-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J6iiF86zc4hbJdd1pKPu4ohK6Q7BFoFAL9rTVsbDVKfQgbKRum9iorzIdYCOTTyB FlS7L68JXSHaXFsIJCc50Q== 0001045969-98-000457.txt : 19980601 0001045969-98-000457.hdr.sgml : 19980601 ACCESSION NUMBER: 0001045969-98-000457 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19980228 FILED AS OF DATE: 19980529 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUPERVALU INC CENTRAL INDEX KEY: 0000095521 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & RELATED PRODUCTS [5140] IRS NUMBER: 410617000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0222 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-05418 FILM NUMBER: 98633985 BUSINESS ADDRESS: STREET 1: 11840 VALLEY VIEW RD STREET 2: NULL CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 BUSINESS PHONE: 6128284000 MAIL ADDRESS: STREET 1: 11840 VALLEY VIEW ROAD CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 FORMER COMPANY: FORMER CONFORMED NAME: SUPER VALU STORES INC DATE OF NAME CHANGE: 19920703 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 For the fiscal year ended February 28, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 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. [ ] The aggregate market value of the voting stock held by non-affiliates of the Registrant as of April 1, 1998 was approximately $2,782,954,632 (based upon the closing price of Registrant's Common Stock on the New York Stock Exchange on March 31, 1998). Number of shares of $1.00 par value Common Stock outstanding as of April 1, 1998: 60,085,208. DOCUMENTS INCORPORATED BY REFERENCE 1. Portions of Registrant's Annual Report to Stockholders for the fiscal year ended February 28, 1998 are incorporated into Parts I, II and IV, as specifically set forth in Parts I, II and IV. 2. Portions of Registrant's definitive Proxy Statement filed for Registrant's 1998 Annual Meeting of Stockholders are incorporated into Part III, as specifically set forth in 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, was organized in 1925 as the successor to two wholesale grocery firms established in the 1870's. The Company's principal executive offices are located at 11840 Valley View Road, Eden Prairie, Minnesota 55344 (Telephone: 612-828-4000). The Company is the largest food wholesaler and approximately the 13th largest food retailer in the nation. It is engaged in the business of selling food and nonfood products at wholesale and operating a variety of store formats at retail. The Company supplied approximately 4,800 stores (not including 701 Save-A-Lot limited assortment stores) in 48 states as of the close of fiscal 1998 and approximately 4,300 stores (not including 611 Save-A-Lot limited assortment stores) at the close of fiscal 1997. The Company operated at fiscal year-end 328 retail stores under its principal corporate retail formats, including price superstores, supercenters, fresh superstores, limited-assortment stores, and supermarkets, primarily under the names of Cub Foods, Shop `n Save, bigg's, Save-A-Lot, Scott's Foods, Laneco and Hornbacher's. On July 2, 1997, SUPERVALU sold its remaining 46% ownership position in ShopKo Stores, Inc. ("ShopKo"), its discount general merchandise subsidiary, pursuant to two simultaneous transactions, a 8,174,387 share repurchase by ShopKo and a secondary public offering for the remaining 6,557,280 ShopKo shares. Additional description of the Company's business is contained in the "Financial Review" portion of the Company's Annual Report to the Stockholders for fiscal year 1998 (Exhibit 13), pages 14-19, 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 28, 1998 is incorporated by reference to page 22 of the Company's Annual Report to Stockholders for fiscal year 1998 (Exhibit 13). CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The information in this Annual Report on Form 10-K, for the year ended February 28, 1998, includes forward-looking statements. Important risks and uncertainties that could cause actual results to differ materially from those discussed in such forward looking statements are detailed in Exhibit 99.1; other risks or uncertainties may be detailed from time to time in the Company's future Securities and Exchange Commission filings. FOOD DISTRIBUTION OPERATIONS DESCRIPTION OF FOOD STORES SERVED. SUPERVALU food distribution regions sell food and non-food products at wholesale and offer a variety of retail support services to independently-owned retail food stores. At February 28, 1998, the Company supplied approximately 4,800 retail grocery and general merchandise stores (not including 701 Save-A-Lot limited assortment 3 stores), compared with 4,300 stores (not including 611 Save-A-Lot limited assortment stores) served at the end of fiscal 1997. Save-A-Lot limited assortment stores are supplied separately from the Company's traditional wholesale business. 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, regional and national chains and Company owned stores, operating in a variety of formats including price superstores, supercenters, fresh superstores, limited assortment stores, and supermarkets. 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. Many stores offer one or more specialized services, such as delis, 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. The Company is also developing market-driving capabilities which are intended to help independent retailers achieve new growth by offering category management, an on-line pass through allowance program, and other programs and services. PRODUCTS SUPPLIED. SUPERVALU continues to supply retail food stores with an increasing variety and selection of products, including national and regional brands and the Company's own lines of private label products. Such private label trademarks as FLAV-O-RITE, SHOPPERS VALUE, NATURE'S BEST, HOME BEST, BI-RITE, FOODLAND, PREFERRED SELECTION, SWEET LIFE, and others accounted for approximately eight percent of the Company's fiscal 1998 sales to independent retail food supermarkets. See also "Retail Food Operations - Private Label Program" for a description of the Company's principal corporate retail formats private label programs. SUPERVALU supplies private label merchandise over a broad range of products included in 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 promoting private label programs to maximize sales and produce profit advantage. Hazelwood Farms Bakeries, Inc., a subsidiary of the Company, manufactures frozen dough and par baked bakery products primarily for the supermarket in-store bakery and foodservice business channels. Hazelwood Farms' customer base includes wholesale food distributors, supermarket chains (including company-owned, affiliated and non-affiliated stores), quick service restaurant chains and other foodservice establishments in the U.S. and Canada. 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. 4 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. The Company has reexamined its pricing structure and has developed a new pricing approach to retailers called Activity Based Sell ("ABS"). The primary objectives of ABS are to reflect the net product price plus fees to recover the Company's cost to serve the retailer and to earn an adequate profit margin. In fiscal 1998, the Company implemented ABS pricing for retailers serviced through three distribution centers in the Midwest region. The Company seeks to continue lowering 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 purchasing power of larger product orders. The Company is implementing a two-tiered distribution system to create a national logistics network composed of its existing wholesale distribution facilities plus regional distribution facilities which will provide regional distribution for slow moving grocery product, general merchandise and health and beauty care products. The Southeastern Regional Facility, the Company's first regional distribution facility located in Anniston, Alabama, became operational in June 1996 and currently serves six existing Southeast distribution facilities. The Company began construction of a second regional distribution facility located in Ogelsby, Illinois in June 1996, which is planned to be open in the summer of 1998 and is intended to serve 12 distribution centers and three marketing regions in the Midwest. This two-tiered distribution system is intended to increase buying scale, improve operating efficiencies and lower cost of operations. A new National Customer Service Center was established in Denver, Colorado in the fall of 1996. The national service center was established to replace divisional customer service functions for retailers, facilitate rapid customer response and track and identify ways to service the Company's retailers more efficiently. The National Customer Service function is currently servicing customers in five of the Company's seven regions. SERVICES SUPPLIED. In addition to supplying merchandise, the Company also offers retail customers 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, building design and construction services, financial and budget planning, strategic and business planning, assistance in selection and purchasing or leasing of store sites, consumer and market research and personnel training and management assistance. Certain Company subsidiaries operate as insurance agencies and provide comprehensive insurance programs to the Company's affiliated retailers. The Company has realigned its wholesale food divisions into seven marketing regions designed to reduce the cost of services to retailers while maintaining contact with retailers and the ultimate consumer. One such service intended to be offered to retailers is category management, which is a process designed to align product assortment with consumer preferences. Category management efforts have been accelerating, with the Company currently in various phases of implementation with various independent retailers. In addition, the Company is beginning to roll out an on-line pass through vendor allowance program referred to as the Category Management Allowance Program ("CMAP"). CMAP is designed to maximize vendor allowances by demonstrating compliance with pricing levels or displays and market performance by individual store or group of stores. 5 The Company may provide financial assistance to retail stores served or to be served by it, including the acquisition, leasing 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. RETAIL FOOD OPERATIONS PRINCIPAL CORPORATE RETAIL FORMATS. At fiscal year end, the Company's retail businesses operated a total of 328 retail stores, including price superstores, supercenters, fresh superstores, limited assortment stores and supermarkets. These diverse formats enable the Company to operate in a variety of markets under widely differing competitive circumstances. At the close of fiscal 1998, the Company's retail stores operated under the following principal corporate formats: CUB FOODS consists of 114 price superstores located in 13 states, 61 of which are franchised to independent retailers and 53 of which are corporately operated. Plans for fiscal 1999 include the opening of five corporate stores and two franchised stores. SHOP `N SAVE consists of 32 price superstores located principally in the metropolitan St. Louis, Missouri market. Three new Shop `n Save price superstores (two of which are replacement stores) are planned for fiscal 1999. BIGG'S consists of seven supercenters and three price superstores that operate in the Cincinnati, Louisville and Denver metropolitan markets. bigg's was acquired by the Company in August 1994. No new bigg's stores are planned for fiscal 1999. SAVE-A-LOT is the Company's combined wholesale and retail limited assortment operation. At fiscal year end there were 701 Save-A-Lot limited assortment stores located in 31 states, of which 142 were corporately operated. Save-A-Lot projects adding approximately 140 stores in fiscal 1999, including 30 corporately owned stores and 110 licensed units. SCOTT'S FOODS is an 18-store group located in the Fort Wayne, Indiana area. One new store is planned for fiscal 1999. LANECO operates a diverse mix of 19 retail outlets comprised predominantly of supermarkets, supercenters and discount food stores located in Pennsylvania and New Jersey. These stores operate mainly under the LANECO AND FOODLAND names and formats. No new stores are planned for fiscal 1999. HORNBACHER'S is a five-store group located in the Fargo, North Dakota area, with no new stores planned for fiscal 1999. Other store formats operated by the Company include COUNTY MARKET, SUPERVALU, IGA, and BUTSON'S. 6 PRIVATE LABEL PROGRAM. Private label products continue to be a focus of SUPERVALU's principal corporate retail formats which are expanding their private label item selection. Approximately 85 percent of the sales by the Company's Save-A-Lot limited assortment operations consist of Save-A-Lot created or controlled brands. Cub Foods, bigg's and Scott's Foods are in the process of developing or have developed proprietary name brands. 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 licensor of certain servicemarks such as CUB FOODS, SAVE-A-LOT, COUNTY MARKET, SHOP `N SAVE, NEW MARKET, 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 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 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 success of the Company's wholesale food business is also dependent upon the ability of independent retail store operators and the Company's retail food business to compete successfully with other retail food stores. 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, various formats selling prepared foods, and specialty and discount retailers. EMPLOYEES At February 28, 1998, the Company had approximately 48,000 employees. Approximately 16,000 employees are covered by collective bargaining agreements. During fiscal year 1998, 19 agreements covering 3,800 employees were re-negotiated without any work stoppage. In fiscal 1999, 11 contracts covering approximately 1,600 employees will expire. The Company believes that it has generally good relationships with its employees. 7 INVESTMENTS The Company has ownership interests in business ventures related to its food distribution and retail segments, which include investments in Waremart, Inc. 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. During fiscal 1998, the Company sold One Southwest Crossing, a 240,000 square foot office facility which is located within one mile of its principal executive offices. In connection with this sale, the Company leased approximately 97,400 square feet of office space from the purchaser to continue to office employees of the Company at this facility. 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 28, 1998: WAREHOUSE, DISTRIBUTION AND MANUFACTURING FACILITIES
Square Square Footage Footage Owned Leased Division or Location Use (Approximate) (Approximate) - -------------------- ------------------------------ ------------- ------------- Anniston, Alabama Distribution Center & Offices 497,000 Anniston, Alabama Advantage Logistics - Regional Distribution Center 225,000 Los Angeles, California General Merchandise Warehouse and Offices 227,000 Rancho Cucamonga, California Save-A-Lot Distribution Center and Offices 110,000 Denver, Colorado Distribution Center & Offices 721,000 Suffield, Connecticut Distribution Center & Offices 650,000 Lakeland, Florida Save-A-Lot Distribution Center and Offices 127,000 Quincy, Florida Distribution Center & Offices 772,000 Atlanta, Georgia Distribution Center & Offices 628,000 Atlanta, Georgia Bakery, Warehouse and Offices 105,000 Macon, Georgia Save-A-Lot Distribution Center and Offices 252,000 Buffalo Grove, Illinois Bakery, Warehouse and Offices 47,000 Champaign, Illinois Distribution Center & Offices 820,000 172,000 Oglesby, Illinois General Merchandise, Warehouse and Offices 303,500 Ft. Wayne, Indiana Distribution Center & Offices 1,099,000 Des Moines, Iowa Distribution Center & Offices 663,000 Greenville, Kentucky Distribution Center & Offices 309,000 Lexington, Kentucky Save-A-Lot Distribution Center and Offices 294,000
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Square Square Footage Footage Owned Leased Division or Location Use (Approximate) (Approximate) - -------------------- ------------------------------ ------------- ------------- Hammond, Louisiana Distribution Center & Offices 257,000 St. Rose, Louisiana Distribution Center & Offices 275,000 Portland, Maine Distribution Center & Offices 194,000 Perryman, Maryland Distribution Center & Offices 511,000 Williamsport, Maryland Save-A-Lot Distribution Center and Offices 173,000 Andover, Massachusetts Distribution Center & Offices 454,000 Medford, Massachusetts Bakery, Warehouse & Offices 47,000 Somerville, Massachusetts Bakery, Warehouse & Offices 22,500 Holt, Michigan Save-A-Lot Distribution Center and Offices 218,000 Livonia, Michigan(1) Foodland Distributors, Distribution Center 1,275,000 Minneapolis, Minnesota Distribution Center & Offices 1,594,000 Indianola, Mississippi Distribution Center & Offices 721,000 Desloge, Missouri General Merchandise Warehouse and Offices 134,000 34,000 Hazelwood, Missouri Distribution Center & Offices 545,600 310,000 Hazelwood, Missouri Bakery, Warehouse and Offices 259,000 Scott City, Missouri Distribution Center & Offices 278,000 St. Louis, Missouri Save-A-Lot Distribution Center and Offices 135,000 Vinita Park, Missouri Save-A-Lot Offices 55,000 Billings, Montana Distribution Center & Offices 267,000 11,000 Great Falls, Montana Distribution Center & Offices 154,000 Keene, New Hampshire Distribution Center & Offices 196,400 Albany, New York Save-A-Lot Distribution Center and Offices 220,000 Rochester, New York Bakery, Warehouse and Offices 33,000 Bismarck, North Dakota Distribution Center & Offices 257,000 Fargo, North Dakota Distribution Center & Offices 493,000 Columbus, Ohio Save-A-Lot Distribution Center and Offices 182,000 Xenia, Ohio Distribution Center & Offices 511,000 170,000 McMinnville, Oregon Bakery, Warehouse and Offices 110,000 Belle Vernon, Pennsylvania Distribution Center & Offices 713,000 Hazleton, Pennsylvania Bakery, Warehouse and Offices 125,000 Lower Nazareth Township, General Merchandise Warehouse Pennsylvania (Easton) and Offices 230,000 New Stanton, Pennsylvania Distribution Center & Offices 726,000 Reading, Pennsylvania Distribution Center & Offices 284,000 256,000 Cranston, Rhode Island Distribution Center & Offices 196,000 Humboldt, Tennessee Save-A-Lot Distribution Center and Offices 214,000
- --------------- 1 Leased by Foodland Distributors in which the Company is a 50% partner. 9
Square Square Footage Footage Owned Leased Division or Location Use (Approximate) (Approximate) - -------------------- ------------------------------ ------------- ------------- Grand Prairie, Texas Save-A-Lot Distribution Center and Offices 140,000 Spokane, Washington Distribution Center & Offices 551,000 Tacoma, Washington Distribution Center & Offices 910,000 113,000 Milton, West Virginia Distribution Center & Offices 6,000 268,000 Green Bay, Wisconsin Distribution Center & Offices 430,000 475,000 Pleasant Prairie, Wisconsin Distribution Center & Offices 625,000
The retail food stores operated by the Company generally have been leased, usually for a term of 15-25 years plus renewal options. The following table is a summary of the retail stores operated by the Company's principal corporate retail banners as of February 28, 1998: PRINCIPAL CORPORATE RETAIL BANNERS
Square Square Footage Footage Owned Leased Retail Banners Location and Number of Corporate Stores (Approximate) (Approximate) - -------------- --------------------------------------- ------------- ------------- Cub Foods(1) Colorado (7), Illinois (16), Indiana (8), 2,325,734 1,518,754 Minnesota (15), Wisconsin (7) Shop `n Save Illinois (14), Missouri (18) 236,000 1,225,000 bigg's Colorado (1), Indiana (1), Kentucky (2), 473,000 1,082,000 Ohio (6) Save-A-Lot(2) Arkansas (6), California (23), Connecticut (2), 45,000 1,776,000 Delaware (3), Florida (29), Illinois (1), Maryland (4), Massachusetts (4), Mississippi (3), Missouri (4), New Jersey (4), Ohio (7), Oklahoma (8), Pennsylvania (19), Rhode Island (2), Tennessee (4), Texas (19) Scott's Food Indiana (18) 178,470 752,284 Laneco New Jersey (5), Pennsylvania (14) 167,000 994,000 Hornbacher's Minnesota (1), North Dakota (4) 95,000 107,000 - ---------------
1 As of February 28, 1998, Cub Foods included an additional 61 franchised stores not listed above. 2 As of February 28, 1998, Save-A-Lot included an additional 559 licensed stores not listed above. The Company also owns and leases certain additional real estate consisting primarily of shopping centers and transition stores, which are not material to its operations. Transition stores are generally those retail stores that the Company operates for a limited period of time pending sale or sublet to its independent retailers. Transition stores that are sublet are generally leased for periods not exceeding 20 years plus renewal options. The Company owns, in addition to merchandise inventories, substantially all of the trucks and trailers used in transporting its products. Incorporated by reference hereto is the Note captioned "Leases" of Notes to Consolidated Financial Statements on pages 30-31 of the Company's Annual Report to Stockholders for fiscal 10 year 1998 (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 pages 29-30 of the Company's Annual Report to Stockholders for fiscal year 1998 (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. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There was no matter submitted during the fourth quarter of fiscal year 1998 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 30, 1998.
YEAR ELECTED TO PRESENT OTHER POSITIONS HELD WITH THE NAME AGE PRESENT POSITION POSITION COMPANY FROM 1993-1998 - ---------------------- ------- ----------------------------------- ----------------- --------------------------------------- Michael W. Wright 59 Director, Chairman of the Board, 1982 President and Chief Executive Officer David L. Boehnen 51 Executive Vice President 1997 Senior Vice President, Law and External Relations, 1991 - 1997 William J. Bolton 51 Executive Vice President; and 1997 President and Chief Operating Officer - Retail Food Companies Pamela K. Knous 44 Executive Vice President, Chief 1997 Financial Officer Jeffrey Noddle 51 Executive Vice President; and 1995 Executive Vice President, Marketing, President and Chief Operating 1992-1995 Officer - Wholesale Food Companies Kim M. Erickson 44 Senior Vice President, Strategic 1998 Senior Vice President, Finance, and Planning and Treasurer Treasurer, 1997 - 1998; Vice President and Treasurer, 1995-1997 Gregory C. Heying 49 Senior Vice President, 1994 Vice President, Distribution, Distribution 1988-1994 H. S. (Skip) Smith 51 Senior Vice President, 1994 Vice President, Information Services, III Information Technology 1986-1994
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YEAR ELECTED TO PRESENT OTHER POSITIONS HELD WITH THE NAME AGE PRESENT POSITION POSITION COMPANY FROM 1993-1998 - ---------------------- ------- ----------------------------------- ----------------- --------------------------------------- Ronald C. Tortelli 51 Senior Vice President, Human 1988 Resources James R. Campbell 57 Vice President, Retail Services 1995 Vice President, Market Development, 1993-1995; Senior Vice President, Northeast Region, 1992-1993 Leland J. Dake 41 Vice President, Wholesale 1998 Vice President, Corporate Category Merchandising Management, 1995-1998; Director, Category Management, Corporate from 1993 to 1995 Janel S. Haugarth 42 Vice President, Controller, 1998 Assistant Corporate Controller, Wholesale 1996-1998; Vice President, Finance - Midwest Region, 1995-1996; Assistant Director of Merchandising, 1993-1995 J. Andrew Herring 39 Vice President, Corporate 1998 Development and External Relations Michael L. Mulligan 53 Vice President, Wholesale Sales 1996 Vice President, Sales, 1992-1996 and Marketing E. Wayne Shives 56 Vice President, Employee Relations 1993 Vice President, Labor Relations, 1988-1993 Sherry M. Smith 36 Vice President, Controller, 1998 Assistant Corporate Controller, Corporate 1996-1998; Director, Finance and Accounting/Advantage, 1995-1996; Director, Financial Reporting, 1993-1995
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 William J. Bolton, Pamela K. Knous, Kim M. Erickson, and J. Andrew Herring. Mr. Bolton was elected Executive Vice President and President and Chief Operating Officer, Retail Food Companies in October 1997. Mr. Bolton was Chairman and Chief Executive Officer of Bruno's, Inc. (a retail grocery company) from 1995 to 1997; Chief Operating Officer - Markets at American Stores, Inc. (a retail grocery company) from February 1995 to August 1995; Executive Vice President of American Stores, Inc. and General Manager of Jewel Osco (Chicago) from February 1994 to February 1995; and President of Jewel Food Stores (a retail grocery company) from February 1992 to February 1994. On February 2, 1998, Bruno's, Inc. and its subsidiaries each 12 filed a voluntary petition for reorganization under Chapter 11 of Title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Ms. Knous was elected Executive Vice President and Chief Financial Officer of the Company in September 1997. From December 1995 to 1997, Ms. Knous was Executive Vice President, Chief Financial Officer and Treasurer at The Vons Companies, Inc. (a retail grocery company); and from May 1995 to December 1995 she was Executive Vice President and Chief Financial Officer, from July 1994 to May 1995 she served as Senior Vice President and Chief Financial Officer, from November 1993 to July 1994 she served as Group Vice President, Finance, and Controller, and from April 1991 to November 1993 she served as Vice President, Finance, and Controller of The Vons Companies, Inc. Ms. Erickson was elected Senior Vice President, Strategic Planning and Treasurer of the Company in March 1998. From March 1997 through March 1998 she was Senior Vice President, Finance, and Treasurer of the Company; from August 1995 through March 1997 she was Vice President and Treasurer of the Company; and from January 1992 through August 1995 she was Vice President and Treasurer of International Multifoods Corporation (a food service distribution and manufacturing company). Mr. Herring was elected Vice President, Corporate Development and External Relations of the Company in February 1998. Prior to that time, he was with the law firm of Dorsey & Whitney, LLP for approximately eleven years, the last seven as a partner. 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 1998 (Exhibit 13) page 36. 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 1998 (Exhibit 13) page 18. 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 1998 (Exhibit 13) pages 29-30. During the fiscal year ended February 28, 1998, the Company issued 7,000 shares of unregistered restricted common stock as stock bonuses to certain employees. The issuance of such shares did not constitute a "sale" within the meaning of Section 2(3) of Securities Act of 1933, as amended. 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 1998 (Exhibit 13) pages 20-21. 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 1998 (Exhibit 13) pages 14-19. ITEM 7.A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Not required at this time. 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 1998 (Exhibit 13) pages 22-36. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The information called for by Item 9 is incorporated by reference to the Registrant's Annual Report to the Stockholders for fiscal year 1998 (Exhibit 13) page 35. 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 29, 1998 filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant's 1998 Annual Meeting of Stockholders at pages 6-7 and page 23. 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 29, 1998 filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant's 1998 Annual Meeting of Stockholders at pages 8-14, excluding the section entitled "Report of Executive Personnel and Compensation Committee," and page 23. 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 29, 1998 filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant's 1998 Annual Meeting of Stockholders at pages 4-5, excluding portions of the section entitled "SUPERVALU Board Practices". 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 29, 1998 filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant's 1998 Annual Meeting of Stockholders at page 23. 15 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 1998 Annual Report to Stockholders (Exhibit 13)): Independent Auditors' Report Consolidated balance sheets as of February 28, 1998 and February 22, 1997. Consolidated statements of earnings for each of the three years in the period ended February 28, 1998 Consolidated statements of cash flows for each of the three years in the period ended February 28, 1998 Consolidated statements of stockholders' equity for each of the three years in the period ended February 28, 1998 Notes to consolidated financial statements 2. Consolidated Financial Statement Schedules Page on this for SUPERVALU INC. and Subsidiaries: Form 10-K ------------ Selected Quarterly Financial Data - for the two years ended February 28, 1998 - included in Part II, Item 8 (which incorporates information by reference to the Registrant's 1998 Annual Report to Stockholders (Exhibit 13)). Independent Auditors' report on schedules 23 Schedule VIII - Valuation and qualifying 24 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. 16 (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. 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. Third Supplemental Indenture dated as of September 1, 1995 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 October 2, 1995. f. Credit Agreement dated as of October 8, 1997 among the Registrant, the Lenders named therein and Bankers Trust Company, as Agent, is incorporated by reference to Exhibit (10)a to the Registrant's Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended November 29, 1997. g. 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 Item 601(b)(4)(iii) 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. 17 b. 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. c. SUPERVALU INC. Executive Incentive Bonus Plan is incorporated by reference to Exhibit (10)c. to Registrant's Annual Report on Form 10-K for the year ended February 22, 1997. d. SUPERVALU INC. Directors Deferred Compensation Plan for Non-Employee Directors, as amended, is incorporated by reference to Exhibit (10)c. to the Registrant's Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 6, 1997. e. SUPERVALU INC. 1983 Employee Stock Option Plan, as amended, is incorporated by reference to Exhibit (10)b. to Registrant's Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended November 29, 1997. f. 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. g. 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. h. 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. i. 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. j. Amendments to the SUPERVALU INC. Deferred Compensation Plan and the SUPERVALU INC. Executive Deferred Compensation Plan II are incorporated by reference to Exhibit (10)c. to Registrant's Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 7, 1996. 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 18 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)o. to the Registrant's Quarterly Report on Form 10-Q for the quarterly period (16 weeks) ended June 15, 1996. p. SUPERVALU INC. Non-Qualified 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. First Amendment to SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan is incorporated by reference to Exhibit (10)a. to Registrant's Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 7, 1996. r. Second Amendment to SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan. s. SUPERVALU INC. Long-Term Incentive Plan, as amended, is incorporated by reference to Exhibit (10)r. to the Registrant's Annual Report on Form 10-K for the year ended February 22, 1997. t. 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. u. SUPERVALU INC. Non-Employee Directors Deferred Stock Plan, as amended, is incorporated by reference to Exhibit (10)b. to Registrant's Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 6, 1997. v. SUPERVALU INC. 1997 Stock Plan is incorporated by reference to Exhibit (10)u. to Registrant's Annual Report on Form 10-K for the year ended February 22, 1997. w. Separation Agreement and General Release dated November 1, 1996 between Phillip A. Dabill and SUPERVALU INC., is incorporated by reference to Exhibit (10)v. to Registrant's Annual Report on Form 10-K for the year ended February 22, 1997. x. Separation Agreement and General Release dated February 26, 1997 between Laurence Anderson and SUPERVALU INC. is incorporated by reference to Exhibit (10)a. to Registrant's Quarterly Report on Form 10-Q for the quarterly period (16 weeks) ended June 14, 1997. y. Separation Agreement and General Release dated July 11, 1997 between Jeffrey C. Girard and SUPERVALU INC. is incorporated by reference to Exhibit (10)a. to Registrant's Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 6, 1997. (12) Ratio of Earnings to Fixed Charges. (13) Portions of 1998 Annual Report to Stockholders of Registrant. 19 (16) Letter from Deloitte & Touche LLP to the Securities and Exchange Commission dated May 8, 1998 is incorporated by reference to the Registrant's Form 8- K Report dated May 8, 1998. (21) Subsidiaries of the Registrant. (23) Consent of Independent Auditors. (24) Power of Attorney. (27)a. Financial Data Schedule. (27)b. Restated Financial Data Schedule. (27)c. Restated Financial Data Schedule. (99.1) Cautionary Statements pursuant to the Securities Litigation Reform Act. (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 28, 1998. 20 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 29, 1998 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 29, 1998 - -------------------------- Chief Executive Officer; and Michael W. Wright Director (principal executive officer) /s/ Pamela K. Knous Executive Vice President and May 29, 1998 - -------------------------- Chief Financial Officer (principal Pamela K. Knous financial and accounting officer) /s/ Herman Cain* Director - -------------------------- Herman Cain /s/ Stephen I. D'Agostino* Director - -------------------------- Stephen I. D'Agostino /s/ Lawrence A. Del Santo* Director - -------------------------- Lawrence A. Del Santo /s/ Edwin C. Gage* Director - -------------------------- Edwin C. Gage /s/ William A. Hodder* Director - -------------------------- William A. Hodder /s/ Garnett L. Keith, Jr.* Director - -------------------------- Garnett L. Keith, Jr. 21 /s/ Richard L. Knowlton* Director - -------------------------- Richard L. Knowlton /s/ Charles M. Lillis* Director - -------------------------- Charles M. Lillis /s/ Harriet Perlmutter* Director - -------------------------- Harriet Perlmutter /s/ Carole F. St. Mark* Director - -------------------------- Carole F. St. Mark *Executed this 29th day of May, 1998, 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 22 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 28, 1998 and February 22, 1997 and for each of the three years in the period ended February 28, 1998 and have issued our report thereon dated April 6, 1998. Such financial statements and report are included in your 1998 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. /S/ DELOITTE & TOUCHE LLP Minneapolis, Minnesota April 6, 1998 23 SUPERVALU INC. AND SUBSIDIARIES SCHEDULE VIII - Valuation and Qualifying Accounts
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ---------------------------------- ------------ ------------- ----------- ------------- Balance at Charged Balance at beginning to costs end Description of year and expenses Deductions of year - ---------------------------------- ------------ ------------- ----------- ------------- Allowance for doubtful accounts: Year ended: February 28, 1998 $17,806,000 5,791,000 10,182,000 (A) $13,415,000 February 22, 1997 22,064,000 8,851,000 13,109,000 (A) 17,806,000 February 24, 1996 29,268,000 2,269,000 9,473,000 (A) 22,064,000
(A) Balance consists of accounts determined to be uncollectible and charged against reserves, net of collection on accounts previously charged off. 24 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. Third Supplemental Indenture dated as of September 1, 1995 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)f. Credit Agreement dated as of October 8, 1997 among the Registrant, the Lenders named therein and Bankers Trust Company, as Agent. *(4)g. 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. 1978 Stock Appreciation Rights Plan, as amended. *(10)c. SUPERVALU INC. Executive Incentive Bonus Plan. *(10)d. SUPERVALU INC. Directors Deferred Compensation Plan for Non-Employee Directors, as amended. *(10)e. SUPERVALU INC. 1983 Employee Stock Option Plan, as amended. *(10)f. SUPERVALU INC. 1989 Stock Appreciation Rights Plan. *(10)g. SUPERVALU INC. ERISA Excess Plan Restatement. *(10)h. SUPERVALU INC. Deferred Compensation Plan. 1 *(10)i. SUPERVALU INC. Executive Deferred Compensation Plan as amended and Executive Deferred Compensation Plan II. *(10)j. Amendments to the SUPERVALU INC. Deferred Compensation Plan and the SUPERVALU INC. 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. SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan. *(10)q. First Amendment to SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan. (10)r. Second Amendment to SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan. *(10)s. SUPERVALU INC. Long-Term Incentive Plan, as amended. *(10)t. SUPERVALU INC. Bonus Plan for Designated Corporate Officers. *(10)u. SUPERVALU INC. Non-Employee Directors Deferred Stock Plan, as amended. *(10)v. SUPERVALU INC. 1997 Stock Plan. *(10)w. Separation Agreement and General Release dated November 1, 1996 between Phillip A. Dabill and SUPERVALU INC. *(10)x. Separation Agreement and General Release dated February 26, 1997 between Laurence Anderson and SUPERVALU INC. *(10)y. Separation Agreement and General Release dated July 11, 1997 between Jeffrey C. Girard and SUPERVALU INC. (12) Ratio of Earnings to Fixed Charges. (13) Portions of 1998 Annual Report to Stockholders of Registrant. *(16) Letter from Deloitte & Touche LLP to the Securities and Exchange Commission dated May 8, 1998. (21) Subsidiaries of the Registrant. 2 (23) Consent of Independent Auditors. (24) Power of Attorney. (27)a. Financial Data Schedule. (27)b. Restated Financial Data Schedule. (27)c. Restated Financial Data Schedule. (99.1) Cautionary Statements pursuant to the Securities Litigation Reform Act. - ----------------- * Incorporated by Reference 3 EX-10.A 2 1993 STOCK PLAN, AS AMENDED 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 and non-employee directors of the Company capable of assuring the future success of the Company, to offer such individuals incentives to put forth maximum efforts for the success of the Company's business and to afford such individuals 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 Awards granted under the Plan to qualify under Rule 16b-3. Each member of the Committee shall be a "Non-Employee Director" 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, or any director of the Company who is not an employee of the Company or an Affiliate. (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(e) 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 -3- 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 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. 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 4,800,000. 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. -4- (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 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. (d) Award Limitations Under the Plan. No Eligible Person, who is an employee of the Company at the time of grant, may be granted any Option, Stock Appreciation Right and such Other Stock Based Award (the value of which is based solely on an increase in the value of the Shares after the date of grant) for more than 250,000 Shares (subject to adjustment as provided for in Section 4(c)), taking into account all such awards granted by the Company pursuant to any of its stock compensation plans, in any calendar year period beginning with the period commencing January 1, 1997. The foregoing annual limitation specifically includes the grant of any Awards representing "qualified performance-based compensation" within the meaning of Section 162(m) of the Code. 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. -5- 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. (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, (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, and (C) the number of previously owned Shares, if any, tendered as payment for additional tax obligations of the Participant 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 -6- 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. (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 -7- 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 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(e) 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. -8- (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 may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments. (iv) Term of Awards. The term of each Award shall be for such period as may be determined by the Committee. (v) 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. -9- 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: (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 and Payment. 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 -10- 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. In addition to the amounts required to be withheld to pay applicable taxes, subject to such terms and conditions as the Committee shall determine in its sole and absolute discretion, the Committee may permit the Participant to elect to deliver 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 additional federal and/or state income taxes imposed on the Participant in connection with the exercise of the Award. All elections, if any, must be made on or before the date that the amount of tax to be withheld is determined. 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. -11- (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 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 -12- 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. Amended 4/9/97 Amended 10/15/97 Amended 4/8/98 -13- EX-10.R 3 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN EXHIBIT (10)r SECOND AMENDMENT OF SUPERVALU INC. NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Effective February 26, 1989, SUPERVALU INC., a Delaware corporation, established an unfunded nonqualified deferred compensation plan for certain executive employees in accordance with the terms of the Plan Statement entitled SUPERVALU INC. NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN, as amended by a First Amendment. SUPERVALU INC. has reserved to itself the power to amend said Plan Statement and it now desires to amend the Plan Statement in the following respects: 1. TIER 2 OFFSET. EFFECTIVE AS OF THE DATE THIS AMENDMENT IS ADOPTED, FOR PARTICIPANTS WHO PERFORM ONE OR MORE HOURS OF SERVICE AFTER THAT DATE, SECTION 1.2.1(b)(ii) OF THE PLAN STATEMENT IS AMENDED TO READ IN FULL AS FOLLOWS: (ii) OFFSET. A dollar amount, equal to the sum of the following: (A) the value of the Participant's Accrued Benefit under the SUPERVALU INC. RETIREMENT PLAN as of such date; and (B) the value of any matching contributions made to an account established for the Participant under the SUPERVALU PRE-TAX SAVINGS AND PROFIT SHARING PLAN as of such date; and (C) the value of any matching contributions credited to the Participant under any nonqualified deferred compensation plan sponsored by SUPERVALU INC. as of such date; and (D) one-half of the Approximate Social Security Benefit available to such Participant as of such date; and (E) a dollar amount as specified by the Board of Directors of SUPERVALU INC. (or any duly authorized committee of the Board of Directors of SUPERVALU INC.). These offsets shall be expressed as a benefit payable monthly to the Participant in the Single Life Annuity form beginning on the first day of the month following the Participant's Normal Retirement Date and, if necessary, shall be converted to such form using the mortality and interest assumptions in effect under the SUPERVALU INC. RETIREMENT PLAN as of such date. 2. SAVINGS CLAUSE. SAVE AND EXCEPT AS HEREIN EXPRESSLY AMENDED THE PLAN STATEMENT SHALL CONTINUE IN FULL FORCE AND EFFECT. EX-12 4 RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT (12) SUPERVALU INC. and Subsidiaries Ratio of Earnings to Fixed Charges For Fiscal Years Ended
(In thousands, except ratios) 1998 1997 1996 1995 1994 --------- --------- --------- --------- --------- Earnings before income taxes $ 384,780 $ 280,512 $ 267,692 $ 15,925 $ 294,080 Less undistributed earnings of less than fifty percent owned affiliates (7,388) (15,813) (11,136) (10,902) (8,306) --------- --------- --------- --------- --------- Earnings before income taxes 377,392 264,699 256,556 5,023 285,774 Interest expense 133,619 136,831 140,150 135,383 120,292 Interest on operating leases 18,010 16,950 17,059 18,204 17,288 --------- --------- --------- --------- --------- $ 529,021 $ 418,480 $ 413,765 $ 158,610 $ 423,354 ========= ========= ========= ========= ========= Total fixed charges 151,629 153,781 157,209 153,587 137,580 ========= ========= ========= ========= ========= Ratio of earnings to fixed charges 3.49 2.72 2.63 1.03 3.08 ========= ========= ========= ========= =========
EX-13 5 PORTIONS OF 1998 ANNUAL REPORT TO STOCKHOLDERS Exhibit 13 - ----------------------------------- financial review RESULTS OF OPERATIONS In fiscal 1998, the company recorded record sales of $17.2 billion, net earnings of $230.8 million, basic earnings per share of $3.68 and diluted earnings per share of $3.65. After excluding the non-recurring gain from the sale of the investment in ShopKo Stores, Inc. ("ShopKo"), net earnings were $177.1 million, basic earnings per share were $2.83 and diluted earnings per share were $2.80. Fiscal 1997 sales were $16.6 billion, basic earnings per share were $2.60 and diluted earnings per share were $2.59. The following table sets forth items from the company's Consolidated Statements of Earnings:
Fiscal Year Ended - ----------------------------------------------------------------------------------------------------------- (In millions) February 28,1998 February 22,1997 February 24,1996 (53 weeks) (52 weeks) (52 weeks) - ----------------------------------------------------------------------------------------------------------- Net sales $17,201.4 100.0% $16,551.9 100.0% $16,486.3 100.0% Cost of sales 15,430.7 89.7 14,885.3 89.9 14,906.6 90.4 Selling and administrative expenses 1,365.3 7.9 1,286.1 7.8 1,213.0 7.4 Interest expense 133.6 .8 136.8 .8 140.1 .9 Interest income 19.6 (.1) 16.1 (.1) 23.5 (.2) Equity in earnings and gain on sale of ShopKo 93.4 (.5) 20.7 (.1) 17.6 (.1) --------------------------------------------------------------------------- Earnings before income taxes 384.8 2.2 280.5 1.7 267.7 1.6 Income taxes 154.0 .9 105.5 .6 101.3 .6 --------------------------------------------------------------------------- Net earnings $ 230.8 1.3% $ 175.0 1.1% $ 166.4 1.0% ===========================================================================
Comparison Of Fifty-three Weeks Ended February 28, 1998 ("1998") With Fifty-two Weeks Ended February 22, 1997 ("1997") Net Sales Net sales for 1998 increased 3.9 percent over 1997. On a comparable 52-week basis, sales increased 2.1 percent, positively impacted by a 2.1 percent increase in food distribution sales and a 1.8 percent increase in retail food sales. Food distribution sales increased in 1998 due to the addition of new customers, despite the 1997 discontinuance of service to a major customer in the Southeast, continuing competitive market conditions and low food price inflation. Retail food sales were favorable in 1998 compared to 1997, primarily due to the addition of new stores, partially offset by the closing or sale of underperforming stores and a slight decrease in same-store sales of .4 percent, reflecting competitive market conditions. Gross Profit Gross profit as a percentage of net sales increased to 10.3 percent in 1998, compared with 10.1 percent in 1997. Food distribution gross profit margin for 1998 was comparable to fiscal 1997. Retail food gross profit margin increased due to continued focus on merchandising activities. Selling And Administrative Expenses Selling and administrative expenses were 7.9 percent of net sales in 1998, compared with 7.8 percent in 1997. Food distribution expenses continued to be impacted by technology related spending in support of new systems development as well as to make systems year 2000 compliant. Retail food expenses in 1998 were impacted by unfavorable wage expenses in comparison to 1997 related to both increased wage rates and expansion of perishable departments. 14 - ----------------------------------- financial review Operating Earnings The company's pre-tax operating earnings (earnings before interest, equity in earnings and gain on sale of ShopKo, and taxes) increased to $405.4 million in 1998, compared with $380.5 million in 1997. Operating earnings before depreciation and amortization increased to $635.5 million in 1998, compared with $612.6 million in 1997, a 3.7% increase. Food distribution operating earnings increased 2.1 percent in 1998 to $317.1 million, from $310.5 million in 1997. The increase was due to the favorable sales and better buying, offset somewhat by increased wages, information technology costs and LIFO. Retail food operating earnings increased 25.5 percent to $117.6 million in 1998, from $93.7 million in 1997. The increase in retail operating earnings was due to increased sales, merchandising activities and benefits derived from the closing or sale of underperforming stores, offset somewhat by increased labor costs. Interest Expense And Income Interest expense decreased to $133.6 million in 1998, compared with $136.8 million in 1997, reflecting a reduction in debt levels. Interest income increased to $19.6 million in 1998, compared with $16.1 million in 1997, primarily due to increased retailer financing. Equity In Earnings And Gain On Sale Of ShopKo On July 2, 1997, the company exited its 46 percent investment in ShopKo through two simultaneous and cross-conditional transactions: selling 8,174,387 shares back to ShopKo for an aggregate price of $150 million and a secondary public offering of all remaining shares. The transactions resulted in proceeds of $305 million and a pretax gain of $90.0 million. Equity in earnings for 1998 were $3.3 million or $.05 per share (basic and diluted) compared with $20.7 million or $.31 per share (basic and diluted) in fiscal 1997. Income Taxes The effective tax rate increased to 40.0 percent in fiscal 1998, compared with 37.6 percent in 1997, due to the elimination of ShopKo earnings. Net Earnings Net earnings were $230.8 million or $3.68 per share - basic ($3.65 per share - diluted) in 1998 compared with 1997 net earnings of $175.0 million or $2.60 per share - basic ($2.59 per share - diluted). Excluding the gain on the sale of ShopKo, net earnings were $177.1 million or $2.83 per share - basic ($2.80 per share - diluted). Weighted average shares - diluted declined to 63.3 million in 1998 compared with 67.5 million for 1997, primarily due to the repurchase of 6.9 million shares in the second quarter of 1998, with proceeds from the ShopKo transaction. Comparison Of Fifty-two Weeks Ended February 22, 1997 ("1997") With Fifty-two Weeks Ended February 24, 1996 ("1996"): Net Sales Net sales increased .4 percent in 1997. The sales increase was driven by an increase in retail food sales of 7.0 percent, offset partially by a decrease in food distribution sales of 1.0 percent. Food distribution sales decreased in 1997, due to competitive market conditions at the wholesale and retail level, the planned discontinuance of service to a major customer in the Southeast and the expected liquidation of a major customer at the end of 1996 in the Northeast. This effect was partially mitigated by the addition of new retail customers 15 - -------------------------- financial review and food inflation of about one percent. Retail food sales increased in 1997, primarily due to the addition of stores. Same-store sales increased 2.2 percent. The retail food sales increase was partially offset by the closing of underperforming retail stores pursuant to the restructuring program. Gross Profit Gross profit as a percentage of net sales increased to 10.1 percent in 1997, compared with 9.6 percent in 1996. The increase was due principally to the growing proportion within the company's total sales mix of the higher-margined retail food business, which represented 29 percent of total sales in 1997, compared with 27 percent in 1996. Food distribution gross profit margin increased slightly due to favorable LIFO expense and certain merchandising initiatives. The retail food gross profit margin increased as a result of merchandising activities, changes to product mix and the closing of underperforming stores. Selling And Administrative Expenses Selling and administrative expenses were 7.8 percent of net sales in 1997, compared with 7.4 percent in 1996. The higher percentage was primarily due to the increased proportion of the company's retail food segment which operates at a higher selling and administrative expense percentage than the food distribution segment, and the increase in direct and indirect costs related to the transformation of the distribution operations. Food distribution selling and administrative expenses as a percent of net sales were higher due to increased technology related spending in support of the development of market driving services, as well as costs related to opening the Southeast regional distribution facility and the impact of fixed expenses as a percent of slightly decreased sales. Retail food selling and administrative expenses in 1997 as a percent of net sales were comparable to 1996. Operating Earnings The company's pre-tax operating earnings (earnings before interest, equity in earnings of ShopKo and taxes) were $380.5 million in 1997, compared with $366.8 million in 1996. Operating earnings before depreciation and amortization increased to $612.6 million in 1997, compared with $585.8 million in 1996. Food distribution operating earnings were $310.5 million in 1997, compared with $334.7 million in 1996. Operating earnings in 1997 were negatively impacted by higher technology related expenses and the general softness in sales. Retail food operating earnings were $93.7 million in 1997, compared with $57.2 million in 1996. The increase in 1997 resulted from higher sales and improved gross margins resulting from merchandising efforts and changes to product mix. Interest Expense And Income Interest expense of $136.8 million was incurred in 1997 compared with $140.2 million for 1996. The decrease was primarily due to slightly lower short-term interest rates. Interest income decreased to $16.1 million in 1997, compared with $23.5 million in 1996. Interest income decreased 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 1996 and in the fourth quarter of 1997. Equity In Earnings Of ShopKo The company's ownership in ShopKo in 1997 was 46 percent and was accounted for under the equity method. Equity in earnings of ShopKo was 16 - ------------------------- financial review $20.7 million compared with $17.6 million in 1996. The net earnings increase resulted from increased sales in ShopKo's ProVantage managed health care operations and comparable store sales increases of 6 percent. Income Taxes The effective tax rate of 37.6 percent for 1997 was comparable with the 1996 effective tax rate of 37.8 percent. Net Earnings Net earnings for 1997 were $175.0 million, compared with net earnings for 1996 of $166.4 million. Net earnings were positively impacted by the significant improvement in the company's retail food operations, which more than offset increased technology related spending in support of new systems. LIQUIDITY Cash provided by operating activities was $393 million in 1998, compared with $329 million in 1997 and $422 million in 1996. Cash provided from operations in 1998 was primarily used to finance capital expenditures of $230.9 million, repay long-term debt of $84.6 million and pay dividends of $64.9 million. On July 2, 1997, the company exited its 46 percent investment in ShopKo which resulted in proceeds of $305 million. The Board of Directors approved an additional treasury stock purchase program authorizing the company to repurchase up to 8.5 million shares with proceeds received from the ShopKo sale. In fiscal 1998, the company repurchased 6.9 million shares at a cost of $266.7 million under the 1997 program and 1.7 million shares at a cost of $71.7 million under the 1996 program. In fiscal 1997, the company repurchased 746,000 shares at a cost of $21.6 million. Internally-generated funds from operations were the major source of liquidity in 1998. Management expects that the company will continue to replenish operating assets and reduce aggregate debt with internally-generated funds. The company has adequate short-term and long-term financing capabilities to fund acquisitions as the opportunities arise. SUPERVALU will continue to use short-term and long-term debt as a supplement to internally generated funds to finance its activities. The company has a $400 million "shelf registration' in effect, pursuant to which the company could issue $242.5 million of additional debt securities as of the end of fiscal 1998. A $400 million revolving credit agreement, with rates tied to LIBOR plus .180 to .275 percent, also is in place and expires in October 2002. The revolving credit agreement is available for general corporate purposes and to support the company's commercial paper program. There were no drawings on the revolving credit agreement during fiscal 1998. Total commercial paper outstanding as of the the end of fiscal 1998 was $223 million of which $100 million has been classified as long-term debt as the company has the ability and intent to renew these obligations past 1999 and into future periods. Maturities of debt issued will depend on management's views with respect to the relative attractiveness of interest rates at the time of issuance. SUPERVALU's capital budget for fiscal 1999, which includes leases, is $370 million compared with $280 million incurred during 1998. The capital budget 17 - -------------------------- financial review anticipates cash spending of $336 million plus $34 million of capital leases. Approximately $187 million of the fiscal 1999 capital budget is slated for use in the company's food distribution activities, including facilities, information technology and normal replacement spending. The retail food capital budget of $133 million covers corporately-owned retail food businesses. The budget provides for approximately 39 new corporate stores including eight new price superstores and 30 limited assortment stores and also includes capital for remodeling of existing stores. The balance of the fiscal 1999 capital budget is dedicated to the corporate area and will be utilized principally for systems- related items. In addition, the company is prepared to provide up to $150 million to support store development and financing for the company's independent retailers. Certain retailer financing activities do not require new cash outlays because they are leases or guarantees. These capital spending activities are not expected to result in an increase in the company's debt-to-total-capital ratio as internal cash flow is expected to substantially support spending requirements. 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 1998 totaled $1.03 per common share, an increase of 3.5 percent over the 99 1/2 cents per share declared in 1997. This was the 61st year of consecutive cash dividends and the 26th year of successive annual increases. The company's dividend policy will continue to emphasize a high level of earnings retention for growth. Common Stock Price SUPERVALU's common stock is listed on the New York Stock Exchange under the symbol SVU. At year-end, there were 7,161 stockholders of record compared with 7,655 at the end of fiscal 1997.
Common Stock Dividends Per Price Range Share Fiscal Quarter 1998 1997 1998 1997 - -------------------------------------------------------------------------- High Low High Low - -------------------------------------------------------------------------- First $36 5/8 $28 5/8 $32 5/8 $30 5/8 $.250 $.245 Second 41 5/8 34 1/2 31 5/8 27 5/8 .260 .250 Third 41 3/4 34 7/8 30 3/8 27 1/4 .260 .250 Fourth 48 9/16 39 9/16 32 3/8 27 3/4 .260 .250 - -------------------------------------------------------------------------- Year $48 9/16 $28 5/8 $32 5/8 $27 1/4 $1.030 $.995 - --------------------------------------------------------------------------
Dividend payment dates are on or about the 15th day of March, June, September and December, subject to Board of Directors approval. New Accounting Standards Earnings Per Share Statement of Financial Accounting Standards No. 128, "Earnings per Share" was issued in February 1997 and was adopted in fiscal 1998. Reporting Comprehensive Income Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive Income" was issued in June 1997. This statement establishes standards for the reporting and display of 18 - ---------------------------- financial review comprehensive income in the consolidated financial statements. The provisions of the statement are effective for fiscal 1999. Disclosures About Segments of an Enterprise Statement of Financial Accounting Standard No. 131, "Disclosures About Segments of an Enterprise and Related Information" was issued in June 1997. This statement establishes standards for the reporting of information concerning operating segments in the consolidated financial statements. The provisions of the statement are effective for fiscal 1999. Pensions And Other Postretirement Benefits Statement of Financial Accounting Standard No. 132, "Employer's Disclosures About Pensions and Other Postretirement Benefits" was issued in February 1998. This statement establishes standards for the reporting of information concerning pensions and other postretirement benefits. The provisions of this statement are effective for fiscal 1999. The new accounting standards above that are effective for fiscal 1999 will be adopted in fiscal 1999 and are not expected to have a material effect on the company's consolidated financial position or results of operations. Year 2000 The company has established processes for evaluating and managing the risks and costs associated with the year 2000 issue and is remediating its computer applications and business processes to provide for their continued functionality. The company has initiated formal communications with significant suppliers and large customers to determine the extent to which the company is vulnerable to those third parties' failure to address their own year 2000 issues. Failure of the company's suppliers or its customers to become year 2000 compliant may have a material adverse impact on the company's operations. The company expects to complete the majority of the project in the spring of 1999. The total estimated cost of the project, which began in fiscal 1997, is estimated at approximately $26 million, excluding the cost of new systems which will be capitalized. The company has delayed other non-critical systems development activities and expects that fiscal 1999 information technology expenses will not differ significantly from the fiscal 1998 level. Cautionary Statements For Purposes Of The Safe Harbor Provisions Of The Private Securities Litigation Reform Act Of 1995 The information in this Annual Report includes forward-looking statements. Important risks and uncertainties that could cause actual results to differ materially from those discussed in such forward looking statements are detailed in Exhibit 99.1 to the company's Annual Report on Form 10-K, for the Year Ended February 28, 1998; other risks or uncertainties may be detailed from time to time in the company's future Securities and Exchange Commission filings. 19 - -------------------------------------------------- ten year financial and operating summary
1998 (b) 1997 1996 1995 (c) - ----------------------------------------------------------------------------------------------------------------------------- STATEMENT OF EARNINGS DATA (a) Net sales $17,201,378 $16,551,902 $16,486,321 $16,563,772 Cost of sales 15,430,642 14,885,249 14,906,602 15,040,117 Selling and administrative expense 1,365,327 1,286,121 1,212,967 1,169,843 Restructuring and other charges -- -- -- 244,000 Interest, net 113,993 120,695 116,678 111,271 Equity in earnings and gain on sale of ShopKo 93,364 20,675 17,618 17,384 Earnings before taxes and accounting change 384,780 280,512 267,692 15,925 Provision for income taxes 154,023 105,468 101,259 (27,409) Net earnings 230,757 175,044 166,433 43,334 Earnings per common share before accounting change-basic 3.68 2.60 2.44 .61 Earnings per common share before accounting change-diluted 3.65 2.59 2.43 .61 Net earnings per common share-basic 3.68 2.60 2.44 .61 Net earnings per common share-diluted 3.65 2.59 2.43 .61 ------------------------------------------------------------- BALANCE SHEET DATA (a) Inventories (FIFO) $ 1,247,429 $ 1,221,344 $ 1,158,028 $ 1,230,017 Working capital (e) 286,800 361,260 355,124 319,429 Net property, plant and equipment 1,589,601 1,648,524 1,600,166 1,571,298 Total assets 4,093,010 4,283,326 4,183,503 4,305,149 Long-term debt (f) 1,260,728 1,420,591 1,445,562 1,459,766 Stockholders' equity 1,201,905 1,307,423 1,216,176 1,193,222 ------------------------------------------------------------- OTHER STATISTICS (a) Earnings before accounting change as a percent of net sales 1.34% 1.06% 1.01% .26% Return on average stockholders' equity 18.49% 13.89% 13.96% 3.46% Book value per common share $ 19.87 $ 19.46 $ 17.94 $ 16.92 Current ratio (e) 1.20:1 1.26:1 1.27:1 1.22:1 Debt to capital ratio 57% 56% 57% 59% Dividends declared per common share $ 1.03 $ .99 1/2 $ .97 $ .92 1/2 Weighted average common shares outstanding-basic 62,663 67,255 68,277 71,388 Weighted average common shares outstanding-diluted 63,275 67,477 68,492 71,528 Depreciation and amortization $ 230,082 $ 232,071 $ 219,084 $ 198,718 Capital expenditures, excluding retailer financing $ 279,768 $ 285,939 $ 271,456 $ 319,560 =============================================================
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 1998 and Fiscal 1992 contain 53 weeks; all other years cover 52 weeks. Dollars in thousands except per share and percentage data. (b) Net earnings include a gain on the sale of ShopKo of $53.7 million ($.85 per share-diluted). All statistics include this transaction. (c) Net earnings were reduced by restructuring and other charges of $159.4 million ($2.23 per share-diluted). The provision for income taxes includes a reversal of $40.8 million ($.57 per share-diluted) of deferred taxes in 1995 related to the partial disposition of ShopKo in 1992. The 1995 ratios were calculated including the restructuring and other charges and including 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 .98 and 12.95 percent, respectively, if the restructuring and other charges and the reversal of $40.8 million of deferred taxes had been excluded. (d) 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 $13.3 million ($.18 per share-diluted). A $51.3 million after-tax gain on the sale of a 54 percent interest in ShopKo was included in fiscal 1992 net earnings ($.68 per share-diluted). All statistics include the results of both transactions. (e) Working capital and current ratio are calculated after adding back the LIFO reserve. (f) Total long-term debt includes long-term debt and long-term obligations under capital leases. 20
1994 1993 1992 (d) 1991 1990 1989 - --------------------------------------------------------------------------------------------------- $15,936,925 $12,568,000 $10,632,301 $10,104,899 $9,734,811 $9,061,176 14,523,434 11,531,394 9,807,633 9,360,886 9,043,953 8,429,692 1,044,433 746,857 583,789 531,972 484,586 433,177 -- -- -- -- -- -- 89,767 54,203 34,320 31,441 33,104 34,532 14,789 23,072 116,281 45,080 42,562 36,943 294,080 258,618 322,840 225,680 215,730 200,718 108,827 94,092 115,175 70,544 67,984 63,250 185,253 164,526 194,377 155,136 147,746 137,468 2.58 2.31 2.78 2.06 1.97 1.84 2.56 2.30 2.77 2.06 1.96 1.83 2.58 2.31 2.60 2.06 1.97 1.84 2.56 2.30 2.59 2.06 1.96 1.83 - --------------------------------------------------------------------------------------------------- $ 1,227,170 $ 1,247,337 $ 862,621 $ 785,395 $ 726,194 $ 688,947 452,121 361,093 534,182 196,217 188,139 165,887 1,410,123 1,384,241 879,186 789,443 701,162 666,508 4,042,351 4,064,189 2,484,300 2,401,357 2,239,900 2,116,202 1,262,995 1,347,386 608,241 567,444 549,694 557,828 1,275,458 1,134,820 1,030,981 978,678 869,891 763,706 - --------------------------------------------------------------------------------------------------- 1.16% 1.31% 1.95% 1.54% 1.52% 1.52% 15.40% 15.32% 20.17% 16.82% 18.12% 19.31% $ 17.62 $ 15.84 $ 14.35 $ 13.01 $ 11.59 $ 10.20 1.37:1 1.27:1 1.72:1 1.24:1 1.25:1 1.22:1 53% 59% 43% 46% 46% 46% $ .85 1/2 $ .76 1/2 $ .70 1/2 $ .64 1/2 $ .58 1/2 $ .48 1/2 71,817 71,341 74,700 75,165 74,972 74,785 72,240 71,608 74,947 75,390 75,336 75,092 $ 186,261 $ 140,790 $ 111,488 $ 105,582 $ 95,593 $ 86,944 $ 239,602 $ 164,728 $ 175,624 $ 203,199 $ 142,899 $ 193,218 ===================================================================================================
21 - -------------------------------------------------------------------------- consolidated composition of net sales and operating earnings (in thousands, except percent data) The following table sets forth, for each of the last five fiscal years, the composition of the company's net sales and operating earnings.
1998 1997 1996 1995 1994 .................................................................................................................. NET SALES Food distribution $ 15,108,779 $14,545,266 $14,685,899 $14,820,009 $14,361,255 87.8% 87.9% 89.1% 89.5% 90.1% Retail food 4,877,290 4,719,079 4,412,203 4,219,691 3,696,145 28.4% 28.5% 26.7% 25.4% 23.2% Less: Eliminations (2,784,691) (2,712,443) (2,611,781) (2,475,928) (2,120,475) (16.2)% (16.4)% (15.8)% (14.9)% (13.3)% Total net sales $ 17,201,378 $16,551,902 $16,486,321 $16,563,772 $15,936,925 100.0% 100.0% 100.0% 100.0% 100.0% ................................................................................ OPERATING EARNINGS Food distribution $ 317,068 $ 310,455 $ 334,673 $ 257,495 $ 365,527 Retail food 117,576 93,662 57,176 (104,338) 31,366 -------------------------------------------------------------------------------- Total operating earnings 434,644 404,117 391,849 153,157 396,893 Interest expense, net (113,993) (120,695) (116,678) (111,271) (89,767) General corporate expenses (29,235) (23,585) (25,097) (43,345) (27,835) -------------------------------------------------------------------------------- Earnings before equity in earnings and gain on sale of ShopKo and income taxes 291,416 259,837 250,074 (1,459) 279,291 Equity in earnings and gain on sale of ShopKo 93,364 20,675 17,618 17,384 14,789 -------------------------------------------------------------------------------- Earnings before income taxes $ 384,780 $ 280,512 $ 267,692 $ 15,925 $ 294,080 -------------------------------------------------------------------------------- IDENTIFIABLE ASSETS Food distribution $ 2,825,762 $ 2,746,284 $ 2,684,088 $ 2,843,862 $ 2,644,670 Retail food 1,109,296 1,166,870 1,126,197 1,121,596 948,551 Corporate 157,952 370,172 373,218 339,691 449,130 -------------------------------------------------------------------------------- Total $ 4,093,010 $ 4,283,326 $ 4,183,503 $ 4,305,149 $ 4,042,351 ................................................................................ DEPRECIATION AND AMORTIZATION Food distribution $ 118,556 $ 122,778 $ 115,507 $ 107,471 $ 105,763 Retail food 90,704 90,389 85,010 76,145 64,924 Corporate 20,822 18,904 18,567 15,102 15,574 -------------------------------------------------------------------------------- Total $ 230,082 $ 232,071 $ 219,084 $ 198,718 $ 186,261 ................................................................................ CAPITAL EXPENDITURES Food distribution $ 166,066 $ 139,779 $ 102,435 $ 159,838 $ 131,322 Retail food 92,651 120,881 137,914 119,605 69,939 Corporate 21,051 25,279 31,107 40,117 38,341 ................................................................................ Total $ 279,768 $ 285,939 $ 271,456 $ 319,560 $ 239,602 ================================================================================
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. 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 include $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. 22 - ----------------------------------------------- consolidated statements of earnings (in thousands, except per share data)
Fiscal Year Ended February 28, February 22, February 24, 1998 1997 1996 (53 Weeks) (52 Weeks) (52 Weeks) - ------------------------------------------------------------------------------- NET SALES $17,201,378 $16,551,902 $16,486,321 COSTS AND EXPENSES Cost of sales 15,430,642 14,885,249 14,906,602 Selling and administrative expenses 1,365,327 1,286,121 1,212,967 Interest Interest expense 133,619 136,831 140,150 Interest income 19,626 16,136 23,472 ------------------------------------------- Interest expense, net 113,993 120,695 116,678 ------------------------------------------- Total costs and expenses 16,909,962 16,292,065 16,236,247 ------------------------------------------- EARNINGS BEFORE EQUITY IN EARNINGS AND GAIN ON SALE OF SHOPKO AND INCOME TAXES 291,416 259,837 250,074 Equity in earnings and gain on sale of ShopKo 93,364 20,675 17,618 ------------------------------------------- EARNINGS BEFORE INCOME TAXES 384,780 280,512 267,692 PROVISION FOR INCOME TAXES Current 131,343 77,591 36,692 Deferred 22,680 27,877 64,567 ------------------------------------------- Income tax expense 154,023 105,468 101,259 ------------------------------------------- NET EARNINGS $ 230,757 $ 175,044 $ 166,433 ------------------------------------------- Weighted average number of common shares outstanding Basic 62,663 67,255 68,277 Diluted 63,275 67,477 68,492 NET EARNINGS PER COMMON SHARE-BASIC $ 3.68 $ 2.60 $ 2.44 NET EARNINGS PER COMMON SHARE-DILUTED $ 3.65 $ 2.59 $ 2.43 ============================================
See notes to consolidated financial statements. 23 - ----------------------------------------------------- consolidated balance sheets (in thousands, except per share data)
February 28, 1998 February 22, 1997 - -------------------------------------------------------------------------------------------------------- Assets Current Assets Cash $ 6,100 $ 6,539 Receivables, less allowance for losses of $13,415 in 1998 and $17,806 in 1997 410,741 403,835 Inventories 1,115,529 1,091,805 Other current assets 79,690 98,620 ---------- ---------- Total current assets 1,612,060 1,600,799 ---------- ---------- Long-term notes receivable 83,401 45,588 Long-term investment in direct financing leases 95,291 84,350 Property, plant and equipment Land 138,615 140,427 Buildings 929,975 957,815 Property under construction 54,175 28,030 Leasehold improvements 150,745 150,040 Equipment 1,147,626 1,113,486 Assets under capital leases 286,762 298,757 ---------- ---------- 2,707,898 2,688,555 Less accumulated depreciation and amortization Owned property, plant and equipment 1,052,521 983,229 Assets under capital leases 65,776 56,802 ---------- ---------- Net property, plant and equipment 1,589,601 1,648,524 ---------- ---------- Investment in ShopKo -- 209,789 Goodwill 498,438 491,427 Other assets 214,219 202,849 ---------- ---------- Total assets $4,093,010 $4,283,326 ========== ==========
See notes to consolidated financial statements. 24 - ---------------------------------------------- consolidated balance sheets (in thousands, except per share data)
February 28, 1998 February 22, 1997 - -------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 149,002 $ 134,272 Accounts payable 924,371 923,958 Accrued vacation, compensation and benefits 95,129 89,458 Current maturities of long-term debt 156,897 72,905 Current obligations under capital leases 22,697 21,544 Other current liabilities 109,064 126,941 ----------------------------------- TOTAL CURRENT LIABILITIES 1,457,160 1,369,078 ----------------------------------- LONG-TERM DEBT 934,167 1,087,162 LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES 326,561 333,429 DEFERRED INCOME TAXES 41,948 38,054 OTHER LIABILITIES 131,269 148,180 COMMITMENTS AND CONTINGENCIES -- -- STOCKHOLDERS' EQUITY Preferred stock, no par value: Authorized 1,000 shares Shares issued and outstanding, 6 in 1998 and 1997 ($1,000 stated value) 5,908 5,908 Common stock, $1.00 par value: Authorized 200,000 shares Shares issued, 75,335 in 1998 and 1997 75,335 75,335 Capital in excess of par value 16,124 13,296 Retained earnings 1,611,834 1,444,755 Treasury stock, at cost, 15,151 shares in 1998 and 8,453 in 1997 (507,296) (231,871) ----------------------------------- TOTAL STOCKHOLDERS' EQUITY 1,201,905 1,307,423 ----------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,093,010 $ 4,283,326 =================================== 25
- --------------------------------------------------- consolidated statements of stockholder's equity (in thousands, except per share data)
Capital in Preferred Common Excess of Treasury Retained Stock Stock Par Value Stock Earnings Total - -------------------------------------------------------------------------------------------------------------- Balances at February 25, 1995 $5,908 $75,335 $12,717 $(137,245) $1,236,507 $1,193,222 Net earnings -- -- -- -- 166,433 166,433 Sales of common stock under option plans -- -- (84) 3,458 -- 3,374 Cash dividends declared on common stock--$.970 per share -- -- -- -- (65,998) (65,998) Compensation under employee incentive plans -- -- 104 (869) -- (765) Purchase of shares for treasury -- -- -- (80,090) -- (80,090) ---------------------------------------------------------------------------- Balances at February 24, 1996 5,908 75,335 12,737 (214,746) 1,336,942 1,216,176 Net earnings -- -- -- -- 175,044 175,044 Sales of common stock under option plans -- -- 378 3,786 -- 4,164 Cash dividends declared on common stock--$.995 per share -- -- -- -- (67,231) (67,231) Compensation under employee incentive plans -- -- 181 650 -- 831 Purchase of shares for treasury -- -- -- (21,561) -- (21,561) --------------------------------------------------------------------------- Balances at February 22, 1997 5,908 75,335 13,296 (231,871) 1,444,755 1,307,423 Net earnings -- -- -- -- 230,757 230,757 Sales of common stock under option plans -- -- (4,123) 51,623 -- 47,500 Cash dividends declared on common stock--$1.03 per share -- -- -- -- (63,678) (63,678) Compensation under employee incentive plans -- -- 6,951 11,289 -- 18,240 Purchase of shares for treasury -- -- -- (338,337) -- (338,337) --------------------------------------------------------------------------- Balances at February 28, 1998 $5,908 $75,335 $16,124 $(507,296) $1,611,834 $1,201,905 ===========================================================================
See notes to consolidated financial statements. 26 - ------------------------------------- consolidated statements of cash flows (in thousands)
Fiscal Year Ended February 28, February 22, February 24, 1998 1997 1996 (53 weeks) (52 weeks) (52 weeks) ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 230,757 $ 175,044 $ 166,433 Adjustments to reconcile net earnings to net cash provided by operating activities: Equity in earnings and gain on sale of ShopKo (93,364) (20,675) (17,618) Dividends received from ShopKo -- 4,862 6,482 Depreciation and amortization 230,082 232,071 219,084 Provision for losses on receivables 5,791 8,851 2,269 Deferred income taxes 22,680 27,877 64,567 Other adjustments, net (3,476) (3,100) (12,108) Changes in assets and liabilities, excluding effect from acquisitions: Receivables (29,905) (30,509) 17,865 Inventories (23,297) (58,658) 79,880 Accounts payable 38,453 (53,872) (59,218) Other assets and liabilities 15,214 46,898 (45,938) ----------- ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 392,935 328,789 421,698 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of ShopKo stock 305,153 -- -- Additions to long-term notes receivable (77,779) (52,727) (28,394) Proceeds received on long-term notes receivable 39,966 43,870 64,757 Proceeds from sale of property, plant and equipment 90,169 78,825 94,733 Purchase of property, plant and equipment (230,910) (244,682) (236,248) Business acquisitions, net of cash acquired (23,523) (4,996) -- Other investing activities (28,742) (16,920) (39,645) ----------- ----------- ----------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 74,334 (196,630) (144,797) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in checks outstanding, net of deposits (23,924) 3,270 3,972 Net issuance (reduction) of short-term notes payable 14,730 (23,755) (68,141) Proceeds from issuance of long-term debt 15,592 3,193 257,500 Repayment of long-term debt (84,595) (7,612) (308,406) Reduction of obligations under capital leases (24,055) (21,205) (17,529) Proceeds from the sale of common stock under option plans 37,736 3,719 2,291 Dividends paid (64,855) (66,884) (66,122) Payment for purchase of treasury stock (338,337) (21,561) (80,090) ----------- ----------- ----------- NET CASH USED IN FINANCING ACTIVITIES (467,708) (130,835) (276,525) ----------- ----------- ----------- Net increase (decrease) in cash (439) 1,324 376 Cash at beginning of year 6,539 5,215 4,839 ----------- ----------- ----------- CASH AT END OF YEAR $ 6,100 $ 6,539 $ 5,215 ----------- ----------- -----------
See notes to consolidated financial statements. 27 - ------------------------------------------ notes to consolidated financial statements SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation: The consolidated 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 and income from product sales are recognized upon shipment of the product for food distribution and at the point of sale for retail food. Revenues and income from services rendered are recognized immediately after such services have been provided. 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: 74.4 percent for fiscal 1998 and 76.3 percent for fiscal 1997. 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 $131.9 million at February 28, 1998 and $129.5 million at February 22, 1997. 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 the straight-line method. Estimated useful lives generally are 10 to 40 years for buildings and major improvements; 3 to 10 years for equipment; and term of the lease or expected life for leasehold improvements. Interest on property under construction of $1.9, $2.0 and $2.6 million was capitalized in fiscal years 1998, 1997 and 1996, respectively. Goodwill: Amounts paid in excess of the fair value of acquired net assets are amortized on a straight-line basis. 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. 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. As of February 28, 1998, $400 million of goodwill related to the acquisition of Wetterau Incorporated in fiscal 1993 is being amortized over 40 years. Goodwill related to other acquisitions is being amortized over 15 to 20 years. Goodwill is shown net of accumulated amortization of $87.0 and $66.9 million for fiscal 1998 and 1997, respectively. Fair Value Disclosures of Financial Instruments: The estimated fair value of notes receivable approximates the net carrying value at February 28, 1998 and February 22, 1997. Notes receivable are valued based on comparisons to publicly traded debt instruments of similar credit quality. At February 28, 1998 and February 22, 1997 the estimated fair market value of the company's long-term debt (including current maturities) exceeded the carrying value by approximately $42 and $33 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 28, 1998 and February 22, 1997 approximates the carrying value. Pre-opening Costs: Pre-opening costs of retail stores are charged against earnings as incurred. Net Earnings Per Share: In fiscal 1998 the company adopted Statement of Financial Accounting Standard No. 128 (SFAS 128), "Earnings Per Share." SFAS 128 requires the disclosure of Basic and Diluted Earnings per Share (EPS). Basic EPS is calculated using income available to common shareholders divided by the weighted average of common shares outstanding during the year. Diluted EPS is similar to Basic EPS except that the weighted average of common shares outstanding is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares, such as options, had been issued. All prior year EPS have been restated in accordance with the provisions of SFAS 128. Use of Estimates: The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications: Certain reclassifications have been made to prior years' consolidated financial statements to conform to 1998 presentation. These reclassifications did not affect results of operations as previously reported. 28 - ------------------------------------------ notes to consolidated financial statements RESTRUCTURING CHARGES In fiscal 1995, restructuring charges of $205 million were incurred for the implementation of the ADVANTAGE project and the sale, closure or restructure of certain retail businesses. The company utilized approximately $39.2 million, $44.0 million and $64.0 million of the reserve in 1998, 1997 and 1996 respectively, primarily for carrying costs and losses on the disposition of property as well as the closing of underperforming corporate retail stores and employee separation costs. The remaining $11.6 million of reserve is expected to be utilized for certain non cancelable lease and other obligations which will extend beyond fiscal 1999. NOTES RECEIVABLE Notes receivable arise from fixture and other financing activities related to independently owned retail food customers. 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 10 years with the average being 7 years, and may be non-interest bearing or bear interest at rates ranging from 5 to 12 percent. Included in current receivables are notes receivable due within one year totaling $16.7 and $6.6 million at February 28, 1998 and February 22, 1997, respectively. INVESTMENT IN SHOPKO On July 2, 1997, the company exited its 46 percent investment in ShopKo, a mass merchandise discount retailer, through two simultaneous and cross-conditional transactions: selling 8,174,387 shares back to ShopKo for an aggregate of $150 million and a secondary public offering of 6,557,280 shares. The transactions resulted in proceeds of $305 million and a net gain of $53.7 million. Proceeds were primarily used to repurchase shares of SUPERVALU stock. DEBT
(In thousands, February 28, February 22, except payment data) 1998 1997 - -------------------------------------------------------------------------------- 7.800%-8.875% promissory $ 400,000 $ 400,000 notes semi-annual interest payments of $16.1 million; due fiscal 2003 to 2023 7.25% promissory notes 150,000 150,000 semi-annual interest payments of $5.4 million; due fiscal 2000 6.09%-6.69% medium-term 132,500 157,500 notes semi-annual interest payments of $4.2 million; due fiscal 1999 to 2006 Notes payable 100,000 100,000 Variable rate to 8.25% industrial 88,900 89,369 revenue bonds 9.67% senior subordinated notes 75,000 75,000 due fiscal 1999 8.875% promissory notes 45,000 70,000 semi-annual interest payments of $2.0 million; due fiscal 2000 6.00%-11.50% promissory notes 24,991 38,482 due fiscal 1999 to 2004 8.28%-9.46% promissory notes due fiscal 2010 22,894 23,893 9.96% promissory notes due fiscal 2006 19,643 21,247 8.875% sinking fund debentures 7,110 22,110 due fiscal 2017 Other debt 25,026 12,466 - -------------------------------------------------------------------------------- 1,091,064 1,160,067 Less current maturities 156,897 72,905 - -------------------------------------------------------------------------------- Long-term debt $ 934,167 $1,087,162 ================================================================================
Aggregate maturities of long-term debt during the next five fiscal years are: (In thousands) - -------------------------------------------------------------------------------- 1999 $156,897 2000 212,445 2001 78,121 2002 9,395 2003 409,026 ================================================================================ The company has a $400 million revolving credit agreement that expires in October 2002. The company pays an annual facility fee of .09 percent for the credit agreement. The revolving credit agreement is available for general corporate purposes and to support the company's commercial paper program. There were no drawings on the revolving credit agreement during fiscal 1998 and 1997. As of February 28, 29 - -------------------------------------- notes to consolidated financial statements 1998, and February 22, 1997, total commercial paper outstanding was $223 million and $213 million, respectively. Of the total commercial paper outstanding borrowings of $100 million were classified as long-term debt at February 28, 1998 and February 22, 1997, reflecting SUPERVALU's intent and ability, through the existence of the revolving credit agreement, to refinance these borrowings. The company also has a $400 million "shelf registration" in effect pursuant to which the company could issue $242.5 million of additional debt securities. The debt agreements contain various covenants including maximum permitted leverage. Under the most restrictive covenants, retained earnings of approximately $134 million were available at year-end for payment of cash dividends. The weighted-average interest rate on short-term borrowings outstanding was 5.7 percent at February 28, 1998 and 5.5 percent at February 22, 1997. LEASES Capital and Operating Leases: The company leases certain food distribution warehouse and office facilities, as well as corporate-owned 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 $17.9, $18.2 and $13.8 million in fiscal 1998, 1997 and 1996, respectively. Future minimum obligations under capital leases in effect at February 28, 1998 are as follows: (In thousands) Lease Fiscal Year Obligations - -------------------------------------------------------------------------------- 1999 $ 33,266 2000 32,608 2001 31,699 2002 30,812 2003 30,350 Later 250,928 - -------------------------------------------------------------------------------- Total future minimum obligations 409,663 Less interest 161,322 - -------------------------------------------------------------------------------- Present value of net future minimum obligations 248,341 Less current portion 13,601 - -------------------------------------------------------------------------------- Long-term obligations $234,740 ================================================================================ The present values of future minimum obligations shown are calculated based on interest rates ranging from 6.7 percent to 13.8 percent, with a weighted average of 9.2 percent, determined to be applicable at the inception of the leases. 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 28, 1998 are as follows: (In thousands) Lease Fiscal Year Obligations - -------------------------------------------------------------------------------- 1999 $ 60,393 2000 55,213 2001 49,291 2002 40,912 2003 30,935 Later 101,566 - -------------------------------------------------------------------------------- Total future minimum obligations $338,310 ================================================================================ Total rent expense, net of sublease income, relating to all operating leases with terms greater than one year was $40.0, $36.5, and $33.0 million in fiscal 1998, 1997 and 1996, respectively. Future minimum receivables under operating leases and subleases in effect at February 28, 1998 are as follows: (In thousands) Owned Leased Fiscal Year Property Property Total - -------------------------------------------------------------------------------- 1999 $ 3,140 $17,495 $ 20,635 2000 2,515 15,085 17,600 2001 2,027 12,791 14,818 2002 1,853 9,840 11,693 2003 1,725 7,171 8,896 Later 5,601 21,484 27,085 - -------------------------------------------------------------------------------- Total future minimum receivables $16,861 $83,866 $100,727 ================================================================================ Owned property under operating leases is as follows: (In Thousands) February 28, February 22, 1998 1997 - -------------------------------------------------------------------------------- Land, buildings and equipment $35,507 $45,513 Less accumulated depreciation 11,428 14,922 - -------------------------------------------------------------------------------- Net land, buildings and equipment $24,079 $30,591 ================================================================================ 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 future minimum obligations under the related capital leases in effect at February 28, 1998 are as follows: 30 - -------------------------------------------- notes to consolidated financial statements
(In thousands) Direct Financing Capital Lease Fiscal Year Lease Receivables Obligations - -------------------------------------------------------------------------------- 1999 $ 18,678 $ 17,357 2000 16,830 15,668 2001 14,855 13,840 2002 13,998 13,069 2003 12,921 12,082 Later 100,012 94,140 - -------------------------------------------------------------------------------- Total minimum lease payments 177,294 166,156 Less unearned income 73,106 -- Less interest -- 65,239 - -------------------------------------------------------------------------------- Present value of net minimum lease payments 104,188 100,917 Less current portion 8,897 9,096 - -------------------------------------------------------------------------------- Long-term portion $ 95,291 $ 91,821 ================================================================================
INCOME TAXES The provision for income taxes consists of the following:
(In thousands) 1998 1997 1996 - -------------------------------------------------------------------------------- Current Federal $109,550 $ 64,033 $ 30,427 State 22,161 13,730 6,548 Tax credits (368) (172) (283) Deferred Restructuring charges 15,550 15,599 31,565 Other 7,130 12,278 33,002 - -------------------------------------------------------------------------------- Total provision $154,023 $105,468 $101,259 ================================================================================
The difference between the actual tax provision and the tax provision computed by applying the statutory Federal income tax rate to earnings before taxes is attributable to the following:
(In thousands) 1998 1997 1996 - -------------------------------------------------------------------------------- Federal taxes based on statutory rate $134,680 $ 98,180 $ 93,692 State income taxes, net of federal benefit 16,508 12,763 12,180 Benefit of dividends received deduction (1,342) (7,793) (6,455) Nondeductible goodwill 6,248 6,277 5,973 Other (2,071) (3,959) (4,131) - -------------------------------------------------------------------------------- Total provision $154,023 $105,468 $101,259 ================================================================================
Temporary differences which give rise to significant portions of the net deferred tax asset (liability) as of February 28, 1998 and February 22, 1997 are as follows:
(In thousands) 1998 1997 - -------------------------------------------------------------------------------- Deferred tax assets: Depreciation and amortization $ 20,676 $ 18,442 Restructuring charges 13,089 28,639 Net operating loss from acquired subsidiaries 19,964 21,968 Valuation allowance (8,000) (8,000) Provision for obligations to be settled in future periods 105,193 139,774 Inventory 14,269 14,559 Other 10,566 8,858 - -------------------------------------------------------------------------------- Total deferred tax assets 175,757 224,240 - -------------------------------------------------------------------------------- Deferred tax liabilities: Depreciation and amortization (85,767) (85,867) Acquired assets adjustment to fair values (50,573) (85,699) Accelerated tax deductions for benefits to be paid in future periods (34,860) (30,483) Other (10,687) (5,641) - -------------------------------------------------------------------------------- Total deferred tax liabilities (181,887) (207,690) - -------------------------------------------------------------------------------- Net deferred tax asset (liability) $ (6,130) $ 16,550 ================================================================================
The company acquired net operating loss (NOL) carryforwards of $58.1 million for tax purposes which expire beginning in 2000 and continuing through 2010. A valuation allowance of $8.0 million relates to NOL carryforwards not expected to be realized. Temporary differences attributable to obligations consist primarily of accrued postretirement benefits, 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) 1998 1997 1996 - -------------------------------------------------------------------------------- Leased asset additions and related obligation $39,072 $41,257 $37,769 ================================= Acquisitions: Fair value of assets acquired 28,114 25,169 -- Cash paid 23,570 5,014 -- - -------------------------------------------------------------------------------- Liabilities assumed $ 4,544 $20,155 -- ================================================================================ Payments for interest and income taxes were as follows: (In thousands) 1998 1997 1996 - -------------------------------------------------------------------------------- Interest (net of amount capitalized) $134,645 $136,618 $144,599 Income taxes 142,829 58,551 61,994 ================================================================================
31 - -------------------------------------------------- notes to consolidated financial statements STOCK OPTION PLANS The company's 1997, 1993 and 1983 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. In April 1997, the Board of Directors reserved an additional 2.0 million shares to be issued for stock option plans. 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 Weighted Average (In thousands) Price per Share - ------------------------------------------------------------------------------- Outstanding, February 25, 1995 3,539 $28.79 Granted 1,444 27.36 Exercised (187) 24.30 Canceled and forfeited (195) - ------------------------------------------------------------------------------- Outstanding, February 24, 1996 4,601 28.43 Granted 705 31.50 Exercised (199) 25.81 Canceled and forfeited (79) - ------------------------------------------------------------------------------- Outstanding, February 22, 1997 5,028 28.92 Granted 1,398 35.04 Exercised (2,051) 28.01 Canceled and forfeited (186) - ------------------------------------------------------------------------------- Outstanding, February 28, 1998 4,189 $31.34 ===============================================================================
The outstanding stock options at February 28, 1998 have exercise prices ranging from $20.63 to $48.31 and a weighted average remaining contractual life of 6.7 years. Options to purchase 2.5 and 3.1 million shares were exercisable at February 28, 1998, and February 22, 1997, respectively. These options have a weighted average exercise price of $31.35 and $28.54, respectively. Option shares available for grant were 1.9 and 1.1 million at February 28, 1998, and February 22, 1997, respectively. The company has reserved 6.1 million shares, in aggregate, for the plans. As of February 28, 1998, 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 2.0 million shares of common stock and are exercisable only upon a "change of control." In 1997 the company adopted Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock Based Compensation." The company has elected to continue following the accounting guidance of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" for measurement and recognition of stock-based transactions with employees. No compensation cost has been recognized for options issued under the Stock Option Plans because the exercise price of all options granted was not less than 100 percent of fair market value of the common stock on the date of grant. Had compensation cost for the stock options issued been determined based on the fair value at the grant date, consistent with provisions of SFAS No. 123, the company's 1998, 1997 and 1996 net income and earnings per share would have been changed to the pro forma amounts indicated below:
(In thousands, except per share amounts) 1998 1997 1996 - ------------------------------------------------------------------------------- Net earnings As reported $230,757 $175,044 $166,433 Pro forma 227,896 173,568 165,565 Earnings per share - diluted As reported $3.65 $2.59 $2.43 Pro forma 3.60 2.57 2.42 ===============================================================================
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions and results:
Assumptions 1998 1997 1996 - ------------------------------------------------------------------------------- Dividend yield 2.69% 3.31% 3.30% Risk free interest rate 5.62% 6.42% 5.81% Expected life 5 years 7 years 7 years Expected volatility 18.21% 13.78% 11.52% Estimated fair value of options granted per share $6.78 $6.19 $4.75 ===============================================================================
TREASURY STOCK PURCHASE PROGRAM During fiscal 1996, the company repurchased 2.9 million shares at an average per share cost of $27.99 under the December 1994 program. In August 1996, the Board of Directors instituted a treasury stock program under which the company is authorized to repurchase up to 5.0 million shares for reissuance upon the exercise of employee stock options and for other compensation programs utilizing the company's stock. Upon adoption of the August 1996 program, the December 1994 and February 1994 treasury stock programs were rescinded. In fiscal 1997, the company repurchased .7 million shares at an average cost of $28.91 under the August 1996 program. In June 1997, the Board of Directors instituted a treasury stock program under which the company is authorized to repurchase up to 8.5 million shares with proceeds received from the sale of ShopKo. In fiscal 1998, the company repurchased 6.9 million shares at an average cost of $38.72 under the June 1997 program and 1.7 million shares at an average cost of $41.01 under the August 1996 program. 32 - ------------------------------------------ notes to consolidated financial statements 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. EARNINGS PER SHARE In fiscal 1998 the company adopted Statement of Financial Accounting Standards (SFAS) No.128 "Earnings per Share." Earnings per share amounts presented for 1997 and 1996 have been restated for the adoption of SFAS 128. The following table reflects the calculation of basic and diluted earnings per share:
(In thousands, except per share amounts) 1998 1997 1996 - -------------------------------------------------------------------------- Earnings per share - basic Income available to common shareholders $230,757 $175,044 $166,433 Weighted average shares outstanding 62,663 67,255 68,277 Earnings per share - basic $3.68 $2.60 $2.44 - -------------------------------------------------------------------------- Earnings per share - diluted Income available to common shareholders $230,757 $175,044 $166,433 Weighted average shares outstanding 62,663 67,255 68,277 Dilutive impact of options outstanding 612 222 215 -------- -------- -------- Weighted average shares and potential dilutive shares outstanding 63,275 67,477 68,492 Earnings per share - diluted $3.65 $2.59 $2.43 ==========================================================================
COMMITMENTS AND CONTINGENCIES The company has guaranteed mortgage loan and other debt obligations of $14.8 million. The company has also guaranteed the leases and fixture financing loans of various affiliated retailers with a present value of $66.4 and $22.4 million, respectively. The company has provided limited recourse to purchasers of notes receivable from affiliated retailers with outstanding note balances of $33.6 million and $51.3 million at fiscal 1998 and 1997, $18.2 million of which the company has contingent liability at both February 28, 1998 and February 22, 1997, respectively. The company has also entered into note repurchase agreements with various lenders totaling $7.4 million, under which certain events require the company to repurchase collateralized loans. The company is a party to various legal proceedings arising from the normal course of business activities, none of which, in management's opinion, is expected to have a material adverse impact on the company's consolidated financial statements. 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 $1.9, $2.3 and $5.5 million for fiscal 1998, 1997 and 1996, respectively. Amounts charged to union pension expense were $37.4, $34.4 and $33.5 million for fiscal 1998, 1997 and 1996, 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). Plan assets are held in trust and invested in separately managed accounts and publicly traded mutual funds holding both equity and fixed income securities. 33 - ----------------------------------------------- notes to consolidated financial statements The following table sets forth the company's defined benefit pension plans' funded status and the amounts recognized in the company's financial statements:
(In thousands) February 28, February 22, 1998 1997 - ---------------------------------------------------------------- Actuarial present value of accumulated benefit obligation: Vested $ 197,273 $ 189,623 Total $ 220,528 $ 211,917 - ---------------------------------------------------------------- Projected benefit obligation $ 281,665 $ 273,714 Plan assets at fair value (260,028) (233,410) - ---------------------------------------------------------------- Projected benefit obligation in excess of plan assets 21,637 40,304 Unrecognized net loss (17,263) (38,419) Unrecognized prior service cost 1,043 798 Unrecognized transition obligation (190) (285) Adjustment to minimum liability 168 22 - ---------------------------------------------------------------- Pension liability $ 5,395 $ 2,420 ================================================================
Net pension expense included the following components:
(In thousands) 1998 1997 1996 - ---------------------------------------------------------------- Service cost $12,668 $12,197 $8,742 Interest cost 19,545 18,676 16,815 Actual return on plan assets (27,477) (27,401) (32,468) Net amortization and deferral 5,374 9,878 17,053 - ---------------------------------------------------------------- Net pension expense $10,110 $13,350 $10,142 ================================================================
For both fiscal 1998 and 1997, 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 7.5 percent and 4.5 percent, respectively. 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. 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 were $14.9 million and $16.4 million at February 28, 1998 and February 22, 1997, respectively. The accumulated benefit obligation of these plans totaled $11.1 million and $12.9 million at February 28, 1998 and February 22, 1997, respectively. Net periodic pension cost was $2.3 million for fiscal 1998 and $2.2 million for fiscal 1997 and 1996. 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 1998 1997 1996 - ---------------------------------------------------------------- Service cost-benefits attributed to service during the period $1,850 $1,813 $1,460 Interest cost on accumulated postretirement benefit obligation 4,182 3,932 3,667 Net amortization and deferral (262) (261) (335) - ---------------------------------------------------------------- Net periodic postretirement benefit cost $5,770 $5,484 $4,792 ================================================================
(In thousands) Accumulated postretirement February 28, February 22, benefit obligation 1998 1997 - ---------------------------------------------------------------- Retirees $24,539 $22,816 Active plan participants 36,166 34,336 - ---------------------------------------------------------------- Total accumulated postretirement benefit obligation 60,705 57,152 Unrecognized loss (8,259) (5,949) Unrecognized prior service cost 1,959 2,221 - ---------------------------------------------------------------- Postretirement benefit liability $54,405 $53,424 ================================================================
The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7.5 percent in 1998 and 1997. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation for both fiscal 1998 and 1997 was 9 percent decreasing to 6 percent by fiscal 2001. 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 $8.7 million and $8.5 million and the net periodic cost by $1.0 million and $.9 million for fiscal 1998 and 1997, respectively. INDUSTRY SEGMENT INFORMATION Information concerning the company's continuing operations by business segment for the years ended February 28, 1998, February 22, 1997 and February 24, 1996, as required by Statement of Financial Accounting Standards No. 14, "Financial Reporting for Segments of a Business Enterprise," is contained on page 22. Statement of Financial Standard No. 131, "Disclosures About Segments of an Enterprise and Related Information" was issued in June 1997 and will be adopted in fiscal 1999. 34 - ------------------------------------------------- unaudited quarterly financial information (in thousands, except per share data) Quarterly unaudited financial information for SUPERVALU INC. and subsidiaries is as follows:
Fiscal Year (53 Weeks) Ended February 28, 1998 First Second Third Fourth Year (16 wks) (12 wks) (12 wks) (13 wks) (53 wks) - ------------------------------------------------------------------------------------------------------------- Net sales $5,033,303 $3,866,012 $4,004,565 $4,297,498 $17,201,378 Gross profit 501,129 393,286 403,792 472,529 1,770,736 Net earnings 49,766 89,115 40,249 51,627 230,757 Net earnings per common share-basic .74 1.44 .67 .86 3.68 Net earnings per common share-diluted .74 1.42 .66 .85 3.65 Dividends declared per common share .250 .260 .260 .260 1.030 Weighted average shares-basic 66,977 62,059 60,211 60,175 62,663 Weighted average shares-diluted 67,244 62,840 60,871 61,013 63,275 =======================================================================
The results for the second quarter, fiscal 1998, include an after-tax gain on the sale of ShopKo stock of $53.7 million.
Fiscal Year (52 Weeks) Ended February 22, 1997 First Second Third Fourth Year (16 wks) (12 wks) (12 wks) (12 wks) (52 wks) - ------------------------------------------------------------------------------------------------------------- Net sales $4,978,761 $3,778,745 $3,904,841 $3,889,555 $16,551,902 Gross profit 479,413 380,240 385,210 421,790 1,666,653 Net earnings 45,982 35,864 40,217 52,981 175,044 Net earnings per common share-basic .68 .53 .60 .79 2.60 Net earnings per common share-diluted .68 .53 .60 .79 2.59 Dividends declared per common share .245 .250 .250 .250 .995 Weighted average shares-basic 67,482 67,466 67,110 66,885 67,255 Weighted average shares-diluted 67,794 67,632 67,284 67,093 67,477 =======================================================================
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure On May 8, 1998, the company determined not to re-engage its independent auditors, Deloitte & Touche LLP ("Deloitte") and appointed KP MG Peat Marwick LLP ("KPMG") as its new independent auditors, effective immediately. This determination followed the company's decision to seek proposals from independent accounting firms, including Deloitte, with respect to the engagement of independent accountants to audit the company's financial statements for the fiscal year ending February 27, 1999. The decision not to re-engage Deloitte and to retain KPMG was approved by the unanimous consent of the company's Board of Directors upon the recommendation of its Audit Committee. The reports of Deloitte on the financial statements of the company for its fiscal years ended February 28, 1998 and February 22, 1997 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the company's two most recent fiscal years and the subsequent interim period through May 8, 1998 (i) there were no disagreements between the company and Deloitte on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which, if not resolved to the satisfaction of Deloitte, would have caused Deloitte to make reference to the subject matter of the disagreement in connection with its reports (a "Disagreement") and (ii) there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K of the Securities and Exchange Commission (a "Reportable Event"). The company has not, during the company's two most recent fiscal years or the subsequent interim period through May 8, 1998, consulted with KPMG regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the company's financial statements, and either a written report was provided to the company or oral advice was provided that KPMG concluded was an important factor considered by the company in reaching a decision as to the accounting, auditing or financial reporting issue, or (ii) any matter that was either the subject of a Disagreement with Deloitte or a Reportable Event. The company reported the change in accountants on Form 8-K on May 12, 1998. The Form 8-K contained a letter from Deloitte addressed to the Securities and Exchange Commission stating that it agreed with the comments in the second paragraph of the above statements and had no basis for agreeing or disagreeing with the remaining comments in the above statements. 35 - ------------------------------ 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 28, 1998 and February 22, 1997, and the related statements of earnings, stockholders' equity and cash flows for each of the three years (52-53 weeks) in the period ended February 28, 1998. These consolidated financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of SUPERVALU INC. and subsidiaries as of February 28, 1998 and February 22, 1997, and the results of their operations and their cash flows for each of the three years in the period ended February 28, 1998, in conformity with generally accepted accounting principles. /S/ Deloitte & Touche LLP Minneapolis, Minnesota April 6, 1998 - ------------------------------ investor information Annual Meeting Stockholders are invited to attend the Annual Stockholders' Meeting, which will be held on July 1, 1998 at 10:30 a.m., Minneapolis time at the: Minneapolis Convention Center 1301 Second Avenue South Minneapolis, Minnesota Transfer Agent and Registrar Shareholders may contact the transfer agent with any matter concerning ownership of SUPERVALU stock. Norwest Shareowner Services P.O. Box 64854 St. Paul, Minnesota 55164 0854 800 468 9716 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 13, 1998 there were approximately 7,062 holders of the company's stock. Form 10-K A copy of the annual report to the Securities and Exchange Commission on Form 10-K may be obtained without charge to stockholders after May 29, 1998. Requests should be directed to: Office of the Secretary SUPERVALU INC. P.O. Box 990 Minneapolis, Minnesota 55440 Dividend Reinvestment Plan Stockholders of record may elect to participate in the company's dividend reinvestment plan. No brokerage commission or service fees are charged on any shares purchased through either reinvested dividends or optional cash payments. The plan is administered by Norwest Bank Minnesota, N.A. Requests for a brochure describing terms and conditions of the plan and an authorization card should be addressed to the Transfer Agent at the address set forth above. Investor Relations Inquiries from securities analysts and institutional investors are welcomed and should be directed to: Director, Investor Relations SUPERVALU INC. P.O. Box 990 Minneapolis, Minnesota 55440 Phone: 612 828 4540 To be added to the company's investor relations mailing list please call or write: SUPERVALU INC. Communications Dept. P.O. Box 990 Minneapolis, Minnesota 55440 Phone: 612 828 4599 Fax: 612 828 8955 36 EX-21 6 SUBSIDIARIES OF THE REGISTRANT EXHIBIT (21) SUPERVALU INC. SUBSIDIARIES as of May 18, 1998 (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. Blaine North 1996 L.L.C. Delaware Limited Liability Company 70% Diamond Lake 1994 L.L.C. Delaware Limited Liability Company 25% J. M. Jones Equipment Company Delaware 100% Jackson Markets, Inc. Mississippi 100% Maplewood East 1996 L.L.C. Delaware Limited Liability Company 70% Max Club, Inc. Minnesota 100% NAFTA Industries Consolidated, Inc. Texas 51% NAFTA Industries, Ltd. Texas Limited Partnership 51% International Data, LLC Indiana Limited Liability Company 50% NC&T Supermarkets, Inc. Ohio 100% Nevada Bond Investment Corp. I Nevada 100% Planmark Architecture of Oregon, P.C. Oregon 100% Planmark, Inc. Minnesota 100% Preferred Products, Inc. Minnesota 100% Risk Planners Agency of Ohio, Inc. Ohio 100% Risk Planners of Mississippi, Inc. Mississippi 100% Risk Planners of Pennsylvania, Inc. Pennsylvania 100% Risk Planners, Inc. Minnesota 100% Risk Planners of Illinois, Inc. Illinois 100% Risk Planners of Montana, Inc. Montana 100% Shakopee 1997 L.L.C. Delaware Limited Liability Company 25% Silver Lake 1996 L.L.C. Delaware Limited Liability Company 51% SUPERVALU Pharmacies, Inc. Minnesota 100% SUPERVALU Transportation, Inc. Minnesota 100% SUVACO Insurance International, Ltd. Islands of Bermuda 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% Valu Ventures, Inc. Minnesota 100% Valu Ventures 2, Inc. Minnesota 100% SUPERVALU Terre Haute Limited Partnership Indiana Limited Partnershp 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 - Midwest, Inc. Delaware 100% Advantage Logistics - Southeast, Inc. Alabama 100% Clyde Evans Markets, Inc. Ohio 100% Clyde Evans, Inc. Ohio 100% Hyper Shoppes, Inc. Delaware 100% HS Real Estate Company, Inc. Delaware 100% Hyper Shoppes (Colorado), Inc. Colorado 100% Hyper Real Estate (Colorado), Inc. Colorado 100% Hyper Shoppes (Ohio), Inc. Ohio 100% bigg's (KY), Inc. Delaware 100% BFO, Inc. Ohio 100% HSO, Inc. Ohio 100% Scott's Food Stores, Inc. Indiana 100% SV Ventures* Indiana General Partnership 50%
PERCENTAGE OF VOTING JURISDICTION SECURITIES OWNED BY OF ORGANIZATION IMMEDIATE PARENT --------------- ---------------- SUPERMARKET OPERATORS OF AMERICA INC. (CONTINUED) SUPERVALU HOLDINGS, INC. Missouri 100% Airway Redevelopment Corporation Missouri 100% Augsburger's, Inc. Indiana 100% GM Distributing, Inc. California 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% WSI Satellite, Inc. Missouri 100% SV Ventures* Indiana General Partnership 50% SVH Holding, Inc. Delaware 100% SVH Realty, Inc. Delaware 100% WC&V Supermarkets, Inc. Vermont 100% Wetterau Finance Co. Missouri 100% Wetterau Independence, Inc. Missouri 100% Wetterau Insurance Co. Ltd. Bermuda 100% SUPERVALU OPERATIONS, INC. Rhode Island 100% Butson's Enterprises, Inc. New Hampshire 100% Butson's Enterprises of Vermont, Inc. Vermont 100% Keatherly, Inc. New Hampshire 100% Peoples Market, Incorporated New Hampshire 100% Violette's Supermarkets, Inc. New Hampshire 100% East Main Development, Inc. Rhode Island 100% Ellsworth Foods, Inc. Maine 100% Glendale Foods, Inc. Pennsylvania 100% M & C Foods, Inc. Pennsylvania 100% Maryland Specialty 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% Ultra Foods, Inc. New Jersey 100% Verona Road Associates, Inc. Pennsylvania 100%
* 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. EX-23 7 CONSENT OF INDEPENDENT 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, No. 33-50071, No. 333-10151, and No. 333-24813 on Form S-8 and No. 33-56415 on Form S-3 of our reports dated April 6, 1998, appearing in or incorporated by reference in this Annual Report on Form 10-K of SUPERVALU INC. for the year ended February 28, 1998. /S/ DELOITTE & TOUCHE LLP Minneapolis, Minnesota May 26, 1998 EX-24 8 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 28, 1998 under the provisions of the Securities Exchange Act of 1934, as amended, hereby constitutes and appoints Michael W. Wright and John P. Breedlove, 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 8th day of April, 1998. /s/ Herman Cain /s/ Richard L. Knowlton - ----------------------------------- -------------------------------- Herman Cain Richard L. Knowlton /s/ Stephen I. D'Agostino /s/ Charles M. Lillis - ----------------------------------- -------------------------------- Stephen I. D'Agostino Charles M. Lillis /s/ Lawrence A. Del Santo /s/ Harriet Perlmutter - ----------------------------------- -------------------------------- Lawrence A. Del Santo Harriet Perlmutter /s/ Edwin C. Gage /s/ Carole F. St. Mark - ----------------------------------- -------------------------------- Edwin C. Gage Carole F. St. Mark /s/ William A. Hodder /s/ Michael W. Wright - ----------------------------------- -------------------------------- William A. Hodder Michael W. Wright s/ Garnett L. Keith, Jr. /s/ Pamela K. Knous - ----------------------------------- -------------------------------- Garnett L. Keith, Jr. Pamela K. Knous EX-27.(A) 9 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AS OF FEBRUARY 28, 1998 AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE 53 WEEKS ENDED FEBRUARY 28, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS FEB-28-1998 FEB-23-1997 FEB-28-1998 6,100 0 424,156 (13,415) 1,115,529 1,612,060 2,707,898 (1,118,297) 4,093,010 1,457,160 1,260,728 0 5,908 75,335 1,120,662 4,093,010 17,201,378 17,201,378 15,430,642 15,430,642 0 5,791 133,619 384,780 154,023 230,757 0 0 0 230,757 3.68 3.65
EX-27.(B) 10 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SUPERVALU INC. CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS 12-MOS 4-MOS 6-MOS 9-MOS FEB-24-1996 FEB-22-1997 FEB-22-1997 FEB-22-1997 FEB-22-1997 FEB-26-1995 FEB-25-1996 FEB-25-1996 FEB-25-1996 FEB-25-1996 FEB-24-1996 FEB-22-1997 JUN-15-1996 SEP-07-1996 NOV-30-1996 5,215 6,539 5,082 6,501 7,134 0 0 0 0 0 402,675 421,641 385,100 395,448 457,976 (22,064) (17,806) (18,694) (17,417) (17,554) 1,029,911 1,091,805 1,083,672 1,082,294 1,285,973 1,553,709 1,600,799 1,580,645 1,588,430 1,860,502 2,500,994 2,688,555 2,574,207 2,625,726 2,649,692 (900,828) (1,040,031) (943,733) (982,221) (1,014,085) 4,183,503 4,283,326 4,279,307 4,295,465 4,566,199 1,326,702 1,369,078 1,358,716 1,358,091 1,650,629 1,445,562 1,420,591 1,464,457 1,468,404 1,421,673 0 0 0 0 0 5,908 5,908 5,908 5,908 5,908 75,335 75,335 75,335 75,335 75,335 1,134,933 1,226,180 1,166,342 1,178,121 1,190,782 4,183,503 4,283,326 4,279,307 4,295,465 4,566,199 16,486,321 16,551,902 4,978,761 8,757,506 12,662,347 16,486,321 16,551,902 4,978,761 8,757,506 12,662,347 14,906,602 14,885,249 4,499,348 7,897,853 11,417,484 14,906,602 14,885,249 4,499,348 7,897,853 11,417,484 0 0 0 0 0 2,269 8,851 1,788 2,716 6,138 140,150 136,831 41,363 72,534 105,057 267,692 280,512 75,690 134,349 198,864 101,259 105,468 29,708 52,503 76,801 166,433 175,044 45,982 81,846 122,063 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 166,433 175,044 45,982 81,846 122,063 2.44 2.60 .68 1.21 1.81 2.43 2.59 .68 1.21 1.81
EX-27.(C) 11 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINACIAL INFORMATION EXTRACTED FROM SUPERVALU INC. CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENT OF EARNINGS IN FISCAL YEAR 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 4-MOS 6-MOS 9-MOS FEB-28-1998 FEB-28-1998 FEB-28-1998 FEB-23-1997 FEB-23-1997 FEB-23-1997 JUN-14-1997 SEP-06-1997 NOV-29-1997 7,317 39,173 39,626 0 0 0 415,393 395,759 458,140 (17,159) (15,294) (14,589) 1,121,396 1,063,070 1,287,484 1,621,366 1,573,907 1,854,787 2,664,161 2,657,050 2,698,259 (1,058,367) (1,077,514) (1,103,851) 4,309,729 4,008,135 4,336,917 1,460,208 1,419,917 1,693,542 1,318,118 1,215,681 1,270,177 0 0 0 5,908 5,908 5,908 75,335 75,335 75,335 1,266,885 1,110,265 1,116,555 4,309,729 4,008,135 4,336,917 5,033,303 8,899,315 12,903,880 5,033,303 8,899,315 12,903,880 4,532,174 8,004,900 11,605,673 4,532,174 8,004,900 11,605,673 0 0 0 2,016 3,221 4,439 41,321 71,167 101,026 81,917 231,097 298,413 32,151 92,216 119,283 49,766 138,881 179,130 0 0 0 0 0 0 0 0 0 49,766 138,881 179,130 .74 2.14 2.82 .74 2.12 2.80
EX-99.1 12 CAUTIONARY STATEMENTS FOR SAFE HARBOR EXHIBIT (99.1) CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE SECURITIES LITIGATION REFORM ACT In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 ("Act"), SUPERVALU INC. (the "Company") is filing cautionary statements identifying important factors that could cause the Company's actual results to differ materially from those projected in forward-looking statements made by, or on behalf of the Company. When used in this Annual Report on Form 10-K for the fiscal year ended February 28, 1998 and in future filings by the Company with the Securities and Exchange Commission, in the Company's press releases, other communications, and in oral statements made by or with the approval of an authorized executive officer, the words or phrases "will likely result", "are expected to", "will continue", "is anticipated", "estimate", "project", "believe" or similar expressions are intended to identify forward-looking statements within the meaning of the Act. The following cautionary statements are for use as a reference to a readily available written document in connection with forward looking statements as defined in the Act. These factors are in addition to any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statement. WHOLESALE BUSINESS RISKS The Company's sales and earnings at wholesale are dependent on the Company's ability to retain existing customers and attract new customers, as well as its ability to control costs. While the Company believes that its efforts, including its Activity Based Sell ("ABS") pricing, new market driving services, and regional logistics, will enable it to attain its goals, certain factors could adversely impact the Company's results, including: decline of sales to its independent retailer customer base due to competition and other factors; loss of corporate retail sales due to increased competition and other risks detailed more fully below; consolidations of retailers or competitors; increased self-distribution by chain retailers; increase in operating costs; the possibility that the Company will incur additional costs and expenses due to further rationalization or consolidation of distribution centers; entry of new or non-traditional distribution systems into the industry; possible delays or increased costs in implementing its initiatives; manufacturers do not change their pricing, transportation, and/or promotional programs in cooperation with the Company's new pricing methods; and possible loss of retailer customers who are not compatible with such changes. In addition, timing of certain efforts could be impacted by the information technology related expenses associated with addressing year 2000 issues. RISKS OF EXPANSION AND ACQUISITIONS The Company intends to continue to grow its retail and wholesale segments in part through acquisitions. Expansion is subject to a number of risks, including the adequacy of the Company's capital resources; the location of suitable store or distribution center sites and the negotiation of acceptable lease terms; ability to hire, train and integrate employees; and possible costs and other risks of integrating or adapting operational systems. In addition, acquisitions involve a number of special risks, including: making acquisitions at acceptable rates of return; the diversion of management's attention to assimilation of the operations and 1 personnel of the acquired business; potential adverse short-term effects on the Company's operating results; and amortization of acquired intangible assets. RETAIL BUSINESS RISKS The Company's retail segment faces risks which may prevent the Company from maintaining or increasing retail sales and earnings including: competition from other retail chains, supercenters, non-traditional competitors, and emerging alternative formats; operating risks of certain strategically important retail operations; and adverse impact from the entry of other retail chains, supercenters and non-traditional or emerging competitors into markets where the Company has a retail concentration. LIQUIDITY 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. If capital spending significantly exceeds anticipated capital needs, additional funding could be required from other sources. In addition, acquisitions could affect the Company's borrowing costs and future financial flexibility. LITIGATION While the Company believes that it is currently not subject to any material litigation, the costs and other effects of legal and administrative cases and proceedings and settlements are impossible to predict with certainty. The current environment for litigation involving food wholesalers may increase the risk of litigation being commenced against the Company. The Company would incur the costs of defending any such litigation whether or not any claim had merit. The foregoing should not be construed as exhaustive and the Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. 2 -----END PRIVACY-ENHANCED MESSAGE-----