UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995 (thirteen weeks)
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-10252
SMITH'S FOOD & DRUG CENTERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 87-0258768
(State of Incorporation) (I.R.S. Employer Identification No.)
1550 South Redwood Road, Salt Lake City, UT 84104
(Address of principal executive offices) (Zip Code)
(801) 974-1400
(Registrant's telephone number, including area code)
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
Number of shares outstanding of each class of common stock as
of September 30, 1995:
Class A 11,665,567
Class B 13,405,088
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Income for the
thirteen weeks ended September 30, 1995
and October 1, 1994 and the thirty-nine
weeks ended September 30, 1995 and
October 1, 1994 3
Consolidated Balance Sheets as of
September 30, 1995 and December 31, 1994 4
Consolidated Statements of Cash Flows for
the thirty-nine weeks ended September 30,
1995 and October 1, 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
SMITH'S FOOD & DRUG CENTERS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollar amounts in thousands, except per share data)
Thirteen Thirteen Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
Sept 30, Oct 1, Sept 30, Oct 1,
1995 1994 1995 1994
---- ---- ---- ----
Net sales $768,335 $725,360 $2,285,413 $2,227,468
Cost of goods sold 595,891 561,815 1,775,066 1,736,506
-------- -------- ---------- ----------
172,444 163,545 510,347 490,962
Expenses:
Operating, selling and
administrative 114,329 105,174 343,797 329,063
Depreciation and
amortization 25,227 22,750 72,694 65,207
Interest 14,927 13,480 45,284 39,410
-------- -------- ---------- ----------
154,483 141,404 461,775 433,680
INCOME BEFORE
INCOME TAXES 17,961 22,141 48,572 57,282
Income taxes 6,900 8,800 19,000 22,700
-------- -------- ---------- ----------
NET INCOME $ 11,061 $ 13,341 $ 29,572 $ 34,582
======== ======== ========== ==========
Net income per share of
Common Stock $ .44 $ .48 $ 1.17 $ 1.20
======== ======== ========== ==========
Dividends paid per share
of Common Stock $ .15 $ .13 $ .45 $ .39
======== ======== ========== ==========
Average number of common
shares outstanding
(In thousands) 25,076 27,583 25,257 28,761
======== ======== ========== ==========
See notes to consolidated financial statements
<PAGE>
SMITH'S FOOD & DRUG CENTERS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollar amounts in thousands)
Sept 30, Dec. 31,
1995 1994
---- ----
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 12,323 $ 14,188
Rebates and accounts receivable 23,045 25,596
Inventories 382,620 389,564
Prepaid expenses and deposits 32,585 17,258
---------- ----------
TOTAL CURRENT ASSETS 450,573 446,606
PROPERTY AND EQUIPMENT
Land 315,336 303,701
Buildings 645,733 619,056
Leasehold improvements 58,719 42,369
Fixtures and equipment 618,526 589,480
---------- ----------
1,638,314 1,554,606
Less allowances for depreciation
and amortization 421,680 364,741
---------- ----------
1,216,634 1,189,865
OTHER ASSETS 17,100 16,996
---------- ----------
$1,684,307 $1,653,467
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 215,094 $ 235,843
Accrued sales and other taxes 47,949 44,379
Accrued payroll and related benefits 89,443 84,083
Current maturities of long-term debt 20,460 19,011
Current maturities of
Redeemable Preferred Stock 534 1,017
---------- ----------
TOTAL CURRENT LIABILITIES 373,480 384,333
LONG-TERM DEBT, less current maturities 721,235 699,882
DEFERRED INCOME TAXES 94,500 89,500
REDEEMABLE PREFERRED STOCK, less
current maturities 4,410 4,410
COMMON STOCKHOLDERS' EQUITY
Convertible Class A Common Stock, par value
$.01 per share: Authorized 20,000,000 shares;
issued and outstanding, 11,665,567 shares
in 1995 and 12,140,317 shares in 1994 116 121
Class B Common Stock, par value $.01 per share:
Authorized 100,000,000 shares; issued
18,296,444 shares in 1995 and 17,821,694
shares in 1994 183 178
Additional paid-in capital 285,399 285,592
Retained earnings 311,848 293,456
---------- ----------
597,546 579,347
Less Treasury Shares at cost (4,891,356 shares
in 1995 and 4,772,822 shares in 1994) 106,864 104,005
---------- ----------
490,682 475,342
---------- ----------
$1,684,307 $1,653,467
========== ==========
See notes to consolidated financial statements
<PAGE>
SMITH'S FOOD & DRUG CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollar amounts in thousands)
Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
Sept 30, Oct 1,
1995 1994
---- ----
OPERATING ACTIVITIES:
Net income $29,572 $34,582
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization (including
amounts charged to cost of goods sold) 77,152 69,566
Deferred income taxes 6,400 9,100
Other 588 460
Changes in operating assets and
liabilities:
Rebates and accounts receivable 2,551 1,329
Inventories 6,944 11,774
Prepaid expenses and deposits (16,727) (4,626)
Trade accounts payable (20,749) 19,648
Accrued sales and other taxes 3,570 8,556
Accrued payroll and related benefits 5,360 3,027
------- -------
CASH PROVIDED BY OPERATING ACTIVITIES 94,661 153,416
INVESTING ACTIVITIES:
Additions to property and equipment (106,616) (106,156)
Sale/leaseback arrangements and other
property sales 2,695 20,903
Other (104) (7,013)
------- -------
CASH USED IN INVESTING ACTIVITIES (104,025) (92,266)
FINANCING ACTIVITIES:
Additions to long-term debt 37,000
Payments on long-term debt (14,198) (30,309)
Purchases of Treasury Stock (7,845) (68,584)
Proceeds from sale of Treasury Stock 4,204 4,820
Redemptions of Preferred Stock (483) (417)
Payment of dividends (11,179) (11,241)
------ -------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 7,499 (105,731)
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,865) (44,581)
Cash and cash equivalents at beginning of year 14,188 61,921
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $12,323 $17,340
======= =======
See notes to consolidated financial statements
<PAGE>
SMITH'S FOOD & DRUG CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the thirteen and thirty-nine week periods
ended September 30, 1995 are not necessarily indicative of the
results that may be expected for the year ending December 30,
1995. For further information, refer to the consolidated
financial statements and notes thereto incorporated by reference
in the Company's annual report on Form 10-K for the year ended
December 31, 1994.
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES
Net Income per Share of Common Stock: Net income per share of
Common Stock is computed by dividing net income by the weighted
average number of shares of Common Stock outstanding. The
weighted average number of common shares includes Common Stock
equivalents in the form of stock options.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales increased 5.9% in the third quarter of 1995 to $768
million compared to $725 million for the same period last year.
For the first thirty-nine weeks of 1995, net sales increased
to $2.29 billion from $2.23 billion for the same period last
year, an increase of 2.6%. Same store sales decreased 1.8%
compared with the prior year's third quarter and decreased
3.6% compared to the first nine months of the prior year. The
weakness in net sales, despite new store openings, was mainly
caused by a significant number of competitive store openings
in most marketing areas. Aggressive price competition in the
Company's marketing area in recession-plagued Southern
California also contributed to the weakness. To the extent
these conditions persist, the weakness in sales and same store
sales may continue.
During the first nine months of 1995, the Company opened nine
large combination food and drug centers in Phoenix, Glendale,
and two in Mesa, Arizona; Vista, California; Gallup and Hobbs,
New Mexico; and Gardnerville and Elko, Nevada. One smaller
store was closed in Las Vegas, Nevada. At September 30, 1995,
the Company operated 148 stores totaling 9.8 million square
feet compared to 134 stores totaling 8.9 million square feet
at the end of the prior year's third quarter. During the
remainder of fiscal 1995, the Company currently expects to
open six additional stores in Arizona, California, Nevada,
New Mexico, and Utah averaging approximately 54,000 square
feet. The Company anticipates that future stores will range
in size from 54,000 to 66,000 square feet.
The Company opened four new retail warehouse format stores in
Las Vegas, Nevada during the first nine months of 1995,
including one conversion of a smaller Smith's store. These
new price-impact stores are called PriceRite Grocery
Warehouse.
Gross margins as a percentage of net sales decreased slightly
to 22.4% during the third quarter of 1995 from 22.5% during
the same period last year. For the first thirty-nine weeks
of 1995, gross margins increased to 22.3% from 22.0% for the
same period last year. This increase is due primarily to
reduced charges for inventory shrinkage and more effective
promotional offerings. The Company anticipates that new
stores recently opened and planned to open, as in the past,
will apply pressure on its gross margins until the stores
become established in their respective markets. The pretax
LIFO charge was $1.0 million for the third quarter of 1995
compared to $750,000 for the same period last year and $3.0
million for the first nine months of 1995 compared to $3.75
million for the same period last year.
Operating, selling and administrative expenses as a
percentage of net sales increased to 14.9% during the third
quarter of 1995 from 14.5% during the third quarter of 1994.
For the first nine months of the year compared to last year,
operating, selling and administrative expenses increased to
15.0% from 14.8%. This increase was caused mainly by the
store opening costs related to the thirteen stores opened
during the first nine months of the year. The decrease in
same store sales also contributed to the increase of
operating, selling and administrative expenses as a
percentage of net sales.
Depreciation and amortization expenses increased 10.9% for
the third quarter and 11.5% for the first nine months of 1995
compared to the same respective periods last year due to the
increase in the number of new combination stores and
equipment replacements in remodeled stores.
Interest expense increased 10.7% for the third quarter and
14.9% for the first nine months of 1995 compared to the same
respective periods last year. The increase was due to the
increase in debt incurred primarily to finance new stores.
Liquidity and Capital Resources
Cash and cash equivalents decreased $1.9 million during the
first nine months of 1995. Working capital was $77.1 million
at September 30, 1995, an increase of $14.8 million compared
to December 31, 1994.
During the first nine months of 1995, cash provided by
operating activities was $94.7 million reflecting a prepayment
of health and medical expenses and a decrease in accounts
payable which were partially offset by a decrease in
inventories.
Cash used in investing activities was $104.0 million for the
first nine months of 1995 reflecting the Company's ongoing
expansion program. The Company anticipates investing
approximately $30 million during the remainder of 1995 for
the development and construction of new food and drug centers,
remodeling of existing stores and replacing equipment.
However, the actual timing and amount of capital expenditures
may vary depending upon a number of factors.
Cash provided by financing activities totaled $7.5 million
for the first nine months of 1995 as a result of increasing
long-term debt.
Management believes that the financial resources available to
it, including proceeds from sale/leaseback transactions,
amounts available under existing and future bank lines of
credit, additional long-term financings, and internally
generated funds, will be sufficient to meet planned capital
expansion and working capital requirements for the foreseeable
future, including debt and lease servicing requirements.
The Company may, however, use additional sources of funds for
such purposes, including the issuance of debt or equity
securities and leasing rather than owning buildings and
equipment.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits listed in the accompanying index to exhibits
are filed as part of the Form 10-Q.
(b) There were no reports on Form 8-K filed during the third
quarter.
INDEX TO EXHIBITS
Exhibit
Number Document
27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
SMITH'S FOOD & DRUG CENTERS, INC.
(Registrant)
Date: 11/9/95 /s/ Matthew G. Tezak
Matthew G. Tezak, Senior Vice
President and Chief Financial
Officer (Principal Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Article 5 FDS for 3rd Quarter 10-Q
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-30-1995 DEC-30-1995
<PERIOD-END> SEP-30-1995 SEP-30-1995
<CASH> 12,323 12,323
<SECURITIES> 0 0
<RECEIVABLES> 23,045 23,045
<ALLOWANCES> 0 0
<INVENTORY> 382,620 382,620
<CURRENT-ASSETS> 450,573 450,573
<PP&E> 1,638,314 1,638,314
<DEPRECIATION> 421,680 421,680
<TOTAL-ASSETS> 1,684,307 1,684,307
<CURRENT-LIABILITIES> 373,480 373,480
<BONDS> 0 0
<COMMON> 299 299
4,410 4,410
0 0
<OTHER-SE> 597,247 597,247
<TOTAL-LIABILITY-AND-EQUITY> 1,684,307 1,684,307
<SALES> 768,335 2,285,413
<TOTAL-REVENUES> 768,335 2,285,413
<CGS> 595,891 1,775,066
<TOTAL-COSTS> 595,891 1,775,066
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 14,927 45,284
<INCOME-PRETAX> 17,961 48,572
<INCOME-TAX> 6,900 19,000
<INCOME-CONTINUING> 11,061 29,572
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 11,061 29,572
<EPS-PRIMARY> .44 1.17
<EPS-DILUTED> .44 1.17
</TABLE>
