Safeway 2001 Annual Report Download - page 34

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Note F: Interest Expense
Interest expense consisted of the following (in millions):
2001 2000 1999
Commercial paper $ 61.3 $ 138.8 $ 87.4
Bank credit agreement 6.8 7.7 19.4
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
5.875% Senior Notes 20.3 23.5 23.5
6.05% Senior Notes 21.2 21.2 21.2
6.50% Senior Notes 16.3 16.3 16.3
7.00% Senior Notes 42.0 42.0 12.8
7.25% Senior Notes 29.0 29.0 8.8
7.5% Senior Notes 37.5 37.5 11.4
6.15% Senior Notes 35.5 ––
6.50% Senior Notes 26.8 ––
7.25% Senior Debentures 39.8 ––
3.625% Senior Notes 2.2 ––
9.35% Senior Subordinated Notes ––1.3
10% Senior Subordinated Notes 7.2 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 6.0 6.7 7.3
Other notes payable 3.0 7.1 16.0
Medium-term notes 1.4 1.6 2.1
Short-term bank borrowings 0.9 3.9 4.9
Obligations under capital leases 50.1 48.3 46.1
Amortization of deferred finance costs 8.0 7.0 4.8
Interest rate swap and cap agreements 1.8 0.2 1.7
Capitalized interest (25.7) (17.0) (9.3)
$ 446.9 $ 457.2 $362.2
Safeway terminated its swap agreement in 2001 at a net set-
tlement cost of $7.1 million. This amount, net of tax benefit, is
included in accumulated other comprehensive income in the
consolidated statement of stockholders’ equity and is being
amortized over the original term of the swap agreement. At year-
end 2000, there was a net unrealized loss on this interest rate
swap agreement of $1.9 million. At year-end 2001, there were
no outstanding interest rate swap agreements. Interest rate swap
agreements, and a cap agreement that expired in 1999, increased
interest expense by $1.8 million in 2001, $0.2 million in 2000
and $1.7 million in 1999.
Note G: Capital Stock
SHARES AUTHORIZED AND ISSUED Authorized preferred stock
consists of 25 million shares of which none was outstanding dur-
ing 2001, 2000 or 1999. Authorized common stock consists of
1.5 billion shares at $0.01 par value per share. Common stock
outstanding at year-end 2001 was 488.1 million shares (net of
82.7 million shares of treasury stock) and 504.1 million shares at
year-end 2000 (net of 64.3 million shares of treasury stock).
STOCK OPTION PLANS Under Safeway’s stock option plans, the
Company may grant incentive and non-qualified options to pur-
chase 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 five or seven years. Vested
options are exercisable in part or in full at any time prior to the expi-
ration date of 10 to 15 years from the date of the grant. Options to
purchase 5.4 million shares were available for grant at year-end 2001.
The intrinsic value of Safeway options issued in exchange for
Randall’s and Dominick’s options as part of the Randall’s and
Dominick’s acquisitions were accounted for as part of the purchase
price of Randall’s and Dominick’s. The number of options issued and
per-share exercise prices were adjusted from the predecessor compa-
nies’ options to prevent dilution in value to the option holders.
In 2000, the Company granted an option to purchase 100,000
shares of common stock to a member of the Company’s Board of
Directors as compensation for services to Safeway as a consultant
regarding the Company’s equity investment in FBO. The option has
an exercise price of $41.00 per share and vests ratably over five years.
The Company estimated the fair value of the option granted using
the Black-Scholes option pricing model with assumptions similar to
those used by the Company to value employee stock options. The
Company charged $375,000 in 2001 and $202,000 in 2000 to
compensation expense for this option.