Albertsons Companies, Inc.: Form 10-K for the period ended Feb 28, 2026

Retail Operations

Albertsons is one of the largest food and drug retailers in the United States, with both strong local presence and national scale. As of February 28, 2026, we operated 2,244 stores across 35 states and the District of Columbia. We operate 22 well known banners including Albertsons, Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs, Jewel-Osco, ACME, Shaw's, Star Market, United Supermarkets, Market Street, Haggen, Kings Food Markets and Balducci's Food Lovers Market, with approximately 280,000 talented and dedicated employees. Additionally, as of February 28, 2026, we operated 1,713 in-store pharmacies, 1,240 in-store branded coffee shops, 405 associated fuel centers, 22 dedicated distribution centers, 19 manufacturing facilities and various digital platforms.

Our stores operate in premier locations and have leading market share within attractive and growing geographies. Our portfolio of well-located, full-service stores provides the foundation of our omnichannel platform, and we have continued to enhance our capabilities, including automated self-checkout options, to meet customer demand for convenience and flexibility. We offer delivery services in more than 2,200 of our stores and our Drive Up & Go curbside pickup service is offered in more than 2,100 stores. In our delivery service, we engage customers on the platform of their choice, providing customers the ability to place delivery orders from our platform as well as delivery orders placed through our third-party partners. We continue to partner with Instacart, DoorDash and Uber. Our eCommerce capabilities are integrated with our store network, supporting store‑based fulfillment and allowing customers to engage with our banners seamlessly across digital and in‑store channels.

Through our loyalty programs and digital platforms, we collect customer transaction and engagement data that supports personalized offers, targeted marketing and enhanced customer experiences across both digital and in-store channels. These capabilities also support improved marketing efficiency and inform merchandising, pricing and promotional decisions across our operations.

Our business strategy is centered around driving customer growth and engagement through digital connection, enhancing the customer value proposition, modernizing capabilities through technology and driving productivity. We seek to tailor our offerings to local demographics and preferences of the markets in which we operate. Our Locally Great, Nationally Strong operating structure empowers decision making at the local level, which we believe better serves our customers and communities, while also providing the technology platforms, systems, analytics and buying power afforded by an organization with national scale.

Improvements in productivity, combined with data-enabled insights and automation, support reinvestment in customer value, digital capabilities and store operations across the business.

Segments

We are engaged in the operation of food and drug retail stores that offer grocery products, general merchandise, health and beauty care products, pharmacy, fuel and other items and services in our stores or through digital channels. Our retail operating divisions are geographically based, have similar economic characteristics and similar expected long-term financial performance. Our operating segments and reporting units are made up of our operating divisions, which are reported in one reportable segment. Each reporting unit constitutes a business for which discrete financial information is available and for which management regularly reviews the operating results and makes key operating decisions on how to allocate resources. Across all operating segments, we operate primarily one store format. Each division offers, through its stores and digital channels, the same general mix of products with similar pricing to similar categories of customers, has similar distribution methods, operates in similar regulatory environments and purchases merchandise from similar or the same vendors.

Products

We offer grocery products, general merchandise, health and beauty care products, pharmacy, vaccines, fuel and other items and services through our stores and digital channels, including delivery and curbside pickup. We are not dependent on any individual supplier; only one third-party supplier represented more than 5% of our sales for fiscal 2025.

Merchandising and Manufacturing

Our Own Brands portfolio provides high-quality products to our customers at an attractive price point, offering more than 14,000 unique items. The Own Brands portfolio includes but is not limited to the registered trademarks Signature SELECT®, O Organics®, Open Nature®, Signature Café®, Lucerne®, Waterfront BISTRO®, Primo Taglio®, Signature Care®, Signature Reserve® and Value Corner®. Our Own Brands products resonate well with our customers, as evidenced by Own Brands retail sales of $16.9 billion in fiscal 2025.

As measured by units for fiscal 2025, 9.9% of our Own Brands products were manufactured in Company-owned facilities, and the remainder was purchased from third parties. We closely monitor make-versus-buy decisions to optimize their quality and profitability. In addition, we believe that our scale provides opportunities to leverage our fixed manufacturing costs in order to drive innovation across our Own Brands portfolio. As of February 28, 2026, we operated 19 food production plants. These plants consisted of seven milk plants, three soft drink bottling plants, three bakery plants, two ice cream plants, two grocery/prepared food plants, one ice plant and one soup plant.

Intellectual Property

Our banners, brand image and Own Brands portfolio are significant to our business strategy. We own numerous registered trademarks and service marks and seek to obtain and preserve intellectual property protection of our marks and to ensure that any third-party uses are properly licensed.

Marketing and Advertising

Our marketing efforts involve collaboration between our national marketing and merchandising team and local divisions and stores. We augment the local division teams with corporate resources and are focused on providing expertise, sharing best practices and leveraging scale in partnership with leading consumer packaged goods vendors. Our corporate teams support divisions by providing strategic guidance in order to drive key areas of our business, including pharmacy, general merchandise and our Own Brands. Our local marketing teams set brand strategy and communicate brand messages through our integrated digital and physical marketing and advertising channels.

We devote significant resources to differentiating our banners in the local markets where we operate and invest in loyalty programs to drive traffic through our omnichannel approach. Our local merchandising teams spend considerable time working with store directors to make sure we are satisfying consumer preferences. We also strive to achieve and maintain favorable recognition of our Own Brands offerings by marketing them to consumers and enhancing value for consumers, relative to the cost of branded products.

We measure price competitiveness through systematic, selective and thoughtful price investment to drive customer traffic and basket size. We also use our loyalty program to target promotional activity and improve our customers' experience. This includes leveraging customer and transaction information with data-driven analytics to provide both personalized deals and digital coupons, as well as fuel rewards and grocery rewards, including automatic cash-off discounts. We have 51.2 million members currently enrolled in our loyalty program. We have achieved significant success with active participants in our loyalty program, which drives higher sales and customer retention. We have deployed and are continuing to refine cloud-based enterprise solutions to quickly process proprietary customer, product and transaction data and efficiently provide our local managers with targeted marketing strategies for customers in their communities. In addition, we use data analytics to optimize shelf assortment and space in our stores by continually and systematically reviewing the performance of each product.

We operate a retail media business through Albertsons Media Collective (the "Media Collective") that leverages customer engagement across our digital and in‑store platforms to deliver targeted marketing opportunities for vendor partners, supported by first‑party customer data and advanced analytics developed through our loyalty and digital platforms. The Media Collective is our proprietary digital marketing platform that enables new and existing partners to reach our extensive customer network while benefiting from our strong market presence, particularly in the markets we hold significant share. These capabilities complement our core retail operations and support our broader business and growth strategy.

Raw Materials

Various agricultural commodities constitute the principal raw materials used by us in the manufacture of our food products. Although historically raw materials for our products have not been in short supply and have been readily available, see "Part I—Item 1A. Risk Factors" regarding the potential adverse impact on our results of operations due to the lack of, or reduced availability of, raw materials.

Environmental

Our operations are subject to regulation under environmental laws, including those relating to waste management, air emissions and underground storage tanks. In addition, as an owner and operator of commercial real estate, we may be subject to liability under applicable environmental laws for clean-up of contamination at our facilities. Compliance with and clean-up liability under these laws has not had and is not expected to have a material adverse effect upon our business, financial condition, liquidity or operating results.

We work hard to maintain the highest standards of environmental stewardship (including procuring and offering sustainably sourced products). During fiscal 2025, we recycled approximately 765 million pounds of cardboard and more than 25 million pounds of plastic bags and film from our operations and completed over 500 energy efficiency projects.

Human Capital

As one of the largest food and drug retailers in the U.S., serving 36.5 million customers per week, we recognize that our success and ability to delight our customers lies in the engagement of our associates. We remain committed to attracting, developing and retaining associates by fostering a culture of connection, investing in talent development and supporting the personal health and well-being of associates and their families.

As of February 28, 2026, we employed approximately 280,000 associates, of which approximately 62% were part-time and approximately 190,000 associates were covered by collective bargaining agreements. A significant number of our associates have long tenure and during fiscal 2025, more than 56,000 of our associates celebrated at least 15 years of service, and more than 43,000 associates celebrated over 20 years of service.

We are proud to offer our associates a myriad of opportunities to grow and advance in their careers. We have a talent management process that is designed to enable us to identify and assess talent across the organization and provide equal and consistent opportunities for employees to develop their skills. Several levels of associates participate in our annual performance management process that includes goal setting, feedback and development to support their personal growth and development. We engage associates across the organization to provide input through our annual Associate Experience Survey. We hold regular town hall meetings where any employee can ask questions of executives and make their voice heard.

We also offer formal and informal learning and development opportunities to all associates through synchronous, asynchronous and hybrid experiences. These offerings include eLearning and on-demand content, virtual and in-person classes, on-the-job training and mentoring programs. In addition to our internal learning offerings, through partnerships with third parties, we offer development programs and conferences to our top talent based on nominations.

We are continually evaluating and developing our compensation and benefits programs to offer competitive wages and job-appropriate compensation. Our benefits are designed to attract and retain our employees and vary from location, seniority and employment status. In addition to comprehensive, accessible and affordable healthcare coverage, we offer paid time off, flexible work schedules, family leave, associate assistance programs and a 401(k)-retirement savings and investment plan.

The health and safety of our associates remains at the forefront of our business, and we remain committed to the prevention of injury and illness through strong health and safety management, employee empowerment and accountability, and strict compliance with health and safety regulations. We are also focused on fostering a safe, open and accountable work environment and we provide a hotline for all associates to report workplace concerns and violations.

Seasonality

Our business is generally not seasonal in nature, but a larger share of annual revenues may be generated in November and December due to the major holidays.

Competitive Environment

See "Part I—Item 1A. Risk Factors—Risks Related to Our Industry" for information related to our competitive environment.

Other Information

We maintain a website (www.Albertsonscompanies.com (http://www.Albertsonscompanies.com)) that includes additional information about the Company. We make available through our website, free of charge, our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and our interactive data files, including amendments to those reports. The information contained on or connected to our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered as part of this or any other report filed with or furnished with the Securities and Exchange Commission ("SEC"). These forms are available as soon as reasonably practicable after we have filed them with, or furnished them electronically to, the SEC. Additionally, all of our filings with the SEC can be accessed on the SEC's website at www.sec.gov (http://www.sec.gov).

Executive Officers of the Registrant

The following table sets forth information regarding our executive officers as of April 27, 2026:

Susan Morris has served as our Chief Executive Officer and Director since May 2025, and as our Executive Vice President and Chief Operations Officer since January 2018. Ms. Morris has served in various executive positions at the Company since 2010 including serving as our Executive Vice President, Retail Operations, West Region from April 2017 to January 2018 and Executive Vice President, Retail Operations, East Region from April 2016 to April 2017. Prior to joining the Company, Ms. Morris served as Senior Vice President of Sales and Merchandising and Vice President of Customer Satisfaction at SuperValu.

Sharon McCollam has served as our President and Chief Financial Officer since September 2021. Ms. McCollam previously served as Executive Vice President, Chief Administrative and Chief Financial Officer at Best Buy Co. Inc. ("Best Buy"), a multinational consumer electronics retailer, from 2012 to 2016. Prior to Best Buy, Ms. McCollam held several transformational leadership positions at Williams-Sonoma, Inc., a consumer retail company, from 2000 to 2012, including Chief Operating and Chief Financial Officer from 2006 to 2012.

Robert Backus has served as our Executive Vice President of Retail Operations, East Region since April 2024. Mr. Backus previously served as Shaw's Division President from 2020 and as Senior Vice President of Operations from 2016. Mr. Backus also served in various roles and positions of increasing responsibility at Safeway prior to its merger with the Company dating back to October 1990.

Anuj Dhanda has served as our Executive Vice President and Chief Technology & Transformation Officer since 2023 and as our Executive Vice President and Chief Information Officer since joining the Company in December 2015. Prior to joining the Company, Mr. Dhanda served as Senior Vice President of Digital Commerce of the Giant Eagle supermarket chain from March to December 2015, and as its Chief Information Officer from September 2013. Prior to Giant Eagle, from March 2008 to August 2013, Mr. Dhanda served as Chief Information Officer of PNC Financial Services, a bank holding company and financial services corporation.

Michelle Larson has served as our Chief Merchandising Officer since May 2025. Ms. Larson previously served as our Executive Vice President of Retail Operations, West Region since April 2024, our Executive Vice President of Retail Operations, East Region since March 2023 and as our Southwest and Shaw’s Division President since 2018. Ms. Larson also served in various roles and positions of increasing responsibility since joining the Company in 1995.

Thomas Moriarty has served as our Executive Vice President, M&A and Corporate Affairs since March 2025 and leads the functions of M&A, Business Development, Government Relations, Corporate Communications, Sustainability and Legal. Mr. Moriarty served as our Executive Vice President, General Counsel and Chief Policy Officer since June 2023. Prior to joining the Company, Mr. Moriarty served as EVP, Chief Policy and External

Affairs Officer and General Counsel at CVS Health where he spent more than ten years in roles of increasing responsibility.

Allison Pinkham has served as our Executive Vice President and Chief Human Resources Officer since February 2026. Prior to joining the Company, Ms. Pinkham served as Chief Human Resources Officer at Galderma, a global dermatology category leader from 2021 to 2026. Prior to joining Galderma, Ms. Pinkham served as the Chief People Officer at Heineken USA.

Evan Rainwater has served as our Executive Vice President, Supply Chain, Manufacturing and Strategic Sourcing since March 2020 and our Senior Vice President, Supply Manufacturing since May 2019. Mr. Rainwater joined the Company in May 2005 as Vice President, Manufacturing.

Michael Withers has served as our Executive Vice President of Retail Operations, West Region since May 2025. Mr. Withers previously served as our Executive Vice President of Retail Operations, California since February 2025, President of our Jewel-Osco division from September 2019 and in various executive positions in the Company including as our Executive Vice President of East Operations from 2017 to 2019. Mr. Withers has served in various roles and positions of increasing responsibility since 2006.

There are risks and uncertainties that can affect our business. The most significant risk factors are discussed below. The following information should be read together with "Part II—Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-K, which includes forward-looking statements and factors that could cause us not to realize our goals or meet our expectations.

Risks Related to Our Business and Operations

General economic conditions affecting the food and drug retail industry and various operating factors may affect our business and may adversely affect our business and operating results.

Our operations and financial performance are affected by economic conditions such as macroeconomic factors, credit market conditions, tariffs and trade disruptions and the level of consumer confidence. Both inflation and deflation affect our business. Food deflation could reduce sales growth and earnings, while food inflation could reduce gross margin rates and consumer spending. We have observed increased inflation periods during the past several years with varying impacts on our business. We are unable to predict the direction of the economy or if inflation will increase materially or revert to deflation. A continued increase in energy costs, including fuel, could also have an effect on consumer spending and on our costs of producing and procuring products that we sell. If the economy weakens, energy costs continue to increase or inflationary trends continue, our business and operating results could be adversely affected. We may also experience materially adverse impacts to our business as a result of consumers' perceptions of the economy, and a decrease in their personal financial condition could hurt overall consumer confidence and reduce demand for many of our product offerings. Consumers may reduce spending on non-essential items, purchase value-oriented products or increasingly rely on food discounters in an effort to secure the food and drug products that they need, all of which could impact our sales and profit. Governmental and regulatory changes and reductions in governmental subsidies such as the Supplemental Nutrition Assistance Program ("SNAP") could also materially impact our business adversely.

Our inability to invest in, manage costs and keep pace with technological changes, including those adopted by our competitors, may adversely impact our business initiatives and affect our financial performance. We may be limited in our ability to implement automation-related technological changes or artificial intelligence in certain of our operations if we are unable to negotiate appropriate terms in our contracts with our labor unions. Our success is also dependent in large part upon our ability to maintain and enhance the goodwill and reputation of our banners, our customers’ connection to our banners, and a positive relationship with the communities in which we serve. Additionally, acts of violence at, or threatened against, our stores, including active shooter situations, may, in addition to other operational impact, result in damage and restricted access to our stores and/or store closures for short or extended periods of time, all of which could materially adversely affect our financial performance.

Our operations are dependent upon the availability of a significant amount of energy and fuel to manufacture, store, transport and sell products.

Our operations are dependent upon the availability of a significant amount of energy and fuel to manufacture, store, transport and sell products. Energy and fuel costs are influenced by domestic and international political and economic circumstances and have experienced volatility both recently and over time. While we have entered into contracts to reduce the impact of volatile energy and fuel costs for our future energy needs, volatility that exceeds offsetting contractual arrangements could adversely affect our results of operations.

Failure to realize anticipated benefits from our productivity initiatives could adversely affect our financial performance and competitive position.

While we have identified and are implementing a broad range of specific productivity initiatives to help offset cost inflation, increase growth and improve earnings, the savings from these productivity initiatives represent management's estimates and remain subject to risks and uncertainties. There can be no assurance that all of our initiatives will be successful or that we will realize the estimated benefits in the currently anticipated amounts or timeframe, if at all. Also, certain of our initiatives may involve up-front costs or significant changes to our operating processes and systems that could result in disruptions in our operations and impact our results of operations.

We may be unable to achieve our corporate social responsibility and sustainability goals.

In recent years, there has been focus from investors, governmental and nongovernmental entities, associates and the public on corporate social responsibility and sustainability matters, including greenhouse gas emissions, renewable energy, packaging and waste, practices related to sustainable supply chain, energy and water use, human rights, animal rights and social commitment. We have historically established and publicly announced certain goals, commitments, and targets which we may change in the future. Our ability to set and execute on our operational strategies and achieve these goals, commitments, and targets are subject to risks and uncertainties, many of which may be outside of our control and prove to be more costly than we anticipated. Any failure, or perceived failure, to achieve our social responsibility and sustainability goals, commitments, and targets, or perceived lack of intensity of our commitment to these initiatives or to otherwise meet evolving and varied stakeholder expectations could damage our reputation and customer, investor and other stakeholder relationships. In addition, we could face increased regulatory, reputational and legal scrutiny as a result of our corporate social responsibility and sustainability related commitments and disclosures, and we could also face challenges with managing conflicting regulatory requirements and our various stakeholders' expectations. Such conditions could have an adverse effect on our business, results of operations and financial condition.

Failure to attract and retain qualified associates could materially adversely affect our financial performance and our ability to successfully execute our business strategy.

Our ability to continue to conduct and expand our operations and the acceleration of our business strategy depends on our ability to attract and retain a large and growing number of qualified associates. The food retail industry is labor intensive. Our ability to meet our labor needs, including our ability to find qualified personnel to fill positions that become vacant at our existing stores and distribution centers, while controlling our associate wage and related labor costs, is subject to numerous external factors, including the availability of qualified persons in the workforce in the local markets in which we are located, unemployment levels within those markets, prevailing wage rates, changing demographics, attitudes toward employment in the food and drug retail industry, the perception of our corporate values and business strategy, health and other insurance costs and adoption of new or revised employment and labor laws and regulations. Such laws related to employee hours, wages, job classification and benefits could significantly increase our operating costs. In the event of increasing wage rates, if we fail to increase our wages competitively, the quality of our workforce could decline, causing our customer service to suffer, while increasing wages for our employees could cause our costs to increase. If we are unable to locate, to train, to attract or to retain qualified personnel capable of meeting our business needs and expectations, the quality of service we provide to our customers may decrease and our business, financial performance and brand image may be adversely affected. Any failure to meet our staffing needs or any material increase in turnover rates of our employees may adversely affect our business, results of operations and financial condition. We believe that our success is directly linked to the competent people in the Company, including our executive officers and other key personnel. Personnel turnover can be costly and could materially and adversely impact our operating results and potentially jeopardize the success of our business strategy. Our business and operating results may be adversely impacted if we fail to retain and recruit key personnel.

A significant majority of our employees are unionized, and our relationship with unions, including labor disputes or work stoppages, as well as related and other pensions expenses could have an adverse impact on our operations and financial results.

As of February 28, 2026, approximately 190,000 of our employees were covered by collective bargaining agreements. During fiscal 2025, collective bargaining agreements covering approximately 126,000 employees expired and were successfully renegotiated. In fiscal 2026, collective bargaining agreements covering approximately 22,000 employees are scheduled to expire. We currently contribute to 28 multiemployer pension plans for a substantial majority of employees represented by unions pursuant to collective bargaining agreements that require us to contribute to these plans. In future negotiations with labor unions, we expect that health care, pension costs and/or contributions and wage costs, among other issues, will be important topics for negotiation. If, upon the expiration of such collective bargaining agreements, we are unable to negotiate acceptable contracts with labor unions, it could result in strikes by the affected workers and significantly disrupt our operations. As part of our collective bargaining agreements, we may need to fund additional pension contributions, which would negatively impact our operating costs. In the event we were to exit certain markets or otherwise cease contributing to multiemployer plans, we could trigger a substantial withdrawal liability. Such withdrawal liability may have a material adverse impact on our financial results. We are also the sponsors of defined benefit retirement plans for certain employees. The funded status of these plans is a significant factor in determining annual pension expense and cash contributions to fund the plans. Unfavorable investment performance, increased pension expense and cash contributions may have an adverse impact on our financial results. For additional information, see "Part II—Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Multiemployer Pension Plans."

Risks Related to Our Industry

Competition in our industry is intense, and our failure to compete successfully may adversely affect our profitability and operating results.

The food and drug retail industry is large and dynamic, characterized by intense competition among a collection of local, regional and national participants. In addition to new entrants to the market, we face strong competition from existing supercenters, other brick and mortar food and/or drug retailers, club stores, dollar and discount stores, grocery outlets, online retailers and distributors, specialty and niche supermarkets, "limited assortment" stores, drug stores, general merchandisers, wholesale stores, convenience stores, natural food stores, farmers' markets, local chains and stand-alone stores that cater to the individual cultural preferences of specific neighborhoods, restaurants, catering companies and home delivery and meal solution companies. Shifts in the competitive landscape, consumer preference or market share may have an adverse effect on our profitability and results of operations.

As a result of consumers' growing desire to shop online, we also face increasing competition from both our existing competitors that have incorporated the internet as a direct-to-consumer channel and online providers that sell grocery products. Although we have accelerated the expansion of our digital business to offer our customers the ability to shop online for both Drive Up & Go curbside pickup and home delivery, there is no assurance that these online initiatives will continue to be successful. In addition, these initiatives may have an adverse impact on our profitability because of lower gross margins or greater operating costs to compete.

Our ability to attract customers is dependent, in large part, upon a combination of channel preference, location, store conditions, quality, fresh, price, service, convenience and selection and our ability to leverage existing and emerging digital technologies. In each of these areas, other companies compete with us and may successfully attract our customers by matching or exceeding what we offer or by providing greater shopping convenience or better offerings. In recent years, many of our competitors have aggressively added locations and adopted a multi-channel approach to marketing and advertising. Our responses to competitive pressures, such as additional promotions, increased advertising, additional capital investment including for development of our digital offerings and retail media network, could adversely affect our profitability and cash flow. We cannot guarantee that our competitive response will succeed in increasing or maintaining our share of retail food sales.

An increasingly competitive industry and inflation and deflation in the prices of certain foods have made it difficult for food retailers to achieve positive identical sales growth on a consistent basis. We and our competitors have attempted to maintain or grow our respective share of retail food sales through capital and price investment, increased promotional activity and new and remodeled stores, creating a more difficult environment to consistently increase year-over-year sales. Some of our primary competitors are larger than us, have greater financial resources available to them or sell a diversified mix of non-food products, and, therefore, may be able to devote greater resources to grow their share of retail food sales or offset lower food margins with higher-margin non-food products. Price investment by our competitors has also adversely affected our operating margins.

We have evaluated in the past, and may evaluate in the future, certain strategic transactions with complementary businesses, services, or technologies as part of our overall growth strategy. These strategic transactions may involve significant risks, including but not limited to: the need for substantial financial investment; the diversion of management’s attention and resources from our existing operations; challenges in integrating acquired businesses or realizing expected synergies; the need to obtain costly or time-consuming regulatory approvals; potential negative perception by our customers, shareholders and the broader market; and exposure to contingent or unexpected liabilities, any of which could adversely impact our business, results of operations, financial condition and future prospects.

Our continued success to effectively compete in the food retail industry is dependent upon our ability to control operating expenses, replicate competitor capabilities, make appropriate investments, manage product and labor costs in an increasingly competitive labor market and health care and pension costs stipulated by our collective bargaining agreements. Several of our primary competitors are larger than we are, or are not subject to collective bargaining agreements. This allows them to more effectively leverage their fixed costs or more easily reduce operating expenses. Changes in our product mix also may negatively affect our profitability. Our inability to adequately control and prevent shrink has impacted our results of operations and could impact our results of operations in the future. Failure to accomplish our objectives could impair our ability to compete successfully and adversely affect our profitability. Profit margins in the food retail industry are low. In order to increase or maintain our profit margins, we develop operating strategies to increase revenues, increase gross margins and reduce costs, such as our business strategy, new marketing programs, new advertising campaigns, productivity improvements, shrink-reduction initiatives, distribution center efficiencies, manufacturing efficiencies, energy efficiencies and other similar strategies and value-creating initiatives. Our failure to achieve forecasted revenue growth, gross margin improvement or cost reductions could have a material adverse effect on our profitability and operating results.

Failure to timely identify or respond to evolving consumer preferences, including changes in how customers use digital and AI-driven tools, could adversely affect our customer relationships, demand and market share.

Because we face intense competition, our success depends, in part, on effectively anticipating evolving trends in demographics and responding to changing consumer preferences and demands. It is difficult to predict consistently and successfully the products and services our customers will demand over time. Failure to timely identify or effectively respond to changing consumer tastes, preferences and spending patterns could lead us to offer our customers a mix of products, methods to purchase products or a level of pricing that they do not find attractive.

In addition, advances in technology are changing how customers interact with retailers and make purchasing decisions. The emergence of artificial intelligence‑powered agentic shopping tools, through which AI agents autonomously research, compare and purchase products on behalf of consumers, could further disrupt traditional grocery retail. If customers increasingly rely on these tools and AI agents prioritize factors such as price or speed over retailer preference or brand loyalty, we could lose our direct relationship with customers. This could reduce our visibility into customer behavior, increase margin pressure, and limit our ability to influence purchasing decisions.

These developments could negatively affect our relationship with customers, leading them to reduce their visits to our stores, shift purchases to other channels or methods, and decrease the amount they spend with us. Further, while we have significantly expanded our digital capabilities and grown our loyalty programs over the last several years, as technology continues to evolve and customer expectations change, we will need to continue to develop and offer digital, loyalty, media and other technology‑enabled solutions that are both cost effective and compelling. Failure to anticipate or respond to customer expectations for products, services, digital capabilities, loyalty programs or emerging purchasing technologies could negatively affect demand for our products and services and our market share, which may adversely impact our financial condition and results of operations.

Changes in the healthcare industry could adversely affect our financial condition and results of operations.

Many organizations in the healthcare industry have consolidated to create larger healthcare enterprises with greater market power, which has resulted in increased pricing pressures. If this consolidation trend continues, it could give the resulting enterprises even greater bargaining power, which may lead to further pressure on the prices for our pharmacy products and services. If these pressures result in reductions in our prices, we will become less profitable unless we are able to achieve corresponding reductions in costs, increase productivity or develop profitable new revenue streams. We expect that market demand, government regulation, third-party reimbursement policies, government contracting requirements, direct-to-consumer sales of prescription drugs, growth in online pharmacies, litigation and societal pressures will continue to cause the healthcare industry to evolve, potentially resulting in further business consolidations and alliances among the industry participants we engage with, which may adversely impact our financial condition and results of operations. In addition, the Inflation Reduction Act of 2022 established the Medicare Drug Negotiation Program, which authorizes the federal government to directly negotiate prices for certain prescription drugs reimbursed under Medicare Part B and Part D. The program became effective in 2026 and, while initially limited, is expected to expand over time to include up to 100 drugs by 2031. The drugs subject to future negotiation, the prices ultimately established, and the broader effects on commercial pricing, reimbursement structures, and customer purchasing behavior remain uncertain. As a result, the program could negatively impact the Company's revenues, profitability, and overall financial condition or results of operations. Any expansion of the program or adoption of similar pricing mechanisms by other government or private payers could further increase these risks.

Certain risks are inherent in providing pharmacy products and services, and our insurance may not be adequate to cover any claims against us.

We currently operate 1,713 in-store pharmacies. As a result, we are exposed to risks inherent in the packaging, dispensing, billing, display, distribution and disposal of pharmaceuticals and other healthcare products, including risks of liability for products such as opioids. Although we maintain insurance against such liabilities, we cannot guarantee that the coverage limits under our insurance programs will be adequate to protect us against future claims, or that we will be able to maintain this insurance on acceptable terms in the future, or at all for healthcare and pharmaceutical liabilities. Our results of operations, financial condition or cash flows may be materially adversely affected if in the future our insurance coverage proves to be inadequate or unavailable, or there is an increase in the liability for which we self-insure, or we suffer harm to our reputation because of an error or omission. Also, our business operations and operating results could be materially adversely impacted by legislative, enforcement, regulatory, judicial and public policy changes.

We are subject to numerous federal and state regulations. Each of our in-store pharmacies are enrolled in government healthcare programs and must be licensed by the respective state government. The licensing and enrollment requirements vary from state to state. An additional registration certificate must be granted by the U.S. Drug Enforcement Administration, and, in some states, a separate controlled substance license must be obtained to dispense controlled substances. In addition, pharmacies selling controlled substances are required to maintain extensive records and often report information to state and federal agencies. If we fail to comply with existing or future laws and regulations, we could suffer substantial civil or criminal penalties, including the loss of our licenses to operate pharmacies and our ability to participate in federal and state healthcare programs. Because of the severe penalties we could face, we must devote significant operational and managerial resources to complying with these laws and regulations. Application of federal and state laws and regulations could subject our current practices to allegations of impropriety or illegality, or could require us to make significant changes to our operations. In addition, we cannot predict the impact of future legislation and regulatory changes on our pharmacy operations or assure that we will be able to obtain or maintain the regulatory approvals required to operate our pharmacy business.

Risks Related to Our Supply Chain

Product and raw material supply disruptions, especially those related to fresh products, may have an adverse effect on our profitability and operating results.

Reflecting consumer preferences, we have a significant focus on fresh products. We rely on various suppliers and vendors to provide and deliver our fresh and other product inventory on a continuous basis and to supply the raw materials to manufacture certain of our Own Brands products. We could suffer significant fresh and other product inventory losses and significant lost revenue in the event of the loss or a shutdown of a major supplier or vendor, disruption of our distribution network, extended power outages, natural disasters, current and future tariffs arising from international trade disputes, foreign conflicts, acts of war or terrorism, disruptive political events or other catastrophic or unexpected occurrences such as a pandemic like COVID-19. We expect our suppliers to comply with applicable laws, including labor, safety and environmental laws. Our ability to find qualified suppliers who uphold our standards and requirements for products, including fresh, and to access such products in a timely and operationally efficient manner in volumes we may demand may become a significant challenge.

Severe weather, natural disasters and other climate changes may adversely affect our business.

Severe weather conditions such as hurricanes, earthquakes, floods, wildfires, mudslides, winter storms, tornadoes, as well as other natural disasters in areas in which we have stores or distribution centers have caused and may cause physical damage to our properties, closure of one or more of our stores, manufacturing facilities or distribution centers, lack of an adequate work force, disruption in the manufacture and supply of products, disruption and delays in transportation and delivery of goods, inability of our workforce to work at our facilities, reduction in customer traffic and generally a reduction in the availability of products in our stores.

In addition, adverse climate conditions, weather patterns and their respective impacts such as drought, flood, wildfires, mudslides and changing ambient temperatures adversely impact product cultivation conditions for farmers, ranchers and fishermen, including by disrupting ecosystems and severely altering the growing conditions, nutrient levels, soil moisture, and water availability necessary for the growth and cultivation of crops and raising of animals. As extreme shifts in climate conditions make it more difficult to raise and produce crops, livestock, and seafood, there may be a decrease in the product quality and the yield quantity of food products. Consequently, such a decreased food supply may adversely affect the availability or cost of certain products within the grocery supply chain, which could lead to shortages or reduced gross profit margins as such products become more expensive. At the global level, the impact of climate change on food supply is more likely to lead to food insecurity in countries which, unlike the United States, have climates insufficient to sustain diverse food production. Thus, there may be increased demand for agricultural exports from regions that experience production difficulties yet have sufficient wealth to purchase imports. This may impact the availability of products for us to purchase.

In addition, legislative and regulatory efforts to combat climate change or other environmental issues could result in new or more stringent forms of oversight and mandatory or voluntary reporting, diligence and disclosure, which could increase costs, result in additional taxes and other expenses, and further impact our business, results of operations and financial condition.

Threats or potential threats to food and drug safety, the occurrence of a widespread health epidemic and/or pandemic or regulatory concerns in our supply chain may adversely affect our business.

Acts or threats, whether perceived or real, of war or terror or other criminal activity directed at the food and drug industry or the transportation industry, whether or not directly involving our stores, could increase our operating costs or impact general consumer behavior and consumer spending. Other events that give rise to actual or potential food contamination, drug contamination or food-borne illnesses, or a widespread regional, national or global health epidemic and/or pandemic could have an adverse effect on our operating results or disrupt production and delivery of the products we sell, our ability to appropriately and safely staff our stores and cause customers to avoid public gathering places or otherwise change their shopping behaviors. We source our products from vendors and suppliers and related networks across the globe who may be subject to regulatory actions or face criticism due to actual or perceived social injustices, including human trafficking, non-sustainable practices, child labor or environmental, health and safety violations. A disruption in our supply chain due to any regulatory action or social injustice could have an adverse impact on our supply chain and ultimately our business, including potential harm to our reputation.

We could be affected if consumers lose confidence in the food supply chain or the quality and safety of our products.

We could be adversely affected if consumers lose confidence in the safety and quality of certain food products. Adverse publicity about these types of concerns, whether valid or not, may discourage consumers from buying our products or cause production and delivery disruptions. To the extent that a pathogen is food-borne, or perceived to be food-borne, future outbreaks may adversely affect the price and availability of certain food products and cause our customers to eat less of such products. In addition, recalls or withdrawals of food products, and in particular the food products we manufacture or are sold under any of our Own Brands product names, may involve costs to us, the inability to sell those products or reputational harm to us. The real or perceived sale of contaminated food products by us could result in product liability claims, a loss of consumer confidence in our products and product recalls or withdrawals, which could have a material adverse effect on our business.

Fuel prices and availability may adversely affect our results of operations.

We currently operate 405 fuel centers that are adjacent to many of our store locations. As a result, we sell a significant amount of gasoline and diesel fuel. Increased regulation or significant increases in wholesale fuel costs and fuel taxes could result in lower gross margins on fuel sales, and demand could be negatively impacted by retail price increases as well as by concerns about the effect of emissions on the environment. We are unable to predict future regulations, environmental effects, political unrest, geopolitical tensions, hostilities or boycotts, acts of war or terrorism, the actions of major oil producing countries to regulate oil production, or the acts of countries to disrupt the distribution of oil, and other matters that may affect the cost and availability of fuel, and how our customers will react to any of the preceding matters, which could adversely affect our results of operations.

Increased commodity prices may adversely impact our profitability.

Many of our own and sourced products include ingredients such as wheat, corn, oils, milk, sugar, proteins, cocoa and other commodities. Commodity prices can be volatile and can be impacted by geopolitical risks and tariffs arising from international trade disputes, trade wars and inflation. For example, tariffs on products imported from certain countries may increase commodity prices for products. Any increase in commodity prices may cause an increase in our input costs or the prices our vendors seek from us. Although we typically are able to pass on modest commodity price increases or mitigate vendor efforts to increase our costs, we may be unable to continue to do so, either in whole or in part, if commodity prices increase materially or there are significant inflationary pressures. If we are forced to increase prices, our customers may reduce their purchases at our stores or trade down to less profitable products. Both may adversely impact our profitability as a result of reduced revenue or reduced margins.

Legal and Regulatory Risks

Unfavorable changes in government regulation may have a material adverse effect on our business.

We operate our business within strict and complex regulatory environments, which includes laws and regulations involving antitrust and competition, privacy, data protection, environmental, healthcare, anti-bribery, anti-corruption, tax, accounting, financial reporting, health and sanitation standards, food labeling and safety, prescriptions, controlled substances, zoning, vehicle operations, fuel operations, equal employment opportunity, minimum wages and licensing for the sale of food, drugs, and alcoholic beverages, among other matters, and we could be materially adversely affected by changes to, and/or any failure to comply with, existing and new legal requirements. In addition, our industry faces significant political, societal, and media scrutiny, and we may be subject to frequent or increasing challenges which may impact our reputation and business. Additionally, shifts in enforcement practices or regulatory scrutiny generally cannot be anticipated or predicted or our predictions may not be accurate. If we fail to predict or respond adequately to regulatory changes or expanding disclosure requirements, or do not respond as effectively as our competitors, our reputation, business, operations, and financial performance may be adversely affected. Political, governmental, and regulatory regimes and practices can evolve as a result of elections or other events beyond our control. Such changes, including those which have and may occur under the new administration, are unpredictable and may have negative impacts on our business and operations. Compliance with laws, regulations, policies, and enforcement practices may become challenging requiring operational changes which may be difficult to implement, increase our operating costs, require significant capital expenditures, or result in adverse publicity and harm our reputation.

Tax matters could adversely affect our results of operations and financial conditions.

We may be affected by higher rates of federal, state, or local tax imposed as a result of political developments or economic conditions, which could adversely affect our earnings. Our future tax liability could be adversely affected by regulatory and legal changes, the results of tax audits and examinations, and changes in accounting policies and interpretations relating to tax matters, all of which could negatively impact our business. In addition, changes in tax rates, tax laws, and regulations that impact our customers or the economy generally may also impact our financial condition and results of operations.

Unfavorable changes in, failure to comply with, or increased costs to comply with environmental laws and regulations could adversely affect us. The storage and sale of petroleum products could expose us to potentially significant liabilities.

Our operations, including our 405 fuel centers, are subject to various laws and regulations relating to the protection of the environment, including those governing the storage, management, disposal and cleanup of hazardous materials. Some environmental laws, such as the Comprehensive Environmental Response, Compensation and Liability Act and similar state statutes, impose strict, and under certain circumstances joint and several, liability for costs to remediate a contaminated site, and also impose liability for damages to natural resources. Third-party claims in connection with releases of, or exposure to, hazardous materials relating to our current or former properties or third-party waste disposal sites can also arise. In addition, the presence of contamination at any of our properties could impair our ability to sell or lease the contaminated properties or to borrow money using any of these properties as collateral. The costs and liabilities associated with any such contamination could be substantial and could have a material adverse effect on our business. Under current environmental laws, we may be held responsible for the remediation of environmental conditions regardless of whether we lease, sublease or own the stores or other facilities and regardless of whether such environmental conditions were created by us or a prior owner or tenant. In addition, the increased focus on climate change, waste management and other environmental issues may result in new environmental laws or regulations that negatively affect us directly or indirectly through increased costs on our suppliers. There can be no assurance that environmental contamination relating to prior, existing or future sites or other environmental changes will not adversely affect us through, for example, business interruption, cost of remediation or adverse publicity.

We are subject to, and may in the future be subject to, legal or other proceedings that could have a material adverse effect on us.

In the course of conducting our business, arising in or outside of the ordinary course, we are and may become a party to various legal proceedings, including lawsuits related to the termination of the merger agreement with Kroger, class actions in matters involving personnel and employment issues, federal and state wage and hour laws, personal injury, antitrust claims based on both federal and state law, packaging or product claims, claims related to the sale of drug or pharmacy products, such as opioids, claims invoking consumer-protection statutes, intellectual property claims and fiduciary and securities claims. We may also become subject to governmental and regulatory inquiries related to our operations. We estimate our exposure to legal proceedings and establish reserves for the estimated liabilities. We are unable to predict the outcome of any litigation, investigation or any action by governmental entities and can provide no assurance as to the scope and outcome of these matters and whether our business, financial position, results of operations or cash flows will not be materially adversely affected. In addition, legal proceedings are expensive and could result in significant costs to us, including any costs we may be required to pay in connection with the legal proceedings with Kroger. These significant costs, along with our inability to collect the termination fee of $600 million from Kroger, could have a material adverse effect on our business, operating results, and financial condition.

The inability to insure or have adequate amounts of insurance against the risks we face may have a material adverse impact on our results of operations.

We estimate the liabilities associated with the risks retained by us, in part, by considering historical claims experience, demographic and severity factors and other actuarial assumptions which, by their nature, are subject to a high degree of variability. Among the causes of this variability are unpredictable external factors affecting future inflation rates, discount rates, litigation trends, legal interpretations, benefit level changes and claim settlement patterns. The majority of our workers' compensation liability is from claims occurring in California, where workers' compensation has received intense scrutiny from the state's politicians, insurers, employers and providers, as well as the public in general. State-specific statutes and legislation may result in an increase to our workers' compensation liability, which could have a material adverse impact on our results of operations.

Risks Related to Information Security, Cybersecurity, Data Privacy and Artificial Intelligence Technologies

We may be adversely affected by risks related to our dependence on IT systems. Any future changes to or intrusion into these IT systems, even if we are compliant with industry security standards, could materially adversely affect our financial condition and operating results.

We have complex information technology systems that are important to the success of our business operations, financial reporting and marketing initiatives. Our information systems are subject to outages, unplanned downtime, program transitions, breakdowns, ransomware attacks, denial of service attacks, malware and other cyber incidents. If we fail to timely or successfully mitigate such adverse events affecting these systems, or experience difficulties accessing the proprietary business data stored in these systems, or in maintaining, expanding or upgrading existing systems or implementing new systems, we could incur significant losses to our business and operations. These risks may be further exacerbated by the deployment and use of cloud-based enterprise solutions. In a cloud computing environment, we are subject to outages by third-party service providers and security breaches to their systems, which we may have little control over. In the case of a cloud computing outage, the reconstitution of our business services running on those computing resources will be dependent on the third-party hosting provider restoring availability.

Improper activities by third parties, exploitation of encryption technology, new data-hacking tools and discoveries and other events or developments may result in future intrusions into or compromise of our networks, payment card terminals or other payment systems.

We regularly defend against and respond to data security incidents. While we are vigilant in monitoring the security of our information technology systems, we may not be able to prevent all unauthorized access or remediate the impact of such unauthorized access. The techniques used by cyber criminals change frequently and often cannot be recognized until launched against a target; accordingly, we may not be able to anticipate these frequently changing techniques, implement adequate preventive measures for all of them or remediate any unauthorized access on a timely basis. In addition, ongoing geopolitical conflicts and the development of sophisticated artificial intelligence systems may increase the risk of cyberattacks which could impact our operations. Any unauthorized access into our customers' sensitive information, data belonging to us or our vendors or employee data, even if we are compliant with industry security standards, could put us at a competitive disadvantage, result in deterioration of our customers', vendors' and employees' confidence in us and subject us to investigations, required notifications or public disclosures, potential litigation, liability, fines and penalties and consent decrees, resulting in a possible material adverse impact on our financial condition and results of operations.

As a merchant that accepts debit and credit cards for payment, we are subject to the Payment Card Industry ("PCI") Data Security Standard ("PCI DSS"), issued by the PCI Council. PCI DSS contains compliance guidelines and standards with regard to security surrounding the physical administrative and technical storage, processing and transmission of individual cardholder data. By accepting debit cards for payment, we are also subject to compliance with American National Standards Institute ("ANSI") data encryption standards and payment network security operating guidelines. Failure to be PCI compliant or to meet other payment card standards may result in the imposition of financial penalties or the allocation by the card brands of the costs of fraudulent charges to us. Additionally, the Fair and Accurate Credit Transactions Act ("FACTA") requires systems that print payment card receipts to employ personal account number truncation so that the consumer's full account number is not viewable on the slip. Despite our efforts to comply with these or other payment card standards and other information security measures, we cannot be certain that all of our IT systems will be able to prevent, contain or detect all cyber-attacks or intrusions. To the extent that any disruption results in the loss, damage or misappropriation of information, we may be adversely affected by claims from customers, financial institutions, regulatory authorities, payment card associations and others. In addition, privacy and information security laws and standards continue to evolve and could expose us to further regulatory burdens. The cost of complying with stricter laws and standards, including PCI DSS, ANSI and FACTA data encryption standards and state consumer data privacy, data protection and related laws, could be significant.

The loss of confidence from a data security incident involving our customers, employees or vendors could materially adversely affect our financial condition and operating results.

We receive, store and transmit personal information in connection with our business, including information from processing credit card data, digital marketing, and human resources records. The legal landscape surrounding privacy and cybersecurity is constantly changing, leading to stricter requirements for the processing of personal information. Meeting these obligations poses challenges, as any missteps could result in fines, government scrutiny, and lawsuits from individuals and regulators. Violations, or even perceived violations, of privacy, can adversely affect the trust that customers, employees, and vendors place in us regarding their personal information. The protection of our customer, employee and vendor data is critically important to us. Despite our considerable efforts to secure, upgrade and maintain our computer networks, our information security could be compromised, and customer, employee and vendor confidential information could be misappropriated whether as a result of cyberattacks on our information systems, the information systems hosted by third party providers or otherwise. If we experience a data security incident, we could be exposed to government enforcement actions, ransomware claims, loss of business information, negative publicity and possible claims from customers, associates, financial institutions and payment card associations. In addition, our customers could lose confidence in our ability to protect their personal information, which could cause them to stop shopping at our stores altogether and materially adversely affect our financial condition and operating results.

We and our third parties may use artificial intelligence in our business, which could result in competitive and reputational harm, and legal liability, and adversely affect our results of operations.

We and our third parties are increasingly incorporating artificial intelligence ("AI") solutions into our operations, systems, and services. Developing and incorporating AI solutions into our business is uncertain and may result in increased costs and business disruptions without a corresponding benefit. Our competitors may incorporate AI into their products and services more quickly or more successfully than us, which could impair our ability to compete effectively in the market. Additionally, if the content, analyses, or recommendations that AI applications assist in producing are or are alleged to be deficient, inaccurate, biased, or infringe on existing intellectual property, our business, financial condition, and results of operations may be adversely affected. AI presents emerging ethical issues and could pose potential harms to our customers and associates and if our use of AI becomes controversial, we may experience competitive harm, brand or reputational harm, or legal liability. AI also presents a new attack surface that cybercriminals will attempt to exploit as well as providing means to scale and automate targeted attacks. The rapid evolution of AI, including expected government regulation of AI and automated decision making, requires resources, formalized AI governance, a commitment to the ethical and responsible use of data, and processes to best meet these challenges. If we fail to adopt AI in a thoughtful and strategic manner, the risks above may be exacerbated.

Risks Related to Our Indebtedness

Our indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under our indebtedness.

As of February 28, 2026, we had approximately $8.6 billion of debt outstanding (other than finance lease obligations), and, subject to our borrowing base, we would have been able to borrow an additional $3.6 billion under our asset-based loan ("ABL") facility (the "ABL Facility"). As of February 28, 2026, we and our subsidiaries had approximately $0.4 billion of finance lease obligations.

Our indebtedness could have important consequences. For example, it could: increase our vulnerability to general adverse economic and industry conditions; require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes, including acquisitions; limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; place us at a competitive disadvantage compared to our competitors that have less debt; and limit our ability to borrow additional funds. In addition, there can be no assurance that we will be able to refinance any of our debt or that we will be able to refinance on commercially reasonable terms. If we were unable to make payments or refinance our debt or obtain new financing under these circumstances, we would have to consider other options, such as sales of assets, sales of equity or restructure of the applicable debt.

We may incur substantially more debt in the future.

We and our subsidiaries may incur substantial additional indebtedness in the future. The terms of the credit agreement that governs the ABL Facility and the indentures that govern our indebtedness, as disclosed in "Part II—Item 8. Financial Statements and Supplementary Data—Note 5", permit us to incur significant additional debt, subject to certain limitations. If new indebtedness is added to our and our subsidiaries' current debt levels, the related risks that we and they now face would increase.

To service our indebtedness, we require a significant amount of cash, and our ability to generate cash depends on many factors beyond our control.

Our ability to make cash payments on and to refinance the indebtedness and to fund planned capital expenditures will depend on our ability to generate significant operating cash flow in the future, as described in the section entitled "Part II—Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-K. This ability is, to a significant extent, subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Our business may not generate sufficient cash flow from operations to enable us to pay our indebtedness or to fund our other liquidity needs. In any such circumstance, we may need to refinance all or a portion of our indebtedness, on or before maturity. We may not be able to refinance any indebtedness on commercially reasonable terms, or at all. If we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional equity or reducing or delaying capital expenditures, strategic acquisitions and investments. Any such action, if necessary, may not be effected on commercially reasonable terms, or at all. The instruments governing our indebtedness may restrict our ability to sell assets and our use of the proceeds from such sales.

If we are unable to generate sufficient cash flow or are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under our credit agreement, or any replacement revolving credit facility in respect thereof, could elect to terminate their revolving commitments thereunder, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation.

Our debt instruments limit our flexibility in operating our business.

Our debt instruments contain various covenants that limit our and our restricted subsidiaries' ability to engage in specified types of transactions. A breach of any of these covenants could result in a default under our debt instruments. Any debt agreements we enter into in the future may further limit our ability to enter into certain types of transactions. In addition, certain of the covenants governing the ABL Facility and our existing notes restrict, among other things, our and our restricted subsidiaries' ability to: incur additional indebtedness or provide guarantees in respect of obligations of other persons; pay dividends on, repurchase stock from or make distributions to our stockholders, or make other restricted payments or make certain investments; prepay, redeem or repurchase debt; make loans, investments and capital expenditures; sell or otherwise dispose of certain assets; incur liens; engage in sale leaseback transactions; restrict dividends, loans or asset transfers from our subsidiaries; consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; enter into a new or different line of business; and enter into certain transactions with our affiliates.

In addition, the restrictive covenants in our ABL Facility require us, in certain circumstances, to maintain a specific fixed charge coverage ratio. Our ability to meet that financial ratio can be affected by events beyond our control, and there can be no assurance that we will meet it. A breach of this covenant could result in a default under such facilities. Moreover, the occurrence of a default under our ABL Facility could result in an event of default under our other indebtedness. Upon the occurrence of an event of default under our ABL Facility, the lenders could elect to declare all amounts outstanding under the ABL Facility to be immediately due and payable and terminate all commitments to extend further credit. Even if we can obtain new financing, it may not be on commercially reasonable terms, or terms that are acceptable to us.

Increases in interest rates, a downgrade of our credit ratings and/or instability in the credit market could negatively affect our financing costs and our ability to access capital.

We have exposure to future interest rates based on the variable rate debt under our ABL Facility and to the extent we raise additional debt in the capital markets to meet maturing debt obligations, to fund our capital expenditures, working capital needs and to finance future acquisitions. Daily working capital requirements are typically financed with operational cash flow and use of our ABL Facility. The interest rate on these borrowing arrangements is generally determined from a borrowing rate at the borrowing date plus a pre-set margin. Significant and sustained increases in market interest rates could materially increase our financing costs and negatively impact our reported results. We rely on access to bank and capital markets as sources of liquidity for cash requirements not satisfied by cash flows from operations. A downgrade in our credit ratings from the internationally recognized credit rating agencies could negatively affect our ability to access the bank and capital markets, especially in a time of uncertainty in either of those markets. A rating downgrade could also impact our ability to grow our business by substantially increasing the cost of, or limiting access to, capital.

Risks Related to Owning Our Common Stock

The price of our common stock may be volatile or may decline regardless of our operating performance, and you may suffer a decline in value.

The market price of our common stock is volatile and may be influenced by many factors, some of which are beyond our control, including: stock market volatility in response to macroeconomic and global events; if a substantial number of shares of our common stock becomes available for sale and are sold in a short period of time, the market price of our common stock could decline; the failure of securities analysts to cover our common stock, or changes in financial estimates by analysts; if one or more securities analysts downgrade our shares or if those analysts issue a sell recommendation or other unfavorable commentary or cease publishing reports about us or our business; changes in, or investors' perception of, the food and drug retail industry; the activities of competitors; future issuances and sales of our common stock, including in connection with acquisitions; the impact of our stock repurchase program; future sales of our common stock by our largest stockholder; our quarterly or annual earnings or those of other companies in our industry; the public's reaction to our press releases, our other public announcements and our filings with the SEC; and litigation involving us, our industry, or both.

Our largest stockholder is Cerberus, which may have conflicts of interest with other stockholders in the future.

Cerberus beneficially owns in the aggregate approximately 30% of our common stock and Cerberus has certain governance rights pursuant to a Stockholders' Agreement. As a result, Cerberus may be able to influence (i) the election of our directors, (ii) our corporate and management policies and (iii) other matters submitted to our stockholders for approval. The interests of Cerberus may not coincide with the interests of other holders of our common stock. Additionally, Cerberus is in the business of making investments in companies and may, from time to time, acquire and hold interests in businesses that compete directly or indirectly with us. Cerberus may also pursue, for its own account, acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. So long as Cerberus continues to own a significant amount of the outstanding shares of our common stock, Cerberus will continue to be able to strongly influence our decisions.

Provisions in our charter documents and Delaware law may prevent attempts by our stockholders to replace or remove our current management, even if beneficial to our stockholders.

Provisions in our amended and restated certificate of incorporation, as amended ("certificate of incorporation"), and our amended and restated bylaws ("bylaws") may restrict the ability of stockholders to make changes in our governance that they may consider advantageous or desirable. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace members of our Board of Directors (the "Board"). Because our Board is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace members of our management team. Our certificate of incorporation authorizes our Board to issue up to 100,000,000 shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which may be determined by our Board at the time of issuance or fixed by resolution without further action by the stockholders. These terms may include voting rights, preferences as to dividends and liquidation, conversion rights, redemption rights, and sinking fund provisions. The issuance of preferred stock could diminish the rights of holders of our common stock, and therefore could reduce the value of our common stock. In addition, specific rights granted to holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of our Board to issue preferred stock could delay, discourage, prevent, or make it more difficult or costly to acquire or effect a change in control, thereby preserving the current stockholders' control.

Our ability to pay dividends to our stockholders is restricted by applicable laws and regulations and requirements under certain of our securities and debt agreements, including the ABL Facility, and our existing notes.

Holders of our common stock are only entitled to receive such cash dividends as our Board, in its sole discretion, may declare out of funds legally available for such payments, including minimum capital requirements and limited by contractual obligations or covenants in any financing arrangements that we are currently a party to, including the ABL Facility and our existing notes, or any that we may enter into in the future. As a consequence of these various limitations and restrictions, we may not be able to make, or may have to reduce or eliminate at any time, the payment of dividends on our common stock.

Risk Management and Strategy

Our cybersecurity risk management processes for assessing and managing risks from cybersecurity threats include proactively identifying and detecting internal and external threats and vulnerabilities and mitigating, containing or eradicating attacks, as necessary. To ensure the highest levels of availability and integrity of critical business systems and services, we have designed a comprehensive risk reduction strategy. Our cybersecurity related risk management processes include assessing risk based on business criticality, data classification, disaster recovery rating, and security monitoring our operations (e.g., network, systems, retail stores, manufacturing plants and distribution centers) to determine where and how critical business operations could be impacted by a cyber incident. We maintain a risk repository and partner with technology and business teams to identify and remediate risk. Our cybersecurity team conducts regular risk assessments to analyze the likelihood of compromise and magnitude of harm which could potentially result from unauthorized access, use, disclosure, disruption, modification, or destruction of the Company's systems and data. We also perform risk assessments on our third-party suppliers. We make reasonable efforts to require third-party technology service providers to manage vulnerabilities in their environments to prevent the risk of impact to our business operations and enterprise network. We also undertake periodic National Institute of Standards and Technology ("NIST") Cybersecurity Framework assessments, conducted by a third party, to ensure our cybersecurity program is maturing in-line with industry and includes the key functions and capabilities to address key risk areas.

Collectively with our technology partners, we continuously (24/7) monitor our systems and assets to quickly respond to cybersecurity threats against our business. We conduct vulnerability scanning of our infrastructure and applications to identify risk and work with relevant stakeholders to proactively remediate risk where necessary. Additionally, we partner with multiple third-party managed security service providers ("MSSP") for enhanced monitoring of our information technology and data security environment and to perform proactive detection and investigation of suspicious or malicious activity within our network. We have defined processes with our third-party MSSPs for handling and escalating identified potential malicious activity within the Company’s information technology environment. MSSPs and internal stakeholders perform response actions when a security event is identified. Additionally, we meet regularly with our MSSPs to enhance processes and to ensure service level requirements are being met.

Information security risk events are managed by following our cyber incident response plan and executed by our cybersecurity team in coordination with stakeholders (including legal counsel) who review and assess materiality based on qualitative and quantitative factors. In the case of a risk event that has a broad organizational impact, the event will be escalated to the Company’s Corporate Crisis Management Team comprised of senior leadership who will execute a tailored response plan, activate notification procedures where applicable, and guided by legal counsel, coordinate communications with appropriate business partners, and manage the incidents through closure. We conduct annual tabletop exercises to test our response processes and incident management procedures. The outcomes from these exercises are used to drive continuous improvement in how we handle cybersecurity incidents.

Governance

Our Board is engaged in risk management and the oversight of Company-wide risks. To supplement its risk oversight function, our Board has delegated certain risk management responsibilities to the Audit and Risk Committee (the "Audit Committee") and the Technology Committee of the Board (the "Technology Committee").

As part of its responsibility related to enterprise-wide risk management, the Audit Committee reviews and discusses with management cybersecurity risks, how they are being addressed and the effectiveness of risk management policies and practices to help safeguard the Company's operations, financial systems, and data in an ever-evolving threat landscape. The internal audit team, in its quarterly compliance and risk assessment update to the Audit Committee, reports on its reviews of the Company's cybersecurity risk exposures, controls and management actions, as applicable. In addition to this regular reporting, significant cybersecurity incidents, risks or threats may also be escalated on an as-needed basis to the Audit Committee.

The Technology Committee is responsible for oversight of the Company's technology risk management, including but not limited to the Company's technology related policies, technology architecture, significant emerging technology issues and trends that may affect the Company, and practices and safeguards for information technology, cybersecurity, and data security. Our Chief Information Security Officer ("CISO") presents cybersecurity related topics quarterly to the Technology Committee, including reviews of key information security risk metrics and program maturity progress, and annually updates the Board on external assessments.

At the management level, our cybersecurity organization is led by the Company's CISO, who reports to the Company's Chief Technology and Transformation Officer. The CISO is responsible for all aspects of our cybersecurity program across the Company, which includes cybersecurity engineering and architecture, cybersecurity operations, incident response, threat intelligence, identity and access management, cybersecurity risk and compliance, and vulnerability management. Our CISO has served in leadership roles across the banking and financial services sectors. Before joining the Company, he was the Head of Strategy and Governance for the Global Technology Chief Technology Office at JPMorgan. He earned a BS in Computer Science from Saint Anselm College and MBA in Finance from NYU's Stern School of Business. Effective April 26, 2026, the Company hired a new CISO to lead our cybersecurity organization.

Risks from Material Cybersecurity Threats

As of the date of this report, we have not identified any cybersecurity threats that have materially affected or are reasonably anticipated to have a material effect on the Company. Although we have not experienced cybersecurity incidents that are individually, or in the aggregate, material, we have experienced cyberattacks in the past, which have been mitigated by preventive, detective, and responsive measures put in place by the Company.

For a detailed discussion of the Company’s cybersecurity related risks, see "Item 1A. Risk Factors—Risks Related to Information Security, Cybersecurity, Data Privacy and Artificial Intelligence Technologies."

As of February 28, 2026, we operated 2,244 stores located in 35 states and the District of Columbia as shown in the following table:

The following table summarizes our stores by size as of February 28, 2026:

We own or ground-lease approximately 39% of our operating stores and 51% of our industrial properties (distribution centers, warehouses and manufacturing plants).

Our corporate headquarters is located in Boise, Idaho. We own our headquarters. The premises is approximately 250,000 square feet in size. In addition to our corporate headquarters, we have corporate offices in Pleasanton, California, Phoenix, Arizona and Plano, Texas. We also operate global business capability centers in India and the Philippines. We believe our properties are well maintained, in good operating condition and suitable for operating our business.

The Company is subject from time to time to various claims and lawsuits arising in the ordinary course of business, including lawsuits involving trade practices, lawsuits alleging violations of state and/or federal wage and hour laws (including alleged violations of meal and rest period laws and alleged misclassification issues), real estate disputes and other matters. Some of these claims or suits purport or may be determined to be class actions and/or seek substantial damages. It is the opinion of the Company's management that although the amount of liability with respect to certain of the matters described herein cannot be ascertained at this time, any resulting liability of these and other matters, including any punitive damages, will not have a material adverse effect on the Company's business or overall financial condition. See also the matters under the caption Legal Proceedings in "Part II—Item 8. Financial Statements and Supplementary Data—Note 12."

The Company continually evaluates its exposure to loss contingencies arising from pending or threatened litigation and believes it has made provisions where the loss contingency is probable and can be reasonably estimated. Nonetheless, assessing and predicting the outcomes of these matters involves substantial uncertainties. While management currently believes that the aggregate estimated liabilities currently recorded are reasonable, it remains possible that differences in actual outcomes or changes in management's evaluation or predictions could arise that could be material to the Company's results of operations or cash flows.

Environmental Matters

Our operations are subject to regulation under environmental laws, including those relating to waste management, air emissions and underground storage tanks. In addition, as an owner and operator of commercial real estate, we may be subject to liability under applicable environmental laws for clean-up of contamination at our facilities. SEC regulations require us to disclose certain environmental matters arising under federal, state, or local environmental provisions if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold. Pursuant to SEC regulations, we use a threshold of $1 million for purposes of determining whether disclosure of any such proceedings is required.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and related notes found in "Part II—Item 8. Financial Statements and Supplementary Data" in this Form 10-K, as well as "Part II—Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal year ended February 22, 2025 filed with the SEC on April 21, 2025, which provides comparisons of fiscal 2024 and fiscal 2023. This discussion contains forward-looking statements based upon current expectations that involve numerous risks and uncertainties. Our actual results may differ materially from those contained in any forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the section entitled "Special Note Regarding Forward-Looking Statements" set forth in Part I and in Item 1A. "Risk Factors."

Our last three fiscal years consisted of the 53 weeks ended February 28, 2026 ("fiscal 2025"), the 52 weeks ended February 22, 2025 ("fiscal 2024") and the 52 weeks ended February 24, 2024 ("fiscal 2023"). In this Management's Discussion and Analysis of Financial Condition and Results of Operations of Albertsons Companies, Inc., the words "Albertsons," the "Company," "we," "us," "our" and "ours" refer to Albertsons Companies, Inc., together with its subsidiaries.

EXECUTIVE SUMMARY - FISCAL 2025 OVERVIEW

We are one of the largest food retailers in the United States, with 2,244 stores across 35 states and the District of Columbia as of February 28, 2026. We operate 22 well known banners including Albertsons, Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs, Jewel-Osco, ACME, Shaw's, Star Market, United Supermarkets, Market Street, Haggen, Kings Food Markets and Balducci's Food Lovers Market, with approximately 280,000 talented and dedicated employees, as of February 28, 2026, who serve on average 36.5 million customers each week. Additionally, as of February 28, 2026, we operated 1,713 in-store pharmacies, 1,240 in-store branded coffee shops, 405 associated fuel centers, 22 dedicated distribution centers, 19 manufacturing facilities and various digital platforms.

During fiscal 2025, we continued to execute on our business strategy, which is centered around driving customer growth and engagement through digital connection and loyalty, expanding our Media Collective, enhancing the customer value proposition, modernizing capabilities through technology and AI, and driving transformational productivity. We continue to invest in growth through our four digital platforms of eCommerce, Loyalty, Pharmacy & Health and the use of our mobile app in our stores. This integrated ecosystem is intended to enhance our ability to innovate, improve marketing efficiency, and support revenue growth over time, while strengthening customer engagement and loyalty.

Identical sales, excluding fuel, increased 2.0% during fiscal 2025. Our digital investments are continuing to drive engagement, customer acquisition and retention. During fiscal 2025, digital sales, which include Drive Up & Go curbside pickup and home delivery, increased 21% compared to fiscal 2024 as we continue to elevate our customer experience. In loyalty, membership grew 12% to 51.2 million in fiscal 2025 compared to fiscal 2024, while program enhancements and simplification continue to fuel deeper engagement through more frequent transactions and easier reward redemption. During fiscal 2025, in-store pharmacy sales were influenced by evolving regulatory and reimbursement dynamics, while management actions remained focused on improving underlying profitability, operational efficiency and customer engagement

Our customer value proposition focuses on making shopping more affordable, intuitive and personalized across our markets. By combining data-driven personalization with disciplined price investments, we aim to deliver clearer, more consistent value. Through targeted pricing actions, improved loyalty-driven promotions and continued Own Brands innovation, we are reinforcing trust with customers who increasingly expect transparency and consistency in their weekly shop. These efforts are designed to support both value perception and longer-term margin sustainability.

Technology and AI are an important component of our transformation and long-term growth strategy. In the digital customer experience, AI-driven capabilities are helping to modernize the way customers shop, delivering increased personalization intended to drive engagement, basket size and loyalty. Our AI-enabled shopping assistant continues to evolve as customer adoption increases. As part of our investments in an AI-enabled supply chain, we have launched a proprietary forecasting capability we call Gateway to enhance replenishment performance and improve efficiency across promotional center store SKUs. Execution of these initiatives occurs within a dynamic macroeconomic and competitive environment and requires continued investment, discipline and adaptability.

Our capital allocation strategy balances investing for the future, strengthening our balance sheet and returning capital to shareholders through a combination of dividends and opportunistic share repurchases. Capital expenditures were approximately $1,833.6 million during fiscal 2025, primarily including the completion of 94 remodels, the opening of nine new stores and continued investment in our digital and technology platforms. Capital returns to shareholders during fiscal 2025 included $322.7 million of common stock dividends ($0.60 per common share) and the investment of $1,492.5 million for the repurchase of common stock, inclusive of the $750 million ASR Agreement. On April 14, 2026, we increased the quarterly cash dividend from $0.15 per common share to $0.17 per common share. Also on April 14, 2026, we increased the remaining share repurchase authorization to $2.0 billion in total.

Fiscal 2025 highlights

In summary, our financial and operating highlights for fiscal 2025 include:

• Identical sales increased 2.0%
• Digital sales increased 21%
• Loyalty members increased 12% to 51.2 million
• Net income of $217 million, or $0.40 per Class A common share, inclusive of the $600 million charge, net of tax, or $(1.10) per Class A common share, related to the Opioid Settlement Framework (as defined herein)
• Adjusted net income of $1,209 million, or $2.18 per Class A common share
• Adjusted EBITDA of $3,902 million
• Operating cash flows of $2,367 million
• Continued modernization of our store fleet, including completing 94 remodels and opening nine new stores

Stores

The following table shows stores operating, opened and closed during the periods presented:

The following table summarizes our stores by size:

(1) In millions, reflects total square footage of retail stores operating at the end of the period.

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, as well as the conversion of Convertible Preferred Stock when it is antidilutive for GAAP.

EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted net income per Class A common share (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, gross margin and net income per Class A common share. These Non-GAAP Measures exclude the financial impact of items management does not consider in assessing our ongoing core operating performance, and thereby provide useful measures to analysts and investors of our operating performance on a period-to-period basis. Other companies may have different definitions of Non-GAAP Measures and provide for different adjustments, and comparability to our results of operations may be impacted by such differences. We also use Adjusted EBITDA for board of director and bank compliance reporting. Our presentation of 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.

RESULTS OF OPERATIONS

The following information summarizes the components of our Consolidated Statements of Operations for fiscal 2025 compared to fiscal 2024.

Summary of Consolidated Statements of Operations (dollars in millions, except per share data):

Net Sales and Other Revenue

Net sales and other revenue increased $2,781.6 million, or 3.5%, to $83,172.5 million in fiscal 2025 from $80,390.9 million in fiscal 2024. The increase in Net sales and other revenue in fiscal 2025 as compared to fiscal 2024 was driven by our 2.0% increase in identical sales, with growth in pharmacy sales being the primary driver of the identical sales increase, as well as the impact of the additional 53rd week. We also continued to grow our digital sales with a 21% increase during fiscal 2025. These increases in Net sales and other revenue were partially offset by a net reduction in sales driven by store closures since the fourth quarter of fiscal 2024 and lower fuel sales. The components of the change in Net sales and other revenue for fiscal 2025 were as follows (in millions):

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 digital 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 results, on an actual basis, for the past three fiscal years were as follows:

The following table represents Net sales and other revenue by product type (dollars in millions):

(1) Digital related sales are included in the categories to which the revenue pertains.

(2) Consists primarily of general merchandise, grocery, dairy and frozen foods.

(3) Consists primarily of produce, meat, deli and prepared foods, bakery, floral and seafood.

(4) Consists primarily of wholesale sales to third parties, commissions, rental income, media advertising revenue and other miscellaneous revenue.

(5) Fiscal 2025 includes an estimated $1.4 billion of incremental Net sales and other revenue due to the additional 53rd week.

Gross Margin

Gross margin rate decreased to 27.2% in fiscal 2025 compared to 27.7% in fiscal 2024. Excluding the impacts of fuel and LIFO, gross margin rate decreased 59 basis points. This decrease in gross margin rate was primarily driven by strong growth in pharmacy sales, which carries an overall lower gross margin rate, and increases in delivery and handling costs related to the continued growth in our digital sales. We also continue to make incremental investments in our customer value proposition which were largely funded by the benefits from our productivity initiatives.

Selling and Administrative Expenses

Selling and administrative expenses increased to 26.3% of Net sales and other revenue in fiscal 2025 compared to 25.6% in fiscal 2024. Excluding the impacts of fuel and the Opioid Settlement Framework, Selling and administrative expenses as a percentage of Net sales and other revenue decreased 38 basis points during fiscal 2025 compared to fiscal 2024. The decrease in Selling and administrative expenses as a percentage of Net sales and other revenue was primarily attributable to the sales leveraging of employee costs and lower Merger-related costs, partially offset by an increase in business transformation costs. The benefits from our productivity initiatives continue to partially offset increasing wage rates and other inflationary pressures on our operating expenses.

(Gain) Loss on Property Dispositions and Impairment Losses, Net

For fiscal 2025, net gain on property dispositions and impairment losses was $12.2 million, driven by $59.8 million of net gains primarily from the sale of real estate assets, partially offset by $28.4 million of retail store impairment losses and $19.2 million from the impairment and disposal of certain technology assets. For fiscal 2024, net loss on property dispositions and impairment losses was $95.8 million, primarily driven by $104.2 million of asset impairments including impairment losses of $60.9 million of retail store impairment losses, $39.8 million primarily related to equipment from the closing of our micro-fulfillment centers and $3.5 million related to certain technology assets, partially offset by $8.4 million of net gains from the sale of real estate assets.

Interest Expense, Net

Interest expense, net was $504.2 million in fiscal 2025 compared to $459.8 million in fiscal 2024. The increase in Interest expense, net was primarily attributable to higher average outstanding borrowings.

Other Income, Net

For fiscal 2025, Other income, net was $44.4 million primarily driven by non-service cost components of net pension and post-retirement income, including $29.4 million of pension settlement income, and realized gains from non-operating investments, partially offset by unrealized losses from non-operating investments. For fiscal 2024, Other income, net was $43.4 million primarily driven by unrealized gains from non-operating investments and non-service cost components of net pension and post-retirement income.

Income Taxes

Income tax expense was $50.4 million in fiscal 2025, representing an 18.8% effective tax rate. Income tax expense was $171.1 million in fiscal 2024, representing a 15.1% effective tax rate. The increase in the effective income tax rate during fiscal 2025 compared to fiscal 2024 was primarily driven by the recognition of $81.0 million of discrete state income tax benefits related to the settlement of audits during the third quarter of fiscal 2024. Refer to "Part II—Item 8. Financial Statements and Supplementary Data—Note 9 - Income Taxes" for additional information on our effective tax rate.

Net Income and Adjusted Net Income

Net income was $217.4 million or $0.40 per diluted share during fiscal 2025 compared to $958.6 million or $1.64 per diluted share during fiscal 2024. Fiscal 2025 included the $599.8 million charge, net of tax, or $(1.10) per share loss related to the Opioid Settlement Framework. Fiscal 2024 included the $81.0 million or $0.14 per share benefit related to certain discrete state income tax benefits related to the settlement of audits. Adjusted net income was $1,209.3 million, or $2.18 per share, during fiscal 2025 compared to $1,382.4 million, or $2.34 per share, during fiscal 2024. Adjusted net income per share during fiscal 2025 includes an estimated incremental $0.03 per share related to the extra week in fiscal 2025.

Adjusted EBITDA

Adjusted EBITDA was $3,901.5 million, or 4.7% of Net sales and other revenue, during fiscal 2025 compared to $4,004.7 million, or 5.0% of Net sales and other revenue, during fiscal 2024. The increase in Adjusted EBITDA reflects an estimated incremental $68 million related to the extra week in fiscal 2025.

Reconciliation of Non-GAAP Measures

The following table reconciles Net income to Adjusted net income and adjusted EBITDA (in millions):

38

The following tables reconcile diluted net income per Class A common share to Adjusted net income per Class A common share (in millions, except per share data):

(1) Primarily includes costs associated with third-party consulting fees related to our business transformation strategy and costs related to employee terminations, as follows (see table below):

(2) Fiscal 2025 primarily relates to litigation costs and retention program expense related to the terminated merger. Fiscal 2024 and fiscal 2023 primarily include third-party legal and advisor fees and retention program expense related to the merger.

(3) Includes the $773.8 million charge in the fourth quarter of fiscal 2025 related to the Opioid Settlement Framework. Refer to "Part II—Item 8. Financial Statements and Supplementary Data—Note 12" for additional information.

(4) Miscellaneous adjustments include the following (see table below):

(i) Primarily includes adjustments for unconsolidated equity investments and other costs not considered in our core performance.

(5) Fiscal 2025 includes an estimated $68 million of incremental Adjusted EBITDA due to the impact of the additional 53rd week.

(6) See the reconciliation of Net income to Adjusted net income above for further details.

(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) Adjusted net income per share for fiscal 2025 includes an estimated incremental $0.03 per share due to the impact of the additional 53rd week.

(10) Reflects the per share impact of Non-GAAP adjustments for each period. See the reconciliation of Net income to Adjusted net income above for further details.

Non-GAAP adjustment classifications within the Consolidated Statements of Operations:

(a) Cost of sales

(b) Selling and administrative expenses

(c) Interest expense, net

(d) Depreciation and amortization:

(e) Miscellaneous adjustments:

LIQUIDITY AND FINANCIAL RESOURCES

The following table sets forth the major sources and uses of cash and cash equivalents and restricted cash for each period (in millions):

Net Cash Provided By Operating Activities

Net cash provided by operating activities was $2,366.7 million during fiscal 2025 compared to $2,680.6 million during fiscal 2024. The decrease in cash flow from operating activities during fiscal 2025 compared to fiscal 2024 was primarily driven by a decrease in Adjusted EBITDA and increases in cash paid for income and indirect taxes, insurance claims, operating leases and business transformation costs, as well as changes in working capital related to inventory, accounts payable and other prepaids. These decreases in cash flow from operating activities were partially offset by lower Merger-related costs and contributions to our defined benefit pension plans.

Net Cash Used In Investing Activities

Net cash used in investing activities during fiscal 2025 was $1,679.4 million primarily due to payments for property, equipment and intangibles of $1,833.6 million, partially offset by proceeds from the sale of assets of $109.5 million, primarily related to real estate. Payments for property, equipment and intangibles included the completion of 94 remodels, the opening of nine new stores and continued investment in our digital and technology platforms.

Net cash used in investing activities during fiscal 2024 was $1,891.8 million primarily due to payments for property, equipment and intangibles of $1,927.5 million, partially offset by proceeds from the sale of assets of $31.4 million, primarily related to real estate. Payments for property, equipment and intangibles included the completion of 127 remodels, the opening of 11 new stores and continued investments in our digital and technology platforms.

In fiscal 2026, we expect capital expenditures to be in the range of $2.0 billion to $2.2 billion.

Net Cash Used In Financing Activities

Net cash used in financing activities was $782.2 million in fiscal 2025 primarily consisting of the repurchase of common stock, dividends paid on our Class A common stock, payments for debt financing costs, payments of obligations under finance leases and tax withholding payments on vesting of RSUs, partially offset by $4,200.0 million of issuances and subsequent $3,450.0 million of redemptions of senior unsecured notes (as further discussed below under the caption Debt Management). Net proceeds from the issuance of long-term debt also includes $425.0 million from the asset-based loan facility (as amended, the "ABL Facility"), including the $750 million of borrowings related to the ASR Agreement and subsequent repayment using proceeds from the issuance of senior unsecured notes in fiscal 2025.

Net cash used in financing activities was $684.1 million in fiscal 2024 primarily consisting of the $250.0 million repayment of the ABL Facility, dividends paid on our Class A common stock, the repurchase of common stock, payments of obligations under finance leases and tax withholding payments on vesting of RSUs, partially offset by $50.0 million of proceeds from the issuance of debt under the ABL Facility.

See "Part II—Item 8. Financial Statements and Supplementary Data—Note 5 and Note 7" for additional information.

Debt Management

Total debt, including both the current and long-term portions of finance lease obligations, net of debt discounts and deferred financing costs, increased $1,126.5 million to $8,946.6 million as of the end of fiscal 2025 compared to $7,820.1 million as of the end of fiscal 2024.

Outstanding debt, including current maturities, net of debt discounts and deferred financing costs, principally consisted of (in millions):

As of February 28, 2026, there was $425.0 million outstanding under the ABL Facility and total availability of $3,562.3 million (net of letter of credit usage). On August 27, 2025, the existing ABL Facility was amended and restated to, among other things, extend the maturity date of the facility to August 27, 2030. The new ABL Facility has an interest rate of term SOFR plus a margin ranging from 1.25% to 1.50% and also provides for a letters of credit sub-facility of $1,500.0 million.

On February 2, 2026, the Company and certain of its subsidiaries (the "Subsidiary Co-Issuers") completed the issuance of $1,200.0 million in aggregate principal amount of 5.625% senior unsecured notes due March 31, 2032 (the "2032 Notes") and $900.0 million in aggregate principal amount of additional 5.750% 2034 Notes, as defined below (the "Additional 2034 Notes" and together with the 2032 Notes, the "New Notes"). The Additional 2034 Notes were issued as "additional securities" under the indenture governing the outstanding 2034 Notes. The Additional 2034 Notes are treated as a single class with the outstanding 2034 Notes for all purposes and have the same terms as those of the outstanding 2034 Notes. The New Notes are guaranteed on a senior unsecured basis by all of our existing and future direct and indirect domestic subsidiaries (other than the Subsidiary Co-Issuers) that are obligors under the ABL Facility. Interest on the 2032 Notes is payable semi-annually in arrears on January 15 and July 15 of each year, with the first payment commencing on July 15, 2026. Proceeds from the New Notes, together with approximately $20.7 million of cash on hand, were used to (i) redeem in full the $1,350.0 million outstanding of our 4.625% senior unsecured notes due January 15, 2027 (the "2027 Notes Refinancing"), (ii) redeem in full the $750.0 million outstanding of our 5.875% senior unsecured notes due February 15, 2028 (the "2028 Notes Refinancing" and together with the 2027 Notes Refinancing, the “Refinancing”); and (iii) pay fees and expenses related to the Refinancing and the issuance of the New Notes.

On November 10, 2025, the Company and the Subsidiary Co-Issuers completed the issuance of $700.0 million in aggregate principal amount of 5.500% senior unsecured notes due March 31, 2031 (the "2031 Notes") and $800.0 million in aggregate principal amount of 5.750% senior unsecured notes due March 31, 2034 (the "2034 Notes" and together with the 2031 Notes, the "Notes"). The Notes are guaranteed on a senior unsecured basis by all of our existing and future direct and indirect domestic subsidiaries (other than the Subsidiary Co-Issuers) that are obligors under the ABL Facility. Interest on the Notes is payable semi-annually in arrears on May 15 and November 15 of each year, with the first payment commencing on May 15, 2026. During fiscal 2025, the proceeds from the Notes were used to (i) redeem in full the $750.0 million outstanding of our 3.250% senior unsecured notes due March 15, 2026 (the "November Refinancing"); (ii) repay a portion of the borrowings under the ABL Facility; and (iii) pay fees and expenses related to the November Refinancing and the issuance of the Notes.

On March 11, 2025, the Company and the Subsidiary Co-Issuers completed the issuance of $600.0 million in aggregate principal amount of 6.250% senior unsecured notes due March 15, 2033 (the "2033 Notes"). The 2033 Notes are guaranteed on a senior unsecured basis by all of our existing and future direct and indirect domestic subsidiaries (other than the Subsidiary Co-Issuers) that are obligors under the ABL Facility. Interest on the 2033 Notes is payable semi-annually in arrears on March 15 and September 15 of each year, and the first payment commenced on September 15, 2025. Proceeds from the 2033 Notes, together with approximately $5.7 million of cash on hand, were used to (i) redeem in full the $600.0 million outstanding of our 7.500% senior unsecured notes due March 15, 2026 (the "March Refinancing") and (ii) pay fees and expenses related to the March Refinancing and the issuance of the 2033 Notes.

During fiscal 2025 and fiscal 2024, there were no financial maintenance covenants in effect under the ABL Facility because the conditions had not been met.

See "Part II—Item 8. Financial Statements and Supplementary Data—Note 5" for additional information.

Dividends

We have established a dividend policy pursuant to which we intend to pay a quarterly dividend on our Class A common stock. Cash dividends paid on our Class A common stock were $322.7 million ($0.60 per common share), $295.1 million ($0.51 per common share) and $276.2 million ($0.48 per common share) during fiscal 2025, fiscal 2024 and fiscal 2023, respectively. On April 14, 2026 subsequent to the end of fiscal 2025, we announced that the Board of Directors (the "Board") increased the quarterly cash dividend 13% from $0.15 per common share to $0.17 per common share. Also on April 14, 2026, we announced the next quarterly dividend payment of $0.17 per share of Class A common stock to be paid on May 8, 2026 to stockholders of record as of the close of business on April 24, 2026.

Common Stock Repurchase Program

On October 14, 2025, the Board authorized an increase to the share repurchase program from $2.0 billion to $2.75 billion of our common stock. The share repurchase program could include open market repurchases, accelerated share repurchase programs, tender offers, block trades, potential privately negotiated transactions, or trading plans in compliance with the federal securities laws. Also on October 14, 2025, we entered into an accelerated share repurchase agreement (the "ASR Agreement") with JPMorgan Chase Bank, National Association ("JPMorgan") to repurchase $750 million of shares of our common stock. The ASR Agreement was funded with $750.0 million of borrowings under the ABL Facility. Pursuant to the ASR Agreement, on October 15, 2025, we paid JPMorgan $750.0 million in cash and received an initial delivery of 35.4 million shares of common stock with a value equal to $600.0 million as of the date the ASR Agreement was executed, representing an estimated 80% of the total shares initially underlying the ASR Agreement. Final settlement of the ASR Agreement occurred during the fourth quarter of fiscal 2025, and the Company received a final delivery of 7.3 million shares on January 8, 2026. The Company repurchased a total of 42.7 million shares under the ASR Agreement at an average price of $17.57 per share, based on the average of the volume-weighted average share price of the Company's common stock on specified dates during the term of the ASR Agreement, less a discount.

During fiscal 2025 and fiscal 2024, we repurchased an aggregate of 78.7 million shares and 4.1 million shares of our common stock for a total of $1,492.5 million and $82.5 million, respectively. We did not repurchase any shares of our common stock during fiscal 2023. On April 14, 2026, the Board authorized an increase to the remaining share repurchase authorization of $900 million, resulting in a total remaining authorization of $2.0 billion as of April 14, 2026.

Liquidity and Factors Affecting Liquidity

Based on current operating trends, we believe that we have significant sources of cash to meet our liquidity needs for the next 12 months and for the foreseeable future, including cash on hand, cash flows from operating activities and other sources of liquidity, including the ABL Facility. We estimate our liquidity needs over the next 12 months to be in the range of $6.0 billion to $6.5 billion. This includes $425.0 million related to the outstanding borrowings under our ABL Facility for which we may, at our discretion, elect to pay all or a portion of the outstanding balance within the next 12 months, and anticipated requirements for working capital, capital expenditures, pension obligations, interest payments and scheduled principal payments of debt, operating leases, finance leases, legal settlements, quarterly dividends on Class A common stock and common stock repurchases. In addition, we may enter into refinancing and sale leaseback transactions from time to time. We believe we have adequate cash flow to continue to maintain our current debt ratings and to respond effectively to competitive conditions.

The table below presents our material cash requirements as of February 28, 2026 (in millions):

(1) The cash requirements table excludes funding of pension and other postretirement benefit obligations, which totaled $56.9 million in fiscal 2025 and is expected to total approximately $50 million in fiscal 2026. This table also excludes recurring contributions under various multiemployer pension plans, which totaled $583.3 million in fiscal 2025 and is expected to total approximately $610 million in fiscal 2026.

(2) Long-term debt amounts exclude any debt discounts and deferred financing costs. See "Part II—Item 8. Financial Statements and Supplementary Data—Note 5" for additional information.

(3) Amounts include contractual interest payments using the stated fixed interest rate or the variable interest rate in effect as of February 28, 2026. See "Part II—Item 8. Financial Statements and Supplementary Data—Note 5" for additional information.

(4) Represents the minimum rents payable under operating and finance leases, excluding common area maintenance, insurance or tax payments, for which we are obligated.

(5) Consists of self-insurance liabilities, which have not been reduced by insurance-related receivables, as well as payment obligations related to withdrawal liabilities. The table also includes expected cash outflows related to the Opioid Settlement Framework estimated liability. The table excludes the unfunded pension and postretirement benefit obligation of $98.8 million. The potential settlement payments related to unrecognized tax benefits have been excluded from the contractual obligations table because a reasonably reliable estimate of the timing of future tax settlements cannot be determined. Also excludes deferred tax liabilities and certain other deferred liabilities that will not be settled in cash.

(6) Purchase obligations include various obligations that have specified purchase commitments. As of February 28, 2026, future purchase obligations primarily relate to energy, fixed asset, information technology and marketing commitments, including fixed price contracts. In addition, not included in the contractual obligations table are supply contracts to purchase product for resale to consumers which are typically of a short-term nature with limited or no purchase commitments. We also enter into supply contracts which typically include either volume commitments or fixed expiration dates, termination provisions and other customary contractual considerations. The supply contracts that are cancelable have not been included above.

Multiemployer Pension Plans

We currently contribute to 28 multiemployer pension plans for a substantial majority of employees represented by unions pursuant to collective bargaining agreements that require us to contribute to these plans. The benefits are paid from assets held in trust for that purpose and the respective plan trustees are responsible for determining the level of benefits to be provided to participants, the management of the plan assets and plan administration. We continue to monitor any potential exposure to underfunded multiemployer plans for our associates who are beneficiaries of these plans.

Based on an assessment of the most recent information available, we believe that a majority of the multiemployer plans to which we contribute are underfunded, which is the amount by which the actuarial determined plan liabilities exceed the value of the plan assets. We are only one of many employers that contribute to these plans, and we are neither obligated to fund nor act as a guarantor of any plan's underfunded status. Accordingly, the underfunding of these plans does not represent a liability of the Company.

The American Rescue Plan Act ("ARP Act") establishes a special financial assistance program for financially troubled multiemployer pension plans. Under the ARP Act, eligible multiemployer plans can apply to receive a one-time cash payment in the amount projected by the Pension Benefit Guaranty Corporation ("PBGC") to pay pension benefits through the plan year ending 2051. The payment received by the multiemployer plan under this special financial assistance program would not be considered a loan and would not need to be paid back. Any financial assistance received by the multiemployer plan would need to be segregated from the other assets of the multiemployer plans and invested in investment grade bonds or other investments permitted by the PBGC.

Of the 28 multiemployer plans to which we contribute, 16 plans are classified as "Critical" or "Critical and Declining" and eligible for relief under the special financial assistance program through the ARP Act. A substantial majority of the eligible multiemployer plans have either received, or have been approved to receive, special financial assistance funds, which have already resulted in, or are expected to result in, a significant reduction in the underfunding of these plans. Based on current expectations and the plans' funding status, we expect the special financial assistance provided under these regulations will allow these plans to remain solvent for at least the next 30 years and continue to provide benefits to our associates who are beneficiaries of these multiemployer plans.

The amount of underfunding is an estimate and may change based on factors including investment returns on plan assets, benefit payments, plan amendments, collective bargaining, trustee actions, or legislative changes. The Company's share of the underfunding could increase or decrease depending on changes in asset values, employer participation, or other actions affecting the plans. The Company continues to monitor its potential exposure to underfunded multiemployer pension plans.

We will continue to make our contributions based on collective bargaining agreements for each of the multiemployer plans to which we contribute. Our contributions to multiemployer plans were $583.3 million, $547.7 million and $545.5 million during fiscal 2025, fiscal 2024 and fiscal 2023, respectively, and we expect to contribute approximately $610 million in fiscal 2026. In the event we were to exit certain markets or otherwise cease contributing to certain multiemployer plans, such actions could result in a substantial withdrawal liability. Any resulting withdrawal liability is recognized when it is probable that a liability has been incurred and the amount can be reasonably estimated. Refer to "Part II—Item 8. Financial Statements and Supplementary Data—Note 10" for additional information.

Guarantees

We are party to a variety of contractual agreements pursuant to which we may be obligated to indemnify the other party for certain matters. These contracts primarily relate to our commercial contracts, operating leases and other real estate contracts, trademarks, intellectual property, financial agreements and various other agreements. Under these agreements, we may provide certain routine indemnifications relating to representations and warranties (for example, ownership of assets, environmental or tax indemnifications) or personal injury matters. The terms of these indemnifications range in duration and may not be explicitly defined. We believe that if we were to incur a loss in any of these matters, the loss would not have a material effect on our financial statements.

We are liable for certain operating leases that were assigned to third parties. If any of these third parties fail to perform their obligations under the leases, we could be responsible for the lease obligation. Because of the wide dispersion among third parties and the variety of remedies available, we believe that if an assignee became insolvent it would not have a material effect on our financial condition, results of operations or cash flows.

In the ordinary course of business, we enter into various supply contracts to purchase products for resale and purchase and service contracts for fixed asset and information technology commitments. We have also entered into fixed price contracts to purchase electricity and natural gas for a portion of our energy needs. These contracts typically include volume commitments or fixed expiration dates, termination provisions and other standard contractual considerations.

Letters of Credit

We had letters of credit of $12.7 million outstanding as of February 28, 2026. The letters of credit are maintained primarily to support our performance, payment, deposit or surety obligations. We typically pay bank fees of 1.25% plus a fronting fee of 0.125% on the face amount of the letters of credit.

NEW ACCOUNTING POLICIES

See "Part II—Item 8. Financial Statements and Supplementary Data—Note 1" for new accounting pronouncements.

CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

We have chosen accounting policies that we believe are appropriate to report accurately and fairly our operating results and financial position, and we apply those accounting policies in a fair and consistent manner. See "Part II—Item 8. Financial Statements and Supplementary Data—Note 1" for a discussion of our significant accounting policies.

Management believes the following critical accounting policies reflect its more subjective or complex judgments and estimates used in the preparation of our consolidated financial statements.

Self-Insurance Liabilities

We are primarily self-insured for workers' compensation, property, automobile and general liability. The self-insurance liability is undiscounted and determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported. We have established stop-loss amounts that limit our further exposure after a claim reaches the designated stop-loss threshold. In determining our self-insurance liabilities, we perform a continuing review of our overall position and reserving techniques. Since recorded amounts are based on estimates, the ultimate cost of all incurred claims and related expenses may be more or less than the recorded liabilities.

Any actuarial projection of self-insured losses is subject to a high degree of variability. Litigation trends, legal interpretations, benefit level changes, claim settlement patterns and similar factors influenced historical development trends that were used to determine the current year expense and, therefore, contributed to the variability in the annual expense. However, these factors are not direct inputs into the actuarial projection, and thus their individual impact cannot be quantified.

Contingencies

We are involved in a number of legal proceedings and certain regulatory matters. We record a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. We also perform an assessment of the materiality of loss contingencies where a loss is either reasonably possible or it is reasonably possible that an estimated liability could materially change. If a loss or change in the estimated liability has at least a reasonable possibility of occurring and the impact on the financial statements would be material, we provide disclosure of the nature of the uncertainty and estimate of possible loss or range of loss to the extent such estimate can be made. We review all contingencies at least quarterly to determine whether the likelihood of loss has changed and whether a reasonable estimate of the loss can be made. The assessment of the outcome of litigation can be very difficult to predict as it is subject to legal processes that are highly complex, subject to many factors, including those that are not within our control, and highly dependent on individual facts and circumstances. While management currently believes that the estimated liabilities currently recorded are reasonable, it remains possible that differences in actual outcomes or changes in management's evaluation or predictions could arise that could be material to our financial condition, results of operations or cash flows. In addition, although we are not able to predict the outcome or reasonably estimate a range of possible losses in certain matters described in "Part II—Item 8. Financial Statements and Supplementary Data—Note 12" and have not recorded an associated estimated liability related to these matters, an adverse judgment or negotiated settlement in these matters could be material to our financial condition, results of operations or cash flows.

We are exposed to market risk from a variety of sources, including changes in interest rates and energy prices. We have from time to time selectively used derivative financial instruments to reduce these market risks. Our market risk exposures related to interest rates and energy prices are discussed below.

Interest Rate Risk and Long-Term Debt

We are exposed to market risk from fluctuations in interest rates. From time to time, we manage our exposure to interest rate fluctuations through the use of interest rate swaps. At the time of entering into interest rate swap contracts, our risk management objective and strategy is to utilize them to protect us against adverse fluctuations in interest rates by reducing our exposure to variability in cash flows relating to interest payments on a portion of our outstanding debt. All of our interest rate swaps expired in March 2023. Our exposure to changes in Term SOFR primarily relates to our ABL Facility which had a $425.0 million outstanding balance as of February 28, 2026. Therefore, we estimate that a 100 basis point increase on our variable interest rates would increase our interest expense by approximately $4 million per year.

The table below provides information about debt instruments that are sensitive to changes in interest rates, and presents principal amounts due and related weighted average interest rates by expected maturity dates (dollars in millions):

(1) Excludes debt discounts and deferred financing costs.

Energy Price Risk

We have entered into fixed price contracts to purchase electricity and natural gas for a portion of our energy needs. We expect to take delivery of these commitments in the normal course of business, and, as a result, these commitments qualify as normal purchases. We also manage our exposure to changes in diesel prices utilized in our distribution process through the use of short-term heating oil derivative contracts. These contracts are economic hedges of price risk and are not designated or accounted for as hedging instruments for accounting purposes. Changes in the fair value of these instruments are recognized in earnings. We do not believe that these energy swaps would cause a material change to our financial position.

Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's reports under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of February 28, 2026. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of February 28, 2026.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Further, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the 2013 framework set forth in the report entitled Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our evaluation under such framework, our management concluded that our internal control over financial reporting was effective as of February 28, 2026.

The attestation of Deloitte & Touche LLP, our independent registered public accounting firm, on the effectiveness of our internal control over financial reporting is included in "Part II—Item 8. Financial Statements and Supplementary Data" in this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the fourth quarter of fiscal 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.