Albertsons Companies Inc

Previous wording

• uncertainties related to the Merger, including our ability to close the transactions contemplated by the Merger Agreement, and the impact of the costs related to the Merger;

Current wording

• uncertainties related to our ability to close the transactions contemplated by the Merger Agreement, including resolution of the pending legal actions related to the Merger;

Previous wording

• restrictions on our ability to operate as a result of the Merger Agreement;

Current wording

• restrictions on our ability to operate as a result of the Merger Agreement and the impact of the costs related to the Merger;

Previous wording

• challenges in retaining and motivating our associates until the closing of the Merger, particularly following the public announcement of the locations to be divested, with difficulties in attracting new employees during the pendency of the Merger;

Current wording

• challenges in retaining and motivating our associates until the closing of the Merger, particularly following the public announcement of the locations and operations to be divested, with difficulties in attracting new employees during the pendency of the Merger;

Previous wording

• litigation related to the transactions contemplated by the Merger Agreement;

Current wording

• litigation in connection with, or related to the transactions contemplated by, the Merger Agreement which may arise out of pending regulatory actions;

Previous wording

We define EBITDA as GAAP earnings (net loss) before interest, income taxes, depreciation and amortization. We define Adjusted EBITDA as earnings (net loss) before interest, income taxes, depreciation and amortization, further adjusted to eliminate the effects of items management does not consider in assessing our ongoing core performance. We define Adjusted net income as GAAP Net income adjusted to eliminate the effects of items management does not consider in assessing our ongoing core performance. We define Adjusted net income per Class A common share as Adjusted net income divided by the weighted average diluted Class A common shares outstanding, as adjusted to reflect all RSUs and RSAs outstanding at the end of the period, as well as the conversion of Convertible Preferred

Current wording

We define EBITDA as GAAP earnings (net loss) before interest, income taxes, depreciation and amortization. We define Adjusted EBITDA as earnings (net loss) before interest, income taxes, depreciation and amortization, further adjusted to eliminate the effects of items management does not consider in assessing our ongoing core performance. We define Adjusted net income as GAAP Net income adjusted to eliminate the effects of items management does not consider in assessing our ongoing core performance. We define Adjusted net income per Class A common share as Adjusted net income divided by the weighted average diluted Class A common shares outstanding, as adjusted to reflect all RSUs and RSAs outstanding at the end of the period, as well as the conversion of Convertible Preferred Stock when it is antidilutive for GAAP. See "Results of Operations" for further discussion and a reconciliation of Adjusted EBITDA, Adjusted net income and Adjusted net income per Class A common share.

Previous wording

FIRST QUARTER OF FISCAL 2024 OVERVIEW

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SECOND QUARTER OF FISCAL 2024 OVERVIEW

Previous wording

We are one of the largest food retailers in the United States, with 2,269 stores across 34 states and the District of Columbia as of June 15, 2024. We operate more than 20 well known banners including Albertsons, Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs, Jewel-Osco, Acme, Shaw's, Star Market, United Supermarkets, Market Street, Haggen, Kings Food Marketsand Balducci's Food Lovers Market, with approximately 285,000 talented and dedicated employees, as of June 15, 2024, who serve on average 36.3 million customers each week. Additionally, as of June 15, 2024, we operated 1,725 pharmacies, 1,346 in-store branded coffee shops, 403 associated fuel centers, 22 dedicated distribution centers, 19 manufacturing facilities and various digital platforms.

Current wording

We are one of the largest food retailers in the United States, with 2,267 stores across 34 states and the District of Columbia as of September 7, 2024. We operate more than 20 well known banners including Albertsons, Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs, Jewel-Osco, Acme, Shaw's, Star Market, United Supermarkets, Market Street, Haggen, Kings Food Marketsand Balducci's Food Lovers Market, with approximately 285,000 talented and dedicated employees, as of September 7, 2024, who serve on average 36.8 million customers each week. Additionally, as of September 7, 2024, we operated 1,726 pharmacies, 1,330 in-store branded coffee shops, 405 associated fuel centers, 22 dedicated distribution centers, 19 manufacturing facilities and various digital platforms.

Previous wording

First quarter of fiscal 2024 highlights

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Second quarter of fiscal 2024 highlights

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In summary, our financial and operating highlights for the first quarter of fiscal 2024 include:

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In summary, our financial and operating highlights for the second quarter of fiscal 2024 include:

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•Loyalty members increased 15% to 41.4 million

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•Loyalty members increased 15% to 43.0 million

Previous wording

Comparison of the First Quarter of Fiscal 2024 to the First Quarter of Fiscal 2023.

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Comparison of the Second Quarter of Fiscal 2024 and the First 28 weeks of Fiscal 2024 to the Second Quarter of Fiscal 2023 and the First 28 weeks of Fiscal 2023.

Previous wording

The following tables and related discussion set forth certain information and comparisons regarding the components of our Condensed Consolidated Statements of Operations for the 16 weeks ended June 15, 2024 ("first quarter of fiscal 2024" and "first 16 weeks of fiscal 2024") and 16 weeks ended June 17, 2023 ("first quarter of fiscal 2023" and "first 16 weeks of fiscal 2023") (dollars in millions, except per share data).

Current wording

The following tables and related discussion set forth certain information and comparisons regarding the components of our Condensed Consolidated Statements of Operations for the 12 and 28 weeks ended September 7, 2024 ("second quarter of fiscal 2024" and "first 28 weeks of fiscal 2024") and 12 and 28 weeks ended September 9, 2023 ("second quarter of fiscal 2023" and "first 28 weeks of fiscal 2023") (dollars in millions, except per share data).

Previous wording

Net sales and other revenue increased 0.9% to $24,265.4 million for the first quarter of fiscal 2024 from $24,050.2 million for the first quarter of fiscal 2023. The increase in Net sales and other revenue was driven by our 1.4% increase in identical sales, with strong growth in pharmacy sales driving the identical sales increase. We also continued to grow our digital sales during the first quarter of fiscal 2024. The increase in Net sales and other revenue was partially offset by lower fuel sales.

Current wording

Net sales and other revenue increased 1.4% to $18,551.5 million for the second quarter of fiscal 2024 from $18,290.7 million for the second quarter of fiscal 2023. The increase in Net sales and other revenue was driven by our 2.5% increase in identical sales, with strong growth in pharmacy sales driving the identical sales increase. We also continued to grow our digital sales during the second quarter of fiscal 2024. The increase in Net sales and other revenue was partially offset by lower fuel sales.

Previous wording

Identical sales include stores operating during the same period in both the current year and the prior year, comparing sales on a daily basis. Direct to consumer digital sales are included in identical sales, and fuel sales are excluded from identical sales. Acquired stores become identical on the one-year anniversary date of the acquisition. Identical sales for the 16 weeks ended June 15, 2024 and the 16 weeks ended June 17, 2023, respectively, were:

Current wording

Identical sales include stores operating during the same period in both the current year and the prior year, comparing sales on a daily basis. Direct to consumer digital sales are included in identical sales, and fuel sales are excluded from identical sales. Acquired stores become identical on the one-year anniversary date of the acquisition. Identical sales for the 12 and 28 weeks ended September 7, 2024 and the 12 and 28 weeks ended September 9, 2023, respectively, were:

Previous wording

Gross margin rate increased to 27.8% during the first quarter of fiscal 2024 compared to 27.7% during the first quarter of fiscal 2023. Excluding the impact of fuel and LIFO expense, gross margin rate decreased 22 basis points compared to the first quarter of fiscal 2023. The strong growth in pharmacy sales, which carries an overall lower gross margin rate, increases in shrink, and increases in picking and delivery costs related to the continued growth in our digital sales were the primary drivers of the decrease, partially offset by our procurement and sourcing productivity initiatives.

Current wording

Gross margin rate increased to 27.7% during the first 28 weeks of fiscal 2024 compared to 27.6% during the first 28 weeks of fiscal 2023. Excluding the impact of fuel and LIFO expense, gross margin rate decreased 31 basis points compared to the first 28 weeks of fiscal 2023. The strong growth in pharmacy sales, which carries an overall lower gross margin rate, increases in shrink during the first quarter of fiscal 2024, and increases in picking and delivery costs related to the continued growth in our digital sales were the primary drivers of the decrease, partially offset by the benefits from our procurement and sourcing productivity initiatives.

Previous wording

Selling and administrative expenses increased to 25.9% of Net sales and other revenue during the first quarter of fiscal 2024 compared to 25.0% during the first quarter of fiscal 2023. Excluding the impact of fuel, Selling and administrative expenses as a percentage of Net sales and other revenue increased 79 basis points. The increase in Selling and administrative expenses as a percentage of Net sales and other revenue was primarily attributable to an increase in operating expenses related to the ongoing development of our digital and omnichannel capabilities, Merger-related costs, higher employee costs, increased store occupancy costs and additional third-party store security services, partially offset by the benefit of productivity initiatives.

Current wording

Selling and administrative expenses increased to 25.8% of Net sales and other revenue during the second quarter of fiscal 2024 compared to 25.1% during the second quarter of fiscal 2023. Excluding the impact of fuel, Selling and administrative expenses as a percentage of Net sales and other revenue increased 41 basis points. The increase in Selling and administrative expenses as a percentage of Net sales and other revenue was primarily attributable to an increase in operating expenses related to the ongoing development of our digital and omnichannel capabilities, Merger-related costs, higher employee costs, increased business transformation costs and additional third-party store security services, partially offset by the benefits from our productivity initiatives.

Previous wording

Loss on Property Dispositions and Impairment Losses, Net

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Loss (Gain) on Property Dispositions and Impairment Losses, Net

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For the first quarter of fiscal 2024, net loss on property dispositions and impairment losses was $5.3 million, primarily driven by the impairment of certain technology assets. For the first quarter of fiscal 2023, net loss on property dispositions and impairment losses was $27.6 million, primarily driven by the impairment and disposal of certain technology assets.

Current wording

For the first 28 weeks of fiscal 2024, net loss on property dispositions and impairment losses was $49.2 million, primarily driven by $56.8 million of asset impairments including impairment losses of $39.8 million primarily related to equipment from the closing of our micro-fulfillment centers, $13.5 million of retail store impairment losses and $3.5 million related to certain technology assets, partially offset by $7.6 million of gains from the sale of real estate assets. For the first 28 weeks of fiscal 2023, net loss on property dispositions and impairment losses was $19.2 million, primarily driven by the write-off of certain technology assets, partially offset by net gains from the sale of real estate assets.

Previous wording

Interest expense, net was $145.7 million during the first quarter of fiscal 2024 compared to $154.9 million during the first quarter of fiscal 2023. The decrease in interest expense, net was primarily attributable to lower average outstanding borrowings. The weighted average interest rate during both the first quarter of fiscal 2024 and the first quarter of fiscal 2023 was 5.6%, excluding deferred financing costs and original issue discount.

Current wording

Interest expense, net was $103.6 million during the second quarter of fiscal 2024 compared to $111.9 million during the second quarter of fiscal 2023. The decrease in interest expense, net was primarily attributable to lower average outstanding borrowings. The weighted average interest rate during the second quarter of fiscal 2024 was 5.5%, excluding amortization and write-off of deferred financing costs and original issue discount, compared to 5.6% during the second quarter of fiscal 2023.

Previous wording

For the first quarter of fiscal 2024, other expense, net was $4.0 million compared to other income, net of $16.0 million for the first quarter of fiscal 2023. Other expense, net during the first quarter of fiscal 2024 was primarily driven by unrealized losses from non-operating investments, partially offset by non-service cost components of net pension and post-retirement income. Other income, net during the first quarter of fiscal 2023 was primarily driven by income related to our equity interest and gain on sale of El Rancho, as well as non-service cost components of net pension and post-retirement income, partially offset by realized losses from non-operating investments.

Current wording

For the first 28 weeks of fiscal 2024, Other expense, net was $5.9 million compared to other income, net of $7.9 million for the first 28 weeks of fiscal 2023. Other expense, net during the first 28 weeks of fiscal 2024 was primarily driven by unrealized losses from non-operating investments, partially offset by non-service cost components of net pension and post-retirement income. Other income, net during the first 28 weeks of fiscal 2023 was primarily driven by non-service cost components of net pension and post-retirement income and income related to our equity interest and gain on sale of El Rancho in the first quarter of fiscal 2023, partially offset by realized and unrealized losses from non-operating investments.

Previous wording

Income tax expense was $69.2 million, representing a 22.3% effective tax rate, for the first quarter of fiscal 2024. Income tax expense was $66.1 million, representing a 13.7% effective tax rate, for the first quarter of fiscal 2023. The increase in the effective income tax rate in the first quarter of fiscal 2024 was primarily driven by the reduction 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 fiscal 2023.

Current wording

Income tax expense was $110.2 million, representing a 22.2% effective tax rate, for the first 28 weeks of fiscal 2024. Income tax expense was $133.6 million, representing a 16.3% effective tax rate, for the first 28 weeks of fiscal 2023. The increase in the effective income tax rate was primarily driven by the reduction 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 fiscal 2023.

Previous wording

Net income was $240.7 million, or $0.41 per Class A common share, during the first quarter of fiscal 2024 compared to $417.2 million, or $0.72 per Class A common share, during the first quarter of fiscal 2023. The first quarter of fiscal 2023 included the $49.7 million or $0.09 per share benefit related to the reduction in the reserve for an uncertain tax position. Adjusted net income was $391.6 million, or $0.66 per Class A common share, during the first quarter of fiscal 2024 compared to $545.7 million, or $0.93 per Class A common share (which includes the tax benefit discussed above), during the first quarter of fiscal 2023.

Current wording

Net income was $386.2 million, or $0.66 per Class A common share, during the first 28 weeks of fiscal 2024 compared to $684.1, or $1.18 per Class A common share, during the first 28 weeks of fiscal 2023. The first 28 weeks of fiscal 2023 included the $49.7 million or $0.09 per share benefit related to the reduction in the reserve for an uncertain tax position. Adjusted net income was $692.6 million, or $1.17 per Class A common share, during the first 28 weeks of fiscal 2024 compared to $913.4 million, or $1.56 per Class A common share (which includes the tax benefit discussed above), during the first 28 weeks of fiscal 2023.

Previous wording

For the first quarter of fiscal 2024, Adjusted EBITDA was $1,183.9 million, or 4.9% of Net sales and other revenue, compared to $1,318.5 million, or 5.5% of Net sales and other revenue, for the first quarter of fiscal 2023.

Current wording

For the second quarter of fiscal 2024, Adjusted EBITDA was $900.6 million, or 4.9% of Net sales and other revenue, compared to $976.9 million, or 5.3% of Net sales and other revenue, for the second quarter of fiscal 2023. For the first 28 weeks of fiscal 2024, Adjusted EBITDA was $2,084.5 million, or 4.9% of Net sales and other revenue, compared to $2,295.4 million, or 5.4% of Net sales and other revenue for the first 28 weeks of fiscal 2023.

Previous wording

(i) Primarily includes adjustments for unconsolidated equity investments and other costs not considered in our core performance.

Current wording

(i) Primarily includes adjustments for pension settlement loss, unconsolidated equity investments and other costs not considered in our core performance.

Previous wording

(d) Gain on energy hedges, net:

Current wording

(d) Loss (gain) on energy hedges, net:

Previous wording

Net cash provided by operating activities was $960.9 million for the first 16 weeks of fiscal 2024 compared to $838.3 million for the first 16 weeks of fiscal 2023. The increase in cash flow from operations compared to the first 16 weeks of fiscal 2023 was due to changes in working capital, primarily related to lower inventory, and less cash paid for taxes and interest, partially offset by a decrease in Adjusted EBITDA and higher Merger-related costs during the first 16 weeks of fiscal 2024.

Current wording

Net cash provided by operating activities was $1,374.1 million for the first 28 weeks of fiscal 2024 compared to $1,347.9 million for the first 28 weeks of fiscal 2023. The change in cash flow from operations compared to the first 28 weeks of fiscal 2023 was due to changes in working capital, primarily related to lower inventory, a decrease in multiemployer pension withdrawal liability payments and less cash paid for taxes and interest, partially offset by a decrease in Adjusted EBITDA, higher Merger-related costs and an increase in contributions to our defined benefit pension plans during the first 28 weeks of fiscal 2024.

Previous wording

Net cash used in investing activities was $538.0 million for thefirst 16 weeks of fiscal 2024 compared to $453.9 million for the first 16 weeks of fiscal 2023.

Current wording

Net cash used in investing activities was $925.3 million for thefirst 28 weeks of fiscal 2024 compared to $890.1 million for the first 28 weeks of fiscal 2023.

Previous wording

For the first 16 weeks of fiscal 2024, cash used in investing activities consisted primarily of payments for property, equipment and intangibles of $543.0 million, partially offset by proceeds from the sale of assets of $3.8 million, primarily related to real estate. Payments for property, equipment and intangibles in the first 16 weeks of fiscal 2024 included the completion of 17 remodels, the opening of one new store and continued investment in our digital and technology platforms. For the first 16 weeks of fiscal 2023, cash used in investing activities consisted primarily of payments for property, equipment and intangibles of $622.5 million, partially offset by proceeds from the sale of assets of $169.3 million, primarily related to the sale of our equity interest in El Rancho. Payments for property, equipment and intangibles in the first 16 weeks of fiscal 2023 included the completion of 43 remodels, the opening of two new stores and continued investment in our digital and technology platforms.

Current wording

For the first 28 weeks of fiscal 2024, cash used in investing activities consisted primarily of payments for property, equipment and intangibles of $952.3 million, partially offset by proceeds from the sale of assets of $19.8 million, primarily related to real estate. Payments for property, equipment and intangibles in the first 28 weeks of fiscal 2024 included the completion of 44 remodels, the opening of two new stores and continued investment in our digital and technology platforms. For the first 28 weeks of fiscal 2023, cash used in investing activities consisted primarily of payments for property, equipment and intangibles of $1,084.3 million, partially offset by proceeds from the sale of assets of $195.1 million, primarily related to the sale of our equity interest in El Rancho during the first quarter of fiscal 2023. Payments for property, equipment and intangibles in the first 28 weeks of fiscal 2023 included the completion of 80 remodels, the opening of three new stores and continued investment in our digital and technology platforms.

Previous wording

Net cash used in financing activities was $320.8 million during the first 16 weeks of fiscal 2024 compared to net cash used in financing activities of $615.0 million during the first 16 weeks of fiscal 2023.

Current wording

Net cash used in financing activities was $357.8 million during the first 28 weeks of fiscal 2024 compared to net cash used in financing activities of $651.1 million during the first 28 weeks of fiscal 2023.

Previous wording

Net cash used in financing activities during the first 16 weeks of fiscal 2024 consisted primarily of the $200.0 million repayment of the ABL Facility, dividends paid on our Class A common stock and tax withholding payments on vesting of restricted stock units. Net cash used in financing activities during the first 16 weeks of fiscal 2023 consisted primarily of the $500.0 million partial repayment of the ABL Facility, dividends paid on our Class A common stock and tax withholding payments on vesting of restricted stock units.

Current wording

Net cash used in financing activities during the first 28 weeks of fiscal 2024 consisted primarily of the $200.0 million repayment of the ABL Facility, dividends paid on our Class A common stock and tax withholding payments on vesting of RSUs, partially offset by $50.0 million of proceeds from the issuance of long-term debt under the ABL Facility. Net cash used in financing activities during the first 28 weeks of fiscal 2023 consisted primarily of the $500.0 million partial repayment of the ABL Facility, dividends paid on our Class A common stock and tax withholding payments on vesting of RSUs, partially offset by $50.0 million of proceeds from the issuance of long-term debt under the ABL Facility.

Previous wording

We have established a dividend policy pursuant to which we intend to pay a quarterly dividend on our Class A common stock. Cash dividends paid on our Class A common stock were $69.5 million ($0.12 per common share) and $69.0 million ($0.12 per common share) during the first 16 weeks of fiscal 2024 and first 16 weeks of fiscal 2023, respectively. On July 11, 2024, we announced the next quarterly dividend payment of $0.12 per share of Class A common stock to be paid on August 9, 2024 to stockholders of record as of the close of business on July 26, 2024.

Current wording

We have established a dividend policy pursuant to which we intend to pay a quarterly dividend on our Class A common stock. Cash dividends paid on our Class A common stock were $139.0 million ($0.24 per common share) and $138.0 million ($0.24 per common share) during the first 28 weeks of fiscal 2024 and first 28 weeks of fiscal 2023, respectively. On October 15, 2024, we announced the next quarterly dividend payment of $0.12 per share of Class A common stock to be paid on November 8, 2024 to stockholders of record as of the close of business on October 28, 2024.

Previous wording

As of June 15, 2024, we had no borrowings outstanding under our ABL Facility and total availability of $3,954.2 million (net of letter of credit usage).

Current wording

As of September 7, 2024, we had $50.0 million borrowings outstanding under our ABL Facility and total availability of $3,908.3 million (net of letter of credit usage).

Previous wording

The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. We have chosen accounting policies that we believe are appropriate to report accurately and fairly our operating results and financial position, and we apply those accounting policies in a fair and consistent manner. See the Critical Accounting

Current wording

The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. We have chosen accounting policies that we believe are appropriate to report accurately and fairly our operating results and financial position, and we apply those accounting policies in a fair and consistent manner. See the Critical Accounting Policies section included in our Annual Report on Form 10-K for the fiscal year ended February 24, 2024, filed with the SEC on April 22, 2024, for a discussion of our significant accounting policies.