Albertsons 2013 Annual Report Download - page 48

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 23, 2013, the maximum amount of undiscounted payments the Company would be
required to make in the event of default of all guarantees was $84 and represented $60 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.
The Company has guaranteed the obligations of American Stores Company (“ASC”) under the ASC indenture
which total $467 notes outstanding. As part of the NAI Banner Sale, AB Acquisition assumed the ASC debt but
the existing guarantee as provided to the ASC bondholders will not be released and the Company continues as
guarantor. Concurrently with the close of the NAI Banner Sale, AB Acquisition, entered into an agreement with
the Company to indemnify the Company for any consideration used to satisfy the guarantee by depositing $467
into an escrow account, which gives the Company first priority interest and the trustee of the ASC bondholders
second priority interest in the collateral balance.
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
not aware of any matters that are expected to result in a material liability.
Multiemployer Plans
The Company contributes to various multiemployer pension plans under collective bargaining agreements,
primarily defined benefit pension plans. These multiemployer plans generally provide retirement benefits to
participants based on their service to contributing employers. The benefits are paid from assets held in trust for
that purpose. Plan trustees typically are responsible for determining the level of benefits to be provided to
participants as well as the investment of the assets and plan administration. Trustees are appointed in equal
number by employers and unions parties to the collective bargaining agreement.
Expense is recognized in connection with these plans as contributions are funded, in accordance with generally
accepted accounting principles. The Company made contributions to these plans, and recognized expense, of
$38, $38 and $37 in fiscal 2013, 2012 and 2011, respectively. Company contributions to these plans could
increase in the near term. However, the amount of any increase or decrease in contributions will depend on a
variety of factors, including the results of the Company’s collective bargaining efforts, investment returns on the
assets held in the plans, actions taken by the trustees who manage the plans and requirements under the Pension
Protection Act and Section 412(e) of the Internal Revenue Code. Furthermore, if the Company were to
significantly reduce contributions, exit certain markets or otherwise cease making contributions to these plans, it
could trigger a partial or complete withdrawal that would require the Company to fund its proportionate share of
a plan’s unfunded vested benefits.
Based on the assessment of the most recent information available, the Company believes that most of the
multiemployer plans to which it contributes are underfunded. The Company is only one of a number of
employers contributing to these plans and the underfunding is not a direct obligation or liability of the Company.
46