Albertsons Companies, Inc 10-Q for FY2022 Q1
Albertsons Companies, Inc. (ACI)
10-Q
2021-07-29
For: 2021-06-19
View Original
Added on
April 07, 2026
About this 10-Q
Albertsons Companies, Inc filed this 10-Q on July 29, 2021, covering the quarter ended June 19, 2021 (FY2022 Q1).
Headline figures
Quarter ended June 19, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $21.27B
- down 6.5% from $22.75B a year earlier
- Net income
- $444.8M
- down 24.1% from net income of $586.2M a year earlier
- Diluted EPS
- $0.78
- down 22.0% from $1.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended June 19, 2021
OR
For the transition period from _____ to _____
Commission File Number: 001-39350
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(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 pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
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 (§232.405 of this chapter) 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 | ☐ | 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of July 28, 2021, the registrant had 466,535,671 shares of Class A common stock, par value $0.01 per share, outstanding.
Albertsons Companies, Inc. and Subsidiaries
| Page | ||||||||
PART I - FINANCIAL INFORMATION
Item 1 - Condensed Consolidated Financial Statements (unaudited)
Albertsons Companies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in millions, except share data)
(unaudited)
| June 19, 2021 | February 27, 2021 | |||||||||||||
| ASSETS | ||||||||||||||
| Current assets | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Receivables, net | ||||||||||||||
| Inventories, net | ||||||||||||||
| 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 maturities of operating lease obligations | ||||||||||||||
| Other current liabilities | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Long-term debt and finance lease obligations | ||||||||||||||
| Long-term operating lease obligations | ||||||||||||||
| Deferred income taxes | ||||||||||||||
| Other long-term liabilities | ||||||||||||||
| Commitments and contingencies | ||||||||||||||
Series A convertible preferred stock, $ | ||||||||||||||
Series A-1 convertible preferred stock, $ | ||||||||||||||
| STOCKHOLDERS' EQUITY | ||||||||||||||
Undesignated preferred stock, $ | ||||||||||||||
Class A common stock, $ | ||||||||||||||
Class A-1 convertible common stock, $ | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
Treasury stock, at cost, | ( | ( | ||||||||||||
| Accumulated other comprehensive income | ||||||||||||||
| Retained earnings | ||||||||||||||
| Total stockholders' equity | ||||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | ||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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Albertsons Companies, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income
(in millions, except per share data)
(unaudited)
| 16 weeks ended | |||||||||||||||||||||||
| June 19, 2021 | June 20, 2020 | ||||||||||||||||||||||
| Net sales and other revenue | $ | $ | |||||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Selling and administrative expenses | |||||||||||||||||||||||
| Loss on property dispositions and impairment losses, net | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||
| Other (income) expense, net | ( | ||||||||||||||||||||||
Income before income taxes | |||||||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||
| Net income | $ | $ | |||||||||||||||||||||
| Other comprehensive income, net of tax | |||||||||||||||||||||||
| Recognition of pension gain | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Other comprehensive income | $ | $ | |||||||||||||||||||||
| 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 | |||||||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4
Albertsons Companies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
| 16 weeks ended | |||||||||||
| June 19, 2021 | June 20, 2020 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Loss on property dispositions and impairment losses, net | |||||||||||
| Depreciation and amortization | |||||||||||
| Operating lease right-of-use assets amortization | |||||||||||
| LIFO expense | |||||||||||
| Deferred income tax | ( | ( | |||||||||
| Contributions to pension and post-retirement benefit plans, net of (income) expense | ( | ( | |||||||||
| (Gain) loss on interest rate swaps and commodity hedges, net | ( | ||||||||||
| Equity-based compensation expense | |||||||||||
| Other | ( | ( | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Receivables, net | ( | ( | |||||||||
| Inventories, net | |||||||||||
| Accounts payable, accrued salaries and wages and other accrued liabilities | ( | ||||||||||
| Operating lease 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 payments for lease buyouts | ( | ( | |||||||||
| Proceeds from sale of long-lived 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 | ( | ( | |||||||||
| Dividends paid on common stock | ( | ||||||||||
| Dividends paid on convertible preferred stock | ( | ||||||||||
| 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 units | ( | ( | |||||||||
| Other financing activities | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Net increase 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 | $ | $ | |||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
5
Albertsons Companies, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders' Equity
(in millions, except share data)
(unaudited)
| Class A Common Stock | Additional paid in capital | Treasury Stock | Accumulated other comprehensive income | Retained earnings | Total stockholders' equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of February 27, 2021 | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| Equity-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Shares issued and employee tax withholding on vesting of restricted stock units | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared on common stock | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Dividends accrued on convertible preferred stock | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other activity | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Balance as of June 19, 2021 | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| Class A Common Stock | Additional paid in capital | Treasury Stock | Accumulated other comprehensive loss | Retained earnings | Total stockholders' equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of February 29, 2020 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock to Company's parents | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Equity-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Employee tax withholding on vesting of restricted stock units | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Dividends accrued on convertible preferred stock | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Balance as of June 20, 2020 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
6
Albertsons Companies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant Accounting Policies
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 2021, 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 2021 relative to the fiscal 2021 performance target.
7
Equity-based compensation expense recognized in the Condensed Consolidated Statements of Operations (in millions):
| 16 weeks ended | ||||||||||||||
| June 19, 2021 | June 20, 2020 | |||||||||||||
| RSUs | $ | $ | ||||||||||||
| RSAs | ||||||||||||||
| Total equity-based compensation expense | $ | $ | ||||||||||||
| Total related tax benefit | $ | $ | ||||||||||||
On May 12, 2021, the Company issued 3.2 million RSUs to its employees and directors, of which 2.2 million were deemed granted. The 2.2 million issued and granted awards consist of 1.7 million RSUs that have solely time-based vesting and 0.5 million performance-based RSUs that were deemed granted upon the establishment of the fiscal 2021 performance target and that would vest upon both the achievement of such performance target and continued service through the vesting period. Additionally, 1.2 million previously issued performance-based RSUs and 0.3 million previously issued performance-based RSAs were deemed granted in fiscal 2021 upon the establishment of the fiscal 2021 annual performance target and that would vest upon both the achievement of such performance target and continued service through the vesting period.
As of June 19, 2021, there was $119.4 million of unrecognized costs related to 11.1 million unvested granted RSUs. That cost is expected to be recognized over a weighted average period of 1.9 years. As of June 19, 2021, there was $9.2 million of unrecognized costs related to 1.0 million unvested granted RSAs. That cost is expected to be recognized over a weighted average period of 1.9 years.
8
Disaggregated Revenues
The following table represents sales revenue by type of similar product (dollars in millions):
| 16 weeks ended | |||||||||||||||||||||||||||||||||||||||||||||||
| June 19, 2021 | June 20, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| Amount (1) | % of Total | Amount (1) | % of Total | ||||||||||||||||||||||||||||||||||||||||||||
| Non-perishables (2) | $ | % | $ | % | |||||||||||||||||||||||||||||||||||||||||||
| Perishables (3) | |||||||||||||||||||||||||||||||||||||||||||||||
| Pharmacy | |||||||||||||||||||||||||||||||||||||||||||||||
| Fuel | |||||||||||||||||||||||||||||||||||||||||||||||
| Other (4) | |||||||||||||||||||||||||||||||||||||||||||||||
Net sales and other revenue | $ | % | $ | % | |||||||||||||||||||||||||||||||||||||||||||
(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.
NOTE 2 - 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; and
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.
9
The following table presents assets and liabilities which were measured at fair value on a recurring basis as of June 19, 2021 (in millions):
| Fair Value Measurements | ||||||||||||||||||||||||||
| Total | Quoted prices in active markets for identical assets (Level 1) | Significant observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Short-term investments (1) | $ | $ | $ | $ | ||||||||||||||||||||||
| Non-current investments (2) | ||||||||||||||||||||||||||
| Derivative contracts (3) | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Derivative contracts (4) | $ | $ | $ | $ | ||||||||||||||||||||||
| 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 energy hedges. Included in Other assets.
(4) Primarily relates to interest rate swaps. Included in Other current liabilities.
The following table presents assets and liabilities which were measured at fair value on a recurring basis as of February 27, 2021 (in millions):
| Fair Value Measurements | ||||||||||||||||||||||||||
| Total | Quoted prices in active markets for identical assets (Level 1) | Significant observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||||||||||||||
| 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 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 June 19, 2021, the fair value of total debt was $8,178.2 million compared to the carrying value of
10
$7,815.2 million, excluding debt discounts and deferred financing costs. As of February 27, 2021, the fair value of total debt was $8,150.7 million compared to the carrying value of $7,815.5 million, excluding debt discounts and deferred financing costs.
Assets Measured at Fair Value on a Non-Recurring Basis
NOTE 3 - DERIVATIVE FINANCIAL INSTRUMENTS
The aggregate notional amount of the Company's Swaps as of June 19, 2021 and February 27, 2021 were $1,653.0
Activity related to interest rate swaps consisted of the following (in millions):
| 16 weeks ended | ||||||||||||||||||||
| June 19, 2021 | June 20, 2020 | Location of loss recognized from derivatives | ||||||||||||||||||
| Loss on undesignated portion of interest rate swaps | $ | ( | $ | ( | Other (income) expense, net | |||||||||||||||
NOTE 4 - LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS
The Company's long-term debt and finance lease obligations as of June 19, 2021 and February 27, 2021, net of unamortized debt discounts of $43.8 million and $44.8 million, respectively, and deferred financing costs of $66.2 million and $69.8 million, respectively, consisted of the following (in millions):
| June 19, 2021 | February 27, 2021 | ||||||||||
Senior Unsecured Notes due 2023 to 2030, interest rate range of | $ | $ | |||||||||
Safeway Inc. Notes due 2021 to 2031, interest rate range of | |||||||||||
New Albertsons L.P. Notes due 2026 to 2031, interest rate range of | |||||||||||
| Other financing obligations | |||||||||||
| Mortgage notes payable, secured | |||||||||||
| Finance lease obligations | |||||||||||
| Total debt | |||||||||||
| Less current maturities | ( | ( | |||||||||
| Long-term portion | $ | $ | |||||||||
ABL Facility
As of June 19, 2021 and February 27, 2021, there were no 349.1 million and $354.6 million, respectively.
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NOTE 5 - EMPLOYEE BENEFIT PLANS
Pension and Other Post-Retirement Benefits
The following tables provide the components of net pension and post-retirement (income) expense (in millions):
| 16 weeks ended | |||||||||||||||||||||||
| Pension | Other post-retirement benefits | ||||||||||||||||||||||
| June 19, 2021 | June 20, 2020 | June 19, 2021 | June 20, 2020 | ||||||||||||||||||||
| Estimated return on plan assets | $ | ( | $ | ( | $ | $ | |||||||||||||||||
| Service cost | |||||||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Amortization of prior service cost | |||||||||||||||||||||||
| Amortization of net actuarial loss (gain) | ( | ( | |||||||||||||||||||||
| (Income) expense, net | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
The Company contributed $2.0 million and $54.6 million to its defined pension plans and post-retirement benefit plans during the 16 weeks ended June 19, 2021 and June 20, 2020, respectively. The Company currently anticipates contributing an additional $46.8 million to meet the minimum funding requirements for these plans for the remainder of fiscal 2021 but may make additional discretionary contributions that are determined to be beneficial to the Company.
Defined Contribution Plans and Supplemental Retirement Plans
Total contributions expensed for defined contribution plans (401(k) plans) were $16.2 million and $21.8 million for the 16 weeks ended June 19, 2021 and June 20, 2020, respectively.
Multiemployer Pension Plans
ARP Act: The American Rescue Plan Act ("ARP Act") was signed into law on March 11, 2021. The ARP Act 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 projected by the Pension Benefit Guaranty Corporation ("PBGC") to pay pension benefits through the plan year ending 2051. On July 9, 2021, the PBGC issued its interim final rule with respect to the special financial assistance program. The PBGC interim final rule provides direction on the application requirements, identifies which plans will have priority, eligibility requirements, the determination of the amount of financial assistance to be provided and establishes conditions and restrictions that apply to plans that receive the assistance. The Company is currently evaluating the interim final rule, which is subject to a 30-day comment period, including any potential impact to the Company's Excess Plan as defined in and further described in "Part II—Item 8. Financial Statements and Supplemental Data—Note 12" of the Company's Annual Report on Form 10-K for the fiscal year ended February 27, 2021.
NOTE 6 - COMMITMENTS AND CONTINGENCIES AND OFF BALANCE SHEET ARRANGEMENTS
Guarantees
California Department of Industrial Relations: On January 21, 2014, the Company entered into a Collateral Substitution Agreement with the California Self-Insurers' Security Fund to provide collateral related to certain California self-insured workers' compensation obligations pursuant to applicable regulations. The collateral not covered by the California Self-Insurers' Security Fund is covered by surety bonds for the benefit of the State of
12
California Office of Self-Insurance Plans. A portion of the surety bonds is covered by irrevocable LOCs. The collateral requirements are 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 $22.6 million as of June 19, 2021 and $40.1 million as of February 27, 2021, respectively.
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 claims or 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.
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 is probable and can be reasonably estimated. 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.
ERISA Litigation: Two lawsuits were brought against Safeway Inc. ("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 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 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, 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
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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: 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 a False Claims Act ("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 intends to 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.
In United States ex rel. Proctor v. Safeway, filed in the United States District Court for the Central District of Illinois, the relator alleges that Safeway overcharged federal government healthcare programs by not providing the federal 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. The appeal is now pending in the Seventh Circuit Court of Appeals. Oral argument is scheduled for September 9, 2021.
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 federal government healthcare programs by not providing the federal 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 federal 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 federal government, as a part of its usual and customary prices to the federal 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.
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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 80 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. Most of these cases have been stayed pending bellwether trials. At present, the most active case is a matter in New Mexico state court where we have been in active discovery and where a September 2022 trial date has been set. The MDL Court and a state court in Utah are currently considering position statements from the parties in connection with scheduling bellwether trials and it is likely that the Company may be included in one or more of those anticipated bellwether trials. The Company is vigorously defending these matters and believes that these cases are without merit. At this 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. On July 7, 2021, the parties entered into a settlement agreement for which the Company has recorded an estimated liability.
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
NOTE 7 - OTHER COMPREHENSIVE INCOME OR LOSS
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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 comprehensive income, net of tax, as of the balance sheet date. Changes in the AOCI balance by component are shown below (in millions):
| 16 weeks ended June 19, 2021 | |||||||||||||||||||||||
| Total | Pension and Post-retirement benefit plans | Other | |||||||||||||||||||||
| Beginning balance | $ | $ | $ | ||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income | |||||||||||||||||||||||
| Tax expense | ( | ( | |||||||||||||||||||||
| Current-period other comprehensive income, net of tax | |||||||||||||||||||||||
| Ending balance | $ | $ | $ | ||||||||||||||||||||
| 16 weeks ended June 20, 2020 | |||||||||||||||||||||||
| Total | Pension and Post-retirement benefit plans | Other | |||||||||||||||||||||
| Beginning balance | $ | ( | $ | ( | $ | ||||||||||||||||||
| Other comprehensive income before reclassifications | |||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income | |||||||||||||||||||||||
| Tax expense | ( | ( | ( | ||||||||||||||||||||
| Current-period other comprehensive income, net of tax | |||||||||||||||||||||||
| Ending balance | $ | ( | $ | ( | $ | ||||||||||||||||||
NOTE 8 - NET INCOME PER CLASS A COMMON SHARE
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The components of basic and diluted net income per Class A common share were as follows (in millions, except per share data):
| 16 weeks ended | |||||||||||||||||||||||
| June 19, 2021 | June 20, 2020 | ||||||||||||||||||||||
| Basic net income per Class A common share | |||||||||||||||||||||||
| Net income | $ | $ | |||||||||||||||||||||
| Accrued dividends on Convertible Preferred Stock | ( | ( | |||||||||||||||||||||
| Earnings allocated to Convertible Preferred Stock | ( | ||||||||||||||||||||||
| Net income allocated to Class A common stockholders - Basic | $ | $ | |||||||||||||||||||||
| Weighted average Class A common shares outstanding - Basic (1) | |||||||||||||||||||||||
| Basic net income per Class A common share | $ | $ | |||||||||||||||||||||
| 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) | |||||||||||||||||||||||
| Diluted net income per Class A common share | $ | $ | |||||||||||||||||||||
(1) There were 20,048 Class A common shares remaining to be issued for the 16 weeks ended June 19, 2021 compared to no Class A common shares remaining to be issued for the 16 weeks ended June 20, 2020.
(2) Reflects the number of shares of Convertible Preferred Stock issued, if converted into common stock for the period outstanding.
(3) There were no
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Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report, 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. In many cases, you can identify forward-looking statements by terms such as "may," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of these terms or other similar expressions. Forward-looking statements are based on our current expectations and assumptions about market conditions and our future operating performance which the Company believes to be reasonable at this time. The Company's results may vary significantly from quarter to quarter, and these expectations and assumptions involve risks and uncertainties, including changes in macroeconomic conditions and the Company's industry, failure to achieve anticipated synergies and cost-savings, increased rates of food price inflation or deflation and other factors, that could cause actual results or events to be materially different from those anticipated. 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. The Company undertakes no obligation to update or revise any such statements as a result of new information, future events or otherwise. 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.
As used in this Form 10-Q, unless the context otherwise requires, references to "Albertsons," the "Company," "we," "us" and "our" refer to Albertsons Companies, Inc. and, where appropriate, its subsidiaries.
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 ("RSUs") and restricted common stock ("RSAs") outstanding at the end of the period. 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 "Results of Operations" for further discussion and a reconciliation of Adjusted EBITDA, Adjusted net income and Adjusted net income per Class A common share.
EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted net income per Class A common share (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 and gross profit. These Non-GAAP Measures exclude the financial impact of items management does not consider in assessing our ongoing core operating performance, and thereby provide useful measures to analysts and investors of our operating performance on a period-to-period basis. Other companies may have different definitions of Non-GAAP Measures and provide for different
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adjustments, and comparability to our results of operations may be impacted by such differences. We also use Adjusted EBITDA and Net Debt Ratio 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.
FIRST QUARTER OF FISCAL 2021 OVERVIEW
Given the significant variations that occurred in our business during fiscal 2020 due to the COVID-19 pandemic, we provide a supplemental comparison of the 16 weeks ended June 19, 2021 ("first quarter of fiscal 2021") to the 16 weeks ended June 15, 2019 ("first quarter of fiscal 2019") for certain financial measures to demonstrate the two-year growth in our business in addition to comparisons to the 16 weeks ended June 20, 2020 ("first quarter of fiscal 2020").
As of June 19, 2021, we operated 2,278 retail food and drug stores with 1,725 pharmacies, 399 associated fuel centers, 22 dedicated distribution centers and 20 manufacturing facilities. We continue to make 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 decreased 10.0%, excluding fuel, during the first quarter of fiscal 2021, resulting in two-year stacked identical sales growth of 16.5%. Underscoring our strong omni-channel capabilities that allow customers to complete their shopping with us in any way they want, our digital initiatives continue to resonate with our customers, as evidenced by our sustained sales levels in the first quarter of fiscal 2021 with digital sales flat compared to the first quarter of fiscal 2020 and a two-year stacked growth of 276%. During the first quarter of fiscal 2021, we expanded our Drive Up & Go curbside pickup service to 1,740 locations and offer delivery services across more than 2,000 of our stores. In our delivery service, we have expanded first party locations, and continue to work with third party services to engage with customers on the platform of their choice. In addition to our continuing partnership with Instacart, we have expanded our partnership with DoorDash to offer on-demand grocery delivery service where customers can receive a broad assortment in under one hour. We also recently launched a similar partnership with Uber, where customers can order a full assortment of groceries on the Uber platform.
We continue to achieve significant success with members in our just for U loyalty program, which drives higher sales and customer retention, with participation growing 18% compared to the first quarter of fiscal 2020, reaching 26.7 million members. Our Own Brands products resonate well with our customers as evidenced by increased sales penetration of Own Brands by 100 basis points to 25.2% compared to the first quarter of fiscal 2020. Own Brands continues to deliver on innovation with more than 300 new items launched in the first quarter of fiscal 2021. During the first quarter of fiscal 2021, we made significant progress on productivity initiatives, including labor efficiency, shrink, promotional effectiveness and purchasing and procurement.
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 $513 million during the first quarter of fiscal 2021 as we opened five new stores and completed 33 upgrades and remodels. Our balance sheet remains strong with a Net Debt Ratio of 1.5x as of the end of the first quarter of fiscal 2021. Capital returns to shareholders in the first quarter of fiscal 2021 included our $0.10 per share quarterly dividend.
In addition, during the first quarter of fiscal 2021, our Nourishing Neighbors fundraising drive raised approximately $9 million from our customers at our check stands, which was matched by the Albertsons Companies Foundation, resulting in approximately $18 million in funds to feed children and families. We have also been partnering with the
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Department of Health and Human Services and local health authorities to administer COVID-19 vaccines to our local communities and, as of July 28, 2021, have administered approximately 6 million doses.
First quarter of fiscal 2021 highlights
In summary, our financial and operating highlights for the first quarter of fiscal 2021 include:
•Identical sales decrease of 10.0%; two-year identical sales stacked growth of 16.5%
•Sustained digital sales levels; on a two-year stacked basis digital sales growth was 276%
•Net income of $445 million, or $0.78 per Class A common share
•Adjusted net income of $518 million, or $0.89 per Class A common share
•Adjusted EBITDA of $1,308 million
•Opened five new stores and completed 33 remodel projects
•Launched 320 new Drive Up & Go locations and one micro-fulfillment center
Stores
The following table shows stores operating, acquired, opened and closed during the periods presented:
| 16 weeks ended | |||||||||||||||||||||||
| June 19, 2021 | June 20, 2020 | ||||||||||||||||||||||
| Stores, beginning of period | 2,277 | 2,252 | |||||||||||||||||||||
| Acquired (1) | 1 | — | |||||||||||||||||||||
| Opened | 5 | — | |||||||||||||||||||||
| Closed | (5) | — | |||||||||||||||||||||
| Stores, end of period | 2,278 | 2,252 | |||||||||||||||||||||
(1) The 16 weeks ended June 19, 2021 includes 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:
| Number of stores | Percent of Total | Retail Square Feet (1) | ||||||||||||||||||||||||||||||||||||
| Square Footage | June 19, 2021 | June 20, 2020 | June 19, 2021 | June 20, 2020 | June 19, 2021 | June 20, 2020 | ||||||||||||||||||||||||||||||||
| Less than 30,000 | 223 | 204 | 9.8 | % | 9.1 | % | 5.1 | 4.7 | ||||||||||||||||||||||||||||||
| 30,000 to 50,000 | 786 | 783 | 34.5 | % | 34.7 | % | 32.9 | 32.9 | ||||||||||||||||||||||||||||||
| More than 50,000 | 1,269 | 1,265 | 55.7 | % | 56.2 | % | 75.0 | 74.7 | ||||||||||||||||||||||||||||||
| Total Stores | 2,278 | 2,252 | 100.0 | % | 100.0 | % | 113.0 | 112.3 | ||||||||||||||||||||||||||||||
(1) In millions, reflects total square footage of retail stores operating at the end of the period.
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RESULTS OF OPERATIONS
Comparison of First Quarter of Fiscal 2021 to First Quarter of Fiscal 2020:
The following table and related discussion set forth certain information and comparisons regarding the components of our Condensed Consolidated Statements of Operations for the first quarter of fiscal 2021 and the first quarter of fiscal 2020 (in millions, except per share data).
| 16 weeks ended | |||||||||||||||||||||||
| June 19, 2021 | % of Sales | June 20, 2020 | % of Sales | ||||||||||||||||||||
Net sales and other revenue | $ | 21,269.4 | 100.0 | % | $ | 22,751.6 | 100.0 | % | |||||||||||||||
Cost of sales | 15,078.4 | 70.9 | 15,980.1 | 70.2 | |||||||||||||||||||
Gross profit | 6,191.0 | 29.1 | 6,771.5 | 29.8 | |||||||||||||||||||
Selling and administrative expenses | 5,503.6 | 25.9 | 5,769.4 | 25.4 | |||||||||||||||||||
| Loss on property dispositions and impairment losses, net | 0.3 | — | 30.3 | 0.1 | |||||||||||||||||||
| Operating income | 687.1 | 3.2 | 971.8 | 4.3 | |||||||||||||||||||
| Interest expense, net | 153.3 | 0.7 | 180.6 | 0.8 | |||||||||||||||||||
| Other (income) expense, net | (43.5) | (0.2) | 3.1 | — | |||||||||||||||||||
Income before income taxes | 577.3 | 2.7 | 788.1 | 3.5 | |||||||||||||||||||
Income tax expense | 132.5 | 0.6 | 201.9 | 0.9 | |||||||||||||||||||
Net income | $ | 444.8 | 2.1 | % | $ | 586.2 | 2.6 | % | |||||||||||||||
| Basic net income per Class A common share | $ | 0.80 | $ | 1.03 | |||||||||||||||||||
| Diluted net income per Class A common share | 0.78 | 1.00 | |||||||||||||||||||||
Net Sales and Other Revenue
Net sales and other revenue decreased 6.5% to $21,269.4 million for the first quarter of fiscal 2021 from $22,751.6 million for the first quarter of fiscal 2020. The decrease in Net sales and other revenue was primarily driven by our 10.0% decrease in identical sales, driven by significantly elevated demand at the onset of the COVID-19 pandemic in the first quarter of fiscal 2020 and partially offset by an increase in pharmacy sales, primarily from administering COVID-19 vaccines. The decrease in Net sales and other revenue was also partially offset by $460.1 million in higher fuel sales.
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 for the 16 weeks ended June 19, 2021 and the 16 weeks ended June 20, 2020, respectively, were:
| 16 weeks ended | |||||||||||||||||||||||
| June 19, 2021 | June 20, 2020 | ||||||||||||||||||||||
| Identical sales, excluding fuel | (10.0)% | 26.5% | |||||||||||||||||||||
The decrease in identical sales for the first quarter of fiscal 2021 was a direct result of significant demand at the onset of the COVID-19 pandemic during the first quarter of fiscal 2020. Though our identical sales decreased in the first quarter of fiscal 2021, we retained market share gains compared to pre-pandemic levels.
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Gross Profit
Gross profit represents the portion of Net sales and other revenue remaining after deducting 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, warehouse 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.
Gross profit margin decreased to 29.1% during the first quarter of fiscal 2021 compared to 29.8% during the first quarter of fiscal 2020. Excluding the impact of fuel, gross profit margin increased 10 basis points compared to the first quarter of fiscal 2020. The increase in gross profit margin was primarily driven by improved pharmacy margins related to administering COVID-19 vaccines, productivity initiatives related to optimization of promotions, growth in Own Brands penetration and lower COVID-19 related costs, partially offset by the sales deleverage.
Selling and Administrative Expenses
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 to 25.9% of Net sales and other revenue during the first quarter of fiscal 2021 compared to 25.4% of Net sales and other revenue for the first quarter of fiscal 2020. Excluding the impact of fuel, Selling and administrative expenses as a percentage of Net sales and other revenue increased 115 basis points during the first quarter of fiscal 2021 compared to the first quarter of fiscal 2020. The increase in Selling and administrative expenses as a percentage of Net sales and other revenue was primarily attributable to the sales deleverage, including employee wage and benefit costs, depreciation and amortization and rent and occupancy costs. The increase was partially offset by benefits related to the execution of our productivity initiatives and lower COVID-19 related costs.
Loss on Property Dispositions and Impairment Losses, Net
For the first quarter of fiscal 2021, net loss on property dispositions and impairment losses was $0.3 million, primarily driven by $9.9 million of asset impairments, primarily related to right-of-use assets, partially offset by $9.6 million of gains from the sale of real estate assets. For the first quarter of fiscal 2020, net loss on property dispositions and impairment losses was $30.3 million, primarily driven by $21.1 million of asset impairments, primarily related to right-of-use assets, and $9.2 million of losses from the sale of real estate assets.
Interest Expense, Net
Interest expense, net was $153.3 million during the first quarter of fiscal 2021 compared to $180.6 million during the first quarter of fiscal 2020. The decrease in interest expense was primarily attributable to lower average outstanding borrowings and lower average interest rates. The weighted average interest rate during the first quarter of fiscal 2021 was 5.6%, excluding amortization and write-off of deferred financing costs and original issue discount, compared to 6.0% during the first quarter of fiscal 2020.
Other (Income) Expense, Net
For the first quarter of fiscal 2021, other income, net was $43.5 million compared to other expense, net of $3.1 million for the first quarter of fiscal 2020. Other income, net during the first quarter of fiscal 2021 was primarily driven by realized 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 unrealized losses from non-operating investments. Other expense, net during the first quarter of fiscal 2020 was primarily driven by recognized
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losses on interest rate swaps and unrealized losses from non-operating investments, partially offset by income from non-service cost components of net pension and post-retirement expense.
Income Taxes
Income tax expense was $132.5 million, representing a 23.0% effective tax rate, for the first quarter of fiscal 2021. Income tax expense was $201.9 million, representing a 25.6% effective tax rate, for the first quarter of fiscal 2020. The decrease in the effective income tax rate was primarily driven by the recognition of certain discrete state income tax benefits during the first quarter of fiscal 2021. We expect our annual effective tax rate for fiscal 2021 to be approximately 25%.
Net Income and Adjusted Net Income
Net income was $444.8 million, or $0.78 per Class A common share, during the first quarter of fiscal 2021 compared to $586.2 million, or $1.00 per Class A common share, during the first quarter of fiscal 2020. Adjusted net income was $517.5 million, or $0.89 per Class A common share, during the first quarter of fiscal 2021 compared to $801.2 million, or $1.35 per Class A common share, during the first quarter of fiscal 2020.
Adjusted EBITDA
For the first quarter of fiscal 2021, Adjusted EBITDA was $1,308.1 million, or 6.2% of Net sales and other revenue, compared to $1,691.0 million, or 7.4% of Net sales and other revenue, for the first quarter of fiscal 2020.
Supplemental Two-Year Results - Comparison of First Quarter of Fiscal 2021 to First Quarter of Fiscal 2019
The following table provides a comparison of the first quarter of fiscal 2021 to the first quarter of fiscal 2019 for certain financial measures, including a compounded annual growth rate ("CAGR"), to demonstrate the two-year growth in our business. We believe these supplemental comparisons provide meaningful and useful information to investors about the trends in our business relative to pre-COVID-19 pandemic periods. These comparisons should not be reviewed in isolation or considered substitutes for our financial results included elsewhere in this Form 10-Q.
| First Quarter of Fiscal 2021 Supplemental Two-Year Results | |||||
| Identical sales two-year stacked (1) | 16.5 | % | |||
| Net income per Class A common share two-year CAGR | 212.2 | % | |||
| Adjusted net income per Class A common share two-year CAGR | 72.2 | % | |||
| Net income two-year CAGR | 201.3 | % | |||
| Adjusted EBITDA two-year CAGR | 22.1 | % | |||
| Margins: | |||||
| Gross profit (1) | Increased 90 basis points | ||||
| Selling and administrative expenses (1) | Decreased 75 basis points | ||||
(1) Excluding fuel
Net sales and other revenue was $21.3 billion during the first quarter of fiscal 2021 compared to $18.7 billion during the first quarter of fiscal 2019. The increase in sales compared to the first quarter of 2019 is primarily due to the 16.5% increase in two-year stacked identical sales. Identical sales were driven in part by the 276% two-year stacked increase in digital sales.
Gross profit margin was 29.1% during the first quarter of fiscal 2021 compared to 28.0% during the first quarter of fiscal 2019. Excluding the impact of fuel, gross profit margin increased by approximately 90 basis points compared
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to the first quarter of fiscal 2019, primarily driven by improvements in shrink expense, productivity initiatives, sales leverage and improved pharmacy margins related to administering COVID-19 vaccines, partially offset by our growth in digital sales and incremental COVID-19 expenses.
Selling and administrative expenses were 25.9% of sales during the first quarter of fiscal 2021 compared to 26.4% of sales for the first quarter of fiscal 2019. Excluding the impact of fuel, selling and administrative expenses as a percentage of sales decreased 75 basis points primarily due to sales leverage and the execution of our productivity initiatives, partially offset by incremental COVID-19 expenses.
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Reconciliation of Non-GAAP Measures
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):
| 16 weeks ended | |||||||||||||||||||||||||||||
| June 19, 2021 | June 20, 2020 | June 15, 2019 Supplemental | |||||||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||||||||
| Net income | $ | 444.8 | $ | 586.2 | $ | 49.0 | |||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||
(Gain) loss on interest rate and commodity hedges, net (d) | (6.3) | 24.5 | 0.3 | ||||||||||||||||||||||||||
| Facility closures and transformation (1)(b) | 20.8 | 9.8 | — | ||||||||||||||||||||||||||
| Acquisition and integration costs (2)(b) | 3.5 | 6.3 | 26.1 | ||||||||||||||||||||||||||
| Equity-based compensation expense (b) | 22.2 | 19.0 | 11.1 | ||||||||||||||||||||||||||
| Loss (gain) on property dispositions and impairment losses, net | 0.3 | 30.3 | (28.5) | ||||||||||||||||||||||||||
| LIFO expense (a) | 14.5 | 13.1 | 10.5 | ||||||||||||||||||||||||||
Discretionary COVID-19 pandemic related costs (3)(b) | — | 89.9 | — | ||||||||||||||||||||||||||
Government-mandated incremental COVID-19 pandemic related pay (4)(b) | 29.1 | — | — | ||||||||||||||||||||||||||
| Civil disruption related costs (5)(b) | — | 14.9 | — | ||||||||||||||||||||||||||
| Transaction and reorganization costs related to convertible preferred stock issuance and initial public offering (b) | — | 20.3 | — | ||||||||||||||||||||||||||
| Amortization of debt discount and deferred financing costs (c) | 6.4 | 6.5 | 8.4 | ||||||||||||||||||||||||||
| Loss on debt extinguishment | — | — | 42.7 | ||||||||||||||||||||||||||
| Amortization of intangible assets resulting from acquisitions (b) | 16.1 | 17.5 | 92.8 | ||||||||||||||||||||||||||
| Miscellaneous adjustments (6)(f) | (10.8) | 34.1 | 8.8 | ||||||||||||||||||||||||||
| Tax impact of adjustments to Adjusted net income | (23.1) | (71.2) | (44.6) | ||||||||||||||||||||||||||
| Adjusted net income | $ | 517.5 | $ | 801.2 | $ | 176.6 | |||||||||||||||||||||||
| Denominator: | |||||||||||||||||||||||||||||
| Weighted average Class A common shares outstanding - diluted | 571.4 | 583.7 | 579.4 | ||||||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||
| Restricted stock units and awards (7) | 9.4 | 8.2 | 9.5 | ||||||||||||||||||||||||||
| Adjusted weighted average Class A common shares outstanding - diluted | 580.8 | 591.9 | 588.9 | ||||||||||||||||||||||||||
| Adjusted net income per Class A common share - diluted | $ | 0.89 | $ | 1.35 | $ | 0.30 | |||||||||||||||||||||||
| Supplemental Two-Year CAGR: | |||||||||||||||||||||||||||||
| Net income two-year CAGR | 201.3 | % | |||||||||||||||||||||||||||
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| 16 weeks ended | |||||||||||||||||||||||||||||
| June 19, 2021 | June 20, 2020 | June 15, 2019 Supplemental | |||||||||||||||||||||||||||
| Net income per Class A common share - diluted | $ | 0.78 | $ | 1.00 | $ | 0.08 | |||||||||||||||||||||||
| Non-GAAP adjustments (8) | 0.13 | 0.37 | 0.22 | ||||||||||||||||||||||||||
| Restricted stock units and awards (7) | (0.02) | (0.02) | — | ||||||||||||||||||||||||||
| Adjusted net income per Class A common share - diluted | $ | 0.89 | $ | 1.35 | $ | 0.30 | |||||||||||||||||||||||
| Supplemental Two-Year CAGR: | |||||||||||||||||||||||||||||
| Net income per Class A common share two-year CAGR | 212.2 | % | |||||||||||||||||||||||||||
| Adjusted net income per Class A common share two-year CAGR | 72.2 | % | |||||||||||||||||||||||||||
The following table is a reconciliation of Adjusted net income to Adjusted EBITDA:
| 16 weeks ended | |||||||||||||||||||||||||||||
| June 19, 2021 | June 20, 2020 | June 15, 2019 Supplemental | |||||||||||||||||||||||||||
| Adjusted net income (9) | $ | 517.5 | $ | 801.2 | $ | 176.6 | |||||||||||||||||||||||
| Tax impact of adjustments to Adjusted net income | 23.1 | 71.2 | 44.6 | ||||||||||||||||||||||||||
| Income tax expense | 132.5 | 201.9 | 15.7 | ||||||||||||||||||||||||||
| Amortization of debt discount and deferred financing costs (c) | (6.4) | (6.5) | (8.4) | ||||||||||||||||||||||||||
| Interest expense, net | 153.3 | 180.6 | 225.2 | ||||||||||||||||||||||||||
| Amortization of intangible assets resulting from acquisitions (b) | (16.1) | (17.5) | (92.8) | ||||||||||||||||||||||||||
| Depreciation and amortization (e) | 504.2 | 460.1 | 515.9 | ||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 1,308.1 | $ | 1,691.0 | $ | 876.8 | |||||||||||||||||||||||
| Supplemental Two-Year CAGR: | |||||||||||||||||||||||||||||
| Adjusted EBITDA two-year CAGR | 22.1 | % | |||||||||||||||||||||||||||
(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. Also includes expenses related to management fees in prior periods paid in connection with acquisition and financing activities.
(3) Includes $53 million of charitable contributions to our communities for 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) Represents incremental pay that is legislatively required in certain municipalities in which we operate.
(5) Primarily includes costs related to store damage, inventory losses and community support as a result of the civil disruption during late May 2020 and early June 2020 in certain markets.
(6) Miscellaneous adjustments include the following (see table below):
| 16 weeks ended | |||||||||||||||||||||||||||||
| June 19, 2021 | June 20, 2020 | June 15, 2019 Supplemental | |||||||||||||||||||||||||||
| Non-cash lease-related adjustments | $ | 2.1 | $ | 2.0 | $ | 1.9 | |||||||||||||||||||||||
| Lease and lease-related costs for surplus and closed stores | 10.2 | 18.7 | 6.8 | ||||||||||||||||||||||||||
| Net realized and unrealized (gain) loss on non-operating investments | (22.5) | 4.5 | (3.3) | ||||||||||||||||||||||||||
| Other (i) | (0.6) | 8.9 | 3.4 | ||||||||||||||||||||||||||
| Total miscellaneous adjustments | $ | (10.8) | $ | 34.1 | $ | 8.8 | |||||||||||||||||||||||
(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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(8) Reflects the per share impact of Non-GAAP adjustments for each period. 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.
Non-GAAP adjustment classifications within the Consolidated Statement of Operations:
(a) Cost of sales
(b) Selling and administrative expenses
(c) Interest expense, net
(d) (Gain) loss on interest rate and commodity hedges, net:
| 16 weeks ended | |||||||||||||||||||||||||||||
| June 19, 2021 | June 20, 2020 | June 15, 2019 Supplemental | |||||||||||||||||||||||||||
| Cost of sales | $ | (6.6) | $ | 5.5 | $ | 0.3 | |||||||||||||||||||||||
| Other (income) expense, net | 0.3 | 19.0 | — | ||||||||||||||||||||||||||
| Total (Gain) loss on interest rate and commodity hedges, net | $ | (6.3) | $ | 24.5 | $ | 0.3 | |||||||||||||||||||||||
(e) Depreciation and amortization:
| 16 weeks ended | |||||||||||||||||||||||||||||
| June 19, 2021 | June 20, 2020 | June 15, 2019 Supplemental | |||||||||||||||||||||||||||
| Cost of sales | $ | 50.8 | $ | 54.0 | $ | 52.0 | |||||||||||||||||||||||
| Selling and administrative expenses | 453.4 | 406.1 | 463.9 | ||||||||||||||||||||||||||
| Total Depreciation and amortization | $ | 504.2 | $ | 460.1 | $ | 515.9 | |||||||||||||||||||||||
(f) Miscellaneous adjustments:
| 16 weeks ended | |||||||||||||||||||||||||||||
| June 19, 2021 | June 20, 2020 | June 15, 2019 Supplemental | |||||||||||||||||||||||||||
| Selling and administrative expenses | $ | 6.8 | $ | 24.8 | $ | 7.1 | |||||||||||||||||||||||
| Other (income) expense, net | (17.6) | 9.3 | 1.7 | ||||||||||||||||||||||||||
| Total Miscellaneous adjustments | $ | (10.8) | $ | 34.1 | $ | 8.8 | |||||||||||||||||||||||
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth the major sources and uses of cash and cash equivalents and restricted cash for each period (in millions):
| 16 weeks ended | |||||||||||
| June 19, 2021 | June 20, 2020 | ||||||||||
| Cash and cash equivalents and restricted cash at end of period | $ | 2,224.4 | $ | 2,064.5 | |||||||
| Cash flows provided by operating activities | 1,059.0 | 2,091.9 | |||||||||
| Cash flows used in investing activities | (493.0) | (399.4) | |||||||||
| Cash flows used in financing activities | (109.2) | (106.9) | |||||||||
Net Cash Provided by Operating Activities
Net cash provided by operating activities was $1,059.0 million for the first quarter of fiscal 2021 compared to $2,091.9 million for the first quarter of fiscal 2020. The decrease in cash flow from operations compared to the first quarter of fiscal 2020 was due to changes in working capital primarily related to accounts payable as our business
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experienced significantly elevated demand during the first quarter of fiscal 2020, a deferral of approximately $140 million of the employer-paid portion of social security taxes in the first quarter of fiscal 2020 and an increase of approximately $78 million in cash paid for income taxes. These decreases were partially offset by a decrease of approximately $43 million in cash paid for interest, $75 million payment for the UFCW & Employers Midwest Pension Fund settlement in the first quarter of fiscal 2020 and $52.6 million in reduced contributions to our defined benefit pension plans and post-retirement benefit plans.
Net Cash Used by Investing Activities
Net cash used in investing activities was $493.0 million for the first quarter of fiscal 2021 compared to $399.4 million for the first quarter of fiscal 2020.
For the first quarter of fiscal 2021, cash used in investing activities consisted primarily of payments for property and equipment, including lease buyouts, of $513.4 million and payments for business acquisitions of $23.5 million, partially offset by proceeds from the sale of long-lived assets of $15.2 million. Payments for property and equipment in the first quarter of fiscal 2021 included the opening of five new stores, completion of 33 remodels and continued investment in our digital technology. For the full fiscal year of 2021, we expect capital expenditures to be in the range of $1.9 billion to $2.0 billion. For the first quarter of fiscal 2020, cash used in investing activities consisted primarily of payments for property and equipment, including lease buyouts, of $402.3 million. Payments for property and equipment in the first quarter of fiscal 2020 included the completion of 46 remodels and continued investment in our digital technology.
Net Cash Used in Financing Activities
Net cash used in financing activities was $109.2 million during the first quarter of fiscal 2021 compared to $106.9 million during the first quarter of fiscal 2020.
Net cash used in financing activities during the first quarter of fiscal 2021 consisted primarily of dividends paid on our Class A common stock and Convertible Preferred Stock.
Liquidity Needs
We estimate our liquidity needs over the next 12 months to be in the range of $4.75 billion to $5.25 billion, which includes anticipated requirements for working capital, capital expenditures, pension obligations, 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 respond effectively to competitive conditions. In addition, we may enter into refinancing and sale leaseback 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.
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. On March 15, 2021 and June 15, 2021, we declared quarterly cash dividends of $29.5 million, respectively, to holders of the Convertible Preferred Stock, which was paid on March 31, 2021 and June 30, 2021, respectively. 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.
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We have 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 $0.40 per share. On April 13, 2021, we announced a quarterly dividend payment of $0.10 per share of Class A common stock which was paid on May 10, 2021 to stockholders of record as of the close of business on April 26, 2021. On July 13, 2021, subsequent to the end of the first quarter of fiscal 2021, we announced the next quarterly dividend payment of $0.10 per share of Class A common stock to be paid on August 10, 2021 to stockholders of record as of the close of business on July 26, 2021.
Multiemployer Pension Plans
The American Rescue Plan ("ARP Act") 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 projected by the Pension Benefit Guaranty Corporation ("PBGC") 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 are potentially eligible for special financial assistance under 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 the $4.7 billion we estimated as our share of the underfunding of the 27 plans. On July 9, 2021, the PBGC issued its interim final rule with respect to the special financial assistance program. The PBGC interim final rule provides direction on the application requirements, identifies which plans will have priority, eligibility requirements, the determination of the amount of financial assistance to be provided and establishes conditions and restrictions that apply to plans that receive assistance. We are currently evaluating the interim final rule, which is subject to a 30-day comment period, and we expect the special financial assistance program to provide funding for the multiemployer plans to which we contribute to remain solvent through the next 25 to 30 years.
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 the Critical Accounting Policies section included in our Annual Report on Form 10-K for the fiscal year ended February 27, 2021, filed with the SEC on April 28, 2021, for a discussion of our significant accounting policies.
RECENTLY ISSUED AND RECENTLY ADOPTED ACCOUNTING STANDARDS
See Note 1 - Basis of presentation and summary of significant accounting policies of our unaudited interim Condensed Consolidated Financial Statements located elsewhere in this Form 10-Q.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in our exposure to market risk from the information provided in our Annual Report on Form 10-K for the fiscal year ended February 27, 2021, filed with the SEC on April 28, 2021.
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Item 4 - Controls and Procedures
Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934 (the "Exchange Act")) as of the end of the period covered by this Quarterly Report on Form 10-Q, our Principal Executive Officer and Principal Financial Officer concluded our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and is accumulated and communicated to management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the first quarter of fiscal 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1 - 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 claims or 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 in this Form 10-Q 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 the matters under the caption Legal Proceedings in Note 6 - Commitments and contingencies and off balance sheet arrangements in the unaudited interim Condensed Consolidated Financial Statements located elsewhere in this Form 10-Q.
Item 1A - Risk Factors
There have been no material changes to the risk factors previously included in our Annual Report on Form 10-K for the fiscal year ended February 27, 2021, filed with the SEC on April 28, 2021, under the heading "Risk Factors."
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
(a) Unregistered Sales of Equity Securities
None.
(b) Use of Proceeds
None.
(c) Purchases of Equity Securities
None.
Item 3 - Defaults Upon Senior Securities
None.
Item 4 - Mine Safety Disclosures
Not Applicable.
Item 5 - Other Information
None.
Item 6 - Exhibits
10.1 Employment Agreement, dated June 15, 2020, between Albertsons Companies, Inc. and Juliette Pryor
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EXHIBIT 101.INS - Inline XBRL Instance Document
EXHIBIT 101.SCH - Inline XBRL Taxonomy Extension Schema Document
EXHIBIT 101.CAL - Inline XBRL Taxonomy Extension Calculation Linkbase Document
EXHIBIT 101.DEF - Inline XBRL Taxonomy Extension Definition Linkbase Document
EXHIBIT 101.LAB - Inline XBRL Taxonomy Extension Label Linkbase Document
EXHIBIT 101.PRE - Inline XBRL Taxonomy Extension Presentation Linkbase Document
EXHIBIT 104 - Cover Page Interactive Data File (embedded within the Inline XBRL document)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Albertsons Companies, Inc. (Registrant) | |||||||||||
| Date: | July 29, 2021 | By: | /s/ Vivek Sankaran | ||||||||
| Vivek Sankaran | |||||||||||
| President, Chief Executive Officer and Director (Principal Executive Officer) | |||||||||||
| Date: | July 29, 2021 | By: | /s/ Robert B. Dimond | ||||||||
| Robert B. Dimond | |||||||||||
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) | |||||||||||
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Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of June 15, 2020 (the “Effective Date”), is between Albertsons Companies, Inc., a Delaware corporation (the “Company”), and Juliette Pryor (the “Executive,” and together with the Company, the “Parties”).
WHEREAS, the Executive is joining the Company as an employee; and
WHEREAS, the Parties desire to set forth the terms and conditions of the Executive’s employment with the Company under this Agreement,
NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein and other good and valuable consideration, the Parties agree to the following:
1. Employment and Acceptance. The Company shall employ the Executive, and the Executive shall accept employment with the Company, subject to the terms of this Agreement effective on the Effective Date.
2. Term. Subject to earlier termination pursuant to Section 5 of this Agreement, this Agreement and the employment relationship hereunder shall continue from the Effective Date until January 30, 2023 (the “Term Date”). As used in this Agreement, the “Term” shall refer to the period beginning on the Effective Date and ending on the date the Executive’s employment hereunder terminates in accordance with this Section 2 or Section 5. In the event that the Executive’s employment with the Company terminates (such date, the “Termination Date”) prior to the Term Date, the Company’s obligation to continue to pay all base salary, as adjusted, bonus and other benefits then accrued shall terminate except as may be provided for in Section 5 of this Agreement.
3. Duties and Title.
3.1 Title. The Executive shall be employed to render exclusive and full-time services to the Company and its subsidiaries and affiliates. The Executive shall serve in the capacity of Executive Vice President and General Counsel.
3.2 Duties. The Executive shall have the authority and responsibilities and shall perform such executive duties in the areas of law, asset protection and government relations, or such duties and responsibilities as may be assigned to the Executive by the Chief Executive Officer of the Company (the “CEO”). The Executive shall devote all of the Executive’s full working-time and best efforts to the performance of such duties and to the promotion of the business and interests of the Company, its subsidiaries and its affiliates. Notwithstanding the foregoing, during the Term, subject to disclosure to, and approval by the Board of Directors of the Company (the “Board”) or the CEO, the Executive may (a) continue to serve on any boards of directors upon which the Executive serves as of the Effective Date, and (b) serve on other corporate, industry, civic or charitable boards and committees, provided that
with respect to (a) and (b), (x) such activities, in the Board’s or CEO’s discretion, do not materially interfere with and are not inconsistent with the Executive’s performance of the Executive’s duties under this Agreement and (y) any such entity does not engage in the “Business” (as defined below).
4. Compensation and Benefits by the Company.
4.1 Base Salary. During the Term, the Company shall pay to the Executive an annual base salary of $725,000, payable in accordance with the customary payroll practices of the Company (“Base Salary”). The Executive shall be entitled to such increases, if any, in Base Salary as may be determined from time to time by the Board or the Compensation Committee of the Board (the “Compensation Committee”).
4.2 Bonuses. During the Term, the Executive shall be eligible to receive a bonus or bonuses (collectively, the “Bonus”) for each fiscal year of the Company subject to a plan (or plans) established by the Company (the “Bonus Plan”) in an amount determined by the Board or Compensation Committee based upon achievement of performance measures derived from the business plan presented by management and approved by the Board or Compensation Committee. The target amount of the Executive’s Bonus for each fiscal year shall be 100% of the Base Salary (the “Target Bonus”). If such performance measures are only partially achieved or not achieved, the Executive shall only be entitled to such Bonus, if any, as provided under the applicable Bonus Plan or as otherwise determined in the sole discretion of the Board or Compensation Committee.
4.3 Annual Equity Grant. During the Term, the Company shall award the Executive with an annual equity grant (which may include phantom equity) valued at $2,000,000, as determined by the Board or the Compensation Committee, allocated between time-based equity and performance-based equity as the Board or Compensation Committee shall determine, subject to increases or decreases in the annual equity grant value as determined by the Board or Compensation Committee, and subject to the terms and conditions of the Company’s equity program and the award agreement applicable to each grant. The first such grant shall be awarded at the Company’s customary grant date for executives at the end of or following the end of Fiscal Year 2020.
4.4 Participation in Employee Benefit Plans. During the Term, the Executive shall be entitled, if and to the extent eligible, to participate in all of the applicable benefit plans of the Company or its affiliates, which may be available to other senior executives of the Company, on the same terms as such other executives. The Company or its affiliates may at any time or from time to time amend, modify, suspend or terminate any employee benefit plan, program or arrangement for any reason without the Executive’s consent if such amendment, modification, suspension or termination is consistent with the amendment, modification, suspension or termination for other similarly-situated employees of the Company and its affiliates.
4.5 Expense Reimbursement. During the Term, the Executive shall be entitled to receive reimbursement for all of the Executive’s appropriate business expenses incurred in connection with the Executive’s duties under this Agreement in accordance with the policies of
2
the Company as in effect from time to time, as well as reimbursement for the costs incurred by the Executive in connection with the preparation of the Executive’s applicable tax returns, up to a maximum of $8,000 annually.
4.6 Special Sign-On Terms. As an incentive to accept employment, and as compensation for benefits left behind at the Executive’s previous place of employment, the Executive shall be entitled to the following special one-time benefits:
(a) Equity Grant. The Executive shall receive on the Effective Date a one-time $3,250,000 equity grant. This award shall consist of a $1,625,000 time-based equity grant vesting in equal tranches over the first three anniversaries from grant date, and a $1,625,000 performance-based equity grant earned in three equal annual tranches at the end of each fiscal year beginning with FY 2020 as performance targets are met and cliff-vested at the end of FY 2022.
(b) Cash Award. The Executive shall receive a $3,250,000 cash incentive award paid in three installments. The first installment of $1,500,000 will be paid within 30 days of the Effective Date. The second installment of $875,000 will be paid on the first pay period following the first anniversary of the Effective Date. The third installment of $875,000 will be paid on the first pay period following the second anniversary of the Effective Date. The Executive must be an employee in good standing on the date of the installment payment to be eligible to receive the payment. If the Executive is terminated by the Company for Cause or leaves without Good Reason (as defined in Section 5 below), the Executive will be required to repay any installment payment received in the 12 months prior to the Termination Date.
5. Termination of Employment.
5.1 By the Company for Cause or by the Executive Without Good Reason. If: (i) the Company terminates the Executive’s employment with the Company for “Cause” (as defined below); or (ii) the Executive voluntarily terminates the Executive’s employment without “Good Reason” (as defined below), the Executive shall be entitled to receive the following:
(a) payment for accrued but unused vacation days, payable in accordance with Company policy;
(b) the Executive’s accrued but unpaid Base Salary and vested benefits, if any, through the Termination Date;
(c) the earned but unpaid portion of any Bonus earned in respect of any completed performance period prior to the Termination Date; and
(d) expenses reimbursable under Section 4.5 incurred but not yet reimbursed to the Executive through the Termination Date (Sections 5.1(a), 5.1(b), 5.1(c) and 5.1(d), collectively, the “Accrued Benefits”).
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For the purposes of this Agreement, “Cause” means, as determined by the Board or its designee), with respect to conduct during the Executive’s employment with the Company, whether or not committed during the Term, (i) conviction of a felony by the Executive; (ii) acts of intentional dishonesty by the Executive resulting or intending to result in personal gain or enrichment at the expense of the Company, its subsidiaries or its affiliates; (iii) the Executive’s material breach of the Executive’s obligations under this Agreement; (iv) conduct by the Executive in connection with the Executive’s duties hereunder that is fraudulent, unlawful or grossly negligent; (v) engaging in personal conduct by the Executive (including but not limited to employee harassment or discrimination, the use or possession at work of any illegal controlled substance) which seriously discredits or damages the Company, its subsidiaries or its affiliates; (vi) contravention of specific lawful direction from the Board; or (vii) breach of the Executive’s covenants set forth in Section 6 below before termination of employment. The Executive shall have fifteen (15) business days after notice from the Company to cure the deficiency leading to the Cause determination (except with respect to (i) above), if curable. A termination for “Cause” shall be effective immediately (or on such other date set forth by the Company).
For the purposes of this Agreement, “Good Reason” means the occurrence of one or more of the following events (regardless of whether any other reason, other than Cause, for such termination exists or has occurred): (i) a reduction in the Executive’s Base Salary or Target Bonus, provided that, the Company may at any time or from time to time amend, modify, suspend or terminate any bonus, incentive compensation or other benefit plan or program provided to the Executive for any reason and without the Executive’s consent if such modification, suspension or termination (x) is a result of the underperformance of the Company under its business plan, or (y) is consistent with an “across the board” reduction for all senior executives of the Company, and, in each case, is undertaken in the Board’s reasonable business judgment, acting in good faith, and engaging in fair dealing with the Executive; or (ii) without the Executive’s prior written consent, relocation of the Executive’s principal location of work to any location that is in excess of fifty (50) miles from the location thereof on the Effective Date.
The Company shall have fifteen (15) business days after receipt from the Executive of a written notice specifying the deficiency to cure the deficiency that would result in Good Reason.
5.2 Due to Death or Disability. If either: (a) the Executive’s employment terminates due to the Executive’s death; or (b) the Company terminates the Executive’s employment with the Company due to the Executive’s “Disability” (as defined below), the Executive or the Executive’s beneficiaries (in the case of the Executive’s death), shall be entitled to receive (i) the Accrued Benefits and (ii) subject to Section 5.4, a lump sum payment in an amount equal to twenty-five percent (25%) of the Executive’s then Base Salary.
For the purposes of this Agreement, “Disability” means a determination by the Company in accordance with applicable law that as a result of a physical or mental injury or illness, the Executive is unable to perform the essential functions of the Executive’s job with or without reasonable accommodation for a period of (i) ninety (90) consecutive days; or (ii) one hundred eighty (180) days in any one (1) year period.
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The Company shall have no obligation to provide the benefits set forth above (other than the Accrued Benefits) in the event that the Executive breaches the provisions of Section 6.
5.3 By the Company Without Cause or By the Executive for Good Reason. If the Company terminates the Executive’s employment without Cause or the Executive voluntarily terminates the Executive’s employment for Good Reason, the Executive shall be entitled to receive the Accrued Benefits and, subject to Section 5.4:
(a) a lump sum payment in an amount equal to two hundred percent (200%) of the sum of (i) the Base Salary, plus (ii) the Target Bonus, each based on the then Base Salary; and
(b) reimbursement on a monthly basis of the cost of continuation coverage of group health coverage (including family coverage) for twelve (12) months; provided that the Executive elects continuation coverage under a policy, plan, program or arrangement of the Company or its affiliate pursuant to COBRA. The twelve (12) month period shall include, and run concurrently with, the maximum continuation coverage period pursuant to COBRA. If, and to the extent, that any benefit described in this Section 5.3(b) cannot be paid or provided under any policy, plan, program or arrangement of the Company, then the Company itself shall pay or provide for the payment to the Executive, the Executive’s dependents, eligible family members and beneficiaries, of such benefits, along with, in the case of any benefit described in this Section 5.3(b) which is subject to tax because it is not or cannot be paid or provided under any such policy, plan, program or arrangement of the Company, an additional amount such that after payment by the Executive, or the Executive’s dependents, eligible family members or beneficiaries, as the case may be, of all taxes so imposed, the recipient retains an amount equal to such taxes. Notwithstanding the foregoing, benefits under this Section 5.3(b) shall cease when the Executive is covered under another group health plan.
5.4 Continued Compliance and Release. The Company shall have no obligation to provide the payments and benefits provided in Section 5.2 and Section 5.3 (other than the Accrued Benefits) (the “Severance Benefits”) in the event (a) the Executive breaches the provisions of Section 6 of this Agreement and (b) unless the Executive signs, and does not revoke, a valid release agreement in a form reasonably acceptable to the Company (the “Release”), not later than sixty (60) days following the Termination Date. If the Severance Benefits are subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), such Severance Benefits shall begin (or be paid, as applicable) on the first pay period following the date that is sixty (60) days after the Termination Date. If the Severance Benefits are not otherwise subject to Section 409A of the Code, they shall begin (or be paid, as applicable) on the first pay period after the Release becomes effective.
5.5 No Mitigation. The obligations of the Company to the Executive which arise upon the termination of the Executive’s employment pursuant to this Section 5 shall not be subject to mitigation or offset.
5.6 Removal from any Boards and Position. If the Executive’s employment is terminated for any reason under this Agreement, the Executive shall be deemed to resign (i) if a
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member, from the Board or board of directors of any subsidiary or affiliate of the Company or any other board to which the Executive has been appointed or nominated by or on behalf of the Company and (ii) from any position with the Company or any subsidiary or affiliate of the Company, including, but not limited to, as an officer of the Company and any of its subsidiaries.
5.7 Continued Employment Beyond the Expiration of the Term. Unless the Company and the Executive otherwise agree in writing, continuation of the Executive’s employment with the Company beyond the expiration of the Term shall be deemed an employment at-will and shall not be deemed to extend any of the provisions of this Agreement and the Executive’s employment may thereafter be terminated at will by either the Executive or the Company; provided that Sections 6, 7, 8, 9.7 and 9.12 of this Agreement shall survive any termination of this Agreement or the termination of the Executive’s employment hereunder.
6. Restrictions and Obligations of the Executive.
6.1 Confidentiality.
(a) During the course of the Executive’s employment by the Company and its affiliates (prior to, during, and if applicable, after, the Term), the Executive has had and shall have access to certain trade secrets and confidential information relating to the Company, its subsidiaries and its affiliates (the “Protected Parties”) which is not readily available from sources outside the Protected Parties. The confidential and proprietary information and, in any material respect, trade secrets of the Protected Parties are among their most valuable assets, including but not limited to, their customer, supplier and vendor lists, databases, competitive strategies, computer programs, frameworks, or models, their marketing programs, their sales, financial, marketing, training and technical information, their product development (and proprietary product data) and any other information, whether communicated orally, electronically, in writing or in other tangible forms concerning how the Protected Parties create, develop, acquire or maintain their products and marketing plans, target their potential customers and operate their retail and other businesses. The Protected Parties invested, and continue to invest, considerable amounts of time and money in their process, technology, know-how, obtaining and developing the goodwill of their customers, their other external relationships, their data systems and data bases, and all the information described above (hereinafter collectively referred to as “Confidential Information”), and any misappropriation or unauthorized disclosure of Confidential Information in any form would irreparably harm the Protected Parties. The Executive acknowledges that such Confidential Information constitutes valuable, highly confidential, special and unique property of the Protected Parties. The Executive shall hold in a fiduciary capacity for the benefit of the Protected Parties all Confidential Information relating to the Protected Parties and their businesses, which shall have been obtained by the Executive during the Executive’s employment by the Company or its affiliates and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). Except as required by law or an order of a court or governmental agency with jurisdiction, the Executive shall not, during the period the Executive is employed by the Company, its subsidiaries or its affiliates, or at any time thereafter disclose any Confidential Information, directly or indirectly, to any person or entity, nor shall the
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Executive use it in any way, except in the course of the Executive’s employment with, and for the benefit of, the Protected Parties or to enforce any rights or defend any claims hereunder or under any other agreement to which the Executive is a party, provided that such disclosure is relevant to the enforcement of such rights or defense of such claims and is only disclosed in the formal proceedings related thereto. The Executive shall take all reasonable steps to safeguard the Confidential Information and to protect it against disclosure, misuse, espionage, loss and theft. The Executive understands and agrees that the Executive shall acquire no rights to any such Confidential Information.
(b) All files, records, documents, drawings, specifications, data, computer programs, evaluation mechanisms and analytics and similar items relating thereto or to the Business, as well as all customer lists, specific customer information, compilations of product research and marketing techniques of the Company and its affiliates, whether prepared by the Executive or otherwise coming into the Executive’s possession, shall remain the exclusive property of the Company, its subsidiaries and its affiliates, and the Executive shall not remove any such items from the premises of the Company, its subsidiaries and its affiliates, except in furtherance of the Executive’s duties under any employment agreement.
(c) It is understood that while employed by the Company, its subsidiaries or its affiliates, the Executive shall promptly disclose to it, and assign to it the Executive’s interest in any invention, improvement or discovery made or conceived by the Executive, either alone or jointly with others, which arises out of the Executive’s employment. At the Company’s request and expense, the Executive shall assist the Company, its subsidiaries and its affiliates during the period of the Executive’s employment by the Company, its subsidiaries and its affiliates and thereafter in connection with any controversy or legal proceeding relating to such invention, improvement or discovery and in obtaining domestic and foreign patent or other protection covering the same.
(d) As requested by the Company and at the Company’s expense, from time to time and upon the termination of the Executive’s employment with the Company for any reason, the Executive shall promptly deliver to the Company, its subsidiaries and its affiliates all copies and embodiments, in whatever form, of all Confidential Information in the Executive’s possession or within the Executive’s control (including, but not limited to, memoranda, records, notes, plans, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information) irrespective of the location or form of such material. If requested by the Company, the Executive shall provide the Company with written confirmation that all such materials have been delivered to the Company as provided herein.
(e) The Executive understands that nothing contained in this Agreement limits the Executive’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (each, a “Government Agency”). The Executive further understands that this Agreement does not limit the Executive’s ability to communicate with any Government Agency, including to
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report possible violations of federal law or regulation or making other disclosures that are protected under the whistleblower provisions of federal law or regulation, or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company.
(f) This Agreement does not limit the Executive’s right to receive an award for information provided to any Government Agency. The Executive will not be criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (i) is made (x) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (y) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
6.2 Non-Solicitation or Hire. During the Term and for the “Restricted Period” (as defined below) following the termination of the Executive’s employment for any reason, the Executive shall not directly or indirectly solicit or attempt to solicit or induce, directly or indirectly, (a) any supplier, vendor or service provider to the Company, its subsidiaries or its affiliates to terminate, reduce or alter negatively its relationship with the Company, its subsidiaries or its affiliates or in any manner interfere with any agreement or contract between the Company, its subsidiaries or its affiliates and such supplier, vendor or service provider; or (b) any employee of the Company, its subsidiaries or its affiliates or any person who was an employee of the Company, its subsidiaries or its affiliates during the twelve (12) month period immediately prior to the date the Executive’s employment terminates to terminate such employee’s employment relationship with the Protected Parties in order, in either case, to enter into a similar relationship with the Executive, or any other person or any entity in competition with the Business.
For the purposes of this Agreement, “Restricted Period” means a period equal to the period of severance under Section 5.3(a).
6.3 Non-Competition. During the Term and for the Restricted Period following the termination of the Executive’s employment (for any reason), the Executive shall not, whether individually, as a director, manager, member, stockholder, partner, owner, employee, consultant or agent of any business, or in any other capacity, other than on behalf of the Company, its subsidiaries or its affiliates, organize, establish, own, operate, manage, control, engage in, participate in, invest in, permit the Executive’s name to be used by, act as a consultant or advisor to, render services for (alone or in association with any person, firm, corporation or business organization), or otherwise assist any person or entity that engages in or owns, invests in, operates, manages or controls any venture or enterprise which engages or proposes to engage in any business conducted by the Company, its subsidiaries or its affiliates on the Termination Date or within twelve (12) months of the Executive’s termination of employment in the geographic locations where the Company, its subsidiaries or its affiliates engage or, to the Executive’s knowledge, propose to engage in such business (the “Business”). Notwithstanding the foregoing, nothing in this Agreement shall prevent the Executive from owning for passive investment purposes not intended to circumvent this Agreement, less than five percent (5%) of
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the publicly traded common equity securities of any company engaged in the Business (so long as the Executive has no power to manage, operate, advise, consult with or control the competing enterprise and no power, alone or in conjunction with other affiliated parties, to select a director, manager, general partner, or similar governing official of the competing enterprise other than in connection with the normal and customary voting powers afforded the Executive in connection with any permissible equity ownership).
6.4 Property. The Executive acknowledges that all originals and copies of materials, records and documents generated by the Executive or coming into the Executive’s possession during the Executive’s employment by the Company, its subsidiaries or its affiliates are the sole property of the Company, its subsidiaries and its affiliates (“Company Property”). During the Term, and at all times thereafter, the Executive shall not remove, or cause to be removed, from the premises of the Company, its subsidiaries or its affiliates copies of any record, file, memorandum, document, computer related information or equipment, or any other item relating to the business of the Company, its subsidiaries or its affiliates, except in furtherance of the Executive’s duties under this Agreement. When the Executive’s employment with the Company terminates, or upon request of the Company at any time, the Executive shall promptly deliver to the Company all copies of Company Property in the Executive’s possession or control.
6.5 Nondisparagement. The Executive agrees that the Executive shall not at any time (whether during or after the Term) publish or communicate to any person or entity any “Disparaging” (as defined below) remarks, comments or statements concerning the Company, Cerberus Capital Management, L.P., their parents, subsidiaries and affiliates, and their respective present and former members, partners, directors, officers, shareholders, employees, agents, attorneys, successors and assigns. “Disparaging” remarks, comments or statements are those that impugn the character, honesty, integrity or morality or business acumen or abilities in connection with any aspect of the operation of business of the individual or entity being disparaged.
7. Remedies; Specific Performance. The Company and the Executive acknowledge and agree that the Executive’s breach or threatened breach of any of the restrictions set forth in Section 6 shall result in irreparable and continuing damage to the Protected Parties for which there may be no adequate remedy at law and that the Protected Parties shall be entitled to equitable relief, including specific performance and injunctive relief as remedies for any such breach or threatened or attempted breach. The Executive hereby consents to the grant of an injunction (temporary or otherwise) against the Executive or the entry of any other court order against the Executive prohibiting and enjoining the Executive from violating, or directing the Executive to comply with any provision of Section 6. The Executive also agrees that such remedies shall be in addition to any and all remedies, including damages, available to the Protected Parties against the Executive for such breaches or threatened or attempted breaches. In addition, without limiting the Protected Parties’ remedies for any breach of any restriction on the Executive set forth in Section 6, except as required by law, the Executive shall not be entitled to any Severance Benefits if the Executive has breached the covenants applicable to the Executive contained in Section 6, the Executive shall immediately return to the Protected Parties any such Severance Benefits previously received, upon such a breach, and, in the event of such breach, the
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Protected Parties shall have no obligation to pay any of the amounts that remain payable by the Company under Section 5.3.
8. Indemnification. The Company agrees, to the extent permitted by applicable law and its organizational documents, to indemnify, defend and hold harmless the Executive from and against any and all losses, suits, actions, causes of action, judgments, damages, liabilities, penalties, fines, costs or claims of any kind or nature (“Indemnified Claim”), including reasonable legal fees and related costs incurred by the Executive in connection with the preparation for or defense of any Indemnified Claim, whether or not resulting in any liability, to which the Executive may become subject or liable or which may be incurred by or assessed against the Executive, relating to or arising out of the Executive’s employment by the Company or the services to be performed pursuant to this Agreement, provided that the Company shall only defend, but not indemnify or hold the Executive harmless, from and against an Indemnified Claim in the event there is a final, non-appealable, determination that the Executive’s liability with respect to such Indemnified Claim resulted from the Executive’s willful misconduct or gross negligence. The Company’s obligations under this section shall be in addition to any other right, remedy or indemnification which the Executive may have or be entitled to at common law or otherwise.
9. Other Provisions.
9.1 Notices. Any notice or other communication required or which may be given hereunder shall be in writing and shall be delivered personally, telegraphed, telexed, sent by facsimile transmission or sent by certified, registered or express mail, postage prepaid or overnight mail and shall be deemed given when so delivered personally, telegraphed, telexed, or sent by facsimile transmission or, if mailed, four (4) days after the date of mailing or one (1) day after overnight mail, as follows:
(a) If the Company, to:
Albertsons Companies, Inc.
Attention: Chief Human Resources Officer
Telephone: (208) 395-6200
Attention: Chief Human Resources Officer
Telephone: (208) 395-6200
(b) If the Executive, to the Executive’s home address reflected in the Company’s records.
9.2 Entire Agreement. This Agreement contains the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto.
9.3 Limitation on Payments and Benefits. Notwithstanding any provision of this Agreement to the contrary, if any amount or benefit to be paid or provided under this Agreement would be an “Excess Parachute Payment,” within the meaning of Section 280G of the Code, but for the application of this sentence, then the payments and benefits to be paid or
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provided under this Agreement shall be reduced to the minimum extent necessary (but in no event to less than zero) so that no portion of any such payment or benefit, as so reduced, constitutes an Excess Parachute Payment; provided, however, that the foregoing reduction shall be made only if and to the extent that such reduction would result in an increase in the aggregate payment and benefits to be provided, determined on an after-tax basis (taking into account the excise tax imposed pursuant to Section 4999 of the Code, any tax imposed by any comparable provision of state law, and any applicable federal, state and local income and employment taxes). Whether requested by the Executive or the Company, the determination of whether any reduction in such payments or benefits to be provided under this Agreement or otherwise is required pursuant to the preceding sentence shall be made at the expense of the Company by the Company’s independent accountant. The fact that the Executive’s right to payments or benefits may be reduced by reason of the limitations contained in this Section 9.3 shall not of itself limit or otherwise affect any other rights of the Executive other than pursuant to this Agreement. In the event that any payment or benefit intended to be provided under this Agreement or otherwise is required to be reduced pursuant to this Section 9.3, cash Severance Benefits payable hereunder shall be reduced first, then other cash payments that qualify as Excess Parachute Payments payable to the Executive, then non-cash benefits shall be reduced, as determined by the Company.
9.4 Representations and Warranties by the Executive. The Executive represents and warrants that the Executive is not a party to or subject to any restrictive covenants, legal restrictions or other agreements in favor of any entity or person which would in any way preclude, inhibit, impair or limit the Executive’s ability to perform the Executive’s obligations under this Agreement, including, but not limited to, non-competition agreements, non-solicitation agreements or confidentiality agreements.
9.5 Waiver and Amendments. This Agreement may be amended, modified, superseded, canceled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by the Parties or, in the case of a waiver, by the Party waiving compliance. No delay on the part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any right, power or privilege hereunder, nor any single or partial exercise of any right, power or privilege hereunder, preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.
9.6 Section 409A. The Company and the Executive intend that the payments and benefits provided for in this Agreement either be exempt from Section 409A of the Code, or be provided in a manner that complies with Section 409A of the Code, and any ambiguity herein shall be interpreted so as to be consistent with the intent of this Section 9.6. Notwithstanding anything contained herein to the contrary, to the extent that any Severance Benefits constitute “nonqualified deferred compensation” subject to Section 409A of the Code, all such Severance Benefits shall be paid or provided only upon the Executive’s “separation from service” within the meaning of Section 409A of the Code and the regulations and guidance promulgated thereunder (determined after applying the presumptions set forth in Treas. Reg. Section 1.409A-1(h)(1)). Further, if as of the Executive’s Termination Date, the Executive is a
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“specified employee” as defined in Section 409A of the Code as determined by the Company in accordance with Section 409A of the Code, and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the Company shall defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in payments or benefits ultimately paid or provided to the Executive) until the date that is at least six (6) months following the Executive’s Termination Date (or the earliest date permitted under Section 409A of the Code), whereupon the Company shall pay the Executive a lump-sum amount equal to the cumulative amounts that would have otherwise been previously paid to the Executive under this Agreement during the period in which such payments or benefits were deferred. Thereafter, payments shall resume in accordance with this Agreement.
Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided under this Agreement during any calendar year shall not affect in-kind benefits or reimbursements to be provided in any other calendar year, other than an arrangement providing for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by the Executive and, if timely submitted, reimbursement payments shall be promptly made to the Executive following such submission, but in no event later than December 31st of the calendar year following the calendar year in which the expense was incurred. In no event shall the Executive be entitled to any reimbursement payments after December 31st of the calendar year following the calendar year in which the expense was incurred. This paragraph shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to the Executive.
Additionally, in the event that following the date hereof the Company or the Executive reasonably determines that any compensation or benefits payable under this Agreement may be subject to Section 409A of the Code, the Company and the Executive shall work together to adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effect), or take any other commercially reasonable actions necessary or appropriate to (x) exempt the compensation and benefits payable under this Agreement from Section 409A of the Code and/or preserve the intended tax treatment of the compensation and benefits provided with respect to this Agreement or (y) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.
9.7 Governing Law, Dispute Resolution and Venue. This Agreement shall be governed and construed in accordance with the laws of the State of Idaho applicable to agreements made and not to be performed entirely within such state, without regard to conflicts of laws principles.
9.8 Assignability by the Company and the Executive. This Agreement, and the rights and obligations hereunder, may not be assigned by the Company or the Executive
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without written consent signed by the other Party; provided that the Company may assign this Agreement to any successor that continues the business of the Company.
9.9 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.
9.10 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein.
9.11 Severability. If any term, provision, covenant or restriction of this Agreement, or any part thereof, is held by a court of competent jurisdiction of any foreign, federal, state, county or local government or any other governmental, regulatory or administrative agency or authority to be invalid, void, unenforceable or against public policy for any reason, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected or impaired or invalidated. The Executive acknowledges that the restrictive covenants contained in Section 6 are a condition of this Agreement and are reasonable and valid in temporal scope and in all other respects.
9.12 Judicial Modification. If any court determines that any of the covenants in Section 6, or any part of any of them, is invalid or unenforceable, the remainder of such covenants and parts thereof shall not thereby be affected and shall be given full effect, without regard to the invalid portion. If any court determines that any of such covenants, or any part thereof, is invalid or unenforceable because of the geographic or temporal scope of such provision, such court shall reduce such scope to the minimum extent necessary to make such covenants valid and enforceable.
9.13 Tax Withholding. The Company or other payor is authorized to withhold from any benefit provided or payment due hereunder, the amount of withholding taxes due any federal, state or local authority in respect of such benefit or payment and to take such other action as may be necessary in the opinion of the Board to satisfy all obligations for the payment of such withholding taxes.
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IN WITNESS WHEREOF, the Parties hereto, intending to be legally bound hereby, have executed this Agreement as of the day and year first above mentioned.
EXECUTIVE
/s/ Juliette Pryor
Juliette Pryor
ALBERTSONS COMPANIES, INC.
By: /s/ Michael Theilmann
Name: Michael Theilmann
Title: Executive Vice President
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Exhibit 10.2
ALBERTSONS COMPANIES, INC.
2020 OMNIBUS INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
Albertsons Companies, Inc. (the “Company”), pursuant to the Albertsons Companies, Inc. 2020 Omnibus Incentive Plan (the “Plan”), hereby grants to the Participant named below an Award of Restricted Stock Units. Unless otherwise defined herein, the capitalized terms used in this Restricted Stock Unit Award Agreement (the “Agreement”), which includes the Notice of Grant (the “Notice of Grant”) and the Terms and Conditions of Restricted Stock Unit Grant, attached hereto as Exhibit A, shall have the meanings ascribed to such terms in the Plan.
NOTICE OF GRANT
Participant: | |||||
Grant Date: | |||||
Award: | [•] Restricted Stock Units | ||||
Vesting Schedule: | The Participant shall become vested in the Award in three equal installments on the last day of each of the next three (3) fiscal years of the Company (excluding fiscal years of less than 12 months) (each, a “Fiscal Year”), as follows: (a) one-third (1/3) on the last day of the 2021 Fiscal Year; (b) one-third (1/3) on the last day of the 2022 Fiscal Year; and (c) one-third (1/3) on the last day of the 2023 Fiscal Year. | ||||
The Participant and the Company agree that this Award of Restricted Stock Units is granted under and governed by the terms and conditions of the Plan and this Agreement, including the Terms and Conditions of Restricted Stock Unit Grant, attached hereto as Exhibit A, all of which are incorporated into this Agreement.
ALBERTSONS COMPANIES, INC. By: Name: Title: | PARTICIPANT: Name: | ||||
EXHIBIT A
TERMS AND CONDITIONS OF RESTRICTED STOCK UNIT GRANT
1.Grant. The Company hereby grants to the individual named in the Notice of Grant (the “Participant”) an Award of Restricted Stock Units set forth in the Notice of Grant, subject to all of the terms and conditions in this Agreement and the Plan.
2.Definitions.
“Cause” shall have the meaning ascribed to such term in the Plan.
“Change in Control Period” means the 24-month period following a Change in Control.
“Competitive Activity” means the Participant’s engagement, directly or indirectly, as principal, agent, independent contractor, consultant, director, officer, employee, employer, advisor, stockholder, partner, member or in any other individual or representative capacity whatsoever, whether paid or unpaid, either for the Participant’s own benefit or the benefit of any other person or entity, other than on behalf of the Company, to organize, establish, own, operate, manage, control, engage in, participate in, invest in, permit the Participant’s name to be used by, act as a consultant or advisor to, render services for (alone or in association with any person, firm, corporation or business organization), or otherwise assist any person or entity that engages in or owns, invests in, operates, manages or controls any venture or enterprise which engages or proposes to engage in (a) the business conducted by the Company or any of its subsidiaries on the date of the Participant’s Termination of Service in the geographic locations where the Company or any of its subsidiaries engage in such business or (b) any business which, to the Participant’s knowledge, the Company or any of its subsidiaries propose to engage in within the twelve (12) month period following the date of the Participant’s Termination of Service in the geographic locations where the Company or any of its subsidiaries propose to engage in such business.
“Disability” shall have the meaning ascribed to such term in the Plan.
“Early Retirement” means, prior to the Participant’s attainment of age 62, the Participant’s Termination of Service for any reason, other than for Cause, death or Disability, on or after the Participant’s (i) attainment of age 55 and (ii) completion of 10 years of continuous service with the Company or any of its subsidiaries. A Participant’s years of service shall be determined by the Committee in accordance with predetermined, nondiscretionary rules established by the Company.
“Normal Retirement” means the Participant’s Termination of Service for any reason, other than for Cause, death or Disability, on or after the Participant’s attainment of age 62, and forbearance from engaging in any work or activity that would constitute Competitive Activity. Notwithstanding the foregoing, if the Participant’s primary place of employment or services as of the Participant’s Termination of Service is California, North Dakota, Oklahoma or
2 | ||||||||
any state that prohibits the enforcement of post-employment non-competition agreements, the Participant’s engaging in any work or activity that would constitute Competitive Activity after the Participant’s Termination of Service shall not cause the Participant fail to qualify for Normal Retirement.
3.Vesting. Except as otherwise set forth in Section 5, the Award shall vest in accordance with the vesting schedule set forth in the Notice of Grant.
4.Dividend Equivalent Rights. If the Company declares a cash dividend on the shares of Common Stock, the Participant shall be credited with an additional number of Restricted Stock Units equal to: (i) the product of (A) the number of Restricted Stock Units subject to this Award (including additional Restricted Stock Units previously credited in accordance with this Section 4) that have not been settled as of the dividend payment date, and (B) the amount of the cash dividend paid per share of Common Stock; divided by (ii) the Fair Market Value (which shall be equal to the closing price) of a share of Common Stock on the dividend payment date. Each additional Restricted Stock Unit credited pursuant to this Section 4 shall be subject to the same vesting and settlement and other terms, conditions and restrictions as the underlying Restricted Stock Unit to which such additional Restricted Stock Unit relates.
5.Termination of Service.
(a)Unvested Restricted Stock Units. Except as otherwise provided in this Section 5, upon the Participant’s Termination of Service for any reason, any portion of the Award in which the Participant has not yet become vested shall be immediately forfeited by the Participant and cancelled, without the payment of consideration.
(b)Death or Disability. Upon the Participant’s Termination of Service due to the Participant’s death or Disability at any time, the Participant shall become immediately vested in any portion of the Award in which the Participant has not yet become vested, to the extent not previously forfeited or cancelled.
(c)Retirement.
(i)If the Participant incurs a Termination of Service that qualifies as an Early Retirement, the Participant shall become immediately vested in a number of Restricted Stock Units equal to the product of (A) the number of Restricted Stock Units subject to the Award that would have otherwise vested at the end of the Fiscal Year in which the Participant’s Early Retirement occurs and (B) a fraction, the numerator of which is the number of days elapsed in the period beginning on the first day of the Fiscal Year in which the Participant’s Early Retirement occurs and ending on the date the Participant’s Termination of Service occurs and the denominator of which is the number of days in the Fiscal Year in which the Participant’s Early Retirement occurs.
(ii)If the Participant incurs a Termination of Service that qualifies as a Normal Retirement, the Participant shall continue to vest in the Award in accordance with the vesting schedule set forth in the Notice of Grant, with delivery of the shares
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of Common Stock in respect of such Restricted Stock Units to be made at the same time as if Participant had remained employed by the Company through the applicable vesting dates, provided that, in the event of the Participant’s death following the Participant’s Normal Retirement, the Participant shall become immediately vested in any portion of the Award in which the Participant has not yet become vested, to the extent not previously forfeited or cancelled. Notwithstanding anything in this Section 5(c)(ii) to the contrary, if the Participant engages in work or other activity that causes the Participant to no longer qualify for Normal Retirement treatment (such as Competitive Activity) following the Participant’s Termination of Service, the Participant will no longer be qualified to receive and retain any portion of the Award that has not yet vested as of the date the Participant engages in activity that causes the Participant to no longer qualify for Normal Retirement. The Participant must immediately provide notice to the Company as set forth in Section 9(b) if the Participant engages in Competitive Activity.
(d)Change in Control. Notwithstanding anything in this Agreement to the contrary, if, during a Change in Control Period, the Participant incurs a Termination of Service (i) due to the Participant’s death or Disability, (ii) that qualifies as an Early Retirement or Normal Retirement, or (iii) by the Company for any reason other than for Cause, the Participant shall become immediately vested in any portion of the Award in which the Participant has not yet become vested, to the extent not previously forfeited or cancelled.
(e)Termination of Service for Cause. Upon the Participant’s Termination of Service by the Company for Cause, the entire Award, including all of the Restricted Stock Units subject to the Award, whether vested or unvested, shall be immediately forfeited by the Participant and cancelled, without the payment of consideration.
6.Award Settlement. Upon the Participant becoming vested in any portion of the Award, the Company shall deliver to the Participant one share of Common Stock for each vested Restricted Stock Unit in accordance with this Agreement (with any fractional shares of Common Stock being rounded to the nearest whole share of Common Stock). Delivery of such shares of Common Stock shall be made as soon as reasonably practicable following the applicable date the Participant becomes vested in the Restricted Stock Units, but in no event later than the fifteenth day of the third month following the end of the Fiscal Year in which the Participant becomes vested in the Restricted Stock Units; provided, that, if the Award is considered “nonqualified deferred compensation” (within the meaning of Section 409A of the Code), delivery of such shares of Common Stock shall be within the calendar year in which the Participant becomes vested in the Restricted Stock Units.
7.Section 409A Compliance. To the extent the Award constitutes “nonqualified deferred compensation” (within the meaning of Section 409A of the Code), then (a) this Agreement is intended to comply with the requirements of Section 409A of the Code and the Restricted Stock Units subject to this Agreement shall be interpreted in a manner consistent with this intent; and (b) if the Participant is a “specified employee” as defined in Section 409A of the Code at the time of the Participant’s Termination of Service, then solely to the extent necessary to comply with Section 409A of the Code, no shares of Common Stock shall be
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delivered in respect of any Restricted Stock Units until the date that is six months following the date of the Participant’s Termination of Service or, if earlier, the Participant’s death.
8.Taxes. The Company shall have the power and the right to require the Participant to remit to the Company the amount necessary to satisfy federal, state, provincial and local taxes, domestic or foreign, required by law or regulation to be withheld, and to deduct or withhold from any shares of Common Stock deliverable under the Award to satisfy such withholding obligation.
9.General.
(a)Amendments. No amendment, suspension or termination of this Agreement shall materially and adversely affect the rights of the Participant under this Agreement without the consent of the Participant.
(b)Notices. Any notice or other communication required or which may be given hereunder shall be in writing and shall be deemed to have been given (i) on the date of transmission, if delivered by facsimile or electronic mail, (ii) on the date of delivery, if delivered by hand, (iii) on the first (1st) business day following the date of mailing, if sent by a nationally recognized overnight express mail service, or (iv) on the fourth (4th) business day after the date of mailing, if sent by United States registered or certified mail, return receipt requested, postage prepaid, as follows:
(i)If to the Company, to:
Albertsons Companies, Inc.
250 Parkcenter Blvd.
Boise, ID 83706
Attention: Executive Vice President, Chief Human Resources Officer, Government Relations, Labor Relations, & Public Affairs
Telephone: (208) 395-5785
With a copy to: General Counsel
With a copy to: General Counsel
(ii)If to the Participant, to the address listed in the personnel records of the Company.
(c)Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors and permitted assigns. The Participant may not assign any of its rights or obligations under this Agreement without the prior written consent of the Company.
(d)Counterparts. This Agreement may be executed in two or more counterparts, each of which, when so executed and delivered, shall be deemed to be an original, but all of which counterparts, taken together, shall constitute one and the same instrument.
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(e)Descriptive Headings, Etc. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein. Unless the context of this Agreement otherwise requires: (i) words of any gender shall be deemed to include each other gender; (ii) words using the singular or plural number shall also include the plural or singular number, respectively; (iii) the words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and paragraph references are to the Sections and paragraphs of this Agreement unless otherwise specified; (iv) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified; (v) “or” is not exclusive; and (vi) provisions apply to successive events and transactions.
(f)Severability. If any provision of this Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.
(g)Choice of Law and Venue. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware, without reference to the principles of conflicts of laws, and to applicable federal laws. The parties agree that any legal claim arising from or related to this Agreement that may be pursued in a court of law shall be pursued exclusively in a court of competent subject matter jurisdiction located Idaho, and the parties consent to the personal jurisdiction of the courts located in Idaho and waive all objections to same (based on convenience, cost, location of witnesses or evidence, or otherwise); provided, however, that if for any reason personal jurisdiction cannot be maintained over a party in accordance with the forgoing choice of venue clause then it shall not apply.
(h)Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR THE VALIDITY, INTERPRETATION OR ENFORCEMENT HEREOF. THE PARTIES HERETO AGREE THAT THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND WOULD NOT ENTER INTO THIS AGREEMENT IF THIS SECTION WERE NOT PART OF THIS AGREEMENT.
(i)Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings relating to such subject matter, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties hereto with respect to such subject matter.
(j)Further Assurances. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto
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reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
(k)Construction. The Company and the Participant acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Agreement with its legal counsel and that this Agreement shall be construed as if jointly drafted by the Company and the Participant.
(l)Unfunded Status of Award. Except upon the issuance of shares of Common Stock pursuant to this Agreement, any rights of the Participant under the Plan and this Agreement shall be those of a general unsecured creditor of the Company, and neither the Participant nor the Participant’s permitted transferees or estate shall have any other interest in any assets of the Company or its subsidiaries by virtue of the Plan or this Agreement.
(m)Plan Governs. This Award is made pursuant to the terms and conditions of the Plan. In the event of a conflict between this Agreement and the Plan, the provisions of the Plan shall govern.
(n)No Employment Rights. Nothing in the Plan or this Agreement shall confer upon the Participant any right to continue in the Service of the Company or any of its subsidiaries or interfere in any way with the right of the Company or any of its subsidiaries to terminate the employment or other service relationship of the Participant for any reason or no reason at any time.
(o)No Rights as Stockholder. The Participant shall not have any rights as a stockholder with respect to the shares subject to this Award until shares of Common Stock are delivered to the Participant pursuant to this Agreement.
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Exhibit 10.3
ALBERTSONS COMPANIES, INC.
2020 OMNIBUS INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
Albertsons Companies, Inc. (the “Company”), pursuant to the Albertsons Companies, Inc. 2020 Omnibus Incentive Plan (the “Plan”), hereby grants to the Participant named below an Award of Restricted Stock Units. Unless otherwise defined herein, the capitalized terms used in this Restricted Stock Unit Award Agreement (the “Agreement”), which includes the Notice of Grant (the “Notice of Grant”) and Terms and Conditions of Restricted Stock Unit Grant, attached hereto as Exhibit A (including the Appendix), shall have the meanings ascribed to such terms in the Plan.
NOTICE OF GRANT
Participant: | |||||||||||
Grant Date: | |||||||||||
Award Term: | 2021-2023 | ||||||||||
Target Number of Restricted Stock Units: | |||||||||||
| Fiscal Year: | 2021 | 2022 | 2023 | ||||||||
| Target Number: | [•] | [•] | [•] | ||||||||
Vesting Schedule: | See the Appendix to Exhibit A, attached hereto | ||||||||||
The Participant and the Company agree that this Award of Restricted Stock Units is granted under and governed by the terms and conditions of the Plan and this Agreement, including the Terms and Conditions of Restricted Stock Unit Grant, attached hereto as Exhibit A, all of which are incorporated into this Agreement.
ALBERTSONS COMPANIES, INC. By: Name: Title: | PARTICIPANT: Name: | ||||
EXHIBIT A
TERMS AND CONDITIONS OF RESTRICTED STOCK UNIT GRANT
1.Grant. The Company hereby grants to the individual named in the Notice of Grant (the “Participant”) the right to be awarded Restricted Stock Units in respect of each Fiscal Year during the Award Term, subject to all of the terms and conditions in this Agreement and the Plan.
2.Awarding and Vesting. The Participant shall be awarded and become vested in the Restricted Stock Units subject to the Award as set forth on the Appendix.
3.Section 409A Compliance. To the extent the Award constitutes “nonqualified deferred compensation” (within the meaning of Section 409A of the Code), then (a) this Agreement is intended to comply with the requirements of Section 409A of the Code and the Restricted Stock Units subject to this Agreement shall be interpreted in a manner consistent with this intent; and (b) if the Participant is a “specified employee” as defined in Section 409A of the Code at the time of the Participant’s Termination of Service, then solely to the extent necessary to comply with Section 409A of the Code, no shares of Common Stock shall be delivered in respect of any Restricted Stock Units until the date that is six months following the date of the Participant’s Termination of Service or, if earlier, the Participant’s death.
4.Taxes. The Company shall have the power and the right to require the Participant to remit to the Company the amount necessary to satisfy federal, state, provincial and local taxes, domestic or foreign, required by law or regulation to be withheld, and to deduct or withhold from any shares of Common Stock deliverable under the Award to satisfy such withholding obligation.
5.General.
(a)Amendments. No amendment, suspension or termination of this Agreement shall materially and adversely affect the rights of the Participant under this Agreement without the consent of the Participant.
(b)Notices. Any notice or other communication required or which may be given hereunder shall be in writing and shall be deemed to have been given (i) on the date of transmission, if delivered by facsimile or electronic mail, (ii) on the date of delivery, if delivered by hand, (iii) on the first business day following the date of mailing, if sent by a nationally recognized overnight express mail service, or (iv) on the fourth business day after the date of mailing, if sent by United States registered or certified mail, return receipt requested, postage prepaid, as follows:
(i)If to the Company, to:
Albertsons Companies, Inc.
250 Parkcenter Blvd.
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Boise, ID 83706
Attention: Executive Vice President, Chief Human Resources Officer, Government Relations, Labor Relations, & Public Affairs
Telephone: (208) 395-5785
With a copy to: General Counsel
With a copy to: General Counsel
(ii)If to the Participant, to the address listed in the personnel records of the Company.
(c)Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors and permitted assigns. The Participant may not assign any of its rights or obligations under this Agreement without the prior written consent of the Company.
(d)Counterparts. This Agreement may be executed in two or more counterparts, each of which, when so executed and delivered, shall be deemed to be an original, but all of which counterparts, taken together, shall constitute one and the same instrument.
(e)Descriptive Headings, Etc. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein. Unless the context of this Agreement otherwise requires: (i) words of any gender shall be deemed to include each other gender; (ii) words using the singular or plural number shall also include the plural or singular number, respectively; (iii) the words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and paragraph references are to the Sections and paragraphs of this Agreement unless otherwise specified; (iv) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified; (v) “or” is not exclusive; and (vi) provisions apply to successive events and transactions.
(f)Severability. If any provision of this Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.
(g)Choice of Law and Venue. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware, without reference to the principles of conflicts of laws, and to applicable federal laws. The parties agree that any legal claim arising from or related to this Agreement that may be pursued in a court of law shall be pursued exclusively in a court of competent subject matter jurisdiction located Idaho, and the parties consent to the personal jurisdiction of the courts located in Idaho and waive all objections to same (based on convenience, cost, location of witnesses or evidence, or otherwise); provided, however, that if for any reason personal jurisdiction cannot be maintained over a party in accordance with the forgoing choice of venue clause then it shall not apply.
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(h)Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR THE VALIDITY, INTERPRETATION OR ENFORCEMENT HEREOF. THE PARTIES HERETO AGREE THAT THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND WOULD NOT ENTER INTO THIS AGREEMENT IF THIS SECTION WERE NOT PART OF THIS AGREEMENT.
(i)Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings relating to such subject matter, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties hereto with respect to such subject matter.
(j)Further Assurances. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
(k)Construction. The Company and the Participant acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Agreement with its legal counsel and that this Agreement shall be construed as if jointly drafted by the Company and the Participant.
(l)Unfunded Status of Award. Except upon the issuance of shares of Common Stock pursuant to this Agreement, any rights of the Participant under the Plan and this Agreement shall be those of a general unsecured creditor of the Company, and neither the Participant nor the Participant’s permitted transferees or estate shall have any other interest in any assets of the Company or its subsidiaries by virtue of the Plan or this Agreement.
(m)Plan Governs. This Award is made pursuant to the terms and conditions of the Plan. In the event of a conflict between this Agreement and the Plan, the provisions of the Plan shall govern.
(n)No Employment Rights. Nothing in the Plan or this Agreement shall confer upon the Participant any right to continue in the Service of the Company or any of its subsidiaries or interfere in any way with the right of the Company or any of its subsidiaries to terminate the employment or other service relationship of the Participant for any reason or no reason at any time.
(o)No Rights as Stockholder. The Participant shall not have any rights as a stockholder with respect to the shares subject to this Award until shares of Common Stock are delivered to the Participant pursuant to this Agreement.
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APPENDIX
1.Definitions.
“Accrual Factor” means, with respect to a Fiscal Year, a number equal to the product of (i) the EPS Accrual Percentage (as determined in accordance with Section 2(a)) and (ii) the ROIC Modifier (as determined in accordance with Section 2(b)).
“Accrued RSUs” means the Restricted Stock Units credited to the Participant’s RSU Account in accordance with this Appendix.
“Cause” shall have the meaning ascribed to such term in the Plan.
“Change in Control Period” means the 24-month period following a Change in Control.
“Competitive Activity” means the Participant’s engagement, directly or indirectly, as principal, agent, independent contractor, consultant, director, officer, employee, employer, advisor, stockholder, partner, member or in any other individual or representative capacity whatsoever, whether paid or unpaid, either for the Participant’s own benefit or the benefit of any other person or entity, other than on behalf of the Company, to organize, establish, own, operate, manage, control, engage in, participate in, invest in, permit the Participant’s name to be used by, act as a consultant or advisor to, render services for (alone or in association with any person, firm, corporation or business organization), or otherwise assist any person or entity that engages in or owns, invests in, operates, manages or controls any venture or enterprise which engages or proposes to engage in (i) the business conducted by the Company or any of its subsidiaries on the date of the Participant’s Termination of Service in the geographic locations where the Company or any of its subsidiaries engage in such business or (ii) any business which, to the Participant’s knowledge, the Company or any of its subsidiaries propose to engage in within the twelve (12) month period following the date of the Participant’s Termination of Service in the geographic locations where the Company or any of its subsidiaries propose to engage in such business.
“Closed Fiscal Year” means a Fiscal Year in the Award Term that has ended.
“Disability” shall have the meaning ascribed to such term in the Plan.
“Early Retirement” means, prior to the Participant’s attainment of age 62, the Participant’s Termination of Service for any reason, other than for Cause, death or Disability, on or after the Participant’s (i) attainment of age 55 and (ii) completion of 10 years of continuous service with the Company or any of its subsidiaries. The Participant’s years of service shall be determined by the Committee in accordance with predetermined, nondiscretionary rules established by the Company.
“EPS” means, with respect to a particular Fiscal Year, the Company’s Adjusted Net Income Per Class A Common Share, as defined in the Company’s Form 10-K for such Fiscal
Year, as consistently applied to each Fiscal Year and in a manner determined and approved by the Committee within a reasonable time period following the commencement of the Fiscal Year.
“EPS Goal” means, with respect to a particular Fiscal Year, a target amount of EPS to be achieved by the Company during such Fiscal Year, as set by the Committee in its sole discretion.
“Final Date” means the final day of the third Fiscal Year of the Award Term.
“Fiscal Year” means a fiscal year of the Company (excluding fiscal years of less than 12 months).
“Normal Retirement” means the Participant’s Termination of Service for any reason, other than for Cause, death or Disability, on or after the Participant’s attainment of age 62, and forbearance from engaging in any work or activity that would constitute Competitive Activity. Notwithstanding the foregoing, if the Participant’s primary place of employment or services as of the Participant’s Termination of Service is California, North Dakota, Oklahoma or any state that prohibits the enforcement of post-employment non-competition agreements, the Participant’s engaging in any work or activity that would constitute Competitive Activity after the Participant’s Termination of Service shall not cause the Participant fail to qualify for Normal Retirement.
“Open Fiscal Year” means each Fiscal Year in the Award Term that has commenced but not yet ended or has not yet commenced.
“ROIC” means, with respect to a particular Fiscal Year, the Company’s return on invested capital for a Fiscal Year, determined by dividing (i) the Company’s adjusted operating profit for such Fiscal Year, by (ii) the Company’s average invested capital for such Fiscal Year. For purposes of the calculation of ROIC, the Company’s adjusted operating profit for a Fiscal Year shall exclude certain items included in the Company’s U.S. GAAP operating profit that management does not consider in assessing core performance in addition to adjustments for LIFO charges (credits), depreciation and amortization and rent to the Company’s U.S. GAAP operating profit for the Fiscal Year. For purposes of the calculation of ROIC, the Company’s average invested capital for a Fiscal Year shall be calculated as the sum of (i) the average of the Company’s total assets, (ii) the average LIFO reserve, (iii) the average accumulated depreciation and amortization; minus (i) the average taxes receivable, (ii) the average trade accounts payable, (iii) the average accrued salaries and wages, (iv) the average other current liabilities, excluding accrued income taxes and (v) certain other adjustments as appropriately determined. ROIC shall be consistently applied to each Fiscal Year and approved by the Committee within a reasonable time period following the commencement of the Fiscal Year.
“ROIC Goal” means, with respect to a particular Fiscal Year, a target amount of ROIC to be achieved by the Company during such Fiscal Year, as set by the Committee in its sole discretion.
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“RSU Account” means an unfunded bookkeeping account, notionally established on behalf of the Participant, that will be credited with any Accrued RSUs pursuant to the terms of this Agreement.
“Target Number” means, with respect to a particular Fiscal Year, the target number of Restricted Stock Units in respect of such Fiscal Year specified in the Notice of Grant.
2.Performance Criteria. At the end of each Fiscal Year of the Award Term, the Participant’s RSU Account shall be credited with that number of Accrued RSUs equal to the Target Number for such Fiscal Year multiplied by the Accrual Factor for such Fiscal Year.
(a)EPS Accrual Percentage. The “EPS Accrual Percentage” for a particular Fiscal Year shall be determined as indicated in the table below by comparing the Company’s EPS for such Fiscal Year to the EPS Goal for such Fiscal Year (expressed as a percentage):
Attainment of EPS Goal (EPS/EPS Goal) | EPS Accrual Percentage | ||||
| Less than 66% | 0% | ||||
| 66% | 50% | ||||
| 100% | 100% | ||||
| Greater than or equal to 123% | 160% | ||||
If the Company’s EPS for a Fiscal Year as compared to the EPS Goal for such Fiscal Year falls between the percentiles specified in the table above, the EPS Accrual Percentage for such Fiscal Year shall be determined on a straight-line interpolated basis. In no event shall the EPS Accrual Percentage for a Fiscal Year be more than 160%.
(b)ROIC Modifier. The “ROIC Modifier” for a particular Fiscal Year shall be determined as indicated in the table below by comparing the Company’s ROIC for such Fiscal Year to the ROIC Goal for such Fiscal Year (expressed as a percentage):
Attainment of ROIC Goal (ROIC/ROIC Goal) | ROIC Modifier | ||||
| Less than or equal to 89% | 75% | ||||
| Greater than 89% but less than 107% | 100% | ||||
| Greater than or equal to 107% | 125% | ||||
In no event shall the ROIC Modifier for a Fiscal Year be more than 125%.
3.Dividend Equivalent Rights. If the Company declares and pays a cash dividend on the shares of Common Stock, the Participant’s RSU Account will be credited with an additional number of Accrued RSUs equal to: (a) the product of (i) the number of Accrued RSUs in the Participant’s RSU Account (including additional Accrued RSUs previously credited
7 | ||||||||
to the Participant’s RSU Account in accordance with this Section 3) for which shares of Common Stock have not been delivered to the Participant as of the dividend payment date, and (ii) the amount of the cash dividend paid per share of Common Stock; divided by (b) the Fair Market Value (which shall be equal to the closing price) of a share of Common Stock on the dividend payment date. Each additional Accrued RSU credited to the Participant’s RSU Account pursuant to this Section 3 shall be subject to the same terms, conditions and restrictions as the underlying Accrued RSUs to which such additional Accrued RSU relates.
4.Termination of Service.
(a)If the Participant incurs a Termination of Service prior to the Final Date other than due to Participant’s death, Disability, Early Retirement or Normal Retirement, the entire Award, including any Accrued RSUs credited to the Participant’s RSU Account in respect of any Completed Fiscal Year, shall be immediately forfeited by the Participant and cancelled, without the payment of consideration.
(b)If the Participant incurs a Termination of Service due to the Participant’s death or Disability:
(i)the Participant’s RSU Account shall be immediately credited with that number of Accrued RSUs equal to the Target Number in respect of each Open Fiscal Year; and
(ii)the Participant shall not be entitled to have any additional Accrued RSUs credited to the Participant’s RSU Account in respect of the Award Term or under this Agreement.
(c)If the Participant incurs a Termination of Service that qualifies as an Early Retirement:
(i)at the end of the Fiscal Year in which the Participant’s Early Retirement occurs, the Participant’s RSU Account shall be credited with that number of Accrued RSUs equal to the product of (A) that number of Accrued RSUs, calculated pursuant to Section 2 of this Appendix, which would have been credited to the Participant’s RSU Account for the Open Fiscal Year in which the Participant’s Early Retirement occurs, and (B) a fraction, the numerator of which is the number of days elapsed in the period beginning on the first day of the Fiscal Year in which the Participant’s Early Retirement occurs and ending on the date the Participant’s Early Retirement occurs and the denominator of which is the number of days in the Fiscal Year in which the Participant’s Early Retirement occurs; and
(ii)the Participant shall not be entitled to have any additional Accrued RSUs credited to the Participant’s RSU Account in respect of the Award Term or under this Agreement.
(d)If the Participant incurs a Termination of Service that qualifies as a Normal Retirement, at the end of each Open Fiscal Year, the Participant’s RSU Account shall be
8 | ||||||||
credited with that number of Accrued RSUs, calculated pursuant to Section 2 of this Appendix which would have been credited to the Participant’s RSU Account in respect of such Open Fiscal Year. Notwithstanding the foregoing, in the event of the Participant’s death following the Participant’s Normal Retirement but prior to the Final Date, the Participant’s RSU Account shall be credited with that number of Accrued RSUs equal to the Target Number in respect of each Open Fiscal Year (determined as of the date of the Participant’s death) and the Participant shall not be entitled to have any additional Accrued RSUs credited to the Participant’s RSU Account in respect of the Award Term or under this Agreement. Notwithstanding anything in this Section 4(d) to the contrary, if the Participant engages in work or other activity that causes the Participant to no longer qualify for Normal Retirement treatment (such as Competitive Activity) following the Participant’s Termination of Service, the Participant will no longer be qualified to receive and retain any portion of the Award that has not yet vested as of the date the Participant engages in activity that causes the Participant to no longer qualify for Normal Retirement. The Participant must immediately provide notice to the Company as set forth in Section 5(b) of the Agreement if the Participant engages in Competitive Activity.
5.Award Settlement. Subject to Section 3 of the Agreement, as soon as reasonably practicable following the applicable settlement date, but in no event later than the fifteenth day of the third month following the end of the Fiscal Year in which the applicable settlement date occurs, the Company shall deliver to the Participant one share of Common Stock for each Accrued RSU in the Participant’s RSU Account (with any fractional shares of Common Stock being rounded to the nearest whole share of Common Stock), to the extent not otherwise forfeited or cancelled pursuant to the terms of this Agreement (provided, that, if the Award is considered “nonqualified deferred compensation” (within the meaning of Section 409A of the Code), delivery of such Common Stock shall be within the calendar year in which the applicable settlement date occurs). For purposes of this Section 5, the applicable settlement date shall be the Final Date, provided, however, if the Participant incurs a Termination of Service due to the Participant’s death or Disability, the applicable settlement date shall be the Participant’s Termination of Service.
6.Change in Control. Notwithstanding anything in this Appendix to the contrary, if a Change in Control occurs during the Award Term:
(a)Upon such Change in Control, the Participant’s RSU Account shall immediately be credited with a number of Accrued RSUs equal to the Target Number in respect of each Open Fiscal Year as of the date of the Change in Control and thereafter Participant shall not be entitled to have any additional Accrued RSUs credited to the Participant’s RSU Account in respect of the Award Term or under this Agreement.
(b)If, during a Change in Control Period, the Participant incurs a Termination of Service for any reason other than due to (i) the Participant’s death, Disability, Early Retirement or Normal Retirement or (ii) an involuntary Termination of Service by the Company for any reason other than for Cause, the entire Award, including any Accrued RSUs credited to the Participant’s RSU Account, shall be immediately forfeited by the Participant and cancelled, without the payment of consideration.
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(c)If, prior to the Change in Control, the Participant has incurred a Termination of Service which qualifies as an Early Retirement, then to the extent such Change in Control occurs in the Fiscal Year in which the Participant’s Early Retirement occurs:
(i)the Participant’s RSU Account shall immediately be credited with that number of Accrued RSUs equal to the product of (i) the Target Number for the Open Fiscal Year in which the Participant’s Early Retirement occurs, and (B) a fraction, the numerator of which is the number of days elapsed in the period beginning on the first day of the Fiscal Year in which the Participant’s Early Retirement occurs and ending on the date the Participant’s Early Retirement occurs and the denominator of which is the number of days in the Fiscal Year in which the Participant’s Early Retirement occurs; and
(ii)the Participant shall not be entitled to have any additional Accrued RSUs credited to the Participant’s RSU Account in respect of the Award Term or under this Agreement.
(d)If, prior to the Change in Control, the Participant has incurred a Termination of Service which qualifies as a Normal Retirement, upon such Change in Control, the Participant’s RSU Account shall immediately be credited with a number of Accrued RSUs equal to the Target Number in respect of each Open Fiscal Year as of the date of the Change in Control and thereafter the Participant shall not be entitled to have any additional Accrued RSUs credited to the Participant’s RSU Account in respect of the Award Term or under this Agreement.
(e)Subject to Section 3 of the Agreement, as soon as reasonably practicable following the applicable settlement date, but in no event later than the fifteenth day of the third month following the end of the Fiscal Year in which the applicable settlement date occurs, the Company shall deliver to the Participant one share of Common Stock for each Accrued RSU in the Participant’s RSU Account (with any fractional shares of Common Stock being rounded to the nearest whole share of Common Stock), to the extent not otherwise forfeited or cancelled pursuant to the terms of this Agreement (provided, that, if the Award is considered “nonqualified deferred compensation” (within the meaning of Section 409A of the Code), delivery of such Common Stock shall be within the calendar year in which the applicable settlement date occurs). For purposes of this Section 6(e), the applicable settlement date shall be the Final Date, provided, however, if the Participant incurs a Termination of Service during a Change in Control Period, the applicable Settlement Date shall be date of the Participant’s Termination of Service.
7.Termination of Service for Cause. Notwithstanding anything in this Agreement or the Plan to the contrary, upon the Participant’s Termination of Service by the Company for Cause, the entire Award, including any Accrued RSUs in the Participant’s RSU Account, shall be immediately forfeited by the Participant and cancelled, without the payment of consideration.
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Exhibit 31.1
Certification of the Principal Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
| I, Vivek Sankaran, certify that: | |||||
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Albertsons Companies, Inc.; | ||||
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||||
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||||
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | ||||
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||||||
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |||||||
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |||||||
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |||||||
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | ||||
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |||||||
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |||||||
| Date: | July 29, 2021 | /s/ Vivek Sankaran | |||||||||
| Vivek Sankaran | |||||||||||
| President, Chief Executive Officer and Director (Principal Executive Officer) | |||||||||||
Exhibit 31.2
Certification of the Principal Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
I, Robert B. Dimond, certify that: | |||||
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Albertsons Companies, Inc.; | ||||
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||||
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||||
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | ||||
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||||||
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |||||||
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |||||||
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |||||||
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | ||||
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |||||||
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |||||||
| Date: | July 29, 2021 | /s/ Robert B. Dimond | |||||||||
| Robert B. Dimond | |||||||||||
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) | |||||||||||
Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Albertsons Companies, Inc. (the “Company”) on Form 10-Q for the period ended June 19, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | ||||
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. | ||||
| Date: | July 29, 2021 | /s/ Vivek Sankaran | |||||||||
| Vivek Sankaran | |||||||||||
| President, Chief Executive Officer and Director (Principal Executive Officer) | |||||||||||
| /s/ Robert B. Dimond | ||||||||
| Robert B. Dimond | ||||||||
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||||||||