<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 25, 2000
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)
Delaware 94-3019135
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5918 Stoneridge Mall Rd.
Pleasanton, California 94588-3229
---------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (925) 467-3000
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 28, 2000, there were
issued and outstanding 496.4 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 25, 2000 3
and January 1, 2000
Condensed Consolidated Statements of Income for the 12 5
weeks ended March 25, 2000 and March 27, 1999
Condensed Consolidated Statements of Cash Flows for the 12 6
weeks ended March 25, 2000 and March 27, 1999
Notes to the Condensed Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 10
CONDITION AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 12
PART II OTHER INFORMATION
- ------- -----------------
ITEM 1. LEGAL PROCEEDINGS 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
</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 25, January 1,
2000 2000
--------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 71.0 $ 106.2
Receivables 305.5 292.9
Merchandise inventories 2,318.1 2,444.9
Prepaid expenses and other current assets 198.7 208.1
--------- ---------
Total current assets 2,893.3 3,052.1
--------- ---------
Property 9,838.8 9,726.6
Less accumulated depreciation and amortization (3,406.3) (3,281.9)
--------- ---------
Property, net 6,432.5 6,444.7
Goodwill, net of accumulated amortization
of $343.1 and $314.4 4,760.4 4,786.6
Prepaid pension costs 422.3 405.6
Investment in unconsolidated affiliate 138.7 131.6
Other assets 84.0 79.7
--------- ---------
Total assets $14,731.2 $14,900.3
========= =========
</TABLE>
(Continued)
3
<PAGE> 4
SAFEWAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
March 25, January 1,
2000 2000
--------- ----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of notes
and debentures $ 487.5 $ 557.1
Current obligations under capital leases 41.2 41.8
Accounts payable 1,487.8 1,878.4
Accrued salaries and wages 331.2 387.7
Other accrued liabilities 845.8 717.6
--------- ---------
Total current liabilities 3,193.5 3,582.6
--------- ---------
Long-term debt:
Notes and debentures 5,923.3 5,922.0
Obligations under capital leases 426.9 435.4
--------- ---------
Total long-term debt 6,350.2 6,357.4
Deferred income taxes 368.6 379.1
Accrued claims and other liabilities 476.9 495.4
--------- ---------
Total liabilities 10,389.2 10,814.5
--------- ---------
Commitments and contingencies
Stockholders' equity:
Common stock: par value $0.01 per share;
1,500 shares authorized; 494.8 and 493.6 shares
issued, after deducting 65.2 and 65.4 treasury shares 5.6 5.6
Additional paid-in capital 1,339.6 1,321.8
Retained earnings 3,011.8 2,769.9
Accumulated other comprehensive loss (15.0) (11.5)
--------- ---------
Total stockholders' equity 4,342.0 4,085.8
--------- ---------
Total liabilities and stockholders' equity $14,731.2 $14,900.3
========= =========
</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 25, March 27,
2000 1999
--------- ---------
<S> <C> <C>
Sales $ 7,086.3 $ 6,113.2
Cost of goods sold (4,976.6) (4,291.6)
--------- ---------
Gross profit 2,109.7 1,821.6
Operating and administrative expense (1,565.7) (1,376.4)
Goodwill amortization (29.1) (20.0)
--------- ---------
Operating profit 514.9 425.2
Interest expense (109.8) (73.3)
Equity in earnings of unconsolidated affiliate 7.1 8.0
Other income, net 1.3 1.2
--------- ---------
Income before income taxes 413.5 361.1
Income taxes (171.6) (155.3)
--------- ---------
Net income $ 241.9 $ 205.8
========= =========
Basic earnings per share $ 0.49 $ 0.42
========= =========
Diluted earnings per share $ 0.48 $ 0.40
========= =========
Weighted average shares outstanding - basic 494.2 492.6
========= =========
Weighted average shares outstanding - diluted 507.9 512.8
========= =========
</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 25, March 27,
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOW FROM OPERATIONS
Net income $241.9 $205.8
Reconciliation to net cash flow from operations:
Depreciation and amortization 189.7 144.0
LIFO expense -- 2.3
Equity in undistributed earnings of unconsolidated affiliate (7.1) (8.0)
Net pension income (20.4) (4.2)
Other (40.8) (20.0)
Change in working capital items:
Receivables and prepaid expenses (4.6) 18.3
Inventories at FIFO cost 123.4 (6.3)
Payables and accruals (313.6) (162.3)
------ ------
Net cash flow from operations 168.5 169.6
------ ------
CASH FLOW FROM INVESTING ACTIVITIES
Cash paid for property additions (154.5) (130.1)
Proceeds from sale of property 35.9 8.2
Other (7.9) (4.9)
------ ------
Net cash flow used by investing activities (126.5) (126.8)
------ ------
CASH FLOW FROM FINANCING ACTIVITIES
Additions to short-term borrowings -- 9.5
Payments on short-term borrowings (70.0) (86.5)
Additions to long-term borrowings 125.1 236.5
Payments on long-term borrowings (141.4) (212.7)
Net proceeds from exercise of stock options and warrants 9.1 11.6
Other -- (2.0)
------ ------
Net cash flow used by financing activities (77.2) (43.6)
------ ------
Decrease in cash and equivalents (35.2) (0.8)
CASH AND EQUIVALENTS
Beginning of period 106.2 45.7
------ ------
End of period $ 71.0 $ 44.9
====== ======
</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 25, 2000
and March 27, 1999 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 1999 Annual Report to Stockholders. The results of operations for the
12 weeks ended March 25, 2000 are not necessarily indicative of the results
expected for the full year.
ACQUISITION OF CARR-GOTTSTEIN FOODS CO. ("CARRS")
In April 1999, Safeway completed its acquisition of Carrs by purchasing all of
the outstanding shares of Carrs for approximately $106 million in cash (the
"Carrs Acquisition"). The Carrs Acquisition was accounted for as a purchase and
Carrs operating results have been consolidated with Safeway's since the
beginning of the second quarter of 1999. See Note D.
ACQUISITION OF RANDALL'S FOOD MARKETS, INC. ("RANDALL'S")
In September 1999, Safeway acquired Randall's by purchasing all of the
outstanding shares of Randall's for $1.3 billion consisting of $754 million in
cash and 12.7 million shares of Safeway stock (the "Randall's Acquisition"). The
Randall's Acquisition was accounted for as a purchase and Randall's operating
results have been consolidated with Safeway's since the beginning of the fourth
quarter of 1999. See Note D.
INVENTORY
Net income reflects the application of the LIFO method of valuing certain
domestic inventories, based upon estimated annual inflation ("LIFO Indices").
Safeway did not record LIFO expense in the first quarter of 2000 reflecting
management's expectation of little or no inflation for the full year. LIFO
expense was $2.3 million in the first quarter of 1999. Actual LIFO Indices are
calculated during the fourth quarter of the year based upon a statistical
sampling of inventories.
COMPREHENSIVE INCOME
Comprehensive income includes net income and foreign currency translation
adjustments. Total comprehensive income approximates net income.
NOTE B - NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which defines derivatives, requires that
derivatives be carried at fair value, and provides for hedge accounting when
certain conditions are met. Safeway will adopt SFAS No. 133 as required by SFAS
137, "Deferral of the Effective Date of the FASB Statement No. 133," beginning
in the first quarter of 2001. Although the Company has not fully assessed the
implications of this new statement, the Company does not believe adoption of
this statement will have a material impact on its financial statements.
7
<PAGE> 8
SAFEWAY INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE C - FINANCING
Notes and debentures were composed of the following at March 25, 2000 and
January 1, 2000 (in millions):
<TABLE>
<CAPTION>
March 25, 2000 January 1, 2000
---------------------- ---------------------
Long-term Current Long-term Current
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Commercial paper $2,361.3 $2,358.1
Bank credit agreement, unsecured 75.1 75.7
9.30% Senior Secured Debentures due 2007 24.3 24.3
6.85% Senior Notes due 2004, unsecured 200.0 200.0
7.00% Senior Notes due 2007, unsecured 250.0 250.0
7.45% Senior Debentures due 2027, unsecured 150.0 150.0
5.75% Senior Notes due 2000, unsecured -- $400.0 -- $400.0
5.875% Senior Notes due 2001, unsecured 400.0 400.0
6.05% Senior Notes due 2003, unsecured 350.0 350.0
6.50% Senior Notes due 2008, unsecured 250.0 250.0
7.00% Senior Notes due 2002, unsecured 600.0 600.0
7.25% Senior Notes due 2004, unsecured 400.0 400.0
7.50% Senior Notes due 2009, unsecured 500.0 500.0
10% Senior Subordinated Notes due 2001, 79.9 79.9
unsecured
9.65% Senior Subordinated Debentures due
2004, unsecured 81.2 81.2
9.875% Senior Subordinated Debentures due
2007, unsecured 24.2 24.2
10% Senior Notes due 2002, unsecured 6.1 6.1
Mortgage notes payable, secured 68.8 15.1 63.5 12.1
Other notes payable, unsecured 85.9 3.7 92.5 6.3
Medium-term notes, unsecured 16.5 9.0 16.5 9.0
Short-term bank borrowings, unsecured 59.7 129.7
-------- ------ -------- ------
$5,923.3 $487.5 $5,922.0 $557.1
======== ====== ======== ======
</TABLE>
8
<PAGE> 9
SAFEWAY INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE D - PRO FORMA SUMMARY FINANCIAL INFORMATION
The following unaudited pro forma combined summary financial information is
based on the historical consolidated results of the operations of Safeway,
Randall's and Carrs, as if the Randall's and Carrs Acquisitions had occurred as
of the beginning of the 12-week period ended March 27, 1999. This pro forma
financial information is presented for informational purposes only and may not
be indicative of what the actual consolidated results of operations would have
been if the acquisition had been effective as of the period being presented.
Under purchase accounting, the purchase price is allocated to acquired assets
and liabilities based on their estimated fair values at the date of acquisition,
and any excess is allocated to goodwill. For Randall's and Carrs, such
allocations are subject to adjustment when additional analysis concerning asset
and liability balances is finalized. Management does not expect the final
allocations to differ materially from the amounts presented herein.
<TABLE>
<CAPTION>
12 Weeks Ended
--------------------------------
(Actual) (Pro Forma)
(in millions, except per-share amounts) March 25, 2000 March 27, 1999
-------------- --------------
<S> <C> <C>
Sales $7,086.3 $6,859.2
Net income $241.9 $201.1
Diluted earnings per share $0.48 $0.38
</TABLE>
NOTE E - CONTINGENCIES
LEGAL MATTERS
Note K to the Company's consolidated financial statements, under the caption
"Legal Matters" on pages 37 and 38 of the 1999 Annual Report to Stockholders,
provides information on certain litigation in which the Company is involved.
There have been no material developments to these matters, except as described
below.
On March 31, 2000, in the gender discrimination class action against Dominick's,
the court held a fairness hearing in connection with the settlement agreement
executed by the parties and granted final approval of the settlement.
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 was $241.9 million ($0.48 per share) for the first quarter
ended March 25, 2000, compared to $205.8 million ($0.40 per share) for the first
quarter of 1999.
First-quarter sales increased 15.9% to $7.1 billion in 2000 from $6.1 billion in
1999, primarily because of the Randall's and Carrs Acquisitions. As expected,
sales during the first two weeks of the quarter were soft because many customers
stocked up at the end of 1999 due to Y2K concerns. For the final 10 weeks of the
quarter, comparable-store sales increased 3.3% and identical-store sales (which
exclude replacement stores) increased 2.7%. For the full quarter,
comparable-store sales increased 2.4%, while identical store sales increased
1.8%.
In September 1999, Safeway acquired Randall's Food Markets, Inc. (the "Randall's
Acquisition"). In April 1999, Safeway acquired Carr-Gottstein Foods Co. (the
"Carrs Acquisition"). In order to facilitate an understanding of the Company's
operations, the following discussions of gross profit and operating and
administrative expense include certain pro forma information based on the 1999
combined historical financial statements as if the Randall's and Carrs
Acquisitions had been effective as of the beginning of 1999.
Safeway's continued improvement in buying practices and product mix helped
increase gross profit to 29.77% of sales in the first quarter of 2000 from
29.46% on a pro forma basis in the first quarter of 1999. Gross profit decreased
slightly on a historical basis from 29.80% in the first quarter of 1999.
Operating and administrative expense, including goodwill amortization, declined
to 22.51% of sales in the first quarter of 2000 from 22.84% in 1999 on a
historical basis and 22.87% on a pro forma basis, reflecting increased sales,
ongoing efforts to reduce or control expenses and gains on the sale of certain
non-operating store properties in the first quarter of 2000.
Interest expense increased to $109.8 million in the first quarter of 1999 from
$73.3 million in the first quarter of 1999. This increase was primarily due to
debt incurred to finance the Randall's and Carrs Acquisitions and the repurchase
of Safeway stock during the fourth quarter of 1999. Despite the increase in
interest expense, the interest coverage ratio (operating cash flow divided by
interest expense) remains very strong at 7.10 times over the last four quarters.
Operating cash flow (defined on page 11) as a percentage of sales reached 9.49%
over the last four quarters compared to 9.37% one year ago.
Equity in earnings of Casa Ley, Safeway's unconsolidated affiliate, was $7.1
million for the first quarter of 2000, compared to $8.0 million in 1999. Casa
Ley operates 88 food and general merchandise stores in western Mexico.
ACQUISITION OF CARR-GOTTSTEIN FOODS CO. ("CARRS")
In April 1999, Safeway completed its acquisition of all of the outstanding
shares of Carrs for approximately $106 million in cash (the "Carrs
Acquisition"). On the acquisition date, Carrs operated 49 stores. The Carrs
Acquisition was accounted for as a purchase. Safeway funded the acquisition, and
subsequent repayment of approximately $239 million of Carrs' debt, with the
issuance of commercial paper.
ACQUISITION OF RANDALL'S FOOD MARKETS, INC. ("RANDALL'S")
In September 1999, Safeway acquired all of the outstanding shares of Randall's
in exchange for $1.3 billion consisting of $754 million of cash and 12.7 million
shares of Safeway stock (the "Randall's Acquisition"). On the acquisition date,
Randall's operated 117 stores in Texas. The Randall's Acquisition was accounted
for as a purchase. Safeway funded the cash portion of the acquisition and
subsequent repayment of approximately $403 million in Randall's debt, through
the issuance of senior notes.
10
<PAGE> 11
SAFEWAY INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND FINANCIAL RESOURCES
Cash flow from operations was $168.5 million in the first quarter of 2000
compared to cash flow from operations of $169.6 million in the first quarter of
1999. This change is primarily due to improved results of operations and changes
in working capital. Working capital (excluding cash and debt) at March 25, 2000
was $157.5 million compared to a deficit of $124.3 million at March 27, 1999.
Cash flow used by investing activities for the first quarter of the year was
$126.5 million in 2000 compared to $126.8 million in 1999, primarily due to
higher proceeds from property sales in 1999 offset by increased capital
expenditures.
Cash flow used by financing activities was $77.2 million in the first quarter of
2000 and $43.6 million in 1999, primarily due to the repayment of debt.
Net cash flow from operations as presented in the Condensed Consolidated
Statements of Cash Flows is an important measure of cash generated by the
Company's operating activities. Operating cash flow, as defined below, is
similar to net cash flow from operations because it excludes certain noncash
items. However, operating cash flow also excludes interest expense and income
taxes. Management believes that operating cash flow is relevant because it
assists investors in evaluating Safeway's ability to service its debt by
providing a commonly used measure of cash available to pay interest, and it
facilitates comparisons of Safeway's results of operations with those of
companies having different capital structures. Other companies may define
operating cash flow differently, and as a result, such measures may not be
comparable to Safeway's operating cash flow. Safeway's computation of operating
cash flow is as follows:
<TABLE>
<CAPTION>
12 Weeks Ended
------------------------------
(Dollars in millions) March 25, 2000 March 27, 1999
-------------- --------------
<S> <C> <C>
Income before income taxes $413.5 $361.1
Interest expense 109.8 73.3
Depreciation and amortization 189.7 144.0
LIFO expense -- 2.3
Equity in earnings of unconsolidated affiliate (7.1) (8.0)
------ ------
Operating cash flow $705.9 $572.7
====== ======
As a percent of sales 9.96% 9.37%
As a multiple of interest expense 6.43x 7.81x
</TABLE>
Based upon the current level of operations, Safeway believes that operating cash
flow and other sources of liquidity, including borrowings under Safeway's
commercial paper program and the bank credit agreement, will be adequate to meet
anticipated requirements for working capital, capital expenditures, interest
payments and scheduled principal payments for the foreseeable future. There can
be no assurance, however, that the Company's business will continue to generate
cash flow at or above current levels. The bank credit agreement is used
primarily as a backup facility to the commercial paper program.
CAPITAL EXPENDITURE PROGRAM
During the first quarter of 1999, Safeway invested $178.9 million in capital
expenditures (as defined on page 15 of the Company's 1999 Annual Report to
Stockholders). The Company opened 14 new stores and closed 10 stores The Company
expects to spend approximately $1.6 billion in 2000 while opening 70 to 75 new
stores and completing approximately 250 remodels.
11
<PAGE> 12
SAFEWAY INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD -LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Such statements relate to, among other things, capital expenditures,
acquisitions, operating improvements and cost reductions, and are indicated by
words or phrases such as "continuing," "on-going," "expects," and similar words
or phrases. The following factors are among the principal factors that could
cause actual results to differ materially from the forward-looking statements:
general business and economic conditions in our operating regions, including the
rate of inflation, population, employment and job growth in our markets; pricing
pressures and other competitive factors, which could include pricing strategies,
store openings and remodels; results of our program to reduce costs; the ability
to integrate and achieve operating improvements at companies we acquire;
increases in labor costs and deterioration in relations with the union
bargaining units representing the our employees; opportunities or acquisitions
that the we pursue; and the availability and terms of financing. Consequently,
actual events and results may vary significantly from those included in or
contemplated or implied by such statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes regarding the Company's market risk position
from the information provided under the caption "Market Risk from Financial
Instruments" on page 16 of the Company's 1999 Annual Report to Stockholders.
12
<PAGE> 13
SAFEWAY INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Note K to the Company's consolidated financial statements, under the caption
"Legal Matters" on pages 37 and 38 of the 1999 Annual Report to Stockholders,
provides information on certain litigation in which the Company is involved.
There have been no material developments to these matters, except as described
below.
On March 31, 2000, in the gender discrimination class action against Dominick's,
the court held a fairness hearing in connection with the settlement agreement
executed by the parties and granted final approval of the settlement.
ITEM 6(a). EXHIBITS
<TABLE>
<S> <C>
Exhibit 2.1 Agreement and Plan of Merger dated as of July 22, 1999,
among Safeway, Inc., SI Merger Sub, Inc. and Randall's Food
Markets Inc. (incorporated by reference to Exhibit 2 to the
Registrant's Form 8-K dated August 3, 1999).
Exhibit 3.1 Restated Certificate of Incorporation of the Company and
Certificate of Amendment of Restated Certificate of
Incorporation by the Company (incorporated by reference to
Exhibit 3.1 to the Registrant's Quarterly Report on Form
10-Q for the quarterly period ended June 15, 1996) and
Certificate of Amendment of Restated Certificate of
Incorporation of Safeway Inc. (incorporated by reference to
Exhibit 3.1 to the Registrant's Quarterly Report on Form
10-Q for the quarterly period ended June 20, 1998).
Exhibit 3.2 Form of By-laws of the Company as amended and restated
(incorporated by reference to Exhibit 3.2 to Registrant's
Form 10-K for the year ended January 1, 2000).
Exhibit 4.(i).1 First Amendment to the Credit Agreement dated as of
March 19, 1999 and Second Amendment to the Credit Agreement
dated as of March 9, 2000 to the Credit Agreement dated as
of April 8, 1997.
Exhibit 11.1 Computation of Earnings Per Share.
Exhibit 12.1 Computation of Ratio of Earnings to Fixed Charges.
Exhibit 27.1 Financial Data Schedule (electronic filing only).
</TABLE>
ITEM 6(b). REPORTS ON FORM 8-K
The Company filed no Current Reports on Form 8-K during the first quarter of
2000.
13
<PAGE> 14
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 9, 2000 \s\ Steven A. Burd
------------------------------------
Steven A. Burd
Chairman, President
and Chief Executive Officer
Date: May 9, 2000 \s\ David G. Weed
------------------------------------
David G. Weed
Executive Vice President
and Chief Financial Officer
14
<PAGE> 15
SAFEWAY INC. AND SUBSIDIARIES
EXHIBIT INDEX
LIST OF EXHIBITS FILED WITH FORM 10-Q FOR THE PERIOD
ENDED MARCH 25, 2000
<TABLE>
<S> <C>
Exhibit 4.(i).1 First Amendment to the Credit Agreement dated as of
March 19, 1999 and Second Amendment to the Credit Agreement
dated as of March 9, 2000 to the Credit Agreement dated as
of April 8, 1997.
Exhibit 11.1 Computation of Earnings Per Share
Exhibit 12.1 Computation of Ratio of Earnings to Fixed Charges
Exhibit 27.1 Financial Data Schedule (electronic filing only)
</TABLE>
15
<PAGE> 1
EXHIBIT 4(i).1
SAFEWAY INC.
FIRST AMENDMENT TO CREDIT AGREEMENT
DATED AS OF MARCH 19, 1999
This FIRST AMENDMENT TO CREDIT AGREEMENT dated as of March 19,
1999 (this "FIRST AMENDMENT") to the Credit Agreement dated as of April 8, 1997
(as amended, the "CREDIT AGREEMENT"), is by and among Safeway Inc., a Delaware
corporation ("COMPANY"), The Vons Companies, Inc. ("VONS" and together with
Company, the "DOMESTIC BORROWERS"), Canada Safeway Limited (together with the
Domestic Borrowers, the "BORROWERS"), the financial institutions named on the
signature pages hereof ("LENDERS"), Bankers Trust Company ("BTCO"), as
Administrative Agent for Lenders ("ADMINISTRATIVE AGENT"), The Chase Manhattan
Bank, as Syndication Agent, and The Bank of Nova Scotia and Bank of America
National Trust and Savings Association, as Documentation Agents. Capitalized
terms used herein without definition shall have the same meanings herein as set
forth in the Credit Agreement.
RECITALS
WHEREAS, Domestic Borrowers have requested that the Tranche B
Domestic Commitment be increased from $880,666,667 to $1,000,000,000;
WHEREAS, Tranche B Domestic Lenders have agreed to make Tranche B
Domestic Loans to the Domestic Borrowers in an amount equal to their respective
Tranche B Domestic Commitments set forth on Schedule 1 annexed hereto;
WHEREAS, Domestic Borrowers have agreed to pay to the Tranche B
Domestic Lenders, a utilization fee in connection with any utilized Tranche B
Domestic Commitments under the Credit Agreement; and
WHEREAS, the Borrowers and Lenders have agreed, subject to the
terms and conditions of this First Amendment, to restate subsection 9.4(i) of
the Credit Agreement to clarify the intent of such provision to allow for the
merger of other Persons with and into the Company or its Wholly-Owned
Subsidiaries as provided therein and to make certain other modifications to the
Credit Agreement as set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the terms and conditions
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
<PAGE> 2
SECTION 1
EXTENSION OF TRANCHE B REVOLVING TERMINATION DATE.
Pursuant to subsection 2.8 of the Credit Agreement, each Tranche
B Domestic Lender by execution of a counterpart hereof agrees that the Tranche B
Revolving Termination Date (which date is currently April 5, 1999) is hereby
extended for an additional 364 days.
SECTION 2.
INCREASE IN TRANCHE B DOMESTIC COMMITMENT.
Subject to the terms and conditions of the Credit Agreement
(including subsection 2.1A(iii) thereof), each Domestic Lender listed on
Schedule 1 annexed hereto severally agrees to lend Domestic Borrowers from time
to time during the period from the First Amendment Effective Date to such
Lender's Tranche B Revolving Termination Date an aggregate amount, not exceeding
such Lender's Tranche B Domestic Pro Rata Share of the aggregate amount of the
Tranche B Domestic Commitments. The portion of Schedule 2.1 of the Credit
Agreement relating to the Tranche B Domestic Commitments of Domestic Lenders is
hereby amended and restated in the form attached hereto as Schedule 1.
SECTION 3.
AMENDMENT TO THE CREDIT AGREEMENT.
A. UTILIZATION FEE. Subsection 2.3 of the Credit Agreement is
hereby amended to add paragraph D, which shall read as follows:
"D. UTILIZATION FEE. The Domestic Borrowers shall pay to
the Agent for distribution to each Tranche B Domestic Lender as provided
herein, a utilization fee based on the actual daily aggregate principal
amount of Tranche B Domestic Loans then outstanding hereunder with
respect to each day on which the principal amount of all Tranche B
Domestic Loans outstanding exceeds 35% of the Tranche B Domestic
Commitments as of the First Amendment Effective Date. The amount of the
utilization fee will equal 0.25% per annum of outstanding Tranche B
Domestic Loans during each day on which outstanding Tranche B Domestic
Loans exceeds 35% of the aggregate Tranche B Domestic Commitments as of
the First Amendment Effective Date and shall be increased to 0.50% per
annum of outstanding Tranche B Domestic Loans during each day on which
outstanding Tranche B Domestic Loans exceed 70% of the aggregate Tranche
B Domestic Commitments as of the First Amendment Effective Date. The
utilization fee shall be payable to each Tranche B Domestic Lender in
proportion to such Lender's Tranche B Domestic Pro Rata Share for the
period from and including the First Amendment Effective Date to and
excluding such Lender's Tranche B Revolving Termination Date. In the
event that any Lender's Tranche B Domestic Loans remain outstanding
beyond such Lender's Tranche B Revolving Termination Date, a utilization
fee of 0.50% per annum shall be payable to such Lender based on the
actual daily aggregate principal amount of such loans outstanding for the
period from and including
2
<PAGE> 3
such Lender's Tranche B Revolving Termination Date, to and excluding such
Lender's Tranche B Term Termination Date. In the event any Tranche B
Domestic Loans remain outstanding beyond any Lender's Tranche B Term
Termination Date, the utilization fees described in the previous sentence
shall continue to accrue on such Loans and be due and payable as
described in this subsection 2.3D. All such utilization fees described in
this subsection 2.3D are to be payable quarterly in arrears on each
Quarterly Payment Date, commencing on the first such date to occur after
the First Amendment Effective Date, and on each Tranche B Domestic
Lender's Tranche B Revolving Termination Date and Tranche B Term
Termination Date, as the case may be."
B. DEFINITIONS. Subsection 1.1 of the Credit Agreement is hereby
amended to include the following definitions:
"FIRST AMENDMENT" means the First Amendment to the Agreement
dated as of March 19, 1999 by and among Borrowers, the financial
institutions party thereto, BTCo, as Administrative Agent for Lenders,
Chase, as Syndication Agent, Scotiabank and BofA, as Documentation
Agents.
"FIRST AMENDMENT EFFECTIVE DATE" means the date on which the
First Amendment became effective in accordance with its terms.
"TRANCHE B DOMESTIC LENDER" means any Domestic Lender having a
Tranche B Domestic Commitment.
C. RESTRICTION ON FUNDAMENTAL CHANGES; MATERIAL ASSET SALES.
Subsection 9.4 of the Credit Agreement is hereby amended by deleting paragraph
(i) in its entirety and substituting the following in place thereof:
"(i) any Subsidiary of Company or any other Person may be
merged or amalgamated with or into Company or any Wholly-Owned
Subsidiary of Company, or be liquidated, wound up or dissolved into, or
all or any part of its business, property or assets may be conveyed,
sold, leased, transferred or otherwise disposed of, in one transaction
or a series of transactions, to Company or any Wholly-Owned Subsidiary
of Company; provided that, (a) in the case of any such merger involving
Company, Company shall be the surviving corporation, (b) in the case of
such a merger involving Vons or Canada Safeway but not covered by clause
(a), Vons or Canada Safeway, as the case may be, shall be the surviving
corporation and shall, after giving effect to such merger, be a
Wholly-Owned Subsidiary of Company, and (c) in the case of such a merger
involving a Wholly-Owned Subsidiary and not covered by either clause (a)
or clause (b) above, the surviving corporation shall be a Wholly-Owned
Subsidiary of Company; and"
3
<PAGE> 4
SECTION 4.
REPRESENTATIONS AND WARRANTIES.
In order to induce Lenders to enter into this First Amendment and
to amend the Credit Agreement in the manner provided herein, Borrowers represent
and warrant to each Lender as of the date hereof, as of the First Amendment
Effective Date that the following statements are true, correct and complete:
A. CORPORATE POWER AND AUTHORITY. Borrowers have all requisite
corporate power and authority to enter into this First Amendment and to carry
out the transactions contemplated by, and perform its obligations under, the
Credit Agreement.
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this First Amendment and the performance of the Credit Agreement have been duly
authorized by all necessary corporate action on the part of the Borrowers.
C. NO CONFLICT. The execution and delivery by Borrowers of this
First Amendment and the performance by Borrowers of the Credit Agreement do not
and will not (i) violate any provision of any law or any governmental rule or
regulation applicable to Borrowers or any Subsidiary, the Certificate or
Articles of Incorporation or Bylaws of Borrowers or any Subsidiary or any order,
judgment or decree of any court or other agency of government binding on
Borrowers or any Subsidiary, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Borrowers or any Subsidiary, (iii) result in or
require the creation or imposition of any Lien upon any of the properties or
assets of Borrowers or any Subsidiary (other than Liens created under any of the
Loan Documents in favor of Administrative Agent on behalf of Lenders), or (iv)
require any approval of stockholders or any approval or consent of any Person
under any Contractual Obligation of Borrowers or any Subsidiary, except for such
approvals which will be obtained on or before the First Amendment Effective Date
and disclosed in writing to Lenders.
D. GOVERNMENTAL CONSENTS. The execution and delivery by Borrowers
of this First Amendment and the performance by Borrowers of the Credit Agreement
do not and will not require any registration with, consent or approval of, or
notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.
E. BINDING OBLIGATION. This First Amendment has been duly
executed and delivered by Borrowers and, when executed and delivered, this First
Amendment and the Credit Agreement will be the legally valid and binding
obligations of Borrowers, enforceable against Borrowers in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 7 of the
Credit Agreement are and will be true, correct and complete in all material
respects to the same extent as though
4
<PAGE> 5
made on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they were true,
correct and complete in all material respects on and as of such earlier date.
G. ABSENCE OF DEFAULT. No event has occurred and is continuing or
will result from the consummation of the transactions contemplated by this First
Amendment that would constitute an Event of Default or a Potential Event of
Default.
SECTION 5.
CONDITIONS TO EFFECTIVENESS.
This First Amendment shall become effective only on or after
April 5, 1999 and only upon the satisfaction of all of the following conditions
precedent, in form and substance satisfactory to Administrative Agent (the
"FIRST AMENDMENT EFFECTIVE DATE"):
(i) On or before the First Amendment Effective Date, the
Borrowers shall have delivered to the Administrative Agent
resolutions of the Board of Directors of each Borrower
authorizing and approving the execution, delivery and performance
of this First Amendment, in each case certified by the corporate
secretary or an assistant secretary of such Borrower, as the case
may be, as of the First Amendment Effective Date;
(ii) On or before the First Amendment Effective Date, the
Borrowers shall have delivered to the Administrative Agent a
certificate of the corporate secretary or an assistant secretary
of each Borrower which shall certify, as of the First Amendment
Effective Date, the names and offices of the officers of each
Borrower authorized to sign this First Amendment;
(iii) On or before the First Amendment Effective Date, the
Borrowers shall have delivered to the Administrative Agent a
counterpart hereof executed by a duly authorized officer of each
Borrower, Requisite Lenders and each Tranche B Domestic Lender;
(iv) On or before the First Amendment Effective Date, the
Domestic Borrowers shall have paid (a) to each Tranche B
Domestic Lender that has offered a Tranche B Domestic
Commitment of $75 million or more an upfront fee of (i) 0.10%
of its allocated Tranche B Domestic Commitment to the extent
that its allocated Tranche B Domestic Commitment is greater
than $75 million and (ii) an upfront fee of 0.08% of its
allocated Tranche B Domestic Commitment to the extent that
such allocated Tranche B Domestic Commitment is less than or
equal to $75 million, (b) to each Tranche B Domestic Lender
that has offered a Tranche B Domestic Commitment of at least
$45 million but less than $75 million an upfront fee of 0.06%
of its allocated Tranche B Domestic Commitment and (c) to each
Tranche B Domestic Lender that has offered a Tranche B
Domestic
5
<PAGE> 6
Commitment of less than $45 million an upfront fee of 0.04% of
its allocated Tranche B Domestic Commitment.
SECTION 6.
LIMITATION OF AMENDMENTS.
Without limiting the generality of the provisions of subsection
13.7 of the Credit Agreement, the consent and the amendments set forth above
shall be limited precisely by their terms, shall not have any force or effect
with respect to any other matter except as expressly provided above, and nothing
in this First Amendment shall be deemed to:
(i) constitute a waiver or modification of any other term,
provision or condition of the Credit Agreement or any other
instrument or agreement referred to therein; or
(ii) prejudice any right or remedy that Administrative Agent or
any Lender may now have (except to the extent such right or
remedy was based upon existing defaults that will not exist after
giving effect to this First Amendment) or may have in the future
under or in connection with the Credit Agreement or any other
instrument or agreement referred to therein.
Except as expressly set forth herein, the terms, provisions and
conditions of the Credit Agreement and the other Loan Documents shall remain in
full force and effect and in all other respects are hereby ratified and
confirmed.
SECTION 7.
MISCELLANEOUS.
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE LOAN
DOCUMENTS.
(i) On and after the First Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import referring
to the Credit Agreement, and each reference in the other Loan
Documents to the "Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement shall mean
and be a reference to the Credit Agreement, as amended by this
First Amendment.
(ii) Except as specifically amended by this First Amendment, the
Credit Agreement and the other Loan Documents shall remain in
full force and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this First
Amendment shall not, except as expressly provided herein,
constitute a waiver of any provision of,
6
<PAGE> 7
or operate as a waiver of any right, power or remedy of Agent or
any Lender under, the Credit Agreement or any of the other Loan
Documents.
B. FEES AND EXPENSES. Borrowers acknowledge that all costs, fees
and expenses as described in subsection 13.2 of the Credit Agreement incurred by
Administrative Agent and its counsel with respect to this First Amendment and
the documents and transactions contemplated hereby shall be for the account of
Borrowers.
C. HEADINGS. Section and subsection headings in this First
Amendment are included herein for convenience of reference only and shall not
constitute a part of this First Amendment for any other purpose or be given any
substantive effect.
D. APPLICABLE LAW. THIS FIRST AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS; EFFECTIVENESS. This First Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This First Amendment shall become
effective upon the execution of a counterpart hereof by Borrowers, Tranche B
Domestic Lenders, Requisite Lenders and receipt by Company and Administrative
Agent of written or telephonic notification of such execution and authorization
of delivery thereof.
[Remainder of Page Intentionally Left Blank]
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be executed as of the date first above written, by their respective
officers thereunto duly authorized.
BORROWERS: SAFEWAY INC.
By:
-------------------------------------------
Title:
----------------------------------------
THE VONS COMPANIES, INC.
By:
-------------------------------------------
Title:
----------------------------------------
CANADA SAFEWAY LIMITED
By:
-------------------------------------------
Title:
----------------------------------------
LENDERS: ABN-AMRO BANK N.V., as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
BANCA DI ROMA, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
BANCA MONTE DEI PASCHI DE SIENA, as a Domestic
Lender
By:
-------------------------------------------
Title:
----------------------------------------
BANCA POPULARE DI MILANO, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
S-1
<PAGE> 9
BANK OF AMERICA, NATIONAL TRUST & SAVINGS
ASSOCIATION, as a Domestic Lender and as a
Documentation Agent
By:
-------------------------------------------
Title:
----------------------------------------
BANK OF MONTREAL, as a Domestic Lender and a
Canadian Lender and as an Agent
By:
-------------------------------------------
Title:
----------------------------------------
BANK OF NEW YORK, as a Domestic Lender and as
an Agent
By:
-------------------------------------------
Title:
----------------------------------------
THE BANK OF NOVA SCOTIA, as a Domestic Lender
and a Canadian Lender and as primary
Documentation Agent
By:
-------------------------------------------
Title:
----------------------------------------
BANKERS TRUST COMPANY, as a Domestic Lender
and as Administrative Agent
By:
-------------------------------------------
Title:
----------------------------------------
BANK OF SCOTLAND, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
S-2
<PAGE> 10
BANQUE NATIONALE DE PARIS, as a Domestic
Lender
By:
-------------------------------------------
Title:
----------------------------------------
CARIPLO-CASSA DI RISPARMIO DELLE PROVINCIE
LOMBARDE SPA, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
THE CHASE MANHATTAN BANK, as Syndication Agent
and as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
CANADIAN IMPERIAL BANK OF COMMERCE, as a
Domestic Lender and a Canadian Lender and as
an Agent
By:
-------------------------------------------
Title:
----------------------------------------
CITICORP USA, INC., as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
CREDIT AGRICOLE INDOSUEZ, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
CREDIT SUISSE FIRST BOSTON, as a Domestic
Lender
By:
-------------------------------------------
Title:
----------------------------------------
S-3
<PAGE> 11
FIRST HAWAIIAN BANK, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
FIRST NATIONAL BANK OF CHICAGO, as a Domestic
Lender
By:
-------------------------------------------
Title:
----------------------------------------
THE FIRST NATIONAL BANK OF MARYLAND, as a
Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
THE FUJI BANK, LIMITED, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
INDUSTRIAL BANK OF JAPAN, LIMITED, SAN
FRANCISCO AGENCY, as a Domestic Lender
V
KEY BANK NATIONAL ASSOCIATION, as a Domestic
Lender
By:
-------------------------------------------
Title:
----------------------------------------
THE LONG TERM CREDIT BANK OF JAPAN, LIMITED,
LOS ANGELES AGENCY, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
S-4
<PAGE> 12
MELLON BANK, N.A., as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
MERCANTILE BANK OF ST. LOUIS, N.A., as a
Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION, as
a Domestic Lender and as an Agent
By:
-------------------------------------------
Title:
----------------------------------------
NORTHERN TRUST COMPANY, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
ROYAL BANK OF CANADA, as a Domestic Lender and
a Canadian Lender and as an Agent
By:
-------------------------------------------
Title:
----------------------------------------
THE SUMITOMO BANK, LIMITED, as a Domestic
Lender and as an Agent
By:
-------------------------------------------
Title:
----------------------------------------
UNION BANK OF CALIFORNIA, N.A., as a Domestic
Lender and as an Agent
By:
-------------------------------------------
Title:
----------------------------------------
S-5
<PAGE> 13
US BANK NATIONAL ASSOCIATION, as a Domestic
Lender
By:
-------------------------------------------
Title:
----------------------------------------
WELLS FARGO BANK, NATIONAL ASSOCIATION, as a
Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
WACHOVIA BANK, N.A., as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
S-6
<PAGE> 14
<TABLE>
<CAPTION>
SCHEDULE 1
DOMESTIC LENDER TRANCHE B DOMESTIC COMMITMENT
- --------------- -----------------------------
<S> <C>
ABN-Amro Bank N.V $ 8,000,000
Banca Di Roma $18,000,000
Banca Populare Di Milano $10,000,000
Bank of America, National Trust & Savings $62,500,000
Association
Bank of Montreal $45,000,000
Bank of New York $45,000,000
The Bank of Nova Scotia $62,500,000
Bankers Trust Company $72,500,000
Banque Nationale de Paris $16,000,000
Cariplo-Cassa di Risparmio Delle Provincie $ 3,500,000
Lombarde Spa
The Chase Manhattan Bank $72,500,000
Canadian Imperial Bank of Commerce $45,000,000
Citicorp USA, Inc. $50,000,000
Credit Agricole Indosuez $25,000,000
Credit Suisse First Boston $18,000,000
First Hawaiian Bank $25,000,000
First National Bank of Chicago $50,000,000
The First National Bank of Maryland $10,000,000
Industrial Bank of Japan, Limited, San $16,000,000
Francisco Agency
Key Bank National Association $45,000,000
Mellon Bank, N.A $ 5,500,000
Northern Trust Company $35,000,000
Royal Bank of Canada $45,000,000
</TABLE>
1
<PAGE> 15
TRANCHE B DOMESTIC COMMITMENT
<TABLE>
<CAPTION>
DOMESTIC LENDER TRANCHE B DOMESTIC COMMITMENT
- --------------- -----------------------------
<S> <C>
DOMESTIC LENDER
The Sumitomo Bank, Limited $ 45,000,000
Union Bank of California, N.A $ 50,000,000
US Bank National Association $ 50,000,000
Wells Fargo Bank, National Association $ 25,000,000
Wachovia Bank, N.A $ 45,000,000
--------------
TOTAL $1,000,000,000
==============
</TABLE>
2
<PAGE> 16
SAFEWAY INC.
SECOND AMENDMENT
TO CREDIT AGREEMENT
DATED AS OF MARCH 9, 2000
This SECOND AMENDMENT TO CREDIT AGREEMENT dated as of March 9,
2000 (this "Amendment" or the "SECOND AMENDMENT") to the Credit Agreement dated
as of April 8, 1997, as amended by the First Amendment to Credit Agreement dated
as of March 19, 1999 (as amended, the "CREDIT AGREEMENT"), is by and among
Safeway Inc., a Delaware corporation ("COMPANY"), The Vons Companies, Inc.
("VONS" and together with the Company, the "DOMESTIC BORROWERS"),Canada Safeway
Limited (together with the Domestic Borrowers, the "BORROWERS"), the financial
institutions named on the signature pages hereof ("LENDERS"), Bankers Trust
Company ("BTCO"), as Administrative Agent for Lenders ("ADMINISTRATIVE AGENT"),
The Chase Manhattan Bank, as Syndication Agent, and The Bank of Nova Scotia and
Bank of America, N.A., as Documentation Agents. Capitalized terms used herein
without definition shall have the same meanings herein as set forth in the
Credit Agreement.
RECITALS
WHEREAS, Company and Requisite Lenders desire to amend the Credit
Agreement to increase the utilization fees for the Tranche B Domestic Loans
payable pursuant to Subsection 2.3D thereof and permit Company to request an
additional extension of the Tranche B Revolving Termination Date on any date
after May 1, 2000 and on or prior to June 30, 2000, as more specifically
provided for herein;
WHEREAS, after giving effect to this Second Amendment, the
Tranche B Domestic Loan facility shall be deemed to be amended and restated as
specifically provided herein and in the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the terms and conditions
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. AMENDMENT TO THE CREDIT AGREEMENT.
1.1 Amendment to Section 2.3D: Utilization Fee
Subsection 2.3D of the Credit Agreement is amended by
deleting the reference therein to "0.25%" and substituting "0.30%" therefor and
deleting the two references therein to "0.50%" and substituting "0.60%"
therefor.
1.2 Amendment to Section 2.8: Extension of Tranche B Revolving
Termination Date.
1
<PAGE> 17
Section 2.8 is hereby amended by the addition of the
following paragraph after the first paragraph of such section:
"At any time after May 1, 2000 and on or prior to June 30, 2000,
Company may, at its option, deliver to Administrative Agent, for distribution to
each Lender within five Business Days of Administrative Agent's receipt thereof,
a Tranche B Extension Request signed by each Domestic Borrower requesting an
extension of the Tranche B Revolving Termination Date for 364 days pursuant to
such Tranche B Extension Request as provided in this paragraph. Each Lender may,
in its sole discretion, consent or not consent to any such Tranche B Extension
Request and, if such Lender so consents, such Lender shall deliver its consent
to such Tranche B Extension Request to Administrative Agent (which shall
promptly notify Company of such consent) during the 30 day period following the
date of such Tranche B Extension Request. Any Lender that fails to consent to
such Tranche B Extension Request within such 30 day period shall be deemed to
have rejected such Tranche B Extension Request. If Administrative Agent shall
have received, within such 30 day period, consents to such Tranche B Extension
Request from one or more Lenders, the Tranche B Revolving Termination Date to be
extended pursuant to such request shall, with respect to those Lenders
consenting to such request, be extended for 364 days from the end of such 30 day
period, and, on or prior to the end of such 30 day period, the Domestic
Borrowers shall pay to each Lender that has consented to such Tranche B
Extension Request a fee of 0.02% of its Tranche B Domestic Commitments. If any
Lender rejects a Tranche B Extension Request pursuant to this paragraph, Company
may, at its option, at any time prior to the Tranche B Revolving Termination
Date (as in effect prior to giving effect to such Tranche B Extension Request),
replace such rejecting Lender by causing such Lender to assign, and each Lender
agrees that, following its rejection of any Tranche B Extension Request and upon
the written request of Company, it shall assign, its Tranche B Domestic Loans
and Tranche B Domestic Commitment, as the case may be, to another Lender or an
Eligible Assignee identified by Company (that, in either case, has agreed to the
Tranche B Extension Request) in accordance with the provisions of subsection
13.1; provided that no assignment fee shall be payable to Primary Documentation
Agent in connection with such assignment. Administrative Agent shall give
Company and each Lender prompt notice of any extension of the Tranche B
Revolving Termination Date pursuant to this paragraph."
SECTION 2. REPRESENTATIONS AND WARRANTIES.
In order to induce Requisite Lenders to enter into this Second
Amendment, Company represents and warrants to each Lender that:
A. No event would result from the execution of this Second
Amendment and, after giving effect to this Amendment, no event
has occurred or is continuing which constitutes an Event of
Default or Potential Event of Default;
B. After giving effect to this Second Amendment, the
representations and warranties of Company contained in the Credit
Agreement, as amended by this Second Amendment (the "Amended
Credit Agreement") are true, correct and complete in all material
respects on and as of the date hereof to the same extent as
though made on and as of the date hereof, except that the
representations and warranties need not be true and correct to
the extent that changes in the facts and
2
<PAGE> 18
conditions on which such representations and warranties are
based are required or permitted under the Credit Agreement;
C. This Second Amendment, the Amended Credit Agreement, and the
consummation of the transactions contemplated hereby or thereby
do not and will not (i) violate any provisions of law applicable
to Company or any of its Subsidiaries, the Certificate of
Incorporation or Bylaws of Company or any of its Subsidiaries, or
any order, judgment or decree of any court or other agency of
government binding on Company or any of its Subsidiaries, or (ii)
conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under, the indentures
pursuant to which any outstanding Subordinated Indebtedness or
any term of any other material agreement or instrument to which
Company or any of its Subsidiaries is a party or by which any of
their properties or assets are bound;
D. Each Loan Party has performed in all material respects all
agreements and satisfied all conditions which the Credit
Agreement and this Second Amendment provide shall be performed by
it on or before the date hereof; and
E. The execution, delivery and performance by Company of this
Second Amendment are within the corporate power of Company and
have been duly authorized by all necessary corporate action on
the part of Company, and this Second Amendment and the Amended
Credit Agreement constitute the valid and binding obligations of
Company enforceable against Company in accordance with their
respective terms, subject to the effect of any applicable
bankruptcy, insolvency, reorganization or other laws relating to
or affecting the enforcement of creditors' rights generally.
SECTION 3. CONDITIONS TO EFFECTIVENESS.
This Second Amendment shall become effective on the first date
Administrative Agent, on behalf of Lenders, shall have received all of the
following, in form and substance satisfactory to Administrative Agent (the
"Second Amendment Effective Date"):
A. A certificate of the corporate secretary or an
assistant secretary of each Borrower which shall certify, as of
the Second Amendment Effective Date, the names and offices of the
officers of each Borrower authorized to sign this Amendment;
B. A counterpart hereof executed by a duly authorized
officer of each Borrower and Requisite Lenders, or in the case of
any Lender, telecopy or telephone confirmation from such Lender
of its execution hereof.
On the later of (i) April 3, 2000 and (ii) the first date on
which both the Second Amendment Effective Date has occurred and the Tranche B
Revolving Termination Date for all or a portion of the Tranche B Domestic Loans
has been extended to April 2, 2001, the Domestic Borrowers shall pay to each
Tranche B Domestic Lender that has elected to execute the Second
3
<PAGE> 19
Amendment and has extended its Tranche B Domestic Commitments to
April 2, 2001 a fee of 0.03% of its Tranche B Domestic Commitments.
SECTION 4. MISCELLANEOUS.
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
(i) On and after the Second Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to the "Credit
Agreement", "thereunder", "thereof" or words of like import referring to
the Credit Agreement shall mean and be a reference to the Amended Credit
Agreement.
(ii) Except as specifically amended by this Second Amendment, the
Credit Agreement and the other Loan Documents shall remain in full force
and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Second
Amendment shall not, except as expressly provided herein, constitute a
waiver of any provision of, or operate as a waiver of any right, power
or remedy of Agent or any Lender under, the Credit Agreement or any of
the other Loan Documents.
B. COUNTERPARTS. This Second Amendment may be executed in any
number of counterparts, and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document.
C. HEADINGS. Section and subsection headings in this Second
Amendment are included herein for convenience of reference only and shall not
constitute a part of this Second Amendment for any other purpose or be given any
substantive effect.
D. APPLICABLE LAW. THIS SECOND AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Remainder of Page Intentionally Left Blank
4
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed as of the date first above written, by their respective
officers thereunto duly authorized.
BORROWERS: SAFEWAY INC.
By:
-------------------------------------------
Title:
----------------------------------------
THE VONS COMPANIES, INC.
By:
-------------------------------------------
Title:
----------------------------------------
CANADA SAFEWAY LIMITED
By:
-------------------------------------------
Title:
----------------------------------------
LENDERS: BANKERS TRUST COMPANY, as a Domestic Lender
and as Administrative Agent
By:
-------------------------------------------
Title:
----------------------------------------
THE CHASE MANHATTAN BANK, as Syndication Agent
and a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
THE CHASE MANHATTAN BANK OF CANADA, as a
Canadian Lender
By:
-------------------------------------------
Title:
----------------------------------------
S-1
<PAGE> 21
THE BANK OF NOVA SCOTIA, as a Domestic Lender
and a Canadian Lender and as primary
Documentation Agent
By:
-------------------------------------------
Title:
----------------------------------------
BANK OF AMERICA, N.A., as a Domestic Lender
and as a Documentation Agent
By:
-------------------------------------------
Title:
----------------------------------------
DEUTSCHE BANK CANADA, as a Canadian Lender
By:
-------------------------------------------
Title:
----------------------------------------
CREDIT AGRICOLE INDOSUEZ, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
By:
-------------------------------------------
Title:
----------------------------------------
ALLFIRST BANK, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
WACHOVIA BANK, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
S-2
<PAGE> 22
BANK ONE, NA (main office Chicago), as a
Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
BANK OF SCOTLAND, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
BANCA MONTE DEI PASCHI DE SIENA, as a Domestic
Lender
By:
-------------------------------------------
Title:
----------------------------------------
BANCA NAZIONALE DEL LAVORO, as a Domestic
Lender
By:
-------------------------------------------
Title:
----------------------------------------
BANCA POPOLARE DI MILANO, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
GE CAPITAL COM'L FINANCE, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
KEYBANK, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
S-3
<PAGE> 23
BANK OF AMERICA CANADA, as a Canadian Lender
By:
-------------------------------------------
Title:
----------------------------------------
CITICORP USA, INC., as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
CITIBANK CANADA, as a Canadian Lender
By:
-------------------------------------------
Title:
----------------------------------------
MELLON BANK, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
STB DELAWARE FUNDING TRUST I, as a Domestic
Lender
By:
-------------------------------------------
Title:
----------------------------------------
MERCANTILE BANK, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
NORTHERN TRUST COMPANY, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
S-4
<PAGE> 24
BANK OF MONTREAL, as a Domestic Lender and a
Canadian Lender and as an Agent
By:
-------------------------------------------
Title:
----------------------------------------
CARIPLO-CASSA DI RISPARMIO DELLE PROVINCIE
LOMBARDE S.P.A., as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
By:
-------------------------------------------
Title:
----------------------------------------
CANADIAN IMPERIAL BANK OF COMMERCE, as a
Domestic Lender and a Canadian Lender and as
an Agent
By:
-------------------------------------------
Title:
----------------------------------------
ROYAL BANK OF CANADA, as a Domestic Lender and
a Canadian Lender and as an Agent
By:
-------------------------------------------
Title:
----------------------------------------
UNITED STATES NATIONAL BANK OF OREGON, as a
Domestic Lender and as an Agent
By:
-------------------------------------------
Title:
----------------------------------------
BANK HAPOALIM, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
S-5
<PAGE> 25
THE SUMITOMO BANK, LIMITED, SAN FRANCISCO
BRANCH, as a Domestic Lender and as an Agent
By:
-------------------------------------------
Title:
----------------------------------------
THE SUMITOMO BANK OF CANADA, as a Canadian
Lender and as an Agent
By:
-------------------------------------------
Title:
----------------------------------------
UNION BANK OF CALIFORNIA, N.A., as a Domestic
Lender and as an Agent
By:
-------------------------------------------
Title:
----------------------------------------
THE DAI-ICHI KANGYO BANK, LIMITED, SAN
FRANCISCO AGENCY, as a Domestic Lender and as
an Agent
By:
-------------------------------------------
Title:
----------------------------------------
THE BANK OF NEW YORK, as a Domestic Lender and
as an Agent
By:
-------------------------------------------
Title:
----------------------------------------
THE FUJI BANK, LIMITED, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
S-6
<PAGE> 26
ABN AMRO BANK N.V., as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
By:
-------------------------------------------
Title:
----------------------------------------
THE TOKAI BANK, LTD., LOS ANGELES AGENCY, as a
Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
TOKAI BANK CANADA, as a Canadian Lender
By:
-------------------------------------------
Title:
----------------------------------------
FIRST HAWAIIAN BANK, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
WELLS FARGO BANK, NATIONAL ASSOCIATION, as a
Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
By:
-------------------------------------------
Title:
----------------------------------------
S-7
<PAGE> 27
BANQUE NATIONALE DE PARIS, as a Domestic
Lender
By:
-------------------------------------------
Title:
----------------------------------------
By:
-------------------------------------------
Title:
----------------------------------------
BANQUE NATIONALE DE PARIS (CANADA), as a
Canadian Lender
By:
-------------------------------------------
Title:
----------------------------------------
THE INDUSTRIAL BANK OF JAPAN, LIMITED, as a
Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
THE INDUSTRIAL BANK OF JAPAN (CANADA), as a
Canadian Lender
By:
-------------------------------------------
Title:
----------------------------------------
THE SANWA BANK LIMITED, LOS ANGELES BRANCH, as
a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
CREDIT SUISSE FIRST BOSTON, as a Domestic
Lender
By:
-------------------------------------------
Title:
----------------------------------------
By:
-------------------------------------------
Title:
----------------------------------------
S-8
<PAGE> 28
THE SAKURA BANK, LIMITED, SAN FRANCISCO
AGENCY, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
SAKURA BANK (CANADA), as a Canadian Lender
By:
-------------------------------------------
Title:
----------------------------------------
BANCA DI ROMA, as a Domestic Lender
By:
-------------------------------------------
Title:
----------------------------------------
By:
-------------------------------------------
Title:
----------------------------------------
S-9
<PAGE> 1
EXHIBIT 11.1
SAFEWAY INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
12 Weeks Ended
--------------------------------------------
March 25, March 25, March 27, March 27,
2000 2000 1999 1999
Diluted Basic Diluted Basic
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income $241.9 241.9 $ 205.8 205.8
------ ----- -------- -----
Weighted average common shares outstanding 494.2 494.2 492.6 492.6
===== =====
Common share equivalents 13.7 20.2
------ --------
Weighted average shares outstanding 507.9 512.8
====== ========
Earnings per share $ 0.48 0.49 $ 0.40 0.42
====== ===== ======== =====
Calculation of common share equivalents:
Options and warrants to purchase common shares 34.9 40.5
Common shares assumed purchased with potential
proceeds (21.2) (20.3)
------ --------
Common share equivalents 13.7 20.2
====== ========
Calculation of common shares assumed purchased with
potential proceeds:
Potential proceeds from exercise of options and
warrants to purchase common shares $790.3 $1,134.6
Common stock price used under the treasury
stock method $37.20 $ 55.76
Common shares assumed purchased with
potential proceeds 21.2 20.3
</TABLE>
16
<PAGE> 1
EXHIBIT 12.1
SAFEWAY INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
12 Weeks Fiscal Year
--------------------- --------------------------------------------------------
March 25, March 27,
2000 1999 1999 1998 1997 1996 1995
--------- --------- -------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Income before income taxes and
extraordinary loss $413.5 $361.1 $1,674.0 $1,396.9 $1,076.3 $767.6 $556.5
Add interest expense 109.8 73.3 362.2 235.0 241.2 178.5 199.8
Add interest on rental expense (a) 42.2 32.3 183.0 108.2 88.5 90.0 87.5
Less equity in earnings of unconsolidated
affiliates (7.1) (8.0) (34.5) (28.5) (34.9) (50.0) (26.9)
Add minority interest in subsidiary 0.6 0.6 5.9 5.1 4.4 3.4 3.9
------ ------ -------- -------- -------- ------ ------
Earnings $559.0 $459.3 $2,190.6 $1,716.7 $1,375.5 $989.5 $820.8
------ ------ -------- -------- -------- ------ ------
Interest expense $109.8 $ 73.3 $ 362.2 $ 235.0 $ 241.2 $178.5 $199.8
Add capitalized interest 2.3 2.4 9.3 8.5 5.7 4.4 4.6
Add interest on rental expense (a) 42.2 32.3 183.0 108.2 88.5 90.0 87.5
------ ------ -------- -------- -------- ------ ------
Fixed charges $154.3 $108.0 $ 554.5 $ 351.7 $ 335.4 $272.9 $291.9
------ ------ -------- -------- -------- ------ ------
Ratio of earnings to fixed charges 3.62 4.25 3.95 4.88 4.10 3.63 2.81
------ ------ -------- -------- -------- ------ ------
</TABLE>
(a) Based on a 10% discount factor on the estimated present value of future
operating lease payments.
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND THE CONSOLIDATED STATEMENTS OF INCOME
ON PAGES 3 THROUGH 5 OF THE COMPANY'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
MARCH 25, 2000 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-30-2000
<PERIOD-START> JAN-02-2000
<PERIOD-END> MAR-25-2000
<CASH> 71,000
<SECURITIES> 0
<RECEIVABLES> 305,500
<ALLOWANCES> 0
<INVENTORY> 2,318,100
<CURRENT-ASSETS> 2,893,300
<PP&E> 9,838,800
<DEPRECIATION> 3,406,300
<TOTAL-ASSETS> 14,731,200
<CURRENT-LIABILITIES> 3,193,500
<BONDS> 6,350,200
0
0
<COMMON> 5,600
<OTHER-SE> 4,336,400
<TOTAL-LIABILITY-AND-EQUITY> 14,731,200
<SALES> 7,086,300
<TOTAL-REVENUES> 7,086,300
<CGS> (4,976,600)
<TOTAL-COSTS> (4,976,600)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (109,800)
<INCOME-PRETAX> 413,500
<INCOME-TAX> (171,600)
<INCOME-CONTINUING> 241,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 241,900
<EPS-BASIC> 0.49
<EPS-DILUTED> 0.48
</TABLE>
