Albertsons 2002 Annual Report Download - page 14

Results of Operations
In fiscal 2002, the Company achieved net sales of $20.9 billion compared
to $23.2 billion last year. Net earnings for fiscal 2002 were $205.5 million,
and diluted earnings per share were $1.53.
Comparison of fifty-two weeks ended February 23, 2002 (2002) with
fifty-two weeks ended February 24, 2001 (2001):
Net Sales Net sales for 2002 of $20.9 billion decreased 9.9 percent from
$23.2 billion in 2001. Retail food sales increased 2.1 percent and food
distribution sales decreased 17.9 percent in 2002 compared to 2001.
Retail food sales increased over last year primarily due to new store open-
ings. Same-store sales were positive 0.2 percent reflecting the soft economy,
competitor activities and cannibalization in certain markets. Food distribu-
tion sales decreased from last year reflecting customer losses, primarily
the exit of the Kmart supply contract which terminated June 30, 2001. In
addition, sales decreased as a result of the impact of restructure activities.
Fiscal 2002 store activity, including licensed units, resulted in 115 new
stores opened and 49 stores closed or sold for a total of 1,260 stores at
year end, an increase in square footage of 6.7 percent over the prior year.
Gross Profit Gross profit as a percentage of net sales increased to 12.4
percent from 11.0 percent last year. The increase is due to the growing
proportion of the Company’s retail food business, which operates at a
higher gross profit margin as a percentage of net sales than does the food
distribution business, improved merchandising execution in retail, and
benefits of restructure and reconfiguration activities in distribution. In 2001,
gross profit included $17.1 million in cost of sales for inventory markdowns
related to restructure activities.
Highlights of results of operations as reported were as follows:
February 23, 2002 February 24, 2001 February 26, 2000
(In millions) (52 weeks) (52 weeks) (52 weeks)
Net sales $20,908.5 100.0% $23,194.3 100.0% $20,339.1 100.0%
Cost of sales 18,308.0 87.6 20,635.5 89.0 18,111.4 89.0
Selling and administrative expenses 2,037.7 9.7 2,042.3 8.8 1,705.0 8.4
Gain on sale of Hazelwood Farms Bakeries —— —— (163.7) (0.8)
Restructure and other charges 46.3 0.2 171.3 0.7 103.6 0.5
Operating earnings 516.5 2.5 345.2 1.5 582.8 2.9
Interest expense 194.3 0.9 212.9 0.9 154.5 0.8
Interest income (21.5) (0.1) (22.1) (0.1) (19.1) (0.1)
Earnings before income taxes 343.7 1.7 154.4 0.7 447.4 2.2
Income tax expense 138.2 0.7 72.4 0.3 204.5 1.0
Net earnings $ 205.5 1.0% $ 82.0 0.4% $ 242.9 1.2%
Management’s Discussion and Analysis of Financial Condition and Results of Operations
In fiscal 2001, the Company achieved net sales of $23.2 billion com-
pared to $20.3 billion in fiscal 2000. Net earnings for fiscal 2001 were
$82.0 million, and diluted earnings per share were $0.62. Net earnings for
fiscal 2000 were $242.9 million, and diluted earnings per share were $1.87.
The results of operations for fiscal 2000 include the impact of the Richfood
acquisition and the results of its operations since August 31, 1999.
Selling and Administrative Expenses Selling and administrative
expenses were 9.7 percent of net sales for 2002 compared to 8.8 percent
of net sales last year. In the fourth quarter of 2002 and 2001, selling and
administrative expenses include $12.5 million of store closing reserves and
$51.7 million primarily for store closing reserves and provisions for certain
uncollectible receivables, respectively. Excluding these items, selling and
administrative expenses were 9.7 percent and 8.6 percent of net sales,
respectively. The increase in selling and administrative expenses as a per-
cent of net sales is primarily due to the growing proportion of the
Company’s retail food business, which operates at a higher selling and
administrative expense as a percentage of net sales than does the food
distribution business, as well as increases in labor and employee benefit
costs and increases in closed property reserves partially offset by gains
on sales of disposed properties.
Operating Earnings The Company’s earnings before interest and taxes
(EBIT) were $516.5 million compared to $345.2 million last year, a 49.6%
increase. Earnings before interest, taxes, depreciation and amortization
(EBITDA) increased 24.4% to $857.2 million, or 4.1% of net sales, from
$689.0 million, or 3.0% of net sales, last year. Fiscal 2002 includes $46.3
million for restructure charges and $12.5 million for store closing reserves.
Fiscal 2001 includes $171.3 million for restructure charges and $68.8
million primarily for store closing reserves and provisions for certain uncol-
lectible receivables.
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