Safeway 2006 Annual Report Download - page 46

SAFEWAY INC. AND SUBSIDIARIES
Dividends on Common Stock Safeway paid a quarterly dividend of $0.05 per common share on January 20, 2006
and April 21, 2006 to stockholders of record as of December 30, 2005 and March 31, 2006, respectively. In May
2006, the Company’s Board of Directors approved a 15% increase in the quarterly dividend from $0.05 to $0.0575
per common share. A cash dividend of $0.0575 per common share was paid on July 7, 2006, October 5, 2006 and
January 19, 2007 to stockholders of record as of June 16, 2006, September 13, 2006 and December 29, 2006,
respectively. The dividend payments totaled $121.3 million, of which $96.0 million occurred in 2006.
Safeway paid a quarterly dividend of $0.05 per common share on July 7, 2005 and September 28, 2005 to
stockholders of record as of June 16, 2005 and September 7, 2005, respectively. The dividend payments totaled $44.9
million.
Stock Repurchase Program In July 2002, the Company announced that its Board of Directors had increased the
authorized level of its stock repurchase program to $3.5 billion from the previously announced level of $2.5 billion. In
December 2006, the Board of Directors increased the total authorized level of the stock repurchase program to $4.0
billion. From the initiation of the repurchase program in 1999 through the end of fiscal 2006, the aggregate cost of
shares of common stock repurchased by the Company, including commissions, was approximately $3.3 billion, leaving
an authorized amount for repurchases of $747.2 million. During fiscal 2006, the Company repurchased 12.0 million
shares of its common stock under the repurchase program at an aggregate price, including commissions, of $318.0
million. The average price per share, excluding commissions, was $26.53. The timing and volume of future
repurchases will depend on market conditions. The repurchase program has no expiration date but may be terminated
by the Board of Directors.
Tax Settlements As announced on April 10, 2006, Safeway settled a federal income tax refund claim for the years
1992 through 1999 for costs associated with debt financing. The federal refund received in 2006 consisted of a tax
refund of $259.2 million and interest, net of tax, earned on that refund of $60.8 million. Safeway received state
income tax refunds in 2006 of $3.1 million and state interest refunds of $1.8 million, net of tax.
Safeway has outstanding claims for refunds of income tax and interest related to this same matter in several states. As
of December 30, 2006, the Company expects these state income tax and interest refunds will be approximately $27
million and $10 million, respectively, net of tax. Collection of these funds may take several years.
Credit Ratings On June 29, 2005, S&P lowered its long-term credit rating on the Company to BBB- (with a stable
outlook) from BBB. Moody’s Investors Service and Fitch ratings remained unchanged at Baa2 and BBB, respectively
(both with a negative outlook). On October 24, 2006, Fitch affirmed Safeway’s BBB rating and revised its outlook to
stable from negative. Safeway’s ability to borrow under the Credit Agreement is unaffected by Safeway’s credit
ratings. Also, the Company maintains no debt which requires accelerated repayment based on the lowering of credit
ratings. Pricing under the Credit Agreement is generally determined by the better of Safeway’s interest coverage ratio
or credit ratings. Safeway’s pricing was unaffected by S&P’s lowered rating. However, changes in the Company’s
credit ratings may have an adverse impact on financing costs and structure in future periods, such as the ability to
participate in the commercial paper market and higher interest costs on future financings. Additionally, if Safeway
does not maintain the financial covenants in its Credit Agreement, its ability to borrow under the Credit Agreement
would be impaired. Investors should note that a credit rating is not a recommendation to buy, sell or hold securities
and may be subject to withdrawal by the rating agency. Each credit rating should be evaluated independently.
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