SALT LAKE CITY, Nov. 25 /PRNewswire/ -- American Stores Company
(NYSE: ASC) today announced 1997 third quarter earnings of $0.22 per share
compared to $0.26 per share in the third quarter of 1996. Earnings for the
first thirty-nine weeks of 1997 were $0.81 per share before non-recurring
items compared to $0.76 per share in 1996, an increase of 6.6 percent.
Reported earnings for the first thirty-nine weeks of 1997 were $0.67 per
share.
Comparable store sales increased 0.7 percent during the 1997 third quarter
and 1.1 percent for the first thirty-nine weeks of 1997. Total sales
increased 1.8 percent to $4.6 billion for the quarter and 2.8 percent to
$14.2 billion for the year-to-date.
Operating profit was $169.7 million (3.7 percent of sales) in the third
quarter of 1997 compared to $177.6 million (3.9 percent of sales) in the third
quarter of 1996. Operating profit for the thirty-nine weeks of 1997 increased
8.9 percent to $568.3 million (4.0 percent of sales) compared to $522.0
million (3.8 percent of sales) for the same period in 1996.
Operating profit at the Food Store Operations for the third quarter of
1997 was $145.4 million compared to $151.5 million in the third quarter of the
prior year. As a percent of sales, operating profit for the Food Store
Operations was 4.5 percent for the quarter. Food Store Operations experienced
lower sales due to continued food price deflation, increased competitor
promotional activity and increased competitive square footage. Gross profit
as a percent of sales was flat with the prior year. During the quarter, the
Company responded to aggressive competitor pricing and promotions with retail
price adjustments that reduced sales and margins but were successful in
retaining overall market share.
Operating profit at the Drug Store Operations for the third quarter of
1997 was $42.0 million compared to $50.0 million in the third quarter of the
prior year. As a percent of sales, operating profit for the Drug Store
Operations was 3.0 percent for the quarter. Drug Store gross margins were
down due to continued pressure from unfavorable industry-wide trends in
pharmacy and disruption associated with the move of the Drug Stores marketing
and procurement groups to Salt Lake City. Drug Store operating expenses
increased over the prior year due to the Company's aggressive new drug store
program.
The Company did not record a LIFO inventory charge during the quarter due
to continued estimates of low inflation. A LIFO charge of $6 million was
recorded in the prior year third quarter.
Interest expense increased to $54.4 million for the third quarter from
$43.3 million in the prior year due to higher debt levels primarily due to the
Company's financing of the repurchase of shares from former chairman L.S.
Skaggs and related parties as well as increased capital expenditures.
Victor L. Lund, chairman and chief executive officer of American Stores
Company, said, "I am not pleased with the results for the quarter. We faced
some difficulties within our organization as well as significant external
competitive pressures. However, I remain confident in the strength of our
important long-term strategies of aggressive new store growth and our Delta
Program. Both of these initiatives are on track."
The Company opened 41 new stores, completed 55 remodels and closed 16
stores during the quarter. Compared to the third quarter of the prior year,
retail square footage increased by 7.8 percent before closures and 4.2 percent
on a net basis after closures.
American Stores Company is one of the nation s largest food and drug
retailers. It operates 1,714 stores in 27 states, including 173 jointly
operated combination stores each of which is counted in both the Food Store
and Drug Store totals. Its principal retail operations include Acme Markets,
Jewel Food Stores, Lucky Northern California Division, Lucky Southern
California Division, Jewel Osco Southwest, Osco Drug and Sav-on.
Cautionary Note: This press release may contain certain forward-looking
statements about the future performance of the Company which are based on
management's assumptions and beliefs in light of the information currently
available to it. The Company assumes no obligation to update the information
contained herein. These forward-looking statements are subject to
uncertainties and other factors that could cause actual results to differ
materially from such statements including, but not limited to: competitive
practices and pricing in the food and drug industries generally and
particularly in the Company's principal markets; the implementation of the
Company's Delta initiatives in accordance with the currently contemplated
schedule and budget; the Company's relationship with its employees and the
terms of future collective bargaining agreements; the costs and other effects
of legal and administrative cases and proceedings; the nature and extent of
continued consolidation of the food and drug industry; changes in the
financial markets related to the cost of the Company's capital; the ability of
the Company to access the public debt and equity markets to refinance
indebtedness and fund the Company's capital expenditure program on
satisfactory terms; supply or quality control problems with the Company's
vendors; and changes in economic conditions which affect the buying patterns
of the Company's customers.
AMERICAN STORES COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands except per share amounts)
(Unaudited)
13 Weeks Ended 39 Weeks Ended
Nov 1, 1997 Nov 2, 1996 Nov 1, 1997 Nov 2,1996
Sales $4,647,465 $4,563,362 $14,158,283 $13,768,456
Cost of sales (3,412,766) (3,340,396) (10,372,330) (10,107,986)
LIFO provision 0 (6,000) (14,000) (22,000)
Gross profit 1,234,699 1,216,966 3,771,953 3,638,470
26.6% 26.7% 26.6% 26.4%
Operating expenses (1,064,961) (1,039,404) (3,203,625) (3,116,440)
(22.9)% (22.8)% (22.6)% (22.6)%
Operating profit 169,738 177,562 568,328 522,030
3.7% 3.9% 4.0% 3.8%
Interest expense (54,432) (43,337) (161,937) (125,491)
Other (7,014) (1,550) (56,713)(a) (8,460)
Earnings before
income taxes 108,292 132,675 349,678 388,079
Federal & state
income taxes (48,017) (56,918) (165,221) (164,953)
Net earnings $60,275 $75,757 $184,457 $223,126
Average shares
outstanding 273,304 291,363 277,360 291,815
Earnings per share $0.22 $0.26 $0.67 $0.76
Dividends per share $0.09 $0.08 $0.26 $0.24
(a)Includes one-time charges of $47.3 million ($.14 per share after tax)
related to the secondary stock offering of shares held by L.S. Skaggs and
related parties and a reserve for the sale of the Company's communications
subsidiary.
CONSOLIDATED CONDENSED BALANCE SHEETS
Nov 1, 1997 Nov 2, 1996
Assets
Inventory $1,799,571 $1,771,369
Other current assets 447,648 512,215
Property, plant and equipment and capital
leases, net 4,081,304 3,515,999
Goodwill, net 1,625,169 1,683,294
Other assets 383,143 357,340
$8,336,835 $7,840,217
Liabilities and Shareholders' Equity
Current maturities of long-term debt
and capital leases $108,924 $71,414
Accounts payable 1,286,225 1,110,843
Other current liabilities 764,945 740,091
Long-term debt and obligations under capital
leases, less current maturities 3,022,962 2,486,833
Other liabilities 925,438 939,486
Shareholders' equity 2,228,341 2,491,550
$8,336,835 $7,840,217
Shares issued and outstanding 273,320 291,564 (b)
(b)Restated as necessary to reflect the July 1997 two-for-one stock
split.
AMERICAN STORES COMPANY
SALES AND OPERATING PROFIT DETAIL
(Dollars in thousands)
(Unaudited)
13 Weeks Ended 39 Weeks Ended
Nov 1, 1997 Nov 2,1996(a) Nov 1, 1997 Nov 2, 1996(a)
Comparable Store Sales:
Eastern food
operations (2.0)% 3.0% (1.5)% 3.1%
Western food
operations (0.5)% 2.5% 0.0% 2.6%
Total food store
operations (1.2)% (a) 2.7% (0.7)% (a) 2.8%
Drug store operations 5.5% (a) 6.3% 5.9% (a) 5.8%
Total 0.7% 3.7% 1.1% 3.6%
Sales:
Food store
operations $3,257,080 $3,301,013(1.3)% $9,957,629 $9,977,527(0.2)%
Drug store
operations 1,382,405 1,254,618 10.2% 4,174,802 3,769,406 10.8%
Other 7,980 7,731 25,852 21,523
Total sales $4,647,465 $4,563,362 1.8% $14,158,283$13,768,456 2.8%
Operating Profit:
Food store
operations $145,408 $151,467(4.0)% $468,562 $431,036 8.7%
Drug store
operations 41,976 50,020(16.1)% 168,417 166,723 1.0%
LIFO 0 (6,000) (14,000) (22,000)
Purchase accounting
amortization (19,270) (19,752) (57,948) (58,896)
Other 1,624 1,827 3,297 5,167
Total operating
profit $169,738 $177,562(4.4)% $568,328 $522,030 8.9%
Food Store Operations
Sales $3,257,080 $3,301,013 $9,957,629 $9,977,527
Gross profit 873,896 883,954 2,684,493 2,635,619
% sales 26.8% 26.8% 27.0% 26.4%
Operating expenses(728,488) (732,487) (2,215,931)(2,204,583)
% sales (22.3)% (22.2)% (22.3)% (22.1)%
Operating profit $145,408 $151,467 $468,562 $431,036
% sales 4.5 4.6% 4.7% 4.3%
Drug Store Operations
Sales $1,382,405 $1,254,618 $4,174,802 $3,769,406
Gross profit 359,606 336,153 1,094,642 1,016,350
% sales 26.0% 26.8% 26.2% 27.0%
Operating expenses(317,630) (286,133) (926,225) (849,627)
% sales (23.0)% (22.8)% (22.2)% (22.6)%
Operating profit $41,976 $50,020 $168,417 $166,723
% sales 3.0% 4.0% 4.0% 4.4%
NOTES:
Comparable store sales include stores opened one year or more and
replacement stores.
Food store operations include Acme Markets, Jewel Food Stores, Lucky
Northern California Division, Lucky Southern California Division, and
Jewel Osco Southwest.
Drug store operations include Osco Drug and Sav-on.
(a)If food store operations comparable store sales are modified to
include the drug side of combination stores, comparable store sales would
have been -0.6% and drug store operations would have been 5.8% for the
quarter and for the year-to-date, food store operations would have been
-0.2% and drug store operations would have been 6.4%.
AMERICAN STORES COMPANY
CONSOLIDATED CONDENSED CASH FLOWS
(Amounts in thousands)
(Unaudited)
39 Weeks Ended
Nov 1, 1997 Nov 2,1996
Cash Flows From Operating Activities:
Net earnings $184,457 $223,126
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 347,561 330,417
Net (gain) on asset sales (3,304) (2,942)
Changes in operating assets and liabilities 240,275 (144,982)
Net cash provided by operating activities 768,989 405,619
Cash Flows From Investing Activities,
Proceeds from the sale of assets 38,363 14,017
Capital expenditures (a) (765,549) (603,700)
Net cash (used in) investing activities (727,186) (589,683)
Cash Flows From Financing Activities,
New public debt 500,000 350,000
Other decreases in borrowing (51,918) (31,921)
Cash dividends (72,443) (70,025)
Repurchase of common stock (454,086)(b) (37,798)
Other changes in equity 34,985 21,751
Net cash (used in) provided by
financing activities (43,462) 232,007
Net (decrease) increase in
cash and cash equivalents (1,659) 47,943
Cash and cash equivalents
at beginning of period 37,467 102,422
Cash and cash equivalents
at end of period $35,808 $150,365
(a) Total capital expenditures, including the present value of new
leases, were $345.5 million for the quarter and $842.1 million year to
date ended November 1, 1997, and $237.9 million for the quarter and $675.4
million for year-to-date ended November 2, 1996.
(b) Repurchased 24.4 million shares from the family of Mr. L.S. Skaggs
and certain family and charitable trusts and issued 4.6 million shares for
overallotments related to the secondary offering in April 1997.
STORE COUNT
Stores Stores
Beginning of Opened/ Closed/ End of
Quarter Acquired Sold Quarter Remodels
Quarter Ended November 1, 1997
Food store operations 807 10 (12) 805 23
Drug store operations 882 31 (4) 909 32
Gross store count 1,689 41 (16) 1,714 55
Less combination stores (a) (169) (5) 1 (173) (11)
Net store count 1,520 36 (15) 1,541 44
Stores Stores
Beginning of Opened/ Closed/ 1997
Year Acquired Sold Year-to- Remodels
date
Year-to-date November 1, 1997
Food store operations 813 23 (31) 805 31
Drug store operations 882 41 (14) 909 42
Gross store count 1,695 64 (45) 1,714 73
Less combination stores (a) (166) (9) 2 (173) (16)
Net store count 1,529 55 (43) 1,541 57
(a) Jointly operated combination stores are counted in both the food
and drug store operations.
SOURCE American Stores Company
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CONTACT:
Investor and Media: Dan Zvonek, Director -
Investor and Public Relations, 801-539-0112
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