Albertsons 2012 Annual Report Download - page 19

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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’s 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.
Legal Proceedings
The Company’s businesses are subject to the risk of legal proceedings by employees, consumers, suppliers,
stockholders, governmental agencies 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 efficient operation of the Company’s businesses is dependent on computer hardware and software systems.
Information systems are vulnerable to security breach by computer hackers and cyber terrorists. The Company
relies on industry accepted security measures and technology to securely maintain confidential and proprietary
information maintained on the Company’s information systems, and continues to invest in maintaining and
upgrading the systems and applications to ensure risk is controlled. However, these measures and technology
may not adequately prevent security breaches. In addition, the unavailability of the information systems or failure
of these systems to perform as anticipated for any reason could disrupt the Company’s business and could result
in decreased performance and increased overhead costs, causing the Company’s business and results of
operations to suffer.
Additionally, the Company’s businesses involve the receipt and storage of personal information about the
Company’s customers. 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 resources developing, maintaining or
upgrading technology systems and by causing the Company to incur significant costs to reimburse third parties
for damages. If the Company experiences a data security breach, it could be exposed to governmental
enforcement actions and private litigation. The Company may also lose credibility with its customers, resulting in
lost future sales.
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 the
quantity and quality of crops yielded by food producers may adversely affect the availability or cost of certain
products within the grocery supply chain. Any of these factors may disrupt the Company’s businesses and
adversely affect the Company’s financial condition and results of operations.
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