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TheStreet Open House

SUPERVALU Announces Second Quarter Fiscal 2013 Results

Stocks in this article: SVU

Independent Business

Second quarter Independent Business net sales were $1.87 billion compared to $1.85 billion last year, an increase of 1.1 percent, primarily due to higher sales to existing customers.

Independent Business operating earnings in the second quarter were $50 million, or 2.7 percent of net sales, compared to $56 million, or 3.1 percent of net sales last year. The decline in Independent Business operating earnings as a percent of net sales was primarily attributable to gross margin investment.

Cash flows

Year-to-date net cash flows from operating activities were $415 million compared to $580 million in the prior year. Year-to-date net cash flows used in investing activities were $307 million compared to $203 million last year, reflecting higher payments for capital expenditures. Year-to-date cash flows used in financing activities were $117 million compared to $334 million last year, reflecting a higher level of debt reduction in the prior year.

Outlook

The Company currently expects debt reduction for fiscal 2013 to be in the range of $400 to $450 million. Cash capital spending is projected to be in the range of $450 to $500 million, including expenditures for technology, maintenance of fleet and facilities, new Save-A-Lot stores, and approximately 40 store remodels.

Strategic Review Update

The Company’s previously announced review of strategic alternatives is proceeding. The Company has received a number of indications of interest and is in active dialogue with several parties. There can be no assurance that this process will result in any transaction or any change in the Company’s overall structure or its business model.

Conference Call

A conference call to review the second quarter results is scheduled for 9:00 a.m. central time today. The call will be webcast live at www.supervaluinvestors.com (click on microphone icon). A replay of the call will be archived at www.supervaluinvestors.com. To access the website replay go to the "Investors" link and click on "Presentations and Webcasts."

About SUPERVALU INC.

SUPERVALU INC. is one of the largest companies in the U.S. grocery channel with annual sales of approximately $35 billion. SUPERVALU serves customers across the United States through a network of approximately 4,400 stores composed of 1,099 traditional retail stores, including 797 in-store pharmacies; 1,341 Save-A-Lot stores, of which 943 are operated by licensee owners; and 1,950 independent stores serviced primarily by the Company's food distribution business. SUPERVALU has approximately 125,000 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, particularly those pertaining to SUPERVALU’s expectations, guidance, or future operating results, 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 competition, ability to execute initiatives, substantial indebtedness, impact of economic conditions, labor relations issues, escalating costs of providing employee benefits, regulatory matters, food and drug safety issues, self-insurance, legal and administrative proceedings, information technology, severe weather, natural disasters and adverse climate changes, the continuing review of goodwill and other intangible assets, accounting matters 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 or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

 
 
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
    Fiscal Quarter Ended     Fiscal Quarter Ended
September 8, 2012     September 10, 2011    
(In millions, except per share data)     (12 weeks)     % of net sales     (12 weeks)     % of net sales
 
Net sales $ 8,039 100.0 % $ 8,429 100.0 %
Cost of sales       6,319       78.6 %       6,556     77.8 %
Gross profit 1,720 21.4 % 1,873 22.2 %
 
Selling and administrative expenses 1,687 21.0 % 1,657 19.7 %
Intangible asset impairment charges       74       0.9 %       -     0.0 %
Operating earnings (loss) (41 ) (0.5 )% 216 2.6 %
 
Interest expense, net       141       1.7 %       120     1.4 %
Earnings (loss) before income taxes (182 ) (2.3 )% 96 1.1 %
Income tax provision (benefit)       (71 )     (0.9 )%       36     0.4 %
 
Net earnings (loss)     $ (111 )     (1.4 )%     $ 60     0.7 %
 
Net income (loss) per share
Basic $ (0.52 ) $ 0.28
Diluted $ (0.52 ) $ 0.28
Weighted average number of shares outstanding
Basic 212 212
Diluted 212 213
 
     
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
Fiscal Year-to-Date Ended     Fiscal Year-to-Date Ended
September 8, 2012     September 10, 2011  
(In millions, except per share data)     (28 weeks)     % of net sales     (28 weeks)     % of net sales
 
Net sales $ 18,629 100.0 % $ 19,542 100.0 %
Cost of sales       14,584       78.3 %       15,210     77.8 %
Gross profit 4,045 21.7 % 4,332 22.2 %
 
Selling and administrative expenses 3,803 20.4 % 3,836 19.6 %
Intangible asset impairment charges       74       0.4 %       -     0.0 %
Operating earnings (loss) 168 0.9 % 496 2.5 %
 
Interest expense, net       296       1.6 %       275     1.4 %
Earnings (loss) before income taxes (128 )

(0.7

)% 221 1.1 %
Income tax provision (benefit)       (58 )     (0.3 )%       87     0.4 %
 
Net earnings (loss)     $ (70 )     (0.4 )%     $ 134     0.7 %
 
Net income (loss) per share
Basic $ (0.33 ) $ 0.63
Diluted $ (0.33 ) $ 0.63
Weighted average number of shares outstanding
Basic 212 212
Diluted 212 213
 
 
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED SEGMENT FINANCIAL INFORMATION
(Unaudited)
 
    Fiscal Quarter Ended     Fiscal Quarter Ended
September 8, 2012 September 10, 2011
(In millions)     (12 weeks) (12 weeks)
 
Net sales
Retail Food (1) $ 5,196 $ 5,608
% of total 64.6 % 66.6 %
Save-A-Lot (1) 973 972
% of total 12.1 % 11.5 %
Independent Business 1,870 1,849
% of total       23.3 %       21.9 %
Total net sales 8,039 8,429
        100.0 %       100.0 %
 
Operating earnings (loss)
Retail Food (2) $ (83 ) $ 127
% of sales (1.6 )% 2.3 %
Save-A-Lot (3) 18 50
% of sales 1.9 % 5.1 %
Independent Business 50 56
% of sales 2.7 % 3.1 %
Corporate (4)       (26 )       (17 )
Total operating earnings (loss) (41 ) 216
% of sales (0.5 )% 2.6 %
Interest expense, net (5)       141         120  
Earnings (loss) before income taxes (182 ) 96
Income tax provision (benefit)       (71 )       36  
Net earnings (loss)     $ (111 )     $ 60  
 
 
LIFO charge
Retail Food $ 5 $ 17
Independent Business       1         2  
Total     $ 6       $ 19  
 
Depreciation and amortization
Retail Food $ 171 $ 172
Save-A-Lot 16 14
Independent Business       15         16  
Total     $ 202       $ 202  
 
(1) The Company's Save-A-Lot reportable segment was formerly aggregated with the Retail Food reportable segment.
 
(2) Retail Food operating loss for the second quarter ended September 8, 2012 includes $74 of intangible asset impairment charges, $38 of asset impairment charges, $39 of charges for previously announced store closures, and $4 of multi-employer pension withdrawal, offset in part by $13 in gain on sale of assets in conjunction with the announced store closures.
 
(3) Save-A-Lot operating earnings for the second quarter ended September 8, 2012 includes $16 of charges for previously announced store closures.
 
(4) Corporate operating loss for the second quarter ended September 8, 2012 includes $3 of severance.
 
(5) Interest expense for the second quarter ended September 8, 2012 includes $22 for the write-off of unamortized costs related to debt which was replaced as a result of the recent debt refinancing.
 
   
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED SEGMENT FINANCIAL INFORMATION
(Unaudited)
 
    Fiscal Year-to-Date Ended Fiscal Year-to-Date Ended
September 8, 2012 September 10, 2011
(In millions)     (28 weeks) (28 weeks)
 
Net sales
Retail Food (1) $ 12,021 $ 12,938
% of total 64.5 % 66.2 %
Save-A-Lot (1) 2,260 2,254
% of total 12.1 % 11.5 %
Independent Business 4,348 4,350
% of total       23.4 %       22.3 %
Total net sales 18,629 19,542
        100.0 %       100.0 %
 
Operating earnings (loss)
Retail Food (2) $ 16 $ 277
% of sales 0.1 % 2.1 %
Save-A-Lot (3) 77 119
% of sales 3.4 % 5.3 %
Independent Business 115 133
% of sales 2.6 % 3.1 %
Corporate (4)       (40 )       (33 )
Total operating earnings (loss) 168 496
% of sales 0.9 % 2.5 %
Interest expense, net (5)       296         275  
Earnings (loss) before income taxes (128 ) 221
Income tax provision (benefit)       (58 )       87  
Net earnings (loss)     $ (70 )     $ 134  
 
 
LIFO charge
Retail Food $ 11 $ 30
Independent Business       1         6  
Total     $ 12       $ 36  
 
Depreciation and amortization
Retail Food $ 406 $ 410
Save-A-Lot 37 33
Independent Business       35         35  
Total     $ 478       $ 478  
 
(1) The Company's Save-A-Lot reportable segment was formerly aggregated with the Retail Food reportable segment.
 
(2) Retail Food operating loss for the fiscal year-to-date ended September 8, 2012 includes $74 of intangible asset impairment charges, $38 of asset impairment charges, $39 of charges for previously announced store closures, and $4 of multi-employer pension withdrawal, offset in part by $13 in gain on sale of assets in conjunction with the announced store closures.
 
(3) Save-A-Lot operating earnings for the fiscal year-to-date ended September 8, 2012 includes $16 of charges for previously announced store closures.
 
(4) Corporate operating loss for the fiscal year-to-date ended September 8, 2012 includes $3 of severance.
 
(5) Interest expense for the fiscal year-to-date ended September 8, 2012 includes $22 for the write-off of unamortized costs related to debt which was replaced as a result of the recent debt refinancing.
 
 
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
       
(In millions)     September 8, 2012     February 25, 2012
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 148 $ 157
Receivables, net 752 730
Inventories 2,190 2,150
Other current assets       222         188
Total current assets 3,312 3,225
Property, plant and equipment, net 6,120 6,362
Goodwill 847 847
Intangible assets, net 713 809
Other assets       862         810
Total assets     $ 11,854       $ 12,053
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 2,546 $ 2,519
Current maturities of long-term debt and capital lease obligations 250 388
Other current liabilities       596         683
Total current liabilities 3,392 3,590
Long-term debt and capital lease obligations 6,064 5,868
Pension and other postretirement benefit obligations 1,036 1,126
Other long-term liabilities 1,389 1,448
Commitments and contingencies
Total stockholders' equity (deficit)       (27 )       21
Total liabilities and stockholders’ equity     $ 11,854       $ 12,053
 
   
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Fiscal Year-to-Date Ended     Fiscal Year-to-Date Ended
September 8, 2012 September 10, 2011
(In millions)     (28 weeks)     (28 weeks)
 
Cash flows from operating activities
Net earnings (loss) $ (70 ) $ 134
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Intangible asset impairment charges 74 -
Depreciation and amortization 478 478
LIFO charge 12 36
Asset impairment and other charges 136 9
Net gain on the sale of assets and exits of surplus leases (43 ) (12 )
Deferred income taxes (43 ) 70
Stock-based compensation 9 8
Net pension and other postretirement benefits cost 64 66
Contributions to pension and other postretirement benefit plans (93 ) (77 )
Other adjustments 20 11
Changes in operating assets and liabilities       (129 )       (143 )
Net cash provided by operating activities       415         580  
Cash flows from investing activities
Proceeds from sale of assets 39 63
Purchases of property, plant and equipment (344 ) (267 )
Other       (2 )       1  
Net cash used in investing activities       (307 )       (203 )
Cash flows from financing activities
Proceeds from issuance of debt 1,591 291
Payment of debt and capital lease obligations (1,609 ) (580 )
Dividends paid (37 ) (37 )
Other       (62 )       (8 )
Net cash used in financing activities       (117 )       (334 )
Net increase (decrease) in cash and cash equivalents (9 ) 43
Cash and cash equivalents at beginning of year       157         172  
Cash and cash equivalents at the end of period     $ 148       $ 215  
 
 
SUPERVALU INC. and Subsidiaries
SUPPLEMENTAL INFORMATION
(Unaudited)
 
The measures and items identified below should not be considered an alternative to any GAAP measure of performance or liquidity. Management believes the measures and items identified below are measures of performance and important measures of liquidity. The items below should be reviewed in conjunction with SUPERVALU Inc's financial results reported in accordance with GAAP.
 
TABLE: 1 SECOND QUARTER FISCAL 2013 RECONCILIATION OF NET LOSS TO ADJUSTED NET EARNINGS
           
Fiscal Quarter Ended September 8, 2012
(in millions, except per share data) Before Tax After Tax

Diluted Earnings Per Share

 
Net loss $ (182 ) $ (111 ) $ (0.52 )
Adjustments:
Intangible asset impairment charges 74 45 0.21
Store closure impairment charges, net of gain 42 25 0.12
Long-lived asset impairment charges 38 23 0.11
Unamortized financing cost charge 22 14 0.06
Labor buy-out and severance costs 7 4 0.02
     
Net earnings after adjustments $ 1   $ -   $ 0.00  
 
 
TABLE: 2 SECOND QUARTER FISCAL 2013 YEAR-TO-DATE RECONCILIATION OF NET LOSS TO ADJUSTED NET EARNINGS
     
Fiscal Year-to-Date Ended September 8, 2012
(in millions, except per share data) Before Tax After Tax

Diluted Earnings Per Share

 
Net loss $ (128 ) $ (70 ) $ (0.33 )
Adjustments:
Intangible asset impairment charges 74 45 0.21
Store closure impairment charges, net of gain 42 25 0.12
Long-lived asset impairment charges 38 23 0.11
Unamortized financing cost charge 22 14 0.06
Pension withdrawal and severance costs 7 4 0.02
     
Net earnings after adjustments $ 55   $ 41   $ 0.19  
 
 
TABLE: 3 RECONCILIATION OF NET EARNINGS (LOSS) TO ADJUSTED EBITDA FOR 52 WEEKS ENDED SEPTEMBER 8, 2012 AND SEPTEMBER 10, 2011
       
52 Weeks Ended
(in millions)

September 8, 2012

September 10, 2011

 
Net earnings (loss) $ (1,244 ) $ 27
Adjustments:
Goodwill and intangible asset impairment charges 1,506 270
Store closure and other impairment charges, net of gain (1) 64 36
Long-lived asset impairment charges 38 -
Labor buy-out, severance, and pension withdrawal 27 40
Depreciation and amortization 884 901
Interest expense (2) 508 519
Income tax provision (benefit) (133 ) 70
   
Adjusted EBITDA $ 1,650   $ 1,863
 
(1) Store closure and other impairment charges, net of gain includes a gain on the sale of assets in conjunction with the announced store closures of $13 for the 52 weeks ended September 8, 2012 and a gain on the sale of Total Logistics Control of $62 for the 52 weeks ended September 10, 2011.
 
(2) Interest expense for the 52 weeks ended September 8, 2012 is exclusive of the unamortized financing cost impairment charge, which is reported in Store closure and other impairment charges, net of gain above.




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