<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period (12 weeks) ended September 9, 2000.
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ............. to ..................
Commission file number 1-5418
SUPERVALU INC.
(Exact name of registrant as specified in its Charter)
DELAWARE 41-0617000
(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
11840 VALLEY VIEW ROAD,
EDEN PRAIRIE, MINNESOTA 55344
(Address of principal executive offices) (Zip Code)
(952) 828-4000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
N/A
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The number of shares outstanding of each of the issuer's classes of Common Stock
as of October 9, 2000 is as follows:
Title of Each Class Shares Outstanding
------------------- ------------------
Common Shares 132,320,986
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
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Item 1: Financial Statements
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CONSOLIDATED STATEMENTS OF EARNINGS
-------------------------------------------------------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
-------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
Second quarter (12 weeks) ended
Sept 9, 2000 % of sales Sept 11, 1999 % of sales
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 5,333,823 100.00% $ 4,145,775 100.00%
Costs and expenses:
Cost of sales 4,740,086 88.87 3,697,589 89.19
Selling and administrative expenses 442,102 8.29 344,120 8.30
Amortization of goodwill 11,383 0.21 6,024 0.15
Interest
Interest expense 49,869 0.93 27,439 0.66
Interest income 5,430 0.10 4,574 0.11
--------------------------------------------------------------------------------
Interest expense, net 44,439 0.83 22,865 0.55
--------------------------------------------------------------------------------
Total costs and expenses 5,238,010 98.20 4,070,598 98.19
--------------------------------------------------------------------------------
Earnings before income taxes 95,813 1.80 75,177 1.81
Provision for income taxes
Current 50,462 30,942
Deferred (11,945) (1,247)
-----------------------------------------------------------------------------
Income tax expense 38,517 0.72 29,695 0.71
--------------------------------------------------------------------------------
Net earnings $ 57,296 1.07% $ 45,482 1.10%
================================================================================
Net earnings per common share- diluted $ .43 $ .37
Net earnings per common share- basic $ .43 $ .37
Weighted average number of common
shares outstanding
Diluted 133,096 123,682
Basic 132,321 122,483
Dividends declared per common share $ .1375 $ .1350
All data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
2
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
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-------------------------------------------------------------------------------------------------------------------------------
Item 1: Financial Statements
-------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
-------------------------------------------------------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
-------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
Year-to-date (28 weeks) ended
----------------------------------------------------------------------
Sept 9, 2000 % of sales Sept 11, 1999 % of sales
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 12,287,216 100.00% $ 9,435,495 100.00%
Costs and expenses:
Cost of sales 10,945,207 89.08 8,444,486 89.50
Selling and administrative expenses 1,000,696 8.14 757,718 8.03
Amortization of goodwill 26,448 0.22 12,850 0.14
Gain on sale - - 163,662 1.73
Restructuring and other charges - - 103,596 1.09
Interest
Interest expense 113,505 0.92 63,009 0.67
Interest income 11,451 0.09 9,899 0.11
--------------------------------------------------------------------
Interest expense, net 102,054 0.83 53,110 0.56
--------------------------------------------------------------------
Total costs and expenses 12,074,405 98.27 9,208,098 97.59
--------------------------------------------------------------------
Earnings before income taxes 212,811 1.73 227,397 2.41
Provision for income taxes
Current 104,815 165,314
Deferred (19,265) (50,120)
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Income tax expense 85,550 0.70 115,194 1.22
--------------------------------------------------------------------
Net earnings $ 127,261 1.04% $ 112,203 1.19%
====================================================================
Net earnings per common share- diluted $ .96 $ .92
Net earnings per common share- basic $ .96 $ .93
Weighted average number of common
shares outstanding
Diluted 133,068 122,017
Basic 132,130 120,853
Dividends declared per common share $ .2725 $ .2675
All data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
3
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF NET SALES AND EARNINGS
-----------------------------------------------------------------------------------------------------------------------------
SUPERVALU INC and Subsidiaries
-----------------------------------------------------------------------------------------------------------------------------
(In thousands)
Second Quarter (12 weeks) ended Year-to-date (28 weeks) ended
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales Sept. 9, 2000 Sept. 11, 1999 Sept. 9, 2000 Sept. 11, 1999
-----------------------------------------------------------------------------------------------------------------------------
Retail food $ 2,141,789 $ 1,705,751 $ 4,840,297 $ 3,705,340
40.2% 41.1% 39.4% 39.3%
Food distribution 3,192,034 2,440,024 7,446,919 5,730,155
59.8% 58.9% 60.6% 60.7%
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Total net sales $ 5,333,823 $ 4,145,775 $ 12,287,216 $ 9,435,495
100.0% 100.0% 100.0% 100.0%
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Earnings
-----------------------------------------------------------------------------------------------------------------------------
Retail food $ 86,350 $ 65,132 $ 195,747 $ 144,278
Food distribution 62,575 41,188 137,484 94,201
Gain on sale - - - 163,662
Restructuring and other charges (1) - - - (103,596)
---------------------------------------------------------------------------------------
Total operating earnings 148,925 106,320 333,231 298,545
Interest income 5,430 4,574 11,451 9,899
Interest expense (49,869) (27,439) (113,505) (63,009)
General corporate expenses (8,673) (8,278) (18,366) (18,038)
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Earnings before income taxes 95,813 75,177 212,811 227,397
Provision for income taxes (38,517) (29,695) (85,550) (115,194)
---------------------------------------------------------------------------------------
Net earnings $ 57,296 $ 45,482 $ 127,261 $ 112,203
=============================================================================================================================
All data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
(1) In the first quarter of fiscal 2000, the company incurred restructuring and
other charges for retail food and food distribution of $19.4 million and
$84.2 million, respectively.
4
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<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
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SUPERVALU INC. and Subsidiaries Second Quarter as of Fiscal Year End
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(In thousands) September 9, February 26,
Assets 2000 2000
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<S> <C> <C>
Current Assets
Cash and cash equivalents $ 14,460 $ 10,920
Receivables, less allowance for losses of $30,349 at
September 9, 2000 and $30,399 at February 26, 2000 597,537 562,448
Inventories 1,382,702 1,490,454
Other current assets 98,805 113,817
------------------------------------------------
Total current assets 2,093,504 2,177,639
Long-term notes receivable 180,834 179,224
Property, plant and equipment, net 2,258,249 2,168,210
Goodwill 1,616,160 1,608,580
Other assets 383,979 361,700
------------------------------------------------
Total assets $6,532,726 $6,495,353
================================================
Liabilities and Stockholders' Equity
-----------------------------------------------------------------------------------------------------------------------
Current Liabilities
Notes payable $ 620,242 $ 576,513
Accounts payable 1,409,393 1,430,312
Current debt and obligations under capital leases 106,540 200,282
Other current liabilities 312,894 302,513
------------------------------------------------
Total current liabilities 2,449,069 2,509,620
Long-term debt and obligations under capital leases 1,992,880 1,953,741
Other liabilities and deferred income taxes 216,278 210,513
Total stockholders' equity 1,874,499 1,821,479
------------------------------------------------
Total liabilities and stockholders' equity $6,532,726 $6,495,353
================================================
All data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
5
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
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SUPERVALU INC. and Subsidiaries
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(In thousands, except per share data)
Capital in
Preferred Common Excess of Treasury Retained
Stock Stock Par Value Stock Earnings Total
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at February 27, 1999 $ 5,908 $150,670 $ - $(524,321) $1,673,382 $1,305,639
Net earnings - - - - 242,941 242,941
Sales of common stock
under option plans - - (5,181) 10,738 - 5,557
Cash dividends declared
on common stock-
$.5375 per share - - - - (68,952) (68,952)
Compensation under employee
incentive plans - - (1,802) 9,408 - 7,606
Treasury shares exchanged for
acquisitions - - 139,209 318,293 - 457,502
Redemption of Preferred Stock (5,908) - - - - (5,908)
Purchase of shares for treasury - - - (122,906) - (122,906)
-----------------------------------------------------------------------------------------------------------------------------
Balances at February 26, 2000 - 150,670 132,226 (308,788) 1,847,371 1,821,479
Net earnings - - - - 127,261 127,261
Sales of common stock
under option plans - - (3,164) 6,501 - 3,337
Cash dividends declared
on common stock-
$.2725 per share - - - - (36,716) (36,716)
Compensation under employee
incentive plan - - 19 7,723 - 7,742
Purchase of shares for treasury - - - (48,604) - (48,604)
-----------------------------------------------------------------------------------------------------------------------------
Balances at September 9, 2000 $ - $150,670 $ 129,081 $(343,168) $1,937,916 $1,874,499
=============================================================================================================================
All data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
6
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<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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SUPERVALU INC. and Subsidiaries
----------------------------------------------------------------------------------------------------------------------
(In thousands)
----------------------------------------------------------------------------------------------------------------------
Year-to-date
(28 weeks ended)
----------------------------------------------------------------------------------------------------------------------
September 9, September 11,
2000 1999
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net cash provided by operating activities $ 380,653 $ 222,387
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Cash flows from investing activities
Additions to long-term notes receivable (31,052) (24,635)
Proceeds received on long-term notes receivable 18,200 22,942
Proceeds from sale of assets 20,510 359,206
Purchase of property, plant and equipment (187,346) (179,401)
Business acquisitions, net of cash acquired - (469,185)
Other cash provided by (used in) investing activities (72,148) 36,696
----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (251,836) (254,377)
----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net increase in checks outstanding, net of deposits 24,744 6,068
Net issuance of short-term notes payable 43,729 351,412
Proceeds from issuance of long-term debt - 346,300
Repayment of long-term debt (95,499) (603,987)
Dividends paid (36,119) (31,861)
Payment for purchase of treasury stock (48,604) (15,883)
Other cash used in financing activities (13,528) (16,410)
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Net cash provided by (used in) financing activities (125,277) 35,639
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Net increase in cash 3,540 3,649
Cash at beginning of year 10,920 7,608
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Cash at end of second quarter $ 14,460 $ 11,257
======================================================================================================================
Supplemental Information:
Pretax LIFO expense $ 1,292 $ 1,337
Pretax depreciation and amortization $ 175,312 $ 130,378
All data subject to year-end audit. See notes to consolidated financial statements.
</TABLE>
7
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting Policies
-------------------
The summary of significant accounting policies is included in the notes to
consolidated financial statements set forth in the Annual Report on Form 10-K of
SUPERVALU INC. ("SUPERVALU" or the "company") for its fiscal year ended February
26, 2000 ("fiscal 2000").
Statement of Registrant
-----------------------
The data presented herein is unaudited but, in the opinion of management,
includes all adjustments necessary for a fair presentation of the condensed
consolidated financial position of the company and its subsidiaries at September
9, 2000 and September 11, 1999, and the results of the company's operations and
condensed cash flows for the periods then ended. These interim results are not
necessarily indicative of the results of the fiscal years as a whole.
Richfood Acquisition
--------------------
On August 31, 1999, the company acquired, in a merger, all of the outstanding
common stock of Richfood Holdings, Inc. ("Richfood"), a major food retailer and
distributor operating primarily in the Mid-Atlantic region of the United States.
The acquisition was accounted for as a purchase. The company issued
approximately 19.7 million shares of SUPERVALU common stock with a market value
of approximately $443 million, paid $443 million in cash for the common stock of
Richfood and assumed approximately $685 million of debt in conjunction with the
acquisition. In addition, the company repaid approximately $394 million of
outstanding Richfood debt, leaving approximately $291 million outstanding
immediately after the acquisition. The allocation of the consideration paid for
Richfood to the consolidated assets and liabilities is based on estimates of
their respective fair values. The excess of the purchase price over the fair
value of net assets acquired of approximately $1.1 billion is being amortized on
a straight-line basis over 40 years.
Unaudited pro forma consolidated results of continuing operations, as though the
companies had been combined at the beginning of the periods presented, are as
follows:
<TABLE>
<CAPTION>
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Year-to-date (28 weeks) ended
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(In thousands, except per share data) Sept. 9, 2000 Sept. 11, 1999
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 12,287,216 $ 11,405,477
Net earnings $ 127,261 $ 130,668 (a)
Net earnings per common share - diluted $ .96 $ .93 (a)
==============================================================================================================================
</TABLE>
(a) Amounts include a net gain of $10.9 million or $.08 per share-diluted from
the gain on the sale of Hazelwood Farms Bakeries and from restructuring and
other charges.
Restructuring and Other Charges
-------------------------------
In the first quarter of fiscal 2000, the company recorded one-time pre-tax
restructuring and other charges of $103.6 million as a result of an extensive
review to reduce costs and enhance efficiency. Included in this total is $9.6
million for asset impairment costs. The restructuring charges include costs for
facility consolidation, non-core store disposal, and rationalization of
redundant and certain decentralized administrative functions.
The facility consolidation and non-core store disposal charges represent costs
to exit certain distribution centers and stores. Included in the charges are
costs such as markdown of assets from net book value to estimated selling price,
subsidized lease costs for leased properties at current estimated market rates,
and severance and related benefits to be paid to terminated employees. The
rationalization of redundant and certain decentralized administrative functions
represents severance and related benefits such as outplacement, counseling and
medical coverage to be paid to terminated employees.
During the second quarter of fiscal 2000, the company acquired Richfood and
signed a $2.3 billion annual supply agreement with Kmart Corporation ("Kmart").
Due to these significant changes in the business, the company reevaluated the
restructure activities in the fourth quarter of fiscal 2000 as well as the
timeline to complete. This resulted in an increase to the facility
consolidation charge of $8.0 million and a decrease in the non-core store
disposal charge of $1.9 million. The infrastructure
8
<PAGE>
realignment charge decreased $6.1 million due to a number of voluntary
terminations and higher than expected attrition. The company expects to complete
these activities by the end of fiscal 2001. Details of the restructuring
activity follow.
<TABLE>
<CAPTION>
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Balance, Fiscal 2001 Balance,
(Dollars in thousands) Feb. 26, 2000 Activity Sept. 9, 2000
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Facility consolidation $ 44,550 $ 7,555 $ 36,995
Non-core store disposal 29,326 16,426 12,900
Infrastructure realignment 6,791 2,225 4,566
-------------------------------------------------------------------------------------------------------------------
Total restructure and other charges $ 80,667 $ 26,206 $ 54,461
-------------------------------------------------------------------------------------------------------------------
Employees 1,513 402 1,111
-------------------------------------------------------------------------------------------------------------------
</TABLE>
Item 2: Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
RESULTS FOR THE QUARTER:
For the second quarter of fiscal 2001, the company achieved sales of $5.3
billion, net earnings of $57.3 million and diluted earnings per share of $.43.
Last year, sales were $4.1 billion, net earnings were $45.5 million and diluted
earnings per share were $.37.
Net sales
Net sales increased 28.7 percent compared to last year reflecting the
acquisition of Richfood, incremental volume from other new customers and new
corporate stores. Retail food and food distribution sales increased 25.6
percent and 30.8 percent, respectively.
Retail food sales increased over last year primarily due to the Richfood
acquisition and 132 new store openings including 103 new limited assortment
stores over the past twelve months. Same-store sales were negative 3.3 percent
due to the effect of cannibalization and competitive activities in certain
markets. Food distribution sales increased from last year primarily due to the
Richfood acquisition and incremental volume from other new customers,
principally the $2.3 billion annual supply agreement with Kmart.
Gross profit
Gross profit as a percentage of net sales was 11.1 percent compared to 10.8
percent last year. The increase was primarily due to the Richfood acquisition,
which increased the proportion of the higher margin retail food business of the
company.
Selling and administrative expenses
Selling and administrative expenses as a percentage of sales remained flat at
8.5 percent compared to last year.
Operating earnings
The company's pretax operating earnings (earnings before interest and taxes)
increased to $140.3 million compared with $98.0 million last year, a 43.2
percent increase. Operating earnings before depreciation and amortization
increased to $219.2 million compared with $155.8 million last year, a 40.7
percent increase. Retail food operating earnings increased 32.6 percent to
$86.4 million, or 4.0 percent of sales, from last year's $65.1 million, or 3.8
percent of sales, primarily reflecting sales growth from the Richfood
acquisition and the opening of 132 new stores. Retail food operating earnings
before depreciation and amortization increased 31.2 percent to $125.7 million,
or 5.9 percent of sales, from last year's $95.8 million, or 5.6 percent of
sales. Food distribution operating earnings increased 51.9 percent to $62.6
million, or 2.0 percent of sales, from last year's $41.2 million, or 1.7 percent
of sales, due primarily to the Richfood acquisition and incremental volume from
other new customers, principally Kmart. Food distribution operating earnings
before depreciation and amortization increased 50.3 percent to $101.5 million,
or 3.2 percent of sales, from last year's $67.5 million, or 2.8 percent of
sales.
9
<PAGE>
Interest expense
Interest expense increased to $49.9 million compared with $27.4 million last
year, primarily reflecting higher average borrowings due to the Richfood
acquisition and higher interest rates compared to last year.
Income taxes
The effective tax rate was 40.2 percent in the second quarter, compared with
39.5 percent in the second quarter of last year as a result of a full quarter of
non-deductible goodwill expense occurring in the current year associated with
the Richfood acquisition.
Net earnings
Net earnings increased 26.0 percent to $57.3 million or $.43 per share - diluted
compared with last year's net earnings of $45.5 million or $.37 per share -
diluted. Weighted average shares - diluted increased to 133.1 million compared
with last year's 123.7 million. The increase in shares outstanding was due to
the 19.7 million shares issued in connection with the Richfood acquisition,
partially offset by the company's repurchase of 7.9 million shares.
YEAR TO DATE RESULTS:
Net sales
Net sales increased 30.2 percent to $12.3 billion compared with $9.4 billion
last year, reflecting the acquisition of Richfood, incremental volume from other
new customers and new corporate stores. Retail food and food distribution sales
increased 30.6 percent and 30.0 percent, respectively.
Retail food sales increased over last year primarily due to the Richfood
acquisition and 132 new store openings including 103 new limited assortment
stores over the past twelve months. Same-store sales were negative 2.4 percent
due to the effect of cannibalization and competitive activities in certain
markets. Food distribution sales increased from last year primarily due to the
Richfood acquisition and incremental volume from other new customers,
principally the $2.3 billion annual supply agreement with Kmart.
Gross profit
Gross profit as a percentage of net sales was 10.9 percent compared to 10.5
percent last year. The increase was primarily due to the Richfood acquisition,
which increased the proportion of the higher margin retail food business of the
company.
Selling and administrative expenses
Selling and administrative expenses were 8.4 percent of net sales compared to
8.2 percent last year. The higher percentage was primarily due to the Richfood
acquisition, which increased the proportion of the company's retail food
business, which operates at a higher selling and adminstrative expense
percentage.
Sale of Business
On May 22, 1999 the company sold Hazelwood Farms Bakeries, which resulted in a
pre-tax gain of $163.7 million. The company had identified Hazelwood Farms
Bakeries as a non-strategic asset to be liquidated. The transaction resulted in
$248.2 million of after-tax cash proceeds, which were utilized in funding the
cash portion of the Richfood acquisition in the second quarter of fiscal 2000.
Restructuring and other charges
In the first quarter of fiscal 2000, the company recorded one-time pre-tax
restructuring and other charges of $103.6 million as a result of an extensive
review to reduce costs and enhance efficiency. Included in this total is $9.6
million for asset impairment costs. The restructuring charges include costs for
facility consolidation, non-core store disposal, and rationalization of
redundant and certain decentralized administrative functions.
During the second quarter of fiscal 2000, the company acquired Richfood and
signed the $2.3 billion annual supply agreement with Kmart. Due to these
significant changes in the business, the company reevaluated the restructure
activities in the fourth quarter as well as the timeline to complete. This
resulted in an increase to the facility consolidation charge of $8.0 million and
a decrease in the non-core store disposal charge of $1.9 million. The
infrastructure realignment charge decreased $6.1 million due to a number of
voluntary terminations and higher than expected attrition. The company expects
to complete these activities by the end of fiscal 2001.
10
<PAGE>
Operating earnings
The company's pretax operating earnings (earnings before interest and taxes)
increased to $314.9 million compared with $220.4 million last year, excluding
the gain on the sale of Hazelwood Farms Bakeries and restructuring and other
charges. Including the one-time items, last year's operating earnings were
$280.5 million. Operating earnings before depreciation and amortization
increased to $490.2 million compared with $350.8 million last year, excluding
one-time items, a 39.7 percent increase. Retail food operating earnings
increased 35.7 percent to $195.7 million, or 4.0 percent of sales, from last
year's $144.3 million, or 3.9 percent of sales, primarily reflecting sales
growth from the Richfood acquisition and the opening of 132 new stores. Retail
food operating earnings before depreciation and amortization increased 34.7
percent to $283.4 million, or 5.9 percent of sales, from last year's $210.4
million, or 5.7 percent of sales. Food distribution operating earnings increased
45.9 percent to $137.5 million, or 1.8 percent of sales, from $94.2 million, or
1.6 percent of sales due primarily to the Richfood acquisition and incremental
volume from other new customers, principally Kmart. Food distribution operating
earnings before depreciation and amortization increased 42.7 percent to $223.5
million, or 3.0 percent of sales, from last year's $156.6 million, or 2.7
percent of sales.
Interest expense
Interest expense increased to $113.5 million compared with $63.0 million last
year, primarily reflecting higher average borrowings due to the Richfood
acquisition and higher interest rates compared to last year.
Income taxes
The effective tax rate was 40.2 percent compared to 50.7 percent last year. The
higher effective tax rate in the prior year was due to the gain on the sale of
Hazelwood Farms Bakeries. Excluding the impact of this gain, the effective tax
rate in fiscal 2000 was approximately 39.5 percent.
Net earnings
Excluding the gain on the sale of Hazelwood Farms Bakeries and restructuring and
other charges, net earnings increased 25.7 percent to $127.3 million or $.96 per
share - diluted compared with last year's net earnings of $101.3 million or $.83
per share - diluted. Including one-time items, last year's net earnings were
$112.2 million or $.92 per share - diluted. Weighted average shares - diluted
increased to 133.1 million compared with last year's 122.0 million. The
increase in shares outstanding is due to the 19.7 million shares issued in
connection with the Richfood acquisition, partially offset by the company's
repurchase of 7.9 million shares.
Liquidity and Capital Resources
-------------------------------
Internally generated funds from operations continued to be the major source of
liquidity and capital growth. Cash provided from operations was $380.7 million
year-to-date compared with $222.4 million last year, a 71.2 percent increase.
The increase is primarily due to a reduction in net working capital of $96.4
million and an increase in depreciation and amortization of $44.9 million. Net
cash used in investing activities was $251.8 million, compared with $254.4
million last year. Last year's results reflect cash used for business
acquisitions of $469.2 million and pretax proceeds received on the sale of
assets of $359.2 million, which includes the proceeds received from the sale of
Hazelwood Farms Bakeries. Net cash used in financing activities was $125.3
million, compared with $35.6 million generated last year. Last year's financing
activities included the issuance of $350 million of 7 7/8 percent notes due 2009
and proceeds from the issuance of commercial paper, primarily used to fund the
cash portion of the Richfood acquisition and to repay long-term debt.
During the first quarter of fiscal 2001, the company completed the $140 million
stock repurchase program, authorized in December 1999, by purchasing 2.0 million
shares at a cost of $35.2 million.
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 its capital
expenditures plan and acquisitions as the opportunities arise. SUPERVALU will
continue to use short-term and long-term debt as a supplement to internally
generated funds to finance its activities. 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 entered into revolving credit agreements with various financial
institutions, which are available for general corporate purposes and to support
the company's commercial paper program as well as the issuance of letters of
credit. A $400 million revolving credit agreement, with rates tied to LIBOR plus
.180 to .275 percent, is in place and expires in October 2002. As of September
9, 2000, letters of credit outstanding under this agreement totaled $21.7
million, compared to $40.5 million outstanding as of September 11, 1999. In
August 1999, the company executed a 364-day $300 million revolving credit
agreement with rates tied to LIBOR plus .310 to .535 percent. This agreement was
amended and restated in August 2000 to change the maturity date to August 2001.
From time to time the company enters into short-term revolving credit agreements
having tenors of three to nine months. As of October 20, 2000, the company had
established $140 million in credit facilities under such agreements with rates
tied to LIBOR plus .310 to .535 percent.
11
<PAGE>
There have been no drawings under the company's revolving credit agreements
during fiscal 2001. Total commercial paper outstanding as of the end of the
second quarter was $608.0 million. On August 8, 2000, the company filed an $850
million "shelf registration". To date, there have been no securities issued
under this "shelf registration".
Cautionary statements for Purposes of the Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995
The information in this Quarterly Report includes forward-looking statements.
Important risks and uncertainties that could cause actual results to differ
materially from those discussed in such forward looking statements, such as the
impact of changing economic or business conditions, the impact of competition,
the nature and extent of the consolidation of the retail food and food
distribution industries, the ability to attract and retain customers for the
company's businesses, the ability to control food distribution costs, the
ability of SUPERVALU to grow through acquisition and assimilate acquired
entities, the availability of favorable credit and trade terms, food price
changes, other risk factors inherent in the food wholesaling and retail
businesses and other factors, are detailed in Exhibit 99(i) to this report. Any
forward-looking statement speaks only as of the date on which such statement is
made, and SUPERVALU undertakes no obligation to update such statement to reflect
events or circumstances arising after such date. Other risks or uncertainties
may be detailed from time to time in the company's future Securities and
Exchange Commission filings.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
There were no material changes in market risk for the company in the period
covered by this report.
12
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
------- -----------------
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business of the Registrant.
Item 2. Changes in Securities and Use of Proceeds
------- -----------------------------------------
None
Item 3. Defaults Upon Senior Securities
------- -------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders.
------- ----------------------------------------------------
The Registrant held its Annual Meeting of Stockholders on June 29,
2000 at which the stockholders took the following actions:
(a) elected Lawrence A. Del Santo, Susan E. Engel, William A. Hodder
and Harriet Perlmutter to the Board of Directors for terms
expiring in 2003. The votes cast for and withheld with respect to
each such Director were as follows:
Votes For Votes Withheld
----------- --------------
Lawrence A. Del Santo 105,986,275 10,880,236
Susan E. Engel 114,795,262 2,071,249
William A. Hodder 114,783,400 2,083,111
Harriet Perlmutter 114,682,584 2,183,927
The Directors whose terms continued after the meeting are as
follows: Edwin C. Gage, Garnett L. Keith, Jr., Richard L.
Knowlton, Charles M. Lillis, Steven S. Rogers, Carole F. St. Mark
and Michael W. Wright .
(b) ratified by a vote of 115,261,168 for, 1,140,157 against, and
465,186 abstaining, the appointment of KPMG LLP as the
independent auditors of Registrant for the fiscal year ending
February 24, 2001.
Item 5. Other Information
------- -----------------
None
Item 6. Exhibits and Reports on Form 8-K.
------- ---------------------------------
(a) Exhibits filed with this Form 10-Q:
(11) Computation of Earnings Per Common Share.
(27) Financial Data Schedule.
(99)(i) Cautionary Statements pursuant to the Securities Litigation
Reform Act.
(b) Reports on Form 8-K:
None.
SIGNATURES
----------
13
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUPERVALU INC. (Registrant)
Dated: October 24, 2000 By: /s/ Pamela K. Knous
-----------------------------
Pamela K. Knous
Executive Vice President,
Chief Financial Officer
(Authorized officer of Registrant)
14
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
(11) Computation of Earnings Per Common Share
(27) Financial Data Schedule
(99)(i) Cautionary Statements pursuant to the Securities Litigation
Reform Act
15
