10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

      SECURITIES EXCHANGE ACT OF 1934

    For the fiscal year ended February 23, 2002

OR

¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

      SECURITIES EXCHANGE ACT OF 1934

    For the transition period from                         to                      

Commission file number: 1-5418

SUPERVALU INC.

(Exact name of registrant as specified in its charter)

Delaware	41-0617000
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
11840 Valley View Road Eden Prairie, Minnesota (Address of principal executive offices)	55344 (Zip Code)

Registrant’s telephone number, including area code: (952) 828-4000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $1.00     per share	New York Stock Exchange
Preferred Share Purchase Rights	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of April 12, 2002 was approximately $3,808,868,463 (based upon the closing price of Registrant’s Common Stock on the New York Stock Exchange on April 12, 2002).

Number of shares of $1.00 par value Common Stock outstanding as of April 12, 2002: 133,160,599

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant’s definitive Proxy Statement filed for the Registrant’s 2002 Annual Meeting of Stockholders are incorporated into Part III, as specifically set forth in Part III.

PART I

ITEM 1.    BUSINESS

General Development

SUPERVALU is one of the largest companies in the United States grocery channel. SUPERVALU conducts its retail operations under three principal store formats: extreme value food stores under the retail banner Save-A-Lot; price superstores, under such retail banners as Cub Foods, Shop ’n Save, Shoppers Food Warehouse, Metro and bigg’s; and supermarkets, under such retail banners as Farm Fresh, Scott’s and Hornbacher’s. SUPERVALU also provides food distribution and related logistics support services across the United States retail grocery channel. As of the close of the fiscal year, the Company conducted its retail operations through 1,260 retail food stores, including 764 licensed extreme value food stores. In addition, as of the close of the fiscal year, the Company was affiliated with 4,280 retail food stores in 48 states as the primary supplier of approximately 2,780 stores and a secondary supplier of approximately 1,500 stores.

SUPERVALU’s plans include focused retail growth through targeted new store development, licensee growth and acquisitions. The Company’s plans also include growing its distribution operations by providing logistic and service solutions through an efficient supply chain, which will allow it to affiliate new customers, and participate in the consolidation of the food distribution industry. During fiscal 2002, the Company added 115 stores through new store development and acquisitions, including 37 licensed extreme value food stores. In fiscal 2002, the Company substantially completed its plan to consolidate certain distribution facilities, exit certain non-core retail markets and dispose of under-performing retail stores. In addition, the Company announced initiatives to extend its distribution efficiency program begun early in fiscal 2002. The additional initiatives primarily relate to personnel reductions in transportation and administrative functions which will occur in fiscal 2003.

SUPERVALU INC., a Delaware corporation, was organized in 1925 as the successor to two wholesale grocery firms established in the 1870’s. The Company’s principal executive offices are located at 11840 Valley View Road, Eden Prairie, Minnesota 55344 (Telephone: 952-828-4000). Unless the discussion in this Annual Report on Form 10-K indicates otherwise, all references to the “Company,” “SUPERVALU” or “Registrant” relate to SUPERVALU INC. and its majority-owned subsidiaries.

Additional description of the Company’s business is found in Part II, Item 7 and Item 7.A of this report.

Financial Information About Reportable Segments

The Company’s business is classified by management into two reportable segments: Retail Food and Food Distribution. Retail Food operations include three retail formats: extreme value food stores, price superstores and supermarkets. The retail formats include results of food stores owned and results of sales to extreme value food stores licensed by the Company. Food Distribution operations represent the second reportable segment and include results of sales to affiliated food stores, mass merchants, and other logistics arrangements. Management utilizes more than one measurement and multiple views of data to assess segment performance and to allocate resources to the segments. However, the dominant measurements are consistent with the consolidated financial statements. The financial information concerning the Company’s operations by reportable segment for the years ended February 23, 2002, February 24, 2001 and February 26, 2000 is contained on page F-4.

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Retail Food Operations

Overview.  At February 23, 2002, the Company conducted its retail operations through a total of 1,260 retail food stores, including 764 licensed extreme value food stores. Its principal retail formats include extreme value food stores, price superstores and supermarkets. These diverse formats enable the Company to operate in a variety of markets under widely differing competitive circumstances. In fiscal 2003, the Company anticipates opening approximately 150 to 170 new extreme value stores and 10 to 15 new price superstores. During fiscal 2002, no customer accounted for more than two percent or greater of the Company’s business.

Extreme Value Food Stores.  The Company operates extreme value food stores under the banner of Save-A-Lot. Through this banner, the Company holds the number one market position in the extreme value grocery retailing sector. Save-A-Lot stores typically are approximately 14,000 square feet in size, and stock approximately 1,250 high volume items that focus on a single size for each product sold. At a Save-A-Lot store, the majority of the products offered for sale are custom branded products. The specifications for the Save-A-Lot custom branded product emphasize quality and characteristics that the Company believes are comparable to national brands. The Company’s attention to the packaging of Save-A-Lot products has resulted in the Company registering a number of its custom labels. In April 2002, the Company announced the acquisition of a 45-store extreme value general merchandise retailer. The Company plans to finalize a prototype that represents a combination store of grocery and general merchandise over the next few months.

At fiscal year end, there were 998 extreme value food stores located in 36 states, of which 764 were licensed, which are supplied from 13 dedicated distribution centers.

Price Superstores.  The Company’s price superstores hold the number one, two or three market position in most of their markets. The price superstore focus is on providing every day low prices and product selection across all departments. Most of the Company’s price superstores offer traditional dry grocery departments, along with strong perishable departments. In-store pharmacies are also operated in 187 locations. Price superstores carry over 30,000 items and generally range in size from 45,000 to 100,000 square feet with an average size of approximately 63,000 square feet.

At fiscal year end, the Company owned and operated 202 price superstores under the Cub Foods, Shop ’n Save, Shoppers Food Warehouse, Metro and bigg’s banners in 14 states; an additional 31 stores were franchised to independent retailers.

Supermarkets.  The Company’s traditional supermarket format combines a grocery store that has a variety of specialty departments that may include floral, seafood, expanded health and beauty care, video rental, cosmetics, photo finishing, delicatessen, bakery, in-store bank, and a traditional drug store that includes a pharmacy. The supermarket format offers traditional dry grocery departments along with strong fresh food departments. A typical supermarket carries approximately 40,000 items and generally ranges in size from 30,000 to 65,000 square feet with an average size of approximately 50,000 square feet.

At fiscal year end, the Company operated 60 supermarkets under the Farm Fresh, Scott’s and Hornbacher’s banners.

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Food Distribution Operations

Overview.  SUPERVALU provides logistics and service solutions to retailers for food and non-food product. At February 23, 2002, the Company was affiliated with approximately 2,780 stores as their primary supplier and approximately 1,500 additional stores as a secondary supplier. SUPERVALU’s customers include single and multiple grocery store independent operators, regional and national chains, as well as mass merchants and the military. Such customers are located in 48 states, and range in size from small convenience stores to 200,000 square foot supercenters. During fiscal 2002, no customer accounted for more than two percent or greater of the Company’s business. The supply agreement with Kmart Corporation (Kmart) terminated June 30, 2001.

Products Supplied.  The Company offers and supplies its distribution customers with a wide variety and selection of food and non-food products, including groceries, meats, dairy products, frozen foods, fresh fruits and vegetables, health and beauty aids, general merchandise, seasonal items and tobacco products. Such products include national and regional brands and the Company’s own lines of private label products. The Company has no significant long-term purchase obligations and considers that it has adequate and alternative sources of supply for most of its purchased products.

SUPERVALU offers three tiers of private label products to its customers: premium product under the private label PREFERRED SELECTION; first quality product under such private labels as CUB, FLAVORITE, HOME BEST, IGA, RICHFOOD and VALU CHOICE; and economy product under such private labels as SHOPPERS VALUE and BI-RITE. SUPERVALU supplies private label merchandise over a broad range of products in the majority of departments in the store. These products are produced to the Company’s specifications by many suppliers.

Logistics Network.  The Company has established a network of strategically located distribution centers utilizing a multi-tiered logistics system. The network includes facilities that carry slow turn or fast turn groceries, perishables, general merchandise and health and beauty care products. The network is comprised of 30 wholesale distribution facilities. The Company believes that its multi-tiered distribution network increases buying scale, improves operating efficiencies and lowers cost of operations. The Company is continuing to work on business initiatives that will deliver lower cost of operations. Deliveries to retail stores are made from the Company’s distribution centers by Company-owned trucks, third party independent trucking companies or customer-owned trucks. In addition, many types of meats, dairy products, bakery and other products purchased from the Company are delivered directly by suppliers to retail stores under programs established by the Company.

Services Supplied.  In addition to supplying merchandise, the Company also offers its food distribution customers a wide variety of support services, including procurement, category management, promotional programs, internet marketing solutions, store management assistance, accounting, store design and construction, site selection, strategic and business planning, consumer and market research, and personnel training. Also, certain Company subsidiaries operate as insurance agencies and provide comprehensive insurance programs to the Company’s food distribution customers.

The Company may provide financial assistance to retail stores served, including acquiring, leasing and subleasing store properties, making direct loans and providing guarantees or other forms of financing. In general, loans made by the Company to independent retailers are secured by liens on inventory and/or equipment, personal guarantees and other security. When the Company subleases store properties to retailers, the rentals are generally as high or higher than those paid by the Company.

Trademarks

The Company offers its customers the opportunity to franchise a concept or license a servicemark. This program helps the customer compete by providing, as part of the franchise or license program, a complete business concept, group advertising, private label products and other benefits. The Company is the franchisor or licensor of certain servicemarks such as CUB FOODS, SAVE-A-LOT, COUNTY MARKET, SHOP ’N SAVE, NEW MARKET, SUPERVALU, IGA, FOODLAND and SUPERVALU FOOD & DRUG. The Company registers a substantial number of its trademarks/servicemarks in the United States Patent and Trademark Office, including many of its private label product trademarks and servicemarks. See “Retail Food Operations—Extreme Value Food Stores” and “Food Distribution Operations—Products Supplied” for further information. The Company considers certain of its trademarks

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and servicemarks to be of material importance to its business and actively defends and enforces such trademarks and servicemarks.

Competition

The Company’s retail food and food distribution businesses are highly competitive and are characterized by low profit margins. The Company believes that the success of its retail food and food distribution businesses are dependent upon the ability of the Company’s retail food operations, and the retail food stores with whom it is affiliated as a supplier, to compete successfully with other retail food stores in a consolidating market. Principal competition comes from local, regional and national chains under a variety of formats (i.e. supercenters, supermarkets, extreme value food stores, membership warehouse clubs, convenience stores, various formats selling prepared foods, and specialty and discount retailers), as well as from independent food stores. The Company believes that the principal competitive factors that face its owned stores, as well as the stores owned by retailers it supplies, include: the location and image of the store, the price, quality and variety of products, and the quality and consistency of service.

The food distribution business competes directly with a number of food wholesalers. The Company believes it competes in this supply chain on the basis of product price, quality and assortment, schedule and reliability of deliveries, the range and quality of services provided, service fees, and the location of distribution facilities.

Employees

At February 23, 2002, the Company had approximately 57,800 employees. Approximately 24,500 employees are covered by collective bargaining agreements. During fiscal 2002, 21 agreements covering 7,500 employees were re-negotiated without any work stoppage. In fiscal 2003, 14 contracts covering approximately 5,500 employees will expire. The Company believes that it has generally good relations with its employees.

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ITEM 2.    PROPERTIES

Retail Food Operations

The following table is a summary of the corporate retail stores operated by the Company under its principal retail formats as of February 23, 2002:

Retail Format	Banner	Location and Number of Corporate Stores	Square Footage Owned (Approximate)	Square Footage Leased (Approximate)
ExtremeValue Food Stores	Save-A-Lot1	Arkansas (3), Alabama (2), Arizona (2) California (17), Connecticut (4), Delaware (6), Florida (65), Georgia (14), Illinois (9), Louisiana (3), Maryland (6), Massachusetts (10), Mississippi (6), Missouri (8), New Jersey (8), New York (2), Ohio (30), Pennsylvania (23), Rhode Island (3), South Carolina (2), Tennessee (5), Vermont (1), Virginia (5)	307,000	3,376,000
	Save-A-Lot2	California (1), Florida (1), Georgia (1), Indiana (1), Kentucky (1), Louisiana (1), Maryland (1), Michigan (1), Missouri (1), New York (1), Ohio (1), Tennessee (1), Texas (1)	2,237,000	1,140,000
Price Superstores	Cub Foods3	Colorado (10), Illinois (28), Iowa (2), Minnesota (28), Wisconsin (11) South Dakota (1)	3,006,000	2,628,000
	Shop ’n Save	Illinois (14), Missouri (20), Pennsylvania (19)	469,000	2,257,000
	Shoppers Food Warehouse	Maryland (21), Virginia (19)	-0-	2,021,000
	Metro	Delaware (1), Maryland (16)	-0-	921,000
	bigg’s	Colorado (1), Indiana (1), Kentucky (1), Ohio (9)	158,000	1,380,000
Supermarkets	Farm Fresh	Virginia (37)	30,000	1,805,000
	Hornbacher’s	Minnesota (1), North Dakota (4)	95,000	113,000
	Scott’s	Indiana (18)	234,000	727,000

¹ Excludes 764 Save-A-Lot stores that are licensed by independent retailers.

² Represents Save-A-Lot distribution centers, as Save-A-Lot is a self-distributing network.

³ Excludes 31 Cub Foods stores that are franchised by independent retailers.

The extreme value food stores that are leased by the Company generally have terms of 5 to 10 years plus renewal options. The price superstores and supermarkets that are leased by the Company generally have terms of 15 to 25 years plus renewal options.

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Food Distribution Operations

The following table is a summary of the Company’s principal distribution centers and office space utilized in the Company’s food distribution operations as of February 23, 2002:

Region or Division	Location and Number of Distribution Centers	Square Footage Owned (Approximate)	Square Footage Leased (Approximate)
Central Region	Indiana (1), Ohio (1), Pennsylvania (3)*, West Virginia (1)	3,285,000	438,000
Midwest Region	Illinois (2), Missouri (1), Wisconsin (2)	2,420,000	1,086,000
Northern Region	Minnesota (1), Iowa (1)*, North Dakota (2)	3,372,000	160,000
New England Region	Maine (1), Massachusetts (1), Rhode Island (1)	844,000	0
Northwest Region	Colorado (1), Montana (1), Washington (2)	2,449,000	124,000
Southeast Region	Alabama (2), Florida (1), Georgia (1), Mississippi (1)	1,718,000	975,000
Eastern Region	Pennsylvania (1), Virginia (1), Maryland (1)	1,768,000	896,000

* The Company recently announced plans to close distribution centers in Belle Vernon, Pennsylvania and Des Moines, Iowa in fiscal 2003.

Additional Property

The Company’s principal executive offices are located in a 180,000 square foot corporate headquarters facility located in Eden Prairie, Minnesota, a western suburb of Minneapolis, Minnesota. This headquarters facility is located on a 140 acre site owned by the Company.

Additional information on the Company’s properties is found in another section of this report on pages F-14 through F-16 in the Note captioned “Leases” of the Company’s Notes to Consolidated Financial Statements. Management of the Company believes its physical facilities and equipment are adequate for the Company’s present needs and businesses.

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ITEM 3.    LEGAL PROCEEDINGS

There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business of the Registrant.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There was no matter submitted during the fourth quarter of fiscal year 2002 to a vote of the security holders of the Registrant.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table provides certain information concerning the executive officers of the Company as of April 19, 2002.

Name	Age	Present Position	Year Elected to Present Position	Other Positions Recently Held With the Company
Michael W. Wright	63	Director, Chairman of the Board(1)	1982	President and Chief Executive Officer, 1982-2000
Jeffrey Noddle	55	Director, President and Chief Executive Officer(1)	2001	President and Chief Operating Officer, 2000-2001; Executive Vice President and President and Chief Operating Officer, Wholesale Food Companies, 1995-2000
David L. Boehnen	55	Executive Vice President	1997	Senior Vice President, Law and External Relations, 1991-1997
John H. Hooley	50	Executive Vice President; President and Chief Operating Officer, Retail Foods	2002	Senior Vice President; President and Chief Executive Officer, Cub Foods, 2000-2002; Vice President; President and Chief Executive Officer, Cub Foods, 1992-1999
Michael L. Jackson	48	Executive Vice President; President and Chief Operating Officer, Distribution	2001	Senior Vice President, Retail Food Companies, 1999-2001; President, Northwest Region, 1995-1999
Pamela K. Knous	48	Executive Vice President, Chief Financial Officer	1997
Robert W. Borlik	53	Senior Vice President, Chief Information Officer	1999
J. Andrew Herring	43	Senior Vice President, Corporate Development	1999	Vice President, Corporate Development and External Relations, 1998-1999
Gregory C. Heying	53	Senior Vice President, Distribution	1994
Sherry M. Smith	40	Senior Vice President, Finance and Treasurer	2002	Vice President, Corporate Controller, 1998-2002; Assistant Corporate Controller, 1996-1998
Ronald C. Tortelli	55	Senior Vice President, Human Resources	1988
Leland J. Dake	45	Vice President, Merchandising, Distribution Food Companies	1998	Vice President, Corporate Category Management, 1995-1998
Stephen P. Kilgriff	60	Vice President, Legal Services	2000	Associate General Counsel, 1996-2000

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(1) Mr. Wright plans to retire as Chairman of the Board of the Company effective May 30, 2002, the date of the Company’s Annual Meeting of Stockholders. On April 10, 2002, Mr. Noddle was elected to succeed Mr. Wright as Chairman of the Board effective May 30, 2002, coinciding with Mr. Wright’s retirement.

The term of office of each executive officer is from one annual meeting of the directors until the next annual meeting of directors or until a successor for each is elected. There are no arrangements or understandings between any of the executive officers of the Company and any other person (not an officer or director of the Company acting as such) pursuant to which any of the executive officers were selected as an officer of the Company. There are no family relationships between or among any of the executive officers of the Company.

Each of the executive officers of the Company has been in the employ of the Company or its subsidiaries for more than five years, except for Pamela K. Knous, Robert W. Borlik, J. Andrew Herring and John H. Hooley.

Ms. Knous was elected to her current position in September 1997. From December 1995 to April 1997, she was Executive Vice President, Chief Financial Officer and Treasurer of The Vons Companies, Inc., a retail grocery company.

Mr. Borlik was elected to his current position in April 1999. From 1995 to March 1999, he was Vice President, Information Services, of Northwest Airlines, Inc., an air transportation company and subsidiary of Northwest Airlines Corporation.

Mr. Herring was elected to his current position in April 1999. From February 1998 to April 1999, he was Vice President, Corporate Development and External Relations of the Company, and prior to that time, he was a partner with the law firm of Dorsey & Whitney LLP.

Mr. Hooley was elected to his current position in April 2002. From November 2000 to April 2002, he was Senior Vice President; President and Chief Executive Officer, Cub Foods. From February 2000 to September 2000, he was Executive Vice President of Partner Alliances, 24K.com., a loyalty marketing company and affiliate of the Carlson Companies. From November 1992 to September 1999, he was President and Chief Executive Officer of Cub Foods.

PART II

ITEM  5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company’s common stock is listed on the New York Stock Exchange under the symbol SVU. As of April 12, 2002, there were 133,160,599 shares of common stock outstanding. At that date, there were 7,155 stockholders of record, excluding individual participants in security position listings. The information called for by Item 5 as to sales price for the Company’s common stock on a quarterly basis during the last two fiscal years and dividend information is found under the heading “Common Stock Price” in Part II, Item 7 below.

During the fiscal year ended February 23, 2002, the Company issued 35,000 shares of unregistered restricted common stock as stock bonuses to certain employees. The issuance of such shares did not constitute a “sale” within the meaning of Section 2(3) of the Securities Act of 1933, as amended.

ITEM  6. SELECTED FINANCIAL DATA

The information called for by Item 6 is found on the Five Year Financial and Operating Summary on page F-2.

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ITEM  7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

In fiscal 2002, the Company achieved net sales of $20.9 billion compared to $23.2 billion last year. Net earnings for fiscal 2002 were $205.5 million, and diluted earnings per share were $1.53.

In fiscal 2001, the Company achieved net sales of $23.2 billion compared to $20.3 billion in fiscal 2000. Net earnings for fiscal 2001 were $82.0 million, and diluted earnings per share were $0.62. Net earnings for fiscal 2000 were $242.9 million, and diluted earnings per share were $1.87. The results of operations for fiscal 2000 include the impact of the Richfood acquisition and the results of its operations since August 31, 1999.

Highlights of results of operations as reported were as follows:

	February 23, 2002 (52 weeks)					February 24, 2001 (52 weeks)					February 26, 2000 (52 weeks)
	(In millions)
Net sales	$	20,908.5		100.0	%	$	23,194.3		100.0	%	$	20,339.1		100.0	%
Cost of sales		18,308.0		87.6			20,635.5		89.0			18,111.4		89.0
Selling and administrative expenses		2,037.7		9.7			2,042.3		8.8			1,705.0		8.4
Gain on sale of Hazelwood Farms Bakeries		—		—			—		—			(163.7	)	(0.8	)
Restructure and other charges		46.3		0.2			171.3		0.7			103.6		0.5
Operating earnings		516.5		2.5			345.2		1.5			582.8		2.9
Interest expense		194.3		0.9			212.9		0.9			154.5		0.8
Interest income		(21.5	)	(0.1	)		(22.1	)	(0.1	)		(19.1	)	(0.1	)
Earnings before income taxes		343.7		1.7			154.4		0.7			447.4		2.2
Income tax expense		138.2		0.7			72.4		0.3			204.5		1.0
Net earnings	$	205.5		1.0	%	$	82.0		0.4	%	$	242.9		1.2	%

Comparison of fifty-two weeks ended February 23, 2002 (2002) with fifty-two weeks ended February 24, 2001 (2001):

Net Sales

Net sales for 2002 of $20.9 billion decreased 9.9 percent from $23.2 billion in 2001. Retail food sales increased 2.1 percent and food distribution sales decreased 17.9 percent in 2002 compared to 2001. Retail food sales increased over last year primarily due to new store openings. Same-store sales were positive 0.2 percent reflecting the soft economy, competitor activities and cannibalization in certain markets. Food distribution sales decreased from last year reflecting customer losses, primarily the exit of the Kmart supply contract which terminated June 30, 2001. In addition, sales decreased as a result of the impact of restructure activities.

Fiscal 2002 store activity, including licensed units, resulted in 115 new stores opened and 49 stores closed or sold for a total of 1,260 stores at year end, an increase in square footage of 6.7 percent over the prior year.

Gross Profit

Gross profit as a percentage of net sales increased to 12.4 percent from 11.0 percent last year. The increase is primarily due to the growing proportion of the Company’s retail food business, which operates at a higher gross profit margin as a percentage of net sales than does the food distribution business, improved merchandising execution in retail, and benefits of restructure and reconfiguration activities in distribution. In 2001, gross profit included $17.1 million in cost of sales for inventory markdowns related to restructure activities.

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Selling and Administrative Expenses

Selling and administrative expenses were 9.7 percent of net sales for 2002 compared to 8.8 percent of net sales last year. In the fourth quarter of 2002 and 2001, selling and administrative expenses include $12.5 million of store closing reserves and $51.7 million primarily for store closing reserves and provisions for certain uncollectible receivables, respectively. Excluding these items, selling and administrative expenses were 9.7 percent and 8.6 percent of net sales, respectively. The increase in selling and administrative expenses as a percent of net sales is primarily due to the growing proportion of the Company’s retail food business, which operates at a higher selling and administrative expense as a percentage of net sales than does the food distribution business, as well as increases in labor and employee benefit costs and increases in closed property reserves partially offset by gains on sales of disposed properties.

Operating Earnings

The Company’s earnings before interest and taxes (EBIT) were $516.5 million compared to $345.2 million last year, a 49.6 percent increase. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased 24.4 percent to $857.2 million, or 4.1 percent of net sales, from $689.0 million, or 3.0 percent of net sales, last year. Fiscal 2002 includes $46.3 million for restructure charges and $12.5 million for store closing reserves. Fiscal 2001 includes $171.3 million for restructure charges and $68.8 million primarily for store closing reserves and provisions for certain uncollectible receivables.

Excluding the impacts of restructure and other items in 2002 and 2001, the Company’s EBIT and EBITDA were as follows: EBIT was $575.3 million compared to $585.3 million last year, a 1.7 percent decrease; EBITDA was $916.0 million compared with $921.6 million last year, a 0.6 percent decrease; retail food EBIT increased 12.1 percent to $387.5 million, or 4.1 percent of net sales, from last year’s $345.8 million, or 3.7 percent of net sales, primarily due to growth in new stores and improved merchandising execution in retail; retail food EBITDA increased 9.0 percent to $565.1 million, or 5.9 percent of net sales, from last year’s $518.3 million, or 5.5 percent of net sales; food distribution EBIT decreased 17.6 percent to $227.0 million, or 2.0 percent of net sales, from last year’s $275.4 million, or 2.0 percent of net sales, reflecting a decrease in sales volume, primarily the exit of the Kmart supply contract, partially offset by benefits of restructure and reconfiguration activities; food distribution EBITDA decreased 11.1 percent to $387.7 million, or 3.4 percent of net sales, from last year’s $436.0 million, or 3.2 percent of net sales.

Net Interest Expense

Interest expense decreased to $194.3 million in 2002, compared with $212.9 million in 2001, reflecting lower borrowing levels and lower interest rates since last year. Interest income decreased to $21.5 million in 2002 compared with $22.1 million in 2001.

Income Taxes

The effective tax rate was 40.2 percent in 2002 compared with 46.9 percent in 2001. Excluding the impacts of restructure and other items for 2002 and 2001, the effective tax rate was 40.2 percent for both years.

Net Earnings

Net earnings were $205.5 million or $1.53 per diluted share in 2002 compared with 2001 net earnings of $82.0 million or $0.62 per diluted share.

Weighted average diluted shares increased to 134.0 million in 2002 compared with last year’s 132.8 million, primarily reflecting the dilutive impact of stock options.

Excluding the impacts of restructure and other items, net earnings were $240.7 million or $1.80 per diluted share in 2002, compared with $235.9 million or $1.78 per diluted share in 2001.

Comparison of fifty-two weeks ended February 24, 2001 (2001) with fifty-two weeks ended February 26, 2000 (2000):

Net Sales

Net sales for 2001 of $23.2 billion increased 14.0 percent from $20.3 billion in 2000, reflecting the acquisition of Richfood in August 1999, incremental volume from new customers, and new corporate stores. Retail food sales increased 15.9 percent and food distribution sales increased 12.8 percent in 2001 compared to 2000. Retail food sales increased from 2000 primarily due to the Richfood acquisition and the opening of new stores in 2001. Same-store sales were negative 3.7 percent, impacted by competitive activities and cannibalization in certain markets. Food distribution sales increased from 2000 primarily due to the Richfood acquisition and incremental volume from new customers, primarily the $2.3 billion annual supply contract with Kmart.

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Fiscal 2001 store activity, including licensed units, resulted in 117 new stores opened, five stores acquired, and 45 stores closed or sold for a total of 1,194 stores at year end, an increase in square footage of 6.9 percent over 2000.

Gross Profit

Gross profit as a percentage of net sales remained flat at 11.0 percent. In 2001, gross profit included $17.1 million in cost of sales for inventory markdowns related to restructure activities.

Selling and Administrative Expenses

Selling and administrative expenses were 8.8 percent of net sales for 2001 compared to 8.4 percent of net sales in 2000. The increase reflects $51.7 million primarily for store closing reserves and provisions for certain uncollectible receivables. Excluding these items, selling and administrative expenses were 8.6 percent of net sales in 2001. The increase 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 does the food distribution business.

Operating Earnings

The Company’s EBIT was $345.2 million in 2001 compared to $582.8 million in 2000, a 40.8 percent decrease. EBITDA was $689.0 million in 2001 compared with $859.9 million in 2000, a 19.9 percent decrease. Fiscal 2001 includes $171.3 million for restructure charges and $68.8 million primarily for store closing reserves and provisions for certain uncollectible receivables. Fiscal 2000 includes a net $60.1 million benefit from the gain on the sale of Hazelwood Farms Bakeries of $163.7 million, partially offset by restructure charges of $103.6 million.

Excluding the impacts of restructure and other items in 2001 and 2000, the Company’s EBIT and EBITDA were as follows: EBIT was $585.3 million in 2001 compared to $522.8 million in 2000, a 12.0 percent increase; EBITDA was $921.6 million in 2001 compared with $799.8 million in 2000, a 15.2 percent increase; retail food EBIT increased 1.5 percent to $345.8 million, or 3.7 percent of net sales, from $340.7 million in 2000, or 4.2 percent of net sales, primarily due to the Richfood acquisition and the opening of 117 stores, substantially offset by increased advertising, promotional spending, and labor costs; retail food EBITDA increased 5.7 percent to $518.3 million, or 5.5 percent of net sales, from $490.3 million in 2000, or 6.1 percent of net sales; food distribution EBIT increased 23.3 percent to $275.4 million, or 2.0 percent of net sales, from $223.4 million, or 1.8 percent of net sales, in 2000, primarily due to the Richfood acquisition and the incremental volume from other customers, primarily Kmart; food distribution EBITDA increased 25.4 percent to $436.0 million, or 3.2 percent of net sales, from $347.6 million in 2000, or 2.8 percent of net sales.

Net Interest Expense

Interest expense increased to $212.9 million in 2001, compared with $154.5 million in 2000, reflecting increased borrowings due to the Richfood acquisition in August 1999 and the $140 million share buyback under the December 1999 treasury stock program completed early in the first quarter of 2001. Interest income increased to $22.1 million in 2001 compared with $19.1 million in 2000.

Income Taxes

The effective tax rate was 46.9 percent in 2001 compared with 45.7 percent in 2000. Excluding the impacts of the restructure and other items in 2001 and the gain on the sale of Hazelwood Farms Bakeries and the restructure charges in 2000, the effective tax rates were 40.2 percent and 40.1 percent in 2001 and 2000, respectively.

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Net Earnings

Net earnings were $82.0 million or $0.62 per diluted share in 2001 compared with 2000 net earnings of $242.9 million or $1.87 per diluted share.

Weighted average diluted shares increased to 132.8 million in 2001 compared with 130.1 million in 2000. The increase was primarily due to a full year’s impact in the current year of the approximately 19.7 million shares issued in the second quarter of 2000 in connection with the Richfood acquisition, partially offset by the 7.9 million shares repurchased under the December 1999 treasury stock program.

Excluding the impacts of the restructure and other items in 2001 and the gain on the sale of Hazelwood Farms Bakeries and the restructure charges in 2000, net earnings were $235.9 million or $1.78 per diluted share in 2001 compared with $232.0 million or $1.78 per diluted share in 2000.

RESTRUCTURE AND OTHER CHARGES

In the fourth quarter of fiscal 2002, the Company identified additional efforts that will allow it to extend its distribution efficiency program begun in fiscal 2001 and adjusted prior years’ restructure reserves for changes in estimates primarily related to real estate, as a result of a softening real estate market. The additional distribution efficiency initiatives identified in fiscal 2002 primarily relate to personnel reductions in transportation and administrative functions. The total pretax restructure charges were $46.3 million, of which $16.3 million is related to additional efficiency efforts, $17.8 million is related to changes in estimates for the fiscal 2001 restructure reserves and $12.2 million is related to changes in estimates for the fiscal 2000 restructure reserves.

Included in the $16.3 million of restructure charges for fiscal 2002 is $13.1 million related to severance and employee related costs and $3.2 million related to lease cancellation fees. These actions include a net reduction of approximately 800 employees throughout the organization. Management will begin the initiatives in fiscal 2003 and expects the majority of these actions to be completed by the end of fiscal 2003.

In the fourth quarter of fiscal 2001, the Company recorded pretax restructure 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 restructure reserve of $10.3 million for lease subsidies and future payments on exited leased facilities. As a result of changes in estimates in fiscal 2002, the fiscal 2001 charges were increased by $17.8 million, including $19.1 million for increased lease liabilities in exiting the non-core retail markets and the disposal of non-core assets, offset by a net decrease of $1.3 million in restructure reserves for the consolidation of distribution centers. The reserve at the end of fiscal 2002 for fiscal 2001 restructure charges was $56.0 million, including $50.0 million for lease subsidies, lease terminations and future payments on exited lease facilities and $6.0 million for employee related costs. There are 750 employees yet to be terminated related to this reserve.

In fiscal 2001, the Company reduced the original fiscal 2000 restructure reserve by $10.3 million primarily for a change in estimate for the closure of a remaining facility. The amount was subsequently increased $12.2 million in fiscal 2002, primarily due to the softening real estate market. The reserve at the end of fiscal 2002 for fiscal 2000 restructure charges was $18.0 million, including $14.9 million for future payments on exited leased facilities and $3.1 million for unpaid employee benefits. There are no remaining employee terminations under the fiscal 2000 restructure.

Approximately $30 million in cash outflows are anticipated in fiscal 2003 primarily related to the payment of employee severance and the payment of lease liabilities. As of fiscal year end 2002, remaining future net cash flows of all restructure activities is estimated at approximately $5 million. The changes in cash flow estimates from the prior year are primarily a result of new fiscal 2002 restructure activities, changes in estimates of lease liabilities and the timing of disposition of properties.

CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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Management believes the following critical accounting policies reflect its more significant judgments and estimates used in the preparation of the Company’s consolidated financial statements.

LIFO and Retail Inventory Method

For a significant portion of the Company’s inventory, cost is determined through use of the last-in, first-out (LIFO) method for food distribution or the retail LIFO method, as applicable. Under the retail LIFO method, otherwise referred to as the retail inventory method (RIM), the valuation of inventories are at cost and the resulting gross margins are calculated by applying a calculated cost-to-retail ratio to the retail value of inventories. RIM is an averaging method that has been widely used in the retail industry due to its practicality.

Inherent in the RIM calculations are certain significant management judgments and estimates, including shrinkage, which significantly impact the ending inventory valuation at cost, as well as the resulting gross margins. These judgments and estimates, coupled with the fact that the RIM is an averaging process, can, under certain circumstances, produce results which differ from actual. Management believes that the Company’s RIM provides an inventory valuation which reasonably approximates cost and results in carrying inventory at the lower of cost or market.

Allowances for Losses on Receivables

Management makes estimates of the uncollectibility of its accounts and notes receivable portfolios. In determining the adequacy of the allowances, management analyzes the value of the collateral, customer financial statements, historical collection experience, aging of receivables and other economic and industry factors. It is possible that the accuracy of the estimation process could be materially impacted by different judgments as to collectibility based on the information considered and further deterioration of accounts.

Reserves for Closed Properties

The Company maintains reserves for estimated losses on retail stores, distribution warehouses and other properties that are no longer being utilized in current operations. Calculating the estimated losses requires significant judgments and estimates to be made by management. The Company’s reserves for closed properties could be materially affected by factors such as the extent of interested buyers, its ability to secure subleases, the creditworthiness of sublessees and the Company’s success at negotiating early termination agreements with lessors. These factors are significantly dependent on the general health of the economy and resultant demand for commercial property. While management believes the current estimates of reserves on closed properties are adequate, it is possible that changes in events could cause changes in the Company’s assumptions, requiring additional reserves to be recorded.

Reserves for Self Insurance

The Company is primarily self-insured for workers’ compensation and general and automobile liability costs. It is the Company’s policy to record its self insurance liabilities based on claims filed and an estimate of claims incurred but not yet reported. Any projection of losses concerning workers’ compensation and general and automobile liability is subject to a considerable degree of variability. Among the causes of this variability are unpredictable external factors affecting future inflation rates, litigation trends, legal interpretations, benefit level changes and claim settlement patterns.

LIQUIDITY AND CAPITAL RESOURCES

Net cash from operations was $786.7 million in fiscal 2002, $651.2 million in fiscal 2001 and $341.2 million in fiscal 2000. In the current year, activity in cash from operations primarily related to a reduction in receivables. In addition, fiscal 2002 cash from operations was impacted by a reduction in inventories which was more than offset by a decrease in payables. In fiscal 2001, activity in cash from operations also primarily related to a reduction in inventories that was partially offset by a decrease in payables.

Cash used in investing activities was $244.1 million in fiscal 2002, $380.4 million in fiscal 2001, and $534.5 million in fiscal 2000. The decrease in cash used in fiscal 2002 as compared to fiscal 2001 was primarily due to lower fixed asset purchases and higher proceeds from sales of assets primarily related to restructure activities. The decrease in cash used in investing

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activities in fiscal 2001 compared to fiscal 2000 was primarily due to the $443 million cash used for a portion of the Richfood acquisition in fiscal 2000, offset in part by proceeds from the sale of Hazelwood Farms Bakeries.

Cash used in financing activities was $540.8 million in fiscal 2002, compared with $271.4 million in fiscal 2001 and compared with cash provided by financing activities of $196.6 million in fiscal 2000. The increase in cash used in financing activities as compared to fiscal 2001 reflects higher debt reduction in fiscal 2002. In fiscal 2001, cash was used primarily to reduce long-term debt. In fiscal 2000, net new debt increased primarily due to debt incurred in connection with the acquisition of Richfood in August 1999. The Company used proceeds from the issuance of debt to finance the acquisition and repay indebtedness incurred or assumed in connection therewith.

Management expects that the Company will continue to replenish operating assets with internally generated funds. There can be no assurance, however, that the Company’s business will continue to generate cash flow at current levels. The Company will continue to obtain short-term financing from its revolving credit agreements with various financial institutions, as well as through its accounts receivable securitization program. Long-term financing will be maintained through existing and new debt issuances. The Company’s short-term and long-term financing abilities are believed to be adequate as a supplement to internally generated cash flows to fund its capital expenditures and acquisitions as opportunities arise. Maturities of debt issued will depend on management’s views with respect to the relative attractiveness of interest rates at the time of issuance and other debt maturities.

The Company has 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. Outstanding borrowings under the revolving credit facilities for February 23, 2002 and February 24, 2001 were $0 and $250 million, respectively, and are reflected in Notes Payable on the consolidated balance sheet. As of February 23, 2002, letters of credit under the credit facilities were $122 million and the unused available credit under these facilities was $578 million.

In April 2002, the Company received commitments from various financial institutions for a new $650 million revolving credit agreement. The new credit facility is expected to be a three-year unsecured facility with rates tied to LIBOR plus 0.650 to 1.400 percent. The facility is expected to contain various financial covenants including ratios for fixed charge interest coverage, asset coverage and debt leverage, in addition to a minimum net worth covenant. This credit facility will replace the two existing credit facilities.

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 February 23, 2002, the Company had no borrowings outstanding under this program.

In November 2001, the Company sold zero-coupon convertible debentures having an aggregate principal amount at maturity of $811 million. The proceeds from the offering, net of approximately $5 million of expenses, were $208 million and were initially used to pay down notes payable and will later be used to retire a portion of the $300 million in debt maturing November 2002. 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 will generally be convertible if the closing price of the Company’s common stock on the New York Stock Exchange for twenty of the last thirty trading days of any fiscal quarter exceeds certain levels, set initially at $33.20 per share for the quarter ended February 23, 2002, and rising to $113.29 per share at September 6, 2031. In the event of conversion, 9.6434 shares of the Company’s common stock will be issued per $1,000 debenture. 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.

SUPERVALU’s capital budget for fiscal 2003, which includes capitalized leases, is projected at approximately $500 to $525 million, compared with actual spending of $388.7 million in fiscal 2002. The capital budget for 2003 anticipates cash spending of $420 to $445 million, in addition to $80 million budgeted for capital leases. Approximately $340 million of the fiscal 2003 budget has been identified for use in the Company’s retail food business. The budget provides for approximately 10 to 15 new price superstores and approximately 150 to 170 new extreme value stores, including the announced acquisition of 45 extreme value general merchandise stores. The balance of the fiscal 2003 capital budget relates to distribution maintenance capital and information technology related items. In addition, the Company will continue to support store development and financing for the Company’s independent retailers. Certain retailer financing activities do not require new cash outlays because they are leases or guarantees. The capital budget does include amounts for projects which are subject to change and for which firm commitments have not been made.

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Cash dividends declared during fiscal 2002, 2001 and 2000 totaled $0.5575 cents, $0.5475 cents, and $0.5375 cents per common share, respectively. The Company’s dividend policy will continue to emphasize a high level of earnings retention for growth.

COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS

The Company has guaranteed mortgage loan and other debt obligations of $6.7 million. The Company has also guaranteed the leases and fixture financing loans of various retailers with a present value of $174.8 million and $33.7 million, respectively.

On December 4, 1998, the Company entered into an agreement to sell notes receivable to a special purpose entity, which qualifies to be accounted for as an unconsolidated subsidiary. The entity is designed to acquire qualifying notes receivable from the Company and sell them to a third party. No notes have been sold since February 29, 2000. Assets and related debt off-balance sheet were $27.0 million at February 23, 2002 and $46.4 million at February 24, 2001. At February 23, 2002, the Company’s limited recourse with respect to notes sold was $12.1 million.

The Company is party to synthetic leasing programs for two of its major warehouses. The leases expire in fiscal 2004 and fiscal 2005 and may be renewed with the lessor’s consent through fiscal 2009 and fiscal 2007, and have purchase options of $60 million and $25 million, respectively. At February 23, 2002, the estimated market value of the properties underlying these leases equaled or exceeded the purchase options. See further disclosure in the Company’s footnote on Commitments, Contingencies and Off-Balance Sheet Arrangements.

The Company is a party to various legal proceedings arising from the normal course of business activities, none of which, in management’s opinion, is expected to have a material adverse impact on the Company’s consolidated statement of earnings or consolidated financial position.

The following table represents the Company’s total commitments and total off-balance sheet arrangements at February 23, 2002.

	Amount of Commitment Expiration Per Period
	Total Amount Committed		Fiscal 2003		Fiscal 2004-2005		Fiscal 2006-2007		Thereafter
	(in thousands)
Commitments:
Notes Payable	$	27,465	$	27,465	$	—	$	—	$	—
Debt		1,668,694		326,266		472,154		135,938		734,336
Capital and Deferred Financing Leases		563,587		30,142		82,919		79,838		370,688
Total Commitments	$	2,259,746	$	383,873	$	555,073	$	215,776	$	1,105,024
Off-Balance Sheet Arrangements:
Retailer Loan and Lease Guarantees	$	215,200	$	39,200	$	54,500	$	36,600	$	84,900
Limited Recourse Liability on		12,100		2,000		4,300		3,600		2,200
Purchase Options on Synthetic Leases		85,000		—		85,000		—		—
Operating Leases		996,728		136,826		228,364		173,869		457,669
Total Off-Balance Sheet Arrangements	$	1,309,028	$	178,026	$	372,164	$	214,069	$	544,769

COMMON STOCK PRICE

SUPERVALU’s common stock is listed on the New York Stock Exchange under the symbol SVU. At fiscal 2002 year end, there were 7,155 shareholders of record compared with 7,243 at the end of fiscal 2001.

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	Common Stock Price Range								Dividends Per Share
Fiscal	2002				2001				2002		2001
	High		Low		High		Low
First Quarter	$	16.46	$	12.60	$	22.88	$	14.00	$	0.1375	$	0.1350
Second Quarter		21.80		15.00		20.25		14.69		0.1400		0.1375
Third Quarter		24.10		18.81		18.19		14.00		0.1400		0.1375
Fourth Quarter		24.96		18.85		17.81		11.75		0.1400		0.1375
Year	$	24.96	$	12.60	$	22.88	$	11.75	$	0.5575	$	0.5475

Dividend payment dates are on or about the 15th day of March, June, September and December, subject to the Board of Directors approval.

NEW ACCOUNTING STANDARDS            

In June 2001, the Financial Accounting Standards Board (FASB) approved Statement of Financial Accounting Standard (SFAS) No. 141, “Business Combinations” and SFAS 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 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 24, 2002. 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 has determined that discontinuing the amortization of goodwill will have a $0.35 per diluted share impact on earnings per share. The Company is currently measuring the impact of goodwill impairment and will complete this evaluation by the end of the first quarter of fiscal 2003.

In June 2001, the FASB issued SFAS 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 plans to adopt the provisions of SFAS No. 143 in the first quarter of fiscal 2004. In August 2001, the FASB approved SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Company plans to adopt the provisions of SFAS No. 144 in the first quarter of fiscal 2003. The Company is currently analyzing the effect SFAS No. 143 and SFAS No. 144 will have on its consolidated financial statements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK            

SUPERVALU is exposed to market pricing risk consisting of interest rate risk related to debt obligations outstanding, its investment in notes receivable and, from time to time, derivatives employed to hedge interest rate changes on variable and fixed rate debt. The Company does not use financial instruments or derivatives for any trading or other speculative purposes.

SUPERVALU manages interest rate risk through the strategic use of fixed and variable rate debt and, to a limited extent, derivative financial instruments. Variable interest rate debt (commercial paper, bank loans, industrial revenue bonds and other variable interest rate debt) is utilized to help maintain liquidity and finance business operations. Long-term debt with fixed interest rates is used to assist in managing debt maturities and to diversify sources of debt capital.

SUPERVALU carries notes receivable because, in the normal course of business, the Company makes long-term loans to certain retail customers (see “Notes Receivable” in the Notes to the Consolidated Financial Statements for further information). The notes generally bear fixed interest rates negotiated with each retail customer. The market value of the fixed rate notes is subject to change due to fluctuations in market interest rates. At February 23, 2002, the estimated fair value of notes receivable approximates the net carrying value.

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The table below provides information about the Company’s financial instruments that are sensitive to changes in interest rates, including notes receivable and debt obligations. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For notes receivable, the table presents the expected collection of principal cash flows and weighted average interest rates by expected maturity dates.

	Summary of Financial Instruments
	February 23, 2002					Aggregate maturities of principal by fiscal year
	Fair Value		Total			2003			2004			2005			2006			2007			Thereafter
	(in millions, except rates)
Notes receivable-principal
Receivable	$	92.7	$	92.7		$	23.9		$	13.8		$	13.3		$	13.1		$	7.2		$	21.4
Average rate receivable				8.7	%		8.0	%		8.6	%		8.9	%		8.4	%		9.1	%		9.6	%
Debt with variable interest rates
Principal payable	$	94.5	$	94.5		$	24.0		$	8.0			—		$	2.4		$	2.6		$	57.5
Average variable rate payable				1.6	%		2.4	%		1.3	%		—			1.4	%		1.4	%		1.3	%
Debt with fixed interest rates
Principal payable	$	1,662.5	$	1,598.5		$	326.3		$	23.9		$	440.3		$	60.5		$	70.5		$	677.0
Average fixed rate payable				7.6	%		7.8	%		8.4	%		8.5	%		7.2	%		6.8	%		7.0	%

Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995

Any statements in this report regarding SUPERVALU’s outlook for its businesses and their respective markets, such as projections of future performance, statements of management’s plans and objectives, forecasts of market trends and other matters, are forward-looking statements based on management’s assumptions and beliefs. Such statements may be identified by such words or phrases as “will likely result,” “are expected to,” “will continue,” “outlook,” “is anticipated,” “estimate,” “project,” “management believes” or similar expressions. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those discussed in such forward-looking statements and no assurance can be given that the results in any forward-looking statement will be achieved. For these statements, SUPERVALU claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

The following is a summary of certain factors, the results of which could cause SUPERVALU’s future results to differ materially from those expressed or implied in any forward-looking statements contained in this report:

• 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,

• our ability to attract and retain customers for our food distribution business and to control food distribution costs,

• our ability to grow through acquisitions and assimilate acquired entities,

• 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 restructure activities we have announced, including our consolidation of certain distribution facilities and our disposition of under-performing stores and non-operating properties,

• the availability of favorable credit and trade terms, and

• other risk factors inherent in the retail food and food distribution industries.

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 SUPERVALU undertakes no obligation to update such statement to reflect events or circumstances arising after such date.

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ITEM 7.A.    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The information called for by Item 7.A is found under the heading of “Quantitative and Qualitative Disclosure About Market Risk” under Part II, Item 7 above.

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information called for by Item 8 is found in a separate section of this report on pages F-1 through F-25. See “Index of Selected Financial Data, Financial Statements and Schedules.”

ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information called for by Item 10, as to (a) Directors of the Registrant and (b) compliance with Section 16(a) of the Securities and Exchange Act of 1934, is incorporated by reference to the Registrant’s definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant’s 2002 Annual Meeting of Stockholders under the heading “Election of Directors (Item 1),” and under the heading “Section 16(a) Beneficial Ownership Reporting Compliance.” Certain information regarding executive officers is included in Part I immediately following Item 4 above.

ITEM 11.     EXECUTIVE COMPENSATION

The information called for by Item 11 is incorporated by reference to the Registrant’s definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant’s 2002 Annual Meeting of Stockholders under the headings “Compensation of Directors,” “Compensation of Executive Officers,” “Option Grants in Last Fiscal Year,” “Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values,” “Long-Term Incentive Plans—Awards in Last Fiscal Year,” “Pension Plans and Retirement Benefits,” and “Change in Control and Other Agreements,” and under the heading “Related Party Transactions, Compensation Committee Interlocks and Insider Participation.”

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information called for by Item 12 is incorporated by reference to the Registrant’s definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant’s 2002 Annual Meeting of Stockholders under the headings “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management.”

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information called for by Item 13 is incorporated by reference to the Registrant’s definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant’s 2002 Annual Meeting of Stockholders under the heading “Related Party Transactions, Compensation Committee Interlocks and Insider Participation.”

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PART IV

ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  (1)  Financial Statements:

The consolidated financial statements of the Registrant listed in the accompanying “Index of Selected Financial Data, Financial Statements and Schedules” together with the reports of KPMG LLP, independent auditors, are filed as part of this report.

(2)  Financial Statement Schedules:

The consolidated financial statement schedules of the Registrant listed in the accompanying “Index of Selected Financial Data, Financial Statements and Schedules” together with the reports of KPMG LLP, independent auditors, are filed as part of this report.

(3)  Articles of Incorporation and by-laws:

(3)(i) Restated Certificate of Incorporation is incorporated by reference to Exhibit (3)(i) to the Registrant’s Annual Report on Form 10-K for the year ended February 26, 1994.

(3)(ii) Restated Bylaws, as amended, are incorporated by reference to Exhibit (3) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 12, 1998.

(4)  Instruments defining the rights of security holders, including indentures:

4.1.	Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee, relating to certain outstanding debt securities of the Registrant, is incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-3, Registration No. 33-52422.
4.2.	First Supplemental Indenture dated as of August 1, 1990, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee, is incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-3, Registration No. 33-52422.
4.3.	Second Supplemental Indenture dated as of October 1, 1992, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee, is incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated November 13, 1992.

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4.4.	Third Supplemental Indenture dated as of September 1, 1995, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee, is incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated October 2, 1995.
4.5.	Fourth Supplemental Indenture dated as of August 4, 1999, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee, is incorporated by reference to Exhibit 4.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (16 weeks) ended September 11, 1999.
4.6.	Fifth Supplemental Indenture dated as of September 17, 1999, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee, is incorporated by reference to Exhibit 4.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (16 weeks) ended September 11, 1999.
4.7.	Letter of Representations dated November 12, 1992, between the Registrant, Bankers Trust Company, as Trustee, and The Depository Trust Company relating to certain outstanding debt securities of the Registrant, is incorporated by reference to Exhibit 4.5 to the Registrant’s Report on Form 8-K dated November 13, 1992.
4.8.	Rights Agreement dated as of April 12, 2000, between SUPERVALU INC. and Wells Fargo Bank Minnesota, N.A. (formerly Norwest Bank Minnesota, N.A.) as Rights Agent, including as Exhibit B the forms of Rights Certificate and Election to Exercise, is incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated April 17, 2000.
4.9.	Indenture dated as of November 2, 2001, between SUPERVALU INC. and The Chase Manhattan Bank, as Trustee, including form of Liquid Yield Option™ Note due 2031 (Zero Coupon—Senior), is incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-3, Registration No. 333-81252.
4.10.	Registration Rights Agreement dated as of November 2, 2001, by and among SUPERVALU INC., Merrill Lynch & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, is incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-3, Registration No. 333-81252.
4.11.	Form of Credit Agreement, dated as of October 8, 1997, as amended and restated as of August 16, 2001, among the Registrant, the Lenders named therein, the Chase Manhattan Bank, as Agent, and Bank One, NA, as Syndication Agent, is incorporated by reference to Exhibit 4.8 to the Registrant’s Current Report on Form 8-K dated August 17, 2001.

Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of certain instruments defining the rights of holders of certain long-term debt of the Registrant and its subsidiaries are not filed and, in lieu thereof, the Registrant agrees to furnish copies thereof to the Securities and Exchange Commission upon request.

(10)  Material Contracts:

10.1.	SUPERVALU INC. 1993 Stock Plan, as amended, is incorporated by reference to Exhibit 10.1 to the Registrant’s Annual Report on Form 10-K for the year ended February 27, 1999.*
10.2.	SUPERVALU INC. 1978 Stock Appreciation Rights Plan, as amended, is incorporated by reference to Exhibit (10)c. to the Registrant’s Annual Report on Form 10-K for the year ended February 25, 1989.*

21

10.3.	SUPERVALU INC. Executive Incentive Bonus Plan is incorporated by reference to Exhibit (10)c. to the Registrant’s Annual Report on Form 10-K for the year ended February 22, 1997. *
10.4.	SUPERVALU INC. Deferred Compensation Plan for Non-Employee Directors, as amended, is incorporated by reference to Exhibit (10)g. to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 12, 1998. *
10.5.	SUPERVALU INC. 1983 Employee Stock Option Plan, as amended, is incorporated by reference to Exhibit (10)a. to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 12, 1998. *
10.6.	SUPERVALU INC. 1989 Stock Appreciation Rights Plan is incorporated by reference to Exhibit (10)g. to the Registrant’s Annual Report on Form 10-K for the year ended February 25, 1989.*
10.7.	SUPERVALU INC. ERISA Excess Benefit Plan Restatement, as amended, is incorporated by reference to Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K for the year ended February 26, 2000.*
10.8.	SUPERVALU INC. Deferred Compensation Plan is incorporated by reference to Exhibit (10)i. to the Registrant’s Annual Report on Form 10-K for the year ended February 23, 1991.*
10.9.	SUPERVALU INC. Executive Deferred Compensation Plan, as amended, and Executive Deferred Compensation Plan II are incorporated by reference to Exhibit (10)c. to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 12, 1998.*
10.10.	Amendments to the SUPERVALU INC. Executive Deferred Compensation Plan and the SUPERVALU INC. Executive Deferred Compensation Plan II are incorporated by reference to Exhibit (10)c. to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 7, 1996.*
10.11.	Form of Agreement used in connection with the Registrant’s Executive Post-Retirement Survivor Benefit Program, is incorporated by reference to Exhibit (10)i. to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 12, 1998.*
10.12.	Form of Change of Control Severance Agreements entered into with certain officers of the Registrant, is incorporated by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K for the year ended February 27, 1999. *

22

10.13.	SUPERVALU INC. Directors Retirement Program, as amended, is incorporated by reference to Exhibit (10)e. to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 12, 1998.*
10.14.	SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan is incorporated by reference to Exhibit (10)r. to the Registrant’s Annual Report on Form 10-K for the year ended February 24, 1990.*
10.15.	First Amendment to SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan is incorporated by reference to Exhibit (10)a. to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 7, 1996.*
10.16.	Second Amendment to SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan is incorporated by reference to Exhibit (10)r. to the Registrant’s Annual Report on Form 10-K for the year ended February 28, 1998.*
10.17.	Third Amendment to SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan is incorporated by reference to Exhibit (10)h. to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 12, 1998.*
10.18.	SUPERVALU INC. Long-Term Incentive Plan, as amended, is incorporated by reference to Exhibit (10)b. to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 12, 1998.*
10.19.	SUPERVALU INC. Annual Cash Bonus Plan for Designated Corporate Officers, as amended, is incorporated by reference to Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K for the year ended February 24, 2001.
10.20.	SUPERVALU INC. Non-Employee Directors Deferred Stock Plan, as amended, is incorporated by reference to Exhibit 10.21 to the Registrant’s Annual Report on Form 10-K for the year ended February 26, 2000.*
10.21.	SUPERVALU INC. 1997 Stock Plan, as amended, is incorporated by reference to Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K for the year ended February 26, 2000.*
10.22.	Split Dollar Life Insurance Agreement for Michael W. Wright and Collateral Assignment of Policy, is incorporated by reference to Exhibit 10.24 to the Registrant’s Annual Report on Form 10-K for the year ended February 26, 2000.*
10.23.	SUPERVALU/Richfood Stock Incentive Plan, as amended.*
10.24.	Restricted Stock Unit Award Agreement for David L. Boehnen is incorporated by reference to Exhibit 10.26 to the Registrant’s Annual Report on Form 10-K for the year ended February 24, 2001.*
10.25.	Restricted Stock Unit Award Agreement for Pamela K. Knous is incorporated by reference to Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K for the year ended February 24, 2001.*
10.26.	Resolutions of SUPERVALU INC. Board of Directors, amending the SUPERVALU INC. Restricted Stock Plan, as amended, are incorporated by reference to Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K for the year ended February 24, 2001.
10.27.	Special Fiscal 2002 Incentive Plan.*

23

10.28. Letter agreement dated May 21, 2001, providing for post-retirement benefits for Michael W. Wright.*

* Indicates management contracts, compensatory plans or arrangements required to be filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K

(12)  Statement re Computation of Ratios.

12.1.    Ratio of Earnings to Fixed Charges.

(21)  Subsidiaries of the Registrant.

21.1.    SUPERVALU INC. Subsidiaries.

(23)  Consents of Experts and Counsel.

23.1.    Consent of KPMG LLP.

(24)  Power of Attorney.

24.1.    Power of Attorney.

(99)  Additional Exhibits.

99(i)    Cautionary Statements for Purposes of the Safe Harbor Provisions of the Securities Litigation Reform Act.

(b)    Reports on Form 8-K:

During the fourth quarter of the fiscal year ended February 23, 2002, the Registrant filed no reports on Form 8-K.

24

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SUPERVALU INC. (Registrant)
DATE: April 19, 2002	By:	/s/    JEFFREY NODDLE
		Jeffrey Noddle President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/s/    JEFFREY NODDLE         Jeffrey Noddle	President (principal executive officer) and Chief Executive Officer; Director	April 19, 2002
/s/    PAMELA K. KNOUS         Pamela K. Knous	Executive Vice President, Chief Financial Officer (principal financial and accounting officer)	April 19, 2002
/s/    MICHAEL W. WRIGHT*         Michael W. Wright	Chairman of the Board; Director
/s/    LAWRENCE A. DEL SANTO*         Lawrence A. Del Santo	Director
/s/    SUSAN E. ENGEL*         Susan E. Engel	Director
/s/    EDWIN C. GAGE*         Edwin C. Gage*	Director
/s/    WILLIAM A. HODDER*         William A. Hodder	Director
/s/    GARNETT L. KEITH, JR.*         Garnett L. Keith, Jr.	Director

25

Signature	Title	Date
/s/    RICHARD L. KNOWLTON*         Richard L. Knowlton	Director
/s/    CHARLES M. LILLIS*         Charles M. Lillis	Director
/s/    HARRIET PERLMUTTER*         Harriet Perlmutter	Director
/s/    STEVEN S. ROGERS*         Steven S. Rogers*	Director
/s/    CAROLE F. ST. MARK*         Carole F. St. Mark*	Director

* Executed this 19th day of April, 2002, on behalf of the indicated Directors by John P. Breedlove, duly appointed Attorney-in-Fact.

By:	/s/    JOHN P. BREEDLOVE
	John P. Breedlove Attorney-in-Fact

26

SUPERVALU INC.

Annual Report on Form 10-K

Items 6, 8 and 14(a)

Index of Selected Financial Data and Financial Statements and Schedules

	Page
Selected Financial Data:
Five Year Financial and Operating Summary	F-2
Financial Statements:
Independent Auditors’ Report of KPMG LLP	F-3
Consolidated composition of net sales and operating earnings for each of the three years ended February 23, 2002, February 24, 2001 and February 26, 2000	F-4
Consolidated statements of earnings for each of the three years ended February 23, 2002, February 24, 2001 and February 26, 2000	F-5
Consolidated balance sheets as of February 23, 2002 and February 24, 2001	F-6
Consolidated statements of stockholders’ equity for each of the three years ended February 23, 2002, February 24, 2001 and February 26, 2000	F-7
Consolidated statements of cash flows for each of the three years ended February 23, 2002, February 24, 2001 and February 26, 2000	F-8
Notes to consolidated financial statements	F-9 – F-22
Unaudited quarterly financial information	F-23
Financial Schedules:
Schedule II:        Valuation and qualifying accounts	F-25

All other schedules are omitted because they are not applicable or not required.

F-1

SUPERVALU INC. and Subsidiaries FIVE YEAR FINANCIAL AND OPERATING SUMMARY
	2002 (b)			2001 (c)			2000 (d)			1999			1998 (e)
Statement of Earnings Data (a) (f)
Net sales	$	20,908,522		$	23,194,279		$	20,339,079		$	17,420,507		$	17,201,378
Cost of sales		18,307,974			20,635,564			18,111,296			15,620,127			15,430,642
Selling and administrative expenses		2,037,771			2,042,259			1,705,003			1,382,212			1,365,327
Gain on sale of Hazelwood Farms Bakeries		—			—			(163,662	)		—			—
Restructure and other charges		46,300			171,264			103,596			—			—
Interest, net		172,774			190,835			135,392			101,907			113,993
Equity in earnings and gain on sale of ShopKo		—			—			—			—			(93,364	)
Earnings before taxes		343,703			154,357			447,454			316,261			384,780
Provision for income taxes		138,168			72,392			204,513			124,923			154,023
Net earnings		205,535			81,965			242,941			191,338			230,757
Net earnings per common share—diluted		1.53			0.62			1.87			1.57			1.82
Balance Sheet Data (a)
Inventories (FIFO)	$	1,186,803		$	1,490,685		$	1,626,087		$	1,195,217		$	1,247,429
Working capital (g)		43,305			(115,062	)		(196,348	)		188,000			286,800
Net property, plant and equipment		2,208,633			2,232,794			2,168,210			1,699,024			1,589,601
Total assets		5,824,782			6,359,980			6,495,353			4,265,949			4,093,010
Long-term debt (h)		1,875,873			2,008,474			1,953,741			1,246,269			1,260,728
Stockholders’ equity		1,916,693			1,793,495			1,821,479			1,305,639			1,201,905
Other Statistics (a) (f)
Earnings as a percent of net sales		1.15	%		1.02	%		1.14	%		1.10	%		1.01	%
Return on average stockholders’ equity		12.63	%		12.57	%		14.27	%		15.24	%		14.19	%
Book value per common share	$	14.42		$	13.55		$	13.53		$	10.82		$	9.94
Current ratio (g)		1.03:1			0.95:1			0.92:1			1.12:1			1.20:1
Debt to capital ratio		54.1	%		59.6	%		60.0	%		54.6	%		56.9	%
Dividends declared per common share	$	0.55	3/4	$	0.54	3/4	$	0.53	3/4	$	0.52	3/4	$	0.51	1/2
Weighted average common shares outstanding—diluted		133,978			132,829			130,090			121,961			126,550
Depreciation and amortization	$	340,750		$	343,779		$	277,062		$	233,523		$	230,082
EBITDA	$	916,027		$	921,563		$	799,842		$	651,691		$	638,821
EBITDA as a percent of net sales		4.38	%		3.97	%		3.93	%		3.74	%		3.71	%
Capital expenditures	$	388,658		$	511,673		$	539,264		$	346,390		$	279,768

Notes:

(a) Fiscal 1998 contains 53 weeks; all other years include 52 weeks. Dollars in thousands except per share and percentage data.

(b) Fiscal 2002 net earnings include restructure and other items of $35.2 million or $0.27 per diluted share. This includes total pretax adjustments of $58.8 million, including $46.3 million of restructure charges and $12.5 million in store closing charges recorded in the fourth quarter. The $46.3 million of restructure charges includes $16.3 million for additional efficiency initiatives and $30.0 million of net adjustments to increase prior years’ restructure charges for increased lease liabilities. During the fourth quarter, the Company also recorded $12.5 million in store closing reserves reflected in selling and administrative expenses. Earnings as a percent of net sales, return on average stockholders’ equity, and EBITDA have been adjusted to exclude these transactions.

(c) Fiscal 2001 net earnings include restructure and other items of $153.9 million or $1.16 per diluted share. This includes total pretax adjustments of $240.1 million, including $171.3 million of restructure and other charges related primarily to consolidation of distribution facilities, exit of certain non-core retail markets, and write-off of other items. The pretax adjustments also include $17.1 million in cost of sales for inventory markdowns related to restructure activities and $51.7 million in selling and administrative expenses primarily for store closing reserves and provisions for certain uncollectible receivables. Earnings as a percent of net sales, return on average stockholders’ equity, and EBITDA have been adjusted to exclude these transactions.

(d) Fiscal 2000 net earnings include a net benefit of $10.9 million or $0.08 per diluted share from the gain on sale of Hazelwood Farms Bakeries and restructure charges. This reflects total pretax net adjustments of $60.1 million, which include a $163.7 million gain on sale of Hazelwood Farms Bakeries and $103.6 million of restructure charges related primarily to facility consolidation, non core store disposal, and rationalization of redundant and certain decentralized administrative functions. Earnings as a percent of net sales, return on average stockholders’ equity, and EBITDA have been adjusted to exclude these transactions.

(e) Fiscal 1998 net earnings include a net gain on the sale of ShopKo of $53.7 million or $0.42 per diluted share. Earnings as a percent of net sales, return on average stockholders’ equity, and EBITDA have been adjusted to exclude this transaction.

(f) Information adjusted to include stock split in fiscal 1999.

(g) Working capital and current ratio are calculated after adding back the LIFO reserve.

(h) Long-term debt includes long-term debt and long-term obligations under capital leases.

F-2

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders

SUPERVALU INC.

Eden Prairie, Minnesota

We have audited the accompanying consolidated balance sheets of SUPERVALU INC. and subsidiaries as of February 23, 2002 and February 24, 2001, and the related consolidated statements of earnings, stockholders’ equity and cash flows for each of the fiscal years in the three-year period ended February 23, 2002. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of SUPERVALU INC. and subsidiaries as of February 23, 2002 and February 24, 2001, and the results of their operations and their cash flows for each of the fiscal years in the three-year period ended February 23, 2002, in conformity with accounting principles generally accepted in the United States of America.

/s/ KPMG LLP

KPMG LLP

Minneapolis, Minnesota

April 3, 2002

F-3

SUPERVALU INC. and Subsidiaries CONSOLIDATED COMPOSITION OF NET SALES AND OPERATING EARNINGS
(In thousands, except percent data)
	February 23, 2002 (52 weeks)			February 24, 2001 (52 weeks)			February 26, 2000 (52 weeks)
Net sales
Retail food	$	9,549,068		$	9,353,992		$	8,069,767
		45.7	%		40.3	%		39.7	%
Food distribution		11,359,454			13,840,287			12,269,312
		54.3	%		59.7	%		60.3	%
Total net sales	$	20,908,522		$	23,194,279			20,339,079
		100.0	%		100.0	%		100.0	%
Operating earnings
Retail food	$	375,009		$	301,287		$	340,707
Food distribution		227,013			251,009			223,429
General corporate expenses		(39,245	)		(35,840	)		(41,356	)
Gain on sale of Hazelwood Farms Bakeries		—			—			163,662
Restructure and other charges		(46,300	)		(171,264	)		(103,596	)
Total operating earnings		516,477			345,192			582,846
Interest expense, net		(172,774	)		(190,835	)		(135,392	)
Earnings before income taxes	$	343,703		$	154,357		$	447,454
Identifiable assets
Retail food	$	3,127,110		$	3,098,916		$	3,077,134
Food distribution		2,683,486			3,247,172			3,408,866
Corporate		14,186			13,892			9,353
Total	$	5,824,782		$	6,359,980		$	6,495,353
Depreciation and amortization
Retail food	$	177,585		$	173,418		$	149,574
Food distribution		160,718			167,253			124,161
Corporate		2,447			3,108			3,327
Total	$	340,750		$	343,779		$	277,062
Capital expenditures
Retail food	$	310,738		$	347,540		$	352,428
Food distribution		74,860			158,591			180,968
Corporate		3,060			5,542			5,868
Total	$	388,658		$	511,673		$	539,264

Reportable segment operating earnings were computed as total revenue less associated operating expenses.

Fiscal 2002 operating earnings reflect pretax charges of $12.5 million in retail food for store closing reserves.

Fiscal 2001 operating earnings reflect pretax charges of $44.5 million in retail food for store closing reserves and $24.3 million in food distribution for inventory markdowns and provisions for certain uncollectible receivables.

Identifiable assets are those assets of the Company directly associated with the reportable segments.

See notes to consolidated financial statements

F-4

SUPERVALU INC. and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

	February 23, 2002		February 24, 2001			February 26, 2000
	(52 weeks)		(52 weeks)			(52 weeks)
Net sales	$	20,908,522	$	23,194,279		$	20,339,079
Costs and expenses
Cost of sales		18,307,974		20,635,564			18,111,296
Selling and administrative expenses		2,037,771		2,042,259			1,705,003
Gain on sale of Hazelwood Farms Bakeries		—		—			(163,662	)
Restructure and other charges		46,300		171,264			103,596
Interest
Interest expense		194,294		212,898			154,482
Interest income		21,520		22,063			19,090
Interest expense, net		172,774		190,835			135,392
Total costs and expenses		20,564,819		23,039,922			19,891,625
Earnings before income taxes		343,703		154,357			447,454
Provision for income taxes
Current		61,808		110,872			225,554
Deferred		76,360		(38,480	)		(21,041	)
Income tax expense		138,168		72,392			204,513
Net earnings	$	205,535	$	81,965		$	242,941
Weighted average number of common shares outstanding
Diluted		133,978		132,829			130,090
Basic		132,940		132,251			129,162
Net earnings per common share—diluted	$	1.53	$	0.62		$	1.87
Net earnings per common share—basic	$	1.55	$	0.62		$	1.88

See notes to consolidated financial statements.

F-5

SUPERVALU INC. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	February 23, 2002			February 24, 2001
ASSETS
Current Assets
Cash and cash equivalents	$	12,171		$	10,396
Receivables, less allowance for losses of $22,941 in 2002 and $22,750 in 2001		467,790			591,077
Inventories		1,046,036			1,350,061
Other current assets		78,030			101,104
Total current assets		1,604,027			2,052,638
Long-term notes receivable, less allowance for losses of $18,876 in 2002 and $18,449 in 2001		68,774			79,196
Long-term investment in direct financing leases		68,552			74,038
Property, plant and equipment
Land		172,385			166,505
Buildings		1,128,882			1,051,027
Property under construction		51,977			57,631
Leasehold improvements		285,842			286,316
Equipment		1,603,890			1,645,641
Assets under capital leases		546,289			556,902
		3,789,265			3,764,022
Less accumulated depreciation and amortization
Owned property, plant and equipment		1,460,541			1,416,538
Assets under capital leases		120,091			114,690
Net property, plant and equipment		2,208,633			2,232,794
Goodwill		1,531,312			1,576,780
Other assets		343,484			344,534
Total assets	$	5,824,782		$	6,359,980
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Notes payable	$	27,465		$	579,039
Accounts payable		1,013,140			1,396,011
Accrued vacation, compensation and benefits		148,179			119,960
Current maturities of long-term debt		326,266			23,171
Current obligations under capital leases		30,142			31,497
Other current liabilities		156,297			158,646
Total current liabilities		1,701,489			2,308,324
Long-term debt		1,342,428			1,444,376
Long-term obligations under capital leases		533,445			564,098
Deferred income taxes		79,750			15,310
Other liabilities		250,977			234,377
Commitments and Contingencies
Stockholders’ equity
Common stock, $1.00 par value: Authorized 200,000 shares
Shares issued, 150,670 in 2002 and 2001		150,670			150,670
Capital in excess of par value		121,444			128,492
Other comprehensive loss		(7,075	)		—
Retained earnings		1,987,539			1,856,433
Treasury stock, at cost, 17,781 shares in 2002 and 18,296 shares in 2001		(335,885	)		(342,100	)
Total stockholders’ equity		1,916,693			1,793,495
Total liabilities and stockholders’ equity	$	5,824,782		$	6,359,980

See notes to consolidated financial statements.

F-6

SUPERVALU INC. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except per share data)

	Preferred Stock					Common Stock			Capital in Excess of Par Value			Treasury Stock					Accumulated Other Comprehensive Loss
	Shares		Amount			Shares	Amount					Shares		Amount						Retained Earnings			Total
BALANCES AT FEBRUARY 27, 1999	6		$	5,908		150,670	$	150,670	$	—		(30,561	)	$	(524,321	)	$	—		$	1,673,382		$	1,305,639
Net earnings	—			—		—		—		—		—			—			—			242,941			242,941
Sales of common stock under option plans	—			—		—		—		(5,181	)	377			10,738			—			—			5,557
Cash dividends declared on common stock $0.5375 per share	—			—		—		—		—		—			—			—			(68,952	)		(68,952	)
Compensation under employee incentive plans	—			—		—		—		(1,802	)	395			9,408			—			—			7,606
Treasury shares exchanged for acquisitions	—			—		—		—		139,209		20,449			318,293			—			—			457,502
Redemption of preferred stock	(6	)		(5,908	)	—		—		—		—			—			—			—			(5,908	)
Purchase of shares for treasury	—			—		—		—		—		(6,668	)		(122,906	)		—			—			(122,906	)
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	—			—		—		—		—		—			—			—			205,535			205,535
Sales of common stock under option plans	—			—		—		—		(2,103	)	1,401			28,005			—			—			25,902
Cash dividends declared on common stock $0.5575 per share	—			—		—		—		—		—			—			—			(74,429	)		(74,429	)
Compensation under employee incentive plans	—			—		—		—		(4,945	)	576			10,293			—			—			5,348
Other comprehensive loss	—			—		—		—		—		—			—			(7,075	)					(7,075	)
Purchase of shares for treasury	—			—		—		—		—		(1,462	)		(32,083	)		—			—			(32,083	)
BALANCES AT FEBRUARY 23, 2002	—			—		150,670	$	150,670	$	121,444		(17,781	)	$	(335,885	)	$	(7,075	)	$	1,987,539		$	1,916,693

See notes to consolidated financial statements.

F-7

SUPERVALU INC. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	February 23, 2002 (52 weeks)			February 24, 2001 (52 weeks)			February 26, 2000 (52 weeks)
Cash flows from operating activities
Net earnings	$	205,535		$	81,965		$	242,941
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		340,750			343,779			277,062
LIFO expense		143			4,991			8,253
Provision for losses on receivables		19,898			23,107			9,895
Gain on sale of Hazelwood Farms Bakeries		—			—			(163,662	)
Restructure and other charges		46,300			171,264			103,596
Deferred income taxes		76,360			(38,480	)		(21,041	)
Other adjustments, net		1,382			829			2,032
Changes in assets and liabilities, excluding effect from acquisitions:
Receivables		103,389			(43,582	)		(58,887	)
Inventories		304,779			135,402			(195,192	)
Accounts payable		(349,463	)		(66,824	)		61,997
Other assets and liabilities		37,629			38,774			74,178
Net cash provided by operating activities		786,702			651,225			341,172
Cash flows from investing activities
Additions to long-term notes receivable		(37,372	)		(69,875	)		(55,162	)
Proceeds received on long-term notes receivable		47,794			69,439			52,101
Proceeds from sale of assets		89,504			48,179			374,714
Purchases of property, plant and equipment		(292,927	)		(397,715	)		(407,947	)
Business acquisitions, net of cash acquired		—			—			(480,502	)
Other investing activities		(51,093	)		(30,389	)		(17,704	)
Net cash used in investing activities		(244,094	)		(380,361	)		(534,500	)
Cash flows from financing activities
Net (decrease) increase in checks outstanding, net of deposits		(77,764	)		(13,537	)		23,529
Net (reduction) issuance of short-term notes payable		(551,574	)		2,526			472,670
Proceeds from issuance of long-term debt		218,014			60,000			594,485
Repayment of long-term debt		(16,867	)		(171,692	)		(672,303	)
Reduction of obligations under capital leases		(25,988	)		(28,220	)		(28,376	)
Net proceeds from the sale of common stock under option plans		19,453			457			2,381
Redemption of preferred stock		—			—			(5,908	)
Dividends paid		(74,024	)		(72,244	)		(66,932	)
Payment for purchase of treasury stock		(32,083	)		(48,678	)		(122,906	)
Net cash (used in) provided by financing activities		(540,833	)		(271,388	)		196,640
Net increase (decrease) in cash and cash equivalents		1,775			(524	)		3,312
Cash and cash equivalents at beginning of year		10,396			10,920			7,608
Cash and cash equivalents at end of year	$	12,171		$	10,396		$	10,920

SUPPLEMENTAL CASH FLOW INFORMATION

The Company’s non-cash investing and financing activities were as follows:

Leased asset additions and related obligations	$	95,730	$	113,958	$	131,316
Acquisitions:
Fair value of assets acquired		—		—	$	1,951,004
Cash paid		—		—		481,861
Common stock issued		—		—		457,502
Liabilities assumed		—		—		1,011,641
Interest paid	$	184,719	$	213,572	$	138,415
Income taxes paid	$	102,123	$	75,226	$	245,177

See notes to consolidated financial statements.

F-8

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation:

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Revenue and Income Recognition:

Revenues and income from product sales are recognized at the point of sale for retail food and upon shipment of the product for food distribution. Revenues and income from services rendered are recognized immediately after such services have been provided.

Allowances for Losses on Receivables:

Management makes estimates of the uncollectibility of its accounts and notes receivable portfolios. In determining the adequacy of its allowances, management analyzes the value of the collateral, customer financial statements, historical collection experience, aging of receivables and other economic and industry factors. It is possible that the accuracy of the estimation process could be materially impacted by different judgments as to collectibility based on the information considered and further deterioration of accounts.

Reserves for Closed Properties:

The Company maintains reserves for estimated losses on retail stores, distribution warehouses and other properties that are no longer being utilized in current operations. Calculating the estimated losses requires significant judgments and estimates to be made by management. The Company’s reserves for closed properties could be materially affected by factors such as the extent of interested buyers, its ability to secure subleases, the creditworthiness of sublessees and the Company’s success at negotiating early termination agreements with lessors. These factors are significantly dependent on the general health of the economy and resultant demand for commercial property. While management believes the current estimates of reserves on closed properties are adequate, it is possible that changes in events could cause changes in the Company’s assumptions, requiring additional reserves to be recorded.

LIFO and Retail Inventory Method:

Inventories are stated at the lower of cost or market. Cost is determined through use of the last-in, first-out (LIFO) method for food distribution or the retail LIFO method, as applicable. Under the retail LIFO method, otherwise referred to as the retail inventory method (RIM), the valuation of inventories are at cost and the resulting gross margins are calculated by applying a calculated cost-to-retail ratio to the retail value of inventories. The Company utilizes LIFO or the retail LIFO method to value approximately 69.8 percent and 75.5 percent of the Company’s consolidated inventories for fiscal 2002 and 2001, respectively. The first-in, first-out method (FIFO) is used to determine cost for some of the remaining highly consumable inventories. Market is replacement value. If the FIFO method had been used to determine cost of inventories for which the LIFO method is used, the Company’s inventories would have been higher by approximately $140.8 million at February 23, 2002 and $140.6 million at February 24, 2001.

Reserves for Self Insurance:

The Company is primarily self-insured for workers’ compensation and general and automobile liability costs. It is the Company’s policy to record its self insurance liabilities based on claims filed and an estimate of claims incurred but not yet reported. Any projection of losses concerning workers’ compensation and general and automobile liability is subject to a considerable degree of variability. Among the causes of this variability are unpredictable external factors affecting future inflation rates, litigation trends, legal interpretations, benefit level changes and claim settlement patterns.

Property, Plant and Equipment:

Property, plant and equipment are carried at cost. Depreciation, as well as amortization of assets under capital leases, are based on the estimated useful lives of the assets using the straight-line method. Estimated useful lives generally are 10 to 40 years for buildings and major improvements, 3 to 10 years for equipment, and the shorter of the term of the lease or expected life for leasehold improvements. Interest on property under construction of $5.7, $8.1 and $4.8 million was capitalized in fiscal years 2002, 2001 and 2000, respectively.

F-9

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Goodwill and Other Intangible Assets:

Under existing accounting rules, goodwill and other intangible assets are amortized on a straight-line basis over an estimated useful life, or if no useful life is determinable, over a period no greater than 40 years. Through fiscal 2002, the recoverability of goodwill is assessed by determining whether the goodwill balance can be recovered through projected undiscounted cash flows and operating results over its remaining life. Impairment of the asset would be recognized when it is probable that such future undiscounted cash flows will be less than the carrying value of the asset. Goodwill is shown net of accumulated amortization of $218.5 million and $171.3 million in fiscal 2002 and 2001, respectively.

In fiscal 2003, SFAS No. 142, “Goodwill and Other Intangible Assets” will become effective for the Company and as a result, the Company will cease to amortize goodwill and other intangibles deemed to have indefinite lives. In lieu of amortization, the Company is required to perform an initial impairment review of its goodwill and other intangibles in fiscal 2003 and an annual impairment review thereafter. The Company expects to complete its initial review prior to the end of the first quarter of fiscal 2003. Other intangible assets with determinable lives will continue to be amortized over their respective useful lives and will also be subject to annual impairment testing based on estimated fair value.

Retirement Plans:

The Company sponsors pension and other retirement plans in various forms covering substantially all employees who meet eligibility requirements. The determination of the obligation and expense for these plans is dependent on management’s selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions are described in the Retirement Plans footnote to the consolidated financial statements and include the discount rate, expected long-term rate of return on plan assets, and rates of increases in compensation and healthcare costs. The actuarial assumptions used by the Company may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates, and longer or shorter life spans of participants.

Financial Instruments:

The Company has only limited involvement with derivative financial instruments and uses them only to manage well-defined interest rate risks. The derivatives used have included interest rate caps, collars and swap agreements. The Company does not use financial instruments or derivatives for any trading or other speculative purposes. At fiscal year end 2001, the Company had two interest rate swap agreements in place which either exchanged a floating rate payment obligation for a fixed rate payment obligation, or exchanged a fixed rate payment obligation for a floating rate payment obligation.

SFAS No. 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.

Fair Value Disclosures of Financial Instruments:

The estimated fair value of notes receivable approximates the net carrying value at February 23, 2002 and February 24, 2001. Notes receivable are valued based on comparisons to publicly traded debt instruments of similar credit quality.

The estimated fair market value of the Company’s long-term debt (including current maturities) was in excess of the carrying value by approximately $64.0 million at February 23, 2002, and was less than the carrying value by approximately $43.3 million at February 24, 2001. The estimated fair value was based on market quotes, where available, discounted cash flows and market yields for similar instruments. The estimated fair market value of the Company’s commercial paper and bank borrowings outstanding as of February 24, 2001 approximated the carrying value.

Advertising Costs:

Advertising costs are expensed as incurred.

Stock-based Compensation:

The Company uses the “intrinsic value-based method” for measuring the cost of compensation paid in Company common stock. This method defines the Company’s cost as the excess of the stock’s market value at the time of the grant over the amount that the employee is required to pay.

Net Earnings Per Share:

Basic earnings per share (EPS) is calculated using income available to common shareholders divided by the weighted average of common shares outstanding during the year. Diluted EPS is similar to Basic EPS except that the weighted average of common

F-10

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 exercised.

Use of Estimates:

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications:

Certain reclassifications have been made to the prior year’s financial statements to conform to the fiscal 2002 presentation. These reclassifications did not affect results of operations previously reported.

RICHFOOD ACQUISITION

On August 31, 1999, the Company acquired, in a merger, all of the outstanding common stock of Richfood Holdings, Inc. (Richfood), a major food retailer and distributor operating primarily in the Mid-Atlantic region of the United States. The acquisition was accounted for as a purchase. The Company issued approximately 19.7 million shares of SUPERVALU common stock with a market value of approximately $443 million, paid $443 million in cash for the common stock of Richfood and assumed approximately $685 million of debt in conjunction with the acquisition. In addition, the Company repaid approximately $394 million of outstanding Richfood debt, leaving approximately $291 million outstanding immediately after the acquisition. The allocation of the consideration paid for Richfood to the consolidated assets and liabilities is based on estimates of their respective fair values. The excess of the purchase price over the fair value of net assets acquired of approximately $1.1 billion is being amortized on a straight-line basis over 40 years. Beginning in fiscal 2003, goodwill will no longer be amortized and will instead be periodically evaluated for impairment. The results of Richfood’s operations since August 31, 1999 have been included in the Company’s consolidated financial statements.

Unaudited pro forma consolidated results of continuing operations, as though the companies had been combined at the beginning of the periods presented, are as follows:

	2000
	(In thousands, except per share data)
Net sales	$	22,309,061
Net earnings	$	261,406	(a)
Net earnings per common share—diluted	$	1.87	(a)

(a) Amounts include a net gain of $10.9 million or $0.08 per diluted share from the gain on the sale of Hazelwood Farms Bakeries and from restructure charges.

RESTRUCTURE AND OTHER CHARGES

In the fourth quarter of fiscal 2002, the Company identified additional efforts that will allow it to extend its distribution efficiency program begun early in fiscal 2001 and adjusted prior years’ restructure reserves for changes in estimates primarily related to real estate, as a result of a softening real estate market. The additional distribution efficiency initiatives identified in fiscal 2002 primarily relate to personnel reductions in transportation and administrative functions. The total pretax restructure charges were $46.3 million, of which $16.3 million is related to additional efficiency efforts, $17.8 million is related to changes in estimates for the fiscal 2001 restructure reserve and $12.2 million is related to changes in estimates for the fiscal 2000 restructure reserve.

Included in the $16.3 million of restructure charges for fiscal 2002 is $13.1 million related to severance and employee related costs and $3.2 million related to lease cancellation fees. These actions include a net reduction of approximately 800 employees throughout the organization. Management will begin the initiatives in fiscal 2003 and expects the majority of these actions to be completed by the end of fiscal 2003.

In the fourth quarter of fiscal 2001, the Company recorded pretax restructure 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 restructure reserve of $10.3 million for lease subsidies and future payments on exited leased facilities. As a result

F-11

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

of changes in estimates in fiscal 2002, the fiscal 2001 charges were increased by $17.8 million, including $19.1 million for increased lease liabilities in exiting the non-core retail markets and the disposal of non-core assets, offset by a net decrease of $1.3 million in restructure reserves for the consolidation of distribution centers.

Details of the fiscal 2001 restructure balances for fiscal 2002 follow:

	Balance February 24, 2001		Fiscal     2002     Usage		Fiscal 2002 Adjustment			Balance February 23, 2002
	(In thousands, except for employees)
Consolidation of distribution centers	$	41,499	$	14,134	$	(1,303	)	$	26,062
Exit of non-core retail markets		33,735		26,829		15,235			22,141
Disposal of non-core assets and other administrative reductions		16,619		12,782		3,911			7,748
Total restructure and other charges	$	91,853	$	53,745	$	17,843		$	55,951
Employees		4,500		3,200		(550	)		750

The reserve at the end of fiscal 2002 for fiscal 2001 restructure charges was $56.0 million, including $50.0 million for lease subsidies, lease terminations and future payments on exited leased facilities and $6.0 million for employee related costs.

In fiscal 2000, the Company recorded pretax restructure and other charges of $103.6 million as a result of an extensive review to reduce costs and enhance efficiencies. The restructure charges included costs for facility consolidation, non-core store disposal, and rationalization of redundant and certain decentralized administrative functions. The original amount was reduced by $10.3 million in fiscal 2001, primarily for a change in estimate for the closure of a remaining facility. The amount was subsequently increased $12.2 million in fiscal 2002, primarily due to the softening real estate market.

Details of the fiscal 2000 restructure balances for fiscal 2002 follow:

	Balance February 24, 2001		Fiscal     2002     Usage		Fiscal 2002 Adjustment			Balance February 23, 2002
	(In thousands, except for employees)
Facility consolidation	$	11,472	$	8,481	$	10,247		$	13,238
Non-core store disposal		4,404		2,754		2,961			4,611
Infrastructure realignment		1,980		854		(984	)		142
Total restructure and other charges	$	17,856	$	12,089	$	12,224		$	17,991
Employees		463		463		—			—

The reserve at the end of fiscal 2002 for fiscal 2000 restructure charges was $18.0 million, including $14.9 million for future payments on exited leased facilities and $3.1 million for unpaid employee benefits.

NOTES RECEIVABLE

Notes receivable arise from financing activities with affiliated retail food customers. Loans to affiliated retailers, as well as trade accounts receivable, are primarily collateralized by the retailers’ inventory, equipment and fixtures. The notes range in length from 1 to 20 years with an average term of 7 years, and may be non-interest bearing or bear interest at rates ranging from 5 to 11 percent.

Included in current receivables are notes receivable due within one year, net of allowance for losses, of $23.9 and $25.1 million at February 23, 2002 and February 24, 2001, respectively.

F-12

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

DEBT
	February 23, 2002		February 24, 2001
	(In thousands)
7.8% promissory note due fiscal 2003	$	300,000	$	300,000
7.625% promissory note due fiscal 2005		250,000		250,000
7.875% promissory note due fiscal 2010		350,000		350,000
8.875% promissory note due fiscal 2023		100,000		100,000
9.75% senior notes, $168,850 face amount due fiscal 2005		174,098		178,111
6.23%-6.69% medium-term notes due fiscal 2006-2007		103,500		103,500
Zero-coupon convertible debentures		216,345		—
Variable rate to 7.125% industrial revenue bonds		71,530		74,526
8.28%-9.96% promissory notes due fiscal 2004-2010		32,420		37,648
7.78%, 8.02%, and 8.57% obligations with quarterly payments of principal and interest due fiscal 2005 through 2007		59,845		60,000
Other debt		10,956		13,762
		1,668,694		1,467,547
Less current maturities		326,266		23,171
Long-term debt	$	1,342,428	$	1,444,376
Aggregate maturities of long-term debt during the next five fiscal years are:
			(In thousands)
2003			$	326,266
2004				31,857
2005				440,297
2006				62,826
2007				73,112

The debt agreements contain various financial covenants including maximum permitted leverage, minimum coverage and asset coverage ratios as defined in the Company’s debt agreements. The Company has met the financial covenants under the debt agreements as of February 23, 2002.

On February 28, 2000, the Company exercised its option to prepay $88.5 million of variable rate debt. Also during fiscal year 2001, $57.5 million in medium term notes matured. On December 26, 2000 and February 23, 2001, the Company issued $40 million and $20 million of five year debt with quarterly payments of principal and interest at 7.78% and 8.02%, respectively. On May 30, 2001, the Company issued $10 million of five-year debt with quarterly payments of principal and interest at 8.57%. The proceeds from these issuances were used to reduce other short-term debt.

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 February 23, 2002, the Company had no borrowings outstanding under this program.

In November 2001, the Company sold zero-coupon convertible debentures having an aggregate 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. The debentures will generally be convertible if the closing price of the Company’s common stock on the New York Stock Exchange for twenty of the last thirty trading days of any fiscal quarter exceeds certain levels, set initially at $33.20 per share for the quarter ended February 23, 2002, and rising to $113.29 per share at September 6, 2031. In the event of conversion, 9.6434 shares of the Company’s common stock will be issued per $1,000 debenture. 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 period 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.

F-13

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company has periodically entered into short-term credit agreements having tenors of three to nine months. The Company had $215 million in credit facilities under such agreements with rates tied to LIBOR plus 0.310 to 0.515 percent at February 24, 2001. There were no borrowings outstanding under these credit facilities at February 24, 2001. As of February 23, 2002 and February 24, 2001, total commercial paper outstanding was $0 and $327 million, respectively, with a weighted average interest rate of 6.4 percent at February 24, 2001.

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. Outstanding borrowings under the revolving credit facilities for February 23, 2002 and February 24, 2001 were $0 and $250 million, respectively, and are reflected in Notes Payable on the consolidated balance sheet. As of February 23, 2002, letters of credit under the facilities were $122 million and the unused available credit under these facilities was $578 million.

LEASES

Capital and operating leases:

The Company leases certain retail food stores, food distribution warehouses and office facilities. Many of these leases include renewal options, and to a limited extent, include options to purchase. Amortization of assets under capital leases was $31.6, $33.3 and $27.0 million in fiscal 2002, 2001 and 2000, respectively. Future minimum obligations under capital leases in effect at February 23, 2002 are as follows:

	Lease Obligations
	(In thousands)
Fiscal Year
2003	$	64,265
2004		63,251
2005		62,872
2006		61,877
2007		62,196
Later		618,941
Total future minimum obligations		933,402
Less interest		443,226
Present value of net future minimum obligations		490,176
Less current obligations		23,062
Long-term obligations	$	467,114

The present values of future minimum obligations shown are calculated based on interest rates ranging from 6.7 percent to 13.8 percent, with a weighted average rate of 8.3 percent, determined to be applicable at the inception of the leases.

F-14

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In addition to its capital leases, the Company is obligated under operating leases, primarily for buildings, warehouses and computer equipment. Future minimum obligations under operating leases in effect at February 23, 2002 are as follows:

	Lease Obligations
	(In thousands)
Fiscal Year
2003	$	136,826
2004		122,144
2005		106,220
2006		91,884
2007		81,985
Later		457,669
Total future minimum obligations	$	996,728

The Company is party to synthetic leasing programs for two of its major warehouses. The leases qualify for operating lease accounting treatment under SFAS No. 13, “Accounting for Leases”. For additional information on synthetic leases, refer to the footnote on Commitments, Contingencies and Off-Balance Sheet Arrangements.

Total rent expense, net of sublease income, relating to all operating leases with terms greater than one year was $100.7, $88.4 and $61.5 million in fiscal 2002, 2001 and 2000, respectively.

Future minimum receivables under operating leases and subleases in effect at February 23, 2002 are as follows:

	Owned Property		Leased Property		Total
	(In thousands)
Fiscal Year
2003	$	2,893	$	20,110	$	23,003
2004		2,714		16,523		19,237
2005		2,620		13,815		16,435
2006		2,338		10,705		13,043
2007		2,158		8,459		10,617
Later		10,703		27,626		38,329
Total future minimum receivables	$	23,426	$	97,238	$	120,664
Owned property under operating leases is as follows:
	February 23, 2002		February 24, 2001
	(In thousands)
Land, buildings and equipment	$	42,343	$	44,946
Less accumulated depreciation		19,435		20,911
Net land, buildings and equipment	$	22,908	$	24,035

F-15

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Direct financing leases:

Under direct financing capital leases, the Company leases buildings on behalf of independent retailers with terms ranging from 5 to 20 years. Future minimum rentals to be received under direct financing leases and related future minimum obligations under capital leases in effect at February 23, 2002 are as follows:

	Direct Financing Lease Receivables		Capital Lease Obligations
	(In thousands)
Fiscal Year
2003	$	12,821	$	12,714
2004		11,748		11,706
2005		10,794		10,771
2006		10,046		10,025
2007		9,407		9,511
Later		57,366		56,494
Total minimum lease payments		112,182		111,221
Less unearned income		36,670		—
Less interest		—		37,810
Present value of net minimum lease payments		75,512		73,411
Less current portion		6,960		7,080
Long-term portion	$	68,552	$	66,331

INCOME TAXES

The provision for income taxes consists of the following:

	2002			2001			2000
	(In thousands)
Current
Federal	$	54,034		$	96,022		$	187,788
State		8,524			15,450			38,245
Tax credits		(750	)		(600	)		(479	)
Deferred
Restructure and other items		18,590			(63,452	)		(31,678	)
Other		57,770			24,972			10,637
Total provision	$	138,168		$	72,392		$	204,513

The difference between the actual tax provision and the tax provision computed by applying the statutory federal income tax rate to earnings before taxes is attributable to the following:

	2002			2001			2000
	(In thousands)
Federal taxes based on statutory rate	$	120,296		$	54,025		$	156,609
State income taxes, net of federal benefit		11,961			5,267			19,196
Nondeductible goodwill		15,439			22,354			11,118
Asset sale basis difference		—			—			24,238
Audit settlements		(4,583	)		(6,539	)		—
Other		(4,945	)		(2,715	)		(6,648	)
Total provision	$	138,168		$	72,392		$	204,513

F-16

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Temporary differences which give rise to significant portions of the net deferred tax (liability) asset as of February 23, 2002 and February 24, 2001 are as follows:

	2002			2001
	(In thousands)
Deferred tax assets:
Restructure and other items	$	90,207		$	108,797
Net operating loss from acquired subsidiaries		42,131			48,193
Provision for obligations to be settled in future periods		133,013			133,647
Inventories		11,062			14,175
Other		25,127			31,022
Total deferred tax assets		301,540			335,834
Deferred tax liabilities:
Depreciation and amortization		(76,381	)		(76,181	)
Acquired assets adjustment to fair values		(54,842	)		(48,439	)
Tax deductions for benefits to be paid in future periods		(145,086	)		(114,574	)
Other		(71,994	)		(67,043	)
Total deferred tax liabilities		(348,303	)		(306,237	)
Net deferred tax (liability) asset	$	(46,763	)	$	29,597

The Company currently has net operating loss (NOL) carryforwards from acquired companies of $104.1 million for tax purposes, which expire beginning in 2005 and continuing through 2018.

Temporary differences attributable to obligations to be settled in future periods consist primarily of accrued postretirement benefits and vacation pay, and other expenses that are not deductible for income tax purposes until paid.

STOCK OPTION PLANS            

The Company’s 1997, 1993 and SUPERVALU/Richfood 1996 stock option plans allow the granting of non-qualified stock options and incentive stock options to key salaried executive employees at prices not less than 100 percent of fair market value, determined by averaging the open and close price on the date of grant. The Company’s 1983 plan no longer allows granting of stock options, but outstanding options remain to be exercised. On August 31, 1999 the Company acquired Richfood, and in connection therewith assumed all outstanding options and shares available for grant related to existing Richfood stock option plans, based on the exchange factor set forth in the merger agreement. In February 2000, the Board of Directors reserved an additional 3.0 million shares for issuance under stock option plans. The plans provide that the Board of Directors or the Executive Personnel and Compensation Committee of the Board (the Committee) may determine at the time of granting whether each option granted will be a non-qualified or incentive stock option under the Internal Revenue Code. The term of each option will be determined by the Board of Directors or the Committee, but shall not be for more than 10 years from the date of grant. Options may be exercised in installments or otherwise, as the Board of Directors or the Committee, may determine.

F-17

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Changes in the options are as follows:

	Shares		Weighted Average Price per Share
	(In thousands)
Outstanding, February 27, 1999	7,916		$	18.26
Richfood acquisition	1,030			24.30
Granted	3,458			28.73
Exercised	(562	)		14.76
Canceled and forfeited	(100	)
Outstanding, February 26, 2000	11,742		$	22.01
Granted	4,243			15.15
Exercised	(509	)		15.72
Canceled and forfeited	(1,066	)
Outstanding, February 24, 2001	14,410		$	20.26
Granted	1,215			17.32
Exercised	(1,781	)		15.82
Canceled and forfeited	(677	)
Outstanding, February 23, 2002	13,167		$	20.69

The outstanding stock options at February 23, 2002 have exercise prices ranging from $6.93 to $40.00 and a weighted average remaining contractual life of 6.28 years. Options to purchase 8.3 and 8.2 million shares were exercisable at February 23, 2002 and February 24, 2001, respectively. These options have a weighted average exercise price of $19.11 and $18.61, respectively. Option shares available for grant were 1.9 and 2.4 million at February 23, 2002 and February 24, 2001, respectively. The Company has reserved 15.1 million shares, in aggregate, for the plans.

As of February 23, 2002, limited stock appreciation rights have been granted and are outstanding under the 1978, 1989 and 1993 Stock Appreciation Rights Plans. Such rights relate to options granted to purchase 2.9 million shares of common stock and are exercisable only upon a “change in control.”

No compensation cost has been recognized for options issued under the stock option plans because the exercise price of all options granted was not less than 100 percent of fair market value of the common stock on the date of grant. Had compensation cost for the stock options issued been determined based on the fair value at the grant date, consistent with provisions of SFAS No. 123, “Accounting for Stock Based Compensation,” the Company’s 2002, 2001 and 2000 net earnings and earnings per share would have been changed to the pro forma amounts indicated below:

F-18

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	2002		2001		2000
	(In thousands, except per share amounts)
Net earnings
As reported	$	205,535	$	81,965	$	242,941
Pro forma		200,034		74,071		237,381
Earnings per share—diluted
As reported	$	1.53	$	0.62	$	1.87
Pro forma		1.49		0.56		1.82

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions and results:

	2002		2001		2000
Assumptions
Dividend yield		2.00%		2.00%		2.00%
Risk free interest rate		4.23%		4.83%		6.57%
Expected life		4.5 years		5 years		5 years
Expected volatility		32.50%		30.40%		21.97%
Estimated fair value of options granted per share	$	4.85	$	4.37	$	6.20

TREASURY STOCK PURCHASE PROGRAM            

In August 1996, the Board of Directors authorized a treasury stock purchase program under which the Company is authorized to repurchase up to 10.0 million shares for reissuance upon the exercise of employee stock options and for other compensation programs utilizing the Company’s stock. In December 1999, the Board of Directors authorized a treasury stock purchase program under which the Company is authorized to purchase up to $140.0 million of the Company’s common stock. In fiscal 2000, the Company repurchased 0.8 million shares at an average cost of $22.66 under the August 1996 program and 5.9 million shares at an average cost of $17.86 under the December 1999 program. In fiscal 2001, the Company repurchased an additional 0.8 million shares under the August 1996 program at an average cost of $15.92 per share. In fiscal 2001, the Company completed the December 1999 program with the repurchase of an additional 2.1 million shares at an average cost of $16.86 per share for a total cost of $140.0 million. In fiscal 2002, the Company completed the 1996 stock repurchase program by purchasing 0.2 million shares at an average cost of $19.97 per share. In fiscal 2002, the Board of Directors authorized a treasury stock purchase program under which the Company is authorized to purchase up to 5.0 million shares for reissuance upon the exercise of employee stock options and for other compensation programs utilizing the Company’s stock. In fiscal 2002, the Company repurchased 1.3 million shares at an average cost of $22.16 per share under the 2002 program.

EARNINGS PER SHARE

The following table reflects the calculation of basic and diluted earnings per share:

	2002		2001		2000
	(In thousands, except per share amounts)
Earnings per share—basic
Earnings available to common shareholders	$	205,535	$	81,965	$	242,941
Weighted average shares outstanding		132,940		132,251		129,162
Earnings per share—basic	$	1.55	$	0.62	$	1.88
Earnings per share—diluted
Earnings available to common shareholders	$	205,535	$	81,965	$	242,941
Weighted average shares outstanding		132,940		132,251		129,162
Dilutive impact of options outstanding		1,038		578		928
Weighted average shares and potential dilutive shares outstanding		133,978		132,829		130,090
Earnings per share—diluted	$	1.53	$	0.62	$	1.87

F-19

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS

The Company has guaranteed mortgage loan and other debt obligations of $6.7 million. The Company has also guaranteed the leases and fixture financing loans of various affiliated retailers with a present value of $174.8 million and $33.7 million, respectively.

On December 4, 1998, the Company entered into an agreement to sell notes receivable to a special purpose entity, which qualifies to be accounted for as an unconsolidated subsidiary. The entity is designed to acquire qualifying notes receivable from the Company and sell them to a third party. No notes have been sold since February 29, 2000. Assets and related debt off-balance sheet were $27.0 million at February 23, 2002 and $46.4 million at February 24, 2001. At February 23, 2002, the Company’s limited recourse with respect to notes sold was $12.1 million.

The Company is party to synthetic leasing programs for two of its major warehouses. At the expiration of each lease, the Company has the option to either renew the lease if agreed to through negotiations with the applicable third party, purchase the property based on a fixed purchase price as established in the original agreement, or remit a contingent rental payment to the applicable third party. The two synthetic leases expire in fiscal 2004 and fiscal 2005. The synthetic lease that expires in fiscal 2004 has a renewal option available through fiscal 2009, an approximate purchase option of $60 million or a contingent rental liability of $50 million. The synthetic lease that expires in fiscal 2005 has a renewal option available through fiscal 2007, an approximate purchase option of $25 million or a contingent rental liability of $20 million. At February 23, 2002, the estimated market value of the properties underlying these leases equals or exceeds the purchase option and the contingent rental liability.

The Company is a party to various legal proceedings arising from the normal course of business activities, none of which, in management’s opinion, is expected to have a material adverse impact on the Company’s consolidated statement of earnings or consolidated financial position.

RETIREMENT PLANS            

Substantially all non-union employees of the Company and its subsidiaries are covered by various contributory and non-contributory pension or profit sharing plans. The Company also participates in several multi-employer plans providing defined benefits to union employees under the provisions of collective bargaining agreements.

Contributions under the defined contribution 401(k) and profit sharing plans are determined at the discretion of the Board of Directors and were $16.1, $11.9 and $14.1 million for fiscal 2002, 2001 and 2000, respectively.

Amounts charged to union pension expense were $38.4, $42.7 and $39.3 million for fiscal 2002, 2001 and 2000, respectively.

Benefit calculations for the Company’s defined benefit pension plans are based on years of service and the participants’ highest compensation during five consecutive years of employment. Annual payments to the pension trust fund are determined in compliance with the Employee Retirement Income Security Act (ERISA). Plan assets are held in trust and invested in separately managed accounts and publicly traded mutual funds holding both equity and fixed income securities.

In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for certain retired employees. Certain employees become eligible for these benefits upon meeting certain age and service requirements.

F-20

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following tables set forth the changes in benefit obligations and plan assets, a reconciliation of the accrued benefit costs and total benefit costs for the fiscal years for the Company’s defined benefit pension plans and other postretirement plans:

	Pension Benefits						Other Benefits
	February 23, 2002			February 24, 2001			February 23, 2002			February 24, 2001
	(In thousands)
CHANGES IN BENEFIT OBLIGATIONS
Benefit obligations at beginning of year	$	412,517		$	379,154		$	86,246		$	72,061
Service cost		17,487			16,217			1,902			2,000
Interest cost		31,163			28,859			6,031			5,407
Plan amendments		—			319			(8,294	)		—
Actuarial loss		25,544			11,174			22,396			11,736
Benefits paid		(19,941	)		(23,206	)		(4,594	)		(4,958	)
Benefit obligations at end of year	$	466,770		$	412,517		$	103,687		$	86,246
CHANGES IN PLAN ASSETS
Fair value of plan assets at beginning of year	$	409,685		$	392,374		$	—		$	—
Actual return on plan assets		(11,845	)		27,897			—			—
Company contributions		18,135			12,620			3,424			2,650
Plan participants’ contributions		—			—			4,594			4,958
Benefits paid		(19,941	)		(23,206	)		(8,018	)		(7,608	)
Fair value of plan assets at end of year	$	396,034		$	409,685		$	—		$	—
RECONCILIATION OF PREPAID (ACCRUED) COST
Funded status	$	(70,736	)	$	(2,832	)	$	(103,687	)	$	(86,246	)
Accrued contribution		3,000			3,264			—			—
Unrecognized net loss		110,236			32,145			43,302			21,621
Unrecognized prior service cost		(148	)		(306	)		(7,938	)		(1,164	)
Prepaid (accrued) cost	$	42,352		$	32,271		$	(68,323	)	$	(65,789	)

	Pension Benefits									Other Benefits
	2002			2001			2000			2002			2001			2000
	(In thousands)
NET BENEFIT COSTS FOR THE FISCAL YEAR
Service cost	$	17,487		$	16,217		$	15,991		$	1,902		$	2,000		$	2,040
Interest cost		31,163			28,859			23,657			6,031			5,407			4,915
Expected return on plan assets		(41,386	)		(38,231	)		(31,928	)		—			—			—
Amortization of:
Unrecognized net loss		—			—			192			715			167			509
Unrecognized prior service cost		(159	)		(159	)		(187	)		(736	)		(271	)		(262	)
Unrecognized net obligation		—			(306	)		63			—			—			—
Net benefit costs for the fiscal year	$	7,105		$	6,380		$	7,788		$	7,912		$	7,303		$	7,202

In July 2001, the Company amended its postretirement health care and life insurance benefit plan, making changes to plan eligibility, benefit coverage, and premium subsidization. This amendment resulted in a decrease in the plan’s benefit obligation of approximately $8.3 million in fiscal 2002.

For both the pension and the postretirement benefit calculations, the weighted-average discount rate used was 7.25 percent and 7.75 percent for fiscal 2002 and 2001, respectively, the expected return on plan assets used was 10.0 percent for both fiscal 2002 and 2001, and the rate of compensation increase was 3.5 percent and 4.0 percent for fiscal 2002 and 2001, respectively.

The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 10.0 percent in fiscal 2002 and 6.0 percent in fiscal 2001. The assumed health care cost trend rate will decrease by one percent each year for the next five years until it reaches the ultimate trend rate of 5.0 percent. The health care cost trend rate assumption has a significant impact on the amounts reported. For example, a one percent increase in the trend rate would increase the

F-21

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

accumulated postretirement benefit obligation by $7.7 and $10.1 million in fiscal 2002 and 2001, respectively, and the net periodic cost by $0.6 and $1.0 million in fiscal 2002 and 2001, respectively. In contrast, a one percent decrease in the trend rate would decrease the accumulated postretirement benefit obligation by $7.2 and $7.7 million in fiscal 2002 and 2001, respectively, and the net periodic cost by $0.5 and $0.8 million in fiscal 2002 and 2001, respectively.

The Company also maintains non-contributory, unfunded pension plans to provide certain employees with pension benefits in excess of limits imposed by federal tax law. The projected benefit obligation of the unfunded plans was $18.8 and $21.0 million at February 23, 2002 and February 24, 2001, respectively. The accumulated benefit obligation of these plans totaled $14.2 and $17.0 million at February 23, 2002 and February 24, 2001, respectively. Net periodic pension cost was $2.8, $2.2 and $3.5 million for 2002, 2001 and 2000, respectively.

SEGMENT INFORMATION

The Company’s business is classified by management into two reportable segments: Retail Food and Food Distribution. Retail Food operations include three retail formats: extreme value food stores, price superstores and supermarkets. The retail formats include results of food stores owned and results of sales to extreme value food stores licensed by the Company. Food Distribution operations represent the second reportable segment and include results of sales to affiliated food stores, mass merchants, and other logistics arrangements. Management utilizes more than one measurement and multiple views of data to assess segment performance and to allocate resources to the segments. However, the dominant measurements are consistent with the consolidated financial statements and accordingly, are reported on the same basis herein.

The financial information concerning the Company’s continuing operations by reportable segment for the years ended February 23, 2002, February 24, 2001 and February 26, 2000 is contained on page F-4.

SIGNIFICANT CUSTOMER            

During fiscal 2002, no single customer accounted for ten percent or greater of net sales or accounts receivable. During fiscal 2001, Kmart represented 10.5 percent of net sales. Receivables outstanding for Kmart at February 24, 2001 were $70.0 million or 11.4 percent. The supply contract with Kmart terminated on June 30, 2001. During fiscal 2000, no single customer accounted for ten percent or greater of net sales or accounts receivable.

SHAREHOLDER RIGHTS PLAN            

On April 24, 2000, the Company announced that the Board of Directors adopted a Shareholder Rights Plan under which one preferred stock purchase right will be distributed for each outstanding share of common stock. The rights, which expire on April 12, 2010, are exercisable only under certain conditions, and may be redeemed by the Board of Directors for $0.01 per right. The plan contains a three-year independent director evaluation provision whereby a committee of the Company’s independent directors will review the plan at least once every three years. The rights become exercisable, with certain exceptions, after a person or group acquires beneficial ownership of 15 percent or more of the outstanding voting stock of the Company.

F-22

Unaudited Quarterly Financial Information

(In thousands, except per share data)

Unaudited quarterly financial information for SUPERVALU INC. and subsidiaries is as follows:

	Fiscal Year Ended February 23, 2002
	First (16 wks)		Second (12 wks)		Third (12 wks)		Fourth (12 wks)		Year (52 wks)
Net sales	$	6,931,568	$	4,715,257	$	4,610,293	$	4,651,404	$	20,908,522
Gross profit		770,892		593,573		593,580		642,503		2,600,548
Net earnings		59,417		52,145		59,044		34,929		205,535
Net earnings per common share—diluted		0.45		0.39		0.44		0.26		1.53
Dividends declared per common share		0.1375		0.1400		0.1400		0.1400		0.5575
Weighted average shares—diluted		132,576		134,249		135,068		134,486		133,978

Note: Net earnings include after-tax restructure and other items of $35.2 or $0.27 per diluted share.

	Fiscal Year Ended February 24, 2001
	First (16 wks)		Second (12 wks)		Third (12 wks)		Fourth (12 wks)			Year (52 wks)
Net sales	$	6,953,393	$	5,333,823	$	5,420,238	$	5,486,825		$	23,194,279
Gross profit		748,272		593,737		584,538		632,168			2,558,715
Net earnings		69,965		57,296		47,511		(92,807	)		81,965
Net earnings per common share—diluted		0.53		0.43		0.36		(0.70	)		0.62
Dividends declared per common share		0.1350		0.1375		0.1375		0.1375			0.5475
Weighted average shares—diluted		133,026		133,096		132,733		132,404			132,829

Note: Net earnings include after-tax restructure and other items of $153.9 or $1.16 per diluted share.

F-23

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders

SUPERVALU INC:

Under date of April 3, 2002, we reported on the consolidated balance sheets of SUPERVALU INC. and subsidiaries as of February 23, 2002 and February 24, 2001, and the related consolidated statements of earnings, stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended February 23, 2002, which are included in the annual report on Form 10-K for the 2002 fiscal year. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule as listed in the accompanying index. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.

In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

KPMG LLP

Minneapolis, Minnesota

April 3, 2002

F-24

SUPERVALU INC. and Subsidiaries

SCHEDULE II—Valuation and Qualifying Accounts

COLUMN A	COLUMN B		COLUMN C	COLUMN D	COLUMN E
Description	Balance at beginning of year		Additions(A)	Deductions	Balance at end of year
Allowance for doubtful accounts:
Year ended:
February 23, 2002	$	22,750,000	13,536,000	13,345,000	$	22,941,000
February 24, 2001		22,383,000	11,839,000	11,472,000		22,750,000
February 26, 2000		11,063,000	15,506,000	4,186,000		22,383,000
Allowance for notes receivable accounts:
Year ended:
February 23, 2002	$	18,449,000	6,362,000	5,935,000		18,876,000
February 24, 2001		15,500,000	11,268,000	8,319,000		18,449,000
February 26, 2000		7,904,000	9,374,000	1,778,000		15,500,000
Closed properties reserves:
Year ended:
February 23, 2002	$	83,756,000	22,428,000	14,554,000		91,630,000
February 24, 2001		40,711,000	55,323,000	12,278,000		83,756,000
February 26, 2000		25,493,000	26,870,000	11,652,000		40,711,000

(A) Certain additions represent reserves related to purchase accounting as a result of acquisitions.

F-25

EXHIBIT INDEX

SUPERVALU INC.

ANNUAL REPORT ON FORM 10-K

Exhibit Number	Exhibit
*3(i)	Restated Certificate of Incorporation.
*3(ii)	Restated Bylaws, as amended.
*4.1.	Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee, relating to certain outstanding debt securities of the Registrant.
*4.2.	First Supplemental Indenture dated as of August 1, 1990, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee.
*4.3.	Second Supplemental Indenture dated as of October 1, 1992, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee.
*4.4.	Third Supplemental Indenture dated as of September 1, 1995, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee.
*4.5.	Fourth Supplemental Indenture dated as of August 4, 1999, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee.
*4.6.	Fifth Supplemental Indenture dated as of September 17, 1999, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee.
*4.7.	Letter of Representations dated November 12, 1992, between the Registrant, Bankers Trust Company, as Trustee, and The Depository Trust Company relating to certain outstanding debt securities of the Registrant.
*4.8.	Rights Agreement dated as of April 12, 2000, between SUPERVALU INC. and Wells Fargo Bank Minnesota, N.A. (formerly Norwest Bank Minnesota, N.A.) as Rights Agent, including as Exhibit B the forms of Rights Certificate and Election to Exercise.
*4.9.	Indenture dated as of November 2, 2001, between SUPERVALU INC. and The Chase Manhattan Bank, as Trustee, including form of Liquid Yield Option™ Note due 2031 (Zero Coupon—Senior).
*4.10.	Registration Rights Agreement dated as of November 2, 2001, by and among SUPERVALU INC., Merrill Lynch & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
*4.11.	Form of Credit Agreement, dated as of October 8, 1997, as amended and restated as of August 16, 2001, among the Registrant, the Lenders named therein, the Chase Manhattan Bank, as Agent, and Bank One, NA, as Syndication Agent.
*10.1.	SUPERVALU INC. 1993 Stock Plan, as amended.
*10.2.	SUPERVALU INC. 1978 Stock Appreciation Rights Plan, as amended.

Exhibit Number	Exhibit
*10.3.	SUPERVALU INC. Executive Incentive Bonus Plan.
*10.4.	SUPERVALU INC. Deferred Compensation Plan for Non-Employee Directors, as amended.
*10.5.	SUPERVALU INC. 1983 Employee Stock Option Plan, as amended.
*10.6.	SUPERVALU INC. 1989 Stock Appreciation Rights Plan.
*10.7.	SUPERVALU INC. ERISA Excess Benefit Plan Restatement, as amended.
*10.8.	SUPERVALU INC. Deferred Compensation Plan.
*10.9	SUPERVALU INC. Executive Deferred Compensation Plan, as amended, and Executive Deferred Compensation Plan II.
*10.10.	Amendments to the SUPERVALU INC. Executive Deferred Compensation Plan and the SUPERVALU INC. Executive Deferred Compensation Plan II.
*10.11.	Form of Agreement used in connection with the Registrant’s Executive Post-Retirement Survivor Benefit Program.
*10.12.	Form of Change of Control Severance Agreements entered into with certain officers of the Registrant.
*10.13.	SUPERVALU INC. Directors Retirement Program, as amended.
*10.14.	SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan.
*10.15.	First Amendment to SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan.
*10.16.	Second Amendment to SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan.
*10.17.	Third Amendment to SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan.
*10.18.	SUPERVALU INC. Long-Term Incentive Plan, as amended.
*10.19.	SUPERVALU INC. Annual Cash Bonus Plan for Designated Corporate Officers, as amended.
*10.20.	SUPERVALU INC. Non-Employee Directors Deferred Stock Plan, as amended.
*10.21.	SUPERVALU INC. 1997 Stock Plan, as amended.
*10.22.	Split Dollar Life Insurance Agreement for Michael W. Wright and Collateral Assignment of Policy.
10.23.	SUPERVALU/Richfood Stock Incentive Plan, as amended.
*10.24.	Restricted Stock Unit Award Agreement for David L. Boehnen.
*10.25.	Restricted Stock Unit Award Agreement for Pamela K. Knous.
*10.26.	Resolutions of SUPERVALU INC. Board of Directors, amending the SUPERVALU INC. Restricted Stock Plan, as amended.
10.27.	Special Fiscal 2002 Incentive Plan.
10.28.	Letter agreement dated May 21, 2001, providing for post-retirement benefits for Michael W. Wright.

Exhibit Number	Exhibit
12.1.	Ratio of Earnings to Fixed Charges.
21.1.	SUPERVALU INC. Subsidiaries.
23.1.	Consent of KPMG LLP.
24.1.	Power of Attorney.
99(i)	Cautionary Statements for Purposes of the Safe Harbor Provisions of the Securities Litigation Reform Act.

* Incorporated by Reference

EX-10.23

                                                                   Exhibit 10.23


                     SUPERVALU/Richfood Stock Incentive Plan
            (formerly the Richfood, Inc. Omnibus Stock Incentive Plan
                         (as assumed by SUPERVALU INC.))

                              Amended and Restated
                             Effective June 27, 2001


                                  INTRODUCTION
                                  ------------

     The Richfood Holdings, Inc. Omnibus Stock Incentive Plan (the "Plan") was
adopted by the Board of Directors of Richfood Holdings, Inc. on March 7, 1991
and was approved by shareholders at the 1991 annual meeting. The Plan authorized
the grant of Options, SARs and Stock Awards.

     The Plan was amended and restated effective November 4, 1993. The
amendments adopted at that time (1) clarified the definition of Common Stock,
(2) revised the manner in which the option price and withholding tax obligations
may be settled, and (3) clarified that immediately vested and transferable Stock
Awards may be granted under the Plan.

     The Plan was further amended and restated effective June 13, 1996, subject
to the approval of shareholders. The amendments (1) increased the number of
shares that may be issued under the Plan, (2) included provisions that will
permit the award of "performance based compensation" under Section 162(m) of the
Internal Revenue Code of 1986, as amended, and (3) clarified the provisions
regarding the grant of Performance Shares under the Plan.

     The Plan was further amended, effective July 29, 1997, subject to the
approval of shareholders at the 1997 annual meeting. The Plan was further
amended and restated on October 13, 1999 in connection with the Company's
acquisition of Richfood Holdings, Inc. on August 31, 1999. The amendments (1)
reflected the Company's assumption of the Plan and (2) eliminated the cashless
exercise option whereby shares were withheld or the shares otherwise issuable
were reduced.

     The Plan was further amended and restated, effective June 27, 2001, subject
to the approval of shareholders at the 2001 annual meeting. The amendments (1)
limit the annual grant to any employee of stock options, stock appreciation
rights and other awards with a value based solely on an increase in the value of
the Company's Common Stock after the grant date, to a maximum of 500,000 shares,
taking into account all of the Company's stock plans in which the employee
participates, for the purpose of qualifying such awards as performance based
compensation for purposes of Internal Revenue Code Section 162(m), (2) provide
that options may not be granted with an exercise price of less than 100% of the
fair market value of the Company's Common Stock on the date of grant, and (3)
allow for restoration options, commonly referred to as "reload options", to be
granted under the Plan. The terms of the Plan stated herein will govern awards
granted on and after June 27, 2001.


                                    ARTICLE I
                                   DEFINITIONS
                                   -----------

     1.01 Affiliate means any "subsidiary" or "parent" corporation (within the
meaning of Section 424 of the Code) of the Company.

     1.02 Agreement means a written agreement (including any consent, amendment
or supplement thereto) between the Company and a Participant specifying the
terms and conditions of an award of Performance Shares, or an Option, SAR or
Stock Award granted to such Participant.

     1.03 Board means the Board of Directors of the Company.

     1.04 Committee means the Executive Personnel and Compensation Committee of
the Board.


                                       -1-



     1.05 Common Stock means the Common Stock, $1.00 par value of the Company.

     1.06 Company means SUPERVALU INC.

     1.07 Corresponding SAR means an SAR that is granted in relation to a
particular Option and that can be exercised only upon the surrender to the
Company, unexercised, of that portion of the Option to which the SAR relates.

     1.08 Fair Market Value means, on any given date, the average of the opening
and closing sale prices of a share of Common Stock as reported on the New York
Stock Exchange on such date or, if such exchange is not open for trading on such
date, on the day closest to such date when such exchange is open for trading.
Notwithstanding the foregoing, with respect solely to grants made under the Plan
prior to August 31, 1999, "Fair Market Value" shall be determined using the last
sale price of a share of Common Stock rather than the average of the opening and
closing sale prices.

     1.09 Initial Value means, with respect to an SAR, the Fair Market Value of
one share of Common Stock on the date of grant, as set forth in the Agreement.

     1.10 Option means a stock option that entitles the holder to purchase from
the Company a stated number of shares of Common Stock at the price set forth in
the holder's Agreement.

     1.11 Participant means an employee of the Company or an Affiliate,
including an employee who is a member of the Board, who satisfies the
requirements of Article IV and is selected by the Committee to receive an award
of Performance Shares, an Option, a SAR or a Stock Award or a combination
thereof.

     1.12 Performance Shares means an award which, in accordance with and
subject to an Agreement, will entitle the Participant to receive a Stock Award,
a payment of cash or a combination thereof.

     1.13 Plan means the SUPERVALU/Richfood Stock Incentive Plan (formerly the
Richfood, Inc. Omnibus Stock Incentive Plan (as assumed by SUPERVALU INC.)).

     1.14 Restoration Option shall mean any Option granted under Article VI.

     1.15 Restricted Stock means shares of Common Stock that are nontransferable
or subject to a substantial risk of forfeiture or both and that the Committee
may grant to a Participant pursuant to a Stock Award. Shares of Common Stock
shall cease to be Restricted Stock when, in accordance with the terms of the
applicable Agreement, they become transferable and free of a substantial risk of
forfeiture.

     1.16 SAR means a stock appreciation right that entitles the holder to
receive, with respect to each share of Common Stock encompassed by the exercise
of such SAR, the amount determined by the Committee and specified in the
holder's Agreement. In the absence of such a determination, the holder shall be
entitled to receive, with respect to each share of Common Stock encompassed by
the exercise of such SAR, the excess of the Fair Market Value on the date of
exercise over the Initial Value. References to "SARs" include both Corresponding
SARs and SARs granted independently of Options, unless the context requires
otherwise.

     1.17 Stock Award means Common Stock awarded to a Participant under Article
X (including an award of Restricted Stock) or in full or partial settlement of
an award of Performance Shares.


                                   ARTICLE II
                                    PURPOSES
                                    --------

     The Plan is intended to assist the Company and its Affiliates in recruiting
and retaining employees with ability and initiative by enabling employees to
participate in its future success and to associate their interests with those of
the Company and its Affiliates. The Plan authorizes the award of Performance
Shares and the grant of Stock Awards, SARs, Options qualifying under Section 422
of the Code ("incentive stock


                                       -2-



options") and Options not so qualifying. No Option that is intended to be an
incentive stock option shall be invalid for failure to qualify as an incentive
stock option. The proceeds received by the Company from the sale of Common Stock
pursuant to the Plan shall be used for general corporate purposes.


                                   ARTICLE III
                                 ADMINISTRATION
                                 --------------

     Except as provided in this Article III, the Plan shall be administered by
the Committee. The Committee shall have authority to award Performance Shares
and to grant Options, SARs and Stock Awards upon such terms (not inconsistent
with the provisions of the Plan) as the Committee may consider appropriate. Such
terms may include conditions (in addition to those contained in the Plan) on the
exercisability of all or any part of an Option or SAR or on the transferability
or forfeitability of Performance Shares or a Stock Award. Notwithstanding any
such conditions, the Committee may, in its discretion, accelerate the time at
which any Option or SAR may be exercised, the time at which an award of
Performance Shares may be earned or the time at which Restricted Stock may
become transferable or nonforfeitable. In addition, the Committee shall have
complete authority to interpret all provisions of the Plan; to prescribe the
form of Agreements; to adopt, amend and rescind rules and regulations pertaining
to the administration of the Plan; and to make all other determinations
necessary or advisable for the administration of the Plan. The express grant in
the Plan of any specific power to the Committee shall not be construed as
limiting any power or authority of the Committee. Any decision made, or action
taken, by the Committee or in connection with the administration of the Plan
shall be final and conclusive. No member of the Committee shall be liable for
any act done in good faith with respect to the Plan or any Agreement, Option,
SAR, Stock Award or an award of Performance Shares. All expenses of
administering the Plan shall be borne by the Company.

     The Committee, in its discretion, may delegate to one or more officers of
the Company or its Affiliates all or part of the Committee's authority and
duties with respect to grants and awards to individuals who are not subject to
the reporting and other provisions of Section 16 of the Securities Exchange Act
of 1934, as in effect from time to time. In the event of such delegation, and as
to matters encompassed by the delegation, references in the Plan to the
Committee shall be interpreted as a reference to the Committee's delegate or
delegates. The Committee may revoke or amend the terms of a delegation at any
time but such action shall not invalidate any prior actions of the Committee's
delegate or delegates that were consistent with the terms of the Plan.


                                   ARTICLE IV
                                   ELIGIBILITY
                                   -----------

     4.01 General. Any employee of the Company or an Affiliate (including a
corporation that becomes an Affiliate after the adoption of the Plan) is
eligible to participate in the Plan if the Committee, in its sole discretion,
determines that such person has contributed significantly or can be expected to
contribute significantly to the profits or growth of the Company or an
Affiliate. Directors of the Company or an Affiliate who are employees of the
Company or an Affiliate may be selected to participate in the Plan. A person who
is a member of the Committee may not be awarded Performance Shares or granted
Options, SARs or Stock Awards under the Plan.

     4.02 Grants. The Committee will designate individuals to whom Performance
Shares are to be awarded and to whom Options, SARs and Stock Awards are to be
granted and will specify the number of shares of Common Stock subject to each
award or grant. An Option may be granted with or without a related SAR. An SAR
may be granted with or without a related Option. Each award of Performance
Shares and all Options, SARs and Stock Awards granted under the Plan shall be
evidenced by Agreements which shall be subject to applicable provisions of the
Plan and to such other provisions as the Committee may adopt. No Participant may
be granted incentive stock options or related SARs (under all incentive stock
option plans of the Company and its Affiliates) that are first exercisable in
any calendar year for stock having an aggregate Fair Market Value (determined as
of the date of grant) exceeding $100,000. The preceding annual limitation shall
not apply with respect to Options that are not incentive stock options.


                                       -3-



                                    ARTICLE V
                              STOCK SUBJECT TO PLAN
                              ---------------------

     Upon the award of shares of Common Stock pursuant to a Stock Award, the
Company may issue authorized Common Stock. Upon the exercise of any Option or
SAR, the Company may deliver to the Participant (or the Participant's broker if
the Participant so directs) authorized Common Stock. The maximum aggregate
number of shares of Common Stock that may be issued under the Plan with respect
to Stock Awards, Options, SARs and Performance Shares granted on or after
October 13, 1999, is 2,076,684 shares, subject to adjustment as provided in
Article XII. If an Option or SAR is terminated, in whole or in part, for any
reason other than its exercise, the number of shares of Common Stock allocated
to the Option or SAR or portion thereof may be reallocated to other Options,
SARs, Stock Awards and awards of Performance Shares to be granted under the
Plan. If an award of Performance Shares is forfeited, in whole or in part,
without the issuance of a Stock Award, the number of shares of Common Stock
allocated to the award of Performance Shares or a portion thereof may be
reallocated to other Options, SARs, Stock Awards and Performance Shares to be
granted under the Plan.


                                   ARTICLE VI
                                     AWARDS
                                     ------

     In accordance with the provisions of Article IV, the Committee will
designate each individual to whom an Option or SAR is to be granted and will
specify the number of shares of Common Stock covered by such grants.
Notwithstanding the preceding sentence, no Participant, who is an employee of
the Company at the time of grant, may be granted any Option, SAR or other Stock
Award, the value of which are based solely on an increase in the value of the
Shares after the date of grant, for more than 500,000 Shares (subject to
adjustment as provided for in Article XII relating to stock splits, etc.), in
the aggregate, taking into account all such awards granted by the Company
pursuant to any of its stock compensation plans, in any calendar year period
beginning with the period commencing January 1, 2001 and ending December 31,
2001. The foregoing annual limitation specifically includes the grant of any
awards representing "qualified performance-based compensation" within the
meaning of Section 162(m) of the Code. For purposes of this Article VI, an
Option and Corresponding SAR shall be treated as a single grant.

     The Committee may grant Restoration Options, commonly referred to as
"reloads", separately or together with another Option, pursuant to which,
subject to the terms and conditions established by the Committee and any
applicable requirements of Rule 16b-3 or any other applicable law, the
Participant would be granted a new Option when the payment of the exercise price
of the option to which such Restoration Option relates is made by the delivery
or withholding of Shares pursuant to the relevant provisions of the plan or
agreement relating to such option, which new Option would be an Option to
purchase the number of Shares not exceeding the sum of (A) the number of Shares
so provided as consideration upon the exercise of the previously granted option
to which such Restoration Option relates, (B) the number of Shares, if any,
tendered or withheld as payment of the amount to be withheld under applicable
tax laws in connection with the exercise of the option to which such Restoration
Option relates, and (C) the number of previously owned Shares, if any, tendered
as payment for additional tax obligations of the Participant in connection with
the exercise of the option to which such Restoration Option relates pursuant to
the relevant provisions of the plan or agreement relating to such option.
Restoration Options may be granted with respect to Options previously granted
under the Plan or any other stock option plan of the Company, and may be granted
in connection with any Option granted under the Plan or any other stock option
plan of the Company at the time of such grant.


                                   ARTICLE VII
                              OPTION EXERCISE PRICE
                              ---------------------

     The purchase price per share of Common Stock purchasable under an Option
shall be determined by the Committee; provided, however, that such purchase
price shall not be less than one hundred percent (100%) of the Fair Market Value
of a share of Common Stock on the date of grant of such Option.


                                       -4-



                                  ARTICLE VIII
                          EXERCISE OF OPTIONS AND SARS
                          ----------------------------

     8.01 Maximum Option or SAR Period. The maximum period in which an Option or
SAR may be exercised shall be determined by the Committee on the date of grant,
except that no Option or SAR shall be exercisable after the expiration of ten
years from the date the Option or SAR was granted. The terms of any Option or
SAR may provide that it is exercisable for a period less than such maximum
period.

     8.02 Nontransferability. Any Option or SAR granted under the Plan shall be
nontransferable except by will or by the laws of descent and distribution. In
the event of any such transfer, the Option and any Corresponding SAR that
relates to such Option must be transferred to the same person(s). During the
lifetime of the Participant to whom the Option or SAR is granted, the Option or
SAR may be exercised only by the Participant. No right or interest of a
Participant in any Option or SAR shall be liable for, or subject to, any lien,
obligation or liability of such Participant.

     8.03 Employee Status. For purposes of determining the applicability of
Section 422 of the Code (relating to incentive stock options), or in the event
that the terms of any Option or SAR provide that it may be exercised only during
employment or within a specified period of time after termination of employment,
the Committee may decide to what extent leaves of absence for governmental or
military service, illness, temporary disability or other reasons shall not be
deemed interruptions of continuous employment.

     8.04 Performance Objectives. The Committee may prescribe that an Option or
SAR is exercisable only to the extent that certain performance objectives are
attained. Such performance objectives may be based on the Company's, an
Affiliate's or an operating unit's return on equity, earnings per share, total
earnings, earnings growth, total sales, sales growth, return on capital or
return on assets or based on Fair Market Value. If the Committee, on the date of
the award, prescribes that an Option or SAR shall become exercisable only upon
the attainment of performance objectives stated with respect to one or more of
the foregoing criteria, the Option or SAR shall become exercisable only to the
extent the Committee certifies that such objectives have been achieved.


                                   ARTICLE IX
                               METHOD OF EXERCISE
                               ------------------

     9.01 Exercise. Subject to the provisions of Articles VII and VIII, an
Option or SAR may be exercised in whole at any time or in part from time to time
at such times and in compliance with such requirements as the Committee shall
determine; provided, however, that a Corresponding SAR that is related to an
incentive stock option may be exercised only to the extent that the related
Option is exercisable and when the Fair Market Value exceeds the option price of
the related Option. An Option or SAR granted under the Plan may be exercised
with respect to any number of whole shares less than the full number of shares
for which the Option or SAR could be exercised. A partial exercise of an Option
or SAR shall not affect the right to exercise the Option or SAR from time to
time in accordance with the Plan and the applicable Agreement with respect to
remaining shares subject to the Option or related to the SAR. The exercise of
either an Option or Corresponding SAR shall result in the termination of the
other to the extent of the number of shares with respect to which the Option or
Corresponding SAR is exercised.

     9.02 Payment. Unless otherwise provided by the Agreement, payment of the
Option price shall be made in cash or a cash equivalent acceptable to the
Committee. Payment of all or part of the Option price also may be made by
surrendering shares of Common Stock to the Company. If Common Stock is used to
pay all or part of the Option price, the sum of the cash and cash equivalent and
the Fair Market Value (determined as of the day preceding the date of exercise)
of the shares surrendered must not be less than the Option price of the shares
for which the Option is being exercised.

     9.03 Installment Payment. If the Agreement so provides, and if the
Participant is employed by the Company or an Affiliate on the date the Option is
exercised, payment of all or part of the Option price may be made in
installments. In that event, the Participant shall pay not less than ten percent
(10%) of the Option price of the shares acquired upon the exercise of an Option.
If the Agreement so provides, payment of such portion of the Option price may be
made in cash, a cash equivalent or by surrendering shares of Common


                                       -5-



Stock to the Company. If Common Stock is used to pay part of the Option price,
the amount deemed to be paid with Common Stock shall be the Fair Market Value
(determined as of the day preceding the date of exercise) of the shares
surrendered.

     In the event that payment of all or part of the Option price is made in
installments, the Company shall lend the Participant an amount equal to not more
than ninety percent (90%) of the Option price of the shares acquired by the
exercise of the Option. This amount shall be evidenced by the Participant's
promissory note and shall be payable in not more than five equal annual
installments, unless the amount of the loan exceeds the maximum loan value for
the shares purchased, which value shall be established from time to time by
regulations of the Board of Governors of the Federal Reserve System. In that
event, the note shall be payable in equal quarterly installments over a period
of time not to exceed five years. The Committee, however, may vary such terms
and make such other provisions concerning the unpaid balance of such purchase
price in the case of hardship, subsequent termination of employment, absence on
military or government service or subsequent death of the Participant as in its
discretion are necessary or advisable in order to protect the Company, promote
the purposes of the Plan and comply with regulations of the Board of Governors
of the Federal Reserve System relating to securities credit transactions.

     The Participant shall pay interest on the unpaid balance at the minimum
rate necessary to avoid imputed interest or original issue discount under the
Code. All shares purchased with cash borrowed from the Company shall be pledged
to the Company as security for the repayment thereof. In the discretion of the
Committee, shares of stock may be released from such pledge proportionately as
payments on the note (together with interest) are made, provided the release of
such shares complies with the regulations of the Federal Reserve System relating
to securities credit transactions then applicable. While shares are so pledged,
and so long as there has been no default in the installment payments, such
shares shall remain registered in the name of the Participant, and the
Participant shall have the right to vote such shares and to receive all
dividends thereon.

     9.04 Determination of Payment of Cash and/or Common Stock Upon Exercise of
SAR. At the Committee's discretion, the amount payable as a result of the
exercise of a SAR may be settled in cash, Common Stock, or a combination of cash
and Common Stock. No fractional shares shall be deliverable upon the exercise of
a SAR but a cash payment will be made in lieu thereof.

     9.05 Shareholder Rights. No Participant shall have any rights as a
stockholder with respect to shares subject to an Option or SAR until the date of
exercise of such Option or SAR.


                                    ARTICLE X
                                  STOCK AWARDS
                                  ------------

     10.01 Awards. In accordance with the provisions of Article IV, the
Committee will designate each individual to whom a Stock Award is to be made and
will specify the number of shares of Common Stock covered by such award;
provided, however, that no Participant may receive Stock Awards in any calendar
year for more than 37,500 shares of Common Stock. The preceding sentence shall
not limit the issuance of Stock Awards in settlement of Performance Share
awards.

     10.02 Vesting. The Committee, on the date of the award, may, but shall not
be required to, prescribe that a Participant's rights in the Stock Award shall
be forfeitable or otherwise restricted for a period of time set forth in the
Agreement. By way of example and not of limitation, the restrictions may
postpone transferability of the shares until the attainment of performance
objectives prescribed by the Committee or may provide that the shares will be
forfeited if the Participant separates from the service of the Company and its
Affiliates before the expiration of a stated term.

     10.03 Performance Objectives. In accordance with Section 10.02, the
Committee may prescribe that Stock Awards will become vested or transferable or
both based on objectives stated with respect to the Company's, an Affiliate's or
an operating unit's return on equity, earnings per share, total earnings,
earnings growth, total sales, sales growth, return on capital or return on
assets or based on Fair Market Value. If the Committee, on the date of the
award, prescribes that a Stock Award shall become nonforfeitable and
transferable only upon the attainment of performance objectives stated with
respect to one or more of the


                                       -6-



foregoing criteria, the shares subject to such Stock Award shall become
nonforfeitable and transferable only to the extent the Committee certifies that
such objectives have been achieved.

     10.04. Shareholder Rights. In accordance with the terms of the Agreement, a
Participant will have all rights of a shareholder with respect to the Common
Stock covered by a Stock Award, including the right to receive dividends and
vote the shares; provided, however, that (a) a Participant may not sell,
transfer, pledge, exchange, hypothecate or otherwise dispose of Restricted
Stock, (b) the Company shall retain custody of the certificates evidencing
shares of Restricted Stock, and (c) the Participant shall deliver to the Company
a stock power, endorsed in blank, with respect to each award of Restricted
Stock. The limitations set forth in the preceding sentence shall not apply after
the Restricted Stock is, in accordance with the terms of the applicable
Agreement, transferable and no longer forfeitable.


                                   ARTICLE XI
                           AWARD OF PERFORMANCE SHARES
                           ---------------------------

     11.01. Award. In accordance with the provisions of Article IV, the
Committee will designate individuals to whom an award of Performance Shares is
to be granted and will specify the number of shares of Common Stock covered by
such award; provided, however, that no Participant may receive Performance share
awards in any calendar year for more than 37,500 shares of Common Stock.

     11.02. Earning the Award. The Committee, on the date of the grant of an
award, may prescribe that the Performance shares, or a portion thereof, will be
earned according to the terms of the applicable Agreement. By way of example and
not of limitation, the Agreement may specify that Performance Shares shall be
earned only upon the Participant's completion of a specified period of
employment with the Company or an Affiliate or upon the attainment of stated
performance objectives or goals. Such performance objectives or goals may be
based on the Company's, an Affiliate's or an operating unit's return on equity,
earnings per share, total earnings, earnings growth, total sales, sales growth,
return on capital, return on assets, or Fair Market Value. If the Committee, on
the date of the award, prescribes that Performance Shares shall be earned only
upon the attainment of performance objectives stated with respect to one or more
of the foregoing criteria, such Performance Shares shall be earned only to the
extent the Committee certifies that such objectives have been achieved.

     11.03. Settlement. In the Committee's discretion, the amount payable when
an award of Performance Shares is earned may be settled in cash, by the grant of
a Stock Award or a combination of cash and a Stock Award. A fractional share
shall not be deliverable when a Performance Share is settled, but a cash payment
will be made in lieu thereof.

     11.04. Shareholder Rights. No Participant shall, as a result of receiving
an award of Performance Shares, have any rights as a shareholder until and to
the extent that the award of Performance Shares is earned and a Stock Award is
made. A Participant may not sell, transfer, pledge, exchange, hypothecate or
otherwise dispose of an award of Performance Shares or the right to receive
Common Stock thereunder other than by will or the laws of descent and
distribution. After and to the extent that an award of Performance Shares is
settled with a Stock Award, a Participant will have all the rights of a
shareholder as described in Plan section 11.03.


                                   ARTICLE XII
                     ADJUSTMENT UPON CHANGE IN COMMON STOCK
                     --------------------------------------

     The maximum number of shares that may be issued pursuant to Options, SARs
and Stock Awards under this Plan and the individual limits on the award of
Options, SARs, Stock Awards and Performance Shares in a calendar year shall be
proportionately adjusted, and the terms of outstanding awards of Performance
Shares, Options, SARs and Stock Awards shall be adjusted, as the Committee shall
determine to be equitably required in the event that the Company (1) effects one
or more stock dividends, stock split-ups, subdivisions or consolidations of
shares or (2) engages in a transaction to which Section 424 of the Code applies.
Any determination made under this Article XI by the Committee shall be final and
conclusive.


                                       -7-



     The issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services, either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the maximum
number of shares that may be issued pursuant to Options, SARs and Stock Awards
under this Plan, the individual limits on the award of Options, SARs, Stock
Awards and Performance Shares in a calendar year or outstanding awards of
Performance Shares, Options, SARs or Stock Awards.

     The Committee may award Performance Shares or grant Options, SARs and Stock
Awards in substitution for performance shares, stock awards, stock options,
stock appreciation rights or similar awards held by an individual who becomes an
employee of the Company or an Affiliate in connection with a transaction
described in the first paragraph of this Article XII. Notwithstanding any
provision of the Plan (other than the limitation of Article V), the terms of
such substituted award of Performance Shares, or grant of an Option, SAR or
Stock Award, shall be as the Committee, in its discretion, determines is
appropriate.


                                  ARTICLE XIII
              COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
              -----------------------------------------------------

     No Option or SAR shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made under this Plan except in compliance with all applicable federal and
state laws and regulations (including, without limitation, withholding tax
requirements), any listing agreement to which the Company is a party, and the
rules of all domestic stock exchanges on which the Company's shares may be
listed. The Company shall have the right to rely on an opinion of its counsel as
to such compliance. Any share certificate issued to evidence Common Stock for
which a Stock Award is granted or for which an Option or SAR is exercised may
bear such legends and statements as the Committee may deem advisable to assure
compliance with federal and state laws and regulations. No Option or SAR shall
be exercisable, no Stock Award shall be granted, no Common Stock shall be
issued, no certificate for shares shall be delivered and no payment shall be
made under this Plan until the Company has obtained such consent or approval as
the Committee may deem advisable from regulatory bodies having jurisdiction over
such matters.


                                   ARTICLE XIV
                               GENERAL PROVISIONS
                               ------------------

     14.01. Effect on Employment. Neither the adoption of this Plan, its
operation nor any documents describing or referring to this Plan (or any part
thereof) shall confer upon any individual any right to continue in the employ or
service of the Company or an Affiliate or in any way affect any right and power
of the Company or an Affiliate to terminate the employment or service of any
individual at any time with or without assigning a reason therefor.

     14.02. Unfunded Plan. The Plan, insofar as it provides for awards or
grants, shall be unfunded, and the Company shall not be required to segregate
any assets that may at any time be represented by awards or grants under this
Plan. Any liability of the Company to any person with respect to any award or
grant under this Plan shall be based solely upon any contractual obligations
that may be created pursuant to this Plan. No such obligation of the Company
shall be deemed to be secured by any pledge of, or other encumbrance on, any
property of the Company.

     14.03. Disposition of Stock. A Participant shall notify the Committee of
any sale or other disposition of Common Stock acquired pursuant to an Option
that was an incentive stock option if such sale or disposition occurs (a) within
two (2) years of the grant of an Option or (b) within one (1) year of the
issuance of the Common Stock to the Participant. Such notice shall be in writing
and directed to the Secretary of the Company.

     14.04. Withholding Taxes. Each Participant shall be responsible for
satisfying any income and employment tax withholding obligations attributable to
participation in the Plan. Unless otherwise provided by the Agreement, any such
withholding tax obligations may be satisfied in cash (including from any cash


                                       -8-



payable in settlement of an award of Performance Shares or an SAR) or a cash
equivalent acceptable to the Committee. Any withholding tax obligations may also
be satisfied by surrendering shares of Common Stock to the Company, by
withholding or reducing the number of shares of Common Stock otherwise issuable
to the Participant upon the exercise of an Option or SAR, the settlement of an
award of Performance Shares or the grant or vesting of a Stock Award, or by any
other method as may be approved by the Committee. If shares of Common Stock are
used to pay all or part of such withholding tax obligation, the Fair Market
Value of the shares surrendered, withheld or reduced shall be determined as of
the day preceding the date the Option or SAR is exercised, the Restricted stock
vests or the Performance Shares are earned, as applicable.

     14.05. Rules of Construction. Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.


                                   ARTICLE XV
                                    AMENDMENT
                                    ---------

         The Board may amend or terminate this Plan from time to time; provided,
however, that no amendment may become effective until shareholder approval is
obtained if (1) the amendment materially increases the aggregate number of
shares of Common Stock that may be issued under the Plan, (2) the amendment
materially changes the class of individuals eligible to become Participants or
(3) the amendment materially increases the benefits that may be provided under
the Plan. No amendment shall, without a Participant's consent, adversely affect
any rights of such Participant under any outstanding award of Performance Shares
or any Option, SAR or Stock Award outstanding at the time such amendment is
made.


                                   ARTICLE XVI
                                DURATION OF PLAN
                                ----------------

     No Performance Shares may be awarded and no Option, SAR or Stock Award may
be granted under this Plan after March 6, 2006. Awards of Performance Shares and
Options, SARs and Stock Awards granted on or before that date shall remain valid
in accordance with their terms.


                                  ARTICLE XVII
                                INCENTIVE AWARDS
                                ----------------

     17.01. Awards. The Committee shall designate Participants to whom Incentive
Awards shall be made. All Incentive Awards shall be determined exclusively by
the Committee under procedures established by the committee; provided, however,
that in any calendar year, no Participant may receive an Incentive Award
exceeding $1 million.

     17.02. Earning an Award. The Committee, at the time an Incentive Award is
made, shall specify the terms and conditions that govern the award. Such terms
and conditions may include, by way of example and not of limitation,
requirements that the Participant complete a specified period of employment with
the Company or an Affiliate or that the Company, an Affiliate, an operating unit
or the Participant attain stated objectives or goals as a prerequisite to
payment under an Incentive Award. Such performance objectives or goals may be
based on one or more of the Company's, an Affiliate's or an operating unit's
gross, operating net earnings before or after taxes, return on equity, return on
capital, return on sales, return on assets or net assets, earnings per share,
cash flow per share, book value per share, earnings growth, sales growth, volume
growth, cash flow (as defined by the Committee), Fair Market Value, share price
or total shareholder return, market share, economic value added, market value
added, productivity, legal of expenses, qualify, safety, customer satisfaction,
total sales, total earnings or peer group comparisons of any of the
aforementioned objectives. Such goals may be set for a one-year period or a
longer period. If the Committee, on the date of an award, prescribes that the
Incentive Award shall be earned only upon the attainment of performance
objectives stated with respect to one or more of the foregoing criteria, such
Incentive Award shall be earned only to the extent that the Committee certifies
that such objectives or objectives have been achieved. The Committee, at the
time an Incentive Award is made, shall also specify when amounts shall be
payable under the Incentive Award and whether amounts shall be payable in the
event of the Participant's death, disability, retirement or a change of control.


                                       -9-



     Except with respect to those Participants who are covered employees (as
determined under Code Section 162(m)(3)) and notwithstanding any other provision
of the Plan, the Committee, in its discretion may adjust the terms, conditions
or other requirements applicable to Incentive Awards and may increase or
decrease the amounts otherwise payable under an Incentive Award, to reflect
unusual or extraordinary transactions or events. The Committee may make such
adjustments with respect to one or more Participants, with respect to all
Participants as to Incentive Awards made during a particular year or with
respect to all outstanding Incentive Awards.

     17.03 Settlement. In the Committee's discretion, the amount payable when an
Incentive Award is earned may be settled in cash, by the issuance of Common
Stock or a combination of cash and Common Stock. A fractional share shall not be
deliverable when an Incentive Award is settled, but a cash payment shall be made
in lieu thereof.

     17.04. Shareholder Rights. No Participants shall, as a result of receiving
an Incentive Award, have any rights as a shareholder of the Company until and
then only to the extent that the Incentive Award is earned and Common Stock is
distributed. A Participant may not sell, transfer, pledge, exchange, hypothecate
or otherwise dispose of an Incentive Award or the rights to receive Common Stock
thereunder other than by will or the laws of descent and distribution. After and
to the extent that an Incentive Award is settled in Common Stock, a Participant
will have all the rights of a shareholder of the Company.

     17.05. Administration. The Committee shall construe and administer the
Plan, including this Article XVII relating to Incentive Awards, as if the term
"Incentive Award" had been included in all Plan provisions of general
application in a manner similar to the term Performance Shares. For example,
shares of Common Stock issued pursuant to Incentive Awards shall reduce the
aggregate number of shares of Common Stock that may be issued under the Plan in
accordance with Article V. As provided in Article III, the Committee's authority
to interpret the Plan in this regard shall be absolute.

                                       -10-

EX-10.27

                                                                   Exhibit 10.27

                       SPECIAL FISCAL 2002 INCENTIVE PLAN

A special fiscal year 2002 incentive opportunity has been developed to provide
additional reward for exceptional fiscal 2002 profit and ROIC performance.

Objective - Focus and reward key executives' efforts on immediate earnings
growth recovery, simultaneously with reducing invested capital.

Eligibility - Approximately 60-70 key executives consisting of all officers, all
major profit center heads, and designated others.

Performance Period - Fiscal 2002

Payout Opportunity (Norm) - 25%-35% of base salary plus annual bonus norm for
officers and presidents; flat $40,000 for all others. Payout will be in addition
to any payout from the annual bonus plan, but will be in lieu of a new unit
under the long-term incentive plan.

Payout Opportunity (Range) - The award opportunity is denominated in dollars and
will range from 50% of norm at payout threshold, to 150% of norm at payout
maximum.

Performance Objectives

Before any payout will be made a minimum corporate Return On Invested Capital
(ROIC) of 13.2% must be achieved. Year end invested capital will be used for
this purpose.

If the 13.2% ROIC is achieved plan payout will be a variable amount based on EPS
ranging from 50% to 150% of annual bonus norm if EPS is equal to or greater than



$1.75, with the 50% minimum payable if EPS is equal to $1.75, the 150% maximum
payable if EPS is equal to or greater than $1.85, and the amount payable if the
percentage is between 50% and 150% calculated on a linear progression basis if
EPS is between $1.75 and $1.85, so that, by way of example, 100% of plan
incentive will be payable if EPS is $1.80.

Payout Form and Special Conditions

Payout to officers will be in the form of restricted stock that vests on the
second anniversary of grant.

Payout to profit center heads will be half in cash (immediate) and half in
restricted stock (with the same vesting term as above).

Payout to all others will be 100% cash.

Payout in restricted stock will delay tax until vesting occurs, although 83(b)
elections will be available.

Termination due to death, disability or change in control during the two-year
stock restriction period will result in immediate vesting. Retirement (age 55
and 10 years) during this period will result in immediate vesting if approved by
the Executive Personnel and Compensation Committee of the Board. All other
terminations will result in forfeiture of the restricted stock.

Dividends will be paid on restricted stock during the restriction period.

Payments under this program will not be included in compensation for pension
benefit determination.

Cash payouts will be eligible for deferral in the non-qualified deferred
compensation plan.

EX-10.28

                                                                   Exhibit 10.28


May 21, 2001


Mr. Michael W. Wright
Chairman and Chief Executive Officer
SUPERVALU INC.

Dear Mike:

     On behalf of the SUPERVALU INC. Executive Personnel and Compensation
Committee and Board Affairs Committee, we would like to outline the plans for
your retirement, as we discussed in our conversation following the April 11,
2001 SUPERVALU Board of Directors meeting.

     We understand, as you announced last June, and reaffirmed on April 11, you
plan to step down as Chief Executive Officer of SUPERVALU at the Annual
Shareholder Meeting on June 27, 2001. At the Board's request, you have agreed to
stay on as a full-time employee of SUPERVALU and Chairman of the Board of
Directors until the Annual Shareholder Meeting of June 2002, at which time you
have agreed to retire as an employee of SUPERVALU and resign from its Board of
Directors.

     During the period from June 27, 2001 until the Annual Shareholder Meeting
in June 2002, you agreed to aid in the transition of leadership from you to your
successor as Chief Executive Officer of SUPERVALU and undertake such duties as
specifically requested by the CEO from time to time during such period. After
you step down as Chief Executive Officer in June 2001, we understand you intend
to maintain an off-premise office in Minneapolis, Minnesota (see below) or an
office in Sarasota, Florida. You will be expected to provide such transition
services from either or both locations as appropriate for carrying out the
requested duties.

     SUPERVALU will continue to pay you your current base salary through the
last pay period in June, 2002, in accordance with its normal payroll policies.
In addition, you will be included in SUPERVALU's annual incentive program for
senior management for its fiscal year 2002 at your current participation level,
and you will be included in SUPERVALU's annual incentive program for senior
management for its fiscal year 2003 at one-third of your current participation
level, payable in each case under SUPERVALU's regular procedures. All of your
current special benefits and perquisites in effect now will continue until June
30, 2002.

     Once you step down as Chief Executive Officer in June 2001, SUPERVALU has
agreed to provide you, at its cost, with off-premise office space in
Minneapolis, Minnesota (or at your election in Sarasota, Florida or such other
location as you select), including your existing office furniture (or other
furniture acceptable to you presently in storage at SUPERVALU), office supplies,


Mr. Michael W. Wright
May 21, 2001
Page 2


secretarial support (and necessary secretarial equipment), luncheon club dues
and parking, commencing June 27, 2001, and for a period up to 10 years following
your retirement in June 2002. SUPERVALU will also outfit such office, at its
cost, with office equipment, computer, copier, scanner, fax machine, telephone,
internet access, etc., and it will provide IT support to set up such office
equipment and maintain it during such period. SUPERVALU, with your consent, may
provide such secretarial support by giving you reasonable access to its on-staff
secretarial services.

     SUPERVALU will also continue to provide you with your existing financial
counseling allowance and will pay for your executive health exam until one year
after your retirement in June 2002.

     This letter, when signed by an authorized officer of SUPERVALU, and by you,
will constitute a binding obligation enforceable by you against SUPERVALU and
any and all successors and assigns.

                                       Very truly yours,


/s/ Edwin C. Gage                      /s/ William A. Hodder
- ----------------------------------     -----------------------------------------
Edwin C. (Skip) Gage                   William A. Hodder
Chairman, Executive Personnel          Director, Board Affairs Committee
and Compensation Committee

     SUPERVALU hereby accepts the obligations set forth in the foregoing letter
and agrees to be bound thereby.

                                       SUPERVALU INC.


                                       By /s/ Jeffrey Noddle
                                          --------------------------------------
                                       Jeffrey Noddle
                                       President and Chief Operating Officer,
                                       Chief Executive Officer Designate


     The undersigned hereby accepts the terms set forth in the foregoing letter.

                                       /s/ Michael W. Wright
                                       -----------------------------------------
                                       Michael W. Wright

EX-12.1

                                                                    EXHIBIT 12.1
                         SUPERVALU INC. and Subsidiaries
                       Ratio of Earnings to Fixed Charges
                             For Fiscal Years Ended




(In thousands, except ratios)                2002         2001         2000         1999         1998
                                           ---------    ---------    ---------    ---------    ---------
                                                                                
Earnings before income taxes               $ 343,703    $ 154,357    $ 447,454    $ 316,261    $ 384,780

Less undistributed earnings of less than
  fifty percent owned affiliates:
                                             (13,450)      (9,429)      (6,605)      (5,943)      (7,388)
                                           ---------    ---------    ---------    ---------    ---------

Earnings before income taxes                 330,253      144,928      440,849      310,318      377,392

Interest expense                             194,294      212,898      154,482      124,111      133,619

Interest on operating leases                  35,971       29,047       23,838       18,574       18,010
                                           ---------    ---------    ---------    ---------    ---------

                                           $ 560,518    $ 386,873    $ 619,169    $ 453,003    $ 529,021
                                           =========    =========    =========    =========    =========
 Total fixed charges                         230,265      241,945      178,320      142,685      151,629
                                           =========    =========    =========    =========    =========
Ratio of earnings to fixed charges              2.43         1.60         3.47         3.17         3.49
                                           =========    =========    =========    =========    =========

EX-21.1

                                                                    Exhibit 21.1


                                 SUPERVALU INC.
                                  Subsidiaries

                              As of April 19, 2002
       (All are Subsidiary Corporations 100% Owned Directly or Indirectly,
                                Except as Noted)



                                                                                                      PERCENTAGE OF VOTING
                                                               JURISDICTION                            SECURITIES OWNED BY
                                                               OF ORGANIZATION                           IMMEDIATE PARENT
                                                               ---------------                           ----------------
                                                                                                       
SUPERVALU INC.
   Blaine North 1996 L.L.C.                                   Delaware Limited Liability Company               70%
   Bloomington 1998 L.L.C.                                    Delaware Limited Liability Company               40%
   Burnsville 1998 L.L.C.                                     Delaware Limited Liability Company             77.5%
   Diamond Lake 1994 L.L.C.                                   Delaware Limited Liability Company               25%
   Forest Lake 2000 L.L.C.                                    Delaware Limited Liability Company               65%
   Fridley 1998 L.L.C.                                        Delaware Limited Liability Company             74.5%
   Hastings 2002 L.L.C.                                       Delaware Limited Liability Company             51.0%
   Inver Grove Heights 2001 L.L.C.                            Delaware Limited Liability Company             66.0%
   J. M. Jones Equipment Company                              Delaware                                        100%
   Keltsch Bros., Inc.                                        Indiana                                         100%
   Maplewood East 1996 L.L.C.                                 Delaware Limited Liability Company               70%
   Max Club, Inc.                                             Minnesota                                       100%
   Monticello 1998 L.L.C.                                     Delaware Limited Liability Company               90%
   NAFTA Industries Consolidated, Inc.                        Texas                                            51%
       NAFTA Industries, Ltd.                                 Texas Limited Partnership                        51%
          International Data, LLC                             Indiana Limited Liability Company                50%
   NC&T Supermarkets, Inc.                                    Ohio                                            100%
   Nevada Bond Investment Corp. I                             Nevada                                          100%
   Northfield 2002 L.L.C.                                     Delaware                                         51%
   Planmark Architecture of Oregon, P.C.                      Oregon                                          100%
   Planmark, Inc.                                             Minnesota                                       100%
   Plymouth 1998 L.L.C.                                       Delaware Limited Liability Company             62.5%
   Preferred Products, Inc.                                   Minnesota                                       100%
   Richfood Holdings, Inc.                                    Delaware                                        100%
       Market Funding, Inc.                                   Delaware                                        100%
       Market Transportation Services, Inc.                   Delaware                                        100%
       Penn Perishables, Inc.                                 Virginia                                        100%
       Retail Licensing Corporation                           Delaware                                        100%
       GV Holdings, Inc.                                      Delaware                                        100%
            Great Valu LLC                                    Virginia Limited Liability Company              100%
       Richfood, Inc.                                         Virginia                                        100%
           GWM Holdings, Inc.                                 Virginia                                        100%
           MFFL, Inc.                                         Virginia                                        100%
           Market Brands, Inc.                                Delaware                                        100%
           Market Improvement Corporation                     Virginia                                        100%
           Market Insurance Agency, Inc.                      Virginia                                        100%
           Market Leasing Company                             Virginia                                        100%
           Maryland Retail Services, Inc.                     Virginia                                        100%
           Retail Funding Corporation, Inc.                   Virginia                                        100%
           Rich-Temps, Inc.                                   Virginia                                        100%
       Rotelle, Inc.                                          Pennsylvania                                    100%
            Penn Brands, Inc.                                 Delaware                                        100%
            Rotelle Management, Inc.                          Pennsylvania                                    100%
            Spring House Leasing, Inc.                        Pennsylvania                                    100%
       Super Rite Foods, Inc.                                 Delaware                                        100%
            FF Acquisition LLC                                Virginia Limited Liability Company              100%
            Foodarama Incorporated                            Delaware                                        100%






                                                                                                      PERCENTAGE OF VOTING
                                                               JURISDICTION                            SECURITIES OWNED BY
                                                               OF ORGANIZATION                           IMMEDIATE PARENT
                                                               ---------------                           ----------------
                                                                                                       
                  Foodarama, Inc.                             Maryland                                        100%
                  Foodarama Group, Inc.                       Maryland                                        100%
                     Midway Markets of Delaware, Inc.         Delaware                                        100%
                     Food-A-Rama G.U., Inc.                   Maryland                                        100%
                         Oxon Run, Inc.                                                                       100%
            SRF Subsidiary Corporation                        Delaware                                        100%
               Richfood Procurement LLC                       Virginia Limited Liability Company              100%
       Dart Group Corporation                                 Delaware                                        100%
            Bridgeview Warehouse LLC                          Delaware Limited Liability Company              100%
            75th Avenue Headquarters LLC                      Delaware Limited Liability Company              100%
            Cabot Morgan Real Estate Company                  Delaware                                        100%
            Dart Group Financial Corporation                  Delaware                                        100%
            Discount Books East, Inc.                         Delaware                                        100%
            Pennsy Warehouse Leasing Corporation              Delaware                                        100%
            Pennsy Drive Warehouses LLC                       Delaware                                        100%
            California Ontario Warehouse LLC                  Delaware Limited Liability Company              100%
            SFW Holding Corp.                                 Delaware                                        100%
                 Shoppers Food Warehouse Corporation          Delaware                                        100%
                       RBC Corporation                        Maryland                                        100%
                       SFW DC Corp.                           District of Columbia                            100%
                       SFW Investment Corporation             Delaware                                        100%
   Risk Planners Agency of Ohio, Inc.                         Ohio                                            100%
   Risk Planners of Mississippi, Inc.                         Mississippi                                     100%
   Risk Planners of Pennsylvania, Inc.                        Pennsylvania                                    100%
   Risk Planners, Inc.                                        Minnesota                                       100%
       Risk Planners of Illinois, Inc.                        Illinois                                        100%
       Risk Planners of Montana, Inc.                         Montana                                         100%
       Risk Planners of Washington, Inc.                      Washington                                      100%
   Shakopee 1997 L.L.C.                                       Delaware Limited Liability Company               25%
   Silver Lake 1996 L.L.C.                                    Delaware Limited Liability Company               51%
   SUPERVALU Finance, Inc.                                    Minnesota                                       100%
   SUPERVALU Management Corp.                                 Delaware                                        100%
   SUPERVALU Pharmacies, Inc.                                 Minnesota                                       100%
   SUPERVALU Receivables, Inc.                                Delaware                                        100%
   SUPERVALU Transportation, Inc.                             Minnesota                                       100%
   SUVACO Insurance International, Ltd.                       Islands of Bermuda                              100%
   Sweet Life Products Co., Inc.                              New York                                         75%
   Valu Ventures, Inc.                                        Minnesota                                       100%
   Valu Ventures 2, Inc.                                      Indiana                                         100%
       SUPERVALU Terre Haute Limited Partnership              Indiana Limited Partnership                     100%
   Western Dairy Distributors, Inc.                           Colorado                                        100%

   Supermarket Operators of America Inc.                      Delaware                                        100%
       Advantage Logistics - Southeast, Inc.                  Alabama                                         100%
       Clyde Evans Markets, Inc.                              Ohio                                            100%
       Scott's Food Stores, Inc.                              Indiana                                         100%
                SV Ventures*                                  Indiana General Partnership                      50%
       SUPERVALU Receivables Funding                          Delaware                                        100%
           Corporation

       SUPERVALU Holdings, Inc.                               Missouri                                        100%
           Advantage Logistics Southwest, Inc.                Arizona                                         100%
           Advantage Logistics - PA LLC                       Pennsylvania                                    100%
           Airway Redevelopment Corporation                   Missouri                                        100%



                                      -2-





                                                                                                      PERCENTAGE OF VOTING
                                                               JURISDICTION                            SECURITIES OWNED BY
                                                               OF ORGANIZATION                           IMMEDIATE PARENT
                                                               ---------------                           ----------------
                                                                                                       
           Augsburger's, Inc.                                 Indiana                                         100%
           Butson's Enterprises, Inc.                         New Hampshire                                   100%
                  Butson's Enterprises of
                         Massachusetts, Inc.                  Massachusettts                                  100%
                  Butson's Enterprises of Vermont, Inc.       Vermont                                         100%
                  Keatherly, Inc.                             New Hampshire                                   100%
                  Peoples Market, Incorporated                New Hampshire                                   100%
                  Violette's Supermarkets, Inc.               New Hampshire                                   100%
           East Main Development, Inc.                        Rhode Island                                    100%
           GM Distributing, Inc.                              California                                      100%
           John Alden Industries, Inc.                        Rhode Island                                    100%
           Livonia Holding Company, Inc.                      Michigan                                        100%
                Foodland Distributors                         Michigan General Partnership                     50%
           Mohr Developers, Inc.                              Missouri                                        100%
           Mohr Distributors of Litchfield, Inc.              Illinois                                        100%
           Moran Foods, Inc.                                  Missouri                                        100%
                Save-A-Lot Food Stores, Inc.                  Missouri                                        100%
                Lot 18 Redevelopment Corp.                    Missouri                                        100%
           Rostraver Township L.L.C.                          Pennsylvania                                     85%
                Rostraver Township                            Pennsylvania Limited Partnership                  1%
           Shop `N Save Warehouse Foods, Inc.                 Missouri                                        100%
                 Shop `N Save St. Louis, Inc.                 Missouri                                        100%
                 WSI Satellite, Inc.                          Missouri                                        100%
           SUPERVALU Holdings - PA LLC                        Pennsylvania Limited Liability Company          100%
           SV Markets, Inc.                                   Ohio                                            100%
           SV Ventures*                                       Indiana General Partnership                      50%
           SVH Holding, Inc.                                  Delaware                                        100%
                 SVH Realty, Inc.                             Delaware                                        100%
           Total Insurance Marketing Enterprises, Inc.        Pennsylvania                                    100%
           Ultra Foods, Inc.                                  New Jersey                                      100%
           Verona Road Associates, Inc.                       Pennsylvania                                    100%
           WC&V Supermarkets, Inc.                            Vermont                                         100%
           Wetterau Finance Co.                               Missouri                                        100%
           Wetterau Insurance Co. Ltd.                        Bermuda                                         100%


*    SV Ventures is a general partnership between SUPERVALU Holdings, Inc. and
     Scott's Food Stores, Inc. each of which holds a 50% interest. Both general
     partners are direct subsidiaries of Supermarket Operators of America, Inc.


                                      -3-

EX-23.1

                                                                    Exhibit 23.1


                          Independent Auditors' Consent



The Board of Directors
SUPERVALU INC.:

We consent to incorporation by reference in the Registration Statements No.
33-28310, No. 33-16934, No. 2-56896, No. 33-50071, No. 333-10151, No. 333-24813,
No. 333-61365, No. 333-72851, No. 333-89157, No. 333-32354, No. 333-32356,
No. 333-43538 and No. 333-44570 on Form S-8 and No. 33-56415, No. 333-94965,
No. 333-43538 and No. 333-81252 on Form S-3 of SUPERVALU INC., of our reports
dated April 3, 2002, relating to the consolidated balance sheets of SUPERVALU
INC. and subsidiaries as of February 23, 2002 and February 24, 2001, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the fiscal years in the three-year period ended February 23,
2002, and the related schedule, which reports appear in the 2002 annual report
on Form 10-K of SUPERVALU INC.

/s/ KPMG LLP

KPMG LLP

Minneapolis, Minnesota
April 19, 2002

EX-24.1

                                                                    EXHIBIT 24.1


                                POWER OF ATTORNEY

     Each person whose signature appears below hereby constitutes and appoints
Michael W. Wright, David L. Boehnen and John P. Breedlove, and each of them, the
undersigned's true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in such person's name,
place and stead, in any and all capacities (including the undersigned's capacity
as Director and/or Principal Executive Officer, Principal Financial Officer,
Principal Accounting Officer or any other officer of SUPERVALU INC.), to sign
SUPERVALU's Annual Report on Form 10-K to be filed pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended, for the fiscal year
ended February 23, 2002, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in or about the premises, as fully to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.

     IN WITNESS WHEREOF, this Power of Attorney has been signed as of the 19th
day of April, 2002, by the following persons:



/s/ Lawrence A. Del Santo                   /s/ Charles M. Lillis
- ----------------------------------          ------------------------------------
Lawrence A. Del Santo                       Charles M. Lillis


/s/ Susan E. Engel                          /s/ Jeffrey Noddle
- ----------------------------------          ------------------------------------
Susan E. Engel                              Jeffrey Noddle


/s/ Edwin C. Gage                           /s/ Harriet Perlmutter
- ----------------------------------          ------------------------------------
Edwin C. Gage                               Harriet Perlmutter


/s/ William A. Hodder                       /s/ Steven S. Rogers
- ----------------------------------          ------------------------------------
William A. Hodder                           Steven S. Rogers


/s/ Garnett L. Keith                        /s/ Carole F. St. Mark
- ----------------------------------          ------------------------------------
Garnett L. Keith                            Carole F. St. Mark


/s/ Richard L. Knowlton                     /s/ Michael W. Wright
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Richard L. Knowlton                         Michael W. Wright


/s/ Pamela K. Knous
- ----------------------------------
Pamela K. Knous

EX-99.1

                                                                   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 Annual Report on Form 10-K 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 or national emergencies; 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 or national
emergencies; and the entry of new or non-traditional distribution systems into
the industry.

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
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.