<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended February 24, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 (Zip Code)
executive offices)
Registrant's telephone number, including area code: (612) 828-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, par value $1.00 New York Stock Exchange
per share
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No ___
[Cover page 1 of 2 pages]
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of April 1, 1996 was approximately $2,070,625,576 (based upon the
closing price of Registrant's Common Stock on the New York Stock Exchange on
March 31, 1996).
Number of shares of $1.00 par value Common Stock outstanding as of April 1,
1996: 67,458,719
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Registrant's Annual Report to Stockholders for the fiscal
year ended February 24, 1996 are incorporated into Parts I, II and IV,
as specifically set forth in said Parts I, II and IV.
2. Portions of Registrant's definitive Proxy Statement filed for
Registrant's 1996 Annual Meeting of Stockholders are incorporated into
Part III, as specifically set forth in said Part III.
[Cover page 2 of 2 pages]
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PART I
------
Unless the context indicates otherwise, all references to the "Company,"
"SUPERVALU" or "Registrant" in this Annual Report on Form 10-K relate to
SUPERVALU INC. and its majority-owned subsidiaries.
ITEM 1. BUSINESS
- ------ --------
General Development
-------------------
SUPERVALU INC., a Delaware corporation organized in 1925 as the successor
to two wholesale grocery firms established in the 1870's, has its
principal executive offices at 11840 Valley View Road, Eden Prairie,
Minnesota 55344 (Telephone: 612-828-4000).
The Company is one of the largest food wholesalers and approximately the
14th largest food retailer in the nation. It is engaged in the business
of selling food and nonfood products at wholesale and operating a variety
of store formats at retail. The Company supplied approximately 4,618
stores (including 518 Save-A-Lot limited assortment stores) in 48 states
as of the close of fiscal 1996 and approximately 4,600 stores (including
472 Save-A-Lot limited assortment stores) at the close of fiscal 1995.
The Company operated at fiscal year-end 287 retail stores under several
formats, including, price superstores, supercenters, food and drug
combination stores, limited-assortment stores, and supermarkets,
primarily under the names of Cub Foods, Shop 'n Save, bigg's, Save-A-Lot,
Scott's Foods, Laneco and Hornbacher's.
In 1991, SUPERVALU began the implementation of a strategy to focus on its
core food distribution and retailing business segments. The Company
executed the first major step of this strategy in October 1991 with the
sale of 54% of SUPERVALU's interest in ShopKo Stores, Inc. ("ShopKo"),
its discount general merchandise subsidiary, through an initial public
offering. SUPERVALU continues to own a 46% interest in ShopKo which, at
fiscal year end, operated 129 discount department stores in 15 states.
In October 1992, the Company completed the acquisition of Wetterau
Incorporated ("Wetterau"), resulting in a significant expansion of the
geographic market and customer base compared with that previously served
by SUPERVALU food wholesale and retail operations. The Company has
integrated Wetterau's administrative and support services, and has
combined, consolidated or closed a number of distribution operations to
eliminate inefficiencies and overlap.
In March 1994, the Company acquired Sweet Life Foods, Inc. ("Sweet
Life"), a privately-owned grocery wholesale distributor serving
Massachusetts, Connecticut, Maine and Eastern New York. This acquisition
further strengthened the Company's New England customer base.
In May 1994, the Company acquired the assets of Wetterau Properties Inc.
("WPI"), a publicly owned real estate investment trust which was formed
by Wetterau prior to the Company's acquisition of Wetterau. Most of the
properties owned by WPI had been acquired from and leased back to
Wetterau; the Company was the tenant for all but one of the properties
acquired from WPI in the transaction.
In August 1994, the Company acquired Hyper Shoppes, Inc. ("Hyper
Shoppes"), which operated five bigg's supercenters and two bigg's price
superstores in the Cincinnati, Louisville and Denver markets. Prior to
the transaction, SUPERVALU held a minority ownership interest in Hyper
Shoppes and was the principal supplier to the bigg's stores.
3
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The Company has also made other smaller acquisitions from time to time to
further the growth of its food distribution, retailing and bakery
operations.
In December 1994, the Company announced a change in operating strategy
which included the decision to restructure certain of its operations and
reassess the recoverability of underlying assets. Restructuring and
other charges totaling $244 million were recorded in the third quarter of
fiscal 1995 to provide for the sale, closure or restructure of certain
retail businesses, certain costs and expenses incurred in connection with
the ADVANTAGE project (described below) and the recognition of certain
asset impairments.
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. Management's retail food
objective is to improve retail performance by eliminating certain
operations and assets that do not add shareholder value and focusing its
retail efforts on building retail formats which it believes will produce
the best results in the future. The ADVANTAGE project has three major
initiatives: creation of a transformed logistics network; development of
enhanced market driving capabilities at retail; and adoption of a new
approach to pricing.
Under ADVANTAGE in fiscal 1996, the Company has: substantially completed
the construction of the Anniston, Alabama prototype regional distribution
facility; tested its new pricing strategy, Activity Based Sell, which
charges retailers on a cost-to-serve basis and is intended to encourage
optimum economic behavior at both retail and wholesale; tested a new
computerized promotional system; designated and begun staffing marketing
regions; and implemented portions of a comprehensive business process
redesigned to support on-going cost reduction. Further, the Midwest
regional distribution facility site has been selected with construction
to begin this spring and operations expected to begin in fiscal 1998.
Additional description of the Company's business, including the ADVANTAGE
project, is contained in the "Financial Review" portion of the Company's
Annual Report to the Stockholders for fiscal year 1996 (Exhibit 13),
pages 16-21, which description is incorporated herein by reference.
Financial Information about Industry Segments
---------------------------------------------
Financial information about the Company's industry segments for the five
years ended February 24, 1996 is incorporated by reference to page 24 of
the Company's Annual Report to Stockholders for fiscal year 1996 (Exhibit
13).
Cautionary Statements for Purposes of the Safe Harbor Provisions of the
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Private Securities Litigation Reform Act of 1995
------------------------------------------------
The information in this Annual Report on Form 10-K, for the year ended
February 24, 1996, includes forward-looking statements. Important risks
and uncertainties that could cause actual results to differ materially
from those discussed in such forward looking statements are detailed in
Exhibit 99.1; other risks or uncertainties may be detailed form time to
time in the Company's future Securities and Exchange Commission filings.
Food Distribution Operations
----------------------------
Description of Food Stores Served. SUPERVALU food distribution divisions
sell food and non-food products at wholesale and offer a variety of
retail support services to independently-owned retail food stores. At
February 24, 1996, the Company was the principal supplier to
approximately
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4,618 retail grocery and general merchandise stores (including 518 Save-
Lot limited assortment stores), compared with 4,600 stores (including 472
Save-A-Lot limited assortment stores) served at the end of fiscal 1995.
Retail food stores served by the Company at wholesale range in size from
small convenience stores to 200,000 square foot supercenters. The
Company's wholesale customer base includes single and multiple store
independent operators, regional and national chains and Company owned
stores, operating in a variety of formats including price superstores,
supercenters, food and drug combination stores, limited assortment
stores, and supermarkets.
Retail food stores served by the Company at wholesale offer a wide
variety of groceries, meats, dairy products, frozen foods and fresh
fruits and vegetables. In addition, most stores carry an assortment of
non-food items, including tobacco products, health and beauty aids, paper
products, cleaning supplies, and small household and clothing items. The
number and variety of such non-food items have expanded significantly in
recent years in line with the general industry trend but vary
considerably from store to store. Many stores offer one or more
specialized services, such as delicatessens, food courts, in-store
bakeries, liquor departments, video, pharmacies, housewares and flower
shops.
The Company is constantly endeavoring to strengthen the retail food
stores it serves by assisting in the upgrading and enlarging of existing
stores, establishing new stores, more aggressively merchandising its
stores, developing diverse formats and retail strategies, and assisting
stores to serve markets which are increasingly segmented. As part of the
ADVANTAGE project, the Company is also developing market-driving
capabilities to help independent retailers achieve new growth by offering
new category management and other programs and services.
Products Supplied. SUPERVALU continues to supply its retail food stores
with an increasing variety and selection of products, including national
and regional brands and the Company's own lines of private label
products. Such private label trademarks as SUPERVALU, FLAV-O-RITE,
CHATEAU, SHOP 'N SAVE, SHOPPERS VALUE, IGA, NATURE'S BEST, HOME BEST, BI-
RITE, FOODLAND, PREFERRED SELECTION, SWEET LIFE, WHY PAY MORE, and others
accounted for approximately 10 percent of the Company's fiscal 1996 sales
to retail food stores. A majority of the sales by the Company's Save-A-
Lot operations consist of Save-A-Lot created and controlled brands.
SUPERVALU supplies private label merchandise over a broad range of
products included in every department in the store: frozen, dairy,
grocery, meats, bakery, deli, general merchandise and produce. These
products are produced to the Company's specifications by many suppliers,
some of whom are the nation's foremost manufacturers.
In addition to making these products available, SUPERVALU also assumes a
large part of the marketing and merchandising role, conducts private
label sales events, and provides a wide array of in-store promotional and
advertising tools and training expertise to assist the retailer in
promoting private label programs to maximize sales and produce profit
advantage.
Hazelwood Farms Bakeries, Inc., a subsidiary of the Company, manufactures
frozen dough and bakery products primarily for the in-store bakery
market, and has customers in all 50 states as well as Canada and Mexico.
Its customer base consists of wholesale food distributors, supermarket
chains (including company-owned, affiliated and non-affiliated stores),
fast food chains and institutional food service companies.
The Company has no significant long-term purchase obligations and
considers that it has adequate and alternative sources of supply for most
of its purchased products.
5
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Distribution and Costs of Merchandise. Deliveries to retail stores are
made from the Company's distribution centers, usually in Company-owned
trucks. In addition, many types of meats, dairy products, bakery and
other products purchased from the Company are delivered directly by
suppliers to retail stores under programs established by the Company.
Wholesale sales are made to the Company's retailers at the applicable
price and fee schedule in effect at the time of sale. In connection with
the ADVANTAGE project, the Company reexamined its pricing structure and
is developing a new pricing approach to retailers called Activity Based
Sell ("ABS"). The primary objectives of ABS are to reflect the net
product price plus fees to recover the Company's cost to serve the
retailer and to earn an adequate profit margin. In fiscal 1996, the
Company began testing ABS in Denver, Colorado. The Company intends to
begin rolling out ABS systematically in fiscal 1997.
The Company seeks to lower its cost of product by regionalizing its food
buying operations and centralizing buying for general merchandise and
health and beauty products to better leverage the purchasing power of
larger product orders. As part of the ADVANTAGE project, the Company is
developing a two-tiered distribution system to create a national
logistics network composed of its 31 existing wholesale distribution
facilities plus four new regional distribution facilities which will
provide regional distribution for slow moving grocery product, general
merchandise and health and beauty care products. The Southeastern
Regional Facility, the Company's first regional distribution facility
located in Anniston, Alabama, is scheduled to become operational in the
summer of 1996 and will serve five existing Southeast distribution
facilities. The Company plans to begin construction of a second regional
distribution facility to be located in Oglesby, Illinois in the summer of
1996, which is scheduled to become initially operational in the fall of
calendar 1997 and is intended to serve 12 distribution centers and three
marketing regions in the Midwest. In the Northeast, the Company will use
its existing Easton, Pennsylvania operations for general merchandise and
the Perryman, Maryland facility for regional slow moving grocery
distribution. The Northwest will modify existing facilities to serve as a
regional distribution facility. These actions are intended to improve
operating efficiencies and lower cost of operations which will, in turn,
reduce the cost of product to the Company's retailers.
Services Supplied. In addition to supplying merchandise, the Company also
offers retail stores a wide variety of support services, including
advertising, promotional and merchandising assistance, store management
assistance, retail operations counseling, computerized inventory control
and ordering services, accounting, bill paying and payroll services
(largely computerized), store layout and equipment planning (including
point-of-sale electronic scanning), cash management, tax counseling,
building design and construction services, financial and budget planning,
assistance in selection and purchasing or leasing of store sites,
consumer and market research and personnel management assistance. Certain
Company subsidiaries operate as insurance agencies and provide
comprehensive insurance programs to the Company's retail stores.
As part of the ADVANTAGE project, the Company has begun to realign its
wholesale food divisions into seven marketing regions designed to reduce
the cost of services to retailers while maintaining contact with
retailers and the ultimate consumer, and is in the process of analyzing
the services to be offered and the fees to be charged to independent
retailers. One such service to be offered to retailers is category
management, which is a process designed to align product assortment with
consumer preferences. The Company is testing its category management
program in Denver, Colorado, and plans to systematically roll out
elements of the category management program region by region beginning in
fiscal 1997.
The Company may provide financial assistance to retail stores served or
to be served by it, including the acquisition, leasing and subleasing of
store properties, the making of direct loans, and providing guarantees or
other forms of financing. In general, loans made by the Company to
independent retailers are secured by liens on inventory and/or equipment,
by personal
6
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guarantees and other security. When the Company subleases store
properties to retailers, the rentals are generally as high or higher than
those paid by the Company.
Retail Food Operations
----------------------
At fiscal year end, the Company's retail businesses operated a total of
287 retail stores under several formats, including supermarkets, price
superstores, supercenters, food and drug combination stores and limited
assortment stores. These diverse formats enable the Company to operate
in a variety of markets under widely differing competitive circumstances.
At the close of fiscal 1996, the Company's retail stores operated under
the following principal formats:
Cub Foods consists of 116 price superstores located in 13 states, 60 of
which are franchised to independent retailers and 56 of which are
corporately operated. Plans for fiscal 1997 include the opening of three
corporate stores and five franchised stores.
Shop 'n Save consists of 27 price superstores located in Eastern Missouri
and Southern and Central Illinois. At the end of fiscal 1996, Shop 'n
Save announced the intention to acquire six Price Chopper stores in the
St. Louis area. These stores, not included in the above number, were
acquired in the first quarter of fiscal 1997 and are being converted to
the Shop 'n Save banner. Three additional Shop 'n Save price superstores
are planned for fiscal 1997, one of which opened in the first quarter.
bigg's consists of five supercenters and three discount food superstores
that operate in the Cincinnati, Louisville and Denver metropolitan
markets. bigg's was acquired by the Company in August 1994 when the
Company acquired Hyper Shoppes, Inc. Two bigg's supercenters are planned
for fiscal 1997.
Save-A-Lot is the Company's combined wholesale and retail limited
assortment operation. At fiscal year end there were 518 Save-A-Lot
limited assortment stores located in 29 states, of which 106 were
corporately operated. Save-A-Lot projects adding approximately 99 stores
in fiscal 1997, including 19 corporately owned stores and 80 licensed
units.
Scott's Foods is a 17-store group located in the Fort Wayne, Indiana
area. One new store is planned for fiscal 1997.
Laneco, a division of the Company, operates a diverse mix of 35 retail
outlets comprised predominantly of supermarkets, supercenters and
discount food stores located in Pennsylvania and New Jersey. These
stores operate mainly under the Laneco, Foodland, Ultra IGA and Price
Slasher names and formats. One new replacement store is planned for
fiscal 1997, which opened in the first quarter.
Hornbacher's is a five-store group located in the Fargo, North Dakota
area, with no new stores planned for fiscal 1997.
Other formats operated by the Company include County Market, SUPERVALU,
IGA, and Foodland.
In fiscal 1996 the Company closed 17 retail stores as part of its
restructuring plan. Pursuant to the Company's restructuring plan, the
Company has closed a total of 23 retail stores under the restructuring
plan. The Company is continuing its plan to close additional under-
performing retail stores.
7
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Trademarks
----------
The Company offers its customers the opportunity to franchise a concept
or license a servicemark. This program helps the customer compete by
providing, as part of the franchise or license program, a complete
business concept, group advertising, private label products and other
benefits. The Company is the franchisor or has the right to license
retailers to use certain servicemarks such as CUB FOODS, SAVE-A-LOT,
COUNTY MARKET, SHOP 'N SAVE, NEWMARKET, SUPERVALU, IGA, FOODLAND and
SUPERVALU FOOD & DRUG. The Company registers a substantial number of is
trademarks/servicemarks in the United States Patent and Trademark Office,
including many of its private label product trademarks and servicemarks.
See "Food Distribution Operations -- Products Supplied". The Company
considers certain of its trademarks and servicemarks to be of material
importance to its business and actively defends and enforces such
trademarks and servicemarks.
Competition
-----------
Since the Company's food business consists principally of supplying
independently owned and operated retail food stores, its success is
dependent upon the ability of those retail store operators to compete
successfully with other retail food stores, and also upon its own ability
to compete successfully with other wholesale distributors. Both the
wholesale and the retail food businesses are highly competitive. At the
wholesale level, the Company competes directly with a number of
wholesalers which supply retailers and indirectly with the warehouse and
distribution operations of the large integrated chains. The Company
competes with other wholesale food distributors in most of its market
areas on the basis of product price, quality and assortment, schedule and
reliability of deliveries, the range and quality of services provided,
the location of the store sites and distribution facilities and its
willingness to provide financing to its customers. See "Food
Distribution Operations -- Distribution and Costs of Merchandise" and
"-- Services Supplied."
The principal competitive factors that affect the Company's retail
segment are location, price, quality, service and consumer loyalty.
Local, regional, and national food chains, as well as independent food
stores and markets, comprise the principal competition, although the
Company also faces competition from alternative formats including
supercenters and membership warehouse clubs and from convenience stores,
various formats selling prepared foods, and specialty and discount
retailers.
Employees
---------
At February 24, 1996, the Company had approximately 44,800 employees.
Approximately 16,000 employees are covered by collective bargaining
agreements. During fiscal year 1996, 24 agreements covering 2,500
employees were re-negotiated, with one work stoppage involving
approximately 250 employees for one week. In fiscal 1997, 20 contracts
covering approximately 3,400 employees will expire. The Company believes
that it has generally good relationships with its employees.
Investment in Shopko
--------------------
Following its initial public offering in October 1991, ShopKo has been
operated as an independent company. The Company's 46% investment in
ShopKo is accounted for by the equity method. The following summary of
ShopKo's business has been prepared from information provided by ShopKo.
Additional information regarding ShopKo is available from the reports and
other documents prepared and filed by ShopKo with the Securities and
Exchange Commission.
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As of February 24, 1996, ShopKo operated 129 discount retail stores in
15 states. ShopKo's corporate headquarters is located in Green Bay,
Wisconsin and its stores are located primarily in medium-sized and
smaller cities in the Upper Midwest and in Mountain and Pacific
Northwest states. ShopKo stores carry a wide selection of branded and
private label nondurable "hard line" goods such as housewares,
music/videos, health and beauty aids, toys and sporting goods and
"soft line" goods such as home textiles, men's, women's and children's
apparel, shoes, jewelry, cosmetics and accessories. ShopKo also
provides pharmacy and optical services in most of its stores. ShopKo's
stores average 89,945 square feet with approximately 84% of the stores
greater than 74,000 square feet. During fiscal 1996, ShopKo opened
five new stores and renovated 13 stores. ShopKo plans to open one
additional store in fiscal 1997. It is anticipated that seven stores
will be remodeled and one leased store will be relocated during the
first half of fiscal 1997. The discount general merchandise business
is very competitive. ShopKo competes in most of its markets with a
variety of national discount chains, including Wal-Mart and K Mart,
and with regional discount chains such as Target, and local discount
stores, certain discount specialty retail chains and deep discount
drug operations. One of ShopKo's subsidiaries, ProVantage, is a
prescription benefit management company which provides electronic
claim processing, mail service pharmacy and drug formulary management
services to insurance companies and other health plan sponsors and
administrators. ProVantage currently provides these services for
approximately 1.6 million covered lives. Of ShopKo's five directors,
two are officers of SUPERVALU.
Other investments
-----------------
The Company has ownership interests in business ventures related to
its food distribution and retail segments, which include investments
in Waremart, Inc., Foodland Distributors, and Super-Discount Markets,
Inc. The results of these investments are accounted for using the
equity method. The aggregate carrying amount of these investments is
less than 2% of total assets.
ITEM 2. PROPERTIES
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The Company's principal executive offices are located in a 180,000
square foot corporate headquarters facility located in Eden Prairie,
Minnesota, a western suburb of Minneapolis, Minnesota. This
headquarters facility is located on a 140 acre site owned by the
Company. The Company also owns a 240,000 square foot office facility,
One Southwest Crossing, which is located within one mile of its
principal executive offices. At the end of fiscal 1996, One Southwest
Crossing was fully occupied by third party tenants and Company
employees. The Company plans to occupy additional space at One
Southwest Crossing as certain third party leases expire.
The following table lists the location, use and approximate size of
the Company's principal warehouse, distribution and manufacturing
facilities utilized in the Company's food distribution operations as
of February 24, 1996:
<TABLE>
<CAPTION>
Square Square
Footage Footage
Division or Location Use Owned Leased
- -------------------- --- ------- -------
<S> <C> <C> <C>
Andover, Massachusetts Distribution Center & Offices 454,000
Anniston, Alabama Distribution Center & Offices 497,000
Anniston, Alabama Advantage Logistics - Regional 225,000
Distribution Center
Atlanta, Georgia Distribution Center & Offices 628,000
Atlanta, Georgia Bakery, Warehouse and Offices 104,700
Belle Vernon, Pennsylvania Distribution Center & Offices 713,000
</TABLE>
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<TABLE>
<CAPTION>
Square Square
Footage Footage
Division or Location Use Owned Leased
-------------------- --- ------- -------
<S> <C> <C> <C>
Billings, Montana Distribution Center & Offices 255,000 10,800
Bismarck, North Dakota Distribution Center & Offices 257,000
Buffalo Grove, Illinois Bakery, Warehouse and Offices 47,000
Champaign, Illinois Distribution Center & Offices 820,000 172,000
Columbus, Ohio Save-A-Lot Distribution Center
and Offices 182,000
Cranston, Rhode Island Distribution Center & Offices 195,500
Denver, Colorado Distribution Center & Offices 721,000
Des Moines, Iowa Distribution Center & Offices 663,000
Desloge, Missouri General Merchandise Warehouse
and Offices 137,000
Fargo, North Dakota Distribution Center & Offices 493,000
Ft. Wayne, Indiana Distribution Center & Offices 1,099,000
Grand Prairie, Texas Save-A-Lot Distribution Center
and Offices 139,000
Great Falls, Montana Distribution Center & Offices 154,000
Green Bay, Wisconsin Distribution Center & Offices 430,000 475,000
Greenville, Kentucky Distribution Center & Offices 309,000
Hammond, Louisiana Distribution Center & Offices 257,000
Hazelwood, Missouri Distribution Center & Offices 459,000 310,000
Hazelwood, Missouri Bakery, Warehouse and Offices 248,000
Hazleton, Pennsylvania Bakery, Warehouse and Offices 112,900
Humboldt, Tennessee Save-A-Lot Distribution Center
and Offices 212,000
Indianola, Mississippi Distribution Center & Offices 720,500
Keene, New Hampshire Distribution Center & Offices 176,000
Lakeland, Florida Save-A-Lot Distribution Center
and Offices 127,000
Lexington, Kentucky Save-A-Lot Distribution Center
and Offices 293,000
Livonia, Michigan/1/ Foodland Distributors, Distribution
Center 1,275,000
Los Angeles, California General Merchandise Warehouse
and Offices 227,000
Lower Nazareth Township, General Merchandise Warehouse
Pennsylvania (Easton) and Offices 230,000
McMinnville, Oregon Bakery, Warehouse and Offices 110,400
Milton, West Virginia Distribution Center & Offices 6,000 268,000
Minneapolis, Minnesota Distribution Center & Offices 1,594,000
New Stanton, Pennsylvania Distribution Center & Offices 726,000
Perryman, Maryland Distribution Center & Offices 511,000
Pleasant Prairie, Wisconsin Distribution Center & Offices 595,000
Portland, Maine Distribution Center & Offices 194,000
Quincy, Florida Distribution Center & Offices 772,000
</TABLE>
______________________
/1/ Leased by Foodland Distributors in which the Company is a 50% partner.
10
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<TABLE>
<CAPTION>
Square Square
Footage Footage
Division or Location Use Owned Leased
-------------------- --- ------- -------
<S> <C> <C> <C>
Reading, Pennsylvania Distribution Center & Offices 300,560 311,611
Rochester, New York Bakery, Warehouse and Offices 33,200
Scott City, Missouri Distribution Center & Offices 278,000
Spokane, Washington Distribution Center & Offices 551,000
St. Louis, Missouri Save-A-Lot Distribution Center
and Offices 147,000
Suffield, Connecticut Distribution Center & Offices 650,000
Tacoma, Washington Distribution Center & Offices 910,000 113,000
Vinita Park, Missouri Offices 31,000
Williamsport, Maryland Save-A-Lot Distribution Center
and Offices 173,000
Xenia, Ohio Distribution Center & Offices 511,000 170,000
</TABLE>
The Company also owns certain additional real estate consisting
primarily of shopping centers and retail store locations, which in the
aggregate are not material to its operations.
The Company owns, in addition to merchandise inventories, substantially
all of the trucks and trailers used in making deliveries in its food
operations.
Retail food stores operated by the Company generally have been leased,
usually for a term of 15-25 years plus renewal options. The Company is
increasingly developing and owning its own retail store sites. The
Company also leases properties for subletting to certain affiliated
retailers for periods generally not exceeding 20 years plus renewal
options.
Incorporated by reference hereto is the Note captioned "Leases" of
Notes to Consolidated Financial Statements on pages 32-33 of the
Company's Annual Report to Stockholders for fiscal year 1996 (Exhibit
13) for information regarding lease commitments for facilities occupied
by the Company. Incorporated by reference hereto is the Note captioned
"Debt" of Notes to Consolidated Financial Statements on pages 31-32 of
the Company's Annual Report to Stockholders for fiscal year 1996
(Exhibit 13) for information regarding properties held subject to
mortgages.
Management of the Company believes the physical facilities and
equipment described above are adequate for the Company's present needs
and businesses.
ITEM 3. LEGAL PROCEEDINGS
- ------ -----------------
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business of the Registrant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
There was no matter submitted during the fourth quarter of fiscal year
1996 to a vote of the security holders of Registrant.
11
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EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
The following table sets forth certain information concerning the executive
officers of the Company as of April 1, 1996.
<TABLE>
<CAPTION> YEAR ELECTED
TO PRESENT OTHER POSITIONS HELD WITH THE
NAME AGE PRESENT POSITION POSITION COMPANY 1991-1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael W. Wright 57 Director, Chairman of the 1982
Board, President and Chief
Executive Officer
Laurence L. Anderson 54 Executive Vice President, and 1995 Executive Vice President,
President and Chief Operating Regional President-Retail
Officer - Retail Food Support Companies, 1992-
Companies 1995; Senior Vice President,
1988-1992
Phillip A. Dabill 53 Executive Vice President; and 1995 Executive Vice President
President, Retail Services and President-Retail Support
Corporate Strategies Companies, 1992-1995; Senior
Vice President, 1988-1992
Jeffrey C. Girard 48 Executive Vice President, 1992 Senior Vice President. Chief
Chief Financial Officer Financial Officer, 1990-1992
Jeffrey Noddle 49 Executive Vice President, and 1995 Executive Vice President,
President and Chief Operating Marketing, 1992-1995; Senior
Officer - Wholesale Food Vice President, Marketing,
Companies 1988-1992
David L. Boehnen 49 Senior Vice President, Law 1991
and External Relations
Gregory C. Heying 47 Senior Vice President, 1994 Vice President, Distribution,
Distribution 1994
George Z. Lopuch 46 Senior Vice President, 1992 Vice President, 1989-1992
Strategic Planning & Research
H.S. (Skip) Smith III 49 Senior Vice President, 1994 Vice President, Information
Information Services Services, 1986-1994
Ronald C. Tortelli 50 Senior Vice President, Human 1988
Resources
James R. Campbell 55 Vice President, Retail Services 1995 Vice President, Market
Development, 1993-1995;
Senior Vice President,
Northeast Region, 1992-1993;
Minneapolis, Great Lakes
and former Green Bay Divisions
President, 1984-1992
George Chirtea 59 Vice President, Merchandising 1993 Wetterau Senior Vice President,
Marketing, and First Vice
President-Retail Operations,
1992-1993
Kim M. Erickson 42 Vice President and Treasurer 1995
Isaiah Harris 43 Vice President, Controller 1991 Director, Internal Control,
1987-1991
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION> YEAR ELECTED
TO PRESENT OTHER POSITIONS HELD WITH THE
NAME AGE PRESENT POSITION POSITION COMPANY 1991-1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John H. Hooley 44 Vice President, SUPERVALU; Cub 1993 Cub Foods Division President,
Foods Division President and Chief Operating Officer, 1992-
Chief Executive Officer 1993; Vice President,
Merchandising, 1991-1992; Cub
Foods Division Senior Vice
President, Marketing and
Merchandising, 1989-1991.
Michael L. Mulligan 51 Vice President, 1992 Vice President, Communications,
Sales 1985-1992
Jonathan M. Seltzer 46 Vice President, Industry & 1991 Director,Corporate Planning,
Government Relations 1989-1991
E. Wayne Shives 54 Vice President, Employee 1993 Vice President, Labor Relations,
Relations 1988-1993
Kristine K. Sundberg 47 Vice President, Investor Relations & 1993
Communications
</TABLE>
The term of office of each executive officer is from one annual meeting of the
directors until the next annual meeting of directors or until a successor for
each is elected. There are no arrangements or understandings between any of the
executive officers of the Registrant and any other person (not an officer or
director of the Registrant acting as such) pursuant to which any of the
executive officers were selected as an officer of the Registrant. There are no
immediate family relationships between or among any of the executive officers of
the Company.
Each of the executive officers of the Company has been in the employ of the
Company or its subsidiaries for more than five years, except for George Chirtea,
Kim M. Erickson and Kristine K. Sundberg.
Mr. Chirtea is Vice President, Merchandising. Prior to the Company's acquisition
of Wetterau, Mr. Chirtea was Senior Vice President, Marketing, Wetterau and
Wetterau First Vice President, Retail Operations from 1984 through 1992.
Ms. Erickson was elected Vice President and Treasurer in August 1995; from
January 1992 through August 1995 she was Vice President and Treasurer of
International Multifoods Corporation (a food service distribution and
manufacturing company); and from November 1990 to December 1991 she was Vice
President, Finance with Minnegasco (a public utility providing natural gas
services); prior to that time she was Vice President and Treasurer of
Diversified Energies, Inc. (a holding company for Minnegasco) from April 1990 to
November 1990.
Ms. Sundberg was elected Vice President - Investor Relations and Communications
in November, 1993; from November 1990 through November 1993, she held positions
as Director, Public Affairs and Communications and Director, Communications,
with Minnegasco (a public utility providing natural gas services); prior to that
time she was Director, Investor Relations with Diversified Energies, Inc. (a
holding company for Minnegasco) from 1986 through October 1990.
13
<PAGE>
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- ------- -----------------------------------------------------------------
MATTERS
-------
The information called for by Item 5 as to the principal market upon
which the Registrant's Common Stock is traded and as to the
approximate record number of stockholders of the Registrant is hereby
incorporated by reference to the Registrant's Annual Report to the
Stockholders for fiscal year 1996 (Exhibit 13) page 41.
The information called for by Item 5 as to the Registrant's quarterly
dividends and quarterly stock price ranges for the last two fiscal
years is hereby incorporated by reference to the paragraph captioned
"Common Stock Price" in the Financial Review Section of the
Registrant's Annual Report to the Stockholders for fiscal year 1996
(Exhibit 13) page 18.
The information called for by Item 5 as to restrictions on the payment
of dividends by the Registrant is hereby incorporated by reference to
the Note captioned "Debt" of Notes to Consolidated Financial
Statements of the Registrant's Annual Report to the Stockholders for
fiscal year 1996 (Exhibit 13) pages 31-32.
ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
The information called for by Item 6 is incorporated by reference to
the Registrant's Annual Report to the Stockholders for fiscal year
1996 (Exhibit 13) pages 22-23.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS
-------------
The information called for by Item 7 is incorporated by reference to
the Registrant's Annual Report to the Stockholders for fiscal year
1996 (Exhibit 13) pages 16-21.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
The information called for by Item 8 is incorporated by reference to
the Registrant's Annual Report to the Stockholders for fiscal year
1996 (Exhibit 13) pages 24-38.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------- --------------------------------------------------
The information called for by Item 10, as to (a) Directors of the
Registrant and (b) compliance with Section 16(a) of the Securities and
Exchange Act of 1934, is incorporated by reference to the Registrant's
definitive Proxy Statement dated May 24, 1996 filed with the
Securities and Exchange Commission pursuant to Regulation 14A in
connection with the Registrant's 1996 Annual Meeting of Stockholders
at pages 3-5. Certain information regarding executive officers is
included in Part I above.
14
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
- ------- ----------------------
The information called for by Item 11 is incorporated by reference to
the Registrant's definitive Proxy Statement dated May 24, 1996 filed
with the Securities and Exchange Commission pursuant to Regulation 14A
in connection with the Registrant's 1996 Annual Meeting of
Stockholders at pages 7-13.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------- --------------------------------------------------------------
The information called for by Item 12 is incorporated by reference to
the Registrant's definitive Proxy Statement dated May 24, 1996 filed
with the Securities and Exchange Commission pursuant to Regulation 14A
in connection with the Registrant's 1996 Annual Meeting of
Stockholders at pages 2-3.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------
The information called for by Item 13 is incorporated by reference to
the Registrant's definitive Proxy Statement dated May 24, 1996 filed
with the Securities and Exchange Commission pursuant to Regulation 14A
in connection with the Registrant's 1996 Annual Meeting of
Stockholders at page 13.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- ------- ---------------------------------------------------------------
Form 10-K
---------
(a) 1. Financial Statements:
The following consolidated financial statements
of SUPERVALU INC. and Subsidiaries
are included in Part II, Item 8 (which incorporates
information by reference to the
Registrant's 1996 Annual Report to Stockholders
(Exhibit 13)):
Independent Auditors' Report
Consolidated balance sheets as of February 24, 1996 and
February 25, 1995.
Consolidated statements of earnings for each of the three
years in the period ended February 24, 1996
Consolidated statements of cash flows for each of the three
years in the period ended February 24, 1996
Consolidated statements of stockholders' equity for each of
the three years in the period ended February 24, 1996
Notes to consolidated financial statements
15
<PAGE>
<TABLE>
<CAPTION>
2. Consolidated Financial Statement Schedules Page on this Form 10-K
for SUPERVALU INC. and Subsidiaries: ----------------------
<S> <C>
Selected Quarterly Financial Data - for the
two years ended February 24, 1996 - included
in Part II, Item 8 (which incorporates
information by reference to the Registrant's
1996 Annual Report to Stockholders
(Exhibit 13)).
Independent Auditors' report on schedules 22
Schedule VIII - Valuation and qualifying 23
accounts
All other schedules are omitted because they
are not applicable or not required.
</TABLE>
3. Exhibits:
(3)(i) Articles of Incorporation. Restated Certificate of
Incorporation is incorporated by reference to Exhibit
(3)(i) to the Registrant's Annual Report on Form 10-K for
the year ended February 26, 1994.
(3)(ii) Bylaws. Bylaws, as amended, is incorporated by reference
to Exhibit 3.2 to the Registrant's Registration Statement
on Form S-3, Registration No. 33-52422.
(4) Instruments defining the rights of security holders,
including indentures:
a. Indenture dated as of July 1, 1987 between the Registrant and
Bankers Trust Company, as Trustee, relating to certain
outstanding debt securities of the Registrant, is incorporated
by reference to Exhibit 4.1 to the Registrant's Registration
Statement on Form S-3, Registration No. 33-52422.
b. First Supplemental Indenture dated as of August 1, 1990
between the Registrant and Bankers Trust Company, as Trustee,
to Indenture dated as of July 1, 1987 between the Registrant
and Bankers Trust Company, as Trustee, is incorporated by
reference to Exhibit 4.2 to the Registrant's Registration
Statement on Form S-3, Registration No. 33-52422.
c. Second Supplemental Indenture dated as of October 1, 1992
between the Registrant and Bankers Trust Company, as Trustee,
to Indenture dated as of July 1, 1987 between the Registrant
and Bankers Trust Company, as Trustee, is incorporated by
reference to Exhibit 4.1 to the Registrant's Form 8-K Report
dated November 13, 1992.
d. Letter of Representations dated November 12, 1992 between
the Registrant, Bankers Trust Company, as Trustee, and The
Depository Trust Company relating to certain outstanding debt
securities of the Registrant, is incorporated by reference to
Exhibit 4.5 to the Registrant's Form 8-K Report dated November
13, 1992.
16
<PAGE>
e. 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.
f. 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.
g. Rights Agreement dated as of April 12, 1989 between the Registrant and
Norwest Bank Minnesota, N.A., as Rights Agent, is incorporated by reference
to Exhibit 1 to the Registrant's Form 8-K Report dated April 19, 1989.
Pursuant to Instruction 4(iii) of Item 601(b) of Regulation S-K, copies of
certain instruments defining the rights of holders of certain long-term debt of
the Registrant and its subsidiaries are not filed and, in lieu thereof, the
Registrant agrees to furnish copies thereof to the Securities and Exchange
Commission upon request.
(10) Material Contracts. The following exhibits are management contracts,
compensatory plans or arrangements required to be filed pursuant to Item
601(b)(10)(iii)(A) of Regulation S-K:
a. SUPERVALU INC. 1993 Stock Plan, as amended, is incorporated by reference to
Exhibit (10)a. to Registrant's Annual Report on Form 10-K for the year
ended February 25, 1995.
b. SUPERVALU INC. 1976 Executive Employees Stock Option Plan, as amended, is
incorporated by reference to Exhibit (10)b. to Registrant's Annual Report
on Form 10-K for the year ended February 23, 1991.
c. SUPERVALU INC. 1978 Stock Appreciation Rights Plan, as amended, is
incorporated by reference to Exhibit (10)c. to Registrant's Annual Report
on Form 10-K for the year ended February 25, 1989.
d. Executive Incentive Bonus Plan is incorporated by reference to Exhibit
(10)e. to Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 10, 1994.
e. Directors Deferred Compensation Plan, as amended, is incorporated by
reference to Exhibit (10)e. to the Registrant's Annual Report on Form 10-K
for the year ended February 27, 1988.
f. SUPERVALU INC. 1983 Employee Stock Option Plan, as amended.
g. SUPERVALU INC. 1989 Stock Appreciation Rights Plan is incorporated by
reference to Exhibit (10)g. to Registrant's Annual Report on Form 10-K for
the year ended February 25, 1989.
h. SUPERVALU INC. ERISA Excess Plan Restatement is incorporated by reference
to Exhibit (10)h. to Registrant's Annual Report on Form 10-K for the year
ended February 24, 1990.
17
<PAGE>
i. SUPERVALU INC. Deferred Compensation Plan is incorporated by reference to
Exhibit (10)i. to Registrant's Annual Report on Form 10-K for the year
ended February 23, 1991.
j. SUPERVALU INC. Executive Deferred Compensation Plan as amended and
Executive Deferred Compensation Plan II are incorporated by reference to
Exhibit (10)j. to Registrant's Annual Report on Form 10-K for the year
ended February 25, 1989.
k. Form of Agreement used in connection with Registrant's Executive Post-
Retirement Survivor Benefit Program, is incorporated by reference to
Exhibit (10)j. to Registrant's Annual Report on Form 10-K for the year
ended February 27, 1988.
l. Forms of Change of Control Severance Agreements entered into with certain
officers of the Registrant are incorporated by reference to Exhibit (10)l.
to Registrant's Annual Report on Form 10-K for the year ended February 27,
1993.
m. SUPERVALU INC. Agreement and Plans Trust dated as of November 14, 1988 is
incorporated by reference to Exhibit (10)n. to Registrant's Annual Report
on Form 10-K for the year ended February 25, 1989.
n. First Amendment (dated May 7, 1991) to SUPERVALU INC. Agreement and Plans
Trust dated as of November 14, 1988, is incorporated by reference to
Exhibit (10)o. to Registrant's Annual Report on Form 10-K for the year
ended February 23, 1991.
o. SUPERVALU INC. Directors Retirement Program, as amended, is incorporated by
reference to Exhibit 10(q). to the Registrant's Annual Report on Form 10-K
for the year ended February 26, 1994.
p. Supplemental Executive Retirement Plan is incorporated by reference to
Exhibit (10)r. to Registrant's Form 10-K Report for the year ended February
24, 1990.
q. SUPERVALU INC. Long-Term Incentive Plan is incorporated by reference to
Exhibit (10)s. to Registrant's Form 10-K Report for the year ended February
29, 1992.
r. SUPERVALU INC. Bonus Plan for Designated Corporate Officers is incorporated
by reference to Exhibit (10)t. to Registrant's Annual Report on Form 10-K
for the year ended February 26, 1994.
s. SUPERVALU INC. Non-Employee Directors Deferred Stock Plan.
(12) Ratio of Earnings to Fixed Charges.
(13) Portions of 1996 Annual Report to Stockholders of Registrant.
(21) Subsidiaries of the Registrant.
(23) Consent of Independent Auditors.
(24) Power of Attorney.
18
<PAGE>
(27) Financial Data Schedule.
(99.1) Cautionary Statements pursuant to the Securities Litigation
Reform Act.
(b) Reports on Form 8-K:
No report on Form 8-K was filed during the fourth fiscal quarter of the fiscal
year ended February 24, 1996.
19
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SUPERVALU INC.
(Registrant)
DATE: May 23, 1996 By: /s/ Michael W. Wright
-------------------------------
Michael W. Wright
Chairman of the Board;
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Michael W. Wright Chairman of the Board; President; May 23, 1996
- ---------------------------- Chief Executive Officer; and
Michael W. Wright Director (principal executive
officer)
/s/ Jeffrey C. Girard Executive Vice President and May 23, 1996
- ---------------------------- Chief Financial Officer (principal
Jeffrey C. Girard financial officer)
/s/ Isaiah Harris Vice President and Controller May 23, 1996
- ---------------------------- (principal accounting officer)
Isaiah Harris
/s/ Herman Cain* Director
- ----------------------------
Herman Cain
/s/ Stephen I. D'Agostino* Director
- ----------------------------
Stephen I. D'Agostino
/s/ Edwin C. Gage* Director
- ----------------------------
Edwin C. Gage
/s/ Vernon H. Heath* Director
- ----------------------------
Vernon H. Heath
20
<PAGE>
/s/ William A. Hodder* Director
- ----------------------------
William A. Hodder
/s/ Garnett L. Keith, Jr.* Director
- ---------------------------
Garnett L. Keith, Jr.
/s/ Richard L. Knowlton* Director
- ---------------------------
Richard L. Knowlton
/s/ Charles M. Lillis* Director
- ---------------------------
Charles M. Lillis
/s/ Harriet Perlmutter* Director
- ---------------------------
Harriet Perlmutter
/s/ Carole F. St. Mark* Director
- ---------------------------
Carole F. St. Mark
/s/ Winston R. Wallin* Director
- ---------------------------
Winston R. Wallin
*Executed this 23rd day of May, 1996, on behalf of the indicated
Directors by Michael W. Wright, duly appointed Attorney-in-Fact.
/s/ Michael W. Wright
-----------------------
Michael W. Wright
Attorney-in-Fact
21
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
SUPERVALU INC.
Eden Prairie, Minnesota
We have audited the consolidated financial statements of SUPERVALU INC. (the
Company) and subsidiaries as of February 24, 1996 and February 25, 1995 and for
each of the three years in the period ended February 24, 1996 and have issued
our report thereon dated April 5, 1996. Such financial statements and report are
included in your 1996 Annual Report to Stockholders and are incorporated herein
by reference. Our audits also included the financial statement schedule of
SUPERVALU INC. and subsidiaries, listed in Item 14. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
April 5, 1996
22
<PAGE>
<TABLE>
<CAPTION>
SUPERVALU INC. and Subsidiaries
SCHEDULE VIII - Valuation and Qualifying Accounts
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
----------------------------- ----------- ------------------------------- ---------- --------
(1) (2)
Balance at Charged Balance at
beginning to costs Charged to end
Description of year and expenses other accounts Deductions of year
----------------------------- ----------- ------------ -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended:
February 24, 1996 $29,268,000 2,269,000 - (A) 9,473,000 (B) $22,064,000
February 25, 1995 33,820,000 1,627,000 423,000 (A) 6,602,000 (B) 29,268,000
February 26, 1994 38,593,000 7,165,000 - (A) 11,938,000 (B) 33,820,000
</TABLE>
(A) Beginning account balances of companies acquired.
(B) Balance consists of accounts determined to be uncollectible and
charged against reserves, net of collection on accounts previously
charged off.
23
<PAGE>
EXHIBIT INDEX
-------------
SUPERVALU INC.
ANNUAL REPORT ON FORM 10-K
EXHIBIT NUMBER EXHIBIT
- -------------- -------
*(3)(i) Restated Certificate of Incorporation.
*(3)(ii) Bylaws, as amended.
*(4)a. Indenture dated as of July 1, 1987 between the Registrant
and Bankers Trust Company, as Trustee, relating to certain
outstanding debt securities of the Registrant.
*(4)b. First Supplemental Indenture dated as of August 1, 1990
between the Registrant and Bankers Trust Company, as Trustee,
to Indenture dated as of July 1, 1987 between the Registrant
and Bankers Trust Company, as Trustee.
*(4)c. Second Supplemental Indenture dated as of October 1, 1992
between the Registrant and Bankers Trust Company, as Trustee,
to Indenture dated as of July 1, 1987 between the Registrant
and Bankers Trust Company, as Trustee.
*(4)d. Letter of Representations dated November 12, 1992 between the
Registrant, Bankers Trust Company, as Trustee, and The
Depository Trust Company relating to certain outstanding debt
securities of the Registrant.
*(4)e. 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)f. 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.
*(4)g. Rights Agreement dated as of April 12, 1989 between the
Registrant and Norwest Bank Minnesota, N.A., as Rights Agent.
*(10)a. SUPERVALU INC. 1993 Stock Plan, as amended.
*(10)b. SUPERVALU INC. 1976 Executive Employees Stock Option Plan,
as amended.
*(10)c. SUPERVALU INC. 1978 Stock Appreciation Rights Plan, as
amended.
*(10)d. Executive Incentive Bonus Plan.
*(10)e. Directors Deferred Compensation Plan, as amended.
(10)f. SUPERVALU INC. 1983 Employee Stock Option Plan, as amended.
*(10)g. SUPERVALU INC. 1989 Stock Appreciation Rights Plan.
1
<PAGE>
*(10)h. SUPERVALU INC. ERISA Excess Plan Restatement.
*(10)i. SUPERVALU INC. Deferred Compensation Plan.
*(10)j. SUPERVALU INC. Executive Deferred Compensation Plan as
amended and Executive Deferred Compensation Plan II.
*(10)k. Form of Agreement used in connection with Registrant's
Executive Post-Retirement Survivor Benefit Program.
*(10)l. Forms of Change of Control Severance Agreements entered into
with certain officers of the Registrant.
*(10)m. SUPERVALU INC. Agreement and Plans Trust dated as of
November 14, 1988.
*(10)n. First Amendment (dated May 7, 1991) to SUPERVALU INC.
Agreement and Plans Trust dated as of November 14, 1988.
*(10)o. SUPERVALU INC. Directors Retirement Program, as amended.
*(10)p. Supplemental Executive Retirement Plan
*(10)q. SUPERVALU INC. Long-Term Incentive Plan
*(10)r. SUPERVALU INC. Bonus Plan for Designated Corporate Officers.
(10)s. SUPERVALU INC. Non-Employee Directors Deferred Stock Plan.
(12) Ratio of Earnings to Fixed Charges.
(13) Portions of 1996 Annual Report to Stockholders of
Registrant.
(21) Subsidiaries of the Registrant.
(23) Consent of Independent Auditors.
(24) Power of Attorney.
(27) Financial Data Schedule.
(99.1) Cautionary Statements pursuant to the Securities Litigation
Reform Act.
_________________
* Incorporated by Reference
2
<PAGE>
EXHIBIT (10)f.
SUPERVALU INC.
1983 EMPLOYEE STOCK OPTION PLAN
1. PURPOSE. The purpose of this Plan is to promote the interests of
SUPERVALU INC., a Delaware corporation (the "Corporation"), and its stockholders
by encouraging selected key salaried management employees of the Corporation,
and members of the Board of Directors who are not also employees of the
Corporation, to invest in shares of the Corporation's Common Stock with the
increased personal interest and effort in the continued success and progress of
the business that stock ownership can produce, and by providing additional means
of attracting and retaining competent executive personnel and directors.
2. ADMINISTRATION; GRANTING OF OPTIONS. The Plan shall be administered by
the Board of Directors of the Corporation.
The Board of Directors shall have full authority in its discretion,
but subject to the express provisions of the Plan, to:
(a) determine the purchase price of the Common Stock covered by each
option;
(b) determine the persons to whom and the time or times at which
options shall be granted;
(c) determine the number of shares to be subject to each option;
(d) determine terms and provisions (and amendments thereof) of the
respective option agreements (which need not be identical), including such terms
and provisions (and amendments) as shall be required in the judgment of the
Board to conform to any law or regulation applicable thereto;
(e) determine which options shall be Incentive Stock Options within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code");
(f) accelerate the time at which all or any part of an option may be
exercised;
(g) modify or amend any outstanding option agreement subject to the
consent of optionee;
(h) interpret the Plan and prescribe, amend and rescind rules and
regulations relating to it;
-1-
<PAGE>
(i) make all other determinations deemed necessary or advisable for
the administration of the Plan.
All decisions, determinations and selections made by the Board of Directors
on the foregoing matters shall be conclusive.
The granting of an option pursuant to the Plan shall be effective only when
an option is duly awarded to an employee or director by the Board of Directors.
The Executive Committee of the Corporation, in addition to and not to the
exclusion of the Board of Directors of the Corporation, is authorized to
exercise all of the powers authorized and conferred by the Plan on the Board of
Directors other than the power under Section 13 of this Plan to terminate and
amend the Plan.
The Board of Directors may also authorize, at any time, the formation of a
Stock Option Committee (the "Committee"), consisting of three or more members
appointed from time to time by the Board, which Committee would have authority
to exercise the powers conferred on the Board under the Plan, other than the
power under Section 13 herein to terminate and amend the Plan. In addition, the
Board of Directors may authorize, at any time, the Chief Executive Officer of
the Corporation to extend the period of exercise of certain Incentive Stock
Options and non-incentive (non-qualified) stock options in accordance with the
provisions of Section 10 of the Plan.
3. ELIGIBILITY; FACTORS TO BE CONSIDERED IN GRANTING STOCK OPTIONS.
Incentive Stock Options may be granted only to key salaried management employees
(which term, as used herein, includes officers) of the Corporation and of its
present and future subsidiary corporations. Options which do not qualify as
Incentive Stock Options may be granted to key salaried management employees of
the Corporation and of its present and future subsidiary corporations and to
members of the Board of Directors of the Corporation who are not also employees
of the Corporation or one of its subsidiaries ("Non-Employee Directors"),
provided, however, that options shall be granted to Non-Employee Directors only
pursuant to Section 7 hereof.
In determining the employees to whom options shall be granted and the
number of shares to be covered by each such option, the Board of Directors may
take into account the nature of the services rendered by the respective
employees, their present and potential contributions to the success of the
Corporation and such other factors as the Board of Directors, in its discretion,
shall deem relevant.
Subject to the provisions of Section 11 herein, an employee who has been
granted an option under the Plan or under any prior stock option plan of the
Corporation may be granted an additional option or options under the Plan if the
Board of Directors shall so determine.
-2-
<PAGE>
4. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in
Section 12 herein:
(a) the stock to be offered under the Plan shall be shares of the
Corporation's authorized Common Stock, par value $1.00 per share, which may be
either shares reacquired and held in the treasury of the Corporation or
authorized but unissued shares; and
(b) the aggregate number of shares which may be issued under all
options granted pursuant to the Plan shall be 4,500,000 shares.
Shares subject to, but not issued under, any option terminating or expiring
for any reason prior to exercise thereof in full shall again be available for
other options thereafter granted under the Plan.
5. TERM OF PLAN AND OF EACH OPTION AGREEMENT; EXERCISE OF OPTIONS. The
period during which options may be granted under the Plan shall expire February
7, 1999. The term of each option so granted shall expire not more than ten
years from the date the option is granted.
The Board of Directors may determine at the time of granting whether each
such option is exercisable in full, in part from time to time or in
installments, which may be cumulative from year to year during such term to the
extent not exercised in a prior year; provided, however, that notwithstanding
the foregoing, from and after a Change of Control (as hereinafter defined), all
options granted under the Plan, including options granted to Non-Employee
Directors pursuant to Section 7 hereof, shall become immediately exercisable to
the full extent of the original award. As used herein, "Change of Control" shall
mean any of the following events:
(i) The acquisition by any person, entity or "group", within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), other than the Corporation or any of its
wholly-owned subsidiaries, or any employee benefit plan of the Corporation
and/or one or more of its wholly-owned subsidiaries, of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either the then outstanding shares of Common Stock or the combined
voting power of the Corporation's then outstanding voting securities in a
transaction or series of transactions not approved in advance by a vote of at
least three-quarters of the Continuing Directors (as hereinafter defined); or
(ii) Individuals who, as of April 13, 1988, constitute the Board of
Directors of the Corporation (generally the "Directors" and as of April 13, 1988
the "Continuing Directors") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a Director subsequent to
April 13, 1988 whose nomination for election was approved in advance by a vote
of at least three-quarters of
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the Continuing Directors (other than a nomination of an individual whose initial
assumption of office is in connection with an actual or threatened solicitation
with respect to the election or removal of the Directors of the Corporation, as
such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act)
shall be deemed to be a Continuing Director; or
(iii) The approval by the stockholders of the Corporation of a
reorganization, merger, consolidation, liquidation or dissolution of the
Corporation or of the sale (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Corporation other
than a reorganization, merger, consolidation, liquidation, dissolution or sale
approved in advance by a vote of at least three quarters of the Continuing
Directors; or
(iv) The first purchase under any tender offer or exchange offer
(other than an offer by the Corporation or any of its subsidiaries) pursuant to
which shares of Common Stock are purchased.
Options granted under this Plan need not be identical with respect to the
terms of exercise thereof. Subject only to the foregoing limitations, options
may be exercised in whole at any time or in part from time to time during the
option term by serving written notice of exercise on the Corporation,
accompanied by payment of the purchase price.
The Board of Directors or the Committee, as the case may be, may grant
"restoration" options, separately or together with another option, pursuant to
which, subject to the terms and conditions established by the Board of Directors
or the Committee, as the case may be, and any applicable requirements of Rule
16b-3 promulgated under the Exchange Act or any other applicable law, the
optionee would be granted a new option when the payment of the exercise price of
the option to which such "restoration" option relates is made by the delivery of
shares of the Corporation's Common Stock owned by the optionee, as described in
Section 6 hereof, which new option would be an option to purchase the number of
shares not exceeding the sum of (a) the number of shares of the Corporation's
Common Stock tendered as payment upon the exercise of the option to which such
"restoration" option relates and (b) the number of shares of the Corporation's
Common Stock, if any, tendered as payment of the amount to be withheld under
applicable income tax laws in connection with the exercise of the option to
which such "restoration" option relates, as described in Section 15 hereof.
"Restoration" options may be granted with respect to options previously granted
under this Plan or any prior stock option plan of the Corporation, and may be
granted in connection with any option granted under this Plan (other than an
option granted to a Non-Employee Director pursuant to Section 7 hereof) at the
time of such grant. The purchase price of the Common Stock under each such new
option, and the other terms and conditions of such option, shall be determined
by the Board of Directors or the Committee, as the case may be, consistent with
the provisions of the Plan.
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6. OPTION PRICES. Except with respect to options granted to Non-Employee
Directors pursuant to Section 7 hereof, the purchase price of the Common Stock
under each option shall be determined by the Board of Directors, but shall not
be less than 100% of the fair market value of the Common Stock at the time of
granting the option as found by the Board.
The purchase price of the shares as to which an option shall be exercised
shall be paid in full in cash at the time of exercise as shall be provided in
the option agreement, and any optionee, without limitation, shall also be
entitled to pay the exercise price by tendering to the Corporation shares of the
Corporation's Common Stock, previously owned by the optionee, having a fair
market value on the date of exercise equal to the option price (or the portion
thereof not paid in cash).
7. OPTIONS TO NON-EMPLOYEE DIRECTORS. The Board of Directors or the
Committee, as the case may be, shall issue options which do not qualify as
Incentive Stock Options to Non-Employee Directors in accordance with this
Section 7.
Each Non-Employee Director serving on the Corporation's Board of Directors
immediately following the Annual Meeting of Stockholders of the Corporation on
June 30, 1992 shall be granted, as of June 30, 1992, an option to purchase 3,000
shares of Common Stock. Each Non-Employee Director first elected or appointed
to the Corporation's Board of Directors after June 30, 1992 and during the term
of the Plan shall be granted, as of the date of such Director's first election
or appointment to the Board of Directors, an option to purchase 3,000 shares of
Common Stock. After the initial grant to each Non-Employee Director as set
forth above in this Section 7, each such Director shall be granted during the
term of the Plan, as of the date of the Corporation's Annual Meeting of
Stockholders in each even-numbered year, if such Director's term of office
continues after such Annual Meeting, an option to purchase 3,000 shares of
Common Stock.
Each option granted to a Non-Employee Director pursuant to this Section 7
shall have an exercise price equal to the fair market value of the shares of
Common Stock as of the date of grant and shall expire on the tenth anniversary
of the date of grant. "Restoration" options may not be granted to any Non-
Employee Director. This Section 7 shall not be amended more than once every six
months other than to comport with changes in the Code, the Employee Retirement
Income Security Act or the rules and regulations thereunder.
8. ADDITIONAL TERMS. Options granted under the Plan shall not be
affected by any change of duties or position so long as the optionee continues
to be an employee of the Corporation or of a subsidiary (or continues to be a
Director of the Corporation in the case of any Non-Employee Director). Each
option agreement may contain such provisions as the Board of Directors shall
approve with reference to the effect of approved leaves of absence, provided
that with respect to Incentive Stock Options such provisions conform to the
requirements of the Code.
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Nothing in the Plan or in any option granted pursuant thereto shall confer
on any person any right to continue in the employ of the Corporation or of any
of its subsidiaries (or to continue as a Director of the Corporation in the case
of any Non-Employee Director) or affect, in any way, the right of the
Corporation or any of its subsidiaries to terminate his employment (or to
terminate his directorship in the case of any Non-Employee Director) at any
time.
9. NON-TRANSFERABILITY OF OPTIONS. No option granted under the Plan may
be assignable or transferable except by will or the laws of descent and
distribution, and each option may be exercised, during the lifetime of the
optionee, only by him.
10. DEATH; OTHER TERMINATION OF EMPLOYMENT OR DIRECTORSHIP. If an optionee
(other than a Non-Employee Director) shall cease to be employed by the
Corporation or a subsidiary of the Corporation for any reason other than death,
except as otherwise provided in the following paragraphs, he may, within three
months following the date of such termination of employment, exercise his
option; provided, however, that the option may not be exercised after the
expiration of the applicable period referred to in Section 5 hereof and may be
exercised only to the extent of the number of shares the optionee was entitled
to purchase under the option on the date of such termination of employment,
subject to any right of the Board of Directors to accelerate the vesting of
options at the time of such termination of employment or otherwise and any right
of repurchase by the Corporation provided for in the option agreement.
Except as otherwise provided in this paragraph, if an optionee (other than
a Non-Employee Director) retires at or after age 55 with ten or more years of
service with the Corporation or a subsidiary of the Corporation he may, within
two years following the date of such retirement, exercise his option; provided,
however, that the option may not be exercised after the original expiration date
of such option set forth in the related option agreement and may be exercised
only to the extent of the number of shares the optionee was entitled to purchase
under the option on the date of such retirement, subject to any right of the
Board of Directors to accelerate the vesting of options at the time of
retirement or otherwise and any right of repurchase by the Corporation provided
for in the option agreement. With respect to Incentive Stock Options granted
before February 16, 1991, if an optionee retires at or after age 55 with ten or
more years of service with the Corporation, he may, if so determined by the
Chief Executive Officer of the Corporation (or by the Committee in the case of
an optionee who is subject to the provisions of Section 16 of the Exchange Act)
in their sole and absolute discretion, within two years following the date of
such retirement, exercise his option; provided, however, that the option may not
be exercised after the original expiration date of such option set forth in the
related option agreement and may be exercised only to the extent of the number
of shares the optionee was entitled to purchase under the option on the date of
such retirement, subject to any right of the Board of Directors to accelerate
the vesting of options at the time of retirement or otherwise and any right of
repurchase by the Corporation provided for in the option agreement. If an
optionee (other than a Non-Employee Director) retires (which term shall include
termination of employment due to
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disability) at or after age 55 with ten or more years of service with the
Corporation or a subsidiary of the Corporation, he may (if so determined by the
Committee in its sole and absolute discretion, and only if such optionee is not
subject to the provisions of Section 16 of the Securities Exchange Act of 1934,
as amended) exercise his option at any time prior to the expiration date of such
option set forth in the related option agreement; provided, however, that the
option may be exercised only to the extent of the number of shares the optionee
was entitled to purchase under the option on the date of such retirement,
subject to any right of the Board of Directors to accelerate the vesting of
options at the time of retirement or otherwise and any right of repurchase by
the Corporation provided for in the option agreement. Any determination made
pursuant to this paragraph by the Chief Executive Officer or the Committee, as
the case may be, regarding the extension of the exercise period of an option
shall be made on a case-by-case basis, at or about the time of retirement,
taking into account the optionee's service on behalf of the Corporation, the
value of the Corporation's Common Stock and the option price.
If any optionee who was a Non-Employee Director shall cease to be a
Director for any reason, including the death of the optionee, such optionee may
exercise his or her options at such time as set forth in the related option
agreement.
In the event that the Corporation ceases to own at least 50% or more of the
outstanding capital stock of ShopKo Stores, Inc. ("ShopKo"), an optionee who is
employed by ShopKo and who is not subject to Section 16 of the Exchange Act with
respect to the Corporation may, if so determined by the Chief Executive Officer
of the Corporation in his sole and absolute discretion, exercise his option
within two years following the date on which the Corporation ceases to own at
least 50% or more of the outstanding capital stock of ShopKo (the "Termination
Date"); provided, however, that the option may not be exercised after the
original expiration date of such option set forth in the related option
agreement and may be exercised only to the extent of the number of shares the
optionee was entitled to purchase under the option on the Termination Date,
subject to any right of the Board of Directors to accelerate the vesting of
options prior to the Termination Date or otherwise and any right of repurchase
by the Corporation provided for in the option agreement; provided, further, that
the optionee is employed by ShopKo at the time of exercise of the option. The
determination by the Chief Executive Officer of the Corporation regarding the
extension of the exercise period of an option pursuant to the terms of this
paragraph shall be made on a case-by-case basis, at or about the Termination
Date, taking into account the optionee's service on behalf of the Corporation
and ShopKo, the value of the Corporation's Common Stock and the option price.
If a person to whom an option has been granted under the Plan shall die
prior to the exercise or expiration of all options granted, such options may be
exercised by a legatee or legatees of the option holder under his last will or
by his personal representatives or distributees within one year following the
date of his death to the full extent of the number of shares covered by the
option not previously purchased, whether or not such shares have become
purchasable by such optionee at the date of such death;
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provided, however, that the option may not be exercised after the expiration of
the applicable period referred to in Section 5 hereof (or Section 7 hereof with
respect to any option granted to a Non-Employee Director); and provided further,
that if an optionee (other than a Non-Employee Director) dies at or after age 55
with ten or more years of service with the Corporation or a subsidiary of the
Corporation and while employed by the Corporation or a subsidiary, such legatee,
legatees, representatives or distributees may (if so determined by the Committee
in its sole and absolute discretion, and only if such optionee is not subject to
the provisions of Section 16 of the Securities Exchange Act of 1934, as amended)
exercise such option at any time prior to the expiration date of such option set
forth in the related option agreement to the full extent of the number of shares
covered by the option not previously purchased, whether or not such shares have
become purchasable by such optionee at the date of such death. Any determination
made pursuant to this paragraph by the Committee regarding the extension of the
exercise period of an option shall be made on a case-by-case basis, at or about
the time of death, taking into account the optionee's service on behalf of the
Corporation, the value of the Corporation's Common Stock and the option price.
11. INCENTIVE STOCK OPTIONS. Except with respect to options granted to
Non-Employee Directors pursuant to Section 7 hereof, the Board of Directors is
hereby authorized to determine, upon the granting of each option, whether such
option shall be an Incentive Stock Option under Section 422 of the Code or
shall be an option which is not an Incentive Stock Option under Section 422.
For Incentive Stock Options granted before January 1, 1987, the aggregate fair
market value of the stock (determined as of the time the Incentive Stock Option
is granted) covered under all Incentives Stock Options granted (under this Plan
and all other incentive stock option plans of the Corporation or any
subsidiary), in any calendar year, shall not exceed $100,000 plus any unused
limit carry-over (as provided under former Section 422(c)(4) of the Code
effective for options granted before January 1, 1987). For Incentive Stock
Options granted after December 31, 1986, the aggregate fair market value
(determined at the time the Incentive Stock Option is granted) of the stock with
respect to which all Incentive Stock Options are exercisable for the first time
by an employee during any calendar year (under all plans described in subsection
(b) of Section 422 of the Code of his employer corporation and its parent and
subsidiary corporations) shall not exceed $100,000.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Notwithstanding any other
provision of the Plan, the Board of Directors may adjust the number and class of
shares subject to each outstanding option and the option prices in the event of
changes in the outstanding Common Stock of the Corporation by reason of stock
dividends, split-ups, recapitalizations, mergers, consolidations, combinations
or exchanges of shares and the like. In the event of any such change in the
outstanding Common Stock of the Corporation, the aggregate number and class of
shares available under the Plan shall be appropriately adjusted by the Board of
Directors, whose determination shall be conclusive.
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13. TERMINATION AND AMENDMENT. The Plan may be terminated, modified or
amended by the stockholders of the Corporation.
Subject to Section 7 hereof, the Board of Directors of the Corporation may
also terminate the Plan or make such modifications or amendments thereof as it
shall deem advisable, or to conform to any change in any law or regulation
applicable thereto; provided, however, that the Board of Directors may not,
without further approval by the holders of a majority of the outstanding stock
of the Corporation having general voting power, make any modification or
amendment which operates:
(a) to make any material change in the class of employees eligible to
receive Incentive Stock Options as defined in Section 3 above; and
(b) to increase the total number of shares for which options may be
granted under the Plan, except as resulting from the operation of Section 12
above.
No termination, modification or amendment of the Plan may, without the
consent of the employee to whom any option shall theretofore have been granted,
adversely affect the rights of such employee under such option.
14. EFFECTIVE DATE OF PLAN. The Plan shall become effective February
23, 1983, subject to approval by the shareholders of the Corporation within 12
months thereafter.
15. TAX WITHHOLDING. Subject to such rules as the Board of Directors or
the Committee may adopt not inconsistent with the provisions of the Plan:
(a) At any time when an optionee is required to pay the Corporation an
amount required to be withheld under applicable income tax laws in connection
with the exercise of an option which does not qualify as an Incentive Stock
Option under Section 422 of the Code, the optionee may elect to have the
Corporation retain from the distribution shares of Common Stock to satisfy this
obligation in whole or in part (an "Election"). The shares to be withheld shall
be valued at 100% of the fair market value of the shares on the date that the
amount of tax required to be paid shall be determined (the "Tax Date"). Fair
market value of the shares shall equal the mean of the opening and closing trade
prices of the shares as reported on the New York Stock Exchange on the Tax Date,
or, if no trading in the shares occurs on the Tax Date, on the immediately
preceding trading date.
(b) Each election must be made prior to the Tax Date. The Board or the
Committee may disapprove of any Election, may suspend or terminate the right to
make Elections, may limit the amount of any Election, may provide at the time of
grant with respect to any option that the right to make Elections shall not
apply to such option and may make rules concerning the required information to
be included in any Election. An Election is irrevocable.
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(c) The Election may be made in an amount equal to the amount of tax
required by law to be withheld with respect to the option exercise. Any
fractional share withholding amount must be paid in cash.
(d) If an optionee makes an Election and the optionee's Tax Date is
deferred for six months from the date of exercise of the option, the optionee
will initially receive the full amount of the shares, but will be
unconditionally obligated to surrender to the Corporation on the Tax Date the
proper number of shares to satisfy the withholding obligation, plus cash for any
remainder of the withholding obligation including any fractional shares
withholding amount.
(e) Optionees who are "officers" or "directors" of the Corporation, as
those terms are used in Section 16(b) of the Exchange Act, may only make an
Election in compliance with the rules established by the Board or the Committee
to comply with Section 16(b).
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EXHIBIT (10)s.
SUPERVALU INC.
NON-EMPLOYEE DIRECTORS DEFERRED STOCK PLAN
1. PURPOSE. The purpose of the SUPERVALU INC. Non-Employee Directors
Deferred Stock Plan (the "Plan") is to further strengthen the alignment of
interests between members of the Board of Directors (the "Board") of SUPERVALU
INC. (the "Company") who are not employees of the Company (the "Participants")
and the Company's stockholders through the increased ownership by Participants
of shares of the Company's common stock, par value $1.00 per share ("Common
Stock"). This will be accomplished by (i) providing to Participants deferred
compensation in the form of the right to receive shares of Common Stock for
services rendered in their capacity as directors, and (ii) allowing Participants
to elect voluntarily to defer all or a portion of their fees for services as
members of the Board pursuant to the Plan in exchange for the right to receive
shares of Common Stock valued at 110% of the cash fees otherwise payable.
2. ELIGIBILITY. Each member of the Board of Directors of the Company
who is not an employee of the Company or of any subsidiary of the Company shall
be eligible to participate in the Plan.
3. FORMULA SHARE AWARD. Effective on July 1, or the first business
day thereafter in each year (the "Award Date"), the Company shall award each
Participant who shall continue to serve on the Board following the Award Date,
as a credit to the Participant's account under the Plan (the "Deferred Stock
Account"), that number of shares (rounded to the nearest one-hundredth share) of
Common Stock, having an aggregate fair market value on the Award Date of Fifteen
Thousand Dollars ($15,000) (the "Award"). The Award shall be in addition to any
cash retainer, stock options, or other remuneration received by the Participant
for services rendered as a director. If, after receiving an Award, the
Participant shall cease to serve on the Board prior to the Company's next annual
meeting, for any reason other than death or permanent disability, then such
Participant's Deferred Stock Account shall be reduced by (i) that number of
shares equal to 1/12 of the Award for each full calendar month during which the
Participant did not serve as a director of the Company, plus (ii) any dividends
paid on that number of shares of Common Stock specified in (i) above during the
period that the Participant did not serve as a director of the Company.
4. ELECTION TO DEFER CASH COMPENSATION. A Participant may elect to
defer, in the form of a credit to the Participant's Deferred Stock Account all
or a portion of the annual cash retainer, meeting fees for attendance at
meetings of the Board and its committees, committee chairperson retainers, and
any other fees and retainers ("Compensation") otherwise payable to the director
in cash during the period following the effective date of the deferral election.
Such deferral election shall be made pursuant to Section 5.
<PAGE>
5. MANNER OF MAKING DEFERRAL ELECTION. A Participant may elect to
defer Compensation pursuant to the Plan by filing, no later than December 31 of
each year (or by such other date as the Committee shall determine), an
irrevocable election with the Corporate Secretary on a form provided for that
purpose ("Deferral Election"). The Deferral Election shall be effective with
respect to Compensation payable on or after July 1 of the following year unless
the Participant shall revoke or change the election by means of a subsequent
Deferral Election in writing that takes effect on the date specified therein but
in no event earlier than six (6) months (or such other period as the Committee,
as defined in Section 17, shall determine) after the subsequent Deferral
Election is received by the Company. The Deferral Election form shall specify
an amount to be deferred expressed as a dollar amount or as a percentage of the
Participant's Compensation otherwise payable in cash for the director's
services.
6. CREDITS TO DEFERRED STOCK ACCOUNT FOR ELECTIVE DEFERRALS. On the
first day of each calendar quarter (the "Credit Date"), a Participant shall
receive a credit to his or her Deferred Stock Account. The amount of the credit
shall be the number of shares of Common Stock (rounded to the nearest one-
hundredth of a share) determined by dividing an amount equal to 110% of the
Participant's Compensation payable on the Credit Date and specified for deferral
pursuant to Section 5 hereof, by the fair market value on the Credit Date of a
share of Common Stock.
7. FAIR MARKET VALUE. The fair market value of shares of Common
Stock as of a given date for all purposes of the Plan, shall be the closing sale
price per share of Common Stock as reported on the consolidated tape of the New
York Stock Exchange on the relevant date or, if the New York Stock Exchange is
closed on such day, then the day closest to such date on which it was open.
8. DIVIDEND CREDIT. Each time a dividend is paid on the Common
Stock, the Participant shall receive a credit to his or her Deferred Stock
Account equal to that number of shares of Common Stock (rounded to the nearest
one-hundredth of a share) having a fair market value on the dividend payment
date equal to the amount of the dividend payable on the number of shares
credited to the Participant's Deferred Stock Account on the dividend record
date.
9. MAXIMUM NUMBER OF SHARES TO BE CREDITED UNDER THE PLAN. Subject
to adjustment as provided in Section 10, the maximum number of shares of Common
Stock that may be credited under the Plan is 500,000 shares.
10. ADJUSTMENTS FOR CERTAIN CHANGES IN CAPITALIZATION. If the
Company shall at any time increase or decrease the number of its outstanding
shares of Common Stock or change in any way the rights and privileges of such
shares by means of the payment of a stock dividend or any other distribution
upon such shares payable in Common Stock, or through a stock split, subdivision,
consolidation, combination, reclassification, or recapitalization involving the
Common Stock, then the numbers,
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rights, and privileges of the shares credited under the Plan shall be increased,
decreased, or changed in like manner as if such shares had been issued and
outstanding, fully paid, and nonassessable at the time of such occurrence.
11. DEFERRAL PAYMENT ELECTION. At the time of making the Deferral
Election, each Participant shall also complete a deferral payment election
specifying one of the payment options described in Sections 12 and 13, and the
year in which amounts credited to the Participant's Deferred Stock Account shall
be paid in a lump sum pursuant to Section 12, or in which installment payments
shall commence pursuant to Section 13. The deferral payment election shall be
irrevocable as to all amounts credited to the Participant's Deferred Stock
Account. The Participant may change the deferral payment election by means of a
subsequent deferral payment election in writing that will take effect for
deferrals credited after the date the Company receives such subsequent deferral
payment election.
12. PAYMENT OF DEFERRED STOCK ACCOUNTS IN A LUMP SUM. Unless a
Participant elects to receive payment of his or her Deferred Stock Account in
installments as described in Section 13, credits to a Participant's Deferred
Stock Account shall be payable in full on January 10 of the year following the
Participant's termination of service on the Board (or the first business day
thereafter) or such other date as elected by the Participant pursuant to Section
11. All payments shall be made in shares of Common Stock plus cash in lieu of
any fractional share. Notwithstanding the foregoing, in the event of a Change
of Control (as defined in Section 19), credits to a Participant's Deferred Stock
Account as of the business day immediately prior to the effective date of the
transaction constituting the Change of Control shall be paid in full to the
Participant or the Participant's beneficiary or estate, as the case may be, in
whole shares of Common Stock (together with cash in lieu of a fractional share)
on such date.
13. PAYMENT OF DEFERRED STOCK ACCOUNTS IN INSTALLMENTS. A
Participant may elect to have his or her Deferred Stock Account paid in annual
installments following termination of service as a director or at such other
time as elected by the Participant pursuant to Section 11. All payments shall
be made in shares of Common Stock plus cash in lieu of any fractional share.
All installment payments shall be made annually on January 10 of each year (or
the first business day thereafter). The amount of each installment payment
shall be computed as the number of shares credited to the Participant's Deferred
Stock Account on the Computation Date, multiplied by a fraction, the numerator
of which is one and the denominator of which is the total number of installments
elected (not to exceed fifteen) minus the number of installments previously
paid. Amounts paid prior to the final installment payment shall be rounded to
the nearest whole number of shares; the final installment payment shall be for
the whole number of shares then credited to the Participant's Deferred Stock
Account, together with cash in lieu of any fractional shares. Notwithstanding
the foregoing, in the event of a Change of Control (as defined in Section 19),
credits to a Participant's Deferred Stock Account as of the business day
immediately prior to the effective date of the transaction
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constituting the Change of Control shall be paid in full to the Participant or
the Participant's beneficiary or estate, as the case may be, in whole shares of
Common Stock (together with cash in lieu of a fractional share) on such date.
14, DEATH OF PARTICIPANT. If a Participant dies before receiving all
payments to which he or she is entitled under the Plan, payment shall be made in
accordance with the Participant's designation of a beneficiary on a form
provided for that purpose and delivered to and accepted by the Committee (as
hereinafter defined) or, in the absence of a valid designation or if the
designated beneficiary does not survive the Participant, to such Participant's
estate.
15. NONASSIGNABILITY. No right to receive payments under the Plan
nor any shares of Common Stock credited to a Participant's Deferred Stock
Account shall be assignable or transferable by a Participant other than by will
or the laws of descent and distribution. The designation of a beneficiary by a
Participant pursuant to Section 14 does not constitute a transfer.
16. PARTICIPANTS ARE GENERAL CREDITORS OF THE COMPANY. Benefits due
under this Plan shall be funded out of the general funds of the Company. The
Participants and beneficiaries thereof shall be general, unsecured creditors of
the Company with respect to any payments to be made pursuant to the Plan and
shall not have any preferred interest by way of trust, escrow, lien or otherwise
in any specific assets of the Company. If the Company shall, in fact, elect to
set aside monies or other assets to meet its obligations hereunder (there being
no obligation to do so), whether in a grantor's trust or otherwise, the same
shall, nevertheless, be regarded as a part of the general assets of the company
subject to the claims of its general creditors, and neither any Participant nor
any beneficiary of any Participant shall have a legal, beneficial, or security
interest therein.
17. ADMINISTRATION. The Plan shall be administered by a committee
(the "Committee") of three or more individuals appointed by the Board to
administer the Plan. The members of the Committee must be members of, and shall
serve at the discretion of, the Board. The members of the Committee shall be
"disinterested persons" as defined in Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (the "Act"), or any successor rule or definition adopted
by the Securities and Exchange Commission ("Rule 16b-3"), if, in the opinion of
counsel for the Company, the absence of "disinterested" administrators would
adversely impact the availability of the exemption from Section 16(b) of the Act
provided by Rule 16b-3 for any Participant's acquisition of Common Stock under
the Plan.
Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to construe and interpret the Plan; to establish, amend
and rescind appropriate rules and regulations relating to the Plan; to
administer the Plan; and to take all such steps and make all such determinations
in connection with the Plan as it may deem necessary or advisable to carry out
the provisions and intent of the Plan. All
4
<PAGE>
determinations of the Committee shall be made by a majority of its members, and
its determinations shall be final and conclusive for all purposes and upon all
persons, including, but without limitation, the Company, the Committee, the
Participants and their respective successors in interest.
18. AMENDMENT AND TERMINATION. The Board may at any time terminate,
suspend, or amend this Plan; provided, however, that the provisions of Sections
2 and 3 may not be amended more than once in every six months other than to
comport with changes in the Internal Revenue Code, ERISA, or the rules
thereunder. No such action shall deprive any Participant of any benefits to
which he or she would have been entitled under the Plan if termination of the
Participant's service as a director had occurred on the day prior to the date
such action was taken, unless agreed to by the Participant.
19. CHANGE OF CONTROL. "Change of Control" means any one of the
following events:
(a) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of Common Stock (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the Company
(ii) any acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i), (ii) and (iii) of
subsection (c) hereof; or
(b) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then constituting the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case, unless,
following such Business
5
<PAGE>
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the Board of Directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
20. EFFECTIVE DATE. The effective date of the Plan shall be the
date of approval of the Plan by the Company's stockholders.
6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT (12)
SUPERVALU INC. and Subsidiaries
Ratio of Earnings to Fixed Charges
For Fiscal Years Ended
(In thousands, except ratios) 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings before income taxes $267,692 $ 15,925 $294,080 $258,618 $322,840
Less undistributed earnings of ShopKo (11,136) (10,902) (8,306) (16,582) (14,891)
-------- -------- -------- -------- --------
Earnings before income taxes 256,556 5,023 285,774 242,036 307,949
Interest expense 140,150 135,383 120,292 83,066 72,693
Interest on operating leases 17,059 18,204 17,288 6,661 2,732
-------- -------- -------- -------- --------
$413,765 $158,610 $423,354 $331,763 $383,374
======== ======== ======== ======== ========
Total fixed charges 157,209 153,587 137,580 89,727 75,425
======== ======== ======== ======== ========
Ratio of earnings to fixed charges 2.63 1.03 3.08 3.70 5.08
======== ======== ======== ======== ========
</TABLE>
<PAGE>
EXHIBIT (13)
Financial Review
SUPERVALU management decisions are guided by established policies covering
financial goals, capital structure, capital investment and dividends. The
company's long-term financial goals are arrived at by balancing two broad
objectives: increasing profitability levels and maintaining a strong capital
structure.
The profitability of the company is gauged by return on investment measures.
Achievement of targeted return levels in these areas would lead to excellent
returns for the company's stockholders through increasing dividends and higher
valuations on their investment in the company. These measures are an integral
part of the company's planning process and are an integral part of management
incentive compensation.
CAPITAL STRUCTURE
Management believes that maintaining a strong capital structure and financial
flexibility provides a significant competitive advantage and allows the company
to be opportunistic in terms of acquisitions. The debt-to-total capitalization
ratio was affected in 1996 by the treasury stock purchase program. In 1995, the
treasury stock purchase program and acquisition activity affected the debt-to-
total capitalization ratio.
The capital structure of SUPERVALU at each fiscal year-end included the
following:
<TABLE>
<CAPTION>
Summary of Balance Sheet Capitalization
- ---------------------------------------------------------------
(In millions) 1996 1995 1994
- ---------------------------------------------------------------
<S> <C> <C> <C>
Short-term borrowings $ 158.0 $ 226.2 $ 23.1
Long-term debt 1,153.1 1,224.5 1,139.1
Present value of:
Capital leases 237.5 179.6 163.4
Retailer finance leases 81.4 84.0 88.4
- ---------------------------------------------------------------
Total debt, including current
maturities 1,630.0 1,714.3 1,414.0
Stockholders' equity 1,216.2 1,193.2 1,275.5
- ---------------------------------------------------------------
Total capitalization $2,846.2 $2,907.5 $2,689.5
- ---------------------------------------------------------------
Debt-to-total capitalization 57% 59% 53%
</TABLE>
[PHOTO OF JEFF GIRARD]
Jeff Girard
Executive Vice President and
Chief Financial Officer
LIQUIDITY
Internally-generated funds, principally from the company's food distribution
business, were the major source of capital for liquidity and growth in 1996 and
1995. The debt-to-total capitalization ratio decreased to 57 percent in 1996,
primarily due to an increase in cash provided by operating activities which was
used to repay short-term borrowings and long-term debt. Management expects that
the company will continue to replenish operating assets and reduce aggregate
debt with internally-generated funds and capital leases unless additional funds
are necessary to complete acquisitions. The company has adequate short-term and
long-term financing capabilities to fund acquisitions as the opportunities
arise.
Cash provided from operations was $426 million in 1996, compared with $341
million in 1995 and $433 million in 1994. Cash provided from operations in 1996
was primarily used to finance capital expenditures of $236.2 million.
In December 1994, the Board of Directors approved a new treasury stock purchase
program. The company may repurchase up to 5.0 million shares which may be used
for any corporate purpose. The company repurchased 2.9 million shares at a cost
of approximately $80.1 million during 1996 and purchased a total of 4.2 million
shares under this program. The purchase of the treasury stock was financed
primarily from the sale of surplus and under-utilized property, plant and
equipment as part of the ADVANTAGE strategy.
- 16 -
<PAGE>
FINANCIAL REVIEW
Fiscal 1996 capital expenditures related to the ADVANTAGE project of $40.2
million were primarily for the construction of the Anniston, Alabama prototype
regional distribution facility and computer technology. The investment in the
ADVANTAGE project was funded principally by related reductions in inventory
levels. The company intends to invest approximately $72 million in 1997 for the
ADVANTAGE project which includes construction of the Midwest regional
distribution facility and new computer technology.
SUPERVALU will continue to use short-term and long-term debt as a supplement to
internally generated funds to finance its activities. The company has a $400
million "shelf registration" in effect of which $157.5 million of medium term
notes were issued during 1996. A $400 million revolving credit agreement also is
in place and expires in May 2000. The company refinanced $300 million of debt
due in November 1995 by utilizing the shelf registration and $142.5 million of
short-term commercial paper. Short-term commercial paper totaling $100 million
has been classified as long-term debt as the company has the ability and intent
to renew these obligations past 1997 and into future periods. Maturities of debt
issued will depend on management's views with respect to the relative
attractiveness of interest rates at the time of issuance.
The company's financial position and long-term debt ratings are strong, with an
A3 rating from Moody's Investors Services, Inc. and a BBB+ from Standard and
Poor's Ratings Group. These strong ratings, the available credit facilities and
internally-generated funds provide the company with the financial flexibility to
meet liquidity needs.
EXPANSION PLANS FOR FISCAL 1997
SUPERVALU's capital budget for fiscal 1997 is $440 million including leases
compared with $271 million and $320 million incurred during 1996 and 1995,
respectively. The capital budget provides sufficient funding for the growth of
the company and covers anticipated expenditures to implement the ADVANTAGE
project.
[GRAPH APPEARS HERE]
Capital Expenditures
(In Millions)
<TABLE>
<CAPTION>
1997 (Budget) 1996 1995
------------- ----- -----
<S> <C> <C> <C>
Food Distribution $243 $102 $160
Retail Food 166 138 120
Corporate 31 31 40
---- ---- ----
TOTAL $440 $271 $320
</TABLE>
Approximately $243 million of the 1997 capital budget is slated for use in the
company's food distribution activities of which $171 million is allocated for
two perishable expansion projects and regular replacement, productivity and
capacity enhancement projects. The remaining balance of $72 million is allocated
for the ADVANTAGE project which includes the construction of the new Midwest
regional distribution center and new technology.
The retail food capital budget of $166 million ($21 million of which are capital
leases) covers corporately-owned retail food businesses. The budget provides for
approximately 29 new corporate retail stores. The balance of the 1997 capital
budget is dedicated to the corporate area and will be utilized principally for
computer equipment.
In addition, the company is prepared to provide up to $150 million for financing
the company's independent retailers. Retailer financing activities typically do
not require new cash outlays because they are leases, guarantees or funded by
the repayment or refinancing in the commercial market of existing notes.
- 17 -
<PAGE>
FINANCIAL REVIEW
These capital spending activities are not expected to result in an increase in
the company's debt-to-total-capital ratio as internal cash flow is expected to
support spending requirements except leases. Because of the opportunistic nature
of acquisitions, no amount for acquisition activity is included in the capital
budget. The capital budget does include amounts for projects which are subject
to change and for which firm commitments have not been made.
DIVIDENDS
Cash dividends declared during fiscal 1996 amounted to 97 cents per common
share, an increase of 4.9 percent over the 92 1/2 cents per share declared in
the prior fiscal year. This was the 59th year of consecutive cash dividends and
the 24th year of successive annual increases. Cash dividend payments have
increased since 1974 at an annual compounded rate of 11.1 percent. The company's
dividend policy will continue to emphasize a high level of earnings retention.
COMMON STOCK PRICE
SUPERVALU's common stock is listed on the New York Stock Exchange under the
symbol SVU. At year-end, there were 7,988 stockholders of record compared with
8,060 at the end of fiscal 1995.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Common Stock Dividends Per
Price Range Share
Fiscal Quarter 1996 1995 1996 1995
High Low High Low
<S> <C> <C> <C> <C> <C> <C>
First $28 7/8 $25 5/8 $37 $31 $.235 $.220
Second 31 28 1/8 31 7/8 27 1/2 .245 .235
Third 32 3/4 29 1/4 28 3/4 23 7/8 .245 .235
Fourth 32 3/4 30 3/4 26 22 1/8 .245 .235
- ---------------------------------------------------------------------------------
Year $32 3/4 $25 5/8 $37 $22 1/8 $.970 $.925
- ---------------------------------------------------------------------------------
</TABLE>
Dividend payment dates are on or about the 15th day of March, June, September
and December, subject to Board of Directors approval.
RESULTS OF OPERATIONS
The following table sets forth items from the company's Consolidated Statements
of Earnings as percentages of net sales:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Fiscal Year Ended
- -------------------------------------------------------------------------------
February 24, February 25, February 26,
1996 1995 1994
(52 weeks) (52 weeks) (52 weeks)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 90.4 90.8 91.1
Selling and administrative
expenses 7.4 7.1 6.6
Restructuring and other charges -- 1.5 --
Interest expense .9 .8 .7
Interest income (.2) (.2) (.2)
Equity in earnings of ShopKo (.1) (.1) (.1)
- ---------------------------------------------------------------------------------
Earnings before income taxes 1.6 .1 1.9
Income taxes .6 .1 .7
ShopKo deferred tax credit -- (.3) --
- ---------------------------------------------------------------------------------
Net earnings 1.0% .3% 1.2%
- ---------------------------------------------------------------------------------
</TABLE>
NET SALES
Net sales decreased .5 percent to $16.5 billion in fiscal 1996, from $16.6
billion in 1995 and increased 3.9 percent in 1995 from $15.9 billion in 1994.
Net sales in 1996 were affected by competitive market conditions at the
wholesale and retail levels and the closing of underperforming corporate-owned
retail stores. These decreases were partially offset by the addition of new
retail customers in food distribution and the increase in sales resulting from
the acquisition of Hyper Shoppes, Inc. in August 1994. The increase in net sales
in 1995 was principally due to the acquisitions of Sweet Life Foods, Texas T
Stores and Hyper Shoppes, Inc., partially offset by lost sales due to warehouse
consolidation and declining sales in corporate-owned retail stores closed or
announced to be closed as a result of the retail restructuring program started
in 1995.
- 18 -
<PAGE>
FINANCIAL REVIEW
Food distribution sales decreased $.1 billion or .9 percent in fiscal 1996 to
$14.7 billion. The decrease in sales from 1995 was due to competitive market
conditions at the wholesale and retail levels, the liquidation of a major
customer and lost sales from the closing of corporate-owned retail stores. This
effect was partially mitigated by the addition of new retail customers in food
distribution and food inflation of about 1 percent. Food distribution sales for
1995 increased 3.2 percent over 1994 sales of $14.4 billion due to acquisitions
and new store openings in the company's retail food chains, partially offset by
lost sales due to warehouse consolidations and competitive market conditions at
the retail level. Food inflation was negligible in 1995.
Retail food sales increased 4.6 percent in 1996 to $4.4 billion, compared with
$4.2 billion in 1995. Sales in 1995 grew 14.2 percent over 1994 sales of $3.7
billion. The increase in 1996 was the result of the inclusion of Hyper Shoppes,
Inc.'s sales for 52 weeks this year compared with 26 weeks last year, an
increase in same-store sales of 2.6 percent and new store openings. The increase
in sales was partially offset by the closing of underperforming corporate-owned
retail stores pursuant to the restructuring program. The increase in 1995 was
primarily due to acquisitions and new store openings, partially offset by a
decline in same-store sales of approximately 1 percent.
GROSS PROFIT
Gross profit as a percentage of net sales increased to 9.6 percent in 1996,
compared with 9.2 percent in 1995 and 8.9 percent in 1994. These increases were
due principally to the growing proportion within the company's total sales mix
of the higher-margined retail food business, which represented 27 percent of
total sales in 1996, compared with 25 percent and 23 percent in 1995 and 1994,
respectively. Food distribution gross profit margin decreased slightly due to
the competitive retail environment and the continuation of the industry's
movement to every-day-low-pricing and reduced opportunity for inventory gains.
However, this trend was partially offset by favorable warehouse expense,
primarily worker's compensation insurance costs. The company continues to
implement ADVANTAGE initiatives that focus on stabilizing gross margin as well
as lowering selling and administrative expenses, but expects continued pressure
in fiscal 1997 on gross margins due to the competitive retail environment and
the industry's movement to every-day-low-pricing. The retail food gross margin
increased due to the improved mix from higher gross margin items and the closing
of underperforming corporate-owned retail stores.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses were 7.4 percent of net sales in 1996,
compared with 7.1 percent in 1995 and 6.6 percent in 1994. These 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 higher than last year
due to ADVANTAGE implementation expenses totaling $17.1 million charged to this
segment. Last year ADVANTAGE expenses totaling $15.0 million represented the
costs of studying the changing fundamentals of our business and the industry and
developing a restructuring plan, and accordingly were reported in unallocated
corporate expenses.
ADVANTAGE Expenses by Segment
- --------------------------------------------------------------------------------
(In millions) Fiscal Year Ended
- --------------------------------------------------------------------------------
February 24, 1996 February 25, 1995
- --------------------------------------------------------------------------------
Food distribution $17.1 --
Retail food 1.5 --
Corporate expenses 4.9 $15.0
- --------------------------------------------------------------------------------
$23.5 $15.0
- --------------------------------------------------------------------------------
The higher expenses in food distribution due to ADVANTAGE were offset by
favorable expense controls, including favorable insurance experience. Retail
food selling and administrative expenses as a percent of net sales were also
higher than last year due to increased advertising expense in response to
competitive
- 19 -
<PAGE>
FINANCIAL REVIEW
pressures and higher supply costs for paper and packaging supplies. The
increases in advertising and supply costs were partially offset by the
elimination of underperforming corporate-owned retail stores which reduced
expenses.
Pre-tax expenses of $23.5 million related to the ADVANTAGE project were incurred
during 1996, compared with $15.0 million in 1995. The 1996 expenses relate to
implementation costs associated under the project including, but not limited to,
systems development, employee training, relocation, consultants costs and
retailer training and promotional programs, as well as other activities.
Under ADVANTAGE the company has to date: substantially completed the
construction of the Anniston, Alabama prototype regional distribution facility;
tested its new pricing strategy, Activity Based Sell, which charges retailers on
a cost-to-serve basis and is intended to encourage optimum economic behavior at
both retail and wholesale; tested a new computerized promotional system;
designated and begun staffing marketing regions; and implemented portions of
comprehensive business process redesign to support on-going cost reduction.
Further, the Midwest regional distribution center site has been selected with
construction to begin this spring and operations expected to begin in fiscal
1998.
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 program is being conducted in
Denver, the restructuring and retraining of retail operations field staff has
been completed and the company is beginning implementation of the new retail
technology initiative.
OPERATING EARNINGS
The company's pre-tax operating earnings (earnings before interest, corporate
expenses, equity in earnings of ShopKo Stores, Inc. ["ShopKo"] and taxes) were
$391.8 million in 1996, compared with $153.2 million in 1995 and $396.9 million
reported in 1994. The increase in operating earnings was principally due to the
restructuring and other charges totaling $231.4 million recorded in 1995.
Excluding these charges, operating earnings increased 1.9 percent over last
year.
Food distribution operating earnings, before the restructuring and other
charges, decreased 4.5 percent in 1996 to $334.7 million after decreasing 4.1
percent in 1995. Operating earnings were positively affected by favorable
insurance experience in 1996. This positive impact was offset by pre-tax
expenses of $17.1 million related to ADVANTAGE expenses charged to this segment
versus none last year and slightly reduced gross margins due to the competitive
market. The decrease in 1995 was primarily due to warehouse consolidation
expenses, an increased LIFO charge, higher insurance expenses and integration
costs of the Sweet Life acquisition.
Retail food operating earnings, before restructuring and other charges,
increased 68.1 percent in 1996 to $57.2 million. Operating earnings in 1995
increased 8.4 percent over 1994 operating earnings. The increase in 1996
resulted from the elimination of operating losses from the closing of
underperforming corporate-owned retail stores. The increase in 1995 was
primarily due to the Hyper Shoppes, Inc. and Texas T Stores acquisitions,
partially offset by reduced gross margins resulting from competitive pressures.
INTEREST EXPENSE AND INCOME
Interest expense increased to $140.2 million for 1996 compared with $135.4
million for 1995 primarily due to an increase in debt levels and higher short-
term interest rates. The increase in interest expense in 1995 over 1994 resulted
from an increase in short-term borrowings related to acquisitions, the issuance
of debt securities and an increase in short-term borrowing rates. Interest
income decreased to $23.5 million in 1996 compared with $24.1 million in 1995.
Interest income for 1995 was below 1994 due to the reduction in notes receivable
as a result of the sale of notes in the ordinary course of business at the end
of fiscal 1994.
- 20 -
<PAGE>
FINANCIAL REVIEW
EQUITY IN EARNINGS OF SHOPKO
ShopKo net sales for 1996 increased 6.2 percent to $1.97 billion, compared with
1995 sales of $1.85 billion, an increase of 6.6 percent over 1994. ShopKo
reported total net earnings of $38.4 million for 1996, an increase of 1.7
percent from 1995. Net earnings increased due to an increase in the prescription
benefit management sales and lower selling, general and administrative expenses
resulting from expense control initiatives. Net earnings for 1995 were $37.8
million, a 17.6 percent increase over 1994. ShopKo's net earnings for 1995 were
impacted by improved gross margins and lower selling, general and administrative
expenses.
INCOME TAXES
In 1995, the Internal Revenue Service ("IRS") completed its review for tax years
ending in 1991 and 1992, which included the partial disposition of ShopKo in
October 1991. The transaction was reported as a taxable sale in the audited
financial statements for that year. Upon completion of their review, the IRS
concluded that the partial disposition of ShopKo resulted in no tax liability.
Therefore, the $40.8 million of deferred taxes provided by the company in the
financial statements was reversed and reflected in the 1995 consolidated
statement of earnings.
NET EARNINGS
Net earnings for 1996 were $166.4 million, compared with net earnings for 1995
of $43.3 million and $185.3 million reported in 1994. The increase in net
earnings in 1996 was related principally to last year's restructuring and other
charges which was partially offset by a one-time tax credit related to the
partial disposition of ShopKo. After adjusting 1995 earnings to exclude these
special items, net earnings increased 2.8 percent. Net earnings were positively
impacted by favorable insurance experience and the closing of underperforming
corporate-owned retail stores, offsetting increased expenses related to the
ADVANTAGE project and higher net interest expense. Although ADVANTAGE
initiatives are generating benefits, the company preliminarily anticipates
spending under ADVANTAGE to exceed benefits through fiscal 1997 with a positive
contribution from this project in fiscal 1998. This is the result of the
expansion and the acceleration in timing of certain ADVANTAGE programs which
will drive expenses higher in fiscal 1997.
NEW ACCOUNTING STANDARDS
Impairment of Long-Lived Assets
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
was issued in March 1995 and must be adopted no later than fiscal 1997. The
company is in the process of evaluating the impact of this statement.
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation," was issued in October
1995 and must be adopted no later than fiscal 1997. The adoption of SFAS No. 123
will have no effect on net earnings. The company intends to continue to measure
compensation cost for stock compensation plans under APB Opinion No. 25,
"Accounting for Stock Issued to Employees."
INFLATION
Although not significant, inflation has had some effect on the company's
operating results and its external sources of liquidity. The impact of low food
inflation on the company's sales was partially offset by retail development and
marketing activities. As operating expenses and inventory costs have increased,
the company has been able to identify operating efficiencies to minimize the
impact.
CAUTIONARY STATEMENTS FOR PURPOSE OF THE SAFE
HARBOR PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
The information in this Annual Report includes forward-looking statements.
Important risks and uncertainties that could cause actual results to differ
materially from those discussed in such forward looking statements are detailed
in Exhibit 99.1 to the company's Annual Report on Form 10-K, for the Year Ended
February 24, 1996; other risks or uncertainties may be detailed from time to
time in the company's future Securities and Exchange Commission filings.
- 21 -
<PAGE>
- --------------------------------------------------------------------------------
Ten Year Financial and Operating Summary
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
1996 1995 (b) 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Statement of Earnings Data (a)
Net sales $16,486,321 $16,563,772 $15,936,925 $12,568,000
Cost of sales 14,906,602 15,040,117 14,523,434 11,531,394
Selling and administrative expense 1,212,967 1,169,843 1,044,433 746,857
Restructuring and other charges - 244,000 - -
Interest, net 116,678 111,271 89,767 54,203
Equity in earnings of ShopKo 17,618 17,384 14,789 23,072
Earnings before taxes and accounting change 267,692 15,925 294,080 258,618
Provision for income taxes 101,259 (27,409) 108,827 94,092
Net earnings 166,433 43,334 185,253 164,526
Earnings per common share before accounting change 2.44 .61 2.58 2.31
Net earnings per common share 2.44 .61 2.58 2.31
- ------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data (a)
Inventories (FIFO) $ 1,158,028 $ 1,230,017 $ 1,227,170 $ 1,247,337
Working capital (e) 355,124 319,429 452,121 361,093
Net property, plant and equipment 1,600,166 1,571,298 1,410,123 1,384,241
Total assets 4,183,503 4,305,149 4,042,351 4,064,189
Long-term debt (f) 1,445,562 1,459,766 1,262,995 1,347,386
Stockholders' equity 1,216,176 1,193,222 1,275,458 1,134,820
- ------------------------------------------------------------------------------------------------------------------------------
Other Statistics (a)
Earnings before accounting change as a
percent of net sales 1.01% .98% 1.16% 1.31%
Return on average stockholders' equity 13.96% 12.95% 15.40% 15.32%
Book value per common share $ 17.94 $ 16.92 $ 17.62 $ 15.84
Current ratio (e) 1.27:1 1.22:1 1.37:1 1.27:1
Debt to capital ratio 57% 59% 53% 59%
Dividends declared per common share $ .97 $ .92 1/2 $ .85 1/2 $ .76 1/2
Weighted average common shares outstanding 68,277 71,388 71,817 71,341
Depreciation and amortization $ 219,084 $ 198,718 $ 186,261 $ 140,790
Capital expenditures, excluding retailer financing $ 271,456 $ 319,560 $ 239,602 $ 164,728
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(a) Amounts for all years prior to 1992 have been restated to reflect the
company's ownership percentage in ShopKo under the equity method of
accounting because of the sale of a 54 percent interest in ShopKo,
effective October 16, 1991. Fiscal 1992 and 1987 contained 53 weeks; all
other years cover 52 weeks. Dollars in thousands except per share and
percentage data.
(b) Net earnings were reduced by restructuring and other charges of $159.4
million ($2.23 per share). The provision for income taxes includes a
reversal of $40.8 million ($.57 per share) of deferred taxes in 1995
related to the partial disposition of ShopKo in 1992. The 1995 ratios were
calculated excluding the restructuring and other charges and excluding the
reversal of $40.8 million of deferred taxes related to the partial
disposition of ShopKo. The ratios for earnings before accounting change as
a percent of net sales and the return on average stockholders' equity would
have been .26 and 3.46 percent, respectively, if the restructuring and
other charges and the reversal of $40.8 million of deferred taxes had not
been excluded.
(c) The cumulative effect of adopting Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," resulted in a decrease in net earnings of $13,288,000 ($.18
per share). A $51,304,000 after-tax gain on the sale of a 54 percent
interest in ShopKo was included in fiscal 1992 net earnings ($.69 per
share). All statistics include the results of both transactions.
(d) The cumulative effect of adopting Statement of Financial Accounting
Standards No. 96, "Accounting for Income Taxes," resulted in a decrease in
net earnings of $13,640,000 ($.18 per share).
(e) Working capital and current ratio are calculated after adding back the LIFO
reserve.
(f) Total long-term debt includes long-term debt and long-term obligations
under capital leases.
- 22 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1992 (c) 1991 1990 1989 1988 1987 (d)
- ----------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$10,632,301 $10,104,899 $9,734,811 $9,061,176 $8,331,333 $8,172,099
9,807,633 9,360,886 9,043,953 8,429,692 7,751,172 7,620,235
583,789 531,972 484,586 433,177 399,504 381,822
- - - - - -
34,320 31,441 33,104 34,532 30,089 23,288
32,176 45,080 42,562 36,943 27,122 21,594
322,840 225,680 215,730 200,718 177,690 168,348
115,175 70,544 67,984 63,250 64,678 81,837
194,377 155,136 147,746 137,468 113,012 72,871
2.78 2.06 1.97 1.84 1.51 1.16
2.60 2.06 1.97 1.84 1.51 .98
- ----------------------------------------------------------------------------------------------------------
$ 862,621 $ 785,395 $ 726,194 $ 688,947 $ 618,545 $ 588,646
534,182 196,217 188,139 165,887 217,320 169,526
879,186 789,443 701,162 666,508 518,197 474,296
2,484,300 2,401,357 2,239,900 2,116,202 1,844,918 1,641,401
608,241 567,444 549,694 557,828 529,894 415,907
1,030,981 978,678 869,891 763,706 660,720 578,275
- ----------------------------------------------------------------------------------------------------------
1.95% 1.54% 1.52% 1.52% 1.36% 1.06%
20.17% 16.82% 18.12% 19.31% 18.28% 15.55%
$ 14.35 $ 13.01 $ 11.59 $ 10.20 $ 8.84 $ 7.76
1.72:1 1.24:1 1.25:1 1.22:1 1.35:1 1.28:1
43% 46% 46% 46% 49% 45%
$ .70 1/2 $ .64 1/2 $ .58 1/2 $ .48 1/2 $ .43 1/2 $ .41
74,700 75,165 74,972 74,785 74,634 74,387
$ 111,488 $ 105,582 $ 95,593 $ 86,944 $ 85,179 $ 71,955
$ 175,624 $ 203,199 $ 142,899 $ 193,218 $ 137,533 $ 214,314
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- 23 -
<PAGE>
CONSOLIDATED COMPOSITION OF NET SALES AND OPERATING EARNINGS
The following table sets forth, for each of the last five fiscal years, the
composition of the company's net sales and operating earnings.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
(In thousands, except percent data) 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
NET SALES
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Food distribution $14,685,899 $14,820,009 $14,361,255 $11,448,148 $ 9,841,033
89.1% 89.5% 90.1% 91.1% 92.6%
Retail food 4,412,203 4,219,691 3,696,145 2,699,075 2,002,923
26.7% 25.4% 23.2% 21.5% 18.8%
Less: Eliminations (2,611,781) (2,475,928) (2,120,475) (1,579,223) (1,211,655)
(15.8)% (14.9)% (13.3)% (12.6)% (11.4)%
Total net sales $16,486,321 $16,563,772 $15,936,925 $12,568,000 $10,632,301
100.0% 100.0% 100.0% 100.0% 100.0%
- -------------------------------------------------------------------------------------------------------------------------------
OPERATING EARNINGS
- -------------------------------------------------------------------------------------------------------------------------------
Food distribution $ 334,673 $ 257,495 $ 365,527 $ 284,337 $ 241,666
Retail food 57,176 (104,338) 31,366 24,842 12,512
-------------------------------------------------------------------------
Total operating earnings 391,849 153,157 396,893 309,179 254,178
Interest expense, net (116,678) (111,271) (89,767) (54,203) (34,320)
General corporate expenses (25,097) (43,345) (27,835) (19,430) (13,299)
-------------------------------------------------------------------------
Earnings before equity in earnings
of ShopKo, gain on sale of
ShopKo stock and income taxes 250,074 (1,459) 279,291 235,546 206,559
Equity in earnings of ShopKo 17,618 17,384 14,789 23,072 32,176
Gain on sale of ShopKo stock -- -- -- -- 84,105
-------------------------------------------------------------------------
Earnings before income taxes $ 267,692 $ 15,925 $ 294,080 $ 258,618 $ 322,840
- -------------------------------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
- -------------------------------------------------------------------------------------------------------------------------------
Food distribution $ 2,684,088 $ 2,843,862 $ 2,644,670 $ 2,830,400 $ 1,594,003
Retail food 1,126,197 1,121,596 948,551 837,148 508,441
Corporate 373,218 339,691 449,130 396,641 381,856
-------------------------------------------------------------------------
Total $ 4,183,503 $ 4,305,149 $ 4,042,351 $ 4,064,189 $ 2,484,300
- -------------------------------------------------------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION
- -------------------------------------------------------------------------------------------------------------------------------
Food distribution $ 115,507 $ 107,471 $ 105,763 $ 83,686 $ 71,326
Retail food 85,010 76,145 64,924 48,303 35,360
Corporate 18,567 15,102 15,574 8,801 4,802
-------------------------------------------------------------------------
Total $ 219,084 $ 198,718 $ 186,261 $ 140,790 $ 111,488
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES
- -------------------------------------------------------------------------------------------------------------------------------
Food distribution $ 102,435 $ 159,838 $ 131,322 $ 60,408 $ 94,835
Retail food 137,914 119,605 69,939 78,715 68,562
Corporate 31,107 40,117 38,341 25,605 12,227
-------------------------------------------------------------------------
Total $ 271,456 $ 319,560 $ 239,602 $ 164,728 $ 175,624
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The company's food distribution operations include sales to independently owned
and operated food stores, sales to food stores owned by the company, and the
operations of several allied service operations throughout the United States.
Retail food operations include sales by food stores owned by the company, other
than transition retail food stores. Eliminations include food distribution sales
to food stores included in the retail food segment.
Industry segment operating earnings were computed as total revenue less
associated operating expenses, which exclude general corporate expenses, net
interest expense and income taxes.
Identifiable assets are those assets of the company directly associated with the
industry segments and exclude short-term investments, certain accumulated income
tax temporary differences and other corporate assets.
Operating earnings in 1995 for food distribution and retail food were reduced by
$93.1 and $138.4 million, respectively, for restructuring and other charges.
General corporate expenses includes $12.6 million for restructuring and other
charges.
See notes following the Ten Year Financial and Operating Summary and notes to
the consolidated financial statements.
- 24 -
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) Fiscal Year Ended
- ------------------------------------------------------------------------------------------------------------------------------------
February 24, February 25, February 26,
1996 1995 1994
(52 Weeks) (52 Weeks) (52 Weeks)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $16,486,321 $16,563,772 $15,936,925
COST AND EXPENSES
Cost of sales 14,906,602 15,040,117 14,523,434
Selling and administrative expenses 1,212,967 1,169,843 1,044,433
Restructuring and other charges - 244,000 -
Interest
Interest expense 140,150 135,383 120,292
Interest income 23,472 24,112 30,525
- -----------------------------------------------------------------------------------------------------------------------------------
Interest expense, net 116,678 111,271 89,767
- -----------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 16,236,247 16,565,231 15,657,634
- -----------------------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE EQUITY IN EARNINGS OF SHOPKO
AND INCOME TAXES 250,074 (1,459) 279,291
Equity in earnings of ShopKo 17,618 17,384 14,789
- -----------------------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 267,692 15,925 294,080
PROVISIONS FOR INCOME TAXES
Current 36,692 113,505 110,717
Deferred 64,567 (140,914) (1,890)
- -----------------------------------------------------------------------------------------------------------------------------------
Income tax expense 101,259 (27,409) 108,827
- -----------------------------------------------------------------------------------------------------------------------------------
NET EARNINGS $ 166,433 $ 43,334 $ 185,253
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted average number of common shares outstanding 68,277 71,388 71,817
NET EARNINGS PER COMMON SHARE $ 2.44 $ .61 $ 2.58
- -----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
- 25 -
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA) February 24, 1996 February 25, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 5,215 $ 4,839
Receivables, less allowance for losses of $22,064 in 1996
and $29,268 in 1995 380,611 383,458
Inventories 1,029,911 1,109,791
Other current assets 137,972 148,252
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,553,709 1,646,340
- ------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM NOTES RECEIVABLE 36,731 73,094
LONG-TERM INVESTMENT IN DIRECT FINANCING LEASES 74,185 77,688
PROPERTY,PLANT AND EQUIPMENT
Land 146,535 202,949
Buildings 903,621 868,379
Property under construction 53,775 51,640
Leasehold improvements 137,551 134,094
Equipment 988,963 970,779
Assets under capital leases 270,549 205,030
- ------------------------------------------------------------------------------------------------------------------------------------
2,500,994 2,432,871
Less accumulated depreciation and amortization
Owned property, plant and equipment 855,429 825,546
Assets under capital leases 45,399 36,027
- ------------------------------------------------------------------------------------------------------------------------------------
NET PROPERTY, PLANT AND EQUIPMENT 1,600,166 1,571,298
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT IN SHOPKO 193,975 182,839
GOODWILL 499,688 515,009
OTHER ASSETS 225,049 238,881
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $4,183,503 $4,305,149
- ------------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
- 26 -
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
February 24, 1996 February 25, 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable $ 158,027 $ 226,168
Accounts payable 965,444 1,003,106
Current maturities of long-term debt 8,483 9,277
Current obligations under capital leases 17,955 19,060
Other current liabilities 176,793 189,526
- --------------------------------------------------------------------------------------------------------------------
Total current liabilities 1,326,702 1,447,137
- --------------------------------------------------------------------------------------------------------------------
Long-term debt 1,144,600 1,215,184
Long-term obligations under captial leases 300,962 244,582
Deferred income taxes 37,076 --
Other liabilities 157,987 205,024
Commitments and contingencies -- --
Stockholders' equity
Preferred stock, no par value: Authorized 1,000 shares
Shares issued and outstanding, 6 in 1996 and 1995 ($1,000 stated value) 5,908 5,908
Common stock, $1.00 par value: Authorized 200,000 shares
Shares issued, 75,335, in 1996 and 1995 75,335 75,335
Capital in excess of par value 12,737 12,717
Retained earnings 1,336,942 1,236,507
Treasury stock, at cost, 7,892 shares in 1996 and 5,161 in 1995 (214,746) (137,245)
- --------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,216,176 1,193,222
- --------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $4,183,503 $4,305,149
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- 27 -
<PAGE>
Consolidated Statements Of Stockholders' Equity
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
(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 -- -- -- -- 43,334 43,334
Sales of common stock under
option plans -- -- (290) 1,435 -- 1,145
Cash dividends declared on common
stock--$.925 per share -- -- -- -- (66,024) (66,024)
Compensation under employee
incentive plans -- -- 41 253 -- 294
Purchase of shares for treasury -- -- -- (52,065) -- (52,065)
Other -- -- -- -- (8,920) (8,920)
- ----------------------------------------------------------------------------------------------------------------------
Balances at February 25, 1995 5,908 75,335 12,717 (137,245) 1,236,507 1,193,222
Net earnings -- -- -- -- 166,433 166,433
Sales of common stock under
option plans -- -- (84) 3,458 -- 3,374
Cash dividends declared on common
stock--$.970 per share -- -- -- -- (65,998) (65,998)
Compensation under employee
incentive plans -- -- 104 (869) -- (765)
Purchase of shares for treasury -- -- -- (80,090) -- (80,090)
- ----------------------------------------------------------------------------------------------------------------------
Balances at February 24, 1996 $5,908 $75,335 $12,737 $(214,746) $1,336,942 $1,216,176
- ----------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
- 28 -
<PAGE>
Consolidated Statements Of Cash Flows
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
(In thousands) Fiscal Year Ended
- ----------------------------------------------------------------------------------------------------------------------
February 24, February 25, February 26,
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings $ 166,433 $ 43,334 $ 185,253
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Equity in earnings of ShopKo (17,618) (17,384) (14,789)
Dividends received from ShopKo 6,482 6,482 6,483
Depreciation and amortization 219,084 198,718 186,261
Provision for losses on receivables 2,269 1,627 7,165
Restructuring and other charges -- 244,000 --
Gain on sale of property, plant and equipment (12,215) (3,689) (404)
Deferred income taxes 64,567 (140,914) (1,890)
Treasury shares contributed to employee incentive plan 107 525 444
Changes in assets and liabilities, excluding effect from acquisitions:
Receivables 17,865 (14,862) (1,207)
Inventories 79,880 52,296 22,222
Other current assets (2,671) 4,638 108
Direct financing leases 8,302 9,517 9,183
Accounts payable (55,246) 6,516 18,171
Other liabilities (51,569) (49,804) 15,745
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 425,670 341,000 432,745
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Additions to long-term notes receivable (28,394) (32,052) (35,591)
Proceeds received on long-term notes receivable 64,757 33,396 51,557
Proceeds from sale of property, plant and equipment 94,733 43,854 41,531
Purchase of property, plant and equipment (236,248) (298,124) (231,489)
Business acquisitions, net of cash acquired -- (111,083) --
Other investing activities (39,645) 33,033 44,249
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (144,797) (330,976) (129,743)
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net issuance (reduction) of short-term notes payable (68,141) 199,530 (228,414)
Proceeds from issuance of long-term debt 257,500 150,000 4,365
Repayment of long-term debt (308,406) (221,245) (9,462)
Reduction of obligations under capital leases (17,529) (19,095) (18,377)
Proceeds from the sale of common stock under option plans 2,291 212 9,521
Dividends paid (66,122) (65,368) (59,562)
Payment for purchase of treasury stock (80,090) (52,065) --
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (280,497) (8,031) (301,929)
- ----------------------------------------------------------------------------------------------------------------------
Net increase in cash 376 1,993 1,073
Cash at beginning of year 4,839 2,846 1,773
- ----------------------------------------------------------------------------------------------------------------------
Cash at end of year $ 5,215 $ 4,839 $ 2,846
- ----------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
- 29 -
<PAGE>
Notes To Consolidated Financial Statements
Summary of Significant Accounting Policies
Principles of Consolidation:
The financial statements include the accounts of the company and all its
subsidiaries. All significant inter-company accounts and transactions have been
eliminated.
Revenue and Income Recognition:
Revenues from product sales are recognized upon shipment of the product for food
distribution and at the point of sale for retail food. Revenues from services
rendered are recognized immediately after such services have been provided.
Income is recognized upon the completion of the earnings process.
Inventories:
Inventories are stated at the lower of cost or market. Cost is determined
through use of the last-in, first-out method (LIFO) for a major portion of
consolidated inventories: 78.9 percent for fiscal 1996 and 79.5 percent for
fiscal 1995. The first-in, first-out method (FIFO) is used to determine cost for
remaining inventories which are principally perishable products. Market is
replacement value. If the FIFO method had been used to determine cost of
inventories for which the LIFO method is used, the company's inventories would
have been higher by approximately $128.1 million at February 24, 1996 and $120.2
million at February 25, 1995.
Property, plant and equipment:
Property, plant and equipment are carried at cost. Depreciation, as well as
amortization of assets under capital leases, is based on the estimated useful
lives of the assets using a straight-line method. Interest on property under
construction of $2.6, $2.7 and $2.9 million was capitalized in fiscal years
1996, 1995 and 1994, respectively.
Goodwill:
Amounts paid in excess of the fair value of acquired net assets are amortized on
a straight-line basis over 5 to 40 years. The recoverability of goodwill is
assessed by determining whether the goodwill balance can be recovered through
projected cash flows and operating results over its remaining life. Impairment
of the asset is recognized when it is probable that such future undiscounted
cash flows will be less than the carrying value of the asset. Goodwill is shown
net of accumulated amortization of $48.6 and $31.1 million for fiscal 1996 and
1995, respectively.
Accounts payable:
Accounts payable include $72.5 and $68.5 million at February 24, 1996 and
February 25, 1995, respectively, of issued checks which had not cleared the
company's bank accounts, reduced by deposits in transit and cash on deposit in
the company's depository banks.
Financial Instruments:
The company, from time to time, utilizes interest rate caps, collars and swaps
to manage interest costs and reduce exposure to interest rate changes. The cost
of these instruments is recognized over the life of such contracts.
Fair value disclosures of financial instruments:
The estimated fair value of notes receivable approximates the net carrying value
at February 24, 1996 and February 25, 1995. Notes receivable are valued based on
comparisons to publicly traded debt instruments of similar credit quality.
At February 24, 1996 and February 25, 1995 the estimated fair market value of
the company's long-term debt (including current maturities) exceeded the
carrying value by approximately $57 and $11 million, respectively. The estimated
fair value was based on market quotes where available, discounted cash flows and
market yields for similar instruments. The estimated fair market value of the
company's commercial paper outstanding as of February 24, 1996 and February 25,
1995 approximated the carrying value. The fair market value of the company's
interest rate caps, collars and swaps was immaterial at February 24, 1996 and
February 25, 1995.
Pre-opening costs:
Pre-opening costs of retail stores are charged against earnings as incurred.
Net earnings per share:
Net earnings per share are computed by dividing net earnings by the weighted
average number of common shares outstanding. Outstanding stock options do not
have a significant dilutive effect on earnings per share.
Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications:
Certain reclassifications have been made to prior years' financial statements to
conform to 1996 presentation. These reclassifications did not affect results of
operations as previously reported.
Restructure 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 and an additional $39.2 million for asset impairment. The
asset impairment charge covered intangibles in businesses where future
undiscounted cash flow was not sufficient to recover the book value of the
recorded intangible.
- 30 -
<PAGE>
Notes To Consolidated Financial Statements
The charges included $53.1 million for the elimination of approximately 4,300
employees; $20.0 million for expected losses on the sale of tangible assets and
expenses under non-cancelable leases; $87.8 million for the closing of
approximately 30 underperforming corporate retail stores; and $43.9 million for
carrying costs and losses on disposition of property.
In 1995, the company utilized approximately $28.0 million of the reserve
primarily for the closedown and disposal of assets at 6 underperforming
corporate retail stores, losses and disposition of tangible assets and severance
of employees.
In 1996, the company utilized approximately $64.0 million of the reserve; $6.2
million for elimination of 1,264 positions; $3.7 million for the sale of
tangible assets and expenses under non-cancelable leases; $38.5 million for the
closing of 17 underperforming corporate retail stores; and $15.6 million for
carrying costs and losses on disposition of property. The retail units covered
by the reserve had aggregate sales of $121.1, $296.3 and $291.7 million in 1996,
1995 and 1994, respectively, and pre-tax losses of $9.5, $21.3 and $19.0 million
in 1996, 1995 and 1994, respectively.
An additional $54.0 million of the reserve is expected to be utilized for
completion of pending property sales, for severance and termination benefits as
regionalization of distribution facilities and other operations occur in fiscal
1997 and for the closing of additional underperforming corporate retail stores.
Notes Receivable
Notes receivable arise from fixture and other financing related to independently
owned retail food operations. Loans to independent retailers, as well as trade
accounts receivable, are primarily collateralized by the retailers' inventory,
equipment and fixtures. The notes range in length from 1 to 10 years with the
average being 6 years, and may be non-interest bearing or bear interest at rates
ranging primarily from 5 to 12 percent.
Included in current receivables are notes receivable due within one year
totaling $5.7 and $11.6 million at February 24, 1996 and February 25, 1995,
respectively.
Investment in ShopKo
The company's ownership in ShopKo, a mass merchandise discount retailer, is 46
percent and is accounted for under the equity method.
Summarized financial information of ShopKo is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
(In thousands) 1996 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $1,968,016 $1,852,929 $1,738,746
Gross profit 501,283 488,016 449,488
Net earnings 38,439 37,790 32,122
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
(In thousands) 1996 1995
- ------------------------------------------------------------------------
Current assets $476,191 $468,744
Non-current assets 641,769 641,007
Current liabilities 260,795 281,473
Non-current liabilities 435,534 431,003
- ------------------------------------------------------------------------
Debt
- ------------------------------------------------------------------------
(In thousands, February 24, February 25,
except payment data) 1996 1995
- ------------------------------------------------------------------------
5.875%-8.875% promissory notes $ 400,000 $ 700,000
semi-annual interest payments of
$16.1 million; due 1999 to 2002
5.92%-6.69% medium-term notes 157,500 --
semi-annual interest payments of
$4.9 million; due 1997 to 2005
7.25% promissory notes 150,000 150,000
semi-annual interest payments of
$5.4 million; due 1999
Notes payable 100,000 --
Variable rate to 8.25% industrial 89,833 93,085
revenue bonds
9.67% senior subordinated notes 75,000 75,000
due 1998
8.875%-9.64% promissory notes 70,000 70,000
semi-annual interest payments of
$3.2 million; due 1997 to 1999
8.39%-11.5% promissory notes 29,268 31,351
due 1996 to 2004
8.28%-9.46% promissory notes 24,804 25,640
due 2010
9.96% promissory notes due 2005 22,698 24,013
8.875% sinking fund debentures
due 2016 22,110 22,110
3.0%-9.5% mortgages payable due 4,072 5,490
1996 to 2008 (secured by land
and buildings)
Other debt 7,798 27,772
- ------------------------------------------------------------------------
1,153,083 1,224,461
Less current maturities 8,483 9,277
- ------------------------------------------------------------------------
Long-term debt $1,144,600 $1,215,184
- ------------------------------------------------------------------------
</TABLE>
- 31 -
<PAGE>
Notes To Consolidated Financial Statements
Aggregate maturities of long-term debt during the next five fiscal years are:
- -------------------------------------------------------------------------------
(In thousands)
- -------------------------------------------------------------------------------
1997 $ 8,483
1998 63,248
1999 146,279
2000 207,093
2001 182,045
- -------------------------------------------------------------------------------
The company has a $400 million revolving credit agreement that expires in May
2000. The company pays an annual facility fee of .10 percent for the credit
agreement. The company also has a $400 million "shelf registration" in effect
under which $157.5 million of medium-term notes were issued. These notes and
$142.5 million of short-term commercial paper were used to repay $300 million of
debt which matured on November 15, 1995.
At February 24, 1996, $100 million of commercial paper borrowings were
classified as long-term debt, reflecting SUPERVALU's intent and ability, through
the existence of the revolving credit agreement to refinance these borrowings.
The debt agreements contain various covenants, including minimum tangible net
worth requirements and maximum permitted leverage. Under the most restrictive
covenants, retained earnings of approximately $98 million were available at
year-end for payment of cash dividends and repurchase of stock.
The company periodically enters into interest rate caps, collars and swaps to
manage exposure to interest rate changes. The financial instruments are subject
to market risk as interest rates fluctuate. In June 1995, an interest rate cap
which provided an upper limit on the rates of $100 million of the company's
floating rate commercial paper expired and was not replaced.
The weighted-average interest rate on short-term borrowings outstanding at
February 24, 1996, and February 25, 1995, was 5.5 and 6.1 percent, respectively.
LEASES
Capital and operating leases:
The company leases certain food distribution warehouse and office facilities, as
well as corporate-owned retail food stores. Many of these leases include renewal
options, and to a limited extent, include options to purchase.
Amortization of assets under capital leases was $13.8, $12.9 and $13.6 million
in fiscal 1996, 1995 and 1994, respectively.
Future minimum obligations under capital leases in effect at February 24, 1996
are as follows:
- --------------------------------------------------------------------------------
(In thousands) Lease
Year Obligations
- --------------------------------------------------------------------------------
1997 $ 31,574
1998 31,343
1999 31,033
2000 30,393
2001 29,497
Later 286,432
- --------------------------------------------------------------------------------
Total future minimum obligations 440,272
Less interest 202,776
- --------------------------------------------------------------------------------
Present value of net future minimum obligations 237,496
Less current portion 8,885
- --------------------------------------------------------------------------------
Long-term obligations $228,611
- --------------------------------------------------------------------------------
The present values of future minimum obligations shown are calculated based on
interest rates ranging from 7.1 percent to 13.8 percent, with a weighted average
of 9.6 percent, determined to be applicable at the inception of the leases.
In addition to its capital leases, the company is obligated under operating
leases, primarily for buildings, warehouse and computer equipment.
Future minimum obligations under operating leases in effect at February 24, 1996
are as follows:
- --------------------------------------------------------------------------------
(In thousands) Lease
Year Obligations
- --------------------------------------------------------------------------------
1997 $ 48,896
1998 42,205
1999 36,000
2000 30,775
2001 25,947
Later 121,155
- --------------------------------------------------------------------------------
Total future minimum obligations $304,978
- --------------------------------------------------------------------------------
Total rent expense, net of sublease income, relating to all operating leases
with terms greater than one year was $33.0, $32.9 and $33.3 million in fiscal
1996, 1995 and 1994, respectively.
Future minimum receivables under operating leases and subleases in effect at
February 24, 1996 are as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands) Owned Leased
Year Property Property Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1997 $ 5,097 $17,571 $22,668
1998 4,636 14,492 19,128
1999 4,021 11,834 15,855
2000 3,245 9,162 12,407
2001 2,542 7,039 9,581
Later 11,811 20,077 31,888
- --------------------------------------------------------------------------------
Total future
minimum receivables $31,352 $80,175 $111,527
- --------------------------------------------------------------------------------
</TABLE>
- 32 -
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Owned property under operating leases is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(In thousands) February 24, February 25,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Land, buildings and equipment $52,940 $69,067
Less accumulated depreciation 17,675 17,402
- --------------------------------------------------------------------------------
Net land, buildings and equipment $35,265 $51,665
- --------------------------------------------------------------------------------
</TABLE>
Direct financing leases:
Under direct financing capital leases, the company leases buildings on behalf of
independent retailers with terms ranging from 5 to 25 years.
Future minimum rentals to be received under direct financing leases and the
related future minimum obligations under capital leases in effect at February
24, 1996 are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(In thousands) Direct Financing Capital Lease
Year Lease Receivables Obligations
- --------------------------------------------------------------------------------
<S> <C> <C>
1997 $ 17,616 $ 16,191
1998 15,946 14,691
1999 14,208 13,178
2000 12,174 11,324
2001 9,543 8,898
Later 71,215 66,708
- --------------------------------------------------------------------------------
Total minimum lease payments 140,702 130,990
Less unearned income 57,533 --
Less interest -- 49,569
- --------------------------------------------------------------------------------
Present value of net minimum
lease payments 83,169 81,421
Less current portion 8,984 9,070
- --------------------------------------------------------------------------------
Long-term portion $ 74,185 $ 72,351
- --------------------------------------------------------------------------------
</TABLE>
INCOME TAXES
The provision (benefit) for income taxes consists of the following:
- --------------------------------------------------------------------------------
(In thousands) 1996 1995 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Current
Federal $ 30,427 $ 93,785 $ 91,113
State 6,548 20,060 19,955
Tax credits (283) (340) (351)
Deferred
Statutory rate change -- -- 500
ShopKo deferred tax benefit -- (40,783) --
Restructuring and
other charges 31,565 (75,803) --
Other 33,002 (24,328) (2,390)
- --------------------------------------------------------------------------------
Total provision (benefit) $101,259 $ (27,409) $108,827
</TABLE>
The difference between the actual tax provision (benefit) and the tax provision
(benefit) computed by applying the statutory Federal income tax rate to earnings
(loss) before taxes is attributable to the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(In thousands) 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal taxes based on
statutory rate $ 93,692 $ 5,574 $102,928
State income taxes, net of
federal benefit 12,180 725 12,645
ShopKo deferred tax benefit -- (40,783) --
Benefit of dividends received
deduction (6,455) (6,910) (2,058)
Nondeductible goodwill 5,973 17,990 4,192
Other (4,131) (4,005) (8,880)
- --------------------------------------------------------------------------------
Total provision (benefit) $101,259 $(27,409) $108,827
- --------------------------------------------------------------------------------
</TABLE>
The company recorded a tax benefit of $40.8 million in 1995 for the reversal of
deferred taxes related to the 1992 sale of 54 percent of the then wholly-owned
ShopKo Stores, Inc. to reflect a favorable Internal Revenue Service settlement.
Temporary differences which give rise to significant portions of the net
deferred tax asset as of February 24, 1996 and February 25, 1995 are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(In thousands) 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Depreciation and amortization $ 15,468 $ 10,756
Restructuring and other charges 44,238 75,803
Net operating loss from acquired
subsidiaries 25,241 26,736
Valuation allowance (8,000) (8,000)
Provision for obligations and
contingencies to be settled in
future periods 146,862 182,034
Inventory 10,121 16,910
Other 9,123 7,015
- --------------------------------------------------------------------------------
Total deferred tax assets 243,053 311,254
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation and amortization (86,314) (77,621)
Acquired assets adjustment to fair values (84,335) (104,247)
Accelerated tax deductions for
benefits to be paid in future periods (21,813) (12,404)
Other (5,881) (7,705)
- --------------------------------------------------------------------------------
Total deferred tax liabilities (198,343) (201,977)
- --------------------------------------------------------------------------------
Net deferred tax asset $ 44,710 $ 109,277
- --------------------------------------------------------------------------------
</TABLE>
- 33 -
<PAGE>
Notes To Consolidated Financial Statements
The company has acquired net operating loss (NOL) carryforwards of $63.8 million
for tax purposes which expire beginning in 2000 and continuing through 2010. A
valuation allowance of $8.0 million relates to NOL carryforwards not expected to
be realized.
Temporary differences attributable to obligations and contingencies consist
primarily of valuation allowances, accrued postretirement benefits and vacation
pay, and other expenses which are not deductible for income tax purposes until
paid.
Supplemental Cash Flow Information
The company's non-cash investing and financing activities were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(In thousands) 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Leased asset additions and
related obligation $37,769 $ 22,695 $13,127
----------------------------
Acquisitions:
Fair value of assets acquired -- 402,885 35,482
Cash paid -- 117,477 --
Preferred stock issued -- -- 5,908
- -------------------------------------------------------------------------------
Liabilities assumed -- $285,408 $29,574
- -------------------------------------------------------------------------------
</TABLE>
Payments for interest and income taxes were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(In thousands) 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest (net of amount
capitalized) $144,599 $134,251 $123,457
Income taxes 61,994 123,808 107,891
- -------------------------------------------------------------------------------
</TABLE>
Stock Option Plans
The company's 1993, 1983 and 1976 stock option plans allow the granting of non-
qualified stock options and incentive stock options to key salaried executive
employees at prices not less than 100 percent of fair market value, determined
by averaging the open and close price on the date of grant. The plans provide
that the Board of Directors or the Executive Personnel and Compensation
Committee of the Board may determine at the time of granting whether each option
granted will be a non-qualified or incentive stock option under the Internal
Revenue Code. The term of each option will be determined by the Board of
Directors or the Committee, but shall not be for more than 10 years from the
date of grant. Options may be exercised in installments or otherwise, as the
Board of Directors or the Committee may determine.
Changes in the options were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Shares Price
(In thousands) Range
- -------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, February 27, 1993 2,628 $13.19-34.56
Granted 692 31.63-39.25
Exercised (482) 13.19-32.81
Canceled and forfeited (73)
- -------------------------------------------------------------------------------
Outstanding, February 26, 1994 2,765 15.25-39.25
Granted 910 25.69-32.50
Exercised (66) 15.25-33.19
Canceled and forfeited (70)
- -------------------------------------------------------------------------------
Outstanding, February 25, 1995 3,539 15.91-39.25
Granted 1,444 26.38-32.38
Exercised (187) 15.91-29.75
Canceled and forfeited (195)
- -------------------------------------------------------------------------------
Outstanding, February 24, 1996 4,601 $18.38-39.25
- -------------------------------------------------------------------------------
</TABLE>
Options to purchase 2.6 and 2.1 million shares were exercisable at February 24,
1996, and February 25, 1995, respectively. Option shares available for grant
were 1.8 and 3.0 million at February 24, 1996, and February 25, 1995,
respectively. The company has reserved 9.6 million shares, in aggregate, for the
plans.
As of February 24, 1996, limited stock appreciation rights have been granted and
are outstanding under the 1978, 1989 and 1993 Stock Appreciation Rights Plans.
Such rights relate to options granted to purchase 1.8 million shares of common
stock and are exercisable only upon a "change of control."
Treasury Stock Purchase Programs
In February 1994, the Board of Directors instituted a treasury stock program
under which the company is authorized to purchase shares in such amounts as it
deems appropriate for reissuance upon the exercise of employee stock options and
for other compensation programs utilizing the company's stock. In December 1994,
the Board of Directors approved an additional treasury stock purchase program.
Under the December 1994 program the company may repurchase up to 5.0 million
shares which may be used for any corporate purpose. During fiscal 1996, the
company repurchased 2.9 million shares at an average per share cost of $27.99
under the December 1994 program. In fiscal 1995, the company repurchased .6
million shares at an average cost of $34.49 per share under the February 1994
treasury stock program and 1.3 million shares at an average cost of $23.72 per
share under the December 1994 treasury stock program. No shares were repurchased
under either treasury stock program in fiscal 1994.
- 34 -
<PAGE>
Notes To Consolidated Financial Statements
Stockholder Rights Plan
The company has a "Preferred Share Purchase Rights Plan," in which the Board of
Directors declared a dividend of one preferred share purchase right for each
outstanding share of common stock. The rights, which expire on April 12, 1999,
are exercisable only under certain conditions, and when exercisable the holder
will be entitled to purchase from the company one one-thousandth of a share of a
new series of preferred stock at a price of $95 per one one-thousandth of a
preferred share, subject to certain adjustments. The rights will become
exercisable 10 days after a person or group acquires beneficial ownership of 20
percent or more of the company's shares, or 10 business days (or such later time
as the Board of Directors may determine) after a person or group announces an
offer the consummation of which would result in such person or group owning 20
percent or more of the shares.
Retirement Plans
Substantially all non-union employees of the company and its subsidiaries are
covered by various contributory and non-contributory pension or profit-sharing
plans. The company also participates in several multi-employer plans providing
defined benefits to union employees under the provisions of collective
bargaining agreements.
Contributions under the defined contribution profit sharing plans are determined
at the discretion of the Board of Directors and were $5.5, $5.3 and $5.1 million
for fiscal 1996, 1995 and 1994, respectively.
Amounts charged to union pension expense were $33.5, $31.8 and $28.2 million for
fiscal 1996, 1995 and 1994, respectively.
Benefit calculations for the company's defined benefit pension plan are based on
years of service and the participants' highest compensation during five
consecutive years of employment. Annual payments to the pension trust fund are
determined in compliance with the Employee Retirement Income Security Act
(ERISA).
The following table sets forth the company's defined benefit pension plans'
funded status and the amounts recognized in the company's financial statements:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(In thousands) February 24, February 25,
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
accumulated benefit obligation:
Vested $ 178,894 $ 139,315
Total $ 197,877 $ 153,480
- -------------------------------------------------------------------------------
Projected benefit obligation $ 244,958 $ 192,082
Plan assets at fair value (200,985) (164,943)
- -------------------------------------------------------------------------------
Projected benefit obligation in
excess of plan assets 43,973 27,139
Unrecognized net loss (35,298) (14,096)
Unrecognized prior service cost 552 307
Unrecognized transition obligation (380) (475)
Adjustment to minimum liability 138 125
- -------------------------------------------------------------------------------
Pension liability $ 8,985 $ 13,000
- -------------------------------------------------------------------------------
</TABLE>
Net pension expense included the following components:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(In thousands) 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 8,742 $10,647 $ 8,848
Interest cost 16,815 15,638 14,975
Actual return on plan assets (32,468) (4,892) (12,834)
Net amortization and deferral 17,053 (9,490) (1,235)
- -------------------------------------------------------------------------------
Net pension expense $ 10,142 $11,903 $ 9,754
- -------------------------------------------------------------------------------
</TABLE>
The weighted-average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligation were 7.5 percent and 4.5 percent, respectively for 1996, and 8.5
percent and 4.5 percent, respectively, for 1995. The expected long-term rate of
return on assets was 10 percent. The company computes pension expense using the
projected unit credit actuarial cost method.
The company also maintains non-contributory, unfunded pension plans to provide
certain employees with pension benefits in excess of limits imposed by federal
tax law.
The projected benefit obligation of the unfunded plans totals $16.9 and $13.7
million at February 24, 1996 and February 25, 1995, respectively. The
accumulated benefit obligation of this plan totaled $12.9 and $10.4 million at
February 24, 1996 and February 25, 1995, respectively. Net periodic pension cost
was $2.2, $1.9 and $1.3 million for fiscal 1996, 1995 and 1994, respectively.
- 35 -
<PAGE>
Notes To Consolidated Financial Statements
Other Postretirement Benefits:
In addition to providing pension benefits, the company provides certain health
care and life insurance benefits for retired employees. Employees become
eligible for these benefits upon meeting certain age and service requirements.
The periodic postretirement benefit cost and accumulated postretirement benefit
obligation are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(In thousands)
Net periodic postretirement benefit cost 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits attributed to
service during the period $1,460 $1,901 $1,783
Interest cost on accumulated
postretirement benefit obligation 3,667 4,024 3,686
Net amortization and deferral (335) 93 340
- -------------------------------------------------------------------------------
Net periodic postretirement
benefit cost $4,792 $6,018 $5,809
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Accumulated postretirement February 24, February 25,
benefit obligation 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Retirees $18,771 $21,021
Active plan participants 34,555 30,607
- -------------------------------------------------------------------------------
Total accumulated postretirement
benefit obligation 53,326 51,628
Unrecognized (loss) gain (3,929) 1,328
Unrecognized prior service cost 2,482 (362)
- -------------------------------------------------------------------------------
Postretirement benefit liability $51,879 $52,594
- -------------------------------------------------------------------------------
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5 percent in 1996 and 8.5 percent in
1995.
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 12 percent through fiscal 1995, 9 percent
through fiscal 1999 and 6 percent thereafter. The health care cost trend rate
assumption has a significant effect on the amounts reported. For example, a 1
percent increase in the health care trend rate would increase the accumulated
postretirement benefit obligation by $7.9 million and $6.5 million and the net
periodic cost by $.9 million and $1 million for fiscal 1996 and 1995,
respectively.
Industry Segment Information
Information concerning the company's continuing operations by business segment
for the years ended February 24, 1996, February 25, 1995 and February 26, 1994,
as required by Statement of Financial Accounting Standards No. 14, "Financial
Reporting for Segments of a Business Enterprise," is contained on page 24.
Commitments and Contingencies
The company has guaranteed mortgage loan and other debt obligations of $16.0
million. The company has also guaranteed the leases and fixture financing loans
of various affiliated retailers with a present value of $36.1 and $6.9 million,
respectively. The company has provided limited recourse to purchasers of notes
receivable from affiliated retailers with outstanding note balances of $56.9 and
$34.8 million, $17.0 and $7.2 million of which the company has contingent
liability at February 24, 1996 and February 25, 1995, respectively. In addition,
the company is contingently liable for bonds totaling $1.2 million. The company
has also entered into note repurchase agreements with various lenders totaling
$7.5 million, under which certain events require the company to repurchase
collateralized loans.
The company is a party to various legal proceedings arising from the normal
course of business activities, none of which, in management's opinion, is
expected to have a material adverse impact on the company's consolidated results
of operations or its financial position.
- 36 -
<PAGE>
Independent Auditors' Report
SUPERVALU INC.
Board of Directors and Stockholders
Eden Prairie, Minnesota
We have audited the accompanying consolidated balance sheets of SUPERVALU INC.
and subsidiaries as of February 24, 1996 and February 25, 1995, and the related
statements of earnings, stockholders' equity and cash flows for each of the
three years (52 weeks) in the period ended February 24, 1996. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SUPERVALU INC. and
subsidiaries as of February 24, 1996 and February 25, 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended February 24, 1996, in conformity with generally accepted accounting
principles.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
April 5, 1996
- 37 -
<PAGE>
- --------------------------------------------------------------------------------
Unaudited Quarterly Financial Information
- --------------------------------------------------------------------------------
Quarterly unaudited financial information for SUPERVALU INC. and subsidiaries is
as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) Fiscal Year (52 Weeks) Ended February 24, 1996
- ---------------------------------------------------------------------------------------------------------------
First Second Third Fourth Year
(16 wks) (12 wks) (12 wks) (12 wks) (52 wks)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $4,973,037 $3,779,397 $3,886,595 $3,847,292 $16,486,321
Gross profit 460,341 351,708 366,845 400,825 1,579,719
Net earnings 45,951 33,278 38,445 48,759 166,433
Net earnings per common share .66 .49 .57 .72 2.44
Dividends declared per common share .235 .245 .245 .245 .970
Weighted average shares 69,225 68,181 67,841 67,504 68,277
- ---------------------------------------------------------------------------------------------------------------
Fiscal Year (52 Weeks) Ended February 25, 1995
- ---------------------------------------------------------------------------------------------------------------
First Second Third Fourth Year
(16 wks) (12 wks) (12 wks) (12 wks) (52 wks)
- ---------------------------------------------------------------------------------------------------------------
Net sales $4,991,115 $3,773,725 $3,908,194 $3,890,738 $16,563,772
Gross profit 438,168 336,237 360,893 388,357 1,523,655
Net earnings 50,613 33,515 (84,123) 43,329 43,334
Net earnings per common share .71 .47 (1.18) .61 .61
Dividends declared per common share .220 .235 .235 .235 .925
Weighted average shares 71,633 71,471 71,487 70,879 71,388
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The results for the third quarter, fiscal 1995, include restructuring and other
charges after tax of $159.4 million and a $40.8 million deferred tax
benefit related to the partial disposition of ShopKo in fiscal 1992.
- 38 -
<PAGE>
I N V E S T O R I N F O R M A T I O N SUPERVALU INC.
ANNUAL MEETING
Stockholders are invited to attend the Annual Stockholder's Meeting, which will
be held on June 27, 1996, at 10:30 a.m., Minneapolis time at the
Minneapolis Convention Center
1301 Second Avenue South
Minneapolis, Minnesota
TRANSFER AGENT & REGISTRAR
Shareholders may contact the transfer agent with any matter concerning ownership
of SUPERVALU stock.
Norwest Shareowner Services
PO Box 64854
St. Paul, Minnesota 55164 0854
800 468 9716
STOCK EXCHANGE
The company's common stock is listed on the New York Stock Exchange (trading
symbol SVU).
STOCKHOLDERS OF THE COMPANY
As of May 8, 1996 there were approximately 7,901 holders of the company's stock.
FORM 10-K
A copy of the annual report to the Securities and Exchange Commission on Form
10-K may be obtained without charge to stockholders after May 24, 1996. Requests
should be directed to:
Office of the Secretary
SUPERVALU INC.
PO Box 990
Minneapolis, Minnesota 55440
DIVIDEND REINVESTMENT PLAN
Stockholders of record may elect to participate in the company's dividend
reinvestment plan. No brokerage commission or service fees are charged on any
shares purchased through either reinvested dividends or optional cash payments.
The plan is administered by Norwest Bank Minnesota, N.A. Requests for a brochure
describing terms and conditions of the plan and an authorization card should be
addressed to the Transfer Agent at the address set forth above.
INVESTOR RELATIONS
Inquiries from securities analysts and institutional investors are welcomed and
should be directed to:
Kristine K. Sundberg
Vice President
Investor Relations & Communications
612 828 4450
In the interest of providing timely information, the company will no longer
print quarterly earnings reports but will provide its quarterly earnings release
as soon as results are made public.
SUPERVALU earnings releases are now available at no charge through a Wall Street
Journal service by calling 1 800 965 4404 or by fax: 1 800 965 6766.
Another fax service is Company News On Call: 1 800 758 5804. An automated
operator will ask for SUPERVALU's extension number, which is 831017.
In addition, quarterly earnings releases will be available on the Internet World
Wide Web at http://www.prnewswire.com.
To be added to the company's mailing list please call or write:
SUPERVALU INC.
Investor Relations & Communications
PO Box 990
Minneapolis, Minnesota 55440
Phone: 612 828 4599
Fax: 612 828 8955
<PAGE>
EXHIBIT (21)
SUPERVALU INC. SUBSIDIARIES
as of May 1, 1996
(All are Subsidiary Corporations 100% Owned Directly or Indirectly, Except as
Noted)
<TABLE>
<CAPTION>
PERCENTAGE OF VOTING
JURISDICTION SECURITIES OWNED BY
OF ORGANIZATION IMMEDIATE PARENT
---------------------------------- ---------------------
<S> <C> <C>
SUPERVALU INC.
Diamond Lake 1994 L.L.C. Delaware Limited Liability Company 25%
J. M. Jones Equipment Company Delaware 100%
Jackson Markets, Inc. Mississippi 100%
Maplewood East 1996 L.L.C. Delaware Limited Liability Company 70%
Max Club, Inc. Minnesota 100%
NAFTA Industries Consolidated, Inc. Texas 51%
NAFTA Industries, Ltd. Texas Limited Partnership 51%
NC&T Supermarkets, Inc. Ohio 100%
Nevada Bond Investment Corp. I Nevada 100%
Planmark Architecture of Oregon, P.C. Oregon 100%
Planmark, Inc. Minnesota 100%
Preferred Products, Inc. Minnesota 100%
Risk Planners Agency of Ohio, Inc. Ohio 100%
Risk Planners of Mississippi, Inc. Mississippi 100%
Risk Planners of Pennsylvania, Inc. Pennsylvania 100%
Risk Planners, Inc. Minnesota 100%
Risk Planners of Illinois, Inc. Illinois 100%
Risk Planners of Montana, Inc. Montana 100%
SUPERVALU Pharmacies, Inc. Minnesota 100%
SUPERVALU Transportation, Inc. Minnesota 100%
SUVACO Insurance International, Ltd. Islands of Bermuda 100%
Sweet Life Foods, Inc. Missouri 100%
Market Development Corporation Connecticut 100%
Springfield Sugar & Products Company Delaware 100%
First Colonial Trading Corporation Massachusetts 100%
Hamlet Trading Corporation Massachusetts 100%
Sweet Life Products Corporation New York 75%
Valu Ventures, Inc. Minnesota 100%
Valu Ventures 2, Inc. Minnesota 100%
Valu Ventures-Albert Lea, Inc. Minnesota 100%
Valu Ventures-Duluth, Inc. Minnesota 100%
Western Dairy Distributors, Inc. Colorado 100%
Woodbury 1995 L.L.C. Delaware Limited Liability Company 25%
SUPERMARKET OPERATORS OF AMERICA INC. Delaware 100%
Advantage Logistics - Midwest, Inc. Delaware 100%
Advantage Logistics - Southeast, Inc. Alabama 100%
Clyde Evans Markets, Inc. Ohio 100%
Clyde Evans, Inc. Ohio 100%
Hyper Shoppes, Inc. Delaware 100%
HS Real Estate Company, Inc. Delaware 100%
Hyper Shoppes (Colorado), Inc. Colorado 100%
Hyper Real Estate (Colorado), Inc. Colorado 100%
Hyper Shoppes (Ohio), Inc. Ohio 100%
bigg's (KY), Inc. Delaware 100%
BFO, Inc. Ohio 100%
HSO, Inc. Ohio 100%
Scott's Food Stores, Inc. Indiana 100%
SV Ventures* Indiana General Partnership 50%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF VOTING
JURISDICTION SECURITIES OWNED BY
OF ORGANIZATION IMMEDIATE PARENT
--------------- --------------------
SUPERMARKET OPERATORS OF AMERICA INC. (CONTINUED)
<S> <C> <C>
SUPERVALU HOLDINGS, INC. Missouri 100%
(f/k/a Wetterau Incorporated)
Airway Redevelopment Corporation Missouri 100%
Augsburger's, Inc. Indiana 100%
Glenn-Wohlberg & Company Missouri 100%
Hazelwood Farms Bakeries, Inc. Missouri 100%
John Alden Industries, Inc. Rhode Island 100%
Livonia Holding Company, Inc. Michigan 100%
Foodland Distributors Michigan General Partnership 50%
Mohr Developers, Inc. Missouri 100%
Mohr Distributors of Litchfield, Inc. lllinois 100%
Save Mart Foods, Inc. Missouri 100%
Treasure Enterprises, Inc. Missouri 100%
Shop 'N Save Warehouse Foods, Inc. Missouri 100%
Wincom Systems, Incorporated Missouri 100%
SV Ventures* Indiana General Partnership 50%
USCP-WESCO, Inc. California 100%
WC&V Supermarkets, Inc. Vermont 100%
Wetterau Finance Co. Missouri 100%
Wetterau Independence, Inc. Missouri 100%
Wetterau Insurance Co. Ltd. Bermuda 100%
SUPERVALU OPERATIONS, INC. Rhode Island 100%
(f/k/a Wetterau N.E. Inc.)
Ellsworth Foods, Inc. Maine 100%
Glendale Foods, Inc. Pennsylvania 100%
M & C Foods, Inc. Pennsylvania 100%
Maryland Special Realty Corp. Maryland 100%
Moran Foods, Inc. Missouri 100%
Lot 18 Redevelopment
Corporation Missouri 100%
Pets, Crafts & Things, Inc. Pennsylvania 100%
Total Insurance Marketing
Enterprises, Inc. Pennsylvania 100%
Ultra Foods, Inc. New Jersey 100%
Verona Road Associates, Inc. Pennsylvania 100%
West Kittanning Foods, Inc. Pennsylvania 56.8%
</TABLE>
* SV Ventures is a general partnership between SUPERVALU Holdings, Inc. and
Scott's Food Stores, Inc. each of which holds a 50% interest. Both general
partners are direct subsidiaries of Supermarket Operators of America, Inc.
-2-
<PAGE>
EXHIBIT (23)
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in 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 of our reports dated April 5, 1996, appearing in or incorporated by
reference in this Annual Report on Form 10-K of SUPERVALU INC. for the year
ended February 24, 1996.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
May 23, 1996
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned directors
and officers of SUPERVALU INC., a Delaware corporation, which is about to file
with the Securities and Exchange Commission, Washington, D.C. 20549, its Annual
Report on Form 10-K for the year ended February 24, 1996 under the provisions of
the Securities Exchange Act of 1934, as amended, hereby constitutes and appoints
Michael W. Wright and Vernon H. Heath, his or her true and lawful attorneys-in-
fact and agents, and each of them, with full power to act without the other, for
him or her and in his or her name, place and stead, in any and all capacities
(including without limitation, as Director and/or principal Executive Officer,
principal Financial Officer, principal Accounting Officer or any other officer
of the Company), to sign such Annual Report on Form 10-K which is about to be
filed, and any and all amendments thereto, and to file such Annual Report on
Form 10-K and each such amendment thereto so signed, with all exhibits thereto,
and any and all other documents in connection therewith, with the Securities and
Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform any and all acts and
things requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he or she might do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney on
this 12th day of April, 1996.
/s/ Herman Cain /s/ Charles M. Lillis
- -------------------------------- ---------------------------
Herman Cain Charles M. Lillis
/s/ Stephen I. D'Agostino /s/ Harriet Perlmutter
- -------------------------------- ---------------------------
Stephen I. D'Agostino Harriet Perlmutter
/s/ Edwin C. Gage /s/ Carole F. St. Mark
- -------------------------------- ---------------------------
Edwin C. Gage Carole F. St. Mark
/s/ Vernon H. Heath /s/ Winston R. Wallin
- -------------------------------- ---------------------------
Vernon H. Heath Winston R. Wallin
/s/ William A. Hodder /s/ Michael W. Wright
- -------------------------------- ---------------------------
William A. Hodder Michael W. Wright
/s/ Garnett L. Keith, Jr. /s/ Jeffrey Girard
- -------------------------------- ---------------------------
Garnett L. Keith, Jr. Jeffrey Girard
/s/ Richard L. Knowlton /s/ Isaiah Harris
- -------------------------------- ---------------------------
Richard L. Knowlton Isaiah Harris
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AS OF FEBRUARY 24, 1996 AND THE CONSOLIDATED
STATEMENT OF EARNINGS FOR THE 52 WEEKS ENDED FEBRUARY 24, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-24-1996
<PERIOD-END> FEB-24-1996
<CASH> 5,215
<SECURITIES> 0
<RECEIVABLES> 402,675
<ALLOWANCES> (22,064)
<INVENTORY> 1,029,911
<CURRENT-ASSETS> 1,553,709
<PP&E> 2,500,994
<DEPRECIATION> (900,828)
<TOTAL-ASSETS> 4,183,503
<CURRENT-LIABILITIES> 1,326,702
<BONDS> 1,445,562
<COMMON> 75,335
0
5,908
<OTHER-SE> 1,134,933
<TOTAL-LIABILITY-AND-EQUITY> 4,183,503
<SALES> 16,486,321
<TOTAL-REVENUES> 16,486,321
<CGS> 14,906,602
<TOTAL-COSTS> 14,906,602
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,269
<INTEREST-EXPENSE> 140,150
<INCOME-PRETAX> 267,692
<INCOME-TAX> 101,259
<INCOME-CONTINUING> 166,433
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 166,433
<EPS-PRIMARY> 2.44
<EPS-DILUTED> 2.44
</TABLE>
<PAGE>
EXHIBIT (99.1)
CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS
OF THE SECURITIES LITIGATION REFORM ACT
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995 ("Act"), SUPERVALU INC. (the "Company") is filing
cautionary statements identifying important factors that could cause the
Company's actual results to differ materially from those projected in forward-
looking statements made by, or on behalf of the Company. When used in this
Annual Report on Form 10-K for the fiscal year ended February 24, 1996 and in
future filings by the Company with the Securities and Exchange Commission, in
the Company's press releases, other communications, and in oral statements made
by or with the approval of an authorized executive officer, the words or phrases
"will likely result", "are expected to", "will continue", "is anticipated",
"estimate", "project", "believe" or similar expressions are intended to identify
forward-looking statements within the meaning of the Act. The following
cautionary statements are for use as a reference to a readily available written
document in connection with forward looking statements as defined in the Act.
These factors are in addition to any other cautionary statements, written or
oral, which may be made or referred to in connection with any such forward-
looking statement.
WHOLESALE BUSINESS RISKS
The Company's sales and earnings at wholesale are dependent on the Company's
ability to retain existing customers and attract new customers, as well as its
ability to control costs. While the Company believes that the ADVANTAGE
initiative, including its new Activity Based Sell ("ABS") pricing, new market
driving services, and regional logistics, will enable it to attain its goals,
certain factors could adversely impact the Company's results, including: decline
of its independent retailer customer base due to competition and other factors;
loss of corporate retail sales due to increased competition and other risks
detailed more fully below; consolidations of retailers or competitors; increased
self-distribution by chain retailers; increase in operating costs; the
possibility that the Company will incur additional costs and expenses due to
further rationalization or consolidation of distribution centers; entry of new
or non-traditional distribution systems into the industry; possible delays or
increased costs in implementing the ADVANTAGE initiative; manufacturers do not
change their pricing, transportation, and/or promotional programs in cooperation
with the Company's new pricing methods; and possible loss of retailer customers
who do not accept the ADVANTAGE changes.
RISKS OF EXPANSION AND ACQUISITIONS
The Company intends to continue to grow its retail and wholesale segments in
part through acquisitions. Expansion is subject to a number of risks, including
the adequacy of the Company's capital resources; the location of suitable store
or distribution center sites and the negotiation of acceptable lease terms;
ability to hire, train and integrate employees; and possible costs and other
risks of integrating or adapting operational systems. In addition acquisitions
involve a number of special risks, including: making acquisitions at acceptable
rates of return; the diversion of management's attention to assimilation of the
operations and personnel of the acquired business; potential adverse short-term
effects on the Company's operating results; and amortization of acquired
intangible assets.
<PAGE>
Retail Business Risks
The Company's retail segment faces risks which may prevent the Company from
maintaining or increasing retail sales and earnings including: competition from
other retail chains, supercenters, non-traditional competitors, and emerging
alternative formats; operating risks of certain strategically important retail
operations; and adverse impact from the entry of other retail chains,
supercenters and non-traditional or emerging competitors into markets where the
Company has a retail concentration.
Liquidity
Management anticipates that ADVANTAGE capital spending will be funded in
significant part through reductions in working capital. If ADVANTAGE capital
spending significantly exceeds working capital reductions or other capital needs
arise, additional funding could be required from cash flow or other sources. In
addition, acquisitions could affect the Company's borrowing costs and future
financial flexibility.
Litigation
While the Company believes that it is currently not subject to any material
litigation, the costs and other effects of legal and administrative cases and
proceedings and settlements are impossible to predict with certainty. The
current environment for litigation involving food wholesalers may increase the
risk of litigation being commenced against the Company. The Company would incur
the costs of defending any such litigation whether or not any claim had merit.
The foregoing should not be construed as exhaustive and the Company disclaims
any obligation subsequently to revise any forward-looking statements to reflect
events or circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.
