Safeway 8-K 2013
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):
October 10, 2013
(Exact Name of Registrant as Specified in Charter)
(Registrant’s 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 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 October 10, 2013, we issued our earnings press release for the third quarter of fiscal 2013. 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):
A reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure - income from continuing operations, net of tax - is provided in the press release, as is a reconciliation of Pro forma adjusted EBITDA to Adjusted EBITDA. Reconciliations of “free cash flow” to GAAP cash flow for the 36 weeks ended September 7, 2013 and September 8, 2012 and to the forecasted range for fiscal 2013 are 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 2013, and therefore is not able to provide a reconciliation of the forecasted range of free cash flow for fiscal
2013 to net cash flow from operating activities. Reconciliations of “income from continuing operations adjusted for unusual charges,” “income from discontinued operations, net of income taxes, as adjusted,” “diluted earnings per common share from discontinued operations, as adjusted,” “net income attributable to Safeway Inc., as adjusted,” “2013 adjusted diluted earnings per common share guidance (including and excluding Dominick's),” “2013 adjusted operating profit margin guidance from continuing operations, excluding fuel,” “2013 pro forma adjusted EBITDA guidance” and “2012 adjusted diluted earnings per common share” are also provided in the press release. 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 “Pro forma adjusted EBITDA” are useful measures of operating performance that facilitate management's 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 "Pro forma adjusted EBITDA” also facilitate comparisons of our results of operations with those of companies having different capital structures. Since the levels of indebtedness, tax structures, discontinued operations, 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 management's experience, whether a store is new or one that is fully or mostly depreciated does not necessarily correlate to the contribution such store makes to operating performance.
Management also believes that investors, analysts and other interested parties view our ability to generate “Adjusted EBITDA” and “Pro forma adjusted EBITDA” as important measures of our operating performance and that of other companies in our industry.
“Adjusted EBITDA” and “Pro forma adjusted EBITDA” are useful indicators of Safeway's ability to service debt, fund share repurchases and pay dividends that management believes will enhance stockholder value. “Adjusted EBITDA” and “Pro forma adjusted EBITDA” also are useful indicators of cash available for investing activities. A portion of the free cash flow that we generate in fiscal 2013 is expected to be spent on mandatory debt service requirements or other non-discretionary expenditures.
The exclusions included in “income from continuing operations adjusted for unusual charges,” “income from discontinued operations, net of income taxes, as adjusted,” “diluted earnings per common share from discontinued operations, as adjusted,” “net income attributable to Safeway Inc., as adjusted,” “2013 adjusted diluted earnings per common share guidance (including and excluding Dominick's),” “2013 adjusted operating profit margin guidance from continuing operations, excluding fuel,” “2013 pro forma adjusted EBITDA guidance” and “2012 adjusted diluted earnings per common share” relate to certain unusual or nonrecurring items. Management believes that excluding these items provides a useful financial measure that will facilitate comparisons of our operating results before, during and after such benefits were realized or charges were 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 “income from continuing operations adjusted for unusual charges,” “income from discontinued operations, net of income taxes, as adjusted,” “diluted earnings per common share from discontinued operations, as adjusted,” “net income attributable to Safeway Inc., as adjusted,” “2013 adjusted diluted earnings per common share guidance (including and excluding Dominick's),” “2013 adjusted operating profit margin guidance from continuing operations, excluding fuel,” “2013 pro forma adjusted EBITDA guidance” and “2012 adjusted diluted earnings per common share” 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,” “Pro forma adjusted EBITDA” 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.
99.1 Release dated October 10, 2013 of Safeway Inc.
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, uses of free cash flow, earnings per share guidance, operating profit margin guidance and Pro forma Adjusted EBITDA guidance. Forward-looking statements are indicated by words or phrases such as “guidance,” “believes,” “expects,” “anticipates,” “estimates,” “plans,” “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 or deflation, consumer spending levels, currency valuations, population, employment and job growth and/or losses in our markets; sales volume levels and price per item trends; 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 expand corporate brands; results of our programs to improve our perishables and center of store departments; the impact of generic drugs on pharmacy sales and identical-store sales; results of our promotional programs; results of our capital program; results of our efforts to improve working capital; results of any ongoing litigation in which we are involved or any litigation in which we may become involved; the resolution of uncertain tax positions; the outcome of the agreement to sell substantially all the net assets of Canada Safeway Limited to Sobeys Inc. including: the possibility that the transaction may not close, the possibility that events may transpire that will require the transaction to be modified prior to or at closing, the ability to use proceeds as anticipated, and the ability to project the impact of the transaction on our ongoing operations; the ability to exit the Chicago market; 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 existing or new business ventures, including our Blackhawk and Property Development Centers subsidiaries; legislative, regulatory, tax, accounting or judicial developments, including with respect to Blackhawk; the cost and stability of fuel, energy and other power sources; the impact of the cost of fuel on gross margin and identical-store sales; discount rates used in actuarial calculations for pension obligations and self-insurance reserves; the rate of return on our pension assets; the availability and terms of financing, including interest rates; adverse developments with regard to food and drug safety and quality issues or concerns that may arise; loss of a key member of senior management; data security or other information technology issues that may arise; unanticipated events or changes in real estate matters, including acquisitions, dispositions and impairments; adverse weather conditions and effects from natural disasters; performance in new business ventures or other opportunities that we pursue; and the capital investment in and financial results from our retail stores. 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.