Safeway 8-K 2011
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):
July 21, 2011
(Exact Name of Registrant as Specified in Charter)
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(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 exhibit, 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., whether made before or after the date hereof, regardless of any general incorporation language in such filing.
On July 21, 2011, we issued our earnings press release for the second quarter of fiscal 2011. A copy of our press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
In the press release and our other public statements in connection with 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):
Reconciliations of Adjusted EBITDA to the most directly comparable GAAP financial measures net income and net cash flow from operating activities are provided in the press release. Reconciliations of free cash flow to GAAP cash flow for the 12 and 24 weeks ended June 18, 2011 and June 19, 2010 and to the forecasted range for fiscal 2011are also provided in the press release. Given the rapid growth in the third-party gift card business and the highly seasonal nature of that business, with a significant portion of sales of third-party gift cards occurring in late December each year, management is unable to provide a meaningful estimate for payables related to third-party gift cards for 2011, and therefore is not able to provide a reconciliation of the forecasted range of free cash flow for fiscal 2011 to net cash flow from operating activities. Reconciliations of gross profit and operating and administrative expense basis point change, excluding impact from fuels sales and gross presentation of gift card commissions, are also provided in the press release, as are reconciliations of net income, as adjusted, to GAAP net income attributable to Safeway Inc. and diluted earnings per share, as adjusted, to GAAP diluted net income per common share attributable to Safeway Inc. 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, Adjusted Debt and the related ratios 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 other enumerated 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 the related ratios also facilitate comparisons of our results of operations with those of companies having different capital structures. Since the levels of indebtedness, tax structures, property impairment charges, methodologies in calculating LIFO expense 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 as an important measure of our operating performance and that of other companies in our industry.
Adjusted EBITDA, Adjusted Debt, free cash flow and the related ratios are useful indicators of Safeways ability to service debt, fund share repurchases and pay dividends 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 we generate in fiscal 2011 is expected to be spent on mandatory debt service requirements or other non-discretionary expenditures.
Management believes that basis point change in gross profit and operating and administrative expense, excluding impact from fuel sales and gross presentation of gift card commissions provides a useful financial measure that will facilitate comparisons of our performance with that of other companies that might not have the business ventures that we have.
Management also believes that excluding fuel sales from gross profit and operating and administrative expense 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 basis point change in gross profit and operating and administrative expense, excluding impact from fuel sales and gross presentation of gift card commissions as indicators of our ongoing operating performance.
The exclusions from net income, as adjusted and diluted earnings per share, as adjusted relate to the income tax expense associated with repatriating earnings to the U.S. from the Companys Canadian subsidiary. Management believes that excluding this item provides a useful financial measure that will facilitate comparisons of our operating results before, during and after such charge was incurred, as well as facilitating comparisons of our performance with that of other companies that might not have the organizational structure that we have. Management also believes that investors, analysts and other interested parties view our net income, as adjusted and diluted earnings per share, as adjusted as indicators of our ongoing operating performance.
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 our Consolidated Statements of Cash Flows 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 Adjusted EBITDA, Adjusted Debt and free cash flow differently than we do, limiting their usefulness as comparative measures.
Additional limitations include:
Because of these and other 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 and other limitations by relying primarily on our GAAP results and use our non-GAAP financial measures supplementally.
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.