Company Tightens Fiscal 2008 Earnings Guidance Demonstrating
Confidence in Outlook
MINNEAPOLIS--(BUSINESS WIRE)--July 24, 2007--SUPERVALU INC.
(NYSE:SVU) today reported record results for the first quarter of
fiscal 2008, which ended June 16, 2007, marking the completion of four
full quarters as a retail powerhouse. The company reported fiscal 2008
first quarter record net sales of $13.3 billion compared to $5.8
billion in the first quarter of fiscal 2007, record net earnings of
$148 million compared to $87 million last year and diluted earnings
per share of $0.69 compared to $0.57 last year, a 21 percent increase.
First quarter results include net after-tax charges of approximately
$17 million, or $0.08 per diluted share, related to one-time
acquisition related costs. Last year's first quarter results include
net after-tax charges of approximately $9 million, or $0.06 per
diluted share related to one-time acquisition related costs. On June
2, 2006, SUPERVALU completed its acquisition of Albertsons' premier
retail properties which transformed SUPERVALU into one of the nation's
largest supermarket chains with leading market shares across the
country. Prior year results do not include operating results from the
acquired properties.
Jeff Noddle, SUPERVALU chairman and chief executive officer said,
"As we pass the one year mark of the acquisition of Albertsons'
premier retail properties which transformed SUPERVALU into a $44
billion coast-to-coast retail powerhouse, we are on track. On all
fronts, this was a highly successful first year which sets the
foundation for the next two years of our journey following the
acquisition. Today's announcement of a double-digit increase in our
first quarter earnings completes a full year of double-digit accretive
results. We are now beginning to execute our business plans that will
maximize the full potential of our transformed company including the
delivery of synergies. Today, by raising the bottom end of our fiscal
2008 diluted earnings per share guidance range by $0.05, we now expect
earnings per share in the range of $2.93 to $3.03 before one-time
acquisition related costs of $0.20. We are confident that our second
year as a transformed company will continue to generate value for our
shareholders."
Segment Results
Retail Food Segment - First quarter retail net sales were a record
$10.4 billion compared to $2.9 billion last year, primarily reflecting
the acquisition of Albertsons' premier retail properties. Identical
store sales growth on a combined basis, as if the newly acquired
operations were in the store base for more than a year, increased 1.2
percent in the first quarter. The acquired stores identical store
sales growth in the quarter increased 1.7 percent. Identical store
sales for stores in existence prior to the acquisition decreased 0.4
percent and when adjusted for planned in-market expansion increased
approximately 70 basis points.
Reported retail operating earnings for the first quarter were a
record $449 million, or 4.3 percent of sales, reflecting the fiscal
2007 acquisition of Albertsons' premier retail properties. Last year's
first quarter reported operating earnings were $128 million, or 4.4
percent of sales. Last year's first quarter reported operating
earnings included the benefit of approximately $10 million pre-tax, or
approximately 40 basis points, from the sale of a minority partnership
interest in two retail stores in the Northwest.
As of June 16, 2007, SUPERVALU's retail store network of 2,464
stores included approximately 878 combination stores, 407 food stores,
and 1,179 limited assortment food stores. Included in this total are
855 licensed limited assortment food stores and 121 fuel centers.
Total owned retail square footage at the end of the first quarter of
fiscal 2008 was approximately 71 million square feet, which increased
approximately three percent exclusive of store closings.
Supply Chain Services Segment - First quarter net sales for supply
chain services were flat with the first quarter of fiscal 2007 at $2.9
billion as new business growth offset normal customer attrition.
Reported supply chain services operating earnings for the first
quarter were $67 million compared to $76 million last year. Reported
operating earnings as a percent of sales was 2.3 percent compared to
2.6 percent in last year's first quarter. The decrease in operating
earnings as a percent of sales primarily reflects shifts in customer
and product mix combined with softer perishable margin performance in
the current year.
Other Items
General corporate expense for the first quarter was $50 million
compared to $36 million last year, primarily reflecting higher
one-time acquisition related costs of $28 million pre-tax compared to
$13 million last year. Net interest expense for the first quarter was
$223 million compared to $26 million last year reflecting the
assumption of debt and new borrowings from the acquisition.
Capital spending for the first quarter was approximately $240
million, including approximately $10 million in capital leases.
Capital spending primarily included retail store expansion, store
remodeling, and supply chain initiatives.
Total debt to capital was approximately 62 percent at quarter end
compared to approximately 64 percent at fiscal 2007 year end. The
total debt to capital ratio is calculated as total debt, which
includes notes payable, current debt and obligations under capital
leases, long-term debt and obligations under capital leases, divided
by the sum of total debt and total stockholders' equity.
Diluted weighted average shares outstanding in the quarter were
216 million shares compared to 156 million shares last year. The net
increase was primarily due to the shares issued for the acquisition.
As of June 16, 2007, SUPERVALU had approximately 213 million shares
outstanding.
Fiscal 2008 Guidance
Diluted Earnings Per Share Summary
Previous Guidance New Guidance
Fiscal 2008 Fiscal 2008
----------------------------------------------------------------------
Reported diluted earnings per share $2.68 to $2.87 $2.73 to $2.83
One-time acquisition related costs $0.20 to $0.16 $0.20
----------------------------------------------------------------------
Diluted earnings per share before $2.88 to $3.03 $2.93 to $3.03
one-time costs
Weighted average diluted shares 214 to 217 216 to 218
outstanding (millions)
SUPERVALU's fiscal 2008 outlook includes business assumptions,
such as:
-- Net sales are estimated to be approximately $44 billion;
-- Identical store sales for the combined retail network, as if
the newly acquired operations were in the store base for more
than a year, are projected to increase 1 to 2 percent;
-- Store development plans are projected to be approximately 25
to 30 standard size stores and 60 to 80 limited assortment
stores, including licensed stores. Major remodels are
estimated at approximately 100 to 110 stores;
-- Sales attrition, exclusive of new business, in the traditional
food distribution business will approximate four to five
percent for the year;
-- The second and third quarters of fiscal 2008 will consist of
12 weeks of operating results of the Acquired Operations
compared to 13 weeks for the second and third quarters of
fiscal 2007;
-- Stock option expense is projected to be approximately $0.12
per diluted share, compared to $0.08 in fiscal 2007
representing the larger employee base of the company;
-- Total capital spending is projected to be approximately $1.2
billion, including capital leases; and
-- The effective tax rate is estimated to be 39 percent.
A conference call to review the first quarter results is scheduled
for today at 9:00 a.m. (CDT). A live Web cast of the call will be
available at http://investor.supervalu.com. An archive of the call is
accessible via telephone by dialing 630-652-3041 with passcode
18419016 and through the company's Web site at www.supervalu.com. The
conference call archive will be available through August 23, 2007.
About SUPERVALU INC
SUPERVALU INC. is one of the largest companies in the United
States grocery channel with estimated annual sales of approximately
$44 billion. SUPERVALU holds leading market share positions across the
U.S. with its approximately 2,450 retail grocery locations. Through
SUPERVALU's nationwide supply chain network, the company provides
distribution and related logistics support services to more than 5,000
grocery endpoints across the country. SUPERVALU currently has
approximately 190,000 employees. For more information about SUPERVALU
visit www.supervalu.com.
CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR
THE PURPOSE OF "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
Except for the historical and factual information contained
herein, the matters set forth in this news release, including
statements as to the progress and expected benefits of the combination
of the operations of Albertson's, Inc. that were acquired in June 2006
with those of SUPERVALU, such as efficiencies, cost savings, market
profile and financial strength, and the competitive ability and
position of the combined company, and other statements identified by
words such as "estimates," "expects," "projects," "plans," and similar
expressions are forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially,
including the possibility that the anticipated benefits from the
acquisition cannot be fully realized or may take longer to realize
than expected, the possibility that costs or difficulties related to
the combination of Albertsons operations into SUPERVALU will be
greater than expected, and the impact of competition, economic and
industry conditions, security and food and drug safety issues, severe
weather and natural disasters, escalating costs of providing employee
benefits, and other labor relations issues including contract
negotiations, expansion, liquidity, legal and administrative
proceedings, regulatory and accounting matters, changes in operating
conditions, and other risk factors relating to our business or
industry as detailed from time to time in SUPERVALU's reports filed
with the SEC. You should not place undue reliance on these
forward-looking statements, which speak only as of the date of this
news release. Unless legally required, SUPERVALU undertakes no
obligation to update publicly any forward-looking statements, whether
as a result of new information, future events or otherwise.
SUPERVALU INC. and Subsidiaries
CONSOLIDATED COMPOSITION OF NET SALES AND OPERATING EARNINGS
(unaudited)
June 16, 2007 June 17, 2006
(In millions, except per share data) (16 weeks) (16 weeks)
----------------------------------------------------------------------
Net sales
Retail food and drug $10,423 $2,930
78% 51%
Supply chain services 2,869 2,853
22% 49%
----------------------------------------------------------------------
Total net sales $13,292 $5,783
100.0% 100.0%
======================================================================
Operating earnings
Retail food and drug operating earnings $ 449 $ 128
Supply chain services operating earnings 67 76
General corporate expenses 50 36
----------------------------------------------------------------------
Total operating earnings 466 168
Interest expense, net 223 26
----------------------------------------------------------------------
Operating earnings before income taxes $ 243 $ 142
Income tax expense 95 55
----------------------------------------------------------------------
Net earnings $ 148 $ 87
======================================================================
LIFO charge $ 7 $ 3
Depreciation and amortization
Retail food and drug $ 295 $ 57
Supply chain services 29 30
----------------------------------------------------------------------
Total $ 324 $ 87
======================================================================
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
June 16, 2007 June 17, 2006
(In millions, except per (16 weeks) % of sales (16 weeks) % of sales
share data)
----------------------------------------------------------- ----------
Net sales $13,292 100.0% $5,783 100.0%
Cost of sales 10,209 76.8% 4,968 85.9%
----------------------------------------------------------------------
Gross profit 3,083 23.2% 815 14.1%
Selling, general and
administrative expenses 2,617 19.7% 647 11.2%
----------------------------------------------------------------------
Operating earnings 466 3.5% 168 2.9%
Interest expense, net 223 1.7% 26 0.4%
----------------------------------------------------------------------
Earnings before income
taxes 243 1.8% 142 2.5%
Income tax expense 95 0.7% 55 1.0%
----------------------------------------------------------------------
Net earnings $ 148 1.1% $ 87 1.5%
======================================================================
Earnings per common share
Basic
Net earnings $ 0.70 $ 0.59
Diluted
Net earnings $ 0.69 $ 0.57
Weighted average number of
common shares outstanding
Basic 211 147
Diluted 216 156
SUPERVALU INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In millions)
June 16, 2007 February 24,
2007
(unaudited)
----------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 286 $ 285
Accounts and notes receivable, net 911 957
Inventories 2,827 2,749
Prepaid and other current assets 337 469
----------------------------------------------------------------------
Total Current Assets 4,361 4,460
Land, buildings, leasehold
improvements and equipment, net 7,380 8,415
Goodwill 6,864 5,921
Intangibles, net 1,997 2,450
Other assets 538 456
----------------------------------------------------------------------
Total Assets $21,140 $21,702
======================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued
liabilities $ 3,263 $ 3,548
Current maturities of long-term
debt and capital lease
obligations 395 286
Other current liabilities 800 871
----------------------------------------------------------------------
Total Current Liabilities 4,458 4,705
Long-term debt and obligations under
capital Leases 8,936 9,192
Other long-term liabilities and
deferred credits 2,091 2,499
Total Stockholder's Equity 5,655 5,306
----------------------------------------------------------------------
Total Liabilities and Stockholders'
Equity $21,140 $21,702
======================================================================
CONTACT: SUPERVALU INC.
Investors and Financial Media:
Yolanda Scharton, 952-828-4540
yolanda.scharton@supervalu.com
or
Jean Giese, 952-828-4939
jean.giese@supervalu.com
SOURCE: SUPERVALU INC.
