SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
February 19, 1996
SMITH'S FOOD & DRUG CENTERS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 001-10252 87-0258768
(State or Other (Commission File Number) (I.R.S. Employer
Jurisdiction Identification No.)
of Incorporation)
1550 South Redwood Road
Salt Lake City, Utah 84104
(801) 974-1400
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
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Item 5. Other Events
On January 29, 1996, Smith's Food & Drug Centers, Inc., a
Delaware corporation ("Smith's") entered into a definitive
Recapitalization Agreement and Plan of Merger (the
"Recapitalization Agreement"), among Smith's, Cactus Acquisition,
Inc., a Delaware Corporation and a wholly owned subsidiary of
Smith's, ("Acquisition"), Smitty's Supermarket, Inc., a Delaware
Corporation ("Smitty's"), and The Yucaipa Companies, a California
general partnership ("Yucaipa"). Pursuant to the
Recapitalization Agreement, Smith's has agreed to recapitalize
Smith's, subject to certain terms and conditions, by (i) a self
tender offer (the "Offer") to purchase 50% of Smith's outstanding
common stock for $36.00 per share, and (ii) the merger of
Smitty's with Acquisition, pursuant to which Smitty's will become
a wholly owned subsidiary of Smith's and the stockholders of
Smitty's will receive 3,038,888 shares of Class B Common Stock of
Smith's. It is anticipated that the Offer and the Merger will
close simultaneously, except in certain limited circumstances.
The terms and conditions of the Recapitalization Agreement
and related transactions are set forth in the January 29, 1996
press release issued by Smith's which is filed as an exhibit to
this Form 8-K and is hereby incorporated by reference.
The information set forth above shall not be deemed to
constitute either an offer to sell, or the offer to purchase, any
security. Any such offer to sell or offer to purchase will be
made only by means of a prospectus or an offer to purchase.
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements of the business acquired. Not
applicable.
(b) Pro forma financial information. Not applicable.
(c) Exhibits.
99.1 press release dated January 29, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned hereunto duly authorized.
SMITH'S FOOD & DRUG CENTERS, INC.
February 19, 1996 By: /s/ Michael C. Frei
Name: Michael C. Frei
Title: Senior Vice President
and General Council
January 29, 1996
SMITH'S FOOD & DRUG CENTERS, INC. ANNOUNCES MERGER AGREEMENT WITH
SMITTY'S SUPERMARKETS, INC., SELF TENDER OFFER TO PURCHASE 50% OF ITS
COMMON STOCK AND FINANCIAL RESULTS FOR 1995
(Salt Lake City, UT) -- Smith's Food & Drug Centers, Inc.
(NYSE: SFD) made the following announcements today:
MERGER OF SMITTY'S SUPERMARKETS, INC.
Smith's has entered into a definitive merger agreement with
Smitty's Supermarkets, Inc. Smitty's, which operates 28 supermarkets
in the Phoenix and Tucson areas, is controlled by The Yucaipa
Companies, a private investment company. Smitty's sales totaled
approximately $590 million in 1995. Under the merger agreement,
Smith's will issue 3,038,888 shares of its Class B Common Stock in
exchange for all of Smitty's outstanding common stock and it will
assume or refinance approximately $148 million of Smitty's debt.
REPURCHASE OF STOCK
Smith's also said it will commence a self tender offer to
purchase 50% of its Class A and Class B Common Stock for $36 per
share, excluding shares to be issued in connection with the Smitty's
merger. Consummation of the tender offer will be subject to the
tender of at least 50% of Smith's outstanding common stock, the
receipt of financing and various other conditions. Consummation of
the Smitty's merger will be conditioned on Smith's purchase of shares
pursuant to the self tender offer, receipt of financing, regulatory
approvals, approval by Smith's stockholders and various other
conditions. Smith's has received commitment letters and highly
confident letters from several financial institutions with respect to
all of the financing necessary to consummate the Smitty's merger and
the self tender offer.
The tender offer is expected to commence around April 1, 1996
and be consummated around May 1, 1996. The Smitty's merger is
expected to be consummated concurrently with the closing of the
tender offer.
Upon consummation of the Smitty's merger and the self tender
offer, the Smith family will continue to be Smith's largest
stockholder with approximately 24% of the outstanding common stock
and over 40% of the vote. The Yucaipa Companies and its affiliates
will own approximately 14% of Smith's outstanding common stock and
the other Smitty's stockholders will own approximately 6%. The
Yucaipa Companies will enter into a 10 year standstill agreement with
Smith's.
MANAGEMENT CHANGES
Upon consummation of the Smitty's merger and the self tender
offer, Smith's will enter into a five year management services
agreement with The Yucaipa Companies under which Yucaipa will provide
various management services to Smith's. As part of that arrangement,
Ronald W. Burkle, managing partner of The Yucaipa Companies, will be
appointed as Chief Executive Officer of Smith's upon consummation of
the Smitty's merger and the self tender offer. In addition, at that
time Smith's board of directors will be reconstituted to consist of
two representatives of Yucaipa, two representatives of the Smith
family, one senior member of management, and two independent
directors.
The Yucaipa Companies is a private investment company which in
addition to Smitty's also controls Ralphs Grocery Company, the
largest supermarket company in Southern California, operating stores
under the Ralphs and Food 4 Less names, which also operates stores in
Northern California under the Cala and Bell names and in the midwest
under the Falley's and Food 4 Less names; and Dominick's Finer Foods,
Inc., a leading Chicago area supermarket company, operating stores
under the Dominick's and Omni names.
In addition, Smith's announced that it has hired Allen R.
Rowland as President and Chief Operating Officer of Smith's. Mr.
Rowland spent 25 years at Albertson's Inc., holding various senior
executive positions at that company.
Jeffrey P. Smith, Chairman and CEO of Smith's, said: "I am very
excited about the transactions we are announcing today. The Smitty's
merger will significantly enhance the combined companies' position in
the Arizona market. The self tender offer will give all of Smith's
stockholders the opportunity to receive substantial cash proceeds
while permitting them at the same time to participate in Smith's
future growth. Additionally, our management arrangements with
Yucaipa will permit Smith's to benefit from Yucaipa's extensive
management experience in the supermarket industry. I am particularly
pleased about our good fortune in hiring Rowland. He is one of the
most accomplished senior executives in the supermarket industry and I
believe Smith's will benefit greatly from his experience."
Ron Burkle said: "We look forward to consummating this exciting
merger. I have admired Jeff Smith and his company and we are
delighted at the prospect of the combination of Smitty's and Smith's.
I am committed to continuing the expansion of the combined company to
benefit its shareholders, employees and customers."
FISCAL 1995 RESULTS
Smith's sales for the year ended December 30, 1995 of $3.08
billion were up 3% over the $2.98 billion reported a year ago.
Income before restructuring charges was $43.5 million compared to
last year's $48.8 million, a decrease of 11%. Income per common
share before restructuring charges decreased from $1.73 to $1.72,
down 1% over last year. In January, the Company announced the sale
and closure of its Southern California Region. Consequently,
restructuring charges of $84 million ($3.34 per common share) after
tax were recorded which resulted in a net loss of $40.5 million for
1995 compared to net income of $48.8 million last year. The pretax
LIFO charge was $4.0 million for 1995 compared to $2.5 million last
year. Sales in comparable stores decreased 3.4% for the year.
FOURTH QUARTER RESULTS
Smith's sales for the fourth quarter ended December 30, 1995,
totaled $798 million compared to $754 million for the same quarter
last year, an increase of 6%. Income per common share before
restructuring charges totaled $.55 compared to $.53 earned last year,
an increase of 4%. Income before restructuring charges was $13.9
million compared to $14.2 million reported last year, a decrease of
2%. The pretax LIFO charge was $1.0 million for the fourth quarter
compared to a credit of $1.25 million last year. Sales in comparable
stores decreased 2.9% for the quarter.
The weakness in sales can be attributed to a significant number
of competitive store openings in most marketing areas, in addition to
aggressive price competition in the Company's Southern California
Region. Earnings were affected by the weakness in sales, putting
pressure on expense ratios.
CLOSURE OF CALIFORNIA
In January, the Company announced the sale and anticipated
closure of its Southern California Region. Smith's has entered into
agreements to sell or lease 18 stores to various supermarket
companies. The remaining 16 stores will be closed in the near future
and it is anticipated they will be sold or leased to other retail
companies. A large distribution center located in Riverside,
California was recently subleased to Ralphs Grocery Company. These
34 stores had sales of approximately $675 million for the year ended
December 30, 1995. Restructuring charges of $84 million after tax
were charged against earnings for the year ended December 30, 1995.
The continuing recession in Southern California and a very
difficult competitive environment made it impossible for Smith's to
earn an adequate return on its investment there. Jeff Smith,
Chairman and CEO, stated that "Company and shareholder interests
would be better served by redeploying assets to further develop
Smith's other profitable regions." Smith's has established
profitable operating areas in Utah, Arizona, Nevada, New Mexico,
Idaho, Wyoming and Texas.
EXPANSION PROGRAM
During the year, the Company opened 15 combination food and drug
centers in Phoenix, Gilbert, Glendale, Peoria, and two in Mesa,
Arizona; Vista and Yucca Valley, California; Albuquerque, Gallup and
Hobbs, New Mexico; Gardnerville, Elko and Las Vegas, Nevada; and
Kimball Junction, Utah. Two smaller superstores were closed in Las
Vegas.
The Company also opened four retail warehouse stores in Las
Vegas. These new "price-impact" stores operate under the PriceRite
Grocery Warehouse name.
Smith's is a leading regional supermarket chain operating 154
stores at the end of the year (including the 34 stores in California)
in eight western states. Of these stores, 138 are large combination
food and drug centers.
CONTACT: Robert D. Bolinder or Matthew G. Tezak both of Smith's Food
& Drug Centers, Inc., (801) 974-1400
Darius Anderson of Smitty's at (602) 801-1000
<PAGE>
SMITH'S FOOD & DRUG CENTERS, INC.
Condensed Consolidated Statements of Income
(Unaudited)
(Amounts in thousands, except per share data)
13 Weeks Ended 52 Weeks Ended
Dec 30, Dec 31, Dec 30, Dec 31,
1995 1994 1995 1994
Net sales $798,324 $753,891 $3,083,737 $2,981,359
Cost of goods sold 617,657 581,621 2,392,723 2,318,127
180,667 172,270 691,014 663,232
Expenses:
Operating, selling and
administrative 117,604 111,781 461,401 440,844
Depreciation and
amortization 26,253 23,385 98,947 88,592
Interest 15,194 14,305 60,478 53,715
Restructuring charges 140,000 140,000
299,051 149,471 760,826 583,151
INCOME (LOSS) BEFORE
INCOME TAXES (118,384) 22,799 (69,812) 80,081
Income taxes (48,300) 8,600 (29,300) 31,300
NET INCOME (LOSS) $(70,084) $ 14,199 $ (40,512) $ 48,781
Per common share:
Income before
restructuring charges $ .55 $ .53 $ 1.72 $ 1.73
Net income (loss) (2.79) .53 (1.62) 1.73
Average common
shares outstanding 25,071 26,407 25,031 28,177
<PAGE>
SMITH'S FOOD & DRUG CENTERS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
Dec 30, Dec 31,
1995 1994
ASSETS
CURRENT ASSETS
Cash $ 16,079 $ 14,188
Receivables 23,802 25,596
Inventories 394,982 389,564
Assets held for sale 125,000
Other current assets 45,155 17,258
TOTAL CURRENT ASSETS 605,018 446,606
PROPERTY AND EQUIPMENT
Land 276,626 303,701
Buildings 610,049 619,056
Leasehold improvements 55,830 42,369
Fixtures and equipment 509,524 589,480
1,452,029 1,554,606
Less allowances 390,933 364,741
1,061,096 1,189,865
OTHER ASSETS 20,066 16,996
$1,686,180 $1,653,467
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 214,152 $ 235,843
Accrued taxes 50,749 44,379
Other accrued liabilities 97,455 84,083
Current maturities 21,940 20,028
Restructuring reserves 58,000
TOTAL CURRENT LIABILITIES 442,296 384,333
LONG-TERM DEBT 725,253 699,882
RESTRUCTURING RESERVES 40,000
DEFERRED INCOME TAXES 58,600 89,500
REDEEMABLE PREFERRED STOCK 3,311 4,410
COMMON STOCKHOLDERS' EQUITY 416,720 475,342
$1,686,180 $1,653,467
<PAGE>
SMITH'S FOOD & DRUG CENTERS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
52 Weeks 52 Weeks
Ended Ended
Dec 30, Dec 31,
1995 1994
OPERATING ACTIVITIES:
Net income (loss) $(40,512) $ 48,781
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 104,963 94,491
Deferred income taxes (53,400) 10,500
Restructuring charges 140,000
Other 568 635
151,619 154,407
Changes in operating assets and
liabilities:
Receivables 1,794 (4,758)
Inventories (5,418) (11,625)
Other current assets (5,397) (1,324)
Trade accounts payable (21,691) 50,618
Accrued taxes 6,370 5,616
Other accrued liabilities 13,372 10,616
CASH PROVIDED BY OPERATING ACTIVITIES 140,649 203,550
INVESTING ACTIVITIES:
Additions to property and equipment (149,035) (146,676)
Sale/leaseback arrangements and other
property sales 5,841 20,949
Other (3,070) (1,649)
CASH USED IN INVESTING ACTIVITIES (146,264) (127,376)
FINANCING ACTIVITIES:
Additions to long-term debt 45,978 27,000
Payments on long-term debt (18,686) (33,594)
Redemptions of Redeemable
Preferred Stock (1,108) (1,042)
Purchases of Treasury Stock (9,039) (109,239)
Proceeds from sale of Treasury Stock 5,278 7,693
Payment of dividends (14,917) (14,725)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 7,506 (123,907)
NET INCREASE (DECREASE) IN CASH 1,891 (47,733)
Cash balance at beginning of year 14,188 61,921
CASH BALANCE AT END OF YEAR $ 16,079 $ 14,188
