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| SWY > SEC Filings for SWY > Form 8-K on 23-Jul-2009 | All Recent SEC Filings |
23-Jul-2009
Results of Operations and Financial Condition, Financial Statements and Exhibits
The information in this Form 8-K, including the exhibit, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of Safeway Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.
On July 23, 2009, we issued our earnings press release for the second quarter of fiscal 2009. A copy of our press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
In the press release and our other public statements in connection with the press release, we use the following financial measures that are not measures of financial performance under U.S. generally accepted accounting principles (non-GAAP financial measures):
• "Adjusted EBITDA" which is defined by our bank credit agreement as EBITDA (earnings before interest, income taxes, depreciation and amortization), excluding the following:
• LIFO expense;
• Stock-based employee compensation;
• Property impairment charges; and
• Equity in (earnings) loss of unconsolidated affiliate.
• "Adjusted Debt" which is defined by our bank credit agreement as total debt less cash and equivalents in excess of $75.0 million.
• "Adjusted EBITDA as a multiple of interest expense" which is calculated by dividing Adjusted EBITDA by interest expense.
• "Adjusted Debt to Adjusted EBITDA" which is calculated by dividing Adjusted Debt by Adjusted EBITDA.
• "free cash flow" which is calculated as net cash flow provided by operating activities, as adjusted to exclude payables related to third-party gift cards, net of receivables, less net cash flow used by investing activities. Cash from the sale of third-party gift cards is held for a short period of time and then remitted, less our commission, to card partners. Because this cash flow is temporary, it is not available for other uses, and it is therefore excluded from our calculation of free cash flow.
Reconciliations of Adjusted EBITDA to the most directly comparable GAAP financial measures - net income and net cash flow from operating activities - are provided in the press release. Reconciliations of "free cash flow" to GAAP cash flow for the 12 and 24 weeks ended
Management believes that "Adjusted EBITDA," "Adjusted Debt" and the related ratios are useful measures of operating performance that facilitate management's evaluation of our ability to service debt and our capability to incur more debt to generate the cash needed to grow the business (including at times when interest rates fluctuate). Omitting interest, taxes and the other enumerated items provides a financial measure that is useful to management in assessing operating performance because the cash our business operations generate enables us to incur debt and thus to grow.
Management believes that "Adjusted EBITDA" and the related ratios also facilitate comparisons of our results of operations with those of companies having different capital structures. Since the levels of indebtedness, tax structures, methodologies in calculating LIFO expense and unconsolidated affiliates that other companies have are different from ours, we omit these amounts to facilitate investors' ability to make these comparisons. Similarly, we omit depreciation and amortization because other companies may employ a greater or lesser amount of owned property, and because, in management's experience, whether a store is new or one that is fully or mostly depreciated does not necessarily correlate to the contribution that such store makes to operating performance.
Management also believes that investors, analysts and other interested parties view our ability to generate "Adjusted EBITDA" as an important measure of our operating performance and that of other companies in our industry.
"Adjusted EBITDA," "Adjusted Debt," "free cash flow" and the related ratios are useful indicators of Safeway's ability to service debt and fund share repurchases that management believes will enhance stockholder value. Adjusted EBITDA also is a useful indicator of cash available for investing activities. A portion of the free cash flow that we generate in fiscal 2009 is expected to be spent on mandatory debt service requirements or other non-discretionary expenditures.
These non-GAAP financial measures should not be considered as an alternative to net cash from operating activities or other increases and decreases in cash as shown on our Consolidated Statements of Cash Flows for the periods indicated as a measure of liquidity. These measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. Other companies in our industry may calculate "Adjusted EBITDA," "Adjusted Debt" and "free cash flow" differently than we do, limiting their usefulness as comparative measures.
• "Adjusted EBITDA" does not reflect our cash expenditures for capital expenditures;
• "Adjusted EBITDA" does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debts;
• "Adjusted EBITDA" does not reflect cash requirements for income taxes paid; and
• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and "Adjusted EBITDA" does not reflect any cash requirements for such replacements.
Because of these limitations, our non-GAAP financial measures should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and use our non-GAAP financial measures supplementally.
(d) Exhibits.
99.1 Press Release dated July 23, 2009 of Safeway Inc.
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