<PAGE> 1
Registration No. 33-33388
Rule 424(b)(3)
4,643,000 Shares
of Common Stock (par value $.01 per share)
Issuable upon Exercise of Common Stock Purchase Warrants
[SAFEWAY LOGO]
Safeway Inc.
This Prospectus relates to the offering by Safeway Inc., from time to
time, of 4,643,000 shares of its common stock, par value $.01 per share (the
"Common Stock"). The shares of Common Stock offered hereby are issuable upon the
exercise of warrants (the "Warrants") to purchase an aggregate of 4,643,000
shares of Common Stock (the "Warrant Shares"). On November 24, 1986, the
Company's predecessor, Safeway Stores, Incorporated, a Maryland corporation
("Predecessor"), was merged with a wholly owned subsidiary of the Company. Each
former shareholder of Predecessor received a pro rata share of Warrants to
purchase an aggregate of 4,643,000 shares of Common Stock of the Company for an
aggregate purchase price upon exercise of $17.5 million. Each Warrant represents
the right to purchase 0.279 shares of Common Stock for the warrant exercise
price of $1.052; and, as a result, one share of Common Stock will be issued upon
the exercise of 3.584 Warrants and a cash payment of $3.7691.
All the shares of Common Stock offered are being issued and sold by
Safeway.
The last reported sale price of the Warrants on the New York Stock
Exchange Composite Tape on July 13, 1995 was $9-1/4 per Warrant. The last
reported sale price of the Common Stock on the New York Stock Exchange Composite
Tape on July 13, 1995 was $37 per share.
SEE "RISK FACTORS" COMMENCING ON PAGE 5 FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
EXERCISE PRICE PROCEEDS TO
PER SHARE SAFEWAY
-------------- -----------
<S> <C> <C>
Per Share................................................... $3.7691 $3.7691
Total (1)................................................... $17,500,000 $17,500,000
</TABLE>
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(1) Of the 4,643,000 shares of Common Stock initially issuable upon exercise of
Warrants, through June 17, 1995, 3,707,845 shares of Common Stock had been
issued upon exercise of Warrants for an aggregate amount received upon
exercise of approximately $14 million.
The date of this Prospectus is July 14, 1995.
<PAGE> 2
AVAILABLE INFORMATION
Safeway has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus is a part)
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the securities offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. Statements contained in the Prospectus as to the contents of any
contract or other document are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference and the exhibits and schedules thereto. For
further information regarding Safeway and the Common Stock offered hereby,
reference is hereby made to the Registration Statement and such exhibits and
schedules which may be obtained from the Commission at its principal office in
Washington, D.C. upon payment of the fees prescribed by the Commission.
Safeway is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. The Registration Statement, the exhibits and schedules forming a
part thereof and the reports, proxy statements and other information filed by
Safeway with the Commission in accordance with the Exchange Act can be inspected
and copied at the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following regional offices of the
Commission: 7 World Trade Center, 13th Floor, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, Safeway Common Stock and Warrants are listed on the New York Stock
Exchange and the Pacific Stock Exchange and similar information concerning
Safeway can be inspected and copied at the New York Stock Exchange, 20 Broad
Street, New York, New York 10005 and the Pacific Stock Exchange, 301 Pine
Street, San Francisco, California 94104.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed with the Commission by
the Company are hereby incorporated by reference in this Prospectus:
(1) Safeway's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994.
(2) Safeway's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 25, 1995.
(3) Safeway's 1995 Proxy Statement.
(4) Safeway's Current Reports on Form 8-K dated March 29, 1995
and May 22, 1995.
(5) Description of Safeway's Common Stock contained in Safeway's
Registration Statement on Form 8-A filed with the Commission
on February 20, 1990, including the amendment on Form 8 dated
March 26, 1990.
All documents filed by Safeway pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act, subsequent to the date of this Prospectus and
prior to the filing of a post-effective amendment which indicates that all
securities offered have been sold or which deregisters all securities then
remaining unsold, shall be deemed incorporated by reference herein and to be a
part hereof from the date of filing such reports and documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the Prospectus.
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Copies of all documents which are incorporated herein by
reference (not including the exhibits to such information, unless such exhibits
are specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered, upon written or oral request. Copies of this
Prospectus, as amended or supplemented from time to time, any other documents
(or parts of documents) that constitute part of the Prospectus under Section
10(a) of the Securities Act and Safeway's Annual Report to Stockholders will
also be provided without charge to each such person, upon written or oral
request. Requests should be directed to Safeway Inc., Attention: Investor
Relations Department, Safeway Inc., Fourth and Jackson Streets, Oakland,
California 94660, telephone number (510) 891-3790.
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PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
more detailed information appearing elsewhere in this Prospectus or incorporated
herein by reference.
SAFEWAY
Safeway Inc. ("Safeway" or the "Company") is one of the world's largest
food retailers, operating approximately 1,062 stores in the United States and
Canada. U.S. retail operations are located in northern California, Oregon,
Washington, and the Rocky Mountain, Southwest and Mid-Atlantic regions. Canadian
retail operations are located principally in British Columbia, Alberta,
Saskatchewan and Manitoba. Safeway believes that it is among the market share
leaders in each of its nine operating areas. Management of the retail operations
is largely decentralized to encourage local autonomy in responding to consumer
demands within the Company's diverse markets. In support of these operations,
Safeway has an extensive network of distribution, manufacturing and food
processing facilities.
In addition to stores operated under the Safeway name, Safeway has
ownership interests in two other retail companies. Safeway holds a 35% interest
in The Vons Companies, Inc., which operates 336 grocery stores located mostly in
southern California, and a 49% interest in a privately held company, Casa Ley,
S.A. de C.V., which operates 70 stores in western Mexico.
A key component of Safeway's long-term strategy is its capital
expenditure program. Safeway scaled back its capital expenditure program in 1993
in order to focus on near-term operating challenges, as well as to develop ways
to enhance the quality and lower the costs of projects. During 1994, improved
operations and lower project costs improved the quality of capital projects and
allowed Safeway to increase capital expenditures to $352 million from $290
million in 1993. The Company plans to invest in excess of $400 million for
capital expenditures in 1995. The Company expects to increase its level of
capital expenditures gradually over time. Safeway anticipates that the capital
expenditure program will be funded through cash provided by operations,
permitted borrowings, lease obligations and the proceeds from this offering.
See "Risk Factors" regarding certain factors to be considered by
investors.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by Safeway............................ 935,155 (1)
Common Stock outstanding................................... 105,957,994 (2)
Total................................................. 106,893,149 (2)
Use of Proceeds............................................ Capital expenditures
New York Stock Exchange Symbol............................. SWY
</TABLE>
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(1) Of the 4,643,000 shares of Common Stock initially issuable upon exercise of
Warrants, through June 17, 1995, 3,707,845 shares of Common Stock had been
issued upon exercise of Warrants for an aggregate amount received upon
exercise of approximately $14 million.
(2) Includes shares of Common Stock outstanding as of June 17, 1995. Does not
include up to 12,656,512 shares of Common Stock issuable upon exercise of
stock options outstanding on December 31, 1994, and 13,928,000 shares of
Common Stock issuable upon exercise of warrants (the "SSI Warrants") held
by SSI Equity Associates, L.P. (the "SSI
Partnership").
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<PAGE> 5
RISK FACTORS
Prospective investors should consider carefully, in addition to the
other information contained or incorporated in this Prospectus, the following
factors before purchasing the shares of Common Stock offered hereby.
LEVERAGE AND RESTRICTIONS IMPOSED BY LENDERS
As a result of the Acquisition, Safeway is highly leveraged. At
December 31, 1994, Safeway and its subsidiaries had total debt of approximately
$2.2 billion (reduced from approximately $5.8 billion at the time of the
Acquisition) and stockholders' equity of $643.8 million. If future cash provided
by operations is less than that realized since the Acquisition, Safeway may
reduce planned capital expenditures. If future cash provided by operations is
further reduced, Safeway may experience difficulty meeting the interest and
principal payments due on outstanding indebtedness, rent and other obligations.
The discretion of the management of Safeway with respect to certain
business matters is limited by covenants (the "Debt Covenants") contained in the
Company's Credit Agreement (the "Bank Agreement") and the indentures related to
Safeway's 9.30% Senior Secured Debentures due 2007 (the "9.30% Debentures"),
certain of its medium-term notes and its 10% Senior Subordinated Notes due 2001
(the "10% Notes"), 9.875% Senior Subordinated Debentures due 2007 (the "9.875%
Debentures"), 9.65% Senior Subordinated Debentures due 2004 (the "9.65%
Debentures") and 9.35% Senior Subordinated Notes due 1999 (the "9.35% Notes,"
and together with the 10% Notes, the 9.875% Debentures and the 9.65% Debentures,
the "Subordinated Securities"). The Debt Covenants limit Safeway with respect
to, among other things: (i) paying cash dividends on its capital stock; (ii)
incurring additional indebtedness; (iii) creating liens upon its assets; (iv)
repurchasing shares of its capital stock or certain indebtedness; (v) acquiring
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Safeway; and (vi) disposing of material amounts of assets other than
in the ordinary course of business. Indebtedness under the Bank Agreement is
secured by pledges of certain assets of Safeway and assets and stock of certain
subsidiaries. Indebtedness under the 9.30% Debentures, and certain other
indebtedness incurred in connection with Safeway's capital expenditure program,
is secured by certain real estate and personal property of Safeway. Indebtedness
under the Bank Agreement is guaranteed by certain subsidiaries. There can be no
assurance that Safeway's leverage and such restrictions will not adversely
affect Safeway's ability to finance its future operations or capital needs or
engage in other business activities which may be in the interests of Safeway and
its stockholders.
CONTROLLING STOCKHOLDERS
Approximately 62% of the outstanding Common Stock is held by two
partnerships (the "Common Stock Partnerships"), the general partner of each of
which is KKR Associates, a New York limited partnership ("KKR Associates"). KKR
Associates has sole voting and investment power with respect to such shares.
Consequently, KKR Associates and its general partners control Safeway and have
the power to elect a majority of its directors and to approve any action
requiring stockholder approval, including, assuming compliance with applicable
Delaware laws, approval of certain corporate transactions (including any
so-called "going private" transactions). The Common Stock Partnerships have no
present intention to effect a "going private" transaction.
UNREALIZED GAIN BY EXISTING STOCKHOLDERS
In 1986, Safeway was acquired from its public stockholders in a
leveraged buyout transaction led by KKR. As of June 17, 1995, the Common Stock
Partnerships beneficially owned 65,000,000 shares of Common Stock, which were
purchased at $2.00 per share and the SSI Partnership (in which 31.8% of the
limited partnership interests are owned by the Company) held the SSI Warrants to
purchase an aggregate of 13,928,000 shares exercisable at $2.00 per share. In
addition, from December 1986 through December 1989, certain other investors,
consisting primarily of members of management, purchased and/or acquired options
to purchase, an aggregate of 9,636,000 shares of Common Stock. Such investors
paid, and stock options held by such investors are exercisable primarily at,
$2.00 per share. Based on these share amounts and the $37 per share closing sale
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price of the Common Stock on July 13, 1995, as reported on the New York Stock
Exchange, the unrealized aggregate market value gain on the shares held by the
Common Stock Partnerships was $2.3 billion and the unrealized aggregate market
value gain on the shares issuable upon exercise of the SSI Warrants was $332.5
million. The Common Stock Partnerships and the SSI Partnership have no present
intention to sell, contract to sell or otherwise dispose of the shares of Common
Stock held by them. Each management investor has entered into a subscription
agreement with Safeway, pursuant to which all shares of Common Stock held by
such investor are subject to certain restrictions on transfer and certain
repurchase rights and obligations under certain circumstances, primarily
relating to such investor's termination of employment.
DILUTION
The exercise price will significantly exceed the Company's net tangible
book value per share. Based on the exercise price of $3.7691 per share, a holder
of Warrants who exercised Warrants as of December 31, 1994 would have
experienced an immediate dilution in net tangible book value of $0.67 per share
and a dilution of $3.70 per share assuming the exercise of all outstanding
warrants and options (including all Warrants).
SHARES ELIGIBLE FOR FUTURE SALE
As of June 17, 1995, a total of 935,155 shares of Common Stock were
issuable upon exercise of the Warrants, and an additional 13,928,000 shares of
Common Stock were issuable upon exercise of the SSI Warrants. Safeway has a
stock option plan covering up to 23,000,000 shares of Common Stock. At December
31, 1994, options to purchase 12,067,762 shares of Common Stock were outstanding
under the stock option plan (including shares subject to options held by the
management investors). Safeway also has an Outside Director Equity Purchase Plan
and a Stock Option Plan for Consultants under which options to purchase 588,750
shares of Common Stock were outstanding at December 31, 1994. If exercised,
these warrants and options would result in the issuance of a substantial number
of shares of Common Stock, thereby diluting the proportionate voting power and
equity interests of the holders of the Common Stock being offered hereby. The
beneficial holders of 78,928,000 shares of Common Stock are entitled to certain
rights to registration under the Securities Act, and certain members of
management and other investors who hold shares and options subject to the terms
of subscription agreements have the right to participate as selling stockholders
in one underwritten public offering of the Common Stock subsequent to the
termination of the subscription agreements covering such shares and options.
No prediction can be made as to the effect, if any, that future sales
of shares, or the availability of shares for future sales, will have on the
market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock (including shares issued upon the exercise
of warrants or options), or the perception that such sales could occur, could
adversely affect prevailing market prices for the Common Stock.
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SAFEWAY INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(dollars in millions, except per share amounts)
The financial data below are derived from the audited Consolidated
Financial Statements of Safeway. The selected financial data should be read in
conjunction with Safeway's Consolidated Financial Statements and accompanying
Notes, which are included in Safeway's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, which report is incorporated by reference in this
Prospectus.
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 53 Weeks 52 Weeks 52 Weeks
1994 1993 1992 1991 1990
---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT:
Sales.................................................. $ 15,626.6 $ 15,214.5 $ 15,151.9 $ 15,119.2 $ 14,873.6
Cost of goods sold .................................... (11,376.6) (11,131.1) (11,045.5) (11,060.1) (10,970.6)
---------- ---------- ---------- ---------- ----------
Gross profit .......................................... 4,250.0 4,083.4 4,106.4 4,059.1 3,903.0
Operating and administrative expenses.................. (3,637.9) (3,641.9) (3,664.8) (3,510.8) (3,367.7)
AppleTree charge....................................... -- -- -- (115.0) --
---------- ---------- ---------- ---------- ----------
Operating profit....................................... 612.1 441.5 441.6 433.3 535.3
Interest expense....................................... (221.7) (265.5) (290.4) (355.4) (384.1)
Equity in earnings of unconsolidated affiliates........ 27.3 33.5 39.1 45.8 25.5
Gain on common stock offering by unconsolidated
affiliate............................................ -- -- -- 27.4 --
Other income, net...................................... 6.4 6.8 7.1 15.1 18.0
---------- ---------- ---------- ---------- ----------
Income before income taxes, extraordinary loss
and cumulative effect of accounting changes.......... 424.1 216.3 197.4 166.2 194.7
Income taxes........................................... (173.9) (93.0) (99.0) (87.2) (107.6)
---------- ---------- ---------- ---------- ----------
Income before extraordinary loss and cumulative
effect of accounting changes......................... 250.2 123.3 98.4 79.0 87.1
Extraordinary loss, net of tax benefit of $6.7,
$17.1 and $14.9..................................... (10.5) -- (27.8) (24.1) --
Cumulative effect of accounting changes, net of tax
benefit of $12.0..................................... -- -- (27.1) -- --
---------- ---------- ---------- ---------- ----------
Net income............................................. $ 239.7 $ 123.3 $ 43.5 $ 54.9 $ 87.1
========== ========== ========== ========== ==========
Earnings per common share and common share
equivalent (fully diluted):
Income before extraordinary loss and cumulative
effect of accounting changes......................... $ 2.02 $ 1.00 $ 0.83 $ 0.69 $ 0.91
Extraordinary loss..................................... (0.08) -- (0.23) (0.21) --
Cumulative effect of accounting changes................ -- -- (0.23) -- --
---------- ---------- ---------- ---------- ----------
Net income............................................. $ 1.94 $ 1.00 $ 0.37 $ 0.48 $ 0.91
========== ========== ========== ========== ==========
FINANCIAL STATISTICS:
Gross profit margin.................................... 27.2% 26.8% 27.1% 26.8% 26.2%
Operating profit margin................................ 3.9% 2.9% 2.9% 2.9% 3.6%
Operating and administrative expenses as a percent
of sales............................................. 23.28% 24.94% 24.19% 23.22% 22.64%
Capital expenditures................................... $ 352.2 $ 290.2 $ 553.4 $ 635.0 $ 489.6
Depreciation and amortization.......................... 326.4 330.2 320.3 295.9 276.2
Total assets........................................... 5,022.1 5,074.7 5,225.8 5,170.7 4,739.1
Total debt............................................. 2,196.1 2,689.2 3,048.6 3,066.0 3,083.6
Stockholders' equity (deficit)......................... 643.8 382.9 243.1 214.4 (183.4)
Common shares outstanding at year-end (in millions).... 104.8 101.5 98.8 97.7 79.3
Stockholders' equity (deficit) per common share
outstanding at year-end.............................. $ 6.14 $ 3.77 $ 2.46 $ 2.19 $ (2.31)
Weighted average common shares and common share
equivalents (fully diluted) (in millions).......... 123.6 123.4 119.0 115.2 96.0
OTHER STATISTICS:
Employees at year-end.................................. 110,000 105,900 104,900 110,100 114,500
Stores opened during the year.......................... 20 14 35 33 30
Stores closed or sold during the year.................. 36 39 49 37 26
Total stores at year-end............................... 1,062 1,078 1,103 1,117 1,121
Total retail square footage at year-end (in millions).. 39.5 39.4 39.7 38.9 38.2
</TABLE>
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USE OF PROCEEDS
The net proceeds to Safeway from the exercise of the Warrants will be
$17.5 million. As of June 17, 1995, Warrants to purchase an aggregate of
3,707,845 shares of Common Stock had been exercised for an aggregate exercise
price of approximately $14 million. Safeway intends to use the proceeds to fund
a portion of its capital expenditure program. In 1994, Safeway made capital
expenditures of approximately $352 million. The Company expects to invest in
excess of $400 million for capital expenditures in 1995. Safeway expects to
increase its level of capital expenditures gradually over time.
PLAN OF DISTRIBUTION
Warrants may be exercised, in whole or in part, by surrendering a
Warrant certificate together with a duly completed purchase form to The First
National Bank of Boston, Shareholder Services Division, P.O. Box 1889, Mail Stop
45-02-05, Boston, Massachusetts 02105-1889. The purchase form on the back of
each Warrant certificate must be completed and signed in order to exercise
Warrants. The Warrant exercise price must be paid by certified or official bank
check payable to the order of Safeway. Purchase forms and information regarding
the exercise of Warrants may be obtained by contacting The First National Bank
of Boston through its Telephone Inquiry Unit, (617) 575-2700, or at the above
address.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby will be
passed upon for Safeway by Latham & Watkins, Los Angeles, California. Certain
partners of Latham & Watkins, members of their families, related persons and
others, have an indirect interest, through limited partnerships, in less than 1%
of the Common Stock. Such persons do not have the power to vote or dispose of
such shares.
EXPERTS
Safeway's consolidated financial statements and the related
consolidated financial statement schedules, incorporated herein by reference to
Safeway's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, have been audited by Deloitte & Touche, independent auditors, as stated in
their reports incorporated herein by reference, and have been so incorporated by
reference in reliance upon such reports given upon the authority of that firm as
experts in accounting and auditing.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OF SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF SAFEWAY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THIS DATE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Available Information................................................... 2
Incorporation of Certain Documents By Reference......................... 2
Prospectus Summary...................................................... 4
Risk Factors............................................................ 5
Selected Financial Data................................................. 7
Use of Proceeds......................................................... 8
Plan of Distribution.................................................... 8
Legal Matters........................................................... 8
Experts................................................................. 8
</TABLE>
4,643,000 Shares
of Common Stock
Issuable upon Exercise of
Common Stock Purchase
Warrants
Safeway Inc.
[SAFEWAY LOGO]
9
