SUPERVALU (NYSE: SVU) announced a third-quarter loss of $0.95 per share Tuesday, missing analyst estimates of $0.31 earnings per share. With a long-term debt-to-equity ratio of about 5.5, you might wonder if bankruptcy is around the corner. But all is usually not as it seems, and SUPERVALU's situation is no exception.

The loss includes a non-cash intangible asset impairment charge of $0.99 for starters, which tells us the dramatic losses are mostly accounting figments. EPS year-to-date is negative $7.58, but cash flow from operations per share, a metric less susceptible to accounting gimmicks, is actually a positive $3.07.

Also included is a $0.06 per share charge related to employee severance – namely, several of the company's top executives, who were replaced after new CEO Craig Herkert was hired in 2009. Herkert came to SUPERVALU from Wal-Mart, where he had been CEO of the Americas and COO of the International Division, but before that he had spent more than 20 years working in various SUPERVALU divisions.

Herkert was brought on board to turn SUPERVALU around, and while positive cash flows stave bankruptcy off for now, he's got his work cut out for him. The company saw a same store sales decline of 4.9% this quarter, as grocers in the middle of the economic spectrum, like SUPERVALU or Safeway (NYSE: SWY), lose sales to deep discounters like Dollar Tree (Nasdaq: DLTR) or luxury retailers like Whole Foods (Nasdaq: WFMI).

In the middle of the pack, there isn't much to differentiate an Albertsons from a Safeway, so companies resort to price wars, which don't always work out as hoped, as Herkert himself conceded on the conference call. The company went so far as to lower guidance for the rest of the year, sending the stock into an 11% freefall.

On the bright side, SUPERVALU has been able to pay off nearly 1.5 billion in debt over the past two years, bringing long-term debt down 17% to $6.9 billion. The company will have to continue paying that debt down while trying to turn sales around -- which might be like wrestling a wolf while putting out a fire -- but at a new 52-week low, the market isn't pricing in much chance, if any, for a recovery, which creates a possible opportunity for the savvy turnaround investor.

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