11-K Dominicks 401k Financials
Dominick's Finer Foods, LLC
401(k) Retirement Plan for
Union Employees
Financial Statements as of and for the Years Ended December 31, 2012 and 2011,
Supplemental Schedule as of December 31, 2012, and Report of Independent
Registered Public Accounting Firm
DOMINICK'S FINER FOODS, LLC 401(k)
RETIREMENT PLAN FOR UNION EMPLOYEES
TABLE OF CONTENTS
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FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011: | |
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SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2012 | |
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NOTE: | All other schedules required by Section 2520.103-10 of the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 have been omitted because they are not applicable. |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Safeway Benefit Plans Committee and Participants of the
Dominick's Finer Foods, LLC 401(k) Retirement Plan for Union Employees:
We have audited the accompanying statements of net assets available for benefits of the Dominick's Finer Foods, LLC 401(k) Retirement Plan for Union Employees (the “Plan”) as of December 31, 2012 and 2011, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2012 and 2011, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) as of December 31, 2012 is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This schedule is the responsibility of the Plan's management. Such schedule has been subjected to the auditing procedures applied in our audit of the basic 2012 financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole.
/s/ Deloitte & Touche LLP
San Francisco, California
June 27, 2013
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DOMINICK'S FINER FOODS, LLC 401(k) | | | |
RETIREMENT PLAN FOR UNION EMPLOYEES | | | |
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STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS | | | |
AS OF DECEMBER 31, 2012 AND 2011 | | | |
(In thousands) | | | |
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| 2012 | | 2011 |
ASSETS: | | | |
Investments at fair value — | | | |
Plan's interest in investments of the Safeway Inc. | | | |
Defined Contribution Plans Master Trust (Note 3) | $ | 149,724 |
| | $ | 142,584 |
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Other assets (liabilities) of the Safeway Inc. Defined Contribution Plans | | | |
Master Trust: | | | |
Due from broker for securities sold | — |
| | 66 |
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Due to broker for securities purchased | (4 | ) | | (51 | ) |
Total interest in net assets of the Safeway Inc. Defined | | | |
Contribution Plans Master Trust | 149,720 |
| | 142,599 |
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Receivables — Notes receivable from participants | 4,018 |
| | 4,114 |
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Total assets | 153,738 |
| | 146,713 |
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LIABILITIES | 14 |
| | 9 |
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NET ASSETS REFLECTING ALL INVESTMENTS AT FAIR VALUE | 153,724 |
| | 146,704 |
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ADJUSTMENT FROM FAIR VALUE TO CONTRACT VALUE FOR FULLY BENEFIT-RESPONSIVE INVESTMENT CONTRACTS | (1,768 | ) | | (1,635 | ) |
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NET ASSETS AVAILABLE FOR BENEFITS | $ | 151,956 |
| | $ | 145,069 |
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See notes to financial statements | | | |
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DOMINICK’S FINER FOODS, LLC 401(k) | | | |
RETIREMENT PLAN FOR UNION EMPLOYEES | | | |
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STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS | | | |
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 | | | |
(In thousands) | | | |
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| 2012 | | 2011 |
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ADDITIONS: | | | |
Investment income — Plan’s interest in Safeway Inc. | | | |
Defined Contribution Plans Master Trust investment income (Note 3) | $ | 11,592 |
| | $ | 298 |
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Interest income on notes receivable from participants | 179 |
| | 213 |
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Participant contributions | 5,079 |
| | 5,242 |
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Employer contributions | 41 |
| | — |
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Total additions | 16,891 |
| | 5,753 |
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DEDUCTIONS: | | | |
Benefits paid to participants | (9,914 | ) | | (9,490 | ) |
Administrative expenses | (90 | ) | | (46 | ) |
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Total deductions | (10,004 | ) | | (9,536 | ) |
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INCREASE (DECREASE) IN NET ASSETS | 6,887 |
| | (3,783 | ) |
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NET ASSETS AVAILABLE FOR BENEFITS: | | | |
Beginning of year | 145,069 |
| | 148,852 |
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End of year | $ | 151,956 |
| | $ | 145,069 |
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See notes to financial statements. | | | |
DOMINICK'S FINER FOODS, LLC 401(k)
RETIRMENT PLAN FOR UNION EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2012 AND 2011
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1. | DESCRIPTION OF THE PLAN |
The following description of the Dominick's Finer Foods, LLC 401(k) Retirement Plan for Union Employees (the “Plan”) is provided for general information only. Participants should refer to the Summary Plan Description for more complete information about the Plan's provisions. The following description reflects all Plan amendments through December 31, 2012.
General - The Plan is a defined contribution plan available to Dominick's Finer Foods, LLC (the “Company”) union employees who have attained age 21 and completed one month of employment. The Company is a wholly-owned subsidiary of Safeway Inc. (“Safeway”), which sponsors the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). A portion of the Plan is designated as an employee stock ownership plan (ESOP). The ESOP portion of the Plan permits each participant who has an investment in Safeway Inc. common stock to elect to receive dividends paid as cash or reinvested in additional shares of Safeway Inc. common stock. The Safeway Benefits Plans Committee controls and manages the operation and administration of the Plan.
Contributions - Participants may elect to contribute between 1% and 18% of their eligible pay, up to a maximum contribution of $17,000 for 2012 and $16,500 for 2011, according to the Internal Revenue Code (the “Code”) limitations. Participants may also elect an automatic increase in their deferral contributions from 1% to 3%. Participant contributions are not currently taxable to participants pursuant to Section 401(k) of the Code. There have been no employer contributions to the Plan.
Trustee and Recordkeeper - The trustee of the Plan is JPMorgan Chase Bank, N.A. and the recordkeeper is J.P. Morgan Retirement Plan Services.
Investment Options - Participants may direct their accounts in any one or combination of investment funds and Safeway Inc. common stock. The Plan's current investment offerings include mutual funds, Safeway Inc. common stock, common collective trusts and the Interest Income Fund (see Note 4). Participants may change their investment options on a daily basis.
Vesting - Participants are vested immediately in their contributions plus actual earnings thereon.
Participant Accounts - Individual accounts are maintained for each Plan participant. Each participant's account is adjusted for the participant's contributions, income or loss thereon and withdrawals. Payment for Plan administrative expenses is paid in part by the investment funds based on revenue sharing agreements between the Plan and the investment funds. In addition, participants are charged up to $4 per month for administrative expenses. The benefit to which a participant is entitled is the value of the participant's vested account.
Participant Loans - Participants may borrow a minimum of $1,000 up to a maximum of the lesser of $50,000 or 50% of their account balance. The loan term cannot exceed five years, except where the loan is used to purchase a primary residence, in which case the loan period may extend to 15 years. Loans are secured by the balance in the participant's account. The interest rate charged on participant loans will be equal to the sum of 1% plus the prime rate published in The Wall Street Journal on the first business date of each month for loans processed in that week. Principal and interest payments are made through payroll deductions. Participants may make loan payments directly to the recordkeeper after termination of
employment. Participants may only have one loan outstanding at a time and are charged a one-time $50 fee for the loan and a $10.50 servicing fee each
quarter for the term of the loan. At December 31, 2012 and 2011, there were 631 and 659 loans outstanding, respectively, with interest rates ranging from 4.25% to 9.25%.
Participant loans are held by the Plan outside the Master Trust arrangement (see Note 3).
In-Service Withdrawals - An active or inactive participant may withdraw all or any portion of their rollover account, ESOP dividend account and certain prior accounts, if applicable, at any time. The Plan also provides for in-service withdrawals for participants who are age 59 1/2. Hardship withdrawals are not permitted.
Payment of Benefits - Upon termination of employment, a participant may elect (a) to leave the balance of his or her account in the Plan until April 1 of the year following the year in which the participant turns age 70 1/2, (b) to receive an immediate lump sum distribution as cash, as Safeway Inc. common stock (up to the amount invested in Safeway Inc. common stock) or as a rollover to another qualified plan or Individual Retirement Account, or (c) receive a series of payments over a period of years not to exceed the participant's or participant and spouse's life expectancies if such balance exceeds $5,000. The optional forms of annuity payments are (i) a 10 or 15 Years Certain and Life Annuity, (ii) a Contingent Annuitant - Ten Years Certain and Life Annuity, (iii) a Flexible Installment Refund Annuity, or (iv) a 5, 10 or 15 Years Installment Refund Annuity. If a participant's balance is $1,000 or less, and the participant does not elect a distribution of funds as a direct rollover or to be payable to the participant, the account will be distributed in accordance with plan provisions to be payable to the participant, subject to income tax withholding. If the balance of the participant's account is $5,000 or less, but greater than $1,000, and the participant does not elect a distribution of funds as a direct rollover or to be payable to the participant, the account will be automatically rolled over into an IRA designated by the Plan in accordance with plan provisions.
Plan Termination - Although Safeway has not expressed any intent to terminate the Plan, it may do so at any time, subject to the provisions set forth in ERISA. In the event of termination of the Plan, the assets of the Plan would be distributed to the participants in accordance with the value of their individual investment accounts.
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2. | SIGNIFICANT ACCOUNTING POLICIES |
Basis of Accounting - The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("GAAP").
Investment Valuation and Income Recognition - The fair value of the Plan's interest in the Master Trust is based on the beginning of year value of the Plan's interest in the Safeway Inc. Defined Contribution Plans Master Trust (the "Master Trust"), plus actual contributions and allocated investment income, less actual distributions and allocated administrative expenses, plus or minus changes in unrealized gains and losses. The Master Trust's investments are stated at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). See Note 3 for discussion of fair value measurements.
In accordance with GAAP, the statements of net assets available for benefits present investment contracts at fair value, as well as an additional line item showing an adjustment of the fully benefit-responsive contracts from fair value to contract value. The statements of changes in net assets available for benefits are presented on a contract value basis.
Purchases and sales of securities are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
Management fees and operating expenses charged to the Plan for investments in mutual funds, Safeway Inc. common stock, common collective trusts and the Interest Income Fund are deducted from income earned on a daily basis and are not separately reflected. Consequently, management fees and operating expenses are reflected as a reduction of investment returns for such investments.
Concentrations of Risk - The Master Trust investments at December 31, 2012, include a mutual fund with a year-end fair value of $72.7 million that the Master Trust has a 96.5% beneficial ownership of the outstanding institutional shares.
Payment of Benefits - Benefit payments to participants are recorded upon distribution. Amounts allocated to accounts of persons who have elected to withdraw from the Plan, but have not yet been paid were $0 and $4,000 at December 31, 2012 and 2011, respectively.
Notes Receivable from Participants - Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent participant loans are recorded as distributions based on the terms of the Summary Plan Description.
Excess Contributions Payable - The Plan is required to return contributions received during the Plan year in excess of the Code limits.
Administrative Expenses - The Plan's administrative expenses are primarily allocated to participant accounts.
Use of Estimates - The preparation of 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 at the date of the financial statements and the reported amounts of additions to and deductions from net assets available for benefits during the reporting period. Actual results could differ from these estimates.
The estimated fair value of traditional guaranteed investment contracts presented in Note 3 and Note 4 are based on assumptions about the market for such investments because quoted market prices are unavailable. Such estimates are not necessarily indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions could have a material effect on the estimated fair values. Additionally, the fair values were estimated as of year-end, and current estimates may differ from the amounts presented.
Risks and Uncertainties - The Plan invests in the Master Trust which utilizes various investment instruments, including common stock, mutual funds, common collective trusts and the Interest Income Fund. Investment securities, in general, are exposed to various risks, such as interest rate, credit and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and such changes could materially affect the amounts reported in the financial statements.
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3. | MASTER TRUST FINANCIAL INFORMATION |
The Plan participates in a master trust arrangement with the Safeway Inc. Defined Contribution Plans Master Trust. The Trustee holds the Master Trust's investment assets, provides administrative functions for each of the Plans participating in the Master Trust, and executes investment transactions as directed by participants.
Use of the Master Trust permits the commingling of Plan assets with the assets of the Safeway 401(k) Savings Plan (prior to June 24, 2011 when this plan was merged into the Safeway 401(k) Plan), the Safeway 401(k) Plan and The Vons Companies, Inc. Pharmacists' 401(k) Plan. Although assets of each of the plans are commingled in the Master Trust, the Trustee maintains supporting records for each
participating plan. The net investment income of the investment assets is allocated daily by the Trustee to each participating plan based on the relationship of the interest in each plan to the total of the interests of all four participating plans.
The following presents the investment securities of the Master Trust, and the Plan's share of investment securities, as of December 31, 2012 and 2011 (in thousands):
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| 2012 | | 2011 |
Investments at fair value: | | | |
Safeway Inc. common stock | $ | 140,163 |
| | $ | 152,609 |
|
Mutual Funds (outside of Interest Income Fund) | 634,864 |
| | 561,943 |
|
Common/collective trusts (outside of Interest Income Fund) | 469,931 |
| | 406,932 |
|
Interest Income Fund (see Note 4): | | | |
Synthetic guaranteed investment contracts (“GICs”): | | | |
Underlying investments | 411,788 |
| | 362,773 |
|
Wrapper contracts | 65 |
| | 30 |
|
Traditional guaranteed investment contracts | 18,342 |
| | 33,569 |
|
Separate account contract | 25,053 |
| | — |
|
Mutual Fund | 50,017 |
| | 23,861 |
|
Stable Asset Fund | — |
| | 98,490 |
|
| | | |
Investment securities in Trust at fair value | $ | 1,750,223 |
| | $ | 1,640,207 |
|
Other net assets | 231 |
| | 3,099 |
|
Total net assets of Master Trust | 1,750,454 |
| | 1,643,306 |
|
| | | |
Plan’s interest in investment securities in Trust, at fair value | $ | 149,724 |
| | $ | 142,584 |
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Plan’s percentage interest in investment securities | | | |
in Trust, at fair value | 8.6 | % | | 8.7 | % |
The following presents the increase (decrease) in the Master Trust's assets, and the Plan's share of the increase (decrease) in the Master Trust's assets, for the years ended December 31, 2012 and 2011 (in thousands):
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| | | | | | | |
| 2012 | | 2011 |
Investment income: | | | |
Income from Safeway Inc. common stock: | | | |
Dividends on Safeway Inc. common stock | $ | 6,094 |
| | $ | 3,715 |
|
Net loss in market value of Safeway Inc. common stock | (20,468 | ) | | (8,383 | ) |
Income from mutual funds: | | | |
Dividend income | 34,005 |
| | 14,309 |
|
Net investment gain (loss) | 54,078 |
| | (35,435 | ) |
Income from common/collective trusts (outside of Interest | | | |
Income Fund) — net investment gain | 64,366 |
| | 3,161 |
|
Income from Interest Income Fund: | | | |
Interest income | 8,740 |
| | 9,803 |
|
Net investment loss | (2,447 | ) | | (1,252 | ) |
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Increase (decrease) in trust assets derived from investment activities | $ | 144,368 |
| | $ | (14,082 | ) |
| | | |
Plan’s interest in Trust investment activities | $ | 11,592 |
| | $ | 298 |
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The Plan's interest in the Master Trust's investments that represent five percent or more of the Plan's net assets available for benefits at year-end 2012 and 2011, are as follows (in thousands):
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SSgA S&P 500 Fund | $ | 31,479 |
| $ | 28,150 |
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Monumental MDA #01046TR | 17,738 |
| 15,102 |
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State Street Bank #97044 | 15,830 |
| 12,851 |
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PIMCO Total Return Fund | 14,571 |
| 12,809 |
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CDC-IXIS WR-1027-01 | 13,178 |
| 12,700 |
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Wells Fargo Advantage Large Cap Growth-Inst | 12,580 |
| — |
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Wells Fargo Advantage Strategic Large Cap Growth-Inst | — |
| 11,108 |
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SEI Stable Asset Fund #190-783 | — |
| 13,225 |
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Fair Value Measurements - The accounting guidance for fair value measurements defines fair value, established a framework for measuring fair value, and requires disclosures about fair value measurements. The guidance prioritizes the inputs for measuring fair value into the following hierarchy:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable;
Level 3 - Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.
The level within the fair value hierarchy is based on the lowest level of any input which is deemed significant to the fair value measurement. The Plan's policy is to recognize significant transfers between levels at the end of the reporting period.
In accordance with the accounting guidance for fair value measurements, the table below includes the major categorization for debt and equity securities on the basis of nature and risk. Assets measured at fair value on a recurring basis consisted of the following as of December 31, 2012 (in thousands): |
| | | | | | | | | | | | | | | | | |
| | | Master Trust Fair Value Measurements |
| | | | | Quoted | | | | |
| | | | | Prices in | | | | |
| | | | | Active | | | | |
| | | | | Markets | | Significant | | Significant |
| | | | | for Identical | | Observable | | Unobservable |
| | | | | Assets | | Inputs | | Inputs |
| Asset Category | | Total | | (Level 1) | | (Level 2) | | (Level 3) |
| | | | | | | | | |
* | Safeway Inc. common stock | | $ | 140,163 |
| | $ | 140,163 |
| | $ | — |
| | $ | — |
|
| Mutual funds (outside of | | | | | | | | |
| Interest Income Fund): | | | | | | | | |
| Bond fund | | 207,350 |
| | 207,350 |
| | — |
| | — |
|
| Domestic stock funds | | 327,997 |
| | 327,997 |
| | — |
| | — |
|
| International stock fund | | 99,517 |
| | 99,517 |
| | — |
| | — |
|
| Common/collective trusts | | | | | | | | |
| (outside of Interest Income | | | | | | | | |
| Fund): | |
|
| | | | | | |
| S&P 500 funds | | 318,702 |
| | | | 318,702 |
| | |
* | Target date retirement funds | | | | | | | | |
| (blend of investments) | | 151,229 |
| | | | 151,229 |
| | |
| Interest Income Fund: | | | | | | | | |
| Synthetic GICs — underlying | | | | | | | | |
| investments: | | | | | | | | |
| Cash and cash equivalents | | 11,666 |
| | 11,666 |
| | — |
| | — |
|
** | Commercial trust | | 56,389 |
| | — |
| | 56,389 |
| | — |
|
| Mortgage-and other- | | | | | | | | |
| asset backed securities | | 98,995 |
| | — |
| | 98,995 |
| | — |
|
| U.S. government securities | | 209,801 |
| | — |
| | 209,801 |
| | — |
|
| Other securities | | 34,937 |
| | — |
| | 34,937 |
| | — |
|
| Wrapper contracts | | 65 |
| | — |
| | — |
| | 65 |
|
| Traditional GICs | | 18,342 |
| | — |
| | 18,342 |
| | — |
|
*** | Separate account contract | | 25,053 |
| | — |
| | 25,053 |
| | — |
|
* | Mutual Fund | | 50,017 |
| | 50,017 |
| | — |
| | |
| | | | | | | | | |
| Total Investment Securities | | $ | 1,750,223 |
| | $ | 836,710 |
| | $ | 913,448 |
| | $ | 65 |
|
| Other Net Assets | | 231 |
| | | | | | |
| Total Trust Assets | | $ | 1,750,454 |
| | | | | | |
| | | | | | | | | |
* | Represents a party-in-interest transaction (see Note 6) |
** | Contains 21 securities totaling $582 thousand that represents party-in-interest transactions (see Note 6) |
*** | Contains 6 securities totaling $718 thousand that represents party-in-interest transactions (see Note 6) |
For the year ended December 31, 2012, there were no significant transfers in or out of Levels 1, 2 or 3. | |
Assets measured at fair value on a recurring basis consisted of the following as of December 31, 2011 (in thousands): |
| | | | | | | | | | | | | | | | | |
| | | Master Trust Fair Value Measurements |
| | | | | Quoted | | | | |
| | | | | Prices in | | | | |
| | | | | Active | | | | |
| | | | | Markets | | Significant | | Significant |
| | | | | for Identical | | Observable | | Unobservable |
| | | | | Assets | | Inputs | | Inputs |
| Asset Category | | Total | | (Level 1) | | (Level 2) | | (Level 3) |
| | | | | | | | | |
* | Safeway Inc. common stock | | $ | 152,609 |
| | $ | 152,609 |
| | $ | — |
| | $ | — |
|
| Mutual funds (outside of | | | | | | | | |
| Interest Income Fund): | | | | | | | | |
| Bond fund | | 187,969 |
| | 187,969 |
| | — |
| | — |
|
| Domestic stock funds | | 286,156 |
| | 286,156 |
| | — |
| | — |
|
| International stock fund | | 87,818 |
| | 87,818 |
| | — |
| | — |
|
| Common/collective trusts | | | | | | | | |
| (outside of Interest Income | | | | | | | | |
| Fund) | |
|
| | | | | | |
| S&P 500 funds | | 286,989 |
| | — |
| | 286,989 |
| | — |
|
* | Target date retirement funds | | | | | | | | |
| (blend of investments) | | 119,943 |
| | — |
| | 119,943 |
| | — |
|
| Interest Income Fund: | | | | | | | | |
| Synthetic GICs — underlying | | | | | | | | |
| investments: | | | | | | | | |
* | Mutual Fund | | 13,032 |
| | 13,032 |
| | — |
| | — |
|
** | Commercial trust | | 29,803 |
| | — |
| | 29,803 |
| | — |
|
| Mortgage-and other- | | | | | | | | |
| asset backed securities | | 127,283 |
| | — |
| | 127,283 |
| | — |
|
| U.S. government securities | | 150,433 |
| | — |
| | 150,433 |
| | — |
|
| Other securities | | 42,222 |
| | — |
| | 42,222 |
| | — |
|
| Wrapper contracts | | 30 |
| | — |
| | — |
| | 30 |
|
| Traditional GICs | | 33,569 |
| | — |
| | 33,569 |
| | — |
|
*** | Stable Asset Fund | | 98,490 |
| | — |
| | 98,490 |
| | — |
|
* | Mutual Fund | | 23,861 |
| | 23,861 |
| | — |
| | — |
|
| | | | | | | | | |
| Total Investment Securities | | 1,640,207 |
| | 751,445 |
| | 888,732 |
| | 30 |
|
| Other Net Assets | | 3,099 |
| | | | | | |
| Total Trust Assets | | $ | 1,643,306 |
| | | | | | |
| | | | | | | | | |
* | Represents a party-in-interest transaction (see Note 6) |
** | Contains 17 securities totaling $454 thousand that represents party-in-interest transactions (see Note 6) |
*** | Contains 8 securities totaling $2.6 million that represents party-in-interest transactions (see Note 6) |
For the year ended December 31, 2011, there were no significant transfers in or out of Levels 1, 2 or 3. | |
A reconciliation of the beginning and ending balances for Level 3 assets for the year ended December 31, 2012 and 2011, follows (in thousands):
|
| | | | | | | |
| 2012 | | 2011 |
| | | |
Balance as of January 1 | $ | 30 |
| | $ | 278 |
|
Settlements | — |
| | (84 | ) |
Unrealized gains (losses) | 35 |
| | (164 | ) |
| | | |
Balance as of December 31 | $ | 65 |
| | $ | 30 |
|
Below is a description of the valuation methodologies used for the fair value measurements.
Safeway Inc. Common Stock - Safeway Inc. common stock is valued at the closing price as reported on the New York Stock Exchange Composite Tape.
Mutual Funds - These investments are publicly traded investments which are valued using the Net Asset Value ("NAV"). The NAV of the mutual funds is a quoted price in an active market. The NAV is determined once a day after the closing of the exchange based upon the underlying assets in the fund, less the fund's liabilities, expressed on a per-share basis.
Common/Collective Trusts (Outside of Interest Income Fund) - Common/collective trusts invest primarily in a pool of investments, including contracts that are issued by insurance companies and commercial banks and in contracts that are backed by high quality bonds, bond trusts and bond mutual funds. The overall fair value of the common/collective trusts are based on observable inputs.
Investment Contracts - The fair value of Traditional GICs are calculated by discounting the related cash flows based on current yields of similar instruments with comparable durations. Separate account contracts and synthetic GICs include underlying investments that are stated at fair value. Fair value of the underlying investments is determined based on quoted market prices or yields currently available on comparable securities of issuers with similar credit ratings. Synthetic GICs also include wrapper contracts which guarantee that there will be no loss of principal or accrued interest. Fair market value of the wrapper contracts is estimated by converting the basis points assigned to the wrap fees into dollars and comparing cost to replacement value.
Stable Asset Fund - This fund is valued based on the NAV of the underlying investments. The beneficial interest of each participant is represented by units. Units are issued and redeemed daily at a constant NAV of $1 per unit.
The Master Trust maintains an Interest Income Fund (the “Fund”) that invests in a mutual fund, a stable asset fund, a separate account contract, traditional GICs and synthetic GICs, as described below. The GICs and common collective trust are fully-benefit responsive and are recorded in the financial statements at fair value and then adjusted to contract value.
Mutual Fund - The Fund invests in the JPM U.S. Treasury Plus Money Market Fund. The Fund seeks current income with liquidity and stability of principal. The Fund invests exclusively in U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Treasury, and repurchase agreements collateralized by such obligations.
Stable Asset Fund - The Fund invests in a Stable Asset Fund, a common collective trust. The beneficial interest of each participant is represented by units which are issued and redeemed daily at the constant NAV of $1 per unit. Distribution to the unit holders are declared daily from the net investment income and automatically reinvested in the Stable Asset Fund on a monthly basis, when paid. Although it is not guaranteed, best efforts are used to maintain a constant NAV of $1 per unit.
Participants ordinarily may direct the withdrawal or transfer of all or a portion of their investment at contract value. Contract value represents contributions made to the Stable Asset Fund, plus earnings, less participant withdrawals and administrative expenses. Plan management believes that the occurrence of events that would cause the Stable Asset Fund to transact at less than contract value is not probable.
Redemption Restrictions on the Stable Asset Fund - The Stable Asset Fund had redemption restrictions for participant-directed transfers to competing investment options, permitted participant withdrawals and transfers, and plan sponsor-directed withdrawals or liquidations.
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• | Permitted participant withdrawals and transfers are typically processed daily, the Fund trustee may request such evidence as it deems appropriate of entitlement to such withdrawal pursuant to certain procedures and may deny any application for withdrawal if satisfactory evidence is not provided. |
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• | Plan Sponsor directed withdrawals or liquidations require a 12 month advance written notice. |
Separate Account Contract - A Separate Account Contract is an investment contract issued by an insurance company or bank. The contract has no maturity and has a variable crediting rate that resets monthly. These contracts typically provide that realized and unrealized gains and losses on the underlying assets are not reflected immediately in the net assets of the Fund, but rather are amortized, usually over time to maturity or the duration of the underlying investments, through adjustments to the future interest crediting rate. The issuer guarantees that all qualified participant withdrawals will occur at contract value. Crediting rates of separate account contracts can be impacted by variables which include the current yield of the assets within the wrap contract, the duration of the assets covered by the wrap contract and the existing difference between the market value and contract value of the assets within the wrap contract.
Traditional GICs - Traditional GICs are backed by the general account of the issuer. The Fund deposits a lump sum with the issuer and receives a guaranteed interest rate for a specified time. Interest is accrued on either a simple interest or fully compounded basis and paid either periodically or at the end of the contract term. The issuer guarantees that all qualified participant withdrawals will occur at contract value (principal plus accrued interest). The traditional GICs in the Fund provide a fixed rate of interest over the term to maturity of the contract; therefore, crediting rates do not reset.
Synthetic GICs - A synthetic GIC is an investment contract (otherwise known as a wrap contract) issued by an insurance company or bank, backed by a portfolio of bonds that are owned by the Fund. The Fund has four synthetic GICs, as of December 31, 2012, with three having a pro-rata share of one wrapped portfolio and one having its own wrap. The assets underlying the synthetic GICs are maintained separate from the contract issuer's general assets, usually by a third party custodian. These contracts typically provide that realized and unrealized gains and losses on the underlying assets are not reflected immediately in the net assets of the Fund, but rather are amortized, usually over time to maturity or the duration of the underlying investments, through adjustments to the future interest crediting rate. The issuer guarantees that all qualified participant withdrawals will occur at contract value. Crediting rates of synthetic GICs can be impacted by variables which include the current yield of the assets within the wrap contract, the duration of the assets covered by the wrap contract and the existing difference between the market value and contract value of the assets within the wrap contract. For synthetic contracts, the Fund uses crediting rate calculations which adjust the current yield of the bonds by a portion of the current gain or loss that is built into the wrap contracts at the measurement date. These crediting rates are reset quarterly and cannot be less than zero. The crediting rate of synthetic contracts will track current market yields on a trailing basis. The rate reset allows the contract value of the portfolio to converge to the market value over time,
assuming the market value continues to earn the current portfolio yield for a period of time equal to the current portfolio duration.
With regards to both traditional and synthetic GICs and separate account contracts, certain potential events could limit the ability of the Fund to transact at contract value with the issuer. Such events include the following: (i) amendments to the Plan documents; (ii) changes to Fund's prohibition on competing investment options by participating plans or deletion of equity wash provisions; (iii) complete or partial termination of the Fund or its merger with another fund; (iv) the failure of the Plan to qualify for exemption from federal income taxes or any required prohibited transaction exemption under ERISA; (v) unless made in accordance with the withdrawal provisions of the Fund, the redemption of all or a portion of the interests in the Fund held by a participating plan at the direction of the participating plan sponsor, including withdrawals due to the removal of a specifically identifiable group of employees from coverage under the participating plan (such as a group layoff or early retirement incentive program), or the closing or sale of a subsidiary, employing unit or affiliate, the bankruptcy or insolvency of a plan sponsor, the merger of the Plan with another plan, or the Plan sponsor's establishment of another tax-qualified defined contribution plan; (vi) any change in law, regulation, ruling, administrative or judicial position or accounting requirement, in any case applicable to the Fund or participating plans, and (vii) the delivery of any communication to Plan participants designed to influence a participant not to invest in the Fund. The Plan Administrator does not believe that the occurrence of any such market value event which would limit the Fund's ability to transact at contract value with participants is probable.
Guaranteed investment contracts in the Fund do not permit issuers to terminate the agreement prior to the scheduled maturity date. The wrap contracts are evergreen contracts that contain termination provisions. Wrap agreements permit the Fund's investment manager or issuer to terminate upon notice at any time at market value and provide for automatic termination of the wrap contract if the book value or the market value of the contract equals zero. The issuer is not excused from paying the excess contract value when the market value equals zero. Wrap contracts that permit the issuer to terminate at market value generally provide that the Fund may elect to convert such termination to an Amortization Election as described below. In addition, if the Fund defaults in its obligations under the agreement (including the issuer's determination that the agreement constitutes a nonexempt prohibited transaction as defined under ERISA) and such default is not cured within the time permitted by any cure period, then the wrap contract may be terminated by the issuer and the Fund will receive the market value as of the date of termination. Also, wrap contracts permit the issuer or investment manager to elect at any time to convert the wrapped portfolio to a declining duration strategy whereby the contract would terminate at a date which corresponds to the duration of the underlying fixed-income portfolio on the date of the amortization election (“Amortization Election”). After the effective date of an Amortization Election, the fixed-income portfolio must conform to the guidelines agreed upon by the wrap issuer and the investment manager for the Amortization Election period. Such guidelines are intended to result in contract value equaling market value of the wrapped portfolio by such termination date.
The average yield on guaranteed investment contracts was computed by dividing the annualized one-day actual earnings of the contract on the last day of the Plan year by the fair value of the investments on the same date. For 2012 and 2011, the average yield for the Master Trust was 0.73% and 1.20% respectively.
The average crediting interest rate was computed by dividing the annualized one-day earnings credited to participants on the last day of the Plan year by the fair value of the investments on the same date. The average crediting interest rate for the Master Trust was 1.56% and 1.90% at December 31, 2012 and 2011, respectively.
The portfolio holdings of the Interest Income Fund in the Master Trust at December 31, 2012, is shown below (in thousands):
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| | | | | | | | | | | | | |
| As of December 31, 2012 |
| | | | | Wrapper | | |
| Rating | | Investments | | Contracts | | Adjustment to |
| S&P/ | | at | | at Fair | | Contract |
| Moody’s | | Fair Value | | Value | | Value |
| | | | | | | |
Mutual Fund — JPM U.S. Treasury | | | | | | | |
Plus Money Market Fund | AAA/Aaa | | $ | 50,017 |
| | | | $ | — |
|
Insurance Company Separate | | | | | | | |
Account Contract - Metropolitan | | | | | | | |
Life GAC 32718 | AA/Aa2 | | 25,053 |
| | | | (19 | ) |
Traditional Guaranteed Investment | | | | | | | |
Contracts: | | | | | | | |
Metropolitan Life GAC 32173 | AA-/Aa3 | | 6,686 |
| | | | (105 | ) |
Metropolitan Life GAC 32333 | AA-/Aa3 | | 5,211 |
| | | | (27 | ) |
Monumental SV-04747-Q | AA-/A1 | | 6,445 |
| | | | (176 | ) |
Synthetic Guaranteed Investment | | | | | | | |
Contracts: | | | | | | | |
Prudential #GA-62379 | AA/Aa2 | | 56,389 |
| | | | (1,521 | ) |
CDC-IXIS #WR-1027-01 | AA+/Aa1 | | 100,190 |
| | | | (3,269 | ) |
Monumental MDA #01046TR | AA+/Aa1 | | 134,856 |
| | | | (4,399 | ) |
Wrapper | | | | | $ | 65 |
| | — |
|
State Street Bank #97044 | AA+/Aa1 | | 120,353 |
| | | | (3,926 | ) |
Total | | | $ | 505,200 |
| | $ | 65 |
| | $ | (13,442 | ) |
The portfolio holdings of the Interest Income Fund in the Master Trust at December 31, 2011, is shown below (in thousands):
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| | | | | | | | | | | | | |
| As of December 31, 2011 |
| | | | | Wrapper | | |
| Rating | | Investments | | Contracts | | Adjustment to |
| S&P/ | | at | | at Fair | | Contract |
| Moody’s | | Fair Value | | Value | | Value |
| | | | | | | |
Mutual Fund — JPM U.S. Treasury | | | | | | | |
Plus Money Market Fund | AAA/Aaa | | $ | 23,861 |
| | | | $ | — |
|
Traditional Guaranteed Investment | | | | | | | |
Contracts: | | | | | | | |
Metropolitan Life GAC 32173 | AA-/Aa3 | | 6,633 |
| | | | (250 | ) |
Metropolitan Life GAC 32333 | AA-/Aa3 | | 5,168 |
| | | | (66 | ) |
Metropolitan Life GAC 29850 | AA-/Aa3 | | 6,166 |
| | | | (127 | ) |
Monumental SV-04728-Q | AA-/Aa3 | | 4,628 |
| | | | (141 | ) |
Monumental SV-04747-Q | AA-/Aa3 | | 6,394 |
| | | | (414 | ) |
Prudential GA 62069-212 | AA-/Aa3 | | 4,580 |
| | | | (90 | ) |
Common/Collective Trust — SEI Stable | | | | | | | |
Asset Fund #190-783 | AA+/Aa1 | | 98,490 |
| | | | 455 |
|
Synthetic Guaranteed Investment | | | | | | | |
Contracts: | | | | | | | |
Prudential #GA-62379 | AA/Aa2 | | 29,803 |
| | | | (799 | ) |
CDC-IXIS #WR-1027-01 | AA+/Aa1 | | 98,205 |
| | | | (3,185 | ) |
Monumental MDA #01046TR | AA+/Aa1 | | 116,780 |
| | | | (3,789 | ) |
Wrapper | | | | | $ | 30 |
| | — |
|
State Street Bank #97044 | AA+/Aa1 | | 99,377 |
| | | | (3,224 | ) |
State Street Bank #99002 | AA+/Aa1 | | 18,608 |
| | | | (604 | ) |
Total | | | $ | 518,693 |
| | $ | 30 |
| | $ | (12,234 | ) |
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5. | COMMON/COLLECTIVE TRUSTS (OUTSIDE OF INTEREST INCOME FUND) |
The Fund invests in the JPMCB SmartRetirement Passive Blend Funds and the SSgA S&P 500 Index NL-A Fund which are common collective trusts. Fair value of these investments has been estimated using the NAV per share of the investment. Plan participants had the ability to redeem these investments with the investee at NAV per share at December 31, 2012 and 2011.
There were no unfunded commitments, normal course of business redemption restrictions, or other redemption restrictions on these funds at December 31, 2012 or 2011.
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6. | PARTY-IN-INTEREST TRANSACTIONS |
The Plan's investments include Safeway Inc. common stock, which qualify as exempt party-in-interest transactions. At December 31, 2012 and 2011, the Plan held 84,461 and 81,760 shares, respectively, of Safeway Inc. common stock, with a cost basis of $2,056,566 and $2,110,147, respectively. During 2012 and 2011, the Plan received $66,230 and $38,899, respectively, of dividend income on Safeway Inc. common stock.
Certain Plan investments are managed or significantly influenced by J.P. Morgan Chase Bank N.A., trustee of the Plan. As J.P. Morgan Retirement Plan Services provides recordkeeping services to the Plan, these transactions qualify as party-in-interest transactions. Administrative fees paid to J.P. Morgan Retirement Plan Services for recordkeeping were $65,705 in 2012 and $69,038 in 2011.
The Internal Revenue Service ("IRS") issued a Determination Letter dated March 31, 2003 stating that the Plan and related trust, as then designed, qualified under the Code. Subsequent to this determination by the IRS, the Plan was amended and restated in its entirety, effective January 1, 2005. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. In 2010, the Plan applied for an updated Determination Letter. In January 2011, the IRS confirmed receipt of the application, and it is currently being processed by the IRS. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan, as amended and restated, is qualified and the related trust is tax exempt as of the financial statement date. Therefore, no provision for income taxes has been included in the Plan's financial statements.
GAAP requires Plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The Plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2012, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Plan administrator believes it is no longer subject to income tax examinations for years prior to 2006.
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8. | RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 |
The following is a reconciliation of the Statement of Net Assets Available for Benefits and the Statement of Changes in Net Assets Available for Benefits per the financial statements to the Form 5500 (in thousands):
|
| | | | | | | |
| | | |
| December 31, 2012 | | December 31, 2011 |
| | | |
Net assets available for benefits per the financial statements | $ | 151,956 |
| | $ | 145,069 |
|
Adjustment from contract to fair value for fully | | | |
benefit-responsive investment contracts | 1,768 |
| | 1,635 |
|
Net assets available for benefits per the Form 5500 | $ | 153,724 |
| | $ | 146,704 |
|
| | | |
| | | |
| December 31, 2012 | | December 31, 2011 |
| | | |
Increase (decrease) in net assets per the financial statements | $ | 6,887 |
| | $ | (3,783 | ) |
Adjustment from contract to fair value for fully | | | |
benefit-responsive investment contracts | 133 |
| | 1,516 |
|
Net income (loss) per Form 5500 | $ | 7,020 |
| | $ | (2,267 | ) |
|
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DOMINICK'S FINER FOODS, LLC 401(k) | |
RETIREMENT PLAN FOR UNION EMPLOYEES | |
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FORM 5500, SCHEDULE H, PART IV, LINE 4i — SCHEDULE OF ASSETS | |
(HELD AT END OF YEAR) | |
DECEMBER 31, 2012 | |
(In thousands) | |
| |
| |
| Current |
Asset Name and Description | Value |
| |
* Notes receivable from participants, maturing in 2013–2026 (631 loans, interest rates | |
ranging from 4.25% to 9.25%) | $ | 4,018 |
|
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TOTAL | $ | 4,018 |
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* Represents a party-in-interest transaction | |