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 June 19, 2004
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 incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x No ¨
As of July 23, 2004 there were issued and outstanding 446.9 million shares of the registrant’s common stock.
INDEX
2
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
| June 19, 2004 |
January 3, 2004 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and equivalents |
$ | 206.4 | $ | 174.8 | ||||
| Receivables |
323.5 | 383.2 | ||||||
| Merchandise inventories |
2,629.5 | 2,642.2 | ||||||
| Prepaid expenses and other current assets |
185.6 | 307.5 | ||||||
| Total current assets |
3,345.0 | 3,507.7 | ||||||
| Property |
14,255.1 | 14,024.8 | ||||||
| Less accumulated depreciation and amortization |
(5,850.2 | ) | (5,619.0 | ) | ||||
| Property, net |
8,404.9 | 8,405.8 | ||||||
| Goodwill |
2,399.4 | 2,404.9 | ||||||
| Prepaid pension costs |
373.9 | 418.7 | ||||||
| Investment in unconsolidated affiliates |
192.3 | 191.8 | ||||||
| Other assets |
171.5 | 167.8 | ||||||
| Total assets |
$ | 14,887.0 | $ | 15,096.7 | ||||
(Continued)
3
SAFEWAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(In millions, except per-share amounts)
(Unaudited)
| June 19, 2004 |
January 3, 2004 |
|||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Current maturities of notes and debentures |
$ | 608.5 | $ | 699.5 | ||||
| Current obligations under capital leases |
48.0 | 50.5 | ||||||
| Accounts payable |
1,638.5 | 1,509.6 | ||||||
| Accrued salaries and wages |
372.3 | 406.0 | ||||||
| Other accrued liabilities |
782.2 | 798.7 | ||||||
| Total current liabilities |
3,449.5 | 3,464.3 | ||||||
| Long-term debt: |
||||||||
| Notes and debentures |
5,930.8 | 6,404.0 | ||||||
| Obligations under capital leases |
650.9 | 668.3 | ||||||
| Total long-term debt |
6,581.7 | 7,072.3 | ||||||
| Deferred income taxes |
421.8 | 421.9 | ||||||
| Accrued claims and other liabilities |
626.7 | 493.9 | ||||||
| Total liabilities |
11,079.7 | 11,452.4 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Common stock: par value $0.01 per share; 1,500 shares authorized; 577.6 and 575.4 shares outstanding |
5.8 | 5.8 | ||||||
| Additional paid-in capital |
3,364.1 | 3,334.6 | ||||||
| Deferred stock compensation |
(17.6 | ) | (14.0 | ) | ||||
| Accumulated other comprehensive income |
20.7 | 87.5 | ||||||
| Retained earnings |
4,316.1 | 4,117.8 | ||||||
| 7,689.1 | 7,531.7 | |||||||
| Less: Treasury stock at cost; 130.9 and 131.2 shares |
(3,881.8 | ) | (3,887.4 | ) | ||||
| Total stockholders’ equity |
3,807.3 | 3,644.3 | ||||||
| Total liabilities and stockholders’ equity |
$ | 14,887.0 | $ | 15,096.7 | ||||
See accompanying notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per-share amounts)
(Unaudited)
| 12 Weeks Ended |
24 Weeks Ended |
|||||||||||||||
| June 19, 2004 |
June 14, 2003 |
June 19, 2004 |
June 14, 2003 |
|||||||||||||
| Sales |
$ | 8,361.1 | $ | 8,248.1 | $ | 15,999.9 | $ | 16,291.4 | ||||||||
| Cost of goods sold |
(5,957.4 | ) | (5,764.3 | ) | (11,319.6 | ) | (11,419.3 | ) | ||||||||
| Gross profit |
2,403.7 | 2,483.8 | 4,680.3 | 4,872.1 | ||||||||||||
| Operating and administrative expense |
(2,086.7 | ) | (2,126.4 | ) | (4,208.1 | ) | (4,146.1 | ) | ||||||||
| Goodwill impairment charges |
— | — | — | (256.5 | ) | |||||||||||
| Operating profit |
317.0 | 357.4 | 472.2 | 469.5 | ||||||||||||
| Interest expense |
(95.5 | ) | (102.0 | ) | (191.7 | ) | (205.7 | ) | ||||||||
| Other income, net |
4.7 | 2.7 | 7.8 | 5.2 | ||||||||||||
| Income before income taxes |
226.2 | 258.1 | 288.3 | 269.0 | ||||||||||||
| Income taxes (expense) benefit |
(71.0 | ) | (97.1 | ) | (90.0 | ) | 54.6 | |||||||||
| Net income |
$ | 155.2 | $ | 161.0 | $ | 198.3 | $ | 323.6 | ||||||||
| Earnings per share: |
||||||||||||||||
| Basic |
$ | 0.35 | $ | 0.36 | $ | 0.45 | $ | 0.73 | ||||||||
| Diluted |
$ | 0.35 | $ | 0.36 | $ | 0.44 | $ | 0.73 | ||||||||
| Weighted average shares outstanding: |
||||||||||||||||
| Basic |
445.6 | 441.4 | 444.8 | 441.3 | ||||||||||||
| Diluted |
449.4 | 445.8 | 448.8 | 445.9 | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
| 24 Weeks Ended |
||||||||
| June 19, 2004 |
June 14, 2003 |
|||||||
| OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | 198.3 | $ | 323.6 | ||||
| Reconciliation to net cash flow from operating activities: |
||||||||
| Goodwill impairment charges |
— | 256.5 | ||||||
| Property impairment charges |
14.6 | 120.1 | ||||||
| Depreciation expense |
406.2 | 392.4 | ||||||
| LIFO expense |
4.6 | 4.6 | ||||||
| Equity in (earnings) losses of unconsolidated affiliates, net |
(0.5 | ) | 3.1 | |||||
| Net pension expense |
51.7 | 59.1 | ||||||
| Loss on property retirements and lease exit costs |
34.6 | 2.5 | ||||||
| Other |
72.4 | (1.0 | ) | |||||
| Change in working capital items: |
||||||||
| Receivables and prepaid expenses |
172.0 | 107.4 | ||||||
| Inventories at FIFO cost |
(13.5 | ) | 107.3 | |||||
| Income taxes |
34.9 | (118.8 | ) | |||||
| Payables and accruals |
72.4 | (233.0 | ) | |||||
| Net cash flow from operating activities |
1,047.7 | 1,023.8 | ||||||
| INVESTING ACTIVITIES: |
||||||||
| Cash paid for property additions |
(479.4 | ) | (376.0 | ) | ||||
| Proceeds from sale of property |
80.3 | 68.8 | ||||||
| Other |
(33.0 | ) | (31.4 | ) | ||||
| Net cash flow used by investing activities |
(432.1 | ) | (338.6 | ) | ||||
| FINANCING ACTIVITIES: |
||||||||
| Additions to short-term borrowings |
— | 1.9 | ||||||
| Payments on short-term borrowings |
(1.0 | ) | (1.7 | ) | ||||
| Additions to long-term borrowings |
28.5 | 90.8 | ||||||
| Payments on long-term borrowings |
(621.2 | ) | (773.3 | ) | ||||
| Net proceeds from exercise of stock options |
17.2 | 5.4 | ||||||
| Other |
0.1 | — | ||||||
| Net cash flow used by financing activities |
(576.4 | ) | (676.9 | ) | ||||
| Effect of changes in exchange rates on cash |
||||||||