Q2 2013 Earnings Call Transcript

Transcript Call Date 07/18/2013

Operator: Welcome to the Safeway Second Quarter Earnings Conference Call. Your lines have been placed on listen-only until the question-and-answer session. This call is being recorded. If you have any objections, please disconnect at this time.

I would now like to turn the call over to Ms. Melissa Plaisance, Safeway's Senior Vice President of Finance and Investor Relations. Please go ahead.

Melissa C. Plaisance - SVP, Finance and IR: Thank you, Shirley. Good morning, everyone and thank you for joining us for our second quarter 2013 earnings conference call. With me today are Robert Edwards, President and CEO; and Pete Bocian, Executive Vice President and Chief Financial Officer.

Today, Robert will provide opening comments about the quarterly results and our plans to grow the business. Pete will then provide more details on the quarter with the focus on continuing operations as we have classified our Canadian operations as discontinued operations beginning with the second quarter. Pete will also spend some time discussing our guidance going forward. Robert will then close the prepared remarks with the few comments.

So, before I hand the call over to Robert, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the federal securities laws. Forward-looking statements contain information about our future operating or financial performance. Forward-looking statements are based on our current expectations and assumptions and involve risks and uncertainties that could cause actual results or events to be materially different from those anticipated. However, we undertake no obligation to update or revise any such statements as a result of new information, future events or otherwise. For a list and description of those risks and uncertainties, please see our filings with the SEC.

With that, I'd turn the call over to Robert.

Robert L. Edwards - President and CEO: Melissa, thank you and good morning to those who are on the call. We achieved some significant milestones this quarter with the announced sale of our Canadian operations and the Blackhawk IPO. These actions and the substantial cash proceeds, we expect to receive will allow us to broadly enhance stakeholder value.

As most of you know, we entered into an agreement to sell substantially all of the net assets of Canada Safeway Limited to Sobeys Inc. for C$5.8 billion in cash. Total cash proceeds after taxes and expenses are currently estimated to be approximately C$4 billion. The proceeds are expected to be used to pay down C$2 billion of debt to maintain our current debt ratings, to buy back stock and to invest in growth opportunities.

This transaction, which is valued at a multiple of approximately 10.7, represents an EBITDA multiple of approximately 10.7, represents an attractive price at over 2 times the prevailing U.S. market multiple of 4.9 for Safeway at the time of the announcement. It allows us to realize the higher multiples attributed to Canadian supermarket companies and the premium attributed to our strong operations. We believe the transaction maximizes the value of our Canadian assets. The substantial cash proceeds in this transaction will allow us to create value for all stakeholders at Safeway.

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