
<PAGE>   1
                                                        EXHIBIT 13
Albertson's, Inc.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Results of Operations

         The Company has reported increased sales and earnings for 25
consecutive years. Sales for 1994 were $11.9 billion compared to $11.3 billion
in 1993 (a 53-week year) and $10.2 billion in 1992. Sales for 1994 increased
7.4% when compared on a 52-week basis to 1993. Increases in sales are
attributable to a number of factors, including identical store sales increases,
the continued expansion of net square footage, inflation and the purchase of 74
Jewel Osco stores on April 13, 1992. Identical store sales, stores that have
been in operation for two full fiscal years, increased 2.3% (on a comparable
52-week basis) in 1994, 2.8% (on a comparable 53-week basis) in 1993 and 1.8%
in 1992. Identical store sales continued to increase through higher average
ticket sales per customer and increased customer counts. Management estimates
that inflation accounted for approximately 0.7% of the 1994 identical store
sales increase, compared to 0.6% in 1993 and 1.7% in 1992. During 1994, the
Company opened 55 stores (5 of which were acquired), remodeled 46 stores and
closed 11 stores for a net square footage increase of 2.4 million square feet.
Net square footage increased 7.7% in 1994, 4.1% in 1993 and 23.0% in 1992.

         The following table sets forth certain income statement components
expressed as a percent to sales and the year-to-year percentage changes in the
amounts of such components:

<TABLE>
<CAPTION>
                                                 Percent to Sales                  Percentage Change
                                        --------------------------------    --------------------------------
                                                                              1994       1993       1992
                                         1994         1993         1992     vs. 1993   vs. 1992    vs. 1991
- ------------------------------------------------------------------------------------------------------------
<S>                                     <C>          <C>          <C>          <C>       <C>         <C>
Sales                                   100.00%      100.00%      100.00%      5.4%      10.9%       17.2%
Gross profit                             25.32        24.74        24.11       7.9       13.8        17.8
Selling, general and                                                                          
  administrative                                                                              
  expenses                               19.14        19.16        19.41       5.3        9.4        18.5
Operating profit                          6.17         5.58         4.70      16.6       31.8        15.4
Net interest expense                      0.52         0.45         0.42      21.9       18.2        86.6
Nonrecurring charge                                    0.26                                   
Earnings before income taxes                                                                  
  and cumulative effects                                                                      
  of accounting changes                   5.71         4.89         4.36      22.9       24.5         9.2
Net earnings                              3.37         3.01         2.65      17.9       26.2         4.4
</TABLE>                                                                      

         Gross profit, as a percent to sales, increased due primarily to the
expansion and increased utilization of Company-owned distribution facilities.
During 1994, the Company's distribution system provided 77% of all products
purchased by retail stores, compared to 70% in 1993 and 66% in 1992.
Utilization of the Company's distribution system has enabled the Company to
improve its control over product costs and product distribution. The pre-tax
LIFO adjustment, as a percent to sales, reduced gross margin by 0.08% in 1994,
0.06% in 1993 and 0.12% in 1992.

         The 1992 increase in selling, general and administrative (SG&A)
expenses was due primarily to one-time costs associated with the Jewel Osco
Acquisition. The Company continues to emphasize cost containment programs as
well as increased productivity in an effort to continue to reduce SG&A expenses
as a percent to sales.

         Net interest expense for 1993 included a reduction of $9.7 million due
to the successful resolution of a tax issue for which interest expense had
previously been accrued. Excluding this adjustment, net interest expense for
1993, as a percent to sales, would have increased to 0.54% due to borrowings
associated with the Company's purchase of its common stock from the estate of
J. A. Albertson on March 10, 1993. The 1992 increase in net interest expense
resulted from new borrowings associated with the Jewel Osco Acquisition.


                                   SEVENTEEN
<PAGE>   2


Albertson's, Inc.

         Net earnings for 1994 were reduced by $17.0 million (0.14% to sales)
for the cumulative effect of the adoption of Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits," which
was recognized in the first quarter. Net earnings for 1993 included a
nonrecurring charge to cover the settlement of a lawsuit and a decrease in
interest expense due primarily to the successful resolution of a tax issue,
both of which were recognized in the third quarter of 1993. Net earnings for
1992 were reduced by certain one-time costs primarily associated with the Jewel
Osco Acquisition and two accounting changes, all of which were recognized in
the first quarter of 1992. The following table shows comparisons for 1994, 1993
and 1992 of certain income statement components and the percent to sales,
excluding these adjustments (dollars in millions):

<TABLE>
<CAPTION>
                                                 1994                 1993                  1992
                                          -----------------    -----------------    ------------------
                                          DOLLARS   PERCENT    Dollars   Percent    Dollars    Percent
    --------------------------------------------------------------------------------------------------                            
    <S>                                   <C>        <C>       <C>         <C>      <C>         <C>
    Gross profit                          $3,011.4   25.32%    $2,791.2    24.74%   $2,460.6    24.33%
    Selling, general and 
       administrative expenses             2,277.1   19.14      2,161.6    19.16     1,941.1    19.19
    Operating profit                         734.2    6.17        629.6     5.58       519.5     5.14
    Net earnings                             417.4    3.51        352.1     3.12       307.1     3.04
</TABLE>

Liquidity and Capital Resources

         The Company's operating results continue to enhance its financial
position and ability to continue its planned expansion program. Cash provided
by operating activities during 1994 was $608 million compared to $585 million
in 1993 and $498 million in 1992. These amounts have enabled the Company to
fund its capital expansion program (aside from the 1992 Jewel Osco Acquisition)
and pay dividends. During 1994, the Company spent $473 million on capital
expenditures, $83 million to reduce long-term debt and $107 million for the
payment of dividends (which represents 26.6% of 1994 net earnings). The Company
also utilizes its commercial paper program to supplement cash requirements
from seasonal fluctuations in working capital resulting from operations and the
Company's capital expenditure program. Accordingly, commercial paper borrowings
will fluctuate between the Company's quarterly reporting periods. The Company
had $109.7 million of commercial paper borrowings outstanding at February 2,
1995, compared to $79.9 million at February 3, 1994, and $110.0 million at
January 28, 1993. As of February 2, 1995, the Company had available lines of
credit of $435 million, of which $400 million was reserved as alternative
funding for the Company's commercial paper program.

         On March 10, 1993, pursuant to a 1979 agreement, the Company purchased
21,976,320 shares of its common stock from the estate of J. A. Albertson, the
Company's founder, at a cost of $518 million or $23.55 per share. This purchase
was financed through the reissuance of 10,400,000 shares of treasury stock at
$26.25 per share, netting $265 million, and the issuance of $252 million in
medium-term notes. The effect of these transactions was to retire the remaining
11,576,320 treasury shares at a net cost to the Company of $21.85 per share.

         Since 1987, the Board of Directors has continuously adopted or renewed
plans under which the Company is authorized, but not required, to purchase
shares of its common stock on the open market. The current plan was adopted by
the Board on March 6, 1995, and authorizes the Company to purchase up to five
million shares through March 31, 1996. No shares were purchased under these
plans in 1994, 1993 or 1992.


                                    EIGHTEEN



<PAGE>   3
Albertson's, Inc.

         The following leverage ratios demonstrate the Company's levels of
long-term financing as of the indicated year end:

<TABLE>
<CAPTION>
                                                                  FEBRUARY 2,   February 3,  January 28,
                                                                     1995          1994         1993
    ----------------------------------------------------------------------------------------------------
    <S>                                                              <C>           <C>          <C>
    Long-term debt (including capitalized lease obligations)
      to equity                                                      30.4%         47.9%        36.6%
    Long-term debt (including capitalized lease obligations)
      to total assets                                                14.1%         20.2%        17.3%
</TABLE>


         During 1994, the Company opened 53 combination food-drug stores,
1 warehouse store and 1 conventional store. The average size of these stores,
49,800 square feet, increased the Company's average store size to 46,900 square
feet. At February 2, 1995, 92% of the Company's square footage consisted of
stores over 35,000 square feet. Square footage has also increased because of
the Company's remodel program. In 1994, 13 of the 46 remodeled stores were
expanded in size. The Company continues to retain ownership of real estate when
possible.

         During the past three years, the Company has invested $220 million
(excluding inventory) in its distribution operations and has added 2.5 million
square feet of new or expanded facilities. A new 687,000 square foot full-line
distribution center in Tolleson, Arizona, located in the Phoenix metropolitan
area, became fully operational in August 1993. The Company also purchased an
existing 818,000 square foot warehouse in Plant City, Florida in February 1993.
This center was remodeled and expanded to approximately 954,000 square feet to
add frozen and perishable storage areas. It began limited operations in
December 1993 and became fully operational in March 1994. The Company services
all of its retail stores from Company-owned distribution centers.

         Capital expenditures for 1995 (excluding amounts anticipated to be
financed by operating leases of approximately $30 million) are expected to be
approximately $560 million. New stores and remodels will continue to be the
most significant portion of planned capital expenditures. The Company is
committed to keeping its stores up to date. In the last three years, the
Company has opened and remodeled 337 stores representing 16.3 million square
feet. In 1995, the Company plans to begin construction on a full-line
distribution center in South Texas.  The following is a summary of capital
expenditures excluding operating leases but including the Jewel Osco
Acquisition in 1992, capital leases and assets acquired with related debt (in
thousands):

<TABLE>
<CAPTION>
                                                        1995
                                                     (PROJECTED)     1994         1993         1992
    -------------------------------------------------------------------------------------------------
    <S>                                                <C>         <C>          <C>          <C>
    New and acquired stores                            $320,000    $320,479     $246,052     $466,246
    Remodels                                            110,000      86,381       82,409       74,914
    Retail replacement equipment and
      technological upgrades                             45,000      36,464       20,804       10,793
    Distribution facilities and equipment                70,000      38,490      100,936       81,024
    Other                                                15,000      17,119        5,963        9,880
                                                       ----------------------------------------------
                                                       $560,000    $498,933     $456,164     $642,857
                                                       ==============================================
</TABLE>

         The estimated fair market value of new and acquired stores opened in
1994 and financed by operating leases was approximately $18 million.



                                    NINETEEN

<PAGE>   4
Albertson's, Inc.


CONSOLIDATED EARNINGS

<TABLE>
<CAPTION>
                                                             52 WEEKS          53 Weeks         52 Weeks
                                                            FEBRUARY 2,       February 3,      January 28,
(In thousands except per share data)                           1995              1994             1993
- -----------------------------------------------------------------------------------------------------------
<S>                                                        <C>               <C>               <C>
SALES                                                      $11,894,621       $11,283,678       $10,173,676
Cost of sales                                                8,883,265         8,492,524         7,720,824
                                                           -----------------------------------------------
Gross profit                                                 3,011,356         2,791,154         2,452,852
Selling, general and administrative expenses                 2,277,119         2,161,561         1,975,079
                                                           -----------------------------------------------
Operating profit                                               734,237           629,593           477,773
Other (expenses) income:
  Interest, net                                                (62,141)          (50,984)          (43,124)
  Other, net                                                     6,556             3,506             9,072
  Nonrecurring charge                                                            (29,900)
                                                           -----------------------------------------------
Earnings before income taxes and cumulative effects
  of accounting changes                                        678,652           552,215           443,721
Income taxes                                                   261,281           212,534           167,646
                                                           -----------------------------------------------
Earnings before cumulative effects of accounting changes       417,371           339,681           276,075
Cumulative effects of accounting changes:
  Postemployment benefits                                      (17,006)
  Postretirement health care benefits                                                               (4,093)
  Accounting for income taxes                                                                       (2,765)
                                                           -----------------------------------------------
NET EARNINGS                                               $   400,365       $   339,681       $   269,217
                                                           ===============================================
Earnings per share before cumulative effects
  of accounting changes                                    $      1.65        $     1.34        $     1.04
Cumulative effects of accounting changes:
  Postemployment benefits                                         (.07)
  Postretirement health care benefits                                                                 (.01)
  Accounting for income taxes                                                                         (.01)
                                                           -----------------------------------------------
EARNINGS PER SHARE                                         $      1.58       $      1.34       $      1.02
                                                           ===============================================
  Average number of common shares outstanding                  253,633           254,227           264,418
</TABLE>



See Notes to Consolidated Financial Statements.



                                     TWENTY


<PAGE>   5
Albertson's, Inc.

CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
                                                           52 WEEKS       53 Weeks      52 Weeks
                                                          FEBRUARY 2,    February 3,   January 28,
(In thousands)                                               1995           1994          1993
- -------------------------------------------------------------------------------------------------
<S>                                                       <C>           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings                                              $ 400,365     $ 339,681      $ 269,217
Adjustments to reconcile net earnings to net cash
  provided by operating activities:
  Depreciation and amortization                             226,467       196,427        171,724
  Net deferred income taxes                                 (18,956)      (12,016)         8,462
  Cumulative effects of accounting changes                   17,006                        6,858
  Changes in operating assets and liabilities,
    net of acquisition:
    Receivables and prepaid expenses                           (499)      (24,194)       (36,114)
    Inventories                                             (76,842)      (41,633)       (72,955)
    Accounts payable                                        (24,825)       84,601        104,614
    Other current liabilities                                   (86)       23,836         38,570
    Self-insurance                                           31,125        10,192          4,788
    Unearned income                                          51,318          (609)        (7,859)
    Other long-term liabilities                               3,059         8,230         10,671
                                                          --------------------------------------
      Net cash provided by operating activities             608,132       584,515        497,976

CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of business, net of cash acquired                                         (428,860)
  Capital expenditures                                     (473,247)     (435,526)      (331,160)
  Proceeds from disposals of land,
     buildings and equipment                                 44,752        20,874         18,053
  Increase in other assets                                  (31,971)       (3,719)       (14,808)
                                                          --------------------------------------
      Net cash used in investing activities                (460,466)     (418,371)      (756,775)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net line of credit activity                               (10,000)        5,000        (25,000)
  Proceeds from long-term borrowings                                      252,075        443,000
  Payments on long-term borrowings                          (83,013)      (32,158)       (43,497)
  Net commercial paper activity                              29,828       (30,090)       (33,000)
  Proceeds from stock options exercised                       9,782         4,484          4,390
  Purchase of treasury shares                                            (517,526)
  Net proceeds from issuance of treasury shares                           264,527
  Cash dividends paid                                      (106,502)      (89,534)       (81,957)
                                                          --------------------------------------
      Net cash (used in) provided by
         financing activities                              (159,905)     (143,222)       263,936
                                                          --------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS        (12,239)       22,922          5,137
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR               62,463        39,541         34,404
                                                          --------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                  $  50,224     $  62,463      $  39,541
                                                          ======================================
</TABLE>

See Notes to Consolidated Financial Statements.


                                  TWENTY-ONE
                                       


<PAGE>   6

Albertson's, Inc.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                         FEBRUARY 2,   February 3,  January 28,
(Dollars in thousands)                                      1995          1994         1993
- -----------------------------------------------------------------------------------------------
<S>                                                     <C>           <C>          <C>
Assets

CURRENT ASSETS:
  Cash and cash equivalents                             $   50,224    $   62,463   $   39,541
  Accounts and notes receivable                            109,324       114,493       90,945
  Inventories                                              948,561       871,719      830,086
  Prepaid expenses                                          19,257        13,589       12,943
  Deferred income taxes                                     62,223        59,967       39,948
                                                        -------------------------------------
    TOTAL CURRENT ASSETS                                 1,189,589     1,122,231    1,013,463

OTHER ASSETS                                               122,781        90,810       87,091

LAND, BUILDINGS AND EQUIPMENT:
  Land                                                     527,125       467,392      415,911
  Buildings                                              1,242,813     1,097,681      930,883
  Fixtures and equipment                                 1,258,749     1,130,735    1,001,627
  Leasehold improvements                                   287,544       257,566      231,533
  Capitalized leases                                       180,026       155,798      147,316
                                                        -------------------------------------
                                                         3,496,257     3,109,172    2,727,270
  Less accumulated depreciation and amortization         1,186,898     1,027,318      882,251
                                                        -------------------------------------
                                                         2,309,359     2,081,854    1,845,019
                                                        ------------------------------------- 
                                                        $3,621,729    $3,294,895   $2,945,573
                                                        =====================================
</TABLE>


See Notes to Consolidated Financial Statements.



                                   TWENTY-TWO


<PAGE>   7
Albertson's, Inc.



<TABLE>
<CAPTION>
                                                          FEBRUARY 2,    February 3,   January 28,
(Dollars in thousands)                                       1995           1994          1993
- --------------------------------------------------------------------------------------------------
<S>                                                       <C>            <C>            <C>
Liabilities and Stockholders' Equity                                                    

CURRENT LIABILITIES:
  Accounts payable                                         $  575,551    $  600,376     $  515,775
  Notes payable                                                              10,000          5,000
  Salaries and related liabilities                            114,906       101,443         95,820
  Taxes other than income taxes                                38,212        38,095         41,522
  Income taxes                                                 37,913        48,622         29,592
  Self-insurance                                               63,905        58,436         51,870
  Unearned income                                              22,092        19,927         15,567
  Other                                                        34,810        30,277         26,033
  Current maturities of long-term debt                        201,146        76,692         25,757
  Current capitalized lease obligations                         6,904         6,194          6,044
                                                           ---------------------------------------
      TOTAL CURRENT LIABILITIES                             1,095,439       990,062        812,980

LONG-TERM DEBT                                                382,775       554,092        404,476

CAPITALIZED LEASE OBLIGATIONS                                 129,573       110,919        103,764

OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS:
  Deferred compensation                                        36,396        31,684         28,016
  Deferred income taxes                                         2,017        28,766         20,763
  Deferred rents payable                                       69,381        72,251         69,864
  Self-insurance                                              109,513        83,857         80,231
  Unearned income                                              59,978        10,825         15,794
  Other                                                        48,764        23,060         21,257
                                                           ---------------------------------------
                                                              326,049       250,443        235,925
STOCKHOLDERS' EQUITY:
  
  Preferred stock - $1.00 par value; 
     authorized - 10,000,000 shares; 
     issued - none
  Common stock - $1.00 par value; 
     authorized - 600,000,000 shares; 
     issued - 253,984,381 shares,
     253,406,983 shares and 132,329,428 shares,
     respectively                                             253,984       253,407        132,330
  Capital in excess of par value                               11,322         2,117          4,909
  Retained earnings                                         1,422,587     1,133,855      1,251,189
                                                           ---------------------------------------
                                                            1,687,893     1,389,379      1,388,428
                                                           ---------------------------------------
                                                           $3,621,729    $3,294,895     $2,945,573
                                                           =======================================
</TABLE>

See Notes to Consolidated Financial Statements.




                                  TWENTY-THREE

<PAGE>   8

Albertson's, Inc.

CONSOLIDATED STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                             Common      Capital in
                                           Stock $1.00    Excess of       Retained     Treasury
(In thousands except per share data)        Par Value     Par Value       Earnings       Stock       Total
- --------------------------------------------------------------------------------------------------------------
<S>                                        <C>           <C>              <C>          <C>          <C>
BALANCE AT JANUARY 30, 1992                  $132,131      $   718        $1,066,603                $1,199,452

Exercise of stock options                         199        1,475                                       1,674
Tax benefits related to stock options                        2,716                                       2,716
Cash dividends, $.32 per share                                               (84,631)                  (84,631)
Net earnings                                                                 269,217                   269,217
                                             -----------------------------------------------------------------
BALANCE AT JANUARY 28, 1993                   132,330        4,909         1,251,189                 1,388,428

Exercise of stock options                         245        1,700                                       1,945
Tax benefits related to stock options                        2,538                                       2,538
Purchase treasury shares                                                               $(517,526)     (517,526)
Issue treasury shares                                       19,615                       244,912       264,527
Retire treasury shares                         (5,788)     (25,010)         (241,816)    272,614
Two-for-one stock split                       126,620       (1,635)         (124,985)
Other                                                                            953                       953
Cash dividends, $.36 per share                                               (91,167)                  (91,167)
Net earnings                                                                 339,681                   339,681
                                             -----------------------------------------------------------------
BALANCE AT FEBRUARY 3, 1994                   253,407        2,117         1,133,855                 1,389,379

Exercise of stock options                         577        5,120                                       5,697
Tax benefits related to stock options                        4,085                                       4,085
Cash dividends, $.44 per share                                             (111,633)                  (111,633)
Net earnings                                                                400,365                    400,365
                                             -----------------------------------------------------------------
BALANCE AT FEBRUARY 2, 1995                  $253,984     $ 11,322        $1,422,587                $1,687,893
                                             =================================================================
</TABLE>


See Notes to Consolidated Financial Statements.




                                  TWENTY-FOUR

<PAGE>   9

Albertson's, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Summary of Significant Accounting Policies

FISCAL YEAR END  The Company's fiscal year ends on the Thursday nearest to
January 31 each year. Unless the context otherwise indicates, reference to a
fiscal year of the Company refers to the calendar year in which such fiscal
year commences.

CONSOLIDATION  The consolidated financial statements include the results of
operations, account balances and cash flows of the Company and its wholly owned
subsidiaries. All material intercompany balances have been eliminated.

CASH AND CASH EQUIVALENTS  The Company considers all highly liquid investments
with a maturity of three months or less at the time of purchase to be cash
equivalents.

INVENTORIES  The Company values inventories at the lower of cost or market. Cost
of substantially all inventories is determined on a last-in, first-out (LIFO)
basis.

CAPITALIZATION, DEPRECIATION AND AMORTIZATION  Land, buildings and equipment are
recorded at cost. Depreciation is provided on the straight-line method over the
estimated useful life of the asset. Estimated useful lives are generally as
follows: buildings and improvements -- 10 to 35 years; fixtures and equipment
- -- 3 to 8 years; leasehold improvements -- 10 to 15 years; and capitalized
leases -- 25 to 30 years.

         The costs of major remodeling and improvements on leased stores are
capitalized as leasehold improvements. Leasehold improvements are amortized on
the straight-line method over the shorter of the life of the applicable lease
or the useful life of the asset. Capital leases are recorded at the lower of
fair market value of the asset or the present value of future minimum lease
payments. These leases are amortized on the straight-line method over their
primary term.

         Beneficial lease rights and lease liabilities are recorded on
purchased leases based on differences between contractual rents under the
respective lease agreements and prevailing market rents at the date of the
acquisition of the lease. Beneficial lease rights are amortized over the lease
term using the straight-line method. Lease liabilities are amortized over the
lease term using the interest method.

         Upon disposal of fixed assets, the appropriate property accounts are
reduced by the related costs and accumulated depreciation and amortization. The
resulting gains and losses are reflected in consolidated earnings.

STORE OPENING AND CLOSING COSTS  Noncapital expenditures incurred in opening new
stores or remodeling existing stores are expensed in the year in which they are
incurred. When a store is closed the remaining investment in fixed assets, net
of expected recovery value, is expensed. For properties under operating lease
agreements, the present value of any remaining liability under the lease, net
of expected sublease recovery, is also expensed.

SELF-INSURANCE  The Company is primarily self-insured for property loss,
workers' compensation and general liability costs. Self-insurance liabilities
are based on claims filed and estimates for claims incurred but not reported.
These liabilities are not discounted.

STOCK OPTIONS  Proceeds from the sale of newly issued stock to employees under
the Company's stock option plans are credited to common stock to the extent of
par value and the excess to capital in excess of par value. With respect to
nonqualified stock options, the difference between the option exercise price
and market value of the stock at date of grant 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.

INCOME TAXES  The Company provides for deferred income taxes resulting from
timing differences in reporting certain income and expense items for income tax
and financial accounting purposes. The major timing differences and their net
effect are shown in the "Income Taxes" note.  Investment tax credits have been
deferred and are being amortized over the remaining useful life of the related
asset.



                                  TWENTY-FIVE


<PAGE>   10

Albertson's, Inc.


EARNINGS PER SHARE     Earnings per share are computed by dividing consolidated
net earnings by the weighted average number of common shares outstanding.
Equivalent shares in the form of stock options are excluded from the
calculation since they are not materially dilutive.

STOCK SPLIT     On August 30, 1993, the Board of Directors approved a two-for-
one stock split, effected in the form of a 100% stock dividend payable to
stockholders of record at the close of business on September 17, 1993, and
distributed on October 4, 1993. All references in the financial statements to
the number of shares (except outstanding shares at year end), related prices
and per share amounts have been restated to reflect the split.

Nonrecurring Charge

         During the third quarter of 1993, a $29.9 million nonrecurring charge
was recorded to cover a $29.5 million settlement of a lawsuit.  The
nonrecurring charge covers the full cost of the settlement including compliance
with the consent decree and plaintiffs' attorney fees, as well as all expenses
associated with its implementation.

Supplemental Cash Flow Information

         Selected cash payments and noncash activities were as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                            1994         1993       1992
- ----------------------------------------------------------------------------------------------------------
<S>                                                                       <C>          <C>        <C>
Cash payments for income taxes                                            $285,884     $202,472   $143,045
Cash payments for interest,
   net of amounts capitalized                                               51,103       36,311     27,819
Noncash investing and financing activities:
   Liabilities assumed in connection with business acquisition                                      12,385
   Liabilities assumed in connection with asset acquisitions                   112        5,590
   Capitalized lease obligations incurred                                   28,232       15,048     12,647
   Capitalized lease obligations terminated                                  2,658        1,656
</TABLE>

Acquisition

         On April 13, 1992, the Company purchased 74 Jewel Osco combination
food-drug stores, a general merchandise warehouse in Ponca City, Oklahoma and
related assets, including potential store locations, from American Stores
Company (the Acquisition). The Acquisition included stores located in Texas (52
stores), Oklahoma (14 stores), Florida (7 stores) and Arkansas (1 store). The
majority of the acquired stores are located in existing operating areas of the
Company, and the Company is continuing to operate most of these stores as
combination food-drug stores under the Albertson's name. The Acquisition was
accounted for using the purchase method of accounting.

         The purchase price, based upon the book value of fixed assets and cost
of inventory, was approximately $442 million, including approximately $144
million for inventory. The purchase price included real estate for 41 operating
stores and the general merchandise warehouse. The remaining 33 operating stores
are subject to leases that have been assumed by the Company. The Acquisition
was ultimately financed through proceeds from commercial paper borrowings and
offerings of senior unsecured debt securities. The results of operations of the
acquired properties have been included in the consolidated financial statements
from the date of acquisition.



                                   TWENTY-SIX


<PAGE>   11

Albertson's, Inc.

Accounts and Notes Receivable

         Accounts and notes receivable consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                               FEBRUARY 2,    February 3,   January 28,
                                                                  1995           1994          1993
    ---------------------------------------------------------------------------------------------------
    <S>                                                         <C>            <C>           <C>
    Trade accounts receivable                                   $108,080       $ 113,335     $ 86,239
    Trade notes receivable                                         2,606           2,191        5,813
    Allowance for doubtful accounts                               (1,362)         (1,033)      (1,107)
                                                                -------------------------------------
                                                                $109,324       $ 114,493     $ 90,945
                                                                =====================================
</TABLE>

Inventories

         Approximately 96% of the Company's inventories are valued using the
last-in, first-out (LIFO) method. If the first-in, first-out (FIFO) method had
been used, inventories would have been $200,738,000, $191,592,000 and
$185,150,000 higher at the end of 1994, 1993 and 1992, respectively. Net
earnings would have been higher by $5,625,000 ($.02 per share) in 1994,
$3,962,000 ($.02 per share) in 1993 and $7,964,000 ($.03 per share) in 1992.
The replacement cost of inventories valued at LIFO approximates FIFO cost.

Indebtedness

         Long-term debt includes the following (in thousands):

<TABLE>
<CAPTION>
                                                               FEBRUARY 2,   February 3,    January 28,
                                                                  1995           1994          1993
    ---------------------------------------------------------------------------------------------------
    <S>                                                        <C>            <C>            <C>
    Unsecured 6.375% notes due May 1995                        $ 150,000      $150,000       $150,000
    Medium-term notes, unsecured:                                                           
      Due May 1993 (4.29% interest)                                                            25,000
      Due May 1994 (5.49% interest)                                             75,000         75,000
      Due May 1995 (6.15% interest)                               50,000        50,000         50,000
      Due March 1996 (4.86% interest)                             77,000        77,000      
      Due March 1998 (5.68% interest)                             85,425        85,425      
      Due March 2000 (6.14% interest)                             89,650        89,650      
    Commercial paper                                             109,738        79,910        110,000
    Industrial revenue bonds                                      16,550        17,305         18,040
    Mortgage notes                                                 5,558         6,083          1,807
    Other unsecured notes payable                                                  411            386
                                                               --------------------------------------
                                                                 583,921       630,784        430,233
    Less current maturities                                     (201,146)      (76,692)       (25,757)
                                                               --------------------------------------
                                                               $ 382,775      $554,092       $404,476
                                                               ======================================
</TABLE>


                                  TWENTY-SEVEN


<PAGE>   12

Albertson's, Inc.

         In connection with the Company's 1993 purchase of its common stock
from the estate of J.A. Albertson, the Company's founder, $252.1 million of
medium-term notes due from 1996 to 2000 were issued under a shelf registration
statement filed with the Securities and Exchange Commission in 1993. Interest
on these notes is paid semiannually.

         In connection with the 1992 Jewel Osco Acquisition and subsequent
issuance of the 6.375% notes and medium-term notes due from 1993 to 1995, a
shelf registration statement was filed with the Securities and Exchange
Commission in 1992 covering debt securities in the amount of $500 million
available for issuance from time to time. As of February 2, 1995, $200 million
of the debt remained available for issuance in the form of medium-term notes.
Interest on the 6.375% notes and medium-term notes is paid semiannually.

         The Company has in place a $400 million commercial paper program.
Interest on the outstanding commercial paper borrowings ranges from 5.8% to
6.31% with an effective weighted average rate of 5.96%. The Company has
established the necessary credit facilities, through its revolving credit
agreement, to refinance the commercial paper borrowings on a long-term basis.
These borrowings have been classified as noncurrent because it is the Company's
intent to refinance these obligations on a long-term basis.

         The industrial revenue bonds are payable in varying annual
installments through 2011, with interest paid semiannually at 4.2% to 9.875%.

         The Company has pledged real estate with a cost of $15,786,000 as
collateral for the mortgage notes, which are payable monthly, quarterly and
semiannually, including interest at 7.5% to 16.5%. The notes mature from 1995
to 2011.

         The scheduled maturities of long-term debt outstanding at February 2,
1995 are summarized as follows: $201,146,000 in 1995, $78,281,000 in 1996,
$1,032,000 in 1997, $86,560,000 in 1998, $110,913,000 in 1999 and $105,989,000
thereafter.

         In October 1994, the Company entered into a new revolving credit
agreement with several banks, whereby the Company may borrow principal amounts
up to $400 million at varying interest rates any time prior to October 5, 1999.
The agreement contains certain covenants, the most restrictive of which
requires the Company to maintain consolidated tangible net worth, as defined,
of at least $750 million.

         In addition to amounts available under the revolving credit agreement,
the Company had available lines of credit from banks at prevailing interest
rates in the amount of $35 million at February 2, 1995. The cash balances
maintained at these banks are not legally restricted.

         The weighted average interest rate on notes payable outstanding under
the Company's lines of credit was 3.32% as of February 3, 1994 and 3.17% as of
January 28, 1993.

         Interest expense, net, was as follows (in thousands):
<TABLE>
<CAPTION>
                                                                   1994           1993          1992
    --------------------------------------------------------------------------------------------------
    <S>                                                           <C>           <C>           <C>
    Debt                                                          $42,780       $32,164        $26,862
    Capitalized leases                                             13,412        12,233         11,560
    Capitalized interest                                           (3,974)       (4,219)        (4,617)
                                                                  ------------------------------------
    Interest expense                                               52,218        40,178         33,805
    Net bank service charges                                        9,923        10,806          9,319
                                                                  ------------------------------------
    Interest expense, net                                         $62,141       $50,984        $43,124
                                                                  ====================================
</TABLE>

         Interest expense, net for 1993 included a reduction of $9.7 million
due to the successful resolution of a tax issue for which interest expense had
previously been accrued.


                                  TWENTY-EIGHT


<PAGE>   13

Albertson's, Inc.

Capital Stock

         On March 10, 1993, pursuant to a 1979 agreement, the Company purchased
21,976,320 shares of its common stock from the estate of J.A. Albertson, the
Company's founder, at a cost of $517.5 million or $23.55 per share. This
purchase was financed through the reissuance of 10,400,000 shares of treasury
stock at $26.25 per share, netting $264.5 million, and the issuance of $252.1
million in medium-term notes. The remaining 11,576,320 treasury shares were
retired.

         On March 2, 1987, the Board of Directors adopted a stockholder rights
plan, which was amended on August 31, 1987, November 28, 1988, September 6,
1989 and September 6, 1994. Under the plan, stockholders of record on March 23,
1987 received a dividend distribution of one nonvoting right for each share of
common stock. Subject to certain exceptions, one right has been or will be
issued with each share of common stock issued after March 23, 1987. The rights
are attached to all common stock certificates and no separate rights
certificate will be distributed. Each right entitles the holder to purchase one
share of the Company's common stock at a price of $60.00. The rights are
exercisable for shares of common stock upon the earlier of the tenth business
day following (i) the public announcement that a person or group has acquired,
or has obtained the right to acquire, beneficial ownership of 20% or more of
the outstanding common stock, or (ii) the commencement of, or public
announcement of an intention to make, a tender offer or exchange offer if, upon
consummation, such person or group would be the beneficial owner of 20% or more
of the then outstanding common stock.

         Additionally, if any person or group becomes the beneficial owner of
more than 20% of the outstanding common stock, each right will entitle its
holder, other than such person or group, upon payment of the $60.00 exercise
price, to purchase common stock with a deemed market value of twice the
exercise price. The purchase rights for common stock will not be exercisable if
the 20% acquisition is made pursuant to a tender or exchange offer for all
outstanding common stock which a majority of certain directors of the Company
deem to be in the best interests of the Company and its stockholders. If there
is a merger with an acquirer of 20% or more of the Company's common stock and
the Company is not the surviving corporation, or more than 50% of the Company's
assets or earning power is transferred or sold, each right will entitle its
holder, other than the acquirer, to purchase, or in certain instances to
receive the cash value of, the acquiring company's common stock with a deemed
market value of twice the exercise price.

         All of the rights may be redeemed by the Board of Directors, and under
certain circumstances, with the approval of a majority of the continuing
directors (as defined in the plan), at a price of $.00625 per right until the
earlier of (i) ten business days after the public announcement that a person or
group has acquired beneficial ownership of 20% or more of the outstanding
common stock or (ii) the date the stockholder rights plan expires. The rights,
which are not entitled to dividends, expire on March 23, 1997.

         Since 1987, the Board of Directors has continuously adopted or renewed
plans under which the Company is authorized, but not required, to purchase
shares of its common stock on the open market. The current plan was adopted by
the Board on March 6, 1995, and authorizes the Company to purchase up to 5
million shares through March 31, 1996. The Company has purchased and retired an
equivalent of 12.4 million shares of its common stock for $156.2 million under
these plans.

Income Taxes

         At the beginning of 1992, the Company elected early adoption of the
provisions of Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." This Statement requires that the liability
method of accounting for income taxes be used rather than the deferred method
previously used. The Company elected not to restate prior years' consolidated
financial statements. The cumulative effect of this accounting change was to
decrease 1992 net earnings by $2.8 million or $.01 per share.



                                  TWENTY-NINE
<PAGE>   14
Albertson's, Inc.

         Deferred tax assets and liabilities consist of the following (in
thousands):


<TABLE>
<CAPTION>
                                                              FEBRUARY 2,    February 3,   January 28,
                                                                  1995           1994          1993
    --------------------------------------------------------------------------------------------------
    <S>                                                        <C>           <C>            <C>
    Deferred tax assets:
      Nondeductible accruals for:
         Self-insurance                                        $  66,884     $   54,811     $   49,446
         Lease accounting                                         20,689         21,626         20,335
         Vacations                                                18,386         17,129         14,332
         Postemployment benefits                                  10,447
         Litigation                                                9,508         11,968
         Property valuation                                        8,868          8,828          5,197
         Deferred compensation                                     6,504          5,742          5,007
         Pension costs                                             2,485          2,133          1,683
         Other                                                     6,294          5,955          5,652
      Income unearned for financial reporting purposes            31,298         11,846         11,739
      Costs capitalized for tax purposes                          11,499         10,803          5,808
                                                               ----------------------------------------
            Total deferred tax assets                            192,862        150,841        119,199
    Deferred tax liabilities:
      Accelerated depreciation for tax purposes                 (110,590)      (103,219)       (86,441)
      Pension costs expensed for tax purposes                    (18,040)       (13,312)       (10,000)
      Other                                                       (4,026)        (3,109)        (3,573)
                                                               ---------------------------------------
            Total deferred tax liabilities                      (132,656)      (119,640)      (100,014)
                                                               ---------------------------------------
    Net deferred tax assets                                    $  60,206     $   31,201     $   19,185
                                                               =======================================
</TABLE>

No valuation allowances were considered necessary in the calculation of
deferred tax assets.

Income tax expense on continuing operations consists of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                  1994           1993          1992
    -------------------------------------------------------------------------------------------------
    <S>                                                        <C>            <C>            <C>
    Current:
      Federal                                                  $239,937       $191,343       $133,872
      State                                                      40,508         33,580         26,052
                                                               --------------------------------------
                                                                280,445        224,923        159,924
    Deferred:
      Federal                                                   (16,218)       (10,222)         7,193
      State                                                      (2,738)        (1,794)         1,269
                                                               --------------------------------------
                                                                (18,956)       (12,016)         8,462
    Amortization of deferred investment tax credits                (208)          (373)          (740)
                                                               --------------------------------------
                                                               $261,281       $212,534       $167,646
                                                               ======================================
</TABLE>



                                     THIRTY

<PAGE>   15

Albertson's, Inc.

<TABLE>
<CAPTION>
                                                                  1994            1993          1992
    --------------------------------------------------------------------------------------------------
    <S>                                                         <C>            <C>             <C>
    Deferred taxes resulted from:
      Income unearned for financial reporting purposes         $(19,452)       $   (107)       $ 1,871                           
      Accelerated depreciation for tax purposes                   7,371          16,778          9,682
      Self-insurance                                            (12,073)         (5,365)        (2,179)
      Litigation                                                  2,460         (11,968)
      Costs capitalized for tax purposes                           (696)         (4,994)          (129)
      Property valuation                                            (40)         (3,631)          (152)
      Other                                                       3,474          (2,729)          (631)
                                                               ---------------------------------------
                                                               $(18,956)       $(12,016)       $ 8,462
                                                               =======================================  
                                                                                                      
</TABLE>

         Total tax expense for 1994 was $250,635,000 consisting of taxes on
continuing operations of $261,281,000 and tax benefits of $10,646,000 for the
cumulative effect of a change in accounting for postemployment benefits. Total
tax expense for 1992 was $167,992,000 consisting of taxes on continuing
operations of $167,646,000, tax expense of $2,765,000 for the cumulative effect
of a change in accounting for income taxes and tax benefits of $2,419,000
attributed to the cumulative effect of a change in accounting for
postretirement health care benefits.

         The reconciliations between the federal statutory tax rates and the
Company's effective tax rates are as follows (in thousands):


<TABLE>
<CAPTION>
                                               1994    PERCENT      1993    Percent     1992    Percent
    ---------------------------------------------------------------------------------------------------
    <S>                                       <C>        <C>      <C>         <C>     <C>         <C>
    Taxes computed at statutory rate          $237,528    35.0     $193,275    35.0    $150,865    34.0        
                                                                                                
    State income taxes net of federal
      income tax benefit                        24,530     3.6       20,612     3.8      16,364     3.7
                                                                                                       
    Amortization of deferred
      investment tax credits                      (208)                (373)   (0.1)       (740)   (0.2)
                                                                                                        
    Other                                         (569)   (0.1)        (980)   (0.2)      1,157     0.3
                                              ---------------------------------------------------------
                                              $261,281    38.5     $212,534    38.5    $167,646    37.8
                                              =========================================================
</TABLE>

Stock Options

         The Company issued stock under stock option plans adopted in 1986,
1982 and 1975. The 1986 plan authorized the granting of options with respect to
8,000,000 shares of the Company's common stock. The 1982 plan expired on
February 29, 1992, and the 1975 plan expired on April 6, 1985. Expiration of
the 1982 and 1975 plans did not affect the rights of optionees for any options
outstanding. There are no options remaining to be exercised under the 1975
plan.




                                   THIRTY-ONE

<PAGE>   16

Albertson's, Inc.

         The following is a summary of stock option activity and number of
shares reserved for outstanding options:

<TABLE>
<CAPTION>
                                                                         Option              Number
                                                                    Price Per Share        of Shares
    -------------------------------------------------------------------------------------------------
    <S>                                                            <C>         <C>          <C>
    Balance at January 30, 1992                                    $  .88  to  $22.63       4,232,400
    Granted                                                         24.31  to   24.31         344,000
    Exercised                                                         .88  to    6.25        (398,400)
    Forfeited                                                        2.95  to   16.88        (128,200)
                                                                   ----------------------------------
    Balance at January 28, 1993                                      1.88  to   24.31       4,049,800
    Granted                                                         25.13  to   25.13         479,000
    Exercised                                                        1.88  to    8.69        (327,947)
    Forfeited                                                        2.95  to   24.31        (145,200)
    Canceled                                                        24.31  to   24.31          (4,000)
                                                                   ----------------------------------
    Balance at February 3, 1994                                      1.88  to   25.13       4,051,653
    Granted                                                         28.63  to   28.63         141,000
    Exercised                                                        1.88  to   16.88        (593,700)
    Forfeited                                                        6.25  to   25.13        (131,000)
                                                                   ----------------------------------
    Balance at February 2, 1995                                    $ 2.92  to  $28.63       3,467,953
                                                                   ==================================
</TABLE>

         Options on 179,453 shares were exercisable at February 2, 1995. In
addition, there were 3,918,000 shares of common stock under the 1986 plan
reserved for the granting of additional options.

Employee Benefit Plans

         Substantially all employees working over 20 hours per week are covered
by retirement plans. Union employees participate in multi-employer retirement
plans under collective bargaining agreements. The Company sponsors two funded
plans, Albertson's Salaried Employees Pension Plan and Albertson's Employees
Corporate Pension Plan, which are defined benefit, noncontributory plans for
eligible employees who are 21 years of age with one or more years of service
and (with certain exceptions) are not covered by collective bargaining
agreements. Benefits paid to retirees are based upon age at retirement, years
of credited service and average compensation. The Company's funding policy for
these plans is to contribute amounts deductible for federal income tax
purposes.

         The Company also sponsors an unfunded Executive Pension Makeup Plan.
This plan is nonqualified and provides certain key employees defined pension
benefits which supplement those provided by the Company's other retirement
plans.

         Net periodic pension cost for the Company plans was as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                  1994           1993           1992
    -------------------------------------------------------------------------------------------------
    <S>                                                         <C>            <C>           <C>
    Service cost - benefits earned during the period            $ 19,523      $ 12,726       $ 10,983
    Interest cost on projected benefit obligations                15,097        12,687         10,805
    Actual return on assets                                         (145)      (27,696)       (15,596)
    Net amortization and deferral                                (19,860)       11,515          1,809
                                                                -------------------------------------
    Net periodic pension cost                                   $ 14,615      $  9,232       $  8,001
                                                                =====================================
</TABLE>




                                   THIRTY-TWO
<PAGE>   17
Albertson's, Inc.

         The following table sets forth the funded status of Albertson's
Salaried Employees Pension Plan and Albertson's Employees Corporate Pension
Plan and the amounts included in other assets in the Company's consolidated
balance sheets (in thousands):


<TABLE>
<CAPTION>
                                                               FEBRUARY 2,   February 3,   January 28,
                                                                  1995           1994         1993
    --------------------------------------------------------------------------------------------------
    <S>                                                         <C>            <C>            <C>
    Plan assets at fair value                                   $240,534       $218,284       $177,825
    Actuarial present value of:
      Vested benefits                                            138,322        155,087        101,858
      Nonvested benefits                                          13,460         15,797          7,581
                                                                --------------------------------------
      Accumulated benefit obligation                             151,782        170,884        109,439
      Effect of projected future salary increases                 27,529         38,508         32,308
                                                                --------------------------------------
      Projected benefit obligation                               179,311        209,392        141,747
                                                                --------------------------------------
    Plan assets in excess of projected benefit obligation         61,223          8,892         36,078
    Unrecognized net (gain) loss                                 (19,535)        19,713        (15,975)
    Unrecognized prior service cost                                6,274          7,123          7,972
    Unrecognized net transition assets                              (983)        (1,171)        (1,358)
                                                                --------------------------------------
    Prepaid pension cost                                        $ 46,979       $ 34,557       $ 26,717
                                                                ======================================
</TABLE>

         Assets of the two funded Company plans are invested in directed
trusts. Assets in the directed trusts are invested in common stocks (including
$33,071,000, $28,937,000 and $26,802,000 of the Company's common stock at
February 2, 1995, February 3, 1994 and January 28, 1993, respectively), U.S.
Government obligations, corporate bonds, international equity funds, real
estate and money market funds.

         The following table sets forth the status of the unfunded Executive
Pension Makeup Plan and the amounts included in other long-term liabilities in
the Company's consolidated balance sheets (in thousands):

<TABLE>
<CAPTION>
                                                              FEBRUARY 2,    February 3,     January 28,
                                                                  1995          1994            1993
    ----------------------------------------------------------------------------------------------------
    <S>                                                         <C>            <C>            <C>
    Actuarial present value of:
      Vested benefits                                           $ 6,734        $ 6,493           $ 5,490
      Nonvested benefits                                             23              9                 1
                                                                ----------------------------------------
      Accumulated benefit obligation                              6,757          6,502             5,491
      Effect of projected future salary increases                 1,408          1,861             2,564
                                                                ----------------------------------------
      Projected benefit obligation                                8,165          8,363             8,055
                                                                ----------------------------------------
    Actuarial present value of projected benefit
      obligations in excess of plan assets                       (8,165)        (8,363)           (8,055)
    Unrecognized net (gain) loss                                   (870)            (7)              458
    Unrecognized prior service cost                               1,041          1,136             1,231
    Unrecognized net transition liability                         1,507          1,688             1,869
    Additional minimum liability                                   (271)          (956)             (994)
                                                                ----------------------------------------
    Accrued pension cost                                        $(6,758)       $(6,502)          $(5,491)
                                                                ========================================
                                                                                                      
</TABLE>



                                  THIRTY-THREE
<PAGE>   18
Albertson's, Inc.

         Net periodic pension cost is determined using assumptions as of the
beginning of each year. The projected benefit obligation and related funded
status is determined using assumptions as of the end of each year.

         Assumptions used at the end of each year for all Company-sponsored
plans were as follows:

<TABLE>
<CAPTION>
                                                                  1994            1993           1992
    ---------------------------------------------------------------------------------------------------
    <S>                                                           <C>             <C>             <C>
    Weighted-average discount rate                                8.5%            7.0%            8.0%
    Annual salary increases                                       4.5%            4.5%            4.5%
    Expected long-term rate of return on assets                   9.0%            9.0%            9.0%
</TABLE>

         The Company also contributes to various plans under industrywide
collective bargaining agreements which provide for pension benefits.  Total
contributions to these plans were $17,354,000 for 1994, $16,025,000 for 1993
and $19,295,000 for 1992.

         The Company sponsors a tax deferred savings plan which is a salary
deferral plan pursuant to Section 401(k) of the Internal Revenue Code.
Employees eligible to participate are those who are at least 21 years of age
with one or more years of service and (with certain exceptions) are not covered
by collective bargaining agreements. All contributions are made by the
employees and the Company incurs no material costs in connection with this
plan.

         At the beginning of 1994, the Company adopted the provisions of SFAS
No. 112, "Employers' Accounting for Postemployment Benefits." This statement
requires employers to recognize an obligation for benefits provided to former
or inactive employees after employment but before retirement. The Company is
self-insured for its employees' short-term and long-term disability plans which
are the primary benefits paid to inactive employees prior to retirement. In
prior years, expenses for disability benefits were charged to earnings under
the pay-as-you-go method. The total cumulative effect of this accounting change
(net of $10.6 million in tax benefits) was to decrease net earnings by $17.0
million or $.07 per share. The impact of this change on current year operations
was not material. As of February 2, 1995, $25.8 million of the obligation for
postemployment benefits is included with other long-term liabilities and $3.0
million is included with current salaries and related liabilities in the
Company's consolidated balance sheets.

         Most retired employees of the Company are eligible to remain in its
health and life insurance plans. Retirees who elect to remain in the
Company-sponsored plans are charged a premium which is equal to the difference
between the estimated costs of the benefits for the retiree group and a fixed
contribution amount made by the Company.

         At the beginning of 1992, the Company elected early adoption of the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions." In prior years, the Company charged expenses relating to
postretirement benefits to earnings under the pay-as-you-go method. The Company
elected immediate recognition of a transition obligation equal to the
accumulated and vested postretirement benefit obligations to existing retirees
and active employees as of the date of adoption. The cumulative effect of this
accounting change (net of $2.4 million in tax benefits) was to decrease 1992
net earnings by $4.1 million or $.01 per share.

         Net periodic postretirement benefit cost was as follows (in thousands):

<TABLE>
<CAPTION>
                                                                 1994           1993            1992
    --------------------------------------------------------------------------------------------------
    <S>                                                        <C>             <C>             <C>
    Service cost                                               $  812          $  574           $  528
    Interest cost                                                 669             605              549
                                                               ---------------------------------------
    Net periodic postretirement benefit cost                   $1,481          $1,179           $1,077
                                                               =======================================
</TABLE>




                                  THIRTY-FOUR

<PAGE>   19
Albertson's, Inc.

         The following table sets forth the actuarial present value of the
accumulated postretirement benefit obligation (APBO) and related liabilities
included in other long-term liabilities in the Company's consolidated balance
sheets (in thousands):

<TABLE>
<CAPTION>
                                                              FEBRUARY 2,    February 3,     January 28,
                                                                 1995           1994            1993
    ----------------------------------------------------------------------------------------------------
    <S>                                                         <C>            <C>              <C>
    Existing retired employees                                   $1,706        $1,613           $1,355
    Active employees fully eligible                               1,871         1,800            1,526
    Other active employees                                        4,639         5,645            4,354
                                                                 -------------------------------------
    Accumulated postretirement benefit obligation                 8,216         9,058            7,235
    Unrecognized net gain (loss) and effects
      of changes in assumptions                                   1,402          (963)
                                                                 -------------------------------------
    Accrued postretirement benefit liabilities                   $9,618        $8,095           $7,235
                                                                 =====================================
    Assumed discount rate                                           8.5%          7.0%             8.0%
</TABLE>

         Annual rates of increases in health care costs are not applicable in
the calculation of the APBO because the Company's contribution is a fixed
amount.

         The Company also contributes to various plans under industrywide
collective bargaining agreements which provide for health care benefits to both
active employees and retirees. Total contributions to these plans were
$106,439,000 for 1994, $90,613,000 for 1993 and $83,754,000 for 1992.

         The Company has bonus plans for store management personnel and other
key management personnel. Amounts charged to earnings under all bonus plans
were $58,406,000 for 1994, $53,907,000 for 1993 and $52,301,000 for 1992.

Leases

         The Company leases a portion of its real estate. The typical lease
period is 25 to 30 years and most leases contain renewal options.  Exercise of
such options is dependent on the level of business conducted at the location.
In addition, the Company leases certain equipment.  Some leases contain
contingent rental provisions based on sales volume at retail stores or miles
traveled for trucks.

         Capitalized leases are calculated using interest rates appropriate at
the inception of each lease. Contingent rents associated with capitalized
leases were $2,141,000 in 1994, $2,716,000 in 1993 and $2,428,000 in 1992.
Following is an analysis of the Company's capitalized leases (in thousands):

<TABLE>
<CAPTION>
                                                              FEBRUARY 2,   February 3,   January 28,
                                                                  1995          1994         1993
    -------------------------------------------------------------------------------------------------
    <S>                                                        <C>            <C>            <C>
    Real estate                                                $179,893       $154,157       $145,548
    Equipment                                                       133          1,641          1,768
                                                               --------------------------------------
                                                               $180,026       $155,798       $147,316
                                                               --------------------------------------
    Accumulated amortization                                   $ 78,183       $ 73,074       $ 72,176
                                                               ======================================
</TABLE>



                                  THIRTY-FIVE
<PAGE>   20
Albertson's, Inc.

         Future minimum lease payments for capitalized lease obligations at
February 2, 1995 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                              Real Estate     Equipment       Total
    --------------------------------------------------------------------------------------------------
    <S>                                                        <C>              <C>           <C>
    1995                                                       $  21,363        $ 36         $  21,399
    1996                                                          21,100          36            21,136
    1997                                                          21,202          36            21,238
    1998                                                          20,727          12            20,739
    1999                                                          20,025                        20,025
    Remainder                                                    179,698                       179,698
                                                               ---------------------------------------
    Total minimum obligations                                    284,115         120           284,235
    Less interest                                               (147,728)        (30)         (147,758)
                                                               ---------------------------------------
    Present value of net minimum obligations                     136,387          90           136,477
    Less current portion                                          (6,883)        (21)           (6,904)
                                                               ---------------------------------------
    Long-term obligations at February 2, 1995                  $ 129,504        $ 69         $ 129,573
                                                               =======================================
</TABLE>

         Minimum obligations have not been reduced by minimum capitalized
sublease rentals of $4,746,000 receivable in the future under noncancelable
capitalized subleases.

         Rent expense under operating leases was as follows (in thousands):

<TABLE>
<CAPTION>
                                                                  1994           1993           1992
    --------------------------------------------------------------------------------------------------
    <S>                                                         <C>            <C>            <C>
    Minimum rent                                                $ 65,566       $ 66,506       $ 66,130
    Contingent rent                                                4,634          4,641          5,003
                                                                --------------------------------------
                                                                  70,200         71,147         71,133
    Less sublease rent                                           (19,055)       (17,232)       (16,511)
                                                                --------------------------------------
                                                                $ 51,145       $ 53,915       $ 54,622
                                                                ======================================
</TABLE>

         Future minimum lease payments for all noncancelable operating leases
and related subleases having a remaining term in excess of one year at February
2, 1995 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                             Real Estate    Subleases
     -------------------------------------------------------------------------------------------------
    <S>                                                                       <C>            <C>
    1995                                                                      $ 64,244       $(11,560)
    1996                                                                        65,954        (11,422)
    1997                                                                        66,504        (10,675)
    1998                                                                        68,779        (10,005)
    1999                                                                        69,632         (7,459)
    Remainder                                                                  629,544        (26,220)
                                                                              -----------------------
    Total minimum obligations (receivables)                                   $964,657       $(77,341)
                                                                              =======================
</TABLE>                                                                       

         The present value of minimum rent payments under operating leases
using an assumed interest rate of 9.5% was approximately $465 million at
February 2, 1995.


                                   THIRTY-SIX
<PAGE>   21
Albertson's, Inc.


Financial Instruments

         Financial instruments with off-balance-sheet risk to the Company
include lease guarantees whereby the Company is contingently liable as a
guarantor of certain leases that were assigned to third parties in connection
with various store closures and outstanding letters of credit primarily
associated with the Company's self-insurance programs. Minimum rentals
guaranteed under assigned leases are $5.2 million in 1995 and aggregate $60.9
million for the remaining lease terms, which expire at various dates through
2020. The Company believes the likelihood of a significant loss from these
agreements is remote because of the wide dispersion among third parties and
remedies available to the Company should the primary party fail to perform
under the agreements. As of February 2, 1995, the Company had letters of credit
outstanding of $45.4 million.

         Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of cash equivalents and trade
receivables. The Company limits the amount of credit exposure to any one
financial institution and places its temporary cash into investments of high
credit quality. Concentrations of credit risk with respect to trade receivables
are limited due to the dispersion of the Company's operations across different
industries and geographies.

         The estimated fair value of cash and cash equivalents, short-term debt
and commercial paper borrowings approximates their carrying amount. The
estimated fair value and carrying amount of all long-term debt borrowings were
as follows (in millions):

<TABLE>
<CAPTION>
                                                              FEBRUARY 2,    February 3,   January 28,
                                                                1995           1994          1993
    --------------------------------------------------------------------------------------------------
    <S>                                                         <C>            <C>           <C>
    Fair value                                                  $572.7         $645.3        $441.5
    Carrying amount                                              583.9          630.8         430.2
</TABLE>

These fair values were estimated using discounted cash flow analyses, based on
the Company's current incremental borrowing rates for similar types of
borrowing arrangements, when quoted market values were not available. The
Company has not determined the fair value of lease guarantees due to the
inherent difficulty in evaluating the credit worthiness of each tenant.

Legal Proceedings

         The Company is involved in routine litigation incidental to
operations. In the opinion of management, the ultimate resolution of these
legal proceedings will not have a material adverse effect on the Company's
financial condition or results of operations.




                                  THIRTY-SEVEN
<PAGE>   22
Albertson's, Inc.

RESPONSIBILITY FOR FINANCIAL REPORTING

         The management of Albertson's, Inc. is responsible for the preparation
and integrity of the consolidated financial statements of the Company. The
accompanying consolidated financial statements have been prepared by the
management of the Company, in accordance with generally accepted accounting
principles, using management's best estimates and judgment where necessary.
Financial information appearing throughout this Annual Report is consistent
with that in the consolidated financial statements.

         To help fulfill its responsibility, management maintains a system of
internal controls designed to provide reasonable assurance that assets are
safeguarded against loss or unauthorized use and that transactions are executed
in accordance with management's authorizations and are reflected accurately in
the Company's records. The concept of reasonable assurance is based on the
recognition that the cost of maintaining a system of internal accounting
controls should not exceed benefits expected to be derived from the system. The
Company believes that its long-standing emphasis on the highest standards of
conduct and ethics, set forth in comprehensive written policies, serves to
reinforce its system of internal controls.

         Deloitte & Touche LLP, independent auditors, audited the consolidated
financial statements in accordance with generally accepted auditing standards
to independently assess the fair presentation of the Company's financial
position, results of operations and cash flows.

         The Audit Committee of the Board of Directors, comprised entirely of
outside directors, oversees the fulfillment by management of its
responsibilities over financial controls and the preparation of financial
statements. The Committee meets with internal and external auditors at least
three times per year to review audit plans and audit results. This provides
internal and external auditors direct access to the Board of Directors.

         Management recognizes its responsibility to conduct the business of
Albertson's, Inc. in accordance with high ethical standards. This
responsibility is reflected in key policy statements that, among other things,
address potentially conflicting outside business interests of Company
employees and specify proper conduct of business activities. Ongoing
communications and review programs are designed to help ensure compliance with
these policies.

    Gary G. Michael                       A. Craig Olson
    Chairman of the Board and             Senior Vice President, Finance and
    Chief Executive Officer               Chief Financial Officer



                                  THIRTY-EIGHT
<PAGE>   23
Albertson's, Inc.

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders of Albertson's, Inc.:

         We have audited the accompanying consolidated balance sheets of
Albertson's, Inc. and subsidiaries as of February 2, 1995, February 3, 1994 and
January 28, 1993, and the related consolidated statements of earnings,
stockholders' equity and cash flows for the years then ended.  These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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, such consolidated financial statements present fairly,
in all material respects, the financial position of Albertson's, Inc. and
subsidiaries at February 2, 1995, February 3, 1994 and January 28, 1993, and
the results of their operations and their cash flows for the years then ended
in conformity with generally accepted accounting principles.

         As discussed in the Notes to Consolidated Financial Statements, in
fiscal year 1994 the Company changed its method of accounting for
postemployment benefits to conform with Statement of Financial Accounting
Standards No. 112.




Deloitte & Touche LLP

Boise, Idaho
March 22, 1995





                                  THIRTY-NINE
<PAGE>   24
Albertson's, Inc.

FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>

                                       52 WEEKS         53 Weeks       52 Weeks       52 Weeks         52 Weeks
(Dollars in thousands except          FEBRUARY 2,     February 3,     January 28,    January 30,      January 31,
   per share data)                      1995             1994            1993           1992             1991
- -----------------------------------------------------------------------------------------------------------------
<S>                                  <C>              <C>             <C>            <C>               <C>  
OPERATING RESULTS:                                                                                    
   Sales                             $11,894,621      $11,283,678     $10,173,676    $8,680,467        $8,218,562
   Gross profit                        3,011,356        2,791,154       2,452,852     2,081,517         1,924,681
   Interest expense:
      Debt                                38,806           27,945          22,245         5,863             9,351
      Capitalized lease obligations       13,412           12,233          11,560        12,278            11,786
   Earnings before income taxes and
      cumulative effects of
      accounting changes                 678,652          552,215         443,721       406,394           366,009
   Income taxes                          261,281          212,534         167,646       148,600           132,235
   Earnings before cumulative 
      effects of accounting changes      417,371          339,681         276,075       257,794           233,774
   Cumulative effects of
      accounting changes                 (17,006)                          (6,858)
   Net earnings                          400,365          339,681         269,217       257,794           233,774
   Net earnings as a percent 
     to sales                               3.37%            3.01%           2.65%         2.97%             2.84%
                                     ----------------------------------------------------------------------------
COMMON STOCK DATA:
   Earnings per share before 
      cumulative effects of 
      accounting changes                   $1.65            $1.34           $1.04         $ .97             $ .87
   Cumulative effects of
      accounting changes                    (.07)                            (.02)
   Earnings per share                       1.58             1.34            1.02           .97               .87
   Cash dividends per share                  .44              .36             .32           .28               .24
   Book value per share                     6.65             5.48            5.25          4.54              4.06
                                     ----------------------------------------------------------------------------
FINANCIAL POSITION:
   Total assets                      $ 3,621,729      $ 3,294,895     $ 2,945,573    $2,216,247        $2,013,510
   Working capital                        94,150          132,169         200,483        99,039            91,824
   Long-term debt                        382,775          554,092         404,476        52,510            56,056
   Capitalized lease obligations         129,573          110,919         103,764        99,159           103,039
   Stockholders' equity                1,687,893        1,389,379       1,388,428     1,199,452         1,087,882
                                     ----------------------------------------------------------------------------
OTHER YEAR END STATISTICS:
   Number of stores                          720              676             656           562               531
   Number of employees:
      Total                               76,000           75,000          71,000        60,000            58,000
      Full-time equivalents               60,000           58,000          54,000        45,000            44,000
</TABLE>

o  Refer to the "Nonrecurring Charge" and "Indebtedness" notes in Notes to
   Consolidated Financial Statements regarding the 1993 charge to cover the
   settlement of a lawsuit and the reduction of interest expense due to the
   successful resolution of a tax issue for which interest expense had
   previously been accrued.

o  Refer to the "Acquisition" note in Notes to Consolidated Financial
   Statements regarding the 1992 acquisition from American Stores Company.

o  Refer to the "Income Taxes" and "Employee Benefit Plans" notes in Notes to
   Consolidated Financial Statements regarding the 1994 and 1992 adoption of
   new accounting standards.

o  Common stock data has been adjusted for the two-for-one stock split
   distributed October 4, 1993.



                                     FORTY


<PAGE>   25
Albertson's, Inc.

QUARTERLY FINANCIAL DATA

<TABLE>
<CAPTION>
(Dollars in thousands
except per share data - Unaudited)     First         Second         Third          Fourth        Year
- ----------------------------------------------------------------------------------------------------------
<S>                                 <C>            <C>            <C>            <C>           <C>
1994
Sales                               $2,909,808     $2,987,680     $2,928,012     $3,069,121    $11,894,621
Gross profit                           722,755        750,912        740,410        797,279      3,011,356
Earnings before cumulative effect
   of accounting change                 85,157         93,677         94,326        144,211        417,371
Net earnings                            68,151         93,677         94,326        144,211        400,365
Earnings per share before
   cumulative effect of
   accounting change                       .34            .37            .37            .57           1.65
Earnings per share                         .27            .37            .37            .57           1.58
                                    ----------------------------------------------------------------------
1993
Sales                               $2,719,633     $2,768,242     $2,733,773     $3,062,030    $11,283,678
Gross profit                           661,487        672,577        668,057        789,033      2,791,154
Net earnings                            74,137         75,870         62,712        126,962        339,681
Earnings per share                         .29            .30            .25            .50           1.34
                                    ----------------------------------------------------------------------
</TABLE>

  The Company estimates the quarterly LIFO reserves which cannot be accurately
determined until year end. The LIFO method of valuing inventories increased
(decreased) net earnings and earnings per share as follows (in thousands except
per share data):

<TABLE>
<CAPTION>
                                          First         Second          Third         Fourth          Year
- -----------------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>            <C>            <C>            <C>
1994
Net earnings                             $(7,380)       $(5,966)       $(1,660)       $9,381        $(5,625)
Earnings per share                          (.03)          (.02)          (.01)          .04           (.02)
                                         ------------------------------------------------------------------

1993
Net earnings                             $(6,978)       $(6,479)                      $9,495        $(3,962)
Earnings per share                          (.03)          (.03)                         .04           (.02)
                                         ------------------------------------------------------------------
</TABLE>


o   In 1994, the Company adopted the provisions of Statement of Financial
    Accounting Standards No. 112, "Employers' Accounting for Postemployment
    Benefits." The Company's first quarter net income has been restated to 
    reflect a correction of the cumulative effect of the adoption of this 
    statement. The cumulative effect amounted to $17.0 million, or $.07 per 
    share, compared to $6.4 million, or $.03 per share, as previously reported. 
    Refer to the "Employee Benefit Plans" note in Notes to Consolidated 
    Financial Statements.

o   The fourth quarter of 1993 was a 14-week quarter.

o   Net earnings and earnings per share for the third quarter of 1993 were 
    reduced by $12.4 million or $.05 per share for a nonrecurring charge to 
    cover the settlement of a lawsuit and for reduced interest expense for the 
    successful resolution of a tax issue for which interest expense had 
    previously been accrued. Refer to the "Nonrecurring Charge" and 
    "Indebtedness" notes in Notes to Consolidated Financial Statements.

o   Earnings per share have been adjusted to reflect the two-for-one stock split
    distributed October 4, 1993.





                                   FORTY-ONE
<PAGE>   26
ALBERTSON'S, INC.

STOCKHOLDERS' INFORMATION

GENERAL INFORMATION

ADDRESS

ALBERTSON'S, INC.
General Offices
250 Parkcenter Boulevard
P.O. Box 20
Boise, Idaho 83726
Telephone: (208) 385-6200

AUDITORS

Deloitte & Touche LLP
Boise, Idaho

STOCK TRANSFER AGENT AND REGISTRAR

Chemical Trust Company of California (Chemical Trust)
Securityholder Relations Department
50 California Street, 10th Floor
San Francisco, California 94111

CO-TRANSFER AGENT AND REGISTRAR

West One Bank, Idaho
Boise, Idaho

STOCKHOLDERS OF RECORD

There were 17,000 stockholders of record at March 31, 1995.

ANNUAL MEETING

The 1995 Annual Meeting of Stockholders will be held at 10:00 a.m., Mountain
Daylight Time on Friday, May 26, 1995 in the Byries Room, Boise Centre on the
Grove, 850 Front Street, Boise, Idaho.

DIVIDEND INVESTMENT PLAN

The Company's Dividend Investment Plan allows stockholders owning at least 15
shares of record to automatically invest the quarterly dividends or to purchase
additional shares under the Plan with voluntary cash payments. More information
may be obtained from Chemical Trust (800) 982-7649 or from the Corporate
Secretary of Albertson's, Inc.

INFORMATION CONTACT

Information on individual accounts or on procedures necessary to make changes
in an account is provided by Chemical Trust at (800) 356-2017 between the hours
of 8:30 a.m. and 8:30 p.m., Eastern Time, after a stockholder identifies his or
her account by providing a taxpayer identification number, the registration
name on the securities and the address of record.

         When directing correspondence to Chemical Trust at the address shown,
stockholders are reminded to include a reference to Albertson's, Inc.

COMPANY PROFILE AVAILABLE

A copy of the Company Profile, which contains a discussion of our core values,
including equal opportunity, environmental quality and community support, as
well as statistical information about the Company, is available to
stockholders, without charge, upon request to the Corporate Secretary of
Albertson's, Inc.

FORM 10-K AVAILABLE

A copy of Form 10-K Annual Report filed with the Securities and Exchange
Commission for Albertson's Inc. fiscal year ended February 2, 1995 is available
to stockholders, without charge, upon request to the Corporate Secretary of
Albertson's, Inc.

COMPANY STOCK INFORMATION

The Company's stock is traded on the New York and Pacific Stock Exchanges under
the symbol ABS. An analysis of high and low stock prices by quarter is as
follows:

<TABLE>
<CAPTION>
                First                  Second             Third                Fourth                Year
- ---------------------------------------------------------------------------------------------------------------
          High          Low       High       Low       High      Low       High       Low      High      Low
<S>      <C>           <C>       <C>        <C>      <C>        <C>       <C>        <C>       <C>       <C>
1994      30-7/8       25-1/8    28-3/4     25-3/4   30-1/4     26-1/8    30-5/8     27-5/8    30-7/8    25-1/8
1993      29           23-3/8    29-3/4     25-1/4   29-1/4     24-1/8    28         23-3/8    29-3/4    23-3/8
1992      22-1/2       19-5/8    21-3/4     18-1/2   23-3/4     19-5/8    26-3/4     22-1/8    26-3/4    18-1/2
</TABLE>

Cash dividends per share were:

<TABLE>
<CAPTION>
                 First                 Second             Third                Fourth                 Year
<S>              <C>                    <C>               <C>                   <C>                   <C>
1994             $.11                   $.11              $.11                  $.11                  $.44
1993              .09                    .09               .09                   .09                   .36
1992              .08                    .08               .08                   .08                   .32
</TABLE>

- -  Stock prices and dividend information have been adjusted to reflect the
   two-for-one stock split distributed October 4, 1993.

- -  In March 1995, the Board of Directors increased dividends to an annual rate
   of $.52 per share, an increase of 18.2% over 1994. The new quarterly rate of
   $.13 per share will be paid on May 25, 1995 to stockholders of record on May
   5, 1995.

