- Fourth quarter net earnings from
continuing operations of $6 million; adjusted EBITDA of $124
million
- Fourth quarter net earnings per
share from continuing operations of $0.02; adjusted earnings per
share of $0.13
- Completion of Save-A-Lot sale in
fourth quarter strengthened balance sheet
- Agreement to acquire Unified Grocers
announced in April 2017
- Total outstanding debt and pension
obligation reduced by $1.04 billion and $248 million, respectively,
in fiscal 2017
SUPERVALU INC. (NYSE: SVU) today reported fourth quarter fiscal
2017 consolidated net sales of $2.91 billion and net earnings from
continuing operations of $6 million, or $0.02 per diluted share,
which included $32 million in after-tax charges and costs related
to an asset impairment charge, unamortized financing cost charges
and a pension settlement charge. When adjusted for these items,
fourth quarter fiscal 2017 net earnings from continuing operations
were $38 million, or $0.13 per diluted share.
Net earnings from continuing operations for last year’s fourth
quarter were $30 million, or $0.10 per diluted share, which
included $9 million in after-tax charges and costs related to
debt refinancing charges and store closure charges and costs. When
adjusted for these items, fourth quarter fiscal 2016 net earnings
from continuing operations were $39 million, or $0.14 per diluted
share.
In the fourth quarter of fiscal 2017, SUPERVALU completed the
sale of its Save-A-Lot business. The results of operations,
financial position and cash flows of the Save-A-Lot business are
presented as discontinued operations for all periods, and
SUPERVALU's results from continuing operations no longer include
the sales, operating earnings, net earnings, and adjusted EBITDA
from Save-A-Lot. Certain costs previously charged to Save-A-Lot are
included in SUPERVALU's results from continuing operations and now
relate to performing under the services agreement entered into with
Save-A-Lot. For comparability purposes, management includes a
pro forma adjustment to its adjusted EBITDA that reflects the fees
SUPERVALU expects to recognize under the services agreement for the
applicable periods prior to the sale. [See tables 1-6 for a
reconciliation of GAAP and non-GAAP (adjusted) results appearing in
this release.]
"We finished fiscal 2017 with momentum in our Wholesale business
and an improved balance sheet resulting from the sale of
Save-A-Lot,” said President and CEO Mark Gross. “I’m very excited
about our agreement to acquire Unified Grocers as it brings
together two great companies to create one of the nation’s leading
grocery wholesale organizations. At the same time, we are working
to fundamentally improve the shopping experience in our retail
stores and with new leadership and renewed passion we are focused
on changing our operating results. I remain optimistic for growth
and believe strongly in the path our team is pursuing to achieve
it.”
Fourth Quarter Results - Continuing Operations
Fourth quarter net sales were $2.91 billion compared to $2.89
billion last year, an increase of $16 million or 0.6 percent. Total
net sales within the Wholesale segment increased 3.0 percent.
Retail identical store sales were negative 5.8 percent. Fees earned
under services agreements in the fourth quarter were $42 million
compared to $44 million last year.
Gross profit for the fourth quarter was $435 million, or 15.0
percent of net sales. Last year’s fourth quarter gross profit was
$431 million, or 14.9 percent of net sales. The gross profit rate
increase compared to last year is primarily driven by higher gross
margins and vendor allowances as well as lower inventory shrink
costs.
Selling and administrative expenses in the fourth quarter were
$400 million and included a $41 million asset impairment charge and
a $1 million pension settlement charge. When adjusted for these
items, selling and administrative expenses were $358 million, or
12.3 percent of net sales. Selling and administrative expenses in
last year’s fourth quarter were $356 million and included $6
million of store closure charges and costs. When adjusted for these
items, last year's selling and administrative expenses were $350
million, or 12.1 percent of net sales. The increase in the adjusted
selling and administrative expenses rate compared to last year was
primarily driven by higher employee costs, partially offset by
lower pension expense.
Net interest expense for the fourth quarter was $40 million
which included $12 million in unamortized financing cost charges.
When adjusted for this item, net interest expense was $28 million.
Last year's fourth quarter net interest expense was $47 million
which included $10 million in debt refinancing costs and
unamortized financing cost charges. When adjusted for these items,
last year's fourth quarter interest expense was $37 million. The
decrease in adjusted net interest expense was primarily driven by
lower outstanding debt balances associated with the use of proceeds
from the sale of Save-A-Lot.
Income tax benefit was $9 million for the fourth quarter
compared to $0 million in last year’s fourth quarter. The fourth
quarter of both years included discrete items that impacted the
effective tax rate.
Wholesale
Fourth quarter Wholesale net sales were $1.79 billion, compared
to $1.74 billion last year, an increase of 3.0 percent. The net
sales increase is primarily due to sales to new customers and
increased sales from new stores operated by existing customers,
partially offset by stores from the prior year no longer being
supplied by the Company.
Wholesale operating earnings in the fourth quarter were $64
million, or 3.6 percent of net sales. Last year’s Wholesale
operating earnings in the fourth quarter were $50 million, or 2.9
percent of net sales. The increase in Wholesale operating earnings
was driven by higher gross margins and vendor allowances.
Retail
Fourth quarter Retail net sales were $1.07 billion, compared to
$1.11 billion last year, a decrease of 3.2 percent. The net sales
decrease reflects negative identical store sales of 5.8 percent,
partially offset by sales from acquired and new stores.
Retail operating loss in the fourth quarter was $27 million and
included a $41 million asset impairment charge. When adjusted for
this item, Retail operating earnings were $14 million, or 1.3
percent of net sales. Last year’s Retail operating earnings in the
fourth quarter were $30 million, or 2.7 percent of net sales. The
decrease in Retail operating earnings, as adjusted, was driven
by the impact of lower sales and higher employee costs partially
due to acquired and new stores.
Corporate
Fourth quarter fees earned under services agreements were $42
million compared to $44 million last year.
Net Corporate operating loss in the fourth quarter was $2
million and included $1 million of costs related to a pension
settlement charge. When adjusted for this item, net Corporate
operating loss was $1 million. Last year’s fourth quarter net
Corporate operating loss was $5 million and included $6 million in
store closure charges and costs. When adjusted for this item, last
year's net Corporate operating income was $1 million. The decrease
in net Corporate operating earnings, as adjusted, was primarily
driven by higher employee costs, partially offset by lower pension
expense.
Discontinued Operations
Fiscal 2017 included a $577 million after-tax gain on the sale
of Save-A-Lot, recorded in Income from discontinued operations, net
of tax.
Cash Flows - Continuing Operations
Fiscal 2017 net cash flows provided by operating activities of
continuing operations were $308 million, compared to $245 million
last year, primarily reflecting lower levels of cash utilized
toward operating assets and liabilities. Fiscal 2017 net cash flows
used in investing activities of continuing operations were $198
million, compared to $187 million last year, primarily reflecting
an increase in capital spending. Fiscal 2017 net cash flows used in
financing activities of continuing operations were $1,106 million,
compared to $192 million last year, primarily reflecting the
required debt prepayments as part of the Save-A-Lot sale.
Conference Call
A conference call to review the fourth quarter and full year
fiscal 2017 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 $12
billion. SUPERVALU serves customers across the United States
through a network of 2,363 stores including 1,902 stores
operated by wholesale customers serviced primarily by the Company’s
food distribution business and 217 traditional retail grocery
stores operated under five retail banners in six geographic regions
(store counts as of February 25, 2017). Headquartered in
Minnesota, SUPERVALU has approximately 29,000 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, the matters set forth in this news release and related
conference call, particularly those pertaining to SUPERVALU’s
expectations, guidance, or future operating results, and other
statements identified by words such as “estimates,” “expects,”
“projects,” “plans,” “intends,” “outlook” 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 operations and
initiatives, ability to realize benefits from acquisitions and
dispositions, ability to grow sales, reliance on the wholesale
customers' performance, failure to perform services, wind down of
the Company’s relationships with Albertson’s LLC and New
Albertson’s, Inc., ability to maintain or increase margins or
identical store sales, restrictive covenants from indebtedness,
labor relations issues, escalating costs of providing employee
benefits, intrusions to and disruption of information technology
systems, changes in military business, adequacy of insurance, asset
impairment charges, fluctuations in our common stock price, impact
of economic conditions, commodity pricing, severe weather,
disruption to supply chain and distribution network, governmental
regulation, food and drug safety issues, legal proceedings,
pharmacy reimbursement and health care financing, intellectual
property protection, 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
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In millions, except percent and per share data)
Fourth Quarter Ended Fiscal Year
Ended
February 25, 2017
February 27, 2016
February 25, 2017
February 27, 2016
(12 weeks) (12 weeks) (52 weeks) (52
weeks) Net sales $ 2,907 100.0 % $ 2,891
100.0 % $ 12,480 100.0 % $ 12,907
100.0 %
Cost of sales 2,472 85.0
2,460 85.1 10,693 85.7
11,033 85.5
Gross profit 435
15.0 431 14.9 1,787 14.3 1,874 14.5
Selling and administrative
expenses(1) 400 13.7 356 12.3 1,589 12.7 1,570 12.2
Goodwill and intangible asset impairment charges(1)
— — — — 15
0.1 6 —
Operating earnings 35
1.2 75 2.6 183 1.5 298 2.3
Interest expense, net(1)
40 1.3 47 1.6 181 1.4 195 1.5
Equity in earnings of
unconsolidated affiliates (2 ) — (2 ) —
(5 ) — (5 ) —
(Loss) earnings
from continuing operations before income taxes(1) (3 )
(0.1 ) 30 1.0 7 0.1 108 0.8
Income tax (benefit) provision
(9 ) (0.3 ) — — (20 ) (0.2 )
24 0.2
Net earnings from continuing
operations(1) 6 0.2 30 1.0 27 0.2 84 0.6
Income from
discontinued operations, net of tax 594 20.5
24 0.9 627 5.0
102 0.8
Net earnings including
noncontrolling interests 600 20.7 54 1.9 654 5.2 186 1.4
Less net earnings attributable to noncontrolling interests
(1 ) — (2 ) (0.1 ) (4 ) —
(8 ) (0.1 )
Net earnings attributable to SUPERVALU INC. $
599 20.6 % $ 52 1.8 % $ 650 5.2 % $ 178
1.4 %
Basic net earnings per share attributable to
SUPERVALU INC.: Continuing operations $ 0.02 $ 0.10 $ 0.09 $
0.29 Discontinued operations $ 2.23 $ 0.09 $ 2.37 $ 0.39 Basic net
earnings per share $ 2.25 $ 0.20 $ 2.45 $ 0.68
Diluted net
earnings per share attributable to SUPERVALU INC.: Continuing
operations(2) $ 0.02 $ 0.10 $ 0.09 $ 0.28 Discontinued operations $
2.21 $ 0.09 $ 2.34 $ 0.38 Diluted net earnings per share $ 2.23 $
0.20 $ 2.43 $ 0.66
Weighted average number of shares
outstanding: Basic 267 264 265 263 Diluted 269 267 268 268
(1)
Results from continuing operations for the fourth quarter
ended February 25, 2017 include net charges and costs of $54 before
tax ($32 after tax, or $0.11 per diluted share), composed of an
asset impairment charge of $41 before tax ($25 after tax, or $0.09
per diluted share) and a pension settlement charge of $1 before tax
($0 after tax, or $0.00 per diluted share) within Selling and
administrative expenses, and unamortized financing cost charges of
$12 before tax ($7 after tax, or $0.02 per diluted share) within
Interest expense, net.
Results from continuing operations for the
fourth quarter ended February 27, 2016 include net charges and
costs of $16 before tax ($9 after tax, or $0.04 per diluted share),
comprised of debt refinancing costs of $6 before tax ($4 after tax,
or $0.02 per diluted share) and unamortized financing cost charges
of $4 before tax ($2 after tax, or $0.01 per diluted share)
included within Interest expense, net, and store closure charges
and costs of $6 before tax ($3 after tax, or $0.01 per diluted
share) included within Selling and administrative expenses.
Results from continuing operations for the
year ended February 25, 2017 include net charges and costs of
$110 before tax ($56 after tax, or $0.20 per diluted share),
comprised of pension settlement charges of $42 before tax ($24
after tax, or $0.09 per diluted share), an asset impairment charge
of $41 before tax ($25 after tax, or $0.09 per diluted share) and
store closure charges and costs of $5 before tax ($4 after tax, or
$0.01 per diluted share), offset in part by a supply agreement
termination fee of $9 before tax ($6 after tax, or $0.02 per
diluted share), a sales and use tax refund of $2 before tax ($1
after tax, or $0.00 per diluted share), and severance benefits of
$1 before tax ($1 after tax, or $0.00 per diluted share) within
Selling and administrative expenses, a goodwill impairment charge
of $15 before tax ($9 after tax, or $0.03 per diluted share) within
Goodwill and intangible asset impairment charges, and unamortized
financing cost charges of $17 before tax ($10 after tax, or $0.03
per diluted share), and debt refinancing costs of $2 before tax ($1
after tax, or $0.00 per diluted share) within Interest expense,
net.
Results from continuing operations for the
year ended February 27, 2016 include net charges and costs of
$29 before tax ($17 after tax, or $0.06 per diluted share),
comprised of store closure charges and costs of $7 before tax ($4
after tax, or $0.01 per diluted share), an intangible asset
impairment charge of $6 before tax ($4 after tax, or $0.01 per
diluted share) and severance costs of $6 before tax ($3 after tax,
or $0.01 per diluted share) included within Selling and
administrative expenses, and debt refinancing costs of $6 before
tax ($4 after tax, or $0.02 per diluted share) and unamortized
financing cost charges of $4 before tax ($2 after tax, or $0.01 per
diluted share) included within Interest expense, net.
SUPERVALU INC. and Subsidiaries
CONSOLIDATED SEGMENT FINANCIAL INFORMATION
(Unaudited) (In millions, except percent data)
Fourth Quarter Ended Fiscal Year
Ended February 25, February 27,
February 25, February 27, 2017
2016 2017 2016 (12 weeks) (12
weeks) (52 weeks) (52 weeks) Net sales
Wholesale $ 1,793 $ 1,740 $ 7,705 $ 7,935 % of total 61.7 % 60.2 %
61.7 % 61.5 % Retail 1,072 1,107 4,596 4,769 % of total 36.9 % 38.3
% 36.8 % 36.9 % Corporate 42 44 179 203 % of total 1.4 %
1.5 % 1.5 % 1.6 % Total net sales $ 2,907 $
2,891 $ 12,480 $ 12,907 100.0 % 100.0 % 100.0
% 100.0 %
Operating earnings Wholesale(1) $ 64 $ 50 $
238 $ 230 % of Wholesale sales 3.6 % 2.9 % 3.1 % 2.9 % Retail(2)
(27 ) 30 (45 ) 94 % of Retail sales (2.6 )% 2.7 % (1.0 )% 2.0 %
Corporate(3) (2 ) (5 ) (10 ) (26 )
Total operating earnings 35 75 183 298 % of total net sales 1.2 %
2.6 % 1.5 % 2.3 %
Interest expense, net(4) 40 47 181
195
Equity in earnings of unconsolidated affiliates
(2 ) (2 ) (5 ) (5 )
(Loss) earnings from
continuing operations before income taxes (3 ) 30 7 108
Income tax (benefit) provision (9 ) —
(20 ) 24
Net earnings from continuing
operations 6 30 27 84
Income from discontinued operations,
net of tax 594 24 627
102
Net earnings including noncontrolling
interests 600 54 654 186
Less net earnings attributable to
noncontrolling interests (1 ) (2 ) (4 )
(8 )
Net earnings attributable to SUPERVALU INC. $
599 $ 52 $ 650 $ 178
LIFO
(credit) charge Wholesale $ (1 ) $ (1 ) $ — $ 1 Retail
(1 ) (2 ) 1 2 Total LIFO
(credit) charge $ (2 ) $ (3 ) $ 1 $ 3
Depreciation
and amortization Wholesale $ 14 $ 12 $ 54 $ 49 Retail 31 35 145
153 Corporate 3 2 8
8 Total depreciation and amortization $ 48 $
49 $ 207 $ 210 (1)
Wholesale operating earnings for the fiscal year ended February 25,
2017 include a supply agreement termination fee of $9. Wholesale
operating earnings for the fiscal year ended February 27, 2016
include an intangible asset impairment charge of $6.
(2)
Retail operating loss for the fourth
quarter ended February 25, 2017 includes an asset impairment
charge of $41. Retail operating loss for the fiscal year ended
February 25, 2017 includes an asset impairment charge of $41,
a goodwill impairment charge of $15 and store closure charges and
costs of $5. Retail operating earnings for the fiscal year ended
February 27, 2016 include store closure charges and costs of
$1.
(3)
Corporate operating loss for the fourth
quarter ended February 25, 2017 includes a pension settlement
charge of $1. Corporate operating loss for the fourth quarter ended
February 27, 2016 includes store closure charges and costs of $6.
Corporate operating loss for the fiscal year ended
February 25, 2017 includes pension settlement charges of $42,
offset in part by a sales and use tax refund of $2 and a severance
benefit of $1. Corporate operating loss for the fiscal year ended
February 27, 2016 includes severance costs of $6 and store closure
charges and costs of $6.
(4)
Interest expense, net for the fourth
quarter ended February 25, 2017 includes unamortized financing
cost charges of $12. Interest expense, net for the fiscal year
ended February 25, 2017 includes unamortized financing cost
charges of $17 and debt refinancing costs of $2. Interest expense,
net for the fourth quarter and fiscal year ended February 27, 2016
includes debt refinancing costs of $6 and unamortized financing
costs charges of $4.
SUPERVALU INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS (Unaudited) (In
millions, except par value data)
February 25, February 27, 2017 2016
ASSETS Current assets Cash and cash equivalents $ 332
$ 42 Receivables, net 386 406 Inventories, net 764 738 Other
current assets 59 73 Current assets of discontinued operations
— 376
Total current assets 1,541
1,635
Property, plant and equipment, net 1,004 1,021
Goodwill 710 725
Intangible assets, net 39 47
Deferred tax assets 165 238
Other assets 121 91
Long-term assets of discontinued operations —
613
Total assets $ 3,580 $ 4,370
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current
liabilities Accounts payable $ 881 $ 829 Accrued vacation,
compensation and benefits 150 148 Current maturities of long-term
debt and capital lease obligations 26 123 Other current liabilities
172 126 Current liabilities of discontinued operations —
346
Total current liabilities 1,229
1,572
Long-term debt 1,263 2,197
Long-term capital lease
obligations 186 194
Pension and other postretirement benefit
obligations 322 578
Long-term tax liabilities 63 75
Other long-term liabilities 134 145
Long-term liabilities
of discontinued operations — 42
Commitments and
contingencies Stockholders’ equity (deficit) Common
stock, $0.01 par value: 400 shares authorized; 268 and 266 shares
issued, respectively 3 3 Capital in excess of par value 2,828 2,808
Treasury stock, at cost, 0 and 1 shares, respectively (2 ) (5 )
Accumulated other comprehensive loss (278 ) (422 ) Accumulated
deficit (2,175 ) (2,825 )
Total SUPERVALU INC.
stockholders’ equity (deficit) 376 (441 ) Noncontrolling
interests 7 8
Total stockholders’
equity (deficit) 383 (433 )
Total
liabilities and stockholders’ equity (deficit) $ 3,580 $
4,370
SUPERVALU INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions) Fiscal Year Ended
February 25, 2017 February 27, 2016
(52 weeks) (52 weeks) Cash flows from operating
activities Net earnings including noncontrolling interests $
654 $ 186 Income from discontinued operations, net of tax
627 102 Net earnings from continuing
operations 27 84 Adjustments to reconcile Net earnings from
continuing operations to Net cash provided by operating
activities—continuing operations: Goodwill and intangible asset
impairment charges 15 6 Asset impairment and other charges 47 8
Loss on debt extinguishment 19 10 Net gain on sale of assets and
exits of surplus leases (1 ) (2 ) Depreciation and amortization 207
210 LIFO charge 1 3 Deferred income taxes 2 1 Stock-based
compensation 18 22 Net pension and other postretirement benefits
costs 18 34 Contributions to pension and other postretirement
benefit plans (62 ) (40 ) Other adjustments 3 20 Changes in
operating assets and liabilities, net of effects from business
combinations: Receivables 27 22 Inventories (18 ) (52 ) Accounts
payable and accrued liabilities 36 (33 ) Income taxes (23 ) (8 )
Other changes in operating assets and liabilities (8 )
(40 )
Net cash provided by operating
activities—continuing operations 308 245
Net cash provided
by operating activities—discontinued operations 53
179
Net cash provided by operating
activities 361 424
Cash flows
from investing activities Proceeds from sale of assets 4 2
Purchases of property, plant and equipment (182 ) (158 ) Payments
for business acquisition (19 ) (7 ) Other (1 ) (24 )
Net cash used in investing activities—continuing operations
(198 ) (187 )
Net cash provided by (used in) investing
activities—discontinued operations 1,219
(101 )
Net cash provided by (used in) investing activities
1,021 (288 )
Cash flows from financing
activities Proceeds from issuance of debt 218 138 Proceeds from
the sale of common stock 3 10 Payments of debt and capital lease
obligations (1,315 ) (320 ) Payments for debt financing costs (6 )
(9 ) Distributions to noncontrolling interests (7 ) (10 ) Dividends
paid — — Other 1 (1 )
Net cash used in
financing activities—continuing operations (1,106 ) (192 )
Net cash used in financing activities—discontinued
operations (1 ) (1 )
Net cash used in
financing activities (1,107 ) (193 ) Net increase
(decrease) in cash and cash equivalents 275 (57 )
Cash and cash
equivalents at beginning of year 57 114
Cash and cash equivalents at end of year $ 332 $ 57
Less cash and cash equivalents of discontinued operations at end
of year — (15 )
Cash and cash
equivalents of continuing operations at end of year $ 332
$ 42
SUPPLEMENTAL CASH FLOW INFORMATION
Supervalu’s non-cash activities were as follows: Purchases of
property, plant and equipment included in Accounts payable $ 33 $
28 Capital lease asset additions $ 17 $ 20 Interest and income
taxes paid: Interest paid, net of amounts capitalized $ 156 $ 176
Income taxes (refunded) paid, net $ 24 $ 91
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, and the adjusted Selling and administrative expenses, 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 exclude certain items that are 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 and financial institutions 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 25, 2017.
RECONCILIATIONS OF (LOSS) EARNINGS FROM
CONTINUING OPERATIONS TO EARNINGS FROM CONTINUING OPERATIONS AFTER
ADJUSTMENTS
Table 1 Fourth
Quarter Ended February 25, 2017
Diluted
(Loss) earnings
Earnings After
Earnings Per
(In millions, except per share data) Before Tax
Tax
Share
Continuing operations $ (3 ) $ 6 $ 0.02 Adjustments: Asset
impairment charge 41 25 0.09 Unamortized financing cost charges 12
7 0.02 Pension settlement charge 1 —
— Continuing operations after adjustments $ 51
$ 38 $ 0.13
Table 2 Fiscal Year
Ended February 25, 2017
Diluted
Earnings
Earnings After
Earnings Per
(In millions, except per share data) Before Tax
Tax
Share
Continuing operations $ 7 $ 27 $ 0.09 Adjustments: Pension
settlement charges 42 24 0.09 Asset impairment charge 41 25 0.09
Unamortized financing cost charges 17 10 0.03 Goodwill impairment
charge 15 9 0.03 Store closure charges and costs 5 4 0.01 Debt
refinancing costs 2 1 — Supply agreement termination fee (9 ) (6 )
(0.02 ) Deferred income tax benefit — (9 ) (0.03 ) Sales and use
tax refund (2 ) (1 ) — Severance costs (1 ) (1 )
— Continuing operations after adjustments $ 117
$ 83 $ 0.29
Table 3 Fourth
Quarter Ended February 27, 2016
Diluted
Earnings
Earnings After
Earnings Per
(In millions, except per share data) Before Tax
Tax
Share
Continuing operations $ 30 $ 30 $ 0.10 Adjustments: Store closure
charges and costs 6 3 0.01 Debt refinancing costs 6 4 0.02
Unamortized financing cost charges 4 2
0.01 Continuing operations after adjustments $ 46
$ 39 $ 0.14
Table 4 Fiscal
Year Ended February 27, 2016
Diluted
Earnings
Earnings After
Earnings Per
(In millions, except per share data) Before Tax
Tax
Share
Continuing operations $ 108 $ 84 $ 0.28 Adjustments: Store closure
charges and costs 7 4 0.01 Severance costs 6 3 0.01 Intangible
asset impairment charge 6 4 0.01 Debt refinancing costs 6 4 0.02
Unamortized financing cost charges 4 2
0.01 Continuing operations after adjustments $ 137
$ 101 $ 0.34
RECONCILIATIONS
OF NET EARNINGS FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA AND
PRO FORMA ADJUSTED EBITDA
Table 5 Fourth Quarter Ended Fiscal Year
Ended February 25, February 27,
February 25, February 27, 2017 2016
2017 2016 (In millions) (12 weeks)
(12 weeks) (52 weeks) (52 weeks) Results of
operations, as reported Net earnings from continuing operations
$ 6 $ 30 $ 27 $ 84 Income tax (benefit) provision (9 ) — (20 ) 24
Equity in earnings of unconsolidated affiliates (2 ) (2 ) (5 ) (5 )
Interest expense, net 40 47 181
195 Total operating earnings $ 35 $ 75
$ 183 $ 298 Add Equity in earnings of
unconsolidated affiliates 2 2 5 5 Less net earnings attributable to
noncontrolling interests (1 ) (2 ) (4 ) (8 ) Depreciation and
amortization 48 49 207 210 LIFO charge (2 ) (3 ) 1 3 Pension
settlement charges 1 — 42 — Asset impairment charge 41 — 41 —
Goodwill and intangible asset impairment charges — — 15 6 Store
closure charges and costs — 6 5 7 Severance (benefit) cost — — (1 )
6 Sales and use tax refund — — (2 ) — Supply agreement termination
fee — — (9 ) —
Adjusted EBITDA(1) $ 124 $ 127 $ 483 $ 527
Pro forma adjustments: Net sales(2) — 8 33 47 Cost of
sales(3) — (2 ) (9 ) (17 ) Total
pro forma adjustments — 6 24
30 Pro forma adjusted EBITDA $ 124 $
133 $ 507 $ 557 (1) The
Company's measure of adjusted EBITDA includes SUPERVALU INC.'s
operating earnings (loss), as reported, plus depreciation and
amortization, LIFO charge, equity earnings of unconsolidated
affiliates and certain adjustment items as determined by
management, and less net earnings attributable to noncontrolling
interests.
(2)
This adjustment reflects (1) the fees that
the Company expects to recognize in connection with performing
services for Save-A-Lot under the services agreement entered into
with Save-A-Lot on December 5, 2016 (the "Services Agreement") and
(2) Wholesale distribution sales to Save-A-Lot pursuant to a
customer agreement between the Company and Save-A-Lot that had
historically been intercompany sales. Actual Services Agreement
fees are subject to adjustments pursuant to the terms of the
Services Agreement including for changes in service levels. This
adjustment only applies to time periods prior to the sale of
Save-A-Lot on December 5, 2016.
(3)
This adjustment reflects the Cost of sales
related to Wholesale’s distribution to Save-A-Lot, which was
previously eliminated on an intercompany basis. No adjustment for
expenses related to the Services Agreement has been included within
Cost of sales because the shared service center costs incurred to
support back office functions related to the Services Agreement
represent administrative overhead costs that have been included
within Selling and administrative expenses within the Company’s
historical consolidated financial statements. This adjustment only
applies to time periods prior to the sale of Save-A-Lot on December
5, 2016.
RECONCILIATION OF OPERATING EARNINGS FROM
CONSOLIDATED SEGMENT FINANCIAL INFORMATION AS REPORTED TO
SUPPLEMENTALLY PROVIDED ADJUSTED EBITDA AND PRO FORMA ADJUSTED
EBITDA Table 6 Fourth
Quarter Ended Fiscal Year Ended
February 25,
February 27,
February 25,
February 27,
2017 2016 2017 2016 (In
millions) (12 weeks) (12 weeks) (52 weeks)
(52 weeks) Results of operations, as reported: Net
earnings from continuing operations $ 6 $ 30 $ 27 $ 84 Income tax
provision (9 ) — (20 ) 24 Equity in earnings of unconsolidated
affiliates (2 ) (2 ) (5 ) (5 ) Interest expense, net 40
47 181 195 Total
operating earnings $ 35 $ 75 $ 183 $ 298
Reconciliation of segment operating earnings to total
operating earnings, as reported Wholesale operating earnings $
64 $ 50 $ 238 $ 230 Retail operating (loss) earnings (27 ) 30 (45 )
94 Corporate operating loss (2 ) (5 ) (10 )
(26 ) Total operating earnings $ 35 $ 75 $ 183
$ 298
Reconciliation of segment operating
earnings, as reported, to segment Adjusted EBITDA and consolidated
pro forma adjusted EBITDA: Wholesale operating earnings, as
reported $ 64 $ 50 $ 238 $ 230 Adjustments: Supply agreement
termination fee — — (9 ) — Intangible asset impairment charge
— — — 6
Wholesale operating earnings, as adjusted 64 50 229 236 Wholesale
depreciation and amortization 14 12 54 49 LIFO (credit) charge
(1 ) (1 ) — 1 Wholesale
adjusted EBITDA(1) $ 77 $ 61 $ 283 $ 286
Retail operating (loss) earnings, as reported $ (27 )
$ 30 $ (45 ) $ 94 Adjustments: Asset impairment charge 41 — 41 —
Goodwill impairment charge — — 15 — Store closure charges and costs
— — 5 1
Retail operating earnings, as adjusted 14 30 16 95 Retail
depreciation and amortization 31 35 145 153 LIFO (credit) charge (1
) (2 ) 1 2 Equity in earnings of unconsolidated affiliates 2 2 5 5
Net earnings attributable to noncontrolling interests (1 )
(2 ) (4 ) (8 ) Retail adjusted EBITDA(1) $ 45
$ 63 $ 163 $ 247 Corporate
operating (loss) earnings, as reported $ (2 ) $ (5 ) $ (10 ) $ (26
) Adjustments: Pension settlement charges 1 — 42 — Sales and use
tax refund — — (2 ) — Severance costs — — (1 ) 6 Store closure
charges and costs 6 — 6
Corporate operating (loss) earnings, as adjusted (1 ) 1 29
(14 ) Corporate depreciation and amortization 3
2 8 8 Corporate adjusted
EBITDA(1) $ 2 $ 3 $ 37 $ (6 ) Total adjusted
EBITDA(1) $ 124 $ 127 $ 483 $ 527 Pro
forma adjustments: Net sales(2) — 8 33 47 Cost of sales(3) —
(2 ) (9 ) (17 ) Total Pro forma
adjustments — 6 24
30 Pro Forma Adjusted EBITDA $ 124 $ 133 $ 507
$ 557 (1) The Company's measure
of adjusted EBITDA includes SUPERVALU INC.'s segment operating
earnings (loss), as reported, plus depreciation and amortization,
LIFO charge, equity earnings of unconsolidated affiliates and
certain adjustment items as determined by management, and less net
earnings attributable to noncontrolling interests.
(2)
This adjustment reflects (1) the fees that
the Company expects to recognize in connection with performing
services for Save-A-Lot under the Services Agreement and (2)
Wholesale distribution sales to Save-A-Lot pursuant to a customer
agreement between the Company and Save-A-Lot that had historically
been intercompany sales. Actual Services Agreement fees are subject
to adjustments pursuant to the terms of the Services Agreement
including for changes in service levels. This adjustment only
applies to time periods prior to the sale of Save-A-Lot on December
5, 2016.
(3)
This adjustment reflects the Cost of sales
related to Wholesale’s distribution to Save-A-Lot, which was
previously eliminated on an intercompany basis. No adjustment for
expenses related to the Services Agreement has been included within
Cost of sales because the shared service center costs incurred to
support back office functions related to the Services Agreement
represent administrative overhead costs that have been included
within Selling and administrative expenses within the Company’s
historical consolidated financial statements. This adjustment only
applies to time periods prior to the sale of Save-A-Lot on December
5, 2016.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170425005403/en/
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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