Safeway 2006 Annual Report Download - page 45

SAFEWAY INC. AND SUBSIDIARIES
the foreseeable future. There can be no assurance, however, that Safeway’s business will continue to generate cash
flow at or above current levels or that the Company will maintain its ability to borrow under its commercial paper
program and credit agreement.
Bank Credit Agreement On June 1, 2005, the Company entered into a $1,600.0 million credit agreement (the
“Credit Agreement”) with a syndicate of banks. On June 15, 2006, the Company amended the Credit Agreement to
extend the termination date for an additional year to June 1, 2011. The Credit Agreement, as amended, provides
(1) to Safeway a $1,350.0 million, five-year, revolving credit facility (the “Domestic Facility”), (2) to Safeway and
Canada Safeway Limited, a Canadian facility of up to $250.0 million for U.S. Dollar and Canadian Dollar advances and
(3) to Safeway a $400.0 million sub-facility of the Domestic Facility for issuance of standby and commercial letters of
credit. The Credit Agreement also provides for an increase in the credit facility commitments up to an additional
$500.0 million, subject to the satisfaction of certain conditions. The restrictive covenants of the 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. As of December 30, 2006, outstanding borrowings and letters of
credit were $52.3 million and $44.7 million, respectively, under this agreement. Total unused borrowing capacity
under the Credit Agreement was $1,502.9 million as of December 30, 2006. Additionally, the Company is required to
maintain a minimum Adjusted EBITDA, as defined in the Credit Agreement, to interest expense ratio of 2.0 to 1 and
not exceed an Adjusted Debt (total consolidated debt less cash and cash equivalents in excess of $75.0 million) to
Adjusted EBITDA ratio of 3.5 to 1. As of December 30, 2006, the Company was in compliance with the covenant
requirements. The computation of Adjusted EBITDA, as defined by the Credit Agreement, is provided below solely to
provide an understanding of the impact that Adjusted EBITDA has on Safeway’s ability to borrow under the Credit
Agreement. Adjusted EBITDA should not be considered as an alternative to net income or cash flow from operating
activities (which are determined in accordance with GAAP) as an indicator of operating performance or a measure of
liquidity. Other companies may define Adjusted EBITDA differently and, as a result, such measures may not be
comparable to Safeway’s Adjusted EBITDA (dollars in millions).
52 weeks
2006
Adjusted EBITDA:
Net income $ 870.6
Add (subtract):
Income taxes 369.4
LIFO expense 1.2
Interest expense 396.1
Depreciation 991.4
Stock option expense 51.2
Property impairment charges 39.2
Equity in earnings of unconsolidated affiliates (21.1)
Total Adjusted EBITDA $2,698.0
Adjusted EBITDA as a multiple of interest expense 6.81x
Total debt at year-end 2006 $5,868.1
Less cash and equivalents in excess of $75.0 at December 30, 2006 (141.6)
Adjusted Debt $5,726.5
Adjusted Debt to Adjusted EBITDA 2.12x
Shelf Registration In 2004 the Company filed a shelf registration statement covering the issuance from time to
time of up to $2.3 billion of debt securities and/or common stock. As of December 30, 2006, $1.3 billion of securities
were available for issuance under the shelf registration. The Company may issue debt or common stock in the future
depending on market conditions, the need to refinance existing debt and capital expenditure plans or other investing
activities.
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