<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 27, 1999
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
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]
<PAGE>
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. [ X ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of April 1, 1999 was approximately $2,481,335,346 (based upon the
closing price of Registrant's Common Stock on the New York Stock Exchange on
March 31, 1999).
Number of shares of $1.00 par value Common Stock outstanding as of April 1,
1999: 119,222,683
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive Proxy Statement filed for Registrant's 1999
Annual Meeting of Stockholders are incorporated into Part III, as specifically
set forth in Part III.
[Cover page 2 of 2 pages]
<PAGE>
PART I
ITEM 1. BUSINESS
General Development
SUPERVALU is the nation's 11th largest food retailer and largest food
distributor. SUPERVALU operates three principal store formats at retail
and sells food and non-food products at wholesale. As of the close of
the fiscal year, the Company operated 345 corporate retail stores under
its principal retail formats including price superstores, combination
food and drug stores, and limited assortment stores under such retail
banners as Cub Foods, Shop 'n Save, Save-A-Lot, bigg's, Scott's Foods,
Laneco and Hornbachers. Through its Save-A-Lot operations, as of the
close of the fiscal year, SUPERVALU served 772 limited assortment
stores. Additionally, as of the close of the fiscal year, the Company
was the primary supplier of approximately 2,700 additional stores and a
partial supplier of approximately 1,200 additional stores in 48 states.
SUPERVALU continues to focus on its retail food and food distribution
operations. SUPERVALU plans include growing its retail operations
through new store development and acquisitions, expanding Save-A-Lot,
the Company's limited assortment store banner, and increasing
efficiencies in its food distribution operations while participating in
the consolidation of the food distribution industry. During fiscal
1999, the Company added 73 retail stores through new store development
and acquisition. In addition, SUPERVALU commenced operations of its
second "upstream" facility, a regional distribution facility in
Ogelsby, Illinois for slow moving grocery product, general merchandise
and health and beauty care product, and began construction of a
regional distribution facility in Minneapolis, Minnesota for fast
moving product.
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). Unless
the discussion in this Annual Report on Form 10-K indicates otherwise,
all references to the "Company," "SUPERVALU" or "Registrant" relates to
SUPERVALU INC. and its majority-owned subsidiaries.
Additional description of the Company's business is found in Part II,
Item 7 and Item 7A of this report.
Financial Information About Industry Segments
The financial information about the Company's industry segments for the
five years ended February 27, 1999 is found in a separate section of
this report on page F-2.
Retail Food Operations
Overview. At February 27, 1999, the Company operated a total of 345
corporate retail food stores under its principal retail formats that
include price superstores, combination food and drug, and limited
assortment. These diverse formats enable the Company to operate in a
variety of markets under widely differing competitive circumstances.
Price Superstores. The Company's price superstore format focus is on
providing value to SUPERVALU customers while offering a convenient one
stop shopping opportunity. Most of the Company's price superstores
offer traditional dry grocery departments, along with strong basic
perishables. Our price superstores carry over 30,000 items, and
generally range in size from 45,000 to 100,000 square feet with an
average size of approximately 68,000 square feet.
3
<PAGE>
The Company's price superstores operate principally under the store
banners of Cub Foods, Shop 'n Save, and bigg's. At fiscal year end, the
Company owned and operated 65 Cub Foods in six states (an additional 52
stores are franchised to independent retailers), 45 Shop 'n Save stores
principally in the St. Louis, Philadelphia and Pittsburgh metropolitan
markets, and 10 bigg's stores in the Cincinnati, Louisville and Denver
metropolitan markets. The Company anticipates opening eight new
corporate Cub Foods stores, five new franchised Cub Foods stores, two
replacement Shop 'n Save stores, and one new bigg's store in fiscal
2000. In addition, in April 1999, the Company acquired seven additional
Shop 'n Save stores in the Pittsburgh, Pennsylvania metropolitan area.
Private label products are a new focus of SUPERVALU's price superstore
format. The Company is in the process of developing proprietary name
branded product. Currently, there are approximately 950 items under the
Cub Foods brand, and the Company intends on further expanding this
offering of products.
Combination Food and Drug. The Company's combination food and drug
store format combines a traditional drug store with a grocery store
that has a variety of specialty departments, that may include floral,
seafood, expanded health and beauty care, video rental, cosmetics,
photo finishing, delicatessen, bakery, and in-store bank. The
combination food and drug format offers traditional dry grocery
departments along with strong fresh food departments. A typical
combination food and drug store carries approximately 40,000 items, and
generally ranges in size from 30,000 to 65,000 square feet with an
average size of approximately 48,000 square feet.
At fiscal year-end, the Company operated 22 Scott's Foods stores in the
Fort Wayne, Indiana area, 19 Laneco stores in Pennsylvania and New
Jersey, and five Hornbachers stores in the Fargo, North Dakota area
under this format. The Company does not anticipate adding any new
Scott's Foods, Laneco or Hornbachers stores in fiscal 2000.
Limited Assortment. The Company operates limited assortment stores
under the banner of Save-A-Lot. The Company believes Save-A-Lot is the
nation's leading limited assortment food retailer. Save-A-Lot limited
assortment stores typically are approximately 15,000 square feet in
size, and stock approximately 1,200 higher volume items that focus on a
single size for each product sold. At a Save-A-Lot store, the majority
of the products offered for sale are created or control branded
product. The specifications for the Save-A-Lot private created or
controlled branded product emphasize quality and characteristics that
the Company believes are comparable to national brands. The Company's
attention to the packaging of Save-A-Lot product has resulted in the
Company registering a number of its custom labels.
At fiscal year end, SUPERVALU served 772 Save-A-Lot limited assortment
stores located in 33 states, of which 142 were corporately operated,
which are supplied from 11 Save-A-Lot distribution centers. The Company
projects adding approximately 140 Save-A-Lot stores in fiscal 2000,
including 40 corporately operated stores.
Conventional Stores. SUPERVALU also operates 37 smaller conventional
supermarkets under the banners Foodland, Butson's, SUPERVALU, and IGA.
Such conventional supermarkets typically have an average size of 28,000
square feet and carry under 15,000 items.
Food Distribution Operations
Overview. SUPERVALU sells food and non-food products at wholesale and
offers a variety of retail support services to independently owned
retail food stores. At February 27, 1999, the Company was the primary
supplier of approximately 2,700 stores (in addition to the Company's
corporate retail stores and licensed Save-A-Lot stores) and a partial
supplier of approximately
4
<PAGE>
1,200 additional stores. SUPERVALU's food distribution customers are
located in 48 states, and range in size from small convenience stores
to 200,000 square foot supercenters. Such customers include single and
multiple store independent operators, regional and national chains and
Company owned retail stores. As of the fiscal year end, no single
customer represented more than two percent (2%) of the Company's total
sales.
Products Supplied. The Company offers and supplies its distribution
customers with a wide variety and selection of food and non-food
products, including groceries, meats, dairy products, frozen foods,
fresh fruits and vegetables, health and beauty aids, paper products,
cleaning supplies, tobacco products, and small household and clothing
items. Such products include national and regional brands and the
Company's own lines of private label products. 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.
SUPERVALU offers three tiers of private label products to its
customers: premium product under the private label PREFERRED SELECTION,
first quality product under such private labels as FLAVORITE, IGA and
HOME BEST, and economy product under such private labels as SHOPPERS
VALUE and BI-RITE. SUPERVALU supplies private label merchandise over a
broad range of products included in every department in the store.
These products are produced to the Company's specifications by many
suppliers.
Distribution of Merchandise. Deliveries to retail stores are made from
the Company's distribution centers by Company-owned trucks, third party
independent trucking companies or customer-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. The Company
has implemented a multi-tiered distribution system to create a national
logistics network composed of seven marketing regions comprised of 35
wholesale distribution facilities plus two "upstream" regional
distribution facilities in Anniston, Alabama and Oglesby, Illinois for
slow moving grocery product, general merchandise and health and beauty
care products. A new "fast moving product" regional distribution center
is anticipated to open in the summer of 1999 in Minneapolis, Minnesota.
The Company believes that its multi-tiered distribution network
increases buying scale, improves operating efficiencies and lowers cost
of operations.
Services Supplied. In addition to supplying merchandise, the Company
also offers its food distribution customers a wide variety of support
services, including category management, merchandising assistance,
private label program support, store management assistance, accounting,
store design and construction, site selection, strategic and business
planning, consumer and market research, and personnel training. Also,
certain Company subsidiaries operate as insurance agencies and provide
comprehensive insurance programs to the Company's food distribution
customers.
The Company may provide financial assistance to retail stores served,
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.
Bakery Operation. Through its Hazelwood Farms Bakeries, Inc.
subsidiary, 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-
5
<PAGE>
affiliated stores), quick service restaurant chains and other
foodservice establishments in the U.S. and Canada.
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 "Retail Food Operations - Price Superstore" and "--
Limited Assortment," and "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
The Company's retail food and food distribution businesses are highly
competitive and characterized by low profit margins. The Company
believes that the success of its retail food and food distribution
businesses is dependent upon the ability of the Company's retail food
operations and its independent retail store customers to compete
successfully with other retail food stores in a consolidating market.
Principal competition comes from local, regional, and national chains
under a variety of formats (i.e. supercenters, supermarkets, limited
assortment stores, membership warehouse clubs, convenience stores,
various formats selling prepared foods, and specialty and discount
retailers), as well as from independent food stores. The Company
believes that the principal competitive factors that face its owned
stores as well as the stores owned by independent retailers it supplies
include: the location and image of the store; the price, quality, and
variety of product; and the quality and consistency of service.
In addition, at the food distribution level, the Company competes
directly with a number of food wholesalers. The Company believes it
competes in this supply chain on the basis of product price, quality
and assortment, schedule and reliability of deliveries, the range and
quality of services provided, and the location of the store sites and
distribution facilities.
Employees
At February 27, 1999, the Company had approximately 50,000 employees.
Approximately 16,000 employees are covered by collective bargaining
agreements. During fiscal 1999, 21 agreements covering 4,100 employees
were re-negotiated without any work stoppage. In fiscal 2000, 19
contracts covering approximately 2,800 employees will expire. The
Company believes that it has generally good relationships with its
employees.
Investments
The Company has ownership interests in business ventures related to its
retail food segment, which include investments in Waremart, Inc.,
Tidyman's, LLC 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 two percent (2%) of
total assets. In addition, at the end of the fiscal year, the Company
operated retail stores pending sale or sublet to independent retailers
that the Company believes are not material to its operations.
6
<PAGE>
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 27, 1999, includes forward-looking statements based on
management's assumptions and beliefs. Important risks and uncertainties
that could cause actual results to differ materially from those
discussed in such forward-looking statements, including, but not
limited to: the nature and extent of the consolidation of the retail
food and food distribution industry and the ability of the Company to
grow through acquisition and assimilate the acquired entities; the
competitive practices in the retail and food distribution industries;
the ability of the Company to attract and retain customers for its food
distribution operation, and control food distribution costs; and the
ability of the Company and its vendors, customers and others to resolve
Year 2000 issues in a timely manner. Such risks and uncertainties are
further detailed in Exhibit 99.1 and Part II, Item 7 below, and other
risks or uncertainties may be detailed from time to time in the
Company's future Securities and Exchange Commission filings.
ITEM 2. PROPERTIES
Retail Food Operations
The following table is a summary of the corporate retail stores
operated by the Company under its principal retail formats as of
February 27, 1999:
<TABLE>
<CAPTION>
Square Square
Footage Footage
Location and Number Owned Leased
Retail Format Banners of Corporate Stores (Approximate) (Approximate)
- ------------- ------- ------------------- ------------- -------------
<S> <C> <C> <C> <C>
Price Superstore Cub Foods(1) Colorado (8), Illinois (17), Indiana (9), 2,391,000 2,330,000
Iowa (2), Minnesota (21), Wisconsin (8)
Shop 'n Save Illinois (14), Missouri (19), Pennsylvania (12) 1,313,000 926,000
bigg's Colorado (1), Indiana (1), Kentucky (2), 158,000 1,397,000
Ohio (6)
Combination Scott's Food Indiana (22) 178,000 868,000
Food and Drug Hornbachers Minnesota (1), North Dakota (4) 95,000 117,000
Laneco New Jersey (5), Pennsylvania (14) 172,000 960,000
Limited Assortment Save-A-Lot(2) Arkansas (6), California (20), Connecticut (3), 48,000 1,875,000
Delaware (4), Florida (34), Illinois (1),
Maryland (5), Massachusetts (5), Mississippi
(3), Missouri (5), New Jersey (5), Ohio (9),
Pennsylvania (19), Rhode Island (2),
Tennessee (4), Texas (17)
</TABLE>
- --------------------
(1) Excludes an additional 52 Cub Foods stores that are operated by
independent retailers.
(2) Excludes an additional 630 Save-A-Lot stores that are operated
by independent retailers.
The retail food stores that are leased by the Company generally have a
term of 15-25 years plus renewal options.
7
<PAGE>
Food Distribution Operations
The following table lists the principal location and approximate size
of the Company's principal distribution centers and office space
utilized in the Company's food distribution and bakery operations as of
February 27, 1999:
<TABLE>
<CAPTION>
Square Square
Footage Footage
Owned Leased
Region or Division Location and Number of Distribution Centers (Approximate) (Approximate)
- ------------------ ------------------------------------------- ------------- -------------
<S> <C> <C> <C>
Central Region Indiana (1), Kentucky (1), Ohio (1) 1,919,000 170,000
Midwest Region Illinois (2)(1), Missouri (3), Wisconsin (2) 2,833,000 1,205,000
Northern Region Iowa (1), Minnesota (1)(2), North Dakota (2) 3,007,000 0
New England Region Connecticut (1), Maine (1), Massachusetts (1), 1,040,000 650,000
New Hampshire (1), Rhode Island (1)
Northeast Region Maryland (1), Pennsylvania (4), West Virginia (1) 2,470,000 524,000
Northwest Region Colorado (1), Montana (2), Washington (2) 2,603,000 124,000
Southeast Region Alabama (2), Florida (1), Georgia (1), 1,975,000 1,400,000
Louisiana (2), Mississippi (1)
Save-A-Lot California (1), Florida (1), Georgia (1), 1,295,000 1,161,000
Kentucky (1), Maryland (1), Michigan (1),
Missouri (2), New York (1), Ohio (1),
Tennessee (1), Texas (1)
Hazelwood Farms Georgia (1), Massachusetts (2), Missouri (1), 690,000 57,000
Bakeries New York (1), Oregon (1), Pennsylvania (1)
</TABLE>
- ---------------
(1) Includes a Regional Distribution facility that provides slow moving
grocery product, general merchandise and health and beauty care product
to customers located in the Central, Midwest and Northern Regions.
(2) Excludes a 579,000 square foot Regional Distribution facility for
fast moving product that is scheduled to commence operations in the
summer of 1999.
Additional Property
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.
Additional information on the Company's properties is found in another
section of this report on pages F-14 through F-16 in the Note captioned
"Leases" of Notes to the Company's Consolidated Financial Statements.
Management of the Company believes its physical facilities and
equipment are adequate for the Company's present needs and businesses.
8
<PAGE>
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
1999 to a vote of the security holders of the Registrant.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table provides certain information concerning the executive
officers of the Company as of April 15, 1999:
<TABLE>
<CAPTION>
Year Elected
to Present Other Positions Held With the
Name Age Present Position Position Company from 1994-1999
- -------------------- ----- ----------------------------------- ---------------- ------------------------------------
<S> <C> <C> <C> <C>
Michael W. Wright 60 Director, Chairman of the Board, 1982
President and Chief Executive
Officer
David L. Boehnen 52 Executive Vice President 1997 Senior Vice President, Law and
External Relations, 1991 - 1997
William J. Bolton 52 Executive Vice President; and 1997
President and Chief Operating
Officer - Retail Food Companies
Pamela K. Knous 45 Executive Vice President, Chief 1997
Financial Officer
Jeffrey Noddle 52 Executive Vice President; and 1995 Executive Vice President, Marketing,
President and Chief Operating 1992-1995
Officer - Wholesale Food Companies
Robert W. Borlik 50 Senior Vice President, Chief 1999
Information Officer
Kim M. Erickson 45 Senior Vice President, Strategic 1998 Senior Vice President, Finance and
Planning and Treasurer Treasurer, 1997 - 1998; Vice
President and Treasurer, 1995-1997
Michael Frank 40 Senior Vice President, 1999
Merchandising, Retail Food
Companies
Gregory C. Heying 50 Senior Vice President, 1994 Vice President, Distribution,
Distribution 1988-1994
J. Andrew Herring 40 Senior Vice President, Corporate 1999 Vice President, Corporate Development
Development and External Relations and External Relations, 1998-1999
W. O'Neill McDonald 55 Senior Vice President, Wholesale 1998 President, Midwest Region, 1995-1998;
Foods President, Great Lakes Division,
1992-1995
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Year Elected
to Present Other Positions Held With the
Name Age Present Position Position Company from 1994-1999
- -------------------- ----- ----------------------------------- ---------------- ------------------------------------
<S> <C> <C> <C> <C>
Ronald C. Tortelli 52 Senior Vice President, Human 1988
Resources
Leland J. Dake 42 Vice President, Wholesale 1998 Vice President, Corporate Category
Merchandising Management, 1995-1998; Director,
Category Management, Corporate from
1993 to 1995
Janel S. Haugarth 43 Vice President, Controller, 1998 Assistant Corporate Controller,
Wholesale 1996-1998; Vice President, Finance -
Midwest Region, 1995-1996; Assistant
Director of Merchandising, 1993-1995
Michael L. Mulligan 54 Vice President, Wholesale Sales 1996 Vice President, Sales, 1992-1996
and Marketing
E. Wayne Shives 55 Vice President, Employee Relations 1993
Sherry M. Smith 37 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, Robert W. Borlik, Kim M. Erickson,
Michael Frank 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 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
10
<PAGE>
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 from April 1991 to November 1993 she
served as Vice President, Finance of The Vons Companies, Inc.
Mr. Borlik was elected Senior Vice President, Chief Information Officer
in April 1999. From 1995 to 1999, Mr. Borlik was Vice President,
Information Services, of Northwest Airlines, Inc. (an air
transportation company and subsidiary of Northwest Airlines
Corporation), and from 1992 to 1995 he was Managing Director, Marketing
and Customer Service Planning, Process Engineering, Training and
Automation of Northwest Airlines, 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. Frank was elected Senior Vice President, Merchandising, Retail Food
Companies, in March 1999. From 1997 to 1999, Mr. Frank was Senior Vice
President, Sales and Merchandising, of Rainbow Foods (a retail grocery
company and division of Fleming Companies, Inc.). From 1995 to 1997, he
was Vice President, Merchandising, of Ralph's Grocery Company (a retail
grocery company), and from 1994 to 1995, he was Director,
Merchandising, of Ralph's Grocery Company.
Mr. Herring was elected Senior Vice President, Corporate Development
and External Relations of the Company in April 1999. From February 1998
to April 1999, Mr. Herring was Vice President, Corporate Development
and External Relations of the Company and prior to that time, he was
with the law firm of Dorsey & Whitney, LLP for approximately eleven
years, the last seven as a partner.
11
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is listed on the New York Stock Exchange
under the symbol SVU. As of April 1, 1999, there were 119,222,683
shares of common stock outstanding. At that date, there were 6,677
stockholders of record and approximately 21,500 stockholders whose
shares are held in street name by brokerage firms and financial
institutions. The information called for by Item 5 as to sales price
for the Company's common stock on a quarterly basis during the last two
fiscal years and dividend information is found under the heading
"Common Stock Price" in Part II, Item 7 below. The information called
for by Item 5 as to restrictions on the payment of dividends by the
Registrant is found in a separate section of this report on pages F-13
through F-14 in the Note captioned "Debt" of the Notes to Consolidated
Financial Statements.
During the fiscal year ended February 27, 1999, the Company issued
8,000 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 the Securities Act of
1933, as amended.
ITEM 6. SELECTED FINANCIAL DATA
The information called for by Item 6 is found in a separate section of
this report on page F-2. See "Index of Selected Financial Data,
Financial Statements and Schedules."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
In fiscal 1999, the Company recorded record sales of $17.4 billion
compared to $17.2 billion last year. Net earnings for fiscal 1999 were
$191.3 million, basic earnings per share were $1.59 and diluted
earnings per share were $1.57. Net earnings for fiscal 1998 were $230.8
million, basic earnings per share were $1.84 and diluted earnings per
share were $1.82. After excluding the non-recurring gain from the sale
of the investment in ShopKo Stores, Inc. ("ShopKo"), fiscal 1998's net
earnings were $177.1 million, basic earnings per share were $1.41 and
diluted earnings per share were $1.40. Fiscal 1998 results included a
53rd week. The following table sets forth items from the Company's
Consolidated Statements of Earnings:
<TABLE>
<CAPTION>
Fiscal Year Ended
- -------------------------------------------------------------------------------------------------
(In millions) February 27, 1999 February 28, 1998 February 22, 1997
(52 weeks) (53 weeks) (52 weeks)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $17,420.5 100.0% $17,201.4 100.0% $16,551.9 100.0%
Cost of sales 15,620.1 89.7 15,430.7 89.7 14,885.3 89.9
Selling and admin expenses 1,382.2 7.9 1,365.3 7.9 1,286.1 7.8
Interest expense 124.1 .7 133.6 .8 136.8 .8
Interest income 22.2 (.1) 19.6 (.1) 16.1 (.1)
Equity in earnings and gain
on sale of ShopKo 93.4 (.5) 20.7 (.1)
- -------------------------------------------------------------------------------------------------
Earnings before income taxes 316.2 1.8 384.8 2.2 280.5 1.7
Income taxes 124.9 .7 154.0 .9 105.5 .6
- -------------------------------------------------------------------------------------------------
Net earnings $ 191.3 1.1 $ 230.8 1.3% $ 175.0 1.1%
=================================================================================================
</TABLE>
12
<PAGE>
Comparison of fifty-two weeks ended February 27, 1999 ("1999") with
fifty-three weeks ended February 28, 1998 ("1998"):
Net sales for 1999 increased 1.3 percent from 1998. On a comparable
52-week basis, sales increased 3.1 percent, positively impacted by a
6.0 percent increase in retail food sales and a 3.2 percent increase in
food distribution sales. Sales gains were achieved despite the low
inflationary environment.
Retail food sales were favorable in 1999 compared to 1998 primarily due
to new store openings and acquisitions of 73 stores over the past
twelve months. Same-store sales increased 1.5 percent. The 6.0 percent
increase in retail food sales was achieved despite the closing or sale
of underperforming stores in the prior year. Food distribution sales
increased in 1999 due to the addition of net new independent customers
and stores and from the growth in owned retail stores.
Gross profit as a percentage of net sales was 10.3 percent, even with
last year. Retail food and food distribution gross profit margins for
1999 were comparable to fiscal 1998.
Selling and administrative expenses were 7.9 percent of net sales, even
with last year. Retail food and food distribution selling and
administrative expenses as a percent of net sales were consistent with
last year.
The Company's pre-tax operating earnings (earnings before interest,
equity in earnings and gain on sale of ShopKo, and taxes) increased to
$418.2 million in 1999 compared with $405.4 million in 1998, a 3.1
percent increase. Operating earnings before depreciation and
amortization increased to $651.7 million in 1999, compared with $635.5
million in 1998, a 2.5 percent increase. Retail food operating earnings
increased 13.6 percent to $133.5 million in 1999 from $117.6 million in
1998. The increase in retail operating earnings was due to increased
sales and selling and administrative expense controls. Food
distribution operating earnings decreased .6 percent in 1999 to $315.2
million from $317.1 million in 1998, primarily from increased wages and
related costs which included the startup of the new regional
distribution facility in the Midwest.
Interest expense decreased to $124.1 million in 1999, compared with
$133.6 million in 1998, reflecting lower average interest rates and
borrowings. Interest income increased to $22.2 million in 1999 compared
with $19.6 million in 1998, primarily due to increased retailer
financing.
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. Due to the sale there were no equity in earnings
recorded in 1999 compared with $3.3 million or $.03 per share - diluted
last year.
The effective tax rate was 39.5 percent in fiscal 1999 compared with
40.0 percent in 1998.
Net earnings were $191.3 million or $1.57 per share - diluted in 1999
compared with 1998 net earnings of $230.8 million or $1.82 per share -
diluted. Excluding the gain on the sale of ShopKo, last year's net
earnings were $177.1 million or $1.40 per share - diluted. Weighted
average shares - diluted decreased to 122.0 million in 1999 compared
with last year's 126.6 million.
13
<PAGE>
Comparison of fifty-three weeks ended February 28, 1998 ("1998") with
fifty-two weeks ended February 22, 1997 ("1997"):
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
1.8 percent increase in retail food sales and a 2.1 percent increase in
food distribution sales.
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. 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.
Gross profit as a percentage of net sales increased to 10.3 percent in
1998, compared with 10.1 percent in 1997. Retail food gross profit
margin increased due to continued focus on merchandising activities.
Food distribution gross profit margin for 1998 was comparable to fiscal
1997.
Selling and administrative expenses were 7.9 percent of net sales in
1998, compared with 7.8 percent in 1997. Retail food expenses in 1998
were impacted by unfavorable wage expenses in comparison to 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.
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 percent
increase. 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. 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 offset somewhat by increased wages.
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.
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 $.03
per share - diluted compared with $20.7 million or $.15 per share -
diluted in fiscal 1997.
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 were $230.8 million or $1.82 per share - diluted in 1998
compared with 1997 net earnings of $175.0 million or $1.30 per share -
diluted. Excluding the gain on the sale of ShopKo, net earnings were
$177.1 million or $1.40 per share - diluted. Weighted average shares -
diluted declined to 126.6 million in 1998 compared with 135.0 million
for 1997
14
<PAGE>
primarily due to the repurchase of 13.8 million shares in the second
quarter of 1998 with proceeds from the ShopKo transaction.
LIQUIDITY
Cash provided by operating activities was $560 million in 1999 compared
with $393 million in 1998 and $329 million in 1997. The increase was
primarily due to a reduction in working capital investment. Cash
provided from operations in 1999 was primarily used to finance capital
expenditures of $240 million and business acquisitions of $166 million
and a net reduction in debt of $109 million.
Internally-generated funds from operations were the major source of
liquidity in 1999. 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.
In fiscal 1998, the Company repurchased 13.8 million shares at a cost
of $266.7 million under the 1997 treasury stock purchase program, with
proceeds received from the Shopko sale.
SUPERVALU will continue to use short-term and long-term debt as a
supplement to internally-generated funds to finance its activities.
Maturities of debt issued will depend on management's views with
respect to the relative attractiveness of interest rates at the time of
issuance. The Company has a $400 million "shelf registration" in
effect, pursuant to which the Company could issue $159 million of
additional debt securities as of the end of fiscal 1999. During the
year the Company issued $83.5 million of bonds under the existing
"shelf registration". The bonds issued had average coupon rates of 6.6
percent with seven and eight year maturities. In connection with a
fiscal 1999 acquisition, the Company incurred variable rate debt of
$124 million based on three month LIBOR plus 1 percent with quarterly
payments of principal and interest.
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 1999.
During fiscal 1999, $30 million of letters of credit were issued under
the revolving credit agreement and were outstanding as of February 27,
1999. Total commercial paper outstanding as of the end of fiscal 1999
was $60 million.
SUPERVALU's capital budget for fiscal 2000, which includes leases, is
$515 million compared with $346 million incurred during 1999. In fiscal
1999, the Company also spent $166 million on retail acquisitions. The
capital budget anticipates cash spending of $455 million plus $60
million of capital leases. Approximately $270 million of the fiscal
2000 budget is slated for use in the Company's corporately-owned retail
food businesses. The budget provides for approximately 15 new price
superstores, the acquisition of 7 Shop 'n Save stores in Pittsburgh in
April 1999 and 14 remodels. The food distribution capital budget of
$180 million provides for the construction of a new distribution
facility in the Northern region and normal replacement spending. The
balance of the fiscal 2000 capital budget relates to the corporate area
and will be utilized principally for systems-related items.
In addition, the Company is prepared to provide up to $100 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.
15
<PAGE>
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, only acquisition
activity that is committed to 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.
Cash dividends declared during 1999 totaled 52.75 cents per common
share, an increase of 2.4 percent over the 51.50 cents per share
declared in 1998. This was the 62nd year of consecutive cash dividends
and the 27th 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 6,860 stockholders of record
compared with 7,161 at the end of fiscal 1998.
<TABLE>
<CAPTION>
Common Stock Dividends Per
Price Range Share
Fiscal Quarter 1999 1998 1999 1998
- ------------------------------------------------------------------------------------
High Low High Low
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First $24 5/8 $20 6/16 $18 5/16 $14 5/16 $.1300 $.1250
Second 25 1/32 20 5/16 20 13/16 17 1/4 .1325 .1300
Third 28 7/16 21 1/2 20 7/8 17 7/16 .1325 .1300
Fourth 28 3/4 24 1/8 24 9/32 19 25/32 .1325 .1300
- ------------------------------------------------------------------------------------
Year $28 3/4 $20 5/16 $24 9/32 $14 5/16 $.5275 $.5150
- ------------------------------------------------------------------------------------
</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
Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use.
Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" was issued in March
1998. This statement provides guidance on the accounting for the
described costs. The provisions of the statement are effective for
fiscal 2000.
Accounting for Derivative Instruments and Hedging Activities.
Statement of Financial Accounting Standard No. 133, "Accounting for
Derivative Instruments and Hedging Activities" was issued in June 1998.
This statement establishes comprehensive accounting and reporting
standards for derivative instruments and hedging activities. The
provisions of the statement are effective for fiscal 2001.
The new accounting standards above are not expected to have a material
effect on the Company's consolidated financial position or results of
operations.
YEAR 2000
General
SUPERVALU's Company wide Year 2000 Project ("Project") is proceeding on
schedule. The Project is addressing the issue of application systems,
information technology (IT) systems
16
<PAGE>
and technologies which include embedded systems being able to
distinguish between the year 1900 and the year 2000. In 1996, the
Company began establishing processes for evaluating and managing the
risks associated with the Project. The Project is divided into six
components. These components include program management,
communications, application conversions and technology upgrades,
contingency planning, quality assurance and external entities. The
Company is using both internal and external resources to implement the
Project. The work to complete the Project is expected to be completed
by mid to late 1999.
The Company has relationships with a significant number of key business
partners. The Company has initiated formal communications with its key
business partners and has initiated formal contingency planning
processes to mitigate the risk to the Company if the business partners
are not prepared for the year 2000. This is planned to be completed by
mid 1999. There can be no guarantee that the business partners will
successfully and timely reprogram or replace and test all of their own
computer hardware, software and process control systems. While the
failure of a single business partner to achieve year 2000 compliance
should not have a material adverse effect on the Company's results of
operations, the failure of several key business partners could have
such an effect.
Costs
The total costs associated with required modifications to become Year
2000 compliant is not expected to be material to the Company's
financial position. The Company has incurred costs to date of $23.3
million. Estimated costs for the remainder of work is $6.0 million for
a total projected Project cost of $29.3 million.
Risks
While the effort to assess and correct the Company's Year 2000 issues
are expected to be complete prior to related forecasted failure
horizons, the Company is taking specific measures to assess risks and
develop specific contingency plans. A formal process is being developed
to assess key business functions and create action plans which will
describe the communications, operations and IT activities that will be
conducted if the contingency plan must be executed.
The costs of the Project and the completion dates are based on
management's best estimates, which were derived from assumptions of
future events including the availability of resources, key business
partner modification plans and other factors. There can be no guarantee
that these estimates will be achieved and actual results could vary due
to uncertainties.
The Company's Year 2000 efforts are ongoing and its overall Project
will continue to evolve as new information becomes available. The
failure to correct a material Year 2000 problem could result in an
interruption in certain normal business activities and operations. Due
to the general uncertainty inherent in the Year 2000 problem, resulting
in part from the uncertainty of the Year 2000 readiness of third
parties on whom the Company relies, the Company is unable to determine
at this time whether the consequences of Year 2000 failures will have a
material adverse impact on the Company's results of operation but the
Company believes that, with the implementation of new business systems
and completion of the Project as scheduled, the possibility of
significant interruptions of normal operations should be reduced.
Readers are cautioned that forward looking statements contained in year
2000 disclosures should be read in conjunction with the information
found in Part I, Item 1 above under the heading "Cautionary Statements
for Purposes of the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995."
17
<PAGE>
QUANITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
SUPERVALU is exposed to market pricing risk consisting of interest rate
risk related to debt obligations outstanding, its investment in notes
receivable, and derivatives employed to hedge interest rate changes on
variable and fixed rate debt. The Company does not have any material
foreign currency or commodity contract exposure. The Company does not
use financial instruments or derivatives for any trading or other
speculative purposes.
SUPERVALU manages interest rate risk through the strategic use of fixed
and variable rate debt and, to a limited extent, derivative financial
instruments. Variable interest rate debt (commercial paper, bank loans,
industrial revenue bonds and other variable rate interest rate debt) is
utilized to help maintain liquidity and finance business operations.
Long term debt with fixed interest rates is used to assist in managing
debt maturities and to diversify sources of debt capital.
SUPERVALU carries notes receivable because, in the normal course of
business the Company makes long-term loans to certain retail customers
(see "Notes Receivable" in the notes to the consolidated financial
statements). The notes generally bear fixed interest rates negotiated
with each retail customer. The market value of the fixed rate notes is
subject to change due to fluctuations in market interest rates.
The table below provides information about the Company's derivative
financial instruments and other financial instruments that are
sensitive to changes in interest rates, including notes receivable,
debt obligations and interest rate swaps. For debt obligations, the
table presents principal cash flows and related weighted average
interest rates by expected maturity dates. For notes receivable, the
table presents the expected collection of principal cash flows and
weighted average interest rates by expected maturity dates. For
interest rate swaps, the table presents notional amounts and weighted
average interest rates by expected (contractual) maturity dates.
Notional amounts are used to calculate the contractual payments to be
exchanged under the contract.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(In millions, except rates) Summary of Financial Instruments
- -----------------------------------------------------------------------------------------------------------------------
February 27, Aggregate maturities of principal by fiscal year
1999
Fair Value 2000 2001 2002 2003 2004 Thereafter
------------ -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Notes receivable with fixed
interest rates
Principal receivable 57.3 9.2 8.2 7.3 5.5 4.5 22.6
Average variable rate 8.7% 8.6% 8.5% 8.8% 8.5% 8.4% 8.8%
receivable
Debt with variable interest
rates
Principal payable 263.0 60.0 16.4 8.0 6.6 16.1 155.9
Average variable rate 4.8% Variable
payable
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(In millions, except rates) Summary of Financial Instruments
- -----------------------------------------------------------------------------------------------------------------------
February 27, Aggregate maturities of principal by fiscal year
1999
Fair Value 2000 2001 2002 2003 2004 Thereafter
------------ -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Debt with fixed interest rates
Principal payable 875.8 208.9 74.1 8.1 309.6 8.5 232.2
Average fixed rate 7.7% 7.7% 6.9% 8.8% 7.8% 8.9% 7.8%
payable
Variable-to-Fixed rate swap
Amount payable 15.3 - - - - - 100.0 (not payable)
Average fixed rate 7.4% 7.4% 7.4% 7.4% 7.4% 7.4% 7.4%
payable
Average variable rate 5.0% Based on LIBOR
receivable
Fixed-to-Variable rate swap
Amount receivable 14.8 - - - 100.0 (not payable)
Average variable rate 5.0% Based on LIBOR
payable
Average fixed rate 8.9% 8.9% 8.9% 8.9% 8.9%
receivable
</TABLE>
ITEM 7.A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The information called for by Item 7A is found under the heading of
"Quantitative and Qualitative Disclosure About Market Risk" under Part
II, Item 7 above.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by Item 8 is found in a separate section of
this report on pages F-3 through F-23. See "Index of Selected Financial
Data, Financial Statements and Schedules."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On May 8, 1998, the Company determined not to re-engage its former
independent auditors, Deloitte & Touche LLP ("Deloitte") and appointed
KPMG 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 (fiscal 1998) and February 22,
1997 (fiscal 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 fiscal 1998 and fiscal 1997 and
the interim
19
<PAGE>
period from February 28, 1998 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 had not, during the interim period from February 28, 1998
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 certain
of the above statements, and had no reason to agree or disagree with
the remaining statements.
20
<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 to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A in connection with the
Registrant's 1999 Annual Meeting of Stockholders under the heading
"Election of Directors (Item 1)," and under the heading "Section 16(a)
Beneficial Ownership Reporting Compliance." Certain information
regarding executive officers is included in Part I immediately
following Item 4 above.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by Item 11 is incorporated by reference to
the Registrant's definitive Proxy Statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A in
connection with the Registrant's 1999 Annual Meeting of Stockholders
under the headings "Compensation of Directors," "Compensation of
Executive Officers," "Option/SAR Grants in Last Fiscal Year,"
"Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-
End Option/SAR Values," "Long-Term Incentive Plans - Awards in Last
Fiscal Year," "Pension Plans," and "Change in Control Agreements," and
under the heading "Compensation Committee Interlocks and Insider
Participation."
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 to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A in
connection with the Registrant's 1999 Annual Meeting of Stockholders
under the headings "Security Ownership of Certain Beneficial Owners"
and "Security Ownership of Management."
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 to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A in
connection with the Registrant's 1999 Annual Meeting of Stockholders
under the heading "Compensation Committee Interlocks and Insider
Participation."
21
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
The consolidated financial statements of the Registrant listed
in the accompanying "Index of Selected Financial Data,
Financial Statements and Schedules" together with the reports
of KPMG Peat Marwick LLP, independent auditors, and Deloitte &
Touche LLP, former independent auditors, are filed as part of
this report.
2. Financial Statement Schedules:
The consolidated financial statement schedule of the
Registrant listed in the accompanying "Index of Selected
Financial Data, Financial Statements and Schedules" together
with the reports of KPMG Peat Marwick LLP, independent
auditors, and Deloitte & Touche LLP, former independent
auditors, are filed as part of this report.
3. Exhibits:
(3)(i) Articles of Incorporation.
3.1. Restated Certificate of Incorporation is
incorporated by reference to Exhibit (3)(i)
to the Registrant's Annual Report on Form
10-K for the year ended February 26, 1994.
(3)(ii) Bylaws.
3.2. Restated Bylaws, as amended, is incorporated
by reference to Exhibit (3) to the
Registrant's Quarterly Report for the
quarterly period (12 weeks) ended September
12, 1998.
(4) Instruments defining the rights of security holders,
including indentures:
4.1. 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.
4.2. 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.
4.3. 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.
22
<PAGE>
4.4. 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.
4.5. Third Supplemental Indenture dated as of
September 1, 1995 between the Registrant and
Bankers Trust Company, as Trustee, to
Indenture dated as of July 1, 1987 between
the Registrant and Bankers Trust Company, as
Trustee, is incorporated by reference to
Exhibit 4.1 to the Registrant's Form 8-K
Report dated October 2, 1995.
4.6. 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.
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:
10.1. SUPERVALU INC. 1993 Stock Plan, as amended.
10.2. 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.
10.3. 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.
10.4. SUPERVALU INC. Directors Deferred
Compensation Plan for Non-Employee
Directors, as amended, is incorporated by
reference to Exhibit (10)g. to the
Registrant's Quarterly Report on Form 10-Q
for the quarterly period (12 weeks) ended
September 12, 1998.
10.5. SUPERVALU INC. 1983 Employee Stock Option
Plan, as amended, 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
12, 1998.
10.6. 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.
10.7. 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.
23
<PAGE>
10.8. 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.
10.9. SUPERVALU INC. Executive Deferred
Compensation Plan as amended and 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 12, 1998.
10.10. 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.
10.11. Form of Agreement used in connection with
Registrant's Executive Post-Retirement
Survivor Benefit Program, is incorporated by
reference to Exhibit (10)i. to Registrant's
Quarterly Report on Form 10-Q for the
quarterly period (12 weeks) ended September
12, 1998.
10.12. Form of Change of Control Severance
Agreements entered into with certain
officers of the Registrant.
10.13. Amended and Restated SUPERVALU INC. Grantor
Trust, is incorporated by reference to
Exhibit (10)d. to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period
(12 weeks) ended September 12, 1998.
10.14. SUPERVALU INC. Directors Retirement Program,
as amended, is incorporated by reference to
Exhibit (10)e. to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period
(12 weeks) ended September 12, 1998.
10.15. 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.
10.16. 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.
10.17. Second Amendment to 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 28, 1998.
10.18. Third Amendment to SUPERVALU INC.
Non-Qualified Supplemental Executive
Retirement Plan is incorporated by reference
to Exhibit (10)h. to the Registrant's
Quarterly Report on Form 10-Q for the
quarterly period (12 weeks) ended September
12, 1998.
24
<PAGE>
10.19. SUPERVALU INC. Long-Term Incentive Plan, as
amended, is incorporated by reference to
Exhibit (10)b. to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period
(12 weeks) ended September 12, 1998.
10.20. 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.
10.21. SUPERVALU INC. Non-Employee Directors
Deferred Stock Plan, as amended, is
incorporated by reference to Exhibit (10)f.
to Registrant's Quarterly Report on Form
10-Q for the quarterly period (12 weeks)
ended September 12, 1998.
10.22. 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.
10.23. Supplemental Retirement Agreement for
William J. Bolton.
(12) Statement re Computation of Ratios.
12.1. Ratio of Earnings to Fixed Charges.
(16) Letter re Change in Certifying Account.
16.1. 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.
21.1. List of Subsidiaries of the Registrant.
(23) Consents of Experts and Counsel.
23.1. Consent of KPMG Peat Marwick LLP
23.2. Consent of Deloitte & Touche LLP
(24) Power of Attorney.
24.1. Power of Attorney.
(27) Financial Data Schedule.
27.1. Financial Data Schedule.
(99) Additional Exhibits.
99.1 Cautionary Statements pursuant to the
Securities Litigation Reform Act.
25
<PAGE>
(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 27, 1999.
26
<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: April 16, 1999 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; April 16, 1999
- -------------------------- Chief Executive Officer; and
Michael W. Wright Director (principal executive
officer)
/s/ Pamela K. Knous Executive Vice President and April 16, 1999
- -------------------------- Chief Financial Officer (principal
Pamela K. Knous financial and accounting officer)
/s/ Herman Cain* Director
- --------------------------
Herman Cain
/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.
/s/ Richard L. Knowlton* Director
- --------------------------
Richard L. Knowlton
27
<PAGE>
/s/ Charles M. Lillis* Director
- --------------------------
Charles M. Lillis
/s/ Harriet Perlmutter* Director
- --------------------------
Harriet Perlmutter
/s/ Steven S. Rogers* Director
- --------------------------
Steven S. Rogers
/s/ Carole F. St. Mark* Director
- --------------------------
Carole F. St. Mark
*Executed this 16th day of April, 1999, 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
28
<PAGE>
SUPERVALU INC.
Annual Report on Form 10-K
Items 6, 8 and 14(a)
Index of Selected Financial Data and Financial Statements and Schedules
-----------------------------------------------------------------------
Selected Financial Data: Page
- ------------------------ ----
Five Year Financial and Operating Summary F-2
Financial Statements:
- ---------------------
Independent Auditors' Report of KPMG Peat Marwick LLP F-3
Independent Auditors' Report of Deloitte & Touche LLP F-4
Consolidated composition of net sales and operating earnings for F-5
each of the five years in the period ended February 27, 1999
Consolidated statements of earnings for each of the three F-6
years in the period ended February 27, 1999
Consolidated balance sheets as of February 27, 1999 and F-7 - F-8
February 28, 1998
Consolidated statements of stockholders' equity for each of F-9
the three years in the period ended February 27, 1999
Consolidated statements of cash flows for each of the three F-10
years in the period ended February 27, 1999
Notes to consolidated financial statements F-11 - F-22
Unaudited quarterly financial information F-23
Financial Schedules:
- --------------------
Independent Auditors' Report of KPMG Peat Marwick LLP F-24
Independent Auditors' Report of Deloitte & Touche LLP F-25
Schedule VIII: Valuation and qualifying accounts F-26
All other schedules are omitted because they are not applicable or not
required.
F-1
<PAGE>
FIVE YEAR FINANCIAL AND OPERATING SUMMARY
- --------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
1999 1998 (b) 1997 1996 1995 (c)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Earnings Data (a)(f)
Net sales $17,420,507 $17,201,378 $16,551,902 $16,486,321 $16,563,772
Cost of sales 15,620,127 15,430,642 14,885,249 14,906,602 15,040,117
Selling and administrative expense 1,382,212 1,365,327 1,286,121 1,212,967 1,169,843
Restructuring and other charges - - - - 244,000
Interest, net 101,907 113,993 120,695 116,678 111,271
Equity in earnings and gain on sale of ShopKo - 93,364 20,675 17,618 17,384
Earnings before taxes and accounting change 316,261 384,780 280,512 267,692 15,925
Provision for income taxes 124,923 154,023 105,468 101,259 (27,409)
Net earnings 191,338 230,757 175,044 166,433 43,334
Net earnings per common share-diluted 1.57 1.82 1.30 1.21 .30
- ---------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data (a)
Inventories (FIFO) $ 1,195,217 $ 1,247,429 $ 1,221,344 $ 1,158,028 $ 1,230,017
Working capital (d) 188,000 286,800 361,260 355,124 319,429
Net property, plant and equipment 1,699,024 1,589,601 1,648,524 1,600,166 1,571,298
Total assets 4,265,949 4,093,010 4,283,326 4,183,503 4,305,149
Long-term debt (e) 1,246,269 1,260,728 1,420,591 1,445,562 1,459,766
Stockholders' equity 1,305,639 1,201,905 1,307,423 1,216,176 1,193,222
- ---------------------------------------------------------------------------------------------------------------------------------
Other Statistics (a)(f)
Earnings before accounting change as a
percent of net sales 1.10 % 1.34 % 1.06 % 1.01 % .26 %
Return on average stockholders' equity 15.24 % 18.49 % 13.89 % 13.96 % 3.46 %
Book value per common share $ 10.82 $ 9.94 $ 9.73 $ 8.97 $ 8.46
Current ratio (d) 1.12:1 1.20:1 1.26:1 1.27:1 1.22:1
Debt to capital ratio 55 % 57 % 56 % 57 % 59 %
Dividends declared per common share $ .52 3/4 $ .51 1/2 $ .49 3/4 $ .48 1/2 $ .46 1/4
Weighted average common shares outstanding-diluted 121,961 126,550 134,954 136,984 143,056
Depreciation and amortization $233,523 $230,082 $232,071 $219,084 $198,718
EBITDA $651,691 $638,821 $633,278 $603,454 $325,914
Capital expenditures, excluding retailer financing $346,390 $279,768 $285,939 $271,456 $319,560
==================================================================================================================================
</TABLE>
Notes:
(a) Fiscal 1998 contains 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 $53.7 million ($.42
per share-diluted). All statistics except EBITDA include this
transaction.
(c) Net earnings were reduced by restructuring and other charges of $159.4
million ($1.11 per share-diluted). The provision for income taxes
includes a reversal of $40.8 million ($.29 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) Working capital and current ratio are calculated after adding back the
LIFO reserve.
(e) Total long-term debt includes long-term debt and long-term obligations
under capital leases.
(f) Information adjusted to include a two-for-one stock split in Fiscal 1999.
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
SUPERVALU INC.
We have audited the accompanying consolidated balance sheet of SUPERVALU INC.
and subsidiaries as of February 27, 1999, and the related statements of
earnings, stockholders' equity and cash flows for the fiscal year ended February
27, 1999. 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the 1999 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SUPERVALU
INC. and subsidiaries as of February 27, 1999, and the results of their
operations and their cash flows for the fiscal year ended February 27, 1999, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
April 5, 1999
F-3
<PAGE>
INDEPENDENT AUDITORS' REPORT
SUPERVALU INC.
Board of Directors and Stockholders
Eden Prairie, Minnesota
We have audited the accompanying consolidated balance sheet of SUPERVALU INC.
(the Company) and subsidiaries as of February 28, 1998, and the related
statements of earnings, stockholders' equity and cash flows for each of the two
years (53-52 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 the results of
their operations and their cash flows for each of the two years in the period
ended February 28, 1998, in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
April 6, 1998
F-4
<PAGE>
CONSOLIDATED COMPOSITION OF NET SALES AND OPERATING EARNINGS
- --------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
- --------------------------------------------------------------------------------
The following table sets forth, for each of the last five fiscal years, the
composition of the company's net sales and operating earnings.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
(In thousands, except percent data) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
Net sales
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Retail food $ 5,091,339 $ 4,877,290 $ 4,719,079 $ 4,412,203 $ 4,219,691
29.2 % 28.4 % 28.5 % 26.7 % 25.4 %
Food distribution 15,314,529 15,108,779 14,545,266 14,685,899 14,820,009
87.9 % 87.8 % 87.9 % 89.1 % 89.5 %
Less: Eliminations (2,985,361) (2,784,691) (2,712,443) (2,611,781) (2,475,928)
(17.1)% (16.2)% (16.4)% (15.8)% (14.9)%
Total net sales $ 17,420,507 $ 17,201,378 $ 16,551,902 $ 16,486,321 $ 16,563,772
100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
- ------------------------------------------------------------------------------------------------------------------------
Operating earnings
- ------------------------------------------------------------------------------------------------------------------------
Retail food $ 133,532 $ 117,576 $ 93,662 $ 57,176 $ (104,338)
Food distribution 315,185 317,068 310,455 334,673 257,495
---------------------------------------------------------------------------------
Total operating earnings 448,717 434,644 404,117 391,849 153,157
Interest expense, net (101,907) (113,993) (120,695) (116,678) (111,271)
General corporate expenses (30,549) (29,235) (23,585) (25,097) (43,345)
---------------------------------------------------------------------------------
Earnings before equity in earnings
of ShopKo and gain on sale of
ShopKo and income taxes 316,261 291,416 259,837 250,074 (1,459)
Equity in earnings and gain
on sale of ShopKo -- 93,364 20,675 17,618 17,384
---------------------------------------------------------------------------------
Earnings before income taxes $ 316,261 $ 384,780 $ 280,512 $ 267,692 $ 15,925
- ------------------------------------------------------------------------------------------------------------------------
Identifiable assets
- ------------------------------------------------------------------------------------------------------------------------
Retail food $ 1,399,096 $ 1,109,296 $ 1,166,870 $ 1,126,197 $ 1,121,596
Food distribution 2,691,882 2,825,762 2,746,284 2,684,088 2,843,862
Corporate 174,971 157,952 370,172 373,218 339,691
---------------------------------------------------------------------------------
Total $ 4,265,949 $ 4,093,010 $ 4,283,326 $ 4,183,503 $ 4,305,149
- ------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization
- ------------------------------------------------------------------------------------------------------------------------
Retail food $ 93,829 $ 90,704 $ 90,389 $ 85,010 $ 76,145
Food distribution 120,902 118,556 122,778 115,507 107,471
Corporate 18,792 20,822 18,904 18,567 15,102
---------------------------------------------------------------------------------
Total $ 233,523 $ 230,082 $ 232,071 $ 219,084 $ 198,718
- ------------------------------------------------------------------------------------------------------------------------
Capital expenditures
- ------------------------------------------------------------------------------------------------------------------------
Retail food $ 196,296 $ 92,651 $ 120,881 $ 137,914 $ 119,605
Food distribution 125,995 166,066 139,779 102,435 159,838
Corporate 24,099 21,051 25,279 31,107 40,117
---------------------------------------------------------------------------------
Total $ 346,390 $ 279,768 $ 285,939 $ 271,456 $ 319,560
========================================================================================================================
</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 includes $12.6 million for restructuring and other
charges.
See notes following the Five Year Financial and Operating Summary and notes to
the consolidated financial statements.
F-5
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
- --------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands, except per share data) Fiscal Year Ended
- ----------------------------------------------------------------------------------------------
February 27, February 28, February 22,
1999 1998 1997
(52 weeks) (53 weeks) (52 weeks)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $17,420,507 $17,201,378 $16,551,902
Costs and expenses
Cost of sales 15,620,127 15,430,642 14,885,249
Selling and administrative expenses 1,382,212 1,365,327 1,286,121
Interest
Interest expense 124,111 133,619 136,831
Interest income 22,204 19,626 16,136
- ----------------------------------------------------------------------------------------------
Interest expense, net 101,907 113,993 120,695
- ----------------------------------------------------------------------------------------------
Total costs and expenses 17,104,246 16,909,962 16,292,065
- ----------------------------------------------------------------------------------------------
Earnings before equity in earnings and gain
on sale of ShopKo and income taxes 316,261 291,416 259,837
Equity in earnings and gain on sale of ShopKo -- 93,364 20,675
- ----------------------------------------------------------------------------------------------
Earnings before income taxes 316,261 384,780 280,512
Provision for income taxes
Current 108,403 131,343 77,591
Deferred 16,520 22,680 27,877
- ----------------------------------------------------------------------------------------------
Income tax expense 124,923 154,023 105,468
- ----------------------------------------------------------------------------------------------
Net earnings $ 191,338 $ 230,757 $ 175,044
- ----------------------------------------------------------------------------------------------
Weighted average number of common shares outstanding
Diluted 121,961 126,550 134,954
Basic 120,376 125,326 134,510
Net earnings per common share - diluted $ 1.57 $ 1.82 $ 1.30
Net earnings per common share - basic $ 1.59 $ 1.84 $ 1.30
==============================================================================================
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands, except per share data) February 27, February 28,
1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash $ 7,608 $ 6,100
Receivables, less allowance for losses of $18,983 in 1999
and $13,415 in 1998 410,799 410,741
Inventories 1,067,837 1,115,529
Other current assets 96,283 79,690
- -------------------------------------------------------------------------------------
Total current assets 1,582,527 1,612,060
- -------------------------------------------------------------------------------------
Long-term notes receivable 48,697 83,401
Long-term investment in direct financing leases 112,576 95,291
Property, plant and equipment
Land 139,120 138,615
Buildings 990,331 929,975
Property under construction 26,601 54,175
Leasehold improvements 167,122 150,745
Equipment 1,245,134 1,147,626
Assets under capital leases 352,104 286,762
- -------------------------------------------------------------------------------------
2,920,412 2,707,898
Less accumulated depreciation and amortization
Owned property, plant and equipment 1,156,921 1,052,521
Assets under capital leases 64,467 65,776
- -------------------------------------------------------------------------------------
Net property, plant and equipment 1,699,024 1,589,601
- -------------------------------------------------------------------------------------
Goodwill 567,890 498,438
Other assets 255,235 214,219
- -------------------------------------------------------------------------------------
Total assets $4,265,949 $4,093,010
=====================================================================================
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
February 27, February 28,
1999 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable $ 89,157 $ 149,002
Accounts payable 981,961 924,371
Accrued vacation, compensation and benefits 96,161 95,129
Current maturities of long-term debt 208,913 156,897
Current obligations under capital leases 24,015 22,697
Other current liabilities 121,700 109,064
- --------------------------------------------------------------------------------------------------------
Total current liabilities 1,521,907 1,457,160
- --------------------------------------------------------------------------------------------------------
Long-term debt 835,485 934,167
Long-term obligations under capital leases 410,784 326,561
Deferred income taxes 54,096 41,948
Other liabilities 138,038 131,269
Commitments and contingencies -- --
Stockholders' equity
Preferred stock, no par value: Authorized 1,000 shares
Shares issued and outstanding, 6 in 1999 and 1998 ($1,000 stated value) 5,908 5,908
Common stock, $1.00 par value: Authorized 400,000 shares
Shares issued, 150,670 in 1999 and 1998 150,670 150,670
Capital in excess of par value -- 2,927
Retained earnings 1,673,382 1,549,696
Treasury stock, at cost, 30,561 shares in 1999 and 30,562 in 1998 (524,321) (507,296)
- --------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,305,639 1,201,905
- --------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 4,265,949 $ 4,093,010
========================================================================================================
</TABLE>
F-8
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
- --------------------------------------------------------------------------------
(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 24, 1996 $ 5,908 $ 150,670 $ (460) $ (214,746) $ 1,274,804 $ 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 -
$.4975 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 5,908 150,670 99 (231,871) 1,382,617 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 -
$.515 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 5,908 150,670 2,927 (507,296) 1,549,696 1,201,905
Net earnings -- -- -- -- 191,338 191,338
Sales of common stock
under option plans -- -- (5,902) 35,497 (3,667) 25,928
Cash dividends declared
on common stock -
$.5275 per share -- -- -- -- (63,985) (63,985)
Compensation under employee
incentive plans -- -- 1,057 10,914 -- 11,971
Treasury shares exchanged for
acquisition -- -- 1,918 2,167 -- 4,085
Purchase of shares for treasury -- -- -- (65,603) -- (65,603)
- ----------------------------------------------------------------------------------------------------------------------
BALANCES AT
FEBRUARY 27, 1999 $ 5,908 $ 150,670 $ -- $ (524,321) $ 1,673,382 $ 1,305,639
======================================================================================================================
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands) Fiscal Year Ended
- ----------------------------------------------------------------------------------------------------------------
February 27, February 28, February 22,
1999 1998 1997
(52 weeks) (53 weeks) (52 weeks)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings $ 191,338 $ 230,757 $ 175,044
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)
Dividends received from ShopKo -- -- 4,862
Depreciation and amortization 233,523 230,082 232,071
LIFO (income) expense (3,889) 2,403 1,380
Provision for losses on receivables 10,150 5,791 8,851
Deferred income taxes 16,520 22,680 27,877
Other adjustments, net 64 (3,476) (3,100)
Changes in assets and liabilities, excluding effect from acquisitions:
Receivables (20,558) (29,905) (30,509)
Inventories 80,466 (25,700) (60,038)
Accounts payable 14,623 38,453 (53,872)
Other assets and liabilities 37,703 15,214 46,898
- --------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 559,940 392,935 328,789
- --------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Additions to long-term notes receivable (51,455) (77,779) (52,727)
Proceeds received on long-term notes receivable 95,172 39,966 43,870
Proceeds from sale of assets 64,658 395,322 78,825
Purchase of property, plant and equipment (240,363) (230,910) (244,682)
Business acquisitions, net of cash acquired (165,797) (23,523) (4,996)
Other investing activities (23,578) (28,742) (16,920)
- --------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (321,363) 74,334 (196,630)
- --------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net increase (decrease) in checks outstanding, net of deposits 15,958 (23,924) 3,270
Net issuance (reduction) of short-term notes payable (61,439) 14,730 (23,755)
Proceeds from issuance of long-term debt 207,155 15,592 3,193
Repayment of long-term debt (260,928) (84,595) (7,612)
Reduction of obligations under capital leases (24,945) (24,055) (21,205)
Proceeds from the sale of common stock under option plans 16,747 37,736 3,719
Dividends paid (64,014) (64,855) (66,884)
Payment for purchase of treasury stock (65,603) (338,337) (21,561)
- --------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (237,069) (467,708) (130,835)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 1,508 (439) 1,324
Cash at beginning of year 6,100 6,539 5,215
- --------------------------------------------------------------------------------------------------------------
Cash at end of year $ 7,608 $ 6,100 $ 6,539
==============================================================================================================
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUPERVALU INC. and Subsidiaries
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: 71.6 percent for fiscal 1999 and 74.4 percent for
fiscal 1998. 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 $127.4 million at February 27, 1999 and $131.9
million at February 28, 1998.
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 the shorter of the term of the lease or expected life for
leasehold improvements. Interest on property under construction of $3.0, $1.9
and $2.0 million was capitalized in fiscal years 1999, 1998 and 1997,
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 27, 1999, $416 million
of goodwill is being amortized over 40 years. The remaining goodwill is being
amortized over 15 to 20 years. Goodwill is shown net of accumulated amortization
of $107.2 and $87.0 million for fiscal 1999 and 1998, respectively.
Financial instruments:
The company, from time to time, utilizes interest rate caps, collars and swaps
to manage interest costs and reduce exposure to interest rate changes. The
difference between amounts to be paid or received is accrued and recognized over
the life of such contracts which have various expiration dates through 2022.
Fair value disclosures of financial instruments:
The estimated fair value of notes receivable approximates the net carrying value
at February 27, 1999 and February 28, 1998. Notes receivable are valued based on
comparisons to publicly traded debt instruments of similar credit quality.
At February 27, 1999 and February 28, 1998 the estimated fair market value of
the company's long-term debt (including current maturities) exceeded the
carrying value by approximately $34 and $42 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 27, 1999 and February 28,
1998 approximates the carrying value.
F-11
<PAGE>
Stock-based compensation:
The company uses the "intrinsic value-based method" for measuring the cost of
compensation paid in company common stock. This method defines the company's
cost as the excess of the stock's market value at the time of the grant over the
amount that the employee is required to pay.
Net earnings per share:
Basic earnings per share (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.
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.
Stock split:
On July 1, 1998 the company announced a two-for-one stock split, to be effected
in the form of a 100 percent stock dividend for shareholders of record on July
20, 1998. All share and per share data have been adjusted to reflect the stock
dividend.
Reclassifications:
Certain reclassifications have been made to prior years' consolidated financial
statements to conform to 1999 presentation. These reclassifications did not
affect results of operations as previously reported.
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 $5.8, $39.2 and
$44.0 million of the reserve in fiscal 1999, 1998 and 1997 respectively. The
remaining reserve balance of $5.8 million will be utilized for non-cancelable
lease obligations.
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 11 percent.
Included in current receivables are notes receivable due within one year
totaling $8.6 and $16.7 million at February 27, 1999 and February 28, 1998,
respectively.
F-12
<PAGE>
INVESTMENT IN SHOPKO
In fiscal 1998, the company exited its remaining 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
- --------------------------------------------------------------------------------
(In thousands, February 27, February 28,
except payment data) 1999 1998
- --------------------------------------------------------------------------------
7.800%-8.875% promissory notes $400,000 $400,000
semi-annual interest payments of
$16.1 million; due fiscal 2003 to 2023
6.23%-6.69% medium-term notes 161,000 132,500
semi-annual interest payments of
$5.3 million; due fiscal 2001 to 2007
7.25% promissory notes 150,000 150,000
semi-annual interest payments of
$5.4 million; due fiscal 2000
Variable rate three month LIBOR plus 1% 123,655 -
Notes Payable - 100,000
Variable rate to 8.25% industrial revenue bonds 80,898 88,900
9.67% senior subordinated notes due fiscal 1999 - 75,000
6.00%-9.96% promissory notes; 55,438 67,528
due fiscal 2000 to 2010
8.875% promissory notes 45,000 45,000
semi-annual interest payments of
$2.0 million; due fiscal 2000
8.875% sinking fund debentures due fiscal 2017 7,110 7,110
Other debt 21,297 25,026
- --------------------------------------------------------------------------------
1,044,398 1,091,064
Less current maturities 208,913 156,897
- --------------------------------------------------------------------------------
Long-term debt $835,485 $934,167
================================================================================
Aggregate maturities of long-term debt during the next five fiscal years are:
- --------------------------------------------------------------------------------
(In thousands)
- --------------------------------------------------------------------------------
2000 208,913
2001 90,460
2002 16,113
2003 316,256
2004 24,590
================================================================================
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 1999 and 1998.
During fiscal 1999, $30 million of letters of credit were issued under the
revolving credit agreement and were outstanding as of February 27, 1999. As of
February 27, 1999 and February 28, 1998, total commercial paper outstanding was
$60 million and $223 million, respectively. At February 28, 1998, borrowings of
$100 million of commercial paper outstanding were classified as long-term debt,
reflecting SUPERVALU's intent and
F-13
<PAGE>
ability, through the existence of the revolving credit agreement, to refinance
these borrowings. The weighted-average interest rate on short-term borrowings
outstanding was 5.1 percent at February 27, 1999 and 5.7 percent at February 28,
1998. The company periodically enters into interest rate swaps to manage
exposure to interest rate changes.
The company also has a $400 million "shelf registration" in effect pursuant to
which the company could issue $159 million of additional debt securities. During
fiscal 1999 the company issued $83.5 million of medium-term notes which were
used to reduce commercial paper outstanding. The debt agreements contain various
covenants including maximum permitted leverage. Under the most restrictive
covenants, retained earnings of approximately $119 million were available at
year-end for payment of cash dividends.
In connection with a fiscal 1999 acquisition, the company incurred debt of
$123.7 million in January 1999. The obligation is variable rate based on three
month LIBOR plus 1 percent with quarterly payments of principal and interest.
LEASES
Capital and operating leases:
The company leases certain corporate-owned retail food stores, food distribution
warehouses and office facilities. Many of these leases include renewal options,
and to a limited extent, include options to purchase. Amortization of assets
under capital leases was $19.6, $17.9 and $18.2 million in fiscal 1999, 1998 and
1997, respectively.
Future minimum obligations under capital leases in effect at February 27, 1999
are as follows:
- -----------------------------------------------------------------------------
(In thousands) Lease
Fiscal Year Obligations
- -----------------------------------------------------------------------------
2000 $ 41,505
2001 38,875
2002 38,481
2003 38,017
2004 37,094
Later 345,006
- -----------------------------------------------------------------------------
Total future minimum obligations 538,978
Less interest 215,144
- -----------------------------------------------------------------------------
Present value of net future minimum obligations 323,834
Less current portion 15,306
- -----------------------------------------------------------------------------
Long-term obligations $308,528
=============================================================================
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 8.5 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 27, 1999 are as
follows:
F-14
<PAGE>
- ------------------------------------------------------------------------------
(In thousands) Lease
Fiscal Year Obligations
- ------------------------------------------------------------------------------
2000 $ 65,787
2001 59,839
2002 51,130
2003 40,279
2004 28,809
Later 108,861
- ------------------------------------------------------------------------------
Total future minimum obligations $354,705
==============================================================================
Total rent expense, net of sublease income, relating to all operating leases
with terms greater than one year was $44.4, $40.0, and $36.5 million in fiscal
1999, 1998 and 1997, respectively.
Future minimum receivables under operating leases and subleases in effect at
February 27, 1999 are as follows:
- ---------------------------------------------------------------------------
(In thousands) Owned Leased
Fiscal Year Property Property Total
- ---------------------------------------------------------------------------
2000 $ 3,068 $17,923 $ 20,991
2001 2,455 15,560 18,015
2002 2,384 12,769 15,153
2003 2,282 10,434 12,716
2004 2,021 7,716 9,737
Later 7,213 24,336 31,549
- ---------------------------------------------------------------------------
Total future minimum receivables $19,423 $88,738 $108,161
===========================================================================
Owned property under operating leases is as follows:
- ------------------------------------------------------------------------------
(In thousands) February 27, February 28,
1999 1998
- ------------------------------------------------------------------------------
Land, buildings and equipment $41,033 $35,507
Less accumulated depreciation 12,678 11,428
- ------------------------------------------------------------------------------
Net land, buildings and equipment $28,355 $24,079
==============================================================================
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 related future minimum
obligations under capital leases in effect at February 27, 1999 are as follows:
F-15
<PAGE>
- ---------------------------------------------------------------------------
(In thousands) Direct Financing Capital Lease
Fiscal Year Lease Receivables Obligations
- ---------------------------------------------------------------------------
2000 $ 19,102 $ 17,441
2001 16,986 15,675
2002 16,186 14,956
2003 15,196 14,051
2004 13,833 12,828
Later 112,794 106,319
- ---------------------------------------------------------------------------
Total minimum lease payments 194,097 181,270
Less unearned income 73,090 -
Less interest - 70,305
- ---------------------------------------------------------------------------
Present value of net minimum
lease payments 121,007 110,965
Less current portion 8,431 8,709
- ---------------------------------------------------------------------------
Long-term portion $112,576 $102,256
===========================================================================
INCOME TAXES
The provision for income taxes consists of the following:
- ----------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- ----------------------------------------------------------------------------
Current
Federal $90,166 $109,550 $64,033
State 18,528 22,161 13,730
Tax credits (291) (368) (172)
Deferred
Restructuring and other charges 0 15,550 15,599
Other 16,520 7,130 12,278
- ----------------------------------------------------------------------------
Total provision $124,923 $154,023 $105,468
============================================================================
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:
- ----------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- ----------------------------------------------------------------------------
Federal taxes based on statutory rate $110,691 $134,680 $98,180
State income taxes, net of federal
benefit 13,568 16,508 12,763
Nondeductible goodwill 6,236 6,248 6,277
Other (5,572) (3,413) (11,752)
- ----------------------------------------------------------------------------
Total provision $124,923 $154,023 $105,468
============================================================================
Temporary differences which give rise to significant portions of the net
deferred tax asset (liability) as of February 27, 1999 and February 28, 1998 are
as follows:
- ------------------------------------------------------------------------------
(In thousands) 1999 1998
- ------------------------------------------------------------------------------
Deferred tax assets:
Depreciation and amortization $20,819 $20,676
Restructuring and other charges 11,188 13,089
F-16
<PAGE>
Net operating loss from acquired
Subsidiaries 19,111 19,964
Provision for obligations to be
settled in future periods 126,809 105,193
Inventory 14,079 14,269
Other 10,224 10,566
- ------------------------------------------------------------------------------
Total deferred tax assets 202,230 183,757
- ------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation and amortization (85,660) (85,767)
Acquired assets adjustment to fair (55,518) (50,573)
Values
Accelerated tax deductions for benefits
to be paid in future periods (65,698) (34,860)
Other (18,003) (18,687)
- ------------------------------------------------------------------------------
Total deferred tax liabilities (224,879) (189,887)
- ------------------------------------------------------------------------------
Net deferred tax liability $ (22,649) $(6,130)
==============================================================================
The company acquired net operating loss (NOL) carryforwards of $58.1 million for
tax purposes which expire beginning in 2000 and continuing through 2010.
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:
- ------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- ------------------------------------------------------------------------------
Leased asset additions
And related obligation $106,027 $39,072 $41,257
-----------------------------------
Acquisitions:
Fair value of assets acquired 196,591 28,114 25,169
Cash paid 166,731 23,570 5,014
- ------------------------------------------------------------------------------
Liabilities assumed $29,860 $4,544 $20,155
==============================================================================
Payments for interest and income taxes were as follows:
- ------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- ------------------------------------------------------------------------------
Interest (net of amount capitalized) $127,505 $134,645 $136,618
Income taxes 99,686 142,829 58,551
==============================================================================
F-17
<PAGE>
STOCK OPTION PLANS
The company's 1997 and 1993 stock option plans allow the granting of
non-qualified stock options and incentive stock options to key salaried
executive employees at prices not less than 100 percent of fair market value,
determined by averaging the open and close price on the date of grant. The
company's 1983 plan no longer allows granting, but outstanding grants remain to
be exercised. In April 1998 and 1997, the Board of Directors reserved an
additional 2.6 million and 4.0 million shares, respectively, 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:
- -----------------------------------------------------------------------------
Shares Weighted Average
(In thousands) Price per Share
- -----------------------------------------------------------------------------
Outstanding, February 24, 1996 9,202 $14.22
Granted 1,410 15.75
Exercised (398) 12.91
Canceled and forfeited (158)
- -----------------------------------------------------------------------------
Outstanding, February 22, 1997 10,056 14.46
Granted 2,796 17.52
Exercised (4,102) 14.00
Canceled and forfeited (372)
- -----------------------------------------------------------------------------
Outstanding, February 28, 1998 8,378 15.67
Granted 2,377 23.74
Exercised (2,487) 14.98
Canceled and forfeited (352)
- -----------------------------------------------------------------------------
Outstanding, February 27, 1999 7,916 $18.26
=============================================================================
The outstanding stock options at February 27, 1999 have exercise prices ranging
from $12.00 to $28.59 and a weighted average remaining contractual life of 5.7
years. Options to purchase 4.9 and 5.0 million shares were exercisable at
February 27, 1999, and February 28, 1998, respectively. These options have a
weighted average exercise price of $17.81 and $15.68, respectively. Option
shares available for grant were 4.4 and 3.8 million at February 27, 1999, and
February 28, 1998, respectively. The company has reserved 12.4 million shares,
in aggregate, for the plans.
As of February 27, 1999, 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 2.7 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 1999, 1998 and
1997 net income and earnings per share would have been changed to the pro forma
amounts indicated below:
F-18
<PAGE>
- ------------------------------------------------------------------------------
(In thousands, except per share amounts) 1999 1998 1997
- ------------------------------------------------------------------------------
Net earnings
As reported $ 191,338 $ 230,757 $ 175,044
Pro forma 185,951 227,896 173,568
Earnings per share - diluted
As reported $1.57 $ 1.82 $1.30
Pro forma 1.52 1.80 1.29
- ------------------------------------------------------------------------------
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:
- ------------------------------------------------------------------------------
Assumptions 1999 1998 1997
- ------------------------------------------------------------------------------
Dividend yield 1.99% 2.69% 3.31%
Risk free interest rate 5.27% 5.62% 6.42%
Expected life 4 years 5 years 7 years
Expected volatility 19.33% 18.21% 13.78%
Estimated fair value of options
granted per share $ 4.62 $ 3.39 $ 3.10
==============================================================================
TREASURY STOCK PURCHASE PROGRAM
In August 1996, the Board of Directors instituted a treasury stock program under
which the company is authorized to repurchase up to 10.0 million shares for
reissuance upon the exercise of employee stock options and for other
compensation programs utilizing the company's stock. In fiscal 1997, the company
repurchased 1.4 million shares at an average cost of $14.46 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 17.0 million
shares with proceeds received from the sale of ShopKo. In fiscal 1998, the
company repurchased 13.8 million shares at an average cost of $19.36 under the
June 1997 program and 3.4 million shares at an average cost of $20.50 under the
August 1996 program. In fiscal 1999, the company repurchased 2.6 million shares
at an average cost of $24.77 under the August 1996 program.
STOCKHOLDER RIGHTS PLAN
The company had 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 expired in April 1999.
F-19
<PAGE>
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 have been restated for the adoption of SFAS 128. The following table
reflects the calculation of basic and diluted earnings per share:
- ------------------------------------------------------------------------------
(In thousands, except per share amounts) 1999 1998 1997
- ------------------------------------------------------------------------------
Earnings per share - basic
Income available to common shareholders $191,338 $230,757 $175,044
Weighted average shares outstanding 120,376 125,326 134,510
Earnings per share - basic $1.59 $1.84 $1.30
Earnings per share - diluted
Income available to common shareholders $191,338 $230,757 $175,044
Weighted average shares outstanding 120,376 125,326 134,510
Dilutive impact of options outstanding 1,585 1,224 444
--------- ---------- --------
Weighted average shares and potential
dilutive shares outstanding 121,961 126,550 134,954
Earnings per share - diluted $1.57 $1.82 $1.30
==============================================================================
COMMITMENTS AND CONTINGENCIES
The company has guaranteed mortgage loan and other debt obligations of $23.7
million. The company has also guaranteed the leases and fixture financing loans
of various affiliated retailers with a present value of $59.4 and $18.9 million,
respectively. The company has provided limited recourse to purchasers of notes
receivable from affiliated retailers with outstanding note balances of $76.3 and
$33.6 million, at fiscal 1999 and 1998; $32.3 and $18.2 million of which the
company has contingent liability for at February 27, 1999 and February 28, 1998,
respectively. The company has also entered into note repurchase agreements with
various lenders totaling $7.3 million, under which certain events require the
company to repurchase collateralized loans.
The company is a party to various legal proceedings arising from the normal
course of business activities, none of which in management's opinion, is
expected to have a material adverse impact on the company's consolidated results
of operations or consolidated financial position.
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 $2.2, $1.9 and $2.3 million
for fiscal 1999, 1998 and 1997, respectively.
F-20
<PAGE>
Amounts charged to union pension expense were $37.9, $37.4 and $34.4 million for
fiscal 1999, 1998 and 1997, 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.
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 following tables set forth the change in benefit obligation and plan assets,
a reconciliation of the accrued benefit costs and total benefit cost for the
fiscal year for the company's defined benefit pension plans and other
postretirement plans:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Pension Benefits Other Benefits
(In thousands) February 27, February 28, February 27, February 28,
1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning
of year $281,665 $273,714 $ 60,705 $ 57,152
Service cost 12,916 12,668 1,750 1,850
Interest cost 20,638 19,545 4,895 4,182
Actuarial loss (gain) 18,595 (14,657) 10,574 859
Benefits paid (12,121) (9,605) (3,609) (3,338)
- ---------------------------------------------------------------------------------------------------------
Benefit obligation at end of year $321,693 $281,665 $ 74,315 $ 60,705
=========================================================================================================
CHANGE IN PLAN ASSETS
Fair value of plan assets at
beginning of year $260,028 $233,410 $ -- $ --
Actual return on plan assets 26,829 25,857 -- --
Company contributions 10,031 10,366 3,609 3,338
Plan participants' contributions -- -- 1,829 1,929
Benefits paid (12,121) (9,605) (5,438) (5,267)
- ---------------------------------------------------------------------------------------------------------
Fair value of plan assets at
end of year $284,767 $260,028 $ -- $ --
=========================================================================================================
RECONCILIATION OF PREPAID
(ACCRUED) COST
Funded status $(36,926) $(21,637) $(74,315) $(60,705)
Unrecognized net loss 34,335 17,095 16,471 8,259
Unrecognized prior service cost (971) (1,043) (1,697) (1,959)
Unrecognized net obligation 95 190 -- --
- ---------------------------------------------------------------------------------------------------------
Accrued pension cost $ (3,467) $ (5,395) $(59,541) $(54,405)
=========================================================================================================
</TABLE>
F-21
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Pension Benefits Other Benefits
(In thousands) 1999 1998 1997 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET BENEFIT COSTS FOR THE FISCAL YEAR
Service cost $12,916 $12,668 $12,197 $1,750 $1,850 $1,813
Interest cost 20,638 19,545 18,676 4,895 4,182 3,932
Expected return on plan assets (25,634) (23,020) (20,291) -- -- --
Amortization of:
Unrecognized net loss 2 499 2,273 362 -- --
Unrecognized prior service cost (72) 246 246 (262) (262) (261)
Unrecognized net obligation 152 172 249 -- -- --
- -----------------------------------------------------------------------------------------------------------------
Net benefit costs for the fiscal year $8,002 $10,110 $13,350 $6,745 $5,770 $5,484
=================================================================================================================
</TABLE>
For both the pension and the postretirement benefit calculations, the
weighted-average discount rate used was 6.85 percent and 7.50 percent for fiscal
1999 and 1998 respectively, the expected return on plan assets used was 10.0
percent for both fiscal 1999 and 1998, and the rate of compensation increase was
3.5 percent and 4.5 percent for fiscal 1999 and 1998, respectively.
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation for both fiscal 1999 and 1998 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 one
percent increase in the trend rate would increase the accumulated postretirement
benefit obligation by $8.7 million in both fiscal 1999 and 1998 and the net
periodic cost by $0.9 and $1.0 million for fiscal 1999 and 1998, respectively.
In contrast, a one percent decrease in the trend rate would decrease the
accumulated postretirement benefit obligation by $6.6 and $6.0 million in fiscal
1999 and 1998 respectively, and the net periodic cost by $0.7 in both fiscal
1999 and 1998.
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 was $15.0 and
$14.9 million at February 27, 1999 and February 28, 1998, respectively. The
accumulated benefit obligation of these plans totaled $11.9 and $11.1 million at
February 27, 1999 and February 28, 1998, respectively. Net periodic pension cost
was $2.4, $2.3 and $2.2 million for 1999, 1998, and 1997, respectively.
INDUSTRY SEGMENT INFORMATION
Information concerning the company's continuing operations by business segment
for the years ended February 27, 1999, February 28, 1998 and February 22, 1997,
as required by the newly adopted Statement of Financial Accounting Standards No.
131, "Disclosures About Segments of an Enterprise and Related Information," is
contained on page F-5.
F-22
<PAGE>
Unaudited Quarterly Financial Information
Quarterly unaudited financial information for SUPERVALU INC. and subsidiaries is
as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) Fiscal Year (52 Weeks) Ended February 27, 1999
- ----------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth Year
(16 wks) (12 wks) (12 wks) (12 wks) (52 wks)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $5,202,576 $3,937,318 $4,079,696 $4,200,917 $17,420,507
Gross profit 518,821 402,767 413,763 465,029 1,800,380
Net earnings 51,798 39,900 45,260 54,380 191,338
Net earnings per common share-diluted .42 .33 .37 .45 1.57
Dividends declared per common share .1300 .1325 .1325 .1325 .5275
Weighted average shares-diluted 122,144 122,178 121,861 121,602 121,961
============================================================================================================================
Fiscal Year (53 Weeks) Ended February 28, 1998
- ----------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth Year
(16 wks) (12 wks) (12 wks) (13 wks) (53 wks)
- ----------------------------------------------------------------------------------------------------------------------------
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-diluted .37 .71 .33 .42 1.82
Dividends declared per common share .1250 .1300 .1300 .1300 .5150
Weighted average shares-diluted 134,488 125,680 121,742 122,026 126,550
============================================================================================================================
</TABLE>
Note: Results for fiscal 1998 include an after-tax gain on the sale of ShopKo
stock of $53.7 million, or $.42 per share-diluted.
F-23
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
SUPERVALU INC.
Under date of April 5, 1999, we reported on the consolidated balance sheet of
SUPERVALU INC. and subsidiaries as of February 27, 1999, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
the fiscal year ended February 27, 1999, which are included in the annual report
on Form 10-K for the 1999 fiscal year. In connection with our audit of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedules as listed in the accompanying index.
These financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audit.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
April 5, 1999
F-24
<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 for each of the two 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 1999
Annual Report on Form 10-K. 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
F-25
<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 27, 1999 $13,415,000 10,150,000 4,582,000 (A) $18,983,000
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
</TABLE>
(A) Balance consists of accounts determined to be uncollectible and charged
against reserves, net of collection on accounts previously charged off.
F-26
<PAGE>
EXHIBIT INDEX
-------------
SUPERVALU INC.
ANNUAL REPORT ON FORM 10-K
EXHIBIT NUMBER EXHIBIT
-------------- -------
*3.1. Restated Certificate of Incorporation.
*3.2. Restated Bylaws, as amended.
*4.1. 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.
*4.2. 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.
*4.3. 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.
*4.4. 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.
*4.5. 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.
*4.6. Credit Agreement dated as of October 8, 1997 among the
Registrant, the Lenders named therein and Bankers Trust
Company, as Agent.
10.1. SUPERVALU INC. 1993 Stock Plan, as amended.
*10.2. SUPERVALU INC. 1978 Stock Appreciation Rights Plan, as
amended.
*10.3. SUPERVALU INC. Executive Incentive Bonus Plan.
*10.4. SUPERVALU INC. Directors Deferred Compensation Plan for
Non-Employee Directors, as amended.
*10.5. SUPERVALU INC. 1983 Employee Stock Option Plan, as
amended.
*10.6. SUPERVALU INC. 1989 Stock Appreciation Rights Plan.
*10.7. SUPERVALU INC. ERISA Excess Plan Restatement.
*10.8. SUPERVALU INC. Deferred Compensation Plan.
*10.9. SUPERVALU INC. Executive Deferred Compensation Plan as
amended and Executive Deferred Compensation Plan II.
1
<PAGE>
*10.10. Amendments to the SUPERVALU INC. Deferred Compensation
Plan and the SUPERVALU INC. Executive Deferred
Compensation Plan II.
*10.11. Form of Agreement used in connection with Registrant's
Executive Post-Retirement Survivor Benefit Program.
10.12. Form of Change of Control Severance Agreements entered
into with certain officers of the Registrant.
*10.13. Amended and Restated SUPERVALU INC. Grantor Trust dated
as of August 3, 1998.
*10.14. SUPERVALU INC. Directors Retirement Program, as amended.
*10.15. SUPERVALU INC. Non-Qualified Supplemental Executive
Retirement Plan.
*10.16. First Amendment to SUPERVALU INC. Non-Qualified
Supplemental Executive Retirement Plan.
*10.17. Second Amendment to SUPERVALU INC. Non-Qualified
Supplemental Executive Retirement Plan.
*10.18. Third Amendment to SUPERVALU INC. Non-Qualified
Supplemental Executive Retirement Plan.
*10.19. SUPERVALU INC. Long-Term Incentive Plan, as amended.
*10.20. SUPERVALU INC. Bonus Plan for Designated Corporate
Officers.
*10.21. SUPERVALU INC. Non-Employee Directors Deferred Stock
Plan, as amended.
*10.22. SUPERVALU INC. 1997 Stock Plan.
10.23. Supplemental Retirement Agreement for William J. Bolton.
12.1. Ratio of Earnings to Fixed Charges.
*16.1. Letter from Deloitte & Touche LLP to the Securities and
Exchange Commission dated May 8, 1998.
21.1. Subsidiaries of the Registrant.
23.1. Consent of KPMG Peat Marwick LLP.
23.2. Consent of Deloitte & Touche LLP.
24.1. Power of Attorney.
27.1. Financial Data Schedules.
99.1 Cautionary Statements pursuant to the Securities
Litigation Reform Act.
- -----------------
* Incorporated by Reference
2
<PAGE>
EXHIBIT 10.1.
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
appoint such agents as it shall deem appropriate for the proper administration
of the Plan;
-3-
<PAGE>
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 9,600,000. 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.
(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
-4-
<PAGE>
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 500,000 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 option compensation plans, in any calendar year period
beginning with the period commencing January 1, 1997. Notwithstanding, the
foregoing, the above mentioned annual limitation shall be increased to 1,810,000
Shares (subject to adjustment as provided for in Section 4(c)) for awards made
to the Chief Executive Officer of the Company during only the calendar year that
commences on January 1, 1998. 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
-5-
<PAGE>
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.
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
-6-
<PAGE>
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 under the Plan or any other stock option plan of
the Company at the time of such grant.
(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.
-7-
<PAGE>
(iii) Forfeiture; Delivery of Shares. Except as otherwise determined
by the Committee, upon termination of employment (as determined under
criteria 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
-9-
<PAGE>
and until such Shares or other securities have been admitted for trading on
such securities exchange.
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
-10-
<PAGE>
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 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 the termination of the Plan. However, unless otherwise expressly
provided in the Plan or
-12-
<PAGE>
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.
-13-
<PAGE>
EXHIBIT 10.12
CHANGE OF CONTROL SEVERANCE AGREEMENT
[TIERS I, II & III]
This Agreement ("Agreement") is dated as of ________, 199_, by and between
SUPERVALU INC., a Delaware corporation (the "Company"), and ________________
(the "Executive").
WHEREAS, the Company's Board of Directors (the "Board") considers the
continued services of key executives of the Company to be in the best interests
of the Company and its stockholders; and
WHEREAS, the Board desires to assure, and has determined that it is
appropriate and in the best interests of the Company and its stockholders to
reinforce and encourage the continued attention and dedication of key executives
of the Company to their duties of employment without personal distraction or
conflict of interest in circumstances arising from the possibility or occurrence
of a change of control of the Company; and
WHEREAS, the Board has authorized the Company to enter into continuity
agreements with those key executives of the Company who are designated by the
Executive Personnel and Compensation Committee of the Board of Directors
("Committee"), such agreements to set forth the severance compensation which the
Company agrees under certain circumstances to pay such executives; and
WHEREAS, the Executive is a key executive of the Company and has been
designated by the Committee as an executive to be offered such a continuity
compensation agreement with the Company.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and the
Executive agree as follows:
1. Term of Agreement. On the date on which a Change of Control occurs (the
"Effective Date"), this Agreement shall become effective. If Executive ceases to
be employed by reason of an Anticipatory Termination (as defined in Section
3(c)) prior to the Effective Date, then Executive shall receive the severance
benefits provided herein and the Effective Date of this Agreement shall be
deemed to be the date immediately preceding the occurrence of an Anticipatory
Termination. If Executive ceases to be employed for any reason other than an
Anticipatory Termination prior to a Change of Control, this Agreement shall
terminate and have no effect and Executive shall receive such severance payments
as are provided in any existing agreement between the Executive and the Company.
<PAGE>
2
If a Change of Control occurs, the Executive's employment shall be continued
hereunder for the period (the "Employment Period") commencing on the Effective
Date and ending on the second anniversary of the date on which a Change of
Control occurs, subject to the termination of Executive's employment as
described hereinafter. Any existing employment agreement between the Executive
and the Company shall continue to be effective following the Change of Control,
but severance amounts under this Agreement shall be reduced by amounts payable
under any such employment agreement.
For purposes of this Agreement, a "Change of Control" shall be deemed to have
occurred upon any of the following events:
(i) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then outstanding shares of common stock of the Company or
(B) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors;
provided, however, that for purposes of this subsection (i), the following
acquisitions shall not constitute a Change of Control; (A) any acquisition
directly from the Company or (B) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or
(ii) the consummation of any merger or other business combination of
the Company, sale or lease of the Company's assets or combination of the
foregoing transactions (the "Transactions") other than a Transaction
immediately following which the shareholders of the Company and any trustee
or fiduciary of any Company employee benefit plan immediately prior to the
Transaction own at least 60% of the voting power, directly or indirectly,
of (A) the surviving corporation in any such merger or other business
combination; (B) the purchaser or lessee of the Company's assets; or (C)
both the surviving corporation and the purchaser or lessee in the event of
any combination of Transactions; or
(iii) within any 24 month period, the persons who were directors
immediately before the beginning of such period (the "Incumbent Directors")
shall cease (for any reason other than death) to constitute at least a
majority of the Board or the board of directors of a successor to the
Company. For this purpose, any director who was not a director at the
beginning of such period shall be deemed to be an Incumbent Director if
such director was elected to the Board by, or on the recommendation of or
with the approval of, at least three-fourths of the directors who then
qualified as Incumbent Directors (so long as such director was not
nominated by a person who has expressed an intent to effect a Change of
Control or engage in a proxy or other control contest); or
<PAGE>
3
(iv) such other event or transaction as the Board shall determine
constitutes a Change of Control.
2. Employment following Change of Control. Executive shall have at least
the same titles and responsibilities as those in effect immediately prior to the
Change of Control. Executive shall receive an annual base salary which is not
less than the highest base salary in effect for Executive at any time in the 12
months preceding the Change of Control, and the Company shall review the salary
annually with a view to increasing it; provided any such increase shall be in
the sole discretion of the Board. Once increased, base salary cannot be
decreased. For the year of the Change of Control, the Executive shall be paid an
annual bonus which shall be no less than the higher of (i) the bonus which the
Executive would have received under the Company's bonus plans as they were prior
the Change of Control (based upon actual performance in the year up to the
Change of Control), (ii) the highest of the annual bonuses paid or payable in
respect of the three years prior to the Change of Control, or (iii) the
Executive's target bonus immediately prior to the Change of Control. Thereafter,
the Executive shall be paid an annual bonus which shall be no less than the
higher of (i) the bonus which the Executive would have received under the
Company's bonus plans as they were prior the Change of Control (based upon
actual performance in the year up to the Change of Control), (ii) the average of
the annual bonuses paid or payable in respect of the three years prior to the
Change of Control, or (iii) the Executive's target bonus immediately prior to
the Change of Control (the highest of (i), (ii) and (iii) being the "Bonus"). In
addition, the Executive shall be provided with incentive compensation, pension,
general insurance, vacation, fringe benefits, perquisites (including an
automobile allowance, if any), the use of an office and support staff that are
commensurate with the benefits, vacation, expense reimbursement, fringe
benefits, perquisites, office and support staff provided to Executive
immediately prior to the Change of Control or, if more favorable to Executive,
at the level made available to other similarly situated executive officers of
the Company after the Change of Control. In addition, the Executive's place of
employment following a Change of Control shall be no further than 35 miles from
the Executive's place of employment prior to the Change of Control.
3. Termination Following Change of Control.
(a) The Executive shall be entitled to the severance benefits provided in
Section 4 hereof in the event Executive's employment is terminated (A) within
two years following a Change of Control (i) by the Company without Cause, or
(ii) by Executive for Good Reason, or (B) prior to a Change of Control, as a
result of an Anticipatory Termination.
Notwithstanding the foregoing, Executive shall not be entitled to severance
benefits in the event of a termination of employment on account of death,
Disability or Retirement,
<PAGE>
4
but excluding any such termination which is coincident with or subsequent to a
termination which would otherwise give rise to severance benefits. For purposes
of this Agreement:
(i) "Disability" shall have the same meaning as in the Company's
long-term disability plan.
(ii) "Retirement" shall mean a termination of employment by Executive
pursuant to late, normal or early retirement under a pension plan sponsored
by the Company, as defined in such plan.
(b) Cause. For purposes of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of Executive to perform
substantially Executive's duties with the Company (other than any such
failure resulting from incapacity due to physical or mental illness), after
a written demand for substantial performance is delivered to Executive by
the Board or an officer of the Company which specifically identifies the
manner in which the Board or the officer believes that Executive has not
substantially performed Executive's duties;
(ii) (A) the conviction of, or plea of guilty or nolo contendere to, a
felony or (B) the willful engaging by Executive in gross misconduct which
is materially and demonstrably injurious to the Company; or
(iii) Executive's commission of an act or acts of personal dishonesty
intended to result in substantial personal enrichment of the Executive at
the expense of the Company;
provided, however, that in no event shall Cause exist by virtue of any action
taken by the Executive (A) in compliance with express written directions of the
Board, [the Company's Chief Executive Officer or the officer to whom the
Executive reports,](1) or (B) in reliance upon the express written consent of
the Company's counsel. In each case above, for a termination of employment to be
for Cause: (a) the Executive must be provided with a Notice of Termination (as
described in Section 3(d)) within six (6) months after the Company has actual
knowledge of the act or omission constituting Cause; (b) the Executive must be
provided with an opportunity to be heard by the Board no earlier than 30 days
following the Notice of Termination (during which notice period Executive has
failed to cure or resolve the behavior in question); and (c) there
- ----------
(1) Not to be included in CEO's Agreement, and, for those Executives reporting
directly to the CEO, "the officer to whom the Executive reports" shall not
be included.
<PAGE>
5
must be a good faith determination of Cause by at least 2/3rds of the
non-employee outside directors of the Company.
(c) Good Reason and Anticipatory Termination. For purposes of this
Agreement, "Good Reason" shall mean:
(i) Executive's annual salary is reduced below the higher of (A) the
amount in effect on the Effective Date, or (B) the highest amount in effect
at any time thereafter;
(ii) Executive's annual bonus is reduced below the Bonus;
(iii) Executive's duties and responsibilities or the program of
incentive compensation (including, without limitation, long term incentive
plans), vacation, fringe benefits, perquisites, retirement and general
insurance benefits offered to Executive are materially and adversely
diminished in comparison to the duties and responsibilities or the program
of such benefits enjoyed by Executive on the Effective Date;
(iv) Executive is required to be based at a location more than 35
miles from the location where Executive was based and performed services on
the Effective Date or Executive's business travel obligations are
significantly increased over those in effect immediately prior to the
Effective Date; [or]
(v) failure to provide for the assumption of this Agreement by any
successor entity; [or
(vi) Executive's termination of employment for any reason during the
seventh month following the Change of Control;](2)
provided, however, that any diminution of duties or responsibilities that occurs
solely as a result of the fact that the Company ceases to be a public company
shall not, in and of itself, constitute Good Reason.
Any event or condition described in clauses (i) through (iv) or a termination
without Cause, either of which occurs prior to a Change of Control but which
Executive reasonably demonstrates (A) was at the request of a third party who
has indicated an intention or taken steps reasonably calculated to effect a
Change of Control (a "Third Party"), or (B) otherwise arose in connection with,
or in anticipation of a Change of Control, shall constitute Good Reason for
purposes of this Agreement, notwithstanding that it occurred prior to a Change
of Control ("Anticipatory Termination").
- ----------
(2) For CEO only.
<PAGE>
6
Executive shall give the Company written notice of any event which Executive
claims is the basis for Good Reason [(other than a termination pursuant to
Section 3(c)(vi))], within 6 months of such event, and the Company shall have 30
days from its receipt of such notice within which to cure or resolve the
behavior in question before Executive can terminate for Good Reason.
(d) Notice of Termination. Any purported termination of the Executive's
employment with the Company [(other than a termination pursuant to Section
3(c)(vi))] shall be communicated by a Notice of Termination to the Executive, if
such termination is by the Company, or to the Company, if such termination is by
the Executive. For purposes of this Agreement, "Notice of Termination" shall
mean a written notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provisions so indicated. For purposes of this Agreement, no
purported termination of Executive's employment with the Company shall be
effective without such a Notice of Termination having been given.
(e) Dispute Resolution. Disputes arising from the operation of this
Agreement, including, but not necessarily being limited to, the manner of giving
the Notice of Termination, the reasons or cause for the Executive's termination
or the amount of severance compensation due to the Executive subsequent to the
Executive's termination, shall be resolved by arbitration; provided, however,
that disputes arising under Section 11 of this Agreement shall not be resolved
under this Section 3(e). In the event that any dispute which shall be resolved
by arbitration, is not able to be resolved by mutual agreement of the parties
within sixty calendar (60) days of the giving of such notice, the Executive and
the Company hereby agree to promptly submit such a dispute to binding
arbitration in Minnesota in accordance with Delaware law and the rules and
procedures of the American Arbitration Association. During any period in which a
dispute is pending, the Executive shall continue to receive Executive's salary
(including any Bonus) and benefits as if Executive's employment with the Company
had continued through the date of the arbiters' determination, and any such
payments or benefits shall not be offset against any severance, either under
this Agreement or otherwise, to which Executive may be entitled.
4. Compensation Upon Termination After a Change of Control.
If within two (2) years after the Effective Date, the Executive's
employment by the Company shall be terminated in accordance with Section 3(a)
(the "Termination"), the Executive shall be entitled to the following payments
and benefits:
(a) Severance. As soon as practicable after the Termination, but in any
event no later than 10 business days following such Termination, the Company
<PAGE>
7
shall pay or cause to be paid to the Executive, a lump sum cash amount equal to
[three (3) times][two (2) times](3) the sum of (i) the Executive's annual base
salary on the Effective Date (the "Base Salary"), (ii) the Bonus, and (iii) the
value of the perquisites (e.g., car allowance, club dues, etc., including any
ordinary tax gross-ups for perquisites) provided to Executive in respect of the
year prior to the Change of Control. In addition, at the time of the above
payment, the Executive shall be entitled to an additional lump sum cash payment
equal to the sum of (A) Executive's annual salary through the date of
termination, (B) a pro rata portion of the Bonus (calculated through the date of
termination), and (C) an amount, if any, equal to compensation previously
deferred (excluding any qualified plan deferral) and any accrued vacation pay,
in each case, in full satisfaction of Executive's rights thereto
(b) Welfare Benefits. The Executive shall be entitled to continued medical,
dental and life insurance coverage for the Executive and the Executive's
eligible dependents on the same basis as in effect prior to the Change of
Control or the Executive's Termination of employment, whichever is deemed to
provide for more substantial benefits, until the earlier of (A) [thirty-six
(36)][twenty-four (24)][twelve (12)](4) months (the "Separation Period") after
the Executive's Termination or (B) the commencement of comparable coverage with
a subsequent employer; provided, however, that such continued coverage shall not
count against any continued coverage required by law; provided, further, that if
the Company is not able to provide the coverage required above under the general
terms and provisions of the Company's plans, then the Company shall reimburse
Executive for the cost of obtaining substantially similar benefits (the "Benefit
Payment") and shall pay Executive an additional amount, such that after payment
of all applicable federal, state and local income and payroll taxes imposed upon
Executive as a result of the Benefit Payment, the Executive retains an amount
equal to the amount of the Benefit Payment.
(c) Pension Benefits. The Executive shall also receive additional service
credit (including, benefit accrual and vesting credit) for the Separation Period
under any Company pension plan in which Executive participates; provided,
however, that in the case of a qualified pension plan, the Executive shall be
paid (within 30 days after Executive's last day of employment) a cash lump sum
equal to the present value of the additional benefits Executive would have
accrued if Executive had been credited for all purposes with the additional
years of service under such plan. In addition, the Executive shall receive an
additional payment (the "401(k) Payment") equal to the
- ----------
(3) Three times for Tier I (CEO & EVPs); Two times for Tier II (SVPs); one time
for Tier III (remaining participants).
(4) Thirty-six months for Tier I; twenty-four months for Tier II; twelve months
for Tier III.
<PAGE>
8
product of (i) [three (3)] [two (2)][one (1)](5), (ii) 0.0225, and (iii) the sum
of the Base Salary and the Bonus.
(d) Outplacement. If so requested by the Executive, outplacement services
shall be provided by a professional outplacement provider at a cost to the
Company of not more than 10% of the Executive's Base Salary.
(e) Indemnification; Liability Insurance. The Company shall maintain, for a
period not less than 6 years following Executive's termination of employment,
comparable indemnification policies and liability insurance coverage for
Executive's benefit to those indemnification policies and liability insurance
coverage provided by the Company for Executive's benefit prior to the Change of
Control.
(f) Withholding. Payments and benefits provided pursuant to this Section 4
or any other provision of this Agreement shall be subject to any applicable
payroll and other taxes required to be withheld.
5. Certain Additional Payments by the Company:
(a) Anything in this Agreement to the contrary notwithstanding, if it is
determined (as hereafter provided) that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise pursuant to or by reason of any other agreement, policy, plan, program
or arrangement, including without limitation any stock option, stock
appreciation right or similar right, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the foregoing (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Code (or any successor provision thereto) by reason of being "contingent on a
change in ownership or control" of the Company, within the meaning of Section
280G of the Code (or any successor provision thereto) or to any similar tax
imposed by state or local law, or any interest or penalties with respect to such
excise tax (such tax or taxes, together with any such interest and penalties,
are hereafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment or payments (a "Gross-Up
Payment") in an amount such that, after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) Subject to the provisions of Section 5(f) hereof, all determinations
required to be made under this Section 5, including whether an Excise Tax is
payable by the Executive and the amount of such Excise Tax and whether a
Gross-Up Payment
- ----------
(5) Three for Tier I; two for Tier II; and one for Tier III.
<PAGE>
9
is required and the amount of such Gross-Up Payment, shall be made by the
nationally recognized firm of certified public accountants (the "Accounting
Firm") used by the Company prior to the Change of Control (or, if such
Accounting Firm declines to serve, the Accounting Firm shall be a nationally
recognized firm of certified public accountants selected by the Executive). The
Accounting Firm shall be directed by the Company or the Executive to submit its
determination and detailed supporting calculations to both the Company and the
Executive within 15 calendar days after the Termination Date, if applicable, and
any other such time or times as may be requested by the Company or the
Executive. If the Accounting Firm determines that any Excise Tax is payable by
the Executive, the Company shall pay the required Gross-Up Payment to the
Executive within five business days after receipt of such determination and
calculations. If the Accounting Firm determines that no Excise Tax is payable by
the Executive, it shall, at the same time as it makes such determination,
furnish the Executive with an opinion that Executive has substantial authority
not to report any Excise Tax on Executive's federal, state, local income or
other tax return. Any determination by the Accounting Firm as to the amount of
the Gross-Up Payment shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code (or any
successor provision thereto) and the possibility of similar uncertainty
regarding applicable state or local tax law at the time of any determination by
the Accounting Firm hereunder, it is possible that Gross-Up Payments that will
not have been made by the Company should have been made (an "Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts or fails to pursue its remedies pursuant to Section
5(f) hereof and the Executive thereafter is required to make a payment of any
Excise Tax, the Executive shall direct the Accounting Firm to determine the
amount of the Underpayment that has occurred and to submit its determination and
detailed supporting calculations to both the Company and the Executive as
promptly as possible. Any such Underpayment shall be promptly paid by the
Company to, or for the benefit of, the Executive within five business days after
receipt of such determination and calculations.
(c) The Company and the Executive shall each provide the Accounting Firm
access to and copies of any books, records and documents in the possession of
the Company or the Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in connection
with the preparation and issuance of the determination contemplated by Section
5(b) hereof.
(d) The federal, state and local income or other tax returns filed by the
Executive and the Company (or any filing made by a consolidated tax group which
includes the Company) shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive shall make proper payment of the amount of any
Excise Tax, and at the request of the Company, provide to the Company true and
correct copies (with any amendments) of Executive's federal income tax return as
filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as
<PAGE>
10
filed with the applicable taxing authority, and such other documents reasonably
requested by the Company, evidencing such payment. If prior to the filing of the
Executive's federal income tax return, or corresponding state or local tax
return, if relevant, the Accounting Firm determines that the amount of the
Gross-Up Payment should be reduced, the Executive shall within five business
days pay to the Company the amount of such reduction.
(e) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by Sections
5(b) and (d) hereof shall be borne by the Company. If such fees and expenses are
initially advanced by the Executive, the Company shall reimburse the Executive
the full amount of such fees and expenses within five business days after
receipt from the Executive of a statement therefor and reasonable evidence of
Executive's payment thereof.
(f) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of a Gross-Up Payment. Such notification shall be given as promptly as
practicable but no later than 10 business days after the Executive actually
receives notice of such claim and the Executive shall further apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid (in each case, to the extent known by the Executive). The
Executive shall not pay such claim prior to the earlier of (a) the expiration of
the 30-calendar-day period following the date on which Executive gives such
notice to the Company and (b) the date that any payment of amount with respect
to such claim is due. If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) provide the Company with any written records or documents in
Executive's possession relating to such claim reasonably requested by the
Company;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including
without limitation accepting legal representation with respect to such
claim by an attorney competent in respect of the subject matter and
reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to
contest such claim; and
(iv) permit the Company to participate in any proceedings relating to
such claim;
<PAGE>
11
provided, however, that the Company shall bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of this
Section 5(f), the Company shall control all proceedings taken in connection with
the contest of any claim contemplated by this Section 5(f) and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim
(provided, however, that the Executive may participate therein at Executive's
own cost and expense) and may, at its option, either direct the Executive to pay
the tax claimed and sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay the tax claimed and sue for a
refund, the Company shall advance the amount of such payment to the Executive on
an interest-free basis and shall indemnify and hold the Executive harmless, on
an after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance; and
provided further, however, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which the contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of any such contested claim
shall be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to settle or contest, as
the case may be, any other issue raised by the Internal Revenue Service or any
other taxing authority.
(g) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 5(f) hereof, the Executive receives any refund with
respect to such claim, the Executive shall (subject to the Company's complying
with the requirements of Section 5(f) hereof) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
any taxes applicable thereto). If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 5(f) hereof, a determination
is made that the Executive is not entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial or refund prior to the expiration of 30 calendar days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid pursuant to this
Section 5.
6. Obligations Absolute; No Mitigation; No Effect On Other Rights.
<PAGE>
12
(a) The obligations of the Company to make the payment to the Executive,
and to make the arrangements, provided for herein are absolute and unconditional
and may not be reduced by any circumstances, including without limitation any
set-off, counterclaim, recoupment, defense or other right which the Company may
have against the Executive or any third party at any time.
(b) The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise
and no such payment shall be offset or reduced by the amount of any compensation
or benefits provided to the Executive in any subsequent employment.
(c) The provision of this Agreement, and any payment provided for herein,
shall not supersede or in any way limit the rights, benefits, duties or
obligations which the Executive may now or in the future have under any benefit,
incentive or other plan or arrangement of the Company or any other agreement
with the Company.
7. Not an Employment Agreement. Subject to the terms of this or any other
agreement or arrangement between the Company and the Executive that may then be
in effect, nothing herein shall prevent the Company from terminating the
Executive's employment.
8. Successors; Binding Agreement, Assignment.
(a) The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business of the Company, by agreement to expressly, absolutely and
unconditionally assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession had taken place. Failure of the Company to obtain such agreement
prior to the effectiveness of any such succession shall be a material breach of
this Agreement and shall entitle the Executive to terminate the Executive's
employment with the Company or such successor for Good Reason immediately prior
to or at any time after such succession. As used in this Agreement, "Company"
shall mean (i) the Company as hereinbefore defined, and (ii) any successor to
all or substantially all of the Company's business or assets which executes and
delivers an agreement provided for in this Section 8(a) or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law, including any parent or subsidiary of such a successor.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amount would be payable to the Executive hereunder if the
Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Executive's estate or designated
<PAGE>
13
beneficiary. Neither this Agreement nor any right arising hereunder may be
assigned or pledged by the Executive.
9. Notice. For purpose of this Agreement, notices and all other
communications provided for in this Agreement or contemplated hereby shall be in
writing and shall be deemed to have been duly given when personally delivered or
when mailed United States certified or registered mail, return receipt
requested, postage prepaid, and addressed, in the case of the Company, to the
Company at:
P.O. Box 990
Minneapolis, MN 55440
Attention: Corporate Secretary
and in the case of the Executive, to the Executive at the most current address
shown on the Executive's employment records. Either party may designate a
different address by giving notice of change of address in the manner provided
above, except that notices of change of address shall be effective only upon
receipt.
10. Expenses. In addition to all other amounts payable to the Executive
under this Agreement, the Company shall pay or reimburse the Executive for legal
fees (including without limitation, any and all court costs and attorneys' fees
and expenses), incurred by the Executive in connection with or as a result of
any claim, action or proceeding brought by the Company or the Executive with
respect to or arising out of this Agreement or any provision hereof; unless, (i)
in the case of an action brought by the Executive, it is determined by an
arbitrator or by a court of competent jurisdiction that such action was
frivolous and was not brought in good faith, or (ii) in the case of a claim
arising under section 11 hereof, the Company prevails on the merits of such
claim.
11. Nondisclosure of Confidential Information; Non-Competition.
(a) Executive shall not, without the prior written consent of the Company,
use, divulge, disclose or make accessible to any other person, firm,
partnership, corporation or other entity any Confidential Information pertaining
to the business of the Company or any of its affiliates, except (i) while
employed by the Company, in the business of and for the benefit of the Company,
or (ii) when required to do so by a court of competent jurisdiction, by any
governmental agency having supervisory authority over the business of the
Company, or by any administrative body or legislative body (including a
committee thereof) with jurisdiction to order Executive to divulge, disclose or
make accessible such information. For purposes of this Section 11(a),
"Confidential Information" shall mean non-public information concerning the
financial data, strategic business plans, product development (or other
proprietary product data), customer lists, marketing plans and other non-public,
proprietary and confidential information of the
<PAGE>
14
Company or its affiliates (the "Restricted Group") or customers, that, in any
case, is not otherwise available to the public (other than by Executive's breach
of the terms hereof).
(b) During the period of Executive's employment hereunder and for one (1)
year thereafter, Executive agrees that, without the prior written consent of the
Company, (A) Executive will not, directly or indirectly, either as principal,
manager, agent, consultant, officer, stockholder, partner, investor, lender or
employee or in any other capacity, carry on, be engaged in or have any financial
interest in, any business which is in competition with the business of the
Restricted Group and (B) Executive shall not, on Executive's own behalf or on
behalf of any person, firm or company, directly or indirectly, solicit or offer
employment to any person who has been employed by the Restricted Group at any
time during the 12 months immediately preceding such solicitation.
(c) For purposes of this Section 11, a business shall be deemed to be in
competition with the Restricted Group if it or any of its material affiliates is
in the business of selling food (fresh, packaged and/or frozen), retail or
wholesale, within the continental United States. Nothing in this Section 11
shall be construed so as to preclude Executive from investing in any publicly or
privately held company, provided Executive's beneficial ownership of any class
of such company's securities does not exceed 1% of the outstanding securities of
such class. Executive shall retain the right to seek the written approval of the
Company's [successor] Chief Executive Officer waiving the requirements of
Section 11(b) with respect to any particular activity in which Executive seeks
to engage.
(d) Executive and the Company agree that this covenant not to compete is a
reasonable covenant under the circumstances, and further agree that if in the
opinion of any court of competent jurisdiction such restraint is not reasonable
in any respect, such court shall have the right, power and authority to excise
or modify such provision or provisions of this covenant as to the court shall
appear not reasonable and to enforce the remainder of the covenant as so
amended. Executive agrees that any breach of the covenants contained in this
Section 11 would irreparably injure the Company. Accordingly, Executive agrees
that the Company may, in addition to pursuing any other remedies it may have in
law or in equity, cease making any payments otherwise required by this Agreement
and obtain an injunction against Executive from any court having jurisdiction
over the matter restraining any further violation of this Agreement by
Executive; provided, however, that the Company may not cease making any payments
required by this Agreement until a court or arbitrator(s) having jurisdiction
over the matter has made a final non-appealable determination on the merits of
such action in the Company's favor.
12. Miscellaneous. No provision of this Agreement may be amended, altered,
modified, waived or discharged unless such amendment, alteration, modification,
waiver or discharge is agreed to in writing signed by the Executive and
<PAGE>
15
such officer of the Company as shall be specifically designated by the Committee
or by the Board. No waiver by either party, at any time, of any breach by the
other party of, or of compliance by the other party with, any condition or
provision of this Agreement to be performed or complied with by such other party
shall be deemed a waiver of any similar or dissimilar provision or condition of
this Agreement or any other breach of or failure to comply with the same
condition or provision at the same time or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Delaware without giving effect to its conflict of laws rules. Any
action brought by the Executive or the Company shall be brought and maintained
in a court of competent jurisdiction in the State of Minnesota.
13. Severability. If any one or more of the provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions of this Agreement shall not be
affected thereby. To the extent permitted by applicable law, each party hereto
waives any provision of law which renders any provision of this Agreement
invalid, illegal or unenforceable in any respect.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which shall be
deemed to constitute one and the same instrument.
15. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof, and
supersedes all prior oral or written agreements, commitments or understanding
with respect to the matters provided for herein (except that any other
non-disclosure, non-competition or non-solicitation agreements or provisions the
parties hereto have entered into shall continue to be in effect), including the
Change of Control Severance Agreement, dated as of _________, 19__, between the
Company and the Executive.
16. Grantor Trust. Immediately prior to a Change of Control, the Company
shall contribute to a grantor trust an amount equal to 125% of the payments
Executive would receive from the Company, pursuant to Section 4 hereof, if
Executive were terminated without Cause by the Company or if Executive were to
terminate Executive's employment for Good Reason, in either case, immediately
following the Change of Control.
<PAGE>
16
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SUPERVALU INC.
---------------------------------
Witnesses:
- ---------------------------------- ---------------------------------
Name:
---------------------------
Title:
---------------------------
- ---------------------------------- ---------------------------------
Executive
<PAGE>
EXHIBIT 10.23
SUPPLEMENTAL RETIREMENT AGREEMENT
FOR WILLIAM J. BOLTON
In this Agreement:
"Agreement" means -- this Supplemental Retirement Agreement
"You" (or "Your") means -- William J. Bolton
"SUPERVALU" means -- SUPERVALU INC., a Delaware corporation
"We" (or "Our") means -- you and SUPERVALU together
"Committee" means -- the SUPERVALU Retirement Committee
"Retirement Plan" means -- the SUPERVALU STORES, INC. RETIREMENT PLAN
"Excess Plan" means -- the SUPERVALU STORES, INC. EXCESS BENEFITS PLAN
Terms defined in the Retirement Plan or Excess Plan and used in this Agreement
with initial capital letters shall have the meanings assigned to them in the
Retirement Plan or Excess Plan.
Recitals:
A. You are now employed by SUPERVALU in the capacity of Executive Vice
President and President, Retail Food Companies.
B. The Compensation Committee of the SUPERVALU Board of Directors has approved
a supplemental retirement agreement for You and has authorized officers of
SUPERVALU to implement its actions by entering into an agreement with You.
Agreement:
We agree as follows:
1. Benefit. The benefit payable by SUPERVALU to You under this Agreement
will be determined as follows:
1.1. SUPERVALU will calculate a benefit for You, using the Retirement Plan
formula, with the following exceptions: (i) You will be credited with two
years of Credited Service for each one Year of Credited Service You have
earned under the rules of the Retirement Plan; (ii) Your Final Average
Compensation will be determined without regard to the limitations of
section 401(a)(17) of the Internal Revenue Code (e.g., without regard to
the $160,000 limitation in 1998); and (iii) Your benefit will not be
limited by the limitation on annual benefits under section 415 of the
Internal Revenue
<PAGE>
Code (e.g., if payable in 1998, it would not be subject to the $130,000
limit on benefits in 1998). 1.2. The benefit described in Section 1.1 above
will be offset by Your Accrued Benefit under the Retirement Plan.
1.3. The benefit described in Section 1.1 above will be further offset by
Your benefit as determined under the Excess Plan benefit formula.
Your benefit under this Agreement shall be expressed as a Single Life Annuity,
using actuarial rules and factors in effect under the Retirement Plan at the
time the benefit is first payable.
2. Payment to You. SUPERVALU shall pay to You the benefits under this
Agreement at the same time and in the same form as any payments made to You
under the Excess Plan. Rules and elections under the Excess Plan regarding form
of benefit, time of benefit, default elections, payments to beneficiaries, and
such other matters as determined by SUPERVALU, shall control the payment of any
benefit under this Agreement.
3. Source of Payments. Benefits due under this Agreement shall be paid out
of the general funds of SUPERVALU, and You and Your beneficiaries shall not have
any preferred interest by way of trust, escrow, lien or otherwise in any
specific assets. The rights accruing to You and Your beneficiaries hereunder
shall be solely those of unsecured creditors of SUPERVALU.
4. Nontransferability. You and Your beneficiaries shall not have the right
to assign, encumber or otherwise anticipate the payments to be made under this
Agreement, and the benefits provided hereunder shall not be subject to seizure
for payment of any debts or judgments against You or any beneficiary.
5. Tax Withholding. SUPERVALU may deduct from any benefit payment (and
transmit to the proper taxing authority) such amount as it may be required to
withhold under any applicable federal, state or other law.
6. Claims Procedure. Payments under this Agreement will be made to You at
the same time and in the same form as any payments made to You under the Excess
Plan. Payments will be made to a beneficiary only after a proper written claim
for payment has been filed with the Retirement Committee. If You or any
beneficiary are in disagreement with any determination that has been made, a
claim may be presented.
6.1. Making a Claim. The claim must be written and must be delivered to the
Retirement Committee. Within 90 days after the claim is delivered, the
claimant will receive either: (a) a decision; or (b) a notice describing
special circumstances requiring a specified amount of additional time (but
no more than 180 days from the day the claim was delivered) to reach a
decision.
If the claim is wholly or partially denied, the claimant will receive a
written notice specifying: (a) the reasons for denial; (b) the provisions
of the Agreement on which the denial is based; and (c) any additional
information needed in connection with the claim and the reason such
information is needed. Information concerning the claimant's right to
request a review will also be given to the claimant.
<PAGE>
6.2. Requesting Review of a Denied Claim. A claimant may request that a
denied claim be reviewed. The request for review must be written and must
be delivered to the Retirement Committee within 60 days after claimant's
receipt of written notice that the claim was denied. A request for review
may (but is not required to) include issues and comments the claimant wants
considered in the review. The claimant may examine pertinent documents by
asking the Retirement Committee. Within 60 days after delivery of a request
for review, claimant will receive either: (a) a decision; or (b) a notice
describing special circumstances requiring a specified amount of additional
time (but no more than 120 days from the day the request for review was
delivered) to reach a decision. The decision will be in writing and will
specify the provisions of this Agreement on which it is based.
6.3. In General. All decisions on claims and on reviews of denied claims
will be made by the Retirement Committee, which shall have the sole
discretion to interpret and construe the Agreement and to determine all
factual and legal questions under the Agreement. The Retirement Committee
shall have the sole discretion to hold one or more hearings. If a claimant
does not receive a decision within the specified time, the claimant should
assume the claim was denied or re-denied on the date the specified time
expired. The claimant may, at the claimant's own expense, have an attorney
or other representative act on behalf of the claimant, but the Retirement
Committee has the right to require a written authorization. The Retirement
Committee also has the right to delegate the authority to make decisions.
If You are a Retirement Committee member, You will not take part in any
decision or action concerning Your benefit under this Agreement in such
capacity. Rather, such decision or action will be made by the other
Retirement Committee members.
7. Applicability to Successors. This Agreement shall be binding upon and
inure to the benefit of SUPERVALU and You, the successors and assigns of
SUPERVALU, and Your beneficiaries, personal representatives and heirs. If
SUPERVALU becomes a party to any merger, consolidation or reorganization, this
Agreement shall remain in full force and effect as an obligation of SUPERVALU or
its successors in interest.
8. Amendment. This Agreement may not be amended or revoked without Your
prior written consent.
9. Applicable Law. Except to the extent governed by federal law, this
Agreement shall be construed in accordance with the laws of the State of
Minnesota.
10. Headings. The headings of the paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any provisions of this Agreement.
11. Regulatory Compliance. The Retirement Committee shall monitor
regulatory compliance. This Agreement will be interpreted and administered
consistent with the intentions stated in this Section 11.
11.1. ERISA. For purposes of the Employee Retirement Income Security Act of
1974 ("ERISA"), this Agreement is intended to be part of an employee
pension benefit plan
<PAGE>
which is maintained primarily for purposes of providing deferred
compensation for a select group of management or highly compensated
employees. The Retirement Committee shall monitor compliance with
regulations and rulings of the Department of Labor (including 29 C.F.R.
ss.2510.104-23) to carry out that intention and shall file with the
Department of Labor the statement required by such regulations.
11.2. Tax Laws. For purposes of section 3121(v) of the Internal Revenue
Code and other tax and social security laws, this Agreement is intended to
be part of a "nonqualified deferred compensation plan."
12. Entire Agreement. This Agreement and each Election Form incorporate Our
entire agreement with respect to deferred compensation and other matters
addressed in this Agreement and supersede any other related written or oral
communications.
INTENDING TO BE LEGALLY BOUND, we have signed this Agreement.
Dated: March 26, 1999 SUPERVALU INC.
By: /s/ Robert Shebeck
------------------------------
Its Director of Compensation
------------------------------
/s/ William J. Bolton
------------------------------
William J. Bolton - Employee
<PAGE>
EXHIBIT 12.1
SUPERVALU INC. and Subsidiaries
Ratio of Earnings to Fixed Charges
For Fiscal Years Ended
<TABLE>
<CAPTION>
(In thousands, except ratios) 1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Earnings before income taxes $ 316,261 $ 384,780 $ 280,512 $ 267,692 $ 15,925
Less undistributed earnings of less than
fifty percent owned affiliates (5,943) (7,388) (15,813) (11,136) (10,902)
--------- --------- --------- --------- ---------
Earnings before income taxes 310,318 377,392 264,699 256,556 5,023
Interest expense 124,111 133,619 136,831 140,150 135,383
Interest on operating leases 18,574 18,010 16,950 17,059 18,204
--------- --------- --------- --------- ---------
$ 453,003 $ 529,021 $ 418,480 $ 413,765 $ 158,610
========= ========= ========= ========= =========
Total fixed charges 142,685 151,629 153,781 157,209 153,587
========= ========= ========= ========= =========
Ratio of earnings to fixed charges 3.17 3.49 2.72 2.63 1.03
========= ========= ========= ========= =========
</TABLE>
<PAGE>
EXHIBIT 21.1
SUPERVALU INC.
Subsidiaries
As of April 1, 1999
(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%
Bloomington 1998 L.L.C. Minnesota Limited Liability Company 40%
Burnsville 1998 L.L.C. Minnesota Limited Liability Company 77.5%
Diamond Lake 1994 L.L.C. Delaware Limited Liability Company 25%
Fridley 1998 L.L.C. Minnesota Limited Liability Company 74.5%
J. M. Jones Equipment Company Delaware 100%
Jackson Markets, Inc. Mississippi 100%
Keltsch Bros., Inc. Indiana 100%
Maplewood East 1996 L.L.C. Delaware Limited Liability Company 70%
Max Club, Inc. Minnesota 100%
Monticello 1998 L.L.C. Minnesota Limited Liability Company 90%
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%
Plymouth 1998 L.L.C. Minnesota Limited Liability Company 62.5%
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%
Risk Planners of Washington, Inc. Washington 100%
RSI-SUPERVALU, Inc. Minnesota 100%
RxPartners, Inc. Indiana 100%
Shakopee 1997 L.L.C. Delaware Limited Liability Company 25%
Silver Lake 1996 L.L.C. Delaware Limited Liability Company 51%
SUPERVALU Finance, Inc. Minnesota 100%
SUPERVALU Management Corp. Minnesota 100%
SUPERVALU Pharmacies, Inc. Minnesota 100%
SUPERVALU Receivables, Inc Delaware 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 Co., Inc. Massachusetts 100%
Hamlet Trading Corporation Massachusetts 100%
Sweet Life Products Co., Inc. New York 75%
Valu Ventures, Inc. Minnesota 100%
Valu Ventures 2, Inc. Minnesota 100%
SUPERVALU Terre Haute Limited Partnership Indiana Limited Partnership 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%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF VOTING
JURISDICTION SECURITIES OWNED BY
OF ORGANIZATION IMMEDIATE PARENT
--------------- --------------------
<S> <C> <C>
Clyde Evans Markets, Inc. Ohio 100%
Clyde Evans, Inc. Ohio 100%
Scott's Food Stores, Inc. Indiana 100%
SV Ventures* Indiana General Partnership 50%
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. lllinois 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.
-2-
<PAGE>
Exhibit 23.1
The Board of Directors
SUPERVALU INC.:
We consent to incorporation by reference in the registration statements No.
33-28310, No. 33-16934, No. 2-56896, No. 33-50071, No. 333-10151, No. 333-24813,
No. 333-72851, and No. 333-61365 on Form S-8 and No. 33-56415 on Form S-3 of
SUPERVALU INC. of our reports dated April 5, 1999, relating to the consolidated
balance sheet of SUPERVALU INC. and subsidiaries as of February 27, 1999, and
the related consolidated statement of earnings, stockholders' equity, and cash
flows for the fiscal year then ended, and the related schedules, which reports
appear in the 1999 annual report on Form 10-K of SUPERVALU INC.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
April 14, 1999
<PAGE>
EXHIBIT 23.2
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, No. 333-24813,
No. 333-72851 and No. 333-61365 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 27,
1999.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
April 14, 1999
<PAGE>
EXHIBIT 24.1
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 27, 1999 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 7th day of April, 1999.
/s/ Herman Cain /s/ Charles M. Lillis
- ------------------------------------- -------------------------------------
Herman Cain Charles M. Lillis
/s/ Lawrence A. Del Santo /s/ Harriet Perlmutter
- ------------------------------------- -------------------------------------
Lawrence A. Del Santo Harriet Perlmutter
/s/ Edwin C. Gage /s/ Steven S. Rogers
- ------------------------------------- -------------------------------------
Edwin C. Gage Steven S. Rogers
/s/ William A. Hodder /s/ Carole F. St. Mark
- ------------------------------------- -------------------------------------
William A. Hodder Carole F. St. Mark
/s/ Garnett L. Keith /s/ Michael W. Wright
- ------------------------------------- -------------------------------------
Garnett L. Keith Michael W. Wright
/s/ Richard L. Knowlton /s/ Pamela K. Knous
- ------------------------------------- -------------------------------------
Richard L. Knowlton 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 27, 1999 AND THE CONSOLIDATED
STATEMENT OF EARNINGS FOR THE 52 WEEKS ENDED FEBRUARY 27, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-27-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> FEB-27-1999
<CASH> 7,608
<SECURITIES> 0
<RECEIVABLES> 429,782
<ALLOWANCES> (18,983)
<INVENTORY> 1,067,837
<CURRENT-ASSETS> 1,582,527
<PP&E> 2,920,412
<DEPRECIATION> (1,221,388)
<TOTAL-ASSETS> 4,265,949
<CURRENT-LIABILITIES> 1,521,907
<BONDS> 1,246,269
0
5,908
<COMMON> 150,670
<OTHER-SE> 1,149,061
<TOTAL-LIABILITY-AND-EQUITY> 4,265,949
<SALES> 17,420,507
<TOTAL-REVENUES> 17,420,507
<CGS> 15,620,127
<TOTAL-COSTS> 15,620,127
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,150
<INTEREST-EXPENSE> 124,111
<INCOME-PRETAX> 316,261
<INCOME-TAX> 124,923
<INCOME-CONTINUING> 191,338
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 191,338
<EPS-PRIMARY> 1.59
<EPS-DILUTED> 1.57
</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 27, 1999 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.
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; the potential disruption from labor disputes; 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.
Wholesale Business Risks
The Company's sales and earnings in its food distribution operations are
dependent on the Company's ability to retain existing customers and attract new
customers; the success of its customers in competing with other retail chains,
supercenters, and non-traditional competitors; and its ability to control costs.
While the Company believes that its efforts 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;
increase in credit risk associated with open accounts and financing activities
with independent retailers; the potential disruption from labor disputes; 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; and possible loss of retailer
customers who are not compatible with such changes.
1
<PAGE>
Risks of Expansion and Acquisitions
The Company intends to continue to grow its retail and wholesale businesses in
part through acquisitions. Expansion is subject to a number of risks, including
the adequacy of the Company's capital resources; the location of suitable store
or distribution center sites and the negotiation of acceptable lease terms;
ability to hire, train and integrate employees; and possible costs and other
risks of integrating or adapting operational systems. In addition, acquisitions
involve a number of special risks, including: making acquisitions at acceptable
rates of return; the diversion of management's attention to assimilation of the
operations and personnel of the acquired business; potential adverse short-term
effects on the Company's operating results; and amortization of acquired
intangible assets.
Year 2000 Risks
While the Company believes it will be able to resolve the year 2000 issues in a
timely manner, if it is unable to complete the required changes to existing
critical systems, or if those with whom the Company conducts business are
unsuccessful in implementing timely solutions, the year 2000 issues could have a
material adverse effect upon the Company's results of operations. There can be
no guarantee that the third parties of business importance to the Company will
successfully and timely reprogram or replace and test all of their own computer
hardware, software and process control systems. While the failure of a single
third party to achieve year 2000 compliance should not have a material adverse
effect on the Company's results of operations, the failure of several key third
parties could have such an effect. The costs of the project and the completion
dates are based on management's best estimates, which were derived from
assumptions of future events including the availability of resources, third
party modification plans and other factors. There can be no guarantee that these
estimates will be achieved and actual results could vary due to uncertainties.
In addition, timing of certain of the Company's retail and wholesale initiatives
could be impacted by the information technology related expenses associated with
addressing year 2000 issues.
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.
2
<PAGE>
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.
3
