Safeway 8-K 2007
Documents found in this filing:
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 13, 2007
(Exact Name of Registrant as Specified in Charter)
(Registrants telephone number, including area code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
The information in this Form 8-K, including the exhibits, shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of Safeway Inc. (the Company), whether made before or after the date hereof, regardless of any general incorporation language in such filing.
On December 13, 2007, we will hold our annual investor conference, at which slides regarding our recent performance, growth strategy, progress on executing the strategy and our financial outlook will be presented. Copies of certain of the slides are attached hereto as Exhibit 99.2 and incorporated herein by reference.
In the investor conference presentation, the press release and our other public statements in connection with the presentation and the press release, we use the following financial measures that are not measures of financial performance under U.S. generally accepted accounting principles (non-GAAP financial measures):
Additional items were excluded in 2002 and 2003 as described in the attached slides.
Reconciliations of each of the above non-GAAP financial measures, other than Free Cash Flow for 2009, 2010, 2011 and 2012, to the most directly comparable GAAP financial measures are provided in the attached slides.
The exclusions included in Adjusted Earnings Per Diluted Share include impairment charges at our Texas stores, closing costs relating to Texas and Dominicks store closures, the Northern California employee buyout, health and welfare benefit contributions, rent holiday accruals, stock option expense and income tax associated with the resolution of certain tax issues. Management believes that excluding these items provides a useful financial measure that will facilitate comparisons of our operating results before, during and after such expenses are incurred, as well as facilitate comparisons of our performance with that of other companies that might not have the impairment charges, closing costs, employee buyouts, health and welfare benefit contributions, rent holidays, stock option expense and income taxes that we have experienced. Management also believes that investors, analysts and other interested parties view our Adjusted Earnings Per Diluted Share as an indicator of our ongoing operating performance.
Management believes that Adjusted Basis Point Change in Operating and Administrative Expense, Excluding Fuel and Unusual Items provides a useful financial measure that will facilitate comparisons of our adjusted operating and administrative expense before, during and after the unusual or unpredictable expenses are incurred, as well as facilitate comparisons of our performance with that of other companies that might not have the non-cash charges, store closures, health and welfare benefit contributions, employee buyout, stock option expense and strike charges that we have experienced.
Management believes that Adjusted Basis Point Change in Gross Margin, Excluding Fuel and Unusual Items provides a useful financial measure that will facilitate comparisons of our adjusted gross margins before, during and after the unusual or unpredictable expenses are incurred, as well as facilitate comparisons of our performance with that of other companies that might not have the inventory adjustment and strike charges that we have experienced.
Management also believes that excluding fuel sales from operating and administrative expense, gross margin and operating profit margin provides more useful measures because volatility in fuel prices and the resulting fluctuations in our sales and cost of sales may distort investors, analysts and other interested parties perception of our operating performance. Management also believes that investors, analysts and other interested parties view Adjusted Basis Point Change in Operating and Administrative Expense, Excluding Fuel and Unusual Items, Adjusted Basis Point Change in Gross Margin, Excluding Fuel and Unusual Items and Adjusted Basis Point Change in Operating Profit Margin, Excluding Fuel as indicators of our ongoing operating performance.
Reconciliations of Free Cash Flow to GAAP cash flow are provided in the attached slides. The reconciliations of Adjusted EBITDA to the most directly comparable GAAP financial measures net income and net cash flow from operating activities also are provided in the attached slides. Each of these non-GAAP financial measures provides information regarding various aspects of the cash that our business generates, which management believes is useful to understanding our business.
Management believes that Adjusted EBITDA and Adjusted EBITDA as a Multiple of Interest Expense are useful measures of operating performance that facilitate managements evaluation of our ability to service debt and our capability to incur more debt to generate the cash needed to grow the business (including at times when interest rates fluctuate). Omitting interest, taxes and the enumerated non-cash items provides a financial measure that is useful to management in assessing operating performance because the cash our business operations generate enables us to incur debt and thus to grow.
Management believes that Adjusted EBITDA and Adjusted EBITDA as a Multiple of Interest Expense also facilitate comparisons of our results of operations with those of companies having different capital structures. Since the levels of indebtedness, tax structures, methodologies in calculating LIFO expense (income) and unconsolidated affiliates that other companies have are different from ours, we omit these amounts to facilitate investors ability to make these comparisons. Similarly, we omit depreciation and amortization because other companies may employ a greater or lesser amount of owned property and because, in managements experience, whether a store is new or one that is fully or mostly depreciated does not necessarily correlate to the contribution that such store makes to operating performance.
Management also believes that investors, analysts and other interested parties view our ability to generate Adjusted EBITDA and Free Cash Flow as an important measure of our operating performance and that of other companies in our industry.
Free Cash Flow, Adjusted EBITDA and Adjusted EBITDA as a Multiple of Interest Expense are useful indicators of Safeways ability to service debt and fund share repurchases that management believes will enhance stockholder value. Adjusted EBITDA also is a useful indicator of cash available for investing activities. A portion of the Free Cash Flow that the Company generates in 2007 through 2012 is expected to be spent on mandatory debt service
requirements or other non-discretionary expenditures. Our estimate of the range of Free Cash Flow for 2007 and 2008 (without giving effect to cash flow related to Blackhawk Networks gift card payables and receivables) is used by management as a baseline for estimating our 2007 and 2008 Free Cash Flow. Management is unable to estimate the effect that Blackhawk Networks gift card payables and receivables will have on Free Cash Flow for 2007 and 2008, and therefore is not able to provide any reconciliation of such amounts to the most directly comparable GAAP financial measure. Management is unable provide any reconciliation of Free Cash Flow for 2009, 2010, 2011 or 2012 to the most directly comparable GAAP financial measure.
These non-GAAP financial measures should not be considered as an alternative to net cash from operating activities or other increases and decreases in cash as shown on Safeways Consolidated Statements of Cash Flows for the periods indicated as a measure of liquidity. These measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. Other companies in our industry may calculate Free Cash Flow and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.
Additional limitations include:
Because of these limitations, our non-GAAP financial measures should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and use our non-GAAP financial measures supplementally.
On December 13, 2007, Safeway issued a press release, a copy of which is attached hereto as Exhibit 99.1 and incorporated herein by reference.
Forward Looking Statements
This Current Report on Form 8-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements relate to, among other things, estimates of diluted earnings per share, diluted earnings per share growth, identical-store sales growth, capital expenditures, free cash flow, financial and operating results and Lifestyle stores. Forward-looking statements are indicated by words or phrases such as guidance, believes, expects, anticipates, estimates, continuing, ongoing and similar words or phrases and the negative of such words and phrases. Forward-looking statements are based on our current plans and expectations and involve risks and uncertainties which are, in many instances, beyond our control, and which could cause actual results to differ materially from those included in or contemplated or implied by the forward-looking statements. Such risks and uncertainties include the following: general business and economic conditions in our operating regions, including the rate of inflation, consumer spending levels, currency valuations, population, employment and job growth in our markets; pricing pressures and competitive factors, which could include pricing strategies, store openings, remodels or acquisitions by our competitors; results of our programs to control or reduce costs, improve buying practices and control shrink; results of our programs to increase sales; results of our continuing efforts to improve corporate brands; results of our programs to improve our perishables departments; results of our promotional programs; results of our capital program; results of our efforts to improve working capital; results of any on-going litigation in which we are involved or any litigation in which we may become involved; the resolution of uncertain tax positions; the ability to achieve satisfactory operating results in all geographic areas where we operate; changes in the financial performance of our equity investments; labor costs, including benefit plan costs and severance payments, or labor disputes that may arise from time to time and work stoppages that could occur in areas where certain collective bargaining agreements have expired or are on indefinite extensions or are scheduled to expire in the near future; failure to fully realize or delay in realizing growth prospects for new business ventures including Blackhawk Network Holdings, Inc. (Blackhawk); legislative, regulatory, tax or judicial developments, including with respect to Blackhawk; the cost and stability of fuel, energy and other power sources; unanticipated events or changes in real estate matters, including acquisitions, dispositions and impairments; adverse weather conditions; performance in new business ventures or other opportunities that we pursue, including Blackhawk; the capital investment in and financial results from our Lifestyle stores; the rate of return on our pension assets; and the availability and terms of financing. We undertake no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof and disclaim any obligation to do so. Please refer to our reports and filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q and subsequent Current Reports on Form 8-K, for a further discussion of these risks and uncertainties.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.