Albertson’s, Inc. (NYSE:ABS), one of the nation’s largest food and drug retailing companies, yesterday reported sales of $9.5 billion and diluted earnings per share before merger-related costs of $0.60 for the thirteen-week quarter ended February 1, 2001. On a comparable thirteen-week basis, identical store sales were flat and comparable store sales (which include replacement stores) increased 0.3%. Total sales for the thirteen-week quarter decreased 3.6% when compared to last year’s fourteen-week quarter. Total sales for the quarter increased 3.9% when compared on a thirteen-week basis to the same quarter last year and excluding sales from divested stores.
Peter Lynch, president and chief operating officer, said, “We saw improvement in our comparable sales figures and we see great sales-building opportunities ahead as we leverage the expertise of our marketing and operations teams across our 19 divisions. Our performance in November and December 2000 is particularly noteworthy because it compares against some of the best retail sales periods in recent history due to the Y2K stock up in 1999. Our results reflect a Company that is getting past the merger and focusing more externally on increasing our market share and providing the best value and service for our customers.”
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Operating profit before merger-related costs for the thirteen-week quarter was $523 million or 5.5% as a percent to sales. The LIFO adjustment for the fourth quarter was a credit of $43 million, resulting from a combination of lower inventory levels and deflation in some of the products the Company sells. Net earnings before merger-related costs were $246 million or 2.6% as a percent to sales. Earnings before interest, taxes, depreciation and amortization, and merger-related costs (EBITDA) on a FIFO basis were $739 million, or 7.7% as a percent to sales.
Merger-related costs for the quarter amounted to $42 million ($26 million after tax or $0.06 per basic and diluted share) which includes $20 million of period costs and $22 million in restructuring charges. Including all merger-related costs, the Company reported net earnings of $220 million, or $0.54 per basic and diluted share for the quarter.
“The good news is — we’ve made progress,” said Gary Michael, chairman and chief executive officer. “We exceeded our earnings target and our associates did a good job during the quarter. We continued to improve operations in California at both the store and distribution level. In addition, the momentum we created in the fourth quarter is carrying over into the current year. Our business is healthy and we have solid strategies in place to enable us to make additional improvements and return this Company to the operating levels that everyone expects from Albertson’s.”
Annual sales were $36.8 billion for the fifty-two week year ended February 1, 2001. On a comparable fifty-two week basis, identical store sales increased 0.3% and comparable store sales increased 0.6%. Total sales for the fifty-two week year decreased 1.9% when compared to the prior fifty-three week year. Total sales for the year increased 3.8% when compared on a fifty-two week basis to the prior year and excluding divested stores’ sales from both years.
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By GlobalDataFor the year, operating profit before merger-related costs and a one-time charge was $1.8 billion. The LIFO adjustment for the year was a $23 million credit. Net earnings before merger-related costs and a one-time charge were $870 million, or 2.4% as a percent to sales. Diluted earnings per share before merger-related costs and a one-time charge were $2.08. Earnings before interest, taxes, depreciation and amortization, and merger-related costs and a one-time charge (EBITDA) on a FIFO basis were $2.8 billion, or 7.6% as a percent to sales. Cash flow from operations was $1.8 billion compared to $1.4 billion in 1999.
Merger-related costs and a one-time charge for the year amounted to $171 million ($105 million after tax or $0.25 per basic and diluted share). The annual pre-tax merger-related costs include $127 million in period costs and $24 million in restructuring charges. A one-time $20 million pre-tax charge was expensed to selling, general and administrative expenses in the first quarter of 2000 to reflect liabilities related to certain previously assigned leases and subleases to tenants who are in bankruptcy. The Company does not expect to exceed its original estimate on merger-related costs. Including merger-related costs and the one-time charge, net earnings for the year increased to $765 million compared to $404 million last year.
“Although we still have a lot of work ahead of us, we have made good progress on many fronts,” said A. Craig Olson, executive vice president and chief financial officer. “The ‘Culture of Thrift’ is starting to take hold in the Company and our associates are committed to reducing costs. We plan to take $250 million out of our distribution and selling, general and administrative expenses during 2001. The first steps have been taken to review store work processes and eliminate non-value added activities. We are also currently reviewing our distribution and procurement processes to ensure we are operating our back stage functions as efficiently and effectively as possible. In addition, this year we were able to reduce FIFO inventories by over $250 million, net of new stores, and we have several training and technology initiatives in place to help us continue our progress in this area,” said Olson.
The Company purchased and retired 4.1 million shares of its common stock during the fourth quarter at a total cost of $100 million, or an average of $24.48 per share. During the fiscal 2000 year, the Company purchased and retired 18.7 million shares at a total cost of $451 million, or an average of $24.15 per share.
During the fourth quarter the Company opened 11 combination food and drug stores, 15 stand-alone drugstores, 29 fuel centers and completed remodels on 62 food stores and 11 drugstores. The Company, during the quarter, closed 13 drugstores, 9 of which were replaced with newer stores, as well as 8 food stores, 3 of which were replaced with newer stores. For the fiscal year, the Company opened 56 combination food and drug stores, 1 conventional store, 1 warehouse store, 33 stand-alone drugstores, 74 fuel centers and completed remodels on 101 food stores and 13 drugstores. The Company during the year, closed 22 combination food and drug stores, 13 of which were replaced with newer stores and 21 conventional supermarkets, 1 of which was replaced with a newer store. The Company also closed 28 drugstores, 15 of which were replaced with newer stores. During the year, the Company also expanded its online drugstore Savon.com nationwide, allowing customers across the country to refill and order new prescriptions, choose from a full range of sundry items and access consumer health information.
Mike Reuling, vice chairman, said, “Increasing our return on capital is a top priority. Our capital expenditure program is two-fold: we are focused on allocating capital to markets where we believe we can generate the best returns and we are focused on taking costs out of the development process — including building and equipment costs for our new and remodeled stores. In addition, consolidation of our distribution operations this past year and a move to more efficient inventory management procedures will help us improve our utilization of capital.
“During 2001, we expect to spend $1.9 billion on capital expenditures, including leases. Half of our retail investment this year will go toward remodels and replacement stores to help solidify our market positions and provide the best return on our investment. We plan to open 80 combination stores and 75 drugstores, and complete 115 major remodels and 75 minor remodels. With this capital plan we will improve or replace over 250 stores this year. In addition, we plan to open 105 fuel centers during the year. This should result in net retail square footage growth of approximately 4% for 2001,” concluded Reuling.
The Company also said that at this time it is projecting fiscal year 2001 diluted earnings per share without merger-related costs to be approximately $2.20. For the first quarter of 2001, diluted earnings per share without merger-related costs are expected to be approximately $0.45. The earnings outlook reflects the Company’s current strategic initiatives to increase sales, reduce costs and increase return on capital.
“While we are pleased with the improvements we’ve made this quarter, we think it is prudent to remain cautious going into 2001. The strategic initiatives we announced in January have enormous potential, but they will take time to realize and the near term economic outlook does cause some concern. External forces such as a slowing economy and declining consumer confidence could have an impact on our operations going forward. However, we remain committed to our strategic initiatives to increase sales, reduce costs and increase return on capital. We expect to build momentum throughout the year as we strengthen our marketing and merchandising expertise, realize our expense reduction efforts and allocate our capital more efficiently,” concluded Michael.
Albertson’s, Inc. is one of the largest retail food and drug chains in the United States. Based in Boise, Idaho, the Company currently operates 2,533 retail stores in 36 states across the United States.
The Company does not undertake to update forward-looking statements in this news release to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking information. Assumptions and other information that could cause actual results to differ from those set forth in the forward-looking information can be found in the Company’s filings with the Securities and Exchange Commission, including the Company’s Form 10-Q.
ALBERTSON’S, INC.
(Unaudited – In millions except per share data)
Consolidated Earnings
13 Weeks Ended 14 Weeks Ended
February 1, 2001 February 3, 2000
Sales $9,544 100.00% $9,899 100.00%
Cost of sales 6,822 71.48 7,108 71.81
Gross profit 2,722 28.52 2,791 28.19
Selling, general and
administrative expenses 2,219 23.25 2,263 22.86
Litigation settlement
Merger-related
expense (income) 22 0.23 (13) (0.13)
Operating profit 481 5.04 541 5.46
Other (expenses) income:
Interest, net (104) (1.09) (109) (1.10)
Other, net (6) (0.06) 7 0.08
Earnings before income taxes 371 3.88 439 4.44
Income taxes 151 1.58 175 1.78
Earnings before
extraordinary item 220 2.30 264 2.67
Extraordinary loss on extinguishment
of debt, net of tax benefit of $7
Net Earnings $220 2.30% $264 2.67%
Basic Earnings Per Share:
Earnings before
extraordinary item $0.54 $0.62
Extraordinary item
Net earnings $0.54 $0.62
Diluted Earnings Per Share:
Earnings before
extraordinary item $0.54 $0.62
Extraordinary item
Net earnings $0.54 $0.62
Weighted Average Number of
Common Shares Outstanding:
Basic 408 424
Diluted 409 424
LIFO (income) expense before
income taxes $(43) $3
52 Weeks Ended 53 Weeks Ended
February 1, 2001 February 3, 2000
Sales $36,762 100.00% $37,478 100.00%
Cost of sales 26,336 71.64 27,164 72.48
Gross profit 10,426 28.36 10,314 27.52
Selling, general and
administrative expenses 8,740 23.77 8,641 23.06
Litigation settlement 37 0.10
Merger-related
expense (income) 24 0.07 396 1.06
Operating profit 1,662 4.52 1,240 3.31
Other (expenses) income:
Interest, net (385) (1.05) (353) (0.94)
Other, net (3) (0.01) 12 0.03
Earnings before
income taxes 1,274 3.46 899 2.40
Income taxes 509 1.39 472 1.26
Earnings before
extraordinary item 765 2.08 427 1.14
Extraordinary loss
on extinguishment
of debt, net of
tax benefit of $7 (23) (0.06)
Net Earnings $ 765 2.08% $ 404 1.08%
Basic Earnings Per Share:
Earnings before
extraordinary item $1.83 $1.01
Extraordinary item (0.05)
Net earnings $1.83 $0.96
Diluted Earnings Per Share:
Earnings before
extraordinary item $1.83 $1.00
Extraordinary item (0.05)
Net earnings $1.83 $0.95
Weighted Average Number of
Common Shares Outstanding:
Basic 418 422
Diluted 418 423
LIFO (income) expense before
income taxes $ (23) $ 30
Consolidated Earnings – Without Merger-Related Costs and One-Time
Charges
13 Weeks Ended 14 Weeks Ended
February 1, 2001 February 3, 2000
Sales $9,544 100.00% $9,899 100.00%
Cost of sales 6,815 71.41 7,087 71.59
Gross profit 2,729 28.59 2,812 28.41
Selling, general and
administrative expenses 2,206 23.11 2,195 22.18
Operating profit 523 5.48 617 6.23
Other (expenses) income:
Interest, net (104) (1.09) (108) (1.10)
Other, net (6) (0.06) 7 0.08
Earnings before
income taxes 413 4.32 516 5.21
Income taxes 167 1.75 206 2.08
Net Earnings $246 2.57% $310 3.13%
Earnings Per Share:
Basic $0.60 $0.73
Diluted $0.60 $0.73
Return on average
stockholders’ equity (1) 17.3% 20.9%
Return on average assets (1) 6.1% 7.5%
Effective tax rate 40.5% 40.0%
52 Weeks Ended 53 Weeks Ended
February 1, 2001 February 3, 2000
Sales $36,762 100.00% $37,478 100.00%
Cost of sales 26,299 71.54 27,122 72.37
Gross profit 10,463 28.46 10,356 27.63
Selling, general and
administrative expenses 8,630 23.47 8,427 22.49
Operating profit 1,833 4.99 1,929 5.15
Other (expenses) income:
Interest, net (385) (1.05) (352) (0.94)
Other, net (3) (0.01) 12 0.03
Earnings before
income taxes 1,445 3.93 1,589 4.24
Income taxes 575 1.56 634 1.69
Net Earnings $ 870 2.37% $ 955 2.55%
Earnings Per Share:
Basic $2.08 $2.26
Diluted $2.08 $2.26
Return on average
stockholders’ equity (1) 15.3% 17.0%
Return on average assets (1) 5.5% 6.2%
Effective tax rate 39.8% 39.9%
(1) Annualized for the thirteen weeks ended February 1, 2001 and
fourteen weeks ended February 3, 2000.
— Certain reclassifications have been made in the prior year to
conform to classifications used in the current year.
ALBERTSON’S, INC.
(Unaudited – In millions)
Consolidated Balance Sheets
February 1, 2001 February 3, 2000
Assets
Current Assets:
Cash and cash equivalents $ 57 $ 245
Inventories 3,364 3,481
Property held for resale 71 100
Other current assets 807 765
Total Current Assets 4,299 4,591
Other Assets 451 456
Goodwill and other intangibles, net 1,705 1,761
Land, Buildings and
Equipment, net 9,622 8,911
Total Assets $16,077 $15,719
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable $ 2,163 $ 2,176
Current portions of long-term
debt and capitalized lease
obligations 82 639
Other current liabilities 1,150 1,254
Total Current Liabilities 3,395 4,069
Long-Term Debt 5,715 4,803
Capitalized Lease Obligations 227 187
Other Long-Term Liabilities
and Deferred Credits 1,046 958
Stockholders’ Equity 5,694 5,702
Total Liabilities and
Stockholders’ Equity $16,077 $15,719
Total Common Shares
Outstanding at End of Period 405 424
Consolidated Cash Flows
52 Weeks Ended 53 Weeks Ended
February 1, 2001 February 3, 2000
Cash Flows From
Operating Activities:
Net earnings $ 765 $ 404
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation and amortization 944 853
Goodwill amortization 57 59
Merger-related noncash expense 21 271
Net gain on asset sales (4) (2)
Net deferred income taxes 11 (52)
Decrease (increase) in cash surrender
value of Company-owned
life insurance 4 (12)
Changes in operating
assets and liabilities (18) (103)
Net cash provided by
operating activities 1,780 1,418
Cash Flows From
Investing Activities:
Net capital expenditures (1,582) (1,837)
Decrease (increase)
in other assets 33 (122)
Proceeds from divestitures 476
Net cash used in
investing activities (1,549) (1,483)
Cash Flows From
Financing Activities:
Proceeds from
long-term borrowings 1,232 1,841
Payments on long-term
borrowings (417) (970)
Net commercial paper and
bank line activity (475) (430)
Proceeds from stock options
exercised 7 32
Cash dividends paid (315) (265)
Stock purchased and retired (451)
Tax payments for options exercised (14)
Net cash (used in) provided by
financing activities (419) 194
Net (Decrease) Increase in Cash
and Cash Equivalents (188) 129
Cash and Cash Equivalents
at Beginning of Period 245 116
Cash and Cash Equivalents
at End of Period $ 57 $ 245
— Certain reclassifications have been made in the prior year to
conform to classifications used in the current year.
