Albertsons 2004 Annual Report Download - page 28

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On May 3, 2004, the company utilized after-tax WinCo proceeds and additional cash balances to voluntarily
redeem $250 million of 7 5/8 percent Notes due September 15, 2004, in accordance with the note redemption
provisions.
On September 13, 2003, the company acquired certain former Fleming Companies’ distribution operations
in the Midwest pursuant to the Asset Exchange. This transaction had no material impact on liquidity or capital
resources in fiscal 2004. This transaction is expected to contribute to fiscal 2005 earnings per share in the range
of $0.07 to $0.10 on an approximately $200 million lower revenue stream.
In August 2003, the company renewed its annual accounts receivable securitization program, under which
the company can borrow up to $200.0 million on a revolving basis, with borrowings secured by eligible accounts
receivable. Outstanding borrowings under this program at February 28, 2004 and February 22, 2003, were $0 and
$80.0 million, respectively, and are reflected as a component of “notes payable” in the accompanying
Consolidated Balance Sheets. The average short-term interest rate was 1.32% for fiscal 2004.
In November 2001, the company sold zero-coupon convertible debentures having an aggregate principal
amount at maturity of $811.0 million. The proceeds from the offering, net of approximately $5.0 million of
expenses, were $208.0 million and were initially used to pay down notes payable and were later used to retire a
portion of the $300.0 million in debt that matured in November 2002. The debentures mature in 30 years and are
callable at the company’s option on or after October 1, 2006. Holders may require the company to purchase all or
a portion of their debentures on October 1, 2003, October 1, 2006 or October 1, 2011 at a purchase price equal to
the accreted value of the debentures, which includes accrued and unpaid cash interest. If the option is exercised,
the company has the choice of paying the holder in cash, common stock or a combination of the two. The
debentures will generally be convertible if the closing price of the company’s common stock on the New York
Stock Exchange for twenty of the last thirty trading days of any fiscal quarter exceeds certain levels, at $36.58
per share for the quarter ending June 19, 2004, and rising to $113.29 per share at September 6, 2031. In the event
of conversion, 9.6434 shares of the company’s common stock will be issued per $1,000 debenture. The
debentures have an initial yield to maturity of 4.5%, which is being accreted over the life of the debentures using
the effective interest method. The company may pay contingent cash interest for the six-month period
commencing November 3, 2006, and for any six-month period thereafter if the average market price of the
debentures for a five trading day measurement period preceding the applicable six-month period equals 120% or
more of the sum of the issue price and accrued original issue discount for the debentures. The debentures are
classified as long-term debt based on the company’s ability and intent to refinance the obligation with long-term
debt if the company is required to repurchase the debentures.
The company is party to synthetic leasing programs for two of its major warehouses. The leases expire in
September 2004 and April 2008. The lease that expires in September 2004 may be renewed with the lessor’s
consent through September 2006, and has a purchase option of approximately $25 million. The lease that expires
in April 2008 may be renewed with the lessor’s consent through April 2013, and has a purchase option of
approximately $60 million.
During fiscal 2004, the company repurchased 0.6 million shares of common stock at an average cost of
$23.80 per share as part of the 5.0 million share repurchase program authorized in fiscal 2003 for employee
compensation-related programs. During fiscal 2003, the company repurchased 1.5 million shares of common
stock at an average cost of $27.94 per share as part of the 5.0 million share repurchase program authorized in
fiscal 2002.
SFAS No. 87, “Employers’ Accounting for Pension”, requires that a prepaid pension asset or minimum
pension liability, based on the current market value of plan assets and the accumulated benefit obligation of the
plan, be reflected. Based on both performance of the pension plan assets and plan assumption changes, the
company recorded a net after-tax other comprehensive loss adjustment in the fourth quarter of fiscal 2004 of
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