EX-99.1 2 f17form10-12bano2xex991.htm EX 99.1 Exhibit
Exhibit 99.1
(Subject to Completion, Dated August 8, 2016)
 
Dear SUPERVALU INC. Stockholder:
We are pleased to inform you that on       , the board of directors of SUPERVALU INC. (“Supervalu”) approved the separation of Save-A-Lot, Inc. (“Save-A-Lot”), a wholly owned subsidiary of Supervalu, from Supervalu. Upon completion of the separation, we currently expect that Supervalu stockholders will directly own approximately 60% of the outstanding shares of common stock of Save-A-Lot and that Supervalu will retain approximately 40% of the outstanding shares of common stock of Save-A-Lot. Supervalu plans to dispose within 24 months of the distribution of a portion of the retained Save-A-Lot stock sufficient to reduce Supervalu’s ownership of Save-A-Lot stock to 20% or less. Supervalu has no plans to acquire any additional Save-A-Lot common stock following the distribution.
We believe that separating Save-A-Lot from Supervalu so that it can operate as an independent, publicly traded company is in the best interests of both Supervalu and Save-A-Lot. As two distinct publicly traded companies, each of Supervalu and Save-A-Lot will be better positioned to focus on its respective businesses, customers and strategic priorities and to capitalize on growth opportunities. After the separation, Supervalu and Save-A-Lot will each strive to be an industry leader in terms of both products and services in their respective businesses. We believe Supervalu will be able to focus on providing distribution services to independent retail customers and operating its five regionally based traditional-format grocery banners. Save-A-Lot will continue to be a leader in hard discount grocery retailing in the United States.
The separation will be completed by way of a pro rata distribution of shares of Save-A-Lot common stock to Supervalu stockholders of record as of the close of business,       Eastern time, on       , the record date. Each Supervalu stockholder will receive one share of Save-A-Lot common stock for every       shares of Supervalu common stock held by such stockholder on the record date. The distribution of these shares will be made in book-entry form, which means that no physical share certificates will be issued. Following the separation, stockholders may request that their shares of Save-A-Lot common stock be transferred to a brokerage or other account at any time. No fractional shares of Save-A-Lot common stock will be issued. Fractional shares of Save-A-Lot common stock that Supervalu stockholders of record would otherwise be entitled to receive in the distribution will be aggregated and sold in the public market by the distribution agent. The aggregate net cash proceeds of such sales will be distributed ratably to those stockholders who would otherwise have received fractional shares of Save-A-Lot common stock.
The distribution will not be eligible for treatment as a tax-free distribution for U.S. federal income tax purposes. You should consult your own tax advisor as to the particular tax consequences of the distribution to you, including potential tax consequences under U.S. federal, state, local and non-U.S. tax laws.
The distribution does not require stockholder approval, nor do you need to take any action to receive your shares of Save-A-Lot common stock. Immediately following the separation, you will own common stock in Supervalu and Save-A-Lot. Supervalu’s common stock will continue to trade on the New York Stock Exchange (the “NYSE”) under the symbol “SVU.” We expect that Save-A-Lot common stock will be listed on the NYSE under the symbol “     .”
The enclosed Information Statement, which we are providing to all Supervalu stockholders as of the record date for the distribution, describes the separation and distribution in detail and contains important information about Save-A-Lot, including its business, financial condition and operations. We urge you to carefully read the Information Statement in its entirety.
We want to thank you for your continued support of Supervalu. We look forward to your support of Save-A-Lot in the future.

 
 
Sincerely,
 
 


Mark Gross
President and Chief Executive Officer
SUPERVALU INC.





 
 

Dear Future Save-A-Lot Stockholder:
It is our pleasure to welcome you as a stockholder of our company, Save-A-Lot, Inc. Save-A-Lot is one of the largest hard discount grocery retailers by store count in the United States. Save-A-Lot provides a specific and edited assortment of high volume, conveniently sized and low-priced items selected to fit our target customer’s needs.
As an independent, publicly traded company, we believe we can more effectively focus on our growth and operating objectives and specific business characteristics, and thus bring more value to you as a stockholder than we could as an operating segment of Supervalu.
As of June 18, 2016, we operated 472 retail locations through our Corporate Stores business and we provided distribution and other services to 896 stores that we license to retailers, allowing our licensees to operate under the Save-A-Lot name and providing access to our private-label brands, store programs, operating standards and supervisory support. We are the primary grocery supplier to our licensed stores. Our network of stores currently spans 37 states, along with the Caribbean and Central America. Our store format is generally consistent across our network of corporate and licensed stores.
Our vision is to be the hard discount grocery retailer of choice for value-seeking shoppers. Each store’s merchandising mix is tailored for local preferences through the use of demographic and ethnic specific product offerings. Our private-label program, which is a key driver of our value offering and our Save-A-Lot brand awareness, is responsible for a significant portion of our sales.
We expect to have Save-A-Lot common stock listed on the NYSE under the symbol “     ” in connection with the distribution of Save-A-Lot common stock by Supervalu.
We invite you to learn more about Save-A-Lot by reviewing the enclosed Information Statement. We look forward to our future as an independent, publicly traded company and to your support as a holder of Save-A-Lot common stock.

 
 
Sincerely,


Eric A. Claus
Chief Executive Officer
Save-A-Lot, Inc.






Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.
Preliminary Information Statement

(Subject to Completion, Dated August 8, 2016)

INFORMATION STATEMENT
Save-A-Lot, Inc.

We are sending this Information Statement to you in connection with the separation of Save-A-Lot, Inc. (“Save-A-Lot”) from SUPERVALU INC. (collectively with its consolidated subsidiaries, other than, for all periods following the separation, Save-A-Lot and its consolidated subsidiaries, “Supervalu”), following which Save-A-Lot will be an independent, publicly traded company. To implement the separation, we currently expect that Supervalu will undergo an internal restructuring (as further described in this Information Statement), and distribute approximately 60% of the shares of Save-A-Lot common stock on a pro rata basis to the holders of Supervalu common stock on the record date for the distribution. We refer to this pro rata distribution as the “Distribution,” and we refer to the separation, including the internal restructuring, as the “Separation.” The Distribution will be effective as of       , Eastern time, on       . Supervalu currently expects to own approximately 40% of the outstanding shares of common stock of Save-A-Lot immediately after the Distribution becomes effective, after which time Save-A-Lot will be an independent, publicly traded company. Within the two-year period following the distribution of Save-A-Lot shares, Supervalu intends to dispose, in an orderly fashion, of sufficient shares of Save-A-Lot common stock to decrease Supervalu’s ownership stake in Save-A-Lot to 20% or less.
The Distribution will not be eligible for treatment as a tax-free distribution for U.S. federal income tax purposes. Every       shares of Supervalu common stock outstanding as of the close of business, Eastern time, on       , the record date for the Distribution, will entitle the holder thereof to receive one share of Save-A-Lot common stock. The Distribution of shares will be made in book-entry form. Supervalu will not distribute any fractional shares of Save-A-Lot common stock. Instead, the Distribution agent will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing market prices and distribute the aggregate net cash proceeds from the sales pro rata to each holder who would otherwise have been entitled to receive a fractional share in the Distribution.
No vote or further action of Supervalu stockholders is required in connection with the Separation. We are not asking you for a proxy. Supervalu stockholders will not be required to pay any consideration for the shares of Save-A-Lot common stock they receive in the Distribution, and they will not be required to surrender or exchange shares of their Supervalu common stock or take any other action in connection with the Separation.
Supervalu currently owns all of the outstanding shares of Save-A-Lot common stock. Accordingly, there is no current trading market for Save-A-Lot common stock. We expect, however, that a limited trading market for Save-A-Lot common stock, commonly known as a “when-issued” trading market, will develop beginning on or shortly before the record date for the Distribution, and we expect “regular-way” trading of Save-A-Lot common stock will begin the first trading day after the distribution date. We intend to apply for authorization to list Save-A-Lot common stock on the NYSE under the ticker symbol “    .”
In reviewing this Information Statement, you should carefully consider the matters described in the section entitled “Risk Factors” beginning on page 25 of this Information Statement.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of any of the securities of Save-A-Lot or determined whether this Information Statement is truthful or complete. Any representation to the contrary is a criminal offense.
 
This Information Statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.
 
The date of this Information Statement is       .
This Information Statement was first made available to Supervalu stockholders on or about       . 




TABLE OF CONTENTS
 
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PRESENTATION OF INFORMATION

Except as otherwise indicated or unless the context otherwise requires, the information included in this Information Statement about Save-A-Lot assumes the completion of all of the transactions referred to in this Information Statement in connection with the Separation. Except as otherwise indicated or unless the context otherwise requires, references in this Information Statement to “Save-A-Lot,” “our Company,” “the Company,” “us,” “our” and “we” refer to Save-A-Lot, Inc., a Delaware corporation, and its subsidiaries. References to Save-A-Lot’s historical business and operations refer to the business and operations of the hard discount grocery business. Except as otherwise indicated or unless the context otherwise requires, references in this Information Statement to “Supervalu” or “Parent” refer to SUPERVALU INC., a Delaware corporation, and its consolidated subsidiaries, which prior to the Separation, but not after such date, includes the business and operations of Save-A-Lot. Except as otherwise indicated or unless the context otherwise requires, all references to Save-A-Lot per share data assume a distribution ratio of one share of Save-A-Lot common stock for every       shares of Supervalu common stock. Save-A-Lot, Supervalu and their subsidiaries’ names, abbreviations thereof, logos and product and service designators are all either the registered or unregistered trademarks or trade names of Save-A-Lot, Supervalu and their subsidiaries. Names, abbreviations of names, logos and product and service designators of other companies are either the registered or unregistered trademarks or trade names of their respective owners.

All dollar and share amounts in this Information Statement are in millions, except per share amounts and where otherwise indicated.

Non-GAAP Financial Measures
The Company’s Combined Financial Statements are prepared and presented in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company considers certain non-GAAP financial measures to assess the performance of its business and understand underlying operating performance and core business trends, which it uses to facilitate operating performance comparisons of our business on a consistent basis over time. The measures and items identified below, such as Adjusted EBITDA, segment Adjusted EBITDA and segment operating earnings as adjusted are provided as a supplement to our results of operations and related analysis, and should not be considered superior to, a substitute for or an alternative to any financial measure of performance prepared and presented in accordance with GAAP. In each of these measures, certain items are being omitted either because they are non-cash items or are items that are not considered in our supplemental assessment of on-going business performance. Certain of these adjustments are considered in similar supplemental analyses by other companies, such as Depreciation and amortization, Stock-based compensation, impairment charges and certain other adjustments.
We believe these non-GAAP measures are useful to investors because Adjusted EBITDA, segment Adjusted EBITDA and segment operating earnings, as adjusted, provide investors an additional understanding of factors and trends affecting our business in total and in our business segments, which are used in our business planning process to understand expected performance and to evaluate results against those expectations. We believe these measures are more reflective of factors that affect our underlying operating performance and facilitate operating performance comparisons of our business on a consistent basis over time. However, 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 reflected in this Information Statement exclude certain items that are occasionally 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. The non-GAAP financial measures should only be considered as an additional supplement to the Company’s financial results reported in accordance with GAAP and should be reviewed in conjunction with the Company’s results reported in accordance with GAAP in this Information Statement. For our definition, use and a reconciliation of the non-GAAP financial measurements used in this Information Statement, refer to the “Selected Historical Combined Financial and Operating DataNon-GAAP Financial Measures” section of this Information Statement.

Certain Reporting Metrics

A key reporting metric we use to evaluate both our Corporate Stores and Licensee Distribution segments, as well as for our overall network, is identical store sales. For our Corporate Stores segment, identical store sales are defined as the sales attributable to Company-operated stores operating for four full quarters, including store expansions and excluding planned store dispositions. For our Licensee Distribution segment, identical store sales are defined as wholesale sales made to licensee stores operating for four full quarters, including store expansions and excluding planned store dispositions. For our overall network, identical store sales are defined as the sales attributable to Company-operated stores and wholesale sales made to licensee stores operating for four full quarters, including store expansions and excluding planned store dispositions. Planned

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store dispositions are corporate stores that we have announced will close or licensee stores that a licensee has notified us will close, although those stores have not yet closed as of the end of the applicable reporting period.

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SUMMARY

The following is a summary of selected information disclosed in this Information Statement. This summary may not contain all the details concerning the Separation or other information that may be important to you. To better understand the Separation and Save-A-Lot’s business and financial position, you should carefully review this entire Information Statement.

Save-A-Lot Overview
The Save-A-Lot Vision
We aspire to be the hard discount grocery retailer of choice for value-seeking shoppers. Unwavering in this objective, we provide a locally relevant, edited assortment of high-quality products at great prices, served by friendly associates in a convenient shopping experience. Our goal is to continue to enhance our customer experience through the execution of numerous proven initiatives, including the continued refinement of our compelling private-label programs, our fresh cut meat and produce offerings and our tailored merchandise assortments. We believe these initiatives can continue to drive increases in our average sales per store throughout our network. In the United States, where we have virtually all of our operations and where there is a relatively low penetration of hard discount grocers in comparison to Europe and other developed economies, we believe we are poised to benefit from strong industry tailwinds as we continue to improve our customer experience and expand our store concept throughout the country.
Our store concept consists of corporate operated and owned stores (our Corporate Stores segment), as well as stores operated by retailers with whom we maintain strong relationships through the license of our Save-A-Lot name and the supply of our products and services (our Licensee Distribution segment). We believe this flexible ownership model will enable us to substantially expand our network of Save-A-Lot stores in a strategic and prudent manner. Following the separation of our Save-A-Lot business from Supervalu, we believe we will be even better positioned to execute on our growth strategies and achieve our vision.
Our History
Our history began with just a single store in 1977. While working for a grocery wholesaler in the mid-1970s, our founder, Bill Moran, identified an opportunity for small grocers to compete against emerging larger format grocers and created Save-A-Lot’s hard discount business model, which we define as a small grocery store format with an edited assortment of quality products at discount prices every day that are primarily private-label. The first store opened in Cahokia, Illinois, and since then, Save-A-Lot has grown into one of the largest U.S. discount grocery chains by store count. As of June 18, 2016, our store and distribution network encompassed 1,368 corporate and licensed stores in 37 states, the Caribbean and Central America, and 17 wholesale distribution centers.
Overview of the Save-A-Lot Format
As of June 18, 2016, we operated 472 corporate stores, and 896 additional stores were operated by our licensees. As one of the nation’s leading hard discount grocery chains, we and our licensees are everyday low-cost providers of quality products, targeting savings on individual items of up to 15% compared to “large box” discount chains, which we believe can result in savings of up to 30% or more compared to traditional grocery stores depending on the market and competitors. Save-A-Lot stores serve more than five million shoppers each week, mostly in the southern and eastern United States. A typical Save-A-Lot customer has a household income of up to $50 thousand, although our demographics vary across our network of stores and we continue to seek ways to expand our demographic reach. Customers enjoy everyday savings on Save-A-Lot private-label brands and national brands, as well as quality beef, pork and poultry, farm-fresh fruits and vegetables, and non-food items.

We provide a specific and edited assortment of high volume, conveniently sized and low priced items selected to fit our target customer’s needs. Our store merchandising mix is tailored for local preferences through the use of demographic and ethnic specific product offerings. A typical Save-A-Lot store is approximately 17,000 gross square feet in size (with approximately 11,000 square feet of retail selling space on average) and carries approximately 3,000 core stock-keeping units (“SKUs”). Our store format is generally consistent across our network of corporate and licensed stores. We provide merchandising and marketing programs as well as planogram recommendations to our licensees that are based on the programs and planograms created for our corporate stores. Licensees generally adhere to our programs and recommendations, using their local market knowledge in order to effectively customize product offerings, thereby facilitating the adaptability of the store concept across different demographic and economic trade areas.

Our private-label program provides budget conscious consumers a high-quality, low-priced alternative to national brands. Our private-label brands currently include Coburn Farms®, Fairgrounds®, Ginger Evans®, J. Higgs®, Wylwood®, Tio Santi™,

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and the Company’s newest private-label brand, America’s Choicesm. Private-label products account for approximately 60% and 55% of our corporate stores and licensee store retail sales (excluding fresh meat and produce), respectively, which is a significantly higher percentage than in a traditional grocery store. With our private-label offering, we target significant savings for our customers relative to both national brands and private-label brands that are offered by traditional grocery stores and “large box” discount chains.
We recently acquired the America’s Choicesm brand and will be enhancing our private label assortment with the introduction of new and innovative items under this label. Over time, we expect that America’s Choicesm will become the predominant food private label brand in our stores as we seek to consolidate our private label brand offerings by reducing the number of private label brands that we offer while increasing brand recognition and enhancing brand equity.
Corporate Stores vs. Licensee Distribution
We operate two reportable segments: Corporate Stores, a retail format comprising 46% of our revenues in fiscal 2016, and Licensee Distribution, a wholesale format comprising 54% of our revenues in fiscal 2016. Through our Corporate Stores business, we sell groceries at 472 retail locations operated by the Company as of June 18, 2016. Through our Licensee Distribution business, we are the primary grocery supplier to 896 licensed stores as of June 18, 2016. Our licensees operate under the Save-A-Lot name and are provided access to our private-label brands, store programs, operating standards and supervisory support. The network currently spans 37 states along with the Caribbean and Central America.    
Corporate Stores
Our corporate stores are largely concentrated in the southern and eastern United States. Since the end of fiscal 2013, the Corporate Stores segment has grown from 381 to 472 stores. Along with the opening of new corporate stores, Save-A-Lot has from time-to-time opportunistically converted licensee stores to corporate stores. The Company added 50 new corporate stores in fiscal 2016 on a gross basis, through a combination of 42 new store openings and the opportunistic conversion of eight existing licensee stores to corporate stores. We intend to continue to grow our number of corporate stores through a combination of new store openings and attractive licensee conversion opportunities if they arise in the future.
We set high standards for our corporate stores and are constantly working to refine our corporate stores operations. For example, over the last few years, we have implemented a number of initiatives within our corporate stores, including the addition of fresh cut meat departments to virtually all of our corporate stores and the reinvigoration and relocation of our produce departments. We have seen store performance improve as a result. First-year average weekly sales (“AWS”), a common metric to measure store performance during the first full year a store is open, has grown significantly for our corporate stores over the past several years. Across all of our markets, first-year AWS increased approximately 18% from fiscal 2012 to fiscal 2016. While we are pleased with this improvement in first-year AWS over the past few years, we believe we have a number of opportunities to further enhance the sales productivity of our store base in the future. We calculate AWS as corporate stores product sales divided by the number of weeks in a fiscal period excluding the first partial period a store is opened.
We generally open corporate stores in larger markets to establish a presence and build brand awareness. We subsequently may open additional new corporate and/or licensee stores, which further improves our brand awareness in that market and results in

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improved overall market profitability. However, in other select markets, which are smaller and mostly rural, we have largely used licensee operators as an entry strategy, as licensees typically have a more established connection to the local communities.
Licensee Distribution
Our strong licensee base is largely concentrated in the eastern half of the United States. The typical licensee has previous grocery retail business experience along with local community knowledge and relationships. Licensees generally must meet certain criteria to be considered to operate a Save-A-Lot, including minimum net worth, liquid cash available to invest in the store and prior retail experience. In addition, new licensee owners are expected to meet strict operating and store condition standards for a consistent Save-A-Lot brand across the store network.

Our licensees are diverse in terms of the size of their Save-A-Lot operations. We have many licensees that operate a single store as well as a large number who operate several stores. As of June 18, 2016, our largest licensee, who has been operating Save-A-Lot stores for over 30 years, operates 172 stores.


We maintain strong, long-term relationships with our licensees. The average tenure of our licensees is approximately 13 years, and our top 25 licensees (as measured by wholesale purchases), which represents approximately half of our Licensee Distribution segment sales, have an average tenure of nearly 20 years. The support we provide licensees contributes to the strength of those relationships. We provide our licensees with store layouts, shelf planograms, pricing support, merchandising and marketing plans as well as our store set-up expertise to assist in new store openings. We then provide ongoing planogram updates, retail pricing support, store merchandising plans and marketing and field support, which we believe further strengthens our relationships and also improves execution of our consistent store format and standards. By using incentives, such as advertising and other strategies, we work side-by-side with our licensees to help them achieve their goals, while providing customers with a pleasant, convenient and value-oriented shopping experience. Our long-term distribution experience has also strengthened our licensee relationships, allowing our business to maintain licensee store turnover of less than five percent annually.
Our Licensee Distribution business is not a franchise arrangement and we do not charge a royalty fee for the use of our Save-A-Lot name that we provide our licensees. We enter into license and supply agreements with our licensees under which we agree to license our name to the licensees and the licensees agree to purchase their inventory from the Company with some exceptions, including items that we do not carry in our distribution centers and direct store delivery products. Our agreements also give us options to purchase licensed stores under certain circumstances, such as if the licensee desires to sell its store(s).
Key Geographies
Most Save-A-Lot stores are located in the southern and eastern United States, with our corporate stores primarily located in large designated market areas (“DMAs”) (as defined by Nielsen), while our licensee stores are located more equally in large, medium and small DMAs.

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Geographic data as of June 18, 2016

Our stores are generally located within a 250-mile radius of one of Save-A-Lot’s 17 distribution centers. The following map represents the combined Save-A-Lot network as of June 18, 2016. Total Corporate Stores retail store square footage is approximately eight million and total distribution center square footage is approximately five million.
Industry Overview
We operate in the $1 trillion U.S. grocery retail industry an industry that has been transformed over the years, presenting consumers with an increasing number of formats. While the vast majority of consumers’ everyday consumable needs were purchased at a traditional grocery store in the 1990s, today more than 60% of consumables are purchased at other formats, which range from larger stores such as supercenters and wholesale clubs, to smaller square footage retailers, such as dollar stores or hard discount grocers.
Within the broader U.S. grocery and consumables industry, we operate within the hard discount sector, a sub-component of the limited assortment channel. This sector has benefited from industry tailwinds that have similarly benefited other value-oriented

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channels, such as wholesale clubs, supercenters and dollar stores. According to Willard Bishop’s The Future of Food Retailing 2016, this momentum is expected to continue as value-oriented channels are predicted to outpace the broader industry’s growth, with an average projected compound annual growth rate (“CAGR”) over the next five years of 3.2% (vs. 1.8% for the total U.S. grocery and consumables industry).
The chart below illustrates the projected sales growth by channel. As depicted in the chart below, the fresh and limited assortment channels are anticipated to be the two leading growth channels of the U.S. grocery and consumables industry. As a hard discount grocer, we have plans to capitalize on the growth trends of both channels by providing what we believe is a leading fresh food offering (which we define as our fresh meat and produce departments) within the limited assortment channel.
We believe that several trends support the positive outlook for the long-term growth of hard discount grocers who operate within the limited assortment channel, including:
U.S. Market Remains Underpenetrated in Small-Box, Deep-Value Formats: The limited assortment channel represented approximately 3% of the overall U.S. market annual sales in 2015 as illustrated in the pie chart below. With projected annual growth of approximately 8% over the next five years, this channel would still represent less than 5% of the overall market, suggesting that there is significant room for growth over the long-term. Moreover, this channel remains less-established in the U.S. than in comparable developed economies, such as in Europe, where in 2014, according to Planet Retail, UK Discount Grocery, Structural Not Cyclical Change, March 2014, “discounter” penetration of overall grocery market sales was 16%. Discounters, according to Planet Retail, include both the limited assortment and dollar store channels.

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Growth of Value-Conscious Shoppers: We believe the economic slowdown at the end of the previous decade fueled a rise in shoppers seeking ways to spend less, particularly for the items in their grocery carts. As the economy continues to recover, we believe value-conscious shoppers have retained their shopping habits with an increased preference to shop at discount retailers.
Convenience as a Differentiator: We believe that consumers have become increasingly strapped for time, and that dual income families have been on the rise, and that as a result, the demand for convenient solutions to everyday consumable needs has been increasing. Industry participants are addressing consumers’ desire for a convenient shopping experience through smaller store formats located closer to where their customers live or work, while offering a simpler store presentation with a more edited assortment of products.
Increased Customer Acceptance of Private Brand Offerings: Customers are becoming increasingly receptive to purchasing private-label products as a lower-cost alternative to national brands. Over the last several years, private-label penetration in the traditional supermarket channel has increased meaningfully, and we believe now represents an approximate high teens to low 20s percentage of the overall sales mix. Hard discount grocery retailers, including Save-A-Lot, have embraced this trend and have led the industry with respect to the mix of store brand products that they offer their customers. Our private-label program is responsible for approximately 60% and 55% of corporate store and licensee store retail sales, respectively, excluding fresh meat and produce.
 
Business Strengths
Differentiated Store Concept: Our stores provide a differentiated, highly convenient and simplified shopping experience. We focus on quality, low prices and fresh food, including quality produce and fresh cut meat. We believe our unique shopping experience is attractive to customers and builds customer loyalty. Our grocery retailing format is distinguished by the following key attributes:
Simplified Shopping Experience: We provide an easy-to-shop environment in a smaller physical footprint compared to traditional grocery retailers. Our smaller stores provide a simple, time-saving shopping experience while offering products across the major retail food departments, including grocery, frozen, dairy, produce, meat and general merchandise. By focusing on an edited assortment of SKUs of the most purchased products and sizes, our stores are able to meet the needs of the everyday shopper while maintaining a simplified and expedited shopping experience across all key departments. Our SKU requirements per store are approximately 3,000 compared to a traditional grocery store, which typically carries over 20,000 SKUs.
Compelling Value Proposition: Providing our customers with a compelling value proposition is a key tenet of our merchandising strategy. Our edited product assortment, portfolio of private-label brands and efficient supply chain expertise enable us to sell at prices well below other retailers, with targeted savings on individual items of up to 15% compared to “large box” discount chains, which we believe can result in savings of up to 30% or more compared to traditional grocery stores depending on the market and competitors. Our edited assortment, smaller buildings and dedicated distribution network create operating efficiencies for our stores and distribution centers and lower our operating costs. Inventory turns quickly from the time we purchase the product from suppliers to selling it to our customers, which creates efficiencies for our suppliers and allows us to negotiate lower costs of goods. We also leverage our store network of over 1,300 stores to maintain strong supplier relationships and negotiate attractive prices. Our portfolio of high-quality, low-priced, private-label brands is developed to be at least equivalent to national brands in terms of quality while offering substantial savings to our customers as well as higher gross margins for us. All private-

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label products undergo an extensive development process intended to confirm that the products have an attractive flavor profile and are packaged with fresh, modern designs that continue building customer brand recognition. Private-label products account for approximately 60% and 55% of our corporate stores and licensee store retail sales, respectively, excluding fresh meat and produce, which is a significantly higher percentage than in a traditional grocery store.
Differentiated Fresh Program: Save-A-Lot stores carry a selection of fresh meat that is hand cut in-store daily, which we believe sets us apart from other hard discount grocers, and a targeted selection of fresh, high-quality produce tailored to customer needs. Our fresh sales, which we define as fresh meat and produce, typically account for approximately 35% of store sales. We provide customers access to affordable beef, pork and poultry, farm-fresh fruits and vegetables. Our heightened focus on product handling, rotation and merchandising has improved the high standards of our produce.
Convenient Store Locations: Our smaller store format enables our stores to be located in convenient and attractive locations that permit us to serve customers across a range of large, medium and small DMAs and rural to urban communities. We are able to open stores in existing locations or new in-line and freestanding locations with convenient, nearby parking facilities.

Flexible Store Ownership Model: Historically, our core focus has been our Licensee Distribution business, which has driven much of our growth since our founding. In recent years, our corporate stores have become an increasingly important component of our overall strategy. We plan to pursue a flexible, dual ownership model, in which we intend to efficiently utilize both our corporate stores as well as our licensees to grow the business, enabling us to execute a tailored expansion strategy best suited for each specific market. Generally, corporate stores are better suited for first time expansion into dense, competitive urban areas and larger DMAs where capital investment is needed to build Save-A-Lot brand recognition. We have planned and are executing on a corporate stores-led expansion strategy in markets such as Los Angeles and Las Vegas, where corporate stores are anticipated to more quickly gain a foothold in the more urban, larger markets.
In certain markets, licensee operators augment our corporate stores in the market and further assist in leveraging our distribution center infrastructure and marketing penetration. The licensee model works especially well in expanding Save-A-Lot’s presence in geographically remote and smaller markets or in supplementing Save-A-Lot’s corporate store growth in larger DMAs such as suburban regions around major urban areas. Experienced licensee operators are also able to expand the footprint in more rural areas where Save-A-Lot has had little presence, such as Colorado and Iowa. Licensees who have strong ties to a rural area are often best suited to open a new Save-A-Lot in the community, given their knowledge of the local market and resulting ability to implement tailored and efficient merchandising strategies and to effectively market their stores in smaller towns. We believe that our ability to enter and compete in varying markets with a customized corporate and licensee ownership approach has helped, and will continue to help, facilitate successful store operations and long-term store growth.

Highly Efficient Distribution Capabilities That Can Support a Growing Store Footprint: We utilize a large-scale, efficient distribution network to service the needs of our licensed and corporate stores. Our 17 distribution centers, including 15 “full-line” facilities that handle dry, refrigerated and frozen food product orders, are strategically located throughout the United States to provide inventory in a cost-effective manner to our stores. We are able to leverage our fixed logistics costs in addition to realizing economies of scale around procurement, merchandising, transportation, promotions, advertising and pricing.
The investments in our distribution network and processes have allowed us to expand in existing markets and into new markets. Our existing distribution network covers the densely populated regions of the eastern and southern United States. As indicated in the map below, our distribution network extends west through our distribution center in California and our new distribution center in Denver, giving us supply capabilities covering the relatively untapped markets of California, Colorado, parts of Arizona and parts of Nevada.

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Distribution center and store location data as of June 18, 2016
With the investments in our distribution network, we believe we have sufficient capacity to execute on our store growth strategies. We estimate that our current distribution infrastructure can support approximately 700 incremental stores, based on our typical store format. Our supply network’s reach and available capacity provides us with the flexibility to expand into new markets and enhance our presence in existing markets.
In addition to expanding our distribution footprint, we continuously work to improve the efficiency and cost effectiveness of our distribution network. For example, we have made capital investments in our refrigeration systems, lighting and internal/external doors that have resulted in meaningful reductions in electrical usage. We expect to continue to increase the back-haul allowances we receive from our vendors over time, and we are also in the process of implementing labor standards throughout our network that are designed to create more efficient workflow in the distribution centers and enhance productivity.
Well Positioned for Growth: We have made meaningful investments in our business over the past few years to improve our pricing and enhance our shopping experience, assortment of product offerings, brand image and confidence of our licensees. We believe these investments better position us for future success as we look to grow our network. These investments have included:

Pricing: In fiscal 2014, we invested in gross margin by lowering prices at our corporate stores as well as the prices we charged to our licensees. We are committed to staying competitive on price and will continue to assess ways to pass along future savings to our customers and licensees in the form of lower prices.
Merchandising assortments and store design: Over the past few years, we have made a number of investments in our merchandise offering and presentation and the design and layout of our stores, including:
Added a fresh cut meat program to virtually all of our corporate stores (substantially all of our licensees also have this program).
Expanded our frozen and smoked meat departments.
Reinvigorated our produce departments and their relocation to the front of the store.
Improved our assortment of products, adding new items to replace slower moving items for approximately 20% of our SKUs.
Updated the labels and packaging of nearly all of our private-label products.
Expanded our ethnic offerings.
Inserted approximately 130 “must have” national brand items into our corporate stores in fiscal 2017.

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Brand awareness: We increased our marketing and advertising investment in a variety of channels, including digital, print and community involvement to build brand awareness, drive customer traffic and create awareness of the various in-store initiatives to both current as well as potential customers.
 
Great People: We believe that our people are an integral component of our success. On December 2, 2015, we announced that retail veteran Eric Claus had been named our new Chief Executive Officer and he started in his role with Save-A-Lot on December 14, 2015. Mr. Claus brings with him over 30 years of experience in the retail industry where he has gained deep experience in both discount and grocery retail in both the United States and Canada, most recently serving as the Chairman, President and Chief Executive Officer of Red Apple Stores Inc., a 155-store value-oriented clothing, general merchandise and food chain in Canada. Mike Collins was named Chief Financial Officer in January 2016 and brings with him over 25 years of finance and business experience, including serving as Chief Financial Officer of Sears Holding Corporation and more recently serving as Chief Financial Officer of NBTY, which manufactures, wholesales and retails vitamins, minerals, herbs and sports drinks. Nancy Chagares is serving as the Chief Merchandising Officer of Save-A-Lot and has over 20 years of experience in the retail industry, including serving as Senior Vice President Fresh Foods at Bi-Lo Holdings and Senior Vice President Merchandising and Marketing at Jewel-Osco, and most recently as a partner at a consulting group that provides advice to food retailers and manufacturers on sales, merchandising, product development, brand marketing and operations. These executives supplement a well-experienced management team.
In addition to our seasoned executive management team, we rely on the passion and knowledge of our store associates. We and our licensees continually invest in training and development programs to enhance our associates’ knowledge and skill sets.  In turn, our and our licensees’ associates are well prepared to execute in-store Save-A-Lot programs that drive sales and ensure brand consistency across our store network. Our experienced store managers and operations specialists have an average tenure of approximately eight years.
Strategy
Our long-term strategy is focused on driving profitability and store unit growth in both of our business segments Corporate Stores and Licensee Distribution. We employ a three-pronged approach: (1) increase the sales per store productivity across our network, (2) grow and optimize our Save-A-Lot store network through our flexible store ownership model and (3) identify and implement operational efficiencies and continue to seek effective methods of managing costs in order to increase our profitability and pass through a portion of the savings to our customers and licensees in the form of lower prices.
Increase Sales Per Store Productivity of Our Save-A-Lot Network: We plan to drive same-store sales growth by executing merchandising programs that provide customers with a locally relevant assortment of high-quality products, differentiated fresh and private brands offerings and a compelling value proposition. We complement our merchandising efforts with marketing and promotions that are focused on increasing brand awareness, improving our value perception and supporting our growth strategy. Key elements of our strategy to drive sales productivity within our stores include:
Deliver Exceptional Fresh Offerings: We believe our fresh offerings and programs are key differentiators of the Save-A-Lot brand. We continue to refine and enhance our meat and fresh produce selection to increase ethnic and regional relevance. For example, in fiscal 2015, we completed the implementation of an on-site meat cutting program in our corporate stores that allows us to provide fresh, locally relevant offerings that can be tailored to meet customers’ needs. Moreover, we plan to continue to invest in associate in-store training in an effort to provide perishable offerings that are best in class.
Optimize the Offering of Our Private and National Brands:
Continue to Enhance Our Private-Label Offering: Our portfolio of high-quality private-label products are an integral component of our customer value proposition. We will continue to innovate and refine our exclusive merchandising offering with the goal of driving product excitement and enticing customers to shop our stores and increase their basket of purchases. We will also continue to optimize our assortment and consolidate our private-label brand names over time. We recently acquired the America’s Choicesm brand and will be enhancing our private label assortment with the introduction of new and innovative items under this label. Over time, we expect that America’s Choicesm will become the predominant food private label brand in our stores. We will seek to consolidate our private label brand offerings by reducing the number of private label brands that we offer, which currently consists of approximately 70 brands, while increasing brand recognition and enhancing brand equity of America’s Choicesm along with approximately five supporting brands.
Strategically Incorporate National Brand Products Into Our Offering to Drive Customer Traffic: We provide our customers with a highly convenient and edited assortment of consumables. While adhering to this strategy, we will continue to supplement our high-quality private-label offering with certain traffic-driving “must have” national brand products. Beginning in fiscal 2017, all corporate stores and the vast majority of licensed stores executed the insertion of approximately 130 “must have” national brand items. This targeted

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merchandising approach will enable us to provide our customers with enhanced selection while also highlighting the value that our private-label equivalent products provide. We believe the changes to our private label assortment and the introduction of select national brands will be well received by our current customers while also attracting and retaining new customers, and is an important step in expanding our customer base. We are encouraged by the initial results.
Targeted Value Proposition for our Customers: We recently hired a dedicated team that will seek “special buys” that change throughout the year and offer opportunities for greater savings through “treasure hunt” style deals. We will also soon have supporting website capabilities for our licensees so that they can see opportunistic product availability and order for their store(s).
Use Targeted Marketing and Promotions to Drive Traffic and Increase Brand Awareness: We plan to utilize multi-pronged marketing and promotional strategies, including the use of print, mass media and digital communication channels to drive brand awareness and customer traffic. These strategies will incorporate our recent improvements in content, cadence and frequency of our programs. Our messaging will continue to stress local relevance and emphasize quality and great prices. For example, in select areas we advertise in community and Spanish language publications emphasizing our ethnic product offerings and low prices. In addition, when entering a new market, we use an omni-channel marketing approach that is executed through a multi-phase store opening process to build brand awareness while maximizing customer attraction and retention.
Drive In-Store Execution: We believe we have a number of opportunities to improve the “look and feel” of our stores, including the continued refinement of our visual presentations, our merchandising sets and our product adjacencies. In fiscal 2017, we expect that approximately two-thirds of all corporate stores will be redesigned to expand on growth and high gross margin departments such as produce, bakery, dairy and frozen. In addition, we expect that all corporate stores will undergo a merchandising center store reset designed to expand on growth categories while reducing non-growth categories. It is our expectation that approximately two-thirds of our licensed stores will incorporate parts or all of our new design features in Fiscal 2017. We will continue to work with our operations specialists to execute these strategies, which we believe will drive increased sales productivity throughout the Save-A-Lot network. Our operations specialists execute in-store programs in our corporate stores and work with licensees to implement the programs in their stores as well, which we believe supports sales in our Licensee Distribution business. We monitor licensee adherence to our Save-A-Lot programs to help achieve a consistent Save-A-Lot brand across the network.
Create and Implement Locally Relevant Merchandising Programs: We will continue to tailor our assortment of products to customers in different demographic and economic areas. For example, in select markets, we have launched an ethnic merchandising program focused primarily on Hispanic customers in certain of our corporate stores where we believed that such products and merchandising would have traction.

Grow Our Save-A-Lot Store Network:  We plan to grow our store footprint through the opening of both corporate and licensed stores. We believe the United States can support more than 3,500 Save-A-Lot stores under our existing store concept and layout.  We expect that the total number of potential stores could expand over time as the Save-A-Lot concept evolves.  We opened 80 new corporate and licensee stores in fiscal 2016 and plan to open approximately 75 new corporate and licensee stores on a gross basis in fiscal 2017, and to maintain mid-to-high single digit rates of annual new store growth in future years. Our expected store growth in fiscal 2017 reflects a modest reduction from fiscal 2016 as we reallocate capital to the corporate store redesigns and retro-fits in fiscal 2017.
Our near-term expansion plans are focused on growing our network in current and adjacent markets. In our Corporate Stores segment, a significant majority of our new stores are expected to be opened in markets where we currently have an established presence. We have refined our disciplined and analytical new location identification process, incorporating additional internal and external resources that consider many site characteristics, including population density, demographics, competitor proximity and location within the shopping center. We have also refined our geographical analysis by analyzing smaller, more targeted areas and are redeploying our resources accordingly. We plan to be more strategic in growth site selection while remaining opportunistic. In addition to opening new stores where we already have an established market presence, we plan to continue our expansion in the western half of the United States. For example, we recently entered the Las Vegas market and plan to grow our presence there over time. We also plan to further penetrate the Los Angeles market in the near to medium term. In our Licensee Distribution segment, we drive new licensed store development by targeting existing and potential licensees through focused advertising, participation in trade associations, and the efforts of our internal team of development specialists. Our experienced real estate professionals execute a rigorous site selection process and work closely with local real estate brokers to identify optimal locations.
We believe there are compelling reasons for our continued focus on a balanced growth strategy. We believe that corporate stores are better suited for certain markets, particularly dense urban areas, and licensee stores are better suited in rural areas where licensees are able to effectively market their stores in smaller towns. Furthermore, we have greater control over the growth trajectory and timing of opening new corporate stores. In addition, by operating corporate stores, we believe that we can

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more quickly implement strategy changes and capitalize on opportunities and be more nimble in today’s ever-changing grocery retail environment. While our Corporate Stores segment has had a lower Operating earnings margin ((0.3)% compared to 7.7% in fiscal 2016) and Adjusted EBITDA margin (2.8% compared to 8.1% in fiscal 2016) than our Licensee Distribution segment, we believe our Corporate Stores segment Operating earnings margin and Adjusted EBITDA margin can expand over time as we (1) improve the sales-per-store productivity of our network through the execution of the in-store initiatives described above, (2) increase the store density within certain markets and (3) leverage our fixed expenses as we open new corporate stores. We expect that unit growth will be driven by new licensee stores and corporate stores over the next few years. We believe that growth in our corporate store base, through a more refined and strategic site expansion process and the resulting maturation of our newer markets, combined with continued improvements in our operations including through the enhancements in our merchandising, will further attract existing and new licensees to increase the number of Save-A-Lot units they operate.
Adjusted EBITDA and each of Corporate Stores, Licensee Distribution and Corporate segment Adjusted EBITDA are non-GAAP financial measures. Adjusted EBITDA, segment Adjusted EBITDA and segment operating earnings, as adjusted, provide investors an additional understanding of factors and trends affecting our business in total and in our business segments, which are used in our business planning process to understand expected performance and to evaluate results against those expectations. We believe that these measures are more reflective of factors that affect our underlying operating performance and are not considered in our supplemental assessment of on-going business performance. For a reconciliation of all non-GAAP financial measurements used in this Information Statement, see “Selected Historical Combined Financial and Operating Data—Non-GAAP Financial Measures.”
We believe we have an attractive new store economic model for both our new corporate stores and our new licensed stores:
Corporate Stores: Our corporate stores average approximately 17,000 square feet in size and typically require an upfront store-level investment of approximately $1.4, which includes leasehold improvements, store equipment, net working capital and landlord rebates. For the corporate stores we approved to open in fiscal 2016, we are expecting to generate average annual store-level sales of approximately $5 with average annual cash store-level operating expenses (defined as estimated annual store-level operating expenses but excluding non-cash expenses such as depreciation and amortization) and variable distribution expenses of approximately $4.8.  This results in an expected average mid-teens store-level return on invested capital (defined as the estimated annual store-level sales less the store-level cash operating expenses and variable distribution expenses, divided by the amount of the upfront store-level investment) in the second full year of operation, which we expect to approach 20% by the fifth year of a store’s operation.
Licensed Stores: We have a strong licensee base that we believe can continue to grow. We offer financial incentives to our licensees to reduce their upfront costs of opening new stores. We view the amount of these incentives as a meaningful inducement for new and existing licensees to open stores, grow their businesses and thus expand our network of stores and our overall profitability. We continue to refine the incentive structures we provide so that we can further support our licensees as they look to expand their Save-A-Lot store base. New licensees are also offered training and comprehensive support services in connection with opening a new store. We have an efficient operating infrastructure in place to support our licensees, which has also helped to generate an attractive Adjusted EBITDA margin in our Licensee Distribution segment in fiscal 2016 of 8.1%. The addition of licensed stores results in a positive investment return to Save-A-Lot relative to the financial incentives we provide.

Expenses associated with new corporate store openings typically include store employee training costs, licensing, new store advertising and marketing costs, and certain store establishment costs. Expenses associated with new licensee store openings typically include licensee incentives, potential rebates and promotions on product purchases and nominal administrative costs associated with systems setup and licensee agreement execution.
Expenses associated with converting a licensee store to a corporate store include certain new store advertising and marketing costs and store establishment costs. Typically, there are not significant operating expenses associated with converting a licensee store to a corporate store.
Optimize Our Store Network: We have a compelling store format that appeals to customers across a range of geographies and demographic areas. As we look to profitably grow our store network while leveraging our dual ownership model, we will also actively manage the ownership structure of our existing portfolio of 1,368 Save-A-Lot stores. As some of our corporate stores may be better operated as licensee stores and vice versa, we will continue to monitor and analyze ways to optimize our store base. We currently have a number of corporate stores in more geographically remote markets that could better serve our customers under licensee ownership. We will look for opportunities to transfer the ownership of these stores to new and existing licensees over the next few years. Similarly, Save-A-Lot has from time-to-time opportunistically converted licensee stores to corporate stores and will continue to consider conversions in the future, particularly for stores in larger, more densely populated markets.

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Improve Operational Efficiencies and Continue to Manage Costs to Offer Compelling Value to Our Customers: As a hard discount operator and service provider, we are continuously seeking ways to simplify processes and reduce costs in order to increase profitability and to pass through a portion of the related savings to our customers in the form of lower prices. Our efforts are focused in our stores, supply chain network and administrative functions. Key elements of this strategy include:
Removing Costs from Corporate Stores: We continue to identify and execute initiatives to reduce costs at our corporate stores which include efforts to optimize our store labor model, minimize non-labor store operating expenses, and reduce facilities-related operating costs.
Leveraging Scale Economies and Reducing Supply Chain Costs: We work closely with our vendors to drive cost savings in our supply chain which becomes increasingly important as we add additional volume into the network. In addition, we continue to refine our already efficient logistics infrastructure by implementing key initiatives to lower freight-related costs, increase back-haul allowances, optimize labor staffing and maximize utilization of our distribution centers. With available capacity in our supply chain, additional network growth will allow us to leverage our existing distribution centers and our transportation routes.
Investing in Information Technology: We have identified a number of information technology initiatives that we believe will help drive the productivity of our network. These include a deal portal, that will allow licensees access to special deals on extremely limited product at great prices; an assisted replenishment system that will provide recommended ad and replenishment order quantities, improving inventory levels and in-stock positions; and a transportation management solution, which will seek to lower our cost of transportation across the network through route optimization and improved inbound planning and execution.
Operating a Lean Corporate Infrastructure: We plan to operate a lean store support center and will pursue options that will help achieve a low-cost infrastructure for our business.
Summary Risk Factors
An investment in Save-A-Lot common stock is subject to a number of risks, including risks related to Save-A-Lot’s business, the Separation and Save-A-Lot common stock. You should carefully read the risk factors set forth in the section entitled “Risk Factors” in this Information Statement. 
The Separation and Distribution
On July 28, 2015, Supervalu announced that its board of directors had authorized the exploration of a plan to separate its Save-A-Lot business from Supervalu. Supervalu currently intends to effect the Separation through a pro rata Distribution of approximately 60% of the common stock of Save-A-Lot to Supervalu’s stockholders, which will not be eligible for treatment as a tax-free distribution for U.S. federal income tax purposes. The number of shares of Supervalu common stock you own will not change as a result of the Separation. Supervalu may propose a reverse stock split for approval by its stockholders, which we expect would increase the per-share trading price, but not the aggregate market value, of Supervalu common stock.
On        , the Supervalu board of directors approved the Distribution of the issued and outstanding shares of Save-A-Lot common stock on the basis of one share of Save-A-Lot common stock for every       shares of Supervalu common stock held as of the close of business, Eastern time, on       , the record date for the Distribution.
Save-A-Lot’s Post-Separation Relationship with Supervalu
Following the Distribution, we expect that Supervalu stockholders will directly own approximately 60% of the outstanding shares of common stock of Save-A-Lot, and Save-A-Lot will be a separate company from Supervalu. Supervalu currently expects to retain approximately 40% of the outstanding shares of common stock of Save-A-Lot immediately following the Distribution. Supervalu plans to dispose within 24 months of the Distribution of a portion of the retained Save-A-Lot stock sufficient to reduce Supervalu’s ownership of Save-A-Lot stock to 20% or less. Supervalu has no plans to acquire any additional Save-A-Lot common stock following the Distribution.
After the Distribution, Supervalu and Save-A-Lot will be separate companies with separate management teams and separate boards of directors. Save-A-Lot will have entered into a separation agreement and a distribution agreement with Supervalu, which is referred to in this Information Statement together as the “separation and distribution agreement.” In connection with the Separation, Save-A-Lot will also enter into various other agreements to effect the Separation and provide a framework for its relationship with Supervalu after the Separation, including a services agreement, a tax matters agreement, an employee matters agreement and a stockholder’s agreement. These agreements will provide for the Separation between Save-A-Lot and Supervalu of the assets, employees, liabilities and obligations (including property, employee benefits and tax liabilities) of Supervalu and its subsidiaries attributable to periods prior to, at and after Save-A-Lot’s Separation from Supervalu, and will govern the relationship between Save-A-Lot and Supervalu subsequent to the completion of the Separation.

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For additional information regarding the separation and distribution agreement and other transaction agreements, see the sections entitled “Risk Factors—Risks Related to the Separation and Save-A-Lot’s Relationship with Supervalu” and “Certain Relationships and Related Party Transactions” elsewhere in this Information Statement.
Reasons for the Separation
Supervalu’s board of directors believes that separating the Save-A-Lot business from Supervalu is in the best interests of Supervalu and its stockholders for a number of reasons, including:
The Separation will enable each company to focus on its own distinct operations and strategies, and permit the management of each company to concentrate efforts on its unique customers and market conditions.
The Separation will position Save-A-Lot as an independent hard discount grocery business and enable it to focus on and strengthen relationships with its licensees and customers.
The Separation will also enable Save-A-Lot to make investment, personnel and operational decisions better aligned with its licensees and customer base.
The Separation will permit each company to concentrate its financial resources solely on its own operations without having to compete with each other for investment capital.
The Separation will enable Save-A-Lot to optimize its investment strategies and invest in capital-intensive long-term programs that may not meet Supervalu investment objectives and provide Save-A-Lot with direct access to debt and equity capital markets, enabling it to fund desired growth strategies based on its own targeted return rates.
The Separation will allow Save-A-Lot to invest capital and focus on higher growth opportunities in its hard discount grocery business.
The Separation will focus Save-A-Lot leadership on program execution and customer needs and relieve the demands on the time and attention of Supervalu’s management and board of directors associated with overseeing Save-A-Lot’s operations and growth strategy.
The Separation will reduce internal competition for capital among existing Supervalu segments, and facilitate a more efficient allocation of capital and capital structure.
The Separation will allow investors to separately value Supervalu and Save-A-Lot based on their distinct investment identities. Save-A-Lot’s hard discount grocery business differs from Supervalu’s wholesale distribution and retail food businesses in several respects, such as the nature of the business and growth profile.
The Separation will enable investors to evaluate the merits, performance and future prospects of each company’s respective business and to invest in each company separately based on these distinct characteristics, which may attract new investors to each business who may not have properly assessed the value of the businesses as stand-alone entities relative to the value they are currently accorded.
The Separation will improve the ability of both Supervalu and Save-A-Lot to use their respective stock as acquisition currency.
The Separation will facilitate incentive compensation arrangements for employees that are more directly tied to the performance of each of Save-A-Lot’s and Supervalu’s respective businesses, facilitating employee hiring and incentivization.
Corporate Information
Save-A-Lot was incorporated in Delaware on October 19, 2015. The address of Save-A-Lot’s principal executive office is 100 Corporate Office Drive, Earth City, Missouri 63045. Save-A-Lot’s telephone number after the Distribution will be 314-592-9100. Save-A-Lot maintains an Internet site at www.save-a-lot.com. Save-A-Lot’s website and the information contained therein or connected thereto shall not be deemed to be incorporated herein, and you should not rely on any such information in making an investment decision.
Internal Restructuring and Preferred Stock Issuance
Prior to the Distribution, Supervalu will complete an internal corporate restructuring to transfer the businesses and assets that are part of its Save-A-Lot business to Save-A-Lot. In addition, prior to the completion of the Distribution, third-party investors unrelated to Supervalu will acquire all of the shares of the Series A (non-voting) cumulative perpetual preferred stock (the “Series A preferred stock”) of Save-A-Lot. See “The Separation and Distribution—Internal Restructuring and Preferred Stock Issuance” and “Description of Capital Stock—Preferred Stock—Series A Preferred Stock.”
Corporate Structure
The following diagram depicts the corporate structure that we currently expect immediately after giving effect to the internal restructuring, the Distribution and the other transactions described in this Information Statement:


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* Within the two-year period following the Distribution of Save-A-Lot shares, Supervalu intends to dispose, in an orderly fashion, of sufficient shares of Save-A-Lot common stock to decrease Supervalu’s ownership stake in Save-A-Lot to 20% or less.
Reason for Furnishing this Information Statement
This Information Statement is being furnished solely to provide information to stockholders of Supervalu who will receive shares of Save-A-Lot common stock in the Distribution. It is not, and is not to be construed as, an inducement or encouragement to buy or sell any of Save-A-Lot’s securities. The information contained in this Information Statement is believed by Save-A-Lot to be accurate as of the date set forth on the cover of this Information Statement. Changes may occur after that date, and neither Supervalu nor Save-A-Lot will update the information except in the normal course of their respective disclosure obligations and practices, or as required by applicable law.
Summary Historical Combined Financial and Other Data
The following table summarizes Save-A-Lot’s historical combined financial and other data and summary pro forma combined financial data as of the dates and for the periods indicated. We derived the combined financial and operating data for the 16 weeks ended June 18, 2016, and June 20, 2015 and the combined balance sheet data as of June 18, 2016, from our unaudited interim combined financial statements, which are included elsewhere in this Information Statement. In management's opinion, the unaudited interim combined financial statements have been prepared on the same basis as the audited combined financial statements and include all adjustments, consisting only of ordinary recurring adjustments, necessary for a fair presentation of the information for the periods presented. We derived the combined financial and operating data for the three fiscal years ended February 27, 2016, February 28, 2015 and February 22, 2014, and the combined balance sheet data as of February 27, 2016 and February 28, 2015, as set forth below, from our audited combined financial statements, which are included elsewhere in this Information Statement. We derived the combined balance sheet data as of June 20, 2015 from our unaudited interim combined financial statements that are not included in this Information Statement. We derived the combined balance sheet data as February 22, 2014 from our audited combined financial statements that are not included in this Information Statement.

Our combined financial information may not necessarily reflect our financial position, results of operations or cash flows as if

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we had operated as a stand-alone, public company during all periods presented, as this combined financial information does not reflect changes that will occur in our operations and capitalization as a result of the Separation from Supervalu and the Distribution. Accordingly, our historical results should not be relied upon as an indicator of our future performance.
The following table should be read together with, and is qualified in its entirety by reference to, the historical combined financial statements and the related notes included elsewhere in this Information Statement. Among other things, the historical combined financial statements include more detailed information regarding the basis of presentation for the information in the following table. The table should also be read together with the sections entitled “Capitalization,” “Unaudited Pro Forma Combined Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The summary unaudited pro forma consolidated financial data for the fiscal year ended February 25, 2017 has been prepared to give effect to the Separation and the Distribution in the manner described under “Unaudited Pro Forma Combined Financial Statements” and the notes thereto. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. The summary unaudited pro forma consolidated financial data are for informational purposes only and do not purport to represent what our results of operations actually would have been if the Separation and the Distribution had occurred on the date assumed, do not purport to project the results of operations for any future period and should not be relied upon as an indicator of our future performance.
 
First Quarter Ended
 
Fiscal Year Ended
(in millions, except per share amounts and stores)
Pro Forma(9)  June 18,
2016
(16 weeks)
 
June 18, 
 2016 
 (16 weeks)
 
June 20, 
 2015 
 (16 weeks)
 
Pro Forma(9) 
2016
(52 weeks)
 
2016
(52 weeks)
 
2015
(53 weeks)
 
2014
(52 weeks)
Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
 
$
1,432

 
$
1,408

 

 
$
4,623

 
$
4,641

 
$
4,254

Cost of sales
 
 
1,202

 
1,185

 

 
3,913

 
3,952

 
3,600

Gross profit
 
 
230

 
223

 

 
710

 
689

 
654

Selling and administrative expenses
 
 
197

 
177

 

 
598

 
551

 
503

Operating earnings(1)
 
 
33

 
46

 

 
112

 
138

 
151

Interest expense, net
 
 
1

 

 

 
3

 
1

 
1

Earnings before income taxes(1)
 
 
32

 
46

 

 
109

 
137

 
150

Income tax provision
 
 
12

 
18

 

 
42

 
53

 
57

Net earnings
 
 
$
20

 
$
28

 

 
$
67

 
$
84

 
$
93

Pro forma net earnings per share(2)
 
 
n/a

 
n/a

 
 
 
n/a

 
n/a

 
n/a

Cash Flows
 
 
 
 
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities
 
 
$
2

 
$
43

 
 
 
$
154

 
$
103

 
$
141

Net cash used in investing activities
 
 
$
(22
)
 
$
(18
)
 
 
 
$
(105
)
 
$
(95
)
 
$
(38
)
Net cash provided by (used in) financing activities
 
 
$
20

 
$
(26
)
 
 
 
$
(49
)
 
$
(6
)
 
$
(102
)
Financial Position
 
 
 
 
 
 
 
 
 
 
 
 
 
Working capital
 
 
$
77

 
$
71

 
 
 
$
34

 
$
48

 
$
5

Total assets
 
 
$
1,002

 
$
948

 
 
 
$
991

 
$
948

 
$
859

Total debt and capital lease obligations
 
 
$
10

 
$
4

 
 
 
$
10

 
$
4

 
$
5

Other Statistics
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization(3)
 
 
$
24

 
$
22

 
 
 
$
71

 
$
65

 
$
65

Capital expenditures(4)
 
 
$
21

 
$
18

 
 
 
$
114

 
$
79

 
$
41

Adjusted EBITDA(5)
 
 
$
61

 
$
73

 
 
 
$
219

 
$
217

 
$
234

Licensee Distribution identical store sales percentage(6)
 
 
(1.8
)%
 
(1.1
)%
 
 
 
(3.0
)%
 
4.4
%
 
(1.4
)%
Corporate Stores identical store sales percentage(7)
 
 
(1.0
)%
 
2.8
 %
 
 
 
0.6
 %
 
7.6
%
 
2.6
 %
Save-A-Lot network identical store sales percentage(8)
 
 
(1.4
)%
 
0.6
 %
 
 
 
(1.4
)%
 
5.8
%
 
0.2
 %
Store Network
 
 
 
 
 
 
 
 
 
 
 
 
 
Licensee Distribution stores supplied
 
 
896

 
902

 
 
 
897

 
903

 
948

Corporate Stores
 
 
472

 
433

 
 
 
463

 
431

 
382

Total Save-A-Lot network stores
 
 
1,368

 
1,335

 
 
 
1,360

 
1,334

 
1,330


17


(1)
Pre-tax items recorded in the first quarters of fiscal 2017 and fiscal 2016 included $3 of Supervalu-allocated Separation-related costs.
Pre-tax items recorded in fiscal 2016 included $15 of Supervalu-allocated Separation-related costs, $11 of store closure and impairment charges, $2 of employee-related costs and $1 of Supervalu-allocated severance costs.
Pre-tax items recorded in fiscal 2015 included $4 of Supervalu-allocated items attributable to pension settlement charges and a benefit plan charge and $3 of store closure and impairment charges.
Pre-tax items recorded in fiscal 2014 included a $5 legal settlement charge, $4 of asset impairment charges, $2 of severance costs and $2 of Supervalu- allocated items attributable to severance costs and other charges.
(2)
The calculations of pro forma net earnings per share for the periods presented are based on the number of shares used to calculate Supervalu common stock outstanding for the first quarters of fiscal 2017 and fiscal 2016, adjusted for the distribution ratio of one share of Save-A-Lot common stock for every        shares of Supervalu common stock outstanding. In calculating pro forma net earnings per share, net earnings available to common stockholders are reduced by the amount of dividends accumulated in the period attributable to the Series A preferred stock. The calculation does not include the number of outstanding shares of Series A preferred stock. Historical net earnings per share are not calculable because the financial statements included in this Information Statement have been prepared on a combined basis and have not been prepared for a separate legal entity that had share capital throughout the historical periods presented.
(3)
Depreciation and amortization expense presented here includes Supervalu-allocated depreciation expense of $2 and $2 for the first quarters of fiscal 2017 and 2016, respectively, and $5, $3 and $3 for fiscal 2016, 2015 and 2014, respectively.
(4)
Capital expenditures include cash payments for purchases of property, plant and equipment and non-cash capital lease additions and exclude business acquisitions and capitalized property, plant and equipment additions within Accounts payable.
(5)
Adjusted EBITDA is a non-GAAP financial measure that the Company provides as a supplement to our results of operations and related analysis, and should not be considered superior to, a substitute for or an alternative to any financial measure of performance prepared and presented in accordance with GAAP. Refer to the “Selected Historical Combined Financial and Operating Data” section of this Information Statement for further information.
(6)
Licensee Distribution identical store sales are defined as wholesale sales made to licensee stores operating for four full quarters, including store expansions and excluding planned store dispositions.
(7)
Corporate Stores identical store sales are defined as the sales attributable to Company-operated stores operating for four full quarters, including store expansions and excluding planned store dispositions.
(8)
Save-A-Lot network identical store sales are defined as the sales attributable to Company-operated stores and wholesale sales made to licensee stores operating for four full quarters, including store expansions and excluding planned store dispositions.
(9)
Pro forma financial information, including adjustments prepared in accordance with Article 11 of Regulation S-X, have been derived from the historical combined financial statements of Save-A-Lot, after giving effect to Save-A-Lot’s anticipated capital structure and transactions resulting from the Separation and the Distribution. Refer to the “Unaudited Pro Forma Combined Financial Statements” section of this Information Statement for further information.


18


QUESTIONS AND ANSWERS ABOUT THE SEPARATION AND DISTRIBUTION
What is the Separation?
The Separation is the method by which Save-A-Lot will separate from Supervalu. To complete the Separation, Supervalu currently expects to distribute to its stockholders approximately 60% of the shares of Save-A-Lot common stock.
 
Following the Distribution, we currently expect that Supervalu stockholders will own approximately 60% of the outstanding shares of common stock of Save-A-Lot, and Save-A-Lot will be a separate company from Supervalu. Supervalu currently expects to retain approximately 40% of the outstanding shares of common stock of Save-A-Lot immediately following the Distribution. Supervalu plans to dispose within 24 months of the Distribution of a portion of the retained Save-A-Lot stock sufficient to reduce Supervalu’s ownership of Save-A-Lot stock to 20% or less. Supervalu has no plans to acquire any additional Save-A-Lot common stock following the Distribution.

The number of shares of Supervalu common stock you own will not change as a result of the Separation.
What is Save-A-Lot?
Save-A-Lot is a wholly owned direct subsidiary of Supervalu whose shares will be distributed to Supervalu stockholders if we complete the Separation. After the Distribution, Save-A-Lot will be an independent public company and will continue its operations of hard discount grocery retailing.
What will I receive in the Distribution?
As a holder of Supervalu common stock, you will retain your Supervalu shares and will receive one share of Save-A-Lot common stock for every       shares of Supervalu common stock you own as of the record date. Your proportionate interest in Supervalu will not change as a result of the Separation. For a more detailed description, see “The Separation and Distribution” beginning on page 41.
Will Save-A-Lot issue fractional shares of its common stock in the Distribution?
No. Save-A-Lot will not issue fractional shares of its common stock in the Distribution. Fractional shares that Supervalu stockholders would otherwise be entitled to receive in the Distribution will be aggregated and sold in the public market by the distribution agent. The aggregate net cash proceeds of these sales will be distributed pro rata (based on the fractional share such holder would otherwise be entitled to receive) to those Supervalu stockholders who would otherwise have been entitled to receive fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payment made in lieu of fractional shares.
When is the record date for the Distribution?
The record date for the Distribution is       .
When will the Distribution occur?
We expect the Distribution of the shares of Save-A-Lot common stock to occur on       , to holders of record of shares of common stock of Supervalu at the close of business, Eastern time, on the record date.

19


What are the reasons for and the benefits of separating Save-A-Lot from Supervalu?
Supervalu believes that the Separation will provide various benefits to both Supervalu and Save-A-Lot, including by: (1) enabling each company to focus on its own distinct operations and strategies, and permitting the management of each company to concentrate efforts on its unique customers and market conditions; (2) positioning Save-A-Lot as an independent hard discount grocery retailer and enabling it to focus on and strengthen relationships with its licensees and customers; (3) enabling Save-A-Lot to make investment, personnel and operational decisions better aligned with its licensees and customer base; (4) permitting each company to concentrate its financial resources solely on its own operations without having to compete with each other for investment capital; (5) enabling Save-A-Lot to optimize its investment strategies and invest in capital-intensive long-term programs that may not meet Supervalu investment objectives and provide Save-A-Lot with direct access to debt and equity capital markets, enabling it to fund desired growth strategies based on its own targeted return rates; (6) allowing Save-A-Lot to invest capital in and focus on higher growth opportunities in its hard discount grocery retailing business; (7) focusing Save-A-Lot leadership on program execution and customer needs and relieving the demands on the time and attention of Supervalu’s management and board of directors associated with overseeing Save-A-Lot’s operations and growth strategy; (8) reducing internal competition for capital among existing Supervalu segments, and facilitating a more efficient allocation of capital and capital structure; (9) allowing investors to separately value Supervalu and Save-A-Lot based on their distinct investment identities; (10) enabling investors to evaluate the merits, performance and future prospects of each company’s respective business and to invest in each company separately based on these distinct characteristics, which may attract new investors to each business, who may not have properly assessed the value of the businesses as stand-alone entities relative to the value they are currently accorded; (11) improving the ability of both Supervalu and Save-A-Lot to use their respective stock as acquisition currency; and (12) facilitating incentive compensation arrangements for employees that are more directly tied to the performance of each of Save-A-Lot’s and Supervalu’s respective businesses, facilitating employee hiring and incentivization.

For a more detailed discussion of the reasons for the Separation, see “The Separation and Distribution—Reasons for the Separation” beginning on page 41.
What are the risks associated with the Separation?
There are a number of risks associated with Save-A-Lot’s business, the Separation, the relationship between Supervalu and Save-A-Lot and ownership of Save-A-Lot common stock. The risks are discussed under “Risk Factors” beginning on page 25.
What do stockholders need to do to participate in the Distribution?
Stockholders of Supervalu on the record date will not be required to take any action to receive shares of Save-A-Lot common stock in the Distribution, but you are urged to read this entire Information Statement carefully. No stockholder approval of the Distribution is required. You are not being asked for a proxy. You do not need to pay any consideration, exchange or surrender your existing Supervalu shares or take any other action to receive your Save-A-Lot common stock. Please do not send in your Supervalu stock certificates. The Distribution will not affect the number of outstanding shares of Supervalu common stock or any rights of Supervalu stockholders, although it will affect the market value of each outstanding Supervalu common share.
How will shares of Save-A-Lot common stock be issued?
You will receive shares of Save-A-Lot common stock through the same channels that you currently use to hold or trade Supervalu common stock, whether through a brokerage account or other channel. Receipt of Save-A-Lot shares will be documented for you in the same manner that you typically receive stockholder updates, such as monthly broker statements.

If you own shares of Supervalu common stock as of the close of business on       , the record date for the Distribution, including shares owned in certificate form, Supervalu, with the assistance of         , the distribution agent for the Separation, will electronically distribute shares of Save-A-Lot common stock to you or your brokerage firm on your behalf in book-entry form.         will mail you a book-entry account statement that reflects your shares of Save-A-Lot common stock, or your bank or brokerage firm will credit your account for the shares.

20


What are the conditions to the Distribution?
The Distribution is subject to the satisfaction (or waiver by Supervalu in its sole discretion) of the following conditions:
 
 
the board of directors of Supervalu, in its sole discretion, shall have authorized and approved the Separation and not withdrawn such authorization and approval, and shall have declared the distribution of Save-A-Lot common stock to Supervalu stockholders;
 
 
the transfer of assets and liabilities between Supervalu and Save-A-Lot shall have been completed in accordance with the separation and distribution agreement;
 
 
Supervalu shall have received a private letter ruling from the Internal Revenue Service (“IRS”) regarding certain U.S. federal income tax matters relating to the Separation, the Distribution and certain related transactions;
 
 
the Securities and Exchange Commission (“SEC”) shall have declared effective Save-A-Lot’s registration statement on Form 10, of which this Information Statement forms a part, and this Information Statement shall have been made available to the Supervalu stockholders;
 
 
the shares of Save-A-Lot common stock to be distributed shall have been accepted for listing on the NYSE subject to official notice of distribution;
 
 
all actions and filings with, and approvals or other consents from, governmental authorities necessary or appropriate under applicable law shall have been taken and, where applicable, have become effective or been accepted by, or obtained from, as applicable, the applicable governmental authority;
 
 
the transaction agreements relating to the Separation shall have been duly executed and delivered by each party thereto;
 
 
no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Separation, the Distribution or any of the related transactions shall be in effect;
 
 
Supervalu shall have received the proceeds from the cash payments from Save-A-Lot, as described in “Certain Relationships and Related Party Transactions—Separation and Distribution Agreement—Cash Payments,” and Supervalu shall be satisfied in its sole and absolute discretion that, as of the effective time of the Distribution, it shall have no further liability under any of the Save-A-Lot financing arrangements described under “Description of Material Indebtedness”;
 
 
Supervalu’s board of directors shall have received one or more opinions delivered by an independent appraisal firm satisfactory to the Supervalu board of directors confirming the solvency and financial viability of Supervalu before the consummation of the Distribution and each of Supervalu and Save-A-Lot after consummation of the Distribution, such opinions being satisfactory to the Supervalu board of directors in form and substance in the sole discretion of the Supervalu board of directors and such opinions having not been withdrawn or rescinded; and
 
 
no event or development shall have occurred or exist that, in the judgment of Supervalu’s board of directors, in its sole and absolute discretion, makes it inadvisable to effect the Separation, the Distribution and other related transactions.
 
Supervalu and Save-A-Lot cannot assure you of the timing of these conditions or that any or all of these conditions will be met. In addition, Supervalu can decline at any time to go forward with the Separation. For a further discussion of the conditions to the Distribution, see “The Separation and DistributionConditions to the Distribution.”
Can Supervalu decide to cancel the Distribution of Save-A-Lot common stock even if all the conditions have been met?
Yes. Until the Distribution has occurred, Supervalu has the right to terminate the Distribution, even if all of the conditions are satisfied.
What if I want to sell my Supervalu common stock or my Save-A-Lot common stock?
You should consult with your financial advisors, such as your stockbroker, bank and/or tax advisor. The Distribution will not result in any additional restrictions on either Supervalu stock or, following the Distribution and upon the commencement of trading, Save-A-Lot stock.

21


What is “regular-way” and “ex-distribution” trading of Supervalu stock?
Beginning on or shortly before the record date and continuing up to and through the distribution date, it is expected that there will be two markets in Supervalu common stock: a “regular-way” market and an “ex-distribution” market. Supervalu common stock that trades in the “regular-way” market will trade with an entitlement to shares of Save-A-Lot common stock distributed pursuant to the Distribution. Shares that trade in the “ex-distribution” market will trade without an entitlement to shares of Save-A-Lot common stock distributed pursuant to the Distribution.

If you decide to sell any Supervalu common stock before the distribution date, you should make sure your stockbroker, bank or other nominee understands whether you want to sell your Supervalu common stock with or without your entitlement to Save-A-Lot common stock pursuant to the Distribution.
Where will I be able to trade shares of Save-A-Lot common stock?
Save-A-Lot intends to apply to list its common stock on the NYSE under the symbol “     .” Save-A-Lot anticipates that trading in shares of its common stock will begin on a “when-issued” basis on or shortly before the record date and will continue up to and through the distribution date and that “regular-way” trading in Save-A-Lot common stock will begin on the first trading day following the completion of the Distribution. If trading begins on a “when-issued” basis, you may purchase or sell Save-A-Lot common stock up to and through the distribution date, but your transaction will not settle until after the distribution date. Save-A-Lot cannot predict the trading prices for its common stock before, on or after the distribution date.
What will happen to the listing of Supervalu common stock?
Shares of Supervalu common stock will continue to trade on the NYSE after the Distribution, and the Separation is not expected to have any effect on that listing.
Will the number of shares of Supervalu common stock that I own change as a result of the Distribution?
No. The number of shares of Supervalu common stock that you own will not change as a result of the Distribution.
Will the Distribution affect the market price of my Supervalu shares?
Yes. As a result of the Separation, Supervalu expects the trading price of Supervalu common stock immediately following the Distribution to be lower than the “regular-way” trading price of such shares immediately prior to the Distribution because the trading price will no longer reflect the value of the Save-A-Lot business. Supervalu believes that over time following the Separation, assuming the same market conditions and the realization of the expected benefits of the Separation, the Supervalu common stock and the Save-A-Lot common stock should have a higher aggregate market value as compared to what the market value of Supervalu common stock would be if the Separation did not occur. There can be no assurance, however, that such a higher aggregate market value will be achieved. This means, for example, that the combined trading prices of one share of Supervalu common stock and a certain fraction of Save-A-Lot common stock after the Distribution may be equal to, greater than or less than the trading price of one share of Supervalu common share before the Distribution. In addition, Supervalu may propose a reverse stock split for approval by its stockholders, which we expect would increase the per-share trading price, but not the aggregate market value, of Supervalu common stock.

22


What are the material U.S. federal income tax consequences of the Distribution?
The Distribution will not be eligible for treatment as a tax-free distribution for U.S. federal income tax purposes. An amount equal to the fair market value of the Save-A-Lot common stock received by you in the Distribution (including any fractional shares deemed received) will be treated as a taxable dividend to the extent of your share of current and accumulated earnings and profits of Supervalu for the taxable year of the Distribution. To the extent that the fair market value of such Save-A-Lot common stock exceeds your share of such earnings and profits, any such excess will be treated first as a nontaxable return of capital to the extent of your tax basis in Supervalu shares, and thereafter as capital gain recognized on a sale or exchange of such shares.

Your adjusted tax basis in your common stock of Supervalu held at the time of the Distribution will be reduced (but not below zero) to the extent the fair market value of Save-A-Lot common stock distributed by Supervalu to you in the Distribution exceeds your share of Supervalu’s current and accumulated earnings and profits. Your holding period for such Supervalu common stock will not be affected by the Distribution. Your tax basis in shares of Save-A-Lot common stock received will equal the fair market value of such shares on the distribution date. Your holding period for such shares will begin the day after the distribution date. You should consult your own tax advisor as to the particular tax consequences of the Distribution to you, including potential tax consequences under U.S. federal, state, local and non-U.S. tax laws.

It is also intended that Supervalu will recognize gain with respect to certain assets transferred to Save-A-Lot, most of which gain would, in general, be offset against Supervalu’s existing capital loss, and that Save-A-Lot would obtain a corresponding increase in the tax basis of its assets. It is intended that such a tax basis increase, if it is obtained, would give rise to depreciation and amortization deductions to Save-A-Lot, which may be used to reduce taxable income of Save-A-Lot.

You should consult your own tax advisor as to the particular consequences of the Distribution to you, including the applicability and effect of any U.S. federal, state and local tax laws, as well as foreign tax laws. For more information regarding the material U.S. federal income tax consequences of the Distribution, see “Material U.S. Federal Income Tax Consequences of the Distribution” beginning on page 105.
What will Save-A-Lot’s relationship be with Supervalu following the Separation?
Following the Distribution, we currently expect that Supervalu stockholders will own approximately 60% of the outstanding shares of common stock of Save-A-Lot, and Save-A-Lot will be a separate company from Supervalu. Supervalu currently expects to retain approximately 40% of the outstanding shares of common stock of Save-A-Lot immediately following the Distribution. Supervalu plans to dispose within 24 months of the Distribution of a portion of the retained Save-A-Lot stock sufficient to reduce Supervalu’s ownership of Save-A-Lot stock to 20% or less. Supervalu has no plans to acquire any additional Save-A-Lot common stock following the Distribution.

In addition, Save-A-Lot will enter into a separation and distribution agreement with Supervalu to effect the Separation, and Save-A-Lot will also enter into certain other agreements with Supervalu in connection with the Separation, including a services agreement, a tax matters agreement, an employee matters agreement and a stockholder’s agreement. These agreements will provide for the Separation between Save-A-Lot and Supervalu of the assets, employees, liabilities and obligations (including investments, property and employee benefits and tax liabilities) of Supervalu and its subsidiaries attributable to periods prior to, at and after Save-A-Lot’s Separation from Supervalu, and will govern the relationship between Save-A-Lot and Supervalu subsequent to the completion of the Separation. For additional information regarding the separation and distribution agreement and other transaction agreements, see the sections entitled “Risk Factors—Risks Related to the Separation and Save-A-Lot's Relationship with Supervalu” and “Certain Relationships and Related Party Transactions” elsewhere in this Information Statement.

23


How will Supervalu vote any shares of our common stock that it retains?
Immediately following the Distribution, we expect that Supervalu will hold approximately 40% of our outstanding common stock. As a result, Supervalu could exert significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. Supervalu will not be required to vote any shares of our common stock it retains in any particular manner and its interests may differ from those of our other stockholders. In addition, Supervalu will be entitled to nominate directors to Save-A-Lot’s board of directors proportionate to its ownership interest (rounded down to the nearest whole number that represents a proportion of director representation that is less than or equal to Supervalu’s percentage interest) and to certain other governance rights pursuant to its stockholder’s agreement with Save-A-Lot. For additional information, see “Certain Relationships and Related Party TransactionsStockholder’s Agreement” and “Risk Factors—Risks Related to the Separation and Save-A-Lot’s Relationship with Supervalu—Supervalu will be our principal stockholder immediately following the Distribution. As a result, it will exert significant influence over us and its interests may not coincide with yours.”
What does Supervalu intend to do with any shares of our common stock that it retains?
Within the two-year period following the Distribution, Supervalu intends to dispose, in an orderly fashion, of sufficient shares of Save-A-Lot common stock to decrease Supervalu’s ownership stake in Save-A-Lot to 20% or less. Supervalu may dispose of our shares at any time over that time period, including through open-market sales, private sales, an exchange for Supervalu debt, a distribution to our stockholders or a combination of the foregoing.
Who will manage Save-A-Lot after the Separation?
Led by Eric A. Claus, who is expected to be the chief executive officer of Save-A-Lot after the Separation, Save-A-Lot will benefit from a management team with an extensive background in the hard discount grocery retailing industry, including significant experience in operations and supply chain management.
Are there risks associated with owning Save-A-Lot common stock?
Yes. Ownership of Save-A-Lot common stock is subject to both general and specific risks related to Save-A-Lot’s business, the industry in which it operates, its ongoing contractual relationships with Supervalu and its status as a separate, publicly traded company. Ownership of Save-A-Lot common stock is also subject to risks related to the Separation. These risks are described in the “Risk Factors” section of this Information Statement beginning on page 25.
Who is the distribution agent, transfer agent and registrar for Save-A-Lot’s common stock?
The distribution agent, transfer agent and registrar for Save-A-Lot’s common stock is         . For questions relating to the transfer or mechanics of the Distribution, you should contact:
 
 
Where can I find more information about Supervalu and Save-A-Lot?
Before the Distribution, Supervalu stockholders who have questions relating to Supervalu should contact:

SUPERVALU INC.
Investor Relations
11840 Valley View Road
Eden Prairie, Minnesota 55344
Tel: (952) 828-4540
www.supervaluinvestors.com
 
After the Distribution, Save-A-Lot stockholders who have questions relating to Save-A-Lot should contact:
Save-A-Lot, Inc.
100 Corporate Office Drive
Earth City, Missouri 63045
Tel: (341) 592-9100
www.save-a-lot.com
 
The Save-A-Lot investor website will be operational as of       .


24


RISK FACTORS
You should carefully consider each of the following risk factors and all of the other information set forth in this Information Statement. The risk factors generally have been separated into three groups: (1) risks related to Save-A-Lot’s business; (2) risks related to the Separation and Save-A-Lot’s relationship with Supervalu; and (3) risks related to Save-A-Lot’s common stock. Based on the information currently known to us, we believe that the following information identifies the most significant risk factors affecting our Company in each of these categories of risks. The risks and uncertainties our Company faces, however, are not limited to those set forth in the risk factors described below. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. In addition, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.
If any of the following risks and uncertainties develops into actual events, these events could have a material adverse effect on our competitive position, financial condition, operating results or cash flows. In such case, the trading price of our common stock could decline.
Risks Related to Save-A-Lot’s Business
Competition in our industry, including on price, is intense, and our failure to compete successfully may adversely affect our sales, financial condition and operating results.
The grocery business is intensely competitive, and the recent and ongoing consolidation within the grocery industry is expected to result in increased competition, including from some competitors that have greater financial, marketing and other resources than the Company. Price is a significant driver of consumer choice in our industry. The grocery industry is characterized by relatively small operating margins, and as competition in certain areas intensifies, our results of operations may be negatively impacted through a loss of sales and reductions in gross margins. Where necessary, in order to compete effectively with competitors, we may need to lower our prices on goods for sale. The nature and extent to which our competitors implement various pricing and promotional activities in response to increasing competition and our response, or failure to respond effectively, to these competitive actions, can adversely affect profitability and our operating results.
We face significant competition for customers, managers, employees, store sites and products from supercenters, membership warehouse clubs, specialty supermarkets, drug stores, discount stores, dollar stores, convenience stores, online retailers and stores as well as other grocery retailers, including regional and national chains and independent food store operators. Competitors continue to increase their presence in our markets, including certain non-traditional competitors that have entered the grocery retailing business. Our ability to differentiate ourselves from our competitors and create an attractive value proposition for our customers is dependent upon a combination of low price, quality, convenience, in-stock levels, brand perception, store location and conditions, in-store marketing and merchandising and promotional strategies. Any failure to positively differentiate the Company’s and our licensees’ stores, as well as the inability to identify and respond to changes in economic conditions and trends in consumer preferences, could decrease the number of customer transactions at our stores and decrease the amount customers spend when they visit our stores.
We may not be able to successfully identify and execute on initiatives to organically increase our sales and profits.
Our ability to grow sales and profits depends on many factors, including our ability to attract new licensees and customers throughout the existing network of distribution centers, political, social and economic conditions, and our ability to successfully identify and execute growth and profit-enhancing opportunities. The Company continuously evaluates the changing business environments in which we operate and seeks out opportunities to improve profit, performance, customer service and growth through selected initiatives. Our ability to execute on these initiatives is dependent, in part, upon our ability to continue to offer competitive, quality products at low prices, maintain high levels of productivity, become a more cost-efficient organization and offer services that provide value. In addition, any initiatives that involve acquisitions or dispositions may entail various risks such as identifying suitable sellers or buyers, realizing acceptable rates of return on the investment or sale, negotiating acceptable terms and conditions and successfully integrating or separating operations and systems following the acquisition or disposition.
There are no assurances that we will be able to identify the appropriate course of action, including which initiatives will be the most effective in improving the competitive position or profitability of the Company, or that we will be able to respond appropriately to competitors’ initiatives. If we are unable to execute on our initiatives or are delayed in their execution, our financial condition and results of operations may be adversely affected.
We may not be able to grow or maintain our levels of identical store sales.
We have experienced both positive and negative identical store sales in recent periods. If our future identical store sales decline or fail to meet market expectations, the price of our common shares could decline. In addition, the results of operations of our stores have fluctuated in the past and can be expected to continue to fluctuate in the future. A variety of factors affect identical

25


store sales and profitability, including consumer tastes, competition, current economic conditions, pricing, inflation, deflation and weather conditions, and many of these factors are beyond our control and can be difficult to predict in advance. These factors may cause our identical store sales results to be materially lower than recent periods, which could harm our results of operations and result in a decline in the price of our common shares.
Our inability to maintain or increase our operating margins could adversely affect our results of operations and the price of our stock.
We may not be able to maintain or increase our operating margins. If we are not able to continue to capture scale efficiencies, improve our systems and discipline and enhance our merchandise offerings, we may not be able to achieve our goals with respect to operating margins. In addition, if we do not continuously refine and improve our various ordering, tracking and allocation systems, we may not be able to increase sales and reduce inventory shrinkage. As a result, our operating margins may stagnate or decline, which could adversely affect the price of our stock. We may not be able to capture the scale efficiencies from expansion if we are unable to successfully manage the potential difficulties associated with store growth, which may adversely affect our operating margins.
Our continued growth depends in part on new corporate and licensee store openings and our failure to successfully open new stores or successfully manage the potential difficulties associated with store growth could adversely affect our business and stock price.
Our continued growth depends, in part, on our ability, and the ability of our licensees, to open new stores and to operate those stores successfully. Successful execution of our expansion strategy depends upon a number of factors, including the availability of attractive store locations, our ability to negotiate lease and development terms, secure and manage the inventory necessary for the launch and operation of our new stores, hire, train and retain skilled store personnel, promote and market new stores and address competitive merchandising, distribution and other challenges encountered in connection with expansion in existing markets and into new geographic areas and markets. Delays or failures in opening new stores, or achieving lower than expected sales in new stores, could adversely affect our growth. In addition, as we continue to add stores in markets where we currently have a less established presence or no presence, we may become subject to additional laws and governmental regulations that may impede or delay our growth or increase the cost of doing business, including environmental, labor and employment laws and regulations.
Although we believe that the U.S. market can support additional Save-A-Lot stores, we cannot assure you when or whether we or our licensees will open new stores. We may not have the level of cash flow or financing necessary to execute our growth strategy. If and when such store openings occur, we cannot assure you that these new stores will be successful or result in greater sales and profitability. Some of our new stores or stores of our licensees may be located in areas where we have little experience or a lack of brand recognition. Those markets may have different competitive conditions, market conditions, consumer tastes and discretionary spending patterns than our existing markets, which may cause these new stores to be less successful than stores in our existing markets. If we fail to successfully execute our growth strategy, including by opening new stores, our financial condition and operating results may be adversely affected.
Our store expansion strategy will place increased demands on our personnel and could adversely affect the results of our existing stores.
Our store growth strategy will place increased demands on our operational, managerial and administrative resources. These increased demands could cause us to operate our existing business less effectively, which in turn could adversely affect the financial condition and operating results of our existing stores. Also, new store openings in markets where we have existing stores may result in reduced sales volumes at those existing stores. We may also be unable to successfully manage the potential difficulties associated with store growth, including capturing efficiencies of scale, improving our systems, continuing cost discipline and maintaining appropriate store labor levels and disciplined product and real estate selection, which may result in stagnation or decline in our operating margins. If we experience such a decline in financial condition and operating results as a result of such difficulties, we may slow or discontinue store openings or we may close stores that we are unable to operate profitably.
Our licensee distribution business model presents a number of risks.
Our success relies in part on the financial success and cooperation of our licensees. Our licensees manage their businesses independently, and therefore are responsible for the day-to-day operation of their stores. The revenues we realize from licensed stores are largely dependent on the ability of our licensees to maintain and grow their sales. Our licensees may not experience sales growth or achieve an acceptable level of sales or profitability to the licensees, and our revenues and gross margins could be negatively affected as a result. If sales trends or profitability worsen for licensees, their financial results may deteriorate, which could result in, among other things, store closures or delayed or reduced payments to us and could adversely impact our ability to grow out licensee business.

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Our success also depends on the willingness and ability of our licensees to implement initiatives, which may include financial investments, and to remain aligned with us on operating, promotional and capital-intensive reinvestment plans. The ability of our licensees to contribute to the achievement of our plans is dependent in part on the availability of funding at reasonable interest rates and may be negatively impacted by the financial markets in general or by the individual licensee’s creditworthiness. Our operating performance could also be negatively affected if our licensees experience food safety or other operational problems or project a brand image inconsistent with our values, particularly if our contractual and other rights and remedies are limited, costly to exercise or subject to litigation. If licensees do not successfully operate stores in a manner consistent with our required standards, our brand’s image and reputation could be harmed, which in turn could hurt our business and operating results.
Our store growth strategy is dependent in part on our ability to identify current and prospective licensees who are willing to invest in opening new Save-A-Lot stores and who meet our standards for licensees. The decision to own stores or enter into license agreements is driven by many factors whose interrelationship is complex and changing. Our current and prospective licensees also have numerous investment options that compete with our licensee opportunity, some of which require less upfront investment. Our inability to identify new retailers that want to become licensees and that meet our standards and the performance of our existing licensees, and the willingness and ability of our new and existing licensees to open new stores, could negatively impact our ability to grow, which would also affect our results of operations and financial condition.
We have a concentration among licensees of our licensed stores, and changes in relationships with our significant licensees could adversely affect our business and stock price.
In fiscal 2016, our top five licensees collectively accounted for approximately 15.3% of our net sales, and our top ten licensees collectively accounted for approximately 19.4% of our net sales. In addition, a single licensee operates 173 of our licensed stores as of the end of fiscal 2016, accounting for approximately 8.5% and 9.2% of our net sales for fiscal 2016 and fiscal 2015, respectively. We enter into license and supply agreements with our licensees under which we agree to license our name to the licensees and the licensees agree to purchase their inventory from us with some exceptions. Our agreements also give us options to purchase licensed stores under certain circumstances such as if the licensee desires to sell its stores. However, in the event that a significant licensee or its customers experiences financial difficulties or is not willing to do business with us in the future on terms acceptable to management, there could be a material adverse effect on our business, results of operations or financial condition.
We may be unable to adequately protect our intellectual property rights, which could harm our business.
We rely on a combination of trademark, trade secret, copyright and domain name law and internal procedures and nondisclosure agreements to protect our intellectual property. In particular, we believe our Save-A-Lot name and private-label trademarks, including America’s Choicesm, Coburn Farms®, Fairgrounds®, Ginger Evans®, J. Higgs®, Wylwood® and Tio Santi™, and our domain names are valuable assets. However, our intellectual property rights may not be sufficient to distinguish our products and services from those of our competitors and to provide us with a competitive advantage. From time to time, third parties may use names, logos and slogans similar to ours, may apply to register trademarks or domain names similar to ours, and may infringe or otherwise violate our intellectual property rights. Our intellectual property rights may not be successfully asserted against such third parties or may be invalidated, circumvented or challenged. Asserting or defending our intellectual property rights could be time consuming and costly and could distract management’s attention and resources. If we are unable to prevent our competitors from using names, logos, slogans and domain names similar to ours, consumer confusion could result, the perception of our brand and products could be negatively affected, and our sales and profitability could suffer as a result. In addition, if our licensees receive negative publicity or fail to maintain the quality of the goods and services used in connection with our trademarks, our rights to, and the value of, our trademarks could potentially be harmed. Failure to protect our proprietary information could also have an adverse effect on our business.
We may also be subject to claims that our activities or the products we sell infringe, misappropriate or otherwise violate the intellectual property rights of others. Any such claims can be time consuming and costly to defend and may distract management’s attention and resources, even if the claims are without merit. Such claims may also require us to enter into costly settlement or license agreements (which could, for example, prevent us from using our trademarks in certain geographies or in connection with certain products and services), pay costly damage awards, and face a temporary or permanent injunction prohibiting us from marketing or providing the affected products and services, any of which could have an adverse effect on our business.
Real or perceived food quality or food safety issues and related unfavorable publicity could adversely affect our operating results and reputation.
There is increasing governmental scrutiny, regulation and public awareness regarding food quality and food safety. We may be adversely affected if consumers lose confidence in the safety and quality of our food products. Any events that give rise to actual or potential food contamination or food-borne illness or injury may result in product liability claims from individuals or consumers and government agencies, and penalties and enforcement actions from government agencies and a loss of consumer

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confidence. In addition, adverse publicity about these types of concerns, whether valid or not, may discourage consumers from buying our products or cause production and delivery disruptions, which may adversely affect our financial condition and results of operations. It may be necessary for the Company to recall unsafe, contaminated or defective products. Recall costs and product liability claims can be material. While we generally seek contractual indemnification and insurance coverage from our suppliers, we might not be able to recover these significant costs from our suppliers.
Disruption to the supply chain and distribution network could have an adverse impact on our sales and operating results.
Our sales and operating results could be adversely impacted if we are not able to provide goods to the Company’s stores and its licensees’ stores in a timely and cost-effective manner, to maintain continued supply, pricing or access to new products or to identify alternative sources of merchandise without delay and at similar cost and quality levels. Additionally, perishable products make up an increasingly significant portion of our sales, and we rely on various suppliers to provide and deliver our perishable product inventory on a continuous basis.
Factors that may disrupt our ability to maintain an uninterrupted supply chain and distribution network include weather, product recalls, crop conditions, regulatory actions, disruptions in technology, political or financial instability for suppliers, transportation interruptions, labor supply or stoppages or vendor defaults or disputes, as well as other risk factors mentioned, any of which could also have an adverse effect on our sales and operating results. Disruptions to the national and international transportation infrastructure that lead to delays or interruptions of deliveries could also negatively affect our business.
Changes in commodity prices, including due to inflation or deflation, and availability of commodities may affect our financial condition and operating results.
Many products we sell include ingredients such as wheat, corn, oils, milk, eggs, sugar, cocoa and other commodities. In addition, we purchase and use significant quantities of packaging materials to package our products and energy for our distribution centers, stores and offices. Prices for these raw materials, other supplies and energy are volatile and can fluctuate due to conditions that are difficult to predict. These conditions include global competition for resources, currency fluctuations, political conditions, severe weather, the potential longer-term consequences of climate change on agricultural productivity, crop disease or pests, water risk, health pandemics, consumer or industrial demand, and changes in governmental trade, alternative energy and agricultural programs.
We believe we are impacted to a greater degree by inflation and deflation than traditional grocery formats due to product mix, our edited assortment of products and product sourcing on private-label products. Continued volatility in the prices of commodities and other supplies we purchase could increase or decrease the costs of our products, and our sales and profitability could suffer as a result. Moreover, increases in the price of our products to cover increased input costs may result in lower sales volumes, while decreases in input costs could cause us to lower our prices and thereby affect our revenues or gross margins. Likewise, constraints in the supply of key commodities may limit our ability to grow our net revenues. If our mitigation activities are not effective, if we are unable to increase prices to cover increased costs or must reduce our prices, or if we are limited by supply constraints, our financial condition and results of operations could be adversely affected.
Worsening economic conditions could adversely impact consumer spending, increase costs of doing business or otherwise adversely affect our operating results.
The vast majority of the Company’s stores, licensees and customers are located in the United States, making our results highly dependent on U.S. consumer confidence and spending habits. In recent economic cycles, the U.S. economy has experienced economic recession, higher unemployment rates, higher energy costs, higher insurance and healthcare costs, a decline in the housing market and greater restrictions on the availability of credit, all of which contributed to suppress consumer confidence and increased price competition.
While the U.S. economy and consumer confidence have improved recently, the sustainability of these improvements remains uncertain. There can be no assurance that we will be able to identify and respond to changes and trends in consumer spending and preferences and/or maintain the competitive position of our operations. Additionally, these economic factors, along with higher interest rates, costs of labor and tax rates, and other changes in tax, healthcare and other laws and regulations, can increase our cost of sales and selling and administrative expenses, and otherwise adversely affect our operating results.
We may be adversely affected by our dependence on information technology systems and services, including systems and services provided under the services agreement to be entered into with Supervalu as part of the Separation. Disruptions to our or third-party information technology systems, including future cyber-attacks and security breaches, and the costs of maintaining secure and effective information technology systems and services could negatively affect our business and results of operations.
The efficient operation of our business is highly dependent on computer hardware and software systems. Our ability to effectively manage our day-to-day business depends significantly on information technology (“IT”) services and systems that initially will be provided by Supervalu pursuant to the services agreement. The failure of Supervalu’s or our IT systems to

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operate effectively or to integrate with other systems, or unauthorized access into IT systems, could cause us to incur significant losses due to disruptions in our systems and business.
Information systems are vulnerable to disruptions and security breaches by computer hackers and cyber terrorists. Supervalu previously experienced information technology intrusions during a time period in which we were part of Supervalu. Although we do not believe our information systems were impacted by the intrusions, there can be no assurance that the Company, or Supervalu during periods that Supervalu provides information technology services under the services agreement, will not suffer a security breach in the future or that a third party relied on by us will not suffer a breach, that unauthorized parties will not gain access to confidential or personal information or that any such incident will be discovered promptly. The techniques used by criminals to obtain unauthorized access to sensitive data change frequently and often are not recognized until launched against a target, and we or Supervalu or another third-party provider may be unable to anticipate these techniques or implement adequate preventative measures. The failure to promptly detect, determine the extent of and appropriately respond to a significant data security breach could have a material adverse impact on our business, financial condition and results of operations. In addition, the unavailability of the information systems or failure of these systems or software to perform as anticipated for any reason, including a major disaster, technical malfunction or business interruption and any inability to respond to, or recover from, such an event, or any inability to timely implement new security measures or technology, could disrupt our business, impact our licensees and customers and could result in decreased performance, increased overhead costs and increased risk for liability, causing our business and results of operations to suffer.
Additionally, our business involves the receipt and storage of sensitive data, including personal information about our customers and employees and proprietary business information of the Company and our licensees, customers and vendors. We may also share information with vendors that assist us in conducting our business, as required by law, with the permission of the individual or as permitted under our privacy policy. As a merchant that accepts debit and credit cards for payment, we are subject to the Payment Card Industry Data Security Standard (“PCI DSS”), issued by the PCI Council. PCI DSS contains compliance guidelines and standards with regard to our security surrounding the physical and electronic storage, processing and transmission of individual cardholder data. By accepting debit cards for payment, we are also subject to compliance with American National Standards Institute data encryption standards and payment network security operating guidelines. On October 1, 2015, the payment card industry began to shift liability for certain transactions to retailers who are not able to accept Europay, MasterCard and Visa (“EMV”) transactions. We expect to implement the EMV technology in calendar year 2016. As a result, before the implementation of the EMV technology, we may be liable for costs incurred by payment card issuing banks and other third parties or subject to fines and higher transaction fees.
Despite any certifications and the utilization of other information security measures, we cannot be certain that all of our or Supervalu’s or another third party’s IT systems or the IT systems of our vendors operate properly or will be able to prevent, contain or detect any future cyber-attacks or security breaches from known malware, malware that may be developed in the future or otherwise. Cyber-attacks are rapidly evolving and becoming increasingly sophisticated and difficult to detect, and therefore, we may be unable to anticipate these attacks or implement adequate preventive measures. Additionally, unauthorized parties may attempt to gain access to our or Supervalu’s or a vendor’s systems or facilities through fraud, trickery or other forms of deception involving our employees or vendors. To the extent that any attack or breach results in the loss, damage or misappropriation of information, we may be adversely affected by claims from customers, financial institutions, payment card brands, stockholders and others and by costly inquiries or enforcement actions on the part of regulatory authorities. Our operations could also be significantly disrupted by these claims, as well as by the need to spend significant time and resources/funds to upgrade, fix or replace our systems. We could also lose credibility with our customers and suffer damage to our reputation and future sales. In addition, the cost of complying with stricter privacy and information security laws and standards and developing, maintaining and upgrading technology systems to address future advances in technology, could be significant and we could experience problems and interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems.
Severe weather and natural disasters may harm our business.
Severe weather conditions and natural disasters such as hurricanes, earthquakes, floods, extended winter storms or tornadoes, as well as other natural disasters, in areas in which we or licensees have stores, or we have offices or distribution facilities or from which we obtain products may cause physical damage to our properties, closure of one or more of the Company’s stores or licensee stores, offices or distribution facilities, lack of an adequate work force in a market, temporary disruption in the supply of products, disruption in the transport of goods, delays in the delivery of goods to distribution centers or stores, a reduction in licensee volume and a reduction in the availability of products in the Company’s and licensees’ stores. In addition, adverse climate conditions and adverse weather patterns, such as drought or flood, that impact growing conditions and the quantity and quality of crops yielded by food producers may adversely affect the availability or cost of certain products within the grocery supply chain. Any of these factors may disrupt our business and adversely affect our financial condition and results of operations.

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We may face significant costs for compliance with existing or changing environmental, health, food safety and safety requirements and for potential environmental obligations relating to current or discontinued operations.
Our operations are subject to extensive and increasingly stringent federal, state, local and foreign laws and regulations pertaining to the protection of the environment, including those relating to the discharge of materials into the environment, the disposal of food by-products, the handling, treatment and disposal of wastes and remediation of soil and groundwater contamination. Failure to comply with these requirements could have serious consequences for us, including criminal, as well as civil and administrative penalties, claims for property damage, personal injury and damage to natural resources and negative publicity. Compliance with existing or changing environmental requirements, including more stringent limitations imposed or expected to be imposed in recently renewed or soon-to-be renewed environmental permits, may require capital expenditures.
Operations at many of our facilities require the treatment and disposal of wastewater, storm-water and agricultural and food processing wastes, the use and maintenance of refrigeration systems, including ammonia-based chillers, noise, odor and dust management, the operation of mechanized processing equipment, and other operations that potentially could affect the environment, health and safety. Some of our facilities have been operating for many years, and were built before current environmental standards were imposed, and/or in areas that recently have become subject to residential and commercial development pressures. Failure to comply with current and future environmental, health and safety standards could result in the imposition of fines and penalties, and we have been subject to such sanctions from time to time. New environmental, health and safety requirements, stricter interpretations of existing requirements, or obligations related to the investigation or clean-up of contaminated sites, may materially affect our business or operations in the future.
Any change or reduction in government benefits, such as to the Supplemental Nutrition Assistance Program, could adversely affect our business.
We understand that a substantial portion of our customers receive government benefits from the Supplemental Nutrition Assistance Program (“SNAP”) and from other government spending programs, such as the Special Supplemental Nutrition Program for Women, Infants and Children (“WIC”). These customers use benefits under those programs to purchase certain of our products. As a result, our volumes may be impacted by the level of government spending that supports grocery purchases. If there is any reduction or change in SNAP benefits, or if other government programs, such as WIC, are suspended or expire or their applicability to our products is changed, it could have an adverse impact on our volumes and our results of operations.
If we are unable to attract, train and retain our employees, we may not be able to grow or successfully operate our business.
The food retail and food service industries are labor intensive. Our continued success is dependent in part upon our ability to attract, train and retain qualified employees who understand and appreciate our culture and can represent our brands effectively and establish credibility with our licensees and customers. We face intense competition for qualified employees, many of whom are subject to offers from competing employers. Our ability to meet our labor needs, while controlling wage and labor-related costs, is subject to numerous external factors, including the availability of a sufficient number of qualified persons in the work force in the markets in which we operate, unemployment levels within those markets, unionization of the available work force, prevailing wage rates, changing demographics, health and other insurance costs and changes in employment legislation. If we fail to maintain competitive wages, the quality of our workforce could decline and cause our customer service to suffer. However, increasing our wages could cause our profit margins to decrease. If we are unable to hire and retain employees capable of meeting our business needs and expectations, our business and brand images may be impaired. Any failure to meet our staffing needs or any material increase in turnover rates of our employees or employee wages may adversely affect our business, financial condition and operating results.
Failure to maintain satisfactory relations with our employees or the unionization by our employees could adversely affect our financial condition and results of operations.
We have a non-union workforce. While we believe our relationships with our employees are good, there can be no assurance that our operations will not experience pressure from labor unions or become the target of campaigns to unionize. If our employees were to unionize, it could result in demands that may increase our operating expenses and adversely affect our profitability. Employee groups could unionize at any time and require collective bargaining agreements. If any group of our employees were to unionize and we were unable to reach agreement on the terms of their collective bargaining agreement or we were to experience widespread employee dissatisfaction, we could be subject to work slowdowns or stoppages. In addition, we may be subject to disruptions by organized labor groups protesting our non-union status. Any of these events would be disruptive to our operations and could distract our management team and harm our business.
Our high level of fixed lease obligations could adversely affect our financial condition and operating results.
Our high level of fixed lease obligations will require us to use a significant portion of cash generated by our operations to satisfy these obligations and could adversely affect our ability to obtain future financing to support our growth or other operational investments. We will require substantial cash flows from operations to make our payments under our operating leases, which in some cases provide for periodic adjustments in our rent rates. If we are not able to make the required payments

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under the leases, the lenders to or owners of the relevant stores, distribution centers or administrative offices may, among other things, repossess those assets, which could adversely affect our ability to conduct our operations. In addition, our failure to make payments under our operating leases could trigger defaults under other leases or under agreements governing our indebtedness, which could cause the counterparties under those agreements to accelerate the obligations due thereunder.
Our lease obligations may require us to continue paying rent for locations that we no longer operate.
We are subject to risks associated with our current and future store, distribution center and administrative office real estate leases. We generally cannot cancel our leases, so if we decide to close or relocate a location, we may nonetheless be committed to perform our obligations under the applicable lease, including paying the base rent for the remaining lease term. In addition, as our leases expire, we may fail to negotiate renewals, either on commercially acceptable terms or at all, which could adversely affect our business, financial condition and operating results.
After Save-A-Lot’s Separation from Supervalu, we will have debt obligations that could adversely affect our business and our ability to meet our growth objectives or our obligations.
As of       , on a pro forma basis after giving effect to the new financing arrangements that Save-A-Lot expects to enter into in connection with the Separation and after giving effect to the application of the net proceeds of such financing, Save-A-Lot’s total combined indebtedness would have been $       .
This amount of debt could have important consequences to Save-A-Lot and its investors, including:
requiring a portion of our cash flow from operations to make interest payments on this debt;
making it more difficult to satisfy debt service and other obligations;
increasing the risk of a future credit ratings downgrade of its debt, which could increase future debt costs and limit the future availability of debt financing;
increasing our vulnerability to general adverse economic and industry conditions;
reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow Save-A-Lot’s business;
limiting our flexibility in planning for, or reacting to, changes in its business and the industry;
placing us at a competitive disadvantage relative to our competitors that may not be as highly leveraged with debt; and
limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase common stock.
We may need to obtain financing in the future, and such financing may not be available to us on satisfactory terms, if at all.
We may periodically need to obtain financing in order to meet our debt obligations as they come due, to support our operations and growth strategy, to invest in new technology or development programs and/or to make acquisitions. Our access to the capital markets and the cost of borrowings are affected by a number of factors that could cause us to incur increased borrowing costs and to have greater difficulty accessing public and private markets for debt, including disruptions or declines in the global capital markets and/or a decline in our financial performance, outlook or credit ratings. If we cannot obtain adequate sources of credit on favorable terms, or at all, it could have a material adverse effect on our competitive position, financial condition, operating results or cash flows.
Our insurance and self-insurance programs may not be adequate to cover future claims.
We use a combination of insurance and self-insurance to provide for potential liabilities for workers’ compensation, automobile and general liability, director and officer liability, property risk, cyber and privacy risks and employee healthcare benefits. We estimate the liabilities associated with the risks retained by the Company, in part, by considering historical claims experience, demographic and severity factors and other actuarial assumptions, which, by their nature, are subject to a degree of variability. Any actuarial projection of losses concerning workers’ compensation and general and automobile liability is subject to a degree of variability. Among the causes of this variability are unpredictable external factors affecting future inflation rates, discount rates, rising health care costs, litigation trends, legal interpretations, benefit level changes and actual claim settlement patterns.
Some of the many sources of uncertainty in our reserve estimates include changes in benefit levels, medical fee schedules, medical utilization guidelines, vocation rehabilitation and apportionment. If the number or severity of claims for which we are self-insured increases, or we are required to accrue or pay additional amounts because the claims prove to be more severe than our original assessments, our financial condition and results of operations may be adversely affected.
Our business may become subject to legal proceedings that may adversely affect our financial condition and results of operations.
Our business is subject to the risk of legal proceedings by employees, consumers, customers, licensees, suppliers, stockholders, debt holders, governmental agencies or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation or proceeding. The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large amounts, and the magnitude

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of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. The cost to defend future litigation may be significant. There may also be adverse publicity associated with litigation that may decrease consumer confidence in our business, regardless of whether the allegations are valid or whether the Company is ultimately found liable. As a result, litigation may adversely affect our financial condition and results of operations. See also “BusinessLegal Proceedings” in this Information Statement.
Our business is subject to laws and governmental regulations that could adversely impact our financial condition and results of operations.
Our business is subject to various federal, state and local laws, regulations and administrative practices. These laws require the Company to comply with numerous provisions regulating health and sanitation standards, food safety, marketing of natural or organically produced food, facilities, environmental conditions, equal employment opportunity, public accessibility, employee benefits, wages and hours worked and licensing for the sale of food and alcoholic beverages, among others. Our inability to timely obtain permits, comply with government regulations or make capital expenditures required to maintain compliance with governmental regulations may adversely impact our business operations and prospects for future growth and our ability to participate in federal and state healthcare programs. In addition, changes in federal or state minimum wage and overtime laws could cause us to incur additional wage costs, which could adversely affect our operating margins.
We cannot predict the nature of future laws, regulations, interpretations or applications, nor can we determine the effect that additional governmental regulations or administrative orders, when and if promulgated, or disparate federal, state and local regulatory schemes would have on our future business. They may, however, impose additional requirements or restrictions on the products we sell, require that we recall or discontinue sale of certain products, make substantial changes to our facilities or operations, or otherwise result in changes to the manner in which we operate our business. Any or all of such requirements may adversely affect our financial condition and results of operations. Additionally, under various federal, state and local laws, ordinances and regulations, the Company could be liable for the failure to properly dispose of hazardous waste and costs of removal or remediation of contamination at current or former locations. These costs could be substantial, and any failure to properly remediate such contamination may subject the Company to liability to third parties and may adversely affect our ability to sell or lease such property or to borrow money using such property as collateral.
Our foreign operations subject us to regulatory, political, economic and other risks and conditions in foreign countries, which could adversely affect our business, financial condition and operating results.
Our supplier base includes domestic and foreign suppliers, and we have a limited number of licensed stores in foreign countries. Accordingly, political or financial instability in these foreign countries, changes in U.S. and foreign laws and regulations affecting the importation and taxation of goods, including duties, tariffs and quotas, or changes in the enforcement of those laws and regulations could adversely impact our financial condition and results of operations. Further, foreign currency exchange rates and fluctuations may have an effect on our future costs or on future cash flows from our foreign operations, and could adversely affect our financial condition and operating results. Other factors that may affect, and additional risks inherent in, our foreign operations include:
foreign trade, monetary and fiscal policies both of the United States and of other countries in which we do business;
laws, regulations and other activities of foreign governments, agencies and similar organizations;
risks associated with having operations located in countries that have historically been less stable than the United States;
costs and difficulties of managing international operations; and
adverse tax consequences and greater difficulty in enforcing intellectual property rights in other jurisdictions.
The various risks inherent in doing business in the United States generally also exist when doing business outside of the United States, and may be exaggerated by the difficulty of doing business in numerous sovereign jurisdictions due to differences in culture, laws and regulations.
In addition, we are required to comply with laws and regulations governing ethical, anti-bribery and similar business practices. In our foreign operations, our employees, contractors or agents could, in contravention of our policies, engage in business practices prohibited by U.S. laws and regulations that are applicable to us, such as the Foreign Corrupt Practices Act, and we are subject to the risk that one or more of our employees, contractors or agents, including those based in or from countries where practices that violate such U.S. laws and regulations or the laws and regulations of other countries may be customary, will engage in business practices that are prohibited by our policies, circumvent our compliance programs and, by doing so, violate these laws and regulations. Any of these violations could adversely affect our business, financial condition and operating results.

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We may engage in acquisitions and divestitures, and may encounter difficulties integrating acquired businesses with, or disposing of divested businesses from, our current operations; therefore, we may not realize the anticipated benefits of these acquisitions and divestitures.
We may engage in strategic acquisitions in addition to internal and licensee growth. Our due diligence reviews may not identify all of the material issues necessary to accurately estimate the cost and potential loss contingencies of a particular transaction, including potential exposure to regulatory sanctions resulting from an acquisition target’s previous activities. We may incur unanticipated costs or expenses, including post-closing asset impairment charges, expenses associated with eliminating duplicate facilities, litigation and other liabilities. We also may encounter difficulties in integrating acquisitions with our operations, applying our internal controls processes to these acquisitions or in managing strategic investments. Additionally, we may not realize the degree or timing of benefits we anticipate when we first enter into a transaction. Any of the foregoing could materially adversely affect our competitive position, financial condition, operating results or cash flows. Furthermore, we may make strategic divestitures from time to time. Any divestitures may result in continued financial involvement in the divested businesses, such as through guarantees or other financial arrangements or continued supply and services arrangements, following the transaction. Under these arrangements, non-performance by those divested businesses could result in obligations imposed on us and could have a material adverse effect on our competitive position, financial condition, operating results or cash flows. The success of future acquisitions and divestitures will depend on the satisfaction of conditions precedent to, and consummation of, the transactions, the timing of consummation of these transactions and the ability of the parties to secure any required regulatory approvals in a timely manner, among other things.
Our continued growth also depends, in part, on our ability to successfully convert certain licensed stores to corporate stores. If we fail to successfully identify the licensed stores suitable for conversion, or fail to manage such conversations in a cost-effective manner, our financial condition and operating results may be adversely affected.
Impairment of long-lived assets could result in impairment charges.
Our long-lived assets, primarily stores, are subject to periodic testing for impairment. Failure to achieve sufficient levels of cash flow at our reporting units could result in impairment charges on long-lived assets.
Risks Related to the Separation and Save-A-Lot’s Relationship with Supervalu
Supervalu will be our principal stockholder immediately following the Distribution. As a result, it will exert significant influence over us and its interests may not coincide with yours.
Immediately following the Distribution, we expect that Supervalu will hold approximately 40% of our outstanding common stock. As a result, Supervalu will exert significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. For example, for as long as Supervalu continues to own shares of common stock representing more than one-third of the voting power of Save-A-Lot’s outstanding capital stock entitled to vote on a matter, it will effectively be able to veto corporate actions requiring a two-thirds vote of Save-A-Lot’s stockholders.
In connection with the Distribution, Save-A-Lot intends to enter into a stockholder’s agreement with Supervalu, pursuant to which Save-A-Lot will be required to nominate a number of individuals designated by Supervalu (each, a “Supervalu Designee”) for election as our directors at any meeting of our stockholders which is proportionate to Supervalu’s ownership interest in Save-A-Lot (rounded down to the nearest whole number that represents a proportion of director representation that is less than or equal to Supervalu’s percentage interest). The stockholder’s agreement will also provide that so long as Supervalu owns more than 20% of Save-A-Lot’s outstanding shares, Save-A-Lot will include at least one Supervalu Designee on each committee of our board of directors, subject to the rules of the NYSE, and Supervalu would have a veto right over changes to the size of our board of directors. Further, Supervalu will have the right to receive specified non-public financial and other information from Save-A-Lot, subject to potential antitrust and securities law constraints, until the time that it holds less than a specified percentage of Save-A-Lot’s outstanding shares.
For more information, see “Certain Relationships and Related Party Transactions—Stockholder’s Agreement.”
This concentration of ownership and the provisions of the stockholder’s agreement may delay or prevent a change in control of Save-A-Lot and make some transactions more difficult or impossible without the support of Supervalu. The interests of Supervalu may not always coincide with our interests as a company or the interest of other stockholders. Accordingly, Supervalu could cause Save-A-Lot to enter into transactions or agreements that you would not approve or make decisions with which you may disagree (or prevent Save-A-Lot from entering into transactions or agreements that you would approve or prevent us from making decisions with which you would agree).

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The combined post-Separation value of Supervalu and Save-A-Lot shares may not equal or exceed the pre-Separation value of Supervalu common stock.
As a result of the Distribution, Supervalu expects the trading price of Supervalu common stock immediately following the Distribution to be lower than the “regular-way” trading price of such shares immediately prior to the Distribution because the trading price will no longer reflect the value of the Save-A-Lot business. There can be no assurance that the aggregate market value of the Supervalu common stock and the Save-A-Lot common stock following the Separation will be higher or lower than, or the same as, the market value of Supervalu common stock if the Separation did not occur.
Save-A-Lot has no history of operating as an independent public company, and our historical and pro forma financial information is not necessarily representative of the results that we would have achieved as a separate, publicly traded company and may not be a reliable indicator of our future results.
The historical information about Save-A-Lot contained in this Information Statement refers to our business as operated by and integrated with Supervalu. Our historical and pro forma financial information included in this Information Statement is derived from the historical financial statements and accounting records of Supervalu. Accordingly, the historical and pro forma financial information included in this Information Statement does not necessarily reflect the financial condition, operating performance or cash flows that we would have achieved as a separate, publicly traded company during the periods presented or those that we will achieve in the future, including as a result of the following factors:
Prior to the Separation, Supervalu or one of its affiliates performed various corporate functions for Save-A-Lot, such as treasury, accounting, auditing, legal, investor relations and finance. Our historical and pro forma financial results reflect allocations of corporate expenses from Supervalu for such functions. While Supervalu intends to provide certain of these services under the services agreement, we may incur additional expenses for services that are not provided by Supervalu or that we choose to obtain from other sources or provide internally.
Currently, our business is partially integrated with the other businesses of Supervalu. Although we will enter into a services agreement with Supervalu, these arrangements may not fully capture the benefits that Save-A-Lot has enjoyed as a result of being integrated with Supervalu and may result in us paying higher charges than in the past for these services. This could have a material adverse effect on our competitive position, financial condition, operating results or cash flows following the completion of the Separation.
In addition to the services agreement we will enter into with Supervalu, Save-A-Lot will be required to establish the necessary infrastructure and systems to perform certain services, which Save-A-Lot previously shared with Supervalu, on an ongoing basis. Replacing this infrastructure and systems could be time consuming and distracting to management and the process of becoming a stand-alone public company could be challenging. Any of these could adversely affect our results of operations and ability to grow.
Generally, our working capital requirements and capital for our general corporate purposes, including store growth, program development, acquisitions and capital expenditures, have historically been satisfied as part of the corporate-wide cash management policies of Supervalu. Following the completion of the Separation, we may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements, which may or may not be available and may be more costly.
After the completion of the Separation, the cost of capital for Save-A-Lot’s business may be higher than Supervalu’s cost of capital prior to the Separation.
Our historical financial information does not reflect the debt that we will incur as part of the Separation.
Other significant changes may occur in our cost structure, management, financing and business operations as a result of operating as a company separate from Supervalu. For additional information about the past financial performance of our business and the basis of presentation of the unaudited combined interim financial statements, the audited combined financial statements and the unaudited pro forma combined financial statements of our business, see “Unaudited Pro Forma Combined Financial Statements,” “Selected Historical Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and accompanying notes included elsewhere in this Information Statement.

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The Distribution will not be eligible for treatment as a tax-free distribution for U.S. federal income tax purposes.
The Distribution will not be eligible for treatment as a tax-free distribution for U.S. federal income tax purposes. An amount equal to the fair market value of the Save-A-Lot common stock received by a Supervalu stockholder in the Distribution (including any fractional shares deemed received) will be treated as a taxable dividend to the extent of such stockholder’s share of current and accumulated earnings and profits of Supervalu for the taxable year of the Distribution. To the extent that the fair market value of such Save-A-Lot common stock exceeds a Supervalu stockholder’s share of such earnings and profits, any such excess will be treated first as a nontaxable return of capital to the extent of such stockholder’s tax basis in Supervalu shares, and thereafter as capital gain recognized on a sale or exchange of such shares. No cash will be distributed to Supervalu stockholders pursuant to the Distribution (except for cash paid in lieu of fractional shares of Save-A-Lot common stock). Accordingly, Supervalu stockholders will need to have alternative sources of cash from which to pay any resulting U.S. federal income tax liability. Supervalu will not be able to advise stockholders of the amount of earnings and profits of Supervalu until after the end of its taxable year in which the Distribution occurs.
Although Supervalu will report a value for our shares in the Distribution for tax purposes, this valuation is not binding on the IRS or any other taxing authority. These taxing authorities could ascribe a higher valuation to our shares, particularly if our common stock trades at prices significantly above the value for our common stock reported by Supervalu in the period following the Distribution. Such a higher valuation may cause a larger reduction in the adjusted tax basis of your Supervalu shares or may cause you to recognize additional dividend or capital gain income. You are urged to consult your tax advisor as to the particular tax consequences of the Distribution to you.
It is also intended that Supervalu will recognize gain with respect to certain assets transferred to Save-A-Lot, most of which gain would, in general, be offset against Supervalu’s existing capital loss. However, if the Separation, the Distribution and/or certain related transactions do not qualify for their intended U.S. federal income tax treatment, Save-A-Lot could fail to obtain its intended increase in tax basis in its assets and corresponding depreciation and amortization deductions. For more information, see “Material U.S. Federal Income Tax Consequences of the Distribution” elsewhere in this Information Statement.
Until the Separation occurs, Supervalu has sole discretion to change the terms of the Separation in ways which may be unfavorable to Save-A-Lot, Supervalu or their respective stockholders.
Until the Separation occurs, Save-A-Lot will be a wholly owned subsidiary of Supervalu. Accordingly, Supervalu will effectively have the sole and absolute discretion to determine and change the terms of the Separation, including the establishment of the record date for the Distribution and the distribution date, as well as the number of shares of Save-A-Lot that will be retained by Supervalu immediately following the Distribution and the terms of the separation and distribution agreement, the stockholder’s agreement and other Separation-related agreements. These changes could be unfavorable to Save-A-Lot, Supervalu or their respective stockholders. In addition, Supervalu may decide at any time not to proceed with the Separation.
We may not achieve some or all of the expected benefits of the Separation, and the Separation may adversely affect our business.
We may not be able to achieve the full strategic and financial benefits expected to result from the Separation, or such benefits may be delayed or not occur at all. We have described those anticipated benefits elsewhere in this Information Statement. See “The Separation and DistributionReasons for the Separation.” We may not achieve these and other anticipated benefits for a variety of reasons, including, among others: (a) the Separation will require significant amounts of our management’s time and effort, which may divert management’s attention from operating and growing our business; (b) following the Separation, we may be more susceptible to market fluctuations and other adverse events than if we were still a part of Supervalu; (c) following the Separation, our business will be less diversified than Supervalu’s business prior to the Separation; and (d) the other actions required to separate Supervalu’s and Save-A-Lot’s respective businesses could disrupt our operations. If we fail to achieve some or all of the benefits expected to result from the Separation, or if such benefits are delayed, it could have a material adverse effect on our competitive position, financial condition, operating results or cash flows.
Save-A-Lot or Supervalu may fail to perform under various transaction agreements that will be executed as part of the Separation, including a services agreement pursuant to which Supervalu is expected to provide certain key services required for the operation of our business, or we may fail to have necessary systems and services in place when certain of the Separation agreements expire.
In connection with the Separation, Save-A-Lot and Supervalu will enter into a separation and distribution agreement and will also enter into various other agreements, including a services agreement, a tax matters agreement, an employee matters agreement and a stockholder’s agreement. These agreements will determine the allocation of assets and liabilities between the companies following the Separation for those respective areas and will include any necessary indemnifications related to liabilities and obligations. The services agreement will also provide for the performance of certain services by Supervalu for the benefit of Save-A-Lot. Services provided to Save-A-Lot by Supervalu pursuant to the services agreement are currently

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expected to include certain information technology, finance, accounting and similar back office support services. We will rely on Supervalu to satisfy its performance and payment obligations under these agreements. If Supervalu is unable to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties or losses. If we do not have in place our own systems and services, or systems or services of equal or better quality, which could be costly and time-consuming to implement and we may not be successful in implementing these systems or services or in transitioning data from Supervalu’s systems, or if we do not have agreements with other providers of these systems or services at all or of equal or better quality once certain Separation agreements expire, we may not be able to operate our business effectively and our profitability may decline.
Challenges in the commercial and credit environments may materially adversely affect our ability to complete the Separation and our future access to capital.
Our ability to issue debt or enter into other financing arrangements on acceptable terms could be materially adversely affected if there is a material decline in the demand for our products or in the solvency of our licensees or suppliers, or if other significantly unfavorable changes in economic conditions occur. Volatility in the financial markets could increase borrowing costs or affect our ability to gain access to the capital markets, which could have a material adverse effect on our competitive position, financial condition, operating results or cash flows.
Our accounting and other management systems and resources may not be adequately prepared to meet the financial reporting and other requirements to which we will be subject following the Distribution.
Our financial results previously were included within the consolidated results of Supervalu, and we believe that our financial reporting and internal controls were appropriate for those of subsidiaries of a public company. However, we were not directly subject to the reporting and other requirements of the Securities Exchange Act, as amended (the “Exchange Act”). In connection with the Distribution, we will become directly subject to reporting and other obligations under the Exchange Act. Beginning with our Annual Report on Form 10-K for fiscal year          , we will be required to comply with Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), which will require annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm addressing these assessments. These reporting and other obligations may place significant demands on our management, administrative and operational resources, including accounting systems and resources.
The Exchange Act will require that we file annual, quarterly and current reports with respect to our business and financial condition. Under the Sarbanes-Oxley Act, we will be required to maintain effective disclosure controls and procedures and internal controls over financial reporting. To comply with these requirements, we may need to upgrade our systems; implement additional financial and management controls, reporting systems and procedures; and hire additional accounting and finance staff. We expect to incur additional annual expenses for the purpose of addressing these requirements, and those expenses may be significant. If we are unable to upgrade our financial and management controls, reporting systems, information technology systems and procedures or hire the necessary employees or contractors in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies under the Exchange Act could be impaired. Any failure to achieve and maintain effective internal controls could have a material adverse effect on our competitive position, financial condition, operating results or cash flows.
Risks Related to Save-A-Lot’s Common Stock
We cannot be certain that an active trading market for our common stock will develop or be sustained after the Separation, and our stock price may fluctuate significantly following the Separation.
A public market for Save-A-Lot common stock does not currently exist. We anticipate that on or prior to the record date for the Distribution, trading of shares of our common stock will begin on a “when-issued” basis and will continue through the distribution date. We, however, cannot guarantee that an active trading market will develop or be sustained for our common stock after the Separation. Similarly, we cannot predict the effect of the Separation on the trading prices of our common stock or whether the combined market value of the shares of Save-A-Lot common stock and Supervalu common stock following the Separation will be less than, equal to or greater than the market value of Supervalu common stock prior to the Separation.
The market price of Save-A-Lot common stock may fluctuate significantly due to a number of factors, some of which may be beyond our control, including:
actual or anticipated fluctuations in our operating results or growth;
changes in earnings estimated by securities analysts or our ability to meet those estimates;
the operating and stock price performance of comparable companies;
general stock market conditions;
changes to the regulatory and legal environment under which we operate; and
domestic and worldwide economic conditions.

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Future sales or distributions of shares of Save-A-Lot common stock, including the sale by Supervalu of the shares of our common stock that Supervalu will retain after the Distribution, may cause our stock price to decline.
Any sales of substantial amounts of Save-A-Lot common stock in the public market or the perception that such sales might occur, in connection with the Separation or otherwise, may cause the market price of Save-A-Lot common stock to decline. Upon completion of the Distribution, we expect that we will have an aggregate of approximately       million shares of our common stock issued and outstanding. These shares will generally be freely tradable without restriction or further registration under the U.S. Securities Act of 1933, as amended (the “Securities Act”), unless the shares are owned by one of Save-A-Lot’s “affiliates,” as that term is defined in Rule 405 under the Securities Act. In addition, approximately       shares of our common stock are expected to be issuable under employee equity plans, including under awards granted to employees prior to or in connection with the Separation, and approximately       million shares of our common stock will remain held by Supervalu for sale or other disposition.
Supervalu currently expects to retain approximately 40% of the outstanding shares of common stock of Save-A-Lot immediately following the Distribution. Supervalu plans to dispose within 24 months of the Distribution of a portion of the retained Save-A-Lot stock sufficient to reduce Supervalu’s ownership of Save-A-Lot stock to 20% or less. Supervalu has no plans to acquire any additional Save-A-Lot common stock following the Distribution. However, except as may be required pursuant to any agreement to which Save-A-Lot is a party, Save-A-Lot will have little or no control over the manner in or time at which Supervalu decreases its ownership stake, or if Supervalu does so at all. We will agree that, upon the request of Supervalu, we will use our reasonable best efforts to effect a registration under applicable federal and state securities laws of any shares of our common stock retained by Supervalu. Any disposition by Supervalu, or any significant stockholder, of our common stock in the public market, or the perception that such dispositions could occur, could adversely affect prevailing market prices for our common stock. We are unable to predict whether large amounts of our common stock will be sold in the open market following the Distribution. We are also unable to predict whether a sufficient number of buyers would be in the market at that time.
We do not expect that we will pay dividends on our common stock.
We do not expect that we will pay a regular cash dividend following the Separation. The timing, declaration, amount and payment of future dividends, if any, to stockholders will fall within the discretion of our board of directors. The board’s decisions regarding the payment of dividends will depend on many factors, such as our financial condition, earnings, cash flows, capital requirements, debt service obligations, covenants associated with any of our debt service obligations, industry practice, legal requirements, regulatory constraints and other factors that the board deems relevant. Among other things, our ability to pay dividends will depend on our ongoing ability to generate cash from operations and on our access to the capital markets. Moreover, if we determine to pay any dividend in the future, there can be no assurance that we will continue to pay such dividends or the amount of such dividends.
Your percentage of ownership in Save-A-Lot may be diluted in the future.
In the future, your percentage ownership in Save-A-Lot may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise, including equity awards that we will be granting to our directors, officers and employees. Certain of our employees and Supervalu’s employees will have stock-based awards with respect to shares of our common stock after the Separation as a result of conversion of their Supervalu stock-based awards (in whole or in part) to Save-A-Lot equity-based awards. We anticipate our compensation committee will grant additional stock-based awards to certain of our employees from time to time after the Separation. Such awards will have a dilutive effect on our earnings per share, which could adversely affect the market price of Save-A-Lot’s common stock.
In addition, our amended and restated certificate of incorporation will authorize us to issue, without the approval of Save-A-Lot’s stockholders, one or more classes or series of preferred stock having such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over Save-A-Lot’s common stock respecting dividends and distributions, as our board of directors generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of Save-A-Lot’s common stock. For example, we could grant the holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred stock could affect the residual value of our common stock. See “Description of Capital Stock” elsewhere in this Information Statement.
Certain provisions in Save-A-Lot’s amended and restated certificate of incorporation and amended and restated bylaws, and of Delaware law, may prevent or delay an acquisition of Save-A-Lot by a third party, which could decrease the trading price of our common stock.
Save-A-Lot’s amended and restated certificate of incorporation and amended and restated bylaws will contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such

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practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with Save-A-Lot’s board of directors rather than to attempt a hostile takeover. These provisions are expected to include, among others:
the inability of our stockholders to act by written consent;
the division of our board of directors into three classes of directors, with each class serving a staggered three-year term, subject to a proposal that Save-A-Lot will make to our stockholders at the third annual meeting following the Distribution for a staged declassification of our board of directors;
a provision that stockholders may only remove directors with cause while our board of directors is classified into more than one class;
the ability of our remaining directors, and not stockholders, to fill vacancies on our board of directors;
rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings;
the right of our board of directors to issue preferred stock without stockholder approval; and
the requirement that the affirmative vote of stockholders holding at least 75% of Save-A-Lot’s voting stock is required to amend certain provisions in Save-A-Lot’s amended and restated certificate of incorporation and Save-A-Lot’s amended and restated bylaws (relating to the number, term, election and removal of our directors, the filling of board vacancies, the calling of special meetings of stockholders, stockholder action by written consent and director and officer indemnification provisions).
In addition, we expect to be subject to Section 203 of the Delaware General Corporation Law (the “DGCL”), which could have the effect of delaying or preventing a change of control that you may favor. Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with persons that acquire, more than 15% of the outstanding voting stock of a Delaware corporation may not engage in a business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or any of its affiliates becomes the holder of more than 15% of the corporation’s outstanding voting stock.
We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition proposal. These provisions are not intended to make Save-A-Lot immune from takeovers; however, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our board of directors determines is not in the best interests of Save-A-Lot and our stockholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.
Save-A-Lot’s amended and restated certificate of incorporation will designate the state courts within the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by Save-A-Lot’s stockholders, which could discourage lawsuits against Save-A-Lot and our directors and officers.
Save-A-Lot’s amended and restated certificate of incorporation is expected to provide that unless the board of directors otherwise determines, a state court within the State of Delaware will be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of Save-A-Lot; (b) any action asserting a claim of breach of a fiduciary duty owed by any director or officer of Save-A-Lot to Save-A-Lot or Save-A-Lot’s stockholders, creditors or other constituents; (c) any action asserting a claim against Save-A-Lot or any director or officer of Save-A-Lot arising pursuant to any provision of the DGCL, Save-A-Lot’s amended and restated certificate of incorporation or Save-A-Lot’s amended and restated bylaws; or (d) any action asserting a claim against Save-A-Lot or any director or officer of Save-A-Lot governed by the internal affairs doctrine. If, however, no state court located within the State of Delaware has jurisdiction, the action may be brought in the U.S. District Court for the District of Delaware. Although Save-A-Lot’s amended and restated certificate of incorporation is expected to include this exclusive forum provision, it is possible that a court could rule that this provision is inapplicable or unenforceable. This exclusive forum provision may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with Save-A-Lot or our directors or officers, which may discourage such lawsuits against Save-A-Lot and our directors and officers. Alternatively, if a court were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could have a material adverse effect on our competitive position, financial condition, operating results or cash flows.



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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Information Statement and other material Supervalu and Save-A-Lot have filed or will file with the SEC contain, or will contain, statements which, to the extent they are not statements of historical or present fact, constitute “forward-looking statements” under the securities laws. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These forward-looking statements are intended to provide management’s current expectations or plans for our future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as “believe,” “expect,” “expectations,” “plans,” “intend,” “strategy,” “prospects,” “estimate,” “project,” “target,” “anticipate,” “will,” “should,” “see,” “guidance,” “confident” and other words of similar meaning in connection with a discussion of future operating or financial performance. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow growth, results of operations, uses of cash and other measures of financial performance. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For those statements we claim the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995. Such risks, uncertainties and other factors include, without limitation:
competitive pressures in the markets in which we operate, which would impact our margins and profitability;
our ability to successfully identify and execute initiatives to organically increase sales and profits;
the inability to maintain or improve levels of identical store sales growth;
the inability to maintain or increase our operating margins;
our ability to successfully open new stores or successfully manage the potential difficulties and demands on our personnel associated with store growth;
the risks associated with our licensee distribution business model and concentration among licensees;
risks related to the infringement of our intellectual property rights;
real or perceived food quality or safety issues and related unfavorable publicity;
disruption to our supply chain and distribution network;
changes in commodity prices, including due to inflation or deflation, and availability of commodities;
worsening economic conditions, which could adversely impact consumer spending, increase the costs of doing business or otherwise adversely affect our operating results;
risks related to our dependence on information technology systems and services, including systems and services provided under the services agreement;
customer payment-related risks due to the payment card industry’s shift to chip-and-PIN technology;
the effect of any health epidemics or severe weather and natural disasters;
the costs of complying with existing or changing environmental, health, food safety and safety requirements and for potential environmental obligations relating to current or discontinued operations;
changes to or reductions in government benefits that are used to support grocery purchases;
our inability to attract, train and retain, or maintain satisfactory relations with, our employees;
our high level of fixed lease obligations;
the costs associated with our lease obligations, which may require us to continue paying rent for locations that we no longer operate;
our capital expenditures and future additional indebtedness;
risks associated with Save-A-Lot’s debt obligations following the Separation;
the ability to obtain financing on satisfactory terms, or at all;
the adequacy of Save-A-Lot’s insurance and self-insurance programs;
the outcome of legal proceedings;
the effect of changes in regulatory and other laws and regulations in the U.S. and other countries in which we operate;
the scope, nature, impact or timing of acquisition and divestiture activity, including, among other things, integration of acquired businesses into our existing businesses and realization of synergies and opportunities for growth and innovation;
risks related to the impairment of long-lived assets;
risks related to Supervalu’s ownership of a significant amount of our common stock and influence over us following the Distribution; and
other risk factors included under “Risk Factors” in this Information Statement.

See the sections “Risk Factors,” “The Separation and Distribution,” “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Notes to Combined Financial Statements” under the heading “Note 13—Commitments, Contingencies and Off-Balance Sheet Arrangements” elsewhere in this Information Statement. The forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of

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new information, future events or otherwise, except as required by applicable law. Additional information as to factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements are or will be disclosed from time to time in our other filings with the SEC.

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THE SEPARATION AND DISTRIBUTION
Background
On July 28, 2015, Supervalu announced that its board of directors had authorized the exploration of a plan to separate its Save-A-Lot business from Supervalu. Supervalu currently intends to effect the Separation through a pro rata distribution of approximately 60% of the common stock of Save-A-Lot to Supervalu’s stockholders, which will not be eligible for treatment as a tax-free distribution for U.S. federal income tax purposes. Following the Distribution, we currently expect that Supervalu stockholders will own approximately 60% of the outstanding shares of common stock of Save-A-Lot, and Save-A-Lot will be a separate company from Supervalu. Supervalu currently expects to retain approximately 40% of the outstanding shares of common stock of Save-A-Lot immediately following the Distribution. The number of shares of Supervalu common stock you own will not change as a result of the Separation.
On      , the Supervalu board of directors approved the Distribution of at least        of the issued and outstanding shares of Save-A-Lot common stock on the basis of one share of Save-A-Lot common stock for every       shares of Supervalu common stock held as of the close of business, Eastern time, on      , the record date for the Distribution. Supervalu plans to dispose within 24 months of the Distribution of a portion of the retained Save-A-Lot stock sufficient to reduce Supervalu’s ownership of Save-A-Lot stock to 20% or less. Supervalu has no plans to acquire any additional Save-A-Lot common stock following the Distribution. At 11:59 p.m., Eastern time, on      , the distribution date, each Supervalu stockholder will receive one share of Save-A-Lot common stock for every       shares of Supervalu common stock held as of the close of business on the record date for the Distribution, as described below. Supervalu stockholders will receive cash in lieu of any fractional shares of Save-A-Lot common stock that they would have received after application of this ratio. You will not be required to make any payment, surrender or exchange your Supervalu common stock or take any other action to receive your shares of Save-A-Lot’s common stock in the Distribution. The distribution of Save-A-Lot’s common stock as described in this Information Statement is subject to the satisfaction or waiver of certain conditions. For a more detailed description of these conditions, see “—Conditions to the Distribution.”

Reasons for the Separation
The Supervalu board of directors believes that the Separation of Save-A-Lot’s business from Supervalu would be in the best interests of Supervalu and its stockholders. A wide variety of factors have been considered by the Supervalu board of directors in evaluating the Separation. Among other things, the Supervalu board of directors considered the following potential benefits of the Separation:
The Separation will enable each company to focus on its own distinct operations and strategies, and permit the management of each company to concentrate efforts on its unique customers and market conditions.
The Separation will position Save-A-Lot as an independent hard discount grocery retailer and enable it to focus on and strengthen relationships with its licensees and customers.
The Separation will also enable Save-A-Lot to make investment, personnel and operational decisions better aligned with its licensees and customer base.
The Separation will permit each company to concentrate its financial resources solely on its own operations without having to compete with each other for investment capital.
The Separation will enable Save-A-Lot to optimize its investment strategies and invest in capital-intensive long-term programs that may not meet Supervalu investment objectives and provide Save-A-Lot with direct access to debt and equity capital markets, enabling it to fund desired growth strategies based on its own targeted return rates.
The Separation will allow Save-A-Lot to invest capital in and focus on higher growth opportunities in its hard discount grocery retailing business.
The Separation will focus Save-A-Lot leadership on program execution and customer needs and relieve the demands on the time and attention of Supervalu’s management and board of directors associated with overseeing Save-A-Lot’s operations and growth strategy.
The Separation will reduce internal competition for capital among existing Supervalu segments, and facilitate a more efficient allocation of capital and capital structure.
The Separation will allow investors to separately value Supervalu and Save-A-Lot based on their distinct investment identities. Save-A-Lot’s hard discount grocery business differs from Supervalu’s wholesale distribution and retail food businesses in several respects, such as the nature of the business and growth profile.
The Separation will enable investors to evaluate the merits, performance and future prospects of each company’s respective business and to invest in each company separately based on these distinct characteristics, which may attract new investors to each business who may not have properly assessed the value of the businesses as stand-alone entities relative to the value they are currently accorded.

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The Separation will improve the ability of both Supervalu and Save-A-Lot to use their respective stock as acquisition currency.
The Separation will facilitate incentive compensation arrangements for employees that are more directly tied to the performance of each of Save-A-Lot’s and Supervalu’s respective businesses, facilitating employee hiring and incentivization.
Neither Save-A-Lot nor Supervalu can assure you that, following the Separation, any of the benefits described above or otherwise will be realized to the extent anticipated or at all.
Other Considerations of the Supervalu Board of Directors
The Supervalu board of directors also considered a number of other factors in evaluating the Separation, including the loss of synergies, joint purchasing power and shared services, increased costs resulting from operating as a separate public entity (including financing costs), one-time costs of the Separation, continued transition expenses and the risk of not realizing the anticipated benefits of the Separation. The Supervalu board of directors concluded that the potential benefits of the Separation outweighed these factors.
Internal Restructuring and Series A Preferred Stock Issuance
Prior to the Distribution, Supervalu currently expects to complete an internal corporate restructuring to transfer to Save-A-Lot the assets and liabilities that are part of its Save-A-Lot business. We currently expect that this internal corporate restructuring (which we refer to as the “internal restructuring”) will include following transactions:
Certain subsidiaries of Supervalu, which are not subsidiaries of the operating entity Moran Foods, LLC (“Moran”), will distribute or otherwise transfer assets related to the Save-A-Lot business to Supervalu (the “Save-A-Lot distribution assets”).
Supervalu will transfer 100% of the outstanding shares of Moran and the Save-A-Lot distribution assets to Save-A-Lot in exchange for shares of Save-A-Lot common stock, shares of newly issued Series A nonvoting preferred stock of Save-A-Lot, having an aggregate liquidation preference of approximately $5 million to $20 million, plus accrued but unpaid dividends (which we refer to as the “Series A preferred stock”), the assumption of certain liabilities and all or a portion of any cash borrowings of Save-A-Lot in connection with the Separation. The terms of the Series A preferred stock are subject to ongoing consideration. We cannot be certain these terms will not be changed or supplemented. For more information regarding the expected terms of the Series A preferred stock, please see “Description of Capital Stock—Preferred Stock—Series A Preferred Stock.” After this transfer, and prior to the completion of the Distribution, third-party investors unrelated to Supervalu will acquire all of the shares of the Series A preferred stock from Supervalu for cash.
Number of Shares Received in Distribution
At 11:59 p.m., Eastern time, on      , the distribution date, each Supervalu stockholder will receive one share of Save-A-Lot common stock for every       shares of Supervalu common stock held as of the close of business of the NYSE on      , the record date.
Treatment of Fractional Shares
Supervalu will not distribute any fractional shares of Save-A-Lot common stock to its stockholders. Instead, as soon as practicable on or after the distribution date,         , our distribution agent, will aggregate fractional shares of our common stock held by holders of record into whole shares, sell them in the open market at the prevailing market prices and then distribute the aggregate sale proceeds ratably to Supervalu stockholders who would otherwise have been entitled to receive fractional shares of our common stock. The amount of this payment will depend on the prices at which the distribution agent sells the aggregated fractional shares of our common stock in the open market shortly after the distribution date. The distribution agent will, in its sole discretion, without any influence by Supervalu or us, determine when, how, through which broker-dealer and at what price to sell the whole shares. The distribution agent is not, and any broker-dealer used by the distribution agent will not be, an affiliate of either Supervalu or us. We will be responsible for payment of any brokerage fees, which we do not expect to be material to us. Your receipt of cash in lieu of fractional shares of our common stock generally will result in a taxable gain or loss for U.S. federal income tax purposes, as described in more detail under “Material U.S. Federal Income Tax Consequences of the Distribution.”

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When and How to Receive the Distribution
With the assistance of         , Supervalu expects to distribute Save-A-Lot common stock on       , the distribution date, to all holders of outstanding Supervalu common stock as of the close of business on       , the record date.         will serve as the settlement and distribution agent in connection with the Distribution and the transfer agent and registrar for Save-A-Lot common stock.
If you own Supervalu common stock as of the close of business on the record date, Save-A-Lot’s common stock that you are entitled to receive in the Distribution will be issued electronically, as of the distribution date, to you in direct registration form or to your bank or brokerage firm on your behalf. If you are a registered holder,         will then mail you a direct registration account statement that reflects your shares of Save-A-Lot common stock. If you hold your shares through a bank or brokerage firm, your bank or brokerage firm will credit your account for the shares. “Direct registration form” refers to a method of recording share ownership when no physical share certificates are issued to stockholders, as is the case in this Distribution. If you sell Supervalu common stock in the “regular-way” market up to and including the distribution date, you will be selling your right to receive shares of Save-A-Lot common stock in the Distribution.
Commencing on or shortly after the distribution date, if you hold physical share certificates that represent your Supervalu common stock and you are the registered holder of the shares represented by those certificates, the distribution agent will mail to you an account statement that indicates the number of shares of Save-A-Lot’s common stock that have been registered in book-entry form in your name.
Most Supervalu stockholders hold their common stock through a bank or brokerage firm. In such cases, the bank or brokerage firm would be said to hold the shares in “street name” and ownership would be recorded on the bank or brokerage firm’s books. If you hold your Supervalu common stock through a bank or brokerage firm, your bank or brokerage firm will credit your account for the Save-A-Lot common stock that you are entitled to receive in the Distribution. If you have any questions concerning the mechanics of having shares held in “street name,” please contact your bank or brokerage firm.
Results of the Distribution
After its separation from Supervalu, Save-A-Lot will be an independent, publicly traded company. The actual number of shares of Save-A-Lot common stock to be distributed pursuant to the Distribution will be determined at the close of business on       , the record date for the Distribution, and will reflect any exercise of Supervalu options and vesting of restricted stock units between the date the Supervalu board of directors declares the Distribution and the record date for the Distribution. The Distribution will not affect the number of outstanding Supervalu common stock or any rights of Supervalu stockholders. Supervalu will not distribute any fractional shares of Save-A-Lot common stock.
Save-A-Lot will enter into a separation and distribution agreement and other related agreements with Supervalu before the Distribution to effect the Separation. These agreements will provide for the allocation between Supervalu and Save-A-Lot of Supervalu’s assets, liabilities and obligations (including employee benefits, intellectual property and tax-related assets and liabilities) attributable to periods prior to Save-A-Lot’s Separation from Supervalu and will govern the relationship between Supervalu and Save-A-Lot after the Separation. For a more detailed description of these agreements, see “Certain Relationships and Related Party Transactions” elsewhere in this Information Statement.
The following diagram depicts the corporate structure that we currently expect immediately after giving effect to the internal restructuring, the Distribution and the other transactions described in this Information Statement:

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* Within the two-year period following the Distribution of Save-A-Lot shares, Supervalu intends to dispose, in an orderly fashion, of sufficient shares of Save-A-Lot common stock to decrease Supervalu’s ownership stake in Save-A-Lot to 20% or less.

Incurrence of Debt
Save-A-Lot intends to enter into certain financing arrangements prior to the Separation. We currently expect that Save-A-Lot will incur $400 to $500 of long-term debt prior to the Distribution, the net proceeds of which Save-A-Lot will distribute to Supervalu prior to the Distribution. See “Certain Relationships and Related Party Transactions—Separation and Distribution Agreement.”
The amount and type of financing arrangements that we plan to enter into prior to the Separation are subject to negotiation and market conditions. We cannot be certain the financing arrangements described above will not be changed or supplemented.

Market for Save-A-Lot Common Stock
There is currently no public trading market for Save-A-Lot’s common stock. We intend to apply to list our common stock on the NYSE under the symbol “     ”. We have not and will not set the initial price of our common stock. The initial price will be established by the public markets. We cannot predict the price at which our common stock will trade after the Distribution. In fact, the combined trading prices, after the Distribution, of the shares of Save-A-Lot common stock that each Supervalu stockholder will receive in the Distribution and the Supervalu common stock held at the record date for the Distribution may not equal or exceed the “regular-way” trading price of a Supervalu share immediately prior to the Distribution. The price at which Save-A-Lot common stock trades may fluctuate significantly, particularly until an orderly public market develops. Trading prices for Save-A-Lot common stock will be determined in the public markets and may be influenced by many factors. See “Risk Factors—Risks Related to Save-A-Lot’s Common Stock” elsewhere in this Information Statement.

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Trading Between the Record Date and Distribution Date
Beginning on or shortly before the record date for the Distribution and continuing up to and including through the distribution date, Supervalu expects that there will be two markets in Supervalu common stock: a “regular-way” market and an “ex-distribution” market. Shares of Supervalu common stock that trade on the “regular-way” market will trade with an entitlement to shares of Save-A-Lot common stock distributed pursuant to the Separation. Shares of Supervalu common stock that trade on the “ex-distribution” market will trade without an entitlement to shares of Save-A-Lot common stock distributed pursuant to the Distribution. The “regular-way” and “ex-distribution” markets for Supervalu’s common stock will trade at different prices. Therefore, if you sell shares of Supervalu common stock in the “regular-way” market up to and including through the distribution date, you will be selling your right to receive shares of Save-A-Lot common stock in the Distribution related to ownership of such shares of Supervalu common stock. If you own Supervalu common stock at the close of business on the record date and sell those shares on the “ex-distribution” market up to and including through the distribution date, you will receive the shares of Save-A-Lot common stock that you are entitled to receive pursuant to your ownership as of the record date of the Supervalu common stock.
Furthermore, beginning on or shortly before the record date for the Distribution and continuing up to and including the distribution date, we expect that there will be a “when-issued” market in our common stock. “When-issued” trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. The “when-issued” trading market will be a market for Save-A-Lot common stock that will be distributed to holders of Supervalu common stock on the distribution date. If you own Supervalu common stock at the close of business on the record date for the Distribution, you would be entitled to Save-A-Lot common stock distributed pursuant to the Distribution. You may trade this entitlement to shares of Save-A-Lot common stock, without the Supervalu common stock you own, on the “when-issued” market. On the first trading day following the distribution date, “when-issued” trading with respect to Save-A-Lot common stock will end, and “regular-way” trading will begin.
Conditions to the Distribution
We have announced that the Distribution will be effective at 11:59 p.m., Eastern time, on       , which is the distribution date, provided that the following conditions shall have been satisfied (or waived by Supervalu in its sole discretion):
the board of directors of Supervalu, in its sole and absolute discretion, shall have authorized and approved the Separation and not withdrawn such authorization and approval, and shall have declared the Distribution of our common stock to Supervalu stockholders;
the transfer of assets and liabilities between Supervalu and Save-A-Lot shall have been completed in accordance with the separation and distribution agreement;
Supervalu shall have received a private letter ruling from the IRS regarding certain U.S. federal income tax matters relating to the Separation, the Distribution and certain related transactions;
the SEC shall have declared effective Save-A-Lot’s registration statement on Form 10, of which this Information Statement forms a part, and this Information Statement shall have been made available to the Supervalu stockholders;
the shares of Save-A-Lot common stock to be distributed shall have been accepted for listing on the NYSE subject to official notice of distribution;
all actions and filings with, and approvals and other consents from, governmental authorities necessary or appropriate under applicable laws shall have been taken and, where applicable, have become effective or been accepted by, or obtained from, as applicable, the applicable governmental authority;
the transaction agreements relating to the Separation shall have been duly executed and delivered by each party thereto;
no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Separation, the Distribution or any of the related transactions shall be in effect;
Supervalu shall have received the proceeds from the cash payments from Save-A-Lot, as described in “Certain Relationships and Related Party Transactions—The Separation and Distribution Agreement—Cash Payments,” and Supervalu shall be satisfied in its sole and absolute discretion that, as of the effective time of the Distribution, it shall have no further liability under any of the Save-A-Lot financing arrangements described under “Description of Material Indebtedness”;
Supervalu’s board of directors shall have received one or more opinions delivered by an independent appraisal firm satisfactory to the Supervalu board of directors confirming the solvency and financial viability of Supervalu before the consummation of the Distribution and each of Supervalu and Save-A-Lot after consummation of the Distribution, such opinions being satisfactory to the Supervalu board of directors in form and substance in the sole discretion of the Supervalu board of directors and such opinions having not been withdrawn or rescinded; and
no event or development shall have occurred or exist that, in the judgment of Supervalu’s board of directors, in its sole and absolute discretion, makes it inadvisable to effect the Separation, the Distribution and other related transactions.

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Supervalu will have the sole and absolute discretion to determine (and change) the terms of, and whether to proceed with, the Distribution and, to the extent it determines to so proceed, to determine the record date for the Distribution, the distribution date and the distribution ratio. Supervalu will also have sole discretion to waive any of the conditions to the Distribution. Supervalu does not intend to notify its stockholders of any modifications to the terms of the Separation that, in the judgment of its board of directors, are not material. For example, the Supervalu board of directors might consider material such matters as significant changes to the distribution ratio, developments in the businesses of Supervalu or Save-A-Lot, or changes in the assets to be contributed or the liabilities to be assumed in the Separation. To the extent that the Supervalu board of directors determines that any modifications by Supervalu materially change the material terms of the Distribution, Supervalu will notify Supervalu stockholders in a manner reasonably calculated to inform them about the modification as may be required by law, by, for example, publishing a press release, filing a current report on Form 8-K or circulating a supplement to this Information Statement.
Reason for Furnishing This Information Statement
This Information Statement is being furnished solely to provide information to Supervalu’s stockholders that are entitled to receive shares of our common stock in the Distribution. This Information Statement is not, and is not to be construed as, an inducement or encouragement to buy, hold or sell any of our securities. We believe that the information in this Information Statement is accurate as of the date set forth on the cover. Changes may occur after that date, and neither Supervalu nor we undertake any obligation to update the information except in the normal course of our respective public disclosure obligations.
Treatment of Equity-Based Compensation
The employee matters agreement will provide for the conversion of the outstanding awards granted under Supervalu’s equity compensation plans into adjusted awards relating to shares of Supervalu, Save-A-Lot, or both pursuant to the terms of the applicable Supervalu equity compensation plan. The Supervalu equity compensation plans are administered by the Leadership Development and Compensation Committee of the Supervalu board of directors, which will approve the employee matters agreement, including the equity award conversion methodology contained therein. The Save-A-Lot equity compensation plans are expected to be administered by the Leadership Development and Compensation Committee of the Save-A-Lot board of directors following the Distribution. The Save-A-Lot board of directors will approve the employee matters agreement, including the equity award conversion methodology contained therein. The adjusted awards generally will be subject to the same vesting conditions and other terms that applied to the original Supervalu award immediately before the Distribution.
Each option to purchase Supervalu common stock (which we refer to as a “Supervalu option”) that is held by an employee who will remain with Supervalu following the Separation, referred to as a Supervalu allocated employee, will be converted into both an adjusted Supervalu option and a Save-A-Lot option. The exercise price and number of shares subject to each option will be adjusted to preserve the aggregate intrinsic value of the original Supervalu option, as measured immediately before and immediately after the Distribution, subject to rounding. Each Supervalu option that is held by an employee who will be a Save-A-Lot employee following the Separation, referred to as a Save-A-Lot allocated employee, will be converted into a Save-A-Lot option, with the exercise price and number of shares subject to the option adjusted to preserve the aggregate intrinsic value of the original Supervalu option as measured immediately before and immediately after the Distribution, subject to rounding.
Holders of Supervalu restricted stock and restricted stock unit awards who are Supervalu allocated employees will retain those awards and also will receive a Save-A-Lot award covering a number of shares of Save-A-Lot common stock that reflects the Distribution to Supervalu stockholders, determined by applying the distribution ratio to the Supervalu awards as though they were actual shares of Supervalu common stock. Holders of Supervalu restricted stock and restricted stock unit awards who are Save-A-Lot allocated employees will receive corresponding Save-A-Lot awards, with the number of shares adjusted to preserve the aggregate value of the original Supervalu award as measured immediately before and immediately after the separation, subject to rounding.
Prior to the effectiveness of the registration statement of which this Information Statement is a part, Supervalu will determine the treatment of performance share unit awards granted in April 2016 in the separation, and such treatment will be described in a subsequent amendment to this Information Statement.
Non-employee directors of Supervalu who hold Supervalu deferred stock unit awards under the Supervalu Directors’ Deferred Compensation Plan will retain those awards and will also receive a Save-A-Lot deferred stock unit award covering a number of shares of Save-A-Lot common stock that reflects the distribution to Supervalu stockholders, determined by applying the distribution ratio to the Supervalu awards as though they were actual shares of Supervalu common stock. In connection with the Separation and the Distribution, the Supervalu and Save-A-Lot deferred stock units of Supervalu non-employee directors

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who resign from the Supervalu board of directors and become directors of Save-A-Lot upon the Distribution will be transferred to the Save-A-Lot Directors’ Deferred Compensation Plan, which is described in further detail in “Executive CompensationSave-A-Lot Directors’ Deferred Compensation Plan” elsewhere in this Information Statement.
For more information, see “Certain Relationships and Related Party TransactionsEmployee Matters Agreement” elsewhere in this Information Statement.


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DIVIDEND POLICY

We do not expect that we will pay a regular cash dividend to holders of our common stock following the Separation. The timing, declaration, amount and payment of future dividends, if any, to holders of our common stock will fall within the discretion of Save-A-Lot’s board of directors. The board’s decisions regarding the payment of dividends will depend on many factors, such as our financial condition, earnings, cash flow, capital requirements, debt service obligations, covenants associated with debt obligations, industry practice, legal requirements, regulatory constraints and other factors that the board deems relevant. Among other things, our ability to pay dividends will depend on our ongoing ability to generate cash from operations and on our access to the capital markets. Moreover, if the Save-A-Lot board determines to pay any dividend to holders of our common stock in the future, there can be no assurance that we will continue to pay such dividends or the amount of such dividends.



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CAPITALIZATION
The following table sets forth our capitalization as of June 18, 2016, on a historical basis and pro forma basis after giving effect to the Separation and the Distribution as if it occurred on June 18, 2016. The following table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Combined Financial Statements,” “Index to Combined Annual Financial Statements,” “Index to Unaudited Combined Interim Financial Statements,” and the statements referenced therein.
We are providing the capitalization table below for informational purposes only. The capitalization table below may not reflect the capitalization or financial condition that would have resulted had we been operating as a separate, independent entity on June 18, 2016 and is not necessarily indicative of our future capitalization or financial condition.
 
 
As of June 18, 2016
(in millions, except par values)
 
Historical
 
Pro Forma
Cash and cash equivalents(1)
 
$
7

 
 
 
 
 
 
 
Indebtedness:
 
 
 
 
Capital leases
 
10

 

Long-term debt(2)
 

 
 
Total debt and capital lease obligations
 
10

 

Mezzanine equity
 
 
 
 
Redeemable series A (non-voting) cumulative perpetual preferred stock,       par value,       shares issued and outstanding on a pro forma basis,       shares authorized and outstanding with a liquidation preference of $       (3)
 

 
 
Total mezzanine equity
 

 
 
Equity:
 
 
 
 
Common stock, $0.01 par value,       shares authorized,       issued and outstanding on a pro forma basis(3)
 

 
 
Additional paid-in capital(3)
 

 
 
Parent company equity(3)
 
642

 
 
Total equity
 
642

 
 
Total capitalization
 
$
652

 

(1)
Historically, cash received by Save-A-Lot has been “swept” by Supervalu as part of Supervalu’s centralized cash management function. Supervalu has funded our operating and investing activities as needed. The net effect of transfers of cash to/from Supervalu’s cash management accounts is reflected in Parent company equity in the historical Combined Balance Sheets.
(2)
We currently expect to incur up to $400 to $500 in aggregate principal amount of indebtedness, including a new term loan and/or senior notes issued to third parties. We also currently expect to enter into a revolving credit facility of up to $       . See “Description of Material Indebtedness” included elsewhere in this Information Statement for additional information.
(3)
Reflects the pro forma recapitalization of Save-A-Lot equity through the issuance of Save-A-Lot common stock and Save-A-Lot Series A preferred stock, with a corresponding decrease to Parent company equity to reflect the Separation and the Distribution. See “Description of Capital Stock” included elsewhere in this Information Statement for additional information.
We have not yet finalized our post-Separation capitalization and these adjustments are subject to change. We intend to update and include pro forma financial information reflecting our post-Separation capitalization in an amendment to this Information Statement.


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BUSINESS
Save-A-Lot Overview
The Save-A-Lot Vision
We aspire to be the hard discount grocery retailer of choice for value-seeking shoppers. Unwavering in this objective, we provide a locally relevant, edited assortment of high-quality products at great prices, served by friendly associates in a convenient shopping experience. Our goal is to continue to enhance our customer experience through the execution of numerous proven initiatives, including the continued refinement of our compelling private-label programs, our fresh cut meat and produce offerings and our tailored merchandise assortments. We believe these initiatives can continue to drive increases in our average sales per store throughout our network. In the United States, where we have virtually all of our operations and where there is a relatively low penetration of hard discount grocers in comparison to Europe and other developed economies, we believe we are poised to benefit from strong industry tailwinds as we continue to improve our customer experience and expand our store concept throughout the country.
Our store concept consists of corporate operated and owned stores (our Corporate Stores segment), as well as stores operated by retailers with whom we maintain strong relationships through the license of our Save-A-Lot name and the supply of our products and services (our Licensee Distribution segment). We believe this flexible ownership model will enable us to substantially expand our network of Save-A-Lot stores in a strategic and prudent manner. Following the separation of our Save-A-Lot business from Supervalu, we believe we will be even better positioned to execute on our growth strategies and achieve our vision.
Our History
Our history began with just a single store in 1977. While working for a grocery wholesaler in the mid-1970s, our founder, Bill Moran, identified an opportunity for small grocers to compete against emerging larger format grocers and created Save-A-Lot’s hard discount business model, which we define as a small grocery store format with an edited assortment of quality products at discount prices every day that are primarily private-label. The first store opened in Cahokia, Illinois, and since then, Save-A-Lot has grown into one of the largest U.S. discount grocery chains by store count. As of June 18, 2016, our store and distribution network encompassed 1,368 corporate and licensed stores in 37 states, the Caribbean and Central America, and 17 wholesale distribution centers.
Overview of the Save-A-Lot Format
As of June 18, 2016, we operated 472 corporate stores, and 896 additional stores were operated by our licensees. As one of the nation’s leading hard discount grocery chains, we and our licensees are everyday low-cost providers of quality products, targeting savings on individual items of up to 15% compared to “large box” discount chains, which we believe can result in savings of up to 30% or more compared to traditional grocery stores depending on the market and competitors. Save-A-Lot stores serve more than five million shoppers each week, mostly in the southern and eastern United States. A typical Save-A-Lot customer has a household income of up to $50 thousand, although our demographics vary across our network of stores and we continue to seek ways to expand our demographic reach. Customers enjoy everyday savings on Save-A-Lot private-label brands and national brands, as well as quality beef, pork and poultry, farm-fresh fruits and vegetables, and non-food items.

We provide a specific and edited assortment of high volume, conveniently sized and low priced items selected to fit our target customer’s needs. Our store merchandising mix is tailored for local preferences through the use of demographic and ethnic specific product offerings. A typical Save-A-Lot store is approximately 17,000 gross square feet in size (with approximately 11,000 square feet of retail selling space on average) and carries approximately 3,000 core stock-keeping units (“SKUs”). Our store format is generally consistent across our network of corporate and licensed stores. We provide merchandising and marketing programs as well as planogram recommendations to our licensees that are based on the programs and planograms created for our corporate stores. Licensees generally adhere to our programs and recommendations, using their local market knowledge in order to effectively customize product offerings, thereby facilitating the adaptability of the store concept across different demographic and economic trade areas.

Our private-label program provides budget conscious consumers a high-quality, low-priced alternative to national brands. Our private-label brands currently include Coburn Farms®, Fairgrounds®, Ginger Evans®, J. Higgs®, Wylwood®, Tio Santi™, and the Company’s newest private-label brand, America’s Choicesm. Private-label products account for approximately 60% and 55% of our corporate stores and licensee store retail sales (excluding fresh meat and produce), respectively, which is a significantly higher percentage than in a traditional grocery store. With our private-label offering, we target significant savings for our customers relative to both national brands and private-label brands that are offered by traditional grocery stores and “large box” discount chains.

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We recently acquired the America’s Choicesm brand and will be enhancing our private label assortment with the introduction of new and innovative items under this label. Over time, we expect that America’s Choicesm will become the predominant food private label brand in our stores as we seek to consolidate our private label brand offerings by reducing the number of private label brands that we offer while increasing brand recognition and enhancing brand equity.
Corporate Stores vs. Licensee Distribution
We operate two reportable segments: Corporate Stores, a retail format comprising 46% of our revenues in fiscal 2016, and Licensee Distribution, a wholesale format comprising 54% of our revenues in fiscal 2016. Through our Corporate Stores business, we sell groceries at 472 retail locations operated by the Company as of June 18, 2016. Through our Licensee Distribution business, we are the primary grocery supplier to 896 licensed stores as of June 18, 2016. Our licensees operate under the Save-A-Lot name and are provided access to our private-label brands, store programs, operating standards and supervisory support. The network currently spans 37 states along with the Caribbean and Central America.    
Corporate Stores
Our corporate stores are largely concentrated in the southern and eastern United States. Since the end of fiscal 2013, the Corporate Stores segment has grown from 381 to 472 stores. Along with the opening of new corporate stores, Save-A-Lot has from time-to-time opportunistically converted licensee stores to corporate stores. The Company added 50 new corporate stores in fiscal 2016 on a gross basis, through a combination of 42 new store openings and the opportunistic conversion of eight existing licensee stores to corporate stores. We intend to continue to grow our number of corporate stores through a combination of new store openings and attractive licensee conversion opportunities if they arise in the future.
We set high standards for our corporate stores and are constantly working to refine our corporate stores operations. For example, over the last few years, we have implemented a number of initiatives within our corporate stores, including the addition of fresh cut meat departments to virtually all of our corporate stores and the reinvigoration and relocation of our produce departments. We have seen store performance improve as a result. First-year average weekly sales (“AWS”), a common metric to measure store performance during the first full year a store is open, has grown significantly for our corporate stores over the past several years. Across all of our markets, first-year AWS increased approximately 18% from fiscal 2012 to fiscal 2016. While we are pleased with this improvement in first-year AWS over the past few years, we believe we have a number of opportunities to further enhance the sales productivity of our store base in the future. We calculate AWS as corporate stores product sales divided by the number of weeks in a fiscal period excluding the first partial period a store is opened.
We generally open corporate stores in larger markets to establish a presence and build brand awareness. We subsequently may open additional new corporate and/or licensee stores, which further improves our brand awareness in that market and results in improved overall market profitability. However, in other select markets, which are smaller and mostly rural, we have largely used licensee operators as an entry strategy, as licensees typically have a more established connection to the local communities.

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Licensee Distribution
Our strong licensee base is largely concentrated in the eastern half of the United States. The typical licensee has previous grocery retail business experience along with local community knowledge and relationships. Licensees generally must meet certain criteria to be considered to operate a Save-A-Lot, including minimum net worth, liquid cash available to invest in the store and prior retail experience. In addition, new licensee owners are expected to meet strict operating and store condition standards for a consistent Save-A-Lot brand across the store network.

Our licensees are diverse in terms of the size of their Save-A-Lot operations. We have many licensees that operate a single store as well as a large number who operate several stores. As of June 18, 2016, our largest licensee, who has been operating Save-A-Lot stores for over 30 years, operates 172 stores.


We maintain strong, long-term relationships with our licensees. The average tenure of our licensees is approximately 13 years, and our top 25 licensees (as measured by wholesale purchases), which represents approximately half of our Licensee Distribution segment sales, have an average tenure of nearly 20 years. The support we provide licensees contributes to the strength of those relationships. We provide our licensees with store layouts, shelf planograms, pricing support, merchandising and marketing plans as well as our store set-up expertise to assist in new store openings. We then provide ongoing planogram updates, retail pricing support, store merchandising plans and marketing and field support, which we believe further strengthens our relationships and also improves execution of our consistent store format and standards. By using incentives, such as advertising and other strategies, we work side-by-side with our licensees to help them achieve their goals, while providing customers with a pleasant, convenient and value-oriented shopping experience. Our long-term distribution experience has also strengthened our licensee relationships, allowing our business to maintain licensee store turnover of less than five percent annually.
Our Licensee Distribution business is not a franchise arrangement and we do not charge a royalty fee for the use of our Save-A-Lot name that we provide our licensees. We enter into license and supply agreements with our licensees under which we agree to license our name to the licensees and the licensees agree to purchase their inventory from the Company with some exceptions, including items that we do not carry in our distribution centers and direct store delivery products. Our agreements also give us options to purchase licensed stores under certain circumstances, such as if the licensee desires to sell its store(s).
Key Geographies
Most Save-A-Lot stores are located in the southern and eastern United States, with our corporate stores primarily located in large designated market areas (“DMAs”) (as defined by Nielsen), while our licensee stores are located more equally in large, medium and small DMAs.

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Geographic data as of June 18, 2016

Our stores are generally located within a 250-mile radius of one of Save-A-Lot’s 17 distribution centers. The following map represents the combined Save-A-Lot network as of June 18, 2016. Total Corporate Stores retail store square footage is approximately eight million and total distribution center square footage is approximately five million.
Industry Overview
We operate in the $1 trillion U.S. grocery retail industry an industry that has been transformed over the years, presenting consumers with an increasing number of formats. While the vast majority of consumers’ everyday consumable needs were purchased at a traditional grocery store in the 1990s, today more than 60% of consumables are purchased at other formats, which range from larger stores such as supercenters and wholesale clubs, to smaller square footage retailers, such as dollar stores or hard discount grocers.
Within the broader U.S. grocery and consumables industry, we operate within the hard discount sector, a sub-component of the limited assortment channel. This sector has benefited from industry tailwinds that have similarly benefited other value-oriented

53


channels, such as wholesale clubs, supercenters and dollar stores. According to Willard Bishop’s The Future of Food Retailing 2016, this momentum is expected to continue as value-oriented channels are predicted to outpace the broader industry’s growth, with an average projected compound annual growth rate (“CAGR”) over the next five years of 3.2% (vs. 1.8% for the total U.S. grocery and consumables industry).
The chart below illustrates the projected sales growth by channel. As depicted in the chart below, the fresh and limited assortment channels are anticipated to be the two leading growth channels of the U.S. grocery and consumables industry. As a hard discount grocer, we have plans to capitalize on the growth trends of both channels by providing what we believe is a leading fresh food offering (which we define as our fresh meat and produce departments) within the limited assortment channel.
We believe that several trends support the positive outlook for the long-term growth of hard discount grocers who operate within the limited assortment channel, including:
U.S. Market Remains Underpenetrated in Small-Box, Deep-Value Formats: The limited assortment channel represented approximately 3% of the overall U.S. market annual sales in 2015 as illustrated in the pie chart below. With projected annual growth of approximately 8% over the next five years, this channel would still represent less than 5% of the overall market, suggesting that there is significant room for growth over the long-term. Moreover, this channel remains less-established in the U.S. than in comparable developed economies, such as in Europe, where in 2014, according to Planet Retail, UK Discount Grocery, Structural Not Cyclical Change, March 2014, “discounter” penetration of overall grocery market sales was 16%. Discounters, according to Planet Retail, include both the limited assortment and dollar store channels.

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Growth of Value-Conscious Shoppers: We believe the economic slowdown at the end of the previous decade fueled a rise in shoppers seeking ways to spend less, particularly for the items in their grocery carts. As the economy continues to recover, we believe value-conscious shoppers have retained their shopping habits with an increased preference to shop at discount retailers.
Convenience as a Differentiator: We believe that consumers have become increasingly strapped for time, and that dual income families have been on the rise, and that as a result, the demand for convenient solutions to everyday consumable needs has been increasing. Industry participants are addressing consumers’ desire for a convenient shopping experience through smaller store formats located closer to where their customers live or work, while offering a simpler store presentation with a more edited assortment of products.
Increased Customer Acceptance of Private Brand Offerings: Customers are becoming increasingly receptive to purchasing private-label products as a lower-cost alternative to national brands. Over the last several years, private-label penetration in the traditional supermarket channel has increased meaningfully, and we believe now represents an approximate high teens to low 20s percentage of the overall sales mix. Hard discount grocery retailers, including Save-A-Lot, have embraced this trend and have led the industry with respect to the mix of store brand products that they offer their customers. Our private-label program is responsible for approximately 60% and 55% of corporate store and licensee store retail sales, respectively, excluding fresh meat and produce.
 
Business Strengths
Differentiated Store Concept: Our stores provide a differentiated, highly convenient and simplified shopping experience. We focus on quality, low prices and fresh food, including quality produce and fresh cut meat. We believe our unique shopping experience is attractive to customers and builds customer loyalty. Our grocery retailing format is distinguished by the following key attributes:
Simplified Shopping Experience: We provide an easy-to-shop environment in a smaller physical footprint compared to traditional grocery retailers. Our smaller stores provide a simple, time-saving shopping experience while offering products across the major retail food departments, including grocery, frozen, dairy, produce, meat and general merchandise. By focusing on an edited assortment of SKUs of the most purchased products and sizes, our stores are able to meet the needs of the everyday shopper while maintaining a simplified and expedited shopping experience across all key departments. Our SKU requirements per store are approximately 3,000 compared to a traditional grocery store, which typically carries over 20,000 SKUs.
Compelling Value Proposition: Providing our customers with a compelling value proposition is a key tenet of our merchandising strategy. Our edited product assortment, portfolio of private-label brands and efficient supply chain expertise enable us to sell at prices well below other retailers, with targeted savings on individual items of up to 15% compared to “large box” discount chains, which we believe can result in savings of up to 30% or more compared to traditional grocery stores depending on the market and competitors. Our edited assortment, smaller buildings and dedicated distribution network create operating efficiencies for our stores and distribution centers and lower our operating costs. Inventory turns quickly from the time we purchase the product from suppliers to selling it to our customers, which creates efficiencies for our suppliers and allows us to negotiate lower costs of goods. We also leverage our store network of over 1,300 stores to maintain strong supplier relationships and negotiate attractive prices. Our portfolio of high-quality, low-priced, private-label brands is developed to be at least equivalent to national brands in terms of quality while offering substantial savings to our customers as well as higher gross margins for us. All private-

55


label products undergo an extensive development process intended to confirm that the products have an attractive flavor profile and are packaged with fresh, modern designs that continue building customer brand recognition. Private-label products account for approximately 60% and 55% of our corporate stores and licensee store retail sales, respectively, excluding fresh meat and produce, which is a significantly higher percentage than in a traditional grocery store.
Differentiated Fresh Program: Save-A-Lot stores carry a selection of fresh meat that is hand cut in-store daily, which we believe sets us apart from other hard discount grocers, and a targeted selection of fresh, high-quality produce tailored to customer needs. Our fresh sales, which we define as fresh meat and produce, typically account for approximately 35% of store sales. We provide customers access to affordable beef, pork and poultry, farm-fresh fruits and vegetables. Our heightened focus on product handling, rotation and merchandising has improved the high standards of our produce.
Convenient Store Locations: Our smaller store format enables our stores to be located in convenient and attractive locations that permit us to serve customers across a range of large, medium and small DMAs and rural to urban communities. We are able to open stores in existing locations or new in-line and freestanding locations with convenient, nearby parking facilities.

Flexible Store Ownership Model: Historically, our core focus has been our Licensee Distribution business, which has driven much of our growth since our founding. In recent years, our corporate stores have become an increasingly important component of our overall strategy. We plan to pursue a flexible, dual ownership model, in which we intend to efficiently utilize both our corporate stores as well as our licensees to grow the business, enabling us to execute a tailored expansion strategy best suited for each specific market. Generally, corporate stores are better suited for first time expansion into dense, competitive urban areas and larger DMAs where capital investment is needed to build Save-A-Lot brand recognition. We have planned and are executing on a corporate stores-led expansion strategy in markets such as Los Angeles and Las Vegas, where corporate stores are anticipated to more quickly gain a foothold in the more urban, larger markets.
In certain markets, licensee operators augment our corporate stores in the market and further assist in leveraging our distribution center infrastructure and marketing penetration. The licensee model works especially well in expanding Save-A-Lot’s presence in geographically remote and smaller markets or in supplementing Save-A-Lot’s corporate store growth in larger DMAs such as suburban regions around major urban areas. Experienced licensee operators are also able to expand the footprint in more rural areas where Save-A-Lot has had little presence, such as Colorado and Iowa. Licensees who have strong ties to a rural area are often best suited to open a new Save-A-Lot in the community, given their knowledge of the local market and resulting ability to implement tailored and efficient merchandising strategies and to effectively market their stores in smaller towns. We believe that our ability to enter and compete in varying markets with a customized corporate and licensee ownership approach has helped, and will continue to help, facilitate successful store operations and long-term store growth.

Highly Efficient Distribution Capabilities That Can Support a Growing Store Footprint: We utilize a large-scale, efficient distribution network to service the needs of our licensed and corporate stores. Our 17 distribution centers, including 15 “full-line” facilities that handle dry, refrigerated and frozen food product orders, are strategically located throughout the United States to provide inventory in a cost-effective manner to our stores. We are able to leverage our fixed logistics costs in addition to realizing economies of scale around procurement, merchandising, transportation, promotions, advertising and pricing.
The investments in our distribution network and processes have allowed us to expand in existing markets and into new markets. Our existing distribution network covers the densely populated regions of the eastern and southern United States. As indicated in the map below, our distribution network extends west through our distribution center in California and our new distribution center in Denver, giving us supply capabilities covering the relatively untapped markets of California, Colorado, parts of Arizona and parts of Nevada.

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Distribution center and store location data as of June 18, 2016
With the investments in our distribution network, we believe we have sufficient capacity to execute on our store growth strategies. We estimate that our current distribution infrastructure can support approximately 700 incremental stores, based on our typical store format. Our supply network’s reach and available capacity provides us with the flexibility to expand into new markets and enhance our presence in existing markets.
In addition to expanding our distribution footprint, we continuously work to improve the efficiency and cost effectiveness of our distribution network. For example, we have made capital investments in our refrigeration systems, lighting and internal/external doors that have resulted in meaningful reductions in electrical usage. We expect to continue to increase the back-haul allowances we receive from our vendors over time, and we are also in the process of implementing labor standards throughout our network that are designed to create more efficient workflow in the distribution centers and enhance productivity.
Well Positioned for Growth: We have made meaningful investments in our business over the past few years to improve our pricing and enhance our shopping experience, assortment of product offerings, brand image and confidence of our licensees. We believe these investments better position us for future success as we look to grow our network. These investments have included:

Pricing: In fiscal 2014, we invested in gross margin by lowering prices at our corporate stores as well as the prices we charged to our licensees. We are committed to staying competitive on price and will continue to assess ways to pass along future savings to our customers and licensees in the form of lower prices.
Merchandising assortments and store design: Over the past few years, we have made a number of investments in our merchandise offering and presentation and the design and layout of our stores, including:
Added a fresh cut meat program to virtually all of our corporate stores (substantially all of our licensees also have this program).
Expanded our frozen and smoked meat departments.
Reinvigorated our produce departments and their relocation to the front of the store.
Improved our assortment of products, adding new items to replace slower moving items for approximately 20% of our SKUs.
Updated the labels and packaging of nearly all of our private-label products.
Expanded our ethnic offerings.
Inserted approximately 130 “must have” national brand items into our corporate stores in fiscal 2017.

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Brand awareness: We increased our marketing and advertising investment in a variety of channels, including digital, print and community involvement to build brand awareness, drive customer traffic and create awareness of the various in-store initiatives to both current as well as potential customers.
 
Great People: We believe that our people are an integral component of our success. On December 2, 2015, we announced that retail veteran Eric Claus had been named our new Chief Executive Officer and he started in his role with Save-A-Lot on December 14, 2015. Mr. Claus brings with him over 30 years of experience in the retail industry where he has gained deep experience in both discount and grocery retail in both the United States and Canada, most recently serving as the Chairman, President and Chief Executive Officer of Red Apple Stores Inc., a 155-store value-oriented clothing, general merchandise and food chain in Canada. Mike Collins was named Chief Financial Officer in January 2016 and brings with him over 25 years of finance and business experience, including serving as Chief Financial Officer of Sears Holding Corporation and more recently serving as Chief Financial Officer of NBTY, which manufactures, wholesales and retails vitamins, minerals, herbs and sports drinks. Nancy Chagares is serving as the Chief Merchandising Officer of Save-A-Lot and has over 20 years of experience in the retail industry, including serving as Senior Vice President Fresh Foods at Bi-Lo Holdings and Senior Vice President Merchandising and Marketing at Jewel-Osco, and most recently as a partner at a consulting group that provides advice to food retailers and manufacturers on sales, merchandising, product development, brand marketing and operations. These executives supplement a well-experienced management team.
In addition to our seasoned executive management team, we rely on the passion and knowledge of our store associates. We and our licensees continually invest in training and development programs to enhance our associates’ knowledge and skill sets.  In turn, our and our licensees’ associates are well prepared to execute in-store Save-A-Lot programs that drive sales and ensure brand consistency across our store network. Our experienced store managers and operations specialists have an average tenure of approximately eight years.
Strategy
Our long-term strategy is focused on driving profitability and store unit growth in both of our business segments Corporate Stores and Licensee Distribution. We employ a three-pronged approach: (1) increase the sales per store productivity across our network, (2) grow and optimize our Save-A-Lot store network through our flexible store ownership model and (3) identify and implement operational efficiencies and continue to seek effective methods of managing costs in order to increase our profitability and pass through a portion of the savings to our customers and licensees in the form of lower prices.
Increase Sales Per Store Productivity of Our Save-A-Lot Network: We plan to drive same-store sales growth by executing merchandising programs that provide customers with a locally relevant assortment of high-quality products, differentiated fresh and private brands offerings and a compelling value proposition. We complement our merchandising efforts with marketing and promotions that are focused on increasing brand awareness, improving our value perception and supporting our growth strategy. Key elements of our strategy to drive sales productivity within our stores include:
Deliver Exceptional Fresh Offerings: We believe our fresh offerings and programs are key differentiators of the Save-A-Lot brand. We continue to refine and enhance our meat and fresh produce selection to increase ethnic and regional relevance. For example, in fiscal 2015, we completed the implementation of an on-site meat cutting program in our corporate stores that allows us to provide fresh, locally relevant offerings that can be tailored to meet customers’ needs. Moreover, we plan to continue to invest in associate in-store training in an effort to provide perishable offerings that are best in class.
Optimize the Offering of Our Private and National Brands:
Continue to Enhance Our Private-Label Offering: Our portfolio of high-quality private-label products are an integral component of our customer value proposition. We will continue to innovate and refine our exclusive merchandising offering with the goal of driving product excitement and enticing customers to shop our stores and increase their basket of purchases. We will also continue to optimize our assortment and consolidate our private-label brand names over time. We recently acquired the America’s Choicesm brand and will be enhancing our private label assortment with the introduction of new and innovative items under this label. Over time, we expect that America’s Choicesm will become the predominant food private label brand in our stores. We will seek to consolidate our private label brand offerings by reducing the number of private label brands that we offer, which currently consists of approximately 70 brands, while increasing brand recognition and enhancing brand equity of America’s Choicesm along with approximately five supporting brands.
Strategically Incorporate National Brand Products Into Our Offering to Drive Customer Traffic: We provide our customers with a highly convenient and edited assortment of consumables. While adhering to this strategy, we will continue to supplement our high-quality private-label offering with certain traffic-driving “must have” national brand products. Beginning in fiscal 2017, all corporate stores and the vast majority of licensed stores executed the insertion of approximately 130 “must have” national brand items. This targeted

58


merchandising approach will enable us to provide our customers with enhanced selection while also highlighting the value that our private-label equivalent products provide. We believe the changes to our private label assortment and the introduction of select national brands will be well received by our current customers while also attracting and retaining new customers, and is an important step in expanding our customer base. We are encouraged by the initial results.
Targeted Value Proposition for our Customers: We recently hired a dedicated team that will seek “special buys” that change throughout the year and offer opportunities for greater savings through “treasure hunt” style deals. We will also soon have supporting website capabilities for our licensees so that they can see opportunistic product availability and order for their store(s).
Use Targeted Marketing and Promotions to Drive Traffic and Increase Brand Awareness: We plan to utilize multi-pronged marketing and promotional strategies, including the use of print, mass media and digital communication channels to drive brand awareness and customer traffic. These strategies will incorporate our recent improvements in content, cadence and frequency of our programs. Our messaging will continue to stress local relevance and emphasize quality and great prices. For example, in select areas we advertise in community and Spanish language publications emphasizing our ethnic product offerings and low prices. In addition, when entering a new market, we use an omni-channel marketing approach that is executed through a multi-phase store opening process to build brand awareness while maximizing customer attraction and retention.
Drive In-Store Execution: We believe we have a number of opportunities to improve the “look and feel” of our stores, including the continued refinement of our visual presentations, our merchandising sets and our product adjacencies. In fiscal 2017, we expect that approximately two-thirds of all corporate stores will be redesigned to expand on growth and high gross margin departments such as produce, bakery, dairy and frozen. In addition, we expect that all corporate stores will undergo a merchandising center store reset designed to expand on growth categories while reducing non-growth categories. It is our expectation that approximately two-thirds of our licensed stores will incorporate parts or all of our new design features in Fiscal 2017. We will continue to work with our operations specialists to execute these strategies, which we believe will drive increased sales productivity throughout the Save-A-Lot network. Our operations specialists execute in-store programs in our corporate stores and work with licensees to implement the programs in their stores as well, which we believe supports sales in our Licensee Distribution business. We monitor licensee adherence to our Save-A-Lot programs to help achieve a consistent Save-A-Lot brand across the network.
Create and Implement Locally Relevant Merchandising Programs: We will continue to tailor our assortment of products to customers in different demographic and economic areas. For example, in select markets, we have launched an ethnic merchandising program focused primarily on Hispanic customers in certain of our corporate stores where we believed that such products and merchandising would have traction.

Grow Our Save-A-Lot Store Network:  We plan to grow our store footprint through the opening of both corporate and licensed stores. We believe the United States can support more than 3,500 Save-A-Lot stores under our existing store concept and layout.  We expect that the total number of potential stores could expand over time as the Save-A-Lot concept evolves.  We opened 80 new corporate and licensee stores in fiscal 2016 and plan to open approximately 75 new corporate and licensee stores on a gross basis in fiscal 2017, and to maintain mid-to-high single digit rates of annual new store growth in future years. Our expected store growth in fiscal 2017 reflects a modest reduction from fiscal 2016 as we reallocate capital to the corporate store redesigns and retro-fits in fiscal 2017.
Our near-term expansion plans are focused on growing our network in current and adjacent markets. In our Corporate Stores segment, a significant majority of our new stores are expected to be opened in markets where we currently have an established presence. We have refined our disciplined and analytical new location identification process, incorporating additional internal and external resources that consider many site characteristics, including population density, demographics, competitor proximity and location within the shopping center. We have also refined our geographical analysis by analyzing smaller, more targeted areas and are redeploying our resources accordingly. We plan to be more strategic in growth site selection while remaining opportunistic. In addition to opening new stores where we already have an established market presence, we plan to continue our expansion in the western half of the United States. For example, we recently entered the Las Vegas market and plan to grow our presence there over time. We also plan to further penetrate the Los Angeles market in the near to medium term. In our Licensee Distribution segment, we drive new licensed store development by targeting existing and potential licensees through focused advertising, participation in trade associations, and the efforts of our internal team of development specialists. Our experienced real estate professionals execute a rigorous site selection process and work closely with local real estate brokers to identify optimal locations.
We believe there are compelling reasons for our continued focus on a balanced growth strategy. We believe that corporate stores are better suited for certain markets, particularly dense urban areas, and licensee stores are better suited in rural areas where licensees are able to effectively market their stores in smaller towns. Furthermore, we have greater control over the growth trajectory and timing of opening new corporate stores. In addition, by operating corporate stores, we believe that we can

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more quickly implement strategy changes and capitalize on opportunities and be more nimble in today’s ever-changing grocery retail environment. While our Corporate Stores segment has had a lower Operating earnings margin ((0.3)% compared to 7.7% in fiscal 2016) and Adjusted EBITDA margin (2.8% compared to 8.1% in fiscal 2016) than our Licensee Distribution segment, we believe our Corporate Stores segment Operating earnings margin and Adjusted EBITDA margin can expand over time as we (1) improve the sales-per-store productivity of our network through the execution of the in-store initiatives described above, (2) increase the store density within certain markets and (3) leverage our fixed expenses as we open new corporate stores. We expect that unit growth will be driven by new licensee stores and corporate stores over the next few years. We believe that growth in our corporate store base, through a more refined and strategic site expansion process and the resulting maturation of our newer markets, combined with continued improvements in our operations including through the enhancements in our merchandising, will further attract existing and new licensees to increase the number of Save-A-Lot units they operate.
Adjusted EBITDA and each of Corporate Stores, Licensee Distribution and Corporate segment Adjusted EBITDA are non-GAAP financial measures. Adjusted EBITDA, segment Adjusted EBITDA and segment operating earnings, as adjusted, provide investors an additional understanding of factors and trends affecting our business in total and in our business segments, which are used in our business planning process to understand expected performance and to evaluate results against those expectations. We believe that these measures are more reflective of factors that affect our underlying operating performance and are not considered in our supplemental assessment of on-going business performance. For a reconciliation of all non-GAAP financial measurements used in this Information Statement, see “Selected Historical Combined Financial and Operating Data—Non-GAAP Financial Measures.”
We believe we have an attractive new store economic model for both our new corporate stores and our new licensed stores:
Corporate Stores: Our corporate stores average approximately 17,000 square feet in size and typically require an upfront store-level investment of approximately $1.4, which includes leasehold improvements, store equipment, net working capital and landlord rebates. For the corporate stores we approved to open in fiscal 2016, we are expecting to generate average annual store-level sales of approximately $5 with average annual cash store-level operating expenses (defined as estimated annual store-level operating expenses but excluding non-cash expenses such as depreciation and amortization) and variable distribution expenses of approximately $4.8.  This results in an expected average mid-teens store-level return on invested capital (defined as the estimated annual store-level sales less the store-level cash operating expenses and variable distribution expenses, divided by the amount of the upfront store-level investment) in the second full year of operation, which we expect to approach 20% by the fifth year of a store’s operation.
Licensed Stores: We have a strong licensee base that we believe can continue to grow. We offer financial incentives to our licensees to reduce their upfront costs of opening new stores. We view the amount of these incentives as a meaningful inducement for new and existing licensees to open stores, grow their businesses and thus expand our network of stores and our overall profitability. We continue to refine the incentive structures we provide so that we can further support our licensees as they look to expand their Save-A-Lot store base. New licensees are also offered training and comprehensive support services in connection with opening a new store. We have an efficient operating infrastructure in place to support our licensees, which has also helped to generate an attractive Adjusted EBITDA margin in our Licensee Distribution segment in fiscal 2016 of 8.1%. The addition of licensed stores results in a positive investment return to Save-A-Lot relative to the financial incentives we provide.

Expenses associated with new corporate store openings typically include store employee training costs, licensing, new store advertising and marketing costs, and certain store establishment costs. Expenses associated with new licensee store openings typically include licensee incentives, potential rebates and promotions on product purchases and nominal administrative costs associated with systems setup and licensee agreement execution.
Expenses associated with converting a licensee store to a corporate store include certain new store advertising and marketing costs and store establishment costs. Typically, there are not significant operating expenses associated with converting a licensee store to a corporate store.
Optimize Our Store Network: We have a compelling store format that appeals to customers across a range of geographies and demographic areas. As we look to profitably grow our store network while leveraging our dual ownership model, we will also actively manage the ownership structure of our existing portfolio of 1,368 Save-A-Lot stores. As some of our corporate stores may be better operated as licensee stores and vice versa, we will continue to monitor and analyze ways to optimize our store base. We currently have a number of corporate stores in more geographically remote markets that could better serve our customers under licensee ownership. We will look for opportunities to transfer the ownership of these stores to new and existing licensees over the next few years. Similarly, Save-A-Lot has from time-to-time opportunistically converted licensee stores to corporate stores and will continue to consider conversions in the future, particularly for stores in larger, more densely populated markets.

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Improve Operational Efficiencies and Continue to Manage Costs to Offer Compelling Value to Our Customers: As a hard discount operator and service provider, we are continuously seeking ways to simplify processes and reduce costs in order to increase profitability and to pass through a portion of the related savings to our customers in the form of lower prices. Our efforts are focused in our stores, supply chain network and administrative functions. Key elements of this strategy include:
Removing Costs from Corporate Stores: We continue to identify and execute initiatives to reduce costs at our corporate stores which include efforts to optimize our store labor model, minimize non-labor store operating expenses, and reduce facilities-related operating costs.
Leveraging Scale Economies and Reducing Supply Chain Costs: We work closely with our vendors to drive cost savings in our supply chain which becomes increasingly important as we add additional volume into the network. In addition, we continue to refine our already efficient logistics infrastructure by implementing key initiatives to lower freight-related costs, increase back-haul allowances, optimize labor staffing and maximize utilization of our distribution centers. With available capacity in our supply chain, additional network growth will allow us to leverage our existing distribution centers and our transportation routes.
Investing in Information Technology: We have identified a number of information technology initiatives that we believe will help drive the productivity of our network. These include a deal portal, that will allow licensees access to special deals on extremely limited product at great prices; an assisted replenishment system that will provide recommended ad and replenishment order quantities, improving inventory levels and in-stock positions; and a transportation management solution, which will seek to lower our cost of transportation across the network through route optimization and improved inbound planning and execution.
Operating a Lean Corporate Infrastructure: We plan to operate a lean store support center and will pursue options that will help achieve a low-cost infrastructure for our business.

Our Products

Our merchandising strategy offers a locally relevant, edited assortment of high-quality products at great prices. Our edited product assortment, portfolio of private-label brands and efficient supply chain expertise enable us to sell at prices well below traditional grocery stores and “large box” discount chains.

Our typical store offers 3,000 SKUs across the major retail food departments, including grocery, frozen, dairy, produce, meat and general merchandise. Our stores carry a selection of affordable beef, pork and poultry, farm-fresh fruits and vegetables, while at the same time, our heightened focus on product handling, rotation and merchandising has improved the high standards of our products. Our meat and produce merchandising program has resonated successfully with our customers; sales of meat and produce within our Corporate Stores have consistently increased since fiscal 2013. The net sales of each of our categories of merchandise for the fiscal periods indicated below were as follows:
 
First Quarter Ended
 
Fiscal Year
 
June 18, 
 2016 
 (16 weeks)
 
2016
(52 weeks)
 
2015
(53 weeks)
 
2014
(52 weeks)
Licensee Distribution
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Grocery
$
463

 
32
%
 
$
1,588

 
34
%
 
$
1,691

 
36
%
 
$
1,664

 
39
%
Meat
203

 
14

 
642

 
14

 
693

 
15

 
625

 
15

Produce
68

 
5

 
202

 
4

 
198

 
4

 
179

 
4

Professional services and other
16

 
1
%
 
62

 
1
%
 
58

 
1
%
 
52


1
%
Total Licensee Distribution
750

 
52
%
 
2,494

 
54
%
 
2,640

 
57
%
 
2,520

 
59
%
Corporate Stores
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Grocery
428

 
30
%
 
1,368

 
30
%
 
1,298

 
28
%
 
1,159

 
27
%
Meat
179

 
13

 
542

 
12

 
498

 
11

 
406

 
10

Produce
72

 
5

 
211

 
5

 
198

 
4

 
163

 
4

Other revenue
3

 
%
 
7

 
%
 
6

 
%
 
5

 
%
Total Corporate Stores
682

 
48
%
 
2,128

 
46
%
 
2,000

 
43
%
 
1,733

 
41
%
Corporate

 
%
 
1

 
%
 
1

 
%
 
1

 
%
Total Net sales
$
1,432

 
100
%
 
$
4,623

 
100
%
 
$
4,641

 
100
%
 
$
4,254

 
100
%

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Intellectual Property
We offer licensees the opportunity to license our Save-A-Lot service mark. This program helps licensees compete by providing, as part of our license program, a complete business concept, group advertising, private-label products and other benefits. In conjunction with our licensing arrangements, we maintain wholesale distribution agreements with licensees under the Save-A-Lot name. We register a substantial number of our trademarks/service marks in the United States Patent and Trademark Office, including many of our private-label product trademarks and service marks. U.S. trademark and service mark registrations are generally for a term of ten years, renewable every ten years as long as the trademark is used in the regular course of trade. We consider certain of our trademarks and service marks to be of material importance to our business and actively defend and enforce such trademarks and service marks.
Private-Label Products and Trademarks
Our private-label products are produced to our specification by many suppliers and compete in many areas of our stores.  Private-label products offer budget conscious consumers a quality alternative to national brands at substantial savings and include Coburn Farms®, Fairgrounds®, Ginger Evans®, J. Higgs®, Wylwood®, Tio Santi™ and the Company’s newest private-label brand, America’s Choicesm. Over time, we expect that America’s Choicesm will become the predominant food private label brand in our stores as we seek to consolidate our private label brand offerings by reducing the number of private label brands that we offer while increasing brand recognition and enhancing brand equity. Save-A-Lot also has licensee stores offering private-label products in five countries outside of the United States.
Government Regulation
A wide variety of federal, state and local regulations and agencies govern our Corporate Store and Licensee Distribution business operations in such areas as food and product safety, transportation, anti-bribery/anti-corruption, financial reporting, labor and employment, licensing, tax and environmental protection. The regulatory environment in which we operate is ever-changing, with sweeping new laws being enacted and implemented, such as the Food Safety Modernization Act.  Moreover, relevant enforcement agencies in all areas are heightening their focus on investigation and enforcement activities, particularly in the environmental protection, anti-corruption and food safety areas.  Non-compliance with existing laws and regulations and/or our inability to identify and timely respond to new or changing laws and regulations could have material adverse financial, operational and reputational impacts on our company.  Accordingly, we closely monitor and track key regulatory risks across all operations to have in place compliance and risk management programs and processes.
Working Capital
Normal operating fluctuations in working capital balances can result in changes to cash flow from operations presented in the Combined Statements of Cash Flows that are not necessarily indicative of long-term operating trends. Our working capital needs are generally greater during the months leading up to high sales periods, such as the time period from prior to Thanksgiving through December. We intend to finance these working capital needs with funds provided by operating activities and short-term borrowings. Inventories are managed primarily through demand forecasting and replenishing depleted inventories.
Seasonality
Overall sales of our products are fairly balanced throughout the year, although demand for certain products of a seasonal nature may be influenced by holidays, changes in seasons or other annual events. Our first quarter consists of 16 weeks, while all of our other quarters consist of 12 weeks, and all of our quarters typically include a major holiday.
Competition
We operate in a highly competitive environment. We believe that the principal competitive factors faced by our corporate stores and licensed stores include price, quality, store locations, customer service, convenience, assortment, in-stock levels, brand recognition, store conditions, in-store marketing and merchandising, promotional strategies and other competitive activities.
Our principal competition comes from non-traditional retailers, such as hard discount stores, supercenters, membership warehouse clubs, specialty supermarkets, drug stores, dollar stores, convenience stores, online retailers and restaurants and traditional grocery retailers, including regional and national chains and independent food store operators.
We compete to attract and maintain licensed operators to operate stores to which we provide wholesale distribution. This competition generally takes the form of alternative investment formats, such as a potential or existing licensee’s investment in fast food restaurants, dollar stores, specialty supermarkets, drug stores and other potential investments.

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We believe that the success of Save-A-Lot is dependent upon the ability of our corporate stores and licensed stores to compete successfully with other retail food stores and non-traditional retailers that sell food products. Recent and ongoing consolidation within the grocery industry has resulted in, and is expected to continue to result in, increased competition, including from some competitors that have greater financial, marketing and other resources than us and our licensees.
Employees
As of June 18, 2016, the Save-A-Lot business had approximately 10,000 employees, none of whom are covered by collective bargaining agreements. We are focused on ensuring competitive cost structures in each market in which we operate while meeting our employees’ needs for attractive wages and affordable healthcare and retirement benefits. We believe that we have generally good relations with our employees.
Properties
Following the Distribution, Save-A-Lot’s corporate headquarters will be located in Earth City, Missouri. As of June 18, 2016, Save-A-Lot operated 472 corporate-owned stores. Our operations are supplied by distribution centers with total square footage of five million, of which approximately 28% was leased, as of June 18, 2016.
We continue to pursue growth through new stores within our network by opening new corporate stores and attracting licensees to open new stores. Our corporate and licensed stores are supplied by our distribution centers. The Company’s properties are in good condition, well maintained and suitable to carry on our business. Substantially all of our owned and ground-leased real estate are subject to mortgages to secure Supervalu’s bank credit facilities. These liens will be released as part of the Separation.

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The following table is a summary of our corporate stores and licensed stores organized by state as of June 18, 2016:
State / Region
 
Number of Corporate Stores
 
Number of Licensee Stores
 
Total Stores
 
Total Corporate Stores Square Footage(1)
(In Thousands)
 
Percentage of Corporate Stores Leased
Ohio
 
62
 
84
 
146
 
1,065
 
84%
Florida
 
111
 
35
 
146
 
1,889
 
96%
Kentucky
 
 
111
 
111
 
 
—%
Tennessee
 
15
 
88
 
103
 
250
 
87%
Michigan
 
13
 
69
 
82
 
225
 
85%
Pennsylvania
 
25
 
46
 
71
 
408
 
92%
Missouri
 
25
 
44
 
69
 
428
 
84%
New York
 
9
 
59
 
68
 
131
 
100%
Illinois
 
17
 
44
 
61
 
249
 
65%
Indiana
 
9
 
47
 
56
 
148
 
89%
West Virginia
 
 
42
 
42
 
 
—%
North Carolina
 
16
 
21
 
37
 
293
 
94%
Georgia
 
17
 
18
 
35
 
315
 
88%
Louisiana
 
20
 
12
 
32
 
316
 
95%
Maryland
 
22
 
9
 
31
 
416
 
95%
South Carolina
 
7
 
24
 
31
 
120
 
100%
Mississippi
 
4
 
25
 
29
 
75
 
75%
Virginia
 
12
 
12
 
24
 
190
 
92%
Alabama
 
11
 
8
 
19
 
212
 
100%
New Jersey
 
16
 
2
 
18
 
254
 
81%
Texas
 
8
 
10
 
18
 
137
 
88%
Oklahoma
 
2
 
13
 
15
 
28
 
100%
Wisconsin
 
6
 
8
 
14
 
106
 
100%
Colorado
 
1
 
13
 
14
 
19
 
100%
Massachusetts
 
9
 
3
 
12
 
158
 
89%
Maine
 
 
11
 
11
 
 
—%
Arkansas
 
1
 
9
 
10
 
16
 
100%
Kansas
 
3
 
7
 
10
 
47
 
100%
Connecticut
 
9
 
 
9
 
150
 
89%
California
 
8
 
1
 
9
 
148
 
75%
Delaware
 
5
 
3
 
8
 
91
 
100%
Iowa
 
 
7
 
7
 
 
—%
Rhode Island
 
6
 
 
6
 
97
 
83%
Nevada
 
3
 
 
3
 
55
 
100%
District of Columbia
 
 
1
 
1
 
 
—%
New Hampshire
 
 
1
 
1
 
 
—%
South Dakota
 
 
1
 
1
 
 
—%
Minnesota
 
 
1
 
1
 
 
—%
Total U.S.
 
472
 
889
 
1,361
 
8,036
 
90%
International licensee locations
 
 
7
 
7
 
 
—%
Total Save-A-Lot
 
472
 
896
 
1,368
 
8,036
 
90%
(1)
Square footage excludes licensed stores square footage and includes the approximate total corporate stores square footage.
Legal Proceedings
The Company is subject to various lawsuits, claims and other legal matters that arise in the ordinary course of conducting business. Based upon currently available facts, management of the Company does not believe that the ultimate outcome of any lawsuits, claims and other proceedings will have a material adverse effect on the overall results of our operations, cash flows or financial position.

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Predicting the outcomes of claims and litigation and estimating related costs and exposures involves substantial uncertainties that could cause actual outcomes, costs and exposures to vary materially from current expectations. We regularly monitor our exposure to the loss contingencies associated with these matters and may from time to time change our predictions with respect to outcomes and our estimates with respect to related costs and exposures.


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MANAGEMENT AND CERTAIN SECURITY HOLDERS
Executive Officers Following the Separation
The individuals listed below are expected to be executive officers of Save-A-Lot after the Separation. We are in the process of identifying the full set of individuals who will be our executive officers following the Separation and will include information regarding those persons in an amendment to this Information Statement.
Name
 
Age
 
Position
Eric A. Claus
 
59
 
Chief Executive Officer
Michael D. Collins
 
53
 
Chief Financial Officer
Nancy Chagares
 
60
 
Chief Merchandising Officer
Eric A. Claus is expected to serve as the Chief Executive Officer of Save-A-Lot after the Separation and report to the Save-A-Lot board of directors. From July 2013 until December 14, 2015, when he became Chief Executive Officer of Save-A-Lot, Mr. Claus has served as the Chairman, President and Chief Executive Officer of Red Apple Stores Inc. Mr. Claus resigned from the board of Red Apple Stores Inc. in April 2016. From 2012 to July 2013, Mr. Claus served as Executive Chairman of TBS Acquireco Inc., overseeing under-performing assets. From 2009 to 2012, he worked with various private equity firms analyzing potential transactions. Mr. Claus served as Chief Executive Officer and President of The Great Atlantic & Pacific Tea Company, Inc. (“A&P”) from August 2005 to October 2009. He joined A&P in 2002, serving as Chief Executive Officer and President of A&P Canada of The Great Atlantic & Pacific Tea Company Inc., Canada from November 2002 to August 2005. Prior to joining A&P, Mr. Claus served as Chief Executive Officer of Co-Op Atlantic from February 1997 to November 2002. He was a director of Rona Inc. from May 2013 until its acquisition in May 2016.
Michael D. Collins is expected to serve as the Chief Financial Officer of Save-A-Lot after the Separation and will report to Mr. Claus. From June 2011 to September 2014, Mr. Collins served as the Chief Financial Officer of NBTY, which manufactures, wholesales and retails vitamins, minerals, herbs and sports drinks. Previously, he served as the Chief Financial Officer of Sears Holding Corporation from October 2008 to June 2011. Prior to his time at Sears Holding Corporation, Mr. Collins spent 18 years at General Electric Corporation, including as the Senior Vice President, Financial Planning & Analysis at NBC Universal.
Nancy Chagares is expected to serve as the Chief Merchandising Officer of Save-A-Lot after the Separation and will report to Mr. Claus. From August 2014 to June 2015, Ms. Chagares was a partner at The Bellweather Group, Ltd., a consulting group that provides advice to food retailers and manufacturers on sales, merchandising, product development, brand marketing and operations, where she served as the Interim Chief Operating Officer of HOORAY PUREE, LLC from December 2014 to June 2015, and as the Interim Senior Vice President of Fresh Merchandising and Procurement at Demoulas Market Basket from August 2014 to October 2014. Previously, Ms. Chagares served as the Senior Vice President, Fresh Foods of Bi-Lo Holdings, LLC from January 2012 to June 2014, and as the Senior Vice President, Merchandising & Marketing at Jewel-Osco from 2007 to August 2011. Ms. Chagares is currently a member of the board of the National American Heart Association Nutrition Committee.
Board of Directors Following the Separation
We are in the process of identifying the persons who are expected to serve on Save-A-Lot’s board of directors following the Separation and will include information regarding those persons in an amendment to this Information Statement.
The directors will be divided, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as is reasonably possible, with the term of office of the first class to expire at the       annual meeting of stockholders, the term of office of the second class to expire at the       annual meeting of stockholders and the term of office of the third class to expire at the       annual meeting of stockholders, with each director to hold office until his or her successor shall have been duly elected and qualified. At any meeting of stockholders for the election of directors at which a quorum is present, the election will be determined by a majority of the votes cast by the stockholders entitled to vote in the election, except that in the case of a contested election, the election will be determined by a plurality of the votes cast by the stockholders entitled to vote in the election.
As will be required by Save-A-Lot’s amended and restated certificate of incorporation, at Save-A-Lot’s       annual meeting, the third annual meeting following the Distribution, Save-A-Lot will submit to its stockholders a proposal to amend its certificate of incorporation that will provide for the staged declassification of our board of directors.


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Director Compensation
Prior to the effectiveness of the registration statement of which this Information Statement is a part, information regarding the expected compensation of Save-A-Lot non-employee directors following the Separation will be disclosed in accordance with the rules and regulations of the SEC.
Director Independence
We expect that a majority of our board of directors will meet the criteria for independence as defined by the rules of the NYSE.
We expect that our board of directors will determine the independence of directors annually based on a review by the directors and the Corporate Governance and Nominating Committee. In determining whether a director is independent, we expect that the board of directors will determine whether each director meets the objective standards for independence set forth in the rules of the NYSE.
Committees of the Board of Directors
Following the Separation, the standing committees of our board of directors are expected to include an Audit Committee, a Corporate Governance and Nominating Committee and a Leadership Development and Compensation Committee, each as further described below. Following the listing of our common stock on the NYSE and in accordance with the transition provisions of the rules of the NYSE applicable to companies listing in conjunction with a spin-off transaction, each of these committees will, by the date required by the rules of the NYSE, be composed exclusively of directors who are independent. Other committees may also be established by the board of directors from time to time.
We anticipate that, pursuant to the stockholder’s agreement between Save-A-Lot and Supervalu, Supervalu will be entitled to include at least one of its designees on each committee of Save-A-Lot’s board of directors, subject to the rules of the NYSE, so long as Supervalu owns more than 20% of Save-A-Lot’s outstanding shares. For additional information on Supervalu’s rights under the stockholder’s agreement, see “Certain Relationships and Related Party Transactions—Stockholder’s Agreement” elsewhere in this Information Statement.
Audit Committee. The members of the Audit Committee are expected to be       ,       and       . It is expected that       will be the chairman of the Audit Committee. The primary responsibilities of the Audit Committee will be to assist the board of directors in: the board’s oversight of our accounting and financial reporting principles and policies, and our internal controls and procedures; the board’s oversight of our financial statements and the independent registered public accounting firm; selecting, appointing, compensating, evaluating and, where deemed appropriate, replacing the independent registered public accounting firm, which reports directly to the Audit Committee; evaluating the independence of the independent registered public accounting firm; the board’s oversight of our major financial risk exposures and assessment of the steps that we have taken to assess and manage such exposures; and the board’s oversight of our compliance with legal and regulatory requirements. In addition, the Audit Committee will have the responsibility to: review the scope of the annual audit plan and organizational structure of the internal auditors, and the results of the internal auditor’s activities; regularly meet separately with the senior internal audit executive and the independent registered public accounting firm; review reports by the independent registered public accounting firm describing and assessing our internal controls, and discuss the adequacy and effectiveness of our internal controls and any specified audit procedures taken in light of any material weakness or significant deficiencies identified by us or the independent registered public accounting firm; establish procedures concerning the receipt, retention and treatment of complaints regarding financial reporting, accounting, internal accounting controls or auditing and federal securities law matters; and review and recommend action to the board of directors on matters concerning transactions with related persons. The responsibilities of the Audit Committee, which are anticipated to be substantially identical to the responsibilities of Supervalu’s Audit Committee, will be more fully described in our Audit Committee charter. The Audit Committee charter will be posted on our website at www.save-a-lot.com and will be available in print to any stockholder that requests it. By the date required by the transition provisions of the rules of the NYSE, all members of the Audit Committee will be independent and financially literate. Further, the board of directors has determined that       possesses accounting or related financial management expertise within the meaning of the NYSE listing standards and qualifies as an “audit committee financial expert” as defined under the applicable SEC rules.
Corporate Governance and Nominating Committee. The members of the Corporate Governance and Nominating Committee are expected to be       ,       and       . It is expected that       will be the chairman of the Corporate Governance and Nominating Committee. The primary responsibility of the Corporate Governance and Nominating Committee will be to recommend a framework to assist the board of directors in fulfilling its corporate governance responsibilities. In carrying out this responsibility, the Corporate Governance and Nominating Committee will establish and regularly review the board’s policies and procedures, which will include: criteria for the size and composition of the board; policies on the structure and operations of the board, including its leadership structure and committees; procedures for the conduct of board meetings, including executive sessions of the board; policies on director retirement and resignation; and criteria regarding personal qualifications

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needed for board membership. In addition, the Corporate Governance and Nominating Committee will have the responsibility to: consider and recommend nominations for board membership and the composition of board committees; evaluate our board practices and those of other well-managed companies and recommend appropriate changes to the board; evaluate the members of our board on an annual basis and provide opportunities for director education; consider governance issues raised by stockholders and recommend appropriate responses to the board; and consider appropriate compensation for directors. The responsibilities of the Corporate Governance and Nominating Committee, which are anticipated to be substantially identical to the responsibilities of Supervalu’s Corporate Governance and Nominating Committee, will be more fully described in the Corporate Governance and Nominating Committee charter. The Corporate Governance and Nominating Committee charter will be posted on our website at www.save-a-lot.com and will be available in print to any stockholder that requests it. Each member of the Corporate Governance and Nominating Committee will be a non-employee director and, by the date required by the transition provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) and the rules of the NYSE, independent.
Leadership Development and Compensation Committee. The members of the Leadership Development and Compensation Committee are expected to be       ,       and       . It is expected that       will be the chairman of the Leadership Development and Compensation Committee. The primary responsibilities of the Leadership Development and Compensation Committee will be to: determine the process to evaluate the performance of the Chief Executive Officer (“CEO”); review and recommend to the independent members of the board the compensation of the CEO; review and approve (and recommend to the board with respect to the CEO) major changes in executive compensation programs, executive stock options and retirement plans for officers; consider and make recommendations to the board concerning the annual election of corporate officers and the succession plan for the CEO; approve annual salaries and bonuses of “Section 16” officers and any other officers who report directly to the CEO; review and approve participants and performance targets under our annual and long-term incentive compensation plans; retain or obtain the advice of and terminate any compensation consultant used to assist in the evaluation of directors and executives, including the CEO, and any outside legal counsel and other advisors, and to approve the terms of and fees for such retention; approve equity grants and awards under our stock plan, bonus and other incentive plans; and review with management the Compensation Discussion and Analysis and related disclosures. The responsibilities of the Leadership Development and Compensation Committee, which are anticipated to be substantially identical to the responsibilities of Supervalu’s Leadership Development and Compensation Committee, will be more fully described in the Leadership Development and Compensation Committee charter. The Leadership Development and Compensation Committee charter will be posted on our website at www.save-a-lot.com and will be available in print to any stockholder that requests it. Each member of the Leadership Development and Compensation Committee will qualify as “non-employee directors” under Rule 16b-3 of the Exchange Act and as “outside directors” under Section 162(m) of the Code and will be, by the date required by the transition provisions of Section 162(m) of the Code and the rules of the NYSE, independent.
Compensation Committee Interlocks and Insider Participation
During the Company’s fiscal year ended February 27, 2016, Save-A-Lot was not an independent company, and did not have a compensation committee or any other committee serving a similar function. Decisions as to the compensation of those who currently serve as Save-A-Lot’s executive officers were made by Supervalu, as described in the section of this Information Statement captioned “Compensation Discussion and Analysis.”
Corporate Governance and Risk Management
Save-A-Lot Governance Principles. Save-A-Lot’s board of directors is expected to adopt a set of Governance Principles in connection with the Separation to assist it in guiding Save-A-Lot’s governance practices, which are anticipated to be substantially identical to those currently in place at Supervalu. These practices will be regularly re-evaluated by the Corporate Governance and Nominating Committee in light of changing circumstances in order to continue serving the best interests of Save-A-Lot and its stockholders.
Stockholder Recommendations for Director Nominees. Save-A-Lot’s amended and restated bylaws will contain provisions that address the process by which a stockholder may nominate an individual to stand for election to the board of directors. We expect that our board of directors will adopt principles in the Governance Principles concerning the evaluation of stockholder recommendations of board candidates by the Corporate Governance and Nominating Committee.
Director Qualification Standards. Save-A-Lot’s Governance Principles are expected to provide that the Corporate Governance and Nominating Committee is responsible for reviewing with Save-A-Lot’s board of directors the appropriate skills and characteristics required of board members in the context of the makeup of the board of directors and developing criteria for identifying and evaluating board candidates.
The process that this committee will use to identify a nominee to serve as a member of the board of directors will depend on the qualities being sought. The criteria applied to director candidates will stress independence, integrity, experience and sound judgment in areas relevant to our business, financial acumen, interpersonal skills, a proven record of accomplishment, a

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willingness to commit sufficient time to the board and the ability to challenge and stimulate management, in addition to other factors developed by the Corporate Governance and Nominating Committee and approved by the board, including any requirements of applicable law or listing standards and those relating to the composition of the board (including its size and structure) and principles of diversity. Diversity will be viewed in its broadest sense, which will include gender, ethnicity, education, experience and leadership qualities. The Corporate Governance and Nominating Committee will consider the criteria described above in the context of an assessment of the perceived needs of the board of directors as a whole. The board of directors will be responsible for selecting candidates for election as directors based on the recommendation of the Corporate Governance and Nominating Committee.
Board Leadership Structure. There will be no fixed policy on whether the roles of Chairman of the board of directors and chief executive officer should be separate or combined. This decision will be made in the best interests of Save-A-Lot and its stockholders, considering the circumstances at the time.
Save-A-Lot’s Governance Principles are expected to provide that when the Chairman is not an independent director, the independent directors will select from among themselves a director to serve as a lead independent director. The lead independent director, if any, will, among other things, (a) chair meetings of the independent directors, including presiding over executive sessions of the board of directors (instead of the Chairman of the board of directors); (b) help to develop agendas and meeting schedules with the Chairman of the board of directors and approve the information sent to the board, the meeting agendas for the board and the meeting schedules to assure that there is sufficient time for discussion of all agenda items; (c) advise the Chairman on the quality, quantity and timeliness of information provided by management to the board; (d) interview candidates for the board along with other designated directors; (e) in conjunction with the Corporate Governance and Nominating Committee, oversee evaluations of the board and meet with any director who is not adequately performing his or her duties as a member of the board or any committee; (f) act as a direct conduit to the board for major stockholders and other stockholders, employees, the public and others as appropriate regarding matters not readily addressable directly to the Chairman, ensuring that he or she is available for consultation and direct communication; (g) take the lead in assuring that the board carries out its responsibilities in circumstances where the Chairman is incapacitated or otherwise unable to act, including presiding at all meetings of the board at which the Chairman is not present or has a conflict of interest; (h) work with the Chair of the Leadership Development and Compensation Committee to coordinate and conduct the evaluation process for the Chairman and Chief Executive Officer; and (i) ensure that the respective responsibilities of the board and management are understood, and that the boundaries between the board and management responsibilities are respected.
Board’s Role in Oversight of Risk Management
It is expected that Save-A-Lot’s board of directors will take an active role in risk oversight related to the Company, both as a full board and through its committees. The board will review and advise on risk with respect to our business, including strategies and financial plans, with attention and focus on the risks to achievement of these strategies and plans. Such risks may include those inherent in our business, as well as the risks from external sources such as competitors, the economy and regulatory and legislative developments. In addition, it is expected that the heads of certain of our key functional areas will regularly update the board on risks in their areas.
In addition, it is expected that we will conduct an annual enterprise-wide risk assessment. A formal report will be delivered to the Audit Committee, the chair of which provides a synopsis to the board. Risk assessment updates are expected to be provided to the Audit Committee and the board on a regular basis and as required, and management will provide updates to the Audit Committee and the board on any material developments or actions taken with respect to the risks identified. The objectives for the risk assessment process will include: (a) facilitating the NYSE governance requirement that the Audit Committee discuss policies regarding risk assessment and risk management; (b) developing a defined list of key risks to be shared with the Audit Committee, board and senior management; (c) determining whether there are risks that require additional or higher priority mitigation efforts; (d) facilitating discussion of the risk factors to be included in Item 1A of the Company’s Annual Report on Form 10-K; and (e) guiding the development of the internal audit plans.
It is also expected that the Leadership Development and Compensation Committee will be responsible for overseeing any risks relating to our compensation policies and practices. The Leadership Development and Compensation Committee is expected to regularly evaluate whether our executive and broad-based compensation programs contribute to unnecessary risk-taking and determine whether any risks arising from these programs are reasonably likely to have a material adverse effect on the Company.
Our management team is also expected to regularly conduct additional reviews of risks, as needed, or as requested by the board of directors or the Audit Committee.
Policies on Business Ethics. In connection with the Separation, Save-A-Lot is expected to adopt a Code of Business Conduct and Ethics that requires all of our business activities to be conducted in compliance with laws, regulations and ethical principles and values.

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The Code of Business Conduct and Ethics will be accessible on our website. Any waiver of the Code of Business Conduct and Ethics for directors or executive officers may be made only by the Audit Committee. We will disclose any amendment to, or waiver from, a provision of the Code of Business Conduct and Ethics for the principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, on our website within four business days following the date of the amendment or waiver. In addition, we will disclose any waiver from the Code of Business Conduct and Ethics for the other executive officers and for directors on our website.
Procedures for Treatment of Complaints Regarding Accounting, Internal Accounting Controls and Auditing Matters. In accordance with the Sarbanes-Oxley Act, we expect that the Audit Committee will adopt procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls and auditing matters, and to allow for the confidential, anonymous submission by employees and others of concerns regarding questionable accounting or auditing matters.


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COMPENSATION DISCUSSION AND ANALYSIS
Introduction
As discussed above, Save-A-Lot is currently part of Supervalu and not an independent company, and its compensation committee has not yet been formed. This Compensation Discussion and Analysis describes the historical compensation practices of Supervalu and outlines certain aspects of Save-A-Lot’s anticipated compensation structure for its senior executive officers following the Separation. While Save-A-Lot has discussed its anticipated programs and policies with the Leadership Development and Compensation Committee of Supervalu’s board of directors (which we refer to as the “Supervalu Compensation Committee”), they remain subject to the review and approval of Save-A-Lot’s own compensation committee (which we refer to as the “Save-A-Lot Compensation Committee”).
The employees who are expected to be appointed to serve as Save-A-Lot’s Chief Executive Officer, Chief Financial Officer, and Chief Merchandising Officer are identified below. The former President of Save-A-Lot, who was an executive officer of Save-A-Lot during fiscal 2016, is also identified below. For purposes of the following Compensation Discussion and Analysis and executive compensation disclosures, the individuals listed below are collectively referred to as Save-A-Lot’s or our “named executive officers.”
Eric A. Claus, our Chief Executive Officer. Prior to the Separation, Mr. Claus served as Chief Executive Officer, Save-A-Lot. Mr. Claus commenced employment with Supervalu on December 14, 2015.
Michael D. Collins, our Chief Financial Officer. Prior to the Separation, Mr. Collins served as the Chief Financial Officer of Save-A-Lot. Mr. Collins commenced employment with Supervalu on January 25, 2016.
Nancy Chagares, our Chief Merchandising Officer. Prior to the Separation, Ms. Chagares served as Chief Merchandising Officer of Save-A-Lot. Ms. Chagares commenced employment with Supervalu on March 2, 2016 and was not employed by Supervalu during fiscal 2016.
Ritchie L. Casteel, our former President of Save-A-Lot. Mr. Casteel terminated from his position as President of Save-A-Lot effective March 11, 2016.
The historical decisions relating to the compensation of Messrs. Claus and Casteel, who served as executive officers of Supervalu in fiscal 2016, were made by the Supervalu Compensation Committee. Following the Separation, the compensation of Save-A-Lot’s executive officers will be determined by the Save-A-Lot Compensation Committee consistent with the compensation and benefit plans, programs and policies adopted by Save-A-Lot. Additional information about Save-A-Lot’s expected senior executive team following the Separation is set forth in the section of this Information Statement captioned “Management and Certain Security HoldersExecutive Officers Following the Separation.”
In connection with the Separation, Save-A-Lot (or Supervalu on Save-A-Lot’s behalf) will need to identify additional Save-A-Lot executive officers, and the compensation arrangements for the Save-A-Lot named executive officers and any other Save-A-Lot executive officers will either have been approved by the Supervalu Compensation Committee for historic executive officers of Supervalu or will be approved by the Supervalu Compensation Committee prior to the Separation. While the focus of the following disclosure is on the compensation for Messrs. Claus and Casteel, the only Save-A-Lot named executive officers identified above who are a historic executive officer of Supervalu, the types of compensation and benefits provided to them are generally similar to those that will likely be provided to the other individuals who are identified to serve as executive officers of Save-A-Lot upon the Separation. In subsequent filings with the SEC, we will describe the material terms of any compensation arrangements with any other individual expected to serve as an executive officer of Save-A-Lot.
Initially, Save-A-Lot’s compensation policies will be substantially the same as those employed by Supervalu. The Save-A-Lot Compensation Committee will review these policies and practices, and, it is expected, will make adjustments to support Save-A-Lot’s strategies and to remain market competitive. The following sections of this Compensation Discussion and Analysis primarily describe Supervalu’s compensation philosophy, policies, and practices as they applied to Messrs. Claus and Casteel, as the only Save-A-Lot named executive officers identified above who were executive officers of Supervalu during fiscal 2016.

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Compensation Philosophy & Pay for Performance
Historically
Supervalu’s executive compensation program is designed to reward strong financial performance, effective strategic leadership and the creation of long-term value for Supervalu’s stockholders. Top talent is valuable to Supervalu and its stockholders, and Supervalu’s compensation programs need to be structured in a way that allows Supervalu to attract, motivate, and retain leaders who help Supervalu achieve its objectives. Supervalu’s compensation programs are designed to:
align executives’ interests with stockholders by delivering a greater percentage of variable pay as leaders reach more senior levels in the organization;
enhance both alignment with stockholders’ interests and executive retention through the use of multi-year vesting and stock ownership guidelines for executives;
maintain an emphasis on consistent and sustainable top-line and bottom-line growth, while discouraging excessive risk-taking; and
provide competitive total direct compensation for leaders at all levels in the organization.
Going Forward
As noted above, because the Save-A-Lot Compensation Committee has not yet been formed, the executive compensation philosophy of Save-A-Lot will be developed and established by the Save-A-Lot Compensation Committee after the Separation. It is, however, currently expected that after the Separation, the framework of Save-A-Lot’s executive compensation program will be similar to Supervalu’s, and will be comprised of base salaries, annual performance-based bonuses, and long-term incentive awards in respect of Save-A-Lot common stock.
In connection with the Separation, Save-A-Lot expects to adopt compensation and benefit plans, including the Save-A-Lot 2016 Stock Plan (subject to the approval of Supervalu prior to the Separation, in its capacity as Save-A-Lot’s sole stockholder), which plans will initially be substantially similar to those in effect at Supervalu before the Separation. Following the Separation, the Save-A-Lot Compensation Committee will administer and make determinations under the Save-A-Lot compensation plans consistent with Save-A-Lot’s business needs and goals. Additional information about the Save-A-Lot 2016 Stock Plan is set forth in the section of this Information Statement captioned “Executive Compensation—Save-A-Lot 2016 Stock Plan.”
Executive Compensation Practices
Historically
Supervalu endeavors to maintain executive compensation policies and programs that align with best practices, as well as long-term stockholder interests. The following compensation practices were in effect during fiscal 2016 at Supervalu:
Pay versus Performance: A significant portion of the compensation opportunities for Supervalu executives is based on the achievement of performance objectives and the Supervalu Compensation Committee continually reviews the relationship between executive compensation and Supervalu’s performance.
Median Compensation Targets: Total direct compensation for Supervalu executives is assessed in comparison to the median of its peer group. The Supervalu Compensation Committee ultimately considers median pay, recommendations from Supervalu’s head of HR, internal equity relationships, and the advice of the Supervalu Compensation Committee’s compensation consultant in determining final pay decisions.
Stock Ownership and Retention Guidelines: Supervalu has stock ownership and retention guidelines in place for Supervalu directors and executives to encourage them to build and maintain an ownership position in Supervalu common stock.
No Repricing: Option exercise prices are set at the closing price of Supervalu common stock on the date of grant and may not be reduced or replaced with a lower exercise price without stockholder approval (except to adjust for stock splits or similar transactions).
Recoupment Policy: Supervalu’s recoupment (or clawback) policy is in place to provide for recovery of amounts paid under Supervalu’s annual incentive plan and awards under Supervalu’s long-term incentive plan in the event an accounting restatement is required due to material noncompliance with financial reporting requirements that results in performance-based compensation that would have been a lower amount if calculated on restated results.
Anti-Hedging and Pledging Policy: Supervalu directors and executive officers are prohibited from pledging, engaging in short sales, hedging, and trading put and call options with respect to Supervalu securities.

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Restrictive Covenants: Supervalu named executive officers must adhere to restrictive covenants upon separation from Supervalu, including noncompetition, nonsolicitation, and nondisclosure obligations.
Use of Double Triggers: All Supervalu change of control severance agreements have a double, rather than a single, trigger for benefit eligibility. This means that a change of control will not automatically entitle an executive to severance benefits; the executive must also be terminated without cause or resign for good reason (which includes suffering a diminution in compensation, a reduction in title, or a material adverse diminution in his or her duties or responsibilities).
Review of Compensation Peer Group: Supervalu’s peer group is reviewed annually by the Supervalu Compensation Committee and adjusted as needed to ensure that the companies remain relevant and appropriate for the executive compensation program.
Review of Committee Charter: The Supervalu Compensation Committee reviews its charter annually to incorporate any new best practices or other changes deemed necessary.
Going Forward
As noted above, because the Save-A-Lot Compensation Committee has not yet been formed, the executive compensation practices at Save-A-Lot will be developed and established by the Save-A-Lot Compensation Committee after the Separation. It is, however, currently expected that after the Separation, the framework of Save-A-Lot’s executive compensation program will be similar to Supervalu’s.
Oversight of the Compensation Process
Historically
Supervalu’s annual review of executive compensation occurs at the April meeting of the Supervalu Compensation Committee and the Supervalu Board. As delegated by the Supervalu Board, compensation for Supervalu’s named executive officers is reviewed and approved by the Supervalu Compensation Committee and, with respect to the Supervalu Chief Executive Officer, ratified by the independent members of the Supervalu Board. As part of that review, the Supervalu Compensation Committee takes into consideration competitive market analyses, annual performance evaluations and the recommendations of Supervalu’s Executive Vice President, Human Resources and Communications, the Supervalu Compensation Committee’s compensation consultant, and, other than with respect to the Supervalu Chief Executive Officer’s pay, the Supervalu Chief Executive Officer. The Supervalu Compensation Committee reviews at least annually the relationship of target compensation levels for each Supervalu named executive officer relative to the median pay levels of executives at companies in Supervalu’s peer group for base salary, annual incentives, and long-term equity compensation and relative to the compensation target for the Supervalu Chief Executive Officer. The Supervalu Compensation Committee also reviews at least annually internal equity relationships for comparable positions across the company. With respect to the compensation of Supervalu’s Chief Executive Officer, the recommendations are not shared with the Supervalu Chief Executive Officer during this process and the Supervalu Chief Executive Officer does not participate in any such review, approval, or ratification.
Going Forward
After the Separation, the Save-A-Lot Compensation Committee will adopt and develop practices and procedures with respect to compensation decisions relating to base salary, annual incentives, and long-term incentives within the framework of the compensation plans adopted by Save-A-Lot, which at least initially will be substantially similar to Supervalu’s compensation plans. In addition, the Save-A-Lot Compensation Committee will need to evaluate the relevance of peer data and determine the appropriate peer group, if any, for Save-A-Lot following the Separation.
Role of Executive Officers
Historically
The Supervalu Chief Executive Officer provides the Supervalu Compensation Committee with his evaluation of the other Supervalu named executive officers and his recommendations for their pay, which the Supervalu Compensation Committee is free to endorse, modify, or reject. The Supervalu Compensation Committee is supported in its work by Supervalu’s management and its primary liaisons have been the Executive Vice President, Human Resources and Communications and the Executive Vice President, General Counsel and Corporate Secretary, who acts as the Supervalu Compensation Committee’s secretary and helps coordinate the Supervalu Compensation Committee’s meetings and provides support to the Supervalu Compensation Committee in the execution of its duties.

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Going Forward
After the Separation, the Save-A-Lot Compensation Committee will adopt and develop practices and procedures with respect to the role of executive officers in making compensation decisions.
Role of the Compensation Consultant
Historically
The Supervalu Compensation Committee has the authority to retain outside compensation consultants to assist in the evaluation of executive compensation or to otherwise advise the Supervalu Compensation Committee. The Supervalu Compensation Committee directs the work of such consultants, and decisions regarding compensation of Supervalu’s named executive officers are ultimately made by the Supervalu Compensation Committee as delegated by the Supervalu Board and, in the case of Supervalu’s Chief Executive Officer, ratified by the independent members of the Supervalu Board.
During fiscal 2016, the Supervalu Compensation Committee continued to retain Exequity, a nationally recognized independent provider of executive compensation advisory services with no legal or financial connection to any other service provider, to serve as its independent compensation consultant. In fiscal 2016, Exequity supported the Supervalu Compensation Committee by providing competitive data on compensation and relative performance of Supervalu’s peer group companies (which information allows the Supervalu Compensation Committee to make informed decisions with the benefit of understanding the factors shaping the external marketplace for executive compensation); provided an updated comprehensive review of Supervalu’s executive compensation program; provided input and suggested approaches with respect to Supervalu’s pay programs; made presentations on regulatory and legislative matters affecting executive compensation; and consulted on other matters as requested.
The Supervalu Compensation Committee determined that the work of Exequity did not raise any conflicts of interest in fiscal 2016. In making this assessment, the Supervalu Compensation Committee considered the applicable SEC and NYSE independence factors, including the other services Exequity provided to Supervalu, the level of fees received from Supervalu as a percentage of Exequity’s total revenue, policies and procedures employed by Exequity to prevent conflicts of interest, and whether the individual Exequity advisers to the Supervalu Compensation Committee own any Supervalu stock or have any business or personal relationships with members of the Supervalu Compensation Committee or Supervalu’s executive officers.
The Supervalu Compensation Committee has adopted a policy whereby any consulting work done by its independent compensation consultant with expected billings in excess of $25,000 (in dollars), excluding work for the Supervalu Compensation Committee, is subject to pre-approval by the Supervalu Compensation Committee Chair. Exequity and its affiliates did not perform any work in fiscal 2016 for Supervalu outside of Exequity’s role as an executive compensation consultant to the Supervalu Compensation Committee and as a consultant to the Supervalu Corporate Governance and Nominating Committee regarding director compensation.
Going Forward
After the Separation, the Save-A-Lot Compensation Committee will adopt and develop practices and procedures with respect to the role of a compensation consultant, if any, in making compensation decisions.
Assessing the Competitive Market
Historically
Supervalu assesses its executives’ compensation opportunities with reference to the median of the competitive market. In assessing competitiveness, the Supervalu Compensation Committee reviews compensation information from Supervalu’s peer group, as well as compensation information available from third-party surveys. This information is used to inform the Supervalu Compensation Committee of competitive pay practices, including the relative mix among elements of compensation. This information is also used to determine, as a point of reference for each named executive officer, a midpoint (or median) within the competitive compensation range, for base salary, annual incentive, long-term equity incentive, and the total of these elements.
The Supervalu Compensation Committee also recognizes that comparative pay assessments have inherent limitations, due to the lack of precise comparability of executive positions between companies, as well as the companies themselves. As a result, the competitive medians are used only as a guide and are not the sole determinative factor in making compensation decisions

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for the named executive officers. In exercising its judgment, the Supervalu Compensation Committee looks beyond the competitive market data and considers individual job responsibilities, individual performance, experience, compensation history, internal comparisons, and compensation at former employers (in the case of new hires) and Supervalu’s performance.
The third-party compensation surveys used by the Supervalu Compensation Committee provide data on similarly sized organizations based on revenue and industry. In fiscal 2016, the Supervalu Compensation Committee referenced comparable positions from Supervalu’s peer group and Equilar’s Executive Compensation Survey in determining market median pay for Supervalu named executive officers.
Going Forward
After the Separation, the Save-A-Lot Compensation Committee will adopt and develop practices and procedures with respect to the assessment of the competitive market.
Peer Group
Historically
In April 2015, Exequity assisted the Supervalu Compensation Committee in reviewing and updating Supervalu’s peer group so that it is aligned to Supervalu’s industry (wholesale distribution company with regional retail grocery segments), revenue base (approximately $18 billion in annual revenue), and employee base (approximately 38,000 employees). Based upon the Supervalu Compensation Committee’s assessment of operational comparability and the competitive landscape, the changes made to Supervalu’s peer group for fiscal 2016 were to add SpartanNash Company and TechData Corporation now that data is available for each of them following their merger and financial restatement, respectively.
Supervalu’s fiscal 2016 peer group consisted of 16 companies that have median revenues of approximately $18.3 billion.
Fiscal 2016 Peer Group
Dollar General Corporation
Staples, Inc.
Kohl’s Corporation
SYNNEX Corporation
Office Depot, Inc.
Sysco Corporation
Publix Super Markets, Inc.
TechData Corporation
Rite Aid Corporation
Toys "R" Us, Inc.
Safeway Inc.
W.W. Grainger, Inc.
Sears Holdings Corporation
WESCO International, Inc.
SpartanNash Company
Whole Foods Market, Inc.
Going Forward
After the Separation, the Save-A-Lot Compensation Committee will establish and develop practices and procedures with respect to a Save-A-Lot peer group.
Components of Executive Compensation
Historically
Supervalu’s executive compensation programs are structured to provide a mix of fixed and variable compensation, with variable compensation delivered via annual and long-term incentives that meet the pay for performance and stockholder alignment principles of Supervalu’s compensation philosophy.
The fundamental elements of Supervalu’s fiscal 2016 executive compensation program and the key characteristics and objective(s) of each element are presented in the following table.


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Component
Key Characteristic
Objective(s)
Base Salary
Fixed compensation paid on a weekly basis, reviewed annually and adjusted as deemed appropriate.
Market competitive pay:
Intended to compensate executives fairly for services rendered during the year, set at a level to fairly reflect the responsibility level and value to Supervalu of the position held, and to support retention and recruitment of key executive talent.
Annual Incentive Plan
Variable cash bonus payment opportunity based on achievement of key corporate and business unit performance goals and individual contributions to that performance.
Pay for performance and market competitive pay:
Intended to motivate and reward executives for achieving specific performance goals over annual performance periods.
Long-Term Incentives and
Other Stock-Based Awards
Variable equity compensation generally granted in the form of nonqualified stock options and restricted stock awards.
Long-term stockholder alignment, pay for performance and market competitive pay:
Intended to reinforce the alignment between the interests of Supervalu’s executives and stockholders and to motivate executives by tying incentives to performance of Supervalu common stock.
Health, Welfare, and
Retirement Benefits
Provides protection against financial catastrophe that may result from illness, disability or death and that provides an opportunity to save for a competitive level of retirement income.
Market competitive pay:
Intended to promote employee health and well-being, consistent with broad-based plans offered to all salaried employees, and to support employees in attaining financial security.
Deferred Compensation
Provides for tax planning opportunities commonly provided to executives.
Market competitive pay:
Intended to provide competitive benefits that assist Supervalu in attracting and retaining executive officers.
Post-Employment Compensation
Provides for lump sum cash benefits, continuation of welfare benefits, and outplacement services in the event of termination without cause or, following a change of control, a termination without cause or for good reason.
Market competitive pay:
Intended to ensure retention of executives for business continuity leading up to and following a significant corporate transaction or in the event of involuntary termination.

Base Salaries
Supervalu pays its named executive officers and other executives an annual base salary. Base salary levels for Supervalu named executive officers are based on individual performance and experience, job responsibility and internal equity, and also take into consideration the competitive market median. For fiscal 2016, the Supervalu Compensation Committee determined that as part of its focus on pay for performance, base salaries for named executive officers and certain other officers would be increased only in cases where the incumbent assumed additional responsibilities, including leading a larger operation, or in recognition of significant achievements. This method is consistent with the approach to base salaries used in previous years.
Mr. Casteel received a base salary increase from $450,000 to $525,000 effective on April 25, 2015 to more closely align his base salary with the market median and to recognize the performance and growth of the Save-A-Lot business in fiscal 2015.
Annual Incentive Plan
Supervalu provides its executives with annual incentive compensation through plans that are designed to align a significant portion of their total cash compensation with the financial performance of Supervalu and its business segments. Each executive is assigned a target amount of annual incentive compensation as part of his or her total cash compensation, but the amount of annual incentive compensation actually paid depends on the performance of the company and its relevant business segments.

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Annual incentive targets and payouts. Target amounts of annual incentive compensation for each Supervalu named executive officer were determined based on job responsibilities, internal parity, peer group data and input from the Supervalu Compensation Committee’s external compensation consultant. The Supervalu Compensation Committee established annual minimum, target, and maximum bonus opportunities expressed as a percentage of base salary for Messrs. Claus and Casteel in fiscal 2016. The Supervalu Compensation Committee’s objectives were to set targets such that total cash compensation (base salary and annual incentive at target) was generally aligned with Supervalu’s peer group median, with a substantial portion of compensation linked to corporate performance. Targets as well as minimum and maximum bonus opportunities for Mr. Collins, who participated in a semi-annual bonus plan in fiscal 2016, were established by Supervalu through its processes for non-executive employee compensation. The following targets and payouts were approved for our named executive officers:
Annual Incentive Plan Targets and Payouts for NEOs(1)
Executive
 
Base Salary in Dollars
(Fiscal 2016 year-end)
 
Incentive Target as % of Base Salary
 
Incentive Target in Dollars
 
Incentive Target in Dollars (Prorated Based on Start/End Date)
 
Weighted Payout Percentage
Eric A. Claus
 
$850,000
 
100%
 
$850,000
 
$179,808
 
53%
Michael D. Collins(1)
 
$450,000
 
75%
 
$337,500
 
$35,156
 
49%
Ritchie L. Casteel
 
$525,000
 
73%(2)
 
$385,096
 
$205,145
 
53%
(1)
The target and payout amounts for Mr. Collins have been annualized based on his semi-annual incentive plan in fiscal 2016.
(2)
Mr. Casteel's incentive target remained at 75% of base salary and he received a base salary increase on April 25, 2015.
Annual incentive metrics. Supervalu’s annual incentive plans for its named executive officers in fiscal 2016 had sales, Adjusted EBITDA, and Adjusted Overhead Expense for the performance metrics. Messrs. Claus and Casteel participated in an annual incentive plan and Mr. Collins participated in a semi-annual incentive plan, that each measured performance in Supervalu’s Save-A-Lot business segment, as reflected in the table below.
Supervalu’s sales metrics, which include ID sales for the Save-A-Lot segment, place an emphasis on driving sales, along with continuing Supervalu’s strategic efforts around business growth. Supervalu’s Adjusted EBITDA metrics create a focus on delivering strong bottom-line performance. Supervalu’s Adjusted Overhead Expense metric creates a focus on controlling costs as Supervalu continues to manage towards a lower cost structure. Metrics for all executives are tracked regularly, are well-understood and Supervalu’s executives can deliver against these metrics by taking actions to improve operating performance.
Supervalu’s Adjusted EBITDA metrics that were used for its annual and semi-annual incentive plans in fiscal 2016 are mostly the same as the Adjusted EBITDA publicly reported in Supervalu’s financial statements and earnings releases for fiscal 2016, explained in more detail below. However, as explained below under “Discretionary Adjustments,” Supervalu’s Adjusted EBITDA results for its annual and semi-annual incentive plans varied from Supervalu’s publicly reported Adjusted EBITDA because the Supervalu Compensation Committee exercised negative discretion (i.e., a reduction in bonus payout) in making an adjustment to Supervalu’s Consolidated Adjusted EBITDA results for purposes of Supervalu’s annual incentive plans in fiscal 2016.
Supervalu defines Adjusted EBITDA as Net earnings (loss) from continuing operations, plus Interest expense, net and Income tax provision (benefit), less Net earnings attributable to noncontrolling interests calculated in accordance with GAAP, plus non-GAAP adjustments for Depreciation and amortization, LIFO charge (credit), certain employee-related costs and pension related items (including severance costs, accelerated stock-based compensation charges, pension settlement charges, multiemployer pension withdrawal charges and other items), charges and costs related to debt financing activities, non-cash asset impairment and other charges and gains (including asset write-offs, store closures, market exits and certain gains on the sale of property), goodwill and intangible asset impairment charges, costs related to the separation of businesses, legal settlement charges and gains, contract breakage costs and certain other non-cash charges or items.
Supervalu omits these items either because they are non-cash items or are items that are not considered in Supervalu’s supplemental assessment of our on-going business performance. Certain of these adjustments are considered in similar supplemental analyses by other companies, such as Depreciation and amortization, LIFO charge (credit) and certain other adjustments. Adjusted EBITDA is less disposed to variances in actual performance resulting from depreciation, amortization and other noncash charges and credits, and more reflective of other factors that affect Supervalu’s underlying operating performance.

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There are significant limitations to using Adjusted EBITDA as a financial measure including, but not limited to, it not reflecting cash expenditures for capital assets or contractual commitments, changes in working capital, income taxes and debt service expenses that are recurring in Supervalu’s results of operations.
The following is a reconciliation of the Net earnings from continuing operations as reported in accordance with GAAP to the non-GAAP measure of Adjusted EBITDA:
 
 
Fiscal 2016
(52 weeks)
Net earnings from continuing operations
 
$
178

Less: net earnings attributable to noncontrolling interests
 
(8
)
Income tax provision
 
85

Interest expense, net
 
196

Depreciation and amortization
 
276

LIFO charge
 
3

Employee-related costs
 
8

Store closure and asset impairment charges
 
12

Costs incurred for potential Save-A-Lot separation
 
15

Intangible asset impairment charge
 
6

Adjusted EBITDA
 
$
771

To reinforce the importance of balancing growth and profitability across the business, Supervalu used an Adjusted EBITDA payout qualifier under each annual incentive plan to ensure Supervalu met a minimum performance level before any payout under each such plan. If the applicable minimum Adjusted EBITDA performance threshold had not been met for a plan, the plan would not have paid out any incentive amount for that metric or for its sales metric, regardless of its sales performance. Additionally, Supervalu’s Consolidated Adjusted EBITDA was a qualifier for all plans. If Supervalu did not achieve a minimum Consolidated Adjusted EBITDA of 95% of Supervalu’s target Consolidated Adjusted EBITDA, then no bonus would be paid under any annual or semi-annual incentive plan. For fiscal 2016, Supervalu’s Consolidated Adjusted EBITDA exceeded its minimum threshold.
Supervalu’s Adjusted Overhead Expense metric was added as a metric to all Supervalu named executive officer bonus plans in fiscal 2016. It is a non-GAAP supplemental expense measure Supervalu uses to manage administrative costs that generally can vary based on the extent of administrative support services needed for the company or to service other entities. Costs that are included in the metric include payroll and non-payroll expenses for corporate, banner, and region support functions, net of income from the Supervalu’s transition services agreements. Adjusted Overhead Expense results are adjusted for publicly reported one-time items that occur in accordance with Supervalu’s accounting guidelines and may include discretionary adjustments as discussed below under “—Discretionary Adjustments.”
Supervalu defines Adjusted Overhead Expense as Selling and administrative expenses as reported in Supervalu’s Consolidated Statements of Operations calculated in accordance with GAAP, less the following expenses included within Selling and administrative expenses: (i) Wholesale, Save-A-Lot, Retail and corporate operating expenses; (ii) depreciation and amortization costs; (iii) pension expense; and (iv) publicly disclosed adjustment items; less transition services agreement revenues included within Net sales, net of certain related costs; plus Wholesale and Retail overhead costs included within Cost of sales.
Adjusted Overhead Expense consists of Supervalu’s corporate overhead expenses that management has identified are controllable in nature, as compared to costs that are operational. In determining the Adjusted Overhead Expense measure, Supervalu excluded certain items from Selling and administrative expenses that are generally operational, noncash and publicly disclosed adjustment items as determined by Supervalu management.
Retail store, distribution center and other operating expenses of Supervalu are excluded from Adjusted Overhead Expense because they are incurred at operating locations that fluctuate with operating revenue and are non-administrative in nature. Depreciation and amortization expense and pension expense are excluded because they are non-cash expenses. Transition services agreement revenues of Supervalu are included since administrative costs within the Adjusted Overhead Expense are higher due to the overhead costs related to servicing the transition services agreements.

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The following is a reconciliation of the Selling and administrative expenses as reported in accordance with GAAP to the non-GAAP measure of Adjusted Overhead Expense:
 
 
Fiscal 2016
(52 weeks)
Selling and administrative expenses, as reported
 
$
2,124

Less expenses and adjustments included within Selling and administrative costs and Intangible asset impairment charges:
 
 
Wholesale, Save-A-Lot, Retail and Corporate operating expenses
 
(1,396