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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period (16 weeks) ended June 14, 2014.

OR

For the transition period from                      to                     .

Commission File Number: 1-5418

SUPERVALU INC.

(Exact name of registrant as specified in its charter)

(952) 828-4000

(Registrant’s telephone number, including area code)

N/A

(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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of July 18, 2014, there were 260,775,933 shares of the issuer’s common stock outstanding.

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SUPERVALU INC. and Subsidiaries

Quarterly Report on Form 10-Q

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SUPERVALU INC. and Subsidiaries

CONDENSED CONSOLIDATED SEGMENT FINANCIAL INFORMATION

(Unaudited)

(In millions, except percent data)

See Notes to Condensed Consolidated Financial Statements.

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SUPERVALU INC. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In millions, except percent and per share data)

See Notes to Condensed Consolidated Financial Statements.

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SUPERVALU INC. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In millions)

See Notes to Condensed Consolidated Financial Statements.

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SUPERVALU INC. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)

See Notes to Condensed Consolidated Financial Statements.

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SUPERVALU INC. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)

See Notes to Condensed Consolidated Financial Statements.

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SUPERVALU INC. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars and shares in millions, except per share data)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Registrant

The accompanying condensed consolidated financial statements of SUPERVALU INC. (“SUPERVALU” or the “Company”) for the first quarters ended June 14, 2014 and June 15, 2013 are unaudited and, in the opinion of management, contain all adjustments that are of a normal and recurring nature necessary to present fairly the financial condition and results of operations for such periods. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes in the Company’s Annual Report on Form 10-K for the fiscal year ended February 22, 2014. The results of operations for the first quarter ended June 14, 2014 are not necessarily indicative of the results expected for the full year. The Condensed Consolidated Balance Sheet as of February 22, 2014 has been derived from the audited Consolidated Balance Sheet as of that date.

Accounting Policies

The summary of significant accounting policies is included in the Notes to Consolidated Financial Statements set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended February 22, 2014.

Fiscal Year

The Company’s fiscal year ends on the last Saturday in February. During fiscal 2015, the Company’s first quarter consists of 16 weeks, the second and third quarters both consist of 12 weeks, the fourth quarter consists of 13 weeks and the fiscal year ended February 28, 2015 consists of 53 weeks.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. The Company’s banking arrangements allow the Company to fund outstanding checks when presented to the financial institution for payment. The Company funds all intraday bank balance overdrafts during the same business day. Checks outstanding in excess of bank balances create book overdrafts, which are recorded in Accounts payable in the Condensed Consolidated Balance Sheets and are reflected as an operating activity in the Condensed Consolidated Statements of Cash Flows. As of June 14, 2014 and February 22, 2014, the Company had net book overdrafts of $118 and $134, respectively.

Inventories, Net

Inventories are valued at the lower of cost or market. Substantially all of the Company’s inventory consists of finished goods and a substantial portion of the Company’s inventories have a last-in, first-out (“LIFO”) reserve applied. Interim LIFO calculations are based on the Company’s estimates of expected year-end inventory levels and costs, as the actual valuation of inventory under the LIFO method is computed at the end of each year based on the inventory levels and costs at that time. If the first-in, first-out method had been used, Inventories, net would have been higher by approximately $204 at June 14, 2014 and $202 at February 22, 2014. The Company recorded a LIFO charge of $2 and $0 for the first quarters ended June 14, 2014 and June 15, 2013, respectively.

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Revisions

In the first quarter of fiscal 2015, the Company revised the presentation of noncontrolling interests as reflected in the Condensed Consolidated Financial Statements. Net earnings attributable to noncontrolling interests were previously presented within Selling and administrative expenses in the Condensed Consolidated Statements of Operations and have been revised to be presented separately as Net earnings attributable to noncontrolling interests. Noncontrolling interests were previously presented in Other long-term liabilities in the Condensed Consolidated Balance Sheets and have been revised as a component of Stockholders’ deficit. Distributions to noncontrolling interests were previously presented as a reduction of cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows and have been revised to be presented within distributions to noncontrolling interests within financing activities. In addition, the Company revised the presentation of equity in earnings of unconsolidated affiliates. Equity in earnings of unconsolidated affiliates was previously presented in Net sales and has been revised to be presented separately as Equity in earnings of unconsolidated affiliates. The revisions did not impact Net earnings attributable to SUPERVALU INC. or net earnings per share for any period. Management has determined that the presentation changes are not material to any period reported. Prior period amounts have been revised to conform to the current period presentation.

Recently Adopted Accounting Standards

In July 2013, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance under accounting standard update (“ASU”) 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, A Similar Tax Loss, or a Tax Credit Carryforward Exists. This ASU requires entities to present an unrecognized tax benefit as a reduction of a deferred tax asset for a NOL or tax credit carryforward whenever the NOL or tax credit carryforward would be available to reduce the additional taxable income or tax due if the tax position is disallowed. This accounting standard update requires entities to assess whether to net the unrecognized tax benefit with a deferred tax asset as of the reporting date. The Company adopted ASU 2013-11 in the first quarter of fiscal 2015, which resulted in a reclassification of less than $1 of unrecognized tax benefits and other credits against deferred tax assets.

In April 2014, the FASB issued authoritative guidance under ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Under this ASU, disposals must represent a strategic shift that should have a major effect on operations and financial results and allows for continuing involvement in order to meet certain classification and disclosure requirements. Certain disclosures for disposals of individually significant components of an entity that do not qualify for discontinued operations presentation are also required. This ASU is effective prospectively for disposals that have not been reported in previously issued financial statements. The Company adopted ASU 2014-08 in the first quarter of fiscal 2015 and the adoption did not have an impact on the Company’s Condensed Consolidated Financial Statements.

Recently Issued Accounting Standards

In May 2014, the FASB issued authoritative guidance under ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 supersedes existing revenue recognition requirements and provides a new comprehensive revenue recognition model requiring entities to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. This ASU will be adopted by the Company during the first quarter of fiscal 2018. Adoption is allowed by either the full retrospective or modified retrospective approach. The Company is currently evaluating which approach it will apply and the potential adoption impact on its Consolidated Financial Statements.

NOTE 2 – BUSINESS ACQUISITIONS

Rainbow Stores

On May 6, 2014, the Company entered into asset purchase agreements with RBF, LLC (the “Seller”) and Roundy’s Supermarkets, Inc. (“Roundy’s”). In addition, on May 6, 2014, several independent retailer customers and franchisees, including Diamond Lake 1994 L.L.C. in which the Company has a minority ownership interest, also executed asset purchase agreements with the Seller and Roundy’s.

Subsequent to the end of the first quarter of fiscal 2015, the Company closed on the purchase of certain assets and assumed certain liabilities related to seven Rainbow Foods grocery stores, 11 Rainbow Foods pharmacy locations, one Rainbow Foods liquor store, and three Rainbow Foods grocery stores in which the Company has a minority interest. The Company intends to operate five of the grocery stores, all pharmacies and the liquor store under the Cub Foods banner and two of the grocery stores are operating as Rainbow Foods grocery stores. The Company acquired Roundy’s RAINBOW™ trademarks. Total consideration for stores acquired by the Company was approximately $33 plus cash payments of approximately $5 for inventories. In addition, the Company assumed certain off-balance sheet obligations, including operating leases and multi-employer pension obligations with respect to the acquired stores. Preliminary purchase accounting allocations have not been completed.

The three grocery stores acquired by Diamond Lake 1994 L.L.C are operating under the Cub Foods banner.

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Save-A-Lot Licensee Stores

During the first quarter ended June 14, 2014, the Company paid $5 to acquire equipment, leasehold improvements, inventory and intangible assets associated with 14 licensed Save-A-Lot stores. These Condensed Consolidated Financial Statements reflect the preliminary purchase accounting allocation, which will be completed in the second quarter of fiscal 2015.

NOTE 3 – GOODWILL AND INTANGIBLE ASSETS

Changes in the Company’s Goodwill and Intangible assets consisted of the following:

Amortization of intangible assets with definite useful lives was $3 and $2 for the first quarters ended June 14, 2014 and June 15, 2013, respectively. Future amortization expense is anticipated to average approximately $5 per fiscal year for each of the next five fiscal years.

NOTE 4 – RESERVES FOR CLOSED PROPERTIES AND PROPERTY, PLANT AND EQUIPMENT-RELATED IMPAIRMENT CHARGES

Reserves for Closed Properties

The Company maintains reserves for costs associated with closures of retail stores, distribution centers and other properties that are no longer being utilized in current operations. The Company provides for closed property operating lease liabilities using a discount rate to calculate the present value of the remaining noncancellable lease payments after the closing date, reduced by estimated subtenant rentals that could be reasonably obtained for the property. Adjustments to closed property reserves primarily relate to changes in subtenant income or actual exit costs differing from original estimates.

Changes in the Company’s reserves for closed properties consisted of the following:

Property, Plant and Equipment and Lease Reserve Impairment Charges

Property, plant and equipment and lease reserve impairment charges are recorded as a component of Selling and administrative expenses in the Condensed Consolidated Statements of Operations. The calculation of the closed property charges requires significant judgments and estimates including estimated subtenant rentals, discount rates, and future cash flows based on the Company’s experience and knowledge of the market in which the closed property is located, previous efforts to dispose of similar assets and the assessment of existing market conditions.

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In the first quarter of fiscal 2015, the Company did not incur any property, plant and equipment-related impairment charges. In the first quarter of fiscal 2014, property, plant and equipment-related assets with a carrying amount of $21 were written down to their fair value of $5, resulting in impairment charges of $16. First quarter fiscal 2014 impairment charges primarily related to the write-off of certain software support tools that would no longer be utilized in operations and surplus property impairments.

NOTE 5 – FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair value measurements, as follows:

Impairment charges related to lease reserves and property, plant and equipment recorded during the first quarter of fiscal 2014 discussed in Note 4 – Reserves for Closed Properties and Property, Plant and Equipment-Related Impairment Charges were measured at fair value using Level 3 inputs. Property, plant and equipment impairment charges and finalization adjustments recorded in the first quarter of fiscal 2014, related to New Albertson’s, Inc. (“NAI”), were measured at fair value using Level 3 inputs and recorded in (Loss) income from discontinued operations, net of tax, and are discussed in Note 15 – Discontinued Operations.

Financial Instruments

For certain of the Company’s financial instruments, including cash and cash equivalents, receivables, accounts payable, accrued salaries and other current assets and liabilities, the fair values approximate book values due to their short maturities.

The estimated fair value of notes receivable was greater than their book value by approximately $2 as of June 14, 2014 and February 22, 2014. Notes receivable are valued based on a discounted cash flow approach applying a market rate for similar instruments using Level 3 inputs.

The estimated fair value of the Company’s long-term debt (including current maturities) was greater than the book value by approximately $83 as of June 14, 2014 and February 22, 2014. The estimated fair value was based on market quotes, where available, or market values for similar instruments, using Level 2 and 3 inputs.

NOTE 6 – LONG-TERM DEBT

The Company’s long-term debt consisted of the following:

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.

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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 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

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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.

NOTE 7 – INCOME TAXES

The tax rate for the first quarter of fiscal 2015 included $2 in discrete tax benefits. The tax rate for the first quarter of fiscal 2014 included $2 of discrete tax benefits and $2 of discrete tax expense.

During the first quarter ended June 14, 2014, unrecognized tax benefits increased $2 from the amounts disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended February 22, 2014. The Company does not anticipate that its total unrecognized tax benefits will change significantly in the next 12 months.

As of June 14, 2014, the Company is no longer subject to federal income tax examinations for fiscal years prior to 2011 and in most states is no longer subject to state income tax examinations for fiscal years before 2006.

NOTE 8 – STOCK-BASED AWARDS

The Company recognized pre-tax stock-based compensation expense (included primarily in Selling and administrative expenses in the Condensed Consolidated Statements of Operations) related to stock options, restricted stock units, restricted stock awards and performance awards (collectively referred to as “stock-based awards”) of $7 and $12 for the first quarters of fiscal 2015 and 2014, respectively. In the first quarter of fiscal 2014, the Company recognized $9 of accelerated stock-based compensation charges in Selling and administrative expenses as a result of a deemed change-in-control, comprised of $5 from long-term incentive programs, $3 from restricted stock awards and $1 from stock options.

Stock Options

In May 2014 and May 2013, the Company granted 5 and 9 of non-qualified stock options to certain employees under the Company’s 2012 Stock Plan with weighted average grant date fair values of $3.28 per share and $2.78 per share, respectively. The stock options vest over a period of three years, and were awarded as part of a broad-based employee incentive program designed to retain and motivate employees across the Company.

The Company used the Black-Scholes option pricing model to estimate the fair value of the options at grant date based upon the following assumptions.

Restricted Stock Units

In the first quarter of fiscal 2015, the Company granted 2 restricted stock units (“RSUs”) to certain employees under the 2012 Stock Plan. The RSUs vest over a three year period from the date of grant and were granted at a fair value of $7.50 per unit.

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NOTE 9 – BENEFIT PLANS

Net periodic benefit expense and contributions for defined benefit pension and other postretirement benefit plans consisted of the following:

During each of the first quarters ended June 14, 2014 and June 15, 2013, the Company contributed $13 and $12, respectively, to various multi-employer pension plans, primarily defined benefit pension plans, under collective bargaining agreements.

NOTE 10 – NET EARNINGS (LOSS) PER SHARE

Basic net earnings (loss) per share is calculated using net earnings (loss) attributable to SUPERVALU INC. stockholders divided by the weighted average number of shares outstanding during the period. Diluted net earnings (loss) per share is similar to basic net earnings (loss) per share except that the weighted average number of shares outstanding is computed after giving effect to the dilutive impacts of stock-based awards.

The following table reflects the calculation of basic and diluted net earnings (loss) per share:

Stock-based awards of 17 and 20 were outstanding during the first quarter ended June 14, 2014 and June 15, 2013, respectively, but were excluded from the calculation of diluted net earnings (loss) per share from continuing operations for the periods because their inclusion would be antidilutive.

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NOTE 11 – NONCONTROLLING INTERESTS

Noncontrolling interests primarily include minority ownership interests in certain entities operating Retail Food stores under the Cub Foods banner. Pursuant to the terms of the ownership agreements, the Company is required to distribute cash flows generated by these entities on a proportionate basis based on ownership interest. A reconciliation of the beginning and ending carrying amount of the equity attributable to noncontrolling interests is as follows:

NOTE 12 – COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE LOSS

The Company reports comprehensive income in the Condensed Consolidated Statements of Comprehensive Income. Comprehensive income includes all changes in stockholders’ deficit during the applicable reporting period, other than those resulting from investments by and distributions to stockholders. The Company’s comprehensive income is calculated as net earnings (loss) including noncontrolling interests plus or minus adjustments for pension and other postretirement benefit obligations, net of tax, less comprehensive income attributable to noncontrolling interests.

Accumulated other comprehensive loss represents the cumulative balance of other comprehensive income, net of tax, as of the end of the reporting period and relates to pension and other postretirement benefit obligation adjustments, net of tax. Changes in Accumulated other comprehensive loss by component is as follows:

Upon completion of the sale of NAI in the first quarter of fiscal 2014, the Company disposed approximately $48 of Accumulated other comprehensive loss, which was a component of Stockholders’ deficit in the Consolidated Balance Sheets as of February 23, 2013, due to NAI’s assumption of a defined benefit pension plan established and operated under NAI.

Amortization of amounts included in net periodic benefit cost before tax were reclassified out of Accumulated other comprehensive loss into Selling and administrative expenses and Cost of sales of $12 and $4, respectively, for the first quarter of fiscal 2015 and $26 and $3 for the first quarter of fiscal 2014, respectively, in the Condensed Consolidated Statements of Operations. See Note 9 – Benefit Plans for information regarding the recognition of pension and other postretirement benefit obligation activity.

NOTE 13 – 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.

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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.

The Company and AB Acquisition LLC (“AB Acquisition”) entered into a binding term sheet with the Pension Benefit Guaranty Corporation (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.

Legal Proceedings

The Company is subject to various lawsuits, claims and other legal matters that arise in the ordinary course of conducting business. In the opinion of management, based upon currently-available facts, it is remote that the ultimate outcome of any lawsuits, claims and other proceedings will have a material adverse effect on the overall results of the Company’s operations, its cash flows or its financial position.

In September 2008, a class action complaint was filed against the Company, as well as International Outsourcing Services, LLC (“IOS”); Inmar, Inc.; Carolina Manufacturer’s Services, Inc.; Carolina Coupon Clearing, Inc. and Carolina Services in the United States District Court in the Eastern District of Wisconsin. The plaintiffs in the case are a consumer goods manufacturer, a grocery co-operative and a retailer marketing services company who allege on behalf of a purported class that the Company and the other defendants (i) conspired to restrict the markets for coupon processing services under the Sherman Act and (ii) were part of an illegal enterprise to defraud the plaintiffs under the Federal Racketeer Influenced and Corrupt Organizations Act. The plaintiffs seek monetary damages, attorneys’ fees and injunctive relief. The Company intends to vigorously defend this lawsuit, however all proceedings have been stayed in the case pending the result of the criminal prosecution of certain former officers of IOS.

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In December 2008, a class action complaint was filed in the United States District Court for the Western District of Wisconsin against the Company alleging that a 2003 transaction between the Company and C&S Wholesale Grocers, Inc. (“C&S”) was a conspiracy to restrain trade and allocate markets. In the 2003 transaction, the Company purchased certain assets of the Fleming Corporation as part of Fleming Corporation’s bankruptcy proceedings and sold certain assets of the Company to C&S which were located in New England. Since December 2008, three other retailers have filed similar complaints in other jurisdictions. The cases have been consolidated and are proceeding in the United States District Court for the District of Minnesota. The complaints allege that the conspiracy was concealed and continued through the use of non-compete and non-solicitation agreements and the closing down of the distribution facilities that the Company and C&S purchased from each other. Plaintiffs are seeking monetary damages, injunctive relief and attorneys’ fees. On July 5, 2011, the District Court granted the Company’s Motion to Compel Arbitration for those plaintiffs with arbitration agreements and plaintiffs appealed. On July 16, 2012, the District Court denied plaintiffs’ Motion for Class Certification and on January 11, 2013, the District Court granted the Company’s Motion for Summary Judgment and dismissed the case regarding the non-arbitration plaintiffs. Plaintiffs have appealed these decisions. On February 12, 2013, the 8th Circuit reversed the District Court decision requiring plaintiffs with arbitration agreements to arbitrate and the Company filed a Petition with the 8th Circuit for an En Banc Rehearing. On June 7, 2013, the 8th Circuit denied the Petition for Rehearing and remanded the case to the District Court. On October 30, 2013, the parties attended a District Court ordered mandatory mediation which was not successful in resolving the matter. On May 21, 2014, a panel of the 8th Circuit (1) reversed the District Court’s decision granting summary judgment in favor of the Company, and (2) affirmed the District Court’s decision denying class certification of a class consisting of all retailers located in the States of Illinois, Indiana, Iowa, Michigan, Minnesota, Ohio and Wisconsin that purchased wholesale grocery products from the Company between December 31, 2004 and September 13, 2008, but remanded the case for the District Court to consider whether to certify a narrower class of purchasers supplied from the Company’s Champaign, Illinois distribution center. On June 18, 2014, the Company filed a petition for en banc review by the 8th Circuit on the reversal of the summary judgment decision and specific issues raised thereunder.

In May 2012, Kiefer, a former Assistant Store Manager at Save-A-Lot, filed a class action against Save-A-Lot seeking to represent current and former Assistant Store Managers alleging violations of the Fair Labor Standards Act related to the fluctuating work week method of pay (“FWW”) in the United States District Court in the District of Connecticut. FWW is a method of compensation whereby employees are paid a fixed salary for all hours worked during a week plus additional compensation at one-half the regular rate for overtime hours. Kiefer claimed that the FWW practice is unlawful or, if lawful, that Save-A-Lot improperly applied the FWW method of pay, including in situations involving paid time off, holiday pay, and bonus payments. In March 2013, the United States District Court granted conditional certification in favor of Kiefer on the issue of whether Save-A-Lot properly applied the FWW. In May 2013, the United States District Court denied Save-A-Lot’s motion for summary judgment on the same issue. This FWW practice is permissible under the Fair Labor Standards Act and other state laws, and Save-A-Lot denied all allegations in the case. The same plaintiffs’ attorneys representing Kiefer filed two additional FWW actions against Save-A-Lot and SUPERVALU. Shortly before filing of the Kiefer lawsuit, in one of these cases filed by a former Assistant Store Manager (Roach) in March 2011, the Superior Court for the Judicial District of Hartford at Hartford granted summary judgment in favor of Save-A-Lot determining FWW was a legal practice in Connecticut. In March 2013, another Save-A-Lot Assistant Store Manager (Pagano) filed an FWW class claim against SUPERVALU under Pennsylvania state law in the Philadelphia County Court of Common Pleas relating to overtime payment. In all three cases, which the Company was defending vigorously, plaintiffs were seeking monetary damages and attorneys’ fees. On August 20, 2013, the parties agreed in principle to resolve the matters on a nationwide basis in a settlement that will cap the Company’s aggregate obligation, including with respect to settlement funds, plaintiffs’ attorneys fees and costs and settlement administration costs. The settlement is subject to the applicable courts’ preliminary and final approval. The court granted preliminary approval of the settlement on March 13, 2014. Final resolution is subject to the court’s approval, which the parties will seek in July 2014. The Company recorded a litigation settlement charge of $5 before tax ($3 after tax) in the second quarter of fiscal 2014 in connection with the expected settlement of this matter. The Company funded $5 into a qualified settlement fund on February 28, 2014.

Predicting the outcomes of claims and litigation and estimating related costs and exposures involves substantial uncertainties that could cause actual outcomes, costs and exposures to vary materially from current expectations. The Company regularly monitors its exposure to the loss contingencies associated with these matters and may from time to time change its predictions with respect to outcomes and its estimates of related costs and exposures.

With respect to the IOS and C&S matters discussed above, the Company believes the chance of a negative outcome is remote. It is possible, although management believes it is remote, that material differences in actual outcomes, costs and exposures relative to current predictions and estimates, or material changes in such predictions or estimates, could have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

NOTE 14 – SEGMENT INFORMATION

Refer to the Condensed Consolidated Segment Financial Information for the Company’s segment information.

NOTE 15 – DISCONTINUED OPERATIONS

On March 21, 2013, the Company sold NAI to AB Acquisition, which resulted in the sale of the NAI banners, including Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market and related Osco and Sav-on in-store pharmacies (collectively, the “NAI Banners”). The operating results and cash flows of the NAI Banners have been presented separately as discontinued operations in the Condensed Consolidated Financial Statements for all periods presented.

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During the first quarter of fiscal 2014, the Company received net proceeds of approximately $100 and a short-term note receivable of approximately $44 for the stock of NAI. AB Acquisition assumed approximately $3,200 of debt and capital leases, excluding original issue discounts. In addition, AB Acquisition assumed the underfunded status of NAI’s share of the multiemployer pension plans to which the Company contributed. AB Acquisition’s portion of the underfunded status of the multiemployer pension plans was estimated to be approximately $1,138 before tax, based on the Company’s estimated “proportionate share” of underfunding calculated as of February 23, 2013.

In connection with the sale of NAI, the Company entered into various agreements with AB Acquisition and its affiliates related to on-going operations, including a Transition Services Agreement with each of NAI and Albertson’s LLC (collectively, the “TSA”) and operating and supply agreements. These arrangements had initial terms that range from 12 months to 5 years, are generally subject to renewal upon mutual agreement by the parties thereto and also include termination provisions that can be exercised by each party. The initial terms of the TSA run through September 2015 and may be extended in one year increments with a one year notice. The Company recognized $58 and $84 in TSA fees earned during the first quarters of fiscal 2015 and 2014, respectively, including $36 under the first-year transitional fee provisions recognized during the first quarter of fiscal 2014. TSA fees earned are reflected in Net sales in the Condensed Consolidated Statements of Operations. The shared service center costs incurred to support back office functions related to the NAI Banners represent administrative overhead and are recorded in Selling and administrative expenses.

During fiscal 2013, the Company recorded a preliminary estimated pre-tax loss on contract for the disposal of NAI of approximately $1,150 and a pre-tax property, plant and equipment-related impairment of $203. The loss on sale calculation was finalized during fiscal 2014, including the finalization of the working capital adjustment. The total loss on sale of NAI was $1,263, comprised of $1,081 of contract loss and $182 of property, plant and equipment-related impairment, resulting in pre-tax reductions to the preliminary estimated loss on sale of NAI of $85 and $5 during the first and second quarters of fiscal 2014, respectively, which was recorded as a component of (Loss) income from discontinued operations, net of tax in the Condensed Consolidated Statements of Operations. The Company determined the pre-tax property, plant and equipment-related impairment using Level 3 inputs.

The following is a summary of the Company’s operating results and certain other directly attributable expenses that are included in discontinued operations:

Income before income taxes from discontinued operations for the first quarter of fiscal 2015 reflects $2 of interest income resulting from settlement of income tax audits. The income tax provision included as a component of Loss (income) from discontinued operations, net of tax for the first quarter of fiscal 2015 included $4 of discrete tax expenses. The income tax benefit included as a component of (Loss) income from discontinued operations, net of tax for the first quarter of fiscal 2014 included $118 of discrete tax benefits primarily resulting from the settlement of Internal Revenue Service audits for the fiscal 2010, 2009 and 2008 tax years.

The Company recorded $38 and $53 within Net sales of continuing operations related to wholesale distribution to certain NAI Banners for the first quarters of fiscal 2015 and 2014, respectively. In addition, the Company recorded $54 within Net sales of continuing operations for first quarters of fiscal 2015 and 2014 related to wholesale distribution of certain products to stores owned by Albertson’s LLC that were not part of AB Acquisition’s purchase of NAI.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(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.

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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:

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.

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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.

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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

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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.

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The following summarizes the calculation of Adjusted EBITDA for the first quarters of fiscal 2015 and 2014: