Exhibit 99.1
SUPERVALU REPORTS SECOND QUARTER RESULTS; QUARTER INCLUDES CHARGES OF $0.31
PER DILUTED SHARE RELATED TO THE PLAN TO SELL 20 PITTSBURGH STORES,
GROWTH INITIATIVES AND HURRICANE KATRINA
COMPANY ALSO UPDATES FULL YEAR GUIDANCE
MINNEAPOLIS, Oct. 17 /PRNewswire-FirstCall/ -- SUPERVALU INC. (NYSE: SVU)
today reported results for the second quarter of fiscal 2006, which ended
September 10, 2005. The company reported net sales of $4.6 billion compared to
$4.5 billion last year, net earnings of $33.8 million compared to $78.5
million, basic earnings per share of $0.25 compared to $0.58, and diluted
earnings per share of $0.24 compared to $0.55. Second quarter results include
net after tax charges of approximately $45 million or $0.31 per diluted share
related to the plan to sell 20 Pittsburgh stores, start-up costs related to
growth initiatives and the losses incurred from Hurricane Katrina.
Jeff Noddle, SUPERVALU chairman and chief executive officer said, "We are
pleased that when excluding the charges in the quarter, we matched last year's
record second quarter earnings per share performance, despite the soft sales
environment. As the impact of higher fuel prices continues to unfold across
the consumer spending landscape, we are refining our merchandising programs
across our network to improve sales performance. In addition, our supply chain
services operation continues its progress with next generation strategies
including supply chain technology investments, W. Newell & Co. produce and
third party logistics. We are confident that these programs lay the
groundwork for sales improvement."
Second quarter results include charges of approximately $0.31 per diluted
share which is comprised of $0.25 related to the previously announced plan to
sell 20 Pittsburgh stores, $0.04 related to the previously disclosed start-up
costs for growth initiatives and $0.02 from losses incurred from Hurricane
Katrina.
For the first 28 weeks of fiscal 2006, the company reported net sales of
$10.5 billion compared to $10.4 billion last year, net earnings of $125.0
million compared to $227.9 million last year, basic earnings per share of
$0.92 compared to $1.68 last year, and diluted earnings per share of $0.88
compared to $1.60 last year. Results for the first 28 weeks of fiscal 2006
includes charges of $0.33 per diluted share related to the plan to sell 20
Pittsburgh stores, start-up costs related to growth initiatives and losses
incurred from Hurricane Katrina. Results for the first 28 weeks of fiscal 2005
includes a net after tax gain of $68.3 million or $0.47 per diluted share from
the sale of the company's minority interest in WinCo Foods, Inc.
Segment Results
Retail Food Segment -- Second quarter retail net sales were $2.5 billion,
flat with last year's second quarter. Sales performance reflects new store
openings substantially offset by the impact of higher store closings,
primarily at Save-A-Lot, as well as a more competitive retail environment.
Comparable store sales growth for the quarter was negative 1.6 percent,
including flat comparable store sales at company-operated Save-A-Lot stores.
When adjusted for planned in-market store expansion, second quarter comparable
store sales were negative 1.1 percent. Save-A-Lot licensed stores continued to
experience sales softness. As a result of the plan to sell 20 Pittsburgh
stores, these stores have been excluded from the comparable store sales
calculation. Total retail square footage, including licensed stores,
increased by approximately 3.0 percent from last year's second quarter, with
Save-A-Lot's total square footage increasing by approximately 3.4 percent.
Reported retail operating earnings for the second quarter were $39.0
million compared to $105.3 million in last year's second quarter. Fiscal 2006
second quarter results include charges of approximately $57 million pretax
related to the plan to sell 20 Pittsburgh stores and approximately $5 million
pretax related to losses incurred from Hurricane Katrina for property damage,
primarily at Save-A-Lot locations in Louisiana. Reported operating earnings as
a percent of sales were 1.6 percent compared to 4.3 percent in last year's
second quarter, primarily reflecting the impact of the charges related to the
plan to sell 20 Pittsburgh stores and Hurricane Katrina. Also impacting
results were higher expenses and soft sales. Exclusive of these charges,
retail operating earnings as a percent of sales were 4.1 percent, 10 basis
points higher than the first quarter run rate of 4.0 percent.
New store activity since last year's second quarter, including licensed
stores, resulted in 79 new stores, opened and acquired, and 39 store closings
for a total of 40 net new store openings. During the last 12 months, new store
openings include 69 extreme value stores, and 10 regional banner stores. Store
closings for the last 12 months include 36 extreme value stores and 3 regional
banner stores. As of September 10, 2005, Save-A-Lot, including licensed
stores, operated 1,285 stores, of which 489 stores were combination stores
compared to 384 combination stores at the end of last year's second quarter.
For the first 28 weeks of fiscal 2006, SUPERVALU's retail segment reported
net sales of $5.6 billion, flat with last year and operating earnings of
$166.5 million, compared to $234.1 million last year. Fiscal 2006 operating
earnings include pretax charges of approximately $62 million related to the
plan to sell 20 Pittsburgh stores and losses incurred from the impact of
Hurricane Katrina.
Supply Chain Services Segment -- Second quarter net sales for supply chain
services were $2.1 billion, an increase of 2.8 percent from last year's second
quarter. The sales increase primarily reflects the recently acquired third-
party logistics service business and new business growth that offset customer
attrition.
Reported supply chain services operating earnings for the second quarter
were $47.7 million compared to $52.7 million in last year's second quarter.
Reported operating earnings as a percent of sales were 2.3 percent compared to
2.6 percent in last year's second quarter, primarily reflecting approximately
$10 million pretax of start-up costs associated with technology investments
and new produce initiatives. Excluding these start-up costs, operating
earnings as a percent of sales was 2.7 percent, up 10 basis points from last
year's record second quarter margin of 2.6 percent, primarily reflecting the
higher margin third-party logistics service business.
For the first 28 weeks of fiscal 2006, SUPERVALU's supply chain services
segment reported net sales of $4.9 billion, compared to $4.8 billion last year
and operating earnings of $119.1 million, compared to $115.6 million last
year.
Outlook
SUPERVALU's fiscal 2006 outlook includes business assumptions, such as:
* Consumer spending will continue to be pressured by higher fuel prices
and modest food inflation;
* Comparable store sales, when adjusted for planned in-market store
expansion, are projected to be flat for the remainder of the year;
* Store development plans, including licensee stores, are projected to be
approximately 65 to 75 extreme value stores and approximately 10 to 12
new regional banner stores. Regional banner major and minor remodels are
estimated at approximately 40 stores. Total store closings for the year
are projected to be approximately 52 stores, primarily Save-A-Lot stores
as well as the stores associated with the plan to sell 20 Pittsburgh
stores;
* Sales attrition in the traditional food distribution business will
approximate the historical range of two to four percent for the
remainder of the year when excluding the cycling of a large customer
transition to another supplier in fiscal 2005;
* Total capital spending is projected to be approximately $450 to $475
million, including approximately $50 million in capital leases, a
reduction from earlier guidance as new store spending will shift to
fiscal 2007;
* The fiscal 2006 effective tax rate is estimated to be 37 percent;
* Zero Zone, a refrigeration case and system manufacturer, will be
divested in fiscal 2006 as it is non-core to the company's food retail
and supply chain service businesses. Zero Zone was acquired February 7,
2005, in conjunction with the company's acquisition of Total Logistics,
Inc.; and
* Additional costs associated with the plan to sell 20 Pittsburgh stores
in the second half of fiscal 2006 will be approximately $0.05 per
diluted share.
SUPERVALU's fiscal 2006 outlook for basic earnings per share is a range of
$1.97 to $2.07 and a diluted earnings per share range of $1.88 to $1.98. Both
the basic and diluted earnings per share ranges include charges of $0.41 per
share related to the plan to sell 20 Pittsburgh stores, start-up costs related
to growth initiatives and the losses incurred from Hurricane Katrina. Fiscal
2005 diluted earnings per share was $2.71 which includes a $0.47 per diluted
share gain on the sale of WinCo.
Noddle added, "We are confident that the many initiatives we have underway
will be strong contributors to our future progress. We remain committed to
achieving our new 18 percent long term return on invested capital goal."
Other Items
General corporate expense for the second quarter was $8.1 million compared
to $3.6 million last year reflecting a $7.6 million favorable litigation
settlement in the prior year. Net interest expense during the second quarter
was $24.0 million compared to $23.9 million last year.
Cash on hand at the end of the second quarter was $753 million, up from
$464 million at fiscal year end, reflecting cash flow from operations, timing
of capital spending projects and normal seasonal cash build. The effective
tax rate for the second quarter was 37 percent.
Capital spending during the quarter was $62.7 million, primarily funding
retail store expansion and store remodeling.
Total debt to capital was 38.9 percent at the end of the second quarter
compared to 40.1 percent at fiscal 2005 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 in the quarter were 145.9
million shares reflecting the 7.8 million shares under the company's
outstanding contingently convertible debentures. As of September 10, 2005,
SUPERVALU had 136.2 million shares outstanding.
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
http://www.supervalu.com. An archive of the call is accessible via telephone
by dialing (630) 652-3041 with passcode 12862212 and through the company's Web
site at http://www.supervalu.com. The conference call archive will be
available through October 31, 2005.
As of September 10, 2005 SUPERVALU's retail store network consists of
1,553 stores in 40 states, including 1,285 extreme value stores -- 286
corporate-owned Save-A-Lot stores, 861 licensed Save-A-Lot stores, and 138
Deals stores; 268 regional banner stores including Cub Foods, Shop 'n Save,
Shoppers Food & Pharmacy, bigg's, Farm Fresh, Scott's Foods and Hornbacher's
stores. SUPERVALU serves as primary supplier to approximately 2,250 stores and
SUPERVALU's own regional banner store network of 268 stores.
Celebrating its 135th year of fresh thinking, SUPERVALU INC., a Fortune
500 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 1,553 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 supply chain
network, the company provides distribution and related logistics support
services to 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 approximately 57,000
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 could cause results to differ materially from those anticipated by
such forward-looking statements, including the company's ability to dispose of
its Pittsburgh stores as planned, the impact of natural disasters on local and
regional markets, transportation systems and the company's customers, 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 supply chain services 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 and
fuel 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 supply chain services business and retail
businesses, and other factors discussed from time to time in reports filed by
the company with the Securities and Exchange Commission.
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)
Second Quarter (12 weeks) ended
---------------------------------
Sept. 10, 2005 Sept. 11, 2004
-------------- --------------
(unaudited)
Net sales
Retail Food $ 2,446,058 $ 2,435,174
% of total 53.7% 54.3%
Supply Chain Services 2,110,160 2,051,789
% of total 46.3% 45.7%
Total net sales $ 4,556,218 $ 4,486,963
100.0% 100.0%
Earnings
Retail Food operating earnings $ 39,001 $ 105,264
% of sales 1.6% 4.3%
Supply Chain Services operating
earnings 47,689 52,749
% of sales 2.3% 2.6%
Subtotal 86,690 158,013
% of sales 1.9% 3.5%
General corporate expense (8,080) (3,597)
Restructure and other charges (984) (5,861)
Total operating earnings 77,626 148,555
% of sales 1.7% 3.3%
Interest expense, net (24,018) (23,895)
Earnings before income taxes 53,608 124,660
Income tax expense (19,835) (46,124)
Net earnings $ 33,773 $ 78,536
NOTE 1:
Pretax LIFO expense $ 2,595 $ 3,844
NOTE 2:
Pretax depreciation and
amortization
Retail Food Segment $ 50,668 $ 47,433
Supply Chain Services Segment 21,971 22,449
General Corporate 346 95
Total Company $ 72,985 $ 69,977
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 (28 weeks) ended
---------------------------------
Sept. 10, 2005 Sept. 11, 2004
-------------- --------------
(unaudited)
Net sales
Retail Food $ 5,630,586 $ 5,565,370
% of total 53.5% 53.5%
Supply Chain Services 4,897,922 4,832,242
% of total 46.5% 46.5%
Total net sales $ 10,528,508 $ 10,397,612
100.0% 100.0%
Earnings
Retail Food operating earnings $ 166,541 $ 234,061
% of sales 3.0% 4.2%
Supply Chain Services operating
earnings 119,045 115,648
% of sales 2.4% 2.4%
Subtotal 285,586 349,709
% of sales 2.7% 3.4%
General corporate expense (25,133) (23,932)
Gain on sale of WinCo Foods, Inc. - 109,238
Restructure and other charges (1,170) (6,140)
Total operating earnings 259,283 428,875
% of sales 2.5% 4.1%
Interest expense, net (60,910) (66,187)
Earnings before income taxes 198,373 362,688
Income tax expense (73,398) (134,741)
Net earnings $ 124,975 $ 227,947
NOTE 1:
Pretax LIFO expense $ 4,254 $ 5,644
NOTE 2:
Pretax depreciation and
amortization
Retail Food Segment $ 114,756 $ 108,948
Supply Chain Services Segment 51,938 53,553
General Corporate 455 471
Total Company $ 167,149 $ 162,972
CONSOLIDATED STATEMENTS OF EARNINGS
SUPERVALU INC. and Subsidiaries
(In thousands, except per share data)
Second Quarter (12 weeks) ended
--------------------------------------------------------------
Sept. 10, % of Sept. 11, % of
2005 sales 2004 sales
------------- ------------- ------------- -------------
(unaudited)
Net sales $ 4,556,218 100.0% $ 4,486,963 100.0%
Costs and expenses:
Cost of sales 3,895,230 85.5% 3,831,825 85.4%
Selling and administrative
expenses 582,378 12.8% 500,722 11.2%
Restructure and other charges 984 0.0% 5,861 0.1%
Interest expense, net 24,018 0.5% 23,895 0.5%
Total costs and
expenses 4,502,610 98.8% 4,362,303 97.2%
Earnings before income taxes 53,608 1.2% 124,660 2.8%
Income tax expense 19,835 0.5% 46,124 1.0%
Net earnings $ 33,773 0.7% $ 78,536 1.8%
Net earnings per common share -
basic $ 0.25 $ 0.58
Net earnings per common share -
diluted $ 0.24 $ 0.55
Weighted average number of
common shares outstanding
Basic 136,125 135,230
Diluted 145,948 144,888
Dividends declared per common
share $ 0.1625 $ 0.1525
CONSOLIDATED STATEMENTS OF EARNINGS
SUPERVALU INC. and Subsidiaries
(In thousands, except per share data)
Year-to-date (28 weeks) ended
--------------------------------------------------------------
Sept. 10, % of Sept. 11, % of
2005 sales 2004 sales
------------- ------------- ------------- -------------
(unaudited)
Net sales $ 10,528,508 100.0% $ 10,397,612 100.0%
Costs and expenses:
Cost of sales 8,997,969 85.5% 8,897,437 85.6%
Selling and administrative
expenses 1,270,086 12.1% 1,174,398 11.3%
Gain on sale WinCo Foods,
Inc - 0.0% (109,238) 1.1%
Restructure and other
charges 1,170 0.0% 6,140 0.1%
Interest expense, net 60,910 0.5% 66,187 0.6%
Total costs and
expenses 10,330,135 98.1% 10,034,924 96.5%
Earnings before income taxes 198,373 1.9% 362,688 3.5%
Income tax expense 73,398 0.7% 134,741 1.3%
Net earnings $ 124,975 1.2% $ 227,947 2.2%
Net earnings per common share
- basic $ 0.92 $ 1.68
Net earnings per common share
- diluted $ 0.88 $ 1.60
Weighted average number of
common shares outstanding
Basic 135,924 135,238
Diluted 145,743 145,168
Dividends declared per common
share $ 0.3150 $ 0.2975
CONDENSED CONSOLIDATED BALANCE SHEETS
SUPERVALU INC. and Subsidiaries
(In thousands)
Second Quarter Fiscal
(unaudited) Year End
Sept. 10, February 26,
2005 2005
-------------- --------------
Assets
Current Assets
Cash and cash equivalents $ 753,456 $ 463,915
Receivables, net 470,086 464,249
Inventories, net 1,028,773 1,032,034
Other current assets 122,208 161,922
Total current assets 2,374,523 2,122,120
Property, plant and equipment, net 2,122,899 2,190,888
Goodwill & Other Long Term Assets 1,971,776 1,960,954
Total assets $ 6,469,198 $ 6,273,962
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 1,244,119 $ 1,106,860
Current debt and obligations
under capital leases 143,518 99,463
Other current liabilities 451,078 420,888
Total current
liabilities 1,838,715 1,627,211
Long-term debt and obligations under
capital leases 1,509,119 1,578,867
Other liabilities and deferred income
taxes 520,403 557,323
Total stockholders' equity 2,600,961 2,510,561
Total liabilities and stockholders'
equity $ 6,469,198 $ 6,273,962
CONTACT: Investors: Yolanda Scharton, +1-952-828-4540,
yolanda.scharton@supervalu.com, Media: Lynne High, +1-952-828-4515,
lynne.high@supervalu.com /
Web site: http://www.supervalu.com /