Delaware | 1-5418 | 41-0617000 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
11840 Valley View Road Eden Prairie, Minnesota | 55344 |
(Address of principal executive offices) | (Zip Code) |
N/A | ||
(Former name or former address, if changed since last report) |
Exhibit Number | Description | |
99.1 |
Dated: | October 18, 2017 | ||
SUPERVALU INC. | |||
By: /s/ Rob N. Woseth | |||
Rob N. Woseth | |||
Executive Vice President, Chief Strategy Officer and Interim Chief Financial Officer | |||
(Authorized Officer of Registrant) | |||
Exhibit Number | Description | |
99.1 |
• | Consolidated net sales increased by $995 million, or 35%, over last year’s second quarter |
• | Wholesale net sales increased by over $1 billion, or 58%, over last year’s second quarter, including 11 weeks of Unified Grocers results that contributed approximately $790 million to net sales |
• | Second quarter net loss from continuing operations of $25 million; Adjusted EBITDA of $111 million |
Second Quarter Ended | Year-To-Date Ended | ||||||||||||||||||||||||||
September 9, 2017 (12 weeks) | September 10, 2016 (12 weeks) | September 9, 2017 (28 weeks) | September 10, 2016 (28 weeks) | ||||||||||||||||||||||||
Net sales | $ | 3,800 | 100.0 | % | $ | 2,805 | 100.0 | % | $ | 7,804 | 100.0 | % | $ | 6,570 | 100.0 | % | |||||||||||
Cost of sales | 3,372 | 88.7 | 2,409 | 85.9 | 6,825 | 87.5 | 5,625 | 85.6 | |||||||||||||||||||
Gross profit(1) | 428 | 11.3 | 396 | 14.1 | 979 | 12.5 | 945 | 14.4 | |||||||||||||||||||
Selling and administrative expenses(1) | 435 | 11.4 | 338 | 12.0 | 919 | 11.8 | 798 | 12.2 | |||||||||||||||||||
Operating (loss) earnings | (7 | ) | (0.2 | ) | 58 | 2.1 | 60 | 0.8 | 147 | 2.2 | |||||||||||||||||
Interest expense, net(1) | 31 | 0.8 | 41 | 1.5 | 74 | 0.9 | 101 | 1.5 | |||||||||||||||||||
Equity in earnings of unconsolidated affiliates | — | — | (1 | ) | — | (2 | ) | — | (2 | ) | — | ||||||||||||||||
(Loss) earnings from continuing operations before income taxes(1) | (38 | ) | (1.0 | ) | 18 | 0.6 | (12 | ) | (0.1 | ) | 48 | 0.7 | |||||||||||||||
Income tax (benefit) provision(1) | (13 | ) | (0.3 | ) | 6 | 0.2 | 1 | — | 16 | 0.2 | |||||||||||||||||
Net (loss) earnings from continuing operations(1)(2) | (25 | ) | (0.7 | ) | 12 | 0.4 | (13 | ) | (0.2 | ) | 32 | 0.5 | |||||||||||||||
Income from discontinued operations, net of tax(2) | — | — | 20 | 0.7 | — | — | 47 | 0.7 | |||||||||||||||||||
Net (loss) earnings including noncontrolling interests | (25 | ) | (0.7 | ) | 32 | 1.1 | (13 | ) | (0.2 | ) | 79 | 1.2 | |||||||||||||||
Less net earnings attributable to noncontrolling interests | — | — | (1 | ) | — | (1 | ) | — | (2 | ) | — | ||||||||||||||||
Net (loss) earnings attributable to SUPERVALU INC. | $ | (25 | ) | (0.7 | )% | $ | 31 | 1.1 | % | $ | (14 | ) | (0.2 | )% | $ | 77 | 1.2 | % | |||||||||
Basic net (loss) earnings per share attributable to SUPERVALU INC.:(3) | |||||||||||||||||||||||||||
Continuing operations | $ | (0.65 | ) | $ | 0.30 | $ | (0.35 | ) | $ | 0.79 | |||||||||||||||||
Discontinued operations | $ | — | $ | 0.52 | $ | (0.01 | ) | $ | 1.24 | ||||||||||||||||||
Basic net (loss) earnings per share | $ | (0.65 | ) | $ | 0.82 | $ | (0.36 | ) | $ | 2.04 | |||||||||||||||||
Diluted net (loss) earnings per share attributable to SUPERVALU INC.:(3) | |||||||||||||||||||||||||||
Continuing operations(1) | $ | (0.65 | ) | $ | 0.29 | $ | (0.35 | ) | $ | 0.79 | |||||||||||||||||
Discontinued operations | $ | — | $ | 0.52 | $ | (0.01 | ) | $ | 1.23 | ||||||||||||||||||
Diluted net (loss) earnings per share | $ | (0.65 | ) | $ | 0.81 | $ | (0.36 | ) | $ | 2.02 | |||||||||||||||||
Weighted average number of shares outstanding:(3) | |||||||||||||||||||||||||||
Basic | 38 | 38 | 38 | 38 | |||||||||||||||||||||||
Diluted | 38 | 38 | 38 | 38 |
(1) | Results from continuing operations for the second quarter ended September 9, 2017 include net charges and costs of $65 before tax ($43 after tax, or $1.11 per diluted share), comprised of an asset impairment charge of $42 before tax ($27 after tax, or $0.71 per diluted share) and merger and integration costs of $23 before tax ($16 after tax, or $0.40 per diluted share) within Selling and administrative expenses. |
(2) | The results of operations, financial position and cash flows of Save-A-Lot are reported as discontinued operations for all periods presented. Accordingly, Supervalu’s consolidated financial statements have been recast from their previous presentation. The results of Save-A-Lot for the comparative quarterly periods are disclosed within Note 14—Discontinued Operations within the Condensed Consolidated Financial Statements in Supervalu's Quarterly Report on Form 10-Q for the first quarter of fiscal 2018. |
(3) | On July 19, 2017, Supervalu held its annual meeting of stockholders, at which stockholders authorized the Board of Directors to effect a reverse stock split. Also on July 19, 2017 following the stockholder meeting, the Board of Directors approved a 1-for-7 reverse stock split of Supervalu’s common stock. Supervalu’s common stock began trading on a split-adjusted basis when the market opened on August 2, 2017. The weighted average number of shares and net earnings per share have been recast to give effect to the 1-for-7 reverse stock split. |
September 9, 2017 | February 25, 2017 | ||||||
ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 209 | $ | 332 | |||
Receivables, net | 598 | 386 | |||||
Inventories, net | 1,057 | 764 | |||||
Other current assets | 140 | 59 | |||||
Total current assets | 2,004 | 1,541 | |||||
Property, plant and equipment, net | 1,246 | 1,004 | |||||
Goodwill | 740 | 710 | |||||
Intangible assets, net | 86 | 39 | |||||
Deferred tax assets | 157 | 165 | |||||
Other assets | 162 | 121 | |||||
Total assets | $ | 4,395 | $ | 3,580 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities | |||||||
Accounts payable | $ | 1,252 | $ | 881 | |||
Accrued vacation, compensation and benefits | 222 | 150 | |||||
Current maturities of long-term debt and capital lease obligations | 34 | 26 | |||||
Other current liabilities | 149 | 172 | |||||
Total current liabilities | 1,657 | 1,229 | |||||
Long-term debt | 1,601 | 1,263 | |||||
Long-term capital lease obligations | 174 | 186 | |||||
Pension and other postretirement benefit obligations | 396 | 322 | |||||
Long-term tax liabilities | 64 | 63 | |||||
Other long-term liabilities | 130 | 134 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity | |||||||
Common stock, $0.01 par value: 57 shares authorized; 38 and 38 shares issued, respectively | — | — | |||||
Capital in excess of par value | 2,840 | 2,831 | |||||
Treasury stock, at cost, 0 and 0 shares, respectively | (3 | ) | (2 | ) | |||
Accumulated other comprehensive loss | (278 | ) | (278 | ) | |||
Accumulated deficit | (2,189 | ) | (2,175 | ) | |||
Total SUPERVALU INC. stockholders’ equity | 370 | 376 | |||||
Noncontrolling interests | 3 | 7 | |||||
Total stockholders’ equity | 373 | 383 | |||||
Total liabilities and stockholders’ equity | $ | 4,395 | $ | 3,580 |
Year-To-Date Ended | |||||||
September 9, 2017 (28 weeks) | September 10, 2016 (28 weeks) | ||||||
Cash flows from operating activities | |||||||
Net (loss) earnings including noncontrolling interests | $ | (13 | ) | $ | 79 | ||
Income from discontinued operations, net of tax | — | 49 | |||||
Net (loss) earnings from continuing operations | (13 | ) | 30 | ||||
Adjustments to reconcile Net (loss) earnings from continuing operations to Net cash provided by operating activities – continuing operations: | |||||||
Asset impairment and other charges | 40 | 1 | |||||
Loss on debt extinguishment | 5 | 7 | |||||
Net gain on sale of assets and exits of surplus leases | (2 | ) | — | ||||
Depreciation and amortization | 112 | 111 | |||||
LIFO charge | 3 | 2 | |||||
Deferred income taxes | 6 | 21 | |||||
Stock-based compensation | 11 | 8 | |||||
Net pension and other postretirement benefit income | (29 | ) | (13 | ) | |||
Contributions to pension and other postretirement benefit plans | (1 | ) | (2 | ) | |||
Other adjustments | 7 | 8 | |||||
Changes in operating assets and liabilities, net of effects from business acquisitions | (23 | ) | 35 | ||||
Net cash provided by operating activities – continuing operations | 116 | 208 | |||||
Net cash (used in) provided by operating activities – discontinued operations | (56 | ) | 72 | ||||
Net cash (used in) provided by operating activities | 60 | 280 | |||||
Cash flows from investing activities | |||||||
Proceeds from sale of assets | 4 | 1 | |||||
Purchases of property, plant and equipment | (117 | ) | (67 | ) | |||
Payments for business acquisitions | (105 | ) | (3 | ) | |||
Other | 2 | — | |||||
Net cash used in investing activities – continuing operations | (216 | ) | (69 | ) | |||
Net cash provided by (used in) investing activities – discontinued operations | 3 | (46 | ) | ||||
Net cash used in investing activities | (213 | ) | (115 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from revolving credit facility | 80 | 1,669 | |||||
Payments on revolving credit facility | (80 | ) | (1,707 | ) | |||
Proceeds from issuance of debt | 875 | — | |||||
Payments of debt and capital lease obligations | (825 | ) | (115 | ) | |||
Payments for shares traded for taxes | (3 | ) | (2 | ) | |||
Payments for debt financing costs | (9 | ) | (5 | ) | |||
Distributions to noncontrolling interests | (3 | ) | (5 | ) | |||
Other | (5 | ) | — | ||||
Net cash provided by (used in) financing activities | 30 | (165 | ) | ||||
Net (decrease) increase in cash and cash equivalents | (123 | ) | — | ||||
Cash and cash equivalents at beginning of period | 332 | 57 | |||||
Cash and cash equivalents at the end of period | $ | 209 | $ | 57 | |||
Less cash and cash equivalents of discontinued operations at end of period | — | (17 | ) | ||||
Cash and cash equivalents of continuing operations at end of period | $ | 209 | $ | 40 | |||
SUPPLEMENTAL CASH FLOW INFORMATION | |||||||
Non-cash investing and financing activities were as follows: | |||||||
Purchases of property, plant and equipment included in Accounts payable | $ | 21 | $ | 21 | |||
Capital lease asset additions | $ | 1 | $ | 7 | |||
Interest and income taxes paid: | |||||||
Interest paid, net of amounts capitalized | $ | 63 | $ | 79 | |||
Income taxes paid, net | $ | 48 | $ | 6 |
Second Quarter Ended | Year-To-Date Ended | |||||||||||||||
(In millions) | September 9, 2017 (12 weeks) | September 10, 2016 (12 weeks) | September 9, 2017 (28 weeks) | September 10, 2016 (28 weeks) | ||||||||||||
Wholesale | $ | 2,738 | $ | 1,731 | $ | 5,294 | $ | 4,006 | ||||||||
Retail | 1,022 | 1,033 | 2,415 | 2,464 | ||||||||||||
Corporate | 40 | 41 | 95 | 100 | ||||||||||||
Total net sales | $ | 3,800 | $ | 2,805 | $ | 7,804 | $ | 6,570 |
RECONCILIATIONS OF (LOSS) EARNINGS FROM CONTINUING OPERATIONS TO EARNINGS FROM CONTINUING OPERATIONS AFTER ADJUSTMENTS | ||||||||||||
Table 1 | ||||||||||||
Second Quarter Ended September 9, 2017 | ||||||||||||
(In millions, except per share data) | (Loss) Earnings Before Tax | (Loss) Earnings After Tax | Diluted (Loss) Earnings Per Share | |||||||||
Continuing operations | $ | (38 | ) | $ | (25 | ) | $ | (0.65 | ) | |||
Adjustments: | ||||||||||||
Asset impairment charge | 42 | 27 | 0.71 | |||||||||
Merger and integration costs | 23 | 16 | 0.40 | |||||||||
Continuing operations after adjustments | $ | 27 | $ | 18 | $ | 0.46 | ||||||
Table 2 | ||||||||||||
Year-To-Date Ended September 9, 2017 | ||||||||||||
(In millions, except per share data) | (Loss) Earnings Before Tax | (Loss) Earnings After Tax | Diluted (Loss) Earnings Per Share | |||||||||
Continuing operations | $ | (12 | ) | $ | (13 | ) | $ | (0.35 | ) | |||
Adjustments: | ||||||||||||
Asset impairment charge | 42 | 27 | 0.71 | |||||||||
Merger and integration costs | 27 | 19 | 0.48 | |||||||||
Legal reserve charge | 9 | 6 | 0.15 | |||||||||
Unamortized financing charges | 3 | 2 | 0.06 | |||||||||
Severance costs | 3 | 1 | 0.04 | |||||||||
Debt refinancing costs | 2 | 1 | 0.03 | |||||||||
Store closure charges and costs | (1 | ) | — | (0.01 | ) | |||||||
Gain on sale of property | (2 | ) | (1 | ) | (0.04 | ) | ||||||
Continuing operations after adjustments | $ | 71 | $ | 42 | $ | 1.07 |
Table 3 | ||||||||||||
Second Quarter Ended September 10, 2016 | ||||||||||||
(In millions, except per share data) | Earnings Before Tax | Earnings After Tax | Diluted Earnings Per Share | |||||||||
Continuing operations | $ | 18 | $ | 12 | $ | 0.29 | ||||||
Adjustments: | ||||||||||||
Store closure charges and costs | 4 | 3 | 0.06 | |||||||||
Supply agreement termination fee | (9 | ) | (6 | ) | (0.14 | ) | ||||||
Continuing operations after adjustments | $ | 13 | $ | 9 | $ | 0.21 | ||||||
Table 4 | ||||||||||||
Year-To-Date Ended September 10, 2016 | ||||||||||||
(In millions, except per share data) | Earnings Before Tax | Earnings After Tax | Diluted Earnings Per Share | |||||||||
Continuing operations | $ | 48 | $ | 32 | $ | 0.79 | ||||||
Adjustments: | ||||||||||||
Unamortized financing charges | 5 | 3 | 0.09 | |||||||||
Store closure charges and costs | 4 | 3 | 0.06 | |||||||||
Debt refinancing costs | 2 | 1 | 0.02 | |||||||||
Supply agreement termination fee | (9 | ) | (6 | ) | (0.14 | ) | ||||||
Sales and use tax refund | (2 | ) | (1 | ) | (0.04 | ) | ||||||
Severance benefit | (1 | ) | (1 | ) | (0.01 | ) | ||||||
Continuing operations after adjustments | $ | 47 | $ | 31 | $ | 0.77 |
RECONCILIATIONS OF NET (LOSS) EARNINGS FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA AND PRO FORMA ADJUSTED EBITDA | ||||||||||||||||
Table 5 | ||||||||||||||||
Second Quarter Ended | Year-To-Date Ended | |||||||||||||||
(In millions) | September 9, 2017 (12 weeks) | September 10, 2016 (12 weeks) | September 9, 2017 (28 weeks) | September 10, 2016 (28 weeks) | ||||||||||||
Results of operations, as reported | ||||||||||||||||
Net (loss) earnings from continuing operations | $ | (25 | ) | $ | 12 | $ | (13 | ) | $ | 32 | ||||||
Income tax (benefit) provision | (13 | ) | 6 | 1 | 16 | |||||||||||
Equity in earnings of unconsolidated affiliates | — | (1 | ) | (2 | ) | (2 | ) | |||||||||
Interest expense, net | 31 | 41 | 74 | 101 | ||||||||||||
Total operating (loss) earnings | $ | (7 | ) | $ | 58 | $ | 60 | $ | 147 | |||||||
Add Equity in earnings of unconsolidated affiliates | — | 1 | 2 | 2 | ||||||||||||
Less net earnings attributable to noncontrolling interests | — | (1 | ) | (1 | ) | (2 | ) | |||||||||
Depreciation and amortization | 52 | 47 | 112 | 111 | ||||||||||||
LIFO charge | 1 | — | 3 | 2 | ||||||||||||
Asset impairment charge | 42 | — | 42 | — | ||||||||||||
Merger and integration costs | 23 | — | 27 | — | ||||||||||||
Legal reserve charge | — | — | 9 | — | ||||||||||||
Store closure charges and costs | — | 4 | (1 | ) | 4 | |||||||||||
Severance costs (benefit) | — | — | 3 | (1 | ) | |||||||||||
Gain on sale of property | — | — | (2 | ) | — | |||||||||||
Sales and use tax refund | — | — | — | (2 | ) | |||||||||||
Supply agreement termination fee | — | (9 | ) | — | (9 | ) | ||||||||||
Adjusted EBITDA(1) | $ | 111 | $ | 100 | $ | 254 | $ | 252 | ||||||||
Pro forma adjustments: | ||||||||||||||||
Net sales(2) | — | 9 | — | 24 | ||||||||||||
Cost of sales(3) | — | (2 | ) | — | (8 | ) | ||||||||||
Total pro forma adjustments | — | 7 | — | 16 | ||||||||||||
Pro forma adjusted EBITDA | $ | 111 | $ | 107 | $ | 254 | $ | 268 |
(1) | Supervalu's measure of adjusted EBITDA includes operating earnings, as reported, plus depreciation and amortization, LIFO charge, equity earnings of unconsolidated affiliates and certain adjustment items as determined by management, and less net earnings attributable to noncontrolling interests. |
(2) | This adjustment reflects (1) the fees that Supervalu expects to recognize in connection with performing services for Save-A-Lot under the services agreement entered into with Save-A-Lot on December 5, 2016 (the "Services Agreement") and (2) Wholesale distribution sales to Save-A-Lot pursuant to a customer agreement between Supervalu and Save-A-Lot that had historically been intercompany sales. Actual Services Agreement fees are subject to adjustments pursuant to the terms of the Services Agreement including for changes in service levels. This adjustment only applies to time periods prior to the sale of Save-A-Lot on December 5, 2016. |
(3) | This adjustment reflects the Cost of sales related to Wholesale’s distribution to Save-A-Lot, which was previously eliminated on an intercompany basis. No adjustment for expenses related to the Services Agreement has been included within Cost of sales because the shared service center costs incurred to support back office functions related to the Services Agreement represent administrative overhead costs that have been included within Selling and administrative expenses within Supervalu’s historical consolidated financial statements. This adjustment only applies to time periods prior to the sale of Save-A-Lot on December 5, 2016. |
RECONCILIATION OF NET (LOSS) EARNINGS FROM CONTINUING OPERATIONS TO TOTAL AND SEGMENT OPERATING (LOSS) EARNINGS, TO SUPPLEMENTALLY PROVIDED TOTAL AND SEGMENT ADJUSTED EBITDA | ||||||||||||||||
Table 6 | ||||||||||||||||
Second Quarter Ended | Year-To-Date Ended | |||||||||||||||
(In millions) | September 9, 2017 (12 weeks) | September 10, 2016 (12 weeks) | September 9, 2017 (28 weeks) | September 10, 2016 (28 weeks) | ||||||||||||
Reconciliation of net (loss) earnings from continuing operations to operating earnings, as reported: | ||||||||||||||||
Net (loss) earnings from continuing operations | $ | (25 | ) | $ | 12 | $ | (13 | ) | $ | 32 | ||||||
Income tax (benefit) provision | (13 | ) | 6 | 1 | 16 | |||||||||||
Equity in earnings of unconsolidated affiliates | — | (1 | ) | (2 | ) | (2 | ) | |||||||||
Interest expense, net | 31 | 41 | 74 | 101 | ||||||||||||
Total operating (loss) earnings | $ | (7 | ) | $ | 58 | $ | 60 | $ | 147 | |||||||
Reconciliation of segment operating earnings to total operating earnings, as reported: | ||||||||||||||||
Wholesale operating earnings | $ | 61 | $ | 58 | $ | 123 | $ | 122 | ||||||||
Retail operating loss | (58 | ) | (12 | ) | (62 | ) | (4 | ) | ||||||||
Corporate operating (loss) earnings | (10 | ) | 12 | (1 | ) | 29 | ||||||||||
Total operating (loss) earnings | $ | (7 | ) | $ | 58 | $ | 60 | $ | 147 | |||||||
Reconciliation of segment operating earnings, as reported, to segment Adjusted EBITDA: | ||||||||||||||||
Wholesale operating earnings, as reported | $ | 61 | $ | 58 | $ | 123 | $ | 122 | ||||||||
Adjustments: | ||||||||||||||||
Legal reserve charge | — | — | 9 | — | ||||||||||||
Supply agreement termination fee | — | (9 | ) | — | (9 | ) | ||||||||||
Wholesale operating earnings, as adjusted | 61 | 49 | 132 | 113 | ||||||||||||
Wholesale depreciation and amortization | 19 | 12 | 37 | 28 | ||||||||||||
LIFO charge | 2 | — | 3 | 1 | ||||||||||||
Wholesale adjusted EBITDA(1) | $ | 82 | $ | 61 | $ | 172 | $ | 142 | ||||||||
Retail operating loss, as reported | $ | (58 | ) | $ | (12 | ) | $ | (62 | ) | $ | (4 | ) | ||||
Adjustments: | ||||||||||||||||
Asset impairment charge | 42 | — | 42 | — | ||||||||||||
Store closure charges and costs | — | 4 | (1 | ) | 4 | |||||||||||
Severance costs | — | — | 1 | — | ||||||||||||
Retail operating loss, as adjusted | (16 | ) | (8 | ) | (20 | ) | — | |||||||||
Retail depreciation and amortization | 31 | 33 | 71 | 79 | ||||||||||||
LIFO charge | (1 | ) | — | — | 1 | |||||||||||
Equity in earnings of unconsolidated affiliates | — | 1 | 2 | 2 | ||||||||||||
Net earnings attributable to noncontrolling interests | — | (1 | ) | (1 | ) | (2 | ) | |||||||||
Retail adjusted EBITDA(1) | $ | 14 | $ | 25 | $ | 52 | $ | 80 | ||||||||
Corporate operating (loss) earnings, as reported | $ | (10 | ) | $ | 12 | $ | (1 | ) | $ | 29 | ||||||
Adjustments: | ||||||||||||||||
Merger and integration costs | 23 | — | 27 | — | ||||||||||||
Severance costs | — | — | 2 | (1 | ) | |||||||||||
Gain on sale of property | — | — | (2 | ) | — | |||||||||||
Sales and use tax refund | — | — | — | (2 | ) | |||||||||||
Corporate operating earnings, as adjusted | 13 | 12 | 26 | 26 | ||||||||||||
Corporate depreciation and amortization | 2 | 2 | 4 | 4 | ||||||||||||
Corporate adjusted EBITDA(1) | $ | 15 | $ | 14 | $ | 30 | $ | 30 | ||||||||
Total adjusted EBITDA(1) | $ | 111 | $ | 100 | $ | 254 | $ | 252 | ||||||||
Pro forma adjustments: | ||||||||||||||||
Net sales(2) | — | 9 | — | 24 | ||||||||||||
Cost of sales(3) | — | (2 | ) | — | (8 | ) | ||||||||||
Total Pro forma adjustments | — | 7 | — | 16 | ||||||||||||
Pro Forma Adjusted EBITDA | $ | 111 | $ | 107 | $ | 254 | $ | 268 |
(1) | Supervalu's measure of adjusted EBITDA includes Supervalu's segment operating earnings (loss), as reported, plus depreciation and amortization, LIFO charge, equity earnings of unconsolidated affiliates and certain adjustment items as determined by management, and less net earnings attributable to noncontrolling interests. |
(2) | This adjustment reflects (1) the fees that Supervalu expects to recognize in connection with performing services for Save-A-Lot under the Services Agreement and (2) Wholesale distribution sales to Save-A-Lot pursuant to a customer agreement between Supervalu and Save-A-Lot that had historically been intercompany sales. Actual Services Agreement fees are subject to adjustments pursuant to the terms of the Services Agreement including for changes in service levels. This adjustment only applies to time periods prior to the sale of Save-A-Lot on December 5, 2016. |
(3) | This adjustment reflects the Cost of sales related to Wholesale’s distribution to Save-A-Lot, which was previously eliminated on an intercompany basis. No adjustment for expenses related to the Services Agreement has been included within Cost of sales because the shared service center costs incurred to support back office functions related to the Services Agreement represent administrative overhead costs that have been included within Selling and administrative expenses within Supervalu’s historical consolidated financial statements. This adjustment only applies to time periods prior to the sale of Save-A-Lot on December 5, 2016. |
RECONCILIATION OF PROJECTED NET EARNINGS FROM CONTINUING OPERATIONS TO PROJECTED ADJUSTED EBITDA | ||||||||
Table 7 | ||||||||
For the Fiscal Year Ending February 24, 2018 (52 weeks) | ||||||||
(In millions) | Projected Low End Amount | Projected High End Amount | ||||||
Results of operations, as projected | ||||||||
Net earnings from continuing operations | $ | 31 | $ | 50 | ||||
Income tax provision | 16 | 27 | ||||||
Equity in earnings of unconsolidated affiliates | (4 | ) | (4 | ) | ||||
Interest expense, net | 134 | 134 | ||||||
Total operating earnings | $ | 177 | $ | 207 | ||||
Add Equity in earnings of unconsolidated affiliates | 4 | 4 | ||||||
Less net earnings attributable to noncontrolling interests | (3 | ) | (3 | ) | ||||
Depreciation and amortization | 202 | 202 | ||||||
LIFO charge | 5 | 5 | ||||||
Asset impairment charge | 42 | 42 | ||||||
Merger and integration costs | 39 | 29 | ||||||
Legal reserve charge | 9 | 9 | ||||||
Severance costs | 3 | 3 | ||||||
Gain on store closure | (1 | ) | (1 | ) | ||||
Gain on sale of property | (2 | ) | (2 | ) | ||||
Adjusted EBITDA | $ | 475 | $ | 495 |
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