Safeway 2006 Annual Report Download - page 77

SAFEWAY INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Estimated Future Benefit Payments The following benefit payments, which reflect expected future service as
appropriate, are expected to be paid (in millions):
Pension
benefits
Other
benefits
2007 $108.4 $ 4.1
2008 114.3 4.2
2009 119.1 4.3
2010 124.0 4.4
2011 130.4 4.5
2012 – 2016 735.1 22.9
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
$253.8 million in 2006, $234.5 million in 2005 and $196.8 million in 2004 were made and charged to expense. The
increase from the 2005 contributions was largely due to the expiration of a pension holiday.
Collective Bargaining Agreements At year-end 2006, Safeway had more than 207,000 full- and part-time
employees. Approximately 80% of Safeway’s employees in the United States and Canada are covered by collective
bargaining agreements negotiated with union locals 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 2006, 2005 and 2004, Safeway’s investment in unconsolidated affiliates includes a 49% ownership
interest in Casa Ley, which operates 127 food and general merchandise stores in Western Mexico.
Equity in earnings from Safeway’s unconsolidated affiliates, which is included in other income, was income of $21.1
million in 2006, income of $15.8 million in 2005 and income of $12.6 million in 2004.
Note K: Commitments and Contingencies
Legal Matters On February 2, 2004, the Attorney General for the State of California filed an action in the United
States District Court for the Central District of California, entitled State of California, ex rel. Bill Lockyer v. Safeway Inc.
dba Vons, et al., against the Company’s subsidiary, The Vons Companies, Inc., Albertsons, Inc. and Ralphs Grocery
Company, a division of The Kroger Company. The complaint alleges that certain provisions of a Mutual Strike
Assistance Agreement (“MSAA”) entered into by the defendants in connection with the Southern California grocery
strike that began on October 11, 2003 constituted a violation of section 1 of the Sherman Antitrust Act. The
complaint seeks declaratory and injunctive relief. The Attorney General has also indicated that it will seek an order
requiring the return of any funds received pursuant to the MSAA. Pursuant to the MSAA, the Company received $83.5
million of payments in 2004, which it recorded as reductions to cost of sales of $51.5 million and $32 million in the
fourth quarter of 2003 and the first quarter of 2004, respectively. Defendants filed a motion for summary judgment
based on the federal non-statutory labor exemption to the antitrust laws, which motion was denied by the court on
May 25, 2005. On November 25, 2005, the Ninth Circuit issued an order refusing to hear an interlocutory appeal of
the order denying defendants’ summary judgment motion. In July of 2006, the Attorney General filed a motion for
summary judgment arguing that the MSAA was a per se antitrust violation, which motion was denied by the court on
December 7, 2006. On October 16, 2006 the Attorney General filed a second amended complaint naming Safeway
Inc. as an additional defendant. Safeway’s motion to dismiss was denied on December 11, 2006, and Safeway
answered the second amended complaint shortly thereafter. Trial is scheduled for November 13, 2007.
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