Safeway 2001 Annual Report Download - page 15

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Acquisition of Genuardi’s
Family Markets, Inc. (“Genuardi’s”)
In February 2001, Safeway acquired all of the assets of
Genuardi’s for approximately $530 million in cash (the
“Genuardi’s Acquisition”). On the acquisition date, Genuardi’s
operated 39 stores in the greater Philadelphia, Pennsylvania area,
including New Jersey and Delaware. The Genuardi’s Acquisition
was accounted for as a purchase and was funded through the
issuance of commercial paper and debentures.
Acquisition of Randall’s
Food Markets, 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 oper-
ated 117 stores in Texas. The Randall’s Acquisition was account-
ed 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.
Acquisition of Carr-Gottstein
Foods Co. (“Carrs”)
In April 1999, Safeway acquired all of the outstanding shares of
Carrs for approximately $106 million in cash (the “Carrs
Acquisition”). On the acquisition date, Carrs operated 49 stores in
Alaska. The Carrs Acquisition was accounted for as a purchase.
Safeway funded the acquisition, and subsequent repayment of
$239 million of Carrs’ debt, with the issuance of commercial paper.
Stock Repurchase
In January 2002, Safeway announced that its Board of Directors
had increased the authorized level of the Company’s stock repur-
chase program to $2.5 billion from the previously announced level
of $1.5 billion. During 2001, Safeway repurchased 18.9 million
shares of common stock at a cost of $781 million. From initiation
of the program in 1999 through the end of 2001, Safeway has
repurchased 36.9 million shares of common stock at a cost of $1.4
billion, leaving $1.1 billion available for repurchases.
Results of Operations
Safeway’s net income was $1,253.9 million ($2.44 per share) in
2001, $1,091.9 million ($2.13 per share) in 2000 and $970.9
million ($1.88 per share) in 1999.
Future Beef Operations Holdings, LLC (“FBO”), a meat pro-
cessing company based in Denver, Colorado was placed in bank-
ruptcy in March 2002. Safeway is a 15% equity investor in FBO,
has a supply contract for the purchase of beef from FBO and has
a common board member with FBO. In addition, Safeway has a
first loss deficiency agreement with FBO’s principal lender
which provides that under certain circumstances and in the
event of liquidation of FBO, Safeway will pay the lender up to
$40 million if proceeds from the sale of collateral do not fully
repay the amount owed by FBO to the lender.
FBO’s meat processing plant began operations in August
2001 and failed to meet performance expectations. Subsequent
to year-end 2001, the plant continued to underperform and
larger-than-expected start-up losses caused the company to be
placed into bankruptcy proceedings.
Safeway accrued a pre-tax charge of $51.0 million ($0.06 per
share) related to the FBO bankruptcy in 2001. The charge is pri-
marily for estimated payments under contractual obligations and
the first loss deficiency agreement in the event FBO is liquidated.
In 1987, Safeway assigned a number of leases to Furr’s Inc.
(“Furr’s”) and Homeland Stores, Inc. (“Homeland”) as part of
the sale of the Company’s
former El Paso, Texas
and Oklahoma City,
Oklahoma divisions. Furr’s
filed for Chapter 11 bank-
ruptcy on February 8,
2001. Homeland filed for
Chapter 11 bankruptcy on
August 1, 2001. Safeway
is contingently liable if
Furr’s and Homeland are
unable to continue mak-
ing rental payments on
these leases. In 2001,
Safeway recorded a pre-tax
SAFEWAY INC. AND SUBSIDIARIES
Financial Review
99 00 01
$970.9
$1,091.9
$1,253.9
$1,500
1,000
500
NET INCOME
(In millions)