SAFEWAY INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except per-share amounts) (Unaudited) Year-end Year-end 2012 2011(1) ---------- ----------ASSETSCurrent assets:Cash and equivalents $ 352.2 $ 729.4Receivables 909.0 652.1Merchandise inventories 2,562.0 2,469.6Prepaid expense and other current assets 344.7 335.7 --------- ---------Total current assets 4,167.9 4,186.8Total property, net 9,224.6 9,637.6Goodwill 471.5 469.8Investment in unconsolidated affiliate 191.7 196.8Other assets 601.3 582.6 --------- ---------Total assets $14,657.0 $15,073.6 ========= =========LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Current maturities of notes and debentures $ 294.0 $ 811.3Current obligations under capital leases 36.2 29.2Accounts payable 3,125.0 2,917.0Accrued salaries and wages 460.9 500.9Deferred income taxes 45.7 77.8Other accrued liabilities 643.8 675.9 --------- ---------Total current liabilities 4,605.6 5,012.1Long-term debt:Notes and debentures 4,831.9 4,165.0Obligations under capital leases 411.6 404.7 --------- ---------Total long-term debt 5,243.5 4,569.7Deferred income taxes 178.5 141.9Pension and post-retirement benefit obligations 914.5 904.5Accrued claims and other liabilities 781.5 730.1 --------- ---------Total liabilities 11,723.6 11,358.3Stockholders' equity: Common stock: par value $0.01 per share; 1,500 shares authorized; 605.3 and 604.5 shares issued 6.1 6.0Additional paid-in capital 4,505.6 4,463.9 Treasury stock at cost: 365.8 and 307.9 shares (9,119.8) (7,874.4) Accumulated other comprehensive loss (73.8) (61.5)Retained earnings 7,609.8 7,175.3 --------- ---------Total Safeway Inc. equity 2,927.9 3,709.3Noncontrolling interests 5.5 6.0 --------- ---------Total equity 2,933.4 3,715.3 --------- ----------Total liabilities and stockholders' equity $14,657.0 $15,073.6 ========= ========= (1) Other accrued liabilities, deferred income taxes (current) and retained earnings have been restated to correct an error in the accounting for property taxes. SAFEWAY INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions, unaudited) 52 Weeks 52 Weeks 2012 2011 ---------- ----------OPERATING ACTIVITIES:Net income before allocation to noncontrolling interest $ 598.1 $ 518.2Gain from discontinued operations, net of tax (31.9) - --------- ---------Income from continuing operations, net of tax 566.2 518.2Reconciliation to net cash flow from operating activities: Depreciation expense 1,134.3 1,148.8 Property impairment charges 46.5 44.7 Share-based employee compensation 55.1 50.0 LIFO expense 0.7 35.1 Equity in earnings of unconsolidated affiliate (17.5) (13.0) Net pension and post-retirement benefits expense 150.8 114.3 Contributions to pension and post-retirement benefit plans (159.5) (176.2) Gain on property dispositions and lease exit costs, net (79.1) (65.6) Increase in accrued claims and other liabilities 44.8 23.2 Deferred income taxes (36.0) (63.7) Other 13.0 23.5 Changes in working capital items: Receivables (5.6) (2.1) Inventories at FIFO cost (84.7) 95.0 Prepaid expenses and other current assets (27.5) (13.1) Income taxes (82.7) 91.4 Payables and accruals 24.5 (80.5) Payables related to third-party gift cards, net of receivables 26.4 293.6 --------- --------- Net cash flow from operating activities 1,569.7 2,023.6 --------- ---------INVESTING ACTIVITIESCash paid for property additions (927.6) (1,094.7)Proceeds from sale of property 300.8 188.0Net cash proceeds from discontinued operations 107.0 -Investments and business acquisitions - (35.9)Other (52.2) (71.9) --------- --------- Net cash used by investing activities (572.0) (1,014.5) --------- ---------FINANCING ACTIVITIESAdditions to (payments on) short-term borrowings, net 1.2 (0.8)Additions to long-term borrowings 3,623.4 3,697.5Payments on long-term borrowings (3,551.6) (3,087.6)Purchase of treasury stock (1,274.5) (1,554.0)Dividends paid (163.9) (188.0)Net proceeds from exercise of stock options 3.8 73.4Excess tax benefit from share-based employee compensation 1.3 1.8Other (13.5) (19.6) --------- --------- Net cash flow used by financing activities (1,373.8) (1,077.3) --------- ---------Effect of changes in exchange rates on cash (1.1) 18.8 --------- ---------Decrease in cash and equivalents (377.2) (49.4)CASH AND EQUIVALENTSBeginning of year 729.4 778.8 --------- ---------End of year $ 352.2 $ 729.4 ========= ========= SAFEWAY INC. AND SUBSIDIARIES SUPPLEMENTAL INFORMATION (Dollars in millions) (Unaudited) 16 Weeks Ended 52 Weeks Ended ------------------ ------------------TABLE 1: CAPITAL EXPENDITURES AND Dec 29, Dec 31, Dec 29, Dec 31, OTHER STATISTICAL DATA 2012 2011 2012 2011 -------- -------- -------- --------Cash paid for capital expenditures $ 240.4 $ 412.2 $ 927.6 $1,094.7Stores opened 3 11 9 25Stores closed 6 14 46 41Lifestyle remodels completed 2 10 4 29Stores at end of period 1,641 1,678Square footage (in millions) 77.6 79.2Fuel sales $1,447.3 $1,393.2 $4,974.2 $4,596.6Number of fuel stations at end of period 407 400Increase (decrease) in sales from change in Canadian exchange rate $ 59.4 $ (12.7) $ (63.9) $ 240.0TABLE 2: RECONCILIATION OF NET INCOME ATTRIBUTABLE TO SAFEWAY INC. TO ADJUSTED EBITDA Fiscal Year 2012 --------Net income attributable to Safeway Inc. $ 596.5Add (subtract): Property impairment charges and tax expense from discontinued operations 27.7 Income taxes 262.2 Interest expense 304.0 Depreciation expense 1,134.3 LIFO expense 0.7 Share-based employee compensation 55.1 Property impairment charges 46.5 Equity in earnings of unconsolidated affiliate (17.5)Dividend from unconsolidated affiliate 0.7 --------Adjusted EBITDA $2,410.2 ========Total debt at December 29, 2012 $5,573.7Less cash and equivalents in excess of $75.0 at December 29, 2012 277.2 --------Adjusted Debt, as defined by bank credit agreement $5,296.5 ========Adjusted EBITDA as a multiple of interest expense 7.93 xMinimum Adjusted EBITDA as a multiple of interest expense under bank 2.00 x credit agreementAdjusted Debt to Adjusted EBITDA 2.20 xMaximum Adjusted Debt to Adjusted EBITDA under bank credit agreement 3.50 x SAFEWAY INC. AND SUBSIDIARIES SUPPLEMENTAL INFORMATION (Dollars in millions) (Unaudited)TABLE 3: RECONCILIATION OF NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES TO ADJUSTED EBITDA Fiscal Year 2012 ------------Net cash flow provided by operating activities $ 1,569.7Add (subtract): Income taxes 262.2 Interest expense 304.0 Deferred income taxes 36.0 Net pension and post-retirement benefits expense (150.8) Contributions to pension and post-retirement benefit plans 159.5 Increase in accrued claims and other liabilities (44.8) Gain on property dispositions and lease exit costs, net 79.1 Changes in working capital items 148.0 Lease exit costs and gain on property dispositions from discontinued operations 59.6 Other (12.3) ------------Adjusted EBITDA $ 2,410.2 ============TABLE 4: RECONCILIATION OF GAAP CASH FLOW MEASURE TO FREE CASH FLOW Fiscal Year 2012 2011 ------------ ------------Net cash flow from operating activities, as reported $ 1,569.7 $ 2,023.6Increase in payables related to third-party gift cards, net of receivables (26.4) (293.6) ------------ ------------Net cash flow from operating activities, as adjusted 1,543.3 1,730.0Net cash flow used by investing activities, as reported (572.0) (1,014.5)Investments and business acquisitions - 35.9 ------------ ------------Net cash flow used by investing activities, as adjusted (572.0) (978.6) ------------ ------------Free cash flow $ 971.3 $ 751.4 ============ ============ SAFEWAY INC. AND SUBSIDIARIES SUPPLEMENTAL INFORMATION (Unaudited)TABLE 5: IDENTICAL-STORE SALES* Fourth Fiscal Quarter Year 2012 2012 ----------- -----------As reported 1.0% 1.2%Excluding fuel sales 0.8% 0.5%* Excludes replacement storesTABLE 6: RECONCILIATION OF DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS, AS REPORTED, TO DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS, AS ADJUSTED Fourth Fiscal Quarter Year 2012 2012 ----------- -----------Diluted earnings per share from continuing operations, as reported $ 1.06 $ 2.27Gain from legal settlements (0.12) (0.12) ----------- -----------Diluted earnings per share from continuing operations, as adjusted $ 0.94 $ 2.15 =========== =========== Fiscal Year 2011 -----------Diluted earnings per share from continuing operations, as reported $ 1.49Tax charge on Canadian dividend 0.29 -----------Diluted earnings per share from continuing operations, as adjusted $ 1.78 ===========TABLE 7: RECONCILIATION OF FOURTH QUARTER 2012 OPERATING PROFIT MARGIN BASIS-POINT CHANGE AS REPORTED, TO BASIS-POINT CHANGE EXCLUDING FUEL AND GAIN FROM LEGAL SETTLEMENTS Operating Gross Administrative Operating Profit Expense Profit (Decrease) Decrease Increase Increase (Increase) (Decrease) ---------- -------------- ----------Basis-point increase in operating profit, as reported (21) 60 39Impact of fuel sales and markdowns from fuel partner program 10 (1) 9Gain from legal settlements - (38) (38) ---------- -------------- ----------Basis-point increase in operating profit, as adjusted (11) 21 10 ========== ============== ========== SAFEWAY INC. AND SUBSIDIARIES SUPPLEMENTAL INFORMATION (Unaudited)TABLE 8: RECONCILIATION OF 2012 OPERATING PROFIT MARGIN BASIS-POINT CHANGE AS REPORTED, TO BASIS-POINT CHANGE EXCLUDING FUEL AND GAIN FROM LEGAL SETTLEMENTS Operating Gross Administrative Operating Profit Expense Profit (Decrease) Decrease (Decrease) Increase (Increase) Increase ---------- -------------- ----------Basis-point decrease in operating profit, as reported (52) 42 (10)Impact of fuel sales and markdowns from fuel partner program 30 (16) 14 ---------- -------------- ----------Basis-point increase in operating profit, excluding fuel (22) 26 4Gain from legal settlements - (12) (12) ---------- -------------- ----------Basis-point decrease in operating profit, as adjusted (22) 14 (8) ========== ============== ==========
