<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1 TO
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
----------------
SMITH'S FOOD & DRUG CENTERS, INC.
(NAME OF ISSUER AND PERSON FILING STATEMENT)
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
CLASS B COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLES OF CLASSES OF SECURITIES)
----------------
N/A
(CUSIP NUMBER FOR CLASS A COMMON STOCK)
832388-10-2
(CUSIP NUMBER FOR CLASS B COMMON STOCK)
MICHAEL C. FREI
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
SMITH'S FOOD & DRUG CENTERS, INC.
1550 SOUTH REDWOOD ROAD
SALT LAKE CITY, UTAH 84104
(801) 974-1400
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSON FILING STATEMENT)
----------------
COPIES TO:
ROBERT L. FRIEDMAN
JOHN W. CARR
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NY 10017
(212) 455-2000
----------------
APRIL 25, 1996
(DATE TENDER OFFER FIRST PUBLISHED,
SENT OR GIVEN TO SECURITY HOLDERS)
----------------
CALCULATION OF FILING FEE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
- ------------------------------------------------------------------------------
<S> <C>
$451,291,032 $90,259**
</TABLE>
- -------------------------------------------------------------------------------
* Assumes purchase of 50% of its outstanding shares of Common Stock
(12,535,862 shares based on Common Stock outstanding as of April 15, 1996)
at $36 per share.
** Fee paid with initial filing on April 25, 1996.
----------------
[_]CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY RULE 0-11(A)(2)
AND IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY PAID.
IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM OR
SCHEDULE AND THE DATE OF ITS FILING.
AMOUNT PREVIOUSLY PAID: N/A FILING PARTY: N/A
FORM OR REGISTRATION NO.: N/A DATE FILED: N/A
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
This Amendment No. 1 amends and supplements the Issuer Tender Offer
Statement on Schedule 13E-4, dated April 25, 1996, of Smith's Food & Drug
Centers, Inc. (the "Company") filed in connection with the offer by the
Company to purchase, in the aggregate, 50% of its outstanding shares of Class
A Common Stock, par value $.01 per share, and Class B Common Stock, par value
$.01 per share, of the Company (collectively, the "Shares") (or 12,535,862
Shares based on Shares outstanding as of April 15, 1996) at a price of $36 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated April 25, 1996 (the "Offer to
Purchase"), and related Letter of Transmittal. Capitalized terms used without
definition in this Amendment No. 1 shall have the meanings given to them in the
Offer to Purchase.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The response to this Item is hereby supplemented and amended as
follows:
The information set forth under "Introduction--General," "--Risk
Factors--Leverage and Debt Service" and "Financing of the Recapitalization
and Merger" in the Offer to Purchase is hereby amended by (a) deleting from
such sections all references to the issuance by the Company of (i) up to
$150 million of New Senior Notes (as defined in the Offer to Purchase) and
(ii) New Preferred Stock (as defined in the Offer to Purchase) for gross
proceeds of $75 million, and (b) replacing all references in such sections
to the issuance by the Company of up to $350 million of New Senior
Subordinated Notes (as defined in the Offer to Purchase) to be references
to the issuance by the Company of up to $575 million of New Senior
Subordinated Notes.
The foregoing amendments reflect the changes which the Company has made
to the contemplated capital structure of the Company for financing a
portion of the Recapitalization and Merger (each as defined in the Offer to
Purchase). The Company had intended to issue a series of senior notes, a
series of senior subordinated notes and a series of cumulative redeemable
exchangeable preferred stock to raise a portion of such financing. The Company
currently intends to issue a single series of senior subordinated notes due
2007 (the "Notes") in an aggregate principal amount of $575 million, rather
than the issuance of three separate series of securities of the Company. The
Company believes that the simpler capital structure will enable the Company to
manage more efficiently its current and future sources of liquidity and
capital resources.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
(a)-(j) The response to this Item is hereby supplemented and amended as
follows:
The information set forth under the "Introduction--General," "Financial
Data of the Company" and "Financing of the Recapitalization and Merger" of
the Offer to Purchase is hereby amended by (a) deleting from such sections
all references to the issuance by the Company of (i) up to $150 million of
New Senior Notes and (ii) New Preferred Stock for gross proceeds of $75
million, and (b) replacing all references in such sections to the issuance
by the Company of up to $350 million of New Senior Subordinated Notes to be
references to the issuance by the Company of up to $575 million of New
Senior Subordinated Notes. As noted above, the foregoing amendments reflect
the changes which the Company has made to the contemplated capital
structure of the Company for financing a portion of the Recapitalization
and Merger.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
The response to this Item is hereby supplemented and amended as follows:
The information set forth under the "Introduction--General" and
"Financing of the Recapitalization and Merger" of the Offer to Purchase is
hereby amended by (a) deleting from such sections all references to the
issuance by the Company of (i) up to $150 million of New Senior Notes and
(ii) New Preferred Stock for gross proceeds of $75 million, and (b)
replacing all
1
<PAGE>
references in such sections to the issuance by the Company of up to $350
million of New Senior Subordinated Notes to be references to the issuance
by the Company of up to $575 million of New Senior Subordinated Notes. As
noted above, the foregoing amendments reflect the changes which the Company
has made to the contemplated capital structure of the Company for financing
a portion of the Recapitalization and Merger.
ITEM 7. FINANCIAL INFORMATION.
(a)-(b) The response to this Item is hereby supplemented and amended as
follows:
The information set forth under the "Financial Data of the Company--Pro
Forma Capitalization" and "--Unaudited Pro Forma Combined Financial
Statements" of the Offer to Purchase is hereby amended by replacing such
information in its entirety with the Pro Forma Capitalization and Unaudited
Pro Forma Combined Financial Statements contained in Exhibit (a)(9) to this
Statement.
As a result of the Company's amendment of its contemplated capital
structure noted above, the Company has amended the Unaudited Pro Forma
Financial Data contained in the Offer to Purchase, which give effect to the
Recapitalization and Merger and the California Disposition (each as defined
in the Offer to Purchase).
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<C> <S>
(a)(9) Revised Pro Forma Capitalization and Unaudited Pro Forma Combined
Financial Statements of the Company.
(a)(10) Form of press release dated May 7, 1996.
</TABLE>
2
<PAGE>
SIGNATURE
AFTER DUE INQUIRY AND TO THE BEST OF MY KNOWLEDGE AND BELIEF, I CERTIFY THAT
THE INFORMATION SET FORTH IN THIS STATEMENT IS TRUE, COMPLETE AND CORRECT.
Smith's Food & Drug Centers, Inc.
/s/ Michael C. Frei
By: _________________________________
Michael C. Frei
Senior Vice President, General
Counsel and Secretary
Dated: May 7, 1996
3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
(a)(9) Revised Pro Forma Capitalization and Unaudited Pro
Forma Combined Financial Statements of the Company.
(a)(10) Form of press release dated May 7, 1996.
</TABLE>
<PAGE>
Exhibit (a)(9)
--------------
PRO FORMA CAPITALIZATION
The following table sets forth the consolidated pro forma capitalization of
the Company at December 30, 1995, giving effect to the Recapitalization and
Merger and the California Disposition. This table should be read in conjunction
with the Unaudited Pro Forma Combined Financial Statements and the historical
consolidated financial statements of the Company and Smitty's, and the related
notes thereto, included elsewhere in this Offer to Purchase.
<TABLE>
<CAPTION>
PRO FORMA
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
Current portion of long-term debt:
New Term Loans.................................... $ 12.3
Other indebtedness................................ 1.4
--------
Total current portion of long-term debt......... $ 13.7
========
Long-term debt:
New Term Loans(a)................................. $ 792.7
New Revolving Facility(a)(b)...................... --
Senior Subordinated Notes......................... 575.0
Other indebtedness................................ 50.4
--------
Total long-term debt............................ 1,418.1
--------
Redeemable preferred stock, $.01 par value.......... 3.3
Common stockholders' equity:
Common Stock, $.01 par value(c)................... 0.2
Additional paid-in capital........................ 164.9
Retained earnings (deficit)....................... (286.7)
--------
Total common stockholders' equity (deficit)..... (121.6)
--------
Total capitalization.......................... $1,299.8
========
</TABLE>
- --------
(a) The Company has obtained a commitment from Bankers Trust and Chase Manhattan
for the New Credit Facility that will provide up to $805 million aggregate
principal amount of New Term Loans and a $190 million New Revolving Facility
which will be available for working capital requirements and general
corporate purposes. A portion of the New Revolving Facility may be used to
support letters of credit, approximately $28 million of which are
anticipated to be issued at Closing. The New Credit Facility will be
guaranteed by all subsidiaries of the Company, including Smitty's. See
"Financing of the Recapitalization and Merger-New Credit Facility."
(b) Assumes that all outstanding Smitty's Notes and Smitty's Debentures are
tendered and accepted for purchase in connection with the Smitty's
Refinancing. If all of the outstanding Smitty's Notes and Smitty's
Debentures are not tendered and accepted for purchase, the Company
anticipates that it would reduce other borrowings. As a result of the
assumed application of a portion of the proceeds of the California
Disposition to eliminate pro forma revolving credit balances, pro forma
total debt at December 30, 1995 does not reflect anticipated revolving
credit facility borrowings upon consummation of the Recapitalization and
Merger of $13.2 million.
(c) Does not reflect (i) management options to purchase up to an aggregate of
808,250 shares of Class B Common Stock expected to be outstanding upon
consummation of the Transactions or (ii) Warrants to purchase shares of
Class C Common Stock of the Company (at an initial exercise price of
$50.00 per share) to be issued to Yucaipa upon consummation of the
Recapitalization and Merger. See "Certain Related Agreements."
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements of the
Company for the 52 weeks ended December 30, 1995 give effect to (a) the
Recapitalization and Merger and the application of the proceeds therefrom and
(b) the California Disposition and the retention of the anticipated proceeds
therefrom as cash (after reducing pro forma revolving credit balances to zero),
in each case as if such transactions occurred on January 1, 1995, with respect
to the pro forma operating and other data, and as of December 30, 1995, with
respect to the pro forma balance sheet data. Such pro forma information: (i)
eliminates the results of operations of the Company's California retail division
and the related assets and liabilities as of and for the 52 weeks ended December
30, 1995 from the Company results of operations and balance sheet data as of and
for the 52 weeks ended December 30, 1995 and (ii) combines the operating results
and balance sheet data of the Company, pro forma for the elimination of the
Company's California retail division and the related assets and liabilities, as
of and for the 52 weeks ended December 30, 1995 with the operating results and
balance sheet data of Smitty's as of and for the 52 weeks ended January 14,
1996.
As indicated above, the Unaudited Pro Forma Combined Financial Statements
give effect to the California Divestiture and the California Asset Disposition
and the retention of the anticipated proceeds therefrom as cash. In connection
with the California Divestiture, the Company entered into agreements to sell or
lease 16 stores and related equipment and three non-operating properties. These
transactions are expected to generate net cash proceeds of $77.8 million, of
which $67.2 million has been received to date. The remaining 18 stores in
California have been closed. In connection with the California Divestiture, the
Company recorded the $140 million (pre-tax) California Divestiture Charge for
the year ended December 30, 1995 and classified the assets to be leased or sold
as "assets held for sale." The California Divestiture Charge reflected (i) a
provision for anticipated future lease obligations, (ii) the anticipated cost to
the Company of closing its California stores and distribution center (primarily
termination payments and inventory), and (iii) certain asset valuation
adjustments. The asset valuation adjustments included in the California
Divestiture Charge reflected the reduction in net realizable values for the
equipment in all of the Company's California stores and distribution center and
for the land and buildings associated with those properties being sold or
leased. Pursuant to the California Asset Disposition, following the consummation
of the Recapitalization and Merger the Company intends to accelerate the
disposition of its 18 non-operating stores and its excess land in California. As
a result of the adoption of this strategy, the Company intends to record a pre-
tax charge to earnings of approximately $125 million (the California Asset
Disposition Charge) to reflect the difference between the anticipated cash
proceeds from the accelerated dispositions and the Company's existing book
values for such assets. For purposes of the Unaudited Pro Forma Combined Balance
Sheet, the Company has given effect to the California Asset Disposition as if
each of the relevant properties had been sold for a cash amount equal to its net
book value after giving effect to the California Asset Disposition Charge. The
proceeds of such assumed sales, together with the proceeds of the California
Divestiture, are reflected in the Company's pro forma cash balances (net of pro
forma revolving credit borrowings, which have been eliminated) at December 30,
1995. INVESTORS ARE CAUTIONED THAT THE COMPANY HAS NOT ENTERED INTO ANY
CONTRACTS RELATING TO THE CALIFORNIA ASSET DISPOSITION AND THAT THERE CAN BE NO
ASSURANCE AS TO THE TIMING OR THE AMOUNT OF NET PROCEEDS, IF ANY, WHICH THE
COMPANY WILL ACTUALLY RECEIVE FROM SUCH DISPOSITION.
The pro forma adjustments to give effect to the California Disposition and
the Recapitalization and Merger are based upon currently available information
and upon certain assumptions that management believes are reasonable. The
statement of results of operations used to derive the adjustments to eliminate
the California results of operations differs from a complete statement in that
allocations for interest expense and certain services provided by the Company,
including, but not limited to, portions of legal assistance, employee benefits
administration, treasury, accounting, auditing, tax functions and real estate,
have not been made. The Merger will be accounted for by the Company as a
purchase of Smitty's by the Company and Smitty's assets and liabilities will be
recorded at their estimated fair market values at the date of the Merger. The
adjustments included in the Unaudited Pro Forma Combined Financial Statements
represent the Company's preliminary determination of these adjustments based
upon available information. There can be no assurance that the actual
adjustments will not differ significantly from the pro forma adjustments
reflected in the pro forma financial information. The Unaudited Pro Forma
Combined Financial Statements are not necessarily indicative of either future
results of operations or results that
<PAGE>
might have been achieved if the foregoing transactions had been consummated as
of the indicated dates. The Unaudited Pro Forma Combined Financial Statements
should be read in conjunction with the historical consolidated financial
statements of the Company and Smitty's, together with the related notes thereto,
included elsewhere in this Offer to Purchase.
The Unaudited Pro Forma Combined Financial Statements do not reflect (i)
any of the net annual cost savings which management believes are achievable by
the end of the third full year of operations following the Merger, or (ii) the
anticipated costs to be incurred in connection with the integration of
operations in Arizona following the Merger. The Unaudited Pro Forma Combined
Statement of Operations included herein does not reflect the California
Divestiture Charge, the California Asset Disposition Charge, an extraordinary
loss on extinguishment of debt, an anticipated charge relating to certain costs
expected to be incurred by the Company in connection with the Merger, a
potential severance payment to the Chairman and Chief Executive Officer of the
Company or compensation expense in connection with the repurchase of certain
management stock options as part of the Recapitalization. See Note (g) to the
Unaudited Pro Forma Combined Statement of Operations.
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
52 WEEKS ENDED
-----------------------------------------------------------
JANUARY 14, ADJUSTMENTS
DECEMBER 30, 1995 1996 FOR PRO FORMA
---------------------------------------------- ------------ CALIFORNIA COMBINED FOR
SMITH'S ADJUSTMENTS FOR PRO FORMA SMITH'S SMITTY'S DISPOSITION CALIFORNIA
(HISTORICAL) CALIFORNIA FOR CALIFORNIA (HISTORICAL) AND DISPOSITION
(AUDITED) DIVESTITURE(A) DIVESTITURE (UNAUDITED) TRANSACTIONS AND TRANSACTIONS
------------ --------------- ----------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $ 3,083.7 $(674.6) $ 2,409.1 $ 584.3 $ $ 2,993.4
Cost of goods sold...... 2,386.7 (516.2) 1,870.5 419.6 2,290.1
---------- ------- ---------- --------- ------ ----------
697.0 (158.4) 538.6 164.7 703.3
Expenses:
Operating, selling and
administrative....... 461.4 (145.6) 315.8 136.0 0.4 (b) 452.2
Depreciation and
amortization......... 105.0 (27.0) 78.0 12.3 (1.3)(c)
0.9 (d) 89.9
Restructuring charges. 140.0 (140.0)
Interest.............. 60.0 60.0 18.4 63.3 (e) 141.7
Amortization of debt
issuance costs....... 0.4 0.4 1.0 8.8 (e) 10.2
---------- ------- ---------- --------- ------ ----------
Income (loss) before
income taxes........... (69.8) 154.2 84.4 (3.0) (72.1) 9.3
Income tax expense
(benefit).............. (29.3) 63.2 33.9 (0.7) (27.7)(f) 5.5
---------- ------- ---------- --------- ------ ----------
Net income (loss) (g)... $ (40.5) $ 91.0 $ 50.5 $ (2.3) $(44.4) $ 3.8
========== ======= ========== ========= ====== ==========
Net income (loss) per
common share (g)....... $ (1.62) $ 2.00 $ (2.30) $ 0.24 (h)
========== ========== ========= ==========
Weighted average common
shares outstanding..... 25,031,000 25,284,000 1,001,000 15,530,000
========== ========== ========= ==========
Ratio of earnings to
fixed charges (i)...... -- 2.27x 1.06x
</TABLE>
See Notes to Unaudited Pro Forma Combined Statement of Operations.
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(a) Reflects the elimination of the 1995 operating results for the California
stores, excess real estate and distribution center which were sold, leased
or closed, and the reversal of the restructuring charge recorded, in
connection with the California Divestiture and the anticipated sale of the
Company's remaining California real estate pursuant to the California Asset
Disposition, but does not reflect the California Asset Disposition Charge of
$125 million (pre-tax) which is anticipated to be recorded in connection
with the adoption of a strategy to dispose of such remaining California
assets following the consummation of the Recapitalization and Merger.
(b) Represents fees payable to Yucaipa pursuant to the Management Services
Agreement ($1.0 million) and the elimination of the historical Yucaipa
management fees ($0.6 million) paid by Smitty's.
(c) Represents a reduction in depreciation expense associated with the $14.1
million write-off of accumulated depreciation and amortization which adjusts
Smitty's property and equipment to estimated fair market value.
(d) Reflects the amortization of excess costs over net assets acquired in the
Merger ($2.0 million) and the elimination of Smitty's historical
amortization ($1.1 million). Amortization has been allocated on the straight
line basis over a period of 40 years.
(e) The following table presents a reconciliation of pro forma interest expense
and amortization of debt issuance costs:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
---------------------
<S> <C>
Interest expense:
Smitty's.......................................... $ 18.4
Pro forma Company................................. 60.0
------
78.4
------
Plus: Interest on:
New Term Loans.................................... 71.5
Bank fees......................................... 0.3
New Senior Subordinated Notes..................... 63.3
Less: Interest on:
Old bank term loans:
Pro forma Company............................... (59.5)
Smitty's........................................ (3.1)
Bank fees......................................... (0.4)
Smitty's Notes.................................... (6.5)
Accretion of Smitty's Debentures.................. (2.3)
------
Pro forma adjustment............................... 63.3
------
Pro forma interest expense.......................... $141.7
======
Historical amortization of debt issuance costs...... $ 1.4
Plus:
Financing fees--New Credit Facility............... 7.2
Financing fees--New Senior Subordinated Notes..... 3.0
Less:
Historical financing costs:....................... (1.4)
------
Pro forma adjustment............................... 8.8
------
Pro forma amortization of debt issuance costs....... $ 10.2
======
</TABLE>
(f) The pro forma adjustment to income tax benefit is based upon an assumed
blended rate of 39% applied to the pro forma net loss adjusted for permanent
differences between book and tax income. The deferred tax asset recognized
in the Unaudited Pro Forma Combined Financial Statements is more likely than
not to be realized due to the expected future reversal of taxable temporary
differences and the existence of taxable income in each of the prior three
carryback years available.
(g) The Unaudited Pro Forma Statement of Operations does not reflect the
California Asset Disposition Charge, the California Divestiture Charge or
costs related to (i) expenses to be incurred in connection with the purchase
of certain management stock options as part of the Recapitalization which
are estimated to be $12.5 million, (ii) the integration of the Company's
operations which are estimated to be $15.0 million over a two-year period
and (iii) a potential severance payment to the Chairman and Chief Executive
Officer of the Company (definitive agreements with respect to which have not
yet been reached). The unaudited pro forma results of operations also does
not include an extraordinary item for the loss on extinguishment of debt of
$42.5 million, net of $27.2 million income tax benefit.
(h) Net income (loss) per common share has been computed using the weighted
average number of shares of Common Stock outstanding after giving effect to
the issuance of 3,038,888 shares of Class B Common Stock of the Company to
the stockholders of Smitty's as consideration in the Merger and the purchase
of 50% of the outstanding Common Stock (excluding shares issuable in the
Merger) in the Offer. Common stock equivalents in the form of stock options
do not have an impact on the weighted average number of common shares.
<PAGE>
(i) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of income (loss) before income taxes and fixed charges.
"Fixed charges" consist of interest on all indebtedness, amortization of
deferred financing costs, and one-third of rental expense (the portion of
annual rental expense deemed by the Company to be representative of the
interest factor).
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
52 WEEKS ENDED
----------------------------------------------------------- ADJUSTMENTS
JANUARY 14, FOR PRO FORMA
DECEMBER 30, 1995 1996 CALIFORNIA COMBINED FOR
---------------------------------------------- ------------ DISPOSITION CALIFORNIA
COMPANY ADJUSTMENTS FOR PRO FORMA COMPANY SMITTY'S AND DISPOSITION AND
(HISTORICAL) CALIFORNIA FOR CALIFORNIA (HISTORICAL) RECAPITALIZATION RECAPITALIZATION
(AUDITED) DIVESTITURE(A) DIVESTITURE (UNAUDITED) AND MERGER AND MERGER
------------ --------------- ----------------- ------------ ------------ ----------------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents......... $ 16.1 $ $ 16.1 $ 11.5 $ 82.7 (b)(c) $ 110.3
Rebates and accounts receivable... 23.8 (5.0) 18.8 9.3 28.1
Inventories....................... 395.0 (76.0) 319.0 56.7 1.0 (d) 376.7
Prepaid expenses and deposits..... 21.3 (2.0) 19.3 3.3 22.6
Refundable income taxes........... 1.9 1.9
Deferred tax assets............... 23.9 13.1 37.0 18.0 (e) 55.0
Assets held for sale.............. 125.0 (125.0)
-------- ------- -------- ------ ------- --------
Total current assets............ 605.1 (194.9) 410.2 82.7 101.7 594.6
Property and equipment:
Land.............................. 276.6 276.6 18.6 (128.3)(c) 166.9
Building.......................... 610.0 610.0 50.6 (107.2)(c)(f) 553.4
Leasehold improvements............ 55.8 55.8 9.8 (20.2)(c)(f) 45.4
Furniture and equipment........... 509.5 509.5 69.9 (27.9)(c)(f) 551.5
-------- ------- -------- ------ ------- --------
Less allowances for depreciation
and amortization................ (390.9) (390.9) (14.1) 23.3 (c)(f) (381.7)
-------- ------- -------- ------ ------- --------
Net property and equipment...... 1,061.0 1,061.0 134.8 (260.3) 935.5
Goodwill, net...................... 31.5 46.7 (g) 78.2
Other assets....................... 20.1 (4.6) 15.5 11.0 78.6 (h)(i) 105.1
-------- ------- -------- ------ ------- --------
$1,686.2 $(199.5) $1,486.7 $260.0 $ (33.3) $1,713.4
======== ======= ======== ====== ======= ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C> <C>
Current Liabilities:
Trade accounts payable........... $ 214.2 $ (42.0) $ 172.2 $ 39.6 $ 0.0 $ 211.8
Accrued sales and other taxes
and other liabilities........... 50.7 (12.0) 38.7 12.0 (12.6)(j)
10.0 (k) 48.1
Accrued payroll and
related benefits................. 97.5 (32.0) 65.5 19.2 84.7
Current maturities of
long-term debt................... 20.9 20.9 6.2 (13.4)(l) 13.7
Current maturities of Redeemable
Preferred Stock.................. 1.0 1.0 (1.0)(m)
Accrued restructuring costs....... 58.0 (58.0)
-------- ------- -------- ------ ------- --------
Total current liabilities....... 442.3 (144.0) 298.3 77.0 (17.0) 358.3
Long-term debt, less
current maturities................ 725.3 (28.6) 696.7 139.8 611.4 (n)
(39.4)(c)
(0.9)(n)
4.6 (i)
13.4 (l)
(7.5)(o) 1,418.1
Accrued restructuring costs, less
current portion................... 40.0 (40.0)
Deferred income taxes.............. 58.6 13.1 71.7 13.8 (27.2)(p)
(30.7)(e) 27.6
Other liabilities.................. 20.2 7.5 (o) 27.7
Redeemable Preferred Stock, less
current maturities................ 3.3 3.3 3.3
Common Stockholders' Equity:
Convertible Class A Common Stock... 0.1 0.1 0.1
Class B Common Stock............... 0.2 0.2 (0.1)(q) 0.1
Additional paid-in capital......... 285.2 285.2 11.0 (11.0)(r)
(165.8)(q)
45.5 (s) 164.9
Retained earnings(t)............... 238.0 238.0 (1.8) (35.2)(u)
(405.9)(q)
(76.3)(e)
(7.3)(v)
1.8 (r) (286.7)
-------- ------- -------- ------ ------- --------
523.5 523.5 9.2 (654.3) (121.6)
Less cost of common stock in
the treasury..................... (106.8) (106.8) (464.9)(q)
571.7 (q)
-------- ------- -------- ------ ------- --------
416.7 416.7 9.2 (547.5) (121.6)
-------- ------- -------- ------ ------- --------
$1,686.2 $(199.5) $1,486.7 $260.0 $ (33.3) $1,713.4
======== ======= ======== ====== ======= ========
</TABLE>
See Notes to Unaudited Pro Forma Combined Balance Sheet.
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(a) Reflects the sale of the California stores and other related assets, excess
real estate and distribution center in connection with the California
Divestiture. The Company has received $67.2 million subsequent to December
30, 1995 and expects to receive an additional $10.6 million shortly after
the consummation of the Recapitalization and Merger. The net proceeds of
such sale is reflected as a reduction of the historical revolving credit
balance ($28.6 million) and payment of certain liabilities in the Company's
Unaudited Pro Forma Combined Balance Sheet at December 30, 1995.
(b) Reflects gross proceeds received from (i) New Term Loans, (ii) the New
Revolving Facility, and (iii) the offering used to finance the
Recapitalization and Merger and pay related costs and fees as set forth in
the following table:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
---------------------
<S> <C>
New Term Loans...................................... $ 805.0
New Senior Subordinated Notes....................... 575.0
Repay Smitty's Notes................................ (50.0)
Discount on Smitty's Notes.......................... 0.4
Repay Smitty's Debentures........................... (18.4)
Discount on Smitty's Debentures..................... 0.5
Repay Smitty's Bank Credit Facility................. (34.9)
Repay Company's Mortgage Notes and Other
Indebtedness...................................... (667.1)
Purchase existing Company's Series I Preferred
Stock............................................. (1.0)
Purchase 50% of Common Stock........................ (451.3)
Purchase Management Options......................... (13.7)
Accrued Interest.................................... (12.6)
Fees and Expenses................................... (145.1)
-------
Use of California Proceeds (See Note (c)).......... $ 13.2
=======
</TABLE>
(c) Assumes the anticipated sale of the Company's remaining California real
estate pursuant to the California Asset Disposition. Also reflects the
California Asset Disposition Charge of $125 million (pre-tax) in
connection with the adoption of a strategy to dispose of such remaining
California assets following the consummation of the Transactions.
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
---------------------
<S> <C>
Disposal of Property and Equipment
Land.............................................. $ 128.3
Buildings......................................... 104.0
Leasehold improvements............................ 19.6
Furniture and equipment........................... 17.6
-------
269.5
Depreciation and amortization..................... (9.2)
-------
Net book value of property and equipment.......... 260.3
Write-down of California assets to net realizable
value............................................ (125.0)
-------
Proceeds from California Asset Disposition........ 135.3
Reduction in historical revolving credit balance.. (39.4)
Reduction of anticipated indebtedness under the
New Revolving Facility
(See Note (b))................................... (13.2)
-------
Cash provided by the California Asset
Disposition.................................... $ 82.7
=======
</TABLE>
(d) Reflects the elimination of Smitty's historical LIFO reserve which adjusts
Smitty's inventory to reflect current estimated selling prices less costs
of disposal and a reasonable profit allowance for the acquiring company.
(e) Represents the $125 million California Asset Disposition Charge, tax
effected at 39% tax rate and the recognition of the related deferred tax
asset. The California Asset Disposition Charge reflects the write-down of
California assets, other than assets held for sale at December 30, 1995,
under the Company's strategy to accelerate the disposition of its 18 non-
operating stores and excess land in California following the consummation
of the Recapitalization and Merger.
(f) Reflects the write-off of accumulated depreciation and amortization which
adjusts Smitty's property and equipment to estimated fair market value.
<PAGE>
(g) Reflects the excess of costs over the fair value of net assets of Smitty's
acquired in connection with the Merger ($78.2 million) and the elimination
of Smitty's historical goodwill ($31.5 million). The purchase price for
Smitty's will be determined by reference to the trading price of the
Company's Class B Common Stock following the consummation of the Merger.
The purchase price and preliminary calculation of the excess of costs over
the fair value of net assets acquired is as follows:
<TABLE>
<CAPTION>
Purchase Price:
(DOLLARS IN MILLIONS)
---------------------
<S> <C>
Smith's equity received in exchange for Smitty's equity
with an assumed market value of $15.00/share........... $ 45.5
Fees and expenses....................................... 1.4
-------
Total purchase price.................................... 46.9
Fair value of assets acquired........................... 229.5
Fair value of liabilities assumed....................... 260.8
-------
(31.3)
-------
Goodwill................................................ $ 78.2
=======
</TABLE>
(h) Reflects the debt issuance costs associated with the New Credit Facility
($52.5 million) and the New Senior Subordinated Notes
($33.5 million). These amounts have been capitalized as deferred financing
costs.
(i) Reflects the elimination of deferred financing costs associated with the
Smitty's Bank Credit Facility ($1.8 million), the Smitty's Notes ($3.1
million), the Smitty's Debentures ($0.6 million), the Company's Mortgage
Notes and Other Indebtedness ($1.9 million) and the write-off of an
interest rate swap agreement ($4.6 million), included in historical long-
term debt, to be refinanced in connection with the Merger.
(j) Reflects the payment of accrued interest on Smitty's Bank Credit Facility
($0.1 million), Smitty's Notes ($0.6 million) and Company's Mortgage Notes
and Other Indebtedness ($11.9 million) to be repaid in connection with the
Merger.
(k) Represents severance payments and other costs associated with the
integration of the Company and Smitty's.
(l) Reflects the repayment and cancellation of the current maturities of the
Smitty's Bank Credit Facility ($4.9 million) and the Company's Mortgage
Notes and Other Indebtedness ($20.8 million) and the recording of the
current maturities of the New Term Loans ($12.3 million).
(m) Reflects the retirement of 3,000,000 shares of Series I Preferred Stock.
(n) Reflects the repayment and cancellation of the Smitty's Bank Credit
Facility, the Smitty's Notes, the Smitty's Debentures, the Company's
Revolving Credit Facility, the Company's Mortgage Notes and Other
Indebtedness and records borrowings under the New Term Loans and New
Revolving Facility and the issuance of the New Senior Subordinated Notes.
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
---------------------
<S> <C>
New Term Loans........................................ $ 805.0
New Senior Subordinated Notes......................... 575.0
Repay Smitty's Notes.................................. (50.0)
Discount on Smitty's Notes ........................... 0.4
Repay Smitty's Debentures............................. (18.4)
Discount on Smitty's Debentures ...................... 0.5
Repay Smitty's Bank Credit Facility................... (34.9)
Repay Company's Mortgage Notes and Other Indebtedness. (667.1)
-------
$ 610.5
=======
</TABLE>
(o) Represents a reclassification of $7.5 million of the Company's deferred
compensation and other long-term liabilities to conform to the pro forma
combined classification.
(p) Represents the deferred tax asset associated with the write-off of the
deferred debt issuance costs and the premium over book value on the
Company's and Smitty's debt to be refinanced. The deferred tax asset
recognized in the Unaudited Pro Forma Combined Financial Statements is more
likely than not to be realized due to the expected future reversal of
taxable temporary differences and the existence of taxable income in each of
the prior three carryback years available.
(q) Reflects redemption of 50% of outstanding Common Stock prior to
the Merger at $36.00 per share, the retirement of all treasury shares and
the purchase of certain outstanding management stock options.
(r) Reflects the elimination of Smitty's historical equity.
(s) Represents the issuance of 3,038,888 shares of Common Stock at an
assumed market value of $15.00 per share as consideration in the Merger.
(t) The Unaudited Pro Forma Combined Balance Sheet does not include (i)
certain costs related to the purchase of certain management stock options
as part of the Recapitalization which are estimated to be $12.5 million,
(ii) the integration of the Company's operations which are estimated to be
$15.0 million over a two-year period and (iii) a potential severance
payment to the Chairman and Chief Executive Officer of the Company
(definitive agreements with respect to which have not yet been reached).
(u) Represents the premium over book value attributable to "make whole"
payments and other premiums payable in connection with the retirement of
Company's Mortgage Notes and Other Indebtedness and the Smitty's Notes and
Debentures, net of 39% tax rate. The actual amount of such payments may
vary substantially based on the yields of certain U.S. Treasury debt
securities at the time such indebtedness is actually repaid.
(v) Represents the write-off of the historical deferred debt issuance costs of
the Company and Smitty's related to its refinanced debt, net of 39% tax
rate.
<PAGE>
EXHIBIT (a)(10)
---------------
FOR IMMEDIATE RELEASE
SMITH'S FOOD & DRUG CENTERS, INC. ANNOUNCES CHANGES TO RECAPITALIZATION
FINANCING
SALT LAKE CITY, UTAH, MAY 7, 1996 -- Smith's Food & Drug Centers, Inc.
(NYSE:SFD)("Smith's") announced today that it has revised the terms of the
proposed financing for its pending recapitalization. After consultation with
its underwriters, Smith's has increased the size of its offering of Senior
Subordinated Notes due 2007 (the "Notes") from $350 million to $575 million. As
a result of this increase, Smith's will eliminate its proposed offerings of $150
million of Senior Notes due 2006 and $75 million of Cumulative Redeemable
Exchangeable Preferred Stock. The changes to the terms of the financing are
reflected in filings being made with the Securities and Exchange Commission.
The meeting for Smith's stockholders to approve the recapitalization is
scheduled to be held on May 23, 1996.
BT Securities Corporation, CS First Boston Corporation, Donaldson,
Lufkin & Jenrette Securities Corporation, Goldman, Sachs & Co. and Chase
Securities Inc. will act as underwriters in connection with the offering of
Notes.
A registration statement relating to the Notes has been filed with the
Securities and Exchange Commission but has not yet become effective. These
securities may not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This press release shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state.
A copy of the prospectus with respect to the offering of the Notes may
be obtained from Smith's Food & Drug Centers, Inc., 1550 South Redwood Road,
Salt Lake City, Utah 84104, Attention: Secretary and General Counsel.
