PLEASANTON, CA -- (Marketwired) -- 07/18/13 -- Safeway Inc. (NYSE: SWY)
Agreement to Sell Canada Safeway
In June 2013, Safeway Inc. announced that it entered into an agreement to sell its Canadian operations through a sale of substantially all of the net assets of Canada Safeway Limited ("CSL") to Sobeys Inc., a Canadian food retailer and wholly owned subsidiary of Empire Company Limited. Accordingly, the results of operations from CSL are reported as discontinued operations, and the remaining results of operations are reported as continuing operations. Consistent with this presentation, the discussion of the line items of the income statement, balance sheet, statements of cash flow and supplemental information throughout this announcement refer to the continuing operations of Safeway, unless otherwise noted.
"We are pleased with the significant milestones we achieved this quarter," said Robert Edwards, President and CEO. "The substantial cash proceeds we expect to receive from the sale of our Canadian operations combined with the completion of the Blackhawk IPO will allow us to broadly enhance stakeholder value. At the same time, our continuing U.S. operations demonstrated strong year over year earnings growth in the second quarter, and we continue to gain share in our U.S. markets with a 20 basis-point improvement in the supermarket channel and a two basis-point improvement in the all outlet channel."
Results From Continuing Operations
Income from continuing operations was $58.1 million ($0.24 per diluted share) for the second quarter of 2013 and included the following items:
•Increased legal reserves of $17.0 million related to multiple matters ($0.04 per diluted share)
•Blackhawk expense of $5.7 million ($0.02 per diluted share) triggered by their IPO
•A gain on the sale of investments of $8.5 million ($0.02 per diluted share)
Excluding these items, which total $0.04 per diluted share, income from continuing operations was $68.1 million ($0.28 per diluted share) in the second quarter of 2013 compared to $47.6 million ($0.20 per diluted share) in the second quarter of 2012.
Loss from discontinued operations, net of tax, was $49.3 million ($0.21 per diluted share) in the second quarter of 2013, including a tax charge of $106.7 million ($0.44 per diluted share) on CSL retained earnings. With the agreement to sell CSL in the second quarter of 2013, Safeway must accrue taxes on retained earnings that had previously been considered indefinitely reinvested. This tax charge is included in the previously announced estimated net proceeds of C$4.0 billion from the sale of CSL.
Excluding this tax charge, income from discontinued operations, net of tax, would have been $57.4 million ($0.23 per diluted share) in the second quarter of 2013. This compares with income from discontinued operations, net of tax, in the second quarter of 2012 of $75.3 million ($0.31 per diluted share), which consisted of $74.1 million from Canadian operations and $1.2 million from the sale of three Genuardi's properties.
Net income for the second quarter of 2013 was $8.4 million ($0.03 per diluted share). After adjusting for the items in continuing and discontinued operations outlined above, net income for the second quarter of 2013 was $125.1 million ($0.51 per diluted share). This compares to net income of $122.7 million ($0.51 per diluted share) in the second quarter of 2012.
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