Safeway 1998 Annual Report Download - page 32

Senior Secured Indebtedness The 9.30% Senior Secure d
D e b e n t u res due 2007 are secured by a deed of trust which
c reated a lien on the land, buildings and equipment owned
by Safeway at its distribution center in Tracy, California.
Senior Unsecured Indebtedness In November 1998, Safeway
issued senior unsecured debt securities consisting of 5.75%
Notes due 2000, 5.875% Notes due 2001, 6.05% Notes due
2003, and 6.50% Notes due 2008.
In 1997 Safeway issued senior unsecured debt securities
consisting of 6.85% Senior Notes due 2004, 7.00% Senior Notes
due 2007, and 7.45% Senior Debentures due 2027.
Senior Subordinated Indebtedness The 9.35% Senior
S u b o rdinated Notes due 1999, 10% Senior Subordinated
Notes due 2001, 9.65% Senior Subordinated Debentures due
2004, and 9.875% Senior Subordinated Debentures due 2007
a re subordinated in right of payment to, among other things,
the Company’s borrowings under the bank credit agre e m e n t ,
the 9.30% Senior Secured Debentures, the Senior Unsecure d
Indebtedness, and mortgage notes payable.
Mortgage Notes Payable Mortgage notes payable at year-end
1998 have remaining terms ranging from one to 17 years, have
a weighted average interest rate of 9.36% and are secured by
properties with a net book value of approximately $225 million.
Other Notes Payable Other notes payable at year-end 1998 have
remaining terms ranging from one to 13 years and a weighted
average interest rate of 7.12%.
Redemptions During 1997, the Company redeemed $588.5 million
of the Senior Subordinated Indebtedness, $285.5 million of Vo n s ’
public debt, and $40.0 million of medium-term notes using pro-
ceeds from the Senior Unsecured Indebtedness and commerc i a l
paper program. In connection with these redemptions, Safeway
re c o rded an extraord i n a ry loss of $64.1 million ($0.13 per share ) .
The extraordinary loss represents the payment of redemption
premiums and the write-off of deferred finance costs, net of the
related tax benefits.
Annual Debt Maturities As of year-end 1998, annual debt maturi-
ties were as follows (in millions):
1999 $ 279.8
2000 427.5
2001 549.6
2002 1,872.0
2003 377.6
Thereafter 1,015.9
$4,522.4
Letters of Credit The Company had letters of credit of $143.9
million outstanding at year-end 1998 of which $63.2 million
w e re issued under the bank credit agreement. The letters
of credit are maintained primarily to support perf o r mance,
payment, deposit or surety obligations of the Company.
The Company pays commitment fees ranging from 0.25%
to 1.00% on the outstanding portion of the letters of credit.
Note D: Lease Obligations
Approximately two-thirds of the pr
emises that the Company occu
pies are leased. The Company had approximately 1,400 leases at
year-end 1998, including approximately 220 which are capitalized
for financial reporting purposes. Most leases have renewal
options, some with terms and conditions similar to the original
lease, others with reduced rental rates during the option periods.
Certain of these leases contain options to purchase the property
at amounts that approximate fair market value.
As of year-end 1998, future minimum rental payments applicabl
to non-cancelable capital and operating leases with re m a i n i n g
terms in excess of one year were as follows (in millions):
F u t u re minimum lease payments under non-cancelable
capital and operating lease agreements have not been reduced
by minimum sublease rental income of $210.5 million.
A m o rtization expense for pro p e rty under capital leases was
$22.3 million in 1998, $21.1 million in 1997 and $17.9 million in
1996. Accumulated amortization of pro p e rty under capital leases
was $136.1 million at year-end 1998 and $153.4 million at
year-end 1997.
The following schedule shows the composition of total
rental expense for all operating leases (in millions). In general,
contingent rentals are based on individual store sales.
1998 1997 1996
Property leases:
Minimum rentals $208.7 $206.0 $138.2
Contingent rentals 19.2 12.3 9.9
Less rentals from
subleases (12.0) (13.4) (11.1)
■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■
215.9 204.9 137.0
Equipment leases 22.4 19.3 21.0
■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■
$238.3 $224.2 $158.0
■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■
Capital Operating
Leases Leases
1999 $ 87.9 $ 236.8
2000 84.5 231.5
2001 87.0 207.3
2002 70.1 210.7
2003 67.4 200.2
Thereafter 404.2 1,821.9
■ ■ ■ ■ ■ ■ ■ ■
Total minimum lease payments 801.1 $2,908.4
Less amounts representing interest (351.4)
Present value of net minimum
lease payments 449.7
Less current obligations (41.7)
Long-term obligations $ 408.0