<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period (12 weeks) ended September 10, 1994
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 (I.R.S. Employer Identification No.)
incorporation or organization)
11840 Valley View Road, Eden Prairie, Minnesota 55344
................................................................................
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 828-4000
..............................
Former name, former address and former fiscal year, if changed since last
report:
N.A.
................................................................................
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
........... ...........
The number of shares outstanding of each of the issuer's classes of Common Stock
as of September 29, 1994 is as follows:
Title of Each Class Shares Outstanding
------------------- ------------------
Common Shares 71,489,485
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Item 1: Financial Statements
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
- --------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
- --------------------------------------------------------------------------------
(In thousands, except per share data)
Second Quarter (12 Weeks) Ended
-------------------------------
September 10, 1994 September 11, 1993
- ------------------------------------------------------------------------------------
<S> <C> <C>
NET SALES $ 3,773,725 $ 3,703,823
COSTS AND EXPENSES
Cost of sales 3,437,488 3,392,052
Selling and administrative expenses 255,301 227,148
Amortization of goodwill 3,464 2,715
Interest
Interest expense 29,658 28,054
Interest income 5,792 6,638
----------- -----------
Interest expense, net 23,866 21,416
----------- -----------
Total costs and expenses 3,720,119 3,643,331
----------- -----------
EARNINGS BEFORE EQUITY IN EARNINGS
OF SHOPKO AND INCOME TAXES 53,606 60,492
EQUITY IN EARNINGS OF SHOPKO 1,282 977
----------- -----------
EARNINGS BEFORE INCOME TAXES 54,888 61,469
PROVISION FOR INCOME TAXES
Current 18,888 26,878
Deferred 2,485 (1,733)
----------- -----------
Income taxes 21,373 25,145
----------- -----------
NET EARNINGS $ 33,515 $ 36,324
=========== ===========
NET EARNINGS PER COMMON SHARE $0.47 $0.51
Weighted average number of common
shares outstanding 71,471 71,818
Dividends declared per common share $0.235 $0.220
Supplemental information:
After-tax LIFO income (expense) $(3,121) $244
All data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
2
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
- --------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
- --------------------------------------------------------------------------------
(In thousands, except per share data)
Year-to-Date (28 Weeks) Ended
-----------------------------
September 10, 1994 September 11, 1993
- --------------------------------------------------------------------------------------
<S> <C> <C>
NET SALES $ 8,764,840 $ 8,579,607
COSTS AND EXPENSES
Cost of sales 7,990,435 7,849,474
Selling and administrative expenses 577,253 534,291
Amortization of goodwill 7,689 6,335
Interest
Interest expense 67,955 66,426
Interest income 13,447 15,713
----------- -----------
Interest expense, net 54,508 50,713
----------- -----------
Total costs and expenses 8,629,885 8,440,813
----------- -----------
EARNINGS BEFORE EQUITY IN EARNINGS
OF SHOPKO AND INCOME TAXES 134,955 138,794
EQUITY IN EARNINGS OF SHOPKO 3,575 3,610
----------- -----------
EARNINGS BEFORE INCOME TAXES 138,530 142,404
PROVISION FOR INCOME TAXES
Current 45,996 56,428
Deferred 8,406 (1,432)
----------- -----------
Income taxes 54,402 54,996
----------- -----------
NET EARNINGS $ 84,128 $ 87,408
=========== ===========
TOTAL EARNINGS PER COMMON SHARE $1.18 $1.22
Weighted average number of common
shares outstanding 71,563 71,685
Dividends declared per common share $0.455 $0.415
Supplemental information:
After-tax LIFO income (expense) $(1,412) $2,935
All data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
3
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<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries Second Quarter as of Fiscal Year End
- -------------------------------------------------------------------------------------------------------------
(In thousands) September 10, September 11, February 26,
ASSETS 1994 1993 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 5,391 $ 33,166 $ 2,846
Receivables, less allowance for losses of
$35,633 at September 10, 1994, $42,238 at
September 11, 1993 and $33,820 at February 26, 1994 403,348 364,333 352,151
Inventories 1,203,576 1,110,700 1,113,937
Other current assets 98,524 79,846 94,379
---------- ---------- ----------
TOTAL CURRENT ASSETS 1,710,839 1,588,045 1,563,313
LONG-TERM NOTES RECEIVABLE 69,613 91,540 66,568
LONG-TERM INVESTMENT IN DIRECT FINANCING LEASES 85,946 74,765 81,574
PROPERTY, PLANT AND EQUIPMENT
Land 188,418 153,128 172,241
Buildings 871,003 728,560 769,036
Property under construction 82,239 63,021 73,950
Leasehold improvements 124,076 107,057 114,724
Equipment 926,907 870,091 890,050
Assets under capital leases 200,907 174,189 175,891
---------- ---------- ----------
2,393,550 2,096,046 2,195,892
Less accumulated depreciation and amortization
Owned property, plant and equipment 776,268 697,902 746,027
Assets under capital leases 42,285 28,485 39,742
---------- ---------- ----------
NET PROPERTY, PLANT AND EQUIPMENT 1,574,997 1,369,659 1,410,123
INVESTMENT IN SHOPKO 173,901 165,628 173,567
GOODWILL 569,003 430,172 427,559
OTHER ASSETS 299,710 317,386 319,647
---------- ---------- ----------
TOTAL ASSETS $4,484,009 $4,037,195 $4,042,351
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Notes payable $ 214,358 $ 53,622 $ 23,082
Accounts payable 980,783 993,714 883,088
Current maturities of long-term debt 10,454 6,590 108,728
Current obligations under capital leases 18,838 19,083 19,222
Other current liabilities 179,176 193,204 190,305
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 1,403,609 1,266,213 1,224,425
LONG-TERM DEBT 1,198,902 1,111,577 1,030,378
LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES 273,762 223,184 232,617
DEFERRED INCOME TAXES 97,516 78,578 99,734
OTHER LIABILITIES 212,511 158,817 179,739
COMMITMENTS AND CONTINGENCIES - - -
STOCKHOLDERS' EQUITY
Preferred stock 5,908 - 5,908
Common stock 75,335 75,335 75,335
Capital in excess of par value 13,314 12,788 12,966
Retained earnings 1,310,745 1,202,000 1,268,117
Treasury stock, at cost (107,593) (91,297) (86,868)
---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,297,709 1,198,826 1,275,458
---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,484,009 $4,037,195 $4,042,351
========== ========== ==========
Quarterly data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
- -------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
Capital in
Preferred Common Excess of Treasury Retained
Stock Stock Par Value Stock Earnings Total
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT
FEBRUARY 27, 1993 $ - $75,335 $12,584 $ (97,473) $1,144,374 $1,134,820
Net earnings - - - - 185,253 185,253
Sales of common stock
under option plans - - 225 10,838 - 11,063
Cash dividends declared
on common stock -
$.855 per share - - - - (61,510) (61,510)
Issuance of preferred stock 5,908 - - - - 5,908
Compensation under employee
incentive plans - - 157 (233) - (76)
------ ------- ------- --------- ---------- ---------
BALANCES AT
FEBRUARY 26, 1994 5,908 75,335 12,966 (86,868) 1,268,117 1,275,458
Net earnings - - - - 84,128 84,128
Sales of common stock
under option plans - - 91 (671) - (580)
Cash dividends declared
on common stock -
$.455 per share - - - - (32,580) (32,580)
Compensation under employee
incentive plans - - 257 639 - 896
Purchase of 600 shares
for treasury - - - (20,693) - (20,693)
Other - - - - (8,920) (8,920)
------ ------- ------- --------- --------- ----------
BALANCES AT
SEPTEMBER 10, 1994 $5,908 $75,335 $13,314 $(107,593) $1,310,745 $1,297,709
====== ======= ======= ========= ========== ==========
Interim data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
5
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
- --------------------------------------------------------------------------------------------------
(In thousands) Year-to-date
(28 weeks ended)
-------------------------------
September 10, September 11,
1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 84,128 $ 87,408
Adjustments to reconcile net earnings to net cash
provided from (used in) operating activities:
Equity in earnings of ShopKo (3,575) (3,610)
Dividends received from ShopKo 3,241 3,243
Depreciation and amortization 109,160 100,748
Provision for losses on receivables 2,993 4,472
Gain on sale of property, plant and equipment (4,253) (2,243)
Deferred income taxes 4,735 (1,432)
Treasury shares contributed to employee incentive plans - 94
Change in assets and liabilities:
Receivables (27,275) (11,096)
Inventories (6,929) 23,359
Other current assets 2,986 (6,845)
Direct financing leases 4,920 4,450
Accounts payable 23,372 128,797
Other liabilities (30,133) (2,843)
- --------------------------------------------------------------------------------------------------
Net cash provided from operating activities 163,370 324,502
- --------------------------------------------------------------------------------------------------
Cash flows from investing activities
Additions to long-term notes receivable (11,410) (19,022)
Payments received on long-term notes receivable 8,365 10,016
Proceeds from sale of property, plant and equipment 18,445 4,831
Purchase of property, plant and equipment (119,243) (77,071)
Business acquisitions, net of cash acquired (111,083) -
Other investing activities (728) 17,366
- --------------------------------------------------------------------------------------------------
Net cash provided by investing activities (215,654) (63,880)
- --------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net issuance (reduction) of short-term notes payable 187,720 (197,874)
Proceeds from issuance of long-term debt 150,000 3,000
Repayment of long-term debt (220,334) (3,368)
Reduction of obligations under capital leases (9,518) (8,783)
Proceeds (payments) from the sale or purchase of common
stock under option plans (676) 5,750
Dividends paid (31,670) (27,954)
Payment for purchase of treasury stock (20,693) -
- --------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 54,829 (229,229)
- --------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 2,545 31,393
Cash and cash equivalents at beginning of year 2,846 1,773
- --------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of second quarter $ 5,391 $ 33,166
==================================================================================================
All data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting Policies
- -------------------
The summary of significant accounting policies is included in the notes to
consolidated financial statements in the 1994 annual
report of SUPERVALU INC. ("SUPERVALU" or the "company").
Statement of Registrant
- -----------------------
The data presented herein is unaudited but, in the opinion of management,
includes all adjustments necessary for a fair presentation of the consolidated
financial position of the company and its subsidiaries at September 10, 1994 and
September 11, 1993 and the results of the company's operations and cash flows
for the periods then ended. These interim results are not necessarily
indicative of the results of the fiscal years as a whole.
A limited review of this data has been performed by the company's independent
certified public accountants, Deloitte & Touche LLP. A copy of their report is
attached as an exhibit to this report.
7
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
- ---------------------
The following table sets forth items from the company's Consolidated Statements
of Earnings as percentages of net sales:
<TABLE>
<CAPTION>
Second Quarter Year-to-Date
(12 weeks) Ended (28 weeks) Ended
----------------- -----------------
Fiscal Fiscal Fiscal Fiscal
1995 1994 1995 1994
----------------- -----------------
<S> <C> <C> <C> <C>
Net sales 100.00% 100.00% 100.00% 100.00%
Cost of sales (91.09) (91.58) (91.16) (91.49)
Selling and administrative (6.86) (6.21) (6.67) (6.30)
Interest expense (.79) (.76) (.78) (.77)
Interest income .16 .18 .15 .18
------ ------ ------ ------
Earnings before equity in earnings
of ShopKo and income taxes 1.42 1.63 1.54 1.62
Equity in earnings of ShopKo .03 .03 .04 .04
Provision for income taxes (.56) (.68) (.62) (.64)
------ ------ ------ ------
Net earnings .89% .98% .96% 1.02%
====== ====== ====== ======
</TABLE>
NET SALES:
Net sales increased 1.9% and 2.2% over last year for the second quarter and
year-to-date periods, respectively. The increase was achieved despite year-to-
date deflation as measured by the company of .8% compared with inflation of .2%
for the same period last year.
Food distribution net sales increased 2.8% and 2.3% over last year for the
quarter and year-to-date. Sales were favorably impacted by the acquisition of
Sweet Life Foods in March of 1994 and Texas T Stores in May of 1994. However,
the added sales contributions from acquisitions were partially offset by lost
sales due to wholesale consolidation and competitive market conditions at the
retail level. While recent acquisitions will favorably impact the company's
sales in the future, continuing consolidation activity in several locations will
continue to affect sales comparisons until the projects are completed and the
impact cycled.
Retail food net sales increased 9.2% and 7.9% over last year second quarter and
year-to-date periods, respectively. The increase is primarily due to new store
openings and the acquisition of the Texas T stores late in the first quarter.
Same-store corporate retail sales for the second quarter declined 1% while year-
to-date same-store sales were even with last year.
8
<PAGE>
<TABLE>
<CAPTION>
Net Sales by Segment
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In thousands)
Second Quarter (12 weeks)
-------------------------------------------------------
September 10, 1994 September 11, 1993
------------------------ ------------------------
Net Sales % of total Net Sales % of total
----------- ---------- ----------- ----------
Food distribution $ 3,400,992 90.1% $ 3,309,136 89.3%
Retail food 904,063 24.0% 827,747 22.3%
Sales Eliminations (531,330) (14.1%) (433,060) (11.6%)
----------- ----- ----------- -----
$ 3,773,725 100.0% $ 3,703,823 100.0%
=========== ===== =========== =====
Year-to-date (28 weeks)
-------------------------------------------------------
September 10, 1994 September 11, 1993
------------------------ ------------------------
Net Sales % of total Net Sales % of total
----------- ---------- ----------- ----------
Food distribution $ 7,934,901 90.5% $ 7,755,790 90.4%
Retail food 2,035,174 23.2% 1,885,690 22.0%
Sales Eliminations (1,205,235) (13.7%) (1,061,873) (12.4%)
----------- ----- ----------- -----
$ 8,764,840 100.0% $ 8,579,607 100.0%
=========== ===== =========== =====
</TABLE>
GROSS PROFIT:
Gross profit as a percentage of net sales, increased to 8.9% and 8.8% for the
second quarter and year-to-date periods, respectively, compared with 8.4% and
8.5% for last year. The increases were due primarily to the growing proportion
of the higher margined retail food business within the company's total sales
mix. Food distribution gross margin was affected by a LIFO expense in the
quarter and year-to-date compared with a LIFO credit in the same periods last
year, and a reduction in off invoice allowances offered by certain vendors. The
effect of the off invoice allowances was offset by increases in other components
of gross profit. Retail food gross margins were up year-to-date due to strong
results previously reported in the company's first quarter. However competitive
pressures in certain regions, principally Indiana, drove retail margins down
slightly in the second quarter.
SELLING AND ADMINISTRATIVE EXPENSES:
Selling and administrative expenses as a percentage of net sales were 6.9% and
6.7% for the second quarter and year-to-date, respectively, compared with 6.2%
and 6.3% for the same periods last year. The higher percentages were primarily
due to a growing proportion of the company's retail food segment which operates
at a higher selling and administrative expense percentage than the food
distribution segment. Also affecting the second quarter and year-to-date
selling and administrative expenses were the acquisition of Sweet Life,
wholesale consolidation activity in several markets, and the SUPERVALU Advantage
project ("SUPERVALU Advantage").
SUPERVALU Advantage is a project aimed at fundamentally changing the company's
business operations by investing in new technology, logistics methods and
business practices. Expenses totaling $2.9 million and $6.7 million have been
incurred in the quarter and year-to-date, primarily studying the fundamentals of
our business and the industry. It is expected that spending on this project
should approximate $9.0 million for the remainder of the year. Upon
implementation, it is expected that SUPERVALU
9
<PAGE>
Advantage should provide benefits to the company, its customers and its
suppliers. The company anticipates a modest increase in expenses related to the
initiative next year, however, a net earnings contribution is anticipated in
fiscal 1997.
OPERATING EARNINGS:
The company's pre-tax operating earnings (earnings before interest, corporate
expenses, equity in earnings of ShopKo Stores, Inc. ("ShopKo"), and taxes)
decreased 3.5% to $85.4 million in the second quarter and increased 1.0% to
$206.5 million year-to-date. Food distribution operating earnings decreased
3.4% to $78.8 million and 3.5% to $183.3 million for the second quarter and
year-to-date, respectively. The food distribution operating earnings trend was
affected by wholesale consolidation expenses, a LIFO charge and integration
costs of recent acquisitions. Retail food operating earnings decreased 5.1% to
$6.6 million for the second quarter and increased 59.8% to $23.1 million year-
to-date. Retail food operating earnings were affected primarily by costs
associated with the acquisition of the Texas T stores and converting them to the
Save-A-Lot format. Reduced gross margins resulting from competitive pressures
also affected operating earnings for the second quarter. The year-to-date
increase is due to strong gross profit margins from the first quarter.
The company expects spending on SUPERVALU Advantage, wholesale consolidation
activities and acquisition integration efforts to impact its ability to show
significant growth in operating earnings short-term.
INTEREST INCOME AND EXPENSE:
Interest income decreased to $5.8 and $13.4 million for the second quarter and
year-to-date, respectively, compared with $6.6 and $15.7 million for the same
periods last year. The decrease in interest income is due to the reduction in
notes receivable as a result of the sale of notes in the ordinary course of
business. Interest expense increased to $29.7 and $68.0 million for the second
quarter and year-to-date, respectively, compared with $28.1 and $66.4 million
for the same periods last year due primarily to the issuance of $150 million in
debt securities in July of 1994.
EQUITY IN EARNINGS OF SHOPKO:
Equity in earnings of ShopKo increased slightly in the second quarter and was
flat year-to-date compared with last year. As reported by ShopKo, sales
increased 7.3% for the second quarter and net earnings increased 29% compared
with last year. For the quarter, net earnings were aided by an increase in
income from prescription management services and a small decrease in selling and
administrative resulting from tight expense control.
PROVISION FOR INCOME TAXES:
The effective tax rate decreased 2% in the second quarter compared with last
year. This decrease was due to an adjustment made in the second quarter of last
year to record the impact of the Omnibus Budget Reconciliation Act of 1993 which
included a retroactive adjustment to January 1, 1993. For the remainder of the
year, it is expected that the effective tax rate will be slightly lower compared
with the same periods
10
<PAGE>
last year.
The company is currently under review by the Internal Revenue Service ("IRS")
for tax years ending in 1991, 1992 and 1993. The IRS review period includes the
transaction and related tax expense recorded in connection with the partial
disposition of ShopKo in October, 1991. Income taxes were provided for this
disposition at the transaction date, although the company maintained that the
transaction resulted in no tax for income tax purposes. Based on preliminary
discussions, a favorable outcome from the IRS review of the issues related to
the ShopKo disposition is reasonably possible and, if received, would be
reflected in the consolidated statement of earnings.
LIQUIDITY AND CAPITAL RESOURCES
Internally-generated funds, principally from the company's food distribution
operations, continue to be the major source of capital for liquidity and capital
growth. Cash provided from operations year-to-date was $163.4 million compared
with $324.5 million last year. The change in cash provided from operations was
primarily affected by accounts payable trends. Last year the $324.5 million
cash provided was impacted by the centralization of Wetterau accounts payable
resulting in better cash management and a $128.8 million increase in accounts
payable. Since the centralization of accounts payable, the payable trend has
only been affected by inventory levels. Cash provided from operations and the
issuance of short-term and long-term debt of $337.7 million was used to repay
long-term debt and finance capital expenditures and acquisitions. The company
repaid $117.5 million of long-term debt assumed as part of the acquisitions in
the first and second quarter, which included Sweet Life Foods, Hyper Shoppes,
Inc., Texas T Stores, Wetterau Properties Inc. and Delice de France.
The company will continue to use short-term and long-term debt as a supplement
to internally-generated funds to finance its activities. The company issued
$150 million in debt securities in the second quarter. The proceeds were used
to refund $100 million of notes due August 15, 1994; to repay $32 million of
certain mortgage indebtedness assumed by the company in connection with the
acquisition of Wetterau Properties; and the remaining proceeds were used to
repay short-term borrowings. The company intends to register a $400 million
shelf offering of debt securities which could be used to refinance existing
debt. Management does not anticipate the need for any additional long-term
external financing except for leases or if significant acquisitions are
completed. The company has $400 million of short-term credit available.
It is the company's intent to invest about $175 million into SUPERVALU Advantage
with the majority of the expenditures occurring in fiscal 1996. The monies will
be used to fund regional facilities, technology and various mechanization
systems. The company expects that the investment in SUPERVALU Advantage will be
recovered by the reduction in inventory levels.
The company's long-term debt ratings are considered strong with an A rating from
Standard and Poor's and an A3 rating from Moody's. These strong ratings, the
available credit facilities and the internally generated funds provide the
company with the financial flexibility to meet its anticipated liquidity needs.
11
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K.
------ --------------------------------
(a) Exhibits filed with this Form 10-Q:
10(e) SUPERVALU Executive Incentive Bonus Plan (superceding
Management Incentive Bonus Plan formerly filed as Exhibit
10(e) with Registrant's Form 10-K for the fiscal year
ended February 26, 1994).
(15) Letters from Deloitte & Touche regarding unaudited
interim financial information.
(27) Financial Data Schedule.
(b) Reports on Form 8-K:
(i) On July 14, 1994, the Registrant filed a Form 8-K Report:
(aa) reporting under "Item 5 - Other Events" that on June 29,
1994 the Registrant issued a news release with respect to its
results of operations for its first quarter ended June 18,
1994; and (bb) submitting under "Item 7 - Financial
Statements and Exhibits" a copy of the news release.
(ii) On July 20, 1994, the Registrant filed a Form 8-K Report:
(aa) reporting under "Item 5 - Other Events" that on July 14,
1994, the Registrant agreed to sell $150 million principal
amount of its 7.25% Notes due July 15, 1999 (the "Notes")
pursuant to the Underwriting Agreement dated October 30,
1992, executed by the Registrant, as modified and
incorporated by reference into the Pricing Agreement dated
July 14, 1994 among the Registrant and Goldman, Sachs & Co.,
C S First Boston Corporation and Piper Jaffray Inc. (the
"Pricing Agreement"); (bb) reporting that the Notes are the
subject of a registration statement on Form S-3 (File Number
33-52422) filed by the Registrant with the Securities and
Exchange Commission; (cc) submitting under "Item 7 -
Financial Statements and Exhibits" a copy of the Pricing
Agreement; and (dd) submitting under "Item 7 -Financial
Statements and Exhibits" a copy of the Officer's Certificate
and Authentication Order dated July 21, 1994, relating to the
Notes.
-12-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUPERVALU INC. (Registrant)
By:/s/Jeffrey Girard
----------------------------------
Jeffrey Girard
Date: October 25, 1994 Executive Vice President-
Chief Financial Officer
(Principal Financial Officer
and duly authorized
officer of Registrant)
-13-
<PAGE>
Exhibit 10(e)
EXECUTIVE
INCENTIVE
BONUS PLAN
<PAGE>
I. INTRODUCTION
------------
The intent of the SUPERVALU Executive Incentive Bonus Plan is to provide
a means by which the successful performance of the Corporation's major business
groups, specific Profit Centers, and individual managers can be rewarded.
Each individual who participates in the plan will be aware of his or her
bonus opportunity and the factors that impact this opportunity. The bonus plan
provides for a wide range of bonus opportunities, from an unsatisfactory
individual or organization performance level which generates no award, to an
outstanding individual and organization performance level which would provide a
significant bonus payment, up to the maximum bonus percent provided under the
terms of the plan.
The continued profitability and growth of SUPERVALU is vital to all of
its employees. Through this plan, the Company is providing a means to reward
those who are instrumental in achieving those goals.
1
<PAGE>
II. INCENTIVE BONUS PLAN SUMMARY
----------------------------
The SUPERVALU Executive Incentive Bonus Plan is designed to reward participating
employees for their contributions to the continued growth and profitability of
the Corporation.
Plan Features
- -------------
1. For each fiscal year, a bonus opportunity, or norm, expressed as a
percentage of base salary dollars, is established for each participant in
the program.
2. Performance against organization (e.g., Profit Center, total Corporation)
budget objectives and improvement over previous year's net profit
performance serve as the principal bases for year-end bonus calculations.
2
<PAGE>
3. The bonus award is comprised of an individual portion which is determined
by the participant's job performance against specified objectives, and an
organizational (e.g., Profit Center or Corporation) portion which is
determined by financial performance against both pre-established budget
objectives and the previous year's performance.
4. The individual who meets satisfactory performance levels and whose
organization, (e.g., Profit Center or the total Corporation) meets its
budget objectives, would typically receive a "norm" bonus award. Higher
or lower individual or organization performance will result in a higher or
lower bonus award.
5. The funds for bonus payments are provided out of the earnings of the
Corporation, after a fair return to the stockholders has been assured.
3
<PAGE>
III. ELIGIBILITY AND DETERMINATION
-----------------------------
OF BONUS OPPORTUNITY
--------------------
1. Eligibility
-----------
This SUPERVALU plan is designed to include executive and management
positions which have a significant impact on Company operating and
administrative performance levels. The determination of "significant
impact" is based on the Company's position evaluation plan with approval
for plan participation to be granted by the appropriate Executive Vice
President.
2. Determination of Individual Bonus Norms
---------------------------------------
Each management position has been evaluated and assigned a specific
point value, based on the position content in terms of know-how, problem-
solving and accountability. Every position in the incentive plan has a
percent figure (bonus norm) assigned to it for the purpose of calculating
the initial bonus opportunity.
Example only:
------------
Point Bonus Norm (as a
Evaluation Percent of Salary)
---------- ------------------
Below 900 points 10%
900 - 940 points 11%
941 - 981 points 12%
etc.
4
<PAGE>
Every participant will be informed of their position's point value and
corresponding bonus norm. Each participant's fiscal year earnings are
multiplied by the bonus norm percent to determine his or her individual
bonus opportunity. If a participant is promoted to a bonus position at
some point during the fiscal year, only earnings after the date of
promotion will be used in the calculation.
Example of Bonus Norm Calculation:
- ---------------------------------
<TABLE>
<CAPTION>
(A) (B) Bonus Norm Amount
Fiscal Year Bonus (A) x (B)
Earnings Norm % Dollar Amount
----------- ------ -----------------
<S> <C> <C>
$55,000 10% $ 5,500
$60,000 10% $ 6,000
$75,000 11% $ 8,250
$85,000 12% $10,200
</TABLE>
5
<PAGE>
IV. STANDARDS OF PERFORMANCE
------------------------
Before the beginning of each fiscal year, budget objectives are
established; these will be used as the primary standards against which actual
performance will be compared. Bonus amounts are calculated according to the
procedure detailed later in this booklet and are subject to Board of Director
approval before there will be any payout. Bonus funds not utilized are returned
to earnings. There is no carryover to subsequent years. The following is an
explanation of the process.
1. Corporate Budget Objectives
---------------------------
Before the start of each fiscal year, a net profit budget objective is
established which represents the performance standard for the Corporation which,
if achieved, produces a bonus award at the norm level. At year end, the actual
corporate performance is calculated relative to the budget objectives and to
the previous year's net profit performance. The bonus award payable to
corporate staff participants will vary annually, depending on the actual
corporate results that are achieved both as these results relate to the profit
budget and the previous year's profit performance.
6
<PAGE>
2. Profit Center Budget Objectives
-------------------------------
Also before the start of each fiscal year, budget objectives are
established for each separate Profit Center and become standards of performance
for the year. At year end, Profit Center results are calculated as a percentage
of objectives established. The bonus award payable to Profit Center
participants will vary, depending on the actual Profit Center results that are
achieved.
3. Individual Performance
----------------------
As shown below, an individual's job performance is part of the
determination of bonus awards.
A factor based on an assessment of individual job performance against
specified objectives will be determined for each participant according to the
guidelines shown on page 11.
4. Award Makeup
------------
The incentive award heavily emphasizes organization performance
particularily in the case of corporate officers and division presidents.
Certain corporate jobs, highly measurable relative to individual performance
against objectives, will be equally weighted between organizational and
individual performance. Most positions at both the division and corporate staff
level will have awards weighted toward organization performance but with a
significant individual performance component.
7
<PAGE>
<TABLE>
<CAPTION>
Corporate Positions
-------------------
Portion of Award Based on:
Corporate Individual
Results Performance
------------ -------------
<S> <C> <C>
Corporate Officers 90% 10%
Most Other Positions 75% 25%
Product Directors, etc. 50% 50%
Profit Center Positions
-----------------------
Portion of Award Based on:
Profit Center Individual
Results Performance
------------- -----------
Profit Center Presidents 80% 20%
Profit Center Staff 75% 25%
</TABLE>
8
<PAGE>
POINTS OF EMPHASIS
------------------
Two points should be emphasized regarding the calculation of bonus awards:
1. Profit Center and Corporate operating results will reflect equally on
the awards of all members of a respective Profit Center or business
group.
2. The organization and individual portions of a bonus will be adjusted
independently of each other, subject only to the overall total bonus
fund limitation and to the minimum and maximum conditions stated
later.
9
<PAGE>
OVERALL INCENTIVE BONUS PLAN CONCEPT
------------------------------------
OPERATING RESULTS
------------------------------
CORPORATE EARNINGS
------------------------------
--------------------------
BONUS CALCULATIONS
(ACTUAL PERFORMANCE EXECUTIVE MANAGEMENT
BONUS AWARDS
vs. --------------------
CORPORATE RESULTS
--------------------
BUDGET/ INDIVIDUAL RESULTS
--------------------
PREVIOUS YEAR ACTUAL)
--------------------------
PROFIT CENTER PRESIDENTS
BONUS AWARDS
-------------------------
PROFIT CENTER RESULTS CORPORATE STAFF
-------------------------
INDIVIDUAL RESULTS BONUS AWARDS
-------------------------
--------------------------------
PROFIT CENTER STAFF CORPORATE RESULTS
--------------------------------
BONUS AWARDS INDIVIDUAL RESULTS
-------------------------------
-------------------------
PROFIT CENTER RESULTS
------------------------
INDIVIDUAL RESULTS
------------------------
10
<PAGE>
V. BONUS CALCULATIONS
------------------
1. Individual Awards
-----------------
As indicated previously 10% to 50% of a participant's bonus potential,
depending on position, will be based on individual performance. Individual
awards can range from 80% to 175% of the individual portion of the norm. The
adjustment guide below provides the appropriate individual award adjustment
factor for specific levels of performance against established objectives. Only
the numbers listed below should be used as adjustment factors.
INDIVIDUAL BONUS AWARD
ADJUSTMENT GUIDE
----------------------
<TABLE>
<CAPTION>
Adjustment
Definition Guide
- ---------- ------------
<S> <C>
Outstanding - During the year the individual 1.60 - 1.75
showed effort, skill, and achievement seldom seen,
greatly exceeding objectives & expectations.
Excellent - the individual far exceeded 1.40
expectations and objectives.
Very Good - the individual exceeded expectations 1.20
and performance objectives.
Good - met expectations and objectives. 1.00
Fair - did not totally meet performance .80
objectives and expectations, but came
reasonably close.
Unacceptable - immediate corrective action is No Bonus
required if individual is to remain in the assignment.
New employee (less than 6 months on the job. No More Than
Too soon to evaluate) 1.00
</TABLE>
11
<PAGE>
2. Organization Awards
-------------------
Organization award adjustments are based on performance against budgeted
objectives and the previous year's performance for certain of the financial
factors. The budget objectives themselves will usually have been determined
before the fiscal year as a part of the budgeting process. In determining the
organization award, these points will be observed:
A. Appropriate financial factors for the fiscal year will be selected and
weighted according to the emphasis to be placed on these factors for
the year. Net profit will normally be the primary financial factor.
In addition sales and/or a return measure may also be included as
additional bonus factors. These factors and their weightings may
change from year to year, or from profit center to profit center,
depending on division or corporate strategic business plans.
B. The relationship of financial performance variance from budget to the
actual bonus award payout or adjustment will be linear in nature, and
will be illustrated on the payout curve that will be provided to each
participant for each fiscal year. In this manner, the adjustment is
accelerated (up or down) as performance varies more from budget.
12
<PAGE>
C. Normally the previous year's net profit performance will service as
the threshold performance required before any bonus will be paid.
D. As actual performance for the designated financial factors varies from
budget, the bonus will be increased or decreased pursuant to the
payout curve in effect for the fiscal year.
13
<PAGE>
INCENTIVE BONUS CONCEPT FOR THE INDIVIDUAL
------------------------------------------
---------
Salary
Earnings
---------
times
---------
Norm %
---------
equals
---------
Bonus
Norm $
---------
(Split)
- ----------------- -------------------
Organization Individual
Norm $ Norm $
- ----------------- -------------------
Factored for Organizational* Factored for Individual
Performance Performance
- ------------------ -------------------
Organization* Individual
Award $ Award $
- ------------------ -------------------
-----------
TOTAL
Award $
-----------
* Home Office plan participants will have their organization award determined
by overall corporate performance; profit center plan participants will have
their organization award determined by profit center performance.
14
<PAGE>
VI. MINIMUM CONDITIONS
------------------
The following limitations shall apply to bonus award payments:
1. If an individual's performance does not merit an individual award,
he/she shall also be ineligible to receive an organization award.
2. If an organization's profit performance is below that organization's
minimum payout threshold, there shall be no organization awards to
that organization's members, but they may receive individual awards.
VII. DISCRETIONARY ADJUSTMENTS
-------------------------
The Board of Directors of SUPERVALU has granted the Chief Executive Officer
the right to make discretionary adjustments, either upward or downward, to
incentive bonus awards. Typically, the Chief Executive Officer exercises this
right after having reviewed recommended awards and after consulting with
supervisors of the individuals affected.
15
<PAGE>
VIII. TERMINATION OF EMPLOYMENT
-------------------------
In the event of employment termination prior to the end of the fiscal year
(except for retirement, death, or disability), participants will not be eligible
for an Incentive Bonus award for that fiscal year. Nothing in this plan is to
be construed as an employment agreement between participants and the Company,
and each employee's employment and compensation can be terminated with or
without cause at any time at the option of the company or the employee. If
employment is terminated prior to the end of fiscal year, eligibility for an
award also terminates. Until an award has been approved by the Board of
Directors and actually paid, no employee shall have any claim nor have earned
any right to an award.
IX. PLAN CHANGE AND TERMINATION
---------------------------
The Company reserves the right in its sole and absolute discretion to
modify, change, or discontinue the plan with or without notice at any time.
16
<PAGE>
X. TIME OF PAYMENT
---------------
Availability of funds for this program depend on completion of necessary
accounting work at the close of the fiscal year. Awards cannot be made until
final financial figures are available and are entered into the calculations.
The final awards are in turn approved by the Board of Directors. Typically,
this does not occur until mid-April.
17
<PAGE>
EXHIBIT (15) to
Quarterly Report on Form 10-Q
Page 1 of 2
LETTER REGARDING UNAUDITED INFORMATION
Stockholders and Board of Directors
SUPERVALU INC.
Eden Prairie, Minnesota
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interm information
of SUPERVALU INC. and subsidiaries for the periods ended September 10, 1994 and
September 11, 1993, as indicated in our report dated October 11, 1994. Because
we did not perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended September 10, 1994, is
incorporated by reference in Registration Statements (No. 33-28310, No.
33-16934, No. 2-56896, and No. 33-50071) on Form S-8.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statements prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
October 11, 1994
<PAGE>
Exhibit (15) to
Quarterly Report on Form 10-Q
Page 2 of 2
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Stockholders and Board of Directors
SUPERVALU INC.
Eden Prairie, Minnesota
We have reviewed the accompanying consolidated balance sheets of SUPERVALU INC.
(the Company) and subsidiaries as of September 10, 1994 and September 11, 1993
and the related consolidated statements of earnings and cash flows for the
16-week and 28-week periods then ended and the consolidated statement of
stockholders' equity for the interim period ended September 10, 1994. These
consolidated financial statements are the responsibility of the Company's
management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to such consolidated financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of SUPERVALU INC. and subsidiaries as
of February 26, 1994 and the related consolidated statements of earnings,
stockholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated April 7, 1994, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
February 26, 1994 and the consolidated statement of stockholders' equity for the
year then ended is fairly stated, in all material respects, in relation to the
consolidated financial statements from which it has been derived.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
October 11, 1994
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 10, 1994 AND THE CONSOLIDATED
STATEMENTS OF EARNINGS FOR THE 28 WEEKS ENDED SEPTEMBER 10, 1994 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-25-1995
<PERIOD-END> SEP-10-1994
<EXCHANGE-RATE> 1
<CASH> 5,391
<SECURITIES> 0
<RECEIVABLES> 438,981
<ALLOWANCES> (35,633)
<INVENTORY> 1,203,576
<CURRENT-ASSETS> 1,710,839
<PP&E> 2,393,550
<DEPRECIATION> 818,553
<TOTAL-ASSETS> 4,484,009
<CURRENT-LIABILITIES> 1,403,609
<BONDS> 1,472,664
<COMMON> 75,335
0
5,908
<OTHER-SE> 1,216,466
<TOTAL-LIABILITY-AND-EQUITY> 4,484,009
<SALES> 8,764,840
<TOTAL-REVENUES> 8,764,840
<CGS> 7,990,435
<TOTAL-COSTS> 7,990,435
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,418
<INTEREST-EXPENSE> 67,955
<INCOME-PRETAX> 138,530
<INCOME-TAX> 54,402
<INCOME-CONTINUING> 84,128
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84,128
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
</TABLE>
