Albertsons 2016 Annual Report Download - page 101

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reasonably estimate a range of possible losses because the payment card brands’ investigation is ongoing and the payment card
brands have not alleged what payment cards they consider to have been compromised, what data from those cards they
consider to have been compromised, or the amount of their and/or their issuers' claimed losses. The Company does not
currently believe that the amount, if any, paid on any payment card brand claims that might be asserted would be material to the
Company’s consolidated results of operations, cash flows or financial condition. In addition, one payment card brand has
placed us in a "probationary status" for a period of two years following our re-validation as PCI-DSS compliant, during which
time our failure to comply with the probationary requirements set forth by the payment card brand could result in the
imposition of further conditions, including but not limited to disqualification from the payment system. The Company does not
anticipate material costs to comply with the probationary requirements and is continuing to engage with the payment card
brand about the nature of any final probationary requirements.
On October 23, 2015, the Company received a letter from a multistate group of Attorneys General seeking information
regarding the intrusions. The Company is cooperating with the request. To date, no claims have been asserted against the
Company related to this inquiry. If any claims are asserted, the Company expects to dispute those claims.
As discussed in more detail below in this Note 14 under Legal Proceedings, four class action complaints related to the
intrusions have been filed against the Company and consolidated into one action and are currently pending. As indicated in this
Note 14, the Company believes that the likelihood of a material loss from the four class actions is remote. It is possible that
other similar complaints by consumers, banks or others may be filed against the Company in connection with the intrusions.
Insurance Coverage and Expenses - The Company had $50 of cyber threat insurance above a per incident deductible of $1 at
the time of the intrusions, which it believes should mitigate the financial effect of these intrusions, including claims made or
that might be made against the Company based on these intrusions. The Company now maintains $90 of cyber threat insurance
above a per incident deductible of approximately $3, in each case subject to certain sublimits. In fiscal 2016, the Company
recorded $2 of intrusion related costs, and received and anticipated insurance proceeds of $2. These amounts were recorded
within Selling and administrative expenses in the Consolidated Statements of Operations. Anticipated insurance proceeds
recorded for the insurance receivable were based on the Company’s insurance recovery assessment. This assessment included
the review of applicable insurance policies, correspondence with the insurance carriers and analysis by legal counsel.
Other Contractual Commitments
In the ordinary course of business, the Company enters into supply contracts to purchase products for resale and purchase, and
service contracts for fixed asset and information technology commitments. These contracts typically include either volume
commitments or fixed expiration dates, termination provisions and other standard contractual considerations. As of
February 27, 2016, the Company had approximately $291 of non-cancelable future purchase obligations.
Legal Proceedings
The Company is subject to various lawsuits, claims and other legal matters that arise in the ordinary course of conducting
business. In the opinion of management, based upon currently-available facts, the likelihood that the ultimate outcome of any
lawsuits, claims and other proceedings will have a material adverse effect on the overall results of the Company’s operations,
its cash flows or its financial position is remote.
In September 2008, a class action complaint was filed against the Company, as well as International Outsourcing Services, LLC
(“IOS”); Inmar, Inc.; Carolina Manufacturer’s Services, Inc.; Carolina Coupon Clearing, Inc. and Carolina Services in the
United States District Court in the Eastern District of Wisconsin. The plaintiffs in the case are a consumer goods manufacturer,
a grocery co-operative and a retailer marketing services company that allege on behalf of a purported class that the Company
and the other defendants (i) conspired to restrict the markets for coupon processing services under the Sherman Act and
(ii) were part of an illegal enterprise to defraud the plaintiffs under the Federal Racketeer Influenced and Corrupt Organizations
Act. The plaintiffs seek monetary damages, attorneys’ fees and injunctive relief. The Company intends to vigorously defend
this lawsuit; however, all proceedings have been stayed in the case pending the result of the criminal prosecution of certain
former officers of IOS.
In December 2008, a class action complaint was filed in the United States District Court for the Western District of Wisconsin
against the Company alleging that a 2003 transaction between the Company and C&S Wholesale Grocers, Inc. (“C&S”) was a
conspiracy to restrain trade and allocate markets. In the 2003 transaction, the Company purchased certain assets of the Fleming
Corporation as part of Fleming Corporation’s bankruptcy proceedings and sold certain assets of the Company to C&S that were
located in New England. Since December 2008, three other retailers have filed similar complaints in other jurisdictions. The
cases were consolidated and are proceeding in the United States District Court in Minnesota. The complaints allege that the
conspiracy was concealed and continued through the use of non-compete and non-solicitation agreements and the closing down
of the distribution facilities that the Company and C&S purchased from each other. Plaintiffs are seeking monetary damages,