Safeway 2004 Annual Report Download - page 50

48 SAFEWAY INC. 2004 ANNUAL REPORT
SAFEWAY INC. AND SUBSIDIARIES
RETIREMENT RESTORATION PLAN The Retirement
Restoration Plan provides death benefits and supplemental
income payments for senior executives after retirement. The
Company recognized expense of $7.1 million in 2004, $6.7
million in 2003 and $5.7 million in 2002. The aggregate
projected benefit obligation of the Retirement Restoration
Plan was approximately $74.4 million at year-end 2004 and
$73.3 million at year-end 2003.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to the Company’s retirement plans and the
Retirement Restoration Plan benefits, the Company
sponsors plans that provide postretirement medical and life
insurance benefits to certain employees. Retirees share a
portion of the cost of the postretirement medical plans.
Safeway pays all the costs of the life insurance plans. The
plans are not funded.
The Company’s accrued postretirement benefit obligation
(“APBO”) was $77.8 million at year-end 2004 and $67.8
million at year-end 2003. The APBO represents the actuarial
present value of the benefits expected to be paid after
retirement. Postretirement benefit expense was $10.3 million
in 2004, $9.2 million in 2003 and $8.0 million in 2002.
ESTIMATED FUTURE BENEFIT PAYMENTS The following
benefit payments, which reflect expected future service as
appropriate, are expected to be paid (in millions):
Pension Other
Benefits Benefits
2005 $113.9 $ 5.8
2006 119.8 5.9
2007 125.2 6.0
2008 130.2 6.1
2009 134.3 6.2
2010 – 2014 741.1 33.8
MULTI-EMPLOYER PENSION PLANS Safeway participates
in various multi-employer retirement plans, covering
substantially all Company employees not covered under the
Company’s non-contributory retirement plans, pursuant to
agreements between the Company and various unions.
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
$196.8 million in 2004, $172.1million in 2003 and $151.6
million in 2002 were made and charged to expense.
Under U.S. law applicable to 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 law) from a plan or plan
termination. Safeway participates in a number of these
pension plans, and the potential liability as a participant in
these plans may be significant. The information required to
determine the total amount of this contingent liability, 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 certain operations. 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
that 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
2004, Safeway had approximately 191,000 full and part-time
employees. Approximately 77% of Safeway’s employees in
the United States and Canada are covered by collective
bargaining agreements negotiated with local unions
affiliated with one of 10 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 renegotiates
a significant number of these agreements every year.
Note J: Investment In
Unconsolidated Affiliates
At year-end 2004, 2003 and 2002, Safeway’s investment
in unconsolidated affiliates consists of a 49% ownership
interest in Casa Ley, which operates 115 food and general
merchandise stores in western Mexico.
Equity in earnings (losses) from Safeway’s unconsol-
idated affiliates, which is included in other income
(expense), was income of $12.6 million in 2004, a loss of
$7.1 million in 2003 and a loss of $0.2 million in 2002.
Equity in income in 2002 includes approximately $15.8
million in charges related to the resolution of physical
inventory count discrepancies at Casa Ley.
Note K: Related Party Transactions
Casa Ley’s General Director was one of the Company’s
directors until December 2004. Safeway sold products to
Casa Ley totaling approximately $6.8 million in 2004, $12.0
million in 2003 and $19.0 million in 2002 for resale in Casa
Ley’s retail stores.