Edgar Filing: SUPERVALU INC

Prepared by R.R. Donnelley Financial -- Form 10-Q/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period (16 weeks) ended June 16, 2001.

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number 1-5418

SUPERVALU INC.

(Exact name of registrant as specified in its Charter)

DELAWARE		41-0617000
(State or other jurisdiction of		(I.R.S. Employer identification No.)
incorporation or organization)

11840 VALLEY VIEW ROAD,

EDEN PRAIRIE, MINNESOTA 55344

(Address of principal executive offices) (Zip Code)

(952) 828-4000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

The number of shares outstanding of each of the issuer’s classes of Common Stock as of July 20, 2001 is as follows:

Title of Each Class		Shares Outstanding
Common Shares		133,065,701

SUPERVALU is filing this Form 10-Q/A as a result of matters discussed in the “Notes to Consolidated Financial Statements— Restatement” to the unaudited condensed consolidated financial statements included in this Form 10-Q/A.

PART I—FINANCIAL INFORMATION

Item 1: Financial Statements

CONSOLIDATED STATEMENTS OF EARNINGS

SUPERVALU INC. and Subsidiaries

(In thousands, except per share data)

	First quarter (16 weeks) ended
	Restated June 16, 2001		% of sales		Restated June 17, 2000		% of sales
Net sales	$	6,931,568	100.00	%	$	6,953,393	100.00	%

Costs and expenses:
Cost of sales		6,164,652	88.94			6,209,325	89.30
Selling and administrative expenses		600,440	8.66			558,594	8.03
Amortization of goodwill		14,865	0.21			15,065	0.22
Interest
Interest expense		62,657	0.90			63,636	0.92
Interest income		6,430	0.09			6,021	0.09

Interest expense, net		56,227	0.81			57,615	0.83

Total costs and expenses		6,836,184	98.62			6,840,599	98.38


Earnings before income taxes		95,384	1.38			112,794	1.62

Provision for income taxes
Current		35,367				38,098
Deferred		3,049				7,320

Income tax expense		38,416	0.56			45,418	0.65

Net earnings	$	56,968	0.82	%	$	67,376	0.97	%


Net earnings per common share—diluted	$	0.43			$	0.51

Net earnings per common share—basic	$	0.43			$	0.51

Weighted average number of common shares outstanding
Diluted		132,576				133,026
Basic		132,493				131,987

Dividends declared per common share	$	0.1375			$	0.1350

All data subject to year-end audit.

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF NET SALES AND EARNINGS

SUPERVALU INC. and Subsidiaries

(In thousands)

	First Quarter (16 weeks) ended
	Restated June 16, 2001			Restated June 17, 2000
Net Sales

Retail food	$	2,820,199		$	2,698,508
% of total		40.7	%		38.8	%

Food distribution		4,111,369			4,254,885
% of total		59.3	%		61.2	%


Total net sales	$	6,931,568		$	6,953,393
		100.0	%		100.0	%


Earnings

Retail food	$	87,640		$	105,193
% of sales		3.1	%		3.9	%

Food distribution		75,787			74,909
% of sales		1.8	%		1.8	%


Subtotal		163,427			180,102
% of sales		2.4	%		2.6	%

General corporate expenses		(11,816	)		(9,693	)


Total operating earnings		151,611			170,409
% of sales		2.2	%		2.5	%

Interest income		6,430			6,021

Interest expense		(62,657	)		(63,636	)


Earnings before income taxes		95,384			112,794

Provision for income taxes		(38,416	)		(45,418	)


Net earnings	$	56,968		$	67,376

All data subject to year-end audit.

See notes to consolidated financial statements.

CONDENSED CONSOLIDATED BALANCE SHEETS

SUPERVALU INC. and Subsidiaries

(In thousands)

	Restated First Quarter June 16, 2001		Restated Fiscal Year End February 24, 2001
Assets

Current Assets
Cash and cash equivalents	$	40,071	$	10,396
Receivables, net		547,627		579,600
Inventories		1,276,866		1,336,556
Other current assets		142,469		148,296

Total current assets		2,007,033		2,074,848

Long-term notes receivable		167,223		161,388
Property, plant and equipment, net		2,146,732		2,232,794
Goodwill		1,561,917		1,576,780
Other assets		419,817		344,534

Total assets	$	6,302,722	$	6,390,344


Liabilities and Stockholders’ Equity

Current Liabilities
Notes payable	$	473,587	$	579,039
Accounts payable		1,391,711		1,396,011
Current debt and obligations under capital leases		57,781		54,668
Other current liabilities		256,625		304,970

Total current liabilities		2,179,704		2,334,688

Long-term debt and obligations under capital leases		2,012,362		2,008,474
Other liabilities and deferred income taxes		290,236		264,033
Total stockholders’ equity		1,820,420		1,783,149

Total liabilities and stockholders’ equity	$	6,302,722	$	6,390,344

All data subject to year-end audit.

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

SUPERVALU INC. and Subsidiaries

(In thousands, except per share data)

	Common Stock						Treasury Stock
	Shares	Amount		Capital in Excess of Par Value			Shares		Amount			Restated Retained Earnings			Accumulated Other Comprehensive Loss			Total
RESTATED BALANCES AT FEBRUARY 26, 2000	150,670	$	150,670	$	132,226		(16,008	)	$	(308,788	)	$	1,846,120		$	—		$	1,820,228
Restated net earnings	—		—		—		—			—			72,870			—			72,870
Sales of common stock Under option plans	—		—		(3,538	)	279			7,095			—			—			3,557
Cash dividends declared on common stock—$.5475 per share	—		—		—		—			—			(72,903	)		—			(72,903	)
Compensation under employee incentive plans	—		—		(196	)	366			8,271			—			—			8,075
Purchase of shares for treasury	—		—		—		(2,933	)		(48,678	)		—			—			(48,678	)


RESTATED BALANCES AT FEBRUARY 24, 2001	150,670	$	150,670	$	128,492		(18,296	)	$	(342,100	)	$	1,846,087			—		$	1,783,149

Restated net earnings	—		—		—		—			—			56,968			—			56,968
Sales of common stock Under option plans	—		—		(347	)	26			552			—			—			205
Cash dividends declared on common stock—$.1375 per share	—		—		—		—			—			(18,325	)		—			(18,325	)
Compensation under employee incentive plans	—		—		(1,842	)	435			7,554			—			—			5,712
Other comprehensive loss	—		—		—		—			—			—			(7,289	)		(7,289	)

RESTATED BALANCES AT JUNE 16, 2001	150,670	$	150,670	$	126,303		(17,835	)	$	(333,994	)	$	1,884,730		$	(7,289	)	$	1,820,420

All data subject to year-end audit

See notes to consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SUPERVALU INC. and Subsidiaries

(In thousands)

	Year-to-date (16 weeks ended)
	June 16, 2001			June 17, 2000
Net cash provided by operating activities	$	217,956		$	246,387


Cash flows from investing activities
Additions to long-term notes receivable		(16,799	)		(17,271	)
Proceeds received on long-term notes receivable		11,137			6,183
Proceeds from sale of assets		22,303			11,636
Purchase of property, plant and equipment		(67,416	)		(113,794	)
Other cash used in investing activities		(24,507	)		(44,412	)

Net cash used in investing activities		(75,282	)		(157,658	)


Cash flows from financing activities
Net increase in checks outstanding, net of deposits		30,947			4,250
Net (reduction) issuance of short-term notes payable		(105,452	)		92,286
Proceeds from issuance of long-term debt		10,000			—
Repayment of long-term debt		(5,576	)		(91,492	)
Dividends paid		(36,525	)		(36,095	)
Payment for purchase of treasury stock		—			(48,604	)
Other cash used in financing activities		(6,393	)		(8,213	)

Net cash used in financing activities		(112,999	)		(87,868	)


Net increase in cash and cash equivalents		29,675			861
Cash and cash equivalents at beginning of quarter/year		10,396			10,920


Cash and cash equivalents at the end of first quarter	$	40,071		$	11,781


Supplemental Information:
Pretax LIFO expense	$	(2,341	)	$	(641	)
Pretax depreciation and amortization	$	103,021		$	96,349

All data subject to year-end audit.

See notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounting Policies

The summary of significant accounting policies is included in the notes to consolidated financial statements set forth in the Annual Report on Form 10-K of SUPERVALU INC. (“SUPERVALU” or the “company”) for its fiscal year ended February 24, 2001 (“fiscal 2001”).

Financial Accounting Standard 133, “Accounting for Derivative Instruments and Hedging Activities,” became effective for the Company on February 25, 2001. Therefore, at that date, the company’s interest rate swap agreements were recorded on its balance sheet at fair value, resulting in recognition of a liability of $23.5 million, a non-current asset of $10.8 million, a debit to other comprehensive loss of $7.3 million, and a deferred tax liability of $4.7 million. There was no material impact on pre-tax earnings for first quarter 2002. As of June 16, 2001, the swaps were revalued, resulting in a decrease of $0.7 million to the liability. On July 6, 2001, the swaps were terminated which had no material cash impact.

Statement of Registrant

The data presented herein is unaudited but, in the opinion of management, includes all adjustments necessary for a fair presentation of the condensed consolidated financial position of the company and its subsidiaries at June 16, 2001 and June 17, 2000, and the results of the company’s operations and condensed cash flows for the periods then ended. These interim results are not necessarily indicative of the results of the fiscal years as a whole.

Restatement

In June 2002, the Company announced that it had identified an understatement of cost of goods sold resulting from inventory misstatements by a former employee in its pharmacy division. The effect of the correction of the misstatements was to reduce previously reported net earnings by $2.4 million and $2.6 million and net earnings per share—diluted by $0.02 and $0.02 for the first quarter of fiscal 2002 and 2001, respectively. Impacted financial statement line items were cost of sales, income tax expense, inventory, accounts receivable, accounts payable, and other current liabilities. There was no impact on net cash from operating activities. The condensed consolidated financial statements as of February 24, 2001 and June 16, 2001 and for the quarters ended June 16, 2001 and June 17, 2000 and notes thereto included in this Form 10-Q/A have been restated to include the effects of the corrections of these misstatements, as follows:

Consolidated Statements of Earnings	As previously reported Quarter ended June 16, 2001		Restated Quarter ended June 16, 2001		As previously reported Quarter ended June 17, 2000		Restated Quarter ended June 17, 2000
	(in millions, except per share amounts)
Net sales	$	6,931.6	$	6,931.6	$	6,953.4	$	6,953.4
Cost of sales		6,160.7		6,164.7		6,205.1		6,209.3
Earnings before income taxes		99.4		95.4		117.0		112.8
Income tax expense		40.0		38.4		47.0		45.4
Net earnings		59.4		57.0		70.0		67.4
Net earnings per common share—diluted	$	0.45	$	0.43	$	0.53	$	0.51
Net earnings per common share—basic	$	0.45	$	0.43	$	0.53	$	0.51

Condensed Consolidated Balance Sheets	As previously reported June 16, 2001		Restated June 16, 2001		As previously reported February 24, 2001		Restated February 24, 2001
	(in millions)
Total current assets	$	2,014.1	$	2,007.0	$	2,091.7	$	2,074.8
Total assets		6,309.7		6,302.7		6,407.2		6,390.3
Total current liabilities		2,173.9		2,179.7		2,341.2		2,334.7
Total stockholders’ equity		1,833.2		1,820.4		1,793.5		1,783.1
Total liabilities and stockholders’ equity		6,309.7		6,302.7		6,407.2		6,390.3

Restructure and Other Charges

In the fourth quarter of fiscal 2001, the company completed a company-wide asset review to identify assets that do not meet return objectives, provide long-term strategic opportunities, or justify additional capital investment. As a result, the company recorded restructure and other charges of $171.3 million include $89.7 million of asset impairment charges, $52.1 million for lease subsidies, lease cancellation fees, future payments on exited leased facilities and guarantee obligations and $39.8 million for severance and employee related costs, offset by a reduction in the fiscal 2000 reserve of $10.3 million for lease subsidies and future payments on exited leased facilities. These actions include a net reduction of approximately 4,500 employees throughout the organization. Management expects the majority of these actions to be completed by the end of fiscal 2002.

Details of the fiscal 2001 restructure activity for fiscal 2002 follow:

	Balance February 24, 2001		Fiscal 2002 Activity		Balance June 16, 2001
	(In thousands, except for employees)
Consolidation of distribution centers	$	41,499	$	1,325	$	40,174
Exit of non-core retail markets		33,735		42		33,693
Disposal of non-core assets and other administrative reductions		16,619		238		16,381

Total restructure and other charges	$	91,853	$	1,605	$	90,248

Employees		4,500		200		4,300

The reserves at the end of first quarter fiscal 2002 for fiscal 2001 restructure charges were $90.2 million, including $51.9 million for lease subsidies, lease terminations and future payments on exited leased facilities and $38.3 million for severance and employee related costs.

In fiscal 2000, the company recorded pre-tax restructure and other charges of $103.6 million as a result of an extensive review to reduce costs and enhance efficiencies. This amount was then reduced by $10.3 million in fiscal 2001, primarily for a change in estimate for the closure of a remaining facility, which will occur in the second quarter of fiscal 2002. The restructure charges include costs for facility consolidation, non-core store disposal, and rationalization of redundant and certain decentralized administrative functions.

Details of the fiscal 2000 restructure activity for fiscal 2002 follow:

	Balance February 24, 2001		Fiscal 2002 Activity		Balance June 16, 2001
	(In thousands, except for employees)
Facility consolidation	$	11,472	$	220	$	11,252
Non-core store disposal		4,404		826		3,578
Infrastructure realignment		1,980		196		1,784

Total restructure and other charges	$	17,856	$	1,242	$	16,614

Employees		463		6		457

The reserves at the end of first quarter fiscal 2002 for fiscal 2000 restructure charges were $16.6 million, including $9.5 million for lease subsidies, lease terminations and future payments on exited leased facilities and $7.1 million for severance and employee related costs.

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Management’s Discussion and Analysis of Financial Condition and Results of Operations presented below reflects the impacts of restatements to our previously reported consolidated financial statements as of February 24, 2001 and June 16, 2001 and for the first quarter fiscal 2002 and the first quarter fiscal 2001.

In June 2002, the Company announced that it had identified an understatement of cost of goods sold resulting from inventory misstatements by a former employee in its pharmacy division. The effect of the correction of the misstatements was to reduce previously reported net earnings by $2.4 million and $2.6 million and net earnings per share—diluted by $0.02 and $0.02 for the first quarter of fiscal 2002 and 2001, respectively. The condensed consolidated financial statements as of February 24, 2001 and June 16, 2001 and for the quarters ended June 16, 2001 and June 17, 2000 and notes thereto included in this Form 10-Q/A have been restated to include the effects of the corrections of these misstatements.

Results of Operations

For the first quarter of fiscal 2002, the company achieved sales of $6.9 billion, net earnings of $57.0 million and diluted earnings per share of $0.43. Last year, sales were $7.0 billion, net earnings were $67.4 million and diluted earnings per share were $0.51.

Net sales

Net sales decreased 0.3 percent compared to last year. Retail food sales increased 4.5 percent and food distribution sales decreased 3.4 percent.

Retail food sales increased over last year primarily due to 112 new store openings including 95 new limited assortment stores over the past twelve months. Same-store sales were approximately a negative 1.5 percent due to the effect of competitive activities in certain markets and cannibalization. Food distribution sales decreased from last year due to lower sales volumes from Kmart and the impact of restructuring activity, offset in part by new business. The supply agreement with Kmart terminated June 30, 2001.

Gross profit

Gross profit as a percentage of net sales was 11.1 percent compared to 10.7 percent last year. The increase was primarily due to distribution expense reductions in the logistics operations.

Selling and administrative expenses

Selling and administrative expenses, including goodwill amortization, as a percentage of sales were 8.9 percent for the current year compared to 8.3 percent last year. The increase in selling and administrative expenses as a percentage of sales was primarily due to the growing proportion of the company’s retail business, which operates at a higher selling and administrative expense as a percentage of net sales than the food distribution business.

Operating earnings

The company’s pretax operating earnings (earnings before interest and taxes) decreased to $151.6 million compared to $170.4 million last year, a 11.0 percent decrease. Operating earnings before depreciation and amortization decreased to $254.6 million compared with $266.8 million last year, a 4.6 percent decrease. Retail food operating earnings decreased 16.7 percent to $87.6 million, or 3.1 percent of sales, from last year’s $105.2 million, or 3.9 percent of sales, as sales gains were fully offset by higher promotional and selling and administrative expenses in certain markets. Retail food operating earnings before depreciation and amortization decreased 9.5 percent to $138.9 million, or 4.9 percent of sales, from last year’s $153.5 million, or 5.7 percent of sales. Food distribution operating earnings increased 1.2 percent to $75.8 million, or 1.8 percent of sales, from last year’s $74.9 million, or 1.8 percent of sales, due to cost reductions in distribution. Food distribution operating earnings before depreciation and amortization increased 3.8 percent to $126.7 million, or 3.1 percent of sales, from last year’s $122.0 million, or 2.9 percent of sales.

Interest expense

Interest expense decreased to $62.7 million compared with $63.6 million last year due to lower overall borrowing levels and lower interest rates since last year. Interest income increased to $6.4 million compared to $6.0 million last year.

Income taxes

The effective tax rate was 40.3 percent in the first quarter this year, comparable to last year.

Net earnings

Net earnings decreased 15.4 percent to $57.0 million or $0.43 per share -diluted compared with last year’s net earnings of $67.4 million or $0.51 per share—diluted. Cash earnings decreased to $0.54 per share—diluted compared with last year’s $0.62 per share—diluted. Weighted average shares—diluted decreased to 132.6 million compared with last year’s 133.0 million.

Liquidity and Capital Resources

Internally generated funds from operations continued to be the major source of liquidity and capital growth. Cash provided from operations was $218.0 million, compared with $246.4 million last year. The decrease is primarily due to a decrease in net earnings of $10.4 million and a decrease in net inventory of $59.3 million compared to $86.9 million last year. Net cash used in investing activities was $75.3 million, compared with $157.7 million last year. The decrease is primarily due to lower property, plant & equipment purchases. Net cash used in financing activities was $113.0 million, compared with $87.9 million last year. The increase in cash used is primarily due to the reduction of short-term notes payable, partially offset by the purchase of treasury stock during the first quarter of last year.

Management expects that the company will continue to replenish operating assets and reduce aggregate debt with internally generated funds. The company has adequate short-term and long-term financing capabilities to fund its capital expenditures plan and acquisitions as the opportunities arise. SUPERVALU will continue to use short-term and long-term debt as a supplement to internally generated funds to finance its activities. Maturities of debt issued will depend on management’s views with respect to the relative attractiveness of interest rates at the time of issuance.

The company has entered into revolving credit agreements with various financial institutions, which are available for general corporate purposes, to support the company’s commercial paper program and for the issuance of letters of credit. A $400 million revolving credit agreement, with rates tied to LIBOR, is in place and expires in October 2002. As of June 16, 2001, the company had $170 million of borrowings and $23.2 million of letters of credit outstanding under this agreement. In August 1999, the company executed a 364-day, $300 million revolving credit agreement with rates tied to LIBOR. As of June 16, 2001, the company had $300 million of borrowings outstanding under this agreement. This agreement was amended and restated in August 2000 to change the maturity date to August 2001. The company expects to replace this agreement prior to its expiration date. The company has $29.0 million reinvested in marketable securities.

Company-Wide Asset Review

The restructure and other charges of $171.3 million include $89.7 million of asset impairment charges, $52.1 million for lease subsidies, lease cancellation fees, future payments on exited leased facilities and guarantee obligations and $39.8 million for severance and employee related costs, offset by a reduction in the fiscal 2000 reserve of $10.3 million for lease subsidies and future payments on exited leased facilities. These actions include a net reduction of approximately 4,500 employees throughout the organization. Management expects the majority of these actions to be completed by the end of fiscal 2002.

During first quarter fiscal 2002, the company announced the closure of six distribution centers and the exit of two non-core retail markets relating to the fiscal 2001 restructure charges. The reserves at the end of first quarter fiscal 2002 for fiscal 2001 restructure charges were $90.2 million, including $51.9 million for lease subsidies, lease terminations and future payments on exited leased facilities and $38.3 million for severance and employee related costs.

During the fourth quarter of fiscal 2001, the company reduced the fiscal 2000 restructure reserve by $10.3 million primarily for a change in estimate for the closure of a remaining facility, which will occur in the second quarter of fiscal 2002. The reserves at the end of first quarter fiscal 2002 for fiscal 2000 restructure charges were $16.6 million, including $9.5 million for lease subsidies, lease terminations and future payments on exited leased facilities and $7.1 million for severance and employee related costs.

New accounting standards

In June 2001 the Financial Accounting Standards Board approved Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 requires companies to cease amortizing goodwill that existed at June 30, 2001. For the Company, this amortization of existing goodwill will cease on February 23, 2002. Any goodwill resulting from an acquisition completed after June 30, 2001 will not be amortized. SFAS No 142 also establishes a new method of testing goodwill for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value. The adoption of SFAS No. 142 will result in the discontinuation of amortization of goodwill and goodwill will be tested for impairment under the new standard beginning in the first quarter of fiscal 2003.

Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995

The information in this Quarterly Report includes forward-looking statements. The company’s businesses are subject to certain risks and uncertainties that could cause actual results to differ materially from those discussed in such forward looking statements. These include, but are not limited to, the impact of changing economic or business conditions, 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 businesses, the ability to control food distribution costs, the ability of the company to grow through acquisition and assimilate acquired entities, the availability of favorable credit and trade terms, food price changes and other risk factors inherent in the food wholesaling and retail businesses, all of which are set forth in further detail in Exhibit 99(i) to this report. Any forward-looking statement speaks only as of the date on which such statement is made, and the company undertakes no obligation to update such statement to reflect events or circumstances arising after such date. Other risks or uncertainties may be detailed from time to time in the company’s future Securities and Exchange Commission filings.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes in market risk for the company in the period covered by this report.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business of the Registrant.

Item 2. Changes in Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

None

Item 6. Restated Exhibits filed with this amended 10-Q/A and Reports on Form 8-K.

(a)

Exhibits:

(11) Computation of Earnings Per Common Share.

(b)

Reports on Form 8-K:

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SUPERVALU INC. (Registrant)

Dated: July 30, 2002	By:	/s/ Pamela K. Knous
		Pamela K. Knous Executive Vice President, Chief Financial Officer (Authorized officer of Registrant)

EXHIBIT INDEX

Exhibit

(11)		Computation of Earnings Per Common Share