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Smart & Final Employees Offered Stock Option Deal

February 27, 2001|From Bloomberg News

Smart & Final Inc., the Los Angeles-based grocery warehouse store operator, has offered its employees a way to gain value from stock options that have been worthless for more than two years.

The company's board adopted a voluntary exchange program in which directors and employees can trade in their stock options for restricted stock through March 9, the company said in a Securities and Exchange Commission filing.

The stock options eligible for exchange have an exercise price of $14 or more. The company's shares fell below $14 in July 1998 in a plunge that saw the stock price sink to $5.50 on Feb. 18, 2000, before struggling back to above the $10 mark this month.

The company implemented the exchange program because the "underwater options," or options with an exercise price above the market price, "are not achieving the performance and employee-retention purposes for which they were first granted," the company said.

Company officials couldn't be reached to comment.

Smart & Final's options-exchange program comes as several companies have made similar moves to lower the price employees must pay to exercise options or to replace underwater options with new grants. Some firms have bowed to investor demands that shareholders first approve such changes.

Amazon.com Inc. announced last month an offer to swap existing options for options with a lower exercise price, and Walt Disney Co. said last week that it wouldn't cut the price on stock options without shareholder approval.

Cisco Systems Inc. Chief Executive John Chambers said Monday, however, that he has no plans to reprice employees' stock options or lay off any workers as the company faces a slump in its sales and share price.

Smart & Final's exchange program applies to stock options with exercise prices ranging from $14 to $23.63. The number of shares of restricted stock to be exchanged will be less than the number of options, the SEC filing said.

The board of directors, which approved the program Dec. 7, isn't making any recommendation about whether employees should take advantage of the swap.

Founded in Los Angeles in 1871, Smart & Final operates 221 stores in seven states and Mexico. The company last week reported fourth-quarter earnings of 11 cents per share compared with 6 cents a year earlier.

Smart & Final shares dropped 10 cents to close at $10.15 on the New York Stock Exchange.

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