<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the quarterly period ended March 23, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the transition period from to
--- ---
Commission file number 1-41
SAFEWAY INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 94-3019135
-------- ----------
<S> <C>
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
</TABLE>
Fourth and Jackson Streets
Oakland, California 94660
------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 891-3000
--------------
Not Applicable
--------------
(Former name, former address and former fiscal year, if changed since
last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X NO .
--- ---
As of April 26, 1996, there were issued and outstanding 217.5 million shares of
the registrant's common stock.
<PAGE> 2
SAFEWAY INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION (UNAUDITED) Page
- ------ --------------------------------- ----
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of March 23, 1996 and December 3
30, 1995
Condensed Consolidated Statements of Income for the 12 weeks ended March 5
23, 1996 and March 25, 1995
Condensed Consolidated Statements of Cash Flows for the 12 weeks ended 6
March 23, 1996 and March 25, 1995
Notes to the Condensed Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 10
OF OPERATIONS
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 12
ITEM 6. EXHIBITS 12
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------------------------------
SAFEWAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
March 23, December 30,
1996 1995
-------- -----------
ASSETS
- ----------------
<S> <C> <C>
Current assets:
Cash and equivalents $ 22.0 $ 74.8
Receivables 160.8 152.7
Merchandise inventories 1,124.4 1,191.8
Prepaid expenses and other current assets 165.5 95.5
---------- ----------
Total current assets 1,472.7 1,514.8
---------- ----------
Property 4,709.0 4,687.2
Less accumulated depreciation
and amortization (2,147.5) (2,094.3)
---------- --------
Property, net 2,561.5 2,592.9
Goodwill, net of amortization of $108.6
and $106.3, respectively 321.0 323.8
Prepaid pension costs 327.2 322.4
Investments in unconsolidated affiliates 347.2 336.0
Other assets 99.8 104.4
---------- ----------
Total assets $ 5,129.4 $ 5,194.3
========== ==========
</TABLE>
(Continued)
3
<PAGE> 4
SAFEWAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
March 23, December 30,
1996 1995
-------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C>
Current liabilities:
Current maturities of notes
and debentures $ 261.3 $ 221.4
Current obligations under capital leases 19.0 19.0
Accounts payable 935.5 1,040.0
Accrued salaries and wages 202.4 234.6
Other accrued liabilities 481.3 424.0
---------- ----------
Total current liabilities 1,899.5 1,939.0
---------- ----------
Long-term debt:
Notes and debentures 1,652.3 1,783.6
Obligations under capital leases 163.7 166.2
---------- ----------
Total long-term debt 1,816.0 1,949.8
Deferred income taxes 108.3 108.5
Accrued claims and other liabilities 404.1 401.5
---------- ----------
Total liabilities 4,227.9 4,398.8
---------- ----------
Stockholders' equity:
Common stock: par value $0.01 per share;
300 shares authorized; 217.0 and 213.7
shares outstanding, respectively 2.2 2.1
Additional paid-in capital 695.5 684.9
Unexercised warrants purchased (196.2) (196.2)
Cumulative translation adjustments 19.2 20.3
Retained earnings 380.8 284.4
---------- ----------
Total stockholders' equity 901.5 795.5
---------- ----------
Total liabilities and stockholders' equity $ 5,129.4 $ 5,194.3
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
SAFEWAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
12 Weeks Ended
-----------------------
March 23, March 25,
1996 1995
-------- --------
<S> <C> <C>
Sales $3,882.7 $3,632.3
Cost of goods sold (2,790.2) (2,628.9)
-------- --------
Gross profit 1,092.5 1,003.4
Operating and administrative expense (898.4) (849.4)
-------- --------
Operating profit 194.1 154.0
Interest expense (44.3) (47.5)
Equity in earnings of unconsolidated affiliates 11.2 2.8
Other income, net 1.1 0.5
-------- --------
Income before income taxes 162.1 109.8
Income taxes (65.7) (47.8)
-------- --------
Net income $ 96.4 $ 62.0
======== ========
Primary and fully diluted earnings per common
share and common share equivalent $ 0.40 $ 0.26
======== ========
Weighted average common shares and common share equivalents:
Primary 238.4 242.0
======== ========
Fully diluted 238.6 242.7
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
SAFEWAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
12 Weeks Ended
---------------------
March 23, March 25,
1996 1995
-------- --------
<S> <C> <C>
CASH FLOW FROM OPERATIONS:
Net income $ 96.4 $ 62.0
Reconciliation to net cash flow from operations:
Depreciation and amortization 76.9 74.5
LIFO expense 2.3 2.3
Equity in undistributed earnings of unconsolidated affiliates (11.2) (2.8)
Other 3.3 15.1
Change in working capital items:
Receivables and prepaid expenses (78.2) (2.2)
Inventories at FIFO cost 63.7 46.4
Payables and accruals (72.7) (118.3)
------ ------
Net cash flow from operations 80.5 77.0
------ ------
CASH FLOW FROM INVESTING ACTIVITIES:
Cash paid for property additions (52.1) (60.1)
Proceeds from sale of property 5.3 6.2
Other 4.7 (3.5)
------ ------
Net cash flow used by investing activities (42.1) (57.4)
------ ------
CASH FLOW FROM FINANCING ACTIVITIES:
Additions to short-term borrowings 39.0 47.7
Payments on short-term borrowings (32.7) (29.8)
Additions to long-term borrowings 67.7 142.6
Payments on long-term borrowings (168.1) (80.5)
Net proceeds from exercise of warrants and stock options 5.4 3.4
Purchase of unexercised warrants -- (113.2)
Other (2.5) --
------ ------
Net cash flow used by financing activities (91.2) (29.8)
------ ------
Decrease in cash and equivalents (52.8) (10.2)
CASH AND EQUIVALENTS:
Beginning of period 74.8 60.7
------ ------
End of period $ 22.0 $ 50.5
====== ======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
SAFEWAY INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Safeway Inc. and
subsidiaries ("Safeway" or the "Company") for the 12 weeks ended March 23, 1996
and March 25, 1995 are unaudited and, in the opinion of management, contain all
adjustments that are of a normal and recurring nature necessary to present
fairly the financial position and results of operations for such periods. The
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and related notes contained in the
Company's 1995 Annual Report to Stockholders. The results of operations for the
12 weeks ended March 23, 1996 are not necessarily indicative of the results
expected for the full year.
INVENTORY
Net income reflects the application of the LIFO method of valuing certain
domestic inventories, based upon estimated annual inflation ("LIFO Indices").
LIFO expense was $2.3 million in the first quarters of both 1996 and 1995.
Actual LIFO Indices are calculated during the fourth quarter of the year based
upon a statistical sampling of inventories.
NOTE B - FINANCING
Notes and debentures were composed of the following at March 23, 1996 and
December 30, 1995 (in millions):
<TABLE>
<CAPTION>
March 23, 1996 December 30, 1995
-------------- -----------------
Long-term Current Long-term Current
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Credit Agreement, unsecured $ 318.7 $ 395.0
9.30% Senior Secured Debentures due 2007 70.7 70.7
Mortgage notes payable, secured 279.6 $100.4 322.3 $ 67.0
10% Senior Notes due 2002, unsecured 59.1 - 59.1 -
Medium-term notes, unsecured 65.5 14.5 65.5 14.5
Other notes payable, unsecured 117.6 3.9 118.9 3.8
Short-term bank borrowings, unsecured - 142.5 - 136.1
9.35% Senior Subordinated Notes due 1999, unsecured 161.5 - 172.5 -
10% Senior Subordinated Notes due 2001, unsecured 241.4 - 241.4 -
9.65% Senior Subordinated Debentures due 2004,
unsecured 228.2 - 228.2 -
9.875% Senior Subordinated Debentures due 2007,
unsecured 110.0 - 110.0 -
-------- ------ --------- -------
$1,652.3 $261.3 $ 1,783.6 $ 221.4
======== ====== ========= =======
</TABLE>
Note B to the Company's consolidated financial statements on pages 27 through 29
of the 1995 Annual Report to Stockholders describes all of the material
restrictive covenants of the Credit Agreement, the 9.30% Senior Secured
Debentures, and the Subordinated Securities.
7
<PAGE> 8
SAFEWAY INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE C - INVESTMENTS IN AFFILIATES
Investments in affiliates consist of a 35% interest in The Vons Companies, Inc.
("Vons") which operates 328 supermarkets located mostly in southern California,
and a 49% interest in Casa Ley, S.A. de C.V. which operates 71 stores in western
Mexico. Safeway records income from its equity investments on a one-quarter
delay basis.
For much of 1995, Mexico suffered from inflation, very high interest rates and
other economic difficulties which adversely affected Casa Ley. As a result,
Safeway recorded no income from its equity investment in Casa Ley during the
first quarter of 1995. Inflation and interest rates in Mexico have since
moderated, and Safeway's share of Casa Ley's earnings for the first quarter of
1996 was $4.0 million.
Safeway's recorded investment in Vons at March 23, 1996 was $262.4 million,
including unamortized goodwill of $45.3 million that is being amortized over a
40-year life. Safeway's share of Vons' earnings was $7.2 million for the first
quarter of 1996 compared to $2.8 million in the first quarter of 1995. The $2.8
million earnings from Vons in 1995 was after a $2.9 million restructuring
charge.
Based on the March 22, 1996 closing price for Vons common stock as quoted on the
New York Stock Exchange, the Company's 15.1 million shares of Vons common stock
had an aggregate market value of $470.8 million.
Summarized financial information derived from Vons' financial reports to the
Securities and Exchange Commission is as follows (in millions):
<TABLE>
<CAPTION>
December 31, January 1,
FINANCIAL POSITION 1995 1995
- ------------------ ---- ----
<S> <C> <C>
Current assets $ 452.3 $ 467.8
Property and equipment, net 1,192.5 1,203.0
Other assets 541.7 551.2
--------- ---------
Total assets $ 2,186.5 $ 2,222.0
========= =========
Current liabilities $ 593.4 $ 563.9
Long-term liabilities 969.8 1,105.7
Shareholders' equity 623.3 552.4
--------- ---------
Total liabilities and shareholders' equity $ 2,186.5 $ 2,222.0
========= =========
</TABLE>
<TABLE>
<CAPTION>
12 Weeks Ended
--------------
December 31, January 1,
RESULTS OF OPERATIONS 1995 1995
- --------------------- ---- ----
<S> <C> <C>
Sales $ 1,223.4 $ 1,176.2
Cost of sales and other expenses (1,202.3) (1,167.1)
--------- ---------
Net income $ 21.1 $ 9.1
========= =========
</TABLE>
8
<PAGE> 9
SAFEWAY INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE D - CONTINGENCIES
LEGAL MATTERS
Note J to the Company's consolidated financial statements, under the caption
"Legal Matters" on pages 35 and 36 of the 1995 Annual Report to Stockholders,
provides information on certain claims and litigation in which the Company is
involved.
On March 8, 1996, a purported class action was filed on behalf of persons
allegedly injured as a result of the July 1988 fire at the Company's dry grocery
warehouse in Richmond, California. The complaint generally alleges that the
Company fraudulently (i) obtained settlements of certain claims arising out of
the fire and (ii) made statements that induced claimants not to file actions
within the time period allowed under the statute of limitations. The complaint
seeks compensatory and punitive damages.
The Company has received notice from its insurance carrier that, pending
completion of its investigation of its defenses relating to Safeway's insurance
policy and the purported class action, the insurance carrier has reached a
preliminary view that there may be no coverage under the policy for this action.
Safeway disagrees with the insurance carrier's preliminary view and continues to
believe that its coverage will be sufficient and available for resolution of all
remaining third-party claims arising out of the fire.
9
<PAGE> 10
SAFEWAY INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Safeway's net income for the first quarter ended March 23, 1996 was $96.4
million ($0.40 per share) compared to $62.0 million ($0.26 per share) for the
first quarter of 1995.
Sales were $3.9 billion for the first quarter of 1996 compared to $3.6 billion
for the first quarter of 1995. Same-store sales increased 5.2% and 5.0% in the
first quarters of 1996 and 1995, respectively. Same-store sales increases have
exceeded 3% for eleven consecutive quarters. Safeway has reinvested the cost
savings achieved throughout the Company into serving its customers better, which
Safeway believes has resulted in continued sales growth.
Beginning with the first quarter of 1996, Safeway classified all in-store bakery
production labor costs as operating and administrative expense. Previously, a
portion of this labor cost was classified as a component of cost of goods sold.
All prior periods have been reclassified to conform to the new presentation.
Gross profit was 28.14% of sales in the first quarter of 1996 compared to 27.62%
in 1995. This 0.52 percentage point improvement is primarily a result of
improvements in 1) buying practices, 2) profitability of the Company's
manufacturing division, and 3) product mix.
Operating and administrative expense fell 0.25 percentage points to 23.14% of
sales in the first quarter of 1996 from 23.39% in the first quarter of 1995.
Higher sales and ongoing efforts to reduce or control expenses continued to
improve operating and administrative expense as a percentage of sales.
Interest expense was $44.3 million in the first quarter of 1996 compared to
$47.5 million in the same quarter of 1995 due to a combination of lower interest
rates and reduced debt levels.
Equity in earnings of unconsolidated affiliates, recorded on a one-quarter delay
basis, was $11.2 million for the first quarter of 1996, up from $2.8 million for
the same period of 1995. Safeway holds a 35% interest in Vons, which operates
328 grocery stores located mostly in southern California, and a 49% interest in
Casa Ley, which operates 71 food and general merchandise stores in western
Mexico. For much of 1995, Mexico suffered from inflation, very high interest
rates and other economic difficulties which adversely affected Casa Ley. As a
result, Safeway recorded no income from its equity investment in Casa Ley during
the first quarter of 1995. Interest rates and inflation in Mexico have since
moderated and Casa Ley's financial results have gradually improved. In the first
quarter of 1996, Safeway's share of Casa Ley's earnings was $4.0 million.
Safeway's share of Vons' earnings increased to $7.2 million in the first quarter
of 1996 from $2.8 million in 1995. The $2.8 million of earnings from Vons in
1995 was after a $2.9 million restructuring charge.
10
<PAGE> 11
SAFEWAY INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND FINANCIAL RESOURCES
Operating cash flow, as presented below, provides a measure of the Company's
ability to generate cash to pay interest and fixed charges, and facilitates the
comparison of Safeway's results of operations with those of companies having
different capital structures. Safeway's computation of operating cash flow is as
follows (dollars in millions):
<TABLE>
<CAPTION>
12 Weeks Ended
--------------
March 23, March 25,
1996 1995
---- ----
<S> <C> <C>
Income before income taxes $162.1 $109.8
LIFO expense 2.3 2.3
Interest expense 44.3 47.5
Depreciation and amortization 76.9 74.5
Equity in earnings of unconsolidated affiliates (11.2) (2.8)
------ ------
Operating cash flow $274.4 $231.3
====== ======
As a percent of sales 7.07% 6.37%
====== ======
As a multiple of interest expense 6.19x 4.87x
====== ======
</TABLE>
Management expects operating cash flow, supplemented by credit available under
the Credit Agreement, to be Safeway's primary sources of long-term liquidity. At
March 23, 1996, the Company had total borrowing capacity under the Credit
Agreement of $1.15 billion, of which $765.0 million was unused. Management
believes that these sources will be adequate to meet the Company's requirements.
CAPITAL EXPENDITURE PROGRAM
A key component of the Company's long-term strategy is its capital expenditure
program. During the first quarter of 1996, Safeway invested $59.3 million in
capital expenditures and opened four new stores. The Company plans to invest
approximately $550 million for capital expenditures in 1996 to open 30 to 35 new
stores and complete more than 100 remodels.
11
<PAGE> 12
SAFEWAY INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Note J to the Company's consolidated financial statements, under the caption
"Legal Matters" on pages 35 and 36 of the 1995 Annual Report to Stockholders,
provides information on certain claims and litigation in which the Company is
involved.
On March 8, 1996, a purported class action was filed on behalf of persons
allegedly injured as a result of the July 1988 fire at the Company's dry grocery
warehouse in Richmond, California. The complaint generally alleges that the
Company fraudulently (i) obtained settlements of certain claims arising out of
the fire and (ii) made statements that induced claimants not to file actions
within the time period allowed under the statute of limitations. The complaint
seeks compensatory and punitive damages.
The Company has received notice from its insurance carrier that, pending
completion of its investigation of its defenses relating to Safeway's insurance
policy and the purported class action, the insurance carrier has reached a
preliminary view that there may be no coverage under the policy for this action.
Safeway disagrees with the insurance carrier's preliminary view and continues to
believe that its coverage will be sufficient and available for resolution of all
remaining third-party claims arising out of the fire.
ITEM 6(a). EXHIBITS
Exhibit 3.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to Registration
Statement No. 33-33388).
Exhibit 3.2 Form of By-laws of the Company as amended (incorporated by
reference to Exhibit 3.2 to Registration Statement No.
33-33388), and Amendment to the Company's By-laws effective
March 8, 1993 (incorporated by reference to Exhibit 3.2 to
Registrant's Form 10-K for the year ended January 2, 1993).
Exhibit 11.1 Computation of Earnings Per Common Share and Common Share
Equivalent.
Exhibit 12.1 Computation of Ratio of Earnings to Fixed Charges.
Exhibit 27.1 Financial Data Schedule (electronic filing only).
12
<PAGE> 13
SAFEWAY INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: May 2, 1996 \s\ Steven A. Burd
--------------- ------------------
Steven A. Burd
President and Chief Executive Officer
Date: May 2, 1996 \s\ Julian C. Day
--------------- -----------------
Julian C. Day
Executive Vice President and Chief Financial Officer
13
<PAGE> 14
SAFEWAY INC. AND SUBSIDIARIES
EXHIBIT INDEX
LIST OF EXHIBITS FILED WITH FORM 10-Q FOR THE PERIOD
ENDED MARCH 23, 1996
Exhibit 11.1 Computation of Earnings Per Common Share and Common Share
Equivalent
Exhibit 12.1 Computation of Ratio of Earnings to Fixed Charges
Exhibit 27.1 Financial Data Schedule (electronic filing only)
14
<PAGE> 1
EXHIBIT 11.1
SAFEWAY INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
AND COMMON SHARE EQUIVALENT
(IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
12 Weeks Ended
----------------------------------------------
March 23, 1996 March 25,1995
-------------------- --------------------
Fully Fully
Diluted Primary Diluted Primary
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $ 96.4 $ 96.4 $ 62.0 $ 62.0
======= ======= ======= =======
Weighted average common shares outstanding 215.4 215.4 211.2 210.4
Common share equivalents 23.2 23.0 31.5 31.6
Weighted average common shares and common
share equivalents
------- ------- ------- -------
238.6 238.4 242.7 242.0
======= ======= ======= =======
Earnings per common share and common
share equivalent $ 0.40 $ 0.40 $ 0.26 $ 0.26
======= ======= ======= =======
Calculation of common share equivalents:
Options and warrants to purchase common shares 35.8 35.8 47.6 48.4
Common shares assumed purchased with potential
proceeds (12.6) (12.8) (16.1) (16.8)
------- ------- ------- -------
Common share equivalents 23.2 23.0 31.5 31.6
======= ======= ======= =======
Calculation of common shares assumed purchased with
potential proceeds:
Potential proceeds from exercise of options and
warrants to purchase common shares $ 356.7 $ 337.6 $ 285.6 $ 283.0
Common stock price used under the treasury
stock method $ 28.38 $ 26.29 $ 17.75 $ 16.86
Common shares assumed purchased with
potential proceeds 12.6 12.8 16.1 16.8
</TABLE>
15
<PAGE> 1
SAFEWAY INC. AND SUBSIDIARIES EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
12 Weeks
----------------------
March 23, March 26,
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Income before income taxes,
extraordinary loss and cumulative
effect of accounting changes $ 162.1 $ 109.8 $ 556.5 $ 424.1 $ 216.3 $ 197.4 $ 166.2
Add interest expense 44.3 47.5 199.8 221.7 265.5 290.4 355.4
Add interest on rental expense (a) 20.8 20.0 87.5 86.6 88.0 88.0 83.0
Less equity in earnings of unconsolidated
affiliates (11.2) (2.8) (26.9) (27.3) (33.5) (39.1) (45.8)
Less gain on common stock offering by
unconsolidated affiliate -- -- -- -- -- -- (27.4)
Add minority interest in subsidiary 0.5 0.8 3.9 3.0 3.5 1.7 1.3
------- ------- ------- ------- ------- ------- -------
Earnings $ 216.5 $ 175.3 $ 820.8 $ 708.1 $ 539.8 $ 538.4 $ 532.7
======= ======= ======= ======= ======= ======= =======
Interest expense $ 44.3 $ 47.5 $ 199.8 $ 221.7 $ 265.5 $ 290.4 $ 355.4
Add capitalized interest 0.8 0.8 4.6 2.9 4.2 8.0 10.6
Add interest on rental expense (a) 20.8 20.0 87.5 86.6 88.0 88.0 83.0
------- ------- ------- ------- ------- ------- -------
Fixed charges $ 65.9 $ 68.3 $ 291.9 $ 311.2 $ 357.7 $ 386.4 $ 449.0
======= ======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges 3.29 2.57 2.81 2.28 1.51(b) 1.39 1.19(c)
======= ======= ======= ======= ======= ======= =======
</TABLE>
(a) Based on a 10% discount factor on the estimated present value of future
operating lease payments.
(b) Safeway's ratio of earnings to fixed charges during 1993 was adversely
affected by a $54.9 million charge to operating and administrative expense
for severance payments made to retail employees in the Alberta, Canada
division as part of a voluntary employee buyout. Excluding this charge,
the ratio of earnings to fixed charges for 1993 would have been 1.66.
(c) Safeway's ratio of earnings to fixed charges for 1991 was adversely
affected by a $115 million charge to operating profit in connection with
the bankruptcy of AppleTree Markets, Inc. ("AppleTree"). The $115 million
charge was an estimate of the eventual net lease and related cash payments
which Safeway expected to make over a period of up to 16 years in
connection with any liability Safeway may have on the leases assigned to
AppleTree as part of the sale of the Company's former Houston division.
Excluding this charge, the ratio of earnings to fixed charges for 1991
would have been 1.44.
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND THE CONDENSED CONSOLIDATED STATEMENTS
OF INCOME ON PAGES 3 THROUGH 5 OF THE COMPANY'S FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED MARCH 23, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> MAR-23-1996
<CASH> 22,000
<SECURITIES> 0
<RECEIVABLES> 160,800
<ALLOWANCES> 0
<INVENTORY> 1,124,400
<CURRENT-ASSETS> 1,472,700
<PP&E> 4,709,000
<DEPRECIATION> (2,147,500)
<TOTAL-ASSETS> 5,129,400
<CURRENT-LIABILITIES> 1,899,500
<BONDS> 1,816,000
0
0
<COMMON> 2,200
<OTHER-SE> 899,300
<TOTAL-LIABILITY-AND-EQUITY> 5,129,400
<SALES> 3,882,700
<TOTAL-REVENUES> 3,882,700
<CGS> 2,790,200
<TOTAL-COSTS> 2,790,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,300
<INCOME-PRETAX> 162,100
<INCOME-TAX> 65,700
<INCOME-CONTINUING> 96,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96,400
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
</TABLE>
