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 SALT LAKE CITY, Oct. 26 /PRNewswire/ -- Smith's Food & Drug Centers Inc. (NYSE: SFD) today reported operating results for the third quarter 1993.
 Third Quarter Results
 Sales for the third quarter ended Oct. 2, 1993, totaled $687 million, compared to $653 million for the same quarter last year, an increase of 5 percent. Pretax income was $17.3 million, compared to last year's $22.7 million, a decrease of 23.9 percent. Net income after tax was $7.9 million, or $.26 per common share, compared to $13.8 million, or $.46 per common share, reported last year. Sales in comparable stores decreased 2.2 percent.
 In addition to a tax rate adjustment of $2,600,000, or $.09 per common share, charged to the quarter, earnings were also affected by sluggish sales in California due to the continuing intense recession in this new market and heavy price competition resulting from our aggressive sales program in Utah.
 Nine Month Results
 Adjusting for the additional week (39 weeks this year, compared to 40 weeks last year), sales for the first nine months of $2.08 billion were up 9 percent over a year ago. Pretax income for the period totaled $63.4 million, compared to $66.6 million last year, a decrease of 4.8 percent. Net income was $35.9 million, or $1.18 per common share, compared to $40.5 million, or $1.35 per common share. Sales in comparable stores decreased 0.3 percent for the first nine months.
 Income Tax Rate Change
 The recently enacted Omnibus Budget Reconciliation Act of 1993 retroactively increased the company's Federal tax rate from 34 percent to 35 percent. As a result of the increased tax rate, net income for the third quarter 1993 was reduced by a total of $2,600,000, or $.09 per common share. This reduction consisted of $500,000, or $.02 per common share, for the retroactive effect of income earned in the first six months of 1993, $200,000, or $.01 per common share, for the effect of income earned in the third quarter and $1,900,000, or $.06 per common share, for the increase in recorded deferred taxes. The effective tax rate, including state income taxes, for future quarters is expected to approximate 40.5 percent.
 New Aggressive Pricing Program
 Recognizing the importance of maintaining store sales volume and market share, the company kicked-off a more aggressive pricing program in the Utah area in July 1993. To reinforce the company's Every Day Low Price (EDLP) program, more than 10,000 prices on grocery, meat and produce items were lowered. Jeff Smith, chairman and chief executive officer, reiterated that sales must be protected in both recessionary periods and unusual competitive situations. In the near term, both gross margins and net income will be under pressure as the company continues to build sales volumes. However, management anticipates that this new pricing program will enhance earnings potential in future years.
 The company is continuing efforts to reduce operating costs and be more responsive to consumer needs. Recently the company announced the consolidation of two major operating regions. The Intermountain Region and Southwest Region were combined. The new organization eliminated many duplicate supervisory positions and will empower the store managers to be more autonomous. However, reductions in costs will be offset by higher operating costs from the stores in the California Region.
 In 1992, the company adopted the last-in, first-out (LIFO) cost method for valuing inventories. The adoption of LIFO did not have a material effect on the 1992 financial statements. The LIFO method will more fairly present the company's results of operations by matching current costs with current sales and by recognizing the effects of inflation in the period in which it occurs. Also, adopting LIFO will allow investors to compare the company's results with the many other companies in the supermarket industry using LIFO. The LIFO charge before income taxes for the third quarter of 1993 totaled $750,000 and $2,250,000 for the first nine months. There were no LIFO charges or credits in 1992.
 Expansion Program
 During the first nine months of 1993 four combination centers were opened in Lakewood and Pomona, Calif.; Albuquerque, N.M.; and South Jordan, Utah; and two store remodels were completed. At Oct. 2, 1993, the company operated 123 stores totaling 8.0 million square feet, compared to 113 stores totaling 7.2 million square feet at the end of prior-year's third quarter. The expansion plan for the remainder of 1993 is to complete 10 stores in the fourth quarter totaling approximately 748,000 square feet including nine stores in Southern California. The increase in square footage will be approximately 15 percent for the year.
 The company is continuing to expand its backstage operations. A new million-square-foot, fully integrated distribution center, including a dairy processing plant, in Riverside, Calif., is nearing completion. This center will serve the stores in the California Region and is expected to be in full operation at the end of 1993.
 Smith's is a leading regional supermarket chain operating 123 stores in eight western states. Of these stores, 108 are large combination food and drug centers.
 Condensed Consolidated Statements of Income
 (Amounts in thousands except per share data)
 13 Weeks 13 Weeks 39 Weeks 40 Weeks
 Ended Ended Ended Ended
 Oct 2, Oct 3, Oct 2, Oct 3,
 1993 1992 1993 1992
 Net sales $686,747 $653,385 $2,080,506 $1,962,992
 Cost of goods sold 535,521 502,396 1,606,392 1,513,477
 Total 151,226 150,989 474,114 449,515
 Operating, selling
 and administrative 103,474 102,543 321,687 310,012
 Depreciation and
 amortization 19,850 16,361 56,837 46,030
 Interest 10,591 9,341 32,173 26,837
 Total 133,915 128,245 410,697 382,879
 Income before
 income taxes 17,311 22,744 63,417 66,636
 Income taxes 9,400 8,900 27,500 26,100
 Net income $7,911 $13,844 $35,917 $40,536
 Net income per
 common share $.26 $.46 $1.18 $1.35
 Average common
 shares outstanding 30,086 29,962 30,297 29,962
 Condensed Consolidated Balance Sheets
 (In thousands)
 Oct 2, Oct 3,
 1993 1992
 Current assets
 Cash and cash equivalents $13,266 $12,088
 Receivables 17,060 11,258
 Inventories 344,528 315,723
 Other current assets 41,478 21,062
 Total current assets 416,332 360,131
 Property and equipment
 Land 309,962 266,020
 Buildings 656,950 515,967
 Leasehold improvements 36,406 30,418
 Fixtures and equipment 508,477 405,395
 Total 1,511,795 1,217,800
 Less allowances 265,757 200,115
 Total property and equipment 1,246,038 1,017,685
 Other assets 13,500 12,303
 Total $1,675,870 $1,390,119
 Liabilities and stockholders' equity
 Current liabilities
 Trade accounts payable $183,024 $169,542
 Accrued taxes 44,377 40,970
 Other accrued liabilities 67,072 59,668
 Current maturities 23,105 21,542
 Total current liabilities 317,578 291,722
 Long-term debt 729,739 530,858
 Deferred income taxes 85,800 54,700
 Redeemable preferred stock 6,462 7,401
 Common stockholders' equity 536,291 505,438
 Total $1,675,870 $1,390,119
 Condensed Consolidated Statements of Cash Flows
 (In thousands)
 39 Weeks 40 Weeks
 Ended Ended
 Oct 2, Oct 3,
 1993 1992
 Operating activities:
 Net income $35,917 $40,536
 Adjustments to reconcile net
 income to net cash provided
 by operating activities:
 Depreciation and amortization 60,490 49,375
 Deferred income taxes 9,600 8,500
 Other 364 403
 Total 106,371 98,814
 Changes in operating assets and liabilities:
 Receivables (260) 3,816
 Inventories (3,112) (25,296)
 Other current assets (13,462) (17,207)
 Trade accounts payable (1,082) (10,841)
 Accrued taxes 12,239 10,128
 Other accrued liabilities 1,612 (1,314)
 Cash provided by operating activities 102,306 58,100
 Investing activities:
 Additions to property and equipment (230,993) (206,496)
 Proceeds from sale of
 property and equipment 2,103 786
 Other 589 (714)
 Cash used by investing activities (228,301) (206,424)
 Financing activities:
 Additions to long-term debt 155,000 173,465
 Payments on long-term debt (15,472) (17,246)
 Redemptions of Preferred Stock (414) (314)
 Purchases of Treasury Stock (9,556) ---
 Proceeds from sale of Treasury Stock 5,824 ---
 Payment of dividends (11,647) (9,887)
 Cash provided by financing activities 123,735 146,018
 Net decrease in cash and cash equivalents (2,260) (2,306)
 Cash and cash equivalents
 at beginning of year 15,526 14,394
 Cash and cash equivalents
 at end of period $13,266 $12,088
 -0- 10/26/93
 /CONTACT: Robert D. Bolinder or Matthew G. Tezak of Smith's Food & Drug Centers, 801-974-1400/

CO: Smith's Food & Drug Centers Inc. ST: Utah IN: REA SU: ERN

JL-LS -- LA019 -- 6671 10/26/93 07:31 EDT
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Publication:PR Newswire
Date:Oct 26, 1993

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