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Delaware
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1-5418
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41-0617000
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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11840 Valley View Road
Eden Prairie, Minnesota
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55344
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(Address of principal executive offices)
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(Zip Code)
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N/A
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(Former name or former address, if changed since last report)
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Exhibit Number
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Description
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Form of Indemnification Agreement with directors and officers
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Unaudited consolidated financial statements of Associated Grocers of Florida, Inc. for the first quarter (16 weeks) ended November 18, 2017 and November 19, 2016
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Unaudited pro forma condensed combined financial statement for the fiscal year (52 weeks) ended February 24, 2018
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Dated:
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June 12, 2018
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SUPERVALU INC.
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By:
/s/ Rob N. Woseth
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Rob N. Woseth
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Executive Vice President and Chief Financial Officer
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(Authorized Officer of Registrant)
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COMPANY
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SUPERVALU INC.
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By:
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Name:
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Title:
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INDEMNITEE
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Name:
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Address:
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Financial statements
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Unaudited Condensed Consolidated Balance Sheets
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1
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Unaudited Condensed Consolidated Statements of Comprehensive Income
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2
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Unaudited Condensed Consolidated Statements of Members’ Investment
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3
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Unaudited Condensed Consolidated Statements of Cash Flows
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4
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Notes to Unaudited Condensed Consolidated Financial Statements
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5-14
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Associated Grocers of Florida, Inc. and Subsidiaries
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|||||||
Condensed Consolidated Balance Sheets - Unaudited
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|||||||
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November 18, 2017
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|
July 29,
2017
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||||
Assets
|
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|
||||
Current assets:
|
|
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|
||||
Cash
|
$
|
659,629
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|
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$
|
8,440,211
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Accounts receivable, net of allowance for doubtful accounts of $1,119,799 and $1,087,820, respectively
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53,348,334
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35,439,475
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Current portion of notes receivable, net of allowance for doubtful notes of $74,351 and $74,351, respectively
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2,149,642
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2,115,778
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Inventories
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47,273,443
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35,438,783
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Prepaid expenses
|
1,426,623
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1,101,289
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Deferred income taxes
|
1,110,885
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1,110,885
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Properties held for sale
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17,130,096
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17,151,824
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Total current assets
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123,098,652
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100,798,245
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Property and equipment, net
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53,499,689
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54,321,725
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Property and equipment under capital leases
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1,043,175
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1,192,182
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Notes receivable, net of current portion and allowance for doubtful notes of $355,813 and $355,813, respectively
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3,828,281
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4,145,371
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Intangible assets, net
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1,493,663
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1,576,540
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Other assets
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529,424
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721,710
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Total assets
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$
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183,492,884
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$
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162,755,773
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Liabilities and Members’ Investment
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Current liabilities:
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Accounts payable and accrued expenses
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$
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58,660,967
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$
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49,469,785
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Current portion of long-term debt
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4,919,979
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5,047,553
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Current portion of capital lease obligations
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510,751
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544,524
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Total current liabilities
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64,091,697
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55,061,862
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Long-term debt, net of current portion
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55,950,752
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49,631,817
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Capital lease obligations, net of current portion
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543,170
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675,868
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Deferred income taxes
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6,242,625
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6,126,422
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Other liabilities
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1,580,106
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1,981,957
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Total liabilities
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128,408,350
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113,477,926
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Commitments and contingencies (Note 5)
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Members’ investment:
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||||
Common stock, Class A voting, $100 stated value – 40,000 shares authorized; 2,550 and 2,550 shares issued and outstanding, respectively
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255,000
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255,000
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Common stock, Class B nonvoting, $5 stated value – 3,000,000 shares authorized; 79,564 and 79,502 shares issued and outstanding, respectively
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397,820
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|
397,510
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Common stock, Class C nonvoting, $5 stated value – 5,000,000 shares authorized; 433,406 and 433,406 shares issued and outstanding, respectively
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2,167,030
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2,167,030
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Common stock, Class D nonvoting, $5 stated value – 5,000,000 shares authorized 1,627,165 and 1,547,511 issued and outstanding, respectively
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8,135,824
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7,737,555
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Additional paid-in capital
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7,973,914
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4,550,053
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Retained earnings
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36,599,419
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34,807,774
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Accumulated other comprehensive loss
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(444,473
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)
|
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(637,075
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)
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Total members’ investment
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55,084,534
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|
49,277,847
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$
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183,492,884
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$
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162,755,773
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Associated Grocers of Florida, Inc. and Subsidiaries
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|||||||
Condensed Consolidated Statements of Comprehensive Income - Unaudited
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|||||||
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First Quarter Ended
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||||||
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November 18, 2017
(16 weeks)
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November 19, 2016
(16 weeks)
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Revenues
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$
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257,308,593
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$
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233,405,258
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Cost of revenues
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220,326,713
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199,046,232
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Gross profit
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36,981,880
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34,359,026
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Operating and administrative expenses
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23,028,589
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21,038,139
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Other income
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(78,452
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)
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(98,455
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)
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Total operating expenses
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22,950,137
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20,939,684
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Income from operations
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14,031,743
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13,419,342
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Other income (expense):
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||||
Interest expense
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(781,033
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)
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(1,370,574
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)
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Interest income
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194,127
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107,986
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(586,906
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)
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(1,262,588
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)
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Income before patronage and income tax
expense
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13,444,837
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12,156,754
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Patronage:
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Direct
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8,588,085
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8,145,107
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Year-end
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2,132,475
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1,995,698
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Income before income tax expense
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2,724,277
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2,015,949
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Income tax expense
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932,632
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817,418
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Net income
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1,791,645
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|
1,198,531
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Other comprehensive income, net of tax:
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||||
Unrealized gain on derivative instruments, net of change in deferred tax asset of $116,203; $216,945, respectively
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192,602
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359,576
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Comprehensive income
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$
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1,984,247
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$
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1,558,107
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Associated Grocers of Florida, Inc. and Subsidiaries
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|
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|||||||||||||||||
Condensed Consolidated Statements of Members’ Investment - Unaudited
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||||||||||||||||||||
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||||||||||||||||
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Common
Stock
Class A
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Common
Stock
Class B
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Common
Stock
Class C
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Common
Stock
Class D
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Additional
Paid-in Capital |
Retained
Earnings |
Accumulated
Other Comprehensive Loss |
Total
Members’ Investment |
||||||||||||||||
Balance, July 29, 2017
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$
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255,000
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$
|
397,510
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$
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2,167,030
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$
|
7,737,555
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$
|
4,550,053
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$
|
34,807,774
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$
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(637,075
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)
|
$
|
49,277,847
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Conversion of buying deposits into Class B common stock
|
—
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|
310
|
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—
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—
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2,690
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—
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—
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3,000
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||||||||
Class D common stock issued
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—
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—
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—
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398,269
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|
3,421,171
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—
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—
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3,819,440
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||||||||
Net income
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—
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—
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—
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—
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—
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1,791,645
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—
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1,791,645
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||||||||
Other comprehensive income
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—
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—
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—
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—
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—
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—
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|
192,602
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|
192,602
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||||||||
Balance, November 18, 2017
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$
|
255,000
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$
|
397,820
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$
|
2,167,030
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$
|
8,135,824
|
|
$
|
7,973,914
|
|
$
|
36,599,419
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$
|
(444,473
|
)
|
$
|
55,084,534
|
|
Associated Grocers of Florida, Inc. and Subsidiaries
|
|||||||
Condensed Consolidated Statements of Cash Flows - Unaudited
|
|||||||
|
First Quarter Ended
|
||||||
|
November 18, 2017
(16 weeks)
|
|
November 19, 2016
(16 weeks)
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
1,791,645
|
|
|
$
|
1,198,531
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
||||
Depreciation and amortization
|
1,329,538
|
|
|
1,228,904
|
|
||
Deferred income tax provision
|
308,805
|
|
|
348,152
|
|
||
Provision for recoveries of doubtful accounts
|
31,979
|
|
|
(2,030
|
)
|
||
Change in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(17,940,838
|
)
|
|
(16,337,199
|
)
|
||
Inventories
|
(11,834,660
|
)
|
|
(10,214,606
|
)
|
||
Prepaid expenses and other current assets
|
(325,334
|
)
|
|
(783,955
|
)
|
||
Accounts payable and accrued expenses
|
10,878,140
|
|
|
11,577,930
|
|
||
Patronage payable
|
(1,686,958
|
)
|
|
1,135,103
|
|
||
Rent deposits
|
1,402
|
|
|
(69,264
|
)
|
||
Net cash used in operating activities
|
(17,446,281
|
)
|
|
(11,918,434
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(181,201
|
)
|
|
(511,867
|
)
|
||
Advances on notes receivable
|
(503,225
|
)
|
|
(583,016
|
)
|
||
Repayments of notes receivable
|
786,451
|
|
|
588,204
|
|
||
Decrease in other assets
|
192,286
|
|
|
79,826
|
|
||
Net cash provided by (used in) investing activities
|
294,311
|
|
|
(426,853
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Principal payments on long-term debt and capital lease obligations
|
(1,720,732
|
)
|
|
(1,980,407
|
)
|
||
Net borrowings on long-term revolving line of credit
|
7,672,933
|
|
|
9,434,018
|
|
||
Change in long-term deposits and other liabilities
|
(400,256
|
)
|
|
(1,263,501
|
)
|
||
Proceeds received from Class D common stock issued
|
3,819,443
|
|
|
—
|
|
||
Class A common stock issued to new members
|
—
|
|
|
1,500
|
|
||
Redemption of stock of resigned members
|
—
|
|
|
(776,362
|
)
|
||
Net cash provided by financing activities
|
9,371,388
|
|
|
5,415,248
|
|
||
Net decrease in cash
|
(7,780,582
|
)
|
|
(6,930,039
|
)
|
||
Cash:
|
|
|
|
||||
Beginning of period
|
8,440,211
|
|
|
7,956,043
|
|
||
End of period
|
$
|
659,629
|
|
|
$
|
1,026,004
|
|
Associated Grocers of Florida, Inc. and Subsidiaries
|
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
Associated Grocers of Florida, Inc. and Subsidiaries
|
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
|
|
November 18, 2017
|
|
July 29,
2017
|
||||
Land and improvements
|
|
$
|
22,781,408
|
|
|
$
|
22,781,408
|
|
Buildings and improvements
|
|
45,456,267
|
|
|
45,331,491
|
|
||
Fixtures and equipment
|
|
22,313,898
|
|
|
22,301,745
|
|
||
Total property and equipment
|
|
90,551,573
|
|
|
90,414,644
|
|
||
Less accumulated depreciation
|
|
(37,095,443
|
)
|
|
(36,136,478
|
)
|
||
|
|
53,456,130
|
|
|
54,278,166
|
|
||
Construction in progress
|
|
43,559
|
|
|
43,559
|
|
||
Property and equipment, net
|
|
$
|
53,499,689
|
|
|
$
|
54,321,725
|
|
Associated Grocers of Florida, Inc. and Subsidiaries
|
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
|
November 18, 2017
|
|
July 29,
2017
|
||||
Promissory note payable – matures May 2018 (a)
|
$
|
162,221
|
|
|
$
|
289,795
|
|
Promissory note payable – matures March 2020 (b)
|
2,074,100
|
|
|
2,268,800
|
|
||
Promissory note payable – matures March 2020 (c)
|
14,955,962
|
|
|
15,354,162
|
|
||
Promissory note payable – matures October 2024 (d)
|
28,435,090
|
|
|
29,230,477
|
|
||
Revolving credit agreement – matures March 2020 (e)
|
15,489,982
|
|
|
7,817,049
|
|
||
|
61,117,355
|
|
|
54,960,283
|
|
||
Less deferred financing costs
|
(246,624
|
)
|
|
(280,913
|
)
|
||
Total
|
60,870,731
|
|
|
54,679,370
|
|
||
Less current portion
|
(4,919,979
|
)
|
|
(5,047,553
|
)
|
||
Long-term portion
|
$
|
55,950,752
|
|
|
$
|
49,631,817
|
|
(a)
|
An unsecured promissory note in the amount of $483,855, bearing an annual interest rate of 3.33%, was issued on May 15, 2016. The note was used to finance property insurance premiums. Principal and interest payments were due monthly and the final payment was made in April 2017. A new unsecured promissory note in the amount of $343,282, bearing an annual interest rate of 4.37%, was issued on May 15, 2017. The new note was used to finance property insurance premiums. Principal and interest payments are due monthly with the final payment due April 2018. (See Note 9).
|
(b)
|
A promissory note in the amount of $8,000,000 was issued on February 14, 2006. The promissory note was amended on October 21, 2013, and further amended on April 15, 2016 to extend the maturity date to March 31, 2020. Fees paid in connection with the amendment were not significant to the consolidated financial statements. The loan requires principal payments of $64,900 and payment of accrued interest on a monthly basis. Interest is computed monthly at a variable rate determined by the financial institution (3.78% as of November 18, 2017 and 3.73% as of July 29, 2017). The note is secured by the stock and all property of International Distributors of Grand Bahamas Limited, a wholly owned subsidiary of Associated Grocers of Florida, Inc. with a carrying value of approximately $7.0 million as of November 18, 2017. The promissory note contains various financial and nonfinancial covenants including a fixed charge ratio and a tangible net worth ratio. (See Note 9).
|
(c)
|
A promissory note in the amount of $29,000,000 was issued on April 5, 2006. The promissory note was amended on October 21, 2013, amended on December 9, 2015, and further amended on March 31, 2017 to extend the maturity date to March 31, 2020. Under the terms of the amended promissory note, principal and interest payments are due monthly, and the final payment is due March 31, 2020. Fees paid in connection with the amendment were not significant to the consolidated financial statements. Interest is computed monthly at a variable rate determined by the financial institution (3.75% as of November 18, 2017 and 3.73% as of July 29, 2017). The note is secured by real estate properties with a carrying value of approximately $60.2 million as of November 18, 2017. The proceeds of the original note were used to re-acquire an office and warehouse complex under a previously existing capital lease. The promissory note contains various financial and nonfinancial covenants and restrictions, including a fixed charge ratio and a tangible net worth ratio.
(See Note 9).
|
Associated Grocers of Florida, Inc. and Subsidiaries
|
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
(e)
|
The Company maintains a $30,000,000 revolving long-term line of credit facility (the Revolving Credit Facility). The current agreement provides that funds borrowed will bear interest at the greater of 3.50% or the 30-day LIBOR plus a range between 2.50%-3.50% based upon certain leverage requirements (3.79% as of November 18, 2017 and 3.73% as of July 29, 2017). Borrowings outstanding as of November 18, 2017 and July 29, 2017, were $15,489,982 and $7,817,049, respectively, which did not include $13,333,020 and $9,569,732, respectively, of checks issued which had not cleared the bank. Borrowings under the Revolving Credit Facility are secured by accounts and notes receivable, inventory, and property and equipment of the Company. The Revolving Credit Facility requires the maintenance of minimum borrowings and was extended to March 31, 2020 on March 31, 2017. Fees paid in connection with the extension were not significant to the consolidated financial statements. The facility contains various financial covenants including a fixed charge ratio and a tangible net worth ratio, and restrictions on the issuance of stock, dividends and other payments. (See Note 9).
|
•
|
Managing current and forecasted interest rate risk while maintaining financial flexibility and solvency;
|
•
|
Proactively managing cost of capital to ensure that management can effectively manage operations and execute business strategy, thereby maintaining a competitive advantage and enhancing shareholder value; and
|
•
|
Complying with applicable covenant requirements and restrictions.
|
Associated Grocers of Florida, Inc. and Subsidiaries
|
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
|
Cash Flow Hedging Relationships
|
||||||
|
November 18, 2017
|
|
July 29,
2017
|
||||
Interest rate derivatives:
|
|
|
|
||||
Liability at beginning of period
|
$
|
(1,147,613
|
)
|
|
$
|
(2,964,050
|
)
|
Effective portion of gains recognized in other
comprehensive income
|
169,892
|
|
|
326,355
|
|
||
Effective portion of gains recorded in accumulated other
comprehensive loss and reclassified into interest expense
|
138,913
|
|
|
1,490,082
|
|
||
Liability at end of period
|
$
|
(838,808
|
)
|
|
$
|
(1,147,613
|
)
|
Associated Grocers of Florida, Inc. and Subsidiaries
|
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
Associated Grocers of Florida, Inc. and Subsidiaries
|
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
|
|
Operating
Leases
|
||
Years ending:
|
|
|
||
Remainder 2018
|
|
$
|
2,088,236
|
|
2019
|
|
2,626,231
|
|
|
2020
|
|
1,794,674
|
|
|
2021
|
|
1,125,038
|
|
|
2022
|
|
1,104,702
|
|
|
Thereafter
|
|
2,924,911
|
|
|
Total minimum payments
|
|
$
|
11,663,792
|
|
Associated Grocers of Florida, Inc. and Subsidiaries
|
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
|
Amortization
Expense
|
||
Years ending:
|
|
||
Remainder 2018
|
$
|
186,124
|
|
2019
|
269,000
|
|
|
2020
|
269,000
|
|
|
2021
|
269,000
|
|
|
2022
|
269,000
|
|
|
Thereafter
|
246,334
|
|
|
|
$
|
1,508,458
|
|
Associated Grocers of Florida, Inc. and Subsidiaries
|
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
•
|
the acquisition and transfer of the assets (including the equity interests of certain subsidiaries) and liabilities of the Unified business to Supervalu, including the associated historical presentation of Unified’s results of operations;
|
•
|
the acquisition and transfer of the assets (including the equity interests of certain subsidiaries) and liabilities of the AG Florida business to Supervalu, including the associated historical presentation of AG Florida’s results of operations;
|
•
|
the net cash used in the acquisition of Unified, including adjustments to (i) repay indebtedness attributable to Unified through Supervalu-issued borrowings, (ii) purchase Class A, B and E shares of Unified’s member-owners, (iii) pay transaction costs and Unified employee costs pursuant to the Unified Merger Agreement, (iv) fund benefit plans and (v) reflect the change in ownership of Unified from a cooperative entity;
|
•
|
the net cash used in the acquisition of AG Florida, including adjustments to (i) purchase Class A, B, C and D shares of AG Florida’s member-owners, (ii) repay indebtedness attributable to AG Florida through Supervalu-issued borrowings, (iii) pay AG Florida change-in-control agreements, payments of patronage amounts to members, former member retired stock obligations, and transaction costs;
|
•
|
the change in ownership of AG Florida from a cooperative entity to an entity owned by a corporation; and
|
•
|
the recognition of the income tax effects of the acquisitions and related transactions.
|
•
|
Supervalu’s historical audited Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements contained in Supervalu’s Annual Report on Form 10-K for the year ended February 24, 2018, filed with the SEC on April 24, 2018;
|
•
|
AG Florida’s historical unaudited consolidated condensed financial statements and the accompanying notes to the consolidated condensed financial statements for the first quarter ended November 18, 2017, contained in Exhibit 99.1 to the Current Report on Form 8-K to which this Exhibit 99.2 is filed;
|
•
|
AG Florida’s historical audited consolidated financial statements and the accompanying notes to the consolidated financial statements for the fiscal year ended July 29, 2017, contained in Exhibit 99.1 to the Current Report on Form 8-K/A filed with the SEC on February 23, 2018;
|
•
|
Unified’s historical audited consolidated financial statements and the accompanying notes to the consolidated financial statements for the fiscal year ended October 1, 2016, contained in Exhibit 99.2 to the Current Report on Form 8-K/A filed with the SEC on September 8, 2017;
|
•
|
Unified’s historical unaudited consolidated condensed financial statements and accompanying notes to consolidated condensed financial statements contained in Unified’s Quarterly Report on Form 10-Q for the first quarter ended December 31, 2016, filed by Unified with the SEC on February 14, 2017;
|
•
|
Supervalu’s unaudited pro forma condensed combined financial statements, which include the unaudited pro forma condensed combined balance sheet as of September 9, 2017, and the unaudited pro forma condensed combined statement of operations for the 28 weeks ended September 9, 2017 and for the fiscal year ended February 25, 2017, and the notes to such unaudited pro forma condensed combined financial statements, all giving effect to the acquisition of AG Florida contained in Exhibit 99.2 to the Current Report on Form 8-K/A filed with the SEC on February 23, 2018; and
|
•
|
Supervalu’s unaudited pro forma condensed combined financial statements, which include the unaudited pro forma condensed combined balance sheet as of February 25, 2017, and the unaudited pro forma condensed combined statements of operations for the fiscal year ended February 25, 2017, and the notes to such unaudited pro forma condensed combined financial statements, all giving effect to the acquisition of Unified contained in Exhibit 99.3 to the Current Report on Form 8-K filed with the SEC on September 8, 2017.
|
|
Historical
|
|
Pro Forma
|
||||||||||||||||||
|
Supervalu
|
|
Unified
2(a)
|
|
AG Florida
2(b)
|
|
Adjustments
|
|
Note
|
|
Combined
|
||||||||||
Net sales
|
$
|
14,157
|
|
|
$
|
1,211
|
|
|
$
|
594
|
|
|
$
|
(70
|
)
|
|
2(c)
|
|
$
|
15,892
|
|
Cost of sales
|
12,706
|
|
|
1,173
|
|
|
568
|
|
|
(65
|
)
|
|
2(d)
|
|
14,382
|
|
|||||
Gross profit
|
1,451
|
|
|
38
|
|
|
26
|
|
|
(5
|
)
|
|
|
|
1,510
|
|
|||||
Selling and administrative expenses
|
1,258
|
|
|
47
|
|
|
16
|
|
|
(13
|
)
|
|
2(e)
|
|
1,308
|
|
|||||
Operating earnings
|
193
|
|
|
(9
|
)
|
|
10
|
|
|
8
|
|
|
|
|
202
|
|
|||||
Interest expense, net
|
132
|
|
|
4
|
|
|
2
|
|
|
4
|
|
|
2(f)
|
|
142
|
|
|||||
Equity in earnings of unconsolidated affiliates
|
(16
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
(16
|
)
|
|||||
Earnings (loss) from continuing operations before income taxes
|
77
|
|
|
(13
|
)
|
|
8
|
|
|
4
|
|
|
|
|
76
|
|
|||||
Income tax provision (benefit)
|
28
|
|
|
—
|
|
|
3
|
|
|
(3
|
)
|
|
2(g)
|
|
28
|
|
|||||
Net earnings (loss) from continuing operations
|
$
|
49
|
|
|
$
|
(13
|
)
|
|
$
|
5
|
|
|
$
|
7
|
|
|
|
|
$
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net earnings from continuing operations per share attributable to SUPERVALU INC.:
|
|||||||||||||||||||||
Basic
|
$
|
1.25
|
|
|
|
|
|
|
|
|
|
|
$
|
1.24
|
|
||||||
Diluted
|
$
|
1.25
|
|
|
|
|
|
|
|
|
|
|
$
|
1.24
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Weighted average number of shares outstanding:
|
|||||||||||||||||||||
Basic
|
38
|
|
|
|
|
|
|
|
|
|
|
38
|
|
||||||||
Diluted
|
38
|
|
|
|
|
|
|
|
|
|
|
38
|
|
(a)
|
The results of operations of Unified as they appear in this column have been adjusted to conform to Supervalu’s consolidated financial statement presentation. These adjustments primarily include the following:
|
•
|
The “Unified” column reflects the results of operations attributable to Unified for the 17 week period prior to the acquisition date of June 23, 2017. The results of operations of Unified for the 35 week period ended February 24, 2018 are included in the “Supervalu” column.
|
•
|
The presentation of logistics expense, including employee-related costs, depreciation expense, warehouse costs, and transportation and other costs directly related to costs of selling activities within Cost of sales. These logistics expenses were previously presented in Distribution, selling and administrative expenses within Unified’s historical financial statements.
|
(b)
|
The results of operations of AG Florida as they appear in this column have been adjusted to conform to Supervalu’s consolidated financial statement presentation. These adjustments primarily include the following:
|
•
|
The “AG Florida” column reflects the results of operations attributable to AG Florida for a 41 week period prior to the acquisition date of December 8, 2017. The results of operations of AG Florida for the 11 weeks period ended February 24, 2018 are included in the “Supervalu” column.
|
•
|
The presentation of logistics expense, including employee-related costs, depreciation expense, warehouse costs, and transportation and other costs directly related to costs of selling activities within Cost of sales. These logistics expenses were previously presented in Operating and administrative expenses within AG Florida’s historical financial statements.
|
(c)
|
This adjustment reflects classification changes to conform Unified’s and AG Florida’s revenue presentation with Supervalu’s similar transactions for principal versus agent revenue considerations. Since the acquisition dates of Unified and AG Florida, Supervalu has conformed their revenue presentation to its accounting practices.
|
(d)
|
This adjustment reflects estimated depreciation expense for Unified’s and AG Florida’s property, plant and equipment using the estimated fair value and weighted average useful life, the elimination of patronage earnings from cooperative-based vendors and revenue presentation conforming adjustments discussed in Note 2(c) above.
|
|
|
February 24, 2018
(52 Weeks)
|
||||||||||
|
|
Unified
|
|
AG Florida
|
|
Total
|
||||||
Elimination of historical depreciation expense
|
|
$
|
(3
|
)
|
|
$
|
(2
|
)
|
|
$
|
(5
|
)
|
Elimination of patronage earnings from cooperative vendors
|
|
2
|
|
|
1
|
|
|
3
|
|
|||
Adjustment to conform revenue presentation (see Note 3(c))
|
|
12
|
|
|
(82
|
)
|
|
(70
|
)
|
|||
Estimated Supervalu depreciation expense based on the assigned fair value and estimated useful lives of the acquired property, plant and equipment
|
|
4
|
|
|
3
|
|
|
7
|
|
|||
Total Cost of sales adjustment
|
|
$
|
15
|
|
|
$
|
(80
|
)
|
|
$
|
(65
|
)
|
(e)
|
This adjustment reflects Selling and administrative expenses attributable to the preliminary purchase accounting, transaction costs and other items.
|
|
|
February 24, 2018
(52 Weeks)
|
||||||||||
|
|
Unified
|
|
AG Florida
|
|
Total
|
||||||
Elimination of historical depreciation and amortization expense
|
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
|
$
|
(3
|
)
|
Elimination of historical transaction costs
(1)
|
|
(13
|
)
|
|
—
|
|
|
(13
|
)
|
|||
Elimination of historical patronage expense to cooperative members
|
|
—
|
|
|
(3
|
)
|
|
(3
|
)
|
|||
Estimated Supervalu depreciation and amortization expense based on the assigned fair values and estimated useful lives of the acquired property, plant and equipment and intangibles
|
|
3
|
|
|
3
|
|
|
6
|
|
|||
Total Selling and administrative expenses adjustment
|
|
$
|
(12
|
)
|
|
$
|
(1
|
)
|
|
$
|
(13
|
)
|
(1)
|
This adjustment reflects the removal of transaction costs from the historical transactions costs prior to the acquisition that were included in the “Unified” column (see Note 2(a)). No adjustments have been made for direct and indirect non-recurring merger and integration costs that were incurred subsequent to the respective acquisition dates of Unified or AG Florida of $32 and $5, respectively.
|
(f)
|
This adjustment reflects the reduction of interest expense associated with the debt prepayments, partially offset by increases in interest expense associated with new debt borrowings. Pursuant to the terms of Unified’s debt and the Unified Merger Agreement, Unified’s debt was repaid, which was financed by Supervalu with additional borrowings under Supervalu’s secured term loan facility for the purpose of consummating the acquisition of Unified. Pursuant to the terms of AG Florida’s debt and the AG Florida Merger Agreement, AG Florida’s debt was repaid, which was financed by Supervalu with additional borrowings under Supervalu’s asset-based revolving credit facility for the purposes of consummating the acquisition of AG Florida.
|
|
|
February 24, 2018
(52 Weeks)
|
||||||||||
|
|
Unified
|
|
AG Florida
|
|
Total
|
||||||
Elimination of interest expense and amortization of debt issuance costs
|
|
$
|
(3
|
)
|
|
$
|
(2
|
)
|
|
$
|
(5
|
)
|
Recognition of interest on the $315 of additional borrowings under Supervalu’s secured term loan facility at the rate of LIBOR plus 3.50 percent with a floor on LIBOR set at 1.00 percent
(1)
|
|
4
|
|
|
—
|
|
|
4
|
|
|||
Recognition of interest on the $216 of additional borrowings under Supervalu’s asset-based revolving credit facility at the rate of LIBOR plus 1.25 percent
(2)
|
|
—
|
|
|
5
|
|
|
5
|
|
|||
Total Interest expense, net adjustment
|
|
$
|
1
|
|
|
$
|
3
|
|
|
$
|
4
|
|
(1)
|
The previously calculated combined interest rate of 4.50 percent was used in the calculation of interest expense. Applying the historical interest rate or a 1/8 point increase in the LIBOR interest rate would not have had an impact on Earnings from continuing operations before income taxes due to the LIBOR floor of 1.00 percent.
|
(2)
|
The previously calculated combined interest rate of 2.66 percent was used in the calculation of interest expense. Applying the historical interest rate or a 1/8 point increase in the LIBOR interest rate would not have had an impact on Earnings from continuing operations before income taxes due to the LIBOR floor of 1.00 percent.
|
(g)
|
This adjustment reflects the tax effect of the pro forma adjustments using the blended federal and state statutory tax rates of the applicable jurisdictions during each period presented along with the removal of the current period impact of valuation allowances and other patronage-related tax items not applicable to the combined company. The effective tax rate of the combined company could be different than the historical Supervalu, Unified and AG Florida effective tax rate depending on various factors including post-acquisition activities and the geographic mix of earnings. For the 52 weeks ended February 24, 2018, the tax effect resulting from the combination of Unified and AG Florida is an income tax benefit of $2 and $1, respectively. The results of Unified and AG Florida post acquisition reflect the appropriate effective tax rate resulting from the 2017 Tax Cuts and Jobs Act. No adjustments were made to the historical results of operations of Unified or AG Florida as the periods are prior to the tax change.
|