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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
For the fiscal year ended February 28, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------ -----------
Commission file number: 1-5418
SUPERVALU INC.
(Exact name of registrant as specified in its charter)
Delaware 41-0617000
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11840 Valley View Road
Eden Prairie, Minnesota 55344
(Address of principal (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, 1998 was approximately $2,782,954,632 (based upon the
closing price of Registrant's Common Stock on the New York Stock Exchange on
March 31, 1998).
Number of shares of $1.00 par value Common Stock outstanding as of April 1,
1998: 60,085,208.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Registrant's Annual Report to Stockholders for the
fiscal year ended February 28, 1998 are incorporated into Parts I,
II and IV, as specifically set forth in Parts I, II and IV.
2. Portions of Registrant's definitive Proxy Statement filed for
Registrant's 1998 Annual Meeting of Stockholders are incorporated
into Part III, as specifically set forth in 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, was organized in 1925 as the
successor to two wholesale grocery firms established in the 1870's.
The Company's principal executive offices are located at 11840 Valley
View Road, Eden Prairie, Minnesota 55344 (Telephone: 612-828-4000).
The Company is the largest food wholesaler and approximately the 13th
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 4,800
stores (not including 701 Save-A-Lot limited assortment stores) in 48
states as of the close of fiscal 1998 and approximately 4,300 stores
(not including 611 Save-A-Lot limited assortment stores) at the close
of fiscal 1997. The Company operated at fiscal year-end 328 retail
stores under its principal corporate retail formats, including price
superstores, supercenters, fresh superstores, 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.
On July 2, 1997, SUPERVALU sold its remaining 46% ownership position
in ShopKo Stores, Inc. ("ShopKo"), its discount general merchandise
subsidiary, pursuant to two simultaneous transactions, a 8,174,387
share repurchase by ShopKo and a secondary public offering for the
remaining 6,557,280 ShopKo shares.
Additional description of the Company's business is contained in the
"Financial Review" portion of the Company's Annual Report to the
Stockholders for fiscal year 1998 (Exhibit 13), pages 14-19, 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 28, 1998 is incorporated by reference to
page 22 of the Company's Annual Report to Stockholders for fiscal year
1998 (Exhibit 13).
CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The information in this Annual Report on Form 10-K, for the year ended
February 28, 1998, 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.
FOOD DISTRIBUTION OPERATIONS
DESCRIPTION OF FOOD STORES SERVED. SUPERVALU food distribution regions
sell food and non-food products at wholesale and offer a variety of
retail support services to independently-owned retail food stores. At
February 28, 1998, the Company supplied approximately 4,800 retail
grocery and general merchandise stores (not including 701 Save-A-Lot
limited assortment
3
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stores), compared with 4,300 stores (not including 611 Save-A-Lot
limited assortment stores) served at the end of fiscal 1997.
Save-A-Lot limited assortment stores are supplied separately from the
Company's traditional wholesale business.
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, fresh superstores, 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. Many stores offer one or more specialized services, such as
delis, 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. The Company is also developing market-driving
capabilities which are intended to help independent retailers achieve
new growth by offering category management, an on-line pass through
allowance program, and other programs and services.
PRODUCTS SUPPLIED. SUPERVALU continues to supply 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 FLAV-O-RITE, SHOPPERS
VALUE, NATURE'S BEST, HOME BEST, BI-RITE, FOODLAND, PREFERRED
SELECTION, SWEET LIFE, and others accounted for approximately eight
percent of the Company's fiscal 1998 sales to independent retail food
supermarkets. See also "Retail Food Operations - Private Label
Program" for a description of the Company's principal corporate retail
formats private label programs.
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 par baked bakery products primarily for
the supermarket in-store bakery and foodservice business channels.
Hazelwood Farms' customer base includes wholesale food distributors,
supermarket chains (including company-owned, affiliated and
non-affiliated stores), quick service restaurant chains and other
foodservice establishments in the U.S. and Canada.
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.
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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. The Company has
reexamined its pricing structure and has developed 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 1998, the Company implemented ABS
pricing for retailers serviced through three distribution centers in
the Midwest region.
The Company seeks to continue lowering 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. The Company is
implementing a two-tiered distribution system to create a national
logistics network composed of its existing wholesale distribution
facilities plus 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, became operational in June 1996 and
currently serves six existing Southeast distribution facilities. The
Company began construction of a second regional distribution facility
located in Ogelsby, Illinois in June 1996, which is planned to be open
in the summer of 1998 and is intended to serve 12 distribution centers
and three marketing regions in the Midwest. This two-tiered
distribution system is intended to increase buying scale, improve
operating efficiencies and lower cost of operations.
A new National Customer Service Center was established in Denver,
Colorado in the fall of 1996. The national service center was
established to replace divisional customer service functions for
retailers, facilitate rapid customer response and track and identify
ways to service the Company's retailers more efficiently. The National
Customer Service function is currently servicing customers in five of
the Company's seven regions.
SERVICES SUPPLIED. In addition to supplying merchandise, the Company
also offers retail customers 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, building design and construction services, financial and
budget planning, strategic and business planning, assistance in
selection and purchasing or leasing of store sites, consumer and
market research and personnel training and management assistance.
Certain Company subsidiaries operate as insurance agencies and provide
comprehensive insurance programs to the Company's affiliated
retailers.
The Company has realigned 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.
One such service intended to be offered to retailers is category
management, which is a process designed to align product assortment
with consumer preferences. Category management efforts have been
accelerating, with the Company currently in various phases of
implementation with various independent retailers. In addition, the
Company is beginning to roll out an on-line pass through vendor
allowance program referred to as the Category Management Allowance
Program ("CMAP"). CMAP is designed to maximize vendor allowances by
demonstrating compliance with pricing levels or displays and market
performance by individual store or group of stores.
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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 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
PRINCIPAL CORPORATE RETAIL FORMATS. At fiscal year end, the Company's
retail businesses operated a total of 328 retail stores, including
price superstores, supercenters, fresh superstores, limited assortment
stores and supermarkets. These diverse formats enable the Company to
operate in a variety of markets under widely differing competitive
circumstances.
At the close of fiscal 1998, the Company's retail stores operated
under the following principal corporate formats:
CUB FOODS consists of 114 price superstores located in 13 states, 61
of which are franchised to independent retailers and 53 of which are
corporately operated. Plans for fiscal 1999 include the opening of
five corporate stores and two franchised stores.
SHOP `N SAVE consists of 32 price superstores located principally in
the metropolitan St. Louis, Missouri market. Three new Shop `n Save
price superstores (two of which are replacement stores) are planned
for fiscal 1999.
BIGG'S consists of seven supercenters and three price superstores that
operate in the Cincinnati, Louisville and Denver metropolitan markets.
bigg's was acquired by the Company in August 1994. No new bigg's
stores are planned for fiscal 1999.
SAVE-A-LOT is the Company's combined wholesale and retail limited
assortment operation. At fiscal year end there were 701 Save-A-Lot
limited assortment stores located in 31 states, of which 142 were
corporately operated. Save-A-Lot projects adding approximately 140
stores in fiscal 1999, including 30 corporately owned stores and 110
licensed units.
SCOTT'S FOODS is an 18-store group located in the Fort Wayne, Indiana
area. One new store is planned for fiscal 1999.
LANECO operates a diverse mix of 19 retail outlets comprised
predominantly of supermarkets, supercenters and discount food stores
located in Pennsylvania and New Jersey. These stores operate mainly
under the LANECO AND FOODLAND names and formats. No new stores are
planned for fiscal 1999.
HORNBACHER'S is a five-store group located in the Fargo, North Dakota
area, with no new stores planned for fiscal 1999.
Other store formats operated by the Company include COUNTY MARKET,
SUPERVALU, IGA, and BUTSON'S.
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PRIVATE LABEL PROGRAM. Private label products continue to be a focus
of SUPERVALU's principal corporate retail formats which are expanding
their private label item selection. Approximately 85 percent of the
sales by the Company's Save-A-Lot limited assortment operations
consist of Save-A-Lot created or controlled brands. Cub Foods, bigg's
and Scott's Foods are in the process of developing or have developed
proprietary name brands.
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 licensor of
certain servicemarks such as CUB FOODS, SAVE-A-LOT, COUNTY MARKET,
SHOP `N SAVE, NEW MARKET, SUPERVALU, IGA, FOODLAND and SUPERVALU FOOD
& DRUG. The Company registers a substantial number of its
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
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 success of the
Company's wholesale food business is also dependent upon the ability
of independent retail store operators and the Company's retail food
business to compete successfully with other retail food stores.
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 28, 1998, the Company had approximately 48,000 employees.
Approximately 16,000 employees are covered by collective bargaining
agreements. During fiscal year 1998, 19 agreements covering 3,800
employees were re-negotiated without any work stoppage. In fiscal
1999, 11 contracts covering approximately 1,600 employees will expire.
The Company believes that it has generally good relationships with its
employees.
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INVESTMENTS
The Company has ownership interests in business ventures related to
its food distribution and retail segments, which include investments
in Waremart, Inc. 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
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.
During fiscal 1998, the Company sold One Southwest Crossing, a 240,000
square foot office facility which is located within one mile of its
principal executive offices. In connection with this sale, the Company
leased approximately 97,400 square feet of office space from the
purchaser to continue to office employees of the Company at this
facility.
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 28, 1998:
WAREHOUSE, DISTRIBUTION AND MANUFACTURING FACILITIES
<TABLE>
<CAPTION>
Square Square
Footage Footage
Owned Leased
Division or Location Use (Approximate) (Approximate)
- -------------------- ------------------------------ ------------- -------------
<S> <C> <C> <C>
Anniston, Alabama Distribution Center & Offices 497,000
Anniston, Alabama Advantage Logistics - Regional
Distribution Center 225,000
Los Angeles, California General Merchandise Warehouse
and Offices 227,000
Rancho Cucamonga, California Save-A-Lot Distribution Center
and Offices 110,000
Denver, Colorado Distribution Center & Offices 721,000
Suffield, Connecticut Distribution Center & Offices 650,000
Lakeland, Florida Save-A-Lot Distribution Center
and Offices 127,000
Quincy, Florida Distribution Center & Offices 772,000
Atlanta, Georgia Distribution Center & Offices 628,000
Atlanta, Georgia Bakery, Warehouse and Offices 105,000
Macon, Georgia Save-A-Lot Distribution Center
and Offices 252,000
Buffalo Grove, Illinois Bakery, Warehouse and Offices 47,000
Champaign, Illinois Distribution Center & Offices 820,000 172,000
Oglesby, Illinois General Merchandise, Warehouse
and Offices 303,500
Ft. Wayne, Indiana Distribution Center & Offices 1,099,000
Des Moines, Iowa Distribution Center & Offices 663,000
Greenville, Kentucky Distribution Center & Offices 309,000
Lexington, Kentucky Save-A-Lot Distribution Center
and Offices 294,000
</TABLE>
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<TABLE>
<CAPTION>
Square Square
Footage Footage
Owned Leased
Division or Location Use (Approximate) (Approximate)
- -------------------- ------------------------------ ------------- -------------
<S> <C> <C> <C>
Hammond, Louisiana Distribution Center & Offices 257,000
St. Rose, Louisiana Distribution Center & Offices 275,000
Portland, Maine Distribution Center & Offices 194,000
Perryman, Maryland Distribution Center & Offices 511,000
Williamsport, Maryland Save-A-Lot Distribution Center
and Offices 173,000
Andover, Massachusetts Distribution Center & Offices 454,000
Medford, Massachusetts Bakery, Warehouse & Offices 47,000
Somerville, Massachusetts Bakery, Warehouse & Offices 22,500
Holt, Michigan Save-A-Lot Distribution Center
and Offices 218,000
Livonia, Michigan(1) Foodland Distributors, Distribution
Center 1,275,000
Minneapolis, Minnesota Distribution Center & Offices 1,594,000
Indianola, Mississippi Distribution Center & Offices 721,000
Desloge, Missouri General Merchandise Warehouse
and Offices 134,000 34,000
Hazelwood, Missouri Distribution Center & Offices 545,600 310,000
Hazelwood, Missouri Bakery, Warehouse and Offices 259,000
Scott City, Missouri Distribution Center & Offices 278,000
St. Louis, Missouri Save-A-Lot Distribution Center
and Offices 135,000
Vinita Park, Missouri Save-A-Lot Offices 55,000
Billings, Montana Distribution Center & Offices 267,000 11,000
Great Falls, Montana Distribution Center & Offices 154,000
Keene, New Hampshire Distribution Center & Offices 196,400
Albany, New York Save-A-Lot Distribution Center
and Offices 220,000
Rochester, New York Bakery, Warehouse and Offices 33,000
Bismarck, North Dakota Distribution Center & Offices 257,000
Fargo, North Dakota Distribution Center & Offices 493,000
Columbus, Ohio Save-A-Lot Distribution Center
and Offices 182,000
Xenia, Ohio Distribution Center & Offices 511,000 170,000
McMinnville, Oregon Bakery, Warehouse and Offices 110,000
Belle Vernon, Pennsylvania Distribution Center & Offices 713,000
Hazleton, Pennsylvania Bakery, Warehouse and Offices 125,000
Lower Nazareth Township, General Merchandise Warehouse
Pennsylvania (Easton) and Offices 230,000
New Stanton, Pennsylvania Distribution Center & Offices 726,000
Reading, Pennsylvania Distribution Center & Offices 284,000 256,000
Cranston, Rhode Island Distribution Center & Offices 196,000
Humboldt, Tennessee Save-A-Lot Distribution Center
and Offices 214,000
</TABLE>
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1 Leased by Foodland Distributors in which the Company is a 50% partner.
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<TABLE>
<CAPTION>
Square Square
Footage Footage
Owned Leased
Division or Location Use (Approximate) (Approximate)
- -------------------- ------------------------------ ------------- -------------
<S> <C> <C> <C>
Grand Prairie, Texas Save-A-Lot Distribution Center
and Offices 140,000
Spokane, Washington Distribution Center & Offices 551,000
Tacoma, Washington Distribution Center & Offices 910,000 113,000
Milton, West Virginia Distribution Center & Offices 6,000 268,000
Green Bay, Wisconsin Distribution Center & Offices 430,000 475,000
Pleasant Prairie, Wisconsin Distribution Center & Offices 625,000
</TABLE>
The retail food stores operated by the Company generally have been
leased, usually for a term of 15-25 years plus renewal options. The
following table is a summary of the retail stores operated by the
Company's principal corporate retail banners as of February 28, 1998:
PRINCIPAL CORPORATE RETAIL BANNERS
<TABLE>
<CAPTION>
Square Square
Footage Footage
Owned Leased
Retail Banners Location and Number of Corporate Stores (Approximate) (Approximate)
- -------------- --------------------------------------- ------------- -------------
<S> <C> <C> <C>
Cub Foods(1) Colorado (7), Illinois (16), Indiana (8), 2,325,734 1,518,754
Minnesota (15), Wisconsin (7)
Shop `n Save Illinois (14), Missouri (18) 236,000 1,225,000
bigg's Colorado (1), Indiana (1), Kentucky (2), 473,000 1,082,000
Ohio (6)
Save-A-Lot(2) Arkansas (6), California (23), Connecticut (2), 45,000 1,776,000
Delaware (3), Florida (29), Illinois (1), Maryland (4),
Massachusetts (4), Mississippi (3), Missouri (4),
New Jersey (4), Ohio (7), Oklahoma (8),
Pennsylvania (19), Rhode Island (2),
Tennessee (4), Texas (19)
Scott's Food Indiana (18) 178,470 752,284
Laneco New Jersey (5), Pennsylvania (14) 167,000 994,000
Hornbacher's Minnesota (1), North Dakota (4) 95,000 107,000
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</TABLE>
1 As of February 28, 1998, Cub Foods included an additional 61 franchised
stores not listed above.
2 As of February 28, 1998, Save-A-Lot included an additional 559 licensed
stores not listed above.
The Company also owns and leases certain additional real estate
consisting primarily of shopping centers and transition stores, which
are not material to its operations. Transition stores are generally
those retail stores that the Company operates for a limited period of
time pending sale or sublet to its independent retailers. Transition
stores that are sublet are generally leased for periods not exceeding
20 years plus renewal options. The Company owns, in addition to
merchandise inventories, substantially all of the trucks and trailers
used in transporting its products.
Incorporated by reference hereto is the Note captioned "Leases" of
Notes to Consolidated Financial Statements on pages 30-31 of the
Company's Annual Report to Stockholders for fiscal
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year 1998 (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 29-30 of the Company's Annual Report to
Stockholders for fiscal year 1998 (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
1998 to a vote of the security holders of Registrant.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the executive
officers of the Company as of April 30, 1998.
<TABLE>
<CAPTION>
YEAR ELECTED
TO PRESENT OTHER POSITIONS HELD WITH THE
NAME AGE PRESENT POSITION POSITION COMPANY FROM 1993-1998
- ---------------------- ------- ----------------------------------- ----------------- ---------------------------------------
<S> <C> <C> <C>
Michael W. Wright 59 Director, Chairman of the Board, 1982
President and Chief Executive
Officer
David L. Boehnen 51 Executive Vice President 1997 Senior Vice President, Law and
External Relations, 1991 - 1997
William J. Bolton 51 Executive Vice President; and 1997
President and Chief Operating
Officer - Retail Food Companies
Pamela K. Knous 44 Executive Vice President, Chief 1997
Financial Officer
Jeffrey Noddle 51 Executive Vice President; and 1995 Executive Vice President, Marketing,
President and Chief Operating 1992-1995
Officer - Wholesale Food Companies
Kim M. Erickson 44 Senior Vice President, Strategic 1998 Senior Vice President, Finance, and
Planning and Treasurer Treasurer, 1997 - 1998; Vice
President and Treasurer, 1995-1997
Gregory C. Heying 49 Senior Vice President, 1994 Vice President, Distribution,
Distribution 1988-1994
H. S. (Skip) Smith 51 Senior Vice President, 1994 Vice President, Information Services,
III Information Technology 1986-1994
</TABLE>
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<TABLE>
<CAPTION>
YEAR ELECTED
TO PRESENT OTHER POSITIONS HELD WITH THE
NAME AGE PRESENT POSITION POSITION COMPANY FROM 1993-1998
- ---------------------- ------- ----------------------------------- ----------------- ---------------------------------------
<S> <C> <C> <C>
Ronald C. Tortelli 51 Senior Vice President, Human 1988
Resources
James R. Campbell 57 Vice President, Retail Services 1995 Vice President, Market Development,
1993-1995; Senior Vice President,
Northeast Region, 1992-1993
Leland J. Dake 41 Vice President, Wholesale 1998 Vice President, Corporate Category
Merchandising Management, 1995-1998; Director,
Category Management, Corporate from
1993 to 1995
Janel S. Haugarth 42 Vice President, Controller, 1998 Assistant Corporate Controller,
Wholesale 1996-1998; Vice President, Finance -
Midwest Region, 1995-1996; Assistant
Director of Merchandising, 1993-1995
J. Andrew Herring 39 Vice President, Corporate 1998
Development and External Relations
Michael L. Mulligan 53 Vice President, Wholesale Sales 1996 Vice President, Sales, 1992-1996
and Marketing
E. Wayne Shives 56 Vice President, Employee Relations 1993 Vice President, Labor Relations,
1988-1993
Sherry M. Smith 36 Vice President, Controller, 1998 Assistant Corporate Controller,
Corporate 1996-1998; Director, Finance and
Accounting/Advantage, 1995-1996;
Director, Financial Reporting,
1993-1995
</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 William J. Bolton, Pamela K. Knous, Kim M. Erickson, and J. Andrew
Herring.
Mr. Bolton was elected Executive Vice President and President and
Chief Operating Officer, Retail Food Companies in October 1997. Mr.
Bolton was Chairman and Chief Executive Officer of Bruno's, Inc. (a
retail grocery company) from 1995 to 1997; Chief Operating Officer -
Markets at American Stores, Inc. (a retail grocery company) from
February 1995 to August 1995; Executive Vice President of American
Stores, Inc. and General Manager of Jewel Osco (Chicago) from February
1994 to February 1995; and President of Jewel Food Stores (a retail
grocery company) from February 1992 to February 1994. On February 2,
1998, Bruno's, Inc. and its subsidiaries each
12
<PAGE>
filed a voluntary petition for reorganization under Chapter 11 of
Title 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the District of Delaware.
Ms. Knous was elected Executive Vice President and Chief Financial
Officer of the Company in September 1997. From December 1995 to 1997,
Ms. Knous was Executive Vice President, Chief Financial Officer and
Treasurer at The Vons Companies, Inc. (a retail grocery company); and
from May 1995 to December 1995 she was Executive Vice President and
Chief Financial Officer, from July 1994 to May 1995 she served as
Senior Vice President and Chief Financial Officer, from November 1993
to July 1994 she served as Group Vice President, Finance, and
Controller, and from April 1991 to November 1993 she served as Vice
President, Finance, and Controller of The Vons Companies, Inc.
Ms. Erickson was elected Senior Vice President, Strategic Planning and
Treasurer of the Company in March 1998. From March 1997 through March
1998 she was Senior Vice President, Finance, and Treasurer of the
Company; from August 1995 through March 1997 she was Vice President
and Treasurer of the Company; and from January 1992 through August
1995 she was Vice President and Treasurer of International Multifoods
Corporation (a food service distribution and manufacturing company).
Mr. Herring was elected Vice President, Corporate Development and
External Relations of the Company in February 1998. Prior to that
time, he was with the law firm of Dorsey & Whitney, LLP for
approximately eleven years, the last seven as a partner.
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 1998 (Exhibit 13) page 36.
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 1998
(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 1998 (Exhibit 13) pages 29-30.
During the fiscal year ended February 28, 1998, the Company issued
7,000 shares of unregistered restricted common stock as stock bonuses
to certain employees. The issuance of such shares did not constitute a
"sale" within the meaning of Section 2(3) of Securities Act of 1933,
as amended.
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
1998 (Exhibit 13) pages 20-21.
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
1998 (Exhibit 13) pages 14-19.
ITEM 7.A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not required at this time.
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
1998 (Exhibit 13) pages 22-36.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The information called for by Item 9 is incorporated by reference to
the Registrant's Annual Report to the Stockholders for fiscal year
1998 (Exhibit 13) page 35.
14
<PAGE>
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 29, 1998 filed with the
Securities and Exchange Commission pursuant to Regulation 14A in
connection with the Registrant's 1998 Annual Meeting of Stockholders
at pages 6-7 and page 23. Certain information regarding executive
officers is included in Part I above.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by Item 11 is incorporated by reference to
the Registrant's definitive Proxy Statement dated May 29, 1998 filed
with the Securities and Exchange Commission pursuant to Regulation 14A
in connection with the Registrant's 1998 Annual Meeting of
Stockholders at pages 8-14, excluding the section entitled "Report of
Executive Personnel and Compensation Committee," and page 23.
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 29, 1998 filed
with the Securities and Exchange Commission pursuant to Regulation 14A
in connection with the Registrant's 1998 Annual Meeting of
Stockholders at pages 4-5, excluding portions of the section entitled
"SUPERVALU Board Practices".
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 29, 1998 filed
with the Securities and Exchange Commission pursuant to Regulation 14A
in connection with the Registrant's 1998 Annual Meeting of
Stockholders at page 23.
15
<PAGE>
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
1998 Annual Report to Stockholders (Exhibit 13)):
Independent Auditors' Report
Consolidated balance sheets as of February 28, 1998 and
February 22, 1997.
Consolidated statements of earnings for each
of the three years in the period ended
February 28, 1998
Consolidated statements of cash flows for each of the
three years in the period ended February 28, 1998
Consolidated statements of stockholders' equity for each
of the three years in the period ended February 28,
1998
Notes to consolidated financial statements
2. Consolidated Financial Statement Schedules Page on this
for SUPERVALU INC. and Subsidiaries: Form 10-K
------------
Selected Quarterly Financial Data - for the
two years ended February 28, 1998 - included
in Part II, Item 8 (which incorporates
information by reference to the Registrant's
1998 Annual Report to Stockholders
(Exhibit 13)).
Independent Auditors' report on schedules 23
Schedule VIII - Valuation and qualifying 24
accounts
All other schedules are omitted because they are not
applicable or not required.
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.
16
<PAGE>
(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.
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 October 8, 1997 among the
Registrant, the Lenders named therein and Bankers Trust
Company, as Agent, is incorporated by reference to
Exhibit (10)a to the Registrant's Quarterly Report on
Form 10-Q for the quarterly period (12 weeks) ended
November 29, 1997.
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 Item 601(b)(4)(iii) 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.
17
<PAGE>
b. 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.
c. SUPERVALU INC. Executive Incentive Bonus Plan is
incorporated by reference to Exhibit (10)c. to
Registrant's Annual Report on Form 10-K for the year
ended February 22, 1997.
d. SUPERVALU INC. Directors Deferred Compensation Plan for
Non-Employee Directors, as amended, is incorporated by
reference to Exhibit (10)c. to the Registrant's
Quarterly Report on Form 10-Q for the quarterly period
(12 weeks) ended September 6, 1997.
e. SUPERVALU INC. 1983 Employee Stock Option Plan, as
amended, is incorporated by reference to Exhibit (10)b.
to Registrant's Quarterly Report on Form 10-Q for the
quarterly period (12 weeks) ended November 29, 1997.
f. 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.
g. 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.
h. 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.
i. 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.
j. Amendments to the SUPERVALU INC. Deferred Compensation
Plan and the SUPERVALU INC. Executive Deferred
Compensation Plan II are incorporated by reference to
Exhibit (10)c. to Registrant's Quarterly Report on Form
10-Q for the quarterly period (12 weeks) ended
September 7, 1996.
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
18
<PAGE>
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)o.
to the Registrant's Quarterly Report on Form 10-Q for
the quarterly period (16 weeks) ended June 15, 1996.
p. SUPERVALU INC. Non-Qualified 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. First Amendment to SUPERVALU INC. Non-Qualified
Supplemental Executive Retirement Plan is incorporated
by reference to Exhibit (10)a. to Registrant's
Quarterly Report on Form 10-Q for the quarterly period
(12 weeks) ended September 7, 1996.
r. Second Amendment to SUPERVALU INC. Non-Qualified
Supplemental Executive Retirement Plan.
s. SUPERVALU INC. Long-Term Incentive Plan, as amended, is
incorporated by reference to Exhibit (10)r. to the
Registrant's Annual Report on Form 10-K for the year
ended February 22, 1997.
t. 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.
u. SUPERVALU INC. Non-Employee Directors Deferred Stock
Plan, as amended, is incorporated by reference to
Exhibit (10)b. to Registrant's Quarterly Report on Form
10-Q for the quarterly period (12 weeks) ended
September 6, 1997.
v. SUPERVALU INC. 1997 Stock Plan is incorporated by
reference to Exhibit (10)u. to Registrant's Annual
Report on Form 10-K for the year ended February 22,
1997.
w. Separation Agreement and General Release dated November
1, 1996 between Phillip A. Dabill and SUPERVALU INC.,
is incorporated by reference to Exhibit (10)v. to
Registrant's Annual Report on Form 10-K for the year
ended February 22, 1997.
x. Separation Agreement and General Release dated February
26, 1997 between Laurence Anderson and SUPERVALU INC.
is incorporated by reference to Exhibit (10)a. to
Registrant's Quarterly Report on Form 10-Q for the
quarterly period (16 weeks) ended June 14, 1997.
y. Separation Agreement and General Release dated July 11,
1997 between Jeffrey C. Girard and SUPERVALU INC. is
incorporated by reference to Exhibit (10)a. to
Registrant's Quarterly Report on Form 10-Q for the
quarterly period (12 weeks) ended September 6, 1997.
(12) Ratio of Earnings to Fixed Charges.
(13) Portions of 1998 Annual Report to Stockholders of
Registrant.
19
<PAGE>
(16) Letter from Deloitte & Touche LLP to the Securities
and Exchange Commission dated May 8, 1998 is
incorporated by reference to the Registrant's Form 8-
K Report dated May 8, 1998.
(21) Subsidiaries of the Registrant.
(23) Consent of Independent Auditors.
(24) Power of Attorney.
(27)a. Financial Data Schedule.
(27)b. Restated Financial Data Schedule.
(27)c. Restated 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 28, 1998.
20
<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 29, 1998 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 29, 1998
- -------------------------- Chief Executive Officer; and
Michael W. Wright Director (principal executive
officer)
/s/ Pamela K. Knous Executive Vice President and May 29, 1998
- -------------------------- Chief Financial Officer (principal
Pamela K. Knous financial and accounting officer)
/s/ Herman Cain* Director
- --------------------------
Herman Cain
/s/ Stephen I. D'Agostino* Director
- --------------------------
Stephen I. D'Agostino
/s/ Lawrence A. Del Santo* Director
- --------------------------
Lawrence A. Del Santo
/s/ Edwin C. Gage* Director
- --------------------------
Edwin C. Gage
/s/ William A. Hodder* Director
- --------------------------
William A. Hodder
/s/ Garnett L. Keith, Jr.* Director
- --------------------------
Garnett L. Keith, Jr.
21
<PAGE>
/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
*Executed this 29th day of May, 1998, 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
22
<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 28, 1998 and February 22, 1997 and for
each of the three years in the period ended February 28, 1998 and have issued
our report thereon dated April 6, 1998. Such financial statements and report are
included in your 1998 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 6, 1998
23
<PAGE>
SUPERVALU INC. AND SUBSIDIARIES
SCHEDULE VIII - Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------- ------------ ------------- ----------- -------------
Balance at Charged Balance at
beginning to costs end
Description of year and expenses Deductions of year
- ---------------------------------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended:
February 28, 1998 $17,806,000 5,791,000 10,182,000 (A) $13,415,000
February 22, 1997 22,064,000 8,851,000 13,109,000 (A) 17,806,000
February 24, 1996 29,268,000 2,269,000 9,473,000 (A) 22,064,000
</TABLE>
(A) Balance consists of accounts determined to be uncollectible
and charged against reserves, net of collection on accounts
previously charged off.
24
<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.
*(4)f. Credit Agreement dated as of October 8, 1997 among the
Registrant, the Lenders named therein and Bankers Trust Company,
as Agent.
*(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. 1978 Stock Appreciation Rights Plan, as amended.
*(10)c. SUPERVALU INC. Executive Incentive Bonus Plan.
*(10)d. SUPERVALU INC. Directors Deferred Compensation Plan for
Non-Employee Directors, as amended.
*(10)e. SUPERVALU INC. 1983 Employee Stock Option Plan, as amended.
*(10)f. SUPERVALU INC. 1989 Stock Appreciation Rights Plan.
*(10)g. SUPERVALU INC. ERISA Excess Plan Restatement.
*(10)h. SUPERVALU INC. Deferred Compensation Plan.
1
<PAGE>
*(10)i. SUPERVALU INC. Executive Deferred Compensation Plan as amended
and Executive Deferred Compensation Plan II.
*(10)j. Amendments to the SUPERVALU INC. Deferred Compensation Plan and
the SUPERVALU INC. 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. SUPERVALU INC. Non-Qualified Supplemental Executive Retirement
Plan.
*(10)q. First Amendment to SUPERVALU INC. Non-Qualified Supplemental
Executive Retirement Plan.
(10)r. Second Amendment to SUPERVALU INC. Non-Qualified Supplemental
Executive Retirement Plan.
*(10)s. SUPERVALU INC. Long-Term Incentive Plan, as amended.
*(10)t. SUPERVALU INC. Bonus Plan for Designated Corporate Officers.
*(10)u. SUPERVALU INC. Non-Employee Directors Deferred Stock Plan, as
amended.
*(10)v. SUPERVALU INC. 1997 Stock Plan.
*(10)w. Separation Agreement and General Release dated November 1, 1996
between Phillip A. Dabill and SUPERVALU INC.
*(10)x. Separation Agreement and General Release dated February 26, 1997
between Laurence Anderson and SUPERVALU INC.
*(10)y. Separation Agreement and General Release dated July 11, 1997
between Jeffrey C. Girard and SUPERVALU INC.
(12) Ratio of Earnings to Fixed Charges.
(13) Portions of 1998 Annual Report to Stockholders of Registrant.
*(16) Letter from Deloitte & Touche LLP to the Securities and Exchange
Commission dated May 8, 1998.
(21) Subsidiaries of the Registrant.
2
<PAGE>
(23) Consent of Independent Auditors.
(24) Power of Attorney.
(27)a. Financial Data Schedule.
(27)b. Restated Financial Data Schedule.
(27)c. Restated Financial Data Schedule.
(99.1) Cautionary Statements pursuant to the Securities Litigation
Reform Act.
- -----------------
* Incorporated by Reference
3
<PAGE>
EXHIBIT (10)a
SUPERVALU INC.
1993 STOCK PLAN
Section 1. Purpose.
The purpose of the Plan is to promote the interests of the Company and
its stockholders by aiding the Company in attracting and retaining key
management personnel and non-employee directors of the Company capable of
assuring the future success of the Company, to offer such individuals incentives
to put forth maximum efforts for the success of the Company's business and to
afford such individuals an opportunity to acquire a proprietary interest in the
Company.
Section 2. Definitions.
As used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Affiliate" shall mean (i) any entity that, directly or indirectly
through one or more intermediaries, is controlled by the Company and (ii) any
entity in which the Company has a significant equity interest, in each case as
determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, Performance Award, or Other Stock-Based Award
granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract or
other instrument or document evidencing any Award granted under the Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any regulations promulgated thereunder.
(e) "Committee" shall mean a committee of the Board of Directors of the
Company designated by such Board to administer the Plan, which shall consist of
members appointed from time to time by the Board of Directors and shall be
comprised of not less than such number of directors as shall be required to
permit Awards granted under the Plan to qualify under Rule 16b-3. Each member of
the Committee shall be a "Non-Employee Director" within the meaning of Rule
16b-3.
-1-
<PAGE>
(f) "Company" shall mean SUPERVALU INC., a Delaware corporation, and
any successor corporation.
(g) "Eligible Person" shall mean any employee, officer, consultant or
independent contractor providing services to the Company or any Affiliate, who
the Committee determines to be an Eligible Person, or any director of the
Company who is not an employee of the Company or an Affiliate.
(h) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair market
value of such property determined by such methods or procedures as shall be
established from time to time by the Committee. Notwithstanding the foregoing,
unless otherwise determined by the Committee, the Fair Market Value of Shares on
a given date for purposes of the Plan shall be the average of the opening and
closing sale price of the Shares as reported on the New York Stock Exchange on
such date or, if such Exchange is not open for trading on such date, on the day
closest to such date when such Exchange is open for trading.
(i) "Incentive Stock Option" shall mean an option granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422 of the
Code or any successor provision.
(j) "Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.
(k) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option, and shall include Restoration Options.
(l) "Other Stock-Based Award" shall mean any right granted under
Section 6(e) of the Plan.
(m) "Participant" shall mean an Eligible Person designated to be
granted an Award under the Plan.
(n) "Performance Award" shall mean any right granted under Section 6(d)
of the Plan.
(o) "Person" shall mean any individual, corporation, partnership,
association or trust.
(p) "Plan" shall mean this 1993 Stock Plan, as amended from time to
time.
-2-
<PAGE>
(q) "Restoration Option" shall mean any Option granted under Section
6(a)(iv) of the Plan.
(r) "Restricted Stock" shall mean any Share granted under Section 6(c)
of the Plan.
(s) "Restricted Stock Unit" shall mean any unit granted under Section
6(c) of the Plan evidencing the right to receive a Share (or a cash payment
equal to the Fair Market Value of a Share) at some future date.
(t) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended,
or any successor rule or regulation.
(u) "Shares" shall mean shares of Common Stock, $1.00 par value, of the
Company or such other securities or property as may become subject to Awards
pursuant to an adjustment made under Section 4(c) of the Plan.
(v) "Stock Appreciation Right" shall mean any right granted under
Section 6(b) of the Plan.
Section 3. Administration.
(a) Power and Authority of the Committee. The Plan shall be
administered by the Committee. Subject to the express provisions of the Plan and
to applicable law, the Committee shall have full power and authority to: (i)
designate Participants; (ii) determine the type or types of Awards to be granted
to each Participant under the Plan; (iii) determine the number of Shares to be
covered by (or with respect to which payments, rights or other matters are to be
calculated in connection with) each Award; (iv) determine the terms and
conditions of any Award or Award Agreement; (v) amend the terms and conditions
of any Award or Award Agreement and accelerate the exercisability of Options or
the lapse of restrictions relating to Restricted Stock, Restricted Stock Units
or other Awards; (vi) determine whether, to what extent and under what
circumstances Awards may be exercised in cash, Shares, other securities, other
Awards or other property, or canceled, forfeited or suspended; (vii) determine
whether, to what extent and under what circumstances cash, Shares, other
securities, other Awards, other property and other amounts payable with respect
to an Award under the Plan shall be deferred either automatically or at the
election of the holder thereof or the Committee; (viii) interpret and administer
the Plan and any instrument or agreement relating to, or Award made under, the
Plan; (ix) establish, amend, suspend or waive such rules and regulations and
-3-
<PAGE>
appoint such agents as it shall deem appropriate for the proper administration
of the Plan; and (x) make any other determination and take any other action that
the Committee deems necessary or desirable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to the
Plan or any Award shall be within the sole discretion of the Committee, may be
made at any time and shall be final, conclusive and binding upon any
Participant, any holder or beneficiary of any Award and any employee of the
Company or any Affiliate.
(b) Delegation. The Committee may delegate its powers and duties under
the Plan to one or more officers of the Company or any Affiliate or a committee
of such officers, subject to such terms, conditions and limitations as the
Committee may establish in its sole discretion; provided, however, that the
Committee shall not delegate its powers and duties under the Plan with regard to
officers or directors of the Company or any Affiliate who are subject to Section
16 of the Securities Exchange Act of 1934, as amended.
(c) Power and Authority of the Board of Directors. Notwithstanding
anything to the contrary contained herein, the Board of Directors may, at any
time and from time to time, without any further action of the Committee,
exercise the powers and duties of the Committee under the Plan.
Section 4. Shares Available for Awards.
(a) Shares Available. Subject to adjustment as provided in Section
4(c), the aggregate number of Shares which may be issued under all Awards under
the Plan shall be 4,800,000. Shares to be issued under the Plan may be either
Shares reacquired and held in the treasury or authorized but unissued Shares. If
any Shares covered by an Award or to which an Award relates are not purchased or
are forfeited, or if an Award otherwise terminates without delivery of any
Shares, then the number of Shares counted against the aggregate number of Shares
available under the Plan with respect to such Award, to the extent of any such
forfeiture or termination, shall again be available for granting Awards under
the Plan.
(b) Accounting for Awards. For purposes of this Section 4, if an Award
entitles the holder thereof to receive or purchase Shares, the number of Shares
covered by such Award or to which such Award relates shall be counted on the
date of grant of such Award against the aggregate number of Shares available for
granting Awards under the Plan.
-4-
<PAGE>
(c) Adjustments. In the event that the Committee shall determine that
any dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the Company
or other similar corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number and type of Shares (or
other securities or other property) which thereafter may be made the subject of
Awards, (ii) the number and type of Shares (or other securities or other
property) subject to outstanding Awards and (iii) the purchase or exercise price
with respect to any Award; provided, however, that the number of Shares covered
by any Award or to which such Award relates shall always be a whole number.
(d) Award Limitations Under the Plan. No Eligible Person, who is an
employee of the Company at the time of grant, may be granted any Option, Stock
Appreciation Right and such Other Stock Based Award (the value of which is based
solely on an increase in the value of the Shares after the date of grant) for
more than 250,000 Shares (subject to adjustment as provided for in Section
4(c)), taking into account all such awards granted by the Company pursuant to
any of its stock compensation plans, in any calendar year period beginning with
the period commencing January 1, 1997. The foregoing annual limitation
specifically includes the grant of any Awards representing "qualified
performance-based compensation" within the meaning of Section 162(m) of the
Code.
Section 5. Eligibility.
Any Eligible Person, including any Eligible Person who is an officer or
director of the Company or any Affiliate, shall be eligible to be designated a
Participant. In determining which Eligible Persons shall receive an Award and
the terms of any Award, the Committee may take into account the nature of the
services rendered by the respective Eligible Persons, their present and
potential contributions to the success of the Company or such other factors as
the Committee, in its discretion, shall deem relevant. Notwithstanding the
foregoing, an Incentive Stock Option may only be granted to full or part-time
employees (which term as used herein includes, without limitation, officers and
directors who are also employees) and an Incentive Stock Option shall not be
granted to an employee of an Affiliate unless such Affiliate is also a
"subsidiary corporation" of the Company within the meaning of Section 424(f) of
the Code or any successor provision.
-5-
<PAGE>
Section 6. Awards.
(a) Options. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:
(i) Exercise Price. The purchase price per Share purchasable
under an Option shall be determined by the Committee; provided,
however, that such purchase price shall not be less than 100% of the
Fair Market Value of a Share on the date of grant of such Option.
(ii) Option Term. The term of each Option shall be fixed by
the Committee.
(iii) Time and Method of Exercise. The Committee shall
determine the time or times at which an Option may be exercised in
whole or in part and the method or methods by which, and the form or
forms (including, without limitation, cash, Shares, promissory notes,
other securities, other Awards or other property, or any combination
thereof, having a Fair Market Value on the exercise date equal to the
relevant exercise price) in which, payment of the exercise price with
respect thereto may be made or deemed to have been made.
(iv) Restoration Options. The Committee may grant Restoration
Options, separately or together with another Option, pursuant to which,
subject to the terms and conditions established by the Committee and
any applicable requirements of Rule 16b-3 or any other applicable law,
the Participant 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 or withholding of Shares pursuant to the
relevant provisions of the plan or agreement relating to such option,
which new Option would be an Option to purchase the number of Shares
not exceeding the sum of (A) the number of Shares so provided as
consideration upon the exercise of the previously granted option to
which such Restoration Option relates, (B) the number of Shares, if
any, tendered or withheld as payment of the amount to be withheld under
applicable tax laws in connection with the exercise of the option to
which such Restoration Option relates, and (C) the number of previously
owned Shares, if any, tendered as payment for additional tax
obligations of the Participant in connection with the exercise of the
option to which such Restoration Option relates pursuant to the
relevant provisions of the plan or agreement relating to such option.
Restoration Options may be granted with respect to options previously
granted under the Plan or any other stock option plan of the Company,
and may be granted in connection with any option granted
-6-
<PAGE>
under the Plan or any other stock option plan of the Company at the
time of such grant; provided, however, that Restoration Options may not
be granted with respect to any option granted to a Non-Employee
Director under the Company's 1983 Employee Stock Option Plan.
(b) Stock Appreciation Rights. The Committee is hereby authorized to
grant Stock Appreciation Rights to Participants subject to the terms of the Plan
and any applicable Award Agreement. A Stock Appreciation Right granted under the
Plan shall confer on the holder thereof a right to receive upon exercise thereof
the excess of (i) the Fair Market Value of one Share on the date of exercise
(or, if the Committee shall so determine, at any time during a specified period
before or after the date of exercise) over (ii) the grant price of the Stock
Appreciation Right as specified by the Committee, which price shall not be less
than 100% of the Fair Market Value of one Share on the date of grant of the
Stock Appreciation Right. Subject to the terms of the Plan and any applicable
Award Agreement, the grant price, term, methods of exercise, dates of exercise,
methods of settlement and any other terms and conditions of any Stock
Appreciation Right shall be as determined by the Committee. The Committee may
impose such conditions or restrictions on the exercise of any Stock Appreciation
Right as it may deem appropriate.
(c) Restricted Stock and Restricted Stock Units. The Committee is
hereby authorized to grant Awards of Restricted Stock and Restricted Stock Units
to Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:
(i) Restrictions. Shares of Restricted Stock and Restricted
Stock Units shall be subject to such restrictions as the Committee may
impose (including, without limitation, any limitation on the right to
vote a Share of Restricted Stock or the right to receive any dividend
or other right or property with respect thereto), which restrictions
may lapse separately or in combination at such time or times, in such
installments or otherwise as the Committee may deem appropriate.
(ii) Stock Certificates. Any Restricted Stock granted under
the Plan shall be evidenced by issuance of a stock certificate or
certificates, which certificate or certificates shall be held by the
Company. Such certificate or certificates shall be registered in the
name of the Participant and shall bear an appropriate legend referring
to the terms, conditions and restrictions applicable to such Restricted
Stock. In the case of Restricted Stock Units, no Shares shall be issued
at the time such Awards are granted.
(iii) Forfeiture; Delivery of Shares. Except as otherwise
determined by the Committee, upon termination of employment (as
determined under criteria
-7-
<PAGE>
established by the Committee) during the applicable restriction period,
all Shares of Restricted Stock and all Restricted Stock Units at such
time subject to restriction shall be forfeited and reacquired by the
Company; provided, however, that the Committee may, when it finds that
a waiver would be in the best interest of the Company, waive in whole
or in part any or all remaining restrictions with respect to Shares of
Restricted Stock or Restricted Stock Units. Any Share representing
Restricted Stock that is no longer subject to restrictions shall be
delivered to the holder thereof promptly after the applicable
restrictions lapse or are waived. Upon the lapse or waiver of
restrictions and the restricted period relating to Restricted Stock
Units evidencing the right to receive Shares, such Shares shall be
issued and delivered to the holders of the Restricted Stock Units.
(d) Performance Awards. The Committee is hereby authorized to grant
Performance Awards to Participants subject to the terms of the Plan and any
applicable Award Agreement. A Performance Award granted under the Plan (i) may
be denominated or payable in cash, Shares (including, without limitation,
Restricted Stock), other securities, other Awards or other property and (ii)
shall confer on the holder thereof the right to receive payments, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Committee shall establish. Subject to the terms of the Plan and
any applicable Award Agreement, the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance Award granted, the amount of any payment or transfer to be made
pursuant to any Performance Award and any other terms and conditions of any
Performance Award shall be determined by the Committee.
(e) Other Stock-Based Awards. The Committee is hereby authorized to
grant to Participants such other Awards that are denominated or payable in,
valued in whole or in part by reference to, or otherwise based on or related to,
Shares (including, without limitation, securities convertible into Shares), as
are deemed by the Committee to be consistent with the purpose of the Plan;
provided, however, that such grants must comply with Rule 16b-3 and applicable
law. Subject to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine the terms and conditions of such Awards. Shares or
other securities delivered pursuant to a purchase right granted under this
Section 6(e) shall be purchased for such consideration, which may be paid by
such method or methods and in such form or forms (including without limitation,
cash, Shares, promissory notes, other securities, other Awards or other property
or any combination thereof), as the Committee shall determine, the value of
which consideration, as established by the Committee, shall not be less than
100% of the Fair Market Value of such Shares or other securities as of the date
such purchase right is granted.
-8-
<PAGE>
(f) General.
(i) No Cash Consideration for Awards. Awards shall be granted
for no cash consideration or for such minimal cash consideration as may
be required by applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may,
in the discretion of the Committee, be granted either alone or in
addition to, in tandem with or in substitution for any other Award or
any award granted under any plan of the Company or any Affiliate other
than the Plan. Awards granted in addition to or in tandem with other
Awards or in addition to or in tandem with awards granted under any
such other plan of the Company or any Affiliate may be granted either
at the same time as or at a different time from the grant of such other
Awards or awards.
(iii) Forms of Payment under Awards. Subject to the terms of
the Plan and of any applicable Award Agreement, payments or transfers
to be made by the Company or an Affiliate upon the grant, exercise or
payment of an Award may be made in such form or forms as the Committee
shall determine (including, without limitation, cash, Shares,
promissory notes, other securities, other Awards or other property or
any combination thereof), and may be made in a single payment or
transfer, in installments or on a deferred basis, in each case in
accordance with rules and procedures established by the Committee. Such
rules and procedures may include, without limitation, provisions for
the payment or crediting of reasonable interest on installment or
deferred payments.
(iv) Term of Awards. The term of each Award shall be for such
period as may be determined by the Committee.
(v) Restrictions; Securities Exchange Listing. All
certificates for Shares or other securities delivered under the Plan
pursuant to any Award or the exercise thereof shall be subject to such
stop transfer orders and other restrictions as the Committee may deem
advisable under the Plan or the rules, regulations and other
requirements of the Securities and Exchange Commission and any
applicable federal or state securities laws, and the Committee may
cause a legend or legends to be placed on any such certificates to make
appropriate reference to such restrictions. If the Shares or other
securities are traded on a securities exchange, the Company shall not
be required to deliver any Shares or other securities covered by an
Award unless and until such Shares or other securities have been
admitted for trading on such securities exchange.
-9-
<PAGE>
Section 7. Amendment and Termination; Adjustments.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board of Directors of the Company may
amend, alter, suspend, discontinue or terminate the Plan; provided, however,
that, notwithstanding any other provision of the Plan or any Award Agreement,
without the approval of the stockholders of the Company, no such amendment,
alteration, suspension, discontinuation or termination shall be made that,
absent such approval:
(i) would cause Rule 16b-3 to become unavailable with respect
to the Plan;
(ii) would violate the rules or regulations of the New York
Stock Exchange, any other securities exchange or the National
Association of Securities Dealers, Inc. that are applicable to the
Company; or
(iii) would cause the Company to be unable, under the Code, to
grant Incentive Stock Options under the Plan.
(b) Amendments to Awards. The Committee may waive any conditions of or
rights of the Company under any outstanding Award, prospectively or
retroactively. The Committee may not amend, alter, suspend, discontinue or
terminate any outstanding Award, prospectively or retroactively, without the
consent of the Participant or holder or beneficiary thereof, except as otherwise
herein provided.
(c) Correction of Defects, Omissions and Inconsistencies. The Committee
may correct any defect, supply any omission or reconcile any inconsistency in
the Plan or any Award in the manner and to the extent it shall deem desirable to
carry the Plan into effect.
Section 8. Income Tax Withholding and Payment.
In order to comply with all applicable federal or state income tax laws
or regulations, the Company may take such action as it deems appropriate to
ensure that all applicable federal or state payroll, withholding, income or
other taxes, which are the sole and absolute responsibility of a Participant,
are withheld or collected from such Participant. In order to assist a
Participant in paying all or a portion of the federal and state taxes to be
withheld or collected upon exercise or receipt of (or the lapse of restrictions
relating to) an Award, the Committee, in its discretion and subject to such
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<PAGE>
additional terms and conditions as it may adopt, may permit the Participant to
satisfy such tax obligation by (i) electing to have the Company withhold a
portion of the Shares otherwise to be delivered upon exercise or receipt of (or
the lapse of restrictions relating to) such Award with a Fair Market Value equal
to the amount of such taxes or (ii) delivering to the Company Shares other than
Shares issuable upon exercise or receipt of (or the lapse of restrictions
relating to) such Award with a Fair Market Value equal to the amount of such
taxes. In addition to the amounts required to be withheld to pay applicable
taxes, subject to such terms and conditions as the Committee shall determine in
its sole and absolute discretion, the Committee may permit the Participant to
elect to deliver to the Company Shares (other than Shares issuable upon exercise
or receipt of (or the lapse of restrictions relating to) such Award) with a Fair
Market Value equal to the amount of such additional federal and/or state income
taxes imposed on the Participant in connection with the exercise of the Award.
All elections, if any, must be made on or before the date that the amount of tax
to be withheld is determined.
Section 9. General Provisions.
(a) No Rights to Awards. No Eligible Person, Participant or other
Person shall have any claim to be granted any Award under the Plan, and there is
no obligation for uniformity of treatment of Eligible Persons, Participants or
holders or beneficiaries of Awards under the Plan. The terms and conditions of
Awards need not be the same with respect to any Participant or with respect to
different Participants.
(b) Award Agreements. No Participant will have rights under an Award
granted to such Participant unless and until an Award Agreement shall have been
duly executed on behalf of the Company.
(c) No Limit on Other Compensation Arrangements. Nothing contained in
the Plan shall prevent the Company or any Affiliate from adopting or continuing
in effect other or additional compensation arrangements, and such arrangements
may be either generally applicable or applicable only in specific cases.
(d) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Affiliate, nor will it affect in any way the right of the Company
or an Affiliate to terminate such employment at any time, with or without cause.
In addition, the Company or an Affiliate may at any time dismiss a Participant
from employment free from any liability or any claim under the Plan, unless
otherwise expressly provided in the Plan or in any Award Agreement.
-11-
<PAGE>
(e) Governing Law. The validity, construction and effect of the Plan or
any Award, and any rules and regulations relating to the Plan or any Award,
shall be determined in accordance with the laws of the State of Minnesota.
(f) Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction
or would disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the purpose or intent of
the Plan or the Award, such provision shall be stricken as to such jurisdiction
or Award, and the remainder of the Plan or any such Award shall remain in full
force and effect.
(g) No Trust or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant or
any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
(h) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash shall be paid in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
(i) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
Section 10. Effective Date of the Plan.
The Plan shall be effective as of April 14, 1993, subject to approval
by the stockholders of the Company within one year thereafter.
Section 11. Term of the Plan.
Unless the Plan shall have been discontinued or terminated as provided
in Section 7(a), the Plan shall terminate on April 13, 2003. No Award shall be
granted after
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<PAGE>
the termination of the Plan. However, unless otherwise expressly provided in the
Plan or in an applicable Award Agreement, any Award theretofore granted may
extend beyond the termination of the Plan, and the authority of the Committee
provided for hereunder with respect to the Plan and any Awards, and the
authority of the Board of Directors of the Company to amend the Plan, shall
extend beyond the termination of the Plan.
Amended 4/9/97
Amended 10/15/97
Amended 4/8/98
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<PAGE>
EXHIBIT (10)r
SECOND AMENDMENT
OF
SUPERVALU INC.
NONQUALIFIED SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
Effective February 26, 1989, SUPERVALU INC., a Delaware corporation,
established an unfunded nonqualified deferred compensation plan for certain
executive employees in accordance with the terms of the Plan Statement entitled
SUPERVALU INC. NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN, as amended
by a First Amendment. SUPERVALU INC. has reserved to itself the power to amend
said Plan Statement and it now desires to amend the Plan Statement in the
following respects:
1. TIER 2 OFFSET. EFFECTIVE AS OF THE DATE THIS AMENDMENT IS ADOPTED, FOR
PARTICIPANTS WHO PERFORM ONE OR MORE HOURS OF SERVICE AFTER THAT DATE,
SECTION 1.2.1(b)(ii) OF THE PLAN STATEMENT IS AMENDED TO READ IN FULL
AS FOLLOWS:
(ii) OFFSET. A dollar amount, equal to the sum of the following:
(A) the value of the Participant's Accrued Benefit under
the SUPERVALU INC. RETIREMENT PLAN as of such date;
and
(B) the value of any matching contributions made to an
account established for the Participant under the
SUPERVALU PRE-TAX SAVINGS AND PROFIT SHARING PLAN as
of such date; and
(C) the value of any matching contributions credited to
the Participant under any nonqualified deferred
compensation plan sponsored by SUPERVALU INC. as of
such date; and
(D) one-half of the Approximate Social Security Benefit
available to such Participant as of such date; and
(E) a dollar amount as specified by the Board of
Directors of SUPERVALU INC. (or any duly authorized
committee of the Board of Directors of SUPERVALU
INC.).
These offsets shall be expressed as a benefit payable monthly
to the Participant in the Single Life Annuity form beginning
on the first day of the month following the Participant's
Normal Retirement Date and, if necessary, shall be converted
to such form using the mortality and interest assumptions in
effect under the SUPERVALU INC. RETIREMENT PLAN as of such
date.
2. SAVINGS CLAUSE. SAVE AND EXCEPT AS HEREIN EXPRESSLY AMENDED THE PLAN
STATEMENT SHALL CONTINUE IN FULL FORCE AND EFFECT.
<PAGE>
EXHIBIT (12)
SUPERVALU INC. and Subsidiaries
Ratio of Earnings to Fixed Charges
For Fiscal Years Ended
<TABLE>
<CAPTION>
(In thousands, except ratios) 1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Earnings before income taxes $ 384,780 $ 280,512 $ 267,692 $ 15,925 $ 294,080
Less undistributed earnings of less than
fifty percent owned affiliates (7,388) (15,813) (11,136) (10,902) (8,306)
--------- --------- --------- --------- ---------
Earnings before income taxes 377,392 264,699 256,556 5,023 285,774
Interest expense 133,619 136,831 140,150 135,383 120,292
Interest on operating leases 18,010 16,950 17,059 18,204 17,288
--------- --------- --------- --------- ---------
$ 529,021 $ 418,480 $ 413,765 $ 158,610 $ 423,354
========= ========= ========= ========= =========
Total fixed charges 151,629 153,781 157,209 153,587 137,580
========= ========= ========= ========= =========
Ratio of earnings to fixed charges 3.49 2.72 2.63 1.03 3.08
========= ========= ========= ========= =========
</TABLE>
<PAGE>
Exhibit 13
- -----------------------------------
financial review
RESULTS OF OPERATIONS
In fiscal 1998, the company recorded record sales of $17.2 billion, net earnings
of $230.8 million, basic earnings per share of $3.68 and diluted earnings per
share of $3.65. After excluding the non-recurring gain from the sale of the
investment in ShopKo Stores, Inc. ("ShopKo"), net earnings were $177.1 million,
basic earnings per share were $2.83 and diluted earnings per share were $2.80.
Fiscal 1997 sales were $16.6 billion, basic earnings per share were $2.60 and
diluted earnings per share were $2.59. The following table sets forth items
from the company's Consolidated Statements of Earnings:
<TABLE>
<CAPTION>
Fiscal Year Ended
- -----------------------------------------------------------------------------------------------------------
(In millions) February 28,1998 February 22,1997 February 24,1996
(53 weeks) (52 weeks) (52 weeks)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $17,201.4 100.0% $16,551.9 100.0% $16,486.3 100.0%
Cost of sales 15,430.7 89.7 14,885.3 89.9 14,906.6 90.4
Selling and administrative
expenses 1,365.3 7.9 1,286.1 7.8 1,213.0 7.4
Interest expense 133.6 .8 136.8 .8 140.1 .9
Interest income 19.6 (.1) 16.1 (.1) 23.5 (.2)
Equity in earnings and gain on
sale of ShopKo 93.4 (.5) 20.7 (.1) 17.6 (.1)
---------------------------------------------------------------------------
Earnings before income taxes 384.8 2.2 280.5 1.7 267.7 1.6
Income taxes 154.0 .9 105.5 .6 101.3 .6
---------------------------------------------------------------------------
Net earnings $ 230.8 1.3% $ 175.0 1.1% $ 166.4 1.0%
===========================================================================
</TABLE>
Comparison Of Fifty-three Weeks Ended February 28, 1998 ("1998") With Fifty-two
Weeks Ended February 22, 1997 ("1997")
Net Sales
Net sales for 1998 increased 3.9 percent over 1997. On a comparable 52-week
basis, sales increased 2.1 percent, positively impacted by a 2.1 percent
increase in food distribution sales and a 1.8 percent increase in retail food
sales.
Food distribution sales increased in 1998 due to the addition of new customers,
despite the 1997 discontinuance of service to a major customer in the Southeast,
continuing competitive market conditions and low food price inflation. Retail
food sales were favorable in 1998 compared to 1997, primarily due to the
addition of new stores, partially offset by the closing or sale of
underperforming stores and a slight decrease in same-store sales of .4 percent,
reflecting competitive market conditions.
Gross Profit
Gross profit as a percentage of net sales increased to 10.3 percent in 1998,
compared with 10.1 percent in 1997. Food distribution gross profit margin for
1998 was comparable to fiscal 1997. Retail food gross profit margin increased
due to continued focus on merchandising activities.
Selling And Administrative
Expenses
Selling and administrative expenses were 7.9 percent of net sales in 1998,
compared with 7.8 percent in 1997. Food distribution expenses continued to be
impacted by technology related spending in support of new systems development as
well as to make systems year 2000 compliant. Retail food expenses in 1998 were
impacted by unfavorable wage expenses in comparison to 1997 related to both
increased wage rates and expansion of perishable departments.
14
<PAGE>
- -----------------------------------
financial review
Operating Earnings
The company's pre-tax operating earnings (earnings before interest, equity in
earnings and gain on sale of ShopKo, and taxes) increased to $405.4 million in
1998, compared with $380.5 million in 1997. Operating earnings before
depreciation and amortization increased to $635.5 million in 1998, compared with
$612.6 million in 1997, a 3.7% increase. Food distribution operating earnings
increased 2.1 percent in 1998 to $317.1 million, from $310.5 million in 1997.
The increase was due to the favorable sales and better buying, offset somewhat
by increased wages, information technology costs and LIFO. Retail food operating
earnings increased 25.5 percent to $117.6 million in 1998, from $93.7 million in
1997. The increase in retail operating earnings was due to increased sales,
merchandising activities and benefits derived from the closing or sale of
underperforming stores, offset somewhat by increased labor costs.
Interest Expense And Income
Interest expense decreased to $133.6 million in 1998, compared with $136.8
million in 1997, reflecting a reduction in debt levels. Interest income
increased to $19.6 million in 1998, compared with $16.1 million in 1997,
primarily due to increased retailer financing.
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 price of $150 million and a secondary public
offering of all remaining shares. The transactions resulted in proceeds of $305
million and a pretax gain of $90.0 million. Equity in earnings for 1998 were
$3.3 million or $.05 per share (basic and diluted) compared with $20.7 million
or $.31 per share (basic and diluted) in fiscal 1997.
Income Taxes
The effective tax rate increased to 40.0 percent in fiscal 1998, compared with
37.6 percent in 1997, due to the elimination of ShopKo earnings.
Net Earnings
Net earnings were $230.8 million or $3.68 per share - basic ($3.65 per share -
diluted) in 1998 compared with 1997 net earnings of $175.0 million or $2.60 per
share - basic ($2.59 per share - diluted). Excluding the gain on the sale of
ShopKo, net earnings were $177.1 million or $2.83 per share - basic ($2.80 per
share - diluted). Weighted average shares - diluted declined to 63.3 million in
1998 compared with 67.5 million for 1997, primarily due to the repurchase of 6.9
million shares in the second quarter of 1998, with proceeds from the ShopKo
transaction.
Comparison Of Fifty-two Weeks Ended February 22, 1997 ("1997") With Fifty-two
Weeks Ended February 24, 1996 ("1996"):
Net Sales
Net sales increased .4 percent in 1997. The sales increase was driven by an
increase in retail food sales of 7.0 percent, offset partially by a decrease in
food distribution sales of 1.0 percent.
Food distribution sales decreased in 1997, due to competitive market conditions
at the wholesale and retail level, the planned discontinuance of service to a
major customer in the Southeast and the expected liquidation of a major customer
at the end of 1996 in the Northeast. This effect was partially mitigated by the
addition of new retail customers
15
<PAGE>
- --------------------------
financial review
and food inflation of about one percent. Retail food sales increased in 1997,
primarily due to the addition of stores. Same-store sales increased 2.2 percent.
The retail food sales increase was partially offset by the closing of
underperforming retail stores pursuant to the restructuring program.
Gross Profit
Gross profit as a percentage of net sales increased to 10.1 percent in 1997,
compared with 9.6 percent in 1996. The increase was due principally to the
growing proportion within the company's total sales mix of the higher-margined
retail food business, which represented 29 percent of total sales in 1997,
compared with 27 percent in 1996. Food distribution gross profit margin
increased slightly due to favorable LIFO expense and certain merchandising
initiatives. The retail food gross profit margin increased as a result of
merchandising activities, changes to product mix and the closing of
underperforming stores.
Selling And Administrative
Expenses
Selling and administrative expenses were 7.8 percent of net sales in 1997,
compared with 7.4 percent in 1996. The higher percentage was 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, and the increase in direct and indirect costs related to
the transformation of the distribution operations. Food distribution selling and
administrative expenses as a percent of net sales were higher due to increased
technology related spending in support of the development of market driving
services, as well as costs related to opening the Southeast regional
distribution facility and the impact of fixed expenses as a percent of slightly
decreased sales. Retail food selling and administrative expenses in 1997 as a
percent of net sales were comparable to 1996.
Operating Earnings
The company's pre-tax operating earnings (earnings before interest, equity in
earnings of ShopKo and taxes) were $380.5 million in 1997, compared with $366.8
million in 1996. Operating earnings before depreciation and amortization
increased to $612.6 million in 1997, compared with $585.8 million in 1996. Food
distribution operating earnings were $310.5 million in 1997, compared with
$334.7 million in 1996. Operating earnings in 1997 were negatively impacted by
higher technology related expenses and the general softness in sales. Retail
food operating earnings were $93.7 million in 1997, compared with $57.2 million
in 1996. The increase in 1997 resulted from higher sales and improved gross
margins resulting from merchandising efforts and changes to product mix.
Interest Expense And Income
Interest expense of $136.8 million was incurred in 1997 compared with $140.2
million for 1996. The decrease was primarily due to slightly lower short-term
interest rates. Interest income decreased to $16.1 million in 1997, compared
with $23.5 million in 1996. Interest income decreased 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 1996 and in the fourth quarter of 1997.
Equity In Earnings Of ShopKo
The company's ownership in ShopKo in 1997 was 46 percent and was accounted for
under the equity method. Equity in earnings of ShopKo was
16
<PAGE>
- -------------------------
financial review
$20.7 million compared with $17.6 million in 1996. The net earnings increase
resulted from increased sales in ShopKo's ProVantage managed health care
operations and comparable store sales increases of 6 percent.
Income Taxes
The effective tax rate of 37.6 percent for 1997 was comparable with the 1996
effective tax rate of 37.8 percent.
Net Earnings
Net earnings for 1997 were $175.0 million, compared with net earnings for 1996
of $166.4 million. Net earnings were positively impacted by the significant
improvement in the company's retail food operations, which more than offset
increased technology related spending in support of new systems.
LIQUIDITY
Cash provided by operating activities was $393 million in 1998, compared with
$329 million in 1997 and $422 million in 1996. Cash provided from operations in
1998 was primarily used to finance capital expenditures of $230.9 million, repay
long-term debt of $84.6 million and pay dividends of $64.9 million.
On July 2, 1997, the company exited its 46 percent investment in ShopKo which
resulted in proceeds of $305 million. The Board of Directors approved an
additional treasury stock purchase program authorizing the company to repurchase
up to 8.5 million shares with proceeds received from the ShopKo sale. In fiscal
1998, the company repurchased 6.9 million shares at a cost of $266.7 million
under the 1997 program and 1.7 million shares at a cost of $71.7 million under
the 1996 program. In fiscal 1997, the company repurchased 746,000 shares at a
cost of $21.6 million.
Internally-generated funds from operations were the major source of liquidity in
1998. Management expects that the company will continue to replenish operating
assets and reduce aggregate debt with internally-generated funds. The company
has adequate short-term and long-term financing capabilities to fund
acquisitions as the opportunities arise.
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, pursuant to which the company could
issue $242.5 million of additional debt securities as of the end of fiscal 1998.
A $400 million revolving credit agreement, with rates tied to LIBOR plus .180 to
.275 percent, also is in place and expires in October 2002. The revolving credit
agreement is available for general corporate purposes and to support the
company's commercial paper program. There were no drawings on the revolving
credit agreement during fiscal 1998. Total commercial paper outstanding as of
the the end of fiscal 1998 was $223 million of which $100 million has been
classified as long-term debt as the company has the ability and intent to renew
these obligations past 1999 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.
SUPERVALU's capital budget for fiscal 1999, which includes leases, is $370
million compared with $280 million incurred during 1998. The capital budget
17
<PAGE>
- --------------------------
financial review
anticipates cash spending of $336 million plus $34 million of capital leases.
Approximately $187 million of the fiscal 1999 capital budget is slated for use
in the company's food distribution activities, including facilities, information
technology and normal replacement spending. The retail food capital budget of
$133 million covers corporately-owned retail food businesses. The budget
provides for approximately 39 new corporate stores including eight new price
superstores and 30 limited assortment stores and also includes capital for
remodeling of existing stores. The balance of the fiscal 1999 capital budget is
dedicated to the corporate area and will be utilized principally for systems-
related items.
In addition, the company is prepared to provide up to $150 million to support
store development and financing for the company's independent retailers. Certain
retailer financing activities do not require new cash outlays because they are
leases or guarantees.
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
substantially support spending requirements. 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 1998 totaled $1.03 per common share, an increase
of 3.5 percent over the 99 1/2 cents per share declared in 1997. This was the
61st year of consecutive cash dividends and the 26th year of successive annual
increases. The company's dividend policy will continue to emphasize a high level
of earnings retention for growth.
Common Stock Price
SUPERVALU's common stock is listed on the New York Stock Exchange under the
symbol SVU. At year-end, there were 7,161 stockholders of record compared with
7,655 at the end of fiscal 1997.
<TABLE>
<CAPTION>
Common Stock Dividends Per
Price Range Share
Fiscal Quarter 1998 1997 1998 1997
- --------------------------------------------------------------------------
High Low High Low
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First $36 5/8 $28 5/8 $32 5/8 $30 5/8 $.250 $.245
Second 41 5/8 34 1/2 31 5/8 27 5/8 .260 .250
Third 41 3/4 34 7/8 30 3/8 27 1/4 .260 .250
Fourth 48 9/16 39 9/16 32 3/8 27 3/4 .260 .250
- --------------------------------------------------------------------------
Year $48 9/16 $28 5/8 $32 5/8 $27 1/4 $1.030 $.995
- --------------------------------------------------------------------------
</TABLE>
Dividend payment dates are on or about the 15th day of March, June, September
and December, subject to Board of Directors approval.
New Accounting Standards
Earnings Per Share
Statement of Financial Accounting Standards No. 128, "Earnings per Share" was
issued in February 1997 and was adopted in fiscal 1998.
Reporting Comprehensive Income
Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive
Income" was issued in June 1997. This statement establishes standards for the
reporting and display of
18
<PAGE>
- ----------------------------
financial review
comprehensive income in the consolidated financial statements. The provisions of
the statement are effective for fiscal 1999.
Disclosures About Segments of
an Enterprise
Statement of Financial Accounting Standard No. 131, "Disclosures About Segments
of an Enterprise and Related Information" was issued in June 1997. This
statement establishes standards for the reporting of information concerning
operating segments in the consolidated financial statements. The provisions of
the statement are effective for fiscal 1999.
Pensions And Other
Postretirement Benefits
Statement of Financial Accounting Standard No. 132, "Employer's Disclosures
About Pensions and Other Postretirement Benefits" was issued in February 1998.
This statement establishes standards for the reporting of information concerning
pensions and other postretirement benefits. The provisions of this statement are
effective for fiscal 1999.
The new accounting standards above that are effective for fiscal 1999 will be
adopted in fiscal 1999 and are not expected to have a material effect on the
company's consolidated financial position or results of operations.
Year 2000
The company has established processes for evaluating and managing the risks and
costs associated with the year 2000 issue and is remediating its computer
applications and business processes to provide for their continued
functionality. The company has initiated formal communications with significant
suppliers and large customers to determine the extent to which the company is
vulnerable to those third parties' failure to address their own year 2000
issues. Failure of the company's suppliers or its customers to become year 2000
compliant may have a material adverse impact on the company's operations.
The company expects to complete the majority of the project in the spring of
1999. The total estimated cost of the project, which began in fiscal 1997, is
estimated at approximately $26 million, excluding the cost of new systems which
will be capitalized. The company has delayed other non-critical systems
development activities and expects that fiscal 1999 information technology
expenses will not differ significantly from the fiscal 1998 level.
Cautionary Statements For Purposes 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 28, 1998; other risks or uncertainties may be detailed from time to
time in the company's future Securities and Exchange Commission filings.
19
<PAGE>
- --------------------------------------------------
ten year financial and operating summary
<TABLE>
<CAPTION>
1998 (b) 1997 1996 1995 (c)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA (a)
Net sales $17,201,378 $16,551,902 $16,486,321 $16,563,772
Cost of sales 15,430,642 14,885,249 14,906,602 15,040,117
Selling and administrative expense 1,365,327 1,286,121 1,212,967 1,169,843
Restructuring and other charges -- -- -- 244,000
Interest, net 113,993 120,695 116,678 111,271
Equity in earnings and gain on sale of ShopKo 93,364 20,675 17,618 17,384
Earnings before taxes and accounting change 384,780 280,512 267,692 15,925
Provision for income taxes 154,023 105,468 101,259 (27,409)
Net earnings 230,757 175,044 166,433 43,334
Earnings per common share before accounting change-basic 3.68 2.60 2.44 .61
Earnings per common share before accounting change-diluted 3.65 2.59 2.43 .61
Net earnings per common share-basic 3.68 2.60 2.44 .61
Net earnings per common share-diluted 3.65 2.59 2.43 .61
-------------------------------------------------------------
BALANCE SHEET DATA (a)
Inventories (FIFO) $ 1,247,429 $ 1,221,344 $ 1,158,028 $ 1,230,017
Working capital (e) 286,800 361,260 355,124 319,429
Net property, plant and equipment 1,589,601 1,648,524 1,600,166 1,571,298
Total assets 4,093,010 4,283,326 4,183,503 4,305,149
Long-term debt (f) 1,260,728 1,420,591 1,445,562 1,459,766
Stockholders' equity 1,201,905 1,307,423 1,216,176 1,193,222
-------------------------------------------------------------
OTHER STATISTICS (a)
Earnings before accounting change as a percent of net sales 1.34% 1.06% 1.01% .26%
Return on average stockholders' equity 18.49% 13.89% 13.96% 3.46%
Book value per common share $ 19.87 $ 19.46 $ 17.94 $ 16.92
Current ratio (e) 1.20:1 1.26:1 1.27:1 1.22:1
Debt to capital ratio 57% 56% 57% 59%
Dividends declared per common share $ 1.03 $ .99 1/2 $ .97 $ .92 1/2
Weighted average common shares outstanding-basic 62,663 67,255 68,277 71,388
Weighted average common shares outstanding-diluted 63,275 67,477 68,492 71,528
Depreciation and amortization $ 230,082 $ 232,071 $ 219,084 $ 198,718
Capital expenditures, excluding retailer financing $ 279,768 $ 285,939 $ 271,456 $ 319,560
=============================================================
</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 1998 and Fiscal 1992 contain 53 weeks;
all other years cover 52 weeks. Dollars in thousands except per share and
percentage data.
(b) Net earnings include a gain on the sale of ShopKo of $53.7 million ($.85
per share-diluted). All statistics include this transaction.
(c) Net earnings were reduced by restructuring and other charges of $159.4
million ($2.23 per share-diluted). The provision for income taxes includes
a reversal of $40.8 million ($.57 per share-diluted) of deferred taxes in
1995 related to the partial disposition of ShopKo in 1992. The 1995 ratios
were calculated including the restructuring and other charges and including
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 .98 and 12.95 percent, respectively, if the restructuring
and other charges and the reversal of $40.8 million of deferred taxes had
been excluded.
(d) 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 $13.3
million ($.18 per share-diluted). A $51.3 million after-tax gain on the
sale of a 54 percent interest in ShopKo was included in fiscal 1992 net
earnings ($.68 per share-diluted). All statistics include the results of
both transactions.
(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.
20
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992 (d) 1991 1990 1989
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$15,936,925 $12,568,000 $10,632,301 $10,104,899 $9,734,811 $9,061,176
14,523,434 11,531,394 9,807,633 9,360,886 9,043,953 8,429,692
1,044,433 746,857 583,789 531,972 484,586 433,177
-- -- -- -- -- --
89,767 54,203 34,320 31,441 33,104 34,532
14,789 23,072 116,281 45,080 42,562 36,943
294,080 258,618 322,840 225,680 215,730 200,718
108,827 94,092 115,175 70,544 67,984 63,250
185,253 164,526 194,377 155,136 147,746 137,468
2.58 2.31 2.78 2.06 1.97 1.84
2.56 2.30 2.77 2.06 1.96 1.83
2.58 2.31 2.60 2.06 1.97 1.84
2.56 2.30 2.59 2.06 1.96 1.83
- ---------------------------------------------------------------------------------------------------
$ 1,227,170 $ 1,247,337 $ 862,621 $ 785,395 $ 726,194 $ 688,947
452,121 361,093 534,182 196,217 188,139 165,887
1,410,123 1,384,241 879,186 789,443 701,162 666,508
4,042,351 4,064,189 2,484,300 2,401,357 2,239,900 2,116,202
1,262,995 1,347,386 608,241 567,444 549,694 557,828
1,275,458 1,134,820 1,030,981 978,678 869,891 763,706
- ---------------------------------------------------------------------------------------------------
1.16% 1.31% 1.95% 1.54% 1.52% 1.52%
15.40% 15.32% 20.17% 16.82% 18.12% 19.31%
$ 17.62 $ 15.84 $ 14.35 $ 13.01 $ 11.59 $ 10.20
1.37:1 1.27:1 1.72:1 1.24:1 1.25:1 1.22:1
53% 59% 43% 46% 46% 46%
$ .85 1/2 $ .76 1/2 $ .70 1/2 $ .64 1/2 $ .58 1/2 $ .48 1/2
71,817 71,341 74,700 75,165 74,972 74,785
72,240 71,608 74,947 75,390 75,336 75,092
$ 186,261 $ 140,790 $ 111,488 $ 105,582 $ 95,593 $ 86,944
$ 239,602 $ 164,728 $ 175,624 $ 203,199 $ 142,899 $ 193,218
===================================================================================================
</TABLE>
21
<PAGE>
- --------------------------------------------------------------------------
consolidated composition of net sales and operating earnings
(in thousands, except percent data)
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>
1998 1997 1996 1995 1994
..................................................................................................................
<S> <C> <C> <C> <C> <C>
NET SALES
Food distribution $ 15,108,779 $14,545,266 $14,685,899 $14,820,009 $14,361,255
87.8% 87.9% 89.1% 89.5% 90.1%
Retail food 4,877,290 4,719,079 4,412,203 4,219,691 3,696,145
28.4% 28.5% 26.7% 25.4% 23.2%
Less: Eliminations (2,784,691) (2,712,443) (2,611,781) (2,475,928) (2,120,475)
(16.2)% (16.4)% (15.8)% (14.9)% (13.3)%
Total net sales $ 17,201,378 $16,551,902 $16,486,321 $16,563,772 $15,936,925
100.0% 100.0% 100.0% 100.0% 100.0%
................................................................................
OPERATING EARNINGS
Food distribution $ 317,068 $ 310,455 $ 334,673 $ 257,495 $ 365,527
Retail food 117,576 93,662 57,176 (104,338) 31,366
--------------------------------------------------------------------------------
Total operating earnings 434,644 404,117 391,849 153,157 396,893
Interest expense, net (113,993) (120,695) (116,678) (111,271) (89,767)
General corporate expenses (29,235) (23,585) (25,097) (43,345) (27,835)
--------------------------------------------------------------------------------
Earnings before equity
in earnings and gain on
sale of ShopKo and
income taxes 291,416 259,837 250,074 (1,459) 279,291
Equity in earnings and gain on
sale of ShopKo 93,364 20,675 17,618 17,384 14,789
--------------------------------------------------------------------------------
Earnings before income taxes $ 384,780 $ 280,512 $ 267,692 $ 15,925 $ 294,080
--------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
Food distribution $ 2,825,762 $ 2,746,284 $ 2,684,088 $ 2,843,862 $ 2,644,670
Retail food 1,109,296 1,166,870 1,126,197 1,121,596 948,551
Corporate 157,952 370,172 373,218 339,691 449,130
--------------------------------------------------------------------------------
Total $ 4,093,010 $ 4,283,326 $ 4,183,503 $ 4,305,149 $ 4,042,351
................................................................................
DEPRECIATION AND
AMORTIZATION
Food distribution $ 118,556 $ 122,778 $ 115,507 $ 107,471 $ 105,763
Retail food 90,704 90,389 85,010 76,145 64,924
Corporate 20,822 18,904 18,567 15,102 15,574
--------------------------------------------------------------------------------
Total $ 230,082 $ 232,071 $ 219,084 $ 198,718 $ 186,261
................................................................................
CAPITAL EXPENDITURES
Food distribution $ 166,066 $ 139,779 $ 102,435 $ 159,838 $ 131,322
Retail food 92,651 120,881 137,914 119,605 69,939
Corporate 21,051 25,279 31,107 40,117 38,341
................................................................................
Total $ 279,768 $ 285,939 $ 271,456 $ 319,560 $ 239,602
================================================================================
</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.
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 include $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.
22
<PAGE>
- -----------------------------------------------
consolidated statements of earnings
(in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended February 28, February 22, February 24,
1998 1997 1996
(53 Weeks) (52 Weeks) (52 Weeks)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $17,201,378 $16,551,902 $16,486,321
COSTS AND EXPENSES
Cost of sales 15,430,642 14,885,249 14,906,602
Selling and administrative
expenses 1,365,327 1,286,121 1,212,967
Interest
Interest expense 133,619 136,831 140,150
Interest income 19,626 16,136 23,472
-------------------------------------------
Interest expense, net 113,993 120,695 116,678
-------------------------------------------
Total costs and expenses 16,909,962 16,292,065 16,236,247
-------------------------------------------
EARNINGS BEFORE EQUITY IN
EARNINGS AND GAIN ON SALE
OF SHOPKO AND INCOME TAXES 291,416 259,837 250,074
Equity in earnings and gain
on sale of ShopKo 93,364 20,675 17,618
-------------------------------------------
EARNINGS BEFORE INCOME TAXES 384,780 280,512 267,692
PROVISION FOR INCOME TAXES
Current 131,343 77,591 36,692
Deferred 22,680 27,877 64,567
-------------------------------------------
Income tax expense 154,023 105,468 101,259
-------------------------------------------
NET EARNINGS $ 230,757 $ 175,044 $ 166,433
-------------------------------------------
Weighted average number of
common shares outstanding
Basic 62,663 67,255 68,277
Diluted 63,275 67,477 68,492
NET EARNINGS PER COMMON
SHARE-BASIC $ 3.68 $ 2.60 $ 2.44
NET EARNINGS PER COMMON
SHARE-DILUTED $ 3.65 $ 2.59 $ 2.43
============================================
</TABLE>
See notes to consolidated financial statements.
23
<PAGE>
- -----------------------------------------------------
consolidated balance sheets
(in thousands, except per share data)
<TABLE>
<CAPTION>
February 28, 1998 February 22, 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash $ 6,100 $ 6,539
Receivables, less allowance for losses of $13,415 in 1998
and $17,806 in 1997 410,741 403,835
Inventories 1,115,529 1,091,805
Other current assets 79,690 98,620
---------- ----------
Total current assets 1,612,060 1,600,799
---------- ----------
Long-term notes receivable 83,401 45,588
Long-term investment in direct financing leases 95,291 84,350
Property, plant and equipment
Land 138,615 140,427
Buildings 929,975 957,815
Property under construction 54,175 28,030
Leasehold improvements 150,745 150,040
Equipment 1,147,626 1,113,486
Assets under capital leases 286,762 298,757
---------- ----------
2,707,898 2,688,555
Less accumulated depreciation and amortization
Owned property, plant and equipment 1,052,521 983,229
Assets under capital leases 65,776 56,802
---------- ----------
Net property, plant and equipment 1,589,601 1,648,524
---------- ----------
Investment in ShopKo -- 209,789
Goodwill 498,438 491,427
Other assets 214,219 202,849
---------- ----------
Total assets $4,093,010 $4,283,326
========== ==========
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
- ----------------------------------------------
consolidated balance sheets
(in thousands, except per share data)
<TABLE>
<CAPTION>
February 28, 1998 February 22, 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 149,002 $ 134,272
Accounts payable 924,371 923,958
Accrued vacation, compensation
and benefits 95,129 89,458
Current maturities of long-term debt 156,897 72,905
Current obligations under capital leases 22,697 21,544
Other current liabilities 109,064 126,941
-----------------------------------
TOTAL CURRENT LIABILITIES 1,457,160 1,369,078
-----------------------------------
LONG-TERM DEBT 934,167 1,087,162
LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES 326,561 333,429
DEFERRED INCOME TAXES 41,948 38,054
OTHER LIABILITIES 131,269 148,180
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Preferred stock, no par value: Authorized
1,000 shares
Shares issued and outstanding,
6 in 1998 and 1997 ($1,000
stated value) 5,908 5,908
Common stock, $1.00 par value: Authorized
200,000 shares
Shares issued, 75,335 in 1998 and 1997 75,335 75,335
Capital in excess of par value 16,124 13,296
Retained earnings 1,611,834 1,444,755
Treasury stock, at cost, 15,151 shares in
1998 and 8,453 in 1997 (507,296) (231,871)
-----------------------------------
TOTAL STOCKHOLDERS' EQUITY 1,201,905 1,307,423
-----------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 4,093,010 $ 4,283,326
===================================
25
</TABLE>
<PAGE>
- ---------------------------------------------------
consolidated statements of stockholder's equity
(in thousands, except per share data)
<TABLE>
<CAPTION>
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 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
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)
---------------------------------------------------------------------------
Balances at
February 22, 1997 5,908 75,335 13,296 (231,871) 1,444,755 1,307,423
Net earnings -- -- -- -- 230,757 230,757
Sales of common stock under
option plans -- -- (4,123) 51,623 -- 47,500
Cash dividends declared on
common stock--$1.03 per share -- -- -- -- (63,678) (63,678)
Compensation under employee
incentive plans -- -- 6,951 11,289 -- 18,240
Purchase of shares for treasury -- -- -- (338,337) -- (338,337)
---------------------------------------------------------------------------
Balances at
February 28, 1998 $5,908 $75,335 $16,124 $(507,296) $1,611,834 $1,201,905
===========================================================================
</TABLE>
See notes to consolidated financial statements.
26
<PAGE>
- -------------------------------------
consolidated statements of cash flows
(in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended February 28, February 22, February 24,
1998 1997 1996
(53 weeks) (52 weeks) (52 weeks)
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 230,757 $ 175,044 $ 166,433
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Equity in earnings and gain on sale of ShopKo (93,364) (20,675) (17,618)
Dividends received from ShopKo -- 4,862 6,482
Depreciation and amortization 230,082 232,071 219,084
Provision for losses on receivables 5,791 8,851 2,269
Deferred income taxes 22,680 27,877 64,567
Other adjustments, net (3,476) (3,100) (12,108)
Changes in assets and liabilities, excluding effect from acquisitions:
Receivables (29,905) (30,509) 17,865
Inventories (23,297) (58,658) 79,880
Accounts payable 38,453 (53,872) (59,218)
Other assets and liabilities 15,214 46,898 (45,938)
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 392,935 328,789 421,698
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of ShopKo stock 305,153 -- --
Additions to long-term notes receivable (77,779) (52,727) (28,394)
Proceeds received on long-term notes receivable 39,966 43,870 64,757
Proceeds from sale of property, plant and equipment 90,169 78,825 94,733
Purchase of property, plant and equipment (230,910) (244,682) (236,248)
Business acquisitions, net of cash acquired (23,523) (4,996) --
Other investing activities (28,742) (16,920) (39,645)
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 74,334 (196,630) (144,797)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in checks outstanding, net of deposits (23,924) 3,270 3,972
Net issuance (reduction) of short-term notes payable 14,730 (23,755) (68,141)
Proceeds from issuance of long-term debt 15,592 3,193 257,500
Repayment of long-term debt (84,595) (7,612) (308,406)
Reduction of obligations under capital leases (24,055) (21,205) (17,529)
Proceeds from the sale of common stock under option plans 37,736 3,719 2,291
Dividends paid (64,855) (66,884) (66,122)
Payment for purchase of treasury stock (338,337) (21,561) (80,090)
----------- ----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (467,708) (130,835) (276,525)
----------- ----------- -----------
Net increase (decrease) in cash (439) 1,324 376
Cash at beginning of year 6,539 5,215 4,839
----------- ----------- -----------
CASH AT END OF YEAR $ 6,100 $ 6,539 $ 5,215
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
27
<PAGE>
- ------------------------------------------
notes to consolidated financial statements
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated 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 and income from product sales are recognized upon shipment of the
product for food distribution and at the point of sale for retail food. Revenues
and income from services rendered are recognized immediately after such services
have been provided.
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: 74.4 percent for fiscal 1998 and 76.3 percent for
fiscal 1997. 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 $131.9 million at February 28, 1998 and $129.5
million at February 22, 1997.
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 the straight-line method. Estimated useful lives
generally are 10 to 40 years for buildings and major improvements; 3 to 10
years for equipment; and term of the lease or expected life for leasehold
improvements. Interest on property under construction of $1.9, $2.0 and $2.6
million was capitalized in fiscal years 1998, 1997 and 1996, respectively.
Goodwill:
Amounts paid in excess of the fair value of acquired net assets are amortized on
a straight-line basis. 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
would be recognized when it is probable that such future undiscounted cash flows
will be less than the carrying value of the asset. As of February 28, 1998,
$400 million of goodwill related to the acquisition of Wetterau Incorporated in
fiscal 1993 is being amortized over 40 years. Goodwill related to other
acquisitions is being amortized over 15 to 20 years. Goodwill is shown net of
accumulated amortization of $87.0 and $66.9 million for fiscal 1998 and 1997,
respectively.
Fair Value Disclosures of
Financial Instruments:
The estimated fair value of notes receivable approximates the net carrying value
at February 28, 1998 and February 22, 1997. Notes receivable are valued based
on comparisons to publicly traded debt instruments of similar credit quality.
At February 28, 1998 and February 22, 1997 the estimated fair market value of
the company's long-term debt (including current maturities) exceeded the
carrying value by approximately $42 and $33 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 28, 1998 and February
22, 1997 approximates the carrying value.
Pre-opening Costs:
Pre-opening costs of retail stores are charged against earnings as incurred.
Net Earnings Per Share:
In fiscal 1998 the company adopted Statement of Financial Accounting Standard
No. 128 (SFAS 128), "Earnings Per Share." SFAS 128 requires the disclosure of
Basic and Diluted Earnings per Share (EPS). Basic EPS is calculated using income
available to common shareholders divided by the weighted average of common
shares outstanding during the year. Diluted EPS is similar to Basic EPS except
that the weighted average of common shares outstanding is increased to include
the number of additional common shares that would have been outstanding if the
dilutive potential common shares, such as options, had been issued. All prior
year EPS have been restated in accordance with the provisions of SFAS 128.
Use of Estimates:
The preparation of consolidated 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' consolidated financial
statements to conform to 1998 presentation. These reclassifications did not
affect results of operations as previously reported.
28
<PAGE>
- ------------------------------------------
notes to consolidated financial statements
RESTRUCTURING CHARGES
In fiscal 1995, restructuring charges of $205 million were incurred for the
implementation of the ADVANTAGE project and the sale, closure or restructure of
certain retail businesses.
The company utilized approximately $39.2 million, $44.0 million and $64.0
million of the reserve in 1998, 1997 and 1996 respectively, primarily for
carrying costs and losses on the disposition of property as well as the closing
of underperforming corporate retail stores and employee separation costs.
The remaining $11.6 million of reserve is expected to be utilized for certain
non cancelable lease and other obligations which will extend beyond fiscal
1999.
NOTES RECEIVABLE
Notes receivable arise from fixture and other financing activities related to
independently owned retail food customers. 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 7 years, and may be non-interest bearing or
bear interest at rates ranging from 5 to 12 percent.
Included in current receivables are notes receivable due within one year
totaling $16.7 and $6.6 million at February 28, 1998 and February 22, 1997,
respectively.
INVESTMENT IN SHOPKO
On July 2, 1997, the company exited its 46 percent investment in ShopKo, a mass
merchandise discount retailer, 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.
DEBT
<TABLE>
<CAPTION>
(In thousands, February 28, February 22,
except payment data) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
7.800%-8.875% promissory $ 400,000 $ 400,000
notes semi-annual interest
payments of $16.1 million;
due fiscal 2003 to 2023
7.25% promissory notes 150,000 150,000
semi-annual interest
payments of $5.4 million;
due fiscal 2000
6.09%-6.69% medium-term 132,500 157,500
notes semi-annual interest
payments of $4.2 million;
due fiscal 1999 to 2006
Notes payable 100,000 100,000
Variable rate to 8.25% industrial 88,900 89,369
revenue bonds
9.67% senior subordinated notes 75,000 75,000
due fiscal 1999
8.875% promissory notes 45,000 70,000
semi-annual interest payments
of $2.0 million; due fiscal 2000
6.00%-11.50% promissory notes 24,991 38,482
due fiscal 1999 to 2004
8.28%-9.46% promissory notes
due fiscal 2010 22,894 23,893
9.96% promissory notes
due fiscal 2006 19,643 21,247
8.875% sinking fund debentures 7,110 22,110
due fiscal 2017
Other debt 25,026 12,466
- --------------------------------------------------------------------------------
1,091,064 1,160,067
Less current maturities 156,897 72,905
- --------------------------------------------------------------------------------
Long-term debt $ 934,167 $1,087,162
================================================================================
</TABLE>
Aggregate maturities of long-term debt during the next five fiscal years are:
(In thousands)
- --------------------------------------------------------------------------------
1999 $156,897
2000 212,445
2001 78,121
2002 9,395
2003 409,026
================================================================================
The company has a $400 million revolving credit agreement that expires in
October 2002. The company pays an annual facility fee of .09 percent for the
credit agreement. The revolving credit agreement is available for general
corporate purposes and to support the company's commercial paper program. There
were no drawings on the revolving credit agreement during fiscal 1998 and 1997.
As of February 28,
29
<PAGE>
- --------------------------------------
notes to consolidated financial statements
1998, and February 22, 1997, total commercial paper outstanding was $223 million
and $213 million, respectively. Of the total commercial paper outstanding
borrowings of $100 million were classified as long-term debt at February 28,
1998 and February 22, 1997, reflecting SUPERVALU's intent and ability, through
the existence of the revolving credit agreement, to refinance these borrowings.
The company also has a $400 million "shelf registration" in effect pursuant to
which the company could issue $242.5 million of additional debt securities. The
debt agreements contain various covenants including maximum permitted leverage.
Under the most restrictive covenants, retained earnings of approximately $134
million were available at year-end for payment of cash dividends.
The weighted-average interest rate on short-term borrowings outstanding was 5.7
percent at February 28, 1998 and 5.5 percent at February 22, 1997.
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 $17.9, $18.2 and $13.8 million in fiscal 1998,
1997 and 1996, respectively.
Future minimum obligations under capital leases in effect at February 28, 1998
are as follows:
(In thousands) Lease
Fiscal Year Obligations
- --------------------------------------------------------------------------------
1999 $ 33,266
2000 32,608
2001 31,699
2002 30,812
2003 30,350
Later 250,928
- --------------------------------------------------------------------------------
Total future minimum obligations 409,663
Less interest 161,322
- --------------------------------------------------------------------------------
Present value of net future minimum obligations 248,341
Less current portion 13,601
- --------------------------------------------------------------------------------
Long-term obligations $234,740
================================================================================
The present values of future minimum obligations shown are calculated based on
interest rates ranging from 6.7 percent to 13.8 percent, with a weighted
average of 9.2 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 28, 1998 are as
follows:
(In thousands) Lease
Fiscal Year Obligations
- --------------------------------------------------------------------------------
1999 $ 60,393
2000 55,213
2001 49,291
2002 40,912
2003 30,935
Later 101,566
- --------------------------------------------------------------------------------
Total future minimum obligations $338,310
================================================================================
Total rent expense, net of sublease income, relating to all operating leases
with terms greater than one year was $40.0, $36.5, and $33.0 million in fiscal
1998, 1997 and 1996, respectively.
Future minimum receivables under operating leases and subleases in effect at
February 28, 1998 are as follows:
(In thousands) Owned Leased
Fiscal Year Property Property Total
- --------------------------------------------------------------------------------
1999 $ 3,140 $17,495 $ 20,635
2000 2,515 15,085 17,600
2001 2,027 12,791 14,818
2002 1,853 9,840 11,693
2003 1,725 7,171 8,896
Later 5,601 21,484 27,085
- --------------------------------------------------------------------------------
Total future
minimum receivables $16,861 $83,866 $100,727
================================================================================
Owned property under operating leases is as follows:
(In Thousands) February 28, February 22,
1998 1997
- --------------------------------------------------------------------------------
Land, buildings and equipment $35,507 $45,513
Less accumulated depreciation 11,428 14,922
- --------------------------------------------------------------------------------
Net land, buildings and equipment $24,079 $30,591
================================================================================
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 future minimum
obligations under the related capital leases in effect at February 28, 1998 are
as follows:
30
<PAGE>
- --------------------------------------------
notes to consolidated financial statements
<TABLE>
<CAPTION>
(In thousands) Direct Financing Capital Lease
Fiscal Year Lease Receivables Obligations
- --------------------------------------------------------------------------------
<S> <C> <C>
1999 $ 18,678 $ 17,357
2000 16,830 15,668
2001 14,855 13,840
2002 13,998 13,069
2003 12,921 12,082
Later 100,012 94,140
- --------------------------------------------------------------------------------
Total minimum lease payments 177,294 166,156
Less unearned income 73,106 --
Less interest -- 65,239
- --------------------------------------------------------------------------------
Present value of net minimum
lease payments 104,188 100,917
Less current portion 8,897 9,096
- --------------------------------------------------------------------------------
Long-term portion $ 95,291 $ 91,821
================================================================================
</TABLE>
INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $109,550 $ 64,033 $ 30,427
State 22,161 13,730 6,548
Tax credits (368) (172) (283)
Deferred
Restructuring charges 15,550 15,599 31,565
Other 7,130 12,278 33,002
- --------------------------------------------------------------------------------
Total provision $154,023 $105,468 $101,259
================================================================================
</TABLE>
The difference between the actual tax provision and the tax provision computed
by applying the statutory Federal income tax rate to earnings before taxes is
attributable to the following:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal taxes based on
statutory rate $134,680 $ 98,180 $ 93,692
State income taxes,
net of federal
benefit 16,508 12,763 12,180
Benefit of dividends
received deduction (1,342) (7,793) (6,455)
Nondeductible goodwill 6,248 6,277 5,973
Other (2,071) (3,959) (4,131)
- --------------------------------------------------------------------------------
Total provision $154,023 $105,468 $101,259
================================================================================
</TABLE>
Temporary differences which give rise to significant portions of the net
deferred tax asset (liability) as of February 28, 1998 and February 22, 1997
are as follows:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Depreciation and amortization $ 20,676 $ 18,442
Restructuring charges 13,089 28,639
Net operating loss from acquired
subsidiaries 19,964 21,968
Valuation allowance (8,000) (8,000)
Provision for obligations to be
settled in future periods 105,193 139,774
Inventory 14,269 14,559
Other 10,566 8,858
- --------------------------------------------------------------------------------
Total deferred tax assets 175,757 224,240
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation and amortization (85,767) (85,867)
Acquired assets adjustment
to fair values (50,573) (85,699)
Accelerated tax deductions
for benefits to be paid in
future periods (34,860) (30,483)
Other (10,687) (5,641)
- --------------------------------------------------------------------------------
Total deferred tax liabilities (181,887) (207,690)
- --------------------------------------------------------------------------------
Net deferred tax asset (liability) $ (6,130) $ 16,550
================================================================================
</TABLE>
The company acquired net operating loss (NOL) carryforwards of $58.1 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 consist primarily of accrued
postretirement benefits, 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) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Leased asset additions
and related obligation $39,072 $41,257 $37,769
=================================
Acquisitions:
Fair value of
assets acquired 28,114 25,169 --
Cash paid 23,570 5,014 --
- --------------------------------------------------------------------------------
Liabilities assumed $ 4,544 $20,155 --
================================================================================
Payments for interest and income taxes were as follows:
(In thousands) 1998 1997 1996
- --------------------------------------------------------------------------------
Interest (net of
amount capitalized) $134,645 $136,618 $144,599
Income taxes 142,829 58,551 61,994
================================================================================
</TABLE>
31
<PAGE>
- --------------------------------------------------
notes to consolidated financial statements
STOCK OPTION PLANS
The company's 1997, 1993 and 1983 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. In April 1997, the
Board of Directors reserved an additional 2.0 million shares to be issued for
stock option plans. 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 Weighted Average
(In thousands) Price per Share
- -------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, February 25, 1995 3,539 $28.79
Granted 1,444 27.36
Exercised (187) 24.30
Canceled and forfeited (195)
- -------------------------------------------------------------------------------
Outstanding, February 24, 1996 4,601 28.43
Granted 705 31.50
Exercised (199) 25.81
Canceled and forfeited (79)
- -------------------------------------------------------------------------------
Outstanding, February 22, 1997 5,028 28.92
Granted 1,398 35.04
Exercised (2,051) 28.01
Canceled and forfeited (186)
- -------------------------------------------------------------------------------
Outstanding, February 28, 1998 4,189 $31.34
===============================================================================
</TABLE>
The outstanding stock options at February 28, 1998 have exercise prices ranging
from $20.63 to $48.31 and a weighted average remaining contractual life of 6.7
years. Options to purchase 2.5 and 3.1 million shares were exercisable at
February 28, 1998, and February 22, 1997, respectively. These options have a
weighted average exercise price of $31.35 and $28.54, respectively. Option
shares available for grant were 1.9 and 1.1 million at February 28, 1998, and
February 22, 1997, respectively. The company has reserved 6.1 million shares, in
aggregate, for the plans.
As of February 28, 1998, 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 2.0 million shares of common
stock and are exercisable only upon a "change of control."
In 1997 the company adopted Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock Based Compensation." The company has elected to
continue following the accounting guidance of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" for measurement and
recognition of stock-based transactions with employees. No compensation cost has
been recognized for options issued under the Stock Option Plans because the
exercise price of all options granted was not less than 100 percent of fair
market value of the common stock on the date of grant. Had compensation cost for
the stock options issued been determined based on the fair value at the grant
date, consistent with provisions of SFAS No. 123, the company's 1998, 1997 and
1996 net income and earnings per share would have been changed to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings
As reported $230,757 $175,044 $166,433
Pro forma 227,896 173,568 165,565
Earnings per share - diluted
As reported $3.65 $2.59 $2.43
Pro forma 3.60 2.57 2.42
===============================================================================
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions and results:
<TABLE>
<CAPTION>
Assumptions 1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend yield 2.69% 3.31% 3.30%
Risk free interest rate 5.62% 6.42% 5.81%
Expected life 5 years 7 years 7 years
Expected volatility 18.21% 13.78% 11.52%
Estimated fair value of options
granted per share $6.78 $6.19 $4.75
===============================================================================
</TABLE>
TREASURY STOCK PURCHASE PROGRAM
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 August 1996, the Board
of Directors instituted a treasury stock program under which the company is
authorized to repurchase up to 5.0 million shares for reissuance upon the
exercise of employee stock options and for other compensation programs utilizing
the company's stock. Upon adoption of the August 1996 program, the December 1994
and February 1994 treasury stock programs were rescinded. In fiscal 1997, the
company repurchased .7 million shares at an average cost of $28.91 under the
August 1996 program. In June 1997, the Board of Directors instituted a treasury
stock program under which the company is authorized to repurchase up to 8.5
million shares with proceeds received from the sale of ShopKo. In fiscal 1998,
the company repurchased 6.9 million shares at an average cost of $38.72 under
the June 1997 program and 1.7 million shares at an average cost of $41.01 under
the August 1996 program.
32
<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.
EARNINGS PER SHARE
In fiscal 1998 the company adopted Statement of Financial Accounting Standards
(SFAS) No.128 "Earnings per Share." Earnings per share amounts presented for
1997 and 1996 have been restated for the adoption of SFAS 128. The following
table reflects the calculation of basic and diluted earnings per share:
<TABLE>
<CAPTION>
(In thousands,
except per share amounts) 1998 1997 1996
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings per share - basic
Income available to
common shareholders $230,757 $175,044 $166,433
Weighted average
shares outstanding 62,663 67,255 68,277
Earnings per share - basic $3.68 $2.60 $2.44
- --------------------------------------------------------------------------
Earnings per share - diluted
Income available to
common shareholders $230,757 $175,044 $166,433
Weighted average
shares outstanding 62,663 67,255 68,277
Dilutive impact of
options outstanding 612 222 215
-------- -------- --------
Weighted average shares and
potential dilutive shares
outstanding 63,275 67,477 68,492
Earnings per share - diluted $3.65 $2.59 $2.43
==========================================================================
</TABLE>
COMMITMENTS AND CONTINGENCIES
The company has guaranteed mortgage loan and other debt obligations of $14.8
million. The company has also guaranteed the leases and fixture financing loans
of various affiliated retailers with a present value of $66.4 and $22.4 million,
respectively. The company has provided limited recourse to purchasers of notes
receivable from affiliated retailers with outstanding note balances of $33.6
million and $51.3 million at fiscal 1998 and 1997, $18.2 million of which the
company has contingent liability at both February 28, 1998 and February 22,
1997, respectively. The company has also entered into note repurchase agreements
with various lenders totaling $7.4 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
financial statements.
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 $1.9, $2.3 and $5.5 million
for fiscal 1998, 1997 and 1996, respectively.
Amounts charged to union pension expense were $37.4, $34.4 and $33.5 million for
fiscal 1998, 1997 and 1996, 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). Plan assets are held in trust and invested in separately managed
accounts and publicly traded mutual funds holding both equity and fixed income
securities.
33
<PAGE>
- -----------------------------------------------
notes to consolidated financial statements
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 28, February 22,
1998 1997
- ----------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
accumulated benefit obligation:
Vested $ 197,273 $ 189,623
Total $ 220,528 $ 211,917
- ----------------------------------------------------------------
Projected benefit obligation $ 281,665 $ 273,714
Plan assets at fair value (260,028) (233,410)
- ----------------------------------------------------------------
Projected benefit obligation in
excess of plan assets 21,637 40,304
Unrecognized net loss (17,263) (38,419)
Unrecognized prior service cost 1,043 798
Unrecognized transition obligation (190) (285)
Adjustment to minimum liability 168 22
- ----------------------------------------------------------------
Pension liability $ 5,395 $ 2,420
================================================================
</TABLE>
Net pension expense included the following components:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
- ----------------------------------------------------------------
<S> <C> <C> <C>
Service cost $12,668 $12,197 $8,742
Interest cost 19,545 18,676 16,815
Actual return on
plan assets (27,477) (27,401) (32,468)
Net amortization
and deferral 5,374 9,878 17,053
- ----------------------------------------------------------------
Net pension expense $10,110 $13,350 $10,142
================================================================
</TABLE>
For both fiscal 1998 and 1997, 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. 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 were $14.9
million and $16.4 million at February 28, 1998 and February 22, 1997,
respectively. The accumulated benefit obligation of these plans totaled $11.1
million and $12.9 million at February 28, 1998 and February 22, 1997,
respectively. Net periodic pension cost was $2.3 million for fiscal 1998 and
$2.2 million for fiscal 1997 and 1996.
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 1998 1997 1996
- ----------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits
attributed to service
during the period $1,850 $1,813 $1,460
Interest cost on
accumulated
postretirement
benefit obligation 4,182 3,932 3,667
Net amortization
and deferral (262) (261) (335)
- ----------------------------------------------------------------
Net periodic postretirement
benefit cost $5,770 $5,484 $4,792
================================================================
</TABLE>
<TABLE>
<CAPTION>
(In thousands)
Accumulated postretirement February 28, February 22,
benefit obligation 1998 1997
- ----------------------------------------------------------------
<S> <C> <C>
Retirees $24,539 $22,816
Active plan participants 36,166 34,336
- ----------------------------------------------------------------
Total accumulated postretirement
benefit obligation 60,705 57,152
Unrecognized loss (8,259) (5,949)
Unrecognized prior service cost 1,959 2,221
- ----------------------------------------------------------------
Postretirement benefit liability $54,405 $53,424
================================================================
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5 percent in 1998 and 1997.
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation for both fiscal 1998 and 1997 was 9 percent
decreasing to 6 percent by fiscal 2001. 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 $8.7 million and $8.5 million and the net
periodic cost by $1.0 million and $.9 million for fiscal 1998 and 1997,
respectively.
INDUSTRY SEGMENT INFORMATION
Information concerning the company's continuing operations by business segment
for the years ended February 28, 1998, February 22, 1997 and February 24, 1996,
as required by Statement of Financial Accounting Standards No. 14, "Financial
Reporting for Segments of a Business Enterprise," is contained on page 22.
Statement of Financial Standard No. 131, "Disclosures About Segments of an
Enterprise and Related Information" was issued in June 1997 and will be adopted
in fiscal 1999.
34
<PAGE>
- -------------------------------------------------
unaudited quarterly financial information
(in thousands, except per share data)
Quarterly unaudited financial information for SUPERVALU INC. and subsidiaries is
as follows:
<TABLE>
<CAPTION>
Fiscal Year (53 Weeks) Ended February 28, 1998
First Second Third Fourth Year
(16 wks) (12 wks) (12 wks) (13 wks) (53 wks)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $5,033,303 $3,866,012 $4,004,565 $4,297,498 $17,201,378
Gross profit 501,129 393,286 403,792 472,529 1,770,736
Net earnings 49,766 89,115 40,249 51,627 230,757
Net earnings per common
share-basic .74 1.44 .67 .86 3.68
Net earnings per common
share-diluted .74 1.42 .66 .85 3.65
Dividends declared per
common share .250 .260 .260 .260 1.030
Weighted average shares-basic 66,977 62,059 60,211 60,175 62,663
Weighted average shares-diluted 67,244 62,840 60,871 61,013 63,275
=======================================================================
</TABLE>
The results for the second quarter, fiscal 1998, include an after-tax gain on
the sale of ShopKo stock of $53.7 million.
<TABLE>
<CAPTION>
Fiscal Year (52 Weeks) Ended February 22, 1997
First Second Third Fourth Year
(16 wks) (12 wks) (12 wks) (12 wks) (52 wks)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $4,978,761 $3,778,745 $3,904,841 $3,889,555 $16,551,902
Gross profit 479,413 380,240 385,210 421,790 1,666,653
Net earnings 45,982 35,864 40,217 52,981 175,044
Net earnings per common
share-basic .68 .53 .60 .79 2.60
Net earnings per common
share-diluted .68 .53 .60 .79 2.59
Dividends declared per
common share .245 .250 .250 .250 .995
Weighted average shares-basic 67,482 67,466 67,110 66,885 67,255
Weighted average shares-diluted 67,794 67,632 67,284 67,093 67,477
=======================================================================
</TABLE>
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
On May 8, 1998, the company determined not to re-engage its independent
auditors, Deloitte & Touche LLP ("Deloitte") and appointed KP MG Peat Marwick
LLP ("KPMG") as its new independent auditors, effective immediately. This
determination followed the company's decision to seek proposals from independent
accounting firms, including Deloitte, with respect to the engagement of
independent accountants to audit the company's financial statements for the
fiscal year ending February 27, 1999. The decision not to re-engage Deloitte and
to retain KPMG was approved by the unanimous consent of the company's Board of
Directors upon the recommendation of its Audit Committee.
The reports of Deloitte on the financial statements of the company for its
fiscal years ended February 28, 1998 and February 22, 1997 did not contain any
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. During the company's two
most recent fiscal years and the subsequent interim period through May 8, 1998
(i) there were no disagreements between the company and Deloitte on any matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedure which, if not resolved to the satisfaction of
Deloitte, would have caused Deloitte to make reference to the subject matter of
the disagreement in connection with its reports (a "Disagreement") and (ii)
there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation
S-K of the Securities and Exchange Commission (a "Reportable Event").
The company has not, during the company's two most recent fiscal years or
the subsequent interim period through May 8, 1998, consulted with KPMG regarding
(i) the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the company's financial statements, and either a written report was provided to
the company or oral advice was provided that KPMG concluded was an important
factor considered by the company in reaching a decision as to the accounting,
auditing or financial reporting issue, or (ii) any matter that was either the
subject of a Disagreement with Deloitte or a Reportable Event.
The company reported the change in accountants on Form 8-K on May 12, 1998.
The Form 8-K contained a letter from Deloitte addressed to the Securities and
Exchange Commission stating that it agreed with the comments in the second
paragraph of the above statements and had no basis for agreeing or disagreeing
with the remaining comments in the above statements.
35
<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 28, 1998 and February 22, 1997, and the related
statements of earnings, stockholders' equity and cash flows for each of the
three years (52-53 weeks) in the period ended February 28, 1998. These
consolidated financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
SUPERVALU INC. and subsidiaries as of February 28, 1998 and February 22, 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended February 28, 1998, in conformity with generally
accepted accounting principles.
/S/ Deloitte & Touche LLP
Minneapolis, Minnesota
April 6, 1998
- ------------------------------
investor information
Annual Meeting
Stockholders are invited to attend the Annual Stockholders' Meeting, which will
be held on July 1, 1998 at 10:30 a.m., Minneapolis time at the:
Minneapolis Convention Center
1301 Second Avenue South
Minneapolis, Minnesota
Transfer Agent and Registrar
Shareholders may contact the transfer agent with any matter concerning ownership
of SUPERVALU stock.
Norwest Shareowner Services
P.O. 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 13, 1998 there were approximately 7,062 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 29, 1998.
Requests should be directed to:
Office of the Secretary
SUPERVALU INC.
P.O. 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:
Director, Investor Relations
SUPERVALU INC.
P.O. Box 990
Minneapolis, Minnesota 55440
Phone: 612 828 4540
To be added to the company's investor relations mailing list please call or
write:
SUPERVALU INC.
Communications Dept.
P.O. Box 990
Minneapolis, Minnesota 55440
Phone: 612 828 4599
Fax: 612 828 8955
36
<PAGE>
EXHIBIT (21)
SUPERVALU INC. SUBSIDIARIES
as of May 18, 1998
(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.
Blaine North 1996 L.L.C. Delaware Limited Liability Company 70%
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%
International Data, LLC Indiana Limited Liability Company 50%
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%
Shakopee 1997 L.L.C. Delaware Limited Liability Company 25%
Silver Lake 1996 L.L.C. Delaware Limited Liability Company 51%
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%
SUPERVALU Terre Haute Limited Partnership Indiana Limited Partnershp 100%
Valu Ventures-Albert Lea, Inc. Minnesota 100%
Valu Ventures-Duluth, Inc. Minnesota 100%
Western Dairy Distributors, Inc. Colorado 100%
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
--------------- ----------------
<S> <C> <C>
SUPERMARKET OPERATORS OF AMERICA INC. (CONTINUED)
SUPERVALU HOLDINGS, INC. Missouri 100%
Airway Redevelopment Corporation Missouri 100%
Augsburger's, Inc. Indiana 100%
GM Distributing, Inc. California 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. llinois 100%
Save Mart Foods, Inc. Missouri 100%
Treasure Enterprises, Inc. Missouri 100%
Shop 'N Save Warehouse Foods, Inc. Missouri 100%
WSI Satellite, Inc. Missouri 100%
SV Ventures* Indiana General Partnership 50%
SVH Holding, Inc. Delaware 100%
SVH Realty, Inc. Delaware 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%
Butson's Enterprises, Inc. New Hampshire 100%
Butson's Enterprises of
Vermont, Inc. Vermont 100%
Keatherly, Inc. New Hampshire 100%
Peoples Market, Incorporated New Hampshire 100%
Violette's Supermarkets, Inc. New Hampshire 100%
East Main Development, Inc. Rhode Island 100%
Ellsworth Foods, Inc. Maine 100%
Glendale Foods, Inc. Pennsylvania 100%
M & C Foods, Inc. Pennsylvania 100%
Maryland Specialty 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%
</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.
<PAGE>
EXHIBIT (23)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in 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 of our reports dated April 6,
1998, appearing in or incorporated by reference in this Annual Report on Form
10-K of SUPERVALU INC. for the year ended February 28, 1998.
/S/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
May 26, 1998
<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 28, 1998 under the
provisions of the Securities Exchange Act of 1934, as amended, hereby
constitutes and appoints Michael W. Wright and John P. Breedlove, 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 8th day of April, 1998.
/s/ Herman Cain /s/ Richard L. Knowlton
- ----------------------------------- --------------------------------
Herman Cain Richard L. Knowlton
/s/ Stephen I. D'Agostino /s/ Charles M. Lillis
- ----------------------------------- --------------------------------
Stephen I. D'Agostino Charles M. Lillis
/s/ Lawrence A. Del Santo /s/ Harriet Perlmutter
- ----------------------------------- --------------------------------
Lawrence A. Del Santo Harriet Perlmutter
/s/ Edwin C. Gage /s/ Carole F. St. Mark
- ----------------------------------- --------------------------------
Edwin C. Gage Carole F. St. Mark
/s/ William A. Hodder /s/ Michael W. Wright
- ----------------------------------- --------------------------------
William A. Hodder Michael W. Wright
s/ Garnett L. Keith, Jr. /s/ Pamela K. Knous
- ----------------------------------- --------------------------------
Garnett L. Keith, Jr. Pamela K. Knous
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AS OF FEBRUARY 28, 1998 AND THE CONSOLIDATED
STATEMENT OF EARNINGS FOR THE 53 WEEKS ENDED FEBRUARY 28, 1998 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-28-1998
<PERIOD-START> FEB-23-1997
<PERIOD-END> FEB-28-1998
<CASH> 6,100
<SECURITIES> 0
<RECEIVABLES> 424,156
<ALLOWANCES> (13,415)
<INVENTORY> 1,115,529
<CURRENT-ASSETS> 1,612,060
<PP&E> 2,707,898
<DEPRECIATION> (1,118,297)
<TOTAL-ASSETS> 4,093,010
<CURRENT-LIABILITIES> 1,457,160
<BONDS> 1,260,728
0
5,908
<COMMON> 75,335
<OTHER-SE> 1,120,662
<TOTAL-LIABILITY-AND-EQUITY> 4,093,010
<SALES> 17,201,378
<TOTAL-REVENUES> 17,201,378
<CGS> 15,430,642
<TOTAL-COSTS> 15,430,642
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,791
<INTEREST-EXPENSE> 133,619
<INCOME-PRETAX> 384,780
<INCOME-TAX> 154,023
<INCOME-CONTINUING> 230,757
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 230,757
<EPS-PRIMARY> 3.68
<EPS-DILUTED> 3.65
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SUPERVALU
INC. CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATMENT OF EARNINGS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 4-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> FEB-24-1996 FEB-22-1997 FEB-22-1997 FEB-22-1997 FEB-22-1997
<PERIOD-START> FEB-26-1995 FEB-25-1996 FEB-25-1996 FEB-25-1996 FEB-25-1996
<PERIOD-END> FEB-24-1996 FEB-22-1997 JUN-15-1996 SEP-07-1996 NOV-30-1996
<CASH> 5,215 6,539 5,082 6,501 7,134
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 402,675 421,641 385,100 395,448 457,976
<ALLOWANCES> (22,064) (17,806) (18,694) (17,417) (17,554)
<INVENTORY> 1,029,911 1,091,805 1,083,672 1,082,294 1,285,973
<CURRENT-ASSETS> 1,553,709 1,600,799 1,580,645 1,588,430 1,860,502
<PP&E> 2,500,994 2,688,555 2,574,207 2,625,726 2,649,692
<DEPRECIATION> (900,828) (1,040,031) (943,733) (982,221) (1,014,085)
<TOTAL-ASSETS> 4,183,503 4,283,326 4,279,307 4,295,465 4,566,199
<CURRENT-LIABILITIES> 1,326,702 1,369,078 1,358,716 1,358,091 1,650,629
<BONDS> 1,445,562 1,420,591 1,464,457 1,468,404 1,421,673
0 0 0 0 0
5,908 5,908 5,908 5,908 5,908
<COMMON> 75,335 75,335 75,335 75,335 75,335
<OTHER-SE> 1,134,933 1,226,180 1,166,342 1,178,121 1,190,782
<TOTAL-LIABILITY-AND-EQUITY> 4,183,503 4,283,326 4,279,307 4,295,465 4,566,199
<SALES> 16,486,321 16,551,902 4,978,761 8,757,506 12,662,347
<TOTAL-REVENUES> 16,486,321 16,551,902 4,978,761 8,757,506 12,662,347
<CGS> 14,906,602 14,885,249 4,499,348 7,897,853 11,417,484
<TOTAL-COSTS> 14,906,602 14,885,249 4,499,348 7,897,853 11,417,484
<OTHER-EXPENSES> 0 0 0 0 0
<LOSS-PROVISION> 2,269 8,851 1,788 2,716 6,138
<INTEREST-EXPENSE> 140,150 136,831 41,363 72,534 105,057
<INCOME-PRETAX> 267,692 280,512 75,690 134,349 198,864
<INCOME-TAX> 101,259 105,468 29,708 52,503 76,801
<INCOME-CONTINUING> 166,433 175,044 45,982 81,846 122,063
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 166,433 175,044 45,982 81,846 122,063
<EPS-PRIMARY> 2.44 2.60 .68 1.21 1.81
<EPS-DILUTED> 2.43 2.59 .68 1.21 1.81
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINACIAL INFORMATION EXTRACTED FROM SUPERVALU
INC. CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENT OF EARNINGS IN
FISCAL YEAR 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 4-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> FEB-28-1998 FEB-28-1998 FEB-28-1998
<PERIOD-START> FEB-23-1997 FEB-23-1997 FEB-23-1997
<PERIOD-END> JUN-14-1997 SEP-06-1997 NOV-29-1997
<CASH> 7,317 39,173 39,626
<SECURITIES> 0 0 0
<RECEIVABLES> 415,393 395,759 458,140
<ALLOWANCES> (17,159) (15,294) (14,589)
<INVENTORY> 1,121,396 1,063,070 1,287,484
<CURRENT-ASSETS> 1,621,366 1,573,907 1,854,787
<PP&E> 2,664,161 2,657,050 2,698,259
<DEPRECIATION> (1,058,367) (1,077,514) (1,103,851)
<TOTAL-ASSETS> 4,309,729 4,008,135 4,336,917
<CURRENT-LIABILITIES> 1,460,208 1,419,917 1,693,542
<BONDS> 1,318,118 1,215,681 1,270,177
0 0 0
5,908 5,908 5,908
<COMMON> 75,335 75,335 75,335
<OTHER-SE> 1,266,885 1,110,265 1,116,555
<TOTAL-LIABILITY-AND-EQUITY> 4,309,729 4,008,135 4,336,917
<SALES> 5,033,303 8,899,315 12,903,880
<TOTAL-REVENUES> 5,033,303 8,899,315 12,903,880
<CGS> 4,532,174 8,004,900 11,605,673
<TOTAL-COSTS> 4,532,174 8,004,900 11,605,673
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 2,016 3,221 4,439
<INTEREST-EXPENSE> 41,321 71,167 101,026
<INCOME-PRETAX> 81,917 231,097 298,413
<INCOME-TAX> 32,151 92,216 119,283
<INCOME-CONTINUING> 49,766 138,881 179,130
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 49,766 138,881 179,130
<EPS-PRIMARY> .74 2.14 2.82
<EPS-DILUTED> .74 2.12 2.80
</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 28, 1998 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 its efforts, including
its 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 sales to 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 its initiatives; 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
are not compatible with such changes. In addition, timing of certain 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, 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
1
<PAGE>
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
