- Consolidated net sales increased by
$935 million, or 31%, over last year’s third
quarter
- Wholesale net sales increased by
$982 million, or 52%, over last year’s third quarter,
including Unified Grocers that contributed approximately $860
million to net sales this year
- Third quarter net earnings from
continuing operations of $18 million; Adjusted EBITDA of $96
million
- Completed acquisition of Associated
Grocers of Florida in the fourth quarter
SUPERVALU INC. (NYSE: SVU) today reported third quarter fiscal
2018 consolidated net sales of $3.94 billion and net earnings from
continuing operations of $18 million, or $0.46 per diluted share,
which included $4 million of after-tax merger and integration costs
and $1 million of after-tax store closure charges and costs. When
adjusted for these items, third quarter fiscal 2018 net earnings
from continuing operations were $23 million, or $0.61 per diluted
share, which included a discrete tax benefit that contributed
approximately $0.30 to net earnings from continuing operations per
diluted share.
Net loss from continuing operations for last year’s third
quarter was $11 million, which included $25 million of net
after-tax charges and costs comprised of a pension settlement
charge, a goodwill impairment charge and store closure charges and
costs, partially offset by a deferred income tax benefit. When
adjusted for these items, third quarter fiscal 2017 net earnings
from continuing operations were $14 million, or $0.35 per diluted
share. See tables 1-7 for a reconciliation of GAAP to non-GAAP
(adjusted) results appearing in this release.
"We're pleased to have completed our acquisition of AG Florida
early in the fourth quarter," said President and CEO Mark Gross.
"The work done in the third quarter concluded with this deal which,
combined with the acquisition of Unified Grocers earlier this
fiscal year, demonstrates our commitment to the strategic growth of
our Wholesale business. Furthermore, we're extremely pleased with
the integration work at Unified and the progress made in that
market."
"In addition to these recent acquisitions, we continue to
achieve strong underlying growth in our Wholesale business," Gross
continued. "With the influx of significant new business in
certain distribution centers, we experienced a
larger-than-anticipated increase in expenses, but we're encouraged
by the work we are doing to address those costs and believe they
are manageable going forward. We remain committed to investing in
our Wholesale business to drive future growth.”
Third Quarter Results – Continuing Operations
Third quarter net sales were $3.94 billion compared to $3.00
billion last year, an increase of $935 million or 31 percent. Total
net sales within the Wholesale segment increased 52 percent. Retail
identical store sales were negative 3.5 percent. Fees earned under
services agreements in the third quarter were $33 million compared
to $37 million last year.
Gross profit for the third quarter was $409 million and included
merger and integration costs of $2 million. When adjusted for this
item, gross profit was $411 million, or 10.5 percent of net sales.
Last year’s third quarter gross profit was $407 million, or 13.6
percent of net sales. The gross profit rate decrease compared to
last year is primarily due to the change in business segment mix,
with Wholesale representing a larger portion of total sales and
gross profit, and the contribution from Unified Grocers at a lower
gross profit rate.
Selling and administrative expenses in the third quarter were
$370 million and included merger and integration costs of $3
million and store closure charges and costs of $3 million. When
adjusted for these items, selling and administrative expenses were
$364 million, or 9.3 percent of net sales. Selling and
administrative expenses in last year’s third quarter were $391
million and included a pension settlement charge of $41
million and store closure charges and costs of $1 million. When
adjusted for these items, last year’s selling and administrative
expenses were $349 million, or 11.6 percent of net sales. The
decrease in the adjusted selling and administrative expense rate
compared to last year was primarily driven by the change in
business segment mix, with Wholesale representing a larger portion
of total sales and selling and administrative expenses, and higher
pension income, partially offset by higher employee-related
costs.
Net interest expense for the third quarter was $29 million
compared to $40 million in last year’s third quarter. The decrease
in interest expense was driven by lower average outstanding debt
balances associated with the use of proceeds from the sale of
Save-A-Lot.
Income tax benefit was $8 million, or negative 77.1 percent of
pre-tax earnings, for the third quarter, compared to income tax
benefit of $27 million, or 71.6 percent of pre-tax loss, in last
year’s third quarter. This quarter's tax benefit was driven by a
$12 million non-cash tax benefit from the release of certain tax
reserves.
Supervalu expects the newly enacted federal tax legislation to
reduce future cash taxes, although it is still evaluating the
favorable impact.
Wholesale
Third quarter Wholesale net sales were $2.89 billion, compared
to $1.91 billion last year, an increase of 52 percent. The net
sales increase is primarily due to sales from the acquired Unified
Grocers business, sales to new customers and increased sales to new
stores operated by existing customers, partially offset by stores
no longer operated by customers and lower military sales.
Wholesale operating earnings in the third quarter were $46
million and included $2 million of merger and integration costs.
When adjusted for this item, third quarter Wholesale operating
earnings were $48 million, or 1.7 percent of net sales. Last year’s
third quarter Wholesale operating earnings were $52 million, or 2.7
percent of net sales. The decrease in adjusted Wholesale operating
earnings, as a percent of net sales, was driven by the mix impact
of the acquired Unified Grocers business contributing to operating
earnings at a lower percent of net sales and higher trucking and
logistics costs.
Retail
Third quarter Retail net sales were $1.02 billion, compared to
$1.06 billion last year, a decrease of 4.1 percent. The net sales
decrease reflects identical store sales of negative 3.5 percent and
closed stores, partially offset by new and acquired store
sales.
Retail operating loss in the third quarter was $6 million and
included $3 million in store closure charges and costs. When
adjusted for this item, Retail operating loss in the third quarter
was $3 million. Last year’s third quarter Retail operating loss was
$14 million and included a $15 million goodwill impairment charge
and $1 million of store closure charges and costs. When adjusted
for these items, last year’s third quarter Retail operating
earnings were $2 million, or 0.2 percent of net sales. The decrease
in adjusted Retail operating earnings was driven by the impact of
lower gross margins from lower net sales.
Corporate
Third quarter fees earned under services agreements were $33
million compared to $37 million last year.
Net Corporate operating loss in the third quarter was $1 million
and included $3 million of merger and integration costs. When
adjusted for this item, net Corporate operating earnings were $2
million. Last year’s third quarter net Corporate operating loss was
$37 million and included a $41 million pension settlement charge.
When adjusted for this item, last year’s net Corporate operating
earnings were $4 million.
Cash Flows – Continuing Operations
Fiscal 2018 year-to-date net cash flows used in operating
activities of continuing operations were $44 million compared to
net cash flows provided by operating activities of continuing
operations of $150 million last year, primarily due to cash
utilized for working capital and other assets and liabilities to
support higher Wholesale sales volumes and lower cash generated
from earnings. Fiscal 2018 year-to-date net cash flows used in
investing activities of continuing operations were $328 million
compared to $137 million last year, primarily due to the
acquisition of the Unified Grocers business and two distribution
centers. Fiscal 2018 year-to-date net cash flows provided by
financing activities of continuing operations were $137 million
compared to net cash flows used in financing activities of
continuing operations of $10 million last year, primarily
reflecting borrowings to finance the acquisition of Unified Grocers
and a distribution center this year compared to debt payments made
last year.
Fiscal 2018 Outlook
Supervalu currently expects net earnings from continuing
operations to be in the range of $(20) million to $2 million which
includes a non-cash charge of $35 million to $45 million
anticipated to be made in the fourth quarter to reduce the carrying
value of Supervalu's net deferred tax asset in accordance with the
newly enacted tax reform legislation.
Adjusted EBITDA, including the contribution from Unified Grocers
and Associated Grocers of Florida, is expected to be in the range
of $475 million to $485 million. A reconciliation of projected net
earnings from continuing operations to projected Adjusted EBITDA,
and certain factors affecting the range of expected earnings, is
presented in table 7.
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.
(The following information does not include Associated Grocers
of Florida which became part of SUPERVALU on December 8, 2017)
SUPERVALU INC. is one of the largest grocery wholesalers and
retailers in the U.S. with annual sales of approximately $16
billion. SUPERVALU serves customers across the United States
through a network of 3,324 stores composed of 3,111 wholesale
primary stores operated by customers serviced by SUPERVALU’s food
distribution business and 213 traditional retail grocery stores
operated under five retail banners in six geographic regions (store
counts as of December 2, 2017). Headquartered in Minnesota,
SUPERVALU has approximately 31,000 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
Supervalu’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 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In
millions, except percent and per share data)
Third Quarter Ended Year-To-Date Ended
December 2, December 3, December
2, December 3, 2017 2016
2017 2016 (12 weeks) (12 weeks) (40
weeks) (40 weeks) Net sales $ 3,938
100.0 % $ 3,003 100.0 % $ 11,742 100.0
% $ 9,573 100.0 %
Cost of sales 3,529
89.6 2,596 86.4 10,354
88.2 8,221 85.9
Gross
profit(1) 409 10.4 407 13.6 1,388 11.8 1,352 14.1
Selling and administrative expenses(1) 370 9.4 391
13.0 1,289 11.0 1,189 12.4
Goodwill impairment
charge(1) — — 15 0.5
— — 15 0.2
Operating earnings 39 1.0 1 0.1 99 0.8 148 1.5
Interest
expense, net(1) 29 0.8 40 1.4 103 0.9 141 1.5
Equity
in earnings of unconsolidated affiliates — —
(1 ) — (2 ) — (3 ) —
Earnings (loss) from continuing
operations before income taxes(1)
10 0.3 (38 ) (1.3 ) (2 ) — 10 0.1
Income tax
benefit(1) (8 ) (0.2 ) (27 ) (0.9 )
(7 ) (0.1 ) (11 ) (0.1 )
Net earnings (loss) from
continuing operations(1)(2) 18 0.5 (11 ) (0.4 ) 5 — 21
0.2
Income (loss) from discontinued operations, net of
tax(2) 8 0.2 (14 ) (0.5 )
8 0.1 33 0.3
Net
earnings (loss) including noncontrolling interests 26 0.7 (25 )
(0.9 ) 13 0.1 54 0.6
Less net earnings attributable to
noncontrolling interests — — (1 ) —
(1 ) — (3 ) —
Net earnings
(loss) attributable to SUPERVALU INC. $ 26 0.7 % $ (26 )
(0.9 )% $ 12 0.1 % $ 51 0.5 %
Basic net
earnings (loss) per share attributable to SUPERVALU
INC.:(3) Continuing operations $ 0.47 $ (0.31 ) $ 0.12 $
0.49 Discontinued operations $ 0.21 $ (0.39 ) $ 0.20 $ 0.85 Basic
net earnings (loss) per share $ 0.67 $ (0.69 ) $ 0.32 $ 1.34
Diluted net earnings (loss) per share attributable to SUPERVALU
INC.:(3) Continuing operations(1) $ 0.46 $ (0.31 ) $
0.12 $ 0.48 Discontinued operations $ 0.21 $ (0.39 ) $ 0.20 $ 0.84
Diluted net earnings (loss) per share $ 0.67 $ (0.69 ) $ 0.31 $
1.33
Weighted average number of shares
outstanding:(3) Basic 38 38 38 38 Diluted 38 38 38 38
(1) Results from continuing operations for the third
quarter ended December 2, 2017 include net charges and costs of $8
before tax ($5 after tax, or $0.15 per diluted share), comprised of
merger and integration costs of $3 before tax ($2 after tax, or
$0.07 per diluted share) and store closure charges and costs of $3
before tax ($1 after tax, or $0.04 per diluted share) within
Selling and administrative expenses, and merger and integration
costs of $2 before tax ($2 after tax, or $0.04 per diluted share)
within Gross profit. Results from continuing operations for
the third quarter ended December 3, 2016 include net charges and
costs of $57 before tax ($25 after tax, or $0.66 per diluted
share), comprised of a pension settlement charge of $41 before tax
($24 after tax, or $0.63 per diluted share) and store closure
charges and costs of $1 before tax ($1 after tax, or $0.01 per
diluted share) within Selling and administrative expenses, and a
goodwill impairment charge of $15 before tax ($9 after tax, or
$0.25 per diluted share) within Goodwill impairment charge, offset
in part by a deferred income tax benefit of $0 before tax ($9 after
tax, or $0.23 per diluted share) within Income tax benefit.
Results from continuing operations for the year-to-date ended
December 2, 2017 include net charges and costs of $91 before tax
($60 after tax, or $1.56 per diluted share), comprised of an asset
impairment charge of $42 before tax ($27 after tax, or $0.71 per
diluted share), merger and integration costs of $30 before tax ($21
after tax, or $0.55 per diluted share), a legal reserve charge of
$9 before tax ($6 after tax, or $0.15 per diluted share), severance
costs of $3 before tax ($1 after tax, or $0.04 per diluted share)
and store closure charges and costs of $2 before tax ($1 after tax,
or $0.03 per diluted share) within Selling and administrative
expenses, offset in part by a gain on sale of property of $2 before
tax ($1 after tax, or $0.04 per diluted share) within Selling and
administrative expenses, and unamortized financing charges of $3
before tax ($2 after tax, or $0.05 per diluted share) and debt
refinancing costs of $2 before tax ($1 after tax, or $0.03 per
diluted share) within Interest expense, net, and merger and
integration costs of $2 before tax ($2 after tax, or $0.04 per
diluted share) within Gross profit. Results from continuing
operations for the year-to-date ended December 3, 2016 include net
charges and costs of $56 before tax ($24 after tax, or $0.63 per
diluted share), comprised of a pension settlement charge of $41
before tax ($24 after tax, or $0.63 per diluted share) and store
closure charges and costs of $4 before tax ($4 after tax, or $0.07
per diluted share) within Selling and administrative expenses, a
goodwill impairment charge of $15 before tax ($9 after tax, or
$0.25 per diluted share) within Goodwill impairment charge,
unamortized financing charges of $5 before tax ($3 after tax, or
$0.09 per diluted share) and debt refinancing costs of $2 before
tax ($1 after tax, or $0.02 per diluted share) within Interest
expense, net, and store closure charges and costs of $1 before tax
($0 after tax, or $0.00 per diluted share) within Gross profit,
offset in part by a fee received from a supply agreement
termination of $9 before tax ($6 after tax, or $0.14 per diluted
share), a sales and use tax refund of $2 before tax ($1 after tax,
or $0.04 per diluted share) and severance benefits of $1 before tax
($1 after tax, or $0.01 per diluted share) within Selling and
administrative expenses and a deferred income tax benefit of $0
before tax ($9 after tax, or $0.23 per diluted share) within Income
tax benefit. (2) The results of operations, financial
position and cash flows of Save-A-Lot are reported as discontinued
operations for all periods presented. Accordingly, Supervalu’s
consolidated financial statements have been recast from their
previous presentation. The results of Save-A-Lot for the
comparative quarterly periods are disclosed within Note
14—Discontinued Operations within the Condensed Consolidated
Financial Statements in Supervalu's Quarterly Report on Form 10-Q
for the third quarter of fiscal 2018. (3) On July 19, 2017,
Supervalu held its annual meeting of stockholders, at which
stockholders authorized the Board of Directors to effect a reverse
stock split. Also on July 19, 2017 following the stockholder
meeting, the Board of Directors approved a 1-for-7 reverse stock
split of Supervalu’s common stock. Supervalu’s common stock began
trading on a split-adjusted basis when the market opened on August
2, 2017. The weighted average number of shares and net earnings per
share have been recast to give effect to the 1-for-7 reverse stock
split.
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In millions, except par value data)
December 2, 2017 February 25, 2017
ASSETS Current assets Cash and cash equivalents $ 46
$ 332 Receivables, net 581 386 Inventories, net 1,265 764 Other
current assets 133 59
Total current
assets 2,025 1,541
Property, plant and equipment, net
1,319 1,004
Goodwill 739 710
Intangible assets, net
83 39
Deferred tax assets 156 165
Other assets
145 121
Total assets $ 4,467 $
3,580
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities Accounts payable $ 1,261 $ 881 Accrued vacation,
compensation and benefits 222 150 Current maturities of long-term
debt and capital lease obligations 34 26 Other current liabilities
117 172
Total current
liabilities 1,634 1,229
Long-term debt 1,700 1,263
Long-term capital lease obligations 172 186
Pension and
other postretirement benefit obligations 383 322
Long-term
tax liabilities 42 63
Other long-term liabilities 133
134
Commitments and contingencies Stockholders’
equity Common stock, $0.01 par value: 57 shares authorized; 38
and 38 shares issued, respectively — — Capital in excess of par
value 2,844 2,831 Treasury stock, at cost, 0 and 0 shares,
respectively (3 ) (2 ) Accumulated other comprehensive loss (278 )
(278 ) Accumulated deficit (2,163 ) (2,175 )
Total
SUPERVALU INC. stockholders’ equity 400 376 Noncontrolling
interests 3 7
Total stockholders’
equity 403 383
Total liabilities
and stockholders’ equity $ 4,467 $ 3,580
SUPERVALU INC. and Subsidiaries CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In
millions) Year-To-Date Ended December
2, December 3, 2017 2016
(40 weeks) (40 weeks) Cash flows from operating
activities Net earnings including noncontrolling interests $ 13
$ 54 Income from discontinued operations, net of tax 8
33 Net earnings from continuing operations 5
21 Adjustments to reconcile Net earnings from continuing operations
to Net cash (used in) provided by operating activities – continuing
operations: Goodwill impairment charge — 15 Asset impairment and
other charges 44 4 Loss on debt extinguishment 5 7 Net gain on sale
of assets and exits of surplus leases (4 ) (1 ) Depreciation and
amortization 160 159 LIFO charge 4 3 Deferred income taxes 8 5
Stock-based compensation 15 13 Net pension and other postretirement
benefit (income) expense (42 ) 23 Contributions to pension and
other postretirement benefit plans (2 ) (2 ) Other adjustments 8 6
Changes in operating assets and liabilities, net of effects from
business acquisitions (245 ) (103 )
Net cash (used
in) provided by operating activities – continuing operations
(44 ) 150
Net cash (used in) provided by operating activities –
discontinued operations (54 ) 69
Net
cash (used in) provided by operating activities (98 )
219
Cash flows from investing activities
Proceeds from sale of assets 5 2 Purchases of property, plant and
equipment (234 ) (118 ) Payments for business acquisitions (105 )
(20 ) Other 6 (1 )
Net cash used in
investing activities – continuing operations (328 ) (137 )
Net cash provided by (used in) investing activities –
discontinued operations 3 (65 )
Net
cash used in investing activities (325 ) (202 )
Cash flows from financing activities Proceeds from revolving
credit facility 540 2,837 Payments on revolving credit facility
(430 ) (2,715 ) Proceeds from issuance of debt 878 — Payments of
debt and capital lease obligations (834 ) (121 ) Proceeds from sale
of common stock — 3 Payments for shares traded for taxes (3 ) (2 )
Payments for debt financing costs (10 ) (6 ) Distributions to
noncontrolling interests (3 ) (6 ) Other (1 ) —
Net cash provided by (used in) financing activities
137 (10 )
Net (decrease) increase in cash
and cash equivalents (286 ) 7
Cash and cash equivalents at
beginning of period 332 57
Cash
and cash equivalents at the end of period $ 46 $ 64
Less cash and cash equivalents of discontinued operations
at end of period — (17 )
Cash and cash
equivalents of continuing operations at end of period $ 46
$ 47
SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities were as follows:
Purchases of property, plant and equipment included in Accounts
payable $ 25 $ 25 Capital lease asset additions $ 1 $ 15 Interest
and income taxes paid: Interest paid, net of amounts capitalized $
111 $ 136 Income taxes paid, net $ 49 $ 12
SUPERVALU INC. and Subsidiaries SUPPLEMENTAL FINANCIAL
INFORMATION (Unaudited) (In millions)
Net Sales by Segment
Third Quarter Ended
Year-To-Date Ended December 2,
December 3, December 2, December
3, 2017 2016 2017 2016 (In
millions) (12 weeks) (12 weeks) (40 weeks)
(40 weeks) Wholesale $ 2,888 $ 1,906 $ 8,182 $ 5,912 Retail
1,017 1,060 3,432 3,524 Corporate 33 37 128
137 Total net sales $ 3,938 $ 3,003 $ 11,742 $ 9,573
Non-GAAP Financial Measures
SUPERVALU INC.’s (“Supervalu”) condensed 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 condensed
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 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’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 EARNINGS (LOSS) FROM CONTINUING
OPERATIONS TO EARNINGS FROM CONTINUING OPERATIONS AFTER
ADJUSTMENTS Table
1 Third Quarter Ended December 2, 2017 Diluted
Earnings Earnings Earnings Per (In
millions, except per share data) Before Tax After
Tax Share Continuing operations $ 10 $ 18 $ 0.46
Adjustments: Merger and integration costs 5 4 0.11 Store closure
charges and costs 3 1 0.04
Continuing operations after adjustments $ 18 $ 23
$ 0.61
Table 2 Year-To-Date Ended
December 2, 2017 (Loss) Diluted Earnings
Earnings Earnings Per (In millions, except per
share data) Before Tax After Tax Share
Continuing operations $ (2 ) $ 5 $ 0.12 Adjustments: Asset
impairment charge 42 27 0.71 Merger and integration costs 32 23
0.59 Legal reserve charge 9 6 0.15 Unamortized financing charges 3
2 0.05 Severance costs 3 1 0.04 Debt refinancing costs 2 1 0.03
Store closure charges and costs 2 1 0.03 Gain on sale of property
(2 ) (1 ) (0.04 ) Continuing operations after
adjustments $ 89 $ 65 $ 1.68
Table
3 Third Quarter Ended December 3, 2016 Diluted
(Loss) (Loss) (Loss) Earnings
Earnings Earnings Per (In millions, except per
share data) Before Tax After Tax Share
Continuing operations $ (38 ) $ (11 ) $ (0.31 ) Adjustments:
Pension settlement charge 41 24 0.63 Goodwill impairment charge 15
9 0.25 Store closure charges and costs 1 1 0.01 Deferred income tax
benefit — (9 ) (0.23 ) Continuing
operations after adjustments $ 19 $ 14 $ 0.35
Table 4 Year-To-Date Ended December 3, 2016
Diluted Earnings Earnings Earnings Per
(In millions, except per share data) Before Tax
After Tax Share Continuing operations $ 10 $ 21 $
0.48 Adjustments: Pension settlement charge 41 24 0.63 Goodwill
impairment charge 15 9 0.25 Unamortized financing charges 5 3 0.09
Store closure charges and costs 5 4 0.07 Debt refinancing costs 2 1
0.02 Deferred income tax benefit — (9 ) (0.23 ) Severance costs
(benefit) (1 ) (1 ) (0.01 ) Sales and use tax refund (2 ) (1 )
(0.04 ) Supply agreement termination fees (9 ) (6 )
(0.14 ) Continuing operations after adjustments $ 66
$ 45 $ 1.12
RECONCILIATIONS OF NET
EARNINGS (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA AND
PRO FORMA ADJUSTED EBITDA
Table 5 Third Quarter Ended Year-To-Date
Ended December 2, December 3,
December 2, December 3, 2017 2016
2017 2016 (In millions) (12 weeks)
(12 weeks) (40 weeks) (40 weeks) Results of
operations, as reported Net earnings (loss) from continuing
operations $ 18 $ (11 ) $ 5 $ 21 Income tax benefit (8 ) (27 ) (7 )
(11 ) Equity in earnings of unconsolidated affiliates — (1 ) (2 )
(3 ) Interest expense, net 29 40
103 141 Total operating earnings $ 39 $
1 $ 99 $ 148 Add Equity in earnings of
unconsolidated affiliates — 1 2 3 Less net earnings attributable to
noncontrolling interests — (1 ) (1 ) (3 ) Depreciation and
amortization 48 48 160 159 LIFO charge 1 1 4 3 Asset impairment
charge — — 42 — Merger and integration costs 5 — 32 — Legal reserve
charge — — 9 — Store closure charges and costs 3 1 2 5 Severance
costs (benefit) — — 3 (1 ) Gain on sale of property — — (2 ) —
Sales and use tax refund — — — (2 ) Supply agreement termination
fees — — — (9 ) Pension settlement charge — 41 — 41 Goodwill
impairment charge — 15 —
15 Adjusted EBITDA(1) $ 96 $ 107 $ 350
$ 359 Pro forma adjustments: Net sales(2) — 9 — 33
Cost of sales(3) — (2 ) —
(9 ) Total pro forma adjustments — 7
— 24 Pro forma adjusted EBITDA $ 96
$ 114 $ 350 $ 383 (1)
Supervalu's measure of adjusted EBITDA includes operating earnings,
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 Supervalu 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 Supervalu 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 Supervalu’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 NET EARNINGS (LOSS)
FROM CONTINUING OPERATIONS TO TOTAL AND SEGMENT OPERATING EARNINGS
(LOSS), TO SUPPLEMENTALLY PROVIDED TOTAL AND SEGMENT ADJUSTED
EBITDA Table 6 Third
Quarter Ended Year-To-Date Ended December 2,
December 3, December 2,
December 3, 2017 2016 2017 2016
(In millions) (12 weeks) (12 weeks) (40
weeks) (40 weeks) Reconciliation of net earnings
(loss) from continuing operations to operating earnings, as
reported: Net earnings (loss) from continuing operations $ 18 $
(11 ) $ 5 $ 21 Income tax benefit (8 ) (27 ) (7 ) (11 ) Equity in
earnings of unconsolidated affiliates — (1 ) (2 ) (3 ) Interest
expense, net 29 40 103
141 Total operating earnings $ 39 $ 1 $
99 $ 148
Reconciliation of segment operating
earnings to total operating earnings, as reported: Wholesale
operating earnings $ 46 $ 52 $ 169 $ 174 Retail operating loss (6 )
(14 ) (68 ) (18 ) Corporate operating loss (1 ) (37 )
(2 ) (8 ) Total operating earnings $ 39 $ 1
$ 99 $ 148
Reconciliation of segment
operating earnings, as reported, to segment Adjusted EBITDA:
Wholesale operating earnings, as reported $ 46 $ 52 $ 169 $ 174
Adjustments: Merger and integration costs 2 — 2 — Legal reserve
charge — — 9 — Supply agreement termination fee —
— — (9 ) Wholesale operating
earnings, as adjusted 48 52 180 165 Wholesale depreciation and
amortization 21 12 58 40 LIFO charge 2 —
5 1 Wholesale adjusted EBITDA(1)
$ 71 $ 64 $ 243 $ 206 Retail
operating loss, as reported $ (6 ) $ (14 ) $ (68 ) $ (18 )
Adjustments: Asset impairment charge — — 42 — Store closure charges
and costs 3 1 2 5 Severance costs — — 1 — Goodwill impairment
charge — 15 — 15 Gain on store closure — —
— — Retail operating (loss)
earnings, as adjusted (3 ) 2 (23 ) 2 Retail depreciation and
amortization 26 35 97 114 LIFO charge (1 ) 1 (1 ) 2 Equity in
earnings of unconsolidated affiliates — 1 2 3 Net earnings
attributable to noncontrolling interests — (1
) (1 ) (3 ) Retail adjusted EBITDA(1) $ 22 $
38 $ 74 $ 118 Corporate operating loss,
as reported $ (1 ) $ (37 ) $ (2 ) $ (8 ) Adjustments: Merger and
integration costs 3 — 30 — Severance costs — — 2 (1 ) Gain on sale
of property — — (2 ) — Sales and use tax refund — — — (2 ) Pension
settlement charge — 41 —
41 Corporate operating earnings, as adjusted 2 4 28
30 Corporate depreciation and amortization 1 1
5 5 Corporate adjusted EBITDA(1)
$ 3 $ 5 $ 33 $ 35 Total adjusted
EBITDA(1) $ 96 $ 107 $ 350 $ 359 Pro
forma adjustments: Net sales(2) — 9 — 33 Cost of sales(3) —
(2 ) — (9 ) Total Pro forma
adjustments — 7 —
24 Pro Forma Adjusted EBITDA $ 96 $ 114 $ 350
$ 383 (1) Supervalu's measure of
adjusted EBITDA includes Supervalu'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 Supervalu 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 Supervalu
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 Supervalu’s historical
consolidated financial statements. This adjustment only applies to
time periods prior to the sale of Save-A-Lot on December 5, 2016.
Fiscal 2018 Outlook
The following table reconciles Supervalu’s outlook for full year
fiscal 2018 Adjusted EBITDA to Net earnings from continuing
operations, the most comparable GAAP measure. This outlook includes
results from Supervalu’s acquisition of Unified Grocers, Inc. that
closed on June 23, 2017, and Supervalu’s acquisition of Associated
Grocers of Florida, Inc. that closed on December 8, 2017.
Additional adjustments not related to our on-going business
performance may also arise during fiscal 2018.
RECONCILIATION OF PROJECTED NET EARNINGS FROM CONTINUING
OPERATIONS TO PROJECTED ADJUSTED EBITDA
Table 7 For the Fiscal Year Ending February
24, 2018 (52 weeks) Projected Low End
Projected High End (In millions) Amount
Amount Results of operations, as projected Net (loss)
earnings from continuing operations $ (20 ) $ 2 Income tax
provision 49 47 Equity in earnings of unconsolidated affiliates (3
) (3 ) Interest expense, net 134 134
Total operating earnings $ 160 $ 180 Add Equity in
earnings of unconsolidated affiliates 3 3 Less net earnings
attributable to noncontrolling interests (2 ) (2 ) Depreciation and
amortization 211 211 LIFO charge 5 5 Asset impairment charge 42 42
Merger and integration costs 44 34 Legal reserve charge 9 9
Severance costs 3 3 Gain on store closure 2 2 Gain on sale of
property (2 ) (2 ) Adjusted EBITDA $ 475 $ 485
Management's outlook includes the estimated impact of a non-cash
income tax charge of approximately $35 to $45 in the fourth quarter
of fiscal 2018 due to the reduction in the federal income tax
rate.
Management is providing an outlook for fiscal 2018 Adjusted
EBITDA, which is a non-GAAP financial measure, because management
believes Adjusted EBITDA is an important measure of business
performance that provides investors with useful supplemental
information. Supervalu utilizes non-GAAP measures to analyze
underlying core business trends to understand operating performance
and as a compensation performance measure.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180110005319/en/
SUPERVALU INC.Investor
Contact:Steve Bloomquist, 952-828-4144steve.j.bloomquist@supervalu.comorMedia Contact:Jeff Swanson,
952-903-1645jeffrey.s.swanson@supervalu.com
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