Supervalu trims debt by $850 million; further reductions planned

By Jennifer Lanning Drey

Portland, Ore., April 20 - Supervalu Inc. reduced debt by $850 million in fiscal 2010, which included $545 million of debt reduction during the fiscal fourth quarter ended Feb. 27, chief financial officer Pam Knous said Tuesday during the company's fiscal year-end earnings conference call.

Supervalu is targeting another $600 million of debt reduction in fiscal 2011, she said.

"In the coming year, despite slightly lower earnings, we will again generate free cash flow to further reduce debt through prudent capital investment decisions and aggressive management of working capital," Knous said.

Supervalu reported net cash flows from operating activities of $1.5 billion in fiscal 2010, which was flat with the prior year.

During the fiscal fourth quarter, Supervalu launched the replacement of its credit facility, which was successfully completed in April. As previously reported, the agreement includes a $1.5 billion revolving credit facility with a five-year term, extends the term on $500 million of its term loan B and resets covenant levels.

"This milestone should remove any questions about our financial flexibility," Craig Herkert, Supervalu's chief executive officer, said during the call.

Supervalu was in compliance with all of its debt covenants at fiscal year-end.

The company reported fiscal fourth-quarter net sales of $9.2 billion, compared with net sales of $10.8 billion in the same period of fiscal 2009. Adjusted for the 53rd week of the year included in the prior-year period, net sales were $10.0 billion in the fourth quarter of fiscal 2009.

Supervalu is an Eden Prairie, Minn., grocery business engaged in retail food and supply chain services, including wholesale distribution and related logistics support services.

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