Mt69sinai
7 years ago
SUPERVALU Reports First Quarter Fiscal 2018 Results
Source: Business Wire
Consolidated net sales increased by $239 million, or 6.3%, over last year's first quarter
Wholesale net sales increased by 12.4% over last year's first quarter driven by distribution to new customers
First quarter net earnings from continuing operations of $12 million; Adjusted EBITDA of $143 million
SUPERVALU INC. (NYSE: SVU) today reported first quarter fiscal 2018 consolidated net sales of $4.00 billion and net earnings from continuing operations of $12 million, or $0.04 per diluted share, which included $12 million of after-tax charges and costs, comprised of a legal reserve charge, merger and integration costs, unamortized financing charges, debt refinancing costs and severance costs, partially offset by a gain on a surplus property sale and a gain on store closure. When adjusted for these items, first quarter fiscal 2018 net earnings from continuing operations were $24 million, or $0.09 per diluted share.
Net earnings from continuing operations for last yearโs first quarter were $20 million, or $0.07 per diluted share, which included $2 million in after-tax charges and costs, comprised of unamortized financing charges and debt refinancing costs, offset in part by a sales and use tax refund as well as a severance benefit. When adjusted for these items, first quarter fiscal 2017 net earnings from continuing operations were $22 million, or $0.08 per diluted share. [See tables 1-4 for a reconciliation of GAAP and non-GAAP (adjusted) results appearing in this release.]
โThe results generated this quarter by our Wholesale business were outstanding and demonstrate our ability to deliver on our strategy and commitment toward growing this segment,โ said President and CEO Mark Gross. โAdditionally, weโre thrilled that we closed on the acquisition of Unified Grocers shortly after the end of our first quarter, and weโre now working together as one team to drive the business and integration efforts forward. Weโll begin reporting results in our second fiscal quarter that include the Unified business.โ
First Quarter Results โ Continuing Operations
First quarter net sales were $4.00 billion compared to $3.77 billion last year, an increase of $239 million or 6.3 percent. Total net sales within the Wholesale segment increased 12.4 percent. Retail identical store sales were negative 4.9 percent. Fees earned under services agreements in the first quarter were $55 million compared to $59 million last year.
Gross profit for the first quarter was $551 million, or 13.8 percent of net sales. Last yearโs first quarter gross profit was $549 million, or 14.6 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.
Selling and administrative expenses in the first quarter were $484 million, and included a legal reserve charge of $9 million, merger and integration costs of $4 million and severance costs of $3 million, partially offset by a gain on property sale of $2 million and a gain from a store closure of $1 million. When adjusted for these items, selling and administrative expenses were $471 million, or 11.8 percent of net sales. Selling and administrative expenses in last yearโs first quarter were $460 million, and included a sales and use tax refund of $2 million and a severance benefit of $1 million. When adjusted for these items, last year's selling and administrative expenses were $463 million, or 12.3 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 mix, with Wholesale representing a larger portion of total sales and selling and administrative expenses, and higher pension income as well as lower depreciation expense.
Net interest expense for the first quarter was $43 million, and included $3 million of unamortized financing charges and $2 million of debt refinancing costs. When adjusted for these items, net interest expense was $38 million. Last year's first quarter net interest expense was $60 million, and included $5 million of unamortized financing charges and $2 million of debt refinancing costs. When adjusted for these items, net interest expense for last year was $53 million. The decrease in interest expense was driven by lower average outstanding debt balances.
Income tax expense was $14 million, or 52.0 percent of pre-tax earnings, for the first quarter, compared to income tax expense of $10 million, or 33.7 percent of pre-tax earnings, in last yearโs first quarter. The change in the effective tax rate was primarily due to tax expense related to the adoption of a new accounting standard for stock-based compensation.
Wholesale
First quarter Wholesale net sales were $2.56 billion, compared to $2.28 billion last year, an increase of 12.4 percent. The net sales increase is primarily due to sales to new customers and increased sales to new stores operated by existing customers, partially offset by stores no longer being supplied by Supervalu and lower military sales.
Wholesale operating earnings in the first quarter were $62 million, or 2.4 percent of net sales, and included a $9 million legal reserve charge. When adjusted for this item, Wholesale operating earnings were $71 million, or 2.8 percent of net sales. Last yearโs first quarter Wholesale operating earnings were $64 million, or 2.8 percent of net sales.
Retail
First quarter Retail net sales were $1.39 billion, compared to $1.43 billion last year, a decrease of 2.7 percent. The net sales decrease reflects identical store sales of negative 4.9 percent and closed stores, partially offset by sales from acquired and new stores.
Retail operating loss in the first quarter was $4 million, or negative 0.3 percent of net sales and included $1 million of severance costs, which were offset by $1 million of a gain from a store closure. Last yearโs first quarter Retail operating earnings were $8 million, or 0.6 percent of net sales. The decrease in Retail operating earnings was driven by the impact of lower sales and higher employee costs, partially due to acquired and new stores.
Corporate
First quarter fees earned under services agreements were $55 million compared to $59 million last year.
Net Corporate operating earnings in the first quarter were $9 million, and included $4 million of merger and integration costs and $2 million of severance costs, partially offset by a $2 million gain on sale of property. When adjusted for these items, net Corporate operating earnings were $13 million. Last yearโs first quarter net Corporate operating earnings were $17 million and included a $2 million sales and use tax refund as well as a $1 million severance benefit. When adjusted for these items, last year's net Corporate operating earnings were $14 million.
Cash Flows โ Continuing Operations
First quarter of fiscal 2018 net cash flows provided by operating activities of continuing operations were $47 million compared to $122 million last year, primarily due to cash utilized to build inventories to support higher Wholesale sales volumes and lower cash generated from earnings. First quarter of fiscal 2018 net cash flows used in investing activities of continuing operations were $80 million compared to $36 million last year, primarily due to a distribution center acquisition. First quarter of fiscal 2018 net cash flows provided by financing activities of continuing operations were $5 million compared to net cash flows used in financing activities of $60 million last year, primarily reflecting lower net payments on debt obligations.
Fiscal 2018 Outlook
Supervalu currently expects net earnings from continuing operations to be in the range of $51 million to $70 million. Adjusted EBITDA, including the contribution from Unified Grocers, is expected to be in the range of $475 million to $495 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 5.
Conference Call
A conference call to review the first 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."