-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vu36Dwpfnq8FyvKp7Cz6Sipp11YICq3VvcPanNDIpvoQ4rhiFyWgUzAgzrvUZtuO Itsgsa4Yd/kN1x9ppe93JA== 0000003333-03-000019.txt : 20030606 0000003333-03-000019.hdr.sgml : 20030606 20030606152938 ACCESSION NUMBER: 0000003333-03-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20030501 FILED AS OF DATE: 20030606 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALBERTSONS INC /DE/ CENTRAL INDEX KEY: 0000003333 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 820184434 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06187 FILM NUMBER: 03735890 BUSINESS ADDRESS: STREET 1: 250 PARKCENTER BLVD STREET 2: P O BOX 20 CITY: BOISE STATE: ID ZIP: 83726 BUSINESS PHONE: 2083956200 MAIL ADDRESS: STREET 1: 250 PARKCENTER BLVD STREET 2: P O BOX 20 CITY: BOISE STATE: ID ZIP: 83726 10-Q 1 abs10q12003.txt 10-Q FOR 13 WEEKS ENDED MAY 1, 2003 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------- FORM 10-Q ------------------------------- Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For 13 Weeks Ended: May 1, 2003 Commission File Number: 1-6187 ALBERTSON'S, INC. ----------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 82-0184434 ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 250 Parkcenter Blvd., P.O. Box 20, Boise, Idaho 83726 ----------------------------------------------- ---------- (Address) (Zip Code) Registrant's telephone number, including area code: (208) 395-6200 -------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ----- ----- Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x No ----- ----- There were 366,800,479 shares with a par value of $1.00 per share outstanding at May 30, 2003. 1 ALBERTSON'S INC. INDEX
PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Earnings Statements for the 13 weeks ended May 1, 2003 and May 2, 2002 3 Condensed Consolidated Balance Sheets as of May 1, 2003 and January 30, 2003 4 Condensed Consolidated Cash Flow Statements for the 13 weeks ended May 1, 2003 and May 2, 2002 5 Notes to Condensed Consolidated Financial Statements 6 Independent Accountants' Report 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 12 Item 4. Controls and Procedures 12 PART II OTHER INFORMATION Item 1. Legal Proceedings 12 Item 2. Changes in Securities and Use of Proceeds 13 Item 3. Defaults upon Senior Securities 13 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 13
2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements ALBERTSON'S, INC. CONDENSED CONSOLIDATED EARNINGS STATEMENTS (in millions, except per share data) (unaudited)
13 WEEKS ENDED --------------------------------------- May 1, May 2, 2003 2002 ------------------- ------------------- Sales $8,940 $8,921 Cost of sales 6,387 6,298 ------------------- ------------------- Gross profit 2,553 2,623 Selling, general and administrative expenses 2,179 2,121 Restructuring (credits) charges and other (7) 15 ------------------- ------------------- Operating profit 381 487 Other (expenses) income: Interest, net (103) (105) Other, net 1 (3) ------------------- ------------------- Earnings from continuing operations before income taxes 279 379 Income tax expense 107 147 ------------------- ------------------- Earnings from continuing operations 172 232 Discontinued operations: Operating loss - (454) Income tax benefit - (151) ------------------- ------------------- Loss from discontinued operations - (303) ------------------- ------------------- Earnings (loss) before cumulative effect of change in accounting principle 172 (71) ------------------- ------------------- Cumulative effect of change in accounting principle (net of tax $60) - (94) ------------------- ------------------- Net Earnings (Loss) $ 172 $ (165) =================== =================== Earnings (loss) per share: Basic Continuing operations $ 0.47 $ 0.57 Discontinued operations - (0.74) Cumulative effect of change in accounting principle (net of tax $0.15) - (0.24) ------------------- ------------------- Net Earnings (Loss) $ 0.47 $ (0.41) =================== =================== Diluted Continuing operations $ 0.47 $ 0.57 Discontinued operations - (0.74) Cumulative effect of change in accounting principle (net of tax $0.15) - (0.23) ------------------- ------------------- Net Earnings (Loss) $ 0.47 $ (0.40) =================== =================== Weighted average number of common shares outstanding: Basic 368 407 Diluted 369 409
See Notes to Condensed Consolidated Financial Statements. 3 ALBERTSON'S, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in millions, except par values) (unaudited)
May 1, January 30, 2003 2003 ----------------- ----------------- ASSETS Current Assets: Cash and cash equivalents $ 107 $ 162 Accounts and notes receivable, net 620 647 Inventories 2,944 2,973 Assets held for sale 124 120 Prepaid and other 305 366 ----------------- ----------------- Total Current Assets 4,100 4,268 Land, buildings and equipment (net of accumulated depreciation and amortization of $6,316 and $6,158, respectively) 9,086 9,029 Goodwill, net 1,399 1,399 Intangibles, net 212 214 Other assets 307 301 ----------------- ----------------- Total Assets $ 15,104 $ 15,211 ================= ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $1,945 $2,009 Salaries and related liabilities 476 599 Self-insurance 246 244 Current maturities of long-term debt and capital leases obligations 167 119 Other current liabilities 497 477 ----------------- ----------------- Total Current Liabilities 3,331 3,448 Long-term debt 4,950 4,950 Capitalized lease obligations 302 307 Self-insurance 378 367 Other long-term liabilities and deferred credits 946 942 Commitments and contingencies - - Stockholders' Equity Preferred stock - $1.00 par value; authorized - 10 shares; designated - 3 shares of Series A Junior Participating; issued - none - - Common stock - $1.00 par value; authorized - 1,200 shares; issued - 367 shares and 372 shares, respectively 367 372 Capital in excess of par 134 128 Accumulated other comprehensive loss (96) (96) Retained earnings 4,792 4,793 ----------------- ----------------- Total stockholders' equity 5,197 5,197 ----------------- ----------------- Total Liabilities and Stockholders' Equity $15,104 $ 15,211 ================= =================
See Notes to Condensed Consolidated Financial Statements. 4 ALBERTSON'S, INC. CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (in millions) (unaudited)
13 WEEKS ENDED -------------------------------------------- May 1, May 2, 2003 2002 ------------------ --------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss) $ 172 $ (165) Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 239 251 Discontinued operations noncash charges - 401 Cumulative effect of change in accounting principle - 94 (Gain) loss on asset sales (6) 9 Net deferred income taxes and other 14 (82) Changes in operating assets and liabilities: Receivables, prepaid expenses and other 70 94 Inventories 29 202 Accounts payable (46) (148) Other current liabilities (102) (29) Self-insurance 13 8 Unearned income (8) 5 Other 6 (9) ------------------ --------------------- Net cash provided by operating activities 381 631 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (354) (288) Proceeds from disposal of land, buildings and equipment 35 42 Proceeds from disposal of assets held for sale 31 69 Other (10) 14 ------------------ --------------------- Net cash used in investing activities (298) (163) CASH FLOWS FROM FINANCING ACTIVITIES: Stock purchases and retirements (108) - Cash dividends paid (71) (77) Net commercial paper activity 50 - Payments on long-term borrowings (9) (95) Proceeds from stock options exercised - 10 ------------------ --------------------- Net cash used in financing activities (138) (162) Net (Decrease) Increase in Cash and Cash Equivalents (55) 306 Cash and Cash Equivalents at Beginning of Period 162 61 ------------------ --------------------- Cash and Cash Equivalents at End of Period $ 107 $ 367 ================== =====================
See Notes to Condensed Consolidated Financial Statements. 5 ALBERTSON'S, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars in millions, except per share data) (unaudited) NOTE A - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES Description of Business Albertson's, Inc. ("Albertsons" or the "Company") is incorporated under the laws of the State of Delaware and is the successor to a business founded by J.A. Albertson in 1939. Based on sales, the Company is one of the largest retail food and drug chains in the world. As of May 1, 2003, the Company operated 2,297 stores in 31 states. Retail operations are supported by 17 major Company distribution operations, strategically located in the Company's operating markets. The Company also operated 212 fuel centers near existing stores. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the results of operations, financial position and cash flows of the Company and its subsidiaries. All material intercompany balances have been eliminated. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments necessary to present fairly, in all material respects, the results of operations of the Company for the periods presented. These condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company's 2002 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 24, 2003. The results of operations for the 13 weeks ended May 1, 2003, are not necessarily indicative of results for a full year. The Company's operating results and cash flows for the quarter ended May 2, 2002 differ from the previously reported results due to the impact of the change in the Company's method of accounting for vendor funds, as discussed in the Company's 2002 Annual Report on Form 10-K. The information presented in the financial statements reflects the adoption of EITF 02-16 in the fourth quarter of 2002, retroactive to the beginning of 2002. The Company's Condensed Consolidated Balance Sheet as of January 30, 2003, has been derived from the audited Consolidated Balance Sheet as of that date. Use of Estimates The preparation of the Company's consolidated financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions. Some of these estimates require difficult, subjective or complex judgments about matters that are inherently uncertain. As a result, actual results could differ from these estimates. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Inventory Net earnings reflects the application of the LIFO method of valuing certain inventories. Quarterly inventory determinations under LIFO are based on assumptions as to projected inventory levels at the end of the year and the rate of inflation for the year. Albertsons recorded pretax LIFO expense of $4 and $5 for the 13 weeks ended May 1, 2003, and May 2, 2002, respectively. The Company's vendor fund inventory offset as of May 1, 2003 was $146, a decrease of $6 from the beginning of 2003. The inventory offset as of May 2, 2002 was $143, a decrease of $16 from the beginning of 2002. Stock-Based Compensation The Company accounts for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and has adopted the disclosure-only alternative of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-based Compensation," and SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." 6 The following table represents the effect on net earnings (loss) and earnings (loss) per share that would have resulted if the Company had applied the fair value based method and recognition provisions of SFAS No. 123 to stock-based employee compensation:
13 Weeks Ended May 1, 2003 May 2, 2002 ------------------------------------------------------- ------------------- --------------- Net earnings (loss) as reported $ 172 $ (165) Add: Stock-based compensation expense included in reported net earnings, net of related tax effects 4 3 Deduct: Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects (11) (12) --------------------------------------------------------- ----------------- --------------- Net earnings (loss) - pro forma $ 165 $ (174) ========================================================= ================= =============== Basic earnings (loss) per share: As reported $ 0.47 $ (0.41) Pro forma 0.45 (0.43) ========================================================= ================= =============== Diluted earnings (loss) per share: As reported $ 0.47 $ (0.40) Pro forma 0.45 (0.43) ========================================================= ================= ===============
Long-Term Debt On May 1, 2003, the Company issued $50 in overnight commercial paper for working capital purposes at an interest rate of 1.4% per annum. The outstanding balance at May 1, 2003, is included in "Current maturities of long-term debt and capital lease obligations" on the condensed consolidated balance sheet. Reclassifications Certain reclassifications have been made to the May 2, 2002 financial statements to conform to classifications in the current quarter. NOTE B - RECENTLY ADOPTED ACCOUNTING STANDARDS In July 2001 the Financial Accounting Standards Board ("FASB") issued SFAS No. 143, "Accounting for Asset Retirement Obligations." This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 became effective for the Company on January 31, 2003, and did not have a material effect on the Company's condensed consolidated financial statements for the quarter ended May 1, 2003. In January 2003 the FASB issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51." FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The provisions of this interpretation became effective for the Company on January 31, 2003, and did not have a material effect on the Company's condensed consolidated financial statements for the quarter ended May 1, 2003. NOTE C - RESERVES FOR RESTRUCTURING ACTIVITIES, MARKET EXITS AND CLOSED STORES In 2001 the Company recorded a pre-tax charge to earnings of $107 primarily for lease settlements and severance costs in connection with the closure of 165 stores and the reduction of overhead functions. As of January 30, 2003, an accrual of $28 was recorded for these settlements and costs. During the first quarter of 2003, the Company paid $2 and had favorable lease termination settlements of $2, leaving a balance of $24 as of May 1, 2003. In 2002 the Company recorded a pre-tax charge to earnings of $51 primarily for lease settlements and severance costs in connection with the exit of four underperforming markets. As of January 30, 2003, an accrual of $11 was recorded for these settlements and costs. During the first quarter of 2003, the Company paid $1, leaving a balance of $10 as of May 1, 2003. As of January 30, 2003, the Company had an accrual of $30 for closed store lease termination costs. During the first quarter of 2003, the Company recorded additional reserves of $2, had favorable lease termination settlements of $2 and paid $3, leaving a balance of $27 as of May 1, 2003. The Company also sold certain closed stores in the first quarter of 2003 which resulted in a gain of $6 (reflected in "Selling, general and administrative expenses" on the condensed consolidated earnings statement). 7 NOTE D - CONTINGENCIES The Company is subject to various lawsuits, claims and other legal matters that arise in the ordinary course of conducting business. In March 2000 a class action complaint was filed against Albertsons as well as American Stores Company, American Drug Stores, Inc., Sav-on Drug Stores, Inc. and Lucky Stores, Inc., wholly-owned subsidiaries of the Company, in the Superior Court for the County of Los Angeles, California (Gardner, et al. v. Albertson's, Inc., et al.) by bonus-eligible managers seeking recovery of additional bonus compensation based upon plaintiffs' allegation that the calculation of profits on which their bonuses were based improperly included expenses for workers' compensation costs, cash shortages, premises liability and "shrink" losses in violation of California law. In October 2001 the court granted summary judgment against Sav-on Drug Stores, finding one of its bonus plans unlawful under plaintiffs' liability theory. In August 2001 a class action complaint with very similar claims, also involving bonus-eligible managers, was filed against Albertson's, Inc., Lucky Stores, Inc. and American Stores Company, wholly-owned subsidiaries of the Company, in the Superior Court for the County of Los Angeles, California (Petersen, et al. v. Lucky Stores, Inc., et al.). In June 2002 the cases were consolidated and in August 2002 a class action with respect to the consolidated case was certified by the court. The Company has strong defenses against this lawsuit, and is vigorously defending it. Although this lawsuit is subject to the uncertainties inherent in the litigation process, based on the information presently available to the Company, management does not expect that the ultimate resolution of this action will have a material adverse effect on the Company's financial condition, results of operations or cash flows. In April 2000 a class action complaint was filed against Albertsons as well as American Stores Company, American Drug Stores, Inc., Sav-on Drug Stores, Inc. and Lucky Stores, Inc., wholly-owned subsidiaries of the Company, in the Superior Court for the County of Los Angeles, California (Gardner, et al. v. American Stores Company, et al.) by assistant managers seeking recovery of overtime pay based upon plaintiffs' allegation that they were improperly classified as exempt under California law. In May 2001 a class action with respect to Sav-on Drug Stores assistant managers was certified by the court. A case with very similar claims, involving the Sav-on Drug Stores assistant managers and operating managers, was also filed in April 2000 against the Company's subsidiary Sav-on Drug Stores, Inc. in the Superior Court for the County of Los Angeles, California (Rocher, Dahlin, et al. v. Sav-on Drug Stores, Inc.) and was also certified as a class action. In April 2002 the Court of Appeal of the State of California Second Appellate District reversed the Rocher class certification, leaving only two plaintiffs. The California Supreme Court has accepted plaintiffs' request for review of this class decertification. The Gardner case is on hold pending the review by the California Supreme Court. The Company has strong defenses against these lawsuits, and is vigorously defending them. Although these lawsuits are subject to the uncertainties inherent in the litigation process, based on the information presently available to the Company, management does not expect that the ultimate resolution of these lawsuits will have a material adverse effect on the Company's financial condition, results of operations or cash flows. An agreement has been reached, and court approval granted, to settle eight purported class and/or collective actions which were consolidated in the United States District Court in Boise, Idaho, and which raised various issues including "off-the-clock" work allegations and allegations regarding certain salaried grocery managers' exempt status. Under the settlement agreement, current and former employees who met eligibility criteria have been allowed to present their off-the-clock work claims to a settlement administrator. Additionally, current and former grocery managers employed in the State of California have been allowed to present their exempt status claims to a settlement administrator. The Company mailed notices of the settlement and claims forms to approximately 80,000 associates and former associates. Approximately 6,000 claim forms were returned, of which approximately 5,000 were deemed by the settlement administrator to be incapable of valuation, presumed untimely, or both. The court is considering the status and handling of these 5,000 claims. The claims administrator was able to assign a value to approximately 1,000 claims, which amount to a total of approximately $14, although the value of many of those claims is still subject to challenge by the Company. The Company is presently unable to determine the number of individuals who may ultimately submit valid claims or the amounts that it may ultimately be required to pay with respect to such claims. Based on the information presently available to it, management does not expect that the satisfaction of valid claims submitted pursuant to the settlement will have a material adverse effect on the Company's financial condition, results of operations or cash flows. The Company is also involved in routine legal proceedings incidental to its operations. The Company utilizes various methods of alternative dispute resolution, including settlement discussions, to manage the costs and uncertainties inherent in the litigation process. Management does not expect that the ultimate resolution of these legal proceedings will have a material adverse effect on the Company's financial condition, results of operations or cash flows. The statements above reflect management's current expectations based on the information presently available to the Company. However, predicting the outcomes of claims and litigation and estimating related costs and exposures involve substantial uncertainties that could cause actual outcomes, costs and exposures to vary materially from current expectations. In addition, the Company regularly monitors its exposure to the loss contingencies associated with these matters and may from time to time change its predictions with respect to outcomes and its estimates with respect to related costs and exposures. It is possible that material differences in actual outcomes, costs and exposures relative to current predictions and estimates, or material changes in such predictions or estimates, could have a material adverse effect on the Company's financial condition, results of operations or cash flows. 8 INDEPENDENT ACCOUNTANTS' REPORT To the Board of Directors and Stockholders of Albertson's, Inc.: Boise, Idaho We have reviewed the accompanying condensed consolidated balance sheet of Albertson's, Inc. and subsidiaries ("Albertsons") as of May 1, 2003, and the related condensed consolidated earnings statements and cash flow statements for the thirteen-week periods ended May 1, 2003 and May 2, 2002. These financial statements are the responsibility of Albertsons management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Albertsons as of January 30, 2003, and the related consolidated statements of earnings, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated March 20, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of January 30, 2003, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /S/ DELOITTE & TOUCHE LLP Boise, Idaho June 4, 2003 9 ALBERTSON'S, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (dollars in millions, except per share data) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Net earnings were $172 or $0.47 per diluted share in the first quarter of 2003, compared to a net loss of $165 or $0.40 per diluted share in the first quarter of 2002. The improvement was the result of a charge of $94 in the first quarter of 2002 related to the Company's adoption of a new accounting principle for the recognition of vendor funds, a net loss from discontinued operations of $303 in the first quarter of 2002, and a decrease of $60 in earnings from continuing operations in the first quarter of 2003 as compared to 2002. Earnings from continuing operations were $172 or $0.47 per diluted share in the first quarter of 2003 compared to $232 or $0.57 per diluted share in first quarter of 2002. Earnings from continuing operations in the first quarter of 2003 decreased 26% from the first quarter of 2002 due to a reduction in identical store sales of 1.2%, a decrease in gross margin of 84 basis points to 28.6%, and increased selling, general and administrative expenses. Sales were $8,940 and $8,921 in the first quarter of 2003 and 2002, respectively. The slight sales growth was generated primarily by sales at stores opened in the past year; comparable store sales which includes sales at replacement stores decreased by 0.9% in 2003 versus 2002, and identical store sales decreased 1.2% in 2003 versus 2002. During the first quarter of 2003, the Company opened 20 combination food and drug stores and 12 stand-alone drugstores, while closing 3 combination food and drug stores, 8 conventional stores, and 11 drugstores. Management estimates that overall inflation in products the Company sells was approximately 0.2%, as compared to deflation of 0.4% in the corresponding period ended May 2, 2002. Gross profit, as a percentage of sales, decreased from 29.4% in 2002 to 28.6% in 2003. The decrease resulted from the Company's decision to lower sales prices in key product categories (primarily in the grocery and general merchandise departments) and selected geographic markets to maintain market-share, as well as increased promotional pricing Company-wide. Also, the Company realized cost-savings as part of its strategic sourcing program and re-invested those savings in targeted price reductions. The pharmacy department's gross profit as a percentage of sales improved in 2003 versus 2002 due to increased generic substitution. Total selling, general and administrative expenses, as a percent to sales, increased to 24.4% in first quarter of 2003 as compared to 23.8% in first quarter 2002 primarily due to higher employee benefits costs, occupancy costs, and workers' compensation costs, offset by reductions in salaries and wages and asset impairment costs. Net interest expense in the first quarter of 2003 was $103, a decrease of $2 compared to the first quarter of 2002, primarily due to a slight decrease in the Company's effective interest rate. Capitalized interest expense was $4 and $5 in the first quarter of 2003 and 2002, respectively. The slight decrease was due to a reduction in the Company's average effective interest rate. Critical Accounting Policies The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. The accompanying condensed consolidated financial statements are prepared using the same critical accounting policies discussed in the Company's 2002 Annual Report on Form 10-K. The Company's vendor fund inventory offset as of May 1, 2003 was $146, a decrease of $6 from the beginning of 2003. The inventory offset as of May 2, 2002 was $143, a decrease of $16 from the beginning of 2002. Recent Accounting Standards In July 2001 the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards "SFAS" No. 143, "Accounting for Asset Retirement Obligations." This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 became effective for the Company on January 31, 2003, and did not have a material effect on the Company's condensed consolidated financial statements for the quarter ended May 1, 2003. In January 2003 the FASB issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51." FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The provisions of this interpretation became effective for the Company on January 31, 2003, and did not have a material effect on the Company's condensed consolidated financial statements for the quarter ended May 1, 2003. 10 Liquidity and Capital Resources Cash provided by operating activities during the first quarter of 2003 was $381 compared to $631 for the same period in the prior year. The decrease in 2003 is due primarily to a reduction in earnings before discontinued operations and the cumulative effect of a change in accounting principle, and the prior year inventory reduction connected with the 2002 market exits. Cash flow used by investing activities in the first quarter of 2003 increased to $298 compared to $163 in 2002 primarily because of the Company's store development program, technology investments and a reduction of asset sales. The Company utilizes its commercial paper and bank line programs primarily to supplement cash required for seasonal fluctuations in working capital and to fund its capital expenditure program. Accordingly, commercial paper and bank line borrowings may fluctuate between reporting periods. The Company had $50 in commercial paper borrowings outstanding at May 1, 2003, and no outstanding borrowing at January 30, 2003. The Company has three credit facilities totaling $1,400. These agreements contain certain covenants, the most restrictive of which requires the Company to maintain consolidated tangible net worth, as defined, of at least $3,000 and a fixed charge coverage, as defined, of no less than 2.7 times. As of May 1, 2003, the Company was in compliance with these requirements. No borrowings were outstanding under these credit facilities as of May 1, 2003. The Company filed a shelf registration statement with the Securities and Exchange Commission, which became effective in February 2001 (the "2001 Registration Statement"), to authorize the issuance of up to $3,000 in debt securities. The Company intends to use the net proceeds of any securities sold pursuant to the 2001 Registration Statement for retirement of debt and general corporate purposes, including the potential purchase of outstanding shares of Albertson's common stock. As of May 1, 2003, up to $2,400 of debt securities remain available for issuance under the Company's 2001 Registration Statement. The Company's Board of Directors extended the Company's stock buyback program on December 9, 2002, authorizing, at management's discretion, the Company to purchase and retire up to $500 of the Company's common stock beginning January 1, 2003 and ending December 31, 2003. In the first quarter of 2003, the Company repurchased 5.3 million shares of its common stock for a total expenditure of $108 at an average price of $20.26 per share. Contractual Obligations and Commercial Commitments There have been no material changes regarding the Company's contractual obligations and commercial commitments from the information provided in Note Y "Contractual Obligations and Commercial Commitments" in the Company's 2002 Annual Report on Form 10-K. Letters of Credit The Company had outstanding letters of credit of $103 as of May 1, 2003, consisting of $91 of standby letters of credit covering primarily workers' compensation or performance obligations and $12 of commercial letters of credit supporting the Company's merchandise import program. Off-Balance Sheet Arrangements The Company has no significant off-balance sheet arrangements including equity method investments. Investments that are accounted for under the equity method have no liabilities associated with them that are material to the Company. Related Party Transactions There were no material related party transactions during the first quarter of 2003. Cautionary Statement for Purposes of "Safe Harbor Provisions" of the Private Securities Litigation Reform Act of 1995 All statements other than statements of historical fact contained in this and other documents disseminated by the Company, including statements regarding the Company's expected financial performance, are forward-looking information as defined in the Private Securities Litigation Reform Act of 1995. In reviewing such information about the future performance of the Company, it should be kept in mind that actual results may differ materially from those projected or suggested in such forward-looking information since predictions regarding future results of operations and other future events are subject to inherent uncertainties. These statements may relate to, among other things: investing to increase sales; changes in cash flow; increases in insurance and employee benefit costs; attainment of cost reduction goals; achieving sales increases and increases in identical sales; opening and remodeling stores; and the Company's five strategic imperatives; and are indicated by words or phrases such as "expects," "plans," "believes," "estimate," and "goal." In reviewing such information about the future performance of the Company, it should be kept in mind that actual results may differ materially from those projected or suggested in such forward-looking information. Important assumptions and other important factors that could cause actual results to differ materially from those set forth in the forward-looking information include changes in the general economy; changes in interest rates; 11 changes in consumer spending; actions taken by new or existing competitors (including nontraditional competitors), particularly those intended to improve their market share (such as pricing and promotional activities); and other factors affecting the Company's business in or beyond the Company's control. These factors include changes in the rate of inflation; changes in state or federal legislation or regulation; adverse determinations with respect to litigation or other claims (including environmental matters); labor negotiations; the cost and stability of energy sources; the Company's ability to recruit, retain and develop employees; the Company's ability to develop new stores or complete remodels as rapidly as planned; the Company's ability to implement new technology successfully; stability of product costs; the Company's ability to integrate the operations of acquired or merged companies; the Company's ability to execute its restructuring plans; and the Company's ability to achieve its five strategic imperatives. Other factors and assumptions not identified above could also cause the actual results to differ materially from those projected or suggested in the forward-looking information. The Company does not undertake to update forward-looking information contained herein or elsewhere to reflect actual results, changes in predictions, assumptions, estimates or changes in other factors affecting such forward-looking information. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes regarding the Company's market risk position from the information provided under the caption "Quantitative and Qualitative Disclosures About Market Risk" of the Company's 2002 Annual Report on Form 10-K. Item 4. Controls and Procedures Albertsons management, including the Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) as of a date within 90 days prior to the filing of this report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission's rules and forms. Subsequent to the date of this evaluation, there have not been any significant changes in the Company's internal controls or, to management's knowledge, in other factors that could significantly affect the Company's internal controls. PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is subject to various lawsuits, claims and other legal matters that arise in the ordinary course of conducting business. In March 2000 a class action complaint was filed against Albertsons as well as American Stores Company, American Drug Stores, Inc., Sav-on Drug Stores, Inc. and Lucky Stores, Inc., wholly-owned subsidiaries of the Company, in the Superior Court for the County of Los Angeles, California (Gardner, et al. v. Albertson's, Inc., et al.) by bonus-eligible managers seeking recovery of additional bonus compensation based upon plaintiffs' allegation that the calculation of profits on which their bonuses were based improperly included expenses for workers' compensation costs, cash shortages, premises liability and "shrink" losses in violation of California law. In October 2001 the court granted summary judgment against Sav-on Drug Stores, finding one of its bonus plans unlawful under plaintiffs' liability theory. In August 2001 a class action complaint with very similar claims, also involving bonus-eligible managers, was filed against Albertson's, Inc., Lucky Stores, Inc. and American Stores Company, wholly-owned subsidiaries of the Company, in the Superior Court for the County of Los Angeles, California (Petersen, et al. v. Lucky Stores, Inc., et al.). In June 2002 the cases were consolidated and in August 2002 a class action with respect to the consolidated case was certified by the court. The Company has strong defenses against this lawsuit, and is vigorously defending it. Although this lawsuit is subject to the uncertainties inherent in the litigation process, based on the information presently available to the Company, management does not expect that the ultimate resolution of this action will have a material adverse effect on the Company's financial condition, results of operations or cash flows. In April 2000 a class action complaint was filed against Albertsons as well as American Stores Company, American Drug Stores, Inc., Sav-on Drug Stores, Inc. and Lucky Stores, Inc., wholly-owned subsidiaries of the Company, in the Superior Court for the County of Los Angeles, California (Gardner, et al. v. American Stores Company, et al.) by assistant managers seeking recovery of overtime pay based upon plaintiffs' allegation that they were improperly classified as exempt under California law. In May 2001 a class action with respect to Sav-on Drug Stores assistant managers was certified by the court. A case with very similar claims, involving the Sav-on Drug Stores assistant managers and operating managers, was also filed in April 2000 against the Company's subsidiary Sav-on Drug Stores, Inc. in the Superior Court for the County of Los Angeles, California (Rocher, Dahlin, et al. v. Sav-on Drug Stores, Inc.) and was also certified as a class action. In April 2002 the Court of Appeal of the State of California Second Appellate District reversed the Rocher class certification, leaving only two plaintiffs. The California Supreme Court has accepted plaintiffs' request for review of this class decertification. The Gardner case is on hold pending the review by the California Supreme Court. The Company has strong defenses against these lawsuits, and is vigorously defending them. Although these lawsuits are subject to the uncertainties inherent in the litigation process, based on the information presently available to the Company, management does not expect that the ultimate resolution of these lawsuits will have a material adverse effect on the Company's financial condition, results of operations or cash flows. 12 An agreement has been reached, and court approval granted, to settle eight purported class and/or collective actions which were consolidated in the United States District Court in Boise, Idaho, and which raised various issues including "off-the-clock" work allegations and allegations regarding certain salaried grocery managers' exempt status. Under the settlement agreement, current and former employees who met eligibility criteria have been allowed to present their off-the-clock work claims to a settlement administrator. Additionally, current and former grocery managers employed in the State of California have been allowed to present their exempt status claims to a settlement administrator. The Company mailed notices of the settlement and claims forms to approximately 80,000 associates and former associates. Approximately 6,000 claim forms were returned, of which approximately 5,000 were deemed by the settlement administrator to be incapable of valuation, presumed untimely, or both. The court is considering the status and handling of these 5,000 claims. The claims administrator was able to assign a value to approximately 1,000 claims, which amount to a total of approximately $14, although the value of many of those claims is still subject to challenge by the Company. The Company is presently unable to determine the number of individuals who may ultimately submit valid claims or the amounts that it may ultimately be required to pay with respect to such claims. Based on the information presently available to it, management does not expect that the satisfaction of valid claims submitted pursuant to the settlement will have a material adverse effect on the Company's financial condition, results of operations or cash flows. The Company is also involved in routine legal proceedings incidental to its operations. The Company utilizes various methods of alternative dispute resolution, including settlement discussions, to manage the costs and uncertainties inherent in the litigation process. Management does not expect that the ultimate resolution of these legal proceedings will have a material adverse effect on the Company's financial condition, results of operations or cash flows. The statements above reflect management's current expectations based on the information presently available to the Company. However, predicting the outcomes of claims and litigation and estimating related costs and exposures involve substantial uncertainties that could cause actual outcomes, costs and exposures to vary materially from current expectations. In addition, the Company regularly monitors its exposure to the loss contingencies associated with these matters and may from time to time change its predictions with respect to outcomes and its estimates with respect to related costs and exposures. It is possible that material differences in actual outcomes, costs and exposures relative to current predictions and estimates, or material changes in such predictions or estimates, could have a material adverse effect on the Company's financial condition, results of operations or cash flows. Item 2. Changes in Securities and Use of Proceeds None. Item 3. Defaults upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K a. Exhibits 10.47 Long-term Incentive Plan (effective as of February 1, 2003). 11 Computation of Earnings Per Common Share 15 Letter re: Unaudited Interim Financial Statements 99.1 Certification of CEO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification of CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 13 b. The following reports under Item 9. Regulation FD Disclosure on Form 8-K were filed during the quarter ended May 1, 2003. Current report on Form 8-K dated March 20, 2003, including the Company's press release which discussed the Company's earnings for the fourth quarter of 2002 and for fiscal year 2002 and the Company's 2003 guidance. Current report on Form 8-K dated February 26, 2003, including press release regarding the dismissal of the class action lawsuit Maureen Baker et al. vs. Jewel Food Stores, Inc. and Dominick's Supermarkets, Inc. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ALBERTSON'S, INC. ----------------------------------------- (Registrant) Date: June 6, 2003 /S/ Felicia D. Thornton ----------------------------------------- Felicia D. Thornton Executive Vice President and Chief Financial Officer 14 CERTIFICATIONS I, Lawrence R. Johnston, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Albertson's, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 6, 2003 /S/ Lawrence R. Johnston ------------------------------------------ Lawrence R. Johnston Chairman of the Board and Chief Executive Officer 15 I, Felicia D. Thornton, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Albertson's, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 6, 2003 /S/ Felicia D. Thornton ------------------------------------------ Felicia D. Thornton Executive Vice President and Chief Financial Officer 16 EX-10 3 abs10q12003exhibit10-47.txt ALBERTSONS LONG-TERM INCENTIVE PLAN Microsoft Word 10.0.4219; Exhibit 10.47 - -------------------------------------------------------------------------------- ALBERTSONS LONG-TERM INCENTIVE PLAN - -------------------------------------------------------------------------------- INTRODUCTION The Albertsons Long-term Incentive Plan ("Plan") is a long-term incentive plan for eligible employees of Albertsons and its subsidiaries. The Plan is intended to provide cash-based incentive opportunities to executives and other key employees of the Company and its subsidiaries. Plan payments, if any, will be conditioned on attainment of one or more Performance Measures for one or more fiscal years as established by the Committee. It is intended that payments made pursuant to the Plan to Covered Employees will qualify as performance-based compensation that is exempt from the limitation on deductions imposed by Section 162(m), and that the Plan will be construed, applied and administered accordingly. I. PURPOSE The purpose of the Plan is to allow the Company to attract, motivate and retain highly qualified employees; to obtain from each employee the best possible performance; to establish performance goals that support the Company's long-term business strategies; and to provide consistency in and alignment with the Company's approach to performance-based pay and overall executive compensation strategy. II. DEFINITIONS For purposes of the Plan, the following terms shall have the following meanings: A. AWARD PERIOD. An award period under the Plan shall be one or more consecutive fiscal years of the Company, not to exceed three fiscal years, as established by the Committee. Nothing in this Plan shall preclude the Committee from establishing an Award Period that commences prior to the termination of one or more other Award Periods. B. BOARD OF DIRECTORS. The Board of Directors of the Company. C. CHANGE IN CONTROL. This term shall have the meaning in the Amended and Restated 1995 Stock-Based Incentive Plan or any successor plan thereto. D. COMMITTEE. The Management Development/Compensation Committee of the Board of Directors of the Company or any successor thereto. E. COMPANY. Albertson's, Inc., a Delaware corporation. ------ A-1 F. COVERED EMPLOYEE. Any Participant who is, or is determined by the Committee to be likely to become, a "covered employee" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, as such section may be amended ("Section 162(m)"). G. DEFERRED AWARD. This term is defined in Section VII (A) of the Plan. H. DEFERRED COMPENSATION PLAN. The Albertson's, Inc. 2000 Deferred Compensation Plan, as amended. I. LONG-TERM INCENTIVE COMPENSATION AWARD. Any cash-based award paid pursuant to the Plan. J. PARTICIPANT. An executive or other key employee of the Company or one or more of its subsidiaries, or a person who has agreed to commence serving in any of such capacities, and who is designated to participate in the Plan. K. PERFORMANCE MEASURES. This term is defined in Section V of the Plan. L. RETIREMENT. A Participant's voluntary termination of employment with the Company or any of its subsidiaries on or after attainment of age 55. III. EFFECTIVE DATE The Plan has been adopted effective as of February 1, 2003; provided, however, that no Long-term Incentive Award will be paid to a Covered Employee under this Plan unless, prior to such payment, the holders of a majority of the shares of common stock of the Company actually voting on the matter approve this Plan at a meeting of the shareholders of the Company. IV. DETERMINATION OF AMOUNTS OF AND ELIGIBILITY FOR LONG-TERM INCENTIVE COMPENSATION AWARDS A. Participants will be eligible to receive Long-term Incentive Compensation Awards conditioned on achievement of Performance Measure(s) as approved by the Committee. B. If the Performance Measures are not achieved, then no Long-term Incentive Compensation Awards will be paid to Covered Employees pursuant to the Plan. If the Performance Measures are achieved, then Long-term Incentive Compensation Awards will be paid in amounts at levels determined by the Committee pursuant to the Plan. The maximum Long-term Incentive Compensation Award that can be paid to a Covered Employee with respect to any Award Period is $10 million. C. Long-term Incentive Compensation Awards may be paid following the end of the Award Period to which they relate; provided, however, that no Long-term Incentive Compensation Awards shall be paid to Covered Employees prior to the certification in writing by the Committee that the Performance Measures have been achieved for the relevant Award Period. ------ A-2 D. The Committee will determine the final amounts of Long-term Incentive Compensation Awards to Participants. The Committee may exercise negative discretion to reduce the amount of, or eliminate, a Long-term Incentive Compensation Award that otherwise would be payable. Such determinations, except in the case of the Long-term Incentive Compensation Award for the Chief Executive Officer, shall be made after considering the recommendations of the Chief Executive Officer and such other matters as the Committee shall deem relevant. Such determination in the case of the Long-term Incentive Compensation Award for the Chief Executive Officer shall be made by the Committee. E. A Participant who is designated to participate in the Plan effective after the beginning of a particular Award Period will participate on a prorated basis in all Award Periods that have not ended as of such effective time and will receive Long-term Incentive Compensation Awards prorated on the basis of the ratio of the number of weeks of actual participation during each such Award Period to the aggregate number of weeks in each such Award Period. Such prorated Long-term Incentive Awards will be paid on the dates that all other Participants are paid such awards. V. PERFORMANCE MEASURES A. Payment of Long-term Incentive Compensation Awards is conditioned on the attainment of Performance Measures as established by the Committee. Performance Measures applicable to Award Periods for Covered Employees must be established in writing no later than ninety (90) days after the beginning of an Award Period and must be limited to criteria and objectives related to: (1) The consolidated performance of the Company or the performance of one or more of its subsidiaries or divisions, where performance is determined as set forth in (2) below. (2) Performance shall be determined solely by reference to levels of and/or growth in one or more of the following business criteria as measured over the Award Period: (i) Total shareholder return, including its components of stock price appreciation, dividends and/or dividend yield; (ii) Return on assets, equity, invested capital, cash flow, investment, or sales; (iii) Sales, including food items, non-food items, or private label sales; ------ A-3 (iv) Pre-tax or after-tax profit levels, including: earnings per share; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; net operating profits after tax, and net income; (v) Cash flow and cash flow return on investment; (vi) Economic profit and/or cost of capital; (vii) Turnover of assets, capital, or inventory; (viii) Levels of operating expense or other expense items as reported on the income statement, including operating and maintenance expense; (ix) Measures of customer satisfaction and customer service as surveyed from time to time, including the relative improvement therein; or (x) Market share. B. Further, in establishing Performance Measures for Participants, the Committee may include or exclude the impact of specified objective events, including any of the following except where the action would result in the loss of an otherwise available exemption under Section 162(m): expenses as a result of restructuring or productivity initiatives, non-operating items; acquisition expenses; and any other items of gain, loss or expense that are determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or to a change of accounting principles. C. The Committee may impose additional Performance Measures that have the effect of reducing awards. It also may modify Performance Measures applicable to Participants that have the effect of reducing awards. It also may modify Performance Measures applicable to Participants, except in the case where the action would result in the loss of an otherwise available exemption under Section 162(m), if it determines that the Performance Measures have become unsuitable as a result of certain events. VI. FORM OF LONG-TERM INCENTIVE COMPENSATION AWARDS Long-term Incentive Compensation Awards shall be paid in cash. VII. PAYMENT OF LONG-TERM INCENTIVE COMPENSATION AWARDS A. Long-term Incentive Compensation Awards shall be paid currently, unless the payment is deferred by the Participant pursuant to the Deferred Compensation Plan or unless the Committee shall determine that any Long-term Incentive Compensation Award shall be deferred ("Deferred Awards"). Any Deferred Awards shall be credited to the Participant's account in the Deferred Compensation Plan and shall be subject to the provisions of the Deferred Compensation Plan. ------ A-4 B. When a Long-term Incentive Compensation Award is made, the Company shall cause the cash to be paid to the individual to whom the award is made at the time or times specified by the Committee, or, if no time or times are specified, as soon as practicable after the award is made, but in no event later than two and one-half months after the Award Period ends. VIII. CHANGE IN CONTROL In connection with any actual or potential Change in Control, the Committee will take all such actions hereunder as it may determine to be necessary or appropriate to treat Participants equitably hereunder, including without limitation the modification or waiver of applicable Performance Measures, Award Periods or Long-term Incentive Compensation Awards, notwithstanding the terms of any initial Long-term Incentive Compensation Award, and whether to establish or fund a trust or other arrangement intended to secure the payment of such Awards. IX. TERMINATION OF SERVICE OR DEMOTION A. If a Participant terminates employment with the Company and its subsidiaries before the date prescribed for payment with respect to an Award Period due to death, disability, or Retirement, the Participant's Long-term Incentive Compensation Awards for all Award Periods in effect at the time of such termination of service will be prorated on the basis of the ratio of the number of weeks of participation during each such Award Period to the aggregate number of weeks in each such Award Period. Payment of such prorated Long-term Compensation Awards will occur at the end of the applicable Award Periods on the dates that all other Participants receive payment of such Long-term Compensation Awards. B. If a Participant's employment with the Company and its subsidiaries is terminated by the Company or any such subsidiary before the date prescribed for payment with respect to an Award Period for any reason other than for Cause (as defined in subsection E below), the Participant's Long-term Incentive Compensation Award only for the Award Period(s), if any, ending at the end of the fiscal year in which the termination of service occurs will be prorated on the basis of the ratio of the number of weeks of participation during such Award Period to the aggregate number of weeks in such Award Period, unless otherwise determined by the Committee. Payment of the prorated Long-term Incentive Compensation Award will occur at the end of the Award Period on the date that all other Participants receive payment of such Long-term Incentive Compensation Award. C. If a Participant is demoted to a position that at the time of such demotion is not eligible to be designated for participation in the Plan before the date prescribed for payment with respect to an Award Period, the ------ A-5 Participant's Long-term Incentive Compensation Award only for the Award Period(s), if any, ending at the end of the fiscal year in which the demotion occurs will be prorated on the basis of the ratio of the number of weeks of participation prior to demotion during such Award Period to the aggregate number of weeks in such Award Period, unless otherwise determined by the Committee. Payment of the prorated Long-term Incentive Compensation Award will occur at the end of the Award Period on the date that all other Participants receive payment of such Long-term Incentive Compensation Award. D. Except as otherwise provided in this Section IX, if a Participant's employment with the Company and its subsidiaries is terminated before the date prescribed for payment with respect to an Award Period for any reason or if the Participant voluntarily terminates his or her employment, the Participant will not be entitled to any Long-term Incentive Compensation Award for any such Award Period, unless otherwise determined by the Committee. E. For purposes of this Plan, "Cause" means that the Participant shall have: (i) committed an act of fraud, embezzlement or theft in connection with his or her duties or in the course of his or her employment with the Company or of its subsidiaries; (ii) committed intentional wrongful damage to property of the Company or any of its subsidiaries; or (iii) committed intentional wrongful disclosure of secret processes or confidential information of the Company or any of its subsidiaries. X. SPECIAL AWARDS AND OTHER PLANS A. Nothing contained in the Plan shall prohibit the Company or any of its subsidiaries from granting special performance or recognition awards, under such conditions and in such form and manner as it sees fit, to employees (including Participants) for meritorious service of any nature. B. In addition, nothing contained in the Plan shall prohibit the Company or any of its subsidiaries from establishing other incentive compensation plans providing for the payment of incentive compensation to employees (including Participants). XI. ADMINISTRATION, AMENDMENT AND INTERPRETATION OF THE PLAN A. The Board of Directors or the Committee shall have the right to amend the Plan from time to time or to repeal it entirely or to direct the discontinuance of Long-term Incentive Compensation Awards either temporarily or permanently; provided, however, that (i) no amendment of the Plan shall operate to annul, without the consent of the Participant, a Long-term Incentive Compensation Award already made hereunder; and (ii) with respect to Long-term Incentive Compensation Awards for Covered Employees, no amendment to change the maximum Long-term Incentive Compensation Award of a Covered Employee, the definition of Covered Employee, or the enumerated Performance Measures shall be ------ A-6 effective without approval by the shareholders of the Company. Notwithstanding the foregoing, in the event this Plan is terminated before the last day of an Award Period, Long-term Incentive Compensation Awards payable for such Award Period will be prorated on the basis of the ratio of the number of weeks in such Award Period prior to such termination to the aggregate number of weeks in such Award Period and will be paid only after the end of such Award Period, which will be deemed to continue until the expiration thereof as if this Plan had not been terminated. B. This Plan will be administered by the Committee. The decision of the Committee or the Board of Directors with respect to any questions arising in connection with the administration or interpretation of the Plan shall be final, conclusive and binding. XII. MISCELLANEOUS A. All expenses and costs in connection with the operation of the Plan shall be borne by the Company. B. All Long-term Incentive Compensation Awards under the Plan are subject to withholding, where applicable, for federal, state and local taxes. C. Unless otherwise determined by the Committee, all Long-term Incentive Compensation Awards will be paid from the Company's general assets, and nothing contained in this Plan will require the Company to set aside or hold in trust any funds for the benefit of any Participant, who will have the status of a general unsecured creditor of the Company. D. This Plan will not confer upon any Participant any right with respect to continuance of employment or other service with the Company or any subsidiary, nor will it interfere in any way with any right the Company or any subsidiary would otherwise have to terminate or modify the terms of such Participant's employment or other service at any time. E. Except as otherwise provided in this Plan, no right or benefit under this Plan will be subject to anticipation, alienation, sale, assignment, pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge such right or benefit will be void. No such right or benefit will in any manner be liable for or subject to the debts, liabilities, or torts of a Participant. F. If any provision in this Plan is held to be invalid or unenforceable, no other provision of this Plan will be affected thereby. G. This Plan will be governed by and construed in accordance with applicable United States federal law and, to the extent not preempted by such federal law, in accordance with the laws of the State of Delaware, without giving effect to the principles of conflict of laws thereof. ------ A-7 EX-11 4 abs10q12003exhibit11.txt COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 ALBERTSON'S, INC. COMPUTATION OF EARNINGS PER SHARE (In millions, except per share data) (unaudited)
13 WEEKS ENDED ---------------------------------------------- May 1, 2003 May 2, 2002 --------------------- -------------------- Diluted Basic Diluted Basic ------------ -------- ---------- --------- Earnings from continuing operations $172 $172 $232 $232 ============ ======== ========== ========= Weighted average common shares outstanding 368 368 407 407 Potential common share equivalents 1 2 ------------ -------- ---------- --------- Weighted average shares outstanding 369 368 409 407 ============ ======== ========== ========= Earnings from continuing operations per common share and common share equivalent $0.47 $0.47 $0.57 $0.57 ============ ======== ========== ========= Calculation of potential common share equivalents: Options to purchase potential common shares 2 17 Potential common shares assumed purchased with proceeds (1) (15) ------------ ---------- Potential common share equivalents 1 2 ============ ========== Calculation of potential common shares assumed purchased with potential proceeds: Potential proceeds from exercise of options to purchase common shares $29 $ 449 Common stock price used under the treasury stock method $19.31 $31.76 Potential common shares assumed purchased with potential proceeds 1 14
Anti-dilutive shares totaling 30 and 13 have been excluded from potential common share equivalents for the 13 weeks ended May 1, 2003, and May 2, 2002, respectively. EX-15 5 abs10q12003exhibit15.txt DELOITTE & TOUCHE LETTER EXHIBIT 15 June 6, 2003 Albertson's, Inc. Boise, Idaho We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interim financial information of Albertson's, Inc. and subsidiaries for the thirteen-week periods ended May 1, 2003 and May 2, 2002, as indicated in our report dated June 4, 2003; because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the thirteen-week period ended May 1, 2003, is incorporated by reference in Registration Statement No. 33-54998 on Form S-3 and Registration Statement Nos. 2-80776, 33-2139, 33-7901, 33-15062, 33-43635, 33-62799, 33-59803, 333-82157, 333-82161, 333-87773 and 333-73194 on Form S-8. We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. /S/DELOITTE & TOUCHE LLP Boise, Idaho EX-99 6 abs10q12003exhibit99-1.txt CERTIFICATION - SECTION 906 EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of Albertson's, Inc. (the "Company") for the period ended May 1, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Lawrence R. Johnston, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. June 6, 2003 \S\ Lawrence R. Johnston - ----------------------------------------- Lawrence R. Johnston Chief Executive Officer A signed original of this written statement required by Section 906 has been provided to Albertson's, Inc. and will be retained by Albertson's, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. EX-99 7 abs10q12003exhibit99-2.txt CERTIFICATION - SECTION 906 EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of Albertson's, Inc. (the "Company") for the period ended May 1, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Felicia D. Thornton, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. June 6, 2003 \S\ Felicia D. Thornton - ----------------------------------------- Felicia D. Thornton Chief Financial Officer A signed original of this written statement required by Section 906 has been provided to Albertson's, Inc. and will be retained by Albertson's, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----