[LOGO]
1550 South Redwood Road, Salt Lake City, Utah 84104
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 25, 1995
To the Stockholders of
SMITH'S FOOD & DRUG CENTERS, INC.
The Annual Meeting of the Stockholders of Smith's Food & Drug Centers, Inc.
(the "Corporation"), will be held at the Corporation's principal executive
offices at 1550 South Redwood Road, Salt Lake City, Utah 84104, on Tuesday,
April 25, 1995 at 5:00 p.m., Mountain Time, for the following purposes:
1. To elect a Board of Directors to serve for the ensuing year;
2. To ratify and approve an amendment to the Corporation's 1989 Stock
Option Plan;
3. To ratify the selection of Ernst & Young LLP as the Corporation's
independent auditors for 1995; and
4. To transact such other business as may properly come before the
meeting and any postponements and/or adjournments thereof.
The close of business on February 27, 1995, has been fixed by the Board of
Directors as the record date (the "Record Date") for the determination of the
stockholders entitled to notice of, and to vote at, the Annual Meeting.
We hope all stockholders who can do so will attend the Annual Meeting in
person. Whether or not you plan to attend, we urge you to complete and sign
the enclosed proxy card and return it in the enclosed postage-prepaid envelope.
Returning your proxy will not deprive you of your right to attend the meeting
and vote your shares in person.
If you own any combination of Series I Preferred Stock, Class A Common
Stock, or Class B Common Stock, please sign and return all proxy cards provided
to you for each type of stock owned by you as of the Record Date.
By Order of the Board of Directors,
/s/Michael C. Frei
Michael C. Frei
Secretary
Salt Lake City, Utah
March 24, 1995
<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [XX]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[XX] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-
12
Smith's Food & Drug Centers, Inc.
(Name of Registrant as Specified In Its Charter)
Smith's Food & Drug Centers, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[XX] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_______________________________________________________________________________
_______________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_______________________________________________________________________________
_______________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:(1)
_______________________________________________________________________________
_______________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_______________________________________________________________________________
_______________________________________________________________________
(1)Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No:
3) Filing Party:
4) Filing Date
<PAGE>
[LOGO]
1550 South Redwood Road, Salt Lake City, Utah 84104
PROXY STATEMENT
This Proxy Statement is furnished by Smith's Food & Drug Centers, Inc., a
Delaware corporation (hereinafter called the "Corporation"), in connection with
the solicitation by the Board of Directors of the Corporation of the enclosed
proxies for use at the Annual Meeting of Stockholders to be held at the
Corporation's principal executive offices at 1550 South Redwood Road, Salt Lake
City, Utah 84104, on Tuesday, April 25, 1995 at 5:00 p.m., Mountain Time, and
at any postponements or adjournments thereof (the "Annual Meeting").
Stockholders owning any combination of Series I Preferred Stock, Class A
Common Stock, or Class B Common Stock of the Corporation will receive separate
proxy cards for each type of stock owned and are requested to sign and date all
of the enclosed proxy cards and return them in the envelope provided.
Any stockholder may revoke a proxy at any time before its use by delivering
to the Corporation a written notice of revocation or a duly executed proxy
bearing a later date, or upon request if the stockholder attends the meeting
and chooses to vote in person. If a proxy is properly signed and not revoked,
the shares it represents will be voted in accordance with the instructions of
the stockholder. If no specific instructions are given, the shares will be
voted FOR the election as directors of the nominees described below, FOR
approval and ratification of an amendment to the Corporation's 1989 Stock
Option Plan, and FOR ratification of the selection of Ernst & Young LLP as the
Corporation's independent auditors for fiscal 1995.
This proxy statement and the proxy cards were first mailed to stockholders
on or about March 24, 1995. The cost of soliciting proxies will be borne by
the Corporation. Regular employees and directors of the Corporation may
solicit proxies in person, by telephone, or by mail. No additional
compensation will be given to employees or directors for such solicitation.
The Corporation will request brokers and nominees who hold stock in their names
to furnish proxy material to beneficial owners of the shares and will reimburse
such brokers and nominees for their reasonable expenses incurred in forwarding
solicitation material to such beneficial owners.
VOTING SECURITIES; RECORD DATE
Stockholders will be entitled to one vote for each share of Class B Common
Stock and ten votes for each share of Series I Preferred Stock or Class A
Common Stock held of record at the close of business on February 27, 1995 (the
"Record Date"). All classes of stock will vote together as a single class with
respect to the election of directors, the ratification and approval of an
amendment to the Corporation's 1989 Stock Option Plan, the ratification and
approval of the selection of Ernst & Young LLP as the Corporation's independent
auditors and any other proposal for stockholder action as may properly come
before the Annual Meeting. An automated system administered by the
Corporation's transfer agent will tabulate votes cast by proxy at the Annual
Meeting, and an employee of the Corporation will tabulate votes cast in person
at the Annual Meeting. Abstentions and broker non-votes, tabulated separately,
are included in the determination of the number of shares present at the
Meeting and whether a quorum is present. Abstentions and broker non-votes are
not counted in determining whether a nominee is elected. In determining
whether a proposal has been approved, abstentions are counted as votes against
the proposal and broker non-votes are not counted as votes either for or
against the proposal.
As of the Record Date, the Corporation had issued and outstanding 13,015,425
shares of Class B Common Stock, 12,014,270 shares of Class A Common Stock, and
15,231,777 shares of Series I Preferred Stock.
ELECTION OF DIRECTORS
Fifteen persons have been nominated by the Board of Directors for election
as directors at the Annual Meeting to serve until the next Annual Meeting of
Stockholders and until their respective successors are elected or appointed.
The fifteen nominees receiving the highest number of votes at the Annual
Meeting will be elected as directors. It is the intention of the proxy holders
to vote FOR the election of ALL of the nominees listed below in the absence of
contrary instructions on the proxy cards. If the candidacy of any one or more
of such nominees should, for any reason, be withdrawn, the proxy holders will
vote in favor of the remainder of those nominated and for such substituted
nominees (if any) as shall be designated by the proxy holders, or the number of
directors to be elected at this time may be reduced by the Board of Directors.
The Board of Directors has no reason to believe that any of the nominees will
be unable or unwilling to serve as a director if elected.
The following information is furnished regarding the nominees:
DeLonne Anderson, age 65, has been a director of the Corporation since 1965.
He was previously the Secretary and Marketing Director, Intermountain Region,
of the Corporation before retiring in 1985.
Robert D. Bolinder, age 63, has been a director of the Corporation since
1985. He has served as Executive Vice President, Corporate Planning and
Development of the Corporation since 1993. He served as Executive Vice
President and Chief Financial Officer of the Corporation from 1988 to 1993,
after serving four years as a supermarket industry management consultant. He
is also a director of Hannaford Bros. Company, Inc., a regional supermarket
chain, and Idaho Power Company, a public utility company. Prior to 1984, Mr.
Bolinder was Vice Chairman and a director of Albertson's, Inc. for many years.
Rodney H. Brady, age 62, has been a director of the Corporation since 1985.
Since 1985, he has been President, Chief Executive officer and a director of
Bonneville International Corporation, a broadcasting company headquartered in
Salt Lake City, Utah. Prior to 1985, Mr. Brady served as President of Weber
State University. Mr. Brady is also a director of First Security Corporation,
a bank holding company; Deseret Mutual Benefit Association, an employee
benefits insurance company; and Bergen Brunswig Corporation, a wholesale drug
company.
Alan R. Hoefer, age 60, has been a director of the Corporation since 1985.
Since 1988, he has been Managing Partner of Alan Hoefer & Company, a private
investment banking partnership located in San Francisco, California. He
currently is serving as a director of Piercing Pagoda, Inc., a jewelry
retailer. He also served as President of Hoefer Capital Management Inc., a
registered investment advisor, from September, 1990 through September, 1993.
Prior to 1988, Mr. Hoefer was President of Hoefer & Arnett, Incorporated, an
investment banking firm.
Allen P. Martindale, age 63, has been a director of the Corporation since
1970. Mr. Martindale is a director of JP Realty, Inc., a publicly held real
estate investment trust. Mr. Martindale was Chairman of the Board of Directors
and Chief Executive Officer of the Corporation between 1984 and 1988.
Nicole Miller, age 44, has been President of Nicole Miller since 1986.
Nicole Miller, a division of Kobra International, Ltd., is a wholesale clothing
manufacturer with retail outlets.
Duane Peters, age 74, has been a director of the Corporation since 1985. He
is President of Duane Peters, Inc., a consulting firm located in Rancho Santa
Fe, California. Previously, Mr. Peters was Executive Vice President and
General Manager of H.E. Butt Grocery Company and a director of Hannaford Bros.
Co., a regional supermarket chain.
Ray V. Rose, age 71, has been a director of the Corporation since 1984. He
is retired, and was President of King Sooper Supermarkets of Denver, Colorado,
until 1979. Mr. Rose is also a director of Hormel Company, a meat processing
company.
Stuart Rosenthal, age 49, joined Smith's in 1995 as President and Chief
Operating Officer. Previously, Mr. Rosenthal was President and Chief Operating
Officer of Big V Supermarkets, Inc. from 1993 to 1994, President and Chief
Operating Officer of Furr's Supermarkets, Inc. from 1990 to 1993 and Executive
Vice President, Marketing of The Von's Companies, Inc. from 1984 to 1990.
Fred L. Smith, age 48, has been a director of the Corporation since 1968.
Since 1988, he has been President of Fred Smith's Honda Automobiles of Palm
Springs, an auto dealership, prior to which time he was a private investor.
Since 1989, he has also been President of Fred Smith's Jaguar/Rolls Royce of
Rancho Mirage, an auto dealership.
Jeffrey P. Smith, age 45, has been a director of the Corporation since 1971.
He has been Chairman and Chief Executive Officer of the Corporation since 1988.
He served as Chief Operating Officer and President of the Corporation from 1984
to 1988.
Richard D. Smith, age 40, has been a director of the Corporation since 1975.
He has been Vice Chairman since 1995. He served as President and Chief
Operating Officer of the Corporation from 1988 to 1995, prior to which time he
served as Executive Vice President of Operations and Assistant Chief Operating
Officer.
Sean D. Smith, age 24, has served as a director of the Corporation since
1992. Since 1992, he also has served as one of the District Managers within the
Corporation's Intermountain Region (renamed Region I during 1993), after
serving as a Store Manager since 1991 and holding various other positions with
the Corporation in retail operations since 1983 while attending school,
including the University of Utah.
Douglas John Tigert, age 56, has been a director of the Corporation since
1986. He is the Charles Clark Reynolds Professor of Marketing of Babson
College, Boston, Massachusetts. He is currently serving as director of the
Hudson Bay Company, a retail department store chain; Sobey's Inc., a
supermarket chain; and Tractor Supply Co., a retail farm store chain. From
1970 through 1993 he was President of Psychographics International of Canada,
Ltd., a marketing research firm. Prior to 1986, he was Dean of the School of
Business at the University of Toronto.
Kenneth A. White, age 52, has been a director of the Corporation since 1986.
Since 1992, he has served as Senior Vice President, Regional Manager of the
Corporation's California Region (renamed Region II during 1993). He served as
Vice President, Regional Manager of the Corporation's California Region from
1991 to 1992. From 1980 to 1991, he served as Vice President, Regional Manager
of the Corporation's Intermountain Region.
Jeffrey P. Smith, Richard D. Smith and Fred L. Smith are brothers. Sean D.
Smith is the son of Jeffrey P. Smith.
BOARD OF DIRECTORS, COMMITTEE MEETINGS
AND COMPENSATION OF DIRECTORS
The Board of Directors held four meetings during fiscal 1994. All of the
directors attended 100% of the meetings of the Board and Committees of which
they are members. Directors who are not also employees of the Corporation
receive an annual retainer of $7,200 for their services as directors.
Additionally, directors who are not also employees of the Corporation receive
$2,500 for each Board of Directors meeting attended. Directors who are members
of committees of the Board of Directors receive $1,000 for each committee
meeting attended.
Messrs. Bolinder, Rosenthal, Jeffrey P. Smith (Chair), Richard D. Smith and
White are members of the Executive Committee of the Board of Directors. Such
Committee only exercises the powers of the Board in the management of the
business and affairs of the Corporation between regularly scheduled meetings of
the Board of Directors, when necessary. The Executive Committee did not meet
during fiscal 1994. The Executive Committee serves as the nominating committee
for the Board of Directors and, although there are no formal procedures for
stockholders to recommend nominations, the Committee will consider any
recommendations from stockholders. Recommendations should be sent to
Michael C. Frei, Secretary, Smith's Food & Drug Centers, Inc., 1550 South
Redwood Road, Salt Lake City, Utah 84104.
Messrs. Brady, Hoefer and Martindale (Chair) are members of the Audit
Committee of the Board of Directors. Such Committee, which met three times
during fiscal 1994, reports to the Board of Directors with respect to various
auditing and accounting matters, the scope of audit procedures, and the
performance of the Corporation's independent auditors.
Messrs. Tigert (Chair), Peters and Rose are members of the Compensation
Committee of the Board of Directors. Mr. Tigert became a member of the
Committee in 1995. Previously, Mr. Anderson was a member of the Committee.
Such Committee, which met twice during fiscal 1994, administers the stock
option and stock purchase plans of the Corporation on behalf of the Board of
Directors. The Compensation Committee also determines compensation for
executive officers of the Corporation.
APPROVAL AND RATIFICATION OF AN AMENDMENT TO
THE CORPORATION'S 1989 STOCK OPTION PLAN
At the Annual Meeting, the Corporation's stockholders are being asked to
approve amendments to the Corporation's 1989 Stock Option Plan (the "1989
Option Plan") to implement certain changes in response to the Omnibus Budget
Reconciliation Act of 1993 ("OBRA 1993"). Ratification of the proposal
requires the affirmative vote of a majority of the shares of Series I Preferred
Stock, Class A Common Stock and Class B Common Stock voting on the proposal,
with all such shares voting together as a class and with each share of Series I
Preferred Stock and Class A Common Stock being entitled to ten votes and each
share of Class B Common Stock being entitled to one vote. The total vote cast
on the proposal also must equal or exceed at least fifty percent of the number
of votes represented by all outstanding shares of Series I Preferred Stock,
Class A Common Stock and Class B Common Stock on the Record Date.
General Description of the 1989 Plan
Purpose of the 1989 Plan; Number of Available Shares. The principal
purposes of the 1989 Plan are to permit the use of equity compensation to
attract, retain and incentivize high quality personnel. The 1989 Plan provides
for the grant of options to purchase shares of the Corporation's Class B Common
Stock. The number of shares available for grants under the 1989 Plan cannot
exceed ten percent (10%) of the number of shares of Class B Common Stock
authorized under the Corporation's Certificate of Incorporation; provided that
at no time may the number of shares of Class B Common Stock subject to
outstanding and unexercised options (excluding shares issued upon prior
exercise of options) exceed ten percent (10%) of the number of shares of
Class A and Class B Common Stock outstanding as of the close of trading on the
last trading day of the Corporation's immediately preceding fiscal year. Based
upon the number of outstanding shares of Class A and Class B Common Stock at
the end of fiscal 1994, a total of 2,518,919 shares of Class B Common Stock
currently are available for grant of options under the 1989 Plan, of which
1,700,500 were subject to currently outstanding and unexercised options as of
the Record Date. These options were held by 90 persons and had expiration
dates ranging from January 4, 1997 to June 6, 2005. Each outstanding option
under the 1989 Plan has an exercise price of $19.00 per share. In most cases,
options granted to executive officers and to other employees, become
exercisable in full ten years from the date of grant.
The 1989 Plan permits, subject to the aggregate-limitation described above,
grants of incentive stock options ("ISOs") within the meaning of Section 422 of
the Internal Revenue Code (the "Code") to purchase up to an aggregate of
4,000,000 shares. No ISOs were outstanding under the 1989 Plan as of the
Record Date.
Eligibility. The 1989 Plan permits the grant of stock options to employees,
consultants, non-employee directors and other third parties with whom the
Corporation has contracted.
Administration; Terms of Options. The 1989 Plan is administered by the
Corporation's Compensation Committee, the members of which cannot receive
options under the 1989 Plan. Subject to terms of the 1989 Plan, such Committee
has sole discretion, without reference to any specific criteria, to determine
the persons to whom, and the time or times at which, options will be granted;
the designation of each option as either an ISO or a nonqualified stock option;
the per share exercise price and the duration of each option; the number of
shares subject to each option; the rate and manner of exercise of each option;
and any other restrictions placed on each option. ISOs may not be granted to
any employee who, at the time the option is granted, beneficially owns stock of
the Corporation representing more than 10% of the voting power of the
Corporation.
The 1989 Plan provides that the per share exercise price for an ISO may not
be less than 100% of the fair market value of the Corporation's Class B Common
Stock on the date the option is granted and that the duration of an incentive
stock option may not be more than ten years from the date of grant. The per
share exercise price for nonqualified options may be above or below the fair
market value of the Corporation's Class B Common Stock at the time of grant and
the duration of a nonqualified stock option may be shorter than or exceed ten
years, each in the discretion of the Committee. During the lifetime of the
optionee, his or her option is exercisable only by him or her and is not
transferable except by will or by the laws of descent and distribution, and
then only if presently exercisable. The Committee may, in its sole discretion,
provide that upon disability of any employee of the corporation or death of any
Optionee, such Optionee's options shall become exercisable in whole or in part,
whether or not such option would otherwise have been so exercisable.
In the event of a change in control of the Corporation, all options
outstanding under the 1989 Plan will become fully exercisable. For purposes of
the 1989 Plan, a change of control of the Corporation occurs if (i) a person
acquires or is reasonably believed by the Board of Directors to have acquired
51% or more of the combined voting power of the Corporation's outstanding
securities in a transaction not approved by the Board of Directors serving
immediately prior to such transaction, (ii) a majority of the members of the
Board of Directors is replaced during any period of two consecutive years, or
(iii) the Corporation's stockholders approve a plan of liquidation in
connection with a transaction not approved by the Board of Directors serving
immediately prior to the date of the stockholders' meeting at which such
approval was given.
Options Granted. During fiscal 1994, options to purchase 81,000 shares of
Class B Common Stock were granted to three employees under the 1989 Plan at an
exercise price in each case of $19.00 per share. None of the named executive
officers received grants of any options during fiscal 1994. The Company's
executive officers, as a group, were granted options to purchase an aggregate
of 70,000 shares of Class B Common Stock during fiscal 1994. The last reported
sale price of the Class B Common Stock on the New York Stock Exchange Composite
Tape on the date of such grants was $24 3/8 per share. No shares have been
acquired upon exercise of any options granted under the 1989 Plan.
Proposed Amendment To The 1989 Plan
Code Section 162(m), enacted as part of OBRA 1993, provides that a publicly
held corporation cannot deduct compensation of a "covered employee" to the
extent the compensation (excluding certain "performance-based" compensation
amounts, as discussed below) exceeds $1 million per tax year. Covered
employees include the Chief Executive Officer and the four other most highly
compensated employees for the taxable year whose compensation is required to be
reported to stockholders under the Securities Exchange Act of 1934. There is a
statutory exception to this limitation for compensation based on the attainment
of performance goals. Income derived from stock options will qualify for this
exception and thus be treated as performance-based compensation if the material
terms of the compensation are disclosed to and approved by the shareholders and
such compensation otherwise meets the requirements set forth in Section 162(m).
One of the requirements of Section 162(m) is that the plan must provide for a
maximum number of shares for which options may be granted to any participant
during each fiscal year.
Accordingly, the Board of Directors has approved an amendment to the 1989
Plan to ensure that the Corporation will be permitted to deduct the
compensation expense it may recognize for federal income tax purposes upon the
exercise of nonstatutory options (or the disqualifying disposition of incentive
stock options) granted to covered employees. Under this amendment, no employee
may be granted options for more than 500,000 shares (subject to adjustment for
any stock split, recapitalization or similar event) during any fiscal year of
the Company. Prior to the amendment, the Plan did not contain such a
limitation.
The Board of Directors recommends a vote FOR approval and ratification of
the proposed amendment to the 1989 Plan.
Certain Tax Consequences
The following discussion summarizes certain federal income tax consequences
of stock options under the 1989 Plan based on the current provisions of the
Code. It is intended as a general summary only and may not apply to optionees
who have special tax circumstances. It does not address foreign, state or
local tax consequences, which may differ, nor does it address federal tax
consequences (e.g., gift and estate tax) other than income tax consequences.
Optionees should consult their own tax advisors for specific information
regarding the tax treatment of stock options under the 1989 Plan under their
particular circumstances.
The grant of either an ISO or a nonqualified stock option under the Plan
will not result in any federal income tax consequences to the optionee or to
the Corporation. Upon exercise of a nonqualified stock option, the optionee
recognizes ordinary compensation income equal to the difference, if any,
between the option price and the fair market value of the shares on the date of
exercise. This income is subject to withholding for federal income and
employment tax purposes if the optionee is an employee. The Corporation is
entitled to an income tax deduction in the amount of the income recognized by
the optionee. Any gain or loss on the optionee's subsequent disposition of the
shares will receive long- or short-term capital gain or loss treatment
depending on whether the shares are held for more or not more than twelve
months, respectively, following exercise. The Corporation does not receive a
tax deduction for any such gain. Capital gains currently are taxed at the same
federal income tax rates as ordinary income, except that the maximum marginal
federal rate at which ordinary income is taxed is currently 39.6 % and the
maximum rate at which long-term capital gains are taxed is 28%. Capital gains
may be offset in full by capital losses but capital losses may offset other
types of income only to the extent of $3,000 per year. Special considerations
apply to optionees who are reporting persons for purposes of Section 16(a) of
the Securities Exchange Act of 1934, as amended, and such optionees should
consult their tax advisors with respect to the tax treatment of such options.
An optionee recognizes no federal taxable income upon exercising an ISO
(subject to the alternative minimum tax rules discussed below), and the
Corporation receives no deduction at the time of exercise. In the event of a
disposition of stock acquired upon exercise of an ISO, the tax consequences
depend upon how long the optionee has held the shares. If the optionee does
not dispose of the shares within two years after the ISO was granted, nor
within one year after the ISO was exercised and shares were purchased, the
optionee will recognize a long-term capital gain (or loss) equal to the
difference between the sale price of the shares and the exercise price. The
Corporation is not entitled to any deduction under these circumstances.
If the optionee fails to satisfy either of the foregoing holding periods, he
or she must recognize ordinary income in the year of the disposition (referred
to as a "disqualifying disposition"). The amount of such ordinary income
generally is the lesser of (i) the difference between the amount realized on
disposition and the exercise price, or (ii) the difference between the fair
market value of the stock on the exercise date and the exercise price. Any
gain in excess of the amount taxed as ordinary income (or any loss) will be
treated as a long- or short-term capital gain (or loss), depending on whether
the stock was held for more or not more than twelve months, respectively. The
Corporation, in the year of the disqualifying disposition, is entitled to a
deduction equal to the amount of ordinary income recognized by the optionee.
The "spread" under an ISO - i.e., the difference between the fair market
value of the shares at exercise and the exercise price - is classified as an
item of income in the year of exercise for purposes of the alternative minimum
tax ("AMT"). An optionee generally will incur AMT if his or her income for a
year (i.e., regular taxable income adjusted for certain items and preferences,
including the ISO option spread, but reduced by an exclusion amount of $45,000
for joint filers), multiplied by an AMT rate of 26% for the first $175,000 of
AMT income and 28% for AMT income in excess of that amount for joint filers,
exceeds the optionee's regular income tax liability.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following tables set forth certain information concerning compensation
of the Corporation's Chief Executive Officer and its four other most highly
compensated executive officers (the "named executive officers").
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
Name and Principal Position Year Salary($)<F1> Bonus($) Options/SARs(#)
<S> <C> <C> <C> <C>
Jeffrey P. Smith 1994 $684,112 $516,000 ---
Chairman of the Board of 1993 683,606 539,000 ---
Directorsand Chief 1992 669,300 689,920 ---
Executive Officer
Richard D. Smith 1994 547,300 300,000 ---
President and Chief 1993 546,895 300,000 ---
Operating Officer 1992 535,440 549,120 ---
Robert D. Bolinder 1994 333,310 200,000 ---
Executive Vice President, 1993 529,072 --- 25,000
Corporate Planning and 1992 517,980 --- ---
Development
J. Craig Gilbert 1994 176,156 323,200 ---
Senior Vice President and 1993 143,716 255,700 20,000
Regional Manager, Region I 1992 141,098 259,550 20,000
Kenneth A. White 1994 175,850 323,200 ---
Senior Vice President and 1993 127,817 440,000 ---
Regional Manager Region II 1992 124,831 630,000 ---
<FN>
<F1> Fiscal 1992 includes 53 weeks compared to 52 weeks for fiscal 1994 and
1993.
</TABLE>
Fiscal Year-End Option Value
The following table sets forth the number of shares covered by stock options
held by the named executive officers as of the end of fiscal 1994, and the
value of "in-the-money" stock options, which represents the positive spread
between the exercise price of a stock option and the market price of the shares
subject to such options, as of the end of fiscal 1994. None of the named
executive officers exercised any stock options during fiscal 1994.
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at Fiscal In-the-money Options at
Year End Fiscal Year End(2)
Name(1) Exercisable/Unexercisable Exercisable/Unexercisable
Robert D. Bolinder 30,000/25,000 $183,750/$153,125
Kenneth A. White 0/70,000 0/$428,750
J. Craig Gilbert 0/70,000 0/$428,750
(1) Except as set forth in the table, no named executive officer held any
stock options as of the end of fiscal 1994.
(2) Calculated on the basis of the closing price per share for the
Corporation's Class B Common Stock on the New York Stock Exchange of $25
1/8 on December 30, 1994, the last trading day in fiscal 1994.
Pension Plan and Other Retirement, Death and Disability Arrangements
Pension Plan. The Corporation sponsors a retirement plan (the "Pension
Plan") for its nonunion employees, including executive officers, which is
funded entirely by the Corporation's contributions. An employee's monthly
benefit under the Pension Plan is determined by multiplying a fixed dollar
amount by the number of years of the employee's employment. The fixed dollar
amount, which has varied from year to year, is currently $30 per month and is
not subject to reduction for social security benefits. The fixed dollar amount
is adjusted from time to time on the basis of a number of factors, including
the other compensation and benefits offered to the Corporation's employees
generally, the Corporation's overall budget and earnings and pension benefits
offered by comparable employers. As of the end of fiscal 1994, the estimated
annual amounts payable following retirement to Messrs. Jeffrey P. Smith,
Richard D. Smith, White, Bolinder and Gilbert under the Pension Plan were
$11,604, $12,768, $8,669, $2,160 and $10,662, respectively.
Additional Retirement Benefits. As of the end of fiscal 1994, the
Corporation has entered into agreements with ten of its executive officers,
including each of the named executive officers, which provide that if the
officer serves in his present position or a higher position with the
Corporation through age 65, such officer or his beneficiary will receive
following such officer's retirement or death fixed equal monthly payments over
a ten-year period totaling $100,000.
Supplemental Compensation Agreements. The Corporation has entered into
agreements with Mr. White and six other current executive officers which
provide for monthly cash payments following the officer's disability or death,
or upon reaching a date specified in the agreement (the "Payment Date"). The
agreements provide that if the employee becomes disabled while employed by the
Corporation and before the Payment Date, the employee is entitled to receive
fixed monthly payments for the duration of the disability or for a period of
twenty years, whichever period is shorter. The agreements also provide that if
the employee dies while employed by the Corporation and before the Payment
Date, his beneficiary is entitled to receive fixed monthly payments for a
period of twenty years. Unless the employee dies prior to the Payment Date, he
is entitled to receive monthly payments for a period of twenty years beginning
on the Payment Date. The amount of these monthly payments is based on the
employee's number of years of employment from the date of the agreement through
the Payment Date. If the employee dies after the Payment Date, the employee's
beneficiary is entitled to receive any remaining payments. The payment of
benefits under the agreements is subject to forfeiture if the employee accepts
employment prior to the Payment Date with a company in the food or drug
business (either wholesale or retail) without the prior written consent of the
Corporation. In the event of a change in control of the Corporation, defined
as either a sale of substantially all of the assets of the Corporation or the
sale of 51% of the Corporation's outstanding capital stock to an entity other
than one owned and controlled by the Smith family, the Corporation must
purchase a fully paid insurance annuity for the benefit of the employees that
will fully vest the employees in their benefits under the agreements.
Mr. White and all executive officers as a group are entitled to receive maximum
monthly payments of $12,500 and $53,125, respectively, under the supplemental
compensation agreements, subject to pro rata reduction in the event that
employment ceases prior to the Payment Date other than as a result of death or
disability. Mr. White's agreement provides for a Payment Date in 2000, and
those of the other executive officers provide for Payment Dates ranging from
2000 to 2010. The Corporation has purchased cost-recovery life insurance to
cover its obligations under these agreements.
Report of the Compensation Committee on Executive Compensation
Notwithstanding anything to the contrary set forth in any of the
Corporation's previous or future filings under the Securities Act of 1933 or
the Securities Exchange Act of 1934 that might incorporate this Proxy Statement
or future filings with the Securities and Exchange Commission, in whole or in
part, the following report and the Performance Graph which follows shall not be
deemed to be incorporated by reference into any such filings.
The Compensation Committee is responsible for developing and making
recommendations to the Board with respect to the Corporation's executive
compensation policies. In addition, the Compensation Committee, pursuant to
authority delegated by the Board, reviews and approves on an annual basis the
compensation policies applicable to the Chief Executive Officer and the other
executive officers of the Corporation.
The objectives of the Corporation's executive compensation program are to:
- Support the achievement of desired performance by the Corporation.
- Provide compensation that will attract and retain superior talent and
reward performance.
- Align the executive officers' personal interests and financial
remuneration with the success of the Corporation by basing a significant
portion of their compensation upon corporate performance.
The executive compensation program provides an overall level of compensation
opportunity that is competitive within the retail food and drug industry,
including those companies which compete directly with the Corporation in its
regions, as well as companies outside the industry with which the Corporation
may compete for executive talent. Companies are selected for the purpose of
comparing compensation practices on the basis of a number of factors relative
to the Corporation, such as their size and complexity, the nature of their
businesses, the regions in which they operate, the structure of their
compensation programs (including the extent to which they rely on bonuses and
other contingent forms of compensation), and the availability of compensation
information. In reviewing the compensation practices of other companies, the
Compensation Committee considers the fact that the compensation structures of
most peer companies tend to be significantly different than those of the
Corporation in a number of respects, particularly in such areas as the amount
of bonus relative to salary paid by such companies, their use of stock
appreciation rights and stock options, the time period over which stock options
vest and the nature and amount of pension benefits made available to executive
officers. For these reasons, although the Compensation Committee has
considered the compensation policies of certain companies which are among the
Corporation's peer group in the Performance Graph below, the Compensation
Committee does not believe that all of such companies are comparable to the
Corporation for the purpose of setting the compensation for the Corporation's
executive officers. The Compensation Committee uses its discretion to set
executive compensation at levels warranted by external, internal and individual
circumstances. Actual compensation levels may be greater or less than average
competitive levels in other companies based upon annual and long-term
performance of the Corporation and each individual executive officer's
performance. Based upon a survey of compensation levels at such peer companies
in recent periods, the Compensation Committee believes that the Corporation's
cash compensation level corresponds to the top one-third of compensation paid
to executive officers of companies in the peer group.
The Corporation's executive officer compensation program is comprised of
base salary, cash bonus compensation, long-term incentive compensation in the
form of stock options, and various other benefits such as those available
through the Corporation's medical and pension plans.
Base Salary. Base salary levels for the Corporation's executive officers,
including the Chief Executive Officer, are set such that the overall cash
compensation package for executive officers, including bonus opportunity,
compares favorably to companies with which the Corporation competes for
executive talent. In determining salaries, the Compensation Committee also
takes into account a number of factors, which primarily include individual
experience and performance, the officer's level of responsibility, the cost of
living and historical salary levels. The measures of individual performance
considered include, to the extent applicable to an individual executive
officer, a number of quantitative and qualitative factors such as the
Corporation's historical and recent financial performance (including such
measures as gross margin, net income, same-store sales, customer count, cost
savings and market share), the individual's achievement of particular non-
financial goals within his or her responsibility (such as store openings, site
acquisitions or other specific tasks), and other contributions made by the
officer to the Corporation's success. The Compensation Committee has not found
it practicable to, and has not attempted to, assign relative weights to the
specific factors considered in determining base salary levels, and the specific
factors used may vary among officers. As is typical for most companies,
payment of base salary amounts generally is not conditioned upon the
achievement of any specific, pre-determined performance targets.
Cash Bonus. The Corporation's cash bonus program includes all executive
officers. Its purpose is to provide a direct financial incentive in the form
of an annual cash bonus to executive officers to achieve or exceed the
Corporation's budgeted pre-tax income. Under the terms of the Bonus Program ,
the cash bonus paid for fiscal 1994 to each officer equals the maximum bonus
amount determined for such officer multiplied by a percentage based on a
comparison of actual pre-tax income to budgeted pre-tax income, up to a maximum
of 100 percent of the maximum bonus amount in each case. The annual amount
budgeted for pre-tax income was approved by the Board of Directors for the 1994
fiscal year of the Corporation during its January 1994 meeting. At the
beginning of the 1994 fiscal year, the Compensation Committee established the
maximum amount of bonus payable for such year for each executive officer. In
reviewing the amount, the Compensation Committee considered a number of factors
including each officer's overall compensation package, bonus and other
compensation opportunities at competing companies and the officer's level of
responsibility. The Compensation committee also established a formula for
payment of bonuses based on the extent of achievement of the Board-approved
budgets. The Corporation believes that as compared to other companies in its
industry, the Corporation pays a relatively higher proportion of total
executive compensation in the form of bonus rather than salary and equity-based
compensation.
Stock Option Plan. The Corporation's Amended and Restated 1989 Stock Option
Plan authorizes the Compensation Committee to grant stock options to executives
and key managers. Grants of options are made in amounts commensurate with the
individual's responsibility and at a level calculated to be competitive within
the retail food and drug industries as well as a broader group of companies of
comparable size and complexity. Option grants are made from time to time and,
depending upon the circumstances, typically are not made to each executive
officer during each year. Options granted to executive officers typically do
not vest until ten years after the grant date, and do not include any specific,
pre-determined performance targets as a condition to vesting or granting. The
Corporation believes that such long-term grants serve the primary objective of
retaining executives and key managers, while also aligning executive and
shareholder interests by creating a strong and direct link between compensation
and stockholder return and by enabling executives and key managers to develop
and maintain a significant, long-term ownership interest in the Corporation's
Common Stock. No additional stock options were granted to the named executive
officers during 1994 because the Compensation Committee determined that, in
general, stock and options held by such officers (including the stock holdings
of the Chief Executive Officer) currently provide such officers with a strong
identity of interest with the Corporation's stockholders and are adequate to
achieve the goals discussed above. Grants of additional stock options to the
named executive officers may be considered in future periods by the
Compensation Committee. Since the Corporation's initial public offering in
1989, the Corporation has granted all stock options at an exercise price of
$19.00 per share, which was the initial public offering price for the
Corporation's Class B Common Stock. The Compensation Committee believes that
despite the nominal compensation expense incurred by the Corporation in
granting stock options below the then-current market value of the Corporation's
stock, this policy promotes morale among executive officers while providing
adequate incentives to maximize shareholder value, given that typically no
portion of the Corporation's stock options become exercisable until ten years
from the date of grant.
Benefits. The Corporation provides medical and pension benefits to the
executive officers, including the Chief Executive Officer, that are generally
available to the Corporation's employees. The Corporation also provides
certain executive officers with supplemental retirement, death and disability
benefits, as more fully described under the caption, "Pension Plan and Other
Retirement, Death and Disability Arrangements." The benefits available under
such arrangements generally are the same for each of the Corporation's
executive officers, including the Chief Executive Officer, except to the extent
benefits are payable based upon the length of an officer's employment with the
Corporation.
Chief Executive Officer Compensation. The Chief Executive Officer's
compensation is reviewed and approved independently by the Compensation
Committee. The Compensation Committee members determine the Chief Executive
Officer's compensation based upon the factors applicable to the Corporation's
other executive officers, which are described in detail above, as well as a
number of additional qualitative and quantitative factors appropriate to his
position as the Corporation's principal executive. For 1994, these factors
included providing the strategic leadership necessary when faced with the
current challenges of the Corporation and the supermarket industry. In
particular, the Committee noted that in fiscal 1994 the Chief Executive Officer
led the reorientation of the Corporation's expansion program, which included
the moderation of expansion efforts in the Southern California market, and the
downsizing of the average size of new stores in order to enhance return on the
Corporation's investment and permit expansion in additional market areas.
The Committee also noted that while the Corporation is numbered among the
leading low-cost operators in the industry, as measured by selling, general and
administrative expenses as a percentage of sales, the Chief Executive Officer
continued to achieve reductions in operating costs during 1994. Because of
this cost reduction program, the Corporation was able to generate increased
earnings compared to the prior year despite decreases in same store sales. The
Chief Executive Officer also continued in 1994 a re-engineering process of
several key store systems to better utilize available computer technology,
streamline the systems and reduce operating costs primarily through labor
efficiencies. The Compensation Committee has not found it practicable to, and
has not attempted to, assign relative weights to the specific factors
considered in determining the Chief Executive Officer's compensation.
In accordance with the Corporation's compensation policies for all executive
officers, a large component of the Chief Executive Officer's compensation is
paid in the form of bonus, which, in order to provide an appropriate incentive
to maximize the Corporation's financial performance, is determined based upon
preset bonus maximums and the amount of the Corporation's pre-tax income
compared to budgeted pre-tax income. For fiscal 1994, the Corporation achieved
the budgeted level of pre-tax income, resulting in a maximum CEO bonus of
$516,000, which represented a 4.3% decrease from the bonus paid for the
previous year. The CEO's total cash compensation for 1994 represented a 1.8%
decrease from the previous year. The Compensation Committee believes that the
Chief Executive Officer's lower total cash compensation is appropriate in light
of the Corporation's slower growth in earnings in fiscal 1994 and the other
factors described above. Based upon its survey of compensation levels at the
peer companies included in the Performance Graph below, the Committee noted
that the Chief Executive Officer's cash compensation during fiscal 1994 was in
the top one-third relative to the fiscal 1993 cash compensation of the CEOs of
such companies. The Compensation Committee noted, however, that, while the
Chief Executive Officer's compensation for fiscal 1994 consisted solely of cash
compensation, a substantial majority of the peer companies also provided
substantial equity or stock appreciation compensation to their CEOs during
fiscal 1993. The CEO has not received any stock option grants to date. For
this reason, the Chief Executive Officer's overall compensation would most
likely rank lower relative to CEO compensation at the peer companies when the
value of such non-cash compensation is included. In determining the
compensation of the Chief Executive Officer, the Compensation Committee
considers compensation levels at these peer companies. However, the
Compensation Committee has not deemed it practicable or appropriate to target
the Chief Executive Officer's compensation at any particular percentile
relative to the peer group.
DeLonne Anderson
Duane Peters
Ray V. Rose
Members of the Compensation
Committee of the Board of
Directors
Performance Graph
The graph below compares the cumulative total stockholder return on the
Class B Common Stock of the Corporation with the cumulative total return on the
Standard & Poor's 500 Index and a peer group of eleven companies in the
Corporation's industry over the period. In accordance with guidelines of the
SEC, the stockholder return for each entity in the peer group index has been
weighted on the basis of market capitalization as of the beginning of each
fiscal year set forth on the graph. The stock price performance shown on the
graph below is not necessarily indicative of future price performance.
[PERFORMANCE CHART FILED ON FORM SE]
(1) The selected peer group consists of the following companies: Bruno's,
Inc.; Fred Meyer, Inc.; Giant Food, Inc.; Great Atlantic & Pacific Tea
Co.; Hannaford Brothers Co.; Kroger Co.; Quality Food Centers, Inc.;
Safeway, Inc.; Stop & Shop Cos., Inc.; Vons Companies, Inc.; and Weis
Markets, Inc. Such companies have been selected for the peer group on the
basis of, among other factors, the similarity of their business to that of
the Corporation and their market capitalization relative to that of the
Corporation.<P255>
CERTAIN TRANSACTIONS
During fiscal 1994, the Corporation paid $340,001 in advertising fees to
radio and television stations operated by subsidiary companies of Bonneville
International Corporation ("Bonneville"). Rodney H. Brady, a director of the
Corporation, serves as President and Chief Executive Officer of Bonneville, but
has no role in the Corporation's advertising decisions. The Corporation
believes that the terms of the foregoing transactions were no less favorable to
the Corporation that those which could have been obtained from unaffiliated
third parties.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table provides certain information which has been furnished to
the Corporation regarding ownership of the Corporation's voting securities as
of February 27, 1995, with respect to (i) each director of the Corporation and
nominee for director who benefically owns shares; (ii) each executive officer
of the Corporation named in the Summary Compensation Table above who
beneficially owns shares; (iii) all directors and executive officers of the
Corporation as a group; and (iv) each beneficial owner of five percent or more
of any class of the Corporation's voting securities:
<TABLE>
<CAPTION>
Amount and Percent of
Nature of all Votes of
Title of Beneficial Percent all Classes
Name Class Ownership <F1> of Class of Stock
<S> <C> <C> <C> <C>
Jeffrey P. Smith Class A 3,385,808 <F2> 28.2% 44.5%
c/o Smith's Food & Drug Centers, Inc. Class B 10,600 *
1550 South Redwood Road Preferred 9,330,000 <F3> 61.3
Salt Lake City, UT 84104
Dee Glen Smith Marital Trust I Class A 462,420 <F4> 3.8 34.3
c/o Ida W. Smith Preferred 9,330,000 <F4> 61.3
1066 North East Capital Blvd.
Salt Lake City, UT 84103
Richard D. Smith Class A 2,462,553 <F5> 20.5 8.6
c/o Smith's Food & Drug Centers, Inc.
1550 South Redwood Road
Salt Lake City, UT 84104
Corporation of the President of Preferred 2,000,010 13.1 7.0
the Church of Jesus Christ of
Latter-day Saints
50 East North Temple
Salt Lake City, UT 84150
Fred L. Smith Class A 1,914,996 <F6> 15.9 6.7
74285 Quail Lake Dr.
Indian Wells, CA 92210
Trust for the Children Class A 1,155,300 <F4> 9.6 4.0
of Jeffrey P. Smith
2551 Brentwood Circle
Salt Lake City, UT 84121
Trust for the Children Class A 1,155,300 <F7> 9.6 4.0
of Fred L. Smith
74285 Quail Lakes Dr.
Indian Wells, CA 92210
Trust for the Children Class A 1,115,300 <F8> 9.3 3.9
of Richard D. Smith
1038 North East Capital Blvd.
Salt Lake City, UT 84103
Putnam Investments, Inc Class B 901,300 <F9> 6.9 *
One Post Office Square
Boston, MA 02109
University of Utah Medical School Preferred 1,000,000 6.6 3.5
c/o Treasurer
University of Utah
407 Park Building
Salt Lake City, UT 84112
Ida Smith Preferred 900,000 5.9 3.2
1066 North East Capital Blvd.
Salt Lkae City, UT 84103
Allen P. Martindale Class A 631,000 <F10> 5.3 2.2
c/o Smith's Food & Drug Centers, Inc.
1550 South Redwood Road
Salt Lake City, UT 84104
Sean D. Smith Class A 489,820 <F11> 4.1 1.7
DeLonne Anderson Class A 292,640 <F12> 2.4 1.1
Class B 151,000 <F13> 1.2
Robert D. Bolinder Class A 100,000 * *
Class B 30,000 <F14> *
Ray V. Rose Class A 90,000 <F15> * *
Douglas John Tigert Class A 75,000 * *
Kenneth A. White Class A 66,900 * *
Class B 60,790 *
J. Craig Gilbert Class A 65,000
Rodney H. Brady Class A 53,500 <F16> * *
Alan R. Hoefer Class A 30,000 * *
Class B 11,000 *
Duane Peters Class A 30,500 <F17> * *
Class B 300 *
All Directors and Executive Class A 8,769,536 73.0%
Officers as a Group(22 persons) Class B 301,406 2.3% 63.5%
Preferred 9,330,000 61.3%
<FN>
* Less than one-percent.
<F1> Each person has sole investment and voting power with respect to the
shares indicated, except as otherwise set forth in the footnotes to this
table. Each share of Class A Common Stock is convertible at any time at
the option of the holder into one share of Class B Common Stock.
<F2> Includes 1,542,110 shares which are held of record by four trusts of
which Jeffrey P. Smith is the trustee and of which his children and the
children of Richard D. Smith are beneficiaries, 43,100 shares held of
record by Mr. Smith's wife, and 462,420 shares held of record by a trust
for benefit of Ida W. Smith and of which Mr. Smith is trustee.
<F3> Such shares are held of record by a trust for the benefit of Ida W.
Smith and of which Jeffrey P. Smith trustee.
<F4> Included in the shares shown for Jeffrey P. Smith.
<F5> Includes 1,580,628 shares which are held of record by six trusts of
which Richard D. Smith is trustee and of which his children and the
children of Jeffrey P. Smith are beneficiaries and 11,742 shares held of
record by Mr. Smith's wife.
<F6> Includes 1,358,778 shares which are held of record by four trusts of
which Fred L. Smith is trustee and of which his children are
beneficiaries, and 35,200 shares held of record by Mr. Smith's wife.
<F7> Included in the shares shown for Fred L. Smith.
<F8> Included in the shares shown for Richard D. Smith.
<F9> This information is based on a Scheudle 13G filed with the Securities
and Exchange Commission reporting that, as of December 31, 1994, Putnam
Investments, Inc. had shared voting power as to 393,200 of such shares,
sole voting power with respect to none of such shares, and shared
dispositive power with respect to all of such shares. The Putnam
Advisory Company, Inc., a wholly-owned subsidiary of Putnam Investments,
Inc., also is listed as beneficial owner of such shares.
<F10> Such shares are held of record by a trust for the benefit of Mr.
Martindale and his wife and of which Mr. Martindale is trustee.
<F11> Includes 484,226 shares held of record by trusts for the benefit of Mr.
Sean D. Smith of which Messrs. Richard D. Smith and Jeffrey P. Smith are
trustees. Of such shares, 99,126 shares are included in shares shown
for Richard D. Smith and 385,100 shares are included in shares shown for
Jeffrey P. Smith. Also includes 5,594 shares held of record by four
trusts of which Sean D. Smith is trustee and of which his children and
other family members are beneficiaries.
<F12> Includes shares held of record by the following partnerships, of which
Mr. Anderson is a general partner: Cheever Investments, 111 shares;
Ricks Creek Investment, 28,811 shares; and Lupine Investment, 64,851.
Also includes 148,867 shares held of record by Mr. Anderson's wife.
<F13> Includes shares held of record by the following partnerships, of which
Mr. Anderson is a general partner: Cheever Investments, 70,000 shares;
and Ricks Creek Investment, 42,000 shares.
<F14> Includes 30,000 shares of issuable upon exercise of vested options as of
February 28, 1994.
<F15> Includes 60,000 shares held of record by a trust of which Mr. Rose is
trustee and of which the members of the family of Mr. Rose are
beneficiaries.
<F16> Such shares are held by a trust for the benefit of Mr. Brady and his
wife and of which Mr. Brady is trustee.
<F17> Includes 6,450 shares held of record by two trusts of which Mr. Peters
is trustee and of which the members of the family of Mr. Peters are
beneficiaries. Also includes 24,050 shares held in an IRA account of
which Mr. Peters is beneficiary.
</TABLE>
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the independent
auditors to examine the accounts of the Corporation for the 1995 fiscal year.
Ernst & Young LLP has served as the Corporation's independent auditors since
prior to 1970. In the event that ratification of this selection of auditors is
not approved by the affirmative vote of a majority of the shares of Series I
Preferred Stock, Class A Common Stock and Class B Common Stock voting on the
proposal, with all such shares voting together and with each share of Series I
Preferred Stock and Class A Common Stock entitled to ten votes and each share
of Class B Common Stock entitled to one vote, management will review its future
selection of auditors.
A member of Ernst & Young LLP is expected to be in attendance at the Annual
Meeting with the opportunity to make a statement and respond to questions.
The Board of Directors recommends a vote FOR ratification of the selection
of Ernst & Young LLP as the Corporation's independent auditors for the 1995
fiscal year.
OTHER MATTERS
Compliance with Section 16(a) of the Exchange Act. Section 16(a) of the
Exchange Act requires the Corporation's officers and directors and persons who
own more than ten percent of the Corporation's Class B Common Stock
(collectively, "Reporting Persons") to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and the New York Stock
Exchange. Reporting Persons are required by SEC regulations to furnish the
Corporation with copies of all Section 16(a) forms they file. Based solely on
its review of the copies of such forms received or written representations from
certain Reporting Persons, the Corporation believes that during fiscal 1994 all
the Reporting Persons complied with all applicable filing requirements, except
that one statement of changes in beneficial ownership was inadvertently filed
late on behalf of Mr. Jeffrey P. Smith involving one reportable transaction.
Other Matters. The Board of Directors knows of no other business which will
be presented to the Annual Meeting. If any other business is properly brought
before the Annual Meeting, it is intended that proxies in the enclosed form
will be voted in respect thereof in accordance with the judgments of the
persons voting the proxies.
STOCKHOLDERS' PROPOSALS FOR NEXT ANNUAL MEETING
Stockholders' proposals intended to be presented at the 1996 Annual Meeting
of Stockholders of the Corporation must be received by the Corporation no later
than November 25, 1995 for inclusion in the Corporation's Proxy Statement and
proxy card related to the 1996 Annual Meeting.
Salt Lake City, Utah
March 24, 1995
<PAGE>
[FORM OF FRONT OF PROXY CARD]
SMITH'S FOOD & DRUG CENTERS, INC. PROXY
1550 SOUTH REDWOOD ROAD
SALT LAKE CITY, UTAH 84104
JEFFREY P. SMITH, ROBERT D. BOLINDER AND MICHAEL C. FREI, or any of them
each with the power of substitution, are hereby authorized to represent and
vote the shares of the undersigned, with all the powers which the undersigned
would possess if personally present, at the Annual Meeting of Stockholders of
Smith's Food & Drug Centers, Inc. (the "Corporation"), to be held on Tuesday,
April 25, 1995, and any adjournments or postponements thereof.
Election of all fifteen directors (or if any nominee is not available for
election, such substitute as the Board of Directors or the proxy holders may
designate). Nominees: JEFFREY P. SMITH, RICHARD D. SMITH, STUART ROSENTHAL,
ROBERT D. BOLINDER, KENNETH A. WHITE, DELONNE ANDERSON, RODNEY H. BRADY, ALAN
R. HOEFER, ALLEN P. MARTINDALE, NICOLE MILLER, DUANE V. PETERS, RAY V. ROSE,
FRED L. SMITH, SEAN D. SMITH, AND DOUGLAS J. TIGERT.
If you wish to vote in accordance with the Board of Directors'
recommendations, just sign and date on the reverse side. You need not mark any
boxes.
1. Election of Directors (see above):
___ FOR ___ WITHHOLD
FOR, except vote withheld from the following nominee(s):
_______________________________________________________________________________
_______________________________________________________________________
2. To ratify and approve an amendment to the Corporation's 1989 Stock
Option Plan:
___ FOR ___ AGAINST ___ ABSTAIN
3. To ratify the appointment of Ernst & Young as the Corporation's
independent auditors for 1995:
___ FOR ___ AGAINST ___ ABSTAIN
----------------------------------------------------------------------------
[FORM OF BACK OF PROXY CARD]
Shares represented by this proxy will be voted as directed on the reverse
side by the stockholder. If no such directions are indicated, the Proxies will
have authority to vote FOR the election of all directors, and FOR items 2 and
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
The Board of Directors recommends a vote FOR the election of Directors and
FOR proposals 2 and 3.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING ON APRIL 25, 1995.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED REPLY ENVELOPE.
Please sign exactly as your name appears herein. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
Signature__________________________________________ Date_________________
Signature__________________________________________ Date_________________
