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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report: January 25, 1996
Commission file number 1-41
SAFEWAY INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3019135
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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 or former address, if changed since last report.)
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SAFEWAY INC.
ITEM 5. OTHER EVENTS
On January 25, 1996, Safeway Inc. issued a press release, a copy of which is
attached hereto as Exhibit 1. The information contained in such press release is
incorporated by reference herein in its entirety.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) The following exhibits are filed as part of this Report:
1.1 Press Release of Safeway Inc. dated January 25, 1996
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SAFEWAY INC.
------------
REGISTRANT
Date: January 25, 1996 By: /s/ F. J. Dale
----------------------
F. J. Dale
Group Vice President
Finance
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SAFEWAY INC. AND SUBSIDIARIES
EXHIBIT INDEX
List of Exhibits Filed with Form 8-K dated January 25, 1996:
Exhibit 1.1 Press Release of Safeway Inc. dated January 25, 1996
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EXHIBIT 1.1
SAFEWAY INC. ANNOUNCES 1995 EARNINGS
January 25, 1996
Safeway Inc. today reported income (before extraordinary loss) of $113.9 million
($0.95 per share) for the fourth quarter of 1995, compared to $85.7 million
($0.69 per share) in 1994. After the effect of the previously announced
two-for-one stock split effective January 30, 1996, quarterly per-share amounts
were $0.47 in 1995 compared to $0.35 in 1994. The company incurred
fourth-quarter extraordinary losses of $2.0 million in 1995 and $0.4 million in
1994 for the early retirement of debt, which reduced net income for those
periods to $111.9 million and $85.3 million. On a post-split basis,
fourth-quarter net income per share was $0.46 in 1995 and $0.35 in 1994.
Total sales for the quarter increased 5.6% from a year earlier to $5.2 billion.
On a same-store basis, sales were up 4.7%. Same-store sales gains have now
exceeded 3% in each of the past ten quarters.
Gross profit was 27.1% of sales in the quarter compared to 27.3% last year.
While Safeway continued to make progress in lowering its cost of sales, it
invested in pricing throughout the quarter to maintain its competitive position.
At the same time, operating and administrative expense declined 58 basis points
to 22.64% of sales. Operating and administrative expense as a percentage of
sales has now improved for eleven consecutive quarters.
Interest expense also fell in the fourth quarter, to $58.5 million from $65.1
million, primarily due to lower average debt outstanding during the quarter.
Year-end total debt of $2.19 billion remained essentially flat compared to 1994
despite an increase of $151 million in capital expenditures and the previously
announced acquisition of limited partnership interests in SSI Equity Associates,
L.P. for $196 million. SSI Equity Associates, L.P. is a limited partnership
whose sole assets are warrants to purchase 27.9 million shares of Safeway common
stock at $1.00 per share on a post-split basis.
Equity in earnings of unconsolidated affiliates, recorded on a one-quarter delay
basis, increased to $9.7 million in the fourth quarter of 1995 from $4.5 million
a year earlier. Safeway's share of Vons' earnings was $6.1 million in the fourth
quarter of 1995, compared with $1.2 million in 1994 (which reflects a reduction
of $3.9 million in 1994 for Vons' restructuring charges). Fourth-quarter
earnings from Casa Ley also improved slightly, to $3.6 million from $3.3 million
a year ago. Since the December 1994 devaluation of the peso, Mexico has
experienced economic difficulties, including very high interest rates. Interest
rates and inflation have moderated in recent months, and Casa Ley's financial
results have gradually improved. Worsening of the economic situation in Mexico
could have an effect on Casa Ley. However, any such effect is not expected to be
material to Safeway's operating results.
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Operating cash flow for the fourth quarter rose to 6.52% of sales, compared to
6.09% in 1994. The interest coverage ratio -- operating cash flow divided by
interest expense -- improved to 5.76 times from 4.57 times in the same period a
year ago.
For the full year, which included the effect of a nine-day strike in 208
Northern California stores, results were in line with those described above.
Income before extraordinary items was $328.3 million ($2.70 per share) in 1995
compared to $250.2 million ($2.02 per share) in 1994. After the effect of the
stock split, per-share amounts were $1.35 in 1995 compared to $1.01 in 1994.
Total sales were up 4.9% to $16.4 billion, with annual same-store sales growth
of 4.6%. Gross profit remained flat at 27.2% of sales, while operating and
administrative expenses fell 55 basis points to 22.73%. Interest expense also
decreased by $21.9 million to $199.8 million.
Safeway's equity in earnings of Vons and Casa Ley fell slightly in 1995 to $26.9
million from $27.3 million a year earlier. Earnings from Casa Ley fell to $8.6
million, down from $15.7 million the previous year, while earnings from Vons
increased by $6.7 million to $18.3 million.
The income tax rate was 41.0% for the year, down from an estimated rate of 42.5%
as of the end of the third quarter. The decrease is primarily due to the
Canadian tax treaty with the U.S. which was ratified in the fourth quarter of
1995. Safeway now estimates that its 1996 tax rate will also be approximately
41.0%.
Operating cash flow for the year rose to 6.52% of sales in 1995 compared to
6.06% in 1994. The interest coverage ratio was 5.35 times in 1995 compared to
4.27 times last year.
Improved operations and lower project costs have raised the return on capital
projects, allowing Safeway to increase capital expenditures to $503 million in
1995 from $352 million in 1994. In 1995, Safeway opened 32 new stores and
completed 108 remodels. In 1996, the company expects to spend approximately $550
million for capital expenditures to open 30 to 35 new stores and complete more
than 100 remodels.
Safeway Inc. is one of the world's largest retailers, operating 1,059 stores in
the United States and Canada. The company's common stock is traded on the New
York Stock Exchange and the Pacific Stock Exchange under the symbol SWY.
-o0o-
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SAFEWAY INC. AND SUBSIDIARIES
OPERATING RESULTS
(In millions, except per-share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Fourth Quarter Year
--------------------------- -----------------------------
1995 1994 1995 1994
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 5,166.3 $ 4,890.3 $ 16,397.5 $ 15,626.6
=========== =========== ============ ============
Gross profit $ 1,401.7 $ 1,335.2 $ 4,453.8 $ 4,250.0
Operating and administrative expense (1,169.8) (1,135.7) (3,726.4) (3,637.9)
----------- ----------- ------------ ------------
Operating profit 231.9 199.5 727.4 612.1
Interest expense (58.5) (65.1) (199.8) (221.7)
Equity in earnings of unconsolidated affiliates 9.7 4.5 26.9 27.3
Other income, net 0.5 1.5 2.0 6.4
----------- ----------- ------------ ------------
Income before income taxes and extraordinary loss 183.6 140.4 556.5 424.1
Income taxes (69.7) (54.7) (228.2) (173.9)
----------- ----------- ------------ ------------
Income before extraordinary loss 113.9 85.7 328.3 250.2
Extraordinary loss related to early retirement
of debt, net of income tax benefit (2.0) (0.4) (2.0) (10.5)
----------- ----------- ------------ ------------
Net income $ 111.9 $ 85.3 $ 326.3 $ 239.7
=========== =========== ============ ============
Fully diluted earnings per common share and
common share equivalent:*
Income before extraordinary loss $ 0.47 $ 0.35 $ 1.35 $ 1.01
Extraordinary loss (0.01) -- (0.01) (0.04)
----------- ----------- ------------ ------------
Net income $ 0.46 $ 0.35 $ 1.34 $ 0.97
=========== =========== ============ ============
Weighted average common shares and common share
equivalents (fully diluted)* 240.2 247.2 243.5 247.1
=========== =========== ============ ============
</TABLE>
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* Amounts have been adjusted for a two-for-one stock split.
(Continued)
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SAFEWAY INC. AND SUBSIDIARIES
OPERATING RESULTS
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
Fourth Quarter Year
--------------------------- ---------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating cash flow:
Net income $ 111.9 $ 85.3 $ 326.3 $ 239.7
Add (subtract):
Income taxes 69.7 54.7 228.2 173.9
Interest expense 58.5 65.1 199.8 221.7
Depreciation 98.8 97.7 319.3 316.0
Goodwill amortization 3.2 3.2 10.4 10.4
LIFO expense (income) 2.6 (4.2) 9.5 2.7
Equity in earnings of unconsolidated affiliates (9.7) (4.5) (26.9) (27.3)
Extraordinary loss 2.0 0.4 2.0 10.5
----------- ----------- ----------- -----------
Total operating cash flow $ 337.0 $ 297.7 $ 1,068.6 $ 947.6
=========== =========== =========== ===========
As a percent of sales 6.52% 6.09% 6.52% 6.06%
As a multiple of interest expense 5.76 x 4.57 x 5.35 x 4.27 x
Other statistics during the period:
Stores opened 16 9 32 20
Stores closed 14 15 35 36
Other statistics at year-end:
Total stores 1,059 1,062
Total retail square footage (in millions) 40.1 39.5
Square footage increase 1.5% 0.3%
</TABLE>
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