Albertsons 2011 Annual Report Download - page 17

Company sells or manner in which the Company operates its businesses. Any or all of such requirements may
adversely affect the Company’s financial condition and results of operations.
Insurance claims
The Company uses a combination of insurance and self-insurance to provide for potential liabilities for
workers’ compensation, automobile and general liability, property insurance and employee healthcare benefits.
The Company estimates the liabilities associated with the risks retained by the Company, in part, by
considering historical claims experience, demographic and severity factors and other actuarial assumptions
which, by their nature, are subject to a degree of variability. Any actuarial projection of losses concerning
workers’ compensation and general and automobile liability is subject to a degree of variability. Among the
causes of this variability are unpredictable external factors affecting future inflation rates, discount rates,
litigation trends, legal interpretations, benefit level changes and actual claim settlement patterns.
Some of the many sources of uncertainty in the Company’s reserve estimates include changes in benefit levels,
medical fee schedules, medical utilization guidelines, vocation rehabilitation and apportionment. If the number
or severity of claims for which the Company is self-insured increases, or the Company is required to accrue or
pay additional amounts because the claims prove to be more severe than the Company’s original assessments,
the Company’s financial condition and results of operations may be adversely affected.
Litigation
The Company’s businesses are subject to the risk of litigation by employees, consumers, suppliers,
stockholders or others through private actions, class actions, administrative proceedings, regulatory actions or
other litigation. The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult
to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate
amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial
periods of time. The cost to defend future litigation may be significant. There may also be adverse publicity
associated with litigation that may decrease consumer confidence in the Company’s businesses, regardless of
whether the allegations are valid or whether the Company is ultimately found liable. As a result, litigation may
adversely affect the Company’s financial condition and results of operations.
Information technology systems
The Company has complex information technology systems that are important to the operation of its
businesses. The Company may encounter difficulties in developing new systems or maintaining and upgrading
existing systems. Such difficulties may lead to significant expenses or losses due to disruption in business
operations and, as a result, may adversely affect the Company’s financial condition and results of operations.
Additionally, data theft, information espionage or other criminal activity directed at the grocery or drug store
industry, the transportation industry, or computer or communications systems may adversely affect the Company’s
businesses by causing the Company to implement costly security measures in recognition of actual or potential
threats, by requiring the Company to expend significant time and expense developing, maintaining or upgrading its
information technology systems and by causing the Company to incur significant costs to reimburse third parties
for damages. Such activities may also adversely affect the Company’s financial condition and results of operations
by reducing consumer confidence in the marketplace and by modifying consumer spending habits.
Weather and natural disasters
Severe weather conditions such as hurricanes, earthquakes or tornadoes, as well as other natural disasters, in
areas in which the Company has stores or distribution facilities or from which the Company obtains products
may cause physical damage to the Company’s properties, closure of one or more of the Company’s stores or
distribution facilities, lack of an adequate work force in a market, temporary disruption in the supply of
products, disruption in the transport of goods, delays in the delivery of goods to the Company’s distribution
centers or stores and a reduction in the availability of products in the Company’s stores. In addition, adverse
climate conditions and adverse weather patterns, such as drought or flood, that impact growing conditions and
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