Safeway 2004 Annual Report Download - page 43

SAFEWAY INC. 2004 ANNUAL REPORT 41
SAFEWAY INC. AND SUBSIDIARIES
Store lease exit costs are included as a component of
operating and administrative expense and the liability is
included in accrued claims and other liabilities.
Store lease exit costs related to the Furr’s and Homeland
bankruptcies are not included above but are discussed in
Note L.
Note D: Financing
Notes and debentures were composed of the following at
year-end (in millions):
2004 2003
Commercial paper $ 105.0 $1,210.6
Bank credit agreement, unsecured ––
Other bank borrowings, unsecured 18.2 8.0
Mortgage notes payable, secured 26.1 33.7
9.30% Senior Secured Debentures due 2007 24.3 24.3
6.85% Senior Notes due 2004, unsecured –200.0
7.25% Senior Notes due 2004, unsecured –400.0
2.50% Senior Notes due 2005, unsecured 200.0 200.0
Floating Rate Senior Notes due 2005, unsecured 150.0 150.0
3.80% Senior Notes due 2005, unsecured 225.0 225.0
6.15% Senior Notes due 2006, unsecured 700.0 700.0
4.80% Senior Notes due 2007, unsecured 480.0 480.0
7.00% Senior Notes due 2007, unsecured 250.0 250.0
4.125% Senior Notes due 2008, unsecured 300.0 300.0
6.50% Senior Notes due 2008, unsecured 250.0 250.0
7.50% Senior Notes due 2009, unsecured 500.0 500.0
4.95% Senior Notes due 2010, unsecured 500.0 –
6.50% Senior Notes due 2011, unsecured 500.0 500.0
5.80% Senior Notes due 2012, unsecured 800.0 800.0
5.625% Senior Notes due 2014, unsecured 250.0 –
7.45% Senior Debentures due 2027, unsecured 150.0 150.0
7.25% Senior Debentures due 2031, unsecured 600.0 600.0
9.65% Senior Subordinated Debentures
due 2004, unsecured –81.2
9.875% Senior Subordinated Debentures
due 2007, unsecured 24.2 24.2
Other notes payable, unsecured 13.8 16.5
6,066.6 7,103.5
Less current maturities (596.9) (699.5)
Long-term portion $5,469.7 $6,404.0
COMMERCIAL PAPER The amount of commercial paper
borrowings is limited to the unused borrowing capacity under
the bank credit agreement. Commercial paper is classified as
long-term because the Company intends to and has the ability
to refinance these borrowings on a long-term basis through
either continued commercial paper borrowings or utilization of the
bank credit agreement, which matures in 2006. The weighted
average interest rate on commercial paper borrowings was
1.22% during 2004 and 2.28% at year-end 2004.
BANK CREDIT AGREEMENT Safeway’s total borrowing
capacity under the bank credit agreement is $2.4 billion. Of
the $2.4 billion credit line, $1.25 billion matures in 2006 and
has a one-year extension option requiring lender consent.
Another $1.15 billion is renewable annually through 2006
and can be extended by the Company for an additional year
through a term-loan conversion feature or through a one-year
extension option requiring lender consent. The restrictive
covenants of the bank credit agreement limit Safeway with
respect to, among other things, creating liens upon its assets
and disposing of material amounts of assets other than in
the ordinary course of business. Safeway is also required to
maintain a minimum Adjusted EBITDA to interest expense
ratio of 2.0 to 1 and not exceed a total debt to Adjusted
EBITDA ratio of 4.0 to 1. As part of the second amendment
to the bank credit agreement dated May 20, 2004, the Debt
to Adjusted EBITDA ratio was temporarily increased to 4.0
to 1 from 3.5 to 1 for a period of one year. At year-end
2004, the Company had total unused borrowing capacity
under the bank credit agreement of $2.25 billion.
U.S. borrowings under the bank credit agreement carry
interest at one of the following rates selected by the Company:
(i) the prime rate; (ii) a rate based on rates at which Eurodollar
deposits are offered to first-class banks by the lenders in the
bank credit agreement plus a pricing margin based on the
Company’s debt rating or interest coverage ratio (the “Pricing
Margin”); or (iii) rates quoted at the discretion of the lenders.
Canadian borrowings denominated in U.S. dollars carry
interest at one of the following rates selected by the
Company: (a) the Canadian base rate or (b) the Canadian
Eurodollar rate plus the Pricing Margin. Canadian borrowings
denominated in Canadian dollars carry interest at one of the
following rates selected by the Company: (i) the Canadian
prime rate or (ii) the rate for Canadian bankers acceptances
plus the Pricing Margin.
During 2004, the Company had no outstanding borrowing
under its bank revolving credit agreement. During the year,
the Company paid facility fees ranging from 0.08% to 0.145%
on the total amount of the credit facility.
OTHER BANK BORROWINGS Other bank borrowings at
year-end 2004 have remaining terms ranging from two days
to two years and a weighted average interest rate of 4.0%.