Safeway 1999 Annual Report Download - page 38

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Retirement Restoration Plan The Retirement
Restoration Plan provides death benefits and supplemental
income payments for senior executives after retirement.
The Company recognized expense of $5.4 million in 1999,
$5.0 million in 1998 and $4.3 million in 1997. The aggre-
gate projected benefit obligation of the Retirement
Restoration Plan was approximately $48.4 million at year-
end 1999 and $53.8 million at year-end 1998.
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 general-
ly defined benefit plans; however, in many cases, specific
benefit levels are not negotiated with or known by the
employer-contributors. Contributions of $144 million in
1999, $119 million in 1998 and $130 million in 1997 were
made and charged to expense.
Under U.S. legislation regarding such pension plans, a
company is required to continue funding its proportionate
share of a plan’s unfunded vested benefits in the event of
withdrawal (as defined by the legislation) from a plan or
plan termination. Safeway participates in a number of
these pension plans, and the potential obligation as a par-
ticipant in these plans may be significant. The information
required to determine the total amount of this contingent
obligation, as well as the total amount of accumulated ben-
efits and net assets of such plans, is not readily available.
During 1988 and 1987, the Company sold certain opera-
tions. In most cases, the party acquiring the operation
agreed 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 with-
drawals could result in liability to the Company, is not
determinable at this time.
Collective Bargaining Agreements At year-end
1999, Safeway had more than 193,000 full and part-time
employees. Approximately 90% of Safeway’s employees in
the United States and Canada are covered by collective
bargaining agreements negotiated with local unions affiliat-
ed with one of 12 different international unions. There are
approximately 400 such agreements, typically having
three-year terms, with some agreements having terms up to
five years. Accordingly, Safeway negotiates a significant
number of these agreements every year.
Note I: Investment in Unconsolidated Affiliates
At year-end 1999, Safeway’s investment in unconsolidated
affiliate consists of a 49% ownership interest in Casa Ley,
which operates 86 food and general merchandise stores in
western Mexico. Income from Safeway’s equity investment
in Casa Ley, recorded on a one-quarter delay basis,
was $34.5 million in 1999, $28.5 million in 1998 and
$22.7 million in 1997.
Through April 8, 1997, Safeway also owned 15.1 mil-
lion common shares, or 34.4% of the total shares outstand-
ing 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. Safeway’s
share of Vons’ earnings was $12.2 million for the first
quarter of 1997.
Note J: Related-Party Transactions
The Company holds an 80% interest in Property
Development Associates (“PDA”), a partnership formed in
1987 with a company controlled by an affiliate of KKR, to
purchase, manage and dispose of certain Safeway facilities
which are no longer used in the retail grocery business. The
financial statements of PDA are consolidated with those of
the Company, and a minority interest of $19.9 million and
$23.9 million at year-end 1999 and 1998, respectively, is
included in accrued claims and other liabilities in the
accompanying consolidated balance sheets. Safeway paid
PDA $2.7 million in 1999, $1.9 million in 1998 and $1.5
million in 1997 for reimbursement of expenses related to
management and real estate services provided by PDA.