Supervalu 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
    ... transition for 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...

  • Page 3
    ... of each class Common Stock, par value $0.01 per share None (Title of class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È Indicate by check mark if the registrant is not required to file reports pursuant to Section...

  • Page 4
    ... 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 Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related...

  • 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
    ... rates, and other changes in applicable law Å Food and drug inflation or deflation Labor Relations Å The Company's ability to renegotiate labor agreements with its unions Å Resolution of issues associated with rising pension, healthcare and employee benefits costs Å Potential for work disruption...

  • Page 7
    ... and natural disasters that affect the Company and the Company's customers or suppliers Å Unseasonably adverse climate conditions that impact the availability or cost of certain products in the grocery supply chain Disruption to Supply Chain and Distribution Network Å The Company's ability to...

  • Page 8
    Asset Impairment Charges 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, ...

  • Page 9
    ...'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 Management...

  • Page 10
    ... filings free of charge upon written request to Investor Relations, SUPERVALU INC., P.O. Box 990, Minneapolis, MN 55440. Financial Information About Reportable Segments The Company's business is classified by management into three reportable segments: Independent Business, Save-A-Lot and Retail Food...

  • Page 11
    ... nationally advertised brand name and private-label products, primarily including grocery (both perishable and nonperishable), general merchandise and home, health and beauty care, and pharmacy, which are sold through the Company's owned and licensed Retail Food and Save-A-Lot stores to shoppers and...

  • Page 12
    ... of the franchise or license program, a complete business concept, group advertising, private-label products and other benefits. The Company is the franchisor or licensor of certain service marks such as CUB FOODS, SAVE-ALOT, SENTRY, FESTIVAL FOODS, COUNTY MARKET, SHOP 'N SAVE, NEWMARKET, FOODLAND...

  • Page 13
    ... licensed by the Company, as well as the stores of independent retail customers it supplies, include price, quality, customer service, convenience, assortment, in-stock levels, brand recognition, store location and conditions, in-store marketing and merchandising, promotional strategies and other...

  • Page 14
    ... of collective 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...

  • Page 15
    ... Corporate Secretary 2013 Mark Van Buskirk (7) 56 Executive Vice President, Merchandising, Marketing, Retail & Pharmacy Executive Vice President, Strategy 2013 Rob Woseth (8) 43 2013 (1) The Company agreed in the Tender Offer Agreement that Sam Duncan would replace Wayne C. Sales as Chief...

  • Page 16
    ...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. Van Buskirk served as Vice President of Meat...

  • Page 17
    ... upon a combination of price, quality, customer service, convenience, assortment, in-stock levels, brand perception, store location and conditions, in-store marketing and merchandising and promotional strategies. Any failure to positively differentiate the Company's stores, as well as the inability...

  • Page 18
    ... affect the Company's financial condition and results of operations. Sustained or worsening economic conditions could adversely impact consumer spending, increase costs of doing business or otherwise adversely affect the Company's operating results. The vast majority of the Company's store locations...

  • Page 19
    ...rate, expected long-term rate of return on plan assets, mortality rates and the rates of increase in compensation and health care costs. Changes to these significant estimates could increase the cost of these plans, which could also have a material adverse effect on the Company's financial condition...

  • Page 20
    ... AB Acquisition with respect to a settlement agreement based on the binding term sheet. The Company's defined benefit pension plan was closed for eligibility and frozen for credited benefit service for the vast majority of participants effective December 2007. In December 2012, that plan was frozen...

  • Page 21
    ... term. This uncertainty creates challenges for the Company in managing its corporate resources and increases the risk that the Company will be required to provide the same scope of services under the Transition Services Agreements but for less revenue based on a lower store and distribution center...

  • Page 22
    ... other devices to shop in stores and online and provide feedback and public commentary on their shopping experience, including prices. Multichannel retailing is rapidly evolving. If the Company does not keep pace with changing customer expectations and new developments and technology investments by...

  • 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
    ... of the Company's military business. The Company's Independent Business segment sells and distributes grocery products to military commissaries and exchanges in the United States. The Company's military business faces competition from large national and regional food distributors as well as smaller...

  • Page 25
    ...or market conditions, 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...

  • Page 26
    ... 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 in Boise, Idaho (which is owned by NAI and leased to the Company, but at which the Company has employees and provides services to...

  • Page 27
    ... 2012, Kiefer, 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...

  • Page 28
    ... the Company'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...

  • Page 29
    ...group of peer companies in the retail grocery industry. The stock price performance shown below is not necessarily indicative of future performance. COMPARISON OF CUMULATIVE TOTAL SHAREHOLDER RETURN AMONG SUPERVALU, S&P 500 AND PEER GROUP (1) February 27, 2009 through February 22, 2014 (2) SUPERVALU...

  • Page 30
    ... Net sales as presented above. Refer to Note 1 - Summary of Significant Accounting Policies within Part II, Item 8 of this Annual Report on Form 10-K for additional information. (2) Pre-tax items recorded in fiscal 2014 included $46 of severance costs and accelerated stock-based compensation charges...

  • Page 31
    ... 2013, $1,606 for fiscal 2012, $1,651 for fiscal 2011 and $1,821 for fiscal 2010. (5) Total assets of continuing operations is calculated as Total assets of the Company excluding Current assets of discontinued operations and Long-term assets of discontinued operations. (6) Weighted average shares...

  • Page 32
    ... grocery stores under five regionally-based banners: Cub Foods, Shoppers Food & Pharmacy, Shop 'n Save, Farm Fresh and Hornbacher's. To better address customer needs at the local level, management has introduced a de-centralized model. The initial phase of the model store program within the Retail...

  • Page 33
    on the Company's long-term plans to increase sales and operating cash flow, improve its balance sheet and generate returns for its stockholders. The Company will continue to be challenged by the slow rate of economic improvement and the competitive markets in which the Company operates. Management ...

  • Page 34
    ... expansions and excluding planned store dispositions) were positive 2.6 percent or $41 for fiscal 2014. Save-A-Lot corporate identical store sales performance was primarily a result of a 1.9 percent increase in average basket size and a 0.7 percent increase in customer count. Retail Food net sales...

  • Page 35
    ... services provided to independent retail customers, offset in part by $30 of incremental investments to lower prices to customers, $28 of higher shrink, $22 of lower sales volume and $6 of higher advertising costs. Gross profit for fiscal 2014 also includes a multi-employer pension plan withdrawal...

  • 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
    ... severance 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...

  • Page 38
    ... received 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...

  • Page 39
    ... items per customer. Corporate net sales from transition service agreements for fiscal 2013 was $42, compared with $47 for fiscal 2012, a decrease of $5 or 10.6 percent due to a decline in the number of stores and distribution centers supported. Gross Profit Gross profit for fiscal 2013 was $2,336...

  • Page 40
    ..., plant and equipment impairment charges of $203 and severance costs and multi-employer pension withdrawal charge of $9, partially offset by a cash settlement received from credit card companies of $10. For fiscal 2012 Retail Food operating loss includes a goodwill impairment charge of $92 and...

  • Page 41
    ... to $930 in fiscal 2012. Fiscal 2013 included the loss on sale of the NAI banners of $1,273 net of tax, asset impairment and store closure costs of $97 net of tax and professional services costs of $5 net of tax, partially offset by a cash settlement received from credit card companies of $20 net of...

  • Page 42
    ...severance costs, accelerated stock-based compensation charges, multiemployer pension withdrawal charges and other items, charges and costs related to debt financing activities, non-cash asset impairment and other charges and gains (including store closures, market exits and certain gains on the sale...

  • Page 43
    ... EBITDA Adjusted EBITDA increased from fiscal 2013 to fiscal 2014 by $279 primarily due to $198 of incremental TSA fees earned related to shared service center costs to support back office functions related to the NAI Banners. Such costs have been historically incurred as administrative overhead...

  • Page 44
    ...rights in certain categories; and to compensate for temporary price reductions offered to customers on products held for sale at retail stores. The Company also receives vendor funds for buying activities such as volume commitment rebates, credits for purchasing products in advance of their need and...

  • Page 45
    ... assets are reviewed for impairment at the distribution center level. Save-ALot's long-lived assets are reviewed for impairment at the geographic market level for 11 geographic market groupings of corporate-operated stores and related dedicated distribution centers, and individual corporate store 43

  • Page 46
    ... flows rely on significant judgments by management. A geographic market is generally defined as an area in which the same Company-branded stores operate in close proximity to one another. The Company reviews its long-lived asset groupings at least annually or as facts and circumstances arise during...

  • Page 47
    ...retail food store components under a variety of banners: Cub Foods, Shoppers Food & Pharmacy, Shop 'n Save, Farm Fresh and Hornbacher's. The fair values of the Company's reporting units are determined by using both the market approach, applying a multiple of earnings based on guidelines for publicly...

  • Page 48
    ... the Company's market capitalization and updated discounted cash flows. As of year-end fiscal 2012, there was no remaining goodwill related to the Retail Food segment. Benefit Plans The Company sponsors pension and other postretirement plans in various forms covering substantially all employees who...

  • Page 49
    ... in timing and amount to settle projected future benefits. The Company's expected long-term rate of return on plan assets assumption is determined based on the portfolio's actual and target composition, current market conditions, forward-looking return and risk assumptions by asset class, and...

  • Page 50
    ...based on management's estimate of the ultimate cost of reported claims and claims incurred but not yet reported and related expenses, discounted at a risk-free interest rate. In determining its self-insurance liabilities, the Company performs a continuing review of its overall position and reserving...

  • Page 51
    ... are managed primarily through demand forecasting and replenishing depleted inventories. The Company accessed the credit markets several times during fiscal 2014 to refinance its long-term debt borrowings in conjunction with the NAI Banner Sale, re-price the interest rate on the Secured Term Loan...

  • Page 52
    ... payments made for accrued liabilities and accounts payable related to the Stock Purchase Agreement during the first quarter of fiscal 2014. The decrease in cash provided by operating activities from discontinued operations in fiscal 2013 compared to fiscal 2012 is attributable to a decrease in cash...

  • Page 53
    ... capital lease and long-term debt obligations. Annual cash dividends declared for fiscal 2013 and 2012 were $.0875 and $0.3500 per share, respectively. During fiscal 2013, the Company announced that it had suspended the payment of the regular quarterly dividend. Debt Management and Credit Agreements...

  • Page 54
    ... the ABL Loan Parties have granted a perfected first-priority security interest for the benefit of the facility lenders in its present and future inventory, credit card, wholesale trade, pharmacy and certain other receivables, prescription files and related assets. In addition, the obligations under...

  • 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
    ...of underfunding. The Company 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...

  • Page 58
    ... relate to the Company's commercial contracts, 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...

  • Page 59
    ... 22, 2014, compared to February 23, 2013. The decrease in the Company's proportionate share of underfunding is attributable to the changes in contribution rates resulting from renegotiated collective bargaining agreements, higher than anticipated return on assets and benefit payments in relation to...

  • Page 60
    ... changes in energy prices utilized in the shipping process, and in the Company's stores and warehouses, and are only utilized to manage well-defined risks. Outstanding derivatives were insignificant as of February 22, 2014. Long-term loans are extended to certain independent retail customers in the...

  • Page 61
    excluding any original issue discounts. For notes receivable, the table presents the expected collection 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 ...

  • Page 62
    ... February 22, 2014, February 23, 2013 and February 25, 2012 Notes to Consolidated Financial Statements Unaudited Quarterly Financial Information Financial Statement Schedule: Schedule II-Valuation and Qualifying Accounts All other schedules are omitted because they are not applicable or not required...

  • Page 63
    ... of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was...

  • Page 64
    ... of related fees earned under transition services agreements, pension and other postretirement plan expenses for inactive and corporate participants in the SUPERVALU Retirement Plan and certain other corporate costs to reflect the structure under which the Company is now being managed. These...

  • 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
    SUPERVALU INC. and Subsidiaries CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In millions) February 22, 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), $(...

  • Page 67
    ... Current 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...

  • Page 68
    ...of $123 Divestiture of New Albertsons, Inc.'s pension accumulated comprehensive loss, net of tax of $31 Common stock issued and sold in connection with New Albertsons, Inc. divesture Sales of common stock under option plans Stock-based compensation Other Balances as of February 22, 2014 $ $ 230 230...

  • Page 69
    ... LIFO (credit) charge Deferred income taxes Stock-based compensation Net pension and other postretirement benefits cost Contributions to pension and other postretirement benefit plans Other adjustments Changes in operating assets and liabilities: Receivables Inventories Accounts payable and accrued...

  • Page 70
    ..., and operates five competitive, regionally-based traditional format grocery banners under the Cub Foods, Shoppers Food & Pharmacy, Shop 'n Save, Farm Fresh and Hornbacher's banners. Principles of Consolidation The Consolidated Financial Statements include the accounts of the Company and all its...

  • Page 71
    ...required to support the transition services agreements. Segment Revision The Company revised its segment presentation of Operating earnings for Retail Food and Corporate for results previously reported in the first quarter of fiscal 2014 to reflect certain allocated administrative costs as Retail 69

  • Page 72
    ... credit risk, revenue is recorded 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...

  • Page 73
    ... the life of the contracts. Selling and Administrative Expenses Selling and administrative expenses consist primarily of store and corporate employee-related costs, such as salaries and wages, health and welfare, worker's compensation and pension benefits, as well as rent, occupancy and operating...

  • Page 74
    ...Company's inventories as of February 22, 2014 and February 23, 2013, respectively, were valued using the replacement cost approach under the FIFO method of inventory accounting. The replacement cost approach applied under the FIFO method results in inventories recorded at the lower of cost or market...

  • Page 75
    ... Business, Save-A-Lot and Retail Food. As of February 22, 2014, Goodwill balances existed 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...

  • Page 76
    ... stores and related dedicated distribution centers and individual corporate store level for 29 individual corporate stores which were part of previous asset groups for which management determined that the cash flows in those geographic market areas were no longer interdependent. Retail Food's long...

  • Page 77
    ...Other current liabilities 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...

  • Page 78
    ... as of February 22, 2014 and February 23, 2013. Stock-Based Compensation The Company uses the straight-line method to recognize stock-based compensation expense over the requisite service period related to each award. Stock-based compensation expense is measured by the fair value of the award on the...

  • Page 79
    ... terms and subject to the conditions of the Tender Offer Agreement, and contingent upon the NAI Banner Sale, Symphony Investors tendered for up to 30 percent of the issued and outstanding common stock of the Company at a purchase price of $4.00 per share in cash (the "Tender Offer"). Approximately...

  • Page 80
    ..., pursuant to the terms of the Tender Offer Agreement, on March 21, 2013, the Company issued approximately 42 additional shares of common stock (approximately 19.9 percent of outstanding shares prior to the share issuance) to Symphony Investors at the Tender Offer price per share of $4.00, resulting...

  • 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
    ... other software support tools that the executive management team determined the Company would abandon, all within the Retail Food segment and Corporate, and the announced closing of approximately 22 non-strategic Save-A-Lot stores. In fiscal 2012, property, plant and equipment-related assets with...

  • 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
    ... 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 greater than the book value by approximately $83 and $57 as of February 22, 2014 and February 23, 2013...

  • Page 85
    ... the ABL Loan Parties have granted a perfected first-priority security interest for the benefit of the facility lenders in its present and future inventory, credit card, wholesale trade, pharmacy and certain other receivables, prescription files and related assets. In addition, the obligations under...

  • Page 86
    ... the Company, the "Term Loan Parties"). To secure their obligations under the Secured Term Loan Facility due March 2019, the Company granted a perfected first-priority security interest for the benefit of the facility lenders in the Term Loan Parties' equity interest in Moran Foods, LLC, the parent...

  • Page 87
    ... 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 88
    ... February 22, 2014, consist of the following: Lease Obligations Fiscal Year 2015 2016 2017 2018 2019 Thereafter Total future minimum obligations Less interest Present value of net future minimum obligations Less current capital lease obligations Long-term capital lease obligations $ Operating Leases...

  • 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
    ... and liabilities 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...

  • Page 91
    ... tax benefits, the Company had a liability of $31 and $60 as of February 22, 2014 and February 23, 2013, respectively, related to accrued interest and penalties for uncertain tax positions recorded in Other current liabilities and Other long-term liabilities in the Consolidated Balance Sheets...

  • Page 92
    ... the long-term incentive program are granted to key salaried employees. As of February 22, 2014, there were 12 reserved shares under the 2012 Stock Plan available for stock-based awards. Common stock is delivered out of treasury stock upon the exercise of stock-based awards. The provisions of future...

  • Page 93
    ...-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. The Company granted 8 stock options with a weighted average grant date fair value of $0.98 per share as...

  • Page 94
    ... 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 the three-year service period ending May 1, 2015, and will be settled in the Company's stock. Due to...

  • Page 95
    ... 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 The following table reflects the calculation of...

  • Page 96
    ... 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 participants and service crediting ended for all participants as of December 31, 2007. Pay...

  • 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
    ...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 benefit cost (income) and other changes in plan assets and benefit obligations recognized in Other comprehensive...

  • Page 99
    ...: Discount rate (1) Rate of compensation increase Net periodic benefit cost Discount rate (1) Rate of compensation increase Expected return on plan assets (3) assumptions: (2) 4.25% 2.00% 7.00% 4.55% 2.00% 7.25% 5.60% 2.00% 7.50% 4.65% -% 4.25% 2.00% 4.55% 2.00% 2013 2012 (1) The Company reviews...

  • Page 100
    ... vehicles holding domestic and international equity securities, domestic fixed income securities and other investment classes. The Company employs a total return approach whereby a diversified mix of asset class investments is used to maximize the long-term return of plan assets for an acceptable...

  • 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
    ... 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 Mortgage-backed securities Other Total plan assets at fair value...

  • Page 103
    ... employees prior to retirement. As of February 22, 2014, the obligation for post-employment benefits was $24, with $9 included in Accrued vacation, compensation and benefits, and $15 included in Other long-term liabilities. Multiemployer Plans The Company contributes to various multiemployer pension...

  • 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
    ... 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 Pension Plan Western Conference...

  • Page 107
    ...guarantee. Generally, the guarantees are secured by indemnification agreements or personal guarantees of the independent retail customer. The Company reviews performance risk related to its guarantees of independent retail customers based on internal measures of credit performance. As of February 22...

  • Page 108
    ... 22, 2014, the Company had approximately $283 of non-cancelable future 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...

  • Page 109
    ... 2012, Kiefer, 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...

  • 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
    ... Net sales for each group of similar products sold in the Independent Business, Save-A-Lot and Retail Food segments and Corporate revenue consisted of the following: 2014 Independent Business: Nonperishable grocery products (1) Perishable grocery products (2) Services to independent retail customers...

  • Page 112
    .... The Company recognized $240, $42 and $47 in TSA fees during fiscal 2014, 2013 and 2012, respectively, including $60 under the first-year transitional fee provisions during fiscal 2014. The shared service center costs incurred to support back office functions related to the NAI Banners represent...

  • Page 113
    ...Liabilities Accounts payable Accrued vacation, compensation and benefits Current maturities of long-term debt and capital lease obligations Accrued loss on contract Other current liabilities Total current liabilities of discontinued operations Long-term debt and capital lease obligations Pension and...

  • Page 114
    ...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... term loan lenders or other institutional lenders willing to provide the additional loans and the satisfaction of certain terms and conditions....

  • Page 115
    UNAUDITED QUARTERLY FINANCIAL INFORMATION (In millions, except per 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) ...

  • Page 116
    ... tax ($3 after tax, or $0.01 per diluted share) recorded in Selling and administrative expenses, and a multi-employer pension withdrawal charge of $3 before tax ($2 after tax, or $0.01 per diluted share) recorded in Gross profit, offset in part by a gain on sale of property of $15 before tax ($10...

  • 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
    ... SEC's rules and forms and (2) accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure. Management's Annual Report on Internal Control Over Financial...

  • 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
    ... who submits a request to: Corporate Secretary, SUPERVALU INC., P.O. Box 990, Minneapolis, Minnesota 55440. Information on the Company's website is not deemed to be incorporated by reference into this Annual Report on Form 10-K. ITEM 11. EXECUTIVE COMPENSATION The information called for by Item 11...

  • Page 121
    ... security holders (4) Total 21,181,876(2) $ (1) Includes the Company's 2002 Stock Plan, 2007 Stock Plan, 2012 Stock Plan, Albertson's, Inc. Amended and Restated 1995 Stock-Based Incentive Plan and Albertson's, Inc. 2004 Equity and Performance Incentive Plan. (2) Includes options for 171,230 shares...

  • 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
    ... Commission upon request.) Tender Offer Agreement, dated January 10, 2013, by and between SUPERVALU INC., Symphony Investors LLC and Cerberus Capital Management, L.P., is incorporated herein by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K filed with the SEC on January 14...

  • Page 124
    ...), 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 Notes due 2021 (which includes the form of Note) issued pursuant...

  • Page 125
    ...by reference to Exhibit 10.2 to the Company's Annual Report on Form 10-K for the year ended February 24, 2007.* Form of SUPERVALU INC. 2002 Stock Plan Stock Option Agreement and Stock Option Terms and Conditions for Key Executives, as amended on April 17, 2007, is incorporated herein by reference to...

  • Page 126
    ...8-K filed 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...

  • Page 127
    ....* Sixth 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...

  • Page 128
    ...'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, 2007.* SUPERVALU INC. 2007 Stock Plan Form of...

  • Page 129
    ...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 Compensation Plan (2008...

  • 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
    .... 2012 Stock Plan Form of Bonus Restricted Stock Award Agreement and Terms and Conditions adopted May 6, 2013 is incorporated herein by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed with the SEC on May 8, 2013.* SUPERVALU INC. Directors' Deferred Compensation Plan (2009...

  • Page 132
    ... herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on March 26, 2013.** Term Loan Credit Agreement, dated August 30, 2012, among SUPERVALU INC., as Borrower, the subsidiaries of the Company named as guarantors therein, the Lenders parties thereto...

  • Page 133
    ... incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on March 26, 2013.** Transition Services Agreement, dated as of March 21, 2013, by and between SUPERVALU INC. and New Albertson's, Inc., is incorporated herein by reference to Exhibit 10...

  • Page 134
    ...(101) Interactive 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...

  • Page 135
    ...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 officer) Executive Vice President...

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  • Page 137
    ... and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 23, 2014 /s/ Sam Duncan Sam Duncan Chief Executive Officer and President

  • Page 138
    ... information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 23, 2014 /s/ Bruce H. Besanko Bruce H. Besanko Executive Vice President, Chief Financial 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
    ... 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 H. Besanko Bruce H. Besanko Executive Vice President, Chief Financial Officer

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  • Page 143
    ...ROB WOSETH Executive Vice President, Strategy INVESTOR INFORMATION The annual meeting of SUPERVALU INC. will take place on July 16, 2014 at 9:30 a.m. Central Time at the Hilton Hotel 3900 American Boulevard West Bloomington, MN 55437 SUPERVALU's common stock is listed on the New York Stock Exchange...

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