EX-99.1 2 su2445ex991.txt Exhibit 99.1 SUPERVALU REPORTS FISCAL 2005 FOURTH QUARTER RESULTS Fiscal 2005 Results Set Earnings Record and Exceed Guidance SUPERVALU Reports 35 Percent Increase in Diluted Earnings Per Share in Fiscal 2005; 16 Percent Increase Exclusive of Gain From Sale of WinCo and Extra Week in Fiscal 2004 MINNEAPOLIS, April 19 /PRNewswire-FirstCall/ -- SUPERVALU INC. (NYSE: SVU) today reported results for the fourth quarter of fiscal 2005, which ended February 26, 2005. The company reported net sales of $4.6 billion compared to $5.0 billion last year, net earnings of $92.9 million compared to $95.6 million last year, basic earnings per share of $0.69 compared to $0.71 last year, and diluted earnings per share of $0.65 compared to $0.67 last year. Last year's fourth quarter reflected an extra week, which contributed approximately $360 million of net sales, $9.9 million of net earnings and $0.07 of basic and diluted earnings per share. Fourth quarter results exceed previous earnings per share guidance of $0.61 to $0.66, which did not include the reduction of $0.03 per share from the adoption of the new accounting treatment for contingently convertible debentures. For the fiscal 2005 full year, SUPERVALU reported net sales of $19.5 billion compared to $20.2 billion last year, net earnings of $385.8 million compared to $280.1 million last year, basic earnings per share of $2.86 compared to $2.09 last year, and diluted earnings per share of $2.71 compared to $2.01 last year. Full-year results exceed previous earnings per share guidance of $2.75 to $2.80, which did not include the reduction of $0.11 per share from the adoption of the new accounting treatment for contingently convertible debentures. Jeff Noddle, SUPERVALU chairman and chief executive officer said, "SUPERVALU continues to deliver strong results. Fiscal 2005 set a record net earnings level as diluted earnings per share grew 35 percent and when eliminating this year's one-time gain on the sale of WinCo and last year's extra week, fiscal 2005 diluted earnings per share increased 16 percent. We implemented sizable initiatives during the year, maintained a strict basis point discipline that supports our competitive customer offerings, invested for growth and returns, and improved our overall financial condition. We are excited about our strong position in an ever-changing grocery retail and supply chain environment and believe our highly complementary business model allows SUPERVALU to successfully participate and grow." Fiscal 2005 results include $0.51 basic earnings per share and $0.47 diluted earnings per share impact from the net after-tax gain on the sale of the company's minority interest in WinCo Foods, Inc. Fiscal 2005 and fiscal 2004 include $26.4 million and $15.5 million, respectively, of pre-tax restructure and other charges or $0.12 basic and diluted earnings per share in fiscal 2005 and $0.07 basic and diluted earnings per share in fiscal 2004, primarily related to increased liabilities associated with employee benefit costs from previously exited distribution facilities, as well as changes in estimates on exited real estate. Fiscal 2005 and fiscal 2004 reflect the adoption of the new accounting treatment for contingently convertible debentures. Fiscal 2004 was a 53-week year and included an extra week in the fourth quarter that generated approximately $360 million of sales, $9.9 million of net earnings, and $0.07 basic and diluted earnings per share. Segment Results Retail Food Segment -- Fourth quarter retail net sales were $2.6 billion compared to $2.8 billion last year. The decline in net sales primarily reflects last year's extra week in the quarter, which contributed approximately $185 million in net sales, and a higher level of store closings, which fully offset new store growth. Comparable store sales were negative 0.8 percent in the fourth quarter, reflecting difficult comparison against last year's 12-week comparable store sales growth of 2.5 percent. When adjusted for planned in-market store expansion, fourth quarter comparable store sales were negative 0.3 percent. Comparable store sales at Save-A-Lot were positive in the fourth quarter. Total retail square footage, including licensed stores, increased by approximately 4.2 percent from last year's fourth quarter, with Save-A-Lot's total square footage increasing by approximately 6.4 percent. Reported retail operating earnings for the fourth quarter were $111.0 million compared to $138.0 million last year. Reported operating earnings as a percent to sales were 4.3 percent compared to 4.9 percent in last year's fourth quarter. The decrease in operating earnings as a percent to sales primarily reflects the absence of last year's highly profitable extra week, the absence of WinCo earnings in this year's results, and increased operating costs primarily associated with remodel activities, which more than offset recently launched labor productivity initiatives. New store activity since last year's fourth quarter, including licensed stores, resulted in 104 new stores, opened and acquired, and 38 store closings. During fiscal 2005, net new stores opened include 62 extreme value stores and four regional banner stores. Fiscal 2005 store closings include 35 Save-A-Lot stores and three regional banner stores. As of February 26, 2005, Save-A-Lot, including licensees, operated 1,287 stores, of which 466 were combination stores compared to 199 combination stores at the end of fiscal 2004. Food Distribution Segment -- Fourth quarter distribution net sales were $2.0 billion compared to $2.3 billion last year. The decline in sales primarily reflects the absence of last year's extra week in the quarter, which contributed approximately $177 million in net sales, and customer attrition including the previously announced transition of three large customers to other suppliers, which more than offset new business growth of approximately three percent. The acquisition of Total Logistics, Inc. was completed on February 7, 2005 and overall results were immaterial to the fourth quarter. Reported distribution operating earnings for the fourth quarter were a record $59.4 million, compared to $55.9 million last year, an increase of 6.3 percent. Reported operating earnings as a percent to sales was a record 2.9 percent compared to 2.5 percent in last year's fourth quarter, a 40 basis-point increase. The increase in operating earnings as a percent to sales primarily reflects the benefit of volume throughput including labor productivity improvements, which more than offset the impact of last year's highly profitable extra week. Other Items General corporate expense for the fourth quarter was $10.1 million compared to $9.0 million last year. Included in the fourth quarter of fiscal 2005 was pre-tax expense for the cumulative effect of lease accounting adjustments of approximately $3 million, or $0.01 per diluted share. SUPERVALU's effective tax rate for the fourth quarter was 31.2 percent and the annual effective rate for fiscal 2005 was 35.8 percent versus 38.4 percent for full year fiscal 2004. The fiscal 2004 annual effective tax rate was higher than fiscal 2005, primarily from taxes due on the company's asset exchange with C&S. In both fiscal 2005 and fiscal 2004, the annual effective tax rates reflect the impact of net favorable tax settlements occurring in each respective fourth quarter. Net settlements in fiscal 2005 exceeded net settlements in fiscal 2004 by approximately $4 million. Capital spending for the fourth quarter and full year was $93.8 million and $325.7 million, including $13.9 million and $62.9 million in capital leases, respectively. Capital spending primarily included retail store expansion, store remodeling, and technology enhancements. During the quarter, the company completed its acquisition of Total Logistics, Inc. The aggregate transaction was approximately $234 million, including assumed debt of approximately $69 million and transaction expenses. Total debt to capital was 40.1 percent at year-end compared to 46.7 percent at fiscal 2004 year-end, the lowest level in more than a decade. The total debt to capital ratio is calculated as total debt, which includes notes payable, current debt and obligations under capital leases, long-term debt and obligations under capital leases, divided by the sum of total debt and total stockholders' equity. During the year, SUPERVALU used available cash balances to voluntarily redeem its $250 million in 7 5/8 percent Notes due September 15, 2004 on May 3, 2004. Cash balance as of February 26, 2005 was approximately $464 million. In the fourth quarter of fiscal 2005, the company adopted the Emerging Issues Task Force Issue No. 04-8 (EITF) of the Financial Accounting Standards Board entitled "The Effect of Contingently Convertible Instruments on Diluted Earnings Per Share" in regard to SUPERVALU's zero-coupon 4-1/2 percent convertible debentures. Under the new accounting standard, net earnings and diluted shares outstanding, used only for diluted earnings per share calculations, have been restated for the current and prior periods using the if-converted method of accounting to reflect the contingent issuance of 7.8 million shares under the company's outstanding, contingently convertible debentures, which were issued in November 2001. In fiscal 2005, the impact of the EITF was to reduce fourth quarter diluted earnings per share by approximately $0.03 and the full year by approximately $0.11 per diluted share. The restatement reduced fiscal 2004 and fiscal 2003 diluted earnings per share by $0.06 and $0.05, respectively. Basic weighted average shares outstanding in the quarter were 135.1 million shares and diluted weighted average shares outstanding were 145.2 million shares, reflecting the dilutive impact of stock options and 7.8 million of contingently convertible debentures. As of February 26, 2005, SUPERVALU had 135.5 million shares outstanding. Outlook SUPERVALU's fiscal 2006 outlook includes business assumptions, such as: -- Consumer spending will continue to be pressured by higher fuel prices and modest food inflation. -- Comparable store sales, reflecting planned in-market store expansion, are projected to increase by approximately one percent for the year; -- Store development plans including licensees are: approximately 90 to 110 new extreme value food combination stores; approximately 100 extreme value combination store conversions; approximately 10 to 12 new regional banner stores; and approximately 40 regional banner major and minor store remodels; -- Annual distribution sales attrition will approximate the upper end of the historical range of two to four percent for the year with the first half slightly higher until fiscal 2005 customer losses are fully cycled; -- Total capital spending is projected to be approximately $500 to $550 million, including approximately $90 million in capital leases; -- The fiscal 2006 effective tax rate is estimated to be 37 percent. -- Zero Zone, a refrigeration case and system manufacturer, will be divested in fiscal 2006 as it is non core to the company's food retail and supply chain service businesses. Zero Zone was acquired February 7, 2005 in conjunction with the company's acquisition of Total Logistics, Inc., a third-party logistics company. SUPERVALU establishes preliminary full-year fiscal 2006 basic earnings per share range of $2.43 to $2.58 and diluted earnings per share range of $2.30 to $2.45. Both basic and diluted earnings per share ranges include costs of approximately $0.05 to $0.07 for new growth and return initiatives including supply chain technology investments and the W. Newell & Co. produce business launch. On a comparable basis, Fiscal 2005 basic earnings per share was $2.35 and diluted earnings per share was $2.24 when eliminating the gain on the sale of WinCo. The ranges include the above business assumptions. Commenting on SUPERVALU's outlook, Noddle said, "SUPERVALU continues to transform itself. We are implementing several important initiatives in fiscal 2006 that represent next generation strategies. Initiatives such as leveraging the growth potential in third-party logistics, launching an enhanced produce model, and further innovating our supply chain, represent the next chapter in our efforts to deliver highly successful solutions for our customers. We look forward to sharing our progress on these initiatives and others in development as the year unfolds. With the achievement of 15 percent return on invested capital, we are now establishing a new long-term return-on- invested-capital goal of 18 percent reflecting the long term potential of our business." A conference call to review the full-year results is scheduled for today at 9:00 a.m. (CDT). A live Web cast of the call will be available at http://www.supervalu.com . An archive of the call is accessible via telephone by dialing 1-630-652-3041 with pass code 11055630 and through the company's Web site at http://www.supervalu.com . The conference call archive will be available through May 3, 2005. About SUPERVALU INC. As of February 26, 2005, SUPERVALU's retail store network consisted of 1,549 stores in 40 states, including 1,287 Save-A-Lot extreme value food stores -- 408 owned Save-A-Lot stores, 879 licensed Save-A-Lot stores; 262 regional banners including Cub Foods, Shop 'n Save, Shoppers Food & Pharmacy, bigg's, Farm Fresh, Scott's Foods and Hornbacher's stores. SUPERVALU serves as primary supplier to approximately 2,300 stores and SUPERVALU's own regional banner store network of 262 stores, while serving as secondary supplier to approximately 700 stores. Celebrating its 135th year of fresh thinking, SUPERVALU INC., a Fortune 500 company, is one of the largest companies in the United States grocery channel. With annual revenues of approximately $20 billion, SUPERVALU holds leading market share positions across the U.S. with its 1,549 retail grocery locations, including licensed Save-A-Lot locations. With its Save-A-Lot format, the company holds the number one market position in the extreme value grocery retail sector. Through SUPERVALU's geographically diverse supply chain network, the company provides distribution and related logistics support services to grocery retailers across the nation. In addition, SUPERVALU's third-party logistics business provides end-to-end supply chain management solutions that deliver value for manufacturers, consumer products retailers and food service customers. SUPERVALU currently has more than 56,000 employees. For more information about SUPERVALU visit http://www.supervalu.com . The statements contained in this news release that are not historical fact are forward-looking statements and are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Certain important factors could cause results to differ materially from those anticipated by such forward-looking statements, including the impact of competition, the nature and extent of the consolidation of the retail food and food distribution industries, the ability to attract and retain customers for the company's food distribution operations and to control food distribution costs, the ability of the company to grow through acquisition and assimilate the acquired entities, the execution of restructuring activities, potential work disruptions from labor disputes or national emergencies, the availability of favorable credit and trade terms, food price changes, general economic or political conditions that affect consumer buying habits generally or war-time activities, threats or general acts of terror directed at the food industry that affects consumer behavior, other risk factors inherent in the food distribution and retail businesses and other factors discussed from time to time in reports filed by the company with the Securities and Exchange Commission. SUPERVALU INC. and Subsidiaries Consolidated Composition of Net Sales and Operating Earnings The following table sets forth the composition of the company's net sales and earnings. (In thousands)
Fourth Quarter Fourth Quarter (12 weeks) ended (13 weeks) ended (unaudited) Feb 26, 2005 Feb 28, 2004 -------------------------------------------- ---------------- ---------------- Net sales Retail Food $ 2,553,868 $ 2,791,340 % of total 55.6% 55.3% Food Distribution 2,036,638 2,252,419 % of total 44.4% 44.7% Total net sales $ 4,590,506 $ 5,043,759 100.0% 100.0% Earnings Retail Food operating earnings $ 110,982 $ 138,014 % of sales 4.3% 4.9% Food Distribution operating earnings 59,391 55,947 % of sales 2.9% 2.5% Subtotal 170,373 193,961 % of sales 3.7% 3.8% General corporate expense (10,141) (9,030) Restructure and other charges - (4,922) Total operating earnings 160,232 180,009 % of sales 3.5% 3.6% Interest expense (30,555) (36,332) Interest income 5,415 5,080 Earnings before income taxes 135,092 148,757 Income tax expense (42,159) (53,137) Net earnings $ 92,933 $ 95,620 NOTE 1: Pretax LIFO expense $ (921) $ 161 NOTE 2: Pretax depreciation and amortization Retail Food Segment $ 48,866 $ 48,748 Food Distribution Segment 21,464 24,539 General Corporate 52 449 Total Company $ 70,382 $ 73,736
SUPERVALU INC. and Subsidiaries Consolidated Composition of Net Sales and Operating Earnings The following table sets forth the composition of the company's net sales and earnings. (In thousands)
Year-to-date Year-to-date (52 weeks) ended (53 weeks) ended (unaudited) Feb 26, 2005 Feb 28, 2004 -------------------------------------------- ---------------- ---------------- Net sales Retail Food $ 10,549,478 $ 10,551,235 % of total 54.0% 52.2% Food Distribution 8,993,762 9,658,444 % of total 46.0% 47.8% Total net sales $ 19,543,240 $ 20,209,679 100.0% 100.0% Earnings Retail Food operating earnings $ 446,303 $ 443,968 % of sales 4.2% 4.2% Food Distribution operating earnings 234,585 222,462 % of sales 2.6% 2.3% Subtotal 680,888 666,430 % of sales 3.5% 3.3% General corporate expense (48,064) (49,509) Gain on sale of WinCo Foods, Inc. 109,238 - Restructure and other charges (26,416) (15,523) Total operating earnings 715,646 601,398 % of sales 3.7% 3.0% Interest expense (137,500) (165,581) Interest income 22,718 19,063 Earnings before income taxes 600,864 454,880 Income tax expense (215,041) (174,742) Net earnings $ 385,823 $ 280,138 NOTE 1: Pretax LIFO expense $ 6,112 $ 4,734 NOTE 2: Pretax depreciation and amortization Retail Food Segment $ 199,094 $ 193,450 Food Distribution Segment 103,372 106,239 General Corporate 573 1,900 Total Company $ 303,039 $ 301,589
CONSOLIDATED STATEMENTS OF EARNINGS SUPERVALU INC. and Subsidiaries (In thousands, except per share data)
Fourth Quarter Fourth Quarter (12 weeks) ended (13 weeks) ended ----------------------------- ----------------------------- (unaudited) Feb 26, 2005 % of sales Feb 28, 2004 % of sales -------------------------------- ------------- ------------- ------------- ------------- Net sales $ 4,590,506 100.0% $ 5,043,759 100.0% Costs and expenses: Cost of sales 3,889,110 84.7% 4,290,133 85.1% Selling and administrative expenses 541,164 11.8% 568,695 11.3% Restructure and other charges - 0.0% 4,922 0.1% Interest Interest expense 30,555 0.7% 36,332 0.7% Interest income 5,415 0.1% 5,080 0.1% Interest expense, net 25,140 0.6% 31,252 0.6% Total costs and expenses 4,455,414 97.1% 4,895,002 97.1% Earnings before income taxes 135,092 2.9% 148,757 2.9% Income tax expense 42,159 0.9% 53,137 1.0% Net earnings $ 92,933 2.0% $ 95,620 1.9% Net earnings per common share - basic $ 0.69 $ 0.71 Net earnings per common share - diluted $ 0.65 $ 0.67 Weighted average number of common shares outstanding Basic 135,116 134,366 Diluted 145,243 144,366 Dividends declared per common share $ 0.1525 $ 0.1450
CONSOLIDATED STATEMENTS OF EARNINGS SUPERVALU INC. and Subsidiaries (In thousands, except per share data)
Year-to-date Year-to-date (52 weeks) ended (53 weeks) ended ----------------------------- ----------------------------- (unaudited) Feb 26, 2005 % of sales Feb 28, 2004 % of sales -------------------------------- ------------- ------------- ------------- ------------- Net sales $ 19,543,240 100.0% $ 20,209,679 100.0% Costs and expenses: Cost of sales 16,681,472 85.4% 17,372,429 85.9% Selling and administrative expenses 2,228,944 11.4% 2,220,329 11.0% Gain on sale of WinCo Foods, Inc. 109,238 0.6% - - Restructure and other charges 26,416 0.1% 15,523 0.1% Interest Interest expense 137,500 0.7% 165,581 0.8% Interest income 22,718 0.1% 19,063 0.1% Interest expense, net 114,782 0.6% 146,518 0.7% Total costs and expenses 18,942,376 96.9% 19,754,799 97.7% Earnings before income taxes 600,864 3.1% 454,880 2.3% Income tax expense 215,041 1.1% 174,742 0.9% Net earnings $ 385,823 2.0% $ 280,138 1.4% Net earnings per common share - basic $ 2.86 $ 2.09 Net earnings per common share - diluted $ 2.71 $ 2.01 Weighted average number of common shares outstanding Basic 135,003 133,975 Diluted 144,924 143,236 Dividends declared per common share $ 0.6025 $ 0.5775
CONDENSED CONSOLIDATED BALANCE SHEETS SUPERVALU INC. and Subsidiaries (In thousands)
Fiscal Year End Fiscal Year End (unaudited) February 26, 2005 February 28, 2004 ---------------------------------------- ----------------- ----------------- Assets Current Assets Cash and cash equivalents $ 463,915 $ 291,956 Receivables, net 468,629 447,872 Inventories, net 1,032,034 1,078,343 Other current assets 161,922 218,996 Total current assets 2,126,500 2,037,167 Property, plant and equipment, net 2,201,005 2,134,436 Goodwill & Other Long Term Assets 1,948,277 1,981,410 Total assets $ 6,275,782 $ 6,153,013 Liabilities and Stockholders' Equity Current Liabilities Accounts payable $ 1,111,240 $ 1,068,788 Current debt and obligations under capital leases 99,463 305,944 Other current liabilities 420,888 464,047 Total current liabilities 1,631,591 1,838,779 Long-term debt and obligations under capital leases 1,578,867 1,633,721 Other liabilities and deferred income taxes 554,763 470,939 Total stockholders' equity 2,510,561 2,209,574 Total liabilities and stockholders' equity $ 6,275,782 $ 6,153,013 Subject to change
SOURCE SUPERVALU INC. -0- 04/19/2005 /CONTACT: Investors, Yolanda Scharton, +1-952-828-4540, or yolanda.scharton@supervalu.com , or Media, Lynne High, +1-952-828-4515, or lynne.high@supervalu.com , both of SUPERVALU INC./ /Web site: http://www.supervalu.com / _