- Consolidated net sales increased by
$995 million, or 35%, over last year’s second
quarter
- Wholesale net sales increased by
over $1 billion, or 58%, over last year’s second quarter,
including 11 weeks of Unified Grocers results that contributed
approximately $790 million to net sales
- Second quarter net loss from
continuing operations of $25 million; Adjusted EBITDA of $111
million
SUPERVALU INC. (NYSE: SVU) today reported second quarter fiscal
2018 consolidated net sales of $3.80 billion and a net loss from
continuing operations of $25 million which included a $27 million
after-tax asset impairment charge and $16 million of after-tax
merger and integration costs. When adjusted for these items, second
quarter fiscal 2018 net earnings from continuing operations were
$18 million, or $0.46 per diluted share.
Net earnings from continuing operations for last year’s second
quarter were $12 million which included a net $3 million after-tax
gain, comprised of a fee received from a supply agreement
termination, partially offset by store closure charges and costs.
When adjusted for these items, second quarter fiscal 2017 net
earnings from continuing operations were $9 million, or $0.21 per
diluted share. See tables 1-7 for a reconciliation of GAAP and
non-GAAP (adjusted) results appearing in this release.
“We continue to make tremendous strides in driving our strategy,
evidenced by another quarter of strong growth from our core
Wholesale business which now represents over seventy percent of net
sales,” said SUPERVALU President and CEO Mark Gross. “Additionally,
our results now include the benefit of Unified Grocers, where I'm
pleased that the transition is going well. We have a lot to be
excited about as we turn our focus toward the back half of our
fiscal year.”
Second Quarter Results – Continuing Operations
Second quarter net sales were $3.80 billion compared to $2.81
billion last year, an increase of $995 million or 35 percent. Total
net sales within the Wholesale segment increased 58 percent. Retail
identical store sales were negative 3.5 percent. Fees earned under
services agreements in the second quarter were $40 million compared
to $41 million last year.
Gross profit for the second quarter was $428 million, or 11.3
percent of net sales. Last year’s second quarter gross profit was
$396 million, or 14.1 percent of net sales, and included $1 million
of store closure charges and costs. 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 second quarter were
$435 million, and included an asset impairment charge of $42
million and merger and integration costs of $23 million. When
adjusted for these items, selling and administrative expenses were
$370 million, or 9.7 percent of net sales. Selling and
administrative expenses in last year’s second quarter were $338
million, and included a $9 million fee received from a supply
agreement termination partially offset by $3 million of store
closure charges and costs. When adjusted for these items, last
year’s selling and administrative expenses were $344 million, or
12.2 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.
Net interest expense for the second quarter was $31 million
compared to $41 million in last year's second quarter. The decrease
in interest expense was driven by lower average outstanding debt
balances.
Income tax benefit was $13 million, or 32.6 percent of pre-tax
earnings, for the second quarter, compared to income tax expense of
$6 million, or 33.2 percent of pre-tax earnings, in last year’s
second quarter.
Wholesale
Second quarter Wholesale net sales were $2.74 billion, compared
to $1.73 billion last year, an increase of 58 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 being supplied by Supervalu and lower military sales.
Wholesale operating earnings in the second quarter were $61
million, or 2.2 percent of net sales. Last year’s second quarter
Wholesale operating earnings were $58 million, and included a fee
received from a supply agreement termination of $9 million. When
adjusted for this item, last year's second quarter Wholesale
operating earnings were $49 million, or 2.8 percent of net sales.
The decrease in adjusted Wholesale operating earnings, as a percent
of net sales, was driven by lower operating earnings, as a percent
of net sales, from the acquired Unified Grocers business.
Retail
Second quarter Retail net sales were $1.02 billion, compared to
$1.03 billion last year, a decrease of 1.1 percent. The net sales
decrease reflects identical store sales of negative 3.5 percent and
closed stores, partially offset by sales from acquired and new
stores.
Retail operating loss in the second quarter was $58 million, and
included a $42 million asset impairment charge. When adjusted for
this item, Retail operating loss in the second quarter was $16
million, or negative 1.5 percent of net sales. Last year’s second
quarter Retail operating loss was $12 million, and included $4
million of store closure charges and costs. When adjusted for this
item, last year's second quarter Retail operating loss was $8
million, or 0.8 percent of net sales. The decrease in adjusted
Retail operating earnings was driven by the impact of lower gross
margins from higher promotional activities and net decreased
sales.
Corporate
Second quarter fees earned under services agreements were $40
million compared to $41 million last year.
Net Corporate operating loss in the second quarter was $10
million, and included $23 million of merger and integration costs.
When adjusted for this item, net Corporate operating earnings were
$13 million. Last year’s second quarter net Corporate operating
earnings were $12 million.
Cash Flows – Continuing Operations
Fiscal 2018 year-to-date net cash flows provided by operating
activities of continuing operations were $116 million compared to
$208 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 $216 million compared to
$69 million last year, primarily due to the acquisition of the
Unified Grocers business and a distribution center. Fiscal 2018
year-to-date net cash flows provided by financing activities of
continuing operations were $30 million compared to net cash flows
used in financing activities of continuing operations of $165
million last year, primarily reflecting borrowings to finance the
acquisition of Unified Grocers this year compared to debt payments
last year.
Fiscal 2018 Outlook
Supervalu currently expects net earnings from continuing
operations to be in the range of $31 million to $50 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 7.
Conference Call
A conference call to review the second 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 $16
billion. SUPERVALU serves customers across the United States
through a network of 3,337 stores composed of 3,120 wholesale
primary stores operated by customers serviced by SUPERVALU’s food
distribution business and 217 traditional retail grocery stores
operated under five retail banners in six geographic regions (store
counts as of September 9, 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)
Second Quarter Ended Year-To-Date Ended
September 9, September 10, September
9, September 10, 2017 2016
2017 2016 (12 weeks) (12 weeks) (28
weeks) (28 weeks) Net sales $ 3,800
100.0 % $ 2,805 100.0 % $ 7,804 100.0 %
$ 6,570 100.0 %
Cost of sales 3,372
88.7 2,409 85.9 6,825
87.5 5,625 85.6
Gross
profit(1) 428 11.3 396 14.1 979 12.5 945 14.4
Selling
and administrative expenses(1) 435 11.4
338 12.0 919 11.8
798 12.2
Operating (loss) earnings (7 )
(0.2 ) 58 2.1 60 0.8 147 2.2
Interest expense, net(1)
31 0.8 41 1.5 74 0.9 101 1.5
Equity in earnings of
unconsolidated affiliates — — (1 )
— (2 ) — (2 ) —
(Loss)
earnings from continuing operations before income
taxes(1) (38 ) (1.0 ) 18 0.6 (12 ) (0.1 ) 48 0.7
Income tax (benefit) provision(1) (13 ) (0.3 )
6 0.2 1 — 16
0.2
Net (loss) earnings from continuing
operations(1)(2) (25 ) (0.7 ) 12 0.4 (13 ) (0.2 ) 32 0.5
Income from discontinued operations, net of tax(2)
— — 20 0.7 —
— 47 0.7
Net (loss) earnings
including noncontrolling interests (25 ) (0.7 ) 32 1.1 (13 )
(0.2 ) 79 1.2
Less net earnings attributable to noncontrolling
interests — — (1 ) —
(1 ) — (2 ) —
Net (loss) earnings
attributable to SUPERVALU INC. $ (25 ) (0.7 )% $ 31 1.1
% $ (14 ) (0.2 )% $ 77 1.2 %
Basic net (loss)
earnings per share attributable to SUPERVALU INC.:(3)
Continuing operations $ (0.65 ) $ 0.30 $ (0.35 ) $ 0.79
Discontinued operations $ — $ 0.52 $ (0.01 ) $ 1.24 Basic net
(loss) earnings per share $ (0.65 ) $ 0.82 $ (0.36 ) $ 2.04
Diluted net (loss) earnings per share attributable to SUPERVALU
INC.:(3) Continuing operations(1) $ (0.65 ) $ 0.29 $
(0.35 ) $ 0.79 Discontinued operations $ — $ 0.52 $ (0.01 ) $ 1.23
Diluted net (loss) earnings per share $ (0.65 ) $ 0.81 $ (0.36 ) $
2.02
Weighted average number of shares
outstanding:(3) Basic 38 38 38 38 Diluted 38 38 38 38
(1)
Results from continuing operations for the second quarter ended
September 9, 2017 include net charges and costs of $65 before tax
($43 after tax, or $1.11 per diluted share), comprised of an asset
impairment charge of $42 before tax ($27 after tax, or $0.71 per
diluted share) and merger and integration costs of $23 before tax
($16 after tax, or $0.40 per diluted share) within Selling and
administrative expenses.
Results from continuing operations for the
second quarter ended September 10, 2016 include a
net gain of $5 before tax ($3 after tax, or $0.08 per diluted
share), comprised of a supply agreement termination fee of $9
before tax ($6 after tax, or $0.14 per diluted share) within
selling and administrative expenses offset by store closure charges
and costs of $3 before tax ($3 after tax, or $0.06 per diluted
share) within Selling and administrative expenses and store closure
charges and costs of $1 before tax ($0 after tax, or $0.00 per
diluted share) within Gross profit.
Results from continuing operations for the
year-to-date ended September 9, 2017 include net charges and
costs of $83 before tax ($55 after tax, or $1.42 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 $27 before tax ($19 after tax, or $0.48 per diluted
share), a legal reserve charge of $9 before tax ($6 after tax, or
$0.15 per diluted share) and severance costs of $3 before tax ($1
after tax, or $0.04 per diluted share), offset in part by a gain on
sale of property of $2 before tax ($1 after tax, or $0.04 per
diluted share) and a benefit from a store closure of $1 before tax
($0 after tax, or $0.01 per diluted share) within Selling and
administrative expenses, and unamortized financing charges of $3
before tax ($2 after tax, or $0.06 per diluted share) and debt
refinancing costs of $2 before tax ($1 after tax, or $0.03 per
diluted share) within Interest expense, net.
Results from continuing operations for the
year-to-date ended September 10, 2016 include a net
gain of $1 before tax ($1 after tax, or $0.02 per diluted share),
comprised of a supply agreement termination fee of $9 before tax
($6 after tax, or $0.14 per diluted share), sales and use tax
refund of $2 before tax ($1 after tax, or $0.04 per diluted share)
and a severance benefit of $1 before tax ($1 after tax, or $0.01
per diluted share) within Selling and administrative expenses,
offset in part by store closure charges and costs of $3 before tax
($3 after tax, or $0.06 per diluted share) within Selling and
administrative expenses, 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.
(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 first quarter of fiscal 2018.
In recasting the results for the selected
quarterly financial data disclosure in Supervalu’s Annual Report on
Form 10-K for the fiscal year ended February 25, 2017, Supervalu
supplementally disclosed a previously unreported quarterly measure
of net earnings from continuing operations within the Unaudited
Quarterly Financial Information. This disclosure contained an
inadvertent presentation error for the first and second quarters of
fiscal 2017. For the first quarter of fiscal 2017, tax expense of
$17 was not allocated from continuing operations to discontinued
operations, resulting in an understatement of Net earnings from
continuing operations of $17 (such that Net earnings from
continuing operations should have been $20 instead of $3 for the
first quarter of fiscal 2017). The error had an offsetting impact
to the second quarter of fiscal 2017, resulting in an overstatement
of Net earnings from continuing operations of $17 in that quarter
(such that Net earnings from continuing operations should have been
$12 instead of $29 for the second quarter of fiscal 2017). There
was no impact to total Net earnings attributable to SUPERVALU INC.
within the Unaudited Quarterly Financial Information and no impact
to any amounts previously reported on Quarterly Reports on Form
10-Q. There was no impact to any annual amounts previously
presented. Supervalu has corrected for the presentation error in
the amounts included within the Condensed Consolidated Statements
of Operations for the first and second quarters of fiscal 2017.
(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) September
9, February 25, 2017 2017 ASSETS
Current assets Cash and cash equivalents $ 209 $ 332
Receivables, net 598 386 Inventories, net 1,057 764 Other current
assets 140 59
Total current
assets 2,004 1,541
Property, plant and equipment, net
1,246 1,004
Goodwill 740 710
Intangible assets, net
86 39
Deferred tax assets 157 165
Other assets
162 121
Total assets $ 4,395 $
3,580
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities Accounts payable $ 1,252 $ 881 Accrued vacation,
compensation and benefits 222 150 Current maturities of long-term
debt and capital lease obligations 34 26 Other current liabilities
149 172
Total current
liabilities 1,657 1,229
Long-term debt 1,601 1,263
Long-term capital lease obligations 174 186
Pension and
other postretirement benefit obligations 396 322
Long-term
tax liabilities 64 63
Other long-term liabilities 130
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 2,840 2,831 Treasury stock, at cost, 0 and 0 shares,
respectively (3 ) (2 ) Accumulated other comprehensive loss (278 )
(278 ) Accumulated deficit (2,189 ) (2,175 )
Total
SUPERVALU INC. stockholders’ equity 370 376 Noncontrolling
interests 3 7
Total stockholders’
equity 373 383
Total liabilities
and stockholders’ equity $ 4,395 $ 3,580
SUPERVALU INC. and Subsidiaries CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In
millions) Year-To-Date Ended September
9, September 10, 2017 2016
(28 weeks) (28 weeks) Cash flows from operating
activities Net (loss) earnings including noncontrolling
interests $ (13 ) $ 79 Income from discontinued operations, net of
tax — 49 Net (loss) earnings from
continuing operations (13 ) 30 Adjustments to reconcile Net (loss)
earnings from continuing operations to Net cash provided by
operating activities – continuing operations: Asset impairment and
other charges 40 1 Loss on debt extinguishment 5 7 Net gain on sale
of assets and exits of surplus leases (2 ) — Depreciation and
amortization 112 111 LIFO charge 3 2 Deferred income taxes 6 21
Stock-based compensation 11 8 Net pension and other postretirement
benefit income (29 ) (13 ) Contributions to pension and other
postretirement benefit plans (1 ) (2 ) Other adjustments 7 8
Changes in operating assets and liabilities, net of effects from
business acquisitions (23 ) 35
Net cash
provided by operating activities – continuing operations 116
208
Net cash (used in) provided by operating activities –
discontinued operations (56 ) 72
Net
cash (used in) provided by operating activities 60
280
Cash flows from investing
activities Proceeds from sale of assets 4 1 Purchases of
property, plant and equipment (117 ) (67 ) Payments for business
acquisitions (105 ) (3 ) Other 2 —
Net cash used in investing activities – continuing
operations (216 ) (69 )
Net cash provided by (used in)
investing activities – discontinued operations 3
(46 )
Net cash used in investing activities
(213 ) (115 )
Cash flows from financing activities
Proceeds from revolving credit facility 80 1,669 Payments on
revolving credit facility (80 ) (1,707 ) Proceeds from issuance of
debt 875 — Payments of debt and capital lease obligations (825 )
(115 ) Payments for shares traded for taxes (3 ) (2 ) Payments for
debt financing costs (9 ) (5 ) Distributions to noncontrolling
interests (3 ) (5 ) Other (5 ) —
Net cash
provided by (used in) financing activities 30
(165 )
Net (decrease) increase in cash and cash
equivalents (123 ) —
Cash and cash equivalents at beginning
of period 332 57
Cash and cash
equivalents at the end of period $ 209 $ 57
Less cash and cash equivalents of discontinued operations at end
of period — (17 )
Cash and cash
equivalents of continuing operations at end of period $ 209
$ 40
SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities were as follows:
Purchases of property, plant and equipment included in Accounts
payable $ 21 $ 21 Capital lease asset additions $ 1 $ 7 Interest
and income taxes paid: Interest paid, net of amounts capitalized $
63 $ 79 Income taxes paid, net $ 48 $ 6
SUPERVALU
INC. and Subsidiaries SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited) (In millions)
Net Sales by Segment
Second Quarter Ended
Year-To-Date Ended September 9,
September 10, September 9, September
10, 2017 2016 2017 2016 (In
millions) (12 weeks) (12 weeks) (28 weeks)
(28 weeks) Wholesale $ 2,738 $ 1,731
$
5,294
$
4,006 Retail 1,022 1,033 2,415 2,464 Corporate 40 41
95 100 Total net sales $ 3,800 $ 2,805 $ 7,804 $
6,570
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 (LOSS) EARNINGS FROM CONTINUING
OPERATIONS TO EARNINGS FROM CONTINUING OPERATIONS AFTER
ADJUSTMENTS Table
1 Second Quarter Ended September 9, 2017 Diluted
(Loss) (Loss) (Loss) Earnings
Earnings
Earnings Per
(In millions, except per share data) Before Tax
After Tax
Share
Continuing operations $ (38 ) $ (25 ) $ (0.65 ) Adjustments: Asset
impairment charge 42 27 0.71 Merger and integration costs 23
16 0.40 Continuing operations after adjustments $ 27
$ 18 $ 0.46
Table 2
Year-To-Date Ended September 9, 2017
Diluted
(Loss)
(Loss) (Loss)
Earnings
Earnings
Earnings Per
(In millions, except per share data)
Before Tax
After Tax
Share
Continuing operations $ (12 ) $ (13 ) $ (0.35 ) Adjustments: Asset
impairment charge 42 27 0.71 Merger and integration costs 27 19
0.48
Legal reserve charge 9 6
0.15
Unamortized financing charges 3 2
0.06
Severance costs 3
1
0.04 Debt refinancing costs 2 1 0.03 Store closure charges and
costs (1 ) —
(0.01
)
Gain on sale of property (2 )
(1
) (0.04 ) Continuing operations after adjustments $ 71 $ 42
$ 1.07
Table 3
Second Quarter Ended September 10, 2016
Diluted
Earnings
Earnings Earnings Per (In millions, except per
share data)
Before Tax
After Tax Share Continuing operations $ 18 $ 12 $
0.29 Adjustments: Store closure charges and costs 4 3 0.06 Supply
agreement termination fee (9 ) (6 ) (0.14 ) Continuing operations
after adjustments $ 13 $ 9 $ 0.21
Table 4 Year-To-Date Ended September 10, 2016
Diluted
Earnings
Earnings Earnings Per (In millions, except per
share data)
Before Tax
After Tax Share Continuing operations $ 48 $ 32 $
0.79 Adjustments: Unamortized financing charges 5 3 0.09 Store
closure charges and costs 4 3 0.06 Debt refinancing costs 2 1 0.02
Supply agreement termination fee (9 ) (6 ) (0.14 ) Sales and use
tax refund (2 ) (1 ) (0.04 ) Severance benefit (1 ) (1 ) (0.01 )
Continuing operations after adjustments $ 47 $ 31 $
0.77
RECONCILIATIONS OF NET (LOSS) EARNINGS
FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA AND PRO FORMA
ADJUSTED EBITDA
Table 5 Second Quarter Ended Year-To-Date
Ended
September 9,
September 10,
September 9,
September 10,
2017 2016 2017 2016 (In
millions) (12 weeks) (12 weeks) (28 weeks)
(28 weeks) Results of operations, as reported Net
(loss) earnings from continuing operations $ (25 ) $ 12 $ (13 ) $
32 Income tax (benefit) provision (13 ) 6 1 16 Equity in earnings
of unconsolidated affiliates — (1 ) (2 ) (2 ) Interest expense, net
31 41 74 101
Total operating (loss) earnings $ (7 ) $ 58 $ 60
$ 147 Add Equity in earnings of unconsolidated
affiliates — 1 2 2 Less net earnings attributable to noncontrolling
interests — (1 ) (1 ) (2 ) Depreciation and amortization 52 47 112
111 LIFO charge 1 — 3 2 Asset impairment charge 42 — 42 — Merger
and integration costs 23 — 27 — Legal reserve charge — — 9 — Store
closure charges and costs — 4 (1 ) 4 Severance costs (benefit) — —
3 (1 ) Gain on sale of property — — (2 ) — Sales and use tax refund
— — — (2 ) Supply agreement termination fee —
(9 ) — (9 ) Adjusted EBITDA(1) $ 111 $
100 $ 254 $ 252 Pro forma adjustments: Net
sales(2) — 9 — 24 Cost of sales(3) — (2 )
— (8 ) Total pro forma adjustments —
7 — 16 Pro forma
adjusted EBITDA $ 111 $ 107 $ 254 $ 268
(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 (LOSS) EARNINGS FROM
CONTINUING OPERATIONS TO TOTAL AND SEGMENT OPERATING (LOSS)
EARNINGS, TO SUPPLEMENTALLY PROVIDED TOTAL AND SEGMENT ADJUSTED
EBITDA Table 6 Second
Quarter Ended Year-To-Date Ended September 9,
September 10,
September 9,
September 10,
2017 2016 2017 2016 (In
millions) (12 weeks) (12 weeks) (28 weeks)
(28 weeks) Reconciliation of net (loss) earnings from
continuing operations to operating earnings, as reported: Net
(loss) earnings from continuing operations $ (25 ) $ 12 $ (13 ) $
32 Income tax (benefit) provision (13 ) 6 1 16 Equity in earnings
of unconsolidated affiliates — (1 ) (2 ) (2 ) Interest expense, net
31 41 74 101
Total operating (loss) earnings $ (7 ) $ 58 $ 60
$ 147
Reconciliation of segment operating earnings
to total operating earnings, as reported: Wholesale operating
earnings $ 61 $ 58 $ 123 $ 122 Retail operating loss (58 ) (12 )
(62 ) (4 ) Corporate operating (loss) earnings (10 )
12 (1 ) 29 Total operating (loss)
earnings $ (7 ) $ 58 $ 60 $ 147
Reconciliation of segment operating earnings, as reported, to
segment Adjusted EBITDA: Wholesale operating earnings, as
reported $ 61 $ 58 $ 123 $ 122 Adjustments: Legal reserve charge —
— 9 — Supply agreement termination fee — (9 )
— (9 ) Wholesale operating earnings, as
adjusted 61 49 132 113 Wholesale depreciation and amortization 19
12 37 28 LIFO charge 2 — 3
1 Wholesale adjusted EBITDA(1) $ 82 $
61 $ 172 $ 142 Retail operating loss,
as reported $ (58 ) $ (12 ) $ (62 ) $ (4 ) Adjustments: Asset
impairment charge 42 — 42 — Store closure charges and costs — 4 (1
) 4 Severance costs — — 1
— Retail operating loss, as adjusted (16 ) (8 ) (20 )
— Retail depreciation and amortization 31 33 71 79 LIFO charge (1 )
— — 1 Equity in earnings of unconsolidated affiliates — 1 2 2 Net
earnings attributable to noncontrolling interests —
(1 ) (1 ) (2 ) Retail adjusted EBITDA(1) $ 14
$ 25 $ 52 $ 80 Corporate
operating (loss) earnings, as reported $ (10 ) $ 12 $ (1 ) $ 29
Adjustments: Merger and integration costs 23 — 27 — Severance costs
— — 2 (1 ) Gain on sale of property — — (2 ) — Sales and use tax
refund — — — (2 )
Corporate operating earnings, as adjusted 13 12 26 26 Corporate
depreciation and amortization 2 2
4 4 Corporate adjusted EBITDA(1) $ 15
$ 14 $ 30 $ 30 Total adjusted EBITDA(1)
$ 111 $ 100 $ 254 $ 252 Pro forma
adjustments: Net sales(2) — 9 — 24 Cost of sales(3) —
(2 ) — (8 ) Total Pro forma adjustments
— 7 — 16
Pro Forma Adjusted EBITDA $ 111 $ 107 $ 254 $
268 (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. 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 earnings from
continuing operations $ 31 $ 50 Income tax provision 16 27 Equity
in earnings of unconsolidated affiliates (4 ) (4 ) Interest
expense, net 134 134 Total operating earnings $ 177
$ 207 Add Equity in earnings of unconsolidated
affiliates 4 4 Less net earnings attributable to noncontrolling
interests (3 ) (3 ) Depreciation and amortization 202 202 LIFO
charge 5 5 Asset impairment charge 42 42 Merger and integration
costs 39 29 Legal reserve charge 9 9 Severance costs 3 3 Gain on
store closure (1 ) (1 ) Gain on sale of property (2 ) (2 ) Adjusted
EBITDA $ 475 $ 495
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 provide 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/20171018005381/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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