0001646972-21-000010.txt : 20210113 0001646972-21-000010.hdr.sgml : 20210113 20210113161422 ACCESSION NUMBER: 0001646972-21-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 55 CONFORMED PERIOD OF REPORT: 20201205 FILED AS OF DATE: 20210113 DATE AS OF CHANGE: 20210113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Albertsons Companies, Inc. CENTRAL INDEX KEY: 0001646972 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0227 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-39350 FILM NUMBER: 21526220 BUSINESS ADDRESS: STREET 1: 250 PARKCENTER BLVD. CITY: BOISE STATE: ID ZIP: 83706 BUSINESS PHONE: 208-395-6200 MAIL ADDRESS: STREET 1: 250 PARKCENTER BLVD. CITY: BOISE STATE: ID ZIP: 83706 10-Q 1 aci-20201205.htm 10-Q aci-20201205
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 5, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 001-39350
aci-20201205_g1.jpg
Albertsons Companies, Inc.
(Exact name of registrant as specified in its charter)
Delaware47-4376911
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

250 Parkcenter Blvd.
Boise, Idaho 83706
(Address of principal executive offices and zip code)

(208395-6200
(Registrant's telephone number, including area code)

Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, $0.01 par valueACINew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No
As of January 12, 2021, the registrant had 465,533,258 shares of Class A common stock, par value $0.01 per share, outstanding.



Albertsons Companies, Inc. and Subsidiaries

Page




PART I - FINANCIAL INFORMATION
Item 1 - Condensed Consolidated Financial Statements (unaudited)

Albertsons Companies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in millions, except share data)
(unaudited)


December 5,
2020
February 29,
2020
ASSETS
Current assets
Cash and cash equivalents$1,836.1 $470.7 
Receivables, net549.5 525.3 
Inventories, net4,638.0 4,352.5 
Other current assets420.6 382.8 
Total current assets7,444.2 5,731.3 
Property and equipment, net9,086.4 9,211.9 
Operating lease right-of-use assets5,742.9 5,867.4 
Intangible assets, net2,076.4 2,087.2 
Goodwill1,183.3 1,183.3 
Other assets786.1 654.0 
TOTAL ASSETS$26,319.3 $24,735.1 
LIABILITIES
Current liabilities
Accounts payable$3,395.0 $2,891.1 
Accrued salaries and wages1,268.6 1,126.0 
Current maturities of long-term debt and finance lease obligations212.4 221.4 
Current maturities of operating lease obligations585.8 563.1 
Other current liabilities1,135.5 1,102.7 
Total current liabilities6,597.3 5,904.3 
Long-term debt and finance lease obligations8,328.0 8,493.3 
Long-term operating lease obligations5,355.6 5,402.8 
Deferred income taxes566.6 613.8 
Other long-term liabilities2,498.0 2,042.8 
Commitments and contingencies
Series A convertible preferred stock, $0.01 par value; 1,750,000 shares authorized, 924,000 shares issued and outstanding as of December 5, 2020 and no shares authorized, issued and outstanding as of February 29, 2020
844.3  
Series A-1 convertible preferred stock, $0.01 par value; 1,410,000 shares authorized, 826,000 shares issued and outstanding as of December 5, 2020 and no shares authorized, issued and outstanding as of February 29, 2020
754.8  
STOCKHOLDERS' EQUITY
Undesignated preferred stock, $0.01 par value; 96,840,000 shares authorized, no shares issued as of December 5, 2020 and 30,000,000 shares authorized, no shares issued as of February 29, 2020
  
Class A common stock, $0.01 par value; 1,000,000,000 shares authorized, 585,530,715 and 582,997,251 shares issued as of December 5, 2020 and February 29, 2020, respectively
5.9 5.8 
Class A-1 convertible common stock, $0.01 par value; 150,000,000 shares authorized, no shares issued as of December 5, 2020 and no shares authorized and issued as of February 29, 2020
  
Additional paid-in capital1,883.8 1,824.3 
Treasury stock, at cost, 118,919,289 shares held as of December 5, 2020 and 3,671,621 shares held as of February 29, 2020
(1,890.5)(25.8)
Accumulated other comprehensive loss(105.9)(118.5)
Retained earnings1,481.4 592.3 
Total stockholders' equity1,374.7 2,278.1 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$26,319.3 $24,735.1 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
3




Albertsons Companies, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income
(in millions, except per share data)
(unaudited)
12 weeks ended40 weeks ended
December 5,
2020
November 30,
2019
December 5,
2020
November 30,
2019
Net sales and other revenue$15,408.9 $14,103.2 $53,918.1 $47,018.3 
Cost of sales10,900.3 10,108.1 38,063.1 33,842.1 
Gross profit4,508.6 3,995.1 15,855.0 13,176.2 
Selling and administrative expenses4,309.1 3,807.2 14,109.7 12,548.4 
Gain on property dispositions and impairment losses, net(59.0)(18.7)(47.0)(482.7)
Operating income 258.5 206.6 1,792.3 1,110.5 
Interest expense, net115.9 154.8 425.1 557.5 
Loss on debt extinguishment8.6  57.7 65.8 
Other income, net(19.2)(15.9)(27.5)(21.9)
Income before income taxes
153.2 67.7 1,337.0 509.1 
Income tax expense29.5 12.9 342.6 110.5 
Net income $123.7 $54.8 $994.4 $398.6 
Other comprehensive income (loss), net of tax
Gain (loss) on interest rate swaps 5.0  (33.3)
Recognition of pension gain0.6 0.7 11.5 24.8 
Other(0.1)(0.2)1.1 2.8 
Other comprehensive income (loss)$0.5 $5.5 $12.6 $(5.7)
Comprehensive income$124.2 $60.3 $1,007.0 $392.9 
Net income per Class A common share
Basic net income per Class A common share$0.21 $0.09 $1.78 $0.69 
Diluted net income per Class A common share0.20 0.09 1.71 0.69 
Weighted average Class A common shares outstanding
Basic468.7 579.4 511.0 579.3 
Diluted472.1 580.9 580.3 579.8 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

4




Albertsons Companies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)

40 weeks ended
December 5,
2020
November 30,
2019
Cash flows from operating activities:
Net income$994.4 $398.6 
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on property dispositions and impairment losses, net(47.0)(482.7)
Depreciation and amortization1,171.7 1,281.9 
Operating lease right-of-use assets amortization443.9 418.3 
LIFO expense37.5 18.9 
Deferred income tax(16.8)(40.6)
Contributions to pension and post-retirement benefit plans, net of (income) expense(80.6)(16.2)
Loss on interest rate swaps and commodity hedges, net24.0 0.4 
Amortization and write-off of deferred financing costs16.1 35.4 
Loss on debt extinguishment57.7 65.8 
Equity-based compensation expense43.4 24.8 
Other (46.0)8.5 
Changes in operating assets and liabilities:
Receivables, net(23.1)84.9 
Inventories, net(322.9)(310.4)
Accounts payable, accrued salaries and wages and other accrued liabilities627.1 322.4 
Operating lease liabilities(357.7)(385.5)
Self-insurance assets and liabilities20.6 5.5 
Other operating assets and liabilities453.7 (43.0)
Net cash provided by operating activities2,996.0 1,387.0 
Cash flows from investing activities:
Payments for property, equipment and intangibles, including payments for lease buyouts(1,083.0)(1,083.7)
Proceeds from sale of assets143.9 1,061.0 
Other(5.2)(2.7)
Net cash used in investing activities(944.3)(25.4)
Cash flows from financing activities:
Proceeds from issuance of long-term debt3,500.0 1,518.0 
Payments on long-term borrowings(3,638.7)(3,300.8)
Payments of obligations under finance leases(52.0)(78.3)
Payment of redemption premium on debt extinguishment(48.6) 
Payments for debt financing costs(15.9)(25.5)
Dividends paid on common stock(47.3) 
Dividends paid on convertible preferred stock(36.4) 
Proceeds from convertible preferred stock1,680.0  
Third party issuance costs on convertible preferred stock(80.9) 
Treasury stock purchase, at cost(1,864.7) 
Other(39.4)(26.1)
Net cash used in financing activities(643.9)(1,912.7)
Net increase (decrease) in cash and cash equivalents and restricted cash1,407.8 (551.1)
Cash and cash equivalents and restricted cash at beginning of period478.9 967.7 
Cash and cash equivalents and restricted cash at end of period$1,886.7 $416.6 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
5


Albertsons Companies, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders' Equity
(in millions, except share data)
(unaudited)

Class A Common StockAdditional paid in capitalTreasury StockAccumulated other comprehensive lossRetained earnings Total stockholders' equity
SharesAmountSharesAmount
Balance as of February 29, 2020582,997,251 $5.8 $1,824.3 3,671,621 $(25.8)$(118.5)$592.3 $2,278.1 
Issuance of common stock to Company's parents
1,312,859 — — — — — — — 
Equity-based compensation— — 19.0 — — — — 19.0 
Employee tax withholding on vesting of phantom units
— — (6.2)— — — — (6.2)
Repurchase of common stock— — — 101,611,736 (1,680.0)— — (1,680.0)
Dividends accrued on convertible preferred stock
— — — — — — (3.9)(3.9)
Net income— — — — — — 586.2 586.2 
Other comprehensive income, net of tax— — — — — 1.7 — 1.7 
Balance as of June 20, 2020584,310,110 5.8 1,837.1 105,283,357 (1,705.8)(116.8)1,174.6 1,194.9 
Equity-based compensation— — 9.3 — — — — 9.3 
Shares issued and employee tax withholding on vesting of restricted stock22,101 — (0.5)— — — — (0.5)
Equity reclassification— — 30.0 — — — — 30.0 
Dividends accrued on convertible preferred stock
— — — — — — (26.9)(26.9)
Net income— — — — — — 284.5 284.5 
Other comprehensive income, net of tax— — — — — 10.4 — 10.4 
Other activity— — (0.1)— — — — (0.1)
Balance as of September 12, 2020584,332,211 5.8 1,875.8 105,283,357 (1,705.8)(106.4)1,432.2 1,501.6 
Equity-based compensation— — 15.1 — — — — 15.1 
Shares issued and employee tax withholding on vesting of restricted stock1,198,504 0.1 (7.0)— — — — (6.9)
Repurchase of common stock— — — 13,635,932 (184.7)— — (184.7)
Dividends declared on common stock— — — — — — (47.3)(47.3)
Dividends accrued on convertible preferred stock— — — — — — (27.3)(27.3)
Net income— — — — — — 123.7 123.7 
Other comprehensive income, net of tax— — — — — 0.5 — 0.5 
Other activity— — (0.1)— — — 0.1 — 
Balance as of December 5, 2020585,530,715 $5.9 $1,883.8 118,919,289 $(1,890.5)$(105.9)$1,481.4 $1,374.7 

6


Albertsons Companies, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders' Equity
(in millions, except share data)
(unaudited)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Class A Common StockAdditional paid in capitalTreasury StockAccumulated other comprehensive incomeRetained earnings (accumulated deficit)Total stockholders' equity
SharesAmountSharesAmount
Balance as of February 23, 2019579,443,146 $5.8 $1,811.2 3,671,621 $(25.8)$91.3 $(431.8)$1,450.7 
Equity-based compensation— — 11.1 — — — — 11.1 
Employee tax withholding on vesting of phantom units
— — (12.1)— — — — (12.1)
Adoption of new accounting standards, net of tax
— — — — — 16.6 558.0 574.6 
Net income— — — — — — 49.0 49.0 
Other comprehensive loss, net of tax— — — — — (18.5)— (18.5)
Other activity— — (0.1)— — — (0.3)(0.4)
Balance as of June 15, 2019579,443,146 5.8 1,810.1 3,671,621 (25.8)89.4 174.9 2,054.4 
Equity-based compensation— — 6.5 — — — — 6.5 
Employee tax withholding on vesting of phantom units— — (0.9)— — — — (0.9)
Net income— — — — — — 294.8 294.8 
Other comprehensive loss, net of tax— — — — — (9.3)— (9.3)
Balance as of September 7, 2019579,443,146 5.8 1,815.7 3,671,621 (25.8)80.1 469.7 2,345.5 
Issuance of common stock to Company's parents3,554,105 — — — — — — — 
Equity-based compensation— — 7.2 — — — — 7.2 
Employee tax withholding on vesting of phantom units— — (1.7)— — — — (1.7)
Net income— — — — — — 54.8 54.8 
Other comprehensive income, net of tax— — — — — 5.5 — 5.5 
Other activity— — (0.7)— — — — (0.7)
Balance as of November 30, 2019582,997,251 $5.8 $1,820.5 3,671,621 $(25.8)$85.6 $524.5 $2,410.6 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

7


Albertsons Companies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation

The accompanying interim Condensed Consolidated Financial Statements include the accounts of Albertsons Companies, Inc. and its subsidiaries (the "Company"). All significant intercompany balances and transactions were eliminated. The Condensed Consolidated Balance Sheet as of February 29, 2020 is derived from the Company's annual audited Consolidated Financial Statements for the fiscal year ended February 29, 2020, which should be read in conjunction with these Condensed Consolidated Financial Statements and which are included in the Company's Prospectus dated June 25, 2020 filed with the Securities and Exchange Commission ("SEC") pursuant to Rule 424(b) of the Securities Act of 1933, as amended, relating to the Company's Registration Statement on Form S-1 (File No. 333-236956). Certain information in footnote disclosures normally included in annual financial statements was condensed or omitted for the interim periods presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, the interim data includes all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. The interim results of operations and cash flows are not necessarily indicative of those results and cash flows expected for the year. The Company's results of operations are for the 12 and 40 weeks ended December 5, 2020 and November 30, 2019.
Significant Accounting Policies

Restricted cash: Restricted cash is included in Other current assets or Other assets depending on the remaining term of the restriction and primarily relates to funds held in escrow. The Company had $50.6 million and $8.2 million of restricted cash as of December 5, 2020 and February 29, 2020, respectively.

Inventories, net: Substantially all of the Company's inventories consist of finished goods valued at the lower of cost or market and net of vendor allowances. The Company uses either item-cost or the retail inventory method to value inventory at the lower of cost or market before application of any last-in, first-out ("LIFO") reserve. Interim LIFO inventory costs are based on management's estimates of expected year-end inventory levels and inflation rates. The Company recorded LIFO expense of $14.3 million and $2.6 million for the 12 weeks ended December 5, 2020 and November 30, 2019, respectively, and $37.5 million and $18.9 million for the 40 weeks ended December 5, 2020 and November 30, 2019, respectively.

Equity-based compensation: The Company maintains the Albertsons Companies, Inc. Restricted Stock Unit Plan (the "Restricted Stock Unit Plan"), which was previously named the "Albertsons Companies, Inc. Phantom Unit Plan" (the "Phantom Unit Plan"). Prior to being amended and restated on June 9, 2020, the Phantom Unit Plan provided for grants of "Phantom Units" to certain employees, directors and consultants. Each Phantom Unit provided a participant with a contractual right to receive, upon vesting, one management incentive unit in each of the Company's parents, Albertsons Investor Holdings LLC ("Albertsons Investor") and KIM ACI, LLC ("KIM ACI"). Upon the amendment and restatement of the Phantom Unit Plan as the Restricted Stock Unit Plan, all outstanding Phantom Units were converted into 11.3 million restricted stock units of the Company ("Restricted Stock Units" or "RSUs"), including 1.9 million performance-based RSUs that were not deemed granted for accounting purposes, under the Restricted Stock Unit Plan, subject to substantially identical terms and conditions as applied prior to the conversion. No changes to vesting conditions or the fair value of the award occurred as a result of the conversion. Upon vesting, an award of Restricted Stock Units will be settled in shares of the Company's common stock. Equity-based compensation expense related to these awards recognized by the Company was $13.6 million and $6.3 million for the 12 weeks ended December 5, 2020 and November 30, 2019, respectively. For the 40 weeks ended December 5, 2020 and November 30, 2019, equity-based compensation expense recognized by the Company related to these awards was $39.4 million and $21.8 million, respectively. The Company recorded an income tax benefit of $3.5 million and $1.6 million for the 12 weeks ended December 5, 2020 and November 30, 2019, respectively. For the 40 weeks ended December 5, 2020 and November 30, 2019, the Company recorded an
8


income tax benefit of $10.1 million and $5.7 million, respectively. As of December 5, 2020, there was $98.0 million of unrecognized costs related to 8.7 million unvested RSUs deemed granted for accounting purposes. That cost is expected to be recognized over a weighted average period of 2.0 years.

On April 25, 2019, upon the commencement of employment, the Company's President and Chief Executive Officer was granted direct equity interests in each of the Company's parents, Albertsons Investor and KIM ACI. These equity interests generally vest over five years, with 50% based solely on a service period and 50% upon a service period and achievement of certain performance-based thresholds. On June 30, 2020, upon consummation of the Company's initial public offering ("IPO"), the unvested direct equity interests in each of the Company's parents converted into 1.7 million shares of restricted common stock of the Company ("RSAs"), including 0.6 million performance-based RSAs that are not deemed granted for accounting purposes. No changes to vesting conditions or the fair value of the award occurred as a result of the conversion. For the 12 weeks ended December 5, 2020 and November 30, 2019, equity-based compensation expense recognized by the Company related to these RSAs was $1.5 million and $0.9 million, respectively. For the 40 weeks ended December 5, 2020 and November 30, 2019, equity-based compensation expense recognized by the Company related to these RSAs was $4.0 million and $3.0 million, respectively. As of December 5, 2020, there was $7.3 million of unrecognized costs related to 1.1 million RSAs deemed granted for accounting purposes. That cost is expected to be recognized over a weighted average period of 3.0 years.

Treasury stock: On June 9, 2020, the Company used $1,680.0 million, an amount equal to the proceeds from the sale and issuance of the Company's Series A-1 convertible preferred stock ("Series A-1 preferred stock") and Series A convertible preferred stock ("Series A preferred stock" and together with the Series A-1 preferred stock, the "Convertible Preferred Stock"), to repurchase 101,611,736 shares of Class A common stock from the Company's parents (the "June 2020 Repurchase"). The proceeds received by the Company's parents from the June 2020 Repurchase were distributed to their members, which include the Company's sponsors and current and former members of management.

On September 14, 2020, the Company entered into a stock repurchase agreement with a stockholder pursuant to which the Company repurchased 6,837,970 shares of its Class A common stock held by the stockholder for an aggregate purchase price of $82.0 million. The stockholder was subject to a court-mandated wind-down and a court-appointed receiver was directed to liquidate the stockholder's assets. The price was agreed to between the Company and the receiver (on behalf of the stockholder). In establishing the price, the parties took into account, among many other factors that they each deemed relevant, an applicable discount related to the selling restrictions that a third-party buyer would have had if such third-party buyer purchased the shares, including relevant lock-up agreements.

On October 14, 2020, the Company's Board of Directors authorized a new share repurchase program that allows the Company to repurchase up to $300 million of its Class A common stock. As part of the share repurchase program, during the 12 weeks ended December 5, 2020, the Company, through a series of open-market transactions, repurchased 6,797,962 shares of its Class A common stock for an aggregate purchase price of $102.7 million.

Income taxes: Income tax expense was $29.5 million, representing a 19.3% effective tax rate, for the 12 weeks ended December 5, 2020. Income tax expense was $12.9 million, representing a 19.1% effective tax rate for the 12 weeks ended November 30, 2019. Income tax expense was $342.6 million, representing a 25.6% effective tax rate, for the 40 weeks ended December 5, 2020. Income tax expense was $110.5 million, representing a 21.7% effective tax rate, for the 40 weeks ended November 30, 2019. The effective income tax rate for the 12 weeks ended December 5, 2020 differs from the federal income tax statutory rate of 21% primarily due to state taxes, offset by discrete benefits related to income tax credits and equity-based compensation deductions. The effective income tax rate for the 40 weeks ended December 5, 2020 differs from the federal income tax statutory rate of 21% primarily due to state taxes and certain discrete nondeductible transaction-related costs, partially offset by discrete benefits related to income tax credits and equity-based compensation deductions.

9


Segments: The Company and its subsidiaries offer grocery products, general merchandise, health and beauty care products, pharmacy, fuel and other items and services in its stores or through eCommerce channels. The Company's operating divisions are geographically based, have similar economic characteristics and similar expected long-term financial performance. The Company's operating segments and reporting units are its 12 operating divisions, which are reported in one reportable segment. Each reporting unit constitutes a business for which discrete financial information is available and for which management regularly reviews the operating results. Across all operating segments, the Company operates primarily one store format. Each division offers through its stores and eCommerce channels the same general mix of products with similar pricing to similar categories of customers, has similar distribution methods, operates in similar regulatory environments and purchases merchandise from similar or the same vendors.

Revenue Recognition: Revenues from the retail sale of products are recognized at the point of sale or delivery to the customer, net of returns and sales tax. Pharmacy sales are recorded upon the customer receiving the prescription. Third-party receivables from pharmacy sales were $245.6 million and $218.5 million as of December 5, 2020 and February 29, 2020, respectively, and are recorded in Receivables, net. For eCommerce related sales, which primarily include home delivery and Drive Up & Go curbside pickup, revenues are recognized upon either pickup in store or delivery to the customer and may include revenue for separately charged delivery services. Discounts provided to customers by the Company at the time of sale are recognized as a reduction in sales as the products are sold. Discounts provided to customers by vendors, usually in the form of coupons, are not recognized as a reduction in sales, provided the coupons are redeemable at any retailer that accepts coupons. The Company recognizes revenue and records a corresponding receivable from the vendor for the difference between the sales prices and the cash received from the customer. The Company records a contract liability when rewards are earned by customers in connection with the Company's loyalty programs. As rewards are redeemed or expire, the Company reduces the contract liability and recognizes revenue. The contract liability balance was immaterial as of December 5, 2020 and February 29, 2020.

The Company records a contract liability when it sells its own proprietary gift cards. The Company records a sale when the customer redeems the gift card. The Company's gift cards do not expire. The Company reduces the contract liability and records revenue for the unused portion of gift cards ("breakage") in proportion to its customers' pattern of redemption, which the Company determined to be the historical redemption rate. The Company's contract liability related to gift cards was $91.6 million as of December 5, 2020 and $52.2 million as of February 29, 2020. Breakage amounts were immaterial for the 12 and 40 weeks ended December 5, 2020 and November 30, 2019, respectively.

10


Disaggregated Revenues

The following table represents sales revenue by type of similar product (dollars in millions):
12 weeks ended40 weeks ended
December 5,
2020
November 30,
2019
December 5,
2020
November 30,
2019
Amount (1)% of TotalAmount (1)% of TotalAmount (1)% of TotalAmount (1)% of Total
Non-perishables (2)$7,007.9 45.5 %$6,168.2 43.7 %$24,918.3 46.2 %$20,362.4 43.3 %
Perishables (3)6,369.7 41.3 5,691.5 40.4 22,579.4 41.9 19,347.7 41.1 
Pharmacy1,272.7 8.3 1,228.5 8.7 3,999.4 7.4 3,958.2 8.4 
Fuel528.9 3.4 794.3 5.6 1,688.9 3.1 2,664.0 5.7 
Other (4)229.7 1.5 220.7 1.6 732.1 1.4 686.0 1.5 
Net sales and other revenue
$15,408.9 100.0 %$14,103.2 100.0 %$53,918.1 100.0 %$47,018.3 100.0 %
(1) eCommerce related sales are included in the categories to which the revenue pertains.
(2) Consists primarily of general merchandise, grocery and frozen foods.
(3) Consists primarily of produce, dairy, meat, deli, floral and seafood.
(4) Consists primarily of wholesale revenue to third parties, commissions and other miscellaneous revenue.

CARES Act: The Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law on March 27, 2020. The Company analyzed the various income tax and non-income tax provisions of the CARES Act based on currently available technical guidance and determined that aside from an impact to the timing of cash flows, there is no material impact to the Company's Consolidated Financial Statements. Specifically, as it relates to the Company, the CARES Act allows for deferred payment of the employer-paid portion of social security taxes through the end of 2020, with 50% due on December 31, 2021 and the remainder due on December 31, 2022. For the 40 weeks ended December 5, 2020, the Company deferred approximately $396 million of the employer-paid portion of social security taxes, which is included in Other long-term liabilities. The CARES Act also includes a technical correction to permit 100% bonus depreciation of eligible qualified improvement property. The Company will continue to assess the effect of the CARES Act and ongoing other government legislation related to the COVID-19 pandemic that may be issued, including the Consolidated Appropriations Act, 2021 signed into law on December 27, 2020.

Recently issued accounting standards: In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, "Simplifying the Accounting for Income Taxes" ("ASU 2019-12"). ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating taxes during the quarters and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also simplifies aspects of the accounting for franchise taxes, enacts changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. ASU 2019-12 will take effect for public entities for annual reporting periods beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect of this standard on its Consolidated Financial Statements.

In June 2020, the FASB issued ASU 2020-06, "Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" ("ASU 2020-06"). ASU 2020-06 simplifies the accounting for certain convertible instruments, amends guidance on derivative scope exceptions for contracts in an entity's own equity and modifies the guidance on diluted earnings per share calculations as a result of these changes. ASU 2020-06 will take effect for public entities for annual reporting periods beginning after December 15, 2021, and
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interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect of this standard on its Consolidated Financial Statements.
NOTE 2 - FAIR VALUE MEASUREMENTS
The accounting guidance for fair value established a framework for measuring fair value and established a three-level valuation hierarchy for disclosure of fair value measurement. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability at the measurement date. The three levels are defined as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities;
Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and
Level 3 - Unobservable inputs in which little or no market activity exists, requiring an entity to develop its own assumptions that market participants would use to value the asset or liability.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The following table presents assets and liabilities which were measured at fair value on a recurring basis as of December 5, 2020 (in millions):
Fair Value Measurements
TotalQuoted prices in active markets
for identical assets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Assets:
Short-term investments (1)$11.2 $4.3 $6.9 $ 
Non-current investments (2)89.0 25.6 63.4  
Total$100.2 $29.9 $70.3 $ 
Liabilities:
Derivative contracts (3)$56.4 $ $56.4 $ 
Total$56.4 $ $56.4 $ 
(1) Primarily relates to Mutual Funds (Level 1) and Certificates of Deposit (Level 2). Included in Other current assets.
(2) Primarily relates to investments in publicly traded stock (Level 1) and U.S. Treasury Notes and Corporate Bonds (Level 2). Included in Other assets.
(3) Primarily relates to interest rate swaps. Included in Other current liabilities.
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The following table presents assets and liabilities which were measured at fair value on a recurring basis as of February 29, 2020 (in millions):
 Fair Value Measurements
TotalQuoted prices in active markets
for identical assets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Assets:
Cash equivalents:
Money market
$2.0 $2.0 $ $ 
Short-term investments (1)13.5 5.0 8.5  
Non-current investments (2)85.9 26.8 59.1  
Total$101.4 $33.8 $67.6 $ 
Liabilities:
Derivative contracts (3)$66.4 $ $66.4 $ 
Total$66.4 $ $66.4 $ 
(1) Primarily relates to Mutual Funds (Level 1) and Corporate Bonds (Level 2). Included in Other current assets.
(2) Primarily relates to investments in publicly traded stock (Level 1) and U.S. Treasury Notes and Corporate Bonds (Level 2). Included in Other assets.
(3) Primarily relates to interest rate swaps. Included in Other current liabilities.

The estimated fair value of the Company's debt, including current maturities, was based on Level 2 inputs, being market quotes or values for similar instruments, and interest rates currently available to the Company for the issuance of debt with similar terms and remaining maturities as a discount rate for the remaining principal payments. As of December 5, 2020, the fair value of total debt was $8,534.2 million compared to the carrying value of $8,023.5 million, excluding debt discounts and deferred financing costs. As of February 29, 2020, the fair value of total debt was $8,486.2 million compared to the carrying value of $8,162.2 million, excluding debt discounts and deferred financing costs.
Assets Measured at Fair Value on a Non-Recurring Basis

The Company measures certain assets at fair value on a non-recurring basis, including long-lived assets and goodwill, which are evaluated for impairment. Long-lived assets include store-related assets such as property and equipment and certain intangible assets. The inputs used to determine the fair value of long-lived assets and a reporting unit are considered Level 3 measurements due to their subjective nature.
NOTE 3 - DERIVATIVE FINANCIAL INSTRUMENTS

The aggregate notional amount of the Company's Swaps as of December 5, 2020 and February 29, 2020 were $2,023.0 million, of which none were designated as cash flow hedges as defined by GAAP.

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Activity related to interest rate swaps consisted of the following (in millions):
12 weeks ended
December 5,
2020
November 30,
2019
Location of (loss) gain recognized from derivatives
Loss on undesignated portion of interest rate swaps$(0.3)$ Other income, net
Gain on designated portion of interest rate swaps$ $5.0 Other comprehensive income (loss), net of tax

40 weeks ended
December 5,
2020
November 30,
2019
Location of loss recognized from derivatives
Loss on undesignated portion of interest rate swaps$(19.7)$ Other income, net
Loss on designated portion of interest rate swaps$ $(33.3)Other comprehensive income (loss), net of tax

NOTE 4 - LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS

The Company's long-term debt and finance lease obligations as of December 5, 2020 and February 29, 2020, net of unamortized debt discounts of $39.5 million and $41.3 million, respectively, and deferred financing costs of $71.0 million and $72.9 million, respectively, consisted of the following (in millions):
December 5,
2020
February 29,
2020
Senior Unsecured Notes due 2023 to 2030, interest rate range of 3.25% to 7.50%
$6,885.4 $6,884.5 
Safeway Inc. Notes due 2021 to 2031, interest rate range of 4.75% to 7.45%
504.2 642.1 
New Albertsons L.P. Notes due 2026 to 2031, interest rate range of 6.52% to 8.70%
468.4 466.0 
Other financing obligations37.3 37.2 
Mortgage notes payable, secured17.7 18.2 
Finance lease obligations 627.4 666.7 
Total debt8,540.4 8,714.7 
Less current maturities(212.4)(221.4)
Long-term portion$8,328.0 $8,493.3 
Senior Unsecured Notes

On August 31, 2020, the Company and substantially all of its subsidiaries completed the issuance of $750.0 million in aggregate principal amount of 3.250% Senior Unsecured Notes which will mature on March 15, 2026 (the "2026 Notes") and $750.0 million in aggregate principal amount of 3.500% Senior Unsecured Notes which will mature on March 15, 2029 (the "2029 Notes" and together with the 2026 Notes, the "New Notes"). Interest on the New Notes is payable semi-annually in arrears on March 15 and September 15 of each year, commencing on March 15, 2021. The New Notes have not been and will not be registered with the SEC. The New Notes are also fully and unconditionally guaranteed, jointly and severally, by substantially all of the Company's subsidiaries that are not issuers under the indenture governing such New Notes. On September 11, 2020, proceeds from the New Notes, together with approximately $60 million cash on hand, were used to fully redeem the $1,250.0 million in aggregate principal amount outstanding of the Company's 6.625% Senior Unsecured Notes due 2024 (the "2024 Redemption"). In connection with the 2024 Redemption, the Company paid an associated redemption premium of
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$41.4 million. The Company recorded a $49.1 million loss on debt extinguishment related to the 2024 Redemption, comprised of the $41.4 million redemption premium and $7.7 million write-off of deferred financings costs.

On September 16, 2020, remaining proceeds from the New Notes were used to fund the partial redemption of $250.0 million of the $1,250.0 million in aggregate principal amount outstanding (the "September Partial 2025 Redemption") of the Company's 5.75% Senior Unsecured Notes due 2025 (the "2025 Notes"). In connection with the September Partial 2025 Redemption, the Company paid an associated redemption premium of $7.2 million. The Company recorded an $8.6 million loss on debt extinguishment related to the September Partial 2025 Redemption, comprised of the $7.2 million redemption premium and a $1.4 million write-off of deferred financing costs.

On December 22, 2020, subsequent to the end of the third quarter of fiscal 2020, the Company and substantially all of its subsidiaries completed the issuance of $600.0 million in aggregate principal amount of additional 2029 Notes (the "Additional 2029 Notes"). The Additional 2029 Notes were issued under the same indenture as the 2029 Notes issued by the Company on August 31, 2020. Interest on the Additional 2029 Notes is payable semi-annually in arrears on March 15 and September 15 of each year, commencing on March 15, 2021. The Additional 2029 Notes have not been and will not be registered with the SEC. The Additional 2029 Notes are also fully and unconditionally guaranteed, jointly and severally, by substantially all of the Company's subsidiaries that are not issuers under the indenture governing such Additional 2029 Notes. On January 4, 2021, proceeds from the Additional 2029 Notes, together with approximately $230 million of cash on hand, were used to fund another partial redemption of $800.0 million of the $1,000.0 million in aggregate principal amount outstanding of the 2025 Notes (the "January Partial 2025 Redemption").

Safeway Notes

The Company repaid the remaining $136.8 million in aggregate principal amount of Safeway Inc.'s ("Safeway") 3.95% Notes due 2020 on their maturity date, August 15, 2020.

ABL Facility

On March 12, 2020, the Company provided notice to the lenders to borrow $2.0 billion under the Company's amended and restated senior secured asset-based loan facility (as amended, the "ABL Facility") as a precautionary measure in order to increase its cash position and preserve flexibility in light of the uncertainty in the global markets resulting from the COVID-19 pandemic. The Company repaid the $2.0 billion in full on June 19, 2020 and as of December 5, 2020, there were no amounts outstanding under the Company's ABL Facility, and letters of credit ("LOC") issued under the LOC sub-facility were $354.6 million. There were no amounts outstanding under the Company's ABL Facility as of February 29, 2020, and letters of credit issued under the LOC sub-facility were $454.5 million.

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NOTE 5 - STOCKHOLDERS' EQUITY AND CONVERTIBLE PREFERRED STOCK
Common Stock

On June 8, 2020, the Company amended and restated its certificate of incorporation to authorize 1,150,000,000 shares of common stock, par value $0.01 per share, of which 1,000,000,000 shares were classified as Class A common stock ("Class A common stock") and 150,000,000 shares were classified as Class A-1 convertible common stock ("Class A-1 common stock" and together with the Class A common stock, the "Common Stock"). As of December 5, 2020, there were 585,530,715 shares of Class A common stock and 466,611,426 shares of Class A common stock issued and outstanding, respectively, and no shares of Class A-1 common stock issued or outstanding. As of February 29, 2020, there were 582,997,251 shares of Class A common stock and 579,325,630 shares of Class A common stock issued and outstanding, respectively. For all prior periods presented, use of Class A common stock refers to the Company's common stock pre-reclassification.

The terms of the Class A common stock are substantially identical to the terms of the Class A-1 common stock, except that the Class A-1 common stock does not have voting rights. Each holder of Class A common stock is entitled to one vote for each share owned of record on all matters voted upon by stockholders. A majority vote is required for all action to be taken by stockholders, except as otherwise provided for in the Company's amended and restated certificate of incorporation and amended and restated bylaws or as required by law. Subject to preferences that may be applicable to any then outstanding preferred stock, holders of the Company's Common Stock are entitled to receive ratably those dividends, if any, as may be declared from time to time by the board of directors out of legally available funds. In the event of the Company's liquidation, dissolution or winding-up, the holders of Common Stock are entitled to share equally and ratably in the Company's assets, if any, remaining after the payment of all of debts and liabilities and the liquidation preference of any outstanding preferred stock. Shares of Class A-1 common stock would be issued upon the conversion of the Company's outstanding Series A-1 preferred stock. When permitted under the relevant antitrust restrictions, any issued shares of Class A-1 common stock would automatically convert on a one-for-one basis to voting shares of Class A common stock.

In connection with the IPO, the Company established a dividend policy pursuant to which the Company intends to pay a quarterly dividend on its Common Stock in an annual amount equal to $0.400 per common share. On October 14, 2020, the Company announced the first quarterly dividend payment of $0.100 per common share which was paid on November 10, 2020 to stockholders of record as of the close of business on October 26, 2020. On January 12, 2021, subsequent to the end of the third quarter of fiscal 2020, the Company announced the next quarterly dividend payment of $0.100 per common share to be paid on February 10, 2021 to stockholders of record as of the close of business on January 26, 2021.

Stock Split

On June 18, 2020, the Company effected a 2.072-for-1 stock split of its Common Stock, without any change in the total shares authorized or the par value per share. All information related to the Company's Common Stock and per Class A common share amounts for all periods presented in the accompanying Condensed Consolidated Financial Statements have been retroactively adjusted to give effect to the 2.072-for-1 stock split.
Initial Public Offering

The Company's Class A common stock began trading on the New York Stock Exchange on June 26, 2020 under the symbol "ACI" and on June 30, 2020, certain selling stockholders completed the sale of a total of 50,000,000 shares of Class A common stock at an initial price to the public of $