Albertsons Companies, Inc.ACI
Albertsons Companies, Inc. Income Taxes Disclosure
INCOME TAXES
The components of income tax expense consisted of the following (in millions):
| Fiscal 2024 | Fiscal 2023 | Fiscal 2022 | |||||||||||||||
| Current | |||||||||||||||||
| Federal (1) | $ | 228.9 | $ | 348.2 | $ | 320.5 | |||||||||||
| State (2) | 46.0 | 56.4 | 88.1 | ||||||||||||||
| Foreign | 1.3 | 1.0 | 0.5 | ||||||||||||||
| Total Current | 276.2 | 405.6 | 409.1 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | (11.8) | (83.1) | (7.6) | ||||||||||||||
| State | (92.9) | 31.7 | 11.1 | ||||||||||||||
| Foreign | (0.4) | (61.2) | 9.4 | ||||||||||||||
| Total Deferred | (105.1) | (112.6) | 12.9 | ||||||||||||||
| Income tax expense | $ | 171.1 | $ | 293.0 | $ | 422.0 | |||||||||||
(1) Federal current tax expense is net of $0.3 million, $0.3 million and $0.5 million tax benefit of net operating losses ("NOL") in fiscal 2024, fiscal 2023 and fiscal 2022, respectively.
(2) State current tax expense is net of $1.0 million tax benefit of NOLs in fiscal 2024. There was no tax benefit of NOLs in fiscal 2023 and fiscal 2022.
The difference between the actual tax provision and the tax provision computed by applying the statutory federal income tax rate of 21% to Income before income taxes was attributable to the following (in millions):
| Fiscal 2024 | Fiscal 2023 | Fiscal 2022 | |||||||||||||||
| Income tax expense at federal statutory rate | $ | 237.3 | $ | 333.7 | $ | 406.4 | |||||||||||
| State income taxes, net of federal benefit | 50.6 | 58.5 | 85.9 | ||||||||||||||
| Change in valuation allowance | 3.2 | 3.2 | 0.1 | ||||||||||||||
| Unrecognized tax benefits | (95.2) | (67.3) | (41.8) | ||||||||||||||
| Tax credits | (23.0) | (37.1) | (26.2) | ||||||||||||||
| Other | (1.8) | 2.0 | (2.4) | ||||||||||||||
| Income tax expense | $ | 171.1 | $ | 293.0 | $ | 422.0 | |||||||||||
Deferred income taxes reflect the net tax effects of temporary differences between the bases of assets and liabilities for financial reporting and income tax purposes. The Company's deferred tax assets and liabilities consisted of the following (in millions):
| February 22, 2025 | February 24, 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Compensation and benefits | $ | 192.2 | $ | 204.3 | |||||||
| Net operating loss | 63.7 | 71.2 | |||||||||
| Pension & postretirement benefits | 194.5 | 215.9 | |||||||||
| Self-Insurance | 312.8 | 299.8 | |||||||||
| Tax credits | 5.7 | 8.5 | |||||||||
| Lease obligations | 1,775.3 | 1,735.1 | |||||||||
| Other | 71.3 | 104.4 | |||||||||
| Gross deferred tax assets | 2,615.5 | 2,639.2 | |||||||||
| Less: valuation allowance | (63.7) | (65.6) | |||||||||
| Total deferred tax assets | 2,551.8 | 2,573.6 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation and amortization | 1,302.3 | 1,359.9 | |||||||||
| Inventories | 401.7 | 374.9 | |||||||||
| Operating lease assets | 1,587.4 | 1,543.3 | |||||||||
| Other | 84.5 | 103.1 | |||||||||
| Total deferred tax liabilities | 3,375.9 | 3,381.2 | |||||||||
| Net deferred tax liability | $ | (824.1) | $ | (807.6) | |||||||
| Noncurrent deferred tax asset | $ | — | $ | — | |||||||
| Noncurrent deferred tax liability | (824.1) | (807.6) | |||||||||
| Total | $ | (824.1) | $ | (807.6) | |||||||
The valuation allowance activity on deferred tax assets was as follows (in millions):
| February 22, 2025 | February 24, 2024 | February 25, 2023 | |||||||||||||||
| Beginning balance | $ | 65.6 | $ | 102.3 | $ | 113.6 | |||||||||||
| Additions charged to income tax expense | 5.1 | 6.0 | 3.1 | ||||||||||||||
| Reductions credited to income tax expense | (1.9) | (2.8) | (3.0) | ||||||||||||||
| Changes to other comprehensive income or loss and other | (5.1) | (39.9) | (11.4) | ||||||||||||||
| Ending balance | $ | 63.7 | $ | 65.6 | $ | 102.3 | |||||||||||
The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. On the basis of this evaluation, as of February 22, 2025, a valuation allowance of $63.7 million has been recorded for the portion of the deferred tax asset that is not more likely than not to be realized, consisting primarily of tax credits and carryovers in jurisdictions where the Company has minimal presence or does not expect to have future taxable income. The Company will continue to evaluate the need to adjust the valuation allowance. The amount of the deferred tax asset considered realizable, however, could be adjusted depending on the Company's performance in certain subsidiaries or jurisdictions.
The Company currently has federal and state NOL carryforwards of $16.1 million and $1,220.5 million, respectively, which will begin to expire in 2025 and continue through the fiscal year ending February 2045. As of
February 22, 2025, the Company had $5.7 million of state credit carryforwards, which will begin to expire in 2025 and continue through the fiscal year ending February 2039. The Company had no federal credit carryforwards as of February 22, 2025. As of February 22, 2025, the Company currently has federal charitable contribution carryforwards of $13.1 million, which will expire in the fiscal year ending February 2031.
Changes in the Company's unrecognized tax benefits consisted of the following (in millions):
| Fiscal 2024 | Fiscal 2023 | Fiscal 2022 | |||||||||||||||
| Beginning balance | $ | 178.8 | $ | 216.0 | $ | 276.0 | |||||||||||
| Increase related to tax positions taken in the current year | 6.4 | 9.6 | 5.0 | ||||||||||||||
| Increase related to tax positions taken in prior years | — | — | 2.1 | ||||||||||||||
| Decrease related to tax position taken in prior years | (111.8) | (0.9) | — | ||||||||||||||
| Decrease related to settlements with taxing authorities | (2.1) | (5.6) | (20.7) | ||||||||||||||
| Decrease related to lapse of statute of limitations | (13.9) | (40.3) | (46.4) | ||||||||||||||
| Ending balance | $ | 57.4 | $ | 178.8 | $ | 216.0 | |||||||||||
Included in the balance of unrecognized tax benefits as of February 22, 2025, February 24, 2024 and February 25, 2023 are tax positions of $22.4 million, $118.1 million and $151.1 million, respectively, which would reduce the Company's effective tax rate if recognized in future periods. As of February 22, 2025, the Company is no longer subject to federal income tax examinations for the fiscal years prior to 2021 and in most states, is no longer subject to state income tax examinations for fiscal years before 2013. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. The Company recognized a benefit related to interest and penalties, net of settlement adjustments, of $2.7 million and $27.2 million for fiscal 2024 and fiscal 2023, respectively, and expense for fiscal 2022 of $2.4 million.
The Company believes it is reasonably possible that the reserve for uncertain tax positions may be reduced by approximately $10 million in the next 12 months due to ongoing tax examinations and expiration of statutes of limitations.
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About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.