Albertsons 2014 Annual Report Download - page 20

Company will not pay any dividends to its stockholders at any time for the period beginning on January 9, 2013,
and ending on the earliest of (i) March 21, 2018, (ii) the date on which the total of all contributions made to the
SUPERVALU Retirement Plan on or after the closing date of the NAI Banner Sale is at least $450 and (iii) the
date on which SUPERVALU’s unsecured credit rating is BB+ from Standard & Poor’s or Ba1 from Moody’s
(such earliest date, the end of the “PBGC Protection Period”). SUPERVALU has also agreed to make certain
contributions to the SUPERVALU Retirement Plan in excess of the minimum required contributions at or before
the ends of fiscal years 2015—2017 (where such fiscal years end during the PBGC Protection Period), and AB
Acquisition has agreed to provide a guarantee to the PBGC for such excess payments. The Company is in
negotiations with the PBGC and AB Acquisition with respect to a settlement agreement based on the binding
term sheet.
The Company’s defined benefit pension plan was closed for eligibility and frozen for credited benefit service for
the vast majority of participants effective December 2007. In December 2012, that plan was frozen as to credited
service and earnings for the vast majority of participants, although vesting service may continue to accrue.
Effective March 21, 2013, the plan was frozen for all participants as to credited service and earnings, although
vesting service may continue to accrue.
The projected benefit obligations of the Company sponsored plans exceed the fair value of those plans’
assets. Required contributions have increased in recent years due to a combination of lower pension discount
rates and the effect of the Pension Protection Act of 2006. The SUPERVALU Retirement Plan remaining with
the Company is frozen as to benefit service and earnings for all participants, and participants who were employed
by the Company or NAI on March 21, 2013 became vested in their pension plan benefit under the Company’s
largest retirement plan. Service at the Company (but not service at NAI) after that date will count toward
eligibility for early retirement if applicable under the pension plan formula.
As a result of the NAI Banner Sale and the retention of the Company’s defined benefit pension plan, the
Company has significantly increased minimum pension contributions as a percentage of its cash flows from
continuing operations. Also, since the number of employees of the continuing operations has decreased, certain
administrative and other benefits costs may increase on a per employee level. Additionally, if the Company is
unable to control healthcare benefits and pension costs, the Company may experience increased operating costs,
which may adversely affect the Company’s financial condition and results of operations.
In addition, the Company participates in various multiemployer health and pension plans for a majority of its union-
affiliated employees, and the Company is required to make contributions to these plans in amounts established
under collective bargaining agreements. The costs of providing benefits through such plans have increased in recent
years. The amount of any increase or decrease in the Company’s required contributions to these multiemployer
plans will depend upon many factors, including the outcome of collective bargaining, actions taken by trustees who
manage the plans, government regulations, the actual return on assets held in the plans and the potential payment of
a withdrawal liability if the Company chooses to exit a market. Withdrawal liabilities could be material, and
potential exposure to withdrawal liabilities may influence business decisions and could cause the Company to forgo
business opportunities. Increases in the costs of benefits under these plans coupled with adverse developments in the
stock and capital markets that have reduced the return on plan assets have caused most multiemployer pension plans
in which the Company participates to be underfunded. Many of these plans have required rehabilitation plans or
funding improvement plans, and the Company can give no assurances of the extent to which a rehabilitation plan or
a funding improvement plan will improve the funded status of the plan. The Company expects that the unfunded
liabilities of these plans will result in increased future payments by the Company and the other participating
employers over the next few years. Underfunded multiemployer pension plans may, in certain situations, impose a
surcharge requiring additional pension contributions. The Company’s risk of such increased payments may be
greater if any of the participating employers in these underfunded plans withdraws from the plan due to insolvency
and is not able to contribute an amount sufficient to fund the unfunded liabilities associated with its participants in
the plan. A significant increase to funding requirements could adversely affect the Company’s financial condition,
results of operations or cash flows.
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