Albertsons 2009 Annual Report Download - page 73

NOTE 14—COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS
The Company has guaranteed certain leases, fixture financing loans and other debt obligations of various
retailers as of February 28, 2009. These guarantees were generally made to support the business growth of
independent retail customers. The guarantees are generally for the entire terms of the leases or other debt
obligations with remaining terms that range from less than one year to 21 years, with a weighted average
remaining term of approximately 10 years. For each guarantee issued, if the independent retail customer
defaults on a payment, the Company would be required to make payments under its guarantee. Generally, the
guarantees are secured by indemnification agreements or personal guarantees of the independent retail
customer. The Company reviews performance risk related to its guarantees of independent retail customers
based on internal measures of credit performance. As of February 28, 2009, the maximum amount of
undiscounted payments the Company would be required to make in the event of default of all guarantees was
approximately $168 and represented approximately $110 on a discounted basis. Based on the indemnification
agreements, personal guarantees and results of the reviews of performance risk, the Company believes the
likelihood that it will be required to assume a material amount of these obligations is remote. Accordingly, no
amount has been recorded in the Consolidated Balance Sheets for these contingent obligations under the
Company’s guarantee arrangements.
The Company is contingently liable for leases that have been assigned to various third parties in connection
with facility closings and dispositions. The Company could be required to satisfy the obligations under the
leases if any of the assignees are unable to fulfill their lease obligations. Due to the wide distribution of the
Company’s assignments among third parties, and various other remedies available, the Company believes the
likelihood that it will be required to assume a material amount of these obligations is remote.
In the ordinary course of business, the Company enters into supply contracts to purchase products for resale.
These contracts typically include either volume commitments or fixed expiration dates, termination provisions
and other standard contractual considerations. As of February 28, 2009, the Company had approximately
$1,948 of non-cancelable future purchase obligations primarily related to supply contracts.
The Company is a party to a variety of contractual agreements under which the Company may be obligated to
indemnify the other party for certain matters, which indemnities may be secured by operation of law or
otherwise, in the ordinary course of business. These contracts primarily relate to the Company’s commercial
contracts, operating leases and other real estate contracts, financial agreements, agreements to provide services
to the Company and agreements to indemnify officers, directors and employees in the performance of their
work. While the Company’s aggregate indemnification obligation could result in a material liability, the
Company is aware of no current matter that it expects to result in a material liability.
Legal Proceedings
The Company is subject to various lawsuits, claims and other legal matters that arise in the ordinary course of
conducting business, none of which, in management’s opinion, is expected to have a material adverse impact
on the Company’s financial condition, results of operations or cash flows.
In April 2000, a class action complaint was filed against Albertsons, as well as American Stores Company,
American Drug Stores, Inc., Sav-on Drug Stores, Inc. (“Sav-on Drug Stores”) and Lucky Stores, Inc. (“Lucky
Stores”), wholly-owned subsidiaries of Albertsons, in the Superior Court for the County of Los Angeles,
California (Gardner, et al. v. American Stores Company, et al.) by assistant managers seeking recovery of
overtime based on the plaintiffs’ allegation that they were improperly classified as exempt under California
law. In May 2001, the Court certified a class with respect to Sav-on Drug Stores assistant managers. A case
with very similar claims, involving the Sav-on Drug Stores assistant managers and operating managers, was
also filed in April 2000 against Sav-on Drug Stores in the Superior Court for the County of Los Angeles,
California (Rocher, Dahlin, et al. v. Sav-on Drug Stores, Inc.), and was certified as a class action in June 2001
with respect to assistant managers and operating managers. The two cases were consolidated in December
2001. New Albertsons was added as a named defendant in November 2006. Plaintiffs seek overtime wages,
meal and rest break penalties, other statutory penalties, punitive damages, interest, injunctive relief and the
attorneys’ fees and costs. The parties have entered into a memorandum of understanding regarding settlement
of this matter and are currently negotiating terms of a preliminary settlement agreement. Although this lawsuit
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