-----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, TuVLt4N782YxKTk+ka4egaQJ/kXtSPEDUbwK9LipCXRrqKsd7nXf91LLKjyFkyoN F1uwh+kCo8zd6A9uCcAovg== 0001045969-01-500757.txt : 20010801 0001045969-01-500757.hdr.sgml : 20010801 ACCESSION NUMBER: 0001045969-01-500757 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010616 FILED AS OF DATE: 20010731 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-Q SEC ACT: SEC FILE NUMBER: 001-05418 FILM NUMBER: 1693948 BUSINESS ADDRESS: STREET 1: 11840 VALLEY VIEW RD CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 BUSINESS PHONE: 9528284000 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-Q 1 d10q.txt FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period (16 weeks) ended June 16, 2001. [_] 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 executive offices) (Zip Code) (952) 828-4000 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) N/A 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 The number of shares outstanding of each of the issuer's classes of Common Stock as of July 20, 2001 is as follows: Title of Each Class Shares Outstanding ------------------- ------------------ Common Shares 133,065,701
PART I - FINANCIAL INFORMATION - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- Item 1: Financial Statements - ------------------------------------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF EARNINGS - ------------------------------------------------------------------------------------------------------------------------- SUPERVALU INC. and Subsidiaries - ------------------------------------------------------------------------------------------------------------------------- (In thousands, except per share data) First quarter (16 weeks) ended June 16, 2001 % of sales June 17, 2000 % of sales - ------------------------------------------------------------------------------------------------------------------------- Net sales $6,931,568 100.00% $6,953,393 100.00% Costs and expenses: Cost of sales 6,160,676 88.88 6,205,121 89.24 Selling and administrative expenses 600,440 8.66 558,594 8.03 Amortization of goodwill 14,865 0.21 15,065 0.22 Interest Interest expense 62,657 0.90 63,636 0.92 Interest income 6,430 0.09 6,021 0.09 -------------------------------------------------------------------------- Interest expense, net 56,227 0.81 57,615 0.83 -------------------------------------------------------------------------- Total costs and expenses 6,832,208 98.57 6,836,395 98.32 -------------------------------------------------------------------------- Earnings before income taxes 99,360 1.43 116,998 1.68 Provision for income taxes Current 36,894 39,713 Deferred 3,049 7,320 -------------------------------------------------------------------------- Income tax expense 39,943 0.58 47,033 0.67 -------------------------------------------------------------------------- Net earnings $ 59,417 0.86% $ 69,965 1.01% ========================================================================== Net earnings per common share- diluted $ 0.45 $ 0.53 Net earnings per common share- basic $ 0.45 $ 0.53 Weighted average number of common shares outstanding Diluted 132,576 133,026 Basic 132,493 131,987 Dividends declared per common share $ 0.1375 $ 0.1350
All data subject to year-end audit. See notes to consolidated financial statements. 2 CONSOLIDATED STATEMENTS OF NET SALES AND EARNINGS - -------------------------------------------------------------------------------- SUPERVALU INC. and Subsidiaries - --------------------------------------------------------------------------------
(In thousands) First Quarter (16 weeks) ended June 16, 2001 June 17, 2000 - ------------------------------------------------------------------------------------------------------------------------- Net Sales - ------------------------------------------------------------------------------------------------------------------------- Retail food $2,820,199 $2,698,508 % of total 40.7% 38.8% Food distribution 4,111,369 4,254,885 % of total 59.3% 61.2% Total net sales $6,931,568 $6,953,393 100.0% 100.0% - ------------------------------------------------------------------------------------------------------------------------- Earnings - ------------------------------------------------------------------------------------------------------------------------- Retail food $ 91,616 $ 109,397 % of sales 3.2% 4.1% Food distribution 75,787 74,909 % of sales 1.8% 1.8% --------------------------------------------------- Subtotal 167,403 184,306 % of sales 2.4% 2.7% General corporate expenses (11,816) (9,693) --------------------------------------------------- Total operating earnings 155,587 174,613 % of sales 2.2% 2.5% Interest income 6,430 6,021 Interest expense (62,657) (63,636) --------------------------------------------------- Earnings before income taxes 99,360 116,998 Provision for income taxes (39,943) (47,033) --------------------------------------------------- Net earnings $ 59,417 $ 69,965 =========================================================================================================================
All data subject to year-end audit. See notes to consolidated financial statements. 3 CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------------------------------------------------- SUPERVALU INC. and Subsidiaries First Quarter Fiscal Year End - --------------------------------------------------------------------------------------------------------------------------- (In thousands) June 16, February 24, 2001 2001 Assets - --------------------------------------------------------------------------------------------------------------------------- Current Assets Cash and cash equivalents $ 40,071 $ 10,396 Receivables, net 549,911 582,923 Inventories 1,281,603 1,350,061 Other current assets 142,469 148,296 --------------------------------------------------- Total current assets 2,014,054 2,091,676 Long-term notes receivable 167,223 161,388 Property, plant and equipment, net 2,146,732 2,232,794 Goodwill 1,561,917 1,576,780 Other assets 419,817 344,534 --------------------------------------------------- Total assets $ 6,309,743 $ 6,407,172 =================================================== Liabilities and Stockholders' Equity - --------------------------------------------------------------------------------------------------------------------------- Current Liabilities Notes payable $ 473,587 $ 579,039 Accounts payable 1,377,927 1,396,011 Current debt and obligations under capital leases 57,781 54,668 Other current liabilities 264,635 311,452 --------------------------------------------------- Total current liabilities 2,173,930 2,341,170 Long-term debt and obligations under capital leases 2,012,362 2,008,474 Other liabilities and deferred income taxes 290,236 264,033 Total stockholders' equity 1,833,215 1,793,495 --------------------------------------------------- Total liabilities and stockholders' equity $ 6,309,743 $ 6,407,172 ===================================================
All data subject to year-end audit. See notes to consolidated financial statements. 4 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - -------------------------------------------------------------------------------- SUPERVALU INC. and Subsidiaries - -------------------------------------------------------------------------------- (In thousands, except per share data)
Common Stock Capital in Treasury Stock Accumulated Excess of Retained Other Shares Amount Par Value Shares Amount Earnings Comprehensive Loss Total - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- BALANCES AT FEBRUARY 26, 2000 150,670 150,670 132,226 (16,008) (308,788) 1,847,371 - 1,821,479 Net earnings - - - - - 81,965 - 81,965 Sales of common stock Under option plans - - (3,538) 279 7,095 - - 3,557 Cash dividends declared on common stock- $.5475 per share - - - - - (72,903) - (72,903) Compensation under employee incentive plans - - (196) 366 8,271 - - 8,075 Purchase of shares for treasury - - - (2,933) (48,678) - - (48,678) - ----------------------------------------------------------------------------------------------------------------------------------- BALANCES AT FEBRUARY 24, 2001 150,670 $150,670 $128,492 (18,296) $(342,100) $1,856,433 - $1,793,495 - ----------------------------------------------------------------------------------------------------------------------------------- Net earnings - - - - - 59,417 - 59,417 Sales of common stock Under option plans - - (347) 26 552 - - 205 Cash dividends declared on common stock- $.1375 per share - - - - - (18,325) - (18,325) Compensation under employee incentive plans - - (1,842) 435 7,554 - - 5,712 Other comprehensive loss - - - - - - (7,289) (7,289) - ----------------------------------------------------------------------------------------------------------------------------------- BALANCES AT JUNE 16, 2001 150,670 $150,670 $126,303 (17,835) $(333,994) $1,897,525 $(7,289) $1,833,215 ===================================================================================================================================
All data subject to year-end audit See notes to consolidated financial statements. 5 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - -------------------------------------------------------------------------------- SUPERVALU INC. and Subsidiaries - -------------------------------------------------------------------------------- (In thousands) - --------------------------------------------------------------------------------
Year-to-date (16 weeks ended) - -------------------------------------------------------------------------------------------------------- June 16, June 17, 2001 2000 - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- Net cash provided by operating activities $ 217,956 $ 246,387 - -------------------------------------------------------------------------------------------------------- Cash flows from investing activities Additions to long-term notes receivable (16,799) (17,271) Proceeds received on long-term notes receivable 11,137 6,183 Proceeds from sale of assets 22,303 11,636 Purchase of property, plant and equipment (67,416) (113,794) Other cash used in investing activities (24,507) (44,412) - -------------------------------------------------------------------------------------------------------- Net cash used in investing activities (75,282) (157,658) - -------------------------------------------------------------------------------------------------------- Cash flows from financing activities Net increase in checks outstanding, net of deposits 30,947 4,250 Net (reduction) issuance of short-term notes payable (105,452) 92,286 Proceeds from issuance of long-term debt 10,000 - Repayment of long-term debt (5,576) (91,492) Dividends paid (36,525) (36,095) Payment for purchase of treasury stock - (48,604) Other cash used in financing activities (6,393) (8,213) - -------------------------------------------------------------------------------------------------------- Net cash used in financing activities (112,999) (87,868) - -------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 29,675 861 Cash and cash equivalents at beginning of quarter/year 10,396 10,920 - -------------------------------------------------------------------------------------------------------- Cash and cash equivalents at the end of first quarter $ 40,071 $ 11,781 ======================================================================================================== Supplemental Information: Pretax LIFO expense $ (2,341) $ (641) Pretax depreciation and amortization $ 103,021 $ 96,349
All data subject to year-end audit. See notes to consolidated financial statements. 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Accounting Policies - ------------------- The summary of significant accounting policies is included in the notes to consolidated financial statements set forth in the Annual Report on Form 10-K of SUPERVALU INC. ("SUPERVALU" or the "company") for its fiscal year ended February 24, 2001 ("fiscal 2001"). Financial Accounting Standard 133, "Accounting for Derivative Instruments and Hedging Activities," became effective for the Company on February 25, 2001. Therefore, at that date, the company's interest rate swap agreements were recorded on its balance sheet at fair value, resulting in recognition of a liablility of $23.5 million, a non-current asset of $10.8 million, a debit to other comprehensive loss of $7.3 million, and a deferred tax liability of $4.7 million. There was no material impact on pre-tax earnings for first quarter 2002. As of June 16, 2001, the swaps were revalued, resulting in a decrease of $0.7 million to the liability. On July 6, 2001, the swaps were terminated which had no material cash impact. Statement of Registrant - ----------------------- The data presented herein is unaudited but, in the opinion of management, includes all adjustments necessary for a fair presentation of the condensed consolidated financial position of the company and its subsidiaries at June 16, 2001 and June 17, 2000, and the results of the company's operations and condensed cash flows for the periods then ended. These interim results are not necessarily indicative of the results of the fiscal years as a whole. Restructure and Other Charges - ----------------------------- In the fourth quarter of fiscal 2001, the company completed a company-wide asset review to identify assets that do not meet return objectives, provide long-term strategic opportunities, or justify additional capital investment. As a result, the company recorded restructure and other charges of $171.3 million include $89.7 million of asset impairment charges, $52.1 million for lease subsidies, lease cancellation fees, future payments on exited leased facilities and guarantee obligations and $39.8 million for severance and employee related costs, offset by a reduction in the fiscal 2000 reserve of $10.3 million for lease subsidies and future payments on exited leased facilities. These actions include a net reduction of approximately 4,500 employees throughout the organization. Management expects the majority of these actions to be completed by the end of fiscal 2002. Details of the fiscal 2001 restructure activity for fiscal 2002 follow: - --------------------------------------------------------------------------------------------------------------------------------- Balance Balance (In thousands, except for employees) February 24, Fiscal 2002 June 16, 2001 Activity 2001 - --------------------------------------------------------------------------------------------------------------------------------- Consolidation of distribution centers $41,499 $1,325 $40,174 Exit of non-core retail markets 33,735 42 33,693 Disposal of non-core assets and other administrative reductions 16,619 238 16,381 - --------------------------------------------------------------------------------------------------------------------------------- Total restructure and other charges $91,853 $1,605 $90,248 - --------------------------------------------------------------------------------------------------------------------------------- Employees 4,500 200 4,300 - ---------------------------------------------------------------------------------------------------------------------------------
The reserves at the end of first quarter fiscal 2002 for fiscal 2001 restructure charges were $90.2 million, including $51.9 million for lease subsidies, lease terminations and future payments on exited leased facilities and $38.3 million for severance and employee related costs. In fiscal 2000, the company recorded pre-tax restructure and other charges of $103.6 million as a result of an extensive review to reduce costs and enhance efficiencies. This amount was then reduced by $10.3 million in fiscal 2001, primarily for a change in estimate for the closure of a remaining facility, which will occur in the second quarter of fiscal 2002. The restructure charges include costs for facility consolidation, non-core store disposal, and rationalization of redundant and certain decentralized administrative functions. 7 Details of the fiscal 2000 restructure activity for fiscal 2002 follow: - ------------------------------------------------------------------------------------------------------------------ Balance February 24, Fiscal 2002 Balance June (In thousands, except for employees) 2001 Activity 16, 2001 - ------------------------------------------------------------------------------------------------------------------ Facility consolidation $11,472 $ 220 $ 11,252 Non-core store disposal 4,404 826 3,578 Infrastructure realignment 1,980 196 1,784 - ------------------------------------------------------------------------------------------------------------------ Total restructure and other charges $17,856 $1,242 $ 16,614 - ------------------------------------------------------------------------------------------------------------------ Employees 463 6 457 - ------------------------------------------------------------------------------------------------------------------
The reserves at the end of first quarter fiscal 2002 for fiscal 2000 restructure charges were $16.6 million, including $9.5 million for lease subsidies, lease terminations and future payments on exited leased facilities and $7.1 million for severance and employee related costs. Item 2: Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations --------------------- Results of Operations - --------------------- For the first quarter of fiscal 2002, the company achieved sales of $6.9 billion, net earnings of $59.4 million and diluted earnings per share of $0.45. Last year, sales were $7.0 billion, net earnings were $70.0 million and diluted earnings per share were $0.53. Net sales Net sales decreased 0.3 percent compared to last year. Retail food sales increased 4.5 percent and food distribution sales decreased 3.4 percent. Retail food sales increased over last year primarily due to 112 new store openings including 95 new limited assortment stores over the past twelve months. Same-store sales were approximately a negative 1.5 percent due to the effect of competitive activities in certain markets and cannibalization. Food distribution sales decreased from last year due to lower sales volumes from Kmart and the impact of restructuring activity, offset in part by new business. The supply agreement with Kmart terminated June 30, 2001. Gross profit Gross profit as a percentage of net sales was 11.1 percent compared to 10.8 percent last year. The increase was primarily due to distribution expense reductions in the logistics operations. Selling and administrative expenses Selling and administrative expenses, including goodwill amortization, as a percentage of sales were 8.9 percent for the current year compared to 8.3 percent last year. The increase in selling and administrative expenses as a percentage of sales was primarily due to the growing proportion of the company's retail business, which operates at a higher selling and administrative expense as a percentage of net sales than the food distribution business. Operating earnings The company's pretax operating earnings (earnings before interest and taxes) decreased to $155.6 million compared to $174.6 million last year, a 10.9 percent decrease. Operating earnings before depreciation and amortization decreased to $258.6 million compared with $271.0 million last year, a 4.6 percent decrease. Retail food operating earnings decreased 16.3 percent to $91.6 million, or 3.2 percent of sales, from last year's $109.4 million, or 4.1 percent of sales, as sales gains were fully offset by higher promotional and selling and administrative expenses in certain markets. Retail food operating earnings before depreciation and amortization decreased 9.4 percent to $142.9 million, or 5.1 percent of sales, from last year's $157.7 million, or 5.8 percent of sales. Food distribution operating earnings increased 1.2 percent to $75.8 million, or 1.8 percent of sales, from last year's $74.9 million, or 1.8 percent of sales, due to cost reductions in distribution. Food distribution operating earnings before depreciation and amortization increased 3.8 percent to $126.7 million, or 3.1 percent of sales, from last year's $122.0 million, or 2.9 percent of sales. Interest expense Interest expense decreased to $62.7 million compared with $63.6 million last year due to lower overall borrowing levels and lower interest rates since last year. Interest income increased to $6.4 million compared to $6.0 million last year. 8 Income taxes The effective tax rate was 40.2 percent in the first quarter this year, comparable to last year. Net earnings Net earnings decreased 15.1 percent to $59.4 million or $0.45 per share -diluted compared with last year's net earnings of $70.0 million or $0.53 per share - diluted. Cash earnings decreased to $0.56 per share - diluted compared with last year's $0.64 per share - diluted. Weighted average shares - diluted decreased to 132.6 million compared with last year's 133.0 million. Liquidity and Capital Resources - ------------------------------- Internally generated funds from operations continued to be the major source of liquidity and capital growth. Cash provided from operations was $218.0 million, compared with $246.4 million last year. The decrease is primarily due to a decrease in net earnings of $10.5 million and a decrease in net inventory of $68.1 million compared to $84.3 million last year. Net cash used in investing activities was $75.3 million, compared with $157.7 million last year. The decrease is primarily due to lower property, plant & equipment purchases. Net cash used in financing activities was $113.0 million, compared with $87.9 million last year. The increase in cash used is primarily due to the reduction of short-term notes payable, partially offset by the purchase of treasury stock during the first quarter of last year. 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 its capital expenditures plan and 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. Maturities of debt issued will depend on management's views with respect to the relative attractiveness of interest rates at the time of issuance. The company has entered into revolving credit agreements with various financial institutions, which are available for general corporate purposes, to support the company's commercial paper program and for the issuance of letters of credit. A $400 million revolving credit agreement, with rates tied to LIBOR, is in place and expires in October 2002. As of June 16, 2001, the company had $170 million of borrowings and $23.2 million of letters of credit outstanding under this agreement. In August 1999, the company executed a 364-day, $300 million revolving credit agreement with rates tied to LIBOR. As of June 16, 2001, the company had $300 million of borrowings outstanding under this agreement. This agreement was amended and restated in August 2000 to change the maturity date to August 2001. The company expects to replace this agreement prior to its expiration date. The company has $29.0 million reinvested in marketable securities. Company-Wide Asset Review - ------------------------- In the fourth quarter of fiscal 2001, the company completed a company-wide asset review to identify assets that do not meet return objectives, provide long-term strategic opportunities, or justify additional capital investment. As a result the company recorded charges of $240.1 million pre-tax, or $153.9 million after tax. The charges are net of a $10.3 million reversal of the fiscal 2000 restructure charge. The restructure and other charges of $171.3 million include $89.7 million of asset impairment charges, $52.1 million for lease subsidies, lease cancellation fees, future payments on exited leased facilities and guarantee obligations and $39.8 million for severance and employee related costs, offset by a reduction in the fiscal 2000 reserve of $10.3 million for lease subsidies and future payments on exited leased facilities. These actions include a net reduction of approximately 4,500 employees throughout the organization. Management expects the majority of these actions to be completed by the end of fiscal 2002. During first quarter fiscal 2002, the company announced the closure of six distribution centers and the exit of two non-core retail markets relating to the fiscal 2001 restructure charges. The reserves at the end of first quarter fiscal 2002 for fiscal 2001 restructure charges were $90.2 million, including $51.9 million for lease subsidies, lease terminations and future payments on exited leased facilities and $38.3 million for severance and employee related costs. During the fourth quarter of fiscal 2001, the company reduced the fiscal 2000 restructure reserve by $10.3 million primarily for a change in estimate for the closure of a remaining facility, which will occur in the second quarter of fiscal 2002. The reserves at the end of first quarter fiscal 2002 for fiscal 2000 restructure charges were $16.6 million, including $9.5 million for lease subsidies, lease terminations and future payments on exited leased facilities and $7.1 million for severance and employee related costs. 9 New accounting standards - ------------------------ Financial Accounting Standard 133, "Accounting for Derivative Instruments and Hedging Activities," became effective for the Company on February 25, 2001. Therefore, at that date, the company's interest rate swap agreements were recorded on its balance sheet at fair value, resulting in recognition of a liablility of $23.5 million, a non-current asset of $10.8 million, a debit to other comprehensive loss of $7.3 million, and a deferred tax liablility of $4.7 million. There was no material impact on pre-tax earnings for first quarter 2002. As of June 16, 2001, the swaps were revalued, resulting in a decrease of $0.7 million to the liability. On July 6, 2001, the swaps were terminated which had no material cash impact. In June 2001 the Financial Accounting Standards Board approved Statement of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 requires companies to cease amortizing goodwill that existed at June 30, 2001. For the Company, this amortization of existing goodwill will cease on February 23, 2002. Any goodwill resulting from an acquisition completed after June 30, 2001 will not be amortized. SFAS No 142 also establishes a new method of testing goodwill for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value. The adoption of SFAS No. 142 will result in the discontinuation of amortization of goodwill and goodwill will be tested for impairment under the new standard beginning in the first quarter of fiscal 2003. Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 The information in this Quarterly Report includes forward-looking statements. The company's businesses are subject to certain risks and uncertainties that could cause actual results to differ materially from those discussed in such forward looking statements. These include, but are not limited to, the impact of changing economic or business conditions, the impact of competition, the nature and extent of the consolidation of the retail food and food distribution industries, the ability to attract and retain customers for the company's businesses, the ability to control food distribution costs, the ability of the company to grow through acquisition and assimilate acquired entities, the availability of favorable credit and trade terms, food price changes and other risk factors inherent in the food wholesaling and retail businesses, all of which are set forth in further detail in Exhibit 99(i) to this report. Any forward-looking statement speaks only as of the date on which such statement is made, and the company undertakes no obligation to update such statement to reflect events or circumstances arising after such date. Other risks or uncertainties may be detailed from time to time in the company's future Securities and Exchange Commission filings. Item 3. Quantitative and Qualitative Disclosures About Market Risk ---------------------------------------------------------- There were no material changes in market risk for the company in the period covered by this report. 10 PART II - OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings - ------- There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business of the Registrant. Item 2. Changes in Securities and Use of Proceeds - ------- None Item 3. Defaults Upon Senior Securities - ------- None Item 4. Submission of Matters to a Vote of Security Holders - ------- None Item 5. Other Information - ------- ----------------- None Item 6. Exhibits and Reports on Form 8-K. - ------- --------------------------------- (a) Exhibits filed with this Form 10-Q: (10) Separation Agreement and General Release for Alec C. Covington (11) Computation of Earnings Per Common Share. (99)(i) Cautionary Statements pursuant to the Securities Litigation Reform Act. (b) Reports on Form 8-K: None. 11 SIGNATURES - ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SUPERVALU INC. (Registrant) Dated: July 30, 2001 By: /s/ Pamela K. Knous ------------------------------ Pamela K. Knous Executive Vice President, Chief Financial Officer (Authorized officer of Registrant) 12 EXHIBIT INDEX - ------------- Exhibit (10) Separation Agreement and General Release for Alec C. Covington (11) Computation of Earnings Per Common Share (99)(i) Cautionary Statements pursuant to the Securities Litigation Reform Act 13 EX-10 3 dex10.txt SEPARATION AGREEMENT AND GENERAL RELEASE Exhibit 10 SEPARATION AGREEMENT AND GENERAL RELEASE This Separation Agreement and General Release ("Agreement") is entered into by and between Alec C. Covington ("Covington") and SUPERVALU INC. ("SUPERVALU"). WHEREAS, Covington has resigned his employment and duties with SUPERVALU as Executive Vice President and President & Chief Operating Officer, Distribution Food Companies will terminate by mutual agreement effective April 27, 2001; and WHEREAS, Covington and SUPERVALU desire to fully and finally settle all legal issues, differences and actual and potential claims between them, including, but in no way limited to, any claim that might arise out of Covington's employment with SUPERVALU and the termination thereof; NOW, THEREFORE, in consideration of the mutual promises contained herein, Covington and SUPERVALU agree as follows. 1. Covington hereby resigns from his employment and his position with SUPERVALU as Executive Vice President and President & Chief Operating Officer, Distribution Food Companies, effective April 27, 2001. 2. Covington and SUPERVALU agree that the parties have entered into an agreement entitled, SUPERVALU INC. RESTRICTED STOCK PLAN RESTRICTED STOCK AWARD AGREEMENT, dated August 31, 1999, and that such Agreement is hereby amended to provide that the Shares shall vest in full in Covington on the Effective Date of this Separation Agreement and General Release, as defined in Paragraph20 below and further agree that all other terms of Restricted Stock Award Agreement shall remain in full force and effect. Covington expressly acknowledges and agrees to the enforceability of the covenants contained in Section 8 of that Restricted Stock Award Agreement. 3. Covington and SUPERVALU further agree that the parties have entered into a DEFERRED COMPENSATION AGREEMENT, dated November 3, 1999, which is hereby amended to provide that Covington shall be vested in the Account as of the Effective Date of this Separation Agreement and General Release, as defined in Paragraph 20 below, and further agree that all other terms of that Deferred Compensation Agreement shall remain in full force and effect. Covington expressly acknowledges and agrees to the enforceability of the covenants contained in Section 11 of that Deferred Compensation Agreement. 4. SUPERVALU acknowledges that Covington has accepted employment as Chief Executive Officer of AmeriCold Logistics LLC., and further agrees to waive any claim that SUPERVALU has or might have that such employment breaches the terms of Section 8 of the Restricted Stock Agreement or Section 11 of the Deferred Compensation Agreement, both referenced above, or the terms of Covington's Employment Agreement with SUPERVALU. 5. Except as otherwise expressly provided within this Agreement, Covington's rights to benefits under all SUPERVALU benefit plans shall be governed by the terms of those plans. 6. All other items of compensation not mentioned in this Separation Agreement and General Release have been resolved, and Covington shall have no further claim to any other items of compensation or benefits. 7. Covington agrees that he is not entitled to the payments and benefits described in paragraphs 2 and 3 above as a result of his employment with SUPERVALU, and that the payments and benefits are being provided as consideration for his acceptance and execution of this Agreement. 8. By this Agreement, Covington and SUPERVALU intend to settle any and all claims that Covington has or may have against SUPERVALU arising from or related to Covington's employment with SUPERVALU and/or the cessation of Covington's employment with SUPERVALU. For the consideration expressed herein, Covington hereby releases and discharges SUPERVALU, its subsidiary corporations and all of their officers, employees, agents, assigns, insurers, representatives, counsel, administrators, successors, shareholders, and/or directors from all liability for damages and/or from legal claims of any kind, including but not limited to any statutory, contract, quasi contract, or tort claims, whether known or unknown, developed or undeveloped, and agrees not to institute any claim for damages or otherwise, by charge or otherwise, nor authorize any other party, governmental or otherwise, to institute any claim via administrative or legal proceedings i against SUPERVALU for any such claims including, but not limited to, claims arising out of his employment or the termination of that employment including but not limited to claims for wages, commissions, penalties, vacation pay or other benefit, defamation or improper discharge (based on contract, at common law or under any federal, state or local statute or ordinance prohibiting discrimination in employment particularly discrimination based on race, sex, national origin, age, color, religion, marital status, disability or sexual orientation including the Age Discrimination in Employment Act) or attorney's fees or other costs or expenses. Covington and SUPERVALU agree that, by signing this Agreement, Covington does not waive any claims arising after the execution of this Agreement. 9. Covington agrees to provide limited transition services to SUPERVALU as reasonably requested. 10. Covington further agrees that he will be available upon reasonable notice and will voluntarily participate in the defense or prosecution of any claims or litigation that may be brought against or on behalf of SUPERVALU about which he has information or knowledge. SUPERVALU agrees that it will indemnify Covington with respect to such claims or litigation to the same extent that it is permitted to indemnify its current officers. 11. Covington is hereby informed of his right to rescind and revoke this Separation Agreement by written notice to SUPERVALU within 15 calendar days following his execution of this Agreement. To be effective, such written notice must either be delivered by hand or sent by certified mail, return receipt requested, addressed to Mr. Ronald C. Tortelli, SUPERVALU INC., 11840 Valley View Road, Eden Prairie, Minnesota 55344, delivered or post-marked within such 15-day period. 12. Covington acknowledges that he has been advised to consult with an attorney prior to signing this Agreement and further acknowledges that he has been advised that he has at least 21 days to consider whether to agree to waive and release his rights under the Age Discrimination in Employment Act. In the event that Covington executes this Agreement prior to the end of that 21-day period, that act shall constitute his voluntary waiver of the rights described within this Paragraph 12. 13. The parties further agree that the terms of this Agreement shall remain confidential provided that SUPERVALU may disclose such terms as is necessary to effectuate the terms of the Agreement and/or for the operation or its business and that Covington may disclose such terms to his spouse, tax and financial advisers, and attorney. The disclosing party shall advise the person or entity to whom information is disclosed of the confidential nature of such information. 14. Covington agrees that on or before April 27, 2001 he will return to SUPERVALU any property of SUPERVALU in his possession or control. 15. Covington agrees that he will refrain from making any statements, whether written or oral, which are materially disparaging of SUPERVALU, its directors, officers, employees, agents, or representatives. SUPERVALU agrees that its officers and directors will refrain from making any statements, whether written or oral, that are materially disparaging of Covington. 16. Covington agrees this Agreement shall not in any way be construed as an admission by SUPERVALU that it has acted wrongfully with respect to Covington or any other person, or that Covington has any legal claims whatsoever against SUPERVALU. SUPERVALU specifically disclaims any liability to, or wrongful acts against, Covington or any other person, on the part of itself, its directors, its officers, its employees, its representatives or its agents. 17. SUPERVALU represents and warrants that to the knowledge of its officers and directors, as of the date hereof, SUPERVALU has no claim against Covington for any breach of his duties or responsibilities committed while employed by SUPERVALU. 18. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof. Covington hereby affirms that his rights to payments or benefits from SUPERVALU are specified exclusively and completely in this Agreement. Any modification of, or addition to, this Agreement must be in writing, signed by SUPERVALU and Covington. 19. This Agreement constitutes a contract enforceable against either party and shall be construed and enforced in accordance with the laws of the State of Minnesota. Nothing contained in this Agreement is intended to violate any applicable law. If any part of this Agreement is construed to be in violation of a state and/or federal law, then that part shall be null and void, but the balance of the provisions of this Agreement shall remain in full force and effect. ii 20. Covington hereby affirms and acknowledges that he has read the foregoing Agreement and that he has hereby been advised to consult with an attorney prior to signing this Agreement. Covington agrees that the provisions set forth in this Agreement are written in language understandable to him and further affirms that he understands the meaning of the terms of this Agreement and their effect. Covington represents that he enters into this Agreement freely and voluntarily. 21. The Effective Date of this Separation Agreement and General Release shall be the eighteenth day following the date on which Covington executes this Agreement, provided that Covington has not rescinded as provided in Paragraph 11 hereof. IN WITNESS WHEREOF, the parties have executed this Agreement by their signatures below. Dated: 5/10/01 /s/ Alec C. Covington --------------------- Alec C. Covington Dated: 5/4/01 SUPERVALU INC. By /s/ Ronald C. Tortelli ------------------------- Its Senior Vice President, Human Resources__ iii EX-11 4 dex11.txt COMPUTATION OF EARNINGS PER COMMON SHARE Exhibit 11 SUPERVALU INC. Computation of Earnings per Common Share (unaudited)
- -------------------------------------------------------------------------------------------- First Quarter Ended (In thousands, except per share amounts) June 16, 2001 June 17, 2000 - -------------------------------------------------------------------------------------------- Earnings per share - basic Income available to common shareholders $ 59,417 $ 69,965 Weighted average shares outstanding 132,493 131,987 Earnings per share - basic $ 0.45 $ 0.53 Earnings per share - diluted Income available to common shareholders $ 59,417 $ 69,965 Weighted average shares outstanding 132,493 131,987 Dilutive impact of options outstanding 83 1,039 ------------------------------------- Weighted average shares and potential dilutive shares outstanding 132,576 133,026 Earnings per share - dilutive $ 0.45 $ 0.53 - --------------------------------------------------------------------------------------------
Basic earnings per share is calculated using income available to common shareholders divided by the weighted average of common shares outstanding during the period. Diluted earnings per share is similar to basic earnings per share 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. EX-99.1 5 dex991.txt CAUTIONARY STATEMENTS 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 (the "Act"), SUPERVALU INC. (the "Company") is filing the cautionary statements set forth below, 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 Quarterly Report on Form 10-Q for the fiscal quarter ended June 16, 2001 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. Retail Food Business Risks The Company's retail food 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 retail operations; potential work disruptions from labor disputes; and the 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. Food Distribution Business Risks The Company's sales and earnings in its food distribution operations are dependent on (i) the Company's ability to attract new customers and retain existing customers; (ii) the success of its customers in competing with other retail chains, supercenters, and non-traditional competitors; and (iii) its ability to control costs. While the Company believes that its efforts will enable it to attain its goals, certain factors could adversely impact the Company's results, including: declines in sales to its independent retailer customer base due to competition and other factors; consolidations of retailers or competitors; increased self-distribution by chain retailers; increases in operating costs; increases in credit risk associated with open accounts and financing activities with independent retailers; potential work disruptions from labor disputes; and the entry of new or non-traditional distribution systems into the industry. In addition, on June 30, 2001, the Company's supply agreement with Kmart Corporation terminated. The earnings impact from the elimination of this business is dependent on a number of variables including, the transition process to a new supplier and overall "ramp down" costs. While the Company has forecasted that the loss of the Kmart business, which generated annual revenues of approximately $2.5 billion for fiscal 2001, will impact earnings per share for fiscal 2002 in the range of $.018 to $0.22, including ramp down costs, actual results may differ. Ramp down costs include expenses related to the transfer of inventory, the reallocation of transportation fleet and warehousing equipment, and employee transition costs. Restructure Activities In the fourth quarter of fiscal 2001, the Company completed a company-wide asset review to identify assets that do not meet return objectives, provide long-term strategic opportunities, or justify additional capital improvement, it would consolidate certain distribution facilities, exit certain non-core retail markets, dispose of under-performing retail stores, reduce its workforce and write-off other items. The Company expects these restructuring activities to generate approximately $60 million of free cash flow, which reflects cash proceeds from asset sales and working capital reductions. The Company estimates that the earnings per share benefit of these activities will be minimal in fiscal 2002 and will contribute $0.07 to $0.09 to earnings per share by fiscal 2003. However, the timing of targeted asset sales as well as the Company's ability to realize the anticipated benefits of such sales and working capital reductions may affect the Company's ability to realize the full benefits of these restructuring activities and impact the Company's future financial results. 1 Risks of Expansion and Acquisitions The Company intends to continue to grow its retail and distribution businesses through new store openings, new affiliations and 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; and the ability to hire and train employees. 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 integration of personnel of the acquired business; possible costs and other risks of integrating or adapting operational systems; potential adverse short- term effects on the Company's operating results; and amortization of acquired intangible assets. 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. In April 2001, Moody's Investors Service, Inc. reduced the company's long-term debt ratings from Baa1 to Baa3. Moody's also lowered the company's short-term debt ratings from P2 to P3. The company's access to the commercial paper market has been reduced as a result of these ratings changes. 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 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-----