UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 18, 1998
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FRED MEYER, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-13339 91-1826443
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(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File No.) Identification No.)
3800 SE 22nd Avenue, Portland, Oregon 97202
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(Address of principal executive offices) (Zip Code)
(503) 232-8844
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(Registrant's telephone number, including area code)
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Item 5. Other Events
On June 18, 1998, Fred Meyer, Inc. announced financial results for the
first quarter of fiscal 1998. The press release announcing the results is
included as Exhibit 99.1 and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits
(c) Exhibits.
99.1 Press Release of Fred Meyer, Inc., dated June 18, 1998.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated: June 18, 1998
FRED MEYER, INC.
By: ROGER A. COOKE
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Roger A. Cooke
Senior Vice President, General
Counsel and Secretary
3
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Description Page No.
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99.1 Press Release of Fred Meyer, Inc., dated
June 18, 1998.
Exhibit 99.1
INVESTOR CONTACT: David R. Jessick, Chief Financial Officer
(503) 797-7900
MEDIA CONTACT: Rob Boley, AVP-Public Relations
(503) 797-7176
FOR IMMEDIATE RELEASE
SYMBOL: "FMY" (N.Y.S.E.)
FRED MEYER REPORTS FIRST QUARTER EPS OF $.27 EXCLUDING MERGER RELATED COSTS
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AND EXTRAORDINARY CHARGES
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Portland, Oregon, June 18, 1998 -- Fred Meyer, Inc. announced improved sales and
operating earnings for its 1998 first quarter (16 weeks) ended May 23, 1998.
1998 first quarter results are not comparable to prior year results due to three
recent acquisitions by Fred Meyer, Inc. (the Company). In September 1997, the
Company acquired Smith's Food & Drug Centers, Inc. (Smith's), and in March 1998
the Company acquired Quality Food Centers, Inc. (QFC) and Food 4 Less Holdings,
Inc. (Ralphs). The Smith's and Ralphs acquisitions were accounted for as
purchases and the QFC acquisition was accounted for as a pooling of interests.
Consequently, 1998 first quarter results include the results from the store
operations of Fred Meyer (Fred Meyer Stores), Smith's and QFC for the full
quarter and include Ralphs from March 10, 1998. First quarter 1997 results
include only Fred Meyer Stores and QFC.
FIRST QUARTER RESULTS
Sales were $4.0 billion for the first quarter, an increase of $2.4 billion or
153.6 percent from the prior year's $1.6 billion.
Sales at Fred Meyer Stores were $1.3 billion, up $129 million or 10.8 percent
from the prior year. Comparable store sales increased 6.2 percent, with
comparable food sales up 7.1 percent and comparable nonfood sales up 4.9
percent.
Sales at QFC were $621 million, up $221 million from the prior year's $400
million. QFC completed two acquisitions during the first quarter of the prior
year which contributed to the sales increase. Comparable store sales at QFC were
up 2.6 percent.
Sales at Smith's accounted for $951 million of the increase and sales at Ralphs
accounted for $1.15 billion of the increase.
In conjunction with the recent acquisitions, a charge for merger related costs
and merger integration costs of $209 million was recorded in the first quarter.
Additional merger integration charges will be recorded in future quarters as
expenditures are incurred.
Additionally, an extraordinary charge of $216 million, net of taxes, was
recorded for early extinguishment of debt. This charge primarily consisted of
premiums paid and deferred financing fees written off for Ralphs and QFC bonds
that were purchased in tender offers on March 11, 1998.
<PAGE>
Earnings before interest, taxes, depreciation and amortization and the LIFO
charge (EBITDA) were $314.9 million or 7.8 percent of sales in 1998's first
quarter versus $104.5 million or 6.6 percent of sales in 1997's first quarter.
Without the merger related charges and extraordinary charge, income would have
been $41.4 million or $.27 per share on 154.5 million diluted weighted shares
outstanding this year versus $22.5 million or $.25 per share on 88.3 million
diluted weighted shares outstanding in the prior year. Including the charges,
the Company recorded a loss of $312 million or $2.15 per share in the first
quarter.
COMMENTARY
Commenting on the quarter, Robert G. Miller, President and Chief Executive
Officer, said "We are pleased with first quarter sales and earnings results. Our
recent acquisitions also have contributed to strong improvement in our Company's
cash flow. Comparable store sales continued to be very strong at Fred Meyer
Stores and at QFC. Sales at Ralphs and Smith's were below plan for the first
quarter but overall, comparable store sales for the combined Company were among
the strongest in the industry.
" We are very happy with our merger integration efforts and the related cost
savings continue to be on schedule. The Hughes store integration into Ralphs is
now substantially complete and the QFC and Smith's integrations are progressing
with an expected completion date of fiscal year-end for the Smith's integration
and mid-1999 for the QFC integration."
Fred Meyer, Inc., headquartered in Portland, Oregon, is one of the nation's
largest food and drug retailers. The Company's four subsidiaries -- Fred Meyer
Stores, QFC, Ralphs and Smith's -- operate more than 800 stores in a variety of
food and drug and multi-department formats located primarily in 11 western
states from Alaska to Texas. In addition, the Company operates 259 fine jewelry
stores across the United States under the banners of Fred Meyer, Merksamer and
Fox's Jewelers.
WEB SITE: http://www.fredmeyer.com
-- Three tables follow --
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<TABLE>
<CAPTION>
FRED MEYER, INC.
Condensed Consolidated Statements of Operations (unaudited)
16 weeks 16 weeks
ended ended
May 23, May 24,
(In thousands, except per share amounts) 1998 1997
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<S> <C> <C>
Net sales $ 4,040,448 $ 1,593,437
Cost of goods sold 2,849,017 1,121,353
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Gross margin 1,191,431 472,084
Operating and administrative expenses 988,676 415,784
Amortization of goodwill 22,302 1,003
Merger related costs 208,965 -
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Income (loss) from operations (28,512) 55,297
Interest expense 99,811 18,648
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Income (loss) before income taxes
and extraordinary charge (128,323) 36,649
Provision (benefit) for income taxes (32,770) 14,136
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Income (loss) before extraordinary charge (95,553) 22,513
Extraordinary charge, net of taxes 216,441 -
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Net income (loss) $ (311,994) $ 22,513
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Basic earnings per common share:
Income (loss) before extraordinary charge $ (.66) $ .27
Extraordinary charge (1.49) -
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Net income (loss) $ (2.15) $ .27
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Basic weighted average number of
common shares outstanding 145,141 84,758
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Diluted earnings per common share:
Income (loss) before extraordinary charge $ (.66) $ .25
Extraordinary charge (1.49) -
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Net income (loss) $ (2.15) $ .25
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Diluted weighted average number of
common and common equivalent
shares outstanding 145,141 88,335
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</TABLE>
Table 1 of 3
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<TABLE>
<CAPTION>
FRED MEYER, INC.
Supplemental Operating Data (unaudited)
16 weeks 16 weeks
(In thousands, except per share data ended ended
and percentages) May 23, May 24,
1998 1997
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<S> <C> <C>
Earnings before interest, taxes,
depreciation and amortization (EBITDA) $ 314,928 $ 104,549
LIFO expense 5,975 2,013
Depreciation and amortization expense 106,198 46,236
Amortization of Goodwill:
Deductible for tax 2,464 -
Nondeductible for tax 19,838 1,003
As a percent of sales:
Food sales 86.90% 69.90%
Nonfood sales 13.10% 30.10%
Gross margin -- LIFO 29.49% 29.63%
Gross margin -- excluding LIFO expense 29.64% 29.75%
Operating and administrative expenses 24.47% 26.09%
Amortization of goodwill .55% .06%
Income from operations, excluding
merger related costs 4.47% 3.47%
Merger related costs 5.17% -
Income (loss) from operations (.71%) 3.47%
Interest expense 2.47% 1.17%
Income (loss) before extraordinary charge (2.37%) 1.41%
Net income (loss) (7.72%) 1.41%
EBITDA 7.79% 6.56%
LIFO .15% .13%
Comparable store sales (excluding Smith's
and Ralphs): 5.60% 6.30%
Fred Meyer Stores:
Food sales 7.10% 6.00%
Nonfood sales 4.90% 8.70%
Total sales 6.20% 7.00%
Quality Food Centers (QFC) 2.60% 3.40%
</TABLE>
Table 2 of 3
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<TABLE>
<CAPTION>
FRED MEYER, INC.
Condensed Consolidated Balance Sheets (unaudited)
May 23, May 24,
(In thousands) 1998 1997
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 163,773 $ 127,979
Receivables 123,745 49,199
Inventories 1,795,974 742,968
Prepaid expenses and other 51,060 51,358
Current deferred taxes 270,495 17,226
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Total current assets 2,405,047 988,730
Property and equipment - net 3,500,583 1,502,518
Goodwill - net 3,593,444 238,755
Long-term deferred tax assets 222,271 -
Other assets 167,633 59,042
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Total assets $ 9,888,978 $ 2,789,045
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and bank overdrafts $ 1,161,422 $ 515,785
Income taxes payables - 12,342
Accrued expenses and other 1,126,431 186,226
Current portion long-term debt and capital leases 44,967 2,123
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Total current liabilities 2,332,820 716,476
Long-term debt 4,815,013 958,397
Capital lease obligations 189,886 39,869
Deferred lease transactions 34,659 41,547
Deferred income taxes - 98,826
Other long-term liabilities 437,608 25,221
Stockholders' equity 2,078,992 908,709
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Total liabilities and stockholders' equity $ 9,888,978 $ 2,789,045
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</TABLE>
Table 3 of 3
