Safeway 2006 Annual Report Download - page 67

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SAFEWAY INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Letters of Credit The Company had letters of credit of $63.1 million outstanding at year-end 2006, of which $44.7
million were issued under the Credit Agreement. The letters of credit are maintained primarily to support performance,
payment, deposit or surety obligations of the Company. The Company pays commissions ranging from 0.15% to
1.00% on the face amount of the letters of credit.
Note E: Lease Obligations
Approximately 60% of the premises that the Company occupies are leased. The Company had approximately 1,600
leases at year-end 2006, including approximately 225 that are capitalized for financial reporting purposes. Most leases
have renewal options, some with terms and conditions similar to the original lease, others with reduced rental rates
during the option periods. Certain of these leases contain options to purchase the property at amounts that
approximate fair market value.
As of year-end 2006, future minimum rental payments applicable to non-cancelable capital and operating leases with
remaining terms in excess of one year were as follows (in millions):
Capital
leases
Operating
leases
2007 $ 103.8 $ 425.3
2008 102.9 417.4
2009 97.8 373.9
2010 87.7 345.7
2011 79.2 312.3
Thereafter 785.3 2,773.8
Total minimum lease payments 1,256.7 $4,648.4
Less amounts representing interest (608.0)
Present value of net minimum lease payments 648.7
Less current obligations (40.8)
Long-term obligations $ 607.9
Future minimum lease payments under non-cancelable capital and operating lease agreements have not been reduced
by minimum sublease rental income of $171.3 million.
Amortization expense for property under capital leases was $42.7 million in 2006, $43.0 million in 2005 and $43.4
million in 2004. Accumulated amortization of property under capital leases was $291.4 million at year-end 2006 and
$256.7 million at year-end 2005.
The following schedule shows the composition of total rental expense for all operating leases (in millions):
2006 2005 2004
Property leases:
Minimum rentals $423.7 $422.4 $406.9
Contingent rentals (1) 10.5 10.8 9.4
Less rentals from subleases (6.9) (6.0) (5.8)
427.3 427.2 410.5
Equipment leases 25.4 25.7 24.1
$452.7 $452.9 $434.6
(1) In general, contingent rentals are based on individual store sales.
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