Full Year Net Earnings Including
Non-Controlling Interests of $46 million; Adjusted EBITDA of $478
million
Announces Pursuing Sale of Its Shop ‘n Save
and Shop ‘n Save East Retail Operations
Announces Sale Leaseback Transactions for
Eight Distribution Centers
Introduces Fiscal 2019 Outlook
SUPERVALU INC. (NYSE: SVU) today reported financial results for
its fourth quarter and fiscal year ended February 24, 2018 and
provided updates regarding ongoing efforts to optimize its retail
operations and monetize select real estate assets through sale
leaseback transactions.
Full Year Fiscal 2018 Financial Summary (Compared to Fiscal
2017):
- Continuing operations
- Consolidated net sales increased $3.25
billion, or 30%; including $2.6 billion from Unified Grocers and AG
Florida
- Wholesale net sales increased $3.35
billion, or 43%
- Total Net earnings attributable to
SUPERVALU INC.
- Net earnings including non-controlling
interests of $46 million, comprised of $49 million of Net earnings
from continuing operations and $3 million of Loss from discontinued
operations, net of tax
- Adjusted EBITDA of $478 million,
comprised of $436 million of Adjusted EBITDA from continuing
operations and $42 million from discontinued operations
Fourth Quarter Fiscal 2018 Financial Summary (Compared to
Fourth Quarter Fiscal 2017):
- Continuing operations
- Consolidated net sales increased $1.07
billion, or 42%; including $970 million from Unified Grocers and AG
Florida
- Wholesale net sales increased by $1.08
billion, or 60%
- Total Net earnings attributable to
SUPERVALU INC.
- Net earnings including non-controlling
interests of $33 million, comprised of $25 million of Net earnings
from continuing operations and $8 million of Income from
discontinued operations, net of tax
- Adjusted EBITDA of $128 million,
comprised of $117 million of Adjusted EBITDA from continuing
operations and $11 million from discontinued operations
Operational Updates
- In a separate press release today,
Supervalu announced it has entered into definitive agreements to
sell eight of its owned distribution centers, representing
approximately 5.8 million square feet, to a single buyer for an
aggregate purchase price, excluding closing costs and taxes, of
approximately $483 million (net proceeds estimated to be $445
million). Subject to customary closing conditions, the sale and
leaseback for seven of the properties is expected to be completed
in May, and by October for one property.
- Supervalu today announced it is
pursuing the sale of its corporately owned and operated Shop ‘n
Save (based in St. Louis) and Shop ‘n Save East (with stores in
West Virginia, Maryland, Pennsylvania, and Virginia) retail
operations.
“We finished fiscal 2018 strong with results in-line with our
expectations after having made significant progress throughout the
year with our ongoing wholesale business transformation. We’re
pleased with our efforts to date to create a stronger company with
more focused operations through the purchase of Unified Grocers and
AG Florida,” said President and CEO Mark Gross.
“Already in the first two months of fiscal 2019, we’ve
capitalized on our business momentum by taking several decisive,
strategic actions that further our transformation,” Gross
continued. “These include exiting our Farm Fresh banner, the
announcement that we’re pursuing the sale of our Shop ‘n Save and
Shop ‘n Save East retail operations, and the monetization of
approximately $483 million in owned real estate. With a growing
Wholesale business and more stable group of retail stores, we
believe SUPERVALU is well positioned for success. While we still
have more work to do, we remain optimistic about our ability to
grow our core Wholesale business and create long-term shareholder
value.”
Fourth Quarter Results - Continuing Operations
Fourth quarter net sales were $3.59 billion compared to $2.53
billion for the fourth quarter last year, an increase of $1.07
billion or 42 percent. Total net sales within the Wholesale segment
increased 60 percent. Retail identical store sales were positive
0.1 percent. Fees earned under services agreements in the fourth
quarter were $32 million compared to $42 million for the fourth
quarter last year.
Gross profit for the fourth quarter was $356 million or 9.9
percent of net sales. Last year’s fourth quarter gross profit was
$338 million, or 13.4 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 fourth quarter were
$288 million, or 8.0 percent of net sales, including certain
adjustments that offset one another. Selling and administrative
expenses in last year’s fourth quarter were $273 million and
included a $1 million pension settlement charge and $1 million
of store closure charges and costs. When adjusted for these items,
last year’s fourth quarter selling and administrative expenses were
$271 million, or 10.7 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
toward Wholesale partially offset by higher employee-related
costs.
Net interest expense for the fourth quarter was $31 million,
compared to $40 million in last year’s fourth quarter which
included $12 million of unamortized financing charges. When
adjusted for this item, last year’s fourth quarter interest expense
was $28 million. The increase in adjusted net interest expense was
driven by higher average outstanding debt balances following the
purchase of Unified Grocers and AG Florida.
Income tax expense in the fourth quarter was $26 million and
included a $31 million non-cash charge to reduce the carrying value
of net deferred tax assets resulting from the newly enacted tax
reform legislation as well as a $22 million credit related to an
adjustment to the valuation allowance associated with Supervalu’s
capital loss carry-forward. Last year’s fourth quarter tax expense
was $3 million.
Wholesale
Fourth quarter Wholesale net sales were $2.87 billion, compared
to $1.79 billion for the fourth quarter last year, an increase of
60 percent. The net sales increase is primarily due to sales from
the acquired Unified Grocers and Associated Grocers of Florida
businesses, 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 fourth quarter were $68
million and included $5 million in legal settlement income, offset
in part by $4 million of severance costs. When adjusted for these
items, fourth quarter Wholesale operating earnings were $67
million, or 2.3 percent of net sales. Last year’s fourth quarter
Wholesale operating earnings were $60 million, or 3.4 percent of
net sales. The decrease in adjusted Wholesale operating earnings,
as a percent of net sales, was driven by the mix impact from the
inclusion of the acquired Unified Grocers business, which
contributed to operating earnings at a lower percent of net sales.
Operational cost synergies are expected to increase operating
earnings as a percent of net sales in future periods.
Retail
Fourth quarter Retail net sales were $690 million, compared to
$694 million for the fourth quarter last year, a decrease of 0.6
percent. Identical store sales were positive 0.1 percent, but were
more than offset by the lost sales from closed stores.
Retail operating earnings in the fourth quarter were $1 million,
or 0.1 percent of net sales. Last year’s fourth quarter Retail
operating earnings were $10 million and included $1 million of
store closure charges and costs. When adjusted for this item, last
year’s Retail operating earnings were $11 million, or 1.4 percent
of net sales. The decrease in adjusted Retail operating
earnings, as a percent of net sales, was primarily driven by higher
shrink costs and lower base margins to drive customer traffic.
Corporate
Fourth quarter fees earned under services agreements were $32
million compared to $42 million last year.
Net Corporate operating loss in the fourth quarter was $1
million, and included $5 million of merger and integration costs,
$3 million of store closure charges and costs and $2 million of
severance costs, offset in part by an $8 million benefit plan
termination gain and a gain on sale of property of $1 million. When
adjusted for these items, net Corporate operating earnings were $0
million. Last year’s fourth quarter net Corporate operating loss
was $5 million and included a $1 million pension settlement charge.
When adjusted for this item, last year’s net Corporate operating
loss was $4 million.
Discontinued Operations
In the fourth quarter of fiscal 2018, the results of operations,
financial position and cash flows related to the corporately owned
retail operations of Farm Fresh, Shop ‘n Save and Shop ‘n Save East
moved to discontinued operations for all historical periods. Fiscal
2017 included a $577 million after-tax gain on the sale of
Save-A-Lot, recorded in (Loss) income from discontinued operations,
net of tax.
Cash Flows - Continuing Operations
Fiscal 2018 net cash flows provided by operating activities of
continuing operations were $139 million compared to $233 million
last year, primarily reflecting higher levels of cash utilized
toward operating assets and liabilities. Fiscal 2018 net cash flows
used in investing activities of continuing operations were $494
million compared to $149 million last year, reflecting the purchase
of Unified Grocers, AG Florida, and two distribution centers.
Fiscal 2018 net cash flows provided by financing activities of
continuing operations were $88 million, compared to net cash flows
used in financing activities of continuing operations of $1,107
million last year, primarily reflecting borrowings to finance
business acquisitions this year compared to debt payments made last
year as a result of selling Save-A-Lot.
Fiscal 2019 Outlook for Continuing Operations
Fiscal 2019 consolidated net sales are expected to be within a
range of $15.5 billion to $15.7 billion. Retail ID sales are
expected to be flat to slightly positive.
As part of Supervalu’s fiscal 2019 planning process, Supervalu
determined it would revise its definition of Adjusted EBITDA in
fiscal 2019 to exclude the non-service components related to net
periodic pension and other postretirement benefit income that it
will be required to move below operating earnings, given recent
changes to accounting rules, and has also revised the definition to
exclude stock-based compensation. Fiscal 2018 Adjusted EBITDA from
continuing operations of $436 million would have been $399 million
under this revised definition after subtracting $44 million in
pension income and $12 million in OPEB (other post-employment
benefits) income, and adding $19 million in stock compensation
expense.
Supervalu expects net earnings from continuing operations to be
in the range of $55 million to $73 million. Under the revised
definition of Adjusted EBITDA from the prior paragraph, Fiscal 2019
Adjusted EBITDA from continuing operations is expected to be in the
range of $375 million to $400 million, including $27 million in
rent expense associated with the announced sale leaseback
transaction expected to generate approximately $445 million in net
proceeds. A reconciliation of projected net earnings from
continuing operations to projected Adjusted EBITDA from continuing
operations, and certain factors affecting the range of expected
earnings from continuing operations, is presented in Table 8.
Conference Call
A conference call to review the fourth quarter and full year
fiscal 2018 results is scheduled for 3:30 p.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.” A supplemental presentation is available at www.supervaluinvestors.com.
About SUPERVALU INC.
SUPERVALU INC. is one of the largest grocery wholesalers and
retailers in the U.S. with annual sales of approximately $14
billion. SUPERVALU serves customers across the United States
through a network of 3,437 stores composed of 3,323 wholesale
primary stores operated by customers serviced by SUPERVALU’s food
distribution business and 114 traditional retail grocery stores in
continuing operations operated under three retail banners in three
geographic regions (store counts as of February 24, 2018).
Headquartered in Minnesota, SUPERVALU has approximately 23,000
employees (in continuing operations). 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 transform the business and
execute on operations and initiatives, ability to execute and
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 and employee 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, disruption of any
proxy contest, 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, changes in tax laws,
intellectual property protection, and other risk factors relating
to our business or industry as detailed from time to time in
SUPERVALU’s reports filed with the SEC. You should not place undue
reliance on these forward-looking statements, which speak only as
of the date of this news release. Unless legally required,
SUPERVALU undertakes no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise.
SUPERVALU INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(In millions, except percent and per
share data)
Fourth Quarter Ended Fiscal Year Ended
February 24, 2018 February 25, 2017
February 24, 2018 February 25, 2017 (12
weeks) (12 weeks) (52 weeks) (52 weeks)
Net sales $ 3,594 100.0 % $ 2,529 100.0 % $
14,157 100.0 % $ 10,912 100.0 %
Cost of sales
3,238 90.1 2,191 86.6 12,706
89.7 9,517 87.2
Gross profit 356 9.9
338 13.4 1,451 10.3 1,395 12.8
Selling and administrative
expenses(1) 288 8.0 273 10.8 1,258 8.9 1,187 10.9
Goodwill impairment charge(1) — — —
— — — 13 0.1
Operating
earnings 68 1.9 65 2.6 193 1.4 195 1.8
Interest expense,
net 31 0.8 40 1.5 132 0.9 180 1.6
Equity in earnings of
unconsolidated affiliates (14 ) (0.4 ) (2 ) — (16 ) (0.1
) (5 ) —
Earnings from continuing operations before
income taxes 51 1.4 27 1.1 77 0.5 20 0.2
Income tax
provision (benefit) 26 0.7 3 0.1 28
0.2 (15 ) (0.1 )
Net earnings from continuing
operations(1) 25 0.7 24 1.0 49 0.3 35 0.3
Income
(loss) from discontinued operations, net of tax 8 0.2
576 22.7 (3 ) — 619 5.7
Net earnings including noncontrolling interests 33 0.9 600
23.8 46 0.3 654 6.0
Less net earnings attributable to
noncontrolling interests — — (1 ) (0.1 ) (1 ) —
(4 ) —
Net earnings attributable to SUPERVALU
INC. $ 33 0.9 % $ 599 23.7 % $ 45 0.3 % $
650 6.0 %
Basic net earnings per share
attributable to SUPERVALU INC.: Continuing operations $ 0.65 $
0.65 $ 1.25 $ 0.82 Discontinued operations $ 0.22 $ 15.09 $ (0.07 )
$ 16.35 Basic net earnings per share $ 0.86 $ 15.74 $ 1.18 $ 17.17
Diluted net earnings per share attributable to SUPERVALU
INC.: Continuing operations $ 0.64 $ 0.64 $ 1.25 $ 0.81
Discontinued operations $ 0.22 $ 14.97 $ (0.07 ) $ 16.19 Diluted
net earnings per share $ 0.86 $ 15.61 $ 1.18 $ 17.00
Diluted net
earnings per share Basic 38 38 38 38 Diluted 38 38 38 38
(1) Results from continuing operations for the fourth
quarter ended February 24, 2018 include net income of $13 before
tax ($2 after tax, or $0.03 per diluted share). Refer to Table 1
for additional information. Results from continuing
operations for the fourth quarter ended February 25, 2017 include
net charges and costs of $14 before tax ($8 after tax, or $0.16 per
diluted share). Refer Table 3 for additional information.
Results from continuing operations for the year ended February 24,
2018 include net charges and costs of $35 before tax ($31 after
tax, or $0.81 per diluted share). Refer to Table 2 for additional
information. Results from continuing operations for the year
ended February 25, 2017 include net charges and costs of $67 before
tax ($29 after tax, or $0.76 per diluted share). Refer to Table 4
for additional information.
SUPERVALU INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except par value
data)
February 24, February 25, 2018
2017 ASSETS Current assets Cash and cash
equivalents $ 41 $ 327 Receivables, net 590 376 Inventories, net
981 645 Other current assets 119 55 Current assets of discontinued
operations 130 138
Total current assets
1,861 1,541
Property, plant and equipment, net 1,342 876
Goodwill 780 710
Intangible assets, net 131 37
Deferred tax assets 63 163
Other assets 126 119
Long-term assets of discontinued operations 84 134
Total assets $ 4,387 $ 3,580
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities Accounts payable $ 1,139 $ 822 Accrued vacation,
compensation and benefits 187 132 Current maturities of long-term
debt and capital lease obligations 34 24 Other current liabilities
106 162 Current liabilities of discontinued operations 82 89
Total current liabilities 1,548 1,229
Long-term
debt 1,724 1,263
Long-term capital lease obligations 149
169
Pension and other postretirement benefit obligations 265
322
Long-term tax liabilities 44 63
Other long-term
liabilities 133 134
Long-term liabilities of discontinued
operations 17 17
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 2,848 2,831 Treasury stock, at cost,
0 and 0 shares, respectively (3 ) (2 ) Accumulated other
comprehensive loss (210 ) (278 ) Accumulated deficit (2,130 )
(2,175 )
Total SUPERVALU INC. stockholders’ equity 505 376
Noncontrolling interests 2 7
Total stockholders’
equity 507 383
Total liabilities and
stockholders’ equity $ 4,387 $ 3,580
SUPERVALU INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Unaudited)
(In millions)
Fiscal Year Ended February 24,
February 25, 2018 2017 (52 weeks)
(52 weeks) Cash flows from operating activities Net
earnings including noncontrolling interests $ 46 $ 654 (Loss)
income from discontinued operations, net of tax (3 ) 619 Net
earnings from continuing operations 49 35 Adjustments to reconcile
Net earnings from continuing operations to Net cash provided by
operating activities—continuing operations: Goodwill impairment
charge — 13 Asset impairment and other charges 5 7 Loss on debt
extinguishment 5 19 Net gain on sale of assets and exits of surplus
leases (3 ) (2 ) Depreciation and amortization 197 173 LIFO charge
1 1 Deferred income taxes 5 (5 ) Stock-based compensation 19 17 Net
pension and other postretirement benefit (income) expense (63 ) 18
Contributions to pension and other postretirement benefit plans (2
) (62 ) Other adjustments (5 ) 3 Changes in operating assets and
liabilities, net of effects from business combinations: Receivables
3 25 Inventories (51 ) (10 ) Accounts payable and accrued
liabilities (20 ) 34 Income taxes 14 (23 ) Other changes in
operating assets and liabilities (15 ) (10 )
Net cash provided
by operating activities—continuing operations 139 233
Net
cash (used in) provided by operating activities—discontinued
operations (4 ) 131
Net cash provided by operating
activities 135 364
Cash flows from investing
activities Proceeds from sale of assets 18 4 Purchases of
property, plant and equipment (276 ) (151 ) Payments for business
acquisitions (240 ) (1 ) Other 4 (1 )
Net cash used in
investing activities—continuing operations (494 ) (149 )
Net
cash (used in) provided by investing activities—discontinued
operations (12 ) 1,170
Net cash (used in) provided by
investing activities (506 ) 1,021
Cash flows from
financing activities Proceeds from revolving credit facility
1,250 2,837 Payments on revolving credit facility (1,123 ) (2,975 )
Proceeds from issuance of debt 885 — Payments of debt and capital
lease obligations (906 ) (956 ) Proceeds from the sale of common
stock — 3 Payments for shares traded for taxes (3 ) (3 ) Payments
for debt financing costs (10 ) (6 ) Payments to acquire
noncontrolling interests (6 ) — Distributions to noncontrolling
interests (3 ) (7 ) Other 4 —
Net cash provided by
(used in) financing activities—continuing operations 88 (1,107
)
Net cash used in financing activities—discontinued
operations (1 ) (3 )
Net cash provided by (used in)
financing activities 87 (1,110 ) Net (decrease) increase
in cash and cash equivalents (284 ) 275
Cash and cash
equivalents at beginning of year 332 57
Cash
and cash equivalents at end of year $ 48 $ 332
Less cash and
cash equivalents of discontinued operations at end of year (7 )
(5 )
Cash and cash equivalents of continuing operations at end
of year $ 41 $ 327
SUPPLEMENTAL CASH FLOW
INFORMATION Supervalu’s non-cash activities were as follows:
Purchases of property, plant and equipment included in Accounts
payable $ 39 $ 33 Capital lease asset additions $ 1 $ 17 Interest
and income taxes paid: Interest paid, net of amounts capitalized $
124 $ 156 Income taxes paid, net $ 48 $ 24
SUPERVALU INC. and
Subsidiaries
SUPPLEMENTAL FINANCIAL
INFORMATION
(Unaudited)
Net Sales by Segment
Fourth Quarter Ended Fiscal Year Ended February
24, February 25, February 24,
February 25, 2018 2017 2018 2017
(In millions) (12 weeks) (12 weeks) (52
weeks) (52 weeks) Wholesale $ 2,872 $ 1,793 $ 11,054 $
7,705 Retail 690 694 2,943 3,028 Corporate 32 42 160
179 Total net sales $ 3,594 $ 2,529 $ 14,157
$ 10,912
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 and adjusted net interest expense, 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 24, 2018.
RECONCILIATIONS OF EARNINGS FROM CONTINUING OPERATIONS TO
EARNINGS FROM CONTINUING OPERATIONS AFTER ADJUSTMENTS
Table 1 Fourth Quarter Ended February 24,
2018 Diluted Earnings Earnings Earnings
Per (In millions, except per share data) Before
Tax After Tax Share Continuing operations $ 51 $
25 $ 0.64 Adjustments: Severance costs 6 3 0.09 Merger and
integration costs 5 1 0.03 Store closure charges and costs 3 1 0.03
U.S. tax reform charge — 31 0.80 Gain on sale of property (1 ) (1 )
(0.03 ) Vendor legal settlement income (5 ) (3 ) (0.08 ) Benefit
plan termination gain (8 ) (5 ) (0.12 ) Gain on sale of
unconsolidated affiliates (13 ) (7 ) (0.18 ) Deferred income tax
benefit — (22 ) (0.57 ) Continuing operations after
adjustments $ 38 $ 23 $ 0.61
Table
2 Fiscal Year Ended February 24, 2018 Diluted
Earnings Earnings Earnings Per (In
millions, except per share data) Before Tax After
Tax Share Continuing operations $ 77 $ 49 $ 1.25
Adjustments: Merger and integration costs 37 24 0.62 Legal reserve
charge 9 6 0.15 Severance costs 8 4 0.12 Store closure charges and
costs 3 1 0.03 Unamortized financing charges 3 2 0.05 Asset
impairment charge 2 1 0.03 Debt refinancing costs 2 1 0.03 U.S. tax
reform charge — 31 0.80 Gain on sale of property (3 ) (2 ) (0.07 )
Vendor legal settlement income (5 ) (3 ) (0.08 ) Benefit plan
termination gain (8 ) (5 ) (0.12 ) Gain on sale of unconsolidated
affiliates (13 ) (7 ) (0.18 ) Deferred income tax benefit —
(22 ) (0.57 ) Continuing operations after adjustments $ 112
$ 80 $ 2.06
Table 3 Fourth Quarter
Ended February 25, 2017 Diluted Earnings
Earnings Earnings Per (In millions, except per
share data) Before Tax After Tax Share
Continuing operations $ 27 $ 24 $ 0.64 Adjustments: Unamortized
financing charges 12 7 0.14 Pension settlement charge 1 — — Store
closure charges and costs 1 1 0.02 Continuing
operations after adjustments $ 41 $ 32 $ 0.80
Table 4 Fiscal Year Ended February 25, 2017
Diluted Earnings Earnings Earnings Per
(In millions, except per share data) Before Tax
After Tax Share Continuing operations $ 20 $ 35 $
0.81 Adjustments: Pension settlement charges 42 24 0.61 Unamortized
financing charges 17 10 0.28 Goodwill impairment charge 13 7 0.20
Store closure charges and costs 5 3 0.08 Debt refinancing costs 2 1
0.02 Deferred income tax benefit — (9 ) (0.24 ) Severance cost
benefit (1 ) — (0.01 ) Sales and use tax refund (2 ) (1 ) (0.04 )
Supply agreement termination fee (9 ) (6 ) (0.14 ) Continuing
operations after adjustments $ 87 $ 64 $ 1.57
RECONCILIATIONS OF NET EARNINGS ATTRIBUTABLE TO SUPERVALU
INC. TO ADJUSTED EBITDA TO TOTAL SUPERVALU INC. PRO FORMA ADJUSTED
EBITDA INCLUDING DISCONTINUED OPERATIONS
Table 5 Fourth Quarter Ended Fiscal Year
Ended February 24, 2018 (12 weeks) February 24, 2018
(52 weeks) SUPERVALU Continuing
Discontinued SUPERVALU Continuing
Discontinued (In millions) INC.
Operations Operations INC. Operations
Operations Net earnings (loss) including noncontrolling
interests $ 33 $ 25 $ 8 $ 46 $ 49 $ (3 ) Income tax provision
(benefit) 16 26 (10 ) 3 28 (25 ) Equity in earnings of
unconsolidated affiliates (14 ) (14 ) — (16 ) (16 ) — Interest
expense, net 31 31 — 132 132 —
Total operating earnings (loss) $ 66 $ 68 $ (2
) $ 165 $ 193 $ (28 ) Add Equity in earnings of
unconsolidated affiliates 14 14 — 16 16 — Less net earnings
attributable to noncontrolling interests — — — (1 ) (1 ) —
Depreciation and amortization 54 51 3 214 197 17 LIFO (credit)
charge (3 ) (3 ) — 1 1 — Pension settlement charges — — — — — —
Asset impairment charge 7 — 7 49 2 47 Store closure charges and
costs 3 3 — 5 3 2 Severance costs 6 6 — 9 8 1 Legal reserve charge
3 — 3 12 9 3 Merger and integration costs 5 5 — 37 37 — Gain on
sale of property (1 ) (1 ) — (3 ) (3 ) — Vendor legal settlement
income (5 ) (5 ) — (5 ) (5 ) — Benefit plan termination gain (8 )
(8 ) — (8 ) (8 ) — Gain on sale of unconsolidated affiliates (13 )
(13 ) — (13 ) (13 ) — Adjusted EBITDA(1) $ 128
$ 117 $ 11 $ 478 $ 436 $ 42 Pro
forma adjustments: Lease contract primary obligor accounting(2) —
3 (3 ) — 13 (13 ) Pro forma adjusted
EBITDA $ 128 $ 120 $ 8 $ 478 $ 449
$ 29 (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) The application of continuing
operations accounting presentation requires Supervalu to present
lease expense based on the legal entities that have the contracts
with the landlords, regardless of these locations being held for
sale. This lease expense is attributable to held-for-sale retail
stores for which Supervalu is pursuing sale agreements where
Supervalu will not be selling the legal entities that are party to
these contracts. This lease expense is primarily related to two
retail banners for which Supervalu is likely to pursue sale
agreements in which the leases would be assigned. Upon reaching
agreements to sell these retail stores, Supervalu anticipates that
lease payments will be paid directly by the acquirer, and Supervalu
will no longer incur the expense.
RECONCILIATIONS OF NET
EARNINGS FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA AND PRO
FORMA ADJUSTED EBITDA Table 6
Fourth Quarter Ended Fiscal Year Ended February
24, February 25, February 24, February
25, 2018 2017 2018 2017 (In
millions) (12 weeks) (12 weeks) (52 weeks)
(52 weeks) Results of operations, as reported Net
earnings from continuing operations $ 25 $ 24 $ 49 $ 35 Income tax
provision (benefit) 26 3 28 (15 ) Equity in earnings of
unconsolidated affiliates (14 ) (2 ) (16 ) (5 ) Interest expense,
net 31 40 132 180 Total operating
earnings $ 68 $ 65 $ 193 $ 195 Add
Equity in earnings of unconsolidated affiliates 14 2 16 5 Less net
earnings attributable to noncontrolling interests — (1 ) (1 ) (4 )
Depreciation and amortization 51 40 197 173 LIFO (credit) charge (3
) (1 ) 1 1 Pension settlement charges — 1 — 42 Asset impairment
charge — — 2 — Goodwill impairment charge — — — 13 Store closure
charges and costs 3 1 3 5 Severance costs (benefit) 6 — 8 (1 )
Sales and use tax refund — — — (2 ) Supply agreement termination
fee — — — (9 ) Legal reserve charge — — 9 — Merger and integration
costs 5 — 37 — Gain on sale of property (1 ) — (3 ) — Vendor legal
settlement income (5 ) — (5 ) — Benefit plan termination gain (8 )
— (8 ) — Gain on sale of unconsolidated affiliates (13 ) —
(13 ) — Adjusted EBITDA(1) $ 117 $ 107 $ 436
$ 418 Pro forma adjustments: Net sales(2) — — — 33
Cost of sales(3) — — — (9 ) Lease contract primary obligor
accounting(4) 3 3 13 12 Total pro forma
adjustments 3 3 13 36 Pro forma
adjusted EBITDA $ 120 $ 110 $ 449 $ 454
(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 (4) The application of
continuing operations accounting presentation requires Supervalu to
present lease expense based on the legal entities that have the
contracts with the landlords, regardless of these locations being
held for sale. This lease expense is attributable to held-for-sale
retail stores for which Supervalu is pursuing sale agreements where
Supervalu will not be selling the legal entities that are party to
these contracts. This lease expense is primarily related to two
retail banners for which Supervalu is likely to pursue sale
agreements in which the leases would be assigned. Upon reaching
agreements to sell these retail stores, Supervalu anticipates that
lease payments will be paid directly by the acquirer, and Supervalu
will no longer incur the expense.
RECONCILIATION OF
OPERATING EARNINGS FROM CONSOLIDATED SEGMENT FINANCIAL INFORMATION
AS REPORTED TO SUPPLEMENTALLY PROVIDED ADJUSTED EBITDA AND PRO
FORMA ADJUSTED EBITDA Table 7 Fourth
Quarter Ended Fiscal Year Ended February 24,
February 25, February 24, February
25, 2018 2017 2018 2017 (In
millions) (12 weeks) (12 weeks) (52 weeks)
(52 weeks) Reconciliation of segment operating earnings
to total operating earnings, as reported Wholesale operating
earnings $ 68 $ 60 $ 226 $ 225 Retail operating earnings (loss) 1
10 (13 ) (3 ) Corporate operating loss (1 ) (5 ) (20 ) (27 ) Total
operating earnings $ 68 $ 65 $ 193 $ 195
Reconciliation of segment operating earnings, as
reported, to segment Adjusted EBITDA and consolidated pro forma
adjusted EBITDA: Wholesale operating earnings, as reported $ 68
$ 60 $ 226 $ 225 Adjustments: Supply agreement termination fee — —
— (9 ) Legal reserve charge — — 9 — Severance costs 4 — 4 — Merger
and integration costs — — 2 — Vendor legal settlement income (5 ) —
(5 ) — Wholesale operating earnings, as adjusted 67
60 236 216 Wholesale depreciation and amortization 24 14 84 54 LIFO
charge — — 5 — Wholesale adjusted
EBITDA(1) $ 91 $ 74 $ 325 $ 270
Retail operating earnings (loss), as reported $ 1 $ 10 $ (13 ) $ (3
) Adjustments: Store closure charges and costs — 1 — 5 Goodwill
impairment charge — — — 13 Retail
operating earnings (loss), as adjusted 1 11 (13 ) 15 Retail
depreciation and amortization 24 24 100 108 LIFO (credit) charge (3
) (1 ) (4 ) 1 Equity in earnings of unconsolidated affiliates 14 2
16 5 Gain on sale of unconsolidated affiliates (13 ) — (13 ) — Net
earnings attributable to noncontrolling interests — (1 ) (1
) (4 ) Retail adjusted EBITDA(1) $ 23 $ 35 $ 85
$ 125 Corporate operating (loss) earnings, as
reported $ (1 ) $ (5 ) $ (20 ) $ (27 ) Adjustments: Merger and
integration costs 5 — 35 — Pension settlement charges — 1 — 42
Sales and use tax refund — — — (2 ) Asset impairment charge — — 2 —
Severance costs 2 — 4 (1 ) Gain on sale of property (1 ) — (3 ) —
Store closure charges and costs 3 — 3 — Benefit plan termination
gain (8 ) — (8 ) — Corporate operating (loss)
earnings, as adjusted — (4 ) 13 12 Corporate depreciation and
amortization 3 2 13 11 Corporate
adjusted EBITDA(1) $ 3 $ (2 ) $ 26 $ 23 Total
adjusted EBITDA(1) $ 117 $ 107 $ 436 $ 418
Pro forma adjustments: Net sales(2) — — — 33 Cost of
sales(3) — — — (9 ) Lease contract primary obligor accounting(4) 3
3 13 12 Total Pro forma adjustments 3
3 13 36 Pro Forma Adjusted EBITDA $ 120
$ 110 $ 449 $ 454 (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. (4) The application of continuing operations
accounting presentation requires Supervalu to present lease expense
based on the legal entities that have the contracts with the
landlords, regardless of these locations being held for sale. This
lease expense is attributable to held-for-sale retail stores for
which Supervalu is pursuing sale agreements where Supervalu will
not be selling the legal entities that are party to these
contracts. This lease expense is primarily related to two retail
banners for which Supervalu is likely to pursue sale agreements in
which the leases would be assigned. Upon reaching agreements to
sell these retail stores, Supervalu anticipates that lease payments
will be paid directly by the acquirer, and Supervalu will no longer
incur the expense.
Fiscal 2019 Outlook
The following table reconciles Supervalu’s outlook for full year
fiscal 2019 Adjusted EBITDA, as revised for fiscal 2019 definition
changes, to Net earnings from continuing operations, the most
comparable GAAP measure. The table below illustrates the expected
changes to management’s definition of Adjusted EBITDA. Finally, the
outlook below includes the expected $27 million of (pre-tax) rent
expense associated with the sale leaseback announced on April 24,
2018. Additional adjustments not related to our on-going business
performance may also arise during fiscal 2019.
Table 8 For the Fiscal Year Ending
February 23, 2019 (52 weeks) Projected Low End
Projected High (In millions) Amount End
Amount Results of operations, as projected Net earnings
from continuing operations $ 55 $ 73 Income tax provision 18 24
Equity in earnings of unconsolidated affiliates (1 ) (1 ) Net
pension and other postretirement benefit income(1) (38 ) (38 )
Interest expense, net 113 113 Total operating
earnings(1) $ 147 $ 171 Add Equity in earnings of
unconsolidated affiliates 1 1 Less net earnings attributable to
noncontrolling interests (1 ) (1 ) Depreciation and amortization
180 180 LIFO charge 3 3 Merger and integration costs 20 20 Net
pension and other postretirement benefit income(1) 38 38
Adjusted EBITDA, as historically defined $ 388 $ 413
Fiscal 2019 Adjusted EBITDA definition(1) Net pension and
other postretirement benefit income(1) (38 ) (38 ) Stock-based
compensation(1) 25 25 Adjusted EBITDA, as revised for
fiscal 2019 definition changes $ 375 $ 400 (1)
Accounting standard update 2017-07 requires entities to
present non-service components of net periodic pension and other
post retirement benefit income in a new financial statement line
below operating earnings. Supervalu is required to adopt this
accounting standard in its first quarter of fiscal 2019. As a
result of this required change, Supervalu determined it would
reduce its measure of Adjusted EBITDA by the effect of the
financial statement line item change, which will negatively impact
the measure of Adjusted EBITDA, as historically defined. Upon
considering this accounting standard change and as part of
Supervalu’s fiscal 2019 planning process, Supervalu determined it
would revise its definition of Adjusted EBITDA in fiscal 2019 to
exclude the non-service components related to net periodic pension
and other post retirement benefit income that it will be required
to move below operating earnings and has also revised the
definition to exclude stock-based compensation.
Management is providing an outlook for fiscal 2019 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: https://www.businesswire.com/news/home/20180424006358/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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