SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended January 29, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Commission File No. 0-15023
FRED MEYER, INC.
(Exact name of registrant as
specified in its charter)
Delaware 93-0798201
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3800 SE 22nd Avenue
Portland, Oregon 97202
(Address of principal executive offices) (Zip Code)
(503) 232-8844
(Registrant's telephone number, including area code)
Securities registered pursuant to
Section 12(b) of the Act:
None
Securities registered pursuant to
Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
Indicate by check mark whether the Registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-
K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive
proxy or information statement incorporated by
reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of Common Stock held
by nonaffiliates of the Registrant at March 1, 1994:
$647,460,408
Number of shares of Common Stock outstanding
at March 1, 1994: 26,430,565
Documents Incorporated by Reference
-----------------------------------
Part of Form 10-K into
Document which incorporated
- - -------- ----------------------
Portions of 1993 Annual Parts II and IV
Report to Shareholders
Portions of Proxy Statement Part III
for 1994 Annual Meeting
of Shareholders <PAGE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Item of Form 10-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Page
- - ----------------- ----
<S> <C>
PART I
Item 1 - Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2 - Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 3 - Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 4 - Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . 10
Item 4(a) - Executive Officers of the Registrant. . . . . . . . . . . . . . . . . . . . . . . 10
PART II
Item 5 - Market for the Registrant's Common Stock
and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 6 - Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 7 - Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 8 - Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . 13
Item 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. . . . . . . . . . . . . . . . . . . . . . 13
PART III
Item 10 - Directors and Executive Officers of the Registrant. . . . . . . . . . . . . . . . 13
Item 11 - Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 12 - Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 13 - Certain Relationships and Related Transactions. . . . . . . . . . . . . . . . . . 13
PART IV
Item 14 - Exhibits, Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
/TABLE
<PAGE>
<PAGE>
PART I
Item 1. Business.
- - ------ --------
GENERAL
Fred Meyer, Inc. (the "Company") is a leading
regional retailer of a wide range of food, apparel,
fine jewelry and products for the home. At January 29,
1994, the Company operated 127 stores in Oregon,
Washington, Utah, Alaska, Idaho, Northern California
and Montana under the name "Fred Meyer." Of these
stores, 97 are free-standing, multidepartment stores,
averaging approximately 137,000 square feet of retail
space, that emphasize one-stop-shopping for necessities
and items of everyday use. Of the 97 multidepartment
stores, 77 contain food and nonfood departments, and 20
contain nonfood departments only. The Company's
multidepartment stores accounted for approximately 98
percent of both the Company's total sales and operating
income for the Company's 1993 fiscal year ended January
29, 1994. Of the 30 specialty stores, 23 are jewelry
stores located in regional malls. The Company's
multidepartment stores contain up to seven departments
which include food, the home, apparel, home
electronics, fine jewelry, health and beauty aids and a
pharmacy. The Company's multidepartment stores are
unique in the Pacific Northwest in combining food with
a wide range of nonfood merchandise under one roof.
For the 1993 fiscal year, food and nonfood sales were
37.5 percent and 62.5 percent of total sales,
respectively.
The Company's principal business strategy is
to operate one-stop-shopping stores that provide
convenient shopping for a broad selection of products
in one location. Stores are organized into distinct
departments that specialize in the sale of particular
products. The Company believes that its business
strategy has generated high per-store sales volume and
frequent shopping by area residents and that its
departments achieve greater sales volume because they
are located within one-stop shopping stores. The
strength of the individual departments, with their
breadth and depth of product selection, national and
private label brands and emphasis on products of
everyday use, distinguishes the Company's stores from
other retailers and enables it to compete successfully
with supermarkets, drugstores, discount stores, mass
merchandisers, department and specialty stores. The
Company promotes cross-shopping by providing convenient
access between departments, making each department a
strong competitor in the market for its products and by
facilitating easy customer checkout through a cash
register system that allows customers to purchase
merchandise from any department at any checkout
location ("common checkout").
During the past several years, the Company
has committed substantial capital and management
resources to improve its one-stop-shopping strategy,
allowing it to better serve its customers and respond
to the many new competitors entering its markets. New
competitors in the past six years include Wal-Mart,
Food 4 Less, Cub Foods, Home Depot, HomeBase, Eagle,
Sam's Club and Incredible Universe. During the same
period, the Company also faced increased competition
from existing major national and regional retailers,
including Safeway, Albertson's, Costco, Lamonts,
Mervyn's, PayLess, Penneys, Carrs, QFC, Kmart, Target,
ShopKo and Toys-R-Us. Notwithstanding the competitive
environment and a slowdown in economic conditions in
some of the Company's markets, the Company has been
able to achieve total and comparable store sales growth
averaging 7.8 percent and 3.5 percent, respectively,
over the past five years (based on 52-week years).
Total and comparable store sales growth were 4.4 percent
and 2.4 percent, respectively, for the Company's 1993
fiscal year.
During the past five-year period, the Company
implemented common checkout for the majority of its
multidepartment stores to complement its storewide
merchandising efforts. The Company also remodeled 32
multidepartment stores and redesigned and remodeled
many food departments to include in-store bakeries,
delicatessens and service fish markets to respond to
customer shopping preferences. Beginning in 1987, the
Company implemented
<PAGE>
<PAGE>2
an everyday low pricing strategy in its food
operations. In 1989, the Company reorganized its
operating management structure and for each store
designated a store director responsible for store
operations and profitability and departmental cross-
merchandising. In 1992 the Company augmented its store
management structure by establishing a regional
management structure of six regional management teams
closely aligned with the stores in the regions.
Beginning in 1991, management focused
increased attention on the Company's expenses. This
focus decreased expenses as a percent of sales by 2.36
percent since 1990 for advertising, store labor, store
occupancy and corporate support department expenses,
offset in part by increases in information services
("IS") expenses of .70 percent, resulting in a net
decrease of 1.66 percent. The Company is continuing to
pursue expense reductions as part of its efforts to
improve its financial performance.
The Company's capital expenditure budget for
its 1994 fiscal year is $265,000,000, compared to
capital expenditures of approximately $254,000,000 in
1993. Beginning in 1993, the Company implemented a
plan to increase new store development in its existing
markets and to increase the level of remodeling of
existing stores. As a result, the Company plans to
open at least five new multidepartment stores and
remodel at least seven existing stores in each of the
five fiscal years beginning in 1993. All of the new
stores scheduled for 1993 opened in the second half of
the 1993 fiscal year. Total retail space will increase
by approximately 6.0 percent in 1993 and 1994. The
Company is also constructing a new retail service
center in Chehalis, Washington and developing plans for
a food distribution facility near Seattle, Washington.
In addition, the Company is continuing its program to
replace and upgrade its old IS system with new
architecture and application programs. The Company's
new distribution facilities and new IS system are
designed to improve operations, permit better inventory
management and reduce distribution costs.
The Company was incorporated in Delaware in
1981, as a successor to the business of a company which
was incorporated in Oregon in 1923. The Company's
principal executive offices are located at 3800 SE 22nd
Avenue, Portland, Oregon 97202, and its telephone
number is (503) 232-8844. References in this Form 10-K
to the Company mean Fred Meyer, Inc., including its
subsidiaries, unless the context requires otherwise.
<PAGE>
<PAGE>3
The following table sets forth certain
statistical information with respect to the Company's
operations for the periods indicated:
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------------------------------------------
January 29, January 30, February 1, February 2, February 3,
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- -----------
(53 weeks)
<S> <C> <C> <C> <C> <C>
Percent of net sales:
Nonfood sales 62.5% 63.3% 63.7% 64.3% 66.8%
Food sales 37.5% 36.7% 36.3% 35.7% 33.2%
Sales per square foot of
selling space (weighted average) $312 $304 $283 $269 $261/1
Total stores sales growth 4.4% 5.6% 9.2% 11.6%/1 8.4%/1
Comparable store sales percentage increase: /2
Total Company 2.4% 3.0% 4.0% 3.6%/1 4.5%/1
Food 3.4% 2.8% 4.5% 8.3%/1 9.0%/1
Nonfood 1.9% 3.2% 3.8% 1.1%/1 2.3%/1
Number of multidepartment stores:
Operated at end of period 97 94 94 94 95
Opened 5 2 3 5 4
Closed 2 2 3 6 2
Remodeled 7 5 3 7 10
Number of specialty stores:
Operated at end of period 30 29 28 28 30
Opened 2 4 -- -- 11
Closed 1 3 -- 2 --
Remodeled -- -- -- -- --
Total Number of stores:
Operated at end of period 127 123 122 122 125
Opened 7 6 3 5 15
Closed 3 5 3 8 2
Remodeled 7 5 3 7 10
Total retail square feet:
At beginning of period 12,646,000 12,679,000 12,213,000 11,743,000 10,925,000
Added by new stores opened 811,000 295,000 584,000 940,000 785,000
Added by remodeling
of existing stores 80,000 39,000 63,000 24,000 155,000
Less closed stores 114,000 367,000/3 181,000 494,000 122,000
At end of period 13,423,000 12,646,000 12,679,000 12,213,000 11,743,000
__________________
<FN>
/1 Excludes 53rd week in the year ended February 3, 1990 for comparison purposes.
/2 Includes only sales of stores operating throughout each of the periods compared.
/3 Includes square footage for 30 restaurants that were converted to tenant space.
</TABLE>
BUSINESS STRATEGY
The Company's principal business strategy is
to operate one-stop-shopping stores that provide
convenient shopping for a broad selection of products
in one location. Stores are organized into distinct
departments and sections within departments that
specialize in the sale of particular products. The
Company promotes cross-shopping through convenient
access between departments, by making each department a
strong competitor in the market for the products it
sells and by providing easy customer checkout through
its common checkout system that allows customers to
purchase merchandise from any department at any
checkout location.
Breadth and Depth of Selection.
- - ------------------------------
In most of its stores, the Company sells over 225,000
items, including a wide selection of food, apparel, and
products for the home, with an emphasis on necessities
and items of everyday use. In addition, the Company
takes advantage of the stores' high
<PAGE>
<PAGE>4
and diverse customer traffic to sell many other
categories of goods which are purchased on a
discretionary basis, such as fine jewelry, home
electronics and fashion apparel. Within many
categories of apparel, products for the home, fine
jewelry and home electronics, the Company offers
customers the breadth of selection normally afforded by
department or specialty stores. Its selection of food
and groceries is comparable to that of large
supermarkets. The Company emphasizes the sale of
popular brands and its own private-label brands.
Multidepartment Stores.
- - ----------------------
The Company's large stores are organized into
departments and sections within departments that
specialize in the sale of particular products. The
Company endeavors to create individual, recognizable
identities for each department through specialized
design, fixtures, and decor. In most stores, common
checkout areas allow the checkout of items from the
Company's many departments at any cash register and
facilitate convenient shopping. Most of the Company's
departments are self-service, except service
delicatessens, home electronics, fine jewelry and other
areas where special sales assistance is required.
Stores consist of up to seven departments which are
comprised of a variety of specialty sections.
Departments and specialty sections within the large
Fred Meyer stores include full-service food, pharmacy,
nutrition, housewares, domestics, paint and home decor
items, plumbing and electrical items, hardware and
tools, building materials, garden, floral, sporting
goods, automotive, home office supplies and stationery,
cards and books, toys, basic and fashion apparel for
all ages, shoes, home electronics and fine jewelry.
Multidepartment stores that include food departments
are the Company's primary focus.
Store and Regional Management.
- - -----------------------------
In 1989, the Company reorganized its operating
management structure and for each store designated a
store director responsible for store operations and
profitability and departmental cross-merchandising.
Departments within multidepartment stores are managed
by merchandising managers, who report to store
directors. Each store director and department manager
is supported by a regional manager and other senior
managers who specialize in the market for products sold
in the stores. In 1992, the Company augmented its
store management structure by establishing regional
management teams that work closely with the stores in
their region to enhance sales and profit opportunities.
As a result of its specialized management structure,
the Company believes that each store and each
department within the store better serves its customers
and is able to respond quickly to market changes.
Location and Store Design.
- - -------------------------
New store sites are determined based on a review of
information on demographics and the competitive
environment for the market area in which the proposed
site is located. Most of the Company's stores are
situated in or near well-populated residential areas.
The Company selects store sites, determines store size
and designs stores with a view toward making each store
a very convenient, one-stop-shopping store in the area
it serves. In 1992, the Company standardized its store
design with two basic store plans, approximating
145,000 square feet and 165,000 square feet. The
Company anticipates using a given prototype depending
on the market to be served and the size of the site
being developed. The Company is flexible in its store
design plans where land sites require a specialized
store design.
Promotion and Advertising.
- - -------------------------
The Company aggressively promotes sales for all
departments through weekly advertising, primarily in
local and area newspapers, radio and television.
Advertising often features many high-demand products at
competitive prices. Sale items are usually items
regularly sold in the departments. The Company
emphasizes everyday low prices in its food departments
and for certain nonfood items, and generally offers
promotional sale pricing in its nonfood departments.
The Company believes that it is known for competitive
pricing and its liberal return policy.
Information Services.
- - --------------------
In the fall of 1991, the Company began a five-year
program to modernize its systems to better support its
business. The new systems will permit greater
utilization of information collected from the point-of-
sale bar scanning equipment installed in the Company's
stores.
<PAGE>
<PAGE>5
In 1991, a mainframe computer was installed allowing
every store to be linked with the main office and
distribution centers. In 1992, electronic data
interchange ("EDI") was established, and a new pharmacy
system was added in the multidepartment stores. EDI
permits on-line computer communication between the
Company and its vendors and facilitates order entry and
inventory replenishment on a current basis. Currently,
over 500 vendors are on the EDI system, and the Company
has 6,000 items on the new computer-assisted automatic
replenishment system. In 1993, the Company implemented
a new distribution system and is in the process of
implementing new systems for merchandising information
and inventory management. The new systems are designed
to provide the company with better inventory turnover
and control, reduced markdowns, improved expense
controls, reduced distribution costs and better
customer service.
RETAIL OPERATIONS
The Company's stores contain up to seven departments.
Within each department is a variety of merchandise
sections operated like specialty businesses. The
following table sets forth the number of departments
(and lists certain of the sections within the Home and
Apparel departments) in the Company's 97
multidepartment stores at January 29, 1994:
<TABLE>
<S> <C>
Food . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Nonfood. . . . . . . . . . . . . . . . . . . . . . . . . . . 97
The Home. . . . . . . . . . . . . . . . . . . . . . . 97
Housewares, Domestics, and Home Decor
Sporting Goods
Garden
Home Improvement and Automotive
Cards and Books
Variety and Seasonal
Home Electronics. . . . . . . . . . . . . . . . . . . 97
Apparel . . . . . . . . . . . . . . . . . . . . . . . 97
Apparel
Cosmetics
Shoes
Toys
Pharmacy. . . . . . . . . . . . . . . . . . . . . . . 96
Health and Beauty Aids. . . . . . . . . . . . . . . . 97
Fine Jewelry. . . . . . . . . . . . . . . . . . . . . 83
</TABLE>
The Food Department is typically the same size as free-
standing super food stores of competitors and carries a wide
variety of national brands together with the Company's private-
label brands of grocery items which are Fred Meyer, President's
Choice and FMV (Fred Meyer Value). Beginning in 1992, the
Company implemented a program to increase sales of its private
label grocery items. As a result, sales of private label grocery
items as a percentage of total grocery sales have increased to a
current level of approximately 20 percent from 12 percent in
1991. Private label items generally are sold at lower prices to
the customer and generate higher margins for the Company than
national brand products. The Company also carries fresh produce,
meat, dairy products, nutritional products, bakery products,
candy and tobacco, all sold on a self-selection basis. Most food
departments contain a nutrition section that includes name brand
and generic natural foods, dairy products, juices, vitamins,
supplements, sugar-free and fat-free products and meat
substitutes. Certain items, such as grains, nuts, fruits and
natural snacks, are also displayed in bulk to enable customers to
buy any amount and package their own purchases. In many
multidepartment stores, the Company operates in-store bakeries
and service departments that offer fresh seafood, delicatessen
and meat products. The Company's newer stores include sit-down
eating areas near in-store delicatessens and international take-
out
<PAGE>
<PAGE>6
departments. The following table sets forth the number of
nutrition, in-store bakery and service departments at January 29,
1994:
<TABLE>
<S> <C>
Nutrition. . . . . . . . . . . . . . . . . . . . . . . . . . 81
Bakery . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Service Delicatessen . . . . . . . . . . . . . . . . . . . . 73
Service Fish Market. . . . . . . . . . . . . . . . . . . . . 51
Service Meat Market. . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
The Home Department offers a wide selection of home
decor, housewares, small appliances, domestics, furniture,
sporting goods, greeting cards, books, floral products, power
lawn mowers, garden tools, fertilizers and chemicals, seasonal
and holiday merchandise, hardware, tools, paint, building
materials, plumbing and electrical fixtures, automotive supplies
and related accessories. Some of the national brands featured
are Braun, Kitchen-Aid, Coleman, Rowenta, De Longhi, Glidden and
Weber. Home improvement, garden and automotive sections feature
many items for the do-it-yourself customer. High quality private
label products under our Northwest Home, Turf King and Kraft King
labels complement our national branded offering.
The Home Electronics Department offers the latest name-
brand high-technology merchandise, such as televisions, audio
components, camcorders, cellular phones, computers, computer
software and a large selection of video games. Some of the
national brands featured are SONY, JBL, Pioneer, IBM and
Magnavox. It also offers a large selection of compact discs,
tapes, and for-sale video and includes a photo-finishing section.
One-hour photo-finishing has also been added to selected
locations.
The Apparel Department offers moderately priced
national brand and private-label apparel, sportswear, cosmetics,
accessories, toys and family and active shoes. Major national
brands carried by the apparel departments include Levi's, Jockey,
Maidenform, Vanity Fair, Nike, Reebok, Adidas, Gotcha, Villager,
Eastland, Union Bay, Columbia Sportswear, Capezio, Lee, Bali and
Keds. High quality private label products under our Fred Bear,
Katherine Bishop and KB & Co. labels complement our national
branded offering.
The Pharmacy Department sells a full line of name brand
and generic prescription drugs dispensed by full-time licensed
pharmacists and participates with all major third party HMO and
PPO plans.
The Health and Beauty Aids Department offers a wide
selection of national and private label brands of health and
beauty aid products. It also offers candy and confections and
dietary food products.
The Fine Jewelry Department offers an extensive
selection of bridal jewelry and diamond fashion jewelry,
including precious and semi-precious stones. It also offers name
brand watches and an assortment of 14-carat gold chains and
earrings.
Most of the Company's multidepartment stores are open
from 8:00 a.m. until 10:00 p.m., seven days a week, including all
holidays except Christmas. Multidepartment stores in markets
where the Company does not sell food are open from 9:00 a.m.
until 10:00 p.m. Most of the Company's multidepartment store
locations have unaffiliated tenants which offer goods and
services complementing those offered by the Company, such as
banks, optical centers, restaurants, self-service laundries,
insurance agencies and beauty and barber shops. The Company's
specialty store hours vary depending on location.
The Company honors most nationally recognized credit
cards for sales in all its departments. In addition, the Company
has its own credit card programs which are serviced by national
credit card processors and are generally on a nonrecourse basis.
Beginning in 1992, the Company began accepting debit cards that
do not require customer-activated personal identification number
("PIN") pads.
<PAGE>
<PAGE>7
EXPANSION AND STORE DEVELOPMENT
The Company constructs, enlarges, remodels, closes or
sells stores in light of their past performance and the Company's
assessment of their potential. The Company continually evaluates
its position in its various market areas to determine whether it
should expand or consolidate its operations in those areas. In
1989 and 1990, the Company opened a total of nine new
multidepartment stores and remodeled seventeen existing stores.
In 1991 and 1992, new store openings, development and remodeling
activity declined to a total of five new multidepartment stores
and eight remodels while the Company focused on reducing expenses
and improving profitability. Beginning in 1993, the Company
implemented a plan to increase new store development in its
existing markets and to increase the level of remodeling of
existing stores. During 1993, the Company opened five new
multidepartment stores, one of which replaced an older store;
closed two multidepartment stores (including the one store that
was replaced); and remodeled seven stores. Generally, the
Company plans to open at least five new multidepartment stores
and remodel at least seven existing stores in each of the five
years beginning in 1994. It plans to close one multidepartment
store in 1994. In 1993, capital expenditures for new store
development and remodels were approximately $156,000,000,
compared with expenditures in 1992 of approximately $57,000,000.
A portion of this increase reflects spending for stores to open
in 1994. Total retail space increased 777,000 square feet during
1993, representing an increase of approximately 6.1 percent. New
multidepartment store openings during the year 1993 were as
follows:
<TABLE>
<CAPTION>
Total
Retail Space
Location Square Footage Opened
-------- -------------- ------
<S> <C> <C>
Orchards, Washington. . . . . . . . . . . . . . . . . . 165,000 October, 1993
Anchorage, Alaska . . . . . . . . . . . . . . . . . . . 169,000 November, 1993
Spokane, Washington . . . . . . . . . . . . . . . . . . 165,000 November, 1993
Burlington, Washington. . . . . . . . . . . . . . . . . 165,000 November, 1993
Medford, Oregon . . . . . . . . . . . . . . . . . . . . 144,000 January, 1994
</TABLE>
Planned new multidepartment store openings during the year 1994
are as follows:
<TABLE>
<CAPTION>
Total
Retail Space
Location Square Footage Planned Opening
-------- -------------- ---------------
<S> <C> <C>
Soldotna, Alaska. . . . . . . . . . . . . . . . . . . . 157,000 April, 1994
Brookings, Oregon . . . . . . . . . . . . . . . . . . . 143,000 April, 1994
East Vancouver, Washington. . . . . . . . . . . . . . . 166,000 July, 1994
Boise, Idaho. . . . . . . . . . . . . . . . . . . . . . 164,000 August, 1994
Bonney Lake (Seattle), Washington . . . . . . . . . . . 166,000 September, 1994
</TABLE>
In 1994, the Company is planning capital
expenditures estimated to be $265,000,000. Total
capital expenditures for 1993 were approximately
$254,000,000. In addition to the new store and remodel
program, the Company is initiating or continuing many
capital projects aimed at improving operating
efficiencies, including improvements to its
distribution centers, central bakery, and dairy plant,
continued IS enhancements and the just completed
construction of a new wing to its main office complex.
The new office wing enabled the Company to consolidate
its corporate offices into one facility from the three
locations it previously occupied in the Portland area.
<PAGE>
<PAGE>8
DISTRIBUTION AND PROCESSING
The Company operates a centralized
distribution facility in a complex at Clackamas,
Oregon, near Portland, containing 1,528,000 square feet
and also maintains a distribution facility in Salt Lake
City, Utah, containing 122,000 square feet.
Approximately two-thirds of the merchandise the Company
sells is currently shipped from its Clackamas and Salt
Lake City distribution centers, with approximately one-
third shipped directly by vendors to the Company's
stores.
As a result of its recent investment in IS
systems and distribution facility improvements, the
Company has been able to establish EDI and automated
replenishment programs with many vendors. These "quick
response" capabilities are designed to improve
inventory management and reduce handling of inventory
in the distribution process, which the Company believes
will result in lower markdowns and lower distribution
costs.
The Company believes that its distribution
and related IS systems provide it with several
advantages. First, they permit its stores to maintain
proper inventory levels for more than 190,000 items
supplied through its central distribution centers.
Second, centralized purchasing and distribution reduces
the Company's cost of merchandise and related
transportation costs. Third, because distribution can
be made to stores frequently, the Company is able to
reduce the in-store stockroom space and maximize the
square footage available for retail selling. Fourth,
the Company is able to lower its total level of
inventory investment and related financing costs.
The Company opened a retail service
center in April, 1994 in Chehalis, Washington
containing approximately 310,000 square feet to serve
as the centralized processing facility for certain
apparel and other nonfood items. This facility will
replace approximately 350,000 square feet of outside
store space currently leased from third parties,
including the Salt Lake City facility. It will also
allow the Company to meet its nonfood distribution
center needs past the year 2000. The Company's new
Chehalis facility is designed to minimize the required
handling and processing of goods received from vendors
and distributed to the Company's stores. The Company
believes that this "flow through" system will enable it
to improve inventory management and to further reduce
the distribution costs for the goods shipped through
the Chehalis facility. The Company is also developing
plans for a new 600,000 square-foot centralized food
distribution facility in Puyallup, Washington near
Seattle to serve stores in the Puget Sound Region and
Alaska.
The Company operates a large fleet of trucks
for distribution of goods to its retail stores and
operates a central bakery and dairy.
COMPETITION
The retail merchandising business is highly
competitive and it is projected to become more
competitive in the years to come. Because of the broad
range of merchandise sold by the Company, it competes
with many types of retail companies, including
national, regional, and local supermarkets, discount
stores, drug stores, conventional department stores and
specialty stores. The Company's competitive position
in the retail business varies by type of goods and the
communities in which its stores are located. In the
last few years, many new competitors have entered the
markets in which the Company operates. New competitors
in the past six years include Wal-Mart, Food 4 Less,
Cub Foods, Home Depot, HomeBase, Eagle, Sam's Club and
Incredible Universe. During the same period, the
Company also faced increased competition from existing
major national and regional retailers, including Safeway,
Albertson's, Costco, Lamonts, Mervyn's, PayLess,
Penneys, Carrs, QFC, Kmart, Target, ShopKo and Toys-R-Us.
Notwithstanding the competitive environment and a slowdown
in economic conditions in some of the Company's markets,
the Company has been able to achieve total and comparable
store sales <PAGE>
<PAGE>9
growth averaging 7.8 percent and 3.5 percent,
respectively, over the past five years (based on 52-week
years).
The Company emphasizes customer satisfaction,
large selections of high-quality popular products, and
competitive pricing. In addition, the Company believes
that the convenience, attractiveness and cleanliness of
its stores, together with a sales staff knowledgeable
in specialty areas, enhances its retail sales efforts.
EMPLOYEES
Currently, the Company employs approximately
25,000 full- and part-time employees. Approximately
56 percent of the Company's employees are represented
by 30 different labor unions (or locals). These employees
are covered by 107 different collective bargaining
agreements, none of which covers more than 2,400 employees.
Approximately 35 percent of the agreements will expire
during 1994, including agreements covering employees
in both large metropolitan and smaller nonmetropolitan
areas where the Company operates and at its distribution
facilities in Clackamas, Oregon. The last work stoppage
the Company experienced involved the multiemployer
bargaining unit for food clerks and meatcutters in
Portland, Oregon in 1990. There were no work stoppages
in 1991, 1992 or 1993. The Company believes that it
has good relations with the many unions representing
its employees.
On April 3, 1994 agreements covering
approximately 1,000 employees at the Company's Clackamas
Distribution Center were scheduled to expire. The agreements
have been extended on a day-to-day basis, subject to termination
on seventy-two hour advance written notice. The Company and
the leadership of the unions involved are in negotiation for
a new agreement. No assurance can be given that the parties
will be able to reach new agreements without the occurrence
of a work stoppage.
Item 2. Properties.
- - ------ ----------
As a part of the leveraged buyout transaction
in which the Company was incorporated in 1981, Fred
Meyer Real Estate Properties, Ltd., whose name was
changed in 1991 to Real Estate Properties Limited
Partnership ("Properties"), acquired the real estate
assets of the corporation that was the predecessor to
the Company.
In 1986, the Company amended and restated 76
leases relating to 71 stores, its distribution center,
and four other facilities. The leases provide, among
other things: (1) fixed rent expense in the aggregate
for accounting purposes over the initial term of the
leases at levels below rent expense under the prior
leases for the fiscal year ended January 30, 1988; (2)
initial lease terms generally averaging 20 years; (3)
future rent from certain unrelated subtenants to be
paid to the Company; and (4) seven five-year renewal
options under leases for the 36 leased properties owned
by Metropolitan Life Insurance Company (the
"Institutional Investor") at rents for the first five
option periods below the average rents during the
initial term, and an option for the Company to purchase
any of the leased properties at the end of the initial
term and at the end of each option period. Properties
sold to the Institutional Investor its interest in 36
of the 76 properties which were leased to the Company.
The Institutional Investor is also an investor in
Properties and FMI Associates. At March 1, 1994, FMI
Associates beneficially owned 38.2 percent of the
Company's common stock.
Twenty locations are owned by the Company and
its subsidiaries. The balance of the Company's
locations are leased from the Institutional Investor,
Properties or third parties. All of the Company's
stores and its distribution and processing facilities
are in good condition. Additionally, the Company owns
fifteen parcels of land. Ten are being held for
development of future stores, and three in California
and two in Washington are being held for sale.
<PAGE>
<PAGE>10
The following table as of January 29, 1994,
summarizes the remaining lease years, assuming the
exercise of all options, for store locations and the
Company's distribution facilities, warehouses, and
plants.
<TABLE>
<CAPTION> Distribution Facilities
Store Locations Warehouses & Plants
--------------------------- --------------------------
Remaining Number Square Ft. of % of Total Square Ft. of % of Total
of Lease Years Retail Space Square Ft. Facility Space Square Ft.
- - ---------------- ------------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Less than 5 years 320,405 2.4 265,400 11.1
5 through 15 years 378,871 2.8 0 0.0
16 through 25 years 2,878,206 21.4 122,000 5.1
Over 25 years 7,287,224 54.3 1,527,875 63.8
---------- ----- --------- -----
Total Leased 10,864,706 80.9 1,915,275 80.0
---------- ----- --------- -----
Owned Properties 2,558,435 19.1 479,414 20.0
---------- ----- --------- -----
13,423,141 100.0 2,394,689 100.0
Total ========== ===== ========= =====
Item 3. Legal Proceedings.
- - ------ -----------------
The Company and its subsidiaries are parties
to various legal claims, actions, and complaints which
have arisen in the ordinary course of business.
Although the Company is unable to predict with
certainty whether it will ultimately be successful in
these legal proceedings or, if not, what the impact
might be, management presently believes that
disposition of these matters will not have a material
adverse effect on the Company's consolidated financial
position or consolidated results of operations.
Item 4. Submission of Matters to a
- - ------ Vote of Security Holders.
------------------------
Not applicable.
Item 4(a). Executive Officers of the Registrant.
- - --------- ------------------------------------
As of March 1, 1994, the executive officers
of the Company were as set forth below.
</TABLE>
<TABLE>
<CAPTION>
Original
Date of
Name Age Position Employment
- - ---- --- -------- ----------
<S> <C> <C> <C>
Robert G. Miller 49 Chairman of the Board and 1991
Chief Executive Officer
Cyril K. Green 62 President and Chief Operating Officer 1947
R. Eric Baltzell 53 Senior Vice President, Stores 1962
Roger J. Bladholm 54 Senior Vice President, Distribution 1973
Centers and Transportation
Roger A. Cooke 45 Senior Vice President, General Counsel 1992
and Secretary
Edward A. Dayoob 54 Senior Vice President, Jewelry Group 1973
Curt A. Lerew, III 46 Senior Vice President, Food Group 1991
<PAGE>
<PAGE>11
Keith W. Lovett 50 Senior Vice President, 1992
Human Resources
Ronald J. McEvoy 46 Senior Vice President, 1991
Chief Information Officer
Norman O. Myhr 46 Senior Vice President, 1978
Sales Promotion and Marketing
Cheryl D. Perrin 55 Senior Vice President, Public Affairs 1976
Mary F. Sammons 47 Senior Vice President, General Group 1973
Kenneth Thrasher 44 Senior Vice President - Finance and 1982
Chief Financial Officer
Scott L. Wippel 40 Senior Vice President, 1992
Corporate Facilities
</TABLE>
The executive officers of the Company are
elected annually for one year and hold office until
their successors are elected and qualified. There are
no family relationships among the executive officers of
the Company.
Mr. Miller became Chairman of the Board and
Chief Executive Officer of the Company in August of
1991. Prior to that time he was employed by
Albertson's, where his most recent positions were
Executive Vice President of Retail Operations from 1989
to 1991, and Senior Vice President and Regional Manager
from 1985 to 1989. Mr. Miller has 30 years of
experience in the retail food industry.
Mr. Green became President and Chief
Operating Officer in 1972, and has been with the
Company since 1947. He has held many positions with
the Company prior to his election to President.
Mr. Baltzell served as Vice President, Food
Operations of the Company from 1982 until his election
as Senior Vice President, Store Operations Division in
June 1989.
Mr. Bladholm served as Vice President,
Distribution Centers and Plants from 1984 until his
election as Vice President, Distribution Centers,
Plants, and Transportation in 1990. He was elected
Senior Vice President, Distribution Centers, Plants,
and Transportation on April 14, 1992.
Mr. Cooke became Vice President, General
Counsel and Secretary of the Company in August 1992.
He was elected Senior Vice President in April 1993.
From 1982 to 1992, he was an officer of Pan American
World Airways, Inc., serving as Senior Vice President
and General Counsel from 1990 to 1992. From 1973 to
1980, he was associated with the law firm Simpson
Thacher and Bartlett.
Mr. Dayoob served as Vice President, Jewelry
Division of the Company from 1979 until his election as
Senior Vice President, Photo Electronics and Jewelry
Division in June 1989. This Division was renamed the
Home Electronics and Jewelry Group in 1990. The Home
Electronics Division was merged into the General Group
in 1993.
Mr. Lerew became Senior Vice President, Food
Group in October 1991. Prior to that time he was
employed by Albertson's, where his most recent
positions were Senior Vice President and Regional
Manager in 1991, Senior Vice President of Corporate
Merchandising from 1990 to 1991, and Vice
<PAGE>
<PAGE>12
President, Western Washington Division, from 1987 to
1990. Mr. Lerew has more than 25 years of experience
in the retail food industry.
Mr. Lovett became Senior Vice President,
Human Resources of the Company in February of 1992.
Prior to that time he was employed by Eagle Food
Centers, where he was Senior Vice President of Human
Resources and Vice President of Industrial Relations.
Mr. Lovett has 22 years of experience in labor
negotiations and human resource management.
Mr. McEvoy became Senior Vice President,
Chief Information Officer in charge of the Company's
Information Services in July 1991. For the year prior
to that, he worked for IBM United States as a business
advisor in the retail industry. From 1987 to 1990, he
was Senior Vice President for Management Information
Systems (MIS) for J.B. Ivey. He held the same position
from 1983 to 1987 with John Wanamaker. He also held
various MIS and financial positions with Hecht's from
1969 to 1983. Mr. McEvoy has 23 years of experience in
the retail industry.
Mr. Myhr served as Vice President, Sales
Promotion of the Company from 1982 until his election
as Senior Vice President, Strategic Marketing in June
1989. He now serves as Senior Vice President, Sales
Promotion and Marketing.
Ms. Perrin served as Vice President,
Government Affairs from 1985 until her election as Vice
President, Public Affairs in 1988. She was elected
Senior Vice President, Public Affairs in April 1992.
Ms. Sammons served as Vice President within
the Soft Goods Division of the Company from 1980 until
her election as Senior Vice President, Soft Goods
Division in January 1986. In June 1989, she was
elected Senior Vice President, General Merchandise
Division. This Division was renamed the General Group
in 1990.
Mr. Thrasher served as Vice President,
Corporate Treasurer of the Company from 1982 until his
election as Vice President - Finance, Chief Financial
Officer, and Secretary in June 1987. He was elected
Senior Vice President - Finance effective March 1989.
Mr. Wippel became Vice President, Corporate
Facilities in June 1992. He was elected Senior Vice
President in April 1993. Prior to that, he was
employed by Albertson's, where his most recent
positions were Vice President of Real Estate from 1990
to 1992 and Director of Real Estate from 1988 to 1990.
PART II
Item 5. Market for the Registrant's Common
- - ------ Stock and Related Stockholder Matters.
-------------------------------------
The information required by this item is
included under "Common Stock Information" on page 20 of
the Company's 1993 Annual Report to Shareholders and is
incorporated herein by reference.
Item 6. Selected Financial Data.
- - ------ -----------------------
The information required by this item is
included under "Selected Financial Data" on pages 16
and 17 of the Company's 1993 Annual Report to
Shareholders and is incorporated herein by reference.
<PAGE>
<PAGE>13
Item 7. Management's Discussion and
- - ------ Analysis of Financial Condition
and Results of Operations.
-------------------------
The information required by this item is
included under "Management's Discussion and Analysis"
on pages 18 through 20 of the Company's 1993 Annual
Report to Shareholders and is incorporated herein by
reference.
Item 8. Financial Statements and Supplementary Data.
- - ------ -------------------------------------------
The information required by this item is
incorporated by reference from the Company's 1993
Annual Report to Shareholders as listed in Item 14 of
Part IV of this Report.
Item 9. Changes in and Disagreements with Accountants
- - ------ on Accounting and Financial Disclosure.
--------------------------------------
Not applicable.
PART III
Item 10. Directors and Executive
- - ------- Officers of the Registrant.
--------------------------
Information with respect to directors of the
Company is included under "Election of Directors" in
the Company's Proxy Statement for its 1994 Annual
Meeting of Shareholders and is incorporated herein by
reference. Information with respect to executive
officers of the Company is included under Item 4(a) of
Part I of this Report.
Item 11. Executive Compensation.
- - ------- ----------------------
Information with respect to executive
compensation is included under "Executive Compensation"
in the Company's Proxy Statement for its 1994 Annual
Meeting of Shareholders and is incorporated herein by
reference, except for items appearing under the
subheadings "Compensation Committee Report on Executive
Compensation" and "Comparison of Five Year Cumulative
Total Return" which are not incorporated herein.
Item 12. Security Ownership of Certain
- - ------- Beneficial Owners and Management.
--------------------------------
Information with respect to security
ownership of certain beneficial owners and management
is included under "Voting Securities and Principal
Shareholders" and "Election of Directors" in the
Company's Proxy Statement for its 1994 Annual Meeting
of Shareholders and is incorporated herein by
reference.
Item 13. Certain Relationships and
Related Transactions.
- - ------- --------------------
Information required by this item is included
under "Certain Transactions" in the Company's Proxy
Statement for its 1994 Annual Meeting of Shareholders
and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement
- - ------- Schedules, and Reports on Form 8-K.
----------------------------------
(a)(1) Financial Statements.
The following documents are included in the
Company's 1993 Annual
<PAGE>
<PAGE>14
Report to Shareholders at the pages indicated and are
incorporated herein by reference:
<TABLE>
<CAPTION>
Page in 1993 Annual
Report to Shareholders
----------------------
Fred Meyer, Inc. and Subsidiaries:
<S> <C>
Consolidated Balance Sheets -
January 29, 1994 and January 30, 1993 22-23
Statements of Consolidated Operations -
Years Ended January 29, 1994, January 30, 1993
and February 1, 1992 21
Statements of Consolidated Cash Flows -
Years Ended January 29, 1994, January 30, 1993
and February 1, 1992 24
Statements of Changes in Consolidated
Stockholders' Equity -
Years Ended February 1, 1992,
January 30, 1993 and January 29, 1994 25
Notes to Consolidated Financial Statements 26-31
Independent Auditors' Report 32
</TABLE>
(a)(2) Financial Statement Schedules.
-----------------------------
The following schedules and related
independent auditors' report are filed herewith:
Independent Auditors' Report
Schedule II - Notes Receivable from Related Parties
Schedule V - Property, Plant, and Equipment
Schedule VI - Accumulated Depreciation and
Amortization of Property, Plant,
and Equipment
Schedule X - Supplementary Income Statement
Information
All other schedules are omitted as the
required information is inapplicable or is presented in
the financial statements or related notes thereto.
<TABLE>
<CAPTION>
(a)(3) Exhibits.
--------
<C> <S>
3A Restated Certificate of Incorporation of Fred Meyer, Inc. Incorporated by
reference to Exhibit 3A to the Company's Registration Statement on Form S-1,
Registration No. 33-8574.
3B Amended and Restated Bylaws of Fred Meyer, Inc. Incorporated by reference to
Exhibit 4B to the Company's Registration Statement on Form S-8, Registration
No. 33-49638.
4A Specimen Stock Certificate. Incorporated by reference to Exhibit 4C to the
Company's Registration Statement on Form S-3, Registration No. 33-67670.
4B Credit Agreement dated as of June 15, 1990, as amended June 25, 1990, among Fred
Meyer, Inc., various banks named therein, and Continental Bank, N.A., as Agent
("Credit Agreement"). Incorporated by reference to Exhibit 4 to the Company's
Quarterly Report on Form 10-Q for the quarter ended August 18, 1990 (File
No.0-15023). Second Amendment and Extension of Credit Agreement dated as of June
28, 1991. Incorporated by reference to Exhibit 4 to the Company's Quarterly
Report on Form 10-Q for the quarter ended August 17, 1991 (File No. 0-15023).
Third Amendment to Credit Agreement dated as of January 29, 1992.
<PAGE>
<PAGE>15
Incorporated by reference to Exhibit 4 to the Company's Annual Report on Form 10-K
for the year ended February 1, 1992. Fourth Amendment and Extension to Credit
Agreement dated as of July 31, 1992. Incorporated by reference to Exhibit 4D to
the Company's Registration Statement on Form S-3, Registration
No. 33-67670. Fifth Amendment and Extension to Credit Agreement dated as of July
31, 1993. Incorporated by reference to Exhibit 4D to the Company's Registration
Statement on Form S-3, Registration No. 33-67670.
4C Term Promissory Notes in an original aggregate principal amount of $70,000,000,
including the Intercreditor Agreement dated June 29, 1993 among the Company, and
various banks and financial institutions named therein. Incorporated by reference
to Exhibit 4E to the Company's Registration Statement on Form S-3, Registration
No. 33-67670.
10A-1 Fred Meyer, Inc. 1983 Stock Option Plan, as amended. Incorporated by reference to
Exhibit 10D to the Company's Annual Report on Form 10-K for the year ended January
28, 1989 (File No. 0-15023).
10A-2 Fred Meyer, Inc. 1990 Stock Incentive Plan, as amended. Incorporated by reference
to Exhibit 28 to the Company's Quarterly Report on Form 10-Q for the quarter ended
August 18, 1990 (File No. 0-15023).
10B Fred Meyer, Inc. Bonus Plan Description, as amended.
10C Assumption Agreement and Unconditional Guaranty of Certain Obligations, dated
December 11, 1981, among Fred Meyer, Inc., The Predecessor Company, DTC
Acquisition Corporation, and Real Estate Properties Limited Partnership (formerly
Fred Meyer Real Estate Properties, Ltd.). Incorporated by reference to Exhibit
10FF to the Company's Registration Statement on Form S-1, Registration No. 2-
87139.
10D Fred Meyer, Inc. Management Cash Incentive Program. Incorporated by reference to
Exhibit 10G to the Company's Registration Statement on Form S-1, Registration No.
33-8574.
10E Fred Meyer, Inc. Excess Deferral Plan. Incorporated by reference to Exhibit 10G
to the Company's Annual Report on Form 10-K for the year ended January 30, 1988
(File No. 0-15023). Amendment No. 1 to Fred Meyer, Inc. Excess Deferral Plan.
Incorporated by reference to Exhibit 10G to the Company's Annual Report on Form
10-K for the year ended January 28, 1989 (File No. 0-15023).
10F Non-Employee Directors Stock Compensation Plan, adopted November 17, 1992.
Incorporated by reference to Exhibit 10F to the Company's Annual Report on Form
10-K for the year ended January 30, 1993.
10G Form of contract for Senior Executive Long-Term Disability Program. Incorporated
by reference to Exhibit 10G to the Company's Annual Report on Form 10-K for the
year ended January 30, 1993.
<PAGE>
<PAGE>16
10H Fred Meyer Supplemental Income Plan dated January 1, 1994.
10I Employment Agreement between Fred Meyer, Inc. and Robert G. Miller. Incorporated
by reference to Exhibit 28 to the Company's Current Report on Form 8-K dated March
6, 1992 (File No. 0-15023).
10J Indemnity Agreement. Incorporated by reference to Exhibit 10I to the Company's
Registration Statement on Form S-1, Registration No. 33-8574.
10K Form of Lease Agreement for substantially identical leases covering 36 stores and
other locations leased by Fred Meyer, Inc. (or a wholly owned subsidiary) from
Real Estate Properties Limited Partnership (formerly Fred Meyer Real Estate
Properties, Ltd.) including form of Assignment of Master Lease wherein Fred Meyer
Real Estate Properties, Ltd. (now Real Estate Properties Limited Partnership)
assigned its interest to Metropolitan Life Insurance Company and a First Amendment
to Lease Agreement, dated November 25, 1986, with appendices containing certain
nonstandard provisions of the Lease Agreement and the First Amendment; Collateral
Matters Agreement and Indemnification Agreement, each dated November 25, 1986,
between Fred Meyer, Inc. and Metropolitan Life Insurance Company. Incorporated by
reference to Exhibit 10I to the Company's Annual Report on Form 10-K for the year
ended January 31, 1987 (File No. 0-15023). Memorandum of First Amendment to Lease
Agreement, dated March 6, 1987, between Metropolitan Life Insurance Company
("Metropolitan"), Landlord and Fred Meyer, Inc., Tenant; and Assignment of Master
Lease, dated March 6, 1987, between Real Estate Properties Limited Partnership
(formerly Fred Meyer Real Estate Properties, Ltd.) (Assignor) and Metropolitan
(Assignee) for Nampa, Idaho. Incorporated by reference to Exhibit 10I to the
Company's Annual Report on Form 10-K for the year ended January 30, 1988 (File No.
0-15023).
10L Form of Lease Agreement for substantially identical leases covering 27 stores and
other locations subleased by Fred Meyer, Inc. (or a wholly owned subsidiary) from
Real Estate Properties Limited Partnership (formerly Fred Meyer Real Estate
Properties, Ltd.) with appendices containing certain nonstandard provisions
contained in the Lease Agreement. Incorporated by reference to Exhibit 10J to the
Company's Annual Report on Form 10-K for the year ended January 31, 1987 (File No.
0-15023). Appendices containing certain additional nonstandard provisions.
Incorporated by reference to Exhibit 10J to the Company's Annual Reports on Form
10-K for the years ended January 28, 1989, February 3, 1990, and February 2, 1991
(File No. 0-15023). Certain lease modifications for Burien, Washington facility.
Incorporated by reference to Exhibit 10K to the Company's Annual Report on Form
10-K for the year ended January 30, 1993.
10M Form of Sublease, dated May 1, 1984, Fred Meyer Real Estate Properties, Ltd. (now
Real Estate Properties Limited Partnership), Lessor to Fred Meyer, Inc., Lessee
for the Stadium Parking Lot. Incorporated by reference to Exhibit 10J(6) to the
Company's Registration Statement on Form S-1, Registration No. 33-8574.
<PAGE>
<PAGE>17
10N Form of Sublease, dated May 1, 1984, Fred Meyer Real Estate Properties, Ltd. (now
Real Estate Properties Limited Partnership), Lessor to Roundup Co., Lessee for
Photo Plant Parking Lot. Incorporated by reference to Exhibit 10J(7) to the
Company's Registration Statement on Form S-1, Registration No. 33-8574.
10O Lease Agreement, dated October 22, 1986, including Amendment, dated April 30,
1987, between Fred Meyer Real Estate Properties, Ltd. (now Real Estate Properties
Limited Partnership), and Roundup Co. for Midway store. Incorporated by reference
to Exhibit 10N to the Company's Annual Report on Form 10-K for the year ended
January 31, 1987 (File No. 0-15023).
10P Lease Agreement, dated February 1, 1990, relating to additional property adjacent
to Oak Grove store location between Vanoak Corporation, Lessor, and Fred Meyer,
Inc., Lessee. Incorporated by reference to Exhibit 10P to the Company's Annual
Report on Form 10-K for the year ended February 2, 1991 (File No. 0-15023).
10Q Lease Agreement, dated February 19, 1987, including Addendum, dated September 16,
1987, between Fred Meyer, Inc., as Lessee, and Duane Company, as Lessor, for the
Gateway store. Incorporated by reference to Exhibit 10Q to the Company's Annual
Report on Form 10-K for the year ended January 30, 1988 (File No. 0-15023).
Addendum No. 2 to Lease Agreement. Incorporated by reference to Exhibit 10Q to
the Company's Annual Report on Form 10-K for the year ended February 2, 1991 (File
No. 0-15023).
10R Assignment of Lease, dated August 13, 1987, between Fred Meyer, Inc. and Fred
Meyer Real Estate Properties, Ltd. (now Real Estate Properties Limited
Partnership) for Newport store. Incorporated by reference to Exhibit 10R to the
Company's Annual Report on Form 10-K for the year ended January 30, 1988 (File No.
0-15023).
10S Lease Agreement, dated December 12, 1988, between Fred Meyer, Inc., as Lessee, and
Fifth Avenue Corporation, as Lessor, for the Burlingame store. Incorporated by
reference to Exhibit 10S to the Company's Annual Report on Form 10-K for the year
ended January 28, 1989 (File No. 0-15023).
10T Assignment of Lease and Termination of Subleases, dated as of February 7, 1992
between Fred Meyer, Inc. and Real Estate Properties Limited Partnership (formerly
Fred Meyer Real Estate Properties, Ltd.) for Sixth and Alder location.
Incorporated by reference to Exhibit 10S to the Company's Annual Report on Form
10-K for the year ended January 30, 1993.
10U Purchase and Sale and Lease Termination Agreement, dated May 22, 1992 between Fred
Meyer, Inc. and Real Estate Properties Limited Partnership (formerly Fred Meyer
Real Estate Properties, Ltd.) for the Swan Island Dairy facility. Incorporated by
reference to Exhibit 10T to the Company's Annual Report on Form 10-K for the year
ended January 30, 1993.
10V Purchase and Sale and Lease Termination Agreement, dated October 27, 1992 between
Fred Meyer, Inc. and Union Central Company, controlled by Real Estate Properties
Limited Partnership (formerly Fred Meyer Real Estate <PAGE>
<PAGE>18
Properties, Ltd.) for the Main Office facility. Incorporated by reference to
Exhibit 10U to the Company's Annual Report on Form 10-K for the year ended
January 30, 1993.
10W Assignment of Lease dated April 12, 1993 between Fred Meyer, Inc. and Real Estate
Properties Limited Partnership ("REPL") for Southeast store, including the Lease
Modification Agreement, dated April 12, 1993 between Southeast Company and REPL.
11 Computation of Earnings per Common Share.
13 Portions of the Annual Report to Shareholders of the Company for the year ended
January 29, 1994 are incorporated by reference herein.
21 List of Subsidiaries.
23 Consent of Deloitte & Touche.
24 Powers of Attorney.
(b) Reports on Form 8-K.
-------------------
No reports on Form 8-K were filed by the Company during the last quarter of the year
ended January 29, 1994.
/TABLE
<PAGE>
<PAGE>19
SIGNATURES
----------
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.
FRED MEYER, INC.
Date: April 26, 1994 By KENNETH THRASHER
----------------
Kenneth Thrasher,
Chief Financial Officer,
Senior Vice President-
Finance
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the registrant
and in the capacities indicated on April 26, 1994.
Signature Title
--------- -----
(1) Principal Executive Officer
ROBERT G. MILLER Chairman of the
- - ------------------------------ Board and Chief
Robert G. Miller Executive Officer
(2) Principal Financial Officer
KENNETH THRASHER Chief Financial
- - ------------------------------ Officer, Senior Vice
Kenneth Thrasher President - Finance
(3) Principal Accounting Officer
THOMAS R. HUGHES Vice President
- - ------------------------------ and Controller
Thomas R. Hughes
(4) Directors
* JEROME KOHLBERG, JR. Director
- - ------------------------------
Jerome Kohlberg, Jr.
<PAGE>
<PAGE>20
* PAUL E. RAETHER Director
- - ------------------------------
Paul E. Raether
* SAUL A. FOX Director
- - ------------------------------
Saul A. Fox
* MICHAEL W. MICHELSON Director
- - ------------------------------
Michael W. Michelson
* ROGER S. MEIER Director
- - ------------------------------
Roger S. Meier
* A.M. GLEASON Director
- - ------------------------------
A.M. Gleason
* By KENNETH THRASHER
-------------------------
Kenneth Thrasher
As Attorney in Fact
<PAGE>
<PAGE>21
INDEPENDENT AUDITORS' REPORT
Fred Meyer, Inc.:
We have audited the consolidated financial statements
of Fred Meyer, Inc. and subsidiaries as of January 29,
1994 and January 30, 1993, and for each of the three
fiscal years in the period ended January 29, 1994, and
have issued our report thereon dated March 7, 1994
(which expresses an unqualified opinion and includes an
explanatory paragraph relating to a change in method of
accounting for incomes taxes in the fiscal year ended
January 29, 1994 and other postretirement benefits in
the fiscal year ended January 30, 1993); such financial
statements and report are included in your 1993 Annual
Report to shareholders and are incorporated herein by
reference. Our audits also included the financial
statement schedules of Fred Meyer, Inc., listed in Item
14. These financial statement schedules are the
responsibility of the Company's management. Our
responsibility is to express an opinion based on our
audits. In our opinion, such financial statement
schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly
in all material respects the information set forth
therein.
DELOITTE & TOUCHE
March 7, 1994<PAGE>
<PAGE>22
<TABLE>
<CAPTION>
FRED MEYER, INC. AND SUBSIDIARIES
SCHEDULE II-NOTES RECEIVABLE FROM RELATED PARTIES
(in thousands)
Balance Balance
Beginning End of
of Period Additions Deductions Period
--------- --------- ---------- -------
<S> <C> <C> <C> <C>
YEAR ENDED JANUARY 29, 1994:
R.J. McEvoy . . . . . . . . . . . . . . . . . . . . $ 18 $ 0 $ 18 $ 0
====== ====== ====== ======
YEAR ENDED JANUARY 30, 1993:
R.G. Miller . . . . . . . . . . . . . . . . . . . . $ 975 $ 0 $ 975 $ 0
R.J. McEvoy . . . . . . . . . . . . . . . . . . . . 120 0 102 18
------ ------ ------ ------
TOTAL. . . . . . . . . . . . . . . . . $1,095 $ 0 $1,077 $ 18
====== ====== ====== ======
YEAR ENDED FEBRUARY 1, 1992:
R.G. Miller . . . . . . . . . . . . . . . . . . . . $ 0 $ 975 $ 0 $ 975
R.J. McEvoy . . . . . . . . . . . . . . . . . . . . 0 120 0 120
------ ------ ------ ------
TOTAL. . . . . . . . . . . . . . . . . $ 0 $1,095 $ 0 $1,095
====== ====== ====== ======
/TABLE
<PAGE>
<PAGE>23
<TABLE>
<CAPTION>
FRED MEYER, INC. AND SUBSIDIARIES
SCHEDULE V-PROPERTY, PLANT, AND EQUIPMENT
(in thousands)
Balance Balance
Beginning End of
of Period Additions Retirements Period
--------- --------- ----------- -------
<S> <C> <C> <C> <C>
YEAR ENDED JANUARY 29, 1994:
Buildings, fixtures, and equipment. . . . . . . . . . . $752,336 $214,600 $(10,576) $ 956,360
Property held under capital leases. . . . . . . . . . . 23,855 --- (4,037) 19,818
Land . . . . . . . . . . . . . . . . . . . . . . . 82,840 34,960 (2,295) 115,505
-------- -------- -------- ----------
TOTAL. . . . . . . . . . . . . . . . . . $859,031 $249,560 $(16,908) $1,091,683
======== ======== ======== ==========
YEAR ENDED JANUARY 30, 1993:
Buildings, fixtures, and equipment. . . . . . . . . . . $647,017 $120,559 $(15,240) $752,336
Property held under capital leases. . . . . . . . . . . 24,991 --- (1,136) 23,855
Land . . . . . . . . . . . . . . . . . . . . . . . . 58,771 24,069 --- 82,840
-------- -------- -------- --------
TOTAL. . . . . . . . . . . . . . . . . . $730,779 $144,628 $(16,376) $859,031
======== ======== ======== ========
YEAR ENDED FEBRUARY 1, 1992:
Buildings, fixtures, and equipment. . . . . . . . . . . $563,499 $103,572 $(20,054) $647,017
Property held under capital leases. . . . . . . . . . . 24,991 --- --- 24,991
Land . . . . . . . . . . . . . . . . . . . . . . . . 57,470 2,310 (1,009) 58,771
-------- -------- -------- --------
TOTAL. . . . . . . . . . . . . . . . . . $645,960 $105,882 $(21,063) $730,779
======== ======== ======== ========
/TABLE
<PAGE>
<PAGE>24
<TABLE>
<CAPTION>
FRED MEYER, INC. AND SUBSIDIARIES
SCHEDULE VI-ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY, PLANT, AND EQUIPMENT
(in thousands)
Balance Balance
Beginning End of
of Period Additions Retirements Period
--------- --------- ----------- -------
<S> <C> <C> <C> <C>
YEAR ENDED JANUARY 29, 1994:
Buildings, fixtures, and equipment. . . . . . . . . . . . $309,113 $69,600 $(12,440) $366,273
Property held under capital leases. . . . . . . . . . . . 7,708 761 (2,397) 6,072
-------- ------- -------- --------
TOTAL. . . . . . . . . . . . . . . . . . . $316,821 $70,361 $(14,837) $372,345
======== ======= ======== ========
YEAR ENDED JANUARY 30, 1993:
Buildings, fixtures, and equipment. . . . . . . . . . . . $244,598 $66,102 $ (1,587) $309,113
Property held under capital leases. . . . . . . . . . . . 7,156 856 (304) 7,708
-------- ------- -------- --------
TOTAL. . . . . . . . . . . . . . . . . . . $251,754 $66,958 $ (1,891) $316,821
======== ======= ======== ========
YEAR ENDED FEBRUARY 1, 1992:
Buildings, fixtures, and equipment. . . . . . . . . . . . $206,294 $56,388 $(18,084) $244,598
Property held under capital leases. . . . . . . . . . . . 6,668 488 --- 7,156
-------- ------- -------- --------
TOTAL. . . . . . . . . . . . . . . . . . . $212,962 $56,876 $(18,084) $251,754
======== ======= ======== ========
</TABLE>
<PAGE>
<PAGE>25
<TABLE>
<CAPTION>
FRED MEYER, INC. AND SUBSIDIARIES
SCHEDULE X-SUPPLEMENTARY INCOME STATEMENT INFORMATION
(in thousands)
Fiscal Year Ended
-------------------------------------------------------
January 29, January 30, February 1,
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Advertising Costs . . . . . . . . . . . . . . . . . . . . . . . $33,602 $34,299 $39,763
======= ======= =======
/TABLE
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Sequential
Exhibit Page
Number Number
- - ------- ----------
<C> <S> <C>
3A Restated Certificate of Incorporation of Fred Meyer, Inc.
Incorporated by reference to Exhibit 3A to the Company's
Registration Statement on Form S-1, Registration No. 33-8574.
3B Amended and Restated Bylaws of Fred Meyer, Inc. Incorporated by
reference to Exhibit 4B to the Company's Registration Statement on
Form S-8, Registration No. 33-49638.
4A Specimen Stock Certificate. Incorporated by reference to Exhibit
4C to the Company's Registration Statement on Form S-3,
Registration No. 33-67670.
4B Credit Agreement dated as of June 15, 1990, as amended June 25,
1990, among Fred Meyer, Inc., various banks named therein, and
Continental Bank, N.A., as Agent ("Credit Agreement").
Incorporated by reference to Exhibit 4 to the Company's Quarterly
Report on Form 10-Q for the quarter ended August 18, 1990 (File
No.0-15023). Second Amendment and Extension of Credit Agreement
dated as of June 28, 1991. Incorporated by reference to Exhibit 4
to the Company's Quarterly Report on Form 10-Q for the quarter
ended August 17, 1991 (File No. 0-15023). Third Amendment to
Credit Agreement dated as of January 29, 1992. Incorporated by
reference to Exhibit 4 to the Company's Annual Report on Form 10-K
for the year ended February 1, 1992. Fourth Amendment and
Extension to Credit Agreement dated as of July 31, 1992.
Incorporated by reference to Exhibit 4D to the Company's
Registration Statement on Form S-3, Registration No. 33-67670.
Fifth Amendment and Extension to Credit Agreement dated as of July
31, 1993. Incorporated by reference to Exhibit 4D to the Company's
Registration Statement on Form S-3, Registration No. 33-67670.
4C Term Promissory Notes in an original aggregate principal amount of
$70,000,000, including the Intercreditor Agreement dated June 29,
1993 among the Company, and various banks and financial
institutions named therein. Incorporated by reference to Exhibit
4E to the Company's Registration Statement on Form S-3,
Registration No. 33-67670.
10A-1 Fred Meyer, Inc. 1983 Stock Option Plan, as amended. Incorporated
by reference to Exhibit 10D to the Company's Annual Report on Form
10-K for the year ended January 28, 1989 (File No. 0-15023).
10A-2 Fred Meyer, Inc. 1990 Stock Incentive Plan, as amended.
Incorporated by reference to Exhibit 28 to the Company's Quarterly
Report on Form 10-Q for the quarter ended August 18, 1990 (File No.
0-15023).
10B Fred Meyer, Inc. Bonus Plan Description, as amended.
<PAGE>
<PAGE>
10C Assumption Agreement and Unconditional Guaranty of Certain
Obligations, dated December 11, 1981, among Fred Meyer, Inc., The
Predecessor Company, DTC Acquisition Corporation, and Real Estate
Properties Limited Partnership (formerly Fred Meyer Real Estate
Properties, Ltd.). Incorporated by reference to Exhibit 10FF to
the Company's Registration Statement on Form S-1, Registration No.
2-87139.
10D Fred Meyer, Inc. Management Cash Incentive Program. Incorporated
by reference to Exhibit 10G to the Company's Registration Statement
on Form S-1, Registration No. 33-8574.
10E Fred Meyer, Inc. Excess Deferral Plan. Incorporated by reference
to Exhibit 10G to the Company's Annual Report on Form 10-K for the
year ended January 30, 1988 (File No. 0-15023). Amendment No. 1 to
Fred Meyer, Inc. Excess Deferral Plan. Incorporated by reference
to Exhibit 10G to the Company's Annual Report on Form 10-K for the
year ended January 28, 1989 (File No. 0-15023).
10F Non-Employee Directors Stock Compensation Plan, adopted November
17, 1992. Incorporated by reference to Exhibit 10F to the
Company's Annual Report on Form 10-K for the year ended January 30,
1993.
10G Form of contract for Senior Executive Long-Term Disability Program.
Incorporated by reference to Exhibit 10G to the Company's Annual
Report on Form 10-K for the year ended January 30, 1993.
10H Fred Meyer Supplemental Income Plan dated January 1, 1994.
10I Employment Agreement between Fred Meyer, Inc. and Robert G. Miller.
Incorporated by reference to Exhibit 28 to the Company's Current
Report on Form 8-K dated March 6, 1992 (File No. 0-15023).
10J Indemnity Agreement. Incorporated by reference to Exhibit 10I to
the Company's Registration Statement on Form S-1, Registration No.
33-8574.
10K Form of Lease Agreement for substantially identical leases covering
36 stores and other locations leased by Fred Meyer, Inc. (or a
wholly owned subsidiary) from Real Estate Properties Limited
Partnership (formerly Fred Meyer Real Estate Properties, Ltd.)
including form of Assignment of Master Lease wherein Fred Meyer
Real Estate Properties, Ltd. (now Real Estate Properties Limited
Partnership) assigned its interest to Metropolitan Life Insurance
Company and a First Amendment to Lease Agreement, dated November
25, 1986, with appendices containing certain nonstandard provisions
of the Lease Agreement and the First Amendment; Collateral Matters
Agreement and Indemnification Agreement, each dated November 25,
1986, between Fred Meyer, Inc. and Metropolitan Life Insurance
Company. Incorporated by reference to Exhibit 10I to the Company's
Annual Report on Form 10-K for the year ended January 31, 1987
(File No. 0-15023). Memorandum of First Amendment to Lease
Agreement, dated March 6, 1987, between Metropolitan Life Insurance<PAGE>
<PAGE>
Company ("Metropolitan"), Landlord and Fred Meyer, Inc., Tenant;
and Assignment of Master Lease, dated March 6, 1987, between Real
Estate Properties Limited Partnership (formerly Fred Meyer Real
Estate Properties, Ltd.) (Assignor) and Metropolitan (Assignee) for
Nampa, Idaho. Incorporated by reference to Exhibit 10I to the
Company's Annual Report on Form 10-K for the year ended January 30,
1988 (File No. 0-15023).
10L Form of Lease Agreement for substantially identical leases covering
27 stores and other locations subleased by Fred Meyer, Inc. (or a
wholly owned subsidiary) from Real Estate Properties Limited
Partnership (formerly Fred Meyer Real Estate Properties, Ltd.) with
appendices containing certain nonstandard provisions contained in
the Lease Agreement. Incorporated by reference to Exhibit 10J to
the Company's Annual Report on Form 10-K for the year ended January
31, 1987 (File No. 0-15023). Appendices containing certain
additional nonstandard provisions. Incorporated by reference to
Exhibit 10J to the Company's Annual Reports on Form 10-K for the
years ended January 28, 1989, February 3, 1990, and February 2,
1991 (File No. 0-15023). Certain lease modifications for Burien,
Washington facility. Incorporated by reference to Exhibit 10K to
the Company's Annual Report on Form 10-K for the year ended January
30, 1993.
10M Form of Sublease, dated May 1, 1984, Fred Meyer Real Estate
Properties, Ltd. (now Real Estate Properties Limited Partnership),
Lessor to Fred Meyer, Inc., Lessee for the Stadium Parking Lot.
Incorporated by reference to Exhibit 10J(6) to the Company's
Registration Statement on Form S-1, Registration No. 33-8574.
10N Form of Sublease, dated May 1, 1984, Fred Meyer Real Estate
Properties, Ltd. (now Real Estate Properties Limited Partnership),
Lessor to Roundup Co., Lessee for Photo Plant Parking Lot.
Incorporated by reference to Exhibit 10J(7) to the Company's
Registration Statement on Form S-1, Registration No. 33-8574.
10O Lease Agreement, dated October 22, 1986, including Amendment, dated
April 30, 1987, between Fred Meyer Real Estate Properties, Ltd.
(now Real Estate Properties Limited Partnership), and Roundup Co.
for Midway store. Incorporated by reference to Exhibit 10N to the
Company's Annual Report on Form 10-K for the year ended January 31,
1987 (File No. 0-15023).
10P Lease Agreement, dated February 1, 1990, relating to additional
property adjacent to Oak Grove store location between Vanoak
Corporation, Lessor, and Fred Meyer, Inc., Lessee. Incorporated by
reference to Exhibit 10P to the Company's Annual Report on Form 10-
K for the year ended February 2, 1991 (File No. 0-15023).
10Q Lease Agreement, dated February 19, 1987, including Addendum, dated
September 16, 1987, between Fred Meyer, Inc., as Lessee, and Duane
Company, as Lessor, for the Gateway store. Incorporated by
reference to Exhibit 10Q to the Company's Annual Report on
Form 10-K for the <PAGE>
<PAGE>
year ended January 30, 1988 (File No. 0-15023). Addendum
No. 2 to Lease Agreement. Incorporated by reference to Exhibit 10Q
to the Company's Annual Report on Form 10-K for the year ended
February 2, 1991 (File No. 0-15023).
10R Assignment of Lease, dated August 13, 1987, between Fred Meyer,
Inc. and Fred Meyer Real Estate Properties, Ltd. (now Real Estate
Properties Limited Partnership) for Newport store. Incorporated by
reference to Exhibit 10R to the Company's Annual Report on
Form 10-K for the year ended January 30, 1988 (File No. 0-15023).
10S Lease Agreement, dated December 12, 1988, between Fred Meyer, Inc.,
as Lessee, and Fifth Avenue Corporation, as Lessor, for the
Burlingame store. Incorporated by reference to Exhibit 10S to the
Company's Annual Report on Form 10-K for the year ended January 28,
1989 (File No. 0-15023).
10T Assignment of Lease and Termination of Subleases, dated as of
February 7, 1992 between Fred Meyer, Inc. and Real Estate
Properties Limited Partnership (formerly Fred Meyer Real Estate
Properties, Ltd.) for Sixth and Alder location. Incorporated by
reference to Exhibit 10S to the Company's Annual Report on
Form 10-K for the year ended January 30, 1993.
10U Purchase and Sale and Lease Termination Agreement, dated May 22,
1992 between Fred Meyer, Inc. and Real Estate Properties Limited
Partnership (formerly Fred Meyer Real Estate Properties, Ltd.) for
the Swan Island Dairy facility. Incorporated by reference to
Exhibit 10T to the Company's Annual Report on Form 10-K for the
year ended January 30, 1993.
10V Purchase and Sale and Lease Termination Agreement, dated October
27, 1992 between Fred Meyer, Inc. and Union Central Company,
controlled by Real Estate Properties Limited Partnership (formerly
Fred Meyer Real Estate Properties, Ltd.) for the Main Office
facility. Incorporated by reference to Exhibit 10U to the
Company's Annual Report on Form 10-K for the year ended January 30,
1993.
10W Assignment of Lease dated April 12, 1993 between Fred Meyer, Inc.
and Real Estate Properties Limited Partnership ("REPL") for
Southeast store, including the Lease Modification Agreement, dated
April 12, 1993 between Southeast Company and REPL.
11 Computation of Earnings per Common Share.
13 Portions of the Annual Report to Shareholders of the Company for
the year ended January 29, 1994 are incorporated by reference
herein.
21 List of Subsidiaries.
23 Consent of Deloitte & Touche.
24 Powers of Attorney.
</TABLE>
<PAGE>
EXHIBIT 10B
FRED MEYER, INC. BONUS PLAN DESCRIPTION
AS AMENDED TO JANUARY 29, 1994
INTRODUCTION:
The Fred Meyer, Inc. Bonus Plan compensates selected employees
based on goals and objectives determined periodically by the Company.
Under the Bonus Plan, bonuses are allocated based on programs prescribed
for each of two categories of participants: (1) Regional and Store
bonusable participants, and (2) all other bonusable participants.
REGIONAL AND STORE BONUSABLE PARTICIPANTS PROGRAM:
Awards for regional and store bonusable participants are based
upon predetermined and preapproved objectives for store operational
income and corporate pretax income. Each quarter and year the
Company sets objectives for sales and operational income based upon
the Company's projections, each region/store manager's projections,
and historical results. These objectives are reviewed and approved
by the Company's Compensation Committee. The actual bonus awarded
each quarter and for the year is based on a predefined percentage
of the participant's regular salary for the year, as adjusted for
actual versus budgeted results. Budgeted results give rise to a
target bonus, while greater than budgeted results give rise to a
larger bonus (up to 237.5 percent of target bonus), and lower than
budgeted results will result in a smaller bonus (as low as 0 percent
of target bonus). A portion of each participant's bonus is generally
calculated on how well the participant's area of responsibility
does, and a portion is based on how well the Company does. The
Company portion is capped at 200 percent, and the store/region
portion is capped at 250 percent.
ALL OTHER BONUSABLE PARTICIPANTS PROGRAM:
The program applicable to all other management/supervisory
and other bonusable participants not included in the regional
and store program is based on the following formula: The bonus
paid is based on the Company's <PAGE>
<PAGE>
objectives for sales, pretax income, and various departmental
budgets as prepared by the department's management, and
approved by the Compensation Committee. The bonus amount paid
is determined as a percentage of each participant's salary
(target bonus), adjusted upward or downward based on performance.
Participants can achieve a maximum of 200 percent of their target
bonus for exceeding their performance goals or a minimum of
0 percent of target bonus for lower than expected results.
A portion of a participant's bonus is generally based on
his/her department's results, with the balance based on the
Company's pretax income results. Both the department and
Company portion is capped at 200 percent. Twenty percent
of the target bonus of the Chairman, the President and all
Senior Vice Presidents is deferred into the Company's Capital
Bonus Plan. The Capital Bonus Plan measures the return on
assets invested in new stores and major remodels to determine
the actual payment of the deferred portion of the participant's
bonus. Payments are made after the second and third full years'
results under that plan.
YEAR-END REVIEW AND PAYMENT:
Bonuses are generally paid in April following the year in which
performance goals are measured. The Compensation Committee approves
the final amount of total bonuses to be paid and the amount paid to
executive officers prior to such payment.
EXHIBIT 10(H)
CONFORMED COPY
FRED MEYER
SUPPLEMENTAL INCOME PLAN
January 1, 1994
Fred Meyer, Inc.
a Delaware corporation
PO Box 42121
Portland, Oregon 97202 Company
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
Index of Terms iii
1. Administration 1
1.1 Compensation Committee 1
1.2 Administrator 1
2. Application to the Company and Affiliates 1
2.1 Adoption 1
2.2 Definition of Affiliate 2
2.3 Loss of Affiliate Status 2
2.4 Merger or Consolidation of Affiliate 2
2.5 Transfers of Employment 2
2.6 Benefit Obligation of Company 2
3. Eligibility and Participation 2
3.1 Eligibility 2
3.2 Continuation of participation 2
4. Retirement Benefits 3
4.1 Entitlement 3
4.2 Amount of Retirement Benefit 3
4.3 Time of Payment 3
5. Severance Benefits 3
5.1 Entitlement 3
5.2 Amount of Severance Benefit 4
5.3 Time of Payment 4
5.4 Definition of Cause 4
6. Death Benefit 5
6.1 Death during Employment 5
6.2 Death After Termination 5
6.3 Death Beneficiary 5
6.4 Suicide 6
<PAGE>
<PAGE>
7. Company Investments; Calculation of Benefits 6
7.1 Company Investments 6
7.2 Calculation of Benefits 6
7.3 Present Value; Adjustment 8
7.4 Absence of Funding 8
8. Amendment and Termination 8
8.1 Amendment 8
8.2 Termination 8
8.3 Termination Benefit 9
9. Claims Procedure 9
9.1 Claim or Request 9
9.2 Denial 10
9.3 Response Time 10
9.4 Request for Review 10
9.5 Decision on Review 10
10. Participation Statement 10
10.1 Requirement 10
10.2 Contents of Statement 11
11. General Provisions 11
11.1 Succession 11
11.2 Not Contract of Employment 11
11.3 Applicable Law 11
11.4 Notices 11
11.5 Attorney Fees 12
11.6 Indemnity 12
11.7 Facility of Payment 12
11.8 Entire Arrangement 12
12. Effective Date 13
<PAGE>
<PAGE>
INDEX OF TERMS
Term Section Page
Adjusted Present Value 7.3(d) 8
Administrator 1.2 1
Affiliate 2.2 2
Beneficiary 6.3 5
Cause 5.4 4
Committee 1.1 1
Company Heading 1
Death Benefit 6 5
Early Payment Reduction 5.2(b) 4
Effective Date 12 13
Eligible Employees 3.1 2
Employer 2.2 2
Normal Retirement Age 4.1 3
Normal Retirement Benefit 4.3 3
Normal Retirement Date 4.3 3
Notice 11.4 11
Participants 3.1 2
Participation Statement 7.2 6
Percent Value 7.3 8
Preretirement Death Benefit 6 5
Present Value 7.3 8
Retirement Benefit Preamble 1
Severance Benefit Preamble 1
Termination Benefit 11.4 11
Termination Date 11.3 11
<PAGE>
<PAGE>
FRED MEYER
SUPPLEMENTAL INCOME PLAN
January 1, 1994
Fred Meyer, Inc.
a Delaware corporation
PO Box 42121
Portland, Oregon 97202 Company
The Company wishes to supplement benefits otherwise
provided for key executives by providing certain retirement and
death benefits.
This Plan is intended to be and shall be administered and
maintained as an unfunded plan primarily for the purpose
of providing deferred compensation for a select group of manage-
ment or highly compensated employees within the meaning of sections
201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income
Security Act of 1974, as amended.
1. Administration
1.1 Compensation Committee
This Plan shall be administered by a Compensation
Committee appointed by the Board of Directors of the Company (the
Committee). The Committee shall interpret and administer the Plan
and for that purpose may make, amend or revoke rules and
regulations at any time. The Committee shall also make
determinations about benefits. Any decision of the Committee
within its authority shall be final and binding on all parties.
1.2 Administrator
Day-to-day functions of the Committee shall be carried
out by or at the direction of the Senior Vice President for Human
Resources (the Administrator).
2. Application to the Company and Affiliates
2.1 Adoption
The Company has adopted this Plan and any affiliate
approved by the Company may adopt this Plan with respect to its
employees by a statement in writing that is signed by the affiliate
and the Company.
<PAGE>
<PAGE>
2.2 Definition of Affiliate
"Affiliate" means a corporation, person or other entity
that is a member, with the Company, of a controlled group of
corporations or a group of trades or businesses under common
control under sections 414(b) or (c) of the Internal Revenue Code.
"Employer" means the Company, any adopting affiliate and any
nonadopting affiliate treated as an Employer under 2.5.
2.3 Loss of Affiliate Status
If an Employer ceases to be an affiliate of the
Company, the Plan shall be terminated as to the participants
employed by that Employer and 8.2 shall apply.
2.4 Merger or consolidation of Affiliate
If an Employer merges, consolidates, or otherwise
reorganizes or if its business or assets are acquired by another
entity and it remains an affiliate of the Company, this Plan shall
continue with respect to those eligible individuals who continue
as employees of the successor company. The transition of Employers
shall not be considered a termination of employment for purposes
of this Plan.
2.5 Transfers of Employment
Transfer of employment between affiliates shall not
cause a termination of participation in this Plan. A transferee
affiliate that has not adopted this Plan shall be treated as an
Employer with respect to that participant.
2.6 Benefit Obligation of Company
Benefits payable under this Plan shall be an obligation
of the Company, which may charge the cost back to the Employer of
the participant.
3. Eligibility and Participation
3.1 Eligibility
Any key executive of Employer who holds the position of
Senior Vice President or higher (or its functional equivalent)
shall be eligible to participate in this Plan. The Committee shall
select the participants from those eligible employees recommended
by the Company's Chief Executive Officer.
3.2 Continuation of participation
Subject to 8.2, participation shall continue until
death, retirement or other termination of employment.
<PAGE>
<PAGE>
4. Retirement Benefits
4.1 Entitlement
A participant who terminates employment after Normal
Retirement Age of 62 shall be retired and shall be entitled to a
Retirement Benefit.
4.2 Amount of Retirement Benefit
A participant's Normal Retirement Benefit shall be as
follows:
(a) The amount shall be that specified in the
Participation Statement under 10 below, subject to
calculation and adjustment under 7.2 below.
(b) The amount in (a) shall be paid in equal
monthly installments for 15 years, subject to (c),
below.
(c) The Company may elect at any time to convert
the unpaid balance to an adjusted present value
under 7.3(d) and pay it as a lump sum.
4.3 Time of Payment
(a) Normal Retirement Benefits shall start as of
the first day of the month after Normal Retirement
(Normal Retirement Date) and continue until fully
paid.
(b) Any payment not made when due shall bear
interest at the rate of 12 percent per annum,
compounded each January 1, until fully paid.
5. Severance Benefits
5.1 Entitlement
A participant shall be entitled to a Severance Benefit
on termination of employment other than by death, Normal Retirement
under 4.1, or termination by the Company for cause under 5.4.
<PAGE>
<PAGE>
5.2 Amount of Severance Benefit
A participant's Severance Benefit on termination of
employment under 5.1 shall be as follows:
(a) To the extent the benefit is covered by
insurance owned by Employer under 7.1(a), the
severance amount shall be determined based on the
Employer contributions and policy experience to the
date of termination of employment. No further
contributions shall be made after that date.
(b) If (a) does not apply, the Normal Retirement
Benefit under 4.2(a) shall be reduced by
multiplying by the number of whole months of
participation and dividing by the number of whole
months between the participant's first date of
participation in the plan and the end of the last
month before participant's Normal Retirement Age.
(c) The amount determined under (a) or (b) shall
be paid in the manner provided under 4.2(b) and (c)
for a Normal Retirement Benefit.
5.3 Time of Payment
Severance Benefits shall be paid or commence as of the
participant's Normal Retirement Date and continue until fully paid.
5.4 Definition of Cause
"Termination for Cause," which results in loss of all
benefits under this Agreement, means termination after commission
by the participant of one or more of following acts that the
Committee reasonably determines have resulted or will result in
demonstrable adverse consequences to the Company:
(a) Fraud, embezzlement or theft against the
Company, an affiliate, or a supplier or customer of
the Company or an affiliate.
(b) A crime involving moral turpitude for which
the participant is convicted.
<PAGE>
<PAGE>
6. Death Benefit
6.1 Death during Employment
Subject to 6.4, a Preretirement Death Benefit shall be
paid as follows to the beneficiary under 6.3 if a participant dies
while employed by an Employer:
(a) The amount shall be that specified in the
Participation Statement as the Preretirement Death
Benefit, subject to calculation and adjustment
under 7.2, below.
(b) The amount under (a) shall be paid as
provided under 4.2(b) and (c) for a Normal
Retirement Benefit unless the recipient is an
estate. Payment to an estate shall be by a lump
sum present value in all cases.
(c) Payment shall be made or started as of the
first day of the third month after the month of
death.
6.2 Death After Termination
Subject to 6.4, a benefit shall be paid as follows to
the beneficiary under 6.3 if a participant dies after termination
of employment before full Retirement or Severance Benefits have
been paid:
(a) The amount shall be the Normal Retirement
Benefit or Severance Benefit that the participant
was receiving or was entitled to receive.
(b) The amount in (a) shall be paid for the
balance of the 15 year term under 4.2(b) unless
converted to a lump sum present value under 4.2(c).
Payment to an estate shall be by a lump sum present
value in all cases.
(c) Payments shall start or continue in
accordance with 4.3 or 5.3.
6.3 Death Beneficiary
(a) A participant's death beneficiary shall be
determined in the following order of priority:
(1) The surviving beneficiaries
designated by the participant in writing to
the Committee.
<PAGE>
<PAGE>
(2) The participant's surviving spouse.
(3) The participant's estate.
(b) If a beneficiary under (a) becomes eligible
for a benefit and dies before receiving the entire
benefit, the balance shall be paid by a lump sum
present value to the beneficiary's estate.
(c) If a beneficiary under (a) disclaims a
benefit, the benefit shall be paid as though the
beneficiary had predeceased the participant.
(d) A participant may designate partial or
alternate beneficiaries or change designated
beneficiaries at any time. A single, final
determination of the beneficiary or beneficiaries
entitled to benefits shall be made as of the date
of death by the Administrator.
6.4 Suicide
If death is by suicide during the first 12 months of
participation, no death benefit shall be paid.
7. Company Investments; Calculation of Benefits
7.1 Company Investments
(a) The Company has invested in certain
corporate-owned life insurance covering
participants and may continue to do so. The
Company may wholly or partly discontinue acquiring,
holding, or contributing to such insurance at any
time and may or may not substitute any other
investments.
(b) Any investment under (a) shall be owned
exclusively by the Company who shall have absolute
discretion over its use, retention or disposition.
The Company shall have no obligation to maintain
any investment or identify any assets as related to
the obligations under this Plan.
7.2 Calculation of Benefits
(a) The Benefits shown in the initial
Participation Statements dated January 1, 1994 are
based on the insurance described in 7.1(a). The
stated Benefit on Normal Retirement or
Preretirement<PAGE>
<PAGE>
Death are estimates of the amounts that would be
funded by the policies based on the following assumptions:
(1) Employer contributes to the
policies in accordance with a predetermined
schedule except as otherwise provided in
this Plan.
(2) Benefits are funded by the policy
values remaining after recovery of all
Employer contributions.
(b) The actual Benefit for a participant or
beneficiary shall be an amount more or less than
the estimated amount described in (a) based on
actual experience under the policies. The actual
benefit shall not be less than 60 percent of the
estimated amount in (a), subject to adjustments
under 5.2(a) or (b) and the rights of the Committee
under 8 below.
(c) If the Company exercises its option not to
continue to invest in insurance to cover the
benefit for a participant, the amount of Benefit
shall be converted to a fixed sum using the
procedure in (b). Policy value shall be
extrapolated to normal retirement date based on the
assumptions in (a)(1) and (2) and on policy
experience to the date policy contributions are
discontinued. The resulting amount shall be
inserted in the Participation Statement and (a) and
(b) shall no longer apply.
(d) If the Company does not initially invest in
insurance to cover a participant's benefit, the
benefit amounts stated in the Participation
Statement shall be commitments, and (a) and (b)
above shall not apply.
(e) If a participant retires after age 62, the
amount of Normal Retirement Benefit shall be
increased for each month up to the date of
retirement as follows:
(1) If the benefit is covered by
insurance and the amount is determined
under (b) above, Employer shall continue
scheduled contributions until age 65 and
the increase shall be based on the increase
in value of the insurance policies.
(2) If (1) does not apply, the benefit
shall be increased by 5/9 of one percent
per month.
<PAGE>
<PAGE>
7.3 Present Value; Adjustment
(a) If a Benefit is determined under 7.2(b), the
present value shall be based on the accumulated
experience under the insurance.
(b) If a benefit is determined under 7.2(c) or
(d) the present value shall be determined under the
laws and regulations then in effect for determining
the present value of an annuity benefit under a tax
qualified pension plan.
(c) A benefit shall not be treated as determined
under 7.2(b) if the benefit was not covered by an
insurance investment for at least 90 percent of the
period during which the employee was a participant.
(d) "Adjusted present value" means the amount
under (a) or (b) plus a tax adjustment as follows:
(1) Subject to (2) below, the
adjustment shall compensate, after tax, for
the tax increase, if any, because of
bunching income in one year. The
adjustment shall be determined by the
Administrator, whose decision shall be
final.
(2) The adjustment shall be zero if the
recipient is an estate or a tax exempt
entity.
7.4 Absence of Funding
This Plan and any benefits payable under it shall be
unfunded and shall be payable only from the general assets of the
Company. Participants and beneficiaries shall have no interest in
any assets of the Company and shall have no rights greater than the
rights of any unsecured general creditor of the Company.
8. Amendment and Termination
8.1 Amendment
The Committee may amend this Plan at any time so long
as existing participant's rights that would be preserved under 8.2
on termination are not reduced.
8.2 Termination
The Committee may terminate this Plan or terminate the
participation of one or more participants at any time as follows:
<PAGE>
<PAGE>
(a) Unless (b) applies, the termination date
shall not be effective earlier than the first day
of the third calendar year after the calendar year
in which notice is given to the affected
participants.
(b) For a participant who ceases to hold a
position of Senior Vice President or above (or its
functional equivalent) or whose responsibilities
are significantly diminished, the termination date
shall be the later of the date of demotion or the
first January 1 after notice is given to the
participant.
(c) After the effective date of the termination
no further benefits shall accrue for the affected
participants, who shall be entitled only to
termination benefits under 8.3.
8.3 Termination Benefit
(a) A participant's termination benefit shall
equal the participant's Severance Benefit
calculated under 5.2(a) or (b) as though the
participant had terminated employment as of the
Plan termination date. The resulting amount shall
be the participant's Normal Retirement Benefit for
all purposes under this Plan.
(b) The participant's termination benefit shall
be paid as follows:
(1) The benefit shall be paid at the
time provided in 4.3 or 5.3.
(2) The benefit shall be paid under the
terms of this Plan in effect at the
termination date.
(3) A preretirement death benefit shall
be paid if death is after the termination
date and 6 above would apply.
9. Claims Procedure
9.1 Claim or Request
Any person claiming a payment or requesting
information, an interpretation or a ruling under this Plan shall
present the request in writing to the Administrator, who shall
respond in writing as soon as practicable.
<PAGE>
<PAGE>
9.2 Denial
If the claim or request is denied, the written notice
of denial shall state the following:
(a) The reasons for denial, with specific
reference to the Plan provisions on which the
denial is based.
(b) A description of any additional material or
information required and an explanation of why it
is necessary.
(c) An explanation of the Plan's claim review
procedure.
9.3 Response Time
The initial notice of denial shall normally be given
within 90 days after receipt of the claim. If special
circumstances require an extension of time, the claimant shall be
so notified and the time limit shall be 180 days.
9.4 Request for Review
Any person whose claim or request is denied or who has
not received a response within 30 days may request review by notice
in writing to the Administrator. The initial claim decision shall
be reviewed by the Committee who may, but shall not be required to,
grant the claimant a hearing. On review, whether or not there is
a hearing, the claimant may have representation, examine pertinent
documents and submit issues and comments in writing.
9.5 Decision on Review
The decision on review shall normally be made within 60
days. If an extension is required for a hearing or other special
circumstances, the claimant shall be so notified and the time limit
shall be 120 days. The decision shall be in writing and shall
state the reasons and relevant Plan provisions. All decisions on
review shall be final and bind all parties concerned.
10. Participation Statement
10.1 Requirement
The Administrator shall give each participant a
Participation Statement signed by the Company as soon as
practicable after selection of the participant under 3.1 above.
<PAGE>
<PAGE>
10.2 Contents of Statement
The Participation Statement shall include without
limitation the following data, which shall be conclusive:
(a) The participant's name, address, social
security number and date of birth.
(b) The projected Retirement Benefit and
Preretirement Death Benefit for the participant.
(c) A statement of whether or not the projected
benefit is a firm figure or an estimate based on
related corporate-owned life insurance.
(d) The effective date of participation.
11. General Provisions
11.1 Succession
Except as provided in 6 above, no interest of any
participant or beneficiary under this Plan may be directly or
indirectly assigned, transferred, seized by legal process or
subjected to the claims of creditors in any way. Subject to this
limitation, this plan shall be binding on and enure to the benefit
of the parties, their successors and assigns.
11.2 Not Contract of Employment
Nothing in this Plan shall give any employee the right
to continue employment. This Plan shall not prevent discharge of
any employee at any time for any reason.
11.3 Applicable Law
This Plan shall be construed according to the laws of
Oregon.
11.4 Notices
Notice under this Plan shall be in writing or by
electronic means, and shall be effective when actually delivered
or, if mailed, when deposited postpaid as first-class mail. Mail
shall be directed to the address shown in this Plan, a
Participation Statement, or the Company records, or to such other
address as a party may specify by notice in writing to the other
parties. Notices to the Administrator shall be sent to the
Company's address.
<PAGE>
<PAGE>
11.5 Attorney Fees
If suit or action is instituted to enforce any rights
under this Plan, the prevailing party may recover from the other
party reasonable attorneys' fees at trial and on any appeal.
11.6 Indemnity
The Company shall indemnify and defend the
Administrator, any member of the Committee or any officer, director
or employee of an Employer from any claim or liability that arises
from any action or inaction in connection with the Plan subject to
the following rules:
(a) Coverage shall be limited to actions taken
in good faith that the individual reasonably
believed were not opposed to the best interest of
the Plan.
(b) Negligence by the individual shall be
covered to the fullest extent permitted by law.
(c) Coverage shall be reduced to the extent of
any insurance coverage.
11.7 Facility of Payment
The Committee may decide that because of the mental or
physical condition of a person entitled to payments, or because of
other relevant factors, it is in the person's best interest to make
payments to others for the benefit of the person entitled to
payment. In that event, the Committee may in its discretion direct
that payments be made to one or more of the following:
(a) To a parent or spouse or a child of legal
age.
(b) To a legal guardian.
(c) To one furnishing maintenance, support, or
hospitalization.
11.8 Entire Arrangement
This Plan and the related Participation Statement shall
constitute the entire arrangement between the Company and any
participant, superseding all discussions, representations and other
written or oral arrangements. The arrangement <PAGE>
<PAGE>
can be modified only by written amendment to the Plan pursuant
to 8.1 or by written amendment of the Participation Statement
signed by the Company and the participant.
12. Effective Date
This Plan shall be effective on January 1, 1994.
Adopted: December 29, 1993.
FRED MEYER, INC.
By ROBERT G. MILLER
-------------------------------------
Executed: December 29, 1993
<PAGE>
<PAGE>
FRED MEYER
SUPPLEMENTAL INCOME PLAN
PARTICIPATION STATEMENT
January 1, 1994
To: [Name]
[Address]
[Social Security No.]
[Date of Birth]
I. Participation
You have been selected as a participant in the Fred Meyer
Supplemental Income Plan. Your participation starts January 1,
1994.
II. Projected Benefit Bases
Your projected benefit bases are as follows:
Retirement Benefit Base $____________
Preretirement Death Benefit Base $____________
These base amounts are used in accordance with the plan
to calculate your benefits. The timing and other circumstances
surrounding your benefits will determine how much is actually paid.
These amounts are estimates derived from the expected
performance of certain corporate-owned life insurance the Company
has purchased in connection with this Plan. Subject to various
rights of the Company and the Compensation Committee under the
Plan, the actual benefit bases will be more or less than those
shown, depending on actual insurance policy performance. The
actual base amount will not be less than 60 percent of the
projected base amount except as otherwise provided in the Plan.
ANY LIFE INSURANCE OR OTHER ASSET HELD BY THE COMPANY IN
CONNECTION WITH THIS PLAN IS THE UNCONDITIONAL PROPERTY OF THE
COMPANY. NO ASSETS ARE HELD IN TRUST AND PARTICIPANTS HAVE NO
SPECIAL INTEREST IN ANY COMPANY ASSET. THIS IS AN UNFUNDED PLAN.
<PAGE>
<PAGE>
III. Payment and Withholding
If you or your beneficiary qualify for a benefit, payments
will be made by the Company from its general assets. All payments
are subject to applicable state and federal tax withholding.
IV. Plan Document
A copy of the Plan accompanies this Statement. The Plan
is the controlling document and you should examine it carefully.
If you have any questions, direct them to the Administrator of the
Plan, the Senior Vice President for Human Resources.
________________________, 199 .
FRED MEYER, INC.
By ROBERT G. MILLER
-------------------------
Robert G. Miller
Chairman, Chief Executive
Officer
Acknowledged , 199 .
_____________________________
Participant
EXHIBIT 10(W)
ASSIGNMENT OF LEASE AND CANCELLATION OF SUBLEASE
THIS ASSIGNMENT OF LEASE (the "Agreement") is made as of
this 12th day of April, 1993, between REAL ESTATE PROPERTIES
LIMITED PARTNERSHIP, an Oregon limited partnership ("Assignor"),
and FRED MEYER, INC., a Delaware corporation ("Assignee").
R E C I T A L S
A. As of October 20, 1966, Southeast Company, an Oregon
corporation ("Southeast"), as lessor, and Fred Meyer, Inc., as
original lessee, entered into a lease (the "Lease") for the real
property located at 5253 SE 82nd Avenue, Portland, Oregon, and
more particularly described in Exhibit A attached hereto and
incorporated by reference (the "Premises"). Assignor is the
successor to Fred Meyer, Inc., as lessee under the Lease.
B. By a certain sublease dated October 22, 1986 (the
"Sublease"), Assignee subleased the Premises to Assignor.
C. Southeast and Assignor have entered into a Lease
Modification Agreement (the "Amendment") of even date herewith.
The Amendment will be effective only upon the assignment of the
Lease to Assignee as provided for herein.
D. The parties have agreed to the assignment of the Lease
and termination of the Sublease upon the terms and conditions set
forth below.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants, conditions and agreements contained herein, the
parties agree as follows:
1. Assignment.
----------
Assignor hereby transfers, sets over and
assigns to Assignee, effective as of February 1, 1993 (the
"Effective Date"), all right, title and interest of Assignor as
lessee under the Lease, TO HAVE AND TO HOLD the same to Assignee,
its successors and assigns forever; SUBJECT, HOWEVER, to each and
every provision of the Lease.
2. Acceptance of Assignment.
------------------------
As of the Effective Date, Assignee accepts the within
assignment and assumes and agrees to perform and discharge all
of the covenants, terms, conditions and provisions to be kept,
observed and performed by Assignor as lessee under the Lease
from and after the Effective Date.
<PAGE>
<PAGE>
3. Assignor's Indemnity of Assignee.
--------------------------------
Assignor hereby agrees to defend and indemnify
Assignee, its partners, directors, officers, employees, agents,
representatives, successors and assigns, and each of them,
from and against any and all claims, suits, demands, causes
of action, actions, liabilities, losses, damages, costs and
expenses (including attorneys' fees) arising out of or
resulting from Assignor's failure to perform any of lessee's
obligations under the Lease that were not assumed by or
passed through to Assignee as sublessee under the Sublease and
which occurred prior to the Effective Date.
4. Assignee's Indemnity of Assignor.
--------------------------------
Assignee hereby agrees to defend and indemnify
Assignor and its respective directors, officers, employees,
agents, representatives, successors and assigns, and each
of them, from and against any and all claims, suits, demands,
causes of action, actions, liabilities, losses, damages,
costs and expenses (including attorneys' fees) arising out
of or resulting from (i) the failure by Assignee, its
successors and assigns, to fully perform all of the lessee's
obligations under the Lease after the Effective Date; or
(ii) the failure by Assignee to fully perform all of
sublessee's obligations as sublessee under the Sublease
which accrued prior to the Effective Date.
5. Termination of Sublease.
-----------------------
The Sublease shall terminate and shall be of no
further force or effect whatsoever as of the Effective Date.
From and after the Effective Date, and except as expressly
provided herein, the parties shall have no further rights
or obligations under the Sublease.
6. Attorneys' Fees.
---------------
If either party hereto brings an action at law
or in equity to enforce, interpret or seek redress for the
breach of this Agreement, then the prevailing party in
such action shall be entitled to recover all court costs and
witness fees and reasonable attorneys' fees, (at trial or on
appeal) in addition to all other appropriate relief.
7. Successors and Assigns.
----------------------
This Agreement and every provision hereof shall
bind and inure to the benefit of the parties hereto and
their respective heirs, personal representatives, successors
and assigns.
8. Counterparts.
------------
This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the respective dates set opposite their signatures
<PAGE>
<PAGE>
below, but this Agreement on behalf of such parties shall be
deemed to have been dated as of the date first above written.
ASSIGNOR: REAL ESTATE PROPERTIES LIMITED PARTNERSHIP,
an Oregon limited partnership
By FMGP Associates,
an Oregon limited partnership,
its General Partner
By FMGP Incorporated,
a Delaware corporation,
its General Partner
By DAVID W. RAMUS
---------------------------------
Name David W. Ramus
-------------------------------
Title Vice President
------------------------------
ASSIGNEE: FRED MEYER, INC.,
a Delaware corporation
By SCOTT L. WIPPEL
--------------------------------------
Name Scott L. Wippel
------------------------------------
Title Senior Vice President
-----------------------------------
CONSENT TO ASSIGNMENT AND RELEASE OF ASSIGNOR
Southeast Company, an Oregon Corporation, as lessor under the
Lease, hereby consents to the assignment of the Lease to Assignee
and the assumption of the Lease by Assignee and further agrees
that upon the assumption of the lease by Assignee, Assignor shall
be fully and unconditionally released and discharged from all
liability accruing under the Lease arising from conditions
occurring after the Effective Date.
SOUTHEAST COMPANY
an Oregon corporation
By EARLE M. CHILES
-----------------------------
Name Earle M. Chiles
---------------------------
Title President
--------------------------
STATE OF OREGON )
) ss.
County of Washington )
On April 12, 1993, before me, the undersigned, a
Notary Public in and for said State, personally appeared <PAGE>
<PAGE>
David W. Ramus, personally known to me to be the person whose
name is subscribed to the within instrument as Vice President of
FMGP INCORPORATED, a Delaware corporation, the corporation that
executed the within instrument as the general partner of FMGP
ASSOCIATES, an Oregon limited partnership, itself the limited
partnership that executed the within instrument as a general
partner of REAL ESTATE LIMITED PROPERTIES LIMITED PARTNERSHIP, an
Oregon limited partnership, and acknowledged to me that he
subscribed his name thereto as such officer of said corporation
and that said corporation executed the same, pursuant to its
bylaws or a resolution of its board of directors, as the general
partner of said limited partnership, and that said limited
partnership executed the same as a general partner of said
partnership, and that said partnership executed the same.
WITNESS my hand and official seal.
MANON B. RUDDICK
-------------------------------
[SEAL] Notary Public in and for said
County and State
My commission expires: 2/27/96
-------
STATE OF OREGON )
) ss.
County of Multnomah )
On April 14, 1993, before me, the undersigned, a
Notary Public in and for said State, personally appeared
SCOTT L. WIPPEL, personally known to me to be the
person whose name is subscribed to the within instrument as
Vice President of FRED MEYER, INC., a Delaware corporation,
the corporation that executed the within instrument and
acknowledged to me that he subscribed his name thereto as such
officer of said corporation and that said corporation executed
the same pursuant to its bylaws or a resolution of its board of
directors.
WITNESS my hand and official seal.
CARLA J. BANGERT
------------------------------
Notary Public in and for said
County and State
My commission expires: 11-13-93
--------
<PAGE>
<PAGE>
STATE OF OREGON )
) ss.
County of )
On April 12, 1993, before me, the undersigned, a
Notary Public in and for said State, personally appeared
Earle M. Chiles, personally known to me to be the person
whose name is subscribed to the within instrument as
President of SOUTHEAST COMPANY, an Oregon corporation,
the corporation that executed the within instrument and
acknowledged to me that he subscribed his name thereto as such
officer of said corporation and that said corporation executed
the same pursuant to its bylaws or a resolution of its board of
directors.
WITNESS my hand and official seal.
LINDA H. BARNWELL
-------------------------------
[SEAL] Notary Public in and for said
County and State
My commission expires: 10/21/94
--------<PAGE>
<PAGE>
EXHIBIT A
A tract of land in Section 17, Township 1 South,
Range 2 East of the Willamette Meridian, in the City
of Portland, Multnomah County, Oregon; being portions
of Lot 24, Marysville; Blocks 1, 2 and 3, Avondale;
Block 1 Cahills Subdivision; Block 1, extended plat
of Wedgewood Park and S. E. Steele Street, S. E.
Steele Court, S. E. 81st Avenue, as vacated by City
of Portland Ordinance No. 121530, described as
follows:
PARCEL I:
All that portion of Lot 24, Marysville described as
follows: Beginning at the southeasterly corner of
Block 4, Cahills Subdivision; thence Easterly along
the Easterly extension of the southerly line of said
Block 4, 285.00 feet to a point in a line 45 feet
Westerly from and parallel to the center line of
S. E. 82nd Avenue; thence North along said parallel
line, 100.00 feet; thence Westerly, 285.65 feet to
the northeast corner of Lot 1, said Block 4, Cahills
Subdivision; thence South along the east line of said
lot, 100.00 feet to the point of beginning, EXCEPTING
THEREFROM the Southeast corner thereof, being a
triangular portion measuring 5 feet along S. E. 82nd
Avenue and 5 feet along S. E. Mitchell Street;
PARCEL II:
Beginning at a point on the West line of S. E. 82nd
Avenue (as now established, 45.00 feet from the
center line) that is North 0 degrees 37' East, 193.48
feet from the Northerly boundary line of S. E. Foster
Road extended Southeasterly; said point being the
Northeast corner of the parcel conveyed to Gulf Oil
Corporation by deed recorded September 27, 1966 in
Deed Book 528 page 224; thence West along the North
line of said Gulf Oil parcel, 115.69 feet; thence
South 29 degrees 09' 30" West along the Northwesterly
line of said Gulf Oil parcel, 115.69 feet to the
Northerly line of S. E. Foster Road; thence North 61
degrees 27' 30" West along said Northerly line of said
road, 346.01 feet to the intersection with the Easterly
line of S. E. 80th Avenue (60 feet wide); thence
North 28 degrees 29' East along the Easterly line of
S. E. 80th Avenue, 127.63 feet, to the intersection of
a line drawn 10.00 feet Easterly of the parallel to the
Westerly line of Block 1, Cahills Subdivision
extended Southerly; thence North 0 degrees 37' East along
said line, 406.74 feet to a point in a line 60.00
feet Southerly from the South line of Block 4,
<PAGE>
Cahills Subdivision, said point being 60.00 feet
Easterly from the East line of Block 2, Cahills
Subdivision; thence North 89 degrees 51' East 417.20 feet,
more or less, to the point in the Westerly line of
S. E. 82nd Avenue as now established, that is 60.00
feet South of the Easterly extension of the Southerly
line of Block 4, Cahills Subdivision; thence South
0 degrees 37' West along a line drawn 45.00 feet West
of and parallel to the center line of S. E. 82nd Avenue,
584.29 feet, to the point of beginning.
EXCEPTING THEREFROM the Northeast corner and the
Northwest corner thereof, being triangular portions,
measuring respectively 5 feet along S. E. 82nd Avenue
and 5 feet along S. E. Mitchell Street and 5 feet
along S.E. 80th Avenue and 5 feet along S. E.
Mitchell Street;
PARCEL III:
A parcel of land in Lot 24, MARYSVILLE, within the
corporate limits of the City of Portland, County of
Multnomah and State of Oregon, described as:
Beginning at a point in the East line of Section 17,
Township 1 South, Range 2 East of the Willamette
Meridian, 915.0 feet, North from the one-quarter
section corner in East line of said Section 17;
thence North along said East line 98.0 feet; thence
West 330.0 feet to West line of Lot 24, MARYSVILLE;
thence South along said West line 98.0 feet; thence
East 330.0 feet to beginning, EXCEPT THAT PART OF
PREMISES INCLUDED IN S. E. 82nd Avenue as now widened
and established. EXCEPT that part conveyed to the
City of Portland by deed recorded December 19, 1968
in Book 655, page 1476, Film Records.
<PAGE>
<PAGE>
LEASE MODIFICATION AGREEMENT
THIS LEASE MODIFICATION AGREEMENT (the "Agreement") is made
and entered into this 12th day of April, 1993, by and
between SOUTHEAST COMPANY, an Oregon corporation ("Landlord"),
and REAL ESTATE PROPERTIES LIMITED PARTNERSHIP, an Oregon limited
partnership ("Tenant").
R E C I T A L S
This Agreement is made with reference to the following facts
and objectives:
A. On or about October 20, 1966, Landlord and Fred Meyer,
Inc., an Oregon corporation, as original tenant entered into a
lease for those certain premises (the "leased premises") located
at 5253 SE 82nd Avenue, Portland, Oregon, and more particularly
described on Exhibit A attached hereto and incorporated by
reference. The lease was modified by an Agreement Amending Lease
dated November 12, 1966, an Addendum to Lease dated August 9,
1969, and a Release of Real Property From Lease dated April 21,
1992. The lease, as modified, is hereinafter referred to as the
"Lease."
B. Tenant is the current lessee under the Lease. The
current term of the Lease, as extended, expires on October 31,
1996.
C. Landlord and Tenant have agreed to certain
modifications of the Lease as set forth below.
NOW, THEREFORE, in consideration of the foregoing facts and
for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Landlord and Tenant hereby amend
and modify the Lease as follows:
1. Term.
----
Paragraph 2 of the Lease shall be amended to
extend the term of the Lease an additional twenty (20) years so
that it will end on October 31, 2016.
2. Base Rent; Percentage Rent.
--------------------------
Paragraph 3 of the Lease is amended by changing
the rental for the leased premises as follows:
"3.1 Base Rent.
---------
The monthly minimum base rent for
the leased premises, commencing as
of February 1, 1993, shall be as follows:
<PAGE>
<PAGE>
PERIOD MONTHLY RENT
------ ------------
02/01/1993 - 10/31/1996 $25,000.00
11/01/1996 - 10/31/2001 $40,000.00
11/01/2001 - 10/31/2006 $45,000.00
11/01/2006 - 10/31/2011 $50,000.00
11/01/2011 - 10/31/2016 $55,000.00
"3.2 Percentage Rent.
---------------
In addition to base rent, Tenant
shall pay percentage rent in the amount,
if any, by which one and 37.5/100th
percent (1.375%) of Gross Sales in each of
Tenant's fiscal years (or partial fiscal
year) during the lease term commencing after
October 31, 1996, exceeds the monthly minimum
base rent specified in Paragraph 3.1 above
paid by Tenant to Landlord for such fiscal
year (or partial fiscal year).
"3.3 Definition of Gross Sales.
-------------------------
As used in this Lease, "Gross Sales"
will mean the total amount actually
received for all sales of merchandise
and services from the leased premises
by Tenant or any successor permitted
occupant, subtenant or concessionaire,
whether for cash or credit, including all
gift and merchandise certificates, all credit
charges and all other receipts from business
conducted in or from the leased premises, but
deducting and excluding therefrom (i) sales
of tobacco products, (ii) any sales taxes or
other taxes collected by the seller of goods
for payment to the taxing authority, (iii)
sales of goods to employees at discounts, and
(iv) merchandise exchanges, returns, rebates
and/or refunds to customers, lottery tickets,
sales of Tenant's furniture, fixtures,
equipment and other property which is not
stock in trade, any sales which are "bulk
transfer" sales of inventory as established
by Oregon law, or any sale or transfer of all
or a substantial portion of Tenant's
inventory to a single buyer or successor of
Tenant's business. With respect to the
income received form leased vending machines
or amusement machines or income received from
temporary mall events (such as flower stalls
and independent vendors), only the amount of
location rentals or other payments received
by Tenant (or subtenants) from the machine
owner, mall event operator or vendor shall be
included in Gross Sales. With respect to
sales of tickets, fishing licenses or like
transactions where Tenant or subtenants act
as sales agent and are paid a fee or
commission for assisting with the sale, only
the amount of such fee or commission rentals
shall be <PAGE>
<PAGE>
included in Gross Sales. If any
portion of the leased premises is subleased
to third-party tenants on a basis which does
not permit the calculation of an amount to be
included in Gross Sales as described above
(e.g., a sublease of space for a branch
savings and loan association office or an in-
store sublease of space for insurance sales),
an appropriate adjustment or increase in the
Gross Sales amount will be made, to include
in Gross Sales for the space so leased an
amount equal to the average Gross Sales per
square foot from the retail operation of the
store (based on the total Gross Sales from
the retail operation divided by the gross
building area).
"3.4 Calculation and Time of Payment.
-------------------------------
The minimum base rent will be paid in
advance on the first day of each month.
Percentage rent will be calculated at the
end of each fiscal year of Tenant, which
will be the reporting year for purposes
of calculating and paying percentage rent,
and will be paid by Tenant within sixty
(60) days thereafter.
"3.5 Records.
-------
Tenant shall keep reasonably
complete and accurate records showing Gross
Sales from the leased premises. Such records
shall be preserved for a period of three (3)
years and shall be available for inspection
by Landlord following reasonable advance
notice.
"3.6 Reporting.
---------
Tenant shall submit to Landlord
an annual statement of Gross Sales for
each reporting year and any partial year
during the lease term, within sixty (60) days
after the end of each reporting year. The
statement will be certified by an officer of
Tenant and will show Gross Sales during the
prior reporting year or partial year.
Landlord agrees to hold in confidence all
information obtained from the records of
Tenant, except that Landlord may furnish
copies on a confidential basis to any party
providing financing to Landlord or purchasing
the leased premises.
"3.7 Landlord's Right to Audit.
-------------------------
Landlord may cause the percentage rent
computation and the record of Gross Sales
of Tenant to be examined at any time by an
accountant selected by Landlord. If such
examination discloses that the percentage rent
was understated, Tenant shall immediately pay
the percentage rent to Landlord, together with
interest on the deficiency in percentage rent
at a rate equal to two percent (2%) per annum
above the publicly announced prime rate of
the <PAGE>
<PAGE>
United States National Bank of Oregon in
effect on the date of the billing from the
date payment is due pursuant to paragraph 3.4
above until payment in full. If percentage
rent was understated by more than two percent
(2%), Tenant shall pay the cost of the audit.
If the accountant's examination reveals that
percentage rent was not so understated,
Landlord will pay the cost of the audit. If
there is a misstatement of rent by ten
percent (10%) or more, Landlord may impose an
additional late charge equal to five percent
(5%) of the amount that percentage rent was
understated, in addition to the interest on
such understated rent as provided above.
"3.8 Additional Rent.
---------------
All payments required to be paid by
Tenant under this Lease, other than
base rent and percentage rent, will
constitute additional rent.
"3.9 No Representations as to Sales.
------------------------------
Landlord is not relying on any projections
or representations by Tenant as to sales
anticipated to be made from the leased
premises, and there is, and shall be, no
express or implied covenant regarding the
sales by Tenant."
3. Related Provisions.
------------------
In connection with the foregoing
changes to Paragraph 3 of the Lease, the following clarifications
are added to Paragraph 7 of the Lease:
"There is, and shall be, no express or
implied covenant to operate business on the
leased premises; provided, that in the event
operation of business from sixty percent
(60%) or more of the gross building area of
the improvements on the leased premises is to
be discontinued for a continuous period of at
least one (1) year for any reason other than
(a) strikes, lockouts or other labor
difficulties, acts of God, the requirements
of any local, state or federal law, rule or
regulation, fire or other casualty,
condemnation, war, riot, insurrection or any
other reason beyond Tenant's reasonable
control, or (b) temporary closure due to the
restoration, reconstruction, expansion,
alteration, modification or remodeling of any
improvements located on the leased premises,
then Tenant shall, at least thirty (30) days
prior to discontinuing such operations, but
not more than six (6) months prior to
discontinuing such operations, provide
written notice to Landlord that Tenant
intends to discontinue operation of business
from sixty percent (60%) or more of the gross
building area of the improvements on the
leased premises (the "Notice of
<PAGE>
<PAGE>
Election").
The Notice of Election will include the
anticipated date on which Tenant intends to
discontinue operation of business. Landlord
shall have the right to terminate this Lease
by written notice to Tenant, such notice to
be delivered to Tenant within one hundred
eighty (180) days after Landlord's receipt of
the Notice of Election ("Landlord's
Termination Notice"). Landlord's Termination
Notice will not be effective until Tenant
actually discontinues operation of business
from sixty percent (60%) or more of the gross
building area of the improvements on the
leased premises and the expiration of at
least thirty (30) days from and after the
delivery of Landlord's Termination Notice to
Tenant. Upon the effective date of such
termination, neither party will have any
further obligation to the other under the
Lease (other than obligations accrued through
the effective date of termination of the
Lease). If Landlord does not give a
Landlord's Termination Notice within such one
hundred eighty (180)-day period, then the
procedures for Landlord to have a termination
right under the foregoing "go dark" proviso
and the restrictions on assignment and
subletting and procedures for Landlord to
have a termination right under
Paragraph 7(a), as revised in Section 5
(Assignment) below, are waived and terminated
and will have no further force or effect.
Notwithstanding the foregoing, during the
period starting on the date hereof and ending
on October 31, 1996, if Tenant gives a Notice
of Election and if Landlord does not give a
Landlord's Termination Notice as provided
above, then the procedures for Landlord to
have a termination right under the foregoing
"go dark" proviso and the restrictions on
assignment and subletting and procedures for
Landlord to have a termination right under
Paragraph 7(a), as revised below, will be
deemed waived and terminated only if Tenant,
within one (1) year of its Notice of
Election, causes operation of business from
sixty percent (60%) or more of the gross
building area of the improvements on the
leased premises to be discontinued and such
discontinuance continues for at least one (1)
year or if Tenant, within one (1) year of its
Notice of Election, assigns this Lease or
sublets more than twenty-five percent (25%)
of the gross building area.
Paragraph 7(d) of the Lease is applicable only after
and during the continuance of a default by Tenant and is subject
to Landlord's compliance with the provisions of the Lease and
applicable law concerning Landlord's re-entry and regaining
possession of the leased premises.
<PAGE>
<PAGE>
4. Casualty.
--------
Paragraph 7(g)(4) of the Lease shall be deleted
in its entirety and the following language is substituted
therefor:
"In the event of a casualty to any building
located on the leased premises, and Tenant
restores such building or constructs a new
building on the leased premises, the
insurance proceeds under the policies of
insurance maintained by Tenant shall be paid
to Tenant to the extent necessary to so
restore or reconstruct, and any unused
balance shall be paid to Landlord or its
Lender. In the event of a casualty after
which Tenant chooses not to restore or
reconstruct, or in the event of a casualty to
the leased premises that would allow Tenant
to elect to terminate the Lease and Tenant so
elects to terminate the Lease then the
insurance proceeds, together with any self-
insured retention or deductible amount (which
shall be paid by Tenant) shall be paid to
Landlord or its Lender."
5. Assignment.
----------
Paragraph 7(a) of the Lease, as previously
amended, shall be deleted in its entirety and the following
language is substituted therefor:
"Tenant shall not, without the prior written
consent of Landlord, or compliance with the
procedures set forth in the following
paragraph, assign this lease or sublease all
or any part of the leased premises, except as
otherwise set forth below. Any consent to
any such transfer shall apply only to the
specific act authorized and shall not be
construed as a waiver of the restriction on
transfer contained in this Lease. However,
notwithstanding any other provision of this
Lease, Tenant may: (i) assign or transfer its
interest as lessee under the Lease without
Landlord's consent or compliance with the
procedures set forth below in connection with
the consolidation, merger, acquisition, or
sale of Tenant, or substantially all of the
assets of Tenant, or to a wholly owned
subsidiary of Tenant, or in connection with a
sale-leaseback transaction; and/or (ii)
sublease twenty-five percent (25%) or less of
the gross building area of the improvements
on the leased premises from time to time.
"In the event Tenant desires to assign this
Lease or sublet more than twenty-five percent
(25%) of the gross building area of the
improvements on the leased premises, and if
Landlord's consent is required under the
terms of the foregoing paragraph, the parties
will follow the following procedures:
<PAGE>
<PAGE>
" (a) Tenant will notify Landlord in
writing that Tenant intends to assign this
Lease or sublet more than twenty-five percent
(25%) of the gross building area of the
improvements on the leased premises
("Tenant's Notice").
" (b) Landlord will have the right,
within one hundred eighty (180) days after
receipt of Tenant's Notice, to cancel this
Lease by written notice of cancellation to
Tenant, in which event the Lease will
terminate eighty (80) days after receipt of
such notice unless Tenant, within such eighty
(80)-day period discontinues its plan to
assign the Lease or sublet more than twenty-
five percent (25%) of the gross building area
of the improvements on the leased premises.
" (c) If Landlord does not notify Tenant
of its election to cancel the Lease within
such one hundred eighty (180) day period, as
referenced in subparagraph (b) above, then
the restrictions on assignment and subletting
and procedures to have a termination right
under the foregoing paragraphs and the
procedures for Landlord to have a termination
right under the "go dark" proviso in
Section 3 (Related Provisions) above are
waived and terminated and will have no
further force or effect. Notwithstanding the
foregoing, during the period starting on the
date hereof and ending on October 31, 1996,
if Tenant gives a Tenant's Notice and if
Landlord does not notify Tenant of its
election to cancel the Lease within the one
hundred eighty (180)-day period provided
above, the restrictions on assignment and
subletting and procedures to have a
termination right under the foregoing
paragraphs and the procedures for Landlord to
have a termination right under the "go dark"
proviso in Section 3 (Related Provisions)
above will be deemed waived and terminated
only if Tenant assigns this Lease or sublets
more than twenty-five percent (25%) of the
gross building area within one (1) year of
the Tenant's Notice.
" (d) In the case of an assignment, the
transferee will assume the obligations under
this Lease accruing from and after the date
of transfer, and Tenant will not be released
by Landlord from its liability under the
Lease (except as otherwise specifically
approved in writing by Landlord)."
<PAGE>
<PAGE>
6. Subordination to Mortgages.
--------------------------
The following new Paragraph 10 is added to the Lease:
"10. Subordination to Mortgages.
--------------------------
This Lease, at Landlord's option,
shall be subordinate to the lien of any trust
deed or mortgage subsequently placed upon
the leased premises, and to any and all
advances made on the security thereof,
and to all renewals, modifications,
consolidations, replacements and extensions
thereof; provided, however, that this
provision shall apply only if the
lender who receives the benefit of the
subordination enters into an written non-
disturbance agreement stating that Tenant's
right to quiet possession of the leased
premises shall not be disturbed and that
condemnation and insurance proceeds shall be
used for the purposes set forth in the Lease,
so long as Tenant pays the rent and observes
and performs all of the provisions of this
Lease."
Landlord shall endeavor to obtain a similar non-disturbance
agreement with any lender whose trust deed or mortgage encumbers
the leased premises as of the date of this Agreement.
7. Insurance.
---------
The following new Paragraph 11 is added to
the Lease:
"11. Self-Insurance.
--------------
Tenant may satisfy the insurance
requirements of this Lease by self-insurance
to an extent which is reasonable in relation
to its financial worth. Landlord has approved
Tenant's current coverages, deductibles and
self-insurance arrangements as set forth in
documents previously delivered to Landlord."
8. Cooperation by Landlord.
-----------------------
The following new Paragraph 12 is added to the Lease:
"12. Landlord hereby approves (and agrees not
to remonstrate against) any actions or
applications by Tenant, at Tenant's cost, to
obtain a vacation of the portion of the public
street which is situated between the home
improvement center parcel and the main
building parcel on the leased premises. Any
vacated street area that accrues to such
parcels upon vacation will be deemed
automatically added to and incorporated into
the Lease (without change to the rent to be
paid). Upon reasonable request from time to
time, Landlord shall join with Tenant in any
application, consent, grant of easement or
license or other instrument as shall be
reasonably necessary or <PAGE>
<PAGE>
convenient to allow
development or use of the leased premises by
Tenant, so long as the use or value of the
leased premises is not thereby adversely
affected."
9. Condition Precedent.
-------------------
Effectiveness of this Agreement shall be conditioned
upon completion of the assignment of the Lease from Tenant to
Fred Meyer, Inc., a Delaware corporation.
10. Ratification.
------------
Except as herein modified the Lease is hereby ratified
and confirmed and shall remain in full force and effect.
11. Successors and Assigns.
----------------------
Each and all of the covenants, terms, agreements and
obligations of this Agreement shall extend to and bind and inure
to the benefit of the successors and/or assigns of said parties
hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
LANDLORD:
SOUTHEAST COMPANY
an Oregon corporation
Dated: April 12, 1993 By EARLE M. CHILES
----------------------------
Earle M. Chiles
-------------------------------
(typed or printed name)
Its President
---------------------------
TENANT:
REAL ESTATE PROPERTIES LIMITED PARTNERSHIP,
an Oregon limited partnership
By FMGP Associates,
an Oregon limited partnership,
its General Partner
By FMGP Incorporated,
a Delaware corporation,
its General Partner
Dated: April 12, 1993 By DAVID W. RAMUS
-------------------------------
David W. Ramus
----------------------------------
(typed or printed name)
Its Vice President
------------------------------
<PAGE>
<PAGE>
EXHIBIT A
A tract of land in Section 17, Township 1 South,
Range 2 East of the Willamette Meridian, in the City
of Portland, Multnomah County, Oregon; being portions
of Lot 24, Marysville; Blocks 1, 2 and 3, Avondale;
Block 1 Cahills Subdivision; Block 1, extended plat
of Wedgewood Park and S. E. Steele Street, S. E.
Steele Court, S. E. 81st Avenue, as vacated by City
of Portland Ordinance No. 121530, described as
follows:
PARCEL I:
All that portion of Lot 24, Marysville described as
follows: Beginning at the southeasterly corner of
Block 4, Cahills Subdivision; thence Easterly along
the Easterly extension of the southerly line of said
Block 4, 285.00 feet to a point in a line 45 feet
Westerly from and parallel to the center line of
S. E. 82nd Avenue; thence North along said parallel
line, 100.00 feet; thence Westerly, 285.65 feet to
the northeast corner of Lot 1, said Block 4, Cahills
Subdivision; thence South along the east line of said
lot, 100.00 feet to the point of beginning, EXCEPTING
THEREFROM the Southeast corner thereof, being a
triangular portion measuring 5 feet along S. E. 82nd
Avenue and 5 feet along S. E. Mitchell Street;
PARCEL II:
Beginning at a point on the West line of S. E. 82nd
Avenue (as now established, 45.00 feet from the
center line) that is North 0 degrees 37' East, 193.48
feet from the Northerly boundary line of S. E. Foster
Road extended Southeasterly; said point being the
Northeast corner of the parcel conveyed to Gulf Oil
Corporation by deed recorded September 27, 1966 in
Deed Book 528 page 224; thence West along the North
line of said Gulf Oil parcel, 115.69 feet; thence
South 29 degrees 09' 30" West along the Northwesterly
line of said Gulf Oil parcel, 115.69 feet to the
Northerly line of S. E. Foster Road; thence North 61
degrees 27' 30" West along said Northerly line of said
road, 346.01 feet to the intersection with the Easterly
line of S. E. 80th Avenue (60 feet wide); thence
North 28 degrees 29' East along the Easterly line of
S. E. 80th Avenue, 127.63 feet, to the intersection of
a line drawn 10.00 feet Easterly of the parallel to the
Westerly line of Block 1, Cahills Subdivision
extended Southerly; thence North 0 degrees 37' East along
said line, 406.74 feet to a point in a line 60.00
feet Southerly from the South line of Block 4,
<PAGE>
Cahills Subdivision, said point being 60.00 feet
Easterly from the East line of Block 2, Cahills
Subdivision; thence North 89 degrees 51' East 417.20 feet,
more or less, to the point in the Westerly line of
S. E. 82nd Avenue as now established, that is 60.00
feet South of the Easterly extension of the Southerly
line of Block 4, Cahills Subdivision; thence South
0 degrees 37' West along a line drawn 45.00 feet West
of and parallel to the center line of S. E. 82nd Avenue,
584.29 feet, to the point of beginning.
EXCEPTING THEREFROM the Northeast corner and the
Northwest corner thereof, being triangular portions,
measuring respectively 5 feet along S. E. 82nd Avenue
and 5 feet along S. E. Mitchell Street and 5 feet
along S.E. 80th Avenue and 5 feet along S. E.
Mitchell Street;
PARCEL III:
A parcel of land in Lot 24, MARYSVILLE, within the
corporate limits of the City of Portland, County of
Multnomah and State of Oregon, described as:
Beginning at a point in the East line of Section 17,
Township 1 South, Range 2 East of the Willamette
Meridian, 915.0 feet, North from the one-quarter
section corner in East line of said Section 17;
thence North along said East line 98.0 feet; thence
West 330.0 feet to West line of Lot 24, MARYSVILLE;
thence South along said West line 98.0 feet; thence
East 330.0 feet to beginning, EXCEPT THAT PART OF
PREMISES INCLUDED IN S. E. 82nd Avenue as now widened
and established. EXCEPT that part conveyed to the
City of Portland by deed recorded December 19, 1968
in Book 655, page 1476, Film Records.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
FRED MEYER, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(in thousands, except per share amounts)
(unaudited)
52 Weeks Ended
----------------------------------
Jan. 29, Jan. 30, Feb. 1,
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Weighted average number
of shares outstanding 25,878 24,874 22,694
Weighted average number 4,032 4,108 3,985
of shares under option
Shares assumed to have
been purchased under the
treasury stock method (1,535) (1,536) (1,497)
------ ------ ------
Weighted average number
of common and common
equivalent shares outstanding 28,375 27,446 25,182
====== ====== ======
Net income before the effect
of an accounting change $70,904 $60,587 $45,227
Effect of an accounting change (2,588) --- ---
------- ------- -------
Net income (loss) $68,316 $60,587 $45,227
======= ======= =======
Earnings per common share on:
Net income before the effect
of an accounting change $2.50 $2.21 $1.80
Effect of an accounting change (0.09) --- ---
----- ----- -----
Net Income $2.41 $2.21 $1.80
===== ===== =====
/TABLE
<PAGE>
<PAGE>16
EXHIBIT 13
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
Fiscal Year Ended
------------------------------------------------------------------
(In thousands, except per-share January 29, January 30, February 1, February 2,
data and statistical information) 1994 1993 1992 1991
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales. . . . . . . . . . . . . . . . . $2,979,082 $2,853,962 $2,702,721 $2,476,055
Gross margin . . . . . . . . . . . . . . . 890,375/1 857,086 809,900 741,720
Operating and administrative expenses. . . 761,627 752,004 731,892 674,212
Restructuring charge (reversal). . . . . . -- -- (8,289) --
Income from operations . . . . . . . . . . 128,748/1 105,082 86,297/6 67,508
Interest expense, net of interest income/2 8,246 8,912 15,302 15,974
Income (loss) before income taxes. . . . . 120,502 96,170 70,995 51,534
Income tax expense (benefit) . . . . . . . 49,598/3 35,583 25,768 17,951
Net income (loss) before accounting
change or extraordinary item . . . . . . 70,904/3 60,587 45,227/6 33,583
Effect of an accounting change . . . . . . (2,588)/4 -- -- --
Extraordinary item . . . . . . . . . . . . -- -- -- --
--------- ---------- ---------- ----------
Net income (loss). . . . . . . . . . . . . $ 68,316 $ 60,587 $ 45,227/6 $ 33,583
========= ========== ========== ==========
Earnings (loss) per common share:
Net income (loss) before accounting
change or extraordinary item. . . . . $2.50 $2.21 $1.80/6 $1.37
Effect of accounting change. . . . . . . (.09)/4 -- -- --
Extraordinary item . . . . . . . . . . . -- -- -- --
----- ----- ----- -----
Net income (loss). . . . . . . . . . . . $2.41 $2.21 $1.80/6 $1.37
===== ===== ===== =====
BALANCE SHEET DATA
Total assets . . . . . . . . . . . . . . . $1,318,782 $1,079,103 $ 972,794 $ 905,756
---------- ---------- ---------- ----------
Capitalization:
Long-term debt . . . . . . . . . . . . . $ 321,398 $ 195,837 $ 240,968 $ 232,881
Lease obligations. . . . . . . . . . . . 65,955 70,313 67,387 67,664
Stockholders' equity . . . . . . . . . . 527,686 450,128 335,154 285,299
---------- ---------- ---------- ----------
Total. . . . . . . . . . . . . . . . . . $ 915,039 $ 716,278 $ 643,509 $ 585,844
========== ========== ========== ==========
STATISTICAL INFORMATION
Percent of net sales:
Nonfood sales. . . . . . . . . . . . . . 62.5% 63.3% 63.7% 64.3%
Food sales . . . . . . . . . . . . . . . 37.5% 36.7% 36.3% 35.7%
Total stores sales growth. . . . . . . . . 4.4% 5.6% 9.2% 11.6%/8
Comparable stores sales percentage
increase/5. . . . . . . . . . . . . . . . 2.4% 3.0% 4.0% 3.6%/8
Long-term debt as a percent of total
capitalization . . . . . . . . . . . . . 42.3% 37.2% 47.9% 51.3%
Net income (loss) as a percent of
net sales. . . . . . . . . . . . . . . . 2.3% 2.1% 1.7% 1.4%
Number of stores opened during year. . . . 7 6 3 5
Number of stores closed during year. . . . 3 5 3 8
Number of stores operated at end of year . 127 123 122 122
Total retail square feet at end of year. . 13,423,000 12,646,000 12,679,000 12,213,000
Selling square feet at end of year . . . . 9,999,000 9,471,000 9,657,000 9,361,000
Sales per selling square foot
(weighted average) . . . . . . . . . . . $312 $304 $283 $269
Common shares outstanding (weighted
average) . . . . . . . . . . . . . . . . 28,375,000 27,446,000 25,182,000 24,500,000
- - ------------------------------------------------------------------------------------------------------------
/TABLE
<PAGE>
<PAGE>17
<TABLE>
SELECTED FINANCIAL DATA (continued)
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------------------
(In thousands, except per-share February 3, January 28, January 30, January 31,
data and statistical information) 1990 1989 1988 1987
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales. . . . . . . . . . . . . . . . . $2,284,535 $2,073,544 $1,847,843 $1,688,208
Gross margin . . . . . . . . . . . . . . . 671,044 610,415 547,157 487,829
Operating and administrative expenses. . . 620,953 544,225 485,822 430,469
Restructuring charge (reversal). . . . . . 49,277 -- -- --
Income from operations . . . . . . . . . . 814/7 66,190 61,335 57,360
Interest expense, net of interest income/2 13,947 9,291 7,449 11,945
Income (loss) before income taxes. . . . . (13,133) 56,899 53,886 45,415
Income tax expense (benefit) . . . . . . . (6,285) 20,238 21,850 21,350
Net income (loss) before accounting
change or extraordinary item . . . . . . (6,848)/7 36,661 32,036 24,065
Effect of an accounting change . . . . . . -- -- -- --
Extraordinary item . . . . . . . . . . . . -- -- -- (1,530)/9
--------- --------- ---------- ----------
Net income (loss). . . . . . . . . . . . . $ (6,848)/7 $ 36,661 $ 32,036 $ 22,535
========= ========= ========== ==========
Earnings (loss) per common share to:
Net income (loss) before accounting
change or extraordinary item. . . . . $(.28)/7 $1.50 $1.31 $1.15
Effect of accounting change. . . . . . . -- -- -- --
Extraordinary item . . . . . . . . . . . -- -- -- (.07)/9
----- ----- ----- -----
Net income (loss). . . . . . . . . . . . $(.28)/7 $1.50 $1.31 $1.08
===== ===== ===== =====
BALANCE SHEET DATA
Total assets . . . . . . . . . . . . . . . $ 796,894 $ 686,806 $ 626,522 $ 533,986
--------- ---------- ---------- ----------
Capitalization:
Long-term debt . . . . . . . . . . . . . $ 188,441 $ 92,180 $ 87,730 $ 76,874
Lease obligations. . . . . . . . . . . . 66,393 50,774 46,904 36,093
Stockholders' equity . . . . . . . . . . 251,546 258,188 221,056 186,692
--------- ---------- ---------- ----------
Total. . . . . . . . . . . . . . . . . . $ 506,380 $ 401,142 $ 355,690 $ 299,659
========== ========== ========== ==========
STATISTICAL INFORMATION
Percent of net sales:
Nonfood sales. . . . . . . . . . . . . . 66.8% 68.2% 67.6% 66.1%
Food sales . . . . . . . . . . . . . . . 33.2% 31.8% 32.4% 33.9%
Total stores sales growth. . . . . . . . . 8.4%/8 12.2% 9.5% 6.6%
Comparable stores sales percentage
increase/5. . . . . . . . . . . . . . . . 4.5%/8 7.9% 6.6% 4.3%
Long-term debt as a percent of total
capitalization . . . . . . . . . . . . . 50.3% 35.6% 37.9% 37.7%
Net income (loss) as a percent of
net sales. . . . . . . . . . . . . . . . (.3)%/7 1.8% 1.7% 1.3%
Number of stores opened during year. . . . 15 14 8 1
Number of stores closed during year. . . . 2 1 2 1
Number of stores operated at end of year . 125 112 99 93
Total retail square feet at end of year. . 11,743,000 10,925,000 10,494,000 9,738,000
Selling square feet at end of year . . . . 9,056,000 8,388,000 8,064,000 7,497,000
Sales per selling square foot
(weighted average) . . . . . . . . . . . $261/8 $253 $239 $228
Common shares outstanding (weighted
average) . . . . . . . . . . . . . . . . 24,801,000 24,470,000 24,403,000 20,870,000
- - -----------------------------------------------------------------------------------------------------------
<PAGE>
<PAGE>17
</TABLE>
<TABLE>
SELECTED FINANCIAL DATA (continued)
<CAPTION>
Fiscal Year Ended
-----------------------------------------------
(In thousands, except per-share February 1, February 2, January 28,
data and statistical information) 1986 1985 1984
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME STATEMENT DATA
Net sales. . . . . . . . . . . . . . . . . $1,583,796 $1,449,108 $1,213,992
Gross margin . . . . . . . . . . . . . . . 447,960 395,419 336,677
Operating and administrative expenses. . . 397,841 354,914 293,864
Restructuring charge (reversal). . . . . . -- -- --
Income from operations . . . . . . . . . . 50,119 40,505 42,813
Interest expense, net of interest income/2 17,652 19,565 18,020
Income (loss) before income taxes. . . . . 32,467 20,940 24,793
Income tax expense (benefit) . . . . . . . 13,000 8,000 10,000
Net income (loss) before accounting
change or extraordinary item . . . . . . 19,467 12,940 14,793
Effect of an accounting change . . . . . . -- -- --
Extraordinary item . . . . . . . . . . . . -- 2,649/10 --
--------- --------- ----------
Net income (loss). . . . . . . . . . . . . $ 19,467 $ 15,589 $ 14,793
========= ========= ==========
Earnings (loss) per common share to:
Net income (loss) before accounting
change or extraordinary item. . . . . $1.06 $.73 $.86
Effect of accounting change. . . . . . . -- -- --
Extraordinary item . . . . . . . . . . . -- .15/10 --
----- ----- -----
Net income (loss). . . . . . . . . . . . $1.06 $.88 $.86
===== ===== =====
BALANCE SHEET DATA
Total assets . . . . . . . . . . . . . . . $ 568,531 $ 538,847 $ 420,379
---------- ---------- ----------
Capitalization:
Long-term debt . . . . . . . . . . . . . $ 130,940 $ 175,375 $ 124,964
Lease obligations. . . . . . . . . . . . 89,236 89,297 70,340
Stockholders' equity . . . . . . . . . . 98,395 78,584 62,965
---------- --------- ----------
Total. . . . . . . . . . . . . . . . . . $ 318,571 $ 343,256 $ 258,269
========== ========== ==========
STATISTICAL INFORMATION
Percent of net sales:
Nonfood sales. . . . . . . . . . . . . . 65.6% 63.5% 59.3%
Food sales . . . . . . . . . . . . . . . 34.4% 36.5% 40.7%
Total stores sales growth. . . . . . . . . 11.2%/11 17.3%/11 10.0%
Comparable stores sales percentage
increase/5. . . . . . . . . . . . . . . . 4.1%/11 4.4%/11 5.9%
Long-term debt as a percent of total
capitalization . . . . . . . . . . . . . 69.1% 77.1% 75.6%
Net income (loss) as a percent of
net sales. . . . . . . . . . . . . . . . 1.2% 1.1% 1.2%
Number of stores opened during year. . . . 4 23/12 1
Number of stores closed during year. . . . 1 1 0
Number of stores operated at end of year . 93 90 68
Total retail square feet at end of year. . 9,536,000 8,919,000 6,902,000
Selling square feet at end of year . . . . 7,309,000 6,772,000 5,174,000
Sales per selling square foot
(weighted average) . . . . . . . . . . . $228 $226/11 $238
Common shares outstanding (weighted
average) . . . . . . . . . . . . . . . . 18,355,000 17,790,000 17,139,000
- - -----------------------------------------------------------------------------------------
<PAGE>
<FN>
/1 Includes a nonrecurring LIFO credit of $6,178.
/2 Interest income was $707, $544, $517, $467, $482, $336,
$350, $1,679, $2,983, $3,090, and $3,772. Excludes
interest expense related to occupancy.
/3 Includes $3,588 from the resolution of an IRS audit,
($2,286) related to the LIFO credit, and a 38% tax rate.
/4 Effect of adopting Statement of Financial Accounting
Standards No. 109 relating to income taxes.
/5 Includes only sales of stores operating throughout each of
the periods compared.
/6 Excluding the benefit from the restructuring charge
reversal of $8,289 and a charge against expenses for
previously capitalized software development costs of
$8,748, income from operations, net income, and earnings
per common share would be $86,756; $45,516; and $1.81,
respectively.
/7 Excluding the restructuring charge of $49,277, income from
operations, net income, earnings per common share, and net
income as a percent of net sales would be $50,091;
$24,197; $.98; and 1.1%, respectively.
/8 Excludes 53rd week in the fiscal year ended February 3,
1990.
/9 Prepayment costs of $1,530 ($.07 per share) from early
extinguishment of 17% Senior and Subordinated Notes, net
of taxes.
/10 Extraordinary gain of $2,649 ($.15 per share) arising from
the disposition of a limited partnership interest in
Properties.
/11 Excludes 53rd week in the fiscal year ended February 2,
1985.
/12 Includes 21 nonfood stores acquired from Grand Central,
Inc.
</TABLE>
<PAGE>
<PAGE>18
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion summarizes Fred Meyer, Inc.'s (the
"Company") operating results for the fiscal year ended
January 29, 1994 ("1993") compared with the fiscal year ended
January 30, 1993 ("1992") and for 1992 compared with the fiscal
year ended February 1, 1992 ("1991"). Also included are
discussions of the Company's liquidity, capital resources,
effect of LIFO, effect of inflation, recent accounting changes,
stock data, and dividend policy. This discussion and analysis
should be read in conjunction with the Company's consolidated
financial statements.
RESULTS OF OPERATIONS--1993 COMPARED WITH 1992
Net sales for 1993 increased $125,120,000 or 4.4% over 1992.
This increase reflects sales growth at existing stores,
inflation, openings of five full-size multidepartment stores
and two specialty stores in malls, and adding food to two
nonfood stores. This increase was offset by the closure of two
multidepartment stores without food departments and one
specialty store. Comparable store sales increased 2.4% for
1993. Food sales as a percent of net sales were 37.5% and
36.7%, respectively, for 1993 and 1992. The increase in food
sales as a percent of net sales was primarily due to an
increase in the number of the Company's stores that sell food.
Food comparable store sales increased 3.4% and nonfood
comparable store sales increased 1.9%.
Gross margin as a percent of net sales was 29.9% in 1993
compared with 30.0% in 1992. The LIFO charge decreased from
$4,167,000 in 1992 to $2,890,000 in 1993, primarily as a result
of lower inflation rates. Additionally, 1993's gross margin was
favorably affected by a one-time LIFO credit of $6,178,000.
Excluding the effect of this one-time LIFO credit, 1993 gross
margin as a percent of net sales was 29.7%. Gross margins
decreased primarily due to lower nonfood pricing as a result of
the Company's expense control efforts, start-up costs
associated with expansion of its hardlines distribution
capabilities, and soft apparel sales.
Operating and administrative expenses as a percent of net sales
decreased to 25.6% in 1993 compared with 26.3% in 1992. This
expense ratio decrease was primarily related to lower store
occupancy costs, corporate overhead expenses, and advertising
costs as a percent of net sales. Total operating and
administrative expenses increased 1.3% to $761,627,000 in 1993
from $752,004,000 in 1992.
Net interest expense was $8,246,000 for 1993 and $8,912,000 for
1992, a 7.5% decrease. The decrease primarily reflects lower
interest rates.
The effective tax rate was 41.2% for 1993 and 37.0% for 1992.
This increase is the result of an accrual of $3,588,000 for
amounts related to paid and anticipated taxes which
may be required as a result of the resolution of an IRS audit,
taxes on the one-time LIFO credit, and the higher federal
statutory tax rates applied retroactively from January 30,
1993. Excluding the impact of the tax audit settlement, the
effective tax rate for 1993 was 38.0%.
Before reflecting three nonrecurring accounting adjustments
(which had a net impact of $23,000 on reported net income) and
an accounting change in 1993, net income increased 17.0%
to $70.9 million; and earnings per share were $2.50 for 1993,
assuming a 38% tax rate for 1993 versus <PAGE>
<PAGE>19
37% in 1992. On a reported basis, net income for 1993
increased 12.8% to $68.3 million from $60.6 million in
1992, after reflecting the accounting change and three
accounting adjustments that resulted in a reduction in net
income of $2.6 million and $.09 in earnings per share in 1993.
Reported earnings per share were $2.41 for 1993 based on
28,375,000 shares outstanding, compared with $2.21 for the
prior year's period based on 27,446,000 shares outstanding.
RESULTS OF OPERATIONS--1992 COMPARED WITH 1991
Net sales for 1992 increased $151,241,000 or 5.6% over 1991.
This increase reflects sales growth at existing stores,
inflation, and new store openings of two full-size
multidepartment stores and four small specialty stores in
malls. This increase was offset in part by the closure of two
multidepartment stores without food departments and three
specialty stores. Comparable store sales increased 3.0% for
1992. Food comparable store sales increased 2.8% and nonfood
comparable store sales increased 3.2%. Food sales as a percent
of net sales were 36.7% and 36.3%, respectively, for 1992 and
1991. The increase in food sales as a percent of net sales was
primarily due to an increase in the number of the Company's
stores that sell food.
Gross margin as a percent of net sales was 30.0% for both 1992
and 1991. The LIFO charge decreased from $6,172,000 in 1991 to
$4,167,000 in 1992, primarily as a result of lower inflation
rates. Excluding the impact of the lower LIFO charge, gross
margin was essentially flat with the prior year.
Operating and administrative expenses as a percent of net sales
decreased to 26.3% in 1992 compared with 27.1% in 1991. This
expense ratio decrease was primarily related to lower
advertising, store labor, administrative and support department,
and occupancy expenses, continuing changes begun in 1991.
These percentage reductions were partially offset by higher
costs related to implementation of the Company's new management
information systems ("MIS"), and by the expensing of costs
related to the Company's election in the first quarter of 1992
to adopt the Statement of Financial Accounting Standards ("SFAS")
No. 106, entitled Employers Accounting for Postretirement
Benefits Other Than Pensions. Operating and administrative
expenses for the year 1991 included an $8,748,000 fourth-
quarter charge for the write-off of previously capitalized
software development costs associated with the MIS conversion.
These MIS development costs were expensed due to the change in
the Company's IBM system architecture from a distributed system
to a centralized computer system. Excluding the impact of the
1991 fourth-quarter write-off, operating and administrative
expenses as a percent of net sales was 26.8% in 1991. Total
operating and administrative expenses increased 2.7% to
$752,004,000 in 1992 from $731,892,000 in 1991.
Net interest expense was $8,912,000 for 1992 and $15,302,000
for 1991, a 41.8% decrease. The decrease primarily reflects
lower interest rates and, to a lesser extent, lower borrowings
resulting from the receipt of the proceeds from the Company's
April 1992 public stock offering.
The effective tax rate was 37.0% for 1992 and 36.3% for 1991.
Net income for 1992 increased 34.0% from $45,227,000 in 1991 to
$60,587,000 in 1992. Earnings per common share increased 22.8%
from $1.80 per share reported in 1991 to $2.21 per share in
1992 after reflecting an increase in shares outstanding due to
the April 1992 offering of 2,000,000 additional shares of
common stock.
LIQUIDITY AND CAPITAL RESOURCES
The Company funded its working capital and capital expenditure
needs in 1993 through internally generated cash flow,
supplemented by borrowings under committed and uncommitted bank
lines of credit and unrated commercial paper. During 1992, the
Company sold 2,000,000 shares of Common Stock in a public
offering, resulting in net proceeds to the Company of
$46,558,000. On June 29, 1993 and August 2, 1993, the Company
issued an aggregate of $70 million of five-year floating rate
notes to a group of five banks. At the Company's option, the
notes will bear interest at a spread above LIBOR or certificate
of deposit rates. Proceeds from the public offering and
floating rate notes were used to reduce commercial paper
borrowings.
The Company maintains a credit facility with several domestic
and foreign banks for committed lines of credit which provide
for borrowings of up to $300,000,000. This agreement was
extended in July 1993 for an additional year and continues
through July 31, 1996, at which time the outstanding amounts
convert to a term loan payable quarterly through July 31, 2000.
The bank lines of credit and unrated commercial paper are used
primarily for seasonal inventory requirements, new store
construction and financing, existing store remodeling,
acquisition of land, and major projects such as MIS
development. At January 29, 1994 the Company had unrated
commercial paper outstanding in the amount of approximately
$161,000,000, and a total of approximately $139,000,000
available for borrowing under its committed credit facilities.
The average interest rate for commercial paper outstanding at
January 29, 1994 was 3.39%. The Company has entered into
interest rate swap agreements to reduce the impact of changes
in interest rates on its commercial paper and other floating
rate debt. At January 29, 1994, the Company had outstanding
four interest rate contracts with commercial banks which
effectively fix the Company's interest rate exposure on an
aggregate $75,000,000 principal amount of commercial paper and
bank line borrowings at rates of between 4.63% and 7.60% and
mature between June 1994 and November 1998. The Company also
purchased two interest rate derivative products ("CAPs") which
limit the maximum interest rate the Company can pay at 5.00% on
a notional amount of $25,000,000 of its short-term floating
rate debt, and which expire in November of 1996 and 1998. In
the event of nonperformance by the other parties to the
interest rate swap agreements (which is not anticipated), the
Company would be exposed to credit loss.
During 1993, the Company opened five new multidepartment stores
and completed seven major store remodels, two of which included
the addition of new food departments to previously nonfood
stores. It began construction of five additional
multidepartment stores scheduled to open in 1994 and has
completed construction of a new wing to the corporate main
offices. The Company is planning on the completion of at least
seven major remodels in 1994, three of which will include the
addition of food departments. The Company closed two
multidepartment stores in 1993 and plans to close one
multidepartment store in 1994. Other capital projects in 1993
included
<PAGE>
<PAGE>20
improvements to the main distribution center, central bakery
and dairy plant, a new retail service center in Chehalis,
Washington which opened in April 1994, and continuation of the
Company's MIS improvement program. In April of 1994, the
Company received commitments from major insurance companies to
fund $57,500,000 for privately placed notes with maturities of
between five and 13 years. Funding is scheduled for July of 1994.
Interest will be paid at fixed rates of between 7.25% and 7.98%
payable on a semi-annual basis. The Company believes that a
combination of cash flow from operations, the above-mentioned
note issuance, and borrowings under its expanded credit
facilities will permit it to finance its capital expenditure
requirements for 1994, budgeted to be $265,000,000. Due
primarily to the current favorable interest rates in relation
to market rents, the Company believes that it is presently
desirable for it to own its newly constructed facilities. If
the Company determines that it is preferable, it may also fund
its capital expenditure requirements by mortgaging facilities,
entering into sale and leaseback transactions, or by issuing
additional debt or equity.
EFFECT OF LIFO
During each year, the Company estimates annual LIFO expense for
the year based on estimates of three factors: inflation rates
(calculated by reference to the Department Stores Inventory
Price Index published by the Bureau of Labor Statistics for
soft goods and jewelry, and to internally generated indices
based on Company purchases during the year for all other
departments), expected inventory levels, and expected markup
levels (after reflecting permanent markdowns and cash
discounts). At year-end, the Company makes the final adjustment
reflecting the difference between the Company's prior quarterly
estimates and actual LIFO expense for the year.
EFFECT OF INFLATION
While management believes that some portion of the increase in
sales is due to inflation, it is difficult to segregate and to
measure the effects of inflation because of changes in the
types of merchandise sold year-to-year and other pricing and
competitive influences. By attempting to control costs and
efficiently utilize resources, the Company strives to minimize
the effects of inflation on its operations.
RECENT ACCOUNTING CHANGES
The Financial Accounting Standards Board issued SFAS
No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions. This Statement requires accrual of
postretirement benefits (such as health-care benefits)
during the years an employee provides services to the
Company. The Company adopted this Statement for its
fiscal year beginning February 2, 1992. This resulted in
an increase of $1,533,000 being charged to operations in 1992.
In February 1992, the Financial Accounting Standards Board
issued SFAS No. 109, Accounting for Income Taxes. This
Statement requires companies to adjust deferred tax
liabilities and assets for changes in tax rates and other
tax law provisions in the period the new tax law is enacted
and to recognize certain deferred tax liabilities. The
Company adopted this accounting standard for its fiscal
year beginning January 31, 1993. As a result of the
adoption of this accounting standard, the Company recorded a
charge to earnings of $2,588,000 to provide for book and tax
basis differences of certain capital assets, inventory and
depreciation arising in connection with the acquisition of the
Company in 1981 and Grand Central, Inc. in 1984.
COMMON STOCK INFORMATION
The Company's common stock began trading on the New York Stock
Exchange (NYSE) under the symbol "FMY" on September 9, 1992.
Prior to that it was quoted in the NASDAQ National Market
System under the symbol "MEYR." At January 29, 1994, the
Company had 1,300 shareholders of record. After becoming
privately held in 1981, the Company began trading publicly
after its initial public offering on October 23, 1986. On April
14, 1992 the Company increased the number of shares outstanding
with the sale of an additional 2,000,000 shares of its common
stock in a public offering, in addition to 2,000,000 shares
sold by a major stockholder. In 1993 a major stockholder sold
3,450,000 shares in a public offering, including approximately
505,000 shares resulting from the exercise of a stock option
that was made simultaneously by an institutional investor.
The Company has not paid dividends since its incorporation in
1981, and it is the current policy of the Board of Directors
that all available cash flow be used for reinvestment in the
business of the Company and for the reduction of debt.
<TABLE>
<CAPTION>
Price Ranges
----------------------------------------------------
1993 1992 1991
---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Fiscal Quarter High Low High Low High Low
- - --------------------------------------------------------------------------
First. . . . . . . . $33 7/8 $27 7/8 $29 1/4 $23 1/2 $19 1/4 $13 3/4
Second . . . . . . . 35 5/8 29 1/4 27 1/2 22 3/4 22 1/4 16
Third. . . . . . . . 37 31 29 1/2 24 3/4 24 3/4 19 3/4
Fourth . . . . . . . 38 1/2 34 1/2 33 7/8 29 28 3/4 20 1/2
- - --------------------------------------------------------------------------
/TABLE
<PAGE>
<PAGE>21
<TABLE>
STATEMENTS OF CONSOLIDATED OPERATIONS
<CAPTION>
Fiscal Year Ended
-----------------------------------------
January 29, January 30, February 1,
(In thousands, except per-share data) 1994 1993 1992
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales . . . . . . . . . . . . . . . . . . . . . . . $2,979,082 $2,853,962 $2,702,721
----------------------------------------
Cost of Goods Sold (Notes 3 and 7):
General . . . . . . . . . . . . . . . . . . . . . . . 2,083,141 1,991,310 1,887,255
Related party lease . . . . . . . . . . . . . . . . . 5,566 5,566 5,566
----------------------------------------
Total cost of goods sold. . . . . . . . . . . . . . 2,088,707 1,996,876 1,892,821
----------------------------------------
Gross Margin. . . . . . . . . . . . . . . . . . . . . . 890,375 857,086 809,900
Operating and Administrative Expenses (Notes 3, 6, and 7):
General . . . . . . . . . . . . . . . . . . . . . . . 692,354 680,991 660,980
Related party leases. . . . . . . . . . . . . . . . . 57,942 59,876 63,108
Interest related to occupancy . . . . . . . . . . . . 11,331 11,137 7,804
----------------------------------------
Total operating and administrative expenses . . . . 761,627 752,004 731,892
----------------------------------------
Reversal of Restructuring Charge (Note 4) . . . . . . . -- -- (8,289)
----------------------------------------
Income From Operations. . . . . . . . . . . . . . . . . 128,748 105,082 86,297
Interest Expense--Net of interest income of $707,
$544, and $517. . . . . . . . . . . . . . . . . . . . 8,246 8,912 15,302
----------------------------------------
Income Before Income Taxes. . . . . . . . . . . . . . . 120,502 96,170 70,995
Provision For Income Taxes (Note 5) . . . . . . . . . . 49,598 35,583 25,768
----------------------------------------
Net Income Before Cumulative Effect of
Accounting Change . . . . . . . . . . . . . . . . . . 70,904 60,587 45,227
Cumulative Effect of Accounting Change (Notes 2 and 5). (2,588) -- --
----------------------------------------
Net Income. . . . . . . . . . . . . . . . . . . . . . . $ 68,316 $ 60,587 $ 45,227
==========-----==========-----==========
Earnings Per Common Share:
Net income before cumulative effect of
accounting change . . . . . . . . . . . . . . . . . $2.50 $2.21 $1.80
Cumulative effect of accounting change. . . . . . . . (.09) -- --
-----------------------------------
Net Income. . . . . . . . . . . . . . . . . . . . . . . $2.41 $2.21 $1.80
=====----------=====----------=====
Weighted Average Number of Common Shares Outstanding. . 28,375 27,446 25,182
- - --------------------------------------------------------------======---------======---------======
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>22
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS January 29, January 30,
(In thousands) 1994 1993
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,054 $ 31,884
Receivables (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . 18,306 14,715
Inventories (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . 477,568 426,078
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . 54,098 57,496
Current portion of deferred taxes. . . . . . . . . . . . . . . . . . 7,828 --
-----------------------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 591,854 530,173
-----------------------------
Property And Equipment:
Buildings, fixtures and equipment. . . . . . . . . . . . . . . . . . 956,360 752,336
Property held under capital leases (Note 7). . . . . . . . . . . . . 19,818 23,855
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,505 82,840
-----------------------------
Total property and equipment . . . . . . . . . . . . . . . . . . . . 1,091,683 859,031
Less accumulated depreciation and amortization . . . . . . . . . . . 372,345 316,821
-----------------------------
Property and equipment--net. . . . . . . . . . . . . . . . . . . . . 719,338 542,210
-----------------------------
Other Assets:
Goodwill--net (Note 2) . . . . . . . . . . . . . . . . . . . . . . . 5,523 5,831
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,067 889
-----------------------------
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . 7,590 6,720
-----------------------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,318,782 $1,079,103
- - -----------------------------------------------------------------------==========---------==========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>23
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY January 29, January 30,
(In thousands) 1994 1993
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities:
Outstanding checks (Note 2). . . . . . . . . . . . . . . . . . . . . . . $ 72,373 $ 70,411
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217,277 188,819
Current portion of long-term debt and lease obligations. . . . . . . . . 1,749 1,974
Income taxes payable (Note 5). . . . . . . . . . . . . . . . . . . . . . 18,660 15,418
Accrued expenses:
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,100 39,511
Insurance and other. . . . . . . . . . . . . . . . . . . . . . . . . . 31,834 28,783
--------------------------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . 382,993 344,916
--------------------------
Long-term Debt (Note 6). . . . . . . . . . . . . . . . . . . . . . . . . 321,398 195,837
--------------------------
Capital Lease Obligations (Note 7) . . . . . . . . . . . . . . . . . . . 14,895 16,621
--------------------------
Deferred Lease Transactions (Note 7) . . . . . . . . . . . . . . . . . . 48,254 44,785
--------------------------
Deferred Income Taxes (Note 5) . . . . . . . . . . . . . . . . . . . . . 18,496 16,376
--------------------------
Other Long-term Liabilities (Notes 4 and 10) . . . . . . . . . . . . . . 5,060 10,440
--------------------------
Commitments and Contingencies (Notes 2, 7 and 12). . . . . . . . . . . .
--------------------------
Stockholders' Equity (Notes 3 and 8):
Preferred stock, $.01 par value (authorized, 5,000 shares;
outstanding, none) . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Common stock, $.01 par value (authorized, 100,000 shares;
issued, 1993--26,705 shares, and 1992--25,862 shares;
outstanding, 1993--26,415 shares, and 1992--25,572 shares) . . . . . . 267 259
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 193,719 185,080
Unearned compensation. . . . . . . . . . . . . . . . . . . . . . . . . . (527) (1,122)
Treasury stock (1993--290 shares, and 1992--290 shares). . . . . . . . . (3,896) (3,896)
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 338,123 269,807
--------------------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . 527,686 450,128
--------------------------
Total liabilities and stockholders' equity $1,318,782 $1,079,103
- - --------------------------------------------------------------------------==========------==========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>24
<TABLE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
<CAPTION>
Fiscal Year Ended
-----------------------------------------
January 29, January 30, February 1,
(In thousands) 1994 1993 1992
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 68,316 $ 60,587 $ 45,227
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property
and equipment. . . . . . . . . . . . . . . . . . . . . 70,547 66,958 48,139
Write-off of capitalized software development costs. . . -- -- 8,748
Reversal of restructuring charge . . . . . . . . . . . . -- -- (8,289)
Deferred lease transactions. . . . . . . . . . . . . . . 3,469 4,768 3,958
Deferred income taxes. . . . . . . . . . . . . . . . . . (5,708) (189) 1,984
Other liabilities. . . . . . . . . . . . . . . . . . . . 721 1,533 --
Inventories. . . . . . . . . . . . . . . . . . . . . . . (51,490) (22,803) (25,015)
Other current assets . . . . . . . . . . . . . . . . . . (1) (19,759) 5,710
Accounts payable and accrued expenses. . . . . . . . . . 32,354 32,316 5,672
Income taxes . . . . . . . . . . . . . . . . . . . . . . 3,242 13,687 (4,013)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . (5,067) 356 3,393
----------------------------------------
Net cash provided by operating activities. . . . . . . . . 116,383 137,454 85,514
Cash Flows from Financing Activities:
Proceeds from stock offering . . . . . . . . . . . . . . . -- 45,608 --
Issuance of other common stock--net. . . . . . . . . . . . 8,647 8,779 4,628
Collection of notes receivable . . . . . . . . . . . . . . 264 1,092 139
Increase in notes receivable . . . . . . . . . . . . . . . (1,402) (114) (1,167)
Increase (decrease) in outstanding checks. . . . . . . . . 1,962 (11,960) 9,701
Long-term financing:
Borrowings . . . . . . . . . . . . . . . . . . . . . . . 126,310 2,941 13,728
Repayments . . . . . . . . . . . . . . . . . . . . . . . (1,015) (51,761) (5,652)
----------------------------------------
Net cash provided by (used in) financing activities. . . . 134,766 (5,415) 21,377
Cash Flows from Investing Activities:
Property and equipment . . . . . . . . . . . . . . . . . . (253,920) (144,628) (105,881)
Net proceeds from sale/leaseback of property and
retirement of other assets . . . . . . . . . . . . . . . 4,941 14,485 --
----------------------------------------
Net cash used for investing activities . . . . . . . . . . (248,979) (130,143) (105,881)
----------------------------------------
Cash Increase for the Year . . . . . . . . . . . . . . . . 2,170 1,896 1,010
Cash, Beginning of Year. . . . . . . . . . . . . . . . . . 31,884 29,988 28,978
----------------------------------------
Cash, End of Year. . . . . . . . . . . . . . . . . . . . . $ 34,054 $ 31,884 $ 29,988
=========------=========-------=========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest (including interest capitalized of
$1,689, $406, and $1,321). . . . . . . . . . . . . . . $ 17,984 $ 18,193 $ 18,066
Income taxes . . . . . . . . . . . . . . . . . . . . . . 53,197 21,514 27,106
- - --------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>25
<TABLE>
STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY
<CAPTION>
Common Stock
------------------ Additional
Number of Paid-in Unearned Treasury Retained
(In thousands) Shares Amount Capital Compensation Stock Earnings Total
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 2, 1991. . . . . . . . . . . . 22,564 $229 $124,848 $ 0 $(3,771) $163,993 $285,299
Issuance/purchase of common stock:
Stock options exercised. . . . . . . . . . . . 233 2 2,750 -- -- -- 2,752
Stock awards . . . . . . . . . . . . . . . . . 1 -- 11 -- -- -- 11
Stock bonuses/sale . . . . . . . . . . . . . . 120 1 2,612 (1,637) -- -- 976
Tax benefit from stock options . . . . . . . . -- -- 691 -- -- -- 691
Amortization of unearned compensation. . . . . -- -- -- 198 -- -- 198
Net income . . . . . . . . . . . . . . . . . . . -- -- -- -- -- 45,227 45,227
-----------------------------------------------------------------------------
Balance, February 1, 1992. . . . . . . . . . . . 22,918 232 130,912 (1,439) (3,771) 209,220 335,154
Issuance/purchase of common stock:
Stock issuance . . . . . . . . . . . . . . . . 2,000 20 45,588 -- -- -- 45,608
Stock options exercised. . . . . . . . . . . . 649 6 6,773 -- -- -- 6,779
Stock awards . . . . . . . . . . . . . . . . . -- -- 2 -- -- -- 2
Stock bonuses/sale . . . . . . . . . . . . . . 9 1 247 (248) -- -- --
Treasury stock . . . . . . . . . . . . . . . . (4) -- -- -- (125) -- (125)
Tax benefit from stock options . . . . . . . . -- -- 1,558 -- -- -- 1,558
Amortization of unearned compensation. . . . . -- -- -- 565 -- -- 565
Net income . . . . . . . . . . . . . . . . . . . -- -- -- -- -- 60,587 60,587
-----------------------------------------------------------------------------
Balance, January 30, 1993. . . . . . . . . . . . 25,572 259 185,080 (1,122) (3,896) 269,807 450,128
Issuance/purchase of common stock:
Stock options exercised. . . . . . . . . . . . 843 8 7,185 -- -- -- 7,193
Tax benefits from stock options. . . . . . . . -- -- 1,454 -- -- -- 1,454
Amortization of unearned compensation. . . . . -- -- -- 595 -- -- 595
Net income . . . . . . . . . . . . . . . . . . . -- -- -- -- -- 68,316 68,316
-----------------------------------------------------------------------------
Balance, January 29, 1994. . . . . . . . . . . . 26,415 $267 $193,719 $(527) $(3,896) $338,123 $527,686
- - -----------------------------------------------------======-----====-----========----------======---========---========---========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY
Fred Meyer, Inc., a Delaware corporation, and its subsidiaries
(the "Company") operate a chain of 127 retail stores offering a
wide range of food, products for the home, apparel, fine
jewelry, and home improvement items, with emphasis on
necessities and items of everyday use. The stores are located
in Oregon, Washington, Utah, Alaska, Idaho, Northern California
and Montana and include 97 free-standing, multidepartment
stores and 30 specialty stores.
On December 11, 1981, the Company and a related newly formed
Oregon limited partnership, Fred Meyer Real Estate Properties,
Ltd. whose name was changed in 1991 to Real Estate Properties
Limited Partnership ("Properties") purchased substantially all
of the assets and the business of Fred Meyer, Inc., an Oregon
corporation, and its wholly owned subsidiaries (the
"Predecessor Company"). The Company acquired the operating
business and certain assets and assumed certain liabilities of
the Predecessor Company, and Properties acquired all of the
Predecessor Company's interests in real property and assumed
the indebtedness thereon. The Predecessor Company ceased
operations immediately after the sale and the Company began
operations on December 12, 1981.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation--The accompanying financial
statements include the consolidated accounts of the Company and
its subsidiaries. All significant intercompany transactions and
balances have been eliminated.
Fiscal Year--The Company's fiscal year is generally 52 weeks,
but periodically consists of 53 weeks, because the fiscal year
ends on the Saturday closest to January 31. Fiscal years 1993,
1992, and 1991 ended on January 29, 1994, January 30, 1993, and
February 1, 1992, respectively.
Unless otherwise stated, references to years in this report
relate to fiscal years rather than to calendar years.
Segment Reporting--The Company's operations consist of one
segment, retail sales.
Inventories--The Company's inventories consist principally of
items held for sale in its retail operations and substantially
all inventories are stated at the lower of last-in, first-out
(LIFO) cost or market. If the first-in, first-out method, which
approximates replacement cost, had been used in determining
inventory values, they would have been $56,685,000,
$53,155,000, and $48,988,000 higher at January 29, 1994,
January 30, 1993, and February 1, 1992, respectively.
Property and Equipment--Property and equipment is stated at
cost. Depreciation is provided using the straight-line method
over the estimated useful lives of the related assets.
Amortization of property under capital leases is provided using
the straight-line method over the related lease terms.
Goodwill--Goodwill is being amortized on a straight-line basis
over 30 years. Accumulated amortization was $3,736,000 at
January 29, 1994 and $3,428,000 at January 30, 1993. Management
periodically evaluates the recoverability of goodwill based
upon current and anticipated net income and undiscounted future
cash flows.
Outstanding Checks--Checks issued against bank accounts with a
zero bank balance are included in current liabilities.
Pre-opening Costs--All noncapital expenditures incurred in
connection with the opening of new or acquired stores and other
facilities or remodeling of existing stores are expensed as
incurred.
Income Taxes--Deferred income taxes are provided for those
items included in the determination of income or loss in
different periods for financial reporting and income tax
purposes. Targeted jobs and other tax credits are recognized in
the year realized.
Effective January 31, 1993, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 109, Accounting
for Income Taxes. Accordingly, the Company has changed its
method of accounting for income taxes from the deferred
method used in prior years to the method prescribed by
SFAS No. 109. Under SFAS No. 109, deferred income taxes
are recognized for the tax consequences in future years
of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each
year-end based on enacted tax laws and statutory tax rates
applicable to the periods in which the differences are
expected to affect taxable income. Income tax expense
is the tax payable for the period and the change during
the period in deferred tax assets and liabilities. Prior
years' financial statements have not been restated for the
accounting change (see Note 5).
Earnings Per Common Share--Fully diluted earnings per common
share are computed by dividing net income by the weighted
average number of common and common equivalent shares
outstanding. Weighted average shares reflect the dilutive
effect of the outstanding stock options (ranging in exercise
price from $3.24 to $36.75 per share), which was determined
using the treasury stock method.
Reclassifications--Certain prior year amounts have been
reclassified to conform to current year presentation. The
reclassifications have no effect on net income.
3. RELATED-PARTY TRANSACTIONS
At January 29, 1994, the Company leased or subleased, under
operating or capital leases, 24 store locations, and other
miscellaneous property from Properties and its wholly owned
subsidiaries, which have certain common ownership with the
Company. Payments under these leases and those terminated
during the year were $21,290,000 in 1993, $23,368,000 in 1992,
and $27,041,000 in 1991. The Company also leases 35 store
locations and a distribution center from an institutional
investor, who is a major beneficial shareholder of the
Company's stock. Rents paid to this shareholder on these
properties were $39,573,000 in 1993 and $38,476,000 in both
1992 and 1991.
Total rents included in operating and administrative expenses
for locations leased or subleased from related parties were
$57,942,000 in 1993, $59,876,000 in 1992, and $63,108,000 in
1991, based on the average rental paid during the primary term
of the leases. This does not include the Company's main
distribution center, which is included in cost of goods sold in
the amount of $5,566,000 in each of the years 1993, 1992 and
1991.
<PAGE>
<PAGE>27
During 1991, the Company charged Properties and its wholly
owned subsidiaries for accounting and general and
administrative services rendered. As of September 3, 1991, the
Company discontinued providing such services to Properties.
Charges for these services were $206,000 in 1991.
At January 30, 1993, $18,000 was outstanding on a note
receivable due from an officer of the Company related to common
stock purchased. The balance was paid to the Company during
1993.
On October 30, 1992, the Company purchased property totaling
$3,000,000 from Properties and its wholly owned subsidiaries
which have certain common ownership with the Company. Rents
paid on this property in 1992 and 1991 totaled $393,000 and
$472,000, respectively.
4. RESTRUCTURING CHARGE
During 1989, the Company incurred a restructuring charge of
$49,277,000 ($31,045,000 after a deferred tax benefit of
$18,232,000) related to the write-down of certain assets and
other noncash charges in connection with remodeling, replacing,
and closing stores and to the conversion of the Company's MIS
hardware from Honeywell to IBM.
During 1991, as a result of a reassessment by current
management, based in part on the better-than-expected operating
results, six stores previously scheduled for closure were not
closed. Accordingly, the Company recognized a fourth quarter
increase to pre-tax earnings of $8,289,000 relating to the
reversal of a portion of the restructuring charge taken in
1989. This reversal was offset in part by increased obligations
for leases on stores previously closed as part of the
restructuring in 1989.
At January 29, 1994, included in other long-term liabilities,
were charges for net rentals under noncancelable leases for
future fiscal years for stores which will be replaced or closed
and for Honeywell hardware in the amounts of (in thousands):
<TABLE>
<CAPTION>
Less
Estimated Estimated
Subleases/ Net
Fiscal Year Leases Discounts Rentals
- - -----------------------------------------------------------------
<S> <C> <C> <C>
1994. . . . . . . . . . . . . . .$ 1,701 $ 800 $ 901
1995. . . . . . . . . . . . . . . 1,368 823 545
1996. . . . . . . . . . . . . . . 1,271 824 447
1997. . . . . . . . . . . . . . . 1,122 830 292
1998. . . . . . . . . . . . . . . 1,122 830 292
1999 and thereafter . . . . . . . 7,949 6,720 1,229
--------------------------------
Total . . . . . . . . . . . . . .$14,533 $10,827 $3,706
- - ---------------------------------=======------=======------======
</TABLE>
5. INCOME TAXES
The provision for income taxes includes the following (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
- - -----------------------------------------------------------------
<S> <C> <C> <C>
Current . . . . . . . . . . . . .$57,894 $35,772 $23,784
Deferred. . . . . . . . . . . . . (8,296) (189) 1,984
--------------------------------
Total . . . . . . . . . . . . .$49,598 $35,583 $25,768
- - ---------------------------------=======-----=======------=======
</TABLE>
A reconciliation between the statutory federal income tax rate
to the provision for income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
- - -----------------------------------------------------------------
<S> <C> <C> <C>
Federal income taxes at the
statutory rate. . . . . . . . .$42,176 $32,698 $24,138
Settlement of certain
IRS audits. . . . . . . . . . . 3,588 -- --
Deferred income taxes increase
in statutory rate . . . . . . . 219 -- --
State income taxes. . . . . . . . 3,615 2,885 2,130
Targeted jobs and other
tax credits . . . . . . . . . . (926) (1,180) (1,771)
Other, net. . . . . . . . . . . . 926 1,180 1,271
--------------------------------
Provision for income taxes. . . .$49,598 $35,583 $25,768
- - ---------------------------------========----========----========
</TABLE>
As a result of the adoption of SFAS 109, 1993 consolidated net
income was decreased by $2,588,000 (see Note 2).
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred
tax liabilities at January 29, 1994 are as follows (in
thousands):
<TABLE>
<CAPTION>
- - --------------------------------------------------------------
<S> <C>
Deferred tax assets:
Capitalized inventory costs . . . . . . . . . . . . $ 6,332
Accrued expenses. . . . . . . . . . . . . . . . . . 17,710
Restructuring related charges . . . . . . . . . . . 4,154
Deferred lease transactions . . . . . . . . . . . . 18,337
Other . . . . . . . . . . . . . . . . . . . . . . . 6,860
-------
Total deferred tax assets . . . . . . . . . . . . 53,393
-------
Deferred tax liabilities:
Accumulated depreciation. . . . . . . . . . . . . . 41,712
Prepaid expenses. . . . . . . . . . . . . . . . . . 12,785
LIFO inventory. . . . . . . . . . . . . . . . . . . 9,564
-------
Total deferred tax liabilities. . . . . . . . . . 64,061
-------
Net deferred income taxes . . . . . . . . . . . . $10,668
=======
Current deferred income taxes--asset. . . . . . . . . $(7,828)
Noncurrent deferred income taxes--liability . . . . . 18,496
-------
Net deferred income taxes . . . . . . . . . . . . . . $10,668
- - -------------------------------------------------------=======
</TABLE>
Under the prior method of accounting, the deferred income tax
provision included the following (in thousands):
<TABLE>
<CAPTION>
1992 1991
- - -----------------------------------------------------------------
<S> <C> <C>
Depreciation . . . . . . . . . . . . . . . . $ 3,122 $ 1,757
Restructuring charge . . . . . . . . . . . . 4,073 6,381
Prepaids . . . . . . . . . . . . . . . . . . 10 973
Rental expense . . . . . . . . . . . . . . . (1,827) (1,827)
Capitalized inventory costs. . . . . . . . . (366) (189)
Purchase discounts received in advance . . . (1,177) (812)
Pension and profit sharing payment . . . . . 665 36
Computer system development
costs capitalized. . . . . . . . . . . . . (6,516) (963)
Vacation pay . . . . . . . . . . . . . . . . (798) (984)
Other. . . . . . . . . . . . . . . . . . . . 2,625 (2,388)
-------------------
Total deferred income tax
(benefit) provision. . . . . . . . . . . . $ (189) $ 1,984
- - ---------------------------------------------========----========
</TABLE>
<PAGE>
<PAGE>28
6. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
1993 1992
- - ------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial paper, payable 1994 at current interest
rates of 2.95% to 3.65%, classified as long-term. . . . . . . . . . . $160,911 $ 99,818
Uncommitted bank borrowings, effective interest
rate 3.44%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 8,000
Long-term notes secured by trust deeds, due 2010 through
2012, fixed interest rates from 9.0% to 9.52% . . . . . . . . . . . . 43,943 44,531
Long-term notes, unsecured:
Due 1998, interest rate is periodically reset, 4.07%
at January 29,1994. . . . . . . . . . . . . . . . . . . . . . . . . 70,000 --
Due 1996, interest rate 7.74% . . . . . . . . . . . . . . . . . . . . 10,000 10,000
Zero coupon notes, due in 1994, fixed interest rate
of 9.3%, classified as long-term. . . . . . . . . . . . . . . . . . . 37,024 33,806
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269 323
---------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322,147 196,478
Less current portion. . . . . . . . . . . . . . . . . . . . . . . . . . (749) (641)
---------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $321,398 $195,837
- - ---------------------------------------------------------------------------========-----========
</TABLE>
The Company has the ability to support commercial paper,
uncommitted bank borrowings, and other debt on a long-term
basis through its Credit Agreement and therefore, based upon
management's intent, has classified $197,935,000 of these
borrowings as long-term debt. On July 31, 1993, the Company
amended its Credit Agreement, which now provides for, among
other things: (1) a revolving credit commitment of $300,000,000
and, at the option of the Company, conversion of the unpaid
balance at July 31, 1996 into term notes payable over four
years; (2) interest at a spread over LIBOR on such borrowings
or various other pricing options; and (3) a facility fee
of .20% of the amount of the commitment. The Agreement, among
other things, requires the maintenance of specified ratios and
restricts the amounts of fixed asset acquisitions, debt
incurred, and cash dividends paid. At January 29, 1994,
$17,079,000 of retained earnings was available for dividends,
which are limited to 25% of current-year earnings payable in
the following year.
The Company has established uncommitted lines of credit with
international banks for $35,000,000 and has uncommitted bid
lines of credit with certain banks within its committed bank
group for $105,000,000. These lines, which generally have terms
of one year, allow the Company to borrow from the banks at the
banks' discretion at mutually agreed upon rates, usually below
the rates offered under the Credit Agreement. The Company has
unrated commercial paper programs with maturities ranging from
one to 270 days in amounts up to a maximum of $300,000,000. The
Company also has available a letter of credit line for
$25,000,000, against which letters of credit for $11,109,000
had been issued at January 29, 1994.
In 1991, the Company financed the land and building portion of
one new store with an insurance company. The note requires
regular payments based on a 25-year amortization and can be
called by the insurance company or repaid by the Company,
without premium, after 10 years. Other notes secured by trust
deeds entered into in 1990 require similar payment terms.
During 1993, the Company placed $70,000,000 of unsecured, five
year notes with five domestic and international banks. The
floating rate notes bear interest at a spread over LIBOR or
other pricing indices at the Company's option for durations of
30 to 180 days. Interest on the notes is paid not later than
quarterly.
The Company has entered into interest rate swap agreements to
reduce the impact of changes in interest rates on its floating
rate debt. At January 29, 1994, the Company had outstanding six
interest rate contracts with commercial banks, having a total
notional principal amount of $100,000,000. Four of these
agreements effectively fix the Company's interest rate on
unrated commercial paper, floating rate facilities, and
uncommitted lines of credit at rates between 4.625% and 7.595%
on a notional principal amount of $75,000,000. These contracts
expire at various dates through 1998. The remaining two
agreements are interest rate derivative products ("CAPs")
which effectively limit the maximum interest rate the
Company will pay at 5.0% on a notional principal amount of
$25,000,000. These two agreements mature in 1996 and 1998. The
Company is exposed to credit loss in the event of
nonperformance by the other parties to the interest rate swap
agreements. However, the Company does not anticipate
nonperformance by the other parties.
Beginning in 1992, the Company changed its primary method of
financing land and buildings from leasing to ownership. In
order to consistently reflect the financial cost of the
investment in real estate under different financial
arrangements, the Company reclassifies interest associated with
owned stores into the operating and administrative expenses in
its financial statements. Interest expense reclassified was
$11,331,000, $11,137,000 and $7,804,000 for the fiscal years
ending January 29, 1994, January 30, 1993, and February 1,
1992, respectively.
Annual estimated long-term debt maturities for the five fiscal
years subsequent to January 29, 1994 are: 1994, $749,000; 1995,
$753,000; 1996, $35,764,000; 1997, $50,143,000; 1998,
$50,412,000; and thereafter, $184,326,000. The Company expects
to renegotiate and extend maturities on portions of its credit
facilities in 1994.
7. LEASES
The Company leases or subleases a substantial portion of the
real property used in its operations.
At October 22, 1986, the leases and subleases for a
distribution center, 71 store locations, and certain other
properties were amended and restated to provide, among other
things, an initial lease term of 20 years for 36 locations
(with cash rents of $38,476,000 for the first seven years and
$46,070,000 for the remaining 13 years). The average rent over
the primary lease term is charged to rent expense.
As a result of the above transaction: (1) five previously
capitalized leases qualified as operating leases, resulting in
a decrease in property held under capital leases and capital
lease obligations of $53,678,000 and $72,160,000 respectively,
with the resulting $18,482,000 gain deferred and amortized over
the 20-year lease period; and (2) the difference between the
amount of the cash rent paid and the expense charged to
operations on the 36 locations described above is included in
deferred lease transactions.
In 1992, the Company amended leases for nine store locations,
with cash rent escalating over the term of the leases. The
difference between cash rent paid and the expense charged to
operations is included in deferred lease transactions. The
average rent over the primary lease term is charged to rent
expense.
<PAGE>
<PAGE>29
At January 29, 1994, deferred lease transactions consisted of
$11,780,000 unamortized gain on capital leases, $35,591,000 of
excess of rent expense over cash rents for the aforementioned
leases, and unamortized deferred gain on a sale-leaseback
transaction of $883,000.
The lease terms of certain operating leases require the payment
of executory costs such as property taxes, utilities,
insurance, and maintenance. Certain leases provide for
percentage rents. Portions of the properties are subleased to
others for periods of from one to 20 years.
At January 29, 1994, minimum rentals under noncancelable leases
for future fiscal years were (in thousands):
<TABLE>
<CAPTION>
Operating Capitalized Less Net
Fiscal Year Leases Leases Subleases Rentals
- - ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994. . . . . . . . . . . $ 89,331 $ 1,947 $ 7,625 $ 83,653
1995. . . . . . . . . . . 84,616 1,947 6,624 79,939
1996. . . . . . . . . . . 79,782 1,947 4,396 77,333
1997. . . . . . . . . . . 77,078 1,988 3,816 75,250
1998. . . . . . . . . . . 74,913 2,109 2,673 74,349
1999 and thereafter . . . 688,594 35,342 18,072 705,864
- - ------------------------------------ ------- ------- ----------
Total . . . . . . . . . . $1,094,314 45,280 $43,206 $1,096,388
========== ======= ==========
Less imputed interest . . (30,286)
--------
Present value of minimum
rental payments . . . . . 14,994
Less current portion. . . (99)
--------
Capitalized lease
obligations . . . . . . $14,895
- - -------------------------------------------=======-------------------------
</TABLE>
As of January 29, 1994, the leases for 10 store locations and
one distribution center were accounted for as capital leases.
The amounts representing interest expense on these capital
lease obligations were included in operating and administrative
expenses and were $2,111,000 in 1993, $2,261,000 in 1992, and
$2,529,000 in 1991.
Accumulated amortization of property under capital leases was
$6,072,000 at January 29, 1994, $7,708,000 at January 30, 1993,
and $7,156,000 at February 1, 1992.
Rent expense under operating leases included in operating and
administrative expenses, executory costs, and payments under
capital leases were as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
- - --------------------------------------------------------------------------
<S> <C> <C> <C>
Gross rent expense. . . . . . . . . . . . . $104,892 $113,894 $125,111
Rent income from subleases. . . . . . . . . (11,582) (10,332) (9,450)
------------------------------
Net rent expense. . . . . . . . . . . . . . 93,310 103,562 115,661
Payments under capital leases . . . . . . . 2,178 2,370 2,370
------------------------------
Total . . . . . . . . . . . . . . . . . . . $ 95,488 $105,932 $118,031
- - --------------------------------------------========---========---========
</TABLE>
Included in gross rent expense for 1993, 1992, and 1991 were
contingent rents of $1,650,000, $1,845,000, and $1,832,000,
respectively.
8. STOCKHOLDERS' EQUITY
Stock Incentive Plans--At January 29, 1994, 2,525,406 shares of
common stock were reserved for issuance to employees, including
officers and directors, and non-employee agents, consultants
and advisors, under stock incentive plans. These plans provide
for the granting of incentive stock options, nonqualified stock
options, stock bonuses, stock appreciation rights, cash bonus
rights and performance units.
Under the terms of the plans, the option price is determined by
the Board of Directors at the time the option is granted. The
option price for incentive stock options cannot be less than
the fair value of the Company's stock on the day prior to the
date of grant. Nonqualified stock options may not be granted at
less than 50% of the fair value on the day prior to the date of
grant.
Stock Options--Activity under the plans was as follows (in
thousands, except per share data):
<TABLE>
<CAPTION>
Option Price
(Market Price at Date of Grant)
----------------------------------------
Shares Per Share Total
- - --------------------------------------------------------------------------
<S> <C> <C> <C>
Shares under option:
Balance, February 1, 1992. . . . . 1,880 $12.125-23.000 $32,116
Options granted. . . . . . . . . . 344 24.750-30.875 8,687
Options exercised. . . . . . . . . (356) 12.125-21.750 (5,829)
Options cancelled. . . . . . . . . (43) 12.125-24.750 (643)
----- -------
Balance, January 30, 1993. . . . . 1,825 12.125-30.875 34,331
Options granted. . . . . . . . . . 706 30.625-36.750 23,265
Options exercised. . . . . . . . . (339) 12.125-27.250 (5,856)
Options cancelled. . . . . . . . . (39) 12.125-32.750 (1,089)
----- -------
Balance, January 29, 1994. . . . . 2,153 12.125-36.750 $50,651
===== =======
Shares exercisable,
January 29, 1994 . . . . . . . . 719 12.125-30.875
Shares available for option:
January 30, 1993 . . . . . . . . 1,039
January 29, 1994 . . . . . . . . . 372
- - --------------------------------------------------------------------------
</TABLE>
Other Option--The Company's principal stockholder, FMI
Associates, holds an option, which expires in 1996, that
initially allowed for a purchase of up to 2,364,300 shares of
the Company's common stock at $3.24 per share for an aggregate
of $7,668,000. In 1992, 292,792 shares were exercised,
resulting in a balance of 2,071,508 shares for an aggregate of
$6,718,000. In 1993, 505,067 shares were exercised, resulting
in a balance of 1,566,441 shares for an aggregate of
$5,080,000.
Stock Awards--During 1993, 1992, and 1991, 142 shares, 78
shares, and 615 shares with a market value of $5,000, $2,000,
and $11,000, respectively, were awarded to non-executive
employees of the Company.
Management Bonus--In 1992, the Company awarded stock bonuses
to a corporate officer for 5,000 shares totaling $124,000.
Shares issued vest annually over five years. In 1991, the
Company awarded cash and stock bonuses to two corporate
officers totaling $2,212,000. Shares issued of 74,700, with a
market value at the times of the issuance of $1,637,000,
vest monthly over three years.
Non-employee Directors Stock Compensation Plan--In 1992, the
Company purchased 4,016 shares of its common stock at market
prices for the benefit of two of its non-employee directors in
lieu of a portion of current and future board of director fee
payments. The shares total $125,000 and vest annually over five
years.
<PAGE>
<PAGE>30
9. EMPLOYEE BENEFIT PLANS
Employees' Profit-sharing Plan--Profit-sharing contributions
under this Plan, which covers the Company's nonunion employees,
are made to a trust fund held by a third-party trustee.
Contributions are based on the Company's pre-tax income, as
defined, at rates determined by the Board of Directors and are
not to exceed amounts deductible under applicable provisions of
the Internal Revenue Code. The Company expensed $3,944,000 in
1993, $3,248,000 in 1992, and $3,056,000 in 1991 for these
contributions.
Multi-employer Pension Plan--The Company contributes to multi-
employer pension plan trusts at specified rates in accordance
with collective bargaining agreements. Contributions to the
trusts were $9,667,000 in 1993, $9,157,000 in 1992, and
$9,424,000 in 1991. The Company's relative positions in these
plans with respect to the actuarial present value of the
accumulated benefit obligation and the projected benefit
obligation, net assets available for benefits, and the assumed
rates of return used by the plans are not determinable.
Cash Incentive Plan--Under the Company's cash incentive plan
for selected management personnel, a maximum of 600,000 units
may be awarded. Recipients of an award are paid an amount per
unit equivalent to the increase in book value, adjusted to
exclude certain items, of a share of common stock for the
period the unit is outstanding. At January 30, 1993, 517,925
units had been awarded, of which zero units were outstanding.
The Company accrues expenses incurred under the plan, which
were $5,000 in 1992 and $18,000 in 1991. No executive officers
or directors of the Company participate in this plan, unless
they were awarded units prior to their promotion to such
positions.
Employee Stock Purchase Plan--In April 1992, the Company
implemented a non-contributory employee stock purchase plan.
The plan allows employees to purchase stock in the Company via
payroll deductions. The Company pays all brokerage fees
associated with the purchase of the stock. The plan is
available to all employees over age 18 who have completed six
months of continuous employment with the Company.
Supplemental Retirement Benefit Plan--In January 1994, the
Company implemented a supplemental retirement program for
senior management, selected vice presidents and selected key
individuals. Program provisions are as follows:
Senior Management--The plan is funded with life insurance
contracts on the lives of the participants. The Company is the
owner of the contracts and makes annual contributions of
$25,000 per participant. Total contributions were $325,000 in
1993. Retirement age under the plan is normally 62 with an
alternative age of 65, at which point the Company will make 15
annual benefit payments to the executive.
Selected Vice Presidents and Selected Key Individuals--The
Company will contribute annually a percentage of each
participant's gross salary. The plan is funded with life
insurance contracts on participants 54 and younger and variable
annuity contracts for participants 55 and older. Each
participant is the owner of his/her respective contract.
10. OTHER POSTRETIREMENT BENEFITS
For employees who retired prior to January 1, 1994, the Company
sponsors a retiree health plan, with eligibility requirements
for postretirement health care coverage varying by region of
the Company, as follows:
Eastern Region
Retirement after attaining age 60 with 25 years of continuous
service as a salaried employee.
Southern & Northern Regions:
Salaried employees
(A) Age 60 or more with 25 years of continuous service
(B) Age 62 or more with 20 years of continuous service
(C) Age 65 or more with 15 years of continuous service
Salaried and hourly employees
(D) Ages 62 to 65 with 15 years of continuous service: self-
pay, with coverage to terminate upon Medicare eligibility.
The Company contributes 100% of the premium for eligible
retirees, up to a monthly cap of $250 per person, except
there is no Company contribution for eligibility requirement
(D), for which the retiree pays the entire premium.
As of January 1, 1994, the Company changed the eligibility
requirements for all salaried and non-union hourly employees
for all regions to: Age 60 or more with 10 years of continuous
service. Under the plan, the retiree pays the premium at
current employee rates.
In 1992, the Company changed its method of accounting for these
postretirement benefits to conform with SFAS No. 106, Employers'
Accounting for Postretirement Benefits Other than Pensions.
This statement requires accrual of postretirement benefits
during the years an employee provides services. Prior to 1992,
the costs of these benefits were expensed on a pay-as-you-go
basis. Adoption of this statement resulted in an increase of
$747,000 and $1,484,000 being charged to operations for these
postretirement benefits in 1993 and 1992, respectively.
The following table sets forth the plan's funded status,
reconciled with the amount shown in the Company's balance sheet
at January 29, 1994 and January 30, 1993:
<TABLE>
<CAPTION>
January 29, 1994 January 30, 1993
- - --------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Current retirees. . . . . . . . . . . . $ 1,415,454 $ 1,584,153
Fully eligible plan participants. . . . 715,869 751,256
Other active plan participants. . . . . 2,902,136 7,606,918
-----------------------------
Total . . . . . . . . . . . . . . . . . . $ 5,033,459 $ 9,942,327
===========-------===========
Accumulated postretirement benefit
obligation in excess of plan assets . . $(5,033,459) $(9,942,327)
Unrecognized transition obligation,
transition date 1/31/93 and 2/2/92. . . 1,503,635 7,081,836
Unrecognized prior service cost . . . . . 407,792 --
Unrecognized net loss . . . . . . . . . . 841,184 1,376,535
-----------------------------
Accrued postretirement benefit cost . . . $(2,280,848) $(1,483,956)
============------===========
Net periodic postretirement benefit
cost for 1993 and 1992 included the
following components:
Service cost--benefits attributed to
service during the period . . . . . . $ 297,804 $ 494,282
Interest cost on accumulated
postretirement benefit obligation . . 462,477 666,398
Actual return on plan assets. . . . . . -- --
Amortization of transition obligation
over 20 years . . . . . . . . . . . . 125,783 372,729
Amortization of unrecognized
net loss. . . . . . . . . . . . . . . 25,551 --
-----------------------------
Net periodic postretirement benefit cost. $ 911,615 $ 1,533,409
- - --------------------------------------------------------------------------
</TABLE>
The assumed health care cost trend rates used in measuring the
accumulated postretirement benefit obligation were as follows:
Under Medicare Retirement Age:
All Regions
9% for two years, then grading down to 5% over the next five
years
Medicare Retirement Age and Over:
All Regions
8% for one year, then grading down to 5% over the next six
years
<PAGE>
<PAGE>31
The health care cost trend rate assumption has a significant
effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit
obligation as of January 29, 1994 and the aggregate of the
service and interest cost components of the net periodic
postretirement benefit cost for the 1994-95 fiscal year as
follows:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------
<S> <C>
Increase in accumulated postretirement benefit obligation. . . . . $909,569
Increase in service and interest costs . . . . . . . . . . . . . . 154,060
- - ---------------------------------------------------------------------------
</TABLE>
The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 7.5%.
11. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been
determined by the Company using available market information
and valuation methodologies as shown below. The use of
different assumptions and/or estimation methodologies may have
a material effect on the estimated fair value amounts.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could actually
realize.
The estimated fair value of the Company's financial instruments
is as follows (in thousands):
<TABLE>
<CAPTION>
January 29, 1994
------------------------
Carrying Estimated
Amount Fair Value
- - ----------------------------------------------------------------------
<S> <C> <C>
Financial assets:
Cash. . . . . . . . . . . . . . . . . . . $ 34,054 $ 34,054
Receivables . . . . . . . . . . . . . . . 18,306 18,306
Prepaid expenses and other. . . . . . . . 54,098 54,388
Other long-term assets. . . . . . . . . . 2,067 2,067
Financial liabilities:
Outstanding checks. . . . . . . . . . . . 72,373 72,373
Accounts payable. . . . . . . . . . . . . 217,277 217,277
Long-term debt. . . . . . . . . . . . . . 322,147 330,677
- - ----------------------------------------------------------------------
</TABLE>
Cash, Accounts and Notes Receivable--Current and Other Long-
term Assets--The carrying amounts of these items are a
reasonable estimate of their fair value.
Prepaid Expenses and Other--For stocks, bonds and other
investments (generally municipal securities), the fair value is
estimated using quoted market prices.
Outstanding Checks and Accounts Payable--The carrying amounts
of these items are a reasonable estimate of their fair value.
Long-term Debt--The fair value of notes, mortgages, and real
estate assessments payable is estimated by discounting expected
future cash flows. The discount rate used is the rate currently
available to the Company for issuance of debt with similar
terms and remaining maturities. For commercial paper and bid
lines of credit under the revolving credit agreement (see Note
6), the carrying amounts are a reasonable estimate of their
fair value.
Interest Rate Agreements--The fair value of interest rate swap
agreements and CAPs are based on estimated amounts at which
they could be settled. At January 29, 1994, the Company could
settle these agreements at a cost of $2,580,000.
Management is not aware of any factors that would significantly
change the Estimated Fair Value amounts shown here. A
comprehensive revaluation for purposes of these financial
statements has not been performed since January 29, 1994, and
current estimates of fair value may differ from the amounts
presented herein. There are no financial instruments that
potentially subject the Company to concentrations of credit
risk.
12. COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries are parties to various legal
claims, actions, and complaints, certain of which involve
material amounts. Although the Company is unable to predict
with certainty whether or not it will ultimately be successful
in these legal proceedings or, if not, what the impact might
be, management presently believes that disposition of these
matters will not have a material adverse effect on the
Company's consolidated financial position or consolidated
results of operations.
13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1993 Fiscal Quarters 1992 Fiscal Quarters
----------------------------------------- ---------------------------------------
(In thousands, except per-share data) Fourth Third Second First Fourth Third Second First
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . $807,777 $644,527 $674,719 $852,059 $758,013 $629,374 $641,748 $824,827
Gross margin . . . . . . . . . . . . . . 247,492/1 189,897 206,863/2 246,123 233,880/5 187,084 193,528 242,594
Income from operations . . . . . . . . . 50,775/1 17,900 35,567/2 24,506 42,719/5 14,947 25,689 21,727
Net income before cumulative effect of
an accounting change. . . . . . . . . 30,034/1 9,897 16,962/2,3 14,011 25,830/5 8,320 14,886 11,551
Cumulative effect of an accounting
change. . . . . . . . . . . . . . . . -- -- -- (2,588)/4 -- -- -- --
Net income. . . . . . . . . . . . . . . 30,034/1 9,897 16,962/2,3 11,423/4 25,830/5 8,320 14,886 11,551
Earnings per common share:
Net income before cumulative effect of
an accounting change. . . . . . . . $1.05/1 $.35 $.60/2,3 $.50 $.92/5 $.30 $.54 $.44
Cumulative effect of an
accounting change . . . . . . . . . . -- -- -- (.09)/4 -- -- -- --
Net income. . . . . . . . . . . . . . $1.05/1 $.35 $.60/2,3 $.41)/4 $.92/5 $.30 $.54 $.44
Weighted average number of shares
outstanding . . . . . . . . . . . . . 28,571 28,495 28,338 28,165 28,163 27,908 27,711 26,363
- - ---------------------------------------------------------------------------------------------------------------------------------
<FN>
/1 The LIFO adjustment in the fourth quarter of 1993 increased
gross margin and income from operations by $4,493; net
income by $2,786; and earnings per common share by $.10.
/2 In the second quarter of 1993, a change in the
LIFO computation increased gross margin by $6,178; net income
by $3,892; and earnings per common share by $.14.
/3 In the second quarter of 1993, resolution of certain
IRS audits and a charge for recently enacted federal
statutory tax rates, applied retroactively to January 31,
1993, decreased net income by $4,368 and earnings per common
share by $.15.
/4 In the first quarter of 1993, the Company adopted SFAS No.
109 which decreased net income by $2,588 and earnings per
common share by $.09.
/5 The LIFO adjustment in the fourth quarter of 1992 increased
gross margin and income from operations by $3,216; net
income by $2,026; and earnings per common share by $.07.
/TABLE
<PAGE>
<PAGE>32
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of Fred Meyer, Inc.:
We have audited the accompanying consolidated balance sheets of
Fred Meyer, Inc. and subsidiaries as of January 29, 1994 and
January 30, 1993, and the related statements of consolidated
operations, changes in consolidated stockholders' equity, and
consolidated cash flows for each of the three fiscal years in
the period ended January 29, 1994. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Fred Meyer, Inc. and subsidiaries at January 29, 1994 and
January 30, 1993, and the results of their operations and their
cash flows for each of the three fiscal years in the period
ended January 29, 1994, in conformity with generally accepted
accounting principles.
As discussed in Notes 5 and 10 to the consolidated financial
statements, the Company changed its method of accounting for
income taxes in the fiscal year ended January 29, 1994 and
postretirement benefits in the fiscal year ended January 30,
1993.
DELOITTE & TOUCHE
March 7, 1994
<PAGE>
<PAGE>
Appendix A - Fred Meyer 1993 Annual Report Graphic Material
- - -----------------------------------------------------------
1. The following is a description of graphic material
omitted from the current filing:
Graph Title: Net Earnings Per Common Share
Graph Page Number: 18
Type of Graph: Bar Graph
X-Axis Information: Years from left to right 1990, 1991,
1992 and 1993
Y-Axis Information: Dollars from bottom to top 0.0, 0.5,
1.0, 1.5, 2.0, 2.5
Specific Data Points: 1990 1991 1992 1993
---- ---- ---- ----
1.37 1.80 2.21 2.50*
*Before nonrecurring items and
accounting change
2. The following is a description of graphic material
omitted from the current filing:
Graph Title: Net Income as a Percent of Net Sales
Graph Page Number: 18
Type of Graph: Bar Graph
X-Axis Information: Years from left to right 1990, 1991,
1992 and 1993
Y-Axis Information: Percent from bottom to top 0.0, 0.5,
1.0, 1.5, 2.0, 2.5
Specific Data Points: 1990 1991 1992 1993
---- ---- ---- ----
1.4 1.7 2.1 2.4*
*Before nonrecurring items and
accounting change
3. The following is a description of graphic material
omitted from the current filing:
Graph Title: Stockholders' Equity
Graph Page Number: 18
Type of Graph: Bar Graph
X-Axis Information: Years from left to right 1990, 1991,
1992 and 1993
Y-Axis Information: Dollars in millions from bottom to top
0, 100, 200, 300, 400, 500, 600
Specific Data Points: 1990 1991 1992 1993
---- ---- ---- ----
285.3 335.2 450.1 527.7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 21
LIST OF ACTIVE SUBSIDIARIES OF FRED MEYER, INC.
Jurisdiction of
Incorporation
Name of Subsidiary or Organization
- - ------------------ ---------------
<S> <C>
Roundup Co. (doing business
in the State of Oregon as
Roundup Distribution Co.) Washington
B & B Stores, Inc. Montana
B & B Pharmacy, Inc. Montana
Fred Meyer of Alaska, Inc. Alaska
Fred Meyer of California, Inc. California
Distribution Trucking Company Oregon
CB&S Advertising Agency, Inc. Oregon
FM Holding Corporation Delaware
Grand Central, Inc. Utah
FM Retail Services, Inc. Washington
</TABLE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement Nos. 33-13912, 33-22572, 33-31798, 33-36163, and
33-49638 all on Form S-8 and Registration Statement
No. 33-51177 on Form S-3, of our reports dated March 7, 1994
(our report on the financial statements expresses an
unqualified opinion and includes an explanatory paragraph
relating to a change in method of accounting for income
taxes in the fiscal year ended January 29, 1994 and other
postretirement benefits in the fiscal year ended January 30,
1993), appearing in and incorporated by reference in the
Annual Report on Form 10-K of Fred Meyer, Inc. for the year
ended January 29, 1994.
DELOITTE & TOUCHE
April 26, 1994
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an
officer and/or director of Fred Meyer, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint
Robert G. Miller, Kenneth Thrasher and Roger A. Cooke, and each
of them, his true and lawful attorney and agent, to do any and
all acts and things and execute in his name as an officer or
director of the Company the Annual Report on Form 10-K for the
year ended January 29, 1994 and any and all amendments thereto,
and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission; and the undersigned does hereby ratify and
confirm all that said attorneys and agents and each of them shall
do or cause to be done by virtue hereof. Any one of said
attorneys or agents shall have, and may exercise, all powers
conferred.
IN WITNESS WHEREOF, the undersigned has executed this
Power of Attorney this 12th day of April, 1994.
SAUL A. FOX
----------------------------------
Saul A. Fox
<PAGE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an
officer and/or director of Fred Meyer, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint
Robert G. Miller, Kenneth Thrasher and Roger A. Cooke, and each
of them, his true and lawful attorney and agent, to do any and
all acts and things and execute in his name as an officer or
director of the Company the Annual Report on Form 10-K for the
year ended January 29, 1994 and any and all amendments thereto,
and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission; and the undersigned does hereby ratify and
confirm all that said attorneys and agents and each of them shall
do or cause to be done by virtue hereof. Any one of said
attorneys or agents shall have, and may exercise, all powers
conferred.
IN WITNESS WHEREOF, the undersigned has executed this
Power of Attorney this 12th day of April, 1994.
A. M. GLEASON
----------------------------------
A. M. Gleason
<PAGE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an
officer and/or director of Fred Meyer, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint
Robert G. Miller, Kenneth Thrasher and Roger A. Cooke, and each
of them, his true and lawful attorney and agent, to do any and
all acts and things and execute in his name as an officer or
director of the Company the Annual Report on Form 10-K for the
year ended January 29, 1994 and any and all amendments thereto,
and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission; and the undersigned does hereby ratify and
confirm all that said attorneys and agents and each of them shall
do or cause to be done by virtue hereof. Any one of said
attorneys or agents shall have, and may exercise, all powers
conferred.
IN WITNESS WHEREOF, the undersigned has executed this
Power of Attorney this 12th day of April, 1994.
JEROME KOHLBERG,JR.
----------------------------------
Jerome Kohlberg, Jr.
<PAGE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an
officer and/or director of Fred Meyer, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint
Robert G. Miller, Kenneth Thrasher and Roger A. Cooke, and each
of them, his true and lawful attorney and agent, to do any and
all acts and things and execute in his name as an officer or
director of the Company the Annual Report on Form 10-K for the
year ended January 29, 1994 and any and all amendments thereto,
and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission; and the undersigned does hereby ratify and
confirm all that said attorneys and agents and each of them shall
do or cause to be done by virtue hereof. Any one of said
attorneys or agents shall have, and may exercise, all powers
conferred.
IN WITNESS WHEREOF, the undersigned has executed this
Power of Attorney this 12th day of April, 1994.
ROGER S. MEIER
----------------------------------
Roger S. Meier
<PAGE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an
officer and/or director of Fred Meyer, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint
Robert G. Miller, Kenneth Thrasher and Roger A. Cooke, and each
of them, his true and lawful attorney and agent, to do any and
all acts and things and execute in his name as an officer or
director of the Company the Annual Report on Form 10-K for the
year ended January 29, 1994 and any and all amendments thereto,
and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission; and the undersigned does hereby ratify and
confirm all that said attorneys and agents and each of them shall
do or cause to be done by virtue hereof. Any one of said
attorneys or agents shall have, and may exercise, all powers
conferred.
IN WITNESS WHEREOF, the undersigned has executed this
Power of Attorney this 12th day of April, 1994.
MICHAEL W. MICHELSON
----------------------------------
Michael W. Michelson
<PAGE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an
officer and/or director of Fred Meyer, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint
Robert G. Miller, Kenneth Thrasher and Roger A. Cooke, and each
of them, his true and lawful attorney and agent, to do any and
all acts and things and execute in his name as an officer or
director of the Company the Annual Report on Form 10-K for the
year ended January 29, 1994 and any and all amendments thereto,
and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission; and the undersigned does hereby ratify and
confirm all that said attorneys and agents and each of them shall
do or cause to be done by virtue hereof. Any one of said
attorneys or agents shall have, and may exercise, all powers
conferred.
IN WITNESS WHEREOF, the undersigned has executed this
Power of Attorney this 12th day of April, 1994.
PAUL E. RAETHER
----------------------------------
Paul E. Raether
