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SUPERVALU INC - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Edgar Glimpses Via Acquire Media NewsEdge) (Dollars and shares in millions, except per share data and stores) This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q, the information contained under the caption "Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act" in this Quarterly Report on Form 10-Q and the information in the Company's Annual Report on Form 10-K for the fiscal year ended February 22, 2014. MANAGEMENT OVERVIEW Business Overview SUPERVALU operates its business in three segments: Independent Business, Save-A-Lot and Retail Food. Independent Business is one of the largest wholesale distributors to independent retail customers across the United States. Save-A-Lot is one of the nation's largest hard discount grocery retailers by store count. The Retail Food business operates traditional grocery stores under five regionally-based banners: Cub Foods, Shoppers Food & Pharmacy, Shop 'n Save, Farm Fresh and Hornbacher's. The Company leverages its distribution operations by providing wholesale distribution and logistics service solutions to its independent retail customers and distribution to its Retail Food stores through the Independent Business segment. Save-A-Lot provides wholesale distribution and service solutions to its licensees, and distribution to Save-A-Lot corporate stores. Management continues to focus on simplifying the Company's operations with a view towards driving top-line sales while managing the Company's cost structure. These actions are being undertaken as part of the continued focus on the Company's long-term plans to increase sales and operating cash flow, improve the condition of its balance sheet and generate returns for its stockholders. Independent Business continues to target sales growth by affiliating new customers and driving sales to existing customers while also managing expenses and realigning the business to operate more efficiently. In the first quarter of fiscal 2015, Independent Business's Eastern and Southeast regions were combined to form the East region and the Midwest and Northern regions were combined to form the West region to further streamline the organization, reduce operating costs and create common region organizational structures that more effectively utilize resources and serve the Company's customers. Subsequent to the end of the first quarter of fiscal 2015, Independent Business began supplying all 18 stores acquired by the Company and its independent retail customers and franchisees from Roundy's Inc. Save-A-Lot continues to drive sales and performance through its meat and produce programs, competitive pricing enhancements and incremental marketing activities. In addition, Save-A-Lot is focused on long-term sales and earnings growth through execution of its initiatives at existing locations and expansion through corporate and licensee store development. In the first quarter of fiscal 2015, the Company added seven new Save-A-Lot stores, comprised of six new licensee stores and one new corporate store, and closed 14 Save-A-Lot licensee stores. In addition, the Company opened 15 corporate Save-A-Lot stores purchased from licensees and sold four corporate Save-A-Lot stores to licensees. Retail Food is focused on driving sales and performance through competitive pricing and promotional activities, enhanced perishable offerings, store remodels, store resets and integrating the newly acquired stores from Roundy's Inc. Total retail square footage as of the end of the first quarter of fiscal 2015 was approximately 17.6 million, an increase of approximately 1.2 percent from the end of fiscal 2014. Total retail square footage, excluding actual and planned store dispositions, increased 2.6 percent from the end of fiscal 2014. The Company continues to reduce Corporate costs, including costs related to fees earned under the Transition Services Agreements with New Albertson's, Inc. ("NAI") and Albertson's LLC (collectively, the "TSA"). Management believes that this cost management by the Company has reduced the cost to operate the TSA, which has contributed to our overall consolidated operating profit for the quarter. In March 2014, AB Acquisition, the parent company of Albertson's LLC and NAI, announced a definitive agreement for the acquisition of Safeway Inc. The initial terms of the TSA with Albertson's LLC and NAI run through September 2015, after which the TSA may be extended in one-year increments with a one-year notice. Therefore, in September 2014, the Company is expected to know if Albertson's LLC and NAI wish to extend beyond the initial terms. If they extend, the TSA would run at least through September 2016. The impact of the TSA on the Company's results of operations depends on the revenue being received by the Company and the Company's ability to manage its corporate costs. A decrease in the revenue received by the Company under the TSA, including in the event of any non-renewal or reduction in the scope or level of services, could adversely impact the Company's results of operations, in particular if the Company is not able to manage its cost structure and overhead to appropriately correspond to loss in revenue. The Company continues to be focused on providing quality services under the TSA, and it also remains committed to being an efficient organization. The United States grocery channel in which the Company operates is highly competitive. Competition is experienced through multiple retailing formats and affects the Company's ability to attract and retain customers. Management expects operating results for the Company will continue to be impacted by the effects of operating in a highly competitive and price-sensitive marketplace. The Company monitors product inflation and evaluates whether to pass cost inflation on or absorb cost increases in the form of incremental investments to lower prices to customers. Cost inflation for the first quarter of fiscal 2015 is estimated at 1.5 percent, with higher levels in certain dairy and meat categories. 17 -------------------------------------------------------------------------------- Table of Contents Financial Highlights The following is a summary comparison of financial highlights for the first quarter of fiscal 2015 to the first quarter of fiscal 2014: • Identical store sales for the Save-A-Lot network, Save-A-Lot Company-operated stores and stores in the Retail Food segment increased 5.6 percent, 7.2 percent and 0.6 percent, respectively. • Customer counts increased 6.1 percent and 2.5 percent in Save-A-Lot Company-operated stores and Retail Food stores, respectively. • Independent Business segment sales decreased 2.6 percent. • Incremental price investments were made within Save-A-Lot and Retail Food to increase sales. • Operating earnings increased $51 due to lower costs and charges associated with severance, asset impairments and other items; when adjusted for these items, Operating earnings decreased $6, primarily due to incremental price investments and higher shrink, advertising and last-in, first-out ("LIFO") charges, offset in part by lower employee-related costs, net of the related $26 decrease in TSA fees, and lower depreciation and amortization. • Interest expense, net decreased $185 due to $167 of lower refinancing charges and costs and $18 of savings from lower interest rates and lower average outstanding debt balances. • Net earnings from continuing operations increased $150 primarily due to lower debt refinancing activity, restructuring costs and asset impairments. • Basic and diluted earnings per share from continuing operations increased $0.61 per share due primarily to the previously described increases in Operating earnings and reduction in Interest expense, net. • Operating cash flows from continuing operations increased $155 primarily due to less cash utilized for operating assets and liabilities, including income taxes, receivables and interest, compared with last year. • Capital expenditures increased $17 from investments in Save-A-Lot Company-operated stores and Retail Food store remodels. • Financing cash flows from continuing operations decreased $79 primarily due to lower proceeds from the issuance of common stock offset in part by lower financing costs. FIRST QUARTER RESULTS OF OPERATIONS The following discussion summarizes operating results in the first quarter of fiscal 2015 compared to the first quarter of fiscal 2014. First Quarter Ended % of % of June 14, 2014 Net June 15, 2013 Net (16 weeks) Sales (16 weeks) Sales Net sales $ 5,234 100.0 % $ 5,241 100.0 % Cost of sales 4,482 85.6 4,446 84.8 Gross profit 752 14.4 795 15.2 Selling and administrative expenses 617 11.8 711 13.6 Operating earnings 135 2.6 84 1.6 Interest expense, net 64 1.2 249 4.8 Equity in earnings of unconsolidated affiliates (1 ) - (1 ) - Earnings (loss) from continuing operations before income taxes 72 1.4 (164 ) (3.1 ) Income tax provision (benefit) 24 0.5 (62 ) (1.2 ) Net earnings (loss) from continuing operations 48 0.9 (102 ) (2.0 ) (Loss) income from discontinued operations, net of tax (3 ) (0.1 ) 190 3.6 Net earnings including noncontrolling interests 45 0.9 88 1.7 Net earnings attributable to noncontrolling interests 2 - 3 0.1 Net earnings attributable to SUPERVALU INC. $ 43 0.8 % $ 85 1.6 % Basic net earnings (loss) per share attributable to SUPERVALU INC.: Continuing operations $ 0.18 $ (0.43 ) Discontinued operations $ (0.01 ) $ 0.78 Basic net earnings per share $ 0.17 $ 0.35 Diluted net earnings (loss) per share attributable to SUPERVALU INC.: Continuing operations $ 0.18 $ (0.43 ) Discontinued operations $ (0.01 ) $ 0.77 Diluted net earnings per share $ 0.17 $ 0.34 18 -------------------------------------------------------------------------------- Table of Contents Net Sales Net sales for the first quarter of fiscal 2015 were $5,234, compared with $5,241 last year, a decrease of $7. Independent Business net sales were 45.9 percent of Net sales, Save-A-Lot net sales were 25.7 percent of Net sales, Retail Food net sales were 27.3 percent of Net sales and Corporate TSA fees were 1.1 percent of Net sales for the first quarter of fiscal 2015, compared with 47.0 percent, 24.2 percent, 27.2 percent and 1.6 percent, respectively, for the first quarter of fiscal 2014. Independent Business net sales for the first quarter of fiscal 2015 were $2,400, compared with $2,463 last year, a decrease of $63 or 2.6 percent. The decrease is primarily due to lost accounts, including a larger lost customer and lower sales to one NAI banner that completed the transition to self-distribution part way through the quarter, and lower military sales, offset in part by increased sales to new accounts and existing customers. Save-A-Lot net sales for the first quarter of fiscal 2015 were $1,348, compared with $1,266 last year, an increase of $82 or 6.5 percent. The increase is primarily due to positive network identical store sales of 5.6 percent or $67 (defined as net sales from Company-operated stores and sales to licensee stores operating for four full quarters, including store expansions and excluding planned store dispositions) and a net increase of $15 in sales due to new store openings net of decreased sales due to store dispositions by licensees. Save-A-Lot identical store sales for Company-operated stores (defined as net sales from Company-operated stores operating for four full quarters, including store expansions and excluding planned store dispositions) were positive 7.2 percent or $36 for the first quarter of fiscal 2015. Save-A-Lot corporate identical store sales performance was primarily a result of a 6.1 percent increase in customer count and a 1.1 percent increase in average basket size. Retail Food net sales for the first quarter of fiscal 2015 were $1,428, flat with last year. Retail Food net sales includes positive identical store sales of 0.6 percent or $8 (defined as net sales from stores operating for four full quarters, including store expansions and excluding fuel and planned store dispositions), offset by a sales decrease attributable to a store closed as a result of lease expiration and lower fuel sales. Retail Food positive identical store sales performance was primarily a result of a 2.5 percent customer count increase, offset in part by a 1.9 percent decrease in average basket size. Net sales for the first quarter of fiscal 2015 include fees earned under the TSA of $58, compared with $84 last year, a decrease of $26. The net sales decrease reflects a one-year transition fee earned under the TSA in fiscal 2014 of $60, of which $36 was recognized in the first quarter of fiscal 2014, offset in part by higher fees earned during the first quarter of fiscal 2015 due to the timing of the NAI sale, which closed on March 21, 2013, the commencement date of the TSA. Gross Profit Gross profit for the first quarter of fiscal 2015 was $752, compared with $795 last year, a decrease of $43 or 5.4 percent. Gross profit as a percent of Net sales was 14.4 percent for the first quarter of fiscal 2015, compared with 15.2 percent last year. Gross profit declined due to a net decrease of $26 in TSA fees predominantly related to the one-year transition amount recognized in the first quarter last year. The remaining decrease of $17 is primarily due to $26 of incremental investments to lower prices to customers, higher shrink and stronger private brands pricing support, $6 of higher advertising costs and LIFO charges, offset in part by $10 of higher gross profit from increased sales volume and $7 of lower employee-related costs. Independent Business gross profit as a percent of Independent Business net sales was 4.7 percent for the first quarter of fiscal 2015, compared with 4.8 percent last year. The 10 basis point decrease in Independent Business gross profit rate is primarily due to stronger private brands pricing support. Save-A-Lot gross profit as a percent of Save-A-Lot net sales was 14.7 percent for the first quarter of fiscal 2015, compared with 16.1 percent last year. The 140 basis point decrease in Save-A-Lot gross profit rate is primarily due to $14 of incremental investments to lower prices to customers and higher shrink and $4 of higher advertising costs. Retail Food gross profit as a percent of Retail Food net sales was 26.8 percent for the first quarter of fiscal 2015, compared with 27.2 percent last year. The 40 basis point decrease in Retail Food gross profit rate is primarily due to $8 of incremental investments to lower prices to customers and a $2 higher LIFO charge, offset in part by $5 of lower employee-related costs attributable to cost reduction initiatives. Selling and Administrative Expenses Selling and administrative expenses for the first quarter of fiscal 2015 were $617 compared with $711 last year, a net decrease of $94 or 13.2 percent. Selling and administrative expenses for the first quarter of fiscal 2015 include $1 of severance costs. Selling and administrative expenses for the first quarter of fiscal 2014 included net charges and costs of $58, comprised of severance costs and accelerated stock-based compensation charges of $39, asset impairment and other charges of $14 and contract breakage and other costs of $5. When adjusted for these items, the remaining $37 reduction in Selling and administrative expenses is primarily due to $32 of lower employee-related costs, including net periodic pension expense and wages, and $10 of lower depreciation and amortization, offset in part by $8 of higher Selling and administrative expenses due to higher sales volume. 19-------------------------------------------------------------------------------- Table of Contents Selling and administrative expenses for first quarter of fiscal 2015 were 11.8 percent of Net sales, compared with 13.6 percent of Net sales last year. Selling and administrative expenses as a percent of Net sales for the first quarter of fiscal 2014 included 110 basis points from the net charges and costs of $58 described above. After adjusting for the above items, the remaining 70 basis point net reduction in Selling and administrative expenses as a percent of Net sales is primarily due to lower employee-related costs, including net periodic pension expense, and reduced depreciation and amortization, offset in part by business segment mix. Operating Earnings Operating earnings for the first quarter of fiscal 2015 were $135, compared with $84 last year, an increase of $51 or 60.7 percent. Operating earnings for the first quarter of fiscal 2015 include $1 of severance costs. Operating earnings for the first quarter of fiscal 2014 included net charges and costs of $58, comprised of severance costs and accelerated stock-based compensation charges, asset impairment and other charges and contract breakage and other costs. When adjusted for these items, the remaining $6 decrease in Operating earnings is primarily due to $26 of incremental investments to lower prices to customers, higher shrink and stronger private brands pricing support and $6 of higher advertising costs and LIFO charges, offset in part by a net $13 increase from lower employee-related costs, including net periodic pension expense, net of the effect of lower TSA fees primarily due to the one-year transitional fees recognized last year, $11 of lower depreciation and amortization, and $2 of higher sales volume. Independent Business operating earnings for the first quarter of fiscal 2015 were $66, or 2.8 percent of Independent Business net sales, compared with $55, or 2.3 percent last year. Independent Business operating earnings for the first quarter of fiscal 2015 include $1 of severance costs. Independent Business operating earnings for the first quarter of fiscal 2014 included $14 of charges comprised of severance costs and accelerated stock-based compensation charges of $13, and contract breakage and other costs of $1. When adjusted for these items, the remaining $2 decrease in Independent Business operating earnings is primarily due to lower margin from stronger private brands pricing support and sales volume, offset in part by lower depreciation expense. Save-A-Lot operating earnings for the first quarter of fiscal 2015 were $46, or 3.4 percent of Save-A-Lot net sales, compared with $52, or 4.1 percent last year. Save-A-Lot operating earnings for the first quarter of fiscal 2014 included $5 of charges and costs comprised of $3 of non-cash asset impairment and other charges and $2 of severance costs. When adjusted for these items, the remaining $11 decrease in Save-A-Lot's operating earnings is primarily due to $14 of incremental investments to lower prices to customers and higher shrink, $4 of higher advertising costs and $3 of higher contracted services, offset in part by $10 of lower employee-related costs and higher sales volume. Retail Food operating earnings for the first quarter of fiscal 2015 were $30, or 2.1 percent of Retail Food net sales, compared with $7 or 0.4 percent last year. Retail Food operating earnings for the first quarter of fiscal 2014 included $18 of charges and costs comprised of non-cash asset impairment charges of $9, severance costs and accelerated stock-based compensation charges of $7 and contract breakage costs of $2. When adjusted for these items, the remaining $5 increase in Retail Food's operating earnings is primarily due to $9 of lower employee-related costs and $6 of lower depreciation expense, offset in part by $8 of incremental investments to lower prices to customers and a $2 higher LIFO charge. Corporate operating loss for the first quarter of fiscal 2015 was $7, compared with $30 last year. Corporate expenses for the first quarter of fiscal 2014 included costs and charges of $21 comprised of severance costs and accelerated stock-based compensation charges of $17, contract breakage and other costs of $2 and asset impairment and other charges of $2. When adjusted for these items, the remaining $2 net improvement in Corporate operating loss was primarily due to lower professional service costs of $3, offset in part by a net $2 decrease from the one-year transitional TSA fees net of lower employee-related costs. Interest Expense, Net Interest expense, net was $64 for the first quarter of fiscal 2015, compared with $249 last year. Interest expense, net for the first quarter of fiscal 2015 includes $2 of unamortized financing cost charges related to the Company's second amendment to the Secured Term Loan facility discussed under "Liquidity and Capital Resources" below. Interest expense, net for the first quarter of fiscal 2014 included $98 of unamortized financing cost charges and original issue discount acceleration and $71 of debt refinancing costs related to refinancing activities in conjunction with the sale of NAI and subsequent refinancing activities. When adjusted for these items, the remaining $18 decrease in Interest expense, net is primarily due to lower average interest rates and lower outstanding borrowings. Income Tax Provision (Benefit) Income tax expense on continuing operations for the first quarter of fiscal 2015 was $24, or 33.1 percent of earnings from continuing operations before income taxes, compared with an income tax benefit of $62, or 37.5 percent of loss from continuing operations before income taxes, last year. The tax rate for the first quarter of fiscal 2015 reflects $2 of discrete tax benefits. Net Earnings (Loss) from Continuing Operations Net earnings from continuing operations were $48 compared with a Net loss from continuing operations of $102 last year. Net earnings from continuing operations for the first quarter of fiscal 2015 includes $2 of after tax charges and costs related to unamortized financing cost charges and severance costs. Net loss from continuing operations for the first quarter of fiscal 2014 included $139 of after tax charges and costs primarily related to debt refinancing activity, severance costs and accelerated stock-based compensation charges, asset impairment charges, and contract breakage costs. When adjusted for these items, the remaining $13 after-tax 20 -------------------------------------------------------------------------------- Table of Contents increase is due to $14 of lower depreciation and amortization and other costs, $11 of lower interest expense, $8 of lower employee-related costs, including net periodic pension expense, net of the effect of lower TSA fees and $5 of tax benefits, offset in part by $16 of incremental investments to lower prices to customers, higher shrink and stronger private brands pricing support, and $8 of higher advertising costs, LIFO charges and other administrative expense. (Loss) Income from Discontinued Operations, Net of Tax On January 10, 2013, the Company entered into a stock purchase agreement to sell NAI, which included components of Retail Food and Corporate functions. The Company completed the sale of NAI on March 21, 2013. The financial results for those operations are presented as discontinued operations for all periods presented. Loss from discontinued operations, net of tax, was $3 for the first quarter of fiscal 2015, compared with income from discontinued operations, net of tax of $190 last year. Income before income taxes from discontinued operations for the first quarter of fiscal 2015 reflects $2 of interest income from the settlement of income tax audits. The income tax provision included as a component of Loss from discontinued operations, net of tax for the first quarter of fiscal 2015 included $4 of discrete tax expenses. Discontinued operations results for the first quarter of fiscal 2014 reflect the completion of the sale of NAI on March 21, 2013, discrete tax benefits of $118 and a reduction to the loss on sale of NAI of $90. Non-GAAP Financial Measures The Company's Condensed Consolidated Financial Statements are prepared and presented in accordance with generally accepted accounting principles ("GAAP"). In addition to the above analysis of results of operations, the Company also considers certain other non-GAAP financial measures to assess the performance of our businesses. The measures and items identified below, such as Adjusted EBITDA, are provided as a supplement to our results of operations and related analysis, and should not be considered superior to, a substitute for or an alternative to any financial measure of performance prepared and presented in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. Certain adjustments to our GAAP financial measures reflected below exclude certain items that are occasionally recurring in nature and may be reflected in our financial results for the foreseeable future. These measurements and items may be different from non-GAAP financial measures used by other companies. All measurements are provided with a reconciliation from a GAAP measurement. Management believes the measurements and items identified below are important measures of business performance that provide investors with useful supplemental information. The Company utilizes certain non-GAAP measures to analyze underlying core business trends to understand operating performance. In addition, management utilizes certain non-GAAP measures as a compensation performance measure. The non-GAAP financial measures below should only be considered as an additional supplement to the Company's financial results reported in accordance with GAAP and should be reviewed in conjunction with the Company's results reported in accordance with GAAP in this Quarterly Report on Form 10-Q and in the Company's Annual Report on Form 10-K for the fiscal year ended February 22, 2014. Adjusted EBITDA is a non-GAAP supplemental performance measure the Company uses to facilitate operating performance comparisons of our businesses on a consistent basis. Adjusted EBITDA provides additional understanding of other factors and trends affecting our business which are used in the business planning process to understand expected performance, to evaluate results against those expectations, and as one of the compensation performance measures under certain compensation programs and plans. The Company defines Adjusted EBITDA as Net earnings (loss) from continuing operations, plus Interest expense, net and Income tax provision (benefit), less Net earnings attributable to noncontrolling interests calculated in accordance with GAAP, plus non-GAAP adjustments for Depreciation and amortization, LIFO charge (credit), certain non-recurring or unusual employee-related costs and pension related items (including 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 of property), goodwill and intangible asset impairment charges, legal settlement charges and gains, contract breakage costs and certain other non-cash charges or unusual items. Concurrent with the revised presentation of earnings attributable to noncontrolling interests as described in Note 1 - Summary of Significant Accounting Policies within Part I, Item 1 of this Quarterly Report on Form 10-Q, the Company also revised its definition of Adjusted EBITDA to include net earnings attributable to noncontrolling interests such that the previously reported Adjusted EBITDA measures remained unchanged after corrections were made to certain condensed consolidated financial statement line items. These items are omitted either because they are non-cash items or are items that are not considered in our supplemental assessment of on-going business performance. Certain of these adjustments are considered in similar supplemental analyses by other companies, such as Depreciation and amortization, LIFO charge (credit) and certain other adjustments. Adjusted EBITDA is less disposed to variances in actual performance resulting from depreciation, amortization and other non-cash charges and credits, and more reflective of other factors that affect the Company's underlying operating performance. There are significant limitations to using Adjusted EBITDA as a financial measure including, but not limited to, it not reflecting cash expenditures for capital assets or contractual commitments, changes in working capital, income taxes and debt service expenses that are recurring in our results of operations. 21 -------------------------------------------------------------------------------- Table of Contents The following summarizes the calculation of Adjusted EBITDA for the first quarters of fiscal 2015 and 2014: First Quarter Ended June 14, 2014 June 15, 2013 (16 weeks) (16 weeks) Net earnings (loss) from continuing operations $ 48 $ (102 ) Less Net earnings attributable to noncontrolling interests (2 ) (3 ) Income tax provision (benefit) 24 (62 ) Interest expense, net 64 249 Depreciation and amortization 89 98 LIFO charge (credit) 2 - Unusual employee-related costs and pension related items 1 39 Asset impairment and other charges, net of gains - 14 Contract breakage costs and certain other charges - 5 Adjusted EBITDA $ 226 $ 238 Comparison of First Quarter Fiscal 2015 (16 weeks) Adjusted EBITDA to First Quarter Fiscal 2014 (16 weeks) Adjusted EBITDA Adjusted EBITDA for the first quarter of fiscal 2015 was $226 compared with $238 last year, a decrease of $12. The decrease in Adjusted EBITDA is primarily attributable to $26 of incremental investments to lower prices to customers, higher shrink and lower margin from stronger private brands pricing support, and $11 of higher other administrative expense and advertising costs, offset in part by a net $13 decrease in employee-related costs, including net periodic pension expense, net of the effect of lower TSA fees primarily due to the one-year transition fees recognized in the first quarter of fiscal 2014 and $8 of lower contracted services and occupancy, and $2 of higher sales volume. LIQUIDITY AND CAPITAL RESOURCES Overview Management expects that the Company will continue to replenish operating assets and pay down debt obligations with internally generated funds. The Company will continue to obtain short-term or long-term financing from its credit facilities. Long-term financing will be maintained through existing and new debt issuances and its credit facilities. The Company's short-term and long-term financing abilities are believed to be adequate as a supplement to internally generated cash flows to fund capital expenditures as opportunities arise. Maturities of debt issued will depend on management's views with respect to the relative attractiveness of interest rates at the time of issuance and other debt maturities. The Company's primary source of liquidity is from internally generated funds and from borrowing capacity under its credit facilities. There can be no assurance, however, that the Company's business will continue to generate cash flow at current levels or that it will continually have access to credit on acceptable terms. A significant reduction in operating earnings or the incurrence of operating losses could have a negative impact on the Company's operating cash flow, which may limit the Company's ability to pay down its outstanding indebtedness as planned. As of June 14, 2014 and February 22, 2014, the Company had access to funds totaling $818 and $786, respectively, from the unused available credit under the Revolving ABL Credit Facility (as defined below). Working capital was $310 and $254 excluding the LIFO reserve as of June 14, 2014 and February 22, 2014, respectively. The Company has approximately $14 and $15 in aggregate debt maturities due in the remainder of fiscal 2015 and fiscal 2016, respectively. Aggregate debt maturities for fiscal 2016 are exclusive of any Excess Cash Flow prepayment requirements under the provisions of the Secured Term Loan Facility (as defined below), as that prepayment amount, if any, is not reasonably estimable as of June 14, 2014. Payments to reduce capital lease obligations are expected to total approximately $27 in both fiscal 2015 and 2016. Strategic and operational investments in the Company's businesses and working capital needs are funded by cash provided from operations and on a short-term basis through available liquidity. Primary uses of cash include debt maturities and servicing, capital expenditures, working capital maintenance, contributions to various retirement plans and income tax payments. The Company's working capital needs are generally greater during the months leading up to high sales periods, such as the time period from prior to Thanksgiving through December. The Company typically finances these working capital needs with funds provided by operating activities and short-term borrowings. Inventories are managed primarily through demand forecasting and replenishing depleted inventories. The Company's continued access to short-term and long-term financing through credit markets depends on numerous factors including the condition of the credit markets and the Company's results of operations, cash flows, financial position and credit ratings. 22 -------------------------------------------------------------------------------- Table of Contents Cash Flow Information Operating Activities Net cash provided by (used in) operating activities from continuing operations was $57 and $(98) for the first quarters of fiscal 2015 and 2014, respectively. The increase in net cash provided by operating activities from continuing operations in the first quarter of fiscal 2015 compared to last year is primarily attributable to a decrease in cash utilized in operating assets and liabilities from income taxes and receivables, offset in part by an increase in cash used in inventories, and accounts payable and accrued liabilities. Net cash used in operating activities from discontinued operations was $(86) for the first quarter of 2014, reflecting the completion of the sale of NAI and cash payments made for accrued liabilities and accounts payable related to the sale of NAI during the first quarter of fiscal 2014. Investing Activities Net cash used in investing activities from continuing operations was $32 and $14 in the first quarters of fiscal 2015 and 2014, respectively. The increase in cash used in investing activities in the first quarter of fiscal 2015 compared to last year is primarily attributable to additional cash used for capital expenditures and business acquisitions attributable to investments in Save-A-Lot Company-operated stores and Retail Food store remodels. Net cash provided by investing activities from discontinued operations was $101 for the first quarter of fiscal 2014, reflecting proceeds received from the sale of NAI and NAI note receivable collections, offset in part by purchases of discontinued operations' property, plant and equipment. Financing Activities Net cash (used in) provided by financing activities from continuing operations was $(18) and $61 for the first quarters of fiscal 2015 and 2014, respectively. The increase in cash used in financing activities in the first quarter of fiscal 2015 compared to last year is primarily attributable to $170 of proceeds received from the sale of common stock to Symphony Investors LLC (an affiliate of an investor consortium led by Cerberus Capital Management, L.P.) in connection with the sale of NAI in the first quarter of fiscal 2014 and $49 of higher net debt and capital lease payments, offset in part by $142 of lower cash payments compared to last year's cash payments for debt financing costs associated with the sale of NAI, the amendment of Secured Term Loan Facility and the refinancing of $372 of the 2016 senior notes. Net cash used in the financing activities of discontinued operations was $37 for the first quarter of 2014, reflecting payments on capital lease and long-term debt obligations prior to the sale of NAI. Debt Management and Credit Agreements The Company's credit facilities and certain long-term debt agreements have restrictive covenants and cross-default provisions which generally provide, subject to the Company's right to cure, for the acceleration of payments due in the event of a breach of a covenant or a default in the payment of a specified amount of indebtedness due under certain other debt agreements. The Company was in compliance with all such covenants and provisions for all periods presented. Senior Secured Credit Agreements As of June 14, 2014 and February 22, 2014, the Company had outstanding borrowings of $1,474 under its six-year $1,500 term loan facility (the "Secured Term Loan Facility"), secured by substantially all of the Company's real estate, equipment and certain other assets, which bears interest at the rate of LIBOR plus 3.50 percent and includes a floor on LIBOR set at 1.00 percent. The Secured Term Loan Facility is guaranteed by the Company's material subsidiaries (together with the Company, the "Term Loan Parties"). To secure their obligations under the Secured Term Loan Facility, 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 entity of the Company's Save-A-Lot business, and the Term Loan Parties granted a perfected first priority security interest in substantially all of their intellectual property and a first priority mortgage lien and security interest in certain owned or ground-leased real estate and associated equipment pledged as collateral. As of June 14, 2014 and February 22, 2014, there was $684 and $704, respectively, of owned or ground-leased real estate and associated equipment pledged as collateral, which was included in Property, plant and equipment, net in the Condensed Consolidated Balance Sheets. In addition, the obligations of the Term Loan Parties under the Secured Term Loan Facility are secured by second-priority security interests in the collateral securing the Company's five-year $1,000 asset-based revolving ABL credit facility (the "Revolving ABL Credit Facility"). As of June 14, 2014 and February 22, 2014, $2 and $0, respectively, of the Secured Term Loan Facility was classified as current. The loans under the Secured Term Loan Facility may be voluntarily prepaid in certain minimum principal amounts, subject to the payment of breakage or similar costs and, in certain circumstances, a prepayment fee. Pursuant to the Secured Term Loan Facility, the Company must, subject to certain customary reinvestment rights, apply 100 percent of Net Cash Proceeds (as defined in the facility) from certain types of asset sales (excluding proceeds of the collateral security of the Revolving ABL Credit Facility and other secured indebtedness) to prepay the loans outstanding under the Secured Term Loan Facility. Beginning with the fiscal year ended 23 -------------------------------------------------------------------------------- Table of Contents February 22, 2014, the Company must prepay loans outstanding under the facility no later than 90 days after the fiscal year end in an aggregate principal amount equal to a percentage (which percentage ranges from 0 to 50 percent depending on the Company's Total Secured Leverage Ratio (as defined in the facility) as of the last day of such fiscal year) of Excess Cash Flow (as defined in the facility) for the fiscal year then ended minus any voluntary prepayments made during such fiscal year with Internally Generated Cash (as defined in the facility). The potential amount of prepayment from Excess Cash Flow that will be required for fiscal 2015 is not reasonably estimable as of June 14, 2014. On April 17, 2014, the Company entered into an amendment (the "ABL Amendment") to its Revolving ABL Credit Facility that reduced the interest rates to LIBOR plus 1.50 percent to LIBOR plus 2.00 percent or prime plus 0.50 percent to 1.00 percent, depending on utilization. The ABL Amendment also eliminated the springing maturity provision that would have accelerated the maturity of the facility to 90 days prior to May 1, 2016 if more than $250 of the Company's 8.00 percent Senior Notes due May 2016 remained outstanding as of that date. The springing maturity provision was replaced with a springing reserve provision that calls for a reserve to be placed against availability under the facility in the amount of any outstanding Material Indebtedness (as defined in the facility) that is due within 30 days of the date the reserve is established. The ABL Amendment also amended the facility to provide that the Company may incur additional term loans under the Secured Term Loan Facility in an aggregate principal amount of up to $500 instead of $250 as was in effect prior to the ABL Amendment, subject to identifying term loan lenders or other institutional lenders willing to provide the additional loans and satisfying certain terms and conditions. In addition, the ABL Amendment extended the maturity date of the facility to February 21, 2019 and contains modified covenants to give the Company additional strategic and operational flexibility. As of June 14, 2014 and February 22, 2014, there were no outstanding borrowings under the Revolving ABL Credit Facility. As of June 14, 2014, letters of credit outstanding under the Revolving ABL Credit Facility were $97 at fees of 1.875 percent, and the unused available credit under this facility was $818 with facility fees of 0.375 percent. As of February 22, 2014, letters of credit outstanding under the Company's previous revolving credit facility due March 2018 were $101 at fees of 2.125 percent, and the unused available credit under this facility was $786 with facility fees of 0.375 percent. As of June 14, 2014 and February 22, 2014, the Revolving ABL Credit Facility and the Company's previous revolving credit facility due March 2018 was secured on a first priority basis by $1,115 and $1,066, respectively, of certain inventory assets included in Inventories, net, all eligible receivables included in Receivables, net, all of the Company's pharmacy scripts included in Intangible assets, net and all credit card receivables of wholly-owned stores included in Cash and cash equivalents in the Condensed Consolidated Balance Sheets. The revolving loans under the Revolving ABL Credit Facility may be voluntarily prepaid in certain minimum principal amounts, in whole or in part, without premium or penalty, subject to breakage or similar costs. The Company and those subsidiaries named as borrowers under the Revolving ABL Credit Facility are required to repay the revolving loans in cash and provide cash collateral under this facility to the extent that the revolving loans and letters of credit exceed the lesser of the borrowing base then in effect or the aggregate amount of the lenders' commitments under the Revolving ABL Credit Facility. During the first quarter of fiscal 2015, the Company borrowed and repaid $870 under its Revolving ABL Credit Facility and its previous revolving credit facility due March 2018. During the first quarter of fiscal 2014, the Company borrowed $1,114 and repaid $1,217 under its previous revolving credit facilities. Certain of the Company's material subsidiaries are co-borrowers under the Revolving ABL Credit Facility, and this facility is guaranteed by the rest of the Company's material subsidiaries (the Company and those subsidiaries named as borrowers and guarantors under the Revolving ABL Credit Facility, the "ABL Loan Parties"). To secure their obligations under this facility, 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 the Revolving ABL Credit Facility are secured by second-priority liens on and security interests in the collateral securing the Secured Term Loan Facility, subject to certain limitations to ensure compliance with the Company's outstanding debt instruments and leases. Debentures The remaining $628 of 8.00 percent Senior Notes due 2016 and $400 of 6.75 percent Senior Notes due June 2021 contain operating covenants, including limitations on liens and on sale and leaseback transactions. The Company was in compliance with all such covenants and provisions for all periods presented. Capital Expenditures Capital expenditures for the first quarter of fiscal 2015 were $37, excluding cash paid for business acquisitions, and primarily consisted of investments in Save-A-Lot Company-operated stores and Retail Food store remodels. In addition, during the first quarter of fiscal 2015 the Company paid $5 for the purchase of 14 licensed Save-A-Lot stores. Capital expenditures and cash paid for business acquisitions for fiscal 2015 are projected to be approximately $270 to $280, including capital lease additions. Pension and Other Postretirement Benefit Obligations Cash contributions to defined benefit pension and other postretirement benefit plans were $45 and $72 in the first quarters of fiscal 2015 and 2014, respectively, in accordance with the Employee Retirement Income Security Act of 1974, as amended ("ERISA") minimum requirements. Cash contributions decreased in the first quarter of fiscal 2015 compared to last year due to $50 of contributions made in the first quarter of fiscal 2014 prior to the sale of NAI. Fiscal 2015 total defined benefit pension and other postretirement benefit plans contributions are estimated to be approximately $130 to $140. The Company's funding policy for the 24 -------------------------------------------------------------------------------- Table of Contents defined benefit pension plans is to contribute the minimum contribution amount required under ERISA and the Pension Protection Act of 2006 as determined by the Company's external actuarial consultant. At the Company's discretion, additional funds may be contributed to the pension plan. The Company may accelerate contributions or undertake contributions in excess of the minimum requirements from time to time subject to the availability of cash in excess of operating and financing needs or other factors as may be applicable. The Company assesses the relative attractiveness of the use of cash to accelerate contributions considering such factors as expected return on assets, discount rates, cost of debt, reducing or eliminating required Pension Benefit Guarantee Corporation ("PBGC") variable rate premiums or in order to achieve exemption from participant notices of underfunding. The Company and AB Acquisition LLC ("AB Acquisition") entered into a binding term sheet with the PBGC relating to issues regarding the effect of the sale of NAI on certain SUPERVALU retirement plans. The agreement requires that the Company will not pay any dividends to its stockholders at any time for the period beginning on January 9, 2013 and ending on the earliest of (i) March 21, 2018, (ii) the date on which the total of all contributions made to the SUPERVALU Retirement Plan on or after the closing date of the sale of NAI is at least $450 and (iii) the date on which SUPERVALU's unsecured credit rating is BB+ from Standard & Poor's or Ba1 from Moody's (such earliest date, the end of the "PBGC Protection Period"). SUPERVALU has also agreed to make certain contributions to the SUPERVALU Retirement Plan in excess of the minimum required contributions at or before the end of fiscal years 2015 - 2017 (where such fiscal years end during the PBGC Protection Period), and AB Acquisition has agreed to provide a guarantee to the PBGC for such excess payments. Excess contributions required under this binding term sheet include $25 by the end of fiscal 2015, an additional $25 by the end of fiscal 2016 and an additional $50 by the end of fiscal 2017. The Company is in negotiations with the PBGC and AB Acquisition with respect to a settlement agreement based on the binding term sheet. COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS Guarantees The Company has outstanding guarantees related to certain leases, fixture financing loans and other debt obligations of various retailers as of June 14, 2014. These guarantees were generally made to support the business growth of independent retail customers. The guarantees are generally for the entire terms of the leases or other debt obligations with remaining terms that range from less than one year to 16 years, with a weighted average remaining term of approximately eight years. For each guarantee issued, if the independent retail customer defaults on a payment, the Company would be required to make payments under its 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 customer obligations based on internal measures of credit performance. As of June 14, 2014, the maximum amount of undiscounted payments the Company would be required to make in the event of default of all guarantees was $69 ($53 on a discounted basis). Based on the indemnification agreements, personal guarantees and results of the reviews of performance risk, the Company believes the likelihood that it will be required to assume a material amount of these obligations is remote. Accordingly, no amount has been recorded in the Condensed Consolidated Balance Sheets for these contingent obligations under the Company's guarantee arrangements. The Company is contingently liable for leases that have been assigned to various third parties in connection with facility closings and dispositions. The Company could be required to satisfy the obligations under the leases if any of the assignees are unable to fulfill their lease obligations. Due to the wide distribution of the Company's assignments among third parties, and various other remedies available, the Company believes the likelihood that it will be required to assume a material amount of these obligations is remote. The Company is a party to a variety of contractual agreements under which it may be obligated to indemnify the other party for certain matters in the ordinary course of business, which indemnities may be secured by operation of law or otherwise. These agreements primarily 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 in the performance of their work. While the Company's aggregate indemnification obligation could result in a material liability, the Company is not aware of any matters that are expected to result in a material liability. Following the sale of NAI, the Company remains contingently liable with respect to certain self-insurance commitments and other guarantees as a result of parental guarantees issued by SUPERVALU INC. with respect to the obligations of NAI that were incurred while NAI was a subsidiary of the Company. As of February 22, 2014, the total undiscounted amount of all such guarantees was $331 ($297 on a discounted basis). Based on the expected settlement of the self-insurance claims that underlie the Company's commitments while the Company owned NAI, the Company believes that such contingent liabilities will continue to decline. Subsequent to the sale of NAI, NAI collateralized these obligations with letters of credit to numerous states and certain NAI retail banner real estate assets. Because NAI remains a primary obligor on these self-insurance and other obligations and has collateralized the self-insurance obligations for which the Company remains contingently liable, the Company believes that the likelihood that it will be required to assume a material amount of these obligations is remote. Accordingly, no amount has been recorded in the Condensed Consolidated Balance Sheets for these guarantees. Other Contractual Commitments In the ordinary course of business, the Company enters into supply contracts to purchase products for resale and purchase and service contracts for fixed asset and information technology commitments. These contracts typically include either volume commitments or fixed expiration dates, termination provisions and other standard contractual considerations. As of June 14, 2014, the Company had approximately $312 of non-cancelable future purchase obligations. 25-------------------------------------------------------------------------------- Table of Contents Legal Proceedings The Company is a party to various legal proceedings arising from the normal course of business as described in Part II - Other Information, Item 1, under the caption "Legal Proceedings" and in Note 13 - Commitments, Contingencies and Off-Balance Sheet Arrangements of this Quarterly Report on Form 10-Q, none of which, in management's opinion, is expected to have a material adverse impact on the Company's financial condition, results of operations or cash flows. Contractual Obligations There have been no material changes in the Company's contractual obligations since the end of fiscal 2014. Refer to Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended February 22, 2014 for additional information regarding the Company's contractual obligations. CRITICAL ACCOUNTING POLICIES There were no material changes in the Company's critical accounting policies during the period covered by this Quarterly Report on Form 10-Q. Refer to the description of critical accounting policies included in Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended February 22, 2014. CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE SECURITIES LITIGATION REFORM ACT Any statements contained in this Quarterly Report on Form 10-Q regarding the outlook for the Company's businesses and their respective markets, such as projections of future performance, guidance, statements of the Company's plans and objectives, forecasts of market trends and other matters, are forward-looking statements based on the Company's assumptions and beliefs. Such statements may be identified by such words or phrases as "will likely result," "are expected to," "will continue," "outlook," "will benefit," "is anticipated," "estimate," "project," "management believes" or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those discussed in such statements and no assurance can be given that the results in any forward-looking statement will be achieved. For these statements, SUPERVALU INC. claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Any forward-looking statement speaks only as of the date on which it is made, and we disclaim any obligation to subsequently revise any forward-looking statement to reflect events or circumstances after such date or to reflect the occurrence of anticipated or unanticipated events. Certain factors could cause the Company's future results to differ materially from those expressed or implied in any forward-looking statements contained in this report. These factors include the factors discussed in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended February 22, 2014 under the heading "Risk Factors," the factors discussed below and any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statements. Since it is not possible to foresee all such factors, these factors should not be considered as complete or exhaustive. Competition • The Company's ability to attract and retain customers, and the success of the Company's independent retailers • Increased competition resulting from consolidation in the grocery industry, and the Company's ability to effectively respond • Competition from other food or drug retail chains, supercenters, hard discount, non-traditional competitors and alternative formats in the Company's markets • Customer reaction to the increased presence of competitors, including non-traditional competitors, in the Company's markets • Competition for employees, store sites and products • The ability of the Company's Independent Business to maintain or increase sales due to wholesaler competition, increased competition faced by customers and increased customer self-distribution • Changes in economic conditions or consumer preferences that affect consumer spending or buying habits • The success of the Company's promotional and sales programs and the Company's ability to respond to the promotional and pricing practices of competitors Execution of Initiatives • The Company's ability to identify and effectively execute on performance improvement and customer service initiatives • The Company's ability to offer competitive products and services at low prices and maintain high levels of productivity and efficiency • The ability to grow by attracting new customers and successfully opening new locations 26 -------------------------------------------------------------------------------- Table of Contents • The ability to successfully execute on initiatives involving acquisitions or dispositions • The Company's ability to respond appropriately to competitors' initiatives Substantial Indebtedness • The impact of the Company's substantial indebtedness, including the restrictive operating covenants in the underlying credit facilities, on its business and financial flexibility • The Company's ability to comply with debt covenants or to refinance the Company's debt obligations • A downgrade in the Company's debt ratings, which may increase the cost of borrowing or adversely affect the Company's ability to access one or more financial markets • The availability of favorable credit and trade terms Economic Conditions • Sustained or worsening economic conditions, and the low level of consumer confidence and high unemployment rates that affect consumer spending or buying habits • Increases in unemployment, insurance and healthcare costs, energy costs and commodity prices, which could impact consumer spending or buying habits and the cost of doing business • Increases in interest rates, labor costs and tax rates, and other changes in applicable law • Food and drug inflation or deflation Labor Relations • The Company's ability to renegotiate labor agreements with its unions • Resolution of issues associated with rising pension, healthcare and employee benefit costs • Potential for work disruption from labor disputes Increased Employee Benefit Costs • Increased operating costs resulting from rising employee benefit costs • Potential increases in health plan costs resulting from health care reform • Pension funding obligations related to current and former employees of the Company and the Company's divested operations • Required funding of multiemployer pension plans and any withdrawal liability • The effect of the financial condition of the Company's pension plans on the Company's debt ratings Relationships with Albertson's LLC and New Albertson's, Inc. • Disruptions in current plans, operations and business relationships • Ability to effectively manage the Company's cost structure to realize benefits from the Transition Services Agreement with each of Albertson's LLC and NAI • Non-renewal or reduction in the scope, level of services, or revenues provided under the Transition Services Agreements, including as a result of the announced acquisition of Safeway Inc. by AB Acquisition LLC, the parent company to each of Albertson's LLC and NAI • Ability to eliminate costs and overhead, including costs not directly tied to providing services under the Transition Services Agreements, in the event of any non-renewal or reduction in the scope, level of services or revenues provided under the Transition Services Agreements • Ability to continue to perform services at the applicable service level under the Transition Services Agreements • Ability to attract and retain qualified personnel to perform services under the Transition Services Agreements Disruption of Information Technology Systems • Dependence of the Company's businesses on computer hardware and software systems that are vulnerable to security breach by computer hackers and cyber terrorists • Risk of misappropriation of sensitive data, including customer and employee data, as a result of a cyber-attack or breach and potential related claims • Costs of complying with stricter privacy and information security law • Ability of the information technology systems of the Company or its vendors to prevent, contain or detect cyber-attacks or security breaches • Costs of responding to inquiries, claims or enforcement actions in connection with an attack or breach resulting in the loss, damage or misappropriation of information, and potential related damage to the Company's reputation • Difficulties in developing, maintaining or upgrading information technology systems • Business disruptions or losses resulting from failure of these systems to perform as anticipated for any reason or data theft, information espionage, or other criminal activity directed at the Company's computer or communications systems • Inability to keep pace with changing customer expectations and new developments and technology investments by the Company's competitors Governmental Regulation • Costs of compliance with existing laws and regulations and changes in applicable laws and regulations that impose additional requirements or restrictions on the operation of the Company's businesses 27 -------------------------------------------------------------------------------- Table of Contents • The ability to timely obtain permits, comply with government regulations or make capital expenditures required to maintain compliance with government regulations, including those governing ethical, anti-bribery and similar business practices • Potential costs of compliance with additional foreign laws and regulations if the Company seeks and attains a larger international footprint Food and Drug Safety • Events that give rise to actual or potential food contamination, drug contamination or foodborne illness or injury or any adverse publicity relating to these types of concerns, whether or not valid • Potential recall costs and product liability claims Legal Proceedings • Unfavorable outcomes and the costs to defend litigation, governmental or administrative proceedings or other disputes • Adverse publicity related to such unfavorable outcomes Severe Weather, Natural Disasters and Adverse Climate Changes • Property damage or business disruption resulting from severe weather conditions and natural disasters that affect the Company and the Company's customers or suppliers • 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 • The Company's ability to effectively maintain its supply chain and distribution network without interruption • Disruptions due to weather, product recalls, crop conditions, regulatory actions, supplier instability, transportation interruptions, labor supply or vendor disputes Changes in Military Business • Competition in the Company's military business • Changes in the commissary system, reductions in government expenditures or funding, or changes in military staffing levels or the locations of bases Adequacy of Insurance • Variability in actuarial projections regarding workers' compensation and associated medical costs, automobile and general liability • Potential increase in the number or severity of claims for which the Company is self-insured Volatility in Fuel and Energy Costs • Availability and cost of energy and fuel to store and transport products • Volatility of fuel, energy and natural gas prices • Risks associated with possession of compressed natural gas equipment and a fueling station Asset Impairment Charges • Unfavorable changes in the Company's industry, the broader economy, market conditions, business operations, competition or the Company's stock price and market capitalization that could require impairment to intangible assets, including goodwill, and tangible assets, including property, plant and equipment Stock Price Volatility • Fluctuations in the Company's stock price related to actual or perceived operating performance, any of the factors listed above or stock market fluctuations |