TCR_Public/9701282.MBX




InterNet Bankruptcy Library - News for January 28, 1997 (page 2)






Bankruptcy News For January
28, 1997 (page 2)



  1. Prime Retail, Inc. Reports 29.3% Increase In Fourth Quarter Funds
    From Operations

  2. Smith's Food & Drug Centers, Inc. Announces Record EBITDA For
    Fiscal 1996




Prime Retail, Inc. Reports 29.3% Increase In Fourth Quarter Funds From
Operations


BALTIMORE, MD - Jan. 28, 1997 - Prime Retail, Inc. (Nasdaq: PRME,
PRMEP) today announced its operating results for the fourth quarter and
year ended December 31, 1996.


In accordance with the new definition of funds from operations ("FFO")
established by the National Association of Real Estate Investment Trusts
in 1995, FFO before allocations to preferred shareholders and minority
interests increased 29.3% to $9.7 million for the three months ended
December 31, 1996, compared to $7.5 million for the three months ended
December 31, 1995. On a primary basis, FFO per common share
equivalent increased 66.7% to $0.30 for the three months ended
December 31, 1996, compared to $0.18 for the three months ended
December 31, 1995. On a fully diluted basis, FFO per common share
equivalent increased 10.3% to $0.32 the three months ended December
31, 1996, compared to $0.29 for the three months ended December 31,
1995.


Abraham Rosenthal, chief executive officer of the Company, stated: "We
are very pleased with the 29.3% increase in FFO in the fourth quarter of
1996 when compared to the same period in 1995. Our fourth quarter
results include the financial benefits associated with the recently
completed acquisitions of Rocky Mountain Factory Stores, Kansas City
Factory Outlets and our joint venture partner's 50.0% interest in Grove
City Factory Shops and the openings of Buckeye Factory Shops and
Carolina Factory Shops. 1996 was a very productive year for the
Company, considering we completed a $43.2 million common stock
secondary offering, exchanged 60% of our Series B preferred stock for
common stock, completed a significant debt refinancing, opened 930,000
square feet of new outlet space and completed several strategic property
acquisitions. The fundamentals of our business are sound and, therefore,
we look forward to continued growth in future years."


FFO before allocations to preferred shareholders and minority interests
was $27.6 million for the year ended December 31, 1996, after
deducting non-recurring charges of $6.1 million in the second quarter
related to the debt refinancing, compared to $28.0 million for the year
ended December 31, 1995. On a primary basis, FFO per common share
equivalent increased 37.5% to $0.77 for the year ended December 31,
1996, compared to $0.56 for the year ended December 31, 1995. On a
fully diluted basis, FFO per common share equivalent decreased 12.3%
to $0.93 for the year ended December 31, 1996, compared to $1.06 for
the year ended December 31, 1995. The non- recurring charge of $6.1
million related primarily to the write down of nonrefundable deferred
financing fees and the unamortized cost of certain interest rate protection
contracts. The non-recurring charge had no effect on distributable net
cash flow of the Company.


Income before allocations to preferred shareholders, minority interests
and extraordinary loss (GAAP basis) was $7.0 million and $12.8 million
for the years ended December 31, 1996, and 1995, respectively, and
$3.7 million and $3.4 million for the three months ended December 31,
1996, and 1995, respectively.


As previously announced, on November 1, 1996, the Company acquired
Rocky Mountain Factory Stores and Kansas City Factory Outlets for an
aggregate purchase price of $71.3 million. Rocky Mountain Factory
Stores is located in Loveland, Colorado, which is approximately 35
miles north of Denver and contains approximately 328,000 square feet of
GLA. Kansas City Factory Outlets is located in Odessa, Missouri, which
is approximately 20 miles east of Kansas City and contains
approximately 191,000 square feet of GLA. On November 8, 1996, the
Company opened Phase II of Kansas City Factory Shops, which contains
approximately 105,000 square feet of GLA. On November 1, 1996, the
Company also finalized its previously announced agreement to purchase
its joint venture partner's first mortgage and 50.0% partnership interest in
Grove City Factory Shops. Grove City Factory Shops is located in
Grove City, Pennsylvania, which is approximately 40 miles north of
Pittsburgh and consists of approximately 415,000 square feet of GLA. On
November 15, 1996, the Company opened Phase IV of Grove City
Factory Shops containing approximately 118,000 square feet of GLA
bringing the total project to 533,000 square feet of GLA. Grove City
Factory Shops is the number one project in the Company's portfolio in
terms of total GLA and sales per square foot which exceed $340.00 for
the year ended December 31, 1996. The operating results of the
Company for the three months ended December 31, 1996, include the
results of these three acquisitions which closed on November 1, 1996.
Prior to November 1, 1996, the Company accounted for its 50.0%
investment in Grove City Factory Shops using the equity method of
accounting. As a result of the Company's acquisition of its joint venture
partner's 50.0% interest, the operating results of Grove City Factory
Shops are now consolidated. Finally, on November 1, 1996, the
Company completed a previously announced debt refinancing that
provided $428.3 million of loan proceeds. Proceeds from this
transaction were primarily used (i) to refinance debt under various credit
facilities, (ii) to purchase Rocky Mountain Factory Stores, Kansas City
Factory Outlets and Grove City Factory Shops, and (iii) loan costs, fees
and working capital.


During the year ended December 31, 1996, the Company opened 930,000
square feet of GLA as summarized in the following table:


        Center                       GLA     Opening Date     
         Location Third Quarter Openings Arizona Factory Shops
             109,000   September 26   Phoenix, Arizona Ohio
        Factory Shops          35,000     August 29   
        Jeffersonville,
                                                             O
                                                             h
                                                             i
                                                             o
        Magnolia Bluff Factory Shops21,000      July 28    
        Darien, Georgia Triangle Factory Shops       6,000    
         July 19     Raleigh-Durham,
                                                             N
                                                             o
                                                             r
                                                             t
                                                             h
                                                             C
                                                             a
                                                             r
                                                             o
                                                             l
                                                             i
                                                             n
                                                             a
         Total third quarter       171,000

        Fourth Quarter Openings
        Carolina Factory  Shops    235,000    November 8   
        Gaffney, South Carolina Buckeye Factory Shops     
        205,000    November 22   Medina County, Ohio Grove
        City Factory Shops   118,000    November 15   Grove
        City,
                                                             P
                                                             e
                                                             n
                                                             n
                                                             s
                                                             y
                                                             l
                                                             v
                                                             a
                                                             n
                                                             i
                                                             a
        Kansas City Factory Outlets105,000    November 8   
        Odessa, Missouri
            Gulfport Factory Shops      40,000    November 1  
             Gulfport,
        Mississippi

        Gulf Coast Factory Shops    30,000    October 18   
        Ellenton, Florida Indiana Factory Shops       26,000  
         November 14   Daleville, Indiana
         Total fourth quarter      759,000
         Total - 1996              930,000

For the year ended December 31, 1996, same-space sales in centers
owned by the Company increased 0.4% to $233.00 per square foot
compared to $232.00 per square foot for the year ended December 31,
1995. Same-space sales is defined as weighted average sales per square
foot reported by merchants for space open since January 1, 1995.


On January 16, 1997, the board of directors approved a dividend of
$0.295 per common share payable on February 15, 1997, to common
shareholders of record on February 3, 1997. The dividend covers the
period from October 1, 1996, through December 31, 1996. The dividend
is the pro rata equivalent of an annual dividend of $1.18 per share. In
addition, the board approved a dividend of $0.53125 per share on the
8.5% Series B Preferred Stock. This dividend is payable on February
15, 1997, to Series B Preferred shareholders of record on February 3,
1997. The dividend covers the period from November 16, 1996, through
February 15, 1997. The dividend is the pro rata equivalent of an annual
dividend of $2.125 per share. The board further approved a dividend of
$0.65625 per share on the 10.5% Series A Senior Cumulative Preferred
Stock. This dividend is payable on February 15, 1997, to Series A
Preferred shareholders of record on February 3, 1997. The dividend
covers the period from November 16, 1996, through February 15, 1997.
The dividend is the pro rata equivalent of an annual dividend of $2.625
per share.


Based on the old definition of funds from operations ("old FFO"), old
FFO before allocations to preferred shareholders and minority interests
increased 17.6% to $10.5 million for the three months ended December
31, 1996, compared to $8.9 million for the three months ended December
31, 1995. On a primary basis, old FFO per common share equivalent
increased 13.3% to $0.34 for the three months ended December 31,
1996, compared to $0.30 for the three months ended December 31, 1995.
On a fully diluted basis, old FFO per common share equivalent
decreased 2.8% to $0.35 for the three months ended December 31, 1996,
compared to $0.36 for the three months ended December 31, 1995. The
fourth quarter 1996 old FFO results represent the second consecutive
quarter that parity was achieved in the amount of dividends and
distributions that will be paid to both common shareholders and unit
holders at $0.295 per share.


For the year ended December 31, 1996, the dividends and distributions
paid to shareholders are taxable as summarized in the following table:


        Security                           Return of Capital  
        Ordinary income Common Stock                          
         100.0%                 ---

        10.5% Series A
         Cumulative Preferred Stock                ---        
              100.0%

        8.5% Series B Cumulative
         Participating Convertible
         Preferred Stock                        61.98%        
              38.02%

Prime Retail is a self-administered, self-managed real estate investment
trust engaged in the ownership, development, and management of factory
outlet centers. Prime Retail's outlet center portfolio consists of 21 outlet
centers in 16 states, which total approximately 5.8 million square feet of
GLA as of December 31, 1996. As of December 31, 1996, Prime
Retail's factory outlet center portfolio was approximately 91% leased.
Prime Retail has been a developer of factory outlet centers since 1988.
For additional information, visit Prime Retail's web site at:
http://www.primeretail.com.


                                  PRIME RETAIL, INC.
                         Selected Financial Data (Unaudited)
              Amounts in thousands except per share and unit
              information

                                      GAAP BASIS

                                        Three Months Ended    
                                          Year Ended
                                           December 31        
                                             December 31
                                          1996      1995      
                                          1996      1995

        STATEMENTS OF OPERATIONS
        Revenues
        Base rents                     $16,293    $12,659   
        $54,710    $46,368 Percentage rents                  
        710        399      1,987      1,520 Tenant
        reimbursements            7,181      6,151     25,254
           22,283 Income from
         investment partnerships           380        537     
         1,239      1,729
        Interest and other               1,364      1,583     
        5,850      5,498
           Total revenues               25,928     21,329    
           89,040     77,398

        Expenses
        Property operating               5,885      4,962    
        20,421     17,389 Real estate taxes               
        1,434        911      5,288      4,977 Depreciation
        and amortization    5,678      4,177     19,256    
        15,438 Corporate general and
         administrative                  1,186      1,438     
         4,018      3,878
        Interest                         7,142      5,842    
        24,485     20,821 Other charges                     
        899        630      8,586      2,089
           Total expenses               22,224     17,960    
           82,054     64,592

        Income before minority
         interests and
         extraordinary item              3,704      3,369     
         6,986     12,806
        (Income) loss allocated
         to minority interests          (2,568)     1,213    
         (1,170)     5,364
        Income before extraordinary item 1,136      4,582     
        5,816     18,170 Extraordinary item - loss
         on early extinguishment of
         debt, net of minority
         interests in the amount
         of $3,263                         ---        ---    
         (1,017)       ---
        Net income                       1,136      4,582     
        4,799     18,170 Income allocated to
         preferred shareholders          3,000      5,236    
         14,236     20,944
        Loss allocated to common
         shareholders                  $(1,864)    $(654)   
         $(9,437)  $(2,774)
        Per common share (A):
          Loss before
           extraordinary item           $(0.14)   $(0.23)    
           $(1.03)   $(0.96)
          Extraordinary item               ---        ---     
          (0.12)       --- Net loss                     
          $(0.14)   $(0.23)     $(1.15)   $(0.96)
        Weighted average
         common shares outstanding      13,405      2,875     
         8,221      2,875

        SELECTED BALANCE SHEET DATA
                                                         Decem
                                                         ber
                                                         31
                                                     1996     
                                                          1995
        Rental properties before
         accumulated depreciation                  $644,450   
           $454,480
        Cash and cash equivalents                     3,924   
            14,927 Total assets                               
        666,803       462,405 Mortgage and other debt         
                   499,523       305,954 Total liabilities    
                              527,596       326,465
        Shareholders' equity                        139,207   
           121,484

                   Selected Financial Data (Unaudited) --
                   continued
              Amounts in thousands except per share and unit
              information

            FUNDS FROM OPERATIONS (FFO) and DIVIDEND
            DISTRIBUTION SUMMARY

                                         Three Months Ended   
                                             Year Ended
                                             December 31      
                                                December 31

                                            1996     1995     
                                            1996      1995
        RECONCILIATION OF GAAP INCOME
        TO FFO (NEW and OLD DEFINITION)
        Income before minority
         interests and extraordinary
         item (GAAP basis)                $3,704    $3,369   
         $6,986    $12,806
        Adjustments:
          Depreciation and amortization    5,678     4,177   
          19,256     15,438 Amortization of deferred
           financing costs and
           interest rate
           protection contracts              696     1,213    
           3,723      4,524
          Non-cash charges                   ---       ---    
          6,131        --- Unconsolidated joint
           venture adjustments               388       144    
           2,052        365
        Distributable net cash flow(B)    10,466     8,903   
        38,148     33,133
          Non-cash charges                   ---       ---   
          (6,131)       ---
        FFO - Old Definition(C)           10,466     8,903   
        32,017     33,133
          Non-real estate depreciation
           and amortization                 (773)   (1,407)  
           (4,380)   (5,137)

        FFO - New Definition(C)           $9,693    $7,496  
        $27,637    $27,996

        DIVIDEND DISTRIBUTION SUMMARY
        Distributable net cash flow      $10,466    $8,903  
        $38,148    $33,133 Preferred stock
         dividend - Series A              (1,509)   (1,509)  
         (6,038)   (6,038)
                                           8,957     7,394   
                                           32,110     27,095
        Payout reserves(D)                (1,003)     (739)  
        (3,347)   (2,710)
                                           7,954     6,655   
                                           28,763     24,385
        Preferred stock
         dividend - Series B              (1,491)   (3,727)  
         (8,199)  (14,907)
                                           6,463     2,928   
                                           20,564      9,478
        Common stock dividend             (3,954)     (848)
        (12,711)   (3,392)
                                           2,509     2,080    
                                           7,853      6,086
        Distribution adjustment(E)           ---       ---    
        1,117        --- Total distribution to
         limited partners                 $2,509    $2,080   
         $8,970     $6,086

        Per share/unit amounts:
         Preferred stock
          Series A                        $0.656    $0.656   
          $2.625     $2.625 Series B                       
          $0.531    $0.531    $2.125     $2.125
         Common stock(F)                  $0.295    $0.295   
         $1.180     $1.180 Limited partner units(F)        
         $0.295    $0.226    $1.036     $0.660

                                  PRIME RETAIL, INC.
                   Selected Financial Data (Unaudited) --
                   continued
              Amounts in thousands except per share and unit
              information

         FUNDS FROM OPERATIONS (FFO) and DIVIDEND DISTRIBUTION
         SUMMARY
        - (continued)

                    FUNDS FROM OPERATIONS SUMMARY - NEW
                    DEFINITION

                                         Three Months Ended   
                                             Year Ended
                                             December 31      
                                                December 31
                                           1996      1995     
                                             1996     1995

        FFO - New Definition             $9,693      $7,496   
        $27,637  $27,996 Minority interests                 
        (60)       (45)      (248)    (276)
                                          9,633       7,451   
                                           27,389   27,720
        Preferred stock dividends
         Series A                        (1,509)    (1,509)   
         (6,038)  (6,038) Series B                       
         (1,491)    (3,727)    (8,199) (14,907)
                                          6,633       2,215   
                                           13,152    6,775
        Allocation to limited
         partners                        (2,509)    (2,080)   
         (7,853)  (6,086)

        Allocation to common
         shares outstanding              $4,124        $135   
          $5,299     $689

        FFO per common share
         outstanding(F)(G)                $0.31       $0.05   
           $0.64    $0.24

        FFO per common share
         equivalent - primary(F)(H)       $0.30       $0.18   
           $0.77    $0.56

        FFO per common share
         equivalent - fully
         diluted(F)(I)                    $0.32       $0.29   
           $0.93    $1.06

        Weighted Average Shares
         and Units Outstanding
        Common Shares                    13,405       2,875   
          8,221    2,875 Limited partner common units     
        8,505       9,221      8,855    9,221
         Total primary shares            21,910      12,096   
          17,076   12,096
        Series B convertible
         preferred shares                 3,356       8,391   
           5,805    8,391 Total fully diluted shares     
         25,266      20,487     22,881   20,487

                   Selected Financial Data (Unaudited) --
                   continued
              Amounts in thousands except per share and unit
              information

         FUNDS FROM OPERATIONS (FFO) and DIVIDEND DISTRIBUTION
         SUMMARY
        - (continued)

                    FUNDS FROM OPERATIONS SUMMARY - OLD
                    DEFINITION

                                        Three Months Ended    
                                          Year Ended
                                           December 31        
                                             December 31
                                          1996       1995     
                                          1996      1995

        FFO - Old Definition           $10,466     $8,903    
        $32,017   $33,133 Minority interests                
        (62)       (70)      (253)     (280)
                                        10,404      8,833     
                                        31,764    32,853
        Preferred stock dividends
         Series A                       (1,509)    (1,509)   
         (6,038)   (6,038) Series B                      
         (1,491)    (3,727)    (8,199)  (14,907)
                                         7,404      3,597     
                                         17,527    11,908
        Allocation to limited partners  (2,509)    (2,080)   
        (7,853)   (6,086)

        Allocation to
         common shares outstanding      $4,895     $1,517     
         $9,674    $5,822

        FFO per common
         share outstanding(F)(G)         $0.37      $0.53     
          $1.18     $2.03

        FFO per common share
         equivalent -
         primary(F)(H)                   $0.34      $0.30     
          $1.03     $0.98

        FFO per common share
         equivalent -
         fully diluted(F)(I)             $0.35      $0.36     
          $1.12     $1.31

        Weighted Average Shares
         and Units Outstanding
        Common Shares                   13,405      2,875     
         8,221     2,875 Limited partner common units    
        8,505      9,221       8,855     9,221
         Total primary shares           21,910     12,096     
         17,076    12,096
        Series B convertible
         preferred shares                3,356      8,391     
          5,805     8,391 Total fully diluted shares    
         25,266     20,487      22,881    20,487

        Notes:

(A) Net loss per common share (GAAP basis) is net of applicable
preferred dividends. Fully diluted per share amounts (GAAP basis) are
not presented since the effect would be anti- dilutive.


(B) In accordance with its Partnership Agreement, Prime Retail, L.P.
excludes non-cash charges in determining its distributable net cash flow.


(C) Funds from operations means net income (loss) (computed in
accordance with GAAP), excluding gains or losses from debt
restructuring and sales of real property, plus depreciation and
amortization and after adjustments for unconsolidated partnerships and
joint ventures. In March 1995, the National Association of Real Estate
Investment Trusts established guidelines clarifying the definition of FFO
(as modified, the "New Definition"). For the Company, the primary
impact of reporting FFO under the New Definition is a reduction in FFO
since the amortization of capitalized debt costs and depreciation of
non-real estate assets are not added back to income before allocations to
minority interests (GAAP basis).


(D) Includes reserves for capital expenditures and working capital.


(E) In accordance with the Partnership Agreement, dividends paid on
newly issued shares of common stock are not subtracted in connection
with calculating the amount to be distributed to the limited partners to the
extent such newly issued shares were not issued and outstanding for the
entire quarter.


(F) In accordance with its Partnership Agreement, Prime Retail, L.P.
will pay a preferential distribution of $0.295 in each quarter for each
common unit held by Prime Retail, Inc. (the total of such units is equal to
the number of outstanding common shares of the Company) before any
distribution is paid for the common units held by the Limited Partners.
After payment of the preferential distribution to Prime Retail, Inc., up to
$0.295 will be distributed for each common unit held by the Limited
Partners. Any additional distributions will be allocated pro rata among
the common units held by the Company and by the Limited Partners. The
preferential distribution for common units held by the Company will
terminate after Prime Retail, L.P. has paid quarterly distributions of at
least $0.295 on all common units (21,910 common units after giving
effect to the exchange offer and the secondary common stock offering)
during four successive quarters without distributing to the Convertible
Preferred Units and common units more than 90% of FFO after the
payment of distributions to the Senior Preferred Units in any such
quarter. Once the preferential distribution is terminated, distributions
with respect to the common units held by Prime Retail, Inc. and the
Limited Partners will be pro rata to the holders thereof. Accordingly,
FFO must equal at least $10,347 (or $0.335 per common share
equivalent-primary) for four successive quarters to terminate the
preferential distribution to the Company. For purposes of determining the
amount of distributions to the Limited Partners and whether the
Company's FFO is sufficient to terminate the preferential distribution,
FFO is calculated based on the old definition of Funds from Operations.


(G) "FFO per common share outstanding" is equal to FFO after minority
interests less Series A and Series B preferred dividends and
distributions to limited partners divided by the weighted average number
of common shares outstanding.


(H) "FFO per common share and common share equivalent-primary" is
equal to FFO after minority interests less Series A and Series B
preferred dividends divided by the total of (a) the weighted average
number of common shares and (b) the weighted average number of
limited partner common units.


(I) "FFO per common share and common share equivalent-fully diluted"
is equal to FFO after minority interests less Series A preferred dividends
divided by the total of (a) the weighted average number of common
shares, (b) the weighted average number of limited partner common units
and (c) the weighted average number of common share equivalents
assuming a full conversion of all Series B convertible preferred shares.


SOURCE Prime Retail, Inc./CONTACT: Robert P. Mulreaney, Chief
Financial Officer, or Anya T. Harris, Public Relations of Prime Retail,
410-234-0782/





Smith's Food & Drug Centers, Inc. Announces Record EBITDA For
Fiscal 1996


SALT LAKE CITY, UT - Jan. 28, 1997 - Smith's Food & Drug Centers,
Inc. (NYSE: SFD) ("Smith's or the "Company") today announced results
for the fourth quarter and fiscal 1996 ended December 28, 1996.


FOURTH QUARTER RESULTS


Net income for the quarter was $7.8 million or $.48 per common share
compared to a net loss of $70.1 million or $2.79 per common share for
the quarter in the prior year. Excluding the closed California operations
in 1995, earnings before interest, taxes, depreciation, amortization and
LIFO (EBITDA) for the quarter increased 16.9% to $71.4 million, or
9.3% of sales, compared to EBITDA of $61.1 million, or 9.7% of sales,
last year. The increase in EBITDA resulted primarily from the addition
of 26 stores by merger with Smitty's Supermarkets, Inc. ("Smitty's") and
four new stores opened since the end of 1995. The Company's EBITDA
to cash interest expense coverage for the fourth quarter was 2.1 times.


The average number of common shares outstanding during the quarter
totaled 16.2 million, compared to 25.1 million last year. (There are
currently 15.8 million common shares outstanding, excluding stock
options, reflecting the recapitalization of the Company and the issuance
of shares to the former Smitty's shareholders in connection with the
merger with Smitty's.)


Sales for the fourth quarter 1996 were $766.2 million, a decrease of
4.0% from the fourth quarter last year. Excluding California, net sales
increased $134.9 million, or 21.4%, from $631.3 million in 1995 to
$766.2 million in 1996. Excluding California, same store sales for the 13
week period decreased 1.6% compared to declines of 2.7%, .9% and
.7%, respectively, in the first, second and third quarters of 1996. The
pre-tax LIFO credit for the fourth quarter was $3.3 million or $.12 per
common share after tax.


FISCAL 1996 RESULTS

Sales for the year ended December 28, 1996 were $2.9 billion, a
decrease of 6.3%. Excluding California, net sales increased $407.8
million, or 16.9% during the year. Excluding California, same stores
sales for the year decreased 1.4%.


The net loss for the year totaled $164.2 million or $8.42 per common
share, compared to a net loss of $40.5 million or $1.62 per common
share last year. Results for each year included restructuring charges
related to the California disposition. Additionally, the results for 1996
included one-time expenses resulting from the merger and
recapitalization. Excluding these expenses and charges, EBITDA for
fiscal 1996 increased 14.6% to a record $260.3 million compared to
EBITDA of $227.2 million last year. Due to the merger and
recapitalization, the average number of common shares outstanding
during 1996 were 19.5 million and 25.0 million in 1995. The pre-tax
LIFO charge for the year totaled $2.0 million compared to $4.0 million
last year.


EXPANSION

During the year, the Company opened four new stores located in Cedar
City, Utah; Mesquite, Nevada and two in Phoenix, Arizona; acquired the
28 Smitty's stores in Arizona and closed 34 stores in California. Two of
the Smitty's stores were subsequently leased to other retailers. As of
December 28, 1996, the Company operated 150 stores, 133 of which
were large food and drug combination stores, with total square footage
of approximately 10.2 million.


MERGER AND RECAPITALIZATION


On May 23, 1996, Smith's repurchased approximately one-half of its
25.1 million outstanding shares of Common Stock at $36.00 per share
and issued 3.2 million shares of its Class B Common Stock in connection
with the Smitty's merger. To finance the transactions, Smith's (i) entered
into a new senior secured bank credit facility under which Smith's
borrowed $805 million of term loans and (ii) issued and sold $575
million of 11 1/4% Senior Subordinated Notes due 2007 in a public
offering. The Company recently announced that it has made additional
prepayments of $100 million on the term loans subsequent to the end of
fiscal 1996. In addition, the Company plans to make an additional $25
million prepayment on January 31, 1997. These payments are in addition
to the $50 million prepayment on September 30, 1996 and result in total
prepayments of $175 million since the recapitalization of the Company in
May of 1996.


As a result of the merger, the financial results for the fiscal year include
31 weeks of operations from the Smitty's stores. Additionally, Smith's
closed its California region comprised of 34 stores and a large
distribution center during the first quarter of 1996. Due to the effect on
operations caused by the closure of California and the merger with
Smitty's, comparisons of quarterly and year-to-date results to the prior
year's comparable periods are not meaningful.


Al Rowland, Smith's President and Chief Operating Officer, said, "I am
pleased with the financial results for fiscal 1996. We focused on our
operational opportunities and integrating Smith's and Smitty's which
resulted in achieving record EBITDA of $260 million for the year. Also
since May 1996, we have focused on reducing the leverage of the
Company. I am pleased that the proceeds from the sale of excess assets,
including California assets, and related tax benefits received, in addition
to cash flow from operations, have permitted us to make $175 million in
prepayments on the bank term loans."


The Company operates stores in seven Intermountain and Southwestern
states with principal markets in Salt Lake City, Phoenix, Las Vegas and
Albuquerque.


         SMITH'S FOOD & DRUG CENTERS, INC.
         CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
         (Dollar amounts in thousands)

                                                         Dec
                                                         28,  
                                                             

                                                         Dec
                                                         30,
                                                           199
                                                           6  
                                                              

                                                              
                                                            19
                                                           95
         ASSETS
         CURRENT ASSETS
           Cash and cash equivalents                    
           $48,466        $16,079 Rebates and accounts
           receivable                23,624         23,802
           Inventories                                  
           371,912        394,982 Other current assets        
                            136,031         45,155 Assets held
           for sale                           40,348       
           125,000
         TOTAL CURRENT ASSETS                           
         620,381        605,018 PROPERTY AND EQUIPMENT
           Land                                         
           195,408        276,626 Buildings                   
                            591,075        610,049 Leasehold
           improvements                         46,266        
           55,830 Property under capitalized leases           
             33,212 Fixtures and equipment                    
              530,894        509,524
                                                       1,396,8
                                                       55     
                                                       1,452,0
                                                       29
           Less allowances for depreciation
             and amortization                           
             440,811        390,933
                                                         956,0
                                                         44   
                                                          

                                                         1,061
                                                         ,096

         GOODWILL, less accumulated
           amortization of $1,684                       
           121,484
         OTHER ASSETS                                    
         88,096         20,066
                                                      $1,786,0
                                                      05    
                                                      $1,686,1
                                                      80

         LIABILITIES AND STOCKHOLDERS' EQUITY
         CURRENT LIABILITIES
           Trade accounts payable                      
           $269,717       $214,152 Accrued sales and other
           taxes                  29,480         38,724
           Accrued payroll and related benefits          
           78,950         65,785 Other accrued expenses       
                            69,303         43,695 Current
           maturities                             36,883      
             21,940 Accrued restructuring costs               
               25,678         58,000
         TOTAL CURRENT LIABILITIES                      
         510,011        442,296 LONG-TERM DEBT, less current
         maturities       1,313,926        717,761 OBLIGATIONS
         UNDER CAPITAL LEASES,
           less current portion                          
           25,585
         ACCRUED RESTRUCTURING COSTS,
           less current portion                          
           10,421         40,000
         DEFERRED INCOME TAXES                           
         13,330         58,600 OTHER LONG-TERM LIABILITIES    
                          31,616          7,492 REDEEMABLE
         PREFERRED STOCK,
           less current maturities                        
           3,319          3,311
         COMMON STOCKHOLDERS' EQUITY                  
         (122,203)        416,720
                                                      $1,786,0
                                                      05    
                                                      $1,686,1
                                                      80

         SMITH'S FOOD & DRUG CENTERS, INC.
         CONDENSED CONSOLIDATED STATEMENTS OF INCOME
         (UNAUDITED) (Dollar amounts in thousands, except per
         share data)

                                     Thirteen                 
                                      Fifty-Two
                                    Weeks Ended               
                                    Weeks Ended
                               Dec 28,        Dec 30,      Dec
                               28,     Dec 30,
                                1996            1995        
                                1996         1995

         Net sales              $766,185      $798,324  
         $2,889,988   $3,083,737 Cost of goods sold     
         586,161       616,099    2,237,789    2,386,707
                                 180,024       182,225     
                                 652,199      697,030

         Expenses:
           Operating, selling
            and administrative   105,389       117,604     
            449,247      461,401
           Depreciation and
            amortization          25,700        27,811      
            93,951      104,963
           Interest               33,555        15,086     
           104,602       60,046 Amortization of deferred
            financing costs        2,304           108       
            5,406          432
           Restructuring Charges               140,000     
           201,622      140,000
                                 166,948       300,609     
                                 854,828      766,842

         INCOME (LOSS) BEFORE
           INCOME TAXES AND
           EXTRAORDINARY CHARGE   13,076     (118,384)   
           (202,629)     (69,812)
         Income taxes (benefit)    5,300      (48,300)    
         (80,245)     (29,300) INCOME (LOSS) BEFORE
           EXTRAORDINARY CHARGE    7,776      (70,084)   
           (122,384)     (40,512)
         Extraordinary charge on
           extinguishment of debt,
           net of tax benefit                               
           41,782
         NET INCOME (LOSS)        $7,776     $(70,084)  
         $(164,166)    $(40,512) Income (loss) per share of
         Common Stock:
           Income (loss) before
             extraordinary charge  $0.48       $(2.79)     
             $(6.28)      $(1.62)
           Extraordinary charge                             
           (2.14) Net income (loss)       $0.48       $(2.79)
               $(8.42)      $(1.62)
         Average number of common
           shares outstanding
           (In thousands)         16,182        25,071      
           19,493       25,031

         SMITH'S FOOD & DRUG CENTERS, INC.
         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
         (UNAUDITED) (Dollar amounts in thousands)
                                                      Fifty-Tw
                                                      o     
                                                      Fifty-Tw
                                                      o
                                                     Weeks
                                                     Ended   
                                                     Weeks
                                                     Ended
                                                       Dec 28,
                                                             

                                                       Dec 30,
                                                        1996  
                                                              

                                                          1995

         OPERATING ACTIVITIES:
           Net loss                                  
           $(164,166)      $(40,512) Adjustments to reconcile
           net loss
             to net cash provided by
             operating activities:
               Depreciation and amortization             
               93,951        104,963 Deferred income tax
               benefit              (58,703)       (53,400)
               Restructuring charges                    
               201,622        140,000 Extraordinary charge    
                                 69,636 Other                 
                                    5,957          1,000
                                                         148,2
                                                         97   
                                                            

                                                         152,0
                                                         51
               Changes in operating assets and
                 liabilities:
                   Rebates and accounts receivable        
                   8,966          1,794 Inventories           
                                   68,894        (5,418) Other
                   current assets                 (44,271)    
                      (5,397) Trade accounts payable          
                         18,483       (21,691) Accrued sales
                   and other taxes        (15,608)         
                   6,583 Accrued payroll and
                     related benefits                     
                     3,391          7,058
                   Accrued other expenses              
                   (29,882)          6,101 Accrued
                   restructuring costs          (76,232)
         CASH PROVIDED BY OPERATING ACTIVITIES           
         82,038        141,081 INVESTING ACTIVITIES:
           Additions to property and equipment        
           (101,303)      (149,035) Proceeds from sale of
           property
             and equipment                              
             146,075          5,841
           Other investing activities                     
           4,269        (3,480)
         CASH PROVIDED BY (USED IN)
           INVESTING ACTIVITIES                          
           49,041      (146,674)
         FINANCING ACTIVITIES:
           Additions to long-term debt                
           1,380,000         45,978 Payments on long-term debt
                            (944,712)       (18,686) Purchases
           of Treasury Stock                 (453,636)       
           (9,039) Payments for deferred financing costs      
            (79,224)           (22) Payment of dividends      
                              (3,761)       (14,917) Other
           financing activities                      2,641    
                4,170
         CASH PROVIDED BY (USED IN)
           FINANCING ACTIVITIES                        
           (98,692)          7,484
         NET INCREASE IN
           CASH AND CASH EQUIVALENTS                     
           32,387          1,891
         Cash and cash equivalents at
           beginning of year                             
           16,079         14,188
         CASH AND CASH EQUIVALENTS AT END OF YEAR       
         $48,466        $16,079

SOURCE Smith's Food & Drug Centers Inc./CONTACT: Matthew G.
Tezak of Smith's Food & Drug Centers, Inc., 801-974-1400/