- Consolidated net sales increased by
$239 million, or 6.3%, over last year's first quarter
- Wholesale net sales increased by
12.4% over last year's first quarter driven by distribution to new
customers
- First quarter net earnings from
continuing operations of $12 million; Adjusted EBITDA of $143
million
SUPERVALU INC. (NYSE: SVU) today reported first quarter fiscal
2018 consolidated net sales of $4.00 billion and net earnings from
continuing operations of $12 million, or $0.04 per diluted share,
which included $12 million of after-tax charges and costs,
comprised of a legal reserve charge, merger and integration costs,
unamortized financing charges, debt refinancing costs and severance
costs, partially offset by a gain on a surplus property sale and a
gain on store closure. When adjusted for these items, first quarter
fiscal 2018 net earnings from continuing operations were $24
million, or $0.09 per diluted share.
Net earnings from continuing operations for last year’s first
quarter were $20 million, or $0.07 per diluted share, which
included $2 million in after-tax charges and costs, comprised of
unamortized financing charges and debt refinancing costs, offset in
part by a sales and use tax refund as well as a severance benefit.
When adjusted for these items, first quarter fiscal 2017 net
earnings from continuing operations were $22 million, or $0.08 per
diluted share. [See tables 1-4 for a reconciliation of GAAP and
non-GAAP (adjusted) results appearing in this release.]
“The results generated this quarter by our Wholesale business
were outstanding and demonstrate our ability to deliver on our
strategy and commitment toward growing this segment,” said
President and CEO Mark Gross. “Additionally, we’re thrilled that we
closed on the acquisition of Unified Grocers shortly after the end
of our first quarter, and we’re now working together as one team to
drive the business and integration efforts forward. We’ll begin
reporting results in our second fiscal quarter that include the
Unified business.”
First Quarter Results – Continuing Operations
First quarter net sales were $4.00 billion compared to $3.77
billion last year, an increase of $239 million or 6.3 percent.
Total net sales within the Wholesale segment increased 12.4
percent. Retail identical store sales were negative 4.9 percent.
Fees earned under services agreements in the first quarter were $55
million compared to $59 million last year.
Gross profit for the first quarter was $551 million, or 13.8
percent of net sales. Last year’s first quarter gross profit was
$549 million, or 14.6 percent of net sales. The gross profit rate
decrease compared to last year is primarily due to the change in
business segment mix, with Wholesale representing a larger portion
of total sales and gross profit.
Selling and administrative expenses in the first quarter were
$484 million, and included a legal reserve charge of $9 million,
merger and integration costs of $4 million and severance costs of
$3 million, partially offset by a gain on property sale of $2
million and a gain from a store closure of $1 million. When
adjusted for these items, selling and administrative expenses were
$471 million, or 11.8 percent of net sales. Selling and
administrative expenses in last year’s first quarter were $460
million, and included a sales and use tax refund of $2 million
and a severance benefit of $1 million. When adjusted for these
items, last year's selling and administrative expenses were $463
million, or 12.3 percent of net sales. The decrease in the adjusted
selling and administrative expense rate compared to last year was
primarily driven by the change in business mix, with Wholesale
representing a larger portion of total sales and selling and
administrative expenses, and higher pension income as well as lower
depreciation expense.
Net interest expense for the first quarter was $43 million, and
included $3 million of unamortized financing charges and $2 million
of debt refinancing costs. When adjusted for these items, net
interest expense was $38 million. Last year's first quarter net
interest expense was $60 million, and included $5 million of
unamortized financing charges and $2 million of debt refinancing
costs. When adjusted for these items, net interest expense for last
year was $53 million. The decrease in interest expense was driven
by lower average outstanding debt balances.
Income tax expense was $14 million, or 52.0 percent of pre-tax
earnings, for the first quarter, compared to income tax expense of
$10 million, or 33.7 percent of pre-tax earnings, in last year’s
first quarter. The change in the effective tax rate was primarily
due to tax expense related to the adoption of a new accounting
standard for stock-based compensation.
Wholesale
First quarter Wholesale net sales were $2.56 billion, compared
to $2.28 billion last year, an increase of 12.4 percent. The net
sales increase is primarily due to sales to new customers and
increased sales to new stores operated by existing customers,
partially offset by stores no longer being supplied by Supervalu
and lower military sales.
Wholesale operating earnings in the first quarter were $62
million, or 2.4 percent of net sales, and included a $9 million
legal reserve charge. When adjusted for this item, Wholesale
operating earnings were $71 million, or 2.8 percent of net sales.
Last year’s first quarter Wholesale operating earnings were $64
million, or 2.8 percent of net sales.
Retail
First quarter Retail net sales were $1.39 billion, compared to
$1.43 billion last year, a decrease of 2.7 percent. The net sales
decrease reflects identical store sales of negative 4.9 percent and
closed stores, partially offset by sales from acquired and new
stores.
Retail operating loss in the first quarter was $4 million, or
negative 0.3 percent of net sales and included $1 million of
severance costs, which were offset by $1 million of a gain from a
store closure. Last year’s first quarter Retail operating earnings
were $8 million, or 0.6 percent of net sales. The decrease in
Retail operating earnings was driven by the impact of lower sales
and higher employee costs, partially due to acquired and new
stores.
Corporate
First quarter fees earned under services agreements were $55
million compared to $59 million last year.
Net Corporate operating earnings in the first quarter were $9
million, and included $4 million of merger and integration costs
and $2 million of severance costs, partially offset by a $2 million
gain on sale of property. When adjusted for these items, net
Corporate operating earnings were $13 million. Last year’s first
quarter net Corporate operating earnings were $17 million and
included a $2 million sales and use tax refund as well as a $1
million severance benefit. When adjusted for these items, last
year's net Corporate operating earnings were $14 million.
Cash Flows – Continuing Operations
First quarter of fiscal 2018 net cash flows provided by
operating activities of continuing operations were $47 million
compared to $122 million last year, primarily due to cash utilized
to build inventories to support higher Wholesale sales volumes and
lower cash generated from earnings. First quarter of fiscal 2018
net cash flows used in investing activities of continuing
operations were $80 million compared to $36 million last year,
primarily due to a distribution center acquisition. First quarter
of fiscal 2018 net cash flows provided by financing activities of
continuing operations were $5 million compared to net cash flows
used in financing activities of $60 million last year, primarily
reflecting lower net payments on debt obligations.
Fiscal 2018 Outlook
Supervalu currently expects net earnings from continuing
operations to be in the range of $51 million to $70 million.
Adjusted EBITDA, including the contribution from Unified Grocers,
is expected to be in the range of $475 million to $495 million. A
reconciliation of projected net earnings from continuing operations
to projected Adjusted EBITDA, and certain factors affecting the
range of expected earnings, is presented in table 5.
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.
(The following information does not include Unified Grocers
which became part of SUPERVALU on June 23, 2017)
SUPERVALU INC. is one of the largest grocery wholesalers and
retailers in the U.S. with annual sales of approximately $13
billion. SUPERVALU serves customers across the United States
through a network of 2,289 stores composed of 2,072 stores
operated by wholesale customers serviced primarily by Supervalu’s
food distribution business, 217 traditional retail grocery stores
operated under five retail banners in six geographic regions (store
counts as of June 17, 2017). Headquartered in Minnesota,
SUPERVALU has approximately 30,000 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, the matters set forth in this news release and related
conference call, 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,” “outlook” 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, ability to grow sales, reliance on the wholesale
customers' performance, failure to perform services, wind down of
Supervalu’s relationships with Albertson’s LLC and New Albertson’s,
Inc., ability to maintain or increase margins or identical store
sales, restrictive covenants from indebtedness, labor relations
issues, escalating costs of providing employee benefits, intrusions
to and disruption of information technology systems, changes in
military business, adequacy of insurance, asset impairment charges,
fluctuations in our common stock price, impact of economic
conditions, commodity pricing, severe weather, disruption to supply
chain and distribution network, governmental regulation, food and
drug safety issues, legal proceedings, pharmacy reimbursement and
health care financing, intellectual property protection, 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 17, June
18, 2017 2016 (16 weeks) (16 weeks)
Net sales $ 4,004 100.0 % $ 3,765 100.0 %
Cost of sales 3,453 86.2 3,216 85.4
Gross profit
551 13.8 549 14.6
Selling and administrative
expenses(1) 484 12.1 460 12.2
Operating earnings 67 1.7 89 2.4
Interest expense,
net(1) 43 1.1 60 1.6
Equity in earnings of
unconsolidated affiliates (2 ) — (1 ) —
Earnings from continuing operations before income
taxes(1) 26 0.6 30 0.8
Income tax
provision(1) 14 0.3 10 0.3
Net earnings from continuing
operations(1)(2)
12 0.3 20 0.5
Income from discontinued operations, net of
tax — — 27 0.7
Net earnings
including noncontrolling interests 12 0.3 47 1.3
Less net
earnings attributable to noncontrolling interests (1 ) —
(1 ) —
Net earnings attributable to SUPERVALU INC. $
11 0.3 % $ 46 1.2 %
Basic net earnings per share
attributable to SUPERVALU INC.:(3)
Continuing operations $ 0.04 $ 0.07 Discontinued operations $ — $
0.10 Basic net earnings per share $ 0.04 $ 0.17
Diluted net earnings per share
attributable to SUPERVALU INC.:(3)
Continuing operations(1) $ 0.04 $ 0.07 Discontinued operations $ —
$ 0.10 Diluted net earnings per share $ 0.04 $ 0.17
Weighted average number of shares
outstanding:(3)
Basic 267 264 Diluted 269 267 (1) Results from
continuing operations for the first quarter ended June 17, 2017
include net charges and costs of $18 before tax ($12 after tax, or
$0.05 per diluted share), comprised of a legal reserve charge of $9
before tax ($6 after tax, or $0.02 per diluted share), merger and
integration costs of $4 before tax ($3 after tax, or $0.01 per
diluted share) and severance costs of $3 before tax ($1 after tax,
or $0.01 per diluted share), offset in part by a gain on sale of
property of $2 before tax ($1 after tax, or $0.00 per diluted
share) and a benefit from a store closure of $1 before tax ($0
after tax, or $0.00 per diluted share) within Selling and
administrative expenses, and unamortized financing charges of $3
before tax ($2 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 18, 2016
include net charges and costs of $4 before tax ($2 after tax, or
$0.01 per diluted share), comprised of unamortized financing
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, offset by a sales
and use tax refund of $2 before tax ($1 after tax, or $0.00 per
diluted share) and severance cost benefits of $1 before tax ($1
after tax, or $0.00 per diluted share) within Selling and
administrative expenses.
(2)
The results of operations, financial
position and cash flows of Save-A-Lot are reported as discontinued
operations for all periods presented. Accordingly, Supervalu’s
consolidated financial statements have been recast from their
previous presentation. The results of Save-A-Lot for the
comparative quarterly periods are disclosed within Note
14—Discontinued Operations within the Condensed Consolidated
Financial Statements in Supervalu's Quarterly Report on Form 10-Q
for the first quarter of fiscal 2018.
In recasting the results for the selected
quarterly financial data disclosure in Supervalu’s Annual Report on
Form 10-K for the fiscal year ended February 25, 2017, Supervalu
supplementally disclosed a previously unreported quarterly measure
of net earnings from continuing operations within the Unaudited
Quarterly Financial Information. This disclosure contained an
inadvertent presentation error for the first and second quarters of
fiscal 2017. For the first quarter of fiscal 2017, tax expense of
$17 was not allocated from continuing operations to discontinued
operations, resulting in an understatement of Net earnings from
continuing operations of $17 (such that Net earnings from
continuing operations should have been $20 instead of $3 for the
first quarter of fiscal 2017). The error had an offsetting impact
to the second quarter of fiscal 2017, resulting in an overstatement
of Net earnings from continuing operations of $17 in that quarter
(such that Net earnings from continuing operations should have been
$12 instead of $29 for the second quarter of fiscal 2017).
There was no impact to total Net earnings attributable to SUPERVALU
INC. within the Unaudited Quarterly Financial Information and no
impact to any amounts previously reported on Quarterly Reports on
Form 10-Q. There was no impact to any annual amounts previously
presented. Supervalu has corrected for the presentation error in
the amounts included within the Condensed Consolidated Statements
of Operations for the first quarter of fiscal 2017 and will
undertake future reclassification corrections during the second
quarter for the offsetting overstatement of Net earnings from
continuing operations of $17 in the second quarter of fiscal
2017.
(3)
On July 19, 2017, Supervalu held its
annual meeting of stockholders, at which stockholders authorized
the Board of Directors to effect a reverse stock split. Also on
July 19, 2017 following the stockholder meeting, the Board of
Directors approved a 1-for-7 reverse stock split of Supervalu’s
common stock. Supervalu’s common stock will begin trading on a
split-adjusted basis when the market opens on August 2, 2017, and
accordingly, Supervalu’s common stock is not yet trading on a
reverse stock split basis. The weighted average number of shares
outstanding and earnings per share presented within this Condensed
Consolidated Statements of Operations and earnings release have not
been pro forma adjusted to give effect to the 1-for-7 reverse stock
split.
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In millions, except par value
data)
June 17, 2017 February 25, 2017
ASSETS Current assets Cash and cash equivalents $ 252
$ 332 Receivables, net 411 386 Inventories, net 825 764 Other
current assets 63 59
Total current assets
1,551 1,541
Property, plant and equipment, net 1,011 1,004
Goodwill 710 710
Intangible assets, net 35 39
Deferred tax assets 158 165
Other assets 130
121
Total assets $ 3,595 $ 3,580
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities Accounts payable $ 940 $ 881 Accrued vacation,
compensation and benefits 147 150 Current maturities of long-term
debt and capital lease obligations 30 26 Other current liabilities
125 172
Total current liabilities 1,242 1,229
Long-term debt 1,282 1,263
Long-term capital lease
obligations 179 186
Pension and other postretirement benefit
obligations 305 322
Long-term tax liabilities 64 63
Other long-term liabilities 126 134
Commitments and
contingencies Stockholders’ equity Common stock, $0.01
par value: 400 shares authorized; 269 and 268 shares issued,
respectively 3 3 Capital in excess of par value 2,832 2,828
Treasury stock, at cost, 0 and 0 shares, respectively (3 ) (2 )
Accumulated other comprehensive loss (278 ) (278 ) Accumulated
deficit (2,164 ) (2,175 )
Total SUPERVALU INC. stockholders’
equity 390 376 Noncontrolling interests 7 7
Total stockholders’ equity 397 383
Total
liabilities and stockholders’ equity $ 3,595 $ 3,580
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
(In millions)
First Quarter Ended June 17, June
18, 2017 2016 (16 weeks) (16 weeks)
Cash flows from operating activities Net earnings including
noncontrolling interests $ 12 $ 47 Income from discontinued
operations, net of tax — 27 Net earnings from
continuing operations 12 20 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 5 7 Net gain on sale of
assets and exits of surplus leases (2 ) (1 ) Depreciation and
amortization 60 64 LIFO charge 2 2 Deferred income taxes 8 19
Stock-based compensation 6 4 Net pension and other postretirement
benefit income (17 ) (7 ) Contributions to pension and other
postretirement benefit plans (1 ) (1 ) Other adjustments 9 4
Changes in operating assets and liabilities, net of effects from
business acquisitions (35 ) 10
Net cash provided by
operating activities – continuing operations 47 122
Net cash
(used in) provided by operating activities – discontinued
operations (55 ) 1
Net cash (used in) provided by
operating activities (8 ) 123
Cash flows from
investing activities Proceeds from sale of assets 4 1 Purchases
of property, plant and equipment (84 ) (35 ) Payments for business
acquisitions — (2 )
Net cash used in investing activities
– continuing operations (80 ) (36 )
Net cash provided by
(used in) investing activities – discontinued operations 3
(25 )
Net cash used in investing activities (77 ) (61
)
Cash flows from financing activities Proceeds from
revolving credit facility 49 1,116 Payments on revolving credit
facility (49 ) (1,058 ) Proceeds from issuance of debt 550 —
Payments of debt and capital lease obligations (532 ) (108 )
Payments for shares traded for taxes (3 ) (2 ) Payments for debt
financing costs (8 ) (5 ) Distributions to noncontrolling interests
(2 ) (3 )
Net cash provided by (used in) financing
activities 5 (60 )
Net (decrease) increase in cash
and cash equivalents (80 ) 2
Cash and cash equivalents at
beginning of period 332 57
Cash and cash
equivalents at the end of period $ 252 $ 59
Less cash and cash equivalents of discontinued operations at end
of period — (16 )
Cash and cash equivalents of
continuing operations at end of period $ 252 $ 43
SUPPLEMENTAL CASH FLOW INFORMATION Non-cash investing and
financing activities were as follows: Purchases of property, plant
and equipment included in Accounts payable $ 13 $ 20 Capital lease
asset additions $ 1 $ 7 Interest and income taxes paid: Interest
paid, net of amounts capitalized $ 47 $ 54 Income taxes paid, net $
37 $ 3
SUPERVALU INC. and
Subsidiaries
SUPPLEMENTAL FINANCIAL
INFORMATION
(Unaudited)
(In millions)
Net Sales by Segment
First Quarter Ended June 17, June 18,
2017 2016 (In millions)
(16 weeks) (16 weeks) Wholesale $ 2,556
$ 2,275 Retail 1,393 1,431 Corporate 55 59 Total net sales $
4,004 $ 3,765
Non-GAAP Financial Measures
SUPERVALU INC.'s ("Supervalu") condensed 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 condensed
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'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 25, 2017.
RECONCILIATIONS OF EARNINGS FROM CONTINUING
OPERATIONS TO EARNINGS FROM CONTINUING OPERATIONS AFTER
ADJUSTMENTS
Table 1 First Quarter Ended June 17,
2017 Diluted Earnings Earnings Earnings
Per (In millions, except per share data) Before
Tax After Tax Share Continuing operations $ 26 $
12 $ 0.04 Adjustments: Legal reserve charge 9 6 0.02 Merger and
integration costs 4 3 0.01 Unamortized financing charges 3 2 0.01
Severance costs 3 1 0.01 Debt refinancing costs 2 1 — Gain on store
closure (1 ) — — Gain on sale of property (2 ) (1 ) — Continuing
operations after adjustments $ 44 $ 24 $ 0.09
Table 2 First Quarter Ended June 18,
2016 Diluted Earnings Earnings Earnings
Per (In millions, except per share data) Before
Tax After Tax Share Continuing operations $ 30 $
20 $ 0.07 Adjustments: Unamortized financing charges 5 3 0.01 Debt
refinancing costs 2 1 — Severance costs (1 ) (1 ) — Sales and use
tax refund (2 ) (1 ) — Continuing operations after adjustments $ 34
$ 22 $ 0.08
RECONCILIATIONS OF NET EARNINGS FROM
CONTINUING OPERATIONS TO ADJUSTED EBITDA AND PRO FORMA ADJUSTED
EBITDA
Table 3 First Quarter Ended June 17,
June 18, 2017 2016 (In millions)
(16 weeks) (16 weeks) Results of operations, as
reported Net earnings from continuing operations $ 12 $ 20
Income tax provision 14 10 Equity in earnings of unconsolidated
affiliates (2 ) (1 ) Interest expense, net 43 60
Total operating earnings $ 67 $ 89 Add Equity in
earnings of unconsolidated affiliates 2 1 Less net earnings
attributable to noncontrolling interests (1 ) (1 ) Depreciation and
amortization 60 64 LIFO charge 2 2 Legal reserve charge 9 — Merger
and integration costs 4 —
Severance costs
3
(1
)
Gain on store closure (1 )
—
Gain on sale of property (2 )
—
Sales and use tax refund — (2 ) Adjusted EBITDA(1) $ 143
$ 152 Pro forma adjustments: Net sales(2) — 16 Cost
of sales(3) — (6 ) Total pro forma adjustments — 10
Pro forma adjusted EBITDA $ 143 $ 162
(1) Supervalu's measure of adjusted EBITDA includes
operating earnings, as reported, plus depreciation and
amortization, LIFO charge, equity earnings of unconsolidated
affiliates and certain adjustment items as determined by
management, and less net earnings attributable to noncontrolling
interests. (2) This adjustment reflects (1) the fees that
Supervalu expects to recognize in connection with performing
services for Save-A-Lot under the services agreement entered into
with Save-A-Lot on December 5, 2016 (the "Services Agreement") and
(2) Wholesale distribution sales to Save-A-Lot pursuant to a
customer agreement between Supervalu and Save-A-Lot that had
historically been intercompany sales. Actual Services Agreement
fees are subject to adjustments pursuant to the terms of the
Services Agreement including for changes in service levels. This
adjustment only applies to time periods prior to the sale of
Save-A-Lot on December 5, 2016. (3) This adjustment reflects
the Cost of sales related to Wholesale’s distribution to
Save-A-Lot, which was previously eliminated on an intercompany
basis. No adjustment for expenses related to the Services Agreement
has been included within Cost of sales because the shared service
center costs incurred to support back office functions related to
the Services Agreement represent administrative overhead costs that
have been included within Selling and administrative expenses
within Supervalu’s historical consolidated financial statements.
This adjustment only applies to time periods prior to the sale of
Save-A-Lot on December 5, 2016.
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 17,
June 18, 2017 2016 (In millions)
(16 weeks) (16 weeks) Results of operations, as
reported: Net earnings from continuing operations $ 12 $ 20
Income tax provision 14 10 Equity in earnings of unconsolidated
affiliates (2 ) (1 ) Interest expense, net 43 60
Total operating earnings $ 67 $ 89
Reconciliation
of segment operating earnings to total operating earnings, as
reported: Wholesale operating earnings $ 62 $ 64 Retail
operating (loss) earnings (4 ) 8 Corporate operating earnings 9
17 Total operating earnings $ 67 $ 89
Reconciliation of segment operating earnings, as reported, to
segment Adjusted EBITDA: Wholesale operating earnings, as
reported $ 62 $ 64 Adjustments: Legal reserve charge 9 —
Wholesale operating earnings, as adjusted 71 64 Wholesale
depreciation and amortization 18 16 LIFO charge 1 1
Wholesale adjusted EBITDA(1) $ 90 $ 81 Retail
operating (loss) earnings, as reported $ (4 ) $ 8 Adjustments:
Severance costs 1 — Gain on store closure (1 ) — Retail
operating earnings, as adjusted (4 ) 8 Retail depreciation and
amortization 40 46 LIFO charge 1 1 Equity in earnings of
unconsolidated affiliates 2 1 Net earnings attributable to
noncontrolling interests (1 ) (1 ) Retail adjusted EBITDA(1) $ 38
$ 55 Corporate operating earnings, as reported
$ 9 $ 17 Adjustments: Merger and integration costs 4 — Severance
costs 2 (1 ) Gain on sale of property (2 ) — Sales and use tax
refund — (2 ) Corporate operating earnings, as adjusted 13
14 Corporate depreciation and amortization 2 2
Corporate adjusted EBITDA(1) $ 15 $ 16 Total adjusted
EBITDA(1) $ 143 $ 152 Pro forma adjustments: Net
sales(2) — 16 Cost of sales(3) — (6 ) Total Pro forma
adjustments — 10 Pro Forma Adjusted EBITDA $ 143
$ 162 (1) Supervalu's measure of
adjusted EBITDA includes Supervalu's segment operating earnings
(loss), as reported, plus depreciation and amortization, LIFO
charge, equity earnings of unconsolidated affiliates and certain
adjustment items as determined by management, and less net earnings
attributable to noncontrolling interests. (2) This
adjustment reflects (1) the fees that Supervalu expects to
recognize in connection with performing services for Save-A-Lot
under the Services Agreement and (2) Wholesale distribution sales
to Save-A-Lot pursuant to a customer agreement between Supervalu
and Save-A-Lot that had historically been intercompany sales.
Actual Services Agreement fees are subject to adjustments pursuant
to the terms of the Services Agreement including for changes in
service levels. This adjustment only applies to time periods prior
to the sale of Save-A-Lot on December 5, 2016. (3) This
adjustment reflects the Cost of sales related to Wholesale’s
distribution to Save-A-Lot, which was previously eliminated on an
intercompany basis. No adjustment for expenses related to the
Services Agreement has been included within Cost of sales because
the shared service center costs incurred to support back office
functions related to the Services Agreement represent
administrative overhead costs that have been included within
Selling and administrative expenses within Supervalu’s historical
consolidated financial statements. This adjustment only applies to
time periods prior to the sale of Save-A-Lot on December 5, 2016.
Table 5
Fiscal 2018 Outlook
The following table reconciles Supervalu’s outlook for full year
fiscal 2018 Adjusted EBITDA to Net earnings from continuing
operations, the most comparable GAAP measure. This outlook includes
results from Supervalu’s acquisition of Unified Grocers, Inc. that
closed on June 23, 2017, except that Supervalu has not included the
future impact of purchase accounting allocations because they have
not been finalized yet. Additional adjustments not related to our
on-going business performance may also arise during fiscal
2018.
RECONCILIATION OF PROJECTED NET EARNINGS
FROM CONTINUING OPERATIONS TO PROJECTED ADJUSTED EBITDA
For the Fiscal Year Ending February 24,
2018 (52 weeks) Projected Low End Projected
High End (In millions) Amount Amount
Results of operations, as projected Net earnings from
continuing operations $ 51 $ 70 Income tax provision 36 47 Equity
in earnings of unconsolidated affiliates (4 ) (4 ) Interest
expense, net 134 134 Total operating earnings $ 217
$ 247 Add Equity in earnings of unconsolidated
affiliates 4 4 Less net earnings attributable to noncontrolling
interests (2 ) (2 ) Depreciation and amortization 202 202 LIFO
charge 6 6 Legal reserve charge 9 9 Merger and integration costs 39
29 Severance costs 3 3 Gain on store closure (1 ) (1 ) Gain on sale
of property (2 ) (2 ) Adjusted EBITDA $ 475 $ 495
Management is providing an outlook for fiscal 2018 Adjusted
EBITDA, which is a non-GAAP financial measure, because management
believes Adjusted EBITDA is an important measure of business
performance that provide investors with useful supplemental
information. Supervalu utilizes non-GAAP measures to analyze
underlying core business trends to understand operating performance
and as a compensation performance measure.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170725005449/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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