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SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
    FORM 10-Q    Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 For the 13 Weeks Ended: May 5, 2005          Commission File Number: 1-6187 ALBERTSONS, INC.    Delaware
    
    82-0184434(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 250 Parkcenter Blvd., P.O. Box 20, Boise, Idaho
    
    83726(Address of principal executive offices)
    
    (Zip Code)
 (208) 395-6200   Indicate by check mark whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). Yes þ No o The number of shares of the registrants common stock, $1.00 par value, outstanding at June 3,
2005 was 368,333,190.   1




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ALBERTSONS INC.
INDEX PART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Earnings Statements for the 13 weeks ended May 5, 2005
and April 29, 2004
    
    
    3Condensed Consolidated Balance Sheets as of May 5, 2005 and February 3, 2005
    
    
    4Condensed Consolidated Cash Flow Statements for the 13 weeks ended May 5, 2005
and April 29, 2004
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Report of Independent Registered Public Accounting Firm
    
    
    17Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 4. Controls and Procedures
    
    
    22PART II OTHER INFORMATIONCautionary Statement
    
    
    22Item 1. Legal Proceedings
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 3. Defaults Upon Senior Securities
    
    
    24Item 4. Submission of Matters to a Vote of Security Holders
    
    
    24Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    25EXHIBIT 10.58EXHIBIT 10.59EXHIBIT 10.60EXHIBIT 15EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
  2




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PART I. FINANCIAL INFORMATION 
 Item 1. Financial Statements ALBERTSONS, INC. 
 CONDENSED CONSOLIDATED EARNINGS STATEMENTS
(in millions, except per share data)
(unaudited)
 13 weeks endedMay 5,
    
    
    April 29,2005
    
    
    2004Sales
    
    $
    9,993
    
    
    $
    8,612Cost of sales
    
    
    7,183
    
    
    
    6,184Gross profit
    
    
    2,810
    
    
    
    2,428Selling, general and administrative expenses
    
    
    2,517
    
    
    
    2,236Operating profit
    
    
    293
    
    
    
    192Other expenses (income):Interest, net
    
    
    132
    
    
    
    103Other, net
    
    
    (1
    )
    
    
    Earnings from continuing operations before income taxes
    
    
    162
    
    
    
    89Income tax expense
    
    
    55
    
    
    
    33Earnings from continuing operations
    
    
    107
    
    
    
    56Discontinued operations:Operating loss
    
    
    (1
    )
    
    
    (1
    )Loss on disposal
    
    
    (11
    )
    
    
    (30
    )Income tax benefit
    
    
    5
    
    
    
    11Loss from discontinued operations
    
    
    (7
    )
    
    
    (20
    )Net earnings
    
    $
    100
    
    
    $
    36Earnings (loss) per share:BasicContinuing operations
    
    $
    0.29
    
    
    $
    0.15Discontinued operations
    
    
    (0.02
    )
    
    
    (0.05
    )Net earnings
    
    
    0.27
    
    
    
    0.10DilutedContinuing operations
    
    $
    0.29
    
    
    $
    0.15Discontinued operations
    
    
    (0.02
    )
    
    
    (0.05
    )Net earnings
    
    
    0.27
    
    
    
    0.10Weighted average common shares outstanding:Basic
    
    
    370
    
    
    
    369Diluted
    
    
    371
    
    
    
    371
 See Notes to Condensed Consolidated Financial Statements 3




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ALBERTSONS, INC. 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except par value data)
(unaudited)
 May 5,
    
    
    February 3,2005
    
    
    2005ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    246
    
    
    $
    273Accounts and notes receivable, net
    
    
    663
    
    
    
    675Inventories
    
    
    3,166
    
    
    
    3,119Assets held for sale
    
    
    49
    
    
    
    43Prepaid and other
    
    
    227
    
    
    
    185Total Current Assets
    
    
    4,351
    
    
    
    4,295Land, buildings and equipment (net of accumulated depreciation
and amortization of $7,876 and $7,658, respectively)
    
    
    10,257
    
    
    
    10,472Goodwill
    
    
    2,285
    
    
    
    2,284Intangibles, net
    
    
    859
    
    
    
    868Other assets
    
    
    404
    
    
    
    392Total Assets
    
    $
    18,156
    
    
    $
    18,311LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    2,406
    
    
    $
    2,250Salaries and related liabilities
    
    
    589
    
    
    
    739Self-insurance
    
    
    261
    
    
    
    263Current maturities of long-term debt and capital lease obligations
    
    
    234
    
    
    
    238Other current liabilities
    
    
    551
    
    
    
    595Total Current Liabilities
    
    
    4,041
    
    
    
    4,085Long-term debt
    
    
    5,656
    
    
    
    5,792Capital lease obligations
    
    
    843
    
    
    
    857Self-insurance
    
    
    656
    
    
    
    632Other long-term liabilities and deferred credits
    
    
    1,504
    
    
    
    1,524Commitments and contingencies
    
    
    
    
    
    
    Stockholders EquityPreferred stock  $1.00 par value; authorized - 10 shares;
designated  3 shares of Series A Junior Participating; issued 
none
    
    
    
    
    
    
    Common stock  $1.00 par value; authorized - 1,200 shares; issued
 368 shares and 368 shares, respectively
    
    
    368
    
    
    
    368Capital in excess of par
    
    
    72
    
    
    
    66Accumulated other comprehensive loss
    
    
    (145
    )
    
    
    (145
    )Retained earnings
    
    
    5,161
    
    
    
    5,132Total Stockholders Equity
    
    
    5,456
    
    
    
    5,421Total Liabilities and Stockholders Equity
    
    $
    18,156
    
    
    $
    18,311
 See Notes to Condensed Consolidated Financial Statements 4




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ALBERTSONS, INC. 
 CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
(in millions)
(unaudited)
 13 weeks endedMay 5,
    
    
    April 29,2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net earnings
    
    $
    100
    
    
    $
    36Adjustments to reconcile net earnings to net cash
provided by operating activities:Depreciation and amortization
    
    
    291
    
    
    
    246Net deferred income taxes
    
    
    (17
    )
    
    
    90Discontinued operations noncash charges
    
    
    13
    
    
    
    33Other noncash charges
    
    
    5
    
    
    
    15Stock-based compensation
    
    
    5
    
    
    
    5Net (gain) loss on asset disposals
    
    
    (15
    )
    
    
    2Changes in operating assets and liabilities:Receivables and prepaid expenses
    
    
    (29
    )
    
    
    (70
    )Inventories
    
    
    (46
    )
    
    
    60Accounts payable
    
    
    155
    
    
    
    112Other current liabilities
    
    
    (174
    )
    
    
    (102
    )Self-insurance
    
    
    22
    
    
    
    15Unearned income
    
    
    (36
    )
    
    
    1Other long-term liabilities
    
    
    12
    
    
    
    22Net cash provided by operating activities
    
    
    286
    
    
    
    465CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (184
    )
    
    
    (220
    )Proceeds from disposal of land, buildings and equipment
    
    
    74
    
    
    
    5Proceeds from disposal of assets held for sale
    
    
    8
    
    
    
    27Other
    
    
    2
    
    
    
    (9
    )Net cash used in investing activities
    
    
    (100
    )
    
    
    (197
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net commercial paper activity
    
    
    (135
    )
    
    
    1,603Payments on long-term borrowings
    
    
    (9
    )
    
    
    (5
    )Dividends paid
    
    
    (70
    )
    
    
    (70
    )Proceeds from stock options exercised
    
    
    1
    
    
    
    6Net cash (used in) provided by financing activities
    
    
    (213
    )
    
    
    1,534Net (decrease) increase in cash and cash equivalents
    
    
    (27
    )
    
    
    1,802Cash and cash equivalents at beginning of period
    
    
    273
    
    
    
    561Cash and cash equivalents at end of period
    
    $
    246
    
    
    $
    2,363
 See Notes to Condensed Consolidated Financial Statements 5




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ALBERTSONS, INC. 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and shares in millions, except per share data)
(unaudited)
 NOTE 1  THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES Description of Business Albertsons, Inc. (Albertsons or the Company) is incorporated under the laws of the State of
Delaware and is the successor to a business founded by J.A. Albertson in 1939. Based on sales, the
Company is one of the largest retail food and drug chains in the world. As of May 5, 2005, the Company, through its divisions and subsidiaries, operated 2,500 stores in 37
states. The Company, through its divisions and subsidiaries, also operated 236 fuel centers near
existing stores. Retail operations are supported by 19 major Company distribution operations,
strategically located in the Companys operating markets. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the results of
operations, financial position and cash flows of the Company and its subsidiaries. All material
intercompany balances have been eliminated. In the opinion of management, the accompanying unaudited condensed consolidated financial
statements include all adjustments necessary to present fairly, in all material respects, the
results of operations of the Company for the periods presented. These condensed consolidated
financial statements have been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with accounting principles generally accepted in the
United States have been condensed or omitted pursuant to such rules and regulations. These
condensed consolidated financial statements should be read in conjunction with the consolidated
financial statements and accompanying notes included in the Companys 2004 Annual Report on Form
10-K, as amended (the Companys 2004 Annual Report on Form 10-K) for the fiscal year ended
February 3, 2005 filed with the Securities and Exchange Commission. The results of operations for
the 13 weeks ended May 5, 2005 are not necessarily indicative of results for a full year. The Companys Condensed Consolidated Balance Sheet as of February 3, 2005 has been derived from the
audited Consolidated Balance Sheet as of that date. Use of Estimates The preparation of the Companys consolidated financial statements, in conformity with accounting
principles generally accepted in the United States, requires management to make estimates and
assumptions. Some of these estimates require difficult, subjective or complex judgments about
matters that are inherently uncertain. As a result, actual results could differ from these
estimates. These estimates and assumptions affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Inventories The amount of vendor funds reducing the Companys inventory (inventory offset) as of May 5, 2005
was $137, an increase of $11 from February 3, 2005. The inventory offset was determined by
estimating the average inventory turnover rates by product category for the Companys grocery,
general merchandise and lobby departments (these departments received over three-quarters of the
Companys vendor funds in 2004) and by estimating the average inventory turnover rates by
department for the Companys remaining inventory. These results for the thirteen weeks ended May
5, 2005 include a $9 charge to adjust the prior year inventory offset and a credit of $10 to record
a related adjustment to the prior year LIFO reserve. The net impact of these two related
adjustments on gross margin was a credit of $1. Net earnings reflect the application of the LIFO method of valuing certain inventories. Quarterly
inventory determinations under LIFO are based on assumptions as to projected inventory levels at
the end of the year and the rate of inflation for the year. This determination resulted in pre-tax
LIFO expense of $6 for the 13 week period ended May 5, 2005, which was offset by the LIFO credit of
$10 related to prior year described above, for a net LIFO credit of $4. LIFO expense was $6 for the
13 week period ended April 29, 2004. 6




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NOTE 1  THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES  (CONT.) Stock-Based Compensation The Company accounts for stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees and
related interpretations. Accordingly, expense associated with stock-based compensation is measured
as the excess, if any, of the quoted market price of the Companys stock at the date of the grant
over the option exercise price and is charged to operations over the vesting period. Income tax
benefits attributable to stock options exercised are credited to capital in excess of par value.
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation as amended by SFAS No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure  An Amendment to Financial Accounting Standards Board (FASB) Statement No. 123,
encourages, but does not require, companies to record compensation cost for stock-based employee
compensation plans at fair value. If the fair value-based accounting method was utilized for
stock-based compensation, the Companys pro forma net earnings and earnings per share for the
periods presented below would have been as follows: 13 weeks endedMay 5,
    
    
    April 29,2005
    
    
    2004Net Earnings as reported
    
    $
    100
    
    
    $
    36Add: Stock-based compensation expense included in
reported net earnings, net of related tax effects
    
    
    3
    
    
    
    3Deduct: Total stock-based compensation expense
determined under fair value based method for all
awards, net of related tax effects
    
    
    (9
    )
    
    
    (11
    )Pro Forma Net Earnings
    
    $
    94
    
    
    $
    28Basic Earnings Per Share:As Reported
    
    $
    0.27
    
    
    $
    0.10Pro Forma
    
    
    0.25
    
    
    
    0.08Diluted Earnings Per Share:As Reported
    
    $
    0.27
    
    
    $
    0.10Pro Forma
    
    
    0.25
    
    
    
    0.08
 The pro forma net earnings resulted from reported net earnings less pro forma after-tax
compensation expense. The pro forma effect on net earnings is not representative of the pro forma
effect on net earnings in future periods. To calculate pro forma stock-based compensation expense
under SFAS No. 123, the Company estimated the fair value of each option grant on the date of grant,
using the Black-Scholes option pricing model with the following weighted average assumptions used
for grants in 2005 and 2004: risk-free interest rate of 4.00% and 3.01%, respectively, expected
dividend yield of 3.39% and 3.35%, respectively, expected lives of 6.0 and 6.0 years, respectively,
and expected stock price volatility of 37.60% and 38.90%, respectively. Reclassifications The Companys banking arrangements allow the Company to fund outstanding checks when presented to
the financial institution for payment. This cash management practice frequently results in total
issued checks exceeding available cash balances at a single financial institution. As of May 5,
2005, the Company has recorded its cash disbursement accounts with a net cash book overdraft
position in accounts payable. The Company believes this presentation of cash is preferable under
generally accepted accounting principles. Previously, the Company had reported these balances in
cash and cash equivalents. The condensed consolidated statement of cash flows for the prior period
has been adjusted to conform to this presentation. Net earnings were not impacted by this change.
At May 5, 2005 and February 3, 2005 the Company had net cash book overdrafts of $244 and $294,
respectively, classified in accounts payable. Certain other reclassifications have been made in the prior periods financial statements to
conform to classifications used in the current year. 7




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NOTE 2  NEW AND RECENTLY ADOPTED ACCOUNTING STANDARDS In May 2004, the FASB issued Staff Position No. FAS 106-2, Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (SFAS No.
106-2). SFAS No. 106-2 supersedes SFAS No. 106-1, Accounting and Disclosure Requirements Related
to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 and provides guidance
on the accounting and disclosure related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the Medicare Act), which was signed into law in December 2003. SFAS
No. 106-2 is effective beginning in the third fiscal quarter of 2005. The impact of the Medicare
Act and SFAS No. 106-2 is not expected to have a material effect on the Companys consolidated
financial statements. In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB No. 43,
Chapter 4 (SFAS No. 151). SFAS No. 151 clarifies that inventory costs that are abnormal are
required to be charged to expense as incurred as opposed to being capitalized into inventory as a
product cost. SFAS No. 151 provides examples of abnormal costs to include costs of idle
facilities, excess freight and handling costs, and wasted materials (spoilage). SFAS No. 151 is
effective for the Companys fiscal year beginning February 3, 2006. The impact of SFAS No. 151 is
not expected to have a material effect on the Companys consolidated financial statements. In December 2004, the FASB issued SFAS No. 123 (Revised 2004), Share-Based Payment (SFAS
123(R)). SFAS 123(R) addresses the accounting for share-based payments to employees, including
grants of employee stock options. Under the new standard, companies will no longer be able to
account for share-based compensation transactions using the intrinsic value method in accordance
with APB Opinion No. 25, Accounting for Stock Issued to Employees. Instead, companies will be
required to account for such transactions using a fair-value method and recognize the expense in
the consolidated earnings statements. The Company intends to adopt SFAS 123(R) using the modified
prospective transition method beginning with the first quarter of 2006. Under this method, awards
that are granted, modified or settled after February 3, 2006, will be measured and accounted for
in accordance with SFAS 123(R). In addition, in the Companys first quarter of 2006, expense must
be recognized in the earnings statement for unvested awards that were granted prior to the start of
the Companys first quarter of 2006. The expense will be based on the fair value determined at
grant date under SFAS 123, Accounting for Stock-Based Compensation. The Company estimates that
earnings per share in 2006 will be reduced by approximately $0.07 per diluted share as a result of
implementing SFAS 123(R). However, the calculation of compensation cost for share-based payment
transactions after the effective date of SFAS 123(R) may be different from the calculation of
compensation cost under SFAS 123, but such differences have not yet been quantified. In March 2005, the FASB issued FIN 47, Accounting for Conditional Asset Retirement Obligations 
an interpretation of FASB Statement No. 143 (FIN 47). FIN 47 clarifies that the term
conditional asset retirement obligation as used in FASB Statement No. 143 Accounting for Asset
Retirement Obligations, refers to a legal obligation to perform an asset retirement activity in
which the timing and (or) method of settlement are conditional on a future event that may or may
not be within the control of the entity. Accordingly, an entity is required to recognize a
liability for the fair value of a conditional asset retirement obligation if the fair value of the
liability can be reasonably estimated. FIN 47 is effective at the end of the Companys fiscal year
ending February 2, 2006. The impact of FIN 47 is not expected to have a material effect on the
Companys consolidated financial statements. NOTE 3  BUSINESS ACQUISITIONS Shaws On April 30, 2004, the Company acquired all of the outstanding capital stock of the entity which
conducted J Sainsbury plcs U.S. retail grocery store business (Shaws). The results of Shaws
operations have been included in the Companys consolidated financial statements since that date.
The operations acquired consist of 206 grocery stores in the New England area operated under the
banners of Shaws and Star Market. The Company acquired Shaws for a variety of reasons, including
attractive market share positions and real estate, the opportunity to realize numerous synergies
and strong historical financial performance. The aggregate purchase price was $2,578, which included $2,134 of cash, $441 of assumed capital
lease obligations and debt and $3 of transaction costs. The Company used a combination of
cash-on-hand and the proceeds of the issuance of $1,603 of commercial paper to finance the
acquisition. The Company used the net proceeds from a subsequent mandatory convertible security
offering (see Note 7  Indebtedness to the Condensed Consolidated Financial Statements) to repay
$1,117 of such commercial paper. 8




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NOTE 3  BUSINESS ACQUISITIONS  (CONT.) The following table summarizes the estimated fair values of the assets acquired and liabilities
assumed at the date of acquisition. The initial purchase price allocations were based on a
combination of third-party valuations and internal analyses and were adjusted during the allocation
period in accordance with SFAS No. 141, Business Combinations. RevisedInitial Purchase
    
    
    Purchase Price
    
    
    Purchase PricePrice Allocation
    
    
    Adjustments
    
    
    AllocationCurrent assets
    
    $
    444
    
    
    $
    42
    
    
    $
    486Land, buildings and equipment
    
    
    1,378
    
    
    
    (20
    )
    
    
    1,358Goodwill
    
    
    840
    
    
    
    (37
    )
    
    
    803Intangible assets
    
    
    766
    
    
    
    (17
    )
    
    
    749Other assets
    
    
    23
    
    
    
    
    
    
    
    23Total assets acquired
    
    $
    3,451
    
    
    $
    (32
    )
    
    $
    3,419Current liabilities
    
    $
    417
    
    
    $
    7
    
    
    $
    424Long-term debt
    
    
    441
    
    
    
    
    
    
    
    441Other liabilities
    
    
    456
    
    
    
    (39
    )
    
    
    417Total liabilities assumed
    
    
    1,314
    
    
    
    (32
    )
    
    
    1,282Net assets acquired
    
    $
    2,137
    
    
    $
    
    
    
    $
    2,137
 Acquired intangible assets include $399 assigned to trade names not subject to amortization, $308
assigned to favorable operating leases (13-year weighted average useful life), $36 assigned to a
customer loyalty program (7-year useful life), $5 assigned to pharmacy prescriptions (7-year useful
life), and other assets of $1 (18-year useful life). With the exception of trade names, the
remaining intangible assets are amortized on a straight-line basis over their expected useful
lives. As part of the purchase price allocation, the fair values of operating leases were calculated, a
portion of which represents favorable operating leases compared with current market conditions and
a portion of which represents unfavorable operating leases compared with current market conditions.
The favorable leases totaled $308 and are included in Intangibles, net in the Companys Condensed
Consolidated Balance Sheets. The unfavorable leases totaled $192, have an estimated weighted
average life of 18 years and are included in Other long-term liabilities and deferred credits in
the Companys Condensed Consolidated Balance Sheets. The excess of the purchase price over the fair value of assets acquired and liabilities assumed was
allocated to goodwill. Of the $803 recorded in goodwill, $95 is expected to be deductible for tax
purposes over the next 14 years. Bristol Farms On September 21, 2004, the Company acquired New Bristol Farms, Inc. (Bristol Farms) for $137 in
cash. As of May 5, 2005, Bristol Farms operated 11 gourmet retail stores in Southern California.
This transaction was accounted for using the purchase method and, accordingly, the purchase price
has been allocated on a preliminary basis to the fair value of the tangible and identifiable
intangible assets acquired as determined by third-party valuations and internal analyses. The
purchase price was allocated as follows: $52 in assets, $17 in liabilities, $21 in trade names not
subject to amortization and $81 in goodwill. 9




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NOTE 3  BUSINESS ACQUISITIONS  (CONT.) The following unaudited pro forma financial information presents the combined results of operations
of the Company, Shaws and Bristol Farms as if the acquisitions had occurred on January 30, 2004.
Shaws fiscal year ended on February 28, 2004, and Bristol Farms fiscal year ended on May 2, 2004.
The unaudited pro forma financial information uses Shaws and Bristol Farms data for the periods
corresponding to the Companys fiscal year. This unaudited pro forma financial information is not
intended to represent or be indicative of what would have occurred if the transactions had taken
place on the dates presented and should not be taken as representative of the Companys future
consolidated results of operations or financial position. The pro forma information does not
reflect any potential synergies or integration costs. 13 weeks endedApril 29,2004Sales
    
    $
    9,781Net earnings
    
    
    59Earnings per share:Basic
    
    $
    0.16Diluted
    
    
    0.16
 NOTE 4 DISCONTINUED OPERATIONS, RESTRUCTURING ACTIVITIES AND CLOSED STORES The Company has a process to review its asset portfolio in an attempt to maximize returns on its
invested capital. As a result of these reviews, in recent years the Company has closed and
disposed of a number of properties through market exits, restructuring activities and on-going
store closures. The Company recognizes lease liability reserves and impairment charges associated
with these transactions. Summarized below are the significant transactions the Company has
undertaken and the related lease accrual activity. Discontinued Operations In April 2005 the Company entered into a definitive agreement to sell its operations in the
Jacksonville, Florida market, which consisted of seven operating stores, four of which are owned.
The lease agreements associated with the three leased properties will be assumed by the buyer. The
transaction is expected to close in the second quarter of 2005. Results of operations for those
stores have been reclassified and presented as discontinued operations for the 13 week periods
ended May 5, 2005 and April 29, 2004. As of May 5, 2005, the Company classified the seven
properties with a value of $14 as Assets held for sale in the Condensed Consolidated Balance Sheet. In June 2004 the Company announced its plan to sell, close or otherwise dispose of its operations
in the Omaha, Nebraska market, which consisted of 21 operating stores. Results of operations for
those stores have been reclassified and presented as discontinued operations for the 13 week
periods ended May 5, 2005 and April 29, 2004. As of May 5, 2005, the Company had disposed of 15
properties, resulting in six properties with a value of $2 classified as Assets held for sale in
the Condensed Consolidated Balance Sheet. In April 2004 the Company announced its plan to sell, close or otherwise dispose of its operations
in the New Orleans, Louisiana market, which consisted of seven operating stores and three
non-operating properties. Results of operations for those stores and properties have been
reclassified and presented as discontinued operations for the 13 week periods ended May 5, 2005 and
April 29, 2004. As of May 5, 2005, the Company had disposed of six properties, resulting in four
properties with a value of $15 classified as Assets held for sale in the Condensed Consolidated
Balance Sheet. In 2002 the Company announced its plan to sell, close or otherwise dispose of its operations in
four underperforming markets: Memphis, Tennessee; Nashville, Tennessee; Houston, Texas; and San
Antonio, Texas. This involved the sale or closure of 95 stores and two distribution centers. As of
May 5, 2005, the Company had disposed of 84 properties, resulting in 13 properties with a value of
$2 classified as Assets held for sale in the Condensed Consolidated Balance Sheet. Discontinued operations stores generated sales of $20 and $100 for the 13 week periods ended May 5,
2005 and April 29, 2004, respectively. The loss from discontinued operations of $7 for the 13 week
period ended May 5, 2005 consisted of loss from operations of $1, a write down of fixed assets of
$11, and an income tax benefit of $5. The loss from discontinued operations of $20 for the 13 week
period ended April 29, 2004 consisted of a loss from operations
of $1, a write down of fixed assets
and lease settlements of $30, and an income tax benefit of $11. 10




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NOTE 4 DISCONTINUED OPERATIONS, RESTRUCTURING ACTIVITIES AND CLOSED STORES  (CONT.) Restructuring Activities In 2001 the Company committed to a plan to restructure its operations by 1) closing 165
underperforming stores, 2) closing four division offices, 3) centralizing processing functions to
its corporate offices, and 4) reducing overall store support center headcount. As of May 5, 2005,
the Company had disposed of 137 properties, resulting in 28 properties with a value of $1
classified as Assets held for sale in the Condensed Consolidated Balance Sheet. The following table summarizes the accrual activity for future lease obligations related to
discontinued operations, restructuring activities and closed stores: Balance
    
    
    
    
    
    
    BalanceFebruary 3,
    
    
    
    
    
    
    May 5,2005
    
    
    Payments
    
    
    20052004 Discontinued Operations
    
    $
    2
    
    
    $
    
    
    
    $
    22002 Discontinued Operations
    
    
    6
    
    
    
    (1
    )
    
    
    52001 Restructuring Activities
    
    
    12
    
    
    
    
    
    
    
    12Closed Stores
    
    
    22
    
    
    
    (3
    )
    
    
    19$
    42
    
    
    $
    (4
    )
    
    $
    38
 NOTE 5  INTANGIBLES The carrying amount of intangibles was as follows: May 5,
    
    
    February 3,2005
    
    
    2005Amortizing:Favorable acquired operating leases
    
    $
    497
    
    
    $
    500Customer lists and other contracts
    
    
    32
    
    
    
    30Loyalty card and other
    
    
    37
    
    
    
    37566
    
    
    
    567Accumulated amortization
    
    
    (166
    )
    
    
    (158
    )400
    
    
    
    409Non-Amortizing:Trade names
    
    
    420
    
    
    
    420Liquor licenses
    
    
    39
    
    
    
    39459
    
    
    
    459$
    859
    
    
    $
    868
 At May 5, 2005, amortizing intangible assets had remaining useful lives from less than one year to
37 years. Projected amortization expense (net of amortization of unfavorable acquired operating
lease liabilities) for existing intangible assets is $26, $21, $19, $19 and $19 for 2005, 2006,
2007, 2008 and 2009, respectively. 11




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NOTE 6  EMPLOYEE BENEFIT PLANS The following represents the components of net
periodic pension benefits: Pension Benefits13 weeks endedMay 5,
    
    
    April 29,2005
    
    
    2004Service cost  benefits earned during the period
    
    $
    9
    
    
    $
    4Interest cost on projected benefit obligations
    
    
    16
    
    
    
    11Expected return on assets
    
    
    (16
    )
    
    
    (10
    )Amortization of prior service (credit)
    
    
    (2
    )
    
    
    (2
    )Recognized net actuarial loss
    
    
    4
    
    
    
    4Net periodic benefit expense
    
    $
    11
    
    
    $
    7
 Postretirement Benefits
amounts were less than $1 for the 13 week periods ended May 5, 2005 and
April 29, 2004. During the first quarter of 2005, the Company made no contributions to its defined benefit plans. NOTE 7  INDEBTEDNESS Revolving Credit Facilities At May 5, 2005, the Company had three revolving credit facilities totaling $1,400. The first
agreement, a 364-Day revolving credit facility with total availability of $400, will expire on June
16, 2005. The Company intends to replace this facility with a new five-year facility prior to its
expiration. The second agreement, a five-year facility for $900, will expire in June 2009. The
third agreement, a five-year facility for $100, will expire in July 2009. The 364-Day credit
agreement contains an option which would allow the Company, upon due notice, to convert any
outstanding amount at the expiration date to a term loan. The three existing agreements contain
two financial covenants: 1) a minimum fixed charge coverage ratio and 2) a maximum consolidated
leverage ratio, each as defined in the credit facilities. Under these facilities, the fixed charge
coverage ratio shall not be less than 2.5 to 1 through April 30, 2005, 2.6 to 1 through April 30,
2006 and 2.7 to 1 thereafter and the consolidated leverage ratio shall not exceed 4.5 to 1 through
April 30, 2006, 4.25 to 1 through April 30, 2007 and 4.0 to 1 thereafter. As of May 5, 2005, the
Company was in compliance with these requirements. No borrowings were outstanding under these
credit facilities as of May 5, 2005 or February 3, 2005. The Company had $214 and $349 outstanding in commercial paper borrowings at May 5, 2005, and
February 3, 2005, respectively. These outstanding borrowings are backed by the three revolving
credit facilities. Mandatory Convertible Security Offering In May 2004 the Company completed a public offering registered with the Securities and Exchange
Commission of 40,000,000 of 7.25% mandatory convertible securities (Corporate Units), yielding
net proceeds of $971. In June 2004 the underwriters purchased an additional 6,000,000 Corporate
Units pursuant to an over-allotment option, yielding net proceeds of $146. Each Corporate Unit
consists of a purchase contract and, initially, a 2.5% ownership interest in one of the Companys
senior notes with a principal amount of one thousand dollars, which corresponds to a twenty-five
dollar principal amount of senior notes. The ownership interest in the senior notes is initially
pledged to secure the Corporate Unit holders obligation to purchase Company common stock under the
related purchase contract. The senior notes bear an annual interest rate of 3.75%. In the first
half of 2007 the aggregate principal amount of the senior notes will be remarketed, which may
result in a change in the interest rate and maturity date of the senior notes. Proceeds from a
successful remarketing would be used to satisfy in full each Corporate Unit holders obligation to
purchase common stock under the related purchase contract. If the senior notes are not
successfully remarketed, the holders will have the right to put their senior notes to the Company
to satisfy their obligations under the purchase contract. The purchase contracts yield 3.5% per
year on the stated amount of twenty-five dollars. 12




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##### Table of Contents



NOTE 7  INDEBTEDNESS  (CONT.) Each purchase contract obligates the holder to purchase, and the Company to sell, at a purchase
price of twenty-five dollars in cash, shares of the Companys common stock on or before May 16,
2007 (the Purchase Contract Settlement Date). Generally, the number of shares each holder of the
Corporate Units is obligated to purchase depends on the average closing price per share of the
Companys common stock over a 20-day trading period ending on the third trading day immediately
preceding the Purchase Contract Settlement Date (the Trading Period), subject to anti-dilution
adjustments. If the average closing price of the Companys common stock for the Trading Period is
equal to or greater than $28.82 per share, the settlement rate will be 0.8675 shares of common
stock. If the average closing price for the Trading Period is less than $28.82 per share but
greater than $23.06 per share, the settlement rate is equal to twenty-five dollars divided by the
average closing price of the Companys common stock for the Trading Period. If the average closing
price for the Trading Period is less than or equal to $23.06 per share, the settlement rate will be
1.0841 shares of common stock. The holders of Corporate Units have the option to settle their
obligations under the purchase contracts at any time on or prior to the fifth business day
immediately preceding the Purchase Contract Settlement Date. The purchase contracts are forward transactions in the Companys common stock. Upon issuance, a
liability for the present value of the purchase contract adjustment payments of $114 was recorded
as a reduction (charge) to stockholders equity, with an offsetting increase (credit) to other
long-term liabilities and current liabilities. Subsequent contract adjustment payments will reduce
this liability. Upon settlement of each purchase contract, the Company will receive the stated
amount of twenty-five dollars on the purchase contract and will issue the requisite number of
shares of common stock. The stated amount received will be recorded as an increase (credit) to
stockholders equity. Before the issuance of common stock upon settlement of the purchase contracts, the Corporate Units
will be reflected in diluted earnings per share calculations using the treasury stock method as
defined by SFAS No. 128, Earnings Per Share. Under this method, the number of shares of common
stock used in calculating diluted earnings per share (based on the settlement formula applied at
the end of the reporting period) is deemed to be increased by the excess, if any, of the number of
shares that would be issued upon settlement of the purchase contracts less the number of shares
that could be purchased by the Company in the market at the average market price during the period
using the proceeds to be received upon settlement. Therefore, dilution will occur for periods when
the average market price of the Companys common stock for the reporting period is above $28.82,
and will potentially occur when the average price of the Companys common stock for the 20-day
trading period preceding the end of the reporting period is lower than the average price of the
Companys common stock for the full reporting period. These securities were not dilutive during
the first quarter of 2005. Both the FASB and the EITF continue to study the accounting for financial instruments and
derivative instruments, including instruments such as the Corporate Units. It is possible that the
Companys accounting for the Corporate Units could be affected by new accounting rules that might
be issued by these groups. Accordingly, there can be no assurance that the method in which the
Corporate Units are reflected in the Companys diluted earnings per share will not change in the
future if accounting rules or interpretations evolve. Shelf Registration The Company filed a shelf registration statement with the Securities and Exchange Commission, which
became effective on February 13, 2001 (2001 Registration Statement), to authorize the issuance of
up to $3,000 in debt securities. The Company intends to use the net proceeds of any securities
sold pursuant to the 2001 Registration Statement for retirement of debt and general corporate
purposes, including the potential purchase of outstanding shares of the Companys common stock. As
of May 5, 2005, $2,400 of debt securities remain available for issuance under the 2001 Registration
Statement; however there can be no assurance that the Company will be able to issue debt securities
under this registration statement at terms acceptable to the Company. NOTE 8  CONTINGENCIES The Company is subject to various lawsuits, claims and other legal matters that arise in the
ordinary course of conducting business. In April 2000 a class action complaint was filed against Albertsons as well as American Stores
Company, American Drug Stores, Inc., Sav-on Drug Stores, Inc. and Lucky Stores, Inc., wholly owned
subsidiaries of the Company, in the Superior Court for the County of Los Angeles, California
(Gardner, et al. v. American Stores Company, et al.) by assistant managers seeking recovery of
overtime pay based upon plaintiffs allegation that they were improperly classified as exempt under
California law. In May 2001 a class action with respect to Sav-on Drug Stores assistant managers
was certified by the court. A case with very similar claims, involving the Sav-on Drug Stores
assistant managers and operating managers, was also filed in April 2000 against the Companys
subsidiary Sav-on Drug Stores, Inc. in the Superior Court for the County of Los Angeles, California
(Rocher, Dahlin, et al. v. Sav-on Drug Stores, Inc.) and was also certified as a class action. In
April 2002 the Court of Appeal of the State of California Second Appellate District reversed the
Rocher class certification, leaving only two plaintiffs. However, on August 26, 2004, the
California Supreme Court reversed this decision and remanded the case to the trial court. The
Company continues to believe it has strong defenses against these lawsuits and is vigorously
defending them. Although these lawsuits are subject to the uncertainties inherent in the
litigation process, based on the information presently available to the Company, management does
not expect that the ultimate resolution of these lawsuits will have a material adverse effect on
the Companys financial condition, results of operations or cash flows. In August 2000 a class action complaint was filed against Jewel Food Stores, Inc., an indirect
wholly owned subsidiary of the Company and Dominicks Finer Foods, Inc. in the Circuit Court of
Cook County, Illinois alleging milk price fixing (Maureen Baker et al. v. Jewel Food Stores, Inc.
and Dominicks Finer Foods, Inc., Case No. 00L 009664). In February 2003, the trial court found in
favor of the defendants and dismissed the case with prejudice. On January 12, 2005, the Illinois
Appellate Court upheld the trial courts dismissal of the case and on May 25, 2005, the Illinois
Supreme Court denied the plaintiffs petition for leave to appeal. In September 2000 an agreement was reached and court approval granted, to settle eight purported
class and/or collective actions which were consolidated in the United States District Court in
Boise, Idaho and which raised various issues including off-the-clock work allegations and
allegations regarding certain salaried grocery managers exempt status. 13




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NOTE 8  CONTINGENCIES  (CONT.) Under the settlement agreement, current and former employees who met
eligibility criteria have been allowed to present their off-the-clock work claims to a settlement
administrator. Additionally, current and former grocery managers employed in the State of
California have been allowed to present their exempt status claims to a settlement administrator.
The Company mailed notices of the settlement and claims forms to approximately 70,500 associates
and former associates. Approximately 6,000 claim forms were returned, of which approximately 5,000
were deemed by the settlement administrator to be incapable of valuation, presumed untimely, or
both (the Unvalued Claims). The claims administrator was able to assign a value to approximately
1,080 claims, which amount to a total of approximately $14, although the value of many of those
claims is still subject to challenge by either party. Two other claims processes occurred during
fiscal 2004. First, there was a supplemental mailing and in-store posting directed toward a
narrow-subset of current and former associates. This process resulted in approximately 260
individuals submitting claims documents. These documents are being assessed. Second, in response
to the Courts instruction to plaintiffs counsel to submit supplemental and/or corrected
information for the Unvalued Claims, plaintiffs counsel submitted such information for
approximately 4,700 of the Unvalued Claims. This information is being assessed. The value of
these claims will likewise be subject to challenge by either party. The Company is presently
unable to determine the amounts that it may ultimately be required to pay with respect to all
claims properly submitted. Based on the information presently available to it, management does not
expect that the satisfaction of valid claims submitted pursuant to the settlement will have a
material adverse effect on the Companys financial condition, results of operations or cash flows. On October 13, 2000, a complaint was filed in Los Angeles County Superior Court (Joanne Kay
Ward et al. v. Albertsons, Inc. et al.) alleging that Albertsons, Lucky Stores and Sav-on Drug
Stores paid terminating employees their final paychecks in an untimely manner. The lawsuit seeks
statutory penalties. On January 4, 2005, the case was certified as a class action. The Company
believes that it has strong defenses against this lawsuit and is vigorously defending it. Although
this lawsuit is subject to the uncertainties inherent in the litigation process, based on the
information presently available to the Company, management does not expect that the ultimate
resolution of this lawsuit will have a material adverse effect on the Companys financial
condition, results of operations or cash flows. On February 2, 2004, the Attorney General for the State of California filed an action in Los
Angeles federal court (California, ex rel Lockyer v. Safeway, Inc. dba Vons, a Safeway Company;
Albertsons, Inc. and Ralphs Grocery Company, a division of The Kroger Co., United States District
Court Central District of California, Case No. CV04-0687) claiming that certain provisions of the
agreements (the Labor Dispute Agreements) between the Company, The Kroger Co. and Safeway Inc.
(the Retailers) which provided for lock-outs in the event that any Retailer was struck at any
or all of its Southern California facilities during the 2003-2004 labor dispute in Southern
California when the other Retailers were not and contained a provision designed to prevent the
union from placing disproportionate pressure on one or more Retailer by picketing such Retailer(s)
but not the other Retailer(s) during the labor dispute violate section 1 of the Sherman Act. The
lawsuit seeks declarative and injunctive relief. The Retailers motion for summary
judgment was
denied on May 26, 2005.
This decision has been appealed and
 the Company continues to believe it has strong defenses against
this lawsuit and is vigorously defending it. Although this lawsuit is subject to uncertainties
inherent in the litigation process, based on the information presently available to the Company,
management does not expect that the ultimate resolution of this action will have a material adverse
effect on the Companys financial condition, results of operations or cash flows. In March 2004 a lawsuit seeking class action status was filed against Albertsons in the Superior
Court of the State of California in and for the County of Alameda, California (Dunbar v.
Albertsons, Inc.) by a grocery manager seeking recovery including overtime pay based upon
plaintiffs allegation that he and other grocery managers were improperly classified as exempt
under California law. The Dunbar case is currently in discovery, and a class certification hearing
is scheduled for June 2005. The Company continues to believe it has strong defenses against this
lawsuit and is vigorously defending it. Although this lawsuit is subject to the uncertainties
inherent in the litigation process, based on the information presently available to the Company,
management does not expect that the ultimate resolution of this lawsuit will have a material
adverse effect on the Companys financial condition, results of operations or cash flows. In July 2004, a case similar to Dunbar involving salaried drug/merchandise managers was filed in
the same court (Victoria A. Moore, et al. v. Albertsons, Inc.). In March 2005, the parties
reached a tentative settlement, which remains subject to court approval. Based on information
presently available to the Company, payments under this settlement should not have a material
adverse effect on the Companys financial condition, results of operations or cash flows. The Company has outstanding workers compensation and general liability claims with a former
insurance carrier that is experiencing financial difficulties. If the insurer fails to pay any
covered claims that exceed deductible limits, creating excess claims, the Company may have the
ability to present these excess claims to guarantee funds in certain states in which the claims
originated. As of May 5, 2005, the insurance carrier continues to pay the Companys claims. The
Company currently cannot estimate the amount of the covered claims in excess of deductible limits
which will not be paid by the insurance carrier or otherwise. Although the Company currently
believes that it may recover at least some of these excess claim amounts, the unrecoverable amount
could be material. The Company is in discussions with the carrier regarding transfer of primary
claim responsibility back to the Company in exchange for a payment, which payment may be less than
the projected claim liability. The Company is presently unable to determine the outcome of these
discussions. The Company is also involved in routine legal proceedings incidental to its operations. Some of
these routine proceedings involve class allegations, many of which are ultimately dismissed.
Management does not expect that the ultimate resolution of these legal proceedings will have a
material adverse effect on the Companys financial condition, results of operations or cash flows. 14




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##### Table of Contents



NOTE 8  CONTINGENCIES  (CONT.) The statements above reflect managements current expectations based on the information presently
available to the Company. However, predicting the outcomes of claims and litigation and estimating
related costs and exposures involve substantial uncertainties that could cause actual outcomes,
costs and exposures to vary materially from current expectations. In addition, the Company
regularly monitors its exposure to the loss contingencies associated with these matters and may
from time to time change its predictions with respect to outcomes and its estimates with respect to
related costs and exposures. It is possible that material differences in actual outcomes, costs
and exposures relative to current predictions and estimates, or material changes in such
predictions or estimates, could have a material adverse effect on the Companys financial
condition, results of operations or cash flows. 15




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##### Table of Contents



NOTE 9  INCOME TAXES The Companys effective tax rate from continuing operations for the 13 week period ended May 5,
2005 was 33.8% as compared to 37.5% for the 13 week period ended April 29, 2004. This decrease in
the 13 week period ended
May 5, 2005 was primarily due to a net $8 reduction of previously recorded reserves resulting from
a revision of the required reserves during the quarter. NOTE 10  COMPUTATION OF EARNINGS PER SHARE 13 weeks endedMay 5, 2005
    
    
    April 29, 2004Basic
    
    
    Diluted
    
    
    Basic
    
    
    DilutedEarnings (loss) from:Continuing operations
    
    $
    107
    
    
    $
    107
    
    
    $
    56
    
    
    $
    56Discontinued operations
    
    
    (7
    )
    
    
    (7
    )
    
    
    (20
    )
    
    
    (20
    )Net earnings
    
    $
    100
    
    
    $
    100
    
    
    $
    36
    
    
    $
    36Weighted average common shares outstanding
    
    
    370
    
    
    
    370
    
    
    
    369
    
    
    
    369Potential common share equivalents
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    2Weighted average shares outstanding
    
    
    
    
    
    
    371
    
    
    
    
    
    
    
    371Earnings (loss) per common share and common
share equivalents:Continuing operations
    
    $
    0.29
    
    
    $
    0.29
    
    
    $
    0.15
    
    
    $
    0.15Discontinued operations
    
    
    (0.02
    )
    
    
    (0.02
    )
    
    
    (0.05
    )
    
    
    (0.05
    )Net earnings
    
    
    0.27
    
    
    
    0.27
    
    
    
    0.10
    
    
    
    0.10Calculation of potential common share
equivalents:Potential
common shares assumed issued from exercise of the Corporate Units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options to purchase potential common shares
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    20Potential common shares assumed purchased
with potential proceeds
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    (18
    )Potential common share equivalents
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    2Calculation of potential common shares
assumed purchased with potential proceeds:Potential proceeds from assumed
exercise of
the Corporate Units
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Potential proceeds from exercise of
options
to purchase common shares
    
    
    
    
    
    
    177
    
    
    
    
    
    
    
    407Total assumed proceeds from exercise
    
    
    
    
    
    $
    177
    
    
    
    
    
    
    $
    407Common stock price used under treasury
stock method
    
    
    
    
    
    $
    20.97
    
    
    
    
    
    
    $
    23.19Potential common shares assumed
purchased with potential proceeds
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    18
 Outstanding options excluded for the 13 week periods ended May 5, 2005 and April 29, 2004, because
the option price exceeded the average market price during the period, amounted to 31.5 shares and
17.9 shares, respectively. 16




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Albertsons, Inc.
Boise, Idaho We have reviewed the accompanying condensed consolidated balance sheet of Albertsons, Inc. and
subsidiaries (Albertsons) as of May 5, 2005, and the related condensed consolidated earnings
statements and cash flow statements for the thirteen week periods ended May 5, 2005 and April 29,
2004. These interim financial statements are the responsibility of Albertsons management. We conducted our reviews in accordance with standards of the Public Company Accounting Oversight
Board (United States) (PCAOB). A review of interim financial information consists principally of
applying analytical procedures and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in accordance with
standards of the PCAOB, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to such
condensed consolidated interim financial statements for them to be in conformity with accounting
principles generally accepted in the United States of America. We have previously audited, in accordance with standards of the PCAOB, the consolidated balance
sheet of Albertsons as of February 3, 2005, and the related consolidated statements of earnings,
stockholders equity, and cash flow for the year then ended (not presented herein); and in our
report dated March 31, 2005, we expressed an unqualified opinion on those consolidated financial
statements and included an explanatory paragraph relating to changes in methods of accounting for
goodwill, closed stores and vendor funds. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of February 3, 2005, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it has been derived. /S/ DELOITTE & TOUCHE LLP Boise, Idaho
June 8, 2005 17




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##### Table of Contents



ALBERTSONS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(dollars in millions, except per share data) 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Overview A variety of factors have impacted the comparability of the Companys results of operations for the
13 week periods ended May 5, 2005 and April 29, 2004, all as more fully described below. The
principal factors affecting comparability are the continuation of the Southern California labor
dispute into the first quarter of fiscal 2004 and the Companys ongoing recovery from the dispute,
the Companys acquisition of J Sainsbury plcs U.S. retail grocery store business (Shaws) on
April 30, 2004, and the Companys investments in pricing, promotions and advertising during the
current period. Shaws Acquisition On April 30, 2004, the Company acquired all of the outstanding capital stock of Shaws. The
operations acquired consist of 206 grocery stores in the New England area operated under the
banners of Shaws and Star Market. The Company acquired Shaws for a variety of reasons, including
attractive market share positions and real estate, the opportunity to realize numerous synergies
and strong historical financial performance. The aggregate purchase price was $2,578, which included $2,134 of cash, $441 of assumed capital
lease obligations and debt and $3 of transaction costs. The Company used a combination of
cash-on-hand and the proceeds of the issuance of $1,603 of commercial paper to finance the
acquisition. The Company used the net proceeds from a subsequent mandatory convertible security
offering (see Note 7  Indebtedness to the Condensed Consolidated Financial Statements) to repay
$1,117 of such commercial paper. Bristol Farms Acquisition On September 21, 2004, the Company acquired New Bristol Farms, Inc. (Bristol Farms) for $137 in
cash. As of May 5, 2005, Bristol Farms operated 11 gourmet retail stores in Southern California. Southern California Labor Dispute The Company, The Kroger Co. and Safeway Inc. (the Retailers) engaged in multi-employer bargaining
with the United Food and Commercial Workers (UFCW) in connection with the Labor Dispute and, as a
result, the Retailers entered into agreements (Labor Dispute Agreements) that, among other
things, were designed to prevent the union from placing disproportionate pressure on one or more
Retailer. The Labor Dispute Agreements provided for payments from any of the Retailers who gained
from such disproportionate pressure to any of the Retailers who suffered from such disproportionate
pressure. Amounts earned by the Company under the terms of the Labor Dispute Agreements totaled
$17, $43 and $3 in the 13 week periods ended April 29, 2004, January 29, 2004 and October 30, 2003,
respectively. Amounts earned were recorded as a reduction to Selling, general and administrative
expenses in the respective periods and all amounts were collected during the 13 week period ended
July 29, 2004. Results of Operations 13 Week Period Ended May 5, 2005 Sales were $9,993 and $8,612 for the 13 week periods ended May 5, 2005 and April 29, 2004,
respectively. The increase in sales was primarily due to sales from the 206 stores acquired in the
Shaws transaction and the 11 stores acquired from Bristol Farms. In addition, the Company
experienced increased sales as compared to the prior year in Southern California as a result of the
Labor Disputes negative impact on sales in the first quarter of 2004. However, sales were
unfavorably impacted by competitive pressures primarily in markets such as Dallas/Ft. Worth and
those in which the Company does not have a number one or number two market share position. Management estimates that overall inflation in the cost of the products the Company sells was
approximately 0.97% in the 12 months ended May 5, 2005. Identical store sales increased 1.6% for the 13 week period ended May 5, 2005 compared to the 13
week period ended April 29, 2004. Identical stores are defined as stores that have been in
operation for both full fiscal periods. Comparable store sales, which use the same store base as
the identical store sales computation but includes sales at replacement stores, increased 1.8% for
the 13 week period ended May 5, 2005. Increases in both identical and comparable store sales for
the 13 week period ended May 5, 2005 were due to the Labor Disputes negative impact on sales
during the prior year. The 206 acquired Shaws stores and the 11 acquired Bristol Farms stores are
not included in the Companys identical or comparable store sales computations, as defined above,
and will not be included until the second and fourth quarters of 2005, respectively. 18




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##### Table of Contents



During the 13 week period ended May 5, 2005, the Company, through its divisions and subsidiaries,
opened 10 combination food and drug stores, two stand-alone drugstores, 13 Extreme Inc. price
impact stores and two fuel centers, while closing 22 combination food and drug stores, five
conventional stores and one stand-alone drugstore. Gross profit, as a percent to sales, for the 13 week period ended May 5, 2005 decreased slightly as
compared to the 13 week period ended April 29, 2004 due to continued planned investments in
pricing, promotion and advertising to drive sales growth and market share in highly competitive
markets. The factors causing a decline in gross profit, as a percent to sales, were partially
offset by savings generated from strategic sourcing and consumer demand chain initiatives,
increased generic drug utilization and continued improvement in the Companys Own Brands
penetration. Selling, general and administrative expenses, as a percent to sales, decreased to 25.2% for the 13
week period ended May 5, 2005, as compared to 26.0% for the 13 week period ended April 29, 2004.
This decrease was primarily attributable to reductions in employee benefit and compensation costs,
gains recognized from the disposal of property offset by impairment charges, decreased legal
expenses and lower workers compensation costs. Declines in employee benefit costs were the result
of a one-time contribution in the first quarter of 2004 to the union health and welfare fund of $36
and strike ratification bonus payments of $10 under the terms of the new collective bargaining
agreements in Southern California. Employee compensation costs decreased as a percent to sales
when compared to the prior period due to increased sales leverage and benefits related to the
resolution of the Labor Dispute. Legal expenses decreased due to favorable litigation settlements
recorded in the first quarter of 2005 and estimated litigation settlements for pending litigation
recorded in the first quarter of 2004. Lower workers compensation costs when compared with the
prior period were a result of Company managed initiatives to lower accident frequencies. These
decreases were partially offset by increases in depreciation and repairs and maintenance as a
result of increased investments in information technology, which have a shorter life compared to
traditional real estate investments. Interest expense, net increased to $132 for the 13 week period ended May 5, 2005 as compared to
$103 for the 13 week period ended April 29, 2004. This increase was attributable to an increase in
interest on capital lease obligations resulting from the acquisition of Shaws, interest costs on
the issuance of the $1,150 mandatory convertible security used to repay commercial paper that was
used to finance the acquisition of Shaws and interest related to a tax contingency. The Companys effective tax rate from continuing operations for the 13 week period ended May 5,
2005 was 33.8% as compared to 37.5% for the 13 week period ended April 29, 2004. This decrease in
the 13 week period ended
May 5, 2005 was primarily due to a net $8 reduction of previously recorded reserves resulting from
a revision of the required reserves during the quarter. Earnings from continuing operations were $107, or $0.29 per diluted share, for the 13 week period
ended May 5, 2005 compared to $56, or $0.15 per diluted share, for the 13 week period ended April
29, 2004. This increase was primarily due to inclusion of Shaws operating results in the
Companys first quarter of 2005 and the resolution of the Labor Dispute that impacted prior year
results. To a lesser extent, the decrease in Selling, general and administrative expenses
described above also contributed to the increase. The impact of these factors was partially offset
by earnings pressure in Dallas/Ft. Worth and in Northern California due to intense competition, and
in certain other markets where the Company does not have a number one or number two market share
position. Net loss from discontinued operations was $7 for the 13 week period ended May 5, 2005. This loss
resulted primarily from the Companys decision in April 2005 to exit the Jacksonville, Florida
market. Net loss from discontinued operations was $20 for the 13 week period ended April 29, 2004.
This loss resulted primarily from the Companys decision in April 2004 to exit the New Orleans,
Louisiana market. Critical Accounting Policies The preparation of financial statements requires management to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. The accompanying condensed consolidated financial statements
are prepared using the same critical accounting policies discussed in the Companys 2004 Annual
Report on Form 10-K, as amended, for the fiscal year ended February 3, 2005. Liquidity and Capital Resources Net cash provided by operating activities during the 13 week period ended May 5, 2005 was $286
compared to $465 for the same period in the prior year. The decrease in cash provided by
operations was due primarily to higher levels of inventories during the first quarter of 2005 as
compared to the same period in the prior year and also due to tax planning initiatives implemented
in 2004 which favorably impacted cash flows from operating activities during the 13 week period
ended April 29, 2004. Net cash used in investing activities during the 13 week period ended May 5, 2005 decreased to $100
compared to cash flows used in investing activities of $197 for the 13 week period ended April 29,
2004. This decrease was 19




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primarily the result of proceeds from disposals of land, building and equipment and assets held for
sale, in addition to lower capital expenditures in first quarter 2005. The Company is continuing
to implement its 2005 capital expenditure plan, which includes outlays for new stores, store
remodels and information technology. The Company expects capital expenditures for the year to be
between $1,300 and $1,400 which includes cash capital expenditures as well as capital and operating
leases. Net cash used in financing activities during the 13 week period ended May 5, 2005 was $213 as
compared to net cash provided by financing activities of $1,534 during the 13 week period ended
April 29, 2004. The change is due primarily to commercial paper borrowings during the 13 week
period ended April 29, 2004 in anticipation of the closing of the Shaws acquisition which occurred
on April 30, 2004. The Company utilizes its commercial paper and bank line programs primarily to supplement cash
requirements for seasonal fluctuations in working capital and to fund its capital expenditure
program. Accordingly, commercial paper and bank line borrowings will fluctuate between reporting
periods. At May 5, 2005, the Company had three revolving credit facilities totaling $1,400. The first
agreement, a 364-Day revolving credit facility with total availability of $400, will expire on June
16, 2005. The Company intends to replace this facility with a new five-year facility prior to its
expiration. The second agreement, a five-year facility for $900, will expire in June 2009. The
third agreement, a five-year facility for $100, will expire in July 2009. The 364-Day credit
agreement contains an option which would allow the Company, upon due notice, to convert any
outstanding amount at the expiration date to a term loan. The three existing agreements contain
two financial covenants: 1) a minimum fixed charge coverage ratio and 2) a maximum consolidated
leverage ratio, each as defined in the credit facilities. Under these facilities, the fixed charge
coverage ratio shall not be less than 2.5 to 1 through April 30, 2005, 2.6 to 1 through April 30,
2006 and 2.7 to 1 thereafter and the consolidated leverage ratio shall not exceed 4.5 to 1 through
April 30, 2006, 4.25 to 1 through April 30, 2007 and 4.0 to 1 thereafter. As of May 5, 2005, the
Company was in compliance with these requirements. No borrowings were outstanding under these
credit facilities as of May 5, 2005 or February 3, 2005. The Company had $214 and $349 outstanding in commercial paper borrowings at May 5, 2005 and
February 3, 2005, respectively. These outstanding borrowings are backed by the three revolving
credit facilities. In May 2004 the Company completed a public offering registered with the Securities and Exchange
Commission of 40,000,000 of 7.25% mandatory convertible securities (Corporate Units), yielding
net proceeds of $971. In June 2004 the underwriters purchased an additional 6,000,000 Corporate
Units pursuant to an over-allotment option, yielding net proceeds of $146. Each Corporate Unit
consists of a purchase contract and, initially, a 2.5% ownership interest in one of the Companys
senior notes with a principal amount of one thousand dollars, which corresponds to a twenty-five
dollar principal amount of senior notes. The ownership interest in the senior notes is initially
pledged to secure the Corporate Unit holders obligation to purchase Company common stock under the
related purchase contract. The senior notes bear an annual interest rate of 3.75%. In the first
half of 2007 the aggregate principal amount of the senior notes will be remarketed, which may
result in a change in the interest rate and maturity date of the senior notes. Proceeds from a
successful remarketing would be used to satisfy in full each Corporate Unit holders obligation to
purchase common stock under the related purchase contract. If the senior notes are not
successfully remarketed, the holders will have the right to put their senior notes to the Company
to satisfy their obligations under the purchase contract. The purchase contracts yield 3.5% per
year on the stated amount of twenty-five dollars. (See Note 7  Indebtedness to the Condensed
Consolidated Financial Statements) The Company filed a shelf registration statement with the Securities and Exchange Commission, which
became effective on February 13, 2001 (2001 Registration Statement), to authorize the issuance of
up to $3,000 in debt securities. The Company intends to use the net proceeds of any securities
sold pursuant to the 2001 Registration Statement for retirement of debt and general corporate
purposes, including the potential purchase of outstanding shares of the Companys common stock. As
of May 5, 2005, $2,400 of debt securities remain available for issuance under the 2001 Registration
Statement; however there can be no assurance that the Company will be able to issue debt securities
under this registration statement at terms acceptable to the Company. There were no purchases of the Companys common stock in 2004. In December 2004, the Board of
Directors reauthorized a program authorizing management, at their discretion, to purchase and
retire up to $500 of the Companys common stock through December 31, 2005. The Company may continue
or, from time to time suspend, purchasing shares under its stock purchase program without notice,
depending on prevailing market conditions, alternate uses of capital and other factors. There were
no purchases of the Companys stock during the 13 week period ended May 5, 2005. On March 16, 2005, Standard & Poors Rating Services (S&P) announced that it had placed the
ratings of the Company, The Kroger Co., and Safeway, Inc. on credit watch with negative
implications. S&P also announced that they expected any downgrade to be limited to one notch with
ratings not expected to fall below investment grade. The Company does not have any credit rating
downgrade triggers that would accelerate repayment in the Companys fixed-term debt portfolio were
a downgrade in the Companys credit ratings to occur. Similarly, a downgrade in the Companys
credit ratings would not affect the Companys ability to borrow amounts under the revolving credit
facilities. However, any adverse changes to the Companys credit ratings would increase the cost
of borrowings 20




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##### Table of Contents



under the Companys credit facilities. In addition, a downgrade could limit the Companys ability
to issue commercial paper. Should this occur the Company might seek alternative sources of
funding, including the issuance of notes under the 2001 Registration Statement. In addition, at
May 5, 2005, up to $1,400 could be drawn upon from the Companys senior unsecured credit
facilities. Insurance and Pension Plan Contingencies The Company has outstanding workers compensation and general liability claims with a former
insurance carrier that is experiencing financial difficulties. If the insurer fails to pay any
covered claims that exceed deductible limits, creating excess claims, the Company may have the
ability to present these excess claims to guarantee funds in certain states in which the claims
originated. As of May 5, 2005, the insurance carrier continues to pay the Companys claims. The
Company currently cannot estimate the amount of the covered claims in excess of deductible limits
which will not be paid by the insurance carrier or otherwise. Although the Company currently
believes that it may recover at least some of these excess claim amounts, the unrecoverable amount
could be material. The Company is in discussions with the carrier regarding transfer of primary
claim responsibility back to the Company in exchange for a payment, which payment may be less than
the projected claim liability. The Company is presently unable to determine the outcome of these
discussions. The Company contributes to various multi-employer pension plans under collective bargaining
agreements, primarily for defined benefit pension plans. These plans generally provide retirement
benefits to participants based on their service to contributing employers. The Company contributed
$115 and $92 to these plans in 2004 and 2003, respectively. Based on available information, the
Company believes that some of the multi-employer plans to which it contributes are under-funded.
Company contributions to these plans are likely to continue to increase in the near term. However,
the amount of any increase or decrease in contributions will depend on a variety of factors,
including the results of the Companys collective bargaining efforts, return on the assets held in
the plans, actions taken by trustees who manage the plans and the potential payment of a withdrawal
liability if the Company chooses to exit a market or another employer withdraws from a plan without
provision for their share of pension liability. Many recently completed labor negotiations have
positively affected the Companys future contributions to these plans. Contractual Obligations and Guarantees For information on contractual obligations and guarantees, see the Companys 2004 Annual Report on
Form 10-K. At May 5, 2005, there have been no material changes regarding the Companys contractual
obligations outside the ordinary course of business or material changes to guarantees from the
information disclosed in the Companys 2004 Annual Report on
Form 10-K, as amended. Commercial Commitments The Company had outstanding letters of credit of $104 as of May 5, 2005, all of which were issued
under separate agreements with multiple financial institutions. These agreements are not
associated with the Companys credit facilities. Of the $104 outstanding at May 5, 2005, $96 were
standby letters of credit covering primarily workers compensation or performance obligations. The
remaining $8 were commercial letters of credit supporting the Companys merchandise import program.
The Company paid issuance fees on letters of credit outstanding as of May 5, 2005 that varied,
depending on type, up to 0.75% of the outstanding balance of the letter of credit. Off-Balance Sheet Arrangements At May 5, 2005, the Company had no significant investments that were accounted for under the equity
method in accordance with accounting principles generally accepted in the United States.
Investments that were accounted for under the equity method at May 5, 2005 had no liabilities
associated with them that were guaranteed by or that would be considered material to the Company.
Accordingly, the Company does not have any off-balance sheet arrangements with unconsolidated
entities. Related Party Transactions There were no material related party transactions during the 13 week period ended May 5, 2005. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes regarding the Companys market risk position from the
information provided under the caption Quantitative and Qualitative Disclosures About Market Risk
in the Companys 2004 Annual Report on Form 10-K, as amended, for the fiscal year ended February
3, 2005. 21




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Item 4. Controls and Procedures Management of the Company, including the Chief Executive Officer and the Chief Financial Officer of
the Company, have evaluated the effectiveness of the Companys disclosure controls and procedures
(as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of May 5, 2005. Based on
this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the
Companys disclosure controls and procedures are effective to provide reasonable assurance that
information required to be disclosed by the Company in the reports that it files or submits under
the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time
periods specified by the Securities and Exchange Commissions rules and forms. In the first quarter of 2005, the Company continued its implementation of the PeopleSoft Human
Capital Management system. The Company plans to continue the roll-out through fiscal 2006. Based
on managements evaluation, the necessary steps have been taken to monitor and maintain appropriate
internal controls during this period of change. Other than as described above, there were no changes in the Companys internal control over
financial reporting that occurred during the Companys most recently completed fiscal quarter that
have materially affected, or are reasonably likely to materially affect, the Companys internal
control over financial reporting. 
 PART II. OTHER INFORMATION 
 Cautionary Statement for Purposes of Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995 All statements other than statements of historical fact contained in this and other documents
disseminated by the Company, including statements regarding the Companys expected financial
performance, are forward-looking information as defined in the Private Securities Litigation Reform
Act of 1995. In reviewing such information about the future performance of the Company, it should
be kept in mind that actual results may differ materially from those projected or suggested in such
forward-looking information since predictions regarding future results of operations and other
future events are subject to inherent uncertainties. These statements may relate to, among other
things: statements of expectation regarding the Companys future results of operations; investing
to increase sales; changes in cash flow; increases in general liability costs, workers
compensation costs and employee benefit costs; attainment of cost reduction goals; impacts of the
Labor Dispute; impacts of the completion of the acquisitions of Shaws and Bristol Farms; achieving
sales increases and increases in comparable and identical sales; opening and remodeling stores; and
the Companys five strategic imperatives. These statements are indicated by words or phrases such
as expects, plans, believes, estimate, and goal. In reviewing such information about the
future performance of the Company, it should be kept in mind that actual results may differ
materially from those projected or suggested in such forward-looking information. Important assumptions, risks and uncertainties and other important factors that could cause actual
results to differ materially from those set forth in the forward-looking information include
changes in consumer spending; actions taken by new or existing competitors (including
nontraditional competitors), particularly those intended to improve their market share (such as
pricing and promotional activities); labor negotiations; adverse determinations with respect to, or
the need to increase reserves for litigation or other claims (including environmental matters);
financial difficulties experienced by third-party insurance providers; employee benefit costs; the
Companys ability to recruit, retain and develop employees; the Companys ability to develop new
stores or complete remodels as rapidly as planned; the Companys ability to implement new
technology successfully; stability of product costs; the Companys ability to integrate the
operations of and realize synergies from acquired or merged companies, including Shaws; the
Companys ability to execute its restructuring plans, including the ability of the Company to
complete the sale of non-strategic or under-performing assets, such as the Companys stores in the
Jacksonville, Florida market; the Companys ability to achieve its five strategic imperatives; and
other factors affecting the Companys business in or beyond the Companys control. These other
factors include changes in the rate of inflation; changes in state or federal legislation or
regulation; the cost and stability of energy sources; the continued safety of the products the
Company sells; changes in the general economy; changes in interest rates; and the occurrence of
natural disasters. Other factors and assumptions not identified above could also cause the actual results to differ
materially from those projected or suggested in the forward-looking information. The Company does
not undertake to update forward-looking information contained herein or elsewhere to reflect actual
results, changes in predictions, assumptions, estimates or changes in other factors affecting such
forward-looking information. 22




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##### Table of Contents



Item 1. Legal Proceedings The Company is subject to various lawsuits, claims and other legal matters that arise in the
ordinary course of conducting business. In August 2000 a class action complaint was filed against Jewel Food Stores, Inc., an indirect
wholly owned subsidiary of the Company and Dominicks Finer Foods, Inc. in the Circuit Court of
Cook County, Illinois alleging milk price fixing (Maureen Baker et al. v. Jewel Food Stores, Inc.
and Dominicks Finer Foods, Inc., Case No. 00L 009664). In February 2003, the trial court found in
favor of the defendants and dismissed the case with prejudice. On January 12, 2005, the Illinois
Appellate Court upheld the trial courts dismissal of the case and on May 25, 2005, the Illinois
Supreme Court denied the plaintiffs petition for leave to appeal. In September 2000 an agreement was reached and court approval granted, to settle eight purported
class and/or collective actions which were consolidated in the United States District Court in
Boise, Idaho and which raised various issues including off-the-clock work allegations and
allegations regarding certain salaried grocery managers exempt status. Under the settlement
agreement, current and former employees who met eligibility criteria have been allowed to present
their off-the-clock work claims to a settlement administrator. Additionally, current and former
grocery managers employed in the State of California have been allowed to present their exempt
status claims to a settlement administrator. The Company mailed notices of the settlement and
claims forms to approximately 70,500 associates and former associates. Approximately 6,000 claim
forms were returned, of which approximately 5,000 were deemed by the settlement administrator to be
incapable of valuation, presumed untimely, or both (the Unvalued Claims). The claims
administrator was able to assign a value to approximately 1,080 claims, which amount to a total of
approximately $14, although the value of many of those claims is still subject to challenge by
either party. Two other claims processes occurred during fiscal 2004. First, there was a
supplemental mailing and in-store posting directed toward a narrow-subset of current and former
associates. This process resulted in approximately 260 individuals submitting claims documents.
These documents are being assessed. Second, in response to the Courts instruction to plaintiffs
counsel to submit supplemental and/or corrected information for the Unvalued Claims, plaintiffs
counsel submitted such information for approximately 4,700 of the Unvalued Claims. This
information is being assessed. The value of these claims will likewise be subject to challenge by
either party. The Company is presently unable to determine the amounts that it may ultimately be
required to pay with respect to all claims properly submitted. Based on the information presently
available to it, management does not expect that the satisfaction of valid claims submitted
pursuant to the settlement will have a material adverse effect on the Companys financial
condition, results of operations or cash flows. On February 2, 2004, the Attorney General for the State of California filed an action in Los
Angeles federal court (California, ex rel Lockyer v. Safeway, Inc. dba Vons, a Safeway Company;
Albertsons, Inc. and Ralphs Grocery Company, a division of The Kroger Co., United States District
Court Central District of California, Case No. CV04-0687) claiming that certain provisions of the
agreements (the Labor Dispute Agreements) between the Company, The Kroger Co. and Safeway Inc.
(the Retailers) which provided for lock-outs in the event that any Retailer was struck at any
or all of its Southern California facilities during the 2003-2004 labor dispute in Southern
California when the other Retailers were not and contained a provision designed to prevent the
union from placing disproportionate pressure on one or more Retailer by picketing such Retailer(s)
but not the other Retailer(s) during the labor dispute violate section 1 of the Sherman Act. The
lawsuit seeks declarative and injunctive relief. The Retailers motion for summary judgment was
denied on May 26, 2005. This decision has been appealed and the Company continues to believe it has strong defenses against
this lawsuit and is vigorously defending it. Although this lawsuit is subject to uncertainties
inherent in the litigation process, based on the information presently available to the Company,
management does not expect that the ultimate resolution of this action will have a material adverse
effect on the Companys financial condition, results of operations or cash flows. The Company is also involved in routine legal proceedings incidental to its operations. Some of
these routine proceedings involve class allegations, many of which are ultimately dismissed.
Management does not expect that theultimate resolution of these legal proceedings will have a material adverse effect on the Companys
financial condition, results of operations or cash flows. The statements above reflect managements current expectations based on the information presently
available to the Company. However, predicting the outcomes of claims and litigation and estimating
related costs and exposures involve substantial uncertainties that could cause actual outcomes,
costs and exposures to vary materially from current expectations. In addition, the Company
regularly monitors its exposure to the loss contingencies associated with these matters and may
from time to time change its predictions with respect to outcomes and its estimates with respect to
related costs and exposures. It is possible that material differences in actual outcomes, costs
and exposures relative to current predictions and estimates, or material changes in such
predictions or estimates, could have a material adverse effect on the Companys financial
condition, results of operations or cash flows. 23




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Information concerning the Companys stock repurchases during the 13 weeks ended May 5, 2005
(dollars in millions except per share data): Issuer Purchases of Equity Securities (d)(c)
    
    
    Maximum NumberTotal Number Of
    
    
    (Or ApproximateShares (Or
    
    
    Dollar Value) Of(a)
    
    
    
    
    
    
    Units) Purchased
    
    
    Shares (Or Units)Total Number
    
    
    (b)
    
    
    As Part Of
    
    
    That May Yet Beof Shares (Or
    
    
    Average Price
    
    
    Publicly
    
    
    Purchased UnderUnits)
    
    
    Paid Per Share
    
    
    Announced Plans
    
    
    The Plans OrPeriod
    
    Purchased
    
    
    (Or Unit)
    
    
    Or Programs(1)
    
    
    ProgramsFebruary 4  February 28, 2005
    
    
    137
    (2)
    
    $
    23.07
    
    
    
    
    
    
    $
    500March 1  March 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500April 1  May 5, 2005
    
    
    9,852
    (2)
    
    
    20.16
    
    
    
    
    
    
    
    500
   (1)
    
    On December 16, 2004, the Board of Directors reauthorized a program authorizing
management, at its discretion, to purchase and retire up to $500 of the Companys common stock
through December 31, 2005. No shares of common stock have been repurchased through May 5,
2005 under this program.(2)
    
    Represents shares surrendered or deemed surrendered to the Company to satisfy tax
withholding obligations in connection with the vesting of stock units under employee stock
based compensation plans. 
 Item 3. Defaults Upon Senior Securities None. 
 Item 4. Submission of Matters to a Vote of Security Holders The Company held its Annual Meeting of Stockholders on June 2, 2005, and transacted the
following business:  1)
    Election of Class I Directors (term expiring in 2008): Nominee
    
    
    Votes For
    
    
    Votes WithheldHenry I. Bryant
    
    
    
    244,369,197
    
    
    
    
    78,877,226Bonnie G. Hill
    
    
    
    238,506,663
    
    
    
    
    84,739,760Lawrence R. Johnston
    
    
    
    242,637,400
    
    
    
    
    80,609,023Kathi P. Seifert
    
    
    
    315,660,586
    
    
    
    
    7,585,837
 Continuing Class II Directors (Term expiring in 2006): A. Gary Ames
Paul I. Corddry
Jon C. Madonna
Beatriz Rivera Continuing Class III Directors (Term expiring in 2007): Pamela G. Bailey
Teresa Beck
Beth Pritchard  2)
    Ratification of Appointment of Independent Auditors: Votes For
    
    
    Votes Against
    
    
    Abstentions317,590,747
    
    
    
    3,512,244
    
    
    
    
    2,143,432
 24




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##### Table of Contents



3)
    Shareholder proposal recommending a majority vote for Director elections: Votes For
    
    
    Votes Against
    
    
    Abstentions128,155,709
    
    
    
    141,475,326
    
    
    
    
    2,780,918
 Broker non-votes: 50,834,470  4)
    Shareholder proposal for simple majority voting requirements: Votes For
    
    
    Votes Against
    
    
    Abstentions175,447,183
    
    
    
    94,115,115
    
    
    
    
    2,849,655
 Broker non-votes: 50,834,470  5)
    Shareholder proposal regarding shareholder approval of certain executive severance agreements: Votes For
    
    
    Votes Against
    
    
    Abstentions146,798,184
    
    
    
    122,860,529
    
    
    
    
    2,753,240
 Broker non-votes: 50,834,470  6)
    Shareholder proposal regarding an independent Board Chair: Votes For
    
    
    Votes Against
    
    
    Abstentions63,609,703
    
    
    
    205,948,228
    
    
    
    
    2,854,022
 Broker non-votes: 50,834,470  7)
    Shareholder proposal regarding executive equity grants: Votes For
    
    
    Votes Against
    
    
    Abstentions116,803,561
    
    
    
    152,815,416
    
    
    
    
    2,792,976
 Broker non-votes: 50,834,470 
 Item 5. Other Information On June 2, 2005, Adrian
J. Downes, 41, the Companys Group Vice President and Controller, was
designated the Companys Principal Accounting Officer. Mr. Downes became the Companys Group Vice
President and Controller on June 7, 2004. Previously, he served as the Vice President and
Controller of The GAP, Inc. (clothing retailer) from August 2002 and Senior Director of Corporate Reporting
of The GAP, Inc.
from April 2000. On June 3, 2005, pursuant to the Companys outside director compensation program and 2004 Equity
and Performance Incentive Plan, each non-employee member of the Companys Board of Directors
received an equity grant with a fair market value of $80,000. At each directors election, the
grant was paid in shares of unrestricted, transferable common stock or deferred stock units with
reinvested dividend equivalents. Deferred stock units represent units credited to a directors
account. Although immediately vested, the units are not settled in stock until a future date
specified by the director. 
 Item 6. Exhibits 10.58
    
    Form of Non-Employee Director Deferred Share Units Agreement (Albertsons,
Inc. 2004 Equity and Performance Incentive Plan)10.59
    
    Letter Agreement between the Company and Clarence J. Gabriel, Jr., dated as
of May 9, 200510.60
    
    Form of Award of Deferrable Restricted Stock Units (Albertsons, Inc. 2004
Equity and Performance Incentive Plan)15
    
    Letter re: Unaudited Interim Financial Statements31.1
    
    Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 25




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SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized. ALBERTSONS, INC.(Registrant)Date: June 8, 2005
    
    /S/ Felicia D. ThorntonFelicia D. ThorntonExecutive Vice Presidentand Chief Financial Officer
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