SUPERVALU Announces Fiscal First Quarter 2013 Results and Additional Actions to Enhance Shareholder Value
SUPERVALU Announces Fiscal First Quarter 2013 Results and Additional Actions
to Enhance Shareholder Value
* Cash Flow from Operations of $227 Million; Net Earnings of $41 Million, or
$0.19 Per Share
* Accelerating Price Investments
* Intensifying Focus on Expense Reductions
* Enhancing Financial Flexibility
* Increasing Debt Reduction to a Range of $450 to $500 Million for Fiscal
2013
* Suspends Dividend
* Initiates Review of Strategic Alternatives
Business Wire
MINNEAPOLIS -- July 11, 2012
SUPERVALU INC. (NYSE: SVU) today announced results for the first quarter of
fiscal 2013. For the quarter ended June 16, 2012, the Company reported net
sales of $10.6 billion and net earnings of $41 million, or $0.19 per diluted
share. In the first quarter of fiscal 2012, net sales were $11.1 billion and
the Company reported net earnings of $74 million, or $0.35 per diluted share.
Cash flow from operations was $227 million in the first quarter of 2013,
compared to $245 million in the same quarter last year.
“While our shift to a fair price plus promotion strategy is right for our
business, it is essential that we move even more aggressively to lower prices,
and anticipate and respond to competitor actions. We expect our business
transformation to meet our customers’ demands for great quality at lower
prices,” said Craig Herkert, chief executive officer and president. “We intend
to do this while remaining profitable, continuing to pay down debt and
investing the capital to maintain and enhance our stores and related assets.
Accordingly, we will be pursuing deeper and more structural cost savings
initiatives. Also, we are adopting more flexible financing facilities,
reducing our near-term capital expenditures and suspending our dividend.”
“As we proceed with these actions in an effort to drive more traffic to our
stores and ensure we are the destination of choice in the neighborhoods we
serve, we remain focused on maintaining our operational and financial
strength,” continued Herkert. “We are committed to generating operating cash
flows of more than $1 billion annually and meeting or exceeding our debt
reduction targets. And, to assure we are evaluating the full range of
opportunities available to us to create value for shareholders, the Company’s
Board and management, together with its financial advisors, are reviewing
strategic alternatives for our business.”
“These are bold but necessary moves, which will position SUPERVALU for success
in this increasingly competitive environment,” said Herkert.
Accelerating Price Investments
The Company recently launched its fair price plus promotion repositioning at
its Jewel-Osco banner, supported by a comprehensive media campaign. With
additional efforts this year, approximately half of the Company’s stores are
expected to be priced appropriately to competitors by the end of fiscal 2013,
with the remaining stores moved to fair price plus promotion in fiscal 2014.
“While near- and medium-term operating profit margins will come under pressure
as price reductions initially outpace cost takeouts and volume improvement,
the acceleration of these price investments is expected to create a path to
improved longer-term performance and market share growth,” said Herkert.
Intensifying Focus on Expense Reductions
SUPERVALU also announced that it intends to achieve an additional $250 million
in administrative and operational expense reductions over the next two years
by adopting an intense focus on efficiency and productivity across all
functions and every part of its businesses. It expects the program to result
in a leaner, more efficient organization. The savings expected to be achieved
from these efforts are incremental to the $75 million in cost reductions the
Company targeted for fiscal 2013. The Company noted that it has exceeded its
expense saving targets in each of the past three years.
Enhancing Financial Flexibility
SUPERVALU is also implementing important measures to enhance the Company’s
already strong liquidity position and balance sheet and provide further
flexibility to invest in price. These steps include:
* Replacing the Company’s senior credit facility with an asset-based lending
facility and term loan secured by a portion of the Company’s real estate,
which will remove restrictive covenant concerns and increase financial
flexibility. The Company has entered into underwritten commitments with
banks related to these financings, which are expected to close in August,
2012;
* Reducing capital expenditures in fiscal 2013 to a range of $450 to $500
million from $675 million. The Company will continue to invest in its
store base, including 40 remodels and the addition of 40 Save-A-Lot
locations in fiscal year 2013;
* Suspending the quarterly dividend. The Board will continue to review its
dividend policy annually;
* Increasing debt reduction to a range of $450 to $500 million in fiscal
2013. The company plans to pay down at least $400 million of debt annually
thereafter. The Company has less than $1 billion in aggregate debt coming
due for fiscal years 2013 through 2015.
Review of Strategic Alternatives
The Company’s Board and management, in conjunction with its financial
advisors, Goldman Sachs and Greenhill & Co., have initiated a review of
strategic alternatives to create value for the Company’s shareholders.
SUPERVALU’s non-executive chairman, Wayne Sales, will oversee this process so
that management can remain focused on executing the Company’s accelerated
business plan. There can be no assurance that such a review will result in any
transaction or any change in the Company’s overall structure or its business
model.
Guidance Policy
Concurrent with the actions noted above to enhance performance and shareholder
value, the Company is suspending identical store sales and earnings per share
guidance and withdrawing any previous guidance given for fiscal 2013. It will
continue to provide forward-looking information on debt reduction and capital
expenditures. For fiscal year 2013:
* Debt reduction is estimated in the range of $450 to $500 million;
* As previously stated, capital spending is projected in the range of $450
to $500 million; the Company expects to complete approximately 40 store
remodels and increase Save-A-Lot’s store count by approximately 40 stores,
including licensed locations;
Fiscal First Quarter Results
“SUPERVALU continues to be a profitable company with cash flow from operations
of $227 million in the first quarter of 2013. With our first fiscal quarter
results falling well below our expectations, we must wage a more forceful
response to the competitive challenges we face. We believe that the steps we
are taking are prudent and will be beneficial to all of our constituents,”
said Herkert.
In the first quarter of fiscal 2013, SUPERVALU reported net sales of $10.6
billion and net earnings of $41 million, or $0.19 per diluted share. This
compared to net sales of $11.1 billion and net earnings of $74 million, or
$0.35 per diluted share, in the first quarter of fiscal 2012. The decrease in
net sales reflects the disposition of a majority of our fuel centers, and a
decline in identical store sales attributable to intense price sensitivity on
the part of consumers and aggressive promotion and price actions by
competitors.
Gross profit margin for the first quarter was $2.32 billion, or 22.0 percent
of net sales, compared to $2.46 billion or 22.1 percent of net sales last
year. The decrease in gross margin as a percent of net sales reflects the rate
benefit from lower fuel sales (approximately 30 basis points) and a lower LIFO
charge, which were more than offset by the negative rate impact of higher
shrink, marketing costs and a change in business mix. The impact of price
investments was fully offset by funding initiatives during the quarter.
Selling and administrative expenses in the first quarter were $2.12 billion,
or 20.0 percent of net sales, compared to $2.18 billion, or 19.6 percent of
net sales last year. The increase in selling and administrative expenses as a
percent of net sales reflects the impact of sales deleveraging and lower fuel
sales, partially offset by the benefits from lower employee-related costs and
the Company’s cost reduction initiatives. Without the negative rate impact
from lower fuel sales, selling and administrative expenses as a percent of net
sales would have been relatively flat compared to last year.
Net interest expense for the first quarter was $155 million compared to $155
million last year, primarily due to the benefit of lower debt levels in the
current year and a benefit in last year’s first quarter related to prior
years’ tax audit activity. The Company remains in compliance with all debt
covenants.
SUPERVALU’s income tax expense for the first quarter was $13 million, or 25.2
percent of pre-tax income, reflecting benefits from tax planning activities.
Last year’s first quarter tax expense was $51 million, or 40.8 percent of
pre-tax income, and reflected approximately $4 million of tax expense related
to prior years’ audit activity.
Diluted weighted-average shares outstanding for the first quarter were 214
million shares compared to 213 million shares last year. As of July 6, 2012,
SUPERVALU had 214 million shares outstanding.
Beginning this quarter, the Company is breaking out its former Retail Food
reportable segment, which previously included both the traditional retail and
hard discount stores, into stand-alone Retail Food and Save-A-Lot reportable
segments.
First quarter Retail Food net sales were $6.83 billion compared to $7.33
billion last year, primarily reflecting identical store sales of negative 3.7
percent and the sale of fuel centers.
Retail Food operating earnings were $99 million, or 1.5 percent of net sales,
compared to $150 million, or 2.0 percent of net sales last year. The change in
Retail Food operating earnings as a percent of net sales was largely due to
the impact of sales deleveraging, higher shrink and marketing costs, partially
offset by a lower LIFO charge and cost reduction initiatives.
First quarter Save-A-Lot net sales were $1.29 billion compared to $1.28
billion last year, primarily reflecting the benefit from 53 net additional
stores being operated at the end of the first quarter of fiscal 2013,
partially offset by network identical store sales of negative 3.4 percent.
Save-A-Lot operating earnings in the first quarter were $59 million, or 4.6
percent of net sales, compared to $69 million, or 5.4 percent of net sales
last year. The decline in operating earnings as a percent of net sales was
primarily attributable to the impact of negative network identical store sales
and additional administrative costs related to its growth strategy.
First quarter Independent Business net sales were $2.48 billion compared to
$2.50 billion last year, a decrease of 0.9 percent, primarily attributed to
the sales benefits from net new affiliations being more than offset by a
decrease in sales to existing customers.
Independent Business operating earnings in the first quarter were $65 million,
or 2.6 percent of net sales, compared to $77 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 costs related to a
consolidation of facilities in the first quarter of fiscal 2013 and a gain on
sale related to the sale of a non-core asset in the first quarter of fiscal
2012.
First quarter net cash flows from operating activities were $227 million
compared to $245 million in the prior year. First quarter net cash flows used
in investing activities were $206 million compared to $133 million last year,
reflecting higher cash payments for capital expenditures. First quarter net
cash flows used in financing activities were $27 million compared to $112
million last year, reflecting a higher level of debt reduction in the prior
year.
Conference Call
A conference call to review the first quarter results is scheduled for 4:30
p.m. central time today. The call will be webcast live at
www.supervaluinvestors.com (click on microphone icon) and can be accessed by
dialing (877) 814-2415 and providing the conference code of 95961927. 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 1,101 traditional retail stores, including 798 in-store
pharmacies; 1,336 hard discount stores, of which 939 are operated by licensee
owners; and 1,950 independent stores serviced primarily by the Company's food
distribution business. SUPERVALU has approximately 130,000 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 Fiscal
Quarter Quarter
Ended Ended
June 16, June 18,
2012 2011
(In millions, % of net % of net
except per share (16 weeks) sales (16 weeks) sales
data)
Net sales $ 10,590 100.0 % $ 11,113 100.0 %
Cost of sales 8,265 78.0 % 8,654 77.9 %
Gross profit 2,325 22.0 % 2,459 22.1 %
Selling and
administrative 2,116 20.0 % 2,179 19.6 %
expenses
Operating earnings 209 2.0 % 280 2.5 %
Interest expense, 155 1.5 % 155 1.4 %
net
Earnings before 54 0.5 % 125 1.1 %
income taxes
Income tax 13 0.1 % 51 0.5 %
provision
Net income $ 41 0.4 % $ 74 0.7 %
Net income per
share
Basic $ 0.19 $ 0.35
Diluted $ 0.19 $ 0.35
Weighted average
number of shares
outstanding
Basic 212 212
Diluted 214 213
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED SEGMENT FINANCIAL INFORMATION
(Unaudited)
Fiscal Quarter Ended Fiscal Quarter Ended
June 16, 2012 June 18, 2011
(In millions) (16 weeks) (16 weeks)
Net sales
Retail Food ^(1) $ 6,825 $ 7,330
% of total 64.4 % 66.0 %
Save-A-Lot ^(1) 1,287 1,282
% of total 12.2 % 11.5 %
Independent Business 2,478 2,501
% of total 23.4 % 22.5 %
Total net sales $ 10,590 $ 11,113
100.0 % 100.0 %
Operating earnings
Retail Food ^(1) $ 99 $ 150
% of sales 1.5 % 2.0 %
Save-A-Lot ^(1) 59 69
% of sales 4.6 % 5.4 %
Independent Business 65 77
% of sales 2.6 % 3.1 %
Corporate (14 ) (16 )
Total operating earnings 209 280
% of sales 2.0 % 2.5 %
Interest expense, net 155 155
Earnings before income taxes 54 125
Income tax provision 13 51
Net income $ 41 $ 74
LIFO charge
Retail Food $ 6 $ 13
Independent Business - 4
Total $ 6 $ 17
Depreciation and
amortization
Retail Food $ 235 $ 238
Save-A-Lot 21 19
Independent Business 20 20
Total $ 276 $ 277
(1) The Company's Save-A-Lot reportable segment was formerly aggregated with
the Retail Food reportable segment.
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions) June 16, 2012 February 25, 2012
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 151 $ 157
Receivables, net 715 730
Inventories 2,190 2,150
Other current assets 200 188
Total current assets 3,256 3,225
Property, plant and equipment, net 6,261 6,362
Goodwill 847 847
Intangible assets, net 794 809
Other assets 777 810
Total assets $ 11,935 $ 12,053
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued $ 2,512 $ 2,519
liabilities
Current maturities of long-term debt 258 388
and capital lease obligations
Other current liabilities 602 683
Total current liabilities 3,372 3,590
Long-term debt and capital lease 6,030 5,868
obligations
Pension and other postretirement 1,052 1,126
benefit obligations
Other long-term liabilities 1,417 1,448
Commitments and contingencies
Total stockholders' equity 64 21
Total liabilities and stockholders’ $ 11,935 $ 12,053
equity
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Fiscal Year-to-Date Fiscal Year-to-Date
Ended Ended
June 16, 2012 June 18, 2011
(In millions) (16 weeks) (16 weeks)
Cash flows from operating
activities
Net earnings $ 41 $ 74
Adjustments to reconcile net
earnings to net cash
provided by operating
activities:
Depreciation and 276 277
amortization
LIFO charge 6 17
Asset impairment and other 7 4
charges
Gain on sale of assets and (19 ) (11 )
lease exits, net
Deferred income taxes 15 (5 )
Stock-based compensation 5 5
Net pension and other 37 38
postretirement benefits cost
Contributions to pension and
other postretirement benefit (75 ) (32 )
plans
Other 11 4
Changes in operating assets (77 ) (126 )
and liabilities
Net cash provided by 227 245
operating activities
Cash flows from investing
activities
Proceeds from sale of assets 20 22
Purchases of property, plant (226 ) (158 )
and equipment
Other - 3
Net cash used in investing (206 ) (133 )
activities
Cash flows from financing
activities
Proceeds from issuance of 341 291
debt
Payment of debt and capital (329 ) (358 )
lease obligations
Dividends paid (37 ) (37 )
Other (2 ) (8 )
Net cash used in financing (27 ) (112 )
activities
Net decrease in cash and (6 ) -
cash equivalents
Cash and cash equivalents at 157 172
beginning of year
Cash and cash equivalents at $ 151 $ 172
the end of period
Contact:
SUPERVALU INC.
Investor and Financial Media Contacts:
Kenneth Levy, 952-828-4540
kenneth.b.levy@supervalu.com
or
Steve Bloomquist, 952-828-4144
steve.j.bloomquist@supervalu.com
Sponsored Links
Advertisement
Advertisements
Sponsored Links
Advertisement
Rate this Page