- Net earnings from continuing
operations of $47 million; Adjusted EBITDA of $222 million for Q1
fiscal 2017
- Net earnings per share from
continuing operations of $0.17; adjusted earnings per share of
$0.19
- Outstanding debt reduced by
approximately $40 million in the quarter
SUPERVALU INC. (NYSE: SVU) today reported first quarter fiscal
2017 consolidated net sales of $5.20 billion and net earnings from
continuing operations of $47 million, or $0.17 per diluted share,
which included $6 million in net after-tax charges and costs
related to a debt refinancing and debt prepayment, the potential
separation of Save-A-Lot, and a sales and use tax refund. When
adjusted for these items, first quarter fiscal 2017 net earnings
from continuing operations were $53 million, or $0.19 per diluted
share.
Net earnings from continuing operations for last year’s first
quarter were $63 million, or $0.23 per diluted share, which
included $2 million in after-tax costs related to the potential
separation of Save-A-Lot. When adjusted for this item, first
quarter fiscal 2016 net earnings from continuing operations were
$65 million, or $0.23 per diluted share. [See tables 1-4 for a
reconciliation of GAAP and non-GAAP (adjusted) results appearing in
this release.]
“We’re making great progress in growing our business as
evidenced by our recent business announcements regarding our
agreement with Marsh Supermarkets and our agreement to acquire 22
Food Lion grocery stores,” said President and CEO Mark Gross.
“We’re also seeing great success in growing our wholesale produce
business, and I believe we’ll sell more produce to our wholesale
customers this fiscal year than our wholesale business has sold
before.”
“It takes time to bring on new business and our first quarter
results reflect the sales run rate we experienced coming out of
last year’s fourth quarter,” continued Gross. “We’ve been replacing
lost business, and I am confident in our ability to attract new
customers and grow our business.”
First Quarter Results - Continuing Operations
First quarter net sales were $5.20 billion compared to $5.41
billion last year, a decrease of $211 million or 3.9 percent. Total
net sales within the Wholesale segment decreased 7.6 percent.
Retail identical store sales were negative 4.5 percent. Save-A-Lot
network identical store sales were negative 1.4 percent. Identical
store sales for corporate stores within the Save-A-Lot network were
negative 1.0 percent. Fees earned under transition services
agreements (“TSAs”) in the first quarter were $58 million compared
to $64 million last year.
Gross profit for the first quarter was $779 million, or 15.0
percent of net sales. Last year’s first quarter gross profit was
$810 million, or 15.0 percent of net sales. The gross profit rate
is flat to last year and includes the impact of lower product
margin rates from investments to lower prices to customers,
including higher promotional activities, offset by a favorable
business segment sales mix from new corporate Save-A-Lot
stores.
Selling and administrative expenses in the first quarter were
$646 million and included net costs of $1 million, comprised of
costs related to the potential separation of Save-A-Lot, offset by
a sales and use tax refund. When adjusted for these items, selling
and administrative expenses were $645 million, or 12.4 percent of
net sales. Selling and administrative expenses in last year’s first
quarter were $652 million and included $3 million of costs
related to the potential separation of Save-A-Lot. When adjusted
for this item, first quarter fiscal 2016 selling and administrative
expenses were $649 million, or 12.0 percent of net sales. The
increase in the selling and administrative expense rate when
compared to last year is primarily due to the deleveraging impact
of lower sales and new corporate Save-A-Lot stores.
Net interest expense for the first quarter was $60 million and
included $7 million of debt refinancing and debt prepayment charges
and costs. When adjusted for these charges and costs, net interest
expense was $53 million. Last year's first quarter interest expense
was $59 million. The decrease in interest expense was driven by
lower average debt balances.
Income tax expense was $27 million, or 36.6 percent of pre-tax
earnings, for the first quarter, compared to an income tax expense
of $38 million, or 36.9 percent of pre-tax earnings in last year’s
first quarter.
Wholesale
First quarter Wholesale net sales were $2.28 billion, compared
to $2.46 billion last year, a decrease of 7.6 percent. The net
sales decrease is primarily due to lost stores and lower sales to
existing customers, partially offset by increased sales to new
stores operated by existing customers and new customers.
Wholesale operating earnings in the first quarter were $64
million, or 2.8 percent of net sales. Last year’s Wholesale
operating earnings in the first quarter were $77 million, or 3.1
percent of net sales. The decrease in Wholesale operating earnings
was driven by lower sales and higher employee-related costs.
Save-A-Lot
First quarter Save-A-Lot net sales were $1.43 billion, compared
to $1.41 billion last year, an increase of 1.7 percent. The net
sales increase reflects new corporate and licensed stores,
partially offset by network identical store sales of negative 1.4
percent.
Save-A-Lot operating earnings in the first quarter were $39
million, or 2.7 percent of net sales. Last year’s Save-A-Lot
operating earnings in the first quarter were $51 million, or 3.6
percent of net sales. The decrease in Save-A-Lot operating earnings
was driven by higher employee-related costs from new corporate
stores, higher occupancy costs and higher depreciation expense
driven by new corporate stores, and higher shrink.
Retail
First quarter Retail net sales were $1.43 billion, compared to
$1.47 billion last year, a decrease of 2.9 percent. The net sales
decrease reflects identical store sales of negative 4.5 percent,
partially offset by sales from new stores.
Retail operating earnings in the first quarter were $8 million,
or 0.6 percent of net sales. Last year’s Retail operating earnings
were $33 million, or 2.2 percent of net sales. The decrease in
Retail operating earnings was driven by lower sales and lower
product margin rates from investments to lower prices to customers,
including higher promotional activities.
Corporate
First quarter fees earned under the TSAs were $58 million
compared to $64 million last year.
Net Corporate operating earnings in the first quarter were $22
million and included $3 million of costs related to the potential
separation of Save-A-Lot and a $2 million sales and use tax refund.
When adjusted for these items, net Corporate operating earnings
were $23 million. Last year’s first quarter net Corporate operating
loss was $3 million and included $3 million of costs related to the
potential separation of Save-A-Lot. When adjusted for this item,
last year's net Corporate operating earnings were $0. The
improvement in net Corporate operating earnings was primarily
driven by lower pension expense and lower employee-related
costs.
Cash Flows - Continuing Operations
First quarter net cash flows provided by operating activities of
continuing operations were $121 million compared to $111 million
last year, reflecting lower benefit plan contributions. First
quarter net cash flows used in investing activities of continuing
operations were $61 million compared to $70 million last year.
First quarter net cash flows used in financing activities of
continuing operations were $58 million compared to $19 million last
year, reflecting higher payments on debt obligations.
Conference Call
A conference call to review the first 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 grocery wholesalers and
retailers in the U.S. with annual sales of approximately $18
billion. SUPERVALU serves customers across the United States
through a network of 3,342 stores composed of 1,773 stores
operated by wholesale customers serviced primarily by the Company’s
food distribution business; 1,368 Save-A-Lot stores, of which 896
are operated by licensee owners; and 201 traditional retail grocery
stores (store counts as of June 18, 2016). Headquartered in
Minnesota, SUPERVALU has approximately 40,000 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," "intends," 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 operations and initiatives, ability
to realize benefits from acquisitions and dispositions, impact of
exploration of possible separation of Save-A-Lot, reliance on
wholesale customers and licensees ability to grow or maintain
identical store sales, ability to maintain or increase margins,
substantial indebtedness, labor relations issues, escalating costs
of providing employee benefits, relationships with Albertson’s LLC,
New Albertson’s Inc., and Haggen, intrusions to and disruption of
information technology systems, impact of economic conditions,
commodity pricing, governmental regulation, food and drug safety
issues, legal proceedings, pharmacy reimbursement and health care
financing, intellectual property protection, severe weather,
natural disasters and adverse climate changes, disruption to supply
chain and distribution network, changes in military business,
adequacy of insurance, volatility in fuel and energy costs, asset
impairment charges, fluctuations in our common stock price 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
OPERATIONS
(Unaudited)
(In millions, except percent and per
share data)
First Quarter Ended June 18, June
20, 2016 2015 (16 weeks) (16 weeks)
Net sales $ 5,196 100.0 % $ 5,407 100.0 %
Cost of sales 4,417 85.0 4,597 85.0
Gross profit 779 15.0 810 15.0
Selling and
administrative expenses(1) 646 12.4 652
12.1
Operating earnings 133 2.6 158 2.9
Interest expense, net(1) 60 1.2 59 1.1
Equity in
earnings of unconsolidated affiliates (1 ) — (2 ) —
Earnings from continuing operations before income
taxes(1) 74 1.4 101 1.9
Income tax provision 27
0.5 38 0.7
Net earnings from
continuing operations(1) 47 0.9 63 1.2
Income from
discontinued operations, net of tax — — 1
—
Net earnings including noncontrolling interests 47
0.9 64 1.2
Less net earnings attributable to noncontrolling
interests (1 ) — (3 ) (0.1 )
Net earnings
attributable to SUPERVALU INC. $ 46 0.9 % $ 61
1.1 %
Basic net earnings per share attributable to
SUPERVALU INC.: Continuing operations $ 0.17 $ 0.23
Discontinued operations $ — $ — Basic net earnings per share $ 0.17
$ 0.23
Diluted net earnings per share attributable to SUPERVALU
INC.: Continuing operations(1) $ 0.17 $ 0.23 Discontinued
operations $ — $ — Diluted net earnings per share $ 0.17 $ 0.23
Weighted average number of shares outstanding: Basic 264 262
Diluted 267 268 (1) Results from continuing
operations for the first quarter ended June 18, 2016 include net
charges and costs of $8 before tax ($6 after tax, or $0.02 per
diluted share), comprised of costs related to the potential
Save-A-Lot separation of $3 before tax ($3 after tax, or $0.01 per
diluted share), offset by a sales and use tax refund of $2 before
tax ($1 after tax, or $0.00 per diluted share) within Selling and
administrative expenses, and unamortized financing cost charges of
$5 before tax ($3 after tax, or $0.01 per diluted share) and debt
refinancing costs of $2 before tax ($1 after tax, or $0.00 per
diluted share) within Interest expense, net. Results from
continuing operations for the first quarter ended June 20, 2015
included costs related to the potential Save-A-Lot separation of $3
before tax ($2 after tax, or $0.00 per diluted share) within
Selling and administrative expenses.
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED SEGMENT
FINANCIAL INFORMATION
(Unaudited)
(In millions, except percent
data)
First Quarter Ended June 18, June
20, 2016 2015 (16 weeks) (16 weeks)
Net sales Wholesale $ 2,275 $ 2,462 % of total 43.8 % 45.6 %
Save-A-Lot 1,432 1,408 % of total 27.6 % 26.0 % Retail 1,431 1,473
% of total 27.5 % 27.2 % Corporate 58 64 % of total 1.1 % 1.2 %
Total net sales $ 5,196 $ 5,407 100.0 % 100.0 %
Operating
earnings Wholesale $ 64 $ 77 % of Wholesale sales 2.8 % 3.1 %
Save-A-Lot 39 51 % of Save-A-Lot sales 2.7 % 3.6 % Retail 8 33 % of
Retail sales 0.6 % 2.2 % Corporate(1) 22 (3 ) Total
operating earnings 133 158 % of total net sales 2.6 % 2.9 %
Interest expense, net(2) 60 59
Equity in earnings
of unconsolidated affiliates (1 ) (2 )
Earnings from
continuing operations before income taxes 74 101
Income tax
provision 27 38
Net earnings from continuing
operations 47 63
Income from discontinued operations, net of
tax — 1
Net earnings including noncontrolling
interests 47 64
Less net earnings attributable to
noncontrolling interests (1 ) (3 )
Net earnings attributable
to SUPERVALU INC. $ 46 $ 61
LIFO
charge Wholesale $ 1 $ 1 Retail 1 2 Total LIFO
charge $ 2 $ 3
Depreciation and amortization
Wholesale $ 16 $ 14 Save-A-Lot 23 21 Retail 46 47 Corporate 1
1 Total depreciation and amortization $ 86 $
83 (1) Corporate operating earnings for the
first quarter ended June 18, 2016 include costs related to the
potential Save-A-Lot separation of $3, offset by a sales and use
tax refund of $2. Corporate operating loss for the first quarter
ended June 20, 2015 included costs related to the potential
Save-A-Lot separation of $3. (2) Interest expense, net for the
first quarter ended June 18, 2016 includes unamortized financing
cost charges of $5 and debt refinancing costs of $2.
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In millions, except par value
data)
June 18,
February 27,
2016
2016
(Unaudited) ASSETS Current assets Cash and
cash equivalents $ 59 $ 57 Receivables, net 466 451 Inventories,
net 1,078 1,036 Other current assets 88 91
Total
current assets 1,691 1,635
Property, plant and
equipment, net 1,458 1,481
Goodwill 868 867
Intangible assets, net 52 55
Deferred tax assets 202
228
Other assets 102 104
Total assets $
4,373 $ 4,370
LIABILITIES AND STOCKHOLDERS’
DEFICIT Current liabilities Accounts payable $ 1,136 $
1,118 Accrued vacation, compensation and benefits 182 182 Current
maturities of long-term debt and capital lease obligations 25 124
Other current liabilities 145 148
Total current
liabilities 1,488 1,572
Long-term debt
2,257 2,197
Long-term capital lease obligations 203 203
Pension and other postretirement benefit obligations 560 578
Long-term tax liabilities 82 81
Other long-term
liabilities 166 172
Commitments and contingencies
Stockholders’ deficit Common stock, $0.01 par value: 400
shares authorized; 266 and 266 shares issued, respectively 3 3
Capital in excess of par value 2,806 2,808 Treasury stock, at cost,
1 and 1 shares, respectively (5 ) (5 ) Accumulated other
comprehensive loss (416 ) (422 ) Accumulated deficit (2,779 )
(2,825 )
Total SUPERVALU INC. stockholders’ deficit (391 )
(441 ) Noncontrolling interests 8 8
Total
stockholders’ deficit (383 ) (433 )
Total liabilities and
stockholders’ deficit $ 4,373 $ 4,370
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
(In millions)
First Quarter Ended June 18, June
20, 2016 2015 (16 weeks) (16 weeks)
Cash flows from operating activities Net earnings including
noncontrolling interests $ 47 $ 64 Income from discontinued
operations, net of tax — 1 Net earnings from
continuing operations 47 63 Adjustments to reconcile Net earnings
from continuing operations to Net cash provided by operating
activities – continuing operations: Asset impairment and other
charges 1 — Loss on debt extinguishment 7 — Net gain on sale of
assets and exits of surplus leases (1 ) — Depreciation and
amortization 86 83 LIFO charge 2 3 Deferred income taxes 16 (14 )
Stock-based compensation 4 7 Net pension and other postretirement
benefits (income) expense (7 ) 11 Contributions to pension and
other postretirement benefit plans (1 ) (37 ) Other adjustments 4 9
Changes in operating assets and liabilities, net of effects from
business acquisitions (37 ) (14 )
Net cash provided by operating
activities – continuing operations 121 111
Net cash provided
by operating activities – discontinued operations — 1
Net cash provided by operating activities 121
112
Cash flows from investing activities Proceeds
from sale of assets 1 1 Purchases of property, plant and equipment
(59 ) (49 ) Payments for business acquisitions (3 ) (1 ) Other —
(21 )
Net cash used in investing activities (61 ) (70
)
Cash flows from financing activities Proceeds from
issuance of debt 58 — Proceeds from sale of common stock — 2
Payments of debt and capital lease obligations (109 ) (17 )
Payments for debt financing costs (5 ) (1 ) Distributions to
noncontrolling interests (2 ) (3 ) Other — —
Net
cash used in financing activities (58 ) (19 ) Net increase in
cash and cash equivalents 2 23
Cash and cash equivalents at
beginning of period 57 114
Cash and cash
equivalents at the end of period $ 59 $ 137
SUPPLEMENTAL CASH FLOW INFORMATION The Company’s non-cash
activities were as follows: Purchases of property, plant and
equipment included in Accounts payable $ 20 $ 17 Capital lease
asset additions $ 7 $ — Interest and income taxes paid: Interest
paid, net of amounts capitalized $ 54 $ 62 Income taxes paid, net $
3 $ 4
SUPERVALU INC. and
SubsidiariesSUPPLEMENTAL FINANCIAL
INFORMATION(Unaudited)
SUPERVALU INC.'s consolidated financial statements are
prepared and presented in accordance with generally accepted
accounting principles ("GAAP"). The measures and items identified
below, and the adjusted Selling and administrative expenses, are
provided as a supplement to our consolidated financial statements
and should not be considered an alternative to any GAAP measure of
performance or liquidity. The presentation of these financial
measures and items is not intended to be a substitute for or be
superior to any financial information prepared and presented in
accordance with GAAP. Investors are cautioned that there are
material limitations associated with the use of non-GAAP financial
measures as an analytical tool. Certain adjustments to our GAAP
financial measures exclude certain items that are recurring in
nature and may be reflected in our financial results for the
foreseeable future. These measurements and items may be different
from non-GAAP financial measures used by other companies. All
measurements are provided as a reconciliation from a GAAP
measurement. Management believes the measurements and items
identified below are important measures of business performance
that provide investors with useful supplemental
information. SUPERVALU utilizes certain non-GAAP measures
to analyze underlying core business trends to understand operating
performance. In addition, management utilizes certain non-GAAP
measures as a compensation performance measure. The items below
should be reviewed in conjunction with SUPERVALU
INC.'s financial results reported in accordance with GAAP, as
reported in SUPERVALU's Quarterly Reports on Form 10-Q
and the Annual Report on Form 10-K for the fiscal year
ended February 27, 2016.
RECONCILIATIONS OF EARNINGS FROM CONTINUING OPERATIONS TO
EARNINGS FROM CONTINUING OPERATIONS AFTER ADJUSTMENTS
Table 1 First Quarter Ended June 18,
2016 Diluted Earnings Earnings Earnings
Per (In millions, except per share data) Before
Tax After Tax Share Continuing operations $ 74 $
47 $ 0.17 Adjustments: Unamortized financing cost charges 5 3 0.01
Costs related to the potential Save-A-Lot separation 3 3 0.01 Debt
refinancing costs 2 1 — Sales and use tax refund (2 ) (1 ) —
Continuing operations after adjustments $ 82 $ 53 $
0.19
Table 2 First Quarter Ended June 20, 2015
Diluted Earnings Earnings Earnings Per
(In millions, except per share data) Before Tax
After Tax Share Continuing operations $ 101 $ 63 $
0.23 Adjustments: Costs related to the potential Save-A-Lot
separation 3 2 — Continuing operations after
adjustments $ 104 $ 65 $ 0.23
RECONCILIATIONS OF NET EARNINGS FROM CONTINUING OPERATIONS TO
ADJUSTED EBITDA Table 3 First Quarter
Ended June 18, June 20, 2016
2015 (In millions) (16 weeks) (16
weeks) Net earnings from continuing operations $ 47 $ 63
Less net earnings attributable to
noncontrolling interests
(1 ) (3 ) Income tax provision 27 38 Interest expense, net 60 59
Depreciation and amortization 86 83 LIFO charge 2 3 Costs related
to the potential separation of Save-A-Lot 3 3 Sales and use tax
refund (2 ) — Adjusted EBITDA $ 222 $ 246
RECONCILIATION OF NET EARNINGS FROM CONTINUING OPERATIONS
TO TOTAL AND SEGMENT OPERATING EARNINGS, TO SUPPLEMENTALLY PROVIDED
TOTAL AND SEGMENT ADJUSTED EBITDA Table 4
First Quarter Ended June 18, June 20,
2016 2015 (In millions) (16 weeks)
(16 weeks) Results of operations, as reported: Net
earnings from continuing operations $ 47 $ 63 Income tax provision
27 38 Equity in earnings of unconsolidated affiliates (1 ) (2 )
Interest expense, net 60 59 Total operating earnings
$ 133 $ 158
Reconciliation of segment operating
earnings, as reported: Wholesale operating earnings $ 64 $ 77
Save-A-Lot operating earnings 39 51 Retail operating earnings 8 33
Corporate operating earnings (loss) 22 (3 ) Total operating
earnings $ 133 $ 158
Reconciliation of segment
operating earnings, as reported, to segment Adjusted EBITDA:
Wholesale operating earnings, as reported $ 64 $ 77 Adjustments:
Wholesale depreciation and amortization 16 14 LIFO charge 1
1 Wholesale adjusted EBITDA(1) $ 81 $ 92
Save-A-Lot operating earnings, as reported $ 39 $ 51
Adjustments: Save-A-Lot depreciation and amortization 23 21
Save-A-Lot adjusted EBITDA(1) $ 62 $ 72
Retail operating earnings, as reported $ 8 $ 33 Adjustments: Retail
depreciation and amortization 46 47 LIFO charge 1 2 Equity in
earnings of unconsolidated affiliates 1 2 Net earnings attributable
to noncontrolling interests (1 ) (3 ) Retail adjusted EBITDA(1) $
55 $ 81 Corporate operating earnings (loss),
as reported $ 22 $ (3 ) Adjustments: Costs related to the potential
Save-A-Lot separation 3 3 Sales and use tax refund (2 ) —
Corporate operating earnings (loss), as adjusted 23 — Corporate
depreciation and amortization 1 1 Corporate adjusted
EBITDA(1) $ 24 $ 1 Total adjusted EBITDA(1) $ 222
$ 246 (1) The Company's measure of
adjusted EBITDA includes SUPERVALU INC.'s segment operating
earnings (loss), as reported, plus depreciation and amortization,
LIFO charge (credit), equity earnings of unconsolidated affiliates
and certain adjustment items as determined by management, and less
net earnings attributable to noncontrolling interests.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160727005319/en/
SUPERVALU INC.Investor
ContactSteve Bloomquist, 952-828-4144steve.j.bloomquist@supervalu.comorMedia ContactJeff Swanson,
952-903-1645jeffrey.s.swanson@supervalu.com
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