AlbertsonsCompaniesInc.NYSE_ACI_202310-K.pdf

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1、 UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended February 24,2024OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the

2、 transition period from _ to _Commission File Number:001-39350Albertsons Companies,Inc.(Exact name of registrant as specified in its charter)Delaware 47-4376911(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)250 Parkcenter Blvd.Boise,Idaho,83706(Addre

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

4、k ExchangeSecurities registered under Section 12(g)of the Exchange Act:None Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or

5、Section 15(d)of the Act.Yes No Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2

6、)has been subject tosuch filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule405 of Regulation S-T during the preceding 12 months(or for such shorter period tha

7、t the registrant was required to submit such files).Yes No2025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm1/1612025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm2/161Indicate by ch

8、eck mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitions of large accelerated filer,accelerated filer,smaller reporting company,and emerginggrowth company in Rule 12b-2 of t

9、he 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 extended transition period for complying withany new or revised financial acc

10、ounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of itsinternal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act

11、(15 U.S.C.7262(b)by the registered public accountingfirm that prepared or issued its audit report.If securities are registered pursuant to Section 12(b)of the Act,indicate by check mark whether the financial statements of the registrant includedin the filing reflect the correction of an error to pre

12、viously issued financial statements.Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensationreceived by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).Indic

13、ate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No As of September 8,2023,the last business day of the registrants most recently completed second fiscal quarter,the aggregate market value of theregistrants common stock held by non-affilia

14、tes was approximately$9.9 billion.As of April 18,2024,the registrant had 577,407,663 shares of Class A common stock,par value$0.01 per share,outstanding.DOCUMENTS INCORPORATED BY REFERENCEItems 10,11,12,13 and 14 of Part III incorporate information by reference from the registrants definitive proxy

15、statement related to its 2024Annual Meeting of Stockholders,to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year endedFebruary 24,2024(the Proxy Statement).2025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060

16、/aci-20240224.htm3/161Albertsons Companies,Inc.and Subsidiaries PagePART I4Item 1-Business8Item 1A-Risk Factors14Item 1B-Unresolved Staff Comments30Item 1C-Cybersecurity31Item 2-Properties33Item 3-Legal Proceedings33Item 4-Mine Safety Disclosures34PART II35Item 5-Market for Registrants Common Equity

17、,Related Stockholder Matters and Issuer Purchases of EquitySecurities35Item 6-Reserved37Item 7-Managements Discussion and Analysis of Financial Condition and Results of Operations38Item 7A-Quantitative and Qualitative Disclosures About Market Risk50Item 8-Financial Statements and Supplementary Data5

18、2Item 9-Changes in and Disagreements with Accountants on Accounting and Financial Disclosure101Item 9A-Controls and Procedures102Item 9B-Other Information102Item 9C-Disclosure Regarding Foreign Jurisdictions that Prevent Inspections102PART III103Item 10-Directors,Executive Officers and Corporate Gov

19、ernance103Item 11-Executive Compensation103Item 12-Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters103Item 13-Certain Relationships and Related Transactions,and Director Independence103Item 14-Principal Accountant Fees and Services103PART IV104Item 15-Ex

20、hibits,Financial Statement Schedules104Item 16-Form 10-K Summary108SIGNATURES1092025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm4/161Table of ContentsAs used in this Annual Report on Form 10-K,unless the context otherwise requires,referenc

21、es to Albertsons,theCompany,ACI,we,us and our refer to Albertsons Companies,Inc.and,where appropriate,its consolidatedsubsidiaries.Our last three fiscal years consisted of the 52 weeks ended February 24,2024(fiscal 2023),the 52weeks ended February 25,2023(fiscal 2022)and the 52 weeks ended February

22、26,2022(fiscal 2021).Our nextthree fiscal years consist of the 52 weeks ending February 22,2025(fiscal 2024),the 53 weeks ending February 28,2026(fiscal 2025),and the 52 weeks ending February 27,2027(fiscal 2026).PART ISPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K

23、includes forward-looking statements within the meaning of the federal securitieslaws.The forward-looking statements include our current expectations,assumptions,estimates and projections aboutour business,our industry and the outcome of the Merger.They include statements relating to our future opera

24、ting orfinancial performance which the Company believes to be reasonable at this time.You can identify forward-lookingstatements by the use of words such as outlook,may,should,could,estimates,predicts,potential,continue,anticipates,believes,plans,expects,future,intends and similar expressions which

25、are intendedto identify forward-looking statements.These statements are not guarantees of future performance and are subject to numerous risks and uncertainties whichare beyond our control and difficult to predict and could cause actual results to differ materially from the resultsexpressed or impli

26、ed by the statements.Risks and uncertainties that could cause actual results to differ materially fromsuch statements include:uncertainties related to the Merger,including our ability to close the transactions contemplated by the MergerAgreement,and the impact of the costs related to the Merger;eros

27、ion of consumer confidence as a result of the Merger and the transactions contemplated by the MergerAgreement;changes in macroeconomic conditions and uncertainty regarding the geopolitical environment;rates of food price inflation or deflation,as well as fuel and commodity prices;changes in consumer

28、 behavior and spending due to the impact of macroeconomic factors,including theexpiration of student loan payment deferments;challenges in attracting,retaining and motivating our employees until the closing of the Merger;failure to achieve productivity initiatives,unexpected changes in our objective

29、s and plans,inability toimplement our strategies,plans,programs and initiatives,or enter into strategic transactions,investments orpartnerships in the future on terms acceptable to us,or at all;changes in wage rates,ability to attract and retain qualified associates and negotiate acceptable contract

30、s withlabor unions;litigation related to the transactions contemplated by the Merger Agreement;restrictions on our ability to operate as a result of the Merger Agreement;availability and cost of goods used in our food products;challenges with our supply chain;operational and financial effects result

31、ing from cyber incidents at the Company or at a third party,includingoutages in the cloud environment and the effectiveness of business continuity plans during a ransomware orother cyber incident;and continued reduction in governmental assistance programs such as SNAP.42025/2/12 01:27aci-20240224htt

32、ps:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm5/1612025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm6/161Table of ContentsAll forward-looking statements attributable to us or persons acting on our behalf are

33、 expressly qualified in their entiretyby these cautionary statements and risk factors.Forward-looking statements contained in this Annual Report on Form10-K reflect our view only as of the date of this Annual Report.We undertake no obligation,other than as required bylaw,to update or revise any forw

34、ard-looking statements,whether as a result of new information,future events orotherwise.In evaluating our financial results and forward-looking statements,you should carefully consider the risks anduncertainties more fully described in the section of this Annual Report on Form 10-K entitled Risk Fac

35、tors.Consequently,all of the forward-looking statements we make in this Annual Report on Form 10-K are qualified by theinformation contained in this section and the information discussed under Part IItem 1A.Risk Factors.SUMMARY RISK FACTORSThe following is a summary of the principal factors that cre

36、ate risk in investing in our securities:Risks Related to Our Business and OperationsRisks related to:general economic conditions affecting the food and drug retail industry and various operating factors;availability of a significant amount of energy to manufacture,store,transport and sell products;f

37、ailure to realize anticipated benefits from our productivity initiatives;andimpact of environmental,social and governance matters,including inability to meet goals and commitmentsestablished in relation to such matters.Risks Related to the MergerRisks related to:the Merger Agreement and the pendency

38、 of the Merger;restrictions on our business activities while the Merger Agreement is in effect;litigation related to the Merger;the ability to complete the Merger and the transactions contemplated by the Merger;andsignificant delay or the failure to complete the Merger.Risks Related to Our IndustryR

39、isks related to:intensity of the competition in our industry;our ability to timely identify or effectively respond to consumer trends;consolidation in the healthcare industry;andproviding pharmacy products and services and the adequacy of our insurance to cover any claims.52025/2/12 01:27aci-2024022

40、4https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm7/161Table of ContentsRisks Related to Our Supply ChainRisks related to:product and raw material supply disruptions,especially of fresh products,including from severe weather,natural disasters and climate change;threa

41、ts or potential threats to security of food and drug safety,including the occurrence of a widespread healthepidemic and/or pandemic,and loss of consumer confidence in the supply chain;andavailability and increased prices of fuel or commodities.Risks Related to Our WorkforceRisks related to:our relat

42、ionship with unions,including labor disputes or work stoppages,and increased pension expenses,contributions and surcharges;increases to the minimum wage and changes to wage regulations;andthe failure to attract and retain qualified associates.Legal and Regulatory RisksRisks related to:unfavorable ch

43、anges in government regulation and environmental laws;unfavorable changes in the tax code;legal or other proceedings;andour use of insurance and self-insurance to address potential liabilities.Risks Related to Information Security,Cybersecurity,Data Privacy and Evolving TechnologiesRisks related to:

44、our dependence on IT systems;improper activities by third parties and the loss of confidence from a data security incident involving ourcustomers,employees or vendors;andthe use of artificial intelligence in our business.Risks Related to Our IndebtednessRisks related to:our level of indebtedness and

45、 our ability to generate cash;our debt instruments limiting our flexibility in operating our business;andincreases in interest rates,a downgrade of our credit ratings and/or instability in credit markets.Risks Related to Owning Our Common StockRisks related to:the volatility of the price of our comm

46、on stock and the possibility of a decline regardless of our operatingperformance;our largest stockholder may have conflicts of interest with other stockholders in the future;2025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm8/16162025/2/12 0

47、1:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm9/161Table of Contentsprovisions in our charter documents and Delaware law and certain other agreements that could delay or preventa change of control;andour ability to pay dividends to our stockholders

48、.See Part IItem 1A.Risk Factors for a more complete discussion of the material risks facing our business.NON-GAAP FINANCIAL MEASURESWe define EBITDA as generally accepted accounting principles(GAAP)earnings(net loss)before interest,incometaxes,depreciation and amortization.We define Adjusted EBITDA

49、as earnings(net loss)before interest,income taxes,depreciation and amortization,further adjusted to eliminate the effects of items management does not consider inassessing our ongoing core performance.We define Adjusted net income as GAAP net income adjusted to eliminate theeffects of items manageme

50、nt does not consider in assessing our ongoing core performance.We define Adjusted netincome per Class A common share as Adjusted net income divided by the weighted average diluted Class A commonshares outstanding,as adjusted to reflect all restricted stock units and awards outstanding at the end of

51、the period,aswell as the conversion of Convertible Preferred Stock when it is antidilutive for GAAP.See Part IIItem 7.Managements Discussion and Analysis of Financial Condition and Results of Operations for further discussion and areconciliation of Adjusted EBITDA,Adjusted net income and Adjusted ne

52、t income per Class A common share.EBITDA,Adjusted EBITDA,Adjusted net income and Adjusted net income per Class A common share(collectively,the Non-GAAP Measures)are performance measures that provide supplemental information we believe is useful toanalysts and investors to evaluate our ongoing result

53、s of operations,when considered alongside other GAAP measuressuch as net income,operating income,gross margin and net income per Class A common share.These Non-GAAPMeasures exclude the financial impact of items management does not consider in assessing our ongoing core operatingperformance,and there

54、by provide useful measures to analysts and investors of our operating performance on a period-to-period basis.Other companies may have different definitions of Non-GAAP Measures and provide for differentadjustments,and comparability to our results of operations may be impacted by such differences.We

55、 also use AdjustedEBITDA for board of director and bank compliance reporting.Our presentation of Non-GAAP Measures should not beconstrued as an inference that our future results will be unaffected by unusual or non-recurring items.Non-GAAP Measures should not be considered as measures of discretiona

56、ry cash available to us to invest in the growthof our business.We compensate for these limitations by relying primarily on our GAAP results and using Non-GAAPMeasures only for supplemental purposes.72025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-2024

57、0224.htm10/161Table of ContentsItem 1-BusinessOverviewAlbertsons is one of the largest food and drug retailers in the United States,with both strong local presence andnational scale.We also manufacture and process some of the food for sale in our stores.We maintain a website(www.A)that includes addi

58、tional information about the Company.We make available throughour website,free of charge,our annual reports on Form 10-K,our quarterly reports on Form 10-Q,our current reportson Form 8-K and our interactive data files,including amendments to those reports.These forms are available as soon asreasonab

59、ly practicable after we have filed them with,or furnished them electronically to,the Securities and ExchangeCommission(SEC).Additionally,all of our filings with the SEC can be accessed on the SECs website atwww.sec.gov.Retail OperationsAs of February 24,2024,we operated 2,269 stores across 34 states

60、 and the District of Columbia under more than 20well known banners including Albertsons,Safeway,Vons,Pavilions,Randalls,Tom Thumb,Carrs,Jewel-Osco,Acme,Shaws,Star Market,United Supermarkets,Market Street,Haggen,Kings Food Markets and Balduccis Food LoversMarket.Additionally,as of February 24,2024,we

61、 operated 1,725 pharmacies,1,336 in-store branded coffee shops,402adjacent fuel centers,22 dedicated distribution centers,19 manufacturing facilities and various digital platforms.Ourstores operate in First-and-Main retail locations and have leading market share within attractive and growinggeograph

62、ies.We hold a#1 or#2 position by market share in 70%of the 121 metropolitan statistical areas(MSAs)inwhich we operate.Our portfolio of well-located,full-service stores provides the foundation of our omnichannelplatform,and we have continued to enhance our capabilities,including automated self-checko

63、ut options,to meetcustomer demand for convenience and flexibility.Our Drive Up&Go curbside pickup service is offered in more than2,200 locations and we offer delivery services across more than 2,100 of our stores.In our delivery service,we haveexpanded the number of stores with in-house delivery ser

64、vices,and in our third-party services we have continued topartner with Instacart,DoorDash and Uber to engage with customers on the platform of their choice.Our Customersfor Life transformation strategy is anchored on placing the customer at the center of everything we do,with theultimate goal of sup

65、porting them every day,every week,and for a lifetime.We seek to tailor our offerings to localdemographics and preferences of the markets in which we operate.Our Locally Great,Nationally Strong operatingstructure empowers decision making at the local level,which we believe better serves our customers

66、 and communities,while also providing the technology platforms,systems,analytics and buying power afforded by an organization withnational scale.SegmentsWe are engaged in the operation of food and drug retail stores that offer grocery products,general merchandise,healthand beauty care products,pharm

67、acy,fuel and other items and services in our stores or through digital channels.Ourretail operating divisions are geographically based,have similar economic characteristics and similar expected long-term financial performance.Our operating segments and reporting units are made up of 12 divisions,whi

68、ch arereported in one reportable segment.Each reporting unit constitutes a business for which discrete financial informationis available and for which management regularly reviews the operating results.Across all operating segments,theCompany operates primarily one store format.Each division offers,

69、through its stores and digital channels,the samegeneral mix of products with similar pricing to similar categories of customers,has similar distribution methods,operates in similar regulatory environments and purchases merchandise from similar or the same vendors.82025/2/12 01:27aci-20240224https:/w

70、ww.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm11/161Table of ContentsProductsOur stores offer grocery products,general merchandise,health and beauty care products,pharmacy,fuel and otheritems and services.We are not dependent on any individual supplier;only one third-part

71、y supplier represented morethan 5%of our sales for fiscal 2023.Merchandising and ManufacturingOur Own Brands portfolio provides high-quality products to our customers at a great value,offering more than 14,000unique items.The Own Brands portfolio includes but is not limited to the registered tradema

72、rks Signature SELECT,O Organics,Open Nature,Signature Caf,Lucerne,Waterfront BISTRO,Primo Taglio,Signature Care,Signature Reserve and Value Corner.Our Own Brands products resonate well with our customers,as evidenced byOwn Brands sales of$16.5 billion in fiscal 2023.As measured by units for fiscal 2

73、023,10.1%of our Own Brands products were manufactured in Company-ownedfacilities,and the remainder was purchased from third parties.We closely monitor make-versus-buy decisions tooptimize their quality and profitability.In addition,we believe that our scale will provide opportunities to leverage our

74、fixed manufacturing costs in order to drive innovation across our Own Brands portfolio.As of February 24,2024,weoperated 19 food production plants.These plants consisted of seven milk plants,three soft drink bottling plants,threebakery plants,two ice cream product plants,two grocery/prepared food pl

75、ants,one ice plant and one soup plant.Intellectual PropertyOur banners,brand image and Own Brands portfolio are significant to our business strategy.We own numerousregistered trademarks and service marks and seek to obtain and preserve intellectual property protection of our marksand to ensure that

76、any third-party uses are properly licensed.DistributionAs of February 24,2024,we operated 22 strategically located distribution centers,approximately 36%of which areowned or ground-leased.Our distribution centers collectively provide approximately 63%of all products to our retailoperating areas.Mark

77、eting and AdvertisingOur marketing efforts involve collaboration between our national marketing and merchandising team and localdivisions and stores.We augment the local division teams with corporate resources and are focused on providingexpertise,sharing best practices and leveraging scale in partn

78、ership with leading consumer packaged goods vendors.Our corporate teams support divisions by providing strategic guidance in order to drive key areas of our business,including pharmacy,general merchandise and our Own Brands.Our local marketing teams set brand strategy andcommunicate brand messages t

79、hrough our integrated digital and physical marketing and advertising channels.We devote significant resources to differentiating our banners in the local markets where we operate and invest inloyalty programs to drive traffic through our omnichannel approach.Our local merchandising teams spend consi

80、derabletime working with store directors to make sure we are satisfying consumer preferences.We also strive to achieve andmaintain favorable recognition of our Own Brands offerings by marketing them to consumers and enhancing value forconsumers,particularly in respect of branded products.We measure

81、price competitiveness through systematic,selective and thoughtful price investment to drive customertraffic and basket size.We also use our loyalty program to target promotional activity and improve our customers2025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/00016469722400

82、0060/aci-20240224.htm12/16192025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm13/161Table of Contentsexperience.This includes leveraging customer and transaction information with data driven analytics to provide bothpersonalized deals and di

83、gital coupons,as well as gas and grocery rewards.We have 39.8 million members currentlyenrolled in our loyalty program.We have achieved significant success with active participants in our loyalty program,which drives higher sales and customer retention.We have recently deployed and are continuing to

84、 refine cloud-basedenterprise solutions to quickly process proprietary customer,product and transaction data and efficiently provide ourlocal managers with targeted marketing strategies for customers in their communities.In addition,we use data analyticsto optimize shelf assortment and space in our

85、stores by continually and systematically reviewing the performance ofeach product.In our digital strategies,we capitalize on our rich and proprietary data under our Albertsons Media Collective(AMC).AMC offers new and existing business partners a robust digital marketing platform that reaches ourexte

86、nsive customer network and leverages our strong market share,especially in the 70%of MSAs where we hold a#1or#2 share position.We believe AMC will be a contributor to our growth and a profit driver in the future.Raw MaterialsVarious agricultural commodities constitute the principal raw materials use

87、d by us in the manufacture of our foodproducts.Although historically raw materials for our products have not been in short supply and have been readilyavailable,see Part IItem 1A.Risk Factors regarding the potential adverse impact on our results of operations dueto the lack of,or reduced availabilit

88、y of,raw materials.EnvironmentalOur operations are subject to regulation under environmental laws,including those relating to waste management,airemissions and underground storage tanks.In addition,as an owner and operator of commercial real estate,we may besubject to liability under applicable envi

89、ronmental laws for clean-up of contamination at our facilities.Compliancewith and clean-up liability under these laws has not had and is not expected to have a material adverse effect upon ourbusiness,financial condition,liquidity or operating results.We work hard to maintain the highest standards o

90、f environmental stewardship(including procuring and offeringsustainably sourced products).During fiscal 2023,we recycled more than 865 million pounds of cardboard and morethan 25 million pounds of plastic bags and film from our operations and completed over 500 energy efficiency projects.Moreover,10

91、0%of our Own Brands Waterfront BISTRO and Open Nature seafood is sourced to meet ourResponsible Seafood Policy.Human CapitalAs one of the largest food and drug retailers in the U.S.,serving 35.3 million customers per week,we recognize thatour success and ability to delight our customers lies in the

92、engagement of our associates.We remain committed toattracting,developing and retaining associates by fostering a diverse and inclusive culture through our investment intalent development and supporting the personal health and well-being of associates and their families.As of February 24,2024,we empl

93、oyed approximately 285,000 associates,of which approximately 62%were part-timeand approximately 200,000 associates were covered by collective bargaining agreements.A significant number of ourassociates have long tenure and during fiscal 2023,more than 61,000 of our associates celebrated at least 15

94、years ofservice,and more than 44,000 associates celebrated over 20 years of service.We commit to create a workplace where inclusion thrives through diverse representation across all levels of ourworkforce.In fiscal 2023,we integrated Belonging into our strategic framework and transitioned to Diversi

95、ty,Equity,Inclusion&Belonging(DEI&B).To promote DEI&B among our associates,we support our associate resourcegroups(ARGs).The ARGs collectively comprise over 7,000 members and are based on employee2025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-2024022

96、4.htm14/161102025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm15/161Table of Contentsinterests.During fiscal 2023,we added our newest ARG the Women of Color(WOC)Alliance,which provides aplatform for women of color and their allies through e

97、ducation,awareness,and knowledge.The WOC Alliance joinedour existing ARGs,which include the Womens Inspiration and Inclusion Network,the Hispanic Leadership Network,the Asian Network,the African American Leadership Council,the Pride Alliance,Recipe for Change Alliance,VeteransAssociate Resource Grou

98、p and diverseABILITY.In 2023,we also introduced an ally component to our ARGs to enablethe participation of any associate who wants to support and take action to help that group.As part of our ongoing commitment,we have integrated DEI&B goals into the performance plans of our top leadersand during f

99、iscal 2023 we successfully integrated Leading With Inclusion(LWI)within our in-house curriculum.Wecontinue to expand opportunities for our associates to learn more about DEI&B,including facilitated discussions ofleaders on how to be more inclusive,and bi-annual store and supply chain huddles to furt

100、her embed DEI&B into ourfrontline.We are proud to offer our associates a myriad of opportunities to grow and advance in their careers.We have a talentmanagement process that is designed to enable us to identify and assess talent across the organization and provideequal and consistent opportunities f

101、or employees to develop their skills.Several levels of associates participate in ourannual performance management process that includes goal setting,feedback and development to support theirpersonal growth and development.We engage associates across the organization to provide input through our annu

102、alAssociate Experience Survey.We hold regular town hall meetings where any employee can ask questions of executivesand make their voice heard.We also offer formal and informal learning and development opportunities to all associates through synchronous,asynchronous and hybrid experiences.These offer

103、ings include eLearning and on-demand content,virtual and in-personclasses,on-the-job training,virtual reality and mentoring programs.In addition to our internal learning offerings,through partnerships with third parties,we offer development programs and conferences to our top talent based onnominati

104、ons.We are continually evaluating and developing our compensation and benefits programs to offer competitive wages andjob-appropriate compensation.Our benefits are designed to attract and retain our employees and vary from location,seniority and employment status.In addition to comprehensive,accessi

105、ble and affordable healthcare coverage,we offerpaid time off,flexible work schedules,family leave,associate assistance programs and a 401(k)-retirement savings andinvestment plan.The health and safety of our associates remains at the forefront of our business,and we remain committed to theprevention

106、 of injury and illness through strong health and safety management,employee empowerment andaccountability,and strict compliance with health and safety regulations.We are also focused on fostering a safe,openand accountable work environment and we provide a hotline for all associates to report workpl

107、ace concerns andviolations.SeasonalityOur business is generally not seasonal in nature,but a larger share of annual revenues may be generated in Novemberand December due to the major holidays.Competitive EnvironmentThe food and drug retail industry is highly competitive.The principal competitive fac

108、tors that affect our business arelocation,price,quality,fresh,service,selection,convenience and condition of assets such as our stores.The operatingenvironment for the food and drug retailing industry continues to be characterized by intense competition,112025/2/12 01:27aci-20240224https:/www.sec.go

109、v/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm16/1612025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm17/161Table of Contentsaggressive expansion,increasing specialization of retail and digital formats,entry of non-traditi

110、onal competitors andconsolidation.We face intense competition from supercenters,other food and/or drug retailers,club stores,online retailers,specialtyand niche supermarkets,limited assortment stores,drug stores,general merchandisers,wholesale stores,dollar anddiscount stores,grocery outlets,conveni

111、ence stores,natural food stores,farmers markets,local chains and stand-alonestores that cater to the individual cultural preferences of specific neighborhoods,restaurants and a growing number ofinternet-based home delivery and meal solution companies.We and our competitors engage in price and non-pr

112、icecompetition which has adversely affected our operating margins.Executive Officers of the RegistrantThe following table sets forth information regarding our executive officers as of April 22,2024:NameAgePositionVivek Sankaran61Chief Executive Officer;DirectorSharon McCollam61President,Chief Financ

113、ial OfficerAnuj Dhanda61Executive Vice President,Chief Technology&Transformation OfficerOmer Gajial50Executive Vice President,Chief Merchandising&Digital OfficerThomas Moriarty61Executive Vice President,General Counsel and Chief Policy OfficerSusan Morris55Executive Vice President,Chief Operations O

114、fficerRobert Backus51Executive Vice President,Retail Operations,East RegionMichelle Larson47Executive Vice President,Retail Operations,West RegionEvan Rainwater61Executive Vice President,Supply Chain,Manufacturing and Strategic SourcingJennifer Saenz46Executive Vice President,Pharmacy&eCommerceMicha

115、el Theilmann60Executive Vice President,Chief Human Resources OfficerVivek Sankaran has served as our Chief Executive Officer and Director since September 2021,and our Chief ExecutiveOfficer,President and Director since April 2019.Prior to joining the Company,since 2009 Mr.Sankaran served invarious l

116、eadership and executive positions at PepsiCo,Inc.(PepsiCo),a multinational food,snack,and beveragecorporation.From January to March 2019,he served as Chief Executive Officer of PepsiCo Foods North America,abusiness unit within PepsiCo,where he led PepsiCos snack and convenient foods business.Prior t

117、o that position,Mr.Sankaran served as President and Chief Operating Officer of Frito-Lay North America,a subsidiary of PepsiCo,fromApril 2016 to December 2018,its Chief Operating Officer from February to April 2016 and Chief Commercial Officer,North America,of PepsiCo from 2014 to February 2016,wher

118、e he led PepsiCos cross-divisional performance acrossits North American customers.Prior to joining PepsiCo in 2009,Mr.Sankaran was a partner at McKinsey andCompany,where he served various Fortune 100 companies,bringing a strong focus on strategy and operations.Sharon McCollam has served as our Presi

119、dent and Chief Financial Officer since September 2021.Ms.McCollampreviously served as Executive Vice President,Chief Administrative and Chief Financial Officer at Best Buy Co.Inc.(Best Buy),a multinational consumer electronics retailer,from 2012 to 2016.Prior to Best Buy,Ms.McCollam heldseveral tran

120、sformational leadership positions at Williams-Sonoma,Inc.,a consumer retail company,from 2000 to 2012,including Chief Operating and Chief Financial Officer from 2006 to 2012.Anuj Dhanda has served as our Executive Vice President and Chief Technology&Transformation Officer since 2023and as our Execut

121、ive Vice President and Chief Information Officer since joining the Company in December 2015.Priorto joining the Company,Mr.Dhanda served as Senior Vice President of Digital Commerce of the Giant Eaglesupermarket chain from March to December 2015,and as its Chief Information Officer from September 20

122、13.122025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm18/161Table of ContentsPrior to Giant Eagle,from March 2008 to August 2013,Mr.Dhanda served as Chief Information Officer of PNCFinancial Services,a bank holding company and financial ser

123、vices corporation.Omer Gajial has served as our Executive Vice President and Chief Merchandising&Digital Officer since April 2024,as our Executive Vice President of Health and Chief Digital Officer since August 2022,as our Executive Vice Presidentof Pharmacy and Health since February 2022 and as our

124、 Senior Vice President,Rx Health and Wellness sinceSeptember 2020.Prior to joining the Company,from January 2016 until August 2020,Mr.Gajial was the GeneralManager for Amazon Marketplace business,an e-commerce platform owned and operated by Amazon,acrossHardlines,Softlines,and Consumables categories

125、 for the U.S.,Canada,and Mexico.At Amazon Mr.Gajial led sales,business development,product,program,and fulfillment teams to launch strategic sellers into North America.Prior toAmazon,from July 2000 until December 2015,Mr.Gajial held several positions of increasing responsibility at PepsiCoin Dubai a

126、nd New York,before being named VP Global Strategy,Category Management&Insights for PepsiCosWalmart Customer team.Thomas Moriarty has served as our Executive Vice President,General Counsel and Chief Policy Officer since June2023.Prior to joining the Company,Mr.Moriarty served as EVP,Chief Policy and

127、External Affairs Officer and GeneralCounsel at CVS Health.Mr.Moriarty spent twelve years at Medco Health Solutions,serving in various leadership rolesin corporate strategy,legal affairs,global supply chain management,and mergers and acquisitions.Susan Morris has served as our Executive Vice Presiden

128、t and Chief Operations Officer since January 2018.Ms.Morrishas served in various executive positions at the Company since 2010 including serving as our Executive Vice President,Retail Operations,West Region from April 2017 to January 2018 and Executive Vice President,Retail Operations,EastRegion fro

129、m April 2016 to April 2017.Prior to joining the Company,Ms.Morris served as Senior Vice President ofSales and Merchandising and Vice President of Customer Satisfaction at SuperValu.Robert Backus has served as our Executive Vice President of Retail Operations,East Region since April 2024.Mr.Backus pr

130、eviously served as Shaws Division President from 2020 and as Senior Vice President of Operations from2016.Mr.Backus also served in various roles and positions of increasing responsibility at Safeway prior to its mergerwith the Company dating back to October 1990.Michelle Larson has served as our Exe

131、cutive Vice President of Retail Operations,West Region since April 2024.Ms.Larson previously served as our Executive Vice President of Retail Operations,East Region since March 2023 and asour Southwest and Shaws Division President since 2018.Ms.Larson joined the Company in 2016 as Senior VicePreside

132、nt of Merchandising,Southwest.Evan Rainwater has served as our Executive Vice President,Supply Chain,Manufacturing and Strategic Sourcing sinceMarch 2020 and our Senior Vice President,Supply Manufacturing since May 2019.Mr.Rainwater joined the Companyin May 2005 as Vice President,Manufacturing.Jenni

133、fer Saenz has served as our Executive Vice President,Pharmacy&eCommerce since April 2024 and our ChiefMerchandising Officer since July 2021.Prior to joining the Company,since 2006,Ms.Saenz served in severalexecutive positions at PepsiCo.From October 2019 until July 2021,Ms.Saenz served as Global Chi

134、ef MarketingOfficer for PepsiCo,and President,Global Foods,responsible for overseeing the marketing function across foods andbeverages and growing the PepsiCo Foods portfolio across all global markets.From January 2016 to October 2019 Ms.Saenz served as Senior Vice President&Chief Marketing Officer

135、of PepsiCo Foods North America where shemanaged the business units snacking portfolio.Michael Theilmann has served as our Executive Vice President and Chief Human Resources Officer since August 2019.Prior to joining the Company,Mr.Theilmann served as Global Practice Managing Partner,Human Resources1

136、32025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm19/1612025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm20/161Table of ContentsOfficers Practice,from February 2018 to August 2019,

137、and as Partner,Consumer Markets Practice,from June 2017 toJanuary 2018,of Heidrick&Struggles International Incorporated,a worldwide executive search firm.Item 1A-Risk FactorsThere are risks and uncertainties that can affect our business.The most significant risk factors are discussed below.Thefollow

138、ing information should be read together with Part IIItem 7.Managements Discussion and Analysis ofFinancial Condition and Results of Operations of this Form 10-K,which includes forward-looking statements andfactors that could cause us not to realize our goals or meet our expectations.Risks Related to

139、 Our Business and OperationsGeneral economic conditions affecting the food and drug retail industry and various operating factors may affectour business and may adversely affect our business and operating results.Our operations and financial performance are affected by economic conditions such as ma

140、croeconomic factors,creditmarket conditions and the level of consumer confidence.Both inflation and deflation affect our business.Fooddeflation could reduce sales growth and earnings,while food inflation could reduce gross margin rates and consumerspending.We have observed increased inflation during

141、 the past year with varying impacts on our business.We areunable to predict the direction of the economy or if inflation will increase materially or revert to deflation.Thecontinued increase in energy costs,including fuel,could also have an effect on consumer spending and on our costs ofproducing an

142、d procuring products that we sell.If the economy weakens,energy costs continue to increase orinflationary trends continue,our business and operating results could be adversely affected.We may also experiencematerially adverse impacts to our business as a result of consumers perceptions of the econom

143、y,and a decrease in theirpersonal financial condition could hurt overall consumer confidence and reduce demand for many of our productofferings.Consumers may reduce spending on non-essential items,purchase value-oriented products or increasinglyrely on food discounters in an effort to secure the foo

144、d and drug products that they need,all of which could impact oursales and profit.Governmental and regulatory changes and reductions in governmental subsidies such as SNAP couldalso materially impact our business adversely.We compete within our industry not only for customers,but also for associates.

145、Since the beginning of the COVID-19pandemic,we have faced a competitive labor market due to labor shortages and turnover.Our inability to invest in,manage costs and keep pace with technological changes,including those adopted by our competitors,may adverselyimpact our business initiatives and affect

146、 our financial performance.We may be limited in our ability to implementautomation-related technological changes in certain of our operations if we are unable to negotiate appropriate terms inour contracts with our labor unions.Our success is also dependent in large part upon our ability to maintain

147、 andenhance the goodwill and reputation of our banners,our customers connection to our banners,and a positiverelationship with the communities in which we serve.Additionally,acts of violence at,or threatened against,our stores,including active shooter situations,may,in addition to other operational

148、impact,result in damage and restricted accessto our stores and/or store closures for short or extended periods of time,all of which could materially adversely affectour financial performance.Our operations are dependent upon the availability of a significant amount of energy and fuel to manufacture,

149、store,transport and sell products.Our operations are dependent upon the availability of a significant amount of energy and fuel to manufacture,store,transport and sell products.Energy and fuel costs are influenced by domestic and international political and economiccircumstances and have experienced

150、 volatility both recently and over time.While we have entered into contracts toreduce the impact of volatile energy and fuel costs for our future energy needs,volatility that exceeds offsettingcontractual arrangements could adversely affect our results of operations.2025/2/12 01:27aci-20240224https:

151、/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm21/161142025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm22/161Table of ContentsFailure to realize anticipated benefits from our productivity initiatives could adve

152、rsely affect our financialperformance and competitive position.While we have identified and are implementing a broad range of specific productivity initiatives to help offset costinflation,increase growth and improve earnings,the savings from these productivity initiatives represent managementsestim

153、ates and remain subject to risks and uncertainties.There can be no assurance that all of our initiatives will besuccessful or that we will realize the estimated benefits in the currently anticipated amounts or timeframe,if at all.Also,certain of our initiatives may involve significant changes to our

154、 operating processes and systems that could resultin disruptions in our operations and impact our results of operations.We may be adversely impacted by environmental,social and governance matters,including inability to meet goalsand commitments that we establish in relation to such matters.In recent

155、 years,there has been an increased focus from investors,governmental and nongovernmental entities,and thepublic on environmental,social and governance(ESG)matters,including greenhouse gas emissions,renewableenergy,packaging and waste,practices related to sustainable supply chain,energy and water use

156、,diversity,equity andinclusion,human rights,animal rights and social commitment.A variety of organizations evaluate,and measure theperformance of,companies on such ESG matters,and the results of these assessments can be widely publicized.Givenour commitment to ESG,we have established and publicly an

157、nounced certain goals,commitments,and targets whichwe may change in the future.Execution of our ESG strategies to achieve these goals,commitments,and targets aresubject to risks and uncertainties,many of which may be outside of our control and prove to be more costly than weanticipated.These risks a

158、nd uncertainties include,but are not limited to,our ability to achieve our goals,commitments,and targets within the currently projected costs and the expected timeframes;unforeseen operational and technologicaldifficulties;changes in investment assessments or increases in projected investments and o

159、ur ability to investaccordingly;changes in frameworks we have agreed to;actions by our competitors in setting or achieving similargoals;the outcome of research efforts and future technology developments;and the success of our collaborations withthird parties.Any failure,or perceived failure,to achie

160、ve our ESG goals,commitments,and targets,or perceived lackof intensity of our commitment to ESG initiatives or to otherwise meet evolving and varied stakeholder expectationscould damage our reputation and customer,investor and other stakeholder relationships,and may even result inregulatory enforcem

161、ent action.Such conditions could have an adverse effect on our business,results of operations andfinancial condition.Risks Related to the MergerThe Merger Agreement and the pendency of the Merger could have a material adverse effect on our business,results of operations,financial condition and stock

162、 price.On October 13,2022 the Company,The Kroger Co.(Kroger or Parent)and Kettle Merger Sub,Inc.,a whollyowned subsidiary of Parent(Merger Sub),entered into an Agreement and Plan of Merger(the Merger Agreement),pursuant to which Merger Sub will be merged with and into the Company(the Merger),with th

163、e Company survivingthe Merger as the surviving corporation and a direct,wholly owned subsidiary of Parent.The Merger Agreement issubject to the satisfaction of various covenants and agreements,including,among others the expiration or terminationof the applicable waiting period(and any extension ther

164、eof)under the Hart-Scott-Rodino Antitrust Improvements Actof 1976,as amended(HSR Act)and certain other approvals and clearances.During the period between the date of signing of the Merger Agreement and the closing of the Merger(the Closing),our business is exposed to certain inherent risks due to th

165、e effect of the announcement or pendency of the Merger andthe transactions contemplated by the Merger,including the divestiture plan with C&S Wholesale Grocers,LLC,whichmay impact our business relationships,financial condition and operating results.Some of these risk factors include:152025/2/12 01:2

166、7aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm23/161Table of Contentsdifficulties maintaining relationships with customers,distributors,vendors,suppliers,service providers andother business partners,who may defer decisions about working with us,move t

167、o our competitors,seek todelay or change existing business relationships with us;uncertainties caused by negative sentiment in the marketplace with respect to the Merger,which couldadversely impact investor confidence in the Company;distraction of our current employees as a result of the Merger whic

168、h could result in a decline in theirproductivity or cause distractions in the workplace;our inability to attract new employees or retain current employees may be exacerbated due to uncertaintiesrelated to the Merger;diversion of significant management time and resources towards the completion of the

169、 Merger and transactionsrelated to the Merger;impact of costs related to completion of the Merger and transactions related to the Merger,including any costsrelated to any divestitures for which we are required to obtain regulatory approvals;our inability to solicit other acquisition proposals,pursue

170、 alternative business opportunities,make strategicchanges to our business and other restrictions on our ability to conduct our business pursuant to the MergerAgreement;andother developments beyond our control,including,but not limited to,changes in domestic or global economicconditions that may affe

171、ct the timing or success of the Merger.While the Merger Agreement is in effect,we are subject to restrictions on our business activities.While the Merger Agreement is in effect,we are generally required to conduct our business in the ordinary courseconsistent with past practices.However,we are restr

172、icted from taking certain actions without Krogers prior consent,which is not to be unreasonably withheld,conditioned or delayed.These limitations include,among other things,certain restrictions on our ability to amend our organizational documents,acquire other businesses and assets,disposeof our ass

173、ets,make investments,repurchase,reclassify or issue securities,make loans,pay dividends,incurindebtedness,make capital expenditures,enter into,amend or terminate certain contracts,change accounting policies orprocedures,initiate or settle certain litigation,change tax classifications and elections,o

174、r take certain actions relating tointellectual property.These restrictions could prevent us from pursuing strategic business opportunities and takingextraordinary actions with respect to our business during this period.Litigation related to the Merger could prevent or delay completion of the Merger

175、or otherwise negatively affect ourbusinesses and operations.Putative stockholder complaints,including stockholder class action complaints,demands for books and records andother complaints or actions may be filed against us,our board of directors,Kroger,Krogers board of directors,andothers in connect

176、ion with the transactions contemplated by the Merger Agreement.The outcome of litigation isuncertain,and we may not be successful in defending against any such future claims.Lawsuits that may be filedagainst us,our board of directors,Kroger,or Krogers board of directors could delay or prevent the Me

177、rger andotherwise adversely affect our business,results of operations,and financial condition.The ability to complete the Merger is subject to the receipt of consents and approvals from government entities,which may impose conditions that could cause us or Kroger to abandon the Merger.On February 26

178、,2024,the United States Federal Trade Commission(FTC)issued an administrative complaint andauthorized a lawsuit in federal court to enjoin the Merger.A group of nine states joined the FTC complaint and twostates have filed suits in respective state courts to enjoin the Merger.Completion of the Merge

179、r is conditioned upon,among other things,the expiration or termination of the required waiting period(and any extension thereof)applicableto the Merger and any transactions contemplated by the Merger under the HSR Act,and resolution with162025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/

180、data/1646972/000164697224000060/aci-20240224.htm24/1612025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm25/161Table of Contentsthe FTC and the states who have filed or may file suit.We cannot provide any assurance that we or Kroger will prev

181、ailin court or obtain the necessary approvals to complete the Merger.Failure to prevail in any legal challenge to theMerger may result in the delay or abandonment of the Merger.The Merger may not be completed within the expected timeframe,or at all,and significant delay or the failure tocomplete the

182、 Merger could adversely affect our business.We cannot assure that our business,our relationships or our financial condition will not be adversely affected if theMerger is not consummated within the expected timeframe,or at all.Failure to complete the Merger within theexpected timeframe,or at all,cou

183、ld adversely affect our business and the market price of our common stock in severalways,including the following:to the extent that the current market price of our common stock reflects an assumption that the Merger will becompleted,it may be negatively impacted because of a failure to complete the

184、Merger within the expectedtimeframe or at all;investor and consumer confidence in our business could decline,litigation could be brought against us,relationships with vendors,service providers,investors and other business partners may be adversely impacted,and we may be unable to retain key personne

185、l;we have incurred,and will continue to incur,significant costs,expenses and fees for professional services andother costs in connection with the Merger and the transactions contemplated by the Merger,for which we mayreceive little or no benefit if the Merger and the transactions contemplated by the

186、 Merger are not completed.Many of these fees and costs will be payable by us even if the Merger and the transactions contemplated by theMerger are not completed and may relate to activities that we would not have undertaken other than tocomplete the Merger;andfailure to complete the Merger,may resul

187、t in negative publicity and a negative impression of us in theinvestment community.The occurrence of any of these events individually or in combination could materially and adversely affect ourbusiness,results of operations,financial condition,and our stock price.Risks Related to Our IndustryCompeti

188、tion in our industry is intense,and our failure to compete successfully may adversely affect our profitabilityand operating results.The food and drug retail industry is large and dynamic,characterized by intense competition among a collection oflocal,regional and national participants.In addition to

189、 new entrants to the market,we face strong competition fromexisting supercenters,other brick and mortar food and/or drug retailers,club stores,dollar and discount stores,groceryoutlets,online retailers and distributors,specialty and niche supermarkets,drug stores,general merchandisers,wholesale stor

190、es,convenience stores,natural food stores,farmers markets,local chains and stand-alone stores thatcater to the individual cultural preferences of specific neighborhoods,restaurants,catering companies and homedelivery and meal solution companies.Shifts in the competitive landscape,consumer preference

191、 or market share mayhave an adverse effect on our profitability and results of operations.As a result of consumers growing desire to shop online,we also face increasing competition from both our existingcompetitors that have incorporated the internet as a direct-to-consumer channel and online provid

192、ers that sell groceryproducts.Although we have accelerated the expansion of our digital business to offer our customers the ability to shoponline for both home delivery and Drive Up&Go curbside pickup,there is no assurance that these online initiativeswill continue to be successful.In addition,these

193、 initiatives may have an adverse impact on our profitability because oflower gross margins or greater operating costs to compete.2025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm26/161172025/2/12 01:27aci-20240224https:/www.sec.gov/Archives

194、/edgar/data/1646972/000164697224000060/aci-20240224.htm27/161Table of ContentsOur ability to attract customers is dependent,in large part,upon a combination of channel preference,location,storeconditions,quality,price,service,convenience and selection and our ability to leverage existing and emergin

195、g digitaltechnologies.In each of these areas,other companies compete with us and may successfully attract our customers bymatching or exceeding what we offer or by providing greater shopping convenience or better offerings.In recent years,many of our competitors have aggressively added locations and

196、 adopted a multi-channel approach to marketing andadvertising.Our responses to competitive pressures,such as additional promotions,increased advertising,additionalcapital investment including for development of our digital offerings and retail media network,could adversely affectour profitability an

197、d cash flow.We cannot guarantee that our competitive response will succeed in increasing ormaintaining our share of retail food sales.An increasingly competitive industry and inflation and deflation in the prices of certain foods have made it difficult forfood retailers to achieve positive identical

198、 sales growth on a consistent basis.We and our competitors have attempted tomaintain or grow our respective share of retail food sales through capital and price investment,increased promotionalactivity and new and remodeled stores,creating a more difficult environment to consistently increase year-o

199、ver-yearsales.Some of our primary competitors are larger than us,have greater financial resources available to them or sell adiversified mix of non-food products,and,therefore,may be able to devote greater resources to grow their share ofretail food sales or offset lower food margins with higher-mar

200、gin non-food products.Price investment by ourcompetitors has also adversely affected our operating margins.Our continued success to effectively compete in the food retail industry is dependent upon our ability to controloperating expenses,replicating competitor capabilities,making appropriate invest

201、ments,managing product and laborcosts in an increasingly competitive labor market and health care and pension costs stipulated by our collectivebargaining agreements.Several of our primary competitors are larger than we are,or are not subject to collectivebargaining agreements,allowing them to more

202、effectively leverage their fixed costs or more easily reduce operatingexpenses.Changes in our product mix also may negatively affect our profitability.Our inability to adequately controland prevent shrink has impacted our results of operations and could impact our results of operations in the future

203、.Failure to accomplish our objectives could impair our ability to compete successfully and adversely affect ourprofitability.Profit margins in the food retail industry are low.In order to increase or maintain our profit margins,wedevelop operating strategies to increase revenues,increase gross margi

204、ns and reduce costs,such as new marketingprograms,new advertising campaigns,productivity improvements,shrink-reduction initiatives,distribution centerefficiencies,manufacturing efficiencies,energy efficiency programs and other similar strategies.Our failure to achieveforecasted revenue growth,gross

205、margin improvement or cost reductions could have a material adverse effect on ourprofitability and operating results.We may not timely identify or effectively respond to consumer trends,which could negatively affect our relationshipwith our customers,the demand for our products and services and our

206、market share.Because we face intense competition,our success depends,in part,on effectively anticipating evolving trends indemographics and responding to changing consumer preferences and demands.It is difficult to predict consistently andsuccessfully the products and services our customers will dem

207、and over time.Failure to timely identify or effectivelyrespond to changing consumer tastes,preferences and spending patterns could lead us to offer our customers a mix ofproducts or a level of pricing that they do not find attractive.This could negatively affect our relationship with ourcustomers,le

208、ading them to reduce their visits to our stores and the amount they spend.Further,while we havesignificantly expanded our digital capabilities and grown our loyalty programs over the last several years,astechnology advances,and as the way our customers interact with technology changes,we will need t

209、o continue todevelop and offer digital,loyalty and media solutions that are both cost effective and compelling to our customers.Ourfailure to anticipate or respond to customer expectations for products,services,digital and loyalty programs wouldadversely affect the demand for our products and servic

210、es and our market share and could have an adverse effect on ourfinancial performance,margins,and operating income.182025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm28/1612025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/164

211、6972/000164697224000060/aci-20240224.htm29/161Table of ContentsConsolidation in the healthcare industry could adversely affect our business and financial condition.Many organizations in the healthcare industry have consolidated to create larger healthcare enterprises with greatermarket power,which h

212、as resulted in increased pricing pressures.If this consolidation trend continues,it could give theresulting enterprises even greater bargaining power,which may lead to further pressure on the prices for our pharmacyproducts and services.If these pressures result in reductions in our prices,we will b

213、ecome less profitable unless we areable to achieve corresponding reductions in costs or develop profitable new revenue streams.We expect that marketdemand,government regulation,third-party reimbursement policies,government contracting requirements,litigationand societal pressures will continue to ca

214、use the healthcare industry to evolve,potentially resulting in further businessconsolidations and alliances among the industry participants we engage with,which may adversely impact ourbusiness,financial condition and results of operations.Certain risks are inherent in providing pharmacy products an

215、d services,and our insurance may not be adequate tocover any claims against us.We currently operate 1,725 pharmacies.As a result,we are exposed to risks inherent in the packaging,dispensing,billing,display,distribution and disposal of pharmaceuticals and other healthcare products,including risks of

216、liabilityfor products such as opioids.Although we maintain insurance against such liabilities,we cannot guarantee that thecoverage limits under our insurance programs will be adequate to protect us against future claims,or that we will beable to maintain this insurance on acceptable terms in the fut

217、ure,or at all for healthcare and pharmaceutical liabilities.Our results of operations,financial condition or cash flows may be materially adversely affected if in the future ourinsurance coverage proves to be inadequate or unavailable,or there is an increase in the liability for which we self-insure

218、,or we suffer harm to our reputation because of an error or omission.Also,our business operations and operatingresults could be materially adversely impacted by legislative,enforcement,regulatory,judicial and public policychanges.We are subject to numerous federal and state regulations.Each of our i

219、n-store pharmacies are enrolled in governmenthealthcare programs and must be licensed by the respective state government.The licensing and enrollmentrequirements vary from state to state.An additional registration certificate must be granted by the U.S.DrugEnforcement Administration,and,in some stat

220、es,a separate controlled substance license must be obtained to dispensecontrolled substances.In addition,pharmacies selling controlled substances are required to maintain extensive recordsand often report information to state and federal agencies.If we fail to comply with existing or future laws and

221、regulations,we could suffer substantial civil or criminal penalties,including the loss of our licenses to operatepharmacies and our ability to participate in federal and state healthcare programs.Because of the severe penalties wecould face,we must devote significant operational and managerial resou

222、rces to complying with these laws andregulations.Application of federal and state laws and regulations could subject our current practices to allegations of impropriety orillegality,or could require us to make significant changes to our operations.In addition,we cannot predict the impact offuture le

223、gislation and regulatory changes on our pharmacy operations or assure that we will be able to obtain ormaintain the regulatory approvals required to operate our business.Risks Related to Our Supply ChainProduct and raw material supply disruptions,especially those related to fresh products,may have a

224、n adverse effecton our profitability and operating results.Reflecting consumer preferences,we have a significant focus on fresh products.We rely on various suppliers andvendors to provide and deliver our fresh and other product inventory on a continuous basis and to supply the rawmaterials to manufa

225、cture certain of our Own Brands products.We could suffer significant fresh and other productinventory losses and significant lost revenue in the event of the loss or a shutdown of a major supplier or vendor,2025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/

226、aci-20240224.htm30/161192025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm31/161Table of Contentsdisruption of our distribution network,extended power outages,natural disasters,foreign conflicts or other catastrophicor unexpected occurrences

227、 such as a pandemic like COVID-19.We expect our suppliers to comply with applicablelaws,including labor,safety and environmental laws.Our ability to find qualified suppliers who uphold our standardsand requirements for products,including fresh,and to access such products in a timely and operationall

228、y efficientmanner in volumes we may demand may become a significant challengeSevere weather,natural disasters and other climate changes may adversely affect our business.Severe weather conditions such as hurricanes,earthquakes,floods,wildfires,mudslides,winter storms,tornadoes,aswell as other natura

229、l disasters in areas in which we have stores or distribution centers have caused and may causephysical damage to our properties,closure of one or more of our stores,manufacturing facilities or distribution centers,lack of an adequate work force,disruption in the manufacture and supply of products,di

230、sruption and delays intransportation and delivery of goods,reduction in customer traffic and generally a reduction in the availability ofproducts in our stores.In addition,adverse climate conditions,weather patterns and their respective impacts such as drought,flood,wildfires,mudslides and rising am

231、bient temperatures adversely impact product cultivation conditions for farmers,ranchers andfishermen,including by disrupting ecosystems and severely altering the growing conditions,nutrient levels,soilmoisture,and water availability necessary for the growth and cultivation of crops and raising of an

232、imals.As extremeshifts in climate conditions make it more difficult to raise and produce crops,livestock,and seafood,there may be adecrease in the product quality and the yield quantity of food products.Consequently,such a decreased food supplymay adversely affect the availability or cost of certain

233、 products within the grocery supply chain,which could lead toshortages or reduced gross profit margins as such products become more expensive.At the global level,the impact ofclimate change on food supply is more likely to lead to food insecurity in countries which,unlike the United States,have clim

234、ates insufficient to sustain diverse food production.Thus,there may be increased demand for agriculturalexports from regions that experience production difficulties yet have sufficient wealth to purchase imports.This mayimpact the availability of products for us to purchase.In addition,legislative a

235、nd regulatory efforts to combat climate change or other environmental issues could result innew or more stringent forms of oversight and mandatory or voluntary reporting,diligence and disclosure,which couldincrease costs,result in additional taxes and other expenses,and further impact our business,r

236、esults of operations andfinancial condition.Threats or potential threats to food and drug safety,the occurrence of a widespread health epidemic and/orpandemic or regulatory concerns in our supply chain may adversely affect our business.Acts or threats,whether perceived or real,of war or terror or ot

237、her criminal activity directed at the food and drugindustry or the transportation industry,whether or not directly involving our stores,could increase our operating costsor impact general consumer behavior and consumer spending.Other events that give rise to actual or potential foodcontamination,dru

238、g contamination or food-borne illnesses,or a widespread regional,national or global healthepidemic and/or pandemic could have an adverse effect on our operating results or disrupt production and delivery ofthe products we sell,our ability to appropriately and safely staff our stores and cause custom

239、ers to avoid publicgathering places or otherwise change their shopping behaviors.We source our products from vendors and suppliers and related networks across the globe who may be subject toregulatory actions or face criticism due to actual or perceived social injustices,including human trafficking,

240、non-sustainable practices,child labor or environmental,health and safety violations.A disruption in our supply chain due toany regulatory action or social injustice could have an adverse impact on our supply chain and ultimately our business,including potential harm to our reputation.202025/2/12 01:

241、27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm32/161Table of ContentsWe could be affected if consumers lose confidence in the food supply chain or the quality and safety of our products.We could be adversely affected if consumers lose confidence in t

242、he safety and quality of certain food products.Adversepublicity about these types of concerns,whether valid or not,may discourage consumers from buying our products orcause production and delivery disruptions.To the extent that a pathogen is food-borne,or perceived to be food-borne,future outbreaks

243、may adversely affect the price and availability of certain food products and cause our customers to eatless of such products.In addition,recalls or withdrawals of food products,and in particular the food products wemanufacture or are sold under any of our Own Brands product names,may involve costs t

244、o us or reputational harm tous.The real or perceived sale of contaminated food products by us could result in product liability claims,a loss ofconsumer confidence and product recalls,which could have a material adverse effect on our business.Fuel prices and availability may adversely affect our res

245、ults of operations.We currently operate 402 fuel centers that are adjacent to many of our store locations.As a result,we sell a significantamount of gasoline and diesel fuel.Increased regulation or significant increases in wholesale fuel costs could result inlower gross margins on fuel sales,and dem

246、and could be negatively impacted by retail price increases as well as byconcerns about the effect of emissions on the environment.We are unable to predict future regulations,environmentaleffects,political unrest,geopolitical tensions,hostilities or boycotts,acts of terrorism,the actions of major oil

247、producing countries to regulate oil production and other matters that may affect the cost and availability of fuel,andhow our customers will react to any of the preceding matters,which could adversely affect our results of operations.Increased commodity prices may adversely impact our profitability.

248、Many of our own and sourced products include ingredients such as wheat,corn,oils,milk,sugar,proteins,cocoa andother commodities.Commodity prices can be volatile and can be impacted by global conflicts such as the impact onwheat and corn prices by the armed conflict between Russia and Ukraine.Any inc

249、rease in commodity prices may causean increase in our input costs or the prices our vendors seek from us.Although we typically are able to pass on modestcommodity price increases or mitigate vendor efforts to increase our costs,we may be unable to continue to do so,either in whole or in part,if comm

250、odity prices increase materially or there are significant inflationary pressures.If weare forced to increase prices,our customers may reduce their purchases at our stores or trade down to less profitableproducts.Both may adversely impact our profitability as a result of reduced revenue or reduced ma

251、rgins.Risks Related to Our WorkforceA significant majority of our employees are unionized,and our relationship with unions,including labor disputes orwork stoppages,could have an adverse impact on our operations and financial results.As of February 24,2024,approximately 200,000 of our employees were

252、 covered by collective bargaining agreements.During fiscal 2023,collective bargaining agreements covering approximately 32,500 employees expired and weresuccessfully renegotiated.In fiscal 2024 collective bargaining agreements covering approximately 28,500 employeesare scheduled to expire.In future

253、negotiations with labor unions,we expect that health care,pension costs and/orcontributions and wage costs,among other issues,will be important topics for negotiation.If,upon the expiration ofsuch collective bargaining agreements,we are unable to negotiate acceptable contracts with labor unions,it c

254、ould resultin strikes by the affected workers and thereby significantly disrupt our operations.As212025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm33/161Table of Contentspart of our collective bargaining agreements,we may need to fund addi

255、tional pension contributions,which wouldnegatively impact our operating costs.Increased pension expenses,contributions and surcharges may have an adverse impact on our financial results.We currently contribute to 27 multiemployer pension plans for a substantial majority of employees represented byun

256、ions pursuant to collective bargaining agreements that require us to contribute to these plans.Under the EmployeeRetirement Income Security Act of 1974,as amended(ERISA),the Pension Benefit Guaranty Corporation(thePBGC)has the authority to petition a court to terminate an underfunded pension plan in

257、 limited circumstances.In theevent that our defined benefit pension plans are terminated for any reason,we could be liable for the entire amount ofthe underfunding,as calculated by the PBGC based on its own assumptions(which would result in a larger obligationthan that based on the actuarial assumpt

258、ions used to fund such plans).Under ERISA and the Internal Revenue Code,asamended(the Code),the liability under these defined benefit plans is joint and several with all members of ourcontrol group,such that each member of our control group is potentially liable for the defined benefit plans of each

259、other member of the control group.Based on an assessment of the most recent information available,we believe that most of the multiemployer plans towhich we contribute are underfunded,which is the amount by which the actuarial determined plan liabilities exceed thevalue of the plan assets.We are onl

260、y one of a number of employers contributing to these plans and the underfunding ofany of these plans to which we contribute are not our liability.Though we are not obligated nor the guarantor for any ofthe underfunding of multiemployer plans to which we contribute,as of December 31,2023,we attempted

261、 to estimateour allocable share of the underfunding of multiemployer plans to which we contribute,based on the ratio of ourcontributions to the total of all contributions to these plans in a year.Our estimate of the Companys allocable share ofthe underfunding of multiemployer plans to which we contr

262、ibute was$4.5 billion.Our estimate is based on the mostcurrent information available to us including actuarial evaluations and other data(that includes the estimates of others),and such information may be outdated or otherwise unreliable.Our estimate could also change based on the amountcontributed

263、to the plans,investment returns on the assets held in the plans,actions taken by trustees who manage theplans benefit payments,interest rates,the amount of withdrawal liability payments made to the plans,if the employerscurrently contributing to these plans cease participation,and requirements under

264、 the Pension Protection Act of 2006,the Multiemployer Pension Reform Act of 2014 and applicable provisions of the Code.The American Rescue Plan Act(ARP Act)establishes a special financial assistance program for financially troubledmultiemployer pension plans.Under the ARP Act,eligible multiemployer

265、plans can apply to receive a one-time cashpayment in the amount needed to pay pension benefits through the plan year ending 2051.We participate in 16multiemployer plans that may be eligible for the special financial assistance.In the event we were to exit certain markets or otherwise cease contribut

266、ing to multiemployer plans,we could trigger asubstantial withdrawal liability.Such withdrawal liability may have a material adverse impact on our financial results.We are also the sponsors of defined benefit retirement plans for certain employees.The funded status of these plans is asignificant fact

267、or in determining annual pension expense and cash contributions to fund the plans.Unfavorableinvestment performance,increased pension expense and cash contributions may have an adverse impact on ourfinancial results.The minimum wage continues to increase and is subject to factors outside of our cont

268、rol.Changes to wageregulations could have an impact on our future results of operations.A considerable number of our employees are paid at rates related to the federal minimum wage.Additionally,many ofour stores are located in states,including California,where the minimum wage is greater than the fe

269、deral222025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm34/1612025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm35/161Table of Contentsminimum wage and where a considerable number o

270、f employees receive compensation equal to the states minimumwage which are also slated to increase over the next few years.As examples,in California and New Jersey,where weemployed 70,000 and 8,000 associates,respectively,as of February 24,2024,the current minimum wage was increasedto$16.00 per hour

271、 and$15.13 per hour,respectively,effective January 1,2024.Moreover,municipalities may setminimum wages above the applicable state standards.Increases in the federal minimum wage or the enactment ofadditional state or local minimum wage increases could increase our labor costs,which may adversely aff

272、ect our resultsof operations and financial condition.The food retail industry is labor intensive.Our ability to meet our labor needs,while controlling wage and labor-relatedcosts,is subject to numerous external factors,including the availability of qualified persons in the workforce in thelocal mark

273、ets in which we are located,unemployment levels within those markets,prevailing wage rates,changingdemographics,attitudes toward employment in the food and drug retail industry,the perception of our corporate valuesand business strategy,health and other insurance costs,the impact of the Merger and c

274、hanges in employment and laborlaws.Such laws related to employee hours,wages,job classification and benefits could significantly increase ouroperating costs.In the event of increasing wage rates,if we fail to increase our wages competitively,the quality of ourworkforce could decline,causing our cust

275、omer service to suffer,while increasing wages for our employees could causeour gross margins to decrease.If we are unable to hire and retain employees capable of meeting our business needs andexpectations,our business and brand image may be impaired.Any failure to meet our staffing needs or any mate

276、rialincrease in turnover rates of our employees may adversely affect our business,results of operations and financialcondition.Failure to attract and retain qualified associates could materially adversely affect our financial performance andour ability to successfully execute our business strategy.O

277、ur ability to continue to conduct and expand our operations depends on our ability to attract and retain a large andgrowing number of qualified associates.Our ability to meet our labor needs,including our ability to find qualifiedpersonnel to fill positions that become vacant at our existing stores

278、and distribution centers,while controlling ourassociate wage and related labor costs,is generally subject to numerous external factors,including the availability of asufficient number of qualified persons in the work force of the markets in which we operate,unemployment levelswithin those markets,pr

279、evailing wage rates,changing demographics,attitudes toward employment in the food and drugretail industry,the perception of our corporate values and business strategy,health and other insurance costs,the impactof the Merger and adoption of new or revised employment and labor laws and regulations.If

280、we are unable to locate,toattract or to retain qualified personnel,the quality of service we provide to our customers may decrease and ourfinancial performance may be adversely affected.The continued successful implementation of our business strategy depends in large part upon the ability and experi

281、enceof members of our senior management.In addition,our financial performance is dependent on our ability to identify,hire,train,motivate and retain qualified management,technical,sales and marketing and retail personnel.If we lose theservices of members of our senior management or are unable to con

282、tinue to attract and retain the necessary personnel,we may not be able to successfully execute our business strategy,which could have an adverse effect on our business.Legal and Regulatory RisksUnfavorable changes in government regulation may have a material adverse effect on our business.We operate

283、 our business within strict and complex regulatory environments and could be materially adversely affectedby changes to,and/or any failure to comply with,existing and new legal requirements.In addition,our industry facessignificant political,societal,and media scrutiny,and we may be subject to frequ

284、ent or increasing challenges whichmay impact our reputation and business.Additionally,shifts in enforcement practices or regulatory scrutiny generallycannot be anticipated or predicted or our predictions may not be accurate.If we fail to232025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/

285、data/1646972/000164697224000060/aci-20240224.htm36/1612025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm37/161Table of Contentspredict or respond adequately to regulatory changes or expanding disclosure requirements,or do not respond aseffec

286、tively as our competitors,our reputation,business,operations,and financial performance may be adverselyaffected.Political,governmental,and regulatory regimes and practices can quickly change as a result of elections orother events over which we have little to no control.Such changes,including those

287、which may occur due to electionsheld in 2024,are unpredictable and may have negative impacts on our business and operations.Compliance with laws,regulations,policies,and enforcement practices may become challenging requiring operational changes which may bedifficult to implement,increase our operati

288、ng costs,require significant capital expenditures,or result in adversepublicity and harm our reputation.Tax matters could adversely affect our results of operations and financial conditions.We may be affected by higher rates of federal,state,or local tax imposed as a result of political developments

289、 oreconomic conditions,which could affect our effective tax rate.Our effective tax rate and future tax liability could beadversely affected by regulatory and legal changes,the results of tax audits and examinations,and changes inaccounting principles and interpretations relating to tax matters,all o

290、f which could negatively impact our business.Inaddition,changes in tax rates,tax laws,and regulations that impact our customers or the economy generally may alsoimpact our financial condition and results of operations.Unfavorable changes in,failure to comply with or increased costs to comply with en

291、vironmental laws andregulations could adversely affect us.The storage and sale of petroleum products could expose us to potentiallysignificant liabilities.Our operations,including our 402 fuel centers,are subject to various laws and regulations relating to the protection ofthe environment,including

292、those governing the storage,management,disposal and cleanup of hazardous materials.Some environmental laws,such as the Comprehensive Environmental Response,Compensation and Liability Act andsimilar state statutes,impose strict,and under certain circumstances joint and several,liability for costs to

293、remediate acontaminated site,and also impose liability for damages to natural resources.Third-party claims in connection with releases of,or exposure to,hazardous materials relating to our current or formerproperties or third-party waste disposal sites can also arise.In addition,the presence of cont

294、amination at any of ourproperties could impair our ability to sell or lease the contaminated properties or to borrow money using any of theseproperties as collateral.The costs and liabilities associated with any such contamination could be substantial and couldhave a material adverse effect on our b

295、usiness.Under current environmental laws,we may be held responsible for theremediation of environmental conditions regardless of whether we lease,sublease or own the stores or other facilitiesand regardless of whether such environmental conditions were created by us or a prior owner or tenant.In add

296、ition,theincreased focus on climate change,waste management and other environmental issues may result in new environmentallaws or regulations that negatively affect us directly or indirectly through increased costs on our suppliers.There can beno assurance that environmental contamination relating t

297、o prior,existing or future sites or other environmental changeswill not adversely affect us through,for example,business interruption,cost of remediation or adverse publicity.We are subject to,and may in the future be subject to,legal or other proceedings that could have a material adverseeffect on

298、us.In the course of conducting our business,arising in or outside of the ordinary course,we are and may become a party tovarious legal proceedings,including class actions in matters involving personnel and employment issues,federal andstate wage and hour laws,personal injury,antitrust claims based o

299、n both federal and state law,packaging or productclaims,claims related to the sale of drug or pharmacy products,such as opioids,claims invoking consumer-protectionstatutes,intellectual property claims and fiduciary and securities claims.We may also become subject to governmentaland regulatory inquir

300、ies related to our operations.We estimate our exposure to legal proceedings and establish reservesfor the estimated liabilities.We are unable to predict the outcome of any242025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm38/1612025/2/12 01

301、:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm39/161Table of Contentslitigation,investigation or any action by governmental entities and can provide no assurance as to the scope andoutcome of these matters and whether our business,financial position

302、,results of operations or cash flows will not bematerially adversely affected.We use a combination of insurance and self-insurance to address potential liabilities for workers compensation,automobile and general liability,property risk(including earthquake and flood coverage),director and officersli

303、ability,employment practices liability,pharmacy liability,employee health care benefits and cyber and terrorismrisks.We estimate the liabilities associated with the risks retained by us,in part,by considering historical claims experience,demographic and severity factors and other actuarial assumptio

304、ns which,by their nature,are subject to a high degree ofvariability.Among the causes of this variability are unpredictable external factors affecting future inflation rates,discount rates,litigation trends,legal interpretations,benefit level changes and claim settlement patterns.The majorityof our w

305、orkers compensation liability is from claims occurring in California,where workers compensation hasreceived intense scrutiny from the states politicians,insurers,employers and providers,as well as the public in general.If other states adopt workers compensation programs similar to Californias,then o

306、ur workers compensation liabilitymay increase which could have a material adverse impact on our results of operations.Risks Related to Information Security,Cybersecurity,Data Privacy and Evolving TechnologiesWe may be adversely affected by risks related to our dependence on IT systems.Any future cha

307、nges to or intrusioninto these IT systems,even if we are compliant with industry security standards,could materially adversely affectour financial condition and operating results.We have complex information technology systems that are important to the success of our business operations,financial rep

308、orting and marketing initiatives.Our information systems are subject to outages,unplanned downtime,program transitions,breakdowns,ransomware attacks,viruses,malicious programs and other cyber incidents.If we failto timely or successfully mitigate such adverse events affecting these systems,or experi

309、ence difficulties accessing theproprietary business data stored in these systems,or in maintaining,expanding or upgrading existing systems orimplementing new systems,we could incur significant losses to our business and operations.These risks may be furtherexacerbated by the deployment and use of cl

310、oud-based enterprise solutions.In a cloud computing environment,wecould be subject to outages by third-party service providers and security breaches to their systems,which we may havelittle control over.In the case of a cloud computing outage,the reconstitution of our business services running on th

311、osecomputing resources will be dependent on the third-party hosting provider restoring availability.Improper activities by third parties,exploitation of encryption technology,new data-hacking tools and discoveriesand other events or developments may result in future intrusions into or compromise of

312、our networks,payment cardterminals or other payment systems.We regularly defend against and respond to data security incidents.While we are vigilant in monitoring the security ofour information technology systems,we may not be able to prevent all unauthorized access or remediate the impact ofsuch un

313、authorized access.The techniques used by cyber criminals change frequently and often cannot be recognizeduntil launched against a target;accordingly,we may not be able to anticipate these frequently changing techniques,implement adequate preventive measures for all of them or remediate any unauthori

314、zed access on a timely basis.Inaddition,ongoing geopolitical conflicts may increase the risk of cyberattacks which could impact our operations.Anyunauthorized access into our customers sensitive information,data belonging to us or our vendors or employee data,even if we are compliant with industry s

315、ecurity standards,could put us at a competitive disadvantage,result indeterioration of our customers,vendors and employees confidence in us and subject us to252025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm40/161Table of Contentsinvestiga

316、tions,required notifications,potential litigation,liability,fines and penalties and consent decrees,resulting in apossible material adverse impact on our financial condition and results of operations.As a merchant that accepts debit and credit cards for payment,we are subject to the Payment Card Ind

317、ustry(PCI)Data Security Standard(PCI DSS),issued by the PCI Council.PCI DSS contains compliance guidelines andstandards with regard to security surrounding the physical administrative and technical storage,processing andtransmission of individual cardholder data.By accepting debit cards for payment,

318、we are also subject to compliancewith American National Standards Institute(ANSI)data encryption standards and payment network securityoperating guidelines.Failure to be PCI compliant or to meet other payment card standards may result in the impositionof financial penalties or the allocation by the

319、card brands of the costs of fraudulent charges to us.As well,the Fair andAccurate Credit Transactions Act(FACTA)requires systems that print payment card receipts to employ personalaccount number truncation so that the consumers full account number is not viewable on the slip.Despite our efforts toco

320、mply with these or other payment card standards and other information security measures,we cannot be certain thatall of our IT systems will be able to prevent,contain or detect all cyber-attacks or intrusions.To the extent that anydisruption results in the loss,damage or misappropriation of informat

321、ion,we may be adversely affected by claims fromcustomers,financial institutions,regulatory authorities,payment card associations and others.In addition,privacy andinformation security laws and standards continue to evolve and could expose us to further regulatory burdens.The costof complying with st

322、ricter laws and standards,including PCI DSS,ANSI and FACTA data encryption standards and theCalifornia Privacy Rights Act and other state laws,could be significant.The loss of confidence from a data security incident involving our customers,employees or vendors could materiallyadversely affect our f

323、inancial condition and operating results.We receive and store personal information in connection with our business including from processing credit card data,digital marketing,and human resources records.The protection of our customer,employee and vendor data is criticallyimportant to us.Despite our

324、 considerable efforts to secure,upgrade and maintain our computer networks,ourinformation security could be compromised,and customer,employee and vendor confidential information could bemisappropriated whether as a result of cyberattacks on our information systems,the information systems hosted byth

325、ird party providers or otherwise.If we experience a data security incident,we could be exposed to governmentenforcement actions,ransomware claims,loss of business information,negative publicity and possible claims fromcustomers,associates,financial institutions and payment card associations.In addit

326、ion,our customers could loseconfidence in our ability to protect their personal information,which could cause them to stop shopping at our storesaltogether and materially adversely affect our financial condition and operating results.We and our third parties may use artificial intelligence in our bu

327、siness,which could result in competitive andreputational harm,and legal liability,and adversely affect our results of operations.We and our third parties are increasingly incorporating artificial intelligence(AI)solutions into our operations,systems,and services.Our competitors may incorporate AI in

328、to their products more quickly or more successfully thanus,which could impair our ability to compete effectively in the market.Additionally,if the content,analyses,orrecommendations that AI applications assist in producing are or are alleged to be deficient,inaccurate,or biased,ourbusiness,financial

329、 condition,and results of operations may be adversely affected.AI presents emerging ethical issues and potential harms to our customers,patients,and associates and if our use of AIbecomes controversial,we may experience competitive harm,brand or reputational harm,or legal liability.The rapidevolutio

330、n of AI,including expected government regulation of AI and automated decision making,requires resources,formalized AI governance,a commitment to the ethical and responsible use of data,and processes to best meet thesechallenges.If we fail to adopt AI in a thoughtful and strategic manner,the risks ab

331、ove may be exacerbated.262025/2/12 01:27aci-20240224https:/www.sec.gov/Archives/edgar/data/1646972/000164697224000060/aci-20240224.htm41/161Table of ContentsRisks Related to Our IndebtednessOur indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations

332、 underour indebtedness.As of February 24,2024,we had approximately$7.7 billion of debt outstanding(other than finance lease obligations),and,subject to our borrowing base,we would have been able to borrow an additional$3.8 billion under our asset-basedloan(ABL)facility(the ABL Facility).As of Februa

333、ry 24,2024,we and our subsidiaries had approximately$0.5 billion of finance lease obligations.Our indebtedness could have important consequences.For example,it could:increase our vulnerability to general adverse economic and industry conditions;require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness,thereby reducing the availability of our cash