Safeway 2005 Annual Report Download - page 77

SAFEWAY INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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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 $234.5 million in 2005, $196.8
million in 2004 and $172.1 million in 2003 were made and charged to expense. The increase in the 2005 contributions was
largely due to the expiration of a pension holiday.
Collective Bargaining Agreements At year-end 2005, Safeway had approximately 201,000 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 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 2005, 2004 and 2003, Safeway’s investment in unconsolidated affiliates consists of a 49% ownership interest in
Casa Ley, which operates 119 food and general merchandise stores in Western Mexico.
Equity in earnings (losses) from Safeway’s unconsolidated affiliates, which is included in other income (expense), was income
of $15.8 million in 2005, income of $12.6 million in 2004 and a loss of $7.1 million in 2003.
Note K: Commitments and Contingencies
Legal Matters In July 1988, there was a major fire at the Company’s dry grocery warehouse in Richmond, California.
Through March 1, 2006, in excess of 126,000 claims for personal injury and property damage arising from the fire have been
settled for an aggregate amount of approximately $125 million. The Company’s loss as a result of the fire damage to its
property and settlement of the above claims was substantially covered by insurance.
As of March 1, 2006, there were still pending approximately 175 claims against the Company for personal injury (including
punitive damages), arising from the smoke, ash and embers generated by the fire. A substantial percentage of these claims
has been asserted in lawsuits against the Company filed in the Superior Court for Alameda County, California. There can be
no assurance that the pending claims will be settled or otherwise disposed of for amounts and on terms comparable to those
settled to date. Safeway continues to believe that coverage under its insurance policy will be sufficient and available for
resolution of all remaining personal injury and property damage claims arising out of the fire.
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 (Los Angeles), entitled State of California, ex rel. Bill Lockyer v. Safeway Inc. dba Vons, et al.,
against the Company’s subsidiary, The Vons Companies, Inc., Albertson’s, Inc. and Ralphs Grocery Company, a division of
the Kroger Company. The complaint alleges that certain provisions of a Mutual Strike Assistance Agreement 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. 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. No trial date in the district court has been
set.
There are also pending against the Company various claims and lawsuits arising in the normal course of business, some of
which seek damages and other relief, which, if granted, would require large expenditures.
It is management’s opinion that although the amount of liability with respect to all of the above matters cannot be
ascertained at this time, any resulting liability, including any punitive damages, will not have a material adverse effect on the
Company’s financial statements taken as a whole.