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 July 1, 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 July 1, 1995:
Class A 11,925,019
Class B 13,068,538
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Income for the
thirteen weeks ended July 1, 1995 and
July 2, 1994 3
Consolidated Balance Sheets as of
July 1, 1995 and December 31, 1994 4
Consolidated Statements of Cash Flows for
the thirteen weeks ended July 1, 1995 and
July 2, 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 4. Submission of Matters to a Vote of Securities
Holders 8
Item 6. Exhibits and Reports on Form 8-K 9
<PAGE>
Item 1. Financial Statements (Unaudited)
PART I. FINANCIAL INFORMATION
SMITH'S FOOD & DRUG CENTERS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollar amounts in thousands, except per share data)
Thirteen Thirteen Twenty-six Twenty-six
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
July 1, July 2, July 1, July 2,
1995 1994 1995 1994
Net sales $770,405 $748,328 $1,517,078 $1,502,108
Cost of goods sold 599,369 583,628 1,179,175 1,174,691
-------- -------- ---------- ----------
171,036 164,700 337,903 327,417
Expenses:
Operating, selling and
administrative 116,698 110,641 229,468 223,889
Depreciation and
amortization 24,226 21,745 47,467 42,457
Interest 15,280 12,727 30,357 25,930
-------- -------- ---------- ----------
156,204 145,113 307,292 292,276
INCOME BEFORE
INCOME TAXES 14,832 19,587 30,611 35,141
Income taxes 5,800 7,700 12,100 13,900
-------- -------- ---------- ----------
NET INCOME $ 9,032 $ 11,887 $ 18,511 $ 21,241
======== ======== ========== ==========
Net income per share of
Common Stock $ .36 $ .41 $ .73 $ .72
======== ======== ========== ==========
Dividends paid per share
of Common Stock $ .15 $ .13 $ .30 $ .26
======== ======== ========== ==========
Average number of common
shares outstanding
(In thousands) 25,139 28,650 25,314 29,271
======== ======== ========== ==========
See notes to consolidated financial statements
<PAGE>
SMITH'S FOOD & DRUG CENTERS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollar amounts in thousands)
July 1, Dec. 31,
1995 1994
CURRENT ASSETS
Cash and cash equivalents $ 13,447 $ 14,188
Rebates and accounts receivable 23,119 25,596
Inventories 366,200 389,564
Prepaid expenses and deposits 35,085 17,258
---------- ----------
TOTAL CURRENT ASSETS 437,851 446,606
PROPERTY AND EQUIPMENT
Land 309,261 303,701
Buildings 631,350 619,056
Leasehold improvements 57,887 42,369
Fixtures and equipment 598,943 589,480
---------- ----------
1,597,441 1,554,606
Less allowances for depreciation
and amortization 394,936 364,741
---------- ----------
1,202,505 1,189,865
OTHER ASSETS 17,024 16,996
---------- ----------
$1,657,380 $1,653,467
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 207,734 $ 235,843
Accrued sales and other taxes 47,358 44,379
Accrued payroll and related benefits 86,297 84,083
Current maturities of long-term debt 20,000 19,011
Current maturities of
Redeemable Preferred Stock 634 1,017
---------- ----------
TOTAL CURRENT LIABILITIES 362,023 384,333
LONG-TERM DEBT, less current maturities 715,038 699,882
DEFERRED INCOME TAXES 94,000 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, 11,925,019 shares
in 1995 and 12,357,095 shares in 1994 119 121
Class B Common Stock, par value $.01 per share:
Authorized 100,000,000 shares; issued
18,036,992 shares in 1995 and 17,604,917
shares in 1994 180 178
Additional paid-in capital 285,609 285,592
Retained earnings 304,555 293,456
---------- ----------
590,463 579,347
Less Treasury Shares at cost (4,968,454 shares
in 1995 and 2,337,294 shares in 1994) 108,554 104,005
---------- ----------
481,909 475,342
---------- ----------
$1,657,380 $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)
Twenty-Six Twenty-Six
Weeks Ended Weeks Ended
July 1, July 2,
1995 1994
OPERATING ACTIVITIES:
Net income $18,511 $21,241
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization (including
amounts charged to cost of goods sold) 50,409 45,396
Deferred income taxes 5,600 4,300
Other 393 289
Changes in operating assets and
liabilities:
Rebates and accounts receivable 2,477 3,713
Inventories 23,364 12,627
Prepaid expenses and deposits (18,927) (15,832)
Trade accounts payable (28,109) 16,775
Accrued sales and other taxes 2,979 8,465
Accrued payroll and related benefits 2,214 (1,153)
------- -------
CASH PROVIDED BY OPERATING ACTIVITIES 58,911 95,821
INVESTING ACTIVITIES:
Additions to property and equipment (65,697) (77,206)
Sale/leaseback arrangements and other
property sales 2,648 20,507
Other (28) (3,027)
------- -------
CASH USED IN INVESTING ACTIVITIES (63,077) (59,726)
FINANCING ACTIVITIES:
Additions to long-term debt 25,000
Payments on long-term debt (8,855) (25,096)
Purchases of Treasury Stock (7,845) (46,058)
Proceeds from sale of Treasury Stock 2,920 3,535
Redemptions of Preferred Stock (383) (417)
Payment of dividends (7,412) (7,643)
------ -------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 3,425 (75,679)
NET DECREASE IN
CASH AND CASH EQUIVALENTS (741) (39,584)
Cash and cash equivalents at beginning of year 14,188 61,921
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $13,447 $22,337
======= =======
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 twenty-six week periods
ended July 1, 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 2.9% in the second quarter of 1995 to $770
million compared to $748 million for the same period last year.
For the first twenty-six weeks of 1995, net sales increased to
$1.52 billion from $1.50 billion for the first half of last
year, an increase of 1.0%. Same store sales decreased 4.4% in
the first half of 1995 compared with 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 half of fiscal 1995, the Company opened seven
large combination food and drug centers in Mesa and Phoenix,
Arizona; Vista, California; Gallup and Hobbs, New Mexico; and
Gardnerville and Elko, Nevada. One smaller store was closed in
Las Vegas, Nevada. At July 1, 1995, the Company operated 145
stores totaling 9.6 million square feet compared to 134 stores
totaling 8.9 million square feet at the end of the prior year's
second quarter. During the remainder of fiscal 1995, the
Company currently expects to open 5 to 7 additional stores
including three to four stores in Arizona averaging
approximately 54,000 square feet. The Company anticipates that
future stores will range in size from 54,000 to 66,000 square
feet compared to approximately 72,700 square feet for new
stores opened in recent years. These new combination food &
drug centers will have substantially the same attributes and
product selections as the larger stores.
The Company opened two new retail warehouse format stores in
Las Vegas, Nevada during the second quarter of 1995. These new
"price-impact" stores are called PriceRite Grocery Warehouse.
In July, the Company also opened two additional retail
warehouse format stores in Las Vegas, including one conversion
of a smaller store. These two stores are in addition to the 5
to 7 new combination food and drug centers anticipated to be
added during the remainder of 1995.
Gross margins as a percentage of net sales increased to 22.2%
during the second quarter of 1995 from 22.0% during the same
period last year. For the first twenty-six weeks of 1995 gross
margins increased to 22.3% from 21.8% for the same period last
year. This increase is due primarily to reduced charges for
inventory shrinkage and improved prices on certain merchandise
items.. 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 second quarter of 1995 compared to $1.5 million
for the same period last year and $2.0 million for the first
half of 1995 compared to $3.0 million for the same period last
year.
Operating, selling and administrative expenses as a percentage
of net sales increased to 15.1% during the second quarter of
1995 from 14.8% during the second quarter of 1994. For the
first half of the year compared to last year, operating,
selling and administrative expenses increased to 15.1% from
14.9%. This increase was caused mainly by the store opening
costs related to the nine stores opened during the first half
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 11.4% for the
second quarter and 11.8% for the first half of 1995 compared to
the same respective periods last year due to the increase in
the number of new combination stores.
Interest expense increased 20.1% for the second quarter and
17.1% for the first half 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 $741,000 during the first
half of 1995. Working capital was $75.8 million at July 1,
1995, a increase of $13.5 million compared to December 31,
1994.
During the first half of 1995, cash provided by operating
activities was $58.9 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 $63.1 million for the
first half of 1995 reflecting the Company's ongoing expansion
program. The Company anticipates investing approximately $60
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 $3.4 million for
the first half 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 4. Submission of Matters to a Vote of Securities Holders
At the Company's Annual Meeting of Stockholders held on April
25, 1995, the stockholders elected as directors the following:
VOTES VOTES BROKER
NAME FOR WITHHELD NON-VOTES
Jeffrey P. Smith 267,387,735 89,125 -0-
Richard D. Smith 267,387,735 89,125 -0-
Stuart Rosenthal 267,387,735 89,125 -0-
Robert D. Bolinder 267,387,735 89,125 -0-
Kenneth A. White 267,387,735 89,125 -0-
DeLonne Anderson 267,387,735 89,125 -0-
Rodney H. Brady 267,387,735 89,125 -0-
Alan R. Hoefer 267,387,735 89,125 -0-
Allen P. Martindale 267,387,735 89,125 -0-
Nicole Miller 267,387,735 89,125 -0-
Duane V. Peters 267,387,735 89,125 -0-
Ray V. Rose 267,387,735 89,125 -0-
Fred L. Smith 267,387,735 89,125 -0-
Sean D. Smith 267,387,735 89,125 -0-
Douglas J. Tigert 267,387,735 89,125 -0-
In addition, the stockholders approved an amendment to the
Corporation's 1989 Stock Option 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 nonstatuatory options granted to covered
employees (with 262,026,715 affirmative votes, 420,567
negative votes, 5,029,578 abstentions and zero broker non-
votes). The amendment provides that no employee may be
granted options for more than 500,000 shares during any fiscal
year of the Corporation.
The stockholders also, ratified the appointment of Ernst &
Young LLP as the Corporation's independent auditors for 1995
(with 262,446,032 affirmative votes, 10,568 negative votes,
5,020,260 abstentions and zero broker non-votes).
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 second
quarter.
INDEX TO EXHIBITS
Exhibit
Number Document
10.21 Committed Credit Line Agreement, dated May
31, 1995, between Company and Banque National
de Paris.
10.22 Amendment 2, dated as of May 9, 1995, to
Revolving Credit Agreement, dated as of June
28, 1993, between Company and Bank of
America.
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: 8/11/95 /s/ Matthew G. Tezak
Matthew G. Tezak, Senior Vice
President and Chief
Financial Officer
(Principal Accounting
Officer)
[BNP LETTERHEAD]
Smith's Food & Drug Centers, Inc. May 31, 1995
1550 South Redwood Road
Salt Lake City, UT 84104
Attn: Mr. Casey Jones
Director of Capital Development & Banking
Ladies and Gentlemen:
Banque Nationale de Paris ("BNP") is pleased to advise you that
we have approved the following facility for your use:
Borrower: Smith's Food & Drug Centers, Inc.
Facility: Committed line of credit for one or more advances (the
"Advance(s)"). The maximum aggregate principal amount available
under this Facility at any one time is $10,000,000 (the
"Commitment"), the minimum amount of any one Advance is
$1,000,000.
Repayment: The principal amount of all Advances outstanding
on the Expiration Date, together with all accrued but unpaid
interest thereon, shall be repaid in full on the Expiration Date.
Commitment Fee: Borrower agrees to pay to the Bank a
commitment fee on the average daily unused portion of the
Commitment from the date of this Agreement until the Expiration
date at the rate of 12.5 basis points (one eighth of one
percent), payable on the last day of each March, June, September
and December during the term of the Commitment and on the
Expiration Date, commencing on the last day of September 1995
(for the period beginning on the date of this Letter Agreement),
and ending on the Expiration Date.
Interest: Interest shall be computed in respect of amounts drawn
under this Facility at rates quoted by the Bank and accepted by
the customer at the time of utilization. In any event, the rate
quoted by the Bank shall not exceed the Eurodollar Offered Side
of the market for periods of overnight one, two, three or six
months plus a margin of 35 basis points (0.35 per cent) per
annum. Interest shall be computed on the actual number of days
elapsed and on the basis of a 360 day year. Interest is payable
on the maturity date of each Advance, or if the maturity date for
an Advance is more than three months from the date of the
Advance, then interest shall be payable at least quarterly in
arrears. In any event, all accrued but unpaid interest shall be
paid on the Expiration Date.
Term of Facility: This line of credit is committed for a period
of eighteen months plus one day to include an "evergreen" clause
for the automatic renewal of same each six months, barring notice
of cancellation by yourselves or ourselves of the evergreen
feature. The commitment currently expires on December 1, 1996,
but on November 30, 1995 (i.e. the first business day prior to
the end of the month, referred to as "Renewal Date"), the
expiration extends to June 1, 1997 automatically unless one of
the parties gives notice to the other prior to renewal date that
it does not wish to continue the commitment (as so extended from
time to time, the "Expiration Date").
Requests for Advances: Requests for Advances may be addressed
to Don Hart or Debra McAdam in writing or by telephone and may be
made by any of your Designated Officers (as that term is used in
the Borrowing Certificate referred to below). Requests for
Advances shall be irrevocable and shall be given not later than
10:00 a.m. (San Francisco time) on the date such request is made.
Each Request for Advance shall specify at least the following:
(1) the date and amount of such Advance; (2) the term of the
Advance; and (3) the duration of the interest period.
Terms of Advance: For each Advance made under this agreement,
BNP will maintain a record of the terms and conditions of such
Advance (the "Terms of Advance"). BNP's records of such terms and
conditions shall be binding upon Borrower absent manifest error.
BNP will make a copy of the Terms of Advance available to
Borrower.
Documentation: Prior to the funding of the first Advance to be
made hereunder, Borrower will deliver to BNP: (a) this agreement
(b) a Borrowing Certificate, and (c) a Promissory Note (the
"Note"), each fully executed and in a form acceptable to BNP.
Forms of Borrowing Certificate and Note are attached.
Representations: Borrower represents and warrants that (a)
this agreement and, when executed and delivered to us, the note
(including any substitute or additional Note), has been duly
authorized, executed and delivered by Borrower and constitutes
legally binding and enforceable obligations of Borrower in
accordance with its respective terms, and (b) all financial
information which Borrower has submitted or will submit to BNP in
connection with this agreement or any request for an advance is
(or will be at the time submitted) true and complete, fairly
presents the financial condition of Borrower as of the date
indicated and has been prepared in accordance with generally
accepted accounting principles. Upon the making of each request
for an advance under this Facility and upon receipt of each such
Advance, Borrower will be deemed to have restated and reaffirmed,
as of the date of each such request and receipt, each
representation and warranty made above.
Notices: All notices required or permitted by this agreement or
any Note shall be made by telephone or in writing (but if by
telephone, shall promptly be confirmed in writing) and addressed
to Borrower at 1550 South Redwood Road, Salt Lake City, UT 84104;
(801) 974-1400; telefax number: (801) 973-1892; and to BNP at:
180 Montgomery Street San Francisco, CA 94104; telephone number:
(415) 956-2511; telefax number: (415) 989-9041 ; unless either
party gives notice to the other of a change in address.
Kindly indicate your acceptance of this letter agreement by
signing and returning to us the original of this letter. The
enclosed duplicate is for your files. Unless accepted or extended
in writing, this offer will expire on our close of business June
15, 1995. We are delighted to offer this Facility and look
forward to continuing our mutually satisfactory relationship.
Sincerely,
BANQUE NATIONALE DE PARIS
/s/ D. Guy Gibb /s/ William J. La Herran
D. Guy Gibb William J. La Herran
Vice President Assistant Vice President
ACCEPTED AND AGREED AS OF THIS 1ST DAY OF June, 1995.
SMITH'S FOOD & DRUG CENTERS, INC.
By: /s/ Paul Tezak
Title: V.P. Finance & Treasurer
PROMISSORY NOTE
$10,000,000 June 1, 1995
San Francisco, California
FOR VALUE RECEIVED. Smith's Food & Drug Centers, Inc.
("Borrower"), hereby- promises to pay to the order of Banque
Nationale de Paris ("BNP") or the holder hereof the principal sum
of Ten Million Dollars ($10,000,000). or such lesser amount(s) as
shall have been loaned by BNP to Borrower from time to time in
one or more advances (each an "Advance") pursuant to that certain
letter agreement addressed by BNP to Borrower on May 31, 1995 and
accepted by Borrower (the "Agreement"). Each Advance shall be
payable upon the terms stated in the Terms of Advance defined
below. Each Advance shall bear interest from the date made until
paid in full at the rate(s) of interest to be agreed upon by
Borrower and BNP at the time that such Advance is made. Interest
shall be payable with respect to each advance at the time(s) to
be agreed upon by Borrower and BNP at the time that such ,advance
is made; but in any event not less frequently than quarterly as
provided in the Terms of Advance. If Borrower fails to make any
payment due in connection with this Note (including payments of
principal. interest, expenses or any other charges) such due but
unpaid amount shall bear interest from the date due until such
amount is paid in full at a rate equal to the Prime Rate plus two
percent (2.0%) per annum. As used in this Note the term "Prime
Rate" shall mean that fluctuating rate of interest determined
from time to time by the San Francisco office of BNP to be in
effect as its prime rate. Any change in the Prime Rate shall take
effect on the day determined by BNP.
For each Advance made under this Note, BNP shall maintain a
record as more fully described in the Agreement (the "Terms of
Advance"). The Terms of Advance shall be maintained by BNP in
such format including computer records, as BNP shall determine.
and the Terms of Advance shall be binding upon Borrower absent
manifest error by BNP in respect to such records; provided,
however. that failure by BNP to maintain the Terms of Advance
shall not affect the obligations of Borrower to pay amounts due
under this Note.
In the event that any Advance is made hereunder. any and
each of the following shall constitute an "event of default"
under this Note: (a) Borrower's failure promptly to make any
payment under this Note in accordance with its terms; (b)
Borrower's failure to perform any of its obligations contained in
this Note or in the Agreement; (c) the filing of a petition in
bankruptcy, or for the appointment of a receiver in liquidation
or a trustee, by or against Borrower or for any of Borrower's
property or the filing of the petition or other proceeding by or
against Borrower for reorganization compromise, adjustment or
other relief under the laws of the United States or of any state
relating to the relief of debtor which petition or other
proceeding is in any event not dismissed set aside, or withdrawn
or ceases to be in effect within ten (10) days following the
filing thereof; (d) Borrower's making any general assignment for
the benefit of creditors or otherwise making or attempting an
assignment of all or substantially all of its assets; (e) any
representation or warranty of the Borrower in the Agreement or
the Note shall prove to have been false or misleading in any
material respect when made or when deemed made; or (f) Borrower's
(i) failure to pay any indebtedness in a principal amount in
excess of $5,000,000 or any interest or premium thereon, when due
(whether by scheduled maturity, required prepayment acceleration,
demand, otherwise),or(ii) failure to perform or observe any term,
covenant, or condition on its part to be performed or observed
under any agreement or instrument relating to any such
indebtedness, in excess of $5,000,000 when required to be
performed or observed, if the effect of such failure to perform
or observe is to accelerate or to permit the acceleration after
the giving of notice or passage of time or both, of the maturity,
of such indebtedness, whether or not such failure to perform or
observe shall be waived by the holder of such indebtedness, or
(iii) any such indebtedness shall be declared to be due and
payable or required to be prepaid prior to the stated maturity
thereof and Borrower shall have failed to pay such indebtedness
or cure such default within thirty (30) days. BNP may take any
legal action available to collect all sums owing hereunder.
Borrower may prepay an Advance prior to its maturity date,
or any portion thereof at any time without penalty, provided,
however, that each prepayment shall (a) be in an amount not less
than $100,000, (b) include payment of all accrued interest to the
date of the prepayment with respect to all prepaid principal and
(c) in the case of prepayments of Advances or portions of
Advances which bear interest at a rate which does not fluctuate
on a daily basis, include an amount determined by BNP in its sole
discretion, equal to the losses and expenses incurred by BNP in
connection with such prepayment (BNP's calculation of such losses
and expenses shall be binding upon Borrower absent manifest error
on the part of BNP in making such calculation).
Payments due under this Note shall be made not later than
11:00 a.m. (San Francisco time) on the day each such payment is
due. All payments shall be made in lawful money of the United
States of America by wire transfer of immediately available funds
into the following account or such other account as BNP shall
designate to Borrower in writing : Federal Reserve Bank of San
Francisco, Account Number: 121027234, Reference: Smith's Food &
Drug Centers, lnc. All payments shall be made free and clear of,
and without deduction for or other withholding on account of,
taxes. All payments made hereunder shall be credited first
against accrued and unpaid costs and expenses of BNP, if any,
then against accrued but unpaid interest and finally against
principal. Computations of interest (including default interest)
and fees shall be made by BNP on the basis of a year consisting
of 360 days for the actual number of days elapsed (including the
first day but excluding the last). In the absence of manifest
error, BNP's determination of the amount owed hereunder shall be
conclusive and binding upon the Borrower.
Neither the acceptance of any partial or delinquent payment
by BNP nor BNP's failure to exercise any rights or remedies upon
the occurrence and continuance of any default shall, in and of
itself, constitute a waiver of such default, a modification of
Borrower's obligations under this Note or a waiver of any
subsequent default. This Note, together with the Agreement and
the Terms of Advance with respect to each Advance sets forth the
entire agreement between Borrower and BNP with regard to the
matters referred to herein. No alteration, amendment or extension
of any provision of this Note nor consent to any departure by
Borrower from the terms hereof shall be effective unless the same
shall be in writing and signed by BNP, and then such waiver or
consent shall be effective only in the specific instance and for
the specific purpose for which given. Should any action or
proceeding be brought to construe or enforce the terms and
conditions of this Note, the Agreement or any Terms of Advance,
or the rights of the parties hereunder or thereunder, the party
prevailing in such action or proceeding shall be entitled to
recover from the other party all court costs and reasonable
attorneys' fees to be set by the court, as well as the costs and
fees incurred in enforcing any judgment entered thereon. All
rights of BNP hereunder shall inure to the benefit of its
successors and assigns: all obligations of Borrowers shall bind
its successors and assigns. Borrower's obligations under this
Note are not assignable. The construction of this Note and the
rights and liabilities of the parties hereto, shall be governed
by the laws of the State of California.
IN WITNESS WHEREOF, Borrower has caused this Note to be
executed as of the date and year first written above.
SMITH'S FOOD & DRUG CENTERS, INC.
a Delaware corporation
By: /s/ Paul Tezak Title: VP Finance & Treasurer
BORROWING CERTIFICATE
Designated Officers
The undersigned, being the duly appointed Asst. Sec. of
Smith's Food & Drug Centers, Inc. Delaware corporation(the
"Corporation"),being familiar with the letter agreement, dated
May 31 , 1995 (the"Agreement") between the Corporation and Banque
Nationale de Paris ("BNP"), with the Promissory Note in the
maximum amount of Ten Million Dollars ($10,000,000) to be made by
the Corporation to the order of BNP (the "Note") and with the
matters herein certified does hereby certify to BNP that s/he is
authorized to execute and deliver this Certificate in the name
and on behalf of the Corporation, and that:
1. Attached hereto as Annex A is a true, correct and
complete copy of resolutions duly adopted at a meeting of the
Board of Directors of the Corporation held on April 26, 1995
which authorize the Sr. VP, CEO, VP Finance Treasury, or
Controller of the Corporation to borrow funds on behalf of and in
the name of the Corporation in amounts not to exceed Ten Million
and No/100 Dollars ($10,000,000 ). Such resolutions have not been
amended or rescinded and are in full force and effect on the date
hereof. BNP is hereby authorized to assume that such resolutions
are and continue to be in full force and effect until otherwise
notified in writing by the Corporation.
2. The persons list below (the "Designated Officers") are
duly elected, qualified and acting officers of the Corporation
and occupy the offices indicated opposite their names. The
signatures set opposite their names are the true signatures of
said officers and such officers, acting singly or otherwise, are
authorized by the Corporation (a) to execute and deliver the
Agreement and the Note, (b) to request advances pursuant to the
terms of the Agreement and the Note and agree to the terms and
conditions of such advances, and (c) to perform such other acts
and execute such other instruments and documents as may be
incidental to the transactions described in the Agreement or any
Note. BNP is hereby authorized to assume that each person listed
below has and shall continue to have the authority stated in this
paragraph until otherwise notified in writing by the Corporation.
NAME OFFICE SIGNATURE
MATTHEW G. TEZAK SENIOR VP C.F.O. /s/ Matthew G. Tezak
PAUL TEZAK V.P. FINANCE TREASURY /s/ Paul Tezak
ROBERT DIMOND CONTROLLER /s/ Robert Dimond
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of the Corporation, on behalf of the Corporation, as of the 2nd
day of June 1995.
SMITH'S FOOD & DRUG CENTERS, INC.
By: Peter H. Barth
Title: Asst. Secretary
[SEAL]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Article 5 FDS for 1st Quarter 10-Q
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-30-1995 DEC-30-1995
<PERIOD-END> JUL-01-1995 JUL-01-1995
<CASH> 13,447 13,447
<SECURITIES> 0 0
<RECEIVABLES> 23,119 23,119
<ALLOWANCES> 0 0
<INVENTORY> 366,200 366,200
<CURRENT-ASSETS> 437,851 437,851
<PP&E> 1,597,441 1,597,441
<DEPRECIATION> 394,936 394,936
<TOTAL-ASSETS> 1,657,380 1,657,380
<CURRENT-LIABILITIES> 362,023 362,023
<BONDS> 0 0
<COMMON> 299 299
4,410 4,410
0 0
<OTHER-SE> 590,164 590,164
<TOTAL-LIABILITY-AND-EQUITY> 1,657,380 1,657,380
<SALES> 770,405 1,517,078
<TOTAL-REVENUES> 770,405 1,517,078
<CGS> 599,369 1,179,175
<TOTAL-COSTS> 599,369 1,179,175
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 15,280 30,357
<INCOME-PRETAX> 14,832 30,611
<INCOME-TAX> 5,800 12,100
<INCOME-CONTINUING> 9,032 18,511
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 9,032 18,511
<EPS-PRIMARY> .36 .73
<EPS-DILUTED> .36 .73
</TABLE>
[LOGO]
Bank of America
May 9, 1995
Smith's Food & Drug Centers, Inc.
1550 South Redwood Road
Salt Lake City, Utah 84104
Attention: Mr. Casey Jones
Director of Capital Development
and Banking
Reference is made to that certain Agreement dated June 28,
1993, Master Note: Reference and Offshore Rate Advances dated
June 30, 1993 (the "Master Note") and amendment dated February
22, 1995, between Bank of America NT & SA (the "Bank") and
Smith's Food & Drug Centers, Inc. (the "Company").
The Bank and Company hereby wish to amend the Agreement as
follows:
(i) Section 2.2 is hereby amended to replace "June 30, 1996"
with "June 30, 2000";
(ii) Section 5.2 is amended to describe the existing
paragraph as "(a)" and to add a new paragraph that states "(b)
Each extension of credit hereunder shall constitute a
representation and warranty by Company that the proceeds of such
credit extension will not be used to purchase debt issued by the
Company wherein Bank or any of Bank's subsidiaries or affiliates
acted as placement agent or underwriter" ;
(iii) Section 6.7 is amended to replace "$450,000,000; plus"
with "$350,000,000; plus"; and
(iv) Section 6.8 is amended to replace "2.00 to 1:00" with
"2.10 to 1:00".
These changes shall become effective upon the Bank's receipt
of an executed original of this amendment. For purposes of
covenant compliance amendments (iii) and (iv) above shall be
deemed effective as of September 26, 1994.
Execution and delivery of this amendment shall not be deemed
to create a course of dealing or otherwise create any express or
implied duty by the Bank to enter into or provide any other
amendments (whether similar or otherwise) in the future.
Please indicate your agreement with the above changes by
obtaining the required signature of an authorized corporate
officer (as defined in the Corporate Resolutions to Obtain
Credit, dated June 29, 1993) and returning an original to me
Bank of America National Trust
and Savings Association
/s/ Steven F. Sterling
Steven F. Sterling
Vice President
Accepted and Agreed to on
this 16th day of May, 1995:
Smith's Food & Drug Centers, Inc.
By: /s/ Matthew G. Tezak
Title: Sr. V.P. & CFO
Matthew G. Tezak
