SECURITIES AND EXCHANGE COMMISSION FORM 10-Q. Quarterly report pursuant to sections 13 or 15(d)

Transcription

1 SECURITIES AND EXCHANGE COMMISSION FORM 10-Q Quarterly report pursuant to sections 13 or 15(d) Filing Date: Period of Report: SEC Accession No (HTML Version on secdatabase.com) SUPERVALU INC FILER CIK:95521 IRS No.: State of Incorp.:DE Fiscal Year End: 0224 Type: 10-Q Act: 34 File No.: Film No.: SIC: 5140 Groceries & related products Mailing Address VALLEY VIEW ROAD EDEN PRAIRIE MN Business Address VALLEY VIEW RD EDEN PRAIRIE MN

2 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period (12 weeks) ended September 10, 1994 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 OR For the transition period from... to... Commission file number SUPERVALU INC. (Exact name of registrant as specified in its Charter) DELAWARE (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) Valley View Road, Eden Prairie, Minnesota (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (612) Former name, former address and former fiscal year, if changed since last report: N.A.... 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 X No The number of shares outstanding of each of the issuer's classes of Common Stock as of September 29, 1994 is as follows: Title of Each Class Shares Outstanding <TABLE> <CAPTION> Common Shares 71,489,485 PART I - FINANCIAL INFORMATION Item 1: Financial Statements CONSOLIDATED STATEMENTS OF EARNINGS SUPERVALU INC. and Subsidiaries (In thousands, except per share data) Second Quarter (12 Weeks) Ended

3 September 10, 1994 September 11, <S> <C> <C> NET SALES $ 3,773,725 $ 3,703,823 COSTS AND EXPENSES Cost of sales 3,437,488 3,392,052 Selling and administrative expenses 255, ,148 Amortization of goodwill 3,464 2,715 Interest Interest expense 29,658 28,054 Interest income 5,792 6, Interest expense, net 23,866 21, Total costs and expenses 3,720,119 3,643, EARNINGS BEFORE EQUITY IN EARNINGS OF SHOPKO AND INCOME TAXES 53,606 60,492 EQUITY IN EARNINGS OF SHOPKO 1, EARNINGS BEFORE INCOME TAXES 54,888 61,469 PROVISION FOR INCOME TAXES Current 18,888 26,878 Deferred 2,485 (1,733) Income taxes 21,373 25, NET EARNINGS $ 33,515 $ 36,324 =========== =========== NET EARNINGS PER COMMON SHARE $0.47 $0.51 Weighted average number of common shares outstanding 71,471 71,818 Dividends declared per common share $0.235 $0.220 Supplemental information: After-tax LIFO income (expense) $(3,121) $244 All data subject to year-end audit. </TABLE> See notes to consolidated financial statements. 2 <TABLE> <CAPTION> CONSOLIDATED STATEMENTS OF EARNINGS SUPERVALU INC. and Subsidiaries (In thousands, except per share data) Year-to-Date (28 Weeks) Ended September 10, 1994 September 11, <S> <C> <C> NET SALES $ 8,764,840 $ 8,579,607 COSTS AND EXPENSES Cost of sales 7,990,435 7,849,474 Selling and administrative expenses 577, ,291 Amortization of goodwill 7,689 6,335 Interest Interest expense 67,955 66,426 Interest income 13,447 15, Interest expense, net 54,508 50,713

4 Total costs and expenses 8,629,885 8,440, EARNINGS BEFORE EQUITY IN EARNINGS OF SHOPKO AND INCOME TAXES 134, ,794 EQUITY IN EARNINGS OF SHOPKO 3,575 3, EARNINGS BEFORE INCOME TAXES 138, ,404 PROVISION FOR INCOME TAXES Current 45,996 56,428 Deferred 8,406 (1,432) Income taxes 54,402 54, NET EARNINGS $ 84,128 $ 87,408 =========== =========== TOTAL EARNINGS PER COMMON SHARE $1.18 $1.22 Weighted average number of common shares outstanding 71,563 71,685 Dividends declared per common share $0.455 $0.415 Supplemental information: After-tax LIFO income (expense) $(1,412) $2,935 All data subject to year-end audit. </TABLE> See notes to consolidated financial statements. 3 <TABLE> <CAPTION> CONSOLIDATED BALANCE SHEETS SUPERVALU INC. and Subsidiaries Second Quarter as of Fiscal Year End (In thousands) September 10, September 11, February 26, ASSETS <S> <C> <C> <C> CURRENT ASSETS Cash and cash equivalents $ 5,391 $ 33,166 $ 2,846 Receivables, less allowance for losses of $35,633 at September 10, 1994, $42,238 at September 11, 1993 and $33,820 at February 26, , , ,151 Inventories 1,203,576 1,110,700 1,113,937 Other current assets 98,524 79,846 94, TOTAL CURRENT ASSETS 1,710,839 1,588,045 1,563,313 LONG-TERM NOTES RECEIVABLE 69,613 91,540 66,568 LONG-TERM INVESTMENT IN DIRECT FINANCING LEASES 85,946 74,765 81,574 PROPERTY, PLANT AND EQUIPMENT Land 188, , ,241 Buildings 871, , ,036 Property under construction 82,239 63,021 73,950 Leasehold improvements 124, , ,724 Equipment 926, , ,050 Assets under capital leases 200, , , ,393,550 2,096,046 2,195,892 Less accumulated depreciation and amortization Owned property, plant and equipment 776, , ,027 Assets under capital leases 42,285 28,485 39,742

5 NET PROPERTY, PLANT AND EQUIPMENT 1,574,997 1,369,659 1,410,123 INVESTMENT IN SHOPKO 173, , ,567 GOODWILL 569, , ,559 OTHER ASSETS 299, , , TOTAL ASSETS $4,484,009 $4,037,195 $4,042,351 ========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 214,358 $ 53,622 $ 23,082 Accounts payable 980, , ,088 Current maturities of long-term debt 10,454 6, ,728 Current obligations under capital leases 18,838 19,083 19,222 Other current liabilities 179, , , TOTAL CURRENT LIABILITIES 1,403,609 1,266,213 1,224,425 LONG-TERM DEBT 1,198,902 1,111,577 1,030,378 LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES 273, , ,617 DEFERRED INCOME TAXES 97,516 78,578 99,734 OTHER LIABILITIES 212, , ,739 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock 5,908-5,908 Common stock 75,335 75,335 75,335 Capital in excess of par value 13,314 12,788 12,966 Retained earnings 1,310,745 1,202,000 1,268,117 Treasury stock, at cost (107,593) (91,297) (86,868) TOTAL STOCKHOLDERS' EQUITY 1,297,709 1,198,826 1,275, TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,484,009 $4,037,195 $4,042,351 ========== ========== ========== Quarterly data subject to year-end audit. </TABLE> See notes to consolidated financial statements. 4 <TABLE> <CAPTION> CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY SUPERVALU INC. and Subsidiaries (In thousands, except per share data) Capital in Preferred Common Excess of Treasury Retained Stock Stock Par Value Stock Earnings Total <S> <C> <C> <C> <C> <C> <C> BALANCES AT FEBRUARY 27, 1993 $ - $75,335 $12,584 $ (97,473) $1,144,374 $1,134,820 Net earnings , ,253 Sales of common stock under option plans ,838-11,063 Cash dividends declared on common stock - $.855 per share (61,510) (61,510) Issuance of preferred stock 5, ,908 Compensation under employee incentive plans (233) - (76)

6 BALANCES AT FEBRUARY 26, ,908 75,335 12,966 (86,868) 1,268,117 1,275,458 Net earnings ,128 84,128 Sales of common stock under option plans (671) - (580) Cash dividends declared on common stock - $.455 per share (32,580) (32,580) Compensation under employee incentive plans Purchase of 600 shares for treasury (20,693) - (20,693) Other (8,920) (8,920) BALANCES AT SEPTEMBER 10, 1994 $5,908 $75,335 $13,314 $(107,593) $1,310,745 $1,297,709 ====== ======= ======= ========= ========== ========== Interim data subject to year-end audit. </TABLE> See notes to consolidated financial statements. 5 CONSOLIDATED STATEMENTS OF CASH FLOWS <TABLE> <CAPTION> SUPERVALU INC. and Subsidiaries (In thousands) Year-to-date (28 weeks ended) September 10, September 11, <S> <C> <C> Cash flows from operating activities Net earnings $ 84,128 $ 87,408 Adjustments to reconcile net earnings to net cash provided from (used in) operating activities: Equity in earnings of ShopKo (3,575) (3,610) Dividends received from ShopKo 3,241 3,243 Depreciation and amortization 109, ,748 Provision for losses on receivables 2,993 4,472 Gain on sale of property, plant and equipment (4,253) (2,243) Deferred income taxes 4,735 (1,432) Treasury shares contributed to employee incentive plans - 94 Change in assets and liabilities: Receivables (27,275) (11,096) Inventories (6,929) 23,359 Other current assets 2,986 (6,845) Direct financing leases 4,920 4,450 Accounts payable 23, ,797 Other liabilities (30,133) (2,843) Net cash provided from operating activities 163, , Cash flows from investing activities Additions to long-term notes receivable (11,410) (19,022) Payments received on long-term notes receivable 8,365 10,016 Proceeds from sale of property, plant and equipment 18,445 4,831 Purchase of property, plant and equipment (119,243) (77,071) Business acquisitions, net of cash acquired (111,083) - Other investing activities (728) 17, Net cash provided by investing activities (215,654) (63,880) Cash flows from financing activities Net issuance (reduction) of short-term notes payable 187,720 (197,874)

7 Proceeds from issuance of long-term debt 150,000 3,000 Repayment of long-term debt (220,334) (3,368) Reduction of obligations under capital leases (9,518) (8,783) Proceeds (payments) from the sale or purchase of common stock under option plans (676) 5,750 Dividends paid (31,670) (27,954) Payment for purchase of treasury stock (20,693) Net cash provided by (used in) financing activities 54,829 (229,229) Net increase in cash and cash equivalents 2,545 31,393 Cash and cash equivalents at beginning of year 2,846 1, Cash and cash equivalents at end of second quarter $ 5,391 $ 33,166 ================================================================================================== All data subject to year-end audit. See notes to consolidated financial statements. </TABLE> 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Accounting Policies The summary of significant accounting policies is included in the notes to consolidated financial statements in the 1994 annual report of SUPERVALU INC. ("SUPERVALU" or the "company"). Statement of Registrant The data presented herein is unaudited but, in the opinion of management, includes all adjustments necessary for a fair presentation of the consolidated financial position of the company and its subsidiaries at September 10, 1994 and September 11, 1993 and the results of the company's operations and cash flows for the periods then ended. These interim results are not necessarily indicative of the results of the fiscal years as a whole. A limited review of this data has been performed by the company's independent certified public accountants, Deloitte & Touche LLP. A copy of their report is attached as an exhibit to this report. 7 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The following table sets forth items from the company's Consolidated Statements of Earnings as percentages of net sales: <TABLE> <CAPTION> Second Quarter Year-to-Date (12 weeks) Ended (28 weeks) Ended Fiscal Fiscal Fiscal Fiscal <S> <C> <C> <C> <C> Net sales % % % % Cost of sales (91.09) (91.58) (91.16) (91.49) Selling and administrative (6.86) (6.21) (6.67) (6.30) Interest expense (.79) (.76) (.78) (.77) Interest income Earnings before equity in earnings of ShopKo and income taxes Equity in earnings of ShopKo Provision for income taxes (.56) (.68) (.62) (.64)

8 Net earnings.89%.98%.96% 1.02% ====== ====== ====== ====== </TABLE> NET SALES: Net sales increased 1.9% and 2.2% over last year for the second quarter and year-to-date periods, respectively. The increase was achieved despite year-todate deflation as measured by the company of.8% compared with inflation of.2% for the same period last year. Food distribution net sales increased 2.8% and 2.3% over last year for the quarter and year-to-date. Sales were favorably impacted by the acquisition of Sweet Life Foods in March of 1994 and Texas T Stores in May of However, the added sales contributions from acquisitions were partially offset by lost sales due to wholesale consolidation and competitive market conditions at the retail level. While recent acquisitions will favorably impact the company's sales in the future, continuing consolidation activity in several locations will continue to affect sales comparisons until the projects are completed and the impact cycled. Retail food net sales increased 9.2% and 7.9% over last year second quarter and year-to-date periods, respectively. The increase is primarily due to new store openings and the acquisition of the Texas T stores late in the first quarter. Same-store corporate retail sales for the second quarter declined 1% while yearto-date same-store sales were even with last year. 8 <TABLE> <CAPTION> Net Sales by Segment <S> <C> <C> <C> <C> (In thousands) Second Quarter (12 weeks) September 10, 1994 September 11, Net Sales % of total Net Sales % of total Food distribution $ 3,400, % $ 3,309, % Retail food 904, % 827, % Sales Eliminations (531,330) (14.1%) (433,060) (11.6%) $ 3,773, % $ 3,703, % =========== ===== =========== ===== Year-to-date (28 weeks) September 10, 1994 September 11, Net Sales % of total Net Sales % of total Food distribution $ 7,934, % $ 7,755, % Retail food 2,035, % 1,885, % Sales Eliminations (1,205,235) (13.7%) (1,061,873) (12.4%) $ 8,764, % $ 8,579, % =========== ===== =========== ===== </TABLE> GROSS PROFIT: Gross profit as a percentage of net sales, increased to 8.9% and 8.8% for the second quarter and year-to-date periods, respectively, compared with 8.4% and 8.5% for last year. The increases were due primarily to the growing proportion of the higher margined retail food business within the company's total sales mix. Food distribution gross margin was affected by a LIFO expense in the quarter and year-to-date compared with a LIFO credit in the same periods last year, and a reduction in off invoice allowances offered by certain vendors. The effect of the off invoice allowances was offset by increases in other components of gross profit. Retail food gross margins were up year-to-date due to strong results previously reported in the company's first quarter. However competitive pressures in certain regions, principally Indiana, drove retail margins down

9 slightly in the second quarter. SELLING AND ADMINISTRATIVE EXPENSES: Selling and administrative expenses as a percentage of net sales were 6.9% and 6.7% for the second quarter and year-to-date, respectively, compared with 6.2% and 6.3% for the same periods last year. The higher percentages were primarily due to a growing proportion of the company's retail food segment which operates at a higher selling and administrative expense percentage than the food distribution segment. Also affecting the second quarter and year-to-date selling and administrative expenses were the acquisition of Sweet Life, wholesale consolidation activity in several markets, and the SUPERVALU Advantage project ("SUPERVALU Advantage"). SUPERVALU Advantage is a project aimed at fundamentally changing the company's business operations by investing in new technology, logistics methods and business practices. Expenses totaling $2.9 million and $6.7 million have been incurred in the quarter and year-to-date, primarily studying the fundamentals of our business and the industry. It is expected that spending on this project should approximate $9.0 million for the remainder of the year. Upon implementation, it is expected that SUPERVALU 9 Advantage should provide benefits to the company, its customers and its suppliers. The company anticipates a modest increase in expenses related to the initiative next year, however, a net earnings contribution is anticipated in fiscal OPERATING EARNINGS: The company's pre-tax operating earnings (earnings before interest, corporate expenses, equity in earnings of ShopKo Stores, Inc. ("ShopKo"), and taxes) decreased 3.5% to $85.4 million in the second quarter and increased 1.0% to $206.5 million year-to-date. Food distribution operating earnings decreased 3.4% to $78.8 million and 3.5% to $183.3 million for the second quarter and year-to-date, respectively. The food distribution operating earnings trend was affected by wholesale consolidation expenses, a LIFO charge and integration costs of recent acquisitions. Retail food operating earnings decreased 5.1% to $6.6 million for the second quarter and increased 59.8% to $23.1 million yearto-date. Retail food operating earnings were affected primarily by costs associated with the acquisition of the Texas T stores and converting them to the Save-A-Lot format. Reduced gross margins resulting from competitive pressures also affected operating earnings for the second quarter. The year-to-date increase is due to strong gross profit margins from the first quarter. The company expects spending on SUPERVALU Advantage, wholesale consolidation activities and acquisition integration efforts to impact its ability to show significant growth in operating earnings short-term. INTEREST INCOME AND EXPENSE: Interest income decreased to $5.8 and $13.4 million for the second quarter and year-to-date, respectively, compared with $6.6 and $15.7 million for the same periods last year. The decrease in interest income is due to the reduction in notes receivable as a result of the sale of notes in the ordinary course of business. Interest expense increased to $29.7 and $68.0 million for the second quarter and year-to-date, respectively, compared with $28.1 and $66.4 million for the same periods last year due primarily to the issuance of $150 million in debt securities in July of EQUITY IN EARNINGS OF SHOPKO: Equity in earnings of ShopKo increased slightly in the second quarter and was flat year-to-date compared with last year. As reported by ShopKo, sales increased 7.3% for the second quarter and net earnings increased 29% compared with last year. For the quarter, net earnings were aided by an increase in income from prescription management services and a small decrease in selling and administrative resulting from tight expense control. PROVISION FOR INCOME TAXES: The effective tax rate decreased 2% in the second quarter compared with last year. This decrease was due to an adjustment made in the second quarter of last year to record the impact of the Omnibus Budget Reconciliation Act of 1993 which included a retroactive adjustment to January 1, For the remainder of the year, it is expected that the effective tax rate will be slightly lower compared with the same periods 10

10 last year. The company is currently under review by the Internal Revenue Service ("IRS") for tax years ending in 1991, 1992 and The IRS review period includes the transaction and related tax expense recorded in connection with the partial disposition of ShopKo in October, Income taxes were provided for this disposition at the transaction date, although the company maintained that the transaction resulted in no tax for income tax purposes. Based on preliminary discussions, a favorable outcome from the IRS review of the issues related to the ShopKo disposition is reasonably possible and, if received, would be reflected in the consolidated statement of earnings. LIQUIDITY AND CAPITAL RESOURCES Internally-generated funds, principally from the company's food distribution operations, continue to be the major source of capital for liquidity and capital growth. Cash provided from operations year-to-date was $163.4 million compared with $324.5 million last year. The change in cash provided from operations was primarily affected by accounts payable trends. Last year the $324.5 million cash provided was impacted by the centralization of Wetterau accounts payable resulting in better cash management and a $128.8 million increase in accounts payable. Since the centralization of accounts payable, the payable trend has only been affected by inventory levels. Cash provided from operations and the issuance of short-term and long-term debt of $337.7 million was used to repay long-term debt and finance capital expenditures and acquisitions. The company repaid $117.5 million of long-term debt assumed as part of the acquisitions in the first and second quarter, which included Sweet Life Foods, Hyper Shoppes, Inc., Texas T Stores, Wetterau Properties Inc. and Delice de France. The company will continue to use short-term and long-term debt as a supplement to internally-generated funds to finance its activities. The company issued $150 million in debt securities in the second quarter. The proceeds were used to refund $100 million of notes due August 15, 1994; to repay $32 million of certain mortgage indebtedness assumed by the company in connection with the acquisition of Wetterau Properties; and the remaining proceeds were used to repay short-term borrowings. The company intends to register a $400 million shelf offering of debt securities which could be used to refinance existing debt. Management does not anticipate the need for any additional long-term external financing except for leases or if significant acquisitions are completed. The company has $400 million of short-term credit available. It is the company's intent to invest about $175 million into SUPERVALU Advantage with the majority of the expenditures occurring in fiscal The monies will be used to fund regional facilities, technology and various mechanization systems. The company expects that the investment in SUPERVALU Advantage will be recovered by the reduction in inventory levels. The company's long-term debt ratings are considered strong with an A rating from Standard and Poor's and an A3 rating from Moody's. These strong ratings, the available credit facilities and the internally generated funds provide the company with the financial flexibility to meet its anticipated liquidity needs. 11 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits filed with this Form 10-Q: 10(e) SUPERVALU Executive Incentive Bonus Plan (superceding Management Incentive Bonus Plan formerly filed as Exhibit 10(e) with Registrant's Form 10-K for the fiscal year ended February 26, 1994). (15) Letters from Deloitte & Touche regarding unaudited interim financial information. (27) Financial Data Schedule. (b) Reports on Form 8-K: (i) On July 14, 1994, the Registrant filed a Form 8-K Report: (aa) reporting under "Item 5 - Other Events" that on June 29, 1994 the Registrant issued a news release with respect to its results of operations for its first quarter ended June 18, 1994; and (bb) submitting under "Item 7 - Financial

11 Statements and Exhibits" a copy of the news release. (ii) On July 20, 1994, the Registrant filed a Form 8-K Report: (aa) reporting under "Item 5 - Other Events" that on July 14, 1994, the Registrant agreed to sell $150 million principal amount of its 7.25% Notes due July 15, 1999 (the "Notes") pursuant to the Underwriting Agreement dated October 30, 1992, executed by the Registrant, as modified and incorporated by reference into the Pricing Agreement dated July 14, 1994 among the Registrant and Goldman, Sachs & Co., C S First Boston Corporation and Piper Jaffray Inc. (the "Pricing Agreement"); (bb) reporting that the Notes are the subject of a registration statement on Form S-3 (File Number ) filed by the Registrant with the Securities and Exchange Commission; (cc) submitting under "Item 7 - Financial Statements and Exhibits" a copy of the Pricing Agreement; and (dd) submitting under "Item 7 -Financial Statements and Exhibits" a copy of the Officer's Certificate and Authentication Order dated July 21, 1994, relating to the Notes SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SUPERVALU INC. (Registrant) Date: October 25, 1994 By:/s/Jeffrey Girard Jeffrey Girard Executive Vice President- Chief Financial Officer (Principal Financial Officer and duly authorized officer of Registrant) -13-

12 Exhibit 10(e) EXECUTIVE INCENTIVE BONUS PLAN I. INTRODUCTION The intent of the SUPERVALU Executive Incentive Bonus Plan is to provide a means by which the successful performance of the Corporation's major business groups, specific Profit Centers, and individual managers can be rewarded. Each individual who participates in the plan will be aware of his or her bonus opportunity and the factors that impact this opportunity. The bonus plan provides for a wide range of bonus opportunities, from an unsatisfactory individual or organization performance level which generates no award, to an outstanding individual and organization performance level which would provide a significant bonus payment, up to the maximum bonus percent provided under the terms of the plan. The continued profitability and growth of SUPERVALU is vital to all of its employees. Through this plan, the Company is providing a means to reward those who are instrumental in achieving those goals. 1 II. INCENTIVE BONUS PLAN SUMMARY The SUPERVALU Executive Incentive Bonus Plan is designed to reward participating employees for their contributions to the continued growth and profitability of the Corporation.

13 Plan Features For each fiscal year, a bonus opportunity, or norm, expressed as a percentage of base salary dollars, is established for each participant in the program. 2. Performance against organization (e.g., Profit Center, total Corporation) budget objectives and improvement over previous year's net profit performance serve as the principal bases for year-end bonus calculations The bonus award is comprised of an individual portion which is determined by the participant's job performance against specified objectives, and an organizational (e.g., Profit Center or Corporation) portion which is determined by financial performance against both pre-established budget objectives and the previous year's performance. 4. The individual who meets satisfactory performance levels and whose organization, (e.g., Profit Center or the total Corporation) meets its budget objectives, would typically receive a "norm" bonus award. Higher or lower individual or organization performance will result in a higher or lower bonus award. 5. The funds for bonus payments are provided out of the earnings of the Corporation, after a fair return to the stockholders has been assured. 3 III. ELIGIBILITY AND DETERMINATION OF BONUS OPPORTUNITY Eligibility This SUPERVALU plan is designed to include executive and management positions which have a significant impact on Company operating and administrative performance levels. The determination of "significant impact" is based on the Company's position evaluation plan with approval for plan participation to be granted by the appropriate Executive Vice President. 2. Determination of Individual Bonus Norms Each management position has been evaluated and assigned a specific

14 point value, based on the position content in terms of know-how, problemsolving and accountability. Every position in the incentive plan has a percent figure (bonus norm) assigned to it for the purpose of calculating the initial bonus opportunity. Example only: Point Bonus Norm (as a Evaluation Percent of Salary) Below 900 points 10% points 11% points 12% etc. 4 Every participant will be informed of their position's point value and corresponding bonus norm. Each participant's fiscal year earnings are multiplied by the bonus norm percent to determine his or her individual bonus opportunity. If a participant is promoted to a bonus position at some point during the fiscal year, only earnings after the date of promotion will be used in the calculation. Example of Bonus Norm Calculation: <TABLE> <CAPTION> </TABLE> (A) (B) Bonus Norm Amount Fiscal Year Bonus (A) x (B) Earnings Norm % Dollar Amount <S> <C> <C> $55,000 10% $ 5,500 $60,000 10% $ 6,000 $75,000 11% $ 8,250 $85,000 12% $10,200 5 IV. STANDARDS OF PERFORMANCE

15 Before the beginning of each fiscal year, budget objectives are established; these will be used as the primary standards against which actual performance will be compared. Bonus amounts are calculated according to the procedure detailed later in this booklet and are subject to Board of Director approval before there will be any payout. Bonus funds not utilized are returned to earnings. There is no carryover to subsequent years. The following is an explanation of the process. 1. Corporate Budget Objectives Before the start of each fiscal year, a net profit budget objective is established which represents the performance standard for the Corporation which, if achieved, produces a bonus award at the norm level. At year end, the actual corporate performance is calculated relative to the budget objectives and to the previous year's net profit performance. The bonus award payable to corporate staff participants will vary annually, depending on the actual corporate results that are achieved both as these results relate to the profit budget and the previous year's profit performance Profit Center Budget Objectives Also before the start of each fiscal year, budget objectives are established for each separate Profit Center and become standards of performance for the year. At year end, Profit Center results are calculated as a percentage of objectives established. The bonus award payable to Profit Center participants will vary, depending on the actual Profit Center results that are achieved. 3. Individual Performance As shown below, an individual's job performance is part of the determination of bonus awards. A factor based on an assessment of individual job performance against specified objectives will be determined for each participant according to the guidelines shown on page Award Makeup The incentive award heavily emphasizes organization performance particularily in the case of corporate officers and division presidents.

16 Certain corporate jobs, highly measurable relative to individual performance against objectives, will be equally weighted between organizational and individual performance. Most positions at both the division and corporate staff level will have awards weighted toward organization performance but with a significant individual performance component. 7 <TABLE> <CAPTION> Corporate Positions Portion of Award Based on: Corporate Individual Results Performance <S> <C> <C> Corporate Officers 90% 10% Most Other Positions 75% 25% Product Directors, etc. 50% 50% Profit Center Positions Portion of Award Based on: Profit Center Individual Results Performance Profit Center Presidents 80% 20% Profit Center Staff 75% 25% </TABLE> 8 POINTS OF EMPHASIS Two points should be emphasized regarding the calculation of bonus awards:

17 1. Profit Center and Corporate operating results will reflect equally on the awards of all members of a respective Profit Center or business group. 2. The organization and individual portions of a bonus will be adjusted independently of each other, subject only to the overall total bonus fund limitation and to the minimum and maximum conditions stated later. 9 OVERALL INCENTIVE BONUS PLAN CONCEPT OPERATING RESULTS CORPORATE EARNINGS BONUS CALCULATIONS (ACTUAL PERFORMANCE EXECUTIVE MANAGEMENT BONUS AWARDS vs CORPORATE RESULTS BUDGET/ INDIVIDUAL RESULTS PREVIOUS YEAR ACTUAL) PROFIT CENTER PRESIDENTS BONUS AWARDS PROFIT CENTER RESULTS INDIVIDUAL RESULTS PROFIT CENTER STAFF BONUS AWARDS CORPORATE STAFF BONUS AWARDS CORPORATE RESULTS INDIVIDUAL RESULTS

18 PROFIT CENTER RESULTS INDIVIDUAL RESULTS V. BONUS CALCULATIONS Individual Awards As indicated previously 10% to 50% of a participant's bonus potential, depending on position, will be based on individual performance. Individual awards can range from 80% to 175% of the individual portion of the norm. The adjustment guide below provides the appropriate individual award adjustment factor for specific levels of performance against established objectives. Only the numbers listed below should be used as adjustment factors. <TABLE> <CAPTION> INDIVIDUAL BONUS AWARD ADJUSTMENT GUIDE Adjustment Definition Guide <S> <C> Outstanding - During the year the individual showed effort, skill, and achievement seldom seen, greatly exceeding objectives & expectations. Excellent - the individual far exceeded 1.40 expectations and objectives. Very Good - the individual exceeded expectations 1.20 and performance objectives. Good - met expectations and objectives Fair - did not totally meet performance.80 objectives and expectations, but came reasonably close. Unacceptable - immediate corrective action is required if individual is to remain in the assignment. No Bonus

19 New employee (less than 6 months on the job. No More Than Too soon to evaluate) 1.00 </TABLE> Organization Awards Organization award adjustments are based on performance against budgeted objectives and the previous year's performance for certain of the financial factors. The budget objectives themselves will usually have been determined before the fiscal year as a part of the budgeting process. In determining the organization award, these points will be observed: A. Appropriate financial factors for the fiscal year will be selected and weighted according to the emphasis to be placed on these factors for the year. Net profit will normally be the primary financial factor. In addition sales and/or a return measure may also be included as additional bonus factors. These factors and their weightings may change from year to year, or from profit center to profit center, depending on division or corporate strategic business plans. B. The relationship of financial performance variance from budget to the actual bonus award payout or adjustment will be linear in nature, and will be illustrated on the payout curve that will be provided to each participant for each fiscal year. In this manner, the adjustment is accelerated (up or down) as performance varies more from budget. 12 C. Normally the previous year's net profit performance will service as the threshold performance required before any bonus will be paid. D. As actual performance for the designated financial factors varies from budget, the bonus will be increased or decreased pursuant to the payout curve in effect for the fiscal year. 13 INCENTIVE BONUS CONCEPT FOR THE INDIVIDUAL Salary Earnings

20 times Norm % equals Bonus Norm $ (Split) Organization Individual Norm $ Norm $ Factored for Organizational* Performance Factored for Individual Performance Organization* Individual Award $ Award $ TOTAL Award $ * Home Office plan participants will have their organization award determined by overall corporate performance; profit center plan participants will have their organization award determined by profit center performance. 14 VI. MINIMUM CONDITIONS The following limitations shall apply to bonus award payments: 1. If an individual's performance does not merit an individual award, he/she shall also be ineligible to receive an organization award. 2. If an organization's profit performance is below that organization's

21 minimum payout threshold, there shall be no organization awards to that organization's members, but they may receive individual awards. VII. DISCRETIONARY ADJUSTMENTS The Board of Directors of SUPERVALU has granted the Chief Executive Officer the right to make discretionary adjustments, either upward or downward, to incentive bonus awards. Typically, the Chief Executive Officer exercises this right after having reviewed recommended awards and after consulting with supervisors of the individuals affected. 15 VIII. TERMINATION OF EMPLOYMENT In the event of employment termination prior to the end of the fiscal year (except for retirement, death, or disability), participants will not be eligible for an Incentive Bonus award for that fiscal year. Nothing in this plan is to be construed as an employment agreement between participants and the Company, and each employee's employment and compensation can be terminated with or without cause at any time at the option of the company or the employee. If employment is terminated prior to the end of fiscal year, eligibility for an award also terminates. Until an award has been approved by the Board of Directors and actually paid, no employee shall have any claim nor have earned any right to an award. IX. PLAN CHANGE AND TERMINATION The Company reserves the right in its sole and absolute discretion to modify, change, or discontinue the plan with or without notice at any time. 16 X. TIME OF PAYMENT Availability of funds for this program depend on completion of necessary accounting work at the close of the fiscal year. Awards cannot be made until final financial figures are available and are entered into the calculations. The final awards are in turn approved by the Board of Directors. Typically, this does not occur until mid-april. 17

22 EXHIBIT (15) to Quarterly Report on Form 10-Q Page 1 of 2 LETTER REGARDING UNAUDITED INFORMATION Stockholders and Board of Directors SUPERVALU INC. Eden Prairie, Minnesota We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interm information of SUPERVALU INC. and subsidiaries for the periods ended September 10, 1994 and September 11, 1993, as indicated in our report dated October 11, Because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended September 10, 1994, is incorporated by reference in Registration Statements (No , No , No , and No ) on Form S-8. We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statements prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. /s/ Deloitte & Touche LLP Minneapolis, Minnesota October 11, 1994 INDEPENDENT ACCOUNTANTS' REVIEW REPORT Stockholders and Board of Directors Exhibit (15) to Quarterly Report on Form 10-Q Page 2 of 2

23 SUPERVALU INC. Eden Prairie, Minnesota We have reviewed the accompanying consolidated balance sheets of SUPERVALU INC. (the Company) and subsidiaries as of September 10, 1994 and September 11, 1993 and the related consolidated statements of earnings and cash flows for the 16-week and 28-week periods then ended and the consolidated statement of stockholders' equity for the interim period ended September 10, These consolidated financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to such consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of SUPERVALU INC. and subsidiaries as of February 26, 1994 and the related consolidated statements of earnings, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated April 7, 1994, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of February 26, 1994 and the consolidated statement of stockholders' equity for the year then ended is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived. /s/ Deloitte & Touche LLP Minneapolis, Minnesota October 11, 1994

24 <TABLE> <S> <C> <ARTICLE> 5 <LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 10, 1994 AND THE CONSOLIDATED STATEMENTS OF EARNINGS FOR THE 28 WEEKS ENDED SEPTEMBER 10, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. </LEGEND> <MULTIPLIER> 1,000 <CURRENCY> US DOLLARS <S> <C> <PERIOD-TYPE> 6-MOS <FISCAL-YEAR-END> FEB <PERIOD-END> SEP <EXCHANGE-RATE> 1 <CASH> 5,391 <SECURITIES> 0 <RECEIVABLES> 438,981 <ALLOWANCES> (35,633) <INVENTORY> 1,203,576 <CURRENT-ASSETS> 1,710,839 <PP&E> 2,393,550 <DEPRECIATION> 818,553 <TOTAL-ASSETS> 4,484,009 <CURRENT-LIABILITIES> 1,403,609 <BONDS> 1,472,664 <COMMON> 75,335 <PREFERRED-MANDATORY> 0 <PREFERRED> 5,908 <OTHER-SE> 1,216,466 <TOTAL-LIABILITY-AND-EQUITY> 4,484,009 <SALES> 8,764,840 <TOTAL-REVENUES> 8,764,840 <CGS> 7,990,435 <TOTAL-COSTS> 7,990,435 <OTHER-EXPENSES> 0 <LOSS-PROVISION> 4,418 <INTEREST-EXPENSE> 67,955 <INCOME-PRETAX> 138,530 <INCOME-TAX> 54,402 <INCOME-CONTINUING> 84,128 <DISCONTINUED> 0 <EXTRAORDINARY> 0 <CHANGES> 0 <NET-INCOME> 84,128 <EPS-PRIMARY> 1.18 <EPS-DILUTED> 1.18

25 </TABLE>