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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period (12 weeks) ended September 6, 1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ................ to ...................
Commission file number 1-5418
SUPERVALU INC.
(Exact name of registrant as specified in its Charter)
DELAWARE 41-0617000
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11840 VALLEY VIEW ROAD, EDEN PRAIRIE, MINNESOTA 55344
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 828-4000
-------------------------
Former name, former address and former fiscal year, if changed since last
report:
N/A
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
The number of shares outstanding of each of the issuer's classes of Common Stock
as of October 10, 1997 is as follows:
Title of Each Class Shares Outstanding
------------------- ------------------
Common Shares 60,200,000
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
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Item 1: Financial Statements
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CONSOLIDATED STATEMENTS OF EARNINGS
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SUPERVALU INC. and Subsidiaries
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(In thousands, except per share data)
Second Quarter (12 Weeks) Ended
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September 6, 1997 % of sales September 7, 1996 % of sales
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<S> <C> <C> <C> <C>
Net sales $ 3,866,012 100.00% $ 3,778,745 100.00%
Costs and expenses:
Cost of sales 3,472,726 89.83 3,398,505 89.94
Selling and administrative expenses 303,649 7.85 291,616 7.72
Amortization of goodwill 4,557 0.12 4,193 0.11
Interest
Interest expense 29,846 0.77 31,171 0.83
Interest income 3,912 0.10 3,601 0.10
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Interest expense, net 25,934 0.67 27,570 0.73
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Total costs and expenses 3,806,866 98.47 3,721,884 98.50
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Earnings before equity in earnings and
gain on sale of ShopKo and income taxes 59,146 1.53 56,861 1.50
Equity in earnings and gain on sale of ShopKo 90,034 2.33 1,798 0.05
------------------------------------------------------------
Earnings before income taxes 149,180 3.86 58,659 1.55
Provision for income taxes
Current 58,756 18,292
Deferred 1,309 4,503
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Income tax expense 60,065 1.55 22,795 0.60
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Net earnings $ 89,115 2.31% $ 35,864 0.95%
============================================================
Net earnings per common share $ 1.44 $ .53
Weighted average number of common
shares outstanding 62,059 67,466
Dividends declared per common share $ .260 $ .250
Supplemental information:
After-tax LIFO (expense) $ (1,140) $ (1,120)
All data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
2
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
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Item 1: Financial Statements
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CONSOLIDATED STATEMENTS OF EARNINGS
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SUPERVALU INC. and Subsidiaries
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(In thousands, except per share data)
Year-to-date (28 Weeks) Ended
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September 6, 1997 % of sales September 7, 1996 % of sales
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<S> <C> <C> <C> <C>
Net sales $ 8,899,315 100.00% $ 8,757,506 100.00%
Costs and expenses:
Cost of sales 8,004,900 89.95 7,897,853 90.18
Selling and administrative expenses 683,951 7.68 656,060 7.50
Amortization of goodwill 10,594 0.12 9,784 0.11
Interest
Interest expense 71,167 0.80 72,534 0.83
Interest income 9,030 0.10 8,628 0.10
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Interest expense, net 62,137 0.70 63,906 0.73
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Total costs and expenses 8,761,582 98.45 8,627,603 98.52
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Earnings before equity in earnings and
gain on sale of ShopKo and income taxes 137,733 1.55 129,903 1.48
Equity in earnings and gain on sale of ShopKo 93,364 1.05 4,446 0.05
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Earnings before income taxes 231,097 2.60 134,349 1.53
Provision for income taxes
Current 87,387 45,777
Deferred 4,829 6,726
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Income tax expense 92,216 1.04 52,503 0.60
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Net earnings $ 138,881 1.56% $ 81,846 0.93%
================================================================
Net earnings per common share $ 2.14 $ 1.21
Weighted average number of common
shares outstanding 64,870 67,475
Dividends declared per common share $ .510 $ .495
Supplemental information:
After-tax LIFO income (expense) $ (1,545) $ 1,670
All data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
3
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<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
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SUPERVALU INC. and Subsidiaries Second Quarter as of Fiscal Year End
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(In thousands) September 6, September 7, February 22,
Assets 1997 1996 1997
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<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 39,173 $ 6,501 $ 6,539
Receivables, less allowance for losses of $15,294 at
September 6, 1997, $17,417 at September 7, 1996 and
$17,806 at February 22, 1997 380,465 378,031 403,835
Inventories 1,063,070 1,082,294 1,091,805
Other current assets 91,199 121,604 98,620
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Total current assets 1,573,907 1,588,430 1,600,799
Long-term notes receivable 68,403 49,076 45,588
Long-term investment in direct financing leases 87,184 71,429 84,350
Property, plant and equipment
Land 138,643 144,284 140,427
Buildings 937,401 949,573 957,815
Property under construction 32,870 30,267 28,030
Leasehold improvements 143,781 143,707 150,040
Equipment 1,121,377 1,057,940 1,113,486
Assets under capital leases 282,978 299,955 298,757
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2,657,050 2,625,726 2,688,555
Less accumulated depreciation and amortization
Owned property, plant and equipment 1,018,644 929,003 983,229
Assets under capital leases 58,870 53,218 56,802
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Net property, plant and equipment 1,579,536 1,643,505 1,648,524
Investment in ShopKo - 195,180 209,789
Goodwill 499,206 499,883 491,427
Other assets 199,899 247,962 202,849
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Total assets $ 4,008,135 $ 4,295,465 $ 4,283,326
============================================================
Liabilities and Stockholders' Equity
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Current Liabilities
Notes payable $ 86,975 $ 113,914 $ 134,272
Accounts payable 956,829 1,031,870 923,958
Accrued vacation, compensation and benefits 83,896 79,943 89,458
Current maturities of long-term debt 137,539 12,634 72,905
Current obligations under capital leases 21,928 21,434 21,544
Other current liabilities 132,750 98,296 126,941
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Total current liabilities 1,419,917 1,358,091 1,369,078
Long-term debt 896,805 1,147,169 1,087,162
Long-term obligations under capital leases 318,876 321,235 333,429
Deferred income taxes 42,883 43,910 38,054
Other liabilities 138,146 165,696 148,180
Stockholders' equity
Preferred stock 5,908 5,908 5,908
Common stock 75,335 75,335 75,335
Capital in excess of par value 22,873 12,951 13,296
Retained earnings 1,550,708 1,385,270 1,444,755
Treasury stock, at cost (463,316) (220,100) (231,871)
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Total stockholders' equity 1,191,508 1,259,364 1,307,423
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Total liabilities and stockholders' equity $ 4,008,135 $ 4,295,465 $ 4,283,326
============================================================
Quarterly data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
4
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
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SUPERVALU INC. and Subsidiaries
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(In thousands, except per share data)
Capital in
Preferred Common Excess of Treasury Retained
Stock Stock Par Value Stock Earnings Total
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<S> <C> <C> <C> <C> <C> <C>
Balances at February 24, 1996 $5,908 $ 75,335 $ 12,737 $ (214,746) $ 1,336,942 $ 1,216,176
Net earnings - - - - 175,044 175,044
Sales of common stock
under option plans - - 378 3,786 - 4,164
Cash dividends declared
on common stock -
$.995 per share - - - - (67,231) (67,231)
Compensation under employee
incentive plans - - 181 650 - 831
Purchase of shares for treasury - - - (21,561) - (21,561)
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Balances at February 22, 1997 5,908 75,335 13,296 (231,871) 1,444,755 1,307,423
Net earnings - - - - 138,881 138,881
Sales of common stock
under option plans - - 2,668 28,226 - 30,894
Cash dividends declared
on common stock -
$.51 per share - - - - (32,928) (32,928)
Compensation under employee
incentive plans - - 6,909 5,522 - 12,431
Purchase of shares for treasury - - - (265,193) - (265,193)
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Balances at September 6, 1997 $5,908 $ 75,335 $ 22,873 $ (463,316) $ 1,550,708 $ 1,191,508
=================================================================================================================================
Interim data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
5
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
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SUPERVALU INC. and Subsidiaries
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(In thousands)
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Year-to-date
(28 weeks ended)
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September 6, September 7,
1997 1996
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<S> <C> <C>
Cash flows from operating activities
Net earnings $ 138,881 $ 81,846
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Equity in earnings and gain on sale of ShopKo (93,364) (4,446)
Dividends received from ShopKo - 3,241
Depreciation and amortization 122,617 121,963
Provision for losses on receivables 3,221 2,716
Deferred income taxes 4,829 6,726
Other adjustments, net (1,780) (1,562)
Changes in assets and liabilities:
Receivables 16,952 1,430
Inventory 29,162 (49,147)
Accounts payable 19,944 33,363
Other assets and liabilities 30,650 28,963
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Net cash provided by operating activities 271,112 225,093
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Cash flows from investing activities
Proceeds from sale of ShopKo stock 305,153 -
Additions to long-term notes receivable (40,799) (28,211)
Proceeds received on long-term notes receivable 17,984 15,866
Proceeds from sale of property, plant and equipment 60,252 20,496
Purchase of property, plant and equipment (106,441) (126,452)
Business acquisitions, net of cash acquired (23,523) (4,996)
Other investing activities (5,597) (24,380)
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Net cash provided by (used in) investing activities 207,029 (147,677)
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Cash flows from financing activities
Net increase in checks outstanding, net of deposits 12,192 24,019
Net reduction of short-term notes payable (47,297) (44,113)
Proceeds from issuance of long-term debt - -
Repayment of long-term debt (125,723) (4,683)
Reduction of obligations under capital leases (12,756) (12,278)
Proceeds from the sale of common stock under option plans 27,220 1,372
Dividends paid (33,948) (33,212)
Payments for purchase of treasury stock (265,195) (7,235)
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Net cash used in financing activities (445,507) (76,130)
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Net increase in cash and cash equivalents 32,634 1,286
Cash and cash equivalents at beginning of year 6,539 5,215
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Cash and cash equivalents at end of second quarter $ 39,173 $ 6,501
========================================================================================================
All data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
6
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting Policies
- -------------------
The summary of significant accounting policies is included in the notes to
consolidated financial statements in the 1997 annual report of SUPERVALU INC.
("SUPERVALU" or the "company").
ShopKo Stores, Inc. Sale
- ------------------------
On July 2, 1997, the company exited its 46 percent investment in ShopKo through
two simultaneous and cross-conditional transactions: selling 8,174,387 shares
back to ShopKo for an aggregate of $150 million and a secondary public offering
of 6,557,280 shares. The transactions resulted in proceeds of $305 million and
a net gain of $53.7 million. Proceeds were primarily used to repurchase shares
of SUPERVALU stock.
Treasury Stock Purchase Program
- -------------------------------
On June 11, 1997, the Board of Directors approved an additional treasury stock
purchase program authorizing the company to repurchase up to 8.5 million shares
in anticipation of the sale of its ShopKo holdings. In the quarter, the company
repurchased 6.9 million shares in conjunction with the ShopKo stock sale. These
shares were purchased at a cost of $236.5 million. Six million of these shares
were purchased from a financial intermediary through an accelerated stock
purchase transaction at $34 per share, subject to a market price adjustment
provision. In order to complete the transaction, the financial intermediary has
borrowed SUPERVALU common shares and is purchasing replacement shares in the
open market. The ultimate price per share will be adjusted for changes in the
market price of SUPERVALU common stock prior to settlement and a reimbursement
for dividends paid on the borrowed shares. The final purchase price and
settlement is expected in February and will be in either cash or shares of
SUPERVALU common stock, at the company's option. The settlement cost, currently
estimated at $30 million, will increase the cost of treasury stock as of the
date the final purchase price is determined.
Statement of Registrant
- -----------------------
The data presented herein is unaudited but, in the opinion of management,
includes all adjustments necessary for a fair presentation of the consolidated
financial position of the company and its subsidiaries at September 6, 1997 and
September 7, 1996 and the results of the company's operations and cash flows for
the periods then ended. These interim results are not necessarily indicative of
the results of the fiscal years as a whole.
A limited review of this data has been performed by the company's independent
certified public accountants, Deloitte & Touche LLP. A copy of their report is
attached as an exhibit to this report.
7
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Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
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Results of Operations
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RESULTS FOR THE QUARTER:
The company recorded record sales of $3.9 billion and earnings per share of $.57
after excluding the non-recurring gain from the sale of its investment in ShopKo
Stores, Inc. ("ShopKo"). Last year sales were $3.8 billion and earnings per
share were $.53. The following table sets forth net sales by segment:
<TABLE>
<CAPTION>
Net Sales by Segment
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(In thousands) Second Quarter (12 weeks)
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September 6, 1997 September 7, 1996
Net Sales % of Total Net Sales % of Total
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<S> <C> <C> <C> <C>
Food distribution $3,387,404 87.6 % $3,310,689 87.6 %
Retail food 1,081,245 28.0 1,085,125 28.7
Less: Eliminations (602,637) (15.6) (617,069) (16.3)
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Total net sales $3,866,012 100.0 % $3,778,745 100.0 %
=====================================================================================
</TABLE>
NET SALES
Net sales were favorable compared to last year, positively impacted by a 2.3%
increase in food distribution sales. Retail food sales declined .4% for the
quarter.
Food distribution sales increased over last year due to the addition of new
customers and the growth of Save-A-Lot, despite last year's planned
discontinuance of service to a major customer in the Southeast and competitive
market conditions. Food price inflation, as measured by the company was .3% for
the quarter. Retail food sales decreased slightly compared to last year
primarily due to the closing or sale of nine Cub Food stores over the past
twelve months and a decrease in same-store sales of 1.6% due to competitive
activities.
GROSS PROFIT
Gross profit as a percentage of net sales was 10.2% compared with 10.1% last
year, and was essentially unchanged for both retail and food distribution.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses were 8.0% of net sales compared with 7.8%
last year. The increase was primarily in the retail food segment due to store
remodels and upgrades and fixed expenses as a percent of lower sales. Food
distribution expenses continue to be negatively impacted by increased technology
related spending primarily in support of the ADVANTAGE program as well as to
make systems year 2000 compliant.
8
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OPERATING EARNINGS
The company's pre-tax operating earnings (earnings before interest, corporate
expenses, equity in earnings and gain on sale of ShopKo, and taxes) increased
to $90.7 million compared with $89.6 million last year. Retail food operating
earnings increased 6.9% to $20.3 million due to improved gross margin. Food
distribution operating earnings were $70.4 million, flat to last year.
INTEREST EXPENSE AND INCOME
Interest expense decreased to $29.8 million compared with $31.2 million last
year, reflecting a reduction in debt levels relating to the timing of cash flows
from the ShopKo transactions. Interest income increased to $3.9 million
compared with $3.6 million last year, primarily due to the addition of notes
receivable and new capital subleases.
EQUITY IN EARNINGS AND GAIN ON SALE OF SHOPKO
On July 2, 1997, the company exited its 46 percent investment in ShopKo through
two simultaneous and cross-conditional transactions: selling 8,174,387 shares
back to ShopKo for an aggregate of $150 million and a secondary public offering
of 6,557,280 shares. The transactions resulted in proceeds of $305 million and
a pretax gain of $90.0 million. The gain resulted in $.87 earnings per share in
the quarter. Due to the sale, there was no equity in earnings recorded in the
quarter compared with $1.8 million last year.
INCOME TAXES
The effective tax rate increased to 40.3% in the quarter compared with 38.9%
last year. The increase in the effective tax rate was due to the elimination of
ShopKo earnings.
NET EARNINGS
Net earnings were $89.1 million or $1.44 per share compared with last year's
$35.9 million or $.53 per share. Excluding Shopko, net earnings would have been
$35.5 million or $.57 per share compared with last year's $34.1 million or $.50
per share. Weighted average shares declined to 62.1 million compared with last
year's 67.5 million primarily due to the repurchase of 6.9 million shares
relating to the ShopKo transaction.
9
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YEAR-TO-DATE RESULTS:
The following table sets forth net sales by segment:
<TABLE>
<CAPTION>
Net Sales by Segment
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(In thousands) Year-to-Date (28 weeks)
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September 6, 1997 September 7, 1996
Net Sales % of Total Net Sales % of Total
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<S> <C> <C> <C> <C>
Food distribution $ 7,834,284 88.0 % $ 7,729,600 88.3 %
Retail food 2,446,098 27.5 2,410,111 27.5
Less: Eliminations (1,381,067) (15.5) (1,382,205) (15.8)
- -------------------------------------------------------------------------------------
Total net sales $ 8,899,315 100.0 % $ 8,757,506 100.0 %
=====================================================================================
</TABLE>
NET SALES
Net sales were favorable compared to last year, positively impacted by a 1.4%
increase in food distribution sales and a 1.5% increase in retail food sales.
Food distribution sales increased over last year due to the addition of new
customers and the growth of Save-A-Lot, despite last year's planned
discontinuance of service to a major customer in the Southeast and competitive
market conditions. Food price inflation, as measured by the company was .5%
year-to-date.
Retail food sales were favorable compared to last year primarily due to new
store openings, partially offset by the closing or sale of underperforming
stores and a decrease in same-store sales of 1.8% due to competitive activities.
GROSS PROFIT
Gross profit as a percentage of net sales increased to 10.1% compared with 9.8%
last year. The increase was due principally to a strong retail food gross
profit margin resulting from ongoing merchandising and promotional activities in
all of the retail concepts. In addition, food distribution gross profit margin
was favorable primarily due to merchandising initiatives, offset somewhat by
higher LIFO expense incurred in the first quarter due to increased coffee
prices.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses were 7.8% of net sales compared with 7.6%
last year. The increase was primarily due to higher food distribution expenses
which continue to be negatively impacted by increased technology related
spending primarily in support of the ADVANTAGE program as well as to make
systems year 2000 compliant. In addition, retail food expenses were impacted by
store remodel and upgrade costs.
OPERATING EARNINGS
The company's pre-tax operating earnings (earnings before interest, corporate
expenses, equity in earnings and gain on sale of ShopKo, and taxes) increased
to $213.6 million compared with $206.1 million last year. Retail food operating
earnings increased 20.1% to $56.5 million due to improved gross margin and the
sale
10
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or closing of underperforming retail stores. Food distribution operating
earnings decreased 1.2% to $157.2 million due to higher technology related
spending in support of the ADVANTAGE program.
INTEREST EXPENSE AND INCOME
Interest expense decreased to $71.2 million compared with $72.5 million last
year, reflecting a reduction in debt levels relating to the timing of cash flows
from the ShopKo transactions. Interest income increased to $9.0 million
compared with $8.6 million last year, primarily due to the addition of notes
receivable and new capital subleases.
EQUITY IN EARNINGS AND GAIN ON SALE OF SHOPKO
On July 2, 1997, the company exited its 46 percent investment in ShopKo through
two simultaneous and cross-conditional transactions: selling 8,174,387 shares
back to ShopKo for an aggregate of $150 million and a secondary public offering
of 6,557,280 shares. The transactions resulted in proceeds of $305 million and
a pretax gain of $90.0 million. Equity in earnings for the year were $3.3
million compared with $4.4 million last year.
INCOME TAXES
The effective tax rate increased to 39.9% compared with 39.1% last year due to
the elimination of ShopKo earnings.
NET EARNINGS
Net earnings were $138.9 million or $2.14 per share compared with last year's
$81.8 million or $1.21 per share. Excluding ShopKo, net earnings would have
been $81.9 million or $1.26 per share compared with last year's $77.4 million or
$1.14 per share. Weighted average shares declined to 64.9 million compared with
last year's 67.5 million primarily due to the repurchase of 6.9 million shares
in the second quarter relating to the ShopKo transaction.
11
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Liquidity and Capital Resources
- -------------------------------
Internally generated funds, principally from the company's food distribution
business, continued to be the major source of capital for liquidity and capital
growth. Cash provided from operations year-to-date was $271.1 million compared
with $225.1 million last year. The increase was primarily due to decreased
inventory levels in food distribution resulting from efforts to reduce
inventory. Cash provided from operations of $271.1 million was primarily used
to finance capital expenditures of $106.4 million and repay long-term debt and
short-term notes payable of $173.0 million.
The proceeds from the ShopKo transaction were used to repurchase shares under
the June 1997 treasury stock purchase program. During the quarter, the company
repurchased 6.9 million shares at a cost of $236.5 million. Six million of
these shares were purchased from a financial intermediary through an accelerated
stock purchase transaction, subject to a market price adjustment provision. In
order to complete the transaction, the financial intermediary has borrowed
SUPERVALU common shares and is purchasing replacement shares in the open market
through February 1998. The market price adjustment is currently estimated at
$30 million and will increase the cost of treasury stock as of the date the
final purchase price is determined. An additional .6 million shares were
repurchased in the second quarter and .5 million shares were purchased following
quarter end at a cost of $25.4 million and $19.0 million, respectively, under
the August 1996 treasury stock program to be used for employee stock option
exercises and compensation programs.
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 shelf
registration in effect pursuant to which the company could issue $242.5 million
of additional debt securities. In October, the company renegotiated its $400
million revolving credit agreement to obtain more favorable terms and extend the
expiration date to October 2002. Maturities of debt issued will depend on
management's views with respect to the relative attractiveness of interest rates
at the time of issuance.
CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The information in this 10Q 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 from time to time in the
company's future Securities and Exchange Commission filings.
12
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PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K.
- ------- ---------------------------------
(a) Exhibits filed with this Form 10-Q:
(10)a. Separation Agreement and General Release dated July 11, 1997
between Jeffrey C. Girard and SUPERVALU INC.
(10)b. SUPERVALU INC. Non-Employee Directors Deferred Stock Plan, as
amended.
(10)c. SUPERVALU INC. Deferred Compensation Plan for Non-Employee
Directors, as amended.
(15) Letters from Deloitte & Touche regarding unaudited interim
financial information.
(27) Financial Data Schedule.
(99.1) Cautionary Statements pursuant to the Securities Litigation
Reform Act.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUPERVALU INC. (REGISTRANT)
Dated: October 21, 1997 By: /s/ Pamela K. Knous
-------------------
Pamela K. Knous
Executive Vice President, Chief
Financial Officer
(Authorized officer of Registrant)
13
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EXHIBIT (10)a.
SEPARATION AGREEMENT AND GENERAL RELEASE
----------------------------------------
This Separation Agreement and General Release ("Agreement") is entered into
by and between Jeffrey C. Girard ("Girard") and SUPERVALU INC. ("SUPERVALU").
WHEREAS, Girard's duties with SUPERVALU as Executive Vice President and
Chief Financial Officer shall terminate by mutual agreement effective July 12,
1997; and
WHEREAS, Girard and SUPERVALU desire to fully and finally settle all
issues, differences and actual and potential claims between them, including, but
in no way limited to, any claim that might arise out of Girard's employment with
SUPERVALU and the termination thereof;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
Girard and SUPERVALU agree as follows:
1. Girard hereby resigns from his position with SUPERVALU as Executive
Vice President and Chief Financial Officer, effective July 12, 1997, and resigns
as an employee of the company effective July 12, 1998.
2. For a period of twelve months, from July 13, 1997 through July 12,
1998, SUPERVALU agrees as follows:
a. to continue paying Girard's base compensation, less all customary
SUPERVALU deductions;
b. to continue to provide Girard with his current automobile and
country club allowances; and
c. to continue to provide Girard with his current health, dental,
and life insurance coverages on the same terms currently in place, provided that
SUPERVALU's obligation hereunder to provide any such coverage(s) shall terminate
immediately if and when Girard becomes employed elsewhere and becomes eligible
to receive any such coverage(s) from a new employer.
3. It is understood that that the gross amount of any payment to be made
by SUPERVALU after October 12, 1997 pursuant to paragraph 2 shall be reduced by
the gross amount of:
a. any compensation received by Girard from any subsequent employer
during that same period, and
b. any income from self-employment in excess of a reasonable return
on any related personal investment by Girard during that same period.
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4. Girard shall be eligible for a pro rata annual bonus, if any, for
fiscal year 1998, based upon his service through July 12, 1997. Any such bonus
will be paid to Girard at the same time it is paid to other participants in the
normal course of business.
5. Girard shall be entitled to exercise any vested stock options during a
period of sixty (60) days following his last receipt of any base compensation
payments from SUPERVALU. It is understood, however, that no additional options
shall vest at any time after October 13, 1997, with the exception of price
vesting options which may vest in accordance with the terms of such options.
6. On or before July 22, 1997, SUPERVALU shall pay Girard for all accrued
vacation pay through July 12, 1997, less all customary SUPERVALU deductions.
7. SUPERVALU shall provide Girard with executive-level outplacement
services, or some other similar arrangement of comparable cost.
8. Girard's rights to benefits under all other SUPERVALU benefit plans
shall be governed by the terms of those plans.
9. All other items of compensation not mentioned in paragraphs 2 through
7 above have been resolved, and Girard shall have no further claim to any other
items of compensation or benefits.
10. Girard agrees that he was not entitled to all of the payments and
benefits described in paragraphs 2 through 7 as a result of his employment with
SUPERVALU, and that the payments and benefits are being provided as
consideration for his acceptance and execution of this Agreement.
11. As an essential inducement to SUPERVALU to enter into this Agreement,
and as consideration for the foregoing promises of SUPERVALU, Girard agrees as
follows:
(a) Girard acknowledges that during the course of his employment, he
has had access to and gained knowledge of highly confidential and proprietary
information and trade secrets, as defined in SUPERVALU's policies. Girard
further acknowledges that the misuse, misappropriation or disclosure of this
information could cause irreparable harm to SUPERVALU, both during and after the
term of Girard's employment. Therefore, Girard agrees that both during his
employment and during the period ending twelve (12) months after his last
receipt of any base compensation hereunder, he will not disclose to, or use for
the benefit of anyone outside of SUPERVALU, any financial or other information
reflecting the financial position, performance, or valuation of SUPERVALU or any
portion thereof. Girard further agrees that during this same period he will not
disclose to, or use for the benefit of anyone outside of SUPERVALU, any
confidential or proprietary information or trade secrets, except upon
SUPERVALU's written consent.
(b) Girard confirms and agrees that SUPERVALU will be substantially
harmed if Girard were to compete with SUPERVALU subsequent to his separation
from employment. Therefore, Girard agrees that for the period commencing upon
his execution of this Agreement and ending twenty-four (24) months after his
last receipt of any base compensation hereunder, Girard will not, within the
continental United States, directly or
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indirectly, own, manage, operate, join, control, be employed by or participate
in ownership, management, operation or control of, or be connected in any manner
with any business that competes with SUPERVALU as a food wholesaler. Girard
further agrees that for the period commencing upon his execution of this
Agreement and ending twelve (12) months after his last receipt of any base
compensation hereunder, Girard will not, within the continental United States,
(i) directly or indirectly, own, manage, operate, join, control, be employed by
or participate in ownership, management, operation or control of, or be
connected in any manner with Schnucks Markets, Inc., or (ii) directly or
indirectly, become involved in any manner with any current customer of SUPERVALU
for the purpose of acquiring, leasing, selling, or otherwise disposing of any of
that customer's stores. Girard shall retain the right to seek the written
approval of SUPERVALU's Chief Executive Officer waiving the requirements of this
paragraph 11(b) with respect to any particular activity in which Girard seeks to
engage.
(c) Girard agrees that for the period commencing upon his execution
of this Agreement and ending twelve (12) months after his last receipt of any
base compensation hereunder, he will not either directly, or in concert with
others, recruit, solicit or induce, or attempt to induce, any employee or
employees of SUPERVALU or any of its affiliates to terminate their employment
and/or become associated with another employer. Girard further agrees that for
the period commencing upon his execution of this Agreement and ending twenty-
four (24) months after his last receipt of any base compensation hereunder, he
will not either directly, or in concert with others, recruit, solicit or induce,
or attempt to induce, any Information Technology employee or employees of
SUPERVALU or any of its affiliates to terminate their employment and/or become
associated with another employer.
(d) Without limiting the other remedies available to SUPERVALU in the
event that Girard should violate any of the provisions of paragraphs 11 (a),
(b), and/or (c), Girard agrees that SUPERVALU's obligation to provide any
further payments and/or benefits under paragraphs 2 through 7 above shall
terminate immediately upon any such violation.
(e) By this Agreement, Girard and SUPERVALU intend to settle any and
all claims which Girard has or may have against SUPERVALU as a result of
Girard's employment with SUPERVALU and/or the cessation of Girard's employment
with SUPERVALU. For the consideration expressed herein, Girard hereby releases
and discharges SUPERVALU, its officers, employees, agents, assigns, insurers,
representatives, counsel, administrators, successors, shareholders, and/or
directors from all liability for damages or claims of any kind and agrees not to
institute any claim for damages or otherwise, by charge or otherwise, nor
authorize any other party, governmental or otherwise, to institute any claim via
administrative or legal proceedings against SUPERVALU for any such claims
including, but not limited to, any claims arising under or based upon the
Minnesota Human Rights Act, Minn. Stat. (S)(S) 363.01 et seq.; Title VII of the
Civil Rights Act, 42 U.S.C. (S)(S) 2000e et seq.; the Age Discrimination in
Employment Act, 29 U.S.C. (S)(S) 621 et seq.; or the Americans With Disabilities
Act, 42 U.S.C. (S)(S) 12101 et seq.; and any contract, quasi contract, or tort
claims, whether developed or undeveloped, arising from or related to Girard's
employment with SUPERVALU, and/or the cessation of Girard's employment with
SUPERVALU. Girard and SUPERVALU agree that, by signing this Agreement, Girard
does not waive any claims arising after the execution of this Agreement.
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(f) By this Agreement, SUPERVALU releases Girard, his successors and
assigns from all liability for damages or claims of any kind and agrees not to
institute any claim for damages or otherwise arising from or related to Girard's
employment with SUPERVALU.
12. Girard agrees to provide services to SUPERVALU as reasonably requested
so long as he continues to receive any payments of base compensation hereunder.
13. Girard further agrees that he will be available upon reasonable notice
and will voluntarily participate in the defense or prosecution of any pertinent
claims or litigation that may be brought against or on behalf of SUPERVALU.
SUPERVALU agrees that it will indemnify Girard with respect to such claims or
litigation to the same extent that it is permitted to indemnify its current
officers.
14. Girard is hereby informed of his right to rescind this Agreement as
far as it extends to potential claims under Minn. Stat. (S)(S) 363.01 et seq.
(prohibiting discrimination in employment) by written notice to SUPERVALU within
fifteen (15) calendar days following his execution of this Agreement. To be
effective, such written notice must either be delivered by hand or sent by
certified mail, return receipt requested, addressed to Mr. Ronald C. Tortelli,
SUPERVALU INC., P. O. Box 990, Minneapolis, Minnesota 55440, delivered or post-
marked within such fifteen (15) day period. Girard understands that SUPERVALU
will have no obligations under this Agreement in the event such notice is timely
delivered and any payments made as of that date by SUPERVALU pursuant to
paragraphs 2 through 7, above, shall be immediately repaid by Girard to
SUPERVALU.
15. Girard is hereby informed of his right to revoke this Agreement as far
as it extends to potential claims under the Age Discrimination in Employment
Act, 29 U.S.C. (S)(S) 621 et seq. by informing SUPERVALU of his intent to revoke
this Agreement within seven (7) calendar days following his execution of this
Agreement. Girard understands that SUPERVALU will have no obligations under
this Agreement in the event such notice is timely delivered and any payments
made as of that date by SUPERVALU pursuant to paragraphs 2 through 7, above,
shall be immediately repaid by Girard to SUPERVALU.
16. Girard is hereby informed that the terms of this Agreement shall be
open for acceptance by him for a period of twenty-one (21) days during which
time he may consider whether to accept this Agreement.
17. The terms of this Agreement shall remain strictly confidential between
the parties hereto, and shall not be disclosed to third persons unless required
by law.
18. Girard understands and agrees that effective July 12, 1997, he is no
longer authorized to incur any expenses or obligations or liabilities on behalf
of SUPERVALU, unless authorized in advance by SUPERVALU's Chief Executive
Officer.
19. Girard agrees that on or before July 12, 1997 he will return to
SUPERVALU any property of SUPERVALU in his possession or control.
20. Girard agrees that he will refrain from making any statements, whether
written or oral, which are disparaging of SUPERVALU, its directors, officers,
employees, agents, or representatives. Girard agrees that SUPERVALU's
obligation to provide any further payments
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and/or benefits under paragraphs 2 through 7 above shall terminate immediately
upon any violation of this paragraph 19. SUPERVALU agrees that its officers and
directors will refrain from making any statements, whether written or oral, that
are disparaging of Girard.
21. This Agreement shall not in any way be construed as an admission by
SUPERVALU that it has acted wrongfully with respect to Girard or any other
person, or that Girard has any rights whatsoever against SUPERVALU. SUPERVALU
specifically disclaims any liability to, or wrongful acts against, Girard or any
other person, on the part of itself, its directors, its officers, its employees,
its representatives or its agents.
22. This Agreement contains the entire agreement of the parties with
respect to the subject matter hereof. Girard hereby affirms that his rights to
payments or benefits from SUPERVALU are specified exclusively and completely in
this Agreement. Any modification of, or addition to, this Agreement must be in
writing, signed by SUPERVALU and Girard.
23. This Agreement is personal to Girard and may not be assigned by Girard
without the written agreement of SUPERVALU. All payments provided herein to or
for the benefit of Girard and the maintenance of coverages as herein provided,
shall be made to his estate and for the benefit of his dependents, heirs and
beneficiaries in the event of his death prior to the receipt thereof.
24. This Agreement constitutes a contract enforceable against either party
and shall be construed and enforced in accordance with the laws of the State of
Minnesota. Nothing contained in this Agreement is intended to violate any
applicable law. If any part of this Agreement is construed to be in violation
of a state and/or federal law, then that part shall be null and void, but the
balance of the provisions of this Agreement shall remain in full force and
effect.
25. Girard hereby affirms and acknowledges that he has read the foregoing
Agreement and that he has hereby been advised to consult with an attorney prior
to signing this Agreement. Girard agrees that the provisions set forth in this
Agreement are written in language understandable to him and further affirms that
he understands the meaning of the terms of this Agreement and their effect.
Girard represents that he enters into this Agreement freely and voluntarily.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
signatures below.
Dated: 7/11/97 /s/ Jeffrey C. Girard
----------------------------------
Jeffrey C. Girard
Dated: 7/11/97 SUPERVALU INC.
By: /s/ Michael Wright
-----------------------------
Its: Chairman and CEO
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EXHIBIT (10)b.
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.
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
<PAGE>
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, 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 Section 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 Participant may change the deferral
payment election by means of a subsequent deferral payment election in writing
that will take effect (i) immediately upon receipt for deferrals credited after
the date the Company receives such subsequent deferral payment election and (ii)
at the beginning of the
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second calendar year following the date of the revised deferral payment election
for deferrals previously credited to the Participant's Deferred Stock Account.
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 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
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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 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
4
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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 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.
Last Revised: 8/20/97
5
<PAGE>
EXHIBIT (10)c.
SUPERVALU INC.
--------------
DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
-----------------------------------------------------
EFFECTIVE 6/27/96
-----------------
1. A director who is not an employee of the Company or of a subsidiary of the
Company may elect to defer receipt of the payment of his cash fees and
other cash compensation as a director until such time as he has ceased to
be a director, as hereinafter provided.
2. Any election hereunder to defer fees shall apply to all or any part of the
cash fees and other cash compensation earned by the director as a director
of the Company (quarterly retainer fees as well as fees for attending Board
meetings and committee meetings, but not stock option grants or amounts
paid pursuant to the Non-Employee Directors Deferred Stock Plan) until
termination of such election.
3. Such election shall be made by the director filing a written statement with
the Secretary of the Company electing to defer director's fees pursuant to
this plan and shall be effective with respect to any fees and other
compensation thereafter payable to the electing director for which no
services have yet been rendered by said electing director.
4. A director's election to defer director's fees hereunder shall continue
thereafter unless and until the director terminates the deferral by giving
notice to the Secretary in writing. In the event of such termination of a
deferral, the amount previously deferred shall not be paid until such
director ceases to be a director.
5. All fees so deferred will be credited to a special bookkeeping account for
the director at such times as the fees would have been payable had the
director not elected to defer payment thereof.
6. The Company will not set aside any money in trust or otherwise fund the
payment of any amounts credited to the director's deferred fee account, but
shall make payment to the director when due out of general corporate funds.
The director shall have the status solely of an unsecured general creditor
of the Company with respect to the amounts credited to the director's
deferred fee account.
7. Interest shall be accrued on all deferred fees from and after the date when
credited to the director's deferred fee account until paid as hereinafter
provided. For all amounts credited to a director's deferred fee account
prior to July 1, 1996, interest shall be accrued at the rate of 11% per
annum; for all amounts credited to a director's deferred fee account on or
after July 1, 1996, interest shall be accrued at the prime interest rate as
published in the Wall Street Journal on the first business day of January
each year for the ensuing year. Such interest shall
<PAGE>
be credited to the director's deferred fee account as of the last day of
each month and shall be compounded annually.
8. The balance in the director's deferred fee account (including interest
thereon) accrued prior to July 1, 1996, shall be paid in ten equal annual
installments, each installment being paid on or before January 10 of each
year beginning with the calendar year immediately following the year in
which the director ceases to be a director. The balance in the director's
deferred fee account (including interest thereon) accrued on and after July
1, 1996, shall be paid in a lump sum or in equal annual installments, as
the director shall elect at the time the director makes the deferral
election under paragraph 1 hereof. Notwithstanding the foregoing, the
Company, acting by resolution of the Board exclusive of any director
covered by this plan, in its sole discretion may determine to make payment
of the balance in the director's deferred fee account (including accrued
interest thereon) in one payment or in installments. Furthermore, the
director may change the deferred payment election for cash fees and other
cash compensation that has previously been deferred into the director's
deferred fee account by delivering a subsequent deferral payment election
in writing to the Secretary that will take effect at the beginning of the
second complete calendar year after the date of the revised deferral
payment election. Interest at the rates provided in Section 7 shall be
earned on unpaid installments.
9. Upon the death of a director or a former director, any amounts of deferred
director's fees and interest accrued shall be paid in full on or before
January 10 of the calendar year following the year in which the director
dies, to the legal representative of the director's estate or to such
person(s) as the director shall have instructed the Company by written
instrument filed with the Secretary of the Company and signed by the
director.
10. Upon a Change of Control of the Company (as hereinafter defined) the entire
balance of the director's deferred fee account shall be paid in full to the
director.
CHANGE OF CONTROL:
For purposes hereof, Change of Control shall have the following meaning:
(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 of
the Company (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)
2
<PAGE>
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, than 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 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.
Last Revised: 8/20/97
3
<PAGE>
EXHIBIT 15
LETTER REGARDING UNAUDITED INFORMATION
Stockholders and Board of Directors
SUPERVALU INC.
Eden Prairie, Minnesota
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim information
of SUPERVALU INC. and subsidiaries for the periods ended September 6, 1997 and
September 7, 1996, as indicated in our report dated October 16, 1997. Because
we did not perform an audit on such information, we expressed no opinion on it
in our report.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended September 6, 1997, is
incorporated by reference in the Registration Statements (No. 33-28310,
No. 33-16934, No. 2-56896, No. 33-50071, No. 333-10151, and No. 333-24813 on
Form S-8 and No. 33-56415 on Form S-3).
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statements prepared or certified by an accountant within the meaning of Sections
7 and 11 of that act.
/s/ Deloitte & Touche LLP
October 16, 1997
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Stockholders and Board of Directors
SUPERVALU INC.
Eden Prairie, Minnesota
We have reviewed the accompanying consolidated balance sheets of SUPERVALU INC.
(the Company) and subsidiaries as of September 6, 1997 and September 7, 1996 and
the related consolidated statements of earnings and cash flows for the 12 and
28-week periods then ended and the consolidated statement of stockholders'
equity for the interim period ended September 6, 1997. These consolidated
financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to such consolidated financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of SUPERVALU INC. and subsidiaries as
of February 22, 1997 and the related consolidated statements of earnings,
stockholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated April 3, 1997 (except for the Investment in
ShopKo Note, as to which the date is April 25, 1997), we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated balance sheet as of
February 22, 1997 and the consolidated statement of stockholders' equity for the
year then ended is fairly stated, in all material respects, in relation to the
consolidated financial statements from which it has been derived.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
October 16, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 6, 1997 AND THE CONSOLIDATED
STATEMENT OF EARNINGS FOR THE 28 WEEKS ENDED SEPTEMBER 6, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> FEB-23-1997
<PERIOD-END> SEP-6-1997
<CASH> 39,173
<SECURITIES> 0
<RECEIVABLES> 395,759
<ALLOWANCES> (15,294)
<INVENTORY> 1,063,070
<CURRENT-ASSETS> 1,573,907
<PP&E> 2,657,050
<DEPRECIATION> (1,077,514)
<TOTAL-ASSETS> 4,008,135
<CURRENT-LIABILITIES> 1,419,917
<BONDS> 1,215,681
0
5,908
<COMMON> 75,335
<OTHER-SE> 1,110,265
<TOTAL-LIABILITY-AND-EQUITY> 4,008,135
<SALES> 8,899,315
<TOTAL-REVENUES> 8,899,315
<CGS> 8,004,900
<TOTAL-COSTS> 8,004,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,221
<INTEREST-EXPENSE> 71,167
<INCOME-PRETAX> 231,097
<INCOME-TAX> 92,216
<INCOME-CONTINUING> 138,881
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 138,881
<EPS-PRIMARY> 2.14
<EPS-DILUTED> 2.14
</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
Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended
September 6, 1997 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. In addition, timing of certain
ADVANTAGE efforts could be impacted by the information technology related
expenses associated with addressing year 2000 issues.
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,
1
<PAGE>
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.
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 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. If capital
spending significantly exceeds anticipated capital needs, additional funding
could be required from 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.
2
