Income tax expense on continuing operations declined to 18.5% in the first 24 weeks of 2013 compared to 32.8% in the first 24 weeks of 2012 due primarily to a $17.2 million ($0.07 per diluted share) tax benefit in the first quarter of 2013 related to the settlement of corporate-owned life insurance ("COLI") policies and a $5.0 million ($0.02 per diluted share) reduction in tax expense due to the resolution of federal income tax matters.
On April 24, 2013, Blackhawk, a Safeway subsidiary, completed its initial public offering of 11.5 million shares of its Class A common stock at $23.00 per share. As part of the IPO, Safeway sold 11.3 million shares of Class A common stock of Blackhawk for $237.9 million, net of underwriting discount and fees, reducing Safeway's ownership from approximately 95% to approximately 73% of Blackhawk's total outstanding shares of common stock. Safeway recorded these net proceeds as an increase to additional paid-in capital and used the net proceeds to reduce debt. Additionally, Safeway recorded an estimated $82 million tax liability on the sale of these shares as a reduction to additional paid-in capital which will be paid in the fourth quarter of 2013.
Net cash flow used by operating activities was $161.4 million in the first 24 weeks of 2013 compared to net cash flow used by operating activities of $211.1 million in the first 24 weeks of 2012. This change was largely due to the lower use of cash for working capital in 2013, which was driven primarily by a decline in income taxes.
Net cash flow used by investing activities declined to $160.6 million in the first 24 weeks of 2013 from $448.4 million in the first 24 weeks of 2012 primarily due to a decline in capital expenditures and proceeds on COLI policies in 2013.
Net cash flow provided by financing activities increased to $311.6 million in the first 24 weeks of 2013 from $120.6 million in the first 24 weeks of 2012. This increase was due primarily to cash used for stock repurchases in 2012 and proceeds from the sale of Blackhawk stock in 2013, partly offset by lower net proceeds from long-term borrowings in 2013.
Safeway invested $125.4 million in capital expenditures in the second quarter of 2013 compared to $203.7 million in the second quarter of 2012.
Safeway did not repurchase any shares of its common stock during the first 24 weeks of 2013 under its previously announced share repurchase program. The remaining board authorization for stock repurchases at quarter-end was approximately $0.8 billion.
Safeway's guidance for 2013 continuing operations is as follows:
•Adjusted, diluted EPS of $1.02 to $1.12, compared to $0.99 in 2012. This guidance assumes no benefit from the proceeds from the sale of our Canadian operations
•After adjusting for discontinued operations, the Blackhawk IPO and the reduction of tax expense due to the resolution of federal income tax matters, this EPS guidance is at the lower end of previously provided guidance of $2.25 to $2.45
•Non-fuel ID sales growth of 1.5% to 2.0%
•An increase in adjusted, non-fuel operating profit margin of 15 to 25 basis points
•Proforma adjusted EBITDA of $1.70 billion to $1.73 billion compared to $1.74 billion in 2012
•Capital expenditures of $900 million to $950 million, in line with previously provided guidance, excluding CSL
•Free cash flow of $600 million to $700 million, in line with previously provided guidance, excluding CSL
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