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1、UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended December 2,2023OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934F

2、or the transition period from _ to _Commission File Number:001-39350Albertsons Companies,Inc.(Exact name of registrant as specified in its charter)Delaware47-4376911(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)250 Parkcenter Blvd.Boise,Idaho 83706(

3、Address of principal executive offices and zip code)(208)395-6200(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredClass A common stock,$0.01 par valueACINew York St

4、ock ExchangeIndicate 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 duringthe preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject t

5、o such filing requirements forthe past 90 days.Yes NoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period

6、 that the registrant was required to submit suchfiles).Yes NoIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or anemerging growth company.See the definitions of large accelerated filer,accelerated fil

7、er,smaller reporting company and emerging growth company inRule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the ext

8、ended transition period for complying with any new orrevised 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 NoAs of January 5,2024,the registrant h

9、ad 576,039,866 shares of Class A common stock,par value$0.01 per share,outstanding.Albertsons Companies,Inc.and SubsidiariesPART I-FINANCIAL INFORMATIONPageItem 1-Condensed Consolidated Financial Statements(unaudited)Condensed Consolidated Balance Sheets3Condensed Consolidated Statements of Operatio

10、ns and Comprehensive Income4Condensed Consolidated Statements of Cash Flows5Condensed Consolidated Statements of Stockholders Equity6Notes to Condensed Consolidated Financial Statements8Item 2-Managements Discussion and Analysis of Financial Condition and Results of Operations21Item 3-Quantitative a

11、nd Qualitative Disclosures About Market Risk34Item 4-Controls and Procedures34PART II-OTHER INFORMATIONItem 1-Legal Proceedings36Item 1A-Risk Factors36Item 2-Unregistered Sales of Equity Securities and Use of Proceeds36Item 3-Defaults Upon Senior Securities37Item 4-Mine Safety Disclosures37Item 5-Ot

12、her Information37Item 6-Exhibits37SIGNATURES38Table of ContentsPART I-FINANCIAL INFORMATIONItem 1-Condensed Consolidated Financial Statements(unaudited)Albertsons Companies,Inc.and SubsidiariesCondensed Consolidated Balance Sheets(in millions,except share data)(unaudited)December 2,2023February 25,2

13、023ASSETSCurrent assetsCash and cash equivalents$222.7$455.8 Receivables,net828.4 687.6 Inventories,net5,175.8 4,782.0 Other current assets435.0 345.0 Total current assets6,661.9 6,270.4 Property and equipment,net9,417.1 9,358.7 Operating lease right-of-use assets5,926.3 5,879.1 Intangible assets,ne

14、t2,450.8 2,465.4 Goodwill1,201.0 1,201.0 Other assets839.4 993.6 TOTAL ASSETS$26,496.5$26,168.2 LIABILITIESCurrent liabilitiesAccounts payable$4,119.2$4,173.1 Accrued salaries and wages1,276.5 1,317.4 Current maturities of long-term debt and finance lease obligations737.8 1,075.7 Current maturities

15、of operating lease obligations674.1 664.8 Other current liabilities1,049.9 1,197.8 Total current liabilities7,857.5 8,428.8 Long-term debt and finance lease obligations7,797.0 7,834.4 Long-term operating lease obligations5,514.1 5,386.2 Deferred income taxes794.6 854.0 Other long-term liabilities2,0

16、06.0 2,008.4 Commitments and contingenciesSeries A convertible preferred stock,$0.01 par value;1,750,000 shares authorized,no shares issued and outstanding as ofDecember 2,2023 and 50,000 shares issued and outstanding as of February 25,2023 45.7 Series A-1 convertible preferred stock,$0.01 par value

17、;1,410,000 shares authorized,no shares issued and outstanding as ofDecember 2,2023 and February 25,2023 STOCKHOLDERS EQUITYUndesignated preferred stock,$0.01 par value;96,840,000 shares authorized,no shares issued as of December 2,2023 andFebruary 25,2023 Class A common stock,$0.01 par value;1,000,0

18、00,000 shares authorized,594,390,891 and 590,968,600 shares issued as ofDecember 2,2023 and February 25,2023,respectively5.9 5.9 Class A-1 convertible common stock,$0.01 par value;150,000,000 shares authorized,no shares issued as of December 2,2023 and February 25,2023 Additional paid-in capital2,10

19、9.2 2,072.7 Treasury stock,at cost,18,397,745 and 21,300,945 shares held as of December 2,2023 and February 25,2023,respectively(304.2)(352.2)Accumulated other comprehensive income68.7 69.3 Retained earnings(accumulated deficit)647.7(185.0)Total stockholders equity2,527.3 1,610.7 TOTAL LIABILITIES A

20、ND STOCKHOLDERS EQUITY$26,496.5$26,168.2 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.3Table of ContentsAlbertsons Companies,Inc.and SubsidiariesCondensed Consolidated Statements of Operations and Comprehensive Income(in millions,except per share d

21、ata)(unaudited)12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Net sales and other revenue$18,557.3$18,154.9$60,898.2$59,384.6 Cost of sales13,360.0 13,033.2 43,996.7 42,713.3 Gross margin5,197.3 5,121.7 16,901.5 16,671.3 Selling and administrative expenses4,6

22、07.3 4,532.0 15,215.7 14,883.9 Loss(gain)on property dispositions and impairmentlosses,net23.9 7.3 43.1(86.1)Operating income566.1 582.4 1,642.7 1,873.5 Interest expense,net116.3 84.3 383.1 313.0 Other(income)expense,net(6.7)1.7(14.6)(23.5)Income before income taxes456.5 496.4 1,274.2 1,584.0 Income

23、 tax expense95.1 120.9 228.7 381.6 Net income$361.4$375.5$1,045.5$1,202.4 Other comprehensive income(loss),net of taxRecognition of pension(loss)gain(1.0)0.1(3.5)0.4 Other0.8(0.1)2.9(3.3)Other comprehensive(loss)income$(0.2)$(0.6)$(2.9)Comprehensive income$361.2$375.5$1,044.9$1,199.5 Net income per

24、Class A common shareBasic net income per Class A common share$0.63$0.20$1.82$1.74 Diluted net income per Class A common share0.62 0.20 1.80 1.72 Weighted average Class A common shares outstanding(in millions)Basic576.2 534.6 575.2 525.4 Diluted581.1 538.6 580.5 529.8 The accompanying notes are an in

25、tegral part of these Condensed Consolidated Financial Statements.4Table of ContentsAlbertsons Companies,Inc.and SubsidiariesCondensed Consolidated Statements of Cash Flows(in millions)(unaudited)40 weeks endedDecember 2,2023December 3,2022Cash flows from operating activities:Net income$1,045.5$1,202

26、.4 Adjustments to reconcile net income to net cash provided by operating activities:Loss(gain)on property dispositions and impairment losses,net43.1(86.1)Depreciation and amortization1,359.9 1,380.9 Operating lease right-of-use assets amortization510.7 500.7 LIFO expense87.8 181.4 Deferred income ta

27、x(116.5)101.3 Contributions to pension and post-retirement benefit plans,net of(income)expense(17.0)(34.9)Gain on interest rate swaps and energy hedges,net(6.1)(12.9)Deferred financing costs12.0 13.0 Equity-based compensation expense80.5 96.6 Other operating activities(8.6)1.9 Changes in operating a

28、ssets and liabilities:Receivables,net(139.4)(143.8)Inventories,net(481.6)(735.4)Accounts payable,accrued salaries and wages and other accrued liabilities54.1 33.6 Operating lease liabilities(424.3)(412.0)Self-insurance assets and liabilities31.3 49.6 Other operating assets and liabilities(300.6)(64.

29、3)Net cash provided by operating activities1,730.8 2,072.0 Cash flows from investing activities:Payments for property,equipment and intangibles,including lease buyouts(1,535.0)(1,566.9)Proceeds from sale of assets201.3 99.4 Other investing activities4.9(11.2)Net cash used in investing activities(1,3

30、28.8)(1,478.7)Cash flows from financing activities:Proceeds from issuance of long-term debt,including ABL facility150.0 1,400.0 Payments on long-term borrowings,including ABL facility(500.7)(200.5)Payments of obligations under finance leases(45.4)(46.4)Dividends paid on common stock(207.1)(190.9)Div

31、idends paid on convertible preferred stock(0.8)(50.2)Employee tax withholding on vesting of restricted stock units(37.1)(42.9)Other financing activities2.5 5.3 Net cash(used in)provided by financing activities(638.6)874.4 Net(decrease)increase in cash and cash equivalents and restricted cash(236.6)1

32、,467.7 Cash and cash equivalents and restricted cash at beginning of period463.8 2,952.6 Cash and cash equivalents and restricted cash at end of period$227.2$4,420.3 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.5Table of ContentsAlbertsons Companie

33、s,Inc.and SubsidiariesCondensed Consolidated Statements of Stockholders Equity(in millions,except share data)(unaudited)Class A Common StockAdditionalpaid-incapitalTreasury StockAccumulatedothercomprehensiveincomeRetainedearnings(accumulateddeficit)TotalstockholdersequitySharesAmountSharesAmountBala

34、nce as of February 25,2023590,968,600$5.9$2,072.7 21,300,945$(352.2)$69.3$(185.0)$1,610.7 Equity-based compensation 27.7 27.7 Shares issued and employee taxwithholding on vesting of restrictedstock units3,059,905 (33.1)(33.1)Convertible preferred stockconversions (2,903,200)48.0 (2.3)45.7 Cash divid

35、ends declared on commonstock($0.12 per common share)(69.0)(69.0)Dividends accrued on convertiblepreferred stock (0.3)(0.3)Net income 417.2 417.2 Other comprehensive income,net oftax 1.1 1.1 Other activity 1.0 (1.0)Balance as of June 17,2023594,028,505$5.9$2,068.3 18,397,745$(304.2)$70.4$159.6$2,000.

36、0 Equity-based compensation 22.2 22.2 Shares issued and employee taxwithholding on vesting of restrictedstock units199,441 (2.0)(2.0)Cash dividends declared on commonstock($0.12 per common share)(69.0)(69.0)Net income 266.9 266.9 Other comprehensive loss,net of tax (1.5)(1.5)Other activity 1.1 (1.1)

37、Balance as of September 9,2023594,227,946$5.9$2,089.6 18,397,745$(304.2)$68.9$356.4$2,216.6 Equity-based compensation 20.4 20.4 Shares issued and employee taxwithholding on vesting of restrictedstock units162,945 (2.0)(2.0)Cash dividends declared on commonstock($0.12 per common share)(69.1)(69.1)Net

38、 income 361.4 361.4 Other comprehensive loss,net of tax (0.2)(0.2)Other activity 1.2 (1.0)0.2 Balance as of December 2,2023594,390,891$5.9$2,109.2 18,397,745$(304.2)$68.7$647.7$2,527.3 6Table of ContentsAlbertsons Companies,Inc.and SubsidiariesCondensed Consolidated Statements of Stockholders Equity

39、(in millions,except share data)(unaudited)Class A Common StockAdditionalpaid-incapitalTreasury StockAccumulatedothercomprehensiveincomeRetainedearnings(accumulateddeficit)TotalstockholdersequitySharesAmountSharesAmountBalance as of February 26,2022587,904,283$5.9$2,032.2 99,640,065$(1,647.4)$69.0$2,

40、564.9$3,024.6 Equity-based compensation 35.3 35.3 Shares issued and employee taxwithholding on vesting of restrictedstock units2,479,845 (37.3)(37.3)Convertible preferred stockconversions (32.5)(40,863,977)675.6 643.1 Cash dividends declared on commonstock($0.12 per common share)(63.0)(63.0)Dividend

41、s accrued on convertiblepreferred stock (13.7)(13.7)Net income 484.2 484.2 Other comprehensive loss,net of tax (2.8)(2.8)Other activity 0.5 (0.3)0.2 Balance as of June 18,2022590,384,128$5.9$1,998.2 58,776,088$(971.8)$66.2$2,972.1$4,070.6 Equity-based compensation 27.9 27.9 Shares issued and employe

42、e taxwithholding on vesting of restrictedstock units179,020 (3.0)(3.0)Convertible preferred stockconversions (1.2)(1,475,483)24.4 23.2 Cash dividends declared on commonstock($0.12 per common share)(63.7)(63.7)Dividends accrued on convertiblepreferred stock (10.4)(10.4)Net income 342.7 342.7 Other co

43、mprehensive loss,net of tax (0.1)(0.1)Other activity 0.6 (0.8)(0.2)Balance as of September 10,2022590,563,148$5.9$2,022.5 57,300,605$(947.4)$66.1$3,239.9$4,387.0 Equity-based compensation 27.3 27.3 Shares issued and employee taxwithholding on vesting of restrictedstock units364,650 (2.6)(2.6)Convert

44、ible preferred stockconversions (1.7)(2,090,287)34.6 32.9 Special dividend declared($6.85 pershare)31.3 (3,952.6)(3,921.3)Cash dividends declared on commonstock($0.12 per common share)(64.2)(64.2)Dividends accrued on convertiblepreferred stock (14.3)(14.3)Net income 375.5 375.5 Other activity 0.2 (1

45、.5)(1.3)Balance as of December 3,2022590,927,798$5.9$2,077.0 55,210,318$(912.8)$66.1$(417.2)$819.0 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.7Table of ContentsAlbertsons Companies,Inc.and SubsidiariesNotes to Condensed Consolidated Financial Sta

46、tements(unaudited)NOTE 1-BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of PresentationThe accompanying interim Condensed Consolidated Financial Statements include the accounts of Albertsons Companies,Inc.and itssubsidiaries(the Company).All significant intercompany balanc

47、es and transactions were eliminated.The Condensed Consolidated BalanceSheet as of February 25,2023 is derived from the Companys annual audited Consolidated Financial Statements,which should be read inconjunction with these Condensed Consolidated Financial Statements and which are included in the Com

48、panys Annual Report on Form 10-K forthe fiscal year ended February 25,2023,filed with the Securities and Exchange Commission(the SEC)on April 25,2023.Certain informationin footnote disclosures normally included in annual financial statements was condensed or omitted for the interim periods presented

49、 inaccordance with accounting principles generally accepted in the United States of America(GAAP).In the opinion of management,the interimdata includes all adjustments,consisting of normal recurring adjustments,necessary for a fair statement of the results for the interim periods.Theinterim results

50、of operations and cash flows are not necessarily indicative of those results and cash flows expected for the year.The Companysresults of operations are for the 12 and 40 weeks ended December 2,2023 and December 3,2022.Significant Accounting PoliciesRestricted cash:Restricted cash is included in Othe

51、r current assets or Other assets depending on the remaining term of the restriction andprimarily relates to surety bonds and funds held in escrow.The Company had$4.5 million and$8.0 million of restricted cash as of December 2,2023 and February 25,2023,respectively.Inventories,net:Substantially all o

52、f the Companys inventories consist of finished goods valued at the lower of cost or market and net of vendorallowances.The Company primarily uses the retail inventory or cost method to determine inventory cost before application of any last-in,first-out(LIFO)adjustment.Interim LIFO inventory costs a

53、re based on managements estimates of expected year-end inventory levels and inflationrates.The Company recorded LIFO expense of$27.6 million and$64.5 million for the 12 weeks ended December 2,2023 and December 3,2022,respectively,and$87.8 million and$181.4 million for the 40 weeks ended December 2,2

54、023 and December 3,2022,respectively.Equity method investments:The Companys equity method investments included an equity interest in Mexico Foods Parent LLC and LaFabrica Parent LLC(El Rancho),a Texas-based specialty grocer.During the first quarter of fiscal 2023,El Rancho exercised its contractualo

55、ption to repurchase the Companys 45%ownership interest in El Rancho and the Company received proceeds of$166.1 million.As a result,theCompany realized a gain of$10.5 million during the first quarter of fiscal 2023,included in Other(income)expense,net.Convertible Preferred Stock:During the first quar

56、ter of fiscal 2023,the remaining 50,000 shares of the Companys Series A convertiblepreferred stock(Series A preferred stock)were converted into 2,903,200 shares of the Companys Class A common stock.As a result,theCompany has issued in the aggregate,101,611,902 shares of Class A common stock to holde

57、rs of Series A preferred stock and Series A-1convertible preferred stock(Series A-1 preferred stock and together with the Series A preferred stock,the Convertible Preferred Stock).These non-cash conversions represent 100%of the originally issued Convertible Preferred Stock.As of December 2,2023,no s

58、hares ofConvertible Preferred Stock are outstanding.Concurrent with the issuance and sale of the Convertible Preferred Stock during the first quarter of fiscal 2020,a consolidated real estatesubsidiary of the Company entered into a real estate agreement with an affiliate of the holders of the Conver

59、tible Preferred Stock.Under theterms of the real estate agreement,the Company placed fee owned real estate properties into its real estate subsidiary and contributed$36.5million of cash into a restricted escrow account,with a total value of$2.9 billion(165%of the liquidation preference of the Conver

60、tiblePreferred8Table of ContentsStock at the time of issue).The real estate agreement provided that the Company may release properties and/or cash from the restricted escrowaccount if the holders of Convertible Preferred Stock convert their shares into Class A common stock,provided that certain conv

61、ersionthresholds are met.Due to the conversion of 100%of the originally issued Convertible Preferred Stock discussed above,all real estate propertiesand cash have been released from the restricted escrow account and transferred to the Company.As of December 2,2023,no assets of theCompany were held i

62、n the restricted escrow account.Income taxes:Income tax expense was$95.1 million,representing a 20.8%effective tax rate,for the 12 weeks ended December 2,2023.TheCompanys effective tax rate for the 12 weeks ended December 2,2023 differs from the federal income tax statutory rate of 21%primarily due

63、toan increase in federal tax credits.Income tax expense was$120.9 million,representing a 24.4%effective tax rate,for the 12 weeks endedDecember 3,2022.The Companys effective tax rate for the 12 weeks ended December 3,2022 differs from the federal income tax statutory rateof 21%primarily due to state

64、 income taxes,reduced by federal tax credits.Income tax expense was$228.7 million,representing a 17.9%effective tax rate,for the 40 weeks ended December 2,2023.The Companyseffective tax rate for the 40 weeks ended December 2,2023 differs from the federal income tax statutory rate of 21%primarily due

65、 to thereduction of a reserve of$49.7 million for an uncertain tax position due to the expiration of a foreign statute during the first quarter of fiscal2023,federal tax credits,as well as discrete benefits recognized for state income taxes.Income tax expense was$381.6 million,representing a24.1%eff

66、ective tax rate,for the 40 weeks ended December 3,2022.The Companys effective tax rate for the 40 weeks ended December 3,2022differs from the federal income tax statutory rate of 21%primarily due to state income taxes,reduced by federal tax credits.Segments:The Company and its subsidiaries offer gro

67、cery products,general merchandise,health and beauty care products,pharmacy,fuel andother items and services in its stores or through digital channels.The Companys operating divisions are geographically based,have similareconomic characteristics and similar expected long-term financial performance.Th

68、e Companys operating segments and reporting units are its 12operating divisions,which are reported in one reportable segment.Each reporting unit constitutes a business for which discrete financialinformation is available and for which management regularly reviews the operating results.Across all ope

69、rating segments,the Company operatesprimarily one store format.Each division offers through its stores and digital channels the same general mix of products with similar pricing tosimilar categories of customers,has similar distribution methods,operates in similar regulatory environments and purchas

70、es merchandise fromsimilar or the same vendors.Revenue recognition:Revenues from the retail sale of products are recognized at the point of sale or delivery to the customer,net of returns andsales tax.Pharmacy sales are recorded upon the customer receiving the prescription.Third-party receivables fr

71、om pharmacy sales were$439.3million and$313.5 million as of December 2,2023 and February 25,2023,respectively,and are recorded in Receivables,net.For digital relatedsales,which primarily include home delivery and Drive Up&Go curbside pickup,revenues are recognized upon either pickup in store ordeliv

72、ery to the customer and may include revenue for separately charged delivery services.The Company records a contract liability whenrewards are earned by customers in connection with the Companys loyalty programs.As rewards are redeemed or expire,the Company reducesthe contract liability and recognize

73、s revenue.The contract liability balance was immaterial as of December 2,2023 and February 25,2023.The Company records a contract liability when it sells its own proprietary gift cards.The Company records a sale when the customer redeemsthe gift card.The Companys gift cards do not expire.The Company

74、 reduces the contract liability and records revenue for the unused portion ofgift cards(breakage)in proportion to its customers pattern of redemption,which the Company determined to be the historical redemption rate.The Companys contract liability related to gift cards was$121.1 million and$115.0 mi

75、llion as of December 2,2023 and February 25,2023,respectively.9Table of ContentsDisaggregated RevenuesThe following table represents Net sales and other revenue by product type(dollars in millions):12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Amount(1)%of T

76、otalAmount(1)%of TotalAmount(1)%of TotalAmount(1)%of TotalNon-perishables(2)$9,242.8 49.8%$9,255.2 51.0%$30,566.5 50.2%$29,705.7 50.0%Fresh(3)5,709.0 30.8 5,762.6 31.7 19,517.7 32.0 19,588.6 33.0 Pharmacy2,282.8 12.3 1,724.4 9.5 6,323.9 10.4 5,124.2 8.6 Fuel1,046.7 5.6 1,111.1 6.1 3,573.9 5.9 3,968.

77、6 6.7 Other(4)276.0 1.5 301.6 1.7 916.2 1.5 997.5 1.7 Net sales and otherrevenue$18,557.3 100.0%$18,154.9 100.0%$60,898.2 100.0%$59,384.6 100.0%(1)Digital related sales are included in the categories to which the revenue pertains.(2)Consists primarily of general merchandise,grocery,dairy and frozen

78、foods.(3)Consists primarily of produce,meat,deli and prepared foods,bakery,floral and seafood.(4)Consists primarily of wholesale revenue to third parties,commissions and other miscellaneous revenue.Recently issued accounting standards:In November 2023,the Financial Accounting Standards Board(FASB)is

79、sued Accounting StandardsUpdate(ASU)2023-07,Segment Reporting Topic(280):Improvements to Reportable Segment Disclosure.The ASU improves reportablesegment disclosure requirements,primarily through enhanced disclosures about significant segment expenses.The amendments in this ASU areeffective for fisc

80、al years beginning after December 15,2023,and interim periods within fiscal years beginning after December 15,2024 on aretrospective basis.Early adoption is permitted.The Company is currently evaluating the impact of this ASU on its Consolidated FinancialStatements and related disclosures.In Decembe

81、r 2023,the FASB issued ASU 2023-09,Income Taxes(Topic 740):Improvements to Income Tax Disclosures.The ASU enhancesthe transparency and decision usefulness of income tax disclosures and is effective for annual periods beginning after December 15,2024 on aprospective basis.Early adoption is permitted.

82、The Company is currently evaluating the impact of this ASU on its Consolidated FinancialStatements and related disclosures.NOTE 2-MERGER AGREEMENTOn October 13,2022,the Company,The Kroger Co.(Kroger or Parent)and Kettle Merger Sub,Inc.,a wholly owned subsidiary of Parent(Merger Sub),entered into an

83、Agreement and Plan of Merger(the Merger Agreement),pursuant to which Merger Sub will be merged withand into the Company(the Merger),with the Company surviving the Merger as the surviving corporation and a direct,wholly ownedsubsidiary of Parent.Pursuant to the Merger Agreement,each share of Class A

84、common stock issued and outstanding immediately prior to the effective time of theMerger(the Effective Time),shall be converted automatically at the Effective Time into the right to receive from Parent$34.10 per share incash,without interest.The$34.10 per share consideration to be paid by Parent wou

85、ld be reduced by the special cash dividend of$6.85 per shareof Class A common stock(the Special Dividend),which was declared on October 13,2022 and paid on January 20,2023.At the Effective Time,each outstanding equity award denominated in shares of Class A common stock will be converted into a corre

86、spondingaward with respect to shares of Parent common stock(the Converted Awards).The Converted Awards will remain outstanding and subject tothe same terms and conditions(including vesting and10Table of Contentsforfeiture terms)as were applied to the corresponding Company equity award immediately pr

87、ior to the Effective Time;provided that anyCompany equity award with a performance-based vesting condition will have such vesting condition deemed satisfied at(i)the greater of targetperformance and actual performance(for such awards subject to an open performance period at the Effective Time)and(ii

88、)target performance(for such awards subject to a performance period that begins after the Effective Time).For purposes of the conversion described above,thenumber of shares of Parent common stock subject to a Converted Award will be based upon the number of shares of Class A common stocksubject to s

89、uch Company equity award immediately prior to the Effective Time multiplied by an exchange ratio equal to(i)$34.10 less theSpecial Dividend,divided by(ii)the average closing price of shares of Parent common stock for five trading days preceding the Closing.In connection with obtaining the requisite

90、regulatory clearance necessary to consummate the Merger,the Company and Parent expect to makedivestitures of stores owned by the Company and Parent to a third party.As described in the Merger Agreement and subject to the outcome of thedivestiture process and negotiations with applicable government a

91、uthorities,the Company was prepared to establish a Company subsidiary(SpinCo)as part of this process.If utilized,the common stock or interests in SpinCo would be distributed to Company stockholders no laterthan the closing of the Merger(the Closing)and SpinCo would operate as a standalone public com

92、pany,or the equity of Spinco would becontributed to a trust for later distribution to Company stockholders.As described in more detail below,on September 8,2023,the Company andKroger announced that they entered into a comprehensive divestiture plan with C&S Wholesale Grocers,LLC(C&S).As a result of

93、thecomprehensive divestiture plan announced with C&S,Kroger has exercised its right under the Merger Agreement to sell what would have beenthe SpinCo business to C&S.Consequently,the creation of SpinCo and spin-off previously contemplated by the Company and Kroger is nolonger a requirement under the

94、 Merger Agreement and will no longer be pursued by the Company and Kroger.On September 8,2023,the Company and Kroger announced that the parties had entered into a definitive agreement,dated September 8,2023,with C&S for the sale of select stores,banners,distribution centers,offices and private label

95、 brands to C&S.The stores will be divested byKroger following the Closing.The definitive agreement has customary representations and warranties and covenants of a transaction of its type.The transaction is subject to fulfillment of customary closing conditions,including clearance by the Federal Trad

96、e Commission and thecompletion of the proposed Merger.The Merger Agreement provides for certain termination rights for the Company and Parent,including by mutual written consent,and if theClosing does not occur on or prior to January 13,2024(the Outside Date),the Outside Date may be extended by eith

97、er party for up to 270 daysin the aggregate.The Parent will be obligated to pay a termination fee of$600 million if the Merger Agreement is terminated by either party inconnection with the occurrence of the Outside Date,and,at the time of such termination,all closing conditions other than regulatory

98、 approvalhave been satisfied.NOTE 3-FAIR VALUE MEASUREMENTSThe accounting guidance for fair value established a framework for measuring fair value and established a three-level valuation hierarchy fordisclosure of fair value measurement.The valuation hierarchy is based upon the transparency of input

99、s to the valuation of an asset or liability atthe 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

100、Level 3-Unobservable inputs in which little or no market activity exists,requiring an entity to develop its own assumptions that marketparticipants would use to value the asset or liability.11Table of ContentsFair value is defined as the price that would be received to sell an asset or paid to trans

101、fer a liability in an orderly transaction between marketparticipants at the measurement date.The following table presents certain assets which were measured at fair value on a recurring basis as of December 2,2023(in millions):Fair Value MeasurementsTotalQuoted prices inactive markets for identical

102、assets(Level 1)Significantobservableinputs(Level 2)Significantunobservableinputs(Level 3)Assets:Short-term investments(1)$20.0$5.0$15.0$Non-current investments(2)171.3 77.4 93.9 Derivative contracts(3)4.2 4.2 Total$195.5$82.4$113.1$(1)Primarily relates to Mutual Funds(Level 1)and Certificates of Dep

103、osit(Level 2).Included in Other current assets.(2)Primarily relates to investments in publicly traded stock and Exchange-Traded Funds(Level 1)and certain equity investments,U.S.Treasury Notes and Corporate Bonds(Level 2).Included in Other assets.(3)Primarily relates to energy derivative contracts.In

104、cluded in Other assets.The following table presents certain assets which were measured at fair value on a recurring basis as of February 25,2023(in millions):Fair Value MeasurementsTotalQuoted prices inactive markets for identical assets(Level 1)Significantobservableinputs(Level 2)Significantunobser

105、vableinputs(Level 3)Assets:Short-term investments(1)$21.4$4.6$16.8$Non-current investments(2)99.3 99.3 Derivative contracts(3)1.5 1.5 Total$122.2$4.6$117.6$(1)Primarily relates to Mutual Funds(Level 1)and Certificates of Deposit(Level 2).Included in Other current assets.(2)Primarily relates to certa

106、in equity investments,U.S.Treasury Notes and Corporate Bonds(Level 2).Included in Other assets.(3)Primarily relates to energy derivative contracts and interest rate swaps.Included in Other assets.The Company records cash and cash equivalents,restricted cash,accounts receivable and accounts payable a

107、t cost.The recorded values of thesefinancial instruments approximate fair value based on their short-term nature.The estimated fair value of the Companys debt,including current maturities,was based on Level 2 inputs,being market quotes or values forsimilar instruments,and interest rates currently av

108、ailable to the Company for the issuance of debt with similar terms and remaining maturities asa discount rate for the remaining principal payments.As of December 2,2023,the fair value of total debt was$7,841.7 million compared to thecarrying value of$8,134.3 million,excluding debt discounts and defe

109、rred financing costs.As of February 25,2023,the fair value of total debtwas$8,009.1 million compared to the carrying value of$8,483.7 million,excluding debt discounts and deferred financing costs.12Table of ContentsAssets Measured at Fair Value on a Non-Recurring BasisThe Company measures certain as

110、sets at fair value on a non-recurring basis,including long-lived assets and goodwill,which are evaluated forimpairment.Long-lived assets include store-related assets such as property and equipment,operating lease assets and certain intangible assets.The inputs used to determine the fair value of lon

111、g-lived assets and a reporting unit are considered Level 3 measurements due to their subjectivenature.NOTE 4-LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONSThe Companys long-term debt and finance lease obligations as of December 2,2023 and February 25,2023,net of unamortized debt discountsof$34.3 milli

112、on and$37.5 million,respectively,and deferred financing costs of$45.1 million and$53.2 million,respectively,consisted of thefollowing(in millions):December 2,2023February 25,2023Senior Unsecured Notes due 2026 to 2030,interest rate range of 3.25%to 7.50%$6,503.9$6,496.4 Safeway Inc.Notes due 2027 to

113、 2031,interest rate range of 7.25%to 7.45%375.3 374.9 New Albertsons L.P.Notes due 2026 to 2031,interest rate range of 6.52%to 8.70%479.3 476.2 ABL Facility650.0 1,000.0 Other financing obligations30.0 28.8 Mortgage notes payable,secured16.4 16.7 Finance lease obligations479.9 517.1 Total debt8,534.

114、8 8,910.1 Less current maturities(737.8)(1,075.7)Long-term portion$7,797.0$7,834.4 ABL FacilityAs of December 2,2023,$650.0 million remained outstanding under the ABL Facility as the Company repaid$500.0 million and borrowed$150.0 million during the 40 weeks ended December 2,2023,and letters of cred

115、it(LOC)issued under the LOC sub-facility was$47.8 million.As of February 25,2023,there was$1,000.0 million outstanding under the ABL Facility and LOC issued under the LOC sub-facility was$53.3million.During the 12 and 40 weeks ended December 2,2023,the average interest rate on the ABL Facility was a

116、pproximately 6.7%and 6.5%,respectively.13Table of ContentsNOTE 5-EMPLOYEE BENEFIT PLANSPension and Other Post-Retirement BenefitsThe following table provides the components of net pension and post-retirement(income)expense(in millions):12 weeks endedPensionOther post-retirement benefitsDecember 2,20

117、23December 3,2022December 2,2023December 3,2022Estimated return on plan assets$(22.8)$(21.5)$Service cost4.0 4.6 Interest cost19.3 11.9 0.1 0.1 Amortization of prior service cost0.1 0.1 Amortization of net actuarial(gain)loss(1.2)0.2(0.3)(0.1)(Income)expense,net$(0.6)$(4.7)$(0.2)$40 weeks endedPensi

118、onOther post-retirement benefitsDecember 2,2023December 3,2022December 2,2023December 3,2022Estimated return on plan assets$(75.8)$(71.5)$Service cost13.3 15.3 Interest cost64.3 39.6 0.4 0.3 Amortization of prior service cost0.3 0.3 Amortization of net actuarial(gain)loss(4.2)0.5(0.8)(0.3)(Income)ex

119、pense,net$(2.1)$(15.8)$(0.4)$The Company contributed$4.1 million and$14.5 million to its defined pension plans and post-retirement benefit plans during the 12 and 40weeks ended December 2,2023,respectively.For the 12 and 40 weeks ended December 3,2022,the company contributed$14.1 million and$19.1 mi

120、llion,respectively.At the Companys discretion,additional funds may be contributed to the defined benefit pension plans that aredetermined to be beneficial to the Company.The Company currently anticipates contributing an additional$3.4 million to these plans for theremainder of fiscal 2023.Multiemplo

121、yer Pension PlansARP Act:The American Rescue Plan Act(ARP Act),which was signed into law on March 11,2021,established a special financial assistance(SFA)program for financially troubled multiemployer pension plans.During the 12 weeks ended December 3,2022,the Pension BenefitGuaranty Corporation issu

122、ed the final rule with respect to the SFA program which allowed for both additional funding and the investment of onethird of the SFA funds into return-seeking investments.Based on the final rule,on August 8,2022,the Combined Plan submitted a supplementedapplication for additional funding of approxi

123、mately$120 million.The Combined Plan is expected to remain solvent and therefore the Companycurrently does not expect to have any funding requirements for the Excess Plan.As a result,during the second quarter of fiscal 2022,theCompany recorded a non-cash pre-tax gain of$19.0 million to remove the pe

124、nsion liability for the Excess Plan.For additional information,including a description and definition of the Combined Plan,as well as the impact on the Excess Plan,as defined therein,see Part IIItem 8.Financial Statements and Supplementary DataNote 12 of the Companys Annual Report on Form 10-K for t

125、he fiscal year ended February 25,2023.14Table of ContentsNOTE 6-COMMITMENTS AND CONTINGENCIES AND OFF BALANCE SHEET ARRANGEMENTSGuaranteesLease Guarantees:The Company may have liability under certain operating leases that were assigned to third parties.If any of these thirdparties fail to perform th

126、eir obligations under the leases,the Company could be responsible for the lease obligation.Because of the widedispersion among third parties and the variety of remedies available,the Company believes that if an assignee became insolvent,it would nothave a material effect on the Companys financial co

127、ndition,results of operations or cash flows.The Company also provides guarantees,indemnifications and assurances to others in the ordinary course of its business.Legal ProceedingsThe Company is subject from time to time to various claims and lawsuits,including matters involving trade practices,perso

128、nnel andemployment issues,lawsuits alleging violations of state and/or federal wage and hour laws,real estate disputes,personal injury,antitrust claims,packaging or product claims,claims related to the sale of drug or pharmacy products,such as opioids,intellectual property claims and otherproceeding

129、s arising in or outside of the ordinary course of business.Some of these claims or suits purport,or may be determined,to be classactions and/or seek substantial damages.It is the opinion of the Companys management that although the amount of liability with respect tocertain of the matters described

130、herein cannot be ascertained at this time,any resulting liability of these and other matters,including any punitivedamages,will not have a material adverse effect on the Companys business or overall financial condition.The Company continually evaluates its exposure to loss contingencies arising from

131、 pending or threatened litigation and believes it has madeprovisions where the loss contingency is probable and can be reasonably estimated.Nonetheless,assessing and predicting the outcomes of thesematters involves substantial uncertainties.While management currently believes that the aggregate esti

132、mated liabilities currently recorded arereasonable,it remains possible that differences in actual outcomes or changes in managements evaluation or predictions could arise that could bematerial to the Companys results of operations or cash flows.False Claims Act:Two qui tam actions alleging violation

133、s of the False Claims Act(FCA)have been filed against the Company and itssubsidiaries.Violations of the FCA are subject to treble damages and penalties of up to a specified dollar amount per false claim.In United States ex rel.Proctor v.Safeway,filed in the United States District Court for the Centr

134、al District of Illinois,the relator alleges thatSafeway overcharged federal government healthcare programs by not providing the federal government,as part of its usual and customaryprices,the benefit of discounts given to customers in pharmacy membership discount and price-matching programs.The rela

135、tor filed hiscomplaint under seal on November 11,2011,and the complaint was unsealed on August 26,2015.The relator amended the complaint on March31,2016.On June 12,2020,the District Court granted Safeways motion for summary judgment,holding that the relator could not prove thatSafeway acted with the

136、 intent required under the FCA,and judgment was issued on June 15,2020.On July 10,2020,the relator filed a motion toalter or amend the judgment and to supplement the record,which Safeway opposed.On November 13,2020,the District Court denied relatorsmotion,and on December 11,2020,relator filed a noti

137、ce of appeal.The Seventh Circuit Court of Appeals affirmed the judgment in theCompanys favor on April 5,2022.On August 3,2022,relators filed a petition seeking review by the U.S.Supreme Court.In United States ex rel.Schutte and Yarberry v.SuperValu,New Albertsons,Inc.,et al.,also filed in the Centra

138、l District of Illinois,the relatorsallege that defendants(including various subsidiaries of the Company)overcharged15Table of Contentsfederal government healthcare programs by not providing the federal government,as a part of usual and customary prices,the benefit ofdiscounts given to customers who

139、requested that defendants match competitor prices.The complaint was originally filed under seal and amendedon November 30,2015.On August 5,2019,the District Court granted relators motion for partial summary judgment,holding that price-matchedprices are the usual and customary prices for those drugs.

140、On July 1,2020,the District Court granted the defendants motions for summaryjudgment and dismissed the case,holding that the relator could not prove that defendants acted with the intent required under the FCA.Judgmentwas issued on July 2,2020.On July 9,2020,the relators filed a notice of appeal.On

141、August 12,2021,the Court of Appeals for the SeventhCircuit affirmed the grant of summary judgment in the Companys favor.On September 23,2021,the relators filed a petition for rehearing enbanc with the Seventh Circuit.On December 3,2021,the Seventh Circuit denied relators petition.On April 1,2022,rel

142、ators filed a petitionseeking review by the U.S.Supreme Court.The U.S.Supreme Court decided to hear the appeals filed by the relators in Proctor and Schutte.The Supreme Court consolidated the two casesfor the purpose of hearing the appeal.The Supreme Court heard oral arguments on April 18,2023.On Ju

143、ne 1,2023,the Supreme Court issued anopinion adverse to the Company that reversed the lower courts rulings.On July 3,2023,the Supreme Court issued the order remanding bothcases back to the Court of Appeals for the Seventh Circuit for further review.On July 27,2023,the Court of Appeals remanded both

144、cases backto the U.S.District Court for the Central District of Illinois.On August 22,2023,the District Court-as to Schutte-set a pretrial conference forMarch 4,2024,and a trial date of April 29,2024.At the same July 27 hearing,the District Court also gave the defendants leave to file motionsfor sum

145、mary judgment on a schedule to be agreed upon.On October 11,2023,the Company and co-defendant filed a motion for summaryjudgment.On the same day,the relators filed motions for partial summary judgment.Both sides motions are pending.The District Court has notset any trial date for Proctor as of yet,a

146、nd no motions are pending in that case.In both of the above cases,the federal government previously investigated the relators allegations and declined to intervene.The relators electedto pursue their respective cases on their own and in each case have alleged FCA damages in excess of$100 million bef

147、ore trebling and excludingpenalties.The Company is vigorously defending each of these matters.The Company has recorded an estimated liability for these matters.Pharmacy Benefit Manager(PBM)Litigation:The Company(including its subsidiary,Safeway Inc.)is a defendant in a lawsuit filed onJanuary 21,202

148、1,in Minnesota state court,captioned Health Care Service Corp.et al.v.Albertsons Companies,LLC,et al.The actionchallenges certain prescription-drug prices reported by the Company to a pharmacy benefit manager,Prime Therapeutics LLC(Prime),whichin turn contracted with the health-insurer plaintiffs to

149、 adjudicate and process prescription-drug reimbursement claims.On December 7,2021,the Company filed a motion to dismiss the complaint.On January 14,2022,the court denied the Companys motion todismiss as to all but one count,plaintiffs claim of negligent misrepresentation.On January 21,2022,the Compa

150、ny and co-defendantSUPERVALU,Inc.(SUPERVALU)filed a third-party complaint against Prime,asserting various claims,including:indemnification,fraud andunjust enrichment.On February 17,2022,the Company filed in the Minnesota Court of Appeals an interlocutory appeal of the denial of theirmotion to dismis

151、s on personal jurisdiction grounds(the Jurisdictional Appeal).On February 24,2022,the Company and SUPERVALU filed inthe trial court an unopposed motion to stay proceedings,pending the resolution of the Jurisdictional Appeal.The parties agreed on March 6,2022,to an interim stay in the trial court pen

152、ding a ruling on the unopposed motion to stay proceedings.On September 6,2022,the MinnesotaCourt of Appeals denied the Jurisdictional Appeal and affirmed the trial courts denial of the Companys motion to dismiss.On October 6,2022,the Company and SUPERVALU filed a petition seeking review by the Minne

153、sota Supreme Court.On November 23,2022,the MinnesotaSupreme Court denied that petition.The Company and co-defendant SUPERVALU filed an answer to the complaint on January 23,2023.OnMarch 9,2023,Prime moved to dismiss the third-party complaint filed by the Company and SUPERVALU.The court heard oral ar

154、guments onthe motion on May 11,2023.On August 9,2023,the court denied Primes motion as to 16 of the 17 counts in the third-party complaint.On16Table of ContentsSeptember 18,2023,Prime filed an answer to the third-party complaint;on the same day,the Company and SUPERVALU filed an amendedthird-party c

155、omplaint.The Company is vigorously defending the claims filed against it,and the Company also intends to prosecute its claims against Prime with equalvigor.The Company has recorded an estimated liability for this matter.Opioid Litigation:The Company is one of dozens of companies that have been named

156、 as defendants in lawsuits filed by various plaintiffs,including counties,cities,Native American tribes,and hospitals,alleging that defendants contributed to the national opioid epidemic.At present,the Company is named in approximately 90 suits pending in various state courts as well as in the Unite

157、d States District Court for the NorthernDistrict of Ohio,where over 2,000 cases against various defendants have been consolidated as Multi-District Litigation pursuant to 28 U.S.C.1407.Most of the cases naming the Company have been stayed pending multiple bellwether trials,including one involving th

158、e Company inTarrant County(Texas).The Tarrant County matter is currently in discovery.The relief sought by the various plaintiffs in these matters includescompensatory damages,abatement and punitive damages as well as injunctive relief.Prior to the start of a state-court trial that was scheduled for

159、 September 6,2022,the Company reached an agreement to settle with the state ofNew Mexico.The New Mexico counties and municipal entities that filed 14 additional lawsuits,including Santa Fe County,agreed to the termsof the settlement.Thus,all 15 cases filed by New Mexico entities have been dismissed

160、as a result of the settlement.The Company has alsoexecuted an agreement to settle three matters pending in Nevada state court.The Company recorded a liability of$21.5 million for thesettlements of the cases in New Mexico and Nevada,which was paid by our insurers in the fourth quarter of fiscal 2022.

161、With respect to theremaining pending state-court claims,which may not be covered by insurance,several are proceeding through discovery with none scheduled fortrial in 2023.The Company believes that it has substantial factual and legal defenses to these claims and is vigorously defending these matter

162、s.At this stage in the proceedings,the Company is unable to determine the probability of the outcome of these remaining matters or the range ofreasonably possible loss,if any.The Company has also received,subpoenas,Civil Investigative Demands(CIDs)and other requests for documents and information fro

163、m theU.S.Department of Justice and certain state Attorneys General,and has had preliminary discussions with the Department of Justice with respectto purported violations of the federal Controlled Substances Act and the FCA in dispensing prescriptions.The Company has been cooperatingwith the governme

164、nt with respect to these requests for information.Oregon Class Action:A class action lawsuit entitled Schearon Stewart and Jason Stewart v.Safeway Inc.was filed in Circuit Court,County ofMultnomah,State of Oregon.Plaintiffs have alleged that Safeway engaged in unfair trade practices,in violation of

165、Oregons Unlawful TradePractices Act(ORS 646.608),regarding the sale of certain meat products in 2015 and 2016 in the state of Oregon with its Buy One,Get OneFree and similar promotions.On February 17,2023,plaintiffs and Safeway executed an agreement which settled all claims in the lawsuit for$107.0

166、million.The settlementincluded a claim administration process whereby affected customers,who do not elect to opt-out of the settlement,filed a claim to participate inthe settlement.The court granted final approval of the class settlement by way of an order dated July 20,2023.The Company had a liabil

167、ityrecorded equal to the amount of the settlement,and the Company paid the settlement on September 11,2023.Plated Litigation:On September 1,2020,a complaint was filed in Delaware Court of Chancery,by which complaint ShareholderRepresentative Services LLC,solely in its capacity as agent for the forme

168、r shareholders and rightsholders of DineInFresh,Inc.d/b/a Plated(Plated),sued the Company.Plaintiff alleged that,following the Companys acquisition of Plated,pursuant to a September 19,2017 Agreementand Plan of Merger,the Company intentionally engaged in conduct to prevent Plated from reaching certa

169、in milestones that would have resultedin post-acquisition consideration paid to Plateds former shareholders and rightsholders.Plaintiff alleged breach of17Table of Contentscontract,breach of the implied covenant of good faith and fair dealing,and fraudulent inducement.On October 21,2020,the Company

170、filed amotion to dismiss the complaint.On June 7,2021,the Court granted the motion in part,dismissing all claims except for the breach-of-contractclaim.The Company has reached an agreement in principle to settle the case.The parties are jointly working on finalizing a settlementagreement.The Company

171、 recorded a liability equal to the amount of the settlement.Other CommitmentsIn the ordinary course of business,the Company enters into various supply contracts to purchase products for resale and purchase and servicecontracts for fixed asset and information technology commitments.These contracts ty

172、pically include volume commitments or fixed expirationdates,termination provisions and other standard contractual considerations.NOTE 7-OTHER COMPREHENSIVE INCOME OR LOSSTotal comprehensive earnings are defined as all changes in stockholders equity during a period,other than those from investments b

173、y ordistributions to the stockholders.Generally,for the Company,total comprehensive income equals net income plus or minus adjustments forpension and other post-retirement liabilities.Total comprehensive earnings represent the activity for a period,net of tax.While total comprehensive earnings are t

174、he activity in a period and are largely driven by net earnings in that period,accumulated othercomprehensive income or loss(AOCI)represents the cumulative balance of other comprehensive income,net of tax,as of the balance sheetdate.Changes in the AOCI balance by component are shown below(in millions

175、):40 weeks ended December 2,2023TotalPension and Post-retirement benefitplansOtherBeginning AOCI balance$69.3$71.7$(2.4)Other comprehensive income before reclassifications3.9 3.9 Amounts reclassified from accumulated other comprehensive income(1)(4.7)(4.7)Tax benefit(expense)0.2 1.2(1.0)Current-peri

176、od other comprehensive(loss)income,net of tax(0.6)(3.5)2.9 Ending AOCI balance$68.7$68.2$0.5 18Table of Contents40 weeks ended December 3,2022TotalPension and Post-retirement benefitplansOtherBeginning AOCI balance$69.0$67.1$1.9 Other comprehensive loss before reclassifications(4.4)(4.4)Amounts recl

177、assified from accumulated other comprehensive income(1)0.5 0.5 Tax benefit(expense)1.0(0.1)1.1 Current-period other comprehensive(loss)income,net of tax(2.9)0.4(3.3)Ending AOCI balance$66.1$67.5$(1.4)(1)These amounts are included in the computation of net pension and post-retirement(income)expense.F

178、or additional information,see Note 5-Employee Benefit Plans.NOTE 8-NET INCOME PER CLASS A COMMON SHAREThe Company calculates basic and diluted net income per Class A common share using the two-class method.The two-class method is anallocation formula that determines net income per Class A common sha

179、re for each share of Class A common stock and Convertible PreferredStock,a participating security,according to dividends declared and participation rights in undistributed earnings.Under this method,all earnings(distributed and undistributed)are allocated to Class A common shares and Convertible Pre

180、ferred Stock based on their respective rights toreceive dividends.The holders of Convertible Preferred Stock participate in cash dividends that the Company pays on its common stock to theextent that such cash dividends exceed$206.25 million per fiscal year and shares of Convertible Preferred Stock r

181、emain outstanding as of theapplicable record date to participate in such dividends.In applying the two-class method to interim periods,the Company allocates income to itsquarterly periods independently and discretely from its year-to-date and annual periods.Basic net income per Class A common share

182、iscomputed by dividing net income allocated to Class A common stockholders by the weighted average number of Class A common sharesoutstanding for the period,including Class A common shares to be issued with no prior remaining contingencies prior to issuance.Diluted netincome per Class A common share

183、 is computed based on the weighted average number of shares of Class A common stock outstanding duringeach period,plus potential Class A common shares considered outstanding during the period,as long as the inclusion of such awards is notantidilutive.Potential Class A common shares consist of unvest

184、ed restricted stock units(RSUs),restricted common stock(RSAs)andConvertible Preferred Stock,using the more dilutive of either the two-class method or as-converted stock method.Performance-based RSUs areconsidered dilutive when the related performance criterion has been met.19Table of ContentsThe com

185、ponents of basic and diluted net income per Class A common share were as follows(in millions,except per share data):12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Basic net income per Class A common shareNet income$361.4$375.5$1,045.5$1,202.4 Special Dividend

186、 on Convertible Preferred Stock(252.2)(252.2)Accrued dividends on Convertible Preferred Stock(14.2)(0.3)(38.3)Earnings allocated to Convertible Preferred Stock (0.7)Net income allocated to Class A common stockholders-Basic$361.4$109.1$1,044.5$911.9 Weighted average Class A common shares outstanding-

187、Basic(1)576.2 534.6 575.2 525.4 Basic net income per Class A common share$0.63$0.20$1.82$1.74 Diluted net income per Class A common shareNet income allocated to Class A common stockholders-Diluted$361.4$109.1$1,044.5$911.9 Weighted average Class A common shares outstanding-Basic(1)576.2 534.6 575.2

188、525.4 Dilutive effect of:Restricted stock units and awards4.9 4.0 5.3 4.4 Weighted average Class A common shares outstanding-Diluted(2)581.1 538.6 580.5 529.8 Diluted net income per Class A common share$0.62$0.20$1.80$1.72(1)The number of Class A common shares remaining to be issued for the 12 and 4

189、0 weeks ended December 2,2023 and December 3,2022 were not material.(2)For the 40 weeks ended December 2,2023 and the 12 and 40 weeks ended December 3,2022,0.4 million,37.6 million and 45.2 million potential common sharesoutstanding related to Convertible Preferred Stock were antidilutive,respective

190、ly.The number of potential Class A common shares outstanding related to RSUs and RSAsthat were antidilutive for the 12 and 40 weeks ended December 2,2023 and December 3,2022 were not material.20Table of ContentsItem 2-Managements Discussion and Analysis of Financial Condition and Results of Operatio

191、nsFORWARD-LOOKING STATEMENTS AND FACTORS THAT IMPACT OUR OPERATING RESULTS AND TRENDSThis Form 10-Q contains forward-looking statements within the meaning of the federal securities laws.The forward-looking statementsinclude our current expectations,assumptions,estimates and projections about our bus

192、iness,our industry and the outcome of the Merger.Theyinclude statements relating to our future operating or financial performance which the Company believes to be reasonable at this time.You canidentify forward-looking statements by the use of words such as outlook,may,should,could,estimates,predict

193、s,potential,continue,anticipates,believes,plans,expects,future and intends and similar expressions which are intended to identify forward-looking statements.These statements are not guarantees of future performance and are subject to numerous risks and uncertainties which are beyond our control andd

194、ifficult to predict and could cause actual results to differ materially from the results expressed or implied by the statements.Risks anduncertainties that could cause actual results to differ materially from such statements include:changes in macroeconomic conditions and uncertainty regarding the g

195、eopolitical environment;rates of food price inflation or deflation,as well as fuel and commodity prices;changes in market interest rates;changes in consumer behavior and spending due to the impact of macroeconomic factors,including the expiration of student loanpayment deferments;changes in wage rat

196、es,ability to attract and retain qualified associates and negotiate acceptable contracts with labor unions;failure to achieve productivity initiatives,unexpected changes in our objectives and plans,inability to implement our strategies,plans,programs and initiatives,or enter into strategic transacti

197、ons,investments or partnerships in the future on terms acceptable to us,or at all;uncertainties related to the Merger,including our ability to close the transactions contemplated by the Merger Agreement,and the impactof the costs related to the Merger;erosion of consumer confidence as a result of th

198、e Merger and the transactions contemplated by the Merger Agreement;litigation related to the transactions contemplated by the Merger Agreement;restrictions on our ability to operate as a result of the Merger Agreement;challenges in attracting,retaining and motivating our employees until the closing

199、of the Merger;availability and cost of goods used in our food products;challenges with our supply chain;operational and financial effects resulting from cyber incidents,including outages in the cloud environment and the effectiveness ofbusiness continuity plans during a ransomware or other cyber inc

200、ident;and continued reduction in administering COVID-19 vaccines and dispensing test kits.All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionarystatements and risk factors.Forward-looking statements contained in

201、 this Form 10-Q reflect our view only as of the date of this Form 10-Q.Weundertake no obligation,other than as required by law,to update or revise any forward-looking statements,whether as a result of newinformation,future events or otherwise.In evaluating our financial results and forward-looking s

202、tatements,you should carefully consider the risks and uncertainties more fully describedin the Risk Factors section or other sections in our reports filed with the SEC21Table of Contentsincluding the most recent annual report on Form 10-K and any subsequent periodic reports on Form 10-Q and current

203、reports on Form 8-K.As used in this Form 10-Q,unless the context otherwise requires,references to Albertsons,the Company,we,us and our refer toAlbertsons Companies,Inc.and,where appropriate,its subsidiaries.NON-GAAP FINANCIAL MEASURESWe define EBITDA as GAAP earnings(net loss)before interest,income

204、taxes,depreciation and amortization.We define Adjusted EBITDA asearnings(net loss)before interest,income taxes,depreciation and amortization,further adjusted to eliminate the effects of items managementdoes not consider in assessing our ongoing core performance.We define Adjusted net income as GAAP

205、Net income adjusted to eliminate theeffects of items management does not consider in assessing our ongoing core performance.We define Adjusted net income per Class A commonshare as Adjusted net income divided by the weighted average diluted Class A common shares outstanding,as adjusted to reflect al

206、l RSUs andRSAs outstanding at the end of the period,as well as the conversion of Convertible Preferred Stock when it is antidilutive for GAAP.SeeResults of Operations for further discussion and a reconciliation of Adjusted EBITDA,Adjusted net income and Adjusted net income per ClassA common share.EB

207、ITDA,Adjusted EBITDA,Adjusted net income and Adjusted net income per Class A common share(collectively,the Non-GAAPMeasures)are performance measures that provide supplemental information we believe is useful to analysts and investors to evaluate ourongoing results of operations,when considered along

208、side other GAAP measures such as net income,operating income,gross margin and netincome per Class A common share.These Non-GAAP Measures exclude the financial impact of items management does not consider inassessing our ongoing core operating performance,and thereby provide useful measures to analys

209、ts and investors of our operating performanceon a period-to-period basis.Other companies may have different definitions of Non-GAAP Measures and provide for different adjustments,andcomparability to our results of operations may be impacted by such differences.We also use Adjusted EBITDA for board o

210、f director and bankcompliance reporting.Our presentation of Non-GAAP Measures should not be construed as an inference that our future results will be unaffectedby unusual or non-recurring items.Non-GAAP Measures should not be considered as measures of discretionary cash available to us to invest in

211、the growth of our business.Wecompensate for these limitations by relying primarily on our GAAP results and using Non-GAAP Measures only for supplemental purposes.22Table of ContentsTHIRD QUARTER OF FISCAL 2023 OVERVIEWWe are one of the largest food retailers in the United States,with 2,271 stores ac

212、ross 34 states and the District of Columbia as of December 2,2023.We operate 24 banners including Albertsons,Safeway,Vons,Pavilions,Randalls,Tom Thumb,Carrs,Jewel-Osco,Acme,Shaws,StarMarket,United Supermarkets,Market Street,Haggen,Kings Food Markets and Balduccis Food Lovers Market,with approximatel

213、y 290,000talented and dedicated employees,as of December 2,2023,who serve on average 35.0 million customers each week.Additionally,as ofDecember 2,2023,we operated 1,726 pharmacies,1,332 in-store branded coffee shops,401 associated fuel centers,22 dedicated distributioncenters,19 manufacturing facil

214、ities and various digital platforms.Merger AgreementOn October 13,2022 Albertsons Companies,Inc.(the Company),The Kroger Co.(Kroger or Parent)and Kettle Merger Sub,Inc.,awholly owned subsidiary of Parent(Merger Sub),entered into an Agreement and Plan of Merger(the Merger Agreement),pursuant to which

215、Merger Sub will be merged with and into the Company(the Merger),with the Company surviving the Merger as the surviving corporation anda direct,wholly owned subsidiary of Parent.Pursuant to the Merger Agreement,each share of Class A common stock of the Company issued and outstanding immediately prior

216、 to theeffective time of the Merger(the Effective Time),shall be converted automatically at the Effective Time into the right to receive from Parent$34.10 per share in cash,without interest.The$34.10 per share cash payment is subject to reduction as a result of the Special Dividend paid onJanuary 20

217、,2023 as described in Note 2-Merger Agreement in the unaudited interim Condensed Consolidated Financial Statements locatedelsewhere in this Form 10-Q.In connection with the Merger,on September 8,2023,the Company and Kroger announced that the parties had entered into a definitiveagreement,dated Septe

218、mber 8,2023,with C&S Wholesale Grocers,LLC(C&S)for the sale of select stores,banners,distribution centers,offices and private label brands to C&S.Also on September 8,2023,Kroger notified the Company that,in accordance with the MergerAgreement,Kroger intends to sell the SpinCo Business(as defined in

219、the Merger Agreement)to C&S.As a result,the creation of SpinCo andspin-off previously contemplated by the Company and Kroger is no longer a requirement under the Merger Agreement and will no longer bepursued by the Company and Kroger.Details regarding the definitive agreement with C&S can be found i

220、n the Form 8-K filed on September 8,2023 and the joint press release issued by the Company and Kroger on September 8,2023.The Company has filed with the SEC a definitive information statement on Schedule 14C with respect to the approval of the Merger and hasmailed the definitive information statemen

221、t to the Companys stockholders.You may obtain copies of all documents filed by the Company withthe SEC regarding this transaction,free of charge,at the SECs website,www.sec.gov or from the Companys website athttps:/ of ContentsThird quarter of fiscal 2023 highlightsIn summary,our financial and opera

222、ting highlights for the third quarter of fiscal 2023 include:Identical sales increased 2.9%Digital sales increased 21%Loyalty members increased 17%to 38.5 millionNet income of$361 million,or$0.62 per Class A common shareAdjusted net income of$462 million,or$0.79 per Class A common shareAdjusted EBIT

223、DA of$1,107 millionStoresThe following table shows stores operating,opened and closed during the periods presented:12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Stores,beginning of period2,272 2,272 2,271 2,276 Opened2 1 5 2 Closed(3)(3)(5)(8)Stores,end of p

224、eriod2,271 2,270 2,271 2,270 The following table summarizes our stores by size:Number of storesPercent of TotalRetail Square Feet(1)Square FootageDecember 2,2023December 3,2022December 2,2023December 3,2022December 2,2023December 3,2022Less than 30,000217 218 9.6%9.6%4.9 5.0 30,000 to 50,000778 779

225、34.3%34.3%32.6 32.6 More than 50,0001,276 1,273 56.1%56.1%75.4 75.2 Total Stores2,271 2,270 100.0%100.0%112.9 112.8(1)In millions,reflects total square footage of retail stores operating at the end of the period.24Table of ContentsRESULTS OF OPERATIONSComparison of the Third Quarter of Fiscal 2023 a

226、nd the First 40 weeks of Fiscal 2023 to the Third Quarter of Fiscal 2022 and the First 40weeks of Fiscal 2022.The following tables and related discussion set forth certain information and comparisons regarding the components of our CondensedConsolidated Statements of Operations for the 12 and 40 wee

227、ks ended December 2,2023(third quarter of fiscal 2023 and first 40 weeks offiscal 2023)and 12 and 40 weeks ended December 3,2022(third quarter of fiscal 2022 and first 40 weeks of fiscal 2022)(dollars inmillions,except per share data).12 weeks endedDecember 2,2023%of SalesDecember 3,2022%of SalesNet

228、 sales and other revenue$18,557.3 100.0%$18,154.9 100.0%Cost of sales13,360.0 72.0 13,033.2 71.8 Gross margin5,197.3 28.0 5,121.7 28.2 Selling and administrative expenses4,607.3 24.8 4,532.0 25.0 Loss on property dispositions and impairment losses,net23.9 0.1 7.3 Operating income566.1 3.1 582.4 3.2

229、Interest expense,net116.3 0.6 84.3 0.5 Other(income)expense,net(6.7)1.7 Income before income taxes456.5 2.5 496.4 2.7 Income tax expense95.1 0.5 120.9 0.7 Net income$361.4 2.0%$375.5 2.0%Basic net income per Class A common share$0.63$0.20 Diluted net income per Class A common share0.62 0.20 40 weeks

230、 endedDecember 2,2023%of SalesDecember 3,2022%of SalesNet sales and other revenue$60,898.2 100.0%$59,384.6 100.0%Cost of sales43,996.7 72.2 42,713.3 71.9 Gross margin16,901.5 27.8 16,671.3 28.1 Selling and administrative expenses15,215.7 25.0 14,883.9 25.1 Loss(gain)on property dispositions and impa

231、irment losses,net43.1 0.1(86.1)(0.1)Operating income1,642.7 2.7 1,873.5 3.1 Interest expense,net383.1 0.6 313.0 0.5 Other income,net(14.6)(23.5)Income before income taxes1,274.2 2.1 1,584.0 2.6 Income tax expense228.7 0.4 381.6 0.6 Net income$1,045.5 1.7%$1,202.4 2.0%Basic net income per Class A com

232、mon share$1.82$1.74 Diluted net income per Class A common share1.80 1.72 Net Sales and Other RevenueNet sales and other revenue increased 2.2%to$18,557.3 million for the third quarter of fiscal 2023 from$18,154.9 million for the third quarterof fiscal 2022.The increase in Net sales and other revenue

233、 was driven by our 2.9%increase in identical sales,with growth in pharmacy salesdriving the identical sales increase.We also continued to grow our digital business during the third quarter of fiscal 2023.25Table of ContentsNet sales and other revenue increased 2.5%to$60,898.2 million for the first 4

234、0 weeks of fiscal 2023 from$59,384.6 million for the first 40weeks of fiscal 2022.The increase in Net sales and other revenue was primarily driven by our 3.7%increase in identical sales,with growth inpharmacy sales,retail price inflation across most categories and increasing digital sales being the

235、primary contributors to the identical salesincrease.The increase in Net sales and other revenue was partially offset by lower fuel sales.Identical Sales,Excluding FuelIdentical sales include stores operating during the same period in both the current year and the prior year,comparing sales on a dail

236、y basis.Direct to consumer digital sales are included in identical sales,and fuel sales are excluded from identical sales.Acquired stores become identicalon the one-year anniversary date of the acquisition.Identical sales for the 12 and 40 weeks ended December 2,2023 and the 12 and 40 weeksended Dec

237、ember 3,2022,respectively,were:12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Identical sales,excluding fuel2.9%7.9%3.7%7.3%The following table represents Net sales and other revenue by product type(dollars in millions):12 weeks ended40 weeks endedDecember 2,

238、2023December 3,2022December 2,2023December 3,2022Amount(1)%of TotalAmount(1)%of TotalAmount(1)%of TotalAmount(1)%of TotalNon-perishables(2)$9,242.8 49.8%$9,255.2 51.0%$30,566.5 50.2%$29,705.7 50.0%Fresh(3)5,709.0 30.8 5,762.6 31.7 19,517.7 32.0 19,588.6 33.0 Pharmacy2,282.8 12.3 1,724.4 9.5 6,323.9

239、10.4 5,124.2 8.6 Fuel1,046.7 5.6 1,111.1 6.1 3,573.9 5.9 3,968.6 6.7 Other(4)276.0 1.5 301.6 1.7 916.2 1.5 997.5 1.7 Net sales and otherrevenue$18,557.3 100.0%$18,154.9 100.0%$60,898.2 100.0%$59,384.6 100.0%(1)Digital related sales are included in the categories to which the revenue pertains.(2)Cons

240、ists primarily of general merchandise,grocery,dairy and frozen foods.(3)Consists primarily of produce,meat,deli and prepared foods,bakery,floral and seafood.(4)Consists primarily of wholesale revenue to third parties,commissions and other miscellaneous revenue.Gross MarginGross margin represents the

241、 portion of Net sales and other revenue remaining after deducting Cost of sales during the period,including purchaseand distribution costs.These costs include,among other things,purchasing and sourcing costs,inbound freight costs,product quality testingcosts,warehouse and distribution costs,Own Bran

242、ds program costs and digital-related delivery and handling costs.Advertising,promotionalexpenses and vendor allowances are also components of Cost of sales.Gross margin rate decreased to 28.0%during the third quarter of fiscal 2023 compared to 28.2%during the third quarter of fiscal 2022.Excluding t

243、he impact of fuel and LIFO expense,gross margin rate decreased 64 basis points26Table of Contentscompared to the third quarter of fiscal 2022.Pharmacy operations and increases in shrink were the primary drivers of the decrease,partiallyoffset by our procurement and sourcing productivity initiatives.

244、Gross margin rate decreased to 27.8%during the first 40 weeks of fiscal 2023 compared to 28.1%during the first 40 weeks of fiscal 2022.Excluding the impact of fuel and LIFO expense,gross margin rate decreased 66 basis points compared to the first 40 weeks of fiscal 2022.Therate decrease was primaril

245、y driven by pharmacy operations,increases in shrink,and an increase in promotional activity in the first quarter offiscal 2023 relative to the first quarter of fiscal 2022.Our procurement and sourcing productivity initiatives partially offset these decreases in ourgross profit rate.The gross margin

246、rate decrease in the third quarter of fiscal 2023 and first 40 weeks of fiscal 2023 related to pharmacy operations was primarilydue to growth in pharmacy sales and a lower margin rate on COVID-19 vaccines.In addition,the benefits from our productivity initiativesallowed us to provide incremental tar

247、geted price investments to our customers during the third quarter of fiscal 2023 and first 40 weeks of fiscal2023.Selling and Administrative ExpensesSelling and administrative expenses consist primarily of store level costs,including wages,employee benefits,rent,depreciation and utilities,inaddition

248、 to certain back-office expenses related to our corporate and division offices.Selling and administrative expenses decreased to 24.8%of Net sales and other revenue during the third quarter of fiscal 2023 compared to 25.0%during the third quarter of fiscal 2022.Excluding the impact of fuel,Selling an

249、d administrative expenses as a percentage of Net sales and otherrevenue decreased 28 basis points.The decrease in Selling and administrative expenses as a percentage of Net sales and other revenue wasprimarily attributable to lower employee costs,which includes the benefit of ongoing productivity in

250、itiatives,and lower depreciation andamortization,partially offset by an increase in operating expenses related to the expansion of our digital and omnichannel capabilities,ongoingMerger-related costs,increased store occupancy costs and additional third-party store security services.Selling and admin

251、istrative expenses decreased to 25.0%of Net sales and other revenue during both the first 40 weeks of fiscal 2023 compared to25.1%during the first 40 weeks of fiscal 2022.Excluding the impact of fuel,Selling and administrative expenses as a percentage of Net salesand other revenue decreased 32 basis

252、 points during the first 40 weeks of fiscal 2023 compared to the first 40 weeks of fiscal 2022.The decreasein Selling and administrative expenses as a percentage of Net sales and other revenue was primarily attributable to sales leverage of employeecosts,which includes the benefit of ongoing product

253、ivity initiatives,lower depreciation and amortization and lower legal and regulatory accrualsand settlements,partially offset by ongoing Merger-related costs,an increase in operating expenses related to the expansion of our digital andomnichannel capabilities and additional third-party store securit

254、y services.Loss(Gain)on Property Dispositions and Impairment Losses,NetFor the third quarter of fiscal 2023,net loss on property dispositions and impairment losses was$23.9 million,primarily driven by the write-offof certain technology assets,partially offset by net gains from the sale of assets.For

255、 the third quarter of fiscal 2022,net loss on propertydispositions and impairment losses was$7.3 million,driven by$3.9 million of asset impairments and$3.4 million of losses primarily from thedisposal of assets.For the first 40 weeks of fiscal 2023,net loss on property dispositions and impairment lo

256、sses was$43.1 million,primarily driven by the write-offof certain technology assets,partially offset by net gains from the sale of assets.For the first 40 weeks of fiscal 2022,net gain on propertydispositions and impairment losses was$86.1 million,27Table of Contentsdriven by$91.2 million of gains p

257、rimarily from the sale of real estate assets,partially offset by$5.1 million of asset impairments.Interest Expense,NetInterest expense,net was$116.3 million during the third quarter of fiscal 2023 compared to$84.3 million during the third quarter of fiscal 2022.The increase in interest expense,net w

258、as primarily attributable to lower interest income,as well as higher average outstanding borrowings andhigher average interest rates.The weighted average interest rate during the third quarter of fiscal 2023 was 5.6%,excluding deferred financingcosts and original issue discount,compared to 5.3%durin

259、g the third quarter of fiscal 2022.Interest expense,net was$383.1 million during the first 40 weeks of fiscal 2023 compared to$313.0 million during the first 40 weeks of fiscal2022.The increase in interest expense,net was primarily attributable to higher average outstanding borrowings and higher ave

260、rage interest rates,as well as lower interest income.The weighted average interest rate during the first 40 weeks of fiscal 2023 was 5.6%,excluding amortizationand write-off of deferred financing costs and original issue discount,compared to 5.3%during the first 40 weeks of fiscal 2022.Other(Income)

261、Expense,NetFor the third quarter of fiscal 2023,other income,net was$6.7 million compared to other expense,net of$1.7 million for the third quarter offiscal 2022.Other income,net during the third quarter of fiscal 2023 was primarily driven by realized and unrealized gains from non-operatinginvestmen

262、ts and non-service cost components of net pension and post-retirement income,partially offset by unrealized losses from non-operating investments.Other expense,net during the third quarter of fiscal 2022 was primarily driven by unrealized losses from non-operatinginvestments,partially offset by non-

263、service cost components of net pension and post-retirement income and income related to our equityinvestment.For the first 40 weeks of fiscal 2023,other income,net was$14.6 million compared to$23.5 million for the first 40 weeks of fiscal 2022.Otherincome,net during the first 40 weeks of fiscal 2023

264、 was primarily driven by non-service cost components of net pension and post-retirementincome,realized and unrealized gains from non-operating investments and income related to our equity interest and gain on sale of El Rancho inthe first quarter of fiscal 2023,partially offset by realized and unrea

265、lized losses from non-operating investments.Other income,net during thefirst 40 weeks of fiscal 2022 was primarily driven by non-service cost components of net pension and post-retirement income and income relatedto our equity investment,partially offset by unrealized losses from non-operating inves

266、tments.Income TaxesIncome tax expense was$95.1 million,representing a 20.8%effective tax rate,for the third quarter of fiscal 2023.Income tax expense was$120.9 million,representing a 24.4%effective tax rate,for the third quarter of fiscal 2022.The favorability in the effective income tax rate in the

267、third quarter of fiscal 2023 was primarily due to an increase in federal tax credits.Income tax expense was$228.7 million,representing a 17.9%effective tax rate,for the first 40 weeks of fiscal 2023.Income tax expense was$381.6 million,representing a 24.1%effective tax rate,for the first 40 weeks of

268、 fiscal 2022.The favorability in the effective income tax rate forthe first 40 weeks of fiscal 2023 was driven by the reduction of a reserve of$49.7 million for an uncertain tax position due to the expiration of aforeign statute during the first quarter of fiscal 2023,federal tax credits,as well as

269、discrete benefits recognized for state income taxes.28Table of ContentsNet Income and Adjusted Net IncomeNet income was$361.4 million,or$0.62 per Class A common share,during the third quarter of fiscal 2023 compared to$375.5 million,or$0.20per Class A common share,during the third quarter of fiscal

270、2022.Net income per Class A common share during the third quarter of fiscal 2022includes a$0.45 per share reduction related to the Special Dividend attributable to holders of Convertible Preferred Stock on an as-convertedbasis.Adjusted net income was$462.3 million,or$0.79 per Class A common share,du

271、ring the third quarter of fiscal 2023 compared to$505.1million,or$0.87 per Class A common share,during the third quarter of fiscal 2022.Net income was$1,045.5 million,or$1.80 per Class A common share,during the first 40 weeks of fiscal 2023 compared to$1,202.4 million,or$1.72 per Class A common shar

272、e,during the first 40 weeks of fiscal 2022.The first 40 weeks of fiscal 2023 included the$49.7 million or$0.09per share benefit related to the reduction in the reserve for an uncertain tax position.Adjusted net income was$1,375.7 million,or$2.34 perClass A common share(which includes the tax benefit

273、 discussed above),during the first 40 weeks of fiscal 2023 compared to$1,505.4 million,or$2.59 per Class A common share,during the first 40 weeks of fiscal 2022.Adjusted EBITDAFor the third quarter of fiscal 2023,Adjusted EBITDA was$1,106.5 million,or 6.0%of Net sales and other revenue,compared to$1

274、,158.0million,or 6.4%of Net sales and other revenue,for the third quarter of fiscal 2022.For the first 40 weeks of fiscal 2023,Adjusted EBITDA was$3,401.9 million,or 5.6%of Net sales and other revenue,compared to$3,626.8 million,or 6.1%of Net sales and other revenue for the first 40weeks of fiscal 2

275、022.29Table of ContentsReconciliation of Non-GAAP MeasuresThe following tables reconcile Net income to Adjusted net income,and Net income per Class A common share to Adjusted net income per ClassA common share(in millions,except per share data):12 weeks ended40 weeks endedDecember 2,2023December 3,2

276、022December 2,2023December 3,2022Numerator:Net income$361.4$375.5$1,045.5$1,202.4 Adjustments:(Gain)loss on interest rate swaps and energy hedges,net(d)(0.7)2.0(6.1)(12.9)Business transformation(1)(b)12.3 17.2 37.9 64.5 Equity-based compensation expense(b)23.3 33.4 80.5 96.6 Loss(gain)on property di

277、spositions and impairmentlosses,net23.9 7.3 43.1(86.1)LIFO expense(a)27.6 64.5 87.8 181.4 Government-mandated incremental COVID-19pandemic related pay(2)(b)1.0 10.8 Merger-related costs(3)(b)35.9 14.4 124.2 23.8 Certain legal and regulatory accruals and settlements,net(b)(6.7)(6.7)43.7 Amortization

278、of debt discount and deferred financingcosts(c)3.6 3.9 11.9 12.9 Amortization of intangible assets resulting fromacquisitions(b)11.0 11.7 37.5 39.1 Combined Plan(b)(19.0)Miscellaneous adjustments(4)(f)3.4 16.4 24.0 46.1 Tax impact of adjustments to Adjusted net income(32.7)(42.2)(103.9)(97.9)Adjuste

279、d net income$462.3$505.1$1,375.7$1,505.4 Denominator:Weighted average Class A common shares outstanding-diluted581.1 538.6 580.5 529.8 Adjustments:Convertible Preferred Stock(5)37.6 0.4 45.2 Restricted stock units and awards(6)6.9 6.6 6.4 6.1 Adjusted weighted average Class A common sharesoutstandin

280、g-diluted588.0 582.8 587.3 581.1 Adjusted net income per Class A common share-diluted$0.79$0.87$2.34$2.59 30Table of Contents12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Net income per Class A common share-diluted$0.62$0.20$1.80$1.72 Convertible Preferred S

281、tock(5)0.45 0.37 Non-GAAP adjustments(7)0.18 0.23 0.57 0.53 Restricted stock units and awards(6)(0.01)(0.01)(0.03)(0.03)Adjusted net income per Class A common share-diluted$0.79$0.87$2.34$2.59 The following table is a reconciliation of Adjusted net income to Adjusted EBITDA:12 weeks ended40 weeks en

282、dedDecember 2,2023December 3,2022December 2,2023December 3,2022Adjusted net income(8)$462.3$505.1$1,375.7$1,505.4 Tax impact of adjustments to Adjusted net income32.7 42.2 103.9 97.9 Income tax expense95.1 120.9 228.7 381.6 Amortization of debt discount and deferred financingcosts(c)(3.6)(3.9)(11.9)

283、(12.9)Interest expense,net116.3 84.3 383.1 313.0 Amortization of intangible assets resulting fromacquisitions(b)(11.0)(11.7)(37.5)(39.1)Depreciation and amortization(e)414.7 421.1 1,359.9 1,380.9 Adjusted EBITDA$1,106.5$1,158.0$3,401.9$3,626.8(1)Includes costs associated with third-party consulting

284、fees related to our operational priorities and associated business transformation.(2)Represents incremental COVID-19 related pay legislatively required in certain municipalities in which we operate.(3)Primarily relates to third-party legal and advisor fees and retention program expense related to th

285、e proposed Merger and costs in connection with our previously-announcedBoard-led review of potential strategic alternatives.(4)Miscellaneous adjustments include the following(see table below):12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Non-cash lease-relat

286、ed adjustments$1.7$1.4$2.0$3.4 Lease and lease-related costs for surplus and closedstores4.3 4.7 15.1 17.4 Net realized and unrealized(gain)loss on non-operating investments(3.4)13.7 0.9 19.4 Other(i)0.8(3.4)6.0 5.9 Total miscellaneous adjustments$3.4$16.4$24.0$46.1(i)Primarily includes adjustments

287、for unconsolidated equity investments and other costs not considered in our core performance.(5)Represents the conversion of Convertible Preferred Stock to the fully outstanding as-converted Class A common shares as of the end of each respective period,for periods inwhich the Convertible Preferred S

288、tock is antidilutive under GAAP.(6)Represents incremental unvested RSUs and unvested RSAs to adjust the diluted weighted average Class A common shares outstanding during each respective period to thefully outstanding RSUs and RSAs as of the end of each respective period.(7)Reflects the per share imp

289、act of Non-GAAP adjustments for each period.See the reconciliation of Net income to Adjusted net income above for further details.(8)See the reconciliation of Net income to Adjusted net income above for further details.31Table of ContentsNon-GAAP adjustment classifications within the Condensed Conso

290、lidated Statements of Operations:(a)Cost of sales(b)Selling and administrative expenses(c)Interest expense,net(d)(Gain)loss on interest rate swaps and energy hedges,net:12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Cost of sales$(0.5)$2.8$(4.3)$(2.7)Selling

291、and administrative expenses(0.2)0.5(1.8)(1.6)Other(income)expense,net(1.3)(8.6)Total(Gain)loss on interest rate swaps and energyhedges,net$(0.7)$2.0$(6.1)$(12.9)(e)Depreciation and amortization:12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Cost of sales$40.9

292、$39.5$125.9$129.2 Selling and administrative expenses373.8 381.6 1,234.0 1,251.7 Total Depreciation and amortization$414.7$421.1$1,359.9$1,380.9(f)Miscellaneous adjustments:12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Selling and administrative expenses$7.3

293、$6.5$29.2$20.9 Other(income)expense,net(3.9)9.9(5.2)25.2 Total Miscellaneous adjustments$3.4$16.4$24.0$46.1 LIQUIDITY AND CAPITAL RESOURCESThe following table sets forth the major sources and uses of cash and cash equivalents and restricted cash for each period(in millions):40 weeks endedDecember 2,

294、2023December 3,2022Cash and cash equivalents and restricted cash at end of period$227.2$4,420.3 Cash flows provided by operating activities1,730.8 2,072.0 Cash flows used in investing activities(1,328.8)(1,478.7)Cash flows(used in)provided by financing activities(638.6)874.4 Net Cash Provided by Ope

295、rating ActivitiesNet cash provided by operating activities was$1,730.8 million for the first 40 weeks of fiscal 2023 compared to$2,072.0 million for the first 40weeks of fiscal 2022.The decrease in cash flow from operations compared to the first 40 weeks of fiscal 2022 was due to a decrease in Adjus

296、tedEBITDA and more cash paid for income taxes,interest,legal settlements and ongoing Merger-related costs during the first 40 weeks of fiscal2023,partially offset by changes in working capital.32Table of ContentsNet Cash Used in Investing ActivitiesNet cash used in investing activities was$1,328.8 m

297、illion for the first 40 weeks of fiscal 2023 compared to$1,478.7 million for the first 40weeks of fiscal 2022.For the first 40 weeks of fiscal 2023,cash used in investing activities consisted primarily of payments for property,equipment and intangibles of$1,535.0 million,partially offset by proceeds

298、 from the sale of assets of$201.3 million,primarily related to the sale of our equity interest in ElRancho during the first quarter of fiscal 2023.Payments for property,equipment and intangibles in the first 40 weeks of fiscal 2023 included thecompletion of 115 remodels,the opening of five new store

299、s and continued investment in our digital and technology platforms.For the first 40weeks of fiscal 2022,cash used in investing activities consisted primarily of payments for property,equipment and intangibles of$1,566.9million,partially offset by proceeds from the sale of assets of$99.4 million,prim

300、arily related to real estate.Payments for property,equipmentand intangibles in the first 40 weeks of fiscal 2022 included continued investment in our digital and technology platforms,the completion of 135remodels and the opening of two new stores.Net Cash(Used in)Provided by Financing ActivitiesNet

301、cash used in financing activities was$638.6 million during the first 40 weeks of fiscal 2023 compared to net cash provided by financingactivities of$874.4 million during the first 40 weeks of fiscal 2022.Net cash used in financing activities during the first 40 weeks of fiscal 2023 consisted primari

302、ly of the$500.0 million partial repayment of theABL Facility,dividends paid on our Class A common stock and tax withholding payments on vesting of restricted stock units,partially offset by$150.0 million of proceeds from the issuance of debt under the ABL Facility.Net cash provided by financing acti

303、vities during the first 40 weeksof fiscal 2022 consisted primarily of the$1.4 billion borrowing,which was used with cash on hand to fund the payment of the Special Dividend,partially offset by the$200.0 million subsequent partial repayment of the ABL Facility and dividends paid on our Class A common

304、 stock andConvertible Preferred Stock,as well as tax withholding payments on vesting of restricted stock units.DividendsWe have established a dividend policy pursuant to which we intend to pay a quarterly dividend on our Class A common stock.Cash dividendspaid on our Class A common stock were$207.1

305、million($0.36 per common share)and$190.9 million($0.36 per common share)during the first40 weeks of fiscal 2023 and first 40 weeks of fiscal 2022,respectively.On January 9,2024,we announced the next quarterly dividend paymentof$0.12 per share of Class A common stock to be paid on February 9,2024 to

306、stockholders of record as of the close of business on January 26,2024.During the first quarter of fiscal 2023,the conversion of the remaining Convertible Preferred Stock was completed.The holders of ConvertiblePreferred Stock were entitled to a quarterly dividend at a rate per annum of 6.75%of the l

307、iquidation preference per share of the ConvertiblePreferred Stock.In addition,the holders of Convertible Preferred Stock participate in cash dividends that we pay on our common stock to theextent that such cash dividends exceed$206.25 million per fiscal year and shares of Convertible Preferred Stock

308、 remain outstanding as of theapplicable record date to participate in such dividends.Cash dividends paid to holders of the Convertible Preferred Stock were$0.8 million and$50.2 million during the first 40 weeks of fiscal 2023 and first 40 weeks of fiscal 2022,respectively.On October 13,2022,we decla

309、red the Special Dividend,payable to stockholders of record,including holders of Series A convertible preferredstock on an as-converted basis,as of the close of business on October 24,2022,and was to be paid on November 7,2022.As of December 3,2022,the Special Dividend of$3,921.3 million was33Table o

310、f Contentsrecorded in Special dividend payable on the Condensed Consolidated Balance Sheets,and was subsequently paid on January 20,2023.LiquidityBased on current operating trends,we believe that we have significant sources of cash to meet our liquidity needs for the next 12 months and forthe forese

311、eable future,including cash on hand,cash flows from operating activities and other sources of liquidity,including borrowings underour ABL Facility.We estimate our liquidity needs over the next 12 months to be in the range of$5.0 billion to$5.7 billion.This includes$650.0million related to outstandin

312、g borrowings under our ABL Facility for which we may,at our discretion,elect to pay all or a portion of theoutstanding balance within the next 12 months;and anticipated requirements for incremental working capital,incremental Merger costs,capitalexpenditures,pension obligations,interest payments,qua

313、rterly dividends on Class A common stock,operating leases and finance leases.Inaddition,we may enter into refinancing and sale leaseback transactions from time to time.We believe we have adequate cash flow to continue tomaintain our current debt ratings and to respond effectively to competitive cond

314、itions.As of December 2,2023,we had$650.0 million in borrowings outstanding under our ABL Facility and total availability of$3,302.2 million(netof letter of credit usage).See Note 4 Long-Term Debt and Finance Lease Obligations located elsewhere in this Form 10-Q for furtherdiscussion.CRITICAL ACCOUN

315、TING POLICIESThe preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Consolidated FinancialSt

316、atements and the reported amounts of revenues and expenses during the reporting period.Actual results could differ from those estimates.Wehave chosen accounting policies that we believe are appropriate to report accurately and fairly our operating results and financial position,andwe apply those acc

317、ounting policies in a fair and consistent manner.See the Critical Accounting Policies section included in our Annual Report onForm 10-K for the fiscal year ended February 25,2023,filed with the SEC on April 25,2023,for a discussion of our significant accountingpolicies.RECENTLY ISSUED AND RECENTLY A

318、DOPTED ACCOUNTING STANDARDSSee Note 1-Basis of Presentation and Summary of Significant Accounting Policies of our unaudited interim Condensed Consolidated FinancialStatements located elsewhere in this Form 10-Q.Item 3-Quantitative and Qualitative Disclosures About Market RiskThere have been no mater

319、ial changes in our exposure to market risk from the information provided in our Annual Report on Form 10-K for thefiscal year ended February 25,2023,filed with the SEC on April 25,2023.Item 4-Controls and ProceduresBased on their evaluation of our disclosure controls and procedures(as defined in Rul

320、es 13a-15 and 15d-15 under the Securities Exchange Act of1934(the Exchange Act)as of the end of the period covered by this Form 10-Q,our Principal Executive Officer and Principal FinancialOfficer concluded our disclosure controls and procedures are effective to ensure that information required to be

321、 disclosed by us in the reports thatwe file or submit under the Exchange Act is recorded,processed,summarized and reported within the time periods specified in the SECs rulesand forms and is accumulated and communicated to management,including our Principal Executive Officer and Principal Financial

322、Officer,asappropriate,to allow timely decisions regarding required disclosure.34Table of ContentsChanges in Internal Control over Financial ReportingThere were no changes in our internal control over financial reporting during the third quarter of fiscal 2023 that have materially affected,or arereas

323、onably likely to materially affect,our internal control over financial reporting.35Table of ContentsPART II-OTHER INFORMATIONItem 1-Legal ProceedingsThe Company is subject from time to time to various claims and lawsuits arising in the ordinary course of business,including lawsuits involvingtrade pr

324、actices,lawsuits alleging violations of state and/or federal wage and hour laws(including alleged violations of meal and rest period lawsand alleged misclassification issues),real estate disputes and other matters.Some of these claims or suits purport or may be determined to beclass actions and/or s

325、eek substantial damages.It is the opinion of the Companys management that although the amount of liability with respectto 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 h

326、ave a material adverse effect on the Companys business or overall financial condition.See the mattersunder the caption Legal Proceedings in Note 6-Commitments and Contingencies and Off Balance Sheet Arrangements in the unaudited interimCondensed Consolidated Financial Statements located elsewhere in

327、 this Form 10-Q.The Company continually evaluates its exposure to loss contingencies arising from pending or threatened litigation and believes it has madeprovisions where the loss contingency is probable and can be reasonably estimated.Nonetheless,assessing and predicting the outcomes of thesematte

328、rs involves substantial uncertainties.While management currently believes that the aggregate estimated liabilities currently recorded arereasonable,it remains possible that differences in actual outcomes or changes in managements evaluation or predictions could arise that could bematerial to the Com

329、panys results of operations or cash flows.Environmental MattersOur operations are subject to regulation under environmental laws,including those relating to waste management,air emissions and undergroundstorage tanks.In addition,as an owner and operator of commercial real estate,we may be subject to

330、 liability under applicable environmentallaws for clean-up of contamination at our facilities.SEC regulations require us to disclose certain environmental matters arising under federal,state or local environmental provisions if we reasonably believe that such proceedings may result in monetary sanct

331、ions above a stated threshold.Pursuant to SEC regulations,we use a threshold of$1 million for purposes of determining whether disclosure of any such proceedings isrequired.Item 1A-Risk FactorsThere have been no material changes to the risk factors previously included in our Annual Report on Form 10-

332、K for the fiscal year endedFebruary 25,2023,filed with the SEC on April 25,2023,under the heading Risk Factors.Item 2-Unregistered Sales of Equity Securities and Use of Proceeds(a)Unregistered Sales of Equity SecuritiesNone.(b)Use of ProceedsNone.(c)Purchases of Equity SecuritiesNone.36Table of Cont

333、entsItem 3-Defaults Upon Senior SecuritiesNone.Item 4-Mine Safety DisclosuresNot Applicable.Item 5-Other InformationIn the third quarter of fiscal 2023,none of the Companys directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or anon-Rule 10b5-1 trading arrangement,as defined in Item 408(a)of Regulation S-K.Item 6-Exhibits31.1 Certification of the Principal Executive Offic