A Year of
Transformation
2020 Annual Report
2,277
retail stores
400
fuel stations
$70 billion
FY 2020 sales
One of the largest
retail employers,
providing
300,000 jobs
Home delivery
reaching 90%+
of our customer
base
1,420
Drive Up and Go
locations
25+ million
loyalty members
1,727
in-store
pharmacies
22
distribution
centers
20
manufacturing
plants
Thank you to our
300,000 amazing
associates for
their unwavering
commitment to
take care of our
customers, our
communities and
each other during
every twist and turn
of the pandemic
over the last year.
2020 ANNUAL REPORT
PAGE 1
Locally
great.
Nationally
strong.
We operate in 34 states
and the District of Columbia
Albertsons Companies is a leading
food and drug retailer in the United
States, with both a strong local
presence and national scale.
Albertsons Companies is committed
to helping people across the
country live better lives by making a
meaningful difference, neighborhood
by neighborhood.
0.00
8711.25
17422.50
26133.75
34845.00
43556.25
52267.50
60978.75
69690.00
2018
2019
2020
2018
2019
2020
Financial Highlights
TOTAL SALES (dollars in millions)
IDENTICAL (ID) SALES
2018
2019
2020
$60,535
$62,455
$69,690
2018
2019
2020
1.0%
2.1%
ADJUSTED EBITDA (dollars in millions)
ADJUSTED EPS
2018
2019
2020
$2,741
$2,834
$0.74
$1.04
2018
2019
2020
$4,524
2018
2019
2020
2018
2019
2020
16.9%
$3.24
-2.000
2.725
7.450
12.175
16.900
0.0
565.5
1131.0
1696.5
2262.0
2827.5
3393.0
3958.5
4524.0
-0.40
0.12
0.64
1.16
1.68
2.20
2.72
3.24
Adjusted EBITDA and Adjusted Net Income Per Class A Common Share (Adjusted EPS) are Non-GAAP financial measures. For definitions, the reconciliation of the
Non-GAAP financial measure to the most comparable GAAP financial measure and other related disclosure, see “Part II Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended February 27, 2021.
PAGE 2
TRANSFORMATION
A Year of
Transformation
To Our Shareholders,
Fiscal 2020 was a year like no other, and I am thankful for our associates’ unwavering commitment to take
care of our customers, our communities and each other throughout the COVID-19 pandemic. They stepped
up when our communities closed down and made sure that our neighbors had food and continued access
to our pharmacies. Our hearts go out to all of those directly impacted by the virus. Last year was also a period
of social unrest underpinned by racial tension. I am proud of our teams for taking a stand on the values we
hold dear as a company. It is important to us that we push for progress by promoting inclusiveness.
At the same time, fiscal 2020 was a year of transformation at Albertsons Companies that will better position
the company for growth. We deepened our customer relationships, enhanced our digital capabilities, made
significant progress towards achieving our productivity targets, and strengthened a culture focused on being
locally great and nationally strong.
It was also a year of strong performance. Our full year results reached record levels with ID sales up 16.9%, total
sales of $70 billion, Adjusted EBITDA of over $4.5 billion, and Adjusted EPS of $3.24. Our digital sales grew 258%
during the year, as our improved capabilities enabled us to meet growing customer demand.
Consistent execution against our four strategic priorities drove our results: 1) accelerating growth through
in-store, digital, and omni-channel initiatives, 2) driving productivity, 3) modernizing our technology, and
4) strengthening our talent and culture.
Accelerating Growth
In-Store Excellence
Our associates stepped up to provide our customers a safe and friendly one-stop shopping experience,
supported by our abundant fresh and Own Brands assortment. As customers were eating more at home,
we were able to meet increasing demand with the quality and breadth of our fresh offering. We also added
1,200 new items to our Own Brands portfolio to meet our customers’ needs, offering a range of products from
attractive opening price points to truly unique, high-quality items. Even in the face of COVID-19 restrictions, we
completed 409 store remodels designed to enhance the shopping experience and opened nine new stores.
Digital and Omni-channel Capabilities
As some of our customers changed the way they shopped in response to the pandemic, Albertsons Companies
quickly adapted to the increasing preference for digital engagement. Our enhanced loyalty program was a
strong driver of growth, allowing us to provide personalized offers and drive repeat shopping occasions. Mem-
bership in our Just for U® loyalty program grew more than 20% year-over-year, reaching 25.4 million members.
2020 ANNUAL REPORT
PAGE 3
Digital sales were also a key growth driver for us. During
the year, we invested over $300 million to accelerate
our offerings and launch new capabilities in this area.
As a result of this investment and the hard work of our
customer and digital team, we enhanced our digital
interfaces for online ordering, improved on-time tilling
to 95%, with home delivery reaching 90% of our cus-
tomer base, and we expanded to 1,420 Drive Up and
Go locations.
Driving Productivity
Our teams also delivered on our productivity initiatives
to allow us to reinvest in the business, help offset infla-
tion, and drive earnings growth. During the year, we
achieved approximately $500 million in gross produc-
tivity savings in areas such as indirect spend, labor
productivity, and shrink reduction. Productivity is a
continuous process, and over the course of the year
we identified new opportunities that allowed us to
raise our three-year target by 50% to $1.5 billion by
the end of fiscal 2022. The additional productivity is
from existing and new projects in supply chain and
cost of goods.
Modernizing Technology
Technology underpins everything we do. Building on
our common technology platform, we elevated our
omni-channel customer experience with the launch
of a unified mobile application, digital wallet, AI chat
capability, and expanded self-checkout installations.
We improved productivity with machine learning and
automation in demand forecasting and replenishment,
promotion optimization, eCommerce operations and
the application of robotics across our company. We
have continued to aggressively invest to modernize
our technology infrastructure, moving to the public
cloud and enhancing our data science capabilities.
This is increasingly positioning us as a more agile and
innovative company ready to respond to business
opportunities with differentiated capabilities.
Strengthening Talent and Culture
As I mentioned, our accomplishments would not have
been possible without the support and dedication of
what I consider the best team in the business. We have
added talent to Albertsons Companies throughout
the year, especially to our digital, loyalty, data and
technical teams which drove our rapid advancements
in these areas. We are committed to equality and
are driven by our guiding principle to be a diverse
and inclusive team, and we are proud that we have
increased our diverse representation at all levels of
the company.
We also continued to take steps to ensure we are con-
tributing positively to our communities. During fiscal
2020, we made $260 million in food and charitable
donations. This included approximately $95 million
contributed through our Albertsons Foundation
Nourishing Neighbors Program, reaching 13 million
individuals and over 3,000 organizations. In addition,
our pharmacy teams supported the national COVID-19
vaccination effort, administering over 5 million doses
in partnership with the Department of Health and
Human Services and local authorities.
We are elevating our ESG agenda and completed a
new materiality assessment, which will be the foun-
dation for our strategy and initiatives going forward.
In doing so, we have identified high-priority areas
most critical and relevant to our customers, inves-
tors, suppliers, and internal stakeholders. We also
recently announced our commitment to setting a
science-based target to reduce carbon emissions
and are currently developing in-depth plans and look
forward to sharing them in the near future.
Final Thoughts
Faced with a once-in-a-lifetime global health crisis,
Albertsons Companies rose to the challenge, adapted
to market dynamics, accelerated our transformation
and met the needs of our customers, communities
and associates. We are more digitally focused both
in-store and online and are elevating the experience
that our customers expect, while also driving greater
productivity and delivering profitable growth for all
stakeholders. As we enter fiscal year 2021, we are
emerging from the crisis as a stronger company and
better positioned than ever for the future.
I would like to close by thanking all 300,000 associates
for their outstanding commitment to our customers,
communities, and each other throughout the year, and
for their continued dedication to our company.
Yours truly,
Vivek Sankaran
President & CEO
Albertsons Companies, Inc.
June 7, 2021
PAGE 4
TRANSFORMATION
Best at Fresh: Leveraging what we do well
• Exceptional quality starts with best-in-class fresh produce
specifications and standards with local differentiation
• Full-service meat and seafood counters, providing expert service
by our trusted butchers
• Nation leading In-store fresh cut produce — convenient and
seasonally relevant
Own Brands
Albertsons®
Companies
Own Brands: Be the reason customers choose
to shop with us in-store or online
• Winning with a high-quality portfolio with over 12,000 SKUs
spanning 500+ categories
• Ongoing innovation with 1,200 new products in FY2020
• Providing great value to customers and generating ~1,000 bps
of incremental margin vs CPG Brands
Omni-channel: Providing what the customer
wants, when and how they want it
• Drive Up and Go grew over 800% in FY2020 with DUG now available
in 1,420 stores
•
Increased delivery via third-party delivery with third-party logistics
providers, to improve speed and lower costs
• Enhanced efficiency with improved picking software driving increased
picks per hour and through Micro Fulfillment Center installations
I
N
CLU S I
N
O
O
W
NE R S
H IP
N
C
O
MPA S S I O
L
E
AR N I
G
N
C
O
MPE T I
N
T I O
T
E
AM W O R K
Culture: It is simply who we are when no one
is watching
• Our six principles drive how we develop our team, deepen our
relationships, and drive associate satisfaction
• These principles were the foundation for our first Associate
Experience Survey in 2020 and drove development of our
engagement, mentoring, and talent development programs
• Formalizing these principles reinforces that they truly guide
every business decision and every connection we make
A Year of
Transformation
2020 Form 10-K
page intentionally left blank
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 27, 2021
OR
For the transition period from _____ to _____
Commission File Number: 001-39350
Albertsons Companies, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
47-4376911
(I.R.S. Employer Identification No.)
250 Parkcenter Blvd.
Boise, Idaho, 83706
(Address of principal executive offices and zip code)
(208) 395-6200
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered under Section 12(b) of the Exchange Act:
Title of each class
Class A common stock, $0.01 par value
Trading Symbol(s)
ACI
Name of each exchange on which registered
New York Stock Exchange
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company,"
and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☐
☒
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of September 11, 2020, the last business day of the registrant's most recently completed second fiscal quarter, the aggregate market value
of the registrant's common stock held by non-affiliates was approximately $1.4 billion.
As of April 27, 2021, the registrant had 466,514,113 shares of Class A common stock, par value $0.01 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12, 13 and 14 of Part III incorporate information by reference from the registrant's definitive proxy statement related to its 2021
Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year
ended February 27, 2021 (the "Proxy Statement"). Except as expressly incorporated by reference, the Proxy Statement shall not be deemed to
be part of this Annual Report on Form 10-K.
Albertsons Companies, Inc. and Subsidiaries
PART I
Item 1 - Business
Item 1A - Risk Factors
Item 1B - Unresolved Staff Comments
Item 2 - Properties
Item 3 - Legal Proceedings
Item 4 - Mine Safety
PART II
Item 5 - Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6 - Selected Financial Data
Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A - Quantitative and Qualitative Disclosures About Market Risk
Item 8 - Financial Statements and Supplementary Data
Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A - Controls and Procedures
Item 9B - Other Information
PART III
Item 10 - Directors, Executive Officers and Corporate Governance
Item 11 - Executive Compensation
Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13 - Certain Relationships and Related Transactions, and Director Independence
Item 14 - Principal Accountant Fees and Services
PART IV
Item 15 - Exhibits, Financial Statement Schedules
Item 16 - Summary
SIGNATURES
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4
8
15
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Table of Contents
As used in this Form 10-K, unless the context otherwise requires, references to "Albertsons," the "Company," "ACI,"
"we," "us" and "our" refer to Albertsons Companies, Inc. and, where appropriate, its subsidiaries. Our last three
fiscal years consisted of the 52 weeks ended February 27, 2021 ("fiscal 2020"), the 53 weeks ended February 29,
2020 ("fiscal 2019") and the 52 weeks ended February 23, 2019 ("fiscal 2018"). Our next three fiscal years consist
of the 52 weeks ending February 26, 2022 ("fiscal 2021"), February 25, 2023 ("fiscal 2022") and February 24,
2024 ("fiscal 2023").
PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The information contained in this Annual Report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts contained in this
Annual Report on Form 10-K, including statements regarding our future operating results and financial position,
business strategy, and plans and objectives of management for future operations, are forward-looking statements.
Words such as "believes," "plans," "anticipates," "estimates," "expects," "intends," "aims," "potential," "will,"
"would," "could," "considered," "likely," "estimate" and the negatives or variations of these words and similar future
or conditional expressions are intended to identify forward-looking statements but are not the exclusive means of
identifying such statements.
Statements regarding productivity initiatives and revenue opportunities (and in each case, the components, amounts
and/or percentages thereof) are forward-looking statements. While we believe these expectations, assumptions,
estimates and projections are reasonable, such forward-looking statements are only predictions and involve known
and unknown risks and uncertainties, many of which are beyond our control. By their nature, forward-looking
statements involve risk and uncertainty because they relate to events and depend upon future circumstances that
may or may not occur. These risks and uncertainties that could cause actual results to differ materially from those
expressed or implied in the forward-looking statements include those related to the COVID-19 pandemic, about
which there are still many unknowns, including the duration of the pandemic and the extent of its impact. These
factors include, but are not limited to, risks and uncertainties discussed in the section of this Annual Report on Form
10-K entitled "Risk Factors." Consequently, all of the forward-looking statements we make in this Annual Report on
Form 10-K are qualified by the information contained in this section and the information discussed under "Part I—
Item 1A. Risk Factors."
Persons reading this Annual Report on Form 10-K are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date hereof and only to events as of the date of this Annual Report on
Form 10-K. We are not under any obligation, and we expressly disclaim any obligation, to update, alter, or
otherwise revise any forward-looking statements, whether written or oral, that may be made from time to time,
whether as a result of new information, future events, or otherwise, except as required by law. We may not actually
achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place
undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential
impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
The following is a summary of the principal factors that create risk in investing in our securities:
SUMMARY RISK FACTORS
4
Table of Contents
Risks related to:
Risks Related to Our Business and Operations
•
•
•
various operating factors and economic conditions affecting the food retail industry that may affect our
business and operating results;
the impact of the COVID-19 pandemic; and
the prices and availability of energy and fuel to manufacture, store, transport and sell products.
Risks Related to Our Future Initiatives
Risks related to:
•
•
being unable to consummate acquisitions in the future on acceptable terms; and
failing to realize anticipated benefits from our productivity initiatives.
Risks Related to Our Industry
Risks related to:
•
•
•
•
the intensity of the competition in our industry;
our ability to timely identify or effectively respond to consumer trends;
consolidation in the healthcare industry; and
the adequacy of our insurance to cover any claims against us.
Risks Related to Our Supply Chain
Risks related to:
•
•
•
product supply disruptions, especially those to perishable products, including from severe weather and
natural disasters;
threats or potential threats to security of food and drug safety, including the occurrence of a widespread
health epidemic and/or pandemic, and loss of confidence in the supply chain; and
increases in fuel or commodity prices.
Risks Related to Our Workforce
Risks related to:
•
•
•
our relationship with unions, including labor disputes or work stoppages, and increased pension expenses,
contributions and surcharges;
increases to the minimum wage; and
the failure to attract and retain qualified associates and key personnel.
Legal and Regulatory Risks
Risks related to:
•
•
•
•
unfavorable changes in government regulation and environmental laws;
unfavorable changes in the tax code;
legal or other proceedings that could have a material adverse effect on us; and
our use of insurance and self-insurance to address potential liabilities.
5
Table of Contents
Risks related to:
Risks Related to Information Security, Cybersecurity and Data Privacy
•
•
our dependence on IT systems; and
improper activities by third parties and the loss of confidence from a data security breach involving our
customers or employees.
Risks Related to Our Indebtedness
Risks related to:
•
•
•
•
our substantial level of indebtedness and our ability to generate cash;
our debt instruments limiting our flexibility in operating our business;
increases in interest rates and/or a downgrade of our credit ratings; and
liability under certain operating leases that were assigned to third parties.
Risks Related to Owning Our Common Stock
Risks related to:
•
•
•
•
•
•
•
the volatility of the price of our common stock and the possibility of a decline regardless of our operating
performance;
our being controlled by our Sponsors (as defined below) who may have conflicts of interest with other
stockholders in the future;
our status as a "controlled company" within the meaning of New York Stock Exchange ("NYSE") rules;
provisions in our charter documents and certain other agreements that could delay or prevent a change of
control;
the limit on our stockholders' ability to obtain a favorable judicial forum for disputes with us or our
directors, officers or other employees;
our ability to pay dividends to our stockholders; and
our Convertible Preferred Stock (as defined below) adversely affecting the market price of our common
stock and the rights of our stockholders.
See "Part I—Item 1A. Risk Factors" for a more complete discussion of the material risks facing our business.
NON-GAAP FINANCIAL MEASURES
We define EBITDA as generally accepted accounting principles ("GAAP") earnings (net loss) before interest,
income taxes, depreciation and amortization. We define Adjusted EBITDA as earnings (net loss) before interest,
income taxes, depreciation and amortization, further adjusted to eliminate the effects of items management does not
consider in assessing our ongoing core performance. We define Adjusted Net Income as GAAP net income adjusted
to eliminate the effects of items management does not consider in assessing our ongoing core performance. We
define Adjusted Net Income Per Class A Common Share as Adjusted Net Income divided by the weighted average
diluted Class A common shares outstanding, as adjusted to reflect all restricted stock units and awards outstanding
at the end of the period. We define Adjusted Free Cash Flow as Adjusted EBITDA less capital expenditures. We
define Net Debt as total debt (which includes finance lease obligations and is net of deferred financing costs and
original issue discount) minus unrestricted cash and cash equivalents and we define Net Debt Ratio as the ratio of
Net Debt to Adjusted EBITDA for the rolling 52 or 53 week period. See "Part II—Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations" for further discussion and a reconciliation of
6
Table of Contents
Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income Per Class A Common Share and Adjusted Free
Cash Flow.
EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income Per Class A Common Share, Adjusted
Free Cash Flow and Net Debt Ratio (collectively, the "Non-GAAP Measures") are performance measures that
provide supplemental information we believe is useful to analysts and investors to evaluate our ongoing results of
operations, when considered alongside other GAAP measures such as net income, operating income, gross profit,
net income per Class A common share and cash provided by operating activities. These Non-GAAP Measures
exclude the financial impact of items management does not consider in assessing our ongoing core operating
performance, and thereby facilitate review of our operating performance on a period-to-period basis. Other
companies may have different capital structures or different lease terms, and comparability to our results of
operations may be impacted by the effects of acquisition accounting on our depreciation and amortization. As a
result of the effects of these factors and factors specific to other companies, we believe EBITDA, Adjusted
EBITDA, Adjusted Net Income, Adjusted Net Income Per Class A Common Share, Adjusted Free Cash Flow and
Net Debt Ratio provide helpful information to analysts and investors to facilitate a comparison of our operating
performance to that of other companies. We also use Adjusted EBITDA, as further adjusted for additional items
defined in our debt instruments, for board of director and bank compliance reporting. Our presentation of Non-
GAAP Measures should not be construed as an inference that our future results will be unaffected by unusual or
non-recurring items.
Non-GAAP Measures should not be considered as measures of discretionary cash available to us to invest in the
growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using
Non-GAAP Measures only for supplemental purposes.
7
Table of Contents
Item 1 - Business
Overview
Albertsons is one of the largest food and drug retailers in the United States, with both strong local presence and
national scale. We also manufacture and process some of the food for sale in our stores. We maintain a website
(www.AlbertsonsCompanies.com) that includes additional information about the Company. We make available
through our website, free of charge, our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our
current reports on Form 8-K and our interactive data files, including amendments. These forms are available as soon
as reasonably practicable after we have filed them with, or furnished them electronically to, the Securities and
Exchange Commission ("SEC").
Retail Operations
As of February 27, 2021, we operated 2,277 stores across 34 states and the District of Columbia under more than 20
well known banners including Albertsons, Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs, Jewel-Osco,
Acme, Shaw's, Star Market, United Supermarkets, Market Street, Haggen, Kings Food Markets and Balducci's Food
Lovers Market. Additionally, as of February 27, 2021, we operated 1,727 pharmacies, 1,313 in-store branded coffee
shops, 400 adjacent fuel centers, 22 dedicated distribution centers, 20 manufacturing facilities and various digital
platforms. Our stores operate in First-and-Main retail locations and have leading market share within attractive and
growing geographies. We hold a #1 or #2 position by market share in 67% of the 121 metropolitan statistical areas
("MSAs") in which we operate. Our portfolio of well-located, full-service stores provides the foundation of our
omni-channel platform, and we have continued to enhance our capabilities to meet customer demand for
convenience and flexibility. Our rapidly growing Drive Up & Go curbside pickup service is currently available in
approximately 1,420 locations. In addition to our long-established home delivery network, we also collaborate with
third parties, including Instacart for rush delivery as well as DoorDash for delivery of our prepared and ready-to-eat
offerings. We now offer home delivery services across more than 2,000 of our stores and 12 of the country's top 15
MSAs by population. We seek to tailor our offerings to local demographics and preferences of the markets in which
we operate. Our Locally Great, Nationally Strong operating structure empowers decision making at the local level,
which we believe better serves our customers and communities, while also providing the systems, analytics and
buying power afforded by an organization with national scale.
Segments
We are engaged in the operation of food and drug retail stores that offer grocery products, general merchandise,
health and beauty care products, pharmacy, fuel and other items and services. Our retail operating divisions are
geographically based, have similar economic characteristics and similar expected long-term financial performance.
Our operating segments and reporting units are made up of 12 divisions, which are reported in one reportable
segment. Each reporting unit constitutes a business for which discrete financial information is available and for
which management regularly reviews the operating results. Across all operating segments, the Company operates
primarily one store format. Each division offers, through its stores and digital channels, the same general mix of
products with similar pricing to similar categories of customers, have similar distribution methods, operate in
similar regulatory environments and purchase merchandise from similar or the same vendors.
Products
Our stores offer grocery products, general merchandise, health and beauty care products, pharmacy, fuel and other
items and services. We are not dependent on any individual supplier; only one third-party supplier represented more
than 5% of our sales for fiscal 2020.
8
Table of Contents
Merchandising and Manufacturing
We offer more than 13,000 high-quality products under our Own Brands portfolio. Our Own Brands products
resonate well with our shoppers, as evidenced by Own Brands sales of over $14.8 billion in fiscal 2020, an increase
of over 13% compared to fiscal 2019.
Own Brands continues to deliver on innovation with more than 1,200 new items launched in fiscal 2020 and plans
to launch approximately 800 new Own Brands items annually over the next few years. For example, innovation in
the fourth quarter of fiscal 2020 included the launch of new items ranging from pickles in Open Nature, herbs and
spices in O Organics, family packs in frozen fruits and vegetables helping to stretch the family budget, and specialty
olives in Signature Reserve. Our plant based portfolio expanded to 56 items with $37.6 million in sales in fiscal
2020. We are excited about our O Organics and Open Nature brands, which posted a combined 15.1% growth in
sales year-over-year, with over 2,000 items, and we plan to introduce approximately 100 new items for these brands
in fiscal 2021. In addition to new item innovation and brand development, Own Brands continues to focus on
package redesign to refresh shelf presence and comply with new regulatory nutrition guideline changes.
As measured by units for fiscal 2020, 10.4% of our Own Brands merchandise was manufactured in Company-
owned facilities, and the remainder of our Own Brands merchandise was purchased from third parties. We closely
monitor make-versus-buy decisions on internally sourced products to optimize their quality and profitability. In
addition, we believe that our scale will provide opportunities to leverage our fixed manufacturing costs in order to
drive innovation across our Own Brands portfolio. As of February 27, 2021, we operated 20 food production plants.
These plants consisted of seven milk plants, four soft drink bottling plants, three bakery plants, two ice cream
product plants, two grocery/prepared food plants, one ice plant and one soup plant.
Distribution
As of February 27, 2021, we operated 22 strategically located distribution centers, approximately 36% of which are
owned or ground-leased. Our distribution centers collectively provide approximately 66% of all products to our
retail operating areas.
Marketing and Advertising
Our marketing efforts involve collaboration between our national marketing and merchandising team and local
divisions and stores. We augment the local division teams with corporate resources and are focused on providing
expertise, sharing best practices and leveraging scale in partnership with leading consumer packaged goods vendors.
Our corporate teams support divisions by providing strategic guidance in order to drive key areas of our business,
including pharmacy, general merchandise and our Own Brands. Our local marketing teams set brand strategy and
communicate brand messages through our integrated digital and physical marketing and advertising channels. We
operate in 121 MSAs and are ranked #1 or #2 by market share in 67% of these markets. We maintain price
competitiveness through systematic, selective and thoughtful price investment to drive customer traffic and basket
size. We also use our just for U loyalty program, including both personalized deals and digital coupons, as well as
gas and grocery rewards, to target promotional activity and improve our customers' experience. We have 25.4
million households currently enrolled in our loyalty program. We have achieved significant success with active
participants in our just for U program, which drives higher sales and customer retention. We have recently deployed
and are continuing to refine cloud-based enterprise solutions to quickly process proprietary customer, product and
transaction data and efficiently provide our local managers with targeted marketing strategies for customers in their
communities. By leveraging customer and transaction information with data driven analytics, our "personalized deal
engine" is able to select, out of the thousands of different promotions offered by our suppliers, the offers that we
expect will be most compelling to each of our more than 30 million weekly customers. In addition, we use data
analytics to optimize shelf assortment and space in our stores by continually and systematically reviewing the
performance of each product.
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Raw Materials
Various agricultural commodities constitute the principal raw materials used by us in the manufacture of our food
products. We believe that raw materials for our products are not in short supply, and all are readily available from a
wide variety of independent suppliers.
Environmental
Our operations are subject to regulation under environmental laws, including those relating to waste management,
air emissions and underground storage tanks. In addition, as an owner and operator of commercial real estate, we
may be subject to liability under applicable environmental laws for clean-up of contamination at our facilities.
Compliance with, and clean-up liability under, these laws has not had and is not expected to have a material adverse
effect upon our business, financial condition, liquidity or operating results.
We work hard to maintain the highest standards of environmental stewardship (including sustainably sourced
products). As our most recent sustainability report shows, we recycled more than 25 million pounds of plastic film
and 780 million pounds of cardboard from our operations and completed over 1,400 energy efficiency projects
across 475 facilities. Moreover, 100% of our Own Brands Waterfront BISTRO and Open Nature seafood is sourced
to meet our Responsible Seafood Policy, achieving our commitment three years ahead of our 2022 goal.
Human Capital
As of February 27, 2021, Albertsons Companies, Inc. employed approximately 300,000 full- and part-time
associates who serve our more than 30 million weekly customers. We recognize that our associates are a key
component of delighting our customers. As such, we are proud to offer them myriad opportunities to grow and
advance their careers. For example, we provide our associates with training and development opportunities through
on-the-job training, mentoring programs, eLearning and classroom-style learning. We have also partnered with
industry associations to provide access to relevant continuing retail education opportunities through colleges around
the country. Over the last year our associates from the front lines to our offices completed over six million hours of
training through various programs. In fiscal 2020, more than 60,000 of our associates celebrated at least 15 years of
service, and more than 43,000 of them celebrated over 20 years of service.
Diversity and Inclusion
We are committed to advancing diversity and inclusion by helping ensure that everyone — customers, associates,
people in the neighborhoods in which we operate and business partners — are treated with courtesy, dignity and
respect and have equal access to resources, products, and opportunities to succeed.
Our commitment to diversity and inclusion and thoughtful people practices is a core element of our philosophy,
ensuring our associates in our stores, offices, distribution centers and other operations reflect the diverse
communities we serve. We believe in a diverse and inclusive workplace that fosters personal growth, develops talent
and harnesses the power of different and unique perspectives. We recognize and appreciate the variety of
backgrounds and characteristics that make individuals unique, while providing a work environment that promotes
and celebrates individual and collective achievement.
We believe that diverse perspectives strengthen and enrich our stores, our Company and our society. Diversity and
inclusion are components of our programs for recruitment, development and training of associates and leaders. We
provide opportunities for each person in our company to contribute their ideas, talents and enthusiasm to our
success. Associates can participate in various associate resource and network groups, such as the Women’s
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Inspiration and Inclusion Network ("WIIN"), the Hispanic Leadership Network, the Asian Network, the African
American Leadership Council, and the Albertsons Pride Alliance.
We support equal employment opportunity in hiring, development and advancement for all qualified persons
without regard to race, color, religion, age, sex, national origin, ancestry, physical or mental disability, veteran
status, sexual orientation, gender identity, marital status or any other status protected by law. We provide reasonable
accommodations for applicants and associates with disabilities. We will not tolerate unlawful discrimination in any
aspect of employment, nor will we tolerate harassment of any individual or group on the basis of any protected
characteristic. Over the past few years, more than 241,000 associates have completed Diversity and Inclusion
Training.
Cultural Principles
As a company, our purpose is to bring happiness and well-being to families and communities, because life happens
around food. To achieve our purpose, we focus on a set of six fundamental values:
Inclusivity: We always value everyone's perspective.
•
• Compassion: We always treat each other and our customers with kindness and respect.
• Teamwork: We always support and recognize each other.
• Competition: We always act with integrity to win over the customer.
• Learning: We always strive to grow and develop ourselves and others.
• Ownership: We always take actions to drive our success.
Total Rewards
We offer health and wellness benefits to keep our associates at their best along with a competitive compensation
package. This includes comprehensive wages and benefits to meet the varying needs of our associates and their
families. Our benefit programs include health care insurance, dental, vision, life, disability and other forms of
insurance benefits, paid time off, flexible work schedules, family leave, associate assistance programs and 401(k)
plans among many others, based on eligibility. In response to the COVID-19 pandemic, we provided enhanced
hourly pay, including bonuses to frontline associates and paid time off to associates who tested positive or were
quarantined due to exposure, resulting in more than $400 million in additional compensation.
Labor Relations
As of February 27, 2021, approximately 210,000 of our 300,000 employees were covered by collective bargaining
agreements. During fiscal 2020, collective bargaining agreements covering approximately 27,000 employees were
renegotiated. Collective bargaining agreements covering approximately 67,000 employees have expired or are
scheduled to expire in fiscal 2021. We have sought to actively manage our participation in multiemployer pension
plans through active negotiations with union officials, pension plan trustees, other contributing employers and the
Pension Benefit Guaranty Corporation ("PBGC") in order to best provide our employees fair wages, comprehensive
retirement packages and other benefits.
Community
Throughout the nation, in the neighborhoods served by our stores, the passion of our employees and the generosity
of our customers serve as the backbone of our history of giving back to these communities. It is the foundation of
our business. We champion giving back, and we are proud that our associates and our Company contribute funds,
talent and time to the causes that are important in the many communities in which we operate.
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As a grocer, no greater cause hits closer to home for us than hunger relief. Each year, we donate millions of pounds
of food to food banks, pantries and other agencies that are on the front lines in the fight against hunger in America
through Nourishing Neighbors. Our 2,277 stores support hunger relief efforts and other community causes through
fundraising campaigns in conjunction with the Albertsons Companies Foundation, our nonprofit.
The Albertsons Companies Foundation supports causes that impact our customers' lives. Our stores provide the
opportunity to mobilize funding and create awareness in our neighborhoods through our employees' passion,
partnerships with our vendors and the generous contributions by our customers.
Overall, as a company, we work in collaboration with thousands of local organizations and seek to improve the
quality of life in the communities we serve. We take pride in ensuring that most of the funds we raise stay in local
communities and reflect what is important to our employees and customers.
During fiscal 2020, along with the Albertsons Companies Foundation, we gave $260 million in food and financial
support, including $94 million through our Nourishing Neighbors Program to ensure those living in the
communities in which we operate have enough to eat. In addition, 65,000 people were connected with SNAP
benefits through our funding. We also made a $5 million commitment to organizations supporting social justice,
including the National Urban League and the NAACP Legal Defense Fund. These efforts have helped millions of
people in the areas of hunger relief, education, cancer research and treatment, social justice and programs for people
with disabilities and veterans' outreach.
We are proud of who we are, the products we offer and the people we have the pleasure of serving every day. We
will continue to do the right thing, for the right reasons, and hold ourselves accountable.
Executive Officers of the Registrant
The following table sets forth information regarding our executive officers as of April 28, 2021:
Name
Vivek Sankaran
Susan Morris
Anuj Dhanda
Robert B. Dimond
Michael Theilmann
Geoff White
Christine Rupp
Justin Ewing
Juliette W. Pryor
Age
Position
58 President, Chief Executive Officer and Director
52 Executive Vice President and Chief Operations Officer
58 Executive Vice President and Chief Information Officer
59 Executive Vice President and Chief Financial Officer
57 Executive Vice President and Chief Human Resources Officer
55 Executive Vice President and Chief Merchandising Officer
52 Executive Vice President and Chief Customer and Digital Officer
52 Executive Vice President, Corporate Development and Real Estate
56 Executive Vice President, General Counsel and Secretary
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Vivek Sankaran, President, Chief Executive Officer and Director. Mr. Sankaran has served as our President, Chief
Executive Officer and Director since April 2019. Mr. Sankaran previously served from January 2019 to March 2019
as Chief Executive Officer of PepsiCo Foods North America, which includes Frito-Lay North America ("Frito-
Lay"). There he led PepsiCo, Inc.'s ("PepsiCo") snack and convenient foods business. Prior to that, Mr. Sankaran
served as President and Chief Operating Officer of Frito-Lay from April 2016 to December 2018; Chief Operating
Officer of Frito-Lay from February 2016 to April 2016; Chief Commercial Officer, North America of PepsiCo from
2014 to February 2016, where he led PepsiCo's cross-divisional performance across its North American customers;
Chief Customer Officer of Frito-Lay from 2012 to 2014; Senior Vice President and General Manager of Frito-Lay's
South business unit from 2011 to 2012; and Senior Vice President, Corporate Strategy and Development of PepsiCo
from 2009 to 2010. Before joining PepsiCo in 2009, Mr. Sankaran was a partner at McKinsey and Company, where
he served various Fortune 100 companies, bringing a strong focus on strategy and operations. Mr. Sankaran co-led
the firm's North American purchasing and supply management practice and was on the leadership team of the North
American retail practice. Mr. Sankaran also serves on the Board of Directors of The Guardian Life Insurance
Company of America, one of the nation’s largest mutual life insurers, where he also serves as a member of the
Human Resources and Governance Committee. Mr. Sankaran has an MBA from the University of Michigan, a
master's degree in manufacturing from the Georgia Institute of Technology and a bachelor's degree in mechanical
engineering from the Indian Institute of Technology in Chennai.
Susan Morris, Executive Vice President and Chief Operations Officer. Ms. Morris has been our Executive Vice
President and Chief Operations Officer since January 2018. Previously, Ms. Morris served as our Executive Vice
President, Retail Operations, West Region from April 2017 to January 2018. Ms. Morris also served as our
Executive Vice President, Retail Operations, East Region from April 2016 to April 2017, as President of our Denver
Division from March 2015 to March 2016 and as President of our Intermountain Division from March 2013 to
March 2015. From June 2012 to February 2013, Ms. Morris served as our Vice President of Marketing and
Merchandising, Southwest Division. From February 2010 to June 2012, Ms. Morris served as a Sales Manager in
our Southwest Division. Prior to joining the Company, Ms. Morris served as Senior Vice President of Sales and
Merchandising and Vice President of Customer Satisfaction at SuperValu. Ms. Morris also previously served as
Vice President of Operations at Albertson's, Inc.
Anuj Dhanda, Executive Vice President and Chief Information Officer. Mr. Dhanda has been our Executive Vice
President and Chief Information Officer since December 2015. Prior to joining the Company, Mr. Dhanda served as
Senior Vice President of Digital Commerce of the Giant Eagle supermarket chain since March 2015, and as its
Chief Information Officer since September 2013. Previously, Mr. Dhanda served at PNC Financial Services as Chief
Information Officer from March 2008 to August 2013, after having served in other senior information technology
and business positions at PNC Bank from 1995 to 2013.
Robert B. Dimond, Executive Vice President and Chief Financial Officer. Mr. Dimond has been our Chief
Financial Officer since February 2014. Prior to joining the Company, Mr. Dimond previously served as Executive
Vice President, Chief Financial Officer and Treasurer at Nash Finch Co., a food distributor, from 2007 to 2013.
Mr. Dimond has over 31 years of financial and senior executive management experience in the retail food and
distribution industry. Mr. Dimond has served as Chief Financial Officer and Senior Vice President of Wild Oats,
Group Vice President and Chief Financial Officer for the western region of Kroger, Group Vice President and Chief
Financial Officer of Fred Meyer, Inc. and as Vice President, Administration and Controller for Smith's Food and
Drug Centers Inc., a regional supermarket chain. Mr. Dimond is a Certified Public Accountant.
Michael Theilmann, Executive Vice President and Chief Human Resources Officer. Mr. Theilmann has been our
Executive Vice President and Chief Human Resources Officer since August 2019. Mr. Theilmann previously served
as Global Practice Managing Partner, Human Resources Officers Practice, from February 2018 to August 2019, and
as Partner, Consumer Markets Practice, from June 2017 to January 2018, of Heidrick & Struggles International
Incorporated, a worldwide executive search firm. Prior to that, Mr. Theilmann served as Managing Director of
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Slome Capital LLC, a family office, from April 2013 to June 2017. Mr. Theilmann also served as Group Executive
Vice President, from 2010 to 2012, and as Executive Vice President, Chief Human Resources & Administrative
Officer, from 2005 to 2009, of J.C. Penney Company, Inc., a national department store chain. Mr. Theilmann has
been a director of Leapyear Technologies, Inc. since July 2015 and Catapult Health LLC since October 2013.
Geoff White, Executive Vice President and Chief Merchandising Officer. Mr. White has been our Executive Vice
President and Chief Merchandising Officer since September 2019. Mr. White previously served as president of our
Own Brands division since April 2017. Prior to that, Mr. White served as senior vice president of marketing and
merchandising for the Northern California Division from 2015 to April 2017. From 2004 to 2015, Mr. White held
various leadership roles, including director of Canadian produce operations, at Safeway Inc. ("Safeway"). Mr. White
started his career as a general clerk at Safeway in Burnaby, British Columbia, in 1981.
Christine Rupp, Executive Vice President and Chief Customer and Digital Officer. Ms. Rupp has been our
Executive Vice President and Chief Customer and Digital Officer since December 2019. Ms. Rupp previously
served as General Manager, Xbox Business Engineering, from April 2018 to November 2019, and General
Manager, Microsoft, Windows and Xbox Digital Store Marketing, from March 2016 to April 2018, at Microsoft
Corp., a leading developer of computer software systems and applications. Prior to that, Ms. Rupp served at
Amazon.com, Inc., a multinational technology company, as Vice President, Amazon Prime from August 2014 to
February 2016, Vice President and GM, Fulfillment from August 2009 to August 2014 and Category Manager from
December 2005 to July 2009. Ms. Rupp also previously held roles with Sears, Roebuck and Company, a national
department store chain.
Justin Ewing, Executive Vice President, Corporate Development and Real Estate. Mr. Ewing has been our
Executive Vice President of Corporate Development and Real Estate since January 2015. Previously, Mr. Ewing had
served as our Senior Vice President of Corporate Development and Real Estate since 2013, as Vice President of
Real Estate and Development since 2011 and as Vice President of Corporate Development since 2006, when
Mr. Ewing originally joined the Company from the operations group at Cerberus. Prior to his work with Cerberus,
Mr. Ewing was with Trowbridge Group, a strategic sourcing firm. Mr. Ewing also spent over 13 years with
PricewaterhouseCoopers LLP. Mr. Ewing is a Chartered Accountant with the Institute of Chartered Accountants of
England and Wales.
Juliette W. Pryor, Executive Vice President, General Counsel and Secretary. Ms. Pryor has been our Executive
Vice President and General Counsel since June 2020. Ms. Pryor previously served as senior vice president, general
counsel and corporate secretary for Cox Enterprises, Inc., a leading communications and automotive services
company, since October 2016. Prior to that, Ms. Pryor served as executive vice president, general counsel and chief
compliance officer for US Foods, Inc., a leading U.S. foodservice distributor, from February 2009 to October 2016,
and as senior vice president and deputy general counsel from May 2005 to February 2009. From 2002 to 2005, Ms.
Pryor was in private practice with the law firm Skadden Arps Slate Meagher & Flom LLP. Before joining Skadden,
Ms. Pryor was general counsel and corporate secretary for e.spire Communications, Inc., a NASDAQ-listed
telecommunications company. Ms. Pryor currently serves on the board and as a member of the Audit Committee of
Genuine Parts Company, an NYSE-listed service organization engaged in the distribution of automotive
replacement parts and industrial replacement parts and materials. Ms. Pryor received a B.A. from Fisk University
and a J.D. from Georgetown University, where she also received a M.S. from the school of foreign service.
Seasonality
Our business is generally not seasonal in nature, but a larger share of annual revenues may be generated in
November and December due to the major holidays.
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Competitive Environment
The food and drug retail industry is highly competitive. The principal competitive factors that affect our business
are location, quality, price, service, selection, convenience and condition of assets such as our stores. The operating
environment for the food and drug retailing industry continues to be characterized by intense competition,
aggressive expansion, increasing specialization of retail and online formats, entry of non-traditional competitors and
consolidation.
We face intense competition from other food and/or drug retailers, supercenters, club stores, online retailers,
specialty and niche supermarkets, "limited assortment" stores, drug stores, general merchandisers, wholesale stores,
discount stores, convenience stores, natural food stores, farmers' markets, local chains and stand-alone stores that
cater to the individual cultural preferences of specific neighborhoods, restaurants and a growing number of internet-
based home delivery and meal solution companies. We and our competitors engage in price and non-price
competition which, from time to time, has adversely affected our operating margins. Our competition includes, but
is not limited to, traditional and specialty supermarkets, natural and organic food stores, general merchandise
supercenters, membership clubs, online retailers, home delivery companies, meal kit services and pharmacies. Our
competitive position depends on successfully competing on product quality and selection, store quality, shopping
experience, customer service, convenience and price.
Item 1A - Risk Factors
There are risks and uncertainties that can affect our business. The significant risk factors are discussed below. The
following information should be read together with "Part II—Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" of this Form 10-K, which includes forward-looking statements and
factors that could cause us not to realize our goals or meet our expectations.
Risks Related to Our Business and Operations
Various operating factors and general economic conditions affecting the food retail industry may affect our
business and may adversely affect our business and operating results.
Our operations and financial performance are affected by economic conditions such as macroeconomic conditions,
credit market conditions and the level of consumer confidence. For the majority of fiscal 2019 and prior years, the
combination of an improving economy, lower unemployment, higher wages and lower gasoline prices had
contributed to increased consumer confidence. However, as a result of the COVID-19 pandemic during fiscal 2020,
there continues to be substantial uncertainty about the strength of the economy, which may currently be in a
recession and has experienced rapid increases in unemployment rates, as well as uncertainty about the pace of
recovery despite the fiscal stimulus that Congress enacted. The full extent to which the COVID-19 pandemic
impacts our business, results of operations and financial condition will depend on future developments, which are
currently highly uncertain and cannot be predicted, including, but not limited to the duration, spread, severity and
impact of the COVID-19 pandemic, the effects of the pandemic on our customers and suppliers, the duration of the
federal and local state declarations of emergency and the associated remedial actions and stimulus measures adopted
by federal and local governments, including vaccination capabilities and rates, continued measures to assure social
distancing and to what extent normal economic and operating conditions can resume. We are also unable to predict
the extent, implementation and effectiveness of any government-funded benefit programs and stimulus packages on
employment levels and on demand for our products.
We may experience materially adverse impacts to our business as a result of any economic recession or depression
that occurred or may occur as a result of efforts to curb the spread of COVID-19. For example, during March 2020
through April 2020, the United States experienced a rapid and significant increase in unemployment claims and
other indications of a significant economic slowdown believed to be related to the COVID-19 pandemic.
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Consumers' perception or uncertainty related to the economy, as well as a decrease in their personal financial
condition, could hurt overall consumer confidence and reduce demand for many of our product offerings.
Consumers may reduce spending on non-essential items, purchase value-oriented products or increasingly rely on
food discounters in an effort to secure the food and drug products that they need, all of which could impact our sales
and profit.
An increase in fuel prices could also have an effect on consumer spending and on our costs of producing and
procuring products that we sell. As well, both inflation and deflation affect our business. Food deflation could
reduce sales growth and earnings, while food inflation could reduce gross profit margins. Most food items and
categories experienced price inflation in fiscal 2020; however, prices for some other major food categories, such as
fresh fruits, decreased. We are unable to predict the direction of the economy or fuel prices or if deflationary trends
will occur. If the economy weakens, fuel prices increase or deflationary trends occur, our business and operating
results could be adversely affected.
Our business has been, and will continue to be, impacted by the COVID-19 pandemic.
The COVID-19 pandemic continues to pose a risk to our employees, our customers, our vendors and the
communities in which we operate, which could negatively impact our business. As the pandemic grew throughout
fiscal 2020, consumer fear about becoming ill with the virus and recommendations and/or mandates from federal,
state and local authorities to social distance or self-quarantine increased. Many states, including California,
Washington State and other states in which we operate and have a significant number of stores, at various points
during the COVID-19 pandemic declared a state of emergency, closed schools and non-essential businesses and
enacted limitations on the number of people allowed to gather at one time in the same space. These rules, as well as
the general fear that causes people to avoid gathering in public places, may adversely affect our customer traffic, our
ability to adequately staff our stores and operations and our ability to transport product on a timely basis.
While other types of retail stores had to shut down for prolonged periods of time, we continued to operate our stores
during the COVID-19 pandemic as an "essential" business under relevant federal, state and local mandates. To the
extent those closure regulations remain or return, if the classification of what is an "essential" business changes or
other government regulations are adopted, we may be required to severely curtail operations, including customer
traffic, which would significantly and adversely impact our sales and revenue. While we have taken many protective
measures in our stores, including, among others, spacing requirements, single direction aisles, senior and
compromised customer-only hours, plexiglass shields at checkout and providing masks and gloves to our front line
employees, there can be no assurance that these measures will be sufficient to protect our store employees and
customers. We have, and may in the future again be required to, temporarily close stores, offices or distribution
centers for cleaning and/or to quarantine employees in the event that an employee develops COVID-19. We
proactively paused self-service operations, such as soup bars, wing bars, salad bars and olive bars. These factors
could impact the ability of our stores to maintain normal hours of operation or to have sufficient inventory which
may disrupt our business and negatively impact our financial results. If we do not respond appropriately to the
pandemic, or if customers do not perceive our response to be adequate, we could suffer damage to our reputation
and our brand, which could adversely affect our business in the future.
Further, the COVID-19 pandemic may also impact our ability to access and ship product to and from impacted
locations. Items such as consumer staples, paper goods, key cleaning supplies and protective equipment for our
employees, and more recently, meat products have been, and may continue to be, in short supply.
The extent to which the COVID-19 may impact our business will depend on future developments, which are highly
uncertain and cannot be predicted at this time. We may experience an impact to the timing and availability of key
products from suppliers, broader quarantines or other restrictions that limit consumer visits to our stores, increased,
employee impacts from illness, school closures and other community response measures, all of which could
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negatively impact our business. We continually monitor the situation and regularly adjust our policies and practices
as more information and guidance becomes available.
Our operations are dependent upon the availability of a significant amount of energy and fuel to manufacture,
store, transport and sell products.
Our operations are dependent upon the availability of a significant amount of energy and fuel to manufacture, store,
transport and sell products. Energy and fuel costs are influenced by international, political and economic
circumstances and have experienced volatility over time. To reduce the impact of volatile energy costs, we have
entered into contracts to purchase electricity and natural gas at fixed prices to satisfy a portion of our energy needs.
We also manage our exposure to changes in energy prices utilized in the shipping process through the use of short-
term diesel fuel derivative contracts. Volatility in fuel and energy costs that exceeds offsetting contractual
arrangements could adversely affect our results of operations.
Risks Related to Our Future Initiatives
We may not be able to consummate acquisitions in the future on terms acceptable to us, or at all.
In addition, acquisitions are accompanied by the risk that the obligations and liabilities of an acquired company may
not be adequately reflected in the historical financial statements of that company and the risk that those historical
financial statements may be based on assumptions which are incorrect or inconsistent with our assumptions or
approach to accounting policies. Any of these material obligations, liabilities or incorrect or inconsistent
assumptions could adversely impact our results of operations and financial condition.
Failure to realize anticipated benefits from our productivity initiatives could adversely affect our financial
performance and competitive position.
Although we have identified and are in the early stages of implementing a broad range of new, specific productivity
initiatives to help offset cost inflation, fund growth and drive earnings, there can be no assurance that all of our
initiatives will be successful or that we will realize the estimated benefits in the currently anticipated amounts or
timeframe, if at all. Certain of these initiatives involve significant changes in our operating processes and systems
that could result in disruptions in our operations. The savings from these planned productivity initiatives represent
management's estimates and remain subject to risks and uncertainties. The actual benefits of our productivity
initiatives, if achieved, may be lower than we expect and may take longer than anticipated. While certain projects
are well underway and contributing as expected, in other cases, we temporarily paused some of our initiatives to
ensure we are first taking care of our customers and our communities, while focusing on the safety of our associates
during the COVID-19 pandemic.
Risks Related to Our Industry
Competition in our industry is intense, and our failure to compete successfully may adversely affect our
profitability and operating results.
The food and drug retail industry is large and dynamic, characterized by intense competition among a collection of
local, regional and national participants. We face strong competition from other brick and mortar food and/or drug
retailers, supercenters, club stores, discount stores, online retailers, specialty and niche supermarkets, drug stores,
general merchandisers, wholesale stores, convenience stores, natural food stores, farmers' markets, local chains and
stand-alone stores that cater to the individual cultural preferences of specific neighborhoods, restaurants and home
delivery and meal solution companies. Shifts in the competitive landscape, consumer preference or market share
may have an adverse effect on our profitability and results of operations.
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As a result of consumers' growing desire to shop online, we also face increasing competition from both our existing
competitors that have incorporated the internet as a direct-to-consumer channel and online providers that sell
grocery products. In addition, we face increasing competition from online distributors of pharmaceutical products.
Although we have accelerated the expansion of our digital business, including to respond to increased customer
demand as a result of the pandemic, and offer our customers the ability to shop online for both home delivery and
Drive Up & Go curbside pickup, there is no assurance that these online initiatives will be successful. In addition,
these initiatives may have an adverse impact on our profitability as a result of lower gross profits or greater
operating costs to compete.
Our ability to attract customers is dependent, in large part, upon a combination of channel preference, location, store
conditions, quality, price, service, convenience and selection. In each of these areas, traditional and non-traditional
competitors compete with us and may successfully attract our customers by matching or exceeding what we offer or
by providing greater shopping convenience. In recent years, many of our competitors have aggressively added
locations and adopted a multi-channel approach to marketing and advertising. Our responses to competitive
pressures, such as additional promotions, increased advertising, additional capital investment and the development
of our digital offerings, could adversely affect our profitability and cash flow. We cannot guarantee that our
competitive response will succeed in increasing or maintaining our share of retail food sales.
An increasingly competitive industry and, from time to time, deflation in the prices of certain foods have made it
difficult for food retailers to achieve positive identical sales growth on a consistent basis. We and our competitors
have attempted to maintain or grow our and their respective share of retail food sales through capital and price
investment, increased promotional activity and new and remodeled stores, creating a more difficult environment to
consistently increase year-over-year sales. Some of our primary competitors are larger than we are or have greater
financial resources available to them and, therefore, may be able to devote greater resources to invest in price,
promotional activity and new or remodeled stores in order to grow their share of retail food sales. Price investment
by our competitors has also, from time to time, adversely affected our operating margins. In recent years, we have
invested in price in order to remain competitive and generate sales growth; however, there can be no assurance this
strategy will be successful.
Because we face intense competition, we need to anticipate and respond to changing consumer preferences and
demands more effectively than our competitors. We devote significant resources to differentiating our banners in the
local markets where we operate and invest in loyalty programs to drive traffic. Our local merchandising teams spend
considerable time working with store directors to make sure we are satisfying consumer preferences. In addition, we
strive to achieve and maintain favorable recognition of our Own Brands offerings by marketing these offerings to
consumers and enhancing a perception of value for consumers. While we seek to continuously respond to changing
consumer preferences, there are no assurances that our responses will be successful.
Our continued success is dependent upon our ability to control operating expenses, including managing health care
and pension costs stipulated by our collective bargaining agreements, to effectively compete in the food retail
industry. Several of our primary competitors are larger than we are, or are not subject to collective bargaining
agreements, allowing them to more effectively leverage their fixed costs or more easily reduce operating expenses.
Finally, we need to source, market and merchandise efficiently. Changes in our product mix also may negatively
affect our profitability. Failure to accomplish our objectives could impair our ability to compete successfully and
adversely affect our profitability. Profit margins in the food retail industry are low. In order to increase or maintain
our profit margins, we develop operating strategies to increase revenues, increase gross margins and reduce costs,
such as new marketing programs, new advertising campaigns, productivity improvements, shrink-reduction
initiatives, distribution center efficiencies, manufacturing efficiencies, energy efficiency programs and other similar
strategies.
Our failure to achieve forecasted revenue growth, gross margin improvement or cost reductions could have a
material adverse effect on our profitability and operating results.
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We may not timely identify or effectively respond to consumer trends, which could negatively affect our
relationship with our customers, the demand for our products and services and our market share.
It is difficult to predict consistently and successfully the products and services our customers will demand over
time. Our success depends, in part, on our ability to identify and respond to evolving trends in demographics and
preferences. Failure to timely identify or effectively respond to changing consumer tastes, preferences (including
those relating to sustainability of product sources) and spending patterns could lead us to offer our customers a mix
of products or a level of pricing that they do not find attractive. This could negatively affect our relationship with
our customers, leading them to reduce their visits to our stores and the amount they spend. Further, while we have
significantly expanded our digital capabilities and grown our loyalty programs over the last several years, as
technology advances, and as the way our customers interact with technology changes, we will need to continue to
develop and offer digital and loyalty solutions that are both cost effective and compelling. Our failure to anticipate
or respond to customer expectations for products, services, digital and loyalty programs would adversely affect the
demand for our products and services and our market share and could have an adverse effect on our performance,
margins and operating income.
Consolidation in the healthcare industry could adversely affect our business and financial condition.
Many organizations in the healthcare industry have consolidated to create larger healthcare enterprises with greater
market power, which has resulted in increased pricing pressures. If this consolidation trend continues, it could give
the resulting enterprises even greater bargaining power, which may lead to further pressure on the prices for our
pharmacy products and services. If these pressures result in reductions in our prices, we will become less profitable
unless we are able to achieve corresponding reductions in costs or develop profitable new revenue streams. We
expect that market demand, government regulation, third-party reimbursement policies, government contracting
requirements and societal pressures will continue to cause the healthcare industry to evolve, potentially resulting in
further business consolidations and alliances among the industry participants we engage with, which may adversely
impact our business, financial condition and results of operations.
Certain risks are inherent in providing pharmacy services, and our insurance may not be adequate to cover any
claims against us.
We currently operate 1,727 pharmacies and, as a result, we are exposed to risks inherent in the packaging,
dispensing, distribution and disposal of pharmaceuticals and other healthcare products, such as risks of liability for
products which cause harm to consumers, as well as increased regulatory risks and related costs. Although we
maintain insurance, we cannot guarantee that the coverage limits under our insurance programs will be adequate to
protect us against future claims, or that we will be able to maintain this insurance on acceptable terms in the future,
or at all. Our results of operations, financial condition or cash flows may be materially adversely affected if in the
future our insurance coverage proves to be inadequate or unavailable, or there is an increase in the liability for
which we self-insure, or we suffer harm to our reputation as a result of an error or omission.
We are subject to numerous federal and state regulations. Each of our in-store pharmacies must be licensed by the
state government. The licensing requirements vary from state to state. An additional registration certificate must be
granted by the U.S. Drug Enforcement Administration, and, in some states, a separate controlled substance license
must be obtained to dispense controlled substances. In addition, pharmacies selling controlled substances are
required to maintain extensive records and often report information to state and federal agencies. If we fail to
comply with existing or future laws and regulations, we could suffer substantial civil or criminal penalties,
including the loss of our licenses to operate pharmacies and our ability to participate in federal and state healthcare
programs. As a consequence of the severe penalties we could face, we must devote significant operational and
managerial resources to complying with these laws and regulations.
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Application of federal and state laws and regulations could subject our current practices to allegations of
impropriety or illegality, or could require us to make significant changes to our operations. In addition, we cannot
predict the impact of future legislation and regulatory changes on our pharmacy business or assure that we will be
able to obtain or maintain the regulatory approvals required to operate our business.
Risks Related to Our Supply Chain
Product supply disruptions, especially those to perishable products, may have an adverse effect on our
profitability and operating results.
Reflecting consumer preferences, we have a significant focus on perishable products. Perishable sales accounted for
42% of our revenue in fiscal 2020. We rely on various suppliers and vendors to provide and deliver our perishable
and other product inventory on a continuous basis. We could suffer significant perishable and other product
inventory losses and significant lost revenue in the event of the loss or a shutdown of a major supplier or vendor,
disruption of our distribution network, extended power outages, natural disasters or other catastrophic occurrences.
Due to the COVID-19 pandemic and the resulting dislocation of workplaces and the economy, the ability of vendors
to supply required products may be impaired because of illness or absenteeism in their workforces, government
mandated shutdown orders or impaired financial conditions. The supply of meat products has been impacted by the
shutdown of certain key production facilities due to workforce illness. We have good working relationships with
major meat suppliers, smaller domestic suppliers and international suppliers, and we stay in regular contact to assess
production capacity and product availability. Nonetheless, we have experienced reduced allocations on a range of
meat products, and we have had to expand our supplier portfolio or make adjustments to our merchandising plans to
support in-stock conditions for our customers. Based on current discussions with industry leaders, we anticipate that
the meat supply chain will remain challenging for the near future. The supply of each product will return to pre-
COVID-19 levels at different times, and there can be no assurance that our efforts to ensure in-stock positions for all
of the products that our customers require will be successful.
Severe weather and natural disasters may adversely affect our business.
Severe weather conditions such as hurricanes, earthquakes, floods, wildfires, extended winter storms, heat waves or
tornadoes, as well as other natural disasters in areas in which we have stores or distribution centers or from which
we source or obtain products have caused and may cause physical damage to our properties, closure of one or more
of our stores, manufacturing facilities or distribution centers, lack of an adequate work force in a market, temporary
disruption in the manufacture of products, temporary disruption in the supply of products, disruption in the transport
of goods, delays in the delivery of goods to our distribution centers or stores, a reduction in customer traffic and a
reduction in the availability of products in our stores. In addition, adverse climate conditions and adverse weather
patterns, such as drought or flood, that impact growing conditions and the quantity and quality of crops yielded by
food producers may adversely affect the availability or cost of certain products within the grocery supply chain. Any
of these factors may disrupt our business and adversely affect our business. For example, in February 2021, Texas
experienced a severe winter storm, with temperatures in many parts of the state reaching debilitating lows, which
caused an increase in expenses for our divisions operating there.
Threats or potential threats to security of food and drug safety, the occurrence of a widespread health epidemic
and/or pandemic or regulatory concerns in our supply chain may adversely affect our business.
Acts or threats, whether perceived or real, of war or terror or other criminal activity directed at the food and drug
industry or the transportation industry, whether or not directly involving our stores, could increase our operating
costs and operations, or impact general consumer behavior and consumer spending. Other events that give rise to
actual or potential food contamination, drug contamination or food-borne illnesses, or a widespread regional,
national or global health epidemic and/or pandemic, such as of influenza or, specifically, the recent COVID-19
pandemic, could have an adverse effect on our operating results or disrupt production and delivery of the products
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we sell, our ability to appropriately and safely staff our stores and cause customers to avoid public gathering places
or otherwise change their shopping behaviors.
We source our products from vendors and suppliers and related networks across the globe who may be subject to
regulatory actions or face criticism due to actual or perceived social injustices, including human trafficking, child
labor or environmental, health and safety violations. A disruption in our supply chain due to any regulatory action or
social injustice could have an adverse impact on our supply chain and ultimately our business, including potential
harm to our reputation.
The costs associated with implementing and maintaining the safety measures designed to protect our associates and
customers in the COVID-19 pandemic have to date been more than offset by increased sales, but in the event our
sales decline as stay-at-home guidance subsides and the economy begins to re-open, we may be required to continue
to implement and maintain these protective measures despite lower sales, thereby reducing our profitability.
We could be affected if consumers lose confidence in the food supply chain or the quality and safety of our
products.
We could be adversely affected if consumers lose confidence in the safety and quality of certain food products.
Adverse publicity about these types of concerns, such as the concerns during fiscal 2020 and fiscal 2019 relating to
the COVID-19 pandemic and fiscal 2018 relating to romaine lettuce, whether valid or not, may discourage
consumers from buying our products or cause production and delivery disruptions. To the extent that a pathogen is
food-borne, or perceived to be food-borne, future outbreaks may adversely affect the price and availability of certain
food products and cause our customers to eat less of such product. The real or perceived sale of contaminated food
products by us could result in product liability claims, a loss of consumer confidence and product recalls, which
could have a material adverse effect on our business.
Fuel prices and availability may adversely affect our results of operations.
We currently operate 400 fuel centers that are adjacent to many of our store locations. As a result, we sell a
significant amount of gasoline. Increased regulation or significant increases in wholesale fuel costs could result in
lower gross profit on fuel sales, and demand could be affected by retail price increases as well as by concerns about
the effect of emissions on the environment. We are unable to predict future regulations, environmental effects,
political unrest, acts of terrorism, the actions of major oil producing countries to regulate oil production and other
matters that may affect the cost and availability of fuel, and how our customers will react, which could adversely
affect our results of operations.
Increased commodity prices may adversely impact our profitability.
We make in-store pricing decisions on a regional basis depending on the competitive landscape. We also set our
pricing based on the cost of doing business on a regional basis, as a result of occupancy and labor costs that vary by
region. At the same time, we frequently discuss ways to lower our costs with our consumer packaged goods partners
based upon our scale and sales momentum. Many of our own and sourced products include ingredients such as
wheat, corn, oils, milk, sugar, proteins, cocoa and other commodities. Commodity prices worldwide have been
volatile. Any increase in commodity prices may cause an increase in our input costs or the prices our vendors seek
from us. Although we typically are able to pass on modest commodity price increases or mitigate vendor efforts to
increase our costs, we may be unable to continue to do so, either in whole or in part, if commodity prices increase
materially. Suppliers, like us, are incurring additional costs to respond to the COVID-19 pandemic and may seek to
pass those costs through to us. If we are forced to increase prices, our customers may reduce their purchases at our
stores or trade down to less profitable products. Both may adversely impact our profitability as a result of reduced
revenue or reduced margins.
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Risks Related to Our Workforce
A significant majority of our employees are unionized, and our relationship with unions, including labor disputes
or work stoppages, could have an adverse impact on our operations and financial results.
As of February 27, 2021, approximately 210,000 of our employees were covered by collective bargaining
agreements. Collective bargaining agreements covering approximately 67,000 of our employees have expired or are
scheduled to expire in fiscal 2021. In future negotiations with labor unions, we expect that health care, pension costs
and/or contributions and wage costs, among other issues, will be important topics for negotiation. If, upon the
expiration of such collective bargaining agreements, we are unable to negotiate acceptable contracts with labor
unions, it could result in strikes by the affected workers and thereby significantly disrupt our operations. As part of
our collective bargaining agreements, we may need to fund additional pension contributions, which would
negatively impact our operating cash flow. Further, if we are unable to control health care and pension costs
provided for in the collective bargaining agreements, we may experience increased operating costs and an adverse
impact on our financial results.
Increased pension expenses, contributions and surcharges may have an adverse impact on our financial results.
We are sponsors of defined benefit retirement plans for certain employees at our Safeway, United Supermarkets,
LLC ("United") and Shaw's stores and distribution centers. The funded status of these plans (the difference between
the fair value of the plan assets and the projected benefit obligation) is a significant factor in determining annual
pension expense and cash contributions to fund the plans.
Unfavorable investment performance, increased pension expense and cash contributions may have an adverse
impact on our financial results. Under the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the PBGC has the authority to petition a court to terminate an underfunded pension plan in limited
circumstances. In the event that our defined benefit pension plans are terminated for any reason, we could be liable
for the entire amount of the underfunding, as calculated by the PBGC based on its own assumptions (which would
result in a larger obligation than that based on the actuarial assumptions used to fund such plans). Under ERISA and
the Internal Revenue Code (the "Code"), the liability under these defined benefit plans is joint and several with all
members of our control group, such that each member of our control group is potentially liable for the defined
benefit plans of each other member of the control group.
In addition, we currently contribute to 27 multiemployer pension plans for a substantial majority of employees
represented by unions pursuant to collective bargaining agreements that require us to contribute to these plans.
Under the Pension Protection Act of 2006 ("PPA"), contributions in addition to those made pursuant to a collective
bargaining agreement may be required in limited circumstances.
Pension expenses for multiemployer pension plans are recognized by us as contributions are made. Generally,
benefits are based on a fixed amount for each year of service. Our recurring contributions to multiemployer plans
were $524.0 million, $469.3 million and $451.1 million during fiscal 2020, fiscal 2019 and fiscal 2018, respectively.
Based on an assessment of the most recent information available, we believe that most of the multiemployer plans
to which we contribute are underfunded, which is the amount by which the actuarial determined plan liabilities
exceed the value of the plan assets. We are only one of a number of employers contributing to these plans. Though
we are not obligated nor the guarantor for any of the underfunding of multiemployer plans to which we contribute,
as of December 31, 2020, we attempted to estimate our share of the underfunding of multiemployer plans to which
we contribute, based on the ratio of our contributions to the total of all contributions to these plans in a year. Our
estimate of the Company's share of the underfunding of multiemployer plans to which we contribute was $4.7
billion. Our estimate is based on the most current information available to us including actuarial evaluations and
other data (that includes the estimates of others), and such information may be outdated or otherwise unreliable. Our
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estimate could also change based on the amount contributed to the plans, investment returns on the assets held in the
plans, actions taken by trustees who manage the plans' benefit payments, interest rates, the amount of withdrawal
liability payments made to the plans, if the employers currently contributing to these plans cease participation, and
requirements under the PPA, the Multiemployer Pension Reform Act of 2014 and applicable provisions of the Code.
The American Rescue Plan Act ("ARP Act"), which was signed into law on March 11, 2021, establishes a special
financial assistance program for financially troubled multiemployer pension plans. Under the ARP Act, eligible
multiemployer plans can apply to receive a one-time cash payment in the amount needed to pay pension benefits
through the plan year ending 2051. Though significant uncertainty remains in determining how the special
assistance program will work and the PBGC is expected to issue guidance or regulations within 120 days of
enactment, we expect the special financial assistance program to provide the necessary funding for the
multiemployer plans to which we contribute to remain solvent through at least 2051 in addition to ensuring the
solvency of the PBGC, which is the guarantor of participant benefits for the multiemployer plans.
In the event we were to exit certain markets or otherwise cease contributing to these plans, we could trigger a
substantial withdrawal liability. Any accrual for withdrawal liability will be recorded when a withdrawal is probable
and can be reasonably estimated, in accordance with GAAP. All trades or businesses in the employer's control group
are jointly and severally liable for the employer's withdrawal liability.
We were the second largest contributing employer to the Food Employers Labor Relations Association and United
Food and Commercial Workers Pension Fund ("FELRA"), which was projected by FELRA to become insolvent in
the first quarter of 2021, and to the Mid-Atlantic UFCW and Participating Pension Fund ("MAP"). On March 5,
2020, we agreed with the two applicable local unions to new collective bargaining agreements pursuant to which we
contribute to FELRA and MAP. These agreements were subject to final approval by the PBGC, the local unions and
the largest contributing employer, which was reached on December 31, 2020. In connection with these final
agreements, to address the pending insolvency of FELRA, we and the two local unions, along with the largest
contributing employer, agreed to combine MAP into FELRA (the "Combined Plan") on December 31, 2020. As a
result, we withdrew from the Combined Plan under the terms of the agreement with the applicable unions, the
largest contributing employer and the PBGC and received a release of all withdrawal liability and mass withdrawal
liability from FELRA, MAP, the Combined Plan and the PBGC. As a result, commencing February 2021, we are
required to annually pay $23.2 million to the Combined Plan for the next 25 years. This payment replaces our
previous annual contribution to both MAP and FELRA. In addition to the $23.2 million annual payment, we will
contribute to a new multiemployer pension plan limited to providing benefits to the former participants in MAP and
FELRA in excess of the benefits the PBGC insures under law (the "Excess Plan"). These contributions are expected
to commence in June 2022 and are currently expected to be $13.7 million annually for 10 years. Furthermore, we
are also establishing and will contribute to a new Variable Annuity Pension Plan (the "Combined VAPP") that
provides benefits to participants for future services, effective January 1, 2021. We will contribute approximately
$4.0 million to the Combined VAPP to fund certain administrative expenses and establish a stabilization reserve for
the Combined VAPP.
Effective as of June 30, 2020, we completely withdrew from the United Food and Commercial Workers
International Union ("UFCW") Union-Industry Pension Fund ("National Fund"). We and nine UFCW local unions
entered into a Memorandum of Understanding that permitted the withdrawal and required the establishment of a
new Variable Annuity Pension Plan that will provide benefits to participants for future services, effective as of July
1, 2020. As a result, we will pay, by June 2023, an aggregate of $285.7 million to the National Fund, in full
satisfaction of our withdrawal liability amount and mass withdrawal liability amount.
See "Part II—Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and
"Part II—Item 8. Financial Statements and Supplementary Data—Note 12" for more information relating to our
participation in these multiemployer pension plans.
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The minimum wage continues to increase and is subject to factors outside of our control. Changes to wage
regulations could have an impact on our future results of operations.
A considerable number of our employees are paid at rates related to the federal minimum wage. Additionally, many
of our stores are located in states, including California, where the minimum wage is greater than the federal
minimum wage and where a considerable number of employees receive compensation equal to the state's minimum
wage. For example, as of February 27, 2021, we employed approximately 76,000 associates in California, where the
current minimum wage was increased to $14.00 per hour, effective January 1, 2021, and will increase to $15.00 per
hour by January 1, 2022. In Massachusetts, where we employed approximately 11,700 associates as of February 27,
2021, the minimum wage increased to $13.50 per hour, effective January 1, 2021, and will reach $15.00 per hour by
2023. In New Jersey, where we employed approximately 7,500 associates as of February 27, 2021, the minimum
wage increased to $12.00 per hour, effective January 1, 2021, and will reach $15.00 per hour by 2024. In Maryland,
where we employed approximately 7,500 associates as of February 27, 2021, the minimum wage increased to
$11.75 per hour, effective January 1, 2021, and will reach $15.00 per hour by 2025. Moreover, municipalities may
set minimum wages above the applicable state standards. For example, the minimum wage in Seattle, Washington,
where we employed approximately 2,000 associates as of February 27, 2021, increased to $16.69 per hour effective
January 1, 2021 for employers with more than 500 employees nationwide. In Chicago, Illinois, where we employed
approximately 6,800 associates as of February 27, 2021, the minimum wage increased to $14.00 per hour effective
July 1, 2020. Any further increases in the federal minimum wage or the enactment of additional state or local
minimum wage increases could increase our labor costs, which may adversely affect our results of operations and
financial condition.
The food retail industry is labor intensive. Our ability to meet our labor needs, while controlling wage and labor-
related costs, is subject to numerous external factors, including the availability of qualified persons in the workforce
in the local markets in which we are located, unemployment levels within those markets, prevailing wage rates,
changing demographics, health and other insurance costs and changes in employment and labor laws. Such laws
related to employee hours, wages, job classification and benefits could significantly increase operating costs. In the
event of increasing wage rates, if we fail to increase our wages competitively, the quality of our workforce could
decline, causing our customer service to suffer, while increasing wages for our employees could cause our profit
margins to decrease. If we are unable to hire and retain employees capable of meeting our business needs and
expectations, our business and brand image may be impaired. Any failure to meet our staffing needs or any material
increase in turnover rates of our employees may adversely affect our business, results of operations and financial
condition.
Failure to attract and retain qualified associates could materially adversely affect our financial performance.
Our ability to continue to conduct and expand our operations depends on our ability to attract and retain a large and
growing number of qualified associates. Our ability to meet our labor needs, including our ability to find qualified
personnel to fill positions that become vacant at our existing stores and distribution centers, while controlling our
associate wage and related labor costs, is generally subject to numerous external factors, including the availability
of a sufficient number of qualified persons in the work force of the markets in which we operate, unemployment
levels within those markets, prevailing wage rates, changing demographics, health and other insurance costs and
adoption of new or revised employment and labor laws and regulations. If we are unable to locate, to attract or to
retain qualified personnel, the quality of service we provide to our customers may decrease and our financial
performance may be adversely affected.
To meet our requirements for increased labor in order to meet customer demand in store and across digital channels,
we partnered with major companies to provide temporary jobs to their employees who were furloughed or had their
hours cut. We have increased hiring since the beginning of fiscal 2020, partnering with more than 35 companies to
help keep Americans working, and as of February 27, 2021 had approximately 300,000 associates. To the extent that
our need for increased labor continues, we will need to hire and train additional employees to fill the roles
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performed by these temporary employees. This increase in associates and the wages that we must pay them will
impact our profitability during the period that they are with us.
We may be unable to attract and retain key personnel, which could adversely impact our ability to successfully
execute our business strategy.
The continued successful implementation of our business strategy depends in large part upon the ability and
experience of members of our senior management. In addition, our performance is dependent on our ability to
identify, hire, train, motivate and retain qualified management, technical, sales and marketing and retail personnel.
If we lose the services of members of our senior management or are unable to continue to attract and retain the
necessary personnel, we may not be able to successfully execute our business strategy, which could have an adverse
effect on our business.
Legal and Regulatory Risks
Unfavorable changes in government regulation may have a material adverse effect on our business.
Our stores are subject to various federal, state, local and foreign laws, regulations and administrative practices. We
must comply with numerous provisions regulating health and sanitation standards, food labeling, energy,
environmental, equal employment opportunity, minimum wages, pension, health insurance and other welfare plans,
licensing for the sale of food, drugs and alcoholic beverages and any new provisions relating to the COVID-19
pandemic. We cannot predict either the nature of future laws, regulations, interpretations or applications, or the
effect either additional governmental laws, regulations or administrative procedures, when and if promulgated, or
disparate federal, state, local and foreign regulatory schemes would have on our future business. In addition,
regulatory changes could require the reformulation of certain products to meet new standards, the recall or
discontinuance of certain products not able to be reformulated, additional record keeping, expanded documentation
of the properties of certain products, expanded or different labeling and/or scientific substantiation. Any or all of
such requirements could have an adverse effect on our business.
Unfavorable changes in the tax code could adversely impact our results of operations, financial position and
liquidity.
Changes in tax laws or their interpretations could adversely affect us. For example, prior to the 2020 U.S.
presidential election, President Biden proposed, among other changes to the tax code, an increase in the U.S.
corporate tax income rate from 21% to 28%. We are unable to predict whether any of these changes will ultimately
be enacted, however if any or all of these (or similar) proposals are ultimately enacted into law, they could have a
negative impact on our effective tax rate, cash tax liability, and cash tax refunds.
Unfavorable changes in, failure to comply with or increased costs to comply with environmental laws and
regulations could adversely affect us. The storage and sale of petroleum products could cause disruptions and
expose us to potentially significant liabilities.
Our operations, including our 400 fuel centers, are subject to various laws and regulations relating to the protection
of the environment, including those governing the storage, management, disposal and cleanup of hazardous
materials. Some environmental laws, such as the Comprehensive Environmental Response, Compensation and
Liability Act and similar state statutes, impose strict, and under certain circumstances joint and several, liability for
costs to remediate a contaminated site, and also impose liability for damages to natural resources.
Third-party claims in connection with releases of or exposure to hazardous materials relating to our current or
former properties or third-party waste disposal sites can also arise. In addition, the presence of contamination at any
of our properties could impair our ability to sell or lease the contaminated properties or to borrow money using any
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of these properties as collateral. The costs and liabilities associated with any such contamination could be
substantial and could have a material adverse effect on our business. Under current environmental laws, we may be
held responsible for the remediation of environmental conditions regardless of whether we lease, sublease or own
the stores or other facilities and regardless of whether such environmental conditions were created by us or a prior
owner or tenant. In addition, the increased focus on climate change, waste management and other environmental
issues may result in new environmental laws or regulations that negatively affect us directly or indirectly through
increased costs on our suppliers. There can be no assurance that environmental contamination relating to prior,
existing or future sites or other environmental changes will not adversely affect us through, for example, business
interruption, cost of remediation or adverse publicity.
We are subject to, and may in the future be subject to, legal or other proceedings that could have a material
adverse effect on us.
From time to time, we are a party to legal proceedings, including matters involving personnel and employment
issues, personal injury, antitrust claims, intellectual property claims and other proceedings arising in or outside of
the ordinary course of business. In addition, there are an increasing number of cases being filed against companies
generally, including class-action allegations under federal and state wage and hour laws. We may also be exposed to
legal proceedings arising out of the COVID-19 pandemic, including potential wrongful death actions brought on
behalf of employees that contracted COVID-19 and allegations of improper pricing of necessities during the
COVID-19 pandemic. We estimate our exposure to these legal proceedings and establish reserves for the estimated
liabilities. Assessing and predicting the outcome of these matters involves substantial uncertainties. Although not
currently anticipated by management, unexpected outcomes in these legal proceedings or changes in management's
forecast assumptions or predictions could have a material adverse impact on our results of operations.
We use a combination of insurance and self-insurance to address potential liabilities for workers' compensation,
automobile and general liability, property risk (including earthquake and flood coverage), director and officers'
liability, employment practices liability, pharmacy liability and employee health care benefits.
We use a combination of insurance and self-insurance to address potential liabilities for workers' compensation,
automobile and general liability, property risk (including earthquake and flood coverage), director and officers'
liability, employment practices liability, pharmacy liability and employee health care benefits and cyber and
terrorism risks. We estimate the liabilities associated with the risks retained by us, in part, by considering historical
claims experience, demographic and severity factors and other actuarial assumptions which, by their nature, are
subject to a high degree of variability. Among the causes of this variability are unpredictable external factors
affecting future inflation rates, discount rates, litigation trends, legal interpretations, benefit level changes and claim
settlement patterns.
The majority of our workers' compensation liability is from claims occurring in California, where workers'
compensation has received intense scrutiny from the state's politicians, insurers, employers and providers, as well as
the public in general.
Risks Related to Information Security, Cybersecurity and Data Privacy
We may be adversely affected by risks related to our dependence on IT systems. Any future changes to or
intrusion into these IT systems, even if we are compliant with industry security standards, could materially
adversely affect our reputation, financial condition and operating results.
We have complex IT systems that are important to the success of our business operations and marketing initiatives.
If we were to experience failures, breakdowns, substandard performance or other adverse events affecting these
systems, or difficulties accessing the proprietary business data stored in these systems, or in maintaining, expanding
or upgrading existing systems or implementing new systems, we could incur significant losses due to disruptions in
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our systems and business. These risks may be further exacerbated by the deployment and continued refinement of
cloud-based enterprise solutions. In a cloud computing environment, we could be subject to outages by third-party
service providers and security breaches to their systems. Unauthorized parties have obtained in the past, and may in
the future obtain, access to cloud-based platforms used by companies.
Improper activities by third parties, exploitation of encryption technology, new data-hacking tools and
discoveries and other events or developments may result in future intrusions into or compromise of our networks,
payment card terminals or other payment systems.
The techniques used by criminals to obtain unauthorized access to sensitive data change frequently and often cannot
be recognized until launched against a target; accordingly, we may not be able to anticipate these frequently
changing techniques or implement adequate preventive measures for all of them. Any unauthorized access into our
customers' sensitive information, or data belonging to us or our suppliers, even if we are compliant with industry
security standards, could put us at a competitive disadvantage, result in deterioration of our customers' confidence in
us and subject us to potential litigation, liability, fines and penalties and consent decrees, resulting in a possible
material adverse impact on our financial condition and results of operations.
As a merchant that accepts debit and credit cards for payment, we are subject to the Payment Card Industry ("PCI")
Data Security Standard ("PCI DSS"), issued by the PCI Council. PCI DSS contains compliance guidelines and
standards with regard to our security surrounding the physical administrative and technical storage, processing and
transmission of individual cardholder data. By accepting debit cards for payment, we are also subject to compliance
with American National Standards Institute ("ANSI") data encryption standards and payment network security
operating guidelines. Failure to be PCI compliant or to meet other payment card standards may result in the
imposition of financial penalties or the allocation by the card brands of the costs of fraudulent charges to us. As
well, the Fair and Accurate Credit Transactions Act ("FACTA") requires systems that print payment card receipts to
employ personal account number truncation so that the consumer's full account number is not viewable on the slip.
Despite our efforts to comply with these or other payment card standards and other information security measures,
we cannot be certain that all of our IT systems will be able to prevent, contain or detect all cyber-attacks or
intrusions from known malware or malware that may be developed in the future. To the extent that any disruption
results in the loss, damage or misappropriation of information, we may be adversely affected by claims from
customers, financial institutions, regulatory authorities, payment card associations and others. In addition, privacy
and information security laws and standards continue to evolve and could expose us to further regulatory burdens.
The cost of complying with stricter laws and standards, including PCI DSS, ANSI and FACTA data encryption
standards and the California Consumer Privacy Act which took effect in January 2020, could be significant.
The loss of confidence from a data security breach involving our customers or employees could hurt our
reputation and cause customer retention and employee recruiting challenges.
We receive and store personal information in connection with our marketing and human resources organizations.
The protection of our customer and employee data is critically important to us. Despite our considerable efforts to
secure our computer networks, security could be compromised, confidential information could be misappropriated
or system disruptions could occur, as has occurred with a number of other retailers. If we experience a data security
breach, we could be exposed to government enforcement actions, possible assessments from the card brands if
credit card data was involved and potential litigation. In addition, our customers could lose confidence in our ability
to protect their personal information, which could cause them to stop shopping at our stores altogether.
Unauthorized computer intrusions could adversely affect our brands and could discourage customers from
shopping with us.
In 2014, we were the subject of an unauthorized intrusion affecting 800 of our stores in an attempt to obtain credit
card data. While the claims arising out of this intrusion have been substantially resolved, there can be no assurance
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that we will not suffer a similar criminal attack in the future or that unauthorized parties will not gain access to
personal information of our customers. While we have implemented additional security software and hardware
designed to provide additional protections against unauthorized intrusions, there can be no assurance that
unauthorized individuals will not discover a means to circumvent our security. Hackers and data thieves are
increasingly sophisticated and operate large-scale and complex attacks. Experienced computer programmers and
hackers may be able to penetrate our security controls and misappropriate or compromise sensitive personal,
proprietary or confidential information, create system disruptions or cause shutdowns. They also may be able to
develop and deploy malicious software programs that attack our systems or otherwise exploit any security
vulnerabilities. Computer intrusions could adversely affect our brands, have caused us to incur legal and other fees,
may cause us to incur additional expenses for additional security measures and could discourage customers from
shopping in our stores.
Risks Related to Our Indebtedness
Our substantial level of indebtedness could adversely affect our financial condition and prevent us from fulfilling
our obligations under our indebtedness.
We have a significant amount of indebtedness. As of February 27, 2021, we had approximately $7.8 billion of debt
outstanding (other than finance lease obligations), and, subject to our borrowing base, we would have been able to
borrow an additional $3.6 billion under our asset-based loan ("ABL") facility (the "ABL Facility"). As of
February 27, 2021, we and our subsidiaries had approximately $0.6 billion of finance lease obligations.
Our substantial indebtedness could have important consequences. For example, it could:
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increase our vulnerability to general adverse economic and industry conditions;
require us to dedicate a substantial portion of our cash flow from operations to payments on our
indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital
expenditures and other general corporate purposes, including acquisitions;
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we
operate;
place us at a competitive disadvantage compared to our competitors that have less debt; and
limit our ability to borrow additional funds.
In addition, there can be no assurance that we will be able to refinance any of our debt or that we will be able to
refinance our debt on commercially reasonable terms. If we were unable to make payments or refinance our debt or
obtain new financing under these circumstances, we would have to consider other options, such as:
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sales of assets;
sales of equity; or
negotiations with our lenders to restructure the applicable debt.
Our debt instruments may restrict, or market or business conditions may limit, our ability to obtain additional
indebtedness, refinance our indebtedness or use some of our options.
Despite our significant indebtedness levels, we may still be able to incur substantially more debt, which could
further exacerbate the risks associated with our substantial leverage.
We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the
credit agreement that governs the ABL Facility and the indentures that govern the New Albertsons L.P.'s ("NALP")
6.52% to 7.15% Medium-Term Notes, due July 2027-June 2028, 7.75% Debentures due June 2026, 7.45% Senior
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Debentures due August 2029, 8.70% Senior Debentures due May 2030 and 8.00% Senior Debentures due May 2031
(collectively, the "NALP Notes"), Safeway's 4.75% Senior Notes due December 2021, 7.45% Senior Debentures
due September 2027 and 7.25% Senior Debentures due February 2031 (collectively, the "Safeway Notes"), and
ACI's 3.5% Senior Notes due February 2023 (the "2023 Notes"), 5.750% Senior Notes due September 2025 (the
"2025 Notes"), 7.5% Senior Notes due March 2026, 3.250% Senior Notes due March 2026 (the "New 2026 Notes"),
4.625% Senior Notes due January 2027 (the "2027 Notes"), 5.875% Senior Notes due February 2028 (the "2028
Notes"), 3.500% Senior Notes due March 2029 (the "2029 Notes") and 4.875% Senior Notes due February 2030
(the "2030 Notes") permit us to incur significant additional indebtedness, subject to certain limitations. If new
indebtedness is added to our and our subsidiaries' current debt levels, the related risks that we and they now face
would intensify.
To service our indebtedness, we require a significant amount of cash, and our ability to generate cash depends on
many factors beyond our control.
Our ability to make cash payments on and to refinance the indebtedness and to fund planned capital expenditures
will depend on our ability to generate significant operating cash flow in the future, as described in the section
entitled "Part II—Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations"
of this Annual Report on Form 10-K. This ability is, to a significant extent, subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our control.
Our business may not generate sufficient cash flow from operations to enable us to pay our indebtedness or to fund
our other liquidity needs. In any such circumstance, we may need to refinance all or a portion of our indebtedness,
on or before maturity. We may not be able to refinance any indebtedness on commercially reasonable terms, or at
all. If we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional
equity or reducing or delaying capital expenditures, strategic acquisitions and investments. Any such action, if
necessary, may not be effected on commercially reasonable terms or at all. The instruments governing our
indebtedness may restrict our ability to sell assets and our use of the proceeds from such sales.
If we are unable to generate sufficient cash flow or are otherwise unable to obtain funds necessary to meet required
payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the
various covenants in the instruments governing our indebtedness, we could be in default under the terms of the
agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect
to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the
lenders under our credit agreement, or any replacement revolving credit facility in respect thereof, could elect to
terminate their revolving commitments thereunder, cease making further loans and institute foreclosure proceedings
against our assets, and we could be forced into bankruptcy or liquidation.
In addition, in July 2017, the U.K. Financial Conduct Authority, which regulates the London Interbank Offered Rate
("LIBOR"), announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after
2021. It is unclear if LIBOR will cease to exist or if new methods of calculating LIBOR will evolve and what, if
any, effect these changes, other reforms or the establishment of alternative reference rates may have on instruments
that calculate interest rates based on LIBOR including our ABL Facility. Additionally, changes in the method
pursuant to which the LIBOR rates are determined may result in a sudden or prolonged increase or decrease in the
reported LIBOR rates. While we do not expect that the transition from LIBOR and risks related thereto will have a
material adverse effect on our financing costs, it is still uncertain at this time. For more information, see "Part II—
Item 7A. Quantitative and Qualitative Disclosures About Market Risk."
Our debt instruments limit our flexibility in operating our business.
Our debt instruments contain various covenants that limit our and our restricted subsidiaries' ability to engage in
specified types of transactions. A breach of any of these covenants could result in a default under our debt
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instruments. Any debt agreements we enter into in the future may further limit our ability to enter into certain types
of transactions. In addition, certain of the covenants governing the ABL Facility and our existing notes restrict,
among other things, our and our restricted subsidiaries' ability to:
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incur additional indebtedness or provide guarantees in respect of obligations of other persons;
pay dividends on, repurchase or make distributions to our owners or make other restricted payments or
make certain investments;
prepay, redeem or repurchase debt;
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sell or otherwise dispose of certain assets;
incur liens;
engage in sale leaseback transactions;
restrict dividends, loans or asset transfers from our subsidiaries;
consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;
enter into a new or different line of business; and
enter into certain transactions with our affiliates.
In addition, the restrictive covenants in our ABL Facility require us, in certain circumstances, to maintain a specific
fixed charge coverage ratio. Our ability to meet that financial ratio can be affected by events beyond our control,
and there can be no assurance that we will meet it. A breach of this covenant could result in a default under such
facilities. Moreover, the occurrence of a default under our ABL Facility could result in an event of default under our
other indebtedness. Upon the occurrence of an event of default under our ABL Facility, the lenders could elect to
declare all amounts outstanding under the ABL Facility to be immediately due and payable and terminate all
commitments to extend further credit. Even if we are able to obtain new financing, it may not be on commercially
reasonable terms, or terms that are acceptable to us.
Increases in interest rates and/or a downgrade of our credit ratings could negatively affect our financing costs
and our ability to access capital.
We have exposure to future interest rates based on the variable rate debt under our credit facilities and to the extent
we raise additional debt in the capital markets to meet maturing debt obligations, to fund our capital expenditures
and working capital needs and to finance future acquisitions. Daily working capital requirements are typically
financed with operational cash flow and through the use of our ABL Facility. The interest rate on these borrowing
arrangements is generally determined from the inter-bank offering rate at the borrowing date plus a pre-set margin.
Although we employ risk management techniques to hedge against interest rate volatility, significant and sustained
increases in market interest rates could materially increase our financing costs and negatively impact our reported
results.
We rely on access to bank and capital markets as sources of liquidity for cash requirements not satisfied by cash
flows from operations. A downgrade in our credit ratings from the internationally recognized credit rating agencies
could negatively affect our ability to access the bank and capital markets, especially in a time of uncertainty in
either of those markets. A rating downgrade could also impact our ability to grow our business by substantially
increasing the cost of, or limiting access to, capital.
We may have liability under certain operating leases that were assigned to third parties.
We may have liability under certain operating leases that were assigned to third parties. If any of these third parties
fail to perform their obligations under the leases, including as a result of the economic dislocation caused by the
COVID-19 pandemic, we could be responsible for the lease obligation. Due to the wide dispersion among third
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parties and the variety of remedies available, we believe that if an assignee became insolvent it would not have a
material effect on our financial condition, results of operations or cash flows.
Risks Related to Owning Our Common Stock
The price of our common stock may be volatile or may decline regardless of our operating performance, and you
may suffer a decline in value.
The market price of our common stock is volatile and may be influenced by many factors, some of which are
beyond our control, including:
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the failure of securities analysts to cover our common stock, or changes in financial estimates by analysts;
changes in, or investors' perception of, the food and drug retail industry;
the activities of competitors;
future issuances and sales of our common stock, including in connection with acquisitions;
our quarterly or annual earnings or those of other companies in our industry;
the public's reaction to our press releases, our other public announcements and our filings with the SEC;
regulatory or legal developments in the United States;
litigation involving us, our industry, or both; and
general economic conditions.
In addition, the stock market often experiences extreme price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of a particular company. These broad market fluctuations
and industry factors may materially reduce the market price of our common stock, regardless of our operating
performance. As a result of these factors, you may suffer a decline in value.
We are controlled by Cerberus, Klaff Realty, L.P., Schottenstein Stores Corp., Lubert-Adler Partners, L.P. and
Kimco Realty Corporation (collectively, the "Sponsors") and they may have conflicts of interest with other
stockholders in the future.
Our Sponsors control in the aggregate approximately 78.6% of our common stock. As a result, our Sponsors are
able to control the election of our directors, determine our corporate and management policies and determine,
without the consent of our other stockholders, the outcome of any corporate transaction or other matter submitted to
our stockholders for approval, including potential mergers or acquisitions, asset sales and other significant corporate
transactions. Four of our 14 directors are either employees of, or advisors to, members of our Sponsors. Our
Sponsors also have sufficient voting power to amend our organizational documents. The interests of our Sponsors
may not coincide with the interests of other holders of our common stock. Additionally, our Sponsors are in the
business of making investments in companies and may, from time to time, acquire and hold interests in businesses
that compete directly or indirectly with us. Our Sponsors may also pursue, for their own account, acquisition
opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be
available to us. So long as our Sponsors continue to own a significant amount of the outstanding shares of our
common stock, our Sponsors will continue to be able to strongly influence or effectively control our decisions,
including potential mergers or acquisitions, asset sales and other significant corporate transactions.
We are a "controlled company" within the meaning of the NYSE rules and, as a result, qualify for, and intend to
rely on, exemptions from certain corporate governance requirements. Our stockholders will not have the same
protections afforded to stockholders of companies that are subject to such requirements.
Our Sponsors, as a group, control a majority of our outstanding common stock. As a result, we are a "controlled
company" within the meaning of the NYSE rules. Under the NYSE rules, a company of which more than 50% of
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the voting power is held by an individual, group or another company is a "controlled company" and may elect not to
comply with certain corporate governance requirements, including:
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the requirement that a majority of the board of directors consist of independent directors;
the requirement that we have a nominating and corporate governance committee that is composed entirely
of independent directors with a written charter addressing the committee's purpose and responsibilities;
the requirement that we have a compensation committee that is composed entirely of independent directors
with a written charter addressing the committee's purpose and responsibilities; and
the requirement for an annual performance evaluation of the nominating and corporate governance and
compensation committees.
We currently utilize, and intend to continue to utilize, these exemptions. As a result, we do not have a majority of
independent directors nor do our nominating and corporate governance and compensation committees consist
entirely of independent directors. Accordingly, our stockholders will not have the same protections afforded to
stockholders of companies that are subject to all of the NYSE corporate governance requirements.
Provisions in our charter documents, certain agreements governing our indebtedness, our stockholders
agreement with our Sponsors, dated June 25, 2020 (the "Stockholders' Agreement") and Delaware law could
make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our
current management, even if beneficial to our stockholders.
Provisions in our amended and restated certificate of incorporation, as amended ("certificate of incorporation"), and
our amended and restated bylaws ("bylaws") may discourage, delay or prevent a merger, acquisition or other change
in control that some stockholders may consider favorable, including transactions in which our stockholders might
otherwise receive a premium for their shares of our common stock. These provisions could also limit the price that
investors might be willing to pay in the future for shares of our common stock, possibly depressing the market price
of our common stock.
In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace members of our
board of directors. Because our board of directors is responsible for appointing the members of our management
team, these provisions could in turn affect any attempt by our stockholders to replace members of our management
team. Examples of such provisions are as follows:
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from and after such date that our Sponsors and their respective Affiliates (as defined in Rule 12b-2 of the
Exchange Act), or any person who is an express assignee or designee of their respective rights under our
certificate of incorporation (and such assignee's or designee's Affiliates) ceases to own, in the aggregate, at
least 50% of the then-outstanding shares of our common stock (the "50% Trigger Date"), the authorized
number of our directors may be increased or decreased only by the affirmative vote of two-thirds of the
then-outstanding shares of our common stock or by resolution of our board of directors;
prior to the 50% Trigger Date, only our board of directors and the Sponsors are expressly authorized to
make, alter or repeal our bylaws and, from and after the 50% Trigger Date, our stockholders may only
amend our bylaws with the approval of at least two-thirds of all of the outstanding shares of our capital
stock entitled to vote;
from and after the 50% Trigger Date, the manner in which stockholders can remove directors from the
board will be limited;
from and after the 50% Trigger Date, stockholder actions must be effected at a duly called stockholder
meeting and actions by our stockholders by written consent will be prohibited;
from and after such date that our Sponsors and their respective Affiliates (or any person who is an express
assignee or designee of our Sponsors' respective rights under our certificate of incorporation (and such
assignee's or designee's Affiliates)) ceases to own, in the aggregate, at least 35% of the then-outstanding
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shares of our common stock (the "35% Trigger Date"), advance notice requirements for stockholder
proposals that can be acted on at stockholder meetings and nominations to our board of directors will be
established;
limits on who may call stockholder meetings;
requirements on any stockholder (or group of stockholders acting in concert), other than, prior to the 35%
Trigger Date, the Sponsors, who seeks to transact business at a meeting or nominate directors for election to
submit a list of derivative interests in any of our company's securities, including any short interests and
synthetic equity interests held by such proposing stockholder;
requirements on any stockholder (or group of stockholders acting in concert) who seeks to nominate
directors for election to submit a list of "related party transactions" with the proposed nominee(s) (as if such
nominating person were a registrant pursuant to Item 404 of Regulation S-K, and the proposed nominee was
an executive officer or director of the "registrant"); and
our board of directors is authorized to issue preferred stock without stockholder approval, which could be
used to institute a "poison pill" that would work to dilute the stock ownership of a potential hostile acquiror,
effectively preventing acquisitions that have not been approved by our board of directors.
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Our certificate of incorporation authorizes our board of directors to issue up to 100,000,000 shares of preferred
stock. The preferred stock may be issued in one or more series, the terms of which may be determined by our board
of directors at the time of issuance or fixed by resolution without further action by the stockholders. These terms
may include voting rights, preferences as to dividends and liquidation, conversion rights, redemption rights, and
sinking fund provisions. The issuance of preferred stock could diminish the rights of holders of our common stock,
and therefore could reduce the value of our common stock. In addition, specific rights granted to holders of
preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of our
board of directors to issue preferred stock could delay, discourage, prevent, or make it more difficult or costly to
acquire or effect a change in control, thereby preserving the current stockholders' control.
Certain rights of the holders of the Company's Series A-1 convertible preferred stock ("Series A-1 Preferred
Stock") and Series A convertible preferred stock ("Series A Preferred Stock" and together with the Series A-1
Preferred Stock, the "Convertible Preferred Stock") could delay or prevent an otherwise beneficial takeover or
takeover attempt of the Company.
Certain rights of the holders of the Convertible Preferred Stock could make it more difficult or more expensive for a
third party to acquire us. For example, if a Fundamental Change (as defined in each of the certificate of designations
of the Series A-1 Preferred Stock (the "Series A-1 Certificate of Designations") and the certificate of designations of
the Series A Preferred Stock (the "Series A-1 Certificate of Designations" and together with the Series A Certificate
of Designations, the "Certificate of Designations")) were to occur, holders of the Convertible Preferred Stock, if
issued, may have the right to convert their Convertible Preferred Stock, in whole or in part, at an increased
conversion rate and will also be entitled to receive a make-whole amount equal to the present value of all remaining
dividend payments on their Convertible Preferred Stock as described in the Certificate of Designations governing
the Convertible Preferred Stock. The holders of our Convertible Preferred Stock (the "Preferred Investors") also
hold the Investor Exchange Right (as defined in the Certificate of Designations governing the Convertible Preferred
Stock) which may be exercised if any of the following were to occur: (i) the seventh anniversary of June 9, 2020, so
long as any shares of Convertible Preferred Stock are outstanding, (ii) the fourth anniversary of an initial public
offering, if a Fundamental Change occurs and the related Fundamental Change Stock Price (as defined in the
Certificate of Designations governing the Convertible Preferred Stock) is less than the conversion price, (iii) a
downgrade by one or more gradations (including gradations within ratings categories as well as between ratings
categories) or withdrawal of our credit rating, as a result of which our credit rating is B- (or Moody's equivalent) or
lower, (iv) the failure by us to pay a dividend on the Convertible Preferred Stock, which failure continues for 30
days after such dividend's due date, or (v) a bankruptcy filing. These features of the Convertible Preferred Stock
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could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing
incumbent management.
Our certificate of incorporation and bylaws designate the Court of Chancery of the State of Delaware as the sole
and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which
could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors,
officers or other employees.
Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum,
the Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the exclusive forum
for: (a) any derivative action or proceeding brought on our behalf; (b) any action asserting a claim for breach of a
fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders; (c) any action
asserting a claim arising pursuant to any provision of the Delaware General Corporation Law (the "DGCL"), our
certificate of incorporation or our bylaws; or (d) any action asserting a claim governed by the internal affairs
doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is
deemed to have received notice of and consented to the foregoing provisions. This choice of forum provision may
limit a stockholder's ability to bring a claim in a judicial forum that it finds more favorable for disputes with us or
our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers
and employees. Alternatively, if a court were to find this choice of forum provision inapplicable to, or unenforceable
in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated
with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or
results of operations. Because the applicability of the exclusive forum provision is limited to the extent permitted by
law, we do not intend that the exclusive forum provision would apply to suits brought to enforce any duty or
liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
Additionally, unless we consent in writing to the selection of an alternative forum, the federal district courts of the
United States of America shall be the exclusive forum for the resolution of any action asserting a cause of action
arising under the Securities Act. Investors cannot waive compliance with the federal securities laws and the rules
and regulations thereunder. Although we believe this provision benefits us by providing increased consistency in the
application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of
discouraging lawsuits against our directors and officers.
If a substantial number of shares becomes available for sale and are sold in a short period of time, the market
price of our common stock could decline and our stockholders may be diluted.
If our stockholders sell substantial amounts of our common stock in the public market, the market price of our
common stock could decrease. The perception in the public market that our stockholders might sell shares of
common stock could also create a perceived overhang and depress our market price. The market price for shares of
our common stock may drop when the restrictions on resale by certain of our stockholders and independent
directors lapse.
The Preferred Investors are also subject to certain additional transfer restrictions with respect to the Convertible
Preferred Stock and the shares of common stock issuable pursuant to the Convertible Preferred Stock (the
"Conversion Shares"). The Preferred Investors will not be able to transfer the shares of common stock issuable
pursuant to the Conversion Shares, other than to affiliated entities or in connection with a Fundamental Change,
prior to the 18 month anniversary of June 9, 2020. Prior to the seven month anniversary of June 9, 2020, the
Preferred Investors have the right to transfer shares of Convertible Preferred Stock only to their affiliated entities,
another Preferred Investor or its affiliated entities (with any transferee thereof bound by same transferability/lock-up
provisions hereof). Until the 18 month anniversary of June 9, 2020, the Preferred Investors, and their respective
affiliated entities, are required to collectively continue to hold greater than 50% of the shares of Convertible
Preferred Stock (or Conversion Shares).
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In addition, our Sponsors and the Preferred Investors have substantial demand and incidental registration rights.
Among them, we must use our reasonable best efforts to file and maintain effective a shelf registration statement for
all registrable securities held by the Preferred Investors by no later than 18 months after June 9, 2020. We have also
filed a registration statement on Form S-8 under the Securities Act to register shares of our common stock or
securities convertible into or exchangeable for shares of our common stock issued pursuant to our equity incentive
plans. Such Form S-8 registration statement automatically became effective upon filing. Accordingly, shares
registered under such registration statements are available for sale in the open market. A decline in the market price
of our common stock might impede our ability to raise capital through the issuance of additional shares of our
common stock or other equity securities.
If equity research analysts do not publish research or reports about our business or if they issue unfavorable
commentary or downgrade our common stock, the market price of our common stock could decline.
The trading market for our common stock likely will be influenced by the research and reports that equity and debt
research analysts publish about the industry, us and our business. The market price of our common stock could
decline if one or more securities analysts downgrade our shares or if those analysts issue a sell recommendation or
other unfavorable commentary or cease publishing reports about us or our business. If one or more of the analysts
who elect to cover us downgrade our shares, the market price of our common stock would likely decline.
Our ability to pay dividends to our stockholders is restricted by applicable laws and regulations and requirements
under certain of our securities and debt agreements, including the ABL Facility, our existing notes and the
Convertible Preferred Stock.
Holders of our common stock are only entitled to receive such cash dividends as our board of directors, in its sole
discretion, may declare out of funds legally available for such payments. Effective fiscal 2020, we have established
a dividend policy pursuant to which we intend to pay a quarterly dividend on our common stock in an annual
amount equal to $0.400 per common share. Our board of directors may change or eliminate the payment of future
dividends to our common stockholders at its discretion, without notice to our stockholders. Any future
determination relating to our dividend policy will be dependent on a variety of factors, including our financial
condition, earnings, legal requirements, our general liquidity needs, and other factors that our board deems relevant.
Our ability to declare and pay dividends to our stockholders is subject to certain laws, regulations, and policies,
including minimum capital requirements and, as a Delaware corporation, we are subject to certain restrictions on
dividends under the DGCL. Under the DGCL, our board of directors may not authorize payment of a dividend
unless it is either paid out of our surplus, as calculated in accordance with the DGCL, or if we do not have a surplus,
it is paid out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.
In addition, so long as any shares of our Convertible Preferred Stock remain outstanding, no dividend or distribution
may be declared or paid on our common stock unless all accrued and unpaid dividends have been paid on our
Convertible Preferred Stock, subject to exceptions, such as dividends on our common stock payable solely in shares
of our common stock. Finally, our ability to pay dividends to our stockholders may be limited by covenants in any
financing arrangements that we are currently a party to, including the ABL Facility and our existing notes, to or may
enter into in the future. As a consequence of these various limitations and restrictions, we may not be able to make,
or may have to reduce or eliminate at any time, the payment of dividends on our common stock.
Our stockholders may be diluted by the future issuance of additional common stock in connection with our
equity incentive plans, acquisitions or otherwise.
We have 414,425,334 shares of Class A common stock and 150,000,000 shares of Class A-1 common stock
authorized but unissued under our certificate of incorporation, excluding 101,612,000 shares of common stock and
Class A-1 common stock reserved for issuance upon conversion of the Convertible Preferred Stock. We are
authorized to issue these shares of common stock and options, rights, warrants and appreciation rights relating to
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common stock for consideration and on terms and conditions established by our board of directors in its sole
discretion, whether in connection with acquisitions or otherwise.
We have reserved a maximum of 43,563,800 shares of our common stock for issuance under existing awards of
restricted stock units (following the conversion of our outstanding phantom units granted under our phantom unit
plan) and for awards that may be issued under the Incentive Plan. Any common stock that we issue, including under
our 2020 Omnibus Incentive Plan or other equity incentive plans that we may adopt in the future, may result in
additional dilution to our stockholders.
In the future, we may also issue our securities, including shares of our common stock, in connection with
investments or acquisitions. We regularly evaluate potential acquisition opportunities, including ones that would be
significant to us. The amount of shares of our common stock issued in connection with an investment or acquisition
could constitute a material portion of our then-outstanding shares of common stock. Any issuance of additional
securities in connection with investments or acquisitions may result in additional dilution to our stockholders.
The Convertible Preferred Stock may adversely affect the market price of our common stock.
The market price of our common stock is likely to be influenced by the Convertible Preferred Stock. For example,
the market price of our common stock could become more volatile and could be depressed by investors' anticipation
of the potential resale in the market of a substantial number of additional shares of our common stock received upon
conversion of the Convertible Preferred Stock and hedging or arbitrage trading activity that may develop involving
the Convertible Preferred Stock and our common stock.
Our common stock ranks junior to the Convertible Preferred Stock with respect to the payment of dividends and
amounts payable in the event of our liquidation, dissolution or winding-up of our affairs.
Our common stock ranks junior to the Convertible Preferred Stock with respect to the payment of dividends and
amounts payable in the event of our liquidation, dissolution or winding-up of our affairs. This means that, unless
accumulated and unpaid dividends have been declared and paid, or set aside for payment, on all outstanding shares
of the Convertible Preferred Stock, for all preceding dividend periods, no dividends may be declared or paid on our
common stock and we are not permitted to purchase, redeem or otherwise acquire any of our common stock, subject
to limited exceptions. Likewise, in the event of our voluntary or involuntary liquidation, dissolution or winding-up
of our affairs, no distribution of our assets may be made to holders of our common stock until we have paid to
holders of the Convertible Preferred Stock a liquidation preference equal to $1,000 per share plus accumulated and
unpaid dividends.
Holders of the Convertible Preferred Stock, subject to certain conditions, will have the right to elect two
directors.
From and after such time as (i) it is lawful under Section 8 of the Clayton Antitrust Act of 1914 for the Preferred
Investors affiliated with Apollo (the "Apollo Preferred Investors") to designate a director to our board of directors
and (ii) any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 applicable to the
acquisition of our voting securities expires or is terminated with respect to the Apollo Preferred Investors, and, so
long as the Apollo Preferred Investors and their affiliates hold at least 25% of the Convertible Preferred Stock issued
on June 9, 2020 (or 25% of the Conversion Shares), the Apollo Preferred Investors will have the right to designate
one director to our board of directors. On June 29, 2020, the Preferred Investors affiliated with HPS Investment
Partners, LLC (the "HPS Preferred Investors") were relieved from these same antitrust restrictions allowing the HPS
Preferred Investors the right to designate one director to our board of directors. This right to elect directors will
dilute the representation of the holders of our common stock on our board of directors and may adversely affect the
market price of our common stock.
36
Table of Contents
Our subsidiary ACI Real Estate Company LLC, a Delaware limited liability company ("RE LLC"), which owns a
significant portion of our real estate, is subject to certain restrictions under the Amended and Restated Real
Estate Agreement by and between ACI Real Estate Company LLC and AL RE Investor Holdings, LLC ("RE
Investor"), dated June 9, 2020 (as amended, the "Real Estate Agreement"), which could affect our ability to
execute our operational and strategic objectives.
Prior to June 9, 2020, we underwent a real estate reorganization. As a result of such reorganization, certain
subsidiaries of RE LLC (such subsidiaries, the "SPEs") that are subsidiaries of RE LLC own the real property assets
("Real Estate Assets"), consisting of approximately 240 fee owned store properties which were to have an appraised
value of approximately $2.9 billion. RE LLC also deposited into escrow such amount of cash as was necessary to
make up any shortfall, which cash amount of approximately $36.5 million was deposited with an escrow agent (the
"Escrow Agent"). Immediately prior to June 9, 2020, RE Holdings I, RE Holdings II, RE LLC and each of the SPEs
(collectively, the "RE LLC Entities") entered into amended and restated operating agreements. Our wholly-owned
subsidiary Safeway is the only member of RE Holdings I with the ability to vote on any matters. Each of the RE
LLC Entities has a board of five members, which includes two independent directors. However, the RE Investor
was admitted to each of the RE LLC Entities as a "Special Non-Economic Member." As a Special Non-Economic
Member, the RE Investor has certain approval rights relating to the real estate portfolio, that Unitary Master
Sublease between ACI Real Estate Company LLC, as landlord, and the entities set forth therein, as tenant, dated
June 9, 2020 (the "Master Lease Agreement"), affiliate transactions and the issuance of securities or other
instruments that rank pari passu or senior. These approval rights could limit our ability to implement future strategic
objectives.
The RE Investor could exercise the Investor Exchange Right, which provides it with certain unilateral rights,
upon the occurrence of specified trigger events, that could cause us to lose ownership of all or part of our
indirect interest in the SPEs or their Real Estate Assets unless we redeem all of the outstanding Convertible
Preferred Stock.
The Real Estate Agreement provides the RE Investor with the unilateral right, upon the occurrence of specified
trigger events, to exercise the Investor Exchange Right to exchange all of the outstanding Convertible Preferred
Stock for certain Real Estate Assets or the equity of the SPEs holding such Real Estate Assets. The Investor
Exchange Right may be exercised if any of the following were to occur: (i) the seventh anniversary of June 9, 2020,
so long as any shares of Convertible Preferred Stock are outstanding, (ii) the fourth anniversary of an initial public
offering, if a Fundamental Change occurs and the related Fundamental Change Stock Price is less than the
conversion price, (iii) a downgrade by one or more gradations (including gradations within ratings categories as
well as between ratings categories) or withdrawal of our credit rating, as a result of which our credit rating is B- (or
Moody's equivalent) or lower, (iv) the failure by us to pay a dividend on the Convertible Preferred Stock, which
failure continues for 30 days after such dividend's due date, or (v) a bankruptcy filing. The Investor Exchange Right
may be exercised unless we redeem all of the outstanding Convertible Preferred Stock at a redemption price, if such
redemption occurs after we receive a notice of intent to exercise the Investor Exchange Right, equal to the product
of (x) the aggregate Fixed Liquidation Preference (as defined in the applicable Certificate of Designations) of the
Convertible Preferred Stock of such holder then outstanding and (y) 110%, plus accrued and unpaid dividends to,
but not including, the date of redemption. However, after receiving a notice of intent to exercise the Investor
Exchange Right we may not be able to effectuate the redemption at that time.
If we do not redeem the Convertible Preferred Stock, the RE Investor can exercise the Investor Exchange Right by
delivering to RE LLC and the Escrow Agent a notice directing the Escrow Agent to release from escrow: (1) at our
election, any cash that may be held by the Escrow Agent and (2) at the RE Investor's option, (A) special warranty
deeds for the transfer to the RE Investor or its designee of Real Estate Assets (collectively, the "Transfer
Instruments") with respect to the SPEs, selected in the RE Investor's sole discretion, which collectively own Real
Estate Assets having an aggregate appraised value (as set forth in an appraisal (an "Initial Exchange Appraisal") for
each Real Estate Asset) equal to not more than (x) 130% of the Real Estate Proceeds Target Amount (as defined in
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the Real Estate Agreement) less (y) the Cash Distribution Amount (as defined in the Real Estate Agreement), if any,
multiplied by 118.18% or (B) Transfer Instruments with respect to the such Real Estate Assets.
Upon consummation of the Real Estate Settlement (as defined in the Real Estate Agreement), the SPEs selected by
the RE Investor or, in the case of Real Estate Assets selected by the RE Investor, a special purpose entity newly
formed by the RE Investor will automatically enter into a master lease with the applicable tenant substantially the
same as the Master Lease Agreement solely with respect to the Real Estate Assets that have been transferred,
directly or indirectly to the RE Investor and the Master Lease Agreement will be amended to remove such
transferred Real Estate Assets. Following the delivery of the release notice by the RE Investor to RE LLC and
Escrow Agent, the RE Investor will have 180 days (the "Initial Realization Period") to sell the SPEs or Real Estate
Assets that are released to the RE Investor by the Escrow Agent (the "Owned Sale Properties").
If during the Initial Realization Period, bona fide bids indicate aggregate Real Estate Proceeds (as defined in the
Real Estate Agreement) that are less than the Real Estate Proceeds Target Amount, we may elect to pay cash to the
RE Investor in an amount equal to the shortfall. If we do not elect to pay the shortfall, the RE Investor will have an
additional 90 days (the "Subsequent Realization Period" and together with the Initial Realization Period, if any, the
"Realization Period") to market Owned Sale Properties together with SPEs and/or Real Estate Assets then owned by
RE LLC (collectively, the "Sale Properties"). Upon the sale of each Sale Property, the buyer will be required to enter
into an amended and restated Master Lease Agreement solely with respect to the Sale Properties applicable to such
buyer.
If, at the conclusion of the Realization Period, the RE Investor has not received bona fide offers for the Sale
Properties that would result in the RE Investor receiving Real Estate Proceeds that are at least equal to the Real
Estate Proceeds Target Amount (such event a "Failed Auction"), the RE Investor can elect to have released from the
escrow account all of the remaining Transfer Instruments with respect to SPEs and/or Real Estate Assets and retain
any or all of the Sale Properties (such retained Sale Properties, the "Retained Properties"). If a Failed Auction
occurs, during the period beginning on the expiration of the Realization Period and ending on the three year
anniversary of the expiration of the Realization Period (the "ROFO Period"), if the RE Investor intends to sell
Retained Properties with an aggregate appraised value (as set forth in the Initial Exchange Appraisals) of $250
million or more in a single sale process, RE LLC will have a right of first offer on the Retained Properties proposed
to be sold (the "ROFO Properties"). RE LLC shall have 10 days following the receipt of notice by the RE Investor
of the RE Investor's intent to sell the ROFO Properties to provide a written offer to the RE Investor to purchase such
ROFO Properties for cash, along with a purchase and sale agreement executed by RE LLC and 60 days following
the execution by the RE Investor of such agreement to consummate such transaction. If the RE Investor rejects RE
LLC's offer, then the RE Investor shall only be permitted to sell the ROFO Properties to a third party at a purchase
price that is greater than or equal to the purchase price offered by RE LLC. If RE LLC does not submit an offer or
does not consummate the transaction within 60 days after the RE Investor executes the purchase and sale
agreement, then the RE Investor shall be permitted to sell the ROFO Properties to a third party at a price determined
by the RE Investor in its sole discretion.
Item 1B - Unresolved Staff Comments
None.
38
Table of Contents
Item 2 - Properties
As of February 27, 2021, we operated 2,277 stores located in 34 states and the District of Columbia as shown in the
following table:
Location
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Hawaii
Idaho
Illinois
Indiana
Number of
stores
Location
Iowa
25
134 Louisiana
1 Maine
593 Maryland
105 Massachusetts
7 Montana
18 Nebraska
12 Nevada
23 New Hampshire
42 New Jersey
183 New Mexico
4 New York
Number of
stores
Location
1 North Dakota
16 Oregon
21 Pennsylvania
67 Rhode Island
76 South Dakota
38 Texas
5 Utah
50 Vermont
26 Virginia
88 Washington
34 Wyoming
19
Number of
stores
1
122
50
8
3
209
6
19
40
217
14
The following table summarizes our stores by size as of February 27, 2021:
Square Footage
Less than 30,000
30,000 to 50,000
More than 50,000
Total stores
Number of
stores
Percent of
total
221
789
1,267
2,277
9.7 %
34.7 %
55.6 %
100.0 %
We own or ground-lease approximately 39% of our operating stores and 51% of our industrial properties
(distribution centers, warehouses and manufacturing plants).
Our corporate headquarters are located in Boise, Idaho. We own our headquarters. The premises is approximately
250,000 square feet in size. In addition to our corporate headquarters, we have corporate offices in Pleasanton,
California and Phoenix, Arizona. We believe our properties are well maintained, in good operating condition and
suitable for operating our business.
Item 3 - Legal Proceedings
The Company is subject from time to time to various claims and lawsuits arising in the ordinary course of business,
including lawsuits involving trade practices, lawsuits alleging violations of state and/or federal wage and hour laws
(including alleged violations of meal and rest period laws and alleged misclassification issues), real estate disputes
and other matters. Some of these suits purport or may be determined to be class actions and/or seek substantial
damages. It is the opinion of the Company's management that although the amount of liability with respect to
certain of the matters described herein cannot be ascertained at this time, any resulting liability of these and other
matters, including any punitive damages, will not have a material adverse effect on the Company's business or
financial condition. See also the matters under the caption Legal Proceedings in "Part II - Item 8. Financial
Statement and Supplementary Data - Note 14."
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Table of Contents
The Company continually evaluates its exposure to loss contingencies arising from pending or threatened litigation
and believes it has made provisions where the loss contingency can be reasonably estimated and an adverse
outcome is probable. Nonetheless, assessing and predicting the outcomes of these matters involves substantial
uncertainties. Management currently believes that the aggregate range of reasonably possible loss for the
Company's exposure in excess of the amount accrued is expected to be immaterial to the Company. It remains
possible that despite management's current belief, material differences in actual outcomes or changes in
management's evaluation or predictions could arise that could have a material effect on the Company's financial
condition, results of operations or cash flows.
Item 4 - Mine Safety Disclosures
None.
40
Table of Contents
PART II
Item 5 - Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase of
Equity Securities
Market Information for Common Stock
The Company's Class A common stock began trading on the New York Stock Exchange (the "NYSE") on June 26,
2020 under the symbol "ACI." Prior to that date, there was no public market for the Company's common stock. As
of April 27, 2021, there were 165 holders of record of our Class A common stock.
Dividends
The holders of the Company's Convertible Preferred Stock are entitled to a quarterly dividend at a rate per annum of
6.75% of the liquidation preference per share of the Convertible Preferred Stock. In addition, the holders of
Convertible Preferred Stock will participate in cash dividends that we pay on our common stock to the extent that
such cash dividends exceed $206.25 million per fiscal year. On September 15, 2020, December 15, 2020 and March
15, 2021, we declared a quarterly cash dividend of an aggregate of $36.4 million, $29.5 million and $29.5 million,
respectively, to holders of the Convertible Preferred Stock, which was paid on September 30, 2020, December 30,
2020 and March 30, 2021, respectively.
In connection with our initial public offering, we established a dividend policy pursuant to which we intend to pay a
quarterly dividend on our Class A common stock in an annual amount equal to $0.400 per common share. During
fiscal 2020, we paid quarterly cash dividends of $0.100 per common share on November 10, 2020 and February 10,
2021, to stockholders of record as of October 26, 2020 and January 26, 2021, respectively. On April 13, 2021, we
announced the next quarterly dividend payment of $0.100 per common share to be paid on May 10, 2021 to
stockholders of record as of the close of business on April 26, 2021.
Performance Graph
The following graph shows a comparison of the total cumulative stockholder return on our Class A common stock
with the total return for (i) the S&P 500 Index and (ii) the S&P 500 Retail Index for the period from June 26, 2020
(the date our Class A common stock commenced trading on the NYSE) through February 27, 2021. The graph
assumes an investment of $100 in our Class A common stock at market close on June 26, 2020 and the reinvestment
of dividends. The comparisons in the table are not intended to forecast or be indicative of possible future
performance of our Class A common stock.
41
6/26/20 7/18/20 8/15/20 9/12/20 10/10/20 11/7/20 12/5/20 1/2/21 1/30/21 2/27/21
$ 100.00 $ 99.35 $ 96.12 $ 91.59 $ 92.30 $ 100.94 $ 97.42 $ 114.55 $ 113.79 $ 105.93
100.00 107.17 112.09 111.03 115.56 116.63 122.93 124.83 123.44 126.66
100.00 108.95 116.29 115.51 121.58 121.44 119.00 122.10 120.66 119.26
ACI
S&P 500
S&P 500
Retail
Purchases of Equity Securities
Period
December 6, 2020 through January 2, 2021
January 3, 2021 through January 30, 2021
January 31, 2021 through February 27, 2021
Total
Total Number
of Shares
Purchased
Average Price
Paid per Share
15.07
—
—
15.07
1,090,358 $
—
—
1,090,358 $
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs (1)
Dollar Value of
Shares that
May Yet be
Purchased
Under the
Plans or
Programs (in
millions) (1)
1,090,358 $
—
—
1,090,358 $
180.9
—
—
180.9
(1) On October 14, 2020, the Company's board of directors authorized a share repurchase program that allows the Company to repurchase up
to $300.0 million of the Company's common stock.
42
Table of Contents
Item 6 - Selected Financial Information
The selected consolidated financial information set forth below is derived from our annual Consolidated Financial
Statements for the periods indicated below, including the Consolidated Balance Sheets at February 27, 2021 and
February 29, 2020 and the related Consolidated Statements of Operations and Comprehensive Income and
Consolidated Statements of Cash Flows for the 52 weeks ended February 27, 2021, the 53 weeks ended
February 29, 2020 and the 52 weeks ended February 23, 2019 and notes thereto appearing elsewhere in this Form
10-K.
(dollars in millions, except per share
data)
Fiscal
2020
Fiscal
2019
Fiscal
2018
Fiscal
2017
Fiscal
2016
Results of Operations
Net sales and other revenue
Gross Profit
Selling and administrative expenses
(Gain) loss on property dispositions
and impairment losses, net
Goodwill impairment
Operating income (loss)
Interest expense, net
Loss (gain) on debt extinguishment
Other (income) expense, net
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Balance Sheet (at end of period)
Cash and cash equivalents
Total assets (1)
Convertible preferred stock
Total stockholders' equity
Total debt, including finance leases
Net cash provided by operating
activities
Per Share Data
Basic net income (loss) per Class A
common share
Diluted net income (loss) per Class A
common share
Weighted average Class A common
shares outstanding (in millions):
Basic
Diluted
Cash dividends per Class A common
share
$
69,690.4 $ 62,455.1 $
20,414.5
18,835.8
17,594.2
16,641.9
60,534.5 $
16,894.6
16,272.3
59,924.6 $ 59,678.2
16,640.5
16,361.1
16,072.1
16,208.7
(38.8)
—
1,617.5
538.2
85.3
(134.7)
1,128.7
278.5
850.2 $
(484.8)
—
1,437.1
698.0
111.4
28.5
599.2
132.8
466.4 $
(165.0)
—
787.3
830.8
8.7
(104.4)
52.2
(78.9)
131.1 $
66.7
142.3
(56.6)
874.8
(4.7)
(9.2)
(917.5)
(963.8)
46.3 $
(39.2)
—
607.6
1,003.8
111.7
(44.3)
(463.6)
(90.3)
(373.3)
1,717.0 $
26,598.0
1,599.1
1,324.3
8,313.6
470.7 $
24,735.1
—
2,278.1
8,714.7
926.1 $
20,776.6
—
1,450.7
10,586.4
670.3 $
21,812.3
—
1,398.2
11,875.8
1,219.2
23,755.0
—
1,371.2
12,337.9
3,902.5
1,903.9
1,687.9
1,018.8
1,813.5
1.53 $
1.47 $
0.80 $
0.23 $
0.08 $
(0.64)
0.80 $
0.23 $
0.08 $
(0.64)
$
$
$
$
500
578
579
580
580
581
579
579
$
0.20 $
— $
— $
— $
579
579
—
(1) The Company adopted Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)", and related amendments as of February 24,
2019 under the modified retrospective approach and, therefore, have not revised comparative periods. Under Topic 842, leases historically
classified as capital leases are now referred to as finance leases. See "Part II - Item 8. Financial Statements and Supplementary Data -
Note 1" for additional information.
43
Table of Contents
Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in
conjunction with our Consolidated Financial Statements and related notes found in "Part II—Item 8. Financial
Statements and Supplementary Data" in this Form 10-K, as well as "Part II—Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the
fiscal year ended February 29, 2020 filed with the SEC on May 13, 2020, which provides comparisons of fiscal
2019 and fiscal 2018. This discussion contains forward-looking statements based upon current expectations that
involve numerous risks and uncertainties. Our actual results may differ materially from those contained in any
forward-looking statements.
Our last three fiscal years consisted of the 52 weeks ended February 27, 2021 ("fiscal 2020"), the 53 weeks ended
February 29, 2020 ("fiscal 2019") and the 52 weeks ended February 23, 2019 ("fiscal 2018"). In this Management's
Discussion and Analysis of Financial Condition and Results of Operations of Albertsons Companies, Inc., the words
"Albertsons," the "Company," "we," "us," "our" and "ours" refer to Albertsons Companies, Inc., together with its
subsidiaries.
EXECUTIVE SUMMARY - FISCAL 2020 OVERVIEW
We are one of the largest food retailers in the United States, with 2,277 stores across 34 states and the District of
Columbia. We operate more than 20 well known banners including Albertsons, Safeway, Vons, Pavilions, Randalls,
Tom Thumb, Carrs, Jewel-Osco, Acme, Shaw's, Star Market, United Supermarkets, Market Street, Haggen, Kings
Food Markets and Balducci's Food Lovers Market, with approximately 300,000 talented and dedicated employees,
as of February 27, 2021, who serve on average more than 30 million customers each week. Additionally, as of
February 27, 2021, we operated 1,727 pharmacies, 1,313 in-store branded coffee shops, 400 adjacent fuel centers,
22 dedicated distribution centers, 20 manufacturing facilities and various online platforms.
Fiscal 2020 was a transformative year for us and included many accomplishments. As we faced the challenges
brought upon by the COVID-19 pandemic, we adapted quickly to the market environment and became a more
nimble and efficient retailer, driven by digital and technology enhancements across our business. We made
significant progress against all of our strategic priorities, including in-store excellence, accelerating our digital and
omni-channel capabilities, driving productivity and strengthening our talent and culture. Identical sales growth was
16.9%, excluding fuel, during fiscal 2020, driven in part by our 258% digital sales growth, which underscores our
strong omni-channel capabilities that allow customers to complete their shopping with us in any way they want. We
accomplished all of this while prioritizing the health and safety of our customers and associates.
We have achieved significant success with active participants in our just for U loyalty program, which drives higher
sales and customer retention., with participation growing 20%, reaching 25.4 million users. We offer more than
13,000 high-quality products under our Own Brands portfolio. Our Own Brands products resonate well with our
customers as evidenced by Own Brands sales of over $14.8 billion in fiscal 2020, an increase of over 13%
compared to fiscal 2019. Own Brands continues to deliver on innovation with more than 1,200 new items launched
in fiscal 2020 and plans to launch approximately 800 new Own Brands items annually over the next few years.
We have learned valuable lessons as a result of the ongoing COVID-19 pandemic, including gaining a better
understanding of our customers' preferences, and we are making the investments that position us well to meet their
needs both in-store and online.
Our capital allocation strategy balances investing for the future, strengthening our balance sheet and returns to
shareholders through a combination of dividends and opportunistic share repurchases. Capital expenditures were
approximately $1,630 million during fiscal 2020 as we opened nine new stores, completed 409 upgrades and
remodels and acquired 27 stores operated by Kings Food Markets and Balducci's Food Lovers Market. Fiscal 2020
44
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saw a significant acceleration in customer preferences towards digital, and we invested more than $300 million to
accelerate our offerings and launched new capabilities that build on our strengths, as well as drive scale and
profitability. We launched 834 new Drive Up & Go locations, which is now available in 1,420 stores. We continue
to make progress in strengthening the balance sheet, reducing our Net Debt Ratio to 1.5x as of the end of fiscal 2020
compared to 2.9x at the end of fiscal 2019. Capital returns to shareholders in fiscal 2020 included our $0.10 per
share quarterly dividend which began in November 2020, and repurchases of our common stock of $119.1 million
under the existing $300.0 million authorization.
We have developed and begun to implement specific productivity initiatives across our business to help fund growth
and offset cost inflation. The initiatives include operational efficiencies such as shrink management and labor
efficiencies, purchasing and procurement, improved promotional effectiveness and leveraging corporate overhead,
including continued modernization of our IT infrastructure. These initiatives are well on their way as we realized
over $500 million in productivity savings during fiscal 2020.
In addition, during fiscal 2020, along with the Albertsons Companies Foundation, we gave $260 million in food and
financial support, including $94 million through our Nourishing Neighbors Program to ensure those living in the
communities in which we operate have enough to eat. We have also been partnering with the Department of Health
and Human Services and local health authorities to administer free COVID-19 vaccines to our local communities
and, as of April 23, 2021, have administered more than 3.1 million doses.
COVID-19
The health and safety of our associates and customers has been our highest priority during the COVID-19
pandemic. Responding to the pandemic has also significantly increased our expenses. We continue to clean and
disinfect all departments, restrooms, and other high-touch points of our stores often, including check stands and
service counters. We have implemented social distancing practices in our stores and facilities and provided
protective equipment which includes physical safety barriers and facemasks for associates. This is in addition to our
rigorous food safety and sanitation programs that were already in place. During fiscal 2020, we incurred
incremental COVID-19 costs of nearly $1,000 million which includes the various cleaning and safety measures. We
have also provided additional wages and benefits to our associates through appreciation and bonus pay plus
expanded sick pay.
We continue to experience significant increases in demand in stores as people have adjusted to the new
circumstances resulting from the COVID-19 pandemic. There also continues to be a substantial increase in customer
demand and engagement with our digital offerings because of the pandemic, including both home delivery and our
Drive Up & Go curbside pickup. We have responded to this increased demand for our digital offerings by hiring
additional associates, retaining additional third-party service providers and expanding our Drive Up & Go offerings.
We believe that some of the changes that have been implemented, in our stores and the country as a whole, will be
permanent. However, the ultimate significance of the pandemic on our financial condition, results of operations or
cash flows will be dictated by the length of time that such circumstances continue, which will depend on the
currently unknowable extent and duration of the COVID-19 pandemic and the nature and effectiveness of
governmental and public actions taken in response.
Fiscal 2020 highlights
In summary, our financial and operating highlights for fiscal 2020 include:
Identical sales growth of 16.9%
•
• Digital sales growth of 258%
• Net income per Class A common share of $1.47
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• Adjusted Net Income Per Class A Common Share of $3.24
• Operating cash flows of $3,903 million
• Adjusted EBITDA of $4,524 million
• Over $500 million in savings from productivity initiatives
• Reduced Net Debt Ratio to 1.5x at the end of fiscal 2020 compared to 2.9x in fiscal 2019
• Opened nine new stores and completed 409 upgrade and remodel projects
• Launched 834 new Drive Up & Go locations
• Acquired 27 Kings and Balducci's stores
Stores
The following table shows stores operating, acquired, opened and closed during the periods presented:
Stores, beginning of period
Acquired (1)
Opened
Closed
Stores, end of period
Fiscal
2020
Fiscal
2019
Fiscal
2018
2,252
26
9
(10)
2,277
2,269
—
14
(31)
2,252
2,318
—
6
(55)
2,269
(1) Fiscal 2020 excludes one store acquired from Kings and Balducci's that transferred to us subsequent to the end of the fourth quarter of
fiscal 2020.
The following table summarizes our stores by size:
Square Footage
Less than 30,000
30,000 to 50,000
More than 50,000
Total Stores
Number of Stores
Percent of Total
Retail Square Feet (1)
February 27,
2021
February 29,
2020
February 27,
2021
February 29,
2020
February 27,
2021
February 29,
2020
221
789
1,267
2,277
204
784
1,264
2,252
9.7 %
34.7 %
55.6 %
100.0 %
9.1 %
34.8 %
56.1 %
100.0 %
5.1
33.0
74.9
113.0
4.7
32.9
74.7
112.3
(1) In millions, reflects total square footage of retail stores operating at the end of the period.
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NON-GAAP FINANCIAL MEASURES
EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income Per Class A Common Share, Adjusted
Free Cash Flow and Net Debt Ratio (collectively, the "Non-GAAP Measures") are performance measures that
provide supplemental information we believe is useful to analysts and investors to evaluate our ongoing results of
operations, when considered alongside other GAAP measures such as net income, operating income, gross profit,
net income per Class A common share and net cash provided by operating activities. These Non-GAAP Measures
exclude the financial impact of items management does not consider in assessing our ongoing core operating
performance, and thereby facilitate review of our operating performance on a period-to-period basis. Other
companies may have different capital structures or different lease terms, and comparability to our results of
operations may be impacted by the effects of acquisition accounting on our depreciation and amortization. As a
result of the effects of these factors and factors specific to other companies, we believe EBITDA, Adjusted
EBITDA, Adjusted Net Income, Adjusted Net Income Per Class A Common Share, Adjusted Free Cash Flow and
Net Debt Ratio provide helpful information to analysts and investors to facilitate a comparison of our operating
performance to that of other companies. We also use Adjusted EBITDA, as further adjusted for additional items
defined in our debt instruments, for board of director and bank compliance reporting. Our presentation of Non-
GAAP Measures should not be construed as an inference that our future results will be unaffected by unusual or
non-recurring items.
Non-GAAP Measures should not be considered as measures of discretionary cash available to us to invest in the
growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using
Non-GAAP Measures only for supplemental purposes.
RESULTS OF OPERATIONS
The following information summarizes the components of our Consolidated Statements of Operations for fiscal
2020 compared to fiscal 2019. For discussion of our Consolidated Statements of Operations for fiscal 2019
compared to fiscal 2018, see "Part II—Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in our Annual Report on Form 10-K for the fiscal year ended February 29, 2020
filed with the SEC on May 13, 2020.
Summary of Consolidated Statements of Operations (in millions):
Net sales and other revenue
Cost of sales
Gross profit
Selling and administrative expenses
Gain on property dispositions and impairment
losses, net
Operating income
Interest expense, net
Loss on debt extinguishment
Other (income) expense, net
Income before income taxes
Income tax expense (benefit)
Net income
Fiscal
2020
Fiscal
2019
$ 69,690.4 100.0 % $ 62,455.1 100.0 % $ 60,534.5 100.0 %
49,275.9
72.1
20,414.5
27.9
18,835.8
26.9
71.8 43,639.9
28.2 16,894.6
26.6 16,272.3
70.7 44,860.9
29.3 17,594.2
27.0 16,641.9
Fiscal
2018
(38.8)
1,617.5
538.2
85.3
(134.7)
1,128.7
278.5
$ 850.2
(484.8)
(0.1)
1,437.1
2.4
698.0
0.8
111.4
0.1
28.5
(0.2)
599.2
1.7
0.4
132.8
1.3 % $ 466.4
(165.0)
(0.7)
787.3
2.3
830.8
1.1
8.7
0.2
(104.4)
—
52.2
1.0
0.2
(78.9)
0.8 % $ 131.1
(0.3)
1.3
1.4
—
(0.2)
0.1
(0.1)
0.2 %
47
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Identical Sales, Excluding Fuel
Identical sales include stores operating during the same period in both the current year and the prior year, comparing
sales on a daily basis. Direct to consumer digital sales are included in identical sales, and fuel sales are excluded
from identical sales. Acquired stores become identical on the one-year anniversary date of the acquisition. Identical
sales results, on an actual basis, for the past three fiscal years were as follows:
Identical sales, excluding fuel
Net Sales and Other Revenue
Fiscal
2020
16.9%
Fiscal
2019
2.1%
Fiscal
2018
1.0%
Net sales and other revenue increased $7,235.3 million, or 11.6%, from $62,455.1 million in fiscal 2019 to
$69,690.4 million in fiscal 2020. The components of the change in Net sales and other revenue for fiscal 2020 were
as follows (in millions):
Net sales and other revenue for fiscal 2019
Identical sales increase of 16.9%
Decrease in fuel sales
Impact of 53rd week in fiscal 2019
Decrease in sales due to store closures, net of new store openings
Other (1)
Net sales and other revenue for fiscal 2020
Fiscal
2020
62,455.1
9,523.1
(1,193.9)
(1,067.0)
(91.3)
64.4
69,690.4
$
$
(1) Includes changes in non-identical sales, which includes wholesale and other miscellaneous revenue.
The primary increase in Net sales and other revenue in fiscal 2020 as compared to fiscal 2019 was driven by our
16.9% increase in identical sales, partially offset by a decrease in fuel sales of $1,193.9 million and sales due to the
additional 53rd week in fiscal 2019. The increase in identical sales for fiscal 2020 was across all of our business
segments and a direct result of significant demand due to the COVID-19 pandemic, growth in our digital sales and
increases in market share.
Gross Profit
Gross profit represents the portion of Net sales and other revenue remaining after deducting the Cost of sales during
the period, including purchase and distribution costs. These costs include, among other things, purchasing and
sourcing costs, inbound freight costs, product quality testing costs, warehousing and distribution costs, Own Brands
program costs and digital-related delivery and handling costs. Advertising, promotional expenses and vendor
allowances are also components of Cost of sales.
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Gross profit margin increased 110 basis points to 29.3% in fiscal 2020 compared to 28.2% in fiscal 2019. Excluding
the impact of fuel, gross profit margin increased 55 basis points. The increase in fiscal 2020 as compared to fiscal
2019 was primarily attributable to improvements in shrink expense and leveraging of our distribution, warehousing
and supplies cost, partially offset by delivery and handling costs related to the growth in digital sales and strategic
investments in price. Our gross profit margin was also favorably impacted by the increase in sales of our Own
Brands portfolio of products. In addition, our gross profit margin was reduced by $125.7 million of costs related to
the COVID-19 pandemic, including expanded sick pay, incremental labor for enhanced cleaning and health
screening to support and protect our supply chain employees and other warehousing and inventory costs.
Fiscal 2020 vs. Fiscal 2019
Shrink
Distribution, warehousing and supplies
Depreciation and rent expense
COVID-19 pandemic related costs
Sales channel, price, product mix and advertising
LIFO expense
Other
Total
Selling and Administrative Expenses
Basis point
increase
(decrease)
66
20
3
(19)
(15)
(6)
6
55
Selling and administrative expenses consist primarily of store level costs, including wages, employee benefits, rent,
depreciation and utilities, in addition to certain back-office expenses related to our corporate and division offices.
Selling and administrative expenses increased 40 basis points to 27.0% of Net sales and other revenue in fiscal 2020
from 26.6% in fiscal 2019. Excluding the impact of fuel, Selling and administrative expenses as a percentage of Net
sales and other revenue decreased 20 basis points during fiscal 2020 compared to fiscal 2019. The decrease as a
percentage of sales during fiscal 2020 compared to fiscal 2019 was primarily attributable to depreciation and
amortization expense, rent and occupancy costs and employee wage and benefit costs due to sales leverage as well
as lower third-party expenses and labor efficiencies as a result of our productivity initiatives. The decrease was
partially offset by the $607.2 million charge related to the Combined Plan withdrawal and the $285.7 million charge
related to the previously announced withdrawal from the UFCW National Fund. Employee wage and benefit costs
included $387.1 million of COVID-19 pandemic related employee appreciation and bonus pay, which includes
expanded sick pay, to front-line associates and $325.2 million of incremental labor for enhanced cleaning and health
screening. In addition, we also incurred $122.6 million in additional COVID-19 pandemic costs related to supplies
and outside services, which included personal protective equipment for our stores and employees. We also
contributed $53.0 million to hunger relief in our communities during fiscal 2020 related to the COVID-19
pandemic.
Fiscal 2020 vs. Fiscal 2019
Depreciation and amortization
Rent and occupancy costs
Employee wage and benefit costs
Third-party expenses
COVID-19 pandemic related costs, excluding incremental employee wages and benefits
Other (1)
Total
49
Basis point
increase
(decrease)
(55)
(53)
(49)
(13)
26
124
(20)
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(1) Includes the $607.2 million charge related to the Combined Plan withdrawal in the fourth quarter of fiscal 2020 and the $285.7 million
charge related to the UFCW National Fund withdrawal in the third quarter of fiscal 2020. Also includes the favorable settlement of the
UFCW & Employers Midwest Pension Fund withdrawal in the fourth quarter of fiscal 2019. See "Part II - Item 8. Financial Statements
and Supplementary Data - Note 12" for more information.
Gain on Property Dispositions and Impairment Losses, Net
For fiscal 2020, net gain on property dispositions and impairment losses was $38.8 million, primarily driven by
$69.0 million of gains from the sale of assets, including the sale of a distribution center, partially offset by $30.2
million of asset impairments, primarily related to underperforming or closed stores and certain surplus properties.
For fiscal 2019, net gain on property dispositions and impairment losses was $484.8 million, primarily driven by
gains from the sale of assets of $559.2 million including $463.6 million of gains related to sale leaseback
transactions during the second quarter of fiscal 2019, partially offset by $77.4 million of asset impairments
including impairment losses of $46.0 million related to certain assets of our meal kit operations and impairment
losses related to underperforming or closed stores and certain surplus properties.
Interest Expense, Net
Interest expense, net was $538.2 million in fiscal 2020 and $698.0 million in fiscal 2019. The decrease in Interest
expense, net for fiscal 2020 compared to fiscal 2019 is primarily due to lower average outstanding borrowings and
lower average interest rates. The weighted average interest rate was 5.8% and 6.4% during fiscal 2020 and fiscal
2019, respectively, excluding amortization of debt discounts and deferred financing costs.
Loss on Debt Extinguishment
During fiscal 2020, we completed the issuance of $750.0 million in aggregate principal amount of New 2026 Notes,
$750.0 million in aggregate principal amount of 2029 Notes and $600.0 million in aggregate principal amount of
Additional 2029 Notes (as defined below). The proceeds from these issuances along with cash on hand were used to
fund the 2020 Redemptions (as defined below). In connection with the 2020 Redemptions, we incurred a loss on
debt extinguishment of $85.3 million, comprised of $71.6 million of redemption premiums and $13.7 million of
write-offs of debt discounts.
During fiscal 2019, we completed a cash tender offer and early redemption of Safeway Notes and NALP Notes with
a par value of $437.0 million and a book value of $397.0 million for $415.3 million. We also repurchased NALP
Notes on the open market with an aggregate par value of $553.9 million and a book value of $502.0 million for
$547.5 million. We also repaid our term loan balance in full and, as a result, we wrote-off $15.2 million of deferred
financing costs and $29.9 million of original issue discount. Including fees, we recognized an aggregate loss on debt
extinguishment related to the tender offer, various repurchases of notes and term loan repayment of $111.4 million.
Other (Income) Expense, Net
For fiscal 2020, other income, net was $134.7 million primarily driven by unrealized gains from non-operating
investments, non-service cost components of net pension and post-retirement expense and income related to our
equity investment, partially offset by recognized losses on interest rate swaps. For fiscal 2019, other expense, net
was $28.5 million primarily driven by recognized losses on interest rate swaps, partially offset by non-service cost
components of net pension and post-retirement expense.
Income Taxes
Income tax was an expense of $278.5 million, representing a 24.7% effective tax rate, in fiscal 2020 and $132.8
million, representing a 22.2% effective tax rate, in fiscal 2019. The increase in the effective tax rate was primarily
50
Table of Contents
driven by the increase in income before taxes relative to the amount of certain tax deductions and credits realized
during the comparable fiscal year.
Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income Per Class A Common Share and Adjusted
Free Cash Flow
For fiscal 2020, Adjusted EBITDA was $4.5 billion, or 6.5% of Net sales and other revenue, compared to
$2.8 billion, or 4.5% of Net sales and other revenue, for fiscal 2019. The increase in Adjusted EBITDA reflects our
identical sales increase, and the improved sales leverage experienced in gross margin and selling and administrative
expenses as a percent of sales, partially offset by the impact of the extra week in fiscal 2019.
The following tables reconcile Net income to Adjusted Net Income, and Net income per Class A common share to
Adjusted Net Income Per Class A Common Share (in millions, except per share data):
Fiscal
2020
Fiscal
2019
Fiscal
2018
Numerator:
Net income
Adjustments:
Loss (gain) on interest rate and commodity hedges, net (e)
Facility closures and transformation (1)(b)
Acquisition and integration costs (2)(b)
Equity-based compensation expense (b)
Gain on property dispositions and impairment losses, net
LIFO expense (a)
Discretionary COVID-19 pandemic related costs (3)(b)
Civil disruption related costs (4)(b)
Transaction and reorganization costs related to convertible
preferred stock issuance and initial public offering (b)
Amortization of debt discount and deferred financing costs
(c)
Loss on debt extinguishment
Amortization of intangible assets resulting from acquisitions
(b)
Combined Plan and UFCW National Fund withdrawal
(5)(b)
Miscellaneous adjustments (6)(g)
Effect of Tax Cuts and Jobs Act (the "Tax Act") (d)
Tax impact of adjustments to Adjusted Net Income
Adjusted Net Income
Denominator:
$
850.2 $
466.4 $
16.9
58.0
12.6
59.0
(38.8)
58.7
134.6
13.0
23.8
20.3
85.3
55.8
50.6
18.3
60.5
32.8
(484.8)
18.4
—
—
3.7
73.9
111.4
273.6
892.9
4.2
—
(355.1)
1,891.4 $
$
—
35.0
—
(47.7)
612.1 $
Weighted average Class A common shares outstanding -
diluted
Adjustments:
Restricted stock units and awards (7)
Adjusted weighted average Class A common shares
outstanding – diluted
578.1
6.3
584.4
580.3
6.6
586.9
Adjusted Net Income Per Class A Common Share - diluted
$
3.24 $
1.04 $
51
131.1
(1.3)
13.4
259.7
47.7
(165.0)
8.0
—
—
—
63.0
8.7
326.2
—
(51.7)
(56.9)
(147.1)
435.8
580.7
9.4
590.1
0.74
Table of Contents
Net income per Class A common share - diluted
Non-GAAP adjustments (8)
Restricted stock units and awards (7)
Adjusted Net Income Per Class A Common Share - diluted
$
$
Fiscal
2020
Fiscal
2019
Fiscal
2018
1.47 $
1.80
(0.03)
3.24 $
0.80 $
0.25
(0.01)
1.04 $
0.23
0.52
(0.01)
0.74
The following table is a reconciliation of Adjusted Net Income to Adjusted EBITDA:
Adjusted Net Income (9)
Tax impact of adjustments to Adjusted Net Income
Effect of Tax Act
Income tax expense (benefit)
Amortization of debt discount and deferred financing costs (c)
Interest expense, net
Amortization of intangible assets resulting from acquisitions
(b)
Depreciation and amortization (f)
Adjusted EBITDA (10)
Fiscal
2020
Fiscal
2019
Fiscal
2018
$
$
1,891.4 $
355.1
—
278.5
(20.3)
538.2
(55.8)
1,536.9
4,524.0 $
612.1 $
47.7
—
132.8
(73.9)
698.0
(273.6)
1,691.3
2,834.4 $
435.8
147.1
56.9
(78.9)
(63.0)
830.8
(326.2)
1,738.8
2,741.3
(1) Includes costs related to closures of operating facilities and third-party consulting fees related to our strategic priorities and associated
business transformation.
(2) Related to conversion activities and related costs associated with integrating acquired businesses, primarily the Safeway acquisition. Also
includes expenses related to management fees paid in connection with acquisition and financing activities.
(3) Includes $44.7 million in bonus payments related to front-line associates during the third quarter of fiscal 2020. Also includes $53 million
of charitable contributions to our communities and hunger relief and $36.9 million in final reward payments to front-line associates at the
end of the first quarter of fiscal 2020.
(4) Primarily includes costs related to store damage, inventory losses and community support as a result of the civil disruption during late
May and early June in certain markets.
(5) Related to the withdrawal from the Combined Plan during the fourth quarter of fiscal 2020 and the withdrawal from the UFCW National
Fund during the third quarter of fiscal 2020. See "Part II - Item 8. Financial Statements and Supplementary Data - Note 12" for more
information.
(6) Miscellaneous adjustments include the following (see table below):
Non-cash lease-related adjustments
Lease and lease-related costs for surplus and closed stores
Net realized and unrealized gain on non-operating
investments
Adjustments to contingent consideration
Certain legal and regulatory accruals and settlements, net
Other (i)
Total miscellaneous adjustments
$
$
Fiscal
2020
Fiscal
2019
Fiscal
2018
5.3 $
46.0
(85.1)
—
12.0
26.0
4.2 $
21.2 $
21.5
(1.1)
—
(22.2)
15.6
35.0 $
(13.7)
19.5
(17.2)
(59.3)
4.0
15.0
(51.7)
(i) Primarily includes adjustments for unconsolidated equity investments and certain contract termination costs.
(7) Represents incremental unvested RSUs and unvested RSAs to adjust the diluted weighted average Class A common shares outstanding
during each respective period to the fully outstanding RSUs and RSAs as of the end of each respective period.
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Table of Contents
(8) Reflects the per share impact of Non-GAAP adjustments for each period presented. See the reconciliation of Net income to Adjusted Net
Income above for further details.
(9) Reflects the impact of Non-GAAP adjustments for each period presented. See the reconciliation of Net income to Adjusted Net Income
above for further details.
(10) Fiscal 2019 includes an estimated $54 million of incremental Adjusted EBITDA due to the impact of the additional week in fiscal 2019.
Non-GAAP adjustment classifications within the Consolidated Statements of Operations:
(a) Cost of sales
(b) Selling and administrative expenses
(c) Interest expense, net
(d) Income tax expense (benefit)
(e) Loss (gain) on interest rate and commodity hedges, net:
Cost of sales
Other (income) expense, net
Total Loss (gain) on interest rate and commodity hedges,
net
(f) Depreciation and amortization:
Cost of sales
Selling and administrative expenses
Total Depreciation and amortization
(g) Miscellaneous adjustments:
Selling and administrative expenses
Other (income) expense, net
Total Miscellaneous adjustments
Fiscal
2020
Fiscal
2019
Fiscal
2018
(2.6) $
19.5
16.9 $
2.7 $
47.9
50.6 $
(1.3)
—
(1.3)
Fiscal
2020
Fiscal
2019
Fiscal
2018
172.6 $
1,364.3
1,536.9 $
171.5 $
1,519.8
1,691.3 $
207.1
1,531.7
1,738.8
Fiscal
2020
Fiscal
2019
Fiscal
2018
75.6 $
(71.4)
4.2 $
21.0 $
14.0
35.0 $
11.5
(63.2)
(51.7)
$
$
$
$
$
$
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Table of Contents
The following is a reconciliation of Net cash provided by operating activities to Adjusted Free Cash Flow, which we
define as Adjusted EBITDA less capital expenditures (in millions):
$
Net cash provided by operating activities
Income tax expense (benefit)
Deferred income taxes
Interest expense, net
Operating lease right-of-use assets amortization
Changes in operating assets and liabilities
Amortization and write-off of deferred financing costs
Contributions to pension and post-retirement benefit plans, net
of (income) expense
Facility closures and transformation
Acquisition and integration costs
Discretionary COVID-19 pandemic related costs
Civil disruption related costs
Transaction and reorganization costs related to convertible
preferred stock issuance and initial public offering
Combined Plan and UFCW National Fund withdrawal
Other adjustments
Adjusted EBITDA
Less: capital expenditures
Adjusted Free Cash Flow
$
LIQUIDITY AND FINANCIAL RESOURCES
Fiscal
2020
Fiscal
2019
Fiscal
2018
3,902.5 $
278.5
112.3
538.2
(581.5)
(1,083.6)
(20.9)
96.4
58.0
12.6
134.6
13.0
23.8
892.9
147.2
4,524.0
(1,630.2)
2,893.8 $
1,903.9 $
132.8
5.9
698.0
(570.3)
575.9
(39.8)
13.0
18.3
60.5
—
—
3.7
—
32.5
2,834.4
(1,475.1)
1,359.3 $
1,687.9
(78.9)
81.5
830.8
—
(176.2)
(42.7)
174.8
13.4
259.7
—
—
—
—
(9.0)
2,741.3
(1,362.6)
1,378.7
The following table sets forth the major sources and uses of cash and cash equivalents and restricted cash at the end
of each period (in millions):
February 27,
2021
February 29,
2020
February 23,
2019
Cash and cash equivalents and restricted cash at end of period $
Cash flows provided by operating activities
Cash flows used in investing activities
Cash flows used in financing activities
1,767.6 $
3,902.5
(1,572.0)
(1,041.8)
478.9 $
1,903.9
(378.5)
(2,014.2)
967.7
1,687.9
(86.8)
(1,314.2)
Net Cash Provided By Operating Activities
Net cash provided by operating activities was $3,902.5 million during fiscal 2020 compared to net cash provided by
operating activities of $1,903.9 million during fiscal 2019. The increase in net cash flow from operating activities
during fiscal 2020 compared to fiscal 2019 was primarily due to improvements in Adjusted EBITDA and changes in
working capital primarily related to accounts payable as our business adjusted for the significant increase in sales
volume during fiscal 2020, $426.6 million deferral of the employer-paid portion of social security taxes and a
decrease of $144.2 million in cash paid for interest. These increases were partially offset by the $147.3 million
withdrawal liability payment to the UFCW National Fund, an increase of $137.4 million in cash paid for income
taxes, the $75.0 million payment to the UFCW & Employers Midwest Pension Fund withdrawal liability pension
settlement and an increase in contributions to our defined benefit pension plans and post-retirement benefit plans.
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Net Cash Used In Investing Activities
Net cash used in investing activities during fiscal 2020 was $1,572.0 million primarily due to payments for property
and equipment of $1,643.2 million and the Kings and Balducci's acquisition of $97.9 million, partially offset by
proceeds from the sale of assets of $161.6 million. Payments for property and equipment included the opening of
nine new stores, completion of 409 upgrades and remodels and continued investment in our digital technology.
Net cash used in investing activities during fiscal 2019 was $378.5 million primarily due to payments for property
and equipment of $1,467.4 million, partially offset by proceeds from the sale of assets of $1,096.7 million.
Payments for property and equipment included the opening of 14 new stores, completion of 243 upgrades and
remodels and continued investment in our digital technology. Proceeds from the sale of assets primarily includes the
sale and leaseback of 53 store properties and one distribution center for $931.3 million, net of closing costs, during
the second quarter of fiscal 2019 and certain other property dispositions during fiscal 2019.
In fiscal 2021, we expect capital expenditures to be in the range of $1.9 billion to $2.0 billion.
Net Cash Used In Financing Activities
Net cash used in financing activities was $1,041.8 million in fiscal 2020 consisting of payments on long-term debt
and finance leases of $4,526.6 million, partially offset by proceeds from the issuance of long-term debt of
$4,094.0 million. Payments on long-term debt and proceeds from the issuance of long-term debt principally
consisted of the $2,100 million issuance and subsequent $2,300 million redemption of Senior Unsecured Notes (as
further discussed below), the $2,000 million ABL Borrowing (as defined below), the repurchase of outstanding
Class A common stock, the issuance of the Convertible Preferred Stock and dividends paid on our Class A common
stock and Convertible Preferred Stock.
Net cash used in financing activities was $2,014.2 million in fiscal 2019 consisting of payments on long-term debt
and finance leases of $5,785.9 million, partially offset by proceeds from the issuance of long-term debt of
$3,874.0 million. Payments on long-term debt principally consisted of the full repayment of the term loan, tender
offer and various repurchases of notes.
Debt Management
Total debt, including both the current and long-term portions of finance lease obligations, net of debt discounts and
deferred financing costs, decreased $401.1 million to $8,313.6 million as of the end of fiscal 2020 compared to
$8,714.7 million as of the end of fiscal 2019.
Outstanding debt, including current maturities, net of debt discounts and deferred financing costs, principally
consisted of (in millions):
Senior Unsecured Notes, Safeway Inc. Notes and New Albertson's L.P. Notes
Finance lease obligations
Other financing obligations and mortgage notes payable
Total debt, including finance leases
February 27,
2021
$
$
7,653.9
612.7
47.0
8,313.6
On August 31, 2020, we completed the issuance of $750.0 million in aggregate principal amount of New 2026
Notes and $750.0 million in aggregate principal amount of 2029 Notes (together, the "August Notes"). Proceeds
from the issuance of the August Notes, together with approximately $60 million of cash on hand, were used to fund
the full redemption of the $1,250.0 million aggregate principal amount outstanding of our 6.625% senior unsecured
55
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notes due 2024 (the "2024 Redemption"). In connection with the 2024 Redemption, we paid an associated
redemption premium of $41.4 million.
On September 16, 2020, remaining proceeds from the issuance of the August Notes were used to fund the partial
redemption of $250.0 million of the $1,250.0 million in aggregate principal amount outstanding of our 2025 Notes
(the "September Partial 2025 Redemption"). In connection with the September Partial 2025 Redemption, we paid an
associated redemption premium of $7.2 million.
On December 22, 2020, we completed the issuance of $600.0 million in aggregate principal amount of additional
2029 Notes (the "Additional 2029 Notes"). Proceeds from the issuance of the Additional 2029 Notes, together with
approximately $230 million of cash on hand, were used to fund a partial redemption of $800.0 million of the
$1,000.0 million in aggregate principal amount outstanding of the 2025 Notes (the "January Partial 2025
Redemption" and together with the 2024 Redemption and the September Partial 2025 Redemption, the "2020
Redemptions"). In connection with the January Partial 2025 Redemption, we paid an associated redemption
premium of $23.0 million.
Liquidity and Factors Affecting Liquidity
We estimate our liquidity needs over the next fiscal year to be in the range of $4,750 million to $5,250 million,
which includes anticipated requirements for working capital, capital expenditures, interest payments and scheduled
principal payments of debt, dividends on Class A common stock and Convertible Preferred Stock, operating leases
and finance leases. Based on current operating trends, we believe that cash flows from operating activities and other
sources of liquidity, including borrowings under our ABL Facility, will be adequate to meet our liquidity needs for
the next 12 months and for the foreseeable future. We believe we have adequate cash flow to continue to maintain
our current debt ratings and to respond effectively to competitive conditions. In addition, we may enter into
refinancing transactions from time to time. There can be no assurance, however, that our business will continue to
generate cash flow at or above current levels or that we will maintain our ability to borrow under our ABL Facility.
See "Contractual Obligations" for a more detailed description of our commitments as of the end of fiscal 2020.
The holders of Convertible Preferred Stock are entitled to a quarterly dividend at a rate per annum of 6.75% of the
liquidation preference per share of the Convertible Preferred Stock. In addition, the holders of Convertible Preferred
Stock will participate in cash dividends that we pay on our common stock to the extent that such cash dividends
exceed $206.25 million per fiscal year. On September 15, 2020, December 15, 2020 and March 15, 2021, we
declared a quarterly cash dividend of $36.4 million, $29.5 million and $29.5 million, respectively, to holders of the
Convertible Preferred Stock, which was paid on September 30, 2020, December 30, 2020 and March 31, 2021,
respectively.
In connection with the IPO, we established a dividend policy pursuant to which we intend to pay a quarterly
dividend on our common stock in an annual amount equal to $0.400 per common share. During fiscal 2020, we paid
quarterly cash dividends of $0.100 per common share on November 10, 2020 and February 10, 2021, to
stockholders of record as of October 26, 2020 and January 26, 2021, respectively. On April 13, 2021, we announced
the next quarterly dividend payment of $0.100 per common share to be paid on May 10, 2021 to stockholders of
record as of the close of business on April 26, 2021.
As of February 27, 2021, we had no borrowings outstanding under our ABL Facility and total availability of
approximately $3,584.7 million (net of letter of credit usage). On March 12, 2020, we provided notice to the lenders
to borrow $2,000.0 million under the ABL Facility (the "ABL Borrowing"), so that a total of $2,000.0 million
(excluding $454.5 million in letters of credit) was outstanding immediately following. We increased our borrowings
under the ABL Facility as a precautionary measure in order to increase our cash position and preserve financial
flexibility in light of current uncertainty in the global markets resulting from the COVID-19 pandemic. We repaid
the $2.0 billion in full on June 19, 2020. In accordance with the terms of the ABL Facility, the proceeds from the
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ABL Borrowing may in the future be used for working capital, general corporate or other purposes permitted by the
ABL Facility, but there is no guarantee how or when we will use the proceeds.
The ABL Facility contains no financial maintenance covenants unless and until (a) excess availability is less than
(i) 10% of the lesser of the aggregate commitments and the then-current borrowing base at any time or (ii) $250.0
million at any time or (b) an event of default is continuing. If any such event occurs, we must maintain a fixed
charge coverage ratio of 1.0:1.0 from the date such triggering event occurs until such event of default is cured or
waived and/or the 30th day that all such triggers under clause (a) no longer exist.
During fiscal 2020 and fiscal 2019, there were no financial maintenance covenants in effect under the ABL Facility
because the conditions listed above had not been met.
See "Part II - Item 8. Financial Statements and Supplementary Data - Note 7" for additional information.
CONTRACTUAL OBLIGATIONS
The table below presents our significant contractual obligations as of February 27, 2021 (in millions) (1):
Payments Due Per Year
Long-term debt (2)
Estimated interest on long-term debt (3)
Operating leases (4)
Finance leases (4)
Other obligations (5)
Purchase obligations (6)
Total contractual obligations
$
Total
7,815.5 $
2,633.7
9,147.4
917.2
2,228.7
409.2
2021
Thereafter
2022-2023 2024-2025
751.7 $
732.1
1,855.2
245.2
820.8
116.5
4,521.5 $
231.0 $
704.4
1,517.0
185.3
218.1
57.5
6,701.9
811.8
4,849.2
362.0
849.5
84.0
2,913.3 $ 13,658.4
130.9 $
385.4
926.0
124.7
340.3
151.2
2,058.5 $
$ 23,151.7 $
(1) The contractual obligations table excludes funding of pension and other postretirement benefit obligations, which totaled $60.0 million in
fiscal 2020 and is expected to total $64.6 million in fiscal 2021. This table also excludes recurring contributions under various
multiemployer pension plans, which totaled $524.0 million in fiscal 2020 and is expected to total approximately $520 million in fiscal
2021. This table also excludes the 6.75% annual dividend to holders of Convertible Preferred Stock, which currently totals approximately
$118 million per year.
(2) Long-term debt amounts exclude any debt discounts and deferred financing costs. See "Part II - Item 8. Financial Statements and
Supplementary Data - Note 7" for additional information.
(3) Amounts include contractual interest payments using the stated fixed interest rate as of February 27, 2021. See "Part II - Item 8. Financial
Statements and Supplementary Data - Note 7" for additional information.
(4) Represents the minimum rents payable under operating and finance leases, excluding common area maintenance, insurance or tax
payments, for which we are obligated.
(5) Consists of self-insurance liabilities, which have not been reduced by insurance-related receivables. This table also includes payment
obligations related to the Combined Plan, the Excess Plan and the UFCW National Fund. Also includes the deferral of the long-term
employer-paid portion of social security taxes related to the Coronavirus Aid, Relief and Economic Security Act. The table excludes the
unfunded pension and postretirement benefit obligation of $450.1 million. The potential settlement payments related to unrecognized tax
benefits have been excluded from the contractual obligations table because a reasonably reliable estimate of the timing of future tax
settlements cannot be determined. Also excludes deferred tax liabilities and certain other deferred liabilities that will not be settled in cash.
(6) Purchase obligations include various obligations that have specified purchase commitments. As of February 27, 2021, future purchase
obligations primarily relate to fixed asset, marketing and information technology commitments, including fixed price contracts. In
addition, not included in the contractual obligations table are supply contracts to purchase product for resale to consumers which are
typically of a short-term nature with limited or no purchase commitments. We also enter into supply contracts which typically include
either volume commitments or fixed expiration dates, termination provisions and other customary contractual considerations. The supply
contracts that are cancelable have not been included above.
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Multiemployer Pension Plans
We currently contribute to 27 multiemployer plans which provide retirement benefits to participants based on their
service to contributing employers. The benefits are paid from assets held in trust for that purpose and the respective
plan trustees are responsible for determining the level of benefits to be provided to participants, the management of
the plan assets and plan administration. Though we are not obligated nor the guarantor for any of the underfunding
of the multiemployer plans to which we contribute, we have estimated, based on the ratio of our contributions to the
total of all contributions to these plans, our allocable share of the underfunding (the amount by which the actuarial
determined plan liabilities exceed the value of the plan assets) of these multiemployer plans to which we contribute
to be approximately $4.7 billion.
On March 11, 2021, the ARP Act was signed into law which establishes a special financial assistance program for
financially troubled multiemployer pension plans. Under the ARP Act, eligible multiemployer plans can apply to
receive a one-time cash payment in the amount needed to pay pension benefits through the plan year ending 2051.
The payment received by the multiemployer plan under this special financial assistance program would not be
considered a loan and would not need to be paid back. Any financial assistance received by the multiemployer plan
would need to be segregated from the other assets of the multiemployer plans and invested in investment grade-
bonds or other investments permitted by the PBGC.
Of the 27 multiemployer plans to which we contribute, 16 plans are classified as "Critical" or "Critical and
Declining" and potentially eligible for some level of relief under the special financial assistance through the ARP
Act. Though the amount of financial assistance that each of these 16 plans could receive will vary by plan, we
currently estimate that these 16 plans represent over 90% of $4.7 billion estimated underfunding. Though significant
uncertainty remains in determining how the special assistance program will work and the PBGC is expected to issue
regulations within 120 days of enactment, we expect the special financial assistance program to provide the
necessary funding for the multiemployer plans to which we contribute to remain solvent through at least 2051 in
addition to ensuring the solvency of the PBGC, which is the guarantor of participant benefits for these
multiemployer plans. We do not believe that the ARP Act will have a material impact to our results of operations or
cash flows as we will continue to make our contributions based on collective bargaining agreements for each of the
multiemployer plans to which we contribute. Our contributions to multiemployer plans were $524.0 million,
$469.3 million, and $451.1 million during fiscal 2020, fiscal 2019 and fiscal 2018, respectively, and we expect to
contribute approximately $520 million in fiscal 2021.
Guarantees
We are party to a variety of contractual agreements pursuant to which we may be obligated to indemnify the other
party for certain matters. These contracts primarily relate to our commercial contracts, operating leases and other
real estate contracts, trademarks, intellectual property, financial agreements and various other agreements. Under
these agreements, we may provide certain routine indemnifications relating to representations and warranties (for
example, ownership of assets, environmental or tax indemnifications) or personal injury matters. The terms of these
indemnifications range in duration and may not be explicitly defined. We believe that if we were to incur a loss in
any of these matters, the loss would not have a material effect on our financial statements.
We are liable for certain operating leases that were assigned to third parties. If any of these third parties fail to
perform their obligations under the leases, we could be responsible for the lease obligation. Because of the wide
dispersion among third parties and the variety of remedies available, we believe that if an assignee became insolvent
it would not have a material effect on our financial condition, results of operations or cash flows.
In the ordinary course of business, we enter into various supply contracts to purchase products for resale and
purchase and service contracts for fixed asset and information technology commitments. These contracts typically
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include volume commitments or fixed expiration dates, termination provisions and other standard contractual
considerations.
Letters of Credit
We had letters of credit of $354.6 million outstanding as of February 27, 2021. The letters of credit are maintained
primarily to support our performance, payment, deposit or surety obligations. We typically pay bank fees of 1.25%
plus a fronting fee of 0.125% on the face amount of the letters of credit.
NEW ACCOUNTING POLICIES
See "Part II - Item 8. Financial Statements and Supplementary Data - Note 1" for new accounting pronouncements.
CRITICAL ACCOUNTING POLICIES
The preparation of consolidated financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
We have chosen accounting policies that we believe are appropriate to report accurately and fairly our operating
results and financial position, and we apply those accounting policies in a fair and consistent manner. See "Part II -
Item 8. Financial Statements and Supplementary Data - Note 1" for a discussion of our significant accounting
policies.
Management believes the following critical accounting policies reflect its more subjective or complex judgments
and estimates used in the preparation of our consolidated financial statements.
Self-Insurance Liabilities
We are primarily self-insured for workers' compensation, property, automobile and general liability. The self-
insurance liability is undiscounted and determined actuarially, based on claims filed and an estimate of claims
incurred but not yet reported. We have established stop-loss amounts that limit our further exposure after a claim
reaches the designated stop-loss threshold. In determining our self-insurance liabilities, we perform a continuing
review of our overall position and reserving techniques. Since recorded amounts are based on estimates, the
ultimate cost of all incurred claims and related expenses may be more or less than the recorded liabilities.
Any actuarial projection of self-insured losses is subject to a high degree of variability. Litigation trends, legal
interpretations, benefit level changes, claim settlement patterns and similar factors influenced historical
development trends that were used to determine the current year expense and, therefore, contributed to the
variability in the annual expense. However, these factors are not direct inputs into the actuarial projection, and thus
their individual impact cannot be quantified.
Long-Lived Asset Impairment
We regularly review our individual stores' operating performance, together with current market conditions, for
indications of impairment. When events or changes in circumstances indicate that the carrying value of an
individual store's assets may not be recoverable, its future undiscounted cash flows are compared to the carrying
value. If the carrying value of store assets to be held and used is greater than the future undiscounted cash flows, an
impairment loss is recognized to record the assets at fair value. For property and equipment held for sale, we
recognize impairment charges for the excess of the carrying value plus estimated costs of disposal over the fair
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value. Fair values are based on discounted cash flows or current market rates. These estimates of fair value can be
significantly impacted by factors such as changes in the current economic environment and real estate market
conditions. Long-lived asset impairment losses were $30.2 million, $77.4 million and $36.3 million in fiscal 2020,
fiscal 2019 and fiscal 2018, respectively.
Goodwill
As of February 27, 2021, our goodwill totaled $1,183.3 million, of which $917.3 million related to our acquisition
of Safeway. We review goodwill for impairment in the fourth quarter of each year, and also upon the occurrence of
triggering events. We perform reviews of each of our reporting units that have goodwill balances. We review
goodwill for impairment by initially considering qualitative factors to determine whether it is more likely than not
that the fair value of a reporting unit is less than its carrying amount, including goodwill, as a basis for determining
whether it is necessary to perform a quantitative analysis. If it is determined that it is more likely than not that the
fair value of a reporting unit is less than its carrying amount, a quantitative analysis is performed to identify
goodwill impairment. If it is determined that it is not more likely than not that the fair value of the reporting unit is
less than its carrying amount, it is unnecessary to perform a quantitative analysis. We may elect to bypass the
qualitative assessment and proceed directly to performing a quantitative analysis.
Goodwill has been allocated to all of our reporting units, and none of our reporting units have a zero or negative
carrying amount of net assets. As of February 27, 2021, there is one reporting unit with no goodwill due to the
impairment loss recorded during the fiscal year ended February 24, 2018. There are eleven reporting units with an
aggregate goodwill balance of $1,183.3 million, of which the fair value of each reporting unit was substantially in
excess of its carrying value, which indicates a remote likelihood of a future impairment loss. Though the fair value
of each reporting unit was substantially in excess of its carrying value, the estimates of fair value can be
significantly impacted by factors such as changes in current market conditions within each of the geographies that
our reporting units operate, therefore future potential declines in market conditions or other factors could negatively
impact the estimated future cash flows and valuation assumptions used to determine the fair value of our reporting
units and lead to future impairment charges.
The annual evaluation of goodwill performed for our reporting units during the fourth quarters of fiscal 2020, fiscal
2019 and fiscal 2018 did not result in impairment.
Employee Benefit Plans
Substantially all of our employees are covered by various contributory and non-contributory pension, profit sharing
or 401(k) plans, in addition to defined benefit plans for certain Safeway, Shaw's and United employees. We also
provide certain health and welfare benefits, including short-term and long-term disability benefits to inactive
disabled employees prior to retirement. Most union employees participate in multiemployer retirement plans
pursuant to collective bargaining agreements, unless the collective bargaining agreement provides for participation
in plans sponsored by us.
We recognize a liability for the underfunded status of the single employer defined benefit plans as a component of
pension and post-retirement benefit obligations. Actuarial gains or losses and prior service costs or credits are
recorded within Other comprehensive income (loss). The determination of our obligation and related expense for
our sponsored pensions and other post-retirement benefits is dependent, in part, on management's selection of
certain actuarial assumptions in calculating these amounts. These assumptions include, among other things, the
discount rate and expected long-term rate of return on plan assets.
The objective of our discount rate assumptions was intended to reflect the rates at which the pension benefits could
be effectively settled. In making this determination, we take into account the timing and amount of benefits that
would be available under the plans. We have elected to use a full yield curve approach in the estimation of service
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and interest cost components of net pension and other post-retirement benefit plan expense by applying the specific
spot rates along the yield curve used in the determination of the projected benefit obligation to the relevant
projected cash flows. We utilized weighted discount rates of 2.83% and 4.17% for our pension plan expenses for
fiscal 2020 and fiscal 2019, respectively. To determine the expected rate of return on pension plan assets held by us
for fiscal 2020, we considered current and forecasted plan asset allocations as well as historical and forecasted rates
of return on various asset categories. Our weighted assumed pension plan investment rate of return was 6.18% and
6.36% for fiscal 2020 and fiscal 2019, respectively. See "Part II - Item 8. Financial Statements and Supplementary
Data - Note 12" for more information on the asset allocations of pension plan assets.
Sensitivity to changes in the major assumptions used in the calculation of our pension and other post-retirement plan
liabilities is illustrated below (dollars in millions).
Discount rate
Expected return on assets
Percentage
Point Change
+/- 1.00%
+/- 1.00%
Projected Benefit Obligation
(Decrease) Increase
$(195.0) / $226.6
- / -
Expense
Increase (Decrease)
$13.3 / $(7.0)
$(16.8) / $16.8
In fiscal 2020 and fiscal 2019, we contributed $60.0 million and $11.0 million, respectively, to our pension and
post-retirement plans. We expect to contribute $64.6 million to our pension and post-retirement plans in fiscal 2021.
Income Taxes and Uncertain Tax Positions
We review the tax positions taken or expected to be taken on tax returns to determine whether and to what extent a
benefit can be recognized in our consolidated financial statements. See "Part II - Item 8. Financial Statements and
Supplementary Data - Note 11" for the amount of unrecognized tax benefits and other disclosures related to
uncertain tax positions. Various taxing authorities periodically examine our income tax returns. These examinations
include questions regarding our tax filing positions, including the timing and amount of deductions and the
allocation of income to various tax jurisdictions. In evaluating these various tax filing positions, including state and
local taxes, we assess our income tax positions and record tax benefits for all years subject to examination based
upon management's evaluation of the facts, circumstances and information available at the reporting date. For those
tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded the largest
amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing
authority that has full knowledge of all relevant information. For those income tax positions where it is not more
likely than not that a tax benefit will be sustained, no tax benefit has been recognized in our financial statements. A
number of years may elapse before an uncertain tax position is examined and fully resolved. As of February 27,
2021, we are no longer subject to federal income tax examinations for fiscal years prior to 2012 and in most states,
we are no longer subject to state income tax examinations for fiscal years before 2007. Tax years 2007 through 2019
remain under examination. The assessment of our tax position relies on the judgment of management to estimate the
exposures associated with our various filing positions.
Item 7A - Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk from a variety of sources, including changes in interest rates and commodity prices.
We have from time to time selectively used derivative financial instruments to reduce these market risks. Our
market risk exposures related to interest rates and commodity prices are discussed below.
Interest Rate Risk and Long-Term Debt
We are exposed to market risk from fluctuations in interest rates. From time to time, we manage our exposure to
interest rate fluctuations through the use of interest rate swaps. At the time of entering into interest rate swap
contracts, our risk management objective and strategy is to utilize them to protect us against adverse fluctuations in
interest rates by reducing our exposure to variability in cash flows relating to interest payments on a portion of our
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outstanding debt. As further described in Note 7 - Long-term debt and finance lease obligations, we significantly
reduced our exposure to changes in LIBOR, which is the designated benchmark we hedge, with the extinguishment
of our term loan facility on February 5, 2020. In connection with the term loan extinguishment, we discontinued
hedge accounting, and changes in the fair value of these instruments are now recognized in earnings. We continue to
make scheduled payments on the swaps that were previously designated as cash flow hedges of our term loan
facility in accordance with the terms of the contracts.
As a result of the term loan extinguishment, our principal exposure to LIBOR now relates to our ABL Facility, and
we believe a 100 basis point increase on our variable interest rates would not have a material impact on our interest
expense.
The table below provides information about our derivative financial instruments and other financial instruments that
are sensitive to changes in interest rates, including debt instruments and interest rate swaps. For debt obligations, the
table presents principal amounts due and related weighted average interest rates by expected maturity dates. For
interest rate swaps, the table presents average notional amounts and weighted average interest rates by expected
(contractual) maturity dates (dollars in millions):
Fiscal
2021
Fiscal
2022
Fiscal
2023
Fiscal
2024
Fiscal
2025
Thereafter Total
Fair
Value
Long-Term Debt
Fixed Rate - Principal payments $ 130.9 $ 750.8 $ 0.9 $ 16.9 $ 214.1 $ 6,701.9 $ 7,815.5 $ 8,150.7
Weighted average interest rate
(1)
4.76%
3.50%
6.04%
4.61%
5.87%
5.08%
4.94%
(1) Excludes debt discounts and deferred financing costs.
Pay Fixed / Receive Variable
Fiscal
2021
Fiscal
2022
Fiscal
2023
Fiscal
2024
Fiscal
2025
Thereafter
Interest Rate Swaps
Average Notional amount outstanding
Average pay rate
Average receive rate
Commodity Price Risk
$ 1,653.0 $ 593.0 $ 49.0 $ — $ — $
2.94 %
0.75 %
2.94 %
0.75 %
2.83 %
0.75 %
— %
— %
— %
— %
—
— %
— %
We have entered into fixed price contracts to purchase electricity and natural gas for a portion of our energy needs.
We expect to take delivery of these commitments in the normal course of business, and, as a result, these
commitments qualify as normal purchases. We also manage our exposure to changes in diesel prices utilized in our
distribution process through the use of short-term heating oil derivative contracts. These contracts are economic
hedges of price risk and are not designated or accounted for as hedging instruments for accounting purposes.
Changes in the fair value of these instruments are recognized in earnings. We do not believe that these energy and
commodity swaps would cause a material change to our financial position.
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Item 8 - Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of Albertsons Companies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Albertsons Companies, Inc. and subsidiaries (the
"Company") as of February 27, 2021 and February 29, 2020, the related consolidated statements of operations and
comprehensive income, cash flows, and stockholders' equity for the 52 weeks ended February 27, 2021, the 53
weeks ended February 29, 2020, and the 52 weeks ended February 23, 2019, and the related notes (collectively, the
"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the
consolidated financial position of the Company as of February 27, 2021, and February 29, 2020, and the results of
its operations and its cash flows for each of the three years in the period ended February 27, 2021.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with
the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with
respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis
for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters
below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.
63
Stockholders' Equity and Convertible Preferred Stock – Refer to Note 9 to the financial statements
Critical Audit Matter Description
On June 9, 2020, the Company sold and issued (i) an aggregate of 1,410,000 shares of Series A-1 preferred stock
and (ii) an aggregate of 340,000 shares of Series A preferred stock (collectively, the "Convertible Preferred Stock").
The Company received aggregate proceeds of $1,680.0 million from the sale and issuance of the Convertible
Preferred Stock, which has an aggregate liquidation preference of $1,750.0 million. The Convertible Preferred Stock
is convertible at the option of the holders into common stock and has an investor exchange right to exchange certain
real estate assets or real estate equity interests. The Company assessed the Convertible Preferred Stock for any
beneficial conversion features or embedded derivatives, including the conversion option and investor exchange
right, and did not identify any features that would require bifurcation from the Convertible Preferred Stock and
receive separate accounting treatment.
We identified the accounting evaluation of embedded features in the Convertible Preferred Stock to be a critical
audit matter because the evaluation of the appropriate accounting treatment for potential derivatives involved a high
degree of auditor judgment and an increased extent of effort, including the extent of specialized skill or knowledge
needed to evaluate the Company's conclusions.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the conclusions associated with bifurcation of embedded features from the
Convertible Preferred Stock involved the following procedures, among others:
• We tested certain controls over the Company's process for evaluating and reaching accounting conclusions
regarding bifurcation of the embedded features within the Convertible Preferred Stock.
• We read and analyzed the contract terms included in various agreements related to the issuance of the
Convertible Preferred Stock, including the investment agreement, real estate agreement, and other
agreements entered into on or around the issuance date to identify and assess the reasonableness of
management's accounting treatment for the different embedded features as they impacted bifurcation
conclusions.
• We obtained assistance from internal subject matter experts with specialized knowledge in complex debt
and equity transactions to assist in (i) evaluating relevant contract terms and conditions of the various
agreements in relation to the appropriate accounting literature and (ii) assessing the appropriateness of
conclusions reached by the Company with respect to the accounting for bifurcation of embedded features
within the Convertible Preferred Stock.
Self-Insurance Liabilities—Refer to Note 1 to the financial statements
Critical Audit Matter Description
The Company is self-insured for workers' compensation automobile, property, and general liability. The self-
insurance liability is undiscounted and determined actuarially based on claims filed and an estimate of claims
incurred but not yet reported. The Company has established stop-loss amounts that limit the Company’s exposure.
Self-insurance liabilities as of February 27, 2021, were $1,159.1 million.
We identified the evaluation of the Company's self-insurance liabilities as a critical audit matter because estimating
the projected settlement value of reported and unreported claims involves significant estimation by management.
This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our
actuarial specialists when performing audit procedures to evaluate whether self-insurance liabilities were
appropriately recorded as of February 27, 2021.
64
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the self-insurance liabilities included the following, among others:
We tested the effectiveness of controls over management's self-insurance process, including controls over the
review of the actuarial report and evaluation of the external actuarial expert's qualifications, competency, and
objectivity and evaluation of the underlying data sent to the external actuary.
We evaluated the methods and assumptions used by management to estimate the self-insurance liability by:
• Reading the Company's insurance policies and comparing the coverage and terms to the assumptions used
by management.
• Testing the underlying data that served as the basis for the actuarial analysis, including historical claims, to
•
test that the inputs to the actuarial estimate were accurate and complete.
Involving actuarial specialists with specialized skills, industry knowledge, and relevant experience who
assisted in:
◦ Comparing management's prior-year assumptions of expected development and ultimate loss to
actuals incurred during the current year to identify potential bias in the determination of the self-
insurance reserves.
◦ Developing an independent expectation of the self-insurance liabilities and comparing them to the
amounts recorded by management.
◦ Evaluating the key assumptions and methodologies used by management to determine the reserve.
◦ Evaluating the qualifications of the Company's actuaries by assessing their certifications and
determining whether they met the Qualification Standards of the American Academy of Actuaries to
render the statements of actuarial opinion implicit in their analyses.
/s/ Deloitte & Touche LLP
Boise, Idaho
April 28, 2021
We have served as the Company's auditor since 2006.
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Albertsons Companies, Inc. and Subsidiaries
Consolidated Balance Sheets
(in millions, except share data)
February 27,
2021
February 29,
2020
ASSETS
Current assets
Cash and cash equivalents
Receivables, net
Inventories, net
Prepaid assets
Other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Intangible assets, net
Goodwill
Other assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Accounts payable
Accrued salaries and wages
Current maturities of long-term debt and finance lease obligations
Current operating lease obligations
Current portion of self-insurance liability
Taxes other than income taxes
Other current liabilities
Total current liabilities
Long-term debt and finance lease obligations
Long-term operating lease obligations
Deferred income taxes
Long-term self-insurance liability
Other long-term liabilities
Commitments and contingencies
Series A convertible preferred stock, $0.01 par value; 1,750,000 shares authorized, 924,000 shares
issued and outstanding as of February 27, 2021 and no shares authorized, issued and
outstanding as of February 29, 2020
Series A-1 convertible preferred stock, $0.01 par value; 1,410,000 shares authorized, 826,000
shares issued and outstanding as of February 27, 2021 and no shares authorized, issued and
outstanding as of February 29, 2020
STOCKHOLDERS' EQUITY
Undesignated preferred stock, $0.01 par value; 96,840,000 shares authorized, no shares issued
as of February 27, 2021 and 30,000,000 shares authorized, no shares issued as of February
29, 2020
Class A common stock, $0.01 par value; 1,000,000,000 shares authorized, 585,574,666 and
582,997,251 shares issued as of February 27, 2021 and February 29, 2020, respectively
Class A-1 convertible common stock, $0.01 par value; 150,000,000 shares authorized, no
shares issued as of February 27, 2021 and no shares authorized and issued as of February
29, 2020
Additional paid-in capital
Treasury stock, at cost, 120,009,647 shares held as of February 27, 2021 and 3,671,621
shares held as of February 29, 2020, respectively
Accumulated other comprehensive income (loss)
Retained earnings
Total stockholders' equity
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
$
$
$
1,717.0 $
550.9
4,301.3
317.2
101.6
6,988.0
9,412.7
6,015.6
2,108.8
1,183.3
889.6
26,598.0 $
3,487.3 $
1,474.7
212.4
605.3
321.4
339.1
392.0
6,832.2
8,101.2
5,548.0
533.7
837.7
1,821.8
844.3
754.8
—
5.9
—
1,898.9
(1,907.0)
63.5
1,263.0
1,324.3
26,598.0 $
470.7
525.3
4,352.5
255.0
127.8
5,731.3
9,211.9
5,867.4
2,087.2
1,183.3
654.0
24,735.1
2,891.1
1,126.0
221.4
563.1
308.9
318.1
475.7
5,904.3
8,493.3
5,402.8
613.8
838.5
1,204.3
—
—
—
5.8
1,824.3
(25.8)
(118.5)
592.3
2,278.1
24,735.1
The accompanying notes are an integral part of these Consolidated Financial Statements.
66
Table of Contents
Albertsons Companies, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income
(in millions, except per share data)
Net sales and other revenue
Cost of sales
Gross profit
Selling and administrative expenses
Gain on property dispositions and impairment
losses, net
Operating income
Interest expense, net
Loss on debt extinguishment
Other (income) expense, net
Income before income taxes
Income tax expense (benefit)
Net income
Other comprehensive income (loss), net of tax:
Loss on interest rate swaps
Recognition of pension gain (loss)
Other
Other comprehensive income (loss)
Comprehensive income
Net income per Class A common share:
Basic net income per Class A common share
Diluted net income per Class A common share
Weighted average Class A common shares
outstanding:
Basic
Diluted
52 weeks ended
February 27, 2021
$
69,690.4 $
49,275.9
20,414.5
53 weeks ended
February 29, 2020
52 weeks ended
February 23, 2019
60,534.5
43,639.9
16,894.6
62,455.1 $
44,860.9
17,594.2
18,835.8
(38.8)
1,617.5
538.2
85.3
(134.7)
1,128.7
278.5
850.2 $
—
183.0
(1.0)
182.0 $
16,641.9
(484.8)
1,437.1
698.0
111.4
28.5
599.2
132.8
466.4 $
(3.4)
(210.5)
4.1
(209.8) $
1,032.2 $
256.6 $
1.53 $
1.47 $
0.80 $
0.80 $
500.3
578.1
579.4
580.3
16,272.3
(165.0)
787.3
830.8
8.7
(104.4)
52.2
(78.9)
131.1
(15.5)
(83.1)
(1.2)
(99.8)
31.3
0.23
0.23
580.5
580.7
$
$
$
$
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
67
Table of Contents
Albertsons Companies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in millions)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on property dispositions and impairment
losses, net
Depreciation and amortization
Operating lease right-of-use assets amortization
LIFO expense
Deferred income tax
Pension and post-retirement benefits (income)
expense
Contributions to pension and post-retirement benefit
plans
Loss (gain) on interest rate swaps and commodity
hedges, net
Deferred financing costs
Loss on debt extinguishment
Equity-based compensation expense
Other operating activities
Changes in operating assets and liabilities, net of
effects of acquisition of businesses:
Receivables, net
Inventories, net
Accounts payable, accrued salaries and wages and
other accrued liabilities
Operating lease liabilities
Pension withdrawal liabilities
Self-insurance assets and liabilities
Other operating assets and liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Business acquisitions, net of cash acquired
Payments for property, equipment and intangibles,
including lease buyouts
Proceeds from sale of assets
Other investing activities
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of long-term debt
Payments on long-term borrowings
Payments of obligations under finance leases
Payment of redemption premium on debt
extinguishment
Payments for debt financing costs
Dividends paid on common stock
Dividends paid on convertible preferred stock
52 weeks ended
February 27, 2021
53 weeks ended
February 29, 2020
52 weeks ended
February 23, 2019
$
850.2 $
466.4 $
131.1
(38.8)
1,536.9
581.5
58.7
(112.3)
(36.4)
(60.0)
16.9
20.9
85.3
59.0
(143.0)
0.4
9.2
787.4
(563.3)
672.3
6.5
171.1
3,902.5
(97.9)
(1,630.2)
161.6
(5.5)
(1,572.0)
(484.8)
1,691.3
570.3
18.4
(5.9)
(2.0)
(11.0)
50.6
39.8
111.4
32.8
2.5
60.8
(38.1)
85.3
(584.4)
(62.3)
(4.0)
(33.2)
1,903.9
—
(1,475.1)
1,096.7
(0.1)
(378.5)
(165.0)
1,738.8
—
8.0
(81.5)
24.5
(199.3)
(1.3)
42.7
8.7
47.7
(42.7)
28.8
80.3
98.4
—
(18.2)
(48.7)
35.6
1,687.9
—
(1,362.6)
1,252.0
23.8
(86.8)
52 weeks ended
February 27, 2021
53 weeks ended
February 29, 2020
52 weeks ended
February 23, 2019
$
4,094.0 $
(4,446.7)
(79.9)
3,874.0 $
(5,676.6)
(109.3)
(71.6)
(21.9)
(93.7)
(66.0)
—
(53.2)
—
—
1,969.8
(3,082.3)
(97.5)
(3.1)
(27.0)
—
—
68
Table of Contents
Albertsons Companies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in millions)
Proceeds from convertible preferred stock
Third party issuance costs on convertible preferred
stock
Treasury stock purchase, at cost
Employee tax withholding on vesting of restricted
stock and phantom units
Other financing activities
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
and restricted cash
Cash and cash equivalents and restricted cash at
beginning of period
Cash and cash equivalents and restricted cash at end
of period
Reconciliation of capital investments:
Payments for property and equipment, including
payments for lease buyouts
Lease buyouts
Total payments for capital investments, excluding
lease buyouts
Supplemental cash flow information:
Non-cash investing and financing activities were as
follows:
Additions of finance lease obligations, excluding
business acquisitions
Purchases of property and equipment included in
accounts payable
Interest and income taxes paid:
Interest paid, net of amount capitalized
Income taxes paid
$
$
$
$
1,680.0
(80.9)
(1,881.2)
(14.1)
(59.8)
(1,041.8)
1,288.7
478.9
—
—
—
(18.8)
(30.3)
(2,014.2)
(488.8)
967.7
1,767.6 $
478.9 $
(1,630.2) $
(13.0)
(1,475.1) $
7.7
(1,643.2) $
(1,467.4) $
—
—
(25.8)
(15.3)
(33.0)
(1,314.2)
286.9
680.8
967.7
(1,362.6)
18.9
(1,343.7)
38.8 $
— $
360.8
574.3
366.2
230.8
718.5
228.8
6.0
243.1
805.9
18.2
The accompanying notes are an integral part of these Consolidated Financial Statements.
69
Table of Contents
Albertsons Companies, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(in millions, except share data)
Class A Common Stock
Shares
Amount
579,443,146 $
Additional paid
in capital
Treasury Stock
Shares
Amount
Accumulated
other
comprehensive
income (loss)
Retained
earnings
Total
stockholders'
equity
Balance as of February 24, 2018
Equity-based compensation
Employee tax withholding on vesting of phantom
units
Repurchase of common stock
Reorganization transactions
Net income
Other comprehensive loss, net of tax
Other activity
Balance as of February 23, 2019
Issuance of common stock to Company's parents
Equity-based compensation
Employee tax withholding on vesting of phantom
units
Adoption of new accounting standards, net of tax
Net income
Other comprehensive loss, net of tax
Other activity
Balance as of February 29, 2020
Issuance of common stock to Company's parents
Equity-based compensation
Shares issued and employee tax withholding on
vesting of phantom units and restricted stock
Equity reclassification
Repurchase of common stock
Dividends declared on common stock
Dividends accrued on convertible preferred stock
Net income
Other comprehensive income, net of tax
Other activity
Balance as of February 27, 2021
—
—
—
—
—
—
—
579,443,146
3,554,105
—
—
—
—
—
—
582,997,251
1,312,859
—
1,264,556
—
—
—
—
—
—
—
585,574,666 $
5.8 $
—
—
—
—
—
—
—
5.8
—
—
—
—
—
—
—
5.8
—
—
0.1
—
—
—
—
—
—
—
5.9 $
— $
1,770.3
—
47.7
—
(15.3)
3,671,621
—
—
13.1
—
—
—
—
—
(4.6)
3,671,621
1,811.2
—
—
—
32.8
—
(18.8)
—
—
—
—
—
—
—
(0.9)
3,671,621
1,824.3
—
—
—
59.0
—
(14.1)
30.0
—
— 116,338,026
—
—
—
—
—
—
—
—
—
(0.3)
1,898.9 120,009,647 $ (1,907.0) $
— $
—
—
(25.8)
—
—
—
—
(25.8)
—
—
—
—
—
—
—
(25.8)
—
—
—
—
(1,881.2)
—
—
—
—
—
191.1 $
—
—
—
—
—
(99.8)
—
91.3
—
—
—
16.6
—
(226.4)
—
(118.5)
—
—
—
—
—
—
—
—
182.0
—
63.5 $
(569) $
—
—
—
—
131.1
—
6.1
(431.8)
—
—
—
558.0
466.4
—
(0.3)
592.3
—
—
—
—
—
(93.7)
(86.0)
850.2
—
0.2
1,263.0 $
1,398.2
47.7
(15.3)
(25.8)
13.1
131.1
(99.8)
1.5
1,450.7
—
32.8
(18.8)
574.6
466.4
(226.4)
(1.2)
2,278.1
—
59.0
(14.0)
30.0
(1,881.2)
(93.7)
(86.0)
850.2
182.0
(0.1)
1,324.3
The accompanying notes are an integral part of these Consolidated Financial Statements.
70
Table of Contents
Albertsons Companies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 1 - DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Albertsons Companies, Inc. and its subsidiaries (the "Company" or "ACI") is a food and drug retailer that, as of
February 27, 2021, operated 2,277 retail stores together with 400 associated fuel centers, 22 dedicated distribution
centers, 20 manufacturing facilities and various online platforms. The Company's retail food businesses and in-store
pharmacies operate throughout the United States under the banners Albertsons, Safeway, Vons, Pavilions, Randalls,
Tom Thumb, Carrs, Jewel-Osco, Acme, Shaw's, Star Market, United Supermarkets, Market Street, Haggen, Kings
Food Markets and Balducci's Food Lovers Market. The Company has no separate assets or liabilities other than its
investments in its subsidiaries, and all of its business operations are conducted through its operating subsidiaries.
Basis of Presentation
The Company's Consolidated Financial Statements have been prepared in accordance with accounting principles
generally accepted in the United States of America ("GAAP"). Intercompany transactions and accounts have been
eliminated in consolidation for all periods presented. The Company's investments in unconsolidated affiliates are
recorded using the equity method.
Significant Accounting Policies
Fiscal year: The Company's fiscal year ends on the last Saturday in February. Unless the context otherwise
indicates, reference to a fiscal year of the Company refers to the calendar year in which such fiscal year commences.
The Company's first quarter consists of 16 weeks, the second, third and fourth quarters generally each consist of 12
weeks, and the fiscal year generally consists of 52 weeks. For the fiscal years ended February 27, 2021 and
February 23, 2019, the fiscal years consisted of 52 weeks. For the fiscal year ended February 29, 2020, the fourth
quarter consisted of 13 weeks, and the fiscal year consisted of 53 weeks.
Use of estimates: The preparation of the Company's Consolidated Financial Statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses for the reporting periods presented. Certain estimates require difficult, subjective or
complex judgments about matters that are inherently uncertain. Actual results could differ from those estimates.
Cash and cash equivalents: Cash equivalents include all highly liquid investments with original maturities of three
months or less at the time of purchase and outstanding deposits related to credit and debit card sales transactions
that settle within a few days. Cash and cash equivalents related to credit and debit card transactions were
$525.3 million and $501.8 million as of February 27, 2021 and February 29, 2020, respectively.
Restricted cash: Restricted cash is included in Other current assets and Other assets within the Consolidated
Balance Sheets and primarily relates to surety bonds and funds held in escrow. The Company had $50.6 million and
$8.2 million of restricted cash as of February 27, 2021 and February 29, 2020, respectively.
Receivables, net: Receivables consist primarily of trade accounts receivable, pharmacy accounts receivable, tenant
receivables and vendor receivables. Management makes estimates of the uncollectibility of its accounts receivable.
In determining the adequacy of the allowances for doubtful accounts, management analyzes the value of collateral,
historical collection experience, aging of receivables and other economic and industry factors. It is possible that the
accuracy of the estimation process could be materially impacted by different judgments, estimations and
assumptions based on the information considered and could result in a further adjustment of receivables. The
allowance for doubtful accounts and bad debt expense were not material for any of the periods presented.
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Table of Contents
Inventories, net: Substantially all of the Company's inventories consist of finished goods valued at the lower of
cost or market and net of vendor allowances.
As of February 27, 2021 and February 29, 2020, approximately 84.9% and 85.6%, respectively, of the Company's
inventories were valued under the last-in, first-out ("LIFO") method. The Company primarily uses the retail
inventory or the item-cost method to determine inventory cost before application of any LIFO adjustment. Under
the retail inventory method, inventory cost is determined, before the application of any LIFO adjustment, by
applying a cost-to-retail ratio to various categories of similar items to the retail value of those items. Under the item-
cost method, the most recent purchase cost is used to determine the cost of inventory before the application of any
LIFO adjustment. Replacement or current cost was higher than the carrying amount of inventories valued using
LIFO by $202.2 million and $143.5 million as of February 27, 2021 and February 29, 2020, respectively. During
fiscal 2020, fiscal 2019 and fiscal 2018, inventory quantities in certain LIFO layers were reduced. These reductions
resulted in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared
with the cost of fiscal 2020, fiscal 2019 and fiscal 2018 purchases. As a result, cost of sales decreased by
$11.8 million, $12.9 million and $18.1 million in fiscal 2020, fiscal 2019 and fiscal 2018, respectively. Cost for the
remaining inventories, which represents perishable and fuel inventories, was determined using the most recent
purchase cost, which approximates the first-in, first-out ("FIFO") method. Perishables are counted every four weeks
and are carried at the last purchased cost which approximates FIFO cost. Fuel inventories are carried at the last
purchased cost, which approximates FIFO cost. The Company records inventory shortages based on actual physical
counts at its facilities and also provides allowances for inventory shortages for the period between the last physical
count and the balance sheet date.
Assets held for sale: Assets held for sale represent components and businesses that meet accounting requirements
to be classified as held for sale and are presented as a single asset and liability in Company's Consolidated Balance
Sheets. As of February 27, 2021, and February 29, 2020, immaterial amounts of assets and liabilities held for sale
are recorded in other current assets and other current liabilities, respectively.
Property and equipment, net: Property and equipment is recorded at cost or fair value for assets acquired as part
of a business combination, and depreciation is calculated on the straight-line method over the estimated useful lives
of the assets. Estimated useful lives are generally as follows: buildings - seven to 40 years; leasehold improvements
- the shorter of the remaining lease term or ten to 20 years; fixtures and equipment - three to 20 years; and
specialized supply chain equipment - six to 25 years.
Property and equipment under finance leases are recorded at the lower of the present value of the future minimum
lease payments or the fair value of the asset and are amortized on the straight-line method over the lesser of the
lease term or the estimated useful life. Interest capitalized on property under construction was immaterial for all
periods presented.
Leases: The Company leases certain retail stores, distribution centers, office facilities and equipment from third
parties. The Company determines whether a contract is or contains a lease at contract inception. Operating and
finance lease assets and liabilities are recognized at the lease commencement date. Operating leases are included in
operating lease right-of-use ("ROU") assets, current operating lease obligations and long-term operating lease
obligations on the Consolidated Balance Sheets. Finance leases are included in Property and equipment, net, current
maturities of long-term debt and finance lease obligations and long-term debt and finance lease obligations on the
Consolidated Balance Sheets. Operating lease assets represent the Company's right to use an underlying asset for
the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the
lease. Lease liabilities are based on the present value of remaining lease payments over the lease term. As the rate
implicit in the Company's leases is not readily determinable, the Company's applicable incremental borrowing rate,
which is estimated to approximate the interest rate on a collateralized basis with similar terms, is used in calculating
the present value of the sum of the lease payments. Operating lease assets are based on the lease liability, adjusted
72
Table of Contents
for any prepayments, lease incentives and initial direct costs incurred. The typical real estate lease period is 15 to
20 years with renewal options for varying terms and, to a limited extent, options to purchase. The Company
includes renewal options that are reasonably certain to be exercised as part of the lease term.
The Company has lease agreements with non-lease components that relate to the lease components. Certain leases
contain percent rent based on sales, escalation clauses or payment of executory costs such as property taxes,
utilities, insurance and maintenance. Non-lease components primarily relate to common area maintenance. Non-
lease components and the lease components to which they relate are accounted for together as a single lease
component for all asset classes. The Company recognizes lease payments for short-term leases as expense either
straight-line over the lease term or as incurred depending on whether lease payments are fixed or variable.
Impairment of long-lived assets: The Company regularly reviews its individual stores' operating performance,
together with current market conditions, for indicators of impairment. When events or changes in circumstances
indicate that the carrying value of the individual store's assets may not be recoverable, its future undiscounted cash
flows are compared to the carrying value. If the carrying value of store assets to be held and used is greater than the
future undiscounted cash flows, an impairment loss is recognized to record the assets at fair value. For assets held
for sale, the Company recognizes impairment charges for the excess of the carrying value plus estimated costs of
disposal over the fair value. Fair values are based on discounted cash flows or current market rates. These estimates
of fair value can be significantly impacted by factors such as changes in the current economic environment and real
estate market conditions. Long-lived asset impairments are recorded as a component of Gain on property
dispositions and impairment losses, net.
Intangible assets, net: Intangible assets with finite lives consist primarily of trade names, naming rights, customer
prescription files and internally developed software. Intangible assets with finite lives are amortized on a straight-
line basis over an estimated economic life ranging from three to 40 years. The Company reviews finite-lived
intangible assets for impairment in accordance with its policy for long-lived assets. Intangible assets with indefinite
useful lives, which are not amortized, consist of restricted covenants and liquor licenses. The Company reviews
intangible assets with indefinite useful lives and tests for impairment annually on the first day of the fourth quarter
and also if events or changes in circumstances indicate the occurrence of a triggering event. The review consists of
comparing the estimated fair value of the cash flows generated by the asset to the carrying value of the asset.
Cloud computing arrangements that are service contracts: The Company enters into hosted cloud computing
arrangements that are considered to be service contracts and capitalizes certain development costs related to
implementing the cloud computing arrangement. As of February 27, 2021 and February 29, 2020, the Company had
capitalized implementation costs of $107.0 million and $48.1 million, respectively, included in Other assets. The
Company amortizes the costs over the related service contract period of the hosting arrangement. Amortization
expense for the implementation costs was $15.2 million and $0.6 million for fiscal 2020 and fiscal 2019,
respectively, and is included within Selling and administrative expenses.
Goodwill: Goodwill represents the difference between the purchase price and the fair value of assets and liabilities
acquired in a business combination. Goodwill is not amortized as the Company reviews goodwill for impairment
annually on the first day of its fourth quarter and also if events or changes in circumstances indicate the occurrence
of a triggering event. The Company reviews goodwill for impairment by initially considering qualitative factors to
determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount,
including goodwill, as a basis for determining whether it is necessary to perform a quantitative analysis. If it is
determined that it is more likely than not that the fair value of reporting unit is less than its carrying amount, a
quantitative analysis is performed to identify goodwill impairment. If it is determined that it is not more likely than
not that the fair value of the reporting unit is less than its carrying amount, it is unnecessary to perform a
quantitative analysis. The Company may elect to bypass the qualitative assessment and proceed directly to
performing a quantitative analysis.
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Table of Contents
Business combination measurements: In accordance with applicable accounting standards, the Company
estimates the fair value of acquired assets and assumed liabilities as of the acquisition date of business
combinations. These fair value adjustments are input into the calculation of goodwill related to the excess of the
purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed
in the acquisition.
The fair value of assets acquired and liabilities assumed are determined using market, income and cost approaches
from the perspective of a market participant. The fair value measurements can be based on significant inputs that are
not readily observable in the market. The market approach indicates value for a subject asset based on available
market pricing for comparable assets. The market approach used includes prices and other relevant information
generated by market transactions involving comparable assets, as well as pricing guides and other sources. The
income approach indicates value for a subject asset based on the present value of cash flows projected to be
generated by the asset. Projected cash flows are discounted at a required market rate of return that reflects the
relative risk of achieving the cash flows and the time value of money. The cost approach, which estimates value by
determining the current cost of replacing an asset with another of equivalent economic utility, was used for certain
assets for which the market and income approaches could not be applied due to the nature of the asset. The cost to
replace a given asset reflects the estimated reproduction or replacement cost for the asset, adjusted for obsolescence,
whether physical, functional or economic.
Equity method investments: Investments in certain companies over which we exert significant influence, but do
not control the financial and operating decisions, are accounted for as equity method investments. For equity
method investments, the Company regularly reviews its investments to determine whether there is a decline in fair
value below carrying value. If there is a decline that is other-than-temporary, the investment is written down to fair
value. The Company records equity in earnings from unconsolidated affiliates in Other (income) expense, net. As of
February 27, 2021 and February 29, 2020, the Company has equity method investments of $182.0 million and
$117.8 million, respectively, included in Other assets.
The Company's equity method investments include an equity interest in Mexico Foods Parent LLC and La Fabrica
Parent LLC ("El Rancho"), a Texas-based specialty grocer. The investment represents a 45% ownership interest in
El Rancho which the Company is accounting for under the equity method. The Company has the option to acquire
the remaining 55% of El Rancho at any time until six months after the delivery of El Rancho's financial results for
the fiscal year ended December 31, 2021. If the Company elects to exercise the option to acquire the remaining
equity of El Rancho, the price to be paid will be calculated using a predetermined market-based formula.
Other investments: Investments in equity securities with a readily determinable fair value, not accounted for under
the equity method, are recorded at fair value with realized and unrealized gains and losses included in Other
(income) expense, net. For equity securities without a readily determinable fair value, the investment is recorded at
cost, less any impairment, plus or minus adjustments related to observable transactions for the same or similar
securities, with realized and unrealized gains and losses included in Other (income) expense, net. As of February 27,
2021 and February 29, 2020, the Company has other investments of $152.8 million and $92.6 million, respectively,
included in Other assets.
Company-Owned life insurance policies ("COLI"): The Company has COLI policies that have a cash surrender
value. The Company has loans against these policies. The Company has no intention of repaying the loans prior to
maturity or cancellation of the policies. Therefore, the Company offsets the cash surrender value by the related
loans. As of February 27, 2021 and February 29, 2020, the cash surrender values of the policies were $148.3 million
and $149.2 million, and the balances of the policy loans were $89.9 million and $87.8 million, respectively. The net
balance of the COLI policies is included in Other assets.
Derivatives: The Company entered into several pay fixed, receive variable interest rate swap contracts ("Swaps") to
manage its exposure to changes in interest rates. Swaps are recognized in the Consolidated Balance Sheets at fair
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value. If a Swap is recorded using hedge accounting, changes in the fair value of Swaps designated as cash flow
hedges are recorded in accumulated other comprehensive income (loss) until the hedged item is recognized in
earnings. Changes in fair value for Swaps that do not meet the criteria for hedge accounting, or for which the
Company has not elected hedge accounting are recorded in current period earnings. The Company assesses, both at
the inception of the hedge and on an ongoing basis, whether derivatives used as hedging instruments are highly
effective in offsetting the changes in the fair value or cash flow of the hedged items. If it is determined that a
derivative is not highly effective as a hedge or ceases to be highly effective, the Company discontinues hedge
accounting prospectively.
The Company has also entered into contracts to purchase electricity and natural gas at fixed prices for a portion of
its energy needs. The Company expects to take delivery of the electricity and natural gas in the normal course of
business. Contracts that qualify for the normal purchase exception under derivatives and hedging accounting
guidance are not recorded at fair value. Energy purchased under these contracts is expensed as delivered. The
Company also manages its exposure to changes in diesel prices utilized in the Company's distribution process
through the use of short-term heating oil derivative contracts. These contracts are economic hedges of price risk and
are not designated or accounted for as hedging instruments for accounting purposes. Changes in the fair value of
these instruments are recognized in current period earnings.
Self-Insurance liabilities: The Company is primarily self-insured for workers' compensation, property, automobile
and general liability. The self-insurance liability is undiscounted and determined actuarially, based on claims filed
and an estimate of claims incurred but not yet reported. The Company has established stop-loss amounts that limit
the Company's further exposure after a claim reaches the designated stop-loss threshold. Stop-loss amounts for
claims incurred for the years presented range from $0.25 million to $5.0 million per claim, depending upon the type
of insurance coverage and the year the claim was incurred. In determining its self-insurance liabilities, the Company
performs a continuing review of its overall position and reserving techniques. Since recorded amounts are based on
estimates, the ultimate cost of all incurred claims and related expenses may be more or less than the recorded
liabilities.
The Company has reinsurance receivables of $24.6 million and $22.5 million recorded within Receivables, net and
$47.0 million and $43.9 million recorded within Other assets as of February 27, 2021 and February 29, 2020,
respectively. The self-insurance liabilities and related reinsurance receivables are recorded gross.
Changes in self-insurance liabilities consisted of the following (in millions):
Beginning balance
Expense
Claim payments
Other reductions (1)
Ending balance
Less current portion
Long-term portion
February 27,
2021
February 29,
2020
1,147.4 $
342.7
(273.9)
(57.1)
1,159.1
(321.4)
837.7 $
1,146.3
323.4
(295.6)
(26.7)
1,147.4
(308.9)
838.5
$
$
(1) Primarily reflects actuarial adjustments for claims experience and systematic adjustments to the fair value of assumed self-insurance
liabilities from acquisitions.
Benefit plans and Multiemployer plans: Substantially all of the Company's employees are covered by various
contributory and non-contributory pension, profit sharing or 401(k) plans, in addition to dedicated defined benefit
plans for certain Safeway Inc. ("Safeway"), Shaw's and United Supermarkets, LLC ("United") employees. Certain
employees participate in a long-term retention incentive bonus plan. The Company also provides certain health and
welfare benefits, including short-term and long-term disability benefits to inactive disabled employees prior to
retirement.
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The Company recognizes a liability for the underfunded status of the defined benefit plans as a component of Other
long-term liabilities. Actuarial gains or losses and prior service costs or credits are recorded within Other
comprehensive income (loss). The determination of the Company's obligation and related expense for its sponsored
pensions and other post-retirement benefits is dependent, in part, on management's selection of certain actuarial
assumptions in calculating these amounts. These assumptions include, among other things, the discount rate and
expected long-term rate of return on plan assets.
Most union employees participate in multiemployer retirement plans pursuant to collective bargaining agreements,
unless the collective bargaining agreement provides for participation in plans sponsored by the Company. Pension
expense for the multiemployer plans is recognized as contributions are funded.
Equity-based compensation: The Company recognizes equity-based compensation expense for restricted stock
units ("Restricted Stock Units" or "RSUs") and restricted common stock of the Company ("RSAs") granted to
employees and non-employee directors. Actual forfeitures are recognized as they occur. Equity-based compensation
expense is based on the fair value on the grant date and is recognized over the requisite service period of the award,
generally between one and five years from the date of the award. Subsequent to the initial public offering ("IPO"),
the fair value of the RSUs and RSAs with a service condition or performance-based condition is generally
determined using the fair market value of the Company's Class A common stock on the grant date. Prior to the IPO,
the fair value of equity-based compensation awards was determined using an option pricing model, adjusted for lack
of marketability and using an expected term or time to liquidity based on judgments made by management.
Revenue recognition: Revenues from the retail sale of products are recognized at the point of sale to the customer,
net of returns and sales tax. Pharmacy sales are recorded upon the customer receiving the prescription. Third-party
receivables from pharmacy sales were $262.5 million and $218.5 million as of February 27, 2021 and February 29,
2020, respectively. For digital related sales, which primarily include home delivery and Drive Up & Go curbside
pickup, revenues are recognized upon either pickup in store or delivery to the customer and may include revenue for
separately charged delivery services. Discounts provided to customers by the Company at the time of sale are
recognized as a reduction in sales as the products are sold. Discounts provided to customers by vendors, usually in
the form of coupons, are not recognized as a reduction in sales, provided the coupons are redeemable at any retailer
that accepts coupons. The Company recognizes revenue and records a corresponding receivable from the vendor for
the difference between the sales prices and the cash received from the customer. The Company records a contract
liability when rewards are earned by customers in connection with the Company's loyalty programs. As rewards are
redeemed or expire, the Company reduces the contract liability and recognizes revenue. The contract liability
balance was immaterial in fiscal 2020 and fiscal 2019.
The Company records a contract liability when it sells its own proprietary gift cards. The Company records a sale
when the customer redeems the gift card. The Company's gift cards do not expire. The Company reduces the
contract liability and records revenue for the unused portion of gift cards ("breakage") in proportion to its customers'
pattern of redemption, which the Company determined to be the historical redemption rate. The Company's contract
liability related to gift cards was $98.1 million as of February 27, 2021 and $52.2 million as of February 29, 2020.
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Disaggregated Revenues
The following table represents sales revenue by type of similar product (in millions):
Fiscal
2020
Fiscal
2019
Fiscal
2018
Non-perishables (2)
Perishables (3)
Pharmacy
Fuel
Other (4)
Total (5)
Amount
(1)
$ 32,100.5
29,189.5
5,195.8
2,236.5
968.1
$ 69,690.4
% of Total
Amount
(1)
% of Total
Amount
(1)
46.1 % $ 27,165.3
25,681.8
41.9 %
5,236.8
7.4 %
3,430.4
3.2 %
940.8
1.4 %
100.0 % $ 62,455.1
43.5 % $ 26,371.8
24,920.9
41.1 %
4,986.6
8.4 %
3,455.9
5.5 %
799.3
1.5 %
100.0 % $ 60,534.5
% of Total
43.6 %
41.2 %
8.2 %
5.7 %
1.3 %
100.0 %
(1) Digital related sales are included in the categories to which the revenue pertains.
(2) Consists primarily of general merchandise, grocery and frozen foods.
(3) Consists primarily of produce, dairy, meat, deli, floral and seafood.
(4) Consists primarily of wholesale revenue to third parties, commissions and other miscellaneous revenue.
(5) Fiscal 2019 includes approximately $1.1 billion of incremental Net sales and other revenue due to the additional 53rd week.
Cost of sales and vendor allowances: Cost of sales includes, among other things, purchasing and sourcing costs,
inbound freight costs, product quality testing costs, warehousing and distribution costs, Own Brands program costs
and digital-related delivery and handling costs.
The Company receives vendor allowances or rebates ("Vendor Allowances") for a variety of merchandising
initiatives and buying activities. The terms of the Company's Vendor Allowances arrangements vary in length but
are primarily expected to be completed within a quarter. The Company records Vendor Allowances as a reduction of
Cost of sales when the associated products are sold. Vendor Allowances that have been earned as a result of
completing the required performance under terms of the underlying agreements but for which the product has not
yet been sold are recognized as reductions of inventory. The reduction of inventory for these Vendor Allowances
was $57.9 million and $72.0 million as of February 27, 2021 and February 29, 2020, respectively.
Advertising costs are included in Cost of sales and are expensed in the period the advertising occurs. Cooperative
advertising funds are recorded as a reduction of Cost of sales when the advertising occurs. Advertising costs were
$385.1 million, $405.6 million and $422.3 million, net of cooperative advertising allowances of $72.7 million,
$91.9 million and $101.3 million for fiscal 2020, fiscal 2019 and fiscal 2018, respectively.
Selling and administrative expenses: Selling and administrative expenses consist primarily of store and corporate
employee-related costs such as salaries and wages, health and welfare, workers' compensation and pension benefits,
as well as marketing and merchandising, rent, occupancy and operating costs, amortization of intangibles and other
administrative costs.
Income taxes: The Company's income (loss) before taxes is primarily from domestic operations. Deferred taxes are
provided for the net tax effects of temporary differences between the financial reporting and income tax basis of
assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that
includes the enactment date. Valuation allowances are established where management determines that it is more
likely than not that some portion or all of a deferred tax asset will not be realized. The Company reviews tax
positions taken or expected to be taken on tax returns to determine whether and to what extent a tax benefit can be
recognized. The Company evaluates its positions taken and establishes liabilities in accordance with the applicable
accounting guidance for uncertain tax positions. The Company reviews these liabilities as facts and circumstances
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change and adjusts accordingly. The Company recognizes any interest and penalties associated with uncertain tax
positions as a component of Income tax expense. The Tax Act requires a U.S. shareholder of a controlled foreign
corporation to provide U.S. taxes on its share of global intangible low-taxed income ("GILTI"). The current and
deferred tax impact of GILTI is not material to the Company. Accordingly, the Company will report the tax impact
of GILTI as a period cost and not provide deferred taxes for the basis difference that would be expected to reverse as
GILTI.
Segments: The Company and its subsidiaries offer grocery products, general merchandise, health and beauty care
products, pharmacy, fuel and other items and services in its stores or through digital channels. The Company's retail
operating divisions are geographically based, have similar economic characteristics and similar expected long-term
financial performance. The Company's operating segments and reporting units are its 12 divisions, which are
reported in one reportable segment. Each reporting unit constitutes a business for which discrete financial
information is available and for which management regularly reviews the operating results. Across all operating
segments, the Company operates primarily one store format. Each division offers, through its stores and digital
channels, the same general mix of products with similar pricing to similar categories of customers, has similar
distribution methods, operates in similar regulatory environments and purchases merchandise from similar or the
same vendors.
Recently adopted accounting standards: On February 25, 2016, the FASB issued ASU 2016-02, "Leases (Topic
842)." ASC Topic 842 supersedes existing lease guidance, including ASC 840 - Leases. Among other things, ASU
2016-02 requires recognition of a Right-of-use asset and liability for future lease payments for contracts that meet
the definition of a lease and requires disclosure of certain information about leasing arrangements. On July 30,
2018, the FASB issued ASU 2018-11, "Leases (Topic 842): Targeted Improvements," which, among other things,
allows companies to elect an optional transition method to apply the new lease standard through a cumulative effect
adjustment in the period of adoption. The new guidance requires both classifications of leases, operating and
finance, to be recognized on the balance sheet. The new guidance also results in a change in naming convention for
leases historically classified as capital leases. Under the new guidance, these leases are now referred to as finance
leases. Consistent with prior GAAP, the recognition, measurement and presentation of expenses and cash flows
arising from a lease will depend on its classification.
The Company adopted the guidance effective February 24, 2019 by recognizing and measuring leases at the
adoption date with a cumulative effect of initially applying the guidance recognized at the date of initial application
and as a result did not restate the prior periods presented in the Consolidated Financial Statements. The Company
elected certain practical expedients permitted under the transitional guidance, including retaining historical lease
classification, evaluating whether any expired contracts are or contain leases, and not applying hindsight in
determining the lease term. The Company also elected the practical expedient to not separate lease and non-lease
components within the lessee lease transaction for all classes of assets. Lastly, the Company elected the short-term
lease exception for all classes of assets, and therefore does not apply the recognition requirements for leases of 12
months or less.
The adoption of the standard resulted in the recognition of an operating lease ROU asset of $5.3 billion and an
operating lease liability of $5.4 billion. Included in the measurement of the new operating lease ROU asset is the
reclassification of certain balances, including those historically recorded as lease exit cost liabilities, deferred rent
and beneficial and unfavorable lease interests. The adoption also resulted in a cumulative effect transitional
adjustment of $776.0 million ($574.6 million, net of tax) to retained earnings related to the elimination of $865.8
million deferred gains on sale leaseback transactions, partially offset by the recognition of $87.3 million in
impairment losses on operating lease assets and the removal of $17.2 million and $14.7 million, respectively, of
assets and liabilities related to finance lease obligations under previously existing build-to-suit accounting
arrangements. Several other immaterial reclassifications of historical asset and liability line items were also
recorded in the Company's Consolidated Balance Sheets upon adoption.
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Recently issued accounting standards: In December 2019, the Financial Accounting Standards Board ("FASB")
issued Accounting Standards Update ("ASU") 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for
Income Taxes". ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the
methodology for calculating taxes during the quarters and the recognition of deferred tax liabilities for outside basis
differences. ASU 2019-12 also simplifies aspects of the accounting for franchise taxes, enacts changes in tax laws or
rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. ASU 2019-12
will take effect for public entities for annual reporting periods beginning after December 15, 2020, and interim
periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect of this
standard on its Consolidated Financial Statements.
In August 2020, the FASB issued ASU 2020-06, "Debt—Debt with Conversion and Other Options (Subtopic 470-
20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible
Instruments and Contracts in an Entity's Own Equity". ASU 2020-06 simplifies the accounting for certain
convertible instruments, amends guidance on derivative scope exceptions for contracts in an entity's own equity and
modifies the guidance on diluted earnings per share calculations as a result of these changes. ASU 2020-06 will take
effect for public entities for annual reporting periods beginning after December 15, 2021, and interim periods within
those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect of this standard on its
Consolidated Financial Statements.
CARES Act: The Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law on
March 27, 2020. The Company analyzed the various income tax and non-income tax provisions of the CARES Act
based on currently available technical guidance and determined that aside from an impact to the timing of cash
flows, there is no material impact to the Company's Consolidated Financial Statements. Specifically, as it relates to
the Company, the CARES Act allows for deferred payment of the employer-paid portion of social security taxes
through the end of 2020, with 50% due on December 31, 2021 and the remainder due on December 31, 2022. For
the year ended February 27, 2021, the Company deferred approximately $426.6 million of the employer-paid
portion of social security taxes, which is included in Accrued salaries and wages and Other long-term liabilities. The
CARES Act also includes a technical correction to permit 100% bonus depreciation of eligible qualified
improvement property. The Company will continue to assess the effect of the CARES Act and ongoing other
government legislation related to the COVID-19 pandemic that may be issued, including the Consolidated
Appropriations Act signed into law on December 27, 2020 and the American Rescue Plan Act ("ARP Act") signed
into law on March 11, 2021.
NOTE 2 - ACQUISITIONS
Kings and Balducci's
On January 23, 2021, the Company acquired 27 stores operated by Kings Food Markets and Balducci's Food Lovers
Market ("Kings and Balducci's"). The purchase price was $98.1 million, and the transaction was accounted for
under the acquisition method of accounting. The purchase price was allocated to the fair values of the identifiable
assets and liabilities. Net assets acquired of $102.0 million primarily consisted of fixed assets, intangibles and
inventory, valued at $41.0 million, $31.6 million and $18.1 million, respectively. Intangible assets acquired
primarily consisted of tradenames. The Company recognized a bargain purchase gain of $3.9 million as the amount
by which the fair value of the net assets acquired exceeded the purchase consideration paid. The bargain purchase
was recognized as a gain within Selling and administrative expenses for fiscal 2020. The Company believes it was
able to acquire the net assets for lower than fair value due to the financial condition of Kings and Balducci's which
was in bankruptcy proceedings. Pro forma results are not presented as the acquisition was not considered material to
the Company. Third-party acquisition-related costs were immaterial for fiscal 2020 and were expensed as incurred
as a component of Selling and administrative expenses.
79
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment, net consisted of the following (in millions):
Land
Buildings
Property under construction
Leasehold improvements
Fixtures and equipment
Property and equipment under finance leases
Total property and equipment
Accumulated depreciation and amortization
Total property and equipment, net
February 27,
2021
February 29,
2020
$
$
2,096.8 $
4,880.6
938.9
1,887.1
6,630.5
755.0
17,188.9
(7,776.2)
9,412.7 $
2,119.2
4,720.0
669.3
1,706.6
5,802.4
882.5
15,900.0
(6,688.1)
9,211.9
Depreciation expense was $1,297.7 million, $1,244.7 million and $1,257.7 million for fiscal 2020, fiscal 2019 and
fiscal 2018, respectively. Amortization expense related to finance lease assets was $67.4 million, $90.2 million and
$101.4 million in fiscal 2020, fiscal 2019 and fiscal 2018, respectively. Fixed asset impairment losses of $8.0
million, $21.8 million and $31.0 million were recorded as a component of Gain on property dispositions and
impairment losses, net in fiscal 2020, fiscal 2019 and fiscal 2018, respectively. The impairment losses primarily
relate to assets in underperforming stores, certain surplus properties and fiscal 2019 also includes certain leasehold
interests and equipment related to the Plated meal kit subscription and delivery business.
NOTE 4 - INTANGIBLE ASSETS
The Company's Intangible assets, net consisted of the following (in millions):
February 27,
2021
February 29,
2020
Estimated
useful
lives
(Years)
40
Gross
carrying
amount
$ 1,941.7 $
Accumulated
amortization
Gross
carrying
amount
Net
Accumulated
amortization
Net
(312.5) $ 1,629.2 $ 1,912.1 $
(264.6) $ 1,647.5
5
1,511.3
(1,458.6)
52.7 1,472.1
(1,440.9)
31.2
3 to 5
3 to 6
777.5
52.3
(441.1)
336.4
780.0
(465.2)
314.8
(48.8)
3.5
51.7
(44.1)
7.6
4,282.8
(2,261.0) 2,021.8 4,215.9
(2,214.8) 2,001.1
Indefinite
87.0
—
87.0
86.1
—
86.1
$ 4,369.8 $
(2,261.0) $ 2,108.8 $ 4,302.0 $
(2,214.8) $ 2,087.2
Trade names
Customer prescription
files
Internally developed
software
Other intangible assets
(1)
Total finite-lived
intangible assets
Liquor licenses and
restricted covenants
Total intangible assets,
net
(1) Other intangible assets includes covenants not to compete, specialty accreditation and licenses and patents.
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Amortization expense for intangible assets was $156.6 million, $355.8 million and $379.7 million for fiscal 2020,
fiscal 2019 and fiscal 2018, respectively. Estimated future amortization expense associated with the net carrying
amount of intangibles with finite lives is as follows (in millions):
Fiscal Year
2021
2022
2023
2024
2025
Thereafter
Total
Amortization
Expected
175.1
158.7
125.4
85.6
59.8
1,417.2
2,021.8
$
$
There were no intangible asset impairment losses in fiscal 2020. Intangible asset impairment losses of $34.1 million
and $5.3 million were recorded as a component of Gain on property dispositions and impairment losses, net, in
fiscal 2019 and fiscal 2018, respectively. The fiscal 2019 impairment loss was driven by the continued under
performance of the Plated meal kit subscription and delivery operations and primarily relates to the Plated
tradename, and to a lesser extent, certain other Plated intangible assets. The fair value was determined using an
income approach which included a relief-from-royalty method and relied on inputs with unobservable market prices
including the assumed revenue growth rate, royalty rate, discount rate and estimated tax rate. The fiscal 2018
impairment loss primarily relates to underperforming stores.
NOTE 5 - FAIR VALUE MEASUREMENTS
The accounting guidance for fair value established a framework for measuring fair value and established a three-
level valuation hierarchy for disclosure of fair value measurement. The valuation hierarchy is based upon the
transparency of inputs to the valuation of an asset or liability at the measurement date. The three levels are defined
as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities;
Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly
observable;
Level 3 - Unobservable inputs in which little or no market activity exists, requiring an entity to develop its
own assumptions that market participants would use to value the asset or liability.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
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The following table presents assets and liabilities which are measured at fair value on a recurring basis as of
February 27, 2021 (in millions):
Fair Value Measurements
Quoted prices
in active
markets
for identical
assets
(Level 1)
Total
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
$
$
$
$
11.9 $
110.2
122.1 $
40.0 $
40.0 $
4.4 $
40.3
44.7 $
— $
— $
7.5 $
69.9
77.4 $
40.0 $
40.0 $
—
—
—
—
—
Assets:
Short-term investments (1)
Non-current investments (2)
Total
Liabilities:
Derivative contracts (3)
Total
(1) Primarily relates to Mutual Funds (Level 1) and Certificates of Deposit (Level 2). Included in Other current assets.
(2) Primarily relates to investments in publicly traded stock (Level 1) and U.S. Treasury Notes and Corporate Bonds (Level 2). Included in
Other assets.
(3) Primarily relates to interest rate swaps. Included in Other current liabilities.
The following table presents assets and liabilities which are measured at fair value on a recurring basis as of
February 29, 2020 (in millions):
Fair Value Measurements
Quoted prices
in active
markets
for identical
assets
(Level 1)
Total
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
$
$
$
$
2.0 $
13.5
85.9
101.4 $
66.4 $
66.4 $
2.0 $
5.0
26.8
33.8 $
— $
— $
— $
8.5
59.1
67.6 $
66.4 $
66.4 $
—
—
—
—
—
—
Assets:
Cash equivalents:
Money Market
Short-term investments (1)
Non-current investments (2)
Total
Liabilities:
Derivative contracts (3)
Total
(1) Primarily relates to Mutual Funds. Included in Other current assets.
(2) Primarily relates to investments in publicly traded stock (Level 1) and U.S. Treasury Notes and Corporate Bonds (Level 2). Included in
Other assets.
(3) Primarily relates to interest rate swaps. Included in Other current liabilities.
Contingent consideration obligations are a Level 3 measurement based on cash flow projections and other
assumptions for the milestone performance targets. Changes in fair value of the contingent consideration are
recorded in the consolidated statements of operations within Other (income) expense, net.
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The estimated fair value of the Company's debt, including current maturities, was based on Level 2 inputs, being
market quotes or values for similar instruments, and interest rates currently available to the Company for the
issuance of debt with similar terms and remaining maturities as a discount rate for the remaining principal
payments. As of February 27, 2021, the fair value of total debt was $8,150.7 million compared to a carrying value of
$7,815.5 million, excluding debt discounts and deferred financing costs. As of February 29, 2020, the fair value of
total debt was $8,486.2 million compared to the carrying value of $8,162.2 million, excluding debt discounts and
deferred financing costs.
Assets Measured at Fair Value on a Nonrecurring Basis
The Company measures certain assets at fair value on a non-recurring basis, including long-lived assets and
goodwill, which are evaluated for impairment. Long-lived assets include store-related assets such as property and
equipment, operating lease assets and certain intangible assets. The inputs used to determine the fair value of long-
lived assets and a reporting unit are considered Level 3 measurements due to their subjective nature.
The Company recorded long-lived asset impairment losses of $30.2 million, $77.4 million and $36.3 million during
fiscal 2020, fiscal 2019 and fiscal 2018, respectively.
NOTE 6 - DERIVATIVE FINANCIAL INSTRUMENTS
The aggregate notional amount of all Swaps as of February 27, 2021 and February 29, 2020, were $1,653.0 million
and $2,023.0 million, respectively, of which none were designated as cash flow hedges as defined by GAAP.
On February 5, 2020, the Company repaid in full the Albertsons Term Loans (as defined in Note 7 - Long-term debt
and finance lease obligations) using cash on hand and proceeds from the issuance of new notes (as further discussed
in Note 7 - Long-term debt and finance lease obligations). Consequently, the Company discontinued cash flow
hedge accounting for the interest rate swap agreements that were entered into to hedge the interest rate risk on the
then existing variable rate term loans. In accordance with hedge accounting guidance, the net unrealized loss of
$37.1 million, associated with the discontinued hedging relationship, recorded within Accumulated other
comprehensive income (loss), was reclassified into Other (income) expense, net in fiscal 2019 in the Consolidated
Statements of Operations and Comprehensive Income.
Activity related to the Swaps consisted of the following (in millions):
Loss on undesignated portion of interest rate swaps
Loss on designated portion of interest rate swaps
Fiscal
2020
Fiscal
2019
Fiscal
2018
(19.5)
$
(47.9)
$
—
—
$
(3.4)
$
(15.5)
$
$
Location of loss
recognized from
derivatives
Other (income) expense,
net
Other comprehensive
income (loss), net of tax
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NOTE 7 - LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS
The Company's long-term debt as of February 27, 2021 and February 29, 2020, net of debt discounts of
$44.8 million and $41.3 million, respectively, and deferred financing costs of $69.8 million and $72.9 million,
respectively, consisted of the following (in millions):
Senior Unsecured Notes due 2023 to 2030, interest rate range of 3.25% to
7.5%
Safeway Inc. Notes due 2021 to 2031, interest rate range of 4.75% to 7.45%
New Albertson's L.P. Notes due 2026 to 2031, interest rate range of 6.52% to
8.70%
Other financing obligations
Mortgage notes payable, secured
Finance lease obligations (see Note 8)
Total debt
Less current maturities
Long-term portion
February 27,
2021
February 29,
2020
$
$
6,680.5 $
504.3
469.1
29.4
17.6
612.7
8,313.6
(212.4)
8,101.2 $
6,884.5
642.1
466.0
37.2
18.2
666.7
8,714.7
(221.4)
8,493.3
As of February 27, 2021, the future maturities of long-term debt, excluding finance lease obligations, debt discounts
and deferred financing costs, consisted of the following (in millions):
2021
2022
2023
2024
2025
Thereafter
Total
$
$
130.9
750.8
0.9
16.9
214.1
6,701.9
7,815.5
The Company's term loans (the "Albertsons Term Loans") had, and asset-based loan ("ABL") facility (the "ABL
Facility") and certain of the outstanding notes and debentures have, restrictive covenants, subject to the right to cure
in certain circumstances, calling for the acceleration of payments due in the event of a breach of a covenant or a
default in the payment of a specified amount of indebtedness due under certain debt arrangements. There are no
restrictions on the Company's ability to receive distributions from its subsidiaries to fund interest and principal
payments due under the ABL Facility, the Albertsons Term Loans and the Company's senior unsecured notes (the
"Senior Unsecured Notes"). Each of the ABL Facility, Albertsons Term Loans and the Senior Unsecured Notes
restrict the ability of the Company to pay dividends and distribute property to the Company's stockholders. As a
result, all of the Company's consolidated net assets are effectively restricted with respect to their ability to be
transferred to the Company's stockholders. Notwithstanding the foregoing, the ABL Facility, the Albertsons Term
Loans and the Senior Unsecured Notes each contain customary exceptions for certain dividends and distributions,
including the ability to make cumulative distributions under the Albertsons Term Loans and Senior Unsecured
Notes of up to the greater of $1.0 billion or 4.0% of the Company's total assets (which is measured at the time of
such distribution) and the ability to make distributions if certain payment conditions are satisfied under the ABL
Facility. The Company was in compliance with all such covenants and provisions as of and for the fiscal year ended
February 27, 2021.
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Albertsons Term Loans
On November 16, 2018, the Company repaid approximately $976 million in aggregate principal amount of a
specific term loan tranche along with accrued and unpaid interest on such amount and fees and expenses related to
the repayment and the amendment to establish a new term loan tranche in the principal amount of $2,000.0 million
that effectively replaced the remaining principal amount of the specific term loan tranche. The Company used
approximately $610 million of cash on hand and approximately $410 million of borrowings under the ABL Facility.
The repayment and amendment were accounted for as a debt modification or extinguishment on a lender-by-lender
basis and the Company expensed $4.1 million of newly incurred financing costs and recorded $3.6 million of newly
incurred financing costs and $15.0 million of original issue discount as a reduction of the principal amount. For
previously deferred financing costs and original issue discount associated with the specific term loan tranche, the
Company expensed $12.9 million of financing costs and $8.6 million of original issue discount. The amounts
expensed were included as a component of Interest expense, net.
Through a series of repayments and refinancing transactions during fiscal 2019, the Company repaid $4,662.9
million of aggregate principal amount under its term loan facilities, which effectively represented the full repayment
of the entire outstanding term loan balance, along with accrued and unpaid interest and fees and expenses. In
connection with these repayments and refinancing transactions, the Company used approximately $864 million of
cash on hand and proceeds from the issuance of the 2027 Notes, the 2028 Notes and the February Notes (each as
defined below). In connection with the repayments and refinancing transactions, the Company wrote-off $15.2
million of deferred financing costs and $29.9 million of original issue discount which was included as a component
in Loss on debt extinguishment, and expensed $20.6 million of deferred financing costs and $27.6 million of
original issue discount which was included as a component of Interest expense, net.
Asset-Based Loan Facility
On November 16, 2018, the Company's existing ABL Facility, which provides for a $4,000.0 million senior secured
revolving credit facility, was amended and restated to extend the maturity date of the facility to November 16, 2023.
The ABL Facility has an interest rate of LIBOR plus a margin ranging from 1.25% to 1.75% and also provides for a
letters of credit ("LOC") sub-facility of $1,975.0 million. In connection with the ABL Facility amendment, the
Company capitalized $13.5 million of financing costs.
During fiscal 2018, borrowings of $610.0 million under the ABL Facility were used in connection with the term
loan amendment and repayment and the Safeway Notes Repurchase (as defined below). The $610.0 million was
repaid on December 2, 2018.
On March 12, 2020, the Company provided notice to the lenders to borrow $2,000.0 million under the Company's
ABL Facility as a precautionary measure in order to increase its cash position and preserve flexibility in light of the
uncertainty in the global markets resulting from the COVID-19 pandemic. The Company repaid the $2,000.0
million in full on June 19, 2020 and as of February 27, 2021, there were no amounts outstanding under the
Company's ABL Facility, and letters of credit ("LOC") issued under the LOC sub-facility were $354.6 million.
There were no amounts outstanding under the Company's ABL Facility as of February 29, 2020, and letters of credit
issued under the LOC sub-facility were $454.5 million.
The ABL Facility is guaranteed by the Company's existing and future direct and indirect wholly owned domestic
subsidiaries that are not borrowers, subject to certain exceptions. The ABL Facility is secured by, subject to certain
exceptions, (i) a first-priority lien on substantially all of the ABL Facility priority collateral and (ii) a second-priority
lien on substantially all other assets (other than real property). Following the full repayment of the term loan, the
ABL Facility has a first-priority lien on substantially all other assets (other than real property). The ABL Facility
contains no financial covenant unless and until (a) excess availability is less than (i) 10.0% of the lesser of the
aggregate commitments and the then-current borrowing base at any time or is (ii) $250.0 million at any time or (b)
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an event of default is continuing. If any of such events occur, the Company must maintain a fixed charge coverage
ratio of 1.0 to 1.0 from the date such triggering event occurs until such event of default is cured or waived and/or
the 30th day that all such triggers under clause (a) no longer exist.
Senior Unsecured Notes
On February 5, 2019, the Company and substantially all of its subsidiaries completed the issuance of $600.0 million
in aggregate principal amount of 7.5% senior unsecured notes due March 15, 2026 (the "2026 Notes"). Interest on
the 2026 Notes is payable semi-annually in arrears on March 15 and September 15 of each year, commencing on
September 15, 2019. The 2026 Notes have not been and will not be registered with the SEC. The 2026 Notes are
also fully and unconditionally guaranteed, jointly and severally, by substantially all of our subsidiaries that are not
issuers under the indenture governing such notes. A portion of the proceeds from the 2026 Notes was used to fully
redeem the Safeway 5.00% Senior Notes due 2019.
On August 15, 2019, the Company and substantially all of its subsidiaries completed the issuance of $750.0 million
in aggregate principal amount of 5.875% senior unsecured notes due February 15, 2028 (the "2028 Notes"). Interest
on the 2028 Notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on
February 15, 2020. The 2028 Notes have not been and will not be registered with the SEC. The 2028 Notes are also
fully and unconditionally guaranteed, jointly and severally, by substantially all of the Company's subsidiaries that
are not issuers under the indenture governing such notes. Proceeds from the 2028 Notes were used to partially fund
the fiscal 2019 term loan repayment.
On November 22, 2019, the Company and substantially all of its subsidiaries completed the issuance of $750.0
million in aggregate principal amount of 4.625% senior unsecured notes due January 15, 2027 (the "2027 Notes").
Interest on the 2027 Notes is payable semi-annually in arrears on January 15 and July 15 of each year, commencing
on July 15, 2020. The 2027 Notes have not been and will not be registered with the SEC. The 2027 Notes are also
fully and unconditionally guaranteed, jointly and severally, by substantially all of the Company's subsidiaries that
are not issuers under the indenture governing such notes. Proceeds from the 2027 Notes were used to partially fund
the fiscal 2019 term loan repayment.
On February 5, 2020, the Company and substantially all of its subsidiaries completed the issuance of $750.0 million
in aggregate principal amount of new 3.50% senior unsecured notes due February 15, 2023 (the "2023 Notes"),
$600.0 million in aggregate principal amount of additional 2027 Notes (the "Additional 2027 Notes") and $1,000.0
million in aggregate principal amount of new 4.875% senior unsecured notes due February 15, 2030 (the "2030
Notes" and together with the 2023 Notes and Additional 2027 Notes, the "February Notes"). The Additional 2027
Notes were issued as "additional securities" under the indenture governing the outstanding 2027 Notes. The
Additional 2027 Notes are expected to be treated as a single class with the outstanding 2027 Notes for all purposes
and have the same terms as those of the outstanding 2027 Notes. Interest on the 2023 Notes and 2030 Notes is
payable semi-annually in arrears on February 15 and August 15 of each year, commencing on August 15, 2020. The
February Notes have not been and will not be registered with the SEC. The February Notes are also fully and
unconditionally guaranteed, jointly and severally, by substantially all of the Company's subsidiaries that are not
issuers under the indenture governing such notes. The proceeds received from the issuance of the February Notes,
together with approximately $18 million of cash on hand, were used to (i) to partially fund the fiscal 2019 term loan
repayment and (ii) pay fees and expenses related to the fiscal 2019 term loan repayment and the issuance of the
February Notes.
On August 31, 2020, the Company and substantially all of its subsidiaries completed the issuance of $750.0 million
in aggregate principal amount of 3.250% senior unsecured notes due March 15, 2026 (the "New 2026 Notes") and
$750.0 million in aggregate principal amount of 3.500% senior unsecured notes due March 15, 2029 (the "2029
Notes" and together with the New 2026 Notes, the "August Notes"). Interest on the August Notes is payable semi-
annually in arrears on March 15 and September 15 of each year, commencing on March 15, 2021. The August Notes
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have not been and will not be registered with the SEC. The August Notes are also fully and unconditionally
guaranteed, jointly and severally, by substantially all of the Company's subsidiaries that are not issuers under the
indenture governing such notes. On September 11, 2020, a portion of the proceeds from the issuance of the August
Notes, together with approximately $60 million of cash on hand, were used to fund the full redemption of the
$1,250.0 million aggregate principal amount outstanding of the Company's 6.625% senior unsecured notes due
2024 (the "2024 Redemption"). In connection with the 2024 Redemption, the Company paid an associated
redemption premium of $41.4 million. The Company recorded a $49.1 million loss on debt extinguishment related
to the 2024 Redemption, comprised of the $41.4 million redemption premium and $7.7 million write-off of deferred
financings costs.
On September 16, 2020, remaining proceeds from the issuance of the August Notes were used to fund the partial
redemption of $250.0 million of the $1,250.0 million in aggregate principal amount outstanding (the "September
Partial 2025 Redemption") of the Company's 5.750% senior unsecured notes due September 2025 (the "2025
Notes"). In connection with the September Partial 2025 Redemption, the Company paid an associated redemption
premium of $7.2 million. The Company recorded an $8.6 million loss on debt extinguishment related to the
September Partial 2025 Redemption, comprised of the $7.2 million redemption premium and a $1.4 million write-
off of deferred financing costs.
On December 22, 2020, the Company and substantially all of its subsidiaries completed the issuance of $600.0
million in aggregate principal amount of additional 2029 Notes (the "Additional 2029 Notes"). The Additional 2029
Notes were issued as "additional securities" under the indenture governing the outstanding 2029 Notes. The
Additional 2029 Notes are expected to be treated as a single class with the outstanding 2029 Notes for all purposes
and have the same terms as those of the outstanding 2029 Notes. The Additional 2029 Notes have not been and will
not be registered with the SEC. The Additional 2029 Notes are also fully and unconditionally guaranteed, jointly
and severally, by substantially all of the Company's subsidiaries that are not issuers under the indenture governing
such notes. On January 4, 2021, proceeds from the issuance of the Additional 2029 Notes, together with
approximately $230 million of cash on hand, were used to fund a partial redemption of $800.0 million of the
$1,000.0 million in aggregate principal amount outstanding of the 2025 Notes (the "January Partial 2025
Redemption"). In connection with the January Partial 2025 Redemption, the Company paid an associated
redemption premium of $23.0 million. The Company recorded a $27.6 million loss on debt extinguishment related
to the January Partial 2025 Redemption, comprised of the $23.0 million redemption premium and a $4.6 million
write-off of deferred financing costs.
The Company, an issuer and direct or indirect parent of each of the other issuers of the 2023 Notes, the 2025 Notes,
the 2026 Notes (and New 2026 Notes), the 2027 Notes (and Additional 2027 Notes), the 2028 Notes, the 2029
Notes (and Additional 2029 Notes) and the 2030 Notes, has no independent assets or operations. All of the direct or
indirect subsidiaries of the Company, other than subsidiaries that are issuers, or guarantors, as applicable, of the
2023 Notes, the 2025 Notes, the 2026 Notes, the 2027 Notes (and Additional 2027 Notes), the 2028 Notes, the 2029
Notes (and Additional 2029 Notes) and the 2030 Notes are minor, individually and in the aggregate.
Safeway Notes
During fiscal 2018, Safeway repurchased its 7.45% Senior Debentures due 2027 and 7.25% Debentures due 2031
with a par value of $333.7 million and a book value of $322.4 million for $333.7 million plus accrued interest of
$7.7 million (the "Safeway Notes Repurchase"). The Company recognized a loss on debt extinguishment related to
the Safeway Notes Repurchase of $11.3 million.
On February 6, 2019, a portion of the net proceeds from the issuance of the 2026 Notes were used to fully redeem
$268.6 million of principal of Safeway 5.00% Senior Notes due 2019, and to pay an associated make-whole
premium of $3.1 million and accrued interest of $6.4 million (the "2019 Redemption"). The Company recognized a
loss on debt extinguishment related to the 2019 Redemption of $3.1 million.
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On May 24, 2019, the Company completed a cash tender offer and early redemption of Safeway notes with a par
value of $34.1 million and a book value of $33.3 million for $32.6 million, plus accrued and unpaid interest of $0.7
million (the "Safeway Tender"). Including related fees, the Company recognized a loss on debt extinguishment
related to the Safeway Tender of $0.5 million.
The Company repaid the remaining $136.8 million in aggregate principal amount of Safeway's 3.95% Notes due
2020 on their maturity date, August 15, 2020.
NALP Notes
During fiscal 2018, the Company repurchased NALP Notes with a par value of $108.4 million and a book value of
$96.4 million for $90.7 million plus accrued interest of $1.2 million (the "2018 NALP Notes Repurchase"). In
connection with the 2018 NALP Notes Repurchase, the Company recorded a gain on debt extinguishment of $5.7
million.
On May 24, 2019, the Company completed a cash tender offer and early redemption of NALP Notes with a par
value of $402.9 million and a book value of $363.7 million for $382.7 million, plus accrued and unpaid interest of
$8.2 million (the "NALP Notes Tender"). Including related fees, the Company recognized a loss on debt
extinguishment related to the NALP Notes Tender of $19.1 million.
Also during fiscal 2019, the Company repurchased NALP Notes on the open market with an aggregate par value of
$553.9 million and a book value of $502.0 million for $547.5 million plus accrued and unpaid interest of $11.3
million (the "NALP Notes Repurchase"). Including related fees, the Company recognized a loss on debt
extinguishment related to the NALP Notes Repurchase of $46.2 million.
Merger Related Financing
On June 25, 2018, in connection with the merger agreement with Rite Aid Corporation, the Company issued $750.0
million in aggregate principal amount of floating rate senior secured notes (the "Floating Rate Notes") at an issue
price of 99.5%. As a result of the termination of the merger agreement with Rite Aid Corporation on August 8,
2018, the Company redeemed all of the Floating Rate Notes at a redemption price equal to 99.5% of the aggregate
principal amount of the notes, plus accrued and unpaid interest.
Deferred Financing Costs and Interest Expense, Net
Financing costs incurred to obtain all financing other than ABL Facility financing are recognized as a direct
reduction from the carrying amount of the debt liability and amortized over the term of the related debt using the
effective interest method. Financing costs incurred to obtain ABL Facility financing are capitalized and amortized
over the term of the related debt facilities using the straight-line method. Deferred financing costs associated with
ABL Facility financing are included in Other assets and were $25.9 million and $35.4 million as of February 27,
2021 and February 29, 2020, respectively.
Fiscal 2019 amortization of deferred financing costs of $39.8 million included $20.6 million of deferred financing
costs written off in connection with the term loan amendment and repayments. Fiscal 2018 amortization of deferred
financing costs of $42.7 million included $12.9 million of deferred financing costs written off in connection with
the term loan amendments and reductions.
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Interest expense, net consisted of the following (in millions):
ABL Facility, senior secured and unsecured notes, term loans
and debentures
Finance lease obligations
Deferred financing costs
Debt (premiums) discounts, net
Other interest income
Interest expense, net
NOTE 8 - LEASES
Fiscal
2020
Fiscal
2019
Fiscal
2018
$
$
463.4 $
70.5
20.9
(0.6)
(16.0)
538.2 $
565.3 $
79.8
39.8
34.1
(21.0)
698.0 $
698.3
81.8
42.7
20.3
(12.3)
830.8
The components of total lease cost, net consisted of the following (in millions):
Operating lease cost (1)
Finance lease cost
Amortization of lease assets
Interest on lease liabilities
Variable lease cost (2)
Sublease income
Total lease cost, net
Classification
Cost of sales and Selling and administrative
expenses (3)
Fiscal
2020
Fiscal
2019
$
1,016.2
$
1,011.6
Cost of sales and Selling and administrative
expenses (3)
Interest expense, net
Cost of sales and Selling and administrative
expenses (3)
Net sales and other revenue
67.4
70.5
423.8
$
(91.3)
1,486.6 $
90.4
79.8
402.9
(111.8)
1,472.9
(1) Includes short-term lease cost, which is immaterial.
(2) Represents variable lease costs for both operating and finance leases. Includes contingent rent expense and other non-fixed lease related
costs, including property taxes, common area maintenance and property insurance.
(3) Supply chain-related amounts are included in Cost of sales.
Balance sheet information related to leases as of February 27, 2021 and February 29, 2020 consisted of the
following (in millions):
Assets
Operating
Finance
Total lease assets
Liabilities
Current
Operating
Finance
Long-term
Operating
Finance
Total lease liabilities
Classification
February 27,
2021
February 29,
2020
Operating lease right-of-use assets
Property and equipment, net
Current operating lease obligations
Current maturities of long-term debt and
finance lease obligations
Long-term operating lease obligations
$
$
$
Long-term debt and finance lease obligations
$
6,015.6 $
384.9
6,400.5 $
605.3 $
81.5
5,548.0
531.2
6,766.0 $
5,867.4
430.7
6,298.1
563.1
83.4
5,402.8
583.3
6,632.6
89
The following table presents cash flow information and the weighted average lease term and discount rate for leases
(dollars in millions):
Gains on sale leaseback transactions, net
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Right-of-use assets obtained in exchange for operating lease obligations
Right-of-use assets obtained in exchange for finance lease obligations
Impairment of right-of-use operating lease assets
Impairment of right-of-use finance lease assets
Weighted average remaining lease term - operating leases
Weighted average remaining lease term - finance leases
Weighted average discount rate - operating leases
Weighted average discount rate - finance leases
Fiscal
2020
Fiscal
2019
$
— $
487.1
973.7
70.5
79.9
763.1
35.8
15.9
6.3
11.7 years
8.8 years
6.7 %
12.3 %
995.8
79.8
109.3
1,195.2
—
15.4
6.1
12.1 years
9.0 years
7.0 %
13.7 %
Future minimum lease payments for operating and finance lease obligations as of February 27, 2021 consisted of
the following (in millions):
Fiscal year
2021
2022
2023
2024
2025
Thereafter
Total future minimum obligations
Less interest
Present value of net future minimum lease obligations
Less current portion
Long-term obligations
Lease Obligations
Operating Leases Finance Leases
$
926.0 $
962.0
893.2
802.6
714.4
4,849.2
9,147.4
(2,994.1)
6,153.3
(605.3)
5,548.0 $
$
124.7
126.5
118.7
100.0
85.3
362.0
917.2
(304.5)
612.7
(81.5)
531.2
The Company subleases certain property to third parties. Future minimum tenant operating lease payments
remaining under these non-cancelable operating leases as of February 27, 2021 was $319.8 million.
During the second quarter of fiscal 2019, the Company, through three separate transactions, completed the sale and
leaseback of 53 store properties and one distribution center for an aggregate purchase price, net of closing costs, of
$931.3 million. In connection with the sale leaseback transactions, the Company entered into lease agreements for
each of the properties for initial terms ranging from 15 to 20 years. The aggregate initial annual rent payment for the
properties is approximately $53 million and includes 1.50% to 1.75% annual rent increases over the initial lease
terms. All of the properties qualified for sale leaseback and operating lease accounting, and the Company recorded
total gains of $463.6 million, which is included as a component of Gain on property dispositions and impairment
losses, net. The Company also recorded operating lease right-of-use assets and corresponding operating lease
liabilities of $602.5 million.
90
Rent expense and tenant rental income under operating leases under the previous lease accounting standard
consisted of the following (in millions):
Minimum rent
Contingent rent
Total rent expense
Tenant rental income
Total rent expense, net of tenant rental income
Fiscal
2018
853.5
10.3
863.8
(107.2)
756.6
$
$
During fiscal 2018, the Company, through three separate transactions, completed the sale and leaseback of seven of
the Company's distribution centers for an aggregate purchase price, net of closing costs, of approximately $950
million. In connection with the sale leasebacks, the Company entered into lease agreements for each of the
properties for initial terms of 15 to 20 years. The aggregate initial annual rent payment for the properties was
approximately $55 million and includes 1.50% to 1.75% annual rent increases over the initial lease terms. The
Company qualified for sale leaseback and operating lease accounting on all of the distribution centers, and the
Company recorded total deferred gains of $362.5 million. Under the previous lease accounting standard, the
deferred gains were being amortized over the respective lease periods and, upon adoption of ASC Topic 842 on
February 24, 2019, the related unamortized deferred gains were recognized as a transitional adjustment to retained
earnings.
NOTE 9 - STOCKHOLDERS' EQUITY AND CONVERTIBLE PREFERRED STOCK
Common Stock
On June 8, 2020, the Company amended and restated its certificate of incorporation to authorize 1,150,000,000
shares of common stock, par value $0.01 per share, of which 1,000,000,000 shares were classified as Class A
common stock ("Class A common stock") and 150,000,000 shares were classified as Class A-1 convertible common
stock ("Class A-1 common stock" and together with the Class A common stock, the "Common Stock"). As of
February 27, 2021, there were 585,574,666 shares of Class A common stock and 465,565,019 shares of Class A
common stock issued and outstanding, respectively, and no shares of Class A-1 common stock issued or
outstanding. As of February 29, 2020, there were 582,997,251 shares of Class A common stock and 579,325,630
shares of Class A common stock issued and outstanding, respectively. For all prior periods presented, use of Class A
common stock refers to the Company's common stock pre-reclassification.
The terms of the Class A common stock are substantially identical to the terms of the Class A-1 common stock,
except that the Class A-1 common stock does not have voting rights. Each holder of Class A common stock is
entitled to one vote for each share owned of record on all matters voted upon by stockholders. A majority vote is
required for all action to be taken by stockholders, except as otherwise provided for in the Company's amended and
restated certificate of incorporation and amended and restated bylaws or as required by law. Subject to preferences
that may be applicable to any then outstanding preferred stock, holders of the Company's Common Stock are
entitled to receive ratably those dividends, if any, as may be declared from time to time by the board of directors out
of legally available funds. In the event of the Company's liquidation, dissolution or winding-up, the holders of
Common Stock are entitled to share equally and ratably in the Company's assets, if any, remaining after the payment
of all of debts and liabilities and the liquidation preference of any outstanding preferred stock. Shares of Class A-1
common stock would be issued upon the conversion of the Company's outstanding Series A-1 preferred stock.
When permitted under the relevant antitrust restrictions, any issued shares of Class A-1 common stock would
automatically convert on a one-for-one basis to voting shares of Class A common stock.
91
In connection with the IPO, the Company established a dividend policy pursuant to which the Company intends to
pay a quarterly dividend on its Common Stock in an annual amount equal to $0.40 per common share. During fiscal
2020, the Company paid quarterly dividends of $0.10 per common share on November 10, 2020 and February 10,
2021, to stockholders of record as of October 26, 2020 and January 26, 2021, respectively. On April 13, 2021, the
Company announced the next quarterly dividend payment of $0.10 per common share to be paid on May 10, 2021
to stockholders of record as of the close of business on April 26, 2021.
Stock Split
On June 18, 2020, the Company effected a 2.072-for-1 stock split of its Common Stock, without any change in the
total shares authorized or the par value per share. All information related to the Company's Common Stock and per
Class A common share amounts for all prior periods presented in the accompanying Consolidated Financial
Statements have been retroactively adjusted to give effect to the 2.072-for-1 stock split.
Initial Public Offering
The Company's Class A common stock began trading on the New York Stock Exchange on June 26, 2020 under the
symbol "ACI" and on June 30, 2020, certain selling stockholders completed the sale of a total of 50,000,000 shares
of Class A common stock at an initial price to the public of $16.00 per share. The Company did not receive any
proceeds from the sale of shares of Class A common stock by the selling stockholders in the IPO.
Convertible Preferred Stock and Investor Exchange Right
On June 8, 2020, the Company amended and restated its certificate of incorporation to authorize 100,000,000 shares
of preferred stock, par value $0.01 per share, of which 1,750,000 shares were designated Series A preferred stock
and 1,410,000 shares were designated Series A-1 preferred stock. On June 9, 2020 (the "Preferred Closing Date"),
the Company sold and issued (i) an aggregate of 1,410,000 shares of Series A-1 preferred stock and (ii) an aggregate
of 340,000 shares of Series A preferred stock. The Company received aggregate proceeds of $1,680.0 million from
the sale and issuance of the Convertible Preferred Stock which has an aggregate liquidation preference of $1,750.0
million. The Convertible Preferred Stock is presented outside of permanent equity at its original issuance price less
costs incurred, due to it being contingently redeemable, as described below.
The terms of the Series A preferred stock are substantially identical to the terms of the Series A-1 preferred stock,
except that the Series A preferred stock will vote together with Class A common stock on an as-converted basis, but
the Series A-1 preferred stock cannot vote with Class A common stock on an as converted basis. When permitted
under the relevant antitrust restrictions, shares of the Company's Series A-1 preferred stock will convert on a one-
for-one basis to shares of voting Series A preferred stock. On June 29, 2020, holders of 584,000 shares of Series A-1
preferred stock were relieved from the relevant antitrust restrictions resulting in the automatic conversion into
584,000 shares of voting Series A preferred stock. The Convertible Preferred Stock, with respect to dividend rights
and/or distribution rights upon the liquidation, winding-up or dissolution, as applicable, ranks senior to each class of
Common Stock and junior to existing and future indebtedness and other liabilities.
The holders of Convertible Preferred Stock are entitled to a quarterly dividend at a rate per annum of 6.75% of the
liquidation preference per share of the Convertible Preferred Stock. In the event that the Company does not declare
and pay any dividends in cash, the Company may instead, only for two quarters, pay such dividends by increasing
the liquidation preference of the Convertible Preferred Stock at a rate equal to the applicable cash dividend rate plus
2.25% on such dividend payment date. In addition, the holders of Convertible Preferred Stock will participate in
cash dividends that the Company pays on its Common Stock to the extent that such cash dividends exceed $206.3
million per fiscal year. On September 15, 2020 and December 15, 2020, the Company declared a quarterly cash
dividend of $36.4 million and $29.5 million to holders of the Convertible Preferred Stock, which was paid on
September 30, 2020 and December 30, 2020, respectively. On March 15, 2021, subsequent to the end of the fourth
92
quarter of fiscal 2020, the Company declared a quarterly cash dividend of $29.5 million to holders of the
Convertible Preferred Stock, which was paid on March 31, 2021.
The Series A-1 preferred stock is convertible at the option of the holders thereof at any time into shares of Class A-
1 common stock (which are identical to the Class A common stock, except that the Class A-1 common stock does
not include voting rights) and the Series A preferred stock is convertible at the option of the holders thereof at any
time into shares of Class A common stock, each at an initial conversion price of $17.22 per share and an initial
conversion rate of 58.064 shares of Common Stock per share of Convertible Preferred Stock, subject to certain anti-
dilution adjustments. At any time after June 30, 2023, if the last reported sale price of the Class A common stock has
equaled or exceeded $20.50 per share (or 119% of the initial conversion price), as may be adjusted, for at least 20
trading days in any period of 30 consecutive trading days, the Company will have the right to cause all, or any
portion, of the outstanding Series A-1 preferred stock or Series A preferred stock to convert into the relevant number
of shares of Class A-1 common stock or Class A common stock, as applicable; provided that the Company will not
be permitted to effect a mandatory conversion with respect to more than one-third of the aggregate outstanding
shares, as of the date of the first notice date, of Series A-1 preferred stock and Series A preferred stock in any 12-
month period unless the last reported sale price of the Class A common stock has equaled or exceeded $23.42 (or
136% of the initial conversion price), as may be adjusted, for at least 20 trading days in any period of 30
consecutive trading days.
At any time following June 9, 2026, the Company may redeem all, but not less than all, of the Convertible Preferred
Stock then outstanding at a redemption price equal to the product of the liquidation preference of the Convertible
Preferred Stock then outstanding and 105%, plus accrued and unpaid dividends. In the event that the Company
receives a notice of an intention to exchange the shares of Convertible Preferred Stock for equity interests in certain
of the Company's subsidiaries pursuant to the real estate agreement (as discussed below), the Company will have
the right to redeem all, but not less than all, of its Convertible Preferred Stock then outstanding at a redemption
price equal to the product of the aggregate liquidation preference of the Convertible Preferred Stock of such holder
then outstanding and 110%, plus accrued and unpaid dividends. The Convertible Preferred Stock is also convertible,
at the option of the holder, upon the occurrence of certain fundamental change events, including a change in control
or delisting of the Company at the applicable conversion rate plus an additional number of shares determined by
reference to the price paid for the Company's Common Stock upon such change in control, plus in certain
conditions accrued and unpaid dividends through June 30, 2023 or June 30, 2024, as applicable.
Concurrent with the issuance and sale of the Convertible Preferred Stock, a newly formed consolidated real estate
subsidiary of the Company entered into a real estate agreement with an affiliate of the holders ("RE Investor") of the
Convertible Preferred Stock. Under the terms of the real estate agreement, prior to the closing of the Convertible
Preferred Stock, the Company was to place into its real estate subsidiary fee owned real estate properties with an
appraised value of 165% of the liquidation preference of the Convertible Preferred Stock or a combination of real
estate properties and cash. This resulted in the Company contributing approximately $36.5 million of cash into a
restricted escrow account to make up for the shortfall on the appraised value of owned properties placed into the
real estate subsidiary. The real estate agreement provides the RE Investor with the unilateral right, upon the
occurrence of specified trigger events, to exercise an investor exchange right to exchange all of the outstanding
Convertible Preferred Stock for certain real estate assets or the real estate subsidiary's equity interests in its
subsidiary special purpose entities holding such real estate assets, subject to certain provisions as further defined in
the real estate agreement (the "Investor Exchange Right"). The Investor Exchange Right may be exercised if any of
the following were to occur: (i) the Convertible Preferred Stock remains outstanding as of June 9, 2027, (ii) if a
fundamental change occurs after June 30, 2024 and the related fundamental change stock price is less than the
conversion price, (iii) a downgrade by one or more gradations or withdrawal of the Company's credit rating by
certain rating agencies, as a result of which the Company's credit rating is B- (or its equivalent) or lower, (iv) the
failure by the Company to pay a dividend on the Convertible Preferred Stock, which failure continues for 30 days
after such dividend's due date, or (v) a bankruptcy filing. The target amount of real estate assets (net of taxes and
fees) to be received in exchange for the Convertible Preferred Stock will be the product of the liquidation preference
93
and 110%, plus an amount equal to any accrued and unpaid dividends. The Investor Exchange Right may be
exercised unless the Company redeems all of the outstanding Convertible Preferred Stock at a redemption price, if
such redemption occurs after the Company receives a notice of intent to exercise the Investor Exchange Right, equal
to the product of the aggregate liquidation preference of the Convertible Preferred Stock then outstanding and
110%, plus accrued and unpaid dividends. Upon completion of the Investor Exchange Right, subsidiaries of the
Company, as the applicable tenant, will enter into a master lease agreement with the RE Investor or designated
affiliate as the landlord, solely with respect to the real estate properties that have been transferred directly or
indirectly to the RE Investor, substantially the same as the current master lease agreements between the Company's
consolidated real estate subsidiaries and the Company's consolidated operating subsidiaries.
The Company assessed the Convertible Preferred Stock for any beneficial conversion features or embedded
derivatives, including the conversion option and investor exchange right, and did not identify any features that
would require bifurcation from the Convertible Preferred Stock and receive separate accounting treatment.
Treasury Stock
During fiscal 2018, the Company repurchased 1,772,018 shares of common stock allocable to certain current and
former members of management (the "management holders") for $25.8 million in cash. The shares are classified as
treasury stock on the Consolidated Balance Sheet. The shares repurchased represented a portion of the shares
allocable to management. Proceeds from the repurchase were used by the management holders to repay outstanding
loans of the management holders with a third-party financial institution. As there was no active market for shares of
the Company's common stock, the shares were repurchased at a negotiated price between the Company and the
management holders.
On June 9, 2020, the Company used $1,680.0 million, an amount equal to the proceeds from the sale and issuance
of the Company's Series A-1 convertible preferred stock ("Series A-1 preferred stock") and Series A convertible
preferred stock ("Series A preferred stock" and together with the Series A-1 preferred stock, the "Convertible
Preferred Stock"), to repurchase 101,611,736 shares of Class A common stock from the Company's parents (the
"June 2020 Repurchase"). The proceeds received by the Company's parents from the June 2020 Repurchase were
distributed to their members, which include the Company's sponsors and current and former members of
management.
On September 14, 2020, the Company entered into a stock repurchase agreement with a stockholder pursuant to
which the Company repurchased 6,837,970 shares of its Class A common stock held by the stockholder for an
aggregate purchase price of $82.0 million. The stockholder was subject to a court-mandated wind-down, and a
court-appointed receiver was directed to liquidate the stockholder's assets. The price was agreed to between the
Company and the receiver (on behalf of the stockholder). In establishing the price, the parties took into account,
among many other factors that they each deemed relevant, an applicable discount related to the selling restrictions
that a third-party buyer would have had if such third-party buyer purchased the shares, including relevant lock-up
agreements.
On October 14, 2020, the Company's board of directors authorized a share repurchase program that allows the
Company to repurchase up to $300.0 million of its Class A common stock. As part of the share repurchase program,
during fiscal 2020, the Company, through a series of open-market transactions, repurchased 7,888,320 shares of its
Class A common stock for an aggregate purchase price of $119.1 million.
NOTE 10 - EQUITY-BASED COMPENSATION
The Company maintains the Albertsons Companies, Inc. Restricted Stock Unit Plan (the "Restricted Stock Unit
Plan"), which was previously named the "Albertsons Companies, Inc. Phantom Unit Plan" (the "Phantom Unit
Plan"). Under the Restricted Stock Unit Plan, subsequent to the IPO, 43.6 million shares of Class A common stock
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have been authorized for issuance as equity awards to employees and directors. As of February 27, 2021,
42.3 million shares of Class A common stock remained available for future awards. Prior to being amended and
restated on June 9, 2020, the Phantom Unit Plan provided for grants of "Phantom Units" to certain employees,
directors and consultants. Each Phantom Unit provided a participant with a contractual right to receive, upon
vesting, one management incentive unit in each of the Company's parents, Albertsons Investor Holdings LLC
("Albertsons Investor") and KIM ACI, LLC ("KIM ACI"). Upon the amendment and restatement of the Phantom
Unit Plan as the Restricted Stock Unit Plan, all outstanding Phantom Units were converted into 11.3 million RSUs,
including 1.9 million performance-based RSUs that were not deemed granted for accounting purposes, under the
Restricted Stock Unit Plan, subject to substantially identical terms and conditions as applied prior to the conversion.
No changes to vesting conditions or the fair value of the award occurred as a result of the conversion.
On April 25, 2019, upon the commencement of employment, the Company's President and Chief Executive Officer
was granted direct equity interests in each of the Company's parents, Albertsons Investor and KIM ACI. On June 30,
2020, upon consummation of the Company's IPO, the unvested direct equity interests in each of the Company's
parents converted into 1.7 million RSAs, including 0.6 million performance-based RSAs that are not deemed
granted for accounting purposes. No changes to vesting conditions or the fair value of the award occurred as a result
of the conversion.
Upon vesting, RSUs and RSAs will be settled in shares of the Company's Class A common stock. RSUs generally
vest over three years from the grant date, based on a service period, or upon a combination of both a service period
and achievement of certain performance-based thresholds, and RSAs generally vest over five years from the grant
date, with 50% based solely on a service period and 50% upon a service period and achievement of certain
performance-based thresholds. For performance-based RSUs and RSAs granted in fiscal 2020, the number of shares
of the Company's Class A common stock to be received at vesting can be adjusted within a predetermined range
based on the Company's actual performance for fiscal 2020 relative to the fiscal 2020 performance target.
Equity-based compensation expense recognized in the Consolidated Statements of Operations (in millions):
RSUs
RSAs
Total equity-based compensation expense
Total related tax benefit
Fiscal
2020
Fiscal
2019
Fiscal
2018
53.5 $
5.5
59.0 $
13.7 $
28.9 $
3.9
32.8 $
7.5 $
47.7
—
47.7
12.9
$
$
$
During fiscal 2020, the Company issued 5.6 million RSUs to its employees and directors, of which 4.7 million
shares were deemed granted. The 4.7 million issued and granted awards consist of 4.3 million RSUs that have solely
time-based vesting and 0.4 million performance-based RSUs that were deemed granted upon the establishment of
the fiscal 2020 performance target and that would vest upon both the achievement of such performance target and
continued service through the vesting period. Additionally, 1.3 million previously issued performance-based RSUs
and RSAs were deemed granted in fiscal 2020 upon the establishment of the fiscal 2020 annual performance target
and that would vest upon both the achievement of such performance target and continued service through the
vesting period. The 6.0 million RSUs and RSAs deemed granted in fiscal 2020 have an aggregate grant date value
of $94.5 million.
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Summary of RSU and RSA activity during fiscal 2020:
Time-Based
Performance-Based
Unvested, February 29, 2020
Granted
Vested
Forfeited or cancelled
Unvested, February 27, 2021
Number of shares (in
millions)
Weighted
average grant
date fair value
8.45
15.51
11.04
11.81
11.95
5.2 $
4.3
(3.2)
(0.3)
6.0 $
Number of shares (in
millions)
Weighted
average grant
date fair value
8.93
16.45
10.46
12.20
14.39
0.9 $
1.7
(0.3)
(0.1)
2.2 $
The aggregate fair value of RSUs and RSAs that vested was $54.3 million, $29.3 million and $32.1 million in fiscal
2020, fiscal 2019 and fiscal 2018, respectively. The grant date fair value of awards that vested was $38.1 million,
$23.1 million and $42.1 million in fiscal 2020, fiscal 2019 and fiscal 2018, respectively. The number of RSUs and
RSAs vested includes shares of common stock that the Company withheld on behalf of employees to satisfy
statutory tax withholding requirements.
As of February 27, 2021, the Company had $81.3 million of unrecognized compensation cost related to 7.1 million
unvested granted RSUs. That cost is expected to be recognized over a weighted average period of 1.8 years. As of
February 27, 2021, the Company had $5.7 million of unrecognized costs related to 1.1 million unvested granted
RSAs. That cost is expected to be recognized over a weighted average period of 3.2 years.
Upon the establishment of the annual performance target for fiscal 2021, fiscal 2022, and fiscal 2023, the remaining
1.9 million issued performance-based RSUs and 0.6 million performance-based RSAs will be deemed granted for
accounting purposes, as applicable.
NOTE 11 - INCOME TAXES
The components of income tax expense (benefit) consisted of the following (in millions):
Current
Federal (1)
State (2)
Foreign
Total Current
Deferred
Federal
State
Foreign
Total Deferred
Income tax expense (benefit)
Fiscal
2020
Fiscal
2019
Fiscal
2018
$
$
307.0 $
84.5
(0.7)
390.8
(92.5)
(27.3)
7.5
(112.3)
278.5 $
87.2 $
49.2
2.3
138.7
(14.1)
(1.1)
9.3
(5.9)
132.8 $
9.0
(6.7)
0.3
2.6
(77.9)
(3.6)
—
(81.5)
(78.9)
(1) Federal current tax expense net of $5.7 million, $66.8 million and $12.8 million tax benefit of net operating losses ("NOL") in fiscal
2020, fiscal 2019 and fiscal 2018, respectively.
(2) State current tax expense net of $16.7 million, $22.6 million and $9.5 million tax benefit of NOLs in fiscal 2020, fiscal 2019 and fiscal
2018, respectively.
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The difference between the actual tax provision and the tax provision computed by applying the statutory federal
income tax rate to Income before income taxes was attributable to the following (in millions):
Income tax expense at federal statutory rate
State income taxes, net of federal benefit
Change in valuation allowance
Tax Cuts and Jobs Act
Unrecognized tax benefits
Charitable donations
Tax Credits
Other
Income tax expense (benefit)
Fiscal
2020
Fiscal
2019
Fiscal
2018
$
$
237.0 $
58.0
(0.5)
—
8.6
(8.2)
(23.3)
6.9
278.5 $
125.8 $
32.3
(7.2)
—
7.7
(6.9)
(23.5)
4.6
132.8 $
11.0
0.7
(3.3)
(56.9)
(16.2)
(4.4)
(10.8)
1.0
(78.9)
The Tax Act, enacted in December 2017, resulted in significant changes to U.S. income tax and related laws. The
Company is impacted by a number of aspects of the Tax Act, most notably the reduction in the top U.S. corporate
income tax rate from 35% to 21%, a one-time transition tax on the accumulated unremitted foreign earnings and
profits of the Company's foreign subsidiaries and 100% expensing of certain qualified property acquired and placed
in service after September 27, 2017.
The SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118"), which allowed companies to record a
provisional amount during a measurement period not to extend beyond one year from the date of enactment, which
ended in the fourth quarter of fiscal 2018. In fiscal 2018, the Company recorded a provisional non-cash tax benefit
of $56.9 million, primarily to account for refinement of transition tax and the remeasurement of deferred taxes. The
Company completed its analysis of the Tax Act in fiscal 2018 based on currently available technical guidance. The
Company will continue to assess further guidance issued by the Internal Revenue Service ("IRS") and record the
impact of such guidance, if any, in the year issued.
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Deferred income taxes reflect the net tax effects of temporary differences between the bases of assets and liabilities
for financial reporting and income tax purposes. The Company's deferred tax assets and liabilities consisted of the
following (in millions):
Deferred tax assets:
Compensation and benefits
Net operating loss
Pension & postretirement benefits
Self-Insurance
Tax credits
Lease obligations
Other
Gross deferred tax assets
Less: valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Depreciation and amortization
Inventories
Operating lease assets
Other
Total deferred tax liabilities
Net deferred tax liability
Noncurrent deferred tax asset
Noncurrent deferred tax liability
Total
February 27,
2021
February 29,
2020
$
$
$
$
275.0 $
118.4
333.1
271.0
39.0
1,785.7
96.2
2,918.4
(130.4)
2,788.0
1,233.7
335.9
1,570.4
181.7
3,321.7
(533.7) $
— $
(533.7)
(533.7) $
135.7
117.0
235.5
263.5
41.7
1,728.2
143.8
2,665.4
(135.1)
2,530.3
1,249.1
346.8
1,521.7
26.5
3,144.1
(613.8)
—
(613.8)
(613.8)
The valuation allowance activity on deferred tax assets was as follows (in millions):
Beginning balance
Additions charged to income tax expense
Reductions credited to income tax expense
Changes to other comprehensive income or loss and other
Ending balance
$
$
135.1 $
2.7
(3.2)
(4.2)
130.4 $
139.5 $
3.5
(10.7)
2.8
135.1 $
134.9
3.5
(6.8)
7.9
139.5
February 27,
2021
February 29,
2020
February 23,
2019
The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income
will be generated to use the existing deferred tax assets. On the basis of this evaluation, as of February 27, 2021, a
valuation allowance of $130.4 million has been recorded for the portion of the deferred tax asset that is not more
likely than not to be realized, consisting primarily of tax credits and carryovers in jurisdictions where the Company
has minimal presence or does not expect to have future taxable income. The Company will continue to evaluate the
need to adjust the valuation allowance. The amount of the deferred tax asset considered realizable, however, could
be adjusted depending on the Company's performance in certain subsidiaries or jurisdictions.
The Company currently has federal and state NOL carryforwards of $23.7 million and $1,430.7 million,
respectively, which will begin to expire in 2021 and continue through the fiscal year ending February 2040. As of
February 27, 2021, the Company had $39.0 million of state credit carryforwards, the majority of which will expire
in 2023. The Company had no federal credit carryforwards as of February 27, 2021.
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Changes in the Company's unrecognized tax benefits consisted of the following (in millions):
Beginning balance
Increase related to tax positions taken in the current year
Increase related to tax positions taken in prior years
Decrease related to tax position taken in prior years
Decrease related to settlements with taxing authorities
Decrease related to lapse of statute of limitations
Ending balance
$
$
Fiscal
2020
Fiscal
2019
Fiscal
2018
373.8 $
1.5
1.8
(1.1)
(3.7)
(3.5)
368.8 $
376.2 $
0.9
3.0
(2.2)
(4.1)
—
373.8 $
356.0
1.6
35.1
(0.4)
(8.3)
(7.8)
376.2
Included in the balance of unrecognized tax benefits as of February 27, 2021, February 29, 2020 and February 23,
2019 are tax positions of $277.4 million, $268.2 million and $267.7 million, respectively, which would reduce the
Company's effective tax rate if recognized in future periods. Of the $277.4 million that could impact tax expense,
the Company has recorded $7.2 million of indemnification assets that would offset any future recognition. As of
February 27, 2021, the Company is no longer subject to federal income tax examinations for the fiscal years prior to
2012 and in most states, is no longer subject to state income tax examinations for fiscal years before 2007. The
Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income
tax expense. The Company recognized expense related to interest and penalties, net of settlement adjustments, of
$8.2 million, $9.6 million and $1.8 million for fiscal 2020, fiscal 2019 and fiscal 2018, respectively.
The Company believes it is reasonably possible that the reserve for uncertain tax positions may be reduced by
approximately $121.5 million in the next 12 months due to ongoing tax examinations and expiration of statutes of
limitations.
NOTE 12 - EMPLOYEE BENEFIT PLANS AND COLLECTIVE BARGAINING AGREEMENTS
Employer Sponsored Pension Plans
The Company sponsors a defined benefit pension plan (the "Safeway Plan") for substantially all of its employees
under the Safeway banners not participating in multiemployer pension plans. Effective April 1, 2015, the Company
implemented a soft freeze of the Safeway Plan. A soft freeze means that all existing employees as of March 31,
2015 then participating remained in the Safeway Plan, but any new non-union employees hired after that date would
instead earn retirement benefits under an enhanced 401(k) program. On December 30, 2018, the Company
implemented a hard freeze of non-union benefits of employees of the Safeway Plan and all future benefit accruals
for non-union employees ceased as of that date. Instead, non-union participants earned retirement benefits under the
Company's 401(k) plans. The Safeway Plan continues to remain fully open to union employees and past service
benefits, including future interest credits, for non-union employees continue to be accrued under the Safeway Plan.
The Company sponsors a defined benefit pension plan (the "Shaw's Plan") covering union employees under the
Shaw's banner. Under the United banner, the Company sponsors a frozen plan (the "United Plan") covering certain
United employees and an unfunded Retirement Restoration Plan that provides death benefits and supplemental
income payments for certain executives after retirement.
Other Post-Retirement Benefits
In addition to the Company's pension plans, the Company provides post-retirement medical and life insurance
benefits to certain employees. Retirees share a portion of the cost of the post-retirement medical plans. The
Company pays all the cost of the life insurance plans. The plans are unfunded.
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The following table provides a reconciliation of the changes in the retirement plans' benefit obligation and fair value
of assets over the two-year period ended February 27, 2021 and a statement of funded status as of February 27,
2021 and February 29, 2020 (in millions):
Change in projected benefit obligation:
Beginning balance
Service cost
Interest cost
Actuarial loss (gain)
Plan participant contributions
Benefit payments (including settlements)
Plan amendments
Ending balance
Change in fair value of plan assets:
Beginning balance
Actual return on plan assets
Employer contributions
Plan participant contributions
Benefit payments (including settlements)
Ending balance
Components of net amount recognized in financial
position:
Other current liabilities
Other long-term liabilities
Funded status
Pension
Other Post-Retirement
Benefits
February 27,
2021
February 29,
2020
February 27,
2021
February 29,
2020
$
$
$
$
$
$
2,516.2 $
15.7
48.6
11.9
—
(221.9)
—
2,370.5 $
1,743.7 $
361.2
58.6
—
(221.9)
1,941.6 $
2,325.8 $
14.7
80.6
315.1
—
(218.9)
(1.1)
2,516.2 $
1,847.0 $
106.2
9.4
—
(218.9)
1,743.7 $
20.9 $
—
0.4
1.3
0.2
(1.6)
—
21.2 $
— $
—
1.4
0.2
(1.6)
— $
23.8
0.6
0.7
(2.6)
0.4
(2.0)
—
20.9
—
—
1.6
0.4
(2.0)
—
(6.3) $
(422.6)
(428.9) $
(6.7) $
(765.8)
(772.5) $
(2.8) $
(18.4)
(21.2) $
(2.5)
(18.4)
(20.9)
The actuarial loss related to the projected benefit obligation for fiscal 2020 was immaterial. The actuarial loss for
fiscal 2019 related to the projected benefit obligation was primarily driven by a decrease in discount rates.
Amounts recognized in Accumulated other comprehensive income (loss) consisted of the following (in millions):
Net actuarial (gain) loss
Prior service cost
Pension
Other Post-Retirement
Benefits
February 27,
2021
February 29,
2020
February 27,
2021
February 29,
2020
$
$
(76.7) $
1.4
(75.3) $
170.4 $
1.6
172.0 $
(8.4) $
—
(8.4) $
(10.3)
1.9
(8.4)
Information for the Company's pension plans, all of which have an accumulated benefit obligation in excess of plan
assets as of February 27, 2021 and February 29, 2020, is shown below (in millions):
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
100
February 27,
2021
February 29,
2020
$
2,370.5 $
2,366.4
1,941.6
2,516.2
2,513.4
1,743.7
Table of Contents
The following table provides the components of net pension and post retirement (income) expense for the retirement
plans and other changes in plan assets and benefit obligations recognized in Other comprehensive income (loss) (in
millions):
Pension
Other Post-Retirement
Benefits
Fiscal
2020
Fiscal
2019
Fiscal
2020
Fiscal
2019
Components of net (income) expense:
Estimated return on plan assets
Service cost
Interest cost
Amortization of prior service cost
Amortization of net actuarial loss (gain)
(Income) loss due to settlement accounting
(Income) expense, net
$
(103.9) $
15.7
48.6
0.2
2.0
(0.7)
(38.1)
(110.1) $
14.7
80.6
0.4
0.5
7.4
(6.5)
Changes in plan assets and benefit obligations
recognized in Other comprehensive income (loss):
Net actuarial (gain) loss
Settlement income (loss)
Amortization of net actuarial (loss) gain
Prior service cost
Amortization of prior service cost
Total recognized in Other comprehensive income
(loss)
Total net expense and changes in plan assets and
benefit obligations recognized in Other
comprehensive income (loss)
(245.8)
0.7
(2.0)
—
(0.2)
(247.3)
318.9
(7.4)
(0.5)
(1.1)
(0.4)
309.5
— $
—
0.4
1.9
(0.6)
—
1.7
1.3
—
0.6
—
(1.9)
—
—
0.6
0.7
3.7
(0.5)
—
4.5
(2.6)
—
0.5
—
(3.7)
(5.8)
$
(285.4) $
303.0 $
1.7 $
(1.3)
Prior service costs are amortized on a straight-line basis over the average remaining service period of active
participants. When the accumulation of actuarial gains and losses exceeds 10% of the greater of the projected
benefit obligation and the fair value of plan assets, the excess is amortized over either the average remaining
lifetime of all participants or the average remaining service period of active participants. No significant prior service
costs or estimated net actuarial gain or loss is expected to be amortized from Other comprehensive income (loss)
into periodic benefit cost during fiscal 2021.
Assumptions
The weighted average actuarial assumptions used to determine year-end projected benefit obligations for pension
plans were as follows:
Discount rate
Rate of compensation increase
Cash balance plan interest crediting rate
February 27,
2021
February 29,
2020
2.84 %
3.01 %
2.35 %
2.83 %
3.02 %
2.40 %
101
Table of Contents
The weighted average actuarial assumptions used to determine net periodic benefit costs for pension plans were as
follows:
Discount rate
Expected return on plan assets
Cash balance plan interest crediting rate
February 27,
2021
February 29,
2020
2.83 %
6.18 %
2.40 %
4.17 %
6.36 %
3.05 %
On February 28, 2021, the Company adopted the new MP-2020 mortality improvement projection scale which
assumes an improvement in life expectancy at a marginally slower rate than the MP-2019 projection scale. The
change in mortality assumption and future mortality improvement resulted in an immaterial decrease in the
Company's current year benefit obligations and future expenses.
The Company has adopted and implemented an investment policy for the defined benefit pension plans that
incorporates a strategic long-term asset allocation mix designed to meet the Company's long-term pension
requirements. This asset allocation policy is reviewed annually and, on a regular basis, actual allocations are
rebalanced to the prevailing targets. The investment policy also emphasizes the following key objectives:
(1) maintaining a diversified portfolio among asset classes and investment styles; (2) maintaining an acceptable
level of risk in pursuit of long-term economic benefit; (3) maximizing the opportunity for value-added returns from
active investment management while establishing investment guidelines and monitoring procedures for each
investment manager to ensure the characteristics of the portfolio are consistent with the original investment
mandate; and (4) maintaining adequate controls over administrative costs.
The following table summarizes actual allocations for the Safeway Plan which had approximately $1,597 million in
plan assets as of February 27, 2021:
Asset category
Equity
Fixed income
Cash and other
Total
Target
65%
35%
—%
100%
Plan Assets
February 27,
2021
February 29,
2020
68.3 %
31.2 %
0.5 %
100.0 %
64.0 %
39.2 %
(3.2) %
100.0 %
The following table summarizes the actual allocations for the Shaw's Plan which had approximately $302 million in
plan assets as of February 27, 2021:
Asset category
Equity
Fixed income
Cash and other
Total
Target
65%
35%
—%
100%
Plan Assets
February 27,
2021
February 29,
2020
69.2 %
28.2 %
2.6 %
100.0 %
64.5 %
35.4 %
0.1 %
100.0 %
102
Table of Contents
The following table summarizes the actual allocations for the United Plan which had approximately $43 million in
plan assets as of February 27, 2021:
Asset category
Equity
Fixed income
Cash and other
Total
Target (1)
50%
50%
—%
100%
Plan Assets
February 27,
2021
February 29,
2020
45.0 %
55.0 %
— %
100.0 %
47.8 %
50.4 %
1.8 %
100.0 %
(1) The target market value of equity securities for the United Plan is 50% of plan assets. If the equity percentage exceeds 60% or drops
below 40%, the asset allocation is adjusted to target.
Expected return on pension plan assets is based on historical experience of the Company's portfolios and the review
of projected returns by asset class on broad, publicly traded equity and fixed-income indices, as well as target asset
allocation.
Pension Plan Assets
The fair value of the Company's pension plan assets as of February 27, 2021, excluding pending transactions of
$76.1 million payable to an intermediary agent, by asset category are as follows (in millions):
Asset category
Cash and cash equivalents (1)
Short-term investment collective trust
(2)
Common and preferred stock: (3)
Domestic common and preferred
stock
International common stock
Collective trust funds (2)
Corporate bonds (4)
Mortgage- and other asset-backed
securities (5)
Mutual funds (6)
U.S. government securities (7)
Other securities (8)
Total
Fair Value Measurements
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets
Measured
at NAV
15.3 $
(10.0) $
—
63.1
— $
—
—
—
169.8
56.3
—
—
—
178.7
—
—
420.1 $
—
—
—
120.9
34.1
61.0
282.0
25.2
576.3 $
—
—
—
—
—
—
868.6
—
—
—
—
106.7
—
—
—
46.0
— $ 1,021.3
Total
$
5.3 $
63.1
169.8
56.3
868.6
120.9
34.1
346.4
282.0
71.2
$ 2,017.7 $
103
Table of Contents
(1) The carrying value of these items approximates fair value.
(2) These investments are valued based on the Net Asset Value ("NAV") of the underlying investments and are provided by the fund issuers.
There are no unfunded commitments or redemption restrictions for these funds.
(3) The fair value of common stock is based on the exchange quoted market prices. When quoted prices are not available for identical stock,
an industry valuation model is used which maximizes observable inputs.
(4) The fair value of corporate bonds is generally based on yields currently available on comparable securities of the same or similar issuers
with similar credit ratings and maturities. When quoted prices are not available for identical or similar bonds, the fair value is based upon
an industry valuation model, which maximizes observable inputs.
(5) The fair value of mortgage- and other asset-backed securities is generally based on yields currently available on comparable securities of
the same or similar issuers with similar credit ratings and maturities. When quoted prices are not available for comparable securities, the
fair value is based upon an industry valuation model which maximizes observable inputs.
(6) These investments are open-ended mutual funds that are registered with the SEC which are valued using the NAV. The NAV of the mutual
funds is a published price in an active market. The NAV is determined once a day after the closing of the exchange based upon the
underlying assets in the fund, less the fund's liabilities, expressed on a per-share basis. There are no unfunded commitments, or
redemption restrictions for these funds, and the funds are required to transact at the published price.
(7) The fair value of U.S. government securities is based on quoted market prices when available. When quoted prices are not available, the
fair value of U.S. government securities is based on yields currently available on comparable securities or on an industry valuation model
which maximizes observable inputs.
(8) Level 2 Other securities, which consist primarily of U.S. municipal bonds, foreign government bonds and foreign agency securities are
valued based on yields currently available on comparable securities of issuers with similar credit ratings. Also included in Other securities
is a commingled fund valued based on the NAV of the underlying investments and is provided by the issuer and exchange-traded
derivatives that are valued based on quoted prices in an active market for identical derivatives, assets and liabilities. Funds meeting the
practical expedient are included in the Assets Measured at NAV column. Exchange-traded derivatives are valued based on quoted prices in
an active market for identical derivatives assets and liabilities. Non-exchange-traded derivatives are valued using industry valuation
models, which maximize observable inputs, such as interest-rate yield curve data, foreign exchange rates and applicable spot and forward
rates.
The fair value of the Company's pension plan assets as of February 29, 2020, excluding pending transactions of
$95.1 million payable to an intermediary agent, by asset category are as follows (in millions):
Asset category
Cash and cash equivalents (1)
Short-term investment collective trust
(2)
Common and preferred stock: (3)
Domestic common and preferred
stock
International common stock
Collective trust funds (2)
Corporate bonds (4)
Mortgage- and other asset-backed
securities (5)
Mutual funds (6)
U.S. government securities (7)
Other securities (8)
Total
Fair Value Measurements
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets
Measured
at NAV
3.4 $
2.9 $
—
37.4
167.8
57.8
—
—
—
138.4
—
—
367.4 $
—
—
—
135.9
45.0
22.7
359.0
12.1
615.0 $
— $
—
—
—
—
—
—
—
—
—
— $
—
—
—
—
710.6
—
—
110.9
—
34.9
856.4
Total
$
6.3 $
37.4
167.8
57.8
710.6
135.9
45.0
272.0
359.0
47.0
$ 1,838.8 $
104
Table of Contents
(1) The carrying value of these items approximates fair value.
(2) These investments are valued based on the NAV of the underlying investments and are provided by the fund issuers. There are no
unfunded commitments or redemption restrictions for these funds.
(3) The fair value of common stock is based on the exchange quoted market prices. When quoted prices are not available for identical stock,
an industry valuation model is used which maximizes observable inputs.
(4) The fair value of corporate bonds is generally based on yields currently available on comparable securities of the same or similar issuers
with similar credit ratings and maturities. When quoted prices are not available for identical or similar bonds, the fair value is based upon
an industry valuation model, which maximizes observable inputs.
(5) The fair value of mortgage- and other asset-backed securities is generally based on yields currently available on comparable securities of
the same or similar issuers with similar credit ratings and maturities. When quoted prices are not available for comparable securities, the
fair value is based upon an industry valuation model which maximizes observable inputs.
(6) These investments are open-ended mutual funds that are registered with the SEC which are valued using the NAV. The NAV of the mutual
funds is a published price in an active market. The NAV is determined once a day after the closing of the exchange based upon the
underlying assets in the fund, less the fund's liabilities, expressed on a per-share basis. There are no unfunded commitments, or
redemption restrictions for these funds, and the funds are required to transact at the published price.
(7) The fair value of U.S. government securities is based on quoted market prices when available. When quoted prices are not available, the
fair value of U.S. government securities is based on yields currently available on comparable securities or on an industry valuation model
which maximizes observable inputs.
(8) Level 2 Other securities, which consist primarily of U.S. municipal bonds, foreign government bonds and foreign agency securities are
valued based on yields currently available on comparable securities of issuers with similar credit ratings. Also included in Other securities
is a commingled fund valued based on the NAV of the underlying investments and is provided by the issuer and exchange-traded
derivatives that are valued based on quoted prices in an active market for identical derivatives, assets and liabilities. Funds meeting the
practical expedient are included in the Assets Measured at NAV column. Exchange-traded derivatives are valued based on quoted prices in
an active market for identical derivatives assets and liabilities. Non-exchange-traded derivatives are valued using industry valuation
models, which maximize observable inputs, such as interest-rate yield curve data, foreign exchange rates and applicable spot and forward
rates.
Contributions
In fiscal 2020, fiscal 2019 and fiscal 2018, the Company contributed $60.0 million, $11.0 million and $199.3
million, respectively, to its pension and post-retirement plans. The Company's funding policy for the defined benefit
pension plan is to contribute the minimum contribution required under the Employee Retirement Income Security
Act of 1974, as amended, and other applicable laws as determined by the Company's external actuarial consultant.
At the Company's discretion, additional funds may be contributed to the defined benefit pension plans. The
Company's fiscal 2018 contributions include $150.0 million of additional discretionary contributions to reduce the
Pension Benefit Guaranty Corporation ("PBGC") premium costs and improve the overall funded status of the plans.
The Company expects to contribute $64.6 million to its pension and post-retirement plans in fiscal 2021. The
Company will recognize contributions in accordance with applicable regulations, with consideration given to
recognition for the earliest plan year permitted.
Estimated Future Benefit Payments
The following benefit payments, which reflect expected future service as appropriate, are expected to be paid (in
millions):
2021
2022
2023
2024
2025
2026 – 2030
Pension Benefits
Other Benefits
$
190.3 $
182.8
177.3
191.8
272.7
679.2
2.8
2.7
2.4
2.2
1.9
6.3
105
Table of Contents
Multiemployer Pension Plans
The Company currently contributes to 27 multiemployer pension plans. These multiemployer plans generally
provide retirement benefits to participants based on their service to contributing employers. The benefits are paid
from assets held in trust for that purpose. Plan trustees typically are responsible for determining the level of benefits
to be provided to participants, the investment of the assets and plan administration. Expense is recognized in
connection with these plans as contributions are funded.
The risks of participating in these multiemployer plans are different from the risks associated with single-employer
plans in the following respects:
• Assets contributed to the multiemployer plan by one employer may be used to provide benefits to
employees of other participating employers.
• Though the unfunded obligations of a multiemployer plan are not a liability of the Company, if a
participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by
the remaining participating employers.
• With respect to some multiemployer plans, if the Company chooses to stop participating, or makes market
exits or store closures or otherwise has participation in the plan fall below certain levels, the Company may
be required to pay the plan an amount based on the underfunded status of the plan, referred to as withdrawal
liability. The Company generally records the actuarially determined liability at an undiscounted amount.
The Company's participation in these plans is outlined in the table below. The EIN-Pension Plan Number column
provides the Employer Identification Number ("EIN") and the three-digit plan number, if applicable. Unless
otherwise noted, the most recent Pension Protection Act of 2006 ("PPA") zone status available for fiscal 2020 and
fiscal 2019 is for the plan's year ending at December 31, 2019 and December 31, 2018, respectively. The zone status
is based on information received from the plans and is certified by each plan's actuary. The FIP/RP Status
Pending/Implemented column indicates plans for which a funding improvement plan ("FIP") or a rehabilitation plan
("RP") is either pending or has been implemented by the plan trustees.
The following tables contain information about the Company's multiemployer plans. Certain plans have been
aggregated in the Other funds line in the following table, as the contributions to each of these plans are not
individually material.
106
Table of Contents
Pension Protection Act
zone status (1)
Pension fund
UFCW-Northern California Employers Joint Pension
Trust Fund
EIN - PN
946313554 - 001
2020
Red
2019
Red
Western Conference of Teamsters Pension Plan
916145047 - 001
Green
Green
Southern California United Food & Commercial
Workers Unions and Food Employers Joint Pension
Plan (4)
Food Employers Labor Relations Association and
United Food and Commercial Workers Pension Fund
(8)
Sound Retirement Trust (6)
Bakery and Confectionery Union and Industry
International Pension Fund
UFCW Union and Participating Food Industry
Employers Tri-State Pension Fund
951939092 - 001
526128473 - 001
916069306 - 001
526118572 - 001
236396097 - 001
Red
Red
Red
Red
Red
Red
Red
Red
Red
Red
Rocky Mountain UFCW Unions & Employers Pension
Plan
846045986 - 001
Green
Green
UFCW Local 152 Retail Meat Pension Fund (5)
236209656 - 001
Red
Red
Desert States Employers & UFCW Unions Pension
Plan
846277982 - 001
Green
Green
UFCW International Union - Industry Pension Fund
(5)(9)
Mid Atlantic Pension Fund (8)
Retail Food Employers and UFCW Local 711 Pension
Trust Fund
516055922 - 001
Green
461000515 - 001
Green
516031512 - 001
Red
Green
Green
Red
Oregon Retail Employees Pension Trust
936074377 - 001
Green
Green
Intermountain Retail Store Employees Pension Trust
(7)
916187192 - 001
Red
Red
Company's 5% of total
plan contributions
2018
2019
FIP/RP status
pending/implemented
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Implemented
No
Implemented
Implemented
Implemented
Implemented
Implemented
No
Implemented
No
No
No
Implemented
No
Implemented
107
Table of Contents
Pension fund
UFCW-Northern California Employers
Joint Pension Trust Fund
Contributions of Company
(in millions)
2020
2019
$ 123.2 $ 103.8 $ 104.4
2018
Western Conference of Teamsters Pension
Plan
66.9
64.9
63.7
Southern California United Food &
Commercial Workers Unions and Food
Employers Joint Pension Plan (4)
Food Employers Labor Relations
Association and United Food and
Commercial Workers Pension Fund (8)
133.7 116.1 108.4
19.3
18.8
20.4
Sound Retirement Trust (6)
53.8
44.3
39.1
Bakery and Confectionery Union and
Industry International Pension Fund
18.7
18.5
17.4
UFCW Union and Participating Food
Industry Employers Tri-State Pension
Fund
12.0
14.9
14.0
Rocky Mountain UFCW Unions &
Employers Pension Plan
15.5
12.3
10.8
UFCW Local 152 Retail Meat Pension
Fund (5)
11.1
10.9
10.8
Desert States Employers & UFCW
Unions Pension Plan
UFCW International Union - Industry
Pension Fund (5)(9)
Mid Atlantic Pension Fund (8)
Retail Food Employers and UFCW Local
711 Pension Trust Fund
8.9
8.9
9.1
4.6
9.5
13.1
7.3
8.6
7.4
7.3
6.6
7.1
Oregon Retail Employees Pension Trust
10.0
8.9
7.6
Intermountain Retail Store Employees
Pension Trust (7)
6.9
5.8
4.8
Surcharge
imposed (2)
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
Expiration date
of collective
bargaining
agreements
8/3/2019 to
10/9/2021
Total
collective
bargaining
agreements
83
3/4/2020 to
9/21/2025
3/11/2018 to
3/6/2026
10/26/2019 to
2/24/2024
5/4/2019 to
1/20/2024
9/3/2011 to
3/9/2024
3/28/2020 to
2/1/2024
11/23/2019 to
11/26/2022
5/2/2024
10/24/2020 to
11/5/2022
8/3/2019 to
7/13/2024
(8)
5/19/2018 to
12/17/2023
7/31/2021 to
11/12/2022
5/19/2013 to
4/8/2023
51
43
21
119
107
6
85
4
16
20
(8)
7
142
56
Most significant collective
bargaining agreement(s)(3)
Expiration
Count
78
10
41
15
14
33
2
27
4
13
6
(8)
4
25
13
10/9/2021
9/21/2025
3/6/2022
10/28/2023
5/7/2022
9/6/2020
3/28/2020
2/19/2022
5/2/2024
10/24/2020
6/11/2022
(8)
3/5/2022
1/29/2022
4/4/2020
Other funds
Total Company contributions to U.S.
multiemployer pension plans
23.5
17.0
13.8
$ 524.0 $ 469.3 $ 451.1
(1) PPA established three categories (or "zones") of plans: (1) "Green Zone" for healthy; (2) "Yellow Zone" for endangered; and (3) "Red
Zone" for critical. These categories are based upon multiple factors, including the funding ratio of the plan assets to plan liabilities.
(2) Under the PPA, a surcharge may be imposed when employers make contributions under a collective bargaining agreement that is not in
compliance with a rehabilitation plan. As of February 27, 2021, the collective bargaining agreements under which the Company was
making contributions were in compliance with rehabilitation plans adopted by the applicable pension fund.
(3) These columns represent the number of most significant collective bargaining agreements aggregated by common expiration dates for
each of the pension funds listed above.
(4) The information for this fund was obtained from the Form 5500 filed for the plan's year-end at March 31, 2020 and March 31, 2019.
(5) The information for this fund was obtained from the Form 5500 filed for the plan's year-end at June 30, 2019 and June 30, 2018.
(6) The information for this fund was obtained from the Form 5500 filed for the plan's year-end at September 30, 2019 and September 30,
2018.
(7) The information for this fund was obtained from the Form 5500 filed for the plan's year-end at August 31, 2019 and August 31, 2018.
(8) As further described below, effective December 31, 2020, the Mid Atlantic Pension Fund combined into the Food Employers Labor
Relations Association and United Food and Commercial Workers Pension Fund to form the Combined Plan, and immediately upon
combination the Company withdrew from the Combined Plan under the terms of the agreement with the applicable local unions, the
largest contributing employer and the PBGC.
(9) As further described below, effective June 30, 2020, the Company withdrew from the UFCW National Fund.
108
Table of Contents
FELRA and MAP: The Company was the second largest contributing employer to the Food Employers Labor
Relations Association and United Food and Commercial Workers Pension Fund ("FELRA") which was projected by
FELRA to become insolvent in the first quarter of 2021, and to the Mid-Atlantic UFCW and Participating Pension
Fund ("MAP"). The Company continued to fund all of its required contributions to FELRA and MAP.
On March 5, 2020, the Company agreed with the two applicable local unions to new collective bargaining
agreements pursuant to which the Company contributes to FELRA and MAP. These agreements were subject to
final approval by the Pension Benefit Guaranty Corporation ("PBGC"), the local unions and the largest contributing
employer, which was reached on December 31, 2020. In connection with these final agreements, to address the
pending insolvency of FELRA, the Company and the two local unions, along with the largest contributing
employer, agreed to combine MAP into FELRA (the "Combined Plan") on December 31, 2020. As a result, the
Company withdrew from the Combined Plan under the terms of the agreement with the applicable unions, the
largest contributing employer and the PBGC and received a release of all withdrawal liability and mass withdrawal
liability from FELRA, MAP, the Combined Plan and the PBGC. Commencing February 2021, the Company is
required to annually pay $23.2 million to the Combined Plan for the next 25 years. This payment replaces the
Company's previous annual contribution to both FELRA and MAP. In addition to the $23.2 million annual payment,
the Company will begin to contribute to a new multiemployer pension plan limited to providing benefits to the
former participants in MAP and FELRA in excess of the benefits the PBGC insures under law (the "Excess Plan").
These contributions are expected to commence in June 2022 and are currently expected to be $13.7 million annually
for 10 years. The Company recorded a non-cash pre-tax charge of $607.2 million ($449.4 million, net of tax) in the
fourth quarter of fiscal 2020 to record the pension obligation for these benefits earned for prior service. The pension
obligation was determined using a risk-free rate commensurate with the respective payment term related to the
Combined Plan and the Excess Plan. Furthermore, the Company is also establishing and will contribute to a new
Variable Annuity Pension Plan (the "Combined VAPP") that provides benefits to participants for future services,
effective January 1, 2021. The Company will contribute approximately $4 million to the Combined VAPP to fund
certain administrative expenses and establish a stabilization reserve for the Combined VAPP.
The recently enacted ARP Act establishes a special financial assistance program for financially troubled
multiemployer pension plans and although the special assistance financial assistance will have no impact on the
Company's $23.2 million payment obligation to the Combined Plan, the Company is currently evaluating any
potential favorable impact the special financial assistance may have on the $13.7 million annual payment obligation
to the Excess Plan. Significant uncertainty remains in determining how the special assistance program will work.
The PBGC is expected to issue guidance or regulations within 120 days of enactment and the determination of
favorable financial relief, if any, for the Excess Plan is still to be determined.
National Fund: On July 21, 2020, the Company announced that it had entered into a tentative agreement with the
trustees of the United Food and Commercial Workers International Union ("UFCW") Union-Industry Pension Fund
("National Fund"), providing that the Company will permanently cease to have any obligation to contribute to the
National Fund, a multiemployer pension plan, and will completely withdraw from the National Fund, effective as of
June 30, 2020. The Company and nine UFCW local unions entered into a Memorandum of Understanding that
permitted the withdrawal and required the establishment of a new Variable Annuity Pension Plan (the "National
VAPP") that will provide benefits to participants for future services, effective as of July 1, 2020. On November 30,
2020, these agreements became effective upon ratification by the membership of each of these nine local unions and
the related agreements with the local unions whose members participate in the National Fund and are employed by
the two largest contributors to the National Fund. As a result, the Company will pay, by June 2023, an aggregate of
$285.7 million to the National Fund, in full satisfaction of the Company's withdrawal liability amount and mass
withdrawal liability amount. The Company has paid $147.3 million as of the end of fiscal 2020 and will pay the
remaining amount in two installments over the next 27 months, any portion of which may be prepaid, in whole or in
part. The Company will also pre-fund a transition reserve in the National VAPP to support certain grandfathered
participants by making a payment in the first quarter of fiscal 2021 of approximately $8 million to the National
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VAPP. The Company recorded a pre-tax charge of approximately $285.7 million ($213.0 million, net of tax) in the
third quarter of fiscal 2020 to record the withdrawal liability.
Midwest Plan: As a part of the Safeway acquisition, the Company assumed withdrawal liabilities related to
Safeway's 2013 closure of its Dominick's division. The Company recorded a $221.8 million multiemployer pension
withdrawal liability related to Safeway's withdrawal from these plans. One of the plans, the UFCW & Employers
Midwest Pension Fund (the "Midwest Plan"), had asserted the Company may be liable for mass withdrawal liability,
if the plan had a mass withdrawal, in addition to the liability the Midwest Plan already had assessed. The Company
disputed that the Midwest Plan would have the right to assess mass withdrawal liability on the Company and the
Company also disputed in arbitration the amount of the withdrawal liability the Midwest Plan had assessed. On
March 12, 2020, the Company agreed to a settlement of these matters and the withdrawal liability with the Midwest
Plan's Board of Trustees. As a result of the settlement, the Company agreed to pay $75.0 million, in a lump sum,
which was paid in the first quarter of fiscal 2020, and forego any amounts already paid to the Midwest Plan. The
Company recorded a gain of $43.3 million in the fourth quarter of fiscal 2019 to reduce the previously recorded
estimated withdrawal liability to the settlement amount.
Collective Bargaining Agreements
As of February 27, 2021, the Company had approximately 300,000 employees, of which approximately 210,000
were covered by collective bargaining agreements. During fiscal 2020, collective bargaining agreements covering
approximately 27,000 employees were renegotiated. Collective bargaining agreements covering approximately
67,000 employees have expired or are scheduled to expire in fiscal 2021.
Multiemployer Health and Welfare Plans
The Company makes contributions to multiemployer health and welfare plans in amounts specified in the applicable
collective bargaining agreements. These plans provide medical, dental, pharmacy, vision, and other ancillary
benefits to active employees and retirees as determined by the trustees of each plan. The majority of the Company's
contributions cover active employees and as such, may not constitute contributions to a postretirement benefit plan.
However, the Company is unable to separate contribution amounts to postretirement benefit plans from contribution
amounts paid to active employee plans. Total contributions to multiemployer health and welfare plans were $1.2
billion, $1.2 billion and $1.3 billion for fiscal 2020, fiscal 2019 and fiscal 2018, respectively.
Defined Contribution Plans and Supplemental Retirement Plans
Many of the Company's employees are eligible to contribute a percentage of their compensation to defined
contribution plans ("401(k) Plans"). Participants in the 401(k) Plans may become eligible to receive a profit-sharing
allocation in the form of a discretionary Company contribution based on employee compensation. In addition, the
Company may also provide matching contributions based on the amount of eligible compensation contributed by
the employee. All Company contributions to the 401(k) Plans are made at the discretion of the Company's board of
directors. The Company provides supplemental retirement benefits through a Company sponsored deferred
executive compensation plan, which provides certain key employees with retirement benefits that supplement those
provided by the 401(k) Plans. Total contributions for these plans were $85.8 million, $63.2 million and $45.1
million for fiscal 2020, fiscal 2019 and fiscal 2018, respectively.
NOTE 13 - RELATED PARTIES
In connection with the Safeway acquisition, the Company entered into a four-year management agreement with
Cerberus Capital Management, L.P. and the consortium of investors, which commenced on January 30, 2015,
requiring an annual management fee of $13.75 million. The Company made the final payment under the initial
management agreement in the fourth quarter of fiscal 2017. The agreement was extended to cover both fiscal 2018
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and fiscal 2019, requiring the payment of annual management fees of $13.75 million in each year. The agreement
was extended again in fiscal 2020, payable in quarterly installments, effective through the IPO date. Prior to the
IPO, the Company made one quarterly payment for management fees of $3.4 million in fiscal 2020.
The Company paid Cerberus Operations and Advisory Company, LLC ("COAC"), an affiliate of Cerberus, fees
totaling approximately $0.1 million, $0.3 million and $0.5 million for fiscal 2020, fiscal 2019 and fiscal 2018,
respectively, for consulting services provided in connection with improving the Company's operations.
The Company paid Cerberus Technology Solutions ("CTS"), an affiliate of Cerberus, fees totaling approximately
$5.5 million and $4.4 million for fiscal 2020 and fiscal 2019, respectively, for information technology advisory and
implementation services in connection with modernizing the Company's information systems. The Company paid
no fees to CTS in fiscal 2018.
NOTE 14 - COMMITMENTS AND CONTINGENCIES AND OFF BALANCE SHEET ARRANGEMENTS
Guarantees
California Department of Industrial Relations: On October 24, 2012, the Office of Self-Insurance Plans, a
program within the director's office of the California Department of Industrial Relations (the "DIR"), notified
SuperValu, which was then the owner of NALP, a wholly-owned subsidiary of the Company, that additional
collateral was required to be posted in connection with the Company's, and certain other subsidiaries', California
self-insured workers' compensation obligations pursuant to applicable regulations. The notice from the DIR stated
that the additional collateral was required as a result of an increase in estimated future liabilities, as determined by
the DIR pursuant to a review of the self-insured California workers' compensation claims with respect to the
applicable businesses. On January 21, 2014, the Company entered into a Collateral Substitution Agreement with the
California Self-Insurers' Security Fund to provide collateral. The collateral not covered by the California Self-
Insurers' Security Fund is covered by an irrevocable LOC for the benefit of the State of California Office of Self-
Insurance Plans. The amount of the LOC is adjusted annually based on semi-annual filings of an actuarial study
reflecting liabilities as of December 31 of each year reduced by claim closures and settlements. The related LOC
was $40.1 million as of February 27, 2021 and $90.3 million as of February 29, 2020.
Lease Guarantees: The Company may have liability under certain operating leases that were assigned to third
parties. If any of these third parties fail to perform their obligations under the leases, the Company could be
responsible for the lease obligation, including as a result of the economic dislocation caused by the response to the
COVID-19 pandemic. Because of the wide dispersion among third parties and the variety of remedies available, the
Company believes that if an assignee became insolvent, it would not have a material effect on the Company's
financial condition, results of operations or cash flows.
The Company also provides guarantees, indemnifications and assurances to others in the ordinary course of its
business.
Legal Proceedings
The Company is subject from time to time to various claims and lawsuits arising in the ordinary course of business,
including lawsuits involving trade practices, lawsuits alleging violations of state and/or federal wage and hour laws
(including alleged violations of meal and rest period laws and alleged misclassification issues), real estate disputes
as well as other matters. Some of these suits purport or may be determined to be class actions and/or seek
substantial damages. It is the opinion of the Company's management that although the amount of liability with
respect to certain of the matters described herein cannot be ascertained at this time, any resulting liability of these
and other matters, including any punitive damages, will not have a material adverse effect on the Company's
business or financial condition.
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The Company continually evaluates its exposure to loss contingencies arising from pending or threatened litigation
and believes it has made provisions where the loss contingency can be reasonably estimated and an adverse
outcome is probable. Nonetheless, assessing and predicting the outcomes of these matters involves substantial
uncertainties. Management currently believes that the aggregate range of reasonably possible loss for the
Company's exposure in excess of the amount accrued is expected to be immaterial to the Company. It remains
possible that despite management's current belief, material differences in actual outcomes or changes in
management's evaluation or predictions could arise that could have a material effect on the Company's financial
condition, results of operations or cash flows.
Office of Inspector General: In January 2016, the Company received a subpoena from the Office of the Inspector
General of the Department of Health and Human Services (the "OIG") pertaining to the pricing of drugs offered
under the Company's MyRxCare discount program and the impact on reimbursements to Medicare, Medicaid and
TRICARE (the "Government Health Programs"). In particular, the OIG requested information on the relationship
between the prices charged for drugs under the MyRxCare program and the "usual and customary" prices reported
by the Company in claims for reimbursements to the Government Health Programs or other third-party payors. The
Company cooperated with the OIG in the investigation. The Company is currently unable to determine the
probability of the outcome of this matter or the range of reasonably possible loss, if any.
Civil Investigative Demands: On December 16, 2016, the Company received a civil investigative demand from the
United States Attorney for the District of Rhode Island in connection with a False Claims Act ("FCA") investigation
relating to the Company's influenza vaccination programs. The investigation concerns whether the Company's
provision of store coupons to its customers who received influenza vaccinations in its store pharmacies constituted
an improper benefit to those customers under the federal Medicare and Medicaid programs. The Company believes
that its provision of the store coupons to its customers is an allowable incentive to encourage vaccinations. The
Company cooperated with the U.S. Attorney in the investigation. The Company is currently unable to determine the
probability of the outcome of this matter or the range of possible loss, if any.
The Company has received a civil investigative demand dated February 28, 2020 from the United States Attorney
for the Southern District of New York in connection with an FCA investigation relating to the Company's dispensing
practices regarding insulin pen products. The investigation seeks documents regarding the Company's policies,
practices and procedures, as well as dispensing data, among other things. The Company will cooperate with the U.S.
Attorney in the investigation. The Company is currently unable to determine the probability of the outcome of this
matter or the range of possible loss, if any.
Terraza/Lorenz: Two lawsuits were brought against Safeway and the Safeway Benefits Plan Committee (the
"Benefit Plans Committee," and together with Safeway, the "Safeway Benefits Plans Defendants") and other third
parties alleging breaches of fiduciary duty under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") with respect to Safeway's 401(k) Plan (the "Safeway 401(k) Plan"). On July 14, 2016, a
complaint ("Terraza") was filed in the United States District Court for the Northern District of California by a
participant in the Safeway 401(k) Plan individually and on behalf of the Safeway 401(k) Plan. An amended
complaint was filed on November 18, 2016. On August 25, 2016, a second complaint ("Lorenz") was filed in the
United States District Court for the Northern District of California by another participant in the Safeway 401(k)
Plan individually and on behalf of all others similarly situated against the Safeway Benefits Plans Defendants and
against the Safeway 401(k) Plan's former record-keepers. An amended complaint was filed on September 16, 2016,
and a second amended complaint was filed on November 21, 2016. In general, both lawsuits alleged that the
Safeway Benefits Plans Defendants breached their fiduciary duties under ERISA regarding the selection of
investments offered under the Safeway 401(k) Plan and the fees and expenses related to those investments. All
parties filed summary judgment motions which were heard and taken under submission on August 16,
2018. Plaintiffs' motions were denied, and defendants' motions were granted in part and denied in part. Bench trials
for both matters were set for May 6, 2019. A settlement in principle was reached before trial. On September 13,
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2019, settlement papers were filed with the Court along with a motion for preliminary approval of the settlement. A
hearing for preliminary approval was set for November 20, 2019, but the Court vacated the hearing. The Court
issued an order on March 30, 2020 requesting some minor changes to the notice procedures, and plaintiffs submitted
an amended motion for preliminary approval. On September 8, 2020, the Court granted plaintiffs' amended motion,
and a final approval hearing was held on April 26, 2021 at which time the Court took the matter under submission.
The Company has recorded an estimated liability for these matters.
False Claims Act: Two qui tam actions alleging violations of the FCA have been filed against the Company and its
subsidiaries. Violations of the FCA are subject to treble damages and penalties of up to a specified dollar amount per
false claim.
In United States ex rel. Proctor v. Safeway, filed in the U.S. District Court for the Central District of Illinois, the
relator alleges that Safeway overcharged government healthcare programs by not providing the government, as part
of its usual and customary prices, the benefit of discounts given to customers in pharmacy membership discount and
price-matching programs. The relator filed his complaint under seal on November 11, 2011, and the complaint was
unsealed on August 26, 2015. The relator amended the complaint on March 31, 2016. On June 12, 2020, the Court
granted Safeway's motion for summary judgment, holding that the relator could not prove that Safeway acted with
the intent required under the FCA, and judgment was issued on June 15, 2020. On July 10, 2020, the relator filed a
motion to alter or amend the judgment and to supplement the record, which Safeway opposed. On November 13,
2020, the Court denied relator's motion, and on December 11, 2020, relator filed a notice of appeal.
In United States ex rel. Schutte and Yarberry v. SuperValu, New Albertson's, Inc., et al., also filed in the Central
District of Illinois, the relators allege that defendants (including various subsidiaries of the Company) overcharged
government healthcare programs by not providing the government, as a part of usual and customary prices, the
benefit of discounts given to customers who requested that defendants match competitor prices. The complaint was
originally filed under seal and amended on November 30, 2015. On August 5, 2019, the Court granted relators'
motion for partial summary judgment, holding that price-matched prices are the usual and customary prices for
those drugs. On July 1, 2020, the Court granted the defendants' motions for summary judgment and dismissed the
case, holding that the relator could not prove that defendants acted with the intent required under the FCA.
Judgment was issued on July 2, 2020. On July 9, 2020, the relators filed a notice of appeal. The appeal is now
pending in the Seventh Circuit Court of Appeals. Oral argument was held on January 19, 2021.
In both of the above cases, the government previously investigated the relators' allegations and declined to
intervene. The relators elected to pursue their respective cases on their own and in each case have alleged FCA
damages in excess of $100 million before trebling and excluding penalties. The Company is vigorously defending
each of these matters and believes each of these cases is without merit. The Company has recorded an estimated
liability for these matters.
The Company was also subject to another FCA qui tam action entitled United States ex rel. Zelickowski v.
Albertson's LLC. In that case, the relators alleged that Albertson's LLC ("Albertson's") overcharged federal
healthcare programs by not providing the government, as a part of its usual and customary prices to the government,
the benefit of discounts given to customers who enrolled in the Albertson's discount-club program. The complaint
was originally filed under seal and amended on June 20, 2017. On December 17, 2018, the case was dismissed,
without prejudice.
Alaska Attorney General's Investigation: On May 22, 2018, the Company received a subpoena from the Office
of the Attorney General for the State of Alaska (the "Alaska Attorney General") stating that the Alaska Attorney
General has reason to believe the Company has engaged in unfair or deceptive trade practices under Alaska's Unfair
Trade Practices and Consumer Act and seeking documents regarding the Company's policies, procedures, controls,
training, dispensing practices and other matters in connection with the sale and marketing of opioid pain
medications. The Company responded to the subpoena on July 30, 2018 and has not received any further
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communication from the Alaska Attorney General. The Company does not currently have a basis to believe it has
violated Alaska's Unfair Trade Practices and Consumer Act; however, at this time, the Company is unable to
determine the probability of the outcome of this matter or estimate a range of reasonably possible loss, if any.
Opioid Litigation: The Company is one of dozens of companies that have been named in various lawsuits alleging
that defendants contributed to the national opioid epidemic. At present, the Company is named in over 70 suits
pending in various state courts as well as in the United States District Court for the Northern District of Ohio, where
over 2,000 cases have been consolidated as Multi-District Litigation ("MDL") pursuant to 28 U.S.C. §1407. In two
matters--MDL No. 2804 filed by The Blackfeet Tribe of the Blackfeet Indian Reservation and State of New Mexico
v. Purdue Pharma L.P., et al.--the Company filed motions to dismiss, which were denied, and the Company has now
answered the complaints. The MDL cases are stayed pending bellwether trials, and the only active matter is the New
Mexico action where a September 2021 trial date has been set. The Company is vigorously defending these matters
and believes that these cases are without merit. At this early stage in the proceedings, the Company is unable to
determine the probability of the outcome of these matters or the range of reasonably possible loss, if any.
California Air Resources Board: Upon the inspection by the California Air Resources Board ("CARB") of several
of the Company's stores in California, it was determined that the Company failed certain paperwork and other
administrative requirements. As a result of the inspections, the Company proactively undertook a broad evaluation
of the record keeping and administrative practices at all of its stores in California. In connection with this
evaluation, the Company retained a third party to conduct an audit and correct deficiencies identified across its
California store base. The Company is working with CARB to resolve these compliance issues and comply with
governing regulations, and that work is ongoing. CARB has made an opening demand regarding potential fines and
penalties. The parties are in negotiations to reach a settlement. The Company has recorded an estimated liability for
this matter.
FACTA: On May 31, 2019, a putative class action complaint entitled Martin v. Safeway was filed in the California
Superior Court for the County of Alameda, alleging the Company failed to comply with the Fair and Accurate
Credit Transactions Act ("FACTA") by printing receipts that failed to adequately mask payment card numbers as
required by FACTA. The plaintiff claims the violation was "willful" and exposes the Company to statutory damages
provided for in FACTA. The Company has answered the complaint and is vigorously defending the matter. On
January 8, 2020, the Company commenced mediation discussions with plaintiff's counsel and reached a settlement
in principle on February 24, 2020. The parties will seek court approval of the settlement. The Company has
recorded an estimated liability for this matter.
Other Commitments
In the ordinary course of business, the Company enters into various supply contracts to purchase products for resale
and purchase and service contracts for fixed asset and information technology commitments. These contracts
typically include volume commitments or fixed expiration dates, termination provisions and other standard
contractual considerations.
NOTE 15 - OTHER COMPREHENSIVE INCOME OR LOSS
Total comprehensive earnings are defined as all changes in stockholders' equity during a period, other than those
from investments by or distributions to stockholders. Generally, for the Company, total comprehensive income
equals net income plus or minus adjustments for pension and other post-retirement liabilities and interest rate swaps.
Total comprehensive earnings represent the activity for a period net of tax
While total comprehensive earnings are the activity in a period and are largely driven by net earnings in that period,
accumulated other comprehensive income or loss ("AOCI") represents the cumulative balance of other
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comprehensive income, net of tax, as of the balance sheet date. Changes in the AOCI balance by component are
shown below (in millions):
Fiscal 2020
Total
Interest rate
swaps
Pension and
Post-retirement
benefit plan
items
Other
$
(118.5) $
— $
(121.7) $
Beginning AOCI balance
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from Accumulated other
comprehensive income (loss)
Tax (expense) benefit
Current-period other comprehensive income
(loss), net
Ending AOCI balance
Beginning AOCI balance
Cumulative effect of accounting change
Other comprehensive (loss) income before
reclassifications
Amounts reclassified from Accumulated other
comprehensive income (loss)
Tax benefit (expense)
Current-period other comprehensive (loss)
income, net
Ending AOCI balance
$
$
$
242.5
2.8
(63.3)
182.0
63.5 $
244.5
2.8
(64.3)
183.0
61.3 $
—
—
—
—
— $
Fiscal 2019
3.2
(2.0)
—
1.0
(1.0)
2.2
Total
Interest rate
swaps
Pension and
Post-retirement
benefit plan
items
Other
91.3 $
16.6
3.4 $
1.2
88.8 $
14.9
(356.2)
(45.8)
(315.2)
46.9
82.9
(209.8)
(118.5) $
35.4
5.8
(3.4)
— $
11.5
78.3
(210.5)
(121.7) $
(0.9)
0.5
4.8
—
(1.2)
4.1
3.2
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NOTE 16 - NET INCOME PER COMMON SHARE
The Company calculates basic and diluted net income per Class A common share using the two-class method. The
two-class method is an allocation formula that determines net income per Class A common share for each share of
Class A common stock and Convertible Preferred Stock, a participating security, according to dividends declared
and participation rights in undistributed earnings. Under this method, all earnings (distributed and undistributed) are
allocated to Class A common shares and Convertible Preferred Stock based on their respective rights to receive
dividends. The holders of Convertible Preferred Stock participate in cash dividends that the Company pays on its
Common Stock to the extent that such cash dividends exceed $206.25 million per fiscal year. In applying the two-
class method to interim periods, the Company allocates income to its quarterly periods independently and discretely
from its year-to-date and annual periods. Basic net income per Class A common share is computed by dividing net
income allocated to Class A common stockholders by the weighted average number of Class A common shares
outstanding for the period, including Class A common shares to be issued with no prior remaining contingencies
prior to issuance. Diluted net income per Class A common share is computed based on the weighted average number
of shares of Class A common stock outstanding during each period, plus potential Class A common shares
considered outstanding during the period, as long as the inclusion of such awards is not antidilutive. Potential Class
A common shares consist of unvested RSUs and RSAs and Convertible Preferred Stock, using the more dilutive of
either the two-class method or as-converted stock method. Performance-based RSUs are considered dilutive when
the related performance criterion has been met.
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The components of basic and diluted net income per common share were as follows (in millions, except per share
data):
Fiscal
2020
Fiscal
2019
Fiscal
2018
Basic net income per Class A common share
Net income
Accrued dividends on Convertible Preferred Stock
Earnings allocated to Convertible Preferred Stock
$
850.2 $
(86.0)
—
466.4 $
—
—
Net income allocated to Class A common stockholders - Basic $
764.2 $
466.4 $
131.1
—
—
131.1
Weighted average Class A common shares outstanding - Basic
(1)
500.3
579.4
580.5
Basic net income per Class A common share
$
1.53 $
0.80 $
0.23
Diluted net income per Class A common share
Net income allocated to Class A common stockholders - Basic $
Accrued dividends on Convertible Preferred Stock
Earnings allocated to Convertible Preferred Stock
Net income allocated to Class A common stockholders -
$
Diluted
Weighted average Class A common shares outstanding - Basic
(1)
Dilutive effect of:
Restricted stock units and awards
Convertible preferred stock (2)
Weighted average Class A common shares outstanding -
Diluted (3)
764.2 $
86.0
—
466.4 $
—
—
850.2 $
466.4 $
500.3
4.1
73.7
578.1
579.4
0.9
—
580.3
131.1
—
—
131.1
580.5
0.2
—
580.7
Diluted net income per Class A common share
$
1.47 $
0.80 $
0.23
(1) Fiscal 2020, fiscal 2019 and fiscal 2018 include 1.1 million, 1.3 million and 1.9 million common shares remaining to be issued,
respectively.
(2) Reflects the number of shares of Convertible Preferred Stock issued, if converted into Common Stock for the period outstanding.
(3) There were no potential common shares outstanding that were antidilutive for fiscal 2020, fiscal 2019 and fiscal 2018.
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NOTE 17 - QUARTERLY INFORMATION (unaudited)
The summarized quarterly financial data presented below reflects all adjustments, which in the opinion of
management, are of a normal and recurring nature and are necessary for a fair statement of the results for the interim
periods presented (in millions, except per share data):
Net sales and other revenue
Gross profit
Operating income (loss)
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Basic net income (loss) per Class A common
share
Diluted net income (loss) per Class A
common share
52
Weeks
Last 12
Weeks
Second 12
Weeks
Fiscal 2020
Third 12
Weeks
$ 69,690.4 $ 15,772.3 $ 15,408.9 $ 15,757.6 $ 22,751.6
6,771.5
971.8
788.1
201.9
586.2
20,414.5
1,617.5
1,128.7
278.5
850.2 $
4,574.9
562.0
395.7
111.2
284.5 $
4,508.6
258.5
153.2
29.5
123.7 $
4,559.5
(174.8)
(208.3)
(64.1)
(144.2) $
First 16
Weeks
$
$
$
1.53 $
(0.37) $
0.21 $
0.52 $
1.03
1.47 $
(0.37) $
0.20 $
0.49 $
1.00
Results of operations for fiscal 2020 includes the Company's $607.2 million charge related to the Combined Plan
withdrawal in the fourth quarter of fiscal 2020 and the $285.7 million charge related to the UFCW National Fund
withdrawal in the third quarter of fiscal 2020.
Net sales and other revenue
Gross profit
Operating income
Income before income taxes
Income tax expense
Net income
53
Weeks
Last 13
Weeks
Second 12
Weeks
Fiscal 2019
Third 12
Weeks
$ 62,455.1 $ 15,436.8 $ 14,103.2 $ 14,176.7 $ 18,738.4
5,239.6
321.5
64.7
15.7
49.0
17,594.2
1,437.1
599.2
132.8
466.4 $
3,995.1
206.6
67.7
12.9
54.8 $
3,941.5
582.4
376.7
81.9
294.8 $
4,418.0
326.6
90.1
22.3
67.8 $
First 16
Weeks
$
Basic and diluted net income per Class A
common share
$
0.80 $
0.12 $
0.09 $
0.51 $
0.08
Results of operations for the second quarter of fiscal 2019 includes the Company's $463.6 million net gain related to
three separate sale leaseback transactions, which is included as a component of Gain on property dispositions and
impairment losses, net.
Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
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Item 9A - Controls and Procedures
Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures that are designed to ensure that information required to
be disclosed in the Company's reports under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and
forms, and that such information is accumulated and communicated to management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the
desired control objectives.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated
the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as
of February 27, 2021. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were effective as of February 27, 2021.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting
(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). All internal control systems, no matter how
well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and presentation. Further, because of changes
in conditions, the effectiveness of internal control over financial reporting may vary over time. Under the
supervision and with the participation of our management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting
based on the 2013 framework set forth in the report entitled Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
Based on our evaluation under such framework, our management concluded that our internal control over financial
reporting was effective as of February 27, 2021.
This Annual Report on Form 10-K does not include an attestation report of our independent registered public
accounting firm regarding internal control over financial reporting. Our internal controls over financial reporting
was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that
permit us to provide only management's report in this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the fourth quarter of fiscal 2020 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B - Other Information
None.
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Item 10 - Directors, Executive Officers and Corporate Governance
PART III
Please see the information concerning our executive officers in "Part I—Item 1. Business" herein under the caption
"Executive Officers of the Registrant," which is included in accordance with General Instruction G(3) of Form 10-
K. The remainder of the information covered by this Item is incorporated by reference to the Proxy Statement for
our 2021 Annual Meeting of Stockholders, which is expected to be filed in June 2021.
Item 11 - Executive Compensation
The information covered by this Item is incorporated by reference to the Proxy Statement for our 2021 Annual
Meeting of Stockholders, which is expected to be filed in June 2021.
Item 12 - Security Ownership of Certain Beneficial Owners and Management, and Related Member Matters
The information covered by this Item is incorporated by reference to the Proxy Statement for our 2021 Annual
Meeting of Stockholders, which is expected to be filed in June 2021.
Item 13 - Certain Relationships and Related Transactions, and Director Independence
The information covered by this Item is incorporated by reference to the Proxy Statement for our 2021 Annual
Meeting of Stockholders, which is expected to be filed in June 2021.
Item 14 - Principal Accountant Fees and Services
The information covered by this Item is incorporated by reference to the Proxy Statement for our 2021 Annual
Meeting of Stockholders, which is expected to be filed in June 2021.
120
Table of Contents
Item 15 - Exhibits, Financial Statement Schedules
PART IV
(a)1.
Financial Statements:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of February 27, 2021 and February 29, 2020
Consolidated Statements of Operations and Comprehensive Income for the years ended February
27, 2021, February 29, 2020 and February 23, 2019
Consolidated Statements of Cash Flows for the years ended February 27, 2021, February 29, 2020
and February 23, 2019
Consolidated Statements of Stockholders' Equity for the years ended February 27, 2021, February
29, 2020 and February 23, 2019
Notes to Consolidated Financial Statements
Page
63
66
67
69
70
71
(a)2.
Financial Statement Schedules:
There are no Financial Statement Schedules included in this filing for the reason that they are not applicable or are
not required or the information is included elsewhere in this Form 10-K.
(a)3.&(b) Exhibits:
121
Table of Contents
Exhibit
No.
3.1
3.1.1
3.2
3.3
3.3.1
3.4
3.4.1
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.10.1
Description
Amended and Restated Certificate of Incorporation of Albertsons Companies, Inc. (incorporated by reference to
Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on June 9, 2020)
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Albertsons Companies, Inc.
(incorporated by reference to Exhibit 3.1.1 to the Company's Registration Statement on Form S-1 filed with the SEC
on June 18, 2020)
Amended and Restated Bylaws of Albertsons Companies, Inc. (incorporated by reference to Exhibit 3.3 to the
Company's Current Report on Form 8-K filed with the SEC on June 30, 2020)
Certificate of Designations of 6.75% Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.2
to the Company's Current Report on Form 8-K filed with the SEC on June 9, 2020)
Certificate of Amendment to the Certificate of Designations of 6.75% Series A Convertible Preferred Stock
(incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on June
30, 2020)
Certificate of Designations of 6.75% Series A-1 Convertible Preferred Stock (incorporated by reference to Exhibit 3.3
to the Company's Current Report on Form 8-K filed with the SEC on June 9, 2020)
Certificate of Amendment to the Certificate of Designations of 6.75% Series A-1 Convertible Preferred Stock
(incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed with the SEC on June
30, 2020)
Stockholders' Agreement by and among Albertsons Companies, Inc. and holders of stock of Albertsons Companies,
Inc. signatory thereto (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed
with the SEC on June 30, 2020)
Registration Rights Agreement by and among Albertsons Companies, Inc. and the other parties thereto (incorporated
by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the SEC on June 9, 2020)
Form of Lock-Up Agreement by and among Albertsons Companies, Inc. and the other parties thereto (incorporated
by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-1 filed with the SEC on June 18,
2020)
Indenture, dated September 10, 1997, between Safeway Inc., and the Bank of New York, as trustee (incorporated by
reference to Exhibit 4.1 to the Albertsons Companies, LLC's Registration Statement on Form S-4 filed with the SEC
on May 19, 2017)
Form of Officers' Certificate establishing the terms of Safeway Inc.'s 4.75% Notes due 2021, including the form of
Notes (incorporated by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-1 filed with the
SEC on July 8, 2015)
Form of Officers' Certificate establishing the terms of Safeway Inc.'s 7.45% Senior Debentures due 2027, including
the form of Notes (incorporated by reference to Exhibit 4.6 to the Albertsons Companies, LLC's Registration
Statement on Form S-4 filed with the SEC on May 19, 2017)
Form of Officers' Certificate establishing the terms of Safeway Inc.'s 7.25% Debentures due 2031, including the form
of Notes (incorporated by reference to Exhibit 4.7 to the Albertsons Companies, LLC's Registration Statement on
Form S-4 filed with the SEC on May 19, 2017)
Indenture, dated May 1, 1992, between New Albertson's, Inc. (as successor to Albertson's, Inc.) and U.S. Bank Trust
National Association (as successor to Morgan Guaranty Trust Company of New York), as trustee (as supplemented by
Supplemental Indenture No. 1, dated as of May 7, 2004; Supplemental Indenture No. 2, dated as of June 1, 2006;
Supplemental Indenture No. 3, dated as of December 29, 2008 and Supplemental Indenture No. 4, dated as of
December 3, 2017) (incorporated by reference to Exhibit 4.10 to the Company's Registration Statement on Form S-4
filed with the SEC on April 6, 2018)
Indenture, dated May 1, 1995, between American Stores Company, LLC and Wells Fargo Bank, National Association
(as successor to The First National bank of Chicago), as trustee (as further supplemented) (incorporated by reference
to Exhibit 4.11 to the Albertsons Companies, LLC's Registration Statement on Form S-4 filed with the SEC on May
19, 2017)
Indenture, dated as of August 9, 2016, by and among Albertsons Companies, LLC, New Albertson's, Inc., Safeway
Inc. and Albertson's LLC (collectively, the "Issuers"), certain subsidiaries of the Issuers, as guarantors, and
Wilmington Trust, National Association, as trustee with respect to the 5.750% Senior Notes due 2025 (incorporated
by reference to Exhibit 4.18 to the Albertsons Companies, LLC's Registration Statement on Form S-4 filed with the
SEC on May 19, 2017)
First Supplemental Indenture, dated as of December 23, 2016, by and among Albertsons Companies, LLC, New
Albertson's, Inc., Safeway Inc. and Albertson's LLC (collectively, the "Issuers"), certain subsidiaries of the Issuers, as
guarantors, and Wilmington Trust, National Association, as trustee with respect to the 5.750% Senior Notes due 2025
(incorporated by reference to Exhibit 4.20 to the Albertsons Companies, LLC's Registration Statement on Form S-4
filed with the SEC on May 19, 2017)
122
Table of Contents
Exhibit
No.
4.10.2
4.10.3
4.10.4
4.10.5
4.10.6
4.10.7
4.10.8
4.11
4.11.1
4.11.2
4.12
4.12.1
4.13
4.13.1
Description
Second Supplemental Indenture, dated as of April 21, 2017, by and among Albertsons Companies, LLC, New
Albertson's, Inc., Safeway Inc. and Albertson's LLC (collectively, the "Issuers"), certain subsidiaries of the Issuers, as
guarantors, and Wilmington Trust, National Association, as trustee with respect to the 5.750% Senior Notes due 2025
(incorporated by reference to Exhibit 4.22 to the Albertsons Companies, LLC's Registration Statement on Form S-4
filed with the SEC on May 19, 2017)
Third Supplemental Indenture, dated as of May 5, 2017, by and among Albertsons Companies, LLC, New
Albertson's, Inc., Safeway Inc. and Albertson's LLC, the additional issuers, and Wilmington Trust, National
Association, as trustee with respect to the 5.750% Senior Notes due 2025 (incorporated by reference to Exhibit 4.24
to the Albertsons Companies, LLC's Registration Statement on Form S-4 filed with the SEC on May 19, 2017)
Fourth Supplemental Indenture, dated as of December 3, 2017, by and among Albertsons Companies, LLC, New
Albertsons L.P., Safeway Inc. and Albertson's LLC, the additional issuers, and Wilmington Trust, National
Association, as trustee with respect to the 5.750% Senior Notes due 2025 (incorporated by reference to Exhibit 4.13.4
to the Company's Registration Statement on Form S-4 filed with the SEC on April 6, 2018)
Fifth Supplemental Indenture, dated as of February 25, 2018, by and among Albertsons Companies, Inc., New
Albertsons L.P., Safeway Inc. and Albertson's LLC, the additional issuers, and Wilmington Trust, National
Association, as trustee with respect to the 5.750% Senior Notes due 2025 (incorporated by reference to Exhibit 4.13.5
to the Company's Registration Statement on Form S-4 filed with the SEC on April 6, 2018)
Sixth Supplemental Indenture, dated as of November 16, 2018, by and among Albertsons Companies, Inc., New
Albertsons L.P., Safeway Inc. and Albertson's LLC, the additional issuers, and Wilmington Trust, National
Association, as trustee with respect to the 5.750% Senior Notes due 2025 (incorporated by reference to Exhibit 4.12.6
to the Company's Registration Statement on Form S-1 filed with the SEC on March 6, 2020)
Seventh Supplemental Indenture, dated as of April 17, 2019, by and among Albertsons Companies, Inc., New
Albertsons L.P., Safeway Inc. and Albertson's LLC, the additional issuers, and Wilmington Trust, National
Association, as trustee with respect to the 5.750% Senior Notes due 2025 (incorporated by reference to Exhibit 4.10.7
to the Company's Annual Report on Form 10-K filed with the SEC on April 24, 2019)
Eighth Supplemental Indenture, dated as of June 9, 2020, by and among Albertsons Companies, Inc., New Albertsons
L.P., Safeway Inc. and Albertson's LLC, the additional issuers, and Wilmington Trust, National Association, as trustee
with respect to the 5.750% Senior Notes due 2025 (incorporated by reference to Exhibit 4.12.8 to the Company's
Registration Statement on Form S-1 filed with the SEC on June 10, 2020)
Indenture, dated as of February 5, 2019, by and among Albertsons Companies, Inc., Safeway Inc., New Albertsons,
L.P., Albertson's LLC, the guarantors party thereto from time to time, and Wilmington Trust, National Association, as
Trustee with respect to the 7.5% Senior Notes due 2026 (incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K filed with the SEC on February 5, 2019)
First Supplemental Indenture, dated as of April 17, 2019, by and among Albertsons Companies, Inc., Safeway Inc.,
New Albertsons, L.P., Albertson's LLC, the guarantors party thereto from time to time, and Wilmington Trust,
National Association, as trustee with respect to the 7.5% Senior Notes due 2026 (incorporated by reference to Exhibit
4.11.1 to the Company's Annual Report on Form 10-K filed with the SEC on April 24, 2019)
Second Supplemental Indenture, dated as of June 9, 2020, by and among Albertsons Companies, Inc., Safeway Inc.,
New Albertsons, L.P., Albertson's LLC, the guarantors party thereto from time to time, and Wilmington Trust,
National Association, as trustee with respect to the 7.5% Senior Notes due 2026 (incorporated by reference to Exhibit
4.13.2 to the Company's Registration Statement on Form S-1 filed with the SEC on June 10, 2020)
Indenture, dated as of August 15, 2019, by and among Albertsons Companies, Inc., Safeway Inc., New Albertsons,
L.P., Albertson's LLC, the guarantors party thereto from time to time, and Wilmington Trust, National Association, as
Trustee with respect to the 5.875% Senior Notes due 2028 (incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K filed with the SEC on August 15, 2019)
First Supplemental Indenture, dated as of June 9, 2020, by and among Albertsons Companies, Inc., Safeway Inc.,
New Albertsons, L.P., Albertson's LLC, the guarantors party thereto from time to time, and Wilmington Trust,
National Association, as trustee with respect to the 5.875% Senior Notes due 2028 (incorporated by reference to
Exhibit 4.14.1 to the Company's Registration Statement on Form S-1 filed with the SEC on June 10, 2020)
Indenture, dated as of November 22, 2019, by and among Albertsons Companies, Inc., Safeway Inc., New
Albertsons, L.P., Albertson's LLC, the guarantors party thereto from time to time, and Wilmington Trust, National
Association, as Trustee with respect to the 4.625% Senior Notes due 2027 (incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-K filed with the SEC on November 22, 2019)
First Supplemental Indenture, dated as of June 9, 2020, by and among Albertsons Companies, Inc., Safeway Inc.,
New Albertsons, L.P., Albertson's LLC, the guarantors party thereto from time to time, and Wilmington Trust,
National Association, as trustee with respect to the 4.625% Senior Notes due 2027 (incorporated by reference to
Exhibit 4.15.1 to the Company's Registration Statement on Form S-1 filed with the SEC on June 10, 2020)
123
Table of Contents
Exhibit
No.
4.14
4.14.1
4.15
4.15.1
4.16
4.17
Description
Indenture, dated as of February 5, 2020, by and among Albertsons Companies Inc., Safeway Inc., New Albertsons,
L.P., Albertson's LLC, the guarantors party thereto from time to time, and Wilmington Trust, National Association, as
Trustee, with respect to the 3.50% Senior Notes due 2023 (incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K filed with the SEC on February 5, 2020)
First Supplemental Indenture, dated as of June 9, 2020, by and among Albertsons Companies, Inc., Safeway Inc.,
New Albertsons, L.P., Albertson's LLC, the guarantors party thereto from time to time, and Wilmington Trust,
National Association, as trustee with respect to the 3.50% Senior Notes due 2023 (incorporated by reference to
Exhibit 4.16.1 to the Company's Registration Statement on Form S-1 filed with the SEC on June 10, 2020)
Indenture, dated as of February 5, 2020, by and among Albertsons Companies Inc., Safeway Inc., New Albertsons,
L.P., Albertson's LLC, the guarantors party thereto from time to time, and Wilmington Trust, National Association, as
Trustee, with respect to the 4.875% Senior Notes due 2030 (incorporated by reference to Exhibit 4.3 to the
Company's Current Report on Form 8-K filed with the SEC on February 5, 2020)
First Supplemental Indenture, dated as of June 9, 2020, by and among Albertsons Companies, Inc., Safeway Inc.,
New Albertsons, L.P., Albertson's LLC, the guarantors party thereto from time to time, and Wilmington Trust,
National Association, as trustee with respect to the 4.875% Senior Notes due 2030 (incorporated by reference to
Exhibit 4.17.1 to the Company's Registration Statement on Form S-1 filed with the SEC on June 10, 2020)
Indenture, dated as of August 31, 2020, by and among Albertsons Companies, Inc., Safeway Inc., New Albertsons
L.P., Albertson's LLC, the guarantors party thereto from time to time, and Wilmington Trust, National Association, as
Trustee, with respect to the 3.250% Senior Notes due 2026 (incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K filed with the SEC on August 31, 2020)
Indenture, dated as of August 31, 2020, by and among Albertsons Companies, Inc., Safeway Inc., New Albertsons
L.P., Albertson's LLC, the guarantors party thereto from time to time, and Wilmington Trust, National Association, as
Trustee, with respect to the 3.500% Senior Notes due 2029 (incorporated by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K filed with the SEC on August 31, 2020)
4.18* Description of Registrant's Securities
10.1
10.1.1
10.2
10.3†
10.4†
10.5†
Third Amended and Restated Asset-Based Revolving Credit Agreement, dated as of November 16, 2018, among
Albertsons Companies, Inc., as lead borrower, the subsidiary borrowers and guarantors from time to time party
thereto, the lenders from time to time party thereto and Bank of America, N.A. as administrative and collateral agent
(incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on
November 16, 2018)
Amendment No. 1, dated as of May 20, 2020, to the Third Amended and Restated Asset-Based Revolving Credit
Agreement, dated as of November 16, 2018, among Albertsons Companies, Inc., as lead borrower, the subsidiary
borrowers and guarantors from time to time party thereto and Bank of America, N.A. as administrative and collateral
agent (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on
May 27, 2020)
Amendment No. 8, dated as of August 15, 2019, to the Second Amended and Restated Term Loan Agreement, dated
as of August 25, 2014 and effective as of January 30, 2015, among Albertsons Companies, Inc., Albertson's LLC, the
co-borrowers party thereto, the guarantors party thereto, the parties thereto from time to time as lenders and Credit
Suisse AG, Cayman Islands Branch, in its capacity as administrative agent and collateral agent (incorporated by
reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on August 15, 2019)
Letter Agreement, dated September 21, 2015, between Albertsons Companies, Inc. and Sharon Allen (incorporated by
reference to Exhibit 10.19 to the Albertsons Companies, LLC's Registration Statement on Form S-4 filed with the
SEC on May 19, 2017)
Letter Agreement, dated September 21, 2015, between Albertsons Companies, Inc. and Steven A. Davis (incorporated
by reference to Exhibit 10.20 to the Albertsons Companies, LLC's Registration Statement on Form S-4 filed with the
SEC on May 19, 2017)
Employment Agreement, dated March 25, 2019, between Albertsons Companies, Inc. and Vivek Sankaran
(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on
March 29, 2019)
10.6† Emeritus Agreement, dated March 25, 2019, between Albertsons Companies, Inc. and Robert G. Miller (incorporated
by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on March 29, 2019)
10.7†
Emeritus Agreement, dated December 16, 2019, between Albertsons Companies, Inc. and Robert G. Miller
(incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q filed with the SEC on
January 8, 2020)
124
Table of Contents
Exhibit
No.
10.8†
10.9†
Description
Amended and Restated Employment Agreement, effective as of April 25, 2019, by and between Albertsons
Companies, Inc. and James L. Donald (incorporated by reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K filed with the SEC on May 22, 2019)
Amended and Restated Employment Agreement, dated May 1, 2019, between Albertsons Companies, Inc. and Robert
Dimond (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the
SEC on January 8, 2020)
10.10†
Amended and Restated Employment Agreement, dated May 1, 2019, between Albertsons Companies, Inc. and Shane
Sampson (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed with the
SEC on January 8, 2020)
10.11†
10.12†
10.13†
10.14†
10.15†
Amended and Restated Employment Agreement, dated May 1, 2019, between Albertsons Companies, Inc. and Anuj
Dhanda (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed with the
SEC on January 8, 2020)
Amended and Restated Employment Agreement, dated May 1, 2019, between Albertsons Companies, Inc. and Susan
Morris (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q filed with the
SEC on January 8, 2020)
Separation Agreement, dated as of August 21, 2019, by and between Albertsons Companies, Inc. and Shane Sampson
(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on
August 22, 2019)
Employment Agreement, dated August 19, 2019, between Albertsons Companies, Inc. and Michael Theilmann
(incorporated by reference to Exhibit 10.20 to the Company's Registration Statement on Form S-1 filed with the SEC
on March 6, 2020)
10.19.1
10.19
No. 3 to the Company's Registration Statement on Form S-1 filed with the SEC on June 18, 2020)
Amended and Restated Employment Agreement, dated December 1, 2019, between Albertsons Companies, Inc. and
Christine Rupp (incorporated by reference to Exhibit 10.21 to the Company's Registration Statement on Form S-1
filed with the SEC on March 6, 2020)
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.22 to the Company's Registration
Statement on Form S-1 filed with the SEC on March 6, 2020)
10.16
10.17† Albertsons Companies, Inc. 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.23 to Amendment
10.18† Albertsons Companies, Inc. Restricted Stock Unit Plan (incorporated by reference to Exhibit 10.24 to Amendment
No. 2 to the Company's Registration Statement on Form S-1 filed with the SEC on June 10, 2020)
Amended and Restated Investment Agreement by and among Albertsons Companies, Inc. and the investors party
thereto, dated June 9, 2020 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K
filed with the SEC on June 9, 2020)
Amendment No.1, dated as of June 25, 2020, to the Amended and Restated Investment Agreement, dated as of June
9, 2020, by and among Albertsons Companies, Inc. and each of the investors named therein (incorporated by
reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on June 30, 2020)
Amended and Restated Real Estate Agreement by and between ACI Real Estate Company LLC and AL RE Investor
Holdings, LLC, dated June 9, 2020 (incorporated by reference to Exhibit 10.2 to the Company's Current Report on
Form 8-K filed with the SEC on June 9, 2020)
Unitary Master Sublease between ACI Real Estate Company LLC, as Landlord, and the entities set forth therein, as
Tenant, dated June 9, 2020 (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K
filed with the SEC on June 9, 2020)
Share Repurchase Agreement, dated as of September 14, 2020, by and between Albertsons Companies, Inc. and
Gabriel Assets, LLC (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed
with the SEC on September 15, 2020)
Code of Ethics of the Registrant (incorporated by reference to Exhibit 14.1 to the Company's Annual Report on Form
10-K filed with the SEC on May 13, 2020)
Schedule of Subsidiaries of Albertsons Companies, Inc.
21.1*
23.1* Consent of Deloitte and Touche LLP
31.1* Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2* Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1** Certification of the Principal Executive Officer and the Principal Financial Officer pursuant to Section 906 of the
10.20
10.21
10.22
14.1
Sarbanes-Oxley Act of 2002
125
Table of Contents
Exhibit
No.
Description
101.INS Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
The cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*Filed herewith.
** Furnished herewith.
† Constitutes a compensatory plan or arrangement required to be filed with this Form 10-K.
126
Table of Contents
Item 16 - Summary
None.
127
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: April 28, 2021
Albertsons Companies, Inc.
By:
/s/ Vivek Sankaran
Vivek Sankaran
President, Chief Executive Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant in the capacities and on the dates indicated.
Signature
Title
/s/ Vivek Sankaran
Vivek Sankaran
President, Chief Executive Officer and Director
(Principal Executive Officer)
Date
April 28, 2021
/s/ Robert B. Dimond
Robert B. Dimond
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
April 28, 2021
/s/ Robert B. Larson
Robert B. Larson
/s/ James L. Donald
James L. Donald
/s/ Chan Galbato
Chan Galbato
/s/ Sharon L. Allen
Sharon L. Allen
/s/ Shant Babikian
Shant Babikian
/s/ Steven A. Davis
Steven A. Davis
/s/ Kim Fennebresque
Kim Fennebresque
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
April 28, 2021
Co-Chairman
April 28, 2021
Co-Chairman
April 28, 2021
April 28, 2021
April 28, 2021
April 28, 2021
April 28, 2021
Director
Director
Director
Director
128
Table of Contents
Signature
/s/ Allen M. Gibson
Allen M. Gibson
/s/ Hersch Klaff
Hersch Klaff
/s/ Jay L. Schottenstein
Jay L. Schottenstein
/s/ Alan H. Schumacher
Alan H. Schumacher
/s/ B. Kevin Turner
B. Kevin Turner
/s/ Mary Beth West
Mary Beth West
/s/ Scott Wille
Scott Wille
Title
Director
Director
Director
Director
Date
April 28, 2021
April 28, 2021
April 28, 2021
April 28, 2021
Vice Chairman
April 28, 2021
Director
Director
April 28, 2021
April 28, 2021
129
page intentionally left blank
Corporate Leadership
Board of Directors
Vivek Sankaran
Vivek Sankaran
President & Chief Executive Officer
President, Chief Executive Officer & Director
Anuj Dhanda
EVP, Chief Information Officer
Bob Dimond
EVP, Chief Financial Officer
Justin Ewing
James L. Donald
Co-Chair
Chan Galbato
Co-Chair
Sharon L. Allen
EVP, Real Estate & Corporate Development
Director
Susan Morris
EVP, Chief Operations Officer
Juliette Pryor
EVP, General Counsel & Secretary
Shant Babikian
Director
Steven A. Davis
Director
Chris Rupp
Kim Fennebresque
EVP, Chief Customer & Digital Officer
Director
Mike Theilmann
EVP, Chief Human Resources Officer
Geoff White
EVP, Chief Merchandising Officer
As of February 27, 2021
Allen M. Gibson
Director
Hersch Klaff
Director
Jay L. Schottenstein
Director
Alan H. Schumacher
Director
B. Kevin Turner
Vice Chairman
Mary Beth West
Director
Scott Wille
Director
Corporate Information
EXECUTIVE OFFICES
Mailing address:
Albertsons Companies, Inc.
250 Parkcenter Blvd.
Boise, ID 83706
Internet address:
Albertsons Companies'
Website can be accessed at
albertsonscompanies.com.
We do not incorporate the
information on our Website
into this annual report, and you
should not consider it a part of
this annual report.
ANNUAL MEETING
The 2021 Annual Meeting of
Stockholders will be held on
August 5, 2021. A formal Notice
of Annual Meeting and Proxy
Statement and proxy card
for the 2021 Annual Meeting
have been made available to
stockholders.
STOCK EXCHANGE LISTING
The Company’s common stock,
which trades under the symbol
ACI, is listed on the New York
Stock Exchange..
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Boise, ID
STOCK TRANSFER AGENT INFORMATION
American Stock Transfer & Trust Company, LLC
6201 15th Avenue, Brooklyn, New York 11219
Toll Free Number: 1-800-937-5449
Website: www.astfinancial.com
INVESTOR INQUIRIES
Communication regarding investor records, including changes of
address or ownership, should be directed to the company’s transfer
agent, American Stock Transfer, as listed above.
Investors, security analysts and members of the media should
direct their financial inquiries to our Investor Relations Department
at Investor_relation@albertsons.com.
To access or obtain financial reports, please visit our Website at
albertsonscompanies.com, write to our Investor Relations Department
at our executive offices or at Investor_relation@albertsons.com.
TRUSTEES AND PAYING AGENTS
3.500% ACI Senior Unsecured Notes due 2023
5.750% ACI Senior Unsecured Notes due 2025
3.250% ACI Senior Unsecured Notes due 2026
7.500% ACI Senior Unsecured Notes due 2026
4.625% ACI Senior Unsecured Notes due 2027
5.875% ACI Senior Unsecured Notes due 2028
3.500% ACI Senior Unsecured Notes due 2029
4.875% ACI Senior Unsecured Notes due 2030
4.750% Safeway Notes due 2021
7.450% Safeway Notes due 2027
7.250% Safeway Notes due 2031
7.750% NALP Notes due 2026
7.450% NALP Notes due 2029
8.700% NALP Notes due 2030
8.000% NALP Notes due 2031
Wilmington Trust, N.A.
50 South Sixth Street
Suite 1290
Minneapolis, MN 55402
US Bank, N.A.
U.S. Bank Global Corporate
Trust Services
One Federal Street,
Boston, MA 02110
The Bank of New York Mellon
Corporate Trust
2 North LaSalle Street
Suite 700
Chicago, IL 60602
312-827-8639
Wells Fargo Corporate Trust
Wells Fargo, CTSO Mail
Operations
600 S 4th Street, 7th floor
Minneapolis, MN 55415
MAC N9300-070
FORWARD-LOOKING STATEMENTS
This annual report and letter to shareholders contains forward-looking
statements. For a description of the risks and uncertainties that could cause
actual results to differ from anticipated results, please see the “Forward-
Looking Statements” and “Risk Factors” sections of our Annual Report on
Form 10-K.
EEO-1 REPORT
As an equal opportunity employer, Albertsons Companies, Inc. values and
actively supports diversity in the workplace. A copy of the company’s 2020
summary EEO-1 report, filed with the federal Equal Employment Opportunity
Commission, is available upon request at our executive offices.
Protecting Our Future
By being locally great and nationally strong, to make
a meaningful difference for our people, planet,
products, and communities. It's part of our history,
and a passion for our future.
Minimizing
our impact
on the planet
while meeting
the demands
of an evolving
marketplace
PLANET AND PRODUCTS
Completed
800+ energy
efficiency
projects that
will annually
save 2M+
metric tons of
CO2e
100% of
Own Brands
packaging
will be
recyclable,
reusable or
compostable
by 2025
Committed
to setting
a Science-
Based Target
to reduce
carbon
emissions
100% of O
Organics
coffee is
Fair Trade
Certified
Creating
vibrant
communities
where we live,
work, and
play
PEOPLE AND COMMUNITY
120+ interactive “Leading With
Inclusion,” discussions building
an inclusive leadership team for
4K+ leaders
70+ Women were recognized
for leadership by industry
publications
$5 million donated
to Social Justice &
Equality
$260M in
cash & food
donations
Over 5 million
Vaccinations as
of June 7, 2021
albertsonscompanies.com
250 Parkcenter Blvd.
Boise, ID 83706