Edgar Filing: SUPERVALU INC

Prepared by R.R. Donnelley Financial -- Form 10-Q/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

(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 December 1, 2001.

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-5418

SUPERVALU INC.

(Exact name of registrant as specified in its Charter)

DELAWARE		41-0617000
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

11840 VALLEY VIEW ROAD,

EDEN PRAIRIE, MINNESOTA 55344

(Address of principal executive offices) (Zip Code)

(952) 828-4000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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 January 8, 2002 is as follows:

Title of Each Class		Shares Outstanding
Common Shares		132,413,300

SUPERVALU is filing this Form 10-Q/A as a result of matters discussed in the “Notes to Consolidated Financial Statements— Restatement” to the unaudited condensed consolidated financial statements included in this Form 10-Q/A.

PART I—FINANCIAL INFORMATION

Item 1: Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF EARNINGS

SUPERVALU INC. and Subsidiaries

(In thousands, except per share data)

	Third quarter (12 weeks) ended
	Restated Dec. 1, 2001		% of sales		Restated Dec. 2, 2000			% of sales
Net sales	$	4,610,293	100.00	%	$	5,420,238		100.00	%

Costs and expenses
Cost of sales		4,018,382	87.15			4,837,933		89.27
Selling and administrative expenses		455,488	9.88			461,281		8.50

Interest
Interest expense		43,666	0.95			49,092		0.91
Interest income		4,309	0.09			5,284		0.10

Interest expense, net		39,357	0.86			43,808		0.81

Total costs and expenses		4,513,227	97.89			5,343,022		98.58


Earnings before income taxes		97,066	2.11			77,216		1.42

Provision for income taxes
Current		9,019				52,017
Deferred		30,031				(20,937	)

Income tax expense		39,050	0.85			31,080		0.57

Net earnings	$	58,016	1.26	%	$	46,136		0.85	%


Net earnings per common share—diluted	$	0.43			$	0.35

Net earnings per common share—basic	$	0.43			$	0.35

Weighted average number of common shares outstanding
Diluted		135,068				132,733
Basic		133,475				132,430

Dividends declared per common share	$	0.1400			$	0.1375

All data subject to year-end audit.

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF EARNINGS

SUPERVALU INC. and Subsidiaries

(In thousands, except per share data)

	Year-to-date (40 weeks) ended
	Restated Dec. 1, 2001		% of sales		Restated Dec. 2, 2000			% of sales
Net sales	$	16,257,118	100.00	%	$	17,707,454		100.00	%

Costs and expenses
Cost of sales		14,307,278	88.01			15,790,090		89.17
Selling and administrative expenses		1,537,093	9.46			1,488,425		8.41

Interest
Interest expense		152,265	0.94			162,597		0.92
Interest income		16,609	0.11			16,735		0.10

Interest expense, net		135,656	0.83			145,862		0.82

Total costs and expenses		15,980,027	98.30			17,424,377		98.40


Earnings before income taxes		277,091	1.70			283,077		1.60

Provision for income taxes
Current		74,051				154,162
Deferred		37,488				(40,202	)

Income tax expense		111,539	0.68			113,960		0.64

Net earnings	$	165,552	1.02	%	$	169,117		0.96	%


Net earnings per common share—diluted	$	1.24			$	1.27

Net earnings per common share—basic	$	1.24			$	1.28

Weighted average number of common shares outstanding
Diluted		133,826				132,956
Basic		132,979				132,220

Dividends declared per common share	$	0.4175			$	0.4100

All data subject to year-end audit.

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF NET SALES AND EARNINGS

SUPERVALU INC and Subsidiaries

(In thousands)

	Third Quarter (12 weeks) ended						Year-to-date (40 weeks) ended
	Restated Dec. 1, 2001			Restated Dec. 2, 2000			Restated Dec. 1, 2001			Restated Dec. 2, 2000
Net Sales

Retail food	$	2,194,831		$	2,158,273		$	7,172,872		$	6,998,570
% of total		47.6	%		39.8	%		44.1	%		39.5	%

Food distribution		2,415,462			3,261,965			9,084,246			10,708,884
% of total		52.4	%		60.2	%		55.9	%		60.5	%

Total net sales	$	4,610,293		$	5,420,238		$	16,257,118		$	17,707,454
		100.0	%		100.0	%		100.0	%		100.0	%


Earnings

Retail food	$	91,815		$	66,250		$	270,590		$	255,047
% of sales		4.2	%		3.1	%		3.8	%		3.6	%

Food distribution		54,931			63,722			173,316			201,206
% of sales		2.3	%		2.0	%		1.9	%		1.9	%


Subtotal		146,746			129,972			443,906			456,253
% of sales		3.2	%		2.4	%		2.7	%		2.6	%

General corporate expenses		(10,323	)		(8,948	)		(31,159	)		(27,314	)

Total operating earnings		136,423			121,024			412,747			428,939
% of sales		3.0	%		2.2	%		2.5	%		2.4	%

Interest income		4,309			5,284			16,609			16,735
Interest expense		(43,666	)		(49,092	)		(152,265	)		(162,597	)

Earnings before income taxes		97,066			77,216			277,091			283,077
Provision for income taxes		(39,050	)		(31,080	)		(111,539	)		(113,960	)

Net earnings	$	58,016		$	46,136		$	165,552		$	169,117

All data subject to year-end audit.

See notes to consolidated financial statements.

CONDENSED CONSOLIDATED BALANCE SHEETS

SUPERVALU INC. and Subsidiaries

(In thousands)

	Third Quarter Restated December 1, 2001		Fiscal Year End Restated February 24, 2001
Assets

Current Assets
Cash and cash equivalents	$	11,322	$	10,396
Receivables, net		450,101		579,600
Inventories		1,318,593		1,336,556
Other current assets		137,376		148,296

Total current assets		1,917,392		2,074,848
Long-term receivables		165,224		161,388
Property, plant and equipment, net		2,193,703		2,232,794
Goodwill		1,534,956		1,576,780
Other assets		339,444		344,534

Total assets	$	6,150,719	$	6,390,344


Liabilities and Stockholders’ Equity

Current Liabilities
Notes payable	$	231,217	$	579,039
Accounts payable		1,173,633		1,396,011
Current debt and obligations under capital leases		356,594		54,668
Other current liabilities		301,887		304,970

Total current liabilities		2,063,331		2,334,688

Long-term debt and obligations under capital leases		1,883,692		2,008,474
Other liabilities and deferred income taxes		299,111		264,033
Total stockholders’ equity		1,904,585		1,783,149

Total liabilities and stockholders’ equity	$	6,150,719	$	6,390,344

All data subject to year-end audit.

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

SUPERVALU INC. and Subsidiaries

(In thousands, except per share data)

	Common Stock						Treasury Stock
	Shares	Amount		Capital in Excess of Par Value			Shares		Amount			Restated Retained Earnings			Other Comprehensive Loss			Total
RESTATED BALANCES AT FEBRUARY 26, 2000	150,670	$	150,670	$	132,226		(16,008	)	$	(308,788	)	$	1,846,120		$			$	1,820,228
Restated net earnings	—		—		—		—			—			72,870						72,870
Sales of common stock under option plans	—		—		(3,538	)	279			7,095			—						3,557
Cash dividends declared on common stock—$0.5475 per share	—		—		—		—			—			(72,903	)					(72,903	)
Compensation under employee incentive plans	—		—		(196	)	366			8,271			—						8,075
Purchase of shares for treasury	—		—		—		(2,933	)		(48,678	)		—						(48,678	)


RESTATED BALANCES AT FEBRUARY 24, 2001	150,670	$	150,670	$	128,492		(18,296	)	$	(342,100	)	$	1,846,087		$	—		$	1,783,149

Restated net earnings													165,552						165,552
Sales of common stock under option plans					(2,862	)	900			17,122									14,260
Cash dividends declared on common stock—$0.4175 per share													(55,703	)					(55,703	)
Compensation under employee incentive plans					(2,246	)	547			9,726									7,480
Purchase of shares for treasury	—		—		—		(150	)		(3,000	)		—						(3,000	)
Other comprehensive loss																(7,153	)		(7,153	)


RESTATED BALANCES AT DECEMBER 1, 2001	150,670	$	150,670	$	123,384		(16,999	)	$	(318,252	)	$	1,955,936		$	(7,153	)	$	1,904,585

All data subject to year-end audit.

See notes to consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SUPERVALU INC. and Subsidiaries

(In thousands)

	Year-to-date (40 weeks ended)
	December 1, 2001			December 2, 2000
Net cash provided by operating activities	$	437,079		$	338,742


Cash flows from investing activities
Additions to long-term receivables		(36,471	)		(55,254	)
Proceeds received on long-term receivables		30,831			34,672
Proceeds from sale of assets		73,243			31,519
Purchase of property, plant and equipment		(197,578	)		(275,972	)
Other cash used in investing activities		(32,709	)		(48,264	)

Net cash used in investing activities		(162,684	)		(313,299	)


Cash flows from financing activities
Net (decrease) increase in checks outstanding		(63,927	)		42,871
Net (reduction) issuance of short-term notes payable		(347,822	)		215,496
Proceeds from issuance of long-term debt		218,014			—
Repayment of long-term debt		(12,416	)		(163,460	)
Dividends paid		(55,195	)		(54,338	)
Payment for purchase of treasury stock		(3,000	)		(48,604	)
Other cash used in financing activities		(9,123	)		(18,714	)

Net cash used in financing activities		(273,469	)		(26,749	)


Net increase (decrease) in cash and cash equivalents		926			(1,306	)
Cash and cash equivalents at beginning of period		10,396			10,920

Cash and cash equivalents at the end of period	$	11,322		$	9,614


Supplemental information:
Pretax LIFO expense	$	4,372		$	3,293
Pretax depreciation and amortization	$	257,816		$	253,422

Cash paid during the period for:
Income taxes	$	80,351		$	48,244
Interest	$	147,644		$	135,170

All data subject to year-end audit.

See notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounting Policies

The summary of significant accounting policies is included in the notes to consolidated financial statements set forth in the Annual Report on Form 10-K of SUPERVALU INC. (“SUPERVALU” or the “Company”) for its fiscal year ended February 24, 2001 (“fiscal 2001”).

Statement of Financial Accounting Standard 133, “Accounting for Derivative Instruments and Hedging Activities,” became effective for the Company on February 25, 2001. At that date, the Company’s interest rate swap agreements were recorded on its balance sheet at fair value, resulting in recognition of a liability of $23.5 million, a non-current asset of $10.8 million, a debit to other comprehensive loss of $7.7 million, and a deferred tax liability of $5.0 million. On July 6, 2001, the swaps were terminated, which had no material impact to the Company’s consolidated financial statements.

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 condensed consolidated financial position of the Company and its subsidiaries at December 1, 2001 and December 2, 2000, and the results of the Company’s operations and condensed cash flows for the periods then ended. These interim results are not necessarily indicative of the results of the fiscal years as a whole.

Restatement

In June 2002, the Company announced that it had identified an understatement of cost of goods sold resulting from inventory misstatements by a former employee in its pharmacy division. The effect of the correction of the misstatements was to reduce previously reported net earnings by $1.0 million and $1.4 million and net earnings per share—diluted by $0.01 and $0.01 for the third quarter of fiscal 2002 and 2001, respectively, and to reduce previously reported net earnings by $5.0 million and $5.7 million and net earnings per share—diluted by $0.04 and $0.04 for the 40 week period of fiscal 2002 and 2001, respectively. Impacted financial statement line items were cost of sales, income tax expense, inventory, accounts receivable, accounts payable, and other current liabilities. There was no impact on net cash from operating activities. The condensed consolidated financial statements as of February 24, 2001 and December 1, 2001 and for the quarters and year-to-date periods ended December 1, 2001 and December 2, 2000 and notes thereto included in this Form 10-Q/A have been restated to include the effects of the corrections of these misstatements, as follows:

Consolidated Statements of Earnings	As previously reported Quarter ended December 1, 2001		Restated Quarter ended December 1, 2001		As previously reported Quarter ended December 2, 2000		Restated Quarter ended December 2, 2000
	(in millions, except per share amounts)
Net sales	$	4,610.3	$	4,610.3	$	5,420.2	$	5,420.2
Cost of sales		4,016.7		4,018.3		4,835.7		4,837.9
Earnings before income taxes		98.7		97.1		79.4		77.2
Income tax expense		39.7		39.1		31.9		31.1
Net earnings		59.0		58.0		47.5		46.1
Net earnings per common share—diluted	$	0.44	$	0.43	$	0.36	$	0.35
Net earnings per common share—basic	$	0.44	$	0.43	$	0.36	$	0.35

Consolidated Statements of Earnings	As previously reported Year-to-date ended December 1, 2001		Restated Year-to-date ended December 1, 2001		As previously reported Year-to-date ended December 2, 2000		Restated Year-to-date ended December 2, 2000
	(in millions, except per share amounts)
Net sales	$	16,257.1	$	16,257.1	$	17,707.5	$	17,707.5
Cost of sales		14,299.1		14,307.3		15,780.9		15,790.1
Earnings before income taxes		285.3		277.1		292.3		283.1
Income tax expense		114.7		111.5		117.5		114.0
Net earnings		170.6		165.6		174.8		169.1
Net earnings per common share—diluted	$	1.28	$	1.24	$	1.31	$	1.27
Net earnings per common share—basic	$	1.28	$	1.24	$	1.32	$	1.28

Condensed Consolidated Balance Sheets	As previously reported December 1, 2001		Restated December 1, 2001		As previously reported February 24, 2001		Restated February 24, 2001
	(in millions)
Total current assets	$	1,932.9	$	1,917.4	$	2,091.7	$	2,074.8
Total assets		6,166.2		6,150.7		6,407.2		6,390.3
Total current liabilities		2,063.4		2,063.3		2,341.2		2,334.7
Total stockholders’ equity		1,920.0		1,904.6		1,793.5		1,783.1
Total liabilities and stockholders’ equity		6,166.2		6,150.7		6,407.2		6,390.3

Restructure and Other Charges

In the fourth quarter of fiscal 2001, the Company completed a company-wide asset review to identify assets that did not meet return objectives, provide long-term strategic opportunities, or justify additional capital investment. As a result, the Company recorded restructure and other charges of $171.3 million including $89.7 million for asset impairment charges, $52.1 million for lease subsidies, lease cancellation fees, future payments on exited leased facilities and guarantee obligations and $39.8 million for severance and employee related costs, offset by a reduction in the fiscal 2000 reserve of $10.3 million for lease subsidies and future payments on exited leased facilities. These actions include a net reduction of approximately 4,500 employees throughout the organization. Management expects that these actions will be substantially completed by the end of fiscal 2002.

Details of the fiscal 2001 restructure balances, after-tax, for fiscal 2002 follow:

	Balance February 24, 2001		Fiscal 2002 Usage		Balance December 1, 2001
	(In thousands, except for employees)
Consolidation of distribution centers	$	41,499	$	5,957	$	35,542
Exit of non-core retail markets		33,735		19,251		14,484
Disposal of non-core assets and other administrative reductions		16,619		5,444		11,175

Total restructure and other charges	$	91,853	$	30,652	$	61,201

Employees		4,500		3,000		1,500

The reserve at the end of third quarter fiscal 2002 for fiscal 2001 restructure charges was $61.2 million, including $45.7 million for lease subsidies, lease terminations and future payments on exited leased facilities and $15.5 million for employee related costs.

In fiscal 2000, the Company recorded pre-tax restructure and other charges of $103.6 million as a result of an extensive review to reduce costs and enhance efficiencies. This amount was reduced by $10.3 million in fiscal 2001, primarily for a change in estimate for the closure of a remaining facility, which occurred in the second quarter of fiscal 2002. The restructure charges include costs for facility consolidation, non-core store disposal, and rationalization of redundant and certain decentralized administrative functions.

Details of the fiscal 2000 restructure balances, after-tax, for fiscal 2002 follow:

	Balance February 24, 2001		Fiscal 2002 Usage		Balance December 1, 2001
	(In thousands, except for employees)
Facility consolidation	$	11,472	$	4,322	$	7,150
Non-core store disposal		4,404		1,817		2,587
Infrastructure realignment		1,980		557		1,423

Total restructure and other charges	$	17,856	$	6,696	$	11,160

Employees		463		371		92

The reserve at the end of third quarter fiscal 2002 for fiscal 2000 restructure charges was $11.2 million, including $7.1 million for lease subsidies, lease terminations and future payments on exited leased facilities and $4.1 million for employee related costs.

Notes Payable

On August 16, 2001, the Company entered into an accounts receivable securitization program, under which the Company can borrow up to $200 million on a revolving basis, with borrowings secured by eligible accounts receivable. As of December 1, 2001, the Company had $137.3 million of borrowings outstanding under this program and $194.8 million in eligible receivables pledged as collateral.

In November 2001, the Company sold zero-coupon convertible debentures having an aggregate initial principal amount at maturity of $811 million. The proceeds from the offering, net of approximately $5 million of expenses, were $208 million. The debentures mature in 30 years and are callable at the Company’s option on or after October 1, 2006. Holders may require the Company to purchase all or a portion of their debentures on October 1, 2003, October 1, 2006, or October 1, 2011 at a purchase price equal to the accreted value of the debentures, which includes accrued and unpaid cash interest. Each $1,000 debenture will be convertible into 9.6434 shares of the Company’s common stock at an initial conversion price of $27.29 per share, if the closing price of the Company’s common stock exceeds a specified price (initially, 120% of the conversion price, or $32.75 per share) for a specified period of time in any quarter beginning after February 23, 2002, or otherwise upon the occurrence of certain events. The debentures have an initial yield to maturity of 4.5%, which is being accreted over the life of the debentures using the effective interest method. The Company may pay contingent cash interest for the six-month period commencing November 3, 2006 and for any six-month period thereafter if the average market price of the debentures for a five trading day measurement preceding the applicable six-month period equals 120% or more of the sum of the issue price and accrued original issue discount for the debentures.

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Management’s Discussion and Analysis of Financial Condition and Results of Operations presented below reflects the impacts of restatements to our previously reported consolidated financial statements as of February 24, 2001 and December 1, 2001 and for the third quarter and year-to-date fiscal 2002 and the third quarter and year-to-date fiscal 2001.

In June 2002, the Company announced that it had identified an understatement of cost of goods sold resulting from inventory misstatements by a former employee in its pharmacy division. The effect of the correction of the misstatements was to reduce previously reported net earnings by $1.0 million and $1.4 million and net earnings per share—diluted by $0.01 and $0.01 for the third quarter of fiscal 2002 and 2001, respectively, and to reduce previously reported net earnings by $5.0 million and $5.7 million and net earnings per share—diluted by $0.04 and $0.04 for the 40 week period of fiscal 2002 and 2001, respectively. The condensed consolidated financial statements as of February 24, 2001 and December 1, 2001 and for the quarters and year-to-date periods ended December 1, 2001 and December 2, 2000 and notes thereto included in this Form 10-Q/A have been restated to include the effects of the corrections of these misstatements.

RESULTS FOR THE QUARTER:

For the third quarter of fiscal 2002, the Company achieved sales of $4.6 billion, net earnings of $58.0 million and diluted earnings per share of $0.43. Last year, sales were $5.4 billion, net earnings were $46.1 million and diluted earnings per share were $0.35.

Net sales

Net sales decreased 14.9 percent compared to last year. Retail food sales increased 1.7 percent and food distribution sales decreased 26.0 percent. Retail food sales increased over last year primarily due to new store openings. In addition, same-store

sales were positive 0.7 percent for the quarter. Food distribution sales decreased from last year reflecting customer losses, primarily the exit of the Kmart business. The Kmart supply agreement was terminated June 30, 2001. In addition, sales decreased as a result of the impact of restructuring activities.

Gross profit

Gross profit, as a percentage of net sales, was 12.9 percent compared to 10.7 percent last year. The increase was primarily due to the growing proportion of the Company’s retail business, which operates at a higher gross profit margin as a percentage of net sales than does the food distribution business. In addition, improved merchandising execution in retail and benefits of restructuring and reconfiguration activities in distribution added to the gross profit percent increase.

Selling and administrative expenses

Selling and administrative expenses as a percentage of net sales, were 9.9 percent for the current quarter compared to 8.5 percent last year. The increase in selling and administrative expenses as a percent of sales was due to the growing proportion of the Company’s retail business, which operates at a higher selling and administrative expense as a percentage of sales than does the food distribution business, as well as increases in labor and employee benefit costs.

Operating earnings

The Company’s pretax operating earnings (earnings before interest and taxes) were $136.4 million compared to $121.0 million last year, a 12.7 percent increase. Operating earnings before depreciation and amortization were $213.9 million compared with $199.2 million last year, a 7.4 percent increase. Retail food operating earnings increased 38.5 percent to $91.8 million, or 4.2 percent of sales, from last year’s $66.3 million, or 3.1 percent of sales. The increase was primarily a result of higher gross profit margins, partially offset by increases in labor and employee benefit costs. Retail food operating earnings before depreciation and amortization increased 25.7 percent to $132.7 million, or 6.1 percent of sales, from last year’s $105.6 million, or 4.9 percent of sales. Food distribution operating earnings decreased 13.8 percent to $54.9 million from last year’s $63.7 million. The decrease reflects customer losses, primarily the exit of the Kmart business. Operating earnings for distribution, as a percentage of net sales, increased to 2.3 percent this quarter from 2.0 percent in the prior year reflecting the benefits of restructuring and reconfiguration activities. Food distribution operating earnings before depreciation and amortization decreased 10.7 percent to $90.9 million, or 3.8 percent of sales, from last year’s $101.8 million, or 3.1 percent of sales.

Interest expense

Interest expense decreased to $43.7 million compared with $49.1 million last year due to lower overall borrowing levels and lower interest rates.

Income taxes

The effective tax rate was 40.2 percent in the third quarter, comparable to last year.

Net earnings

Net earnings increased 25.8 percent to $58.0 million or $0.43 per share—diluted compared with last year’s net earnings of $46.1 million or $0.35 per share—diluted. Weighted average shares—diluted increased to 135.1 million compared with last year’s 132.7 million.

RESULTS FOR THE YEAR:

Year-to-date for fiscal 2002, the Company achieved sales of $16.3 billion, net earnings of $165.6 million and diluted earnings per share of $1.24. Last year, net sales were $17.7 billion, net earnings were $169.1 million and diluted earnings per share were $1.27.

Net sales

Net sales decreased 8.2 percent compared to last year. Retail food sales increased 2.5 percent, and food distribution sales decreased 15.2 percent. Retail food sales increased over last year primarily due to new store openings. Food distribution sales

decreased from last year reflecting customer losses, primarily the exit of the Kmart business in the second quarter. In addition, distribution sales decreased as a result of the impact of restructuring activities.

Gross profit

Gross profit as a percentage of net sales was 12.0 percent compared to 10.8 percent last year. This increase was primarily due to the growing proportion of the Company’s retail business, which operates at a higher gross profit margin, as a percentage of net sales, than does the food distribution business. In addition, improved merchandising execution in retail and benefits of restructuring and reconfiguration activities in distribution contributed to the increase in the gross profit percent.

Selling and administrative expenses

Selling and administrative expenses as a percentage of sales were 9.5 percent, compared to 8.4 percent last year. The increase in selling and administrative expenses as a percent of sales was due to the growing proportion of the Company’s retail business, which operates at a higher selling and administrative expense as a percentage of sales than does the food distribution business, as well as increases in labor and employee benefit costs.

Operating earnings

The Company’s pretax operating earnings (earnings before interest and taxes) decreased 3.8 percent to $412.7 million, compared with $428.9 million last year. Operating earnings before depreciation and amortization decreased to $670.6 million compared with $682.3 million last year, a 1.7 percent decrease. Retail food operating earnings increased 6.1 percent to $270.6 million, or 3.8 percent of sales, from last year’s $255.0 million, or 3.6 percent of sales. This increase in retail earnings was attributable to improved merchandising execution resulting in an improvement in gross margins. Retail food operating earnings before depreciation and amortization increased 5.4 percent to $402.5 million, or 5.6 percent of sales, from last year’s $382.0 million, or 5.5 percent of sales. Food distribution operating earnings decreased 13.9 percent to $173.3 million, or 1.9 percent of sales, from last year’s $201.2 million, or 1.9 percent of sales. The decrease in operating earnings reflects customer losses, primarily the exit of the Kmart business. Food distribution operating earnings before depreciation and amortization decreased 8.7 percent to $297.0 million, or 3.3 percent of sales, from last year’s $325.3 million, or 3.0 percent of sales.

Interest expense

Interest expense decreased to $152.3 million compared with $162.6 million last year due to lower overall borrowing levels and lower interest rates.

Income taxes

The effective tax rate was 40.3 percent, comparable to last year.

Net earnings

Net earnings decreased 2.1 percent to $165.6 million or $1.24 per share—diluted compared with last year’s net earnings of $169.1 million or $1.27 per share—diluted. Weighted average shares—diluted increased to 133.8 million compared with last year’s 133.0 million.

Liquidity and Capital Resources

Internally generated funds from operations continued to be the major source of liquidity and capital growth. Cash provided from operations was $437.1 million year-to-date, compared with $338.7 million last year. The increase is reflective of positive impacts on working capital attributable to the exit of the Kmart business as well as restructuring activities. Net cash used in investing activities was $162.7 million, compared with $313.3 million last year. The decrease was primarily due to lower purchases of fixed assets and higher proceeds from sales of assets related to restructuring activities. Net cash used in financing activities was $273.5 million, compared with $26.7 million last year. The increase in cash used in financing activities reflects higher net debt reduction in fiscal 2002.

Management expects that the Company will continue to replenish operating assets and reduce aggregate debt with internally generated funds. The Company has adequate short-term and long-term financing capabilities to fund its capital expenditures plan and acquisitions as the opportunities arise. SUPERVALU will continue to use short-term and long-term debt as a supplement to internally generated funds to finance its activities. Maturities of debt issued will depend on management’s views with respect to the relative attractiveness of interest rates at the time of issuance.

The Company has entered into revolving credit agreements with various financial institutions, which are available for general corporate purposes and for the issuance of letters of credit. A $400 million revolving credit agreement expires in October 2002 and a $300 million 364-day agreement expires in August 2002. Both credit facilities have rates tied to LIBOR plus 0.650 to 1.400 percent, based on the Company’s credit ratings. As of December 1, 2001, letters of credit outstanding under the credit facilities were $111 million and the unused available credit under these facilities was $548 million. The Company also has $137.3 million outstanding under an accounts receivable securitization program. Outstanding borrowings under the revolving credit facilities and the accounts receivable securitization facility are reflected in Notes Payable on the consolidated balance sheet.

In the third quarter, the Board of Directors authorized the repurchase of up to five million shares of the Company’s common stock to offset the issuance of shares over time under the Company’s employee benefit plans and to replace the 1996 share repurchase program.

Company-Wide Asset Review

The restructure and other charges of $171.3 million include $89.7 million for asset impairment charges, $52.1 million for lease subsidies, lease cancellation fees, future payments on exited leased facilities and guarantee obligations and $39.8 million for severance and employee related costs, offset by a reduction in the fiscal 2000 reserve of $10.3 million for lease subsidies and future payments on exited leased facilities. These actions include a net reduction of approximately 4,500 employees throughout the organization. Management expects that these actions will be substantially completed by the end of fiscal 2002.

New accounting standards

In June 2001, the Financial Accounting Standards Board approved Statement of Financial Accounting Standard No. 141, “Business Combinations” and Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for under the purchase

method and addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. SFAS No. 142 requires companies to cease amortizing goodwill that existed at June 30, 2001. For the Company, this amortization of existing goodwill will cease on February 23, 2002. Any goodwill resulting from an acquisition completed after June 30, 2001 will not be amortized. SFAS No. 142 also establishes a new method of testing goodwill for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value. The adoption of SFAS No. 142 will result in the discontinuation of amortization of goodwill and goodwill will be tested for impairment under the new standard beginning in the first quarter of fiscal 2003. The Company is currently evaluating the provisions of SFAS No. 142 and has not yet determined the effect that adoption of this standard will have on its consolidated financial statements.

In June 2001, the Financial Accounting Standards Board issued Statement No. 143, “Accounting for Asset Retirement Obligations,” which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Company is currently analyzing the effect this standard will have on its consolidated financial statements and plans to adopt the provisions of Statement No. 143 in the first quarter of fiscal 2004.

In August 2001, the Financial Accounting Standards Board approved Statement of Financial Accounting Standard No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Company is currently analyzing the effect this standard will have on its consolidated financial statements and plans to adopt the provisions of SFAS No. 144 in the first quarter of fiscal 2003.

Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995

The information in this Quarterly Report includes forward-looking statements. The Company’s businesses are subject to certain risks and uncertainties that could cause actual results to differ materially from those discussed in such forward looking statements. These include, but are not limited to:

competitive practices in the retail food and food distribution industries,

the nature and extent of the consolidation of the retail food and food distribution industries and our ability to grow through acquisitions and assimilate acquired entities,

our ability to attract and retain customers for our food distribution business and to control food distribution costs,

general economic or political conditions that affect consumer buying habits generally or acts of terror directed at the food industry that affect consumer behavior,

potential work disruptions from labor disputes or national emergencies,

the timing and implementation of certain restructuring activities we have announced, including our consolidation of certain distribution facilities, our exit from certain non-core markets and our disposition of under-performing stores,

the availability of favorable credit and trade terms, and

other risk factors inherent in the food distribution and retail businesses.

These risks and uncertainties are set forth in further detail in Exhibit 99(i) to this report. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update such statement to reflect events or circumstances arising after such date.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes in market risk for the Company in the period covered by this report.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business of the Registrant.

Item 2. Changes in Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

None

Item 6. Restated Exhibits filed with this amended 10-Q/A and Reports on Form 8-K.

(a)

Exhibits:

(11) Computation of Earnings Per Common Share.

(b)

Reports on Form 8-K:

None

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)

Dated: July 30, 2002	By:	/s/ Pamela K. Knous
		Pamela K. Knous Executive Vice President, Chief Financial Officer (Authorized officer of Registrant)

EXHIBIT INDEX

Exhibit

(11)		Computation of Earnings Per Common Share.