American Stores
Labor Relations & Purchase Accounting
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Labor Relations
With 121,000 associates, American Stores Company is one of the largest private employers in the United States. Approximately 74% of the Company's associates are represented by unions. Presently, American Stores Company is the largest employer of members of the United Food & Commercial Workers Union (UFCW) in the United States and the third largest employer of members of the International Brotherhood of Teamsters (IBT).
Consistent with the Company's transition to centralized support functions, the labor relations group has consolidated its activities. The development of a central labor philosophy and approach has resulted in a more uniform strategy with core bargaining goals and quantitative guidelines for approval of contracts.
Purchase Accounting
American Stores Company's financial results include "purchase accounting amortization." This purchase accounting amortization results from the accounting requirements for business combinations accounted for under the "purchase" method. Those requirements prescribe that, following the acquisition of a business, the amount of the purchase price that exceeds the net book value (goodwill) must be amortized. The goodwill is being amortized over 40 years and is not deductible for income tax purposes. Asset value write-ups also recorded in connection with the acquisitions are included in the purchase accounting amortization. American Stores Company's purchase accounting amortization arose from its 1984 acquisition of Jewel Companies, Inc. and its 1988 acquisition of Lucky Stores, Inc.
The purchase accounting amortization is a significant, non-cash expense to American Stores Company. The table below reflects the amount of the purchase accounting amortization recorded as operating and administrative expense on the Company's consolidated statements of earnings for each of the last three years, as well as the magnitude of these charges as a percent of sales:
Warehouse Facilities
Presently, American Stores Company operates 8.9 million square feet of warehouse space.
Capital Structure
American Stores Company decreased its debt to capitalization in 1993 through 1995. Prior to 1995, debt was reduced with internally generated funds using the net proceeds from asset sales in 1994 and by converting $120.3 million in notes to equity in 1995.
From 1993 through 1997, common equity increased from $1.7 billion to $2.3 billion. The increase in equity was due principally to net earnings and the conversion of notes in 1995. The Company's expanded capital program and the repurchase of a major shareholders stock in 1997 have led to the increase in debt to capitalization in 1996 and 1997.
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