Safeway 2000 Annual Report Download - page 37

Safeway Inc. and Subsidiaries
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NOTE E: INTEREST EXPENSE
Interest expense consisted of the following (in millions):
2000 1999 1998
Commercial paper $138.8 $ 87.4 $ 83.7
Bank credit agreement 7.7 19.4 10.8
9.30% Senior Secured Debentures 2.3 2.3 2.3
6.85% Senior Notes 13.7 13.7 13.7
7.00% Senior Notes 17.5 17.5 17.5
7.45% Senior Debentures 11.2 11.2 11.2
5.75% Senior Notes 19.9 23.0 3.5
5.875% Senior Notes 23.5 23.5 3.6
6.05% Senior Notes 21.2 21.2 3.2
6.50% Senior Notes 16.3 16.3 2.5
7.00% Senior Notes 42.0 12.8 –
7.25% Senior Notes 29.0 8.8 –
7.5% Senior Notes 37.5 11.4 –
9.35% Senior Subordinated Notes –1.3 6.2
10% Senior Subordinated Notes 8.0 8.0 8.0
9.65% Senior Subordinated
Debentures 7.8 7.8 7.8
9.875% Senior Subordinated
Debentures 2.4 2.4 2.4
10% Senior Notes 0.6 0.6 0.6
Mortgage notes payable 6.7 7.3 12.1
Other notes payable 7.1 16.0 9.5
Medium-term notes 1.6 2.1 2.1
Short-term bank borrowings 3.9 4.9 10.6
Obligations under capital leases 48.3 46.1 27.8
Amortization of deferred
finance costs 7.0 4.8 1.6
Interest rate swap and
cap agreements 0.2 1.7 2.8
Capitalized interest (17.0) (9.3) (8.5)
$457.2 $ 362.2 $ 235.0
As of year-end 2000, the Company had effectively
converted $100 million of its floating-rate debt to fixed-rate
debt through an interest rate swap agreement. Under the
swap agreement, Safeway pays interest of 6.2% on a $100
million notional amount and receives a variable interest rate
based on Federal Reserve rates quoted for commercial paper.
This agreement expires in 2007. Interest rate swap agree-
ments, and a cap agreement that expired in 1999, increased
interest expense by $0.2 million in 2000, $1.7 million in
1999 and $2.8 million in 1998. At year-end 2000, the
net unrealized loss on the interest rate swap agreement was
$1.9 million compared to a net unrealized gain on interest rate
swap agreements of $4.7 million at year-end 1999.
The Company is not subject to credit risk because the
notional amounts do not represent cash flows. The
Company is subject to risk from nonperformance of the
counterparties to the swap agreements in the amount of any
interest differential to be received. Because the Company
monitors the credit ratings of its counterparties, which are
limited to major financial institutions, Safeway does not
anticipate nonperformance by the counterparties.
Because the Company intends to hold this agreement
as a hedge for the term of the agreement, the market risk
associated with changes in interest rates is not expected
to be significant.
NOTE F: CAPITAL STOCK
SHARES AUTHORIZED AND ISSUED Authorized preferred
stock consists of 25 million shares of which none was
outstanding during 2000, 1999 or 1998. Authorized
common stock consists of 1.5 billion shares at $0.01 par
value. Common stock outstanding at year-end 2000 was
504.1 million shares (net of 64.3 million shares of treasury
stock) and 493.6 million shares at year-end 1999 (net of
65.4 million shares of treasury stock).
STOCK OPTION PLANS Under Safeway’s stock option plans,
the Company may grant incentive and non-qualified
options to purchase common stock at an exercise price equal
to or greater than the fair market value at the grant date,
as determined by the Compensation and Stock Option
Committee of the Board of Directors. Options generally
vest over seven years. Vested options are exercisable in part
or in full at any time prior to the expiration date of 10 to
15 years from the date of the grant. Options to purchase
9.8 million shares were available for grant at year-end 2000.