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UNITED STATES
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 November 7, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 No.)
3800 SE 22nd Avenue
Portland, Oregon 97202
(Address of principal executive offices) (Zip Code)
(503) 232-8844
(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 of Common Stock outstanding at December 5, 1998:
155,169,609
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Table of Contents
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Items of Form 10-Q Page
Part I - FINANCIAL INFORMATION
Item 1 Financial Statements .................................... 3
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 12
Item 3 Quantitative and Qualitative Disclosures About
Market Risk.............................................. 19
Part II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K......................... 20
Signatures ............................................................... 21
2
Part I - FINANCIAL INFORMATION
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Item 1. Financial Statements.
- -----------------------------
Consolidated Statements of Income (Unaudited)
12 Weeks Ended 40 Weeks Ended
--------------------------- --------------------------
November 7, November 8, November 7, November 8,
1998 1997 1998 1997
(In thousands, except per share data) ----------- ----------- ----------- -----------
Net sales $ 3,477,091 $ 1,945,543 $ 11,022,471 $ 4,996,582
Cost of goods sold 2,432,708 1,370,439 7,740,401 3,515,612
----------- ----------- ------------ ----------
Gross margin 1,044,383 575,104 3,282,070 1,480,970
Operating and administrative expenses 833,836 488,660 2,668,306 1,272,227
Amortization of goodwill 22,930 6,514 66,166 8,269
Merger related costs 33,737 - 290,701 -
----------- ----------- ------------ ----------
Income from operations 153,880 79,930 256,897 200,474
Interest expense 92,945 30,174 284,720 66,189
----------- ----------- ------------ ----------
Income (loss) before income taxes and extraordinary charge 60,935 49,756 (27,823) 134,285
Provision for income taxes 31,771 21,091 29,619 53,655
----------- ----------- ------------ ----------
Income (loss) before extraordinary charge 29,164 28,665 (57,442) 80,630
Extraordinary charge, net of taxes (324) (91,210) (217,934) (91,210)
----------- ----------- ------------ ----------
Net income (loss) $ 28,840 $ (62,545) $ (275,376) $ (10,580)
=========== =========== ============ ==========
Basic earnings per common share:
Income (loss) before extraordinary charge $ 0.19 $ 0.24 $ (0.38) $ 0.83
Extraordinary charge - (0.77) (1.45) (0.94)
----------- ----------- ------------ ----------
Net income (loss) $ 0.19 $ (0.53) $ (1.83) $ (0.11)
=========== =========== ============ ==========
Basic weighted average number of common
shares outstanding 154,690 118,331 150,601 97,355
=========== =========== ============ ==========
Diluted earnings per common share:
Income (loss) before extraordinary charge $ 0.18 $ 0.23 $ (0.38) $ 0.79
Extraordinary charge - (0.74) (1.45) (0.89)
----------- ----------- ------------ ----------
Net income (loss) $ 0.18 $ (0.51) $ (1.83) $ (0.10)
=========== =========== ============ ==========
Diluted weighted average number of common and
common equivalent shares outstanding 162,127 123,546 150,601 101,562
=========== =========== ============ ==========
See Notes to Consolidated Financial Statements.
3
Consolidated Balance Sheets (Unaudited)
November 7, January 31,
(In thousands) 1998 1998
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 186,045 $ 117,311
Receivables 140,291 108,496
Inventories 2,007,875 1,240,866
Prepaid expenses and other 60,540 70,536
Current portion of deferred taxes 218,318 90,804
----------- -----------
Total current assets 2,613,069 1,628,013
Property and equipment--net 3,570,974 2,432,040
Other assets:
Goodwill--net 3,684,442 1,279,130
Long-term deferred tax assets 272,573 -
Other 170,919 83,753
----------- -----------
Total other assets 4,127,934 1,362,883
----------- -----------
Total assets $10,311,977 $ 5,422,936
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,294,311 $ 766,678
Accrued expenses and other 1,051,905 407,167
Current portion of long-term debt and lease obligations 134,650 19,650
----------- -----------
Total current liabilities 2,480,866 1,193,495
Long-term debt 4,999,856 2,184,794
Capital lease obligations 173,341 82,782
Deferred lease transactions 30,175 38,556
Deferred income taxes - 83,183
Other long-term liabilities 478,492 137,766
Stockholders' equity:
Common stock 1,550 1,288
Additional paid-in capital 1,895,533 1,173,760
Notes receivable from officers (335) (298)
Unearned compensation (3,236) (466)
Retained earnings 255,735 528,076
----------- -----------
Total stockholders' equity 2,149,247 1,702,360
----------- -----------
Total liabilities and stockholders' equity $10,311,977 $ 5,422,936
=========== ===========
See Notes to Consolidated Financial Statements.
4
Consolidated Statements of Cash Flows (Unaudited)
40 Weeks Ended
-------------------------------
November 7, November 8,
(In thousands) 1998 1997
----------- -----------
Cash flows from operating activities:
Income (loss) before extraordinary charge $ (57,442) $ 80,630
Adjustments to reconcile income (loss) before extraordinary
charge to net cash provided by operating activities:
Depreciation and amortization of property and equipment 270,039 141,807
Amortization of goodwill 66,166 8,269
Deferred lease transactions (9,791) (8,884)
Merger related asset write-offs 89,231 -
Deferred income taxes 26,586 (1,140)
Changes in operating assets and liabilities:
Receivables (4,740) (10,156)
Inventories (170,119) (189,050)
Other current assets 12,896 12,780
Accounts payable 198,018 138,750
Accrued expenses and other liabilities (98) (5,953)
Income taxes 19,628 6,235
Other 16,930 (35)
----------- -----------
Net cash provided by operating activities 457,304 173,253
Cash flows from investing activities:
Cash acquired in acquisitions 66,519 71,476
Payments made for acquisitions (173,847) (419,402)
Purchases of property and equipment (497,616) (250,302)
Proceeds from sale of property and equipment 23,028 64,625
Other (27,096) 5,375
----------- -----------
Net cash used for investing activities (609,012) (528,228)
Cash flows from financing activities:
Issuance of common stock - net 59,377 223,679
Net increase in notes receivable 319 928
Payment of deferred financing fees (69,571) -
Long-term financing:
Borrowings 4,514,075 1,989,653
Repayments (4,288,488) (1,728,105)
Other 4,730 -
----------- -----------
Net cash provided by financing activities 220,442 486,155
----------- -----------
Net increase in cash and cash equivalents for the period 68,734 131,180
Cash and cash equivalents at beginning of year 117,311 63,340
----------- -----------
Cash and cash equivalents at end of period $ 186,045 $ 194,520
=========== ===========
See Notes to Consolidated Financial Statements.
5
Notes to Consolidated Financial Statements
1. Organization
Fred Meyer, Inc., a Delaware corporation, collectively with its
subsidiaries ("Fred Meyer" or the "Company") is one of the largest food
retailers in the United States, operating 830 supermarkets and
multi-department stores located primarily in the Western portion of the
United States. The Company operates multiple formats that appeal to
customers across a wide range of income brackets including stores under the
following banners: Fred Meyer, Smith's Food & Drug Centers, Smitty's, QFC,
Ralphs, and Food 4 Less.
2. Recent Events
On October 19, 1998, the Company announced the signing of a definitive
merger agreement with The Kroger Co. ("Kroger"), the largest retail grocery
chain in the United States. On that date, Kroger operated 1,398 food
stores, 802 convenience stores and 34 manufacturing facilities that
manufacture products for sale in all Kroger divisions, as well as to
external customers. Under the terms of the merger agreement, Fred Meyer
stockholders will receive one newly issued share of Kroger common stock for
each share of Fred Meyer common stock. The transaction will be accounted
for as a pooling of interests. It is expected to close in early 1999
subject to approval of Kroger and Fred Meyer stockholders and antitrust and
other regulatory authorities and customary closing conditions. In
anticipation of the intended merger with Kroger, the Company has secured
approval from its banks to amend its 1998 Senior Credit Facility (as
defined herein) as well as its operating lease facility. These proposed
amendments are subject to completion of the merger and will be guaranteed
by Kroger. The Company's outstanding senior notes due 2003 through 2008 are
expected to remain outstanding after the merger. Additional information
regarding the merger can be found in the Company's current report on Form
8-K dated October 20, 1998.
On December 6, 1998, Ralphs Grocery Company, a subsidiary of the
Company, sold 38 grocery stores located in Kansas and Missouri to
Associated Wholesale Grocers, Inc., a member-owned grocery cooperative.
3. Acquisitions
On March 9, 1998, Fred Meyer issued 41.2 million shares of Fred Meyer
common stock for all the outstanding stock of Quality Food Centers, Inc.
("QFC"), a supermarket chain operating 89 stores in the Seattle/Puget Sound
region of Washington state and 56 Hughes Family Markets stores in Southern
California as of the date of the merger. As a result, QFC became a wholly
owned subsidiary of Fred Meyer. The merger of Fred Meyer and QFC was
accounted for as a pooling of interests and the accompanying financial
statements reflect the consolidated results of Fred Meyer and QFC for all
periods presented. The amounts included in the prior year results of
operations from Fred Meyer and QFC are as follows (in thousands, except per
share data):
Fred Meyer QFC Total
Historical Historical Company
---------- ---------- -------
12 Weeks Ended November 8, 1997
Net sales $1,460,372 $ 485,171 $ 1,945,543
Net income (loss) (72,933) 10,388 (62,545)
Diluted earnings (loss) per common share (0.89) 0.25 (0.51)
40 Weeks Ended November 8, 1997
Net sales 3,611,323 1,385,259 4,996,582
Net income (loss) (40,554) 29,974 (10,580)
Diluted earnings (loss) per common share (0.64) 0.79 (0.10)
6
On March 10, 1998, the Company acquired Food 4 Less Holdings, Inc.
("Ralphs/Food 4 Less"), a supermarket chain operating 409 stores primarily
in Southern California on that date, which became a wholly-owned subsidiary
of the Company. The Company issued 21.7 million shares of common stock of
the Company for all of the equity interests of Ralphs/Food 4 Less. The
acquisition is being accounted for under the purchase method of accounting.
The financial statements reflect the preliminary allocation of the purchase
price and assumption of certain liabilities and include the operating
results of Ralphs/Food 4 Less from the date of acquisition.
In conjunction with the acquisitions of Ralphs/Food 4 Less and QFC,
the Company entered into a settlement agreement with the State of
California in which it agreed to divest 19 specific stores in Southern
California to settle potential antitrust and unfair competition claims.
Currently, the Company has sold five of the stores and has sale agreements
or letters of intent on another 13 stores.
On September 9, 1997, the Company succeeded to the businesses of Fred
Meyer Stores, Inc. ("Fred Meyer Stores" and known as Fred Meyer, Inc. prior
to September 9, 1997) and Smith's Food & Drug Centers, Inc. ("Smith's"). At
the closing on September 9, 1997, Fred Meyer Stores and Smith's, a regional
supermarket and drug store chain operating 152 stores in the Intermountain
and Southwestern regions of the United States on that date, became wholly
owned subsidiaries of the Company. The Company issued 1.05 shares of common
stock of the Company for each outstanding share of Class A Common Stock and
Class B Common Stock of Smith's and one share of common stock of the
Company for each outstanding share of common stock of Fred Meyer Stores.
The Smith's acquisition was accounted for under the purchase method of
accounting. The financial statements reflect the allocation of the purchase
price and assumption of certain liabilities and include the operating
results of Smith's from the date of acquisition. In total, the Company
issued 33.3 million shares of common stock to the Smith's stockholders.
On August 17, 1997, the Company acquired substantially all of the
assets and liabilities of Fox Jewelry Company ("Fox") in exchange for
common stock with a fair value of $9.2 million. The Fox acquisition was
accounted for under the purchase method of accounting. The results of
operations of Fox do not have a material effect on the consolidated
operating results, and therefore are not included in the pro forma data
presented.
On March 19, 1997, QFC acquired the principal operations of Hughes
Markets, Inc. ("Hughes"), including the assets and liabilities related to
57 stores located in Southern California and a 50% interest in Santee
Dairies, Inc., one of the largest dairy plants in California. The merger
was effected through the acquisition of 100% of the outstanding voting
securities of Hughes for approximately $360.5 million in cash and the
assumption of approximately $33.2 million of indebtedness of Hughes. The
Hughes acquisition was accounted for under the purchase method of
accounting. The financial statements reflect the allocation of the purchase
price and assumption of certain liabilities and include the operating
results of Hughes from the date of acquisition.
On February 14, 1997, QFC acquired the principal operations of Keith
Uddenberg, Inc. ("KUI"), including assets and liabilities related to 25
stores in the western and southern Puget Sound region of Washington. The
merger was effected through the acquisition of 100% of the outstanding
voting securities of KUI for $34.5 million cash, 1.7 million shares of
common stock and the assumption of approximately $23.8 million of
indebtedness of KUI. The KUI acquisition was accounted for under the
purchase method of accounting. The financial statements reflect the
allocation of the purchase price and assumption of certain liabilities and
include the operating results of KUI from the date of acquisition.
Additionally, the Company completed the acquisition of food and fine
jewelry stores during the 40 weeks ended November 7, 1998. On October 4,
1998, the Company acquired 123 Littman Jewelers and 9 Barclays Jewelers
stores located primarily in 10 states on the East coast. On October 1,
1998, the Company acquired 13 Albertson's and Buttrey grocery stores in
Montana and
7
Wyoming. These acquisitions were accounted for under the purchase method of
accounting. The results of operations for these acquired stores do not have
a material effect on the consolidated operating results, and therefore are
not included in the pro forma data presented.
The following unaudited pro forma information presents the results of
the Company's operations assuming the Ralphs/Food 4 Less, Smith's, QFC,
KUI, and Hughes acquisitions occurred at the beginning of each period
presented. In addition, the following unaudited pro forma information gives
effect to refinancing certain debt as if such refinancing occurred at the
beginning of each period presented (in thousands, except per share data):
40 Weeks Ended
-----------------------------
November 7, November 8,
1998 1997
----------- -----------
Net sales $11,568,003 $11,285,962
Income (loss) before extraordinary charge (118,210) 55,684
Net loss (336,144) (161,926)
Diluted earnings per common share:
Income (loss) before extraordinary charge (0.77) 0.37
Net loss (2.19) (1.06)
The pro forma financial information does not reflect anticipated
annualized operating savings and assumes all notes subject to the
refinancings were redeemed pursuant to tender offers made. Additionally,
each year includes an extraordinary charge of $217.9 million, net of the
related tax benefit, on the extinguishment of debt as a result of
refinancing certain debt. The pro forma financial information is not
necessarily indicative of the operating results that would have occurred
had the acquisitions been consummated as of the beginning of each period
nor is it necessarily indicative of future operating results.
The supplemental schedule of business acquisitions is as follows (in
thousands):
40 Weeks Ended
----------------------------
November 7, November 8,
1998 1997
----------- -----------
Fair value of assets acquired $ 2,165,950 $ 2,055,091
Goodwill recorded 2,397,030 1,221,141
Value of stock issued (652,514) (767,145)
Liabilities assumed (3,736,619) (2,089,685)
----------- -----------
Cash paid $ 173,847 $ 419,402
=========== ===========
4. Summary of Significant Accounting Policies
Basis of Presentation--The accompanying unaudited consolidated
financial statements of the Company have been prepared in accordance with
generally accepted accounting principles for interim financial information
and in accordance with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, the statements 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 of a normal recurring nature which are considered necessary for
a fair presentation have been included. 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
Fiscal Year--The Company's fiscal year ends on the Saturday closest to
January 31. Fiscal year 1997 ended on January 31, 1998 ("1997") and fiscal
year 1998 ends on January 30, 1999 ("1998"). As a result of its
acquisition, QFC changed its year end to that of Fred Meyer beginning
February 1, 1998, the first day of fiscal 1998. Revenues and expenses of
QFC from the end of QFC's fiscal year 1997, ended on December 27, 1997, to
February 1, 1998 (5 weeks) were immaterial and have been excluded from the
statement of operations. Accordingly, net income of $3.3 million for that
period has been added to retained earnings.
Inventories--Inventories consist principally of merchandise held for
sale and substantially all inventories are stated at the lower of last-in,
first-out (LIFO) cost or market. Inventories on a first-in, first-out
method, which approximates replacement cost, would have been higher by
$66.9 million at November 7, 1998 and $51.8 million at January 31, 1998.
The pretax LIFO charge in the third quarter was $4.1 million in 1998 and
$2.1 million in 1997. The pretax LIFO charge for the first 40 weeks was
$15.1 million in 1998 and $5.6 million in 1997.
Goodwill--Goodwill is being amortized on a straight-line basis over 15
to 40 years. Goodwill recorded in connection with the acquisition of
Ralphs/Food 4 Less, Smith's, Hughes, and KUI (see Note 3) is being
amortized over 40 years. Goodwill recorded in connection with the Fox
acquisition is being amortized over 15 years. Management periodically
evaluates the recoverability of goodwill based upon current and anticipated
net income and undiscounted future cash flows.
Use of Estimates--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. Actual results could
differ from those estimates.
Income Taxes--Deferred income taxes are provided for those items
included in the determination of income or loss in different periods for
financial reporting and income tax purposes. Targeted jobs and other tax
credits are recognized in the year realized.
Deferred income taxes are recognized for the tax consequences in
future years of differences between the tax bases of assets and liabilities
and their financial reporting amounts at each year end based on enacted tax
laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Income tax expense is
the tax payable for the period and the change during the period in deferred
tax assets and liabilities.
Deferred tax assets recognized by the Company are presented net of any
deferred tax liabilities and valuation allowance and consist primarily of
net operating loss carryforwards. The deferred tax assets will be used to
offset future tax liabilities generated from taxable income. However, the
amount available to offset the consolidated tax liability will be limited
by each subsidiary's tax circumstances and availability of its net
operating loss carryforwards.
Earnings per Share--Basic earnings per common share are computed by
dividing net income by the weighted average number of common shares
outstanding. Diluted earnings per common share are computed by dividing net
income by the weighted average number of common and common equivalent
shares outstanding which consist of outstanding stock options and warrants.
Common equivalent shares are excluded from the diluted weighted average
share and common equivalent shares outstanding for the first 40 weeks of
1998 due to the net loss.
Reclassifications--Certain prior period amounts have been reclassified
to conform to current period presentation. The reclassifications have no
effect on reported net income.
9
5. Comprehensive Income
Effective February 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," which
requires items previously reported as a component of stockholders' equity
to be more prominently reported in a separate financial statement as a
component of comprehensive income. Components of comprehensive income
include net income (loss) and the income tax benefit the Company receives
upon the exercise of stock options. Comprehensive income (loss) for the
third quarter was $29.4 million in 1998 and $(60.4) million in 1997.
Comprehensive loss for the first 40 weeks was $270.3 million in 1998 and
$4.6 million in 1997.
6. Long-term Debt
Long-term debt consisted of the following (in thousands):
November 7, January 31,
1998 1998
----------- -----------
1997 Senior Credit Facility $ - $1,300,000
1998 Senior Credit Facility 2,448,750 -
Senior notes, unsecured, due 2003 through 2008, fixed interest 1,750,000 -
rate from 7.15% to 7.45%
QFC Credit Facility 214,293
Commercial paper with maturities through February 10, 1999, 628,075 367,156
classified as long-term, interest rates of 5.78% to 6.10%
at August 15, 1998
QFC 8.7% Senior Subordinated Notes, principal due 2007 with 3,065 150,000
interest payable semi-annually
Long-term notes secured by trust deeds, due through 2016, 59,941 61,075
interest rates from 5.00% to 10.50%
Uncommitted bank borrowings classified as long-term 85,000 79,000
Ralphs senior subordinated notes, due 2002 through 2007, 35,232 -
fixed interest rates from 9.0% to 13.75%
Ralphs senior notes, unsecured, due 2004, fixed interest rate 13,458 -
of 10.45%
Other 70,475 29,448
----------- ---------
Total 5,093,996 2,200,972
Less current portion 94,140 16,178
----------- ---------
Total $ 4,999,856 $2,184,794
=========== ==========
In conjunction with the acquisitions of QFC and Ralphs/Food 4 Less in
March 1998, the Company entered into new financing arrangements that
refinanced a substantial portion of the Company's principal debt facilities
and indebtedness assumed in the acquisitions. The new financing
arrangements included a new bank credit facility and a public issue of
$1.75 billion senior unsecured notes. The new bank credit facility (the
"1998 Senior Credit Facility") provided for a $1.875 billion five-year
revolving credit agreement and a $1.625 billion five-year term note. All
indebtedness under the 1998 Senior Credit Facility is guaranteed by certain
of the Company's subsidiaries and secured by the stock in the subsidiaries.
The revolving portion of the 1998 Senior Credit Facility is available for
general corporate purposes, including the support of the commercial paper
program of the Company. Commitment fees are charged at .30% on the unused
portion of the five-year revolving credit facility. Interest on the 1998
Senior Credit Facility is at Adjusted LIBOR plus a margin of 1.0%. At
November 7, 1998, the weighted average interest rate on the five year
10
term note and the amounts outstanding under the revolving credit facility
were 6.5% and 6.3%, respectively.
The unsecured senior notes issued on March 11, 1998, included $250
million of five-year notes at 7.15%, $750 million of seven-year notes at
7.38%, and $750 million of ten-year notes at 7.45% (the "Notes"). In
connection with the issuance of the Notes, each of the Company's direct or
indirect wholly-owned subsidiaries has jointly and severally guaranteed the
Notes on a full and unconditional basis ("Subsidiary Guarantors"). The
Subsidiary Guarantors are 100% wholly owned subsidiaries of the Company and
constitute all of the Company's direct and indirect subsidiaries, other
than inconsequential subsidiaries. The non-guaranteeing subsidiaries
represent less than 3%, on an individual and aggregate basis, of the
Company's consolidated assets, pretax income, cash flow and net investment
in subsidiaries.
The Company is a holding company with no independent operations or
assets other than those relating to its investments in its subsidiaries.
Separate financial statements of the Subsidiary Guarantors are not included
because the guarantees are full and unconditional, the Subsidiary
Guarantors are jointly and severally liable and the separate financial
statements and other disclosures concerning the Subsidiary Guarantors are
not deemed material to investors by management of the Company. No
restrictions exist on the ability of the Subsidiary Guarantors to make
distributions to the Company, except, however, the obligations of each
Guarantor under its Guarantee are limited to the maximum amount as will
result in obligations of such Guarantor under its Guarantee not
constituting a fraudulent conveyance or fraudulent transfer for purposes of
Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar Federal or state law (e.g. adequate
capital to pay dividends under corporate laws).
The 1998 Senior Credit Facility requires the Company to comply with
certain ratios related to indebtedness to earnings before interest, taxes,
depreciation and amortization ("EBITDA") and fixed charge coverage. In
addition, the 1998 Senior Credit Facility limits dividends on and
redemption of capital stock.
In conjunction with the Smith's acquisition in September 1997, the
Company entered into a bank credit facility (the "1997 Senior Credit
Facility") that refinanced a substantial portion of the Company's
indebtedness and indebtedness assumed in the Smith's acquisition. The 1997
Senior Credit Facility was refinanced by the 1998 Senior Credit Facility.
The Company has established uncommitted money market lines with five
banks of $125.0 million. These lines, which generally have terms of
approximately one year, allow the Company to borrow from the banks at
mutually agreed upon rates, usually below the rates offered under the 1998
Senior Credit Facility. The Company also has $900.0 million of unrated
commercial paper facilities with four commercial banks. The Company has the
ability to support commercial paper and other debt on a long-term basis
through its bank credit facilities and therefore, based upon management's
intent, has classified these borrowings, which totaled $713.1 million at
November 7, 1998, as long-term debt.
The Company on occasion enters into various interest rate swap, cap
and collar agreements to reduce the impact of changes in interest rates on
its floating rate long-term debt. At November 7, 1998, the Company had
outstanding one collar agreement which expires on July 24, 2003 and
effectively sets interest rate limits on a notional principal amount of
$300.0 million on the Company's floating rate long-term debt. The agreement
limits the interest rate fluctuation of the 3-month adjusted LIBOR (as
defined in the collar agreement) to a range between 4.10% and 6.50% and
requires quarterly cash settlements for interest rate fluctuations outside
of the limits. As of November 7, 1998, the 3-month adjusted LIBOR was
5.38%. The Company is exposed to credit loss in the event of nonperformance
by the counterparties to the interest rate collar agreement. The Company
requires an "A" or better rating of the counterparties and, accordingly,
does not anticipate nonperformance by the counterparties.
11
Annual long-term debt maturities for the five fiscal years subsequent
to November 7, 1998 are $18.1 million in 1998, $134.8 million in 1999,
$240.9 million in 2000, $362.2 million in 2001, and 472.7 million in 2002.
The Company recorded in the first 40 weeks of 1998 an extraordinary
charge of $357.8 million less a $139.9 million income tax benefit which
consisted of premiums paid in the prepayment of certain notes and bank
facilities of Fred Meyer, QFC and Ralphs/Food 4 Less and the write-off of
the related deferred financing costs.
7. 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 statements.
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations.
- -------------------------------------------------
This discussion and analysis should be read in conjunction with the
Company's consolidated financial statements.
RECENT EVENT
On October 19, 1998, the Company announced the signing of a definitive
merger agreement with The Kroger Co. ("Kroger"), the largest retail grocery
chain in the United States. On that date, Kroger operated 1,398 food
stores, 802 convenience stores and 34 manufacturing facilities that
manufacture products for sale in all Kroger divisions, as well as to
external customers. Under the terms of the merger agreement, Fred Meyer
stockholders will receive one newly issued share of Kroger common stock for
each share of Fred Meyer common stock. The transaction will be accounted
for as a pooling of interests. It is expected to close in early 1999
subject to approval of Kroger and Fred Meyer stockholders and antitrust and
other regulatory authorities and customary closing conditions. In
anticipation of the intended merger with Kroger, the Company has secured
approval from its banks to amend its 1998 Senior Credit Facility as well as
its operating lease facility. These proposed amendments are subject to
completion of the merger and will be guaranteed by Kroger. The Company's
outstanding senior notes due 2003 through 2008 will remain outstanding
after the merger. Additional information regarding the merger can be found
in the Company's current report on Form 8-K dated October 20, 1998.
RESULTS OF OPERATIONS
The following discussion summarizes the Company's operating results
for 1998 compared with 1997. However, 1998 results are not comparable to
prior year results due to the three recent acquisitions (See Note 3 of
Notes to Consolidated Financial Statements). The 1998 results include the
results from Fred Meyer Stores, Smith's and QFC for the full period and
include Ralphs/Food 4 Less from March 10, 1998. The 1997 results include
Fred Meyer Stores and QFC for the full period and Smith's from September 9,
1997.
12
Comparison of the 12 and 40 weeks ended November 7, 1998 with the 12 and 40
weeks ended November 8, 1997
Net sales for the 12 weeks ended November 7, 1998 increased $1.5
billion to $3.5 billion from $2.0 billion for the 12 weeks ended November
8, 1997 and increased $6.0 billion to $11.0 billion in the 40 weeks ended
November 7, 1998 from $5.0 billion in the 40 weeks ended November 8, 1997.
The increases in sales were caused primarily by the recent acquisitions of
Ralphs/Food 4 Less and Smith's. Sales at Smith's accounted for $203.9
million and $1.9 billion of the increases and Ralphs/Food 4 Less accounted
for $1.5 billion and $4.3 billion of the increases for the 12 and 40 weeks
ended November 7, 1998, respectively.
Comparable store sales including the Ralphs/Food 4 Less and Smith's
stores as if acquired at the beginning of the comparable periods and
excluding the Hughes and Smitty's stores which are currently being
converted to other formats increased 3.4% and 2.4% from the prior year for
the 12 and 40 weeks ended November 7, 1998, respectively.
Gross margin increased as a percentage of net sales from 29.6% for the
12 weeks ended November 8, 1997 to 30.0% for the 12 weeks ended November 7,
1998 and from 29.6% for the 40 weeks ended November 7, 1998 to 29.8% for
the 40 weeks ended November 8, 1997. Increases in gross margin as a percent
of sales were generated primarily from economies of scale resulting from
the Company's increased sales offset almost entirely by changes in the
Company's sales mix between food and nonfood. The amount of food sales,
which have a lower gross margin percent, compared to total sales increased
over the prior year due to the recent acquisitions.
Operating and administrative expenses were $833.8 million and $488.7
million for the 12 weeks ended November 7, 1998 and November 8, 1997,
respectively and were $2.7 billion and $1.3 billion for the 40 weeks ended
November 7, 1998 and November 8, 1997, respectively. Operating and
administrative expenses decreased as a percentage of sales 1.1% and 1.25%
from the prior year for the 12 and 40 weeks ended November 7, 1998,
respectively. The reduction of operating and administrative expenses as a
percent of sales is due to economies of scale resulting from the Company's
increased sales and lower operating and administrative expenses as a
percent of sales at Smith's and Ralph's/Food 4 Less, which were recently
acquired and are lower cost operations. Additionally, the Company benefited
from the suspension of contributions to certain multi-employer pension and
benefit plans totaling $15.2 million and $32.3 million in the 12 and 40
weeks ended November 7, 1998, respectively.
Amortization of goodwill increased $16.4 million and $57.9 million
from the prior year for the 12 and 40 weeks ended November 7, 1998,
respectively, as a result of the recent acquisitions.
Charges for merger related costs of $33.7 million and $290.7 million
were recorded in the 12 and 40 weeks ended November 7, 1998 as a result of
the recent acquisitions. Additional merger related costs will be recorded
in future quarters as expenditures are incurred.
Interest expense increased to $92.9 million from $30.2 million for the
12 weeks ended November 7, 1998 and November 8, 1997, respectively and
increased to $284.7 million from $66.2 million for the 40 weeks ended
November 7, 1998 and November 8, 1997, respectively. The increase in
interest expense for the 12 and 40 week periods primarily reflect the
increased amount of indebtedness assumed and/or incurred in conjunction
with the acquisitions of Smith's and Ralphs/Food 4 Less.
The effective tax rates are affected by increased goodwill
amortization and certain merger costs which are not deductible for tax
purposes. The effective tax rates for the income tax expense were 52.1% and
42.4% for the 12 weeks ended November 7, 1998 and November 8, 1997,
respectively. For the 40 weeks ended November 7, 1998, the amount of
nondeductible goodwill amortization and
13
merger costs was greater than the loss before income tax which resulted in
taxable income and income tax expense.
Income (loss) before extraordinary charge was $29.2 million and
$(57.4) million for the 12 and 40 weeks ended November 7, 1998,
respectively, compared to $28.7 million and $80.6 million for the 12 and 40
weeks ended November 8, 1997, respectively. The changes are a result of the
above mentioned factors.
The extraordinary charges of $.3 million and $217.9 million for the 12
and 40 weeks ended November 7, 1998, respectively, consist of fees incurred
in conjunction with the prepayment of certain indebtedness and the
write-off of related debt issuance costs.
Net income increased to $28.8 million for the 12 weeks ended November
7, 1998 from a net loss of $62.5 million for the 12 weeks ended November 8,
1997 and decreased to a loss of $275.4 million for the 40 weeks ended
November 7, 1998 from a loss of $10.6 million for the 40 weeks ended
November 8, 1997 primarily due to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company funded its working capital and capital expenditure needs
in 1998 through internally generated cash flow and the issuance of unrated
commercial paper, supplemented by borrowings under committed and
uncommitted bank lines of credit and lease facilities.
Cash provided by operating activities was $457.3 million for the 40
weeks ended November 7, 1998 compared to $173.3 million for the 40 weeks
ended November 8, 1997. The increase in cash provided from operating
activities is due primarily to an improvement in operating income resulting
from the recent acquisitions. The Company's principal use of cash during
the period is for seasonal purchases of inventory. Because of the inventory
turnover rate, the Company is able to finance a substantial portion of the
increased inventory through trade payables.
Cash used for investing activities was $609.0 million for the 40 weeks
ended November 7, 1998 compared to $528.2 million for the 40 weeks ended
November 8, 1997. The investing activities consisted primarily of capital
expenditures and business acquisitions. Capital expenditures of $497.6
million in the current period were for the construction of new stores,
remodeling existing stores and additions to distribution centers and
offices. During the 40 weeks ended November 7, 1998, the Company opened 17
new stores and completed the remodel of 72 stores. The Company intends to
use the combination of cash flows from operations and borrowings under its
credit facilities to finance its capital expenditure requirements for 1998,
currently budgeted to be approximately $750.0 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. The Company currently owns real estate
with a net book value of approximately $1.6 billion.
Additionally, the Company completed several business acquisitions
which resulted in the use of cash for investing activities. See Note 3 of
Notes to Consolidated Financial Statements for a discussion of the
Company's acquisitions.
Cash provided by financing activities was $220.4 million for the 40
weeks ended November 7, 1998. The financing activities consisted primarily
of cash receipts on the exercise of stock options, principal payments on
long-term debt and capital leases, and activity related to the debt
refinancing completed in conjunction with the acquisitions of Ralphs/Food 4
Less and QFC.
On March 11, 1998 the Company entered into new financing arrangements
which included a public issue of $1.75 billion of senior unsecured notes
(the "Notes") and a bank credit facility (the
14
"1998 Senior Credit Facility"). The 1998 Senior Credit Facility included a
$1.875 billion five-year revolving credit agreement and a $1.625 billion
five-year term loan. The Notes consisted of $250 million of five-year notes
at 7.15%, $750 million of seven-year notes at 7.38% and $750 million of
ten-year notes at 7.45%. Each of the Company's direct or indirect
wholly-owned subsidiaries has jointly and severally guaranteed the Notes on
a full and unconditional basis. No restrictions exist on the ability of the
Subsidiary Guarantors to make distributions to the Company, except,
however, the obligations of each Subsidiary Guarantor under its Guarantee
are limited to the maximum amount as will result in obligations of such
Guarantor under its Guarantee not constituting a fraudulent conveyance or
fraudulent transfer for purposes of Bankruptcy Law, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal
or state law (e.g. adequate capital to pay dividends under corporate laws).
The obligations of the Company under the 1998 Senior Credit Facility are
guaranteed by certain subsidiaries and are also collateralized by the stock
of certain subsidiaries.
In addition to the 1998 Senior Credit Facility and Notes, the Company
entered into a $500 million five-year operating lease facility, which
refinanced $303 million in existing lease financing facilities. At November
7, 1998, $332.0 million was outstanding on this lease facility. The
remaining balance of this lease facility will be used for land acquisition
and construction costs for new stores. The obligations of the Company under
the lease facility are guaranteed by certain subsidiaries and are also
collateralized by the stock of certain subsidiaries.
At November 7, 1998, the Company had $125.0 million of uncommitted
money market lines with five banks and $900.0 million in unrated commercial
paper facilities with four banks. The uncommitted money market 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 management
information systems. At November 7, 1998, a total of approximately $265.6
million was available for borrowings under the 1998 Senior Credit Facility
and the commercial paper facilities and $40.0 million was available for
borrowings from the uncommitted money market lines.
See Note 6 of Notes to Consolidated Financial Statements for a
discussion of the Company's interest rate swap, cap and collar agreements.
The Company had $44.3 million of outstanding Letters of Credit as of
November 7, 1998. The Letters of Credit are used to support the importation
of goods and to support the performance, payment, deposit or surety
obligations of the Company.
Effect of LIFO
During 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 soft goods 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). At year-end, the
Company makes the final adjustment reflecting the difference between the
Company's prior quarterly estimates and actual LIFO amount for the year.
Effect of Inflation
While management believes that some portion of the increase in sales
is due to inflation, it is difficult to segregate and to measure the
effects of inflation because of changes in the types of merchandise sold
year-to-year and other pricing and competitive influences. By attempting to
control
15
costs and efficiently utilize resources, the Company strives to minimize
the effects of inflation on its operations.
Recent Accounting Changes
There are no issued and pending accounting changes which are expected
to have a material effect on the Company's financial reporting.
Year 2000
The Company and each of its subsidiaries are dependent on computer
hardware, software, systems, and processes ("Information Technology") and
non-information technology systems such as telephones, clocks, scales, and
refrigeration units or other equipment containing embedded microprocessor
technology ("Non-IT Systems") in several critical operating areas,
including store and distribution operations, product merchandise and
procurement, manufacturing plant operations, inventory and labor
management, and accounting.
The Company is currently working to resolve the potential effect of
the year 2000 on the processing of date-sensitive information within these
various systems. The year 2000 problem is the result of computer programs
being written using two digits (rather than four) to define the applicable
year. Company programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than 2000, which could result in a
miscalculation or system failure. The date issue also applies to equipment
with embedded microprocessor chips.
The Company has developed a plan (the "Plan") to access and update its
Information Technology systems and Non-IT Systems for year 2000 readiness
and to provide for continued functionality. The Plan focuses on critical
business areas, which are separated into three major categories: (1)
Information Technology, which includes all hardware and software on all
processing platforms; (2) merchandise and external entities, including
product suppliers, service providers, and those with whom the Company
exchanges information; and (3) Non-IT Systems. Additionally, the Plan
consists of three phases: (1) creating an inventory of systems and
assessing the scope of the year 2000 problem as it relates to those
systems; (2) remediating any year 2000 problems; and (3) testing and
implementing systems following remediation.
The following table estimates the Company's completion status for each
phase of the Plan as of November 7, 1998, based on information currently
available:
Percent Complete
-------------------------------
Category Phase 1 Phase 2 Phase 3
-------- ------- ------- -------
Information Technology 1 83% 55% 28%
Merchandise and external entities 2 63% 28% 3%
Non-IT Systems 3 63% 15% 5%
Phase 1 is expected to be completed by the end of the first quarter of
1999 for all three categories. Phase 2 and 3 will continue throughout
calendar 1999. Systems are regularly monitored and procedures are in place
to detect potential re-introduction of date problems.
The Company's management is currently formulating contingency plans in
the event that any critical elements of the Plan should fail, or any of the
Company's vendors or service providers fail to be year 2000 ready. The
contingency plans may be implemented to minimize the risk of interruption
of the Company's business. We expect that contingency plans will be
completed by the end of the third quarter of 1999.
16
The Company's principal vendors, service providers, and other third
parties on which the Company relies for business operations have been
contacted for a status on year 2000 readiness. Based on the Company's
assessment of their responses, the Company believes that many of its
principal vendors, service providers and other third parties are taking
action for year 2000 readiness. However, the Company has limited ability to
test and control such third parties' year 2000 readiness and no assurance
can be given that failure of such third parties to address the year 2000
issue will not cause an interruption of the Company's business.
The Company expects the Plan for critical systems to be substantially
completed during the fourth calendar quarter of 1999. However, the
Company's ability to timely execute its Plan may be adversely affected by a
variety of factors, some of which are beyond the Company's control,
including the potential for unforeseen implementation problems, delays in
the delivery of products, and disruption of store operations resulting from
a loss of power or communication links between stores, distribution
centers, and headquarters. Based on currently available information, the
Company is unable to determine if such interruptions are likely to have a
material adverse effect on the Company's results of operations, liquidity,
or financial condition.
The Company has committed significant resources in connection with
resolving its year 2000 issue. The total estimated costs of the Plan,
exclusive of capital expenditures, are expected to be $25.0 to $30.0
million, of which approximately $3.0 million was expensed in 1997. Costs
charged to operations for the 40 weeks ended November 7, 1998 totaled $4.0
million, which represents an immaterial portion of the Company's
information services budget over the period. Estimated costs expected to be
incurred and expensed are approximately $2.0 million in the fourth quarter
of 1998 and $13.0 to $21.0 million thereafter.
Forward-looking Statements; Factors Affecting Future Results
Certain information set forth in this report contains "forward-looking
statements" within the meaning of federal securities laws. The Company may
make other forward-looking statements from time to time. These
forward-looking statements may include information regarding the Company's
plans for future operations, expectations relating to cost savings and the
Company's integration strategy with respect to its recent mergers, store
expansion and remodeling, capital expenditures, inventory reductions and
expense reduction. The following factors, as well as those discussed below,
are among the principal factors that could cause actual results to differ
materially from the forward-looking statements: business and economic
conditions generally and in the regions in which the Company's stores are
located, including the rate of inflation; population, employment and job
growth in the Company's markets; demands placed on management by the
substantial increase in the Company's size; loss or retirement of senior
management of the Company or of its principal operating subsidiaries;
changes in the availability of debt or equity capital and increases in
borrowing costs or interest rates, especially since a substantial portion
of the Company's borrowings bear interest at floating rates; competitive
factors, such as increased penetration in the Company's markets by large
national food and nonfood chains, large category-dominant stores and large
national and regional discount retailers (whether existing competitors or
new entrants) and competitive pressures generally, which could include
price-cutting strategies, store openings and remodels; results of the
Company's programs to decrease costs as a percent of sales; increases in
labor costs and deterioration in relations with the union bargaining units
representing the Company's employees; unusual unanticipated costs or
unanticipated consequences relating to the recent mergers and integration
strategy and any delays in the realization thereof; operational
inefficiencies in distribution or other Company systems, including any that
may result from the recent mergers; issues arising from addressing the year
2000 problem; legislative or regulatory changes adversely affecting the
business in which the Company is engaged; and other opportunities or
acquisitions which may be pursued by the Company.
17
Leverage; Ability to Service Debt. The Company is highly leveraged. As
of November 7, 1998, the Company has total indebtedness (including current
maturities and capital lease obligations) of $5.3 billion. Total
indebtedness consists of long-term debt, including borrowings under the
1998 Senior Credit Facilities, and the notes, and capitalized leases. Total
indebtedness does not reflect certain commitments and contingencies of the
Company, including operating leases under the lease facility and other
operating lease obligations. The Company has significant interest and
principal repayment obligations and significant rental payment obligations,
and the ability of the Company to satisfy such obligations is subject to
prevailing economic, financial and business conditions and to other
factors, many of which are beyond the Company's control. A significant
amount of the Company's borrowings and rental obligations bear interest at
floating rates (including borrowings under the 1998 Senior Credit
Facilities and obligations under the lease facility), which will expose the
Company to the risk of increased interest and rental rates.
Merger Integration. The significant increase in size of the Company's
operations resulting from the recent mergers has substantially increased
the demands placed upon the Company's management, including demands
resulting from the need to integrate the accounting systems, management
information systems, distribution systems, manufacturing facilities and
other operations of Fred Meyer Stores, Smith's, QFC and Ralphs/Food 4 Less.
In addition, the Company may experience additional unexpected costs from
such integration and/or a loss of customers or sales as a result of the
recent mergers. There is no assurance that the Company will be able to
maintain the levels of operating efficiency which Fred Meyer Stores,
Smith's, QFC and Ralphs/Food 4 Less had achieved separately prior to the
mergers. The failure to successfully integrate the operations of the
acquired businesses, the loss of key management personnel and the loss of
customers or sales could each have a material adverse effect on the
Company's results of operations or financial position.
Ability to Achieve Intended Benefits of the Recent Mergers. Management
believes that significant business opportunities and cost savings are
achievable as a result of the Smith's, QFC and Ralphs/Food 4 Less mergers.
Management's estimates of cost savings are based upon many assumptions
including future sales levels and other operating results, the availability
of funds for capital expenditures, the timing of certain events as well as
general industry and business conditions and other matters, many of which
are beyond the control of the Company. Estimates are also based on a
management consensus as to what levels of purchasing and similar
efficiencies should be achievable by an entity the size of the Company.
Estimates of potential cost savings are forward-looking statements that are
inherently uncertain. Actual cost savings, if any, could differ from those
projected and such differences could be material; therefore, undue reliance
should not be placed upon such estimates. There is no assurance that
unforeseen costs and expenses or other factors (whether arising in
connection with the integration of the Company's operations or otherwise)
will not offset the estimated cost savings or other components of the
Company's plan or result in delays in the realization of certain projected
cost savings.
Competition. The retail merchandising business in general, and the
supermarket industry in particular, is highly competitive and generally
characterized by narrow profit margins. The Company's competitors in each
of its operating divisions include national and regional supermarket
chains, discount stores, independent and specialty grocers, drug and
convenience stores, large category-dominant stores and the newer
"alternative format" food stores, including warehouse club stores, deep
discount drug stores, "supercenters" and conventional department stores.
Competitors of the Company include, among others, Safeway, Albertson's,
Lucky, Costco, Wal-Mart and Target. Retail businesses generally compete on
the basis of location, quality of products and service, price, product
variety and store condition. The Company's ability to compete depends in
part on its ability to successfully maintain and remodel existing stores
and develop new stores in advantageous locations.
18
Labor Relations. The Company is party to more than 171 collective
bargaining agreements with unions and locals, covering approximately 60,000
employees representing approximately 65% of the Company's total employees.
Among the contracts that have expired or will expire in 1998 are those
covering 15,500 employees. Typical agreements are three years in duration,
and as such agreements expire, the Company expects to negotiate with the
unions and to enter into new collective bargaining agreements. There is no
assurance, however, that such agreements will be reached without work
stoppages. A prolonged work stoppage affecting a substantial number of
stores could have a material adverse effect on the Company's results of
operations or financial position.
Forward-looking statements speak only as of the date made. The Company
undertakes no obligation to publicly release the results of any revisions
to any forward-looking statements which may be made to reflect subsequent
events or circumstances or to reflect the occurrence of unanticipated
events.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
Not applicable.
19
Part II - OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
10.G Employment Agreement between Fred Meyer, Inc. and Robert G.
Miller, as amended.
10.N Employment Protection Agreement dated September 22, 1998 between
Fred Meyer, Inc. and George Golleher.
10.R Employment Protection Agreement dated September 22, 1998 between
Fred Meyer, Inc. and certain officers.
10.S Employment Protection Agreement dated September 22, 1998 between
Fred Meyer, Inc. and certain officers.
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated October 18, 1998 to
disclose information under Item 5 thereof. On November 5, 1998, the Company
also filed a Form 8-K/A dated March 9, 1998 to amend certain financial
statement information under Item 7.
20
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.
Date: December 18, 1998 By JOHN STANDLEY
-------------------------------------
John Standley
Senior Vice President and
Chief Financial Officer
21
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.G Employment Agreement between Fred Meyer, Inc. and Robert G. Miller,
as amended.
10.N Employment Protection Agreement dated September 22, 1998 between
Fred Meyer, Inc. and George Golleher.
10.R Employment Protection Agreement dated September 22, 1998 between
Fred Meyer, Inc. and certain officers.
10.S Employment Protection Agreement dated September 22, 1998 between
Fred Meyer, Inc. and certain officers.
27 Financial Data Schedule