8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

March 6, 2013

SAFEWAY INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	1-00041	94-3019135
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

5918 Stoneridge Mall Road, Pleasanton, California	94588-3229
(Address of Principal Executive Offices)	(Zip Code)

(925) 467-3000

(Registrant’s telephone number, including area code)

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

The information in this Form 8-K, including the exhibits, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of Safeway Inc. (the “Company”), whether made before or after the date hereof, regardless of any general incorporation language in such filing.

On March 6, 2013, we will hold our annual investor conference, at which slides regarding our recent performance and 2013 earnings guidance will be presented. Copies of certain of the slides are attached hereto as Exhibit 99.2 and incorporated herein by reference.

In the investor conference presentation, the press release announcing the investor conference and our other public statements in connection with the presentation and the press release, we use the following financial measures that are not measures of financial performance under U.S. generally accepted accounting principles (non-GAAP financial measures):

l Adjusted EBITDA for 2003 through 2012, which is defined by our bank credit agreement as EBITDA (earnings before interest, income taxes, depreciation and amortization), excluding the following:

• LIFO expense (income);

• Share-based employee compensation;

• Property impairment charges;

• Goodwill impairment charges;

• Equity in (earnings) losses of unconsolidated affiliate; and

• Dividend received from unconsolidated affiliate.

An equity investment impairment charge also was excluded in 2003, and property impairment charges and tax expense from discontinued operations also was excluded in 2012.

l    Adjusted EBITDA as a Multiple of Interest Expense for 2003 through 2012, which is calculated by dividing Adjusted EBITDA by interest expense.

l    Basis Point Change in Operating Profit Margin, Excluding Fuel, Gross Presentation of Gift Card Commissions and Unusual Items for 2005 through 2012 and for the guidance ranges for 2012 and 2013, which is defined as reported basis point change in operating profit margin over the prior period, excluding the impacts from fuel sales, the gross presentation of gift card commissions (in 2011) and certain unusual items, as described in the attached slides and in this Form 8-K.

l    Basis Point Change in Operating Profit Margin, Excluding Fuel, Unusual Items and Gain from Legal Settlements for 2012 and for the guidance range for 2013, which is defined as reported basis point change in operating profit margin over the prior year, excluding the impacts from fuel sales, unusual items and the gain from legal settlements, as described in the attached slides and in this Form 8-K.

l    Basis Point Change in Operating and Administrative Expense, Excluding Fuel, Gross Presentation of Gift Card Commissions and Unusual Items for 2005 through 2012, which is defined as reported basis point change in operating and administrative expense over the prior year, excluding the impacts from fuel sales, the gross presentation of gift card commissions (in 2011) and certain unusual items, as described in the attached slides and in this Form 8-K.

l    Basis Point Change in Operating and Administrative Expense, Excluding Fuel and just for U™ Launch Costs for 2012, which is defined as reported basis point change in operating and administrative expense over the prior year, excluding the impacts from fuel sales and the launch costs of our just for U initiative.

l    Basis Point Change in Gross Margin, Excluding Fuel and Gross Presentation of Gift Card Commissions for 2006 through 2012, which is defined as reported basis point change in gross margin over the prior year, excluding the impacts from fuel sales and the gross presentation of gift card commissions (in 2011).

l    Basis Point Change in Gross Margin, Excluding Fuel and just for U Launch Costs for 2012, which is defined as reported basis point change in gross margin over the prior year, excluding the impacts from fuel sales and the launch costs of our just for U initiative.

l    Diluted Earnings Per Share From Continuing Operations, as Adjusted, which is defined as diluted earnings per share from continuing operations, as reported, excluding the gain from legal settlements.

l    Free Cash Flow for 2005 through 2012, the guidance ranges of free cash flow for 2012 and 2013 and the forecasted ranges of free cash flow for 2014 through 2017, which is calculated as net cash flow from operating activities, as adjusted to exclude payables related to third-party gift cards, net of receivables (in the years 2005 through 2012), less net cash flow used by investing activities. In 2006 and 2011, net cash flow used by investing activities is adjusted to include cash used by investments and business acquisitions. Cash from the sale of third-party gift cards is held for a short period of time and then remitted, less our commission, to card partners. Because this cash flow is temporary, it is not available for other uses, and it is therefore excluded from our calculation of free cash flow. We add back cash used by investments and business acquisitions to our calculation of free cash flow in order to provide a more accurate indication of our capacity to apply our available free cash flow to its intended uses. In addition, in 2006, interest earned on a favorable income tax settlement, net of tax, was excluded from net cash flow from operating activities because it was an unusual item.

Reconciliations of each of the above non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the attached slides, which are also available on our website at http://www.safeway.com/investor_relations under Reconciliations.

Management believes that Basis Point Change in Operating Profit Margin, Excluding Fuel, Gross Presentation of Gift Card Commissions and Unusual Items and Basis Point Change in Operating Profit Margin, Excluding Fuel, Unusual Items and Gain from Legal Settlements provide useful financial measures that will facilitate comparisons of our adjusted operating profit margins before, during and after the unusual or unpredictable expenses are incurred, as well as facilitate comparisons of our performance with that of other companies that might not have the non-cash charges, store closures, health and welfare benefit contributions, labor buyout and stock option expense that we have experienced and that might not have the business ventures that we have.

Management believes that Basis Point Change in Operating and Administrative Expense, Excluding Fuel, Gross Presentation of Gift Card Commissions and Unusual Items and Basis Point Change in Operating and Administrative Expense, Excluding Fuel and just for U Launch Costs provide useful financial measures that will facilitate comparisons of our adjusted operating and administrative expense before, during and after the unusual or unpredictable expenses are incurred, as well as facilitate comparisons of our performance with that of other companies that might not have the non-cash charges, store closures, health and welfare benefit contributions, labor buyout and stock option expense that we have experienced and that might not have the business ventures and initiatives that we have.

Management believes that Basis Point Change in Gross Margin, Excluding Fuel and Gross Presentation of Gift Card Commissions and Basis Point Change in Gross Margin, Excluding Fuel and just for U Launch Costs provide useful financial measures that will facilitate comparisons of our performance with that of other companies that might not have the business ventures and initiatives that we have and that might not have experienced the unusual charges that we experienced.

Management also believes that excluding fuel sales from operating profit margin, operating and administrative expense and gross margin provides more useful measures because volatility in fuel prices and the resulting fluctuations in our sales and cost of sales may distort investors', analysts' and other interested parties' perception of our operating performance. Management also believes that investors, analysts and other interested parties view Basis Point Change in Operating Profit Margin, Excluding Fuel, Gross Presentation of Gift Card Commissions and Unusual Items, Basis Point Change in Operating Profit Margin, Excluding Fuel, Unusual Items and Gain from Legal Settlement, Basis Point Change in Operating and Administrative Expense, Excluding Fuel, Gross Presentation of Gift Card Commissions and Unusual Items, Basis Point Change in Operating and Administrative Expense, Excluding Fuel and just for U Launch Costs, Basis Point Change in Gross Margin, Excluding Fuel and Gross Presentation of Gift Card Commissions and Basis Point Change in Gross Margin, Excluding Fuel and just for U launch costs as indicators of our ongoing operating performance.

Management believes that Adjusted EBITDA and Adjusted EBITDA as a Multiple of Interest Expense are useful measures of operating performance that facilitate management's evaluation of our ability to service debt and our capability to incur more debt to generate the cash needed to grow the business (including at times when interest rates fluctuate). Omitting interest, taxes and the enumerated items provides a financial measure that is useful to management in assessing operating performance because the cash our business operations generate enables us to incur debt and thus to grow.

Management believes that Adjusted EBITDA and Adjusted EBITDA as a Multiple of Interest Expense also facilitate comparisons of our results of operations with those of companies having different capital structures. Since the levels of

indebtedness, tax structures, impairment charges, methodologies in calculating LIFO, unconsolidated affiliates and properties that other companies have are different from ours, we omit these amounts to facilitate investors' ability to make these comparisons. Similarly, we omit depreciation and amortization because other companies may employ a greater or lesser amount of owned property and because, in management's experience, whether a store is new or fully or mostly depreciated does not necessarily correlate to the contribution such store makes to operating performance.

Management also believes that investors, analysts and other interested parties view our ability to generate Adjusted EBITDA and Free Cash Flow as important measures of our operating performance and that of other companies in our industry.

Free Cash Flow, Adjusted EBITDA and Adjusted EBITDA as a Multiple of Interest Expense are useful indicators of Safeway's ability to service debt, fund share repurchases and pay dividends that management believes will enhance stockholder value. Adjusted EBITDA also is a useful indicator of cash available for investing activities. A portion of the Free Cash Flow that the Company generates in 2013 through 2017 is expected to be spent on mandatory debt service requirements or other non-discretionary expenditures. Our estimate of the range of Free Cash Flow for 2013 (without giving effect to cash flow related to Blackhawk Network's gift card payables and receivables) is used by management as a baseline for estimating our 2013 Free Cash Flow. At the time management provided its guidance range for Free Cash Flow for 2012, it was unable to estimate the effect that Blackhawk Network's gift card payables and receivables would have on Free Cash Flow for 2012, and therefore was not able to provide any reconciliation of such amounts to the most directly comparable GAAP financial measure. Likewise, management is unable to estimate the effect that Blackhawk Network's gift card payables and receivables will have on Free Cash Flow for 2013 through 2017, and therefore is not able to provide any reconciliation of such amounts to the most directly comparable GAAP financial measure.

The exclusion from diluted earnings per share relates to a gain from legal settlements that occurred during the fourth quarter of 2012. Management believes that excluding this item provides a useful financial measure that will facilitate comparisons of our operating results before, during and after such charges were incurred. Management also believes that investors, analysts and other interested parties view our diluted earnings per share, as adjusted, as an indicator of our ongoing operating performance.

These non-GAAP financial measures should not be considered as an alternative to net cash from operating activities or other increases and decreases in cash as shown on Safeway's Consolidated Statements of Cash Flows as a measure of liquidity. These measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. Other companies in our industry may calculate Free Cash Flow and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.

Additional limitations include:

l    “Adjusted EBITDA” does not reflect our cash expenditures, or future requirements for capital expenditures, or contractual commitments;

l    “Adjusted EBITDA” does not reflect changes in, or cash requirements for, our working capital needs;

l    “Adjusted EBITDA” does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debts;

l    Non-cash compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period;

l    “Adjusted EBITDA” does not reflect cash requirements for income taxes paid; and

l    Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and “Adjusted EBITDA” does not reflect any cash requirements for such replacements.

Because of these and other limitations, our non-GAAP financial 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 use our non-GAAP financial measures supplementally.

Item 8.01.Other Events.

On March 6, 2013, Safeway issued a press release, a copy of which is attached hereto as Exhibit 99.1 and incorporated herein by reference.

Item 9.01.Financial Statements and Exhibits.

(d) Exhibits.

99.1    Press Release dated March 6, 2013 of Safeway Inc.

99.2    Reconciliations and Financial Slides from the 2013 Safeway Investor Conference (March 6, 2013)

Forward Looking Statements

This Current Report on Form 8-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements relate to, among other things, sales, margins and basis point changes in margins, earnings and earnings per diluted share estimates, free cash flow and capital expenditures. Forward-looking statements are indicated by words or phrases such as “guidance,” “believes,” “expects,” “anticipates,” “estimates,” “plans,” “continuing,” “ongoing,” and similar words or phrases and the negative of such words and phrases. Forward-looking statements are based on our current plans and expectations and involve risks and uncertainties which are, in many instances, beyond our control, and which could cause actual results to differ materially from those included in or contemplated or implied by the forward-looking statements. Such risks and uncertainties include the following: general business and economic conditions in our operating regions, including the rate of inflation or deflation, consumer spending levels, currency valuations, population, employment and job growth and/or losses in our markets; sales volume levels and price per item trends; pricing pressures and competitive factors, which could include pricing strategies, store openings, remodels or acquisitions by our competitors; results of our programs to control or reduce costs, improve buying practices and control shrink; results of our programs to increase sales; results of our continuing efforts to expand corporate brands; results of our programs to improve our perishables departments; results of our promotional programs; results of our capital program; results of our efforts to improve working capital; results of any ongoing litigation in which we are involved or any litigation in which we may become involved; the resolution of uncertain tax positions; the ability to achieve satisfactory operating results in all geographic areas where we operate; changes in the financial performance of our equity investments; labor costs, including benefit plan costs and severance payments, or labor disputes that may arise from time to time and work stoppages that could occur in areas where certain collective bargaining agreements have expired or are on indefinite extensions or are scheduled to expire in the near future; failure to fully realize or delay in realizing growth prospects for existing or new business ventures, including our Blackhawk and Property Development Centers subsidiaries; legislative, regulatory, tax, accounting or judicial developments, including with respect to Blackhawk; the cost and stability of fuel, energy and other power sources; the impact of the cost of fuel on gross margin and identical-store sales; loss of a key member of senior management, including the failure to effectively manage the succession of our departing Chairman and Chief Executive Officer or Chief Information Officer; discount rates used in actuarial calculations for pension obligations and self-insurance reserves; the rate of return on our pension assets; the availability and terms of financing, including interest rates; adverse developments with regard to food and drug safety and quality issues or concerns that may arise; data security or other information technology issues that may arise; unanticipated events or changes in real estate matters, including acquisitions, dispositions and impairments; adverse weather conditions and effects from natural disasters; performance in new business ventures or other opportunities that we pursue; and the capital investment in and financial results from our Lifestyle stores. We undertake no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof and disclaim any obligation to do so. Please refer to our reports and filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q and subsequent Current Reports on Form 8-K, for a further discussion of these risks and uncertainties.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SAFEWAY INC.
	(Registrant)
March 6, 2013	By:	/s/ Robert A. Gordon
	Name:	Robert A. Gordon
	Title:	Senior Vice President,
		Secretary & General Counsel

EXHIBIT INDEX

Exhibit

No.

99.1    Press Release dated March 6, 2013 of Safeway Inc.

99.2    Reconciliations and Financial Slides from the 2013 Safeway Investor Conference (March 6, 2013)

EX-99.1

FOR IMMEDIATE RELEASE

Safeway Inc. Holds 2013 Investor Conference

Provides 2013 Financial Guidance

PLEASANTON, CA - March 6, 2013 - Safeway Inc. (NYSE:SWY) will hold a conference today for institutional investors and research analysts beginning at 8:00 AM PST (11:00 AM EST). Management will review Safeway's recent performance and establish its 2013 financial guidance.

For the year 2013, the company is initiating guidance as follows:

• Earnings per diluted share of $2.25 to $2.45

• ID sales growth, excluding fuel, in a range of 2.0% to 3.0%

• Operating profit margin change, excluding fuel, of flat to positive 10 basis points*

• Capital expenditures of approximately $1.0 billion to $1.1 billion and

• Free cash flow in a range of $0.85 billion to $0.95 billion*

“We made progress in 2012 on a number of initiatives, which we believe helped achieve market share gains and positive volume in the U.S. As we move forward, just for U^TM, fuel partnerships with Chevron and ExxonMobil, innovation in-store and in private label, as well as growth in Blackhawk and PDC should drive continued positive momentum,” said Steve Burd, Chairman and CEO.

The investor conference will be audio webcast live today from 8:00 AM PST to approximately 12:00 PM PST at http://www.safeway.com/investor_relations. Click on the webcast link to access the event. The audio replay will be available in an archived format for approximately two weeks after the meeting.

Safeway Inc. is a Fortune 100 company and one of the largest food and drug retailers in North America. The company operates 1,641 stores in the U.S. and Canada and had sales of $44.2 billion in 2012.

* See reconciliations.

CONTACT:

Christiane Pelz, 925-467-3832

This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements relate to, among other things, earnings per diluted share, identical-store sales growth, operating profit margins, capital expenditures and free cash flow. Forward-looking statements are indicated by words or phrases such as “guidance,” “believes,” “expects,” “anticipates,” “estimates,” “plans,” “continuing,” “ongoing,” and similar words or phrases and the negative of such words and phrases. Forward-looking statements are based on our current plans and expectations and involve risks and uncertainties which are, in many instances, beyond our control, and which could cause actual results to differ materially from those included in or contemplated or implied by the forward-looking statements. Such risks and uncertainties include the following: general business and economic conditions in our operating regions, including the rate of inflation or deflation, consumer spending levels, currency valuations, population, employment and job growth and/or losses in our markets; sales volume levels and price per item trends; pricing pressures and competitive factors, which could include pricing strategies, store openings, remodels or acquisitions by our competitors; results of our programs to control or reduce costs, improve buying practices and control shrink; results of our programs to increase sales; results of our continuing efforts to expand corporate brands; results of our programs to improve our perishables departments; results of our promotional programs; results of our capital program; results of our efforts to improve working capital; results of any ongoing litigation in which we

are involved or any litigation in which we may become involved; the resolution of uncertain tax positions; the ability to achieve satisfactory operating results in all geographic areas where we operate; changes in the financial performance of our equity investments; labor costs, including benefit plan costs and severance payments, or labor disputes that may arise from time to time and work stoppages that could occur in areas where certain collective bargaining agreements have expired or are on indefinite extensions or are scheduled to expire in the near future; failure to fully realize or delay in realizing growth prospects for existing or new business ventures, including our Blackhawk and Property Development Centers subsidiaries; legislative, regulatory, tax, accounting or judicial developments, including with respect to Blackhawk; the cost and stability of fuel, energy and other power sources; the impact of the cost of fuel on gross margin and identical-store sales; loss of a key member of senior management, including the failure to effectively manage the succession of our departing Chairman and Chief Executive Officer or Chief Information Officer; discount rates used in actuarial calculations for pension obligations and self-insurance reserves; the rate of return on our pension assets; the availability and terms of financing, including interest rates; adverse developments with regard to food and drug safety and quality issues or concerns that may arise; data security or other information technology issues that may arise; unanticipated events or changes in real estate matters, including acquisitions, dispositions and impairments; adverse weather conditions and effects from natural disasters; performance in new business ventures or other opportunities that we pursue; and the capital investment in and financial results from our Lifestyle stores. We undertake no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof and disclaim any obligation to do so. Please refer to our reports and filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, and subsequent Current Reports on Form 8-K, for a further discussion of these risks and uncertainties.

2

SAFEWAY INC. AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

(Dollars in millions)

(Unaudited)

RECONCILIATION OF OPERATING PROFIT MARGIN BASIS-POINT CHANGE
EXCLUDING FUEL AND GAIN FROM LEGAL SETTLEMENTS IN 2012
Basis point (decrease) increase over prior year
	2013 Guidance
	Low		High
Basis point change in operating profit margin	(21	)	(11	)
Fuel impact	9		9
Gain from legal settlements in 2012	12		12
Basis point change in operating profit margin, excluding fuel and gain from legal settlements in 2012	—		10

RECONCILIATION OF GAAP CASH FLOW MEASURE TO FREE CASH FLOW
	2013 Guidance
	Low			High
Net cash flow from operating activities	$	1,700		$	1,900
Net cash flow used by investing activities	(850		)	(950		)
Free cash flow	$	850		$	950

3

EX-99.2

Reconciliations and Financial Slides

from the 2013 Safeway Investor Conference

March 6, 2013

1

Safe Harbor Language

This presentation may contain forward-looking statements. Such statements may related to topics such as sales, margins and basis point changes in margins, earnings and earnings per diluted share estimates, free cash flow and capital expenditures, and other related subjects.

These statements are based on Safeway's current plans and expectations and are subject to risks and uncertainties that could cause actual events and results to vary significantly from those implied by such statements. We ask you to refer to Safeway's reports and filings with the SEC for a further discussion of these risks and uncertainties.

2

Reconciliation of GAAP Cash Flow
Measure to Free Cash Flow *
(In Millions)
	2012 Original Guidance
	Low			High			2012			2011			2010			2009			2008			2007			2006			2005
Net cash flow from operating activities	$	1,700		$	1,800		$	1,569		$	2,024		$	1,850		$	2,549		$	2,251		$	2,190		$	2,175		$	1,881
(Increase) decrease in payables related to third-party gift cards, net of receivables	—			—			(26		)	(294		)	7			(170		)	(24		)	(84		)	(71		)	(48		)
Interest earned on favorable income tax settlement, net of tax	—			—			—			—			—			—			—			—			(63		)	—
Net cash flow from operating activities, as adjusted	1,700			1,800			1,543			1,730			1,857			2,379			2,227			2,106			2,041			1,833
Net cash flow used by investing activities	(850		)	(850		)	(572		)	(1,015		)	(799		)	(889		)	(1,546		)	(1,686		)	(1,735		)	(1,314		)
Cash used for investments and other business acquisitions	—			—			—			36			—			—			—			—			50			—
Net cash flow used by investing activities, as adjusted	(850		)	(850		)	(572		)	(979		)	(799		)	(889		)	(1,546		)	(1,686		)	(1,685		)	(1,314		)
Free cash flow	$	850		$	950		$	971		$	751		$	1,058		$	1,490		$	681		$	420		$	356		$	519
* Free cash flow is calculated as (1) net cash flow from operating activities adjusted to exclude payables related to third-party gift cards, net of receivables, less (2) net cash flow used by investing activities adjusted to exclude cash used by investments and business acquisitions. Cash from the sale of third-party gift cards is held for a short period of time and then remitted, less our commission, to card partners. Because this cash flow is temporary, it is not available for other uses, and it is therefore excluded from our calculation of free cash flow. We add back cash used by investments and business acquisitions to our calculation of free cash flow in order to provide a more accurate indication of our capacity to apply our available free cash flow to its intended uses. No forecast was made for these items.

3

Reconciliation of GAAP Cash Flow
Measure to Free Cash Flow
(In Millions)
	2013G						2014F						2015F						2016F						2017F
	Low			High			Low			High			Low			High			Low			High			Low			High
Net cash flow from operating activities	$	1,700		$	1,900		$	1,800		$	2,000		$	1,900		$	2,100		$	2,100		$	2,300		$	2,200		$	2,400
Net cash flow used by investing activities	(850		)	(950		)	(800		)	(900		)	(800		)	(900		)	(900		)	(1,000		)	(900		)	(1,000		)
Free cash flow	$	850		$	950		$	1,000		$	1,100		$	1,100		$	1,200		$	1,200		$	1,300		$	1,300		$	1,400

4

Reconciliation of Diluted EPS from Continuing Operations, as Reported, to Diluted EPS from Continuing Operations, as Adjusted
	2012
Diluted earnings per share from continuing operations, as reported	$	2.27
Gain from legal settlements	(0.12		)
Diluted earnings per share from continuing operations, as adjusted	$	2.15

5

Reconciliation of Operating Profit Margin BP Change
Excluding Fuel, Gross Presentation of Gift Card Commissions in 2011, Unusual Items and Gain from Legal Settlements in 2012
Basis point (decrease) increase over prior year:
						2012
		2013G				Original Guidance
		Low		High		Low		High		2012		2011		2010		2009		2008		2007	2006		2005
Basis point change in operating profit margin		(21	)	(11	)	(12	)	(2	)	(10	)	(22	)	436		(574	)	1		21	82		(11	)
Unusual items:
	Texas store closures																				(29	)	29
	Goodwill impairment charges													(483	)	483
	Impairment charges																						(13	)
	Labor buyout and health and welfare contributions																				(15	)	7
	Stock option expense																						15
Impact from gross presentation of gift card commissions												5
Fuel impact		9		9		7		7		14		9		(3	)	(4	)	(1	)	4	15		6
Basis point change in operating profit margin, excluding fuel, gross presentation of gift card commissions in 2011 and unusual items		(12	)	(2	)	(5	)	5		4		(8	)	(50	)	(95	)	—		25	53		33
Gain from legal settlements in 2012		12		12						(12	)
Basis point change in operating profit margin, excluding fuel, unusual items and gain from legal settlements in 2012		—		10						(8	)

6

Reconciliation of Operating & Administrative Expense BP Change
Excluding Fuel, Gross Presentation of Gift Card Commissions, just for U™ launch costs in 2012 and Unusual Items
Basis point (decrease) increase over prior year:
		2012		2011		2010	2009		2008		2007		2006		2005
Basis point change in operating & administrative expense		(42	)	(102	)	12	116		(38	)	(29	)	(93	)	(53	)
Unusual items:
	Texas store closures												29		(29	)
	Impairment charges														13
	Labor buyout and health and welfare contributions												15		(7	)
	Stock option expense														(15	)
Impact from gross presentation of gift card commissions				28
Fuel impact		16		69		31	(56	)	11		16		13		32
Basis point change in operating & administrative expense, excluding fuel, gross presentation of gift card commissions and unusual items		(26	)	(5	)	43	60		(27	)	(13	)	(36	)	(59	)
	just for U launch costs in 2012	(4	)
Basis point change in operating & administrative expense, excluding fuel and just for U launch costs in 2012		(30	)

7

Reconciliation of Gross Margin BP Change
Excluding Fuel, Gross Presentation of Gift Card Commissions and just for U™ launch costs in 2012
Basis point (decrease) increase over prior year:
	2012		2011		2010		2009		2008		2007		2006
Basis point change in gross margin	(52	)	(125	)	(34	)	24		(36	)	(8	)	(11	)
Fuel	30		80		27		(59	)	10		20		28
Impact from gross presentation of gift card commissions	—		32		—		—		—		—		—
Basis point change in gross margin, excluding fuel and gross presentation of gift card commissions	(22	)	(13	)	(7	)	(35	)	(26	)	12		17
Launch costs just for U	7
Basis point change in gross margin, excluding fuel and just for U launch costs in 2012	(15	)

8

Reconciliation of Net Cash Flow from Operating Activities to Adjusted EBITDA
(dollars in millions)
	2012			2011			2010			2009			2008			2007			2006			2005			2004			2003
Net cash flow from operating activities	$	1,569.7		$	2,023.6		$	1,849.7		$	2,549.7		$	2,250.9		$	2,190.5		$	2,175.0		$	1,881.0		$	2,226.4		$	1,609.6
Add (subtract):
Income taxes	262.2			363.9			290.6			144.2			539.3			515.2			369.4			287.9			233.7			310.9
Interest expense	304.0			272.2			298.5			331.7			358.7			388.9			396.1			402.6			411.2			442.4
Deferred income taxes	36.0			63.7			31.3			142.1			(171.7		)	(130.8		)	(1.1		)	215.9			29.2			77.9
Net pension and post-retirement benefits expense	(150.8		)	(114.3		)	(125.2		)	(140.1		)	(96.7		)	(72.1		)	(83.1		)	(115.6		)	(112.9		)	(130.9		)
Contributions to pension and post-retirement benefit plans	159.5			176.2			17.7			24.4			42.5			33.0			29.2			18.1			15.1			12.1
(Increase) decrease in accrued claims and other liabilities	(44.8		)	(23.2		)	(36.2		)	34.3			(21.1		)	5.8			(10.8		)	(44.1		)	(118.1		)	(52.7		)
Gain (loss) on property dispositions and lease exit activities	79.1			65.6			27.5			(12.7		)	19.0			42.3			17.8			(13.6		)	(20.6		)	13.4
Changes in working capital items	148.0			(385.8		)	67.9			(426.7		)	226.0			(45.6		)	(181.4		)	(310.9		)	(538.2		)	263.0
Lease exit costs and gain on property dispositions from discontinued operations	59.6			—			—			—			—			—			—			—			—			—
Other	(12.3		)	(17.4		)	3.4			(25.6		)	(0.5		)	26.1			(4.1		)	(14.4		)	(14.5		)	(8.2		)
Total Adjusted EBITDA	$	2,410.2		$	2,424.5		$	2,425.2		$	2,621.3		$	3,146.4		$	2,953.3		$	2,707.0		$	2,306.9		$	2,111.3		$	2,537.5

9

Reconciliation of Net Income (Loss) Attributable to Safeway Inc. to Adjusted EBITDA (Interest Coverage)
(dollars in millions)
	2012			2011			2010			2009			2008		2007			2006			2005			2004			2003
Net income (loss) attributable to Safeway Inc.	$	596.5		$	516.7		$	589.8		$	(1,097.5	)	$	965.3	$	888.4		$	870.6		$	561.1		$	560.2		$	(169.8	)
Add (subtract):
Property impairment charges and tax expense from discontinued operations	27.7			—			—			—			—		—			—			—			—			—
Income taxes	262.2			363.9			290.6			144.2			539.3		515.2			369.4			287.9			233.7			310.9
Interest expense	304.0			272.2			298.5			331.7			358.7		388.9			396.1			402.6			411.2			442.4
Depreciation expense	1,134.3			1,148.8			1,162.4			1,171.2			1,141.1		1,071.2			991.4			932.7			894.6			863.6
LIFO expense (income)	0.7			35.1			(28.0		)	(35.2		)	34.9		13.9			1.2			(0.2		)	(15.2		)	(1.3		)
Share-based employee compensation	55.1			50.0			55.5			61.7			64.3		48.4			51.2			59.7			—			—
Property impairment charges	46.5			44.7			71.7			73.7			40.3		27.1			39.2			78.9			39.4			344.9
Miscellaneous equity investment impairment charge	—			—			—			—			—		—			—			—			—			10.6
Goodwill impairment charges	—			—			—			1,974.2			—		—			—			—			—			729.1
Equity in (earnings) losses of unconsolidated affiliate	(17.5		)	(13.0		)	(15.3		)	(8.5		)	2.5		(8.7		)	(21.1		)	(15.8		)	(12.6		)	7.1
Dividend received from unconsolidated affiliate	0.7			6.1			—			5.8			—		8.9			9.0			—			—			—
Total Adjusted EBITDA	$	2,410.2		$	2,424.5		$	2,425.2		$	2,621.3		$	3,146.4	$	2,953.3		$	2,707.0		$	2,306.9		$	2,111.3		$	2,537.5
Adjusted EBITDA as a multiple of interest expense	7.9x			8.9x			8.1x			7.9x			8.8x		7.6x			6.8x			5.7x			5.1x			5.7x

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