-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vqzr+JStYuwkozFdRuGdPiYaCoXK9+PV1Kb8C10lY+PfZBP5+MsRAJqNHK2KXLAF yY7B89Py7TIV0voFEXvcpQ== 0000893877-97-000541.txt : 19970924 0000893877-97-000541.hdr.sgml : 19970924 ACCESSION NUMBER: 0000893877-97-000541 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970816 FILED AS OF DATE: 19970923 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEYER FRED INC CENTRAL INDEX KEY: 0000701169 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 930798201 STATE OF INCORPORATION: DE FISCAL YEAR END: 0201 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11274 FILM NUMBER: 97684021 BUSINESS ADDRESS: STREET 1: 3800 SE 22ND AVE CITY: PORTLAND STATE: OR ZIP: 97202 BUSINESS PHONE: 5032328844 MAIL ADDRESS: STREET 1: PO BOX 42121 CITY: PORTLAND STATE: OR ZIP: 97242 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 16, 1997 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 No. 1-13339 FRED MEYER, INC. (Exact name of registrant as specified in its charter) Delaware 91-1826443 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 3800 S.E. 22nd Avenue Portland, Oregon 97202 (Address of principal executive offices) (Zip Code) (503) 232-8844 (Registrant's telephone number, including area code) Not applicable. (Former name, former address and former fiscal year, if changed since last report.) 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 XX No ---- ---- Shares of Common Stock Outstanding at August 16, 1997: 26,777,242 Part I - Financial Information
FRED MEYER, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) August 16, February 1, 1997 1997 --------- ---------- ASSETS CURRENT ASSETS: Cash and cash equivalents ................................... $ 39,794 $ 48,769 Receivables-net ............................................. 24,105 23,729 Inventories ................................................. 629,631 604,910 Prepaid expenses and other .................................. 39,203 43,149 Current portion of deferred taxes ........................... 17,226 17,226 ----------- ----------- Total current assets ..................................... 749,959 737,783 ----------- ----------- PROPERTY AND EQUIPMENT-NET ..................................... 964,208 929,765 ----------- ----------- OTHER ASSETS ................................................... 27,942 24,472 ----------- ----------- TOTAL ................................................. $ 1,742,109 $ 1,692,020 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and outstanding checks ..................... $ 375,623 $ 398,430 Current portion of long-term debt and lease obligations .................................... 1,038 1,038 Income taxes payable ........................................ 16,238 5,115 Accrued expenses and other .................................. 106,566 99,998 ----------- ----------- Total current liabilities ................................ 499,465 504,581 ----------- ----------- LONG-TERM DEBT AND MORTGAGES ................................... 525,213 521,512 ----------- ----------- CAPITAL LEASE OBLIGATIONS ...................................... 13,149 13,227 ----------- ----------- DEFERRED LEASE TRANSACTIONS .................................... 47,775 46,318 ----------- ----------- DEFERRED INCOME TAXES .......................................... 35,176 35,176 ----------- ----------- OTHER LONG-TERM LIABILITIES .................................... 5,765 5,302 ----------- ----------- STOCKHOLDERS' EQUITY: Common stock ................................................ 290 287 Additional paid-in capital .................................. 219,684 203,314 Retained earnings ........................................... 466,501 434,122 Treasury stock .............................................. (69,803) (69,773) Notes receivable from officers .............................. (299) (1,394) Unearned compensation ....................................... (807) (652) ----------- ----------- Total stockholders' equity ............................... 615,566 565,904 ----------- ----------- TOTAL.................................................. $ 1,742,109 $ 1,692,020 =========== =========== See notes to consolidated financial statements.
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FRED MEYER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) 12 Weeks Ended ----------------------------- August 16, August 17, 1997 1996 --------- --------- NET SALES....................................................... $957,015 $853,914 COST OF MERCHANDISE SOLD........................................ 668,356 598,528 -------- -------- GROSS MARGIN.................................................... 288,659 255,386 OPERATING AND ADMINISTRATIVE EXPENSES........................... 247,851 221,735 -------- -------- INCOME FROM OPERATIONS.......................................... 40,808 33,651 INTEREST EXPENSE-NET............................................ 9,970 9,178 -------- -------- INCOME BEFORE INCOME TAXES...................................... 30,838 24,473 PROVISION FOR INCOME TAXES...................................... 11,718 9,300 -------- -------- NET INCOME...................................................... $ 19,120 $ 15,173 ======== ======== EARNINGS PER COMMON SHARE....................................... $.68 $.53 ==== ==== WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING........................................... 28,104 28,703 ======== ======== See notes to consolidated financial statements.
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FRED MEYER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) 28 Weeks Ended ------------------------------ August 16, August 17, 1997 1996 ---------- ---------- NET SALES........................................................ $2,150,951 $1,893,942 COST OF MERCHANDISE SOLD......................................... 1,506,871 1,336,484 ---------- ---------- GROSS MARGIN..................................................... 644,080 557,458 OPERATING AND ADMINISTRATIVE EXPENSES............................ 568,279 495,471 ---------- ---------- INCOME FROM OPERATIONS........................................... 75,801 61,987 INTEREST EXPENSE-NET............................................. 23,577 22,282 ---------- ---------- INCOME BEFORE INCOME TAXES....................................... 52,224 39,705 PROVISION FOR INCOME TAXES....................................... 19,845 15,088 ---------- ---------- NET INCOME....................................................... $ 32,379 $ 24,617 ========== ========== EARNINGS PER COMMON SHARE........................................ $1.16 $.86 ===== ==== WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING............................................ 27,940 28,609 ========== ========== See notes to consolidated financial statements.
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FRED MEYER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) 28 Weeks Ended ------------------------------ August 16, August 17, 1997 1996 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income.................................................... $ 32,379 $ 24,617 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment.................................. 67,533 62,560 Amortization of goodwill................................... 166 166 Deferred lease transactions................................ (7,069) (2,879) Deferred income taxes...................................... --- (1,384) Changes in operating assets and liabilities: Inventories................................................ (24,721) (40,235) Other current assets....................................... 3,570 (18,961) Accounts payable and outstanding checks.................... (22,807) 86,558 Accrued expenses........................................... 6,568 8,030 Income taxes payable....................................... 11,123 11,082 Other liabilities.......................................... 463 (765) Other...................................................... (3,312) (3,841) --------- --------- Net cash provided by operating activities..................... 63,893 124,948 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock-net.................................. 16,343 638 Decrease (increase) in notes receivable....................... 1,024 (22,396) Long-term financing: Borrowings................................................. 14,679 22,930 Repayments................................................. (11,056) (42,769) --------- --------- Net cash provided by (used for) financing activities....................................... 20,989 (41,597) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment........................... (142,306) (93,910) Net proceeds from sale of real property....................... 48,449 8,467 Net sales of investment securities............................ --- 5,080 --------- --------- Net cash used for investing activities........................ (93,857) (80,363) --------- --------- CASH AND CASH EQUIVALENTS: Net (decrease) increase for the period........................ (8,975) 2,988 Beginning of period........................................... 48,769 41,849 --------- --------- End of period................................................. $ 39,794 $ 44,837 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest................................................... $ 24,115 $ 21,510 Income taxes............................................... 4,871 5,335 See notes to consolidated financial statements.
5 FRED MEYER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Interim Reporting Periods ------------------------- The Company's interim reporting periods for reports to stockholders are the 16th, 28th, and 40th weeks of its fiscal year. 2. Reclassifications ----------------- Certain prior year balances have been reclassified to conform to current year presentation. 3. Inventories ----------- Inventories consist mainly of merchandise held for sale. Substantially all of the inventories are valued at the lower of last-in, first-out (LIFO) cost or market. Estimated gross margins have been used for determining the cost of merchandise sold for those operating departments not taking physical inventories at the end of the interim periods. 4. Income Taxes ------------ Income taxes have been provided for based upon the current estimate of the Company's annual effective tax rate. 5. Stockholders' Equity -------------------- Changes in stockholders' equity for the twenty-eight weeks ended August 16, 1997 were: (In thousands) -------------- Stockholders' equity, February 1, 1997 $565,904 Issuance of common stock-net 16,343 Net income 32,379 Decrease in notes receivable - officers 1,095 Unearned compensation, net of amortization (155) -------- Stockholders' equity, August 16, 1997 $615,566 ======== 6. Earnings Per Common Share ------------------------- Fully diluted earnings per common share are computed by dividing net income by the weighted average number of common and common equivalent shares outstanding. Weighted average shares reflect the dilutive effect of outstanding stock options (ranging in exercise price from $12.125 to $41.25 per share) which was determined by using the "treasury stock" method. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share, which establishes new standards for computing and presenting earnings per share (EPS) and applies to entities with publicly held common stock or potential common stock. SFAS No. 128 replaces the presentation of primary EPS with a presentation of basic EPS, requires dual presentation of basic and diluted EPS on the face of the income statement, and requires additional disclosures regarding EPS. SFAS No. 128 will require changes in the computation and presentation of the Company's EPS commencing with the financial statements for the year ending January 31, 1998 and require restatement of all prior periods presented. Earlier application of this statement is not permitted. 6 However, if the Company computed its EPS for the 12 and 28 weeks ended August 16, 1997 in a manner consistent with SFAS No. 128, the pro forma amounts would have been as follows:
12 Weeks 28 Weeks Ended Ended August 16, 1997 August 16, 1997 --------------- --------------- Basic earnings per share $.72 $1.22 Diluted earnings per share $.68 $1.16 Basic weighted average number of common shares outstanding to the nearest thousand 26,717 26,607 Diluted weighted average number of common and common equivalent shares outstanding to the nearest thousand 28,045 27,807
7. New Accounting Pronouncements ----------------------------- In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income, which requires that all items of comprehensive income be reported in a financial statement for the period in which they are recognized. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events from nonowner sources. SFAS No. 130 will be effective for the fiscal year ending January 30, 1999. The Company has elected not to comply early with SFAS No. 130. Compliance, however, is not expected to have a material effect on the Company's financial statement disclosure. Additionally in June 1997, the Financial Accounting Standards Board issued SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which requires public enterprises to disclose financial and descriptive information about their operating segments. SFAS No. 131 will be effective for the fiscal year ending January 30, 1999. At this time, the Company has not completed its analysis of the effects of implementing SFAS No. 131, but does not believe that SFAS No. 131 will have a material effect on the current presentation of the financial statements. 8. Commitments and Contingencies ----------------------------- The Company and its subsidiaries are parties to various legal claims, actions, and complaints, certain of which involve material amounts. Although the Company is unable to predict with certainty whether or not it will ultimately be successful in these legal proceedings or, if not, what the impact might be, management presently believes that disposition of these matters will not have a material adverse effect on the Company's consolidated financial position or consolidated results of operations. 9. Subsequent Events ----------------- On September 5, 1997, the Registrant announced a two-for-one stock split, effected in the form of a 100% stock dividend, payable on September 30, 1997 to shareholders of record on September 19, 1997. On September 9, 1997 Meyer-Smith Holdco, Inc., a newly formed holding company (the "Registrant"), succeeded to the businesses of Fred Meyer, Inc., a Delaware corporation ("Fred Meyer") and Smith's Food & Drug Centers, Inc. ("Smith's"), as a result of mergers (the "Merger") pursuant to the Agreement and Plan of Reorganization and Merger, dated as of May 11, 1997. At the closing on September 9, 1997: (i) Fred Meyer and Smith's became wholly owned subsidiaries of the Registrant, (ii) each outstanding share of Class A Common Stock and Class B Common Stock of Smith's converted into 1.05 shares of Common Stock of the Registrant; (iii) each outstanding share of Series I Preferred Stock of Smith's converted into the right to receive in cash the amount of $.33 1/3; (iv) each outstanding share of Common Stock of Fred Meyer was converted into one share of Common Stock of the Registrant; (v) the name of Fred Meyer was changed to Fred Meyer Stores, Inc. and the name of the Registrant was changed to Fred Meyer, Inc. 7 In connection with the Merger, the Registrant refinanced substantially all of the indebtedness of Fred Meyer and Smith's. At the closing of the Merger, the Registrant entered into a five year $1.03 billion revolving credit facility, a $500.0 million 364-day revolving credit facility and a five year $500.0 million bridge facility (the "Senior Credit Facilities"), each guaranteed by certain of the Registrant's subsidiaries (including Smith's and Fred Meyer). The Senior Credit Facilities were used to refinance the 11 1/4% Senior Subordinated Notes of Smith's, and certain bank and insurance company loans of Fred Meyer and Smith's. The revolving portion of the Senior Credit Facilities is available for general corporate purposes, including the support of the commercial paper program of the Registrant. In addition to the Senior Credit Facilities, Fred Meyer entered into a lease financing program of up to $270.0 million, which refinanced its tax retention operating lease programs. The obligations under the lease finance program were guaranteed by the Registrant and certain of the Registrant's subsidiaries (including Smith's and Fred Meyer). The periods covered by this Report on Form 10-Q ended on August 16, 1997, which was before the closing of the Merger. Accordingly, this Report contains statements of operations and balance sheets of Fred Meyer and its subsidiaries prior to the closing of the Merger. All references in the financial statements, the notes to the financial statements and the Management's Discussion and Analysis of Financial Condition and Results of Operations to "Fred Meyer, Inc." and the "Company" refer to Fred Meyer prior to the Merger. The Merger will be accounted for as a purchase, with Fred Meyer as the acquiror, in accordance with generally accepted accounting principles, and will be reflected in the Registrant's Quarterly Report on Form 10-Q for the quarter ending November 8, 1997. The Smith's shareholders will receive approximately 16.6 million shares of the Registrant with a value of approximately $700 million. Goodwill of approximately $1 billion will be amortized on the straight-line method over 40 years. --------------- The financial information furnished in this Form 10-Q reflects all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair presentation of the results for the 12 and 28 weeks ended August 16, 1997 and August 17, 1996. The consolidated results of operations presented herein are not necessarily indicative of the results to be expected for the year due to the seasonality of the Company's business. These consolidated financial statements should be read in conjunction with the financial statements and related notes incorporated by reference in the Company's latest annual report filed on Form 10-K. 8 FRED MEYER, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RECENT DEVELOPMENTS On September 9, 1997, the Registrant succeeded to the businesses of Fred Meyer, Inc. (the "Company") and Smith's Food & Drug Centers, Inc. See Note 9 - Subsequent Events under "Notes to Consolidated Financial Statements" included on pages 7 and 8 of this Report. FINANCIAL CONDITION The Company funded its working capital and capital expenditure needs in 1996 and the first half of 1997 through internally generated cash flow and sale-leaseback proceeds, supplemented by borrowings under committed and uncommitted bank lines of credit and unrated commercial paper. The Company modified and extended its credit facility on April 23, 1997 with several domestic and foreign banks for a committed line of credit which provides for borrowings of up to $500.0 million. Modifications included more favorable pricing as well as less restrictive financial covenants and a maturity date of June 28, 2002. In addition to this committed credit facility, at August 16, 1997 the Company had $105.0 million of uncommitted money market lines with several foreign banks and $120.0 million of uncommitted money market lines with banks which are also in the committed credit facility. The bank lines and unrated commercial paper are used primarily for seasonal inventory requirements, new store construction and financing, existing store remodeling, acquisition of land, and major projects such as the development of Management Information Systems. At August 16, 1997 the Company had unrated commercial paper outstanding in the amount of $297.5 million and a total of approximately $202.5 million available for borrowings that would be supported by its committed credit facility. The Company has entered into interest rate swap and cap agreements to reduce the impact of changes in interest rates on its floating rate long-term debt. At August 16, 1997, the Company had outstanding four interest rate contracts, for a total notional principal amount of $75.0 million, with commercial banks. Two swap agreements effectively fix the Company's interest rate on unrated commercial paper, floating rate facilities and uncommitted lines of credit at rates between 5.20% and 7.60% on a notional principal amount of $40.0 million. These contracts expire through 1998. Two cap agreements effectively limit the maximum interest rate the Company will pay at rates between 5.00% and 9.00% on notional principal amounts totaling $35.0 million. These contracts expire through 1999. The Company has entered into swap and cap agreements to reduce the impact of changes in rent expense on its two lease lines of credit. At August 16, 1997, the Company had outstanding seven rent rate contracts, for a total notional principal amount of $80.0 million, with commercial banks. Three of these agreements effectively fix the Company's rental rate on the lease lines at rates between 6.28% and 6.54% on notional principal amounts of $40.0 million. The remaining four agreements effectively limit the maximum rental rate the Company will pay at 7.25% on notional principal amounts totaling $40.0 million. All seven of these contracts expire in 2000. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the interest rate and rent rate swap and cap agreements. The Company requires an A or better rating of the counterparties and, accordingly, does not anticipate nonperformance by the counterparties. On June 24, 1997, the Company closed a sale-leaseback with respect to three of its stores, which generated $41.9 million in net proceeds used to pay down its credit lines. The leases were for an initial term of 23 years, subject to renewal at the option of the Company; and the average rent, including amortization of fees and deferred gain, is approximately $4.2 million annually. 9 The Company believes that a combination of cash flow from operations and borrowings under its credit facilities will permit it to finance its capital expenditure requirements for 1997, currently budgeted to be approximately $167.0 million, net of estimated real estate sales and stores financed on leases. If the Company determines that it is preferable, it may fund its capital expenditure requirements by mortgaging facilities, entering into sale-leaseback transactions, or by issuing additional debt or equity. RESULTS OF OPERATIONS COMPARISON OF THE 12 WEEKS ENDED AUGUST 16, 1997 WITH THE 12 WEEKS ENDED AUGUST 17, 1996. Net sales for the second quarter of 1997 increased $103.1 million or 12.1 percent over the corresponding quarter in 1996. The 1997 increase in sales reflects openings of new stores, strong food and nonfood sales, and the acquisition of mall jewelry stores. Comparable store sales increased 6.1 percent for the second quarter of 1997. Food comparable store sales increased 4.7 percent, and nonfood comparable store sales increased 8.3 percent. The Company's food operations accounted for 58.4 percent of the overall sales in 1997 and 59.1 percent in 1996. Gross margin as a percent of net sales was 30.2 percent for the second quarter of 1997, compared with 29.9 percent for 1996's second quarter. Gross margins increased in the second quarter of 1997 due to lower markdowns and the impact on margins of multistore jewelry acquisitions, partially offset by lower margins in pharmacy resulting from increased pharmacy sales to third-party plans. Operating and administrative expenses as a percent of net sales were 25.9 percent for the second quarter of 1997, compared with 26.0 percent for 1996's second quarter. Expenses as a percent of sales decreased in 1997's second quarter primarily due to lower new store opening costs, partially offset by an investment in improved customer service through added staffing at store level. Net interest expense in the second quarter of 1997 was $10.0 million, an increase of 8.6 percent from the $9.2 million reported for 1996. The increase reflects higher interest rates and higher borrowings related to new store construction and remodels. The effective tax rate for the second quarters of 1997 and 1996 was 38.0 percent. Net income increased 26.0 percent to $19.1 million in the second quarter of 1997 from $15.2 million in the second quarter of 1996. Earnings per share were $.68 for the second quarter of 1997 based on 28.1 million shares outstanding, compared with $.53 for the prior year's second quarter based on 28.7 million shares outstanding. COMPARISON OF THE 28 WEEKS ENDED AUGUST 16, 1997 WITH THE 28 WEEKS ENDED AUGUST 17, 1996. Net sales for the first 28 weeks of 1997 increased $257.0 million or 13.6 percent to $2.15 billion. This increase reflects openings of new stores, strong food and nonfood sales, and the acquisition of mall jewelry stores. Comparable store sales increased 6.6 percent for this 28-week period. Food comparable store sales increased 5.4 percent, and nonfood comparable store sales increased 8.5 percent. The Company's food operations accounted for 59.2 percent of the overall sales for the first 28 weeks of 1997, compared with 60.1 percent for the first 28 weeks of 1996. Gross margin as a percent of net sales was 29.9 percent for the first 28 weeks of 1997 compared with 29.4 percent for 1996. Gross margins increased in the first 28 weeks of 1997 due to lower markdowns and the impact on margins of multistore jewelry acquisitions, partially offset by lower margins in pharmacy resulting from increased pharmacy sales to third-party plans. Operating and administrative expenses as a percent of net sales were 26.4 percent for the first 28 weeks of 1997 compared with 26.2 percent for the first 28 weeks of 1996. Expenses as a percent of net sales increased in 1997's first 28 weeks due to the impact on expenses of multistore jewelry acquisitions. 10 Net interest expense in the first 28 weeks of 1997 was $23.6 million, an increase of 5.8 percent from the $22.3 million for 1996. The increase reflects higher interest rates and higher borrowings related to new store construction and remodels. The effective tax rate for the first 28 weeks of 1997 and 1996 was 38.0 percent. Net income increased 31.5 percent to $32.4 million in the first 28 weeks of 1997 from $24.6 million in the first 28 weeks of 1996. Earnings per share were $1.16 for the first 28 weeks of 1997 based on 27.9 million shares outstanding, compared with $.86 for the prior year's period based on 28.6 million shares outstanding. EFFECT OF LIFO Each year, the Company estimates the LIFO adjustment for the year based on estimates of three factors: inflation rates (calculated by reference to the Department Stores Inventory Price Index published by the Bureau of Labor Statistics for softgoods and jewelry, and to internally generated indices based on Company purchases during the year for all other departments), expected inventory levels, and expected markup levels (after reflecting permanent markdowns and cash discounts). The Company reviewed these year-to-date indices at the end of the second quarter and adjusted its LIFO reserve on a year-to-date basis to reflect the Company's overall product mix, anticipated year-end inventory levels, and the Company's expectations of the indices for the remainder of the year. At year-end, the Company makes the final adjustment reflecting the difference between its prior quarterly estimates and actual LIFO amount for the year. 11 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit ------- 11. Computation of Earnings per Common Share. 27. Financial Data Schedule. (b) Reports on Form 8-K ------------------- The Registrant filed a Current Report on Form 8-K dated September 12, 1997 reporting in Item 2 the Merger referred to in Note 9 of Notes to Consolidated Financial Statements in this Report and incorporating by reference historical financial statements of Fred Meyer, Inc. and Smith's Food & Drug Centers, Inc. prior to the Merger and proforma financial statements. 12 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. FRED MEYER, INC. (Registrant) Dated: September 22, 1997 DAVID R. JESSICK ----------------------------------------- David R. Jessick Senior Vice President - Finance Chief Financial Officer 13 EXHIBIT INDEX Exhibit Sequential Number Document Description Page Number - ------- -------------------- ----------- 11. Computation of Earnings per Common Share. 27. Financial Data Schedule. EX-11 2 COMPUTATION OF EARNINGS PER COMMON SHARE EXHIBIT 11
FRED MEYER, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE (In thousands, except per share amounts) (Unaudited) 12 Weeks Ended 28 Weeks Ended ---------------------- ---------------------- Aug. 16, Aug. 17, Aug. 16, Aug. 17, 1997 1996 1997 1996 ------ ------ ------ ------ Weighted average number of shares outstanding................................... 26,717 26,722 26,607 26,713 Weighted average number of shares under option.................................. 2,684 4,218 2,880 3,935 Shares assumed to have been purchased under the treasury stock method............................... (1,297) (2,237) (1,547) (2,039) ------- ------- ------- ------- Weighted average number of common and common equivalent shares outstanding.................................. 28,104 28,703 27,940 28,609 ======= ======= ======= ======= Net income ........................................... $19,120 $15,173 $32,379 $24,617 ======= ======= ======= ======= Earnings per common share............................. $.68 $.53 $1.16 $.86 ======= ======= ======= =======
EX-27 3 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 6-MOS JAN-31-1998 AUG-16-1997 39,794 0 24,105 0 629,631 749,959 1,643,688 679,480 1,742,109 499,465 525,213 0 0 290 615,276 1,742,109 2,150,951 2,150,951 1,506,871 568,279 0 0 23,577 52,224 19,845 32,379 0 0 0 32,379 1.16 1.16
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