-----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, QPmAJyrB6mUb8rbHVQcth3vY4Gcs7V/4xZyXazJIjHXci+tCs8ygKhpo4Ae0PKvW U6Yd8sEMThIxE/OPcpNQhw== 0001045969-02-000022.txt : 20020413 0001045969-02-000022.hdr.sgml : 20020413 ACCESSION NUMBER: 0001045969-02-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20011201 FILED AS OF DATE: 20020114 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: 1934 Act SEC FILE NUMBER: 001-05418 FILM NUMBER: 2508688 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 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period (12 weeks) ended December 1, 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) Not Applicable (Former name, former address and former fiscal year, if changed since last report) 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 January 8, 2002 is as follows: Title of Each Class Shares Outstanding ------------------- ------------------ Common Shares 132,413,300 PART I - FINANCIAL INFORMATION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Item 1: Consolidated Financial Statements - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF EARNINGS - -------------------------------------------------------------------------------- SUPERVALU INC. and Subsidiaries - -------------------------------------------------------------------------------- (In thousands, except per share data)
Third quarter (12 weeks) ended Dec. 1, 2001 % of sales Dec. 2, 2000 % of sales - ----------------------------------------------------------------------------------------------------------------------------- Net sales $4,610,293 100.00% $5,420,238 100.00% Costs and expenses Cost of sales 4,016,713 87.12 4,835,700 89.22 Selling and administrative expenses 455,488 9.88 461,281 8.50 Interest Interest expense 43,666 0.95 49,092 0.91 Interest income 4,309 0.09 5,284 0.10 --------------------------------------------------------------------- Interest expense, net 39,357 0.86 43,808 0.81 --------------------------------------------------------------------- Total costs and expenses 4,511,558 97.86 5,340,789 98.53 --------------------------------------------------------------------- Earnings before income taxes 98,735 2.14 79,449 1.47 Provision for income taxes Current 9,660 52,875 Deferred 30,031 (20,937) --------------------------------------------------------------------- Income tax expense 39,691 0.86 31,938 0.59 --------------------------------------------------------------------- Net earnings $ 59,044 1.28% $ 47,511 0.88% ===================================================================== Net earnings per common share- diluted $ 0.44 $ 0.36 Net earnings per common share- basic $ 0.44 $ 0.36 Weighted average number of common shares outstanding Diluted 135,068 132,733 Basic 133,475 132,430 Dividends declared per common share $ 0.1400 $ 0.1375 All data subject to year-end audit. See notes to consolidated financial statements.
2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF EARNINGS - -------------------------------------------------------------------------------- SUPERVALU INC. and Subsidiaries - -------------------------------------------------------------------------------- (In thousands, except per share data)
Year-to-date (40 weeks) ended Dec. 1, 2001 % of sales Dec. 2, 2000 % of sales - ----------------------------------------------------------------------------------------------------------------------------------- Net sales $ 16,257,118 100.00% $ 17,707,454 100.00% Costs and expenses Cost of sales 14,299,073 87.96 15,780,907 89.12 Selling and administrative expenses 1,537,093 9.46 1,488,425 8.40 Interest Interest expense 152,265 0.94 162,597 0.92 Interest income 16,609 0.11 16,735 0.10 ------------------------------------------------------------------------ Interest expense, net 135,656 0.83 145,862 0.82 ------------------------------------------------------------------------ Total costs and expenses 15,971,822 98.25 17,415,194 98.35 ------------------------------------------------------------------------ Earnings before income taxes 285,296 1.75 292,260 1.65 Provision for income taxes Current 77,202 157,690 Deferred 37,488 (40,202) ------------------------------------------------------------------------ Income tax expense 114,690 0.70 117,488 0.66 ------------------------------------------------------------------------ Net earnings $ 170,606 1.05% $ 174,772 0.99% ======================================================================== Net earnings per common share- diluted $ 1.28 $ 1.31 Net earnings per common share- basic $ 1.28 $ 1.32 Weighted average number of common shares outstanding Diluted 133,826 132,956 Basic 132,979 132,220 Dividends declared per common share $ 0.4175 $ 0.4100 All data subject to year-end audit. See notes to consolidated financial statements.
3 CONSOLIDATED STATEMENTS OF NET SALES AND EARNINGS - -------------------------------------------------------------------------------- SUPERVALU INC and Subsidiaries - -------------------------------------------------------------------------------- (In thousands)
Third Quarter (12 weeks) ended Year-to-date (40 weeks) ended Dec. 1, 2001 Dec. 2, 2000 Dec. 1, 2001 Dec. 2, 2000 - -------------------------------------------------------------------------------------------------------------------------- Net Sales - -------------------------------------------------------------------------------------------------------------------------- Retail food $ 2,194,831 $ 2,158,273 $ 7,172,872 $ 6,998,570 % of total 47.6 % 39.8 % 44.1 % 39.5 % Food distribution 2,415,462 3,261,965 9,084,246 10,708,884 % of total 52.4 % 60.2 % 55.9 % 60.5 % ------------------------------------------------------------------------------------ Total net sales $ 4,610,293 $ 5,420,238 $16,257,118 $17,707,454 100.0 % 100.0 % 100.0 % 100.0 % - -------------------------------------------------------------------------------------------------------------------------- Earnings - -------------------------------------------------------------------------------------------------------------------------- Retail food $ 93,484 $ 68,483 $ 278,795 $ 264,230 % of sales 4.3 % 3.2 % 3.9 % 3.8 % Food distribution 54,931 63,722 173,316 201,206 % of sales 2.3 % 2.0 % 1.9 % 1.9 % ------------------------------------------------------------------------------------ Subtotal 148,415 132,205 452,111 465,436 % of sales 3.2 % 2.4 % 2.8 % 2.6 % General corporate expenses (10,323) (8,948) (31,159) (27,314) ------------------------------------------------------------------------------------ Total operating earnings 138,092 123,257 420,952 438,122 % of sales 3.0 % 2.3 % 2.6 % 2.5 % Interest income 4,309 5,284 16,609 16,735 Interest expense (43,666) (49,092) (152,265) (162,597) ------------------------------------------------------------------------------------ Earnings before income taxes 98,735 79,449 285,296 292,260 Provision for income taxes (39,691) (31,938) (114,690) (117,488) ------------------------------------------------------------------------------------ Net earnings $ 59,044 $ 47,511 $ 170,606 $ 174,772 ========================================================================================================================== All data subject to year-end audit. See notes to consolidated financial statements.
4 CONDENSED CONSOLIDATED BALANCE SHEETS
- ---------------------------------------------------------------------------------------------------------- SUPERVALU INC. and Subsidiaries Third Quarter Fiscal Year End - ---------------------------------------------------------------------------------------------------------- (In thousands) December 1, February 24, 2001 2001 Assets - ---------------------------------------------------------------------------------------------------------- Current Assets Cash and cash equivalents $ 11,322 $ 10,396 Receivables, net 461,782 582,923 Inventories 1,322,430 1,350,061 Other current assets 137,376 148,296 ------------------------------------------- Total current assets 1,932,910 2,091,676 Long-term receivables 165,224 161,388 Property, plant and equipment, net 2,193,703 2,232,794 Goodwill 1,534,956 1,576,780 Other assets 339,444 344,534 ------------------------------------------- Total assets $ 6,166,237 $ 6,407,172 =========================================== Liabilities and Stockholders' Equity - ---------------------------------------------------------------------------------------------------------- Current Liabilities Notes payable $ 231,217 $ 579,039 Accounts payable 1,164,117 1,396,011 Current debt and obligations under capital leases 356,594 54,668 Other current liabilities 311,521 311,452 ------------------------------------------- Total current liabilities 2,063,449 2,341,170 Long-term debt and obligations under capital leases 1,883,692 2,008,474 Other liabilities and deferred income taxes 299,111 264,033 Total stockholders' equity 1,919,985 1,793,495 ------------------------------------------- Total liabilities and stockholders' equity $ 6,166,237 $ 6,407,172 =========================================== All data subject to year-end audit. See notes to consolidated financial statements.
5 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------------------------------- SUPERVALU INC. and Subsidiaries - -------------------------------------------------------------------------------------------------------------------------------- (In thousands, except per share data) Capital in Common Stock Excess of Treasury Stock 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- $0.5475 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 170,606 170,606 Sales of common stock under option plans (2,862) 900 17,122 14,260 Cash dividends declared on common stock- $0.4175 per share (55,703) (55,703) Compensation under (2,246) 547 9,726 7,480 employee incentive plans Purchase of shares for treasury - - - (150) (3,000) - (3,000) Other comprehensive loss $ (7,153) (7,153) - -------------------------------------------------------------------------------------------------------------------------------- BALANCES AT DECEMBER 1, 2001 150,670 $ 150,670 $123,384 (16,999) $ (318,252) $1,971,336 $ (7,153) $1,919,985 ================================================================================================================================ All data subject to year-end audit. See notes to consolidated financial statements.
6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - ------------------------------------------------------------------------------------------------------ SUPERVALU INC. and Subsidiaries - ------------------------------------------------------------------------------------------------------ (In thousands) - ------------------------------------------------------------------------------------------------------ Year-to-date (40 weeks ended) - ------------------------------------------------------------------------------------------------------ December 1, December 2, 2001 2000 - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ Net cash provided by operating activities $ 437,079 $ 338,742 - ------------------------------------------------------------------------------------------------------ Cash flows from investing activities Additions to long-term receivables (36,471) (55,254) Proceeds received on long-term receivables 30,831 34,672 Proceeds from sale of assets 73,243 31,519 Purchase of property, plant and equipment (197,578) (275,972) Other cash used in investing activities (32,709) (48,264) - ------------------------------------------------------------------------------------------------------ Net cash used in investing activities (162,684) (313,299) - ------------------------------------------------------------------------------------------------------ Cash flows from financing activities Net (decrease) increase in checks outstanding (63,927) 42,871 Net (reduction) issuance of short-term notes payable (347,822) 215,496 Proceeds from issuance of long-term debt 218,014 - Repayment of long-term debt (12,416) (163,460) Dividends paid (55,195) (54,338) Payment for purchase of treasury stock (3,000) (48,604) Other cash used in financing activities (9,123) (18,714) - ------------------------------------------------------------------------------------------------------ Net cash used in financing activities (273,469) (26,749) - ------------------------------------------------------------------------------------------------------ Net increase (decrease) in cash and cash equivalents 926 (1,306) Cash and cash equivalents at beginning of period 10,396 10,920 - ------------------------------------------------------------------------------------------------------ Cash and cash equivalents at the end of period $ 11,322 $ 9,614 ====================================================================================================== Supplemental information: Pretax LIFO expense $ 4,372 $ 3,293 Pretax depreciation and amortization $ 257,816 $ 253,422 Cash paid during the period for: Income taxes $ 80,351 $ 48,244 Interest $ 147,644 $ 135,170 All data subject to year-end audit. See notes to consolidated financial statements.
7 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"). Statement of Financial Accounting Standard 133, "Accounting for Derivative Instruments and Hedging Activities," became effective for the Company on February 25, 2001. At that date, the Company's interest rate swap agreements were recorded on its balance sheet at fair value, resulting in recognition of a liability of $23.5 million, a non-current asset of $10.8 million, a debit to other comprehensive loss of $7.7 million, and a deferred tax liability of $5.0 million. On July 6, 2001, the swaps were terminated, which had no material impact to the Company's consolidated financial statements. 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 December 1, 2001 and December 2, 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 did 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 including $89.7 million for 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 that these actions will be substantially completed by the end of fiscal 2002. Details of the fiscal 2001 restructure balances, after-tax, for fiscal 2002 follow:
- --------------------------------------------------------------------------------------------------------------------------- Balance Balance (In thousands, except for employees) February 24, Fiscal 2002 December 1, 2001 Usage 2001 - --------------------------------------------------------------------------------------------------------------------------- Consolidation of distribution centers $41,499 $ 5,957 $35,542 Exit of non-core retail markets 33,735 19,251 14,484 Disposal of non-core assets and other administrative reductions 16,619 5,444 11,175 - --------------------------------------------------------------------------------------------------------------------------- Total restructure and other charges $91,853 $30,652 $61,201 - --------------------------------------------------------------------------------------------------------------------------- Employees 4,500 3,000 1,500 - ---------------------------------------------------------------------------------------------------------------------------
The reserve at the end of third quarter fiscal 2002 for fiscal 2001 restructure charges was $61.2 million, including $45.7 million for lease subsidies, lease terminations and future payments on exited leased facilities and $15.5 million for 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 reduced by $10.3 million in fiscal 2001, primarily for a change in estimate for the closure of a remaining facility, which occurred 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. 8 Details of the fiscal 2000 restructure balances, after-tax, for fiscal 2002 follow:
- ------------------------------------------------------------------------------------------------ Balance Balance (In thousands, except for employees) February 24, Fiscal 2002 December 1, 2001 Usage 2001 - ------------------------------------------------------------------------------------------------ Facility consolidation $11,472 $4,322 $ 7,150 Non-core store disposal 4,404 1,817 2,587 Infrastructure realignment 1,980 557 1,423 - ------------------------------------------------------------------------------------------------ Total restructure and other charges $17,856 $6,696 $11,160 - ------------------------------------------------------------------------------------------------ Employees 463 371 92 - ------------------------------------------------------------------------------------------------
The reserve at the end of third quarter fiscal 2002 for fiscal 2000 restructure charges was $11.2 million, including $7.1 million for lease subsidies, lease terminations and future payments on exited leased facilities and $4.1 million for employee related costs. Notes Payable - ------------- On August 16, 2001, the Company entered into an accounts receivable securitization program, under which the Company can borrow up to $200 million on a revolving basis, with borrowings secured by eligible accounts receivable. As of December 1, 2001, the Company had $137.3 million of borrowings outstanding under this program and $194.8 million in eligible receivables pledged as collateral. In November 2001, the Company sold zero-coupon convertible debentures having an aggregate initial principal amount at maturity of $811 million. The proceeds from the offering, net of approximately $5 million of expenses, were $208 million. The debentures mature in 30 years and are callable at the Company's option on or after October 1, 2006. Holders may require the Company to purchase all or a portion of their debentures on October 1, 2003, October 1, 2006, or October 1, 2011 at a purchase price equal to the accreted value of the debentures, which includes accrued and unpaid cash interest. Each $1,000 debenture will be convertible into 9.6434 shares of the Company's common stock at an initial conversion price of $27.29 per share, if the closing price of the Company's common stock exceeds a specified price (initially, 120% of the conversion price, or $32.75 per share) for a specified period of time in any quarter beginning after February 23, 2002, or otherwise upon the occurrence of certain events. The debentures have an initial yield to maturity of 4.5%, which is being accreted over the life of the debentures using the effective interest method. The Company may pay contingent cash interest for the six-month period commencing November 3, 2006 and for any six-month period thereafter if the average market price of the debentures for a five trading day measurement preceding the applicable six-month period equals 120% or more of the sum of the issue price and accrued original issue discount for the debentures. Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations --------------------------------------------------------------- Results of Operations - --------------------- RESULTS FOR THE QUARTER: For the third quarter of fiscal 2002, the Company achieved sales of $4.6 billion, net earnings of $59.0 million and diluted earnings per share of $0.44. Last year, sales were $5.4 billion, net earnings were $47.5 million and diluted earnings per share were $0.36. Net sales Net sales decreased 14.9 percent compared to last year. Retail food sales increased 1.7 percent and food distribution sales decreased 26.0 percent. Retail food sales increased over last year primarily due to new store openings. In addition, same-store sales were positive 0.7 percent for the quarter. Food distribution sales decreased from last year reflecting customer losses, primarily the exit of the Kmart business. The Kmart supply agreement was terminated June 30, 2001. In addition, sales decreased as a result of the impact of restructuring activities. 9 Gross profit Gross profit, as a percentage of net sales, was 12.9 percent compared to 10.8 percent last year. The increase was primarily due to the growing proportion of the Company's retail business, which operates at a higher gross profit margin as a percentage of net sales than does the food distribution business. In addition, improved merchandising execution in retail and benefits of restructuring and reconfiguration activities in distribution added to the gross profit percent increase. Selling and administrative expenses Selling and administrative expenses as a percentage of net sales, were 9.9 percent for the current quarter compared to 8.5 percent last year. The increase in selling and administrative expenses as a percent of sales was due to the growing proportion of the Company's retail business, which operates at a higher selling and administrative expense as a percentage of sales than does the food distribution business, as well as increases in labor and employee benefit costs. Operating earnings The Company's pretax operating earnings (earnings before interest and taxes) were $138.1 million compared to $123.3 million last year, a 12.0 percent increase. Operating earnings before depreciation and amortization were $215.6 million compared with $201.4 million last year, a 7.1 percent increase. Retail food operating earnings increased 36.5 percent to $93.5 million, or 4.3 percent of sales, from last year's $68.5 million, or 3.2 percent of sales. The increase was primarily a result of higher gross profit margins, partially offset by increases in labor and employee benefit costs. Retail food operating earnings before depreciation and amortization increased 24.7 percent to $134.4 million, or 6.1 percent of sales, from last year's $107.8 million, or 5.0 percent of sales. Food distribution operating earnings decreased 13.8 percent to $54.9 million from last year's $63.7 million. The decrease reflects customer losses, primarily the exit of the Kmart business. Operating earnings for distribution, as a percentage of net sales, increased to 2.3 percent this quarter from 2.0 percent in the prior year reflecting the benefits of restructuring and reconfiguration activities. Food distribution operating earnings before depreciation and amortization decreased 10.7 percent to $90.9 million, or 3.8 percent of sales, from last year's $101.8 million, or 3.1 percent of sales. Interest expense Interest expense decreased to $43.7 million compared with $49.1 million last year due to lower overall borrowing levels and lower interest rates. Income taxes The effective tax rate was 40.2 percent in the third quarter, comparable to last year. Net earnings Net earnings increased 24.3 percent to $59.0 million or $0.44 per share - diluted compared with last year's net earnings of $47.5 million or $0.36 per share - diluted. Weighted average shares - diluted increased to 135.1 million compared with last year's 132.7 million. RESULTS FOR THE YEAR: Year-to-date for fiscal 2002, the Company achieved sales of $16.3 billion, net earnings of $170.6 million and diluted earnings per share of $1.28. Last year, net sales were $17.7 billion, net earnings were $174.8 million and diluted earnings per share were $1.31. Net sales Net sales decreased 8.2 percent compared to last year. Retail food sales increased 2.5 percent, and food distribution sales decreased 15.2 percent. Retail food sales increased over last year primarily due to new store openings. Food distribution sales 10 decreased from last year reflecting customer losses, primarily the exit of the Kmart business in the second quarter. In addition, distribution sales decreased as a result of the impact of restructuring activities. Gross profit Gross profit as a percentage of net sales was 12.0 percent compared to 10.9 percent last year. This increase was primarily due to the growing proportion of the Company's retail business, which operates at a higher gross profit margin, as a percentage of net sales, than does the food distribution business. In addition, improved merchandising execution in retail and benefits of restructuring and reconfiguration activities in distribution contributed to the increase in the gross profit percent. Selling and administrative expenses Selling and administrative expenses as a percentage of sales were 9.5 percent, compared to 8.4 percent last year. The increase in selling and administrative expenses as a percent of sales was due to the growing proportion of the Company's retail business, which operates at a higher selling and administrative expense as a percentage of sales than does the food distribution business, as well as increases in labor and employee benefit costs. Operating earnings The Company's pretax operating earnings (earnings before interest and taxes) decreased 3.9 percent to $421.0 million, compared with $438.1 million last year. Operating earnings before depreciation and amortization decreased to $678.8 million compared with $691.5 million last year, a 1.8 percent decrease. Retail food operating earnings increased 5.5 percent to $278.8 million, or 3.9 percent of sales, from last year's $264.2 million, or 3.8 percent of sales. This increase in retail earnings was attributable to improved merchandising execution resulting in an improvement in gross margins. Retail food operating earnings before depreciation and amortization increased 5.0 percent to $410.7 million, or 5.7 percent of sales, from last year's $391.2 million, or 5.6 percent of sales. Food distribution operating earnings decreased 13.9 percent to $173.3 million, or 1.9 percent of sales, from last year's $201.2 million, or 1.9 percent of sales. The decrease in operating earnings reflects customer losses, primarily the exit of the Kmart business. Food distribution operating earnings before depreciation and amortization decreased 8.7 percent to $297.0 million, or 3.3 percent of sales, from last year's $325.3 million, or 3.0 percent of sales. Interest expense Interest expense decreased to $152.3 million compared with $162.6 million last year due to lower overall borrowing levels and lower interest rates. Income taxes The effective tax rate was 40.2 percent, comparable to last year. Net earnings Net earnings decreased 2.4 percent to $170.6 million or $1.28 per share - diluted compared with last year's net earnings of $174.8 million or $1.31 per share - diluted. Weighted average shares - diluted increased to 133.8 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 $437.1 million year-to-date, compared with $338.7 million last year. The increase is reflective of positive impacts on working capital attributable to the exit of the Kmart business as well as restructuring activities. Net cash used in investing activities was $162.7 million, compared with $313.3 million last year. The decrease was primarily due to lower purchases of fixed assets and higher proceeds from sales of assets related to restructuring activities. Net cash used in financing activities was $273.5 million, compared with $26.7 million last year. The increase in cash used in financing activities reflects higher net debt reduction in fiscal 2002. 11 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 and for the issuance of letters of credit. A $400 million revolving credit agreement expires in October 2002 and a $300 million 364-day agreement expires in August 2002. Both credit facilities have rates tied to LIBOR plus 0.650 to 1.400 percent, based on the Company's credit ratings. As of December 1, 2001, letters of credit outstanding under the credit facilities were $111 million and the unused available credit under these facilities was $548 million. The Company also has $137.3 million outstanding under an accounts receivable securitization program. Outstanding borrowings under the revolving credit facilities and the accounts receivable securitization facility are reflected in Notes Payable on the consolidated balance sheet. In November 2001, the Company sold zero-coupon convertible debentures having an aggregate initial principal amount at maturity of $811 million. The proceeds from the offering, net of $5 million of expenses, were $208 million and were used to pay down notes payable. The debentures mature in 30 years and are callable at the Company's option on or after October 1, 2006. Holders may require the Company to purchase all or a portion of their debentures on October 1, 2003, October 1, 2006, or October 1, 2011 at a purchase price equal to the accreted value of the debentures, which includes accrued and unpaid cash interest. The debentures have an initial yield to maturity of 4.5%, which is being accreted over the life of the debentures using the effective interest method. See Item 1 "Consolidated Financial Statements - Notes Payable" for a further description of these debentures. In the third quarter, the Board of Directors authorized the repurchase of up to five million shares of the Company's common stock to offset the issuance of shares over time under the Company's employee benefit plans and to replace the 1996 share repurchase program. Company-Wide Asset Review - ------------------------- In the fourth quarter of fiscal 2001, the Company completed a company-wide asset review to identify assets that did 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 for 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 that these actions will be substantially completed by the end of fiscal 2002. The reserve at the end of third quarter fiscal 2002 for fiscal 2001 restructure charges was $61.2 million, including $45.7 million for lease subsidies, lease terminations and future payments on exited leased facilities and $15.5 million for employee related costs. The reserve at the end of third quarter fiscal 2002 for fiscal 2000 restructure charges was $11.2 million, including $7.1 million for lease subsidies, lease terminations and future payments on exited leased facilities and $4.1 million for employee related costs. New accounting standards - ------------------------ In June 2001, the Financial Accounting Standards Board approved Statement of Financial Accounting Standard No. 141, "Business Combinations" and Statement of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for under the purchase 12 method and addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. 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. The Company is currently evaluating the provisions of SFAS No. 142 and has not yet determined the effect that adoption of this standard will have on its consolidated financial statements. In June 2001, the Financial Accounting Standards Board issued Statement No. 143, "Accounting for Asset Retirement Obligations," which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Company is currently analyzing the effect this standard will have on its consolidated financial statements and plans to adopt the provisions of Statement No. 143 in the first quarter of fiscal 2004. In August 2001, the Financial Accounting Standards Board approved Statement of Financial Accounting Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The Company is currently analyzing the effect this standard will have on its consolidated financial statements and plans to adopt the provisions of SFAS No. 144 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: . competitive practices in the retail food and food distribution industries, . the nature and extent of the consolidation of the retail food and food distribution industries and our ability to grow through acquisitions and assimilate acquired entities, . our ability to attract and retain customers for our food distribution business and to control food distribution costs, . general economic or political conditions that affect consumer buying habits generally or acts of terror directed at the food industry that affect consumer behavior, . potential work disruptions from labor disputes or national emergencies, . the timing and implementation of certain restructuring activities we have announced, including our consolidation of certain distribution facilities, our exit from certain non-core markets and our disposition of under-performing stores, . the availability of favorable credit and trade terms, and . other risk factors inherent in the food distribution and retail businesses. These risks and uncertainties 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 we undertake no obligation to update such statement to reflect events or circumstances arising after such date. 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. 13 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: (11) Computation of Earnings Per Common Share. (99)(i) Cautionary Statements for Purposes of the Safe Harbor Provisions of the Securities Litigation Reform Act. (b) Reports on Form 8-K: None 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: January 14, 2002 By: /s/ Pamela K. Knous --------------------------------------- Pamela K. Knous Executive Vice President, Chief Financial Officer (Authorized officer of Registrant) 14 EXHIBIT INDEX - ------------- Exhibit (11) Computation of Earnings Per Common Share (99)(i) Cautionary Statements for Purposes of the Safe Harbor Provisions of the Securities Litigation Reform Act 15 EX-11 3 dex11.txt COMPUTATION OF EARNINGS PER COMMON SHARE Exhibit 11 SUPERVALU INC. Computation of Earnings per Common Share (unaudited)
- ---------------------------------------------------------------------------------------------------------------------------- Third Quarter Ended Year-to-date Ended (In thousands, except per share amounts) Dec. 1, 2001 Dec. 2, 2000 Dec. 1, 2001 Dec. 2, 2000 - ---------------------------------------------------------------------------------------------------------------------------- Earnings per share - basic Income available to common shareholders $ 59,044 $ 47,511 $ 170,606 $ 174,772 Weighted average shares outstanding 133,475 132,430 132,979 132,220 Earnings per share - basic $ 0.44 $ 0.36 $ 1.28 $ 1.32 Earnings per share - diluted Income available to common shareholders $ 59,044 $ 47,511 $ 170,606 $ 174,772 Weighted average shares outstanding 133,475 132,430 132,979 132,220 Dilutive impact of options outstanding 1,593 303 847 736 ------------------------------------------------------------------------- Weighted average shares and potential Dilutive shares outstanding 135,068 132,733 133,826 132,956 Earnings per share - diluted $ 0.44 $ 0.36 $ 1.28 $ 1.31 - ----------------------------------------------------------------------------------------------------------------------------
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.I 4 dex99i.txt CAUTIONARY STATEMENTS Exhibit 99(i) 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 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; general economic or political conditions that affect consumer buying habits generally or acts of terror directed at the food industry that affect consumer behavior; 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 emerging alternative formats; (iii) general economic or political conditions that affect consumer buying habits generally or acts of terror directed at the food industry that affect consumer behavior; and (iv) 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. 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 investment, and announced that 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. 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; and potential adverse short-term effects on the Company's operating results. Liquidity Management expects that the Company will continue to replenish operating assets and reduce aggregate debt with internally generated funds 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 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. -----END PRIVACY-ENHANCED MESSAGE-----