Current Report Filing (8-k)
November 27 2018 - 4:38PM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event
reported): November 27, 2018 (November 20, 2018)
FRED’S, INC.
(Exact Name of Registrant as Specified in Charter)
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Commission File Number 001-14565
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Tennessee
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62-0634010
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(State or other Jurisdiction
of Incorporation)
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(IRS Employer
Identification No.)
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4300 New Getwell Road, Memphis, Tennessee
38118
(Address of principal executive offices)
(901) 365-8880
Registrant’s telephone number, including
area code
Not Applicable
(Former name or former address, if changed since
last report)
Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Indicate
by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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If an
emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financing accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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Item 2.01. Completion of Acquisition or Disposition of Assets.
As previously disclosed, on September 7, 2018, Fred’s
Stores of Tennessee, Inc., a Delaware corporation (“Seller”) and wholly owned subsidiary of Fred’s, Inc. (the
“Company”), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Walgreen Co.,
an Illinois corporation (“Buyer”). On October 23, 2018, Seller and Buyer entered into an amendment to the Asset Purchase
Agreement (the “Amendment”). Under the Asset Purchase Agreement, as amended by the Amendment (the “Amended Asset
Purchase Agreement”), Buyer agreed to purchase from Seller certain prescription files and related data and records, retail
pharmaceutical inventory, and certain other assets from 179 of the Company’s retail pharmacy stores (collectively, the “Assets”)
for a cash purchase price of approximately $157 million plus an amount equal to the value of the inventory included in the Assets
up to an approximately $35 million cap, in each case subject to certain adjustments (the “Transaction”). As of November
20, 2018, the Company had completed the disposition of a “significant amount” of the Company’s assets within
the meaning of, and in accordance with, the standards set forth in Item 2.01 of Form 8-K.
As previously disclosed, Seller has been transferring ownership
of the Assets to Buyer in a series of ongoing closings, with the initial closing occurring on November 13, 2018 and the final closing
expected to occur in the first quarter of calendar year 2019. As of November 20, 2018, Seller has transferred to Buyer Assets from
53 stores and has received cash proceeds of approximately $68.3 million for such Assets, subject to adjustment for the final inventory
valuation as described in the Amended Asset Purchase Agreement.
The proceeds received in the Transaction will be used to pay
down the Company’s existing indebtedness or for general corporate purposes. The remaining closings of the Transaction are
subject to certain customary closing conditions as specified in the Amended Asset Purchase Agreement. Neither the Company nor Seller
has any material relationship with Buyer or its subsidiaries out of the ordinary course of business other than in respect of the
transactions contemplated by the Amended Asset Purchase Agreement, including the continued disposition of Assets.
This Current Report on Form 8-K is being filed to provide unaudited
pro forma financial information for the Company giving effect to the sale of all Assets contemplated to be sold to Buyer pursuant
to the Amended Asset Purchase Agreement. Specifically, this pro forma financial information gives effect to the completion of the
sale of the Assets pursuant to the terms of the Amended Asset Purchase Agreement, including the sale of the remaining Assets that
had not occurred as of November 20, 2018 given that such sales are probable, in accordance with Article 11 of Regulation S-X. Although
the Company expects that the sale of the remaining Assets to Buyer will be consummated during the first quarter of calendar year
2019, there can be no assurance that all of the remaining closings will occur, and there can be no assurance that the Company’s
actual results would have been as set forth in the pro forma financial statements, and such differences could be material. In accordance
with U.S. Securities and Exchange Commission (“SEC”) rules, the Company intends to file additional Current Reports
on Form 8-K to disclose the closings of the sale of the remaining Assets pursuant to the Amended Asset Purchase Agreement when
the Company completes the subsequent disposition of a significant amount of the Assets pursuant to the applicable legal requirements.
However, the Company does not intend to update the pro forma financial statements contained herein unless the Company is required
to update such pro forma financial statements by applicable legal requirements.
The foregoing description of the Amended Asset Purchase Agreement
and the transactions contemplated thereby is not complete and is subject to, and qualified in its entirety by, the full text of
the Asset Purchase Agreement, a copy of which was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed
with the SEC on September 10, 2018, which is incorporated herein by reference, and by the Amendment, a copy of which was filed
as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 14, 2018, and which is incorporated
herein by reference.
Item 9.01. Financial Statements and
Exhibits.
(b) Pro Forma Financial Information
The following pro forma financial information for the Company
with respect to the transaction is filed as Exhibit 99.1 hereto and is incorporated into this item by reference:
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Explanatory Note and Basis of Presentation
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Unaudited Pro Forma Condensed Consolidated Balance Sheet as of August
4, 2018
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Unaudited Pro Forma Condensed Consolidated Statements of Operations
for (i) the twenty-six weeks ended August 4, 2018 and (ii) the fiscal years ended (a) February 3, 2018 and (b) January 28, 2017
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(d) Exhibits.
Forward-Looking Statements
Statements about the expected timing, completion
and effects of the Transaction and the other transactions contemplated by the Amended Asset Purchase Agreement and all other statements
herein and therein, other than historical facts, constitute forward-looking statements within the meaning of the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on these forward-looking
statements and any such forward-looking statements are qualified in their entirety by reference to the following cautionary statements.
All forward-looking statements speak only
as of the date hereof and are based on current expectations and involve a number of assumptions, risks and uncertainties that could
cause the actual results to differ materially from such forward-looking statements. The Company may not be able to complete the
Transaction on the terms described above or other acceptable terms or at all because of a number of factors, including without
limitation, (i) the occurrence of any event, change or other circumstances that could give rise to the termination of the Amended
Asset Purchase Agreement or (ii) the failure to satisfy the applicable closing conditions set forth in the Amended Asset Purchase
Agreement.
Actual results may differ materially from
those indicated by such forward-looking statements. In addition, the forward-looking statements represent the Company’s views
as of the date on which such statements were made. The Company anticipates that subsequent events and developments may cause its
views to change. These forward-looking statements should not be relied upon as representing the Company’s views as of any
date subsequent to the date hereof. Additional factors that may affect the business or financial results of the Company are described
in the risk factors included in the Company’s public filings with the U.S. Securities and Exchange Commission, including
the Company’s Annual Report on Form 10-K for the fiscal year ended February 3, 2018 and the Company’s subsequently
filed periodic reports, which factors are incorporated herein by reference. The Company expressly disclaims a duty to provide updates
to forward-looking statements, whether as a result of new information, future events or other occurrences, except as required by
law.
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 hereunto
duly authorized.
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FRED’S, INC.
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Date: November 27, 2018
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By:
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/s/ Joseph M. Anto
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Name:
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Joseph M. Anto
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Title:
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Interim Chief Executive Officer, Executive Vice Present, Chief Financial Officer and Secretary
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