Exhibit 99.1
SUPERVALU Updates Fiscal 2007 Earnings Guidance
and Reports Fiscal 2007 First Quarter;
First Quarter Diluted Earnings Per Share Includes $0.06
of One-Time Transaction Costs and $0.05 Related
to the Adoption of Stock Option Expensing
MINNEAPOLIS--(BUSINESS WIRE)--July 26, 2006--
Company Also Announces 10 Million Share Repurchase Program Related to
Acquisition
SUPERVALU INC. (NYSE:SVU) today reported results for the first
quarter of fiscal 2007, which ended June 17, 2006, marking a
successful beginning to the recently completed $12.4 billion
acquisition of Albertson's premier retail properties.
Jeff Noddle, SUPERVALU chairman and chief executive officer said,
"We are off to a great start following our transformational
acquisition in June. The financial results of the new SUPERVALU will
continue to emerge over the remainder of the year. We are confident
that the benefits of the acquisition of Albertsons' premier retail
properties will be evident. The first quarter of fiscal 2007, which
primarily reflects stand alone SUPERVALU prior to the impact of the
newly acquired Albertson's operations, was on track with our
expectations. We delivered a strong quarter even when absorbing $0.05
of stock option expense and $0.06 of one-time transaction costs."
During the first quarter, SUPERVALU completed its $12.4 billion
acquisition of Albertsons' premier retail properties. The acquisition,
which closed on June 2, transformed SUPERVALU into the nation's
third-largest supermarket chain, with the addition of more than 1,100
stores -- including Acme Markets, Bristol Farms, Jewel-Osco, Shaw's
Supermarkets, Star Market, and Albertsons banner stores in the
Intermountain, Northwest and Southern California regions. The
acquisition also includes the related in-store pharmacies under the
Osco Drug and Sav-on banners.
First Quarter Results
The first quarter does not include operating results of the
acquired operations but includes the acquired operations balance sheet
with preliminary purchase accounting and one-time transaction costs.
The fiscal quarters of the acquired operations will become aligned
with SUPERVALU's at the end of fiscal 2007. Operating results in the
second quarter of fiscal 2007, to be released by mid-October, will
include the acquired operations.
The company reported fiscal 2007 first quarter net sales of $5.8
billion, down slightly in comparison to the same period of fiscal
2006, net earnings of $87 million compared to $91 million last year,
basic earnings per share of $0.59 compared to $0.67 last year, and
diluted earnings per share of $0.57 compared to $0.64 last year. First
quarter results include net after-tax charges of approximately $9
million, or $0.06 per basic share and $0.06 per diluted share,
primarily due to one-time transaction costs. First quarter results
also include costs of approximately $8 million after-tax or $0.05 per
diluted share from the adoption of FAS123R related to stock option
expensing.
Segment Results
Retail Food Segment -- First quarter retail net sales were $2.9
billion compared to $3.2 billion last year. The decline in net sales
primarily reflects store divestitures. Identical store sales growth
for the quarter was negative 1.8 percent. When adjusted for planned
in-market store expansion, first quarter identical store sales growth
was negative 1.3 percent. Identical store sales growth for
corporate-owned Save-A-Lot stores was slightly positive during the
quarter. Exclusive of the divested Cub Foods stores in Chicago, Shop
'n Save stores in Pittsburgh and Deals stores, total retail square
footage, including licensed stores, increased by approximately 2.7
percent from last year's first quarter.
The reported retail operating earnings for the first quarter was
$128 million compared to $128 million last year. Reported operating
earnings as a percent of sales was 4.4 percent compared to 4.0 percent
last year. First quarter fiscal 2007 reported operating earnings as a
percent of sales included the benefit of approximately $10 million
pre-tax, or approximately 40 basis points, from the planned sale of a
minority partnership interest in two retail stores in the Northwest.
This quarter's performance reflects the benefits of merchandising
programs offset by higher utilities and employee benefit related
expenses including approximately $4 million pre-tax of expense, or 12
basis points from the adoption of FAS123R related to stock option
expensing.
Net new store activity since last year's first quarter, including
licensed stores, included seven regional banner stores, 14 Save-A-Lot
stores and 1,113 acquired properties. The store activity excludes
market exits. Save-A-Lot, including licensee stores, operated 1,162
stores at the end of the quarter.
As of June 17, 2006, SUPERVALU's retail store network, including
the acquired properties, consists of 2,504 stores, including 870
licensed stores. The company's store network includes approximately
900 in-store pharmacies and 118 fuel centers.
Supply Chain Services Segment -- First quarter net sales for
supply chain services were $2.9 billion compared to $2.8 billion last
year. The increase in sales primarily reflects new business growth,
which was partially offset by normal customer attrition.
Reported supply chain services operating earnings for the first
quarter were $76 million, compared to $71 million last year, an
increase of approximately 6 percent. Reported operating earnings as a
percent of sales was 2.7 percent, compared to 2.6 percent in last
year's first quarter. The increase in operating earnings as a percent
of sales primarily reflects sales leverage and improved perishable
performance. Operating results include approximately $3 million
pre-tax of expense, or 10 basis points from the adoption of FAS123R
related to stock option expensing.
Other Items
General corporate expense for the first quarter was $33 million
compared to $17 million last year primarily reflecting pre-tax
one-time transaction costs of approximately $14 million and $6 million
pre-tax of expense from the adoption of FAS123R related to stock
option expensing. SUPERVALU's effective tax rate for the first quarter
was 38.6 percent in contrast to last year's 37.0 percent, reflecting
the estimated effective tax rate for fiscal 2007 as a result of the
acquisition.
Net interest expense for the first quarter was $26 million
compared to $37 million last year reflecting increased interest income
from higher invested cash balances partially offset by approximately
$7 million of interest related to the new borrowings from the
acquisition.
Capital spending for the first quarter was $90 million, including
approximately $7 million in capital leases. Capital spending primarily
included retail store expansion, store remodeling, and supply chain
growth initiatives.
Total debt to capital was 64.3 percent at quarter end compared to
36.7 percent at fiscal 2006 year end, reflecting the acquisition. The
total debt to capital ratio is calculated as total debt, which
includes notes payable, current debt and obligations under capital
leases, long-term debt and obligations under capital leases, divided
by the sum of total debt and total stockholders' equity.
Basic weighted average shares outstanding in the quarter were
146.6 million shares compared to 135.8 million shares last year.
Diluted weighted average shares outstanding in the quarter were 156.2
million shares compared to 145.6 million shares last year. The
increase is primarily due to the weighted average share impact of the
69 million of additional shares issued for the acquisition. As of June
17, 2006, SUPERVALU had approximately 210 million shares outstanding.
Share Repurchase Authorization
SUPERVALU's Board of Directors has authorized the company to
repurchase up to 10 million shares of SUPERVALU common stock to offset
stock option exercises by former Albertsons employees, now employed by
SUPERVALU, subsequent to the acquisition. The authorization will
remain in place until June 1, 2007 and is in addition to the company's
existing share repurchase program.
Hybrid Income Term Security Units (HITS)
Previously issued diluted earnings per share guidance for Fiscal
2007 assumed early settlement of the Hybrid Income Term Security units
(HITS). As a result of the HITS holders not exercising the early
settlement option, fiscal 2007 diluted earnings per share will be
negatively impacted by $0.06, reflecting purchase accounting fair
market value adjustments and increased interest expense, partially
offset by 8 million fewer shares outstanding.
Fiscal 2007 Diluted Earnings Per Share Guidance Summary
Fiscal 2007 Diluted Earnings Per Share Guidance Range
Diluted earnings per share guidance prior
to adjustments - no change from May 22 $2.60 $2.80
One-time transaction costs - no change ($0.35) ($0.30)
Stock option expensing - updated on
July 26 to $0.08 ($0.08) ($0.08)
HITS impact due to no early settlement
- new to guidance as of July 26 ($0.06) ($0.06)
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Diluted earnings per share guidance after
adjustments - as of July 26 $2.11 $2.36
SUPERVALU's fiscal 2007 outlook includes the following business
assumptions.
-- Consumer spending will continue to be pressured by higher fuel
prices and modest food inflation;
-- Total sales are estimated in a range of approximately $37.4
billion to $38.0 billion;
-- Identical store sales for the combined retail network, as if
the newly acquired operations were in the store base for more
than a year, are projected to be flat for the remainder of the
year, with the acquired operations slightly positive;
-- Store development plans for the year, including acquired
properties, are projected to be approximately 40 standard size
stores and 50 to 75 limited assortment stores, including
licensed stores. Remodels are estimated at approximately 80
stores;
-- Sales attrition, exclusive of new business, in the traditional
food distribution business will approximate the historical
rate of approximately four percent for the year;
-- One-time transaction costs are expected to be approximately
$99 to $116 million pre-tax, or $0.30 to $0.35 per diluted
share;
-- Guidance includes a charge of approximately $0.03 per diluted
share related to the final disposals of the Pittsburgh
corporate-owned stores;
-- Total capital spending for the year is projected to be
approximately $1.1 billion, including approximately $175
million in capital leases;
-- Incorporated into the outlook for the year is the preliminary
assessment of purchase accounting, based on initial valuations
and estimates. These valuations and estimates will be refined
over the course of the next year;
-- The effective tax rate is estimated to be 38.6 percent; and
-- Weighted average shares outstanding for the full fiscal year
are expected to be approximately 198 million shares.
Commenting on SUPERVALU, Noddle said, "As the third largest
grocery retailer in the country, we remain steadfastly committed to
serving our customers through day to day excellence at the store
level, while delivering the economics of our new business model
through a balance of both earnings growth and debt reduction."
A conference call to review the full-year results is scheduled for
today at 9:00 a.m. (CDT). A live Web cast of the call will be
available at www.supervalu.com. An archive of the call is accessible
via telephone by dialing 630-652-3041 with passcode 15121805 and
through the company's Web site at www.supervalu.com. The conference
call archive will be available through August 9, 2006.
About SUPERVALU INC
SUPERVALU INC. is one of the largest companies in the United
States grocery channel with annual sales approaching $40 billion.
SUPERVALU holds leading market share positions across the U.S. with
its approximately 2,500 retail grocery locations. Through SUPERVALU's
nationwide supply chain network, the company provides distribution and
related logistics support services to more than 5,000 grocery retail
endpoints across the country, including SUPERVALU's own retail store
network. SUPERVALU currently has approximately 200,000 employees. For
more information about SUPERVALU visit http://www.supervalu.com.
CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR
THE PURPOSE OF "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
Except for the historical and factual information contained
herein, the matters set forth in this news release, including
statements as to the expected benefits of the recently completed
acquisition of certain assets and operations of Albertson's, Inc. such
as efficiencies, cost savings, market profile and financial strength,
and the competitive ability and position of the combined company, and
other statements identified by words such as "estimates," "expects,"
"projects," "plans," and similar expressions are forward-looking
statements within the meaning of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements are subject to risks and uncertainties that
may cause actual results to differ materially, including the
possibility that the anticipated benefits from the acquisition cannot
be fully realized or may take longer to realize than expected, the
possibility that costs or difficulties related to the integration of
Albertsons operations into SUPERVALU will be greater than expected,
the impact of competition and other risk factors relating to our
industry as detailed from time to time in SUPERVALU's reports filed
with the SEC.
You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this news release.
Unless legally required, SUPERVALU undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
SUPERVALU INC. and Subsidiaries
CONSOLIDATED COMPOSITION OF NET SALES AND OPERATING EARNINGS
June 17, 2006 June 18, 2005
(In millions, except per share data) (16 weeks) (16 weeks)
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Net sales
Retail food and drug $2,930 $3,184
50.7% 53.3%
Supply Chain Services 2,853 2,788
49.3% 46.7%
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Total net sales $5,783 $5,972
100.0% 100.0%
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Operating earnings
Retail food and drug operating earnings $128 $128
Supply Chain Services operating earnings 76 71
General corporate expenses (33) (17)
Restructuring charges (3) (0)
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Total operating earnings 168 182
Interest expense, net (26) (37)
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Operating earnings before income taxes $142 $145
Income tax expense (55) (54)
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Net earnings $87 $91
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LIFO expense $3 $2
Depreciation and amortization
Retail food and drug $57 $64
Food distribution 30 30
Corporate (0) 0
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Total $87 $94
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SUPERVALU INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
June 17, 2006 June 18, 2005
(In millions, except per share (16 weeks) % of (16 weeks) % of
data) sales sales
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Net sales $5,783 100.0% $5,972 100.0%
Cost of sales 4,968 85.9% 5,102 85.4%
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Gross profit 815 14.1% 870 14.6%
Selling, general and
administrative expenses 644 11.1% 688 11.5%
Restructuring charges 3 0.1% 0 0.0%
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Operating earnings 168 2.9% 182 3.0%
Interest expense, net 26 0.5% 37 0.6%
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Earnings before income taxes 142 2.5% 145 2.4%
Income tax expense 55 0.9% 54 0.9%
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Net earnings $87 1.5% $91 1.5%
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Earnings per common share
Basic
Net earnings $0.59 $0.67
Diluted
Net earnings $0.57 $0.64
Weighted average number of common
shares outstanding
Basic 147 136
Diluted 156 146
Fiscal 2007 first quarter results reflect the adoption of stock
option expensing (FAS123R) as well as costs related to the
acquisition.
SUPERVALU INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In millions, except par value data) June 17, 2006 February 25, 2006
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ASSETS
Current Assets
Cash and cash equivalents $498 $686
Accounts and notes receivable, net 1,141 439
Inventories 2,804 954
Prepaid and other current assets 545 89
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Total Current Assets 4,988 2,168
Land, buildings, leasehold
improvements and equipment, net 8,797 1,969
Goodwill 5,900 1,614
Intangibles, net 2,700 116
Other assets 648 171
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Total Assets $23,033 $6,038
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued
liabilities $3,252 $1,262
Current maturities of long-term
debt and capital lease obligations 147 112
Other current liabilities 2,055 133
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Total Current Liabilities 5,454 1,507
Long-term debt and obligations under
capital Leases 9,160 1,406
Other long-term liabilities and
deferred credits 3,252 506
Total Stockholder's Equity 5,167 2,619
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Total Liabilities and Stockholders'
Equity $23,033 $6,038
======================================================================
The Albertsons' assets and liabilities acquired as of June 2, 2006
have been included in the June 17, 2006 balance sheet and reflect our
preliminary estimate of purchase accounting, based on our initial
valuations and estimates of fair value. We expect to refine these
valuations and estimates over the course of the next year.
CONTACT: SUPERVALU INC., Minneapolis
Yolanda Scharton, 952-828-4540
yolanda.scharton@supervalu.com