Albertsons 2014 Annual Report Download

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T
M
2014 ANNUAL REPORT
2013 ANNUAL REPORT
Independent Business

Table of contents

  • Page 1
    2014 ANNUAL REPORT 2013 ANNUAL REPORT Independent Business TM

  • Page 2
    ...SUPERVALU as we completed the sale of five retail banners and began a new chapter in our company's history. I am pleased with our overall financial performance. Fiscal 2014 marked improved business performance following several years of declining revenues and market capitalization. Full year sales...

  • Page 3
    ... aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of September 6, 2013 was approximately $1,487,797,190 (based upon the closing price of registrant's Common Stock on the New York Stock Exchange). As of April 18, 2014, there were 260,200,688 shares...

  • Page 4
    ...About Market Risk ...Financial Statements and Supplementary Data ...Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ...PART III 10. 11. 12. 13. 14. Directors, Executive Officers and Corporate Governance ...Executive...

  • Page 5
    ... food or drug retail chains, supercenters, hard discount, non-traditional competitors and alternative formats in the Company's markets Å Customer reaction to the increased presence of competitors, including non-traditional competitors, in the Company's markets Å Competition for employees, store...

  • Page 6
    ...employee benefits costs Å Potential for work disruption from labor disputes Increased Employee Benefit Costs Å Increased operating costs resulting from rising employee benefit costs Å Potential increases in health plan costs resulting from health care reform Å Pension funding obligations related...

  • Page 7
    ... general liability Å Potential increase in the number or severity of claims for which the Company is self-insured Volatility in Fuel and Energy Costs Å Availability and cost of energy and fuel to store and transport products Å Volatility of fuel, energy and natural gas prices Å Risks associated...

  • Page 8
    ...Å Unfavorable changes in the Company's industry, the broader economy, market conditions, business operations, competition or the Company's stock price and market capitalization that could require impairment to intangible assets, including goodwill, and tangible assets, including property, plant and...

  • Page 9
    ...-Osco, Shaw's, Star Market, the related in-store pharmacies under the Osco and Sav-on banners, 10 distribution centers and certain regional and corporate offices (the "Albertsons Acquisition"). On January 10, 2013, the Company, AB Acquisition LLC ("AB Acquisition") an affiliate of a Cerberus Capital...

  • Page 10
    ...certain other corporate costs to reflect the structure under which the Company is being managed. These changes primarily resulted in the recast of net expenses from Retail Food to Corporate. Refer to the Consolidated Segment Financial Information set forth in Part II, Item 8 of this Annual Report on...

  • Page 11
    ... independent retail customers and vendors related to products that are delivered directly by suppliers to retail stores under programs established by the Company. These services include sourcing, payment services, advertising and invoicing. Save-A-Lot The Company conducts its Save-A-Lot operations...

  • Page 12
    ... service revenue Net sales 1 100% (1) Includes such items as dry goods, general merchandise, home, health and beauty care, beverages, dairy, frozen foods and candy (2) Includes such items as meat, produce, deli and bakery Private-Label Products The Company's private-label products are produced...

  • Page 13
    ... can result in changes to cash flow from operations presented in the Consolidated Statements of Cash Flows that are not necessarily indicative of long-term operating trends. The Company's working capital needs are generally greater during the months leading up to high sales periods, such as the time...

  • Page 14
    ... bargaining agreements with employees, work stoppages could occur if we are unable to negotiate new contracts. A prolonged work stoppage at distribution centers or a significant number of stores may have a material impact on the Company's business, financial condition or results of operations. 12

  • Page 15
    ...Supply Chain Services, 2005-2011 Senior Vice President, Human Resources & Labor Relations, 2010-2013; Senior Vice President, Labor & Employee Relations, 2006-2010 Executive Vice President, Legal 2013; Vice President, Employment, Compensation and Benefits Law, 20122013; Director, Employment Law, 2011...

  • Page 16
    ... with general merchandise retailer Target Corporation from 2006-2008, most recently as its Senior Employee Relations Counsel and Group Manager. (7) Mark Van Buskirk was appointed Executive Vice President, Merchandising, Marketing, Retail & Pharmacy in March 2013. Prior to joining the Company, Mr...

  • Page 17
    ...for customers, managers, employees, store sites and products from traditional grocery retailers, including regional and national chains and independent food store operators, and non-traditional retailers, such as supercenters, membership warehouse clubs, specialty supermarkets, drug stores, discount...

  • Page 18
    ...For example, high levels of debt could: • require the Company to use a substantial portion of its cash flow from operations for the payment of principal and interest on its indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions, and...

  • Page 19
    ... employees of the Company as well as some of its divested businesses. The Company and AB Acquisition also entered into a binding term sheet with the Pension Benefit Guaranty Corporation (the "PBGC") relating to issues regarding the effect of the NAI Banner Sale on certain SUPERVALU retirement plans...

  • Page 20
    ... fair value of those plans' assets. Required contributions have increased in recent years due to a combination of lower pension discount rates and the effect of the Pension Protection Act of 2006. The SUPERVALU Retirement Plan remaining with the Company is frozen as to benefit service and earnings...

  • Page 21
    ... the Company's results of operations. In connection with the NAI Banner Sale, the Company entered into Transition Services Agreements with each of NAI and Albertson's LLC to support the divested NAI Banners and the continuing operations of Albertson's LLC, each with an initial term that expires...

  • Page 22
    ... the Company's employees or vendors. To the extent that any attack or breach results in the loss, damage or misappropriation of information, the Company may be adversely affected by claims from customers, financial institutions, payment card associations, stockholders and others and by costly...

  • Page 23
    ... food, facilities, equal employment opportunity, public accessibility, employee benefits, wages and hours worked and licensing for the sale of food, drugs and alcoholic beverages, among others. The Company's inability to timely obtain permits, comply with government regulations or make capital...

  • Page 24
    ... supply chain and distribution network could have an adverse impact on the Company's sales and operating results. The Company's sales and operating results could be adversely impacted if the Company is not able to provide goods to the Company's stores and its customers' stores in a timely and cost...

  • Page 25
    ..., changes in business operations and market strategies, changes in competition or changes in the Company's stock price and market capitalization. Changes in these factors, or changes in actual performance compared with estimates of the Company's future performance, may affect the fair value of...

  • Page 26
    ... distribution center square footage was approximately 1 million related to an owned facility which provides wholesale distribution to a Retail Food banner, as of February 22, 2014. In addition to its principal executive offices in Eden Prairie, Minnesota, the Company maintains store support centers...

  • Page 27
    ... a former Assistant Store Manager at Save-A-Lot, filed a class action against Save-A-Lot seeking to represent current and former Assistant Store Managers alleging violations of the Fair Labor Standards Act related to the fluctuating work week method of pay ("FWW") in the United States District Court...

  • Page 28
    ...'s purchases of equity securities for the periods indicated: Total Number of Approximate Shares Purchased Dollar Value of as Part of Shares that May Publicly Yet be Purchased Total Number Average Announced Under the of Shares Price Paid Plans or Plans or Purchased (2) Per Share Programs Programs 239...

  • Page 29
    ... compares the yearly change in the Company's cumulative shareholder return on its common stock for the period from the end of fiscal 2009 to the end of fiscal 2014 to that of the Standard & Poor's ("S&P") 500 and a group of peer companies in the retail grocery industry. The stock price performance...

  • Page 30
    ... FINANCIAL DATA 2014 (52 weeks) 2013 (52 weeks) 2012 (52 weeks) 2011 (52 weeks) 2010 (52 weeks) (Dollars and shares in millions, except percent and per share data) Results of Operations Net sales (1) Gross profit (1) Goodwill and intangible asset impairment charges Operating earnings (loss) (2) Net...

  • Page 31
    ... operations per share-diluted. (7) Capital expenditures include cash payments for purchases of property, plant and equipment and non-cash capital lease additions. (8) Adjusted EBITDA is a non-GAAP financial measure that the Company provides as a supplement to our results of operations and related...

  • Page 32
    ...March 21, 2013, the Company completed the sale of its wholly-owned subsidiary, New Albertson's, Inc. ("NAI"), including the Acme, Albertsons, Jewel-Osco, Shaw's and Star Market retail banners (the "NAI Banners"), to AB Acquisition LLC ("AB Acquisition"), an affiliate of a Cerberus Capital Management...

  • Page 33
    ... operating results in fiscal 2014 compared to fiscal 2013 and for fiscal 2013 compared to fiscal 2012. February 22, 2014 (52 weeks) 14,623 2,532 2,114 - 418 407 11 5 6 176 $ 182 85.2 14.8 12.3 - 2.4 2.4 0.1 - - 1.0 (In millions, except per share data) Net sales Cost of sales Gross profit Selling...

  • Page 34
    ... Total retail square footage, excluding actual and planned store dispositions, increased 0.9 percent from the end of fiscal 2013. Net Sales Net sales for fiscal 2014 were $17,155, compared with $17,139 last year, an increase of $16. Independent Business net sales were 46.8 percent of Net sales, Save...

  • Page 35
    ... year. The 50 basis point decrease in Save-A-Lot gross profit rate is primarily due to $12 of incremental investments to lower prices to customers, $8 of higher shrink and $3 of higher advertising costs. Retail Food gross profit as a percent of Retail Food net sales was 27.0 percent for fiscal 2014...

  • Page 36
    ... from services provided to independent retail customers, $3 of lower bad debt expense and $2 of a LIFO charge decrease, offset in part by $14 of higher allocated corporate overhead costs, including employee-related costs, and $4 of lower sales volume. Save-A-Lot operating earnings for fiscal 2014...

  • Page 37
    ... costs and accelerated stock-based compensation charges of $5, a multi-employer pension plan withdrawal charge of $4, offset in part by a gain on cash settlement received from credit card companies of $10. When adjusted for these items, the remaining $49 increase in Retail Food's operating earnings...

  • Page 38
    ... from credit card companies of $10 before tax ($6 after tax, or $0.03 per diluted share). During fiscal 2013, the Company added 69 new stores through new store development, and closed 70 stores, including planned dispositions, all of which were Save-A-Lot stores. Total retail square footage as...

  • Page 39
    ...decrease in Save-A-Lot gross profit rate is primarily due to a 100 basis point impact from competitive price investment with the remaining decrease primarily due to higher advertising costs. Retail Food gross profit as a percent of Retail Food Net sales was 26.7 percent for fiscal 2013 compared with...

  • Page 40
    ... to gross margin investment and change in business mix partially offset by a lower LIFO charge and lower employee related costs. Save-A-Lot operating earnings for fiscal 2013 were $143, or 3.4 of Save-A-Lot net sales, compared with $230, or 5.4 percent of Save-A-Lot net sales, for fiscal 2012. The...

  • Page 41
    ... of the fuel divestiture of $458. In addition, closed stores net of new stores resulted in decreased net sales of $189. Loss from discontinued operations, net of tax, for fiscal 2013 was $1,203 compared to $930 in fiscal 2012. Fiscal 2013 included the loss on sale of the NAI banners of $1,273 net of...

  • Page 42
    ... performance, to evaluate results against those expectations, and as one of the compensation performance measures to determine achievement under the guidance of certain compensation programs and plans. The Company defines Adjusted EBITDA as Net earnings (loss) from continuing operations, plus Income...

  • Page 43
    ...2013, 2012, 2011 and 2010: 2014 2013 2012 2011 2010 (52 weeks) (52 weeks) (52 weeks) (52 weeks) (52 weeks) Net earnings (loss) from continuing operations Income tax provision (benefit) Interest expense, net Depreciation and amortization LIFO (credit) charge Unusual employee-related costs and pension...

  • Page 44
    ... vendor funds earned, including advertising allowances, with no offsetting changes to the base price on the products purchased, would impact gross profit by less than 10 basis points. Inventories, Net Inventories are valued at the lower of cost or market. Substantially all of the Company's inventory...

  • Page 45
    ... years as compared with the cost of fiscal 2014, 2013 and 2012 purchases. As a result, Cost of sales decreased by $14, $6 and $9 in fiscal 2014, 2013 and 2012, respectively. If the FIFO method had been used to determine cost of inventories for which the LIFO method is used, the Company's inventories...

  • Page 46
    ..., Plant and Equipment Related Charges in the accompanying Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K Reserves for Closed Properties The Company maintains reserves for costs associated with closures of retail stores, distribution centers...

  • Page 47
    ...Company's industry, capital structure and risk premiums including those reflected in the current market capitalization. Fair value calculations contain significant judgments and estimates related to each reporting unit's projected weighted average cost of capital, future revenue, profitability, cash...

  • Page 48
    ... of operating results to plan, the Company would reassess the fair value of the Company's reporting units to their the carrying value. The Company completed step one of the annual goodwill impairment evaluation during the fourth quarter for fiscal 2014 and 2013 with each reporting unit's fair value...

  • Page 49
    ... Plans in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional discussion of actuarial assumptions used in determining pension and postretirement health care liabilities and expenses. The Company reviews and selects the discount...

  • Page 50
    ... 23, 2013, respectively. As of February 22, 2014, each 25 basis point change in the discount rate would impact the self-insurance liabilities by less than $1. LIQUIDITY AND CAPITAL RESOURCES Overview Management expects that the Company will continue to replenish operating assets and pay down debt...

  • Page 51
    ... of the credit markets and the Company's results of operations, cash flows, financial position and credit ratings. Cash Flow Information Operating Activities Net cash provided by operating activities from continuing operations was $120, $417 and $328 in fiscal 2014, 2013 and 2012, respectively. The...

  • Page 52
    fiscal 2012 to 2013 due to inventory management and store closures. The increase in cash used in accounts payable and accrued liabilities in fiscal 2014 compared to fiscal 2013 is attributable to lower employee-related payables associated with the fiscal 2014 workforce reduction. The remaining net ...

  • Page 53
    ... cash payments for debt financing and issuance costs associated with the NAI Banner Sale, the re-pricing of the interest rate on the Secured Term Loan due March 2019 and the refinancing of $372 of the 2016 Senior Notes (defined below). The increase in borrowings compared to last year reflects...

  • Page 54
    ..., LLC, the parent entity of the Company's Save-A-Lot business, and the Term Loan Parties granted a perfected first priority security interest in substantially all of their intellectual property and a first priority mortgage lien and security interest in certain owned or ground leased real estate and...

  • Page 55
    ... costs and accelerated amortization of the original issue discount on the Secured Term Loan Facility due March 2019 during the fourth quarter ended February 22, 2014. Debentures On May 21, 2013, the Company completed a modified "Dutch Auction" tender offer (the "Debt Tender Offer") to purchase...

  • Page 56
    ...Credit Facility due March 2018 or other long-term debt. Capital Expenditures Capital expenditures for fiscal 2014 were $113, including $2 of non-cash capital lease additions. Capital expenditures primarily included store remodeling activity, technology expenditures and new retail stores. The Company...

  • Page 57
    ... and AB Acquisition entered into a binding term sheet with the PBGC relating to issues regarding the effect of the NAI Banner Sale on certain SUPERVALU retirement plans. The agreement requires that the Company will not pay any dividends to its stockholders at any time for the period beginning on...

  • Page 58
    ...contracts entered into for the purchase and sale of stock or assets, operating leases and other real estate contracts, financial agreements, agreements to provide services to the Company and agreements to indemnify officers, directors and employees in the performance of their work. While the Company...

  • Page 59
    ... could change based on the results of collective bargaining efforts, investment returns on the assets held in the plans, actions taken by trustees who manage the plans' benefit payments and requirements under the Pension Protection Act of 2006 and Section 412(e) of the Internal Revenue Code. Company...

  • Page 60
    ... have annual purchase commitments of $1 or greater. As of February 22, 2014, future purchase obligations existed that primarily related to fixed asset and information technology commitments. In addition, in the ordinary course of business, the Company enters into supply contracts to purchase product...

  • Page 61
    ... of principal cash flows and weighted average interest rates by expected year of maturity. Summary of Financial Instruments February 22, 2014 Fair Value Notes receivable Principal receivable Average rate receivable Debt with variable interest rates Principal payments Average variable rate Debt with...

  • Page 62
    ... 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index of Financial Statements and Schedules Page(s) Consolidated Financial Statements: Report of Independent Registered Public Accounting Firm Consolidated Segment Financial Information for the fiscal years ended February 22, 2014, February 23, 2013...

  • Page 63
    ..., the financial position of SUPERVALU INC. and subsidiaries as of February 22, 2014 and February 23, 2013, and the results of their operations and their cash flows for each of the fiscal years in the three-year period ended February 22, 2014, in conformity with U.S. generally accepted accounting...

  • Page 64
    ...Retirement Plan and certain other corporate costs to reflect the structure under which the Company is now being managed. These changes primarily resulted in the recast of net expenses from Retail Food to Corporate. Refer to Note 1-Summary of Significant Accounting Policies for additional information...

  • Page 65
    SUPERVALU INC. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data) February 22, 2014 (52 weeks) Net sales Cost of sales Gross profit Selling and administrative expenses Goodwill and intangible asset impairment charges Operating earnings (loss) Interest ...

  • Page 66
    ..., 2014 (52 weeks) Net earnings (loss) Other comprehensive income (loss): Recognition of pension and other postretirement benefits income (loss), net of tax (expense) benefit of $(123), $(22) and $129, respectively Comprehensive income (loss) $ 182 February 23, 2013 (52 weeks) $ February 25, 2012 (52...

  • Page 67
    ... liabilities Accounts payable Accrued vacation, compensation and benefits Current maturities of long-term debt and capital lease obligations Other current liabilities Current liabilities of discontinued operations Total current liabilities Long-term debt Long-term capital lease obligations Pension...

  • Page 68
    ... per share Stock-based compensation Change in par value of common stock Other Balances as of February 23, 2013 Net earnings Other comprehensive income, net of tax of $123 Divestiture of New Albertsons, Inc.'s pension accumulated comprehensive loss, net of tax of $31 Common stock issued and sold in...

  • Page 69
    ...64 SUPPLEMENTAL CASH FLOW INFORMATION The Company's non-cash activities were as follows: Capital lease asset additions Purchases of property, plant and equipment included in Accounts payable Interest and income taxes paid: Interest paid (net of amounts capitalized) Income taxes paid (net of refunds...

  • Page 70
    ... Acme, Albertsons, Jewel-Osco, Shaw's and Star Market retail banners and the associated Osco and Sav-on in-store pharmacies (the "NAI Banner Sale") to AB Acquisition LLC ("AB Acquisition"). The NAI Banner Sale was completed effective March 21, 2013, during the Company's first quarter of fiscal 2014...

  • Page 71
    ...is now managed. These changes primarily resulted in the recast of net expenses from the Company's Retail Food segment to Corporate for all periods presented and as previously reported in the Company's Annual Report on Form 10-K for the fiscal year ended February 23, 2013 and February 25, 2012. These...

  • Page 72
    ... net as management fees when earned. Cost of Sales Cost of sales in the Consolidated Statements of Operations includes cost of inventory sold during the period, including purchasing, receiving, warehousing and distribution costs, and shipping and handling fees. Save-A-Lot and Retail Food advertising...

  • Page 73
    ... covering a period of one year or less. The Company recognizes vendor funds for merchandising and buying activities as a reduction of Cost of sales when the related products are sold. Vendor funds that have been earned as a result of completing the required performance under the terms of the...

  • Page 74
    ... costs associated with closures of retail stores, distribution centers and other properties that are no longer being utilized in current operations. The Company provides for closed property lease liabilities based on the present value of the remaining noncancellable lease payments after the closing...

  • Page 75
    ... in the Save-A-Lot and Independent Business reporting units. Fair values are determined by using both the market approach, applying a multiple of earnings based on the guideline publicly traded company method, and the income approach, discounting projected future cash flows based on management...

  • Page 76
    ...management determined that the cash flows in those geographic market areas were no longer interdependent. Retail Food's long-lived assets are reviewed for impairment at the geographic market group level for five geographic market groupings of individual retail stores. During fiscal 2013, the Company...

  • Page 77
    ... and the long-term portion is included in Other long-term liabilities in the Consolidated Balance Sheets. The insurance liabilities as of the end of the fiscal year are net of discounts of $7 as of February 22, 2014 and February 23, 2013. Benefit Plans The Company recognizes the funded status of its...

  • Page 78
    ... applicable. The Company recognizes interest related to unrecognized tax benefits in interest expense and penalties in Selling and administrative expenses in the Consolidated Statements of Operations. Net Earnings (Loss) Per Share Basic net earnings (loss) per share is calculated using net earnings...

  • Page 79
    ... postretirement benefit plan accumulated other comprehensive loss at the end of period, net of tax $ (612) 202 55 257 48 2013 $ (657) (20) 65 45 - 2012 $ (446) (262) 51 (211) - $ (307) $ (612) $ (657) Upon completion of the NAI Banner Sale in the first quarter of fiscal 2014, the Company disposed...

  • Page 80
    ... to net the unrecognized tax benefit with a deferred tax asset as of the reporting date. ASU 2013-11 will be effective for the Company's first quarter of fiscal 2015. The Company is currently evaluating the impact of this accounting standard update on its Consolidated Financial Statements. 78

  • Page 81
    ... fourth quarter of fiscal 2012, the Company's stock price experienced a significant and sustained decline, cash flows of the Company's Retail Food segment continued to decline and the book value per share substantially exceeded the stock price. As a result, the Company performed reviews of goodwill...

  • Page 82
    ... maintains reserves for costs associated with closures of retail stores, distribution centers and other properties that are no longer being utilized in current operations. The Company provides for closed property operating lease liabilities using a discount rate to calculate the present value of the...

  • Page 83
    ... expense related to capitalized lease assets was $19, $23 and $26 for fiscal 2014, 2013 and 2012, respectively. NOTE 5-FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market...

  • Page 84
    ... February 22, 2014 and February 23, 2013. The estimated fair value of notes receivable was calculated using a discounted cash flow approach applying a market rate for similar instruments using Level 3 inputs. The estimated fair value of the Company's long-term debt (including current maturities) was...

  • Page 85
    ... equipment located on such real estate. As of February 23, 2013, there was $302 of owned or ground-leased real estate and associated equipment pledged as collateral, classified as Property, plant and equipment, net as well as $767 of assets included in Long-term assets of discontinued operations in...

  • Page 86
    ..., LLC, the parent entity of the Company's Save-A-Lot business, and the Term Loan Parties granted a perfected first priority security interest in substantially all of their intellectual property and a first priority mortgage lien and security interest in certain owned or ground leased real estate and...

  • Page 87
    ... Time were accepted for purchase. On May 21, 2013, the Company issued $400 of 6.75 percent Senior Notes due June 2021 (the "2021 Senior Notes"). The Company filed a registration statement on Form S-4 with the Securities and Exchange Commission (the "SEC") for the exchange of registered 2021 Senior...

  • Page 88
    ... other long-term debt. NOTE 7-LEASES The Company leases most of its retail stores and certain distribution centers, office facilities and equipment from third parties. Many of these leases include renewal options and, to a limited extent, include options to purchase. Future minimum lease payments to...

  • Page 89
    ...Fiscal Year 2015 2016 2017 2018 2019 Thereafter Total minimum lease receipts Less unearned income Net investment in direct financing leases Less current portion Long-term portion The carrying value of owned property leased to third parties under operating leases was as follows: 2014 Property, plant...

  • Page 90
    ... for financial reporting and income tax purposes. The Company's deferred tax assets and liabilities consisted of the following: 2014 Deferred tax assets: Compensation and benefits Self-insurance Property, plant and equipment and capitalized lease assets Loss on sale of discontinued operations Net...

  • Page 91
    ... current liabilities and Other long-term liabilities in the Consolidated Balance Sheets. The Company settled various audits during fiscal 2014 and fiscal 2013 resulting in payments of $14 for interest and penalties in fiscal 2014. The Company is currently under examination or other methods of review...

  • Page 92
    ... in fiscal 2013 stock-based awards granted generally have a term of 10 years. Stock options are granted to key salaried employees and have been granted to the Company's non-employee directors to purchase common stock at an exercise price not less than 100 percent of the fair market value of the...

  • Page 93
    ... share. These options vest over three years. In fiscal 2013, the Company's Board of Directors granted non-qualified stock options to the Company's Chief Executive Officer, and the Board of Directors granted non-qualified stock options to certain other employees, under the Company's 2012 Stock Plan...

  • Page 94
    ... two years. Long-Term Incentive Plans In fiscal 2013, the Company granted 5 performance award units to certain employees under the SUPERVALU INC. 2007 Stock Plan as part of the Company's long-term incentive program ("2013 LTIP"). Payout of the award was based on the increase in share price over...

  • Page 95
    ... award unit. The amount of the awards outstanding was insignificant as of February 22, 2014. The assumptions related to the valuation of the Company's 2013 LTIP consisted of the following: 2013 Dividend yield Volatility rate Risk-free interest rate Expected life NOTE 10-NET EARNINGS (LOSS) PER SHARE...

  • Page 96
    ...all employees of the Company and its subsidiaries are covered by various contributory and noncontributory pension, profit sharing or 401(k) plans. The Company's primary defined benefit pension plan, the SUPERVALU Retirement Plan, and certain supplemental executive retirement plans were closed to new...

  • Page 97
    ...: Pension Benefits 2014 2013 Change in Benefit Obligation Benefit obligation at beginning of year Plan Amendment Service cost Interest cost Actuarial loss (gain) Benefits paid Other Benefit obligation at end of year Changes in Plan Assets Fair value of plan assets at beginning of year Actual return...

  • Page 98
    ... pension plan associated with its former Shaw's banner. The unfunded benefit obligations of $108 attributable to the divested defined benefit pension plan were included in the Long-term liabilities of discontinued operations in the Consolidated Balance Sheets as of February 23, 2013. Net periodic...

  • Page 99
    ... future cash flows. This resulting weighted average discount rate is then used in evaluating the final discount rate to be used by the Company. (2) Net periodic benefit cost is measured using weighted average assumptions as of the beginning of each year. (3) Expected long-term return on plan assets...

  • Page 100
    ... investment manager portfolios and both general and portfolio-specific investment guidelines. Risk tolerance is established through careful consideration of the plan liabilities, plan funded status and the Company's financial condition. This asset allocation policy mix is reviewed annually and...

  • Page 101
    .... Private equity and real estate partnerships-Valued using the most recent general partner statement of fair value, updated for any subsequent partnership interests' cash flows or expected changes in fair value. Mutual funds-Mutual funds are valued at the closing price reported in the active market...

  • Page 102
    ... benefit pension plans held in a master trust as of February 23, 2013, by asset category, consisted of the following: Level 1 Common stock Common collective trusts-fixed income Common collective trusts-equity Government securities Mutual funds Corporate bonds Real estate partnerships Private equity...

  • Page 103
    ...common stock as of February 22, 2014 and February 23, 2013, respectively. Post-Employment Benefits The Company recognizes an obligation for benefits provided to former or inactive employees. The Company is self-insured for certain disability plan programs which comprise, the primary benefits paid to...

  • Page 104
    ...and the three-digit plan number, if applicable. Unless otherwise noted, the most recent Pension Protection Act zone status ("PPA") available in 2014 and 2013 relates to the plans' two most recent fiscal year-ends. The zone status is based on information that the Company received from the plan and is...

  • Page 105
    ... 2014 2013 2012 Imposed (1) Provisions Pension Fund EIN-Pension Plan Number Minneapolis Food Distributing Industry Pension Plan Central States, Southeast and Southwest Areas Pension Fund Minneapolis Retail Meat Cutters and Food Handlers Pension Fund UFCW Unions and Participating Employers Pension...

  • Page 106
    ...% of Associates under Collective Bargaining Agreement (1) Over 5% Contribution 2014 Minneapolis Food Distributing Industry Pension Plan Central States, Southeast and Southwest Areas Pension Fund Minneapolis Retail Meat Cutters and Food Handlers Pension Fund UFCW Unions and Participating Employers...

  • Page 107
    ... amounts paid to benefit active employees. The Company contributed $87, $90 and $90 for fiscal 2014, 2013 and 2012, respectively, to multiemployer health and welfare plans. If healthcare provisions within these plans cannot be renegotiated in a manner that reduces the prospective healthcare cost as...

  • Page 108
    ...purchase obligations. The Company and AB Acquisition entered into a binding term sheet with the Pension Benefit Guaranty Corporation (the "PBGC") relating to issues regarding the effect of the NAI Banner Sale on certain SUPERVALU retirement plans. The agreement requires that the Company will not pay...

  • Page 109
    ... a former Assistant Store Manager at Save-A-Lot, filed a class action against Save-A-Lot seeking to represent current and former Assistant Store Managers alleging violations of the Fair Labor Standards Act related to the fluctuating work week method of pay ("FWW") in the United States District Court...

  • Page 110
    ... Executive Officer. The Company offers a wide variety of grocery products, general merchandise and health and beauty care, pharmacy, fuel and other items and services. The Company's business is classified by management into three reportable segments: Independent Business, Save-A-Lot and Retail Food...

  • Page 111
    ... beauty care, beverages, dairy, frozen foods, and candy (2) Includes such items as meat, produce, deli and bakery NOTE 14-DISCONTINUED OPERATIONS AND DIVESTITURES Discontinued Operations On March 21, 2013, the Company sold its Albertsons, Acme, Jewel-Osco, Shaw's and Star Market banners and related...

  • Page 112
    ... $19 and $236 for fiscal 2014 and 2013, respectively. The Company recorded $209 within Net sales of continuing operations related to the NAI banners for fiscal 2014. The Company provides certain back office support to the divested NAI Banners under the TSA. Fees earned under the TSA are reflected in...

  • Page 113
    ... cash equivalents Receivables, net Inventories, net Other current assets Total current assets Property, plant and equipment, net Intangible assets, net Other assets Total assets Liabilities Accounts payable Accrued vacation, compensation and benefits Current maturities of long-term debt and capital...

  • Page 114
    ...due March 2018) that is due within 30 days of the date the reserve is established. The ABL Amendment also amended the Revolving ABL Credit Facility due March 2018 to provide that the Company may incur additional term loans under the Secured Term Loan Facility due March 2019 in an aggregate principal...

  • Page 115
    ... share data) Unaudited quarterly financial information for SUPERVALU INC. and subsidiaries is as follows: 2014 First (16 weeks) Net sales (1) Gross profit Net (loss) earnings from continuing operations (2) Net earnings Net (loss) earnings per share from continuing operations-diluted (3) Net earnings...

  • Page 116
    ... share) recorded in Gross profit, offset in part by a gain on sale of property of $15 before tax ($10 after tax, or $0.04 per diluted share) recorded in Selling and administrative expenses. (3) As a result of the net loss for the first quarter during fiscal 2014 and four quarters of fiscal 2013...

  • Page 117
    SUPERVALU INC. and Subsidiaries SCHEDULE II-Valuation and Qualifying Accounts (In millions) Balance at Beginning of Fiscal Year Balance at End of Fiscal Year Description Allowance for losses on receivables: 2014 2013 2012 Additions Deductions $ 5 3 4 16 11 6 (12) $ (9) (7) 9 5 3 115

  • Page 118
    ... design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of February 22, 2014, the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer...

  • Page 119
    ... NAI, the Company reviewed the internal controls over financial reporting. During the first quarter of fiscal 2014, the Company identified certain controls which were not related to the Company's continuing operations but were solely related to the operations of the Company's retail banners that are...

  • Page 120
    PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information called for by Item 10, as to compliance with Section 16(a) of the Exchange Act, is incorporated by reference to the Company's definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A in ...

  • Page 121
    ... Plan may not have an exercise price less than 100 percent of the fair market value of the Company's common stock on the date of the grant. Unless the Board of Directors otherwise specifies, restricted stock and restricted stock units will be forfeited and reacquired by the Company if an employee...

  • Page 122
    ... Statement to be filed with the SEC pursuant to Regulation 14A in connection with the Company's 2014 Annual Meeting of Stockholders under the heading "Board Practices- Policy and Procedures Regarding Transactions with Related Persons." ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information...

  • Page 123
    ... on April 28, 2006. Stock Purchase Agreement, dated January 10, 2013, by and among SUPERVALU INC., AB Acquisition LLC and New Albertson's, Inc., is incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the SEC on January 14, 2013 (Schedules have been...

  • Page 124
    ... Bank Trust Company Americas (formerly known as Bankers Trust Company), as Trustee is incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the SEC on May 7, 2009. Officers' Certificate and Authentication Order dated May 21, 2013 for the 6.750% Senior...

  • Page 125
    ... to Exhibit 10.32 to the Company's Annual Report on Form 10-K for the year ended February 25, 2006.* Form of SUPERVALU INC. 2002 Stock Plan Stock Option Agreement for NonEmployee Directors and Stock Option Terms and Conditions for Non-Employee Directors is incorporated herein by reference to...

  • Page 126
    ... with the SEC on October 13, 2006.* SUPERVALU INC. 1997 Stock Plan, as amended, is incorporated herein by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended February 24, 2007.* SUPERVALU INC. Annual Cash Bonus Plan for Designated Corporate Officers, as amended...

  • Page 127
    ... Amendment to SUPERVALU INC. Non-Qualified Supplement Executive Retirement Plan, is incorporated herein by reference to Exhibit 10.48 to the Company's Annual Report on Form 10-K for the year ended February 28, 2009.* SUPERVALU INC. Deferred Compensation Plan for Non-Employee Directors, as amended...

  • Page 128
    ....14.3 to the Quarterly Report on Form 10-Q of Albertson's, Inc. (Commission File Number 1-6187) for the quarter ended May 4, 2006.* SUPERVALU INC. 2007 Stock Plan, as amended, is incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on May 31...

  • Page 129
    ... filed with the SEC on July 28, 2011. SUPERVALU INC. 2007 Stock Plan Fiscal 2013-2015 Multi-Year Performance Award Terms and Conditions is incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on April 20, 2012.* SUPERVALU Executive Deferred...

  • Page 130
    ... to the SUPERVALU INC. Executive and Officer Severance Pay Plan is incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on January 14, 2013.* Summary of Non-Employee Director Compensation.* SUPERVALU INC. 2012 Stock Plan is incorporated...

  • Page 131
    10.65 SUPERVALU INC. 2012 Stock Plan Form of Stock Option Agreement and Terms and Conditions (Directors) adopted May 6, 2013 is incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on May 8, 2013.* SUPERVALU INC. 2012 Stock Plan Form of ...

  • Page 132
    ... Agent, and Wells Fargo Bank, National Association, as Documentation Agent, is incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed with the SEC on October 19, 2012.** Term Loan Credit Agreement, dated March 21, 2013, among SUPERVALU INC., as Borrower...

  • Page 133
    ..., by and between SUPERVALU INC. and New Albertson's, Inc., is incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on March 26, 2013.** Letter Agreement, dated August 2, 2012, between SUPERVALU INC. and Wayne C. Sales, is incorporated herein...

  • Page 134
    ... Data File. 101. The following materials from the SUPERVALU INC. Annual Report on Form 10-K for the fiscal year ended February 22, 2014 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Segment Financial Information (ii) the Consolidated Statements of Operations...

  • Page 135
    ... Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of SUPERVALU and in the capacities and on the dates indicated: Signature /s/ /S/ /S/ SAM DUNCAN Sam Duncan Title Chief Executive Officer, President and Director (principal executive...

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  • Page 137
    ... financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officer...

  • Page 138
    ... financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officer...

  • Page 139
    ...and the information contained in that Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company for the period and as of the dates covered thereby. Dated: April 23, 2014 /s/ Sam Duncan Sam Duncan Chief Executive Officer and...

  • Page 140
    ...(d) of the Securities Exchange Act of 1934 and the information contained in that Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company for the period and as of the dates covered thereby. Dated: April 23, 2014 /s/ Bruce...

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  • Page 143
    ...Senior Director, Investor Relations [email protected] KARLA C. ROBERTSON Executive Vice President, General Counsel and Corporate Secretary [email protected] COMPANY CERTIFICATIONS The Company has filed as exhibits to its Annual Report on Form 10-K for the fiscal year...

  • Page 144
    supervalu.com P.O. BOX 990 MINNEAPOLIS, MN 55440 952-828-4000