2013 Fact Book
SAFEWAY 2013 FACT BOOK
ABOUT THE SAFEWAY FACT BOOK
This Fact Book provides certain financial and
operating information about Safeway. It is
intended to be used as a supplement to the
Safeway 2012 Annual Report on Form 10-K,
quarterly reports on Form 10-Q and current
reports on Form 8-K, and therefore does not
include the company’s consolidated financial
statements and notes.
The majority of the information in this Fact
Book is based on fiscal year 2012 data unless
otherwise noted.
Safeway believes that the information
contained in this Fact Book is correct in all
material respects as of April 2013. However,
such information is subject to change.
CONTENTS
2
3
4
9
10
12
18
25
30
36
Note: This Fact Book contains 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, real estate development and
Lifestyle stores and are indicated by words or phrases such as “continuing,” “ongoing,” “expects,” “plans,” “will” and similar
words or phrases. These statements are based on Safeway’s current plans and expectations and involve risks and uncertainties
that could cause actual events and results to vary significantly from those included in, or contemplated or implied by, such
statements. Certain risks and uncertainties are described in Safeway’s reports filed with the Securities and Exchange Commission.
SA FEWAY 20 13 FA CT B OO K
Investor Information Safeway at a Glance Retail Operations Loyalty Marketing Consumer Brands Finance & Administration Financial & Operating Statistics Directors & Executive Officers Corporate History Reconciliations 1
INVESTOR INFORMATION
CORPORATE OFFICE
INVESTOR CONTACTS
Safeway Inc.
5918 Stoneridge Mall Road
Pleasanton, CA 94588-3229
Phone: (925) 467-3000
www.safeway.com
Christiane Pelz
Vice President, Investor Relations
Phone: (925) 467-3832
STOCK INFORMATION
•
Stock symbol: SWY
•
Listed on New York Stock Exchange (“NYSE”)
•
ransfer Agent:
T
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
Phone: (877) 498-8861
Hearing impaired: (800) 952-9245
www.computershare.com
2012 Data:
239.5 million common shares
outstanding as of December 29, 2012
•
•
245.9 million weighted average shares
outstanding (diluted)
•
164 million cash paid for dividends on
$
common stock
•
1.3 billion cash paid for common stock
$
repurchases
NUMBER OF EMPLOYEES
•
Year-end 2012: 171,000
•
Year-end 2011: 178,000
•
Year-end 2010: 180,000
At year-end 2012, almost 80% of our employees
were covered by collective bargaining agreements.
Melissa Plaisance
Senior Vice President, Finance & Investor Relations
Phone: (925) 467-3136
General Inquiries
www.safeway.com/investor_relations
Phone: (925) 467-3717
BOND INFORMATION (As of April 2013)
•
Floating Rate Senior Notes due December 2013
•
5.625% Senior Notes due August 2014
•
6.25% Senior Notes due March 2014
•
3.40% Senior Notes due December 2016
•
6.35% Senior Notes due August 2017
•
5.00% Senior Notes due August 2019
•
3.95% Senior Notes due August 2020
•
4.75% Senior Notes due December 2021
•
7.45% Senior Debentures due September 2027
•
7.25% Senior Debentures due February 2031
Trustee & Paying Agent:
The Bank of New York Mellon
Bondholder Relations Department
Corporate Trust Division
Fiscal Agencies Department
101 Barclay Street, 7-East
New York, NY 10286
Phone: (800) 548-5075
•
.00% Second Series Notes due March 2014
3
(Canada Safeway Limited)
Trustee & Paying Agent:
BNY Trust Company of Canada
4 King Street West, Suite 1101
Toronto, Ontario MSH 1B6
Phone: (416) 933-8500
2
SAFEWAY AT A GLANCE
ABOUT US
Through our subsidiary, Blackhawk Network, Inc.
(Blackhawk), we provide prepaid gift cards, other
prepaid products and payment services to consumers
through a network of retail store locations in the
United States and 18 other countries as well as various
online channels. Blackhawk is publicly traded under the
symbol “HAWK.”
Safeway Inc. (Safeway) is one of the largest food
and drug retailers in North America. At year-end
2012, Safeway operated 1,641 stores in the Western,
Southwestern, Rocky Mountain, Midwestern and
Mid-Atlantic regions of the United States and in
western Canada. In support of our stores, Safeway has
an extensive network of distribution, manufacturing
and food processing facilities.
Safeway also holds a 49% interest in Casa Ley, S.A. de
C.V., which at year-end 2012 operated 195 food and
general merchandise stores in western Mexico.
Safeway owns and operates GroceryWorks.com,
an Internet grocer doing business under the names
Safeway.com and Vons.com.
STORES BY DIVISION
Carrs
Vancouver
72
Alberta
96
Winnipeg
55
Dominick’s
72
Northwest
(incl. Carrs)
313
Northern
California
268
Denver
136
Southern
California/
Vons
277
Phoenix
115
Eastern
127
Randalls
Texas/
Tom
Thumb
Randalls
Tom112
Thumb
110
SA FEWAY AT A G L ANCE
Casa Ley
195
3
3
RETAIL OPERATIONS
OVERVIEW
Safeway’s operating strategy is to provide outstanding
value to our customers by offering a unique shopping
experience, including maintaining superior store
standards and a wide selection of high-quality
products at attractive, everyday prices and weekly
promotions through our Club Card and just for U™
program. Through our Lifestyle stores, we emphasize
high-quality meat and produce, in-store bakeries, deli
and food service areas and outstanding floral and
pharmacy departments. Safeway’s store employees
also deliver superior service to customers.
Below is a list of our stores by operating area and size.
At year-end 2012, approximately 82% of Safeway’s
stores were 35,000 square feet or larger.
Store Count by State / Province as of December 29, 2012:
United States:
Alaska
Canada – Provinces:
28
Alberta
93
Arizona
114
British Columbia
75
California
506
Manitoba
33
Colorado
115
Ontario
District of Columbia
Delaware
13
20
Idaho
6
Illinois
72
Maryland
65
Montana
12
Nebraska
5
New Jersey
New Mexico
Oregon
19
1
4
99
Pennsylvania
1
South Dakota
3
Texas
Virginia
Washington
Wyoming
Total U.S.
16
4
Hawaii
Nevada
Saskatchewan
6
110
43
168
10
1,418
Total U.S. & Canada
Total Canada
223
1,641
Percentage of Stores with Specialty Departments and Fuel Stations as of December 29, 2012:
Departments:
4
%
Deli
99%
Floral
98%
Bakery
95%
Seafood
81%
Pharmacy
79%
Starbucks
71%
Fuel Stations
25%
Stores by Operating Area as of December 29, 2012:
U.S. Operating Areas:
Chicago (Dominick’s)
Greater Than
35,000 Sq. Ft.
Less Than
35,000 Sq. Ft.
Total Stores
70
2
72
Denver
120
16
136
Eastern
114
13
127
Northern California (includes HI)
204
64
268
Northwest (Carrs in AK)
265
48
313
Phoenix
109
6
115
Southern California (Vons/Pavilions)
206
71
277
Texas (Randalls/Tom Thumb)
99
11
110
1,187
231
1,418
Alberta
76
20
96
Vancouver
47
25
72
Total U.S.
Winnipeg
Total Canada
Total U.S. & Canada
40
15
55
163
60
223
1,350
291
1,641
R ETAI L O P ER AT IO NS
Canadian Operating Areas:
5
PRIMARY COMPETITORS
Safeway U.S.
Operating Areas:
(banner)
Primary Conventional:
Other:
Chicago
(Dominick’s)
Jewel (Cerberus)
Walmart Supercenter, Meijer, Aldi,
Costco, Sam’s Club, Whole Foods
Denver
(Safeway)
King Soopers (Kroger), Albertsons
(Cerberus)
Walmart Supercenter, Sam’s Club,
Costco, Whole Foods, Target
Eastern (MD, VA, D.C.)
(Safeway)
Giant (Ahold), Food Lion (Delhaize),
Shoppers Food Warehouse (SuperValu),
A&P
Costco, BJ’s Wholesale Club, Wegmans,
Whole Foods, Walmart Supercenter,
Harris Teeter
Northern California
includes HI
(Safeway)
Lucky (SaveMart), Raley’s, Nob Hill
(Raley’s)
Walmart, Costco, WinCo Foods,
Whole Foods, Trader Joe’s
Northwest
includes AK
(Safeway/Carrs)
Fred Meyer (Kroger),
Albertsons (Cerberus),
Quality Food Centers (Kroger)
WinCo Foods, Walmart Supercenter,
Costco, Haggen
Phoenix
(Safeway)
Fry’s (Kroger), Albertsons (Cerberus),
Bashas’
Walmart Supercenter, Costco,
Sam’s Club
Southern California
(Vons/Pavilions)
Albertsons (Cerberus),
Ralphs, Food 4 Less (Kroger),
Stater Bros.
Walmart Supercenter, Costco,
Whole Foods, Trader Joe’s
Texas
(Randalls/Tom Thumb)
Kroger, Albertsons (Cerberus), H.E. Butt
Walmart Supercenter, Sam’s Club,
Costco, Fiesta Mart, Target
Primary Conventional:
Other:
Alberta
Sobeys, Co-op,
Save-on-Foods (Overwaitea)
Real Canadian Superstore (Loblaw),
Costco, Walmart
Vancouver
Save-on-Foods (Overwaitea),
PriceSmart Foods (Overwaitea),
Thrifty Foods (Sobeys)
Real Canadian Superstore (Loblaw),
Costco, Walmart
Winnipeg
IGA (Sobeys),
Extra Foods (Loblaw),
Co-op
Real Canadian Superstore (Loblaw),
Costco, Walmart, Real Canadian
Wholesale Club (Loblaw)
Note: Over 3% weighted market share.
Safeway Canadian
Operating Areas:
6
DISTRIBUTION
Each of Safeway’s 11 retail operating areas is served
by a regional distribution center consisting of one or
more facilities. Safeway currently has 17 distribution/
warehousing centers (13 in the United States and
four in Canada*), which collectively provide the
majority of products to stores we operate. Our
distribution centers in Maryland and British Columbia
are operated by third parties.
U.S. Operating Areas:
Location:
Chicago (Dominick’s)
Northlake, IL
Denver
Denver, CO
Size (Sq. Ft.):
932,000
1,232,000
Eastern
Collington, MD
Northern California (includes HI)
Tracy, CA
1,922,000
Northwest (includes Carrs in AK)
Auburn, WA
Clackamas, OR
Spokane, WA
Anchorage, AK
1,208,000
798,000
292,000
233,000
Phoenix
Tempe, AZ
Southern California (Vons/Pavilions)
Santa Fe Springs, CA
El Monte, CA
1,055,000
862,000
Texas (Randalls/Tom Thumb)
Houston, TX
Dallas, TX
686,000
1,019,000
Total U.S.
915,000
788,000
11,942,000
Canadian Operating Areas:
Location:
Size (Sq. Ft.):
Alberta
Calgary, Alberta
Edmonton, Alberta
788,000
442,000
Vancouver*
Vancouver, British Columbia
426,000
Winnipeg
Winnipeg, Manitoba
427,000
Total Canada
Total U.S. & Canada
2,083,000
14,025,000
Note: Listing of major distribution facilities. Safeway also sources product from additional warehouses in the U.S. and Canada.
R ETAI L O P ER AT IO NS
*We sold our distribution center in British Columbia in 2011, and the activity was moved to a third-party facility.
7
MANUFACTURING
As measured by sales dollars, approximately 13% of
Safeway’s private label merchandise is manufactured in
company-owned plants, and the remainder is purchased
from third parties.
The principal function of Safeway’s manufacturing
operations is to purchase, manufacture and process
private label merchandise sold in stores we operate.
We utilize excess capacity in some of our plants to
produce products for third parties.
Manufacturing and food processing facilities by type and location as of December 29, 2012:
U.S.
Canada
Total
Milk plants
6
3
9
Bakery plants
6
2
8
Ice cream plants
2
2
4
Cheese and meat packing plants
-
1
1
Soft drink bottling plants
4
-
4
Fruit and vegetable processing plants
1
3
4
Cake commissary
1
-
1
Sandwich commissary
-
1
1
20
12
32
Total
Sign showing our fuel partnership with Chevron in our Southern California (Vons) Division.
8
8
LOYALTY MARKETING
LOYALTY MARKETING
Our Gas Reward Points program enhances the loyalty of
our customers by offering additional savings at the pump.
Customers can earn Reward Points through eligible grocery,
gift card and pharmacy item purchases. In addition to our
Safeway-branded fuel stations, customers are now able
to redeem their Reward Points at participating Chevron,
Texaco, Exxon and Mobil locations.
Our in-store pharmacies further enhance loyalty by
continually engaging our shoppers with relevant offers
throughout the year on immunizations and prescription
refills. Our pharmacies also create loyalty by offering
convenience for our customers. Our pharmacists not only
fill scripts, but also offer value to our customers through
patient consulting. Safeway was one of the first retailers to
offer immunizations, and we recently announced a smoking
cessation program through an alliance with the UCSF School
of Pharmacy.
Our engagement on social media platforms such as
Facebook, Twitter and Pinterest continues to grow and has
developed a loyal following, including bloggers who have
encouraged their fans to try our loyalty programs.
LO YALTY marketing
In addition to providing value through our Everyday Low
prices and weekly Club Card specials, we offer personalized
savings through our proprietary just for U™ program. Just
for U gives shoppers digital coupons and deals on items they
regularly buy in our stores, and we make it easy to access
just for U through desktop computers and our Safeway App
for tablets and smart phones.
Pharmacist helping a customer at our newly designed pharmacy counter.
9
9
CONSUMER BRANDS
CONSUMER BRANDS
Safeway’s private label offering of Consumer Brands
is dedicated to meeting diverse shopper needs while
building loyalty to Safeway. Our portfolio is designed
to provide high-quality products and a differentiated
experience to our shoppers.
We divide our brands into three portfolios: Core, Premium
and Health & Wellness. Core
•
T he Safeway brand is our largest Consumer Brand with
more than 4,000 items across 350 categories ranging
from cereal and spaghetti to hand sanitizer and laundry
detergent. The Safeway brand offers shoppers the same
quality and taste of name brands, at a lower price. We
recently redesigned the packaging and are in the process
of rebranding the core Safeway brand into four labels:
Safeway Kitchens, Farms, Home and Care.
•
T he Lucerne® brand has been producing quality dairy
products since 1904. It can be found in 20 categories,
offering over 400 items such as milk, cheese, sour cream,
cottage cheese, ice cream and eggs. About 70% of
Lucerne’s portfolio is now rBST free.
•
•
10
elaunched in the summer of 2010, refreshe™ has
R
brought fun back to the beverage category. With over
40 different varieties of beverages, from carbonated soft
drinks to vitamin-enhanced water, our mega beverage
brand, refreshe, continues to be a one-stop brand for
thirsty shoppers.
T he Snack Artist™ is our line of great-tasting, clever snacks,
which also delivers value. In 2012, we added pretzels, trail
mix and frozen appetizers to the variety of salty snacks with
which we launched the brand in 2010.
•
T he Pantry Essentials brand features over 100 items that
are positioned to meet the needs of consumers looking
for basic items that are priced right on a day-in-day-out
basis. Pantry Essentials spans over 45 categories including
dairy, meat, canned vegetables and paper goods, to
name just a few.
•
T he Deli Counter™ consists primarily of sliced deli meats,
cheeses and salads.
Premium
•
T he award-winning Safeway SELECT® brand is designed
to offer premium quality products that we believe are
equal or superior in quality to comparable bestselling,
nationally advertised brands, or are unique to their
category and not available from national brand
manufacturers. Since 1993, hundreds of products have
been developed under the Safeway SELECT brand,
including unique salsas, frozen entrees, hors d’oeuvres,
pastas and sauces, olive oils, freshly baked artisan breads,
whole bean coffees and desserts. Currently, there are over
1,000 items in 60+ categories.
•
ur Signature Cafe® brand offers a variety of items in
O
the deli/food service department, including sandwiches,
soups, salads, side dishes and precooked hot meats such
as meatloaf, roasted chicken and BBQ pork ribs. It also
offers a variety of meals, which we reformulated and
repackaged in 2009, thereby providing even more meal
solutions for today’s busy shoppers.
•
T he Primo Taglio® brand is a full line of premium meats
and cheeses, all crafted using traditional, time-honored
practices. Primo Taglio has no fillers, binders, artificial
flavors or MSG. It was launched in 1999 and has over
80 items.
•
T hrough our Rancher’s Reserve® Tender Beef offering,
we believe we have developed a reputation for having
the most tender and flavorful meat available in the
market.
•
In January 2009, we introduced waterfront BISTRO®–
a brand of over 140 seafood selections, entrees and
complementary items that make preparing a restaurantquality meal at home easy. Some items come with simple
recipes for “do-it-yourself” entrees and appetizers, and
others are pre-made entrees that are ready in minutes.
•
ebi Lilly is another example of the solutions we provide
D
for our shoppers. With a line of unique bouquets,
candles, vases and gifts, Debi Lilly continues to grow.
•
om to Mom® rounds out the portfolio with baby
M
products created by moms, for moms and their babies.
Products include essentials of baby care from diapers,
baby wipes, toiletries, lotions, infant formula and
toddler fruit pouches. Every item was developed with
that special mother’s touch to help make those first
years of parenting just a little bit easier.
•
E ating Right, our brand of products for health-conscious
consumers, debuted during the second quarter of
2007. With carefully balanced ingredients and targeted
nutrition for a variety of needs, Eating Right makes it easy
for our shoppers to eat what’s right for them. The line
includes over 100 great-tasting, better-for-you items.
•
T he Bright Green™ brand of home care products was
launched in October 2008 as a highly effective and
affordable solution for everyone to care for their homes
and contribute to a cleaner and healthier community.
The Bright Green brand currently features 44 items,
including cleaning and laundry products made with
naturally derived and biodegradable ingredients, paper
products made from 100% recycled content and highefficiency light bulbs.
•
In November 2010, Safeway introduced the Open
Nature™ line of 100% natural foods, continuing our
leadership in the retail food industry as an innovator in
health and nutrition. Open Nature today offers more
than 450 skus made with 100% natural ingredients
from natural sources, with nothing artificial added. Open
Nature is Safeway’s way of providing shoppers access to
simple, flavorful food made from all-natural ingredients
that is as close to nature as possible.
™
Health & Wellness
In December 2005, Safeway introduced the first of our
“wellness” brands, O Organics. This line has grown to
over 1,300 USDA-certified organic food and beverage
products. All O Organics products have passed strict
federal government standards for organic farming,
processing and handling. In the spring of 2007, Safeway
Build Lifestyle Brands
Creating a portfolio that appeals to all shoppers & needs
Top
Consumer
through
15 well positionedBrands
brands
CO NS UM ER BR AND S
•
introduced O Organics for Baby and O Organics for
Toddler products, offering a complete line of wholesome,
great tasting and affordable organic food for children.
11
FINANCE & ADMINISTRATION
REAL ESTATE
Since 2004, we have transformed our stores into
“Lifestyle” stores. While Safeway has focused on
an aggressive remodel program, we have also built
a number of new stores each year. New stores are
typically 55,000 square feet. In 2012, we opened nine
new stores and completed four Lifestyle remodels.
These stores showcase Safeway’s commitment to
quality, particularly in the perishables departments.
The stores are dramatically redesigned with earthtoned decor, subdued lighting, custom flooring,
unique display fixtures and other special features to
create a warm, inviting ambience that Safeway believes
significantly enhances the shopping experience. At
year-end 2012, 1,449 stores, or 88% of the store base,
were Lifestyle stores.
At year-end 2012, Safeway owned approximately 45%
of our stores and leased the remaining stores. Safeway
prefers ownership because it provides control and
flexibility with respect to remodels, expansions, closures
and financing terms.
Georgetown Store
12
Safeway employs an analytical and disciplined approach
to all capital spending. To be approved, all new stores
and Lifestyle remodel plans must exceed an internal
cash-on-cash hurdle rate of 22.5%. Post-capital audits
are conducted at the end of the first and third years
after the completion of a project in order to monitor
ongoing performance. The executive officers who are
responsible for making capital decisions are eligible for
capital performance-based compensation, payment of
which is partially contingent on capital investments of
Safeway achieving targeted rates of return.
Our Property Development Centers (PDC) subsidiary
specializes in retail shopping center development and
capitalizes on Safeway’s real estate core competency.
PDC completed several projects in 2012, and with many
more under development, PDC is expected to generate
value for Safeway.
Five-Year History of Capital Expenditure Program
2012
2011
2010
2009
2008
1,678
1,694
1,725
1,739
1,743
Stores opened:
New
Replacement
4
5
6
19
3
11
3
5
8
12
Total
9
25
14
8
20
46
41
45
22
24
1,641
1,678
1,694
1,725
1,739
4
8
29
-
60
7
82
10
232
21
12
29
67
92
253
Number of fuel stations at
year end
407
400
393
388
382
Total retail square footage at
year end (in millions)
77.6
79.2
79.2
80.1
80.4
$927.6
$1,094.7
$837.5
$851.6
$1,595.7
2.1%
2.5%
2.0%
2.1%
3.6%
47,000
47,000
46,700
46,000
46,000
Total stores at beginning of year
Stores closed (1)
Total stores at year end
(2)
Remodels completed :
Lifestyle remodels
Other remodels
Total remodels
Cash capital expenditures
(in millions)
Cash capital expenditures as a
percentage of sales and other
revenue
Average store size
(1)In 2012, the company disposed of 25 Genuardi’s stores.
(2)Defined as store remodel projects (other than maintenance) generally requiring expenditures in excess of $0.2 million. Excludes pharmacy refurbishments.
The Safeway Information Technology (IT) department
supports the business objectives of increasing sales,
reducing costs and creating greater efficiencies that
ultimately improve the overall customer experience.
The IT department works with various business units
to develop and implement technology solutions to
meet business goals. The department delivers solutions
covering all aspects of Safeway’s business including
marketing and merchandising, retail, supply chain,
eCommerce, business intelligence and administration.
Most recently, IT has been involved with the
development of our proprietary just for U™ digital
loyalty platform. Through just for U, customers are able
to download personalized prices and digital coupons to
their Club Cards. Recently, mobile apps were added in
order to provide customers with more convenient access
to just for U.
Safeway operates a data center in Salt Lake City, Utah
and another in Phoenix, Arizona. Each data center
houses mission-critical information and is equipped to
function as a back-up system in the event of a disaster.
FI NA NCE & ADM I NI ST RATI O N
TECHNOLOGY
13
HUMAN RESOURCES
Diversity and Inclusion
We believe a diverse workforce leads to better
teamwork, increased productivity, creative thinking and
innovation - which help us achieve business priorities.
Safeway’s view of diversity is all-inclusive and covers
the many ways employees may be different, including
an individual’s race, color, religion, gender, national
origin, age, disability, ancestry, medical condition,
genetic information, marital status, covered veteran
status, citizenship status, sexual orientation, gender
identity and gender expression. Safeway provides
reasonable accommodations for applicants and
employees with disabilities. Safeway employs more than
171,000 employees of which almost 80% are covered
by collective bargaining agreements.
Safeway supports employee resource groups, which
are individually sponsored by a senior member of our
management team. Employees have formed over ten
groups, thereby increasing employee engagement,
providing networking and mentoring opportunities and
helping connect employees to the community.
Employee Development
Our employees are our most valuable resource. We
provide employees with training and developmental
opportunities that enable them to acquire the necessary
knowledge, skills and abilities, which we believe have
contributed significantly to Safeway becoming a
leading retailer in our markets. Whether it is providing
world-class customer service, offering exceptional
products at a competitive price or mastering the latest
in merchandising and display techniques, Safeway’s
training and development programs are designed to
provide individuals with a solid foundation to perform
their best in their current position, while preparing
them for future opportunities. Safeway provides entrylevel training using multi-media, mentors and on-thejob training. Areas of concentration include: customer
service, technical skills, product knowledge, diversity,
food safety, workplace safety, financial analysis and a
host of other topics, as they relate to each position.
Strong performers are offered further opportunities in
management positions.
14
Retail Management Training/Leadership
Development Program
Strong store management is essential to the success
of Safeway. Our store managers are a significant group
of leaders who are responsible for running our daily
operations. Potential management personnel are selected
from high-performing assistant store managers, store
employees, qualified external store managers and other
outside candidates. Store manager candidates are given
in-depth training on leadership, strategy, store operations,
report analysis and financial business acumen. We also
offer leadership programs to help managers move from
front line supervision to mid-level management and
executive leadership. Managers receive developmental
feedback, which helps them focus on strengthening their
competencies to excel in their roles.
Safeway developed a military recruiting program to
hire and train junior military officers after they return
from active duty. The Safeway retail management
development program prepares Safeway’s retail leaders
for everyday operating challenges by providing them
with the proper training, experience and tools necessary
to adapt and excel in the competitive and constantly
changing grocery industry.
Health and Wellness
In addition to employing and training a diverse workforce,
Safeway offers a number of benefits and programs to
help employees manage all aspects of their total health–
physical, emotional and financial well-being. Our Live
Life, Live Long, Live Well™ programs are available to help
our employees and their families manage their physical,
emotional and financial well-being. Healthy Measures
helps employees understand their major health risks
and take steps to stay or become healthy. Participating
employees qualify for substantial discounts on their health
insurance premiums. Other programs include:
• a state-of-the art corporate fitness center and discounts at local fitness centers;
• a health clinic at corporate headquarters;
• an online tool that helps make health care costs transparent; and
• CareConnect, a service to provide employees and their families with the very best care for breast
cancer, prostate cancer and heart disease at premier
treatment centers nationwide.
CORPORATE SOCIAL RESPONSIBILITY
Stock Ownership
A payroll deduction plan allows employees at all levels
to buy Safeway stock commission-free. Safeway’s 401(k)
plan provides eligible employees an option to invest selfdirected retirement funds in Safeway stock.
For years, Safeway has taken responsibility for
environmental and community stewardship. We strive
to make a real, positive difference in the neighborhoods
we serve. We are committed to “Creating better lives,
vibrant neighborhoods, and a healthier planet.” We
focus our corporate social responsibility (CSR) efforts
on four key areas: People, Products, Community and
Planet, as described below. Please see our CSR website
for more details: www.safeway.com/csr.
People
As previously mentioned, Safeway takes pride in
employing and training a diverse workforce, and
we are also committed to our Live Life, Live Long,
Live Well™ health and well-being programs.
For our customers, we offer a selection of healthy
products and services. In addition, our pharmacies
offer prescription-filling, immunizations, travel
medicines, medication therapy management,
point-of-care screening and health-related advice,
among other services.
Products
Sourcing safe, high-quality products and offering a
selection of healthy and more sustainable products is
very important to us.
Consumer Brands
Our private label product team continues to expand
item selection in the Health & Wellness portfolio of
brands which includes O Organics™, Eating Right®,
Bright Green™ and Open Nature™.
SimpleNutrition
In 2011, we introduced SimpleNutrition, an “at the
shelf” labeling program we developed in partnership
with registered dietitians and food labeling experts.
Green shelf tags identify certain nutrition and ingredient
benefits for a given product, helping our customers to
receive critical nutrition information at a glance.
FI NA NCE & ADM I NI ST RATI O N
Incentive Programs and Benefits
We have a number of bonus programs to motivate,
reward and retain eligible employees and to encourage
individual and team behavior that helps the company
achieve both short- and long-term performance
objectives. Safeway’s bonus programs extend to more
than 21,000 employees from in-store department
managers to senior management. Safeway also
contributes to a pension plan for non-union employees
and several multi-employer pension plans.
Locally Grown
Safeway has spent decades working with hundreds of
local growers across the country to bring the finest and
freshest produce to our consumers. We give buying
preference to our local vendor partners, supporting the
vitality of regional farms and reducing greenhouse gas
emissions by limiting transportation miles.
15
21
Supplier Diversity Program
Our supplier diversity program provides business
opportunities for minority-, women-, LGBT- and servicedisabled, veteran-owned businesses to present their
goods or services to Safeway for consideration. Potential
suppliers are guided through the evaluation process by a
designated diversity contact person and the appropriate
category decision maker.
Supply Chain Transparency
Beginning in 2011, we engaged our suppliers to
address human trafficking and collaborate on finding
solutions to any identified issues. Approximately 900
Safeway employees have successfully completed training
regarding the prevention of human trafficking in
business operations and supply chains.
Animal Welfare and Seafood Sustainability
Safeway is an industry leader in animal welfare.
We believe animals should be raised, transported
and processed using procedures that are clean, safe
and free from cruelty, abuse or neglect. The mandate
of our Animal Welfare Council, comprised of Safeway
experts and a number of animal welfare scientists from
top universities, is to provide guidance on matters
relating to the humane treatment of animals in the food
production system. In May of 2012, Safeway announced
progress toward gestation stall-free pork supply
chain. In December, Safeway became the first major
grocery retailer in the United States to make a national
commitment to offer Certified Humane® cage-free eggs.
Safeway adopted a far-reaching seafood
sustainability policy in 2008 to help ensure this food
source is enjoyed for generations to come. The policy
focuses on four key areas: sourcing, supplier assessment
and employee and customer education. In January
2010, we joined FishWise, a non-profit organization
focused on improving the sustainability performance
of seafood retailers, distributors and producers.
In May 2012, Greenpeace ranked Safeway number
one among the top U.S. grocery retailers for the
sustainability of our seafood practices. In addition,
Safeway launched its Safeway brand skipjack
(chunk-light) canned tuna that is responsibly caught
using free-school purse-seine methods.
16
Food Safety & Packaging
In 2010, we initiated a multi-year program to improve
practices that safeguard the integrity of our products.
Our program includes certification with the Global Food
Safety Initiative (GFSI), a collaboration among food safety
experts from retail, manufacturing and food service, as
well as service providers. The GFSI benchmarks existing
food standards against food safety criteria and develops
ways to share information in the supply chain, raise
consumer awareness and review existing retail practices.
Our innovations in packaging, such as reducing the
weight of our refreshe™ 500 ml water bottles and use
of Reusable Plastic Containers (RPCs) to ship produce,
instead of cardboard boxes, have helped us reduce
our carbon footprint. In 2011, 8.6 million RPCs were
used, which eliminated 17 million pounds of cardboard
packaging. In 2012, over 16.9 million RPCs were used.
Community
We have a longstanding reputation for making
meaningful contributions to the causes our customers
and employees care about. Our Safeway Volunteer
website links our employees with more than 70,000
nonprofit agencies and local volunteer opportunities
such as mentoring programs, food banks and school
youth programs. In 2012, our employees achieved
one million volunteer hours logged for the second
consecutive year.
The major areas of support for both Safeway
and The Safeway Foundation are: hunger relief,
education, health and human services, and people
with special needs.
Hunger Relief
In 2012, Safeway and The Safeway Foundation
donated nearly $120 million in food and products to
regional food banks, food pantries and other hunger
relief agencies.
Education
Safeway contributes more than $20 million annually to
schools through eScrip and other fundraising programs.
The eScrip program allows enrolled shoppers to raise
money for their designated schools simply by making
purchases at participating merchants.
People with Special Needs
Safeway is one of the largest corporate fundraisers
for Easter Seals and Special Olympics. We have raised
more than $128 million for the benefit of Easter
Seals programs which we have supported for over
25 years. Since 2008, we have raised over $9 million
to the Special Olympics. Since we began, Safeway
and The Safeway Foundation raised approximately
$65 million for the Muscular Dystrophy Association
(MDA), a national voluntary health agency dedicated to
conquering more than 40 neuromuscular diseases.
Planet
The protection of our natural resources, such as air,
water, soil and vegetation, is paramount to the health
and sustainability of our planet for future generations
to come. Safeway was one of the first retailers to
recycle and one of the first to offer reusable shopping
bags. We have made substantial progress in our goals
to reduce our energy consumption and greenhouse gas
emissions, divert waste, reduce water usage, increase
efficiencies in our supply chain and build new stores
more sustainably while improving the sustainability of
our existing stores.
Cutting Energy Consumption
and Reducing Greenhouse Gases
In 2006, Safeway was the first retailer to join the
Chicago Climate Exchange, committing to reduce our
carbon footprint over four years by 6% below our 2000
baseline. We completed our 2010 audit and exceeded
our target, reducing our greenhouse gas emissions
by 11.8% from our 2000 baseline. In 2012, Safeway
joined The Climate Registry, a nonprofit collaboration
among North American states, provinces, territories
and Native Sovereign Nations that sets consistent and
transparent standards to calculate, verify and publicly
report greenhouse gas emissions into a single registry. In
2012, we purchased enough green power from biogas,
solar and wind to offset the power used by all of our U.S.
fuel stations, corporate offices in Pleasanton, California
and all of our stores in San Francisco, California and
Boulder, Colorado.
Diverting Waste
Safeway supports the global drive towards zero waste
business practices. Our stores, corporate offices,
distribution centers and manufacturing plants participate
in a number of diversion programs. We recycle or divert
to alternative uses items such as cardboard, plastics,
compostable material, cooking oil, bone and fat, as well
as construction materials on building sites. Currently five
of our manufacturing plants and 11 of our distribution
centers are zero waste facilities.
Reducing Water Usage
Water is a critical natural resource that must be
managed responsibly. Over the past few years, Safeway
has implemented a number of water-saving initiatives
across our retail stores, distribution centers and
manufacturing plants. In addition, Safeway actively
monitors water use and looks for fluctuations in
consumption that may indicate a leak.
Improving Efficiencies in our Supply Chain
Transporting our products to over 1,600 stores is a big
task, and doing so efficiently takes skill and innovation.
One innovative approach we took in 2011 was to recycle
fryer grease from our Northern California stores into
bio-diesel which was used by the Vons transportation
fleet. In addition, by loading our trucks more efficiently,
we reduced the amount of diesel fuel consumption in
our outbound trucks significantly. Two one-megawatt
wind turbines at our Tracy, California distribution center
are projected to provide 15% of the power needs of
the facility.
Designing Stores Sustainably
We strive to minimize environmental impacts in the
design and building of new stores. Since we opened our
first store certified by the US Green Building Council’s
Leadership in Energy and Environmental Design (LEED)
program in 2010 in Santa Cruz, California, we now have
several projects in the LEED certification process.
FI NA NCE & ADM I NI ST RATI O N
Health and Human Services
Safeway and The Safeway Foundation support a wide
array of cutting-edge cancer research at some of North
America’s top cancer centers. Safeway and The Safeway
Foundation are among the largest corporate supporters
in the research and prevention of breast and prostate
cancer. In 2013, we expect to exceed the $200 million
milestone in the amount of money raised and donated
since 2001.
17
FINANCIAL & OPERATING STATISTICS
FINANCIAL TRANSACTION HISTORY (All share prices are split-adjusted)
1986
•
•
In 1986, Safeway was acquired and taken private via a
leveraged buyout by partnerships formed by Kohlberg
Kravis Roberts & Co. (“KKR”) and Safeway senior
management. At year-end 1986, total debt was
$5.7 billion.
F rom 1986 through 1988, Safeway closed or sold
approximately 1,000 stores and received proceeds
of $2.4 billion, which were used to repay debt.
1989
•
1993
• Issued $80 million of Medium-Term Notes in 1993,
with maturities ranging from two to ten years.
1994
•
1995
•
In January 1995, Safeway acquired 31.8% of the
partnership interests in SSI Equity Associates, L.P. for
$113 million with proceeds from bank borrowings. In
October 1995, Safeway acquired an additional 18.9%
of such partnership interests for $83 million with
proceeds from bank borrowings. SSI Equity Associates,
L.P. was a limited partnership whose sole asset
consisted of warrants to purchase Safeway common
stock at $0.50 per share.
•
In May 1995, Safeway entered into a $1.15 billion
unsecured bank credit agreement that was to mature
in the year 2000 and had two one-year extension
options.
•
In May 1995, Standard & Poor’s (“S&P”) upgraded
Safeway’s unsecured senior debt to BBB-.
At year-end 1989, total debt was $3.1 billion.
1990
•
n April 26, 1990, Safeway became a public company
O
once again by issuing 46 million shares at $2.81 per
share, for net proceeds of approximately $120 million.
1991
•
In April 1991, Safeway issued another 70 million
shares at $5.13 per share, for net proceeds of
approximately $340 million.
•
1-16-91: Redeemed $565 million of 14.5% Junior
1
Subordinated Debentures.
•
1-20-91: Issued $300 million of 10.0% Senior
1
Subordinated Notes due 2001.
•
2-20-91: Redeemed $300 million of 11.75% Senior
1
Subordinated Notes.
1992
•
1-15-92: Issued $300 million of 9.65% Senior
0
Subordinated Debentures due 2004.
•
2-12-92: Issued $100 million of 9.3% Senior Secured
0
Debentures due 2007, secured by the distribution
center in Tracy, CA.
•
18
12
2-24-92: Redeemed $300 million of 11.75% Senior
0
Subordinated Notes.
•
3-17-92: Issued $250 million of 9.35% Senior
0
Subordinated Debentures due 1999 and $150 million
of 9.875% Senior Subordinated Debentures due 2007.
•
04-23-92: Redeemed remaining $150 million of
11.75% Senior Subordinated Notes and redeemed
$250 million of 12.0% Senior Subordinated
Debentures.
•
9-02-92: Filed a $240 million shelf registration.
0
Subsequently
issued $80 million of Medium-Term
Notes in 1992 with maturities ranging from three to
ten years.
etired public debt totaling $292 million through open
R
market purchases, consisting of $44 million of senior
debt and $248 million of senior subordinated debt.
1996
•
E ffective January 30, 1996, Safeway stock split
two-for-one.
•
n February 5, 1996, 45.9 million shares of Safeway
O
Inc. were sold to the public by KKR at $12.69 per
share, reducing KKR’s ownership of Safeway to
approximately 51%.
•
In September 1996, S&P upgraded Safeway’s
unsecured senior debt to BBB.
•
In September and December 1996, Safeway acquired
an additional 13.8% of the limited partnership
interests in SSI Equity Associates, L.P. for $127 million
with proceeds from bank borrowings.
•
n December 16, 1996, Safeway Inc. and The Vons
O
Companies, Inc. jointly announced a definitive
agreement pursuant to which Safeway would issue
1.425 shares of Safeway common stock for each share
of Vons common stock that Safeway did not currently
own. Safeway owned approximately 35% of Vons.
1997
In January 1997, Moody’s upgraded Safeway’s
unsecured senior debt to Baa3.
•
n April 8, 1997, Safeway completed the merger with
O
Vons pursuant to which Safeway issued 83.2 million
shares of Safeway common stock for all of the shares
of Vons stock that Safeway did not already own.
•
•
In connection with the Vons merger, Safeway
repurchased 64.0 million shares of Safeway common
stock from a partnership affiliated with KKR at
$21.50 per share for an aggregate purchase price
of $1.376 billion.
In April 1997, to facilitate the Vons merger, Safeway
entered into a new $3.0 billion bank credit agreement.
It provided for, among other things, increased
borrowing capacity, extended maturities and the
opportunity to pay lower interest rates based on
interest coverage ratios or public debt ratings.
•
In September 1997, Moody’s upgraded Safeway’s
unsecured senior debt to Baa2.
•
n September 5, 1997, Safeway completed a tender
O
offer for debt securities in the principal amount of
approximately $588 million:
was completed at $29.88 per share, reducing KKR’s
ownership stake to approximately 22%.
1998
•
E ffective February 25, 1998, Safeway stock split
two-for-one.
•
In July 1998, the public offering of 28.8 million
shares of common stock owned by affiliates of KKR
was completed at $45.00 per share, reducing KKR’s
ownership stake to approximately 17%.
•
n August 6, 1998, Safeway and Carr-Gottstein Foods
O
Co., a grocery retailer operating in Alaska, jointly
announced a definitive merger agreement pursuant to
which Safeway would acquire all outstanding shares
of Carr-Gottstein for $12.50 cash per share and repay
approximately $239 million of Carrs’ debt.
•
n October 15, 1998, Safeway and Dominick’s
O
Supermarkets, Inc. jointly announced a definitive
merger agreement pursuant to which Safeway would
acquire all outstanding shares of Dominick’s for
$49.00 cash per share and repay approximately $560
million of Dominick’s debt and lease obligations.
•
n November 9, 1998, Safeway issued $1.4 billion
O
of senior debt associated with the acquisition of
Dominick’s. The four-tranche public offering
consisted of:
•
95 million of 9.35% Senior Subordinated Notes
$
due 1999
•
161 million of 10.00% Senior Subordinated Notes
$
due 2001
•
$400 million of 5.75% Notes due 2000
•
$53 million of 10.00% Senior Notes due 2002
•
147 million of 9.65% Senior Subordinated
$
Debentures due 2004
$400 million of 5.875% Notes due 2001
•
•
$350 million of 6.05% Notes due 2003
•
$250 million of 6.5% Notes due 2008
•
46 million of 9.30% Senior Secured Debentures
$
due 2007
•
86 million of 9.875% Senior Subordinated
$
Debentures due 2007
•
S afeway simultaneously obtained consents to
proposed amendments to the indentures governing
the remaining securities.
•
n September 5, 1997, the following securities were
O
issued to partially finance the redemption:
•
n November 12, 1998, Safeway was added
O
to the S&P 500 index.
•
n November 12, 1998, 20 million shares of common
O
stock were sold by affiliates of KKR to underwriters at
$55.00 per share, reducing KKR’s ownership stake to
approximately 13%.
•
n November 20, 1998, Safeway completed
O
the acquisition of Dominick’s Supermarkets, Inc.
•
$200 million of 6.85% Senior Notes due 2004
•
$200 million of 7.00% Senior Notes due 2007
1999
•
$150 million of 7.45% Senior Debentures due 2007
•
•
In December 1997, the public offering of 56.5 million
shares of common stock owned by affiliates of KKR
n February 10, 1999, 19.75 million shares of
O
common stock were sold to the public by affiliates of
KKR at $52.69 per share, reducing KKR’s ownership stake to approximately 9%. In connection with the
FI NA NCI AL & OP ER AT I NG STATI S TI CS
•
19
secondary offering, all warrants attributable to SSI
Equity Associates partners other than Safeway were
exercised. This resulted in Safeway holding 100% of
the limited partnership interests in SSI Equity
Associates.
•
n April 16, 1999, Safeway completed the acquisition
O
of Carr-Gottstein Foods Co.
•
n July 23, 1999, Safeway and Randall’s Food
O
Markets, Inc. jointly announced a definitive merger
agreement pursuant to which Safeway would acquire
all the outstanding shares of Randall’s for a total
consideration of $1.3 billion and repay approximately
$403 million of Randall’s debt.
•
n September 8, 1999, Safeway issued $1.5 billion
O
of senior debt associated with the acquisition of
Randall’s. The three-tranche public offering
consisted of:
2001
•
n January 5, 2001, Safeway entered into an
O
agreement with the Fleming Companies, Inc. to
purchase 11 ABCO stores in Arizona.
•
n January 31, 2001, Safeway issued $600 million of
O
7.25% Debentures due 2031, a portion of which was
used to fund the Genuardi’s acquisition.
•
n February 5, 2001, Safeway completed the purchase
O
of the assets of Genuardi’s Family Markets, Inc.
•
n February 28, 2001, Safeway completed the
O
purchase of 11 ABCO stores from the Fleming
Companies, Inc.
•
n March 5, 2001, Safeway issued $1.2 billion of
O
senior debt to repay borrowings under its commercial
paper program. The two-tranche public offering
consisted of:
•
$700 million of 6.15% Senior Notes due 2006
$500 million of 6.5% Senior Notes due 2011
•
$ 600 million of 7.0% Notes due 2002
•
•
$400 million of 7.25% Notes due 2004
•
•
$500 million of 7.5% Notes due 2009
n June 25, 2001, GroceryWorks.com, Safeway’s
O
exclusive online grocery channel, established a
strategic relationship with Tesco PLC. Concurrently,
Tesco made an equity investment for a 35% stake in
GroceryWorks.com.
•
n September 28, 2001, the Safeway Board of
O
Directors increased the authorized level of Safeway’s
stock repurchase program by $500 million to
$1.5 billion.
•
n November 5, 2001, Safeway issued $400 million
O
of 3.625% Notes due 2003.
•
In November 2001, all warrants to purchase Safeway
common stock held in SSI Equity Associates L.P.
expired unexercised and were accounted for as a
reduction to retained earnings.
•
n September 14, 1999, Safeway completed
O
the acquisition of Randall’s Food Markets, Inc.
•
n October 5, 1999, the Safeway Board of Directors
O
authorized a $1.0 billion common stock repurchase
program and began repurchasing stock.
2000
•
•
20
n January 27, 2000, Safeway announced it had
O
repurchased 17.9 million shares of Safeway’s common
stock for $651 million during the fourth quarter of
1999.
n April 28, 2000, two affiliates of KKR completed
O
the private sale of 13.1 million shares of common
stock, including approximately 8 million shares
acquired in the Randall’s merger.
•
n June 5, 2000, Safeway and GroceryWorks.com
O
signed a definitive agreement creating a strategic
alliance between the two companies for
GroceryWorks.com to be Safeway’s online grocery
channel.
•
n December 5, 2000, Safeway and Genuardi’s Family
O
Markets, Inc. jointly announced a definitive agreement
pursuant to which Safeway would acquire the assets
of Genuardi’s in a cash transaction for approximately
$530 million.
2002
•
n January 24, 2002, Safeway announced it had
O
repurchased 18.9 million shares of its common stock
for $781.3 million during 2001. Also, Safeway’s
Board of Directors increased the authorized level of
Safeway’s stock repurchase program by $1.0 billion
to $2.5 billion. At year-end 2001, Safeway had bought
back a total of $1.4 billion of its shares, leaving
$1.1 billion available for repurchases under the
$2.5 billion program.
•
n July 8, 2002, the Safeway Board of Directors
O
increased the authorized level of Safeway’s stock
repurchase program by $1.0 billion to $3.5 billion.
n July 16, 2002, Safeway issued $480 million of
O
4.80% senior debt due 2007 to repay borrowings
under its commercial paper program.
•
n August 12, 2002, Safeway issued $1.025 billion of
O
senior debt to repay borrowings under its commercial
paper program. The two-tranche offering consisted of:
•
$225 million of 3.8% Senior Notes due 2005
•
$ 800 million of 5.8% Senior Notes due 2012
•
•
500 million of 4.95% Senior Notes due 2010
$
(converted to floating rate debt through an interest
rate swap agreement)
•
$250 million of 5.625% Senior Notes due 2014
•
uring the second half of 2004, Safeway closed 18
D
underperforming stores in Southern California.
•
F rom September 7, 2004 through October 5, 2004,
Safeway conducted a stock option exchange tender
offer that allowed eligible employee optionees to
exchange outstanding stock options with an exercise
price greater than $35 per share for a number of
replacement options according to an exchange
formula.
In December 2002, Safeway announced plans to begin
the process to sell Dominick’s and leave the Chicago
market due to labor issues.
2003
•
•
n February 6, 2003, Safeway announced it had
O
repurchased 50.1 million shares of its common stock
for $1.5 billion during 2002. At year-end 2002,
Safeway had bought back a total of $2.9 billion of its
shares, leaving $0.6 billion available for repurchases
under the $3.5 billion program.
n October 29, 2003, Safeway issued $650 million of
O
Senior Notes to refinance upcoming debt maturities.
The three-tranche public offering consisted of:
•
$150 million of Floating Rate Senior Notes due 2005
•
$200 million of 2.5% Senior Notes due 2005
•
300 million of 4.125% Senior Notes due 2008
$
(converted to floating rate debt through an interest
rate swap agreement)
•
n November 3, 2003, Safeway announced it had
O
taken Dominick’s off the market because the union
and the winning bidder could not reach agreement on
an acceptable labor contract.
2005
•
n April 7, 2005, approximately 4.5 million
O
replacement options were issued at an exercise price
of $20.75 per share.
•
n May 3, 2005, Safeway commenced expensing
O
stock options with the first quarter financial results.
•
n May 25, 2005, the Safeway Board of Directors
O
declared Safeway’s first quarterly cash dividend
of $0.05 per common share, with an estimated
annualized payout of $90.0 million.
•
n June 1, 2005, Safeway replaced its existing
O
revolving credit facility with a $1.6 billion 5-year
facility.
•
n June 29, 2005, S&P lowered Safeway’s corporate
O
credit and senior debt ratings to BBB- with a Stable
outlook from BBB. The analyst attributed the
downgrade to increased business risk, reflected in
the difficult operating environment for traditional
supermarket operators.
•
On October 18, 2005, Safeway announced plans to:
2004
•
n January 12, 2004, Safeway announced the closure
O
of 12 underperforming stores in Chicago.
•
n May 3, 2004, Safeway announced it would
O
expense stock options in 2005.
•
n July 27, 2004, Safeway filed a shelf registration
O
covering the issuance of up to $2.3 billion of debt
securities and/or common stock.
•
n August 12, 2004, Safeway issued $750 million
O
of Senior Notes to refinance upcoming debt maturities
and to repay borrowings under its commercial paper
program. The two-tranche public offering consisted of:
•
evitalize the Texas Division, which included the
R
closure of 26 underperforming stores.
•
epatriate $500 million of earnings from its Canadian
R
subsidiary to the U.S. under the American Jobs
Creation Act of 2004.
•
FI NA NCI AL & OP ER AT I NG STATI S TI CS
•
n November 18, 2005, Canada Safeway Limited
O
issued $260 million (CAD300 million) of Senior Notes
due 2008 to repatriate funds to the United States
utilizing a lower tax rate made available under the
American Jobs Creation Act of 2004. Repatriated
funds were used to pay down debt in the U.S.
21
15
2006
•
n March 28, 2006, Safeway issued $250 million of
O
Floating Rate Notes due 2009 to repay borrowings
under its commercial paper program.
•
n August 1, 2007, Moody’s Investor Services
O
affirmed Safeway’s Baa2 rating and revised the
outlook to Stable from Negative.
•
In April 2006, Safeway announced it had settled a
federal income tax refund claim for the years 1992
through 1999 for costs associated with debt financing.
The federal refund consisted of a tax refund of
$259.2 million and interest, net of tax, earned on that
refund of $60.8 million. The state income tax refunds
received in 2006 consisted of $3.1 million of tax and
$1.8 million of interest, net of tax.
•
n August 17, 2007, Safeway issued $500 million
O
of 6.35% Senior Notes due 2017.
•
In May 2006, the Safeway Board of Directors
approved an increase to Safeway’s dividend by 15%
from $0.05 per share to $0.0575 per share.
•
n October 3, 2006, Safeway announced the
O
purchase of the remaining 43.8% of the equity
interests in the parent company of GroceryWorks.com
that it did not already own, making GroceryWorks.com
an indirect, wholly owned subsidiary.
•
n October 24, 2006, Fitch Ratings revised the rating
O
outlook for Safeway to Stable from Negative based
on continued debt reduction and strengthened cash
flows, profitability and credit measures.
•
n December 7, 2006, the Safeway Board of Directors
O
increased the authorized level of Safeway’s stock
repurchase program by $500 million to $4 billion. The
remaining board authorization for stock repurchases
was $747 million.
2008
•
E ffective January 10, 2008, Safeway terminated its
interest rate swap agreements on its $500 million debt
at a gain of approximately $7.5 million.
•
n February 21, 2008, Safeway announced it had
O
repurchased 6.7 million shares of common stock
at an average cost of $33.57 per share and a total
cost of $226 million in 2007. The remaining board
authorization for stock repurchases as of year-end
2007 was $521.1 million.
•
n April 8, 2008, S&P upgraded Safeway’s credit
O
and senior unsecured ratings to BBB with a Stable
outlook. The short-term rating was raised to A-2.
•
In May 2008, Safeway’s Board of Directors approved
a 20% increase in the quarterly dividend from $0.069
to $0.0828 per common share.
•
In May 2008, the Safeway Board of Directors
increased the authorized level of Safeway’s stock
repurchase program by $1.0 billion to $5.0 billion.
The remaining board authorization for stock
repurchases was $1.45 billion.
•
n December 8, 2008, Safeway filed a shelf
O
registration statement with the Securities and
Exchange Commission, enabling Safeway to issue an
unlimited amount of debt securities and/or common
stock. It expired on December 8, 2011. The Safeway
Board of Directors authorized the issuance of up to
$2.0 billion of securities under the shelf.
•
n December 17, 2008, Safeway issued $500 million
O
of 6.25% Senior Notes due 2014 to repay a portion
of the outstanding borrowings under Safeway’s U.S.
commercial paper program, revolving credit facility
and money market bank credit facilities.
2007
22
•
n February 7, 2007, Safeway announced plans to
O
revitalize Dominick’s, which included remodeling 20
stores, opening one new store in 2007 and closing 14
underperforming stores.
•
n February 22, 2007, Safeway announced it had
O
repurchased 12 million shares of common stock at an
average price of $26.53 per share and a total cost of
$318 million in 2006.
•
In May 2007, Safeway’s Board of Directors approved a
20% increase in the quarterly dividend from $0.0575
to $0.069 per common share.
•
n July 23, 2007, S&P affirmed Safeway’s BBB- credit
O
rating and revised the outlook to Positive from Stable.
2009
•
n February 26, 2009, Safeway announced it had
O
repurchased 12.6 million shares of common stock
•
n April 29, 2009, the Safeway Board of Directors
O
approved a 21% increase in the quarterly dividend
from $0.0828 to $0.10 per common share.
•
n August 7, 2009, Safeway issued $500 million of
O
5.0% Senior Notes due 2019 to refinance upcoming
debt maturities.
•
In December 2009, the Safeway Board of Directors
increased the authorized level of Safeway’s stock
repurchase program by $1.0 billion to a total of
$6.0 billion.
•
In December 2009, Safeway converted $800 million
of 5.80% fixed-rate debt due 2012 to floating-rate
debt through interest rate swap agreements.
•
n August 3, 2010, Safeway issued $500 million of
O
3.95% Senior Notes due 2020 to refinance upcoming
debt maturities.
•
In December 2010, the Safeway Board of Directors
increased the authorized level of Safeway’s stock
repurchase program by $1.0 billion to a total of
$7.0 billion.
•
In December 2010, the Safeway Board of Directors
increased the amount of securities authorized to be
issued under its U.S. shelf registration statement by
$0.5 million to a total of $2.5 billion. As of year-end,
$1.0 billion of securities were available for issuance
under the board’s authorization.
2011
•
n February 24, 2011, Safeway announced it had
O
repurchased 27.4 million shares of its common stock
at an average cost of $22.67 per share and a total
cost of $621 million in 2010. The remaining board
authorization for stock repurchases as of year-end
2010 was approximately $1.7 billion.
•
n March 8, 2011, Safeway announced that
O
the Safeway Board of Directors had approved a
$1.1 billion dividend from Canada to the United States,
to be paid in two installments. The first installment
was paid in the first quarter of 2011 with cash on
hand in Canada. The second installment was paid
in the second quarter of 2011. The funds were used
to pay down $600 million of U.S. debt, with the
remaining after-tax balance of the dividend intended
for stock repurchases.
•
n March 31, 2011, Canada Safeway Limited issued
O
CAD300 million of 3.00% Second Series Notes due
2014 to be used for general corporate purposes, in
conjunction with plans to repatriate funds to the
United States.
•
n May 19, 2011, the Safeway Board of Directors
O
approved a 21% increase in the quarterly dividend
from $0.12 to $0.145 per common share.
•
n June 1, 2011, Safeway replaced its existing
O
revolving credit facility with a $1.5 billion 4-year
facility.
2010
•
•
•
•
n February 25, 2010, Safeway announced it had
O
recorded a non-cash goodwill impairment charge of
$1,974.2 million ($1,818.2 million, net of tax) in the
fourth quarter of 2009. The impairment was due
primarily to Safeway’s reduced market capitalization
and a weak economy. The divisions affected were
primarily Vons and Eastern. The goodwill originated
from previous acquisitions.
n February 25, 2010, Safeway announced it had
O
repurchased 42.5 million shares of common stock
at an average cost of $20.80 per share and a total
cost of $885 million in 2009. The remaining board
authorization for stock repurchases as of year-end
2009 was approximately $1.3 billion.
n March 2, 2010, Safeway announced that during
O
2009, it received tax refunds of $413 million as
follows: (1) certain accelerated tax deductions for its
2008 income tax returns resulting in approximately
$224 million of tax refunds; and (2) the resolution
of certain other income tax matters resulting in tax
refunds of approximately $189 million.
n May 19, 2010, the Safeway Board of Directors
O
approved a 20% increase in the quarterly dividend
from $0.10 to $0.12 per common share.
FI NA NCI AL & OP ER AT I NG STATI S TI CS
at an average cost of $28.45 per share and a total
cost of $360 million in 2008. The remaining board
authorization for stock repurchases as of year-end
2008 was approximately $1.2 billion.
23
17
•
n October 24, 2011, Safeway filed a shelf registration
O
statement with the Securities and Exchange
Commission, enabling Safeway to issue an unlimited
amount of debt securities and/or common stock.
It expires on October 24, 2014. The Safeway Board
of Directors authorized the issuance of up to
$3.0 billion of securities under the shelf.
•
n November 29, 2011, the Safeway Board of
O
Directors increased the authorized level of Safeway’s
stock repurchase program by $1.0 billion to a total of
$8.0 billion.
•
n December 5, 2011, Safeway issued $400 million
O
of 3.40% Senior Notes and $400 million of 4.75%
Senior Notes which mature on December 1, 2016
and December 1, 2021, respectively.
•
In December 2011, Safeway sold a distribution center
in Burnaby, British Columbia at a gain of $47.1 million.
•
n December 19, 2011, Safeway entered into a
O
$700 million term credit agreement with a syndicate
of banks which matures on March 19, 2015. The
agreement is a delayed draw term credit facility which
allowed two draws from the closing date through,
on or prior to, April 19, 2012.
2012
24
•
n January 5, 2012, Safeway announced the sale
O
of 16 of its Genuardi’s stores, located in the eastern
United States. Additionally, Safeway announced that
it planned to close or sell the remaining Genuardi’s
stores. These transactions were completed during
2012 with cash proceeds of $107.0 million and a
pre-tax gain of $52.4 million ($31.9 million after tax).
•
n February 23, 2012, Safeway announced that in
O
2011 it had repurchased 76.1 million shares of its
common stock at an average cost of $20.85 per share
and a total cost of approximately $1.6 billion. The
remaining board authorization for stock repurchases
as of year-end 2011 was approximately $1.1 billion.
•
In March 2012, the Safeway Board of Directors
increased the authorized level of Safeway’s stock
repurchase program by $1.0 billion to a total of
$9.0 billion.
•
n April 26, 2012, Safeway announced that during the
O
first quarter of 2012, it had purchased 46.0 million
shares of its common stock at an average cost of
$21.70 per share and a total cost of $1.0 billion. The
remaining board authorization for stock repurchases
was $1.1 billion. In addition, from the end of the first
quarter of 2012 through April 25, 2012, Safeway had
purchased 10.6 million shares of its common stock at
an average cost of $20.78 per share and a total cost of
$219.5 million.
•
n May 15, 2012, the Safeway Board of Directors
O
approved a 21% increase in the quarterly dividend
from $0.145 per share to $0.175 per share.
•
n September 5, 2012, Safeway announced a
O
potential initial public offering of a minority ownership
stake in Blackhawk Network Holdings, Inc. in the first
half of 2013.
2013
•
n February 21, 2013, Safeway announced that in
O
2012 it had repurchased 57.6 million shares of its
common stock at an average cost of $21.51 per share
and a total cost of approximately $1.2 billion. The
remaining board authorization for stock repurchases
as of year-end 2012 was approximately $0.8 billion.
•
n April 19, 2013, Safeway’s subsidiary Blackhawk
O
Network Holdings, Inc. began trading on NASDAQ
under the symbol “HAWK.” The initial public offering
of 11.5 million shares of Blackhawk’s Class A common
stock at $23.00 per share included the exercise by the
underwriters for the offering of an option to purchase
1.5 million shares of Class A common stock.
The offering consisted solely of shares offered by
existing stockholders, including Safeway. Safeway’s
estimated proceeds were approximately $155 million,
net of taxes, the underwriting discount and
professional service fees, reducing the Company’s
ownership from approximately 95% to approximately
73% of Blackhawk’s total outstanding shares of
common stock.
DIRECTORS & EXECUTIVE OFFICERS
BOARD OF DIRECTORS
EXECUTIVE OFFICERS
Steven A. Burd (1)
Chairman and Chief Executive Officer
Safeway Inc.
Steven A. Burd (1)
Chairman and Chief Executive Officer
Janet E. Grove
Former Chair and Chief Executive Officer
Macy’s Merchandising Group
Former Vice Chair
Macy’s, Inc.
Mohan Gyani
Vice Chairman
Roamware, Inc.
Former President and
Chief Executive Officer
AT&T Wireless Mobility Services, Inc.
Robert L. Edwards (2)
President
Peter J. Bocian (3)
Executive Vice President and
Chief Financial Officer
Diane M. Dietz
Executive Vice President and
Chief Marketing Officer
Kelly P. Griffith
Executive Vice President
Retail Operations
Larree M. Renda
Executive Vice President
David F. Bond
Senior Vice President
Finance and Control
(Chief Accounting Officer)
Frank C. Herringer
Chairman and Former
Chief Executive Officer
Transamerica Corporation
Robert A. Gordon
Senior Vice President
Secretary and General Counsel
Chief Governance Officer
George J. Morrow (4)
Consultant and Former
Executive Vice President
Amgen, Inc.
Russell M. Jackson
Senior Vice President
Human Resources
Kenneth W. Oder
Managing Member
Sugar Hollow LLC
Former Executive Vice President
Safeway Inc.
Arun Sarin
Former Chief Executive Officer
Vodafone Group PLc.
William Y. Tauscher
Chief Executive Officer
Blackhawk Network Holdings, Inc.
Managing Member
The Tauscher Group
Melissa C. Plaisance
Senior Vice President
Finance and Investor Relations
David R. Stern
Senior Vice President
Planning and Business Development
Jerry Tidwell
Senior Vice President
Supply Operations
Donald P. Wright
Senior Vice President
Real Estate and Engineering
Chief Executive Officer
Property Development Centers LLC
(1)Mr. Burd will retire as Chief Executive Officer and as a director at the May 14, 2013 Annual Meeting of Stockholders.
(2)Effective May 15, 2013, Mr. Rogers will become Non-Executive Chairman of the Board. Mr. Edwards will become
President, CEO and a director.
(3)Mr. Bocian joined the company as Executive Vice President and Chief Financial Officer effective February 19, 2013.
(4)Mr. Morrow is standing for election at the May 14, 2013 Annual Meeting of Stockholders.
DI R ECT OR S & EXE CUT I VE O FFI CE RS
T. Gary Rogers (2)
Lead Independent Director
Former Chairman and CEO
Dreyer’s Grand Ice Cream, Inc.
Former Chairman
Levi Strauss & Co.
Former Chairman
Federal Reserve Bank of San Francisco
25
25
ANNUAL FINANCIAL DATA
(Dollars in millions, except per-share amounts)
52 Weeks
2012
Adjusted
52 Weeks
2011
Adjusted
52 Weeks
2010
52 Weeks
2009
Adjusted
53 Weeks
2008
$44,206.5
$43,630.2
$41,050.0
$40,850.7
$44,104.0
$4,974.2
$4,596.6
$3,187.9
$2,688.7
$3,885.2
$39,232.3
$39,033.6
$37,862.1
$38,162.0
$40,218.8
1.2%
4.4%
(0.7%)
(5.0%)
1.4%
0.5%
1.0%
(2.0%)
(2.5%)
0.8%
Cost of goods sold
$32,486.5
$31,836.5
$29,442.5
$29,157.2
$31,589.2
Gross profit
$11,720.0
$11,793.7
$11,607.5
$11,693.5
$12,514.8
26.51%
27.03%
28.28%
28.62%
28.38%
Gross profit margin change (bps)
(52)
(125)
(34)
24
(36)
Gross profit margin change, ex-fuel (bps)
(22)
(45)
(7)
(35)
(26)
Sales and other revenue
Fuel sales
Sales and other revenue, excluding fuel
Identical-store sales (1)
Identical-store sales (ex-fuel)
(1)
Gross profit margin
$0.7
$35.1
($28.0)
($35.2)
$34.9
$10,615.9
$10,659.1
$10,448.1
$10,348.0
$10,662.1
24.01%
24.43%
25.45%
25.33%
24.17%
$1,104.1
$1,134.6
$1,159.4
$1,345.5
$1,852.7
2.5%
2.6%
2.8%
3.3%
4.2%
$304.0
$272.2
$298.5
$331.7
$358.7
$28.3
$19.7
$20.3
$7.1
$10.6
$828.4
$882.1
$881.2
$1,020.9
$1,504.6
Income (loss) from continuing operations,
as reported
$566.2
$518.2
$590.6
($1,097.5)
$965.3
Income from continuing operations,
as adjusted
LIFO expense (income)
Operating & administrative expense (2)
O&A expense margin (2)
Operating profit
(2)
Operating profit margin
(2)
Interest expense
Other income, net
Income before income taxes
(2)
$537.4
$617.1
$590.6
$720.7
$965.3
Diluted earnings (loss) per common share
from continuing operations, as reported
$2.27
$1.49
$1.55
($2.66)
$2.21
Diluted earnings per common share from
continuing operations, as adjusted (2, 3, 4)
$2.15
$1.78
$1.55
$1.74
$2.21
Weighted average shares outstanding diluted (2)
245.9
343.8
379.6
414.1
436.3
$0.670
$0.555
$0.46
$0.3828
$0.3174
$1,134.3
$1,148.8
$1,162.4
$1,171.2
$1,141.1
$927.6
$1,094.7
$837.5
$851.6
$1,595.7
Cash dividends declared per common share
Depreciation expense
Cash capital expenditures
Free cash flow
(5)
Total assets
Total debt
Total equity
(6)
Debt/total capital
$971.3
$751.4
$1,057.8
$1,490.3
$681.0
$14,657.0
$15,073.6
$15,148.1
$14,963.6
$17,484.7
$5,573.7
$5,410.2
$4,836.3
$4,901.7
$5,499.8
$2,933.4
$3,715.3
$5,023.9
$4,972.6
$6,812.4
65.5%
59.3%
49.0%
49.6%
44.7%
Note: Financial information contained in this section is not comprehensive and should be read in conjunction with Safeway’s reports and filings with the SEC.
(1)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. 2008 is based on a comparable
53-week period in 2007.
(2)2009 has been adjusted to exclude a non-cash goodwill impairment charge of $1,974.2 million ($1,818.2 million, net of tax). In addition, “weighted average shares
outstanding – diluted” includes common stock equivalents of 1.2 million for the calculation of diluted earnings per share, as adjusted. Reported diluted loss per share
excluded common stock equivalents since they are anti-dilutive. See Reconciliations at the end of this Fact Book.
(3)2011 has been adjusted to exclude a tax expense of $98.9 million from the $1.1 billion Canadian dividend paid in the first half of 2011. See Reconciliations at the end
of this Fact Book.
(4)2012 has been adjusted to exclude a gain of $46.5 million ($28.8 million, net of tax) from legal settlements.
26
(5)Defined as cash flow from operating activities as adjusted for the increase or decrease in payables related to third-party gift cards, net of receivables, less cash flow
used by investing activities. A reconciliation of cash flow calculated under generally accepted accounting principles (“GAAP”) to free cash flow is located under
Reconciliations at the end of this Fact Book.
(6)Total equity in 2008 through 2011 has been increased $26.2 million due to a correction in the accounting for real estate taxes.
QUARTERLY FINANCIAL DATA
(Dollars in millions)
Q1
Q2
Q3
Q4
2012
$10,003.0
$10,386.9
$10,049.1
$13,767.4
2011
$9,772.0
$10,196.4
$10,064.3
$13,597.6
2010
$9,327.1
$9,519.5
$9,399.6
$12,803.7
2012
$1,096.5
$1,282.9
$1,147.5
$1,447.3
2011
$936.5
$1,167.4
$1,099.6
$1,393.2
2010
$649.5
$728.4
$760.8
$1,049.2
2012
$8,906.5
$9,104.0
$8,901.6
$12,320.1
2011
$8,835.5
$9,029.0
$8,964.7
$12,204.4
2010
$8,677.6
$8,791.1
$8,638.8
$11,754.5
2012
1.6%
1.8%
0.5%
1.0%
2011
3.5%
5.1%
4.9%
4.0%
2010
(1.4%)
(1.2%)
(1.4%)
0.8%
2012
0.0%
0.8%
0.1%
0.8%
2011
0.4%
0.5%
1.5%
1.5%
2010
(3.1%)
(2.5%)
(2.0%)
(0.8%)
2012
$7,317.8
$7,657.9
$7,392.2
$10,118.6
2011
$7,080.9
$7,443.4
$7,347.1
$9,965.2
2010
$6,677.5
$6,801.8
$6,755.0
$9,208.2
2012
$2,685.2
$2,729.0
$2,656.9
$3,648.8
2011
$2,691.1
$2,753.0
$2,717.2
$3,632.4
2010
$2,649.6
$2,717.7
$2,644.6
$3,595.5
2012
26.84%
26.27%
26.44%
26.50%
2011
27.54%
27.00%
27.00%
26.71%
2010
28.41%
28.55%
28.14%
28.08%
2012
$0.5
$0.1
$1.0
($0.9)
2011
$4.0
$9.0
$8.4
$13.7
2010
$0.0
$0.0
$0.0
($28.0)
2012
$2,495.4
$2,481.8
$2,438.6
$3,200.0
2011
$2,471.9
$2,476.0
$2,468.9
$3,242.3
2010
$2,435.1
$2,432.5
$2,402.2
$3,178.4
2012
24.95%
23.89%
24.27%
23.24%
2011
25.30%
24.28%
24.53%
23.84%
2010
26.11%
25.55%
25.56%
24.82%
Sales & other revenue
Fuel sales
Sales & other revenue, excluding fuel
Identical-store sales
Identical-store sales (ex-fuel)
Cost of goods sold
Gross profit
LIFO expense (income)
O&A expense
O&A expense margin
See Footnotes on p. 29.
FI NA NCI AL & OP ER AT I NG STATI S TI CS
Gross profit margin
27
25
QUARTERLY FINANCIAL DATA
(Dollars in millions, except per-share amounts)
Q1
Q2
Q3
Q4
2012
$189.8
$247.2
$218.3
$448.8
2011
$219.2
$277.0
$248.3
$390.1
2010
$214.5
$285.2
$242.4
$417.1
2012
1.90%
2.38%
2.17%
3.26%
2011
2.24%
2.72%
2.47%
2.87%
2010
2.30%
3.00%
2.58%
3.26%
2012
$71.4
$73.5
$71.3
$87.7
2011
$65.7
$61.5
$60.7
$84.3
2010
$69.7
$69.2
$69.4
$90.2
2012
$5.3
$3.9
$10.6
$8.5
2011
$3.7
$3.4
$8.7
$3.9
2010
$3.3
$2.4
$4.8
$9.9
Operating profit
Operating profit margin
Interest expense
Other income, net
Income before income taxes
2012
$123.7
$177.6
$157.6
$369.6
2011
$157.2
$218.9
$196.3
$309.7
2010
$148.1
$218.4
$177.8
$336.8
Income from continuing operations, as reported
2012
$81.6
$121.7
$108.0
$255.0
2011
$25.1
$146.0
$130.3
$216.8
2010
$95.8
$141.3
$122.7
$230.7
Diluted earnings per common share from continuing operations, as reported
2012
$0.30
$0.50
$0.45
$1.06
2011
$0.07
$0.41
$0.38
$0.67
2010
$0.25
$0.37
$0.33
$0.62
Diluted earnings per common share from continuing operations, as adjusted
2012 (1)
$0.30
$0.50
$0.45
$0.94
2011 (2)
$0.29
$0.41
$0.38
$0.67
2010
$0.25
$0.37
$0.33
$0.62
Weighted average shares outstanding – diluted
2012
271.9
239.8
237.1
237.3
2011
366.8
352.3
343.0
321.6
2010
390.0
385.7
376.8
370.0
$0.1450
$0.1750
$0.1750
$0.1750
Cash dividends declared per common share
2012
2011
$0.1200
$0.1450
$0.1450
$0.1450
2010
$0.1000
$0.1200
$0.1200
$0.1200
See Footnotes on p. 29.
28
QUARTERLY FINANCIAL DATA
(Dollars in millions, except per-share amounts)
Q1
Q2
Q3
Q4
Depreciation expense
2012
$265.8
$262.9
$260.2
$345.4
2011
$265.1
$263.9
$265.3
$354.5
2010
$269.0
$269.6
$267.5
$356.3
Cash capital expenditures
2012
$308.4
$219.2
$159.6
$240.4
2011
$185.1
$209.0
$288.4
$412.2
2010
$192.6
$192.1
$170.7
$282.1
2012
$2,386.0
$2,351.4
$2,386.0
$2,410.2
2011
$2,424.0
$2,419.4
$2,425.7
$2,424.5
2010
$2,562.7
$2,491.8
$2,451.6
$2,425.2
Adjusted EBITDA
(rolling four fiscal quarters) (3)
Interest coverage
(rolling four fiscal quarters) (3)
2012
8.6x
8.1x
7.9x
7.9x
2011
8.2x
8.4x
8.7x
8.9x
7.9x
7.9x
8.0x
8.1x
($224.2)
$200.1
$505.4
$490.0
2010
Free cash flow
(3, 4)
2012
$111.6
$4.5
$167.5
$467.8
($58.4)
$330.0
$383.3
$402.9
2012
$6,678.3
$6,901.7
$6,433.5
$5,573.7
2011
$4,860.6
$4,963.2
$5,048.3
$5,410.2
2010
$5,409.6
$5,349.7
$5,291.8
$4,836.3
$2,787.1
$2,618.6
$2,813.0
$2,933.4
2011
(5)
2010
Total debt
Total equity (6)
2012
2011
$4,907.3
$4,704.9
$4,596.6
$3,715.3
2010
$5,043.2
$4,996.4
$4,902.7
$5,023.9
2012
70.6%
72.5%
69.6%
65.5%
2011
49.8%
51.3%
52.3%
59.3%
2010
51.8%
51.7%
51.9%
49.0%
FI NA NCI AL & OP ER AT I NG STATI S TI CS
Debt/total capital
Stock price range
2012
$20.20 - $23.16
$17.53 - $22.21
$14.73 - $18.31
$15.00 - $19.36
2011
$20.44 - $22.94
$21.90 - $25.43
$16.51 - $24.28
$15.93 - $21.37
2010
$20.91 - $25.41
$20.53 - $27.04
$18.73 - $21.91
$19.89 - $24.00
(1)Q4, 2012 has been adjusted to exclude a gain of $46.5 million from legal settlements.
(2)Q1, 2011 has been adjusted to exclude a tax expense of $80.2 million from the Canadian dividend.
(3)Reconciliations of net income and net cash flow from operating activities to adjusted EBITDA and GAAP cash flow to free cash flow are located under
“Reconciliations” later in this Fact Book.
(4)Defined as cash flow from operating activities as adjusted for the increase or decrease in payables related to third-party gift cards, net of receivables, less cash flow
used by investing activities.
(5)In Q2 2011, free cash flow was reduced by $153.9 million of contributions to pension and post-retirement plans and approximately $99 million of taxes paid on
Canadian dividends.
29
(6)Total equity in 2008 through 2011 has been increased $26.2 million due to a correction in accounting for real estate taxes.
29
CORPORATE HISTORY
SIGNIFICANT CORPORATE EVENTS
1926
1963
Merrill Lynch forms a holding company and acquires
the assets of Safeway Stores, Inc. The new company is
incorporated in Maryland.
Safeway enters the Australian market by purchasing
three Pratt Supermarkets in the Melbourne area.
At year end, Safeway is operating 766 stores and is one
of the first companies to offer cash-and-carry service.
Safeway establishes operations in another international
market with the acquisition of several Big Bear Basar
stores in West Germany.
1928
M.B. Skaggs becomes President of Safeway Stores, Inc.
1964
1966
Central data processing is located in Oakland, CA.
Safeway makes numerous acquisitions in Washington,
D.C., Virginia and Maryland; others in Arkansas, Iowa,
Kansas, Missouri and Texas.
Total store count at year end is 2,020, of which 855
contain meat markets.
Safeway stock is listed on the NYSE.
Quentin Reynolds, who steers Safeway through an era
of turbulent social upheaval, follows Robert Magowan
as President.
1971
Safeway divests itself of Super S drug stores after
several unprofitable years.
Safeway Stores, Inc. merges with 1,400-store MacMarr
chain.
Robert Magowan steps down as Chairman and Chief
Executive Officer; Reynolds assumes both posts. William
S. Mitchell, under whose administration Safeway passes
A&P to become the world’s largest food retailer, follows
Reynolds as President. Magowan stays on as Chairman
of the Executive Committee.
Company reaches all-time high of 3,257 stores.
1977
1929
Canada Safeway Limited is established in Winnipeg.
1931
1934
Skaggs relinquishes presidency to Lingan A. Warren.
Dale L. Lynch succeeds Mitchell as President of
Safeway and spearheads Safeway’s move into one-stop
shopping superstores that feature a variety of specialty
departments.
1955
Warren retires as President and Director. Robert A.
Magowan, who gives operational autonomy to Safeway
divisions, leaves Merrill Lynch to become Chairman.
Milton A. Selby is President, a post he would later
relinquish to Magowan.
Safeway consolidates its manufacturing divisions in a
modern Walnut Creek, CA, complex.
1980
1962
Peter A. Magowan, who revises Safeway’s strategy and
redirects its merchandising thrust, succeeds Mitchell as
Chairman and Chief Executive Officer.
Company begins operating 11 stores of John Gardner
Ltd. to establish roots in the United Kingdom.
1981
Safeway enters into a joint venture agreement with
Casa Ley, S.A. de C.V., giving Safeway a 49% interest in
the 13-store chain in Western Mexico.
30
30
1982
Omaha division is sold.
1983
Company announces five-year, $3.2 billion capital
expenditure program.
James A. Rowland succeeds Lynch as President.
New company name adopted: Safeway Inc.
San Diego and Los Angeles divisions merge to form
Southern California Division; Tulsa and Oklahoma City
divisions are combined to form Oklahoma Division.
Paul Hazen, President and Chief Operating Officer
of Wells Fargo & Co., and a member of its board, is
elected to the Safeway Board of Directors.
1985
1991
Australia Division is sold to Woolworth’s Ltd. Safeway
receives a 20% interest in Woolworth’s Ltd.
Safeway sells an additional 70.0 million shares of
common stock at $5.125 per share.
1986
Safeway retires $565 million of 14.5% LBO-related debt
with a combination of cash and bank debt.
Company is taken private via a leveraged buyout
by Kohlberg Kravis Roberts & Co. (“KKR”) and
reincorporates in Delaware.
Robert MacDonnell, Henry Kravis and George Roberts,
General Partners of KKR, are elected to the Safeway
Board of Directors.
Safeway sells its 20% interest in Australian retailer
Woolworth’s Ltd.
1987
Company divests United Kingdom, Dallas, Salt Lake City,
Liquor Barn, El Paso and Oklahoma divisions.
James Greene, Jr. and Michael Tokarz, General Partners
of KKR, are elected to Safeway’s Board of Directors.
1988
Rowland retires. Peter Magowan assumes additional
title of President.
Company divests Kansas City, Little Rock, Houston
and parts of Richmond divisions.
1992
Safeway completes refinancing of $1.0 billion of public
subordinated debt.
Steven A. Burd, a long-time consultant to Safeway,
is appointed President. Peter Magowan remains as
Chairman and Chief Executive Officer.
1993
Peter Magowan steps down as Chief Executive Officer
but continues to serve as Chairman of the Board.
Burd is elected Chief Executive Officer and becomes a
member of the Safeway Board of Directors.
Safeway sells 15 stores in the Richmond, VA area to
Farm Fresh, Inc.
1994
Safeway retires $292 million of senior and senior
subordinated debt in open-market purchases with
proceeds from bank borrowings.
Safeway refinances its Bank Credit Agreement on an
unsecured basis and regains investment grade status on
its senior unsecured debt from Standard & Poor’s.
1990
1996
Safeway returns to public status, selling 46.0 million
shares in a public offering.
A two-for-one stock split is effected on January 30.
Safeway moves its corporate offices to Pleasanton, CA
from Oakland, CA.
CO R PO RATE HI ST O RY
1995
Safeway sells Southern California Division to The Vons
Companies, Inc. Safeway receives a 30% interest in
Vons, in addition to cash proceeds.
31
Safeway and Randall’s Food Markets, Inc. jointly
announce a definitive merger agreement.
Safeway Inc. and Vons jointly announce a definitive
agreement for a business combination of the two
companies.
Safeway completes the acquisition of Randall’s.
In connection with the Vons merger, Safeway agrees
to repurchase 64 million shares of common stock from
partnerships controlled by KKR.
1997
On April 8, Safeway completes the acquisition of Vons.
The combined company is the second largest grocery
store chain in North America, with 1,377 stores and
sales in excess of $22 billion.
1998
A two-for-one stock split is effected on February 25.
2000
Pantone® 186
CMYK 0-91-76-6
RGB 228-23-32
Hex E41720
White
CMYK 0-0-0-0
RGB 255-255-255
Hex FFFFFF
Safeway announces it has joined ten of the world’s
leading retailers as a founding member of the
Worldwide Retail Exchange, a web-based business-tobusiness exchange for retailers operating in the food,
general merchandise and drug retailing sectors.
Hector Ley Lopez, General Director of Casa Ley, S.A.
de C.V., is elected to Safeway’s Board of Directors,
replacing Henry Kravis of KKR.
Peter Magowan, Chairman of the Board, retires
but remains a director. Steven A. Burd is appointed
Chairman of the Board.
Safeway and GroceryWorks.com sign a definitive
agreement creating a strategic alliance between the
two companies for GroceryWorks.com to be Safeway’s
online grocery channel.
William Tauscher, Chairman and Chief Executive Officer
of Vanstar Corporation, is elected to the Safeway Board
of Directors.
Safeway and Genuardi’s Family Markets, Inc. announce
a definitive agreement in which Safeway will purchase
the assets of Genuardi’s.
Safeway Inc. and Carr-Gottstein Foods Co. jointly
announce a definitive merger agreement.
Safeway Inc. and Dominick’s Supermarkets, Inc. jointly
announce a definitive merger agreement, and on
November 20, Safeway completes the acquisition of
Dominick’s Supermarkets, Inc..
Safeway is added to the S&P 500 on November 12.
Pantone® 186
CMYK 0-91-76-6
RGB 228-23-32
Hex E41720
Pantone® 340
CMYK 100-0-74-0
RGB 0-153-102
Hex 009966
White
CMYK 0-0-0-0
RGB 255-255-255
Hex FFFFFF
1999
32
Pantone® Reflex Blue
CMYK 100-82-0-2
RGB 0-51-153
Hex 003399
2001
On February 5, Safeway completes the purchase of the
assets of Genuardi’s Family Markets, Inc.
Safeway purchases 11 ABCO stores in Arizona from the
Fleming Companies, Inc.
Pantone® 340
CMYK 100-0-74-0
RGB 0-153-102
Hex 009966
Pantone® 186
CMYK 0-91-76-6
RGB 228-23-32
Hex E41720
White
CMYK 0-0-0-0
RGB 255-255-255
Hex FFFFFF
GroceryWorks.com, Safeway’s exclusive online
grocery channel, establishes a strategic relationship
with Tesco PLC.
On April 16, Safeway completes the acquisition of CarrGottstein Foods Co.
Blackhawk Network, Inc., Safeway’s prepaid and gift
card business, is established.
Rebecca Stirn, Vice President, Sales and Marketing of
Collagen Aesthetics, Inc., is elected to Safeway’s Board
of Directors.
In the months following September 11, Safeway
mobilizes the retail operating divisions across the
U.S. and Canada in a fundraising campaign to
benefit the American Red Cross Disaster Relief Fund.
Approximately $4 million is raised, largely through
customer and employee contributions.
2002
GroceryWorks.com (doing business as Safeway.com)
formally launches Internet grocery service in Portland,
OR and Vancouver, WA. GroceryWorks.com becomes
available in Northern California, Southern California
and Las Vegas, NV.
Safeway purchases five stores in Houston from
Albertsons and three stores in Dallas from Winn-Dixie.
Safeway plans to sell Dominick’s and exit the
Chicago market.
Safeway completes centralization of the marketing
and procurement functions.
2003
During the second half of 2004, Safeway closes 18
underperforming stores in the Vons Division.
In October, Safeway announces the appointments
of Mohan Gyani, former President and Chief Executive
Officer of AT&T Wireless Mobility Group, and Janet
Grove, Chair and Chief Executive Officer of Federated
Merchandising Group and Corporate Vice Chair of
Federated Department Stores, Inc., to the Board of
Directors. They replace retiring board members George
Roberts and James Greene, Jr. In December, Safeway
announces the appointment of Raymond G. Viault,
retired Vice Chairman of General Mills, to the Board
of Directors to replace retiring board member Hector
Ley Lopez.
Seven locals of the United Food and Commercial
Workers Union strike 289 Vons stores in Southern
California on October 11.
2005
Safeway takes Dominick’s off the market because
the union and the winning bidder could not reach
agreement on an acceptable labor contract.
Safeway announces the appointment of Douglas
Mackenzie, a partner at venture capital firm Kleiner
Perkins Caufield & Byers, to Safeway’s Board of
Directors.
Peter Magowan retires from the Safeway Board of
Directors.
2004
Safeway announces it will declassify the Board of
Directors beginning in 2005.
Safeway launches the “Ingredients for life.®” branding
campaign at the NYSE to reposition the Safeway brand.
Safeway announces closure of 12 underperforming
Dominick’s stores.
Safeway announces a plan to revitalize the
Texas Division, including the closure of 26
underperforming stores.
Southern California strike ends on February 28.
Safeway amends bylaws to establish a majority vote
standard for the election of directors.
Brian C. Cornell joins Safeway as Executive Vice
President and Chief Marketing Officer.
Safeway receives the Catalyst Award for the
outstanding diversity initiative that results in the
development and advancement of women and
women of color.
Safeway announces corporate governance
enhancements. Major changes include a commitment
to replace three board members before year end
and the election of Paul Hazen as Lead Independent
Director.
CO R PO RATE HI ST O RY
2006
Robert L. Edwards joins Safeway as Executive Vice
President and Chief Financial Officer.
On October 3, 2006, Safeway announces the purchase
of the remaining 43.8% of the equity interests in the
parent company of GroceryWorks.com it did not already
own, making GroceryWorks.com an indirect, wholly
owned subsidiary.
33
33
On October 5, 2006, Blackhawk announces its
acquisition of EWI Holdings, a provider of prepaid
payment processing technology.
Safeway establishes guidelines for stock ownership
by executive officers to further link the interests of
executives and stockholders.
Safeway adopts a policy on severance agreements
specifying that Safeway will not enter into any
severance agreement with an executive officer that
provides severance benefits in excess of 2.99 times
that executive’s most recent salary plus bonus, without
stockholder approval.
Safeway joins the Chicago Climate Exchange, making
a voluntary but legally binding commitment to reduce
greenhouse gas emissions by 6% over four years.
Safeway also becomes a voluntary member of the
California Climate Action Registry, the state’s official
registry for Greenhouse Gas emissions reduction
projects, and takes action to reduce Safeway’s carbon
footprint and reduce air pollution.
Blackhawk establishes a United Kingdom office and
enters the market with the gift card business.
2007
Safeway announces a plan to revitalize the Dominick’s
Division, including remodeling 20 stores, opening one
new store and closing 14 underperforming stores
in 2007.
Safeway wins California’s Flex Your Power Award for
energy conservation.
Safeway receives the California Governor’s
Environmental and Economic Leadership Award for
Safeway’s strong initiatives in promoting green business
practices and implementing significant environmental
initiatives.
Safeway celebrates the opening of the 1,000th
Lifestyle store.
34
Blackhawk expands the gift card program to Australia.
Safeway unveils the first solar-powered grocery store
in Dublin, CA and announces plans to convert 39
additional stores as part of a broader renewable energy
initiative.
2008
Safeway announces the formation of the Better
Living Brands™ Alliance to market O Organics™ and
Eating Right® products across all retail channels in the
U.S. and select channels internationally.
Safeway announces the appointments of Frank C.
Herringer, Chairman and former Chief Executive Officer
of Transamerica Corporation, and Kenneth W. Oder,
Managing Member, Sugar Hollow LLC and Former
Executive Vice President of Safeway, to Safeway’s Board
of Directors.
Diane M. Dietz joins Safeway as Executive Vice President
and Chief Marketing Officer.
Steven Burd receives the U.S. Department of Labor’s
2008 SPIRIT Award for his leadership in furthering
employment and workplace opportunities for people
with disabilities.
Safeway is named one of “America’s Healthiest Grocery
Stores” by Health magazine.
2009
Safeway is among the “World’s Most Ethical
Companies” as awarded by the Ethisphere Institute.
In November, Safeway opens a store in Santa Cruz, CA
that is a model for the green retail grocery. It is built
from the ground up with sustainability in mind, and in
accordance with the gold certification standards set by
Leadership in Energy and Environmental Design (LEED).
Safeway announces the appointment of Arun Sarin,
former Chief Executive Officer of Vodaphone Group
PLC, and Michael S. Shannon, founder of KSL Recreation
Group, KSL Resorts and KSL Capital Partners LLC, to
Safeway’s Board of Directors.
Douglas J. Mackenzie does not stand for re-election
to the Safeway Board of Directors in May 2009, but
remains on Blackhawk’s board.
In September, Safeway is added to the Dow Jones
Sustainability Index North America.
Safeway receives the Champion of Diversity Award
from Supermarket News for the second year in a row.
2010
In January, Safeway announces that it will work
with FishWise, a non-profit organization focused on
improving the sustainability and financial performance of
seafood retailers, distributors and producers, to develop
and implement a more comprehensive sustainable
seafood policy.
In March, Safeway announces that it is the first U.S.based retail grocery chain and manufacturer of private
label merchandise to join The Sustainability Consortium
in support of a more sustainable global supply chain.
Robert I. MacDonnell, Rebecca A. Stirn and Raymond G.
Viault do not stand for re-election to the Safeway Board
of Directors in May 2010.
Safeway raises or donates more than $2.6 million for the
victims of the Haiti earthquake.
Greenpeace ranks Safeway number one among the top 20
grocery retailers on the sustainability of seafood practices.
Safeway is a recipient of the Waste Reduction Award
Program for the 13th consecutive year.
2012
In April, Robert L. Edwards is named President. Steven A.
Burd remains Chairman and Chief Executive Officer. Larree
M. Renda, Executive Vice President, assumes additional
responsibilities for real estate and information technology.
Paul Hazen does not stand for re-election to the
Safeway Board of Directors in May 2012 but remains
on Blackhawk’s board.
On August 1, Michael Shannon resigns from the
Safeway board.
In September, Safeway is named to the Dow Jones
Sustainability Index North America for the fourth year
in a row.
Safeway is ranked number one and is one of the first
to earn a “green” or “good” rating among top grocery
retailers on the sustainability of seafood practices by
Greenpeace.
2013
Safeway introduces the just for U™ personalized pricing
and digital coupon campaign in select markets.
Safeway announces that Steven A. Burd, its long-time
Chairman and CEO, will retire as CEO and as a director
at the May 14, 2013 Annual Meeting.
In February, Peter J. Bocian joins Safeway as Executive Vice
President and Chief Financial Officer.
Safeway announces the appointment of T. Gary Rogers,
former Chairman of the Board and Chief Executive
Officer of Dreyer’s Grand Ice Cream, Inc., to the Safeway
Board of Directors.
Safeway announces the SimpleNutrition program, an
in-store shelf tag system that makes it easier for shoppers
to make better nutrition choices on food and beverages.
Safeway receives the 2011 Freeman Philanthropic
Services Award for Outstanding Corporation by the
Association of Fundraising Professionals.
In March, Bruce L. Everett, EVP Retail Operations,
announces his retirement. Kelly P. Griffith is named
his successor.
Safeway is among the “World’s Most Ethical Companies”
as awarded by the Ethisphere Institute for the third time.
CO R PO RATE HI ST O RY
2011
Robert L. Edwards succeeds Steven A. Burd as Chief
Executive Officer and becomes a director effective
May 15, 2013.
T. Gary Rogers becomes Non-Executive Chairman of
the Board effective May 15, 2013.
35
35
RECONCILIATIONS
Reconciliation of GAAP Cash Flow Measure to Free Cash Flow (in millions)*
Annual
Net cash flow from operating activities
Net cash flow used by investing activities
(Increase) decrease in payables related to third-party gift cards, net of receivables
Investments and business acquisitions
Free cash flow
Fiscal Year
2012
2011
2010
2009
2008
$1,569.7
$2,023.6
$1,849.7
$2,549.7
$2,250.9
(572.0)
(1,014.5)
(798.8)
(889.0)
(1,546.0)
(26.4)
(293.6)
6.9
(170.4)
(23.9)
-
35.9
-
-
-
$971.3
$751.4
$1,057.8
$1,490.3
$681.0
Reconciliation of Net Income Attributable to Safeway Inc. to Adjusted EBITDA
(Interest Coverage) (dollars in millions)
Annual
Fiscal Year
2012
2011
2010
$596.5
$516.7
$589.8
27.7
-
-
Income taxes
262.2
363.9
290.6
Interest expense
304.0
272.2
298.5
1,134.3
1,148.8
1,162.4
Net income attributable to Safeway Inc.
Add (subtract):
Property impairment charges and tax expense from discontinued operations
Depreciation expense
LIFO expense (income)
0.7
35.1
(28.0)
Share-based employee compensation expense
55.1
50.0
55.5
Property impairment charges
46.5
44.7
71.7
(17.5)
(13.0)
(15.3)
0.7
6.1
-
$2,410.2
$2,424.5
$2,425.2
7.9x
8.9x
8.1x
Equity in earnings of unconsolidated affiliate
Dividend received from unconsolidated affiliate
Total Adjusted EBITDA
Adjusted EBITDA as a multiple of interest expense
Reconciliation of Net Cash Flow from Operating Activities to Adjusted EBITDA
(Interest Coverage) (dollars in millions)
Annual
Fiscal Year
2012
2011
2010
$1,569.7
$2,023.6
$1,849.7
Income taxes
262.2
363.9
290.6
Interest expense
304.0
272.2
298.5
Net cash flow from operating activities
Add (subtract):
Deferred income taxes
36.0
63.7
31.3
(150.8)
(114.3)
(125.2)
Contributions to pension and post-retirement benefit plans
159.5
176.2
17.7
Increase in accrued claims and other liabilities
(44.8)
(23.2)
(36.2)
79.1
65.6
27.5
148.0
(385.8)
67.9
59.6
-
-
Net pension and post-retirement benefits expense
Gain on property dispositions and lease exit activities
Changes in working capital items
Lease exit costs and gain on property dispositions from discontinued operations
Other
Total Adjusted EBITDA
Adjusted EBITDA as a multiple of interest expense
(12.3)
(17.4)
3.4
$2,410.2
$2,424.5
$2,425.2
7.9x
8.9x
8.1x
*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 Safeway’s commission, to card partners. Because this cash flow is temporary, it is not available for other uses and therefore is excluded from the
company’s calculation of free cash flow.
36
Reconciliation of GAAP Cash Flow Measure to Free Cash Flow (in millions)*
2012
Net cash flow (used) provided by operating activities, as reported
Net cash flow (used) provided by investing activities
Decrease (increase) in payables related to third-party gift cards, net of receivables
Free cash flow
Q1
Q2
Q3
Q4
$(541.8)
$451.0
$449.3
$1,211.2
(273.0)
(191.9)
29.0
(136.1)
590.6
(59.0)
27.1
(585.1)
$(224.2)
$200.1
$505.4
$490.0
Q1
Q2
Q3
Q4
Net cash flow (used) provided by operating activities
$(60.0)
$247.6
$523.3
$1,312.7
Net cash flow used by investing activities
(188.4)
(216.9)
(339.1)
(270.1)
360.0
(26.2)
(16.7)
(610.7)
-
-
-
35.9
$111.6
$4.5
$167.5
$467.8
Q1
Q2
Q3
Q4
$(242.0)
$551.1
$537.5
$1,003.1
(192.7)
(200.9)
(157.0)
(248.2)
376.3
(20.2)
2.8
(352.0)
$(58.4)
$330.0
$383.3
$402.9
2011
Decrease (increase) in payables related to third-party gift cards, net of receivables
Investments and business acquisitions
Free cash flow
2010
Net cash flow (used) provided by operating activities
Net cash flow used by investing activities
Decrease (increase) in payables related to third-party gift cards, net of receivables
Free cash flow
*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 Safeway’s commission, to card partners. Because this cash flow is temporary, it is not available for other uses and therefore is excluded from the
company’s calculation of free cash flow.
Reconciliation of Income and Diluted Earnings Per Share from Continuing Operations, as Reported, to Income and
Diluted Earnings Per Share from Continuing Operations, as Adjusted (in millions, except per share amounts)
Fiscal Year 2012
Fiscal Year 2011
Diluted EPS
Diluted EPS
Income from continuing operations, as reported
$566.2
$2.27
Gain from legal settlements, net of $17.7 of tax
(28.8)
(0.12)
-
-
-
-
98.9
0.29
$537.4
$2.15
$617.1
$1.78
Tax on repatriated earnings from Canada
Income from continuing operations, as adjusted
$518.2
$1.49
Reconciliations which Adjust Fiscal Year 2009 Financial Results for Goodwill Impairment Charge
(in millions, except percents and per share amounts)
Fiscal Year 2009
% of sales
Operating loss, as reported
Add goodwill impairment charge
$40,850.7
$(628.7)
(1.5%)
1,974.2
4.8%
Operating income, as adjusted
$1,345.5
3.3%
Pre-tax loss, as reported
$(953.3)
Add goodwill impairment charge
Pre-tax income, as adjusted
Net loss from continuing operations, as reported
Add goodwill impairment charge
1,974.2
$1,020.9
$(1,097.5)
1,974.2
Less tax benefit from goodwill impairment charge*
(156.0)
Net income from continuing operations, excluding goodwill impairment charge
$720.7
Diluted loss per share from continuing operations, as reported
$(2.66)
Less goodwill impairment charge per diluted share, net of tax
4.40
Diluted earnings per share from continuing operations, excluding goodwill impairment charge
$1.74
Weighted average shares outstanding used for diluted loss per share, as reported
412.9
Add common shares equivalents
Weighted average shares outstanding used for diluted earnings per share,
excluding goodwill impairment charge
1.2
414.1
*Represents the tax deduction from the impairment of goodwill that arose from taxable asset acquisitions, tax-affected at Safeway’s incremental rate of 38.6%.
R ECO NCI L IATI O NS
Sales and other revenue, as reported
37
25
2012 Reconciliation of Net Income Attributable to Safeway Inc. to Adjusted EBITDA (dollars in millions)
Q1
Net income attributable to Safeway Inc.
(A+B-C)
Rolling Four Quarters
Ended March 24, 2012
A
Year Ended
2011
B
12 Weeks Ended
March 24, 2012
C
12 Weeks Ended
March 26, 2011
$564.5
$516.7
$72.9
$25.1
Add (subtract):
Property impairment charges and tax benefit
from discontinued operations
1.8
-
1.8
-
Income taxes
273.9
363.9
42.1
132.1
Interest expense
277.9
272.2
71.4
65.7
265.1
Depreciation expense
1,149.5
1,148.8
265.8
LIFO expense
31.6
35.1
0.5
4.0
Share-based employee compensation
50.1
50.0
11.0
10.9
Property impairment charges
Equity in earnings of unconsolidated affiliates, net
Dividend received from unconsolidated affiliate
Total Adjusted EBITDA
Adjusted EBITDA as a multiple of interest
expense
Q2
Net income attributable to Safeway Inc.
51.1
44.7
13.5
7.1
(14.4)
(13.0)
(3.2)
(1.8)
-
6.1
-
6.1
$2,386.0
$2,424.5
$475.8
$514.3
(A+B-C)
Rolling Four Quarters
Ended June 16, 2012
A
Year Ended
2011
B
24 Weeks Ended
June 16, 2012
C
24 Weeks Ended
June 18, 2011
$541.3
$516.7
$195.6
$171.0
8.6x
Add (subtract):
Property impairment charges and tax benefit
from discontinued operations
2.5
-
2.5
-
Income taxes
257.0
363.9
98.0
204.9
Interest expense
290.0
272.2
145.0
127.2
Depreciation expense
1,148.5
1,148.8
528.7
529.0
LIFO expense
22.7
35.1
0.6
13.0
Share-based employee compensation
52.2
50.0
24.3
22.1
Property impairment charges
Equity in earnings of unconsolidated affiliates, net
Dividend received from unconsolidated affiliate
Total Adjusted EBITDA
Adjusted EBITDA as a multiple of interest
expense
Q3
Net income attributable to Safeway Inc.
51.2
44.7
28.5
22.0
(14.0)
(13.0)
(5.4)
(4.4)
-
6.1
-
6.1
$2,351.4
$2,424.5
$1,017.8
$1,090.9
(A+B-C)
Rolling Four Quarters
Ended Sept. 8, 2012
A
Year Ended
2011
B
36 Weeks Ended
Sept. 8, 2012
C
36 Weeks Ended
Sept. 10, 2011
$568.1
$516.7
$352.5
$301.1
8.1x
Add (subtract):
Property impairment charges and tax benefit
from discontinued operations
33.8
-
33.8
-
Income taxes
240.5
363.9
147.6
271.0
Interest expense
300.6
272.2
216.3
187.9
794.3
Depreciation expense
1,143.4
1,148.8
788.9
LIFO expense
15.3
35.1
1.6
21.4
Share-based employee compensation
53.2
50.0
36.6
33.4
Property impairment charges
Equity in earnings of unconsolidated affiliates, net
Dividend received from unconsolidated affiliate
Total Adjusted EBITDA
Adjusted EBITDA as a multiple of interest
expense
38
45.5
44.7
34.5
33.7
(15.1)
(13.0)
(13.2)
(11.1)
0.7
6.1
0.7
6.1
$2,386.0
$2,424.5
$1,599.3
$1,637.8
7.9x
2012 Reconciliation of Net Cash Flow from Operating Activities to Adjusted EBITDA (dollars in millions)
Q1
(A+B-C)
Rolling Four Quarters
March 24, 2012
A
Year Ended
2011
B
12 Weeks Ended
March 24, 2012
C
12 Weeks Ended
March 26, 2011
$1,541.8
$2,023.6
($541.8)
($60.0)
Income taxes
273.9
363.9
42.1
132.1
Interest expense
277.9
272.2
71.4
65.7
Net cash flow provided (used) by operating activities
Add (subtract):
Deferred income taxes
4.7
63.7
-
59.0
(121.5)
(114.3)
(32.9)
(25.7)
199.5
176.2
29.9
6.6
Increase in accrued claims and other liabilities
(0.3)
(23.2)
(2.4)
(25.3)
Gain on property dispositions and lease exit costs, net
72.2
65.6
8.0
1.4
162.6
(385.8)
913.9
365.5
(6.8)
-
(6.8)
-
(18.0)
(17.4)
(5.6)
(5.0)
$2,386.0
$2,424.5
$475.8
$514.3
(A+B-C)
Rolling Four Quarters
June 16, 2012
A
Year Ended
2011
B
24 Weeks Ended
June 16, 2012
C
24 Weeks Ended
June 18, 2011
$1,745.2
$2,023.6
($90.8)
$187.6
Income taxes
257.0
363.9
98.0
204.9
Interest expense
290.0
272.2
145.0
127.2
9.1
63.7
-
54.6
(129.7)
(114.3)
(66.8)
(51.4)
83.3
176.2
67.6
160.5
Net pension and post-retirement benefit expense
Contributions to pension and post-retirement plans
Changes in working capital items
Lease exit costs from discontinued operations
Other
Total Adjusted EBITDA
Adjusted EBITDA as a multiple of interest expense
Q2
Net cash flow provided (used) by operating activities
8.6x
Add (subtract):
Deferred income taxes
Net pension and post-retirement benefit expense
Contributions to pension and post-retirement plans
Decrease (increase) in accrued claims and other liabilities
12.5
(23.2)
2.0
(33.7)
Gain (loss) on property retirements and lease exit costs, net
84.1
65.6
18.4
(0.1)
Changes in working capital items
25.7
(385.8)
861.5
450.0
Lease exit costs and gain on property depositions from
discontinued operations
(5.0)
-
(5.0)
-
(20.8)
(17.4)
(12.1)
(8.7)
$2,351.4
$2,424.5
$1,017.8
$1,090.9
(A+B-C)
Rolling Four Quarters
Sept. 8, 2012
A
Year Ended
2011
B
36 Weeks Ended
Sept. 8, 2012
C
36 Weeks Ended
Sept 10, 2011
$1,671.2
$2,023.6
$358.5
$710.9
Income taxes
240.5
363.9
147.6
271.0
Interest expense
300.6
272.2
216.3
187.9
12.0
63.7
-
51.7
(138.7)
(114.3)
(102.5)
(78.1)
110.5
176.2
102.6
168.3
Decrease (increase) in accrued claims and other liabilities
18.8
(23.2)
2.6
(39.4)
Gain (loss) on property retirements and lease exit costs, net
96.8
65.6
28.4
(2.8)
Changes in working capital items
21.7
(385.8)
786.8
379.3
Other
Total Adjusted EBITDA
Adjusted EBITDA as a multiple of interest expense
Q3
Net cash flow provided by operating activities
8.1x
Deferred income taxes
Net pension and post-retirement benefit expense
Contributions to pension and post-retirement plans
Lease exit costs and gain on property depositions from
discontinued operations
Other
Total Adjusted EBITDA
Adjusted EBITDA as a multiple of interest expense
75.4
-
75.4
-
(22.8)
(17.4)
(16.4)
(11.0)
$2,386.0
$2,424.5
$1,599.3
$1,637.8
7.9x
R ECO NCI L IATI O NS
Add (subtract):
39
25
2011 Reconciliation of Net Income Attributable to Safeway Inc. to Adjusted EBITDA (dollars in millions)
Q1
Net income attributable to Safeway Inc.
(A+B-C)
Rolling Four Quarters
Ended March 26, 2011
A
Year Ended
January 1, 2011
B
12 Weeks Ended
March 26, 2011
C
12 Weeks Ended
March 27, 2010
$518.9
$589.8
$25.1
$96.0
370.4
290.6
132.1
52.3
Add (subtract):
Income taxes
Interest expense
Depreciation expense
LIFO (income) expense
294.5
298.5
65.7
69.7
1,158.5
1,162.4
265.1
269.0
(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
(14.1)
(15.3)
(1.8)
(3.0)
6.1
-
6.1
-
$2,424.0
$2,425.2
$514.3
$515.5
(A+B-C)
Rolling Four Quarters
Ended June 18, 2011
A
Year Ended
January 1, 2011
B
24 Weeks Ended
June 18, 2011
C
24 Weeks Ended
June 19, 2010
$523.5
$589.8
$171.0
$237.3
366.1
290.6
204.9
129.4
Equity in earnings of unconsolidated affiliates, net
Dividend received from unconsolidated affiliate
Total Adjusted EBITDA
Adjusted EBITDA as a multiple of interest
expense
Q2
Net income attributable to Safeway Inc.
8.2x
Add (subtract):
Income taxes
Interest expense
286.8
298.5
127.2
138.9
1,152.8
1,162.4
529.0
538.6
(15.0)
(28.0)
13.0
-
Share-based employee compensation
51.4
55.5
22.1
26.2
Property impairment charges
62.9
71.7
22.0
30.8
(15.2)
(15.3)
(4.4)
(4.5)
Depreciation expense
LIFO (income) expense
Equity in earnings of unconsolidated affiliates, net
Dividend received from unconsolidated affiliate
Total Adjusted EBITDA
Adjusted EBITDA as a multiple of interest
expense
Q3
Net income attributable to Safeway Inc.
6.1
-
6.1
-
$2,419.4
$2,425.2
$1,090.9
$1,096.7
(A+B-C)
Rolling Four Quarters
Ended Sept. 10, 2011
A
Year Ended
January 1, 2011
B
36 Weeks Ended
Sept. 10, 2011
C
36 Weeks Ended
Sept. 11, 2010
$530.8
$589.8
$301.1
$360.1
8.4x
Add (subtract):
Income taxes
377.1
290.6
271.0
184.5
Interest expense
278.1
298.5
187.9
208.3
806.1
Depreciation expense
1,150.6
1,162.4
794.3
LIFO (income) expense
(6.6)
(28.0)
21.4
-
Share-based employee compensation
51.6
55.5
33.4
37.3
Property impairment charges
Equity in earnings of unconsolidated affiliates, net
Dividend received from unconsolidated affiliate
Total Adjusted EBITDA
Adjusted EBITDA as a multiple of interest
expense
40
56.7
71.7
33.7
48.7
(18.7)
(15.3)
(11.1)
(7.7)
6.1
-
6.1
-
$2,425.7
$2,425.2
$1,637.8
$1,637.3
8.7x
2011 Reconciliation of Net Cash Flow from Operating Activities to Adjusted EBITDA (dollars in millions)
Q1
(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
$2,031.7
$1,849.7
($60.0)
($242.0)
Income taxes
370.4
290.6
132.1
52.3
Interest expense
294.5
298.5
65.7
69.7
(4.8)
(4.8)
(1.1)
(1.1)
1.5
1.6
0.4
0.5
Net cash flow provided (used) by operating activities
Add (subtract):
Amortization of deferred finance costs
Excess tax benefit from exercise of stock options
Deferred income taxes
Net pension and post-retirement benefit expense
Contributions to pension and post-retirement plans
Accrued claims and other liabilities
Gain (loss) on property retirements and lease exit activities
Dividend received from unconsolidated affiliate
90.3
31.3
59.0
-
(121.1)
(125.2)
(25.7)
(29.8)
19.9
17.7
6.6
4.4
(45.1)
(36.2)
(25.3)
(16.4)
39.9
27.5
1.4
(11.0)
6.1
-
6.1
-
(258.9)
67.9
365.5
692.3
(0.4)
6.6
(10.4)
(3.4)
$2,424.0
$2,425.2
$514.3
$515.5
(A+B-C)
Rolling Four Quarters
June 18, 2011
A
Year Ended
January 1, 2011
B
24 Weeks Ended
June 18, 2011
C
24 Weeks Ended
June 19, 2010
$1,728.2
$1,849.7
$187.6
$309.1
Income taxes
366.1
290.6
204.9
129.4
Interest expense
286.8
298.5
127.2
138.9
(4.8)
(4.8)
(2.2)
(2.2)
1.7
1.6
0.8
0.7
Changes in working capital items
Other
Total Adjusted EBITDA
Q2
Net cash flow provided by operating activities
Add (subtract):
Amortization of deferred finance costs
Excess tax benefit from exercise of stock options
Deferred income taxes
Net pension and post-retirement benefit expense
85.9
31.3
54.6
-
(118.9)
(125.2)
(51.4)
(57.7)
Contributions to pension and post-retirement plans
169.5
17.7
160.5
8.7
Accrued claims and other liabilities
(40.5)
(36.2)
(33.7)
(29.4)
41.4
27.5
(0.1)
(14.0)
(95.2)
67.9
450.0
613.1
(0.8)
6.6
(7.3)
0.1
$2,419.4
$2,425.2
$1,090.9
$1,096.7
(A+B-C)
Rolling Four Quarters
Sept. 10, 2011
A
Year Ended
January 1, 2011
B
36 Weeks Ended
Sept. 10, 2011
C
36 Weeks Ended
Sept 11, 2010
$1,714.0
$1,849.7
$710.9
$846.6
Income taxes
377.1
290.6
271.0
184.5
Interest expense
278.1
298.5
187.9
208.3
(5.1)
(4.8)
(3.6)
(3.3)
2.5
1.6
1.6
0.7
Gain (loss) on property retirements and lease exit activities
Changes in working capital items
Other
Total Adjusted EBITDA
Q3
Net cash flow provided by operating activities
Amortization of deferred finance costs
Excess tax benefit from exercise of stock options
Deferred income taxes
83.0
31.3
51.7
-
(116.7)
(125.2)
(78.1)
(86.6)
Contributions to pension and post-retirement plans
174.3
17.7
168.3
11.7
Accrued claims and other liabilities
(37.1)
(36.2)
(39.4)
(38.5)
23.3
27.5
(2.8)
1.4
(65.5)
67.9
379.3
512.7
(2.2)
6.6
(9.0)
(0.2)
$2,425.7
$2,425.2
$1,637.8
$1,637.3
Net pension and post-retirement benefit expense
Gain (loss) on property retirements and lease exit activities
Changes in working capital items
Other
Total Adjusted EBITDA
R ECO NCI L IATI O NS
Add (subtract):
41
25
2010 Reconciliation of Net (Loss) Income Attributable to Safeway Inc. to Adjusted EBITDA (dollars in millions)
Q1
Net (loss) income attributable to Safeway Inc.
(A+B-C)
Rolling Four Quarters
Ended March 27, 2010
A
Year Ended
2009
B
12 Weeks Ended
March 27, 2010
C
12 Weeks Ended
March 28, 2009
($1,145.7)
($1,097.5)
$96.0
$144.2
136.2
144.2
52.3
60.3
Add (subtract):
Income taxes
Interest expense
323.2
331.7
69.7
78.2
Depreciation expense
1,175.8
1,171.2
269.0
264.4
Goodwill impairment charge
1,974.2
1,974.2
-
-
(36.6)
(35.2)
-
1.4
61.1
61.7
14.1
14.7
LIFO (income) expense
Share-based employee compensation
Property impairment charges
80.0
73.7
17.4
11.1
(11.3)
(8.5)
(3.0)
(0.2)
5.8
5.8
-
-
$2,562.7
$2,621.3
$515.5
$574.1
(A+B-C)
Rolling Four Quarters
Ended June 19, 2010
A
Year Ended
2009
B
24 Weeks Ended
June 19, 2010
C
24 Weeks Ended
June 20, 2009
($1,243.0)
($1,097.5)
$237.3
$382.8
Income taxes
168.2
144.2
129.4
105.4
Interest expense
315.2
331.7
138.9
155.4
Depreciation expense
1,177.1
1,171.2
538.6
532.7
Goodwill impairment charge
1,974.2
1,974.2
-
-
(35.2)
(35.2)
-
-
60.5
61.7
26.2
27.4
Equity in earnings of unconsolidated affiliates, net
Dividend received from unconsolidated affiliate
Total Adjusted EBITDA
Adjusted EBITDA as a multiple of interest
expense
Q2
Net (loss ) income attributable to Safeway Inc.
7.9x
Add (subtract):
LIFO income
Share-based employee compensation
Property impairment charges
Equity in earnings of unconsolidated affiliates, net
Dividend received from unconsolidated affiliate
79.1
73.7
30.8
25.4
(10.1)
(8.5)
(4.5)
(2.9)
5.8
5.8
-
-
$2,491.8
$2,621.3
$1,096.7
$1,226.2
(A+B-C)
Rolling Four Quarters
Ended Sept. 11, 2010
A
Year Ended
2009
B
36 Weeks Ended
Sept. 11, 2010
C
36 Weeks Ended
Sept. 12, 2009
($1,249.0)
($1,097.5)
$360.1
$511.6
Income taxes
150.8
144.2
184.5
177.9
Interest expense
306.3
331.7
208.3
233.7
Depreciation expense
1,174.2
1,171.2
806.1
803.1
Goodwill impairment charge
1,974.2
1,974.2
-
-
(35.2)
(35.2)
-
-
Total Adjusted EBITDA
Adjusted EBITDA as a multiple of interest
expense
Q3
Net (loss) income attributable to Safeway Inc.
7.9x
Add (subtract):
LIFO income
Share-based employee compensation
57.6
61.7
37.3
41.4
Property impairment charges
77.2
73.7
48.7
45.2
(10.3)
(8.5)
(7.7)
(5.9)
Equity in earnings of unconsolidated affiliates, net
Dividend received from unconsolidated affiliate
Total Adjusted EBITDA
Adjusted EBITDA as a multiple of interest
expense
42
5.8
5.8
-
-
$2,451.6
$2,621.3
$1,637.3
$1,807.0
8.0x
2010 Reconciliation of Net Cash Flow from Operating Activities to Adjusted EBITDA (dollars in millions)
Q1
(A+B-C)
Rolling Four
Quarters Ended
March 27, 2010
A
Year Ended
2009
B
12 Weeks Ended
March 27, 2010
C
12 Weeks Ended
March 28, 2009
$2,458.7
$2,549.7
($242.0)
($151.0)
Income taxes
136.2
144.2
52.3
60.3
Interest expense
323.2
331.7
69.7
78.2
Net cash flow provided (used) by operating activities
Add (subtract):
Deferred income taxes
Net pension and post-retirement benefit expense
Contributions to pension and post-retirement plans
Accrued claims and other liabilities
145.5
142.1
-
(3.4)
(136.4)
(140.2)
(29.8)
(33.6)
22.3
24.4
4.4
6.5
15.6
34.4
(16.4)
2.4
(17.4)
(12.7)
(11.0)
(6.3)
(355.8)
(426.7)
692.3
621.4
(29.2)
(25.6)
(4.0)
(0.4)
$2,562.7
$2,621.3
$515.5
$574.1
(A+B-C)
Rolling Four
Quarters Ended
June 19, 2010
A
Year Ended
2009
B
24 Weeks Ended
June 19, 2010
C
24 Weeks Ended
June 20, 2009
$2,174.7
$2,549.7
$309.1
$684.1
Income taxes
168.2
144.2
129.4
105.4
Interest expense
315.2
331.7
138.9
155.4
Loss on property retirements and lease exit activities
Changes in working capital items
Other
Total Adjusted EBITDA
Adjusted EBITDA as a multiple of interest expense
Q2
Net cash flow provided by operating activities
7.9x
Add (subtract):
Deferred income taxes
Net pension and post-retirement benefit expense
Contributions to pension and post-retirement plans
152.4
142.1
-
(10.3)
(130.2)
(140.2)
(57.7)
(67.7)
20.1
24.4
8.7
13.0
2.2
34.4
(29.4)
2.8
(13.1)
(12.7)
(14.0)
(13.6)
(186.2)
(426.7)
613.1
372.6
(11.5)
(25.6)
(1.4)
(15.5)
$2,491.8
$2,621.3
$1,096.7
$1,226.2
(A+B-C)
Rolling Four
Quarters Ended
Sept. 11, 2010
A
Year Ended
2009
B
36 Weeks Ended
Sept. 11, 2010
C
36 Weeks Ended
Sept. 12, 2009
$2,109.0
$2,549.7
$846.6
$1,287.3
Income taxes
150.8
144.2
184.5
177.9
Interest expense
306.3
331.7
208.3
233.7
Deferred income taxes
152.3
142.1
-
(10.2)
(130.6)
(140.2)
(86.6)
(96.2)
Accrued claims and other liabilities
Loss on property retirements and lease exit activities
Changes in working capital items
Other
Total Adjusted EBITDA
Adjusted EBITDA as a multiple of interest expense
Q3
Net cash flow provided by operating activities
7.9x
Net pension and post-retirement benefit expense
Contributions to pension and post-retirement plans
Accrued claims and other liabilities
Gain (loss) on property retirements and lease exit activities
Changes in working capital items
Other
Total Adjusted EBITDA
Adjusted EBITDA as a multiple of interest expense
18.0
24.4
11.7
18.1
0.2
34.4
(38.5)
(4.3)
7.5
(12.7)
1.4
(18.8)
(153.6)
(426.7)
512.7
239.6
(8.3)
(25.6)
(2.8)
(20.1)
$2,451.6
$2,621.3
$1,637.3
$1,807.0
R ECO NCI L IATI O NS
Add (subtract):
8.0x
43
25
NOTES
44
S A F EWAY INC.
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