10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended February 25, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ____________ to ____________ Commission file number: 1-5418 SUPERVALU INC. (Exact name of registrant as specified in its charter) Delaware 41-0617000 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 11840 Valley View Road Eden Prairie, Minnesota 55344 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: (612) 828-4000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Common Stock, par value $1.00 New York Stock Exchange per share Preferred Share Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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 ----- ------ [Cover page 1 of 2 pages] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.[ X ] The aggregate market value of the voting stock held by non-affiliates of the Registrant as of April 1, 1995 was approximately $1,481,806,646 (based upon the closing price of Registrant's Common Stock on the New York Stock Exchange on March 31, 1995). Number of shares of $1.00 par value Common Stock outstanding as of April 1, 1995: 69,679,964 DOCUMENTS INCORPORATED BY REFERENCE 1. Portions of Registrant's Annual Report to Stockholders for the fiscal year ended February 25, 1995 are incorporated into Parts I, II and IV, as specifically set forth in said Parts I, II and IV. 2. Portions of Registrant's definitive Proxy Statement filed for Registrant's 1995 Annual Meeting of Stockholders are incorporated into Part III, as specifically set forth in said Part III. [Cover page 2 of 2 pages] PART I ------ Unless the context indicates otherwise, all references to the "Company," "SUPERVALU" or "Registrant" in this Annual Report on Form 10-K relate to SUPERVALU INC. and its majority-owned subsidiaries. ITEM 1. BUSINESS ------ -------- GENERAL DEVELOPMENT ------------------- SUPERVALU INC., a Delaware corporation organized in 1925 as the successor to two wholesale grocery firms established in the 1870's, has its principal executive offices at 11840 Valley View Road, Eden Prairie, Minnesota 55344 (Telephone: 612-828-4000). The Company is one of the largest food wholesalers and approximately the 12th largest food retailer in the nation. It is primarily engaged in the business of selling food and nonfood products at wholesale. The Company supplied approximately 4,600 stores in 48 states as of the close of fiscal 1995 and approximately 4,350 stores at the close of fiscal 1994. In addition, the Company also operated at fiscal year-end 296 retail food supermarkets, discount food superstores, supercenters, combination stores, limited-assortment and other stores, primarily under the names of Cub Foods, Shop 'n Save, bigg's, Save-A-Lot, Scott's Foods, Laneco and Hornbacher's. While not material to overall operations to date, the Company also serves a growing military sales operation that serves over 130 military bases and its international sales operation serves customers in many foreign countries. In 1991, SUPERVALU began the implementation of a strategy to focus on its core food distribution and retailing business segments. The Company executed the first major step of this strategy in October 1991 with the sale of 54% of SUPERVALU's interest in ShopKo Stores, Inc. ("ShopKo"), its discount general merchandise subsidiary, through an initial public offering. SUPERVALU continues to own a 46% interest in ShopKo which, at fiscal year end, operated 124 discount department stores in 15 states. In October 1992, the Company completed the acquisition of Wetterau Incorporated ("Wetterau"), resulting in a significant expansion of the geographic market and customer base compared with that previously served by SUPERVALU food wholesale and retail operations. In fiscal 1994, the Company completed the integration of Wetterau's administrative and support services and combined or closed a number of distribution operations to eliminate inefficiencies and overlap. In fiscal 1995, the Company closed the Bloomington, Indiana facility acquired from Wetterau and consolidated its business with the Company's Champaign, Illinois distribution center. The Company completed the consolidation of its distribution operations in Pittsburgh, Pennsylvania by combining the former Wetterau Belle Vernon operations with the Pittsburgh division. In addition, the Butler, Pennsylvania general merchandise facility was closed and its business along with the Pittsburgh division's general merchandise business was transferred to the regional general merchandise distribution center in Easton, Pennsylvania. In March 1994, the Company acquired Sweet Life Foods, Inc. ("Sweet Life"), a privately-owned grocery wholesale distributor serving Massachusetts, Connecticut, Maine and Eastern New York. This acquisition further strengthened the Company's New England customer base by adding 280 additional stores as customers. During fiscal 1995, the Company consolidated distribution volume in the Northeast by transferring its wholesale grocery business from the Northboro, Massachusetts distribution facility acquired from Sweet Life to the Company's distribution center in Andover, Massachusetts. 3 In fiscal 1995, the administrative operations of two wholesale food divisions in Anniston, Alabama and Atlanta, Georgia were consolidated into the Southeast division, with its headquarters in Anniston, Alabama. In addition, the Company has consolidated its operations from its warehouse facility in Presque Isle, Maine to Portland, Maine. In May 1994, the Company acquired the assets of Wetterau Properties Inc. ("WPI"), a publicly owned real estate investment trust which was formed by Wetterau prior to the Company's acquisition of Wetterau. Most of the properties owned by WPI had been acquired from and leased back to Wetterau; the Company was the tenant for all but one of the properties acquired from WPI in the transaction. In August 1994, the Company acquired Hyper Shoppes, Inc. ("Hyper Shoppes"), which operates five bigg's supercenters and two bigg's discount food superstores in the Cincinnati, Louisville and Denver markets. Prior to the transaction, SUPERVALU held a minority ownership interest in Hyper Shoppes and was the principal supplier to the bigg's stores. The Company has also made other smaller acquisitions from time to time to further the growth of its food distribution, retailing and bakery operations. In December 1994, the Company announced a change in operating strategy which included the decision to restructure certain of its operations and reassess the recoverability of underlying assets. Restructuring and other charges totaling $244 million were recorded in the third quarter to provide for the implementation of the plan formulated under the ADVANTAGE project (described below), and the sale, closure or restructure of certain retail businesses. The aggregate charges also included the recognition of certain asset impairments based on the Company's established process of reviewing intangibles on a periodic recurring basis. The restructuring plan, which was approved by the Board of Directors, resulted from a comprehensive review of industry trends and Company operations, and represents a new business vision for the Company. Management's objective under the ADVANTAGE project is to fundamentally change its business processes by improving the effectiveness and efficiency of the Company's food distribution system thus lowering the cost of goods to the Company's customers and by enhancing the market driving support to retailer customers. Management's retail food objective is to improve retail performance by eliminating certain operations and assets that do not add shareholder value and focusing its retail efforts on building retail formats which it believes will produce the best results in the future. The ADVANTAGE project has three major initiatives: creation of a transformed logistics network; development of enhanced market driving capabilities at retail; and adoption of a new approach to pricing. Additional description of the Company's business, including the restructuring charges and the ADVANTAGE project, is contained in the "Financial Review" portion of the Company's Annual Report to the Stockholders for fiscal year 1995 (Exhibit 13), pages 16-21, which description is incorporated herein by reference. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS --------------------------------------------- Financial information about the Company's industry segments for the five years ended February 25, 1995 is incorporated by reference to page 24 of the Company's Annual Report to Stockholders for fiscal year 1995 (Exhibit 13). 4 FOOD DISTRIBUTION OPERATIONS ---------------------------- DESCRIPTION OF FOOD STORES SERVED. SUPERVALU food distribution divisions sell food and non-food products at wholesale and offer a variety of retail support services to independently-owned retail food stores. At February 25, 1995, the Company's 25 food distribution divisions and four general merchandise divisions were the principal supplier to approximately 4,600 retail grocery and general merchandise stores, compared with 4,350 stores served at the end of fiscal 1994. In connection with the ADVANTAGE project, the Company recently established six marketing regions to provide purchasing and marketing support for its retail food and general merchandise customers throughout the country. The Company's wholesale food divisions have been grouped geographically under a regional president and support staff. A regional logistics configuration anchored by a regional distribution facility is also being established to align food distribution companies geographically by region. Retail food stores served by the Company at wholesale range in size from small convenience stores to 200,000 square foot supercenters. The Company's wholesale customer base includes single and multiple store independent operators, affiliated stores, regional chains and Company owned stores, operating in a variety of formats including limited assortment stores, discount food stores, conventional and upscale supermarkets and combination stores. Retail food stores served by the Company at wholesale offer a wide variety of groceries, meats, dairy products, frozen foods and fresh fruits and vegetables. In addition, most stores carry an assortment of non-food items, including tobacco products, health and beauty aids, paper products, cleaning supplies, and small household and clothing items. The number and variety of such non-food items have expanded significantly in recent years in line with the general industry trend but vary considerably from store to store. Many stores offer one or more specialized services, such as delicatessens, food courts, in-store bakeries, liquor departments, video, pharmacies, housewares and flower shops. The Company is constantly endeavoring to strengthen the retail food stores it serves by assisting in the upgrading and enlarging of existing stores, establishing new stores, more aggressively merchandising its stores, developing diverse formats and retail strategies, and assisting stores to serve markets which are increasingly segmented. PRODUCTS SUPPLIED. SUPERVALU continues to supply its retail food stores with an increasing variety and selection of products, including national and regional brands and the Company's own line of private label product programs. Such trademarks as SUPER VALU, FLAV-O-RITE, CHATEAU, SHOP 'N SAVE, SHOPPERS VALUE, IGA, NATURE'S BEST, HOME BEST, BI-RITE, FOODLAND, PREFERRED SELECTION, SWEET LIFE, WHY PAY MORE, and others accounted for approximately 9.7 percent of the Company's fiscal 1995 sales to retail food stores. Private labels cover a broad range of products including every department in the store: frozen, dairy, grocery, meats, bakery, deli, general merchandise and produce. These products are produced to the Company's specifications by many suppliers, some of whom are the nation's foremost manufacturers. In addition to making these products available, SUPERVALU also assumes a large part of the marketing and merchandising role, conducts private label sales events, and provides a wide array of in-store promotional and advertising tools and training expertise to assist the retailer in conducting private label programs to maximize sales and produce profit advantage. Hazelwood Farms Bakeries, Inc., a subsidiary, manufactures frozen dough and bakery products primarily for the in-store bakery market, and has customers in all 50 states as well as Canada and Mexico. Its customer base consists of wholesale food distributors, supermarket chains (including 5 company-owned, affiliated and non-affiliated stores), fast food chains and institutional food service companies. The Company has no significant long-term purchase obligations and considers that it has adequate and alternative sources of supply for most of its purchased products. DISTRIBUTION AND COSTS OF MERCHANDISE. Deliveries to retail stores are made from the Company's distribution centers, usually in Company-owned trucks. In addition, many types of meats, dairy products, bakery and other products purchased from the Company are delivered directly by suppliers to retail stores under programs established by the Company. Wholesale sales are made to the Company's retailers at the applicable price and fee schedule in effect at the time of sale. In connection with the ADVANTAGE project, the Company reexamined its pricing structure and intends to test a new method of pricing. The primary objectives of the new pricing structure are to reflect the cost of goods from the manufacturer, charge for the actual cost to serve and pass through all allowances and promotional monies to the retailer. The Company seeks to lower its cost of product by regionalizing its food buying operations and centralizing buying for general merchandise and health and beauty products to better leverage the buying power of larger product orders. As part of the ADVANTAGE project, planned "upstream" facilities will provide regional distribution for slow moving grocery product, general merchandise and health and beauty care products. Construction of the Anniston, Alabama prototype "upstream" facility is underway and is scheduled to become operational in January 1996. A second facility, a 530,000 square feet distribution facility in Perryman, Maryland was acquired in November 1994 and will be used both for relocation of the Company's Maryland division and selected "upstream" functions. The integration of administrative functions, consolidation and increased mechanization of facilities, and construction of regional facilities is also expected to improve operating efficiencies and lower costs of operations. These actions are intended to reduce the cost of product to the Company's retailers, thereby enhancing their competitive position. SERVICES SUPPLIED. In addition to supplying merchandise, the Company also offers retail stores a wide variety of support services, including advertising, promotional and merchandising assistance, store management assistance, retail operations counseling, computerized inventory control and ordering services, accounting, bill paying and payroll services (largely computerized), store layout and equipment planning (including point-of-sale electronic scanning), cash management, tax counseling, building design and construction services, financial and budget planning, assistance in selection and purchasing or leasing of store sites, consumer and market research and personnel management assistance. Separate charges are made for most, but not all, of these services. Certain Company subsidiaries operate as insurance agencies and provide comprehensive insurance programs to the Company's affiliated retailers. The Company is currently in the process of analyzing the services to be supplied and the fees to be charged to independent retailers in connection with the ADVANTAGE project and its new pricing structure. The Company may provide financial assistance to retail stores served or to be served by it, including the acquisition and subleasing of store properties, the making of direct loans, and providing guarantees or other forms of financing. In general, loans made by the Company to independent retailers are secured by liens on inventory and/or equipment, by personal guarantees and other security. When the Company subleases store properties to retailers, the rentals are generally as high or higher than those paid by the Company. 6 RETAIL FOOD OPERATIONS ---------------------- At fiscal year end, the Company's retail businesses operated a total of 296 retail stores under several formats, including food supermarkets, discount food superstores, supercenters, combination stores and limited- assortment stores. These diverse formats enable the Company to operate in a variety of markets under widely differing competitive circumstances. At the close of fiscal 1995, the Company's retail stores operated under the following principal formats: Cub Foods consists of 114 discount food superstores, 58 of which are franchised to independent retailers and 56 of which are corporately operated. Plans for fiscal 1996 include the opening of four corporate stores and two franchised stores. Shop 'n Save consists of 27 discount food stores located in Eastern Missouri and Southern Illinois; one new replacement store and eight remodeling projects are planned for fiscal 1996. bigg's consists of five supercenters and two discount food superstores that operate in the Cincinnati, Louisville and Denver markets. One new discount food superstore is planned for fiscal 1996. bigg's was acquired by the Company in August 1994 when the Company acquired Hyper Shoppes, Inc. Save-A-Lot is the Company's combined wholesale and retail limited assortment operation. At fiscal year end there were 472 Save-A-Lot limited assortment stores of which 106 were corporately operated. Save- A-Lot projects adding 100 stores in fiscal 1996 including 20 corporately owned stores. Scott's Foods is a 17-store group (which includes two Cub Foods stores) located in the Fort Wayne, Indiana area. One new store and two remodels are planned for fiscal 1996. The Company's LANECO division operates a diverse mix of 46 retail outlets comprised predominantly of supermarkets, supercenters, and discount food stores. These stores operate mainly under the Laneco, Foodland, Ultra IGA, and Price Slasher names and formats. The Laneco division is in the process of a substantial restructuring in which seven stores are being closed, including all department store retail units. Four stores were closed in the fourth quarter of fiscal 1995 and the remaining three stores are in the process of closing. No new stores are planned for fiscal 1996. Hornbacher's is a five-store group located in the Fargo, North Dakota marketplace, with no new stores planned for fiscal 1996. Other formats operated by the Company include County Market, MAX CLUB, SUPERVALU, IGA, Foodland, Rite Choice and Twin Valu Foods. As part of the restructuring plan, the Company is selling or closing approximately 30 retail stores, including the two Twin Valu supercenters and the four Laneco stores closed in fiscal 1995. TRADEMARKS ---------- The Company offers its customers the opportunity to franchise a concept or license a servicemark. This program helps the customer compete by providing, as part of the franchise or license program, a complete business concept, group advertising, private label products and other benefits. The Company is the franchisor or has the right to license retailers to use certain 7 servicemarks such as CUB FOODS, SAVE-A-LOT, COUNTY MARKET, SHOP 'N SAVE, NEWMARKET, SUPERVALU, IGA, FOODLAND and SUPERVALU FOOD & DRUG. The Company registers a substantial number of its trademarks/servicemarks in the United States Patent and Trademark Office, including many of its private label product trademarks and servicemarks. See "Food Distribution Operations -- Products Supplied". The Company considers certain of its trademarks and servicemarks to be of material importance to its business and actively defends and enforces such trademarks and servicemarks. COMPETITION ----------- Since the Company's food business consists principally of supplying independently owned and operated retail food stores, its success is dependent upon the ability of those retail store operators to compete successfully with other retail food stores, and also upon its own ability to compete successfully with other wholesale distributors. Both the wholesale and the retail food businesses are highly competitive. At the wholesale level, the Company competes directly with a number of wholesalers which supply affiliated and unaffiliated retailers and indirectly with the warehouse and distribution operations of the large integrated chains. The Company competes with other wholesale food distributors in most of its market areas on the basis of product price, quality and assortment, schedule and reliability of deliveries, the range and quality of services provided, the location of the store sites and distribution facilities and its willingness to provide financing to its customers. See "Food Distribution Operations -- Distribution and Costs of Merchandise" and "--Services Supplied." The principal competitive factors that affect the Company's retail segment are location, price, quality, service and consumer loyalty. Local, regional, and national food chains, as well as independent food stores and markets, comprise the principal competition, although the Company also faces competition from alternative formats including supercenters and membership warehouse clubs and from convenience stores and specialty and discount retailers. EMPLOYEES --------- At February 25, 1995, the Company had approximately 43,500 employees. Approximately 18,500 employees are covered by collective bargaining agreements. During fiscal year 1995, 32 agreements covering 7,500 employees were re-negotiated, with no work stoppages. In fiscal year 1996, 25 contracts covering approximately 6,000 employees will expire. The Company expects approximately 4,300 positions will be eliminated under the re-engineering efforts, approximately 2,600 of which in connection with the ADVANTAGE project and the remainder in connection with the retail restructuring. The Company believes that it has generally good relationships with its employees. INVESTMENT IN SHOPKO -------------------- Following its initial public offering in October 1991, ShopKo has been operated as an independent company. The Company's 46% investment in ShopKo is accounted for by the equity method. The following summary of ShopKo's business has been prepared from information provided by ShopKo. Additional information regarding ShopKo is available from the reports and other documents prepared and filed by ShopKo with the Securities and Exchange Commission. As of February 25, 1995, ShopKo operated 124 discount retail stores in 15 states. ShopKo's corporate headquarters is located in Green Bay, Wisconsin and its stores are located primarily in medium-sized and smaller cities in the Upper Midwest and in Mountain and Pacific Northwest states. ShopKo stores carry a wide selection of branded and private label nondurable "hard line" goods such as housewares, music/videos, health and beauty aids, toys and sporting goods and "soft line" goods such as home textiles, men's, women's and children's apparel, shoes, jewelry, 8 cosmetics and accessories. ShopKo also provides pharmacy and optical services in most of its stores. ShopKo's stores average 90,260 square feet with approximately 83% of the stores greater than 74,000 square feet. During fiscal 1995, ShopKo opened seven new stores and renovated 32 stores. ShopKo plans to open five new stores and remodel up to 13 stores in fiscal 1996. The discount general merchandise business is very competitive. ShopKo competes in most of its markets with a variety of national discount chains, including Wal-Mart and K Mart, and with regional discount chains such as Target, and local discount stores, certain discount specialty retail chains and deep discount drug operations. Of ShopKo's five directors, two are officers of SUPERVALU. OTHER INVESTMENTS ----------------- The Company has ownership interests in business ventures related to its food distribution and retail segments, which include investments in Waremart, Inc., Foodland Distributors, and Super-Discount Markets, Inc. The results of these investments are accounted for using the equity method. The aggregate carrying amount of these investments is less than 2% of total assets. ITEM 2. PROPERTIES ------ ---------- The Company's principal executive offices are located in a 180,000 square foot corporate headquarters facility located in Eden Prairie, Minnesota, a western suburb of Minneapolis, Minnesota. This headquarters facility is located on a 140 acre site owned by the Company. In February 1994, the Company purchased a 240,000 square foot office facility, One Southwest Crossing, which is located within one mile of its principal executive offices. At the end of fiscal 1995, One Southwest Crossing was occupied by third party tenants and certain members of the Company's headquarters staff. The Company plans to continue to move certain of its headquarters staff to One Southwest Crossing as the remaining third party leases expire. The following table lists the location, use and approximate size of the Company's principal warehouse, distribution and manufacturing facilities utilized in the Company's food distribution operations as of February 25, 1995:
Square Square Footage Footage Division or Location Use Owned Leased ------------------------- ----------------------------- --------- --------- Andover, Massachusetts Distribution Center & Offices 454,000 Anniston, Alabama Distribution Center & Offices 497,000 Atlanta, Georgia Distribution Center & Offices 628,000 Atlanta, Georgia Bakery, Warehouse and Offices 104,700 Belle Vernon, Pennsylvania Distribution Center & Offices 713,000 Billings, Montana Distribution Center & Offices 255,000 10,800 Bismarck, North Dakota Distribution Center & Offices 257,000 Buffalo Grove, Illinois Bakery, Warehouse and Offices 47,000 Champaign, Illinois Distribution Center & Offices 820,000 172,000 Charleston, South Carolina General Merchandise Warehouse and Offices 113,000 Chaska, Minnesota Private Label Manufacturing, Warehouse and Offices 340,000 Columbus, Ohio Save-A-Lot Distribution Center and Offices 183,000 Cranston, Rhode Island Distribution Center & Offices 573,000 91,000
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Square Square Footage Footage Division or Location Use Owned Leased ----------------------------- ----------------------------------- --------- --------- Cumberland, Rhode Island Distribution Center & Offices 240,000 Denver, Colorado Distribution Center & Offices 721,000 Des Moines, Iowa Distribution Center & Offices 663,000 Desloge, Missouri General Merchandise Warehouse and Offices 137,000 Fargo, North Dakota Distribution Center & Offices 493,000 Ft. Wayne, Indiana Distribution Center & Offices 1,040,000 Grand Prairie, Texas Save-A-Lot Distribution Center and Offices 139,000 Great Falls, Montana Distribution Center & Offices 154,000 Green Bay, Wisconsin Distribution Center & Offices 430,000 475,000 Greenville, Kentucky Distribution Center & Offices 309,000 Hammond, Louisiana Distribution Center & Offices 257,000 Hagerstown, Maryland Save-A-Lot Distribution Center and Offices 100,000 Hazelwood, Missouri Distribution Center & Offices 459,000 310,000 Hazelwood, Missouri Bakery, Warehouse and Offices 228,600 Hazleton, Pennsylvania Bakery, Warehouse and Offices 112,900 Jackson, Tennessee Save-A-Lot Distribution Center and Offices 144,000 Indianola, Mississippi Distribution Center & Offices 695,000 Keene, New Hampshire Distribution Center & Offices 176,000 Lexington, Kentucky Save-A-Lot Distribution Center and Offices 293,000 Livonia, Michigan/1/ Foodland Distributors, Distribution Center 1,275,000 Los Angeles, California General Merchandise Warehouse and Offices 227,000 Lower Nazareth Township, General Merchandise Warehouse Pennsylvania (Easton) and Offices 230,000 McMinnville, Oregon Bakery, Warehouse and Offices 110,400 Milton, West Virginia Distribution Center & Offices 6,000 268,000 Minneapolis, Minnesota Distribution Center & Offices 1,594,000 New Stanton, Pennsylvania Distribution Center & Offices 726,000 Perryman, Maryland Distribution Center & Offices 511,000 Pleasant Prairie, Wisconsin Distribution Center & Offices 595,000 Portland, Maine Distribution Center & Offices 194,000 Providence, Rhode Island Distribution Center & Offices 463,000 Quincy, Florida Distribution Center & Offices 772,000 Reading, Pennsylvania Distribution Center & Offices 300,560 311,611 Rochester, New York Bakery, Warehouse and Offices 33,200 Scott City, Missouri Distribution Center & Offices 278,000 Spokane, Washington Distribution Center & Offices 551,000 Suffield, Connecticut Distribution Center & Offices 650,000 Tacoma, Washington Distribution Center & Offices 910,000 113,000
---------------- /1/ Leased by Foodland Distributors in which the Company is a 50% partner. 10
Square Square Footage Footage Division or Location Use Owned Leased ----------------------------- ----------------------------------- --------- --------- Vinita Park, Missouri Save-A-Lot Distribution Center and Offices 147,000 Williamsport, Maryland Distribution Center & Offices 274,000 Xenia, Ohio Distribution Center & Offices 511,000 170,000
The Company is in the process of selling its Chaska, Minnesota facility listed above. The Company also owns certain additional real estate consisting primarily of shopping centers and retail store locations, which in the aggregate are not material to its operations. The Company is also involved in active negotiation for the sale or closing of certain retail units which have not been publicly identified at this time. The Company owns, in addition to merchandise inventories, substantially all of the trucks and trailers used in making deliveries in its food operations. Retail food stores operated by the Company generally have been leased, usually for a term of 15-25 years plus renewal options. The Company is increasingly developing and owning its own retail store sites. The Company also leases properties for subletting to certain affiliated retailers for periods generally not exceeding 20 years plus renewal options. Incorporated by reference hereto is the Note captioned "Leases" of Notes to Consolidated Financial Statements on pages 32-33 of the Company's Annual Report to Stockholders for fiscal year 1995 (Exhibit 13) for information regarding lease commitments for facilities occupied by the Company. Incorporated by reference hereto is the Note captioned "Debt" of Notes to Consolidated Financial Statements on page 32 of the Company's Annual Report to Stockholders for fiscal year 1995 (Exhibit 13) for information regarding properties held subject to mortgages. Management of the Company believes the physical facilities and equipment described above are adequate for the Company's present needs and businesses. ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business of the Registrant. 11 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There was no matter submitted during the fourth quarter of fiscal year 1995 to a vote of the security holders of Registrant. EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information concerning the executive officers of the Company as of April 1, 1995.
YEAR OTHER POSITIONS ELECTED HELD WITH THE TO PRESENT COMPANY NAME AGE PRESENT POSITION POSITION 1990-1995 -------------------------------------------------------------------------------- Michael W. Wright 56 Director, 1981 Chairman of the Board, President and Chief Executive Officer Laurence L. Anderson 53 Executive Vice 1995 Executive Vice President; and President, President and Regional Chief Operating President - Officer - Retail Support Retail Food Companies, Companies 1992-1995; Senior Vice President, 1988-1992 Phillip A. Dabill 52 Executive Vice 1995 Executive Vice President; and President, President, Regional Retail Services President - and Corporate Retail Support Strategies Companies, 1992-1995; Senior Vice President, 1988-1992 Jeffrey C. Girard 47 Executive Vice 1992 Senior Vice President, President, Chief Financial Chief Financial Officer Officer, 1990-1992 Jeffrey Noddle 48 Executive Vice 1995 Executive Vice President; and President, President and Marketing, Chief Operating 1992-1995; Officer - Senior Vice Wholesale Food President, Companies Marketing, 1988-1992 David L. Boehnen 48 Senior Vice 1991 President, Law and External Relations Gregory C. Heying 46 Senior Vice 1994 Vice President, President, Distribution, Distribution 1988-1994 George Z. Lopuch 45 Senior Vice 1992 Vice President, President, 1989-1992 Strategic Planning & Research H. S. (Skip) Smith III 48 Senior Vice 1994 Vice President, President, Information Information Services, Services 1986-1994 Ronald C. Tortelli 49 Senior Vice 1988 President, Human Resources James R. Campbell 54 Vice President, 1993 Senior Vice Market President, Development Northeast Region, 1992-1993; Minneapolis, Great Lakes and former Green Bay Divisions President, 1984-1992 George Chirtea 58 Vice President, 1993 Wetterau Senior Merchandising Vice President, Marketing, and First Vice President -Retail Operations, 1992-1993 Isaiah Harris 42 Vice President, 1991 Director, Controller Internal Control, 1987-1991
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YEAR OTHER POSITIONS ELECTED HELD WITH THE TO PRESENT COMPANY NAME AGE PRESENT POSITION POSITION 1990-1995 -------------------------------------------------------------------------------- John H. Hooley 43 Vice President, 1993 Cub Foods SUPERVALU; Cub Division Foods Division President, President and Chief Operating Chief Executive Officer, Officer 1992-1993; Vice President, Merchandising, 1991-1992; Cub Foods Division Senior Vice President, Marketing and Merchandising, 1989-1991 Michael L. Mulligan 50 Vice President, 1992 Vice President, Sales Communications, 1985-1992 Jonathan M. Seltzer 45 Vice President, 1991 Director, Industry & Corporate Government Planning, Relations 1989-1991 E. Wayne Shives 53 Vice President, 1993 Vice President, Employee Labor Relations Relations, 1988-1993 Kristine K. Sundberg 46 Vice President, 1993 Investor Relations & Communications
The term of office of each executive officer is from one annual meeting of the directors until the next annual meeting of directors or until a successor for each is elected. There are no arrangements or understandings between any of the executive officers of the Registrant and any other person (not an officer or director of the Registrant acting as such) pursuant to which any of the executive officers were selected as an officer of the Registrant. There are no immediate family relationships between or among any of the executive officers of the Company. Each of the executive officers of the Company has been in the employ of the Company or its subsidiaries for more than five years, except for Jeffrey C. Girard, David L. Boehnen, George Chirtea and Kristine K. Sundberg. Mr. Girard is Executive Vice President and Chief Financial Officer; from 1983 to 1990 he held positions as Vice President, Senior Vice President, Executive Vice President and Chief Financial Officer of Supermarkets General Corporation (a supermarket company, not affiliated with the Company); he joined the Company and was elected Senior Vice President and Chief Financial Officer in 1990, and was elected to his present position in 1992. Mr. Boehnen is Senior Vice President-Law and External Relations; from January, 1990 to April, 1991, he was Vice President of Administration of Supercomputer Systems, Incorporated (a computer company); prior to that time he was with the Dorsey & Whitney law firm for approximately 18 years, the last 12 as a partner; he joined the Company and was elected to his present position in April 1991. Mr. Chirtea is Vice President, Merchandising. Prior to the Company's acquisition of Wetterau, Mr. Chirtea was Senior Vice President, Marketing, Wetterau and Wetterau First Vice President, Retail Operations from 1984 through 1992. Ms. Sundberg was elected Vice President - Investor Relations and Communications in November, 1993; from November 1990 through November 1993, she held positions as Director, Public Affairs and Communications and Director, Communications, with Minnegasco (a public utility providing natural gas services); prior to that time she was Director, Investor Relations with Diversified Energies, Inc. (a holding company for diversified energy services) from 1986 through October 1990. 13 PART II ------- ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information called for by Item 5 as to the principal market upon which the Registrant's Common Stock is traded and as to the approximate record number of stockholders of the Registrant is hereby incorporated by reference to the Registrant's Annual Report to the Stockholders for fiscal year 1995 (Exhibit 13) page 41. The information called for by Item 5 as to the Registrant's quarterly dividends and quarterly stock price ranges for the last two fiscal years is hereby incorporated by reference to the paragraph captioned "Common Stock Price" in the Financial Review Section of the Registrant's Annual Report to the Stockholders for fiscal year 1995 (Exhibit 13) page 17. The information called for by Item 5 as to restrictions on the payment of dividends by the Registrant is hereby incorporated by reference to the Note captioned "Debt" of Notes to Consolidated Financial Statements of the Registrant's Annual Report to the Stockholders for fiscal year 1995 (Exhibit 13) page 32. ITEM 6. SELECTED FINANCIAL DATA The information called for by Item 6 is incorporated by reference to the Registrant's Annual Report to the Stockholders for fiscal year 1995 (Exhibit 13) pages 22-23. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information called for by Item 7 is incorporated by reference to the Registrant's Annual Report to the Stockholders for fiscal year 1995 (Exhibit 13) pages 16-21. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information called for by Item 8 is incorporated by reference to the Registrant's Annual Report to the Stockholders for fiscal year 1995 (Exhibit 13) pages 24-38. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 14 PART III -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information called for by Item 10, as to (a) Directors of the Registrant and (b) compliance with Section 16(a) of the Securities and Exchange Act of 1934, is incorporated by reference to the Registrant's definitive Proxy Statement dated May 25, 1995 filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant's 1995 Annual Meeting of Stockholders at pages 4-5. Certain information regarding executive officers is included in Part I above. ITEM 11. EXECUTIVE COMPENSATION The information called for by Item 11 is incorporated by reference to the Registrant's definitive Proxy Statement dated May 25, 1995 filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant's 1995 Annual Meeting of Stockholders at pages 7-13. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information called for by Item 12 is incorporated by reference to the Registrant's definitive Proxy Statement dated May 25, 1995 filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant's 1995 Annual Meeting of Stockholders at pages 2-3. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information called for by Item 13 is incorporated by reference to the Registrant's definitive Proxy Statement dated May 25, 1995 filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant's 1995 Annual Meeting of Stockholders at page 13. PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K Form 10-K (a) 1. Financial Statements: The following consolidated financial statements of SUPERVALU INC. and Subsidiaries are included in Part II, Item 8 (which incorporates information by reference to the Registrant's 1995 Annual Report to Stockholders (Exhibit 13)): Independent Auditors' Report Consolidated balance sheets as of February 25, 1995 and February 26, 1994. Consolidated statements of earnings for each of the three years in the period ended February 25, 1995 15 Consolidated statements of cash flows for each of the three years in the period ended February 25, 1995 Consolidated statements of stockholders' equity for each of the three years in the period ended February 25, 1995 Notes to consolidated financial statements 2. Consolidated Financial Statement Page on this Form 10-K Schedules for SUPERVALU INC. and ---------------------- Subsidiaries: Selected Quarterly Financial Data - for the two years ended February 25, 1995 - included in Part II, Item 8 (which incorporates information by reference to the Registrant's 1995 Annual Report to Stockholders (Exhibit 13)). Independent Auditors' report on schedules 22 Schedule VIII - Valuation and qualifying 23 accounts All other schedules are omitted because they are not applicable or not required. 3. Exhibits: (3)(i) Articles of Incorporation. Restated Certificate of Incorporation is incorporated by reference to Exhibit (3)(i) to the Registrant's Annual Report on Form 10-K for the year ended February 26, 1994. (3)(ii) Bylaws. Bylaws, as amended, is incorporated by reference to Exhibit 3.2 to the Registrant's Registration Statement on Form S-3, Registration No. 33-52422. (4) Instruments defining the rights of security holders, including indentures: a. Indenture dated as of July 1, 1987 between the Registrant and Bankers Trust Company, as Trustee, relating to certain outstanding debt securities of the Registrant, is incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-3, Registration No. 33- 52422. b. First Supplemental Indenture dated as of August 1, 1990 between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987 between the Registrant and Bankers Trust Company, as Trustee, is incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form S-3, Registration No. 33-52422. c. Second Supplemental Indenture dated as of October 1, 1992 between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987 between the Registrant and Bankers Trust Company, as Trustee, is incorporated by reference to Exhibit 4.1 to the Registrant's Form 8-K Report dated November 13, 1992. 16 d. Letter of Representations dated November 12, 1992 between the Registrant, Bankers Trust Company, as Trustee, and The Depository Trust Company relating to certain outstanding debt securities of the Registrant, is incorporated by reference to Exhibit 4.5 to the Registrant's Form 8-K Report dated November 13, 1992. e. Four-year Revolving Credit Agreement dated as of October 26, 1992 among the Registrant, the Banks named therein, Citibank, N.A., as Agent, Bankers Trust Company, Pittsburgh National Bank and Nationsbank of North Carolina, N.A., as Co-Agents, and First Bank National Association, as Lead Manager, is incorporated by reference to Exhibit 4.16 to the Registrant's Registration Statement on Form S-3, Registration No. 33- 52422. f. Rights Agreement dated as of April 12, 1989 between the Registrant and Norwest Bank Minnesota, N.A., as Rights Agent, is incorporated by reference to Exhibit 1 to the Registrant's Form 8-K Report dated April 19, 1989. Pursuant to Instruction 4(iii) of Item 601(b) of Regulation S-K, copies of certain instruments defining the rights of holders of certain long-term debt of the Registrant and its subsidiaries are not filed and, in lieu thereof, the Registrant agrees to furnish copies thereof to the Securities and Exchange Commission upon request. (10) Material Contracts. The following exhibits are management contracts, compensatory plans or arrangements required to be filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K: a. SUPERVALU INC. 1993 Stock Plan, as amended. b. SUPERVALU INC. 1976 Executive Employees Stock Option Plan, as amended, is incorporated by reference to Exhibit (10)b. to Registrant's Annual Report on Form 10-K for the year ended February 23, 1991. c. SUPERVALU INC. 1978 Stock Appreciation Rights Plan, as amended, is incorporated by reference to Exhibit (10)c. to Registrant's Annual Report on Form 10-K for the year ended February 25, 1989. d. Executive Incentive Bonus Plan is incorporated by reference to Exhibit (10)e. to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 10, 1994. e. Directors Deferred Compensation Plan, as amended, is incorporated by reference to Exhibit (10)e. to the Registrant's Annual Report on Form 10-K for the year ended February 27, 1988. f. SUPERVALU INC. 1983 Employee Stock Option Plan, as amended. g. SUPERVALU INC. 1989 Stock Appreciation Rights Plan is incorporated by reference to Exhibit (10)g. to Registrant's Annual Report on Form 10-K for the year ended February 25, 1989. h. SUPERVALU INC. ERISA Excess Plan Restatement is incorporated by reference to Exhibit (10)h. to Registrant's Annual Report on Form 10-K for the year ended February 24, 1990. 17 i. SUPERVALU INC. Deferred Compensation Plan is incorporated by reference to Exhibit (10)i. to Registrant's Annual Report on Form 10-K for the year ended February 23, 1991. j. SUPERVALU INC. Executive Deferred Compensation Plan as amended and Executive Deferred Compensation Plan II are incorporated by reference to Exhibit (10)j. to Registrant's Annual Report on Form 10-K for the year ended February 25, 1989. k. Form of Agreement used in connection with Registrant's Executive Post-Retirement Survivor Benefit Program, is incorporated by reference to Exhibit (10)j. to Registrant's Annual Report on Form 10-K for the year ended February 27, 1988. l. Forms of Change of Control Severance Agreements entered into with certain officers of the Registrant are incorporated by reference to Exhibit (10)l. to Registrant's Annual Report on Form 10-K for the year ended February 27, 1993. m. SUPERVALU INC. Agreement and Plans Trust dated as of November 14, 1988 is incorporated by reference to Exhibit (10)n. to Registrant's Annual Report on Form 10-K for the year ended February 25, 1989. n. First Amendment (dated May 7, 1991) to SUPERVALU INC. Agreement and Plans Trust dated as of November 14, 1988, is incorporated by reference to Exhibit (10)o. to Registrant's Annual Report on Form 10-K for the year ended February 23, 1991. o. SUPERVALU INC. Directors Retirement Program, as amended, is incorporated by reference to Exhibit (10)q. to the Registrant's Annual Report on Form 10-K for the year ended February 26, 1994. p. Supplemental Executive Retirement Plan is incorporated by reference to Exhibit (10)r. to Registrant's Form 10-K Report for the year ended February 24, 1990. q. SUPERVALU INC. Long-Term Incentive Plan is incorporated by reference to Exhibit (10)s. to Registrant's Form 10-K Report for the year ended February 29, 1992. r. SUPERVALU INC. Bonus Plan for Designated Corporate Officers is incorporated by reference to Exhibit (10)t. to Registrant's Annual Report on Form 10-K for the year ended February 26, 1994. s. Consulting Agreement dated April 19, 1995 between SUPERVALU INC. and Gordy Hippen. (12) Ratio of Earnings to Fixed Charges. (13) Portions of 1995 Annual Report to Stockholders of Registrant. (21) Subsidiaries of the Registrant. (23) Consent of Independent Auditors. (24) Power of Attorney. 18 (27) Financial Data Schedule. (b) Reports on Form 8-K: No report on Form 8-K was filed during the fourth fiscal quarter of the fiscal year ended February 25, 1995. 19 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) 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. SUPERVALU INC. (Registrant) DATE: May 25, 1995 By: /s/ Michael W. Wright -------------------------- Michael W. Wright Chairman of the Board; President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE --------- ----- ---- /s/ Michael W. Wright Chairman of the Board; President; May 25, 1995 ---------------------------- Chief Executive Officer; and Michael W. Wright Director (principal executive officer) /s/ Jeffrey C. Girard Executive Vice President and May 25, 1995 ---------------------------- Chief Financial Officer (principal Jeffrey C. Girard financial officer) /s/ Isaiah Harris Vice President and Controller May 25, 1995 ---------------------------- (principal accounting officer) Isaiah Harris /s/ Herman Cain* Director ---------------------------- Herman Cain /s/ Stephen I. D'Agostino* Director ---------------------------- Stephen I. D'Agostino /s/ Edwin C. Gage* Director ---------------------------- Edwin C. Gage /s/ Vernon H. Heath* Director ---------------------------- Vernon H. Heath
20 /s/ William A. Hodder* Director ---------------------------- William A. Hodder /s/ Garnett L. Keith, Jr.* Director ---------------------------- Garnett L. Keith, Jr. /s/ Richard L. Knowlton* Director ---------------------------- Richard L. Knowlton /s/ Richard D. McCormick* Director ---------------------------- Richard D. McCormick /s/ Harriet Perlmutter* Director ---------------------------- Harriet Perlmutter /s/ Carole F. St. Mark* Director ---------------------------- Carole F. St. Mark /s/ Winston R. Wallin* Director ---------------------------- Winston R. Wallin *Executed this 25th day of May, 1995, on behalf of the indicated Directors by Michael W. Wright, duly appointed Attorney-in-Fact. /s/ Michael W. Wright --------------------- Michael W. Wright Attorney-in-Fact 21 INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders SUPERVALU INC. Eden Prairie, Minnesota We have audited the consolidated financial statements of SUPERVALU INC. (the Company) and subsidiaries as of February 25, 1995 and February 26, 1994 and for each of the three years in the period ended February 25, 1995 and have issued our report thereon dated April 10, 1995, such financial statements and report are included in your 1995 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the financial statement schedule of SUPERVALU INC. and subsidiaries, listed in Item 14. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Minneapolis, Minnesota April 10, 1995 22 SUPERVALU INC. and Subsidiaries SCHEDULE VIII - Valuation and Qualifying Accounts
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E -------------------------------- ----------- ----------------------------- ---------- ----------- (1) (2) Balance at Charged Balance at beginning to costs Charged to end Description of year and expenses other accounts Deductions of year -------------------------------- ----------- ------------ -------------- ---------- ----------- Allowance for doubtful accounts: Year ended: February 25, 1995 $33,820,000 1,627,000 423,000 (A) 6,602,000 (B) $29,268,000 February 26, 1994 38,593,000 7,165,000 -- (A) 11,938,000 (B) 33,820,000 February 27, 1993 11,636,000 7,867,000 27,020,000 (A) 7,930,000 (B) 38,593,000
(A) Beginning account balances of companies acquired. (B) Balance consists of accounts determined to be uncollectible and charged against reserves, net of collection on accounts previously charged off. 23 EXHIBIT INDEX ------------- SUPERVALU INC. ANNUAL REPORT ON FORM 10-K EXHIBIT NUMBER EXHIBIT -------------- ------- *(3)(i) Restated Certificate of Incorporation. *(3)(ii) Bylaws, as amended. *(4)a. Indenture dated as of July 1, 1987 between the Registrant and Bankers Trust Company, as Trustee, relating to certain outstanding debt securities of the Registrant. *(4)b. First Supplemental Indenture dated as of August 1, 1990 between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987 between the Registrant and Bankers Trust Company, as Trustee. *(4)c. Second Supplemental Indenture dated as of October 1, 1992 between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987 between the Registrant and Bankers Trust Company, as Trustee. *(4)d. Letter of Representations dated November 12, 1992 between the Registrant, Bankers Trust Company, as Trustee, and The Depository Trust Company relating to certain outstanding debt securities of the Registrant. *(4)e. Four-year Revolving Credit Agreement dated as of October 26, 1992 among the Registrant, the Banks named therein, Citibank, N.A., as Agent, Bankers Trust Company, Pittsburgh National Bank and Nationsbank of North Carolina, N.A., as Co-Agents, and First Bank National Association, as Lead Manager. *(4)f. Rights Agreement dated as of April 12, 1989 between the Registrant and Norwest Bank Minnesota, N.A., as Rights Agent. (10)a. SUPERVALU INC. 1993 Stock Plan, as amended. *(10)b. SUPERVALU INC. 1976 Executive Employees Stock Option Plan, as amended. *(10)c. SUPERVALU INC. 1978 Stock Appreciation Rights Plan, as amended. *(10)d. Executive Incentive Bonus Plan. *(10)e. Directors Deferred Compensation Plan, as amended. (10)f. SUPERVALU INC. 1983 Employee Stock Option Plan, as amended. *(10)g. SUPERVALU INC. 1989 Stock Appreciation Rights Plan. *(10)h. SUPERVALU INC. ERISA Excess Plan Restatement. *(10)i. SUPERVALU INC. Deferred Compensation Plan. (1 of 2) 24 *(10)j. SUPERVALU INC. Executive Deferred Compensation Plan as amended and Executive Deferred Compensation Plan II. *(10)k. Form of Agreement used in connection with Registrant's Executive Post-Retirement Survivor Benefit Program. *(10)l. Forms of Change of Control Severance Agreements entered into with certain officers of the Registrant. *(10)m. SUPERVALU INC. Agreement and Plans Trust dated as of November 14, 1988. *(10)n. First Amendment (dated May 7, 1991) to SUPERVALU INC. Agreement and Plans Trust dated as of November 14, 1988. *(10)o. SUPERVALU INC. Directors Retirement Program, as amended. *(10)p. Supplemental Executive Retirement Plan *(10)q. SUPERVALU INC. Long-Term Incentive Plan *(10)r. SUPERVALU INC. Bonus Plan for Designated Corporate Officers. (10)s. Consulting Agreement dated April 19, 1995 between SUPERVALU INC. and Gordy Hippen. (12) Ratio of Earnings to Fixed Charges. (13) Portions of 1995 Annual Report to Stockholders of Registrant. (21) Subsidiaries of the Registrant. (23) Consent of Independent Auditors. (24) Power of Attorney. (27) Financial Data Schedule. _________________ * Incorporated by Reference (2 of 2) 25 EX-10.A 2 1993 STOCK PLAN EXHIBIT 10(a). SUPERVALU INC. 1993 STOCK PLAN Section 1. Purpose. ------------------- The purpose of the Plan is to promote the interests of the Company and its stockholders by aiding the Company in attracting and retaining key management personnel capable of assuring the future success of the Company, to offer such personnel incentives to put forth maximum efforts for the success of the Company's business and to afford such personnel an opportunity to acquire a proprietary interest in the Company. Section 2. Definitions. ----------------------- As used in the Plan, the following terms shall have the meanings set forth below: (a) "Affiliate" shall mean (i) any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and (ii) any entity in which the Company has a significant equity interest, in each case as determined by the Committee. (b) "Award" shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award, or Other Stock-Based Award granted under the Plan. (c) "Award Agreement" shall mean any written agreement, contract or other instrument or document evidencing any Award granted under the Plan. (d) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder. (e) "Committee" shall mean a committee of the Board of Directors of the Company designated by such Board to administer the Plan, which shall consist of members appointed from time to time by the Board of Directors and shall be comprised of not less than such number of directors as shall be required to permit the Plan to satisfy the requirements of Rule 16b-3. Each member of the Committee shall be a "disinterested person" within the meaning of Rule 16b-3. -1- (f) "Company" shall mean SUPERVALU INC., a Delaware corporation, and any successor corporation. (g) "Eligible Person" shall mean any employee, officer, consultant or independent contractor providing services to the Company or any Affiliate who the Committee determines to be an Eligible Person. A director of the Company who is not also an employee of the Company or an Affiliate shall not be an Eligible Person. (h) "Fair Market Value" shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. Notwithstanding the foregoing, unless otherwise determined by the Committee, the Fair Market Value of Shares on a given date for purposes of the Plan shall be the average of the opening and closing sale price of the Shares as reported on the New York Stock Exchange on such date or, if such Exchange is not open for trading on such date, on the day closest to such date when such Exchange is open for trading. (i) "Incentive Stock Option" shall mean an option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code or any successor provision. (j) "Non-Qualified Stock Option" shall mean an option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option. (k) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock Option, and shall include Restoration Options. (l) "Other Stock-Based Award" shall mean any right granted under Section 6(f) of the Plan. (m) "Participant" shall mean an Eligible Person designated to be granted an Award under the Plan. (n) "Performance Award" shall mean any right granted under Section 6(d) of the Plan. (o) "Person" shall mean any individual, corporation, partnership, association or trust. (p) "Plan" shall mean this 1993 Stock Plan, as amended from time to time. -2- (q) "Restoration Option" shall mean any Option granted under Section 6(a)(iv) of the Plan. (r) "Restricted Stock" shall mean any Share granted under Section 6(c) of the Plan. (s) "Restricted Stock Unit" shall mean any unit granted under Section 6(c) of the Plan evidencing the right to receive a Share (or a cash payment equal to the Fair Market Value of a Share) at some future date. (t) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, or any successor rule or regulation. (u) "Shares" shall mean shares of Common Stock, $1.00 par value, of the Company or such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4(c) of the Plan. (v) "Stock Appreciation Right" shall mean any right granted under Section 6(b) of the Plan. Section 3. Administration. -------------------------- (a) Power and Authority of the Committee. The Plan shall be administered by the Committee. Subject to the express provisions of the Plan and to applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or with respect to which payments, rights or other matters are to be calculated in connection with) each Award; (iv) determine the terms and conditions of any Award or Award Agreement; (v) amend the terms and conditions of any Award or Award Agreement and accelerate the exercisability of Options or the lapse of restrictions relating to Restricted Stock, Restricted Stock Units or other Awards; (vi) determine whether, to what extent and under what circumstances Awards may be exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited or suspended; (vii) determine whether, to what extent and under what circumstances cash, Shares, other securities, other Awards, other property and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or the Committee; (viii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (ix) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (x) make any other determination and take any other action that the Committee -3- deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon any Participant, any holder or beneficiary of any Award and any employee of the Company or any Affiliate. (b) Delegation. The Committee may delegate its powers and duties under the Plan to one or more officers of the Company or any Affiliate or a committee of such officers, subject to such terms, conditions and limitations as the Committee may establish in its sole discretion; provided, however, that the Committee shall not delegate its powers and duties under the Plan with regard to officers or directors of the Company or any Affiliate who are subject to Section 16 of the Securities Exchange Act of 1934, as amended. (c) Power and Authority of the Board of Directors. Notwithstanding anything to the contrary contained herein, the Board of Directors may, at any time and from time to time, without any further action of the Committee, exercise the powers and duties of the Committee under the Plan with regard to any Person who is not an officer or director of the Company or any Affiliate who is subject to Section 16 of the Securities Exchange Act of 1934, as amended. Section 4. Shares Available for Awards. --------------------------------------- (a) Shares Available. Subject to adjustment as provided in Section 4(c), the aggregate number of Shares which may be issued under all Awards under the Plan shall be 3,500,000. Shares to be issued under the Plan may be either Shares reacquired and held in the treasury or authorized but unissued Shares. If any Shares covered by an Award or to which an Award relates are not purchased or are forfeited, or if an Award otherwise terminates without delivery of any Shares, then the number of Shares counted against the aggregate number of Shares available under the Plan with respect to such Award, to the extent of any such forfeiture or termination, shall again be available for granting Awards under the Plan. (b) Accounting for Awards. For purposes of this Section 4, if an Award entitles the holder thereof to receive or purchase Shares, the number of Shares covered by such Award or to which such Award relates shall be counted on the date of grant of such Award against the aggregate number of Shares available for granting Awards under the Plan. (c) Adjustments. In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, other securities or -4- other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or other property) which thereafter may be made the subject of Awards, (ii) the number and type of Shares (or other securities or other property) subject to outstanding Awards and (iii) the purchase or exercise price with respect to any Award; provided, however, that the number of Shares covered by any Award or to which such Award relates shall always be a whole number. Section 5. Eligibility. ----------------------- Any Eligible Person, including any Eligible Person who is an officer or director of the Company or any Affiliate, shall be eligible to be designated a Participant. In determining which Eligible Persons shall receive an Award and the terms of any Award, the Committee may take into account the nature of the services rendered by the respective Eligible Persons, their present and potential contributions to the success of the Company or such other factors as the Committee, in its discretion, shall deem relevant. Notwithstanding the foregoing, an Incentive Stock Option may only be granted to full or part-time employees (which term as used herein includes, without limitation, officers and directors who are also employees) and an Incentive Stock Option shall not be granted to an employee of an Affiliate unless such Affiliate is also a "subsidiary corporation" of the Company within the meaning of Section 424(f) of the Code or any successor provision. Section 6. Awards. ------------------ (a) Options. The Committee is hereby authorized to grant Options to Participants with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine: (i) Exercise Price. The purchase price per Share purchasable under an Option shall be determined by the Committee; provided, however, that such purchase price shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such Option. (ii) Option Term. The term of each Option shall be fixed by the Committee. -5- (iii) Time and Method of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part and the method or methods by which, and the form or forms (including, without limitation, cash, Shares, promissory notes, other securities, other Awards or other property, or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price) in which, payment of the exercise price with respect thereto may be made or deemed to have been made. (iv) Restoration Options. The Committee may grant Restoration Options, separately or together with another Option, pursuant to which, subject to the terms and conditions established by the Committee and any applicable requirements of Rule 16b-3 or any other applicable law, the Participant would be granted a new Option when the payment of the exercise price of the option to which such Restoration Option relates is made by the delivery or withholding of Shares pursuant to the relevant provisions of the plan or agreement relating to such option, which new Option would be an Option to purchase the number of Shares not exceeding the sum of (A) the number of Shares so provided as consideration upon the exercise of the previously granted option to which such Restoration Option relates and (B) the number of Shares, if any, tendered or withheld as payment of the amount to be withheld under applicable tax laws in connection with the exercise of the option to which such Restoration Option relates pursuant to the relevant provisions of the plan or agreement relating to such option. Restoration Options may be granted with respect to options previously granted under the Plan or any other stock option plan of the Company, and may be granted in connection with any option granted under the Plan or any other stock option plan of the Company at the time of such grant; provided, however, that Restoration Options may not be granted with respect to any option granted to a Non-Employee Director under the Company's 1983 Employee Stock Option Plan. (b) Stock Appreciation Rights. The Committee is hereby authorized to grant Stock Appreciation Rights to Participants subject to the terms of the Plan and any applicable Award Agreement. A Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive upon exercise thereof the excess of (i) the Fair Market Value of one Share on the date of exercise (or, if the Committee shall so determine, at any time during a specified period before or after the date of exercise) over (ii) the grant price of the Stock Appreciation Right as specified by the Committee, which price shall not be less than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right. Subject to the terms of the Plan and any applicable Award Agreement, the grant price, term, methods of exercise, dates of exercise, methods of settlement and any other terms and conditions of any Stock Appreciation Right shall be as determined by the Committee. The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate. -6- (c) Restricted Stock and Restricted Stock Units. The Committee is hereby authorized to grant Awards of Restricted Stock and Restricted Stock Units to Participants with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine: (i) Restrictions. Shares of Restricted Stock and Restricted Stock Units shall be subject to such restrictions as the Committee may impose (including, without limitation, any limitation on the right to vote a Share of Restricted Stock or the right to receive any dividend or other right or property with respect thereto), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise as the Committee may deem appropriate. (ii) Stock Certificates. Any Restricted Stock granted under the Plan shall be evidenced by issuance of a stock certificate or certificates, which certificate or certificates shall be held by the Company. Such certificate or certificates shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock. In the case of Restricted Stock Units, no Shares shall be issued at the time such Awards are granted. (iii) Forfeiture; Delivery of Shares. Except as otherwise determined by the Committee, upon termination of employment (as determined under criteria established by the Committee) during the applicable restriction period, all Shares of Restricted Stock and all Restricted Stock Units at such time subject to restriction shall be forfeited and reacquired by the Company; provided, however, that the Committee may, when it finds that a waiver would be in the best interest of the Company, waive in whole or in part any or all remaining restrictions with respect to Shares of Restricted Stock or Restricted Stock Units. Any Share representing Restricted Stock that is no longer subject to restrictions shall be delivered to the holder thereof promptly after the applicable restrictions lapse or are waived. Upon the lapse or waiver of restrictions and the restricted period relating to Restricted Stock Units evidencing the right to receive Shares, such Shares shall be issued and delivered to the holders of the Restricted Stock Units. (d) Performance Awards. The Committee is hereby authorized to grant Performance Awards to Participants subject to the terms of the Plan and any applicable Award Agreement. A Performance Award granted under the Plan (i) may be denominated or payable in cash, Shares (including, without limitation, Restricted Stock), other securities, other Awards or other property and (ii) shall confer on the holder thereof the right to receive payments, in whole or in part, upon the achievement of such performance goals during such performance periods as the Committee shall establish. Subject to the terms of the Plan and any applicable Award Agreement, the performance -7- goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award granted, the amount of any payment or transfer to be made pursuant to any Performance Award and any other terms and conditions of any Performance Award shall be determined by the Committee. (e) Other Stock-Based Awards. The Committee is hereby authorized to grant to Participants such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as are deemed by the Committee to be consistent with the purpose of the Plan; provided, however, that such grants must comply with Rule 16b-3 and applicable law. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions of such Awards. Shares or other securities delivered pursuant to a purchase right granted under this Section 6(f) shall be purchased for such consideration, which may be paid by such method or methods and in such form or forms (including without limitation, cash, Shares, promissory notes, other securities, other Awards or other property or any combination thereof), as the Committee shall determine, the value of which consideration, as established by the Committee, shall not be less than 100% of the Fair Market Value of such Shares or other securities as of the date such purchase right is granted. (f) General. (i) No Cash Consideration for Awards. Awards shall be granted for no cash consideration or for such minimal cash consideration as may be required by applicable law. (ii) Awards May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any other Award or any award granted under any plan of the Company or any Affiliate other than the Plan. Awards granted in addition to or in tandem with other Awards or in addition to or in tandem with awards granted under any such other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards or awards. (iii) Forms of Payment under Awards. Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be made by the Company or an Affiliate upon the grant, exercise or payment of an Award may be made in such form or forms as the Committee shall determine (including, without limitation, cash, Shares, promissory notes, other securities, other Awards or other property or any combination thereof), and may be made in a single payment or transfer, in installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures -8- may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments. (iv) Limits on Transfer of Awards. No Award and no right under any such Award shall be transferable by a Participant otherwise than by will or by the laws of descent and distribution; provided, however, that, if so determined by the Committee, a Participant may, in the manner established by the Committee, designate a beneficiary or beneficiaries to exercise the rights of the Participant and receive any property distributable with respect to any Award upon the death of the Participant. Each Award or right under any Award shall be exercisable during the Participant's lifetime only by the Participant or, if permissible under applicable law, by the Participant's guardian or legal representative. No Award or right under any such Award may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate. (v) Term of Awards. The term of each Award shall be for such period as may be determined by the Committee. (vi) Restrictions; Securities Exchange Listing. All certificates for Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. If the Shares or other securities are traded on a securities exchange, the Company shall not be required to deliver any Shares or other securities covered by an Award unless and until such Shares or other securities have been admitted for trading on such securities exchange. Section 7. Amendment and Termination; Adjustments. -------------------------------------------------- Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Agreement or in the Plan: (a) Amendments to the Plan. The Board of Directors of the Company may amend, alter, suspend, discontinue or terminate the Plan; provided, however, that, notwithstanding any other provision of the Plan or any Award Agreement, without the approval of the stockholders of the Company, no such amendment, alteration, suspension, discontinuation or termination shall be made that, absent such approval: -9- (i) would cause Rule 16b-3 to become unavailable with respect to the Plan; (ii) would violate the rules or regulations of the New York Stock Exchange, any other securities exchange or the National Association of Securities Dealers, Inc. that are applicable to the Company; or (iii) would cause the Company to be unable, under the Code, to grant Incentive Stock Options under the Plan. (b) Amendments to Awards. The Committee may waive any conditions of or rights of the Company under any outstanding Award, prospectively or retroactively. The Committee may not amend, alter, suspend, discontinue or terminate any outstanding Award, prospectively or retroactively, without the consent of the Participant or holder or beneficiary thereof, except as otherwise herein provided. (c) Correction of Defects, Omissions and Inconsistencies. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry the Plan into effect. Section 8. Income Tax Withholding. ---------------------------------- In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes, which are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant. In order to assist a Participant in paying all or a portion of the federal and state taxes to be withheld or collected upon exercise or receipt of (or the lapse of restrictions relating to) an Award, the Committee, in its discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant to satisfy such tax obligation by (i) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes or (ii) delivering to the Company Shares other than Shares issuable upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes. The election, if any, must be made on or before the date that the amount of tax to be withheld is determined. -10- Section 9. General Provisions. ------------------------------ (a) No Rights to Awards. No Eligible Person, Participant or other Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Eligible Persons, Participants or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to any Participant or with respect to different Participants. (b) Award Agreements. No Participant will have rights under an Award granted to such Participant unless and until an Award Agreement shall have been duly executed on behalf of the Company. (c) No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. (d) No Right to Employment. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the Company or any Affiliate, nor will it affect in any way the right of the Company or an Affiliate to terminate such employment at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. (e) Governing Law. The validity, construction and effect of the Plan or any Award, and any rules and regulations relating to the Plan or any Award, shall be determined in accordance with the laws of the State of Minnesota. (f) Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect. (g) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any -11- Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate. (h) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash shall be paid in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. (i) Headings. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. Section 10. Effective Date of the Plan. --------------------------------------- The Plan shall be effective as of April 14, 1993, subject to approval by the stockholders of the Company within one year thereafter. Section 11. Term of the Plan. ----------------------------- Unless the Plan shall have been discontinued or terminated as provided in Section 7(a), the Plan shall terminate on April 13, 2003. No Award shall be granted after the termination of the Plan. However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond the termination of the Plan, and the authority of the Committee provided for hereunder with respect to the Plan and any Awards, and the authority of the Board of Directors of the Company to amend the Plan, shall extend beyond the termination of the Plan. -12- Amended 2-8-95 EX-10.F 3 1983 EMPLOYEE STOCK PLAN EXHIBIT 10(f). SUPER VALU STORES, INC. 1983 EMPLOYEE STOCK OPTION PLAN 1. PURPOSE. The purpose of this Plan is to promote the interests of Super Valu Stores, Inc., a Delaware corporation (the "Corporation"), and its stockholders by encouraging selected key salaried management employees of the Corporation, and members of the Board of Directors who are not also employees of the Corporation, to invest in shares of the Corporation's Common Stock with the increased personal interest and effort in the continued success and progress of the business that stock ownership can produce, and by providing additional means of attracting and retaining competent executive personnel and directors. 2. ADMINISTRATION; GRANTING OF OPTIONS. The Plan shall be administered by the Board of Directors of the Corporation. The Board of Directors shall have full authority in its discretion, but subject to the express provisions of the Plan, to: (a) determine the purchase price of the Common Stock covered by each option; (b) determine the persons to whom and the time or times at which options shall be granted; (c) determine the number of shares to be subject to each option; (d) determine terms and provisions (and amendments thereof) of the respective option agreements (which need not be identical), including such terms and provisions (and amendments) as shall be required in the judgment of the Board to conform to any law or regulation applicable thereto; (e) determine which options shall be Incentive Stock Options within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"); (f) accelerate the time at which all or any part of an option may be exercised; (g) modify or amend any outstanding option agreement subject to the consent of optionee; -1- (h) interpret the Plan and prescribe, amend and rescind rules and regulations relating to it; (i) make all other determinations deemed necessary or advisable for the administration of the Plan. All decisions, determinations and selections made by the Board of Directors on the foregoing matters shall be conclusive. The granting of an option pursuant to the Plan shall be effective only when an option is duly awarded to an employee or director by the Board of Directors. The Executive Committee of the Corporation, in addition to and not to the exclusion of the Board of Directors of the Corporation, is authorized to exercise all of the powers authorized and conferred by the Plan on the Board of Directors other than the power under Section 13 of this Plan to terminate and amend the Plan. The Board of Directors may also authorize, at any time, the formation of a Stock Option Committee (the "Committee"), consisting of three or more members appointed from time to time by the Board, which Committee would have authority to exercise the powers conferred on the Board under the Plan, other than the power under Section 13 herein to terminate and amend the Plan. In addition, the Board of Directors may authorize, at any time, the Chief Executive Officer of the Corporation to extend the period of exercise of certain Incentive Stock Options and non-incentive (non-qualified) stock options in accordance with the provisions of Section 10 of the Plan. 3. ELIGIBILITY; FACTORS TO BE CONSIDERED IN GRANTING STOCK OPTIONS. Incentive Stock Options may be granted only to key salaried management employees (which term, as used herein, includes officers) of the Corporation and of its present and future subsidiary corporations. Options which do not qualify as Incentive Stock Options may be granted to key salaried management employees of the Corporation and of its present and future subsidiary corporations and to members of the Board of Directors of the Corporation who are not also employees of the Corporation or one of its subsidiaries ("Non-Employee Directors"), provided, however, that options shall be granted to Non-Employee Directors only pursuant to Section 7 hereof. In determining the employees to whom options shall be granted and the number of shares to be covered by each such option, the Board of Directors may take into account the nature of the services rendered by the respective employees, their present and potential contributions to the success of the Corporation and such other factors as the Board of Directors, in its discretion, shall deem relevant. -2- Subject to the provisions of Section 11 herein, an employee who has been granted an option under the Plan or under any prior stock option plan of the Corporation may be granted an additional option or options under the Plan if the Board of Directors shall so determine. 4. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in Section 12 herein: (a) the stock to be offered under the Plan shall be shares of the Corporation's authorized Common Stock, par value $1.00 per share, which may be either shares reacquired and held in the treasury of the Corporation or authorized but unissued shares; and (b) the aggregate number of shares which may be issued under all options granted pursuant to the Plan shall be 4,500,000 shares. Shares subject to, but not issued under, any option terminating or expiring for any reason prior to exercise thereof in full shall again be available for other options thereafter granted under the Plan. 5. TERM OF PLAN AND OF EACH OPTION AGREEMENT; EXERCISE OF OPTIONS. The period during which options may be granted under the Plan shall expire February 7, 1999. The term of each option so granted shall expire not more than ten years from the date the option is granted. Except with respect to options granted to Non-Employee Directors pursuant to Section 7 hereof, the Board of Directors may determine at the time of granting whether each such option is exercisable in full, in part from time to time or in installments, which may be cumulative from year to year during such term to the extent not exercised in a prior year; provided, however, that notwithstanding the foregoing, from and after a Change of Control (as hereinafter defined), all options granted under the Plan, including options granted to Non-Employee Directors pursuant to Section 7 hereof, shall become immediately exercisable to the full extent of the original award. As used herein, "Change of Control" shall mean any of the following events: (i) The acquisition by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Corporation or any of its wholly-owned subsidiaries, or any employee benefit plan of the Corporation and/or one or more of its wholly-owned subsidiaries, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the then outstanding -3- shares of Common Stock or the combined voting power of the Corporation's then outstanding voting securities in a transaction or series of transactions not approved in advance by a vote of at least three-quarters of the Continuing Directors (as hereinafter defined); or (ii) Individuals who, as of April 13, 1988, constitute the Board of Directors of the Corporation (generally the "Directors" and as of April 13, 1988 the "Continuing Directors") cease for any reason to constitute at least a majority thereof, provided that any person becoming a Director subsequent to April 13, 1988 whose nomination for election was approved in advance by a vote of at least three-quarters of the Continuing Directors (other than a nomination of an individual whose initial assumption of office is in connection with an actual or threatened solicitation with respect to the election or removal of the Directors of the Corporation, as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall be deemed to be a Continuing Director; or (iii) The approval by the stockholders of the Corporation of a reorganization, merger, consolidation, liquidation or dissolution of the Corporation or of the sale (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation other than a reorganization, merger, consolidation, liquidation, dissolution or sale approved in advance by a vote of at least three quarters of the Continuing Directors; or (iv) The first purchase under any tender offer or exchange offer (other than an offer by the Corporation or any of its subsidiaries) pursuant to which shares of Common Stock are purchased. Options granted under this Plan need not be identical with respect to the terms of exercise thereof. Subject only to the foregoing limitations, options may be exercised in whole at any time or in part from time to time during the option term by serving written notice of exercise on the Corporation, accompanied by payment of the purchase price. The Board of Directors or the Committee, as the case may be, may grant "restoration" options, separately or together with another option, pursuant to which, subject to the terms and conditions established by the Board of Directors or the Committee, as the case may be, and any applicable requirements of Rule 16b-3 promulgated under the Exchange Act or any other applicable law, the optionee would be granted a new option when the payment of the exercise price of the option to which such "restoration" option relates is made by the delivery of shares of the Corporation's Common Stock owned by the optionee, as described in Section 6 hereof, which new option would be an option to purchase the number of shares not exceeding the sum of (a) the number of shares of the Corporation's Common Stock tendered as payment upon the -4- exercise of the option to which such "restoration" option relates and (b) the number of shares of the Corporation's Common Stock, if any, tendered as payment of the amount to be withheld under applicable income tax laws in connection with the exercise of the option to which such "restoration" option relates, as described in Section 15 hereof. "Restoration" options may be granted with respect to options previously granted under this Plan or any prior stock option plan of the Corporation, and may be granted in connection with any option granted under this Plan (other than an option granted to a Non-Employee Director pursuant to Section 7 hereof) at the time of such grant. The purchase price of the Common Stock under each such new option, and the other terms and conditions of such option, shall be determined by the Board of Directors or the Committee, as the case may be, consistent with the provisions of the Plan. 6. OPTION PRICES. Except with respect to options granted to Non- Employee Directors pursuant to Section 7 hereof, the purchase price of the Common Stock under each option shall be determined by the Board of Directors, but shall not be less than 100% of the fair market value of the Common Stock at the time of granting the option as found by the Board. The purchase price of the shares as to which an option shall be exercised shall be paid in full in cash at the time of exercise as shall be provided in the option agreement, and any optionee, without limitation, shall also be entitled to pay the exercise price by tendering to the Corporation shares of the Corporation's Common Stock, previously owned by the optionee, having a fair market value on the date of exercise equal to the option price (or the portion thereof not paid in cash). 7. OPTIONS TO NON-EMPLOYEE DIRECTORS. The Board of Directors or the Committee, as the case may be, shall issue options which do not qualify as Incentive Stock Options to Non-Employee Directors in accordance with this Section 7. Each Non-Employee Director serving on the Corporation's Board of Directors immediately following the Annual Meeting of Stockholders of the Corporation on June 30, 1992 shall be granted, as of June 30, 1992, an option to purchase 3,000 shares of Common Stock. Each Non-Employee Director first elected or appointed to the Corporation's Board of Directors after June 30, 1992 and during the term of the Plan shall be granted, as of the date of such Director's first election or appointment to the Board of Directors, an option to purchase 3,000 shares of Common Stock. After the initial grant to each Non-Employee Director as set forth above in this Section 7, each such Director shall be granted during the term of the Plan, as of each even-numbered anniversary of the date of such initial grant to such Director, if such Director's term of office continues after such anniversary date, an option to purchase 3,000 shares of Common Stock. -5- Each option granted to a Non-Employee Director pursuant to this Section 7 shall be exercisable as to 40% of the shares subject to such option on the first anniversary of the date of grant and as to an additional 30% of the shares subject to such option on each of the second and third anniversaries of the date of grant, shall have an exercise price equal to the fair market value of the shares of Common Stock as of the date of grant and shall expire on the tenth anniversary of the date of grant. "Restoration" options may not be granted to any Non-Employee Director. This Section 7 shall not be amended more than once every six months other than to comport with changes in the Code, the Employee Retirement Income Security Act or the rules and regulations thereunder. 8. ADDITIONAL TERMS. Options granted under the Plan shall not be affected by any change of duties or position so long as the optionee continues to be an employee of the Corporation or of a subsidiary (or continues to be a Director of the Corporation in the case of any Non-Employee Director). Each option agreement may contain such provisions as the Board of Directors shall approve with reference to the effect of approved leaves of absence, provided that with respect to Incentive Stock Options such provisions conform to the requirements of the Code. Nothing in the Plan or in any option granted pursuant thereto shall confer on any person any right to continue in the employ of the Corporation or of any of its subsidiaries (or to continue as a Director of the Corporation in the case of any Non-Employee Director) or affect, in any way, the right of the Corporation or any of its subsidiaries to terminate his employment (or to terminate his directorship in the case of any Non-Employee Director) at any time. 9. NON-TRANSFERABILITY OF OPTIONS. No option granted under the Plan may be assignable or transferable except by will or the laws of descent and distribution, and each option may be exercised, during the lifetime of the optionee, only by him. 10. DEATH; OTHER TERMINATION OF EMPLOYMENT OR DIRECTORSHIP. If an optionee shall cease to be employed by the Corporation or a subsidiary of the Corporation (or shall cease to be a Director of the Corporation in the case of any Non-Employee Director) for any reason other than death, except as otherwise provided in the following paragraphs, he may, within three months following the date of such termination of employment (or following the date of such termination of directorship in the case of any Non-Employee Director), exercise his option; provided, however, that the option may not be exercised after the expiration of the applicable period referred to in Section 5 hereof (or Section 7 hereof with respect to any option granted to a Non-Employee Director) and may be exercised only to the extent of the number of shares the optionee was entitled to purchase under the option on the date of such termination of employment (or on the date of such termination of directorship in the case of any Non-Employee Director), subject to (except with respect to options granted to Non-Employee Directors pursuant to Section 7 -6- hereof) any right of the Board of Directors to accelerate the vesting of options at the time of such termination of employment or otherwise and any right of repurchase by the Corporation provided for in the option agreement. Except as otherwise provided in this paragraph, if an optionee retires at or after age 55 with ten or more years of service with the Corporation or a subsidiary of the Corporation (or if a Non-Employee Director terminates his directorship at or after age 55 with ten or more years of service as a Director of the Corporation, or at or after age 65 regardless of the number of years of service as a Director of the Corporation), he may, within two years following the date of such retirement (or following the date of such termination of directorship in the case of any Non-Employee Director), exercise his option; provided, however, that the option may not be exercised after the original expiration date of such option set forth in the related option agreement and may be exercised only to the extent of the number of shares the optionee was entitled to purchase under the option on the date of such retirement (or on the date of such termination of directorship in the case of any Non-Employee Director), subject to (except with respect to options granted to Non-Employee Directors pursuant to Section 7 hereof) any right of the Board of Directors to accelerate the vesting of options at the time of retirement or otherwise and any right of repurchase by the Corporation provided for in the option agreement. With respect to Incentive Stock Options granted before February 16, 1991, if an optionee retires at or after age 55 with ten or more years of service with the Corporation, he may, if so determined by the Chief Executive Officer of the Corporation (or by the Committee in the case of an optionee who is subject to the provisions of Section 16 of the Exchange Act) in their sole and absolute discretion, within two years following the date of such retirement, exercise his option; provided, however, that the option may not be exercised after the original expiration date of such option set forth in the related option agreement and may be exercised only to the extent of the number of shares the optionee was entitled to purchase under the option on the date of such retirement, subject to any right of the Board of Directors to accelerate the vesting of options at the time of retirement or otherwise and any right of repurchase by the Corporation provided for in the option agreement. If an optionee (other than a Non-Employee Director) retires (which term shall include termination of employment due to disability) at or after age 55 with ten or more years of service with the Corporation or a subsidiary of the Corporation, he may (if so determined by the Committee in its sole and absolute discretion, and only if such optionee is not subject to the provisions of Section 16 of the Securities Exchange Act of 1934, as amended) exercise his option at any time prior to the expiration date of such option set forth in the related option agreement; provided, however, that the option may be exercised only to the extent of the number of shares the optionee was entitled to purchase under the option on the date of such retirement, subject to any right of the Board of Directors to accelerate the vesting of options at the time of retirement or otherwise and any right of repurchase by the Corporation provided for in the option agreement. Any determination made pursuant to this paragraph by the Chief Executive -7- Officer or the Committee, as the case may be, regarding the extension of the exercise period of an option shall be made on a case-by-case basis, at or about the time of retirement, taking into account the optionee's service on behalf of the Corporation, the value of the Corporation's Common Stock and the option price. In the event that the Corporation ceases to own at least 50% or more of the outstanding capital stock of ShopKo Stores, Inc. ("ShopKo"), an optionee who is employed by ShopKo and who is not subject to Section 16 of the Exchange Act with respect to the Corporation may, if so determined by the Chief Executive Officer of the Corporation in his sole and absolute discretion, exercise his option within two years following the date on which the Corporation ceases to own at least 50% or more of the outstanding capital stock of ShopKo (the "Termination Date"); provided, however, that the option may not be exercised after the original expiration date of such option set forth in the related option agreement and may be exercised only to the extent of the number of shares the optionee was entitled to purchase under the option on the Termination Date, subject to any right of the Board of Directors to accelerate the vesting of options prior to the Termination Date or otherwise and any right of repurchase by the Corporation provided for in the option agreement; provided, further, that the optionee is employed by ShopKo at the time of exercise of the option. The determination by the Chief Executive Officer of the Corporation regarding the extension of the exercise period of an option pursuant to the terms of this paragraph shall be made on a case-by-case basis, at or about the Termination Date, taking into account the optionee's service on behalf of the Corporation and ShopKo, the value of the Corporation's Common Stock and the option price. If a person to whom an option has been granted under the Plan shall die prior to the exercise or expiration of all options granted, such options may be exercised by a legatee or legatees of the option holder under his last will or by his personal representatives or distributees within one year following the date of his death to the full extent of the number of shares covered by the option not previously purchased, whether or not such shares have become purchasable by such optionee at the date of such death; provided, however, that the option may not be exercised after the expiration of the applicable period referred to in Section 5 hereof (or Section 7 hereof with respect to any option granted to a Non-Employee Director); and provided further, that if an optionee (other than a Non-Employee Director) dies at or after age 55 with ten or more years of service with the Corporation or a subsidiary of the Corporation and while employed by the Corporation or a subsidiary, such legatee, legatees, representatives or distributees may (if so determined by the Committee in its sole and absolute discretion, and only if such optionee is not subject to the provisions of Section 16 of the Securities Exchange Act of 1934, as amended) exercise such option at any time prior to the expiration date of such option set forth in the related option agreement to the full extent of the number of shares covered by the option not previously purchased, whether or not such shares have -8- become purchasable by such optionee at the date of such death. Any determination made pursuant to this paragraph by the Committee regarding the extension of the exercise period of an option shall be made on a case-by-case basis, at or about the time of death, taking into account the optionee's service on behalf of the Corporation, the value of the Corporation's Common Stock and the option price. 11. INCENTIVE STOCK OPTIONS. Except with respect to options granted to Non-Employee Directors pursuant to Section 7 hereof, the Board of Directors is hereby authorized to determine, upon the granting of each option, whether such option shall be an Incentive Stock Option under Section 422A of the Code or shall be an option which is not an Incentive Stock Option under Section 422A. For Incentive Stock Options granted before January 1, 1987, the aggregate fair market value of the stock (determined as of the time the Incentive Stock Option is granted) covered under all Incentives Stock Options granted (under this Plan and all other incentive stock option plans of the Corporation or any subsidiary), in any calendar year, shall not exceed $100,000 plus any unused limit carry-over (as provided under Section 422A(c)(4) of the Code). For Incentive Stock Options granted after December 31, 1986, the aggregate fair market value (determined at the time the Incentive Stock Option is granted) of the stock with respect to which all Incentive Stock Options are exercisable for the first time by an employee during any calendar year (under all plans described in subsection (b)(7) of Section 422A of the Code of his employer corporation and its parent and subsidiary corporations) shall not exceed $100,000. 12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Notwith- standing any other provision of the Plan, the Board of Directors may adjust the number and class of shares subject to each outstanding option and the option prices in the event of changes in the outstanding Common Stock of the Corporation by reason of stock dividends, split-ups, recapitalizations, mergers, consolidations, combinations or exchanges of shares and the like. In the event of any such change in the outstanding Common Stock of the Corporation, the aggregate number and class of shares available under the Plan shall be appropriately adjusted by the Board of Directors, whose determination shall be conclusive. 13. TERMINATION AND AMENDMENT. The Plan may be terminated, modified or amended by the stockholders of the Corporation. Subject to Section 7 hereof, the Board of Directors of the Corporation may also terminate the Plan or make such modifications or amendments thereof as it shall deem advisable, or to conform to any change in any law or regulation applicable thereto; provided, however, that the Board of Directors may not, without further approval by the holders of a majority of the outstanding stock of the Corporation having general voting power, make any modification or amendment which operates: -9- (a) to make any material change in the class of employees eligible to receive Incentive Stock Options as defined in Section 3 above; and (b) to increase the total number of shares for which options may be granted under the Plan, except as resulting from the operation of Section 12 above. No termination, modification or amendment of the Plan may, without the consent of the employee to whom any option shall theretofore have been granted, adversely affect the rights of such employee under such option. 14. EFFECTIVE DATE OF PLAN. The Plan shall become effective February 23, 1983, subject to approval by the shareholders of the Corporation within 12 months thereafter. 15. TAX WITHHOLDING. Subject to such rules as the Board of Directors or the Committee may adopt not inconsistent with the provisions of the Plan: (a) At any time when an optionee is required to pay the Corporation an amount required to be withheld under applicable income tax laws in connection with the exercise of an option which does not qualify as an Incentive Stock Option under Section 422A of the Code, the optionee may elect to have the Corporation retain from the distribution shares of Common Stock to satisfy this obligation in whole or in part (an "Election"). The shares to be withheld shall be valued at 100% of the fair market value of the shares on the date that the amount of tax required to be paid shall be determined (the "Tax Date"). Fair market value of the shares shall equal the mean of the opening and closing trade prices of the shares as reported on the New York Stock Exchange on the Tax Date, or, if no trading in the shares occurs on the Tax Date, on the immediately preceding trading date. (b) Each election must be made prior to the Tax Date. The Board or the Committee may disapprove of any Election, may suspend or terminate the right to make Elections, may limit the amount of any Election, may provide at the time of grant with respect to any option that the right to make Elections shall not apply to such option and may make rules concerning the required information to be included in any Election. An Election is irrevocable. (c) The Election may be made in an amount equal to the amount of tax required by law to be withheld with respect to the option exercise. Any fractional share withholding amount must be paid in cash. -10- (d) If an optionee makes an Election and the optionee's Tax Date is deferred for six months from the date of exercise of the option, the optionee will initially receive the full amount of the shares, but will be unconditionally obligated to surrender to the Corporation on the Tax Date the proper number of shares to satisfy the withholding obligation, plus cash for any remainder of the withholding obligation including any fractional shares withholding amount. (e) Optionees who are "officers" or "directors" of the Corporation, as those terms are used in Section 16(b) of the Exchange Act, may only make an Election in compliance with the rules established by the Board or the Committee to comply with Section 16(b). -11- Amended 2-8-95 EX-10.S 4 CONSULTING AGREEMENT EXHIBIT 10(s). [LOGO OF SUPERVALU INC.] [LETTERHEAD OF SUPERVALU] April 19, 1995 Mr. Gordy Hippen CONFIDENTIAL SUPERVALU INC. P.O. Box 990 Minneapolis, MN 55440 Dear Gordy: This letter is to outline the terms and conditions of your consulting agreement with SUPERVALU INC. ("SUPERVALU"). You have been an employee of SUPERVALU for many years and have served as a Senior Vice President, rendering guidance, knowledge, experience and counsel to SUPERVALU. Your expertise and experience in the food industry is extremely valuable to us. You will terminate your status as an employee of SUPERVALU effective February 24, 1995, and you are retiring in accordance with the terms and conditions of the SUPERVALU INC. Retirement Plan. Accordingly, it is the desire of SUPERVALU to retain you as an independent contractor/business consultant. 1. Effective on February 25, 1995, SUPERVALU agrees to engage you as an independent contract/business consultant, and you accept said engagement on the terms and conditions set forth herein. We agree that you are an independent contractor, and SUPERVALU obtains no right of control as to the method or means of accomplishing the work which you agree to perform for SUPERVALU. 2. You agree to render services in an advisory nature to SUPERVALU as shall be determined from time to time by its CEO or President of Wholesale Foods. This shall include completion of various special projects as may be requested from time to time. You shall perform these advisory services upon either the oral or written request of SUPERVALU's President of Wholesale Foods or his designates, and such requests shall be reasonable as to both the nature of the services to be performed by you and their frequency, with the expectation that your services will be required hereunder for an average of approximately 24 hours per week. We agree that you shall (a) control both the aggregate number of hours worked and substantially all of the scheduling thereof; (b) be free to perform the services to be rendered hereunder at any location consistent with the goals to be accomplished, and you shall not be provided with a principal place of business by SUPERVALU (although you may use SUPERVALU's office facilities in the performance of your advisory services hereunder); (c) be permitted to hire assistance at your own expense to assist in rendering services hereunder; however, it is your personal knowledge and ability which is the primary object of this consulting agreement; (d) render only advisory services on an irregular basis on matters with respect to which you have special competence by reason of your association with SUPERVALU; (e) not be required to comply with detailed orders or instructions, and you shall not be subject to the rules and regulations generally applicable to employees of SUPERVALU; (f) not use SUPERVALU business cards or stationery following your date of retirement; and (g) not attend officer staff meetings following retirement except to make or participate in reports related to your advisory services. 1 3. As remuneration for your services, SUPERVALU shall pay you at a rate of One Thousand Two Hundred Dollars ($1,250.00) per day. It is understood you will submit to the President of Wholesale Foods or his designate a monthly statement indicating the number of hours you devoted to your services hereunder during the preceding month. You will be paid for your services on the first day of each month commencing one month after the effective date. SUPERVALU shall also pay you special fees of Fifteen Thousand Dollars ($15,000) upon implementation of the new SUPERVALU pricing paradigm for retail customers and Fifteen Thousand Dollars ($15,000) upon successful implementation of the Customer Interface/Service Initiative. We agree that SUPERVALU shall not withhold federal or state income taxes, social security taxes (Federal Insurance Contributions Act), unemployment insurance taxes (Federal Unemployment Tax Act and related state statutes) or worker's compensation taxes or premiums. Except at your own expense, you shall not be entitled to receive any health insurance, life insurance or any other fringe benefits customarily provided by SUPERVALU to its employees, except to the extent such benefits, if any, are generally made available to SUPERVALU retirees. You shall be reimbursed for reasonable air travel, automobile travel, food and lodging, and other necessary, direct business expenses incurred by you in the performance of the services to be rendered hereunder; provided, however, that you shall receive no reimbursement for such expenses unless the amount of such expenses are shown as a separate line item on your monthly billing and otherwise comply with all relevant rules and regulations of SUPERVALU as authorized by SUPERVALU's President of Wholesale Foods or his designee. 4. You agree that for a period of one (1) year following the completion of your consulting services with SUPERVALU (a) that you will not become an employee of, or provide similar consulting services to, any entity which owns or operates a grocery wholesale or distribution operation within the continental United States and (b) that you will seek SUPERVALU's prior written consent prior to becoming an employee of, or providing similar consulting services to, any entity which owns or operates retail food stores within the continental United States. Should a potential conflict arise, you agree to consult with the CEO of SUPERVALU before you become involved. Notwithstanding the above, if the value of your IRA investments made with the proceeds of your withdrawals from your accounts under SUPERVALU's qualified retirement plans (the SUPERVALU Retirement Plan (both pension and profit sharing), 401(K) Plan and ESOP) plus the market value of the shares of SUPERVALU stock you now own should, in the aggregate, decrease by 50% or more during the 12-month period following the expiration of this Agreement from the value of those accounts and shares as of February 28, 1995, then this Agreement shall not prohibit you from providing consulting services to any organization, provided that you first offer your services to SUPERVALU and such services are declined. 5. Except as otherwise provided herein, this consulting agreement shall terminate on December 31, 1995; however, both parties will review the matter of continuance six months prior to such date. Either party may terminate this Agreement upon ninety (90) days' prior written notice to the other. This Agreement shall also terminate upon your death or complete and total disability. 6. We agree that you are hereby given notice of your tax responsibilities as an independent contractor including your obligation to pay income taxes and the tax on self-employment income provided for by Section 1401 of the Internal Revenue Code of 1954, as amended, with respect to your remuneration hereunder. SUPERVALU hereby covenants and agrees that for all tax purposes, it shall treat you as an independent contractor and shall provide you with such tax forms or reports as may be required by Section 6041, or any successor provision thereto, or any other provision of the Internal Revenue Code of 1954, whether now in effect or hereafter enacted with respect to the obligations of service recipients and independent contractors. 2 We each agree to comply fully with any and all additional information or tax return requirements which may be imposed directly on each of us by the Internal Revenue Code, as amended from time to time, or the Internal Revenue Services with respect to your qualification as an independent contractor hereunder. 7. Nothing in this letter shall affect your confidentiality and non- disclosure obligations under that certain Employee Confidential Information Agreement, between you and SUPERVALU, which became effective as of February 17, 1994. If this letter correctly sets forth your understanding of the terms and conditions of the Consulting Agreement, please so indicate by signing the enclosed copy of this letter in the space indicated below and returning it to me at your earliest convenience. Sincerely, /s/ Michael W. Wright Michael W. Wright Chairman and Chief Executive Officer UNDERSTOOD AND AGREED: --------------------- /s/ G W Hippen ___________________________ Gordy Hippen 4/25/95 Date: _______________________ 3 EX-12 5 RATIO OF EARNINGS TO FIX EXHIBIT (12) SUPERVALU INC. and Subsidiaries Ratio of Earnings to Fixed Charges For Fiscal Years Ended [CAPTION] (in thousands, except ratios) 1995 1994 1993 1992 1991 -------- -------- -------- -------- -------- Earnings before income taxes $ 15,925 $294,080 $258,618 $322,840 $225,680 Less undistributed earnings of ShopKo (10,902) (8,306) (16,582) (14,891) - -------- -------- -------- -------- -------- Earnings before income taxes 5,023 285,774 242,036 307,949 225,680 Interest expense 135,383 120,292 83,066 72,693 76,411 Interest on operating leases 18,204 17,288 6,661 2,732 3,435 -------- -------- -------- -------- -------- $158,610 $423,354 $331,763 $383,374 $305,526 ======== ======== ======== ======== ======== Total fixed charges 153,587 137,580 89,727 75,425 79,846 ======== ======== ======== ======== ======== Ratio of earnings to fixed charges 1.03 3.08 3.70 5.08 3.83 ======== ======== ======== ======== ========
EX-13 6 PORTION OF ANNUAL REPORT EXHIBIT (13) FINANCIAL REVIEW SUPERVALU management decisions are guided by established policies covering financial goals, capital structure, capital investment and dividends. The company's long-term financial goals are arrived at by balancing two broad objectives: increasing profitability levels and maintaining a strong capital structure. The profitability of the company is gauged by return on investment measures. Achievement of targeted return levels in these areas would lead to excellent returns for the company's stockholders through increasing dividends and higher valuations on their investment in the company. These measures are an integral part of the company's planning process and are an integral part of management incentive compensation. CAPITAL STRUCTURE Management believes that maintaining a strong capital structure and maintaining financial flexibility provides a significant competitive advantage and allows the company to be opportunistic in terms of acquisitions. The current level of capital has remained relatively constant over the last three years. The debt-to- total capitalization ratio increased in 1993, with the purchase of Wetterau, and has been affected by acquisition activity in 1995 and 1994. The capital structure of SUPERVALU at each fiscal year-end included the following:
Summary of Balance Sheet Capitalization -------------------------------------------------------------------------- (In millions) 1995 1994 1993 -------------------------------------------------------------------------- Short-term borrowings $ 226.2 $ 23.1 $ 251.5 Long-term debt 1,224.5 1,139.1 1,118.5 Present value of: Capital leases 179.6 163.4 158.9 Retailer finance leases 84.0 88.4 95.8 -------------------------------------------------------------------------- Total debt, including current maturities 1,714.3 1,414.0 1,624.7 Stockholders' equity 1,193.2 1,275.5 1,134.8 -------------------------------------------------------------------------- Total capitalization $2,907.5 $2,689.5 $2,759.5 -------------------------------------------------------------------------- Debt-to-total capitalization 59% 53% 59%
LIQUIDITY Internally generated funds, principally from the company's food distribution business, were the major source of capital for liquidity and growth in 1995 and 1994. The debt-to-total capitalization ratio increased to 59 percent in 1995, primarily due to the use of short-term borrowings to finance acquisitions. Management expects that the company will continue to replenish operating assets and reduce aggregate debt with internally-generated funds and capital leases unless additional funds are necessary to complete acquisitions. The company has adequate short-term and long-term financing capabilities to fund acquisitions as the opportunities arise. Cash provided from operations, which was not affected by the restructuring and other charges, was $341 million in 1995, compared with $433 million in 1994, and $404 million in 1993. The issuance of short-term and long-term debt of $349.5 million and cash provided from operations were used to finance capital expenditures, repay long-term debt and finance acquisitions. The company financed $298.1 million in capital expenditures and repaid $221.2 million of long-term debt, a portion of which was assumed as part of the acquisitions of Sweet Life Foods, Hyper Shoppes, Inc., Texas T Stores, Wetterau Properties, Inc. and Delice de France. In 1995, total capital expenditures of $298.1 million included $16 million related to the ADVANTAGE project. [PHOTO OF JEFF GIRARD] Jeff Girard Executive Vice President and Chief Financial Officer The company issued $150 million in debt securities in 1995. The proceeds were used to refund $100 million of notes due August 1994; repay $32 million of certain mortgage indebtedness assumed by the company in connection with the acquisition of Wetterau Properties; and repay $18 million of short-term borrowings. The company intends to invest at least $175 million under the ADVANTAGE project with approximately $104 million of the expenditures occurring in 1996. The monies will be used to fund regional facilities, technology and various mechanization systems. The company expects that the investment in ADVANTAGE will be recovered by the reduction in inventory and property levels. SUPERVALU will continue to use short-term and long-term debt as a supplement to internally generated funds to finance its activ- 16 ities. To that end, the company has a "shelf registration" in effect pursuant to which the company could sell an additional $400 million of long-term debt without further registration. The company has $300 million of debt due in November of 1995, which it intends to refinance by utilizing the existing shelf registration or the use of the available revolving credit agreement. The use of available revolving credit of $400 million, the shelf registration or any other long-term debt will depend on management's views with respect to long-term capital needs and the relative attractiveness of short-term versus long-term interest rates. The company's financial position and long-term debt ratings are strong, with an A rating from Standard and Poor's and an A3 rating from Moody's. These strong ratings, the available credit facilities and internally-generated funds provide the company with the financial flexibility to meet unexpected liquidity needs. EXPANSION PLANS FOR FISCAL 1996 SUPERVALU's capital budget for fiscal 1996, which includes leases, is $500 million compared with the $382 million and $321 million incurred during 1995 and 1994, respectively. The capital budget provides sufficient funding for the growth of the company and covers anticipated projects under the ADVANTAGE initiative.
[BAR GRAPH APPEARS HERE CONTAINING THE FOLLOWING INFORMATION:] 1996 (Budget) 1995 1994 ------------- ----- ----- Food Distribution $345 $ 202 $ 204 Retail Food 142 140 78 Corporate 13 40 39 ---- ----- ----- TOTAL $500 $ 382 $ 321
Approximately $241 million of the 1996 capital budget is slated for use in the company's food distribution activities for regular replacement, productivity and capacity enhancement projects and for financing the company's independent retailers. Retailer financing activities typically do not require new cash outlays because they are leases or guarantees or funded by the repayment of existing notes. In addition, the company has allocated $104 million for the ADVANTAGE project related to food distribution activities. The retail food capital budget of $142 million ($32 million of which are capital leases) covers corporately-owned retail food businesses. The budget provides for approximately 33 new corporate retail stores and several store remodels and expansions. The balance of the 1996 capital budget is dedicated to the corporate area and will be utilized principally for computer equipment. These capital spending activities are not expected to result in an increase in the company's debt-to-total-capitalization ratio as internal cash flow is expected to support all spending requirements except leases. Because of the opportunistic nature of acquisitions, no amount for acquisition activity is included in the capital budget. The capital budget does include amounts for projects which are subject to change and for which firm commitments have not been made. DIVIDENDS Cash dividends declared during fiscal 1995 amounted to 92 1/2 cents per common share, an increase of 8.2 percent over the 85 1/2 cents per share declared in the prior fiscal year. This was the 58th year of consecutive cash dividends and the 23rd year of successive annual increases. Cash dividend payments have increased since 1974 at an annual compounded rate of 11.4 percent. The company's dividend policy will continue to emphasize a high level of earnings retention. COMMON STOCK PRICE SUPERVALU's common stock is listed on the New York Stock Exchange under the symbol SVU. At year-end, there were 8,060 stockholders of record compared with 8,233 at the end of fiscal 1994.
-------------------------------------------------------------------- Common Stock Dividends Per Price Range Share Fiscal Quarter 1995 1994 1995 1994 -------------------------------------------------------------------- High Low High Low -------------------------------------------------------------------- First $37 $31 $34 1/2 $29 7/8 $.220 $.195 Second 31 7/8 27 1/2 37 5/8 32 .235 .220 Third 28 3/4 23 7/8 35 3/4 32 .235 .220 Fourth 26 22 1/8 40 1/8 32 1/2 .235 .220 -------------------------------------------------------------------- Year $37 $22 1/8 $40 1/8 $29 7/8 $.925 $.855 --------------------------------------------------------------------
Dividend payment dates are on or about the 15th day of March, June, September and December, subject to Board of Directors approval. 17 [LOGO] RESULTS OF OPERATIONS The following table sets forth items from the company's Consolidated Statements of Earnings as percentages of net sales:
-------------------------------------------------------------------------------- Fiscal Year Ended -------------------------------------------------------------------------------- February 25, February 26, February 27, 1995 1994 1993 (52 weeks) (52 weeks) (52 weeks) -------------------------------------------------------------------------------- Net sales 100.0% 100.0% 100.0% Cost of sales 90.8 91.1 91.8 Selling and administrative expenses 7.1 6.6 5.9 Restructuring and other charges 1.5 - - Interest expense .8 .7 .6 Interest income (.2) (.2) (.2) Equity in earnings of ShopKo (.1) (.1) (.2) -------------------------------------------------------------------------------- Earnings before income taxes .1 1.9 2.1 Income taxes .1 .7 .8 ShopKo deferred tax credit (.3) - - -------------------------------------------------------------------------------- Net earnings .3% 1.2% 1.3% --------------------------------------------------------------------------------
Wetterau was acquired in October 1992 and treated as a purchase in the fiscal year ended February 27, 1993; therefore, earnings contributions are net of goodwill amortization of $11.2 million in 1995; $10.8 million in 1994; and $3.4 million in 1993, as well as financing costs. Seventeen weeks of Wetterau results were included in fiscal 1993 and 52 weeks in fiscal 1994 and fiscal 1995. NET SALES Net sales increased 3.9 percent to $16.6 billion in fiscal 1995, from $15.9 billion in 1994. Net sales increased 26.8 percent in 1994 from $12.6 billion in 1993. The increase in net sales in 1995 was principally due to the acquisitions of Sweet Life Foods, Texas T Stores and Hyper Shoppes, Inc. However, the increase in 1995 was impacted by lost sales due to warehouse consolidations and declining sales in Twin Valu and Laneco retail stores closed or announced to be closing as a result of the restructuring. The increase in net sales in 1994 was principally due to the acquisition of Wetterau. Sales for 1994 would have increased approximately 1 percent excluding the sales impact of the Wetterau acquisition and the sale of the Salem division. Food distribution sales increased $.5 billion in 1995 to $14.8 billion, a 3.2 percent increase. The increase over 1994 net sales was due to the acquisitions of Sweet Life Foods and Texas T Stores. New store openings in the company's retail food chains also contributed to the sales increase over last year. The added sales contributions from acquisitions and new store openings were partially offset by lost sales due to warehouse consolidations and competitive market conditions at the retail level. Food inflation was negligible in both years. Food distribution sales for 1994 increased 25.4 percent over 1993 net sales of $11.4 billion due to the Wetterau acquisition. Both years were affected by increased competition, slower retail development due to the inability of developers to obtain financing, and low food inflation. Retail food sales increased 14.2 percent in 1995 to $4.2 billion, compared with $3.7 billion in 1994. Sales in 1994 grew 36.9 percent over 1993 sales of $2.7 billion. The increase in 1995 was primarily due to the acquisitions of Hyper Shoppes, Inc. and Texas T Stores and new store openings. However, this increase was partially offset by a decline in same-store sales of approximately 1 percent, which was primarily due to competitive pressures and reduced sales in stores closed or announced to be closing as a result of the restructuring. The increase in 1994 was due to the full year versus partial year contribution from Wetterau's retail operations and new store openings, which was partially offset by a decline in same-store sales of 2 percent. GROSS PROFIT Gross profit as a percentage of net sales increased to 9.2 percent in 1995, compared with 8.9 percent in 1994 and 8.2 percent in 1993. These increases were due principally to the growing proportion within the company's total sales mix of the higher-margined retail food business, which represented 25 percent of total sales in 1995, compared with 23 percent and 22 percent in 1994 and 1993, respectively. The Hyper Shoppes, Inc. and Texas T Stores acquisitions and an increase in the number of corporately-owned Cub Foods stores contributed to the higher gross profit percentage. Food distribution gross profit margin was relatively flat, positively affected by increased fees on certain products, the growth of Save-A-Lot and growth in private label sales. These positive impacts were largely offset by an increase in insurance expense, higher LIFO expense, a reduction in off-invoice allowances offered by certain vendors, and an increase in expenses associated with the company's warehouse consolidation activities. SELLING AND ADMINISTRATIVE EXPENSES Selling and administrative expenses were 7.1 percent of net sales in 1995, compared with 6.6 percent in 1994, and 5.9 percent in 1993. The higher percentage in 1995 was attributable primarily to the increased proportion of the company's retail food operations. Additional factors contributing to the higher selling and 18 administrative percentage were the ADVANTAGE project, warehouse consolidation activity in several markets and integration costs of the Sweet Life acquisition. Expenses of $15 million related to the ADVANTAGE project were incurred. Selling and administrative expenses as a percent of net sales were also higher than last year due to closing and exit activities at the Twin Valu and Laneco locations. The higher percentage in 1994 compared with 1993 was due principally to the increased proportion of the company's retail operations. The company anticipates an increase in expenses to $23 to $29 million related to the ADVANTAGE project next year, however, a net earnings contribution from this project is anticipated in fiscal 1997. RESTRUCTURING AND OTHER CHARGES In December 1994 the company announced a change in operating strategy which included the decision to restructure certain of its operations and reassess the recoverability of underlying assets. Restructuring and other charges totaling $244 million were recorded to provide for the implementation of the plan formulated under the ADVANTAGE project, and the sale, closure or restructure of certain retail businesses. The aggregate charges also included the recognition of certain asset impairments based on the company's established process of reviewing intangibles on a periodic recurring basis. Management's objective under the ADVANTAGE project is to fundamentally change its business processes to improve the effectiveness and efficiency of the company's food distribution system thus lowering the cost of goods to the company's customers. Its retail food objective is to improve retail performance by eliminating certain operations and assets that do not add shareholder value and focusing on building its successful retail formats. The restructuring plan, which was approved by the Board of Directors, resulted from a comprehensive review of industry trends and company operations, and represents a new business vision for the company. The restructuring plan anticipates four main initiatives: creation of three regional "upstream" distribution facilities; resets and mechanized inventory sort at "downstream" distribution facilities; elimination of certain retail businesses and assets; and a realignment of both food distribution and retail food organizations and operations. Under the plan, food distribution costs are expected to be reduced through enhanced logistic procedures. This is expected to be accomplished by better balancing the trade-offs of lower prices from volume buying against handling, storage and transportation expenses. Planned upstream facilities will provide regional distribution of general merchandise, health and beauty care products and slow-moving grocery items. Construction of the Anniston, Alabama prototype "upstream" facility is underway and is scheduled for completion in January 1996. A second facility, a 530,000 square-foot distribution center in Perryman, MD was acquired in November 1994 and will be used both for relocation of the company's Maryland division and for selected upstream functions. The company believes that the regional upstream facilities will allow better price brackets for certain items and categories plus reduced freight expenses. Extensive mechanization is planned for most facilities and inventory levels are expected to decline substantially. Changes in the pricing of goods and services are also planned. It is management's belief that when fully implemented, SUPERVALU will have the ability to deliver product into the marketplace on a competitively advantageous basis. The retail changes involve a refocusing of the company's corporate retail efforts on formats which it believes will produce the best results in the future. The two Twin Valu supercenters have been closed and Laneco will re-focus on food-driven formats and exit certain non-food operations. The aggregate charges include $204.8 million for activities under the restructuring plan and an additional $39.2 million for asset impairment. The asset impairment charge covers intangibles in businesses where future undiscounted cash flow is not sufficient to recover the book value of the recorded intangible. The restructuring charges do not cover certain aspects of the plan, including new information systems, anticipated operating losses, implementation costs associated with the ADVANTAGE project, employee relocation and training. These costs are not considered exit activities and will be recognized as incurred. Cash expenditures related to the aggregate charges were $3.9 million during fiscal 1995. Additional cash expenditures are estimated to be $29.2 million in fiscal 1996 and $22.8 million thereafter. These cash expenditures cover severance, pension, outplacement and carrying costs of impaired food distribution real estate. Management anticipates that the future cash require- 19 [LOGO] ments will be funded through internally generated cash, principally from inventory and property reductions. The aggregate charges include $53.1 million for severance, pension and outplacement which is based on the projected impact of the plan on employee levels in both food distribution and retail food. The company expects approximately 4,300 positions will be eliminated under the re-engineering efforts, 1,700 of which are employed in retail food operations. During 1995 approximately 338 positions were eliminated which resulted in severance and outplacement payments of $1.6 million. The restructuring charges also include a $20.0 million provision in food distribution which represents expected losses on the sale of tangible assets and expenses under non-cancelable leases as a result of the strategic shift. Expenditures under non-cancelable leases and write-offs of losses on sale of $6.0 million were incurred during the fourth quarter of 1995. The restructuring charges include an $87.8 million provision for property and lease discontinuances at retail locations, resulting primarily from various exit strategies and payment of portions of non-cancelable lease obligations. A portion of this amount was established to provide for the exiting of the company's Twin Valu business. The two Twin Valu supercenters were closed during the fourth quarter of 1995. The company finalized a sales agreement on March 20, 1995, covering one Twin Valu supercenter and a vacant parcel which had been acquired for another supercenter. Another portion of this provision covers a substantial restructuring of the company's Laneco division. This will involve the sale or other disposition of 7 stores, including all department store retail units. Four Laneco stores were closed during the fourth quarter of 1995, and the remaining 3 stores are in the process of closing. The company is involved in active negotiation for the sale or closing of approximately 19 other retail units which have not been publicly identified at this time. The company is attempting to sell these units on a going-concern basis so the timing of individual retail transactions will vary. Charges of $16.7 million were incurred during the fourth quarter of 1995 related to the closedown of retail locations. The retail units covered by the reserve had aggregate sales of $296.3, $291.7 and $234.1 million in 1995, 1994 and 1993, respectively, and pre-tax losses of $21.3, $19.0 and $9.2 million in 1995, 1994 and 1993, respectively. The final component of the aggregate charges is a $43.9 million impairment provision representing the effect of the strategic shift on the recoverability of certain assets. The company holds land for development, transition stores for wholesale market share, certain warehouse properties and miscellaneous sites which will be disposed of as soon as practicable. During the fourth quarter of 1995, charges of $3.3 million were incurred, leaving a reserve of $40.6 million to cover expenditures and write-offs expected to be incurred during the next six months. OPERATING EARNINGS The company's pre-tax operating earnings (earnings before interest, corporate expenses, equity in earnings of ShopKo and taxes) decreased 61.4 percent to $153.2 million after increasing 28.4 percent in 1994. The decrease in operating earnings was primarily due to restructuring and other charges. Excluding restructuring and other charges, operating earnings decreased 3.1 percent to $384.6 million. The decrease was due to expenses incurred for the ADVANTAGE project, warehouse consolidation activity and an increase in insurance expense. Food distribution operating earnings before restructuring and other charges decreased 4.1 percent in 1995, to $350.5 million, following a 28.6 percent gain in 1994 over 1993 operating earnings. Operating earnings were affected by warehouse consolidation expenses, an increased LIFO charge, higher insurance expenses, and integration costs of the Sweet Life acquisition. The increase in 1994 was primarily due to the acquisition of Wetterau; however, improved productivity and overall improvements in expense control also contributed to the results. Retail food operating earnings before restructuring and other charges increased 8.4 percent in 1995, to $34.0 million, from $31.4 million in 1994, which increased 26.3 percent over 1993 operating earnings. The increase in 1995 was primarily due to the Hyper Shoppes, Inc. and Texas T Stores acquisitions, and the increase in contribution from corporately-owned Cub stores. However, the increased operating earnings were partially offset by 20 reduced gross margins resulting from competitive pressures, expenses related to new store openings, and reduced sales in stores closed or announced to be closing as a result of the restructure. The increase in 1994 was due to the addition of the Wetterau retail operations and the increase in contribution from corporately-owned Cub and Scott's stores. INTEREST INCOME AND EXPENSE Interest income for 1995 was below 1994, due to the reduction in notes receivable as a result of the sale of notes in the ordinary course of business at the end of fiscal 1994. Interest income in 1994 increased over 1993, due to the notes receivable acquired in conjunction with the Wetterau acquisition offsetting the effect of declining rates. Interest expense increased to $135.4 million for 1995, compared with $120.3 million for 1994, due primarily to an increase in short-term borrowings related to acquisitions, and higher interest rates. In addition, the increase in interest expense was due to the issuance of $150 million in debt securities in July of 1994, part of which was used to repay a maturing issue in the amount of $100 million, and an increase in short-term borrowing rates. The increase in interest expense in 1994 over 1993 was primarily due to the Wetterau acquisition, partially offset by lower interest rates. EQUITY IN EARNINGS OF SHOPKO ShopKo net sales for 1995 increased 6.6 percent to $1.85 billion, compared to 1994 sales of $1.74 billion, an increase of 3.3 percent over 1993. ShopKo reported total net earnings of $37.8 million for 1995, an increase of 17.6 percent from 1994. Net earnings increased due to improved gross margins and lower selling, general and administrative expenses resulting from tight expense control. Net earnings for 1994 were $32.1 million, a 35.9 percent decrease compared with 1993. ShopKo's net earnings for 1994 were negatively impacted by lower gross margins and higher selling, general and administrative expenses. In addition, ShopKo's 1994 earnings were reduced by the cumulative effect of a change in accounting for future postretirement medical benefits (SFAS No. 106) and a higher tax rate. INCOME TAXES The effective tax rate before the restructuring and other charges increased to 38 percent in 1995, from 37 percent in 1994, and 36 percent in 1993. The increase in the effective tax rate was principally due to the increase in goodwill resulting from recent acquisitions. The Internal Revenue Service ("IRS") completed its review for tax years ending in 1991 and 1992, which included the partial disposition of ShopKo in October 1991. The transaction was reported as a taxable sale in the audited financial statements for that year. Upon completion of their review, the IRS concluded that the partial disposition of ShopKo resulted in no tax liability. Therefore, the $40.8 million of deferred taxes provided by the company in the financial statements was reversed and reflected in the current year consolidated statement of earnings. NET EARNINGS Net earnings for 1995 decreased 76.6 percent to $43.3 million, compared with net earnings for 1994 of $185.3 million and $164.5 million reported in 1993. The decrease in net earnings in 1995 was primarily due to the restructuring and other charges, partially offset by a one-time tax credit related to the partial disposition of ShopKo. After adjusting 1995 earnings to exclude the restructuring and other charges and the ShopKo deferred tax credit, net earnings decreased 12.6 percent to $161.9 million. The net earnings increase in 1994 over 1993 was due to the Wetterau acquisition and tight expense controls. INFLATION Inflation has not had a significant effect on the company's operating results or its external sources of liquidity. The impact of negligible food inflation on the company's sales was partially offset by retail development and marketing activities. As operating expenses and inventory costs have increased, the company has been able to identify operating efficiencies to minimize the impact. 21 TEN YEAR FINANCIAL AND OPERATING SUMMARY
--------------------------------------------------------------------------------------------------------------------------- SUPERVALU INC. and Subsidiaries --------------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 1992 (b) --------------------------------------------------------------------------------------------------------------------------- Statement of Earnings Data (a) Net sales $16,563,772 $15,936,925 $12,568,000 $10,632,301 Cost of sales 15,040,117 14,523,434 11,531,394 9,807,633 Selling and administrative expense 1,169,843 1,044,433 746,857 583,789 Restructuring and other charges 244,000 - - - Interest, net 111,271 89,767 54,203 34,320 Equity in earnings of ShopKo 17,384 14,789 23,072 32,176 Earnings before taxes and accounting change 15,925 294,080 258,618 322,840 Provision for income taxes (f) (27,409) 108,827 94,092 115,175 Net earnings 43,334 185,253 164,526 194,377 Earnings per common share before accounting change .61 2.58 2.31 2.78 Net earnings per common share .61 2.58 2.31 2.60 ----------------------------------------------------------------------------------------------------------------------------- Balance Sheet Data (a) Inventories (FIFO) $ 1,230,017 $ 1,227,170 $ 1,247,337 $ 862,621 Working capital (d) 319,429 452,121 361,093 534,182 Net property, plant and equipment 1,571,298 1,410,123 1,384,241 879,186 Total assets 4,305,149 4,042,351 4,064,189 2,484,300 Long-term debt (e) 1,459,766 1,262,995 1,347,386 608,241 Stockholders' equity 1,193,222 1,275,458 1,134,820 1,030,981 ----------------------------------------------------------------------------------------------------------------------------- Other Statistics (a) Earnings before accounting change as a percent of net sales (g) .98% 1.16% 1.31% 1.95% Return on average stockholders' equity (g) 12.95% 15.40% 15.32% 20.17% Book value per common share $ 16.92 $ 17.62 $ 15.84 $ 14.35 Current ratio (d) 1.22:1 1.37:1 1.27:1 1.72:1 Debt to capital ratio 59% 53% 59% 43% Dividends declared per common share $ .92 1/2 $ .85 1/2 $ .76 1/2 $ .70 1/2 Weighted average common shares outstanding 71,388 71,817 71,341 74,700 Depreciation and amortization $ 198,718 $ 186,261 $ 140,790 $ 111,488 Capital expenditures, excluding retailer financing $ 319,560 $ 239,602 $ 164,728 $ 175,624 ------------------------------------------------------------------------------------------------------------------------------
Notes: (a) Amounts for all years prior to 1992 have been restated to reflect the company's ownership percentage in ShopKo under the equity method of accounting because of the sale of a 54 percent interest in ShopKo, effective October 16, 1991. Fiscal 1992 and 1987 contained 53 weeks; all other years cover 52 weeks. Dollars in thousands except per share and percentge data. (b) The cumulative effect of adopting Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," resulted in a decrease in net earnings of $13,288,000 ($.18 per share). A $51,304,000 after-tax gain on the sale of a 54 percent interest in ShopKo was included in fiscal 1992 net earnings ($.69 per share). All statistics incude the results of both transactions. (c) The cumulative effect of adopting Statement of Financial Accounting Standards No. 96, "Accounting for Income Taxes," resulted in a decrease in net earnings of $13,640,000 ($.18 per share). A repeal of the investment tax credit under the Tax Reform Act of 1986 resulted in a reduction in earnings of approximately $6.0 million ($.08 per share). (d) Working capital and current ratio are calculated after adding back the LIFO reserve. (e) Total long-term debt incudes long-term debt and long-term obligations under capital leases. (f) Includes a reversal of $40.8 million of deferred taxes in 1995 related to the partial disposition of ShopKo in 1992. (g) The 1995 ratios were calculated excluding the restructuring and other charges and excluding the reversal of $40.8 million of deferred taxes related to the partial disposition of ShopKo. The ratios for earnings before accounting change as a percent of net sales and the return on average stockholders' equity would have been .26 and 3.46 percent, respectively, if the restructuring and other charges and the reversal of $40.8 million of deferred taxes had not been excluded. 22
----------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- 1991 1990 1989 1988 1987 (c) 1986 ----------------------------------------------------------------------------------------- $10,104,899 $9,734,811 $9,061,176 $8,331,333 $8,172,099 $7,164,463 9,360,886 9,043,953 8,429,692 7,751,172 7,620,235 6,727,338 531,972 484,586 433,177 399,504 381,822 286,259 - - - - - - 31,441 33,104 34,532 30,089 23,288 10,727 45,080 42,562 36,943 27,122 21,594 16,122 225,680 215,730 200,718 177,690 168,348 156,261 70,544 67,984 63,250 64,678 81,837 65,014 155,136 147,746 137,468 113,012 72,871 91,247 2.06 1.97 1.84 1.51 1.16 1.23 2.06 1.97 1.84 1.51 .98 1.23 ----------------------------------------------------------------------------------------- $ 785,395 $ 726,194 $ 688,947 $ 618,545 $ 588,646 $ 524,184 196,217 188,139 165,887 217,320 169,526 250,372 789,443 701,162 666,508 518,197 474,296 450,803 2,401,357 2,239,900 2,116,202 1,844,918 1,641,401 1,410,739 567,444 549,694 557,828 529,894 415,907 412,966 978,678 869,891 763,706 660,720 578,275 534,830 ----------------------------------------------------------------------------------------- 1.54% 1.52% 1.52% 1.36% 1.06% 1.27% 16.82% 18.12% 19.31% 18.28% 15.55% 18.06% $ 13.01 $ 11.59 $ 10.20 $ 8.84 $ 7.76 $ 7.20 1.24:1 1.25:1 1.22:1 1.35:1 1.28:1 1.56:1 46% 46% 46% 49% 45% 40% $ .64 1/2 $ .58 1/2 $ .48 1/2 $ .43 1/2 $ .41 $ .37 75,165 74,972 74,785 74,634 74,387 74,184 $ 105,582 $ 95,593 $ 86,944 $ 85,179 $ 71,955 $ 61,092 $ 203,199 $ 142,899 $ 193,218 $ 137,533 $ 214,314 $ 172,346 -----------------------------------------------------------------------------------------
23
CONSOLIDATED COMPOSITION OF NET SALES AND OPERATING EARNINGS ------------------------------------------------------------------------------------------------------- SUPERVALU INC. and Subsidiaries ------------------------------------------------------------------------------------------------------- The following table sets forth, for each of the last five fiscal years, the composition of the company's net sales and operating earnings. ------------------------------------------------------------------------------------------------------- (In thousands, except percent data) 1995 1994 1993 1992 1991 ------------------------------------------------------------------------------------------------------- Net sales ------------------------------------------------------------------------------------------------------- Food distribution $14,820,009 $14,361,255 $11,448,148 $ 9,841,033 $ 9,523,719 89.5% 90.1% 91.1% 92.6% 94.2% Retail food 4,219,691 3,696,145 2,699,075 2,002,923 1,764,745 25.4% 23.2% 21.5% 18.8% 17.5% Less: Eliminations (2,475,928) (2,120,475) (1,579,223) (1,211,655) (1,183,565) (14.9)% (13.3)% (12.6)% (11.4)% (11.7)% Total net sales $16,563,772 $15,936,925 $12,568,000 $10,632,301 $10,104,899 100.0% 100.0% 100.0% 100.0% 100.0% ------------------------------------------------------------------------------------------------------- Operating earnings ------------------------------------------------------------------------------------------------------- Food distribution $ 257,495 $ 365,527 $ 284,337 $ 241,666 $ 214,155 Retail food (104,338) 31,366 24,842 12,512 11,761 ------------------------------------------------------------------- Total operating earnings 153,157 396,893 309,179 254,178 225,916 Interest expense, net (111,271) (89,767) (54,203) (34,320) (31,441) General corporate expenses (43,345) (27,835) (19,430) (13,299) (13,875) ------------------------------------------------------------------- Earnings before equity in earnings of ShopKo, gain on sale of ShopKo stock and income taxes (1,459) 279,291 235,546 206,559 180,600 Equity in earnings of ShopKo 17,384 14,789 23,072 32,176 45,080 Gain on sale of ShopKo stock - - - 84,105 - ------------------------------------------------------------------- Earnings before income taxes $ 15,925 $ 294,080 $ 258,618 $ 322,840 $ 225,680 ------------------------------------------------------------------------------------------------------- Identifiable assets ------------------------------------------------------------------------------------------------------- Food distribution $ 2,843,862 $ 2,644,670 $ 2,830,400 $ 1,594,003 $ 1,542,859 Retail food 1,121,596 948,551 837,148 508,441 328,383 Corporate 339,691 449,130 396,641 381,856 530,115 ------------------------------------------------------------------- Total $ 4,305,149 $ 4,042,351 $ 4,064,189 $ 2,484,300 $ 2,401,357 ------------------------------------------------------------------------------------------------------- Depreciation and amortization ------------------------------------------------------------------------------------------------------- Food distribution $ 107,471 $ 105,763 $ 83,686 $ 71,326 $ 72,009 Retail food 76,145 64,924 48,303 35,360 27,433 Corporate 15,102 15,574 8,801 4,802 6,140 ------------------------------------------------------------------- Total $ 198,718 $ 186,261 $ 140,790 $ 111,488 $ 105,582 ------------------------------------------------------------------------------------------------------- Capital expenditures ------------------------------------------------------------------------------------------------------- Food distribution $ 159,838 $ 131,322 $ 60,408 $ 94,835 $ 129,518 Retail food 119,605 69,939 78,715 68,562 64,594 Corporate 40,117 38,341 25,605 12,227 9,087 ------------------------------------------------------------------- Total $ 319,560 $ 239,602 $ 164,728 $ 175,624 $ 203,199 -------------------------------------------------------------------------------------------------------
The company's food distribution operations include sales to independently owned and operated food stores, sales to food stores owned by the company, and the operations of several allied service operations throughout the United States. Retail food operations include sales by food stores owned by the company, other than transition retail food stores. Eliminations include food distribution sales to food stores included in the retail food segment. Industry segment operating earnings were computed as total revenue less associated operating expenses, which exclude general corporate expenses, net interest expense and income taxes. Identifiable assets are those assets of the company directly associated with the industry segments and exclude short-term investments, certain accumulated income tax temporary differences and other corporate assets. Operating earnings in 1995 for food distribution and retail food were reduced by $93.1 and $138.4 million, respectively, for restructuring and other charges. General corporate expenses includes $12.6 million for restructuring and other charges. See notes following the Ten Year Financial and Operating Summary and notes to the consolidated financial statements. 24
CONSOLIDATED STATEMENTS OF EARNINGS --------------------------------------------------------------------------------------------------------- SUPERVALU INC. and Subsidiaries --------------------------------------------------------------------------------------------------------- (In thousands, except per share data) Fiscal Year Ended --------------------------------------------------------------------------------------------------------- February 25, February 26, February 27, 1995 1994 1993 (52 Weeks) (52 Weeks) (52 Weeks) --------------------------------------------------------------------------------------------------------- Net sales $16,563,772 $15,936,925 $12,568,000 Costs and expenses Cost of sales 15,040,117 14,523,434 11,531,394 Selling and administrative expenses 1,169,843 1,044,433 746,857 Restructuring and other charges 244,000 - - Interest Interest expense 135,383 120,292 83,066 Interest income 24,112 30,525 28,863 --------------------------------------------------------------------------------------------------------- Interest expense, net 111,271 89,767 54,203 --------------------------------------------------------------------------------------------------------- Total costs and expenses 16,565,231 15,657,634 12,332,454 --------------------------------------------------------------------------------------------------------- Earnings (loss) before equity in earnings of ShopKo and income taxes (1,459) 279,291 235,546 Equity in earnings of ShopKo 17,384 14,789 23,072 --------------------------------------------------------------------------------------------------------- Earnings before income taxes 15,925 294,080 258,618 Provision for income taxes Current 113,505 110,717 79,980 Deferred (140,914) (1,890) 14,112 --------------------------------------------------------------------------------------------------------- Income tax expense (27,409) 108,827 94,092 --------------------------------------------------------------------------------------------------------- Net earnings $ 43,334 $ 185,253 $ 164,526 --------------------------------------------------------------------------------------------------------- Weighted average number of common shares outstanding 71,388 71,817 71,341 Net earnings per common share $.61 $2.58 $2.31 ---------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 25
CONSOLIDATED BALANCE SHEETS ------------------------------------------------------------------------------------------------- SUPERVALU INC. and Subsidiaries ------------------------------------------------------------------------------------------------- (In thousands, except per share data) February 25, 1995 February 26, 1994 ------------------------------------------------------------------------------------------------- Assets Current Assets Cash $ 4,839 $ 2,846 Receivables, less allowance for losses of $29,268 in 1995 and $33,820 in 1994 383,458 352,151 Inventories 1,109,791 1,113,937 Other current assets 148,252 94,379 ------------------------------------------------------------------------------------------------- Total current assets 1,646,340 1,563,313 ------------------------------------------------------------------------------------------------- Long-term notes receivable 73,094 66,568 Long-term investment in direct financing leases 77,688 81,574 Property, plant and equipment Land 202,949 172,241 Buildings 868,379 769,036 Property under construction 51,640 73,950 Leasehold improvements 134,094 114,724 Equipment 970,779 890,050 Assets under capital leases 205,030 175,891 ------------------------------------------------------------------------------------------------- 2,432,871 2,195,892 Less accumulated depreciation and amortization Owned property, plant and equipment 825,546 746,027 Assets under capital leases 36,027 39,742 ------------------------------------------------------------------------------------------------- Net property, plant and equipment 1,571,298 1,410,123 ------------------------------------------------------------------------------------------------- Investment in ShopKo 182,839 173,567 Goodwill 515,009 427,559 Other assets 238,881 319,647 ------------------------------------------------------------------------------------------------- Total assets $4,305,149 $4,042,351 -------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 26
------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------ February 25, 1995 February 26, 1994 ------------------------------------------------------------------------------------------------------------------ Liabilities and Stockholders' Equity Current Liabilities Notes payable $ 226,168 $ 23,082 Accounts payable 1,003,106 883,088 Current maturities of long-term debt 9,277 108,728 Current obligations under capital leases 19,060 19,222 Other current liabilities 189,526 190,305 ------------------------------------------------------------------------------------------------------------------ Total current liabilities 1,447,137 1,224,425 ------------------------------------------------------------------------------------------------------------------ Long-term debt 1,215,184 1,030,378 Long-term obligations under capital leases 244,582 232,617 Deferred income taxes - 99,734 Other liabilities 205,024 179,739 Commitments and contingencies - - Stockholders' equity Preferred stock, no par value: Authorized 1,000 shares Shares issued and outstanding, 6 in 1995 and 1994 ($1,000 stated value) 5,908 5,908 Common stock, $1.00 par value: Authorized 200,000 shares Shares issued, 75,335, in 1995 and 1994 75,335 75,335 Capital in excess of par value 12,717 12,966 Retained earnings 1,236,507 1,268,117 Treasury stock, at cost, 5,161 shares in 1995 and 3,276 in 1994 (137,245) (86,868) ------------------------------------------------------------------------------------------------------------------ Total stockholders' equity 1,193,222 1,275,458 ------------------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $4,305,149 $4,042,351 ------------------------------------------------------------------------------------------------------------------
27
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY ------------------------------------------------------------------------------------------------------------------------ SUPERVALU INC. and Subsidiaries ------------------------------------------------------------------------------------------------------------------------ (In thousands, except per share data) Capital in Preferred Common Excess of Treasury Retained Stock Stock Par Value Stock Earnings Total ------------------------------------------------------------------------------------------------------------------------ Balances at February 29, 1992 $ - $75,335 $12,755 $ (91,496) $1,034,387 $1,030,981 Net earnings - - - - 164,526 164,526 Sales of common stock under option plans - - (932) 8,321 - 7,389 Cash dividends declared on common stock--$.765 per share - - - - (54,539) (54,539) Compensation under employee incentive plans - - 761 6,003 - 6,764 Purchase of shares for treasury - - - (20,301) - (20,301) ------------------------------------------------------------------------------------------------------------------------ Balances at February 27, 1993 - 75,335 12,584 (97,473) 1,144,374 1,134,820 Net earnings - - - - 185,253 185,253 Sales of common stock under option plans - - 225 10,838 - 11,063 Cash dividends declared on common stock--$.855 per share - - - - (61,510) (61,510) Issuance of preferred stock 5,908 - - - - 5,908 Compensation under employee incentive plans - - 157 (233) - (76) ------------------------------------------------------------------------------------------------------------------------ Balances at February 26, 1994 5,908 75,335 12,966 (86,868) 1,268,117 1,275,458 Net earnings - - - - 43,334 43,334 Sales of common stock under option plans - - (290) 1,435 - 1,145 Cash dividends declared on common stock--$.925 per share - - - - (66,024) (66,024) Compensation under employee incentive plans - - 41 253 - 294 Purchase of shares for treasury - - - (52,065) - (52,065) Other - - - - (8,920) (8,920) ------------------------------------------------------------------------------------------------------------------------ Balances at February 25, 1995 $5,908 $75,335 $12,717 $(137,245) $1,236,507 $1,193,222 ------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 28
CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------------------------------------------------------------------------------------------- SUPERVALU INC. and Subsidiaries ------------------------------------------------------------------------------------------------------------------------- (In thousands) Fiscal Year Ended ------------------------------------------------------------------------------------------------------------------------- February 25, February 26, February 27, 1995 1994 1993 ------------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities Net earnings $ 43,334 $ 185,253 $ 164,526 Adjustments to reconcile net earnings to net cash provided by operating activities: Equity in earnings of ShopKo (17,384) (14,789) (23,072) Dividends received from ShopKo 6,482 6,483 6,490 Depreciation and amortization 198,718 186,261 140,790 Provision for losses on receivables 1,627 7,165 7,867 Restructuring and other charges 244,000 - - Gain on sale of property, plant and equipment (3,689) (404) (2,734) Deferred income taxes (140,914) (1,890) 14,112 Treasury shares contributed to employee incentive plan 525 444 6,282 Changes in assets and liabilities, excluding effect from acquisitions: Receivables (14,862) (1,207) 21,917 Inventories 52,296 22,222 119,959 Other current assets 4,638 108 (908) Direct financing leases 9,517 9,183 12,881 Accounts payable 6,516 18,171 (19,968) Other liabilities (49,804) 15,745 (44,004) ------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 341,000 432,745 404,138 ------------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities Additions to long-term notes receivable (32,052) (35,591) (38,986) Proceeds received on long-term notes receivable 33,396 51,557 53,136 Net reductions to note receivable from ShopKo - - 181,167 Proceeds from sale of property, plant and equipment 43,854 41,531 23,467 Purchase of property, plant and equipment (298,124) (231,489) (152,498) Business acquisitions, net of cash acquired (111,083) - (643,718) Other investing activities 33,033 44,249 (114,132) ------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (330,976) (129,743) (691,564) ------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities Net issuance (reduction) of short-term notes payable 199,530 (228,414) (108,910) Proceeds from issuance of long-term debt 150,000 4,365 701,363 Repayment of long-term debt (221,245) (9,462) (219,320) Reduction of obligations under capital leases (19,095) (18,377) (17,590) Proceeds from the sale of common stock under option plans 212 9,521 5,985 Dividends paid (65,368) (59,562) (53,574) Payment for purchase of treasury stock (52,065) - (20,301) ------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (8,031) (301,929) 287,653 ------------------------------------------------------------------------------------------------------------------------- Net increase in cash 1,993 1,073 227 Cash at beginning of year 2,846 1,773 1,546 ------------------------------------------------------------------------------------------------------------------------- Cash at end of year $ 4,839 $ 2,846 $ 1,773 -------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUPERVALU INC. and Subsidiaries ------------------------------------------------------------------------------- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation: The financial statements include the accounts of the company and all its subsidiaries. All significant inter-company accounts and transactions have been eliminated. Revenue and Income Recognition: Revenues from product sales are recognized upon shipment of the product for food distribution and at the point of sale for retail food. Revenues from services rendered are recognized immediately after such services have been provided. Income is recognized upon the completion of the earnings process. Inventories: Inventories are stated at the lower of cost or market. Cost is determined through use of the last-in, first-out method (LIFO) for a major portion of consolidated inventories: 79.5 percent for fiscal 1995 and 82.0 percent for fiscal 1994. The first-in, first-out method (FIFO) is used to determine cost for remaining inventories which are principally perishable products. Market is replacement value. If the FIFO method had been used to determine cost of inventories for which the LIFO method is used, the company's inventories would have been higher by approximately $120.2 million at February 25, 1995 and $113.2 million at February 26, 1994. Property, plant and equipment: Property, plant and equipment are carried at cost. Depreciation, as well as amortization of assets under capital leases, is based on the estimated useful lives of the assets using a straight-line method. Interest on property under construction of $2.7, $2.9 and $4.0 million was capitalized in fiscal years 1995, 1994 and 1993, respectively. Goodwill: Amounts paid in excess of the fair value of acquired net assets are amortized on a straight-line basis over 5 to 40 years. The recoverability of goodwill is assessed by determining whether the goodwill balance can be recovered through projected cash flows and operating results over its remaining life. Any impairment of the asset would be recognized when it is probable that such future undiscounted cash flows will be less than the carrying value of the asset. Goodwill is shown net of accumulated amortization of $31.1 and $20.4 million for fiscal 1995 and 1994, respectively. Accounts payable: Accounts payable include $68.5 and $80.5 million at February 25, 1995 and February 26, 1994, respectively, of issued checks which had not cleared the company's bank accounts, reduced by deposits in transit and cash on deposit in the company's depository banks. Financial Instruments: The company, from time to time, utilizes interest rate caps, collars and swaps to manage interest costs and reduce exposure to interest rate changes. The difference between amounts to be paid or received is accrued and recognized over the life of such contracts. Fair value disclosures of financial instruments: The estimated fair value of notes receivable approximates the net carrying value at February 25, 1995 and February 26, 1994. Notes receivable are valued based on comparisons to publicly traded debt instruments of similar credit quality. At February 25, 1995 and February 26, 1994 the estimated fair market value of the company's long-term debt (including current maturities) exceeded the carrying value by approximately $11 and $69 million, respectively. The estimated fair value was based on market quotes where available, discounted cash flows and market yields for similar instruments. The estimated fair market value of the company's commercial paper outstanding as of February 25, 1995 and February 26, 1994 approximated the carrying value. The fair market value of the company's interest rate caps, collars and swaps was immaterial at February 25, 1995 and February 26, 1994. Pre-opening costs: Pre-opening costs of retail stores are charged against earnings as incurred. Net earnings per share: Net earnings per share are computed by dividing net earnings by the weighted average number of common shares outstanding. Outstanding stock options do not have a significant dilutive effect on earnings per share. Reclassifications: Certain reclassifications have been made to prior years' financial statements to conform to fiscal 1995 presentation. These reclassifications did not affect results of operations as previously reported. ACQUISITIONS As of October 31, 1992, the company completed the acquisition of Wetterau Incorporated ("Wetterau"). The acquisition was accounted for as a purchase, whereby the company acquired all of the outstanding common stock of Wetterau. The results of Wetterau's operations from October 31, 1992 have been included with the company's continuing operations. The following unaudited pro forma results of operations for the year ended February 27, 1993 assumes the acquisition occurred as of the beginning of the respective period after giving effect to certain adjustments, including amortization of goodwill, depre- 30 ------------------------------------------------------------------------------- ciation of fixed asset write-ups, increased interest expense on acquisition debt and related income tax effects. The pro forma results have been prepared for comparative purposes only and do not purport to indicate the results of operations which would actually have occurred had the combination been in effect on the date indicated, or which may occur in the future.
------------------------------------------------------------------------------- (In thousands, except per share amounts) 1993 ------------------------------------------------------------------------------- Net sales $16,446,508 Net earnings 167,499 Net earnings per common share 2.35 -------------------------------------------------------------------------------
RESTRUCTURE AND OTHER CHARGES In December 1994, restructuring and other charges totaling $244.0 million were incurred for the implementation of the plan formulated under the ADVANTAGE project, the sale, closure or restructure of certain retail businesses and the recognition of certain asset impairments. The aggregate charges included $204.8 million for activities under the restructuring plan and an additional $39.2 million for asset impairment. The asset impairment charge covered intangibles in businesses where future undiscounted cash flow was not sufficient to recover the carrying value of the recorded intangible. The charges included $53.1 million for severance, pension and outplacement which is based on the projected impact of the plan on employee levels in both food distribution and retail food. The company expects approximately 4,300 employees to be eliminated over the next 18 months under the re-engineering efforts, 1,700 of which are employed in retail food operations. During fiscal 1995, approximately 338 positions were eliminated which resulted in severance and outplacement payments of $1.6 million. Also included in the charge is a $20.0 million provision in food distribution which represents expected losses on the sale of tangible assets and expenses under non-cancelable leases as a result of the strategic shift. Expenditures under non-cancelable leases and write-offs of losses on sale of $6.0 million were incurred during the fourth quarter of fiscal 1995. The restructuring charges included a $87.8 provision for property and lease discontinuances at retail locations, resulting primarily from various exit strategies and payment of portions of non-cancelable lease obligations. Approximately 30 retail stores were expected to be sold or closed, primarily in fiscal 1995 and 1996. At the end of 1995, six of the stores had been closed. Charges of $16.7 million were incurred during the fourth quarter of fiscal 1995 related to the closedown of retail locations. The retail units covered by the reserve had aggregate sales of $296.3, $291.7 and $234.1 million in 1995, 1994 and 1993, respectively, and pre-tax losses of $21.3, $19.0 and $9.2 million in 1995, 1994 and 1993, respectively. The final component of the aggregate charges was a $43.9 million impairment provision representing the effect of the strategic shift on the recoverability of certain assets. The company holds land for development, transition stores for wholesale market share, certain warehouse properties and miscellaneous sites which will be disposed of as soon as practicable. During the fourth quarter of fiscal 1995, expenditures of $3.3 million were incurred, leaving a reserve of $40.6 million to cover expenditures and write-offs expected to be incurred during the next 6 months. NOTES RECEIVABLE Notes receivable arise from fixture and other financing related to independently owned retail food operations. Loans to independent retailers, as well as trade accounts receivable, are primarily collateralized by the retailers' inventory, equipment and fixtures. The notes range in length from 1 to 20 years with the average being 7 years, and may be non-interest bearing or bear interest at rates ranging primarily from 5 to 13 percent. Included in current receivables are notes receivable due within one year totaling $11.6 and $10.9 million at February 25, 1995 and February 26, 1994, respectively. The Financial Accounting Standards Board issued SFAS No. 114 - "Accounting by Creditors for Impairment of a Loan" during calendar 1994. This new standard must be adopted in fiscal 1996. The impact of this new standard, when adopted, is not expected to be material. INVESTMENT IN SHOPKO The company's ownership in ShopKo, a mass merchandise discount retailer, is 46 percent and is accounted for under the equity method. The following table summarizes the significant transactions between the company and ShopKo:
------------------------------------------------------------------------------- (In thousands) 1995 1994 1993 ------------------------------------------------------------------------------- Sales to ShopKo $2,668 $9,759 $16,645 Interest income - - 509 -------------------------------------------------------------------------------
Summarized financial information of ShopKo is as follows:
------------------------------------------------------------------------------- (In thousands) 1995 1994 1993 ------------------------------------------------------------------------------- Sales $1,852,929 $1,738,746 $1,682,854 Gross profit 488,016 449,488 454,423 Net earnings 37,790 32,122 50,059 -------------------------------------------------------------------------------
------------------------------------------------------------------------------- (In thousands) 1995 1994 ------------------------------------------------------------------------------- Current assets $468,744 $370,507 Non-current assets 641,007 582,542 Current liabilities 281,473 251,743 Non-current liabilities 431,003 327,600 -------------------------------------------------------------------------------
31 ------------------------------------------------------------------------------- DEBT ------------------------------------------------------------------------------- (In thousands, February 25, February 26, except payment data) 1995 1994 -------------------------------------------------------------------------------- 5.875%-8.875% promissory notes $ 700,000 $ 700,000 semi-annual interest payments of $24.9 million; due 1995 to 2002 7.25% promissory notes 150,000 - semi-annual interest payments of $5.4 million; due 1999 2.05%-11.0% industrial revenue bonds 93,085 95,944 9.67% senior subordinated notes due 1998 75,000 75,000 8.875%-9.64% promissory notes 70,000 170,000 semi-annual interest payments of $7.9 million; due 1997 to 1999 8.39%-11.5% promissory notes 31,351 33,317 due 1996 to 2004 8.28%-9.46% promissory notes due 2010 25,640 26,394 9.96% promissory note due 2005 24,013 8.875% sinking fund debentures due 2016 22,110 22,110 3.0%-9.5% mortgages payable due 5,490 8,331 1996 to 2008 (secured by land and buildings) Other debt 27,772 8,010 -------------------------------------------------------------------------------- 1,224,461 1,139,106 Less current maturities 9,277 108,728 -------------------------------------------------------------------------------- Long-term debt $1,215,184 $1,030,378 -------------------------------------------------------------------------------- Aggregate maturities of long-term debt during the next five fiscal years are: -------------------------------------------------------------------------------- (In thousands) -------------------------------------------------------------------------------- 1996 $ 9,277 1997 306,601 1998 36,709 1999 93,222 2000 207,511 -------------------------------------------------------------------------------- The company has a $400 million revolving credit agreement that expires in October 1996. The company pays an annual facility fee of .15 percent for the credit agreement. The company issued unsecured notes of $22.8 million and $3.6 million on February 10, 1994 in connection with the acquisition of certain properties from Wetterau Properties, Inc., a publicly owned real estate investment trust. The notes, which bear interest at 9.46 percent and 8.28 percent, respectively, replaced the company's obligations under debt contingent purchase agreements. On May 26, 1994, the company issued $24.9 million of unsecured notes bearing interest at 9.96 percent. On July 21, 1994, the company issued $150 million of 5 year 7.25 percent notes. The proceeds from the notes were used to refund $100 million of the company's 9.375 percent notes due August 15, 1994 and to repay and reduce certain mortgage indebtedness and short-term commercial paper borrowings. The debt agreements contain various covenants, including minimum tangible net worth requirements and maximum permitted leverage. Under the most restrictive covenants, retained earnings of approximately $53 million were available at year-end for payment of cash dividends. The company has $300 million of debt due in November of 1995, which it intends to refinance by utilizing the existing shelf registration or the use of the available revolving credit agreement. The company periodically enters into interest rate caps, collars and swaps to manage exposure to interest rate changes. The financial instruments are subject to market risk as interest rates fluctuate. In fiscal 1995, the company purchased an interest rate cap which provided an upper limit on the rates of $100 million of the company's floating rate commercial paper. The interest rate cap expires in June of fiscal 1996. In addition to the $100 million interest rate cap, at February 25, 1995, the company had notional amounts in effect of $14.4 million intended to fix interest costs. The weighted average interest rate on short-term borrowings outstanding at February 25, 1995, and February 26, 1994, was 6.1 and 4.8 percent, respectively. LEASES Capital and operating leases: The company leases certain food distribution warehouse and office facilities, as well as corporate-owned and operated retail food stores. Many of these leases include renewal options, and to a limited extent, include options to purchase. Amortization of assets under capital leases was $12.9, $13.6 and $11.8 million in fiscal 1995, 1994 and 1993, respectively. Future minimum obligations under capital leases in effect at February 25, 1995 are as follows: -------------------------------------------------------------------------------- (In thousands) Lease Year Obligations -------------------------------------------------------------------------------- 1996 $ 24,200 1997 23,516 1998 23,151 1999 22,445 2000 21,965 Later 202,843 -------------------------------------------------------------------------------- Total future minimum obligations 318,120 Less interest 138,502 -------------------------------------------------------------------------------- Present value of net future minimum obligations 179,618 Less current portion 10,126 -------------------------------------------------------------------------------- Long-term obligations $169,492 -------------------------------------------------------------------------------- The present values of future minimum obligations shown are calculated based on interest rates ranging from 7.1 percent to 13.8 percent, with a weighted average of 9.7 percent, determined to be applicable at the inception of the leases. 32 ------------------------------------------------------------------------------- Contingent rent expense, based primarily on sales performance, for capital leases was not significant. In addition to its capital leases, the company is obligated under operating leases, primarily for buildings, warehouse and computer equipment. Future minimum obligations under operating leases in effect at February 25, 1995 are as follows: ------------------------------------------------------------------------------- (In thousands) Lease Year Obligations ------------------------------------------------------------------------------- 1996 $ 57,283 1997 50,804 1998 44,088 1999 37,259 2000 32,572 Later 166,887 ------------------------------------------------------------------------------- Total future minimum obligations $388,893 ------------------------------------------------------------------------------- Total rent expense, net of sublease income, relating to all operating leases with terms greater than one year was $32.9, $33.3 and $13.0 million in fiscal 1995, 1994 and 1993, respectively. Contingent rental income earned and rental expense paid, based primarily on sales performance, for operating leases was not significant. Future minimum receivables under operating leases and subleases in effect at February 25, 1995 are as follows: ------------------------------------------------------------------------------- (In thousands) Owned Leased Year Property Property Total ------------------------------------------------------------------------------- 1996 $ 6,489 $ 24,179 $ 30,668 1997 6,325 21,196 27,521 1998 5,900 17,456 23,356 1999 5,276 14,305 19,581 2000 4,345 11,708 16,053 Later 18,242 51,153 69,395 ------------------------------------------------------------------------------- Total future minimum receivables $46,577 $139,997 $186,574 ------------------------------------------------------------------------------- Owned property under operating leases is as follows: ------------------------------------------------------------------------------- (In thousands) February 25, February 26, 1995 1994 ------------------------------------------------------------------------------- Land, buildings and equipment $ 69,067 $ 70,491 Less accumulated depreciation 17,402 15,754 ------------------------------------------------------------------------------- Net land, buildings and equipment $ 51,665 $ 54,737 ------------------------------------------------------------------------------- Direct financing leases: Under direct financing capital leases, the company leases buildings on behalf of independent retailers with terms ranging from 5 to 25 years. Future minimum rentals to be received under direct financing leases and the related future minimum obligations under capital leases in effect at February 25, 1995 are as follows: ------------------------------------------------------------------------------- (In thousands) Direct Financing Capital Lease Year Lease Receivables Obligations ------------------------------------------------------------------------------- 1996 $ 18,380 $ 16,922 1997 17,192 15,766 1998 15,599 14,325 1999 13,739 12,698 2000 11,476 10,635 Later 72,515 67,824 ------------------------------------------------------------------------------- Total minimum lease payments 148,901 138,170 Less unearned income 62,630 - Less interest - 54,146 ------------------------------------------------------------------------------- Present value of net minimum lease payments 86,271 84,024 Less current portion 8,583 8,934 ------------------------------------------------------------------------------- Long-term portion $ 77,688 $ 75,090 ------------------------------------------------------------------------------- Contingent rental income earned and rental expense paid, based primarily on sales performance, for direct financing leases was not significant. INCOME TAXES The company provides for income taxes in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Under this method a deferred tax liability is recognized for taxable temporary differences and a deferred tax asset is recognized for deductible temporary differences, tax credit carryforwards, and net operating loss carryforwards. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. The provision (benefit) for income taxes consists of the following: ------------------------------------------------------------------------------- (In thousands) 1995 1994 1993 ------------------------------------------------------------------------------- Current Federal $ 93,785 $ 91,113 $66,699 State 20,060 19,955 13,836 Tax credits (340) (351) (555) Deferred Statutory rate change - 500 - ShopKo deferred tax benefit (40,783) - - Restructuring and other charges (75,803) - - Other (24,328) (2,390) 14,112 ------------------------------------------------------------------------------- Total provision (benefit) $(27,409) $108,827 $94,092 ------------------------------------------------------------------------------- 33 ------------------------------------------------------------------------------- The difference between the actual tax provision (benefit) and the tax provision (benefit) computed by applying the statutory Federal income tax rate to earnings before taxes is attributable to the following: ------------------------------------------------------------------------------- (In thousands) 1995 1994 1993 ------------------------------------------------------------------------------- Federal taxes based on statutory rate $ 5,574 $102,928 $87,930 State income taxes, net of federal benefit 725 12,645 11,121 ShopKo deferred tax benefit (40,783) - - Benefit of dividends received deduction (6,910) (2,058) (1,810) Nondeductible goodwill 17,990 4,192 1,314 Other (4,005) (8,880) (4,463) ------------------------------------------------------------------------------- Total provision (benefit) $(27,409) $108,827 $94,092 ------------------------------------------------------------------------------- The company recorded a tax benefit of $40.8 million in 1995 for the reversal of deferred taxes related to the 1992 sale of 54 percent of the then wholly-owned ShopKo Stores, Inc. to reflect a favorable Internal Revenue Service settlement. Temporary differences which give rise to significant portions of the net deferred tax asset as of February 25, 1995 and net deferred tax liability for February 26, 1994 are as follows: ------------------------------------------------------------------------------- (In thousands) 1995 1994 ------------------------------------------------------------------------------- Deferred tax assets: Depreciation and amortization $ 10,756 $ 12,683 Restructuring and other charges 75,803 - Net operating loss from acquired subsidiaries 26,736 - Valuation allowance (8,000) - Provision for obligations and contingencies to be settled in future periods 182,034 154,742 Other 23,925 15,439 ------------------------------------------------------------------------------- Total deferred tax assets 311,254 182,864 ------------------------------------------------------------------------------- Deferred tax liabilities: Depreciation and amortization (77,621) (89,522) Acquired assets adjustment to fair values (104,247) (80,329) ShopKo investment - (44,623) Accelerated tax deductions for benefits to be paid in future periods (12,404) (17,986) Other (7,705) (6,511) ------------------------------------------------------------------------------- Total deferred tax liabilities (201,977) (238,971) ------------------------------------------------------------------------------- Net deferred tax asset (liability) $ 109,277 $ (56,107) ------------------------------------------------------------------------------- The company has acquired net operating loss (NOL) carryforwards of $67,872 which expire beginning in 2000 and continuing through 2010. A valuation allowance of $8,000 relates to NOL carryforwards not expected to be realized. Temporary differences attributable to obligations and contingencies consist primarily of valuation allowances, accrued postretirement benefits and vacation pay, and other expenses which are not deductible for income tax purposes until paid. SUPPLEMENTAL CASH FLOW INFORMATION The company's non-cash investing and financing activities were as follows: ------------------------------------------------------------------------------- (In thousands) 1995 1994 1993 ------------------------------------------------------------------------------- Leased asset additions and related obligation $ 22,695 $13,127 $ 12,797 --------------------------------- Acquisitions: Fair value of assets acquired 402,885 35,482 1,837,693 Cash paid 117,477 - 647,382 Preferred stock issued - 5,908 - ------------------------------------------------------------------------------- Liabilities assumed $285,408 $29,574 $1,190,311 ------------------------------------------------------------------------------- Payments for interest and income taxes were as follows: ------------------------------------------------------------------------------- (In thousands) 1995 1994 1993 ------------------------------------------------------------------------------- Interest (net of amount capitalized) $134,251 $123,457 $71,259 Income taxes 123,808 107,891 99,658 ------------------------------------------------------------------------------- STOCK OPTION PLANS The company's 1993, 1983 and 1976 stock option plans allow the granting of non- qualified stock options and incentive stock options to key salaried executive employees at prices not less than 100 percent of fair market value, determined by averaging the open and close price on the date of grant. The plans provide that the Board of Directors or the Executive Personnel and Compensation Committee of the Board may determine at the time of granting whether each option granted will be a non-qualified or incentive stock option under the Internal Revenue Code. The term of each option will be determined by the Board of Directors or the Committee, but shall not be for more than 10 years from the date of grant. Options may be exercised in installments or otherwise, as the Board of Directors or the Committee may determine. Changes in the options were as follows: -------------------------------------------------------------------------------- Shares Price (In thousands) Range -------------------------------------------------------------------------------- Outstanding, February 29, 1992 2,353 $ 8.57-29.75 Granted 793 24.00-34.56 Exercised (495) 8.57-29.75 Canceled and forfeited (23) -------------------------------------------------------------------------------- Outstanding, February 27, 1993 2,628 13.19-34.56 Granted 692 31.63-39.25 Exercised (482) 13.19-32.81 Canceled and forfeited (73) -------------------------------------------------------------------------------- Outstanding, February 26, 1994 2,765 15.25-39.25 Granted 910 25.69-32.50 Exercised (66) 15.25-33.19 Canceled and forfeited (70) -------------------------------------------------------------------------------- Outstanding, February 25, 1995 3,539 $15.91-39.25 -------------------------------------------------------------------------------- 34 -------------------------------------------------------------------------------- Options to purchase 2.1 and 1.7 million shares were exercisable at February 25, 1995, and February 26, 1994, respectively. Option shares available for grant were 3.0 and 3.8 million at February 25, 1995, and February 26, 1994, respectively. The company has reserved 9.6 million shares, in aggregate, for the plans. As of February 25, 1995, limited stock appreciation rights have been granted and are outstanding under the 1978, 1989 and 1993 Stock Appreciation Rights Plans. Such rights relate to options granted to purchase 1.3 million shares of common stock and are exercisable only upon a "change of control." TREASURY STOCK PURCHASE PROGRAM In February 1994, the Board of Directors instituted a treasury stock program under which the company is authorized to purchase shares in such amounts as it deems appropriate for reissuance upon the exercise of employee stock options and for other compensation programs utilizing the company's stock. In December 1994, the Board of Directors approved an additional treasury stock purchase program. Under the December 1994 program the company may repurchase up to 5.0 million shares which may be used for any corporate purpose. During fiscal 1995, the company repurchased .6 million shares at an average per share cost of $34.49 under the February 1994 program and 1.3 million shares at an average per share cost of $23.72 under the December 1994 treasury stock program. No shares were repurchased under either treasury stock program in fiscal 1994. The company repurchased .8 million shares at an average per share cost of $25.78 during fiscal 1993 under the 1991 treasury stock program which was rescinded by the Board of Directors in February 1994. STOCKHOLDER RIGHTS PLAN The company has a "Preferred Share Purchase Rights Plan," in which the Board of Directors declared a dividend of one preferred share purchase right for each outstanding share of common stock. The rights, which expire on April 12, 1999, are exercisable only under certain conditions, and when exercisable the holder will be entitled to purchase from the company one one-thousandth of a share of a new series of preferred stock at a price of $95 per one one-thousandth of a preferred share, subject to certain adjustments. The rights will become exercisable 10 days after a person or group acquires beneficial ownership of 20 percent or more of the company's shares, or 10 business days (or such later time as the Board of Directors may determine) after a person or group announces an offer the consummation of which would result in such person or group owning 20 percent or more of the shares. RETIREMENT PLANS Substantially all non-union employees of the company and its subsidiaries are covered by various contributory and non-contributory pension or profit-sharing plans. The company also participates in several multi-employer plans providing defined benefits to union employees under the provisions of collective bargaining agreements. Contributions under the defined contribution profit sharing plans are determined at the discretion of the Board of Directors and were $5.3, $5.1 and $4.4 million for fiscal 1995, 1994 and 1993, respectively. Amounts charged to union pension expense were $31.8, $28.2 and $21.5 million for fiscal 1995, 1994 and 1993, respectively. Benefit calculations for the company's defined benefit pension plan are based on years of service and the participants' highest compensation during five consecutive years of employment. Annual payments to the pension trust fund are determined in compliance with the Employee Retirement Income Security Act (ERISA). The following table sets forth the company's defined benefit pension plans' funded status and the amounts recognized in the company's financial statements:
----------------------------------------------------------------------------------------------- February 25, February 26, (In thousands) 1995 1994 ----------------------------------------------------------------------------------------------- Actuarial present value of accumulated benefit obligation: Vested $ 139,315 $ 148,335 Total $ 153,480 $ 165,024 ----------------------------------------------------------------------------------------------- Projected benefit obligation $ 192,082 $ 210,567 Plan assets at fair value (164,943) (160,205) ----------------------------------------------------------------------------------------------- Projected benefit obligation in excess of plan assets 27,139 50,362 Unrecognized net loss (14,096) (32,024) Unrecognized prior service cost 307 (3,320) Unrecognized transition obligation (475) (570) Adjustment to minimum liability 125 139 ----------------------------------------------------------------------------------------------- Pension liability $ 13,000 $ 14,587 -----------------------------------------------------------------------------------------------
Net pension expense included the following components:
----------------------------------------------------------------------------------------------- (In thousands) 1995 1994 1993 ----------------------------------------------------------------------------------------------- Service cost $10,647 $ 8,848 $ 5,940 Interest cost 15,638 14,975 9,601 Actual return on plan assets (4,892) (12,834) (6,518) Net amortization and deferral (9,490) (1,235) (2,517) ----------------------------------------------------------------------------------------------- Net pension expense $11,903 $ 9,754 $ 6,506 -----------------------------------------------------------------------------------------------
The weighted-average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were 8.5 percent and 4.5 percent, respectively for 1995, and 7.5 percent and 4.5 percent, respectively, for 1994. The expected long-term rate of return on assets was 10 percent. The company computes pension expense using the projected unit credit actuarial cost method. 35 ------------------------------------------------------------------------------ The company also maintains non-contributory, unfunded pension plans to provide certain employees with pension benefits in excess of limits imposed by federal tax law. The projected benefit obligation of the unfunded plans totals $13.7 and $9.9 million at February 25, 1995 and February 26, 1994, respectively. The accumulated benefit obligation of these plans totaled $10.4 and $8.4 million at February 25, 1995 and February 26, 1994, respectively. Net periodic pension cost was $1.9, $1.3 and $1.1 million for fiscal 1995, 1994 and 1993, respectively. Other Postretirement Benefits: In addition to providing pension benefits, the company provides certain health care and life insurance benefits for retired employees. Employees become eligible for these benefits upon meeting certain age and service requirements. The periodic postretirement benefit cost and accumulated postretirement benefit obligation are as follows:
----------------------------------------------------------------------------------- (In thousands) Net periodic postretirement benefit cost 1995 1994 1993 ----------------------------------------------------------------------------------- Service cost-benefits attributed to service during the period $1,901 $1,783 $1,385 Interest cost on accumulated postretirement benefit obligation 4,024 3,686 2,648 Net amortization and deferral 93 340 - ----------------------------------------------------------------------------------- Net periodic postretirement benefit cost $6,018 $5,809 $4,033 -----------------------------------------------------------------------------------
----------------------------------------------------------------------------------- Accumulated postretirement benefit February 25, February 26, obligation 1995 1994 ----------------------------------------------------------------------------------- Retirees $21,021 $17,617 Active plan participants 30,607 34,930 ----------------------------------------------------------------------------------- Total accumulated postretirement benefit obligation 51,628 52,547 Unrecognized (loss) gain 1,328 (5,984) Unrecognized prior service cost (362) 839 ----------------------------------------------------------------------------------- Postretirement benefit liability $52,594 $47,402 -----------------------------------------------------------------------------------
The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 8.5 percent in 1995 and 7.5 percent in 1994. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 12 percent per year through fiscal 1995, 9 percent through fiscal 1999 and 6 percent thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, a 1 percent increase in the health care trend rate would increase the accumulated postretirement benefit obligation by $6.5 million and $8.1 million and the net periodic cost by $1 million and $.9 million for fiscal 1995 and 1994, respectively. INDUSTRY SEGMENT INFORMATION Information concerning the company's continuing operations by business segment for the years ended February 25, 1995, February 26, 1994 and February 27, 1993, as required by Statement of Financial Accounting Standards No. 14, "Financial Reporting for Segments of a Business Enterprise," is contained on page 24. COMMITMENTS AND CONTINGENCIES The company has guaranteed mortgage loan and other debt obligations of $16.3 million. The company has also guaranteed the leases and fixture financing loans of various affiliated retailers with a present value of $31.2 and $7.7 million, respectively. The company has provided limited recourse to purchasers of notes receivable from affiliated retailers and $9.5 million of which the company has contingent liability at February 25, 1995 and February 26, 1994, respectively. In addition, the company is contingently liable for bonds totaling $2.1 million. The company has also entered into note repurchase agreements with various lenders totaling $7.5 million, under which certain events require the company to repurchase collateralized loans. 36 INDEPENDENT AUDITORS' REPORT SUPERVALU INC. Board of Directors and Stockholders Eden Prairie, Minnesota We have audited the accompanying consolidated balance sheets of SUPERVALU INC. and subsidiaries as of February 25, 1995 and February 26, 1994, and the related statements of earnings, stockholders' equity and cash flows for each of the three years (52 weeks) in the period ended February 25, 1995. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of SUPERVALU INC. and subsidiaries as of February 25, 1995 and February 26, 1994, and the results of their operations and their cash flows for each of the three years in the period ended February 25, 1995, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP ------------------------- Minneapolis, Minnesota April 10, 1995 37 UNAUDITED QUARTERLY FINANCIAL INFORMATION Quarterly unaudited financial information for SUPERVALU INC. and subsidiaries is as follows:
------------------------------------------------------------------------------------------------------------------------------- (In thousands, except per share data) Fiscal Year (52 Weeks) Ended Februrary 25, 1995 ------------------------------------------------------------------------------------------------------------------------------- First Second Third Fourth Year (16 wks) (12 wks) (12 wks) (12 wks) (52 wks) ------------------------------------------------------------------------------------------------------------------------------- Net sales $4,991,115 $3,773,725 $3,908,194 $3,890,738 $16,563,772 Gross profit 438,168 336,237 360,893 388,357 1,523,655 Net earnings 50,613 33,515 (84,123) 43,329 43,334 Net earnings per common share .71 .47 (1.18) .61 .61 Dividends declared per common share .220 .235 .235 .235 .925 Weighted average shares 71,633 71,471 71,487 70,879 71,388 ------------------------------------------------------------------------------------------------------------------------------- Fiscal Year (52 Weeks) Ended February 26, 1994 ------------------------------------------------------------------------------------------------------------------------------- First Second Third Fourth Year (16 wks) (12 wks) (12 wks) (12 wks) (52 wks) ------------------------------------------------------------------------------------------------------------------------------- Net sales $4,875,784 $3,703,823 $3,670,298 $3,687,020 $15,936,925 Gross profit 418,362 311,771 331,270 352,088 1,413,491 Net earnings 51,084 36,324 45,238 52,607 185,253 Net earnings per common share .71 .51 .63 .73 2.58 Dividends declared per common share .195 .220 .220 .220 .855 Weighted average shares 71,583 71,818 71,937 72,005 71,817 -------------------------------------------------------------------------------------------------------------------------------
The results for the third quarter, fiscal 1995, include restructuring and other charges after tax of $159.4 million and a $40.8 million deferred tax benefit related to the partial disposition of ShopKo in fiscal 1992. 38 Stock Exchange The company's common stock is listed on the New York Stock Exchange (trading symbol SVU). Stockholders of the Company As of May 5, 1995 there were approximately 8,047 holders of the company's stock. 41 EX-21 7 SUBSIDIARIES OF REGISTRANT EXHIBIT (21)
SUPERVALU INC. SUBSIDIARIES as of May 1, 1995 (All are Subsidiary Corporations 100% Owned Directly or Indirectly, Except as Noted) PERCENTAGE OF VOTING JURISDICTION SECURITIES OWNED BY OF ORGANIZATION IMMEDIATE PARENT ---------------------------------- --------------------- SUPERVALU INC. Cub Foods of Appleton, Inc. Wisconsin 100% Cub Foods of Green Bay, Inc. Wisconsin 100% Cub Foods of Milwaukee, Inc. Wisconsin 100% DFLP, Inc. Minnesota 100% D2LP, Inc. Minnesota 100% Diamond Lake 1994 L.L.C. Delaware Limited Liability Company 25% J. M. Jones Equipment Company Delaware 100% Jackson Markets, Inc. Mississippi 100% Max Club, Inc. Minnesota 100% NC&T Supermarkets, Inc. Ohio 100% Nevada Bond Investment Corp. I Nevada 100% NAFTA Industries Consolidated, Inc. Texas 51% NAFTA Industries, Ltd. Texas Limited Partnership 51% Planmark, Inc. Minnesota 100% Planmark Architecture of Oregon, P.C. Oregon 100% Preferred Products, Inc. Minnesota 100% Risk Planners Agency of Ohio, Inc. Ohio 100% Risk Planners, Inc. Minnesota 100% Risk Planners of Montana, Inc. Montana 100% Risk Planners of Illinois, Inc. Illinois 100% Risk Planners of Mississippi, Inc. Mississippi 100% Risk Planners of Pennsylvania, Inc. Pennsylvania 100% S & C Supermarkets, Inc. Wisconsin 100% Sweet Life Foods, Inc. Missouri 100% Market Development Corporation Connecticut 100% Springfield Sugar & Products Company Delaware 100% First Colonial Trading Corporation Massachusetts 100% Hamlet Trading Corporation Massachusetts 100% Sweet Life Products Corporation New York 75% SUPERVALU Pharmacies, Inc. Minnesota 100% Supervalu Transportation, Inc. Minnesota 100% SUVACO Insurance International, Ltd. Islands of Bermuda 100% Twin Valu Stores, Inc. Minnesota 100% Valu Ventures, Inc. Minnesota 100% Valu Ventures 2, Inc. Minnesota 100% Valu Ventures-Albert Lea, Inc. Minnesota 100% Valu Ventures-Duluth, Inc. Minnesota 100% Western Dairy Distributors, Inc. Colorado 100% SUPERMARKET OPERATORS OF AMERICA INC. Delaware 100% Advantage Logistics, Inc. Alabama 100% Clyde Evans Markets, Inc. Ohio 100% Hyper Shoppes, Inc. Ohio 100% Hyper Shoppes (Colorado), Inc. Colorado 100% Hyper Real Estate (Colorado), Inc. Colorado 100% HS Real Estate Company, Inc. Delaware 100% Hyper Shoppes (Ohio), Inc. Ohio 100% HSO, Inc. Ohio 100% bigg's (KY), Inc. Delaware 100% BFO, Inc. Ohio 100% Scott's Food Stores, Inc. Indiana 100% SV Ventures* Indiana General Partnership 50%
(1 of 2) PERCENTAGE OF VOTING JURISDICTION SECURITIES OWNED BY OF ORGANIZATION IMMEDIATE PARENT ---------------------------------- --------------------- SUPERVALU HOLDINGS, INC. Missouri 100% (f/k/a Wetterau Incorporated) Airway Redevelopment Corporation Missouri 100% Augsburger's, Inc. Indiana 100% Glenn-Wohlberg & Company Missouri 100% Hazelwood Farms Bakeries, Inc. Missouri 100% John Alden Industries, Inc. Rhode Island 100% Livonia Holding Company, Inc. Michigan 100% Foodland Distributors Michigan General Partnership 50% Mohr Developers, Inc. Missouri 100% Mohr Distributors of Litchfield, Inc. llinois 100% Save Mart Foods, Inc. Missouri 100% Treasure Enterprises, Inc. Missouri 100% Shop 'N Save Warehouse Foods, Inc. Missouri 100% Wincom Systems, Incorporated Missouri 100% SV Ventures* Indiana General Partnership 50% Trans Continental Leasing, Ltd. Missouri 100% Ultra Foods, Inc. New Jersey 100% USCP-WESCO, Inc. California 100% WC&V Supermarkets, Inc. Vermont 100% Wetterau Finance Co. Missouri 100% Wetterau Insurance Co. Ltd. Bermuda 100% Wettersub/SSI Holdings, Inc. Missouri 100% Save and Pack, Inc. Delaware 100% Wetterau Transportation, Inc. Missouri 100% SUPERVALU OPERATIONS, INC. Rhode Island 100% (f/k/a Wetterau N.E. Inc.) Ellsworth Foods, Inc. Maine 100% Glendale Foods, Inc. Pennsylvania 100% M & C Foods, Inc. Pennsylvania 100% Maryland Special Realty Corp. Maryland 100% Moran Foods, Inc. Missouri 100% Lot 18 Redevelopment Corporation Missouri 100% Pets, Crafts & Things Inc. Pennsylvania 100% Total Insurance Marketing Enterprises, Inc. Pennsylvania 100% Verona Road Associates, Inc. Pennsylvania 100% West Kittanning Foods, Inc. Pennsylvania 56.8%
* SV Ventures is a general partnership between SUPERVALU Holdings, Inc. and Scott's Food Stores, Inc. each of which holds a 50% interest. Both general partners are direct subsidiaries of Supermarket Operators of America, Inc. (2 of 2) EX-23 8 CONSENT OF IND. AUDITORS EXHIBIT (23) INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements No. 33-28310, No. 33-16934, No. 2-56896, and No. 33-50071 on Form S-8 and No. 33-56415 on Form S-3 of our reports dated April 10, 1995 appearing in or incorporated by reference in this Annual Report on Form 10-K of SUPERVALU INC. for the year ended February 25, 1995. /s/ DELOITTE & TOUCHE LLP Minneapolis, Minnesota May 19, 1995 EX-24 9 POWER OF ATTORNEY Exhibit (24) POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned directors and officers of SUPERVALU INC., a Delaware corporation, which is about to file with the Securities and Exchange Commission, Washington, D.C. 20549, its Annual Report on Form 10-K for the year ended February 25, 1995 under the provisions of the Securities Exchange Act of 1934, as amended, hereby constitutes and appoints Michael W. Wright and Vernon H. Heath, his or her true and lawful attorneys-in- fact and agents, and each of them, with full power to act without the other, for him or her and in his or her name, place and stead, in any and all capacities (including without limitation, as Director and/or principal Executive Officer, principal Financial Officer, principal Accounting Officer or any other officer of the Company), to sign such Annual Report on Form 10-K which is about to be filed, and any and all amendments thereto, and to file such Annual Report on Form 10-K and each such amendment thereto so signed, with all exhibits thereto, and any and all other documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney on this 12th day of April, 1995. /s/ Herman Cain /s/ Richard D. McCormick ------------------------------------- ------------------------------------- Herman Cain Richard D. McCormick /s/ Stephen I. D'Agostino /s/ Harriet Perlmutter ------------------------------------- ------------------------------------- Stephen I. D'Agostino Harriet Perlmutter /s/ Edwin C. Gage /s/ Carole F. St. Mark ------------------------------------- ------------------------------------- Edwin C. Gage Carole F. St. Mark /s/ Vernon H. Heath /s/ Winston R. Wallin ------------------------------------- ------------------------------------- Vernon H. Heath Winston R. Wallin /s/ William A. Hodder /s/ Michael W. Wright ------------------------------------ ------------------------------------- William A. Hodder Michael W. Wright /s/ Garnett L. Keith, Jr. /s/ Jeffrey Girard ------------------------------------ ------------------------------------- Garnett L. Keith, Jr. Jeffrey Girard /s/ Richard L. Knowlton /s/ Isaiah Harris ------------------------------------ ------------------------------------- Richard L. Knowlton Isaiah Harris EX-27 10 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AS OF FEBRUARY 25, 1995 AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE 52 WEEKS ENDED FEBRUARY 25, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS FEB-25-1995 FEB-25-1995 4,839 0 412,726 (29,268) 1,109,791 1,646,340 2,432,871 (861,573) 4,305,149 1,447,137 1,459,766 75,335 0 5,908 1,111,979 4,305,149 16,563,772 16,563,772 15,040,117 15,040,117 0 1,627 135,383 15,925 (27,409) 43,334 0 0 0 43,334 0.61 0.61