Albertsons 2003 Annual Report Download - page 13

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Operating Earnings
The company’s operating earnings were $504.8 million for fiscal 2002 compared to $330.4 million for
2001, a 52.8 percent increase. Fiscal 2002 operating earnings include $46.3 million for restructure and other
charges and $12.5 million in store closing reserves recorded in the fourth quarter. Fiscal 2001 operating earnings
include $171.3 million for restructure and other charges and $68.8 million primarily for store closing reserves
and provisions for certain uncollectible receivables. Retail food 2002 operating earnings increased 26.8 percent
to $363.3 million, or 3.8 percent of net sales, from 2001 operating earnings of $286.5 million, or 3.1 percent of
net sales primarily due to growth of new stores and improved merchandising execution in retail. Food
distribution 2002 operating earnings decreased 9.6 percent to $227.0 million, or 2.1 percent of net sales, from
2001 operating earnings of $251.0 million, or 1.9 percent of sales, reflecting a decrease in sales volume,
primarily due to the exit of the Kmart supply contract.
Net Interest Expense
Interest expense decreased to $194.3 million in 2002, compared with $212.9 million in 2001, reflecting
lower borrowing levels and lower average interest rates. Interest income decreased to $21.5 million in 2002
compared with $22.1 million in 2001.
Income Taxes
The effective tax rate was 40.3 percent in 2002 compared with 47.8 percent in 2001. The 2001 effective tax
rate includes the impact of restructure and other charges.
Net Earnings
Net earnings were $198.3 million, or $1.48 per diluted share, in 2002 compared with net earnings of
$72.9 million, or $0.55 per diluted share in 2001.
Weighted average diluted shares increased to 134.0 million in 2002 compared with 2001 weighted average
diluted shares of 132.8 million, reflecting the net impact of stock option activity and shares repurchased under
the treasury stock program.
RESTRUCTURE AND OTHER CHARGES
In the fourth quarter of fiscal 2003, the company recognized pre-tax restructure and other charges of
$2.9 million reflected in the “Restructure and other charges” line in the Consolidated Statements of Earnings
primarily due to continued softening of real estate in certain markets. The charges represent the net adjustment
for changes in estimates related to prior years’ restructure reserves and asset impairment charges, including a
decrease of $3.6 million to restructure 2002, a net increase of $8.1 million to restructure 2001 and a net decrease
of $1.6 million to restructure 2000.
Restructure 2002
In the fourth quarter of fiscal 2002, the company identified additional efforts that would allow it to extend
its distribution efficiency program that began early in fiscal 2001. The additional distribution efficiency
initiatives identified resulted in pre-tax restructure charges of $16.3 million, primarily related to personnel
reductions in administrative and transportation functions. Management began the initiatives in fiscal 2003 and
the majority of these actions were completed by the end of fiscal 2003.
In the fourth quarter of fiscal 2003, the fiscal 2002 restructure charges were decreased by $3.6 million,
including a decrease of $1.4 million due to lower than anticipated lease related costs in transportation efficiency
initiatives and a decrease of $2.2 million in employee related costs due to lower than anticipated severance costs.
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