- Sales increase in all three business
segments
- Independent Business sales increase
2.4%
- Save-A-Lot network ID sales positive
6.9%
- Retail Food ID sales positive
2.3%
- Diluted EPS from continuing
operations of $0.04
- Adjusted EPS from continuing
operations of $0.18
SUPERVALU INC. (NYSE:SVU) today reported third quarter fiscal
2015 net sales of $4.20 billion and net earnings from continuing
operations of $12 million ($0.04 per diluted share).
Results for the third quarter of fiscal 2015 included a $36
million after-tax pension settlement charge and $1 million in
after-tax debt refinancing and net information technology intrusion
costs. When adjusted for these items, third quarter fiscal 2015 net
earnings from continuing operations were $49 million ($0.18 per
diluted share). Net earnings from continuing operations for last
year’s third quarter were $33 million ($0.12 per diluted share) and
included $3 million in after-tax net charges and costs comprised of
a multiemployer pension plan withdrawal charge, asset impairment,
contract breakage, and other costs, offset in part by a gain from
the sale of a property and the reduction of previously accrued
severance costs. When adjusted for these items, third quarter
fiscal 2014 net earnings from continuing operations were $36
million ($0.13 per diluted share). [See tables 1-5 for a
reconciliation of GAAP and non-GAAP (adjusted) results appearing in
this release.]
“We passed an important milestone this quarter delivering
positive sales increases in all three of our business segments for
the first time in many years,” said President and CEO Sam Duncan.
“I’m very encouraged to see our Independent Business segment post
higher sales compared to last year’s third quarter, and I remain
pleased with the continued progress we are making in our retail
stores. Save-A-Lot had another good quarter from a sales
perspective while also delivering a higher operating margin
compared to the second quarter. Overall, the third quarter provided
many positives for us to build on during the final quarter of our
fiscal year.”
Third Quarter Results - Continuing Operations
Third quarter net sales were $4.20 billion compared to $4.01
billion last year, an increase of 4.8 percent. Identical store
sales in the Save-A-Lot network were positive 6.9 percent.
Identical store sales for corporate stores within the Save-A-Lot
network were positive 8.5 percent. Identical store sales in the
Retail Food segment were positive 2.3 percent. Total sales within
the Independent Business segment increased 2.4 percent. Fees earned
under the Transition Services Agreements (“TSA”) in the third
quarter were $43 million compared to $48 million last year.
Gross profit for the third quarter was $593 million, or 14.1
percent of net sales. Last year’s third quarter gross profit was
$569 million, or 14.2 percent of net sales, and included a $3
million multiemployer pension plan withdrawal charge. When adjusted
for this charge, gross profit for the third quarter of fiscal 2014
was $572 million, or 14.3 percent of net sales. The decrease in
gross profit rate compared to last year was primarily driven by
higher shrink and lower fees earned under the TSA, predominantly
related to the one-year transition fee earned under the TSA in
fiscal 2014 of $60 million of which $4 million was recognized in
the third quarter of fiscal 2014, partially offset by lower
logistics and employee costs.
Selling and administrative expenses in the third quarter were
$537 million, or 12.8 percent of net sales, and included a $63
million non-cash pension settlement charge and $1 million in net
information technology intrusion costs. When adjusted for these
items, selling and administrative expenses were $473 million, or
11.3 percent of net sales. Selling and administrative expenses in
last year’s third quarter were $463 million, or 11.5 percent of net
sales, and included $1 million in net charges primarily
related to asset impairment and contract breakage costs, partially
offset by a gain from the sale of a property and reduction of
previously accrued severance costs. When adjusted for these items,
selling and administrative expenses in the third quarter of fiscal
2014 were $462 million, or 11.5 percent of net sales. The decline
in adjusted selling and administrative expense as a percent of net
sales was primarily driven by lower pension and depreciation and
amortization expense.
Net interest expense for the third quarter was $46 million and
included $1 million in debt refinancing costs. Net interest expense
for last year’s third quarter was $52 million. The decrease in
interest expense was primarily driven by lower average interest
rates and lower outstanding debt balances.
SUPERVALU’s income tax benefit was $1 million, or 8.9 percent of
pre-tax earnings, for the third quarter, compared to an expense of
$21 million, or 38.6 percent of pre-tax earnings in last year’s
third quarter. The tax rate for the third quarter of fiscal 2015
reflects a $3 million favorable discrete tax benefit primarily
related to the pension settlement recorded in the third
quarter.
Independent Business
Third quarter Independent Business net sales were $1.96 billion
compared to $1.91 billion last year, an increase of 2.4 percent,
primarily due to increased sales to existing customers and new
accounts partly offset by lost accounts, including one New
Albertson’s, Inc. banner that completed the transition to
self-distribution.
Independent Business operating earnings in the third quarter
were $60 million, or 3.1 percent of net sales. Last year’s
Independent Business operating earnings in the third quarter were
$53 million, or 2.8 percent of net sales and included $4 million in
net charges related to a multiemployer pension withdrawal charge,
asset impairment, and other charges, offset in part by a gain from
the sale of a property. When adjusted for these items, Independent
Business operating earnings in the third quarter of fiscal 2014
were $57 million, or 3.0 percent of net sales.
Save-A-Lot
Third quarter Save-A-Lot net sales were $1.08 billion compared
to $991 million last year, an increase of 8.9 percent, primarily
reflecting the impact from network identical store sales of
positive 6.9 percent and new store openings. Identical store sales
for corporate stores within the Save-A-Lot network were positive
8.5 percent.
Save-A-Lot operating earnings in the third quarter were $34
million, or 3.2 percent of net sales. Last year’s Save-A-Lot
operating earnings in the third quarter were $40 million, or 4.1
percent of net sales. The decrease in Save-A-Lot operating earnings
was primarily due to higher advertising, employee, and occupancy
costs.
Retail Food
Third quarter Retail Food net sales were $1.12 billion compared
to $1.06 billion last year. The increase was primarily due to newly
acquired stores and identical store sales of positive 2.3
percent.
Retail Food operating earnings in the third quarter were $28
million, or 2.5 percent of net sales. Last year’s Retail Food
operating earnings were $25 million, or 2.3 percent of net sales,
and included $1 million of income related to a reduction in
previously accrued severance costs. When adjusted for this item,
Retail Food operating earnings in the third quarter of fiscal 2014
were $24 million, or 2.3 percent of net sales. The increase in
Retail Food adjusted operating earnings was primarily due to lower
depreciation, occupancy, and employee-related costs, partly offset
by incremental investments to lower prices to customers and a
higher LIFO charge.
Corporate
Third quarter fees earned under the TSA were $43 million
compared to $48 million last year. The decrease primarily reflects
a one-year transition fee earned under the TSA in fiscal 2014 of
$60 million, of which $4 million was recognized in the third
quarter of fiscal 2014.
Net Corporate operating loss in the third quarter was $66
million and included a $63 million non-cash pension settlement
charge and $1 million in information technology intrusion costs,
net of insurance receivable. When adjusted for these items, net
Corporate operating loss in the third quarter was $2 million. Last
year’s third quarter net Corporate operating loss was $12 million
and included a $1 million contract breakage charge. When adjusted
for this item, net Corporate operating loss in the third quarter of
fiscal 2014 was $11 million. The decrease in net Corporate
operating loss was primarily driven by lower pension expense offset
in part by lower earned TSA fees.
Cash flows - Continuing Operations
Year-to-date fiscal 2015 net cash flows provided by continuing
operations activities were $104 million compared to a use of $163
million in the prior year, reflecting lower levels of cash utilized
in working capital and lower cash tax payments in the current year.
Year-to-date net cash flows used in continuing operations investing
activities were $209 million compared to $42 million in the prior
year, reflecting higher levels of capital expenditures and payments
for business acquisitions. Year-to-date net cash flows provided by
continuing operations financing activities were $438 million
compared to $138 million in the prior year, primarily reflecting
proceeds received in the third quarter of fiscal 2015 related to
the partial refinancing of the Company's 8.00% notes due in
2016.
Discontinued Operations
On March 21, 2013, the Company completed the sale of five retail
grocery banners (Albertson's, Acme, Jewel-Osco, Shaw’s and Star
Market). The results from these banners are presented as
discontinued operations for all periods and include the operating
results and charges related to these stores.
During the third quarter of fiscal 2015, the Company recognized
discrete tax benefits of $69 million in discontinued operations
that were primarily related to property repair regulations. The
Company has filed amended returns and expects to receive the tax
refund within 90 days. In connection with discussions on a
possible amendment to the TSA, the Company is in discussions with
NAI and Albertson’s LLC on whether the Company will pay an amount
equivalent to any portion of this tax refund to NAI and Albertson’s
LLC. The discussions on a possible amendment to the TSA are to
address operational considerations that could arise as a result of
the announced acquisition of Safeway Inc. by Albertson’s and
certain other matters related to the TSA.
Conference Call
A conference call to review the third quarter results is
scheduled for 9:00 a.m. central time today. The call will be
webcast live at www.supervaluinvestors.com (click on microphone
icon). A replay of the call will be archived at www.supervaluinvestors.com. To access the website
replay go to the "Investors" link and click on "Presentations and
Webcasts."
About SUPERVALU INC.
SUPERVALU INC. is one of the largest grocery wholesalers and
retailers in the U.S. with annual sales of approximately $17
billion. SUPERVALU serves customers across the United States
through a network of 3,360 stores composed of 1,832 primary stores
serviced by the Company’s food distribution business; 1,333
Save-A-Lot stores, of which 911 are operated by licensee owners;
and 195 traditional retail grocery stores (store counts as of
November 29, 2014). Headquartered in Minnesota, SUPERVALU has
approximately 35,000 employees. For more information about
SUPERVALU visit www.supervalu.com.
CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION
FOR THE PURPOSE OF “SAFE HARBOR” PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
Except for the historical and factual information contained
herein, the matters set forth in this news release, particularly
those pertaining to SUPERVALU’s expectations, guidance, or future
operating results, and other statements identified by words such as
"estimates," "expects," "projects," "plans," and similar
expressions are forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are subject to
risks and uncertainties that may cause actual results to differ
materially, including competition, ability to execute initiatives,
substantial indebtedness, impact of economic conditions, labor
relations issues, escalating costs of providing employee benefits,
relationships with Albertson’s LLC and New Albertson’s Inc.,
intrusions to and disruption of information technology systems,
governmental regulation, food and drug safety issues, legal
proceedings, severe weather, natural disasters and adverse climate
changes, disruption to supply chain and distribution network,
changes in military business, adequacy of insurance, volatility in
fuel and energy costs, asset impairment charges, fluctuations in
our common stock price and other risk factors relating to our
business or industry as detailed from time to time in SUPERVALU's
reports filed with the SEC. You should not place undue reliance on
these forward-looking statements, which speak only as of the date
of this news release. Unless legally required, SUPERVALU undertakes
no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events
or otherwise.
SUPERVALU INC. and Subsidiaries CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In
millions, except percent and per share data)
Third Quarter Ended Year-To-Date Ended
November 29, November 30, November
29, November 30, 2014 2013
2014 2013 (12 weeks) (12 weeks) (40
weeks) (40 weeks) Net sales $ 4,204
100.0 % $ 4,012 100.0 % $ 13,456 100.0
% $ 13,200 100.0 %
Cost of sales 3,611
85.9 3,443 85.8 11,539
85.8 11,260 85.3
Gross
profit(1) 593 14.1 569 14.2 1,917 14.2 1,940 14.7
Selling and administrative expenses(1) 537
12.8 463 11.5 1,632
12.1 1,638 12.4
Operating
earnings 56 1.3 106 2.6 285 2.1 302 2.3
Interest expense,
net(1) 46 1.1 52 1.3 156 1.2 352 2.7
Equity in
earnings of unconsolidated affiliates (1 ) —
— — (3 ) — (2 ) —
Earnings (loss) from continuing operations before income
taxes(1) 11 0.3 54 1.4 132 1.0 (48 ) (0.4 )
Income
tax (benefit) provision (1 ) — 21
0.5 41 0.3 (19 ) (0.1 )
Net
earnings (loss) from continuing operations(1) 12 0.3 33
0.8 91 0.7 (29 ) (0.2 )
Income (loss) from discontinued
operations, net of tax 69 1.6 (1 )
(0.1 ) 68 0.5 190 1.4
Net earnings including noncontrolling interests 81 1.9 32
0.8 159 1.2 161 1.2
Less net earnings attributable to
noncontrolling interests (2 ) — (1 ) —
(6 ) — (5 ) —
Net earnings
attributable to SUPERVALU INC. $ 79 1.9 % $ 31
0.8 % $ 153 1.1 % $ 156 1.2 %
Basic net
earnings (loss) per share attributable to SUPERVALU INC.:
Continuing operations $ 0.04 $ 0.13 $ 0.33 $ (0.13 ) Discontinued
operations $ 0.27 $ (0.01 ) $ 0.26 $ 0.75 Basic net earnings per
share $ 0.31 $ 0.12 $ 0.59 $ 0.61
Diluted net earnings (loss)
per share attributable to SUPERVALU INC.: Continuing
operations
(1) $ 0.04 $ 0.12 $ 0.33 $ (0.13 ) Discontinued
operations $ 0.26 $ (0.01 ) $ 0.26 $ 0.74 Diluted net earnings per
share $ 0.30 $ 0.12 $ 0.58 $ 0.61
Weighted average number of
shares outstanding: Basic 261 259 260 254 Diluted 265 262 263
257
(1) Results from continuing operations for the third quarter
ended November 29, 2014 include net charges and costs of $65 before
tax ($37 after tax, or $0.14 per diluted share), comprised of a
pension settlement charge of $63 before tax ($36 after tax, or
$0.14 per diluted share) and information technology intrusion
costs, net of insurance recoverable, of $1 before tax ($0 after
tax, or $0.00 per diluted share) included within Selling and
administrative expenses, and debt refinancing costs of $1 before
tax ($1 after tax, or $0.00 per diluted share) included within
Interest expense, net.
Results from continuing operations for the third quarter ended
November 30, 2013 included net charges and costs of $4 before tax
($3 after tax, or $0.01 per diluted share), comprised of a
multiemployer pension withdrawal charge of $3 before tax ($2 after
tax, or $0.01 per diluted share) recorded in Gross profit, and
asset impairment and other charges of $2 before tax ($2 after tax,
or $0.01 per diluted share) and contract breakage and other costs
of $1 before tax ($0 after tax, or $0.00 per diluted share), offset
in part by a gain on sale of property of $1 before tax ($1 after
tax, or $0.01 per diluted share) and a reduction of previously
accrued severance costs of $1 before tax ($0 after tax, or $0.00
per diluted share) recorded in Selling and administrative
expenses.
Results from continuing operations for the year-to-date ended
November 29, 2014 include net charges and costs of $69 before tax
($40 after tax, or $0.15 per diluted share), comprised of a pension
settlement charge of $63 before tax ($36 after tax, or $0.14 per
diluted share), information technology intrusion costs, net of
insurance recoverable, of $2 before tax ($1 after tax, or $0.00 per
diluted share) and severance costs of $1 before tax ($1 after tax,
or $0.00 per diluted share) included within Selling and
administrative expenses, and unamortized financing cost charges of
$2 before tax ($1 after tax, or $0.01 per diluted share) and debt
refinancing costs of $1 before tax ($1 after tax, or $0.00 per
diluted share) included within Interest expense, net.
Results from continuing operations for the year-to-date ended
November 30, 2013 included net costs and charges of $222 before tax
($136 after tax, or $0.53 per diluted share), comprised of charges
for unamortized financing costs and original issue discount
acceleration of $98 before tax ($60 after tax, or $0.24 per diluted
share) and debt refinancing costs of $71 before tax ($44 after tax,
or $0.17 per diluted share) recorded in Interest expense, net,
severance costs and accelerated stock-based compensation charges of
$38 before tax ($24 after tax, or $0.09 per diluted share), asset
impairment and other charges of $16 before tax ($11 after tax, or
$0.04 per diluted share), a legal settlement charge of $5 before
tax ($3 after tax, or $0.01 per diluted share) and contract
breakage and other costs of $6 before tax ($2 after tax, or $0.01
per diluted share) recorded in Selling and administrative expenses,
and multiemployer pension withdrawal charge of $3 before tax ($2
after tax, or $0.01 per diluted share) recorded in Gross profit,
offset in part by a gain on sale of property of $15 before tax ($10
after tax, or $0.04 per diluted share) recorded in Selling and
administrative expenses.
SUPERVALU INC. and Subsidiaries CONDENSED
CONSOLIDATED SEGMENT FINANCIAL INFORMATION (Unaudited)
(In millions, except percent data)
Third Quarter Ended Year-To-Date Ended
November 29, November 30, November
29, November 30, 2014 2013
2014 2013 (12 weeks) (12 weeks) (40
weeks) (40 weeks) Net sales Independent Business
$ 1,958 $ 1,912 $ 6,178 $ 6,215 % of total 46.6 % 47.7 % 45.9 %
47.1 % Save-A-Lot 1,079 991 3,477 3,229 % of total 25.7 % 24.7 %
25.8 % 24.4 % Retail Food 1,124 1,061 3,656 3,562 % of total 26.7 %
26.4 % 27.2 % 27.0 % Corporate 43 48 145 194 % of total 1.0
% 1.2 % 1.1 % 1.5 % Total net sales $ 4,204 $
4,012 $ 13,456 $ 13,200 100.0 % 100.0 % 100.0
% 100.0 %
Operating earnings Independent Business(1)
$ 60 $ 53 $ 180 $ 181 % of Independent Business sales 3.1 % 2.8 %
2.9 % 2.9 % Save-A-Lot(2) 34 40 106 124 % of Save-A-Lot sales 3.2 %
4.1 % 3.0 % 3.8 % Retail Food(3) 28 25 78 39 % of Retail Food sales
2.5 % 2.3 % 2.1 % 1.1 % Corporate(4) (66 ) (12 )
(79 ) (42 ) Total operating earnings 56 106 285 302 %
of total net sales 1.3 % 2.6 % 2.1 % 2.3 %
Interest expense,
net(5) 46 52 156 352
Equity in earnings of
unconsolidated affiliates (1 ) — (3
) (2 )
Earnings (loss) from continuing operations before
income taxes 11 54 132 (48 )
Income tax (benefit)
provision (1 ) 21 41
(19 )
Net earnings (loss) from continuing operations 12 33
91 (29 )
Income (loss) from discontinued operations, net of
tax 69 (1 ) 68 190
Net earnings including noncontrolling interests 81 32
159 161
Less net earnings attributable to noncontrolling
interests (2 ) (1 ) (6 ) (5 )
Net earnings attributable to SUPERVALU INC. $ 79 $ 31
$ 153 $ 156
LIFO charge (credit)
Independent Business $ 1 $ — $ 3 $ 1 Retail Food 2
(1 ) 4 (3 ) Total LIFO charge (credit)
$ 3 $ (1 ) $ 7 $ (2 )
Depreciation and
amortization Independent Business $ 10 $ 11 $ 36 $ 40
Save-A-Lot 15 15 50 50 Retail Food 40 41
133 145 Total depreciation and
amortization $ 65 $ 67 $ 219 $ 235
(1) Independent Business operating earnings for the third
quarter ended November 30, 2013 included a multiemployer pension
withdrawal charge of $3 and asset impairment and other charges of
$2, offset in part by a gain on sale of property of $1. Independent
Business operating earnings for the year-to-date ended November 29,
2014 include severance costs of $1. Independent Business operating
earnings for the year-to-date ended November 30, 2013 included
severance costs and accelerated stock-based compensation charges of
$13, a multiemployer pension withdrawal charge of $3, asset
impairment and other charges of $2 and contract breakage and other
costs of $1, offset in part by a gain on sale of property of
$15.
(2) Save-A-Lot operating earnings for the year-to-date ended
November 30, 2013 included a legal settlement charge of $5, asset
impairment and other charges of $3 and severance costs of $2.
(3) Retail Food operating earnings for the third quarter ended
November 30, 2013 included a reduction of previously accrued
severance costs of $1. Retail Food operating earnings for the
year-to-date ended November 30, 2013 included asset impairment and
other charges of $9, severance costs and accelerated stock-based
compensation charges of $6 and contract breakage and other costs of
$2.
(4) Corporate operating loss for the third quarter ended
November 29, 2014 includes a pension settlement charge of $63 and
information technology intrusion costs, net of insurance
recoverable, of $1. Corporate operating loss for the third quarter
ended November 30, 2013 included contract breakage and other costs
of $1. Corporate operating loss for the year-to-date ended November
29, 2014 includes a pension settlement charge of $63 and
information technology intrusion costs, net of insurance
recoverable, of $2. Corporate operating loss for the year-to-date
ended November 30, 2013 included severance costs and accelerated
stock-based compensation charges of $17, contract breakage and
other costs of $3 and asset impairment and other charges of $2.
(5) Interest expense, net for the third quarter ended November
29, 2014 includes debt refinancing costs of $1. Interest expense,
net for the year-to-date ended November 29, 2014 includes
unamortized financing cost charges of $2 and debt refinancing costs
of $1. Interest expense, net for the year-to-date ended November
30, 2013 included unamortized financing cost charges and original
issue discount acceleration of $98 and debt refinancing costs of
$71.
SUPERVALU INC. and Subsidiaries CONDENSED
CONSOLIDATED BALANCE SHEETS (In millions, except per share
data) November 29,
February 22, 2014 2014 (Unaudited)
ASSETS Current assets Cash and cash equivalents $ 418
$ 83 Receivables, net 526 493 Inventories, net 1,122 861 Other
current assets 175 106
Total current
assets 2,241 1,543
Property,
plant and equipment, net 1,469 1,497
Goodwill 865 847
Intangible assets, net 50 43
Deferred tax assets 309
287
Other assets 144 157
Total assets $ 5,078 $ 4,374
LIABILITIES
AND STOCKHOLDERS’ DEFICIT Current liabilities Accounts
payable $ 1,201 $ 1,043 Accrued vacation, compensation and benefits
197 190 Current maturities of long-term debt and capital lease
obligations 384 45 Other current liabilities 182
213
Total current liabilities 1,964
1,491
Long-term debt 2,617 2,486
Long-term capital lease obligations 222 246
Pension and
other postretirement benefit obligations 601 536
Long-term
tax liabilities 144 140
Other long-term liabilities 177
205
Commitments and contingencies Stockholders’
deficit Common stock, $0.01 par value: 400 shares authorized;
261 and 260 shares issued, respectively 3 3 Capital in excess of
par value 2,815 2,862 Treasury stock, at cost, 3 and 4 shares,
respectively (45 ) (101 ) Accumulated other comprehensive loss (387
) (307 ) Accumulated deficit (3,042 ) (3,195 )
Total SUPERVALU INC. stockholders’ deficit (656 ) (738 )
Noncontrolling interests 9 8
Total
stockholders’ deficit (647 ) (730 )
Total
liabilities and stockholders’ deficit $ 5,078 $ 4,374
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In millions)
Year-To-Date Ended November 29,
November 30, 2014 2013 (40 weeks)
(40 weeks) Cash flows from operating activities Net
earnings including noncontrolling interests $ 159 $ 161 Income from
discontinued operations, net of tax 68 190
Net earnings (loss) from continuing operations 91 (29 )
Adjustments to reconcile Net earnings (loss) from continuing
operations to Net cash provided by (used in) operating activities –
continuing operations: Asset impairment and other charges 3 190 Net
gain on sale of assets and exits of surplus leases (11 ) (19 )
Depreciation and amortization 219 235 LIFO charge (credit) 7 (2 )
Deferred income taxes (41 ) 6 Stock-based compensation 18 18 Net
pension and other postretirement benefits cost 82 61 Contributions
to pension and other postretirement benefit plans (115 ) (122 )
Other adjustments 15 30 Changes in operating assets and
liabilities, net of effects from business acquisitions (164
) (531 )
Net cash provided by (used in) operating
activities – continuing operations 104 (163 )
Net cash
provided by (used in) operating activities – discontinued
operations 2 (101 )
Net cash provided
by (used in) operating activities 106 (264
)
Cash flows from investing activities Proceeds from sale of
assets 7 13 Purchases of property, plant and equipment (164 ) (64 )
Payments for business acquisitions (55 ) — Other 3
9
Net cash used in investing activities –
continuing operations (209 ) (42 )
Net cash provided by
investing activities – discontinued operations —
127
Net cash (used in) provided by investing
activities (209 ) 85
Cash flows from
financing activities Proceeds from issuance of debt 484 2,098
Proceeds from sale of common stock 5 176 Payments of debt and
capital lease obligations (37 ) (1,980 ) Distributions to
noncontrolling interests (8 ) (9 ) Payments of debt financing costs
(7 ) (147 ) Other 1 —
Net cash
provided by financing activities – continuing operations 438
138
Net cash used in financing activities – discontinued
operations — (36 )
Net cash provided by
financing activities 438 102 Net
increase (decrease) in cash and cash equivalents 335 (77 )
Cash
and cash equivalents at beginning of period 83
149
Cash and cash equivalents at the end of
period $ 418 $ 72
SUPPLEMENTAL CASH FLOW
INFORMATION The Company’s non-cash activities were as follows:
Capital lease asset additions $ 1 $ 2 Purchases of property, plant
and equipment included in Accounts payable $ 10 $ 13 Interest and
income taxes paid: Interest paid (net of amounts capitalized) $ 136
$ 181 Income taxes paid (net of refunds) $ 55 $ 117
SUPERVALU INC. and
SubsidiariesSUPPLEMENTAL FINANCIAL
INFORMATION(Unaudited)
SUPERVALU INC.'s consolidated financial statements are
prepared and presented in accordance with generally accepted
accounting principles ("GAAP"). The measures and items identified
below are provided as a supplement to our consolidated financial
statements and should not be considered an alternative to any GAAP
measure of performance or liquidity. The presentation of these
financial measures and items is not intended to be a substitute for
or be superior to any financial information prepared and presented
in accordance with GAAP. Investors are cautioned that there are
material limitations associated with the use of non-GAAP financial
measures as an analytical tool. Certain adjustments to our GAAP
financial measures reflected below exclude certain items that are
occasionally recurring in nature and may be reflected in our
financial results for the foreseeable future. These measurements
and items may be different from non-GAAP financial measures used by
other companies. All measurements are provided as a reconciliation
from a GAAP measurement. Management believes the measurements and
items identified below are important measures of business
performance that provide investors with useful supplemental
information. SUPERVALU utilizes certain non-GAAP measures
to analyze underlying core business trends to understand operating
performance. In addition, management utilizes certain non-GAAP
measures as a compensation performance measure. The items below
should be reviewed in conjunction with SUPERVALU
INC.'s financial results reported in accordance with GAAP, as
reported in SUPERVALU's Quarterly Reports on Form 10-Q
and the Annual Report on Form 10-K for the fiscal year
ended February 22, 2014.
RECONCILIATIONS OF EARNINGS (LOSS) FROM
CONTINUING OPERATIONS TO EARNINGS FROM CONTINUING OPERATIONS AFTER
ADJUSTMENTS
Table 1
Third Quarter Ended November 29, 2014 (In millions,
except per share data)
Earnings BeforeTax
Earnings AfterTax
Diluted EarningsPer
Share
Continuing operations $ 11 $ 12 $ 0.04 Adjustments: Pension
settlement charge 63 36 0.14 Debt refinancing costs 1 1 —
Information technology intrusion costs, net of insurance
recoverable 1 — —
Continuing operations after adjustments $ 76 $ 49 $
0.18
Table 2
Year to Date November 29, 2014 (In millions, except per
share data)
Earnings BeforeTax
Earnings AfterTax
Diluted EarningsPer
Share
Continuing operations $ 132 $ 91 $ 0.33 Adjustments: Pension
settlement charge 63 36 0.14 Unamortized financing cost charges 2 1
0.01 Information technology intrusion costs, net of insurance
recoverable 2 1 — Severance costs 1 1 — Debt refinancing costs
1 1 — Continuing
operations after adjustments $ 201 $ 131 $ 0.48
Table 3 Third Quarter Ended November 30,
2013 (In millions, except per share data)
Earnings BeforeTax
Earnings AfterTax
Diluted EarningsPer
Share
Continuing operations $ 54 $ 33 $ 0.12 Adjustments: Multiemployer
pension withdrawal charge 3 2 0.01 Asset impairment and other
charges 2 2 0.01 Contract breakage and other costs 1 — — Severance
costs
(1
)
—
— Gain on sale of property
(1
)
(1
)
(0.01
)
Continuing operations after adjustments $ 58 $ 36 $
0.13
Table 4
Year to Date November 30, 2013
(In millions, except per share
data)
(Loss) EarningsBefore
Tax
(Loss) EarningsAfter Tax
Diluted (Loss)Earnings
PerShare
Continuing operations
$
(48
)
$
(29
)
$
(0.13
)
Adjustments: Unamortized financing cost charges and original issue
discount acceleration 98 60 0.24 Debt refinancing costs 71 44 0.17
Severance costs and accelerated stock-based compensation charges 38
24 0.09 Asset impairment and other charges 16 11 0.04 Legal
settlement charge 5 3 0.01 Contract breakage and other costs 6 2
0.01 Multiemployer pension withdrawal charge 3 2 0.01 Gain on sale
of property
(15
)
(10
)
(0.04
)
Continuing operations after adjustments $ 174 $ 107 $
0.40
RECONCILIATION OF OPERATING EARNINGS
FROM CONDENSED CONSOLIDATED SEGMENT FINANCIAL INFORMATION AS
REPORTED TO SUPPLEMENTALLY PROVIDED ADJUSTED EBITDA AND PRO FORMA
ADJUSTED EBITDA TABLE 5
Third Quarter Ended Year-To-Date Ended November
29, November 30, November 29,
November 30, 2014 2013
2014 2013 (In millions) (12 weeks)
(12 weeks) (40 weeks) (40 weeks) Independent
Business operating earnings, as reported $ 60 $ 53 $ 180 $ 181
Adjustments: Severance costs and accelerated stock-based
compensation charges — — 1 13 Multiemployer pension withdrawal
charge — 3 — 3 Asset impairment and other charges — 2 — 2 Contract
breakage and other costs — — — 1 Gain on sale of property —
(1 ) — (15 ) Independent
Business operating earnings, as adjusted 60 57 181 185 Independent
Business depreciation and amortization 10 11 36 40 LIFO charge
1 — 3 1
Independent Business adjusted EBITDA(1) $ 71 $ 68 $
220 $ 226 Save-A-Lot operating earnings, as
reported $ 34 $ 40 $ 106 $ 124 Adjustments: Severance costs — — — 2
Asset impairment and other charges — — — 3 Legal settlement charge
— — — 5
Save-A-Lot operating earnings, as adjusted 34 40 106 134 Save-A-Lot
depreciation and amortization 15 15
50 50 Save-A-Lot adjusted EBITDA(1) $
49 $ 55 $ 156 $ 184 Retail Food
operating earnings, as reported $ 28 $ 25 $ 78 $ 39 Adjustments:
Severance costs and accelerated stock-based compensation charges —
(1 ) — 6 Asset impairment and other charges — — — 9 Contract
breakage and other costs — — —
2 Retail Food operating earnings, as adjusted
28 24 78 56 Retail Food depreciation and amortization 40 41 133 145
LIFO charge (credit) 2 (1 ) 4 (3 ) Equity in earnings of
unconsolidated affiliates(2) 1 — 3 2 Net earnings attributable to
noncontrolling interests(2) (2 ) (1 ) (6 )
(5 ) Retail Food adjusted EBITDA(1)(2) $ 69 $ 63
$ 212 $ 195 Corporate operating loss,
as reported $ (66 ) (12 ) $ (79 ) $ (42 ) Adjustments: Pension
settlement charge 63 — 63 — Information technology intrusion costs,
net of insurance recoverable 1 — 2 — Severance costs and
accelerated stock-based compensation charges — — — 17 Contract
breakage and other costs — 1 — 3 Asset impairment and other charges
— — — 2
Corporate operating loss, as adjusted (2 ) (11 ) (14 ) (20 )
Corporate depreciation and amortization — —
— — Corporate adjusted EBITDA(1)
$ (2 ) $ (11 ) $ (14 ) $ (20 ) Total adjusted EBITDA(1)(2) $ 187
$ 175 $ 574 $ 585 Pro forma adjustment:
Incremental administrative expense reimbursements(3) —
— — 11 Total pro
forma adjusted EBITDA(1)(2)(3) $ 187 $ 175 $ 574
$ 596
(1) The Company's measure of adjusted EBITDA includes SUPERVALU
INC.'s segment operating earnings (loss), as reported, plus
depreciation and amortization, LIFO charge (credit), equity
earnings of unconsolidated affiliates, earnings attributable to
noncontrolling interests and any unusual items.
(2) In the first quarter of fiscal 2015, the Company revised its
definition of Adjusted EBITDA to include equity in earnings of
unconsolidated affiliates and net earnings attributable to
noncontrolling interests in order for previously reported Adjusted
EBITDA measures to remain unchanged when reconciling from segment
operating earnings after corrections to certain condensed
consolidated financial statement line items were made.
(3) Incremental administrative expense reimbursements represents
additional fees that the Company would have received under the
Transition Services Agreements between SUPERVALU INC. and New
Albertson's, Inc. ("NAI") and between SUPERVALU INC. and
Albertson's LLC ("ABS") entered into in connection with the sale of
the NAI retail banners to AB Acquisition, LLC (the "NAI TSA") on
March 21, 2013 (the "NAI Banner Sale"), net of the fees recognized
under the previous agreement between SUPERVALU INC. and ABS, which
was terminated on the closing of the NAI Banner Sale. The NAI TSA
provides NAI and ABS with certain administrative and other services
following the closing of the NAI Banner Sale for an initial term of
two and a half years following the sale and is subject to certain
adjustments under the terms of the agreement, such as a decrease in
the number of stores and distribution centers operated by NAI and
ABS. Upon commencement of discontinued operations presentation in
accordance with GAAP, SUPERVALU INC. retained certain
administrative functions for which SUPERVALU INC. agreed to provide
transitional services to NAI similar to those previously provided
to ABS. This pro forma adjustment is intended to provide investors
an understanding as to the effects of administrative expenses
reported by SUPERVALU INC. under discontinued operations
presentation in accordance with GAAP, which subsequent to the NAI
Banner Sale are covered under the NAI TSA. This pro forma
adjustment is directly attributable to the NAI Banner Sale and the
presentation of reporting thereon, is derived from the terms of the
NAI TSA, and will have a continuing impact on SUPERVALU INC.'s
results.
SUPERVALU INC.Investor
ContactSteve Bloomquist, 952-828-4144steve.j.bloomquist@supervalu.comorMedia ContactJeff Swanson,
952-903-1645jeffrey.s.swanson@supervalu.com
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