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 26, 2022 is derived from the Company's annual audited Consolidated Financial Statements, which should be read in conjunction with these Condensed Consolidated Financial Statements and which are included in the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 2022, filed with the Securities and Exchange Commission (the "SEC") on April 26, 2022. 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 3, 2022 and December 4, 2021.

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 surety bonds and funds held in escrow. The Company had $8.0 million and $50.6 million of restricted cash as of December 3, 2022 and February 26, 2022, 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 primarily uses the retail inventory or item-cost method to determine inventory cost before application of any last-in, first-out ("LIFO") adjustment. 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 $64.5 million and $29.5 million for the 12 weeks ended December 3, 2022 and December 4, 2021, respectively, and $181.4 million and $58.6 million for the 40 weeks ended December 3, 2022 and December 4, 2021, respectively.

Convertible Preferred Stock: During the 12 and 40 weeks ended December 3, 2022, certain holders 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") converted approximately 36,001 and 765,186 shares, respectively, of Convertible Preferred Stock into 2,090,287 and 44,429,747 shares, respectively, of the Company's Class A common stock, which were issued from treasury stock. As of December 3, 2022, the Company has issued in the aggregate 64,799,329 shares of Class A common stock to holders of Convertible Preferred Stock with the conversion of the Series A-1 preferred stock being completed during the first quarter of fiscal 2022 as previously reported. These non-cash conversions represent approximately 64% of the originally issued Convertible Preferred Stock.

Concurrent with the issuance and sale of the Convertible Preferred Stock during the first quarter of fiscal 2020, a consolidated real estate subsidiary of the Company entered into a real estate agreement with an affiliate of the holders ("RE Investor") of the Convertible Preferred Stock. Under the terms of the real estate agreement, the Company placed fee owned real estate properties into its real estate subsidiary and contributed $36.5 million of cash into a restricted escrow account, with a total value of $2.9 billion (165% of the liquidation preference of the Convertible Preferred Stock at the time of issue). The real estate agreement provides that the Company may release properties and/or cash from the escrow account if the holders of Convertible Preferred Stock convert their shares into Class A Common Stock, provided that certain conversion thresholds are met. During the second quarter of fiscal 2022, due to the non-cash conversions of Convertible Preferred Stock to Class A common stock discussed

above, real estate properties and cash of $36.5 million, representing approximately 60% of the original $2.9 billion, were released from the restricted escrow account, and the real estate properties were transferred from the real estate subsidiary to operating subsidiaries. For additional information related to the Convertible Preferred Stock and the Investor Exchange Right, see "Part II—Item 8. Financial Statements and Supplementary Data—Note 9" of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 2022.

On October 19, 2022, the Company filed an amendment with the State of Delaware (the "Series A Amendment") to the Certificate of Designations of the Series A preferred stock (as amended, the "Certificate of Designations"), such that the transactions contemplated by the Merger Agreement (as defined in Note 2 - Merger Agreement and Special Dividend) do not constitute a "Fundamental Change" as defined under the Certificate of Designations. Furthermore, under the Series A Amendment, the ability of the Company to deliver a mandatory conversion notice under the Certificate of Designations is temporarily suspended so long as the Merger Agreement has not been terminated. The Series A Amendment also provides that holders of Series A preferred stock will participate in and receive shares of SpinCo (as defined and further described in Note 2 - Merger Agreement and Special Dividend), and no adjustment to the then-applicable conversion rate will occur as a result of such participation. The Company concluded that the Series A Amendment did not result in substantial changes to terms of the Convertible Preferred Stock and as a result, applied modification accounting where it was determined that holders of the Convertible Preferred Stock did not receive any incremental fair value. Furthermore, the Convertible Preferred Stock continues to be classified outside of permanent equity on the Condensed Consolidated Balance Sheets.

Income taxes: Income tax expense was $120.9 million, representing a 24.4% effective tax rate, for the 12 weeks ended December 3, 2022. The Company's effective tax rate for the 12 weeks ended December 3, 2022 differs from the federal income tax statutory rate of 21% primarily due to state income taxes, reduced by federal tax credits. Income tax expense was $98.4 million, representing a 18.8% effective tax rate for the 12 weeks ended December 4, 2021. The Company's effective tax rate for the 12 weeks ended December 4, 2021 differs from the federal income tax statutory rate of 21% primarily due to incremental discrete state income tax benefits related to expired statutes and audit settlements.

Income tax expense was $381.6 million, representing a 24.1% effective tax rate, for the 40 weeks ended December 3, 2022. The Company's effective tax rate for the 40 weeks ended December 3, 2022 differs from the federal income tax statutory rate of 21% primarily due to state income taxes, reduced by federal tax credits. Income tax expense was $331.2 million, representing a 22.1% effective tax rate, for the 40 weeks ended December 4, 2021. The Company's effective tax rate for the 40 weeks ended December 4, 2021 differs from the federal income tax statutory rate of 21% primarily due to state income taxes, largely reduced by the recognition of discrete state income tax benefits related to expired statutes and audit settlements.

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 digital 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 digital 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 product. Third-party receivables from pharmacy sales were $304.4 million and $247.5 million as of December 3, 2022 and February 26, 2022, respectively, and are recorded in Receivables, net. For digital 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. 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 3, 2022 and February 26, 2022.

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 $123.4 million and $104.3 million as of December 3, 2022 and February 26, 2022, respectively.


	12 weeks ended								40 weeks ended
	December 3, 2022				December 4, 2021				December 3, 2022				December 4, 2021
	Amount (1)		% of Total		Amount (1)		% of Total		Amount (1)		% of Total		Amount (1)		% of Total
Non-perishables (2)	$	9,255.2	51.0	%	$	8,519.0	50.9	%	$	29,705.7	50.0	%	$	27,650.5	50.7	%
Fresh (3)	5,762.6		31.7		5,583.8		33.4		19,588.6		33.0		18,675.6		34.3
Pharmacy	1,724.4		9.5		1,436.7		8.6		5,124.2		8.6		4,418.7		8.1
Fuel	1,111.1		6.1		906.6		5.4		3,968.6		6.7		2,874.4		5.3
Other (4)	301.6		1.7		282.3		1.7		997.5		1.7		884.3		1.6
Net sales and other revenue	$	18,154.9	100.0	%	$	16,728.4	100.0	%	$	59,384.6	100.0	%	$	54,503.5	100.0	%

Recently issued accounting standards: In June 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-03, "Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions" ("ASU 2022-03"). ASU 2022-03 clarifies the guidance on the fair value measurement of an equity security that is subject to a contractual sale restriction and requires specific disclosures related to such an equity security. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted. The Company currently does not expect the adoption of this standard to have a material impact on its Consolidated Financial Statements and related disclosures, but evaluation is continuing.