UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Mark One)

[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 16, 2001

OR

[   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _____________.

Commission file number 1-41

SAFEWAY INC.

(Exact name of registrant as specified in its charter)

Delaware	94-3019135
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5918 Stoneridge Mall Rd. Pleasanton, California	94588-3229
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code	(925) 467-3000

Not Applicable

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X]  No [   ]   As of July 23, 2001 there were issued and outstanding 506.4 million shares of the registrant’s common stock

This Form 10-Q/A is being filed solely for the purpose of amending Part I, Item 1 in our Quarterly Report on Form 10-Q for the period ended June 16, 2001 which was filed with the Commission on July 31, 2001, to correct a typographical error. As amended, pro forma net income for the 24 weeks ended June 16, 2001 is now stated correctly as $590.4 million in Note D — Pro Forma Summary Financial Information.

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

SAFEWAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)

		June 16,			December 30,
		2001			2000
ASSETS
Current assets:
	Cash and equivalents	$	102.5		$	91.7
	Receivables		365.4			374.5
	Merchandise inventories		2,369.2			2,508.2
	Prepaid expenses and other current assets		275.6			249.1
	Total current assets		3,112.7			3,223.5
Property			11,310.8			10,728.1
	Less accumulated depreciation and amortization		(3,876.5	)		(3,582.0	)
	Property, net		7,434.3			7,146.1
Goodwill, net of accumulated amortization of $502.6 and $439.3			5,158.2			4,709.9
Prepaid pension costs			512.9			491.5
Investment in unconsolidated affiliate			176.0			166.6
Other assets			237.8			227.7
Total assets		$	16,631.9		$	15,965.3
(Continued)

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SAFEWAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(In millions, except per-share amounts)
(Unaudited)

		June 16,			December 30,
		2001			2000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Current maturities of notes and debentures	$	529.8		$	626.8
	Current obligations under capital leases		47.0			47.0
	Accounts payable		1,541.0			1,920.2
	Accrued salaries and wages		343.2			389.9
	Other accrued liabilities		945.1			795.6
	Total current liabilities		3,406.1			3,779.5
Long-term debt:
	Notes and debentures		5,902.0			5,406.3
	Obligations under capital leases		421.0			415.8
	Total long-term debt		6,323.0			5,822.1
Deferred income taxes			440.8			508.7
Accrued claims and other liabilities			446.0			465.2
Total liabilities			10,615.9			10,575.5
Commitments and contingencies
Stockholders’ equity:
	Common stock: par value $0.01 per share; 1,500 shares authorized; 506.2 and 504.1 shares issued, after deducting 63.9 and 64.3 treasury shares		5.7			5.7
	Additional paid-in capital		1,603.1			1,548.0
	Retained earnings		4,453.0			3,861.8
	Accumulated other comprehensive loss		(45.8	)		(25.7	)
	Total stockholders’ equity		6,016.0			5,389.8
Total liabilities and stockholders’ equity		$	16,631.9		$	15,965.3
See accompanying notes to condensed consolidated financial statements.

3

SAFEWAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per-share amounts)
(Unaudited)

		12 Weeks Ended						24 Weeks Ended
		June 16,			June 17,			June 16,			June 17,
		2001			2000			2001			2000
Sales		$	7,986.2		$	7,418.1		$	15,652.3		$	14,504.4
Cost of goods sold			(5,497.7	)		(5,216.4	)		(10,821.2	)		(10,193.0	)
	Gross profit		2,488.5			2,201.7			4,831.1			4,311.4
Operating and administrative expense			(1,809.3	)		(1,589.6	)		(3,541.3	)		(3,155.3	)
Goodwill amortization			(32.9	)		(29.2	)		(64.2	)		(58.3	)
	Operating profit		646.3			582.9			1,225.6			1,097.8
Interest expense			(105.6	)		(108.3	)		(214.8	)		(218.1	)
Other (expense) income, net			(21.6	)		5.5			(12.2	)		13.9
	Income before income taxes		519.1			480.1			998.6			893.6
Income taxes			(211.8	)		(199.2	)		(407.4	)		(370.8	)
Net income		$	307.3		$	280.9		$	591.2		$	522.8
Basic earnings per share:		$	0.61		$	0.57		$	1.17		$	1.06
Diluted earnings per share:		$	0.59		$	0.55		$	1.14		$	1.03
Weighted average shares outstanding — basic			505.7			496.3			505.2			495.2
Weighted average shares outstanding — diluted			516.5			510.5			516.3			509.2
See accompanying notes to condensed consolidated financial statements.

4

SAFEWAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

					24 Weeks Ended
					June 16,			June 17,
					2001			2000
CASH FLOW FROM OPERATING ACTIVITIES
Net income					$	591.2		$	522.8
Reconciliation to net cash flow from operating activities:
	Depreciation and amortization					426.2			379.8
	LIFO expense					4.6			1.3
	Impairment charge and equity in undistributed earnings of unconsolidated affiliate					20.7			(10.5	)
	Net pension income					(12.6	)		(40.8	)
	Gain on pension settlement					(9.3	)		(10.0	)
	Increase (decrease) in accrued claims and other liabilities					5.9			(44.4	)
	Other					(19.7	)		(42.9	)
	Change in working capital items:
		Receivables and prepaid expenses				(0.5	)		(61.9	)
		Inventories at FIFO cost				157.8			152.0
		Payables and accruals				(334.0	)		(86.7	)
				Net cash flow from operating activities		830.3			758.7
CASH FLOW FROM INVESTING ACTIVITIES
Cash paid for property additions						(679.6	)		(420.7	)
Proceeds from sale of property						97.1			63.0
Net cash used to acquire Genuardi’s						(522.4	)		—
Other						(22.6	)		(26.7	)
			Net cash flow used by investing activities			(1,127.5	)		(384.4	)
CASH FLOW FROM FINANCING ACTIVITIES
Additions to short-term borrowings						24.9			20.9
Payments on short-term borrowings						(106.0	)		(69.0	)
Additions to long-term borrowings						1,846.4			126.5
Payments on long-term borrowings						(1,468.9	)		(490.5	)
Net proceeds from exercise of stock options						32.3			21.6
Other						(20.7	)		(1.2	)
		Net cash flow from (used by) financing activities				308.0			(391.7	)
Increase (decrease) in cash and equivalents						10.8			(17.4	)
CASH AND EQUIVALENTS
		Beginning of period				91.7			106.2
		End of period			$	102.5		$	88.8
See accompanying notes to condensed consolidated financial statements.

5

SAFEWAY INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE A — THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements of Safeway Inc. and subsidiaries (“Safeway” or the “Company”) for the 12 and 24 weeks ended June 16, 2001 and June 17, 2000 are unaudited and, in the opinion of management, contain all adjustments that are of a normal and recurring nature necessary to present fairly the financial position and results of operations for such periods. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s 2000 Annual Report to Stockholders. The results of operations for the 12 and 24 weeks ended June 16, 2001 are not necessarily indicative of the results expected for the full year.

Acquisition of Genuardi’s Family Markets, Inc. (“Genuardi’s”)

In February 2001, Safeway acquired all of the assets of Genuardi’s for approximately $530 million in cash (the “Genuardi’s Acquisition”). On the acquisition date, Genuardi’s operated 39 stores in the greater Philadelphia, Pennsylvania area, including New Jersey and Delaware, and had annualized sales of approximately $1 billion. The Genuardi’s Acquisition was accounted for as a purchase and resulted in goodwill of approximately $504 million which is currently being amortized over 40 years. See Note B. Under purchase accounting, the purchase price is allocated to acquired assets and liabilities based on their estimated fair values at the date of acquisition, and any excess is allocated to goodwill. For Genuardi’s, such allocations are subject to adjustment when additional analysis concerning asset and liability balances is finalized. Management does not expect the final allocations to differ materially from the amounts presented herein. Safeway funded the acquisition through the issuance of commercial paper and debentures. Safeway’s income statement for the first 24 weeks of 2001 includes 19 weeks of Genuardi’s results. See Note D.

Inventory

Net income reflects the application of the LIFO method of valuing certain domestic inventories, based upon estimated annual inflation (“LIFO Indices”). Safeway recorded estimated LIFO expense of $4.6 million during the first 24 weeks of 2001 and $1.3 million during the first 24 weeks of 2000. Actual LIFO Indices are calculated during the fourth quarter of the year based upon a statistical sampling of inventories.

Other Income/Expense

Other expense for the 12 and 24 weeks ended June 16, 2001 includes a $30.1 million impairment charge to reduce the carrying amount of Safeway’s investment in GroceryWorks.com to its estimated fair value. In June 2001 GroceryWorks.com underwent significant changes to its capital structure and governance including a buyout of the common shareholders’ interests and an investment of cash and technology by Tesco PLC, a new third-party strategic investor. Because of these changes, which included Safeway increasing its voting interest in GroceryWorks.com to 50%, Safeway will begin accounting for its investment under the equity method in the third quarter.

Comprehensive Income

Comprehensive income consists primarily of net income, foreign currency translation adjustments and the effects of accounting for hedges under SFAS No. 133. See Note B. Total comprehensive income was $571.1 million for the first 24 weeks of 2001 compared to $517.5 million for the first 24 weeks of 2000.

6

SAFEWAY INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE B — NEW ACCOUNTING STANDARDS

Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 137, “Accounting for Derivative Instruments and Hedging Activities — Deferral of the Effective Date of FASB Statement No. 133,” and SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities,” was adopted by the Company as of December 31, 2000. SFAS No. 133 defines derivatives, requires that derivatives be carried at fair value on the balance sheet, and provides for hedge accounting when certain conditions are met. Initial adoption of this new accounting standard did not have a material impact on Safeway’s financial statements.

In accordance with SFAS No. 133, derivative financial instruments are recognized on the balance sheet at fair value. Changes in the fair value of a derivative instrument designated as “fair value” hedges, along with the corresponding change in fair value of the hedged asset or liability, are recorded in current-period earnings. Changes in the fair value of derivative instruments designated as “cash flow” hedges, to the extent the hedges are highly effective, are recorded in other comprehensive income, net of related tax effects. The ineffective portion of the cash flow hedge, if any, is recognized in current-period earnings. Other comprehensive income is relieved when current earnings are affected by the variability of cash flows.

The Company assesses, both at inception of the hedge and on an ongoing basis, whether derivatives used as hedging instruments are highly effective in offsetting the changes in the fair value or cash flows of hedged items. If it is determined that a derivative is not highly effective as a hedge or ceases to be highly effective, the Company discontinues hedge accounting prospectively.

During the 24 weeks ended June 16, 2001, the Company’s derivative financial instrument contracts consisted only of an interest rate swap used by the Company to convert a portion of its variable-rate debt to fixed-rate debt. At June 16, 2001, the Company recorded a liability of $4.1 million related to the fair value of the interest rate swap agreement. The swap agreement is designated as, and is considered, an effective cash flow hedge of the Company’s forecasted variable rate interest payments. Hedge ineffectiveness was not material during the 24 weeks ended June 16, 2001. A corresponding loss was recorded in accumulated other comprehensive loss, net of income tax effects. The Company does not expect to reclassify any of this loss to current earnings during the next twelve months.

In June 2001, the Financial Accounting Standards Board issued SFAS No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for under the purchase method and addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. In the event Safeway acquires goodwill subsequent to June 30, 2001 it will not be amortized. SFAS No. 142 addresses the initial recognition and measurement of intangible assets acquired outside of a business combination and the accounting for goodwill and other intangible assets subsequent to their acquisition. SFAS No. 142 provides that intangible assets with finite useful lives be amortized and that goodwill and intangible assets with indefinite lives will not be amortized, but will rather be tested at least annually for impairment. Under the provisions of SFAS No. 142, any impairment loss identified upon adoption of this standard is recognized as a cumulative effect of a change in accounting principle which is charged directly to retained earnings. Any impairment loss incurred subsequent to initial adoption of SFAS No. 142 is recorded as a charge to current period earnings. Safeway will adopt SFAS No. 142 in 2002 and, at that time, will stop amortizing goodwill that resulted from business combinations completed prior to the adoption of SFAS No. 141. Goodwill is currently being amortized at approximately $141 million annually and will have an expected net carrying value of approximately $5.1 billion at the date of adoption of this standard. The Company is currently evaluating the provisions of SFAS No. 142 and has not yet determined the effect that adoption of this standard will have on its financial statements.

7

SAFEWAY INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

In December 1999, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements” which provides the SEC staff’s views on selected revenue recognition issues. The guidance in SAB No. 101 was adopted during the quarter ended December 30, 2000 and did not have a material impact on the Company’s financial statements.

Emerging Issues Task Force (“EITF”) Issue Nos. 00-14, “Accounting for Certain Sales Incentives;” 00-22, “Accounting for ‘Points’ and Other Time-Based or Volume-Based Sales and Incentive Offers, and Offers for Free Products or Services to be Delivered in the Future;” and 00-25, “Vendor Income Statement Characterization of Consideration from a Vendor to a Retailer” will become effective for Safeway beginning in the first quarter of 2002. These issues address the appropriate accounting for certain vendor contracts and loyalty programs. Safeway has not fully assessed the impact of these issues but does not believe they will have a material effect on the Company’s financial statements.

NOTE C — FINANCING

Notes and debentures were composed of the following at June 16, 2001 and December 30, 2000 (in millions):

	June 16, 2001				December 30, 2000
	Long-term		Current		Long-term		Current
Commercial paper	$	1,041.9			$	2,328.1
Bank credit agreement, unsecured		140.0				134.3
9.30% Senior Secured Debentures due 2007		24.3				24.3
6.15% Senior Notes due 2006, unsecured		700.0				—
6.50% Senior Notes due 2011, unsecured		500.0				—
6.85% Senior Notes due 2004, unsecured		200.0				200.0
7.00% Senior Notes due 2007, unsecured		250.0				250.0
7.25% Senior Debentures due 2031, unsecured		600.0				—
7.45% Senior Debentures due 2027, unsecured		150.0				150.0
5.875% Senior Notes due 2001, unsecured		—	$	400.0		—	$	400.0
6.05% Senior Notes due 2003, unsecured		350.0				350.0
6.50% Senior Notes due 2008, unsecured		250.0				250.0
7.00% Senior Notes due 2002, unsecured		600.0				600.0
7.25% Senior Notes due 2004, unsecured		400.0				400.0
7.50% Senior Notes due 2009, unsecured		500.0				500.0
10% Senior Subordinated Notes due 2001, unsecured		—		79.9		—		79.9
9.65% Senior Subordinated Debentures due 2004, unsecured		81.2				81.2
9.875% Senior Subordinated Debentures due 2007, unsecured		24.2				24.2
10% Senior Notes due 2002, unsecured		6.1				6.1
Mortgage notes payable, secured		47.2		26.9		60.3		16.4
Other notes payable, unsecured		20.6		23.0		31.3		55.5
Medium-term notes, unsecured		16.5				16.5
Short-term bank borrowings, unsecured		—		—		—		75.0
	$	5,902.0	$	529.8	$	5,406.3	$	626.8

8

SAFEWAY INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE D — PRO FORMA SUMMARY FINANCIAL INFORMATION

The following unaudited pro forma combined summary financial information is based on the historical consolidated results of the operations of Safeway and Genuardi’s, as if the Genuardi’s Acquisition had occurred as of the beginning of the 24-week periods ended June 16, 2001 and June 17, 2000. This pro forma financial information is presented for informational purposes only and may not be indicative of what the actual consolidated results of operations would have been if the acquisition had been effective as of the period being presented.

	24 Weeks Ended
	(Pro Forma)		(Pro Forma)
(in millions, except per-share amounts)	June 16, 2001		June 17, 2000
Sales	$	15,741.6	$	14,910.5
Net income	$	590.4	$	523.9
Diluted earnings per share	$	1.14	$	1.03

NOTE E — CONTINGENCIES

Legal Matters

Note K to the Company’s consolidated financial statements, under the caption “Legal Matters” on pages 40 and 41 of the 2000 Annual Report to Stockholders, provides information on certain litigation in which the Company is involved. There have been no material developments to these matters, except as noted in subsequent filings and except as described below.

Note K refers to a lawsuit against the Company filed on July 10, 1998, in the Superior Court for Alameda County, California, alleging that the Company committed fraud and breach of contract in connection with settlements involving the Richmond warehouse fire. As reported previously, on March 27, 2001, the California Court of Appeal affirmed the trial court’s dismissal of the action. All appeals have now expired, and the case is terminated.

In the case of Baker, et al. v. Jewel Food Stores, Inc. et al., the court has extended discovery by another month, and a ruling on defendants’ motion for summary judgment is now expected in the last quarter of 2001.

9

SAFEWAY INC. AND SUBSIDIARIES

Signatures

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

Date:	August 2, 2001	\s\ Steven A. Burd
		Steven A. Burd Chairman, President and Chief Executive Officer
Date:	August 2, 2001	\s\  Vasant M. Prabhu
		Vasant M. Prabhu Executive Vice President and Chief Financial Officer

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