Albertsons 2014 Annual Report Download - page 57

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The Company’s funding policy for the defined benefit pension plans is to contribute the minimum contribution
amount required under ERISA and the Pension Protection Act of 2006 as determined by the Company’s external
actuarial consultant. At the Company’s discretion, additional funds may be contributed to the pension plan. The
Company may accelerate contributions or undertake contributions in excess of the minimum requirements from
time to time subject to the availability of cash in excess of operating and financing needs or other factors as may
be applicable. The Company assesses the relative attractiveness of the use of cash to accelerate contributions
considering such factors as expected return on assets, discount rates, cost of debt, reducing or eliminating
required PBGC variable rate premiums or in order to achieve exemption from participant notices of
underfunding.
The Company and AB Acquisition entered into a binding term sheet with the PBGC relating to issues regarding
the effect of the NAI Banner Sale on certain SUPERVALU retirement plans. The agreement requires that the
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
contributions to the SUPERVALU Retirement Plan in excess of the minimum required contributions of $25 by
the end of fiscal 2015, an additional $25 by the end of fiscal 2016 and an additional $50 by the end of fiscal 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 payments.
OFF-BALANCE SHEET ARRANGEMENTS
Guarantees
The Company has outstanding guarantees related to certain leases, fixture financing loans and other debt
obligations of various retailers as of February 22, 2014. 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 16 years, with a weighted
average remaining term of approximately nine 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 22, 2014, the maximum amount of undiscounted
payments the Company would be required to make in the event of default of all guarantees was $78 and
represented $57 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 certain debt obligations of American Stores Company (“ASC”) on ASC’s $467
notes outstanding. In connection with the NAI Banner Sale, AB Acquisition assumed the ASC debt but the
existing guarantee as provided by the Company was not released and the Company continues as guarantor.
Concurrently with the NAI Banner Sale, AB Acquisition entered into an agreement with the Company to
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