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) January 7, 1994
FOOD LION, INC.
(Exact name of registrant as specified in its charter)
North Carolina 0-6080 56-0660192
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation of organization) File Number) Identification
No.)
P.O. Box 1330, 2110 Executive Drive, Salisbury, NC 28145-1330
(704) 633-8250
(Address and telephone number of principal executive
offices and principal place of business)
Item 5. Other Events
(a) New Director
Food Lion, Inc. (the "Company") announced on December 10, 1993
the appointment of William G. Ferguson to the Company's Board of
Directors. Mr. Ferguson has 42 years of experience in American
industry as founder, investor, director, officer, and manager in
both public and private enterprises. Among other positions, he has
served as President of Ashland Chemical Company from 1968 to 1971
and Chairman and Chief Executive officer of General Exploration
Company from 1971 to 1977. In addition, he has served on the
boards of director of a broad spectrum of service and manufacturing
companies, including the Pittsburgh and Lake Erie Railroad, the
Wheeling and Lake Erie Railroad, Crestview Aerospace, Witcher Creek
Coal Company, and Snow Aviation. He has also served in the public
sector as Chairman of the Ohio Energy and Resource Development
Agency (1975-1979). Mr. Ferguson fills the position vacated by
David E. Johnston who resigned his position on the Food Lion board.
(b) Financial Matters
At a January 7, 1994 meeting, the Company's Board of Directors
discussed a number of issues relating to the Company's business and
financing plans for fiscal year 1994. As a result of this meeting,
on January 7, 1994, Food Lion announced an updated business plan
for 1994. The updated plan includes 40-50 new store openings, 60-
70 major renovations to existing stores and the closing of certain
unprofitable store locations. Of the planned store closings, 47
are in the Company's Southwestern market (36 in Texas and 11 in
Oklahoma), while 41 stores are located across eight states in Food
Lion's Southeastern market area; Florida (18), Georgia (5),
Kentucky (2), North Carolina (6), Pennsylvania (1), South Carolina
(5), Tennessee (3) and Virginia (1).
The decision to close stores comes as part of Food Lion's on-going
review of individual store profitability. By closing unprofitable
stores, the Company will eliminate operating losses and be able to
focus its resources on profitable stores.
Approximately 1,300 full-time and 2,200 part-time employees will be
affected by these store closings during 1994. Most employees of
the stores scheduled to close will be offered employment elsewhere
in the Company. Where continuing employment is impractical, a
severance package will be offered to both full and part-time
employees.
No distribution center employees are expected to be displaced as a
result of these closings.
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The Company will establish a pre-tax reserve against 1993 earnings
of approximately $170.5 million ($103 million after tax) to cover
management's best estimate of costs associated with the store
closings. These costs include estimated lease obligations and
various asset write-offs. These store closings confirm Food Lion's
goal of maintaining acceptable profitability levels in all
operating areas in an effort to achieve maximum corporate and
shareholder value.
After the store closings, Food Lion will continue to operate more
than 1,000 stores in 14 states, employing more than 60,000 people.
At the January 7, 1994 meeting, the Company's Board of Directors
also discussed three series of senior notes ("Notes"), in the
aggregate principal amount of $214 million, the Company sold
privately in June 1993. The placement of the Notes complemented
other financings carried out by the Company in fiscal 1993,
including the entry into a $300 million revolving credit agreement
("Credit Agreement") and the private issuance of convertible
subordinated debentures amounting to $115 million in principal
amount.
The terms of the Notes and the Credit Agreement require the Company
to comply with certain financial and other covenants. Under one of
these covenants, the Company is prohibited from issuing additional
Funded Debt unless the Company's ratio of Net Income Available for
Fixed Charges for the immediately preceding four fiscal quarters to
Pro Forma Fixed Charges ("Ratio") is at least 2.00 to 1.00. Under
the Note Agreement, "Funded Debt" generally means (i) all
indebtedness having a final maturity of one year or more from the
date of origin, including all payments in respect thereof required
to be made within one year from any date a determination is made,
(ii) all Capitalized Rentals (essentially, the amount of payments
under capitalized leases that would be reflected as a liability on
the Company's balance sheet), and (iii) all guaranties of the
Funded Debt of others.
As of the date of this Report, the Ratio does not exceed 2.00 to
1.00 (the Ratio is currently approximately 1.9 to 1.00). Although
the failure to achieve the specified ratio will not result in a
default under the terms of the Note Agreement or the Credit
Agreement, the issuance of Funded Debt during the time when the
covenant has not been satisfied would constitute such a default.
The Company does not intend to issue any Funded Debt during the
time when the covenant is not satisfied.
Because of its liquidity and the availability of alternatives, the
Company does not believe that the failure to meet the covenant at
this time will have a materially adverse effect on the Company's
business, financial position or results of operations. The Company
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has commenced negotiations to seek a modification to the above-
described restriction.
In addition, and if necessary, the Company would be able to prepay
the Notes (principal amount of $214 million), although in this
event it would incur a "make-whole" premium that would approximate
$20 million. The amount of this premium could change depending
upon the timing of prepayment.
Food Lion expects to receive a modification to the restriction on
issuing Funded Debt.
Item 7. Financial Statements and Exhibits
None.
The Company agrees to furnish a copy of the Note Agreement
dated May 1, 1993 and the Credit Agreement dated June 4, 1993 to
the Commission upon request.
SIGNATURE
Pursuant to the requirements 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.
FOOD LION, INC.
REGISTRANT
BY:
Dan A. Boone
Chief Financial Officer
and Secretary
(Duly Authorized Officer)
DATE: January 7, 1994
