Albertsons 2015 Annual Report Download - page 93

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The Company has outstanding guarantees related to certain leases, fixture financing loans and other debt obligations of various
retailers as of February 28, 2015. 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 15 years, with a weighted average remaining term of approximately eight 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 customer obligations based on internal
measures of credit performance. As of February 28, 2015, the maximum amount of undiscounted payments the Company
would be required to make in the event of default of all guarantees was $69 and represented $54 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 is a party to a variety of contractual agreements under which it may be obligated to indemnify the other party for
certain matters in the ordinary course of business, which indemnities may be secured by operation of law or otherwise. These
agreements primarily relate to the Company’s commercial contracts, the TSA (as defined below), contracts entered into for the
purchase and sale of stock or assets, 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.
Following the sale of NAI, the Company remains contingently liable with respect to certain self-insurance commitments and
other guarantees as a result of parental guarantees issued by SUPERVALU INC. with respect to the obligations of NAI that
were incurred while NAI was a subsidiary of the Company. As of February 28, 2015, using actuarial estimates as of December
31, 2014, the total undiscounted amount of all such guarantees was estimated at $217 ($195 on a discounted basis). Based on
the expected settlement of the self-insurance claims that underlie the Company’s commitments, the Company believes that such
contingent liabilities will continue to decline. Subsequent to the sale of NAI, NAI collateralized most of these obligations with
letters of credit and surety bonds to numerous states. Because NAI remains a primary obligor on these self-insurance and other
obligations and has collateralized most of the self-insurance obligations for which the Company remains contingently liable,
the Company believes that 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 guarantees.
Information Technology Intrusions
Computer Network Intrusions - The Company announced during fiscal 2015 it had experienced separate criminal intrusions
into the portion of its computer network that processes payment card transactions for some of its owned and franchised retail
stores, including some of its associated stand-alone liquor stores. An investigation of those intrusions supported by third-party
data forensics experts is ongoing. The Company believes these criminal intrusions may have resulted in the collection of
account numbers, and in some cases also the expiration date, other numerical information and/or the cardholder’s name. Upon
recognition of each intrusion, the Company took immediate steps to secure the affected part of its network, and the Company
believes that it has eradicated the malware used in each intrusion. The Company notified the major payment card brands and
federal law enforcement authorities and is cooperating in their efforts to investigate these intrusions, identify those responsible
for the intrusions and determine whether any cardholder data was stolen by the intruder(s). The Company also notified several
state Attorneys General of the intrusions. As to both intrusions, given the continuing nature of the investigation, it is possible
that it will be determined that information was stolen from the Company during one or both of these intrusions or that time
frames, locations, at-risk data, and/or other facts will be identified in the future.
Some stores owned and operated by Albertson’s LLC and NAI experienced related criminal intrusions. The Company provides
information technology services to these Albertson’s LLC and NAI stores pursuant to the TSA, and the Company has been
working together with Albertson’s LLC and NAI to respond to the intrusions into their stores. The Company believes that any