EX-99.1 7 a13-8825_1ex99d1.htm EX-99.1

Exhibit 99.1

 

SUPERVALU INC. and Subsidiaries

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share data)

 

On March 21, 2013, SUPERVALU INC. (SUPERVALU or the “Company”) completed the sale of New Albertson’s, Inc., an Ohio corporation and a direct wholly owned subsidiary of SUPERVALU (“NAI”), through a Stock Purchase Agreement (the “Stock Purchase Agreement”), which resulted in the sale of the Company’s NAI banners, including Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market banners and related Osco and Sav-on in-store pharmacies (collectively, the “NAI Banners”), to AB Acquisition, LLC, a Delaware limited liability company (“AB Acquisition,” or the “Buyer”), an affiliate of a Cerberus Capital Management, L.P. (“Cerberus”)-led consortium which also includes Kimco Realty, Klaff Realty LP, Lubert-Adler Partners and Schottenstein Real Estate Group, in a stock sale. The sale consisted of the acquisition by AB Acquisition of the stock of NAI, which owned the NAI Banners, for $100 in cash subject to working capital adjustments, and the assumption of certain debt and capital lease obligations of approximately $3,200, which will be retained by NAI (the “NAI Banner Sale”).

 

As required by the NAI Banner Sale, the Company entered into two new credit agreements: (i) a new six-year $1,500 senior secured term loan credit facility (the “Term Loan Facility”), secured by substantially all of the Company’s real estate and equipment, substantially all of the Company’s intellectual property, and the equity interests in Moran Foods, LLC, the parent company of SUPERVALU’s Save-A-Lot banner, which will bear interest at the rate of London Interbank Offered Rate (“LIBOR”) plus 5.00 percent with a LIBOR floor of 1.25% and will be issued at a $15 discount and (ii) a new five-year $1,000 senior secured asset-based revolving credit facility (the “ABL Facility”), secured by the Company’s inventory, credit card, pharmacy and wholesale trade receivables and certain other assets, which will bear interest at the rate of LIBOR plus 1.75 to 2.25 percent, (collectively the “Refinancing Transactions”). The proceeds of these financings will be used to replace and extinguish the existing $1,650 asset-based revolving credit facility, the existing $834 term loan and the existing $200 accounts receivable securitization revolving facility, and for the early redemption of the Company’s $490 of 7.5% bonds scheduled to mature in November 2014.

 

In connection with the Refinancing Transactions the Company will pay new debt financing costs of approximately $78, of which approximately $63 will be capitalized and $15 will be expensed. In addition, the Company will recognize a non-cash charge of approximately $36 for the write-off of existing unamortized financing costs and $22 for the accelerated amortization of original issue discount on the existing term loan. These amounts are reflected in the Unaudited Pro Forma Condensed Consolidated Financial Statements.

 

Concurrently with the execution of the Stock Purchase Agreement, the Company entered into a Tender Offer Agreement, dated as of January 10, 2013 (the “Tender Offer Agreement”) with Symphony Investors, LLC, owned by a Cerberus-led investor consortium (“Symphony Investors”), pursuant to which, upon the terms and subject to the conditions of the Tender Offer Agreement, and contingent upon the NAI Banner Sale, Symphony Investors tendered for up to 30 percent of the issued and outstanding common stock of the Company at a purchase price of $4.00 per share in cash, without interest, subject to any required withholding tax (the “Tender Offer”). Approximately 12 shares were validly tendered, representing approximately 5.5 percent of the issued and outstanding shares at the time of the Tender Offer expiration on March 20, 2013. All shares that were validly tendered and not properly withdrawn were accepted for payment in accordance with the terms of Tender Offer. In addition, pursuant to the terms of the Tender Offer Agreement, on March 21, 2013, SUPERVALU issued approximately 42 additional shares of common stock (approximately 19.9 percent of outstanding shares prior to the share issuance) to Symphony Investors at the Tender Offer price per share of $4.00, resulting in $170 in cash proceeds to the Company, which brought Symphony Investors ownership percent to 21.2 percent after the share issuance.

 

The following Unaudited Pro Forma Condensed Consolidated Financial Statements were derived from the Company’s historical Consolidated Financial Statements and reflect the Company’s historical Consolidated Statements of Operations (formerly referred to as the Consolidated Statements of Earnings) recast as if the NAI Banner Sale and related Refinancing Transactions and Tender Offer occurred on March 1, 2009 (the first day of fiscal 2010) and the Company’s historical Consolidated Balance Sheet recast as if the NAI Banner Sale and related Refinancing Transactions and Tender Offer occurred on December 1, 2012. These Unaudited Pro Forma Condensed Consolidated Financial Statements should be read together with the Company’s historical Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended February 25, 2012 and in the Company’s Quarterly Reports on Form 10-Q for the year to date third quarter (40 weeks) ended December 1, 2012.

 

The assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the Unaudited Pro Forma Condensed Consolidated Financial Statements. Management believes the assumptions used and pro forma adjustments derived from such assumptions are reasonable under the circumstances and are based upon currently available information.

 

1


 

The historical financial information has been adjusted to give the effect to pro forma events that are related and directly attributable to the NAI Banner Sale, and the Refinancing Transactions and the related Tender Offer, are factually supportable and, in the case of the Unaudited Pro Forma Condensed Consolidated Statements of Operations, are expected to have a continuing impact on the Company’s future results of operations. No adjustments have been made for material indirect non-recurring transition charges anticipated to arise subsequent to the NAI Banner Sale of approximately $25 to $30 primarily related to contract breakage, financial and legal advisors and other costs. The adjustments presented in the Unaudited Pro Forma Condensed Consolidated Financial Statements have been identified and presented to provide relevant information necessary for an understanding of SUPERVALU upon consummation of the NAI Banner Sale, and the Refinancing Transactions and the related Tender Offer.

 

The Unaudited Pro Forma Condensed Consolidated Statements of Operations do not reflect expenses the Company has incurred or will incur for severance and employee-related costs including accelerated vesting of certain stock-based compensation arrangements related to the March 26, 2013 announced workforce reductions, which are anticipated to be approximately $70 to $75. The Company anticipates related costs savings in salary, employee-related benefits and other administrative costs of approximately $160 on an annualized basis from these headcount reductions.

 

The Unaudited Pro Forma Condensed Consolidated Financial Statements are presented for informational purposes only and are subject to a number of uncertainties and assumptions and do not purport to represent what the Company’s actual results of operations or financial position would have been had the NAI Banner Sale and related Refinancing Transactions and Tender Offer occurred on the dates previously described. Additionally, these statements are not necessarily indicative of the future results of operations or financial condition of SUPERVALU as of any future date or for any future period.

 

2


 

SUPERVALU INC. and Subsidiaries

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

For the Year-to-Date Third Quarter (40 Weeks) Ended December 1, 2012

(In millions, except per share data)

 

 

 

 

 

Pro Forma Adjustments

 

 

 

 

 

Historical

 

Disposition of
New Albertson’s,
Inc. (a)

 

Other

 

Note

 

Pro Forma

 

Net sales

 

$

26,542

 

$

(13,329

)

$

—

 

 

 

$

13,213

 

Cost of sales

 

20,818

 

(9,346

)

—

 

 

 

11,472

 

Gross profit

 

5,724

 

(3,983

)

—

 

 

 

1,741

 

Selling and administrative expenses

 

5,325

 

(3,644

)

(110

)

(b)

 

1,571

 

Goodwill and intangible asset impairment charges

 

74

 

(74

)

—

 

 

 

—

 

Operating earnings

 

325

 

(265

)

110

 

 

 

170

 

Interest expense, net

 

422

 

(211

)

7

 

(c)

 

218

 

Loss from continuing operations before income taxes

 

(97

)

(54

)

103

 

 

 

(48

)

Income tax provision (benefit)

 

(43

)

(24

)

39

 

(d)

 

(28

)

Net loss from continuing operations

 

$

(54

)

$

(30

)

$

64

 

 

 

$

(20

)

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share from continuing operations—basic

 

$

(0.26

)

 

 

 

 

 

 

$

(0.08

)

Net loss per share from continuing operations—diluted

 

$

(0.26

)

 

 

 

 

 

 

$

(0.08

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

212

 

 

 

42

 

(e)

 

254

 

Diluted

 

212

 

 

 

42

 

(e)

 

254

 

 

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

 

3


 

SUPERVALU INC. and Subsidiaries

 

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

 

For the Year-to-Date Third Quarter (40 Weeks) Ended December 3, 2011

 

(In millions, except per share data)

 

 

 

 

 

Pro Forma Adjustments

 

 

 

 

 

Historical

 

Disposition of
New
Albertson’s,
Inc. (a)

 

Other

 

Note

 

Pro Forma

 

Net sales

 

$

27,869

 

$

(14,511

)

$

—

 

 

 

$

13,358

 

Cost of sales

 

21,728

 

(10,207

)

—

 

 

 

11,521

 

Gross profit

 

6,141

 

(4,304

)

—

 

 

 

1,837

 

Selling and administrative expenses

 

5,446

 

(3,767

)

(107

)

(b)

 

1,572

 

Goodwill and intangible asset impairment charges

 

907

 

(853

)

—

 

 

 

54

 

Operating earnings (loss)

 

(212

)

316

 

107

 

 

 

211

 

Interest expense, net

 

394

 

(204

)

21

 

(c)

 

211

 

Loss from continuing operations before income taxes

 

(606

)

520

 

86

 

 

 

—

 

Income tax provision (benefit)

 

10

 

(24

)

33

 

(d)

 

19

 

Net loss from continuing operations

 

$

(616

)

$

544

 

$

53

 

 

 

$

(19

)

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share from continuing operations—basic

 

$

(2.91

)

 

 

 

 

 

 

$

(0.08

)

Net loss per share from continuing operations—diluted

 

$

(2.91

)

 

 

 

 

 

 

$

(0.08

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

212

 

 

 

42

 

(e)

 

254

 

Diluted

 

212

 

 

 

42

 

(e)

 

254

 

 

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

 

4


 

SUPERVALU INC. and Subsidiaries

 

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

 

For the Year Ended February 25, 2012

 

(In millions, except per share data)

 

 

 

 

 

Pro Forma Adjustments

 

 

 

 

 

Historical

 

Disposition of
New
Albertson’s,
Inc. (a)

 

Other

 

Note

 

Pro Forma

 

Net sales

 

$

36,100

 

$

(18,759

)

$

—

 

 

 

$

17,341

 

Cost of sales

 

28,081

 

(13,150

)

—

 

 

 

14,931

 

Gross profit

 

8,019

 

(5,609

)

 

 

 

 

2,410

 

Selling and administrative expenses

 

7,106

 

(4,881

)

(143

)

(b)

 

2,082

 

Goodwill and intangible asset impairment charges

 

1,432

 

(1,340

)

—

 

 

 

92

 

Operating earnings (loss)

 

(519

)

612

 

143

 

 

 

236

 

Interest expense, net

 

509

 

(262

)

25

 

(c)

 

272

 

Loss from continuing operations before income taxes

 

(1,028

)

874

 

118

 

 

 

(36

)

Income tax provision (benefit)

 

12

 

(54

)

45

 

(d)

 

3

 

Net loss from continuing operations

 

$

(1,040

)

$

928

 

$

73

 

 

 

$

(39

)

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share from continuing operations—basic

 

$

(4.91

)

 

 

 

 

 

 

$

(0.15

)

Net loss per share from continuing operations—diluted

 

$

(4.91

)

 

 

 

 

 

 

$

(0.15

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

212

 

 

 

42

 

(e)

 

254

 

Diluted

 

212

 

 

 

42

 

(e)

 

254

 

 

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

 

5


 

SUPERVALU INC. and Subsidiaries

 

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

 

For the Year Ended February 26, 2011

 

(In millions, except per share data)

 

 

 

 

 

Pro Forma Adjustments

 

 

 

 

 

Historical

 

Disposition of
New
Albertson’s,
Inc. (a)

 

Other

 

Note

 

Pro Forma

 

Net sales

 

$

37,534

 

$

(20,037

)

$

—

 

 

 

$

17,497

 

Cost of sales

 

29,124

 

(14,023

)

—

 

 

 

15,101

 

Gross profit

 

8,410

 

(6,014

)

—

 

 

 

2,396

 

Selling and administrative expenses

 

7,516

 

(5,266

)

(140

)

(b)

 

2,110

 

Goodwill and intangible asset impairment charges

 

1,870

 

(1,760

)

—

 

 

 

110

 

Operating earnings (loss)

 

(976

)

1,012

 

140

 

 

 

176

 

Interest expense, net

 

547

 

(317

)

49

 

(c)

 

279

 

Loss from continuing operations before income taxes

 

(1,523

)

1,329

 

91

 

 

 

(103

)

Income tax provision (benefit)

 

(13

)

(55

)

35

 

(d)

 

(33

)

Net loss from continuing operations

 

$

(1,510

)

$

1,384

 

$

56

 

 

 

$

(70

)

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share from continuing operations—basic

 

$

(7.13

)

 

 

 

 

 

 

$

(0.28

)

Net loss per share from continuing operations—diluted

 

$

(7.13

)

 

 

 

 

 

 

$

(0.28

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

212

 

 

 

42

 

(e)

 

254

 

Diluted

 

212

 

 

 

42

 

(e)

 

254

 

 

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

 

6


 

SUPERVALU INC. and Subsidiaries

 

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

 

For the Year Ended February 27, 2010

 

(In millions, except per share data)

 

 

 

 

 

Pro Forma Adjustments

 

 

 

 

 

Historical

 

Disposition of
New
Albertson’s,
Inc. (a)

 

Other

 

Note

 

Pro Forma

 

Net sales

 

$

40,597

 

$

(22,125

)

$

 

 

 

 

$

18,472

 

Cost of sales

 

31,444

 

(15,557

)

 

 

 

 

15,887

 

Gross profit

 

9,153

 

(6,568

)

 

 

 

 

2,585

 

Selling and administrative expenses

 

7,952

 

(5,668

)

(124

)

(b)

 

2,160

 

Operating earnings

 

1,201

 

(900

)

124

 

 

 

425

 

Interest expense, net

 

569

 

(346

)

54

 

(c)

 

277

 

Earnings from continuing operations before income taxes

 

632

 

(554

)

70

 

 

 

148

 

Income tax provision (benefit)

 

239

 

(220

)

27

 

(d)

 

46

 

Net earnings from continuing operations

 

$

393

 

$

(334

)

$

43

 

 

 

$

102

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share from continuing operations—basic

 

$

1.86

 

 

 

 

 

 

 

$

0.40

 

Net earnings per share from continuing operations—diluted

 

$

1.85

 

 

 

 

 

 

 

$

0.40

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

212

 

 

 

42

 

(e)

 

254

 

Diluted

 

213

 

 

 

42

 

(e)

 

255

 

 

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

 

7


 

SUPERVALU INC. and Subsidiaries

 

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)

 

As of December 1, 2012

 

(In millions)

 

 

 

 

 

Pro Forma Adjustments

 

 

 

 

 

Historical

 

Disposition of
New
Albertson’s,
Inc. (a)

 

Other

 

Note

 

Pro Forma

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

155

 

$

(35

)

$

(55

)

(f)

 

$

330

 

 

 

 

 

 

 

100

 

(g)

 

 

 

 

 

 

 

 

 

170

 

(h)

 

 

 

 

 

 

 

 

 

97

 

(i)

 

 

 

 

 

 

 

 

 

(78

)

(j)

 

 

 

 

 

 

 

 

 

(24

)

(l)

 

 

 

Receivables, net

 

713

 

(228

)

—

 

 

 

485

 

Inventories

 

2,402

 

(1,320

)

—

 

 

 

1,082

 

Other current assets

 

195

 

(75

)

38

 

(n)

 

158

 

Total current assets

 

3,465

 

(1,658

)

248

 

 

 

2,055

 

Property, plant and equipment, net

 

5,980

 

(4,049

)

—

 

 

 

1,931

 

Goodwill

 

847

 

—

 

—

 

 

 

847

 

Intangible assets, net

 

703

 

(644

)

—

 

 

 

59

 

Other assets

 

862

 

(383

)

63

 

(j)

 

506

 

 

 

 

 

 

 

(36

)

(k)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

11,857

 

$

(6,734

)

$

275

 

 

 

$

5,398

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

2,423

 

$

(911

)

$

 

 

 

 

$

1,512

 

Current maturities of long-term debt and capital lease obligations

 

259

 

(214

)

 

 

 

 

45

 

Other current liabilities

 

592

 

(463

)

(24

)

(l)

 

105

 

Total current liabilities

 

3,274

 

(1,588

)

(24

)

 

 

1,662

 

Long-term debt and capital lease obligations

 

6,180

 

(2,841

)

22

 

(m)

 

3,361

 

Pension and other postretirement benefit obligations

 

1,027

 

(100

)

 

 

 

 

927

 

Other long-term liabilities

 

1,369

 

(871

)

 

 

 

 

498

 

Total stockholders’ equity (deficit)

 

7

 

(1,334

)

(55

)

(f)

 

(1,050

)

 

 

 

 

 

 

100

 

(g)

 

 

 

 

 

 

 

 

 

170

 

(h)

 

 

 

 

 

 

 

 

 

97

 

(i)

 

 

 

 

 

 

 

 

 

(15

)

(j)

 

 

 

 

 

 

 

 

 

(36

)

(k)

 

 

 

 

 

 

 

 

 

(22

)

(m)

 

 

 

 

 

 

 

 

 

38

 

(n)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity (deficit)

 

$

11,857

 

$

(6,734

)

$

275

 

 

 

$

5,398

 

 

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

 

8


 

SUPERVALU INC. and Subsidiaries

 

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(In millions, except per share data)

 

Overall

 

(a)         The “Disposition of New Albertson’s, Inc.” column reflects the net sales, expenses, assets, liabilities and stockholders’ equity attributable to NAI, which were historically included in SUPERVALU’s historical consolidated financial statements. This column excludes certain amounts attributable to NAI which will remain with SUPERVALU pursuant to the terms of the Stock Purchase Agreement and related commercial agreements, such as certain pension and other post retirement benefit obligations, certain corporate assets, and certain other accounts payable and accrued liabilities.

 

Pro Forma Condensed Consolidated Statements of Operations (Unaudited)

 

(b)         Reflects incremental Transition Services Agreement (“TSA”) fees that will be earned under the revised TSA between SUPERVALU INC. and New Albertson’s, Inc. (the “Revised TSA”) in connection with the NAI Banner Sale, net of the TSA fees recognized under the existing agreement between SUPERVALU and Albertson’s, LLC (the former TSA). The Revised TSA provides NAI with certain administrative and other services following the closing of the NAI Banner Sale for an initial term of two and a half years following the sale and is subject to certain adjustments under the terms of the agreement, such as a lower number of stores and distribution centers operated by NAI.

 

(c)          Interest expense, net has been adjusted to reflect the impact of an adjustment in interest rates of the new credit facilities attributable to the Refinancing Transactions as well as the net impact of the amortization of new and remaining deferred financing costs related to the NAI Banner Sale and related Refinancing Transactions.

 

(d)         The adjustments to the Unaudited Pro Forma Condensed Consolidated Statements of Operations adjustments were tax effected using the marginal tax rate of the applicable jurisdiction during each period presented.

 

(e)          Reflects approximately 42 additional common shares issued to Symphony Investors pursuant to the Tender Offer Agreement.

 

Pro Forma Condensed Consolidated Balance Sheet (Unaudited)

 

(f)           Reflects the direct costs of the NAI Banner Sale as of December 1, 2012, which are non-recurring direct and incremental costs.

 

(g)          Reflects the cash proceeds from NAI Banner Sale.

 

(h)         Reflects the cash proceeds received from Symphony Investors for the issuance of approximately 42 additional common shares at the Tender Offer price of $4.00 per share, pursuant to the terms and conditions of the Tender Offer Agreement.

 

(i)             Reflects the cash proceeds from the working capital settlement related to the NAI Banner Sale. Due to seasonal operating needs, higher December 1, 2012 working capital balances resulted in an estimated working capital settlement adjustment of $97 pursuant to the Stock Purchase Agreement. The Company expects that based on lower estimated working capital balances at the March 21, 2013 closing date, no working capital adjustment to the initial purchase price will be required pursuant to the Stock Purchase Agreement.

 

(j)            Reflects the payment of $78, capitalization of $68 and expense of $15 related to the new deferred financing costs related to the Refinancing Transactions.

 

(k)         Reflects the write-off of unamortized deferred financing costs relating to historical debt in connection with the Refinancing Transactions and NAI Banner Sale.

 

(l)             Reflects payment of accrued interest related to the historical debt refinanced pursuant to the Refinancing Transactions.

 

(m)     Reflects an increase in long-term debt to reflect the accelerated amortization of the original issue discount on the existing term loan.

 

(n)         Reflects the tax effects of the Unaudited Pro Forma Condensed Consolidated Balance Sheet adjustments using the applicable marginal tax rate in the jurisdiction in which the adjustment related.

 

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