SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the 13 Weeks Ended: May 5, 2005          Commission File Number: 1-6187

ALBERTSON’S, INC.

(208) 395-6200

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

     The number of shares of the registrant’s common stock, $1.00 par value, outstanding at June 3, 2005 was 368,333,190.

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ALBERTSON’S INC.
INDEX

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ALBERTSON’S, INC.

See Notes to Condensed Consolidated Financial Statements

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ALBERTSON’S, INC.

See Notes to Condensed Consolidated Financial Statements

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ALBERTSON’S, INC.

See Notes to Condensed Consolidated Financial Statements

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ALBERTSON’S, INC.

NOTE 1 – THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Albertson’s, Inc. (“Albertsons” or the “Company”) is incorporated under the laws of the State of Delaware and is the successor to a business founded by J.A. Albertson in 1939. Based on sales, the Company is one of the largest retail food and drug chains in the world.

As of May 5, 2005, the Company, through its divisions and subsidiaries, operated 2,500 stores in 37 states. The Company, through its divisions and subsidiaries, also operated 236 fuel centers near existing stores. Retail operations are supported by 19 major Company distribution operations, strategically located in the Company’s operating markets.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the results of operations, financial position and cash flows of the Company and its subsidiaries. All material intercompany balances have been eliminated.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments necessary to present fairly, in all material respects, the results of operations of the Company for the periods presented. These condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s 2004 Annual Report on Form 10-K, as amended (the “Company’s 2004 Annual Report on Form 10-K”) for the fiscal year ended February 3, 2005 filed with the Securities and Exchange Commission. The results of operations for the 13 weeks ended May 5, 2005 are not necessarily indicative of results for a full year.

The Company’s Condensed Consolidated Balance Sheet as of February 3, 2005 has been derived from the audited Consolidated Balance Sheet as of that date.

Use of Estimates

The preparation of the Company’s consolidated financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions. Some of these estimates require difficult, subjective or complex judgments about matters that are inherently uncertain. As a result, actual results could differ from these estimates. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Inventories

The amount of vendor funds reducing the Company’s inventory (“inventory offset”) as of May 5, 2005 was $137, an increase of $11 from February 3, 2005. The inventory offset was determined by estimating the average inventory turnover rates by product category for the Company’s grocery, general merchandise and lobby departments (these departments received over three-quarters of the Company’s vendor funds in 2004) and by estimating the average inventory turnover rates by department for the Company’s remaining inventory. These results for the thirteen weeks ended May 5, 2005 include a $9 charge to adjust the prior year inventory offset and a credit of $10 to record a related adjustment to the prior year LIFO reserve. The net impact of these two related adjustments on gross margin was a credit of $1.

Net earnings reflect the application of the LIFO method of valuing certain inventories. Quarterly inventory determinations under LIFO are based on assumptions as to projected inventory levels at the end of the year and the rate of inflation for the year. This determination resulted in pre-tax LIFO expense of $6 for the 13 week period ended May 5, 2005, which was offset by the LIFO credit of $10 related to prior year described above, for a net LIFO credit of $4. LIFO expense was $6 for the 13 week period ended April 29, 2004.

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NOTE 1 – THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES – (CONT.)

Stock-Based Compensation

The Company accounts for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” and related interpretations. Accordingly, expense associated with stock-based compensation is measured as the excess, if any, of the quoted market price of the Company’s stock at the date of the grant over the option exercise price and is charged to operations over the vesting period. Income tax benefits attributable to stock options exercised are credited to capital in excess of par value. Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – An Amendment to Financial Accounting Standards Board (“FASB”) Statement No. 123”, encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. If the fair value-based accounting method was utilized for stock-based compensation, the Company’s pro forma net earnings and earnings per share for the periods presented below would have been as follows:

The pro forma net earnings resulted from reported net earnings less pro forma after-tax compensation expense. The pro forma effect on net earnings is not representative of the pro forma effect on net earnings in future periods. To calculate pro forma stock-based compensation expense under SFAS No. 123, the Company estimated the fair value of each option grant on the date of grant, using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2005 and 2004: risk-free interest rate of 4.00% and 3.01%, respectively, expected dividend yield of 3.39% and 3.35%, respectively, expected lives of 6.0 and 6.0 years, respectively, and expected stock price volatility of 37.60% and 38.90%, respectively.

Reclassifications

The Company’s banking arrangements allow the Company to fund outstanding checks when presented to the financial institution for payment. This cash management practice frequently results in total issued checks exceeding available cash balances at a single financial institution. As of May 5, 2005, the Company has recorded its cash disbursement accounts with a net cash book overdraft position in accounts payable. The Company believes this presentation of cash is preferable under generally accepted accounting principles. Previously, the Company had reported these balances in cash and cash equivalents. The condensed consolidated statement of cash flows for the prior period has been adjusted to conform to this presentation. Net earnings were not impacted by this change. At May 5, 2005 and February 3, 2005 the Company had net cash book overdrafts of $244 and $294, respectively, classified in accounts payable.

Certain other reclassifications have been made in the prior period’s financial statements to conform to classifications used in the current year.

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NOTE 2 – NEW AND RECENTLY ADOPTED ACCOUNTING STANDARDS

In May 2004, the FASB issued Staff Position No. FAS 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (“SFAS No. 106-2”). SFAS No. 106-2 supersedes SFAS No. 106-1, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” and provides guidance on the accounting and disclosure related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Medicare Act”), which was signed into law in December 2003. SFAS No. 106-2 is effective beginning in the third fiscal quarter of 2005. The impact of the Medicare Act and SFAS No. 106-2 is not expected to have a material effect on the Company’s consolidated financial statements.

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4” (“SFAS No. 151”). SFAS No. 151 clarifies that inventory costs that are “abnormal” are required to be charged to expense as incurred as opposed to being capitalized into inventory as a product cost. SFAS No. 151 provides examples of “abnormal” costs to include costs of idle facilities, excess freight and handling costs, and wasted materials (spoilage). SFAS No. 151 is effective for the Company’s fiscal year beginning February 3, 2006. The impact of SFAS No. 151 is not expected to have a material effect on the Company’s consolidated financial statements.

In December 2004, the FASB issued SFAS No. 123 (Revised 2004), “Share-Based Payment” (“SFAS 123(R)”). SFAS 123(R) addresses the accounting for share-based payments to employees, including grants of employee stock options. Under the new standard, companies will no longer be able to account for share-based compensation transactions using the intrinsic value method in accordance with APB Opinion No. 25, “Accounting for Stock Issued to Employees”. Instead, companies will be required to account for such transactions using a fair-value method and recognize the expense in the consolidated earnings statements. The Company intends to adopt SFAS 123(R) using the “modified prospective” transition method beginning with the first quarter of 2006. Under this method, awards that are granted, modified or settled after February 3, 2006, will be measured and accounted for in accordance with SFAS 123(R). In addition, in the Company’s first quarter of 2006, expense must be recognized in the earnings statement for unvested awards that were granted prior to the start of the Company’s first quarter of 2006. The expense will be based on the fair value determined at grant date under SFAS 123, “Accounting for Stock-Based Compensation”. The Company estimates that earnings per share in 2006 will be reduced by approximately $0.07 per diluted share as a result of implementing SFAS 123(R). However, the calculation of compensation cost for share-based payment transactions after the effective date of SFAS 123(R) may be different from the calculation of compensation cost under SFAS 123, but such differences have not yet been quantified.

In March 2005, the FASB issued FIN 47, “Accounting for Conditional Asset Retirement Obligations – an interpretation of FASB Statement No. 143” (“FIN 47”). FIN 47 clarifies that the term “conditional asset retirement obligation” as used in FASB Statement No. 143 “Accounting for Asset Retirement Obligations,” refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. Accordingly, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. FIN 47 is effective at the end of the Company’s fiscal year ending February 2, 2006. The impact of FIN 47 is not expected to have a material effect on the Company’s consolidated financial statements.

NOTE 3 – BUSINESS ACQUISITIONS

Shaw’s

On April 30, 2004, the Company acquired all of the outstanding capital stock of the entity which conducted J Sainsbury plc’s U.S. retail grocery store business (“Shaw’s”). The results of Shaw’s operations have been included in the Company’s consolidated financial statements since that date. The operations acquired consist of 206 grocery stores in the New England area operated under the banners of Shaw’s and Star Market. The Company acquired Shaw’s for a variety of reasons, including attractive market share positions and real estate, the opportunity to realize numerous synergies and strong historical financial performance.

The aggregate purchase price was $2,578, which included $2,134 of cash, $441 of assumed capital lease obligations and debt and $3 of transaction costs. The Company used a combination of cash-on-hand and the proceeds of the issuance of $1,603 of commercial paper to finance the acquisition. The Company used the net proceeds from a subsequent mandatory convertible security offering (see Note 7 – “Indebtedness” to the Condensed Consolidated Financial Statements) to repay $1,117 of such commercial paper.

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NOTE 3 – BUSINESS ACQUISITIONS – (CONT.)

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition. The initial purchase price allocations were based on a combination of third-party valuations and internal analyses and were adjusted during the allocation period in accordance with SFAS No. 141, “Business Combinations”.

Acquired intangible assets include $399 assigned to trade names not subject to amortization, $308 assigned to favorable operating leases (13-year weighted average useful life), $36 assigned to a customer loyalty program (7-year useful life), $5 assigned to pharmacy prescriptions (7-year useful life), and other assets of $1 (18-year useful life). With the exception of trade names, the remaining intangible assets are amortized on a straight-line basis over their expected useful lives.

As part of the purchase price allocation, the fair values of operating leases were calculated, a portion of which represents favorable operating leases compared with current market conditions and a portion of which represents unfavorable operating leases compared with current market conditions. The favorable leases totaled $308 and are included in Intangibles, net in the Company’s Condensed Consolidated Balance Sheets. The unfavorable leases totaled $192, have an estimated weighted average life of 18 years and are included in Other long-term liabilities and deferred credits in the Company’s Condensed Consolidated Balance Sheets.

The excess of the purchase price over the fair value of assets acquired and liabilities assumed was allocated to goodwill. Of the $803 recorded in goodwill, $95 is expected to be deductible for tax purposes over the next 14 years.

Bristol Farms

On September 21, 2004, the Company acquired New Bristol Farms, Inc. (“Bristol Farms”) for $137 in cash. As of May 5, 2005, Bristol Farms operated 11 gourmet retail stores in Southern California. This transaction was accounted for using the purchase method and, accordingly, the purchase price has been allocated on a preliminary basis to the fair value of the tangible and identifiable intangible assets acquired as determined by third-party valuations and internal analyses. The purchase price was allocated as follows: $52 in assets, $17 in liabilities, $21 in trade names not subject to amortization and $81 in goodwill.

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NOTE 3 – BUSINESS ACQUISITIONS – (CONT.)

The following unaudited pro forma financial information presents the combined results of operations of the Company, Shaw’s and Bristol Farms as if the acquisitions had occurred on January 30, 2004. Shaw’s fiscal year ended on February 28, 2004, and Bristol Farm’s fiscal year ended on May 2, 2004. The unaudited pro forma financial information uses Shaw’s and Bristol Farm’s data for the periods corresponding to the Company’s fiscal year. This unaudited pro forma financial information is not intended to represent or be indicative of what would have occurred if the transactions had taken place on the dates presented and should not be taken as representative of the Company’s future consolidated results of operations or financial position. The pro forma information does not reflect any potential synergies or integration costs.

NOTE 4 – DISCONTINUED OPERATIONS, RESTRUCTURING ACTIVITIES AND CLOSED STORES

The Company has a process to review its asset portfolio in an attempt to maximize returns on its invested capital. As a result of these reviews, in recent years the Company has closed and disposed of a number of properties through market exits, restructuring activities and on-going store closures. The Company recognizes lease liability reserves and impairment charges associated with these transactions. Summarized below are the significant transactions the Company has undertaken and the related lease accrual activity.

Discontinued Operations

In April 2005 the Company entered into a definitive agreement to sell its operations in the Jacksonville, Florida market, which consisted of seven operating stores, four of which are owned. The lease agreements associated with the three leased properties will be assumed by the buyer. The transaction is expected to close in the second quarter of 2005. Results of operations for those stores have been reclassified and presented as discontinued operations for the 13 week periods ended May 5, 2005 and April 29, 2004. As of May 5, 2005, the Company classified the seven properties with a value of $14 as Assets held for sale in the Condensed Consolidated Balance Sheet.

In June 2004 the Company announced its plan to sell, close or otherwise dispose of its operations in the Omaha, Nebraska market, which consisted of 21 operating stores. Results of operations for those stores have been reclassified and presented as discontinued operations for the 13 week periods ended May 5, 2005 and April 29, 2004. As of May 5, 2005, the Company had disposed of 15 properties, resulting in six properties with a value of $2 classified as Assets held for sale in the Condensed Consolidated Balance Sheet.

In April 2004 the Company announced its plan to sell, close or otherwise dispose of its operations in the New Orleans, Louisiana market, which consisted of seven operating stores and three non-operating properties. Results of operations for those stores and properties have been reclassified and presented as discontinued operations for the 13 week periods ended May 5, 2005 and April 29, 2004. As of May 5, 2005, the Company had disposed of six properties, resulting in four properties with a value of $15 classified as Assets held for sale in the Condensed Consolidated Balance Sheet.

In 2002 the Company announced its plan to sell, close or otherwise dispose of its operations in four underperforming markets: Memphis, Tennessee; Nashville, Tennessee; Houston, Texas; and San Antonio, Texas. This involved the sale or closure of 95 stores and two distribution centers. As of May 5, 2005, the Company had disposed of 84 properties, resulting in 13 properties with a value of $2 classified as Assets held for sale in the Condensed Consolidated Balance Sheet.

Discontinued operations stores generated sales of $20 and $100 for the 13 week periods ended May 5, 2005 and April 29, 2004, respectively. The loss from discontinued operations of $7 for the 13 week period ended May 5, 2005 consisted of loss from operations of $1, a write down of fixed assets of $11, and an income tax benefit of $5. The loss from discontinued operations of $20 for the 13 week period ended April 29, 2004 consisted of a loss from operations of $1, a write down of fixed assets and lease settlements of $30, and an income tax benefit of $11.

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NOTE 4 – DISCONTINUED OPERATIONS, RESTRUCTURING ACTIVITIES AND CLOSED STORES – (CONT.)

Restructuring Activities

In 2001 the Company committed to a plan to restructure its operations by 1) closing 165 underperforming stores, 2) closing four division offices, 3) centralizing processing functions to its corporate offices, and 4) reducing overall store support center headcount. As of May 5, 2005, the Company had disposed of 137 properties, resulting in 28 properties with a value of $1 classified as Assets held for sale in the Condensed Consolidated Balance Sheet.

The following table summarizes the accrual activity for future lease obligations related to discontinued operations, restructuring activities and closed stores:

NOTE 5 – INTANGIBLES

The carrying amount of intangibles was as follows:

At May 5, 2005, amortizing intangible assets had remaining useful lives from less than one year to 37 years. Projected amortization expense (net of amortization of unfavorable acquired operating lease liabilities) for existing intangible assets is $26, $21, $19, $19 and $19 for 2005, 2006, 2007, 2008 and 2009, respectively.

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NOTE 6 – EMPLOYEE BENEFIT PLANS

The following represents the components of net periodic pension benefits:

Postretirement Benefits amounts were less than $1 for the 13 week periods ended May 5, 2005 and April 29, 2004.

During the first quarter of 2005, the Company made no contributions to its defined benefit plans.

NOTE 7 – INDEBTEDNESS

Revolving Credit Facilities

At May 5, 2005, the Company had three revolving credit facilities totaling $1,400. The first agreement, a 364-Day revolving credit facility with total availability of $400, will expire on June 16, 2005. The Company intends to replace this facility with a new five-year facility prior to its expiration. The second agreement, a five-year facility for $900, will expire in June 2009. The third agreement, a five-year facility for $100, will expire in July 2009. The 364-Day credit agreement contains an option which would allow the Company, upon due notice, to convert any outstanding amount at the expiration date to a term l