This presentation may contain forward-looking statements. Such statements may relate to topics such as sales, margins, earnings estimates, guidance, free cash flow, capital spending, 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 Diluted EPS
2011G
2011
Low
High
Diluted earnings per share
$
1.49
$
1.45
$
1.65
Tax effect of Canadian dividend
0.29
0.22
0.22
Diluted earnings per share, before Canadian dividend
$
1.78
$
1.67
$
1.87
3
Reconciliation of GAAP Cash Flow
Measure to Free Cash Flow *
(In Millions)
2011 Original Guidance
Low
High
2011
2010
2009
2008
2007
2006
2005
Net cash flow from operating activities
$
1,750
$
1,850
$
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
—
—
(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
1,750
1,850
1,730
1,857
2,379
2,227
2,106
2,041
1,833
Net cash flow used by investing activities
(1,000
)
(1,000
)
(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
(1,000
)
(1,000
)
(979
)
(799
)
(889
)
(1,546
)
(1,686
)
(1,685
)
(1,314
)
Free cash flow
$
750
$
850
$
751
$
1,058
$
1,490
$
681
$
420
$
356
$
519
Stock buyback
$
1,554
$
621
$
885
$
360
$
226
$
318
$
—
Dividends
$
188
$
168
$
153
$
132
$
112
$
96
$
45
Total cash returned
$
1,742
$
789
$
1,038
$
492
$
338
$
414
$
45
Percent of free cash flow
232
%
75
%
70
%
72
%
80
%
116
%
9
%
* 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.
4
Reconciliation of GAAP Cash Flow
Measure to Free Cash Flow
(In Millions)
2012F
2013F
2014F
2015F
2016F
Low
High
Low
High
Low
High
Low
High
Low
High
Net cash flow from operating activities
$
1,700
$
1,800
$
1,900
$
2,000
$
2,000
$
2,100
$
2,100
$
2,200
$
2,200
$
2,300
Net cash used by investing activities
(850
)
(850
)
(900
)
(900
)
(900
)
(900
)
(900
)
(900
)
(900
)
(900
)
Free cash flow
$
850
$
950
$
1,000
$
1,100
$
1,100
$
1,200
$
1,200
$
1,300
$
1,300
$
1,400
5
Reconciliation of Operating Profit Margin BP Change
Excluding Fuel, Gross Presentation of Gift Card Commissions, Unusual Items and LIFO charge for 2011
Basis point (decrease) increase over prior year:
2011
2012G
Original Guidance
Low
High
Low
High *
2011
2010
2009
2008
2007
2006
2005
Basis point change in operating profit margin
(12
)
(2
)
3
NM
(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
7
7
(3
)
(3
)
9
(3
)
(4
)
(1
)
4
15
6
Basis point change in operating profit margin, excluding fuel and unusual items
(5
)
5
—
NM
(8
)
(50
)
(95
)
—
25
53
33
LIFO charge
16
Basis point change in operating profit margin, excluding fuel, unusual items and LIFO charge
8
* Basis point change not specified.
6
Reconciliation of Net Cash Flow from Operating Activities to Adjusted EBITDA
(dollars in millions)
2011
2010
2009
2008
2007
2006
2005
2004
2003
Net cash flow from operating activities
$
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
363.9
290.6
144.2
539.3
515.2
369.4
287.9
233.7
310.9
Interest expense
272.2
298.5
331.7
358.7
388.9
396.1
402.6
411.2
442.4
Amortization of deferred finance costs
(5.4
)
(4.8
)
(4.8
)
(5.1
)
(5.3
)
—
—
—
—
Excess tax benefit from exercise of stock options
1.8
1.6
0.1
1.5
38.3
—
—
—
—
Deferred income taxes
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
(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
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
(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
65.6
27.5
(12.7
)
19.0
42.3
17.8
(13.6
)
(20.6
)
13.4
Changes in working capital items
(385.8
)
67.9
(426.7
)
226.0
(45.6
)
(181.4
)
(310.9
)
(538.2
)
263.0
Other
(13.8
)
6.6
(20.9
)
3.1
(6.9
)
(4.1
)
(14.4
)
(14.5
)
(8.2
)
Total Adjusted EBITDA
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
7
Reconciliation of Net Income (Loss) Attributable to Safeway Inc. to Adjusted EBITDA (Interest Coverage)
(dollars in millions)
2011
2010
2009
2008
2007
2006
2005
2004
2003
Net income (loss) attributable to Safeway Inc.
$
516.7
$
589.8
$
(1,097.5
)
$
965.3
$
888.4
$
870.6
$
561.1
$
560.2
$
(169.8
)
Add (subtract):
Income taxes
363.9
290.6
144.2
539.3
515.2
369.4
287.9
233.7
310.9
Interest expense
272.2
298.5
331.7
358.7
388.9
396.1
402.6
411.2
442.4
Depreciation expense
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)
35.1
(28.0
)
(35.2
)
34.9
13.9
1.2
(0.2
)
(15.2
)
(1.3
)
Share-based employee compensation
50.0
55.5
61.7
64.3
48.4
51.2
59.7
—
—
Property impairment charges
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
(13.0
)
(15.3
)
(8.5
)
2.5
(8.7
)
(21.1
)
(15.8
)
(12.6
)
7.1
Dividend received from unconsolidated affiliate
6.1
—
5.8
—
8.9
9.0
—
—
—
Total Adjusted EBITDA
$
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
8.9x
8.1x
7.9x
8.8x
7.6x
6.8x
5.7x
5.1x
5.7x
8
Reconciliation of Gross Margin BP Change
Excluding Fuel, Gross Presentation of Gift Card Commissions and LIFO
Basis point (decrease) increase over prior year:
2011
2010
2009
2008
2007
2006
Basis point change in gross margin
(125
)
(34
)
24
(36
)
(8
)
(11
)
Fuel
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
(13
)
(7
)
(35
)
(26
)
12
17
LIFO
16
2
(18
)
5
3
—
Basis point change in gross margin, excluding fuel, gross presentation of gift card commissions and LIFO
3
(5
)
(53
)
(21
)
15
17
9
Reconciliation of Operating & Administrative Expense BP Change
Excluding Fuel, Gross Presentation of Gift Card Commissions and Unusual Items
Basis point (decrease) increase over prior year:
2011
2010
2009
2008
2007
2006
2005
Basis point change in operating & administrative expense
(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
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
(5
)
43
60
(27
)
(13
)
(36
)
(59
)
10
11
12
13
14
15
16
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