Safeway 1999 Annual Report Download - page 20

18
FINANCIAL REVIEW
Stock Repurchase
In October 1999, Safeway announced that its Board of Directors
had authorized a stock repurchase program under which Safeway
may acquire up to $1.0 billion of its common stock. The purpose
of this program is, in part, to replace treasury stock issued in con-
nection with the Randall’s Aquisition. By the end of the year, the
Company incurred $651.0 million in short-term debt to repur-
chase 17.9 million shares of common stock. Due to the timing of
the repurchases, the net impact of the reduced shares outstanding
and the related interest expense increased annual earnings by
only two-tenths of a cent per share.
Acquisition of Randall’s Food M arkets, Inc. (“Randall’s”)
In September 1999, Safeway acquired all of the outstanding
shares of Randall’s in exchange for $1.3 billion consisting of
$754 million of cash and 12.7 million shares of Safeway stock
(the “Randall’s Acquisition”). On the acquisition date, Randall’s
operated 117 stores in Texas. The Randall’s Acquisition was
accounted for as a purchase. Safeway funded the cash portion
of the acquisition, and subsequent repayment of approximately
$403 million of Randall’s debt, through the issuance of senior
notes. Randall’s sales for its last full fiscal year prior to the
acquisition were $2.6 billion.
Acquisition of Carr-Gottstein Foods Co. (“Carrs”)
In April 1999, Safeway completed its acquisition of all of the out-
standing shares of Carrs for approximately $106 million in cash
(the “Carrs Acquisition”). On the acquisition date, Carrs operated
49 stores. The Carrs Acquisition was accounted for as a purchase.
Safeway funded the acquisition, and subsequent repayment of
approximately $239 million of Carrs’ debt, with the issuance of
commercial paper. Carrs’ sales for its last full fiscal year prior to
the acquisition were $602 million.
Acquisition of Dominick’s Supermarkets, Inc. (“Dominick’s”)
In November 1998, Safeway completed its acquisition of all of
the outstanding shares of Dominick’s for approximately $1.2 bil-
lion in cash (the “Dominick’s Acquisition”). The Dominick’s
Acquisition was accounted for as a purchase. Safeway funded the
Dominick’s Acquisition, including repayment of approximately
$560 million in debt and lease obligations, with a combination of
bank borrowings and commercial paper.
Merger with The Vons Companies, Inc. (“Vons”)
In April 1997, Safeway completed a merger with Vons pursuant
to which the Company issued 83.2 million shares of Safeway
common stock for all of the shares of Vons common stock that
Safeway did not already own (the “Vons Merger”). The Vons
Merger was accounted for as a purchase.
In connection with the Vons merger, Safeway repurchased
64.0 million shares of its common stock from a partnership
affiliated with KKR & Co., L.L.C. at $21.50 per share, for an
aggregate purchase price of $1.4 billion. Safeway funded
the purchase through bank borrowings.
Results of Operations
Safeway’s net income was $970.9 million ($1.88 per share) in
1999, $806.7 million ($1.59 per share) in 1998 and $557.4 mil-
lion ($1.12 per share) in 1997. In 1997, income before an
extraordinary item related to debt refinancing was $621.5 million
($1.25 per share).
Safeway’s recent acquisitions have affected its operating
results. Safeway’s 1999 income statement includes Dominick’s
and Vons’ operating results for a full year, Carrs’ operating
results for 40 weeks and Randall’s operating results for one
quarter. Safeway’s 1998 income statement includes Vons’
operating results for the full year and Dominick’s operating
results for eight weeks. Safeway’s 1997 income statement
includes Vons’ operating results since the second quarter plus
the effect of Safeway’s 34.4% equity interest in Vons in the
first quarter of 1997. In order to facilitate an understanding
of the Company’s operations, this financial review presents
certain pro forma information as if the Dominick’s, Carrs
and Randall’s Acquisitions
had been effective for the
comparable period of 1998.
See Note B to the Company’s
1999 Consolidated Financial
Statements.
During the second
quarter of 1997, Safeway
was engaged in a 75-day
labor dispute affecting
74 stores in the Alberta,
Canada operating area. The
Company estimates that the
strike reduced 1997 net
income by approximately
$0.04 per share.
$1,000
750
500
250
97 98 99
$621.5
$806.7
$970.9
Income Before
Extraordinary Loss
(In millions)