<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 9, 1995
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 9, 1995 is as follows:
Title of Each Class Shares Outstanding
------------------- ------------------
Common Shares 67,963,336
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<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 9, 1995 September 10, 1994
- --------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $3,779,397 $3,773,725
Costs and expenses:
Cost of sales 3,427,689 3,437,488
Selling and administrative expenses 265,350 255,301
Amortization of goodwill 4,053 3,464
Interest
Interest expense 32,771 29,658
Interest income 4,503 5,792
-------------------------------------
Interest expense, net 28,268 23,866
-------------------------------------
Total costs and expenses 3,725,360 3,720,119
-------------------------------------
Earnings before equity in earnings
of ShopKo and income taxes 54,037 53,606
Equity in earnings of ShopKo 861 1,282
-------------------------------------
Earnings before income taxes 54,898 54,888
Provision for income taxes
Current 5,562 18,888
Deferred 16,058 2,485
-------------------------------------
Income tax expense 21,620 21,373
-------------------------------------
Net earnings $ 33,278 $ 33,515
=====================================
Net earnings per common share $ 0.49 $ 0.47
Weighted average number of common
shares outstanding 68,181 71,471
Dividends declared per common share $ 0.245 $ 0.235
Supplemental information:
After-tax LIFO (expense) $ (2,525) $ (3,121)
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 9, 1995 September 10, 1994
- --------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $8,752,434 $8,764,840
Costs and expenses:
Cost of sales 7,940,385 7,990,435
Selling and administrative expenses 609,946 577,253
Amortization of goodwill 9,510 7,689
Interest
Interest expense 76,890 67,955
Interest income 11,595 13,447
-----------------------------------
Interest expense, net 65,295 54,508
-----------------------------------
Total costs and expenses 8,625,136 8,629,885
-----------------------------------
Earnings before equity in earnings
of ShopKo and income taxes 127,298 134,955
Equity in earnings of ShopKo 3,329 3,575
-----------------------------------
Earnings before income taxes 130,627 138,530
Provision for income taxes
Current 31,266 45,996
Deferred 20,132 8,406
-----------------------------------
Income tax expense 51,398 54,402
-----------------------------------
Net earnings $ 79,229 $ 84,128
===================================
Net earnings per common share $ 1.15 $ 1.18
Weighted average number of common
shares outstanding 68,795 71,563
Dividends declared per common share $ 0.480 $ 0.455
Supplemental information:
After-tax LIFO (expense) $ (2,317) $ (1,412)
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 9, September 10, February 25,
Assets 1995 1994 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 5,469 $ 5,391 $ 4,839
Receivables, less allowance for losses of $27,884 at
September 9, 1995, $35,633 at September 10, 1994, and
$29,268 at February 25, 1995 406,794 403,348 383,458
Inventories 1,029,077 1,203,576 1,109,791
Other current assets 123,397 98,524 148,252
----------------------------------------------
Total current assets 1,564,737 1,710,839 1,646,340
Long-term notes receivable 70,241 69,613 73,094
Long-term investment in direct financing leases 70,870 85,946 77,688
Property, plant and equipment
Land 168,958 188,418 202,949
Buildings 900,827 871,003 868,379
Property under construction 45,939 82,239 51,640
Leasehold improvements 137,858 124,076 134,094
Equipment 966,161 926,907 970,779
Assets under capital leases 215,241 200,907 205,030
----------------------------------------------
2,434,984 2,393,550 2,432,871
Less accumulated depreciation and amortization
Owned property, plant and equipment 844,745 776,268 825,546
Assets under capital leases 43,098 42,285 36,027
----------------------------------------------
Net property, plant and equipment 1,547,141 1,574,997 1,571,298
Investment in ShopKo 182,927 173,901 182,839
Goodwill 505,196 569,003 515,009
Other assets 217,335 299,710 238,881
----------------------------------------------
Total assets $4,158,447 $4,484,009 $4,305,149
==============================================
Liabilities and Stockholders' Equity
- --------------------------------------------------------------------------------------------------------
Current Liabilities
Notes payable $ 134,673 $ 214,358 $ 226,168
Accounts payable 990,019 980,783 1,003,106
Current maturities of long-term debt 10,181 10,454 9,277
Current obligations under capital leases 18,580 18,838 19,060
Other current liabilities 176,651 179,176 189,526
----------------------------------------------
Total current liabilities 1,330,104 1,403,609 1,447,137
Long-term debt 1,208,042 1,198,902 1,215,184
Long-term obligations under capital leases 245,319 273,762 244,582
Deferred income taxes - 97,516 -
Other liabilities 196,625 212,511 205,024
Stockholders' equity
Preferred stock 5,908 5,908 5,908
Common stock 75,335 75,335 75,335
Capital in excess of par value 12,708 13,314 12,717
Retained earnings 1,282,949 1,310,745 1,236,507
Treasury stock, at cost (198,543) (107,593) (137,245)
----------------------------------------------
Total stockholders' equity 1,178,357 1,297,709 1,193,222
----------------------------------------------
Total liabilities and stockholders' equity $4,158,447 $4,484,009 $4,305,149
==============================================
Quarterly data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
4
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<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 26, 1994 $5,908 $75,335 $12,966 $ (86,868) $1,268,117 $1,275,458
Net earnings - - - - 43,334 43,334
Sales of common stock
under option plans - - (290) 1,435 - 1,145
Cash dividends declared
on common stock -
$.925 per share - - - - (66,024) (66,024)
Compensation under employee
incentive plans - - 41 253 - 294
Purchase of shares for treasury - - - (52,065) - (52,065)
Other - - - - (8,920) (8,920)
- ------------------------------------------------------------------------------------------------------------
Balances at February 25, 1995 5,908 75,335 12,717 (137,245) 1,236,507 1,193,222
Net earnings - - - - 79,229 79,229
Sales of common stock
under option plans - - (9) 1,679 - 1,670
Cash dividends declared
on common stock -
$.48 per share - - - - (32,787) (32,787)
Compensation under employee
incentive plans - - - (788) - (788)
Purchase of shares for treasury - - - (62,189) - (62,189)
- ------------------------------------------------------------------------------------------------------------
Balances at September 9, 1995 $5,908 $75,335 $12,708 $(198,543) $1,282,949 $1,178,357
============================================================================================================
Interim data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
5
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ---------------------------------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
- ---------------------------------------------------------------------------------------------------------
(In thousands)
- ---------------------------------------------------------------------------------------------------------
Year-to-date
(28 weeks ended)
- ---------------------------------------------------------------------------------------------------------
September 9, September 10,
1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 79,229 $ 84,128
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Equity in earnings of ShopKo (3,329) (3,575)
Dividends received from ShopKo 3,241 3,241
Depreciation and amortization 116,077 109,160
Provision for losses on receivables 1,811 2,993
Gain on sale of property, plant and equipment (7,458) (4,253)
Deferred income taxes 20,132 4,735
Treasury shares contributed to employee incentive plan 66 -
Changes in assets and liabilities:
Receivables (25,147) (27,275)
Inventory 80,714 (6,929)
Other current assets 14,120 2,986
Direct finance leases 4,317 4,920
Accounts payable (2,269) 23,372
Other liabilities (21,578) (30,133)
- ---------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 259,926 163,370
- ---------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Additions to long-term notes receivable (16,739) (11,410)
Payments received on long-term notes receivable 19,592 8,365
Proceeds from sale of property, plant and equipment 69,874 18,445
Purchase of property, plant and equipment (120,121) (119,243)
Business acquisitions, net of cash acquired - (111,083)
Other investing activities (10,270) (728)
- ---------------------------------------------------------------------------------------------------------
Net cash used in investing activities (57,664) (215,654)
- ---------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net issuance (reduction) of short-term notes payable (91,495) 187,720
Proceeds from issuance of long-term debt - 150,000
Repayment of long-term debt (6,238) (220,334)
Reduction of obligations under capital leases (9,721) (9,518)
Proceeds (payments) for purchase of common stock under option plans 747 (676)
Dividends paid (32,736) (31,670)
Payments for purchase of treasury stock (62,189) (20,693)
- ---------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (201,632) 54,829
- ---------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 630 2,545
Cash and cash equivalents at beginning of year 4,839 2,846
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of second quarter $ 5,469 $ 5,391
=========================================================================================================
All data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
6
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting Policies
- -------------------
The summary of significant accounting policies is included in the notes to
consolidated financial statements in the 1995 annual report of SUPERVALU INC.
("SUPERVALU" or the "company").
Restructuring and Other Charges
- -------------------------------
In December 1994, restructuring and other charges totaling $244.0 million were
incurred for the implementation of the ADVANTAGE project, the sale, closure or
restructure of certain retail businesses and the recognition of certain asset
impairments.
The aggregate charges included $204.8 million for activities under the
restructuring plan. The restructuring charges do not cover certain aspects of
the plan, including new information systems, anticipated operating losses on
retail business units to be exited, implementation costs associated with the
ADVANTAGE project, employee relocation and training. These costs are not
considered exit activities and are recognized as incurred.
Management's objective under the ADVANTAGE project is to fundamentally change
its business processes by improving the effectiveness and efficiency of the
company's food distribution system, thus lowering the cost of goods to the
company's customers. Its retail food objective is to improve retail performance
by eliminating certain operations and assets that do not add shareholder value
and focusing on building its successful retail formats.
The charges included $53.1 million for severance, pension and outplacement based
on the projected impact of the plan on employee levels in both food distribution
and retail food. The company expected approximately 4,300 employees to be
eliminated over an 18-month period under the re-engineering efforts, 1,700 of
which are employed in retail food operations. Approximately 998 positions have
been eliminated which resulted in severance and outplacement payments of $1.8
million year-to-date. Also included in the charge is a $20.0 million provision
in food distribution which represents expected losses on the sale of tangible
assets and expenses under non-cancelable leases as a result of the strategic
shift. Expenditures of $1.7 million year-to-date have been incurred in
connection with such non-cancelable leases and losses on disposition of assets.
The restructuring charges included an $87.8 million provision for property and
lease discontinuances at retail locations, resulting primarily from various exit
strategies and payment of portions of non-cancelable lease obligations.
Approximately 30 retail stores were expected to be sold or closed, primarily in
fiscal 1995 and 1996. At the end of fiscal 1995, six stores had been closed and
during fiscal 1996, an additional ten stores have been closed. Charges against
the reserve were $17.3 million year-to-date which related to the closedown of
retail locations. The retail units covered by the reserve had year-to-date
aggregate sales and pre-tax losses of $80.0 and $5.8 million, respectively,
compared with $148.3 and $7.9 million last year.
7
<PAGE>
The final component of the aggregate restructuring charges was a $43.9 million
impairment provision representing the effect of the strategic shift on the
recoverability of certain assets. The company holds land for development,
transition stores for wholesale market share, certain warehouse properties and
miscellaneous sites. The company completed a bulk sale of property in the
second quarter which resulted in a charge against the reserve of $9.3 million.
The majority of the properties yet to be disposed of have signed purchase
agreements and will be disposed of as soon as practicable. An additional $2.2
million year-to-date was charged against the reserve for carrying costs and
losses on disposition of property excluded from the bulk sale.
Cash expenditures related to the restructuring plan were $4.9 million year-to-
date.
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 9, 1995 and
September 10, 1994 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.
8
<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
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales 100.00% 100.00% 100.00% 100.00%
Cost of sales (90.69) (91.09) (90.72) (91.16)
Selling and administrative expenses (7.13) (6.86) (7.08) (6.67)
Interest expense (.87) (.79) (.88) (.78)
Interest income .12 .16 .13 .15
- -----------------------------------------------------------------------------------------------
Earnings before equity in earnings of ShopKo,
and income taxes 1.43 1.42 1.45 1.54
Equity in earnings of ShopKo .02 .03 .04 .04
Provision for income taxes (.57) (.56) (.58) (.62)
- -----------------------------------------------------------------------------------------------
Net earnings .88% .89% .91% .96%
===============================================================================================
</TABLE>
NET SALES
Net sales for the second quarter and year-to-date were even with last year.
Food price inflation, as measured by the company, was 1% for the quarter and .4%
year-to-date compared with deflation of .8% for both periods last year. The
flat sales trend was the result of a significant increase in retail food sales,
offset by a moderate decline in food distribution sales. Retail food sales
represented 27% and 26% of total sales for the quarter and year-to-date,
respectively.
Food distribution sales decreased 1.1% and 1.6% over last year for the quarter
and year-to-date, respectively. Sales were affected by the continuing but
diminishing effect of last year's facility consolidations, the soft retail
environment and the closing of corporate retail stores.
Retail food sales increased 11.5% for both the quarter and year-to-date periods
compared with last year. The increase was primarily due to the acquisition of
Hyper Shoppes, Inc. in August 1994, new store openings and an increase in same-
store sales of 2% for the quarter and .1% year-to-date. The increase in sales
was partially offset by the closing of underperforming retail stores under the
previously announced restructuring plan.
9
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<TABLE>
<CAPTION>
Sales by Segment
- -----------------------------------------------------------------------------------------------------------
(In thousands) Second Quarter (12 weeks)
- -----------------------------------------------------------------------------------------------------------
September 9, 1995 September 10, 1994
Net Sales % of Total Net Sales % of Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Food distribution $ 3,362,238 89.0 % $ 3,400,992 90.1 %
Retail food 1,008,391 26.6 % 904,063 24.0 %
Less: Eliminations* (591,232) (15.6)% (531,330) (14.1)%
- -----------------------------------------------------------------------------------------------------------
Total net sales $ 3,779,397 100.0 % $ 3,773,725 100.0 %
===========================================================================================================
Sales by Segment
- -----------------------------------------------------------------------------------------------------------
(In thousands) Year-to-Date (28 weeks)
- -----------------------------------------------------------------------------------------------------------
September 9, 1995 September 10, 1994
Net Sales % of Total Net Sales % of Total
- -----------------------------------------------------------------------------------------------------------
Food distribution $ 7,808,365 89.2 % $ 7,934,901 90.5 %
Retail food 2,269,280 25.9 % 2,035,174 23.2 %
Less: Eliminations* (1,325,211) (15.1)% (1,205,235) (13.7)%
- -----------------------------------------------------------------------------------------------------------
Total net sales $ 8,752,434 100.0 % $ 8,764,840 100.0 %
===========================================================================================================
</TABLE>
* Intercompany eliminations include sales to Hyper Shoppes, Inc. in fiscal 1996
of $53,771 and $121,925 for the quarter and year-to-date, respectively. In
fiscal 1995, the company owned 31% of Hyper Shoppes, Inc.; therefore sales
were not reported in the company's retail food results.
GROSS PROFIT
Gross profit as a percentage of net sales increased to 9.3% for both the quarter
and year-to-date, compared with 8.9% and 8.8% for the same periods last year.
The increases were due principally to the growing proportion within the
company's total sales mix of the higher-margined retail food business. Food
distribution gross profit margin decreased slightly due to the competitive
retail environment. The retail food gross profit margin increased primarily due
to the improved mix of higher gross margin items and the closing of
underperforming retail stores.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses as a percentage of net sales were 7.1% for
both the second quarter and year-to-date, compared with 6.9% and 6.7% for the
same periods last year. The higher percentages were primarily due to the
increased proportion of the company's retail food segment which operates at a
higher selling and administrative expense percentage than the food distribution
segment. Food distribution selling and administrative expenses as a percent of
net sales were lower than last year for the quarter and year-to-date due to
favorable insurance experience and cost reductions in other administrative
areas. Retail food selling and administrative expenses as a percent of net
sales were consistent with last year for the second
10
<PAGE>
quarter, but higher year-to-date. The higher year-to-date percentage was
primarily due to increased advertising expense in response to competitive
pressures and higher promotional activity associated with new store openings.
The increase in retail food expenses was also due to higher supply costs
resulting from the increased cost of paper and packaging supplies. The
elimination of underperforming retail stores reduced expenses in the second
quarter and, to a lesser degree, also impacted year-to-date expenses. Pre-tax
expenses of $5.2 and $10.7 million related to the ADVANTAGE project were
incurred during the second quarter and year-to-date, respectively, compared with
$2.9 and $6.7 million for the same periods last year.
RESTRUCTURING AND OTHER CHARGES
In December 1994, restructuring and other charges totaling $244.0 million were
incurred for the implementation of the ADVANTAGE project, the sale, closure or
restructure of certain retail businesses and the recognition of certain asset
impairments.
The aggregate charges included $204.8 million for activities under the
restructuring plan. Management's objective under the ADVANTAGE project is to
fundamentally change its business processes by improving the effectiveness and
efficiency of the company's food distribution system, thus lowering the cost of
goods to the company's customers, and by enhancing the market-driving support to
retailer customers. Its retail food objective is to improve retail performance
by eliminating certain operations and assets that do not add shareholder value
and focusing on building its successful retail formats.
Under the ADVANTAGE project, food distribution costs are expected to be reduced
through enhanced logistic procedures and a new pricing strategy. Planned
"upstream" facilities will provide regional distribution of general merchandise,
health and beauty care products and slow-moving grocery items. The construction
of the Anniston, Alabama prototype upstream facility is well underway and is
scheduled for completion in February 1996. A cross dock material handling system
is being installed in the upstream facility allowing faster moving product to
flow across the dock from the vendor truck to the SUPERVALU truck without being
stored in the warehouse. The company is currently testing its new pricing
strategy, Activity Based Sell, which charges retailers on a cost-to-serve basis.
The new pricing strategy, which is being tested in Denver, is intended to
encourage optimum economic behavior at both retail and wholesale.
The company is also developing market-driving capabilities to help independent
retailers achieve new growth by offering new category management and other
programs. Testing of the new category management and shelf management programs
is being conducted in Denver.
Retail changes under the restructuring plan include the closing of approximately
30 underperforming stores and the refocusing on preferred formats. To date, 16
stores have been closed or sold under the plan, and the company is in
negotiations for the sale of several other stores.
OPERATING EARNINGS
The company's pre-tax operating earnings (earnings before interest, corporate
expenses, equity in earnings of ShopKo Stores, Inc. ("ShopKo") and taxes)
increased to $89.0 million in the second quarter from $85.4 million last year
and were $206.2 million year-to-date compared with $206.5 million last year.
Food
11
<PAGE>
distribution operating earnings decreased to $78.5 million from $78.8 million
and to $179.9 million from $183.3 million for the second quarter and year-to-
date, respectively. Food distribution operating earnings were positively
impacted by a lower selling and administrative expense rate. This positive
impact was offset by slightly reduced gross margins, pre-tax expenses of $4.0
and $5.6 million for the second quarter and year-to-date, respectively, related
to the ADVANTAGE project and charged to this segment and the softness in sales.
Retail food operating earnings increased 59.8% to $10.5 million and 13.8% to
$26.3 million in the second quarter and year-to-date, respectively. Retail food
operating earnings increased due to the acquisition of Hyper Shoppes, Inc. and
the elimination of operating losses from the closing of underperforming stores.
INTEREST EXPENSE AND INCOME
Interest expense increased to $32.8 and $76.9 million for the second quarter
and year-to-date, respectively, compared with $29.7 and $68.0 for the same
periods last year, reflecting higher short-term rates and increased debt levels.
Interest income decreased to $4.5 and $11.6 million for the second quarter and
year-to-date, respectively, compared with $5.8 and $13.4 million for the same
periods last year.
EQUITY IN EARNINGS OF SHOPKO
SUPERVALU's share of ShopKo net earnings decreased to $.9 and $3.3 million in
the second quarter and year-to-date, respectively, compared with $1.3 and $3.6
million for the same periods last year. As reported by ShopKo, sales increased
9.7% to $418.2 million and net earnings decreased 32% for the second quarter
compared to last year. The decrease in net earnings was primarily due to a
lower gross margin percentage due to a shift in the sales mix from regular sales
to lower gross margin promotional sales and continued competitive pricing
pressures in the discount general merchandise marketplace. Net earnings were
also affected by increased interest expense due to last year's third quarter
sale of long-term debentures.
INCOME TAXES
The effective tax rate increased to 39.38% and 39.35% in the second quarter and
year-to-date, respectively, compared with 38.94% and 39.27% for the same
periods last year. The increase in the effective tax rate was principally due
to the decreased contribution from ShopKo and the increase in goodwill
amortization.
NET EARNINGS
Net earnings were $33.3 and $79.2 million for the quarter and year-to-date,
respectively, compared with $33.5 and $84.1 million for the same periods last
year. The decrease in net earnings was primarily due to higher net interest
expense and increased expenses related to the ADVANTAGE project. In relation to
the ADVANTAGE project, the company anticipates that an additional $6 to $8
million after-tax will be expended for related costs during fiscal 1996. The
company currently anticipates a contribution from this project in fiscal 1997.
12
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K.
- ------ --------------------------------
(a) Exhibits filed with this Form 10-Q:
(4.1) Third Supplemental Indenture dated as of September 1, 1995 between the
Registrant and Bankers Trust Company, as Trustee, to Indenture dated
as of July 1, 1987 between the Registrant and Bankers Trust Company,
as Trustee, is incorporated by reference to Exhibit 4.1 to the
Registrant's Form 8-K Report dated October 2, 1995.
(4.2) Credit Agreement dated as of May 26, 1995 among the Registrant, the
Banks named therein and Citibank, N.A., as Agent, is incorporated by
reference to Exhibit 10.1 to the Registrant's Form 8-K Report dated
October 2, 1995.
(15) Letters from Deloitte & Touche regarding unaudited interim financial
information.
(27) Financial Data Schedule containing a summary of financial information
extracted from the Consolidated Balance Sheets as of September 9,
1995.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter. On October
2, 1995, the Registrant filed a Form 8-K Report (A) reporting under
"Item 5 - Other Events" that on October 2, 1995, the Registrant
entered into a Distribution Agreement dated October 2, 1995 between
the Registrant and Goldman, Sachs & Co., BT Securities Corporation,
Citicorp Securities, Inc. and J.P. Morgan Securities Inc., pursuant
to which the Registrant may offer from time to time its Medium-Term
Notes, Series B at an aggregate initial offering price not to
exceed $400,000,000 and (B) filing as exhibits under "Item 7 -
Financial Statements and Exhibits" a copy of certain exhibits
relating thereto.
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/Isaiah Harris
------------------------------
Isaiah Harris
Date: October 24, 1995 Vice President & Controller
(Principal Financial Officer
and duly authorized
officer of Registrant)
14
<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 interim information
of SUPERVALU INC. and subsidiaries for the periods ended September 9, 1995 and
September 10, 1994, as indicated in our report dated October 18, 1995. 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 9, 1995, is
incorporated by reference in the Registration Statements (No. 33-28310, No.
33-16934, No. 2-56896, and No. 33-50071 on Form S-8 and No. 33-56415 on Form
S-3.)
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
October 18, 1995
<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 9, 1995 and September 10, 1994
and the related consolidated statements of earnings and cash flows for the
12-week and 28-week periods then ended and the consolidated statements of
stockholders' equity for the interim period ended September 9, 1995. 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 25, 1995 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 10, 1995, 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 25, 1995 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 18, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Consolidated Balance Sheets as of September 9, 1995 and the Consolidated
Statement of Earnings for the 28 weeks ended September 9, 1995 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-24-1996
<PERIOD-END> SEP-09-1995
<CASH> 5,469
<SECURITIES> 0
<RECEIVABLES> 434,678
<ALLOWANCES> (27,884)
<INVENTORY> 1,029,077
<CURRENT-ASSETS> 1,564,737
<PP&E> 2,434,984
<DEPRECIATION> (887,843)
<TOTAL-ASSETS> 4,158,447
<CURRENT-LIABILITIES> 1,330,104
<BONDS> 1,453,361
<COMMON> 75,335
0
5,908
<OTHER-SE> 1,097,114
<TOTAL-LIABILITY-AND-EQUITY> 4,158,447
<SALES> 8,752,434
<TOTAL-REVENUES> 8,752,434
<CGS> 7,940,385
<TOTAL-COSTS> 7,940,385
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,811
<INTEREST-EXPENSE> 76,890
<INCOME-PRETAX> 130,627
<INCOME-TAX> 51,398
<INCOME-CONTINUING> 79,229
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 79,229
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.15
</TABLE>
