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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ÈANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended February 22, 2003
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
incorporation or organization)
(I.R.S. Employer
Identification No.)
11840 Valley View Road
Eden Prairie, Minnesota
(Address of principal executive offices)
55344
(Zip Code)
Registrant’s telephone number, including area code: (952) 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 per share New York Stock Exchange
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 ÈNo ‘
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. ‘
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
Yes ÈNo ‘
The aggregate market value of the voting stock held by non-affiliates of the Registrant as of September 7, 2002
was approximately $2,818,177,041 (based upon the closing price of Registrant’s Common Stock on the New
York Stock Exchange on September 7, 2002).
Number of shares of $1.00 par value Common Stock outstanding as of April 15, 2003: 133,783,038
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant’s definitive Proxy Statement filed for the Registrant’s 2003 Annual Meeting of
Stockholders are incorporated by reference into Part III, as specifically set forth in Part III.
Table of contents
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Page 1
... offices) 55344 (Zip Code) Registrant's telephone number, including area code: (952) 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 per share Preferred Share Purchase Rights New York... -
Page 2
...: extreme value stores, regional price superstores and regional supermarkets. The retail formats include results of food stores owned and results of sales to extreme value stores licensed by the company. Food distribution operations include results of sales to affiliated food stores, mass merchants... -
Page 3
... stores located in 36 states, of which 783 were licensed Save-A-Lot's and 93 were Deals general merchandise stores, which are supplied from 15 dedicated distribution centers. Price Superstores. The company's price superstores hold the number one, two or three market position in most of their markets... -
Page 4
... deliver lower cost of operations. Deliveries to retail stores are made from the company's distribution centers by company-owned trucks, third party independent trucking companies or customer-owned trucks. In addition, many types of meats, dairy products, bakery and other products purchased from the... -
Page 5
... 22, 2003: Square Footage Owned (Approximate) Square Footage Leased (Approximate) Retail Format Banner Location and Number of Corporate Stores ExtremeValue Stores Save-A-Lot1 Save-A-Lot2 Deals Price Superstores Deals3 Cub Foods4 Shop 'n Save Supermarkets Shoppers Food Warehouse Metro... -
Page 6
... office space utilized in the company's food distribution operations as of February 22, 2003: Square Footage Owned (Approximate) Square Footage Leased (Approximate) Region Location and Number of Distribution Centers Central Region Midwest Region Northern Region New England Region Northwest Region... -
Page 7
... Vice President, Merchandising, Distribution Food Companies Vice President, Legal Services 1994 2002 1988 1998 2000 Associate General Counsel, 19962000 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... -
Page 8
... and other giftware products), 1997present Director of Wells Fargo & Company Chairman and Chief Executive Officer of GAGE Marketing Group, L.L.C. (an integrated marketing services company), 1991-present Director of AHL Services, Inc. Retired Chief Executive Officer of Donaldson Company, Inc... -
Page 9
... * In accordance with Board policies, Mr. Hodder is retiring from the Board of Directors on May 29, 2003. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The company's common stock is listed on the New York Stock Exchange under the symbol SVU. As of... -
Page 10
... reported were as follows: February 22, 2003 (52 weeks) February 23, 2002 (52 weeks) (In millions) February 24, 2001 (52 weeks) Net sales Cost of sales Selling and administrative expenses Restructure and other charges Operating earnings Interest expense Interest income Earnings before income taxes... -
Page 11
... licensed units, resulted in 198 new stores opened and acquired, including the May 2002 acquisition of 50 Deals stores, and 41 stores closed or sold for a total of 1,417 stores at year end. Total square footage increased approximately 6.6 percent over the prior year. Food distribution sales for 2003... -
Page 12
...markets, it experiences cannibalization. Fiscal 2002 store activity, including licensed units, resulted in 115 new stores opened and 49 stores closed or sold for a total of 1,260 stores at year end. Total square footage increased approximately 6.7 percent over the prior year. Food distribution sales... -
Page 13
... quarter of fiscal 2003, the company recognized pre-tax restructure and other charges of $2.9 million reflected in the "Restructure and other charges" line in the Consolidated Statements of Earnings primarily due to continued softening of real estate in certain markets. The charges represent the net... -
Page 14
.... This review process culminated in the company recording pre-tax restructure and other charges of $181.6 million, including $89.7 million for asset impairment charges, $52.1 million for lease subsidies, lease cancellation fees, future payments on exited real estate and guarantee obligations and... -
Page 15
... estimated market values for similar assets. All activity for the fiscal 2001 restructure plan has been completed. Remaining reserves represent future payments on exited real estate and unpaid employee benefits. Details of the fiscal 2001 restructure activity for fiscal 2003 are as follows: Balance... -
Page 16
... net future payments on exited real estate and employee related costs, net of after-tax proceeds from the sale of owned properties. Cash outflows will be funded by cash from operations. Fiscal 2003 net earnings include $.06 per diluted share of after-tax benefit as a result of the restructure plans... -
Page 17
... value. The company estimates net future cash flows based on its experience and knowledge of the market in which the closed property is located and, when necessary, utilizes local real estate brokers. It is management's intention to dispose of properties or sublease within one year; however, the... -
Page 18
... and the net periodic cost by $0.5 million in fiscal 2003. The weighted average discount rates used in determining the benefit obligation were 7.0% and 7.25% for fiscal 2003 and 2002, respectively. Goodwill Management assesses the valuation of goodwill for each of the company's reporting units on an... -
Page 19
...cash flows to fund its capital expenditures and acquisitions as opportunities arise. Maturities of debt issued will depend on management's views with respect to the relative attractiveness of interest rates at the time of issuance and other debt maturities. In April 2002, the company finalized a new... -
Page 20
...the two. The debentures will generally be convertible if the closing price of the company's common stock on the New York Stock Exchange for twenty of the last thirty trading days of any fiscal quarter exceeds certain levels, at $35.07 per share for the quarter ended June 14, 2003, and rising to $113... -
Page 21
.... At February 22, 2003, the estimated market value of the properties underlying these leases equaled or exceeded the purchase options. In July and August 2002, several class action lawsuits were filed against the company and certain of its officers and directors in the United States District Court... -
Page 22
...49,186 - 5,323 25,000 179,335 $258,844 $ 138,311 - - - 450,561 $ 588,872 COMMON STOCK PRICE SUPERVALU's common stock is listed on the New York Stock Exchange under the symbol SVU. At fiscal 2003 year end, there were 6,960 shareholders of record compared with 7,155 at the end of fiscal 2002. Common... -
Page 23
...123 to require additional disclosure in both annual and interim financial statements on the method of accounting for stock-based employee compensation. The company adopted the disclosure provisions of SFAS No. 148 in the fourth quarter of fiscal 2003. In November 2002, the FASB issued Interpretation... -
Page 24
... notes receivable and, from time to time, derivatives employed to hedge interest rate changes on variable and fixed rate debt. The company does not use financial instruments or derivatives for any trading or other speculative purposes. The company manages interest rate risk through the strategic use... -
Page 25
... to compute the fair value of the interest rate swaps. February 22, 2003 Fair Value Total Summary of Financial Instruments Aggregate payments by fiscal year 2004 2005 2006 2007 (in millions, except rates) 2008 Thereafter Notes receivable Principal receivable Average rate receivable Debt with... -
Page 26
... Market Risk" under Part II, Item 7 above. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information called for by Item 8 is found in a separate section of this report on pages F-1 through F-37. See "Index of Selected Financial Data and Financial Statements and Schedules." ITEM 9. CHANGES... -
Page 27
... Fiscal Year," "Pension Plans and Retirement Benefits," and "Change in Control and Other Agreements," and under the heading "Related Party Transactions, Compensation Committee Interlocks and Insider Participation." ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED... -
Page 28
... employees, consultants or independent contractors providing services to the company, other than officers or directors of the company or any of its affiliates who are subject to Section 16 of the Securities Exchange Act of 1934, are eligible to participate in the plan. The Board administers the plan... -
Page 29
...that information required to be disclosed by the company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. (b) Changes in internal controls. There were no... -
Page 30
... to furnish copies thereof to the Securities and Exchange Commission upon request. (10) Material Contracts: 10.1. SUPERVALU INC. 2002 Stock Plan is incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period (16 weeks) ended June 15, 2002.* 30 -
Page 31
...-Q for the quarterly period (12 weeks) ended September 12, 1998. * SUPERVALU INC. 1989 Stock Appreciation Rights Plan is incorporated by reference to Exhibit (10)g. to the Registrant's Annual Report on Form 10-K for the year ended February 25, 1989.* SUPERVALU INC. Executive Incentive Bonus Plan is... -
Page 32
...'s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 12, 1998.* 10.23. Fourth Amendment to SUPERVALU INC. Non-Qualified Supplement Executive Retirement Plan.* 10.24. SUPERVALU INC. Non-Employee Directors Deferred Stock Plan, as amended.* 10.25. Restricted Stock Unit... -
Page 33
...the undersigned, thereunto duly authorized. SUPERVALU INC. (Registrant) DATE: April 25, 2003 By: /s/ JEFFREY NODDLE Jeffrey Noddle Chief Executive Officer and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on... -
Page 34
... information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for... -
Page 35
... information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for... -
Page 36
... and Financial Statements and Schedules Page(s) Selected Financial Data: Five Year Financial and Operating Summary ...Financial Statements: Independent Auditors' Report of KPMG LLP ...Consolidated composition of net sales and operating earnings for each of the three years ended February 22, 2003... -
Page 37
SUPERVALU INC. and Subsidiaries FIVE YEAR FINANCIAL AND OPERATING SUMMARY 2003 (c) 2002 (d) 2001 (e) 2000 (f) 1999 Statement of Earnings Data (a) (b) (g) Net sales Cost of sales Selling and administrative expenses Gain on sale of Hazelwood Farms Bakeries Restructure and other charges Operating ... -
Page 38
... prior years' restructure charges as a result of changes in estimates primarily due to continued softening of real estate in certain markets. The company also recorded $12.5 million in store closing reserves reflected in selling and administrative expenses. (e) Fiscal 2001 net earnings include... -
Page 39
...of the fiscal years in the three-year period ended February 22, 2003, in conformity with accounting principles generally accepted in the United States of America. As discussed in the note entitled "New Accounting Standards" to the consolidated financial statements, the Company adopted the provisions... -
Page 40
...: extreme value stores, regional price superstores and regional supermarkets. The retail formats include results of food stores owned and results of sales to extreme value stores licensed by the company. Food distribution operations include results of sales to affiliated food stores, mass merchants... -
Page 41
... 22, 2003 (52 weeks) February 23, 2002 (52 weeks) February 24, 2001 (52 weeks) Net sales Costs and expenses Cost of sales Selling and administrative expenses Restructure and other charges Operating earnings Interest Interest expense Interest income Interest expense, net Earnings before income taxes... -
Page 42
... Assets under capital leases Net property, plant and equipment Goodwill Other assets Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Notes payable Accounts payable Accrued vacation, compensation and benefits Current maturities of long-term debt Current obligations under capital... -
Page 43
... Minimum pension liability, net of deferred taxes of $47.1 million Total comprehensive income Sales of common stock under option plans Cash dividends declared on common stock $0.5675 per share Compensation under employee incentive plans Purchase of shares for treasury BALANCES AT FEBRUARY 22, 2003... -
Page 44
... proceeds from the sale of common stock under option plans Payment for purchase of treasury shares Net cash used in financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year $ 257,042 $ 198,326... -
Page 45
...reported by reclassifying cost of sales against net sales for all prior periods. The effect is to present the net gross margin associated with such facilitative services as a component of net sales. This reclassification had no impact on gross profit, earnings before income taxes, net earnings, cash... -
Page 46
... on the general health of the economy and resultant demand for commercial property. While management believes the current estimates of reserves on closed properties are adequate, it is possible that continued weakness in the real estate market could cause changes in the company's assumptions and... -
Page 47
SUPERVALU INC. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) claims incurred but not yet reported, discounted at a risk free interest rate. Any projection of losses concerning workers' compensation and general and automobile liability is subject to a considerable degree of ... -
Page 48
..., "Accounting for Stock Based Compensation" to stock-based employee compensation: 2003 2002 2001 (In thousands, except per share data) Net earnings, as reported Deduct: total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effect... -
Page 49
... in net earnings but rather are recorded directly in the Consolidated Statements of Stockholders' Equity. Use of Estimates: The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make... -
Page 50
...123 to require additional disclosure in both annual and interim financial statements on the method of accounting for stock-based employee compensation. The company adopted the disclosure provisions of SFAS No. 148 in the fourth quarter of fiscal 2003. In November 2002, the FASB issued Interpretation... -
Page 51
... quarter of fiscal 2003, the company recognized pre-tax restructure and other charges of $2.9 million reflected in the "Restructure and other charges" line in the Consolidated Statements of Earnings primarily due to continued softening of real estate in certain markets. The charges represent the net... -
Page 52
.... This review process culminated in the company recording pre-tax restructure and other charges of $181.6 million, including $89.7 million for asset impairment charges, $52.1 million for lease subsidies, lease cancellation fees, future payments on exited real estate and guarantee obligations and... -
Page 53
... estimated market values for similar assets. All activity for the fiscal 2001 restructure plan has been completed. Remaining reserves represent future payments on exited real estate and unpaid employee benefits. Details of the fiscal 2001 restructure activity for fiscal 2003 are as follows: Balance... -
Page 54
... Statements of Earnings for fiscal 2000. In the fourth quarter of fiscal 2003, the fiscal 2000 asset impairment charges for property, plant and equipment on food distribution properties were decreased by $4.5 million primarily due to changes in estimates on exited real estate in certain markets... -
Page 55
... losses on retail stores, distribution warehouses and other properties that are no longer being utilized in current operations. The reserves for closed properties include management's estimates for lease subsidies, lease terminations, future payments on exited real estate and severance. Details... -
Page 56
... owner and operator of retail supermarkets located in Oregon, Washington, California and Nevada, a 26% interest in International Data, LLC, a strategic outsourcing services provider, specializing in, among other things, data services, check and remittance processing and coupon promotions processing... -
Page 57
...of selling and administrative expense in the Consolidated Statements of Earnings, and through February 22, 2003, the net earnings impact was zero. The company has limited involvement with derivative financial instruments and uses them only to manage well-defined interest rate risks. The company does... -
Page 58
... in the Consolidated Balance Sheets. As of February 22, 2003 there was $264.4 million of accounts receivable pledged as collateral. The average short-term interest rate on the outstanding borrowings was 1.76% for fiscal 2003. In April 2002, the company finalized a new three-year, unsecured $650... -
Page 59
...the two. The debentures will generally be convertible if the closing price of the company's common stock on the New York Stock Exchange for twenty of the last thirty trading days of any fiscal quarter exceeds certain levels, at $35.07 per share for the quarter ended June 14, 2003, and rising to $113... -
Page 60
..., Contingencies and Off-Balance Sheet Arrangements note in the Notes to Consolidated Financial Statements. Total rent expense, net of sublease income, relating to all operating leases with terms greater than one year was $113.7 million, $100.7 million and $88.4 million in fiscal 2003, 2002 and 2001... -
Page 61
... 22, 2003 are as follows: Direct Direct Financing Financing Lease Capital Lease Receivables Obligations (In thousands) Fiscal Year 2004 2005 2006 2007 2008 Later Total minimum lease payments Less unearned income Less interest Present value of net minimum lease payments Less current portion Long... -
Page 62
... applying the statutory federal income tax rate to earnings before taxes is attributable to the following: 2003 2002 (In thousands) 2001 Federal taxes based on statutory rate State income taxes, net of federal benefit Nondeductible goodwill Audit settlements Other Total provision $142,801 $116,199... -
Page 63
... the granting of nonqualified stock options and incentive stock options to purchase shares of the company's common stock, to key salaried employees at prices not less than 100 percent of their fair market value, determined based on the average of the opening and closing sale price of a share on the... -
Page 64
...Directors. Compensation expense under these plans was $4.1 million, $4.7 million and $1.0 million for fiscal 2003, 2002 and 2001, respectively. See Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements for the impact of stock based compensation on pro forma net... -
Page 65
SUPERVALU INC. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) TREASURY STOCK PURCHASE PROGRAM In August 1996, the Board of Directors authorized a treasury stock purchase program under which the company was authorized to repurchase up to 10.0 million shares of the company's ... -
Page 66
...defined benefit pension plans for non-union eligible participants are generally 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... -
Page 67
... costs and total benefit costs for the fiscal years for the company's non-union defined benefit pension plans and the post retirement benefit plans: Pension Benefits Post Retirement Benefits February 22, February 23, February 22, February 23, 2003 2002 2003 2002 (In thousands) CHANGES IN BENEFIT... -
Page 68
... the compensation limit from $170,000 to $200,000 and resulted in an increase to the plan's benefit obligation of approximately $10.1 million in fiscal 2003. In July 2001, the company amended its post retirement medical health care benefit plan, making changes to plan eligibility, benefit coverage... -
Page 69
... Plan under which one preferred stock purchase right is distributed for each outstanding share of common stock. The rights, which expire on April 12, 2010, are exercisable only under certain conditions, and may be redeemed by the Board of Directors for $0.01 per right. The plan contains a three-year... -
Page 70
... to products typically known as Direct Store Delivery (DSD) products. This reclassification had no impact on gross profit, earnings before income taxes, net earnings, cash flows, or financial position for any period or their respective trends. See the Summary of Significant Accounting Policies for... -
Page 71
... the three-year period ended February 22, 2003, which are included in the annual report on Form 10-K for the 2003 fiscal year. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule as listed in the... -
Page 72
SUPERVALU INC. and Subsidiaries SCHEDULE II-Valuation and Qualifying Accounts COLUMN A COLUMN B Balance at beginning of year COLUMN C COLUMN D COLUMN E Balance at end of year Description Additions Deductions Allowance for doubtful accounts: Year ended: February 22, 2003 February 23, 2002 ...