Safeway 1998 Annual Report Download - page 37

Multi-Employer Pension Plans Safeway participates in various
multi-employer pension plans, covering virtually all Company
employees not covered under the Company’s non-contributory
pension plans, pursuant to agreements between the Company
and employee bargaining units which are members of such
plans. These plans are generally defined benefit plans; however,
in many cases, specific benefit levels are not negotiated with
or known by the employer-contributors. Contributions of
$119 million in 1998, $130 million in 1997 and $112 million in
1996 were made and charged to expense.
Under U.S. legislation re g a rding such pension plans, a com-
pany is re q u i red to continue funding its pro p o rtionate share
of a plan’s unfunded vested benefits in the event of withdrawal
(as defined by the legislation) from a plan or plan term i n a t i o n .
Safeway participates in a number of these pension plans, and
the potential obligation as a participant in these plans may be
significant. The information re q u i red to determine the total
amount of this contingent obligation, as well as the total amount
of accumulated benefits and net assets of such plans, is not
readily available. During 1988 and 1987, the Company sold cer-
tain operations. In most cases the party acquiring the operation
a g reed to continue making contributions to the plans. Safeway
is relieved of the obligations related to these sold operations to
the extent the acquiring parties continue to make contributions.
Whether such sales could result in withdrawal under ERISA
and, if so, whether such withdrawals could result in liability to
the Company, is not determinable at this time.
Collective Bargaining Agreements At year-end 1998, Safeway
had approximately 170,000 full and part-time employees.
A p p roximately 90% of Safeway’s employees in the United
States and Canada are covered by collective bargaining
a g reements negotiated with local unions affiliated with one
of 12 diff e rent international unions. There are appro x i m a t e l y
400 such agreements, typically having three-year terms, with
some agreements having terms up to five years. Accord i n g l y,
Safeway negotiates a significant number of these agre e m e n t s
every year.
Note I: Investment in Unconsolidated Affiliate
At year-end 1998 Safeway’s investment in unconsolidated
a ffiliate consists of a 49% ownership interest in Casa Ley,
which operates 77 food and general merchandise stores in
western Mexico.
Income from Safeway’s equity investment in Casa Ley,
re c o rded on a one-quarter delay basis, was $28.5 million in
1998, $22.7 million in 1997 and $18.8 million in 1996.
T h rough April 8, 1997, Safeway also owned 15.1 million
common shares, or 34.4% of the total shares outstanding, of
Vons. Vons is now a wholly-owned subsidiary of Safeway, and
as of the beginning of the second quarter of 1997, Safeway’s
consolidated financial statements include Vons’ financial
position and results of operations.
S a f e w a y ’s share of Vons’ earnings was $12.2 million for
the first quarter of 1997 and $31.2 million for the year in 1996.
Note J: Related-Party Transactions
KKR provides management, consulting and financial services
to the Company for an annual fee. Such services include, but
are not necessarily limited to, advice and assistance concerning
any and all aspects of the operation, planning and financing of
the Company. Annual payments for management fees, special
services and reimbursement of expenses were approximately
$1.4 million in 1998, 1997 and 1996.
The Company holds an 80% interest in Pro p e rt y
Development Associates (“PDA”), a partnership formed in 1987
with a company controlled by an affiliate of KKR, to purc h a s e ,
manage and dispose of certain Safeway facilities which are no
longer used in the retail gro c e ry business. The financial state-
ments of PDA are consolidated with those of the Company and
a minority interest of $23.9 million and $24.0 million at year- e n d
1998 and 1997 is included in accrued claims and other liabilities
in the accompanying consolidated balance sheets. During 1997,
the Company contributed to PDA six pro p e rties no longer used
in its retail gro c e ry business which had an aggregate net book
value of $4.9 million. The minority partner contributed cash in
an amount sufficient to maintain its 20% ownership. No gains or
losses were recognized on these transactions. In 1998, no pro p-
e rties were contributed to PDA. Safeway paid PDA $1.9 million
in 1998, $1.5 million in 1997 and $1.6 million in 1996 for re i m-
bursement of expenses related to management and real estate
s e rvices provided by PDA.