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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
_________
FORM 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
-----
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 15, 1997
-------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
-----
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission File Number 001-10811
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SMART & FINAL INC.
(Exact name of registrant as specified in its charter)
Delaware No. 95-4079584
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4700 South Boyle Ave.
Los Angeles, California 90058
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (213) 589-1054
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 .
----- -----
The registrant had 22,184,639 shares of common stock outstanding as of JULY 24,
1997.
Number of Sequentially Numbered Pages:
Exhibit Index at Page: 15
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SMART & FINAL INC.
INDEX
PART I
FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets 2
Unaudited Consolidated Statements of Income 3
Unaudited Consolidated Statements of Cash Flows 4
Notes to Unaudited Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition 7
and Results of Operations
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 12
2. Changes in Securities 12
3. Defaults upon Senior Securities 12
4. Submission of Matters to a Vote of Security Holders 12
5. Other Information 13
6. Exhibits and Reports on Form 8-K 13
1
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
SMART & FINAL INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)
June 15, December 29,
1997 1996
ASSETS (Unaudited)
- ------ ------------ -------------
Current assets:
Cash & cash equivalents $ 18,733 $ 16,795
Trade notes and accounts receivable, less
allowance for doubtful accounts of
$2,893 in 1997 and $2,568 in 1996 67,907 67,695
Inventories 124,010 125,721
Prepaid expenses 5,073 4,346
Deferred tax asset 6,134 6,134
--------- ---------
Total current assets 221,857 220,691
Property, plant and equipment:
Land 39,079 39,079
Buildings and improvements 34,364 34,364
Leasehold improvements 63,185 60,943
Fixtures and equipment 141,287 129,953
--------- ---------
277,915 264,339
Less - Accumulated depreciation and amortization 87,163 77,156
--------- ---------
Net property, plant and equipment 190,752 187,183
Assets under capital leases, net 4,816 671
Goodwill 15,006 10,162
Deferred tax asset 5,814 4,157
Other assets 19,325 18,560
--------- ---------
Total Assets $ 457,570 $ 441,424
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current maturities of long term debt $ 10,732 $ 10,356
Bank line of credit 23,000 17,000
Accounts payable 61,565 70,936
Payable to Parent and affiliates 11,392 8,759
Accrued salaries and wages 8,654 9,940
Workers' compensation reserve 2,600 2,600
Other accrued liabilities 22,898 21,855
--------- ---------
Total current liabilities 140,841 141,446
Long term liabilities:
Notes payable, net of current maturities 36,507 37,063
Bank debt 45,000 45,000
Obligations under capital leases 8,498 581
Other long term liabilities 2,812 -
Worker's compensation reserve, postretirement
and postemployment benefits 20,023 20,000
--------- ---------
Total long term liabilities 112,840 102,644
Minority interest 1,795 1,679
Stockholders' equity:
Preferred stock, $1 par value (authorized-
10,000,000 shares; no shares issued) - -
Common stock, $ .01 par value (authorized-
100,000,000 shares; 22,115,403 shares issued
and outstanding in 1997 and 21,976,406 in 1996) 221 220
Additional paid-in capital 137,198 140,371
Cumulative translation loss (835) (835)
Retained earnings 65,510 55,899
--------- ---------
Total stockholders' equity 202,094 195,655
--------- ---------
Total liabilities and stockholders' equity $ 457,570 $ 441,424
========= =========
The accompanying notes are an integral part of these consolidated balance
sheets.
2
SMART & FINAL INC
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
Twelve Weeks Ended Twenty-four Weeks Ended
---------------------------- ---------------------------
June 15, June 16, June 15, June 16,
1997 1996 1997 1996
---------- ---------- ------- ----------
(Unaudited) (Unaudited)
Sales $ 334,948 $ 307,408 $ 641,932 $ 589,742
Cost of sales, buying and occupancy 285,250 260,726 547,647 502,630
---------- ---------- ---------- ----------
Gross margin 49,698 46,682 94,285 87,112
Operating and administrative expenses 37,177 36,020 72,004 68,617
---------- ---------- ---------- ----------
Income from operations 12,521 10,662 22,281 18,495
---------- ---------- ---------- ----------
Interest income and (expense):
Interest income 120 109 261 230
Interest expense (1,847) (827) (3,525) (1,550)
---------- ---------- ---------- ----------
(1,727) (718) (3,264) (1,320)
Income before provision for income taxes
and minority share of net income 10,794 9,944 19,017 17,175
Provision for income taxes 4,043 3,737 7,278 6,666
---------- ---------- ---------- ----------
6,751 6,207 11,739 10,509
Minority share of net income 10 48 116 155
---------- ---------- ---------- ----------
Income from consolidated subsidiaries 6,741 6,159 11,623 10,354
Equity earnings in unconsolidated subsidiary 100 109 200 109
---------- ---------- ---------- ----------
Net income $ 6,841 $ 6,268 $ 11,823 $ 10,463
========== ========== ========== ==========
Earnings per common share $ 0.30 $ 0.30 $ 0.52 $ 0.50
========== ========== ========== ==========
Dividend per common share $ 0.05 $ 0.05 $ 0.10 $ 0.10
========== ========== ========== ==========
Weighted average common shares and
common share equivalents 22,763,837 21,244,861 22,793,111 21,156,589
========== ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
3
SMART & FINAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Twenty-four Weeks Ended
-----------------------
June 15, June 16,
1997 1996
---------- ----------
(Unaudited)
Cash Flows From Operating Activities:
Net income $ 11,823 $ 10,463
Adjustments to reconcile net income to net
cash provided by operating activities:
(Gain) loss on disposal of fixed assets (70) (20)
Depreciation and amortization 11,400 8,697
Minority share of net income 116 155
Equity (earnings) loss in unconsolidated subsidiary (200) (109)
(Increase) decrease in :
Trade notes and accounts receivable 1,357 (6,084)
Inventories 1,877 (929)
Prepaid expenses and other (727) (434)
Increase (decrease) in :
Accounts payable (9,768) 2,079
Payable to Parent and affiliates 2,633 (1,035)
Accrued liabilities (1,286) 502
Other liabilities 951 119
---------- ----------
Net cash provided by operating activities 18,106 13,404
---------- ----------
Cash Flows From Investing Activities:
Acquisition of property, plant and equipment (14,522) (16,906)
Proceeds from disposal of property, plant and equipment 184 50
Proceeds from redemption of municipal bonds - 225
Acquisition of municipal bonds - (325)
Acquisition of business (5,000) -
Other (1,216) (2,517)
---------- ----------
Net cash used in investing activities (20,554) (19,473)
---------- ----------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock 1,686 693
Bank credit line 6,000 6,325
Borrowings (payments) on notes payable (1,092) 144
Quarterly dividend paid (2,208) (2,027)
---------- ----------
Net cash provided by financing activities 4,386 5,135
---------- ----------
Increase (Decrease) in cash and cash equivalents 1,938 (934)
Cash and cash equivalents at beginning of period 16,795 15,415
---------- ----------
Cash and cash equivalents at end of period $ 18,733 $ 14,481
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
4
SMART & FINAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
Smart & Final Inc. (the "Company") is a Delaware corporation and is a 56.1
percent owned subsidiary of Casino USA, Inc. (the "Parent").
The consolidated balance sheet as of June 15, 1997, the consolidated
statements of income for the twelve and twenty-four weeks ended June 15, 1997,
and June 16, 1996, and cash flows for the twenty-four weeks ended June 15, 1997
and June 16, 1996 are unaudited. In the opinion of management, all adjustments
necessary for a fair presentation of these financial statements have been
included. Such adjustments consisted only of normal recurring items. Interim
results are not necessarily indicative of results for a full year.
These consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's Form 10-K statement for the year ended December 29, 1996.
(2) EARNINGS PER COMMON SHARE
Earnings per common share is based on weighted average outstanding common
shares which include the common stock equivalents related to employee stock
options and a stock purchase agreement.
The Company will adopt SFAS No. 128, "Earnings per share", which is
effective for financial statements ending after December 15, 1997. Basic
earnings per common share were computed by dividing net income by the weighted
average number of shares outstanding during the year. The Pro forma below
illustrates the effects of financial reporting under the provision of SFAS No.
128:
Twelve Weeks Ended Twenty-four Weeks Ended
------------------ -----------------------
June 15, June 16, June 15, June 16,
1997 1996 1997 1996
-------- -------- -------- --------
Per Share Amounts
- -----------------
Primary EPS as reported $0.30 $0.30 $0.52 $0.50
Effect of SFAS No. 128 $0.01 $0.01 $0.02 $0.02
----- ----- ----- -----
Pro forma basic EPS $0.31 $0.31 $0.54 $0.52
===== ===== ===== =====
5
(3) FISCAL YEARS
The Company's fiscal year ends on the Sunday closest to December 31. Each
fiscal year consists of twelve week periods in the first, second and fourth
quarters and a sixteen week period in the third quarter.
(4) DIVIDEND
On May 8, 1997, the Company declared a dividend of $0.05 per share to
stockholders of record at July 4, 1997. The dividend was paid on July 25,
1997.
(5) INCOME TAXES
Tax sharing payments for state income taxes made by the Company to the
Parent were $1,328,000 and $1,375,000 in the twenty-four weeks ended June 15,
1997 and June 16, 1996, respectively. The Company paid $1,375,000 and
$4,855,000 in federal income taxes in the twenty-four week period ended June 15,
1997 and June 16, 1996, respectively.
(6) LEGAL ACTIONS
The Company has been named as defendant in various legal actions arising in
the normal conduct of its business. In the opinion of management, after
consultation with counsel, none of these actions are expected to result in
significant liability to the Company.
(7) LEASES
Lease expense to third-party lessors is included in cost of sales and
buying and occupancy expense in the twelve and twenty-four week periods ended
June 15, 1997. Previously disclosed lease expense to affiliates, for the twelve
and twenty-four week periods ended June 16, 1996, has been reclassified to cost
of sales and buying and occupancy expense for comparability because the
properties which had been owned by affiliates were purchased by the Company on
December 29, 1996.
In conjunction with the real estate that was acquired at December 29, 1996,
from Casino USA and Casino Realty, the Company assumed certain capital and
operating leases. During the second quarter, the Company recorded capital lease
assets and related obligations at historical carryover basis of $4.4 million and
$8.5 million, respectively.
(8) ACQUISITION
On May 30, 1997, Port Stockton Food Distributors, Inc. acquired the assets
of the Davis Lay food service division of Mallard's Food Products, Inc., for
$5.0 million cash and a $0.5 million note.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis should be read in conjunction with the
accompanying consolidated financial statements and notes thereto and the
Company's Form 10-K statement for the year ended December 29, 1996.
SUMMARY.
Smart & Final Inc. (the "Company") reported net income of $6.8 million for
the twelve weeks ended June 15, 1997, compared to net income of $6.3 million for
the twelve weeks ended June 16, 1996.
For the twenty-four weeks ended June 15, 1997, the Company reported net
income of $11.8 million compared to a net income of $10.5 million for the
twenty-four weeks ended June 16, 1996.
Growth in earnings for the second quarter and first half of 1997 reflects
strong operating results which were offset in part by a new "Sliced Price/Right
Price" program introduced in Smart & Final stores late in the first quarter of
1997. The new price program reduced second quarter earnings per share by four
cents and earnings per share for the first half by six cents.
RESULTS OF OPERATIONS.
The following table shows for the periods indicated, certain consolidated
income statement data, expressed as a percentage of total sales.
TWELVE WEEKS ENDED TWENTY-FOUR WEEKS ENDED
--------------------- -------------------------
JUNE 15, JUNE 16, JUNE 15, JUNE 16,
1997 1996 1997 1996
---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
Sales:
Store sales 74.5 % 78.0 % 73.7 % 76.5 %
Foodservice distribution sales 25.5 22.0 26.3 23.5
--------- --------- --------- ---------
Total Sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales, buying and occupancy........... 85.2 84.8 85.3 85.2
----- ----- ----- -----
Gross Margin.................................. 14.8 15.2 14.7 14.8
Operating and administrative expenses........ 11.1 11.7 11.2 11.6
----- ----- ----- -----
Income from operations...................... 3.7 3.5 3.5 3.1
Interest expense, net of interest income...... (0.6) (0.3) (0.5) (0.3)
--------- --------- --------- ---------
Income before provision for income tax, and
minority share of net income................ 3.2 3.2 3.0 2.9
Provision for income taxes.................... 1.2 1.2 1.1 1.1
--------- --------- --------- ---------
2.0 2.0 1.8 1.8
Minority share of net income.................. - - - -
--------- --------- --------- ---------
Income from consolidated subsidiaries....... 2.0 2.0 1.8 1.8
Equity earnings in unconsolidated subsidiaries - - - -
--------- --------- --------- ---------
Net income.................................. 2.0 % 2.0 % 1.8 % 1.8 %
========= ========= ========= =========
* Totals do not aggregate due to rounding.
7
BACKGROUND.
The expansion of the Company's stores in 1996 and 1997 is shown in the
following table:
TWO YEAR
QUARTER ENDED QUARTERS ENDED ENDED
-------------------- ---------------------- -----------
JUNE 15, JUNE 16, JUNE 15, JUNE 16, DECEMBER 29,
1997 1996 1997 1996 1996
---- ---- ---- ---- ----
USA
Store count beginning 167 159 168 155 155
Stores opened:
In new markets - 3 - 7 12
In mature markets 1 - 2 - 1
---- ---- ---- ---- ----
Total 1 3 2 7 13
Relocations 3 - 3 2 6
Stores relocated/closed (3) - (5) (2) (6)
---- ---- ---- ---- ----
Store count ending 168 162 168 162 168
MEXICO
Store count beginning 5 3 5 3 3
New stores opened - - - - 2
---- ---- ---- ---- ----
Store count ending 5 3 5 3 5
---- ---- ---- ---- ----
Grand Total 173 165 173 165 173
==== ==== ==== ==== ====
Mexico operations are not consolidated and are reported on the equity
basis.
Although new stores are important to the Company's continued growth and
profitability, each new store opening initially penalizes earnings because
stores are not immediately profitable. In recent years new stores opened in
existing market areas generally have achieved break even (after full allocation
of all corporate expenses) within the first six to eighteen months and new
stores opened in new market areas, which mature more slowly, generally have
achieved break even in approximately three years.
Each of the Company's fiscal years consists of twelve week periods in the
first, second and fourth quarters of the fiscal year and a sixteen week period
in the third quarter.
COMPARISON OF TWELVE WEEKS ENDED JUNE 15, 1997 WITH TWELVE WEEKS ENDED JUNE 16,
1996.
Sales. Second quarter 1997 sales were $334.9 million, up 9.0% from the
comparable 1996 period. Smart & Final Stores Corporation ("Smart & Final")
store sales increased 4.0%. Store sales increased as a result of the new store
openings and relocations in the United States which numbered nineteen in 1996
and five in the first half of 1997.
Comparable store sales for the second quarter of 1997 increased 2.1% over
the prior year period. Comparable customer transactions for the second quarter
increased 2.2% over the second quarter of 1996. Average comparable transaction
size decreased slightly from $32.18 to $32.14.
Foodservice distribution sales for the second quarter increased to $85.4
million, with strong growth at Port Stockton and moderate sales growth at Henry
Lee which has constrained distribution facilities. As a percentage of total
sales, foodservice distribution sales increased from 22.0% in the second quarter
of 1996 to 25.5% in the second quarter of 1997.
8
Cost of Sales, Buying and Occupancy. These costs totaled $285.2 million in
the second quarter of 1997, up 9.4% from the second quarter of 1996. Costs
increased at a higher rate than the increase in sales due to the introduction of
the Sliced Price/Right Price program late in the first quarter of 1997 and due
to an increased mix of foodservice distribution sales which generate lower gross
margins than store sales, offset by lower occupancy costs which declined by
approximately $1.2 million as a result of the acquisition of operating
properties from an affiliated company late in 1996 (the "Real Estate
Transaction"). As a percentage of sales, these costs increased from 84.8% in the
second quarter of 1996 to 85.2% in the second quarter of the current year.
Gross Margin. Gross margin increased 6.5% from $46.7 million in the second
quarter of 1996 to $49.7 million in the second quarter of 1997. As a percentage
of sales, gross margin decreased from 15.2% of sales in the second quarter of
1996 to 14.8% of sales in the current quarter. Major factors in the lower gross
margin percentage were the new price program which caused a 0.6% of sales
reduction and the increased foodservice distribution sales mix which accounted
for a 0.2% decline, offset by the benefits of the Real Estate Transaction which
reduced occupancy costs and increased gross margin by 0.4% of sales.
Operating and Administrative Expenses. Operating and administrative
expenses for the second quarter of 1997 were $37.2 million, up $1.2 million or
3.2% from the second quarter of 1996. As a percentage of sales, these expenses
declined from 11.7% in the second quarter of 1996 to 11.1% in the current year
quarter. Approximately 0.2% of the reduction resulted from higher foodservice
distribution sales mix which operates at lower expense levels than store sales,
0.2% from vendor marketing rebates in support of the Sliced Price/Right Price
program, and 0.2% from rigorous expense controls.
Income from Operations. Income from operations was $12.5 million for the
second quarter of 1997, up 17.4% from $10.7 million in the second quarter of
1996. The increase is due to higher sales and gross margins accompanied by
moderate growth in expenses.
Interest Income and (Expense). Interest income and expense increased from
$0.7 million of expense in the second quarter of 1996 to $1.7 million of expense
in the second quarter of 1997. The increase is due to interest charges on the
$38.0 million of debt issued late in 1996 in connection with the Real Estate
Transaction and also due to higher levels of bank debt related to business
growth.
COMPARISON OF TWENTY-FOUR WEEKS ENDED JUNE 15, 1997 WITH TWENTY-FOUR WEEKS ENDED
JUNE 16, 1996.
Sales. First half 1997 sales were $641.9 million, up 8.8% from the
comparable 1996 period. Smart & Final store sales increased 4.9%. Store sales
increased as result of the twenty-four new and relocated stores opened since
1995. Comparable store sales increased 2.0% in the first half of 1997. Average
comparable transaction size declined slightly from $31.94 in the first half of
1996 to $31.85 in the first half of 1997.
Foodservice sales increased 21.5% to $168.6 million with strong sales
growth at Port Stockton and moderate growth at Henry Lee which has constrained
distribution capability. As a percentage of overall sales mix, foodservice
distribution sales accounted for 26.3% of total sales in the first half of 1997,
up from 23.5% of sales in the first half of 1996.
Cost of Sales, Buying and Occupancy. These costs totaled $547.6 million in
the first half of 1997, up 9.0% from the first half of 1996. Costs increased at
a higher rate than the increase in sales due to the introduction of the Sliced
Price/Right Price program late in the first quarter of 1997 and due to an
increased mix of foodservice distribution sales which generate lower gross
margins than store sales, offset by lower occupancy costs which declined by
approximately $2.5 million as a result of the acquisition of operating
properties from an affiliated company late in 1996. As a percentage of sales,
these costs increased from 85.2% in the first half of 1996 to 85.3% in the first
half of the current year.
Gross Margin. Gross margin increased 8.2% from $87.1 million in the first
half of 1996 to $94.3 million in the first half of 1997. As a percentage of
sales, gross margin decreased from 14.8% of sales in the first half of 1996 to
14.7% of sales in the first half of the current year. Major factors in the
lower gross margin percentage were the new price program which caused a 0.3% of
sales reduction and the increased foodservice distribution sales mix
9
which accounted for a 0.2% decline, offset by the benefits of the Real Estate
Transaction which reduced occupancy costs and increased gross margin by 0.4% of
sales.
Operating and Administrative Expenses. Operating and administrative
expenses for the first half of 1997 were $72.0 million, up $3.4 million or 4.9%
from the first half of 1996. As a percentage of sales, these expenses declined
from 11.6% in the first half of 1996 to 11.2% in the first half of the current
year. Approximately 0.2% of the reduction resulted from higher foodservice
distribution sales mix which operates at lower expense levels than store sales,
0.1% from vendor marketing rebates in support of the new price program, and 0.2%
from rigorous expense controls.
Income from Operations. Income from operations was $22.3 million for the
first half of 1997, up 20.5% from $18.5 million in the first half of 1996. The
increase is due to higher sales and gross margins accompanied by moderate growth
in expenses.
Interest Income and (Expense). Interest income and expense increased from
$1.3 million of expense in the first half of 1996 to $3.3 million of expense in
the first half of 1997. The increase is due to interest charges on the $38.0
million of debt issued late in 1996 in connection with the Real Estate
Transaction and also due to higher levels of bank debt related to business
growth.
FINANCIAL CONDITION.
Cash and cash equivalents increased from $16.8 million at December 29,
1996, to $18.7 million at June 15, 1997. Cash provided by operating activities
for the twenty-four weeks ended June 15, 1997 was $18.1 million. Of the cash
used for investing activities, $14.5 million was spent on capital expenditures
for property, plant, and equipment and $5.0 million was spent by Port Stockton
to acquire the assets of a small produce distribution company in Northern
California. Cash used for payment of dividends was $2.2 million. Additional
cash was provided by a net increase of $4.9 million of borrowings under the
Company's bank credit line and $1.7 million of proceeds from issuance of common
stock.
Goodwill increased by $4.8 million as a result of the produce distributor
acquisition. Accounts payable declined by $9.3 million due to a $1.7 million
reduction in inventories, and due to normal timing differences in payment
cycles. Payable to Parent and affiliates increased as a result of cash advances
to the Company.
Stockholders' equity increased by $6.4 million from $195.7 million at
December 29, 1996 to $202.1 million at June 15, 1997 as a result of the $6.8
million net income for the first twenty-four weeks of 1997, and the $1.7 million
proceeds from the issuance of common stock, net of the quarterly cash dividends
of $2.2 million declared in the first two quarters of 1997.
LIQUIDITY AND CAPITAL RESOURCES.
The Company's primary source of liquidity is cash flow from operations and
retained earnings. Cash provided by operating activities was $18.1 million in
the first half of 1997, up from $13.4 million in the comparable 1996 period.
At June 15, 1997, the Company had cash of $18.7 million, $202.1 million of
stockholders' equity, and $114.6 million of debt. The Company has $5.0 million
of availability under its $50.0 million bank credit line.
From time to time Smart & Final may publish forward-looking statements
about anticipated results. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply with
the terms of the safe harbor, the Company notes that such forward-looking
statements are based upon internal estimates which are subject to change because
they reflect preliminary information and management assumptions, and that a
variety of factors could cause the Company's actual results and experience
10
to differ materially from the anticipated results or other expectations
expressed in the Company's forward-looking statements. The factors which could
cause actual results or outcomes to differ from such expectation include the
extent of the Company's success in (i) changing market conditions, (ii)
unforeseen costs and expenses, (iii) ability to attract new customers and retain
existing customers, and (iv) gain or losses from sales along with the
uncertainties and other factors, including unusually adverse weather conditions,
described from time to time in the Company's SEC filings and reports. This
report includes "forward-looking statements" including, without limitation,
statements as to the Company's liquidity and availability of capital resources.
The Company expects to be able to fund future acquisitions and other cash
requirements by a combination of available cash, cash from operations, lease
financing and other borrowings and proceeds from the issuance of equity
securities. The amount budgeted for capital expenditures is approximately $30.0
million for fiscal 1997.
11
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Not applicable.
ITEM 2 CHANGES IN SECURITIES
Not applicable.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of stockholders of the Company was held on May 9,
1997. At the meeting stockholders (1) elected four (4) directors of the
Company, (2) approved an amendment to the Company's Stock Incentive Plan to
increase the number of shares of the Company's common stock for which options
may be granted from 2,250,000 shares to 2,450,000 shares, (3) approved the
adoption of the Company's Long Term Equity Compensation Plan, and (4) ratified
the selection of Arthur Andersen LLP, independent public accountants, as
auditors for the Company for the year ending January 4, 1998.
The four (4) directors elected at the meeting are Robert J. Emmons, Antoine
Guichard, James S. Gold, and Christian P. Couvreux. The directors whose term of
office as a director continued after the meeting are Pierre B. Bouchut, Tim F.
Crull, Martin A. Lynch, Georges Plassat, Roger M. Laverty, III, David J.
McLaughlin, Ross E. Roeder, and Thomas G. Plaskett.
The votes cast for, against, or withheld, as well as the number of
abstention and broker non-votes for each nominee for office as a director were
as follows:
VOTES
____________________________ Broker
Name of Nominee For Against Withheld Abstentions Non-Votes
- --------------- --- ------- -------- ----------- ---------
Robert J. Emmons 20,506,603 - 278,262 - -
Antoine Guichard 19,931,512 - 853,353 - -
James S. Gold 20,507,753 - 277,112 - -
Christian P. Couvreux 20,505,509 - 279,356 - -
The votes cast for, against, or withheld, as well as the number of
abstentions and broker non-votes for each matter voted upon in addition to the
election of directors were as follows:
Votes Votes Votes Broker
Matter For Against Withheld Abstentions Non-Votes
- ------ ----- ------- -------- ----------- ---------
1. Amendment
of the Company's
Stock Incentive
Plan to increase 19,509,154 325,325 - 17,318 933,068
the number of
shares subject
thereto from
2,250,000 to
2,450,000
12
Votes Votes Votes Broker
Matter For Against Withheld Abstentions Non-Votes
- ------ ----- ------- -------- ----------- ---------
2. Adoption of the
Company's Long
Term Equity 18,861,405 970,190 - 20,202 933,068
Compensation
Plan
3. Ratification
of Arthur
Andersen LLP,
as auditor for the 20,769,203 1,704 - 11,259 2,699
Company for the
year ending
January 4, 1998
ITEM 5 OTHER INFORMATION
Not applicable.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Sequentially
Exhibit Numbered
Number Description of Exhibit Pages
- ------- ---------------------- -----
10.58 Omnibus Amendment, Direction and Consent No. 4 dated April 30, 1997
10.71 Participation Agreement dated as of April 7, 1997
10.72 Agency Agreement dated as of April 7, 1997
10.73 Lease Agreement dated as of April 7, 1997
10.74 Loan Agreement dated as of April 7, 1997
10.75 First Amendment and Restatement dated as of June 20, 1997,
to Participation Agreement dated December 15, 1994
10.76 First Amendment and Restatement dated as of June 20, 1997 to Agency
Agreement dated December 15, 1994
10.77 First Amendment and Restatement dated as of June 20, 1997 to Lease
Agreement dated December 15, 1994
10.78 First Amendment and Restatement dated as of June 20, 1997 to Loan
Agreement dated December 15, 1994
10.79 Asset Purchase Agreement dated as of May 30, 1997
27 Financial Data Schedule
(b) Reports on Form 8-K
None
13
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.
SMART & FINAL INC.
By:
Date: July 28, 1997 /s/ MARTIN A. LYNCH
______________________________________
Martin A. Lynch
Executive Vice President,
Principal Financial Officer, and
Principal Accounting Officer of the Company
14
SMART & FINAL INC.
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description of Exhibit Pages
- ------ ---------------------- -----
10.58 Omnibus Amendment, Direction and Consent No. 4 dated April 30, 1997
10.71 Participation Agreement dated as of April 7, 1997
10.72 Agency Agreement dated as of April 7, 1997
10.73 Lease Agreement dated as of April 7, 1997
10.74 Loan Agreement dated as of April 7, 1997
10.75 First Amendment and Restatement dated as of June 20, 1997, to
Participation Agreement dated December 15, 1994
10.76 First Amendment and Restatement dated as of June 20, 1997 to Agency
Agreement dated December 15, 1994
10.77 First Amendment and Restatement dated as of June 20, 1997 to Lease
Agreement dated December 15, 1994
10.78 First Amendment and Restatement dated as of June 20, 1997 to Loan
Agreement dated December 15, 1994
10.79 Asset Purchase Agreement dated as of May 30, 1997
27 Financial Data Schedule
15