-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QPSFc6qA/zrI7L3TwdR/4BvNJG8FMrvjeV9gvvZVeC+kIKTuj/Ad7sN3eK+GctIo /o/rBSHVv5hDKwmRrTWd1A== 0000950131-97-003617.txt : 19970526 0000950131-97-003617.hdr.sgml : 19970526 ACCESSION NUMBER: 0000950131-97-003617 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19970222 FILED AS OF DATE: 19970523 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUPERVALU INC CENTRAL INDEX KEY: 0000095521 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & RELATED PRODUCTS [5140] IRS NUMBER: 410617000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0224 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-05418 FILM NUMBER: 97613755 BUSINESS ADDRESS: STREET 1: 11840 VALLEY VIEW RD CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 BUSINESS PHONE: 6128284000 MAIL ADDRESS: STREET 1: 11840 VALLEY VIEW ROAD CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 FORMER COMPANY: FORMER CONFORMED NAME: SUPER VALU STORES INC DATE OF NAME CHANGE: 19920703 10-K405 1 FORM 10-K405 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 22, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission file number: 1-5418 SUPERVALU INC. (Exact name of registrant as specified in its charter) Delaware 41-0617000 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 11840 Valley View Road Eden Prairie, Minnesota 55344 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: (612) 828-4000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Common Stock, par value $1.00 New York Stock Exchange per share Preferred Share Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- [Cover page 1 of 2 pages] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the Registrant as of April 1, 1997 was approximately $1,941,803,206 (based upon the closing price of Registrant's Common Stock on the New York Stock Exchange on March 31, 1997). Number of shares of $1.00 par value Common Stock outstanding as of April 1, 1997: 66,911,219. DOCUMENTS INCORPORATED BY REFERENCE 1. Portions of Registrant's Annual Report to Stockholders for the fiscal year ended February 22, 1997 are incorporated into Parts I, II and IV, as specifically set forth in Parts I, II and IV. 2. Portions of Registrant's definitive Proxy Statement filed for Registrant's 1997 Annual Meeting of Stockholders are incorporated into Part III, as specifically set forth in Part III. [Cover page 2 of 2 pages] PART I ------ Unless the context indicates otherwise, all references to the "Company," "SUPERVALU" or "Registrant" in this Annual Report on Form 10-K relate to SUPERVALU INC. and its majority-owned subsidiaries. ITEM 1. BUSINESS - ------- -------- General Development ------------------- SUPERVALU INC., a Delaware corporation, was organized in 1925 as the successor to two wholesale grocery firms established in the 1870's. The Company's principal executive offices are located at 11840 Valley View Road, Eden Prairie, Minnesota 55344 (Telephone: 612-828-4000). The Company is the largest food wholesaler and approximately the 13th largest food retailer in the nation. It is engaged in the business of selling food and nonfood products at wholesale and operating a variety of store formats at retail. The Company supplied approximately 4,300 stores (not including 611 Save-A-Lot limited assortment stores) in 48 states as of the close of fiscal 1997 and approximately 4,100 stores (not including 518 Save-A-Lot limited assortment stores) at the close of fiscal 1996. The Company operated at fiscal year-end 322 retail stores under its principal corporate retail formats, including price superstores, supercenters, fresh superstores, limited-assortment stores, and supermarkets, primarily under the names of Cub Foods, Shop 'n Save, bigg's, Save-A-Lot, Scott's Foods, Laneco and Hornbacher's. In 1991, SUPERVALU began the implementation of a strategy to focus on its core food distribution and retailing business segments. The Company executed the first major step of this strategy in October 1991 with the sale of 54% of SUPERVALU's interest in ShopKo Stores, Inc. ("ShopKo"), its discount general merchandise subsidiary, through an initial public offering. On April 25, 1997, SUPERVALU announced that it will sell its remaining 46% ownership position in ShopKo pursuant to two simultaneous transactions, a 8,174,387 share repurchase by ShopKo and a secondary public offering for the remaining ShopKo shares. See "Investment in ShopKo" below. The Company has completed a number of acquisitions during the past five years to further the growth of its food distribution, retailing and bakery operations, including Wetterau Incorporated (1992), Sweet Life Foods (1994), Wetterau Properties, Inc. (1994), Hyper Shoppes, Inc. (1994), and several smaller companies. In December 1994, the Company announced a change in operating strategy which included the decision to restructure certain of its operations and reassess the recoverability of underlying assets. Restructuring and other charges totaling $244 million were recorded in the third quarter of fiscal 1995 to provide for the sale, closure or restructure of certain retail businesses, certain costs and expenses incurred in connection with the ADVANTAGE project (described below) and the recognition of certain asset impairments. Management's objective under the ADVANTAGE project is to fundamentally change its business processes by improving the effectiveness and efficiency of the Company's food distribution system thus lowering the cost of goods to the Company's customers and by enhancing the market driving support to retailer customers. Management's retail food objective was to improve retail performance by eliminating certain operations and assets that do not add shareholder value and focusing its retail efforts on building retail formats which it believes will produce the best results in the future. Twenty-five retail stores have been closed since the restructuring reserve was established. The ADVANTAGE project has three major initiatives: creation of a transformed logistics network; development of enhanced market driving capabilities for retailer customers; and adoption of a new approach to pricing. 3 Under ADVANTAGE, the Company in fiscal 1997: opened the Anniston, Alabama prototype Southeast regional distribution facility and began supplying slow-moving grocery and general merchandise to five downstream distribution centers in the southeast; began construction of the Ogelsby, Illinois Midwest regional distribution facility; established a National Customer Service Center in Denver, Colorado; began reconfiguring the existing local distribution centers in the Southeast Region; began retailer training for the category management program in the Midwest and Central Regions; began various phases of category management implementation; and began to design and develop enhanced promotion systems. Additional description of the Company's business, including the ADVANTAGE project and the sale of ShopKo stock, is contained in the "Financial Review" portion of the Company's Annual Report to the Stockholders for fiscal year 1997 (Exhibit 13), pages 16-21, which description is incorporated herein by reference. Financial Information About Industry Segments --------------------------------------------- Financial information about the Company's industry segments for the five years ended February 22, 1997 is incorporated by reference to page 24 of the Company's Annual Report to Stockholders for fiscal year 1997 (Exhibit 13). Cautionary Statements for Purposes of the Safe Harbor Provisions of the ----------------------------------------------------------------------- Private Securities Litigation Reform Act of 1995 ------------------------------------------------ The information in this Annual Report on Form 10-K, for the year ended February 22, 1997, includes forward-looking statements. Important risks and uncertainties that could cause actual results to differ materially from those discussed in such forward looking statements are detailed in Exhibit 99.1; other risks or uncertainties may be detailed from time to time in the Company's future Securities and Exchange Commission filings. Food Distribution Operations ---------------------------- Description of Food Stores Served. SUPERVALU food distribution regions sell food and non-food products at wholesale and offer a variety of retail support services to independently- owned retail food stores. At February 22, 1997, the Company was the principal supplier to approximately 4,300 retail grocery and general merchandise stores (not including 611 Save-A-Lot limited assortment stores), compared with 4,100 stores (not including 518 Save-A-Lot limited assortment stores) served at the end of fiscal 1996. Save-A-Lot limited assortment stores are supplied separately from the Company's traditional wholesale business. Retail food stores served by the Company at wholesale range in size from small convenience stores to 200,000 square foot supercenters. The Company's wholesale customer base includes single and multiple store independent operators, regional and national chains and Company owned stores, operating in a variety of formats including price superstores, supercenters, fresh superstores, limited assortment stores, and supermarkets. Retail food stores served by the Company at wholesale offer a wide variety of groceries, meats, dairy products, frozen foods and fresh fruits and vegetables. In addition, most stores carry an assortment of non-food items, including tobacco products, health and beauty aids, paper products, cleaning supplies, and small household and clothing items. Many stores offer one or more specialized services, such as delis, food courts, in-store bakeries, liquor departments, video, pharmacies, housewares and flower shops. The Company is constantly endeavoring to strengthen the retail food stores it serves by assisting in the upgrading and enlarging of existing stores, establishing new stores, more aggressively merchandising its stores, developing diverse formats and retail strategies, and 4 assisting stores to serve markets which are increasingly segmented. As part of the ADVANTAGE project, the Company is also developing market- driving capabilities which are intended to help independent retailers achieve new growth by offering category management and other programs and services. Products Supplied. SUPERVALU continues to supply retail food stores with an increasing variety and selection of products, including national and regional brands and the Company's own lines of private label products. Such private label trademarks as SUPERVALU, FLAV-O-RITE, CHATEAU, SHOP 'N SAVE, SHOPPERS VALUE, IGA, NATURE'S BEST, HOME BEST, BI-RITE, FOODLAND, PREFERRED SELECTION, SWEET LIFE, WHY PAY MORE, and others accounted for approximately 10 percent of the Company's fiscal 1997 sales to retail food supermarkets. See also "Retail Food Operations - Private Label Program" for a description of the Company's principal corporate retail formats private label programs. SUPERVALU supplies private label merchandise over a broad range of products included in every department in the store: frozen, dairy, grocery, meats, bakery, deli, general merchandise and produce. These products are produced to the Company's specifications by many suppliers, some of whom are the nation's foremost manufacturers. In addition to making these products available, SUPERVALU also assumes a large part of the marketing and merchandising role, conducts private label sales events, and provides a wide array of in-store promotional and advertising tools and training expertise to assist the retailer in promoting private label programs to maximize sales and produce profit advantage. Hazelwood Farms Bakeries, Inc., a subsidiary of the Company, manufactures frozen and par baked bakery products primarily for the supermarket in- store bakery and foodservice business channels. Hazelwood Farms' customer base includes wholesale food distributors, supermarket chains (including company-owned, affiliated and non-affiliated stores), quick service restaurant chains and other foodservice establishments in the U.S. and Canada. The Company has no significant long-term purchase obligations and considers that it has adequate and alternative sources of supply for most of its purchased products. Distribution and Costs of Merchandise. Deliveries to retail stores are made from the Company's distribution centers, usually in Company-owned trucks. In addition, many types of meats, dairy products, bakery and other products purchased from the Company are delivered directly by suppliers to retail stores under programs established by the Company. Wholesale sales are made to the Company's retailers at the applicable price and fee schedule in effect at the time of sale. In connection with the ADVANTAGE project, the Company is reexamining its pricing structure and is developing a new pricing approach to retailers called Activity Based Sell ("ABS"). The primary objectives of ABS are to reflect the net product price plus fees to recover the Company's cost to serve the retailer and to earn an adequate profit margin. In fiscal 1997, the Company delayed its intended roll out of ABS in order to develop additional systems to support category management and an on-line pass through allowance program. The Company seeks to lower its cost of product by regionalizing its food buying operations and centralizing buying for general merchandise and health and beauty products to better leverage the purchasing power of larger product orders. As part of the ADVANTAGE project, the Company is developing a two-tiered distribution system to create a national logistics network composed of its existing wholesale distribution facilities plus regional distribution facilities which will provide regional distribution for slow moving grocery product, general merchandise and health and beauty care products. The Southeastern Regional Facility, the Company's first regional distribution facility located in Anniston, Alabama, became operational in June 1996 and currently serves six existing Southeast distribution facilities. The Company began construction of a second regional distribution facility located in Ogelsby, Illinois in June 1996, which when opened is intended to serve 12 distribution centers and three 5 marketing regions in the Midwest. These actions are intended to increase buying scale, improve operating efficiencies and lower cost of operations. A new National Customer Service Center was established in Denver, Colorado in the fall of 1996. The national service center was established to replace divisional customer service functions for retailers, facilitate rapid customer response and track and identify ways to service the Company's retailers more efficiently. The National Customer Service function is currently servicing customers in two regions. Services Supplied. In addition to supplying merchandise, the Company also offers retail customers a wide variety of support services, including advertising, promotional and merchandising assistance, store management assistance, retail operations counseling, computerized inventory control and ordering services, accounting, bill paying and payroll services (largely computerized), store layout and equipment planning (including point-of-sale electronic scanning), cash management, building design and construction services, financial and budget planning, strategic and business planning, assistance in selection and purchasing or leasing of store sites, consumer and market research and personnel training and management assistance. Certain Company subsidiaries operate as insurance agencies and provide comprehensive insurance programs to the Company's affiliated retailers. As part of the ADVANTAGE project, the Company has realigned its wholesale food divisions into seven marketing regions designed to reduce the cost of services to retailers while maintaining contact with retailers and the ultimate consumer. One such service intended to be offered to retailers is category management, which is a process designed to align product assortment with consumer preferences. Category management efforts have been accelerating, with the Company currently in various phases of implementation with various independent retailers. The Company may provide financial assistance to retail stores served or to be served by it, including the acquisition, leasing and subleasing of store properties, the making of direct loans, and providing guarantees or other forms of financing. In general, loans made by the Company to independent retailers are secured by liens on inventory and/or equipment, by personal guarantees and other security. When the Company subleases store properties to retailers, the rentals are generally as high or higher than those paid by the Company. Retail Food Operations ---------------------- Principal Corporate Retail Formats. At fiscal year end, the Company's retail businesses operated a total of 322 retail stores, including price superstores, supercenters, fresh superstores, limited assortment stores and supermarkets. These diverse formats enable the Company to operate in a variety of markets under widely differing competitive circumstances. At the close of fiscal 1997, the Company's retail stores operated under the following principal corporate formats: Cub Foods consists of 117 price superstores located in 13 states, 62 of which are franchised to independent retailers and 55 of which are corporately operated. Plans for fiscal 1998 include the opening of three corporate stores and three franchised stores, and the conversion of two corporate stores to franchised stores. Shop `n Save consists of 32 price superstores located principally in the metropolitan St. Louis, Missouri. One replacement Shop `n Save price superstore is planned for fiscal 1998. bigg's consists of seven supercenters and three price superstores that operate in the Cincinnati, Louisville and Denver metropolitan markets. bigg's was acquired by the Company in August 1994. No new bigg's stores are planned for fiscal 1998. 6 Save-A-Lot is the Company's combined wholesale and retail limited assortment operation. At fiscal year end there were 611 Save-A-Lot limited assortment stores located in 31 states, of which 135 were corporately operated. In fiscal 1997, the Company acquired 21 Sav-U- Foods stores in southern California which have been converted to the Save-A-Lot banner. Save-A-Lot projects adding approximately 110 stores in fiscal 1998, including 30 corporately owned stores and 80 licensed units. Scott's Foods is a 17-store group located in the Fort Wayne, Indiana area. One replacement store opened in the first quarter of fiscal 1998. No other Scott's Foods stores are planned for fiscal 1998. Laneco operates a diverse mix of 34 retail outlets comprised predominantly of supermarkets, supercenters and discount food stores located in Pennsylvania and New Jersey. These stores operate mainly under the Laneco, Foodland, Ultra IGA and Price Slasher names and formats. No new stores are planned for fiscal 1998. Hornbacher's is a five-store group located in the Fargo, North Dakota area, with no new stores planned for fiscal 1998. Other store formats operated by the Company include County Market, SUPERVALU, IGA, and Butson's. Pursuant to the Company's restructuring plan, since fiscal 1995, the Company has closed a total of 25 retail stores, including two retail stores in fiscal 1997. Private Label Program. Private label products continue to be a focus of SUPERVALU's principal corporate retail formats. SUPERVALU's principal corporate retail formats are expanding their private label item selection. Approximately 85 percent of the sales by the Company's Save- A-Lot limited assortment operations consist of Save-A-Lot created or controlled brands. Cub Foods, bigg's and Scott's Foods are in the process of developing or have developed proprietary name brands. Trademarks ---------- The Company offers its customers the opportunity to franchise a concept or license a servicemark. This program helps the customer compete by providing, as part of the franchise or license program, a complete business concept, group advertising, private label products and other benefits. The Company is the franchisor or has the right to license retailers to use certain servicemarks such as CUB FOODS, SAVE-A-LOT, COUNTY MARKET, SHOP 'N SAVE, NEWMARKET, SUPERVALU, IGA, FOODLAND and SUPERVALU FOOD & DRUG. The Company registers a substantial number of its trademarks/servicemarks in the United States Patent and Trademark Office, including many of its private label product trademarks and servicemarks. See "Food Distribution Operations -- Products Supplied". The Company considers certain of its trademarks and servicemarks to be of material importance to its business and actively defends and enforces such trademarks and servicemarks. Competition ----------- Since the Company's food business consists principally of supplying independently owned and operated retail food stores, its success is dependent upon the ability of those retail store operators to compete successfully with other retail food stores, and also upon its own ability to compete successfully with other wholesale distributors. Both the wholesale and the retail food businesses are highly competitive. At the wholesale level, the Company competes directly with a number of wholesalers which supply retailers and indirectly with the warehouse and 7 distribution operations of the large integrated chains. The Company competes with other wholesale food distributors in most of its market areas on the basis of product price, quality and assortment, schedule and reliability of deliveries, the range and quality of services provided, the location of the store sites and distribution facilities and its willingness to provide financing to its customers. See "Food Distribution Operations -- Distribution and Costs of Merchandise" and "--Services Supplied." The principal competitive factors that affect the Company's retail segment are location, price, quality, service and consumer loyalty. Local, regional, and national food chains, as well as independent food stores and markets, comprise the principal competition, although the Company also faces competition from alternative formats including supercenters and membership warehouse clubs and from convenience stores, various formats selling prepared foods, and specialty and discount retailers. Employees --------- At February 22, 1997, the Company had approximately 48,600 employees. Approximately 16,000 employees are covered by collective bargaining agreements. During fiscal year 1997, 24 agreements covering 2,500 employees were re-negotiated without any work stoppage. In fiscal 1998, 15 contracts covering approximately 1,500 employees will expire. The Company believes that it has generally good relationships with its employees. Investment in ShopKo -------------------- On April 25, 1997, the Company announced that ShopKo has agreed to repurchase 8,174,387 shares of its stock from SUPERVALU for $18.35 per share. Simultaneously, SUPERVALU will sell its remaining 6,557,280 shares of ShopKo common stock in a secondary public offering. The Company is required to proceed with the secondary public offering if the share price in the offering is at or above $18.35, but could at its option, proceed at a lower price. The two transactions, which are cross- conditional and subject to other conditions, are expected to close in the summer of 1997. Michael Wright, Chief Executive Officer of SUPERVALU, and Jeffrey Girard, Chief Financial Officer of SUPERVALU, currently serve on the Board of Directors of ShopKo. They would resign upon completion of the stock repurchase and the secondary public offering. Previously the Company had agreed to sell its 14.7 million shares of ShopKo stock in a transaction which provided for the combination of ShopKo and Phar-Mor, Inc. ("Phar-Mor") under a holding company, Cabot Noble, Inc. That agreement was terminated in April 1997 by the mutual agreement of ShopKo and Phar-Mor. ShopKo has operated as an independent company since its initial public offering in October 1991. The Company's 46% investment in ShopKo is accounted for by the equity method. The following summary of ShopKo's business has been prepared from information provided by ShopKo. Additional information regarding ShopKo is available from the reports and other documents prepared and filed by ShopKo with the Securities and Exchange Commission. As of February 22, 1997, ShopKo operated 130 discount retail stores and four freestanding optical centers in 16 states. ShopKo's corporate headquarters is located in Green Bay, Wisconsin and its stores are located primarily in medium-sized and smaller cities in the Upper Midwest, Western Mountain and Pacific Northwest states. ShopKo stores carry a wide selection of branded and private label "hardline/home" goods such as housewares, home textiles, household supplies, health and beauty aids, home entertainment products, small appliances, furniture, music/videos, toys, sporting goods, social occasion products, candy, snack foods, and seasonal products, and "softline" goods such as home textiles, men's, women's and children's apparel, shoes, jewelry, cosmetics and accessories. ShopKo also provides pharmacy and optical services in most of its stores. ShopKo's stores average 8 approximately 90,000 square feet with approximately 84% of the stores greater than 74,000 square feet. During fiscal 1997, ShopKo opened two new stores (including one relocated store), renovated seven stores, and opened four new freestanding optical centers. ShopKo has no plans to complete any major remodeling or construct any new stores in fiscal 1998. The discount general merchandise business is very competitive. ShopKo competes in most of its markets with a variety of national discount chains, including Wal-Mart, Kmart, and Target, with regional discount chains and local discount stores, and with national category sellers and specialty niche retailers. ShopKo is also engaged in the business of providing health services through its subsidiary, ProVantage, Inc., which specializes in prescription benefit management, mail service pharmacy, vision benefit management and health care information technology. Other Investments ----------------- The Company has ownership interests in business ventures related to its food distribution and retail segments, which include investments in Waremart, Inc., Foodland Distributors, and Super Discount Markets, Inc. The results of these investments are accounted for using the equity method. The aggregate carrying amount of these investments is less than 2% of total assets. ITEM 2. PROPERTIES - ------- ---------- The Company's principal executive offices are located in a 180,000 square foot corporate headquarters facility located in Eden Prairie, Minnesota, a western suburb of Minneapolis, Minnesota. This headquarters facility is located on a 140 acre site owned by the Company. The Company also owns a 240,000 square foot office facility, One Southwest Crossing, which is located within one mile of its principal executive offices. At the end of fiscal 1997, One Southwest Crossing was fully occupied by third party tenants and Company employees. The following table lists the location, use and approximate size of the Company's principal warehouse, distribution and manufacturing facilities utilized in the Company's food distribution operations as of February 22, 1997: WAREHOUSE, DISTRIBUTION AND MANUFACTURING FACILITIES
Square Square Footage Footage Owned Leased Division or Location Use (Approximate) (Approximate) - -------------------- --- ------------- ------------- Anniston, Alabama Distribution Center & Offices 497,000 Anniston, Alabama Advantage Logistics - Regional Distribution Center 225,000 Los Angeles, California General Merchandise Warehouse and Offices 227,000 Rancho Cucamonga, California Save-A-Lot Distribution Center and Offices 110,000 Denver, Colorado Distribution Center & Offices 721,000 Suffield, Connecticut Distribution Center & Offices 650,000
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Square Square Footage Footage Owned Leased Division or Location Use (Approximate) (Approximate) - -------------------- --- ------------- ------------- Lakeland, Florida Save-A-Lot Distribution Center and Offices 127,000 Quincy, Florida Distribution Center & Offices 772,000 Atlanta, Georgia Distribution Center & Offices 628,000 Atlanta, Georgia Bakery, Warehouse and Offices 105,000 Buffalo Grove, Illinois Bakery, Warehouse and Offices 47,000 Champaign, Illinois Distribution Center & Offices 820,000 172,000 Ft. Wayne, Indiana Distribution Center & Offices 1,099,000 Des Moines, Iowa Distribution Center & Offices 663,000 Greenville, Kentucky Distribution Center & Offices 309,000 Lexington, Kentucky Save-A-Lot Distribution Center and Offices 294,000 Hammond, Louisiana Distribution Center & Offices 257,000 St. Rose, Louisiana Distribution Center & Offices 275,000 Portland, Maine Distribution Center & Offices 194,000 Perryman, Maryland Distribution Center & Offices 511,000 Williamsport, Maryland Save-A-Lot Distribution Center and Offices 173,000 Andover, Massachusetts Distribution Center & Offices 454,000 Holtz, Michigan Save-A-Lot Distribution Center and Offices 218,000 Livonia, Michigan/1/ Foodland Distributors, Distribution Center 1,275,000 Minneapolis, Minnesota Distribution Center & Offices 1,594,000 Indianola, Mississippi Distribution Center & Offices 721,000 Desloge, Missouri General Merchandise Warehouse and Offices 134,000 34,000 Hazelwood, Missouri Distribution Center & Offices 459,000 310,000 Hazelwood, Missouri Bakery, Warehouse and Offices 259,000 Scott City, Missouri Distribution Center & Offices 278,000 St. Louis, Missouri Save-A-Lot Distribution Center and Offices 147,000 45,000 Vinita Park, Missouri Offices 31,000 Billings, Montana Distribution Center & Offices 267,000 11,000 Great Falls, Montana Distribution Center & Offices 154,000 Keene, New Hampshire Distribution Center & Offices 176,000 Rochester, New York Bakery, Warehouse and Offices 33,000 Bismarck, North Dakota Distribution Center & Offices 257,000 Fargo, North Dakota Distribution Center & Offices 493,000 Columbus, Ohio Save-A-Lot Distribution Center and Offices 182,000 Xenia, Ohio Distribution Center & Offices 511,000 170,000 McMinnville, Oregon Bakery, Warehouse and Offices 110,000 Belle Vernon, Pennsylvania Distribution Center & Offices 713,000 Hazleton, Pennsylvania Bakery, Warehouse and Offices 125,000
- ------------------------- /1/ Leased by Foodland Distributors in which the Company is a 50% partner. 10
Square Square Footage Footage Owned Leased Division or Location Use (Approximate) (Approximate) - -------------------- --- ------------- ------------- Lower Nazareth Township, General Merchandise Warehouse Pennsylvania (Easton) and Offices 230,000 New Stanton, Pennsylvania Distribution Center & Offices 726,000 Reading, Pennsylvania Distribution Center & Offices 284,000 256,000 Cranston, Rhode Island Distribution Center & Offices 196,000 Humboldt, Tennessee Save-A-Lot Distribution Center and Offices 214,000 Grand Prairie, Texas Save-A-Lot Distribution Center and Offices 140,000 Spokane, Washington Distribution Center & Offices 551,000 Tacoma, Washington Distribution Center & Offices 910,000 113,000 Milton, West Virginia Distribution Center & Offices 6,000 268,000 Green Bay, Wisconsin Distribution Center & Offices 430,000 475,000 Pleasant Prairie, Wisconsin Distribution Center & Offices 625,000
The retail food stores operated by the Company generally have been leased, usually for a term of 15-25 years plus renewal options. The Company is increasingly developing and owning its own retail store sites. The following table is a summary of the retail stores operated by the Company's principal corporate retail formats as of February 22, 1997: PRINCIPAL CORPORATE RETAIL FORMATS
Square Square Footage Footage Owned Leased Retail Format Location and Number of Corporate Stores (Approximate) (Approximate) - ------------- --------------------------------------- ------------- ------------- Cub Foods/1/ Colorado (7), Illinois (15), Indiana (5), 2,456,000 1,546,000 Minnesota (15), Missouri (1), Ohio (4), Wisconsin (8) Shop `n Save Illinois (14), Missouri (18) 236,000 1,225,000 bigg's Colorado (1), Indiana (1), Kentucky (2), 473,000 1,082,000 Ohio (6) Save-A-Lot/2/ Arkansas (6), California (22), Connecticut (1), 38,000 1,674,000 Delaware (3), Florida (24), Maryland (4), Massachusetts (3), Mississippi (3), Missouri (2), New Jersey (5), Ohio (7), Oklahoma (9), Pennsylvania (19), Rhode Island (1), Tennessee (4), Texas (22) Scott's Food Indiana (17) 154,000 716,000 Laneco New Jersey (13), Pennsylvania (21) 169,000 1,589,000 Hornbacher's Minnesota (1), North Dakota (4) 95,000 107,000
- --------------- /1/ As of February 22, 1997, Cub Foods included an additional 62 franchised stores not listed above. /2/ As of February 22, 1997, Save-A-Lot included an additional 476 licensed stores not listed above. 11 The Company also owns and leases certain additional real estate consisting primarily of shopping centers and transition stores, which are not material to its operations. Transition stores are generally those retail stores that the Company operates for a limited period of time pending sale or sublet to its independent retailers. Transition stores that are sublet are generally leased for periods not exceeding 20 years plus renewal options. The Company owns, in addition to merchandise inventories, substantially all of the trucks and trailers used in transporting its products. Incorporated by reference hereto is the Note captioned "Leases" of Notes to Consolidated Financial Statements on pages 32-33 of the Company's Annual Report to Stockholders for fiscal year 1997 (Exhibit 13) for information regarding lease commitments for facilities occupied by the Company. Incorporated by reference hereto is the Note captioned "Debt" of Notes to Consolidated Financial Statements on pages 31-32 of the Company's Annual Report to Stockholders for fiscal year 1997 (Exhibit 13) for information regarding properties held subject to mortgages. Management of the Company believes the physical facilities and equipment described above are adequate for the Company's present needs and businesses. ITEM 3. LEGAL PROCEEDINGS - ------- ----------------- There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business of the Registrant. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------- --------------------------------------------------- There was no matter submitted during the fourth quarter of fiscal year 1997 to a vote of the security holders of Registrant. EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------ The following table sets forth certain information concerning the executive officers of the Company as of April 1, 1997.
Year Elected to Present Other Positions Held With the Name Age Present Position Position Company from 1992-1997 - ---------------------------------------------------------------------------------------------------------------- Michael W. Wright 58 Director, Chairman of the 1982 Board, President and Chief Executive Officer Jeffrey C. Girard 49 Executive Vice President, 1992 Senior Vice President, Chief Chief Financial Officer Financial Officer, 1990-1992 Jeffrey Noddle 50 Executive Vice President; and 1995 Executive Vice President, President and Chief Marketing, 1992-1995; Senior Operating Officer - Wholesale Vice President, Marketing, 1988- Food Companies 1992 David L. Boehnen 50 Senior Vice President, Law 1991 and External Relations Kim M. Erickson 43 Senior Vice President, 1997 Vice President and Treasurer, Finance, and Treasurer 1995-1997 Gregory C. Heying 48 Senior Vice President, 1994 Vice President, Distribution, Distribution 1988-1994
12
Year Elected to Present Other Positions Held With the Name Age Present Position Position Company from 1992-1997 - ----------------------------------------------------------------------------------------------------------------------- George Z. Lopuch 47 Senior Vice President, 1992 Vice President, 1989-1992 Strategic Planning & Research H. S. (Skip) Smith III 50 Senior Vice President, Information Technology 1994 Vice President, Information Services, 1986-1994 Ronald C. Tortelli 51 Senior Vice President, 1988 Human Resources James R. Campbell 56 Vice President, Retail 1995 Vice President, Market Services Development, 1993-1995; Senior Vice President, Northeast Region, 1992-1993; Minneapolis, Great Lakes and former Green Bay Divisions President, 1984-1992 George Chirtea 60 Vice President, 1993 Wetterau Incorporated Senior Merchandising Vice President, Marketing, and First Vice President-Retail Operations, 1992-1993 John H. Hooley 45 Vice President, SUPERVALU; 1993 Cub Foods Division President, Cub Foods Division President Chief Operating Officer, 1992- and Chief Executive Officer 1993; Vice President, Merchandising, 1991-1992 Michael L. Mulligan 52 Vice President, Wholesale 1996 Vice President, Sales, 1992-1996; Sales and Marketing Vice President, Communications, 1985-1992 E. Wayne Shives 55 Vice President, Employee 1993 Vice President, Labor Relations, Relations 1988-1993
The term of office of each executive officer is from one annual meeting of the directors until the next annual meeting of directors or until a successor for each is elected. There are no arrangements or understandings between any of the executive officers of the Registrant and any other person (not an officer or director of the Registrant acting as such) pursuant to which any of the executive officers were selected as an officer of the Registrant. There are no immediate family relationships between or among any of the executive officers of the Company. Each of the executive officers of the Company has been in the employ of the Company or its subsidiaries for more than five years, except for George Chirtea and Kim M. Erickson. Mr. Chirtea is Vice President, Merchandising. Prior to the Company's acquisition of Wetterau Incorporated ("Wetterau") in October 1992, Mr. Chirtea was Senior Vice President, Marketing, Wetterau and Wetterau First Vice President, Retail Operations from 1984 through 1992. Ms. Erickson was elected Senior Vice President, Finance, and Treasurer of the Company in March 1997. From August 1995 through March 1997 she was Vice President and Treasurer of the Company; and from January 1992 through August 1995 she was Vice President and Treasurer of International Multifoods Corporation (a food service distribution and manufacturing company). 13 PART II ------- ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER - ------- ----------------------------------------------------------------- MATTERS ------- The information called for by Item 5 as to the principal market upon which the Registrant's Common Stock is traded and as to the approximate record number of stockholders of the Registrant is hereby incorporated by reference to the Registrant's Annual Report to the Stockholders for fiscal year 1997 (Exhibit 13) page 41. The information called for by Item 5 as to the Registrant's quarterly dividends and quarterly stock price ranges for the last two fiscal years is hereby incorporated by reference to the paragraph captioned "Common Stock Price" in the Financial Review Section of the Registrant's Annual Report to the Stockholders for fiscal year 1997 (Exhibit 13) page 18. The information called for by Item 5 as to restrictions on the payment of dividends by the Registrant is hereby incorporated by reference to the Note captioned "Debt" of Notes to Consolidated Financial Statements of the Registrant's Annual Report to the Stockholders for fiscal year 1997 (Exhibit 13) pages 31-32. During the fiscal year ended February 22, 1997, the Company issued 17,500 shares of unregistered restricted common stock as stock bonuses to certain employees. The issuance of such shares did not constitute a "sale" within the meaning of Section 2(3) of Securities Act of 1933, as amended. ITEM 6. SELECTED FINANCIAL DATA - ------- ----------------------- The information called for by Item 6 is incorporated by reference to the Registrant's Annual Report to the Stockholders for fiscal year 1997 (Exhibit 13) pages 22-23. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - ------- ----------------------------------------------------------------------- OF OPERATIONS ------------- The information called for by Item 7 is incorporated by reference to the Registrant's Annual Report to the Stockholders for fiscal year 1997 (Exhibit 13) pages 16-21. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ------- ------------------------------------------- The information called for by Item 8 is incorporated by reference to the Registrant's Annual Report to the Stockholders for fiscal year 1997 (Exhibit 13) pages 24-37. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND - ------- --------------------------------------------------------------- FINANCIAL DISCLOSURE -------------------- None. 14 PART III -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - -------- -------------------------------------------------- The information called for by Item 10, as to (a) Directors of the Registrant and (b) compliance with Section 16(a) of the Securities and Exchange Act of 1934, is incorporated by reference to the Registrant's definitive Proxy Statement dated May 23, 1997 filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant's 1997 Annual Meeting of Stockholders at pages 5-7 and page 25. Certain information regarding executive officers is included in Part I above. ITEM 11. EXECUTIVE COMPENSATION - -------- ---------------------- The information called for by Item 11 is incorporated by reference to the Registrant's definitive Proxy Statement dated May 23, 1997 filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant's 1997 Annual Meeting of Stockholders at pages 8-13, excluding the section entitled "Report of Executive Personnel and Compensation Committee," and page 25. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - -------- -------------------------------------------------------------- The information called for by Item 12 is incorporated by reference to the Registrant's definitive Proxy Statement dated May 23, 1997 filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant's 1997 Annual Meeting of Stockholders at pages 3-4. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------- ---------------------------------------------- The information called for by Item 13 is incorporated by reference to the Registrant's definitive Proxy Statement dated May 23, 1997 filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant's 1997 Annual Meeting of Stockholders at page 25. 15 PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - -------- --------------------------------------------------------------- Form 10-K --------- (a) 1. Financial Statements: The following consolidated financial statements of SUPERVALU INC. and Subsidiaries are included in Part II, Item 8 (which incorporates information by reference to the Registrant's 1997 Annual Report to Stockholders (Exhibit 13)): Independent Auditors' Report Consolidated balance sheets as of February 22, 1997 and February 24, 1996. Consolidated statements of earnings for each of the three years in the period ended February 22, 1997 Consolidated statements of cash flows for each of the three years in the period ended February 22, 1997 Consolidated statements of stockholders' equity for each of the three years in the period ended February 22, 1997 Notes to consolidated financial statements 2. Consolidated Financial Statement Page on this Form 10-K Schedules for SUPERVALU INC. ---------------------- and Subsidiaries:
Selected Quarterly Financial Data - for the two years ended February 22, 1997 - included in Part II, Item 8 (which incorporates information by reference to the Registrant's 1997 Annual Report to Stockholders (Exhibit 13)). Independent Auditors' report on schedules 22
Schedule VIII - Valuation and qualifying 23 accounts All other schedules are omitted because they are not applicable or not required. 3. Exhibits: (3)(i) Articles of Incorporation. Restated Certificate of Incorporation is incorporated by reference to Exhibit (3)(i) to the Registrant's Annual Report on Form 10-K for the year ended February 26, 1994. (3)(ii) Bylaws. Bylaws, as amended, is incorporated by reference to Exhibit 3.2 to the Registrant's Registration Statement on Form S-3, Registration No. 33-52422. 16 (4) Instruments defining the rights of security holders, including indentures: a. Indenture dated as of July 1, 1987 between the Registrant and Bankers Trust Company, as Trustee, relating to certain outstanding debt securities of the Registrant, is incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-3, Registration No. 33-52422. b. First Supplemental Indenture dated as of August 1, 1990 between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987 between the Registrant and Bankers Trust Company, as Trustee, is incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form S-3, Registration No. 33-52422. c. Second Supplemental Indenture dated as of October 1, 1992 between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987 between the Registrant and Bankers Trust Company, as Trustee, is incorporated by reference to Exhibit 4.1 to the Registrant's Form 8-K Report dated November 13, 1992. d. Letter of Representations dated November 12, 1992 between the Registrant, Bankers Trust Company, as Trustee, and The Depository Trust Company relating to certain outstanding debt securities of the Registrant, is incorporated by reference to Exhibit 4.5 to the Registrant's Form 8-K Report dated November 13, 1992. e. Third Supplemental Indenture dated as of September 1, 1995 between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987 between the Registrant and Bankers Trust Company, as Trustee, is incorporated by reference to Exhibit 4.1 to the Registrant's Form 8-K Report dated October 2, 1995. f. Credit Agreement dated as of May 26, 1995 among the Registrant, the Banks named therein and Citibank, N.A., as Agent, is incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K Report dated October 2, 1995. g. Rights Agreement dated as of April 12, 1989 between the Registrant and Norwest Bank Minnesota, N.A., as Rights Agent, is incorporated by reference to Exhibit 1 to the Registrant's Form 8-K Report dated April 19, 1989. Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of certain instruments defining the rights of holders of certain long-term debt of the Registrant and its subsidiaries are not filed and, in lieu thereof, the Registrant agrees to furnish copies thereof to the Securities and Exchange Commission upon request. (10) Material Contracts. The following exhibits are management contracts, compensatory plans or arrangements required to be filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K: a. SUPERVALU INC. 1993 Stock Plan, as amended. b. SUPERVALU INC. 1978 Stock Appreciation Rights Plan, as amended, is incorporated by reference to Exhibit (10)c. to Registrant's Annual Report on Form 10-K for the year ended February 25, 1989. c. SUPERVALU INC. Executive Incentive Bonus Plan. 17 d. SUPERVALU INC. Directors Deferred Compensation Plan for Non- Employee Directors, as amended, is incorporated by reference to Exhibit (10)e. to the Registrant's Quarterly Report on Form 10-Q for the quarterly period (16 weeks) ended June 15, 1996. e. SUPERVALU INC. 1983 Employee Stock Option Plan, as amended. f. SUPERVALU INC. 1989 Stock Appreciation Rights Plan is incorporated by reference to Exhibit (10)g. to Registrant's Annual Report on Form 10-K for the year ended February 25, 1989. g. SUPERVALU INC. ERISA Excess Plan Restatement is incorporated by reference to Exhibit (10)h. to Registrant's Annual Report on Form 10-K for the year ended February 24, 1990. h. SUPERVALU INC. Deferred Compensation Plan is incorporated by reference to Exhibit (10)i. to Registrant's Annual Report on Form 10-K for the year ended February 23, 1991. i. SUPERVALU INC. Executive Deferred Compensation Plan as amended and Executive Deferred Compensation Plan II are incorporated by reference to Exhibit (10)j. to Registrant's Annual Report on Form 10-K for the year ended February 25, 1989. j. Amendments to the SUPERVALU INC. Deferred Compensation Plan and the SUPERVALU INC. Executive Deferred Compensation Plan II are incorporated by reference to Exhibit (10)c. to Registrant's Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 7, 1996. k. Form of Agreement used in connection with Registrant's Executive Post-Retirement Survivor Benefit Program, is incorporated by reference to Exhibit (10)j. to Registrant's Annual Report on Form 10-K for the year ended February 27, 1988. l. Forms of Change of Control Severance Agreements entered into with certain officers of the Registrant are incorporated by reference to Exhibit (10)l. to Registrant's Annual Report on Form 10-K for the year ended February 27, 1993. m. SUPERVALU INC. Agreement and Plans Trust dated as of November 14, 1988 is incorporated by reference to Exhibit (10)n. to Registrant's Annual Report on Form 10-K for the year ended February 25, 1989. n. First Amendment (dated May 7, 1991) to SUPERVALU INC. Agreement and Plans Trust dated as of November 14, 1988, is incorporated by reference to Exhibit (10)o. to Registrant's Annual Report on Form 10-K for the year ended February 23, 1991. o. SUPERVALU INC. Directors Retirement Program, as amended, is incorporated by reference to Exhibit (10)o. to the Registrant's Quarterly Report on Form 10-Q for the quarterly period (16 weeks) ended June 15, 1996. 18 p. SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan is incorporated by reference to Exhibit (10)r. to Registrant's Form 10-K Report for the year ended February 24, 1990. q. First Amendment to SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan is incorporated by reference to Exhibit (10)a. to Registrant's Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 7, 1996. r. SUPERVALU INC. Long-Term Incentive Plan, as amended. s. SUPERVALU INC. Bonus Plan for Designated Corporate Officers is incorporated by reference to Exhibit (10)t. to Registrant's Annual Report on Form 10-K for the year ended February 26, 1994. t. SUPERVALU INC. Non-Employee Directors Deferred Stock Plan is incorporated by reference to Exhibit (10)b. to Registrant's Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 7, 1996. u. SUPERVALU INC. 1997 Stock Plan. v. Separation Agreement and General Release dated November 1, 1996 between Phillip A. Dabill and SUPERVALU INC. (12) Ratio of Earnings to Fixed Charges. (13) Portions of 1997 Annual Report to Stockholders of Registrant. (21) Subsidiaries of the Registrant. (23) Consent of Independent Auditors. (24) Power of Attorney. (27) Financial Data Schedule. (99.1) Cautionary Statements pursuant to the Securities Litigation Reform Act. (b) Reports on Form 8-K: No report on Form 8-K was filed during the fourth fiscal quarter of the fiscal year ended February 22, 1997. 19 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SUPERVALU INC. (Registrant) DATE: May 23, 1997 By: /s/ Michael W. Wright --------------------------- Michael W. Wright Chairman of the Board; President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ Michael W. Wright Chairman of the Board; President; May 23, 1997 - ------------------------------ Chief Executive Officer; and Michael W. Wright Director (principal executive officer) /s/ Jeffrey C. Girard Executive Vice President and May 23, 1997 - ------------------------------ Chief Financial Officer (principal Jeffrey C. Girard financial and accounting officer) /s/ Herman Cain* Director - ------------------------------ Herman Cain /s/ Stephen I. D'Agostino* Director - ------------------------------ Stephen I. D'Agostino /s/ Lawrence A. Del Santo* Director - ------------------------------ Lawrence A. Del Santo /s/ Edwin C. Gage* Director - ------------------------------ Edwin C. Gage /s/ Vernon H. Heath* Director - ------------------------------ Vernon H. Heath /s/ William A. Hodder* Director - ------------------------------ William A. Hodder
20 /s/ Garnett L. Keith, Jr.* Director - ------------------------------- Garnett L. Keith, Jr. /s/ Richard L. Knowlton* Director - ------------------------------- Richard L. Knowlton /s/ Charles M. Lillis* Director - ------------------------------- Charles M. Lillis /s/ Harriet Perlmutter* Director - ------------------------------- Harriet Perlmutter /s/ Carole F. St. Mark* Director - ------------------------------- Carole F. St. Mark /s/ Winston R. Wallin* Director - ------------------------------- Winston R. Wallin *Executed this 23rd day of May, 1997, on behalf of the indicated Directors by Michael W. Wright, duly appointed Attorney-in-Fact. /s/ Michael W. Wright --------------------- Michael W. Wright Attorney-in-Fact 21 INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders SUPERVALU INC. Eden Prairie, Minnesota We have audited the consolidated financial statements of SUPERVALU INC. (the Company) and subsidiaries as of February 22, 1997 and February 24, 1996 and for each of the three years in the period ended February 22, 1997 and have issued our report thereon dated April 3, 1997, except for the Investment in ShopKo Note, as to which the date is April 25, 1997. Such financial statements and report are included in your 1997 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the financial statement schedule of SUPERVALU INC. and subsidiaries, listed in Item 14. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ Deloitte & Touche LLP - ------------------------------- Minneapolis, Minnesota April 3, 1997, except for the Investment in ShopKo Note to the consolidated financial statements as to which the date is April 25, 1997 22 SUPERVALU INC. and Subsidiaries
SCHEDULE VIII - Valuation and Qualifying Accounts COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E -------------------------------- ---------- ------------------------------- ---------- ---------- (1) (2) Balance at Charged Balance at beginning to costs Charged to end Description of year and expenses other accounts Deductions of year -------------------------------- ---------- ------------ -------------- ---------- ---------- Allowance for doubtful accounts; Year ended; February 22, 1997 $22,064,000 8,851,000 - (A) 13,109,000 (B) $17,806,000 February 24, 1996 29,268,000 2,269,000 - (A) 9,473,000 (B) 22,064,000 February 25, 1995 33,820,000 1,627,000 423,000 (A) 6,602,000 (B) 29,268,000 (A) Beginning account balances of companies acquired. (B) Balance consists of accounts determined to be uncollectible and charged against reserves, net of collection on accounts previously charged off.
23 EXHIBIT INDEX ------------- SUPERVALU INC. ANNUAL REPORT ON FORM 10-K EXHIBIT NUMBER EXHIBIT -------------- ------- *(3)(i) Restated Certificate of Incorporation. *(3)(ii) Bylaws, as amended. *(4)a. Indenture dated as of July 1, 1987 between the Registrant and Bankers Trust Company, as Trustee, relating to certain outstanding debt securities of the Registrant. *(4)b. First Supplemental Indenture dated as of August 1, 1990 between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987 between the Registrant and Bankers Trust Company, as Trustee. *(4)c. Second Supplemental Indenture dated as of October 1, 1992 between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987 between the Registrant and Bankers Trust Company, as Trustee. *(4)d. Letter of Representations dated November 12, 1992 between the Registrant, Bankers Trust Company, as Trustee, and The Depository Trust Company relating to certain outstanding debt securities of the Registrant. *(4)e. Third Supplemental Indenture dated as of September 1, 1995 between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987 between the Registrant and Bankers Trust Company, as Trustee. *(4)f. Credit Agreement dated as of May 26, 1995 among the Registrant, the Banks named therein and Citibank, N.A., as Agent. *(4)g. Rights Agreement dated as of April 12, 1989 between the Registrant and Norwest Bank Minnesota, N.A., as Rights Agent. (10)a. SUPERVALU INC. 1993 Stock Plan, as amended. *(10)b. SUPERVALU INC. 1978 Stock Appreciation Rights Plan, as amended. (10)c. SUPERVALU INC. Executive Incentive Bonus Plan. *(10)d. SUPERVALU INC. Directors Deferred Compensation Plan for Non-Employee Directors, as amended. (10)e. SUPERVALU INC. 1983 Employee Stock Option Plan, as amended. *(10)f. SUPERVALU INC. 1989 Stock Appreciation Rights Plan. *(10)g. SUPERVALU INC. ERISA Excess Plan Restatement. *(10)h. SUPERVALU INC. Deferred Compensation Plan. 1 *(10)i. SUPERVALU INC. Executive Deferred Compensation Plan as amended and Executive Deferred Compensation Plan II. *(10)j. Amendments to the SUPERVALU INC. Deferred Compensation Plan and the SUPERVALU INC. Executive Deferred Compensation Plan II. *(10)k. Form of Agreement used in connection with Registrant's Executive Post-Retirement Survivor Benefit Program. *(10)l. Forms of Change of Control Severance Agreements entered into with certain officers of the Registrant. *(10)m. SUPERVALU INC. Agreement and Plans Trust dated as of November 14, 1988. *(10)n. First Amendment (dated May 7, 1991) to SUPERVALU INC. Agreement and Plans Trust dated as of November 14, 1988. *(10)o. SUPERVALU INC. Directors Retirement Program, as amended. *(10)p. SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan. *(10)q. First Amendment to SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan. (10)r. SUPERVALU INC. Long-Term Incentive Plan, as amended. *(10)s. SUPERVALU INC. Bonus Plan for Designated Corporate Officers. *(10)t. SUPERVALU INC. Non-Employee Directors Deferred Stock Plan. (10)u. SUPERVALU INC. 1997 Stock Plan. (10)v. Separation Agreement and General Release dated November 1, 1996 between Phillip A. Dabill and SUPERVALU INC. (12) Ratio of Earnings to Fixed Charges. (13) Portions of 1997 Annual Report to Stockholders of Registrant. (21) Subsidiaries of the Registrant. (23) Consent of Independent Auditors. (24) Power of Attorney. (27) Financial Data Schedule. (99.1) Cautionary Statements pursuant to the Securities Litigation Reform Act. _________________ * Incorporated by Reference 2 EX-10.A 2 SUPERVALU INC. 1993 STOCK PLAN, AS AMENDED EXHIBIT (10)a. SUPERVALU INC. 1993 STOCK PLAN Section 1. Purpose. - ------------------- The purpose of the Plan is to promote the interests of the Company and its stockholders by aiding the Company in attracting and retaining key management personnel capable of assuring the future success of the Company, to offer such personnel incentives to put forth maximum efforts for the success of the Company's business and to afford such personnel an opportunity to acquire a proprietary interest in the Company. Section 2. Definitions. - ----------------------- As used in the Plan, the following terms shall have the meanings set forth below: (a) "Affiliate" shall mean (i) any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and (ii) any entity in which the Company has a significant equity interest, in each case as determined by the Committee. (b) "Award" shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award, or Other Stock-Based Award granted under the Plan. (c) "Award Agreement" shall mean any written agreement, contract or other instrument or document evidencing any Award granted under the Plan. (d) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder. (e) "Committee" shall mean a committee of the Board of Directors of the Company designated by such Board to administer the Plan, which shall consist of members appointed from time to time by the Board of Directors and shall be comprised of not less than such number of directors as shall be required to permit the Plan to satisfy the requirements of Rule 16b-3. Each member of the Committee shall be a "disinterested person" within the meaning of Rule 16b-3. -1- (f) "Company" shall mean SUPERVALU INC., a Delaware corporation, and any successor corporation. (g) "Eligible Person" shall mean any employee, officer, consultant or independent contractor providing services to the Company or any Affiliate who the Committee determines to be an Eligible Person. A director of the Company who is not also an employee of the Company or an Affiliate shall not be an Eligible Person. (h) "Fair Market Value" shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. Notwithstanding the foregoing, unless otherwise determined by the Committee, the Fair Market Value of Shares on a given date for purposes of the Plan shall be the average of the opening and closing sale price of the Shares as reported on the New York Stock Exchange on such date or, if such Exchange is not open for trading on such date, on the day closest to such date when such Exchange is open for trading. (i) "Incentive Stock Option" shall mean an option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code or any successor provision. (j) "Non-Qualified Stock Option" shall mean an option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option. (k) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock Option, and shall include Restoration Options. (l) "Other Stock-Based Award" shall mean any right granted under Section 6(f) of the Plan. (m) "Participant" shall mean an Eligible Person designated to be granted an Award under the Plan. (n) "Performance Award" shall mean any right granted under Section 6(d) of the Plan. (o) "Person" shall mean any individual, corporation, partnership, association or trust. (p) "Plan" shall mean this 1993 Stock Plan, as amended from time to time. (q) "Restoration Option" shall mean any Option granted under Section 6(a)(iv) of the Plan. -2- (r) "Restricted Stock" shall mean any Share granted under Section 6(c) of the Plan. (s) "Restricted Stock Unit" shall mean any unit granted under Section 6(c) of the Plan evidencing the right to receive a Share (or a cash payment equal to the Fair Market Value of a Share) at some future date. (t) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, or any successor rule or regulation. (u) "Shares" shall mean shares of Common Stock, $1.00 par value, of the Company or such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4(c) of the Plan. (v) "Stock Appreciation Right" shall mean any right granted under Section 6(b) of the Plan. Section 3. Administration. - -------------------------- (a) Power and Authority of the Committee. The Plan shall be ------------------------------------ administered by the Committee. Subject to the express provisions of the Plan and to applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or with respect to which payments, rights or other matters are to be calculated in connection with) each Award; (iv) determine the terms and conditions of any Award or Award Agreement; (v) amend the terms and conditions of any Award or Award Agreement and accelerate the exercisability of Options or the lapse of restrictions relating to Restricted Stock, Restricted Stock Units or other Awards; (vi) determine whether, to what extent and under what circumstances Awards may be exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited or suspended; (vii) determine whether, to what extent and under what circumstances cash, Shares, other securities, other Awards, other property and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or the Committee; (viii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (ix) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (x) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other -3- decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon any Participant, any holder or beneficiary of any Award and any employee of the Company or any Affiliate. (b) Delegation. The Committee may delegate its powers and duties ---------- under the Plan to one or more officers of the Company or any Affiliate or a committee of such officers, subject to such terms, conditions and limitations as the Committee may establish in its sole discretion; provided, however, that the -------- ------- Committee shall not delegate its powers and duties under the Plan with regard to officers or directors of the Company or any Affiliate who are subject to Section 16 of the Securities Exchange Act of 1934, as amended. (c) Power and Authority of the Board of Directors. Notwithstanding --------------------------------------------- anything to the contrary contained herein, the Board of Directors may, at any time and from time to time, without any further action of the Committee, exercise the powers and duties of the Committee under the Plan with regard to any Person who is not an officer or director of the Company or any Affiliate who is subject to Section 16 of the Securities Exchange Act of 1934, as amended. Section 4. Shares Available for Awards. - --------------------------------------- (a) Shares Available. Subject to adjustment as provided in Section ---------------- 4(c), the aggregate number of Shares which may be issued under all Awards under the Plan shall be 3,500,000. Shares to be issued under the Plan may be either Shares reacquired and held in the treasury or authorized but unissued Shares. If any Shares covered by an Award or to which an Award relates are not purchased or are forfeited, or if an Award otherwise terminates without delivery of any Shares, then the number of Shares counted against the aggregate number of Shares available under the Plan with respect to such Award, to the extent of any such forfeiture or termination, shall again be available for granting Awards under the Plan. (b) Accounting for Awards. For purposes of this Section 4, if an --------------------- Award entitles the holder thereof to receive or purchase Shares, the number of Shares covered by such Award or to which such Award relates shall be counted on the date of grant of such Award against the aggregate number of Shares available for granting Awards under the Plan. (c) Adjustments. In the event that the Committee shall determine ----------- that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other -4- securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or other property) which thereafter may be made the subject of Awards, (ii) the number and type of Shares (or other securities or other property) subject to outstanding Awards and (iii) the purchase or exercise price with respect to any Award; provided, -------- however, that the number of Shares covered by any Award or to which such Award - ------- relates shall always be a whole number. (d) Award Limitations Under the Plan. No Eligible Person, who is an -------------------------------- employee of the Company at the time of grant, may be granted any Option, Stock Appreciation Right and such Other Stock Based Award (the value of which is based solely on an increase in the value of the Shares after the date of grant) for more than 250,000 Shares (subject to adjustment as provided for in Section 4(c)), taking into account all such awards granted by the Company pursuant to any of its stock compensation plans, in any calendar year period beginning with the period commencing January 1, 1997. The foregoing annual limitation specifically includes the grant of any Awards representing "qualified performance-based compensation" within the meaning of Section 162(m) of the Code. Section 5. Eligibility. - ----------------------- Any Eligible Person, including any Eligible Person who is an officer or director of the Company or any Affiliate, shall be eligible to be designated a Participant. In determining which Eligible Persons shall receive an Award and the terms of any Award, the Committee may take into account the nature of the services rendered by the respective Eligible Persons, their present and potential contributions to the success of the Company or such other factors as the Committee, in its discretion, shall deem relevant. Notwithstanding the foregoing, an Incentive Stock Option may only be granted to full or part-time employees (which term as used herein includes, without limitation, officers and directors who are also employees) and an Incentive Stock Option shall not be granted to an employee of an Affiliate unless such Affiliate is also a "subsidiary corporation" of the Company within the meaning of Section 424(f) of the Code or any successor provision. Section 6. Awards. - ------------------ (a) Options. The Committee is hereby authorized to grant Options to ------- Participants with the following terms and conditions and with such additional terms and -5- conditions not inconsistent with the provisions of the Plan as the Committee shall determine: (i) Exercise Price. The purchase price per Share purchasable under -------------- an Option shall be determined by the Committee; provided, however, that -------- ------- such purchase price shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such Option. (ii) Option Term. The term of each Option shall be fixed by the ----------- Committee. (iii) Time and Method of Exercise. The Committee shall determine the --------------------------- time or times at which an Option may be exercised in whole or in part and the method or methods by which, and the form or forms (including, without limitation, cash, Shares, promissory notes, other securities, other Awards or other property, or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price) in which, payment of the exercise price with respect thereto may be made or deemed to have been made. (iv) Restoration Options. The Committee may grant Restoration ------------------- Options, separately or together with another Option, pursuant to which, subject to the terms and conditions established by the Committee and any applicable requirements of Rule 16b-3 or any other applicable law, the Participant would be granted a new Option when the payment of the exercise price of the option to which such Restoration Option relates is made by the delivery or withholding of Shares pursuant to the relevant provisions of the plan or agreement relating to such option, which new Option would be an Option to purchase the number of Shares not exceeding the sum of (A) the number of Shares so provided as consideration upon the exercise of the previously granted option to which such Restoration Option relates and (B) the number of Shares, if any, tendered or withheld as payment of the amount to be withheld under applicable tax laws in connection with the exercise of the option to which such Restoration Option relates pursuant to the relevant provisions of the plan or agreement relating to such option. Restoration Options may be granted with respect to options previously granted under the Plan or any other stock option plan of the Company, and may be granted in connection with any option granted under the Plan or any other stock option plan of the Company at the time of such grant; provided, -------- however, that Restoration Options may not be granted with respect to any ------- option granted to a Non-Employee Director under the Company's 1983 Employee Stock Option Plan. (b) Stock Appreciation Rights. The Committee is hereby authorized ------------------------- to grant Stock Appreciation Rights to Participants subject to the terms of the Plan and any applicable Award Agreement. A Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive upon exercise thereof the excess of (i) the -6- Fair Market Value of one Share on the date of exercise (or, if the Committee shall so determine, at any time during a specified period before or after the date of exercise) over (ii) the grant price of the Stock Appreciation Right as specified by the Committee, which price shall not be less than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right. Subject to the terms of the Plan and any applicable Award Agreement, the grant price, term, methods of exercise, dates of exercise, methods of settlement and any other terms and conditions of any Stock Appreciation Right shall be as determined by the Committee. The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate. (c) Restricted Stock and Restricted Stock Units. The Committee is ------------------------------------------- hereby authorized to grant Awards of Restricted Stock and Restricted Stock Units to Participants with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine: (i) Restrictions. Shares of Restricted Stock and Restricted Stock ------------ Units shall be subject to such restrictions as the Committee may impose (including, without limitation, any limitation on the right to vote a Share of Restricted Stock or the right to receive any dividend or other right or property with respect thereto), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise as the Committee may deem appropriate. (ii) Stock Certificates. Any Restricted Stock granted under the ------------------ Plan shall be evidenced by issuance of a stock certificate or certificates, which certificate or certificates shall be held by the Company. Such certificate or certificates shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock. In the case of Restricted Stock Units, no Shares shall be issued at the time such Awards are granted. (iii) Forfeiture; Delivery of Shares. Except as otherwise determined ------------------------------ by the Committee, upon termination of employment (as determined under criteria established by the Committee) during the applicable restriction period, all Shares of Restricted Stock and all Restricted Stock Units at such time subject to restriction shall be forfeited and reacquired by the Company; provided, however, that the Committee may, when it finds that a -------- ------- waiver would be in the best interest of the Company, waive in whole or in part any or all remaining restrictions with respect to Shares of Restricted Stock or Restricted Stock Units. Any Share representing Restricted Stock that is no longer subject to restrictions shall be delivered to the holder thereof promptly after the applicable restrictions lapse or are waived. Upon the lapse or waiver of restrictions and the restricted period relating to Restricted Stock Units evidencing the right to receive Shares, such Shares shall be issued and delivered to the holders of the Restricted Stock Units. -7- (d) Performance Awards. The Committee is hereby authorized to grant ------------------ Performance Awards to Participants subject to the terms of the Plan and any applicable Award Agreement. A Performance Award granted under the Plan (i) may be denominated or payable in cash, Shares (including, without limitation, Restricted Stock), other securities, other Awards or other property and (ii) shall confer on the holder thereof the right to receive payments, in whole or in part, upon the achievement of such performance goals during such performance periods as the Committee shall establish. Subject to the terms of the Plan and any applicable Award Agreement, the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award granted, the amount of any payment or transfer to be made pursuant to any Performance Award and any other terms and conditions of any Performance Award shall be determined by the Committee. (e) Other Stock-Based Awards. The Committee is hereby authorized to ------------------------ grant to Participants such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as are deemed by the Committee to be consistent with the purpose of the Plan; provided, however, that such grants must comply with Rule 16b-3 and applicable - -------- ------- law. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions of such Awards. Shares or other securities delivered pursuant to a purchase right granted under this Section 6(f) shall be purchased for such consideration, which may be paid by such method or methods and in such form or forms (including without limitation, cash, Shares, promissory notes, other securities, other Awards or other property or any combination thereof), as the Committee shall determine, the value of which consideration, as established by the Committee, shall not be less than 100% of the Fair Market Value of such Shares or other securities as of the date such purchase right is granted. (f) General. ------- (i) No Cash Consideration for Awards. Awards shall be granted for -------------------------------- no cash consideration or for such minimal cash consideration as may be required by applicable law. (ii) Awards May Be Granted Separately or Together. Awards may, in -------------------------------------------- the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any other Award or any award granted under any plan of the Company or any Affiliate other than the Plan. Awards granted in addition to or in tandem with other Awards or in addition to or in tandem with awards granted under any such other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards or awards. -8- (iii) Forms of Payment under Awards. Subject to the terms of the ----------------------------- Plan and of any applicable Award Agreement, payments or transfers to be made by the Company or an Affiliate upon the grant, exercise or payment of an Award may be made in such form or forms as the Committee shall determine (including, without limitation, cash, Shares, promissory notes, other securities, other Awards or other property or any combination thereof), and may be made in a single payment or transfer, in installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments. (iv) Term of Awards. The term of each Award shall be for such period -------------- as may be determined by the Committee. (v) Restrictions; Securities Exchange Listing. All certificates for ----------------------------------------- Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. If the Shares or other securities are traded on a securities exchange, the Company shall not be required to deliver any Shares or other securities covered by an Award unless and until such Shares or other securities have been admitted for trading on such securities exchange. Section 7. Amendment and Termination; Adjustments. - -------------------------------------------------- Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Agreement or in the Plan: (a) Amendments to the Plan. The Board of Directors of the Company ---------------------- may amend, alter, suspend, discontinue or terminate the Plan; provided, however, -------- ------- that, notwithstanding any other provision of the Plan or any Award Agreement, without the approval of the stockholders of the Company, no such amendment, alteration, suspension, discontinuation or termination shall be made that, absent such approval: (i) would cause Rule 16b-3 to become unavailable with respect to the Plan; -9- (ii) would violate the rules or regulations of the New York Stock Exchange, any other securities exchange or the National Association of Securities Dealers, Inc. that are applicable to the Company; or (iii) would cause the Company to be unable, under the Code, to grant Incentive Stock Options under the Plan. (b) Amendments to Awards. The Committee may waive any conditions of -------------------- or rights of the Company under any outstanding Award, prospectively or retroactively. The Committee may not amend, alter, suspend, discontinue or terminate any outstanding Award, prospectively or retroactively, without the consent of the Participant or holder or beneficiary thereof, except as otherwise herein provided. (c) Correction of Defects, Omissions and Inconsistencies. The ---------------------------------------------------- Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry the Plan into effect. Section 8. Income Tax Withholding. - ---------------------------------- In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes, which are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant. In order to assist a Participant in paying all or a portion of the federal and state taxes to be withheld or collected upon exercise or receipt of (or the lapse of restrictions relating to) an Award, the Committee, in its discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant to satisfy such tax obligation by (i) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes or (ii) delivering to the Company Shares other than Shares issuable upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes. The election, if any, must be made on or before the date that the amount of tax to be withheld is determined. -10- Section 9. General Provisions. - ------------------------------ (a) No Rights to Awards. No Eligible Person, Participant or other ------------------- Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Eligible Persons, Participants or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to any Participant or with respect to different Participants. (b) Award Agreements. No Participant will have rights under an Award ---------------- granted to such Participant unless and until an Award Agreement shall have been duly executed on behalf of the Company. (c) No Limit on Other Compensation Arrangements. Nothing contained ------------------------------------------- in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. (d) No Right to Employment. The grant of an Award shall not be ---------------------- construed as giving a Participant the right to be retained in the employ of the Company or any Affiliate, nor will it affect in any way the right of the Company or an Affiliate to terminate such employment at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. (e) Governing Law. The validity, construction and effect of the Plan ------------- or any Award, and any rules and regulations relating to the Plan or any Award, shall be determined in accordance with the laws of the State of Minnesota. (f) Severability. If any provision of the Plan or any Award is or ------------ becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect. (g) No Trust or Fund Created. Neither the Plan nor any Award shall ------------------------ create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any -11- Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate. (h) No Fractional Shares. No fractional Shares shall be issued or -------------------- delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash shall be paid in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. (i) Headings. Headings are given to the Sections and subsections of -------- the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. Section 10. Effective Date of the Plan. - --------------------------------------- The Plan shall be effective as of April 14, 1993, subject to approval by the stockholders of the Company within one year thereafter. Section 11. Term of the Plan. - ----------------------------- Unless the Plan shall have been discontinued or terminated as provided in Section 7(a), the Plan shall terminate on April 13, 2003. No Award shall be granted after the termination of the Plan. However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond the termination of the Plan, and the authority of the Committee provided for hereunder with respect to the Plan and any Awards, and the authority of the Board of Directors of the Company to amend the Plan, shall extend beyond the termination of the Plan. Amended 4/9/97 -12- EX-10.C 3 SUPERVALU INC. EXECUTIVE INCENTIVE BONUS PLAN EXHIBIT (10)c. EXECUTIVE INCENTIVE BONUS PLAN I. INTRODUCTION ------------ The intent of the SUPERVALU Executive Incentive Bonus Plan is to provide a means by which the successful performance of the Corporation's major business groups, specific profit centers, and individual managers can be rewarded. Each individual who participates in the plan will be aware of his or her bonus opportunity and the factors that impact this opportunity. The bonus plan provides for a wide range of bonus opportunities, from an unsatisfactory individual performance level which generates no award, to an outstanding individual and organization performance level which would provide a significant bonus payment, up to the maximum bonus percent provided under the terms of the plan. The continued profitability and growth of SUPERVALU is vital to all of its employees. Through this plan, the Company is providing a means to reward those who are instrumental in achieving those goals. II. INCENTIVE BONUS PLAN SUMMARY ---------------------------- The SUPERVALU Executive Incentive Bonus Plan is designed to reward participating employees for their contributions to the continued growth and profitability of the Corporation. Plan Features - ------------- 1. For each fiscal year, a bonus opportunity, or norm, expressed as a percentage of base salary dollars, is established for each participant in the program. 2. The bonus award is comprised of an individual portion which is determined by the participant's job performance against specified objectives, and an organizational (e.g., profit center and/or centers or total corporation) portion which is determined by financial performance against both pre- established budget and growth objectives. The corporate participants' awards are based solely on performance improvement over the prior year. 3. The participant who meets satisfactory individual performance levels and whose organization, (e.g., profit center(s) or the total corporation) meets its objectives, would typically receive a "norm" bonus award. Higher or lower individual or organization performance will result in a higher or lower bonus award. 4. The funds for bonus payments are provided out of the earnings of the Corporation, after a fair return to the stockholders has been assured. III. ELIGIBILITY AND DETERMINATION ----------------------------- OF BONUS OPPORTUNITY -------------------- 1. Eligibility ----------- This SUPERVALU plan is designed to include executive and management positions which have a significant impact on Company operating and administrative performance levels. The determination of "significant impact" is based on the Company's position evaluation plan with approval for plan participation to be granted by the appropriate Executive Vice President and the Sr. Vice President, Human Resources. 2. Determination of Individual Bonus Norms --------------------------------------- Each management position has been evaluated and assigned a specific point value, based on the position content in terms of know-how, problem-solving and accountability. Every position in the incentive plan has a percent figure (bonus norm) assigned to it for the purpose of calculating the initial bonus opportunity.
Example only: ------------ Point Bonus Norm (as a Evaluation Percent of Salary) ---------- ------------------ Below 900 points 10% 900 - 940 points 11% 941 - 981 points 12% etc.
Every participant will be informed of their position's point value and corresponding bonus norm. Each participant's fiscal year earnings are multiplied by the bonus norm percent to determine his or her individual bonus opportunity. If a participant is promoted to a bonus position at some point during the fiscal year, only earnings after the date of promotion will be used in the calculation. Example of Bonus Norm Calculation: - ---------------------------------
(A) (B) Bonus Norm Amount Fiscal Year Bonus (A) x (B) Earnings Norm % Dollar Amount ----------- ------ ----------------- $55,000 10% $ 5,500 $60,000 10% $ 6,000 $75,000 11% $ 8,250 $85,000 12% $10,200
IV. STANDARDS OF PERFORMANCE ------------------------ Before the beginning of each fiscal year, financial performance objectives are established; these will be used as the primary standards against which actual performance will be compared. Bonus amounts are calculated according to the procedure detailed later in this booklet and are subject to Board of Director approval before there will be any payout. Bonus funds not utilized are returned to earnings. There is no carryover to subsequent years. The following is an explanation of the process. 1. Corporate Objectives -------------------- A net profit growth objective is established which represents the performance standard for the Corporation which, if achieved, produces a bonus award at the norm level. At year end, the actual corporate performance is calculated relative to this objective. The bonus award payable to corporate staff participants will vary annually, depending on the actual corporate results as these results relate to the previous year's profit performance. 2. Profit Center Objectives ------------------------ Also before the start of each fiscal year, financial objectives are established for each separate profit center and become standards of performance for the year. At year end, profit center results are calculated as a percentage of objectives established. The bonus award payable to profit center participants will vary, depending on the actual results that are achieved. 3. Individual Performance ---------------------- As shown below, an individual's job performance is part of the determination of bonus awards. A factor based on an assessment of individual job performance against specified objectives will be determined for each participant according to the guidelines shown on page 10. 4. Award Makeup ------------ The incentive award heavily emphasizes organization performance particularly in the case of corporate officers and profit center presidents. Certain corporate jobs, highly measurable relative to individual performance against objectives, will be equally weighted between organizational and individual performance. Most positions at both the profit center and corporate staff level will have awards weighted toward organization performance but with a significant individual performance component.
Corporate Positions ------------------- Portion of Award Based on: Corporate Individual Results Performance --------- ----------- Corporate Officers 90% 10% Most Other Positions 75% 25% Product Directors, etc. 50% 50% Profit Center Positions ----------------------- Portion of Award Based on: Profit Center Individual Results Performance ------------- ----------- Profit Center Presidents 80-90% 10-20% Profit Center Staff 75-80% 20-25%
POINTS OF EMPHASIS ------------------ Two points should be emphasized regarding the calculation of bonus awards: 1. Profit center and Corporate operating results will reflect equally on the awards of all members of a respective profit center or business group. 2. The organization and individual portions of a bonus will be adjusted independently of each other, subject only to the overall total bonus fund limitation and to the minimum and maximum conditions stated later. V. BONUS CALCULATIONS ------------------ 1. Individual Awards ----------------- As indicated previously 10% to 50% of a participant's bonus potential, depending on position, will be based on individual performance. Individual awards can range from 80% to 175% of the individual award portion of the norm. The adjustment guide below provides the appropriate individual award adjustment factor for specific levels of performance against established objectives. Only the numbers listed below should be used as adjustment factors. INDIVIDUAL BONUS AWARD ADJUSTMENT GUIDE ----------------
Adjustment Definition Guide - ---------- ---------- Outstanding - during the year the individual 1.60 - 1.75 showed effort, skill, and achievement seldom seen, greatly exceeding objectives and expectations. Excellent - the individual far exceeded 1.40 expectations and objectives. Very Good - the individual exceeded expectations 1.20 and performance objectives. Good - met expectations and objectives. 1.00 Fair - did not totally meet performance .80 objectives and expectations, but came reasonably close. Unacceptable - immediate corrective action is No Bonus required if individual is to remain in the assignment. New employee (less than 6 months on the job. No More Than Too soon to evaluate) 1.00
2. Organization Awards ------------------- Organization award adjustments are based on performance against financial objectives and the previous year's performance for certain of the financial factors. In determining the organization award, these points will be observed: A. Appropriate financial factors for the fiscal year will be selected and weighted according to the emphasis to be placed on these factors for the year. Net profit growth will normally be the primary financial factor. In addition sales and/or a return measure may also be included as additional bonus factors. These factors and their weightings may change from year to year, or from profit center to profit center, depending on business unit or corporate strategic business plans. B. The relationship of financial performance variance from the financial performance objective(s) to the actual bonus award payout or adjustment will be illustrated on the payout curve that will be provided to each participant for each fiscal year. In this manner, the adjustment varies (up or down) as actual performance varies from the objective. C. Normally the previous year's net profit performance will serve as the threshold performance required before any bonus will be paid at the corporate level. D. Some plan participants may have their bonus based on the results of multiple profit centers. This will typically be the case where management decides to emphasize teamwork between profit centers. ---------------------------------------------------------------------- The specifics of the organization award (profit center makeup, financial factors, and the weighting thereof) and the payout curve for a given year are distributed separately to participants as a supplement to this booklet. ----------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ EXAMPLE BONUS CALCULATION -------------------------------------------------------------------------------------------------- INDIVIDUAL AWARD (25%) ORGANIZATION AWARD (75%) -------------------------------------------------------------------------------------------------- Profit Center Annual Performance Individual Performance Organizational Total Employee Salary Norm % Norm $ Norm Factor Award Norm Factor Award Award Earnings A $70,000 10% $ 7,000 $1,750 .80* $1,400 $5,250 1.10** $5,775 $ 7,175 B $90,000 15% $13,500 $3,375 1.00* $3,375 $10,125 1.10** $11,138 $14,513
* Individual factors will vary according to individual performance ** The Profit Center Performance Factor affects all profit center participants equally. INCENTIVE BONUS CONCEPT FOR THE INDIVIDUAL ------------------------------------------ ------------------ Salary Earnings ------------------ times ------------------ Norm % ------------------ ------------------ equals ------------------ ------------------ Bonus Norm $ ------------------ (Split) - -------------------------------- -------------------------------- Organization Individual Norm % Norm % - -------------------------------- -------------------------------- Times the Organizational* Factor Times the Individual Based on Performance Equals Adjustment Factor Equals - -------------------------------- -------------------------------- Organization* Individual Award $ Award $ - -------------------------------- -------------------------------- ------------------ TOTAL Award $ ------------------ * Home Office plan participants will have their organization award determined by overall corporate performance; profit center plan participants will have their organization award determined primarily by profit center performance but may also include corporate or other "roll-up" results. Some positions will be rewarded on the basis of more than one profit center's performance. VI. MINIMUM CONDITIONS ------------------ The following limitations shall apply to bonus award payments: 1. If an individual's performance does not merit an individual award, he/she shall also be ineligible to receive an organization award. 2. If an organization's profit performance is below that organization's minimum payout threshold, there shall be no organization awards to that organization's members, but they may receive individual awards. VII. DISCRETIONARY ADJUSTMENTS ------------------------- The Board of Directors of SUPERVALU has granted the Chief Executive Officer the right to make discretionary adjustments, either upward or downward, to incentive bonus awards. Typically, the Chief Executive Officer exercises this right after having reviewed recommended awards and after consulting with supervisors of the individuals affected. VIII. TERMINATION OF EMPLOYMENT ------------------------- In the event of employment termination prior to the end of the fiscal year (except for retirement, death or disability), participants will not be eligible for an Incentive Bonus award for that fiscal year. Nothing in this plan is to be construed as an employment agreement between participants and the Company, and each employee's employment and compensation can be terminated with or without cause at anytime at the option of the company or the employee. If employment is terminated prior to the end of the fiscal year, eligibility for an award also terminates. Until an award has been approved by the Board of Directors and actually paid, no employee shall have any claim nor have earned any right to an award. IX. PLAN CHANGE AND TERMINATION --------------------------- The Company reserves the right in its sole and absolute discretion to modify, change, or discontinue the plan with or without notice at any time. X. TIME OF PAYMENT --------------- Availability of funds for this program depend on completion of necessary accounting work at the close of the fiscal year. Awards cannot be made until final financial figures are available and are entered into the calculations. The final awards are in turn approved by the Board of Directors. Typically, this does not occur until mid-April. EX-10.E 4 SUPERVALU INC. 1983 EMPLOYEE STOCK OPTION PLAN EXHIBIT (10)e. SUPERVALU INC. 1983 EMPLOYEE STOCK OPTION PLAN 1. PURPOSE. The purpose of this Plan is to promote the interests of SUPERVALU INC., a Delaware corporation (the "Corporation"), and its stockholders by encouraging selected key salaried management employees of the Corporation, and members of the Board of Directors who are not also employees of the Corporation, to invest in shares of the Corporation's Common Stock with the increased personal interest and effort in the continued success and progress of the business that stock ownership can produce, and by providing additional means of attracting and retaining competent executive personnel and directors. 2. ADMINISTRATION; GRANTING OF OPTIONS. The Plan shall be administered by the Board of Directors of the Corporation. The Board of Directors shall have full authority in its discretion, but subject to the express provisions of the Plan, to: (a) determine the purchase price of the Common Stock covered by each option; (b) determine the persons to whom and the time or times at which options shall be granted; (c) determine the number of shares to be subject to each option; (d) determine terms and provisions (and amendments thereof) of the respective option agreements (which need not be identical), including such terms and provisions (and amendments) as shall be required in the judgment of the Board to conform to any law or regulation applicable thereto; (e) determine which options shall be Incentive Stock Options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"); (f) accelerate the time at which all or any part of an option may be exercised; (g) modify or amend any outstanding option agreement subject to the consent of optionee; -1- (h) interpret the Plan and prescribe, amend and rescind rules and regulations relating to it; (i) make all other determinations deemed necessary or advisable for the administration of the Plan. All decisions, determinations and selections made by the Board of Directors on the foregoing matters shall be conclusive. The granting of an option pursuant to the Plan shall be effective only when an option is duly awarded to an employee or director by the Board of Directors. The Executive Committee of the Corporation, in addition to and not to the exclusion of the Board of Directors of the Corporation, is authorized to exercise all of the powers authorized and conferred by the Plan on the Board of Directors other than the power under Section 12 of this Plan to terminate and amend the Plan. The Board of Directors may also authorize, at any time, the formation of a Stock Option Committee (the "Committee"), consisting of three or more members appointed from time to time by the Board, which Committee would have authority to exercise the powers conferred on the Board under the Plan, other than the power under Section 12 herein to terminate and amend the Plan. In addition, the Board of Directors may authorize, at any time, the Chief Executive Officer of the Corporation to extend the period of exercise of certain Incentive Stock Options and non-incentive (non-qualified) stock options in accordance with the provisions set forth in the option agreement. 3. ELIGIBILITY; FACTORS TO BE CONSIDERED IN GRANTING STOCK OPTIONS. Incentive Stock Options may be granted only to key salaried management employees (which term, as used herein, includes officers) of the Corporation and of its present and future subsidiary corporations. Options which do not qualify as Incentive Stock Options may be granted to key salaried management employees of the Corporation and of its present and future subsidiary corporations and to members of the Board of Directors of the Corporation who are not also employees of the Corporation or one of its subsidiaries ("Non-Employee Directors"), provided, however, that options shall be granted to Non-Employee Directors only pursuant to Section 7 hereof. In determining the employees to whom options shall be granted and the number of shares to be covered by each such option, the Board of Directors may take into account the nature of the services rendered by the respective employees, their present and potential contributions to the success of the Corporation and such other factors as the Board of Directors, in its discretion, shall deem relevant. -2- Subject to the provisions of Section 10 herein, an employee who has been granted an option under the Plan or under any prior stock option plan of the Corporation may be granted an additional option or options under the Plan if the Board of Directors shall so determine. 4. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in Section 11 herein: (a) the stock to be offered under the Plan shall be shares of the Corporation's authorized Common Stock, par value $1.00 per share, which may be either shares reacquired and held in the treasury of the Corporation or authorized but unissued shares; and (b) the aggregate number of shares which may be issued under all options granted pursuant to the Plan shall be 4,500,000 shares. Shares subject to, but not issued under, any option terminating or expiring for any reason prior to exercise thereof in full shall again be available for other options thereafter granted under the Plan. 5. TERM OF PLAN AND OF EACH OPTION AGREEMENT; EXERCISE OF OPTIONS. The period during which options may be granted under the Plan shall expire February 7, 1999. The term of each option so granted shall expire not more than ten years from the date the option is granted. The Board of Directors may determine at the time of granting whether each such option is exercisable in full, in part from time to time or in installments, which may be cumulative from year to year during such term to the extent not exercised in a prior year; provided, however, that notwithstanding the foregoing, from and after a Change of Control (as hereinafter defined), all options granted under the Plan, including options granted to Non-Employee Directors pursuant to Section 7 hereof, shall become immediately exercisable to the full extent of the original award. As used herein, "Change of Control" shall mean any of the following events: (i) The acquisition by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Corporation or any of its wholly-owned subsidiaries, or any employee benefit plan of the Corporation and/or one or more of its wholly-owned subsidiaries, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the then outstanding shares of Common Stock or the combined voting power of the Corporation's then outstanding voting securities in a transaction or series of transactions not approved in -3- advance by a vote of at least three-quarters of the Continuing Directors (as hereinafter defined); or (ii) Individuals who, as of April 13, 1988, constitute the Board of Directors of the Corporation (generally the "Directors" and as of April 13, 1988 the "Continuing Directors") cease for any reason to constitute at least a majority thereof, provided that any person becoming a Director subsequent to April 13, 1988 whose nomination for election was approved in advance by a vote of at least three-quarters of the Continuing Directors (other than a nomination of an individual whose initial assumption of office is in connection with an actual or threatened solicitation with respect to the election or removal of the Directors of the Corporation, as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall be deemed to be a Continuing Director; or (iii) The approval by the stockholders of the Corporation of a reorganization, merger, consolidation, liquidation or dissolution of the Corporation or of the sale (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation other than a reorganization, merger, consolidation, liquidation, dissolution or sale approved in advance by a vote of at least three quarters of the Continuing Directors; or (iv) The first purchase under any tender offer or exchange offer (other than an offer by the Corporation or any of its subsidiaries) pursuant to which shares of Common Stock are purchased. Options granted under this Plan need not be identical with respect to the terms of exercise thereof. Subject only to the foregoing limitations, options may be exercised in whole at any time or in part from time to time during the option term by serving written notice of exercise on the Corporation, accompanied by payment of the purchase price. The Board of Directors or the Committee, as the case may be, may grant "restoration" options, separately or together with another option, pursuant to which, subject to the terms and conditions established by the Board of Directors or the Committee, as the case may be, and any applicable requirements of Rule 16b-3 promulgated under the Exchange Act or any other applicable law, the optionee would be granted a new option when the payment of the exercise price of the option to which such "restoration" option relates is made by the delivery of shares of the Corporation's Common Stock owned by the optionee, as described in Section 6 hereof, which new option would be an option to purchase the number of shares not exceeding the sum of (a) the number of shares of the Corporation's Common Stock tendered as payment upon the exercise of the option to which such "restoration" option relates and (b) the number of shares of the Corporation's Common Stock, if any, tendered as payment of the amount to be withheld under applicable income tax laws in connection with the exercise of the -4- option to which such "restoration" option relates, as described in Section 14 hereof. "Restoration" options may be granted with respect to options previously granted under this Plan or any prior stock option plan of the Corporation, and may be granted in connection with any option granted under this Plan (other than an option granted to a Non-Employee Director pursuant to Section 7 hereof) at the time of such grant. The purchase price of the Common Stock under each such new option, and the other terms and conditions of such option, shall be determined by the Board of Directors or the Committee, as the case may be, consistent with the provisions of the Plan. 6. OPTION PRICES. Except with respect to options granted to Non-Employee Directors pursuant to Section 7 hereof, the purchase price of the Common Stock under each option shall be determined by the Board of Directors, but shall not be less than 100% of the fair market value of the Common Stock at the time of granting the option as found by the Board. The purchase price of the shares as to which an option shall be exercised shall be paid in full in cash at the time of exercise as shall be provided in the option agreement, and any optionee, without limitation, shall also be entitled to pay the exercise price by tendering to the Corporation shares of the Corporation's Common Stock, previously owned by the optionee, having a fair market value on the date of exercise equal to the option price (or the portion thereof not paid in cash). 7. OPTIONS TO NON-EMPLOYEE DIRECTORS. The Board of Directors or the Committee, as the case may be, shall issue options which do not qualify as Incentive Stock Options to Non-Employee Directors in accordance with this Section 7. Each Non-Employee Director serving on the Corporation's Board of Directors immediately following the Annual Meeting of Stockholders of the Corporation on June 30, 1992 shall be granted, as of June 30, 1992, an option to purchase 3,000 shares of Common Stock. Each Non-Employee Director first elected or appointed to the Corporation's Board of Directors after June 30, 1992 and during the term of the Plan shall be granted, as of the date of such Director's first election or appointment to the Board of Directors, an option to purchase 3,000 shares of Common Stock. After the initial grant to each Non-Employee Director as set forth above in this Section 7, each such Director shall be granted during the term of the Plan, as of the date of the Corporation's Annual Meeting of Stockholders in each even-numbered year, if such Director's term of office continues after such Annual Meeting, an option to purchase 3,000 shares of Common Stock. Each option granted to a Non-Employee Director pursuant to this Section 7 shall have an exercise price equal to the fair market value of the shares of Common Stock as of the date of grant and shall expire on the tenth anniversary of the date of grant. "Restoration" options may not be granted to any Non- Employee Director. This Section 7 shall not be amended more than once every six months other than to comport with -5- changes in the Code, the Employee Retirement Income Security Act or the rules and regulations thereunder. 8. ADDITIONAL TERMS. Options granted under the Plan shall not be affected by any change of duties or position so long as the optionee continues to be an employee of the Corporation or of a subsidiary (or continues to be a Director of the Corporation in the case of any Non-Employee Director). Each option agreement may contain such provisions as the Board of Directors shall approve with reference to the effect of approved leaves of absence, provided that with respect to Incentive Stock Options such provisions conform to the requirements of the Code. Nothing in the Plan or in any option granted pursuant thereto shall confer on any person any right to continue in the employ of the Corporation or of any of its subsidiaries (or to continue as a Director of the Corporation in the case of any Non-Employee Director) or affect, in any way, the right of the Corporation or any of its subsidiaries to terminate his employment (or to terminate his directorship in the case of any Non-Employee Director) at any time. No optionee, who is an employee of the Corporation at the time of grant, may be granted any option or options for more than 250,000 Shares (subject to adjustment as provided for in Section 11), taking into account all such awards granted by the Corporation pursuant to any of its stock compensation plans, in any calendar year period beginning with the period commencing January 1, 1997. The foregoing annual limitation specifically includes the grant of any options representing "qualified performance-based compensation" within the meaning of Section 162(m) of the Code. 9. DEATH; OTHER TERMINATION OF EMPLOYMENT OR DIRECTORSHIP. Each option agreement shall include provisions governing the disposition of an option in the event of the retirement, disability, death or other termination of the employment or directorship of an optionee with the Corporation or an Affiliate. 10. INCENTIVE STOCK OPTIONS. Except with respect to options granted to Non-Employee Directors pursuant to Section 7 hereof, the Board of Directors is hereby authorized to determine, upon the granting of each option, whether such option shall be an Incentive Stock Option under Section 422 of the Code or shall be an option which is not an Incentive Stock Option under Section 422. For Incentive Stock Options granted before January 1, 1987, the aggregate fair market value of the stock (determined as of the time the Incentive Stock Option is granted) covered under all Incentives Stock Options granted (under this Plan and all other incentive stock option plans of the Corporation or any subsidiary), in any calendar year, shall not exceed $100,000 plus any unused limit carry-over (as provided under former Section 422(c)(4) of the Code effective for options granted before January 1, 1987). For Incentive Stock Options granted after December 31, 1986, the aggregate fair market value (determined at the time the Incentive -6- Stock Option is granted) of the stock with respect to which all Incentive Stock Options are exercisable for the first time by an employee during any calendar year (under all plans described in subsection (b) of Section 422 of the Code of his employer corporation and its parent and subsidiary corporations) shall not exceed $100,000. 11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Notwithstanding any other provision of the Plan, the Board of Directors may adjust the number and class of shares subject to each outstanding option and the option prices in the event of changes in the outstanding Common Stock of the Corporation by reason of stock dividends, split-ups, recapitalizations, mergers, consolidations, combinations or exchanges of shares and the like. In the event of any such change in the outstanding Common Stock of the Corporation, the aggregate number and class of shares available under the Plan shall be appropriately adjusted by the Board of Directors, whose determination shall be conclusive. 12. TERMINATION AND AMENDMENT. The Plan may be terminated, modified or amended by the stockholders of the Corporation. Subject to Section 7 hereof, the Board of Directors of the Corporation may also terminate the Plan or make such modifications or amendments thereof as it shall deem advisable, or to conform to any change in any law or regulation applicable thereto; provided, however, that the Board of Directors may not, without further approval by the holders of a majority of the outstanding stock of the Corporation having general voting power, make any modification or amendment which operates: (a) to make any material change in the class of employees eligible to receive Incentive Stock Options as defined in Section 3 above; and (b) to increase the total number of shares for which options may be granted under the Plan, except as resulting from the operation of Section 11 above. No termination, modification or amendment of the Plan may, without the consent of the employee to whom any option shall theretofore have been granted, adversely affect the rights of such employee under such option. 13. EFFECTIVE DATE OF PLAN. The Plan shall become effective February 23, 1983, subject to approval by the shareholders of the Corporation within 12 months thereafter. 14. TAX WITHHOLDING. Subject to such rules as the Board of Directors or the Committee may adopt not inconsistent with the provisions of the Plan: -7- (a) At any time when an optionee is required to pay the Corporation an amount required to be withheld under applicable income tax laws in connection with the exercise of an option which does not qualify as an Incentive Stock Option under Section 422 of the Code, the optionee may elect to have the Corporation retain from the distribution shares of Common Stock to satisfy this obligation in whole or in part (an "Election"). The shares to be withheld shall be valued at 100% of the fair market value of the shares on the date that the amount of tax required to be paid shall be determined (the "Tax Date"). Fair market value of the shares shall equal the mean of the opening and closing trade prices of the shares as reported on the New York Stock Exchange on the Tax Date, or, if no trading in the shares occurs on the Tax Date, on the immediately preceding trading date. (b) Each election must be made prior to the Tax Date. The Board or the Committee may disapprove of any Election, may suspend or terminate the right to make Elections, may limit the amount of any Election, may provide at the time of grant with respect to any option that the right to make Elections shall not apply to such option and may make rules concerning the required information to be included in any Election. An Election is irrevocable. (c) The Election may be made in an amount equal to the amount of tax required by law to be withheld with respect to the option exercise. Any fractional share withholding amount must be paid in cash. (d) If an optionee makes an Election and the optionee's Tax Date is deferred for six months from the date of exercise of the option, the optionee will initially receive the full amount of the shares, but will be unconditionally obligated to surrender to the Corporation on the Tax Date the proper number of shares to satisfy the withholding obligation, plus cash for any remainder of the withholding obligation including any fractional shares withholding amount. (e) Optionees who are "officers" or "directors" of the Corporation, as those terms are used in Section 16(b) of the Exchange Act, may only make an Election in compliance with the rules established by the Board or the Committee to comply with Section 16(b). Amended 2/8/95 Amended 2/14/96 Amended 4/9/97 -8- EX-10.R 5 SUPERVALU INC. LONG-TERM INCENTIVE PLAN EXHIBIT (10)r. SUPERVALU INC. LONG-TERM INCENTIVE PLAN SECTION I. ESTABLISHMENT On February 12, 1992, the Board of Directors of SUPERVALU INC. (the "Company"), upon recommendation by the Compensation and Stock Option Committee (the "Committee"), approved an incentive plan for executives as described herein, which plan shall be known as the "SUPERVALU INC. Long-Term Incentive Plan" (the "Plan"). The Plan shall be submitted for approval by the stockholders of the Company at the 1992 annual meeting of stockholders. The Plan shall be effective as of February 12, 1992, subject to its approval by the stockholders of the Company, and no shares shall be issued pursuant to the Plan until after the Plan has been approved by the stockholders of the Company. SECTION II. PURPOSE The purpose of the Plan is to advance the interests of the Company and its stockholders by attracting and retaining key employees, and by stimulating the efforts of such employees to contribute to the continued success and progress of the business. The Plan is further intended to provide such employees with an opportunity to increase their ownership of the Company's common stock with the increased personal interest in the long-term success of the business that such stock ownership can produce. SECTION III. ADMINISTRATION 3.1 Composition of the Committee. The Plan shall be administered by the ---------------------------- Committee, which shall consist of members appointed from time to time by the Board of Directors and shall be comprised of not less than such number of directors as shall be required to permit the Plan to satisfy the requirements of Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any successor rule or regulation ("Rule 16b-3"). All members of the Committee shall be members of the Board of Directors of the Company who are "disinterested persons" within the meaning of Rule 16b-3. To the extent required by Section 162(m) of the Internal Revenue Code of 1986, as amended (such statute, as it may be amended from time to time and all proposed, temporary or final Treasury Regulations promulgated thereunder shall be referred to as the "Code"), the Committee administering the Plan shall be composed solely of "outside directors" within the meaning of Section 162(m) of the Code. 3.2 Power and Authority of the Committee. The Committee shall have full ------------------------------------ power and authority, subject to all the applicable provisions of the Plan and applicable law, to (a) establish, amend, suspend or waive such rules and regulations and appoint such agents as 1 it deems necessary or advisable for the proper administration of the Plan, (b) construe, interpret and administer the Plan and any instrument or agreement relating to, or Award (as defined below in Section 4.2) made under, the Plan, and (c) make all other determinations and take all other actions necessary or advisable for the administration of the Plan. Unless otherwise expressly provided in the Plan, each determination made and each action taken by the Committee pursuant to the Plan or any instrument or agreement relating to, or Award made under, the Plan shall be (x) within the sole discretion of the Committee, (y) may be made at any time and (z) shall be final, binding and conclusive for all purposes on all persons, including, but not limited to, holders of Awards, and their legal representatives and beneficiaries, and employees of the Company or of any "Affiliate" of the Company. For purposes of the Plan and any instrument or agreement relating to, or Award made under, the Plan, the term "Affiliate" shall mean any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and any entity in which the Company has a significant equity interest, in each case as determined by the Committee in its sole discretion. 3.3 Delegation. The Committee may delegate its powers and duties under ---------- the Plan to one or more officers of the Company or any Affiliate or a committee of such officers, subject to such terms, conditions and limitations as the Committee may establish in its sole discretion; provided, however, that the Committee shall not delegate its power to amend the Plan as provided in Section XI hereof and shall not delegate its power to make determinations regarding officers or directors of the Company or any Affiliate who are subject to Section 16 of the Exchange Act. SECTION IV. ELIGIBILITY AND PARTICIPATION 4.1 Eligibility. The Plan is unfunded and is maintained by the Company ----------- for a select group of management or highly compensated employees. In order to be eligible to participate in the Plan, an employee of the Company or of its Affiliates must be selected by the Committee. In determining the employees who will participate in the Plan, the Committee may take into account the nature of the services rendered by the respective employees, their present and potential contributions to the success of the Company and such other factors as the Committee, in its sole discretion, shall deem relevant. A director of the Company or of an Affiliate who is not also an employee of the Company or an Affiliate shall not be eligible to participate in the Plan. 4.2 Participation. The Committee shall determine the employees to be ------------- granted an award opportunity (the "Award"), the amount of each Award, the time or times when Awards will be made, the period of time over which such Awards are intended to be earned, and all other terms and conditions of each Award. The provisions of the Awards need not be the same with respect to any recipient of an Award (the "Participant") or with respect to different Participants. The Committee's decision to approve an Award to an employee in any year shall not require the Committee to approve a similar Award or any Award at all to that employee or any other employee or person at any future date. The Company and the 2 Committee shall not have any obligation for uniformity of treatment of any person, including, but not limited to, Participants and their legal representatives and beneficiaries and employees of the Company or of any Affiliate of the Company. 4.3 Award Agreement. Any employee selected for participation by the --------------- Committee shall, as a condition of participation, execute and return to the Committee a written agreement setting forth the terms and conditions of the Award (the "Award Agreement"). A separate Award Agreement will be entered into between the Company and each Participant for each Award. 4.4 Employment. In the absence of any specific agreement to the ---------- contrary, no Award to a Participant under the Plan shall affect any right of the Company, or of any Affiliate of the Company, to terminate, with or without cause, the Participant's employment at any time. SECTION V. SHARES SUBJECT TO THE PLAN 5.1 Shares Subject to Plan. Subject to adjustment as provided in ---------------------- Section 5.3 hereof, the maximum number of shares or units equivalent to shares with respect to which Awards may be granted under the Plan shall not exceed in the aggregate 750,000 shares (the "Shares") of the Company's Common Stock, $1.00 par value (the "Common Stock"). The payment of cash dividends or dividend equivalents in conjunction with an Award shall not be counted against the Shares available for grant. Shares to be issued pursuant to the Plan shall be made available from treasury, from authorized but unissued shares of Common Stock, or from shares reacquired by the Company, including shares purchased in the open market. For purposes of this Section V, the maximum number of Shares to which an Award relates shall be counted on the date such Award was made against the aggregate number of Shares available for grant under the Plan. 5.2 Reacquired Shares. If any Shares to which an Award relates are ----------------- forfeited, or if an Award is otherwise canceled or terminated or expires without delivery of the maximum number of Shares (or cash for the maximum number of Shares) to which such Award relates, then the number of Shares with respect to such Award, to the extent of any such forfeiture, cancellation, termination or expiration, shall again be available for grant under the Plan. 5.3 Adjustments Upon Chances In Capitalization. In the event that the ------------------------------------------ Committee shall determine that any dividend or other distribution (whether in the form of cash, Common Stock, other securities or other property), stock split, reverse stock split, reorganization, recapitalization, merger, consolidation, combination, split-up, spin-off, repurchase or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event affects the Common Stock such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or 3 enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee may make such adjustments, if any, as it may deem appropriate in the aggregate number of and class of Shares (or other securities or other property) issuable pursuant to Section 5.1 and pursuant to any outstanding Award under the Plan. The Committee's determination of such adjustments shall be final, binding and conclusive. SECTION VI. AWARDS 6.1 General. The Committee shall determine the Award or Awards to be ------- made to each Participant, and each Award shall be subject to the terms and conditions of the Plan and the applicable Award Agreement. An Award may be made in the form of Shares or in the form of units equivalent to Shares (the "Stock Units"). Awards may be granted singly or in combination, or in addition to, in tandem with or in substitution for any grants or rights under any employee or compensation plan of the Company or of any Affiliate. All or part of an Award may be subject to conditions and forfeiture provisions established by the Committee, and set forth in the Award Agreement, which may include, but are not limited to, continuous service with the Company or an Affiliate, achievement of specific business objectives, and other measurement of individual, business unit or Company performance. 6.2 Award of Shares. If an Award is granted in the form of Shares, --------------- certificates representing the Shares shall be issued in the name of the Participant, but may be retained in the custody of the Company and may be legended to indicate restriction on transferability ("Restricted Stock") until the Participant has met designated performance and/or length of employment requirements, if any, and the determination of the number of Shares, if any, that are to be forfeited pursuant to the terms of the Award is made. Until such time as all restrictions are removed, Restricted Stock shall not be transferable. 6.3 Award of Stock Units. If an Award is granted in the form of Stock -------------------- Units, no certificates shall be issued with respect to such Stock Units, but the Company shall maintain a bookkeeping account in the name of the Participant to which the Stock Units shall relate. Each Stock Unit shall represent the right to receive a payment of one Share, or cash of equivalent value to the "fair market value" of the Company's Common Stock at the time payment is made, or a continuing Stock Unit, or other Awards, or a combination thereof, with such restrictions and conditions as the Committee may determine in its sole discretion, including, but not limited to, the restriction of such Shares as Restricted Stock. For purposes of the Plan, "fair market value" shall be determined by such methods or procedures as may be established from time to time by the Committee in its sole discretion. 6.4 Voting Rights, Dividends and Dividend Equivalents. The Committee, ------------------------------------------------- in its sole discretion, may provide that Awards of Shares may contain voting rights and may earn dividends and that any Award may earn dividend equivalents. Such dividends or dividend equivalents may be paid currently or may be credited to an account established by the Committee under the Plan in the name of the Participant. Any crediting of dividend or dividend equivalents may be subject to such restrictions and conditions as the Committee 4 may establish in its sole discretion, including reinvestment in additional shares or share equivalents. 6.5 Payment of Awards. Payment of Awards may be made at such times, ----------------- with such restrictions and conditions, and in such forms (cash, stock, including Restricted Stock, Stock Units, other Awards, or combinations thereof) as the Committee in its sole discretion may determine at the time of grant of the Awards. 6.6 Securities Matters. No Shares shall be issued under the Plan prior ------------------ to such time as counsel to the Company shall have determined that the issuance and delivery of such Shares will not violate any federal or state securities or other laws. Participants may be required by the Company, as a condition to the grant of an Award or the issuance of Shares under the Plan, to agree in writing that all Shares to be acquired pursuant to the Plan shall be held for his or her own account without a view to any further distribution thereof, that the certificates for the Shares shall bear an appropriate legend to that effect, and that such Shares will not be transferred or disposed of except in compliance with applicable federal and state laws. The Company may, in its sole discretion, defer the effectiveness of any Award or the payment of any Award under the Plan in order to allow the issuance of Shares pursuant thereto to be made pursuant to registration or an exemption from registration or other methods for compliance available under federal or state securities laws. The Company shall be under no obligation to effect the registration pursuant to the Securities Act of 1933, as amended, of any Shares to be issued under the Plan or to effect similar compliance under any state law. If Shares are traded on a securities exchange, the Company shall not be required to deliver to the Participant certificates representing any Shares unless and until such Shares have been admitted for trading on such securities exchange. 6.7 Qualified Performance -Based Compensation. From time to time, the ----------------------------------------- Committee may designate an Award granted pursuant to the Plan as an award of "qualified performance-based compensation" within the meaning of Section 162(m) of the Code (hereinafter referred to as a "Performance-Based Award(s)"). Notwithstanding any other provision of the Plan to the contrary, the following additional requirements shall apply to all Performance-Based Awards made to any Participant under the Plan: (a) Any Performance-Based Award shall be null and void and have no effect whatsoever unless these amendments to the Plan, to the extent required by the Code, shall have been approved by the stockholders of the Company at the 1997 annual meeting of stockholders. (b) For purposes of Section 162(m) of the Code, the only employees eligible to receive Performance-Based Awards shall be the employee's identified in Section 4.1 hereof. (c) The right to obtain Restricted Stock or the right to have a Stock Unit become payable in any fashion pursuant to a Performance-Based Award shall be determined solely 5 on account of the attainment of one or more preestablished, objective performance goals for a performance period selected by the Committee at the time of the grant of the Performance-Based Award. Such goals shall be based solely on one or more of the following business criteria, which may apply to the individual in question, an identifiable business unit or the Company as a whole: stock price, market share, sales, earnings per share, profitability targets as measured by return ratios, cumulative total return to shareholders, consolidated pre-tax earnings, net revenues, net earnings, operating income, earnings before interest and taxes, and cash flow, for the applicable performance period based on absolute Company or business unit performance and/or performance as compared to a pre-selected peer group of companies or external financial index, all as computed in accordance with generally accepted accounting principles as in effect from time to time and as applied by the Company in the preparation of its financial statements and subject to such other special rules and conditions as the Committee may establish at any time ending on or before the 90th day of the applicable performance period. The foregoing shall constitute the sole business criteria upon which the performance goals under this Plan shall be based. (d) The maximum number of Shares, whether or not in the form of Restricted Stock, which may be issued to any Participant pursuant to any Performance-Based Award in any calendar year period beginning with the period commencing January 1, 1997, shall not exceed 50,000 shares (subject to adjustment as provided for in Section 5.3). (e) Not later than 90 days after the beginning of each performance period selected by the Committee for a Performance-Based Award, it shall: (i) designate all Participants for such performance period; and (ii) establish the objective performance factors for each Participant for that performance period on the basis of one or more of the business criteria set forth herein. (f) Following the close of each performance period and prior to payment of any amount to any Participant under a Performance-Based Award, the Committee must certify in writing as to the attainment of all factors (including the performance factors for a Participant) upon which any payments to a Participant for that performance period are to be based. (g) Each of the foregoing provisions and all of the other terms and conditions of the Plan as it applies to any Performance-Based Award shall be interpreted in such a fashion so as to qualify all compensation paid thereunder as "qualified performance-based compensation" within the meaning of Section 162(m) of the Code. 6 SECTION VII. TERMINATION OF EMPLOYMENT Each Award Agreement shall include provisions governing the disposition of an Award in the event of the retirement, disability, death or other termination of a Participant's employment with the Company or an Affiliate. SECTION VIII. CHANGE IN CONTROL Notwithstanding any other provision in the Plan to the contrary, at the time of the grant of an Award, the Committee may determine to include provisions in such Award providing that upon the occurrence of a "Change in Control," (i) all outstanding Awards (including Restricted Stock and Stock Units) shall immediately become fully vested (which, in the case of any Award which is subject to the achievement of designated performance objectives during a designated performance period, shall mean vested as if all such performance objectives had been achieved at the 100% award level at the end of such performance period) and (ii) all restrictions, conditions and limitations on all Awards (including Restricted Stock and Stock Units) which are outstanding at the time of such "Change in Control" or become outstanding by virtue of the operation of clause (i) hereof shall immediately lapse, provided that the provisions of clauses (i) and (ii) may be subject to such restrictions, conditions and limitations as the Committee may determine at the time of grant of the Award as set forth in the Award Agreement relating thereto. For purposes of the Plan, "Change in Control" shall mean any of the following events: 1. The acquisition by any person, entity or "group," within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, other than the Company or any of its Affiliates, or any employee benefit plan of the Company and/or one or more of its Affiliates, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the then outstanding shares of the Company's Common Stock or the combined voting power of the Company's then outstanding voting securities in a transaction or series of transactions not approved in advance by a vote of at least three-quarters of the Continuing Directors (as hereinafter defined); or 2. Individuals who, as of February 12, 1992, constitute the Board of Directors of the Company (generally the "Directors" and, as of February 12, 1992, the "Continuing Directors") cease for any reason to constitute at least a majority thereof, provided that any person becoming a Director subsequent to February 12, 1992 whose nomination for election was approved in advance by a vote of at least three-quarters of the Continuing Directors (other than a nomination of an individual whose initial assumption of office is in connection with an actual or threatened solicitation with respect to the election or removal of the Directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall be deemed to be a Continuing Director; or 7 3. The approval by the stockholders of the Company of a reorganization, merger, consolidation, liquidation or dissolution of the Company or of the sale (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company other than a reorganization, merger, consolidation, liquidation, dissolution or sale approved in advance by a vote of at least three-quarters of the Continuing Directors; or 4. The first purchase under any tender offer or exchange offer (other than an offer by the Company or any of its Affiliates) pursuant to which shares of the Company's Common Stock are purchased; or 5. At least a majority of the Continuing Directors determine in their sole discretion that there has been a Chance in control of the Company. SECTION IX. NON-TRANSFERABILITY Except as otherwise determined by the Committee or set forth in the applicable Award Agreement, no Restricted Stock or Stock Unit, and no right under such Restricted Stock or Stock Unit, shall be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of during the time in which the requirement of continued employment or attainment of performance objectives has not been achieved. Each right under any Award shall be exercisable during the Participant's lifetime only by the Participant or, if permissible under applicable law, by the Participant's legal representatives. SECTION X. TAXES In order to comply with all applicable federal or state income, social security, payroll, withholding or other tax laws or regulations, the Company may take such action, and may require a Participant to take such action, as it deems appropriate to ensure that all applicable federal or state income, social security, payroll, withholding or other taxes, which are the sole and absolute responsibility of the Participant, are withheld or collected from such Participant. In order to assist a Participant in paying all or part of the federal and state taxes to be withheld or collected upon receipt or payment of (or the lapse of restrictions relating to) an Award, the Committee, in its sole discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant to satisfy such tax obligation by (a) electing to have the Company withhold a portion of the shares of Common Stock otherwise to be delivered upon receipt or payment of (or the lapse of restrictions relating to) such Award with a fair market value equal to the amount of such taxes or (b) delivering to the Company shares of Common Stock other than the shares issuable upon receipt or payment of (or the lapse of restrictions relating to) such Award with a fair market value equal to the amount of such taxes. 8 SECTION XI. AMENDMENT AND TERMINATION 11.1 Term of Plan. Unless the Plan shall have been discontinued or ------------ terminated as provided in Section 11.2 hereof, the Plan shall terminate on February 11, 2002. No Awards may be granted after such termination, but termination of the Plan shall not alter or impair any rights or obligations under any Award theretofore granted, without the consent of the Participant or holder or beneficiary thereof, except as otherwise provided in the Plan or the Award Agreement. 11.2 Amendments to Plan. Except to the extent prohibited by ------------------ applicable law and unless otherwise expressly provided in the Plan or an Award Agreement, the Committee may amend, alter, suspend, discontinue or terminate the Plan; provided, however, that notwithstanding any other provision of the Plan or any Award Agreement, without the approval of the stockholders of the Company, no such amendment, alteration, suspension, discontinuation or termination shall be made that, absent such approval: (a) would cause Rule 16b-3 to become unavailable with respect to the Plan: or (b) would violate the rules or regulations of any securities exchange that are applicable to the Company. 11.3 Amendments to Awards. Except to the extent prohibited by -------------------- applicable law and unless otherwise expressly provided in the Plan or an Award Agreement, the Committee may waive any condition of, or rights of the Company under, any outstanding Award, prospectively or retroactively. The Committee may not amend, alter, suspend, discontinue or terminate any outstanding Award, prospectively or retroactively, without the consent of the Participant or holder or beneficiary thereof, except as otherwise provided in the Plan or the Award Agreement. 11.4 Correction of Defects, Omissions and Inconsistencies. Except to ---------------------------------------------------- the extent prohibited by applicable law and unless otherwise expressly provided in the Plan or an Award Agreement, the Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan, any Award or any Award Agreement in the manner and to the extent it shall deem desirable to carry the Plan into effect. SECTION XII. MISCELLANEOUS 12.1 Governing Law. The Plan and any Award Agreement shall be ------------- governed by and construed in accordance with the internal laws, and not the laws of conflicts, of the State of Minnesota. 12.2 Severability. If any provision of the Plan, any Award or any ------------- Award Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan, any Award or any Award Agreement under any law deemed 9 applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan, the Award or the Award Agreement, such provision shall be stricken as to such jurisdiction, and the remainder of the Plan, any such Award or any such Award Agreement shall remain in full force and effect. 12.3 No Trust or Fund Created. Neither the Plan nor any Award or ------------------------ Award Agreement shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or of any Affiliate. 12.4 Headings. Headings are given to the sections and subsections of -------- the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. Amended 4/9/97 10 EX-10.U 6 SUPERVALU 1997 STOCK PLAN EXHIBIT (10)u. SUPERVALU INC. 1997 STOCK PLAN Section 1. Purpose. - ------------------- The purpose of the Plan is to promote the interests of the Company and its stockholders by aiding the Company in attracting and retaining employees, to offer such employees incentives to put forth maximum efforts for the success of the Company's business and to afford such employee an opportunity to acquire a proprietary interest in the Company. Section 2. Definitions. - ----------------------- As used in the Plan, the following terms shall have the meanings set forth below: (a) "Affiliate" shall mean (i) any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and (ii) any entity in which the Company has a significant equity interest, in each case as determined by the Committee. (b) "Award" shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award, or Other Stock-Based Award granted under the Plan. (c) "Award Agreement" shall mean any written agreement, contract or other instrument or document evidencing any Award granted under the Plan. (d) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder. (e) "Committee" shall mean a committee of the Company designated by the Board of Directors of the Company to administer the Plan, which shall consist of members appointed from time to time by the Board of Directors. (f) "Company" shall mean SUPERVALU INC., a Delaware corporation, and any successor corporation. (g) "Eligible Person" shall mean any employee, consultant or independent contractor providing services to the Company or any Affiliate who the Committee determines to be an Eligible Person. An officer or director of the Company or any Affiliate that is subject to Section 16 of the Securities Exchange Act of 1934, as amended, or any successor rule or regulation, shall not be an Eligible Person. (h) "Fair Market Value" shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. Notwithstanding the foregoing, unless otherwise determined by the Committee, the Fair Market Value of Shares on a given date for purposes of the Plan shall be the average of the opening and closing sale price of the Shares as reported on the New York Stock Exchange on such date or, if such Exchange is not open for trading on such date, on the day closest to such date when such Exchange is open for trading. (i) "Option" shall mean an option granted under Section 6(a) of the Plan that shall not be an incentive stock option within the meaning of Section 422 of the Code or any successor provision and shall include Restoration Options. (j) "Other Stock-Based Award" shall mean any right granted under Section 6(f) of the Plan. (k) "Participant" shall mean an Eligible Person designated to be granted an Award under the Plan. (l) "Performance Award" shall mean any right granted under Section 6(e) of the Plan. (m) "Person" shall mean any individual, corporation, partnership, association or trust. (n) "Plan" shall mean this 1997 Stock Plan, as amended from time to time. (o) "Restoration Option" shall mean any Option granted under Section 6(b) of the Plan. (p) "Restricted Stock" shall mean any Share granted under Section 6(d) of the Plan. (q) "Restricted Stock Unit" shall mean any unit granted under Section 6(d) of the Plan evidencing the right to receive a Share (or a cash payment equal to the Fair Market Value of a Share) at some future date. (r) "Shares" shall mean shares of Common Stock, $1.00 par value, of the Company or such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4(c) of the Plan. (s) "Stock Appreciation Right" shall mean any right granted under Section 6(c) of the Plan. Section 3. Administration. - -------------------------- (a) Power and Authority of the Committee. The Plan shall be ------------------------------------ administered by the Committee. Subject to the express provisions of the Plan and to applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or with respect to which payments, rights or other matters are to be calculated in connection with) each Award; (iv) determine the terms and conditions of any Award or Award Agreement; (v) amend the terms and conditions of any Award or Award Agreement and accelerate the exercisability of Options or the lapse of restrictions relating to Restricted Stock, Restricted Stock Units or other Awards; (vi) determine whether, to what extent and under what 2 circumstances Awards may be exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited or suspended; (vii) determine whether, to what extent and under what circumstances cash, Shares, other securities, other Awards, other property and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or the Committee; (viii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (ix) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (x) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon any Participant, any holder or beneficiary of any Award and any employee of the Company or any Affiliate. (b) Delegation. The Committee may delegate its powers and duties ---------- under the Plan to one or more officers of the Company or any Affiliate or a committee of such officers, subject to such terms, conditions and limitations as the Committee may establish in its sole discretion. (c) Power and Authority of the Board of Directors. Notwithstanding --------------------------------------------- anything to the contrary contained herein, the Board of Directors may, at any time and from time to time, without any further action of the Committee, exercise the powers and duties of the Committee under the Plan. Section 4. Shares Available for Awards. - --------------------------------------- (a) Shares Available. Subject to adjustment as provided in Section ---------------- 4(c), the aggregate number of Shares which may be issued under all Awards under the Plan shall be 2,000,000. Shares to be issued under the Plan shall be Shares reacquired and held in the treasury of the Company. If any Shares covered by an Award or to which an Award relates are not purchased or are forfeited, or if an Award otherwise terminates without delivery of any Shares, then the number of Shares counted against the aggregate number of Shares available under the Plan with respect to such Award, to the extent of any such forfeiture or termination, shall again be available for granting Awards under the Plan. (b) Accounting for Awards. For purposes of this Section 4, if an --------------------- Award entitles the holder thereof to receive or purchase Shares, the number of Shares covered by such Award or to which such Award relates shall be counted on the date of grant of such Award against the aggregate number of Shares available for granting Awards under the Plan. (c) Adjustments. In the event that the Committee shall determine ----------- that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, 3 then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or other property) which thereafter may be made the subject of Awards, (ii) the number and type of Shares (or other securities or other property) subject to outstanding Awards and (iii) the purchase or exercise price with respect to any Award; provided, -------- however, that the number of Shares covered by any Award or to which such Award - ------- relates shall always be a whole number. Section 5. Eligibility. - ----------------------- Any Eligible Person shall be eligible to be designated a Participant. In determining which Eligible Persons shall receive an Award and the terms of any Award, the Committee may take into account the nature of the services rendered by the respective Eligible Persons, their present and potential contributions to the success of the Company or such other factors as the Committee, in its discretion, shall deem relevant. Section 6. Awards. - ------------------ (a) Options. The Committee is hereby authorized to grant Options to ------- Participants with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine: (i) Exercise Price. The purchase price per Share purchasable -------------- under an Option shall be determined by the Committee; provided, however, -------- ------- that such purchase price shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such Option. (ii) Option Term. The term of each Option shall be fixed by ----------- the Committee. (iii) Time and Method of Exercise. The Committee shall --------------------------- determine the time or times at which an Option may be exercised in whole or in part and the method or methods by which, and the form or forms (including, without limitation, cash, Shares, promissory notes, other securities, other Awards or other property, or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price) in which, payment of the exercise price with respect thereto may be made or deemed to have been made. (b) Restoration Options. The Committee may grant Restoration ------------------- Options, separately or together with an Option, pursuant to which, subject to the terms and conditions established by the Committee and any applicable law, the Participant would be granted a new Option when the payment of the exercise price of the non-qualified stock option to which such Restoration Option relates is made by the delivery or withholding of Shares pursuant to the relevant provisions of the plan or agreement relating to such non-qualified stock option. The new Option shall give the holder the right to purchase the number of Shares not exceeding the sum of (A) the number of Shares so provided as consideration upon the exercise of the previously granted non-qualified stock option to which such Restoration Option relates and (B) the number of Shares, if any, tendered or withheld as payment of the amount to be withheld under applicable tax laws in connection with the exercise of the non-qualified stock option to which such Restoration Option relates pursuant to the relevant provisions of the plan or agreement relating to such non- 4 qualified stock option. Restoration Options may be granted with respect to Options previously granted under the Plan or any other stock option plan of the Company, and may be granted in connection with any Option granted under the Plan or any other stock option plan of the Company at the time of such grant; provided, however, that Restoration Options may only be granted to Eligible - -------- ------- Persons. (c) Stock Appreciation Rights. The Committee is hereby authorized to ------------------------- grant Stock Appreciation Rights to Participants subject to the terms of the Plan and any applicable Award Agreement. A Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive upon exercise thereof the excess of (i) the Fair Market Value of one Share on the date of exercise (or, if the Committee shall so determine, at any time during a specified period before or after the date of exercise) over (ii) the grant price of the Stock Appreciation Right as specified by the Committee, which price shall not be less than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right. Subject to the terms of the Plan and any applicable Award Agreement, the grant price, term, methods of exercise, dates of exercise, methods of settlement and any other terms and conditions of any Stock Appreciation Right shall be as determined by the Committee. The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate. (d) Restricted Stock and Restricted Stock Units. The Committee is ------------------------------------------- hereby authorized to grant Awards of Restricted Stock and Restricted Stock Units to Participants with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine: (i) Restrictions. Shares of Restricted Stock and Restricted ------------ Stock Units shall be subject to such restrictions as the Committee may impose (including, without limitation, any limitation on the right to vote a Share of Restricted Stock or the right to receive any dividend or other right or property with respect thereto), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise as the Committee may deem appropriate. (ii) Stock Certificates. Any Restricted Stock granted under ------------------ the Plan shall be evidenced by issuance of a stock certificate or certificates, which certificate or certificates shall be held by the Company. Such certificate or certificates shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock. In the case of Restricted Stock Units, no Shares shall be issued at the time such Awards are granted. (iii) Forfeiture; Delivery of Shares. Except as otherwise ------------------------------ determined by the Committee, upon termination of employment (as determined under criteria established by the Committee) during the applicable restriction period, all Shares of Restricted Stock and all Restricted Stock Units at such time subject to restriction shall be forfeited and reacquired by the Company; provided, however, that the Committee may, when it finds -------- ------- that a waiver would be in the best interest of the Company, waive in whole or in part any or all remaining restrictions with respect to Shares of Restricted Stock or Restricted Stock Units. Any Share representing Restricted Stock that is no longer subject to restrictions shall be delivered to the holder thereof promptly after the applicable restrictions lapse or are waived. Upon the lapse or waiver of restrictions and the restricted period relating to 5 Restricted Stock Units evidencing the right to receive Shares, such Shares shall be issued and delivered to the holders of the Restricted Stock Units. (e) Performance Awards. The Committee is hereby authorized to grant ------------------ Performance Awards to Participants subject to the terms of the Plan and any applicable Award Agreement. A Performance Award granted under the Plan (i) may be denominated or payable in cash, Shares (including, without limitation, Restricted Stock), other securities, other Awards or other property and (ii) shall confer on the holder thereof the right to receive payments, in whole or in part, upon the achievement of such performance goals during such performance periods as the Committee shall establish. Subject to the terms of the Plan and any applicable Award Agreement, the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award granted, the amount of any payment or transfer to be made pursuant to any Performance Award and any other terms and conditions of any Performance Award shall be determined by the Committee. (f) Other Stock-Based Awards. The Committee is hereby authorized to ------------------------ grant to Participants such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as are deemed by the Committee to be consistent with the purpose of the Plan; provided, however, that such grants must comply with applicable law. Subject to - -------- ------- the terms of the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions of such Awards. Shares or other securities delivered pursuant to a purchase right granted under this Section 6(f) shall be purchased for such consideration, which may be paid by such method or methods and in such form or forms (including without limitation, cash, Shares, promissory notes, other securities, other Awards or other property or any combination thereof), as the Committee shall determine, the value of which consideration, as established by the Committee, shall not be less than 100% of the Fair Market Value of such Shares or other securities as of the date such purchase right is granted. (g) General. ------- (i) No Cash Consideration for Awards. Awards shall be granted -------------------------------- for no cash consideration or for such minimal cash consideration as may be required by applicable law. (ii) Awards May Be Granted Separately or Together. Awards may, -------------------------------------------- in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any other Award or any award granted under any plan of the Company or any Affiliate other than the Plan. Awards granted in addition to or in tandem with other Awards or in addition to or in tandem with awards granted under any such other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards or awards. (iii) Forms of Payment under Awards. Subject to the terms of ----------------------------- the Plan and of any applicable Award Agreement, payments or transfers to be made by the Company or an Affiliate upon the grant, exercise or payment of an Award may be made in such form or forms as the Committee shall determine (including, without limitation, cash, Shares, promissory notes, other securities, other Awards or other property or any combination thereof), and may be made in a single payment or transfer, in installments or 6 on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments. (iv) Limits on Transfer of Awards. Unless otherwise determined ---------------------------- by the Committee: (a) no Award and no right under any such Award shall be transferable by a Participant otherwise than by will or by the laws of descent and distribution; provided, however, that, if so determined by the -------- ------- Committee, a Participant may, in the manner established by the Committee, designate a beneficiary or beneficiaries to exercise the rights of the Participant and receive any property distributable with respect to any Award upon the death of the Participant; (b) each Award or right under any Award shall be exercisable during the Participant's lifetime only by the Participant or, if permissible under applicable law, by the Participant's guardian or legal representative; and (c) no Award or right under any such Award may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate. (v) Term of Awards. The term of each Award shall be for such -------------- period as may be determined by the Committee. (vi) Restrictions; Securities Exchange Listing. All certificates ----------------------------------------- for Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. If the Shares or other securities are traded on a securities exchange, the Company shall not be required to deliver any Shares or other securities covered by an Award unless and until such Shares or other securities have been admitted for trading on such securities exchange. Section 7. Amendment and Termination; Adjustments. - -------------------------------------------------- Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Agreement or in the Plan: (a) Amendments to the Plan. The Board of Directors of the Company ---------------------- may amend, alter, suspend, discontinue or terminate the Plan. (b) Amendments to Awards. The Committee may waive any conditions of -------------------- or rights of the Company under any outstanding Award, prospectively or retroactively. The Committee may not amend, alter, suspend, discontinue or terminate any outstanding Award, prospectively or retroactively, without the consent of the Participant or holder or beneficiary thereof, except as otherwise herein provided. (c) Correction of Defects, Omissions and Inconsistencies. The ---------------------------------------------------- Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry the Plan into effect. 7 Section 8. Income Tax Withholding. - ---------------------------------- In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes, which are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant. In order to assist a Participant in paying all or a portion of the federal and state taxes to be withheld or collected upon exercise or receipt of (or the lapse of restrictions relating to) an Award, the Committee, in its discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant to satisfy such tax obligation by (i) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes or (ii) delivering to the Company Shares other than Shares issuable upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes. The election, if any, must be made on or before the date that the amount of tax to be withheld is determined. Section 9. General Provisions. - ------------------------------ (a) No Rights to Awards. No Eligible Person, Participant or other ------------------- Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Eligible Persons, Participants or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to any Participant or with respect to different Participants. (b) Award Agreements. No Participant will have rights under an Award ---------------- granted to such Participant unless and until an Award Agreement shall have been duly executed on behalf of the Company. (c) No Limit on Other Compensation Arrangements. Nothing contained ------------------------------------------- in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. (d) No Right to Employment. The grant of an Award shall not be ---------------------- construed as giving a Participant the right to be retained in the employ of the Company or any Affiliate, nor will it affect in any way the right of the Company or an Affiliate to terminate such employment at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. (e) Governing Law. The validity, construction and effect of the Plan ------------- or any Award, and any rules and regulations relating to the Plan or any Award, shall be determined in accordance with the laws of the State of Minnesota. (f) Severability. If any provision of the Plan or any Award is or ------------ becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed 8 amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect. (g) No Trust or Fund Created. Neither the Plan nor any Award shall ------------------------ create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate. (h) No Fractional Shares. No fractional Shares shall be issued or -------------------- delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash shall be paid in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. (i) Headings. Headings are given to the Sections and subsections of -------- the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. Section 10. Effective Date of the Plan. - --------------------------------------- The Plan shall be effective as of April 9, 1997. Section 11. Term of the Plan. - ----------------------------- Unless the Plan shall have been discontinued or terminated as provided in Section 7(a), the Plan shall terminate on April 9, 2007. No Award shall be granted after the termination of the Plan. However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond the termination of the Plan, and the authority of the Committee provided for hereunder with respect to the Plan and any Awards, and the authority of the Board of Directors of the Company to amend the Plan, shall extend beyond the termination of the Plan. Adopted: 4/9/97 9 EX-10.V 7 SEPARATION AGREEMENT AND GENERAL RELEASE EXHIBIT (10)v. SEPARATION AGREEMENT AND GENERAL RELEASE ---------------------------------------- This Separation Agreement and General Release ("Agreement") is entered into by and between Phillip Dabill ("Dabill") and SUPERVALU INC. ("SUPERVALU"). WHEREAS, Dabill's duties with SUPERVALU as Executive Vice President, President Retail Services and Corporate Strategies Group shall terminate by mutual agreement effective October 19, 1996; WHEREAS, Dabill and SUPERVALU mutually desire to continue Dabill's employment on the terms expressed below until October 18, 1997, at which time his employment shall terminate by mutual agreement; and WHEREAS, Dabill and SUPERVALU desire to fully and finally settle all issues, differences and actual and potential claims between them, including, but in no way limited to, any claim that might arise out of Dabill's employment with SUPERVALU and the termination thereof; NOW, THEREFORE, in consideration of the mutual promises contained herein, Dabill and SUPERVALU agree as follows: 1. Dabill hereby resigns from his position with SUPERVALU as Executive Vice President, President Retail Services and Corporate Strategies Group, effective October 19, 1996. 2. From October 19, 1996 through October 18, 1997, Dabill agrees that he shall remain an employee of SUPERVALU, and shall be available for assignments at the discretion of SUPERVALU's Chief Executive Officer. Dabill agrees to be available for an average of two days per week throughout this period. 3. Dabill hereby resigns from his employment with SUPERVALU, effective October 18, 1997. 4. During the period of October 19, 1996 through October 18, 1997, SUPERVALU agrees to continue paying Dabill's base compensation, and to provide Dabill with a company automobile and country club allowance. 5. It is understood and agreed that Dabill shall be eligible for his pro rata annual and long-term incentive compensation, if earned, through October 19, 1996. It is further understood and agreed that Dabill shall not be eligible for any bonus, annual, or long-term incentive compensation for any period after October 19, 1996. 1 6. SUPERVALU agrees to pay Dabill's accrued vacation pay of six weeks, less all customary SUPERVALU deductions, sixteen days following the termination of Dabill's employment on October 18, 1997. 7. Dabill's rights to benefits under all SUPERVALU benefit plans shall be governed by the terms of those plans. 8. All other items of compensation not mentioned in paragraphs 4 through 7 above have been resolved, and Dabill shall have no further claim to any other items of compensation or benefits. 9. Dabill agrees that he was not entitled to all of the payments and benefits outlined in paragraphs 4 through 7 as a result of his employment with SUPERVALU, but that the payments and benefits are being provided as consideration for his acceptance and execution of this Agreement. 10. As an essential inducement to SUPERVALU to enter into this Agreement, and as consideration for the foregoing promises of SUPERVALU, Dabill agrees as follows: (a) Dabill acknowledges that during the course of his employment, he has had access to and gained knowledge of highly confidential and proprietary information and trade secrets, as defined in SUPERVALU's policies. Dabill further acknowledges that the misuse, misappropriation or disclosure of this information could cause irreparable harm to SUPERVALU, both during and after the term of Dabill's employment. Therefore, Dabill agrees that during his employment and at all times thereafter he will not disclose to, or use for the benefit of anyone outside of SUPERVALU, any confidential or proprietary information or trade secrets, except upon SUPERVALU's written consent or as required by Dabill's duties with SUPERVALU. (b) Dabill confirms and agrees that SUPERVALU will be substantially harmed if Dabill were to compete with SUPERVALU subsequent to his separation from employment. Therefore, Dabill agrees that for a period of twenty-four (24) months after separation from employment, Dabill will not, within the continental United States, directly or indirectly, own, manage, operate, join, control, be employed by or participate in ownership, management, operation or control of, or be connected in any manner with any business that competes with SUPERVALU in any products which are developed (or in the process of development), sold, licensed or marketed by SUPERVALU, or services which are performed, at the time of separation from employment; or provide consulting services to, or become an employee of, any customer of SUPERVALU as of the date of separation from employment. Dabill shall retain the right to seek the written approval of SUPERVALU's Chief Executive Officer waiving the requirements of this paragraph 10(b) with respect to any particular activity in which Dabill seeks to engage. 2 (c) Dabill agrees that he will not either directly, or in concert with others, recruit, solicit or induce, or attempt to induce, any employee or employees of SUPERVALU or any of its affiliates to terminate their employment and/or become associated with another employer. Dabill further agrees that he will not either directly, or in concert with others, solicit, divert or take away or attempt to divert or take away, the business or patronage of any of the customers or accounts which were contacted, solicited or served by those units of SUPERVALU in which Dabill was employed or for which he exercised management responsibilities while employed with SUPERVALU. (d) By this Agreement, Dabill and SUPERVALU intend to settle any and all claims which Dabill has or may have against SUPERVALU as a result of Dabill's employment with SUPERVALU and/or the cessation of Dabill's employment with SUPERVALU. For the consideration expressed herein, Dabill hereby releases and discharges SUPERVALU, its officers, employees, agents, assigns, insurers, representatives, counsel, administrators, successors, shareholders, and/or directors from all liability for damages or claims of any kind and agrees not to institute any claim for damages or otherwise, by charge or otherwise, nor authorize any other party, governmental or otherwise, to institute any claim via administrative or legal proceedings against SUPERVALU for any such claims including, but not limited to, any claims arising under or based upon the Minnesota Human Rights Act, Minn. Stat. (S)(S) 363.01 et seq.; Title VII of the Civil Rights Act, 42 -- --- U.S.C. (S)(S) 2000e et seq.; the Age Discrimination in Employment -- --- Act, 29 U.S.C. (S)(S) 621 et seq.; or the Americans With -- --- Disabilities Act, 42 U.S.C. (S)(S) 12101 et seq.; and any -- --- contract, quasi contract, or tort claims, whether developed or undeveloped, arising from or related to Dabill's employment with SUPERVALU, and/or the cessation of Dabill's employment with SUPERVALU. Dabill and SUPERVALU agree that, by signing this Agreement, Dabill does not waive any claims arising after the execution of this Agreement. 11. Dabill is hereby informed of his right to rescind this Agreement as far as it extends to potential claims under Minn. Stat. (S)(S) 363.01 et seq. -- --- (prohibiting discrimination in employment) by written notice to SUPERVALU within fifteen (15) calendar days following his execution of this Agreement. To be effective, such written notice must either be delivered by hand or sent by certified mail, return receipt requested, addressed to Mr. Ronald C. Tortelli, SUPERVALU INC., P. O. Box 990, Minneapolis, Minnesota 55440, delivered or post- marked within such fifteen (15) day period. Dabill understands that SUPERVALU will have no obligations under this Agreement in the event such notice is timely delivered and any payments made as of that date by SUPERVALU pursuant to paragraphs 4 through 6, above, shall be immediately repaid by Dabill to SUPERVALU. 12. Dabill is hereby informed of his right to revoke this Agreement as far as it extends to potential claims under the Age Discrimination in Employment Act, 29 U.S.C. (S)(S) 621 et seq. by informing SUPERVALU of his intent to revoke -- --- this Agreement within seven 3 (7) calendar days following his execution of this Agreement. Dabill understands that SUPERVALU will have no obligations under this Agreement in the event such notice is timely delivered and any payments made as of that date by SUPERVALU pursuant to paragraphs 4 through 6, above, shall be immediately repaid by Dabill to SUPERVALU. 13. Dabill is hereby informed that the terms of this Agreement shall be open for acceptance by him for a period of twenty-one (21) days during which time he may consider whether to accept this Agreement. 14. The terms of this Agreement shall remain strictly confidential between the parties hereto, and shall not be disclosed to third persons unless required by law. 15. Dabill understands and agrees that effective October 19, 1996, he is no longer authorized to incur any expenses or obligations or liabilities on behalf of SUPERVALU, except as required in the course of the services he is requested to perform. 16. Dabill agrees that on or before October 18, 1997 he will return to SUPERVALU any property of SUPERVALU in his possession or control. 17. Dabill agrees that he will refrain from making any statements, whether written or oral, which are disparaging of SUPERVALU, its directors, officers, employees, agents, or representatives. SUPERVALU agrees that it will refrain from making any statements, whether written or oral, which are disparaging of Dabill. 18. This Agreement shall not in any way be construed as an admission by SUPERVALU that it has acted wrongfully with respect to Dabill or any other person, or that Dabill has any rights whatsoever against SUPERVALU. SUPERVALU specifically disclaims any liability to, or wrongful acts against, Dabill or any other person, on the part of itself, its directors, its officers, its employees, its representatives or its agents. 19. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof. Dabill hereby affirms that his rights to payments or benefits from SUPERVALU are specified exclusively and completely in this Agreement. Any modification of, or addition to, this Agreement must be in writing, signed by SUPERVALU and Dabill. 20. This Agreement is personal to Dabill and may not be assigned by Dabill without the written agreement of SUPERVALU. All payments provided herein to or for the benefit of Dabill and the maintenance of coverages as herein provided, shall be made to his estate and for the benefit of his dependents, heirs and beneficiaries in the event of his death prior to the receipt thereof. 21. This Agreement constitutes a contract enforceable against either party and shall be construed and enforced in accordance with the laws of the State of Minnesota. Nothing contained in this Agreement is intended to violate any applicable law. If any part of this Agreement is construed to be in violation of a state and/or federal law, then that part 4 shall be null and void, but the balance of the provisions of this Agreement shall remain in full force and effect. 22. Dabill hereby affirms and acknowledges that he has read the foregoing Agreement and that he has hereby been advised to consult with an attorney prior to signing this Agreement. Dabill agrees that the provisions set forth in this Agreement are written in language understandable to him and further affirms that he understands the meaning of the terms of this Agreement and their effect. Dabill represents that he enters into this Agreement freely and voluntarily. IN WITNESS WHEREOF, the parties have executed this Agreement by their signatures below. Dated: November 1, 1996 /s/ Phillip Dabill ------------------ ------------------ Phillip Dabill Dated: November 5, 1996 SUPERVALU INC. ------------------ By /s/ Michael Wright ------------------ Its Chief Executive Officer ------------------------- 5 EX-12 8 RATIO OF EARNINGS TO FIXED CHARGES SUPERVALU INC. and Subsidiaries Ratio of Earnings to Fixed Charges For Fiscal Years Ended
(In thousands, except ratios) 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Earnings before income taxes $280,512 $267,692 $15,925 $294,080 $258,618 Less undistributed earnings of ShopKo (15,813) (11,136) (10,902) (8,306) (16,582) --------------- -------------- ------------- -------------- -------------- Earnings before income taxes 264,699 256,556 5,023 285,774 242,036 Interest expense 136,831 140,150 135,383 120,292 83,066 Interest on operating leases 16,950 17,059 18,204 17,288 6,661 --------------- -------------- ------------- -------------- -------------- $418,480 $413,765 $158,610 $423,354 $331,763 =============== ============== ============= ============== ============== Total fixed charges 153,781 157,209 153,587 137,580 89,727 =============== ============== ============= ============== ============== Ratio of earnings to fixed charges 2.72 2.63 1.03 3.08 3.70 =============== ============== ============= ============== ==============
EX-13 9 PORTIONS OF 1997 ANNUAL REPORT TO STOCKHOLDERS Financial Review ---------------- SUPERVALU INC. And Subsidiaries SUPERVALU management decisions are guided by established policies covering financial goals, capital structure, capital investment and dividends. The company's long-term financial goals are arrived at by balancing two broad objectives: increasing profitability levels and maintaining a strong capital structure. Management continues to review all aspects of the business for strategic fit and growth. At times, adjustments to the portfolio are necessary to obtain long-term growth targets. The profitability of the company is gauged by return on investment measures. Achievement of targeted return levels in these areas would lead to excellent returns for the company's stockholders through increasing dividends and higher valuations on their investment in the company. These measures are an integral part of the company's planning process and are an integral part of management incentive compensation. Capital Structure Management believes that maintaining a strong capital structure and financial flexibility provides a significant competitive advantage and allows the company to be opportunistic in terms of acquisitions. The capital structure of SUPERVALU at each fiscal year-end included the following:
Summary of Balance Sheet Capitalization - ----------------------------------------------------------------- (In millions) 1997 1996 1995 - ----------------------------------------------------------------- Short-term borrowings $ 134.3 $ 158.0 $ 226.2 Long-term debt 1,160.1 1,153.1 1,224.5 Present value of: Capital leases 266.8 237.5 179.6 Retailer finance leases 88.2 81.4 84.0 - ----------------------------------------------------------------- Total debt, including current maturities 1,649.4 1,630.0 1,714.3 Stockholders' equity 1,307.4 1,216.2 1,193.2 - ----------------------------------------------------------------- Total capitalization $2,956.8 $2,846.2 $2,907.5 - ----------------------------------------------------------------- Debt-to-total capitalization 56% 57% 59%
Liquidity Internally-generated funds, principally from the company's food distribution business, were the major source of capital for liquidity and growth in 1997 and 1996. Management expects that the company will continue to replenish operating assets and reduce aggregate debt with internally-generated funds and capital leases unless additional funds are necessary to complete acquisitions. The company has adequate short-term and long-term financing capabilities to fund acquisitions as the opportunities arise. Cash provided by operating activities was $329 million in 1997 compared with $422 million in 1996 and $353 million in 1995. Cash provided by operating activities in 1997 was primarily used to finance capital expenditures of $244.7 million and pay dividends of $66.9 million. In August 1996, the Board of Directors rescinded the previous treasury stock purchase program and approved a new treasury stock purchase program authorizing the company to repurchase up to 5.0 million shares to fund stock related compensation plans. The company repurchased 746,000 shares at a cost of $21.6 million in fiscal 1997. There were no treasury stock purchases under the old program during fiscal 1997. In fiscal 1996, the company repurchased 2.9 million shares at a cost of $80.1 million. On September 9, 1996, the company announced that it had agreed to sell its 14.7 million shares of ShopKo Stores, Inc. ("ShopKo") under an agreement to combine ShopKo and Phar-Mor under a holding company. That agreement was terminated in April 1997 by mutual decision of both ShopKo and Phar-Mor. On April 25, 1997, the company announced that ShopKo agreed to repurchase 8,174,387 shares of its stock from SUPERVALU for $150 million. Simultaneously, SUPERVALU will sell its remaining shares of ShopKo common stock in a secondary public offering. SUPERVALU is required to proceed with the secondary offering if the share price in the offering is at or above $18.35, but could at its option, proceed at a lower price. The two transactions, which are cross-conditional and subject to other conditions, are expected to close in the summer of 1997, resulting in 16 Financial Review ---------------- SUPERVALU INC. And Subsidiaries an estimated after-tax gain of approximately $33 million. Proceeds from the transaction, which are estimated at approximately $270 million, may be used to purchase treasury stock, reduce debt or invest via acquisition in the company's core wholesale or retail food operations. SUPERVALU will continue to use short-term and long-term debt as a supplement to internally generated funds to finance its activities. The company has a $400 million "shelf registration" in effect of which $157.5 million of medium term notes were issued during fiscal 1996, with $242.5 million available as of the end of fiscal 1997. A $400 million revolving credit agreement also is in place and expires in May 2000. The company refinanced $300 million of debt due in November 1995, by utilizing the shelf registration and $142.5 million of short- term commercial paper. Short-term commercial paper totaling $100 million has been classified as long-term debt as the company has the ability and intent to renew these obligations past 1998 and into future periods. Maturities of debt issued will depend on management's views with respect to the relative attractiveness of interest rates at the time of issuance. The company's financial position and long-term debt ratings remain strong, with long-term debt ratings of BBB+ from Standard and Poor's Ratings Group and Baa1 from Moody's Investors Services, Inc. The company's investment grade ratings, the available credit facilities and internally-generated funds provide the company with the financial flexibility to meet liquidity needs. Expansion Plans For Fiscal 1998 SUPERVALU's capital budget for fiscal 1998, which includes leases, is $400 million compared with $286 million and $271 million incurred during 1997 and 1996, respectively. The budget anticipates cash spending of $365 million plus $35 million of capital leases. The capital budget provides sufficient funding for the growth of the company and covers anticipated investments to implement the ADVANTAGE project. Approximately $200 million of the 1998 capital budget is slated for use in the company's food distribution activities, including the construction or acquisition of several small distribution centers for Save-A-Lot, information technology and normal replacement spending. The retail food capital budget of $140 million covers corporately-owned retail food businesses. The budget provides for approximately 33 new corporate retail stores including three new Cub Foods stores and 30 corporate Save-A-Lot limited assortment stores and includes $30 million for remodels of existing stores. The balance of the 1998 capital budget is dedicated to the corporate area and will be utilized principally for computer-related items. [PIE CHART APPEARS HERE] Fiscal '98 Capital Budget (In Millions) Food Distribution $200 Corporate $ 60 Retail Food $140 In addition, the company is prepared to provide up to $150 million to support store development and financing for the company's independent retailers. Retailer financing activities typically do not require new cash outlays because they are leases or guarantees, neither of which require cash outlays, or funded by the repayment or refinancing in the commercial market of existing notes. These capital spending activities are not expected to result in an increase in the company's debt-to-total-capital ratio as internal cash flow is expected to substantially support spending requirements. Because of the opportunistic nature of acquisitions, no amount for acquisition activity is included in the capital budget. The capital budget does include amounts for projects which are subject to change and for which firm commitments have not been made. 17 Financial Review ---------------- SUPERVALU INC. And Subsidiaries Dividends Cash dividends declared during fiscal 1997 totaled 99 1/2 cents per common share, an increase of 2.6 percent over the 97 cents per share declared in the prior fiscal year. This was the 60th year of consecutive cash dividends and the 25th year of successive annual increases. Cash dividend payments over the past 25 years have increased at an annual compounded rate of 10.0 percent. The company's dividend policy will continue to emphasize a high level of earnings retention. Common Stock Price SUPERVALU's common stock is listed on the New York Stock Exchange under the symbol SVU. At year-end, there were 7,655 stockholders of record compared with 7,988 at the end of fiscal 1996.
======================================================================= Common Stock Dividends Per Price Range Share Fiscal Quarter 1997 1996 1997 1996 - ----------------------------------------------------------------------- High Low High Low ======================================================================= First $32 5/8 $30 5/8 $28 7/8 $ 25 5/8 $.245 $.235 Second 31 5/8 27 5/8 31 28 1/8 .250 .245 Third 30 3/8 27 1/4 32 3/4 29 1/4 .250 .245 Fourth 32 3/8 27 3/4 32 3/4 30 3/4 .250 .245 - ----------------------------------------------------------------------- Year $32 5/8 $27 1/4 $32 3/4 $ 25 5/8 $.995 $.970 =======================================================================
Dividend payment dates are on or about the 15th day of March, June, September and December, subject to Board of Directors approval. Results of Operations Net earnings increased 5 percent for the year driven by strong performance in the retail food segment. Net sales were even with last year as the company continued significant focus and investment in ADVANTAGE related activities. The following table sets forth items from the company's Consolidated Statements of Earnings as percentages of net sales:
=========================================================================== Fiscal Year Ended - --------------------------------------------------------------------------- February 22, February 24, February 25, 1997 1996 1995 (52 weeks) (52 weeks) (52 weeks) =========================================================================== Net sales 100.0% 100.0% 100.0% Cost of sales 89.9 90.4 90.8 Selling and administrative expenses 7.8 7.4 7.1 Restructuring and other charges -- -- 1.5 Interest expense .8 .9 .8 Interest income (.1) (.2) (.2) Equity in earnings of ShopKo (.1) (.1) (.1) - --------------------------------------------------------------------------- Earnings before income taxes 1.7 1.6 .1 Income taxes .6 .6 .1 ShopKo deferred tax credit -- -- (.3) - -------------------------------------------------------------------------- Net earnings 1.1% 1.0% .3% ===========================================================================
Net Sales Net sales increased .4 percent to $16.6 billion in fiscal 1997, from $16.5 billion in 1996 and decreased .5 percent in 1996 from $16.6 billion in 1995. This was driven by an increase in retail food sales of 7.0 percent in 1997 to $4.7 billion, and a 4.6 percent increase in 1996 over 1995 sales of $4.2 billion. Food distribution sales decreased 1.0 percent in 1997, due to competitive market conditions at the wholesale and retail level, the planned discontinuance of service to a major customer in the Southeast and the expected liquidation of a major customer at the end of fiscal 1996 in the Northeast. This effect was partially mitigated by the addition of new retail customers in food distribution, the growth of Save-A-Lot limited assortment stores and food inflation of about one percent. The decrease in food distribution sales of .9 percent for 1996 was due to competitive market conditions at the 18 Financial Review ---------------- SUPERVALU INC. And Subsidiaries wholesale and retail levels, the liquidation of a major customer and lost sales from the closing of corporate retail stores, partially offset by the addition of new retail customers and food inflation of about one percent. Retail food sales increased in 1997, primarily due to the addition of stores including eight price superstores; nine conventional stores in the New England area; and the opening of two supercenters. In addition, Save-A-Lot acquired 21 limited assortment stores, its first entry into the California market, and opened 10 additional stores during the year. Corporately-owned same store sales increased 2.2 percent for the year. The sales increase was partially offset by the closing of underperforming retail stores pursuant to the restructuring program. The increase in 1996 was primarily the result of the inclusion of Hyper Shoppes, Inc.'s sales for a full year compared with 26 weeks in 1995, an increase in same-store sales of 2.6 percent and new store openings, offset partially by the closing of underperforming stores. Gross Profit Gross profit as a percentage of net sales increased to 10.1 percent in 1997, compared with 9.6 percent in 1996 and 9.2 percent in 1995. These increases were due principally to the growing proportion within the company's total sales mix of the higher-margined retail food business, which represented 29 percent of total sales in 1997, compared with 27 percent and 25 percent in 1996 and 1995, respectively. In fiscal 1997, food distribution gross profit margin increased slightly due to favorable LIFO expense and certain merchandising initiatives. The retail food gross margin increased in fiscal 1997, as a result of pricing adjustments from price modeling, changed promotional practices, improved product mix from higher gross margin items and the closing of underperforming corporate- owned retail stores. Food distribution gross margin decreased slightly in fiscal 1996, due to the competitive retail environment and the continuation of the industry's movement to every-day-low-pricing, partially offset by favorable warehousing workers compensation insurance costs. In fiscal 1996, retail food gross margin increased due to an improved mix from higher gross margin items and the closing of underperforming corporate-owned retail stores. Selling and Administrative Expenses Selling and administrative expenses were 7.8 percent of net sales in 1997, compared with 7.4 percent in 1996 and 7.1 percent in 1995. These higher percentages were primarily due to the increased proportion of the company's retail food segment which operates at a higher selling and administrative expense percentage than the food distribution segment, and the increase in direct and indirect costs related to the transformation of the distribution operations through the ADVANTAGE program. Food distribution selling and administrative expenses as a percent of net sales were higher than last year due to increased expenses associated with ADVANTAGE, including increased computer and systems development costs, overlapping staffing and training needs, as well as costs related to opening the Southeast regional distribution facility ("SERF") and the impact of fixed expenses as a percent of slightly decreased sales. Retail food selling and administrative expenses as a percent of net sales were comparable to last year. Substantial progress has been made in the company's ADVANTAGE initiatives. Completed activities during fiscal 1997 include: distributing general merchandise and health and beauty care products to all customers in the Southeast region from SERF which opened earlier in the year and servicing customers in two regions from the new National Customer Service Center in Denver. In addition, the following activities are in progress: reconfiguring the existing local distribution centers in the Southeast region to achieve additional cost efficiencies; construction of the Midwest regional distribution facility for which shipping is anticipated to begin in the summer of calendar 1998; retailer training for the category management program in the Midwest and Central regions; category management implementation in various phases across five of seven regions; and the design and development of new category management and allowance programs. 19 Financial Review ---------------- SUPERVALU INC. And Subsidiaries Operating Earnings The company's pre-tax operating earnings (earnings before interest, corporate expenses, equity in earnings of ShopKo and taxes) were $404.1 million in 1997, compared with $391.8 million in 1996 and $153.2 million ($384.6 million excluding restructuring and other charges) in 1995. The increase in operating earnings was principally due to significant improvement in corporate retail performance, offset partially by the continuing impact of increased costs related to the transformation of the food distribution segment through the ADVANTAGE program. Food distribution operating earnings were $310.5 million in 1997, compared with $334.7 million in 1996 and $257.5 million ($350.6 million excluding restructuring and other charges) in 1995. Operating earnings in 1997 were negatively impacted by higher ADVANTAGE related expenses and the general softness in sales, partially offset by improved operating results at Save-A-Lot and Hazelwood Farms Bakeries. The increase in 1996 compared to 1995 was due to the restructure and other charges incurred in fiscal 1995. Retail food operating earnings were $93.7 million in 1997, compared with $57.2 million in 1996 and a loss of $104.3 million (profit of $34.1 million excluding restructuring and other charges) in 1995. The increase in 1997 resulted from higher sales and improved gross margins resulting from merchandising efforts and changes to product mix. The increase in 1996 was due to restructure and other charges incurred in fiscal 1995 and the elimination of operating losses from the closing of underperforming corporate retail stores. Interest Expense and Income Interest expense of $136.8 million was incurred in 1997, compared with $140.2 million for 1996 and $135.4 million for 1995. The decrease in 1997 was primarily due to slightly lower short-term interest rates. The increase in interest expense in 1996 over 1995 resulted from an increase in debt levels and higher short-term borrowing rates. Interest income decreased to $16.1 million in 1997, compared with $23.5 million in 1996 and $24.1 million in 1995. Interest income for 1997 decreased due to the reduction in notes receivable as a result of the sale of notes in the ordinary course of business at the end of fiscal 1996 and in the fourth quarter of fiscal 1997. Equity in Earnings of ShopKo The company's ownership in ShopKo is 46 percent and is accounted for under the equity method. Equity in earnings of ShopKo for 1997 was $20.7 million compared with $17.6 million in 1996 and $17.4 million in 1995. ShopKo net sales for 1997 increased 18.6 percent to $2.33 billion, compared with 1996 sales of $1.97 billion, an increase of 6.2 percent over 1995. ShopKo reported total net earnings of $44.9 million for 1997, an increase of 16.9 percent from 1996. The net earnings increase resulted from increased sales in the ProVantage managed health care operations and comparable store sales increases of 6 percent. Net earnings for 1996 were $38.4 million, a 1.7 percent increase over 1995. Income Taxes In 1995, the Internal Revenue Service ("IRS") completed its review for tax years ending in 1991 and 1992, which included the partial disposition of ShopKo in October 1991. The transaction was reported as a taxable sale in the audited financial statements for that year. Upon completion of their review, the IRS concluded that the partial disposition of ShopKo resulted in no tax liability. Therefore, the $40.8 million of deferred taxes provided by the company in the financial statements was reversed and reflected in the 1995 consolidated statement of earnings. 20 Financial Review ---------------- SUPERVALU INC. And Subsidiaries Net Earnings Net earnings for 1997 were $175.0 million, compared with net earnings for 1996 of $166.4 million and $43.3 million reported in 1995. Net earnings in 1997 were positively impacted by the significant improvement in the company's retail food operations, which more than offset increased expenses related to the ADVANTAGE project. Although certain ADVANTAGE initiatives are generating benefits, the company anticipates ADVANTAGE expenses, primarily driven by increased information technology costs, to exceed benefits through much of fiscal 1998. The increase in net earnings in 1996 was related principally to the restructuring and other charges incurred in 1995, partially offset by a one-time tax credit related to the partial disposition of ShopKo. New Accounting Standards Impairment of Long-Lived Assets Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" was issued in March 1995 and was adopted in fiscal 1997. The impact to the company of adopting this statement was immaterial. Earnings per Share Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share" was issued in February 1997 and will be adopted in the fourth quarter of fiscal 1998. The adoption of SFAS No. 128 is not expected to have a significant impact on the calculation of earnings per share as currently reported. Year 2000 Many of the company's computer systems will require modification or replacement over the next three years in order to render these systems compliant with the year 2000. In 1996, the Emerging Issues Task Force of the Financial Accounting Standards Board reached a consensus that the cost associated with modifying internal use software for the year 2000 should be expensed as incurred. The company has established processes for evaluating and managing the risks and costs associated with this issue. The computing portfolio has been identified and assessments have been completed. The company will incur costs to address the year 2000, but management does not believe that these costs will materially impact the company's results of operations or financial condition through the end of fiscal 2000. Inflation Inflation has had only a modest effect on the company's operating results and its external sources of liquidity. The impact of low food inflation on the company's sales was partially offset by retail development and marketing activities. As operating expenses and inventory costs have increased, the company has been able to identify operating efficiencies to minimize the impact. Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 The information in this Annual Report includes forward-looking statements. Important risks and uncertainties that could cause actual results to differ materially from those discussed in such forward looking statements are detailed in Exhibit 99.1 to the company's Annual Report on Form 10-K, for the Year Ended February 22, 1997; other risks or uncertainties may be detailed from time to time in the company's future Securities and Exchange Commission filings. 21 Ten Year Financial and Operating Summary ---------------------------------------- SUPERVALU INC. And Subsidiaries
- --------------------------------------------------------------------------------------------------------------------------- 1997 1996 1995 (b) 1994 - --------------------------------------------------------------------------------------------------------------------------- Statement of Earnings Data (a) Net sales $16,551,902 $16,486,321 $16,563,772 $15,936,925 Cost of sales 14,885,249 14,906,602 15,040,117 14,523,434 Selling and administrative expense 1,286,121 1,212,967 1,169,843 1,044,433 Restructuring and other charges -- -- 244,000 -- Interest, net 120,695 116,678 111,271 89,767 Equity in earnings of ShopKo 20,675 17,618 17,384 14,789 Earnings before taxes and accounting change 280,512 267,692 15,925 294,080 Provision for income taxes 105,468 101,259 (27,409) 108,827 Net earnings 175,044 166,433 43,334 185,253 Earnings per common share before accounting change 2.60 2.44 .61 2.58 Net earnings per common share 2.60 2.44 .61 2.58 - --------------------------------------------------------------------------------------------------------------------------- Balance Sheet Data (a) Inventories (FIFO) $ 1,221,344 $ 1,158,028 $ 1,230,017 $ 1,227,170 Working capital (d) 361,260 355,124 319,429 452,121 Net property, plant and equipment 1,648,524 1,600,166 1,571,298 1,410,123 Total assets 4,283,326 4,183,503 4,305,149 4,042,351 Long-term debt (e) 1,420,591 1,445,562 1,459,766 1,262,995 Stockholders' equity 1,307,423 1,216,176 1,193,222 1,275,458 - --------------------------------------------------------------------------------------------------------------------------- Other Statistics (a) Earnings before accounting change as a percent of net sales 1.06% 1.01% .26% 1.16% Return on average stockholders' equity 13.89% 13.96% 3.46% 15.40% Book value per common share $ 19.46 $ 17.94 $ 16.92 $ 17.62 Current ratio (d) 1.26:1 1.27:1 1.22:1 1.37:1 Debt to capital ratio 56% 57% 59% 53% Dividends declared per common share $ .99 1/2 $ .97 $ .92 1/2 $ .85 1/2 Weighted average common shares outstanding 67,255 68,277 71,388 71,817 Depreciation and amortization $ 232,071 $ 219,084 $ 198,718 $ 186,261 Capital expenditures, excluding retailer financing $ 285,939 $ 271,456 $ 319,560 $ 239,602 - ---------------------------------------------------------------------------------------------------------------------------
Notes: (a) Amounts for all years prior to 1992 have been restated to reflect the company's ownership percentage in ShopKo under the equity method of accounting because of the sale of a 54 percent interest in ShopKo, effective October 16, 1991. Fiscal 1992 contained 53 weeks; all other years cover 52 weeks. Dollars in thousands except per share and percentage data. (b) Net earnings were reduced by restructuring and other charges of $159.4 million ($2.23 per share). The provision for income taxes includes a reversal of $40.8 million ($.57 per share) of deferred taxes in 1995 related to the partial disposition of ShopKo in 1992. The 1995 ratios were calculated including the restructuring and other charges and including the reversal of $40.8 million of deferred taxes related to the partial disposition of ShopKo. The ratios for earnings before accounting change as a percent of net sales and the return on average stockholders' equity would have been .98 and 12.95 percent, respectively, if the restructuring and other charges and the reversal of $40.8 million of deferred taxes had been excluded. (c) The cumulative effect of adopting Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," resulted in a decrease in net earnings of $13,288,000 ($.18 per share). A $51,304,000 after-tax gain on the sale of a 54 percent interest in ShopKo was included in fiscal 1992 net earnings ($.69 per share). All statistics include the results of both transactions. (d) Working capital and current ratio are calculated after adding back the LIFO reserve. (e) Total long-term debt includes long-term debt and long-term obligations under capital leases. 22
- ----------------------------------------------------------------------------------------------------------------------------------- 1993 1992 (c) 1991 1990 1989 1988 - ----------------------------------------------------------------------------------------------------------------------------------- Statement of Earnings Data (a) Net sales $12,568,000 $10,632,301 $10,104,899 $9,734,811 $9,061,176 $8,331,333 Cost of sales 11,531,394 9,807,633 9,360,886 9,043,953 8,429,692 7,751,172 Selling and administrative expense 746,857 583,789 531,972 484,586 433,177 399,504 Restructuring and other charges -- -- -- -- -- -- Interest, net 54,203 34,320 31,441 33,104 34,532 30,089 Equity in earnings of ShopKo 23,072 32,176 45,080 42,562 36,943 27,122 Earnings before taxes and accounting change 258,618 322,840 225,680 215,730 200,718 177,690 Provision for income taxes 94,092 115,175 70,544 67,984 63,250 64,678 Net earnings 164,526 194,377 155,136 147,746 137,468 113,012 Earnings per common share before accounting change 2.31 2.78 2.06 1.97 1.84 1.51 Net earnings per common share 2.31 2.60 2.06 1.97 1.84 1.51 - ----------------------------------------------------------------------------------------------------------------------------------- Balance Sheet Data (a) Inventories (FIFO) $ 1,247,337 $ 862,621 $ 785,395 $ 726,194 $ 688,947 $ 618,545 Working capital (d) 361,093 534,182 196,217 188,139 165,887 217,320 Net property, plant and equipment 1,384,241 879,186 789,443 701,162 666,508 518,197 Total assets 4,064,189 2,484,300 2,401,357 2,239,900 2,116,202 1,844,918 Long-term debt (e) 1,347,386 608,241 567,444 549,694 557,828 529,894 Stockholders' equity 1,134,820 1,030,981 978,678 869,891 763,706 660,720 - ----------------------------------------------------------------------------------------------------------------------------------- Other Statistics (a) Earnings before accounting change as a percent of net sales 1.31% 1.95% 1.54% 1.52% 1.52% 1.36% Return on average stockholders' equity 15.32% 20.17% 16.82% 18.12% 19.31% 18.28% Book value per common share $ 15.84 $ 14.35 $ 13.01 $ 11.59 $ 10.20 $ 8.84 Current ratio (d) 1.27:1 1.72:1 1.24:1 1.25:1 1.22:1 1.35:1 Debt to capital ratio 59% 43% 46% 46% 46% 49% Dividends declared per common share $ .76 1/2 $ .70 1/2 $ .64 1/2 $ .58 1/2 $ .48 1/2 $ .43 1/2 Weighted average common shares outstanding 71,341 74,700 75,165 74,972 74,785 74,634 Depreciation and amortization $ 140,790 $ 111,488 $ 105,582 $ 95,593 $ 86,944 $ 85,179 Capital expenditures, excluding retailer financing $ 164,728 $ 175,624 $ 203,199 $ 142,899 $ 193,218 $ 137,533 - -----------------------------------------------------------------------------------------------------------------------------------
23 Consolidated Composition of Net Sales and Operating Earnings ============================================================ SUPERVALU INC. And Subsidiaries The following table sets forth, for each of the last five fiscal years, the composition of the company's net sales and operating earnings. - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------- (In thousands, except percent data) 1997 1996 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------- Net sales - ------------------------------------------------------------------------------------------------------------------------------- Food distribution $14,545,266 $14,685,899 $14,820,009 $14,361,255 $11,448,148 87.9% 89.1% 89.5% 90.1% 91.1% Retail food 4,719,079 4,412,203 4,219,691 3,696,145 2,699,075 28.5% 26.7% 25.4% 23.2% 21.5% Less: Eliminations (2,712,443) (2,611,781) (2,475,928) (2,120,475) (1,579,223) (16.4)% (15.8)% (14.9)% (13.3)% (12.6)% Total net sales $16,551,902 $16,486,321 $16,563,772 $15,936,925 $12,568,000 100.0% 100.0% 100.0% 100.0% 100.0% - ------------------------------------------------------------------------------------------------------------------------------- Operating earnings - ------------------------------------------------------------------------------------------------------------------------------- Food distribution $ 310,455 $ 334,673 $ 257,495 $ 365,527 $ 284,337 Retail food 93,662 57,176 (104,338) 31,366 24,842 ------------------------------------------------------------------------------- Total operating earnings 404,117 391,849 153,157 396,893 309,179 Interest expense, net (120,695) (116,678) (111,271) (89,767) (54,203) General corporate expenses (23,585) (25,097) (43,345) (27,835) (19,430) ------------------------------------------------------------------------------- Earnings before equity in earnings of ShopKo and income taxes 259,837 250,074 (1,459) 279,291 235,546 Equity in earnings of ShopKo 20,675 17,618 17,384 14,789 23,072 ------------------------------------------------------------------------------- Earnings before income taxes $ 280,512 $ 267,692 $ 15,925 $ 294,080 $ 258,618 - ------------------------------------------------------------------------------------------------------------------------------- Identifiable assets - ------------------------------------------------------------------------------------------------------------------------------- Food distribution $ 2,746,284 $ 2,684,088 $ 2,843,862 $ 2,644,670 $ 2,830,400 Retail food 1,166,870 1,126,197 1,121,596 948,551 837,148 Corporate 370,172 373,218 339,691 449,130 396,641 ------------------------------------------------------------------------------- Total $ 4,283,326 $ 4,183,503 $ 4,305,149 $ 4,042,351 $ 4,064,189 - ------------------------------------------------------------------------------------------------------------------------------- Depreciation and amortization - ------------------------------------------------------------------------------------------------------------------------------- Food distribution $ 122,778 $ 115,507 $ 107,471 $ 105,763 $ 83,686 Retail food 90,389 85,010 76,145 64,924 48,303 Corporate 18,904 18,567 15,102 15,574 8,801 ------------------------------------------------------------------------------- Total $ 232,071 $ 219,084 $ 198,718 $ 186,261 $ 140,790 - ------------------------------------------------------------------------------------------------------------------------------- Capital expenditures - ------------------------------------------------------------------------------------------------------------------------------- Food distribution $ 139,779 $ 102,435 $ 159,838 $ 131,322 $ 60,408 Retail food 120,881 137,914 119,605 69,939 78,715 Corporate 25,279 31,107 40,117 38,341 25,605 ------------------------------------------------------------------------------- Total $ 285,939 $ 271,456 $ 319,560 $ 239,602 $ 164,728 ===============================================================================================================================
The company's food distribution operations include sales to independently owned and operated food stores, sales to food stores owned by the company, and the operations of several allied service operations throughout the United States. Retail food operations include sales by food stores owned by the company, other than transition retail food stores. Eliminations include food distribution sales to food stores included in the retail food segment. Industry segment operating earnings were computed as total revenue less associated operating expenses, which exclude general corporate expenses, net interest expense and income taxes. Identifiable assets are those assets directly associated with the industry segments. Operating earnings in 1995 for food distribution and retail food were reduced by $93.1 and $138.4 million, respectively, for restructuring and other charges. General corporate expenses includes $12.6 million for restructuring and other charges. See notes following the Ten Year Financial and Operating Summary and notes to the consolidated financial statements. 24 Consolidated Statements of Earnings ----------------------------------- SUPERVALU INC. And Subsidiaries
- -------------------------------------------------------------------------------------------------- (In thousands, except per share data) Fiscal Year Ended - -------------------------------------------------------------------------------------------------- February 22, February 24, February 25, 1997 1996 1995 (52 Weeks) (52 Weeks) (52 Weeks) - -------------------------------------------------------------------------------------------------- Net sales $16,551,902 $16,486,321 $16,563,772 Costs and expenses Cost of sales 14,885,249 14,906,602 15,040,117 Selling and administrative expenses 1,286,121 1,212,967 1,169,843 Restructuring and other charges -- -- 244,000 Interest Interest expense 136,831 140,150 135,383 Interest income 16,136 23,472 24,112 - -------------------------------------------------------------------------------------------------- Interest expense, net 120,695 116,678 111,271 - -------------------------------------------------------------------------------------------------- Total costs and expenses 16,292,065 16,236,247 16,565,231 - -------------------------------------------------------------------------------------------------- Earnings (loss) before equity in earnings of ShopKo and income taxes 259,837 250,074 (1,459) Equity in earnings of ShopKo 20,675 17,618 17,384 - -------------------------------------------------------------------------------------------------- Earnings before income taxes 280,512 267,692 15,925 Provision for income taxes Current 77,591 36,692 113,505 Deferred 27,877 64,567 (140,914) - -------------------------------------------------------------------------------------------------- Income tax expense 105,468 101,259 (27,409) - -------------------------------------------------------------------------------------------------- Net earnings $ 175,044 $ 166,433 $ 43,334 - -------------------------------------------------------------------------------------------------- Weighted average number of common shares outstanding 67,255 68,277 71,388 Net earnings per common share $ 2.60 $ 2.44 $ .61 - --------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 25 Consolidated Balance Sheets --------------------------------- SUPERVALU INC. And Subsidiaries
- ---------------------------------------------------------------------------------------------------------------------- (In thousands, except per share data) February 22, 1997 February 24, 1996 - ---------------------------------------------------------------------------------------------------------------------- Assets Current Assets Cash $ 6,539 $ 5,215 Receivables, less allowance for losses of $17,806 in 1997 and $22,064 in 1996 403,835 380,611 Inventories 1,091,805 1,029,911 Other current assets 98,620 137,972 - ---------------------------------------------------------------------------------------------------------------------- Total current assets 1,600,799 1,553,709 - ---------------------------------------------------------------------------------------------------------------------- Long-term notes receivable 45,588 36,731 Long-term investment in direct financing leases 84,350 74,185 Property, plant and equipment Land 140,427 146,535 Buildings 957,815 903,621 Property under construction 28,030 53,775 Leasehold improvements 150,040 137,551 Equipment 1,113,486 988,963 Assets under capital leases 298,757 270,549 - ---------------------------------------------------------------------------------------------------------------------- 2,688,555 2,500,994 Less accumulated depreciation and amortization Owned property, plant and equipment 983,229 855,429 Assets under capital leases 56,802 45,399 - ---------------------------------------------------------------------------------------------------------------------- Net property, plant and equipment 1,648,524 1,600,166 - ---------------------------------------------------------------------------------------------------------------------- Investment in ShopKo 209,789 193,975 Goodwill 491,427 499,688 Other assets 202,849 225,049 - ---------------------------------------------------------------------------------------------------------------------- Total assets $4,283,326 $4,183,503 - ---------------------------------------------------------------------------------------------------------------------- See notes to consolidated financial statements.
26
- ----------------------------------------------------------------------------------------------------------------- February 22, 1997 February 24, 1996 - ----------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 134,272 $ 158,027 Accounts payable 923,958 965,444 Current maturities of long-term debt 72,905 8,483 Current obligations under capital leases 21,544 17,955 Other current liabilities 216,399 176,793 - ----------------------------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 1,369,078 1,326,702 - ----------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT 1,087,162 1,144,600 LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES 333,429 300,962 DEFERRED INCOME TAXES 38,054 37,076 OTHER LIABILITIES 148,180 157,987 COMMITMENTS AND CONTINGENCIES -- -- STOCKHOLDERS' EQUITY Preferred stock, no par value: Authorized 1,000 shares Shares issued and outstanding, 6 in 1997 and 1996 ($1,000 stated value) 5,908 5,908 Common stock, $1.00 par value: Authorized 200,000 shares Shares issued, 75,335, in 1997 and 1996 75,335 75,335 Capital in excess of par value 13,296 12,737 Retained earnings 1,444,755 1,336,942 Treasury stock, at cost, 8,453 shares in 1997 and 7,892 in 1996 (231,871) (214,746) - ----------------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 1,307,423 1,216,176 - ----------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,283,326 $4,183,503 - -----------------------------------------------------------------------------------------------------------------
27 Consolidated Statements of Stockholders' Equity ----------------------------------------------- SUPERVALU INC. And Subsidiaries
- ---------------------------------------------------------------------------------------------------------------------------------- (In thousands, except per share data) Capital in Preferred Common Excess of Treasury Retained Stock Stock Par Value Stock Earnings Total - ---------------------------------------------------------------------------------------------------------------------------------- Balances at February 26, 1994 $5,908 $75,335 $12,966 $ (86,868) $1,268,117 $1,275,458 Net earnings -- -- -- -- 43,334 43,334 Sales of common stock under option plans -- -- (290) 1,435 -- 1,145 Cash dividends declared on common stock--$.925 per share -- -- -- -- (66,024) (66,024) Compensation under employee incentive plans -- -- 41 253 -- 294 Purchase of shares for treasury -- -- -- (52,065) -- (52,065) Other -- -- -- -- (8,920) (8,920) - ---------------------------------------------------------------------------------------------------------------------------------- Balances at February 25, 1995 5,908 75,335 12,717 (137,245) 1,236,507 1,193,222 Net earnings -- -- -- -- 166,433 166,433 Sales of common stock under option plans -- -- (84) 3,458 -- 3,374 Cash dividends declared on common stock--$.970 per share -- -- -- -- (65,998) (65,998) Compensation under employee incentive plans -- -- 104 (869) -- (765) Purchase of shares for treasury -- -- -- (80,090) -- (80,090) - ---------------------------------------------------------------------------------------------------------------------------------- Balances at February 24, 1996 5,908 75,335 12,737 (214,746) 1,336,942 1,216,176 Net earnings -- -- -- -- 175,044 175,044 Sales of common stock under option plans -- -- 378 3,786 -- 4,164 Cash dividends declared on common stock--$.995 per share -- -- -- -- (67,231) (67,231) Compensation under employee incentive plans -- -- 181 650 -- 831 Purchase of shares for treasury -- -- -- (21,561) -- (21,561) - ---------------------------------------------------------------------------------------------------------------------------------- Balances at February 22, 1997 $5,908 $75,335 $13,296 $(231,871) $1,444,755 $1,307,423 - ----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 28 Consolidated Statements of Cash Flows ------------------------------------- SUPERVALU INC. And Subsidiaries
- --------------------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS) FISCAL YEAR ENDED - --------------------------------------------------------------------------------------------------------------------------------- FEBRUARY 22, FEBRUARY 24, FEBRUARY 25, 1997 1996 1995 - --------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 175,044 $ 166,433 $ 43,334 Adjustments to reconcile net earnings to net cash provided by operating activities: Equity in earnings of ShopKo (20,675) (17,618) (17,384) Dividends received from ShopKo 4,862 6,482 6,482 Depreciation and amortization 232,071 219,084 198,718 Provision for losses on receivables 8,851 2,269 1,627 Restructuring and other charges -- -- 244,000 Gain on sale of property, plant and equipment (3,530) (12,215) (3,689) Deferred income taxes 27,877 64,567 (140,914) Treasury shares contributed to employee incentive plan 430 107 525 Changes in assets and liabilities, excluding effect from acquisitions: Receivables (30,509) 17,865 (14,862) Inventories (58,658) 79,880 52,296 Other current assets 12,408 (2,671) 4,638 Direct financing leases 9,111 8,302 9,517 Accounts payable (53,872) (59,218) 18,444 Other liabilities 25,379 (51,569) (49,804) - --------------------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 328,789 421,698 352,928 - --------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to long-term notes receivable (52,727) (28,394) (32,052) Proceeds received on long-term notes receivable 43,870 64,757 33,396 Proceeds from sale of property, plant and equipment 78,825 94,733 43,854 Purchase of property, plant and equipment (244,682) (236,248) (298,124) Business acquisitions, net of cash acquired (4,996) -- (111,083) Other investing activities (16,920) (39,645) 33,033 - --------------------------------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (196,630) (144,797) (330,976) - --------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in checks outstanding, net of deposits 3,270 3,972 (11,928) Net issuance (reduction) of short-term notes payable (23,755) (68,141) 199,530 Proceeds from issuance of long-term debt 3,193 257,500 150,000 Repayment of long-term debt (7,612) (308,406) (221,245) Reduction of obligations under capital leases (21,205) (17,529) (19,095) Proceeds from the sale of common stock under option plans 3,719 2,291 212 Dividends paid (66,884) (66,122) (65,368) Payment for purchase of treasury stock (21,561) (80,090) (52,065) - --------------------------------------------------------------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (130,835) (276,525) (19,959) - --------------------------------------------------------------------------------------------------------------------------------- Net increase in cash 1,324 376 1,993 Cash at beginning of year 5,215 4,839 2,846 - --------------------------------------------------------------------------------------------------------------------------------- CASH AT END OF YEAR $ 6,539 $ 5,215 $ 4,839 - ---------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 29 Notes To Consolidated Financial Statements ------------------------------------------ SUPERVALU INC. And Subsidiaries Summary of Significant Accounting Policies Principles of Consolidation: The consolidated financial statements include the accounts of the company and all its subsidiaries. All significant inter-company accounts and transactions have been eliminated. Revenue and Income Recognition: Revenues and income from product sales are recognized upon shipment of the product for food distribution and at the point of sale for retail food. Revenues and income from services rendered are recognized immediately after such services have been provided. Inventories: Inventories are stated at the lower of cost or market. Cost is determined through use of the last-in, first-out method (LIFO) for a major portion of consolidated inventories: 76.3 percent for fiscal 1997 and 78.9 percent for fiscal 1996. The first-in, first-out method (FIFO) is used to determine cost for remaining inventories which are principally perishable products. Market is replacement value. If the FIFO method had been used to determine cost of inventories for which the LIFO method is used, the company's inventories would have been higher by approximately $129.5 million at February 22, 1997 and $128.1 million at February 24, 1996. Property, plant and equipment: Property, plant and equipment are carried at cost. Depreciation, as well as amortization of assets under capital leases, is based on the estimated useful lives of the assets using a straight-line method. Estimated useful lives generally are 5 to 40 years for buildings and major improvements; 3 to 10 years for equipment; and term of the lease or expected life for leasehold improvements. Interest on property under construction of $2.0, $2.6 and $2.7 million was capitalized in fiscal years 1997, 1996 and 1995, respectively. Goodwill: Amounts paid in excess of the fair value of acquired net assets are amortized on a straight-line basis. The recoverability of goodwill is assessed by determining whether the goodwill balance can be recovered through projected cash flows and operating results over its remaining life. Any impairment of the asset would be recognized when it is probable that such future undiscounted cash flows will be less than the carrying value of the asset. As of February 22, 1997, $400 million of goodwill related to the acquisition of Wetterau Incorporated in fiscal 1993 is being amortized over 40 years. Goodwill related to other acquisitions is being amortized over 15 to 20 years. Goodwill is shown net of accumulated amortization of $66.9 and $48.6 million for fiscal 1997 and 1996, respectively. Accounts payable: Accounts payable include $75.8 and $72.5 million at February 22, 1997 and February 24, 1996, respectively, of issued checks which had not cleared the company's bank accounts, reduced by deposits in transit and cash on deposit in the company's depository banks. Fair value disclosures of financial instruments: The estimated fair value of notes receivable approximates the net carrying value at February 22, 1997 and February 24, 1996. Notes receivable are valued based on comparisons to publicly traded debt instruments of similar credit quality. At February 22, 1997 and February 24, 1996 the estimated fair market value of the company's long-term debt (including current maturities) exceeded the carrying value by approximately $33 and $57 million, respectively. The estimated fair value was based on market quotes where available, discounted cash flows and market yields for similar instruments. The estimated fair market value of the company's commercial paper outstanding as of February 22, 1997 and February 24, 1996 approximated the carrying value. Pre-opening costs: Pre-opening costs of retail stores are charged against earnings as incurred. Net earnings per share: Net earnings per share are computed by dividing net earnings by the weighted average number of common shares outstanding. Outstanding stock options do not have a significant dilutive effect on earnings per share. Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share" was issued in February 1997 and will be adopted in the fourth quarter of fiscal 1998. The adoption of SFAS No. 128 is not expected to have a significant impact on the calculation of earnings per share as currently reported. Use of Estimates: The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications: Certain reclassifications have been made to prior years' consolidated financial statements to conform to 1997 presentation. These reclassifications did not affect results of operations as previously reported. Restructuring and Other Charges In fiscal 1995, restructuring and other charges totaling $244.0 million were incurred for the implementation of the ADVANTAGE project, the sale, closure or restructure of certain retail businesses and the recognition of certain asset impairments. The aggregate charges included $204.8 million for activities under the restructuring plan and an additional $39.2 million for asset impairment. The asset impairment charge covered intangibles in businesses where future undiscounted cash flow was not sufficient to recover the book value of the recorded intangible. 30 Notes To Consolidated Financial Statements ------------------------------------------ SUPERVALU INC. And Subsidiaries Of the $204.8 million restrucuring charge, $18.0 million represented the reduction of the carrying value of certain assets to their fair market value. The company utilized approximately $28.0 million and $64.0 million of the reserve in 1995 and 1996, respectively, primarily for the closedown and disposal of assets at 23 underperforming corporate retail stores, for carrying costs and losses on disposition of tangible assets and employee separation costs. In 1997 the company utilized $44.0 million of the reserve primarily for carrying costs and losses on the disposition of property as well as the closing of underperforming corporate retail stores and employee separation costs. The remaining $50.8 million of reserve is expected to be utilized for the completion of property sales, employee separation costs, the closing of underperforming retail stores, and for certain non cancelable lease and other obligations which will extend beyond fiscal 1998. Notes Receivable Notes receivable arise from fixture and other financing related to independently owned retail food operations. Loans to independent retailers, as well as trade accounts receivable, are primarily collateralized by the retailers' inventory, equipment and fixtures. The notes range in length from 1 to 10 years with the average being 6 years, and may be non-interest bearing or bear interest at rates ranging primarily from 5 to 12 percent. Included in current receivables are notes receivable due within one year totaling $6.6 and $5.7 million at February 22, 1997 and February 24, 1996, respectively. Investment In ShopKo The company's ownership in ShopKo, a mass merchandise discount retailer, is 46 percent and is accounted for under the equity method. Summarized financial information of ShopKo is as follows:
============================================================= (In thousands) 1997 1996 1995 - ------------------------------------------------------------- Sales $2,333,407 $1,968,016 $1,852,929 Gross profit 549,666 501,283 488,016 Net earnings 44,946 38,439 37,790 ============================================================= ============================================================= (In thousands) 1997 1996 - ------------------------------------------------------------- Current assets $565,172 $476,191 Non-current assets 668,720 641,769 Current liabilities 333,315 260,795 Non-current liabilities 439,713 435,534 - -------------------------------------------------------------
On April 25, 1997, the company announced that ShopKo agreed to repurchase 8,174,387 shares of their stock from SUPERVALU for $150 million. Simultaneously, SUPERVALU will sell their remaining shares of ShopKo common stock in a secondary public offering. SUPERVALU is required to proceed with the secondary offering if the share price in the offering is at or above $18.35, but could at its option, proceed at a lower price. The two transactions, which are cross-conditional and subject to other conditions, are expected to close in the summer of 1997. Debt
=============================================================== (In thousands, February 22, February 24, except payment data) 1997 1996 - --------------------------------------------------------------- 7.800%-8.875% promissory notes $ 400,000 $ 400,000 semi-annual interest payments of $16.1 million; due 2002 to 2022 5.92%-6.69% medium-term notes 157,500 157,500 semi-annual interest payments of $4.9 million; due 1997 to 2005 7.25% promissory notes 150,000 150,000 semi-annual interest payments of $5.4 million; due 1999 Notes payable 100,000 100,000 Variable rate to 8.25% industrial 89,369 89,833 revenue bonds 9.67% senior subordinated notes 75,000 75,000 due 1998 8.875%-9.64% promissory notes 70,000 70,000 semi-annual interest payments of $3.2 million; due 1997 to 1999 6.00%-11.50% promissory notes 38,482 29,268 due 1998 to 2004 8.28%-9.46% promissory notes due 2010 23,893 24,804 9.96% promissory notes due 2005 21,247 22,698 8.875% sinking fund debentures due 2016 22,110 22,110 3.00%-8.50% mortgages payable due 3,154 4,072 1997 to 2008 Other debt 9,312 7,798 - --------------------------------------------------------------- 1,160,067 1,153,083 Less current maturities 72,905 8,483 - --------------------------------------------------------------- Long-term debt $1,087,162 $1,144,600 ===============================================================
Aggregate maturities of long-term debt during the next five fiscal years are:
=============================================================== (In thousands) - --------------------------------------------------------------- 1998 $ 72,905 1999 149,783 2000 207,881 2001 180,157 2002 10,190 ===============================================================
31 Notes To Consolidated Financial Statements ------------------------------------------ SUPERVALU INC. And Subsidiaries The company has a $400 million revolving credit agreement that expires in May 2000. The company pays an annual facility fee of .125 percent for the credit agreement. The company also has a $400 million "shelf registration" in effect under which $157.5 million of medium-term notes were issued in fiscal 1996. As of February 22, 1997, and February 24, 1996, commercial paper borrowings of $100 million were classified as long-term debt, reflecting SUPERVALU's intent and ability, through the existence of the revolving credit agreement, to refinance these borrowings. The debt agreements contain various covenants, including minimum tangible net worth requirements and maximum permitted leverage. Under the most restrictive covenants, retained earnings of approximately $159 million were available at year-end for payment of cash dividends. The weighted-average interest rate on short-term borrowings outstanding at February 22, 1997, and February 24, 1996, was 5.5 percent. Leases Capital and operating leases: The company leases certain food distribution warehouse and office facilities, as well as corporate-owned retail food stores. Many of these leases include renewal options, and to a limited extent, include options to purchase. Amortization of assets under capital leases was $18.2 , $13.8 and $12.9 million in fiscal 1997, 1996 and 1995, respectively. Future minimum obligations under capital leases in effect at February 22, 1997 are as follows:
============================================================== (In thousands) Lease Year Obligations - -------------------------------------------------------------- 1998 $ 34,944 1999 34,649 2000 33,997 2001 33,133 2002 32,379 Later 300,693 - -------------------------------------------------------------- Total future minimum obligations 469,795 Less interest 203,041 - -------------------------------------------------------------- Present value of net future minimum obligations 266,754 Less current portion 12,718 - -------------------------------------------------------------- Long-term obligations $254,036 ==============================================================
The present values of future minimum obligations shown are calculated based on interest rates ranging from 7.1 percent to 13.8 percent, with a weighted average of 9.4 percent, determined to be applicable at the inception of the leases. In addition to its capital leases, the company is obligated under operating leases, primarily for buildings, warehouse and computer equipment. Future minimum obligations under operating leases in effect at February 22, 1997 are as follows:
============================================================== (In thousands) Lease Year Obligations - -------------------------------------------------------------- 1998 $ 55,252 1999 50,172 2000 44,349 2001 38,237 2002 31,911 Later 159,257 - -------------------------------------------------------------- Total future minimum obligations $379,178 ==============================================================
Total rent expense, net of sublease income, relating to all operating leases with terms greater than one year was $36.5, $33.0, and $32.9 million in fiscal 1997, 1996 and 1995, respectively. Future minimum receivables under operating leases and subleases in effect at February 22, 1997 are as follows:
============================================================== (In thousands) Owned Leased Year Property Property Total - -------------------------------------------------------------- 1998 $ 3,754 $ 18,837 $ 22,591 1999 3,205 16,163 19,368 2000 2,380 13,619 15,999 2001 1,888 11,353 13,241 2002 1,717 8,259 9,976 Later 7,343 35,552 42,895 - -------------------------------------------------------------- Total future minimum receivables $20,287 $103,783 $124,070 ==============================================================
Owned property under operating leases is as follows:
============================================================== (In thousands) February 22, February 24, 1997 1996 - -------------------------------------------------------------- Land, buildings and equipment $45,513 $52,940 Less accumulated depreciation 14,922 17,675 - -------------------------------------------------------------- Net land, buildings and equipment $30,591 $35,265 ==============================================================
Direct financing leases: Under direct financing capital leases, the company leases buildings on behalf of independent retailers with terms ranging from 5 to 25 years. 32 Notes To Consolidated Financial Statements ------------------------------------------ SUPERVALUE INC. And Subsidiaries Future minimum rentals to be received under direct financing leases and the related future minimum obligations under capital leases in effect at February 22, 1997 are as follows:
- ----------------------------------------------------------------- (In thousands) Direct Financing Capital Lease Year Lease Receivables Obligations - ----------------------------------------------------------------- 1998 $ 17,775 $ 16,423 1999 16,058 14,928 2000 14,054 13,102 2001 11,601 10,846 2002 10,575 9,912 Later 82,370 77,554 - ----------------------------------------------------------------- Total minimum lease payments 152,433 142,765 Less unearned income 59,316 -- Less interest -- 54,547 - ----------------------------------------------------------------- Present value of net minimum lease payments 93,117 88,218 Less current portion 8,767 8,826 - ----------------------------------------------------------------- Long-term portion $ 84,350 $ 79,392 - -----------------------------------------------------------------
Income Taxes The provision (benefit) for income taxes consists of the following:
- ----------------------------------------------------------------- (In thousands) 1997 1996 1995 - ----------------------------------------------------------------- Current Federal $ 64,033 $ 30,427 $ 93,785 State 13,730 6,548 20,060 Tax credits (172) (283) (340) Deferred ShopKo deferred tax benefit -- -- (40,783) Restructuring and other charges 15,599 31,565 (75,803) Other 12,278 33,002 (24,328) - ----------------------------------------------------------------- Total provision (benefit) $105,468 $101,259 $(27,409) - -----------------------------------------------------------------
The difference between the actual tax provision (benefit) and the tax provision (benefit) computed by applying the statutory Federal income tax rate to earnings (loss) before taxes is attributable to the following:
- ----------------------------------------------------------------- (In thousands) 1997 1996 1995 - ----------------------------------------------------------------- Federal taxes based on statutory rate $ 98,180 $ 93,692 $ 5,574 State income taxes, net of federal benefit 12,763 12,180 725 ShopKo deferred tax benefit -- -- (40,783) Benefit of dividends received deduction (7,793) (6,455) (6,910) Nondeductible goodwill 6,277 5,973 17,990 Other (3,959) (4,131) (4,005) - ----------------------------------------------------------------- Total provision (benefit) $105,468 $101,259 $(27,409) - -----------------------------------------------------------------
The company recorded a tax benefit of $40.8 million in 1995 for the reversal of deferred taxes related to the 1992 sale of 54 percent of the then wholly-owned ShopKo Stores, Inc. to reflect a favorable Internal Revenue Service settlement. Temporary differences which give rise to significant portions of the net deferred tax asset as of February 22, 1997 and February 24, 1996 are as follows:
- ----------------------------------------------------------------- (In thousands) 1997 1996 - ----------------------------------------------------------------- Deferred tax assets: Depreciation and amortization $ 18,442 $ 15,468 Restructuring and other charges 28,639 44,238 Net operating loss from acquired subsidiaries 21,968 25,241 Valuation allowance (8,000) (8,000) Provision for obligations and contingencies to be settled in future periods 139,774 146,862 Inventory 14,559 10,121 Other 8,858 9,123 - ----------------------------------------------------------------- Total deferred tax assets 224,240 243,053 - ----------------------------------------------------------------- Deferred tax liabilities: Depreciation and amortization (85,867) (86,314) Acquired assets adjustment to fair values (85,699) (84,335) Accelerated tax deductions for benefits to be paid in future periods (30,483) (21,813) Other (5,641) (5,881) - ----------------------------------------------------------------- Total deferred tax liabilities (207,690) (198,343) - ----------------------------------------------------------------- Net deferred tax asset $ 16,550 $ 44,710 - -----------------------------------------------------------------
The company has acquired net operating loss (NOL) carryforwards of $58.1 million for tax purposes which expire beginning in 2000, and continuing through 2010. A valuation allowance of $8.0 million relates to NOL carryforwards not expected to be realized. Temporary differences attributable to obligations and contingencies consist primarily of valuation allowances, accrued postretirement benefits and vacation pay, and other expenses which are not deductible for income tax purposes until paid. Supplemental Cash Flow Information The company's non-cash investing and financing activities were as follows:
- ----------------------------------------------------------------- (In thousands) 1997 1996 1995 - ----------------------------------------------------------------- Leased asset additions and related obligation $41,257 $37,769 $ 22,695 ------------------------------ Acquisitions: Fair value of assets acquired 25,169 -- 402,885 Cash paid 5,014 -- 117,477 - ----------------------------------------------------------------- Liabilities assumed $20,155 -- $285,408 - -----------------------------------------------------------------
33 Notes To Consolidated Financial Statements ----------------------------------------- SUPERVALU INC. And Subsidiaries
Payments for interest and income taxes were as follows: ================================================================= (In thousands) 1997 1996 1995 - ----------------------------------------------------------------- Interest (net of amount capitalized) $136,618 $144,599 $134,251 Income taxes 58,551 61,994 123,808 =================================================================
Stock Option Plans The company's 1993 and 1983 stock option plans allow the granting of non- qualified stock options and incentive stock options to key salaried executive employees at prices not less than 100 percent of fair market value, determined by averaging the open and close price on the date of grant. The plans provide that the Board of Directors or the Executive Personnel and Compensation Committee of the Board may determine at the time of granting whether each option granted will be a non-qualified or incentive stock option under the Internal Revenue Code. The term of each option will be determined by the Board of Directors or the Committee, but shall not be for more than 10 years from the date of grant. Options may be exercised in installments or otherwise, as the Board of Directors or the Committee may determine.
Changes in the options were as follows: =================================================================== Shares Weighted Average (In thousands) Price Per Share - ------------------------------------------------------------------- Outstanding, February 26, 1994 2,765 $27.57 Granted 910 31.77 Exercised (66) 20.74 Canceled and forfeitedd (70) - ------------------------------------------------------------------- Outstanding, February 25, 1995 3,539 28.79 Granted 1,444 27.36 Exercised (187) 24.30 Canceled and forfeited (195) - ------------------------------------------------------------------- Outstanding, February 24, 1996 4,601 28.43 Granted 705 31.50 Exercised (199) 25.81 Canceled and forfeited (79) - ------------------------------------------------------------------- Outstanding, February 22, 1997 5,028 $28.92 ===================================================================
The outstanding stock options at February 22, 1997 have exercise prices ranging from $18.38 to $39.25 and a weighted average remaining contractual life of 6.1 years. Options to purchase 3.1 and 2.6 million shares were exercisable at February 22, 1997, and February 24, 1996, respectively. These options have a weighted average exercise price of $28.54 and $27.98, respectively. Option shares available for grant were 1.1 and 1.8 million at February 22, 1997, and February 24, 1996, respectively. The company has reserved 6.2 million shares, in aggregate, for the plans. As of February 22, 1997, limited stock appreciation rights have been granted and are outstanding under the 1978, 1989 and 1993 Stock Appreciation Rights Plans. Such rights relate to options granted to purchase 2.0 million shares of common stock and are exercisable only upon a "change of control." In 1997 the company adopted Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock Based Compensation." The company has elected to continue following the accounting guidance of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" for measurement and recognition of stock-based transactions with employees. No compensation cost has been recognized for options issued under the Stock Option Plans because the exercise price of all options granted was not less than 100 percent of fair market value of the common stock on the date of grant. Had compensation cost for the stock options issued been determined based on the fair value at the grant date, consistent with provisions of SFAS No. 123, the company's 1997 and 1996 net income and earnings per share would have been changed to the pro forma amounts indicated below:
============================================================= (In thousands, except per share amounts) 1997 1996 - ------------------------------------------------------------- Net earnings As reported $175,044 $166,433 Pro forma 173,568 165,565 Earnings per share As reported $ 2.60 $ 2.44 Pro forma 2.58 2.42
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions and results:
============================================================= Assumptions 1997 1996 - ------------------------------------------------------------- Dividend yield 3.31% 3.30% Risk free interest rate 6.42% 5.81% Expected life 7 years 7 years Expected volatility 13.78% 11.52% Estimated fair value of options granted per share $6.19 $4.75
Treasury Stock Purchase Program In August 1996, the Board of Directors instituted a treasury stock program under which the company is authorized to repurchase up to 5.0 million shares for reissuance upon the exercise of employee stock options and for other compensation programs utilizing the company's stock. Upon adoption of the August 1996 program, the December 1994 and February 1994 treasury stock programs were rescinded. In fiscal 1997, the company repurchased .7 million shares at an average cost of $28.91 under the August 1996 program. During fiscal 1996, the company repurchased 2.9 million shares at an average per share cost of $27.99 under the December 1994 program. In fiscal 1995, the company repurchased .6 million shares at an average cost of $34.49 per share under the February 1994 treasury stock program and 1.3 million shares at an average cost of $23.72 per share under the December 1994 treasury stock program. 34 Notes To Consolidated Financial Statements ------------------------------------------- SUPERVALU INC. And Subsidiaries Stockholder Rights Plan The company has a "Preferred Share Purchase Rights Plan," in which the Board of Directors declared a dividend of one preferred share purchase right for each outstanding share of common stock. The rights, which expire on April 12, 1999, are exercisable only under certain conditions, and when exercisable the holder will be entitled to purchase from the company one one-thousandth of a share of a new series of preferred stock at a price of $95 per one one-thousandth of a preferred share, subject to certain adjustments. The rights will become exercisable 10 days after a person or group acquires beneficial ownership of 20 percent or more of the company's shares, or 10 business days (or such later time as the Board of Directors may determine) after a person or group announces an offer the consummation of which would result in such person or group owning 20 percent or more of the shares. Commitments and Contingencies The company has guaranteed mortgage loan and other debt obligations of $16.7 million. The company has also guaranteed the leases and fixture financing loans of various affiliated retailers with a present value of $49.4 and $5.3 million, respectively. The company has provided limited recourse to purchasers of notes receivable from affiliated retailers with outstanding note balances of $51.3 and $56.9 million, $18.2 and $17.0 million of which the company has contingent liability at February 22, 1997 and February 24, 1996, respectively. The company has also entered into note repurchase agreements with various lenders totaling $7.4 million, under which certain events require the company to repurchase collateralized loans. The company is a party to various legal proceedings arising from the normal course of business activities, none of which, in management's opinion, is expected to have a material adverse impact on the company's consolidated results of operations or its financial position. Retirement Plans Substantially all non-union employees of the company and its subsidiaries are covered by various contributory and non-contributory pension or profit-sharing plans. The company also participates in several multi-employer plans providing defined benefits to union employees under the provisions of collective bargaining agreements. Contributions under the defined contribution profit sharing plans are determined at the discretion of the Board of Directors and were $2.3, $5.5 and $5.3 million for fiscal 1997, 1996 and 1995, respectively. Amounts charged to union pension expense were $34.4, $33.5 and $31.8 million for fiscal 1997, 1996 and 1995, respectively. Benefit calculations for the company's defined benefit pension plan are based on years of service and the participants' highest compensation during five consecutive years of employment. Annual payments to the pension trust fund are determined in compliance with the Employee Retirement Income Security Act (ERISA). Plan assets are held in trust and invested in separately managed accounts and publicly traded mutual funds holding both equity and fixed income securities. The following table sets forth the company's defined benefit pension plans' funded status and the amounts recognized in the company's financial statements:
=============================================================================== (In thousands) February 22, February 24, 1997 1996 - ------------------------------------------------------------------------------- Actuarial present value of accumulated benefit obligation: Vested $ 189,623 $ 178,894 Total $ 211,917 $ 197,877 - ------------------------------------------------------------------------------- Projected benefit obligation $ 273,714 $ 244,958 Plan assets at fair value (233,410) (200,985) - ------------------------------------------------------------------------------- Projected benefit obligation in excess of plan assets 40,304 43,973 Unrecognized net loss (38,419) (35,298) Unrecognized prior service cost 798 552 Unrecognized transition obligation (285) (380) Adjustment to minimum liability 22 138 - ------------------------------------------------------------------------------- Pension liability $ 2,420 $ 8,985 =============================================================================== Net pension expense included the following components: =============================================================================== (In thousands) 1997 1996 1995 - ------------------------------------------------------------------------------- Service cost $ 12,197 $ 8,742 $10,647 Interest cost 18,676 16,815 15,638 Actual return on plan assets (27,401) (32,468) (4,892) Net amortization and deferral 9,878 17,053 (9,490) - ------------------------------------------------------------------------------- Net pension expense $ 13,350 $ 10,142 $11,903 ===============================================================================
For both 1997 and 1996, the weighted-average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were 7.5 percent and 4.5 percent, respectively. The expected long-term rate of return on assets was 10 percent. The company computes pension expense using the projected unit credit actuarial cost method. The company also maintains non-contributory, unfunded pension plans to provide certain employees with pension benefits in excess of limits imposed by federal tax law. The projected benefit obligation of the unfunded plans were $16.4 and $16.9 million at February 22, 1997 and February 24, 1996, respectively. The accumulated benefit obligation of these plans totaled $12.9 million at February 22, 1997 and February 24, 1996. Net periodic pension cost was $2.2 million for fiscal 1997 and 1996 and $1.9 million for fiscal 1995. 35 Notes To Consolidated Financial Statements ------------------------------------------ SUPERVALU INC. And Subsidiaries Other Postretirement Benefits: In addition to providing pension benefits, the company provides certain health care and life insurance benefits for retired employees. Employees become eligible for these benefits upon meeting certain age and service requirements. The periodic postretirement benefit cost and accumulated postretirement benefit obligation are as follows:
=================================================================== (In thousands) Net periodic postretirement benefit cost 1997 1996 1995 - ------------------------------------------------------------------- Service cost-benefits attributed to service during the period $1,813 $1,460 $1,901 Interest cost on accumulated postretirement benefit obligation 3,932 3,667 4,024 Net amortization and deferral (261) (335) 93 - ------------------------------------------------------------------- Net periodic postretirement benefit cost $5,484 $4,792 $6,018 ===================================================================
=================================================================== Accumulated postretirement February 22, February 24, benefit obligation 1997 1996 - ------------------------------------------------------------------- Retirees $22,816 $18,771 Active plan participants 34,336 34,555 - ------------------------------------------------------------------- Total accumulated postretirement benefit obligation 57,152 53,326 Unrecognized loss (5,949) (3,929) Unrecognized prior service cost 2,221 2,482 - ------------------------------------------------------------------- Postretirement benefit liability $53,424 $51,879 ===================================================================
The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7.5 percent in 1997 and 1996. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation for fiscal 1997 was 9 percent decreasing to 6 percent by fiscal 2001. In fiscal 1996, the rate was 12 percent decreasing to 6 percent by fiscal 2002. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, a 1 percent increase in the health care trend rate would increase the accumulated postretirement benefit obligation by $8.5 million and $7.9 million for fiscal 1997 and 1996, respectively, and the net periodic cost by $.9 million for fiscal 1997 and 1996. Industry Segment Information Information concerning the company's continuing operations by business segment for the years ended February 22, 1997, February 24, 1996 and February 25, 1995, as required by Statement of Financial Accounting Standards No. 14, "Financial Reporting for Segments of a Business Enterprise," is contained on page 24. Unaudited Quarterly Financial Information ----------------------------------------- Quarterly unaudited financial information for SUPERVALU INC. and subsidiaries is as follows:
- ------------------------------------------------------------------------------------------------------------ (In thousands, except per share data) Fiscal Year (52 Weeks) Ended February 22, 1997 - ------------------------------------------------------------------------------------------------------------ First Second Third Fourth Year (16 wks) (12 wks) (12 wks) (12 wks) (52 wks) - ------------------------------------------------------------------------------------------------------------ Net sales $4,978,761 $3,778,745 $3,904,841 $3,889,555 $16,551,902 Gross profit 479,413 380,240 385,210 421,790 1,666,653 Net earnings 45,982 35,864 40,217 52,981 175,044 Net earnings per common share .68 .53 .60 .79 2.60 Dividends declared per common share .245 .250 .250 .250 .995 Weighted average shares 67,482 67,466 67,110 66,885 67,255 ============================================================================================================ Fiscal Year (52 Weeks) Ended February 24, 1996 - ------------------------------------------------------------------------------------------------------------ First Second Third Fourth Year (16 wks) (12 wks) (12 wks) (12 wks) (52 wks) - ------------------------------------------------------------------------------------------------------------ Net sales $4,973,037 $3,779,397 $3,886,595 $3,847,292 $16,486,321 Gross profit 460,341 351,708 366,845 400,825 1,579,719 Net earnings 45,951 33,278 38,445 48,759 166,433 Net earnings per common share .66 .49 .57 .72 2.44 Dividends declared per common share .235 .245 .245 .245 .970 Weighted average shares 69,225 68,181 67,841 67,504 68,277 ============================================================================================================
36 Independent Auditors' Report --------------------------------- SUPERVALU INC. And Subsidiaries SUPERVALU INC. Board of Directors and Stockholders Eden Prairie, Minnesota We have audited the accompanying consolidated balance sheets of SUPERVALU INC. and subsidiaries as of February 22, 1997 and February 24, 1996, and the related statements of earnings, stockholders' equity and cash flows for each of the three years (52 weeks) in the period ended February 22, 1997. These consolidated financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of SUPERVALU INC. and subsidiaries as of February 22, 1997 and February 24, 1996, and the results of their operations and their cash flows for each of the three years in the period ended February 22, 1997, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Minneapolis, Minnesota April 3, 1997, except for the Investment in ShopKo Note, as to which the date is April 25, 1997 37 Investor Information -------------------- SUPERVALU INC. And Subsidiaries Annual Meeting Stockholders are invited to attend the Annual Stockholder's Meeting, which will be held on June 26, 1997, at 10:30 a.m., Minneapolis time at the: Minneapolis Convention Center 1301 Second Avenue South Minneapolis, Minnesota Transfer Agent and Registrar Shareholders may contact the transfer agent with any matter concerning ownership of SUPERVALU stock. Norwest Shareowner Services PO Box 64854 St. Paul, Minnesota 55164 0854 800 468 9716 Stock Exchange The company's common stock is listed on the New York Stock Exchange (trading symbol SVU). Stockholders of the Company As of May 8, 1997 there were approximately 7,513 holders of the company's stock. Form 10-K A copy of the annual report to the Securities and Exchange Commission on Form 10-K may be obtained without charge to stock-holders after May 23, 1997. Requests should be directed to: Office of the Secretary SUPERVALU INC. PO Box 990 Minneapolis, Minnesota 55440 Dividend Reinvestment Plan Stockholders of record may elect to participate in the company's dividend reinvestment plan. No brokerage commission or service fees are charged on any shares purchased through either reinvested dividends or optional cash payments. The plan is administered by Norwest Bank Minnesota, N.A. Requests for a brochure describing terms and conditions of the plan and an authorization card should be addressed to the Transfer Agent at the address set forth above. Investor Relations Inquiries from securities analysts and institutional investors are welcomed and should be directed to: Director, Investor Relations SUPERVALU INC. P.O. Box 990 Minneapolis, MN 55440 Phone: 612 828 4540 To be added to the company's investor relations mailing list please call or write: SUPERVALU INC. Communications PO Box 990 Minneapolis, Minnesota 55440 Phone: 612 828 4599 Fax: 612 828 8955 EX-21 10 SUBSIDIARIES OF THE REGISTRANT EXHIBIT (21) SUPERVALU INC. SUBSIDIARIES as of May 1, 1997 (All are Subsidiary Corporations 100% Owned Directly or Indirectly, Except as Noted)
PERCENTAGE OF VOTING JURISDICTION SECURITIES OWNED BY OF ORGANIZATION IMMEDIATE PARENT --------------- ---------------- SUPERVALU INC Blaine North 1996 L.L.C Delaware Limited Liability Company 70% Diamond Lake 1994 L.L.C Delaware Limited Liability Company 25% J. M. Jones Equipment Company Delaware 100% Jackson Markets, Inc. Mississippi 100% Maplewood East 1996 L.L.C Delaware Limited Liability Company 70% Max Club, Inc. Minnesota 100% NAFTA Industries Consolidated, Inc. Texas 51% NAFTA Industries, Ltd. Texas Limited Partnership 51% NC&T Supermarkets, Inc. Ohio 100% Nevada Bond Investment Corp. I Nevada 100% Planmark Architecture of Oregon, P.C Oregon 100% Planmark, Inc. Minnesota 100% Preferred Products, Inc. Minnesota 100% Risk Planners Agency of Ohio, Inc. Ohio 100% Risk Planners of Mississippi, Inc. Mississippi 100% Risk Planners of Pennsylvania, Inc. Pennsylvania 100% Risk Planners, Inc. Minnesota 100% Risk Planners of Illinois, Inc. Illinois 100% Risk Planners of Montana, Inc. Montana 100% Silver Lake 1996 L.L.C Delaware Limited Liability Company 51% SUPERVALU Pharmacies, Inc. Minnesota 100% SUPERVALU Transportation, Inc. Minnesota 100% SUVACO Insurance International, Ltd. Islands of Bermuda 100% Sweet Life Foods, Inc. Missouri 100% Market Development Corporation Connecticut 100% Springfield Sugar & Products Company Delaware 100% First Colonial Trading Corporation Massachusetts 100% Hamlet Trading Corporation Massachusetts 100% Sweet Life Products Corporation New York 75% Valu Ventures, Inc. Minnesota 100% Valu Ventures 2, Inc. Minnesota 100% Valu Ventures-Albert Lea, Inc. Minnesota 100% Valu Ventures-Duluth, Inc. Minnesota 100% Western Dairy Distributors, Inc. Colorado 100% Supermarket Operators of America Inc. Delaware 100% Advantage Logistics - Midwest, Inc. Delaware 100% Advantage Logistics - Southeast, Inc. Alabama 100% Clyde Evans Markets, Inc. Ohio 100% Clyde Evans, Inc. Ohio 100% Hyper Shoppes, Inc. Delaware 100% HS Real Estate Company, Inc. Delaware 100% Hyper Shoppes (Colorado), Inc. Colorado 100% Hyper Real Estate (Colorado), Inc. Colorado 100% Hyper Shoppes (Ohio), Inc. Ohio 100% bigg's (KY), Inc. Delaware 100% BFO, Inc. Ohio 100% HSO, Inc. Ohio 100% Scott's Food Stores, Inc. Indiana 100% SV Ventures* Indiana General Partnership 50%
PERCENTAGE OF VOTING JURISDICTION SECURITIES OWNED BY OF ORGANIZATION IMMEDIATE PARENT --------------- ---------------- Supermarket Operators of America Inc. (continued) SUPERVALU Holdings, Inc. Missouri 100% Airway Redevelopment Corporation Missouri 100% Augsburger's, Inc. Indiana 100% Glenn-Wohlberg & Company Missouri 100% Hazelwood Farms Bakeries, Inc. Missouri 100% John Alden Industries, Inc. Rhode Island 100% Livonia Holding Company, Inc. Michigan 100% Foodland Distributors Michigan General Partnership 50% Mohr Developers, Inc. Missouri 100% Mohr Distributors of Litchfield, Inc. Illinois 100% Save Mart Foods, Inc. Missouri 100% Treasure Enterprises, Inc. Missouri 100% Shop 'N Save Warehouse Foods, Inc. Missouri 100% WSI Satellite, Inc. Missouri 100% SV Ventures* Indiana General Partnership 50% SVH Holding, Inc. Delaware 100% SVH Realty, Inc. Delaware 100% USCP-WESCO, Inc. California 100% WC&V Supermarkets, Inc. Vermont 100% Wetterau Finance Co. Missouri 100% Wetterau Independence, Inc. Missouri 100% Wetterau Insurance Co. Ltd. Bermuda 100% SUPERVALU Operations, Inc. Rhode Island 100% Butson's Enterprises, Inc. New Hampshire 100% Butson's Enterprises of Vermont, Inc. Vermont 100% Keatherly, Inc. New Hampshire 100% Peoples Market, Incorporated New Hampshire 100% Violette's Supermarkets, Inc. New Hampshire 100% East Main Development, Inc. Rhode Island 100% Ellsworth Foods, Inc. Maine 100% Glendale Foods, Inc. Pennsylvania 100% M & C Foods, Inc. Pennsylvania 100% Maryland Specialty Realty Corp. Maryland 100% Moran Foods, Inc. Missouri 100% Lot 18 Redevelopment Corporation Missouri 100% Pets, Crafts & Things, Inc. Pennsylvania 100% Total Insurance Marketing Enterprises, Inc. Pennsylvania 100% Ultra Foods, Inc. New Jersey 100% Verona Road Associates, Inc. Pennsylvania 100%
* SV Ventures is a general partnership between SUPERVALU Holdings, Inc. and Scott's Food Stores, Inc. each of which holds a 50% interest. Both general partners are direct subsidiaries of Supermarket Operators of America, Inc. -2- EX-23 11 CONSENT OF INDEPENDENT AUDITORS EXHIBIT (23) INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements No. 33-28310, No. 33-16934, No. 2-56896, No. 33-50071, No. 333-10151, and No. 333-24813 on Form S-8 and No. 33-56415 on Form S-3 of our reports dated April 3, 1997, except for the Investment in ShopKo Note, as to which the date is April 25, 1997, appearing in or incorporated by reference in this Annual Report on Form 10-K of SUPERVALU INC. for the year ended February 22, 1997. /s/ Deloitte & Touche LLP - ---------------------------- Minneapolis, Minnesota May 22, 1997 EX-24 12 POWER OF ATTORNEY EXHIBIT (24) POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned directors and officers of SUPERVALU INC., a Delaware corporation, which is about to file with the Securities and Exchange Commission, Washington, D.C. 20549, its Annual Report on Form 10-K for the year ended February 22, 1997 under the provisions of the Securities Exchange Act of 1934, as amended, hereby constitutes and appoints Michael W. Wright and Vernon H. Heath, his or her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the other, for him or her and in his or her name, place and stead, in any and all capacities (including without limitation, as Director and/or principal Executive Officer, principal Financial Officer, principal Accounting Officer or any other officer of the Company), to sign such Annual Report on Form 10-K which is about to be filed, and any and all amendments thereto, and to file such Annual Report on Form 10-K and each such amendment thereto so signed, with all exhibits thereto, and any and all other documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney on this 9th day of April, 1997. /s/ Herman Cain /s/ Charles M. Lillis - ------------------------------------ --------------------------------------- Herman Cain Charles M. Lillis /s/ Stephen I. D'Agostino /s/ Harriet Perlmutter - ------------------------------------ --------------------------------------- Stephen I. D'Agostino Harriet Perlmutter /s/ Lawrence A. Del Santo /s/ Carole F. St. Mark - ------------------------------------ --------------------------------------- Lawrence A. Del Santo Carole F. St. Mark /s/ Edwin C. Gage /s/ Winston R. Wallin - ------------------------------------ --------------------------------------- Edwin C. Gage Winston R. Wallin /s/ Vernon H. Heath /s/ Michael W. Wright - ------------------------------------ --------------------------------------- Vernon H. Heath Michael W. Wright /s/ William A. Hodder /s/ Jeffrey C. Girard - ------------------------------------ --------------------------------------- William A. Hodder Jeffrey C. Girard /s/ Garnett L. Keith, Jr. /s/ Kim M. Erickson - ------------------------------------ --------------------------------------- Garnett L. Keith, Jr. Kim M. Erickson /s/ Richard L. Knowlton - ------------------------------------ Richard L. Knowlton
EX-27 13 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINACIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALACE SHEETS AS OF FEBRUARY 22, 1997 AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE 52 WEEKS ENDED FEBRUARY 22, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATMENTS. 12-MOS FEB-22-1997 FEB-22-1997 6,539 0 421,641 (17,806) 1,091,805 1,600,799 2,688,555 (1,040,031) 4,283,326 1,369,078 1,420,591 0 5,908 75,335 1,226,180 4,283,326 16,551,902 16,551,902 14,885,249 14,885,249 0 8,851 136,831 280,512 105,468 175,044 0 0 0 175,044 2.60 2.60
EX-99.1 14 CAUTIONARY STATEMENTS FOR SAFE HARBOR EXHIBIT (99.1) Cautionary Statements for Purposes of the Safe Harbor Provisions of the Securities Litigation Reform Act In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 ("Act"), SUPERVALU INC. (the "Company") is filing cautionary statements identifying important factors that could cause the Company's actual results to differ materially from those projected in forward- looking statements made by, or on behalf of the Company. When used in this Annual Report on Form 10-K for the fiscal year ended February 22, 1997 and in future filings by the Company with the Securities and Exchange Commission, in the Company's press releases, other communications, and in oral statements made by or with the approval of an authorized executive officer, the words or phrases "will likely result", "are expected to", "will continue", "is anticipated", "estimate", "project", "believe" or similar expressions are intended to identify forward-looking statements within the meaning of the Act. The following cautionary statements are for use as a reference to a readily available written document in connection with forward looking statements as defined in the Act. These factors are in addition to any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward- looking statement. Wholesale Business Risks The Company's sales and earnings at wholesale are dependent on the Company's ability to retain existing customers and attract new customers, as well as its ability to control costs. While the Company believes that the ADVANTAGE initiative, including its new Activity Based Sell ("ABS") pricing, new market driving services, and regional logistics, will enable it to attain its goals, certain factors could adversely impact the Company's results, including: decline of its independent retailer customer base due to competition and other factors; loss of corporate retail sales due to increased competition and other risks detailed more fully below; consolidations of retailers or competitors; increased self-distribution by chain retailers; increase in operating costs; the possibility that the Company will incur additional costs and expenses due to further rationalization or consolidation of distribution centers; entry of new or non-traditional distribution systems into the industry; possible delays or increased costs in implementing the ADVANTAGE initiative; manufacturers do not change their pricing, transportation, and/or promotional programs in cooperation with the Company's new pricing methods; and possible loss of retailer customers who do not accept the ADVANTAGE changes. In addition, timing of certain ADVANTAGE efforts could be impacted by the information technology related expenses associated with addressing year 2000 issues. Risks of Expansion and Acquisitions The Company intends to continue to grow its retail and wholesale segments in part through acquisitions. Expansion is subject to a number of risks, including the adequacy of the Company's capital resources; the location of suitable store or distribution center sites and the negotiation of acceptable lease terms; ability to hire, train and integrate employees; and possible costs and other risks of integrating or adapting operational systems. In addition, 1 acquisitions involve a number of special risks, including: making acquisitions at acceptable rates of return; the diversion of management's attention to assimilation of the operations and personnel of the acquired business; potential adverse short-term effects on the Company's operating results; and amortization of acquired intangible assets. Retail Business Risks The Company's retail segment faces risks which may prevent the Company from maintaining or increasing retail sales and earnings including: competition from other retail chains, supercenters, non-traditional competitors, and emerging alternative formats; operating risks of certain strategically important retail operations; and adverse impact from the entry of other retail chains, supercenters and non-traditional or emerging competitors into markets where the Company has a retail concentration. Liquidity Management expects that the Company will continue to replenish operating assets and reduce aggregate debt with internally generated funds and capital leases unless additional funds are necessary to complete acquisitions. If capital spending significantly exceeds anticipated capital needs, additional funding could be required from other sources. In addition, acquisitions could affect the Company's borrowing costs and future financial flexibility. Litigation While the Company believes that it is currently not subject to any material litigation, the costs and other effects of legal and administrative cases and proceedings and settlements are impossible to predict with certainty. The current environment for litigation involving food wholesalers may increase the risk of litigation being commenced against the Company. The Company would incur the costs of defending any such litigation whether or not any claim had merit. The foregoing should not be construed as exhaustive and the Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. 2 -----END PRIVACY-ENHANCED MESSAGE-----