Safeway Inc. Announces First Quarter 2014 Results
Merger Still Expected to Close in Fourth Quarter; Shareholders
to Receive Estimated $40 per Share From Merger and Blackhawk
Distribution
PLEASANTON, CA--(Marketwired - Apr 23, 2014) - Safeway Inc.
(NYSE: SWY)
Merger Agreement
and Expected Distribution of PDC and Casa Ley On March
6, 2014, Safeway and Albertsons announced a definitive merger
agreement under which AB Acquisition LLC will acquire all of the
outstanding shares of Safeway. Under the terms of the merger
agreement, Safeway shareholders will receive cash of $32.50 per
share plus a pro-rata distribution of the net proceeds from the
expected sale of Property Development Centers, LLC ("PDC") and the
monetization of Safeway's 49% equity interest in Casa Ley (together
valued at an estimated $3.65 per share as of our March 6, 2014
merger announcement). Safeway does not plan to provide updates
on the status of PDC or Casa Ley until there are material
developments involving their disposition.
PDC and Casa Ley are included in continuing operations in the
accompanying financial statements.
Distribution of
Blackhawk Shares On April 14, 2014, Safeway distributed
the remaining 37.8 million shares of Blackhawk Class B common stock
(NASDAQ: HAWKB) that it owned to its shareholders. Safeway
shareholders received 0.164291 shares of Blackhawk Class B common
stock for each share of Safeway stock owned for a value of
approximately $4.00 per share of Safeway stock as of April 15,
2014. Assuming the completion of the merger agreement, the
distribution of Blackhawk shares is expected to be taxable to
Safeway and Safeway's shareholders.
Because Safeway did not distribute the Blackhawk shares until
after the end of the first quarter of 2014, Blackhawk is included
in continuing operations in the accompanying financial
statements. Blackhawk will be reclassified as a discontinued
operation beginning in the second quarter of 2014.
Earnings Results
Results From
Continuing Operations Loss from continuing operations,
net of tax, was $83.1 million ($0.36 per diluted share) for the
first quarter of 2014 and included a loss on foreign currency
translation of $153.1 million ($93.4 million, net of tax, or $0.41
per diluted share) and merger-related expenses of $4.1 million
($2.5 million, net of tax, or $0.01 per diluted
share).
In the first quarter of 2013, income from continuing operations,
net of tax, was $59.7 million ($0.25 per diluted share) and
included a $17.2 million ($0.07 per diluted share) reduction of
income tax expense on corporate-owned life insurance ("COLI")
policies and a $5.0 million ($0.02 per diluted share) reduction of
tax expense due to the resolution of federal income tax
matters.
Excluding the unusual items in both 2014 and 2013, income from
continuing operations, net of tax, was $12.8 million ($0.06 per
diluted share) in the first quarter of 2014 compared to $37.5
million ($0.16 per diluted share) in the first quarter of
2013.
"We are working diligently to close the merger with Albertsons
by the fourth quarter," said Robert Edwards, President & CEO.
"While sales met plan in the first quarter, income was slightly
below plan, in part as a result of inflation in produce, meat and
pharmacy that was not fully passed along for competitive
reasons. In the second quarter of 2014, identical-stores sales
are currently running well above 2%, and we expect to pass along
most of the inflation we are experiencing. In addition, the
direct and indirect cost initiatives we are implementing are
expected to improve profitability in the second half of 2014."
"We continue to drive sales momentum through our center of store
remodels, as well as merchandising premium, Hispanic and Asian
products to meet local demographic needs," added Edwards. "In
addition, our sales of organic and natural products continue to
grow at a rapid pace, with our private label brands O
Organics and Open Nature growing approximately two times faster
than the rest of the market."
Sales and Other
Revenue Sales and other revenue increased 1.0% to $8.3
billion in the first quarter of 2014 from $8.2 billion in the first
quarter of 2013, primarily due to an identical-store sales
(excluding fuel) increase of 1.8%, partly offset by lower fuel
sales in 2014.
The identical-store sales (excluding fuel) increase of 1.8%
consists of a 1.0% increase in price per item and a 0.8%
increase in volume. Safeway's share of sales in All Outlet
Channels increased slightly, and sales to our most loyal households
improved during the quarter.
Gross
Profit Gross profit declined 34 basis points to 26.15%
of sales in the first quarter of 2014 compared to 26.49% of sales
in the first quarter of 2013. Excluding the 30 basis-point
impact from fuel sales, gross profit declined 64 basis points due
primarily to strong cost inflation in produce, meat and pharmacy
that were not fully passed on to consumers.
Operating and
Administrative Expense Operating and administrative
expense increased 40 basis points to 25.49% of sales in the first
quarter of 2014 from 25.09% of sales in the first quarter of 2013.
Excluding the 27 basis-point impact of fuel sales, operating and
administrative expense increased 13 basis points, primarily due to
increased store occupancy and merger-related expenses, partly
offset by lower depreciation and property impairment.
Operating
Profit Operating profit margin declined 74 basis points
to 0.66% in the first quarter of 2014 from 1.40% in the first
quarter of 2013. Excluding fuel, operating profit declined 77
basis points.
Interest
Expense Interest expense declined to $51.2 million in
the first quarter of 2014 from $64.2 million in the first quarter
of 2013 because of a $1.6 billion decline in average borrowings,
partly offset by a 46 basis-point increase in the average interest
rate.
Loss on Foreign
Currency Translation At the end of the first quarter of
2014, Safeway had $2,985.4 million of cash and equivalents
denominated in Canadian dollars which came from the sale of
substantially all of the net assets of Canada Safeway Limited in
the fourth quarter of 2013. The loss from translating Canadian
dollars to U.S. dollars for financial reporting purposes was $153.1
million ($0.41 per diluted share) in the first quarter of 2014, of
which approximately $17 million was realized. Safeway intends
to convert substantially all of its Canadian cash and equivalents
into U.S. dollars in the second quarter of 2014. The Canadian
exchange rate has improved from 0.8935 at the end of the first
quarter to 0.9069 as of April 22, 2014.
Other Income,
net Other income increased to $13.8 million in the
first quarter of 2014 from $6.3 million in the first quarter of
2013 primarily due to a $7.7 million increase in interest
income.
Income
Taxes Income taxes on continuing operations was a
benefit of 38.8% of pre-tax loss in the first quarter of 2014
compared to a tax benefit of 5.5% on pre-tax income in the first
quarter of 2013. The income tax benefit in the first quarter
of 2013 included a $17.2 million reduction of tax expense on COLI
policies and a $5.0 million reduction of tax expense due to the
resolution of federal income tax matters.
Discontinued
Operations Income from discontinued operations, net of
tax, was $5.6 million ($0.02 per diluted share) in the first
quarter of 2014, which consisted of gains on the disposal of
operations of $37.0 million, losses from Dominick's operations of
$28.0 million and taxes of $3.4 million. Income from
discontinued operations in the first quarter of 2013 was $59.1
million ($0.24 per diluted share) which consisted of income from
Canadian operations of $76.2 million, loss from Dominick's
operations of $11.3 million and taxes of $5.8 million.
Cash
Flow Net cash flow used by operating activities
was $795.2 million in the first 12 weeks of 2014 compared to
$583.5 million in the first 12 weeks of 2013. This change was
largely due to the loss on foreign currency translation and higher
tax payments in 2014.
Net cash flow used by investing activities increased to $200.4
million in the first 12 weeks of 2014 from $56.6 million in the
first 12 weeks of 2013 primarily due to proceeds from COLI policies
in the first quarter of 2013, an increase in restricted cash in
2014 and increased capital expenditures in 2014.
Net cash flow provided by financing activities was $190.4
million in the first 12 weeks of 2014 compared to $571.9 million in
the first 12 weeks of 2013. This change was due primarily to
lower additions to debt in 2014.
Free cash flow was an outflow of $431.3 million in the first 12
weeks of 2014 compared to an outflow of $39.8 million in the first
12 weeks of 2013.
Capital
Expenditures Safeway invested $154.3 million in capital
expenditures in the first quarter of 2014 compared to $129.9
million in the first quarter of 2013.
Stock
Repurchases Under the terms of the merger agreement,
Safeway cannot repurchase any stock under its stock repurchase
program, and Safeway did not repurchase any shares of its common
stock during the first 12 weeks of 2014.
Guidance As a result of
the merger agreement and the distribution of Blackhawk shares,
Safeway is no longer providing guidance or holding conference calls
in conjunction with our earnings releases.
About
Safeway Safeway Inc., which operates Safeway, Vons,
Pavilions, Randalls, Tom Thumb, and Carrs stores, is a Fortune 100
company and one of the largest food and drug retailers in the
United States. The company's common stock is traded on the New York
Stock Exchange under the symbol SWY. For more information,
please visit www.Safeway.com.
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, sales growth,
initiatives to drive sales, passing on inflation to consumers,
direct and indirect cost initiatives, the timing of converting
Canadian currency to U.S. dollars, the tax treatment of the
distribution of Blackhawk shares and the accounting treatment of
Blackhawk. 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: the occurrence of any event, change or other
circumstances that could give rise to the termination of the merger
agreement; the possibility that various closing conditions for the
merger (including the shareholder approval) may not be satisfied or
waived; the possibility of a failure to obtain, delays in obtaining
or adverse conditions contained in any required regulatory or other
approvals; the failure to obtain sufficient funds to close the
merger; the failure of the merger to close for any other reason;
the amount of fees and expenses related to the merger; the
diversion of the Board's attention from ongoing business concerns;
the effect of the announcement of the merger on our business
relationships, operating results and business generally, including
our ability to retain key employees; the merger agreement's
contractual restrictions on the conduct of our business prior to
the closing of the merger; the possible adverse effect on our
business and the price of our common stock if the merger is not
completed in a timely matter or at all; the outcome of, or delays
caused by, any legal proceedings, regulatory proceedings or
enforcement matters that have been or may be instituted against us
and others relating to the merger; 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 and center of store
departments; the impact of generic drugs on pharmacy sales and
identical-store sales; 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; potential costs and risks
associated with actual or potential cyber attacks; data security or
other information technology issues that may arise; failure to
fully realize or delay in realizing growth prospects for existing
or new business ventures; legislative, regulatory, tax, accounting
or judicial developments; 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;
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 retail
stores.
In addition, there is no assurance that any payments will be
made with respect to the sales of Safeway's interest in Casa Ley
and/or PDC, including with respect to the related contingent value
rights (the "CVRs") after the closing of the merger. The right
to receive any future payments with respect to the sales of the
Casa Ley interest and/or PDC, including with respect to the CVRs
after the closing of the merger, will be contingent on a number of
factors, including Safeway's ability to sell all or a portion of
the Casa Ley interest and/or PDC, and the amount of net proceeds
realized. There can be no assurance as to the value of the
Casa Ley interest and/or PDC or that Safeway shareholders will
receive net proceeds in the amount of the value estimated in the
joint press release previously issued by Safeway, or any other
amount. 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 SEC, including our most
recent Annual Report on Form 10-K, subsequent Quarterly Report on
Form 10-Q, and Current Reports on Form 8-K, for a further
discussion of these risks and uncertainties.
Additional
Information About the Merger and Where to Find it
This press release does not constitute a solicitation of any
vote or approval in respect of the proposed merger transaction
involving Safeway and Albertsons. In connection with the
merger, Safeway filed a preliminary proxy statement with the SEC on
April 17, 2014 and intends to file with the SEC and furnish to its
shareholders a definitive proxy statement and other relevant
documents. Shareholders are urged to read the proxy statement
and other relevant materials when they become available because
they will contain important information about Safeway, Albertsons
and the proposed transaction. The proxy statement and other
relevant materials (when they become available), and any other
documents we file with the SEC, may be obtained free of charge at
the SEC's website at www.sec.gov, at Safeway's website at
www.Safeway.com or by sending a written request to Safeway at 5918
Stoneridge Mall Road, Pleasanton, California 94588, Attention:
Investor Relations.
Participants in the
Solicitation Safeway and its directors, executive
officers and certain other members of management and employees may
be deemed to be participants in soliciting proxies from the
shareholders of Safeway in favor of the merger. Information
regarding the persons who may, under the rules of the SEC, be
considered to be participants in the solicitation of Safeway's
shareholders in connection with the proposed transaction will be
set forth in the proxy statement. You can find more
information about Safeway's executive officers and directors in its
Annual Report on Form 10-K for the fiscal year ended December 28,
2013 and in its definitive proxy statement filed with the SEC on
Schedule 14A on April 1, 2013.
|
|
SAFEWAY INC. AND SUBSIDIARIES |
|
CONSOLIDATED STATEMENTS OF OPERATIONS |
|
(In millions, except per-share amounts) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
12 Weeks Ended |
|
|
March 22, 2014 |
|
|
March 23, 2013 |
|
|
|
|
|
|
|
|
|
Sales and other revenue |
$ |
8,260.9 |
|
|
$ |
8,176.9 |
|
Cost of goods sold |
|
(6,100.7 |
) |
|
|
(6,010.6 |
) |
Gross profit |
|
2,160.2 |
|
|
|
2,166.3 |
|
Operating and administrative expense |
|
(2,105.5 |
) |
|
|
(2,051.8 |
) |
Operating profit |
|
54.7 |
|
|
|
114.5 |
|
Interest expense |
|
(51.2 |
) |
|
|
(64.2 |
) |
Loss on foreign currency translation |
|
(153.1 |
) |
|
|
-- |
|
Other income, net |
|
13.8 |
|
|
|
6.3 |
|
(Loss) income before income taxes |
|
(135.8 |
) |
|
|
56.6 |
|
Income taxes |
|
52.7 |
|
|
|
3.1 |
|
(Loss) income from continuing operations, net of
tax |
|
(83.1 |
) |
|
|
59.7 |
|
Income from discontinued operations, net of tax |
|
5.6 |
|
|
|
59.1 |
|
Net (loss) income before allocation to noncontrolling
interests |
|
(77.5 |
) |
|
|
118.8 |
|
Noncontrolling interests |
|
1.0 |
|
|
|
0.1 |
|
Net (loss) income attributable to Safeway Inc. |
$ |
(76.5 |
) |
|
$ |
118.9 |
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per common share: |
|
|
|
|
|
|
|
|
Continuing operations |
$ |
(0.36 |
) |
|
$ |
0.25 |
|
|
Discontinued operations |
|
0.02 |
|
|
|
0.25 |
|
|
|
Total |
$ |
(0.34 |
) |
|
$ |
0.50 |
|
Diluted (loss) earnings per common share: |
|
|
|
|
|
|
|
|
Continuing operations |
$ |
(0.36 |
) |
|
$ |
0.25 |
|
|
Discontinued operations |
|
0.02 |
|
|
|
0.24 |
|
|
|
Total |
$ |
(0.34 |
) |
|
$ |
0.49 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
228.1 |
|
|
|
237.4 |
|
|
Diluted |
|
228.1 |
|
|
|
238.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAFEWAY INC. AND SUBSIDIARIES |
|
CONDENSED CONSOLIDATED BALANCE SHEETS |
|
(In millions, except per-share amounts) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
March 22, 2014 |
|
|
Year-end 2013 |
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and equivalents |
$ |
2,691.4 |
|
|
$ |
4,647.3 |
|
|
Receivables |
|
605.5 |
|
|
|
1,211.4 |
|
|
Merchandise inventories |
|
2,324.2 |
|
|
|
2,089.6 |
|
|
Prepaid expenses and other current assets |
|
557.3 |
|
|
|
371.5 |
|
|
Assets held for sale |
|
107.7 |
|
|
|
143.9 |
|
|
Total current assets |
|
6,286.1 |
|
|
|
8,463.7 |
|
Total property, net |
|
7,484.0 |
|
|
|
7,537.5 |
|
Goodwill |
|
464.6 |
|
|
|
464.5 |
|
Investment in unconsolidated affiliate |
|
200.5 |
|
|
|
196.1 |
|
Other assets |
|
575.9 |
|
|
|
557.7 |
|
Total assets |
$ |
15,011.1 |
|
|
$ |
17,219.5 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current maturities of notes and debentures |
$ |
652.8 |
|
|
$ |
252.9 |
|
|
Current obligations under capital leases |
|
60.5 |
|
|
|
49.3 |
|
|
Accounts payable |
|
2,299.8 |
|
|
|
3,376.4 |
|
|
Accrued salaries and wages |
|
345.2 |
|
|
|
419.4 |
|
|
Income taxes payable |
|
- |
|
|
|
1,135.2 |
|
|
Other accrued liabilities |
|
539.2 |
|
|
|
623.2 |
|
|
Total current liabilities |
|
3,897.5 |
|
|
|
5,856.4 |
|
Long-term debt: |
|
|
|
|
|
|
|
|
Notes and debentures |
|
3,353.1 |
|
|
|
3,515.3 |
|
|
Obligations under capital leases |
|
384.4 |
|
|
|
375.5 |
|
|
Total long-term debt |
|
3,737.5 |
|
|
|
3,890.8 |
|
Pension and post-retirement benefit obligations |
|
451.8 |
|
|
|
451.4 |
|
Accrued claims and other liabilities |
|
1,138.8 |
|
|
|
1,145.8 |
|
Total liabilities |
|
9,225.6 |
|
|
|
11,344.4 |
|
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Common stock: par value $0.01 per share; 1,500 shares
authorized; 244.7 and 244.2 shares issued |
|
2.4 |
|
|
|
2.4 |
|
|
Additional paid-in capital |
|
2,013.7 |
|
|
|
1,981.9 |
|
|
Treasury stock at cost: 14.4 and 14.1 shares |
|
(489.4 |
) |
|
|
(480.6 |
) |
|
Accumulated other comprehensive loss |
|
(261.3 |
) |
|
|
(271.1 |
) |
|
Retained earnings |
|
4,464.2 |
|
|
|
4,586.9 |
|
|
|
Total
Safeway Inc. equity |
|
5,729.6 |
|
|
|
5,819.5 |
|
|
Noncontrolling interests |
|
55.9 |
|
|
|
55.6 |
|
Total equity |
|
5,785.5 |
|
|
|
5,875.1 |
|
Total liabilities and stockholders' equity |
$ |
15,011.1 |
|
|
$ |
17,219.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAFEWAY INC. AND SUBSIDIARIES |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
(In millions, unaudited) |
|
|
|
|
|
|
|
|
12 Weeks Ended |
|
|
March 22, 2014 |
|
|
March 23, 2013 |
|
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
Net (loss) income before allocation to noncontrolling
interest |
$ |
(77.5 |
) |
|
$ |
118.8 |
|
Income from discontinued operations, net of tax |
|
(5.6 |
) |
|
|
(59.1 |
) |
|
(Loss) income from continuing operations, net of
tax |
|
(83.1 |
) |
|
|
59.7 |
|
Reconciliation to net cash flow (used) provided by
operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
209.9 |
|
|
|
215.9 |
|
|
Property impairment charges |
|
7.5 |
|
|
|
11.6 |
|
|
Share-based employee compensation |
|
12.6 |
|
|
|
13.2 |
|
|
Equity in earnings of unconsolidated affiliate |
|
(4.5 |
) |
|
|
(4.4 |
) |
|
Net pension and post-retirement benefits expense |
|
17.6 |
|
|
|
26.5 |
|
|
Contributions to pension and post-retirement benefit
plans |
|
(5.1 |
) |
|
|
(23.3 |
) |
|
Loss on property dispositions and lease exit costs,
net |
|
0.3 |
|
|
|
0.8 |
|
|
Increase in accrued claims and other liabilities |
|
2.9 |
|
|
|
2.4 |
|
|
Deferred income taxes |
|
-- |
|
|
|
(17.2 |
) |
|
Other |
|
11.7 |
|
|
|
9.8 |
|
|
Changes in working capital items: |
|
|
|
|
|
|
|
|
|
Receivables |
|
38.2 |
|
|
|
28.1 |
|
|
|
Inventories at FIFO cost |
|
(247.0 |
) |
|
|
(305.2 |
) |
|
|
Prepaid expenses and other current assets |
|
(4.0 |
) |
|
|
(19.9 |
) |
|
|
Income taxes |
|
(163.3 |
) |
|
|
(59.2 |
) |
|
|
Payables and accruals |
|
(24.6 |
) |
|
|
78.0 |
|
|
|
Payables related to third-party gift cards, net of
receivables |
|
(564.3 |
) |
|
|
(600.3 |
) |
|
|
|
Net
cash flow used by operating activities - continuing operations |
|
(795.2 |
) |
|
|
(583.5 |
) |
|
|
|
Net
cash flow (used) provided by operating activities - discontinued
operations |
|
(1,191.4 |
) |
|
|
28.2 |
|
|
|
|
Net
cash flow used by operating activities |
|
(1,986.6 |
) |
|
|
(555.3 |
) |
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
Cash paid for property additions |
|
(154.3 |
) |
|
|
(129.9 |
) |
Proceeds from sale of property |
|
2.6 |
|
|
|
8.0 |
|
Proceeds from company-owned life insurance
policies |
|
-- |
|
|
|
68.7 |
|
Cash restricted by merger agreement for payment of
mortgage |
|
(40.0 |
) |
|
|
-- |
|
Other |
|
(8.7 |
) |
|
|
(3.4 |
) |
|
|
|
Net
cash used by investing activities - continuing operations |
|
(200.4 |
) |
|
|
(56.6 |
) |
|
|
|
Net
cash provided (used) by investing activities - discontinued
operations |
|
73.2 |
|
|
|
(15.0 |
) |
|
|
|
Net
cash used by investing activities |
|
(127.2 |
) |
|
|
(71.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAFEWAY INC. AND SUBSIDIARIES |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
(In millions, unaudited) |
|
|
|
|
|
|
|
|
12 Weeks Ended |
|
|
March 22, 2014 |
|
|
March 23, 2013 |
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
Additions to long-term borrowings |
|
238.4 |
|
|
|
614.9 |
|
Payments on long-term borrowings |
|
(14.3 |
) |
|
|
(7.8 |
) |
Dividends paid |
|
(46.0 |
) |
|
|
(41.9 |
) |
Net proceeds from exercise of stock options |
|
15.8 |
|
|
|
14.5 |
|
Other |
|
(3.5 |
) |
|
|
(7.8 |
) |
|
|
|
Net
cash flow provided by financing activities - continuing
operations |
|
190.4 |
|
|
|
571.9 |
|
|
|
|
Net
cash flow used by financing activities - discontinued
operations |
|
-- |
|
|
|
(0.8 |
) |
|
|
|
Net
cash flow provided by financing activities |
|
190.4 |
|
|
|
571.1 |
|
|
|
|
|
|
|
|
|
Effect of changes in exchange rates on cash |
|
(32.5 |
) |
|
|
(1.5 |
) |
Decrease in cash and equivalents |
|
(1,955.9 |
) |
|
|
(57.3 |
) |
|
|
|
|
|
|
|
|
CASH AND EQUIVALENTS: |
|
|
|
|
|
|
|
Beginning of year |
|
4,647.3 |
|
|
|
352.2 |
|
End of quarter |
$ |
2,691.4 |
|
|
$ |
294.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAFEWAY INC. AND SUBSIDIARIES |
SUPPLEMENTAL INFORMATION |
(Dollars in millions) |
(Unaudited) |
|
|
|
|
TABLE 1: CAPITAL EXPENDITURES AND OTHER STATISTICAL
DATA |
Continuing Operations |
12 Weeks Ended |
|
March 22, 2014 |
|
March 23, 2013 |
|
|
|
|
|
|
Cash
paid for capital expenditures |
$ |
154.3 |
|
$ |
129.9 |
Stores opened |
|
-- |
|
|
-- |
Stores closed |
|
3 |
|
|
3 |
Stores at end of period |
|
1,332 |
|
|
1,343 |
Square footage (in millions) |
|
63.3 |
|
|
63.6 |
Fuel
sales |
$ |
876.9 |
|
$ |
959.0 |
Number of fuel stations at end of period |
|
351 |
|
|
343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE 2: IDENTICAL-STORE SALES * |
|
|
March 22, 2014 |
|
|
March 23, 2013 |
|
Including fuel sales |
0.5 |
% |
|
0.9 |
% |
Excluding fuel sales |
1.8 |
% |
|
1.9 |
% |
|
*
Identical-store sales (ID Sales) are defined as stores operating in
the same period in both the current year and the prior year,
comparing sales on a daily basis. Stores that are open during
remodeling are included in ID Sales. Internet sales are included in
ID Sales if the store fulfilling the orders is included in the ID
Sales calculation. Replacement stores and discontinued operations
are excluded. |
|
|
|
SAFEWAY INC. AND SUBSIDIARIES |
|
SUPPLEMENTAL INFORMATION |
|
(Dollars in millions) |
|
(Unaudited) |
|
|
|
|
|
|
|
TABLE 3: RECONCILIATION OF CASH FLOW FROM OPERATING
ACTIVITIES TO FREE CASH FLOW |
|
|
|
|
Continuing Operations |
|
|
12 Weeks Ended |
|
|
March 22, 2014 |
|
|
March 23, 2013 |
|
Net
cash flow used by operating activities, as reported |
$ |
(795.2 |
) |
|
$ |
(583.5 |
) |
Decrease in payables related to third-party gift cards, net of
receivables |
|
564.3 |
|
|
|
600.3 |
|
Net
cash flow (used) provided by operating activities, as adjusted |
|
(230.9 |
) |
|
|
16.8 |
|
Net
cash flow used by investing activities, as reported |
|
(200.4 |
) |
|
|
(56.6 |
) |
Free
cash flow |
$ |
(431.3 |
) |
|
$ |
(39.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE 4: RECONCILIATION OF INCOME (LOSS) FROM
CONTINUING OPERATIONS, NET OF TAX, TO ADJUSTED EBITDA |
|
|
|
|
Continuing Operations |
|
|
Rolling Four Quarters |
|
|
|
|
|
12 Weeks Ended |
|
|
12 Weeks Ended |
|
|
March 22, 2014 |
|
|
Fiscal Year 2013 |
|
|
March 22, 2014 |
|
|
March 23, 2013 |
|
Income (loss) from continuing operations, net of
tax |
$ |
103.5 |
|
|
$ |
246.3 |
|
|
$ |
(83.1 |
) |
|
$ |
59.7 |
|
Add (subtract): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interests |
|
(13.8 |
) |
|
|
(14.7 |
) |
|
|
1.0 |
|
|
|
0.1 |
|
|
Income taxes |
|
40.1 |
|
|
|
89.7 |
|
|
|
(52.7 |
) |
|
|
(3.1 |
) |
|
Interest expense |
|
260.0 |
|
|
|
273.0 |
|
|
|
51.2 |
|
|
|
64.2 |
|
|
Depreciation expense |
|
937.9 |
|
|
|
943.9 |
|
|
|
209.9 |
|
|
|
215.9 |
|
|
LIFO
expense |
|
(14.3 |
) |
|
|
(14.3 |
) |
|
|
-- |
|
|
|
-- |
|
|
Share-based employee compensation |
|
58.5 |
|
|
|
59.1 |
|
|
|
12.6 |
|
|
|
13.2 |
|
|
Property impairment charges |
|
31.5 |
|
|
|
35.6 |
|
|
|
7.5 |
|
|
|
11.6 |
|
|
Equity in earnings of unconsolidated affiliate |
|
(17.7 |
) |
|
|
(17.6 |
) |
|
|
(4.5 |
) |
|
|
(4.4 |
) |
|
Dividend from unconsolidated affiliate |
|
5.6 |
|
|
|
3.8 |
|
|
|
5.6 |
|
|
|
3.8 |
|
|
Impairment of notes receivable |
|
30.0 |
|
|
|
30.0 |
|
|
|
-- |
|
|
|
-- |
|
Adjusted EBITDA |
$ |
1,421.3 |
|
|
$ |
1,634.8 |
|
|
$ |
147.5 |
|
|
$ |
361.0 |
|
Loss from foreign currency translation |
|
210.5 |
|
|
|
57.4 |
|
|
|
153.1 |
|
|
|
-- |
|
Merger-related expenses |
|
4.1 |
|
|
|
-- |
|
|
|
4.1 |
|
|
|
-- |
|
Gain on reduction of contingent consideration from
Cardpool acquisition (net of noncontrolling interest of $3.8) |
|
(9.7 |
) |
|
|
(9.7 |
) |
|
|
-- |
|
|
|
-- |
|
Charges for legal reserves |
|
17.0 |
|
|
|
17.0 |
|
|
|
-- |
|
|
|
-- |
|
Blackhawk distribution expense triggered by IPO |
|
5.7 |
|
|
|
5.7 |
|
|
|
-- |
|
|
|
-- |
|
Gain on sale of equity investments |
|
(8.5 |
) |
|
|
(8.5 |
) |
|
|
-- |
|
|
|
-- |
|
Pro forma adjusted EBITDA |
$ |
1,640.4 |
|
|
$ |
1,696.7 |
|
|
$ |
304.7 |
|
|
$ |
361.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAFEWAY
INC. AND SUBSIDIARIES |
SUPPLEMENTAL INFORMATION |
(Dollars
in millions, except per-share amounts) |
(Unaudited) |
|
TABLE 5: RECONCILIATION OF INCOME FROM CONTINUING
OPERATIONS, AS REPORTED, TO INCOME FROM CONTINUING OPERATIONS
ADJUSTED FOR UNUSUAL ITEMS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 Weeks Ended March 22, 2014 |
|
|
12 Weeks Ended March 23, 2013 |
|
|
Dollars |
|
|
Diluted EPS |
|
|
Dollars |
|
|
Diluted EPS |
|
(Loss) income from continuing operations, net of tax, as
reported |
$ |
(83.1 |
) |
|
$ |
(0.36 |
) |
|
$ |
59.7 |
|
|
$ |
0.25 |
|
Loss
on foreign currency translation, net of estimated tax benefit |
|
93.4 |
|
|
|
0.41 |
|
|
|
-- |
|
|
|
-- |
|
Merger-related expenses, net of estimated tax benefit |
|
2.5 |
|
|
|
0.01 |
|
|
|
-- |
|
|
|
-- |
|
Deferred taxes reversed on COLI policies |
|
-- |
|
|
|
-- |
|
|
|
(17.2 |
) |
|
|
(0.07 |
) |
Reduction of tax expense due to resolution of federal income tax
matters |
|
-- |
|
|
|
-- |
|
|
|
(5.0 |
) |
|
|
(0.02 |
) |
Income from continuing operations, net of tax, as adjusted |
$ |
12.8 |
|
|
$ |
0.06 |
|
|
$ |
37.5 |
|
|
$ |
0.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAFEWAY
INC. AND SUBSIDIARIES |
SUPPLEMENTAL INFORMATION |
(Dollars
in millions) |
(Unaudited) |
|
TABLE 6: INCOME FROM DISCONTINUED OPERATIONS |
|
|
|
|
|
|
|
|
|
12 Weeks Ended |
|
|
|
March 22, 2014 |
|
|
March 23, 2013 |
|
Sales and other revenue: |
|
|
|
|
|
|
|
|
|
Canada Safeway Limited |
|
$ |
-- |
|
|
$ |
1,493.2 |
|
|
Dominick's |
|
|
7.3 |
|
|
|
329.9 |
|
|
|
Total |
|
$ |
7.3 |
|
|
$ |
1,823.1 |
|
Income (loss) from discontinued operations before
tax: |
|
|
|
|
|
|
|
|
|
Canada Safeway Limited |
|
$ |
-- |
|
|
$ |
76.2 |
|
|
Dominick's |
|
|
(28.0 |
) |
|
|
(11.3 |
) |
|
|
Total |
|
|
(28.0 |
) |
|
|
64.9 |
|
Gain (loss) on disposal of operations before tax: |
|
|
|
|
|
|
|
|
|
Canada Safeway Limited |
|
|
(5.1 |
) |
|
|
-- |
|
|
Dominick's |
|
|
42.1 |
|
|
|
-- |
|
|
|
Total |
|
|
37.0 |
|
|
|
-- |
|
Tax on discontinued operations |
|
|
(3.4 |
) |
|
|
(5.8 |
) |
Income from discontinued operations, net of tax |
|
$ |
5.6 |
|
|
$ |
59.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE 7: ASSETS AND LIABILITIES HELD FOR SALE |
|
|
|
|
March 22, 2014 |
|
December 28, 2013 |
Assets held for sale: |
|
|
|
|
|
|
Dominick's properties held for sale |
$ |
97.6 |
|
$ |
136.7 |
|
Other United States real estate held for sale |
|
10.1 |
|
|
7.2 |
|
|
Total
assets held for sale |
$ |
107.7 |
|
$ |
143.9 |
Dominick's liabilities held for sale |
|
|
|
|
|
|
Deferred gain on property dispositions |
$ |
15.6 |
|
$ |
9.0 |
|
Obligations under capital leases |
|
-- |
|
|
5.2 |
|
Deferred rent |
|
0.2 |
|
|
2.6 |
|
Other liabilities |
|
0.2 |
|
|
1.4 |
|
|
Total
liabilities held for sale |
$ |
16.0 |
|
$ |
18.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAFEWAY INC. AND SUBSIDIARIES |
|
SUPPLEMENTAL INFORMATION |
|
(In millions, except per-share amounts) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
TABLE 8 - PRO FORMA STATEMENTS OF OPERATIONS EXCLUDING
BLACKHAWK |
|
|
|
|
12 Weeks Ended |
|
|
March 22, 2014 As Reported |
|
|
Present Blackhawk as Discontinued Operations |
|
March 22, 2014 Adjusted |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and other revenue |
$ |
8,260.9 |
|
|
$ |
231.4 |
|
|
$ |
8,029.5 |
|
Cost of goods sold |
|
(6,100.7 |
) |
|
|
(180.5 |
) |
|
|
(5,920.2 |
) |
Gross profit |
|
2,160.2 |
|
|
|
50.9 |
|
|
|
2,109.3 |
|
Operating and administrative expense |
|
(2,105.5 |
) |
|
|
(56.8 |
) |
|
|
(2,048.7 |
) |
Operating profit |
|
54.7 |
|
|
|
(5.9 |
) |
|
|
60.6 |
|
Interest expense |
|
(51.2 |
) |
|
|
-- |
|
|
|
(51.2 |
) |
Loss on foreign currency translation |
|
(153.1 |
) |
|
|
-- |
|
|
|
(153.1 |
) |
Other income, net |
|
13.8 |
|
|
|
0.1 |
|
|
|
13.7 |
|
Loss before income taxes |
|
(135.8 |
) |
|
|
(5.8 |
) |
|
|
(130.0 |
) |
Income taxes |
|
52.7 |
|
|
|
2.5 |
|
|
|
50.2 |
|
Loss from continuing operations, net of tax |
|
(83.1 |
) |
|
|
(3.3 |
) |
|
|
(79.8 |
) |
Income from discontinued operations, net of tax |
|
5.6 |
|
|
|
3.3 |
|
|
|
2.3 |
|
Net loss before allocation to noncontrolling
interests |
$ |
(77.5 |
) |
|
|
-- |
|
|
$ |
(77.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
$ |
(0.36 |
) |
|
|
|
|
|
$ |
(0.35 |
) |
|
Discontinued operations |
|
0.02 |
|
|
|
|
|
|
|
0.01 |
|
|
|
|
Total |
$ |
(0.34 |
) |
|
|
|
|
|
$ |
(0.34 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAFEWAY INC. AND SUBSIDIARIES |
|
SUPPLEMENTAL INFORMATION |
|
(In millions, except per-share amounts) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
TABLE 8 - PRO FORMA STATEMENTS OF OPERATIONS EXCLUDING
BLACKHAWK (continued) |
|
|
|
|
12 Weeks Ended |
|
|
March 23, 2013 As Reported |
|
|
Present Blackhawk as Discontinued Operations |
|
|
March 23, 2013 Adjusted |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and other revenue |
$ |
8,176.9 |
|
|
$ |
183.5 |
|
|
$ |
7,993.4 |
|
Cost of goods sold |
|
(6,010.6 |
) |
|
|
(142.6 |
) |
|
|
(5,868.0 |
) |
Gross profit |
|
2,166.3 |
|
|
|
40.9 |
|
|
|
2,125.4 |
|
Operating and administrative expense |
|
(2,051.8 |
) |
|
|
(40.6 |
) |
|
|
(2,011.2 |
) |
Operating profit |
|
114.5 |
|
|
|
0.3 |
|
|
|
114.2 |
|
Interest expense |
|
(64.2 |
) |
|
|
-- |
|
|
|
(64.2 |
) |
Other income, net |
|
6.3 |
|
|
|
0.3 |
|
|
|
6.0 |
|
Income before income taxes |
|
56.6 |
|
|
|
0.6 |
|
|
|
56.0 |
|
Income taxes |
|
3.1 |
|
|
|
(0.2 |
) |
|
|
3.3 |
|
Income from continuing operations, net of tax |
|
59.7 |
|
|
|
0.4 |
|
|
|
59.3 |
|
Income from discontinued operations, net of tax |
|
59.1 |
|
|
|
(0.4 |
) |
|
|
59.5 |
|
Net income before allocation to noncontrolling
interests |
$ |
118.8 |
|
|
|
-- |
|
|
$ |
118.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
$ |
0.25 |
|
|
|
|
|
|
$ |
0.25 |
|
|
Discontinued operations |
|
0.24 |
|
|
|
|
|
|
|
0.24 |
|
|
|
|
Total |
$ |
0.49 |
|
|
|
|
|
|
$ |
0.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
safeway (NYSE:SWY)
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safeway (NYSE:SWY)
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