ALBERTSONS COMPANIES, INC. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future operating results and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. In many cases, you can identify forward-looking statements by terms such as "may," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of these terms or other similar expressions. Forward-looking statements are based on our current expectations and assumptions and involve risks and uncertainties that could cause actual results or events to be materially different from those anticipated. These risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements include those related to the COVID-19 pandemic, about which there are still many unknowns, including the duration of the pandemic and the extent of its impact. The Company undertakes no obligation to update or revise any such statements as a result of new information, future events or otherwise. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. As used in this Form 10-Q, unless the context otherwise requires, references to "Albertsons," the "Company," "we," "us" and "our" refer toAlbertsons Companies, Inc. and, where appropriate, its subsidiaries.
NON-GAAP FINANCIAL MEASURES
We define EBITDA as generally accepted accounting principles ("GAAP") earnings
(net loss) before interest, income taxes, depreciation and amortization. We
define Adjusted EBITDA as earnings (net loss) before interest, income taxes,
depreciation and amortization, further adjusted to eliminate the effects of
items management does not consider in assessing our ongoing core performance. We
define Adjusted Net Income as GAAP net income adjusted to eliminate the effects
of items management does not consider in assessing our ongoing core performance.
We define Adjusted Net Income Per Class A Common Share as Adjusted Net Income
divided by the weighted average diluted Class A common shares outstanding, as
adjusted to reflect all restricted stock units and awards outstanding at the end
of the period. We define Adjusted Free Cash Flow as Adjusted EBITDA less capital
expenditures. See "Results of Operations" for further discussion and a
reconciliation of Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income Per
Class A Common Share and Adjusted Free Cash Flow.
EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income Per Class A
Common Share and Adjusted Free Cash Flow (collectively, the "Non-GAAP Measures")
are performance measures that provide supplemental information we believe is
useful to analysts and investors to evaluate our ongoing results of operations,
when considered alongside other GAAP measures such as net income, operating
income and gross profit. These Non-GAAP Measures exclude the financial impact of
items management does not consider in assessing our ongoing core operating
performance, and thereby facilitate review of our operating performance on a
period-to-period basis. Other companies may have different capital structures or
different lease terms, and comparability to our results of operations may be
impacted by the effects of acquisition accounting on our depreciation and
amortization. As a result of the effects of these factors and factors specific
to other companies, we believe EBITDA, Adjusted EBITDA, Adjusted Net Income,
Adjusted Net Income Per Class A Common Share and Adjusted Free Cash Flow provide
helpful information to analysts and investors to facilitate a comparison of our
operating performance to that of other companies. We also use Adjusted EBITDA,
as further adjusted for additional items defined in our debt instruments, for
board of director and bank compliance reporting. Our presentation of
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Non-GAAP Measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
Non-GAAP Measures should not be considered as measures of discretionary cash
available to us to invest in the growth of our business. We compensate for these
limitations by relying primarily on our GAAP results and using Non-GAAP Measures
only for supplemental purposes.
COVID-19
We continue to experience significant increases in demand in stores as people
have adjusted to the new circumstances resulting from the COVID-19 pandemic.
There also continues to be a substantial increase in customer demand and
engagement with our eCommerce offerings as a result of the pandemic, including
both home delivery and our Drive Up & Go curbside pickup. We have responded to
this increased demand for our eCommerce offerings by hiring additional
associates, retaining additional third-party service providers and expanding our
Drive Up & Go offerings.
Responding to the pandemic has also significantly increased our expenses. We
continue to clean and disinfect all departments, restrooms, and other high-touch
points of our stores often, including check stands and service counters, and
hourly disinfecting of high-touch areas. This is in addition to our rigorous
food safety and sanitation programs that were already in place. We have also
provided additional wages and benefits to our associates with appreciation and
bonus pay, as well as expanded sick pay.
Most of the states in which we operate have anti-price gouging statutes, which
place limits on our ability to increase prices after an officially declared
emergency. Certain state governors declared an emergency near the outset of the
COVID-19 pandemic, thus triggering the application of anti-price gouging
statutes. As the COVID-19 pandemic began, we implemented procedures to assure
compliance with anti-price gouging laws, including instruction and guidance to
our retail operators on the price restrictions to which we needed to adhere, all
of which remain in place.
We believe that some of the changes that have been implemented, in our stores
and the country as a whole, will be permanent. However, the ultimate
significance of the pandemic on our financial condition, results of operations,
or cash flows will be dictated by the length of time that such circumstances
continue, which will depend on the currently unknowable extent and duration of
the COVID-19 pandemic and the nature and effectiveness of governmental and
public actions taken in response.
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Table of Contents OVERVIEW As ofDecember 5, 2020 , we operated 2,253 retail food and drug stores with 1,727 pharmacies, 400 associated fuel centers, 22 dedicated distribution centers and 20 manufacturing facilities. In addition to our retail footprint, we strive to differentiate through our best in class Own Brands and rapidly expanding eCommerce options, which primarily include home delivery sales and Drive Up & Go curbside pickup. The following table shows stores operating, opened and closed during the periods presented: 12 weeks ended 40 weeks ended December 5, November 30, December 5, November 30, 2020 2019 2020 2019 Stores, beginning of period 2,252 2,262 2,252 2,269 Opened 5 5 7 12 Closed (4) (7) (6) (21) Stores, end of period 2,253 2,260 2,253 2,260
The following table summarizes our stores by size:
Number of stores Percent of Total Retail Square Feet (1)
December 5, November 30, December 5, November 30, December 5, November 30,
Square Footage 2020 2019 2020 2019 2020 2019
Less than 30,000 202 204 9.0 % 9.0 % 4.7 4.7
30,000 to 50,000 784 787 34.8 % 34.8 % 32.9 33.0
More than 50,000 1,267 1,269 56.2 % 56.2 % 74.8 75.0
Total Stores 2,253 2,260 100.0 % 100.0 % 112.4 112.7
(1) In millions, reflects total square footage of retail stores operating at the end of the period.
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Table of Contents RESULTS OF OPERATIONS Comparison of 12 and 40 weeks endedDecember 5, 2020 to 12 and 40 weeks endedNovember 30, 2019 : The following table and related discussion set forth certain information and comparisons regarding the components of our Condensed Consolidated Statements of Operations for the 12 and 40 weeks endedDecember 5, 2020 ("third quarter of fiscal 2020" and "first 40 weeks of fiscal 2020") and 12 and 40 weeks endedNovember 30, 2019 ("third quarter of fiscal 2019" and "first 40 weeks of fiscal 2019"). 12 weeks ended December 5, November 30, 2020 % of Sales 2019 % of Sales Net sales and other revenue$ 15,408.9 100.0 %$ 14,103.2 100.0 % Cost of sales 10,900.3 70.7 10,108.1 71.7 Gross profit 4,508.6 29.3 3,995.1 28.3 Selling and administrative expenses 4,309.1 28.0 3,807.2 27.0 Gain on property dispositions and impairment losses, net (59.0) (0.4) (18.7) (0.1) Operating income 258.5 1.7 206.6 1.4 Interest expense, net 115.9 0.8 154.8 1.1 Loss on debt extinguishment 8.6 0.1 - - Other income, net (19.2) (0.1) (15.9) (0.1) Income before income taxes 153.2 0.9 67.7 0.4 Income tax expense 29.5 0.2 12.9 0.1 Net income$ 123.7 0.7 %$ 54.8 0.3 % 40 weeks ended December 5, November 30, 2020 % of Sales 2019 % of Sales Net sales and other revenue$ 53,918.1 100.0 %$ 47,018.3 100.0 % Cost of sales 38,063.1 70.6 33,842.1 72.0 Gross profit 15,855.0 29.4 13,176.2 28.0 Selling and administrative expenses 14,109.7 26.2 12,548.4 26.7 Gain on property dispositions and impairment losses, net (47.0) (0.1) (482.7) (1.0) Operating income 1,792.3 3.3 1,110.5 2.3 Interest expense, net 425.1 0.8 557.5 1.2 Loss on debt extinguishment 57.7 0.1 65.8 0.1 Other income, net (27.5) (0.1) (21.9) - Income before income taxes 1,337.0 2.5 509.1 1.0 Income tax expense 342.6 0.6 110.5 0.2 Net income$ 994.4 1.9 %$ 398.6 0.8 %Net Sales and Other Revenue Net sales and other revenue increased 9.3% to$15,408.9 million for the third quarter of fiscal 2020 from$14,103.2 million for the third quarter of fiscal 2019. The increase in Net sales and other revenue was primarily driven by our 12.3% increase in identical sales, partially offset by a reduction in sales related to the stores closed since the third quarter of fiscal 2019 and$265.4 million in lower fuel sales. Net sales and other revenue increased 14.7% to$53,918.1 million for the first 40 weeks of fiscal 2020 from$47,018.3 million for the first 40 weeks of fiscal 2019. The increase in Net sales and other revenue was primarily driven by our 18.4% increase in identical sales, partially offset by a reduction in sales related to the stores closed since the third quarter of fiscal 2019 and$975.1 million in lower fuel sales. 30
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Identical Sales, Excluding Fuel Identical sales include stores operating during the same period in both the current year and the prior year, comparing sales on a daily basis. Direct to consumer internet sales are included in identical sales, and fuel sales are excluded from identical sales. Acquired stores become identical on the one-year anniversary date of the acquisition. Identical sales for the 12 and 40 weeks endedDecember 5, 2020 and the 12 and 40 weeks endedNovember 30, 2019 , respectively, were: 12 weeks ended 40 weeks ended December 5, November 30, December 5, November 30, 2020 2019 2020 2019 Identical sales, excluding fuel 12.3% 2.7% 18.4% 2.1% The increase in identical sales for the third quarter of fiscal 2020 and first 40 weeks of fiscal 2020 was a direct result of significant demand due to the COVID-19 pandemic, including 225% growth in our digital sales during the third quarter of fiscal 2020 as more customers shifted to online home delivery and Drive Up & Go. Gross Profit Gross profit represents the portion of Net sales and other revenue remaining after deducting Cost of sales during the period, including purchase and distribution costs. These costs include inbound freight charges, purchasing and receiving costs, warehouse inspection costs, warehousing costs and other costs associated with our distribution network. Advertising, promotional expenses and vendor allowances are also components of Cost of sales. Gross profit margin increased to 29.3% during the third quarter of fiscal 2020 compared to 28.3% during the third quarter of fiscal 2019. Excluding the impact of fuel, gross profit margin increased 25 basis points compared to the third quarter of fiscal 2019. The increase in gross profit margin was driven by improvements in shrink expense and leveraging of our distribution, warehousing and supplies costs, partially offset by expenses related to our growth in digital sales and select investments in promotions and price. The increase was also partially offset by$19.1 million of costs related to the COVID-19 pandemic, including expanded sick pay, incremental labor for enhanced cleaning and health screening to support and protect our supply chain employees and other warehousing and inventory costs. Basis point increase Third quarter of fiscal 2020 vs. Third quarter of fiscal 2019
(decrease)
Shrink 55 Distribution, warehousing and supplies 7 Depreciation and rent expense 2 Advertising and sales and product mix
(20)
COVID-19 pandemic related costs (13) Other (6) Total 25 Gross profit margin increased to 29.4% during the first 40 weeks of fiscal 2020 compared to 28.0% during the first 40 weeks of fiscal 2019. Excluding the impact of fuel, gross profit margin increased 65 basis points compared to the first 40 weeks of fiscal 2019. The increase in gross profit margin was driven by improvements in shrink expense and leveraging of our distribution, warehousing and supplies costs. Gross profit margin was also favorably impacted from leveraging of advertising costs and shifts in sales mix which was partially offset by expenses related to our growth in digital sales and select investments in promotions and price. The increase was also partially offset by$97.0 million of costs related to the COVID-19 pandemic, including employee appreciation pay, expanded sick pay, incremental labor for enhanced cleaning and health screening to support and protect our supply chain employees and other warehousing and inventory costs. 31
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Basis point increase
First 40 weeks of fiscal 2020 vs. First 40 weeks of fiscal 2019 (decrease)
Shrink 67 Distribution, warehousing and supplies 7 Advertising and sales and product mix 7 Depreciation and rent expense 3 COVID-19 pandemic related costs (19) Total 65
Selling and Administrative Expenses
Selling and administrative expenses consist primarily of store level costs, including wages, employee benefits, rent, depreciation and utilities, in addition to certain back-office expenses related to our corporate and division offices.
Selling and administrative expenses increased to 28.0% of Net sales and other revenue during the third quarter of fiscal 2020 compared to 27.0% of Net sales and other revenue for the third quarter of fiscal 2019. Excluding the impact of fuel, Selling and administrative expenses as a percentage of Net sales and other revenue increased 40 basis points during the third quarter of fiscal 2020 compared to the third quarter of fiscal 2019. The increase in Selling and administrative expenses as a percentage of Net sales and other revenue was primarily driven by the$285.7 million charge related to the previously announced withdrawal from theUFCW National Fund , partially offset by rent and occupancy costs, depreciation and amortization and employee wage and benefit costs, attributable to sales leverage driven by significantly higher identical sales. Selling and administrative expenses were also favorably impacted by lower third-party fees and services, partially driven by cost reduction initiatives. Employee wage and benefit costs included$117.0 million of COVID-19 pandemic related incremental labor, which includes$44.7 million in bonus pay to front-line associates and$72.3 million for enhanced cleaning and health screening and expanded sick pay to front-line associates. In addition, we also incurred$13.7 million in additional COVID-19 pandemic costs related to supplies and outside services, which included personal protective equipment for our stores and employees. Basis point increase Third quarter of fiscal 2020 vs. Third quarter of fiscal 2019 (decrease) Rent and occupancy costs (50) Depreciation and amortization (41) Third-party fees and services (21) Employee wage and benefit costs
(12)
COVID-19 pandemic related costs, excluding incremental employee wages and benefits 9 Other (1) 155 Total 40
(1) Includes the
Selling and administrative expenses decreased to 26.2% of Net sales and other revenue during the first 40 weeks of fiscal 2020 compared to 26.7% of Net sales and other revenue for the first 40 weeks of fiscal 2019. Excluding the impact of fuel, Selling and administrative expenses as a percentage of Net sales and other revenue decreased 120 basis points during the first 40 weeks of fiscal 2020 compared to the first 40 weeks of fiscal 2019. The decrease in Selling and administrative expenses as a percentage of Net sales and other revenue was driven by employee wage and benefit costs, depreciation and amortization and rent and occupancy costs, attributable to sales leverage driven by significantly higher identical sales. The decrease was also attributable to lower third-party fees and services, partially driven by cost reduction initiatives. The decrease was partially offset by the$285.7 million charge related to the previously announced withdrawal from theUFCW National Fund . Employee wage and benefit costs included 32
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$354.5 million of COVID-19 pandemic related employee appreciation and bonus pay, which includes expanded sick pay, to front-line associates and$275.0 million of incremental labor for enhanced cleaning and health screening. In addition, we also incurred$104.1 million in additional COVID-19 pandemic costs related to supplies and outside services, which included personal protective equipment for our stores and employees. We also contributed$53.0 million to hunger relief in our communities during the first 40 weeks of fiscal 2020. Basis point increase First 40 weeks of fiscal 2020 vs. First 40 weeks of fiscal 2019
(decrease)
Employee wage and benefit costs (60) Depreciation and amortization (60) Rent and occupancy costs (60) Third-party fees and services (13) COVID-19 pandemic related costs, excluding incremental employee wages and benefits 30 Other (1) 43 Total (120)
(1) Includes the
Gain on Property Dispositions and Impairment Losses, Net
For the third quarter of fiscal 2020, net gain on property dispositions and impairment losses was$59.0 million , primarily driven by$62.9 million of gains from the sale of assets, partially offset by$3.9 million of asset impairments. For the third quarter of fiscal 2019, net gain on property dispositions and impairment losses was$18.7 million , primarily driven by$20.9 million of gains from the sale of assets, partially offset by$2.2 million of asset impairments. For the first 40 weeks of fiscal 2020, net gain on property dispositions and impairment losses was$47.0 million , primarily driven by$73.6 million of gains from the sale of assets, partially offset by$26.6 million of asset impairments, primarily related to right-of-use assets. For the first 40 weeks of fiscal 2019, net gain on property dispositions and impairment losses was$482.7 million , primarily driven by$539.0 million of gains from the sale of assets including$463.6 million of gains related to sale leaseback transactions during the second quarter of fiscal 2019, partially offset by$56.3 million of asset impairments including an impairment loss of$38.6 million related to certain assets of our meal kit operations. Interest Expense, Net Interest expense, net was$115.9 million during the third quarter of fiscal 2020 compared to$154.8 million during the third quarter of fiscal 2019. The decrease in interest expense was primarily attributable to lower average outstanding borrowings and lower average interest rates. The weighted average interest rate during the third quarter of fiscal 2020 was 5.5%, excluding amortization and write-off of deferred financing costs and original issue discount, compared to 6.3% during the third quarter of fiscal 2019. Interest expense, net was$425.1 million during the first 40 weeks of fiscal 2020 compared to$557.5 million during the first 40 weeks of fiscal 2019. The decrease in interest expense was primarily attributable to lower average outstanding borrowings and lower average interest rates. The weighted average interest rate during first 40 weeks of fiscal 2020 was 5.9%, excluding amortization and write-off of deferred financing costs and original issue discount, compared to 6.4% during the first 40 weeks of fiscal 2019. 33
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Table of Contents Loss on Debt Extinguishment Loss on debt extinguishment was$8.6 million during third quarter of fiscal 2020 and$57.7 million during the first 40 weeks of fiscal 2020, compared to no loss on debt extinguishment during the third quarter of fiscal 2019 and$65.8 million during the first 40 weeks of fiscal 2019. The loss on debt extinguishment during the third quarter and first 40 weeks of fiscal 2020 primarily consisted of a redemption premium payment and write-off of debt discounts associated with the 2024 Redemption and the September Partial 2025 Redemption. The loss on debt extinguishment during the first 40 weeks of fiscal 2019 primarily consisted of the write-off of debt discounts associated with the tender offer and various repurchases of notes. Other Income, Net For the third quarter of fiscal 2020, Other income, net was$19.2 million compared to$15.9 million for the third quarter of fiscal 2019. For the first 40 weeks of fiscal 2020, Other income, net was$27.5 million compared to$21.9 million for the first 40 weeks of fiscal 2019. Other income, net during both the third quarter of fiscal 2020 and the first 40 weeks of fiscal 2020 was primarily driven by non-service cost components of net pension and post-retirement expense and income related to our equity investment, partially offset by recognized losses on interest rate swaps. Other income, net during both the third quarter of fiscal 2019 and the first 40 weeks of fiscal 2019 was primarily driven by non-service cost components of net pension and post-retirement expense and unrealized gains from non-operating investments.
Income Taxes
Income tax expense was$29.5 million , representing a 19.3% effective tax rate, for the third quarter of fiscal 2020. Income tax expense was$12.9 million , representing a 19.1% effective tax rate, for the third quarter of fiscal 2019. For the first 40 weeks of fiscal 2020, Income tax expense was$342.6 million , representing a 25.6% effective tax rate. Income tax expense was$110.5 million , representing a 21.7% effective tax rate, for the first 40 weeks of fiscal 2019. The increase in income tax expense for both the third quarter of fiscal 2020 and first 40 weeks of fiscal 2020 was primarily driven by the increase in income before income taxes. The effective income tax rate for the third quarter of fiscal 2020 was favorably impacted by discrete benefits related to income tax credits and equity-based compensation deductions. The effective income tax rate for the first 40 weeks of fiscal 2020 was favorably impacted by income tax credits and equity-based compensation, offset by certain nondeductible transaction-related costs. The effective income tax rate for both the third quarter of fiscal 2019 and first 40 weeks of fiscal 2019 was favorably impacted by income tax credits.
Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income Per Class A Common Share
For the third quarter of fiscal 2020, Adjusted EBITDA was$967.7 million , or 6.3% of Net sales and other revenue, compared to$634.4 million , or 4.5% of Net sales and other revenue, for the third quarter of fiscal 2019. For the first 40 weeks of fiscal 2020, Adjusted EBITDA was$3,607.1 million , or 6.7% of Net sales and other revenue, compared to$2,078.8 million , or 4.4% of Net sales and other revenue for the first 40 weeks of fiscal 2019. The increase in Adjusted EBITDA for the third quarter of fiscal 2020 and first 40 weeks of fiscal 2020 primarily relates to the 12.3% and 18.4% increase in identical sales, respectively, and the improved sales leverage experienced in gross margin and selling and administrative expenses as a percent of sales. 34
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The following tables reconcile Net income to Adjusted net income, and Net income
per Class A common share to Adjusted net income per Class A common share (in
millions, except per share data):
12 weeks ended 40 weeks ended
December 5, November 30, December 5, November 30,
2020 2019 2020 2019
Numerator:
Net income $ 123.7 $ 54.8 $ 994.4 $ 398.6
Adjustments:
(Gain) loss on interest rate and
commodity hedges, net (d) (1.9) 0.1 24.0 0.4
Facility closures and transformation
(1)(b) 18.6 11.0 34.5 11.0
Acquisition and integration costs
(2)(b) 2.0 17.4 10.5 51.0
Equity-based compensation expense (b) 15.1 7.2 43.4 24.8
Gain on property dispositions and
impairment losses, net (59.0) (18.7) (47.0) (482.7)
LIFO expense (a) 14.3 2.6 37.5 18.9
Discretionary COVID-19 pandemic
related costs (3)(b) 44.7 - 134.6 -
Civil disruption related costs (4)(b) - - 13.0 -
Transaction and reorganization costs
related to convertible preferred stock
issuance and initial public offering
(b) (1.0) 3.4 23.4 3.4
Amortization of debt discount and
deferred financing costs (c) 4.9 25.1 16.1 68.9
Loss on debt extinguishment 8.6 - 57.7 65.8
Amortization of intangible assets
resulting from acquisitions (b) 12.9 65.3 43.5 227.0
UFCW National Fund withdrawal (5)(b) 285.7 - 285.7 -
Miscellaneous adjustments (6)(f) 8.6 4.6 56.0 37.7
Tax impact of adjustments to Adjusted
net income (90.6) (30.6) (183.1) (6.9)
Adjusted net income $ 386.6 $ 142.2 $ 1,544.2 $ 417.9
Denominator:
Weighted average Class A common shares
outstanding - diluted 472.1 580.9 580.3 579.8
Adjustments:
Convertible preferred stock (7) 101.6 - - - Restricted stock units and awards (8) 8.9 6.6 8.3 7.6 Adjusted weighted average Class A common shares outstanding - diluted 582.6 587.5 588.6 587.4 Adjusted net income per Class A common share - diluted$ 0.66 $ 0.24 $ 2.62 $ 0.71 35
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12 weeks ended 40 weeks ended
December 5, November 30, December 5, November 30,
2020 2019 2020 2019
Net income per Class A common share
- diluted $ 0.20 $ 0.09 $ 1.71 $ 0.69
Convertible preferred stock (7) 0.01 - - -
Non-GAAP adjustments (9) 0.46 0.15 0.95 0.03
Restricted stock units and awards
(8) (0.01) - (0.04) (0.01)
Adjusted net income per Class A
common share - diluted $ 0.66 $ 0.24 $ 2.62 $ 0.71 The following table is a reconciliation of Adjusted net income to Adjusted EBITDA:
12 weeks ended 40 weeks ended
December 5, November 30, December 5, November 30,
2020 2019 2020 2019
Adjusted net income (10) $ 386.6 $ 142.2 $ 1,544.2 $ 417.9
Tax impact of adjustments to Adjusted
net income 90.6 30.6 183.1 6.9
Income tax expense 29.5 12.9 342.6 110.5
Amortization of debt discount and
deferred financing costs (c) (4.9) (25.1) (16.1) (68.9)
Interest expense, net 115.9 154.8 425.1 557.5
Amortization of intangible assets
resulting from acquisitions (b) (12.9) (65.3) (43.5) (227.0)
Depreciation and amortization (e) 362.9 384.3 1,171.7 1,281.9
Adjusted EBITDA $ 967.7 $ 634.4 $ 3,607.1 $ 2,078.8
(1) Includes costs related to closures of operating facilities and third-party
consulting fees related to our strategic priorities and associated business
transformation.
(2) Related to conversion activities and related costs associated with
integrating acquired businesses, primarily the Safeway acquisition. Also
includes expenses related to management fees paid in connection with acquisition
and financing activities.
(3) Includes $44.7 million in bonus payments related to front-line associates
during the third quarter of fiscal 2020. Also includes $53 million of charitable
contributions to our communities and hunger relief and $36.9 million in final
reward payments to front-line associates at the end of the first quarter of
fiscal 2020.
(4) Primarily includes costs related to store damage, inventory losses and
community support as a result of the civil disruption during late May and early
June in certain markets.
(5) Related to the previously announced withdrawal from the UFCW National Fund .
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(6) Miscellaneous adjustments include the following (see table below):
12 weeks ended 40 weeks ended
December 5, November 30, December 5, November 30,
2020 2019 2020 2019
Non-cash lease-related adjustments $ 1.2 $ 7.0 $ 3.1 $ 13.3
Lease and lease-related costs for
surplus and closed stores 8.8 4.5 38.3 16.5
Net realized and unrealized (gain)
loss on non-operating investments (3.5) (10.0) 1.2 (2.5)
Certain legal and regulatory accruals
and settlements, net - 0.1 - (1.8)
Other (a) 2.1 3.0 13.4 12.2
Total miscellaneous adjustments $ 8.6 $
4.6
(a) Primarily includes adjustments for unconsolidated equity investments and
certain contract termination costs.
(7) Represents the conversion of convertible preferred stock to the fully
outstanding as-converted Class A common shares as of the end of each respective
period, for periods in which the convertible preferred stock is antidilutive
under GAAP.
(8) Represents incremental unvested RSUs and unvested RSAs to adjust the diluted
weighted average Class A common shares outstanding during each respective period
to the fully outstanding RSUs and RSAs as of the end of each respective period.
(9) Reflects the per share impact of Non-GAAP adjustments for each period
presented. See the reconciliation of Net income to Adjusted net income above for
further details.
(10)Reflects the impact of Non-GAAP adjustments for each period presented. See
the reconciliation of Net income to Adjusted net income above for further
details.
Non-GAAP adjustment classifications within the Consolidated Statement of
Operations:
(a) Cost of sales
(b) Selling and administrative expenses
(c) Interest expense, net
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(d) (Gain) loss on interest rate and commodity hedges, net:
12 weeks ended 40 weeks ended
December 5, November 30, December 5, November 30,
2020 2019 2020 2019
Cost of sales $ (2.2) $ 0.1 $ 4.3 $ 0.4
Other income, net 0.3 - 19.7 -
Total (Gain) loss on interest
rate and commodity hedges, net $ (1.9) $ 0.1 (e) Depreciation and amortization:
12 weeks ended 40 weeks ended
December 5, November 30, December 5, November 30,
2020 2019 2020 2019
Cost of sales $ 37.8 $ 38.3 $ 131.9 $ 128.3
Selling and administrative expenses 325.1 346.0 1,039.8 1,153.6
Total Depreciation and amortization
(f) Miscellaneous adjustments:
12 weeks ended 40 weeks ended
December 5, November 30, December 5, November 30,
2020 2019 2020 2019
Selling and administrative expenses
$ 44.7 $ 28.6 Other income, net (1.4) (7.3) 11.3 9.1
Total Miscellaneous adjustments $ 8.6
$ 56.0 $ 37.7 38
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Table of Contents Adjusted Free Cash Flow
The following is a reconciliation of Net cash provided by operating activities to Adjusted Free Cash Flow (in millions):
40 weeks ended
December 5, November 30,
2020 2019
Net cash provided by operating activities $ 2,996.0 $ 1,387.0
Income tax expense 342.6 110.5
Deferred income taxes 16.8 40.6
Interest expense, net 425.1 557.5
Operating lease right-of-use assets amortization (443.9) (418.3)
Changes in operating assets and liabilities (397.7) 326.1
Amortization and write-off of deferred financing costs (16.1) (35.4)
Contributions to pension and post-retirement benefit plans, net of (income) expense
80.6 16.2
Facility closures and transformation 34.5 11.0
Acquisition and integration costs 10.5 51.0
Discretionary COVID-19 pandemic related costs 134.6 -
Civil disruption related costs 13.0 -
Transaction and reorganization costs related to convertible preferred stock issuance and initial public offering
23.4 3.4
UFCW National Fund withdrawal 285.7 -
Other adjustments 102.0 29.2
Adjusted EBITDA 3,607.1 2,078.8
Less: capital expenditures (1,083.0) (1,083.7)
Adjusted Free Cash Flow $
2,524.1
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