Safeway 2006 Annual Report Download - page 5

Download and view the complete annual report

Please find page 5 of the 2006 Safeway annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 93

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93

3
Operating and administrative expense
Operating and administrative expense in 2006 decreased
93 basis points to 24.84% of sales. Of this decline, 44 basis
points were due to the store exit activities and employee
buyouts in 2005, which did not recur in 2006. Higher fuel
sales in 2006 reduced our O&A expense margin by another
13 basis points. The remaining decline last year is primarily
the result of increased sales and reduced costs as a per-
centage of sales for store labor, workers’ compensation
and pension benefits.
Interest expense
Interest expense decreased $6.5 million to $396.1 million
in 2006 despite higher average interest rates, primarily
because average total debt declined.
Capital spending
Capital investments increased to $1.67 billion in 2006.
During the year, we opened 17 new Lifestyle stores,
completed 276 Lifestyle remodels and closed 31 stores.
In 2007 we plan to invest approximately $1.7 billion
in capital expenditures and open approximately 25
new Lifestyle stores while completing some 275
Lifestyle remodels.
We also opened 27 fuel stations adjacent to our stores.
As of year-end 2006, 340 of our stores sold gasoline,
boosting sales at these locations while enhancing one-
stop shopping convenience for our customers.
Cash flow
Net cash flow from operating activities increased to
$2.2 billion in 2006 from $1.9 billion in 2005, primarily
because of higher net income. Net cash flow used by
investing activities, which consists principally of cash paid
for property additions, increased $421 million to $1.7 billion
in 2006. Net cash flow used by financing activities was
$596 million in 2006, up from $467 million the prior year.
Returning cash to stockholders
We returned $414 million to stockholders in 2006,
$96 million in the form of dividends and $318 million in
stock repurchases. The stock repurchases were largely
funded by a substantial tax refund.
2004
DILUTED
EPS
per share
2005 2006
2004
NET
INCOME
in millions
2005 2006
2004
SALES
in billions
2005 2006
$35.8
$38.4
$560.2
$561.1
$1.25
$1.25
$40.2
$870.6
$1.94