Albertsons 2007 Annual Report Download - page 17

The obl
ig
at
i
on to prov
i
de trans
i
t
i
on support serv
i
ces to the purchasers o
f
the non-core supermarke
t
o
p
erat
i
ons o
f
Albertsons could adversel
y
a
ff
ect our
fi
nanc
i
al
p
er
f
ormance
.
I
n connect
i
on w
i
t
h
t
h
e Acqu
i
s
i
t
i
on, we entere
di
nto a Trans
i
t
i
on Serv
i
ces Agreement (“TSA”) w
i
t
h
t
h
e purc
h
ase
r
of
t
h
e non-core supermar
k
et
b
us
i
ness o
f
A
lb
ertsons. T
h
at a
g
reement
i
s structure
d
to prov
id
euspa
y
ments
f
ro
m
the purchaser to cover the historical costs of providin
g
support services to the operations. There is no assuranc
e
t
h
at t
h
e payments w
ill b
esu
ffi
c
i
ent to cover our costs o
f
prov
idi
ng t
h
e serv
i
ces or t
h
at we w
ill b
ea
bl
etore
d
uc
e
o
ur costs as
f
ast as t
h
ose pa
y
ments ma
yd
ecrease
d
ur
i
n
g
t
h
e terms o
f
t
h
e TSA. Our mana
g
ement ma
yh
ave
i
t
s
a
ttention diverted while tr
y
in
g
to provide the services required b
y
the TSA and the TSA ma
y
otherwise limit ou
r
abili
ty to ac
hi
eve t
h
e synerg
i
es an
d
ot
h
er cost sav
i
ngs ant
i
c
i
pate
di
nt
h
e Acqu
i
s
i
t
i
on. D
i
sputes
i
n connect
i
on w
i
t
h
t
h
e TSA cou
ld l
ea
d
to re
d
uct
i
ons
i
nt
h
epa
y
ments
d
ue to us un
d
er t
h
ea
g
reement or unant
i
c
i
pate
d
costs t
h
at cou
ld
a
dversel
y
affect our financial performance
.
W
e have a lower debt covera
g
e rat
i
o as a result o
f
the Acqu
i
s
i
t
i
on, wh
i
ch w
i
ll decrease our bus
i
nes
s
f
lex
i
b
i
l
i
ty and
i
ncrease our borrow
i
ng costs.
As a resu
l
to
f
t
h
e Acqu
i
s
i
t
i
on we
h
ave a s
i
gn
ifi
cant
l
y
l
ower
d
e
b
t coverage rat
i
ot
h
an
b
e
f
ore t
h
e Acqu
i
s
i
t
i
on. T
he
l
ower
d
e
b
t covera
g
e, as compare
d
to t
h
at w
hi
c
hh
as ex
i
ste
d
on a
hi
stor
i
ca
lb
as
i
s, w
ill h
ave t
h
ee
ff
ect, amon
g
o
ther thin
g
s, of reducin
g
our flexibilit
y
to respond to chan
g
in
g
business and economic conditions and increasin
g
b
orrow
i
ng costs. Our
d
e
b
tno
l
onger
h
as an
i
nvestment-gra
d
e rat
i
ng.
Escalat
i
ng costs o
f
prov
i
d
i
ng employee bene
fi
ts and other labor relat
i
ons
i
ssues may lead to labor d
i
spute
s
and disruption of our businesses.
Potent
i
a
l
wor
kdi
srupt
i
ons
f
rom
l
a
b
or
di
sputes ma
y
a
ff
ect sa
l
es at our stores as we
ll
as our a
bili
t
y
to
di
str
ib
ute
products. A si
g
nificant number of our emplo
y
ees are sub
j
ect to collective bar
g
ainin
g
a
g
reements, and a ma
j
orit
y
of
t
h
ose emp
l
oyees are part
i
c
i
pants
i
nmu
l
t
i
-emp
l
oyer
h
ea
l
t
h
an
d
pens
i
on p
l
ans. T
h
e costs o
f
prov
idi
ng
b
ene
fi
ts
t
h
rou
gh
suc
h
p
l
ans
h
ave esca
l
ate
d
rap
idly i
n recent
y
ears. Base
d
upon
i
n
f
ormat
i
on ava
il
a
bl
e to us, we
b
e
li
eve t
h
a
t
certain of these multi-emplo
y
er plans are underfunded. The underfundin
g
was caused b
y
the cost of benefit
s
excee
di
ng contr
ib
ut
i
ons an
di
nvestment returns. Contr
ib
ut
i
ons to t
h
ese p
l
ans may cont
i
nue to
i
ncrease an
d
t
he
b
ene
fi
t
l
eve
l
san
d
ot
h
er
i
ssues ma
y
cont
i
nue to create co
ll
ect
i
ve
b
ar
g
a
i
n
i
n
g
c
h
a
ll
en
g
es, w
hi
c
h
cou
ld i
ncrease our
costs and materiall
y
affect our financial condition and results of operations
.
Approximatel
y
117,000 of the Compan
y
’s emplo
y
ees are covered b
y
collective bar
g
ainin
g
a
g
reements. Ther
e
can
b
e no assurance t
h
at t
h
e Company w
ill b
ea
bl
e to negot
i
ate t
h
e terms o
f
any exp
i
r
i
ng or exp
i
re
d
agreement
i
n
a
manner accepta
bl
etot
h
e Compan
y
.T
h
ere
f
ore, potent
i
a
l
wor
kdi
srupt
i
ons
f
rom
l
a
b
or
di
sputes cou
ld
resu
l
t
,
which ma
y
affect sales and earnin
g
s. If we are unable to control health care, pension and wa
g
e costs, or
g
ai
n
o
perat
i
ona
lfl
ex
ibili
ty un
d
er our co
ll
ect
i
ve
b
arga
i
n
i
ng agreements, we may exper
i
ence
i
ncrease
d
operat
i
ng cost
s
a
n
d
an a
d
verse
i
mpact on
f
uture resu
l
ts o
f
operat
i
ons.
I
f the number or severity of claims for which we are self-insured increases, or we are required to accrue or
p
ay add
i
t
i
onal amounts because the cla
i
ms prove to be more severe than our or
igi
nal assessments, our
operat
i
ng results could be adversely a
ff
ected.
We use a com
bi
nat
i
on o
fi
nsurance an
d
se
lf
-
i
nsurance to prov
id
e
f
or potent
i
a
lli
a
bili
t
i
es
f
or wor
k
ers
’
compensat
i
on, automo
bil
ean
dg
enera
lli
a
bili
t
y
, propert
yi
nsurance an
d
emp
l
o
y
ee
h
ea
l
t
h
care
b
ene
fi
ts. W
e
estimate the liabilities associated with the risks retained b
y
us, in part, b
y
considerin
g
historical claims
exper
i
ence,
d
emograp
hi
can
d
sever
i
ty
f
actors an
d
ot
h
er actuar
i
a
l
assumpt
i
ons w
hi
c
h
,
b
yt
h
e
i
r nature, are su
bj
ect
to a
high d
e
g
ree o
f
var
i
a
bili
t
y
.An
y
actuar
i
a
l
pro
j
ect
i
on o
fl
osses concern
i
n
g
wor
k
ers’ compensat
i
on an
dg
enera
l
a
nd automobile liabilit
y
is sub
j
ect to a hi
g
hde
g
ree of variabilit
y
. Amon
g
the causes of this variabilit
y
ar
e
u
npre
di
cta
bl
e externa
lf
actors a
ff
ect
i
ng
f
uture
i
n
fl
at
i
on rates,
di
scount rates,
li
t
i
gat
i
on tren
d
s,
l
ega
l
i
nterpretat
i
ons,
b
ene
fi
t
l
eve
l
c
h
an
g
es an
d
c
l
a
i
m sett
l
ement patterns
.
11