# Albertsons Companies, Inc. (ACI) FY 2025 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Albertsons Companies, Inc.'s 10-K for fiscal year 2025.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1646972/000164697225000052/aci-20250222.htm
Accession: 0001646972-25-000052
Filing date: 2025-04-21
Report date: 2025-02-22
Extracted from a substantive MD&A body after the formal Item 7 span was a TOC or reference stub.
Confidence: high

Company profile: /company/ACI/
All MD&A years: /company/ACI/mda/
Previous year: /company/ACI/mda/fy2024/ (FY 2024)
Next year: /company/ACI/mda/fy2026/ (FY 2026)

RESULTS OF OPERATIONS

The following information summarizes the components of our Consolidated Statements of Operations for fiscal 2024 compared to fiscal 2023.

Summary of Consolidated Statements of Operations (dollars in millions, except per share data):

[[GREPCENT_TABLE]]
[["","Fiscal 2024","","Fiscal 2023","","Fiscal 2022"],["Net sales and other revenue","$","80,390.9","","","100.0","%","","$","79,237.7","","","100.0","%","","$","77,649.7","","","100.0","%"],["Cost of sales","58,135.3","","","72.3","","","57,192.0","","","72.2","","","55,894.1","","","72.0"],["Gross margin","22,255.6","","","27.7","","","22,045.7","","","27.8","","","21,755.6","","","28.0"],["Selling and administrative expenses","20,613.7","","","25.6","","","19,932.9","","","25.2","","","19,596.0","","","25.2"],["Loss (gain) on property dispositions and impairment losses, net","95.8","","","0.1","","","43.9","","","\u2014","","","(147.5)","","","(0.2)"],["Operating income","1,546.1","","","2.0","","","2,068.9","","","2.6","","","2,307.1","","","3.0"],["Interest expense, net","459.8","","","0.6","","","492.1","","","0.6","","","404.6","","","0.5"],["Other income, net","(43.4)","","","\u2014","","","(12.2)","","","\u2014","","","(33.0)","","","\u2014"],["Income before income taxes","1,129.7","","","1.4","","","1,589.0","","","2.0","","","1,935.5","","","2.5"],["Income tax expense","171.1","","","0.2","","","293.0","","","0.4","","","422.0","","","0.5"],["Net income","$","958.6","","","1.2","%","","$","1,296.0","","","1.6","%","","$","1,513.5","","","2.0","%"],["Basic net income per Class A common share","$","1.65","","","","","$","2.25","","","","","$","2.29"],["Diluted net income per Class A common share","1.64","","","","","2.23","","","","","2.27"]]
[[/GREPCENT_TABLE]]

Net Sales and Other Revenue

Net sales and other revenue increased $1,153.2 million, or 1.5%, to $80,390.9 million in fiscal 2024 from $79,237.7 million in fiscal 2023. The increase in Net sales and other revenue in fiscal 2024 as compared to fiscal 2023 was driven by our 2.0% increase in identical sales, with growth in pharmacy sales being the primary driver of the identical sales increase, while our digital sales also increased 24% during fiscal 2024. The increase in Net sales and other revenue was partially offset by lower fuel sales. The components of the change in Net sales and other revenue for fiscal 2024 were as follows (in millions):

[[GREPCENT_TABLE]]
[["","Fiscal 2024"],["Net sales and other revenue for fiscal 2023","$","79,237.7"],["Identical sales increase of 2.0%","1,479.7"],["Decrease in fuel sales","(416.1)"],["Increase in sales due to new store openings, net of store closures","60.0"],["Other, net","29.6"],["Net sales and other revenue for fiscal 2024","$","80,390.9"]]
[[/GREPCENT_TABLE]]

Identical Sales, Excluding Fuel

Identical sales include stores operating during the same period in both the current year and the prior year, comparing sales on a daily basis. Direct to consumer digital sales are included in identical sales, and fuel sales are excluded

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from identical sales. Acquired stores become identical on the one-year anniversary date of the acquisition. Identical sales results, on an actual basis, for the past three fiscal years were as follows:

[[GREPCENT_TABLE]]
[["","Fiscal 2024","","Fiscal 2023","","Fiscal 2022"],["Identical sales, excluding fuel","2.0%","","3.0%","","6.9%"]]
[[/GREPCENT_TABLE]]

The following table represents Net sales and other revenue by product type (dollars in millions):

[[GREPCENT_TABLE]]
[["","Fiscal 2024","","Fiscal 2023"],["","Amount (1)","","% of Total","","Amount (1)","","% of Total"],["Non-perishables (2)","$","40,102.8","","","49.9","%","","$","39,977.3","","","50.5","%"],["Fresh (3)","25,507.3","","","31.7","%","","25,442.7","","","32.1","%"],["Pharmacy","9,597.2","","","11.9","%","","8,240.0","","","10.4","%"],["Fuel","3,980.6","","","5.0","%","","4,396.7","","","5.5","%"],["Other (4)","1,203.0","","","1.5","%","","1,181.0","","","1.5","%"],["Total","$","80,390.9","","","100.0","%","","$","79,237.7","","","100.0","%"]]
[[/GREPCENT_TABLE]]

(1) Digital related sales are included in the categories to which the revenue pertains.

(2) Consists primarily of general merchandise, grocery, dairy and frozen foods.

(3) Consists primarily of produce, meat, deli and prepared foods, bakery, floral and seafood.

(4) Consists primarily of wholesale sales to third parties, commissions, media advertising revenue, rental income and other miscellaneous revenue.

Gross Margin

Gross margin rate decreased to 27.7% in fiscal 2024 compared to 27.8% in fiscal 2023. Excluding the impacts of fuel and LIFO, gross margin rate decreased 34 basis points. The strong growth in pharmacy sales, which carries an overall lower gross margin rate, increases in delivery and handling costs related to the 24% growth in our digital sales and investment in our customer value proposition were the primary drivers of the decrease, partially offset by the benefits from our productivity initiatives.

Selling and Administrative Expenses

Selling and administrative expenses increased to 25.6% of Net sales and other revenue in fiscal 2024 compared to 25.2% in fiscal 2023. Excluding the impact of fuel, Selling and administrative expenses as a percentage of Net sales and other revenue increased 34 basis points during fiscal 2024 compared to fiscal 2023. The increase in Selling and administrative expenses as a percentage of Net sales and other revenue was primarily attributable to an increase in operating expenses related to the ongoing development of our digital and omnichannel capabilities, Merger-related costs, increased business transformation costs, higher employee costs and increased store occupancy costs including additional third-party store security services, partially offset by the benefits from our productivity initiatives.

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

For fiscal 2024, net loss on property dispositions and impairment losses was $95.8 million, primarily driven by $104.2 million of asset impairments including impairment losses of $60.9 million of retail store impairment losses, $39.8 million primarily related to equipment from the closing of our micro-fulfillment centers and $3.5 million related to certain technology assets, partially offset by $8.4 million of net gains from the sale of real estate assets. For fiscal 2023, net loss on property dispositions and impairment losses was $43.9 million, primarily driven by the impairment and disposal of certain technology assets, partially offset by net gains from the sale of assets.

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Interest Expense, Net

Interest expense, net was $459.8 million in fiscal 2024 compared to $492.1 million in fiscal 2023. The decrease in Interest expense, net was primarily attributable to lower average outstanding borrowings. The weighted average interest rate was 5.6% during both fiscal 2024 and fiscal 2023, excluding amortization of debt discounts and deferred financing costs.

Other Income, Net

For fiscal 2024, Other income, net was $43.4 million primarily driven by unrealized gains from non-operating investments and non-service cost components of net pension and post-retirement income. For fiscal 2023, Other income, net was $12.2 million primarily driven by non-service cost components of net pension and post-retirement income, realized gains from non-operating investments and income related to our equity interest and gain on sale of El Rancho during fiscal 2023, partially offset by realized and unrealized losses from non-operating investments.

Income Taxes

Income tax expense was $171.1 million, representing a 15.1% effective tax rate, in fiscal 2024, and $293.0 million, representing an 18.4% effective tax rate, in fiscal 2023. The decrease in the effective income tax rate during fiscal 2024 compared to fiscal 2023 was primarily driven by the recognition of $81.0 million of discrete state income tax benefits related to audit settlements, compared to a reduction of a reserve of $49.7 million for an uncertain tax position due to the expiration of a foreign statute during the first quarter of fiscal 2023.

Net Income and Adjusted Net Income

Net income was $958.6 million or $1.64 per diluted share during fiscal 2024 compared to $1,296.0 million or $2.23 per diluted share during fiscal 2023. Fiscal 2024 included the $81.0 million or $0.14 per share benefit related to certain discrete state income tax benefits related to the settlement of audits, and fiscal 2023 included the $49.7 million or $0.09 per share benefit related to the reduction in the reserve for an uncertain tax position. Adjusted net income was $1,382.4 million, or $2.34 per share, during fiscal 2024 compared to $1,693.7 million, or $2.88 per share (which includes the $49.7 million tax benefit discussed above), during fiscal 2023.

Adjusted EBITDA

Adjusted EBITDA was $4,004.7 million, or 5.0% of Net sales and other revenue, during fiscal 2024 compared to $4,317.7 million, or 5.4% of Net sales and other revenue, during fiscal 2023.

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Reconciliation of Non-GAAP Measures

The following table reconciles Net income to Adjusted net income and adjusted EBITDA (in millions):

[[GREPCENT_TABLE]]
[["","Fiscal 2024","","Fiscal 2023","","Fiscal 2022"],["Net income","$","958.6","","","$","1,296.0","","","$","1,513.5"],["Adjustments:"],["Loss (gain) on interest rate swaps and energy hedges, net (d)","0.9","","","(3.2)","","","(8.4)"],["Business transformation (1)(b)","105.2","","","45.1","","","78.3"],["Equity-based compensation expense (b)","106.2","","","104.5","","","138.3"],["Loss (gain) on property dispositions and impairment losses, net","95.8","","","43.9","","","(147.5)"],["LIFO expense (a)","28.6","","","52.0","","","268.0"],["Government-mandated incremental COVID-19 pandemic related pay (2)(b)","\u2014","","","\u2014","","","10.8"],["Merger-related costs (3)(b)","254.8","","","180.6","","","56.5"],["Certain legal and regulatory accruals and settlements, net (b)","6.1","","","(6.7)","","","100.7"],["Amortization of debt discount and deferred financing costs (c)","16.1","","","15.5","","","16.8"],["Amortization of intangible assets resulting from acquisitions (b)","47.9","","","48.6","","","50.9"],["Combined Plan (4)(b)","\u2014","","","\u2014","","","(19.0)"],["Miscellaneous adjustments (5)(f)","(0.3)","","","41.4","","","52.1"],["State income tax benefits related to the settlement of audits","(81.0)","","","\u2014","","","\u2014"],["Tax impact of adjustments to Adjusted net income","(156.5)","","","(124.0)","","","(145.9)"],["Adjusted net income","$","1,382.4","","","$","1,693.7","","","$","1,965.1"],["Tax impact of adjustments to Adjusted net income","156.5","","","124.0","","","145.9"],["State income tax benefits related to the settlement of audits","81.0","","","\u2014","","","\u2014"],["Income tax expense","171.1","","","293.0","","","422.0"],["Amortization of debt discount and deferred financing costs (c)","(16.1)","","","(15.5)","","","(16.8)"],["Interest expense, net","459.8","","","492.1","","","404.6"],["Amortization of intangible assets resulting from acquisitions (b)","(47.9)","","","(48.6)","","","(50.9)"],["Depreciation and amortization (e)","1,817.9","","","1,779.0","","","1,807.1"],["Adjusted EBITDA","$","4,004.7","","","$","4,317.7","","","$","4,677.0"]]
[[/GREPCENT_TABLE]]

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The following tables reconcile diluted net income per Class A common share to Adjusted net income per Class A common share (in millions, except per share data):

[[GREPCENT_TABLE]]
[["","Fiscal 2024","","Fiscal 2023","","Fiscal 2022"],["Numerator:"],["Adjusted net income (6)","$","1,382.4","","","$","1,693.7","","","$","1,965.1"],["Denominator:"],["Weighted average Class A common shares outstanding - diluted","583.8","","","581.1","","","534.0"],["Adjustments:"],["Convertible preferred stock (7)","\u2014","","","0.3","","","42.7"],["Restricted stock units and awards (8)","6.5","","","6.4","","","5.9"],["Adjusted weighted average Class A common shares outstanding - diluted","590.3","","","587.8","","","582.6"],["Adjusted net income per Class A common share - diluted","$","2.34","","","$","2.88","","","$","3.37"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Fiscal 2024","","Fiscal 2023","","Fiscal 2022"],["Net income per Class A common share - diluted","$","1.64","","","$","2.23","","","$","2.27"],["Convertible Preferred Stock (7)","\u2014","","","\u2014","","","0.36"],["Non-GAAP adjustments (9)","0.73","","","0.68","","","0.78"],["Restricted stock units and awards (8)","(0.03)","","","(0.03)","","","(0.04)"],["Adjusted net income per Class A common share - diluted","$","2.34","","","$","2.88","","","$","3.37"]]
[[/GREPCENT_TABLE]]

(1) Includes costs associated with third-party consulting fees related to our Customers for Life strategy and employee termination costs related to our reduction in workforce during the fourth quarter of fiscal 2024, as follows (see table below):

[[GREPCENT_TABLE]]
[["","Fiscal 2024","","Fiscal 2023","","Fiscal 2022"],["Third-party consulting fees","$","71.7","","","$","45.1","","","$","78.3"],["Employee termination costs","33.5","","","\u2014","","","\u2014"],["Total Business transformation","$","105.2","","","$","45.1","","","$","78.3"]]
[[/GREPCENT_TABLE]]

(2) Represents incremental COVID-19 related pay legislatively required in certain municipalities in which we operate.

(3) Primarily relates to third-party legal and advisor fees and retention program expense related to the Merger and costs in connection with our previously-announced Board-led review of potential strategic alternatives.

(4) Related to the Combined Plan during the second quarter of fiscal 2022. See "Part II - Item 8. Financial Statements and Supplementary Data - Note 11" for more information.

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(5) Miscellaneous adjustments include the following (see table below):

[[GREPCENT_TABLE]]
[["","Fiscal 2024","","Fiscal 2023","","Fiscal 2022"],["Non-cash lease-related adjustments","$","4.5","","","$","4.2","","","$","5.6"],["Lease and lease-related costs for surplus and closed stores","15.9","","","19.4","","","22.7"],["Net realized and unrealized (gain) loss on non-operating investments","(40.1)","","","8.6","","","25.2"],["Other (i)","19.4","","","9.2","","","(1.4)"],["Total Miscellaneous adjustments","$","(0.3)","","","$","41.4","","","$","52.1"]]
[[/GREPCENT_TABLE]]

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

(6) See the reconciliation of Net income to Adjusted net income above for further details.

(7) Represents the conversion of Convertible Preferred Stock to the fully outstanding as-converted Class A common shares as of the end of each respective period, for periods in which the Convertible Preferred Stock is antidilutive under GAAP. Fiscal 2022 reflects the impact of the Special Dividend (as defined below) that is attributable to the holders of Convertible Preferred Stock on an as-converted basis.

(8) Represents incremental unvested RSUs and unvested RSAs to adjust the diluted weighted average Class A common shares outstanding during each respective period to the fully outstanding RSUs and RSAs as of the end of each respective period.

(9) Reflects the per share impact of Non-GAAP adjustments for each period. See the reconciliation of Net income to Adjusted net income above for further details.

Non-GAAP adjustment classifications within the Consolidated Statements of Operations:

(a) Cost of sales

(b) Selling and administrative expenses

(c) Interest expense, net

(d) Loss (gain) on interest rate swaps and energy hedges, net:

[[GREPCENT_TABLE]]
[["","Fiscal 2024","","Fiscal 2023","","Fiscal 2022"],["Cost of sales","$","1.0","","","$","(2.2)","","","$","(4.8)"],["Selling and administrative expenses","(0.1)","","","(1.0)","","","4.8"],["Other income, net","\u2014","","","\u2014","","","(8.4)"],["Total Loss (gain) on interest rate swaps and energy hedges, net","$","0.9","","","$","(3.2)","","","$","(8.4)"]]
[[/GREPCENT_TABLE]]

(e) Depreciation and amortization:

[[GREPCENT_TABLE]]
[["","Fiscal 2024","","Fiscal 2023","","Fiscal 2022"],["Cost of sales","$","181.4","","","$","169.0","","","$","162.7"],["Selling and administrative expenses","1,636.5","","","1,610.0","","","1,644.4"],["Total Depreciation and amortization","$","1,817.9","","","$","1,779.0","","","$","1,807.1"]]
[[/GREPCENT_TABLE]]

(f) Miscellaneous adjustments:

[[GREPCENT_TABLE]]
[["","Fiscal 2024","","Fiscal 2023","","Fiscal 2022"],["Selling and administrative expenses","$","36.0","","","$","34.7","","","$","28.9"],["Other income, net","(36.3)","","","6.7","","","23.2"],["Total Miscellaneous adjustments","$","(0.3)","","","$","41.4","","","$","52.1"]]
[[/GREPCENT_TABLE]]

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LIQUIDITY AND FINANCIAL RESOURCES

The following table sets forth the major sources and uses of cash and cash equivalents and restricted cash for each period (in millions):

[[GREPCENT_TABLE]]
[["","February 22, 2025","","February 24, 2024","","February 25, 2023"],["Cash and cash equivalents and restricted cash at end of period","$","297.9","","","$","193.2","","","$","463.8"],["Cash flows provided by operating activities","2,680.6","","","2,659.5","","","2,853.9"],["Cash flows used in investing activities","(1,891.8)","","","(1,746.7)","","","(1,977.3)"],["Cash flows used in financing activities","(684.1)","","","(1,183.4)","","","(3,365.4)"]]
[[/GREPCENT_TABLE]]

Net Cash Provided By Operating Activities

Net cash provided by operating activities was $2,680.6 million during fiscal 2024 compared to $2,659.5 million during fiscal 2023. The increase in cash flow from operating activities during fiscal 2024 compared to fiscal 2023 was due to less cash paid for taxes, legal settlements, multiemployer pension plan withdrawal liabilities and interest, partially offset by a decrease in Adjusted EBITDA, higher Merger-related costs, changes in working capital and an increase in contributions to our defined benefit pension plans during fiscal 2024.

Net Cash Used In Investing Activities

Net cash used in investing activities during fiscal 2024 was $1,891.8 million primarily due to payments for property, equipment and intangibles of $1,927.5 million, partially offset by proceeds from the sale of assets of $31.4 million, primarily related to real estate. Payments for property, equipment and intangibles included the completion of 127 remodels, the opening of 11 new stores and continued investment in our digital and technology platforms.

Net cash used in investing activities during fiscal 2023 was $1,746.7 million primarily due to payments for property, equipment and intangibles of $2,036.6 million, partially offset by proceeds from the sale of assets of $217.6 million, which includes $166.1 million related to the sale of our equity interest in El Rancho during fiscal 2023. Payments for property, equipment and intangibles included the completion of 150 remodels, the opening of six new stores and continued investments in our digital and technology platforms.

In fiscal 2025, we expect capital expenditures to be in the range of $1.7 billion to $1.9 billion.

Net Cash Used In Financing Activities

Net cash used in financing activities was $684.1 million in fiscal 2024 primarily consisting of the $250.0 million repayment of the asset-based loan facility (as amended, the "ABL Facility"), dividends paid on our Class A common stock, the repurchase of common stock, payments of obligations under finance leases and tax withholding payments on vesting of RSUs, partially offset by $50.0 million of proceeds from the issuance of debt under the ABL Facility.

Net cash used in financing activities was $1,183.4 million in fiscal 2023 primarily consisting of the $950.0 million partial repayment of the ABL Facility, dividends paid on our Class A common stock, payments of obligations under

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finance leases and tax withholding payments on vesting of RSUs, partially offset by $150.0 million of proceeds from the issuance of debt under the ABL Facility.

See "Part II—Item 8. Financial Statements and Supplementary Data—Note 6 and Note 8" for additional information.

Debt Management

Total debt, including both the current and long-term portions of finance lease obligations, net of debt discounts and deferred financing costs, decreased $248.5 million to $7,820.1 million as of the end of fiscal 2024 compared to $8,068.6 million as of the end of fiscal 2023.

Outstanding debt, including current maturities, net of debt discounts and deferred financing costs, principally consisted of (in millions):

[[GREPCENT_TABLE]]
[["","February 22, 2025"],["Senior Unsecured Notes, New Albertson's L.P. Notes and Safeway Inc. Notes","$","7,377.5"],["Finance lease obligations","427.9"],["Other financing obligations","14.7"],["Total debt, including finance leases","$","7,820.1"]]
[[/GREPCENT_TABLE]]

During fiscal 2024, we repaid $200.0 million, net, of the ABL Facility. As of February 22, 2025, we had no borrowings outstanding under the ABL Facility and total availability of $3,972.6 million (net of letter of credit usage).

On March 11, 2025, subsequent to the end of fiscal 2024, we completed the issuance of $600.0 million in aggregate principal amount of 6.250% senior unsecured notes due March 15, 2033 (the "2033 Notes"). Interest on the 2033 Notes is payable semi-annually in arrears on March 15 and September 15 of each year, with the first payment commencing on September 15, 2025. On March 17, 2025, subsequent to the end of fiscal 2024, proceeds from the 2033 Notes, together with approximately $5.6 million of cash on hand, were used to (i) redeem in full the $600.0 million outstanding of our 7.500% senior unsecured notes due March 15, 2026 and (ii) pay fees and expenses related to the issuance of the 2033 Notes.

During fiscal 2024 and fiscal 2023, there were no financial maintenance covenants in effect under the ABL Facility because the conditions had not been met.

See "Part II—Item 8. Financial Statements and Supplementary Data—Note 6" for additional information.

Dividends

We have established a dividend policy pursuant to which we intend to pay a quarterly dividend on our Class A common stock. Cash dividends paid on our Class A common stock were $295.1 million ($0.51 per common share), $276.2 million ($0.48 per common share) and $255.1 million ($0.48 per common share) during fiscal 2024, fiscal 2023 and fiscal 2022, respectively. On December 11, 2024, the Board increased the quarterly cash dividend 25% from $0.12 per common share to $0.15 per common share. On April 15, 2025, we announced the next quarterly dividend payment of $0.15 per share of Class A common stock to be paid on May 9, 2025 to stockholders of record as of the close of business on April 25, 2025.

During the first quarter of fiscal 2023, the conversion of the remaining Convertible Preferred Stock was completed. The holders of Convertible Preferred Stock were entitled to a quarterly dividend at a rate per annum of 6.75% of the liquidation preference per share of the Convertible Preferred Stock. In addition, the holders of Convertible Preferred

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Stock participated in cash dividends that we pay on our common stock to the extent that such cash dividends exceed $206.25 million per fiscal year and shares of Convertible Preferred Stock remain outstanding as of the applicable record date to participate in such dividends. Cash dividends paid to holders of the Convertible Preferred Stock were $0.8 million and $65.3 million during fiscal 2023 and fiscal 2022, respectively.

On October 13, 2022, we declared the Special Dividend, payable to stockholders of record, including holders of Series A preferred stock on an as-converted basis, as of the close of business on October 24, 2022. On January 20, 2023, the Special Dividend of $3,916.9 million was paid.

Common Stock Repurchase Program

On December 11, 2024, the Board authorized a share repurchase program of up to $2.0 billion of our common stock. The share repurchase program could include open market repurchases, accelerated share repurchase programs, tender offers, block trades, potential privately negotiated transactions, or trading plans in compliance with the federal securities laws. Subsequent to the Board authorization, during the fourth quarter of fiscal 2024, we repurchased an aggregate of 4.1 million shares of our common stock for a total of $82.5 million pursuant to such share repurchase authorization. We did not repurchase any shares of our common stock during fiscal 2023 and fiscal 2022.

Liquidity and Factors Affecting Liquidity

Based on current operating trends, we believe that we have significant sources of cash to meet our liquidity needs for the next 12 months and for the foreseeable future, including cash on hand, cash flows from operating activities and other sources of liquidity, including the ABL Facility. We estimate our liquidity needs over the next 12 months to be approximately $5.5 billion, which includes anticipated requirements for incremental working capital, capital expenditures, pension obligations, interest payments, quarterly dividends on Class A common stock, common stock repurchases, operating leases and finance leases. In addition, we may enter into refinancing and sale leaseback transactions from time to time. We believe we have adequate cash flow to continue to maintain our current debt ratings and to respond effectively to competitive conditions.

The table below presents our material cash requirements as of February 22, 2025 (in millions):

[[GREPCENT_TABLE]]
[["","","Payments Due Per Fiscal Year (1)"],["","","Total","","2025","","2026-2027","","2028-2029","","Thereafter"],["Long-term debt (2)","","$","7,452.4","","","$","0.6","","","$","4,416.7","","","$","2,521.9","","","$","513.2"],["Estimated interest on long-term debt (3)","","1,297.5","","","389.1","","","604.3","","","264.0","","","40.1"],["Operating leases (4)","","8,878.5","","","1,010.6","","","2,011.4","","","1,661.7","","","4,194.8"],["Finance leases (4)","","623.1","","","81.3","","","145.7","","","109.4","","","286.7"],["Other obligations (5)","","1,780.3","","","397.3","","","503.0","","","234.5","","","645.5"],["Purchase obligations (6)","","481.9","","","254.0","","","148.4","","","37.4","","","42.1"],["Total contractual obligations","","$","20,513.7","","","$","2,132.9","","","$","7,829.5","","","$","4,828.9","","","$","5,722.4"]]
[[/GREPCENT_TABLE]]

(1) The cash requirements table excludes funding of pension and other postretirement benefit obligations, which totaled $91.3 million in fiscal 2024 and is expected to total approximately $57 million in fiscal 2025. This table also excludes recurring contributions under various multiemployer pension plans, which totaled $547.7 million in fiscal 2024 and is expected to total approximately $560 million in fiscal 2025.

(2) Long-term debt amounts exclude any debt discounts and deferred financing costs. See "Part II—Item 8. Financial Statements and Supplementary Data—Note 6" for additional information.

(3) Amounts include contractual interest payments using the stated fixed interest rate or the variable interest rate in effect as of February 22, 2025. See "Part II—Item 8. Financial Statements and Supplementary Data—Note 6" for additional information.

(4) Represents the minimum rents payable under operating and finance leases, excluding common area maintenance, insurance or tax payments, for which we are obligated.

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(5) Consists of self-insurance liabilities, which have not been reduced by insurance-related receivables, as well as payment obligations related to the Combined Plan. The table excludes the unfunded pension and postretirement benefit obligation of $170.3 million. The potential settlement payments related to unrecognized tax benefits have been excluded from the contractual obligations table because a reasonably reliable estimate of the timing of future tax settlements cannot be determined. Also excludes deferred tax liabilities and certain other deferred liabilities that will not be settled in cash.

(6) Purchase obligations include various obligations that have specified purchase commitments. As of February 22, 2025, future purchase obligations primarily relate to energy, fixed asset, information technology and marketing commitments, including fixed price contracts. In addition, not included in the contractual obligations table are supply contracts to purchase product for resale to consumers which are typically of a short-term nature with limited or no purchase commitments. We also enter into supply contracts which typically include either volume commitments or fixed expiration dates, termination provisions and other customary contractual considerations. The supply contracts that are cancelable have not been included above.

Multiemployer Pension Plans

We currently contribute to 27 multiemployer plans which provide retirement benefits to participants based on their service to contributing employers. The benefits are paid from assets held in trust for that purpose and the respective plan trustees are responsible for determining the level of benefits to be provided to participants, the management of the plan assets and plan administration. We continue to monitor any potential exposure to underfunded multiemployer plans for our associates who are beneficiaries of these plans.

The American Rescue Plan Act ("ARP Act") establishes a special financial assistance program for financially troubled multiemployer pension plans. Under the ARP Act, eligible multiemployer plans can apply to receive a one-time cash payment in the amount projected by the PBGC to pay pension benefits through the plan year ending 2051. The payment received by the multiemployer plan under this special financial assistance program would not be considered a loan and would not need to be paid back. Any financial assistance received by the multiemployer plan would need to be segregated from the other assets of the multiemployer plans and invested in investment grade bonds or other investments permitted by the PBGC.

The underfunding of any of these plans to which we contribute are not our liability and though we are not obligated nor the guarantor for any of the underfunding, we have estimated, based on the ratio of our contributions to the total of all contributions to these plans, our allocable share of the underfunding (the amount by which the actuarial determined plan liabilities exceed the value of the plan assets) of these multiemployer plans to which we contribute to be approximately $4.9 billion. Of the 27 multiemployer plans to which we contribute, 15 plans are classified as "Critical" or "Critical and Declining" and eligible for relief under the special financial assistance program through the ARP Act. As of February 22, 2025, four of these 15 plans have received special financial assistance funds, reducing our estimated $4.9 billion allocable share of underfunding to approximately $3.6 billion. The remaining 11 plans have applied for special financial assistance and though the amounts each plan could receive will vary, we currently estimate that these 11 plans represent over 85% of our remaining $3.6 billion allocable share of underfunding. We expect the special financial assistance program under these regulations to provide the funding for these plans to remain solvent for at least the next 25 to 30 years and continue to provide benefits to our associates who are beneficiaries of these multiemployer plans.

We will continue to make our contributions based on collective bargaining agreements for each of the multiemployer plans to which we contribute. Our contributions to multiemployer plans were $547.7 million, $545.5 million and $546.5 million during fiscal 2024, fiscal 2023 and fiscal 2022, respectively, and we expect to contribute approximately $560 million in fiscal 2025. Refer to "Part I—Item 1A. Risk Factors" and "Part II—Item 8. Financial Statements and Supplementary Data—Note 11" for additional information.

Guarantees

We are party to a variety of contractual agreements pursuant to which we may be obligated to indemnify the other party for certain matters. These contracts primarily relate to our commercial contracts, operating leases and other real estate contracts, trademarks, intellectual property, financial agreements and various other agreements. Under

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these agreements, we may provide certain routine indemnifications relating to representations and warranties (for example, ownership of assets, environmental or tax indemnifications) or personal injury matters. The terms of these indemnifications range in duration and may not be explicitly defined. We believe that if we were to incur a loss in any of these matters, the loss would not have a material effect on our financial statements.

We are liable for certain operating leases that were assigned to third parties. If any of these third parties fail to perform their obligations under the leases, we could be responsible for the lease obligation. Because of the wide dispersion among third parties and the variety of remedies available, we believe that if an assignee became insolvent it would not have a material effect on our financial condition, results of operations or cash flows.

In the ordinary course of business, we enter into various supply contracts to purchase products for resale and purchase and service contracts for fixed asset and information technology commitments. We have also entered into fixed price contracts to purchase electricity and natural gas for a portion of our energy needs. These contracts typically include volume commitments or fixed expiration dates, termination provisions and other standard contractual considerations.

Letters of Credit

We had letters of credit of $27.4 million outstanding as of February 22, 2025. The letters of credit are maintained primarily to support our performance, payment, deposit or surety obligations. We typically pay bank fees of 1.25% plus a fronting fee of 0.125% on the face amount of the letters of credit.

NEW ACCOUNTING POLICIES

See "Part II—Item 8. Financial Statements and Supplementary Data—Note 1" for new accounting pronouncements.

CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

We have chosen accounting policies that we believe are appropriate to report accurately and fairly our operating results and financial position, and we apply those accounting policies in a fair and consistent manner. See "Part II—Item 8. Financial Statements and Supplementary Data—Note 1" for a discussion of our significant accounting policies.

Management believes the following critical accounting policies reflect its more subjective or complex judgments and estimates used in the preparation of our consolidated financial statements.

Self-Insurance Liabilities

We are primarily self-insured for workers' compensation, property, automobile and general liability. The self-insurance liability is undiscounted and determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported. We have established stop-loss amounts that limit our further exposure after a claim reaches the designated stop-loss threshold. In determining our self-insurance liabilities, we perform a continuing review of our overall position and reserving techniques. Since recorded amounts are based on estimates, the ultimate cost of all incurred claims and related expenses may be more or less than the recorded liabilities.

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Any actuarial projection of self-insured losses is subject to a high degree of variability. Litigation trends, legal interpretations, benefit level changes, claim settlement patterns and similar factors influenced historical development trends that were used to determine the current year expense and, therefore, contributed to the variability in the annual expense. However, these factors are not direct inputs into the actuarial projection, and thus their individual impact cannot be quantified.

Contingencies

We are involved in a number of legal proceedings and certain regulatory matters. We record a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. We also perform an assessment of the materiality of loss contingencies where a loss is either reasonably possible or it is reasonably possible that an estimated liability could materially change. If a loss or change in the estimated liability has at least a reasonable possibility of occurring and the impact on the financial statements would be material, we provide disclosure of the nature of the uncertainty and estimate of possible loss or range of loss to the extent such estimate can be made. We review all contingencies at least quarterly to determine whether the likelihood of loss has changed and whether a reasonable estimate of the loss can be made. The assessment of the outcome of litigation can be very difficult to predict as it is subject to legal processes that are highly complex, subject to many factors, including those that are not within our control, and highly dependent on individual facts and circumstances. While management currently believes that the estimated liabilities currently recorded are reasonable, it remains possible that differences in actual outcomes or changes in management's evaluation or predictions could arise that could be material to our financial condition, results of operations or cash flows. In addition, although we are not able to predict the outcome or reasonably estimate a range of possible losses in certain matters described in Part II—Item 8. Financial Statements and Supplementary Data—Note 13" and have not recorded an associated accrual related to these matters, an adverse judgment or negotiated settlement in these matters could be material to our financial condition, results of operations or cash flows.