SAFEWAY INC - FORM 8-K - EX-99.2 - EXHIBIT 99.2 - March 6, 2013

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Reconciliations and Financial Slides
from the 2013 Safeway Investor Conference

March 6, 2013

1


Safe Harbor Language

This presentation may contain forward-looking statements. Such statements may related to topics such as sales, margins and basis point changes in margins, earnings and earnings per diluted share estimates, free cash flow and capital expenditures, and other related subjects.

These statements are based on Safeway's current plans and expectations and are subject to risks and uncertainties that could cause actual events and results to vary significantly from those implied by such statements. We ask you to refer to Safeway's reports and filings with the SEC for a further discussion of these risks and uncertainties.


2



Reconciliation of GAAP Cash Flow
Measure to Free Cash Flow *
(In Millions)
 
 
 
 
 
 
 
 
 
 
 
2012 Original Guidance
 
 
 
 
 
 
 
 
 
 
Low
 
High
 
2012

2011

2010

2009

2008

2007

2006

2005

Net cash flow from operating activities
$
1,700

 
$
1,800

 
$
1,569

$
2,024

$
1,850

$
2,549

$
2,251

$
2,190

$
2,175

$
1,881

(Increase) decrease in payables related to third-party gift cards, net of receivables
—

 
—

 
(26
)
(294
)
7

(170
)
(24
)
(84
)
(71
)
(48
)
Interest earned on favorable income tax settlement, net of tax
—

 
—

 
—

—

—

—

—

—

(63
)
—

Net cash flow from operating activities, as adjusted
1,700

 
1,800

 
1,543

1,730

1,857

2,379

2,227

2,106

2,041

1,833

Net cash flow used by investing activities
(850
)
 
(850
)
 
(572
)
(1,015
)
(799
)
(889
)
(1,546
)
(1,686
)
(1,735
)
(1,314
)
Cash used for investments and other business acquisitions
—

 
—

 
—

36

—

—

—

—

50

—

Net cash flow used by investing activities, as adjusted
(850
)
 
(850
)
 
(572
)
(979
)
(799
)
(889
)
(1,546
)
(1,686
)
(1,685
)
(1,314
)
Free cash flow
$
850

 
$
950

 
$
971

$
751

$
1,058

$
1,490

$
681

$
420

$
356

$
519

 
 
 
 
 
 
 
 
 
 
 
 
 
* Free cash flow is calculated as (1) net cash flow from operating activities adjusted to exclude payables related to third-party gift cards, net of receivables, less (2) net cash flow used by investing activities adjusted to exclude cash used by investments and business acquisitions. Cash from the sale of third-party gift cards is held for a short period of time and then remitted, less our commission, to card partners. Because this cash flow is temporary, it is not available for other uses, and it is therefore excluded from our calculation of free cash flow. We add back cash used by investments and business acquisitions to our calculation of free cash flow in order to provide a more accurate indication of our capacity to apply our available free cash flow to its intended uses. No forecast was made for these items.

3


Reconciliation of GAAP Cash Flow
 
 
 
Measure to Free Cash Flow
 
 
 
(In Millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2013G
 
2014F
 
2015F
 
2016F
 
2017F
 
Low
High
 
Low
High
 
Low
High
 
Low
High
 
Low
High
Net cash flow from operating activities
$
1,700

$
1,900

 
$
1,800

$
2,000

 
$
1,900

$
2,100

 
$
2,100

$
2,300

 
$
2,200

$
2,400

Net cash flow used by investing activities
(850
)
(950
)
 
(800
)
(900
)
 
(800
)
(900
)
 
(900
)
(1,000
)
 
(900
)
(1,000
)
Free cash flow
$
850

$
950

 
$
1,000

$
1,100

 
$
1,100

$
1,200

 
$
1,200

$
1,300

 
$
1,300

$
1,400



4


Reconciliation of Diluted EPS from Continuing Operations, as Reported, to Diluted EPS from Continuing Operations, as Adjusted
 
 
 
2012

 
 
Diluted earnings per share from continuing operations, as reported
$
2.27

 
 
Gain from legal settlements
(0.12
)
 
 
Diluted earnings per share from continuing operations, as adjusted
$
2.15

 
 



5


Reconciliation of Operating Profit Margin BP Change
Excluding Fuel, Gross Presentation of Gift Card Commissions in 2011, Unusual Items and Gain from Legal Settlements in 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basis point (decrease) increase over prior year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2013G
 
Original Guidance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Low
High
 
Low
High
 
2012
 
2011
 
2010
 
2009
 
2008
 
2007
 
2006
 
2005
Basis point change in operating profit margin
(21
)
(11
)
 
(12
)
(2
)
 
(10
)
 
(22
)
 
436

 
(574
)
 
1

 
21

 
82

 
(11
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unusual items:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Texas store closures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(29
)
 
29

 
Goodwill impairment charges
 
 
 
 
 
 
 
 
 
 
(483
)
 
483

 
 
 
 
 
 
 
 
 
Impairment charges
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(13
)
 
Labor buyout and health and welfare contributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(15
)
 
7

 
Stock option expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15

Impact from gross presentation of gift card commissions
 
 
 
 
 
 
 
 
5

 
 
 
 
 
 
 
 
 
 
 
 
Fuel impact
9

9

 
7

7

 
14

 
9

 
(3
)
 
(4
)
 
(1
)
 
4

 
15

 
6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basis point change in operating profit margin, excluding fuel, gross presentation of gift card commissions in 2011 and unusual items
(12
)
(2
)
 
(5
)
5

 
4

 
(8
)
 
(50
)
 
(95
)
 
—

 
25

 
53

 
33

Gain from legal settlements in 2012
12

12

 
 
 
 
(12
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basis point change in operating profit margin, excluding fuel, unusual items and gain from legal settlements in 2012
—

10

 
 
 
 
(8
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 



6


Reconciliation of Operating & Administrative Expense BP Change
Excluding Fuel, Gross Presentation of Gift Card Commissions, just for U™ launch costs in 2012 and Unusual Items
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basis point (decrease) increase over prior year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2012

 
2011

 
2010

 
2009

 
2008

 
2007

 
2006

 
2005

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basis point change in operating & administrative expense
(42
)
 
(102
)
 
12

 
116

 
(38
)
 
(29
)
 
(93
)
 
(53
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unusual items:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Texas store closures
 
 
 
 
 
 
 
 
 
 
 
 
29

 
(29
)
 
Impairment charges
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13

 
Labor buyout and health and welfare contributions
 
 
 
 
 
 
 
 
 
 
 
 
15

 
(7
)
 
Stock option expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(15
)
Impact from gross presentation of gift card commissions
 
 
28

 
 
 
 
 
 
 
 
 
 
 
 
Fuel impact
16

 
69

 
31

 
(56
)
 
11

 
16

 
13

 
32

Basis point change in operating & administrative expense, excluding fuel, gross presentation of gift card commissions and unusual items
(26
)
 
(5
)
 
43

 
60

 
(27
)
 
(13
)
 
(36
)
 
(59
)
 
just for U launch costs in 2012
(4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basis point change in operating & administrative expense, excluding fuel and just for U launch costs in 2012 
(30
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 



7


Reconciliation of Gross Margin BP Change
Excluding Fuel, Gross Presentation of Gift Card Commissions and just for U™ launch costs in 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basis point (decrease) increase over prior year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2012

 
2011

 
2010

 
2009

 
2008

 
2007

 
2006

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basis point change in gross margin
(52
)
 
(125
)
 
(34
)
 
24

 
(36
)
 
(8
)
 
(11
)
Fuel
30

 
80

 
27

 
(59
)
 
10

 
20

 
28

Impact from gross presentation of gift card commissions
—

 
32

 
—

 
—

 
—

 
—

 
—

Basis point change in gross margin, excluding fuel and gross presentation of gift card commissions
(22
)
 
(13
)
 
(7
)
 
(35
)
 
(26
)
 
12

 
17

Launch costs just for U
7

 
 
 
 
 
 
 
 
 
 
 
 
Basis point change in gross margin, excluding fuel and just for U launch costs in 2012
(15
)
 
 
 
 
 
 
 
 
 
 
 
 



8


Reconciliation of Net Cash Flow from Operating Activities to Adjusted EBITDA
(dollars in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2012
 
2011
 
2010
 
2009
 
2008
 
2007
 
2006
 
2005
 
2004
 
2003
Net cash flow from operating activities
$
1,569.7

 
$
2,023.6

 
$
1,849.7

 
$
2,549.7

 
$
2,250.9

 
$
2,190.5

 
$
2,175.0

 
$
1,881.0

 
$
2,226.4

 
$
1,609.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Add (subtract):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income taxes
262.2

 
363.9

 
290.6

 
144.2

 
539.3

 
515.2

 
369.4

 
287.9

 
233.7

 
310.9

Interest expense
304.0

 
272.2

 
298.5

 
331.7

 
358.7

 
388.9

 
396.1

 
402.6

 
411.2

 
442.4

Deferred income taxes
36.0

 
63.7

 
31.3

 
142.1

 
(171.7
)
 
(130.8
)
 
(1.1
)
 
215.9

 
29.2

 
77.9

Net pension and post-retirement benefits expense
(150.8
)
 
(114.3
)
 
(125.2
)
 
(140.1
)
 
(96.7
)
 
(72.1
)
 
(83.1
)
 
(115.6
)
 
(112.9
)
 
(130.9
)
Contributions to pension and post-retirement benefit plans
159.5

 
176.2

 
17.7

 
24.4

 
42.5

 
33.0

 
29.2

 
18.1

 
15.1

 
12.1

(Increase) decrease in accrued claims and other liabilities
(44.8
)
 
(23.2
)
 
(36.2
)
 
34.3

 
(21.1
)
 
5.8

 
(10.8
)
 
(44.1
)
 
(118.1
)
 
(52.7
)
Gain (loss) on property dispositions and lease exit activities
79.1

 
65.6

 
27.5

 
(12.7
)
 
19.0

 
42.3

 
17.8

 
(13.6
)
 
(20.6
)
 
13.4

Changes in working capital items
148.0

 
(385.8
)
 
67.9

 
(426.7
)
 
226.0

 
(45.6
)
 
(181.4
)
 
(310.9
)
 
(538.2
)
 
263.0

Lease exit costs and gain on property dispositions from discontinued operations
59.6

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Other
(12.3
)
 
(17.4
)
 
3.4

 
(25.6
)
 
(0.5
)
 
26.1

 
(4.1
)
 
(14.4
)
 
(14.5
)
 
(8.2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Adjusted EBITDA
$
2,410.2

 
$
2,424.5

 
$
2,425.2

 
$
2,621.3

 
$
3,146.4

 
$
2,953.3

 
$
2,707.0

 
$
2,306.9

 
$
2,111.3

 
$
2,537.5




9


Reconciliation of Net Income (Loss) Attributable to Safeway Inc. to Adjusted EBITDA (Interest Coverage)
(dollars in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Safeway Inc.
$
596.5

$
516.7

$
589.8

$
(1,097.5
)
$
965.3

$
888.4

$
870.6

$
561.1

$
560.2

$
(169.8
)
 
 
 
 
 
 
 
 
 
 
 
Add (subtract):
 
 
 
 
 
 
 
 
 
 
Property impairment charges and tax expense from discontinued operations
27.7

—

—

—

—

—

—

—

—

—

Income taxes
262.2

363.9

290.6

144.2

539.3

515.2

369.4

287.9

233.7

310.9

Interest expense
304.0

272.2

298.5

331.7

358.7

388.9

396.1

402.6

411.2

442.4

Depreciation expense
1,134.3

1,148.8

1,162.4

1,171.2

1,141.1

1,071.2

991.4

932.7

894.6

863.6

LIFO expense (income)
0.7

35.1

(28.0
)
(35.2
)
34.9

13.9

1.2

(0.2
)
(15.2
)
(1.3
)
Share-based employee compensation
55.1

50.0

55.5

61.7

64.3

48.4

51.2

59.7

—

—

Property impairment charges
46.5

44.7

71.7

73.7

40.3

27.1

39.2

78.9

39.4

344.9

Miscellaneous equity investment impairment charge
—

—

—

—

—

—

—

—

—

10.6

Goodwill impairment charges
—

—

—

1,974.2

—

—

—

—

—

729.1

Equity in (earnings) losses of unconsolidated affiliate
(17.5
)
(13.0
)
(15.3
)
(8.5
)
2.5

(8.7
)
(21.1
)
(15.8
)
(12.6
)
7.1

Dividend received from unconsolidated affiliate
0.7

6.1

—

5.8

—

8.9

9.0

—

—

—

 Total Adjusted EBITDA
$
2,410.2

$
2,424.5

$
2,425.2

$
2,621.3

$
3,146.4

$
2,953.3

$
2,707.0

$
2,306.9

$
2,111.3

$
2,537.5

 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA as a multiple of interest expense
7.9x

8.9x

8.1x

7.9x

8.8x

7.6x

6.8x

5.7x

5.1x

5.7x




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