Exhibit 99.1
SUPERVALU REPORTS RECORD THIRD QUARTER NET EARNINGS
AND EARNINGS PER SHARE RESULTS
MINNEAPOLIS, Jan. 11 /PRNewswire-FirstCall/ -- SUPERVALU INC. (NYSE: SVU)
today reported results for the third quarter of fiscal 2005, which ended
December 4, 2004. The company reported net sales of $4.6 billion compared to
$4.7 billion last year, net earnings of $64.9 million compared to $48.6 million
last year, and diluted earnings per share of $0.48 compared to $0.36 last year.
Included in this year's third quarter results are restructure and other charges
of $0.09 diluted earnings per share primarily related to increased liabilities
associated with employee benefit related costs from previously exited
distribution facilities as well as changes in estimates on exited real estate.
Last year's results included restructure and other charges of $0.03 diluted
earnings per share primarily associated with employee benefit related costs from
previously exited distribution facilities. In addition, last year's third
quarter results include costs of approximately $0.16 diluted earnings per share
related to several events including an early bond redemption, taxes due for the
C&S asset exchange, a strike in St. Louis, and the exit of Denver-based
operations.
Jeff Noddle, SUPERVALU chairman and chief executive officer said, "We
achieved record third quarter performance in both reported net earnings and
reported earnings per share even inclusive of the charges absorbed in the
quarter. I am pleased with the strong operating performance achieved in both our
retail and distribution businesses. In addition, our recent agreement to acquire
Total Logistics, Inc. will establish a sizable foothold in third party logistics
and continue to support SUPERVALU's ongoing momentum. Our tradition of fresh
thinking continues to provide innovative platforms for success."
For the first 40 weeks of fiscal 2005, the company reported net sales of
$15.0 billion compared to $15.2 billion last year, net earnings of $292.9
million compared to $184.5 million last year, and diluted earnings per share of
$2.14 compared to $1.37 last year. Diluted earnings per share for the first 40
weeks of fiscal 2005 includes $0.50 diluted earnings per share impact from the
net after-tax gain on the sale of the company's minority interest in WinCo
Foods, Inc (WinCo). Also included in the first 40 weeks of fiscal 2005 and
fiscal 2004 is $0.12 and $0.05 diluted earnings per share, respectively, of
restructure and other charges related to increased liabilities associated with
employee benefit related costs from previously exited distribution facilities as
well as changes in estimates on exited real estate.
Retail Food Segment - Third quarter retail net sales were $2.4 billion,
flat compared to last year's third quarter reflecting new-store growth and
recovery from last year's strike in St. Louis, that was substantially offset by
store closures including the Denver store disposition. Comparable store sales
performance for the quarter was negative 0.4 percent, reflecting the soft
consumer environment, the impact of hurricanes and comparison against strong
comparable sales increases of 3.0 percent last year. When adjusted for in-market
expansion, third quarter comparable sales performance was positive 0.3 percent.
When compared to last year's strong comparable sales performance, Save-A-Lot's
comparable store sales in the quarter were slightly negative, primarily as a
result of three hurricanes, which affected approximately 20 percent of the
company-operated stores. Total retail square footage, including licensed stores,
increased by approximately 4.5 percent from last year's third quarter, with
Save-A-Lot's retail square footage growing 6.8 percent.
New store activity since last year's third quarter, including licensed
stores, resulted in 72 net new stores, opened and acquired, reflecting a net 68
Save-A-Lot combination stores (grocery and general merchandise) and a net four
new regional banner stores for a total of 1,540 stores at the end of the third
quarter. As of December 4, 2004, Save-A-Lot operated 1,279 stores, of which 435
stores are combination stores compared to 163 combination stores at the end of
last year's third quarter.
Retail reported record operating earnings for the third quarter of $101.3
million, representing an increase of 21.4 percent, compared to $83.4 million in
last year's third quarter. Reported operating earnings as a percent of sales
were 4.2 percent, also a third quarter record, compared to 3.5 percent in last
year's third quarter, an increase of 70 basis points. Operating margin
reflects this year's strong merchandising programs, the absence of the Denver
market exit expenses in the prior year, and the recovery from last year's 28-day
strike in the company's St. Louis Shop 'n Save stores, offset in part by the
absence of non-cash earnings from its minority interest in WinCo, sold in the
first quarter of the current fiscal year.
Food Distribution Segment - Third quarter distribution net sales were $2.1
billion, a decrease of 8.5 percent compared to last year's third quarter,
reflecting new business growth of approximately four percent, offset primarily
by customer attrition including the previously announced transition of a
retailer in the Pacific Northwest and last year's asset exchange with C&S
Wholesale Grocers.
Reported distribution operating earnings for the third quarter were $59.5
million compared to $60.9 million in last year's third quarter. Reported
operating earnings as a percent of sales were 2.8 percent, a record operating
margin rate, compared to 2.6 percent in last year's third quarter, an increase
of 20 basis points. Operating results reflect customer mix including the
continued benefits of volume throughput in the company's Midwestern facilities
and ongoing cost containment efforts.
Outlook
SUPERVALU's diluted earnings per share guidance for the fiscal year ending
February 26, 2005 is a range of $2.75 to $2.80 which includes the after-tax
$0.50 diluted earnings per share gain on the sale of the company's minority
interest in WinCo and $0.12 diluted earnings per share of restructure and other
charges absorbed through the first three quarters of fiscal 2005. The fiscal
2005 guidance reflects a fourth quarter diluted earnings per share range of
$0.61 to $0.66. Previous fiscal 2005 diluted earnings per share guidance had
been $2.80 to $2.90 per share, which included the $0.50 diluted earnings per
share gain on the sale of the company's minority interest in WinCo and $0.03
diluted earnings per share of restructure and other charges. The fiscal 2005
diluted earnings per share guidance range has not been updated to reflect the
fourth quarter adoption of EITF 04-08 relating to contingently convertible debt.
The company plans to provide fiscal 2006 earnings guidance in conjunction with
or before the release of its fourth quarter earnings results in April, 2005.
Noddle added, "With our strong retail strategy and merchandising programs,
excellent execution across our logistics operation, and the anticipated
successful completion of our agreement to acquire Total Logistics, Inc.,
SUPERVALU is well-positioned for continued success."
SUPERVALU's outlook for fiscal 2005 reflects general business assumptions,
including:
* Consumer spending will continue to be pressured by food inflation and
higher fuel prices.
* Comparable store sales, reflecting planned in-market store expansion,
are expected to be slightly positive for the year.
* Employee-related costs, including health and welfare and pension
costs, are expected to increase at a moderating pace.
* SUPERVALU's store development plans in fiscal 2005, exclusive of store
closings, include approximately 100 new extreme value food combination
stores, approximately 80 extreme value company-owned store conversions
to extreme value combination stores, seven to nine new regional banner
stores, and approximately 40 regional banner major and minor remodels.
* Annual distribution sales attrition is trending above the company's
historical range of two to four percent and is currently estimated to
be approximately seven percent in fiscal 2005 due to three large
customer transitions during the year to other suppliers.
* Fiscal 2005 total capital spending between $350 and $375 million,
including approximately $60 million in capital leases.
Recent News
In a separate announcement last week, the company announced an agreement to
acquire Total Logistics, Inc. (TLCX), an industry-leading national provider of
integrated third-party logistics services. The approximately $233 million
acquisition, if successful, will establish an important foothold for SUPERVALU
in third party logistics. The company expects to close on the transaction in
February.
Other Items
Third quarter results include restructure and other charges of $20.3
million pretax compared to prior year of $7.2 million pretax, reflecting charges
for employee benefit related costs from previously exited distribution
facilities as well as changes in estimates on exited real estate.
General corporate expense for the third quarter was $14.0 million, an
increase from $9.7 million last year primarily reflecting incentive related
expenses. Net interest expense during the third quarter was $23.5 million
compared to $37.9 million last year. Lower net interest expense reflects lower
debt levels and a strong cash balance. SUPERVALU has reduced total debt balances
by approximately $250 million in the past twelve months.
Total debt to capital was 41.0 percent at the end of third quarter compared
to 46.7 percent at fiscal 2004 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.
Capital spending during the quarter was $85.1 million, including $25.6
million in capital leases, primarily funding retail store expansion, store
remodeling, and technology enhancements.
Cash on hand at the end of the third quarter was approximately $360
million, up from $280 million at fiscal year end, reflecting strong cash flow,
timing of tax payments and lower than expected capital spending levels.
SUPERVALU's available cash balances will be utilized to purchase Total
Logistics, Inc. The effective tax rate for third quarter was 37.0 percent
compared to 45.7 percent last year which reflected $7.6 million of taxes due on
the C&S asset exchange.
Effective in SUPERVALU's fourth quarter, the company will adopt the impact
of the Emerging Issues Task Force No. 04-08 (EITF) of the Financial Accounting
Standards Board (FASB) entitled, "The Effect of Contingently Convertible
Instruments on Diluted Earnings Per Share". Under the EITF, net earnings and
diluted shares outstanding, used only for diluted earnings per share
calculations, would be restated for the current and prior years using the
if-converted method of accounting to reflect the contingent issuance of 7.8
million shares under the company's outstanding, contingently convertible
zero-coupon debentures, which were issued in November 2001. In fiscal 2005, the
estimated annual impact of EITF No. 04-08 would be to reduce diluted earnings
per share by approximately $0.10 and excluding the gain on the sale of WinCo,
diluted earnings per share would be reduced by approximately $0.08. The effect
of the restatement on fiscal 2004 and 2003 would be to reduce diluted earnings
per share by $0.06 and $0.05, respectively.
Diluted weighted average shares outstanding in the quarter were 136.2
million shares. As of December 4, 2004, SUPERVALU had 134.7 million shares
outstanding.
A conference call to review the third quarter results is scheduled for
today at 9:00 a.m. (CST). A live Web cast of the call will be available at
http://www.supervalu.com. An archive of the call is accessible via telephone by
dialing (630) 652-3041 with pass code 10597609, and through the company's Web
site at http://www.supervalu.com. The conference call archive will be available
through January 25, 2005.
As of December 4, 2004, SUPERVALU's retail store network consists of 1,540
stores in 39 states, including 1,279 Save-A-Lot extreme value stores - 409 owned
Save-A-Lot stores, 870 licensed Save-A-Lot stores; 261 regional banner stores
including Cub Foods, Shop 'n Save, Shoppers Food and Pharmacy, bigg's, Farm
Fresh, Scott's Foods and Hornbacher's stores. SUPERVALU serves as primary
supplier to approximately 2,300 stores and SUPERVALU's own regional banner store
network of 261 stores, while serving as secondary supplier to approximately 600
stores.
About SUPERVALU
Celebrating its 135th year of fresh thinking, SUPERVALU INC., a Fortune
100 company, is one of the largest companies in the United States grocery
channel. With annual revenues of approximately $20 billion, SUPERVALU holds
leading market share positions across the U.S. with its more than 1,500 retail
grocery locations, including licensed Save-A-Lot locations. With its Save-A-Lot
format, the company holds the number one market position in the extreme value
grocery retail sector. Through SUPERVALU's geographically diverse distribution
network, the company provides distribution and related logistics support
services to nearly 4,500 grocery retailers across the nation. In addition,
SUPERVALU's third-party logistics business provides end-to-end supply chain
management solutions that deliver value for manufacturers, consumer products
retailers and food service customers. SUPERVALU currently has more than 55,000
employees. For more information about SUPERVALU visit http://www.supervalu.com.
The statements contained in this news release that are not historical fact
are forward-looking statements and are made under the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Certain important factors
relating to the company's business in general, could cause results to differ
materially from those anticipated by such forward-looking statements. These
include the impact of competition, the nature and extent of the consolidation of
the retail food and food distribution industries, the ability to attract and
retain customers for the company's food distribution operations and to control
food distribution costs, the ability of the company to grow through acquisitions
and assimilate the acquired entities, increases in employee benefit costs,
potential work disruptions from labor disputes or national emergencies, the
availability of favorable credit and trade terms, food price changes, general
economic or political conditions that affect consumer buying habits generally or
war-time activities, threats or general acts of terror directed at the food
industry that affect consumer behavior, other risk factors inherent in the food
distribution and retail businesses, and other factors discussed from time to
time in reports filed by the company with the Securities and Exchange
Commission.
In addition to the foregoing, the company's recently announced agreement to
acquire Total Logistics, Inc. is subject to certain risks and uncertainties that
could cause actual results or events to vary from stated expectations, which
variations could be material or adverse. Factors that could produce such a
variation include, but are not limited to, the following: the possible inability
to complete the Total Logistics, Inc. acquisition; the risks and uncertainties
associated with successfully integrating the two companies; the ability to
retain key personnel; the inherent unreliability of earnings, revenue and cash
flow predictions due to numerous factors, many of which are beyond the company's
control; developments in the demand for each companies' products and services;
relationships with major customers and suppliers; unanticipated delays, costs
and expenses inherent in the development and marketing of new products and
services; the impact of governmental laws and regulations; and competitive
factors.
SUPERVALU INC. and Subsidiaries
Consolidated Composition of Net Sales and Operating Earnings
The following table sets forth the composition of the company's net sales and
earnings.
(In thousands)
Third Quarter (12 weeks) ended
(unaudited)
-------------------------------
Dec. 4, 2004 Nov. 29, 2003
-------------- --------------
Net sales
Retail Food $ 2,430,240 $ 2,417,853
% of total 53.4% 51.0%
Food Distribution 2,124,882 2,321,130
% of total 46.6% 49.0%
Total net sales $ 4,555,122 $ 4,738,983
Earnings 100.0% 100.0%
Retail Food operating earnings $ 101,260 $ 83,418
% of sales 4.2% 3.5%
Food Distribution operating earnings 59,546 60,908
% of sales 2.8% 2.6%
Subtotal 160,806 144,326
% of sales 3.5% 3.0%
General corporate expense (13,991) (9,730)
Restructure and other charges (20,276) (7,154)
Total operating earnings 126,539 127,442
% of sales 2.8% 2.7%
Interest expense (29,072) (42,121)
Interest income 5,617 4,226
Earnings before income taxes 103,084 89,547
Income tax expense (38,141) (40,931)
Net earnings $ 64,943 $ 48,616
NOTE 1:
Pretax LIFO expense $ 1,389 $ 2,051
NOTE 2:
Pretax depreciation and amortization
Retail Food Segment $ 45,667 $ 42,570
Food Distribution Segment 23,968 25,554
General Corporate 50 440
Total Company $ 69,685 $ 68,564
SUPERVALU INC. and Subsidiaries
Consolidated Composition of Net Sales and Operating Earnings
The following table sets forth the composition of the company's net sales and
earnings.
(In thousands)
Year-to-date (40 weeks) ended
(unaudited)
-------------------------------
Dec. 4, 2004 Nov. 29, 2003
-------------- --------------
Net sales
Retail Food $ 7,995,610 $ 7,759,895
% of total 53.5% 51.2%
Food Distribution 6,957,124 7,406,025
% of total 46.5% 48.8%
Total net sales $ 14,952,734 $ 15,165,920
Earnings 100.0% 100.0%
Retail Food operating earnings $ 335,321 $ 305,954
% of sales 4.2% 3.9%
Food Distribution operating earnings 175,194 166,515
% of sales 2.5% 2.2%
Subtotal 510,515 472,469
% of sales 3.4% 3.1%
General corporate expense (37,923) (40,479)
Gain on sale of WinCo Foods, Inc. 109,238 -
Restructure and other charges (26,416) (10,601)
Total operating earnings 555,414 421,389
% of sales 3.7% 2.8%
Interest expense (106,945) (129,249)
Interest income 17,303 13,983
Earnings before income taxes 465,772 306,123
Income tax expense (172,882) (121,605)
Net earnings $ 292,890 $ 184,518
NOTE 1:
Pretax LIFO expense $ 7,033 $ 4,573
NOTE 2:
Pretax depreciation and amortization
Retail Food Segment $ 150,228 $ 135,213
Food Distribution Segment 81,908 91,189
General Corporate 521 1,451
Total Company $ 232,657 $ 227,853
CONSOLIDATED STATEMENTS OF EARNINGS
SUPERVALU INC. and Subsidiaries
(In thousands, except per share data)
Third Quarter (12 weeks) ended
(unaudited)
-------------------------------------------------------------
% of % of
Dec. 4, 2004 sales Nov. 29, 2003 sales
------------- ------------- ------------- -------------
Net sales $ 4,555,122 100.0% 4,738,983 100.0%
Costs and expenses:
Cost of sales 3,894,925 85.5% 4,093,353 86.4%
Selling and administrative
expenses 513,382 11.3% 511,034 10.8%
Restructure and other charges 20,276 0.4% 7,154 0.1%
Interest
Interest expense 29,072 0.6% 42,121 0.9%
Interest income 5,617 0.1% 4,226 0.1%
Interest expense, net 23,455 0.5% 37,895 0.8%
Total costs and
expenses 4,452,038 97.7% 4,649,436 98.1%
Earnings before income taxes 103,084 2.3% 89,547 1.9%
Income tax expense 38,141 0.9% 40,931 0.9%
Net earnings $ 64,943 1.4% 48,616 1.0%
Net earnings per common share -
basic $ 0.48 $ 0.36
Net earnings per common share -
diluted $ 0.48 $ 0.36
Weighted average number of common
shares outstanding
Basic 134,343 133,983
Diluted 136,240 135,862
Dividends declared per common
share $ 0.1525 $ 0.1450
CONSOLIDATED STATEMENTS OF EARNINGS
SUPERVALU INC. and Subsidiaries
(In thousands, except per share data)
Year-to-date (40 weeks) ended
(unaudited)
-------------------------------------------------------------
% of % of
Dec. 4, 2004 sales Nov. 29, 2003 sales
------------- ------------- ------------- -------------
Net sales $ 14,952,734 100.0% $ 15,165,920 100.0%
Costs and expenses:
Cost of sales 12,792,362 85.5% 13,082,296 86.3%
Selling and administrative
expenses 1,687,780 11.3% 1,651,634 10.9%
Gain on sale of WinCo
Foods, Inc. 109,238 0.7% - -
Restructure and other
charges 26,416 0.2% 10,601 0.1%
Interest
Interest expense 106,945 0.7% 129,249 0.8%
Interest income 17,303 0.1% 13,983 0.1%
Interest expense, net 89,642 0.6% 115,266 0.7%
Total costs and
expenses 14,486,962 96.9% 14,859,797 98.0%
Earnings before income taxes 465,772 3.1% 306,123 2.0%
Income tax expense 172,882 1.2% 121,605 0.8%
Net earnings $ 292,890 1.9% $ 184,518 1.2%
Net earnings per common share
- basic $ 2.17 $ 1.38
Net earnings per common share
- diluted $ 2.14 $ 1.37
Weighted average number of
common shares outstanding
Basic 134,970 133,848
Diluted 137,015 135,069
Dividends declared per common
share $ 0.4500 $ 0.4325
CONDENSED CONSOLIDATED BALANCE SHEETS
SUPERVALU INC. and Subsidiaries
(In thousands)
Third Quarter Fiscal Year
(unaudited) End
November 4, February 28,
2004 2004
------------- --------------
Assets
Current Assets
Cash and cash equivalents $ 371,284 $ 291,956
Receivables, net 413,103 447,872
Inventories, net 1,280,194 1,078,343
Other current assets 90,054 218,996
Total current assets 2,154,635 2,037,167
Long-term receivables, net 101,340 129,729
Property, plant and equipment, net 2,116,808 2,134,436
Other Assets
Goodwill 1,557,057 1,557,057
Other 236,213 294,624
Total assets $ 6,166,053 $ 6,153,013
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 1,141,995 1,068,788
Current debt and obligations
under capital leases 89,802 305,944
Other current liabilities 459,471 464,047
Total current liabilities 1,691,268 1,838,779
Long-term debt and obligations under
capital leases 1,596,078 1,633,721
Other liabilities and deferred income
taxes 454,432 470,939
Total stockholders' equity 2,424,275 2,209,574
Total liabilities and stockholders'
equity $ 6,166,053 $ 6,153,013
SOURCE SUPERVALU INC.
-0- 01/11/2005
/CONTACT: INVESTORS, Yolanda Scharton, +1-952-828-4540,
yolanda.scharton@supervalu.com; or MEDIA, Lynne High, +1-952-828-4515,
lynne.high@supervalu.com, both of SUPERVALU INC. /
/First Call Analyst: /
/FCMN Contact: dave.r.heinsch@supervalu.com /
/Web site: http://www.supervalu.com