Safeway Inc. Announces Second Quarter 2013 Results

Safeway Inc. Announces Second Quarter 2013 Results 
Income From Continuing Operations Increased 22%; Reports Adjusted
Diluted Earnings per Share of $0.51 
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.  
Discontinued Operations
 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 
 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. 
Continuing Operations 
Sales and Other Revenue
 Sales and other revenue declined 1.6% to
$8.7 billion in the second quarter of 2013 from $8.8 billion in the
second quarter of 2012, primarily due to lower fuel sales in 2013 and
the disposition of Genuardi's stores in 2012, partly offset by an
identical-store sales (excluding fuel) increase of 1.2%.  
Gross Profit
 Gross profit increased 29 basis points to 26.23% of
sales in the second quarter of 2013 compared to 25.94% of sales in
the second quarter of 2012. Excluding the 32 basis-point impact from
fuel sales, gross profit declined three basis points due primarily to
shrink expense, investments in price and increased revenue from
Blackhawk (which is a lower margin business), partly offset by
reduced advertising expense.  
Operating and Administrative Expense
 Operating and administrative
expense increased 28 basis points to 24.65% of sales in the second
quarter of 2013 from 24.37% of sales in the second quarter of 2012.
Excluding the 49 basis-point impact of lower fuel sales, operating
and administrative expense decreased 21 basis points, primarily due
to lower property impairment charges and store occupancy expense,
partly offset by $17.0 million of increased legal reserves, and
increased labor costs. 
Operating Profit
 Operating profit margin increased two basis points
to 1.59% in the second quarter of 2013 from 1.57% in the second
quarter of 2012. Excluding fuel, operating profit increased 18 basis
points.  
Interest Expense
 Interest expense declined to $64.4 million in the
second quarter of 2013 from $73.1 million in the second quarter of
2012 because of a $777 million decline in average borrowings.  
Other Income, net
 Other income increased to $16.8 million in the
second quarter of 2013 from $3.9 million in the second quarter of
2012 primarily due to an $8.5 million gain on the sale of investments
and a $4.3 million increase in earnings from our equity investment in
Casa Ley. 
Income Taxes
 Income tax expense on continuing operations increased
to 35.8% of pre-tax income in the second quarter of 2013 from 31.5%
in the second quarter of 2012 due to individually immaterial items
that reduced the 2012 tax rate. The tax rate on continuing operations
is expected to be approximately 29% for the full year 2013 and
approximately 35% for the remainder of 2013. 
24-Week Results
 Income from continuing operations increased to
$113.0 million ($0.47 per diluted share) in the first 24 weeks of
2013, compared to $77.8 million ($0.30 per diluted share) in the
first 24 weeks of 2012.  
Sales and other revenue declined 0.8% to $17.2 billion in the first
24 weeks of 2013 from $17.3 billion in the first 24 weeks of 2012
primarily due to lower fuel sales in 2013 and the disposition of
Genuardi's stores in 2012, partly offset by an identical-store sales
(excluding fuel) increase of 1.5%. 
The gross profit margin was 26.38% in the first 24 weeks of 2013
compared to 26.29% in the first 24 weeks of 2012. Operating and
administrative expense margin was 24.96% of sales in the first 24
weeks of 2013 compared to 24.85% in the first 24 weeks of 2012.  
Interest expense declined $15.2 million to $128.8 million in the
first 24 weeks of 2013 from $144.0 million in the first 24 weeks of
2012 due to a decline in average borrowings.  
Other income increased to $23.1 million in the first 24 weeks of 2013
from $9.1 million in the first 24 weeks of 2012 due primarily to an
$8.5 million gain on the sale of investments and a $5.4 million
increase in earnings from our equity investment in Casa Ley. 
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.  
Blackhawk IPO
 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. 
Cash Flow
 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. 
Capital Expenditures
 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. 
Stock Repurchases
 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. 
Guidance
 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

  
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 1,412 stores in the United States. 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 second-quarter results will be broadcast live over the
internet at www.safeway.com/investor_relations at 8:00 a.m. PT on
July 18, 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, EBITDA, income tax rates, the
timing of the tax payment on Safeway's proceeds from the sale of
Blackhawk common stock, free cash flow, store dispositions, capital
expenditures, estimated proceeds from the sale of our Canadian
operations, use of proceeds from the sale of our Canadian operations
and estimated timing of close of sale of our Canadian operations.
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 and center of store departments; the impact of generic
drugs on pharmacy sales and identical-store sales; 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 outcome of
the agreement to sell the net assets of Canada Safeway Limited to
Sobeys Inc. including: the possibility that the transaction may not
close, the possibility that events may transpire that will require
the transaction to be modified prior to or at closing, the ability to
use proceeds as anticipated, and the ability to project the impact of
the transaction on our ongoing operations; 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 retail 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, subsequent Quarterly Report
on Form 10-Q, and 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          24 Weeks Ended     
                             ----------------------  ---------------------- 
                              June 15,    June 16,    June 15,    June 16,  
                                2013        2012        2013        2012    
                             ----------  ----------  ----------  ---------- 
                                                                            
Sales and other revenue      $  8,696.1  $  8,833.9  $ 17,202.8  $ 17,337.8 
Cost of goods sold             (6,414.8)   (6,542.3)  (12,664.5)  (12,779.3)
                             ----------  ----------  ----------  ---------- 
Gross profit                    2,281.3     2,291.6     4,538.3     4,558.5 
Operating and administrative                                                
 expense                       (2,143.2)   (2,152.9)   (4,294.0)   (4,307.8)
                             ----------  ----------  ----------  ---------- 
Operating profit                  138.1       138.7       244.3       250.7 
Interest expense                  (64.4)      (73.1)     (128.8)     (144.0)
Other income, net                  16.8         3.9        23.1         9.1 
                             ----------  ----------  ----------  ---------- 
Income before income taxes         90.5        69.5       138.6       115.8 
Income taxes                      (32.4)      (21.9)      (25.6)      (38.0)
                             ----------  ----------  ----------  ---------- 
Income from continuing                                                      
 operations, net of tax            58.1        47.6       113.0        77.8 
(Loss) income from                                                          
 discontinued operations,                                                   
 net of tax                       (49.3)       75.3        14.6       118.0 
                             ----------  ----------  ----------  ---------- 
Net income before allocation                                                
 to noncontrolling interests        8.8       122.9       127.6       195.8 
Noncontrolling interests           (0.4)       (0.2)       (0.3)       (0.2)
                             ----------  ----------  ----------  ---------- 
Net income attributable to                                                  
 Safeway Inc.                $      8.4  $    122.7  $    127.3  $    195.6 
                             ==========  ==========  ==========  ========== 
                                                                            
Basic earnings (loss) per                                                   
 common share:                                                              
  Continuing operations      $     0.24  $     0.20  $     0.47  $     0.30 
  Discontinued operations         (0.21)       0.31        0.06        0.46 
                             ----------  ----------  ----------  ---------- 
  Total                      $     0.03  $     0.51  $     0.53  $     0.76 
                             ==========  ==========  ==========  ========== 
Diluted earnings (loss) per                                                 
 common share:                                                              
  Continuing operations      $     0.24  $     0.20  $     0.47  $     0.30 
  Discontinued operations         (0.21)       0.31        0.06        0.46 
                             ----------  ----------  ----------  ---------- 
  Total                      $     0.03  $     0.51  $     0.53  $     0.76 
                             ==========  ==========  ==========  ========== 
Weighted average shares                                                     
 outstanding:                                                               
    Basic                         238.7       239.5       238.0       255.5 
                             ==========  ==========  ==========  ========== 
    Diluted                       240.8       239.8       239.7       255.9 
                             ==========  ==========  ==========  ========== 
                                                                            
                                                                            
                                                                            
                       SAFEWAY INC. AND SUBSIDIARIES                        
                   CONDENSED CONSOLIDATED BALANCE SHEETS                    
                  (In millions, except per-share amounts)                   
                                (Unaudited)                                 
                                                                            
                                                     June 15,     Year-end  
                                                       2013         2012    
                                                   -----------  ----------- 
ASSETS                                                                      
Current assets:                                                             
  Cash and equivalents                             $     441.1  $     352.2 
  Receivables                                            612.3        909.0 
  Merchandise inventories                              2,455.7      2,562.0 
  Prepaid expense and other current assets               393.1        344.7 
  Assets held for sale                                 1,770.1           -- 
                                                   -----------  ----------- 
  Total current assets                                 5,672.3      4,167.9 
Total property, net                                    7,861.4      9,224.6 
Goodwill                                                 373.6        471.5 
Investment in unconsolidated affiliate                   198.7        191.7 
Other assets                                             448.7        601.3 
                                                   -----------  ----------- 
Total assets                                       $  14,554.7  $  14,657.0 
                                                   ===========  =========== 
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Current liabilities:                                                        
  Current maturities of notes and debentures       $   1,047.2  $     294.0 
  Current obligations under capital leases                41.0         36.2 
  Accounts payable                                     2,276.9      3,125.0 
  Accrued salaries and wages                             375.0        460.9 
  Deferred income taxes                                  156.9         45.7 
  Other accrued liabilities                              585.9        643.8 
  Liabilities held for sale                              648.5           -- 
                                                   -----------  ----------- 
  Total current liabilities                            5,131.4      4,605.6 
Long-term debt:                                                             
  Notes and debentures                                 4,230.6      4,831.9 
  Obligations under capital leases                       375.0        411.6 
                                                   -----------  ----------- 
  Total long-term debt                                 4,605.6      5,243.5 
Deferred income taxes                                    193.1        178.5 
Pension and post-retirement benefit obligations          677.7        914.5 
Accrued claims and other liabilities                     743.7        781.5 
                                                   -----------  ----------- 
Total liabilities                                     11,351.5     11,723.6 
                                                                            
Stockholders' equity:                                                       
  Common stock: par value $0.01 per share; 1,500                            
   shares authorized; 607.4 and 605.3 shares                                
   issued                                                  6.1          6.1 
  Additional paid-in capital                           4,723.6      4,505.6 
  Treasury stock at cost: 366.2 and 365.8 shares      (9,129.5)    (9,119.8)
  Accumulated other comprehensive loss                   (72.7)       (73.8)
  Retained earnings                                    7,646.7      7,609.8 
                                                   -----------  ----------- 
    Total Safeway Inc. equity                          3,174.2      2,927.9 
  Noncontrolling interests                                29.0          5.5 
                                                   -----------  ----------- 
Total equity                                           3,203.2      2,933.4 
                                                   -----------  ----------- 
Total liabilities and stockholders' equity         $  14,554.7  $  14,657.0 
                                                   ===========  =========== 
                                                                            
                                                                            
                                                                            
                       SAFEWAY INC. AND SUBSIDIARIES                        
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS               
                          (In millions, unaudited)                          
                                                                            
                                                         24 Weeks Ended     
                                                     ---------------------- 
                                                      June 15,    June 16,  
                                                        2013        2012    
                                                     ----------  ---------- 
OPERATING ACTIVITIES:                                                       
Net income before allocation to noncontrolling                              
 interest                                            $    127.6  $    195.8 
Income from discontinued operations, net of tax           (14.6)     (118.0)
                                                     ----------  ---------- 
  Income from continuing operations, net of tax           113.0        77.8 
Reconciliation to net cash flow (used) provided by                          
 operating activities:                                                      
  Depreciation expense                                    446.2       467.1 
  Property impairment charges                              15.6        28.3 
  Share-based employee compensation                        25.4        23.6 
  LIFO expense                                               --         0.6 
  Equity in earnings of unconsolidated affiliate          (10.8)       (5.4)
  Net pension and post-retirement benefits expense         53.0        58.0 
  Contributions to pension and post-retirement                              
   benefit plans                                          (39.7)      (46.0)
  Gain on property dispositions and lease exit                              
   costs, net                                              (5.3)       (6.7)
  Increase (decrease) in accrued claims and other                           
   liabilities                                             15.3        (1.6)
  Deferred income taxes                                   (17.2)         -- 
  Other                                                    (8.9)       11.0 
  Changes in working capital items:                                         
    Receivables                                              --         1.8 
    Inventories at FIFO cost                             (338.0)     (372.0)
    Prepaid expenses and other current assets             (21.4)        7.7 
    Income taxes                                          (30.6)      (72.5)
    Payables and accruals                                 173.8       148.8 
    Payables related to third-party gift cards, net                         
     of receivables                                      (531.8)     (531.6)
                                                     ----------  ---------- 
      Net cash flow used by operating activities -                          
       continuing operations                             (161.4)     (211.1)
      Net cash flow provided by operating activities                        
       - discontinued operations                          139.2       120.3 
                                                     ----------  ---------- 
      Net cash flow used by operating activities          (22.2)      (90.8)
                                                     ----------  ---------- 
                                                                            
INVESTING ACTIVITIES:                                                       
Cash paid for property additions                         (256.7)     (490.0)
Proceeds from sale of property                             39.5        58.5 
Proceeds from company-owned life insurance policies        68.7          -- 
Other                                                     (12.1)      (16.9)
                                                     ----------  ---------- 
      Net cash used by investing activities -                               
       continuing operations                             (160.6)     (448.4)
      Net cash used by investing activities -                               
       discontinued operations                            (29.7)      (16.5)
                                                     ----------  ---------- 
      Net cash used by investing activities              (190.3)     (464.9)
                                                     ----------  ---------- 
                                                                            
                                                                            
                                                                            
                       SAFEWAY INC. AND SUBSIDIARIES                        
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS               
                          (In millions, unaudited)                          
                                                                            
                                                         24 Weeks Ended     
                                                     ---------------------- 
                                                      June 15,    June 16,  
                                                        2013        2012    
                                                     ----------  ---------- 
FINANCING ACTIVITIES:                                                       
Additions to long-term borrowings                         614.6     1,926.9 
Payments on long-term borrowings                         (468.8)     (449.0)
Proceeds from the sale of Blackhawk stock                 237.9          -- 
Purchase of treasury stock                                   --    (1,274.5)
Dividends paid                                            (84.1)      (80.1)
Net proceeds from exercise of stock options                22.3         3.8 
Other                                                     (10.3)       (6.5)
                                                     ----------  ---------- 
      Net cash flow provided by financing activities                        
       - continuing operations                            311.6       120.6 
      Net cash flow used by financing activities -                          
       discontinued operations                             (1.6)      (40.6)
                                                     ----------  ---------- 
      Net cash flow provided by financing activities      310.0        80.0 
                                                     ----------  ---------- 
                                                                            
Effect of changes in exchange rates on cash                (3.1)       (1.2)
                                                     ----------  ---------- 
Increase in cash and equivalents                           94.4      (476.9)
                                                                            
CASH AND EQUIVALENTS:                                                       
Beginning of year                                         352.2       729.4 
                                                     ----------  ---------- 
End of quarter                                            446.6       252.5 
Less cash held for sale                                    (5.5)         -- 
                                                     ----------  ---------- 
Cash and cash equivalents, excluding held for sale   $    441.1  $    252.5 
                                                     ==========  ========== 
                                                                            
                                                                            
                                                                            
                        SAFEWAY INC. AND SUBSIDIARIES                       
                          SUPPLEMENTAL INFORMATION                          
                            (Dollars in millions)                           
                                 (Unaudited)                                
                                                                            
TABLE 1: CAPITAL EXPENDITURES AND                                           
 OTHER STATISTICAL DATA                        Continuing Operations        
                                      --------------------------------------
                                        12 Weeks Ended      24 Weeks Ended  
                                      ------------------  ------------------
                                      June 15,  June 16,  June 15,  June 16,
                                        2013      2012      2013      2012  
                                      --------  --------  --------  --------
                                                                            
Cash paid for capital expenditures    $  125.4  $  203.7  $  256.7  $  490.0
Stores opened                                1         1         1         5
Stores closed                                4        10         7        17
Remodels completed                           3         1         4         1
Stores at end of period                  1,412     1,441                    
Square footage (in millions)              68.1      69.3                    
Fuel sales                            $1,031.4  $1,199.5  $1,995.9  $2,222.0
Number of fuel stations at end of                                           
 period                                    348       343                    
                                                                            
                                                                            
                                                                            
TABLE 2: IDENTICAL-STORE SALES *                                            
                                             Continuing Operations          
                                   ---------------------------------------- 
                                      12 Weeks Ended       24 Weeks Ended   
                                      June 15, 2013       June 15, 2013**   
                                   -------------------  ------------------- 
Including fuel sales                              -1.0%                -0.1%
Excluding fuel sales                               1.2%                 1.5%
                                                                            
*  Identical-store sales (ID Sales) are 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. Excludes replacement 
   stores and discontinued operations.                                      
                                                                            
** ID sales for the first 24 weeks of 2013 were increased by 25 basis points
   due to the New Years Eve holiday shift in the first quarter of 2013.     
                                                                            
                                                                            
                                                                            
                       SAFEWAY INC. AND SUBSIDIARIES                        
                          SUPPLEMENTAL INFORMATION                          
                           (Dollars in millions)                            
                                (Unaudited)                                 
                                                                            
TABLE 3: RECONCILIATION OF CASH FLOW FROM OPERATING ACTIVITIES TO FREE CASH 
 FLOW                                                                       
                                                      Continuing Operations 
                                                         24 Weeks Ended     
                                                     ---------------------- 
                                                      June 15,    June 16,  
                                                        2013        2012    
                                                     ----------  ---------- 
Net cash flow used by operating activities, as                              
 reported                                            $   (161.4) $   (211.1)
Decrease in payables related to third-party gift                            
 cards, net of receivables                                531.8       531.6 
                                                     ----------  ---------- 
Net cash flow provided by operating activities, as                          
 adjusted                                                 370.4       320.5 
Net cash flow used by investing activities, as                              
 reported                                                (160.6)     (448.4)
                                                     ----------  ---------- 
Free cash flow                                       $    209.8  $   (127.9)
                                                     ==========  ========== 
                                                                            
                                                                            
                                                      Continuing Operations 
                                                        Forecasted Range    
                                                           Fiscal 2013      
                                                     ---------------------- 
Net cash flow from operating activities, as                                 
 adjusted                                            $  1,300.0  $  1,500.0 
Net cash flow used by investing activities, as                              
 reported                                                (700.0)     (800.0)
                                                     ----------  ---------- 
Free cash flow                                       $    600.0  $    700.0 
                                                     ==========  ========== 
                                                                            
                                                                            
                                                                            
TABLE 4: RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS, NET OF TAX TO 
 ADJUSTED EBITDA                                                            
                                                                            
                                          Continuing Operations             
                             ---------------------------------------------- 
                               Rolling                24 Weeks    24 Weeks  
                                Four                    Ended       Ended   
                              Quarters                                      
                              June 15,     Fiscal     June 15,    June 16,  
                                2013      Year 2012     2013        2012    
                             ----------  ----------  ----------  ---------- 
Income from continuing                                                      
 operations, net of tax      $    310.0  $    274.8  $    113.0  $     77.8 
Add (subtract):                                                             
  Noncontrolling interests         (1.7)       (1.6)       (0.3)       (0.2)
  Income taxes                    111.0       123.4        25.6        38.0 
  Interest expense                286.5       301.7       128.8       144.0 
  Depreciation expense            983.5     1,004.4       446.2       467.1 
  LIFO expense                      0.1         0.7          --         0.6 
  Share-based employee                                                      
   compensation                    55.4        53.6        25.4        23.6 
  Property impairment                                                       
   charges                         33.6        46.3        15.6        28.3 
  Equity in earnings of                                                     
   unconsolidated affiliate       (22.9)      (17.5)      (10.8)       (5.4)
  Dividend from                                                             
   unconsolidated affiliate         4.5         0.7         3.8          -- 
                             ----------  ----------  ----------  ---------- 
Adjusted EBITDA              $  1,760.0  $  1,786.5  $    747.3  $    773.8 
(Gain) loss from legal                                                      
 settlements/reserves             (29.5)      (46.5)       17.0          -- 
Gain on sale of equity                                                      
 investments                       (8.5)         --        (8.5)         -- 
                             ----------  ----------  ----------  ---------- 
Pro forma adjusted EBITDA    $  1,722.0  $  1,740.0  $    755.8  $    773.8 
                             ==========  ==========  ==========  ========== 
                                                                            
                                                                            
                                                                            

 
                        SAFEWAY INC. AND SUBSIDIARIES                       
                          SUPPLEMENTAL INFORMATION                          
                            (Dollars in millions)                           
                                 (Unaudited)                                
                                                                            
TABLE 5: ASSETS AND LIABILITIES HELD FOR SALE                               
                                                                            
                                                               June 15, 2013
                                                               -------------
Assets held for sale:                                                       
  CSL                                                                       
    Cash in stores                                             $         5.5
    Receivables                                                         67.3
    Merchandise inventories                                            434.8
    Prepaid and other current assets                                    24.9
    Net property, plant and equipment                                1,111.6
    Goodwill                                                            95.4
    Other assets                                                         4.4
                                                               -------------
    Total CSL assets held for sale                             $     1,743.9
  Other United States real estate assets held for sale                  26.2
                                                               -------------
  Total assets held for sale                                   $     1,770.1
                                                               =============
                                                                            
Liabilities held for sale:                                                  
  CSL                                                                       
    Obligations under capital leases                           $        39.7
    Accounts payable                                                   267.7
    Accrued salaries and wages                                          71.6
    Other accrued liabilities                                           50.7
    Pension and post-retirement benefit obligations                    188.2
    Accrued claims and other liabilities                                30.6
                                                               -------------
  Total liabilities held for sale                              $       648.5
                                                               =============
                                                                            
                                                                            
                                                                            
                        SAFEWAY INC. AND SUBSIDIARIES                       
                          SUPPLEMENTAL INFORMATION                          
               (Dollars in millions, except per-share amounts)              
                                 (Unaudited)                                
                                                                            
TABLE 6: RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS, AS REPORTED,  
 TO INCOME FROM CONTINUING OPERATIONS ADJUSTED FOR UNUSUAL CHARGES          
                                                                            
                               12 Weeks Ended June     24 Weeks Ended June  
                                    15, 2013                15, 2013        
                             ----------------------  ---------------------- 
                                           Diluted                 Diluted  
                               Dollars       EPS       Dollars       EPS    
                             ----------  ----------  ----------  ---------- 
Income from continuing                                                      
 operations, net of tax, as                                                 
 reported                    $     58.1  $     0.24  $    113.0  $     0.47 
Deferred taxes reversed on                                                  
 COLI policies                       --          --       (17.2)      (0.07)
Reduction of tax expense due                                                
 to resolution of federal                                                   
 income tax matters                  --          --        (5.0)      (0.02)
Charges for legal reserves,                                                 
 net of $6.6 tax benefit           10.4        0.04        10.4        0.04 
Blackhawk distribution                                                      
 expense triggered by IPO,                                                  
 net of $0.9 tax benefit            4.8        0.02         4.8        0.01 
Gain on sale of investments,                                                
 net of $3.3 tax expense           (5.2)      (0.02)       (5.2)      (0.02)
                             ----------  ----------  ----------  ---------- 
Income from continuing                                                      
 operations, net of tax, as                                                 
 adjusted                    $     68.1  $     0.28  $    100.8  $     0.41 
                             ==========  ==========  ==========  ========== 
                                                                            
Percentage growth over 2012          43%         40%         30%         37%
                             ==========  ==========  ==========  ========== 
                                                                            
                                                                            
                                                                            
                        SAFEWAY INC. AND SUBSIDIARIES                       
                          SUPPLEMENTAL INFORMATION                          
               (Dollars in millions, except per-share amounts)              
                                 (Unaudited)                                
                                                                            
TABLE 7: RECONCILIATION OF (LOSS) INCOME FROM DISCONTINUED OPERATIONS, AS   
 REPORTED TO DISCONTINUED OPERATIONS, AS ADJUSTED                           
                                                                            
                                             Discontinued Operations        
                                     -------------------------------------- 
                                       12 weeks ended      24 weeks ended   
                                     ------------------  ------------------ 
                                     June 15,  June 16,  June 15,  June 16, 
                                       2013      2012      2013      2012   
                                     --------  --------  --------  -------- 
CSL                                                                         
  Sales and other revenue            $1,522.3  $1,558.2  $3,015.5  $3,063.1 
                                     ========  ========  ========  ======== 
                                                                            
  Income from discontinued                                                  
   operations of CSL before income                                          
   taxes                             $   84.7  $  108.1  $  158.1  $  185.5 
  Income tax expense                   (134.0)    (34.0)   (143.5)    (60.0)
                                     --------  --------  --------  -------- 
  (Loss) income from discontinued                                           
   operations of CSL, net of income                                         
   taxes                                (49.3)     74.1      14.6     125.5 
Genuardi's                                                                  
  Gain on property dispositions,                                            
   lease exit costs and property                                            
   impairment charges                      --       2.0        --     (12.2)
  Income tax (expense) benefit             --      (0.8)       --       4.7 
                                     --------  --------  --------  -------- 
  Gain (loss) from discontinued                                             
   operations of Genuardi's                --       1.2        --      (7.5)
(Loss) income from discontinued                                             
 operations, net of income taxes, as                                        
 reported                            $  (49.3) $   75.3  $   14.6  $  118.0 
Tax charge on Canada earnings,                                              
 previously considered indefinitely                                         
 invested in Canada                     106.7        --     106.7        -- 
Reduction of tax expense due to                                             
 resolution of federal tax matters         --        --     (11.7)       -- 
                                     --------  --------  --------  -------- 
Income from discontinued operations,                                        
 net of income taxes, as adjusted    $   57.4  $   75.3  $  109.6  $  118.0 
                                     ========  ========  ========  ======== 
                                                                            
Diluted (loss) earnings from                                                
 discontinued operations per common                                         
 share, as reported                  $  (0.21) $   0.31  $   0.06  $   0.46 
Tax charge on Canada earnings,                                              
 previously considered indefinitely                                         
 invested in Canada                      0.44        --      0.44        -- 
Reduction of tax expense due to                                             
 resolution of federal income tax                                           
 matters                                   --        --     (0.05)       -- 
                                     --------  --------  --------  -------- 
Diluted earnings from discontinued                                          
 operations per common share, as                                            
 adjusted                            $   0.23  $   0.31  $   0.45  $   0.46 
                                     ========  ========  ========  ======== 
                                                                            
                                                                            
                                                                            
                        SAFEWAY INC. AND SUBSIDIARIES                       
                          SUPPLEMENTAL INFORMATION                          
               (Dollars in millions, except per-share amounts)              
                                 (Unaudited)                                
                                                                            
TABLE 8: RECONCILIATION OF NET INCOME ATTRIBUTABLE TO SAFEWAY INC, AS       
 REPORTED TO NET INCOME ATTRIBUTABLE TO SAFEWAY INC, AS ADJUSTED            
                                                                            
                                                        Second Quarter 2013 
                                                       -------------------- 
                                                                   Diluted  
                                                        Dollars      EPS    
                                                       ---------  --------- 
Net income attributable to Safeway Inc., as reported   $     8.4  $    0.03 
Charges for legal reserves, net of $6.6 tax benefit         10.4       0.04 
Blackhawk expense triggered by IPO, net of $0.9 tax                         
 benefit                                                     4.8       0.02 
Gain on sale of investments, net of $3.3 tax expense        (5.2)     (0.02)
Tax charge on Canada earnings, previously considered                        
 indefinitely invested in Canada                           106.7       0.44 
                                                       ---------  --------- 
Net income attributable to Safeway Inc., as adjusted   $   125.1  $    0.51 
                                                       =========  ========= 
                                                                            
                                                                            
                                                                            
TABLE 9: RECONCILIATION OF 2013 DILUTED EARNINGS PER SHARE GUIDANCE TO      
 ADJUSTED GUIDANCE AND 2012 DILUTED EARNINGS PER SHARE TO ADJUSTED DILUTED  
 EARNINGS PER SHARE                                                         
                                                                            
                                                   Continuing Operations    
                                               ---------------------------- 
                                                           Guidance Fiscal  
                                                                2013        
                                                         ------------------ 
                                                 Fiscal                     
                                                  2012      Low      High   
                                               --------  --------  -------- 
Diluted earnings per share                     $   1.10  $   1.07  $   1.17 
Charges for legal reserves                           --      0.04      0.04 
Blackhawk expense triggered by IPO                   --      0.02      0.02 
Gain on sale of investments                          --     (0.02)    (0.02)
Deferred taxes reversed on COLI policies             --     (0.07)    (0.07)
Reduction of tax expense due to resolution of                               
 federal income tax matters                          --     (0.02)    (0.02)
Gain from legal settlements                       (0.11)       --        -- 
                                               --------  --------  -------- 
Adjusted diluted earnings per share            $   0.99  $   1.02  $   1.12 
                                               ========  ========  ======== 
                                                                            
                                                                            
                                                                            
TABLE 10: RECONCILIATION OF 2013 OPERATING PROFIT MARGIN GUIDANCE FROM      
 CONTINUING OPERATIONS TO ADJUSTED OPERATING PROFIT MARGIN GUIDANCE FROM    
 CONTINUING OPERATIONS                                                      
                                                                            
                                                      Guidance on Continuing
                                                      Operations Basis-Point
                                                           Improvement      
                                                     -----------------------
                                                         Low         High   
                                                     ----------- -----------
Operating profit margin basis-point improvement                8          18
Charges for legal reserves                                     5           5
Blackhawk expense triggered by IPO                             2           2
                                                     ----------- -----------
Operating profit margin basis-point improvement, as                         
 adjusted                                                     15          25
                                                     =========== ===========
                                                                            
                                                                            
                                                                            
                       SAFEWAY INC. AND SUBSIDIARIES                        
                          SUPPLEMENTAL INFORMATION                          
                           (Dollars in millions)                            
                                (Unaudited)                                 
                                                                            
TABLE 11: RECONCILIATION OF 2013 ADJUSTED EBITDA GUIDANCE                   
                                                                            
                                                     Guidance on Continuing 
                                                           Operations       
                                                    ----------------------- 
                                                        Low         High    
                                                    ----------- ----------- 
Adjusted EBITDA                                     $     1,685 $     1,715 
Charges for legal reserves                                   17          17 
Blackhawk expense triggered by IPO                            6           6 
Gain on sale of investments                                  (8)         (8)
                                                    ----------- ----------- 
Proforma adjusted EBITDA guidance                   $     1,700 $     1,730 
                                                    =========== =========== 

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