Safeway 2007 Annual Report Download - page 48

SAFEWAY INC. AND SUBSIDIARIES
million of dividends. In 2006 Safeway paid down $493.1 million of debt, repurchased $318.0 million of common stock
and paid dividends of $96.0 million. Also in 2006 Safeway received a $262.3 million tax refund related to prior years’
financing. In 2005 Safeway paid down $444.9 million of debt and paid $44.9 million of dividends.
Based upon the current level of operations, Safeway believes that net cash flow from operating activities and other
sources of liquidity, including potential borrowing under Safeway’s commercial paper program and its credit agreement,
referred to below, will be adequate to meet anticipated requirements for working capital, capital expenditures, interest
payments, dividend payments, stock repurchases, if any, and scheduled principal payments for 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 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. On June 1, 2007, the Company amended the credit agreement again for purposes of
(i) extending the termination date of the credit agreement for an additional year to June 1, 2012, (ii) providing for two
additional one-year extensions of the termination date on the terms set forth in the amendment, and (iii) amending the
pricing levels (which are based on Safeway’s debt ratings or interest coverage ratio), pricing margins and facility fee
percentages for the loans and commitments under the revolving credit facility. The credit agreement, as amended (the
“Credit Agreement”), provides (i) to Safeway a $1,350.0 million, five-year, revolving credit facility (the “Domestic
Facility”), (ii) to Safeway and Canada Safeway Limited, a Canadian facility of up to $250.0 million for U.S. Dollar and
Canadian Dollar advances and (iii) 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 and its subsidiaries 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. 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 29, 2007, the Company was in compliance with the covenant
requirements. As of December 29, 2007, there were no borrowings, and letters of credit totaled $37.1 million under the
Credit Agreement. Total unused borrowing capacity under the Credit Agreement was $1,562.9 million as of
December 29, 2007. The Credit Agreement is scheduled to expire on June 1, 2012.
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