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):
April 28, 2011
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
(Registrants 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 exhibit, 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., whether made before or after the date hereof, regardless of any general incorporation language in such filing.
On April 28, 2011, we issued our earnings press release for the first quarter of fiscal 2011. A copy of our press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
In the press release and our other public statements in connection with 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):
| Adjusted EBITDA which is defined by our bank credit agreement as EBITDA (earnings before interest, income taxes, depreciation and amortization), excluding the following: |
| LIFO (income) expense; |
| Share-based employee compensation; |
| Property impairment charges; |
| Equity in earnings of unconsolidated affiliate; and |
| Dividend from unconsolidated affiliate. |
| Adjusted Debt which is defined by our bank credit agreement as total debt less cash and equivalents in excess of $75.0 million. |
| Adjusted EBITDA as a multiple of interest expense which is calculated by dividing Adjusted EBITDA by interest expense. |
| Adjusted Debt to Adjusted EBITDA which is calculated by dividing Adjusted Debt by Adjusted EBITDA. |
| free cash flow which is calculated as net cash flow from operating activities, as adjusted to exclude payables related to third-party gift cards, net of receivables, less net cash flow used by investing activities. 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. |
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| net income excluding tax on repatriated earnings from Canada which is defined as income before income taxes, as reported, less tax on repatriated earnings from Canada. |
| diluted net income per common share attributable to Safeway Inc. excluding tax on repatriated earnings from Canada which is defined as diluted net income per common share attributable to Safeway Inc., as reported, less tax on repatriated earnings from Canada. |
| gross profit basis point increase, excluding impact from fuel sales and gross presentation of gift card commissions which is defined as basis point decrease in gross profit, as reported, excluding the impact from fuel sales and from the gross presentation of gift card commissions. |
| operating and administrative expense basis point increase, excluding impact from fuel sales and gross presentation of gift card commissions which is defined as basis point decrease in operating and administrative expense, as reported, excluding the impact from fuel sales and from the gross presentation of gift card commissions. |
Reconciliations of Adjusted EBITDA to the most directly comparable GAAP financial measures net income and net cash flow from operating activities are provided in the press release. Reconciliations of free cash flow to GAAP cash flow for the 12 weeks ended March 28, 2011 and March 27, 2010 and to the forecasted range for fiscal 2011 are also provided in the press release. Given the rapid growth in the third-party gift card business and the highly seasonal nature of that business, with a significant portion of sales of third-party gift cards occurring in late December each year, management is unable to provide a meaningful estimate for payables related to third-party gift cards for 2011, and therefore is not able to provide a reconciliation of the forecasted range of free cash flow for fiscal 2011 to net cash flow from operating activities. Reconciliations of net income excluding tax on repatriated earnings from Canada to GAAP net income and diluted income per common share attributable to Safeway Inc. excluding tax on repatriated earnings from Canada to diluted income per common share attributable to Safeway Inc. are also provided in the press release, as are reconciliations of gross profit and operating and administrative expense basis point increase, excluding impact from fuels sales and gross presentation of gift card commissions. Each of these non-GAAP financial measures provides information regarding various aspects of the cash that our business generates, which management believes is useful to understanding our business.
Management believes that Adjusted EBITDA, Adjusted Debt and the related ratios are useful measures of operating performance that facilitate managements 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 other 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 the related ratios also facilitate comparisons of our results of operations with those of companies having different capital structures. Since the levels of indebtedness, tax structures, property impairment charges,
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methodologies in calculating LIFO expense and unconsolidated affiliates 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 managements experience, whether a store is new or one that is fully or mostly depreciated does not necessarily correlate to the contribution that such store makes to operating performance.
Management also believes that investors, analysts and other interested parties view our ability to generate Adjusted EBITDA as an important measure of our operating performance and that of other companies in our industry.
Adjusted EBITDA, Adjusted Debt, free cash flow and the related ratios are useful indicators of Safeways 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 we generate in fiscal 2011 is expected to be spent on mandatory debt service requirements or other non-discretionary expenditures.
The exclusions included in net income excluding tax on repatriated earnings from Canada and diluted net income per common share attributable to Safeway Inc. excluding tax on repatriated earnings from Canada relate to the income tax expense associated with repatriating earnings to the U.S. from the Companys Canadian subsidiary. Management believes that excluding this item provides a useful financial measure that will facilitate comparisons of our operating results before, during and after such charge was incurred, as well as facilitating comparisons of our performance with that of other companies that might not have the organizational structure that we have. Management also believes that investors, analysts and other interested parties view our net income excluding tax on repatriated earnings from Canada and diluted net income per common share attributable to Safeway Inc. excluding tax on repatriated earnings from Canada as indicators of our ongoing operating performance.
Management believes that basis point increase in gross profit and operating and administrative expense, excluding impact from fuel sales and gross presentation of gift card commissions provides a useful financial measure that will facilitate comparisons of our performance with that of other companies that might not have the business ventures that we have.
Management also believes that excluding fuel sales from gross profit and operating and administrative expense 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 increase in gross profit and operating and administrative expense, excluding impact from fuel sales and gross presentation of gift card commissions as indicators 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 our
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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 Adjusted EBITDA, Adjusted Debt and free cash flow differently than we do, limiting their usefulness as comparative measures.
Additional limitations include:
| Adjusted EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures, or contractual commitments; |
| Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
| Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; |
| 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; |
| Adjusted EBITDA does not reflect cash requirements for income taxes paid; and |
| 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 and other limitations by relying primarily on our GAAP results and use our non-GAAP financial measures supplementally.
Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
99.1 | Press Release dated April 28, 2011 of Safeway Inc. |
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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) | ||||||
Date: April 28, 2011 | By: | /s/ Robert A. Gordon | ||||
Name: | Robert A. Gordon | |||||
Title: | Senior Vice President, | |||||
Secretary & General Counsel |
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EXHIBIT INDEX
Exhibit No. |
||
99.1 | Press Release dated April 28, 2011 of Safeway Inc. |
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Exhibit 99.1
FOR IMMEDIATE RELEASE
SAFEWAY INC. ANNOUNCES
FIRST QUARTER
2011 RESULTS
Safeway Reports Positive Identical-Store Sales
Contact: Melissa Plaisance (925) 467-3136
Christiane Pelz (925) 467-3832
Pleasanton, CA April 28, 2011
Results From Operations
Safeway Inc. today reported net income of $25.1 million ($0.07 per diluted share) for the first quarter of 2011. Net income included an $80.2 million tax charge ($0.22 per diluted share) resulting from the previously announced decision to repatriate $1.1 billion from Safeways wholly-owned Canadian subsidiary. Excluding this tax charge, net income was $105.3 million ($0.29 per diluted share). For the first quarter of 2010, net income was $96.0 million ($0.25 per diluted share).
Our first quarter results are in line with our expectations, and we are pleased with our improving sales trends, said Steve Burd, Chairman, President and CEO. Identical-store sales, excluding fuel, improved for the fifth consecutive quarter and are now positive. We are successfully passing cost inflation along at retail, while making appropriate price adjustments to remain competitive.
Sales and Other Revenue
Total sales increased 4.8% to $9.8 billion in the first quarter of 2011 compared to $9.3 billion in the first quarter of 2010. This increase was the result of higher fuel sales, a 0.4% increase in identical-store sales, excluding fuel, and a higher Canadian exchange rate, partly offset by reduced sales due to closed stores.
Historically, Safeway has recorded Blackhawk Network distribution commissions on the sale of certain gift cards net of the commissions shared with other retailers. In the first quarter of 2011, Safeway determined that these commissions should be reported on a gross basis. This change increased both revenue and cost of goods sold in the first quarter of 2011, but had no impact on same-store sales, gross profit dollars, or net income. Previously reported results are not adjusted because the impact is immaterial.
Gross Profit
Gross profit declined 87 basis points to 27.54% of sales in the first quarter of 2011 compared to 28.41% of sales in the first quarter of 2010. Excluding the 87 basis-point impact from fuel sales and the 18 basis-point impact from the accounting change in gift card commissions, gross profit increased 18 basis points. This increase was largely the result of improved shrink, partly offset by investments in price, employee severance charges and LIFO expense.
Operating and Administrative Expense
Operating and administrative expense declined 81 basis points to 25.30% of sales in the first quarter of 2011 from 26.11% of sales in the first quarter of 2010. Excluding the 67 basis-point impact from fuel sales and the 16 basis-point impact from the accounting change in gift card commissions, operating and administrative expense margin increased two basis points. This increase was largely the result of higher labor costs and an increased reserve for real estate litigation, partly offset by reduced losses from property impairment and disposal, lower occupancy costs and reduced store indirect expenses.
Interest Expense
Interest expense declined to $65.7 million in the first quarter of 2011 from $69.7 million in the first quarter of 2010 due to lower average borrowings and lower average interest rates.
Income Taxes
Income tax expense in the first quarter of 2011 includes a charge of $80.2 million ($0.22 per diluted share) related to the decision to repatriate $1.1 billion from Safeways Canadian subsidiary. Excluding this tax charge, income tax expense declined to 33.0% of pre-tax income in the first quarter of 2011 compared to 35.3% in the first quarter of 2010 due primarily to higher earnings from Canadian operations, which have a lower tax rate.
Guidance
Safeway is reaffirming guidance for the year of $1.45 to $1.65 earnings per diluted share (including the estimated $0.15 per diluted share negative impact from the Canadian dividend), non-fuel ID sales growth of 1% to 1.5%, operating profit margin change of flat to slightly positive and free cash flow of $0.75 billion to $0.85 billion.
The estimated negative impact of $0.15 per diluted share from the Canadian dividend consists of $0.22 of tax expense (which was recognized in the first quarter of 2011), partially offset by a $0.06 benefit from share repurchases and $0.01 from lower interest expense (both of which will be recognized over the remainder of 2011). The combined impact of the dividend and related share repurchases is expected to be accretive to earnings per diluted share in 2012 and beyond.
Stock Repurchases
During the first quarter of 2011, Safeway purchased 7.7 million shares of its common stock at an average price of $22.47 per share and a total cost of $173.7 million (including
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commissions). The remaining board authorization for stock repurchases at quarter-end was approximately $1.5 billion.
Capital Expenditures
Safeway invested $185.1 million in capital expenditures in the first quarter of 2011. The company opened three new Lifestyle stores, completed five Lifestyle remodels and closed five stores. For the year, Safeway plans to invest approximately $1.0 billion in capital expenditures, open 26 new Lifestyle stores and complete 30 Lifestyle remodels.
Cash Flow
Net cash flow used by operating activities was $60.0 million in the first quarter of 2011 compared to $242.0 million in the first quarter of 2010. This decrease was primarily due to a lower use of cash by working capital in the first quarter of 2011 compared to the first quarter of 2010 primarily driven by a lower increase in inventory and a lower reduction in payables and accruals.
Net cash flow used by investing activities was $188.4 million in the first quarter of 2011 compared to $192.7 million in the first quarter of 2010 primarily because of reduced capital expenditures.
Net cash flow used by financing activities was $132.8 million in the first quarter of 2011 compared to net cash flow provided by financing activities of $416.3 million in the first quarter of 2010 due primarily to a net reduction in borrowings.
About Safeway
Safeway Inc. is a Fortune 100 company and one of the largest food and drug retailers in North America based on sales. The company operates 1,692 stores in the United States and Canada. The companys common stock is traded on the New York Stock Exchange under the symbol SWY.
Safeway Conference Call
Safeways investor conference call discussing first quarter results will be broadcast live over the internet at www.safeway.com/investor_relations at 8:00 a.m. PT on April 28, 2011. Click on Webcast Events to access the call. A replay will be available via webcast for approximately one week following the conference call.
-o0o-
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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, estimates of diluted earnings per share, sales growth, inflation, cost control, impact of Canadian dividend, related interest expense and related share repurchases, capital expenditures, free cash flow, Lifestyle stores and financial and operating results. 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 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; 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; loss of a key member of senior management; 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, as amended, subsequent Quarterly Reports on Form 10-Q and subsequent Current Reports on Form 8-K, for a further discussion of these risks and uncertainties.
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SAFEWAY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per-share amounts)
(Unaudited)
12 Weeks | 12 Weeks | |||||||
Ended | Ended | |||||||
March 26, | March 27, | |||||||
2011 | 2010 | |||||||
Sales and other revenue |
$ | 9,772.0 | $ | 9,327.1 | ||||
Cost of goods sold |
(7,080.9 | ) | (6,677.5 | ) | ||||
Gross profit |
2,691.1 | 2,649.6 | ||||||
Operating and administrative expense |
(2,471.9 | ) | (2,435.1 | ) | ||||
Operating profit |
219.2 | 214.5 | ||||||
Interest expense |
(65.7 | ) | (69.7 | ) | ||||
Other income, net |
3.7 | 3.3 | ||||||
Income before income taxes |
157.2 | 148.1 | ||||||
Income taxes |
(132.1 | ) | (52.3 | ) | ||||
Net income before allocation to noncontrolling interests |
25.1 | 95.8 | ||||||
Add noncontrolling interests |
| 0.2 | ||||||
Net income attributable to Safeway Inc. |
$ | 25.1 | $ | 96.0 | ||||
Income per common share attributable to Safeway Inc.: |
||||||||
Basic income per share |
$ | 0.07 | $ | 0.25 | ||||
Diluted income per share |
$ | 0.07 | $ | 0.25 | ||||
Weighted average shares outstanding: |
||||||||
Basic |
366.0 | 387.8 | ||||||
Diluted |
366.8 | 390.0 | ||||||
5
SAFEWAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per-share amounts)
(Unaudited)
March 26, | Year-end | |||||||
2011 | 2010 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and equivalents |
$ | 411.5 | $ | 778.8 | ||||
Receivables |
454.3 | 557.4 | ||||||
Merchandise inventories |
2,730.0 | 2,623.4 | ||||||
Prepaid expense and other current assets |
264.6 | 273.4 | ||||||
Total current assets |
3,860.4 | 4,233.0 | ||||||
Total property, net |
9,812.7 | 9,910.2 | ||||||
Goodwill |
432.6 | 430.9 | ||||||
Investment in unconsolidated affiliate |
182.9 | 187.2 | ||||||
Other assets |
329.5 | 386.8 | ||||||
Total assets |
$ | 14,618.1 | $ | 15,148.1 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Current maturities of notes and debentures |
$ | 5.0 | $ | 505.6 | ||||
Current obligations under capital leases |
30.7 | 30.7 | ||||||
Accounts payable |
2,185.1 | 2,533.4 | ||||||
Accrued salaries and wages |
430.0 | 468.9 | ||||||
Deferred income taxes |
96.9 | 96.3 | ||||||
Other accrued liabilities |
656.1 | 679.3 | ||||||
Total current liabilities |
3,403.8 | 4,314.2 | ||||||
Long-term debt: |
||||||||
Notes and debentures |
4,375.0 | 3,843.8 | ||||||
Obligations under capital leases |
449.9 | 456.2 | ||||||
Total long-term debt |
4,824.9 | 4,300.0 | ||||||
Deferred income taxes |
106.2 | 153.5 | ||||||
Pension and post-retirement benefit obligations |
731.4 | 727.9 | ||||||
Accrued claims and other liabilities |
670.7 | 654.8 | ||||||
Total liabilities |
9,737.0 | 10,150.4 | ||||||
Stockholders equity |
||||||||
Common stock: par value $0.01 per share; 1,500 shares authorized; 602.3 and 599.8 shares issued |
6.0 | 6.0 | ||||||
Additional paid-in capital |
4,391.2 | 4,363.1 | ||||||
Treasury stock at cost; 239.7 and 231.8 shares |
(6,459.6 | ) | (6,283.8 | ) | ||||
Accumulated other comprehensive income |
137.7 | 88.0 | ||||||
Retained earnings |
6,801.4 | 6,820.0 | ||||||
Total Safeway Inc. equity |
4,876.7 | 4,993.3 | ||||||
Noncontrolling interests |
4.4 | 4.4 | ||||||
Total equity |
4,881.1 | 4,997.7 | ||||||
Total liabilities and stockholders equity |
$ | 14,618.1 | $ | 15,148.1 | ||||
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SAFEWAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
12 Weeks Ended | ||||||||
March 26, | March 27, | |||||||
2011 | 2010 | |||||||
OPERATING ACTIVITIES |
||||||||
Net income before allocation to noncontrolling interests |
$ | 25.1 | $ | 95.8 | ||||
Reconciliation to net cash flow used by operating activities: |
||||||||
Depreciation expense |
265.1 | 269.0 | ||||||
Property impairment charges |
7.1 | 17.4 | ||||||
Share-based employee compensation |
10.9 | 14.1 | ||||||
Excess tax benefit from exercise of stock options |
(0.4 | ) | (0.5 | ) | ||||
LIFO expense |
4.0 | | ||||||
Equity in earnings of unconsolidated affiliate |
(1.8 | ) | (3.0 | ) | ||||
Net pension and post-retirement benefit expense |
25.7 | 29.8 | ||||||
Contributions to pension and post-retirement plans |
(6.6 | ) | (4.4 | ) | ||||
(Gain) loss on property retirements and lease exit costs, net |
(1.4 | ) | 11.0 | |||||
Increase in accrued claims and other liabilities |
25.3 | 16.4 | ||||||
Amortization of deferred finance costs |
1.1 | 1.1 | ||||||
Deferred income taxes |
(59.0 | ) | | |||||
Other |
10.4 | 3.6 | ||||||
Changes in working capital items: |
||||||||
Receivables |
24.4 | 27.1 | ||||||
Inventories at FIFO cost |
(102.3 | ) | (187.2 | ) | ||||
Prepaid expenses and other current assets |
(12.1 | ) | (31.7 | ) | ||||
Income taxes |
152.0 | 21.2 | ||||||
Payables and accruals |
(67.5 | ) | (145.4 | ) | ||||
Payables related to third-party gift cards, net of receivables |
(360.0 | ) | (376.3 | ) | ||||
Net cash flow used by operating activities |
(60.0 | ) | (242.0 | ) | ||||
INVESTING ACTIVITIES |
||||||||
Cash paid for property additions |
(185.1 | ) | (192.6 | ) | ||||
Proceeds from sales of property |
6.0 | 12.2 | ||||||
Other |
(9.3 | ) | (12.3 | ) | ||||
Net cash flow used by investing activities |
(188.4 | ) | (192.7 | ) | ||||
FINANCING ACTIVITIES |
||||||||
Payments on short-term borrowings, net |
(0.6 | ) | (0.2 | ) | ||||
Additions to long-term borrowings |
556.4 | 504.9 | ||||||
Payments on long-term borrowings |
(532.1 | ) | (7.7 | ) | ||||
Purchase of treasury stock |
(133.0 | ) | (99.2 | ) | ||||
Dividends paid |
(44.2 | ) | (38.8 | ) | ||||
Net proceeds from exercise of stock options |
22.3 | 57.3 | ||||||
Excess tax benefit from exercise of stock options |
0.4 | 0.5 | ||||||
Other |
(2.0 | ) | (0.5 | ) | ||||
Net cash flow (used) provided by financing activities |
(132.8 | ) | 416.3 | |||||
Effect of changes in exchange rate on cash |
13.9 | 5.4 | ||||||
Decrease in cash and equivalents |
(367.3 | ) | (13.0 | ) | ||||
CASH AND EQUIVALENTS |
||||||||
Beginning of period |
778.8 | 471.5 | ||||||
End of period |
$ | 411.5 | $ | 458.5 | ||||
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SAFEWAY INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(Dollars in millions)
(Unaudited)
TABLE 1: CAPITAL EXPENDITURES AND OTHER STATISTICAL DATA
12 Weeks Ended | ||||||||
March 26, 2011 |
March 27, 2010 |
|||||||
Cash capital expenditures |
$ | 185.1 | $ | 192.6 | ||||
Stores opened |
3 | | ||||||
Stores closed |
5 | 13 | ||||||
Lifestyle remodels completed |
5 | 9 | ||||||
Stores at end of period |
1,692 | 1,712 | ||||||
Square footage (in millions) |
79.2 | 79.5 | ||||||
Fuel sales |
$ | 936.5 | $ | 649.5 | ||||
Number of fuel stations at end of period |
393 | 388 | ||||||
Increase in sales from change in Canadian exchange rate |
$ | 82.1 | $ | 236.1 |
TABLE 2: RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
(A+B-C) | A | B | C | |||||||||||||
Rolling Four Quarters March 26, 2011 |
Year Ended January 1, 2011 |
12 Weeks Ended March 26, 2011 |
12 Weeks Ended March 27, 2010 |
|||||||||||||
Net income attributable to Safeway Inc. |
$ | 518.9 | $ | 589.8 | $ | 25.1 | $ | 96.0 | ||||||||
Add (subtract): |
||||||||||||||||
Income taxes |
370.4 | 290.6 | 132.1 | 52.3 | ||||||||||||
Interest expense |
294.5 | 298.5 | 65.7 | 69.7 | ||||||||||||
Depreciation |
1,158.5 | 1,162.4 | 265.1 | 269.0 | ||||||||||||
LIFO (income) expense |
(24.0 | ) | (28.0 | ) | 4.0 | | ||||||||||
Share-based employee compensation |
52.3 | 55.5 | 10.9 | 14.1 | ||||||||||||
Property impairment charges |
61.4 | 71.7 | 7.1 | 17.4 | ||||||||||||
Equity in earnings of unconsolidated affiliate |
(14.1 | ) | (15.3 | ) | (1.8 | ) | (3.0 | ) | ||||||||
Dividend from unconsolidated affiliate |
6.1 | | 6.1 | | ||||||||||||
Adjusted EBITDA |
$ | 2,424.0 | $ | 2,425.2 | $ | 514.3 | $ | 515.5 | ||||||||
Total debt at March 26, 2011 |
$ | 4,860.6 | ||||||||||||||
Less cash and equivalents in excess of $75.0 at March 26, 2011 |
336.5 | |||||||||||||||
Adjusted Debt |
$ | 4,524.1 | ||||||||||||||
Adjusted EBITDA as a multiple of interest expense |
8.23 | x | ||||||||||||||
Minimum Adjusted EBITDA as a multiple of interest expense under bank credit agreement |
2.00 | x | ||||||||||||||
Adjusted Debt to Adjusted EBITDA |
1.87 | x | ||||||||||||||
Maximum Adjusted Debt to Adjusted EBITDA under bank credit agreement |
3.50 | x |
8
SAFEWAY INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(Dollars in millions)
(Unaudited)
TABLE 3: RECONCILIATION OF NET CASH FLOW FROM OPERATING ACTIVITIES TO ADJUSTED EBITDA
(A+B-C) Rolling Four Quarters March 26, 2011 |
A Year Ended January 1, 2011 |
B 12 Weeks Ended March 26, 2011 |
C 12 Weeks Ended March 27, 2010 |
|||||||||||||
Net cash flow provided (used) by operating activities |
$ | 2,031.7 | $ | 1,849.7 | $ | (60.0 | ) | $ | (242.0 | ) | ||||||
Add (subtract): |
||||||||||||||||
Income taxes |
370.4 | 290.6 | 132.1 | 52.3 | ||||||||||||
Interest expense |
294.5 | 298.5 | 65.7 | 69.7 | ||||||||||||
Amortization of deferred finance costs |
(4.8 | ) | (4.8 | ) | (1.1 | ) | (1.1 | ) | ||||||||
Excess tax benefit from exercise of stock options |
1.5 | 1.6 | 0.4 | 0.5 | ||||||||||||
Deferred income taxes |
90.3 | 31.3 | 59.0 | | ||||||||||||
Net pension and post-retirement benefit expense |
(121.1 | ) | (125.2 | ) | (25.7 | ) | (29.8 | ) | ||||||||
Contributions to pension and post-retirement plans |
19.9 | 17.7 | 6.6 | 4.4 | ||||||||||||
Accrued claims and other liabilities |
(45.1 | ) | (36.2 | ) | (25.3 | ) | (16.4 | ) | ||||||||
Gain (loss) on property retirements and lease exit costs |
39.9 | 27.5 | 1.4 | (11.0 | ) | |||||||||||
Dividend received from unconsolidated affiliate |
6.1 | | 6.1 | | ||||||||||||
Changes in working capital items |
(258.9 | ) | 67.9 | 365.5 | 692.3 | |||||||||||
Other |
(0.4 | ) | 6.6 | (10.4 | ) | (3.4 | ) | |||||||||
Adjusted EBITDA |
$ | 2,424.0 | $ | 2,425.2 | $ | 514.3 | $ | 515.5 | ||||||||
TABLE 4: RECONCILIATION OF GAAP CASH FLOW MEASURE TO FREE CASH FLOW*
12 Weeks Ended | Forecasted Range | |||||||||||||||
March 26, 2011 | March 27, 2010 | Fiscal 2011 | ||||||||||||||
Net cash flow used by operating activities, as reported |
$ | (60.0 | ) | $ | (242.0 | ) | ||||||||||
Decrease in payables related to third- party gift cards, net of receivables |
360.0 | 376.3 | ||||||||||||||
Net cash flow from operating activities, as adjusted |
300.0 | 134.3 | $ | 1,755.0 | 1,855.0 | |||||||||||
Net cash flow used by investing activities |
(188.4 | ) | (192.7 | ) | (1,000.0 | ) | (1,000.0 | ) | ||||||||
Free cash flow |
$ | 111.6 | $ | (58.4 | ) | $ | 755.0 | $ | 855.0 | |||||||
* | Excludes cash flow from payables related to third-party gift cards, net of receivables. Cash from the sale of third-party gift cards is held for a short period of time and then remitted, less Safeways commission, to card partners. Because this cash flow is temporary it is not available for other uses, and is therefore excluded from the companys calculation of free cash flow. |
TABLE 5: SAME-STORE SALES
First Quarter 2011 | ||||||||
Comparable- Store Sales Increases |
Identical- Store Sales Increases* |
|||||||
As reported |
4.0 | % | 3.5 | % | ||||
Excluding fuel sales |
1.0 | % | 0.4 | % |
* | Excludes replacement stores. |
9
SAFEWAY INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(Dollars in millions, except per-share amounts)
(Unaudited)
TABLE 6: RECONCILIATION OF GAAP NET INCOME ATTRIBUTABLE TO SAFEWAY INC. TO
NET INCOME EXCLUDING TAX ON REPATRIATED EARNINGS FROM CANADA
First Quarter 2011, as Reported |
Tax on Repatriated Earnings From Canada |
First Quarter 2011, as Adjusted |
||||||||||
Income before income taxes |
$ | 157.2 | $ | 157.2 | ||||||||
Income taxes |
(132.1 | ) | $ | 80.2 | (51.9 | ) | ||||||
Net income attributable to Safeway Inc. |
$ | 25.1 | $ | 80.2 | $ | 105.3 | ||||||
Diluted net income per common share attributable to Safeway Inc. |
$ | 0.07 | $ | 0.22 | $ | 0.29 | ||||||
TABLE 7: RECONCILIATION OF GROSS PROFIT AND OPERATING AND ADMINISTRATIVE EXPENSE
BASIS-POINT CHANGE EXCLUDING FUEL AND GROSS PRESENTATION OF GIFT CARD COMMISSIONS
First Quarter 2011 | ||||||||
Gross Profit | Operating and Administrative Expense |
|||||||
Basis point decrease, as reported |
(87 | ) | (81 | ) | ||||
Impact from fuel sales |
87 | 67 | ||||||
Impact from gross presentation of gift card commissions |
18 | 16 | ||||||
Basis point increase, excluding impact from fuel sales and gross presentation of gift card commissions |
18 | 2 | ||||||
10
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