<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 December 2, 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
incorporation or organization) Identification No.)
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 January 11, 2001 was as follows:
Title of Each Class Shares Outstanding
------------------- ------------------
Common Shares 132,376,174
<PAGE>
PART I - FINANCIAL INFORMATION
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Item 1: Financial Statements
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
--------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
--------------------------------------------------------------------------------
(In thousands, except per share data)
<TABLE>
<CAPTION>
Third quarter (12 weeks) ended
Dec. 2, 2000 % of sales Dec. 4, 1999 % of sales
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 5,420,238 100.00% $ 5,361,732 100.00%
Costs and expenses:
Cost of sales 4,835,700 89.22 4,780,026 89.15
Selling and administrative expenses 449,787 8.30 432,089 8.06
Amortization of goodwill 11,494 .21 10,893 0.20
Interest
Interest expense 49,092 .91 44,738 0.83
Interest income 5,284 .10 4,927 0.09
------------------------------------------------------------------------
Interest expense, net 43,808 .81 39,811 0.74
------------------------------------------------------------------------
Total costs and expenses 5,340,789 98.53 5,262,819 98.16
------------------------------------------------------------------------
Earnings before income taxes 79,449 1.47 98,913 1.84
Provision for income taxes
Current 52,875 36,959
Deferred (20,937) 3,300
------------------------------------------------------------------------
Income tax expense 31,938 .59 40,259 0.75
------------------------------------------------------------------------
Net earnings $ 47,511 .88% $ 58,654 1.09%
========================================================================
Net earnings per common share- diluted $ .36 $ .42
Net earnings per common share- basic $ .36 $ .42
Weighted average number of common
shares outstanding
Diluted 132,733 140,469
Basic 132,430 139,635
Dividends declared per common share $ .1375 $ .1350
</TABLE>
All data subject to year-end audit. See notes to consolidated financial
statements.
2
<PAGE>
PART I - FINANCIAL INFORMATION
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Item 1: Financial Statements
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
--------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
--------------------------------------------------------------------------------
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year-to-date (40 weeks) ended
-----------------------------------------------------------------
Dec. 2, 2000 % of sales Dec. 4, 1999 % of sales
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 17,707,454 100.00% $ 14,797,227 100.00%
Costs and expenses:
Cost of sales 15,780,907 89.12 13,224,512 89.37
Selling and administrative expenses 1,450,483 8.19 1,189,807 8.04
Amortization of goodwill 37,942 .21 23,743 0.16
Gain on sale 163,662 1.11
Restructuring and other charges 103,596 0.70
Interest
Interest expense 162,597 .92 107,747 0.73
Interest income 16,735 .10 14,826 0.10
-----------------------------------------------------------------
Interest expense, net 145,862 .82 92,921 0.63
-----------------------------------------------------------------
Total costs and expenses 17,415,194 98.35 14,470,917 97.79
------------------------------------------------------------------
Earnings before income taxes 292,260 1.65 326,310 2.21
Provision for income taxes
Current 157,690 202,273
Deferred (40,202) (46,820)
-----------------------------------------------------------------
Income tax expense 117,488 .67 155,453 1.06
-----------------------------------------------------------------
Net earnings $ 174,772 .99% $ 170,857 1.15%
=================================================================
Net earnings per common share- diluted $ 1.31 $ 1.34
Net earnings per common share- basic $ 1.32 $ 1.35
Weighted average number of common
shares outstanding
Diluted 132,956 127,553
Basic 132,220 126,488
Dividends declared per common share $ .4100 $ .4025
</TABLE>
All data subject to year-end audit. See notes to consolidated financial
statements.
3
<PAGE>
CONSOLIDATED STATEMENTS OF NET SALES AND EARNINGS
--------------------------------------------------------------------------------
SUPERVALU INC and Subsidiaries
--------------------------------------------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
Third Quarter (12 weeks) ended Year-to-date (40 weeks) ended
---------------------------------------- ------------------------------------
Net Sales Dec. 2, 2000 Dec. 4, 1999 Dec. 2, 2000 Dec. 4, 1999
----------------------------------------------------------------------------------- ------------------------------------
<S> <C> <C> <C> <C>
Retail food $ 2,158,273 $ 2,075,600 $ 6,998,570 $ 5,780,940
39.8% 38.7% 39.5% 39.1%
Food distribution 3,261,965 3,286,132 10,708,884 9,016,287
60.2% 61.3% 60.5% 60.9%
-------------------------------------------------------------------------------
Total net sales $ 5,420,238 $ 5,361,732 $17,707,454 $ 14,797,227
100.0% 100.0% 100.0% 100.0%
--------------------------------------------------------------------------------------------------------------------------
Earnings
--------------------------------------------------------------------------------------------------------------------------
Retail food $ 68,483 $ 88,221 $ 264,230 $ 232,499
% of sales 3.20% 4.3% 3.8% 4.0%
Food distribution 63,722 60,223 201,206 154,424
% of sales 2.0% 1.8% 1.9% 1.7%
Gain on sale - - - 163,662
Restructuring and other charges (1) - - - (103,596)
-------------------------------------------------------------------------------
Total operating earnings 132,205 148,444 465,436 446,989
% of sales 2.4% 2.8% 2.6% 3.0%
Interest income 5,284 4,927 16,735 14,826
Interest expense (49,092) (44,738) (162,597) (107,747)
General corporate expenses (8,948) (9,720) (27,314) (27,758)
-------------------------------------------------------------------------------
Earnings before income taxes 79,449 98,913 292,260 326,310
Provision for income taxes (31,938) (40,259) (117,488) (155,453)
-------------------------------------------------------------------------------
Net earnings $ 47,511 $ 58,654 $ 174,772 $ 170,857
==========================================================================================================================
</TABLE>
All data subject to year-end audit. See notes to consolidated financial
statements.
(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
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries Third Quarter as of Fiscal Year End
-------------------------------------------------------------------------------------------------------------------
(In thousands) December 2, February 26,
2000 2000
Assets
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 9,614 $ 10,920
Receivables, less allowance for losses of $25,302 at
December 2, 2000 and $30,399 at February 26, 2000 631,975 562,448
Inventories 1,572,836 1,490,454
Other current assets 97,362 113,817
------------------------------------------
Total current assets 2,311,787 2,177,639
Long-term notes receivable 193,968 179,224
Property, plant and equipment, net 2,272,149 2,168,210
Goodwill 1,605,392 1,608,580
Other assets 355,217 361,700
------------------------------------------
Total assets $ 6,738,513 $ 6,495,353
==========================================
Liabilities and Stockholders' Equity
-------------------------------------------------------------------------------------------------------------------
Current Liabilities
Notes payable $ 792,009 $ 576,513
Accounts payable 1,442,842 1,430,312
Current debt and obligations under capital leases 42,426 200,282
Other current liabilities 331,784 302,513
------------------------------------------
Total current liabilities 2,609,061 2,509,620
Long-term debt and obligations under capital leases 1,987,417 1,953,741
Other liabilities and deferred income taxes 236,331 210,513
Total stockholders' equity 1,905,704 1,821,479
------------------------------------------
Total liabilities and stockholders' equity $ 6,738,513 $ 6,495,353
==========================================
</TABLE>
All data subject to year-end audit. See notes to consolidated financial
statements.
5
<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 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 - - - - 174,772 174,772
Sales of common stock
under option plans - - (3,527) 7,069 - 3,542
Cash dividends declared
on common stock-
$.2725 per share - - - - (54,959) (54,959)
Compensation under employee
incentive plan - - (36) 9,510 - 9,474
Purchase of shares for treasury - - - (48,604) - (48,604)
-----------------------------------------------------------------------------------------------------------------------------------
Balances at December 2, 2000 $ - $ 150,670 $ 128,663 $ (340,813) $ 1,967,184 $ 1,905,704
===================================================================================================================================
</TABLE>
All data subject to year-end audit. See notes to consolidated financial
statements.
6
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
--------------------------------------------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Year-to-date
(40 weeks ended)
-------------------------------------------------------------------------------------------------------------------
December 2, December 4,
2000 1999
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net cash provided by operating activities $ 338,742 $ 20,381
--------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Additions to long-term notes receivable (55,254) (36,935)
Proceeds received on long-term notes receivable 34,672 28,889
Proceeds from sale of assets 31,519 368,076
Purchase of property, plant and equipment (275,972) (249,722)
Business acquisitions, net of cash acquired - (469,185)
Other cash used in investing activities (48,264) (8,442)
--------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (313,299) (367,319)
--------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net increase in checks outstanding, net of deposits 42,871 99,018
Net issuance of short-term notes payable 215,496 391,699
Proceeds from issuance of long-term debt - 594,485
Repayment of long-term debt (163,460) (645,483)
Dividends paid (54,338) (48,061)
Payment for purchase of treasury stock (48,604) (18,078)
Other cash used in financing activities (18,714) (23,702)
--------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (26,749) 349,878
--------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash (1,306) 2,940
Cash at beginning of year 10,920 7,608
--------------------------------------------------------------------------------------------------------------------
Cash at end of third quarter $ 9,614 $ 10,548
====================================================================================================================
Supplemental Information:
Pretax LIFO expense $ (3,293) $ (5,952)
Pretax depreciation and amortization $ 253,422 $ 201,900
</TABLE>
All data subject to year-end audit. See notes to consolidated financial
statements.
7
<PAGE>
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 December
2, 2000 and December 4, 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:
--------------------------------------------------------------------------------
Year-to-date (40 weeks) ended
--------------------------------------------------------------------------------
(In thousands, except per share data) Dec. 2, 2000 Dec. 4, 1999
--------------------------------------------------------------------------------
Net sales $17,707,454 $16,767,209
Net earnings $ 174,772 $ 189,322 (a)
Net earnings per common share - diluted $1.31 $1.34 (a)
================================================================================
(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 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 realignment charge decreased $6.1 million due
to a number of voluntary terminations and higher than expected attrition. The
8
<PAGE>
company expects to complete the majority of these activities by the end of
fiscal 2001. The company is currently undertaking an asset rationalization
review which may result in an additional charge in the fourth quarter. Details
of the restructuring activity follow.
-----------------------------------------------------------------------------
Balance, Fiscal 2001 Balance,
(Dollars in thousands) Feb. 26, 2000 Activity Dec. 2, 2000
-----------------------------------------------------------------------------
Facility consolidation $ 44,550 $ 8,193 $ 36,357
Non-core store disposal 29,326 19,343 9,983
Infrastructure realignment 6,791 3,303 3,488
-----------------------------------------------------------------------------
Total restructure and other charges $ 80,667 $ 30,839 $ 49,828
-----------------------------------------------------------------------------
Employees 1,513 474 1,039
-----------------------------------------------------------------------------
Subsequent Event
----------------
Kmart has notified the company that Kmart intends to terminate their $2.3
billion supply contract as of June 30, 2001. Kmart expressed its intent to
consolidate its $3.7 billion in annual purchases with one supplier. The company
and Kmart are in negotiations regarding such an alternative supply relationship.
Although it is too early to predict the outcome of those negotiations, they
could lead to additional business opportunities, a continuation of the same
relationship or a termination of the supply relationship.
Item 2: Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
---------------------
RESULTS FOR THE QUARTER:
For the third quarter of fiscal 2001, the company achieved sales of $5.4
billion, net earnings of $47.5 million and diluted earnings per share of $.36.
Last year, sales were $5.4 billion, net earnings were $58.7 million and diluted
earnings per share were $.42.
Net sales
Net sales increased 1.1 percent compared to last year. Retail food sales
increased 4.0 percent while food distribution sales decreased .7 percent.
Retail food sales increased over last year primarily due to 130 new store
openings including 101 new limited assortment stores over the past twelve
months. Same-store sales were approximately a negative 3.0 percent due to the
effect of cannibalization and competitive activities in certain markets. Food
distribution sales decreased slightly from last year as incremental business,
primarily with Kmart, substantially offset the loss of business known at the
time of the Richfood acquisition.
Gross profit
Gross profit as a percentage of net sales was 10.8 percent compared to 10.9
percent last year. The decrease was primarily due to increased advertising and
promotional spending in retail.
Selling and administrative expenses
Selling and administrative expenses as a percentage of sales was 8.5 percent for
the current year compared to 8.3 percent last year. The primary reasons for the
increase in selling and administrative expenses as a percentage of sales were
the higher level of new stores with lower overall expense leverage and higher
labor costs.
Operating earnings
The company's pretax operating earnings (earnings before interest and taxes)
decreased to $123.3 million compared to $138.7 million last year, an 11.1
percent decrease. Operating earnings before depreciation and amortization
decreased to $201.4 million compared with $210.2 million last year, a 4.2
percent decrease. Retail food operating earnings decreased 22.4 percent to $68.5
million, or 3.2 percent of sales, from last year's $88.2 million, or 4.3 percent
of sales, as sales gains were fully offset by increased advertising, promotional
spending and labor costs. Retail food operating earnings before depreciation and
amortization decreased 16.0 percent to $107.8 million, or 5.0 percent of sales,
from last year's $128.3 million, or 6.2 percent of sales. Food distribution
operating earnings increased 5.8 percent to $63.7 million, or 2.0 percent of
sales, from last year's $60.2 million, or 1.8 percent of sales, despite slightly
lower sales, as achieved Richfood synergies offset higher labor costs. Food
distribution operating earnings before depreciation and amortization increased
11.9 percent to $101.8 million, or 3.1 percent of sales, from last year's $90.9
million, or 2.8 percent of sales.
9
<PAGE>
Interest expense
Interest expense increased to $49.1 million compared with $44.7 million last
year, primarily reflecting higher average borrowings due to the share buyback at
the end of fiscal 2000 and higher interest rates compared to last year.
Income taxes
The effective tax rate was 40.2 percent in the third quarter, compared with 40.7
percent in the third quarter of last year.
Net earnings
Net earnings decreased 19.0 percent to $47.5 million or $.36 per share - diluted
compared with last year's net earnings of $58.7 million or $.42 per share -
diluted. Cash earnings decreased to $.44 per share - diluted compared with last
year's $.49 per share - diluted. Weighted average shares - diluted decreased to
132.7 million compared with last year's 140.5 million. The decrease in average
diluted shares outstanding was due primarily to the 7.9 million shares
repurchased under the December 1999 treasury stock program since the prior year.
YEAR TO DATE RESULTS:
Net sales
Net sales increased 19.7 percent to $17.7 billion compared with $14.8 billion
last year, reflecting the acquisition of Richfood in August 1999, incremental
volume from other new customers and new corporate stores. Retail food and food
distribution sales increased 21.1 percent and 18.8 percent, respectively.
Retail food sales increased over last year primarily due to the Richfood
acquisition and 130 new store openings including 101 new limited assortment
stores over the past twelve months. Same-store sales were approximately a
negative 3.0 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 10.6
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 administrative 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 the majority of these activities by the end of fiscal 2001. The
company is currently undertaking an asset rationalization review which may
result in an additional charge in the fourth quarter.
10
<PAGE>
Operating earnings
The company's pretax operating earnings (earnings before interest and taxes)
increased to $438.1 million compared with $359.2 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
$419.2 million. Operating earnings before depreciation and amortization
increased to $691.5 million compared with $561.1 million last year, excluding
one-time items, a 23.3 percent increase. Retail food operating earnings
increased 13.6 percent to $264.2 million, or 3.8 percent of sales, from last
year's $232.5 million, or 4.0 percent of sales, primarily reflecting sales
growth from the Richfood acquisition and the opening of 130 new stores. Retail
food operating earnings before depreciation and amortization increased 15.5
percent to $391.2 million, or 5.6 percent of sales, from last year's $338.7
million, or 5.9 percent of sales. Food distribution operating earnings increased
30.3 percent to $201.2 million, or 1.9 percent of sales, from last year's $154.4
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
31.4 percent to $325.3 million, or 3.0 percent of sales, from last year's $247.6
million, or 2.7 percent of sales.
Interest expense
Interest expense increased to $162.6 million compared with $107.7 million last
year, primarily due to higher average borrowings due to the Richfood
acquisition, the share buyback completed early in the first quarter of this
year, and higher interest rates compared to last year.
Income taxes
The effective tax rate was 40.2 percent compared to 47.6 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 9.3 percent to $174.8 million or $1.31 per
share - diluted compared with last year's net earnings of $159.9 million or
$1.25 per share - diluted. Cash earnings increased to $1.59 per share - diluted
compared to last year's $1.42 per share - diluted. Including one-time items,
last year's net earnings were $170.9 million or $1.34 per share - diluted. Cash
earnings were $1.51 per share - diluted. Weighted average shares - diluted
increased to 133.0 million compared with last year's 127.6 million. The increase
in shares outstanding is due to the 19.7 million shares issued in conjunction
with the Richfood acquisition, partially offset by the 7.9 million shares
repurchased under the December 1999 treasury stock program.
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 $338.7 million
year-to-date compared with $20.4 million last year. The increase is primarily
due to a reduction in net working capital of $260.9 million and an increase in
depreciation and amortization of $51.5 million. Net cash used in investing
activities was $313.3 million, compared with $367.3 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 $368.1 million, which includes
the proceeds received from the sale of Hazelwood Farms Bakeries. Net cash used
in financing activities was $26.7 million, compared with $349.9 million
generated last year. Last year's financing activities included the issuance of
$350 million of 7 7/8 percent notes due 2009, $250 million of 7 5/8 percent
notes due 2004, 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 December 2,
2000, letters of credit outstanding under this agreement totaled $21.7 million,
compared to $40.5 million outstanding as of December 4, 1999. In August 1999,
the company executed a 364-day $300 million
11
<PAGE>
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
December 2, 2000, the company had established $215 million in credit facilities
under such agreements with rates tied to LIBOR plus .310 to .535 percent. 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 third
quarter was $795.0 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.
The company's businesses are subject to certain risks and uncertainties that
could cause actual results to differ materially from those discussed in such
forward looking statements. These include, but are not limited to, 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 the
company to grow through acquisition and assimilate acquired entities, the
availability of favorable credit and trade terms, food price changes and other
risk factors inherent in the food wholesaling and retail businesses, all of
which are set forth in further detail in Exhibit 99(i) to this report. Any
forward-looking statement speaks only as of the date on which such statement is
made, and the company 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
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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 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.
(99)(i) Cautionary Statements pursuant to the Securities
Litigation Reform Act.
(b) Reports on Form 8-K:
None.
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SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUPERVALU INC. (Registrant)
Dated: January 16, 2001 By: /s/ Pamela K. Knous
---------------------------
Pamela K. Knous
Executive Vice President,
Chief Financial Officer
(Authorized officer of Registrant)
14
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EXHIBIT INDEX
-------------
Exhibit
(11) Computation of Earnings Per Common Share
(99)(i) Cautionary Statements for Purposes of the Safe Harbor Provisions of the
Securities Litigation Reform Act
15
