Safeway 2013 Annual Report Download - page 15

Table of Contents
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developed in the future. 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,
the cost of complying with stricter privacy and information security laws and standards, including PCI DSS version 3.0 could be significant to
us.
Insurance Plan Claims We use a combination of insurance and self-insurance to provide for potential liabilities for workers’ compensation,
automobile and general liability, property risk (including earthquake coverage), director and officers’ liability, employment practices liability,
cyber risks, terrorism and employee health care benefits. 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. California workers’ compensation has received
intense scrutiny from the state’s politicians, insurers, employers and providers, as well as the public in general. Recent years have seen
escalation in the number of legislative reforms, judicial rulings and social phenomena affecting our business. Some of the many sources of
uncertainty in our reserve estimates include changes in benefit levels, medical fee schedules, medical utilization guidelines and
apportionment. Reversals of reforms by legislation or judicial action could have a material adverse impact on our financial results.
Leadership Development and Succession Planning The training and development of our future leaders is important to our long-term
growth. We rely on the experience of our senior management, who have specific knowledge of our business and industry that is difficult to
replace. If we are unable to attract and retain highly-qualified senior management, our business may be adversely affected. Effective
succession planning is also important to our long-term success. Failure to ensure effective transfer of knowledge and smooth transitions
involving key employees could hinder our strategic planning and execution.
Stockholder Rights Plan In September 2013, we adopted a one-year stockholder rights plan. Under the plan, one preferred stock purchase
right was distributed for each share of common stock held by stockholders of record on September 30, 2013. Under certain circumstances,
the rights will become exercisable and each right will entitle stockholders to buy one one-thousandth of a share of our Series A Junior
Participating Preferred Stock at an exercise price of $100. In general, the rights become exercisable at the close of business on the tenth
business day following (i) public announcement that a person or group acquired 10% (15% in the case of a passive institutional investor) or
more of our common stock or (ii) commencement or announcement of a tender offer for 10% (15% in the case of a passive institutional
investor) or more of our common stock. Our Board of Directors is entitled to redeem the rights at $0.01 per right at any time before a person or
group has acquired 10% or more (15% or more in the case of a passive institutional investor) of the outstanding common stock. The rights
will expire on September 15, 2014, subject to our right to extend such date, unless earlier redeemed or exchanged by us or terminated.
The stockholder rights plan is designed to deter coercive takeover tactics and to prevent an acquirer from gaining control of the Company
without offering a fair price to all of our stockholders. The plan is intended to accomplish these objectives by encouraging a potential acquirer
to negotiate with our Board of Directors to have the rights redeemed or the plan amended prior to such party exceeding the ownership
thresholds set forth in the plan. The existence of the stockholder rights plan and the rights of holders of any other shares of preferred stock
that may be issued in the future, however, could have the effect of making it more difficult
for a third party to acquire a majority of our outstanding common stock, and thereby adversely affect the price of our common stock.
Canada Safeway Limited In the fourth quarter of 2013, the Company received cash proceeds of CAD5.8 billion from the sale of
substantially all of the net assets of our Canadian operations. If the Company does
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