Exhibit 99.1
SUPERVALU Reports Record Second Quarter Fiscal 2007 Results,
Quarter Includes Acquired Operations
Company Reports Combined Record Sales of $10.7 Billion Compared to
$4.6 Billion Last Year, Record Net Earnings of $132 Million Compared
to $34 Million Last Year, and Record Diluted Earnings Per Share of
$0.61 Compared to $0.24 Last Year
SUPERVALU's Powerful Transformation Begins
MINNEAPOLIS--(BUSINESS WIRE)--Oct. 10, 2006--SUPERVALU INC.
(NYSE:SVU) today reported results for the second quarter of fiscal
2007. The company reported record net sales of $10.7 billion compared
to $4.6 billion last year, record net earnings of $132.0 million
compared to $33.8 million last year, and record diluted earnings per
share of $0.61 compared to $0.24 last year. SUPERVALU's second quarter
includes 12 weeks of SUPERVALU results ended September 9, 2006 and 13
weeks of acquired operations ended August 31, 2006. On June 2,
SUPERVALU completed its $11.3 billion acquisition of Albertson's
premier retail properties which transformed SUPERVALU into the
nation's third-largest supermarket chain with leading market shares
across the country.
Second quarter results include charges for one-time transaction
costs of $0.04 per diluted share, expense from the adoption of FAS
123R related to stock option expensing of $0.01 per diluted share, and
the impact of the Hybrid Income Term Security Units which did not
settle upon close of the acquisition of $0.02 per diluted share. Last
year's second quarter results included charges of $0.27 per diluted
share related to the plan to sell the Shop 'n Save Pittsburgh stores
and losses incurred from Hurricane Katrina.
Jeff Noddle, SUPERVALU chairman and chief executive officer said,
"This quarter represents the first quarter of combined results since
the June acquisition of Albertson's premier retail properties. We
produced double-digit earnings per share growth by significantly
increasing our after-tax earnings, demonstrating the accretive
acquisition and the powerful improvement in our business model. The
sizable transformation of SUPERVALU, where retail now accounts for the
vast majority of total operating earnings, is apparent in these
results. As a coast-to-coast grocery and pharmacy retailer with more
than 2,500 stores which includes 928 in-store pharmacies across the
country, we hold leading market share positions in many of the largest
cities in the country. We are implementing a sizable capital program
and refining both our national and in-store merchandising programs. At
the same time, we are equally committed to capturing efficiencies of
our new size, leveraging our supply chain expertise while generating
strong cash flow to reduce debt."
For the first half of fiscal 2007, the company reported net sales
of $16.4 billion compared to $10.5 billion last year, net earnings of
$218.8 million compared to $125.0 million last year, and diluted
earnings per share of $1.21 compared to $0.88 last year. First quarter
results did not include any operating results from the acquisition.
Results for the first half of fiscal 2007 include charges for one-time
transactions costs of $0.10 per diluted share, expense from the
adoption of FAS 123R related to stock option expensing of $0.06 per
diluted share, and the impact of the Hybrid Income Term Security Units
which did not settle upon close of the acquisition of $0.02 per
diluted share. Results for the first half of fiscal 2006 included
charges primarily related to the plan to sell the Shop 'n Save
Pittsburgh stores and losses incurred from Hurricane Katrina of $0.27
per diluted share.
Segment Results
Retail Food Segment - Second quarter retail net sales were $8.5
billion, compared to $2.4 billion last year. The sales increase
reflects the acquisition of Albertson's premier retail properties.
Starting this quarter, all identical store sales are exclusive of
fuel. Identical store sales growth for SUPERVALU retail in the quarter
was negative 1.0 percent. When adjusted for planned in-market store
expansion, second quarter identical store sales growth for SUPERVALU
retail was negative 0.6 percent. The acquired stores identical store
sales growth in the quarter was positive 30 basis points. When
combined, identical store sales growth as if the newly acquired
operations were in the store base for more than a year was flat. Total
retail square footage, including acquired stores and licensed stores
and excluding the divested stores of Cub Foods Chicago and Shop 'n
Save Pittsburgh from the prior year, increased to approximately 86
million square feet, an increase of approximately 185 percent from
last year's second quarter.
Reported retail operating earnings for the second quarter was
$360.5 million compared to $39.0 million last year. The increase in
retail operating earnings reflects the acquisition of Albertson's
premier retail properties. Reported operating earnings as a percent of
sales were 4.2 percent compared to 1.6 percent last year. The increase
in retail operating earnings as a percent of sales reflects the impact
of last year's charge of $62 million pre-tax, or 254 basis points,
related to the plan to sell the Shop 'n Save Pittsburgh stores and
losses incurred from Hurricane Katrina. Second quarter fiscal 2007
operating earnings also include $1.8 million pre-tax of expense from
the adoption of FAS 123R related to stock option expensing.
Net new store activity since last year's second quarter, included
707 combination stores (combination stores are defined as grocery and
pharmacy), 354 grocery stores and 26 limited assortment grocery
stores. As of the end of the second quarter, SUPERVALU's retail store
network of 2,504 stores includes approximately 928 combination stores,
406 grocery stores, and 1,170 limited assortment grocery stores.
Included in the total store counts are 118 fuel centers and 867
licensed limited assortment grocery stores.
For the first half of fiscal 2007, SUPERVALU's retail segment
reported net sales of $11.5 billion compared to $5.6 billion last year
and operating earnings of $489.1 million compared to $166.5 million
last year. Fiscal 2007 first half retail operating earnings include
the benefit of approximately $10 million pre-tax from the sale of a
minority partnership interest in two retail stores in the Northwest
partially offset by approximately $5.4 million of pre-tax expense from
the adoption of FAS 123R related to stock option expensing. Fiscal
2006 first half retail operating earnings included pre-tax charges of
approximately $62 million related to the plan to sell the Shop 'n Save
Pittsburgh stores and losses incurred from Hurricane Katrina.
Supply Chain Services Segment - Second quarter net sales for
supply chain services were $2.1 billion, up approximately 1.6 percent
from last year. The sales increase primarily reflects new business
growth, which was partially offset by normal customer attrition.
Reported supply chain services operating earnings for the second
quarter were $56.0 million compared to $47.7 million in last year's
second quarter. Reported operating earnings as a percent of sales were
2.6 percent compared to 2.3 percent in last year's second quarter.
This year's operating results include approximately $3 million of
start-up costs associated with technology investments. This compares
with last year's start-up costs of $10 million. Also included in this
year's results was approximately $0.9 million pre-tax of expense from
the adoption of FAS 123R related to stock option expensing.
For the first half of fiscal 2007, SUPERVALU's supply chain
services segment reported net sales of $5.0 billion, compared to $4.9
billion last year and operating earnings of $131.9 million, compared
to $119.0 million last year. Fiscal 2007 first half supply chain
services results include approximately $4.1 million pre-tax of expense
from the adoption of FAS 123R related to stock option expensing.
Other Items
General corporate expense for the second quarter was $25.7 million
compared to $9.1 million last year primarily reflecting pre-tax
one-time transaction costs of approximately $16.3 million and $1.5
million pre-tax of expense from the adoption of FAS 123R related to
stock option expensing. One-time transaction costs primarily include
retention bonuses and consultant fees. SUPERVALU's effective tax rate
for the second 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 second quarter was $175.8 million
compared to $24.0 million last year primarily reflecting the
assumption of debt and new borrowings from the acquisition.
Capital spending for the second quarter was $263 million,
including approximately $22 million in capital leases. Capital
spending primarily includes retail store expansion, store remodeling
and supply chain initiatives.
Total debt to capital was 64.3 percent at the end of the second
quarter compared to 36.7 percent at fiscal 2006 year-end. 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.
Diluted weighted average shares outstanding for the second quarter
were 220 million shares compared to 146 million shares last year. The
increase is due to the additional shares issued for the acquisition
and issuances under employee benefit programs. Late in the quarter,
4.7 million shares were repurchased at an average price of $28.29
under the company's recently authorized share repurchase program. As
of September 9, 2006, SUPERVALU had 207.3 million shares outstanding.
Updated Fiscal 2007 Diluted Earnings Per Share Guidance Summary
Fiscal 2007 Diluted Earnings Per Share Guidance Range
Diluted earnings per share guidance prior to
adjustments $2.62 to $2.80
One-time transaction costs ($0.30) ($0.25)
Adoption of FAS 123R stock option expensing -
no change ($0.08) ($0.08)
HITS impact due to no early settlement - no
change ($0.06) ($0.06)
------- -------
Diluted earnings per share guidance after
adjustments as of October 10 $2.18 to $2.41
Previous diluted earnings per share guidance after adjustments was
$2.11 to $2.36.
SUPERVALU's fiscal 2007 outlook includes business assumptions,
such as:
-- Consumer spending will continue to be pressured by modest
inflation;
-- Total sales are estimated in a range of approximately $37
billion to $38 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 to slightly positive for
the remainder of the year, with the acquired operations
slightly positive.
-- Store development plans are projected to be approximately 35
to 40 standard size stores and 50 to 75 limited assortment
stores, including licensed stores. Major remodels are
estimated at approximately 80 stores. This includes store
development activities by the acquired properties in the
quarter prior to the acquisition;
-- 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
$80 to $96 million pre-tax, or $0.25 to $0.30 per diluted
share;
-- Charges of approximately $0.03 per diluted share will be
incurred related to the final disposals of the corporate-owned
Shop 'n Save Pittsburgh stores;
-- Total capital spending is projected to be approximately $950
million, including approximately $140 million in capital
leases. This does not include approximately $150 million of
capital spent by the acquired properties in the quarter prior
to the acquisition.
-- 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
as final valuation information is received or developed;
-- The effective tax rate is estimated to be 38.6 percent;
-- Weighted average diluted shares outstanding for the full
fiscal year are expected to be approximately 195 million
shares.
Commenting on SUPERVALU, Noddle said, "As the new SUPERVALU
continues to take shape, we are committed to our customers and all our
stakeholders around the country. I am very pleased with our progress
so far and the excitement of our associates throughout the company. I
look forward to sharing our performance throughout the remainder of
the year."
A conference call to review the second quarter 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
15905496 and through the company's Web site at www.supervalu.com. The
conference call archive will be available through October 24, 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
endpoints across the country. SUPERVALU currently has approximately
200,000 employees. For more information about SUPERVALU visit
www.supervalu.com.
CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR
THE PURPOSE OF "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
Except for the historical and factual information contained
herein, the matters set forth in this news release, including
statements as to the progress and expected benefits of the combination
of the operations of Albertson's, Inc. that were acquired in June 2006
with those of SUPERVALU, 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 combination of Albertsons operations into SUPERVALU will be
greater than expected, the impact of competition, economic and
industry conditions, security and food and drug safety issues, severe
weather and natural disasters, labor relations and employee benefit
costs, expansion, liquidity, legal and administrative proceedings,
regulatory and accounting matters, changes in operating conditions,
and other risk factors relating to our business or industry as
detailed from time to time in SUPERVALU's reports filed with the SEC.
You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this news release.
Unless legally required, SUPERVALU undertakes no obligation to update
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
(unaudited)
September 9, September 10,
2006 2005
(In millions, except per share data) (12 weeks) (12 weeks)
- ----------------------------------------------------------------------
Net sales
Retail food and drug $8,522 $2,446
79.9% 53.7%
Supply chain services 2,144 2,110
20.1% 46.3%
- ----------------------------------------------------------------------
Total net sales $10,666 $4,556
100.0% 100.0%
======================================================================
Operating earnings
Retail food and drug operating earnings $361 $39
Supply chain services operating earnings 56 48
General corporate expenses (26) (9)
- ----------------------------------------------------------------------
Total operating earnings 391 78
Interest expense, net (176) (24)
- ----------------------------------------------------------------------
Operating earnings before income taxes $215 $54
Income tax expense (83) (20)
- ----------------------------------------------------------------------
Net earnings $132 $34
======================================================================
LIFO expense $6 $3
Depreciation and amortization
Retail food and drug $242 $51
Supply chain services 22 22
- ----------------------------------------------------------------------
Total $264 $73
======================================================================
SUPERVALU INC. and Subsidiaries
CONSOLIDATED COMPOSITION OF NET SALES AND OPERATING EARNINGS
(unaudited)
September 9, September 10,
2006 2005
(In millions, except per share data) (28 weeks) (28 weeks)
- ----------------------------------------------------------------------
Net sales
Retail food and drug $11,452 $5,631
69.6% 53.5%
Supply chain services 4,997 4,898
30.4% 46.5%
- ----------------------------------------------------------------------
Total net sales $16,449 $10,529
100.0% 100.0%
======================================================================
Operating earnings
Retail food and drug operating earnings $489 $167
Supply chain services operating earnings 132 119
General corporate expenses (62) (27)
- ----------------------------------------------------------------------
Total operating earnings 559 259
Interest expense, net (202) (61)
- ----------------------------------------------------------------------
Operating earnings before income taxes $357 $198
Income tax expense (138) (73)
- ----------------------------------------------------------------------
Net earnings $219 $125
======================================================================
LIFO expense $9 $4
Depreciation and amortization
Retail food and drug $299 $115
Supply chain services 52 52
- ----------------------------------------------------------------------
Total $351 $167
======================================================================
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
Sept. 9, Sept. 10,
2006 2005
(In millions, except per share % of % of
data) (12 weeks) sales (12 weeks) sales
- ----------------------------------------------------------------------
Net sales $10,666 100.0% $4,556 100.0%
Cost of sales 8,205 76.9% 3,895 85.5%
- ----------------------------------------------------------------------
Gross profit 2,461 23.1% 661 14.5%
Selling, general and
administrative expenses 2,070 19.4% 583 12.8%
- ----------------------------------------------------------------------
Operating earnings 391 3.7% 78 1.7%
Interest expense, net 176 1.7% 24 0.5%
- ----------------------------------------------------------------------
Earnings before income taxes 215 2.0% 54 1.2%
Income tax expense 83 0.8% 20 0.5%
- ----------------------------------------------------------------------
Net earnings $132 1.2% $34 0.7%
======================================================================
Earnings per common share
Basic
Net earnings $0.63 $0.25
Diluted
Net earnings $0.61 $0.24
Weighted average number of common
shares outstanding
Basic 211 136
Diluted 220 146
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
Sept. 9, Sept. 10,
2006 2005
(In millions, except per share (28 Weeks) % of (28 Weeks) % of
data) sales sales
- ----------------------------------------------------------------------
Net sales $16,449 100.0% $10,529 100.0%
Cost of sales 13,173 80.1% 8,998 85.5%
- ----------------------------------------------------------------------
Gross profit 3,276 19.9% 1,531 14.5%
Selling, general and
administrative expenses 2,717 16.5% 1,272 12.1%
- ----------------------------------------------------------------------
Operating earnings 559 3.4% 259 2.4%
Interest expense, net 202 1.2% 61 0.5%
- ----------------------------------------------------------------------
Earnings before income taxes 357 2.2% 198 1.9%
Income tax expense 138 0.9% 73 0.7%
- ----------------------------------------------------------------------
Net earnings $219 1.3% $125 1.2%
======================================================================
Earnings per common share
Basic
Net earnings $1.26 $0.92
Diluted
Net earnings $1.21 $0.88
Weighted average number of common
shares outstanding
Basic 174 136
Diluted 184 146
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(In millions) September 9, February 25,
2006 2006
- ----------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $281 $686
Accounts and notes receivable, net 963 439
Inventories 2,885 954
Prepaid and other current assets 452 89
- ----------------------------------------------------------------------
Total Current Assets 4,581 2,168
Land, buildings, leasehold improvements and
equipment, net 8,756 1,969
Goodwill 5,897 1,614
Intangibles, net 2,682 94
Other assets 596 193
- ----------------------------------------------------------------------
Total Assets $22,512 $6,038
======================================================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities
Accounts payable and accrued liabilities $2,938 $1,262
Current maturities of long-term debt and
capital lease obligations 443 112
Other current liabilities 1,868 133
- ----------------------------------------------------------------------
Total Current Liabilities 5,249 1,507
Long-term debt and obligations under capital
Leases 8,871 1,406
Other long-term liabilities and deferred
credits 3,220 506
Total Stockholder's Equity 5,172 2,619
- ----------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $22,512 $6,038
======================================================================
EXHIBIT
SUPERVALU INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(Unaudited)
Sept. 9, Sept. 10, Sept. 9, Sept. 10,
2006 2006 2006 2006
(12 Weeks) (12 Weeks) (28 Weeks) (28 Weeks)
-------------------------------------------
Dilutive Earnings per
share, As Reported $0.61 $0.24 $1.21 $0.88
===========================================
Hurricane Katrina 0.02 0.02
SNS Pittsburgh Impairment 0.25 0.25
Stock Option Expensing 0.01 0.06
One-Time Transaction
Costs 0.04 0.10
Hybrid Income Term
Security Units 0.02 0.02
This is a non-GAAP list of items included in the earnings release.
CONTACT: SUPERVALU INC.
Investors and Financial Media:
Yolanda Scharton
952-828-4540
yolanda.scharton@supervalu.com