- Net loss from continuing operations
of $11 million; pro forma adjusted EBITDA of $114 million
- Net loss per share from continuing
operations of $0.04; adjusted earnings per share from continuing
operations of $0.05
- Wholesale sales increase with new
business outpacing lost business
- Save-A-Lot presented as discontinued
operations; sale results in debt reduction of approximately $1.1
billion
SUPERVALU INC. (NYSE: SVU) today reported third quarter fiscal
2017 consolidated net sales of $3.00 billion and a net loss from
continuing operations of $11 million, or $0.04 per diluted share,
which included $25 million of after-tax non-cash charges 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 $0.05 per diluted share.
Net earnings from continuing operations for last year’s third
quarter were $16 million, or $0.05 per diluted share, which
included $6 million in after-tax costs related to asset impairment
charges, employee severance and store closure charges and costs.
When adjusted for these items, third quarter fiscal 2016 net
earnings from continuing operations were $22 million, or $0.08 per
diluted share. [See tables 1-6 for a reconciliation of GAAP and
non-GAAP (adjusted) results appearing in this release.]
Subsequent to the end of the third quarter, on December 5, 2016,
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 now 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 period.
See tables 5-6 for additional detail on pro forma adjusted EBITDA
and a reconciliation of GAAP and non-GAAP (adjusted) results.
“The successful sale of Save-A-Lot early in the fourth quarter
provides SUPERVALU with additional flexibility to operate and grow
our business,” said President and CEO Mark Gross. “Additionally,
our Wholesale team has done a tremendous job delivering for our
customers. It is a significant accomplishment that we increased
Wholesale sales compared to last year given the sales lost at the
end of fiscal 2016. Unfortunately, in our Retail segment we have
not been able to overcome persistent deflation, competitive
impacts, and other factors. It takes time to change customers’
shopping habits, but our team is dedicated to improving our
results."
Chief Operating Officer and CFO Bruce Besanko added, “Early in
the fourth quarter we used the majority of the proceeds from the
sale of Save-A-Lot to reduce our outstanding debt by approximately
$1.1 billion. We have also taken steps to reduce our pension plan
obligations through a successful lump-sum buyout of certain plan
participants that resulted in the pension settlement charge this
quarter. In addition, we made a $25 million cash contribution to
the pension plan." Besanko ended by saying, “Given the many moving
parts from the sale of Save-A-Lot, we are managing the business for
the next several quarters by reference to pro forma adjusted
EBITDA. For the third quarter, pro forma adjusted EBITDA was $114
million, $18 million less than last year’s third quarter,
reflecting the challenging operating environment across the grocery
industry.”
Third Quarter Results - Continuing Operations
Third quarter net sales were $3.00 billion compared to $3.05
billion last year, a decrease of $42 million or 1.4 percent. Total
net sales within the Wholesale segment increased 0.2 percent.
Retail identical store sales were negative 5.7 percent. Fees earned
under transition services agreements (“TSAs”) in the third quarter
were $37 million compared to $46 million last year.
Gross profit for the third quarter was $407 million, or 13.6
percent of net sales. Last year’s third quarter gross profit was
$436 million, or 14.3 percent of net sales. The gross profit rate
decrease compared to last year is primarily due to lower TSA fees
and higher employee costs.
Selling and administrative expenses in the 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, selling and administrative expenses were
$349 million, or 11.6 percent of net sales. Selling and
administrative expenses in last year’s third quarter were $364
million and included severance costs of $2 million and store
closure charges and costs of $1 million. When adjusted for these
items, third quarter fiscal 2016 selling and administrative
expenses were $361 million, or 11.9 percent of net sales. The
decrease in the selling and administrative expense rate compared to
last year is primarily due to lower pension expense.
Net interest expense for the third quarter was $40 million. Last
year's third quarter interest expense was $45 million. The decrease
in interest expense was driven by lower average outstanding debt
balances.
Income tax benefit was $27 million, or 71.6 percent of pre-tax
loss, for the third quarter, compared to income tax expense of $6
million, or 28.4 percent of pre-tax earnings, in last year’s third
quarter. The change in the effective tax rate is primarily due to
the tax impact from the pension settlement charge, the goodwill
impairment charge, lower pre-tax earnings, and certain discrete
deferred tax items.
Wholesale
Third quarter Wholesale net sales were $1.91 billion, compared
to $1.90 billion last year, an increase of 0.2 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 from the prior year no longer supplied
by the Company.
Wholesale operating earnings in the third quarter were $52
million, or 2.7 percent of net sales. Last year’s third quarter
Wholesale operating earnings in the third quarter were $54 million,
or 2.8 percent of net sales and included a $6 million intangible
asset impairment charge. When adjusted for this item, last year's
third quarter Wholesale operating earnings were $60 million, or 3.2
percent of net sales. The decrease in Wholesale operating earnings,
as adjusted, was primarily driven by higher employee and trucking
costs.
Retail
Third quarter Retail net sales were $1.06 billion, compared to
$1.10 billion last year, a decrease of 3.4 percent. The net sales
decrease reflects identical store sales of negative 5.7 percent and
closed stores, partially offset by sales from acquired and new
stores.
Retail operating loss in the third quarter was $14 million, or
negative 1.3 percent of net sales and included a $15 million
goodwill impairment charge and $1 million of store closure charges
and costs. When adjusted for these items, Retail operating earnings
were $2 million, or 0.2 percent of net sales. Last year’s third
quarter Retail operating earnings were $21 million, or 2.0 percent
of net sales and included $1 million of store closure charges and
costs. When adjusted for this item, last year's third quarter
Retail operating earnings were $22 million, or 2.1 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
Third quarter fees earned under the TSAs were $37 million
compared to $46 million last year.
Net Corporate operating loss in the third quarter was $37
million and included a $41 million pension settlement charge. When
adjusted for this item, net Corporate operating earnings were $4
million. Last year’s third quarter net Corporate operating loss was
$9 million and included $2 million of employee severance costs.
When adjusted for this item, last year's net Corporate operating
loss was $7 million. The improvement in Corporate operating
earnings, as adjusted, was primarily driven by lower pension
expense and lower operating and employee-related costs.
Cash Flows - Continuing Operations
Fiscal 2017 year-to-date net cash flows provided by operating
activities of continuing operations were $147 million compared to
$154 million last year, reflecting lower earnings. Fiscal 2017
year-to-date net cash flows used in investing activities of
continuing operations were $136 million compared to $141 million
last year. Fiscal 2017 year-to-date net cash flows used in
financing activities of continuing operations were $8 million
compared to $33 million last year, reflecting lower net payments on
debt obligations.
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 $13
billion. SUPERVALU serves customers across the United States
through a network of 2,067 stores composed of 1,850 stores
operated by wholesale customers serviced primarily by the Company’s
food distribution business, 195 traditional retail grocery stores
operated under five retail banners and 22 stores under the Shop 'N
Save name in Maryland, Pennsylvania, Virginia, and West Virginia
(store counts as of December 3, 2016). Headquartered in
Minnesota, SUPERVALU has approximately 30,000 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, reliance on the wholesale customers' ability to grow,
ability to maintain or increase margins, substantial indebtedness,
labor relations issues, escalating costs of providing employee
benefits, relationships with Save-A-Lot, including the services
agreement entered into in connection with the sale of the
Save-A-Lot business, Albertson’s LLC and New Albertson’s Inc.,
intrusions to and disruption of information technology systems,
impact of economic conditions, commodity pricing, governmental
regulation, food and drug safety issues, legal proceedings,
pharmacy reimbursement and health care financing, intellectual
property protection, 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 December 3, December 5,
December 3, December 5, 2016
2015 2016 2015 (12 weeks) (12
weeks) (40 weeks) (40 weeks) Net sales $
3,003 100.0 % $ 3,045 100.0 % $ 9,573
100.0 % $ 10,016 100.0 %
Cost of
sales 2,596 86.4 2,609 85.7
8,221 85.9 8,573 85.6
Gross profit(1) 407 13.6 436 14.3 1,352 14.1
1,443 14.4
Selling and administrative expenses(1) 391
13.0 364 12.0 1,189 12.4 1,214 12.1
Goodwill and intangible
asset impairment charge(1) 15 0.5
6 0.2 15 0.2 6
0.1
Operating earnings 1 0.1 66 2.2 148 1.5
223 2.2
Interest expense, net(1) 40 1.4 45 1.5 141
1.5 148 1.5
Equity in earnings of unconsolidated affiliates
(1 ) — (1 ) — (3 ) —
(3 ) —
(Loss) earnings from continuing operations
before income taxes(1) (38 ) (1.3 ) 22 0.7 10 0.1 78 0.8
Income tax (benefit) provision(1) (27 ) (0.9 )
6 0.2 (11 ) (0.1 ) 24 0.2
Net (loss) earnings from continuing
operations(1) (11 ) (0.4 ) 16 0.5 21 0.2 54 0.5
(Loss) income from discontinued operations, net of tax
(14 ) (0.5 ) 19 0.6 33
0.3 78 0.8
Net (loss) earnings
including noncontrolling interests (25 ) (0.9 ) 35 1.2 54 0.6
132 1.3
Less net earnings attributable to noncontrolling
interests (1 ) — (1 ) (0.1 ) (3 ) —
(6 ) (0.1 )
Net (loss) earnings attributable to
SUPERVALU INC. $ (26 ) (0.9 )% $ 34 1.1 % $ 51
0.5 % $ 126 1.3 %
Basic net (loss) earnings per
share attributable to SUPERVALU INC.: Continuing operations $
(0.04 ) $ 0.05 $ 0.07 $ 0.18 Discontinued operations $ (0.06 ) $
0.07 $ 0.12 $ 0.30 Basic net (loss) earnings per share $ (0.10 ) $
0.13 $ 0.19 $ 0.48
Diluted net (loss) earnings per share
attributable to SUPERVALU INC.: Continuing operations(1) $
(0.04 ) $ 0.05 $ 0.07 $ 0.18 Discontinued operations $ (0.06 ) $
0.07 $ 0.12 $ 0.29 Diluted net (loss) earnings per share $ (0.10 )
$ 0.13 $ 0.19 $ 0.47
Weighted average number of shares
outstanding: Basic 265 264 265 263 Diluted 265 268 267 268
(1)
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 $0.09 per diluted share),
comprised of a pension settlement charge of $41 before tax ($24
after tax, or $0.09 per diluted share) and store closure charges
and costs of $1 before tax ($1 after tax, or $0.00 per diluted
share) within Selling and administrative expenses, and a goodwill
impairment charge of $15 before tax ($9 after tax, or $0.03 per
diluted share) within Goodwill and intangible asset impairment
charge, offset in part by a deferred income tax benefit of $0
before tax ($9 after tax, or $0.03 per diluted share) within Income
tax (benefit) provision.
Results from continuing operations for the
third quarter ended December 5, 2015 include net charges and costs
of $9 before tax ($6 after tax, or $0.03 per diluted share),
comprised of an intangible asset impairment charge of $6 before tax
($4 after tax, or $0.02 per diluted share) within Goodwill and
intangible asset impairment charge, and severance costs of $2
before tax ($1 after tax, or $0.00 per diluted share) and store
closure charges and costs of $1 before tax ($1 after tax, or $0.00
per diluted share) within Selling and administrative expenses.
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 $0.09 per diluted share),
comprised of a pension settlement charge of $41 before tax ($24
after tax, or $0.09 per diluted share) and store closure charges
and costs of $4 before tax ($4 after tax, or $0.01 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
charge, unamortized financing cost charges of $5 before tax ($3
after tax, or $0.01 per diluted share) and debt refinancing costs
of $2 before tax ($1 after tax, or $0.00 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 $0.02 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 and a deferred income tax benefit of $0
before tax ($9 after tax, or $0.03 per diluted share) within Income
tax (benefit) provision.
Results from continuing operations for the
year-to-date ended December 5, 2015 include net charges and costs
of $13 before tax ($8 after tax, or $0.03 per diluted share),
comprised of severance costs of $6 before tax ($3 after tax, or
$0.01 per diluted share) and store closure charges and costs of $1
before tax ($1 after tax, or $0.00 per diluted share) within
Selling and administrative expenses, and an intangible asset
impairment charge of $6 before tax ($4 after tax, or $0.02 per
diluted share) within Goodwill and intangible asset impairment
charge.
SUPERVALU INC. and Subsidiaries CONDENSED
CONSOLIDATED SEGMENT FINANCIAL INFORMATION (Unaudited)
(In millions, except percent data)
Third Quarter Ended Year-To-Date Ended
December 3, December 5, December
3, December 5, 2016 2015
2016 2015 (12 weeks) (12 weeks) (40
weeks) (40 weeks) Net sales Wholesale $ 1,906 $
1,902 $ 5,912 $ 6,195 % of total 63.5 % 62.5 % 61.8 % 61.9 % Retail
1,060 1,097 3,524 3,662 % of total 35.3 % 36.0 % 36.8 % 36.6 %
Corporate 37 46 137 159 % of total 1.2 % 1.5 %
1.4 % 1.5 % Total net sales $ 3,003 $ 3,045 $ 9,573 $ 10,016
100.0 % 100.0 % 100.0 % 100.0 %
Operating earnings (loss) Wholesale(1) $ 52 $ 54 $ 174 $ 180
% of Wholesale sales 2.7 % 2.8 % 2.9 % 2.9 % Retail(2) (14 ) 21 (18
) 64 % of Retail sales (1.3 )% 2.0 % (0.5 )% 1.8 % Corporate(3)
(37 ) (9 ) (8 ) (21 ) Total operating
earnings 1 66 148 223 % of total net sales 0.1 % 2.2 % 1.5 % 2.2 %
Interest expense, net(4) 40 45 141 148
Equity in
earnings of unconsolidated affiliates (1 ) (1 )
(3 ) (3 )
(Loss) earnings from continuing
operations before income taxes (38 ) 22 10 78
Income tax
(benefit) provision(5) (27 ) 6
(11 ) 24
Net (loss) earnings from
continuing operations (11 ) 16 21 54
(Loss) income from
discontinued operations, net of tax (14 ) 19
33 78
Net (loss) earnings
including noncontrolling interests (25 ) 35 54 132
Less net
earnings attributable to noncontrolling interests (1 )
(1 ) (3 ) (6 )
Net (loss) earnings
attributable to SUPERVALU INC. $ (26 ) $ 34 $ 51
$ 126
LIFO charge Wholesale $ — $ — $ 1 $ 2
Retail 1 1 2 4
Total LIFO charge $ 1 $ 1 $ 3 $ 6
Depreciation and amortization Wholesale $ 12 $ 12 $
40 $ 37 Retail 35 35 114 118 Corporate 1 2
5 6 Total depreciation and
amortization $ 48 $ 49 $ 159 $ 161
(1) Wholesale operating earnings for the year-to-date
ended December 3, 2016 include a fee received from a supply
agreement termination of $9. Wholesale operating earnings for the
third quarter and year-to-date ended December 5, 2015 include an
intangible asset impairment charge of $6. (2)
Retail operating loss for the third
quarter ended December 3, 2016 includes a goodwill impairment
charge of $15 and store closure charges and costs of $1. Retail
operating loss for the year-to-date ended December 3, 2016 includes
a goodwill impairment charge of $15 and store closure charges and
costs of $5. Retail operating earnings for the third quarter and
year-to-date ended December 5, 2015 include store closure charges
and costs of $1.
(3) Corporate operating loss for the third quarter ended December
3, 2016 includes a pension settlement charge of $41. Corporate
operating loss for the third quarter ended December 5, 2015
includes severance costs of $2. Corporate operating loss for the
year-to-date ended December 3, 2016 includes a pension settlement
charge of $41, offset in part by a sales and use tax refund of $2
and a severance benefit of $1. Corporate operating loss for the
year-to-date ended December 5, 2015 includes severance costs of $6.
(4) Interest expense, net for the year-to-date ended December 3,
2016 includes unamortized financing cost charges of $5 and debt
refinancing costs of $2. (5) Income tax provision for the third
quarter and year-to-date ended December 3, 2016 includes a deferred
income tax benefit of $9.
SUPERVALU INC. and
Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (In millions, except par value data)
December 3, February
27, 2016 2016 ASSETS Current assets
Cash and cash equivalents $ 47 $ 42 Receivables, net 440 406
Inventories, net 895 738 Other current assets 74 73 Current assets
of discontinued operations 394 376
Total current assets 1,850 1,635
Property, plant and equipment, net 1,014 1,021
Goodwill 710 725
Intangible assets, net 41 47
Deferred tax assets 169 238
Other assets 99 91
Long-term assets of discontinued operations 591
613
Total assets $ 4,474 $ 4,370
LIABILITIES AND STOCKHOLDERS’ DEFICIT Current
liabilities Accounts payable $ 924 $ 829 Accrued vacation,
compensation and benefits 152 148 Current maturities of long-term
debt and capital lease obligations 1,091 123 Other current
liabilities 125 126 Current liabilities of discontinued operations
305 346
Total current
liabilities 2,597 1,572
Long-term debt 1,261 2,197
Long-term capital lease
obligations 193 194
Pension and other postretirement benefit
obligations 430 578
Long-term tax liabilities 73 75
Other long-term liabilities 128 145
Long-term liabilities
of discontinued operations 45 42
Commitments and
contingencies Stockholders’ deficit Common stock, $0.01
par value: 400 shares authorized; 268 and 266 shares issued,
respectively 3 3 Capital in excess of par value 2,820 2,808
Treasury stock, at cost, 0 and 1 shares, respectively — (5 )
Accumulated other comprehensive loss (307 ) (422 ) Accumulated
deficit (2,774 ) (2,825 )
Total SUPERVALU INC.
stockholders’ deficit (258 ) (441 ) Noncontrolling interests
5 8
Total stockholders’ deficit
(253 ) (433 )
Total liabilities and stockholders’
deficit $ 4,474 $ 4,370
SUPERVALU INC. and Subsidiaries CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited) (In
millions) Year-To-Date Ended
December 3, December 5, 2016
2015 (40 weeks) (40 weeks) Cash flows from
operating activities Net earnings including noncontrolling
interests $ 54 $ 132 Income from discontinued operations, net of
tax 33 78 Net earnings from continuing
operations 21 54 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 4 2 Loss on debt
extinguishment 7 — Net gain on sale of assets and exits of surplus
leases (1 ) (2 ) Depreciation and amortization 159 161 LIFO charge
3 6 Deferred income taxes 5 (14 ) Stock-based compensation 13 17
Net pension and other postretirement benefits expense 23 29
Contributions to pension and other postretirement benefit plans (2
) (38 ) Other adjustments 6 18 Changes in operating assets and
liabilities, net of effects from business acquisitions (106
) (85 )
Net cash provided by operating activities –
continuing operations 147 154
Net cash provided by operating
activities – discontinued operations 69 98
Net cash provided by operating activities 216
252
Cash flows from investing
activities Proceeds from sale of assets 2 1 Purchases of
property, plant and equipment (118 ) (112 ) Payments for business
acquisitions (19 ) (6 ) Other (1 ) (24 )
Net cash
used in investing activities – continuing operations (136 )
(141 )
Net cash used in investing activities – discontinued
operations (65 ) (57 )
Net cash used in
investing activities (201 ) (198 )
Cash flows
from financing activities Proceeds from issuance of debt
218
— Proceeds from sale of common stock 3 10 Payments of debt and
capital lease obligations
(217
) (34 ) Payments for debt financing costs (6 ) (1 ) Distributions
to noncontrolling interests (6 ) (8 ) Other —
—
Net cash used in financing activities – continuing
operations (8 ) (33 )
Net cash used in financing activities
– discontinued operations — (1 )
Net
cash used in financing activities (8 ) (34 ) Net
increase in cash and cash equivalents 7 20
Cash and cash
equivalents at beginning of period 57 114
Cash and cash equivalents at the end of period $ 64
$ 134
Less cash and cash equivalents of
discontinued operations at end of period $ (17 ) $ (47 )
Cash and cash equivalents of continuing operations at end of
period $ 47 $ 87
SUPPLEMENTAL CASH FLOW
INFORMATION The Company’s non-cash investing and financing
activities were as follows: Purchases of property, plant and
equipment included in Accounts payable $ 25 $ 31 Capital lease
asset additions $ 15 $ 18 Interest and income taxes paid: Interest
paid, net of amounts capitalized $ 136 $ 150 Income taxes paid, net
$ 12 $ 44
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 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 27, 2016.
RECONCILIATIONS OF (LOSS) EARNINGS FROM CONTINUING
OPERATIONS TO EARNINGS FROM CONTINUING OPERATIONS AFTER
ADJUSTMENTS Table
1 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 ) $ (0.04 ) Adjustments:
Pension settlement charge 41 24 0.09 Goodwill impairment charge 15
9 0.03
Store closure charges and costs
1 1 — Deferred income tax benefit — (9 )
(0.03 ) Continuing operations after adjustments $ 19
$ 14 $ 0.05
Table 2 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 $ 0.07 Adjustments: Pension
settlement charge 41 24 0.09 Goodwill impairment charge 15 9 0.03
Unamortized financing cost charges 5 3 0.01
Store closure charges and costs
5 4 0.01 Debt refinancing costs 2 1 — Severance costs (1 ) (1 ) —
Sales and use tax refund (2 ) (1 ) — Deferred income tax benefit —
(9 ) (0.03 ) Supply agreement termination fee (9 ) (6
) (0.02 ) Continuing operations after adjustments $ 66
$ 45 $ 0.16
Table 3 Third
Quarter Ended December 5, 2015 Diluted Earnings
Earnings Earnings Per (In millions, except per
share data) Before Tax After Tax Share
Continuing operations $ 22 $ 16 $ 0.05 Adjustments: Intangible
asset impairment charge 6 4 0.02 Severance costs 2 1 0.01
Store closure charges and costs
1 1 — Continuing
operations after adjustments $ 31 $ 22 $ 0.08
Table 4 Year-To-Date Ended December 5, 2015
Diluted Earnings Earnings Earnings Per
(In millions, except per share data) Before Tax
After Tax Share Continuing operations $ 78 $ 54 $
0.18 Adjustments: Intangible asset impairment charge 6 4 0.02
Severance costs 6 3 0.01
Store closure charges and costs
1 1 — Continuing
operations after adjustments $ 91 $ 62 $ 0.21
RECONCILIATIONS OF NET (LOSS) EARNINGS FROM
CONTINUING OPERATIONS TO ADJUSTED EBITDA AND PRO FORMA ADJUSTED
EBITDA Table 5
Third Quarter Ended Year-To-Date Ended December
3, December 5, December 3,
December 5, 2016 2015 2016 2015
(In millions) (12 weeks) (12 weeks) (40
weeks) (40 weeks) Results of operations, as
reported Net (loss) earnings from continuing operations $ (11 )
$ 16 $ 21 $ 54 Income tax (benefit) provision (27 ) 6 (11 ) 24
Equity in earnings of unconsolidated affiliates (1 ) (1 ) (3 ) (3 )
Interest expense, net 40 45 141
148 Total operating earnings $ 1 $ 66
$ 148 $ 223 Add Equity in earnings of
unconsolidated affiliates 1 1 3 3 Less net earnings attributable to
noncontrolling interests (1 ) (1 ) (3 ) (6 ) Depreciation and
amortization 48 49 159 161 LIFO charge 1 1 3 6 Pension settlement
charge 41 — 41 — Goodwill and intangible asset impairment charge 15
6 15 6
Store closure charges and costs
1 1 5 1 Severance costs — 2 (1 ) 6 Sales and use tax refund — — (2
) — Supply agreement termination fee — —
(9 ) — Adjusted EBITDA(1) $ 107
$ 125 $ 359 $ 400 Pro forma adjustments: Net
sales(2) 9 9 33 39 Cost of sales(3) (2 ) (2 )
(9 ) (15 ) Total pro forma adjustments 7
7 24 24 Pro forma
adjusted EBITDA $ 114 $ 132 $ 383 $ 424
(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 NET EARNINGS (LOSS) FROM
CONTINUING OPERATIONS TO TOTAL AND SEGMENT OPERATING EARNINGS, TO
SUPPLEMENTALLY PROVIDED TOTAL AND SEGMENT ADJUSTED EBITDA
Table 6 Third Quarter
Ended Year-To-Date Ended December 3,
December 5, December 3,
December 5, 2016 2015 2016 2015
(In millions) (12 weeks) (12 weeks) (40
weeks) (40 weeks) Results of operations, as
reported: Net (loss) earnings from continuing operations $ (11
) $ 16 $ 21 $ 54 Income tax provision (27 ) 6 (11 ) 24 Equity in
earnings of unconsolidated affiliates (1 ) (1 ) (3 ) (3 ) Interest
expense, net 40 45 141
148 Total operating earnings $ 1 $ 66 $
148 $ 223
Reconciliation of segment operating
earnings to total operating earnings, as reported: Wholesale
operating earnings $ 52 $ 54 $ 174 $ 180 Retail operating (loss)
earnings (14 ) 21 (18 ) 64 Corporate operating loss (37 )
(9 ) (8 ) (21 ) Total operating earnings $ 1
$ 66 $ 148 $ 223
Reconciliation of
segment operating earnings, as reported, to segment Adjusted
EBITDA:
Wholesale operating earnings, as reported $ 52 $ 54 $ 174 $ 180
Adjustments: Supply agreement termination fee — — (9 ) — Intangible
asset impairment charge — 6 —
6 Wholesale operating earnings, as adjusted 52
60 165 186 Wholesale depreciation and amortization 12 12 40 37 LIFO
charge — — 1 2
Wholesale adjusted EBITDA(1) $ 64 $ 72 $ 206
$ 225 Retail operating (loss) earnings, as
reported $ (14 ) $ 21 $ (18 ) $ 64 Adjustments: Goodwill impairment
charge 15 — 15 —
Store closure charges and costs
1 1 5 1
Retail operating earnings, as adjusted 2 22 2 65 Retail
depreciation and amortization 35 35 114 118 LIFO charge 1 1 2 4
Equity in earnings of unconsolidated affiliates 1 1 3 3 Net
earnings attributable to noncontrolling interests (1 )
(1 ) (3 ) (6 ) Retail adjusted EBITDA(1) $ 38
$ 58 $ 118 $ 184 Corporate
operating (loss) earnings, as reported $ (37 ) $ (9 ) $ (8 ) $ (21
) Adjustments: Pension settlement charge 41 — 41 — Sales and use
tax refund — — (2 ) — Severance costs — 2
(1 ) 6 Corporate operating earnings
(loss), as adjusted 4 (7 ) 30 (15 ) Corporate depreciation and
amortization 1 2 5
6 Corporate adjusted EBITDA(1) $ 5 $ (5 ) $ 35
$ (9 ) Total adjusted EBITDA(1) $ 107 $ 125 $ 359
$ 400 Pro forma adjustments: Net sales(2) 9 9 33 39
Cost of sales(3) (2 ) (2 ) (9 ) (15 )
Total Pro forma adjustments 7 7
24 24 Pro Forma Adjusted EBITDA $ 114 $
132 $ 383 $ 424 (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/20170111005350/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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