Albertsons 2005 Annual Report Download - page 24

thirty trading days of any fiscal quarter exceeds certain levels, at $38.13 per share for the quarter ending June 18,
2005, 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 or approximately 7.8 million shares should all
debentures be converted. The debentures have an initial yield to maturity of 4.5 percent, which is being accreted
over the life of the debentures using the effective interest method. The company will 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 percent 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 debt agreements contain various financial covenants including ratios for fixed charge interest coverage,
asset coverage and debt leverage, in addition to a minimum net worth covenant as defined in the company’s debt
agreements. The company has met the financial covenants under the debt agreements as of February 26, 2005.
The company is party to a synthetic leasing program for one of its major warehouses. The lease expires
April 2008, may be renewed with the lessor’s consent through April 2013 and has a purchase option of
approximately $60 million.
The company repurchases shares of the company’s common stock under programs authorized by the Board
of Directors, for re-issuance upon the exercise of employee stock options and for other compensation programs
utilizing the company’s stock. The company repurchased 2.0 million, 0.6 million and 1.5 million shares of
common stock at an average cost per share of $28.30, $23.80, and $27.94 during fiscal 2005, 2004, and 2003,
respectively. As of February 26, 2005, approximately 4.6 million shares remained available for purchase under
the 5.0 million share repurchase program authorized by the Board of Directors in May 2004.
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’s accumulated other comprehensive loss for minimum pension liability is $104.6 million after-tax as of
February 26, 2005. This accumulated other comprehensive loss for minimum pension liability will be revised in
future years depending upon market performance and interest rate levels.
The company’s capital budget for fiscal 2006, which includes capitalized leases, is projected at
approximately $500.0 million to $550.0 million, compared with actual spending of $325.7 million in fiscal 2005
including $62.9 million of capital leases. The capital budget for 2006 anticipates cash spending of $410.0 million
to $460.0 million, in addition to approximately $90 million for capital leases. Approximately $315.0 million of
the fiscal 2006 budget has been identified for use in the company’s retail food business and includes
approximately 10 to 12 new regional banner stores, approximately 90 to 110 new extreme value combination
stores, including licensed sites, and approximately 20 regional banner major store remodels. The 2006 capital
budget also includes capital for distribution projects, distribution maintenance capital and information technology
related items. In addition, the company will continue to support store development and financing for the
company’s independent retailers. Certain retailer financing activities may not require cash outlays because they
involve leases or guarantees. The capital budget does include amounts for projects which are subject to change
and for which firm commitments have not been made.
Annual cash dividends declared for fiscal 2005, 2004 and 2003, were $.6025, $0.5775 and $0.5675 per
common share, respectively. The company’s dividend policy will continue to emphasize a high level of earnings
retention for growth.
COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS
The company has guaranteed certain leases, fixture financing loans and other debt obligations of various
retailers at February 26, 2005. These guarantees were generally made to support the business growth of affiliated
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