FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period (16 weeks) ended June 18, 1994.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ..................... to........................
Commission file number 1-5418
SUPERVALU INC.
(Exact name of registrant as specified in its Charter)
DELAWARE 41-0617000
................................................................................
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11840 Valley View Road, Eden Prairie, Minnesota 55344
................................................................................
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 828-4000
..............................
Former name, former address and former fiscal year, if changed since last
report:
N.A.
................................................................................
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
....... .......
The number of shares outstanding of each of the issuer's classes of Common Stock
as of as of July 1, 1994 is follows:
Title of Each Class Shares Outstanding
------------------- ------------------
Common Shares 71,470,535
PART 1 - FINANCIAL INFORMATION
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Item 1: Financial Statements
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CONSOLIDATED STATEMENTS OF EARNINGS
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SUPERVALU INC. and Subsidiaries
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(In thousands, except for share data)
First Quarter (16 Weeks) Ended
--------------------------------
June 18, 1994 June 19, 1993
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NET SALES $4,991,115 $4,875,784
COSTS AND EXPENSES:
Cost of sales 4,552,947 4,457,422
Selling and administrative expenses 321,952 307,143
Amortization of goodwill 4,225 3,620
Interest
Interest expense 38,297 38,371
Interest income 7,655 9,074
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Interest expense, net 30,642 29,297
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Total costs and expenses 4,909,766 4,797,482
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EARNINGS BEFORE EQUITY IN EARNINGS
OF SHOPKO AND INCOME TAXES 81,349 78,302
EQUITY IN EARNINGS OF SHOPKO 2,293 2,633
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EARNINGS BEFORE INCOME TAXES 83,642 80,935
PROVISION FOR INCOME TAXES:
Currently payable 27,108 29,550
Deferred 5,921 301
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Income taxes, net 33,029 29,851
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NET EARNINGS $ 50,613 $ 51,084
========== ==========
NET EARNINGS PER COMMON SHARE: $0.71 $0.71
Weighted average number of common
shares outstanding 71,633 71,583
Dividends declared per common share $0.220 $0.195
Supplemental information:
After-tax LIFO income $1,709 $2,734
All data subject to year-end audit.
See notes to consolidated financial statements
(2)
CONSOLIDATED BALANCE SHEETS
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SUPERVALU INC. and Subsidiaries First Quarter as of Fiscal Year End
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(In thousands) June 18, June 19, February 26,
ASSETS 1994 1993 1994
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CURRENT ASSETS
Cash and cash equivalents $ 3,672 $ 1,377 $ 2,846
Receivables, less allowance for losses of
$35,592 at June 18, 1994, $40,614 at
June 19, 1993 and $33,820 at February 26, 1994 399,900 350,967 352,151
Inventories 1,199,843 1,151,833 1,113,937
Other current assets 91,955 71,991 94,379
---------- ---------- ----------
TOTAL CURRENT ASSETS 1,695,370 1,576,168 1,563,313
Long-term notes receivable 67,902 89,447 66,568
Long-term investment in direct financing leases 80,146 89,076 81,574
PROPERTY, PLANT AND EQUIPMENT
Land 179,246 160,003 172,241
Buildings 823,998 734,390 769,036
Property under construction 85,961 48,602 73,950
Leasehold improvements 120,506 105,325 114,724
Equipment 915,034 844,045 890,050
Assets under capital leases 199,659 175,716 175,891
---------- ---------- ----------
2,324,404 2,068,081 2,195,892
Less accumulated depreciation and amortization
Owned property, plant and equipment 776,363 679,841 746,027
Assets under capital leases 38,679 29,296 39,742
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NET PROPERTY, PLANT AND EQUIPMENT 1,509,362 1,358,944 1,410,123
INVESTMENT IN SHOPKO 172,619 164,651 173,567
GOODWILL 480,587 432,933 427,559
OTHER ASSETS 342,606 288,053 319,647
---------- ---------- ----------
TOTAL ASSETS $4,348,592 $3,999,272 $4,042,351
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES
NOTES PAYABLE $ 239,226 $ 178,454 $ 23,082
ACCOUNTS PAYABLE 935,190 854,292 883,088
CURRENT MATURITIES OF LONG-TERM DEBT 9,060 6,606 108,728
CURRENT OBLIGATIONS UNDER CAPITAL LEASES 18,440 19,317 19,222
OTHER CURRENT LIABILITIES 152,513 169,361 190,305
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 1,354,429 1,228,030 1,224,425
LONG-TERM DEBT 1,154,678 1,111,105 1,030,378
LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES 253,895 233,766 232,617
DEFERRED INCOME TAXES 108,874 86,131 99,734
OTHER LIABILITIES 187,037 165,730 179,739
STOCKHOLDERS' EQUITY
Preferred stock 5,908 -- 5,908
Common stock 75,335 75,335 75,335
Capital in excess of par value 13,224 12,516 12,966
Retained earnings 1,302,957 1,181,470 1,268,117
Treasury stock, at cost (107,745) (94,813) (86,868)
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TOTAL STOCKHOLDERS' EQUITY 1,289,679 1,174,508 1,275,458
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,348,592 $3,999,272 $4,042,351
========== ========== ==========
Quarterly data subject to year-end audit. See notes to consolidated financial statements.
(3)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
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SUPERVALU INC. and Subsidiaries
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(In thousands, except per share data)
Capital in
Preferred Common Excess of Treasury Retained
Stock Stock Par Value Stock Earnings Total
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BALANCES AT
FEBRUARY 27, 1993 $ -- $75,335 $12,584 $ (97,473) $1,144,374 $1,134,820
Net earnings -- -- -- -- 185,253 185,253
Sales of common stock
under options plans -- -- 225 10,838 -- 11,063
Cash dividends declared
on common stock-
$.855 per share -- -- -- -- (61,510) (61,510)
Issuance of preferred stock 5,908 -- -- -- -- 5,908
Compensation under employee
incentive plan -- -- 157 (233) -- (76)
------ ------- ------- ------- ---------- ----------
BALANCES AT
FEBRUARY 26, 1994 5,908 75,335 12,966 (86,868) 1,266,117 1,275,458
Net earnings -- -- -- -- 50,613 50,613
Sales of common stock
under options plans -- -- 1 (823) -- (822)
Cash dividends declared
on common stock-
$.22 per share -- -- -- -- (15,773) (15,773)
Compensation under employee
incentive plan -- -- 257 639 -- 896
Purchase of 600 shares
for treasury -- -- -- (20,693) -- (20,693)
------ ------- ------- ------- ---------- ----------
BALANCES AT
JUNE 18, 1994 $5,908 $75,335 $13,224 $(107,745) $1,302,957 $1,289,679
====== ======= ======= ========= ========== ==========
Interim data subject to year-end audit. See notes to consolidated financial statements
(4)
CONSOLIDATED STATEMENTS OF CASH FLOWS
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SUPERVALU INC. and Subsidiaries
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(In thousands) Year-to-date
(16 weeks ended)
-------------------------
June 18, June 19,
1994 1993
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 50,613 $ 51,084
Adjustments to reconcile net earnings to net cash
provided from (used in) operating activities:
Equity in earnings of ShopKo (2,293) (2,633)
Dividends received from ShopKo 3,241 3,243
Depreciation and amortization 65,009 58,161
Provision for losses on receivables 1,425 2,575
Gain on sale of property, plant and equipment (1,950) (1,157)
Deferred income taxes 6,250 301
Treasury shares contributed to employee incentive plans -- 94
Change in assets and liabilities:
Receivables (21,550) 4,167
Inventory (27,953) (17,774)
Other current assets 8,399 7,929
Direct finance leases 2,529 2,334
Accounts payable 4,274 16,464
Other liabilities (34,153) (31,694)
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Net cash provided from operating activities 53,841 93,094
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CASH FLOWS FROM INVESTING ACTIVITIES
Additions to long-term notes receivable (7,919) (16,308)
Payments received on long-term notes receivable 6,585 9,395
Proceeds from sale of property, plant and equipment 14,657 5,512
Purchase of property, plant and equipment (61,619) (34,309)
Business acquisitions, net of cash acquired (58,697) --
Other investing activities (25,403) 46,315
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Net cash provided by (used in) investing activities (132,396) 10,605
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CASH FLOWS FROM FINANCING ACTIVITIES
Net issuance (reduction) of short-term notes payable 212,588 (73,042)
Proceeds from issuance of long-term debt -- 1,340
Repayment of long-term debt (75,296) (2,164)
Reduction of obligations under capital leases (4,746) (4,862)
Proceeds (payments) from the sale or purchase of common stock under option plans (829) 2,552
Dividends paid (31,643) (27,919)
Payment for purchase of treasury stock (20,693) --
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Net cash provided by (used in) financing activities 79,381 (104,095)
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Net increase in cash and cash equivalents 826 (396)
Cash and cash equivalents at beginning of year 2,846 1,773
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Cash and cash equivalents at end of first quarter $ 3,672 $ 1,377
========= =========
All data subject to year-end audit. See notes to consolidated financial statements.
(5)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting Policies
- -------------------
The summary of significant accounting policies is included in the notes to
consolidated financial statements in the 1994 annual report of SUPERVALU INC.
("SUPERVALU" or the "company").
Statement of Registrant
- -----------------------
The data presented herein is unaudited but, in the opinion of management,
includes all adjustments (which consist only of normal recurring accruals)
necessary for a fair presentation of the consolidated financial position of the
company and its subsidiaries at June 18, 1994 and June 19, 1993 and the results
of the company's operations and cash flows for the periods then ended. These
interim results are not necessarily indicative of the results of the fiscal
years as a whole.
A limited review of this data has been performed by the company's independent
certified public accountants, Deloitte & Touche. A copy of their report is
attached as an exhibit to this report.
(6)
Item 2: Management's Discussion and Analysis of Financial Condition
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and Results of Operations
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First Quarter of Fiscal 1995
Compared with First Quarter of Fiscal 1994
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The following table sets forth items from the company's Consolidated Statements
of Earnings as a percentage of net sales:
First Quarter(16 weeks)
-------------------------
Fiscal Fiscal
1995 1994
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Net sales 100.00% 100.00%
Cost of sales (91.22) (91.42)
Selling and administrative (6.54) (6.37)
Interest expense (.76) (.79)
Interest income .15 .19
- ------------------------------------------------------------ ------ ------
Earnings before equity in earnings
of ShopKo, and income taxes 1.63 1.61
Equity in earnings of ShopKo .04 .05
Provision for income taxes (.66) (.61)
- ------------------------------------------------------------ ------ ------
Net earnings 1.01% 1.05%
============================================================ ====== ======
NET SALES:
Net sales for the first quarter increased 2.4% over the first quarter of last
year. Food distribution net sales increased 1.1% over last year, due to the
acquisition of Sweet Life Foods in March of 1994. The increase was achieved
despite deflation as measured by the company of .8% during the quarter compared
to inflation of .3% last year, and was partially offset by wholesale
consolidation and competitive market conditions at the retail level. Retail
food net sales increased 6.9% over prior year first quarter. The increase was
primarily due to new Cub Foods, Scott's Foods, Save-A-Lot, and Max Club stores
opened during the last four quarters. Same-store corporate retail sales were
even with last year.
Net Sales by Segment
(In thousands)
First Quarter (16 weeks)
--------------------------------------------------
June 18, 1994 June 19, 1993
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Net Sales % of total Net Sales % of total
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Food distribution $4,533,909 90.8 % $4,446,654 91.2 %
Retail food 1,131,111 22.7 % $1,057,943 21.7 %
Sales Elimination (673,905) (13.5)% (628,813) (12.9)%
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$4,991,115 100.0 % $4,875,784 100.0 %
========== ========== ========== ======
(7)
GROSS PROFIT:
Gross profit as a percentage of net sales increased to 8.8% in the first
quarter, compared with 8.6% for the first quarter of fiscal 1994. The increase
in the gross profit margin was due primarily to the growing proportion of the
higher margined retail food business within the company's total sales mix. Food
distribution gross profit margin was affected by a reduced LIFO credit and by a
slight reduction in off invoice allowances offered by certain vendors. The
retail food gross profit margin increased from last year due to reduced
competitive pressures in certain regions.
SELLING AND ADMINISTRATIVE EXPENSES:
Selling and administrative expenses were 6.5% of net sales for the quarter
compared with 6.4% in the first quarter last year. The higher percentage was
due to a growing proportion of the company's retail food segment which operates
at higher selling and administrative expenses percentage than the food
distribution segment.
OPERATING EARNINGS:
The company's pre-tax operating earnings (earnings before interest, corporate
expenses, equity in earnings of ShopKo Stores, Inc. and taxes) increased 4.5% to
$121.0 million for the first quarter of fiscal 1995. Food distribution
operating earnings decreased 3.5% in the first quarter from the previous year.
Retail food operating earnings increased significantly over the prior year.
Food distribution operating earnings decreased due to facilities consolidations,
the negative contribution of acquisitions completed during the quarter and a
reduced LIFO credit. Retail food operating earnings increased over last year
due to strong gross profit margins.
INTEREST INCOME AND EXPENSE:
Interest income decreased to $7.7 million in the first quarter of fiscal 1995,
compared with $9.1 million in the prior year due to lower notes receivable
balances. Notes receivable declined because of the sale of notes in the
ordinary course of business and note prepayments by independent retailers.
Interest expense was $38.3 million in the first quarter consistent with last
year's interest expense of $38.4 million.
EQUITY IN EARNINGS OF SHOPKO:
SUPERVALU's share of ShopKo Stores, Inc. (ShopKo) net earnings decreased to $2.3
million in the first quarter from $2.6 million in the first quarter of last
year. Although ShopKo's sales increased 8.5%, net earnings decreased to $5.0
million from last year's $5.7 million. As reported by ShopKo, the decrease in
net earnings was due to a weak gross profit margin and higher interest expense.
The weak gross profit resulted from continued competitive pricing pressures in
the discount market place and clearance markdowns related to shifts in
merchandise mix. Interest expense increased primarily due to long-term
borrowing which principally funded new stores and the company's remodel program.
The unfavorable gross profit percentage and the higher interest expense were
partially offset by a decrease in selling and administrative expenses as a
percent of sales due to tight expense controls.
(8)
INCOME TAXES:
The effective tax rate increased in the first quarter of 1995 to 39.5% compared
to 36.9% in the first quarter of 1994. The increase in the effective tax rate
was principally due to the Omnibus Budget Reconciliation Act of 1993.
LIQUIDITY AND CAPITAL RESOURCES
Internally-generated funds, principally from the company's food distribution
operations, continue to be the major source of capital for liquidity and capital
growth. Cash provided from operations for the first quarter was $53.8 million
compared with $93.1 million last year. The decrease was primarily due to
increases in receivables and inventory related to consolidation and acquisition
activities which were intended to maintain customer service levels and market
share. Cash provided from operations and increased short-term borrowings of
$212.6 million were used to repay long-term debt, finance capital expenditures
and acquisitions, pay dividends and purchase treasury stock. The company repaid
$75.3 million of long-term debt assumed as part of the acquisitions in the first
quarter, which included Sweet Life Foods, Texas T Stores, Wetterau Properties
Inc. and Delice de France, Inc., a Chicago-based croissant manufacturer.
Capital expenditures in the first quarter were $61.6 million. The company paid
dividends of $31.6 million and also financed the purchase of $20.7 million in
treasury stock in accordance with the company's treasury stock repurchase
program.
The company will continue to use short-term and long-term debt as a supplement
to internally-generated funds to finance its activities. Debt securities
totalling $150 million with a five year maturity were issued in July, 1994. It
is intended that $100 million of the proceeds be utilized to refund $100 million
of notes due August 15, 1994. Also, $32 million has been used to repay certain
mortgage indebtedness assumed in connection with the acquisition of Wetterau
Properties and the remaining proceeds to repay short-term borrowings. Also in
July the company announced an agreement to acquire Hyper Shoppes, Inc., which
operates five supercenters and two discount food stores in the Cincinnati,
Louisville and Denver markets. The acquisition is intended to be financed
through internally-generated funds and short-term borrowings. Management does
not anticipate the need for any additional long-term external financing except
for leases or if significant acquisitions are completed. The company has $400
million of short-term credit available. The debt to equity ratio at the end of
the first quarter was 59 percent compared with 57 percent at the end of fiscal
1994.
The company's long-term debt ratings are considered strong with an A rating from
Standard and Poor's and an A3 rating from Moody's. These strong ratings, the
available credit facilities and the internally generated funds provide the
company with the financial flexibility to meet its liquidity needs.
(9)
PART II - OTHER INFORMATION
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Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
The Registrant held its Annual Meeting of Stockholders on June 29,
1994, at which the stockholders took the following actions:
(a) elected Vernon H. Heath, William A. Hodder, Harriet Perlmutter,
Winston R. Wallin as Directors of Registrant, for terms expiring
in 1997, and Richard L. Knowlton for a term expiring in 1996. The
votes cast for and withheld with respect to each such Director was
as follows:
Votes For Votes Withheld
---------- --------------
Vernon H. Heath 60,328,032 420,660
William A. Hodder 60,365,260 383,432
Harriet Perlmutter 60,360,172 388,520
Winston R. Wallin 60,340,221 408,471
Richard L. Knowlton 60,360,000 388,692
The Directors whose terms continued after the meeting are as
follows: Herman Cain, Stephen I. D'Agostino, Edwin Gage, Garnett
L. Keith, Jr., Richard D. McCormick, Carole F. St. Mark and
Michael W. Wright;
(b) approved, by a vote of 46,574,790 for, 13,369,706 against and
804,196 abstaining, the SUPERVALU INC. Annual Cash Bonus Plan for
Designated Corporate Officers.
(c) ratified, by a vote of 60,274,806 for, 242,722 against and 231,164
abstaining, the appointment of Deloitte & Touche as the
independent auditors of Registrant for the fiscal year ending
February 28, 1994.
(d) rejected, by a vote of 14,301,368 for, 39,489,181 against,
1,997,281 abstaining, and 4,960,862 broker non-votes the
stockholder proposal relating to the Company's 1993 Stock Plan
(Item 4).
(e) approved, by a vote of 32,834,726 for, 22,080,714 against, 872,389
abstaining, and 4,960,863 broker non-votes the stockholder
proposal relating to the Company's preferred share purchase rights
(Item 5).
(10)
Reference is hereby made to the Proxy Statement dated May 23, 1994,
filed with the Commission pursuant to Regulation 14A, for further
information regarding these proposals submitted to a vote of the
stockholders at the Annual Meeting.
Item 6. Exhibits and Reports on Form 8-K.
- ------ --------------------------------
(a) Exhibits filed with this Form 10-Q:
(15) Letters from Deloitte & Touche regarding unaudited interim
financial information.
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter ended June
18, 1994.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUPERVALU INC. (Registrant)
By: /s/ Isaiah Harris
--------------------------------------
Isaiah Harris
Date: July 29, 1994 Vice President and Controller
(Chief Accounting Officer and
duly authorized officer
of Registrant)
(11)
EXHIBIT INDEX
SUPERVALU INC.
FORM 10-Q REPORT
EXHIBIT NUMBER EXHIBIT
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15 Letters from Deloitte & Touche
regarding unaudited interim
financial information.
(12)