0000850309-95-000005.txt : 19950815 0000850309-95-000005.hdr.sgml : 19950815 ACCESSION NUMBER: 0000850309-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950701 FILED AS OF DATE: 19950814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SMITHS FOOD & DRUG CENTERS INC CENTRAL INDEX KEY: 0000850309 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 870258768 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10252 FILM NUMBER: 95562193 BUSINESS ADDRESS: STREET 1: 1550 S REDWOOD RD CITY: SALT LAKE CITY STATE: UT ZIP: 84104 BUSINESS PHONE: 8019741400 10-Q 1 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 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 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 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 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 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. 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) EX-10.21 2 [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] EX-27 3
5 Article 5 FDS for 1st Quarter 10-Q 1000 3-MOS 6-MOS DEC-30-1995 DEC-30-1995 JUL-01-1995 JUL-01-1995 13,447 13,447 0 0 23,119 23,119 0 0 366,200 366,200 437,851 437,851 1,597,441 1,597,441 394,936 394,936 1,657,380 1,657,380 362,023 362,023 0 0 299 299 4,410 4,410 0 0 590,164 590,164 1,657,380 1,657,380 770,405 1,517,078 770,405 1,517,078 599,369 1,179,175 599,369 1,179,175 0 0 0 0 15,280 30,357 14,832 30,611 5,800 12,100 9,032 18,511 0 0 0 0 0 0 9,032 18,511 .36 .73 .36 .73
EX-10.22 4 [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