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Albertsons Companies(ACI) - 2026 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1 - Condensed Consolidated Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for the 16-week period ended June 14, 2025, including balance sheets, income, cash flows, and equity statements with detailed notes Condensed Consolidated Balance Sheets Total assets decreased slightly to $26.47 billion as of June 14, 2025, primarily due to reduced cash, while total liabilities were $23.25 billion and equity declined to $3.22 billion Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 14, 2025 | February 22, 2025 | | :--- | :--- | :--- | | Total Assets | $26,469.8 | $26,755.7 | | Cash and cash equivalents | $151.0 | $293.6 | | Total current assets | $6,416.9 | $6,559.0 | | Total Liabilities | $23,245.5 | $23,369.8 | | Total current liabilities | $7,867.9 | $7,251.0 | | Long-term debt and finance lease obligations | $7,005.6 | $7,762.5 | | Total Stockholders' Equity | $3,224.3 | $3,385.9 | Condensed Consolidated Statements of Operations and Comprehensive Income Net sales increased to $24.88 billion for the 16 weeks ended June 14, 2025, while net income slightly decreased to $236.4 million, and diluted EPS remained flat at $0.41 Q1 2025 vs Q1 2024 Statement of Operations (in millions, except per share data) | Metric | 16 weeks ended June 14, 2025 | 16 weeks ended June 15, 2024 | | :--- | :--- | :--- | | Net sales and other revenue | $24,880.8 | $24,265.4 | | Gross margin | $6,738.3 | $6,738.9 | | Operating income | $449.3 | $459.6 | | Net income | $236.4 | $240.7 | | Diluted net income per Class A common share | $0.41 | $0.41 | Condensed Consolidated Statements of Cash Flows Net cash from operations decreased to $754.4 million, with significant cash used in investing ($474.1 million) and financing ($422.9 million), leading to a $142.6 million net decrease in cash Cash Flow Summary (in millions) | Cash Flow Activity | 16 weeks ended June 14, 2025 | 16 weeks ended June 15, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $754.4 | $960.9 | | Net cash used in investing activities | ($474.1) | ($538.0) | | Net cash used in financing activities | ($422.9) | ($320.8) | | Net (decrease) increase in cash | ($142.6) | $102.1 | - Significant financing activities in Q1 2025 included $314.8 million for treasury stock purchases and $85.7 million for dividend payments12 Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity decreased from $3.39 billion to $3.22 billion, primarily due to $314.8 million in stock repurchases and $85.7 million in dividends, partially offset by net income - The company repurchased 14,249,535 shares of common stock for $314.8 million during the quarter14 - Cash dividends of $0.15 per common share were declared, totaling $85.7 million14 Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, revenue disaggregation, debt, and legal contingencies, including pharmacy revenue growth, Kroger merger litigation, and ongoing False Claims Act, PBM, and Opioid lawsuits Disaggregated Revenues by Product Type (in millions) | Product Type | Q1 2025 Amount | Q1 2025 % of Total | Q1 2024 Amount | Q1 2024 % of Total | | :--- | :--- | :--- | :--- | :--- | | Non-perishables | $12,141.7 | 48.8% | $12,054.0 | 49.7% | | Fresh | $7,986.8 | 32.1% | $7,904.9 | 32.6% | | Pharmacy | $3,155.0 | 12.7% | $2,622.8 | 10.8% | | Fuel | $1,229.9 | 4.9% | $1,320.9 | 5.4% | | Other | $367.4 | 1.5% | $362.8 | 1.5% | - On December 10, 2024, the company terminated its merger agreement with Kroger and subsequently filed a lawsuit against Kroger for willful breach of the agreement, seeking damages and a $600 million termination fee6162 - The company is defending against multiple significant legal actions, including two False Claims Act cases, PBM litigation, and numerous Opioid-related lawsuits. Estimated liabilities have been recorded for some of these matters465356 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 performance, highlighting 2.8% identical sales growth, 25% digital sales surge, and loyalty program expansion, alongside a decline in Adjusted EBITDA to $1.11 billion due to strategic investments and sales mix shifts Q1 2025 Key Performance Indicators | Metric | Q1 2025 | Change (YoY) | | :--- | :--- | :--- | | Identical sales (ex-fuel) | 2.8% | +1.4 p.p. | | Digital sales | 25% | N/A | | Loyalty members | 47.3 million | +14% | Q1 2025 vs Q1 2024 Financial Summary (in millions, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Sales and Other Revenue | $24,880.8 | $24,265.4 | | Net Income | $236.4 | $240.7 | | Adjusted Net Income | $318.9 | $391.6 | | Adjusted EBITDA | $1,111.0 | $1,183.9 | | Diluted EPS | $0.41 | $0.41 | | Adjusted Diluted EPS | $0.55 | $0.66 | - The company continued to execute its "Customers for Life" strategy, focusing on digital engagement, customer value, technology modernization, and productivity91 Results of Operations Net sales increased 2.5% to $24.88 billion, driven by identical sales growth and pharmacy, while gross margin rate decreased by 70 basis points, and selling and administrative expenses improved due to lower merger costs - The 2.5% increase in Net sales and other revenue was primarily driven by a 2.8% increase in identical sales, with strong growth in pharmacy sales being a key contributor100 - Gross margin rate, excluding fuel and LIFO, decreased by 85 basis points due to investments in customer value, a sales mix shift to pharmacy, and higher digital sales costs104 - Selling and administrative expenses as a percentage of sales decreased by 50 basis points, largely attributable to lower Merger-related costs, which were $19.0 million in Q1 2025 compared to $92.3 million in Q1 202410572 Liquidity and Capital Resources The company maintains sufficient liquidity, with $754.4 million in operating cash flow, $585 million in capital expenditures, and returned $314.8 million via repurchases and $85.7 million in dividends, while managing debt through new note issuance - The company estimates liquidity needs of approximately $5.5 billion over the next 12 months for working capital, capital expenditures, debt service, and shareholder returns128 - During Q1 2025, the company repurchased 14.2 million shares of common stock for $314.8 million127 - The company issued $600.0 million of 6.250% senior unsecured notes due 2033 to redeem $600.0 million of 7.500% notes due 2026125 Item 3 - Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk exposure were reported compared to the prior fiscal year's Annual Report on Form 10-K - No material changes in market risk exposure were reported for the quarter131 Item 4 - Controls and Procedures Disclosure controls and procedures were deemed effective by management, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures are effective132 - No material changes in internal control over financial reporting were identified during the quarter133 PART II - OTHER INFORMATION Item 1 - Legal Proceedings This section refers to Note 5 for details on legal proceedings, with management asserting no expected material adverse effect on business or financial condition - The company is subject to various claims and lawsuits arising in the ordinary course of business. For detailed information, the report refers to Note 5 of the Condensed Consolidated Financial Statements135 Item 1A - Risk Factors No material changes to previously disclosed risk factors were reported since the Annual Report on Form 10-K - No material changes to risk factors were reported since the last annual report filed on April 21, 2025138 Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales occurred; the company repurchased 14.2 million shares for $314.8 million under its $2.0 billion program, with $1.6 billion remaining Share Repurchase Activity - Q1 2025 | Metric | Value | | :--- | :--- | | Total Shares Purchased | 14,249,535 | | Average Price Paid per Share | $21.93 | | Total Cost (in millions) | $314.8 | | Remaining Authorization (in millions) | $1,604.9 | Item 3 - Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None143 Item 4 - Mine Safety Disclosures This item is not applicable to the company's operations - Not Applicable144 Item 5 - Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2025 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements in Q1 2025145 Item 6 - Exhibits This section lists exhibits filed with the Form 10-Q, including retention stock agreements, officer certifications, and Inline XBRL financial data files - Exhibits filed include officer certifications under Sarbanes-Oxley Sections 302 and 906, and Inline XBRL documents146