Safeway Inc. Announces First Quarter 2013 Results

Safeway Inc. Announces First Quarter 2013 Results 
U.S. Market Share Gains Continue 
PLEASANTON, CA -- (Marketwired) -- 04/25/13 --  Safeway Inc. (NYSE:
SWY) 
Results From Operations
 Safeway Inc. today reported net income of
$0.49 per diluted share for the first quarter of 2013. This includes
tax benefits of $0.14 per diluted share, of which $0.07 was
contemplated in our annual guidance. These results compare with
income from continuing operations in the first quarter of 2012 of
$0.30 per diluted share. Other highlights of the quarter include: 


 
--  Our fourth consecutive quarter of U.S. market share gains in both the
    supermarket channel and in all outlets.
    
    
--  An identical-store sales increase of 1.5% (excluding fuel), which was
    positively impacted by a calendar shift* of 0.4% and negatively
    impacted by a shift to generic drugs of 0.9%.
    
    
--  A unit volume increase of 0.5%, which was also positively impacted by
    the calendar shift.*

  
"We are pleased that we continued to see market share gains in the
first quarter," said Steve Burd, Chairman and CEO. "Just for U(TM)
usage continues to grow, and our partner fuel reward program is
rolling out on schedule and resonating well with consumers." 
"In addition," said Burd, "the successful IPO of Blackhawk Network
Holdings last week highlights the value we are creating for our
stockholders. The proceeds from our sale of Blackhawk stock were used
to pay down debt." 
Sales and Other Revenue
 Total sales were $10.0 billion in the first
quarter of 2013, essentially flat compared to the first quarter of
2012. An identical-store sales increase of 1.5% (excluding fuel) was
offset primarily by the disposition of Genuardi's stores in 2012 and
lower fuel sales in 2013. 
* Safeway's fiscal year 2012 ended on December 29, 2012 and therefore
did not capture all New Year's holiday sales. These sales fell into
the first quarter of 2013. Identical-store sales and unit volume were
positively impacted by 0.4% as a result of this shift. 
Gross Profit
 Gross profit declined 14 basis points to 26.70% of
sales in the first quarter of 2013 compared to 26.84% of sales in the
first quarter of 2012. Excluding the 15 basis-point impact from fuel
sales, gross profit declined 29 basis points
 due primarily to
investments in price, partially offset by improved pharmacy gross
margin and reduced advertising expense.  
Operating and Administrative Expense
 Operating and administrative
expense decreased five basis points to 24.90% of sales in the first
quarter of 2013 from 24.95% of sales in the first quarter of 2012.
Excluding the 17 basis-point impact of lower fuel sales, operating
and administrative expense margin decreased 22 basis points primarily
due to lower depreciation, utilities and other store occupancy costs. 
Operating Profit
 Operating profit margin declined 10 basis points to
1.80% in the first quarter of 2013 from 1.90% in the first quarter of
2012. Excluding fuel, operating profit declined seven basis points. 
Interest Expense
 Interest expense decreased to $65.0 million in the
first quarter of 2013 from $71.4 million in the first quarter of 2012
because of lower average interest rates and lower average borrowings. 
Income Taxes
 Income tax expense was 2.1% of pre-tax income in the
first quarter of 2013. In the first quarter of 2013, Safeway withdrew
$68.7 million from the accumulated cash surrender value of
corporate-owned life insurance ("COLI") policies purchased in the
early1980s and determined that a majority of remaining cash surrender
value would be received in the future through tax-free death
benefits. Consequently, Safeway reversed deferred taxes on that
remaining cash surrender value and reduced income tax expense by
$17.2 million. In addition, income tax expense in the first quarter
of 2013 was reduced by $16.7 million due to the resolution of federal
income tax matters. Excluding these items, income tax expense was
30.0% of pre-tax income in the first quarter of 2013 compared to
34.0% of pre-tax income in the first quarter of 2012. 
Discontinued Operations
 In January 2012, Safeway announced the
planned sale or closure of its Genuardi's stores. In the first
quarter of 2012, Safeway closed three of the Genuardi's stores and
incurred impairment and lease exit losses of $14.2 million ($8.6
million, net of tax). The disposition of Genuardi's was completed
during 2012. 
Cash Flow
 Net cash flow used by operating activities increased to
$555.2 million in the first quarter of 2013 from $541.8 million in
2012 due primarily to an increase in the use of cash for working
capital.  
Net cash flow used by investing activities declined to $71.6 million
in the first quarter of 2013 from $273.0 million in 2012 primarily
due to lower capital expenditures in 2013 and cash received from
proceeds on COLI policies in 2013, partially offset by lower proceeds
from the sale of property in 2013.  
Net cash flow provided by financing activities increased to $571.1
million in the first quarter of 2013 from $220.6 million in 2012 due
primarily to the repurchase of stock in 2012, partly offset by lower
proceeds from the issuance of debt in 2013.  
Capital Expenditures
 Safeway invested $144.9 million in capital
expenditures in the first quarter of 2013. For the year, Safeway
expects to invest approximately $1.0 billion to $1.1 billion in
capital expenditures. 
Stock Repurchases
 Safeway did not repurchase any shares of its
common stock during the first quarter of 2013 under its previously
announced share repurchase program. The remaining board authorization
for stock repurchases at quarter-end was approximately $0.8 billion. 
Guidance
 Safeway's guidance for 2013 remains unchanged at $2.25 to
$2.45 earnings per diluted share. Half of the $0.14 per diluted share
of tax benefits was anticipated in the original earnings guidance and
half was not. However, the unanticipated tax benefits roughly offset
the expected dilution to Safeway's earnings from the Blackhawk IPO.
Guidance for nonfuel ID sales growth remains at 2% to 3%, operating
profit margin change, excluding fuel, at flat to a positive 10 basis
points, and free cash flow at $850 million to $950 million.  
About Safeway
 Safeway Inc. is a Fortune 100 company and one of the
largest food and drug retailers in North America based on sales. The
company operates 1,638 stores in the United States and Canada. The
company's common stock is traded on the New York Stock Exchange under
the symbol SWY. 
Safeway Conference Call
 Safeway's investor conference call
discussing first-quarter results will be broadcast live over the
internet at www.safeway.com/investor_relations at 8:00 a.m. PT on
April 25, 2013. Click on Upcoming Events to access the call. A replay
will be available via webcast for approximately one week following
the conference call. 
This press release and related conference call contain certain
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Such statements relate to, among other things, earnings per
share, sales growth, profit margins, free cash flow, capital
expenditures and tax rates. Forward-looking statements are indicated
by words or phrases such as "guidance," "believes," "expects,"
"anticipates," "estimates," "plans," "continuing," "ongoing," and
similar words or phrases and the negative of such words and phrases.
Forward-looking statements are based on our current plans and
expectations 
and involve risks and uncertainties which are, in many
instances, beyond our control, and which could cause actual results
to differ materially from those included in or contemplated or
implied by the forward-looking statements. Such risks and
uncertainties include the following: general business and economic
conditions in our operating regions, including the rate of inflation
or deflation, consumer spending levels, currency valuations,
population, employment and job growth and/or losses in our markets;
sales volume levels and price per item trends; pricing pressures and
competitive factors, which could include pricing strategies, store
openings, remodels or acquisitions by our competitors; results of our
programs to control or reduce costs, improve buying practices and
control shrink; results of our programs to increase sales; results of
our continuing efforts to expand corporate brands; results of our
programs to improve our perishables departments; results of our
promotional programs; results of our capital program; results of our
efforts to improve working capital; results of any ongoing litigation
in which we are involved or any litigation in which we may become
involved; the resolution of uncertain tax positions; the ability to
achieve satisfactory operating results in all geographic areas where
we operate; changes in the financial performance of our equity
investments; labor costs, including benefit plan costs and severance
payments, or labor disputes that may arise from time to time and work
stoppages that could occur in areas where certain collective
bargaining agreements have expired or are on indefinite extensions or
are scheduled to expire in the near future; failure to fully realize
or delay in realizing growth prospects for existing or new business
ventures, including our Blackhawk and Property Development Centers
subsidiaries; legislative, regulatory, tax, accounting or judicial
developments, including with respect to Blackhawk; the cost and
stability of fuel, energy and other power sources; the impact of the
cost of fuel on gross margin and identical-store sales; discount
rates used in actuarial calculations for pension obligations and
self-insurance reserves; the rate of return on our pension assets;
the availability and terms of financing, including interest rates;
adverse developments with regard to food and drug safety and quality
issues or concerns that may arise; loss of a key member of senior
management; data security or other information technology issues that
may arise; unanticipated events or changes in real estate matters,
including acquisitions, dispositions and impairments; adverse weather
conditions and effects from natural disasters; performance in new
business ventures or other opportunities that we pursue; and the
capital investment in and financial results from our Lifestyle
stores. We undertake no obligation to update forward-looking
statements to reflect developments or information obtained after the
date hereof and disclaim any obligation to do so. Please refer to our
reports and filings with the Securities and Exchange Commission,
including our most recent Annual Report on Form 10-K and subsequent
Current Reports on Form 8-K, for a further discussion of these risks
and uncertainties. 


 
                                                                            
                                                                            
                       SAFEWAY INC. AND SUBSIDIARIES                        
                     CONSOLIDATED STATEMENTS OF INCOME                      
                  (In millions, except per-share amounts)                   
                                (Unaudited)                                 
                                                                            
                                                      12 Weeks Ended        
                                               ---------------------------- 
                                                 March 23,      March 24,   
                                                    2013           2012     
                                               -------------  ------------- 
                                                                            
Sales and other revenue                        $     9,994.0  $    10,003.0 
Cost of goods sold                                  (7,325.5)      (7,317.8)
                                               -------------  ------------- 
Gross profit                                         2,668.5        2,685.2 
Operating and administrative expense                (2,488.7)      (2,495.4)
                                               -------------  ------------- 
Operating profit                                       179.8          189.8 
Interest expense                                       (65.0)         (71.4)
Other income, net                                        6.6            5.3 
                                               -------------  ------------- 
Income before income taxes                             121.4          123.7 
Income taxes                                            (2.6)         (42.1)
                                               -------------  ------------- 
Income from continuing operations, net of tax          118.8           81.6 
Loss from discontinued operations, net of tax             --           (8.6)
                                               -------------  ------------- 
Net income before allocation to noncontrolling                              
 interests                                             118.8           73.0 
Noncontrolling interests                                 0.1           (0.1)
                                               -------------  ------------- 
Net income attributable to Safeway Inc.        $       118.9  $        72.9 
                                               =============  ============= 
                                                                            
Basic earnings (loss) per common share:                                     
  Continuing operations                        $        0.50  $        0.30 
  Discontinued operations                                 --          (0.03)
                                               -------------  ------------- 
  Total                                        $        0.50  $        0.27 
                                               =============  ============= 
Diluted earnings (loss) per common share:                                   
  Continuing operations                        $        0.49  $        0.30 
  Discontinued operations                                 --          (0.03)
                                               -------------  ------------- 
  Total                                        $        0.49  $        0.27 
                                               =============  ============= 
Weighted average shares outstanding:                                        
  Basic                                                237.4          271.4 
                                               =============  ============= 
  Diluted                                              238.6          271.9 
                                               =============  ============= 
                                               
                             
                                                                            
                                                                            
                       SAFEWAY INC. AND SUBSIDIARIES                        
                   CONDENSED CONSOLIDATED BALANCE SHEETS                    
                  (In millions, except per-share amounts)                   
                                (Unaudited)                                 
                                                                            
                                                  March 23,      Year-end   
                                                     2013          2012     
                                                -------------  ------------ 
ASSETS                                                                      
Current assets:                                                             
  Cash and equivalents                          $       295.0  $      352.2 
  Receivables                                           592.8         909.0 
  Merchandise inventories                             2,885.0       2,562.0 
  Prepaid expense and other current assets              434.9         344.7 
                                                -------------  ------------ 
  Total current assets                                4,207.7       4,167.9 
Total property, net                                   9,068.5       9,224.6 
Goodwill                                                468.9         471.5 
Investment in unconsolidated affiliate                  192.2         191.7 
Other assets                                            506.0         601.3 
                                                -------------  ------------ 
Total assets                                    $    14,443.3  $   14,657.0 
                                                =============  ============ 
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Current liabilities:                                                        
  Current maturities of notes and debentures    $       832.5  $      294.0 
  Current obligations under capital leases               38.3          36.2 
  Accounts payable                                    2,389.3       3,125.0 
  Accrued salaries and wages                            425.3         460.9 
  Deferred income taxes                                  45.7          45.7 
  Other accrued liabilities                             575.2         643.8 
                                                -------------  ------------ 
  Total current liabilities                           4,306.3       4,605.6 
Long-term debt:                                                             
  Notes and debentures                                4,899.2       4,831.9 
  Obligations under capital leases                      402.4         411.6 
                                                -------------  ------------ 
  Total long-term debt                                5,301.6       5,243.5 
Deferred income taxes                                   187.4         178.5 
Pension and post-retirement benefit obligations         879.4         914.5 
Accrued claims and other liabilities                    772.8         781.5 
                                                -------------  ------------ 
Total liabilities                                    11,447.5      11,723.6 
                                                                            
Stockholders' equity:                                                       
  Common stock: par value $0.01 per share;                                  
   1,500 shares authorized; 607.1 and 605.3                                 
   shares issued                                          6.1           6.1 
  Additional paid-in capital                          4,517.0       4,505.6 
  Treasury stock at cost: 366.1 and 365.8                                   
   shares                                            (9,128.8)     (9,119.8)
  Accumulated other comprehensive loss                  (90.3)        (73.8)
  Retained earnings                                   7,686.5       7,609.8 
                                                -------------  ------------ 
    Total Safeway Inc. equity                         2,990.5       2,927.9 
  Noncontrolling interests                                5.3           5.5 
                                                -------------  ------------ 
Total equity                                          2,995.8       2,933.4 
                                                -------------  ------------ 
Total liabilities and stockholders' equity      $    14,443.3  $   14,657.0 
                                                =============  ============ 
                                                                            
                                                                            
                                                                            
                       SAFEWAY INC. AND SUBSIDIARIES                        
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS               
                          (In millions, unaudited)                          
                                                                            
                                                      12 Weeks Ended        
                                               ---------------------------- 
                                                 March 23,      March 24,   
                                                    2013           2012     
                                               -------------  ------------- 
OPERATING ACTIVITIES:                                                       
Net income before allocation to noncontrolling                              
 interest                                      $       118.8  $        73.0 
Loss from discontinued operations, net of tax             --            8.6 
                                               -------------  ------------- 
  Income from continuing operations, net of                                 
   tax                                                 118.8           81.6 
Reconciliation to net cash flow used by                                     
 operating activities:                                                      
  Depreciation expense                                 251.1          265.8 
  Property impairment charges                           12.1           13.5 
  Share-based employee compensation                     13.6           11.0 
  LIFO expense                                            --            0.5 
  Equity in earnings of unconsolidated                                      
   affiliate                                            (4.4)          (3.2)
  Net pension and post-retirement benefits                                  
   expense                                              30.7           32.9 
  Contributions to pension and post-retirement                              
   benefit plans                                       (35.3)         (29.9)
  Loss (gain) on property dispositions and                                  
   lease exit costs, net                                 0.9           (8.0)
  (Decrease) increase in accrued claims and                                 
   other liabilities                                    (8.5)           2.4 
  Deferred income taxes                                (17.2)            -- 
  Other                                                 10.0            5.5 
  Changes in working capital items:                                         
    Receivables                                         28.6           19.7 
    Inventories at FIFO cost                          (335.7)        (378.0)
    Prepaid expenses and other current assets    
      (19.9)          (3.6)
    Income taxes                                       (70.7)         (17.2)
    Payables and accruals                               71.0           55.8 
    Payables related to third-party gift                                    
     cards, net of receivables                        (600.3)        (590.6)
                                               -------------  ------------- 
      Net cash flow used by operating                                       
       activities                                     (555.2)        (541.8)
                                               -------------  ------------- 
                                                                            
INVESTING ACTIVITIES:                                                       
Cash paid for property additions                      (144.9)        (308.4)
Proceeds from sale of property                           8.1           48.8 
Proceeds from company-owned life insurance                                  
 policies                                               68.7             -- 
Other                                                   (3.5)         (13.4)
                                               -------------  ------------- 
      Net cash used by investing activities            (71.6)        (273.0)
                                               -------------  ------------- 
                                                                            
FINANCING ACTIVITIES:                                                       
Additions to long-term borrowings                      614.9        1,277.0 
Payments on long-term borrowings                        (8.5)         (21.2)
Purchase of treasury stock                                --         (990.0)
Dividends paid                                         (41.9)         (43.8)
Net proceeds from exercise of stock options             14.5            3.7 
Other                                                   (7.9)          (5.1)
                                               -------------  ------------- 
      Net cash flow provided by financing                                   
       activities                                      571.1          220.6 
                                               -------------  ------------- 
Effect of changes in exchange rates on cash             (1.5)          (0.7)
                                               -------------  ------------- 
Decrease in cash and equivalents                       (57.2)        (594.9)
                                                                            
CASH AND EQUIVALENTS                                                        
Beginning of year                                      352.2          729.4 
                                               -------------  ------------- 
End of quarter                                 $       295.0  $       134.5 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
                       SAFEWAY INC. AND SUBSIDIARIES                        
                          SUPPLEMENTAL INFORMATION                          
                           (Dollars in millions)                            
                                (Unaudited)                                 
                                                                            
                                      12 Weeks Ended                        
                                  ---------------------                     
TABLE 1: CAPITAL EXPENDITURES AND March 23,   March 24,                     
 OTHER STATISTICAL DATA              2013        2012                       
                                  ---------   ---------                     
                                                                            
Cash paid for capital                                                       
 expenditures                     $   144.9   $   308.4                     
Stores opened                            --           4                     
Stores closed                             3           7                     
Lifestyle remodels completed              1          --                     
Stores at end of period               1,638       1,675                     
Square footage (in millions)           77.4        79.1                     
Fuel sales                        $ 1,039.2   $ 1,096.5                     
Number of fuel stations at end of                                           
 period                                 410         402                     
Decrease in sales from change in                                            
 Canadian exchange rate           $   (10.8)  $   (23.9)                    
                                                                            
TABLE 2: RECONCILIATION OF NET INCOME ATTRIBUTABLE TO SAFEWAY INC. TO       
ADJUSTED EBITDA                                                             
                                                                            
                                   Rolling                                  
                                     Four                12 Weeks  12 Weeks 
                                   Quarters                Ended     Ended  
                                  March 23,     Fiscal     March     March  
                                     2013     Year 2012  23, 2013  24, 2012 
                                  ---------   ---------  --------  -------- 
Net income attributable to                                                  
 Safeway Inc.                     $   642.5   $   596.5  $  118.9  $   72.9 
Add (subtract):                                                             
  Property impairment charges and                                           
   tax benefit from discontinued                                            
   operations                          25.9        27.7        --       1.8 
  Income taxes                        222.7       262.2       2.6      42.1 
  Interest expense                    297.6       304.0      65.0      71.4 
  Depreciation expense              1,119.6     1,134.3     251.1     265.8 
  LIFO expense                          0.2         0.7        --       0.5 
  Share-based employee                                                      
   compensation                        57.7        55.1      13.6      11.0 
  Property impairment charges          45.1        46.5      12.1      13.5 
  Equity in earnings of                                                     
   unconsolidated affiliate           (18.7)      (17.5)     (4.4)     (3.2)
  Dividend from unconsolidated                                              
   affiliate                            4.5         0.7       3.8        -- 
                                  ---------   ---------  --------  -------- 
Adjusted EBITDA                   $ 2,397.1   $ 2,410.2  $  462.7  $  475.8 
                                  =========   =========  ========  ======== 
                                                                            
Total debt at March 23, 2013      $ 6,172.4                                 
Less cash and equivalents in                                                
 excess of $75.0 at March 23,                                               
 2013                                 220.0                                 
                                  ---------                                 
Adjusted Debt, as defined by bank                                           
 credit agreement                 $ 5,952.4                                 
                                  =========                                 
                                                   
                         
Adjusted EBITDA as a multiple of                                            
 interest expense                      8.05  x                              
Minimum Adjusted EBITDA as a                                                
 multiple of interest expense                                               
 under bank credit agreement           2.00  x                              
                                                                            
Adjusted Debt to Adjusted EBITDA       2.48  x                              
Maximum 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 FROM OPERATING ACTIVITIES TO       
 ADJUSTED EBITDA                                                            
                                                                            
                                      Rolling                               
                                       Four              12 Weeks  12 Weeks 
                                     Quarters   Fiscal     Ended     Ended  
                                       March     Year      March     March  
                                     23, 2013    2012    23, 2013  24, 2012 
                                     --------  --------  --------  -------- 
                                                                            
Net cash flow provided (used) by                                            
 operating activities                $1,556.3  $1,569.7  $ (555.2) $ (541.8)
Add (subtract):                                                             
  Income taxes                          222.7     262.2       2.6      42.1 
  Interest expense                      297.6     304.0      65.0      71.4 
  Deferred income taxes                  53.2      36.0      17.2        -- 
  Net pension and post-retirement                                           
   benefits expense                    (148.6)   (150.8)    (30.7)    (32.9)
  Contributions to pension and post-                                        
   retirement benefit plans             164.9     159.5      35.3      29.9 
  (Increase) decrease in accrued                                            
   claims and other liabilities         (33.9)    (44.8)      8.5      (2.4)
  Gain (loss) on property                                                   
   dispositions and lease exit costs,                                       
   net                                   70.2      79.1      (0.9)      8.0 
  Changes in working capital items      161.1     148.0     927.0     913.9 
  Lease exit costs from discontinued                                        
   operations                            66.4      59.6        --      (6.8)
  Other                                 (12.8)    (12.3)     (6.1)     (5.6)
                                     --------  --------  --------  -------- 
Adjusted EBITDA                      $2,397.1  $2,410.2  $  462.7  $  475.8 
                                     ========  ========  ========  ======== 
                                                                            
TABLE 4: RECONCILIATION OF GAAP CASH FLOW MEASURE TO FREE CASH              
 FLOW                                                                       
                                                                            
                                        12 Weeks Ended                      
                                     ------------------                     
                                       March     March     Forecasted Range 
                                     23, 2013  24, 2012      Fiscal 2013    
                                     --------  --------  ------------------ 
Net cash flow used by operating                                             
 activities, as reported             $ (555.2) $ (541.8)                    
Decrease in payables related to                                             
 third-party gift cards, net of                                             
 receivables                            600.3     590.6                     
                                     --------  --------                     
Net cash flow from operating                                                
 activities, as adjusted                 45.1      48.8  $1,700.0  $1,900.0 
Net cash flow used by investing                                             
 activities, as reported                (71.6)   (273.0)   (850.0)   (950.0)
                                     --------  --------  --------  -------- 
Free cash flow                       $  (26.5) $ (224.2) $  850.0  $  950.0 
                                     ========  ========  ========  ======== 
                                                                            
                                                                            
                                                                            
                       SAFEWAY INC. AND SUBSIDIARIES                        
                          SUPPLEMENTAL INFORMATION                          
                                (Unaudited)                                 
                                                                            
TABLE 5: IDENTICAL-STORE SALES*                                             
                                                      First                 
                                                     Quarter                
                                                      2013                  
                                                   ----------               
                                                                            
Including fuel sales                                      0.7%              
Excluding fuel sales                                      1.5%              
                                                                            
* 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.                                                                
                                                                            
                                                                            
TABLE 6: RECONCILIATION OF FIRST QUARTER 2013 INCOME TAX RATE, AS REPORTED, 
TO INCOME TAX RATE EXCLUDING TAX BENEFIT FROM COLI AND SETTLEMENT OF        
FEDERAL INCOME TAX MATTERS                                                  
                                                                    First   
                                                                   Quarter  
                                                                    2013    
                                                                ----------- 
                                                                            
Income tax rate, as reported                                            2.1%
Deferred taxes reversed on COLI policies             
                  14.1%
Settlement of federal income tax matters                               13.8%
                                                                ----------- 
Income tax rate, as adjusted                                           30.0%
                                                                =========== 
                                                                            
TABLE 7: RECONCILIATION OF FIRST QUARTER 2013 EARNINGS PER DILUTED SHARE,   
AS REPORTED, TO EARNINGS PER DILUTED SHARE EXCLUDING TAX BENEFIT FROM COLI  
AND SETTLEMENT OF FEDERAL INCOME TAX MATTERS                                
                                                                    First   
                                                                   Quarter  
                                                                    2013    
                                                                ----------- 
Earnings per diluted share, as reported                         $      0.49 
Deferred taxes reversed on COLI policies                              (0.07)
Settlement of federal income tax matters                              (0.07)
                                                                ----------- 
Earnings per diluted share, as adjusted                         $      0.35 
                                                                =========== 

  
Contact:
Melissa Plaisance
(925) 467-3136 
Christiane Pelz
(925) 467-3832