EXHIBIT (13)
FINANCIAL REVIEW
SUPERVALU management decisions are guided by established policies covering
financial goals, capital structure, capital investment and dividends. The
company's long-term financial goals are arrived at by balancing two broad
objectives: increasing profitability levels and maintaining a strong capital
structure.
The profitability of the company is gauged by return on investment measures.
Achievement of targeted return levels in these areas would lead to excellent
returns for the company's stockholders through increasing dividends and higher
valuations on their investment in the company. These measures are an integral
part of the company's planning process and are an integral part of management
incentive compensation.
CAPITAL STRUCTURE
Management believes that maintaining a strong capital structure and maintaining
financial flexibility provides a significant competitive advantage and allows
the company to be opportunistic in terms of acquisitions. The current level of
capital has remained relatively constant over the last three years. The debt-to-
total capitalization ratio increased in 1993, with the purchase of Wetterau, and
has been affected by acquisition activity in 1995 and 1994.
The capital structure of SUPERVALU at each fiscal year-end included the
following:
Summary of Balance Sheet Capitalization
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(In millions) 1995 1994 1993
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Short-term borrowings $ 226.2 $ 23.1 $ 251.5
Long-term debt 1,224.5 1,139.1 1,118.5
Present value of:
Capital leases 179.6 163.4 158.9
Retailer finance leases 84.0 88.4 95.8
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Total debt, including current
maturities 1,714.3 1,414.0 1,624.7
Stockholders' equity 1,193.2 1,275.5 1,134.8
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Total capitalization $2,907.5 $2,689.5 $2,759.5
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Debt-to-total capitalization 59% 53% 59%
LIQUIDITY
Internally generated funds, principally from the company's food distribution
business, were the major source of capital for liquidity and growth in 1995 and
1994. The debt-to-total capitalization ratio increased to 59 percent in 1995,
primarily due to the use of short-term borrowings to finance acquisitions.
Management expects that the company will continue to replenish operating assets
and reduce aggregate debt with internally-generated funds and capital leases
unless additional funds are necessary to complete acquisitions. The company has
adequate short-term and long-term financing capabilities to fund acquisitions as
the opportunities arise.
Cash provided from operations, which was not affected by the restructuring and
other charges, was $341 million in 1995, compared with $433 million in 1994, and
$404 million in 1993. The issuance of short-term and long-term debt of $349.5
million and cash provided from operations were used to finance capital
expenditures, repay long-term debt and finance acquisitions. The company
financed $298.1 million in capital expenditures and repaid $221.2 million of
long-term debt, a portion of which was assumed as part of the acquisitions of
Sweet Life Foods, Hyper Shoppes, Inc., Texas T Stores, Wetterau Properties, Inc.
and Delice de France. In 1995, total capital expenditures of $298.1 million
included $16 million related to the ADVANTAGE project.
[PHOTO OF JEFF GIRARD]
Jeff Girard
Executive Vice President and
Chief Financial Officer
The company issued $150 million in debt securities in 1995. The proceeds were
used to refund $100 million of notes due August 1994; repay $32 million of
certain mortgage indebtedness assumed by the company in connection with the
acquisition of Wetterau Properties; and repay $18 million of short-term
borrowings.
The company intends to invest at least $175 million under the ADVANTAGE project
with approximately $104 million of the expenditures occurring in 1996. The
monies will be used to fund regional facilities, technology and various
mechanization systems. The company expects that the investment in ADVANTAGE will
be recovered by the reduction in inventory and property levels.
SUPERVALU will continue to use short-term and long-term debt as a supplement to
internally generated funds to finance its activ-
16
ities. To that end, the company has a "shelf registration" in effect pursuant to
which the company could sell an additional $400 million of long-term debt
without further registration. The company has $300 million of debt due in
November of 1995, which it intends to refinance by utilizing the existing shelf
registration or the use of the available revolving credit agreement. The use of
available revolving credit of $400 million, the shelf registration or any other
long-term debt will depend on management's views with respect to long-term
capital needs and the relative attractiveness of short-term versus long-term
interest rates.
The company's financial position and long-term debt ratings are 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 internally-generated funds provide
the company with the financial flexibility to meet unexpected liquidity needs.
EXPANSION PLANS FOR FISCAL 1996
SUPERVALU's capital budget for fiscal 1996, which includes leases, is $500
million compared with the $382 million and $321 million incurred during 1995 and
1994, respectively. The capital budget provides sufficient funding for the
growth of the company and covers anticipated projects under the ADVANTAGE
initiative.
[BAR GRAPH APPEARS HERE CONTAINING THE FOLLOWING INFORMATION:]
1996 (Budget) 1995 1994
------------- ----- -----
Food Distribution $345 $ 202 $ 204
Retail Food 142 140 78
Corporate 13 40 39
---- ----- -----
TOTAL $500 $ 382 $ 321
Approximately $241 million of the 1996 capital budget is slated for use in the
company's food distribution activities for regular replacement, productivity and
capacity enhancement projects and for financing the company's independent
retailers. Retailer financing activities typically do not require new cash
outlays because they are leases or guarantees or funded by the repayment of
existing notes. In addition, the company has allocated $104 million for the
ADVANTAGE project related to food distribution activities.
The retail food capital budget of $142 million ($32 million of which are capital
leases) covers corporately-owned retail food businesses. The budget provides for
approximately 33 new corporate retail stores and several store remodels and
expansions. The balance of the 1996 capital budget is dedicated to the corporate
area and will be utilized principally for computer equipment.
These capital spending activities are not expected to result in an increase in
the company's debt-to-total-capitalization ratio as internal cash flow is
expected to support all spending requirements except leases. Because of the
opportunistic nature of acquisitions, no amount for acquisition activity is
included in the capital budget. The capital budget does include amounts for
projects which are subject to change and for which firm commitments have not
been made.
DIVIDENDS
Cash dividends declared during fiscal 1995 amounted to 92 1/2 cents per common
share, an increase of 8.2 percent over the 85 1/2 cents per share declared in
the prior fiscal year. This was the 58th year of consecutive cash dividends and
the 23rd year of successive annual increases. Cash dividend payments have
increased since 1974 at an annual compounded rate of 11.4 percent. The company's
dividend policy will continue to emphasize a high level of earnings retention.
COMMON STOCK PRICE
SUPERVALU's common stock is listed on the New York Stock Exchange under the
symbol SVU. At year-end, there were 8,060 stockholders of record compared with
8,233 at the end of fiscal 1994.
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Common Stock Dividends Per
Price Range Share
Fiscal Quarter 1995 1994 1995 1994
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High Low High Low
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First $37 $31 $34 1/2 $29 7/8 $.220 $.195
Second 31 7/8 27 1/2 37 5/8 32 .235 .220
Third 28 3/4 23 7/8 35 3/4 32 .235 .220
Fourth 26 22 1/8 40 1/8 32 1/2 .235 .220
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Year $37 $22 1/8 $40 1/8 $29 7/8 $.925 $.855
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Dividend payment dates are on or about the 15th day of March, June, September
and December, subject to Board of Directors approval.
17
[LOGO]
RESULTS OF OPERATIONS
The following table sets forth items from the company's Consolidated Statements
of Earnings as percentages of net sales:
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Fiscal Year Ended
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February 25, February 26, February 27,
1995 1994 1993
(52 weeks) (52 weeks) (52 weeks)
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Net sales 100.0% 100.0% 100.0%
Cost of sales 90.8 91.1 91.8
Selling and administrative expenses 7.1 6.6 5.9
Restructuring and other charges 1.5 - -
Interest expense .8 .7 .6
Interest income (.2) (.2) (.2)
Equity in earnings of ShopKo (.1) (.1) (.2)
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Earnings before income taxes .1 1.9 2.1
Income taxes .1 .7 .8
ShopKo deferred tax credit (.3) - -
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Net earnings .3% 1.2% 1.3%
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Wetterau was acquired in October 1992 and treated as a purchase in the fiscal
year ended February 27, 1993; therefore, earnings contributions are net of
goodwill amortization of $11.2 million in 1995; $10.8 million in 1994; and $3.4
million in 1993, as well as financing costs. Seventeen weeks of Wetterau results
were included in fiscal 1993 and 52 weeks in fiscal 1994 and fiscal 1995.
NET SALES
Net sales increased 3.9 percent to $16.6 billion in fiscal 1995, from $15.9
billion in 1994. Net sales increased 26.8 percent in 1994 from $12.6 billion in
1993. The increase in net sales in 1995 was principally due to the acquisitions
of Sweet Life Foods, Texas T Stores and Hyper Shoppes, Inc. However, the
increase in 1995 was impacted by lost sales due to warehouse consolidations and
declining sales in Twin Valu and Laneco retail stores closed or announced to be
closing as a result of the restructuring. The increase in net sales in 1994 was
principally due to the acquisition of Wetterau. Sales for 1994 would have
increased approximately 1 percent excluding the sales impact of the Wetterau
acquisition and the sale of the Salem division.
Food distribution sales increased $.5 billion in 1995 to $14.8 billion, a 3.2
percent increase. The increase over 1994 net sales was due to the acquisitions
of Sweet Life Foods and Texas T Stores. New store openings in the company's
retail food chains also contributed to the sales increase over last year. The
added sales contributions from acquisitions and new store openings were
partially offset by lost sales due to warehouse consolidations and competitive
market conditions at the retail level. Food inflation was negligible in both
years. Food distribution sales for 1994 increased 25.4 percent over 1993 net
sales of $11.4 billion due to the Wetterau acquisition. Both years were affected
by increased competition, slower retail development due to the inability of
developers to obtain financing, and low food inflation.
Retail food sales increased 14.2 percent in 1995 to $4.2 billion, compared with
$3.7 billion in 1994. Sales in 1994 grew 36.9 percent over 1993 sales of $2.7
billion. The increase in 1995 was primarily due to the acquisitions of Hyper
Shoppes, Inc. and Texas T Stores and new store openings. However, this increase
was partially offset by a decline in same-store sales of approximately 1
percent, which was primarily due to competitive pressures and reduced sales in
stores closed or announced to be closing as a result of the restructuring. The
increase in 1994 was due to the full year versus partial year contribution from
Wetterau's retail operations and new store openings, which was partially offset
by a decline in same-store sales of 2 percent.
GROSS PROFIT
Gross profit as a percentage of net sales increased to 9.2 percent in 1995,
compared with 8.9 percent in 1994 and 8.2 percent in 1993. These increases were
due principally to the growing proportion within the company's total sales mix
of the higher-margined retail food business, which represented 25 percent of
total sales in 1995, compared with 23 percent and 22 percent in 1994 and 1993,
respectively. The Hyper Shoppes, Inc. and Texas T Stores acquisitions and an
increase in the number of corporately-owned Cub Foods stores contributed to the
higher gross profit percentage. Food distribution gross profit margin was
relatively flat, positively affected by increased fees on certain products, the
growth of Save-A-Lot and growth in private label sales. These positive impacts
were largely offset by an increase in insurance expense, higher LIFO expense, a
reduction in off-invoice allowances offered by certain vendors, and an increase
in expenses associated with the company's warehouse consolidation activities.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses were 7.1 percent of net sales in 1995,
compared with 6.6 percent in 1994, and 5.9 percent in 1993. The higher
percentage in 1995 was attributable primarily to the increased proportion of the
company's retail food operations. Additional factors contributing to the higher
selling and
18
administrative percentage were the ADVANTAGE project, warehouse consolidation
activity in several markets and integration costs of the Sweet Life acquisition.
Expenses of $15 million related to the ADVANTAGE project were incurred. Selling
and administrative expenses as a percent of net sales were also higher than last
year due to closing and exit activities at the Twin Valu and Laneco locations.
The higher percentage in 1994 compared with 1993 was due principally to the
increased proportion of the company's retail operations. The company anticipates
an increase in expenses to $23 to $29 million related to the ADVANTAGE project
next year, however, a net earnings contribution from this project is anticipated
in fiscal 1997.
RESTRUCTURING AND OTHER CHARGES
In December 1994 the company announced a change in operating strategy which
included the decision to restructure certain of its operations and reassess the
recoverability of underlying assets. Restructuring and other charges totaling
$244 million were recorded to provide for the implementation of the plan
formulated under the ADVANTAGE project, and the sale, closure or restructure of
certain retail businesses. The aggregate charges also included the recognition
of certain asset impairments based on the company's established process of
reviewing intangibles on a periodic recurring basis.
Management's objective under the ADVANTAGE project is to fundamentally change
its business processes to improve the effectiveness and efficiency of the
company's food distribution system thus lowering the cost of goods to the
company's customers. Its retail food objective is to improve retail performance
by eliminating certain operations and assets that do not add shareholder value
and focusing on building its successful retail formats. The restructuring plan,
which was approved by the Board of Directors, resulted from a comprehensive
review of industry trends and company operations, and represents a new business
vision for the company. The restructuring plan anticipates four main
initiatives: creation of three regional "upstream" distribution facilities;
resets and mechanized inventory sort at "downstream" distribution facilities;
elimination of certain retail businesses and assets; and a realignment of both
food distribution and retail food organizations and operations.
Under the plan, food distribution costs are expected to be reduced through
enhanced logistic procedures. This is expected to be accomplished by better
balancing the trade-offs of lower prices from volume buying against handling,
storage and transportation expenses. Planned upstream facilities will provide
regional distribution of general merchandise, health and beauty care products
and slow-moving grocery items. Construction of the Anniston, Alabama prototype
"upstream" facility is underway and is scheduled for completion in January 1996.
A second facility, a 530,000 square-foot distribution center in Perryman, MD was
acquired in November 1994 and will be used both for relocation of the company's
Maryland division and for selected upstream functions. The company believes that
the regional upstream facilities will allow better price brackets for certain
items and categories plus reduced freight expenses. Extensive mechanization is
planned for most facilities and inventory levels are expected to decline
substantially. Changes in the pricing of goods and services are also planned. It
is management's belief that when fully implemented, SUPERVALU will have the
ability to deliver product into the marketplace on a competitively advantageous
basis.
The retail changes involve a refocusing of the company's corporate retail
efforts on formats which it believes will produce the best results in the
future. The two Twin Valu supercenters have been closed and Laneco will re-focus
on food-driven formats and exit certain non-food operations.
The aggregate charges include $204.8 million for activities under the
restructuring plan and an additional $39.2 million for asset impairment. The
asset impairment charge covers intangibles in businesses where future
undiscounted cash flow is not sufficient to recover the book value of the
recorded intangible. The restructuring charges do not cover certain aspects of
the plan, including new information systems, anticipated operating losses,
implementation costs associated with the ADVANTAGE project, employee relocation
and training. These costs are not considered exit activities and will be
recognized as incurred. Cash expenditures related to the aggregate charges were
$3.9 million during fiscal 1995. Additional cash expenditures are estimated to
be $29.2 million in fiscal 1996 and $22.8 million thereafter. These cash
expenditures cover severance, pension, outplacement and carrying costs of
impaired food distribution real estate. Management anticipates that the future
cash require-
19
[LOGO]
ments will be funded through internally generated cash, principally from
inventory and property reductions.
The aggregate charges include $53.1 million for severance, pension and
outplacement which is based on the projected impact of the plan on employee
levels in both food distribution and retail food. The company expects
approximately 4,300 positions will be eliminated under the re-engineering
efforts, 1,700 of which are employed in retail food operations. During 1995
approximately 338 positions were eliminated which resulted in severance and
outplacement payments of $1.6 million. The restructuring charges also include a
$20.0 million provision in food distribution which represents expected losses on
the sale of tangible assets and expenses under non-cancelable leases as a result
of the strategic shift. Expenditures under non-cancelable leases and write-offs
of losses on sale of $6.0 million were incurred during the fourth quarter of
1995.
The restructuring charges include an $87.8 million provision for property and
lease discontinuances at retail locations, resulting primarily from various exit
strategies and payment of portions of non-cancelable lease obligations. A
portion of this amount was established to provide for the exiting of the
company's Twin Valu business. The two Twin Valu supercenters were closed during
the fourth quarter of 1995. The company finalized a sales agreement on March 20,
1995, covering one Twin Valu supercenter and a vacant parcel which had been
acquired for another supercenter. Another portion of this provision covers a
substantial restructuring of the company's Laneco division. This will involve
the sale or other disposition of 7 stores, including all department store retail
units. Four Laneco stores were closed during the fourth quarter of 1995, and the
remaining 3 stores are in the process of closing. The company is involved in
active negotiation for the sale or closing of approximately 19 other retail
units which have not been publicly identified at this time. The company is
attempting to sell these units on a going-concern basis so the timing of
individual retail transactions will vary. Charges of $16.7 million were incurred
during the fourth quarter of 1995 related to the closedown of retail locations.
The retail units covered by the reserve had aggregate sales of $296.3, $291.7
and $234.1 million in 1995, 1994 and 1993, respectively, and pre-tax losses of
$21.3, $19.0 and $9.2 million in 1995, 1994 and 1993, respectively.
The final component of the aggregate charges is a $43.9 million impairment
provision representing the effect of the strategic shift on the recoverability
of certain assets. The company holds land for development, transition stores for
wholesale market share, certain warehouse properties and miscellaneous sites
which will be disposed of as soon as practicable. During the fourth quarter of
1995, charges of $3.3 million were incurred, leaving a reserve of $40.6 million
to cover expenditures and write-offs expected to be incurred during the next six
months.
OPERATING EARNINGS
The company's pre-tax operating earnings (earnings before interest, corporate
expenses, equity in earnings of ShopKo and taxes) decreased 61.4 percent to
$153.2 million after increasing 28.4 percent in 1994. The decrease in operating
earnings was primarily due to restructuring and other charges. Excluding
restructuring and other charges, operating earnings decreased 3.1 percent to
$384.6 million. The decrease was due to expenses incurred for the ADVANTAGE
project, warehouse consolidation activity and an increase in insurance expense.
Food distribution operating earnings before restructuring and other charges
decreased 4.1 percent in 1995, to $350.5 million, following a 28.6 percent gain
in 1994 over 1993 operating earnings. Operating earnings were affected by
warehouse consolidation expenses, an increased LIFO charge, higher insurance
expenses, and integration costs of the Sweet Life acquisition. The increase in
1994 was primarily due to the acquisition of Wetterau; however, improved
productivity and overall improvements in expense control also contributed to the
results.
Retail food operating earnings before restructuring and other charges increased
8.4 percent in 1995, to $34.0 million, from $31.4 million in 1994, which
increased 26.3 percent over 1993 operating earnings. The increase in 1995 was
primarily due to the Hyper Shoppes, Inc. and Texas T Stores acquisitions, and
the increase in contribution from corporately-owned Cub stores. However, the
increased operating earnings were partially offset by
20
reduced gross margins resulting from competitive pressures, expenses related to
new store openings, and reduced sales in stores closed or announced to be
closing as a result of the restructure. The increase in 1994 was due to the
addition of the Wetterau retail operations and the increase in contribution from
corporately-owned Cub and Scott's stores.
INTEREST INCOME AND EXPENSE
Interest income for 1995 was below 1994, due to the reduction in notes
receivable as a result of the sale of notes in the ordinary course of business
at the end of fiscal 1994. Interest income in 1994 increased over 1993, due to
the notes receivable acquired in conjunction with the Wetterau acquisition
offsetting the effect of declining rates. Interest expense increased to $135.4
million for 1995, compared with $120.3 million for 1994, due primarily to an
increase in short-term borrowings related to acquisitions, and higher interest
rates. In addition, the increase in interest expense was due to the issuance of
$150 million in debt securities in July of 1994, part of which was used to repay
a maturing issue in the amount of $100 million, and an increase in short-term
borrowing rates. The increase in interest expense in 1994 over 1993 was
primarily due to the Wetterau acquisition, partially offset by lower interest
rates.
EQUITY IN EARNINGS OF SHOPKO
ShopKo net sales for 1995 increased 6.6 percent to $1.85 billion, compared to
1994 sales of $1.74 billion, an increase of 3.3 percent over 1993. ShopKo
reported total net earnings of $37.8 million for 1995, an increase of 17.6
percent from 1994. Net earnings increased due to improved gross margins and
lower selling, general and administrative expenses resulting from tight expense
control. Net earnings for 1994 were $32.1 million, a 35.9 percent decrease
compared with 1993. ShopKo's net earnings for 1994 were negatively impacted by
lower gross margins and higher selling, general and administrative expenses. In
addition, ShopKo's 1994 earnings were reduced by the cumulative effect of a
change in accounting for future postretirement medical benefits (SFAS No. 106)
and a higher tax rate.
INCOME TAXES
The effective tax rate before the restructuring and other charges increased to
38 percent in 1995, from 37 percent in 1994, and 36 percent in 1993. The
increase in the effective tax rate was principally due to the increase in
goodwill resulting from recent acquisitions.
The Internal Revenue Service ("IRS") completed its review for tax years ending
in 1991 and 1992, which included the partial disposition of ShopKo in October
1991. The transaction was reported as a taxable sale in the audited financial
statements for that year. Upon completion of their review, the IRS concluded
that the partial disposition of ShopKo resulted in no tax liability. Therefore,
the $40.8 million of deferred taxes provided by the company in the financial
statements was reversed and reflected in the current year consolidated statement
of earnings.
NET EARNINGS
Net earnings for 1995 decreased 76.6 percent to $43.3 million, compared with net
earnings for 1994 of $185.3 million and $164.5 million reported in 1993. The
decrease in net earnings in 1995 was primarily due to the restructuring and
other charges, partially offset by a one-time tax credit related to the partial
disposition of ShopKo. After adjusting 1995 earnings to exclude the
restructuring and other charges and the ShopKo deferred tax credit, net earnings
decreased 12.6 percent to $161.9 million. The net earnings increase in 1994 over
1993 was due to the Wetterau acquisition and tight expense controls.
INFLATION
Inflation has not had a significant effect on the company's operating results or
its external sources of liquidity. The impact of negligible food inflation on
the company's sales was partially offset by retail development and marketing
activities. As operating expenses and inventory costs have increased, the
company has been able to identify operating efficiencies to minimize the impact.
21
TEN YEAR FINANCIAL AND OPERATING SUMMARY
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SUPERVALU INC. and Subsidiaries
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1995 1994 1993 1992 (b)
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Statement of Earnings Data (a)
Net sales $16,563,772 $15,936,925 $12,568,000 $10,632,301
Cost of sales 15,040,117 14,523,434 11,531,394 9,807,633
Selling and administrative expense 1,169,843 1,044,433 746,857 583,789
Restructuring and other charges 244,000 - - -
Interest, net 111,271 89,767 54,203 34,320
Equity in earnings of ShopKo 17,384 14,789 23,072 32,176
Earnings before taxes and accounting change 15,925 294,080 258,618 322,840
Provision for income taxes (f) (27,409) 108,827 94,092 115,175
Net earnings 43,334 185,253 164,526 194,377
Earnings per common share before accounting change .61 2.58 2.31 2.78
Net earnings per common share .61 2.58 2.31 2.60
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Balance Sheet Data (a)
Inventories (FIFO) $ 1,230,017 $ 1,227,170 $ 1,247,337 $ 862,621
Working capital (d) 319,429 452,121 361,093 534,182
Net property, plant and equipment 1,571,298 1,410,123 1,384,241 879,186
Total assets 4,305,149 4,042,351 4,064,189 2,484,300
Long-term debt (e) 1,459,766 1,262,995 1,347,386 608,241
Stockholders' equity 1,193,222 1,275,458 1,134,820 1,030,981
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Other Statistics (a)
Earnings before accounting change as a
percent of net sales (g) .98% 1.16% 1.31% 1.95%
Return on average stockholders' equity (g) 12.95% 15.40% 15.32% 20.17%
Book value per common share $ 16.92 $ 17.62 $ 15.84 $ 14.35
Current ratio (d) 1.22:1 1.37:1 1.27:1 1.72:1
Debt to capital ratio 59% 53% 59% 43%
Dividends declared per common share $ .92 1/2 $ .85 1/2 $ .76 1/2 $ .70 1/2
Weighted average common shares outstanding 71,388 71,817 71,341 74,700
Depreciation and amortization $ 198,718 $ 186,261 $ 140,790 $ 111,488
Capital expenditures, excluding retailer financing $ 319,560 $ 239,602 $ 164,728 $ 175,624
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Notes:
(a) Amounts for all years prior to 1992 have been restated to reflect the
company's ownership percentage in ShopKo under the equity method of
accounting because of the sale of a 54 percent interest in ShopKo, effective
October 16, 1991. Fiscal 1992 and 1987 contained 53 weeks; all other years
cover 52 weeks. Dollars in thousands except per share and percentge data.
(b) The cumulative effect of adopting Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," resulted in a decrease in net earnings of $13,288,000 ($.18
per share). A $51,304,000 after-tax gain on the sale of a 54 percent
interest in ShopKo was included in fiscal 1992 net earnings ($.69 per
share). All statistics incude the results of both transactions.
(c) The cumulative effect of adopting Statement of Financial Accounting
Standards No. 96, "Accounting for Income Taxes," resulted in a decrease in
net earnings of $13,640,000 ($.18 per share). A repeal of the investment tax
credit under the Tax Reform Act of 1986 resulted in a reduction in earnings
of approximately $6.0 million ($.08 per share).
(d) Working capital and current ratio are calculated after adding back the LIFO
reserve.
(e) Total long-term debt incudes long-term debt and long-term obligations under
capital leases.
(f) Includes a reversal of $40.8 million of deferred taxes in 1995 related to
the partial disposition of ShopKo in 1992.
(g) The 1995 ratios were calculated excluding the restructuring and other
charges and excluding the reversal of $40.8 million of deferred taxes
related to the partial disposition of ShopKo. The ratios for earnings before
accounting change as a percent of net sales and the return on average
stockholders' equity would have been .26 and 3.46 percent, respectively, if
the restructuring and other charges and the reversal of $40.8 million of
deferred taxes had not been excluded.
22
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1991 1990 1989 1988 1987 (c) 1986
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$10,104,899 $9,734,811 $9,061,176 $8,331,333 $8,172,099 $7,164,463
9,360,886 9,043,953 8,429,692 7,751,172 7,620,235 6,727,338
531,972 484,586 433,177 399,504 381,822 286,259
- - - - - -
31,441 33,104 34,532 30,089 23,288 10,727
45,080 42,562 36,943 27,122 21,594 16,122
225,680 215,730 200,718 177,690 168,348 156,261
70,544 67,984 63,250 64,678 81,837 65,014
155,136 147,746 137,468 113,012 72,871 91,247
2.06 1.97 1.84 1.51 1.16 1.23
2.06 1.97 1.84 1.51 .98 1.23
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$ 785,395 $ 726,194 $ 688,947 $ 618,545 $ 588,646 $ 524,184
196,217 188,139 165,887 217,320 169,526 250,372
789,443 701,162 666,508 518,197 474,296 450,803
2,401,357 2,239,900 2,116,202 1,844,918 1,641,401 1,410,739
567,444 549,694 557,828 529,894 415,907 412,966
978,678 869,891 763,706 660,720 578,275 534,830
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1.54% 1.52% 1.52% 1.36% 1.06% 1.27%
16.82% 18.12% 19.31% 18.28% 15.55% 18.06%
$ 13.01 $ 11.59 $ 10.20 $ 8.84 $ 7.76 $ 7.20
1.24:1 1.25:1 1.22:1 1.35:1 1.28:1 1.56:1
46% 46% 46% 49% 45% 40%
$ .64 1/2 $ .58 1/2 $ .48 1/2 $ .43 1/2 $ .41 $ .37
75,165 74,972 74,785 74,634 74,387 74,184
$ 105,582 $ 95,593 $ 86,944 $ 85,179 $ 71,955 $ 61,092
$ 203,199 $ 142,899 $ 193,218 $ 137,533 $ 214,314 $ 172,346
-----------------------------------------------------------------------------------------
23
CONSOLIDATED COMPOSITION OF NET SALES AND OPERATING EARNINGS
-------------------------------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
-------------------------------------------------------------------------------------------------------
The following table sets forth, for each of the last five fiscal years, the
composition of the company's net sales and operating earnings.
-------------------------------------------------------------------------------------------------------
(In thousands, except percent data) 1995 1994 1993 1992 1991
-------------------------------------------------------------------------------------------------------
Net sales
-------------------------------------------------------------------------------------------------------
Food distribution $14,820,009 $14,361,255 $11,448,148 $ 9,841,033 $ 9,523,719
89.5% 90.1% 91.1% 92.6% 94.2%
Retail food 4,219,691 3,696,145 2,699,075 2,002,923 1,764,745
25.4% 23.2% 21.5% 18.8% 17.5%
Less: Eliminations (2,475,928) (2,120,475) (1,579,223) (1,211,655) (1,183,565)
(14.9)% (13.3)% (12.6)% (11.4)% (11.7)%
Total net sales $16,563,772 $15,936,925 $12,568,000 $10,632,301 $10,104,899
100.0% 100.0% 100.0% 100.0% 100.0%
-------------------------------------------------------------------------------------------------------
Operating earnings
-------------------------------------------------------------------------------------------------------
Food distribution $ 257,495 $ 365,527 $ 284,337 $ 241,666 $ 214,155
Retail food (104,338) 31,366 24,842 12,512 11,761
-------------------------------------------------------------------
Total operating earnings 153,157 396,893 309,179 254,178 225,916
Interest expense, net (111,271) (89,767) (54,203) (34,320) (31,441)
General corporate expenses (43,345) (27,835) (19,430) (13,299) (13,875)
-------------------------------------------------------------------
Earnings before equity in earnings
of ShopKo, gain on sale of
ShopKo stock and income taxes (1,459) 279,291 235,546 206,559 180,600
Equity in earnings of ShopKo 17,384 14,789 23,072 32,176 45,080
Gain on sale of ShopKo stock - - - 84,105 -
-------------------------------------------------------------------
Earnings before income taxes $ 15,925 $ 294,080 $ 258,618 $ 322,840 $ 225,680
-------------------------------------------------------------------------------------------------------
Identifiable assets
-------------------------------------------------------------------------------------------------------
Food distribution $ 2,843,862 $ 2,644,670 $ 2,830,400 $ 1,594,003 $ 1,542,859
Retail food 1,121,596 948,551 837,148 508,441 328,383
Corporate 339,691 449,130 396,641 381,856 530,115
-------------------------------------------------------------------
Total $ 4,305,149 $ 4,042,351 $ 4,064,189 $ 2,484,300 $ 2,401,357
-------------------------------------------------------------------------------------------------------
Depreciation and amortization
-------------------------------------------------------------------------------------------------------
Food distribution $ 107,471 $ 105,763 $ 83,686 $ 71,326 $ 72,009
Retail food 76,145 64,924 48,303 35,360 27,433
Corporate 15,102 15,574 8,801 4,802 6,140
-------------------------------------------------------------------
Total $ 198,718 $ 186,261 $ 140,790 $ 111,488 $ 105,582
-------------------------------------------------------------------------------------------------------
Capital expenditures
-------------------------------------------------------------------------------------------------------
Food distribution $ 159,838 $ 131,322 $ 60,408 $ 94,835 $ 129,518
Retail food 119,605 69,939 78,715 68,562 64,594
Corporate 40,117 38,341 25,605 12,227 9,087
-------------------------------------------------------------------
Total $ 319,560 $ 239,602 $ 164,728 $ 175,624 $ 203,199
-------------------------------------------------------------------------------------------------------
The company's food distribution operations include sales to independently owned
and operated food stores, sales to food stores owned by the company, and the
operations of several allied service operations throughout the United States.
Retail food operations include sales by food stores owned by the company, other
than transition retail food stores. Eliminations include food distribution sales
to food stores included in the retail food segment.
Industry segment operating earnings were computed as total revenue less
associated operating expenses, which exclude general corporate expenses, net
interest expense and income taxes.
Identifiable assets are those assets of the company directly associated with the
industry segments and exclude short-term investments, certain accumulated income
tax temporary differences and other corporate assets.
Operating earnings in 1995 for food distribution and retail food were reduced by
$93.1 and $138.4 million, respectively, for restructuring and other charges.
General corporate expenses includes $12.6 million for restructuring and other
charges.
See notes following the Ten Year Financial and Operating Summary and notes to
the consolidated financial statements.
24
CONSOLIDATED STATEMENTS OF EARNINGS
---------------------------------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
---------------------------------------------------------------------------------------------------------
(In thousands, except per share data) Fiscal Year Ended
---------------------------------------------------------------------------------------------------------
February 25, February 26, February 27,
1995 1994 1993
(52 Weeks) (52 Weeks) (52 Weeks)
---------------------------------------------------------------------------------------------------------
Net sales $16,563,772 $15,936,925 $12,568,000
Costs and expenses
Cost of sales 15,040,117 14,523,434 11,531,394
Selling and administrative expenses 1,169,843 1,044,433 746,857
Restructuring and other charges 244,000 - -
Interest
Interest expense 135,383 120,292 83,066
Interest income 24,112 30,525 28,863
---------------------------------------------------------------------------------------------------------
Interest expense, net 111,271 89,767 54,203
---------------------------------------------------------------------------------------------------------
Total costs and expenses 16,565,231 15,657,634 12,332,454
---------------------------------------------------------------------------------------------------------
Earnings (loss) before equity in earnings of ShopKo
and income taxes (1,459) 279,291 235,546
Equity in earnings of ShopKo 17,384 14,789 23,072
---------------------------------------------------------------------------------------------------------
Earnings before income taxes 15,925 294,080 258,618
Provision for income taxes
Current 113,505 110,717 79,980
Deferred (140,914) (1,890) 14,112
---------------------------------------------------------------------------------------------------------
Income tax expense (27,409) 108,827 94,092
---------------------------------------------------------------------------------------------------------
Net earnings $ 43,334 $ 185,253 $ 164,526
---------------------------------------------------------------------------------------------------------
Weighted average number of common shares outstanding 71,388 71,817 71,341
Net earnings per common share $.61 $2.58 $2.31
---------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
25
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
-------------------------------------------------------------------------------------------------
(In thousands, except per share data) February 25, 1995 February 26, 1994
-------------------------------------------------------------------------------------------------
Assets
Current Assets
Cash $ 4,839 $ 2,846
Receivables, less allowance for losses of $29,268 in 1995
and $33,820 in 1994 383,458 352,151
Inventories 1,109,791 1,113,937
Other current assets 148,252 94,379
-------------------------------------------------------------------------------------------------
Total current assets 1,646,340 1,563,313
-------------------------------------------------------------------------------------------------
Long-term notes receivable 73,094 66,568
Long-term investment in direct financing leases 77,688 81,574
Property, plant and equipment
Land 202,949 172,241
Buildings 868,379 769,036
Property under construction 51,640 73,950
Leasehold improvements 134,094 114,724
Equipment 970,779 890,050
Assets under capital leases 205,030 175,891
-------------------------------------------------------------------------------------------------
2,432,871 2,195,892
Less accumulated depreciation and amortization
Owned property, plant and equipment 825,546 746,027
Assets under capital leases 36,027 39,742
-------------------------------------------------------------------------------------------------
Net property, plant and equipment 1,571,298 1,410,123
-------------------------------------------------------------------------------------------------
Investment in ShopKo 182,839 173,567
Goodwill 515,009 427,559
Other assets 238,881 319,647
-------------------------------------------------------------------------------------------------
Total assets $4,305,149 $4,042,351
-------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
26
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
February 25, 1995 February 26, 1994
------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable $ 226,168 $ 23,082
Accounts payable 1,003,106 883,088
Current maturities of long-term debt 9,277 108,728
Current obligations under capital leases 19,060 19,222
Other current liabilities 189,526 190,305
------------------------------------------------------------------------------------------------------------------
Total current liabilities 1,447,137 1,224,425
------------------------------------------------------------------------------------------------------------------
Long-term debt 1,215,184 1,030,378
Long-term obligations under capital leases 244,582 232,617
Deferred income taxes - 99,734
Other liabilities 205,024 179,739
Commitments and contingencies - -
Stockholders' equity
Preferred stock, no par value: Authorized 1,000 shares
Shares issued and outstanding, 6 in 1995 and 1994 ($1,000 stated value) 5,908 5,908
Common stock, $1.00 par value: Authorized 200,000 shares
Shares issued, 75,335, in 1995 and 1994 75,335 75,335
Capital in excess of par value 12,717 12,966
Retained earnings 1,236,507 1,268,117
Treasury stock, at cost, 5,161 shares in 1995 and 3,276 in 1994 (137,245) (86,868)
------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,193,222 1,275,458
------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $4,305,149 $4,042,351
------------------------------------------------------------------------------------------------------------------
27
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
------------------------------------------------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
Capital in
Preferred Common Excess of Treasury Retained
Stock Stock Par Value Stock Earnings Total
------------------------------------------------------------------------------------------------------------------------
Balances at February 29, 1992 $ - $75,335 $12,755 $ (91,496) $1,034,387 $1,030,981
Net earnings - - - - 164,526 164,526
Sales of common stock under
option plans - - (932) 8,321 - 7,389
Cash dividends declared on common
stock--$.765 per share - - - - (54,539) (54,539)
Compensation under employee
incentive plans - - 761 6,003 - 6,764
Purchase of shares for treasury - - - (20,301) - (20,301)
------------------------------------------------------------------------------------------------------------------------
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
option plans - - 225 10,838 - 11,063
Cash dividends declared on common
stock--$.855 per share - - - - (61,510) (61,510)
Issuance of preferred stock 5,908 - - - - 5,908
Compensation under employee
incentive plans - - 157 (233) - (76)
------------------------------------------------------------------------------------------------------------------------
Balances at February 26, 1994 5,908 75,335 12,966 (86,868) 1,268,117 1,275,458
Net earnings - - - - 43,334 43,334
Sales of common stock under
option plans - - (290) 1,435 - 1,145
Cash dividends declared on common
stock--$.925 per share - - - - (66,024) (66,024)
Compensation under employee
incentive plans - - 41 253 - 294
Purchase of shares for treasury - - - (52,065) - (52,065)
Other - - - - (8,920) (8,920)
------------------------------------------------------------------------------------------------------------------------
Balances at February 25, 1995 $5,908 $75,335 $12,717 $(137,245) $1,236,507 $1,193,222
------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
28
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
-------------------------------------------------------------------------------------------------------------------------
(In thousands) Fiscal Year Ended
-------------------------------------------------------------------------------------------------------------------------
February 25, February 26, February 27,
1995 1994 1993
-------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
Net earnings $ 43,334 $ 185,253 $ 164,526
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Equity in earnings of ShopKo (17,384) (14,789) (23,072)
Dividends received from ShopKo 6,482 6,483 6,490
Depreciation and amortization 198,718 186,261 140,790
Provision for losses on receivables 1,627 7,165 7,867
Restructuring and other charges 244,000 - -
Gain on sale of property, plant and equipment (3,689) (404) (2,734)
Deferred income taxes (140,914) (1,890) 14,112
Treasury shares contributed to employee incentive plan 525 444 6,282
Changes in assets and liabilities, excluding effect from acquisitions:
Receivables (14,862) (1,207) 21,917
Inventories 52,296 22,222 119,959
Other current assets 4,638 108 (908)
Direct financing leases 9,517 9,183 12,881
Accounts payable 6,516 18,171 (19,968)
Other liabilities (49,804) 15,745 (44,004)
-------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 341,000 432,745 404,138
-------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Additions to long-term notes receivable (32,052) (35,591) (38,986)
Proceeds received on long-term notes receivable 33,396 51,557 53,136
Net reductions to note receivable from ShopKo - - 181,167
Proceeds from sale of property, plant and equipment 43,854 41,531 23,467
Purchase of property, plant and equipment (298,124) (231,489) (152,498)
Business acquisitions, net of cash acquired (111,083) - (643,718)
Other investing activities 33,033 44,249 (114,132)
-------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (330,976) (129,743) (691,564)
-------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net issuance (reduction) of short-term notes payable 199,530 (228,414) (108,910)
Proceeds from issuance of long-term debt 150,000 4,365 701,363
Repayment of long-term debt (221,245) (9,462) (219,320)
Reduction of obligations under capital leases (19,095) (18,377) (17,590)
Proceeds from the sale of common stock under option plans 212 9,521 5,985
Dividends paid (65,368) (59,562) (53,574)
Payment for purchase of treasury stock (52,065) - (20,301)
-------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (8,031) (301,929) 287,653
-------------------------------------------------------------------------------------------------------------------------
Net increase in cash 1,993 1,073 227
Cash at beginning of year 2,846 1,773 1,546
-------------------------------------------------------------------------------------------------------------------------
Cash at end of year $ 4,839 $ 2,846 $ 1,773
-------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUPERVALU INC. and Subsidiaries
-------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The financial statements include the accounts of the company and all its
subsidiaries. All significant inter-company accounts and transactions have been
eliminated.
Revenue and Income Recognition:
Revenues from product sales are recognized upon shipment of the product for food
distribution and at the point of sale for retail food. Revenues from services
rendered are recognized immediately after such services have been provided.
Income is recognized upon the completion of the earnings process.
Inventories:
Inventories are stated at the lower of cost or market. Cost is determined
through use of the last-in, first-out method (LIFO) for a major portion of
consolidated inventories: 79.5 percent for fiscal 1995 and 82.0 percent for
fiscal 1994. The first-in, first-out method (FIFO) is used to determine cost for
remaining inventories which are principally perishable products. Market is
replacement value. If the FIFO method had been used to determine cost of
inventories for which the LIFO method is used, the company's inventories would
have been higher by approximately $120.2 million at February 25, 1995 and $113.2
million at February 26, 1994.
Property, plant and equipment:
Property, plant and equipment are carried at cost. Depreciation, as well as
amortization of assets under capital leases, is based on the estimated useful
lives of the assets using a straight-line method. Interest on property under
construction of $2.7, $2.9 and $4.0 million was capitalized in fiscal years
1995, 1994 and 1993, respectively.
Goodwill:
Amounts paid in excess of the fair value of acquired net assets are amortized on
a straight-line basis over 5 to 40 years. The recoverability of goodwill is
assessed by determining whether the goodwill balance can be recovered through
projected cash flows and operating results over its remaining life. Any
impairment of the asset would be recognized when it is probable that such future
undiscounted cash flows will be less than the carrying value of the asset.
Goodwill is shown net of accumulated amortization of $31.1 and $20.4 million for
fiscal 1995 and 1994, respectively.
Accounts payable:
Accounts payable include $68.5 and $80.5 million at February 25, 1995 and
February 26, 1994, respectively, of issued checks which had not cleared the
company's bank accounts, reduced by deposits in transit and cash on deposit in
the company's depository banks.
Financial Instruments:
The company, from time to time, utilizes interest rate caps, collars and swaps
to manage interest costs and reduce exposure to interest rate changes. The
difference between amounts to be paid or received is accrued and recognized over
the life of such contracts.
Fair value disclosures of financial instruments:
The estimated fair value of notes receivable approximates the net carrying value
at February 25, 1995 and February 26, 1994. Notes receivable are valued based on
comparisons to publicly traded debt instruments of similar credit quality.
At February 25, 1995 and February 26, 1994 the estimated fair market value of
the company's long-term debt (including current maturities) exceeded the
carrying value by approximately $11 and $69 million, respectively. The estimated
fair value was based on market quotes where available, discounted cash flows and
market yields for similar instruments. The estimated fair market value of the
company's commercial paper outstanding as of February 25, 1995 and February 26,
1994 approximated the carrying value. The fair market value of the company's
interest rate caps, collars and swaps was immaterial at February 25, 1995 and
February 26, 1994.
Pre-opening costs:
Pre-opening costs of retail stores are charged against earnings as incurred.
Net earnings per share:
Net earnings per share are computed by dividing net earnings by the weighted
average number of common shares outstanding. Outstanding stock options do not
have a significant dilutive effect on earnings per share.
Reclassifications:
Certain reclassifications have been made to prior years' financial statements to
conform to fiscal 1995 presentation. These reclassifications did not affect
results of operations as previously reported.
ACQUISITIONS
As of October 31, 1992, the company completed the acquisition of Wetterau
Incorporated ("Wetterau"). The acquisition was accounted for as a purchase,
whereby the company acquired all of the outstanding common stock of Wetterau.
The results of Wetterau's operations from October 31, 1992 have been included
with the company's continuing operations.
The following unaudited pro forma results of operations for the year ended
February 27, 1993 assumes the acquisition occurred as of the beginning of the
respective period after giving effect to certain adjustments, including
amortization of goodwill, depre-
30
-------------------------------------------------------------------------------
ciation of fixed asset write-ups, increased interest expense on acquisition debt
and related income tax effects. The pro forma results have been prepared for
comparative purposes only and do not purport to indicate the results of
operations which would actually have occurred had the combination been in effect
on the date indicated, or which may occur in the future.
-------------------------------------------------------------------------------
(In thousands, except per share amounts) 1993
-------------------------------------------------------------------------------
Net sales $16,446,508
Net earnings 167,499
Net earnings per common share 2.35
-------------------------------------------------------------------------------
RESTRUCTURE AND OTHER CHARGES
In December 1994, restructuring and other charges totaling $244.0 million were
incurred for the implementation of the plan formulated under the ADVANTAGE
project, the sale, closure or restructure of certain retail businesses and the
recognition of certain asset impairments.
The aggregate charges included $204.8 million for activities under the
restructuring plan and an additional $39.2 million for asset impairment. The
asset impairment charge covered intangibles in businesses where future
undiscounted cash flow was not sufficient to recover the carrying value of the
recorded intangible.
The charges included $53.1 million for severance, pension and outplacement which
is based on the projected impact of the plan on employee levels in both food
distribution and retail food. The company expects approximately 4,300 employees
to be eliminated over the next 18 months under the re-engineering efforts, 1,700
of which are employed in retail food operations. During fiscal 1995,
approximately 338 positions were eliminated which resulted in severance and
outplacement payments of $1.6 million. Also included in the charge is a $20.0
million provision in food distribution which represents expected losses on the
sale of tangible assets and expenses under non-cancelable leases as a result of
the strategic shift. Expenditures under non-cancelable leases and write-offs of
losses on sale of $6.0 million were incurred during the fourth quarter of fiscal
1995.
The restructuring charges included a $87.8 provision for property and lease
discontinuances at retail locations, resulting primarily from various exit
strategies and payment of portions of non-cancelable lease obligations.
Approximately 30 retail stores were expected to be sold or closed, primarily in
fiscal 1995 and 1996. At the end of 1995, six of the stores had been closed.
Charges of $16.7 million were incurred during the fourth quarter of fiscal 1995
related to the closedown of retail locations. The retail units covered by the
reserve had aggregate sales of $296.3, $291.7 and $234.1 million in 1995, 1994
and 1993, respectively, and pre-tax losses of $21.3, $19.0 and $9.2 million in
1995, 1994 and 1993, respectively.
The final component of the aggregate charges was a $43.9 million impairment
provision representing the effect of the strategic shift on the recoverability
of certain assets. The company holds land for development, transition stores for
wholesale market share, certain warehouse properties and miscellaneous sites
which will be disposed of as soon as practicable. During the fourth quarter of
fiscal 1995, expenditures of $3.3 million were incurred, leaving a reserve of
$40.6 million to cover expenditures and write-offs expected to be incurred
during the next 6 months.
NOTES RECEIVABLE
Notes receivable arise from fixture and other financing related to independently
owned retail food operations. Loans to independent retailers, as well as trade
accounts receivable, are primarily collateralized by the retailers' inventory,
equipment and fixtures. The notes range in length from 1 to 20 years with the
average being 7 years, and may be non-interest bearing or bear interest at rates
ranging primarily from 5 to 13 percent.
Included in current receivables are notes receivable due within one year
totaling $11.6 and $10.9 million at February 25, 1995 and February 26, 1994,
respectively.
The Financial Accounting Standards Board issued SFAS No. 114 - "Accounting by
Creditors for Impairment of a Loan" during calendar 1994. This new standard must
be adopted in fiscal 1996. The impact of this new standard, when adopted, is not
expected to be material.
INVESTMENT IN SHOPKO
The company's ownership in ShopKo, a mass merchandise discount retailer, is 46
percent and is accounted for under the equity method.
The following table summarizes the significant transactions between the company
and ShopKo:
-------------------------------------------------------------------------------
(In thousands) 1995 1994 1993
-------------------------------------------------------------------------------
Sales to ShopKo $2,668 $9,759 $16,645
Interest income - - 509
-------------------------------------------------------------------------------
Summarized financial information of ShopKo is as follows:
-------------------------------------------------------------------------------
(In thousands) 1995 1994 1993
-------------------------------------------------------------------------------
Sales $1,852,929 $1,738,746 $1,682,854
Gross profit 488,016 449,488 454,423
Net earnings 37,790 32,122 50,059
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
(In thousands) 1995 1994
-------------------------------------------------------------------------------
Current assets $468,744 $370,507
Non-current assets 641,007 582,542
Current liabilities 281,473 251,743
Non-current liabilities 431,003 327,600
-------------------------------------------------------------------------------
31
-------------------------------------------------------------------------------
DEBT
-------------------------------------------------------------------------------
(In thousands, February 25, February 26,
except payment data) 1995 1994
--------------------------------------------------------------------------------
5.875%-8.875% promissory notes $ 700,000 $ 700,000
semi-annual interest payments of
$24.9 million; due 1995 to 2002
7.25% promissory notes 150,000 -
semi-annual interest payments of
$5.4 million; due 1999
2.05%-11.0% industrial revenue bonds 93,085 95,944
9.67% senior subordinated notes due 1998 75,000 75,000
8.875%-9.64% promissory notes 70,000 170,000
semi-annual interest payments of
$7.9 million; due 1997 to 1999
8.39%-11.5% promissory notes 31,351 33,317
due 1996 to 2004
8.28%-9.46% promissory notes due 2010 25,640 26,394
9.96% promissory note due 2005 24,013
8.875% sinking fund debentures due 2016 22,110 22,110
3.0%-9.5% mortgages payable due 5,490 8,331
1996 to 2008 (secured by land and buildings)
Other debt 27,772 8,010
--------------------------------------------------------------------------------
1,224,461 1,139,106
Less current maturities 9,277 108,728
--------------------------------------------------------------------------------
Long-term debt $1,215,184 $1,030,378
--------------------------------------------------------------------------------
Aggregate maturities of long-term debt during the next five fiscal years are:
--------------------------------------------------------------------------------
(In thousands)
--------------------------------------------------------------------------------
1996 $ 9,277
1997 306,601
1998 36,709
1999 93,222
2000 207,511
--------------------------------------------------------------------------------
The company has a $400 million revolving credit agreement that expires in
October 1996. The company pays an annual facility fee of .15 percent for the
credit agreement.
The company issued unsecured notes of $22.8 million and $3.6 million on February
10, 1994 in connection with the acquisition of certain properties from Wetterau
Properties, Inc., a publicly owned real estate investment trust. The notes,
which bear interest at 9.46 percent and 8.28 percent, respectively, replaced the
company's obligations under debt contingent purchase agreements.
On May 26, 1994, the company issued $24.9 million of unsecured notes bearing
interest at 9.96 percent.
On July 21, 1994, the company issued $150 million of 5 year 7.25 percent notes.
The proceeds from the notes were used to refund $100 million of the company's
9.375 percent notes due August 15, 1994 and to repay and reduce certain mortgage
indebtedness and short-term commercial paper borrowings.
The debt agreements contain various covenants, including minimum tangible net
worth requirements and maximum permitted leverage. Under the most restrictive
covenants, retained earnings of approximately $53 million were available at
year-end for payment of cash dividends.
The company has $300 million of debt due in November of 1995, which it intends
to refinance by utilizing the existing shelf registration or the use of the
available revolving credit agreement.
The company periodically enters into interest rate caps, collars and swaps to
manage exposure to interest rate changes. The financial instruments are subject
to market risk as interest rates fluctuate. In fiscal 1995, the company
purchased an interest rate cap which provided an upper limit on the rates of
$100 million of the company's floating rate commercial paper. The interest rate
cap expires in June of fiscal 1996. In addition to the $100 million interest
rate cap, at February 25, 1995, the company had notional amounts in effect of
$14.4 million intended to fix interest costs.
The weighted average interest rate on short-term borrowings outstanding at
February 25, 1995, and February 26, 1994, was 6.1 and 4.8 percent, respectively.
LEASES
Capital and operating leases:
The company leases certain food distribution warehouse and office facilities, as
well as corporate-owned and operated retail food stores. Many of these leases
include renewal options, and to a limited extent, include options to purchase.
Amortization of assets under capital leases was $12.9, $13.6 and $11.8 million
in fiscal 1995, 1994 and 1993, respectively.
Future minimum obligations under capital leases in effect at February 25, 1995
are as follows:
--------------------------------------------------------------------------------
(In thousands) Lease
Year Obligations
--------------------------------------------------------------------------------
1996 $ 24,200
1997 23,516
1998 23,151
1999 22,445
2000 21,965
Later 202,843
--------------------------------------------------------------------------------
Total future minimum obligations 318,120
Less interest 138,502
--------------------------------------------------------------------------------
Present value of net future minimum obligations 179,618
Less current portion 10,126
--------------------------------------------------------------------------------
Long-term obligations $169,492
--------------------------------------------------------------------------------
The present values of future minimum obligations shown are calculated based on
interest rates ranging from 7.1 percent to 13.8 percent, with a weighted average
of 9.7 percent, determined to be applicable at the inception of the leases.
32
-------------------------------------------------------------------------------
Contingent rent expense, based primarily on sales performance, for capital
leases was not significant.
In addition to its capital leases, the company is obligated under operating
leases, primarily for buildings, warehouse and computer equipment.
Future minimum obligations under operating leases in effect at February 25,
1995 are as follows:
-------------------------------------------------------------------------------
(In thousands) Lease
Year Obligations
-------------------------------------------------------------------------------
1996 $ 57,283
1997 50,804
1998 44,088
1999 37,259
2000 32,572
Later 166,887
-------------------------------------------------------------------------------
Total future minimum obligations $388,893
-------------------------------------------------------------------------------
Total rent expense, net of sublease income, relating to all operating leases
with terms greater than one year was $32.9, $33.3 and $13.0 million in fiscal
1995, 1994 and 1993, respectively.
Contingent rental income earned and rental expense paid, based primarily on
sales performance, for operating leases was not significant.
Future minimum receivables under operating leases and subleases in effect at
February 25, 1995 are as follows:
-------------------------------------------------------------------------------
(In thousands) Owned Leased
Year Property Property Total
-------------------------------------------------------------------------------
1996 $ 6,489 $ 24,179 $ 30,668
1997 6,325 21,196 27,521
1998 5,900 17,456 23,356
1999 5,276 14,305 19,581
2000 4,345 11,708 16,053
Later 18,242 51,153 69,395
-------------------------------------------------------------------------------
Total future minimum receivables $46,577 $139,997 $186,574
-------------------------------------------------------------------------------
Owned property under operating leases is as follows:
-------------------------------------------------------------------------------
(In thousands) February 25, February 26,
1995 1994
-------------------------------------------------------------------------------
Land, buildings and equipment $ 69,067 $ 70,491
Less accumulated depreciation 17,402 15,754
-------------------------------------------------------------------------------
Net land, buildings and equipment $ 51,665 $ 54,737
-------------------------------------------------------------------------------
Direct financing leases:
Under direct financing capital leases, the company leases buildings on behalf of
independent retailers with terms ranging from 5 to 25 years.
Future minimum rentals to be received under direct financing leases and the
related future minimum obligations under capital leases in effect at February
25, 1995 are as follows:
-------------------------------------------------------------------------------
(In thousands) Direct Financing Capital Lease
Year Lease Receivables Obligations
-------------------------------------------------------------------------------
1996 $ 18,380 $ 16,922
1997 17,192 15,766
1998 15,599 14,325
1999 13,739 12,698
2000 11,476 10,635
Later 72,515 67,824
-------------------------------------------------------------------------------
Total minimum lease payments 148,901 138,170
Less unearned income 62,630 -
Less interest - 54,146
-------------------------------------------------------------------------------
Present value of net minimum lease payments 86,271 84,024
Less current portion 8,583 8,934
-------------------------------------------------------------------------------
Long-term portion $ 77,688 $ 75,090
-------------------------------------------------------------------------------
Contingent rental income earned and rental expense paid, based primarily on
sales performance, for direct financing leases was not significant.
INCOME TAXES
The company provides for income taxes in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Under this
method a deferred tax liability is recognized for taxable temporary differences
and a deferred tax asset is recognized for deductible temporary differences, tax
credit carryforwards, and net operating loss carryforwards. If it is more likely
than not that some portion or all of a deferred tax asset will not be realized,
a valuation allowance is recognized.
The provision (benefit) for income taxes consists of the
following:
-------------------------------------------------------------------------------
(In thousands) 1995 1994 1993
-------------------------------------------------------------------------------
Current
Federal $ 93,785 $ 91,113 $66,699
State 20,060 19,955 13,836
Tax credits (340) (351) (555)
Deferred
Statutory rate change - 500 -
ShopKo deferred tax benefit (40,783) - -
Restructuring and other charges (75,803) - -
Other (24,328) (2,390) 14,112
-------------------------------------------------------------------------------
Total provision (benefit) $(27,409) $108,827 $94,092
-------------------------------------------------------------------------------
33
-------------------------------------------------------------------------------
The difference between the actual tax provision (benefit) and the tax provision
(benefit) computed by applying the statutory Federal income tax rate to earnings
before taxes is attributable to the following:
-------------------------------------------------------------------------------
(In thousands) 1995 1994 1993
-------------------------------------------------------------------------------
Federal taxes based on
statutory rate $ 5,574 $102,928 $87,930
State income taxes, net of
federal benefit 725 12,645 11,121
ShopKo deferred tax benefit (40,783) - -
Benefit of dividends received
deduction (6,910) (2,058) (1,810)
Nondeductible goodwill 17,990 4,192 1,314
Other (4,005) (8,880) (4,463)
-------------------------------------------------------------------------------
Total provision (benefit) $(27,409) $108,827 $94,092
-------------------------------------------------------------------------------
The company recorded a tax benefit of $40.8 million in 1995 for the reversal of
deferred taxes related to the 1992 sale of 54 percent of the then wholly-owned
ShopKo Stores, Inc. to reflect a favorable Internal Revenue Service settlement.
Temporary differences which give rise to significant portions of the net
deferred tax asset as of February 25, 1995 and net deferred tax liability for
February 26, 1994 are as follows:
-------------------------------------------------------------------------------
(In thousands) 1995 1994
-------------------------------------------------------------------------------
Deferred tax assets:
Depreciation and amortization $ 10,756 $ 12,683
Restructuring and other charges 75,803 -
Net operating loss from acquired
subsidiaries 26,736 -
Valuation allowance (8,000) -
Provision for obligations and
contingencies to be settled in
future periods 182,034 154,742
Other 23,925 15,439
-------------------------------------------------------------------------------
Total deferred tax assets 311,254 182,864
-------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation and amortization (77,621) (89,522)
Acquired assets adjustment to fair values (104,247) (80,329)
ShopKo investment - (44,623)
Accelerated tax deductions for
benefits to be paid in future periods (12,404) (17,986)
Other (7,705) (6,511)
-------------------------------------------------------------------------------
Total deferred tax liabilities (201,977) (238,971)
-------------------------------------------------------------------------------
Net deferred tax asset (liability) $ 109,277 $ (56,107)
-------------------------------------------------------------------------------
The company has acquired net operating loss (NOL) carryforwards of $67,872 which
expire beginning in 2000 and continuing through 2010. A valuation allowance of
$8,000 relates to NOL carryforwards not expected to be realized.
Temporary differences attributable to obligations and contingencies consist
primarily of valuation allowances, accrued postretirement benefits and vacation
pay, and other expenses which are not deductible for income tax purposes until
paid.
SUPPLEMENTAL CASH FLOW INFORMATION
The company's non-cash investing and financing activities were as follows:
-------------------------------------------------------------------------------
(In thousands) 1995 1994 1993
-------------------------------------------------------------------------------
Leased asset additions and
related obligation $ 22,695 $13,127 $ 12,797
---------------------------------
Acquisitions:
Fair value of assets acquired 402,885 35,482 1,837,693
Cash paid 117,477 - 647,382
Preferred stock issued - 5,908 -
-------------------------------------------------------------------------------
Liabilities assumed $285,408 $29,574 $1,190,311
-------------------------------------------------------------------------------
Payments for interest and income taxes were as follows:
-------------------------------------------------------------------------------
(In thousands) 1995 1994 1993
-------------------------------------------------------------------------------
Interest (net of amount capitalized) $134,251 $123,457 $71,259
Income taxes 123,808 107,891 99,658
-------------------------------------------------------------------------------
STOCK OPTION PLANS
The company's 1993, 1983 and 1976 stock option plans allow the granting of non-
qualified stock options and incentive stock options to key salaried executive
employees at prices not less than 100 percent of fair market value, determined
by averaging the open and close price on the date of grant. The plans provide
that the Board of Directors or the Executive Personnel and Compensation
Committee of the Board may determine at the time of granting whether each option
granted will be a non-qualified or incentive stock option under the Internal
Revenue Code. The term of each option will be determined by the Board of
Directors or the Committee, but shall not be for more than 10 years from the
date of grant. Options may be exercised in installments or otherwise, as the
Board of Directors or the Committee may determine.
Changes in the options were as follows:
--------------------------------------------------------------------------------
Shares Price
(In thousands) Range
--------------------------------------------------------------------------------
Outstanding, February 29, 1992 2,353 $ 8.57-29.75
Granted 793 24.00-34.56
Exercised (495) 8.57-29.75
Canceled and forfeited (23)
--------------------------------------------------------------------------------
Outstanding, February 27, 1993 2,628 13.19-34.56
Granted 692 31.63-39.25
Exercised (482) 13.19-32.81
Canceled and forfeited (73)
--------------------------------------------------------------------------------
Outstanding, February 26, 1994 2,765 15.25-39.25
Granted 910 25.69-32.50
Exercised (66) 15.25-33.19
Canceled and forfeited (70)
--------------------------------------------------------------------------------
Outstanding, February 25, 1995 3,539 $15.91-39.25
--------------------------------------------------------------------------------
34
--------------------------------------------------------------------------------
Options to purchase 2.1 and 1.7 million shares were exercisable at February 25,
1995, and February 26, 1994, respectively. Option shares available for grant
were 3.0 and 3.8 million at February 25, 1995, and February 26, 1994,
respectively. The company has reserved 9.6 million shares, in aggregate, for the
plans.
As of February 25, 1995, limited stock appreciation rights have been granted and
are outstanding under the 1978, 1989 and 1993 Stock Appreciation Rights Plans.
Such rights relate to options granted to purchase 1.3 million shares of common
stock and are exercisable only upon a "change of control."
TREASURY STOCK PURCHASE PROGRAM
In February 1994, the Board of Directors instituted a treasury stock program
under which the company is authorized to purchase shares in such amounts as it
deems appropriate for reissuance upon the exercise of employee stock options and
for other compensation programs utilizing the company's stock. In December 1994,
the Board of Directors approved an additional treasury stock purchase program.
Under the December 1994 program the company may repurchase up to 5.0 million
shares which may be used for any corporate purpose. During fiscal 1995, the
company repurchased .6 million shares at an average per share cost of $34.49
under the February 1994 program and 1.3 million shares at an average per share
cost of $23.72 under the December 1994 treasury stock program. No shares were
repurchased under either treasury stock program in fiscal 1994. The company
repurchased .8 million shares at an average per share cost of $25.78 during
fiscal 1993 under the 1991 treasury stock program which was rescinded by the
Board of Directors in February 1994.
STOCKHOLDER RIGHTS PLAN
The company has a "Preferred Share Purchase Rights Plan," in which the Board of
Directors declared a dividend of one preferred share purchase right for each
outstanding share of common stock. The rights, which expire on April 12, 1999,
are exercisable only under certain conditions, and when exercisable the holder
will be entitled to purchase from the company one one-thousandth of a share of a
new series of preferred stock at a price of $95 per one one-thousandth of a
preferred share, subject to certain adjustments. The rights will become
exercisable 10 days after a person or group acquires beneficial ownership of 20
percent or more of the company's shares, or 10 business days (or such later time
as the Board of Directors may determine) after a person or group announces an
offer the consummation of which would result in such person or group owning 20
percent or more of the shares.
RETIREMENT PLANS
Substantially all non-union employees of the company and its subsidiaries are
covered by various contributory and non-contributory pension or profit-sharing
plans. The company also participates in several multi-employer plans providing
defined benefits to union employees under the provisions of collective
bargaining agreements.
Contributions under the defined contribution profit sharing plans are determined
at the discretion of the Board of Directors and were $5.3, $5.1 and $4.4 million
for fiscal 1995, 1994 and 1993, respectively.
Amounts charged to union pension expense were $31.8, $28.2 and $21.5 million for
fiscal 1995, 1994 and 1993, respectively.
Benefit calculations for the company's defined benefit pension plan are based on
years of service and the participants' highest compensation during five
consecutive years of employment. Annual payments to the pension trust fund are
determined in compliance with the Employee Retirement Income Security Act
(ERISA).
The following table sets forth the company's defined benefit pension plans'
funded status and the amounts recognized in the company's financial statements:
-----------------------------------------------------------------------------------------------
February 25, February 26,
(In thousands) 1995 1994
-----------------------------------------------------------------------------------------------
Actuarial present value of
accumulated benefit obligation:
Vested $ 139,315 $ 148,335
Total $ 153,480 $ 165,024
-----------------------------------------------------------------------------------------------
Projected benefit obligation $ 192,082 $ 210,567
Plan assets at fair value (164,943) (160,205)
-----------------------------------------------------------------------------------------------
Projected benefit obligation in
excess of plan assets 27,139 50,362
Unrecognized net loss (14,096) (32,024)
Unrecognized prior service cost 307 (3,320)
Unrecognized transition obligation (475) (570)
Adjustment to minimum liability 125 139
-----------------------------------------------------------------------------------------------
Pension liability $ 13,000 $ 14,587
-----------------------------------------------------------------------------------------------
Net pension expense included the following components:
-----------------------------------------------------------------------------------------------
(In thousands) 1995 1994 1993
-----------------------------------------------------------------------------------------------
Service cost $10,647 $ 8,848 $ 5,940
Interest cost 15,638 14,975 9,601
Actual return on plan assets (4,892) (12,834) (6,518)
Net amortization and deferral (9,490) (1,235) (2,517)
-----------------------------------------------------------------------------------------------
Net pension expense $11,903 $ 9,754 $ 6,506
-----------------------------------------------------------------------------------------------
The weighted-average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligation were 8.5 percent and 4.5 percent, respectively for 1995, and 7.5
percent and 4.5 percent, respectively, for 1994. The expected long-term rate of
return on assets was 10 percent. The company computes pension expense using the
projected unit credit actuarial cost method.
35
------------------------------------------------------------------------------
The company also maintains non-contributory, unfunded pension plans to provide
certain employees with pension benefits in excess of limits imposed by federal
tax law.
The projected benefit obligation of the unfunded plans totals $13.7 and $9.9
million at February 25, 1995 and February 26, 1994, respectively. The
accumulated benefit obligation of these plans totaled $10.4 and $8.4 million at
February 25, 1995 and February 26, 1994, respectively. Net periodic pension cost
was $1.9, $1.3 and $1.1 million for fiscal 1995, 1994 and 1993, respectively.
Other Postretirement Benefits:
In addition to providing pension benefits, the company provides certain health
care and life insurance benefits for retired employees. Employees become
eligible for these benefits upon meeting certain age and service requirements.
The periodic postretirement benefit cost and accumulated postretirement benefit
obligation are as follows:
-----------------------------------------------------------------------------------
(In thousands)
Net periodic postretirement benefit cost 1995 1994 1993
-----------------------------------------------------------------------------------
Service cost-benefits attributed to service
during the period $1,901 $1,783 $1,385
Interest cost on accumulated
postretirement benefit obligation 4,024 3,686 2,648
Net amortization and deferral 93 340 -
-----------------------------------------------------------------------------------
Net periodic postretirement benefit cost $6,018 $5,809 $4,033
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Accumulated postretirement benefit February 25, February 26,
obligation 1995 1994
-----------------------------------------------------------------------------------
Retirees $21,021 $17,617
Active plan participants 30,607 34,930
-----------------------------------------------------------------------------------
Total accumulated postretirement
benefit obligation 51,628 52,547
Unrecognized (loss) gain 1,328 (5,984)
Unrecognized prior service cost (362) 839
-----------------------------------------------------------------------------------
Postretirement benefit liability $52,594 $47,402
-----------------------------------------------------------------------------------
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8.5 percent in 1995 and 7.5 percent in
1994.
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 12 percent per year through fiscal 1995, 9
percent through fiscal 1999 and 6 percent thereafter. The health care cost trend
rate assumption has a significant effect on the amounts reported. For example, a
1 percent increase in the health care trend rate would increase the accumulated
postretirement benefit obligation by $6.5 million and $8.1 million and the net
periodic cost by $1 million and $.9 million for fiscal 1995 and 1994,
respectively.
INDUSTRY SEGMENT INFORMATION
Information concerning the company's continuing operations by business segment
for the years ended February 25, 1995, February 26, 1994 and February 27, 1993,
as required by Statement of Financial Accounting Standards No. 14, "Financial
Reporting for Segments of a Business Enterprise," is contained on page 24.
COMMITMENTS AND CONTINGENCIES
The company has guaranteed mortgage loan and other debt obligations of $16.3
million. The company has also guaranteed the leases and fixture financing loans
of various affiliated retailers with a present value of $31.2 and $7.7 million,
respectively. The company has provided limited recourse to purchasers of notes
receivable from affiliated retailers and $9.5 million of which the company has
contingent liability at February 25, 1995 and February 26, 1994, respectively.
In addition, the company is contingently liable for bonds totaling $2.1 million.
The company has also entered into note repurchase agreements with various
lenders totaling $7.5 million, under which certain events require the company to
repurchase collateralized loans.
36
INDEPENDENT AUDITORS' REPORT
SUPERVALU INC.
Board of Directors and Stockholders
Eden Prairie, Minnesota
We have audited the accompanying consolidated balance sheets of SUPERVALU INC.
and subsidiaries as of February 25, 1995 and February 26, 1994, and the related
statements of earnings, stockholders' equity and cash flows for each of the
three years (52 weeks) in the period ended February 25, 1995. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SUPERVALU INC. and
subsidiaries as of February 25, 1995 and February 26, 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended February 25, 1995, in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
-------------------------
Minneapolis, Minnesota
April 10, 1995
37
UNAUDITED QUARTERLY FINANCIAL INFORMATION
Quarterly unaudited financial information for SUPERVALU INC. and subsidiaries is
as follows:
-------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) Fiscal Year (52 Weeks) Ended Februrary 25, 1995
-------------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth Year
(16 wks) (12 wks) (12 wks) (12 wks) (52 wks)
-------------------------------------------------------------------------------------------------------------------------------
Net sales $4,991,115 $3,773,725 $3,908,194 $3,890,738 $16,563,772
Gross profit 438,168 336,237 360,893 388,357 1,523,655
Net earnings 50,613 33,515 (84,123) 43,329 43,334
Net earnings per common share .71 .47 (1.18) .61 .61
Dividends declared per
common share .220 .235 .235 .235 .925
Weighted average shares 71,633 71,471 71,487 70,879 71,388
-------------------------------------------------------------------------------------------------------------------------------
Fiscal Year (52 Weeks) Ended February 26, 1994
-------------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth Year
(16 wks) (12 wks) (12 wks) (12 wks) (52 wks)
-------------------------------------------------------------------------------------------------------------------------------
Net sales $4,875,784 $3,703,823 $3,670,298 $3,687,020 $15,936,925
Gross profit 418,362 311,771 331,270 352,088 1,413,491
Net earnings 51,084 36,324 45,238 52,607 185,253
Net earnings per common share .71 .51 .63 .73 2.58
Dividends declared per
common share .195 .220 .220 .220 .855
Weighted average shares 71,583 71,818 71,937 72,005 71,817
-------------------------------------------------------------------------------------------------------------------------------
The results for the third quarter, fiscal 1995, include restructuring and other
charges after tax of $159.4 million and a $40.8 million deferred tax benefit
related to the partial disposition of ShopKo in fiscal 1992.
38
Stock Exchange
The company's common stock is listed on the New York Stock Exchange (trading
symbol SVU).
Stockholders of the Company
As of May 5, 1995 there were approximately 8,047 holders of the company's stock.
41