Safeway Inc. Incurs 2001 Charge Related to Future Beef Bankruptcy.

Business Editors

PLEASANTON, Calif.--(BUSINESS WIRE)--March 8, 2002

Future Beef Operations LLC, a meat processing company based in Denver, Colo., was placed in Chapter 11 bankruptcy on March 4, 2002. Safeway is a 15% equity investor in Future Beef and has a supply contract to purchase beef from Future Beef. In addition, Safeway has a first loss deficiency agreement with Future Beef's principal lender which provides that under certain circumstances and in the event of liquidation, Safeway will pay the lender up to $40 million if proceeds from the sale of collateral do not fully repay the amount owed by Future Beef to the lender.

With its first plant in Arkansas City, Kan., Future Beef had planned to pioneer new practices in integrated beef supply chain management. The plant began operations in August 2001 and failed to meet performance expectations. Subsequent to year-end, the plant continued to underperform and larger-than-expected start-up losses caused the company to be placed into Chapter 11 proceedings.

Safeway will accrue an after-tax charge of $30.5 million ($0.06 per share) related to the Future Beef bankruptcy in its 2001 financial statements. The charge is primarily for potential payments under contractual obligations and the first loss deficiency agreement in the event Future Beef is liquidated.

Because Safeway has not yet filed its 2001 Form 10-K with the SEC, generally accepted accounting principles require that this estimated charge be reflected in 2001 financial statements. Net income for the year 2001 was $1,253.9 million ($2.44 per share) including the $0.06 per share impact of the Future Beef bankruptcy.