Safeway 2007 Annual Report Download - page 51

SAFEWAY INC. AND SUBSIDIARIES
Stock Repurchase Program In December 2006, the Board of Directors increased the total authorized level of the
Company’s stock repurchase program to $4.0 billion from the previously announced level of $3.5 billion. From the
initiation of the repurchase program in 1999 through the end of fiscal 2007, the aggregate cost of shares of common
stock repurchased by the Company, including commissions, was approximately $3.5 billion, leaving an authorized
amount for repurchases of $521.1 million. During 2007, Safeway repurchased approximately 6.7 million shares of its
common stock under the repurchase program at an aggregate price, including commissions, of $226.1 million. The
average price per share, excluding commissions, was $33.57. The timing and volume of future repurchases will depend
on several factors, including market conditions.
Credit Ratings On October 24, 2006, Fitch affirmed Safeway’s BBB rating and revised its outlook to stable from
negative. On July 23, 2007, S&P affirmed the Company’s BBB-credit rating and revised its outlook to positive from stable.
On August 1, 2007, Moody’s Investors Service affirmed Safeway’s Baa2 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.
Contractual Obligations The table below presents significant contractual obligations of the Company at year-end
2007 (in millions) (1):
2008 2009 2010 2011 2012 Thereafter Total
Long-term debt (2) $ 954.9 $ 752.5 $ 505.5 $ 502.1 $ 825.6 $ 1,507.8 $ 5,048.4
Estimated interest on long-term debt (3) 298.2 246.3 205.3 163.8 147.5 1,162.1 2,223.2
Capital lease obligations (2),(4) 42.5 42.9 37.3 32.5 31.3 420.2 606.7
Interest on capital leases 59.7 54.5 50.6 47.0 43.8 287.0 542.6
Self-insurance liability 130.2 91.2 61.8 42.7 30.0 121.7 477.6
Interest on self-insurance liability 2.3 4.8 5.6 5.6 5.0 63.6 86.9
Operating leases (4) 451.8 410.4 380.8 346.3 317.8 3,089.1 4,996.2
Contracts for purchase of property,
equipment and construction of
buildings 307.9 –––– –307.9
Contracts for purchase of inventory 171.4 –––– –171.4
Fixed-price energy contracts 52.9 30.6 18.6 18.9 3.2 – 124.2
(1) Excludes funding of pension and other postretirement benefit obligations, which totaled approximately $41.9 million in 2007. Also
excludes contributions under various multi-employer pension plans, which totaled $270.1 million in 2007.
(2) Required principal payments only.
(3) Excludes payments received or made relating to interest rate swap as discussed below.
(4) Operating and capital lease obligations do not include common area maintenance, insurance or tax payments for which the
Company is also obligated. In fiscal 2007, these charges totaled approximately $218.4 million.
The Company adopted FIN 48 on the first day of its 2007 fiscal year. The amount of unrecognized tax benefits at
December 29, 2007 was $123.1 million. This amount has been excluded from the contractual obligations table because a
reasonably reliable estimate of the timing of future tax settlements cannot be determined.
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