UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
(Mark One)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended:   January 3, 1999
                                       or
[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from __________ to ____________.

                         Commission file number: 1-12116

                            CARR-GOTTSTEIN FOODS CO.
             (Exact name of registrant as specified in its charter)

      Delaware                                         920135158
(State or other jurisdiction of          (I.R.S. Employer Identification No.)
incorporation or organization)                          

                                  6411 A Street
                             Anchorage, Alaska 99518
                    (Address of principal executive offices)

    Registrant's telephone number, including area code: (907) 561-1944

Securities registered pursuant to Section 12(b) of the Act:

Title of each class: Common stock - par value $.01

Name of each exchange on which registered:      New York Stock Exchange

Securities registered pursuant to section 12(g) of the Act: None.

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 [X] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained,  to the best of registrant's knowledge, in definitive proxy or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this form 10-K. [X]

Aggregate  market  value  of the  voting  stock  held by  non-affiliates  of the
registrant as of March 29, 1999: $63,924,493

Number of Shares of Common Stock outstanding as of March 29, 1999: 8,248,052.

                       DOCUMENTS INCORPORATED BY REFERENCE
                        (To the Extent Indicated Herein)



<PAGE>


                            CARR-GOTTSTEIN FOODS CO.
                       INDEX TO ANNUAL REPORT ON FORM 10-K
                    For the Fiscal Year Ended January 3, 1999



                                     PART I
                                                                       Page
Item 1.   Business........................................................1
Item 2.   Properties......................................................8
Item 3.   Legal Proceedings...............................................8
Item 4.   Submission of Matters to a Vote of Security Holders.............9


                                     PART II

Item 5.   Market for Registrant's Common Equity
                 and Related Stockholder Matters.........................10
Item 6.   Selected Financial Information and Other Data..................11
Item 7.   Management's Discussion and Analysis of
                 Financial Condition and Results of Operations...........12
Item 7A.  Quantitative and Qualitative Disclosures about Market Risk.....15
Item 8.   Financial Statements and Supplementary Data....................15
Item 9.       Changes in and Disagreements with Accountants
                       on Accounting and Financial Disclosure............15

                                    PART III

Item 10.  Directors and Officers of the Registrant.......................16
Item 11.  Executive Compensation.........................................17

Item 12.  Security Ownership of Certain Beneficial
                       Owners and Management.............................17
Item 13.  Certain Relationships and Related Transactions.................17


                                     PART IV


Item 14.  Exhibits, Financial Statement Schedules, Reports on Form 8-K...18



<PAGE>



Item 1.           Business

         As used in this Annual  Report on Form 10-K ("Form  10-K"),  unless the
context   indicates   otherwise,   the  terms   "Company"  and  "CGF"  refer  to
Carr-Gottstein Foods Co., a Delaware corporation. Unless otherwise indicated, as
used in this Form 10-K (i) all  references  to square  feet are to gross  square
feet,  rather than net selling  space;  and (ii) all  references to a year shall
mean the fiscal year of the Company  which  commences in such year (for example,
the fiscal  year  commencing  December  29,  1997 and ending  January 3, 1999 is
referred herein as "1998").

The Company

         The Company is the leading  food and drug  retailer in Alaska,  with 49
stores primarily located in Anchorage,  as well as in Fairbanks,  Juneau,  Kenai
and  other   Alaska   communities.   The   Company   operates   a  chain  of  16
super-combination food, drug and general merchandise stores under the name Carrs
Quality  Centers (the "Carrs  Stores").  The Company also  operates nine smaller
stores,  four under the name Eagle  Quality  Centers  and two under  other trade
names  (collectively,  the "Eagle Stores"),  as well as three  neighborhood food
stores  in  smaller   Alaska   communities.   The   Company  is  also   Alaska's
highest-volume  alcoholic  beverage  retailer  through  its chain of 17 wine and
liquor  stores  operated  under the name Oaken Keg Spirit  Shops (the "Oaken Keg
Stores").  The Company also operates  seven small  tobacco  stores which operate
under the name The Great Alaska  Tobacco  Company  (the  "Tobacco  Stores").  In
addition,  the Company's  vertically  integrated  organization,  which  includes
freight transportation operations and Alaska's only full-line food warehouse and
distribution  center,  provides the Company's  retail and  wholesale  operations
important  merchandising  benefits,  cost advantages and operating  efficiencies
generally not available to its competitors.

History

         The Company's predecessor (the "Predecessor") was formed in 1986 as the
result of a merger of J.B.  Gottstein  & Co.,  a retail  grocery  and  wholesale
grocery  distributor  founded  in 1915,  and Carrs  Quality  Centers,  an Alaska
grocery store company that commenced  operations in 1950. The Company was formed
in 1990 by Leonard Green & Partners, L.P. ("LGA"), for the purpose of acquiring,
through Green Equity  Investors,  L.P.  ("GEI") and with certain  members of the
Company's  senior  management,  assets of the  Predecessor  used in its  retail,
wholesale  and freight  operations.  On October 12, 1990,  the Company  acquired
certain  assets  of  the  Predecessor,  including  real  property,  and  certain
subsidiaries  used or held for use in the business and  operation of retail food
and liquor stores, food wholesaling and freight operations,  and assumed certain
liabilities,  pursuant  to an  acquisition  agreement  among  the  Company,  the
Predecessor, Laurence J. Carr and Barnard J. Gottstein.

Proposed Merger

         On  August  6,  1998,  the  Company  announced  that  it had  signed  a
definitive agreement (the "Merger Agreement"), with Safeway Inc. ("Safeway") and
ACG Merger Sub  ("Acquisition"),  Inc., a  wholly-owned  subsidiary  of Safeway,
pursuant to which Safeway would acquire by merger (the "Merger") all outstanding
shares of the Company's  Common Stock  ("Common  Stock") at a purchase  price of
$12.50 per share. In addition, Safeway will assume approximately $220 million of
debt and will account for the transaction as a purchase.  The Board of Directors
of  the  Company  approved  the  Merger  Agreement.   The  consummation  of  the
transactions  contemplated  by the  Merger  Agreement,  is  subject  to  certain
conditions,  including  approval of the Company's  stockholders,  clearance from
certain  regulatory  authorities  and  receipt  of  certain  consents  and court
approval. Financing is not a condition to complete the transaction.

         In connection  with the Merger  Agreement,  GEI, the Company's  largest
stockholder,  executed an  agreement  with  Safeway  (the  "Stockholder  Support
Agreement")  in which it has  agreed  to vote its  2,869,592,  shares  of Common
Stock,  which represents 35.1% of the Company's  outstanding  stock, in favor of
approval of the Merger Agreement.

         The Merger  Agreement  provides for payment to Safeway of a termination
fee and reimbursement of expenses, under certain circumstances, including if the
Board, in the exercise of its fiduciary responsibilities,  withdraws or modifies
its  recommendation to the stockholders of the transactions  contemplated by the
Merger Agreement.

         Consent  Decree.  On  February  9,  1999,  Safeway,   the  Company  and
Acquisition entered into a Consent Decree with the State of Alaska (the "Consent
Decree"),  in connection with settling a lawsuit filed by the State of Alaska in
the Superior Court for the State of Alaska, Third Judicial District at Anchorage
(the  "Court"),  with respect to the Merger (a copy of the Consent Decree may be
<PAGE>
obtained  from  the  Court).  The  Consent  Decree,  which is  subject  to court
approval,  requires  Safeway and the Company to sell seven stores (the "Stores")
-- four Safeway stores  located in Anchorage,  one Safeway store located in each
of Eagle River and Wasilla and the  Company  store in  Fairbanks.  Each of these
Stores is required to be sold to operating  supermarket  companies  that will be
approved by the Attorney General.

         The  Consent  Decree  provides  for  a  60-day  public  comment  period
following  which the Court will conduct a hearing on the  comments,  if any, and
will determine whether to approve the Consent Decree. The parties have scheduled
a hearing before the Court for April 13, 1999. The Merger may not be consummated
prior to the entry of an order by the Court  approving the Consent  Decree,  and
upon the approval and entry of the Consent Decree by the Court.

         Following the Court's  approval of the Consent Decree,  Safeway and the
Company will have six months to obtain approval from the Attorney General of the
State of Alaska (the  "Attorney  General")  of signed  purchase  agreements  and
proposed  transactions  to sell the  Stores  and an  additional  two  months  to
complete the sales,  subject to extensions approved by the Attorney General. The
Consent Decree  contains  provisions for payments by Safeway of up to $1 million
for each Store for which it is unable to meet those deadlines.  In addition,  if
the  deadlines  are not met, the State of Alaska may seek the  appointment  of a
trustee to effect the divestiture of the remaining Stores.

         Pursuant to the Consent Decree, until Safeway and the Company have sold
the Stores,  they have agreed to operate and conduct the  business of the Stores
in the ordinary  course,  maintain  existing  business  relationships  with each
Store's  suppliers,  customers  and  employees,  maintain  inventory  levels and
selections  at each Store and limit  increases in the gross  profit  margins for
supermarkets  that they operate in the geographic  areas in which the Stores are
located.

         Hart-Scott-Rodino  ("HSR")  Act. The Merger is subject to review by the
Federal  Trade  Commission  (the  "FTC")  and  the  Antitrust  Division  of  the
Department  of Justice (the "DOJ") under the HSR Act. The parties have  apprised
the FTC of the Consent  Decree.  The staff of the FTC's Seattle  Regional Office
has  indicated to Safeway and the Company that it is prepared to recommend  that
the Bureau of  Competition  grant early  termination of the waiting period under
the HSR Act,  provided that the Court enters the Consent Decree in substantially
the same form as agreed to by the parties, and that the Bureau of Competition is
in agreement with this position.

         AKPIRG  Litigation.  In late October  1998, an Alaska  consumer  group,
Alaska Public Interest Research Group  ("AKPIRG"),  and five individuals filed a
purported  class-action  lawsuit in Alaska state court  seeking an injunction to
prevent  the Merger.  In February  1999,  Safeway and the Company  settled  with
AKPIRG and the individual  plaintiffs.  The settlement  provided that AKPIRG and
the individual  plaintiffs no longer oppose the Merger or the Consent Decree and
dismiss the lawsuit.

Business Strategy

         The  Company's  business  strategy  is to enhance  its  leading  market
position  in Alaska and to  increase  revenue  and  profitability  by  providing
competitively  priced,   high-quality  grocery  and  perishable  merchandise  at
superior levels of customer  convenience and satisfaction.  The Company believes
it is at the forefront of supermarket industry innovations in customer offerings
and expects to capitalize  on its  competitive  advantages  within  Alaska.  The
Company  has   devoted   significant   resources   to  expand  and  remodel  its
well-established  stores to take full  advantage of their prime  locations.  The
Company expects to vigorously pursue  opportunities to improve its profitability
through  increased  efficiencies  at both the  store  and  distribution  levels,
enhanced  systems and cost  controls and recently  implemented  state-of-the-art
electronic marketing programs. Management believes that these efforts to improve
revenue  and  reduce  costs,   combined  with   opportunistic   acquisition   or
construction of new stores, primarily Eagle Stores in smaller Alaska communities
and,  selectively,  Carrs Stores,  will address the Company's goal of maximizing
profitable growth.

         The  Company's  strategy  capitalizes  on  the  following   competitive
advantages:

                  Superior Merchandising Capabilities. The primary objectives of
         the  Company's  merchandising  strategy  are customer  convenience  and
         satisfaction.  Hallmarks  of the  Company's  stores are their  variety,
         quality and presentation of fresh produce and other perishables offered
         together  with a wide range of specialty  departments  and services not
         found in conventional supermarkets. The Company believes that freshness
         and  quality  of  produce  is  generally  the  single  most   important
         determinant  for a customer  in  choosing a  supermarket,  and that the
         freshness,  quality,  variety and  presentation  of its perishables are
         among the finest in the United States supermarket industry.
<PAGE>
                  Quality  Store  Base.  Over the past 30 years the  Company has
         strategically  located its stores in prime  residential  shopping areas
         intended to provide maximum accessibility and convenience to customers.
         Since  1991 the  Company  has  invested  in excess of $100  million  to
         remodel and expand its existing store base and acquire or construct new
         stores.  Due to the excellent  condition of the current store base, the
         Company does not expect that significant  capital  improvements will be
         necessary in the foreseeable future.

                  Vertically   Integrated  Freight  Distribution  and  Warehouse
         Facilities. The Company's freight distribution and warehouse facilities
         provide it with  distinct  competitive  advantages  in its  procurement
         costs, quality of perishables and inventory management.  The Company is
         able to supply  merchandise  to its  Anchorage  area  stores  generally
         within  12  hours,  six days per  week,  allowing  it to offer  fresher
         perishables,  minimize  stock-outs  and devote a greater  percentage of
         store  square  footage to selling  rather than on-site  storage  space.
         Because  the  Company's  competitors  rely on  distribution  facilities
         located  more than 2,200 miles  away,  the  Company  believes  that its
         competitors   experience   a  five-day  or  more  delay  in   receiving
         merchandise,  must use more store square footage for inventory  storage
         and are not able to match the Company's  shipping volume  efficiencies.
         Furthermore,   the  economies  of  scale   provided  by  the  Company's
         third-party  wholesale and freight  distribution  businesses reduce the
         Company's own delivered cost of goods.

                  State-of-the-Art  Electronic Direct Marketing Program. Through
         its "Carrs  Plus"  electronic  marketing  program,  the Company  tracks
         consumer  buying  patterns,   enabling  the  Company  to  optimize  its
         marketing  expenditures.  By  using a  "Carrs  Plus"  card  with  their
         purchases,  customers  automatically  obtain discounts on various store
         items while the Company collects  detailed  information  about consumer
         preferences.  The Company uses the  information  generated  through its
         "Carrs  Plus"  program  to  develop   targeted  direct  mail  marketing
         campaigns,  which are typically more cost-effective and successful than
         mass mailings or newspaper advertisements.

Merchandising Strategy

         The  Company's  retail   merchandising   strategy  emphasizes  shopping
convenience,  superlative  customer service and high-quality  produce,  meat and
other  perishables.  The  integration of the Company's  retail and  distribution
operations  is important  to the success of its  merchandising  strategy,  as it
allows the Company to offer fresher  perishables and experience fewer stock-outs
than its  competitors.  Key  elements of the  Company's  merchandising  strategy
include:

         Quality  Produce,  Meat and Other  Perishables.  Carrs Stores and Eagle
Stores emphasize  superior quality produce,  meat, seafood and other perishables
in  addition  to  a  wide  selection  of  food,   drugstore  items  and  general
merchandise.  The Company  believes  that the  freshness,  quality,  variety and
presentation  of its  perishables  are among the  finest  in the  United  States
supermarket industry.

         Innovative Specialty Departments. A hallmark of the Company's stores is
the variety of innovative specialty departments.  A number of Carrs Stores offer
a combination of specialty service meat departments, 59-minute photo developing,
"Orient  Express"  Chinese and other specialty food take-out  counters,  service
seafood departments,  sushi counters,  candy departments,  fresh fruit and juice
bars, bagel bars, fresh pasta  departments,  espresso and ice cream stands,  and
full-service  bank  branches.   All  Carrs  Stores  also  include   full-service
pharmacies,  floral departments and service delicatessens.  All Carrs Stores and
most  Eagle  Stores  include  natural  food  departments,  soup and salad  bars,
in-store  bakeries and video rental  departments.  In the  Anchorage  area,  the
Company also offers catering  services for large and small events.  In addition,
the Company is the exclusive  ticketing agent for most major Alaska cultural and
sporting events,  selling tickets through its Carrs TixTM outlets in all but two
Carrs Stores and at certain event locations.

         Competitive  Prices. The Company maintains a reputation as the provider
of  the  best  overall   supermarket  values  in  Alaska  by  supplementing  its
competitive  pricing with targeted  temporary price  reductions on selected food
and non-food merchandise.  The Company's  sophisticated  information systems and
distribution  network  give  management  the  flexibility  to  respond to market
conditions by rapidly adjusting its prices.

         Customer Service. The Company distinguishes itself from its competitors
by offering  excellent  customer  service.  The  Company  has adopted  operating
policies  designed to maximize customer  convenience and satisfaction.  Checkout
services  include price  scanning in all stores,  acceptance of credit cards and
debit cards, use of the Company's  proprietary  "Carrs Plus" card,  "candy-free"
<PAGE>
checkout  aisles  for  customers  with  young  children,  and  carryout  for all
customers  with more than one bag.  Many Carrs Stores and Eagle  Stores  feature
special  services  to assist  customers,  including  baby  changing  rooms  with
complimentary  diapers and a service  center from which  customers  can send and
receive faxes, send overnight packages and purchase hunting and fishing licenses
and money orders.

Store Base

         Over the past 30 years the Company has strategically located its stores
in  prime  residential  shopping  areas to  provide  maximum  accessibility  and
convenience  to  customers.  The Carrs Stores and Eagle  Stores are  destination
stores  that  offer   customers   one-stop   shopping   convenience  in  modern,
easy-to-shop  formats.  Due to the Company's Anchorage  distribution center, the
Company's stores are not required to maintain a significant  amount of space for
inventory storage and are therefore able to maximize selling area.

         Carrs Stores. Carrs Stores are super-combination food, drug and general
merchandise  stores.  Specialty  departments  and  merchandise mix in each Carrs
Stores  are  based  upon  management's  review  of  the  location  of  a  store,
demographics of the area surrounding each store and a store's proximity to other
Carrs Stores. The 16 Carrs Stores range from  approximately  28,500 total square
feet to approximately 73,000 total square feet, and average approximately 52,000
total square feet.

         Eagle Stores and Other  Stores.  Eagle Stores are designed to serve the
smaller  and more rural  communities  in which they  operate by  offering a full
range of food  items,  a variety of  non-food  and  drugstore  items and general
merchandise  products with a selection of the Company's  higher margin specialty
departments.  The Eagle Stores range from approximately 16,300 total square feet
to approximately 43,900 total square feet and average approximately 25,600 total
square  feet.  The  Company  operates  Eagle  Stores in Homer,  Seward,  Valdez,
Unalaska/Dutch  Harbor,  Nome and Kotzebue.  In addition,  the Company  operates
three  smaller  neighborhood  stores in Big Lake,  Seldovia and  Girdwood  which
average approximately 10,000 square feet.

         Oaken Keg Stores. The Company is the state's  highest-volume  alcoholic
beverage retailer.  Alaska law does not permit alcoholic beverages to be sold in
grocery stores. Accordingly, a wholly-owned subsidiary of the Company operates a
chain of 17 Oaken Keg Stores.  The Company has positioned 15 of the 17 Oaken Keg
Stores  adjacent to Carrs Stores to provide  convenient  access to customers and
generate walk-in  traffic.  Oaken Keg Stores range in size from 900 total square
feet to 5,300 total square feet.

         Tobacco  Stores.  Tobacco  Stores were designed to offer the consumer a
customer  friendly  environment,  in a  tightly  controlled  area,  in  which to
purchase a full range of tobacco items including a broad selection of cigars and
miscellaneous accessories. The seven Tobacco Stores range in size from 525 total
square feet to approximately 1,000 total square feet.

         Store Expansions,  Remodels and Additions.  From 1990 through 1998, the
Company  pursued a program of store  expansions  and remodels,  as well as store
additions  through either  construction  or  acquisition.  Remodels  involve the
addition of specialty departments and cosmetic  renovations.  Expansions involve
the same type of work as remodels,  but include the addition of square  footage.
Management believes that the addition or expansion of specialty  departments and
services into the Company's stores,  combined with the upgrading and enlargement
of core product  departments,  has led to increased  customer  traffic and sales
volume  and  improved  store  operating  performance.  In  addition,  management
believes that providing a broad range of products and services  strengthens  the
competitive  position of its Carrs Stores and Eagle Stores as destination stores
in each of their markets.

         The Company completed two major remodels of Carrs stores in early 1998.
On April 9, 1998 the Company  completed a  transaction  whereby it purchased the
fixtures,  equipment  and  inventory  of the three  retail  locations  of Market
Basket,  Inc. located in Fairbanks and North Pole,  Alaska. The transaction also
included  the  purchase  of certain  real  estate in  Fairbanks.  As part of the
agreement,  the Company  entered  into a long-term  lease for the store in North
Pole, Alaska.

Warehouse Facilities and Freight Distribution

         Warehouse  Operations.  The  Company's  full-line  food  warehouse  and
distribution center in Anchorage is the only facility of its kind in Alaska. The
warehouse and distribution  center consists of a 233,000 square foot facility in
Anchorage  which  supplies  approximately  80% of the  merchandise  sold  in the
Company's  stores.  This facility also contains  refrigeration and freezer space
and six state-of-the-industry  banana ripening rooms. The Company's computerized
<PAGE>
store ordering system allows each individual  store to place its own merchandise
orders  directly with the warehouse.  Special  computerized  storage and picking
systems  track  merchandise  from point of  receiving  through  point of sale to
ensure precise  inventory control and minimize handling costs. The warehouse and
distribution  center operates above a 95% fill rate. This  efficiency,  plus the
proximity  of the  facility to a  significant  number of the  Company's  stores,
enables  the  Company  to  respond  quickly  to  store  orders  and to  minimize
stock-outs at its stores.

         Freight  Operations.   The  Company  operates  a  105,000  square  foot
warehouse  and  cross-dock  facility in Tacoma,  Washington,  which  serves as a
collection point for substantially all of the inventory purchased by the Company
in the lower 48 states.  At the Tacoma facility,  inventory is received,  sorted
and logged into the Company's  computerized  inventory  management  system.  The
Company  operates  18 tractors  and 537  trailers.  This  fleet,  in addition to
trailers leased as needed on a short-term basis, handles all transportation from
the Company's  Tacoma  facility to ocean ports,  from the Anchorage  port to the
Company's warehouse, and most of the transportation from the Company's warehouse
to the Company's retail stores and third-party customers.

         Third-Party  Wholesale and Freight  Services.  In addition to supplying
its own stores, the Company utilizes its warehouse and distribution capabilities
to sell  grocery  and  household  products  on a  wholesale  basis to  customers
throughout  Alaska,  including  other retailers and military  commissaries.  The
Company believes that this expanded customer base allows it to take advantage of
purchasing and other operating synergies which might otherwise be unavailable to
it. In addition  to its  warehouse  sales,  the Company  utilizes  its  existing
shipping  and  freight  handling  systems  to offer  freight  services  to third
parties.  The  economies of scale  resulting  from these  third-party  sales and
services reduce the Company's own delivered cost of goods.

         Competitive Advantages.  The Company's freight and warehouse operations
give  the  Company  several  logistical  and  cost  advantages  relative  to its
competition.  The Company  has  developed  logistical  expertise  in  long-range
distribution  which  enables it to  service  efficiently  stores  and  customers
throughout  Alaska, up to approximately 900 miles from its Anchorage  warehouse.
The Company  manages the inventory for its retail  operations  and its wholesale
distribution operations on a combined basis. It is able to consolidate van loads
at its Tacoma facility for maximum space efficiency, reducing the number of vans
that  must  be  shipped  and  the  landed  cost of the  Company's  inventory  in
Anchorage.

         In  contrast,   the  Company's  competitors  do  not  have  centralized
warehousing  and  distribution  facilities in Alaska and must supply  individual
retail sites in Alaska from  warehouses in the lower 48 states,  more than 2,200
miles from  Anchorage.  This  requires a longer  lead time for store  orders and
makes it difficult  for  competitors  to match the  consistent  freshness of the
Company's  perishables or its  responsiveness  to market  conditions.  Without a
consolidation and distribution center in Alaska, the Company's  competitors must
ship vans from the lower 48 states  directly to their  Alaskan  stores,  and the
Company  believes that the competitors  generally have a five-day or more period
from placement of order to receipt of merchandise. Since the Company ships to an
Alaska  warehouse  where loads can be  redistributed  for shipment to individual
stores,  management  believes the Company is able to load vans more efficiently,
reducing  the cost of shipment.  In order to reduce  stock-outs,  the  Company's
competitors must maintain larger in-store inventories,  thereby reducing selling
square  footage  that  could  otherwise  be devoted  to a broader  selection  of
merchandise.

Marketing and Promotion

         The  Company's  retail  advertising  strategy is directed  primarily at
emphasizing  its variety of  high-quality  perishables,  customer  service and a
broad  selection of  nationally  advertised  brand name  products,  available at
competitively  low prices.  The Company  markets its retail  operations  through
newspaper,   radio  and  television   advertising  and  also  uses  direct  mail
advertising,  including periodic advertisements,  and special season catalogues.
The Company's proprietary "Carrs Plus" card is used by customers for quick check
cashing and video rental,  special  discounts and bonuses without using coupons.
Through  its "Carrs  Plus"  electronic  marketing  program  the  Company  tracks
consumer  buying  patterns,  enabling  the  Company to  optimize  its  marketing
expenditures.  The Company  uses the  information  generated  through its "Carrs
Plus" program to develop  targeted  direct mail  marketing  campaigns  which are
typically more  cost-effective  and  successful  than mass mailings or newspaper
advertisements. The Company markets its wholesale operations primarily through a
wholesale sales force. The Company also participates actively in local community
affairs  through the donation of funds and products to local sporting events and
charities, and it encourages employees to participate in civic groups.
<PAGE>
Management Information Systems

         The Company employs sophisticated information technology systems in all
of its stores and distribution  operations to improve  operating  efficiency and
achieve lower costs, particularly in the areas of buying, distribution, scanning
and  in-store  computing,   merchandising  and  expense  management.  Management
believes that its commitment to management  information  systems  provides labor
cost savings, better control of prices and increased checkout speed and accuracy
due  to  improved  product  procurement,  store  delivery  schedules,  inventory
management and pricing accuracy.  The Company's  information system also handles
real time  electronic  mail and  authorizations  for  check,  debit  and  credit
payments,  and processing for third-party pharmacy  authorization.  In addition,
the Company uses  scanner-generated  information by store of individual  product
sales for better  merchandising of stores,  tighter inventory control and better
space allocation.

         All  Company  stores  and  a  majority  of  the  Company's  independent
wholesale customers place orders via hand-held TelxonTM  terminals.  Such orders
can be processed by the  warehouse  within the hour.  The Company  developed and
maintains a warehouse inventory tracking and productivity  improvement system to
manage all of the Company's  warehouse  inventory  levels.  This system includes
inventory control and labor management  components that help reduce product cost
and maximize the Company's ability to service customers. This system also tracks
inventory  that is "on the water"  during ocean  transport  from  Washington  to
Alaska. Sophisticated logistics systems anticipate inventory needs and recommend
product moves between the Tacoma and Anchorage sites.  Central  purchasing and a
proprietary forward-buying system provide the Company with purchasing power that
helps minimize product acquisition costs.

         During the first quarter of 1996, the Company  completed the process of
replacing  its 4381 IBM  mainframe  computer  with the  installation  of its new
purchasing and financial system ("Project  Fusion") that was designed to improve
operating   efficiencies  and  help  streamline  the  Company's   administrative
operations.  Project Fusion has allowed the Company to support  modern  database
tools and client/server technology.  The Company believes that this new flexible
systems  environment  has  enabled  it  to  respond  more  rapidly  to  business
opportunities  and competitive  situations as a result of better  utilization of
management information data.

Trademarks and Licenses

         The Company employs various trademarks,  trade names and service marks.
Certain  governmental   licenses  and  permits,   including  alcoholic  beverage
licenses,  health  permits and  various  business  licenses,  are  necessary  to
operations.  Management  believes  that the  Company  holds  and is in  material
compliance with all necessary licenses and permits.

Competition

         The food,  drug and general  merchandise  retail  businesses are highly
competitive.  The principal  competitive  factors in the Alaska  market  include
quality of products, customer service, product assortment, price, store location
and convenience. The Company believes that its competitive strengths include its
high-quality perishables,  customer service, specialty departments,  low prices,
variety of product  offering,  convenient  store  locations  and long history of
community  involvement.  The  Company  believes  that its  freight  network  and
Anchorage warehouse and distribution center also provide significant competitive
advantages.

         Given the wide  assortment  of products its stores  offer,  the Company
competes  with various types of retailers,  including  independent  and national
supermarket operators, national general merchandisers and discount retailers and
membership   wholesale  clubs.  The  Company's  principal   competitors  in  the
supermarket business include Safeway, Fred Meyer, Alaska Commercial, a number of
independent supermarket operators, and four military commissaries. The Company's
primary  competitors for general merchandise are Fred Meyer, Kmart and Wal-Mart,
and Costco and Sam's Club membership warehouse stores.

Year 2000 Issue

         The year 2000  issue  stems from the fact that many  computer  programs
were written  using two,  rather than four,  digits to identify  the  applicable
year. As a result,  computer programs with time-sensitive software may recognize
a two-digit  code for any year in the next  century as related to this  century.
For example,  "00" entered in a date-field for the year 2000, may be interpreted
as  the  year  1900,   resulting  in  system  failures  or  miscalculations  and
disruptions of operations,  including, among other things, a temporary inability
to process transactions or engage in other normal business activities.
<PAGE>
         In order to improve operating efficiencies and to help streamline CGF's
administrative  operations,  CGF  installed  its new  purchasing  and  financial
system,  Project Fusion, in 1996. An ancillary benefit of Project Fusion is that
the  majority of the  resulting  systems are Year 2000  compliant.  Based upon a
recent assessment, CGF has determined that the incremental cost of ensuring that
its remaining computer systems are Year 2000 compliant is not expected to have a
material  adverse  effect on CGF. CGF has completed a preliminary  assessment of
each of its operations and their Year 2000 readiness,  believes that appropriate
actions  are  being  taken,  and  expects  to  complete  its  overall  Year 2000
remediation  prior to any  anticipated  impact on its  operations.  CGF believes
that, with  modifications  to existing  software and conversions to new systems,
the Year 2000  issue  will not pose  significant  operational  problems  for its
computer  systems and that costs  associated with Year 2000 remediation will not
be material. However, if such modifications and conversions are not made, or are
not completed  timely,  the Year 2000 issue could have a material  impact on the
operations  of this  Company.  CGF expended  approximately  $250,000 in 1998 and
expects to expend  approximately  $500,000 in 1999  addressing Year 2000 issues.
CGF  currently  expects  that the total  incremental  cost of ensuring  that its
remaining  computer systems are Year 2000 complaint will not exceed  $1,000,000.
The potential  impact of the Year 2000 issue on significant  customers,  vendors
and suppliers  has not yet been  assessed and cannot be reasonably  estimated at
this time. Further,  while CGF has initiated formal communications with a number
of its  significant  suppliers to determine the extent to which CGF's  interface
systems are  vulnerable to those third parties'  failure to remediate  their own
Year 2000 issues,  and has initiated similar  communication  with the balance of
its major  suppliers,  there is no guarantee that the systems of other companies
on which  CGF's  systems  rely  will be timely  converted  and would not have an
adverse effect on CGF's systems.

Alaska Economy

         Historically, Alaska had been one of the more rapidly growing states in
the  United  States  in  terms  of  both  population  and  employment,  although
employment  growth  has slowed  recently.  The  Alaska  Department  of Labor had
projected growth in Alaska's  population from  approximately  553,000 in 1990 to
approximately  671,000 in 2000, a compound  annual growth rate of  approximately
2.0% compared to the estimated national  population growth rate of approximately
1.0%  for that  period.  Employment  in  Alaska,  which  grew  2.0% in 1998,  is
projected to remain fairly flat over the next few years.  Alaska's residents are
not subject to any state sales or income taxes and receive annual  distributions
from the state of Alaska  Permanent  Fund, a fund of  approximately  $25 billion
that is supported by royalties from oil  production.  The  distribution  totaled
$864 million  ($1,541 per eligible  resident) in Alaska's fiscal year ended June
30, 1998.

         The  traditional  strengths of the Alaska economy have been  petroleum,
fishing,  forest  products  and  mining  industries.   Military  and  government
spending,  as well as tourism,  have also been major contributors to the state's
economy.  Military  and  government  spending  provide a stimulus to the state's
economy   through  payroll  and  benefit   payments  and  capital   spending  on
transportation and other infrastructure.  In recent years, tourism has become an
increasingly important contributor to the Alaska economy.

Employees

         As of March 1, 1999,  the  Company  employed  a total of  approximately
3,200 people,  approximately 2,400 of whom are covered by collective  bargaining
agreements.  Certain employees engaged in the Company's warehouse operations are
represented by the Teamsters Union,  grocery store and administrative  employees
are represented by the United Food and Commercial  Workers Union  ("UFCW"),  and
pharmacists  are  represented by the Alaska State District  Council of Laborers.
The Company has not  experienced  a labor  strike  since 1971 and  believes  its
relations with its employees to be satisfactory.

         On July 24, 1996, the Company entered into a three-year labor agreement
covering approximately 2,000 grocery store employees represented by the UFCW. On
December 1, 1996, the Company  entered into a three-year  contract with the UFCW
covering its  administrative  employees  and on February  28, 1997,  the Company
entered  into a  three-year  agreement  with the  Teamsters  Union  covering its
Anchorage warehouse and distribution employees. The two latter contracts provide
for pay increases over their terms.

Item 2.           Properties

         The Company owns eight neighborhood  shopping centers. Five centers are
located within the Anchorage  area,  and each is anchored by a Carrs Store.  The
<PAGE>
other  centers are located in Homer,  Valdez and  Unalaska/Dutch  Harbor and are
anchored  by  Eagle  Stores.   These  eight  centers  include  an  aggregate  of
approximately 491,000 square feet of retail space,  approximately 347,000 square
feet of which is  occupied  by the  Company's  grocery  and  liquor  stores  and
approximately 144,000 square feet of which is leased to retail tenants.

         In addition to its shopping  centers,  the Company owns six stand-alone
supermarkets,  one  each in  Anchorage,  Fairbanks,  Juneau,  Seward,  Nome  and
Girdwood. The Anchorage,  Fairbanks and Juneau facilities include adjacent Oaken
Keg Stores. The Company owns a supermarket in Ketchikan,  Alaska,  which is part
of a shopping  center  owned by an  unaffiliated  party.  The  Company  owns its
warehouse and  distribution  center in Anchorage  (approximately  233,000 square
feet), an office building in Anchorage  (approximately  9,300 square feet),  and
one stand-alone  Oaken Keg Store in Fairbanks.  The Company owns a small village
store located in Seldovia, Alaska.

         The Company leases five Carrs Stores, five Oaken Keg Stores and its two
headquarters buildings from general partnerships controlled by the former owners
of the  Predecessor.  The Company leases two Carrs Stores,  two Oaken Keg Stores
and two neighborhood stores from unaffiliated  landlords.  The Company subleases
to its wholly-owned  subsidiary,  Oaken Keg Spirit Shops,  Inc., space for three
Oaken Keg stores.

         In 1998,  Company  sold  approximately  18 acres of property in Tacoma,
Washington,  the location of its current cross-dock and warehouse  facility.  As
part of the  agreement a  replacement  cross-dock  and  warehouse  facility  was
constructed  and leased back to the Company.  The lease term is for 15 years and
includes three  successive  renewal  options at the end of the initial term. The
Company leases its cross-dock and warehouse facility in Tacoma,  Washington from
Safeway.

         The remaining terms for all leased Carrs Stores locations,  except one,
exceed 20 years, including renewal options. The lease term of one Carrs location
in Anchorage  expires on December  31,  1999.  The lease term of three Oaken Keg
locations  expires in 1999,  2001 and 2015. Two Oaken Keg leases expire in 2000.
Two Oaken Keg Stores are currently on month-to-month  lease terms. The lease for
the  Kotzebue  Eagle  Store  expires  in  2003.  The  Company's  lease  for  its
neighborhood store in Big Lake is on a month-to-month term while negotiations to
extend it are under way. The lease for the  Company's  cross dock and  warehouse
facility in Tacoma,  Washington  expires in 2014, with three successive  renewal
options at the end of the initial term.

         Most of the  properties  owned in fee by the Company are collateral for
approximately  $41.1 million  principal amount of first mortgage  financing that
matures in June 2001.  Certain of the Company's leased properties are collateral
for the Company's $116.8 million bank facility.

         The Company is subject to federal, state and local laws and regulations
that impose  liability for cleaning up past or present releases of pollutants to
the   environment.   In  this  regard,   the  Company  has  performed   remedial
investigations  and  cleanup  activities  with  respect  to  contamination  from
underground  storage  tanks at certain  of its  properties.  One such  situation
remains  pending at the present  time.  Management  believes  that any liability
relating  to that  situation  will not have a  material  adverse  impact  on the
financial condition, results of operations or business of the Company.


Item 3.           Legal Proceedings

         The Company is a party to a number of legal proceedings in the ordinary
course of business.  Management believes that these proceedings will not, in the
aggregate, have a material adverse impact on the financial condition, results of
operations or business of the Company.

         In  connection  with the  proposed  Merger,  the  Company,  Safeway and
Acquisition have entered into the Consent Decree. See "Proposed Merger - Consent
Decree."

         A subsidiary of the Company, AOL Express ("AOL"),  operates a warehouse
and cross-dock facility near the Port of Tacoma, Washington. In 1981, the United
States  Environmental   Protection  Agency  ("EPA")  designated  the  bottom  of
Commencement  (Tacoma)  Bay (the  "Bay")  as a site to be  cleaned  up under the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA").
<PAGE>
In 1989,  the EPA named as  potentially  responsible  parties  ("PRPs") over 130
parties,  including  AOL,  that own property  located  along the Bay or on storm
sewer  systems  that  discharge  into the Bay.  The agency  divided the Bay into
several areas and intends to negotiate cleanup responsibilities  separately with
those PRPs in each area.  The  cleanup  costs for the area to which AOL has been
assigned have been estimated  preliminarily to range from $18.0 million to $30.0
million.  The EPA announced that it has named too many PRPs to discuss dismissal
or  settlement  with  any  single  party.  The  Company  therefore  joined  with
approximately  40 other  PRPs who claim to have  contributed  little or  nothing
toward the  contamination  of the Bay (the  "Minor PRPs  Group").  The Minor PRP
Group is currently  working with a group of large,  industrial  PRPs to create a
privately  mediated  allocation of  liability.  No assurance can be given that a
private  allocation of liability will be agreed upon or, if agreed upon, that it
will be acceptable to the Company.  The Company has  commissioned  environmental
investigations  of its Tacoma facility site and operations,  and, based on these
investigations,  management believes that the Company is not responsible for the
contamination that is the subject of these proceedings. Accordingly, the Company
has made no accrual  for  liability  in  connection  with this  action.  It will
continue to seek its dismissal from the action, directly,  through the Minor PRP
Group,  and through the  allocation  mediation.  While there can be no assurance
that the Company will be dismissed from these proceedings and an estimate of the
portion (if any) of the cost allocable to the Company is uncertain, based on the
Company's  findings to date,  the Company  believes  that any costs or liability
resulting  from  this  action  will not have a  material  adverse  impact on the
financial condition, results of operations or business of the Company.


Item 4.           Submissions of Matters to a Vote of Security Holders

         No matters  were  submitted  to a vote of security  holders  during the
fourth quarter of the fiscal year ended January 3, 1999.



<PAGE>


                                     PART II


Item 5.  Market for the  Registrant's  Common  Equity and  Related  Stockholders
         Matters.

         The  Company's  Common  Stock is traded on the New York Stock  Exchange
under the symbol CGF.  The  quarterly  high and low closing  sale prices for the
Common Stock as reported on the New York Stock Exchange  during 1996,  1997,1998
and 1999 are as follows:
<TABLE>
<CAPTION>
1996                                                                                   High                Low
<S>                                                                                    <C>                 <C>    
            First quarter....................                                          $ 5.63              $ 4.50
            Second quarter...................                                          $ 5.13              $ 4.13
            Third quarter....................                                          $ 4.38              $ 3.63
            Fourth quarter...................                                          $ 4.13              $ 3.38
1997
            First quarter....................                                          $ 5.88              $ 3.63
            Second quarter...................                                          $ 5.38              $ 4.75
            Third quarter....................                                          $ 5.44              $ 4.75
            Fourth quarter...................                                          $ 5.31              $ 4.75
1998
            First quarter....................                                          $ 5.75              $ 4.81
            Second quarter...................                                          $ 7.50              $ 5.31
            Third quarter....................                                         $ 11.25              $ 7.13
            Fourth quarter...................                                         $ 11.63             $ 10.75
1999
            First quarter  (through March 19, 1999)                                  $  12.31             $ 10.88
</TABLE>


         As of March  19,  1999,  the  number of  stockholders  of record of the
Company's Common Stock was 221.

         The  Company  has  not   declared  or  paid  cash   dividends   to  its
stockholders.  The  Company  anticipates  that all of its  earnings  in the near
future will be used for debt  repayments or be retained for the  development and
expansion of its business and,  therefore,  does not anticipate paying dividends
on its Common Stock in the foreseeable  future.  Declaration of dividends on the
Common Stock will depend,  among other things,  upon the level of  indebtedness,
future  earnings,  the operating and  financial  conditions of the Company,  its
capital requirements and general business  conditions.  The agreements governing
the Company's  indebtedness  contain  provisions which prohibit the Company from
paying dividends on its Common Stock. See "Item 7.  Management's  Discussion and
Analysis of Financial Condition and Results of Operations-Liquidity  and Capital
Resources."






<PAGE>
<TABLE>
<CAPTION>
Item 6.           Selected Financial Information and Other Data.

(Amounts in Thousands, except for per share,       Fiscal year   Fiscal year     Fiscal year     Fiscal year    Fiscal year
employees and store information)                     1998           1997            1996            1995            1994
------------------------------------------------ -------------- -------------- ---------------- -------------- ---------------
<S>                                              <C>            <C>               <C>            <C>             <C>
Operating Results:
Sales                                             $ 601,869     $  589,274        $  612,576     $  601,322      $  577,063

Cost of merchandise sold, including
warehousing and transportation expenses (1)         426,452        418,639           442,996        431,230         417,183

Gross profit                                        175,417        170,635           169,580        170,092         159,880

Operating and administrative expenses (1,3,5)       143,984        151,105           144,525        141,884         130,255

Operating income (3,5)                               31,433         19,530            25,055         28,208          29,625

Interest expense, net                                25,811         26,711            27,923         16,079          12,210

Income (loss) before extraordinary item (2)          2,124         (5,605)           (2,810)          4,650           9,211

Net income (loss)                                    2,124         (5,605)           (2,810)          3,744           9,211
                                                 ============== =============== =============== ============== ===============

Other Data:
Depreciation and amortization                    $  17,066       $  16,536         $  17,702      $  17,626       $  15,690
Compensation expense stock options (3)                   -               -                 -          1,518               -
Nonrecurring charge (5)                                  -           8,949                 -              -               -
Cash interest                                       24,498          25,366            26,484         15,558          12,143

Basic Income (Loss) Per Share:
   Before extraordinary items                       $  0.26       $  (0.71)        $  (0.36)        $  0.32         $  0.55
   Net income (loss)                                   0.26          (0.71)           (0.36)           0.26            0.55
   Weighted average shares outstanding               8,212           7,921             7,814     (4) 14,457          16,763

Diluted Income (Loss) Per Share: (6)
   Before extraordinary items                       $  .25       $  (0.71)         $  (0.36)        $  0.31         $  0.53
   Net income (loss)                                   .25          (0.71)            (0.36)           0.25            0.53
   Weighted average shares outstanding               8,664           7,921             7,814         15,112          17,233

Financial Position:
Total assets                                     $ 312,721      $  315,465        $  330,844     $  336,620      $  326,369

Long-term debt, excluding current maturities       208,027         215,420           227,640        234,740         136,339

Stockholders' equity                                27,461          24,314            29,598         32,302         112,636

Capital expenditures                                10,097           7,010             4,390         16,660          26,473

Other Year-End Statistics:
   Number of stores                                     49              45                42             39              36
   Number of employees                               3,264           3,040             3,243          3,568           3,597

</TABLE>
  (1)    Reclassifications  have been made to fiscal years 1994 and 1995. During
         these  years,  warehousing,  transportation  and the related  occupancy
         costs  were  originally   reported  as  operating  and   administrative
         expenses.  For the  current  presentation,  these  expenses  have  been
         classified as cost of sales.
  (2)    In fiscal year 1995,  extraordinary item consisted of a $906 ($0.06 per
         share) charge  resulting  from early  retirement of debt.  
  (3)    In 1995, the Company recognized a one-time  pre-tax charge of $1.5 
         million for non-cash expenses associated with the restructuring of a 
         management stock option incentive plan.
  (4)    On November 15, 1995, the Company  repurchased and retired 7,500 shares
         of common stock.  This repurchase  reduced the weighted  average shares
         for fiscal year 1995 by approximately 800 shares.
  (5)    In 1997, the Company  recognized a nonrecurring  charge of $8.9 million
         for expenses principally  associated with its decision to close its YES
         Foods   institutional   food  service   business  and  discontinue  its
         wholesaling services to a Russian export business.
  (6)    Diluted earnings per share data for fiscal years 1994 through 1996 have
         been restated to conform with Statement of Financial Accounting 
         Standard No. 128, Earnings Per Share.


<PAGE>


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

         In recent years,  Alaska,  primarily the greater  Anchorage  area,  has
attracted  an  increased  presence of existing  and new  competitors,  including
supermarkets, general merchandisers, discount retailers and warehouse membership
club  stores.  The Company has  addressed  the  competition  by  remerchandising
certain general merchandise  categories and by continuing its aggressive capital
expenditure  program to remodel existing stores and establish  additional stores
in new regions of Alaska. From 1992 through 1998, 13 of the 16 Carrs Stores have
been remodeled or expanded, and three new Carrs Stores and four new Eagle Stores
have been added.

The table below sets forth certain income  statement  components as a percentage
of sales.
<TABLE>
<CAPTION>
                                                                                 Fiscal Year
                                                                   ------------------------------------------
                                                                         1998          1997        1996
                                                                         ----          ----        ----
<S>                                                                      <C>          <C>          <C>    
      Sales.......................................................       100.0%       100.0%       100.0%

      Cost of merchandise sold, including warehousing
            and transportation expenses ..........................        70.9         71.0         72.3
                                                                          
      Gross profit...............................................         29.1         29.0         27.7

      Operating and administrative expenses.......................        23.9         25.7         23.6
                                                                          ----         ----         ----           
      Operating income............................................         5.2          3.3          4.1
                                                                           ===          ===          ===
</TABLE>
Results of Operations

         Fiscal 1998 Compared to Fiscal 1997

         Sales.  Sales for fiscal  1998 were $601.9  million  compared to $589.3
million for fiscal 1997.  The 2.1%  increase was due  primarily to the fact that
the year included one additional  week as compared to the prior year.  Excluding
the  impact  of the 53rd  week in fiscal  1998 and the  effect of the  Company's
decision  to  close  its YES  Foods  institutional  food  service  business  and
discontinue its wholesaling service to a Russian export business in fiscal 1997,
sales for the year increased  $17.4 million,  or 3.0%. The increase in sales for
1998,  excluding the impact of the 53rd week,  reflects a 1.8% increase in total
retail comparable store sales.

         Gross Profit.  Gross profit for fiscal 1998 was $175.4 million compared
to $170.6  million for fiscal  1997.  The  increase in gross  margin  dollars is
primarily  attributable  to the one  additional  week in 1998 as compared to the
prior year. As a percentage of sales,  gross profit was 29.1% for fiscal 1998 as
compared to 29.0% for fiscal 1997.

         Operating and  Administrative  Expenses.  Operating expenses for fiscal
1998 were $144.0 million as compared to $142.2 million for fiscal 1997. The 1997
results are before a one-time pre-tax  non-recurring  charge of $8.9 million for
expenses  principally  associated  with the Company's  decision to close its YES
Foods  institutional  food service  business  and  discontinue  its  wholesaling
services to a Russian export business.  Excluding the 1997 nonrecurring  charge,
operating expenses as a percentage of sales were 23.9% for fiscal 1998 and 24.1%
for fiscal 1997.

         Operating  Income.  Operating  income for fiscal  1998  increased  $3.0
million from $28.5 million,  excluding the  nonrecurring  pre-tax charge of $8.9
million,  or 4.9% of sales, in 1997 to $31.4 million, or 5.2% of sales, in 1998.
The increase was due primarily to the improved  gross profit dollars during 1998
combined with lower operating expenses.

         Other Income and Expense. Net interest expense was $25.8 million for 
fiscal 1998 compared to $26.7 million for fiscal 1997.  The decrease in interest
expense reflects the lower average debt balances during 1998. See "Liquidity and
Capital  Resources". 

         Income Taxes. The Company recognized an income tax expense for fiscal 
1998 of $3.5 million compared to an income tax benefit of $1.9 for fiscal 1997.

         Net Income. Net income was $2.1 million, or $0.26 per share, for fiscal
1998  compared  to a net loss of $5.6  million,  or $0.71 per share,  for fiscal
<PAGE>
1997.  The  net  loss  for  fiscal  1997  reflects  the  $8.9  million   pre-tax
nonrecurring charge ($5.3 million, or $0.67 per share on an after-tax basis) for
expenses  principally  associated  with the Company's  decision to close its YES
Foods  institutional  food service  business  and  discontinue  its  wholesaling
services to a Russian export business.

         Fiscal 1997 Compared to Fiscal 1996

         Sales.  Sales for fiscal  1997 were $589.3  million  compared to $612.6
million for fiscal 1996.  The 3.8%  decrease was due  primarily to the Company's
decision  to  close  its YES  Foods  institutional  food  service  business  and
discontinue its wholesaling  services to a Russian export  business,  as well as
generally softer  comparable store sales at the retail division during the first
half of 1997.  The decrease in sales for 1997  reflects a 1.4% decrease in total
retail  comparable  store sales.  Sales at the retail  division were impacted by
increased competitive activity and less promotional spending by the Company.

         Gross Profit.  Gross profit for fiscal 1997 was $170.6 million compared
to $169.6  million for fiscal  1996.  The  increase in gross  margin  dollars is
primarily  attributable to improved buying practices,  reductions in promotional
spending,  as well as  improved  gross  margins  achieved at the  wholesale  and
freight  divisions.  As a percentage of sales, gross profit was 29.0% for fiscal
1997 as compared to 27.7% for fiscal 1996. Gross profit as a percentage of sales
for fiscal 1997 increased as a result of improved buying  practices,  reductions
in promotional spending during 1997 and the closure of YES Foods, which operated
at lower gross margin rates.

         Operating and  Administrative  Expenses.  Operating expenses for fiscal
1997,  before a  one-time  pre-tax  non-recurring  charge  of $8.9  million  for
expenses  principally  associated  with the Company's  decision to close its YES
Foods  institutional  food service  business  and  discontinue  its  wholesaling
services to a Russian export  business,  were $142.2 million  compared to $144.5
million for fiscal 1996. Excluding the nonrecurring  charge,  operating expenses
as a  percentage  of sales were 24.1% for fiscal 1997 and 23.6% for fiscal 1996.
Including the nonrecurring  charge,  operating expenses were $151.1 million,  or
25.7% of sales.

         Operating  Income.   Operating  income  for  fiscal  1997,  before  the
nonrecurring  pre-tax charge of $8.9 million recognized in June 1997,  increased
$3.4 million from $25.1 million,  or 4.1% of sales, in 1996 to $28.5 million, or
4.8% of sales,  in 1997.  The increase was due  primarily to the improved  gross
margin rate and dollars during 1997.

         Other Income and Expense.  Net interest  expense was $26.7  million for
fiscal 1997 compared to $27.9 million for fiscal 1996.  The decrease in interest
expense reflects the lower average debt balances during 1997. See "Liquidity and
Capital Resources".

         Income  Taxes.  The Company  recognized  an income tax benefit for 
fiscal 1997 of $1.9  million  compared to an expense of $30  thousand for fiscal
1996.

         Net Loss.  Net loss was $5.6  million,  or $0.71 per share,  for fiscal
1997  compared  to a net loss of $2.8  million,  or $0.36 per share,  for fiscal
1996.  The  net  loss  for  fiscal  1997  reflects  the  $8.9  million   pre-tax
nonrecurring charge ($5.3 million, or $0.67 per share on an after-tax basis) for
expenses  principally  associated  with the Company's  decision to close its YES
Foods  institutional  food service  business  and  discontinue  its  wholesaling
services to a Russian export business.


Liquidity and Capital Resources

         The  Company's  primary  sources  of  liquidity  are  cash  flows  from
operations  and  its  working  capital  revolving  credit  facility,  which  are
considered to be adequate for anticipated  cash needs.  Primary uses are capital
expenditures, debt service and lease payments.

         Net cash provided by operating  activities was $19.2 million for fiscal
1998  compared to $22.2  million  for fiscal  1997 and $22.2  million for fiscal
1996.  The fiscal 1998  decrease  compared to fiscal 1997 was due  primarily  to
increases in inventories and other assets, offset by an increase in net income.

         The Company spent an aggregate of $10.1 million,  $7.0 million and $4.4
million on capital expenditures during fiscal 1998, 1997 and 1996, respectively.
During fiscal 1998, the Company completed two major remodels and added two Great
<PAGE>
Alaska Tobacco  Company  stores.  Also during the year, the Company  completed a
transaction  whereby it purchased the  fixtures,  equipment and inventory of the
three retail  locations of Market  Basket,  Inc.  located in Fairbanks and North
Pole,  Alaska. The transaction also included the purchase of certain real estate
in Fairbanks.

         The table below summarizes year-end historical remodels, expansions and
new store  information,  as well as added selling square footage  resulting from
expansions and new stores,  for the period from 1991 through  December 1998. Due
to the  Company's  substantial  investment  in the store  base since  1990,  the
Company does not expect that significant capital  improvements will be necessary
in the foreseeable future.
<TABLE>
<CAPTION>
                  Number of stores                                 Total selling
             Remodels        Expansions           New stores      Square feet added      Total selling square feet
            ------------     ---------------      ----------      ------------------     -------------------------
Year       Carrs    Eagle     Carrs    Eagle      Carrs    Eagle  Carrs        Eagle     Carrs          Eagle
<S>        <C>       <C>      <C>      <C>        <C>      <C>    <C>          <C>       <C>            <C>
1991         7       --        --        1         --       --         --      5,240     431,689        62,572
1992        --       --         2       --         --       --     31,408         --     463,097        62,572
1993         5        2         2       --          1       --      8,323          --    471,420        62,572
1994         3       --         2       --         --        3     30,377      67,184    501,797       129,756
1995        --       --         1       --          1       --     43,886          --    545,683       129,756
1996        --       --        --       --         --       --    (2,558)          --    543,125       129,756
1997         3       --        --       --         --        1        210       2,255    543,335       132,011
1998         2       --        --       --          1       --     35,382          --    578,717       132,011
</TABLE>
         Net cash used by financing  activities was $7.4 million,  $14.0 million
and $12.3 million for fiscal 1998,  1997 and 1996,  respectively.  The cash used
was principally for scheduled debt  amortization  payments and payments  against
the  Company's  working  capital  revolver.  The level of  borrowings  under the
Company's revolving debt is dependent primarily upon cash flows from operations,
the  timing  of  disbursements,   long-term   borrowing   activity  and  capital
expenditure requirements.

         The Company is a party to a credit  facility  (the  "Credit  Facility")
which  provides  for (i) two term  loan  facilities,  a $35.0  million  facility
maturing on June 30,  2001  ("Term A  Facility")  and a $60.0  million  facility
maturing on December 31, 2002 ("Term B Facility"),  and (ii) a revolving  credit
facility  of $35.0  million  expiring on June 30,  2001.  The  revolving  credit
facility and the $35.0 million term loan bears  interest at an annual rate equal
to the lender's base rate plus 1.0% or the reserve-adjusted Eurodollar rate plus
2.0%, at the Company's option, and the $60.0 million term loan bears interest at
an  annual   rate   equal  to  the   lender's   base  rate  plus  1.25%  or  the
reserve-adjusted  Eurodollar rate plus 2.25%, at the Company's option.  Interest
rates on the  revolving  credit  facility and the Term A Facility are subject to
reduction by up to 0.75% in the event the Company meets certain financial tests.
On April 17,  1998,  the Company  amended  the Credit  Facility.  The  amendment
reduced borrowing rates by 50 basis points on its $35.0 working capital revolver
and  Term A  Facility,  and by 75  basis  points  on its  Term B  Facility.  The
amendment also modified certain financial covenants and restrictions.

         The  principal  amounts of the Term A Facility  and the Term B Facility
are required to be amortized commencing on June 30, 1996. Scheduled amortization
payments  under the Term A Facility  are $5.0  million in 1996,  $7.0 million in
each of 1997,  1998 and 1999,  $5.0  million  in 2000 and $4.0  million in 2001.
Scheduled  amortization payments under the Term B Facility are $600,000 in 1996,
1997,  1998,  1999 and 2000,  $15.0  million in 2001 and $42.0  million in 2002.
Availability  under the  revolver  will be  reduced  by $5.0  million on each of
December 31, 1999 and 2000.

         At January 3, 1999, there were no borrowings on the Company's revolving
credit facility. The Company had available unused credit of $35.0 million. Funds
borrowed  under  the  revolving  credit  portion  of  the  Credit  Facility  are
restricted to working capital and general corporate purposes.

         Inflation.  As is typical of the supermarket industry,  the Company has
adjusted  its retail  prices in response  to  inflationary  trends.  Competitive
conditions  may from time to time limit the  Company's  ability to increase  its
prices as a result of inflation.

         New Accounting  Pronouncements.  In June 1997, the FASB issued SFAS No.
130, "Reporting  Comprehensive  Income".  SFAS 130 establishes standards for the
reporting and display of comprehensive income and its components.  Comprehensive
income  includes all changes in equity during a period except those due to owner
<PAGE>
investments  and  distributions.  It  includes  items such as  foreign  currency
translation  adjustments,  and unrealized gains and losses on available-for-sale
securities.  This  standard  does  not  change  the  display  or  components  of
present-day net income. SFAS 130 does not apply to the Company because it has no
items of other comprehensive income.

         Also in June 1997,  the FASB  issued SFAS No.  131,  "Disclosure  about
Segments of an Enterprise and Related  Information".  This new standard requires
companies to disclose segment data based on how management makes decisions about
allocating resources to segments and how it measures segment  performance.  SFAS
131  requires  companies  to  disclose  a  measure  of  segment  profit  or loss
(operating  income,  for  example),   segment  assets,  and  reconciliations  to
consolidated totals. It also requires entity-wide  disclosures about a company's
products and services,  its major customers and the material  countries in which
it holds assets and reports  revenues.  The Company adopted SFAS 131 in its 1998
year-end financial statements.

         In February 1998, the FASB issued SFAS No 132, "Employers'  Disclosures
about Pensions and Other  Postretirement  Benefits".  SFAS 132  standardizes the
disclosure   requirements  for  pensions  and   postretirement   benefits  where
practical.  It also  eliminates  certain  disclosures  and  requires  additional
information  on changes in benefit  obligations  and fair values of plan assets.
The Company adopted SFAS 132 in its 1998 year-end financial statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

         The company's Facility described in note 10 to the financial statements
as well as in the Management Discussion and Analysis carries interest rate risk.
Amounts  borrowed under this Agreement  bears interest at either LIBOR plus 2.0%
to 2.3%, or at the Company's choice , the lender's prime rate plus 1.0% to 1.3%.
Should the  lenders'  base rate  change,  the  Company's  interest  expense will
increase  or  decrease  accordingly.  As of  January 3, 1999,  the  company  had
borrowed  $74.2  million  subject to interest  rate risk.  On this amount,  a 1%
increase  in the  interest  rate would cost the Company  $742,000 in  additional
gross interest cost on an annual basis.

Item 8. Financial Statements and Supplementary Data.

        See the Index to Consolidated Financial Statements at page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and 
        Financial Disclosure.

        None.


<PAGE>


                                    PART III

         Certain information required by Part III is omitted from this Report as
CGF will file a  definitive  proxy  statement  pursuant to  Regulation  14A (the
"Proxy  Statement")  not later than 120 days  after the end of the  fiscal  year
covered by this Report, and certain information included therein is incorporated
herein  by  reference.   Only  those  sections  of  the  Proxy  Statement  which
specifically  address the items set forth herein are  incorporated by reference.
Such  incorporation  does not include the  Compensation  Committee Report or the
Performance Graph included in the Proxy Statement.


Item 10. Directors and Executive Officers of the Registrant

         John J.  Cairns,  71, is the  current  Chairman of the Board of CGF. He
joined  Carr-Gottstein  Inc., CGF's  predecessor,  in 1981 and served as General
Manager,  Executive Vice President,  Chief Operating Officer,  Secretary,  and a
director until the sale of its operating  assets to CGF in 1990. From 1990 until
1993,  Mr. Cairns served as President of CGF and served as Chairman of the Board
of  Directors  of CGF. In 1993,  he was made Chief  Executive  Officer  upon the
creation of that  position.  In  September  1994,  Mr.  Cairns  retired from his
position as Chief Executive  Officer.  Mr. Cairns continues to serve as Chairman
and is  employed  by the  Company  on a  part-time  basis to  assist  the  Chief
Executive Officer on special projects and matters of strategic  planning.  Prior
to joining CGF's predecessor, Mr. Cairns held various operating, administrative,
and  executive  positions  with the Great  Atlantic and Pacific Tea Company from
1943 to 1978 and served as Vice  President-Corporate  Development and a director
of Smith  Management  Corporation,  a regional retail food operator in Salt Lake
City, from 1978 to 1981.

         Lawrence H. Hayward,  44, is President and Chief  Executive  Officer of
CGF. He joined the Company in March 1995 as its Senior Vice  President and Chief
Operating  Officer and was promoted to President and Chief Executive  Officer in
August  1996.  From 1981 until 1990,  Mr.  Hayward  served in various  corporate
positions at American Stores Company headquartered in Salt Lake City, Utah. From
1990 to 1995,  Mr.  Hayward was  employed  by Buttrey  Food and Drug Co. as Vice
President for  Distribution/Transportation,  Vice President for Support Services
and then Vice President of Store Operations. Mr. Hayward currently serves on the
Board of Directors of Western Association of Food Chains, Inc.

         Donald J.  Anderson,  38, is Senior  Vice  President,  Chief  Financial
Officer and  Secretary of CGF. He joined the Company in his present  position in
April 1995.  Mr.  Anderson has 22 years of experience  in the grocery  industry.
From 1977 to 1994,  he served in various  positions  with  Buttrey Food and Drug
Co., including Director of Financial Reporting,  Corporate Controller,  and Vice
President.  In 1994, Mr. Anderson returned to American Stores Corporate where he
was  Program  Manager  for  the  financial  portion  of a  multi-million  dollar
re-engineering program.

         Jeff L. Philipps,  43, is Senior Vice President  Retail  Division of 
CGF.  He joined the  Company in his  present  position  in  February  1997.  Mr.
Philipps has more than 20 years of experience in the retail food business. Prior
to joining CGF Mr. Philipps  served as the Director of Business  Development for
the National Procurement  Organization at American Stores Company  headquartered
in Salt Lake City, Utah.

         Leonard I. Green,  65, has served as a director  of the  Company  since
1990. Since 1989, he has been, individually or through a corporation,  a partner
of LGA, a merchant  banking firm that is the general partner of GEI. Since 1994,
Mr. Green has also been an executive officer and equity owner of Leonard Green &
Partners,  L.P.  ("LGP"),  a second  merchant  banking firm that manages another
investment fund. Before forming LGA in 1989, Mr. Green had been a partner of the
<PAGE>
merchant banking firm of Gibbons, Green, van Amerongen for more than five years.
Mr.  Green is also a director of Rite-Aid  Corporation,  Communications  & Power
Industries, Inc., and Hechinger Company.

         Jonathan D.  Sokoloff,  41, has been a director of the Company since 
1990.  He  joined  LGA as a  partner  in 1990.  Mr.  Sokoloff  has also  been an
executive  officer  and equity  owner of LGP since its  formation  in 1994.  Mr.
Sokoloff  was  previously  a managing  director in  corporate  finance at Drexel
Burnham  Lambert  Incorporated.  Mr.  Sokoloff  is also a  director  of  TwinLab
Corporation, Gart Sports Company and Hechinger Company.

         Gregory J. Annick,  35, has been a director of the Company  since 1990.
He joined LGA as an associate in 1989, became a principal in 1993, and through a
corporation  became a partner in 1994.  Since 1994,  Mr. Annick has also been an
executive  officer  and  equity  owner  of LGP.  From  1988 to  1989,  he was an
associate  with the merchant  banking  firm of Gibbons,  Green,  van  Amerongen.
Before that time, Mr. Annick was a financial analyst in mergers and acquisitions
with  Goldman,  Sachs & Co. Mr.  Annick is also a director of  Communications  &
Power Industries,  Inc., Leslie's Poolmart,  Inc., Hechinger Company and Liberty
Group Publishing, Inc.

         E. Dean Werries,  69, became a director of CGF in 1994.  From 1989 to
1994, Mr. Werries served as Chairman of the Board of Fleming Companies,  Inc. He
joined Fleming in 1955 and held various  positions  within that company  through
1988, when he was appointed  President and Chief Executive Officer. In 1994, Mr.
Werries  retired as Chairman.  He  currently  serves as Chairman of the Board of
Sonic Corp.

         Donald E.  Gallegos,  64,  became a director of CGF in 1994.  He is the
retired President of King Soopers, a retail grocery chain owned by Kroger,  Inc.
On April 1, 1997,  after serving seven years as President,  Mr. Gallegos retired
from that position and became Chairman of the Executive Committee.  Mr. Gallegos
held various  positions with King Soopers prior to being  appointed  Senior Vice
President of Dillon  Companies,  King Soopers' Parent Company,  in 1982 and then
President in 1990.

         To the best of CGF's knowledge,  based solely upon review of the copies
of such  reports  furnished  to CGF and  written  representations  that no other
reports were required,  all Section 16(a) filing requirements  applicable to its
officers,  directors,  and greater than ten-percent  shareholders  were complied
with during the fiscal year ended December 28, 1997.


Item 11. Executive Compensation

         The information  required by this Item is included  under the captions
"Executive Compensation" in the Proxy Statement.


Item 12. Security Ownership of Certain Beneficial Owners and Management

         The information  required by this Item is  included  under the caption
"Ownership of Voting Securities By Certain  Beneficial Owners and Management" in
the Proxy Statement.




Item 13. Certain Relationships and Related Transactions

         The  information  required by this Item is  included  under the caption
"Certain Transactions" in the Proxy Statement.



<PAGE>





Item 14  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

  (a)1   Financial Statements - See Index to Consolidated Financial Statements 
         at page F-.1

  (a)2   Financial Statement Schedule - none

  (a)3   Exhibits - See Index to Exhibits immediately following page F-29.

  (b)    On  February  23,  1999,  the  Company  filed  a  Form  8-K,
         announcing  that it and  Safeway  Inc.  had  filed a consent
         decree  with the  Attorney  General  of the  State of Alaska
         regarding  the   acquisition   by  Safeway  of  all  of  the
         outstanding shares of common stock of CGF.





<PAGE>


         Pursuant to the  requirements  of Section 13 or 15(d) 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,  on the 2nd day of
April, 1999.

                                   CARR-GOTTSTEIN FOODS CO.



                                    By: /S/  Lawrence H. Hayward
                                        --------------------------
                                       Lawrence H. Hayward, President and Chief
                                       Executive Officer

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities indicated on the 2nd day of April, 1999.

PRINCIPAL EXECUTIVE OFFICERS                         DIRECTORS


/S/  Lawrence H. Hayward.                            /S/  Leonard I. Green
_____________________________                        __________________________
Lawrence H. Hayward, President and Chief             Leonard I. Green
Executive Officer; Director

                                                     /S/  Jonathan Sokoloff
                                                     __________________________
                                                     Jonathan Sokoloff
PRINCIPAL FINANCIAL OFFICER                          
and ACCOUNTING OFFICER

                                                     /S/  Gregory Annick
                                                     __________________________
/S/  Donald J. Anderson                              Gregory Annick
______________________________
Donald J. Anderson, Chief Financial Officer
and Accounting Officer
                                                     /S/  John J. Cairns
                                                     __________________________
                                                     John J. Cairns

     
                                                    /S/  Lawrence H. Hayward
                                                    __________________________
                                                    Lawrence H. Hayward
        

                                                    /S/  E. Dean Werries
                                                    ___________________________
                                                    E. Dean Werries


                                                    /S/  Donald Gallegos
                                                    ___________________________
                                                    Donald Gallegos





<PAGE>










                           [Intentionally Left Blank]







<PAGE>


CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES


Index to Consolidated Financial Statements
-------------------------------------------------------------------------------
                                                                      ....Page

Independent Auditors' Report...............................................F-2

Consolidated Statements of Operations for the years ended 
    January 3, 1999, December 28, 1997 and December 29, 1996...............F-3

Consolidated Balance Sheets as of January 3, 1999 and December 28, 1997... F-4

Consolidated Statements of Stockholders' Equity for the years 
    ended ended January 3, 1999, December 28, 1997 and December 29, 1996...F-5

Consolidated Statements of Cash Flows for the years ended January 3, 1999,
December 28, 1997, and December 29, 1996...................................F-6

Notes to Consolidated Financial Statements.................................F-7



<PAGE>


CARR GOTTSTEON FOODS CO. AND SUBSIDIARIES

Independent Auditors' Report
-------------------------------------------------------------------------------



The Board of Directors and Stockholders
Carr-Gottstein Foods Co.

         We have audited the consolidated financial statements of Carr-Gottstein
Foods  Co.  and  subsidiaries  as  listed  in  the  accompanying   index.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
present  fairly,   in  all  material   respects,   the  financial   position  of
Carr-Gottstein Foods Co. and subsidiaries as of January 3, 1999 and December 28,
1997 and the  results of their  operations  and their cash flows for each of the
years  in the  three-year  period  ended  January  3,  1999 in  conformity  with
generally accepted accounting principles.




KPMG LLP



Anchorage, Alaska
March 24, 1999

<PAGE>


CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES

Consolidated Statements of Operations
<TABLE>
<CAPTION>
                                                                                      Years ended
-------------------------------------------------------------------------------------------------------------------------
                                                                     January 3,     December 28, 1997      December 29,
Amounts In Thousands (except per share data)                            1999                                   1996
----------------------------------------------------------------- ----------------- ------------------ -------------------
<S>                                                                    <C>               <C>                <C>    
Sales                                                                  $  601,869        $  589,274         $  612,576
Cost of merchandise sold, including warehousing
     and transportation expenses                                          426,452           418,639            442,996
----------------------------------------------------------------- ----------------- ------------------ -------------------
         Gross profit                                                     175,417           170,635            169,580

Operating and administrative expenses                                     143,984           142,156            144,525
Nonrecurring charge                                                             -             8,949                  -
----------------------------------------------------------------- ----------------- ------------------ -------------------
         Operating income                                                  31,433            19,530             25,055

Other income (expense):
         Interest expense, net                                            (25,811)          (26,711)           (27,923)
         Other income (expense)                                                (7)             (373)                88
----------------------------------------------------------------- ----------------- ------------------ -------------------
         Income (loss) before income tax expense                            5,615            (7,554)            (2,780)

Income tax benefit (expense)                                               (3,491)            1,949                (30)
----------------------------------------------------------------- ----------------- ------------------ -------------------

         Net income (loss)                                             $    2,124      $     (5,605)       $    (2,810)
================================================================= ================= ================== ===================

Basic income (loss) per common share:
         Income (loss)                                                $      0.26    $        (0.71)      $       (0.36)
----------------------------------------------------------------- ----------------- ------------------ -------------------

         Net income (loss) per share                                  $      0.26    $        (0.71)      $       (0.36)
================================================================= ================= ================== ===================

Diluted income (loss) per common share:
         Income (loss)                                                $      0.25      $      (0.71)       $      (0.36)
----------------------------------------------------------------- ----------------- ------------------ -------------------

         Net income (loss) per share                                  $      0.25      $      (0.71)       $      (0.36)
================================================================= ================= ================== ===================

Weighted average common shares outstanding - basic                          8,212             7,921              7,814

Weighted average common shares outstanding - diluted                        8,664             7,921              7,814
================================================================= ================= ================== ===================
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES

Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                                      January 3,        December 28,
Amounts in Thousands                                                                       1999               1997
-----------------------------------------------------------------------------------------------------------------------

                                      Assets
Current assets:
<S>                                                                                     <C>              <C>    
         Cash and cash equivalents                                                      $    11,273      $     11,081
         Accounts receivable, net                                                            10,816            11,513
         Income taxes receivable                                                                111               949
         Inventories                                                                         54,002            51,471
         Deferred taxes                                                                       2,944             2,690
         Prepaid expenses and other current assets                                            2,810             2,380
----------------------------------------------------------------------------------- ----------------- ------------------
               Total current assets                                                          81,956            80,084

Property, plant and equipment, at cost, net of accumulated depreciation                     125,614           134,090
Intangible assets, net of accumulated amortization                                           88,797            88,973
Deferred taxes                                                                                    -               783
Other assets                                                                                 16,354            11,535
----------------------------------------------------------------------------------- ----------------- ------------------
                                                                                         $  312,721        $  315,465
=================================================================================== ================= ==================

                       Liabilities and Stockholders' Equity
Current liabilities:
         Accounts payable                                                               $    41,097       $    37,187
         Accrued expenses                                                                    21,159            22,797
         Current maturities of long-term debt                                                11,208            12,220
----------------------------------------------------------------------------------- ----------------- ------------------
               Total current liabilities                                                     73,464            72,204

Long-term debt, excluding current maturities                                                208,027           215,420
Deferred tax liability                                                                          387                 -
Other liabilities                                                                             3,382             3,527
----------------------------------------------------------------------------------- ----------------- ------------------
               Total liabilities                                                         $  285,260        $  291,151
----------------------------------------------------------------------------------- ----------------- ------------------

Stockholders' equity:
         Common stock, $.01 par value, authorized 25,000 shares,
            issued 9,680 shares at 1998 and 1997, respectively                                   97                97
         Additional paid-in capital                                                          50,992            52,088
         Deficit                                                                            (14,025)          (16,149)
----------------------------------------------------------------------------------- ----------------- ------------------
                                                                                             37,064            36,036

         Less treasury stock, 1,432 shares and 1,741 shares, respectively, at cost            9,603            11,722
----------------------------------------------------------------------------------- ----------------- ------------------
               Total stockholders' equity                                                    27,461            24,314
----------------------------------------------------------------------------------- ----------------- ------------------

Commitments and contingencies
----------------------------------------------------------------------------------- -----------------  -----------------
                                                                                         $  312,721        $  315,465
=================================================================================== ================= ==================
</TABLE>
See accompanying notes to consolidated financial statements.

<PAGE>

CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity

Years ended January 3, 1999,
December 28, 1997, and  
December 29, 1996 
<TABLE>
<CAPTION>

                                                      Additional                   Stock                       Total
                                           Common      Paid-In                Subscriptions      Treasury    Stockholders'
Amounts in Thousands                       Stock       capital       Deficit   Receivable          Stock       Equity
--------------------------------------- ------------ ------------- ---------- ----------------- ------------ -----------
<S>                                        <C>        <C>           <C>           <C>        <C>             <C>
Balance at December 31, 1995               $    97    $  52,595     $  (7,734)    $    (44)  $    (12,612)   $   32,302

Issuance of treasury stock                       -          (82)            -            -            144            62
Net loss                                         -            -        (2,810)           -              -        (2,810)
Payments under stock purchase plan               -            -             -           44              -            44
---------------------------------------- ---------- ------------ ------------- ------------ -------------- -------------
Balance at December 29, 1996                    97       52,513       (10,544)           -        (12,468)       29,598

Issuance of treasury stock                       -         (425)            -            -            746           321
Net loss                                         -            -        (5,605)           -              -        (5,605)
---------------------------------------- ---------- ------------ ------------- ------------ -------------- -------------
Balance at December 28, 1997                    97       52,088       (16,149)           -        (11,722)`      24,314

Issuance of treasury stock                       -       (1,096)            -            -          2,119         1,023
Net income                                       -            -         2,124            -              -         2,124
---------------------------------------- ---------- ------------ ------------- ------------ -------------- -------------
Balance at January 3, 1999                $     97  $    50,992    $  (14,025) $         -     $   (9,603)  $    27,461
======================================== ========== ============ ============= ============ ============== =============
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

CARR-GOTTSTEIN FOODS CO.

Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                                         Years ended
-----------------------------------------------------------------------------------------------------------------------
                                                                        January 3,       December 28,       December 29,
Amounts in Thousands                                                        1999               1997            1996
-----------------------------------------------------------------------------------------------------------------------
Operating activities:
<S>                                                                     <C>             <C>              <C>    
       Net income (loss)                                                $    2,124      $    (5,605)     $     (2,810)
       Adjustments to reconcile net income (loss) to net cash
          provided by operating activities:
              Depreciation                                                  13,773           13,678            14,844
              Amortization of intangibles                                    3,293            2,858             2,858
              Amortization of loan fees                                      1,313            1,345             1,439
              Loss (gain) on disposal of property and equipment                  7              115               (84)
              Changes in assets and liabilities:
                 Decrease in receivables                                       697            5,137             1,203
                 Decrease (increase) in inventories                         (3,406)           2,761            (3,727)
                 Decrease (increase) in prepaid expenses and
                 other current assets                                         (430)             429                72
                 Increase in other assets                                   (2,061)            (544)             (556)
                 Increase (decrease) in income taxes payable                     -             (298)              298
                 Decrease (increase) in deferred taxes                         916           (1,221)             (984)
                 Increase (decrease) in accounts payable                     3,910           (1,280)            2,481
                 Increase (decrease) in accrued expenses                    (1,638)           5,694             6,957
                 Decrease (increase) in income tax receivable                  838             (949)              164
                 Increase (decrease) in other liabilities                     (145)              70                50
---------------------------------------------------------------------------------------------------------------------
                 Net cash provided by operating activities                  19,191           22,190            22,205
-----------------------------------------------------------------------------------------------------------------------
Investing activities:
       Additions to property and equipment                                  (7,855)          (6,910)           (4,390)
       Additions to intangible assets                                       (2,242)            (100)                -
       Additions to other assets                                            (4,071)               -                 -
       Proceeds from sale of property and equipment                          2,551            1,206               287
-----------------------------------------------------------------------------------------------------------------------
                 Net cash used in investing activities                     (11,617)          (5,804)           (4,103)
-----------------------------------------------------------------------------------------------------------------------
Financing activities:
       Proceeds from issuance of long-term debt                              4,000                -                 -
       Payments under revolving line of credit, net                              -           (7,000)           (9,000)
       Payments on long-term debt                                          (12,405)          (7,281)           (3,370)
       Change in stock subscriptions receivable                                  -                -                44
       Issuance of treasury stock, net                                       1,023              321                62
-----------------------------------------------------------------------------------------------------------------------
                 Net cash used in financing activities                      (7,382)         (13,960)          (12,264)
-----------------------------------------------------------------------------------------------------------------------

Net increase in cash and cash equivalents                                      192            2,426             5,838

Cash and cash equivalents at beginning of year                              11,081            8,655             2,817
-----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                              $     11,273    $      11,081        $    8,655
=======================================================================================================================

Supplemental information:
       Interest paid                                                  $     25,019     $     25,064         $  25,198
       Income taxes paid                                             $       1,558     $        956         $     552
=======================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.


<PAGE>


CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Amounts in Thousands (except for per share data)
-------------------------------------------------------------------------------


(1) BUSINESS

Carr Gottstein Foods Co. and subsidiaries (Company) is the leading food and drug
retailer in Alaska with 49 stores primarily located in Anchorage,  as well as in
Fairbanks,  Juneau,  Kenai and other Alaska communities.  The Company operates a
chain of 16  super-combination  food, drug and general  merchandise stores under
the name Carrs Quality  Centers.  The Company also operates nine smaller  stores
under  the  name  Eagle  Quality  Centers  or  other  names  in  smaller  Alaska
communities.  The Company is also  Alaska's  highest-volume  alcoholic  beverage
retailer  through its chain of 17 wine and liquor stores operated under the name
Oaken Keg Spirit Shops.  The Company  operates  seven small tobacco stores which
operate  under the name The Great  Alaska  Tobacco  Company.  In  addition,  the
Company operates a freight  transportation  business under the names AOL Express
and APR Forwarders, and a full-line food warehouse and distribution center under
the name J.B. Gottstein. The Company, through CGF Properties, Inc., owns many of
the buildings and shopping  centers from which its Carrs,  Eagle Quality Centers
and Oaken Keg Spirit Shops operate.


(2) ACQUISITION AND BASIS OF PRESENTATION

As of  October  12,  1990,  CG  Acquisition  Co.  acquired  certain  assets  and
liabilities of Carr Gottstein Inc. and other related entities  (Predecessor) and
changed  the  corporate  name to  Carr  Gottstein  Foods  Co.  The  transactions
described  above are  referred  to herein  as the  Acquisition.  The cost of the
Acquisition  approximated  $280,000  and was financed  through bank  borrowings,
issuance of senior notes,  subordinated  notes and common stock. The Acquisition
was accounted  for using  purchase  accounting  in which the purchase  price was
allocated  to the  acquired  assets  and  liabilities  based on  their  relative
estimated  fair values.  The excess of the purchase price over the fair value of
assets and liabilities  acquired  resulted in identified  intangibles of $25,100
and goodwill of $105,700.


(3) CAPITALIZATION

On May 6, 1993,  the Company  reclassified  its common stock into a single class
and  authorized  25,000 shares of $.01 par value common stock,  10,000 shares of
$.01 par value  preferred  stock  and a two for one  split for the  reclassified
common stock. As a result of the split,  5,678 shares were issued and additional
paid-in capital was reduced by $57.

During  1993,  the Company  undertook an initial  public  offering of its common
stock.  The  shares  were  issued at an initial  price of $14.50 per share.  The
Company  issued  5,824 new shares of common  stock and  received net proceeds of
$77,632.  Common stock and additional  paid-in capital were increased by $58 and
$77,574, respectively.


(4) MERGER AGREEMENT

On August 6, 1998,  the  Company  signed a  definitive  agreement  (the  "Merger
Agreement"),   with  Safeway  Inc.   ("Safeway")   and  ACG  Merger  Sub,   Inc.
("Acquisition"), a wholly-owned subsidiary of Safeway, pursuant to which Safeway
will acquire  through the merger (the "Merger") of Acquisition  into the Company
all  outstanding  shares of the  Company's  common stock at a purchase  price of
$12.50 per share. In addition,  Safeway would assume  approximately $220 million
of debt and  will  account  for the  transaction  as a  purchase.  The  Board of
Directors of the Company approved the Merger Agreement.  The consummation of the
transactions  contemplated by the Merger Agreement,  which is subject to certain
conditions,  including  approval of the Company's  stockholders,  clearance from
certain  regulatory  authorities  and  receipt  of  certain  consents  and court
approval, is expected to occur in the second quarter of 1999. Financing is not a
condition to complete the transaction.

In  connection  with the Merger  Agreement,  Green  Equity  Investors,  L.P. (an
affiliate  of  Leonard  Green  &  Associates,   L.P.),  the  Company's   largest
stockholder,  executed an  agreement  with  Safeway  (the  "Stockholder  Support
Agreement")  in which it agreed to vote its 2,870 shares of Common Stock,  which
represented  35.1%  of  the  Company's  outstanding  stock  at the  time  of the
execution of the Merger Agreement, in favor of approval of the Merger Agreement.
<PAGE>
The Merger  Agreement  provides for payment to Safeway of a termination  fee and
reimbursement of expenses, under certain circumstances,  including if the Board,
in the  exercise of its  fiduciary  responsibilities,  withdraws or modifies its
recommendation  to the  stockholders  of the  transactions  contemplated  by the
Merger Agreement.

Consent  Decree.  On February  9, 1999,  Safeway,  the  Company and  Acquisition
entered into a Consent  Decree with the State of Alaska (the "Consent  Decree"),
in  connection  with  settling  a  lawsuit  filed by the  State of Alaska in the
Superior  Court for the State of Alaska,  Third  Judicial  District at Anchorage
(the  "Court"),  with respect to the Merger (a copy of the Consent Decree may be
obtained  from  the  Court).  The  Consent  Decree,  which is  subject  to court
approval,  requires  Safeway and the Company to sell seven stores (the "Stores")
-- four Safeway stores  located in Anchorage,  one Safeway store located in each
of Eagle River and Wasilla and the  Company  store in  Fairbanks.  Each of these
Stores is required to be sold to operating  supermarket  companies  that will be
approved by the Attorney General.

The Consent Decree  provides for a 60-day public comment period  following which
the Court will conduct a hearing on the  comments,  if any,  and will  determine
whether to approve the Consent  Decree.  The  parties  have  scheduled a hearing
before the Court for April 13, 1999. The Merger may not be consummated  prior to
the entry of an order by the Court  approving the Consent  Decree,  and upon the
approval and entry of the Consent  Decree by the Court,  Safeway and the Company
anticipate consummating the Merger shortly thereafter.

Following the Court's  approval of the Consent  Decree,  Safeway and the Company
will have six months to obtain  approval from the Attorney  General of the State
of Alaska (the "Attorney  General") of signed  purchase  agreements and proposed
transactions  to sell the Stores and an  additional  two months to complete  the
sales,  subject to  extensions  approved by the  Attorney  General.  The Consent
Decree contains  provisions for payments by Safeway of up to $1 million for each
Store for  which it is  unable to meet  those  deadlines.  In  addition,  if the
deadlines are not met, the State of Alaska may seek the appointment of a trustee
to effect the divestiture of the remaining Stores.

Pursuant  to the Consent  Decree,  until  Safeway and the Company  have sold the
Stores,  they have agreed to operate  and conduct the  business of the Stores in
the ordinary course,  maintain existing business relationships with each Store's
suppliers,  customers and employees, maintain inventory levels and selections at
each Store and limit increases in the gross profit margins for supermarkets that
they operate in the geographic areas in which the Stores are located.

Hart-Scott-Rodino  ("HSR")  Act.  The Merger is subject to review by the Federal
Trade  Commission  (the "FTC") and the Antitrust  Division of the  Department of
Justice (the "DOJ") under the HSR Act. The parties have  apprised the FTC of the
Consent Decree.  The staff of the FTC's Seattle Regional Office has indicated to
Safeway and the Company  that it is  prepared  to  recommend  that the Bureau of
Competition  grant early  termination  of the waiting  period under the HSR Act,
provided that the Court enters the Consent Decree in substantially the same form
as agreed to by the parties,  and that the Bureau of Competition is in agreement
with this position.

AKPIRG Litigation. In late October 1998, an Alaska consumer group, Alaska Public
Interest  Research  Group  ("AKPIRG"),  and five  individuals  filed a purported
class-action  lawsuit in Alaska state court seeking an injunction to prevent the
Merger.  In February 1999,  Safeway and the Company  settled with AKPIRG and the
individual  plaintiffs.  The settlement  provides that AKPIRG and the individual
plaintiffs  will no longer  oppose  the  Merger or the  Consent  Decree and will
dismiss the lawsuit.





<PAGE>


(5) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Estimates and Assumptions
In preparing the consolidated  financial statements in accordance with generally
accepted  accounting  principles,  management is required to make  estimates and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of contingent  assets and liabilities as of the date of the financial
statements  and revenue and expenses for the reporting  period.  Actual  results
could  differ  from  those  estimates  and  assumptions.  The  more  significant
estimates  and  assumptions  applied  in the  preparation  of  the  consolidated
financial statements are discussed below.

Fiscal Year
The Company's fiscal year is a 52 or 53 week year,  ending on the Sunday closest
to the calendar  year-end.  Fiscal year 1998 as  presented  in the  consolidated
financial statements consists of 53 weeks and fiscal years 1997 and 1996 consist
of 52 weeks.  References  to fiscal year 1998  represent the 53 week year ending
January 3, 1999 and  references  to fiscal years 1997 and 1996  represent the 52
week years ending December 28, 1997 and December 29, 1996, respectively.

Consolidation
The  consolidated  financial  statements of the Company  include the accounts of
Carr  Gottstein  Foods Co. and its  divisions;  J.B.  Gottstein,  Carrs  Quality
Centers  and  Eagle  Quality  Centers  and its  wholly-owned  subsidiaries,  AOL
Express,  Inc.,  APR  Forwarders,  Inc.,  Oaken Keg Spirit Shops,  Inc.,  Alaska
Advertisers,   Inc.  and  CGF   Properties,   Inc..   Significant   intercompany
transactions and accounts have been eliminated from the  consolidated  financial
statements.

Cash Equivalents
For  purposes of the  statement  of cash flows,  short-term  investments  with a
maturity of three months or less are considered to be cash equivalents. Cash and
cash equivalents include cash on hand, checking accounts and savings accounts.

Inventories
Inventories  are stated at the lower of cost or market.  Retail food company and
liquor company store inventory cost is determined by reducing  inventories taken
at retail prices by estimated gross margin  percentages.  Wholesale  inventories
are valued at weighted average cost.  Inventories include direct transportation,
warehouse and allocated administrative costs.

Property, Plant and Equipment
Property,  plant and  equipment are recorded at cost.  Maintenance,  repairs and
minor  replacements  are charged to expense as  incurred.  When assets are sold,
retired or fully depreciated,  their cost and related  accumulated  depreciation
are removed from the  property,  plant and equipment  accounts,  and any gain or
loss is recorded.

Depreciation
The costs of  buildings,  equipment  and  fixtures  are  depreciated  over their
estimated useful lives on a straight-line basis. The components of buildings are
depreciated  over lives  ranging  from 10 to 31.5  years or over the  respective
lease terms, if such periods are shorter. Fixtures and equipment are depreciated
over estimated lives of three to 15 years.

Intangible Assets and Amortization
Intangible  assets represent the excess of purchase price over fair value of net
assets acquired.  Goodwill is generally  amortized on a straight-line basis over
40 years.  Costs allocated to specifically  identified assets are amortized on a
straight-line  basis over three to five  years.  On an annual  basis the Company
assesses  the   recoverability  of  goodwill  and  other  intangible  assets  by
determining  whether the  amortization  of the balances over the remaining lives
can be recovered  through the  undiscounted  future  operating cash flows of the
acquired operations.

Loan Fees
Loan fees are amortized over the term of the related debt.
<PAGE>
Buying and Promotional Allowances
Allowances  and credits  received from vendors in connection  with the Company's
buying and merchandising activities are recognized as earned.

Investment in Affiliate
The equity method of  accounting is used to account for the Company's  ownership
of  33-1/3%  of the stock of  Denali  Commercial  Management,  Inc.  (DCM).  The
financial position and results of operations of DCM are not material.

Income Taxes
The Company  files  consolidated  federal and state income tax  returns.  Income
taxes are  accounted  for under the asset and  liability  method.  Deferred  tax
assets  and  liabilities   are  recognized  for  the  future  tax   consequences
attributable to differences  between the financial statement carrying amounts of
existing  assets and  liabilities  and their  respective tax bases and operating
loss and tax credit  carryforwards.  Deferred  tax assets  and  liabilities  are
measured  using  enacted tax rates  expected  to apply to taxable  income in the
years in which those  temporary  differences  are  expected to be  recovered  or
settled.  The effect on deferred tax assets and  liabilities  of a change in tax
rates is recognized in income in the period that includes the enactment date.

Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation,
fines and  penalties,  and other sources are recorded when it is probable that a
liability  has been  incurred  and the amount of the  assessment  or cost can be
reasonably estimated.

Earnings Per Common Share
Statement of Financial  Accounting  Standard No. 128, Earnings Per Share,  which
simplifies the earnings per share  calculation and makes the U.S.  standard more
consistent with international  accounting standards,  was adopted in 1997 by the
Company.  Earnings  per share data for 1996 was  restated  to  conform  with the
provisions of SFAS No. 128.  Basic  earnings per common share are  determined by
dividing  net income  (loss) by the  weighted  average  number of common  shares
outstanding.  Diluted  earnings per common share are  determined by dividing net
income  (loss) by the  weighted  average  number of common  shares  outstanding,
including common stock options which are dilutive.  At January 3, 1999,  options
to  purchase  902 shares of common  stock were  included in the  computation  of
diluted earnings per share because they were dilutive.  At December 28, 1997 and
December 29, 1996,  options to purchase  1,112 and 1,197 shares of common stock,
respectively, were not included in the computation of diluted earnings per share
because they were not dilutive.

Impairment of Long-Lived Assets
Statement  of  Financial   Accounting  Standard  No.  121,  Accounting  for  the
Impairment of  Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of,
sets forth new standards for determining when long-lived assets are impaired and
requires  impaired assets to be carried at the lower of cost or fair value.  The
Company adopted the new standard as of January 1, 1996,  which has had no effect
on the Company's financial statements.

Stock Option Plan
Statement of Financial  Accounting  Standard No. 123, Accounting for Stock-Based
Compensation,  was adopted by the Company as of January 1, 1996.  This statement
establishes   accounting  and  reporting  standards  for  stock-based   employee
compensation  plans. As permitted by this statement,  the Company has elected to
continue to account for stock options using APB Opinion No. 25,  Accounting  for
Stock Issued to Employees,  to determine the amount of any compensation  expense
related to stock  options.  Consequently,  the Company  discloses  the amount of
compensation  expense and the impact on net  earnings and earnings per share had
the  fair  value  method  set  forth  in SFAS No.  123  been  used to  calculate
compensation.




<PAGE>


(6) ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:
<TABLE>
<CAPTION>
                                                                            January 3,              December 28,
                                                                               1999                     1997
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                      <C>    
Wholesale and retail trade                                                  $  10,052                $ 10,593
Tenant                                                                            106                     127
Other                                                                           1,243                   1,492
-----------------------------------------------------------------------------------------------------------------------
                                                                               11,401                  12,212
Less allowance for doubtful accounts                                              585                     699
-----------------------------------------------------------------------------------------------------------------------
  Accounts receivable, net                                                  $  10,816                $ 11,513
=======================================================================================================================


(7) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:
                                                                            January 3,              December 28,
                                                                               1999                     1997
-----------------------------------------------------------------------------------------------------------------------

Land                                                                      $    24,176              $   24,932
Buildings                                                                      95,868                  95,624
Fixtures and equipment                                                        101,972                  98,087
-----------------------------------------------------------------------------------------------------------------------
                                                                              222,016                 218,643
Less accumulated depreciation                                                  96,402                  84,553
-----------------------------------------------------------------------------------------------------------------------
   Property, plant and equipment, net                                      $  125,614               $ 134,090
=======================================================================================================================


(8) INTANGIBLE ASSETS

Intangible assets consist of the following:
                                                                            January 3,              December 28,
                                                                               1999                     1997
-----------------------------------------------------------------------------------------------------------------------

Goodwill                                                                   $  111,275               $ 107,605
Other intangibles                                                              17,932                  18,485
-----------------------------------------------------------------------------------------------------------------------
                                                                              129,207                 126,090
Less accumulated amortization                                                  40,410                  37,117
-----------------------------------------------------------------------------------------------------------------------
   Intangible assets, net                                                 $    88,797               $  88,973
=======================================================================================================================
</TABLE>

(9) REVOLVING LINE OF CREDIT

The Company has a $35,000  revolving  line of credit  (revolver)  available  for
working  capital  purposes.  The  revolver,  along with the bank term debt,  are
secured by substantially  all of the Company's  assets,  except for certain real
estate  assets.  The  revolver  and term  debt  agreements  contain  restrictive
covenants.  Interest is payable  quarterly on the revolver at the lower of prime
plus 1.0% or LIBOR plus 2.0%. Availability under the revolver will be reduced by
$5,000 on each of December 31, 1999 and 2000.  The Company is required to pay an
annual  commitment  fee of 0.5% per annum on the average  unused  portion of the
revolver. There was no outstanding balance on the revolver at January 3, 1999 or
December 28, 1997.


<PAGE>


(10) LONG-TERM DEBT

Long-term debt consists of the following:
<TABLE>
<CAPTION>
                                                                           January 3,               December 28,
                                                                              1999                      1997
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                        <C>    
Firstmortgage notes payable in monthly payments of $426;  including 
     interest at 10.55%; unpaid balance due at maturity of June 1, 2001;
     prepayment penalties apply; secured by real estate                  $     41,073               $  41,871
Senior subordinated notes with interest payable semiannually at
     12.0%; entire balance due at maturity of November 15, 2005;
     prepayment penalties apply; unsecured                                    100,000                 100,000
Bank term note payable with varying semiannual principal
     payments; interest payable quarterly at the lower of
     prime plus 1.0% or LIBOR plus 2.0%, approximately
     8.1% at January 3, 1999; maturity of June 30, 2001                        16,000                  26,500
Bank term note payable with varying semiannual principal
     payments; interest payable quarterly at the lower of
     prime plus 1.3% or LIBOR plus 2.3%, approximately
     8.3% at January 3, 1999; maturity December 31, 2002                       58,200                  59,100
Other notes payable                                                             3,962                     169
-----------------------------------------------------------------------------------------------------------------------
                                                                              219,235                 227,640
Less current maturities of long-term debt                                      11,208                  12,220
-----------------------------------------------------------------------------------------------------------------------
     Total long-term debt                                                 $   208,027               $ 215,420
=======================================================================================================================
</TABLE>
The Company's debt agreements contain various restrictive  covenants  pertaining
to net worth levels and dividends;  limitations on additional  indebtedness  and
capital  expenditures;  financial  ratios  and  monthly,  quarterly  and  annual
reporting  requirements.  In addition,  the agreements require certain mandatory
pre-payment  of  amounts  resulting  from  real  estate  or fixed  asset  sales,
increases in outstanding  cash balances,  issuance of stock,  or the issuance of
additional debt.  Substantially  all of the assets of the Company are pledged as
security for long-term debt. During 1997, the Company amended its bank agreement
whereby its restrictive covenants excluded the impact of the nonrecurring charge
taken for expenses  principally  associated with its decision to close YES Foods
and discontinue its wholesaling services to a Russian export business.  On April
17,  1998 the Company  amended its bank  agreement.  The  amendment  reduced the
Company's  borrowing  rates by 50 basis  points  on its  $35.0  million  working
capital revolver and $23.0 million Term A facilities,  and by 75 basis points on
its $58.8 million Term B facility. The amendment also modified certain financial
covenants  and  restrictions.  The  Company  was in  compliance  with  all  debt
agreements at January 3, 1999.

Certain of the Company's  debt  agreements  also contain a restrictive  covenant
which does not permit the  Company to enter into a  transaction  of merger.  The
creditor has indicated that the Company was in compliance  with this covenant at
January 3, 1999,  and will  continue to be in  compliance  until the merger with
Safeway is consummated. However, at the merger effective date, the covenant will
be violated,  and long-term  debt in the amount of $74,200 will be considered to
be in default  and  callable  by the  creditor.  However,  the  Company has been
advised by Safeway that it is the intention of Safeway to immediately  refinance
this obligation with other  pre-existing  credit  arrangements after the Merger.
The  accompanying  financial  statements  do not reflect  these  obligations  as
current  liabilities;  the obligation is classified as a long-term  liability in
accordance with the original stated maturities.


<PAGE>
Notes to Consolidated Financial Statements

Amounts in Thousands (except for per share data)
-------------------------------------------------------------------------------
The aggregate  maturities of long-term debt for periods subsequent to January 3,
1999, are as follows:
<TABLE>
<CAPTION>
                                    Fiscal year                                Amount
-----------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                                    <C> 
                                    1999                                   $   11,208
                                    2000                                        4,126
                                    2001                                       46,447
                                    2002                                       36,306
                                    2003                                       21,148
                                    Thereafter                                100,000
-----------------------------------------------------------------------------------------------------------------------
                                                                            $ 219,235
=======================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
Interest expense consists of the following:
                                                                              Fiscal year
-----------------------------------------------------------------------------------------------------------------------
                                                         1998                     1997                  1996
-----------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                       <C>                    <C>    
Interest on debt                                    $   24,498                  $ 25,366             $ 26,484
Amortization of loan fees                                1,313                     1,345                1,439
-----------------------------------------------------------------------------------------------------------------------
Interest expense, net                               $   25,811                $   26,711             $ 27,923
=======================================================================================================================
</TABLE>
Loan fees are  classified  as other assets and total  $5,638 and $6,513,  net of
amortization, at January 3, 1999 and December 28, 1997, respectively.

(11) OTHER LIABILITIES

Other long-term  obligations consist primarily of self insurance  reserves,  see
"Commitments  and  Contingencies - Self  Insurance" and installment  obligations
payable  to former or  current  employees  arising  from  deferred  compensation
agreements  of the  Predecessor  which were  assumed in the  Acquisition.  These
obligations are payable over a 10-year period,  without interest,  commencing on
the employee's  termination from the Company. Each employee's principal balance,
which accrues  interest at 8.0% to the date of  termination,  is discounted from
the  date  the  employee  attains  the age of 65 for  current  employees  or the
remaining payoff period for terminated employees.


(12) INCOME TAXES

Income tax expense (benefit) for continuing operations before extraordinary item
consists of the following:
<TABLE>
<CAPTION>
                                                                              Fiscal year
-----------------------------------------------------------------------------------------------------------------------
                                                         1998                     1997                  1996
-----------------------------------------------------------------------------------------------------------------------

Current:
<S>                                                  <C>                       <C>                   <C>    
Federal                                              $   1,985                 $    (562)            $    782
State                                                      589                      (166)                 232
-----------------------------------------------------------------------------------------------------------------------
                                                         2,574                      (728)               1,014
-----------------------------------------------------------------------------------------------------------------------
Deferred:
Federal                                                    708                      (942)                (759)
State                                                      210                      (279)                (225)
-----------------------------------------------------------------------------------------------------------------------
                                                           917                    (1,221)                (984)
-----------------------------------------------------------------------------------------------------------------------
   Income tax expense (benefit)                      $   3,491                 $  (1,949)           $      30
=======================================================================================================================
</TABLE>
<PAGE>
Notes To Consolidated Financial Statements

Amounts in Thousands (except for per share data)
-------------------------------------------------------------------------------
A  reconciliation  of income tax expense  (benefit) at the statutory rate of 35%
applied to earnings before income taxes and extraordinary  item to the Company's
effective rate is as follows:
<TABLE>
<CAPTION>

                                                                              Fiscal year
-----------------------------------------------------------------------------------------------------------------------
                                                         1998                     1997                  1996
-----------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                      <C>                    <C>    
Computed "expected" tax expense (benefit)             $  1,965                 $  (2,644)             $  (973)
State income taxes, net of federal benefit                 519                      (290)                   4
Nondeductible goodwill amortization                        925                       925                  925
Other                                                       82                        60                   74
-----------------------------------------------------------------------------------------------------------------------
                                                      $  3,491                 $  (1,949)            $     30
=======================================================================================================================
</TABLE>
In July 1997, an  examination  by the Internal  Revenue  Service  ("IRS") of the
Company's  federal  tax returns  for fiscal  years 1994 and 1995 was  finalized,
resulting  in no  material  effect on the  results of  operations  or  financial
condition of the Company.  The examination had no effect on previously  recorded
expense or net income.

The components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
                                                                             January 3,             December 28,
                                                                                1999                    1997
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                     <C>    

Deferred tax assets:
       Alternative minimum tax credit carryforward                           $    900                $  4,535
       Intangible assets, due to differences in
          amortization                                                            197                      69
       Financial statement accrual of self-
          insurance costs                                                       1,446                   1,427
       Financial statement accrual for compensated
          absences                                                                675                     671
       Revenues received in advance, amortized
          for financial reporting                                                 315                     638
       Financial statement expense for stock options                              249                     496
       Inventory capitalized for taxes                                            758                     638
Allowance for doubtful accounts                                                   240                     287
       Financial statement accruals not deductible
          until paid                                                            1,020                     510
-----------------------------------------------------------------------------------------------------------------------
             Total gross deferred tax assets                                    5,800                   9,271
-----------------------------------------------------------------------------------------------------------------------

Deferred tax liabilities:
       Property, plant, and equipment, due to
          differences in depreciation                                          (3,243)                 (5,798)

-----------------------------------------------------------------------------------------------------------------------
             Total gross deferred tax liabilities                              (3,243)                 (5,798)
-----------------------------------------------------------------------------------------------------------------------

             Net deferred tax asset                                          $  2,557                $  3,473
=======================================================================================================================
</TABLE>
At January 3, 1999 the Company had alternative minimum tax credit  carryforwards
of approximately $763 and $137 for federal and state income taxes, respectively,
which carry forward indefinitely.



<PAGE>


A  valuation  allowance  is  provided  when it is more likely than not that some
portion of the deferred tax asset will not be realized.  Based on the  Company's
historical taxable income,  adjusted for significant items such as the loss from
early retirement of debt and utilization of net operating  losses,  and expected
future taxable income,  management  believes it is more likely than not that the
Company will  realize the benefit of deferred tax assets  existing at January 3,
1999.  Further,  management  believes  the  existing  net  deductible  temporary
differences  will  reverse  during  periods in which the Company  generates  net
taxable income.  Therefore,  the Company has not provided a valuation allowance.
However,  the amount of the deferred tax asset  considered  realizable  could be
reduced in the near term if estimates of future taxable income are reduced.


(13) LEASE COMMITMENTS

The Company leases (as lessee) land, buildings, fixtures and equipment primarily
for retail  stores and its  headquarters  under  operating  leases  expiring  at
various dates through 2019. Generally,  these leases include options to renew at
the end of the initial lease period.  Commitments  for future  minimum  payments
under noncancelable  operating leases for periods subsequent to January 3, 1999,
are as follows:

                               Fiscal Year                        Amount
-------------------------------------------------------------------------------
                                    1999                        $    7,911
                                    2000                             7,895
                                    2001                             7,906
                                    2002                             7,845
                                    2003                             7,794
                                    Thereafter                      66,438
-------------------------------------------------------------------------------
                                                                 $ 105,789
===============================================================================

Rental expense under  operating lease  agreements  include  contingency  rentals
which are based on a certain  percentage  of sales that are achieved  over a set
amount of sales  determined on an individual  store basis.  Rental expense is as
follows:

 Fiscal year       Minimum payments           Percentage rents         Total
------------------------------------------------------------------------------

  1996                9,338                       355                 9,693
  1997                9,549                        71                 9,620
  1998                8,941                        71                 9,012
==============================================================================

The  Company  leases  five  Carrs  Stores,  six  Oaken  Keg  Stores  and its two
headquarters buildings from general partnerships controlled by the former owners
of the Predecessor.  The Company leases two Carrs Store,  three Oaken Keg Stores
and two neighborhood stores from unaffiliated landlords.

In 1998, Company sold approximately 18 acres of property in Tacoma,  Washington,
the location of its current  cross-dock and warehouse  facility.  As part of the
agreement a replacement  cross-dock and warehouse  facility was  constructed and
leased back to the Company.  The lease term for this operating lease is 15 years
and includes three  successive  renewal  options at the end of the initial term.
The Company leases its cross-dock and warehouse  facility in Tacoma,  Washington
from Safeway Inc.

During the first quarter  1998,  the Company  purchased  certain real estate and
personal  property in Fairbanks  and North Pole. As part of the  agreement,  the
Company  entered into an operating  lease on a 58,000 square foot store in North
Pole for an initial lease term of 15 years followed by four  successive  renewal
options.



<PAGE>
Notes to Consolidated Financial Statements

Amounts in Thousands (except for per share data)
-------------------------------------------------------------------------------

(14) LESSOR

The Company is the lessor of commercial and office facilities.  Generally, these
operating  leases  include  options  to  renew at the end of the  initial  lease
period.  Substantially all of the leases for commercial  facilities  provide for
minimum  rentals and contingent  rentals while leases for office  facilities are
generally  for  fixed  rentals.   Minimum  annual  rentals  under  noncancelable
operating leases for periods subsequent to January 3, 1999 are as follows:

          Fiscal year                         Amount
-------------------------------------------------------------------------------

             1999                          $  1,116
             2000                               838
             2001                               504
             2002                               433
             2003                               344
             Thereafter                         322
-------------------------------------------------------------------------------
                                           $  3,557
===============================================================================
<TABLE>
<CAPTION>
Net rental income related to these operating leases is as follows:

       Fiscal year           Minimum rents          Percentage rents      Related expenses       Net rental incom
-----------------------------------------------------------------------------------------------------------------------
<S>     <C>                    <C>                   <C>                     <C>                      <C>
        1996                   1,582                 19                      661                       940
        1997                   1,454                 72                      996                       530
        1998                   1,598                 75                      895                       778
=======================================================================================================================
</TABLE>
(15) RETIREMENT AND UNION PENSION PLANS

The  Company   contributes  to  a  401(k)   retirement   savings  plan  covering
substantially  all  employees  qualified  by age and length of  service,  except
employees  covered by union  contracts.  The Company employs  approximately  3.2
people  of which  2.4 or 75% are  covered  by union  contracts.  The  retirement
savings plan allows  participant  contributions in an amount equal to 15% of the
participant's   compensation,   not  to   exceed   federal   statutory   maximum
contributions.  The amount of discretionary  Company contributions is determined
by the  Board of  Directors,  subject  to  Internal  Revenue  Code  limitations.
Participants are 100% vested in Company contributions.  In addition, the Company
contributes to union  sponsored  multiemployer  pension plans on behalf of union
employees. Contributions to retirement savings and pension plans are as follows:

    Fiscal year              401(k) plan            Pension plans
-------------------------------------------------------------------------------
      1996                        611                  3,445
      1997                        589                  3,505
      1998                        543                  3,533
===============================================================================


(16) INCENTIVE BONUS PLAN

The Company has an incentive bonus plan for key employees. The amount of bonuses
distributed to eligible  employees and individual  bonus awards are based on the
Company's financial  performance and other criteria set by a committee appointed
by the Board of Directors.  The cost of this plan approximated  $2,260,  $1,455,
and $0 for fiscal years 1998, 1997and 1996 respectively.




<PAGE>


(17) STOCK OPTIONS

Outside Director Plan
The Company has an outside  director stock option plan for directors who are not
for three years prior to  appointment  to the Board of  Directors an employee of
the Company or a partner or employee of Leonard Green & Associates,  L.P.  Green
Equity Investors, L.P. or any partnership controlled by such partnerships.  Each
outside  director is  automatically  granted the option to purchase 20 shares of
common  stock at the then fair market value on the date of such  appointment  or
election to the Board of Directors. The options are fully vested upon grant. The
plan permits  awards with  respect to a maximum of 100 shares.  As of January 3,
1999 two directors each had outstanding  options to purchase 20 shares of common
stock at $5.25 per share.

Employee Performance Plan
The Company has a  nonqualified  performance  stock option  plan,  under which a
committee of the Board of Directors may award key employees  options to purchase
common stock in the Company.  The plan permits  awards with respect to a maximum
of 1,312 shares. In 1998, this plan was amended to permit awards with respect to
a maximum of 1,562  shares.  As of January 3, 1999,  options for 862 shares were
outstanding,  of which options with respect to 797 shares were fully vested. The
committee determines the exercise price of the options and the period over which
the options will vest. Options are generally awarded at fair market value of the
Company's stock as of the date of the award.

At January 3, 1999,  there were 227 additional  shares available for grant under
the plan.  The per share  weighted-average  fair value of stock options  granted
during 1998, 1997 and 1996 was $ 2.09, $1.84 and $1.34 respectively, on the date
of  grant   using  a   qualified   option-pricing   model  with  the   following
weighted-average  assumptions:  1998 - expected  dividend yield 0.0%,  risk-free
interest rate of 5.8%,  volatility of 37.7% and an expected life of seven years;
1997 - expected dividend yield 0.0%, risk-free interest rate of 6.0%, volatility
of 39.2% and an expected  life of seven years;  1996 - expected  dividend  yield
0.0%,  risk-free  interest rate of 7.1% volatility of 38.6% and an expected life
of nine years.

The  Company  applies  APB  Opinion  No.  25 in  accounting  for its  Plan  and,
accordingly, compensation expense is only recognized for stock options which the
exercise  price is less than fair  value on the date of grant.  Had the  Company
determined  compensation  cost based on the fair value at the grant date for its
options  under SFAS No. 123,  the  Company's  net income  (loss) would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
                                                                       1998             1997             1996
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>             <C>              <C>
     Net income (loss)                      As reported              $  2,124        $ ( 5,605)       $  (2,810)
                                            Pro forma                   2,041           (5,727)          (3,066)

     Basic net income (loss) per share      As reported              $   0.26      $     (0.71)       $   (0.36)
                                            Pro forma                    0.25            (0.72)           (0.39)

     Diluted net income (loss) per share    As reported              $   0.25      $     (0.71)       $   (0.36)
                                            Pro forma                    0.24            (0.72)           (0.39)
=======================================================================================================================
</TABLE>
Certain of the Company's  Board members and executive  officers own Common Stock
or stock  options.  Immediately  prior to the  consummation  of the Merger,  all
unvested  stock  options  issued  under the 1991 Stock  Option  Plan will become
vested,  and upon  consummation of the Merger all outstanding  options under the
1991 Stock Option Plan will be exercisable  for a per share cash amount equal to
the Merger  Consideration  minus the per share exercise price. Such options will
be canceled  following the Merger and each optionholder will receive a per share
cash payment equal to the difference  between the Merger  Consideration  and the
per share exercise price.  Stock options held by non-employee  directors will be
canceled  in  exchange  for a per share  cash  payment  equal to the  difference
between the Merger Consideration and the per share exercise price.



<PAGE>
Notes to Consolidated Financial Statements

Amounts in Thousands (except for per share data)
-------------------------------------------------------------------------------
Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
                                                                        Number of             Weighted-Average
                                                                         Shares                 Exercise Price
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                      <C>
                  Balance at December 31, 1995                               990                   $   3.72
                           Granted                                           235                       3.62
                           Exercised                                         (21)                      2.88
                           Forfeited                                          (7)                      5.12
                           Canceled                                          (35)                      5.88
                           Expired                                            (5)                      4.30
-----------------------------------------------------------------------------------------------------------------------
                  Balance at December 29, 1996                             1,157                   $   3.66
                           Granted                                           110                       4.20
                           Exercised                                        (111)                      2.89
                           Forfeited                                         (19)                      5.25
                           Canceled                                          (35)                      5.25
                           Expired                                           (30)                      5.09
-----------------------------------------------------------------------------------------------------------------------
                  Balance at December 28, 1997                             1,072                   $   3.67
                           Granted                                           110                       5.55
                           Exercised                                        (309)                      3.31
                           Forfeited                                         (11)                      5.28
-----------------------------------------------------------------------------------------------------------------------

                  Balance at January 3, 1999                                 862                   $   4.02
=======================================================================================================================
</TABLE>
At January 3, 1999, the range of exercise prices and weighted-average  remaining
contractual  life of  outstanding  options  was $2.88 - $7.50  and seven  years,
respectively.

The number of shares subject to exercisable  options was 797, 1,049 and 1,078 at
fiscal  year-end 1998,  1997 and 1996,  respectively,  and the  weighted-average
exercise price of those options was $3.90, $3.54 and $3.38, respectively.


(18) RELATED PARTY TRANSACTIONS

GEI owns  approximately  35% of the Company's  common stock.  LGA is the general
partner of GEI. The Company paid LGA fees of $450 for each of fiscal years 1998,
1997 and 1996, for management consulting and advisory services.


(19) COMMITMENTS AND CONTINGENCIES

Shared Appreciation Agreement
The Company is party to a shared  appreciation  agreement  with the  Predecessor
which  requires the Company to pay the  Predecessor  50% of certain  proceeds in
excess of $65,500 from the financing,  refinancing,  condemnation, sale or other
disposition or realization of value of certain real  properties.  The cumulative
maximum  amount payable under the agreement was $7,300 through fiscal year 1994.
Beginning in fiscal year 1995,  the maximum  amount  payable is increased by 10%
per annum of any remaining unpaid portion of the maximum. As of January 3, 1999,
the maximum amount payable is $9,937, of which no amount is currently due as the
conditions  of the  agreement  have not been met.  Neither  the  Company nor its
Affiliates  has paid or has been  obligated to pay any amounts  pursuant to this
agreement.


<PAGE>
Notes to Consolidated Financial Statements

Amounts in Thousands (except for per share data)
-------------------------------------------------------------------------------

Self-Insurance
The Company is self-insured for basic automobile, workers' compensation, general
liability and employee health  benefits,  and purchases  insurance  coverage for
amounts in excess of the basic self-insurance program.  Reserves are established
to cover estimated  reported losses,  estimated  unreported losses based on past
experience modified for current trends, and estimated expenses for investigating
and settling  claims.  Actual  losses will vary from the  established  reserves.
While  management uses what it believes is pertinent  information and factors in
determining  the amount of  reserves,  future  additions  to the reserves may be
necessary due to changes in the information and factors used.

Environmental Remediation
The Company,  along with other parties, has been identified by the Environmental
Protection Agency (EPA) as a potentially responsible party (PRP) for the cleanup
of a site in Tacoma, Washington. The EPA has estimated primarily the cost of the
required   remediation   to  range  from   $18,000  to   $30,800.   Based  on  a
Company-commissioned  environmental investigation,  management believes that the
Company is not  responsible  for the  subject  contamination.  Accordingly,  the
Company has made no accrual for  liability in  connection  with this site and is
seeking  dismissal from the proceedings  both directly and indirectly  through a
group  of  PRPs  who are  responsible  for a  minimal  amount,  if  any,  of the
contamination.  While  there  can be no  assurance  that  the  Company  will  be
dismissed from these proceedings and an estimate of the portion,  if any, of the
cost allocable to the Company is uncertain,  based on the Company's  findings to
date, management believes that any liability the Company may incur in connection
with these  proceedings will not have a material adverse impact on the financial
condition, results of operations or business of the Company.

Legal Proceedings
The Company is subject to legal  proceedings and claims which have arisen in the
ordinary  course  of its  business  that are not fully  adjudicated.  Management
believes,  after  consultation  with legal  counsel,  these actions when finally
concluded  and  determined  will  not  have a  material  adverse  effect  on the
Company's financial position.


(20) GEOGRAPHIC CONCENTRATION

All of the  Company's  retail  outlets are in Alaska,  with nine of its 16 Carrs
Quality  Centers  and nine of its 17 Oaken  Keg  Stores  located  in  Anchorage,
Alaska. In addition,  the Company's wholesale distribution business is conducted
in Alaska.  As a result of this geographic  concentration,  the Company's growth
and operations depend upon economic conditions in Alaska. Because the economy of
Alaska is dependent on the natural resources industry, particularly oil, as well
as on tourism,  commercial fishing,  government and U.S. military spending,  any
deterioration or improvements in these markets could affect the Company.


(21) FAIR VALUE OF FINANCIAL INSTRUMENTS

Cash and Accounts Receivable
The carrying amount  approximates  fair value due to the short maturity of these
instruments.

Short and Long-Term Debt
The carrying amount of the Company's  borrowings under the revolver  approximate
fair  value.  The fair value of  long-term  debt is based on the  current  rates
offered to the Company for debt with similar terms and average  maturities.  The
carrying amount of long-term debt of $219,235 and $227,640 has approximate  fair
values of $221,754  and  $230,591,  at January 3, 1999 and  December  28,  1997,
respectively.




<PAGE>
Notes to Consolidated Financial Statements

Amounts in Thousands (except for per share data)
-------------------------------------------------------------------------------

(22) SEGMENTS AND RELATED INFORMATION

The company  adopted SFAS No. 131,  Disclosures  about Segments of an Enterprise
and Related Information, in 1998. As discussed in Note 1, the Company is engaged
principally in one line of business - food and drug retailing - which represents
more than 90% of consolidated  sales.  All other  operations,  food  wholesaler,
freight  transportation  and  certain  corporate  administration  expenses,  are
reported in the Other segment.

The Company evaluates performance based on several factors, of which the primary
financial measurement is Net Income before Taxes. The accounting policies of the
business  segments are the same as those described in the summary of significant
accounting policies (Note 5).

Information  relating to the Company's  operations is set forth in the following
table:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------

Fiscal year 1998                                                        Retail            Other          Total
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>             <C>             <C>    
Net sales from external customers                                        545,152          56,717         601,869
Income before income taxes                                                 8,141         (2,526)           5,615
Total assets                                                             259,338          53,383         312,721
=======================================================================================================================

Fiscal year 1997
-----------------------------------------------------------------------------------------------------------------------

Net sales from external customers                                        514,560          74,714         589,274
Income before income taxes                                                 4,860        (12,414)         (7,554)
Total assets                                                             258,532          56,933         315,465
=======================================================================================================================

Fiscal year 1996
-----------------------------------------------------------------------------------------------------------------------

Net sales from external customers                                        521,291          91,285         612,576
Income before income taxes                                                   461         (3,241)         (2,780)
Total assets                                                             275,186          55,658         330,844
=======================================================================================================================
</TABLE>




<PAGE>
Notes to Consolidated Financial Statements

Amounts in Thousands (except for per share data)
-------------------------------------------------------------------------------
(23) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Following  is a  presentation  of selected  financial  data for each of the four
quarters of fiscal year 1998 and 1997.  The fourth  quarter  1998  consist of 14
weeks, all other quarters consist of 13 weeks:

                                                        First           Second            Third           Fourth
                                                       quarter          quarter          quarter         quarter
-----------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>               <C>              <C>            <C>
     1998:
         Sales                                      $  135,113        $  150,229       $  155,427     $  161,100
         Gross profit                                   39,466            44,143           45,132         46,676
         Operating income                                5,909             8,143            9,024          8,357
         Net income (loss)                                (634)              682            1,345            731
         Basic net income (loss) per share               (0.08)             .08               .16            .09
         Diluted net income (loss) per share             (0.07)             .08               .16            .09
         Average shares outstanding                      8,147             8,213            8,242          8,245
         Average shares outstanding-diluted              8,774             8,728            8,577          8,573

     1997:
         Sales                                      $  141,467        $  152,029       $  152,007     $  143,771
         Gross profit                                   40,992            43,700           43,431         42,512
         Operating income                                5,478            (1,422)           7,964          7,510
         Net income (loss)                              (1,019)           (5,075)             339            150
         Basic net income (loss) per share               (0.13)           (0.64)              .04            .02
         Diluted net income (loss) per share             (0.13)           (0.64)              .04            .02
         Average shares outstanding                      7,883             7,932            7,934          7,937
         Average shares outstanding-diluted              7,883             7,932            8,653          8,482

=======================================================================================================================
</TABLE>

<PAGE>
Notes to Consolidated Financial Statements

Amounts in Thousands (except for per share data)
-------------------------------------------------------------------------------

(24) CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Company issued $100,000 of senior  subordinated  unsecured notes on November
15, 1995.  CGF  Properties,  Inc. has not  guaranteed  the  unsecured  notes and
financial information for this wholly-owned  subsidiary is presented separately.
All of the Company's other direct and indirect subsidiaries,  AOL Express, Inc.,
APR Forwarders, Inc., Oaken Keg Spirit Shops, Inc. and Alaska Advertisers, Inc.,
are  wholly-owned  and have fully and  unconditionally  guaranteed the unsecured
notes on a joint and several basis and, accordingly, are presented on a combined
basis.  Parent company only  information  is presented for Carr Gottstein  Foods
Co., which reflects only its business activity and its wholly-owned subsidiaries
accounted for using the equity method.  Separate financial  statements and other
disclosures  for the guarantor  subsidiaries  are not  presented  because in the
opinion of management such information is not material.

The following are condensed consolidating balance sheets:
<TABLE>
<CAPTION>
Balance Sheet                          Non-Guarantor         Guarantor        Parent
                                         Subsidiary         Subsidiaries      Company
January 3, 1999                        CGF Properties       (Combined)         Only          Elimination
Consolidated
-----------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                  <C>            <C>              <C>           <C>    
                Assets
Inventories                             $           -        $   4,020      $   49,982$             -      $   54,002
Other current assets                            7,931           79,453          (1,430)       (58,000)         27,954
-----------------------------------------------------------------------------------------------------------------------
         Total current assets                   7,931           83,473          48,552        (58,000)         81,956

Property, plant and equipment, net             61,845            2,323          61,446              -         125,614
Intangible, net                                     -                -          88,797              -          88,797
Investments in subsidiaries                         -                -         109,513       (109,513)              -
Other assets                                        -              673          15,681              -          16,354
-----------------------------------------------------------------------------------------------------------------------
                                             $ 69,776         $ 86,469       $ 323,989     $ (167,513)      $ 312,721
=======================================================================================================================

Liabilities and Stockholders' Equity

Current liabilities                         $   1,160       $    5,322       $ 124,982     $  (58,000)     $   73,464
Long-term debt, excluding current
   maturities                                  40,250                -         167,777              -         208,027
Other liabilities                                   -                -           3,769              -           3,769
-----------------------------------------------------------------------------------------------------------------------
         Total liabilities                     41,410            5,322         296,528        (58,000)        285,260
-----------------------------------------------------------------------------------------------------------------------

Common stock                                       10               44              97            (54)             97
Additional paid-in capital                     28,966           39,381          50,992        (68,347)         50,992
Retained earnings (deficit)                      (610)          41,722         (14,025)       (41,112)        (14,025)
-----------------------------------------------------------------------------------------------------------------------
                                               28,366           81,147          37,064       (109,513)         37,064

Less treasury stock                                 -                -           9,603              -           9,603
-----------------------------------------------------------------------------------------------------------------------
         Total stockholders' equity            28,366           81,147          27,461       (109,513)         27,461
-----------------------------------------------------------------------------------------------------------------------

                                             $ 69,776         $ 86,469       $ 323,989     $ (167,513)      $ 312,721
=======================================================================================================================
</TABLE>

<PAGE>
Notes to Consolidated Financial Statements

Amounts in Thousands (except for per share data)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balance Sheet                          Non-Guarantor         Guarantor        Parent
                                         Subsidiary         Subsidiaries      Company
December 28, 1997                      CGF Properties       (Combined)         Only          Elimination
Consolidated
-----------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                  <C>            <C>              <C>           <C>    
                Assets
Inventories                             $           -        $   3,837      $   47,634$             -      $   51,471
Other current assets                            8,323           74,760           5,230        (59,700)         28,613
-----------------------------------------------------------------------------------------------------------------------
         Total current assets                   8,323           78,597          52,864        (59,700)         80,084

Property, plant and equipment, net             62,671            4,951          66,468              -         134,090
Intangible, net                                     -                -          88,973              -          88,973
Investments in subsidiaries                         -                -         108,207       (108,207)              -
Other assets                                       32              573          11,713              -          12,318
-----------------------------------------------------------------------------------------------------------------------
                                             $ 71,026         $ 84,121       $ 328,225     $ (167,907)      $ 315,465
=======================================================================================================================

Liabilities and Stockholders' Equity

Current liabilities                         $   1,591  $         4,276       $ 126,037     $  (59,700)     $   72,204
Long-term debt, excluding current
   maturities                                  41,073                -         174,347              -         215,420
Other liabilities                                   -                -           3,527              -           3,527
-----------------------------------------------------------------------------------------------------------------------
         Total liabilities                     42,664            4,276         303,911        (59,700)        291,151
-----------------------------------------------------------------------------------------------------------------------

Common stock                                       10               44              97            (54)             97
Additional paid-in capital                     28,966           39,381          52,088        (68,347)         52,088
Retained earnings (deficit)                      (614)          40,420         (16,149)       (39,806)        (16,149)
-----------------------------------------------------------------------------------------------------------------------
                                               28,362           79,845          36,036       (108,207)         36,036

Less treasury stock                                 -                -          11,722              -          11,722
-----------------------------------------------------------------------------------------------------------------------
         Total stockholders' equity            28,362           79,845          24,314       (108,207)         24,314
-----------------------------------------------------------------------------------------------------------------------

                                             $ 71,026         $ 84,121       $ 328,225     $ (167,907)      $ 315,465
=======================================================================================================================
</TABLE>

<PAGE>
Notes to Consolidated Financial Statements

Amounts in Thousands (except for per share data)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The following are condensed consolidating statements of operations:

Statement of Operations                Non-Guarantor         Guarantor        Parent
                                         Subsidiary         Subsidiaries    Company
Fiscal year 1998                       CGF Properties       (Combined)         Only          Elimination
Consolidated
-----------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                    <C>            <C>            <C>             <C>    
Sales                                  $          -           $ 81,832       $ 561,133      $ (41,096)      $ 601,869
Cost of merchandise sold, including
   warehousing and transportation                 -             59,404         408,144        (41,096)        426,452
----------------------------------------------------------------------------------------------------------------------
         Gross profit                             -             22,428         152,989              -         175,417

Operating and administrative
   (income) expenses                         (5,514)            10,328         139,170              -         143,984
-----------------------------------------------------------------------------------------------------------------------
         Operating income                     5,514             12,100          13,819              -          31,433

Interest expense, net                        (4,744)                 -         (21,067)             -         (25,811)
Other expense                                     -                  -              (7)             -              (7)
Equity in subsidiary earnings                     -                  -           7,593         (7,593)              -
-----------------------------------------------------------------------------------------------------------------------
         Income before income tax               770             12,100             338         (7,593)         (5,615)

Income tax (expense) benefit                   (316)            (4,961)          1,786              -          (3,491)
-----------------------------------------------------------------------------------------------------------------------

         Net income                       $     454          $   7,139      $    2,124      $  (7,593)      $   2,124
=======================================================================================================================
</TABLE>


<PAGE>

Notes to Consolidated Financial Statements

Amounts in Thousands (except for per share data)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Operations                Non-Guarantor         Guarantor        Parent
                                         Subsidiary         Subsidiaries    Company
Fiscal year 1997                       CGF Properties       (Combined)         Only        Elimination    Consolidated
-----------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                    <C>            <C>            <C>             <C>    
Sales                                  $          -           $ 78,176       $ 551,205      $ (40,107)      $ 589,274
Cost of merchandise sold, including
   warehousing and transportation                 -             57,142         401,604        (40,107)        418,639
----------------------------------------------------------------------------------------------------------------------
         Gross profit                             -             21,034         149,601              -         170,635

Operating and administrative
   (income) expenses                         (5,218)            11,141         145,182              -         151,105
-----------------------------------------------------------------------------------------------------------------------
         Operating income                     5,218              9,893           4,419              -          19,530

Interest expense, net                        (4,456)                 -         (22,255)             -         (26,711)
Other expense                                     -                  -            (373)             -            (373)
Equity in subsidiary earnings                     -                  -           6,287         (6,287)              -
-----------------------------------------------------------------------------------------------------------------------
         Income before income tax               762              9,893         (11,922)        (6,287)         (7,554)

Income tax (expense) benefit                   (312)            (4,056)          6,317              -           1,949
-----------------------------------------------------------------------------------------------------------------------

         Net income (loss)                $     450          $   5,837      $   (5,605)     $  (6,287)     $   (5,605)
======================================================================================================================
</TABLE>


<PAGE>
Notes to Consolidated Financial Statements

Amounts in Thousands (except for per share data)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Operations                Non-Guarantor         Guarantor        Parent
                                         Subsidiary         Subsidiaries     Company
Fiscal year 1996                       CGF Properties       (Combined)         Only        Elimination    Consolidated
-----------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                   <C>            <C>            <C>             <C>    
Sales                                   $         -           $ 75,159       $ 574,182      $ (36,765)      $ 612,576
Cost of merchandise sold, including
   warehousing and transportation                 -             54,261         425,500        (36,765)        442,996
-----------------------------------------------------------------------------------------------------------------------
         Gross profit                             -             28,898         148,682              -         169,580

Operating and administrative
   (income) expenses                         (5,155)            11,884         137,796              -         144,525
-----------------------------------------------------------------------------------------------------------------------
         Operating income                     5,155              9,014          10,886              -          25,055

Interest expense, net                        (4,522)                 -         (23,401)             -         (27,923)
Other income                                      -                  -              88              -              88
Equity in subsidiary earnings                     -                  -           5,691         (5,691)              -
-----------------------------------------------------------------------------------------------------------------------
         Income before income tax               633              9,014          (6,736)        (5,691)         (2,780)

Income tax (expense) benefit                   (260)            (3,696)          3,926              -             (30)
-----------------------------------------------------------------------------------------------------------------------

         Net income (loss)              $       373          $   5,318      $   (2,810)     $  (5,691)     $   (2,810)
=======================================================================================================================
</TABLE>



<PAGE>
Notes to Consolidated Financial Statements

Amounts in Thousands (except for per share data)
-------------------------------------------------------------------------------

The following is condensed consolidating cash flow information. The consolidated
Company's  cash and cash  equivalents  is positive at each balance sheet date so
negative balances for individual subsidiaries are not classified as liabilities.
The net cash  provided  by  operating  activities  fluctuates  due to changes in
intercompany  receivables and payables from the transfer of cash to and from the
parent company.
<TABLE>
<CAPTION>
Statement of Cash Flows                                    Non-Guarantor       Guarantor       Parent
                                                            Subsidiary       Subsidiaries      Company
Fiscal year 1998                                          CGF Properties      (Combined)        Only      Consolidated
-----------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>               <C>           <C>             <C>
Net cash provided by (used in) operating activities        $      2,616      $  (1,731)    $   18,306      $   19,191
-----------------------------------------------------------------------------------------------------------------------

Investing activities
         Addition to property and equipment                      (1,816)          (687)        (5,352)         (7,855)
         Proceeds from sale of property and equipment                 -          2,418            133           2,551
         Additions to intangible assets                               -              -         (2,242)         (2,242)
         Additions to other assets                                    -              -         (4,071)         (4,071)
-----------------------------------------------------------------------------------------------------------------------
   Net cash provided by (used in) investing activities           (1,816)         1,731        (11,532)        (11,617)
-----------------------------------------------------------------------------------------------------------------------

Financing activities
         Payments on long-term debt                                (799)             -        (11,421)        (12,220)
         Issuance of note payable                                     -              -          4,000           4,000
         Payments on note payable                                     -              -           (185)           (185)
         Issuance of treasury stock                                   -              -          1,023           1,023
-------------------------------------------------------------------------------------------------------------------------
   Net cash used in financing activities                           (799)             -         (6,583)         (7,382)
-----------------------------------------------------------------------------------------------------------------------

Net increase in cash and cash equivalents                             1              -            191             192

-----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year                       53            106         10,922          11,081

-----------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at end of year                     $       54       $    106    $    11,113     $    11,273
=======================================================================================================================
</TABLE>


<PAGE>

Notes to Consolidated Financial Statements

Amounts in Thousands (except for per share data)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Cash Flows                                    Non-Guarantor       Guarantor       Parent
                                                            Subsidiary       Subsidiaries      Company
Fiscal year 1997                                          CGF Properties      (Combined)        Only      Consolidated
-----------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>                 <C>       <C>             <C>
Net cash provided by operating activities                    $      661          $  43     $   21,486      $   22,190
-----------------------------------------------------------------------------------------------------------------------

Investing activities
         Addition to property and equipment                           -            (43)        (6,967)         (7,010)
         Proceeds from sale of property and equipment                 -              -          1,206           1,206
-----------------------------------------------------------------------------------------------------------------------
   Net cash used in investing activities                              -            (43)        (5,761)         (5,804)
-----------------------------------------------------------------------------------------------------------------------

Financing activities
         Net payments under line of credit                            -              -         (7,000)         (7,000)
         Payments on long-term debt                                (661)             -         (6,620)         (7,281)
         Purchase of treasury stock                                   -              -            321             321
-----------------------------------------------------------------------------------------------------------------------
   Net cash used in financing activities                           (661)             -        (13,299)        (13,960)
-----------------------------------------------------------------------------------------------------------------------

Net increase in cash and cash equivalents                             -              -          2,426           2,426

Cash and cash equivalents at beginning of year                       53            106          8,496           8,655
-----------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at end of year                     $       53       $    106   $     10,922     $    11,081
=======================================================================================================================
</TABLE>

<PAGE>
Notes to Consolidated Financial Statements

Amounts in Thousands (except for per share data)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Cash Flows                                    Non-Guarantor       Guarantor       Parent
                                                            Subsidiary       Subsidiaries      Company
Fiscal year 1996                                          CGF Properties      (Combined)        Only      Consolidated
-----------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>                <C>        <C>             <C>
Net cash provided by operating activities                    $      548         $  417     $   21,240      $   22,205
-----------------------------------------------------------------------------------------------------------------------

Investing activities
         Addition to property and equipment                           -           (368)        (4,022)         (4,390)
         Proceeds from sale of property and equipment                 -              -            287             287
-----------------------------------------------------------------------------------------------------------------------
   Net cash used in investing activities                              -           (368)        (3,735)         (4,103)
-----------------------------------------------------------------------------------------------------------------------

Financing activities
         Net payments under line of credit                            -              -         (9,000)         (9,000)
         Payments on long-term debt                                (548)             -         (2,822)         (3,370)
         Purchase of treasury stock                                   -              -             62              62
         Change in stock subscriptions receivable                     -              -             44              44
-----------------------------------------------------------------------------------------------------------------------
   Net cash used in financing activities                           (548)             -        (11,716)        (12,264)
-----------------------------------------------------------------------------------------------------------------------

Net increase in cash and cash equivalents                             -             49          5,789           5,838

Cash and cash equivalents at beginning of year                       53             57          2,707           2,817
-----------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at end of year                     $       53       $    106    $     8,496      $    8,655
======================================================================================================================
</TABLE>

<PAGE>


                   CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES

                               Index to Exhibits
                                                                   Sequentially
Exhibit No.     Description                                        Numbered

2.1(1)          Agreement and Plan of Merger Among Carr Gottstein Foods Co., 
                Safeway Inc. and ACG Merger Sub, Inc.
3.1(2)          Restated Certificate of Incorporation
3.3(3)          Restated Bylaws
4.1(4)          Indenture dated as of November 15, 1995 among Registrant, the 
                certain subsidiaries of Registrant and U.S. Trust company of 
                California, N.A., as Trustee
4.2(4)          Registration  Rights  Agreement  dated as of  November  15, 1995
                among  Registrant,   certain  subsidiaries  of  Registrant,  and
                Donaldson,   Lufkin,  &  Jenrette  Securities  Corporation,   BT
                Securities Corporation and Goldman, Sachs & Co.
4.3             Form of Note Certificate (included in Exhibit 4.1)
4.4(6)          First Supplemental Indenture among Carr-Gottstein Foods Co., 
                the guarantors named therein and U.S. Trust Company of 
                California, N.A., as Trustee
10.1(5)         Deed of Trust, Assignment of Rents, Security Agreement and 
                Fixture filing dated October 11, 1991 by and between CGF 
                Properties, Inc., Stewart Title Company of Alaska, Inc., and 
                Teachers Insurance and Annuity Association of America
10.2(5)         Assignment of Lessor's Interest in lease dated October 11, 1991
                by Registrant in favor of Teachers Insurance and Annuity 
                Association of America
10.3(5)         Environmental Indemnity dated October 11, 1991 by Registrant 
                payable to Teachers Insurance and Annuity Association of America
10.8(5)         Carr-Gottstein Foods Co. 1991 Stock Option Plan
10.14(5)        Shared Appreciation Agreement dated October 12, 1990 between 
                Carr-Gottstein Foods Co. and Registrant
10.22(5)        Amended and Restated Retail Lease (Huffman Shopping Center) 
                dated October 12, 1990 between Labar Co. and Registrant
10.65(7)        Carr-Gottstein Foods Co. Retirement Savings & Investment Plan 
                and Trust as Amended and Restated July 1, 1991
10.66(7)        Oaken Keg Spirit Shops Retirement Savings & Investment Plan and
                Trust as Amended and Restated July 1, 1991
10.67(7)        Amendment to the Carr-Gottstein 1991 Stock Option Plan
10.71(8)        Form of Assignment and Assumption Agreement
10.72(8)        Form of Assignment of Leases and Rents
10.73(8)        Form of Environmental Indemnity Agreement
10.74(8)        Form of Fee Mortgage
10.75(8)        Form of Leasehold Mortgage
10.79(8)        Swing Line Loan Promissory Note ($5,000,000) between Registrant
                and Bankers Trust Company
10.80(8)        Guaranty Agreement
10.81(8)        Security Agreement
10.82(8)        Pledge Agreement
10.83(8)        Collateral Account Agreement
10.97(9)        1991 Outside Directors Stock Option Plan
10.99(10)       Employment Agreement - Lawrence Hayward
10.101(11)      Employment Agreement - Donald Anderson
10.102(12)      Amended and Restated Credit Agreement,  dated as of November 15,
                1995  among  Registrant,   certain  lenders  and  Bankers  Trust
                Company, as agent
10.103(13)      Management Service Agreement between Registrant and  Leonard 
                Green & Associates, L.P.
10.104(1)       Amendment to the Carr-Gottstein 1991 Stock Option Plan
10.105(1)       Amendment to the Carr-Gottstein 1994 Stock Option Plan
10.106(1)       1998 Severance Plan
10.107(1)       Amendment to Employment Agreement - Lawrence H. Hayward
<PAGE>

10.108(1)       Amendment to Employment Agreement - Donald J. Anderson
10.109(1)       Amendment to Employment Agreement - Jeff L. Philipps
10.110(1)       1998 Special Bonus Plan
21(13)          Subsidiaries of Registrant

(1)         Incorporated by reference to the exhibit filed with the Registrant's
            Quarterly  Report  on Form  10-Q  for  the  quarterly  period  ended
            September 27, 1998.
(2)         Incorporated by reference to the exhibit filed with the Registrant's
            Quarterly Report on Form 10-Q for the quarter ended July 4, 1993.
(3)         Incorporated by reference to the exhibit filed with the Registrant's
            Quarterly Report on Form 10-Q for the quarter ended October 3, 1993
(4)         Incorporated by reference to the exhibit filed with the Registrant's
            Amendment Number 2 to Schedule 13E-4 first published on October 13,
            1995
(5)         Incorporated by reference to the exhibit filed with the Registrant's
            Form S-1 Registration Statement filed on May 21, 1993.
(6)         Incorporated by reference to the exhibit filed with the Registrant's
            Form 8-K filed on March 14, 1996.
(7)         Incorporated by reference to the exhibit filed with the Registrant's
            Quarterly Report on Form 10-Q for the quarter ended July 4, 1993.
(8)         Incorporated by reference to the exhibit filed with the Registrant's
            Quarterly Report on Form 10-Q for the quarter ended October 3, 1993.
(9)         Incorporated by reference to the exhibit filed with the Registrant's
            Quarterly Report on Form 10-Q for the quarter ended July 3, 1994.
(10)        Incorporated by reference to the exhibit filed with the Registrant's
            Quarterly Report on Form 10-Q for the quarter ended October 2, 1994.
(11)        Incorporated by reference to the exhibit filed with the Registrant's
            Annual  Report on Form 10-K for the  fiscal  year  ended  January 1,
            1995.
(12)        Incorporated by reference to the exhibit filed with the Registrant's
            Quarterly Report on Form 10-Q for the quarter ended July 2, 1995.
(13)        Incorporated by reference to the exhibit filed with the Registrant's
            Registration Statement on Form S-4 on December 19, 1995.