-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, diHDOnS+Z/TKZXUtdQu+L0sPqHvTxvgGNUxvaJ7Xd3t6OI6TiK2fjfxCFWgiZOQo WNj4H+wkkU3HLzlVaR6VGg== 0000056873-94-000065.txt : 19940511 0000056873-94-000065.hdr.sgml : 19940511 ACCESSION NUMBER: 0000056873-94-000065 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19940101 FILED AS OF DATE: 19940502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KROGER CO CENTRAL INDEX KEY: 0000056873 STANDARD INDUSTRIAL CLASSIFICATION: 5411 IRS NUMBER: 310345740 STATE OF INCORPORATION: OH FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-00303 FILM NUMBER: 94525638 BUSINESS ADDRESS: STREET 1: 1014 VINE ST CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137624000 10-K/A 1 FORM 10-K/A FOR YEAR ENDED JANUARY 1, 1994 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A ANNUAL REPORT Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended Commission File No. 1-303 January 1, 1994 THE KROGER CO. An Ohio Corporation I.R.S. Employer Identification No. 31-0345740 Address Telephone Number - - ------- ---------------- 1014 Vine St. (513) 762-4000 Cincinnati, Ohio 45202 Securities registered pursuant to section 12 (b) of the Act: Name of Exchange on Title of Class which Registered - - -------------- -------------------------- Common $1 par value New York Stock Exchange 108,129,456 shares outstanding on February 11, 1994 6-3/8% Convertible Junior Subordinated New York Stock Exchange Notes due 1999, face $1000 200,000 notes outstanding 9% Senior Subordinated Notes New York Stock Exchange due 1999, face $1000 125,000 notes outstanding 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ]. The aggregate market value of the Common Stock of The Kroger Co. held by nonaffiliates as of February 11, 1994: $2,521,592,309 Documents Incorporated by Reference: Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act on or before April 6, 1994 incorporated by reference into Parts II and III of Form 10-K. PART II ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SALES Sales in the fourth quarter 1993, which included 12 weeks, decreased 5.2% below the same quarter in 1992, which included 13 weeks. Adjusting 1992's sales for the extra week and excluding sales from the Company's San Antonio, Texas stores which were sold in August 1993, sales in the 1993 fourth quarter increased 3.8%. Sales for the full year, including the extra week in 1992 and the San Antonio sales, increased 1.1% over those for 1992. Excluding the extra week and the San Antonio stores, full year 1993 sales increased 3.6% over 1992. A review of sales by lines of business for the three years ended January 1, 1994, is as follows:
1993 1992 1991 % OF 1993 -------------- -------------- -------------- SALES AMOUNT CHANGE AMOUNT CHANGE AMOUNT CHANGE ------------------------------------------------------------ (MILLIONS OF DOLLARS) Food Stores.............. 91.3% $20,443 +1.1% $20,199 +3.4% $19,533 +5.7% Convenience Stores....... 4.3% 951 +3.9% 916 +6.0% 864 +0.2% Other sales.............. 4.4% 990 -3.9% 1,030 +8.0% 954 +4.4% ------ ------- ------- ------- Total sales.............. 100.0% $22,384 +1.1% $22,145 +3.7% $21,351 +5.4%
Sales in identical food stores for the full year 1993 (those operating a full year and not expanded) increased 1.6% from the prior year. Excluding Michigan, which had a sixty-seven day strike during the second and third quarters of 1992, identical food stores sales increased 1.2% for all of 1993 and 1.1% in the fourth quarter 1993 versus the same periods in 1992. These increases were achieved despite low overall food inflation and deflation in some commodities in both 1993 and 1992, intense new supermarket competition in markets like Houston, Texas and Toledo, Ohio, and expanding supercenter competition in many other markets. 1993 convenience stores sales changes as compared to the same periods in 1992 were as follows:
4TH QUARTER YEAR-TO-DATE -------------------------- Total Sales............................................ -3.8% 3.9% Identical.............................................. 1.7% 3.6% In-Store Sales: Total................................................ -4.1% 2.7% Identical............................................ 3.9% 4.5% Gasoline Sales: Total................................................ -3.5% 5.2% Identical............................................ -.6% 2.6% Gasoline Gallons: Total................................................ .1% 7.7% Identical............................................ 3.4% 5.3%
The fourth quarter and full year 1993 sales for the seven-company convenience store group were enhanced by strong in-store sales and increases in gasoline gallons sold but were depressed by decreases in gasoline retail prices. Other sales include outside sales by the Company's manufacturing divisions and sales of general merchandise to a drug store company in which the Company maintains an equity interest. The drug store company is expected to complete an expansion of its warehouse in early 1994 and to discontinue its purchases from the Company. The Company expects that this will result in a decline of approximately 45% to 50% in other sales. Total food store square footage, excluding the San Antonio stores disposition, increased 3.2%, 2.5% and 2.2% in 1993, 1992, and 1991, respectively. The Company expects to increase retail food store square footage by 4 1/2 to 5% each year from 1994 through 1996. Convenience store square footage declined .7% and 2.1% in 1993 and 1991 respectively, and increased .2% in 1992. Sales per average square foot for the last three years were:
TOTAL SALES PER AVERAGE SQUARE FOOT -------------- 1993 1992 1991 ------------------------- Food Stores...................................................... $398 $402 $398 Convenience Stores............................................... $405 $389 $364
Food stores sales per average square foot for 1992 includes the extra week. Without the extra week the amount would have been $394. The Company was able to maintain sales growth in 1993 in the face of new and intense competition for a number of reasons. Fierce price competition in markets, such as Dayton, Ohio and Houston and Dallas, Texas, has abated somewhat. The Company's Michigan operations have begun to recover from a prolonged strike in 1992. The Company's efforts to reduce the cost of products through improved procurement and distribution practices have made the Company more price competitive and attractive to consumers without sacrificing gross profit. Finally, the shift in customer interest to private label products has enhanced sales. The Company's line of private label products, many of which are manufactured by the Company, have met with increasing acceptance by consumers. While these factors likely will continue to benefit the Company in 1994, the ability to generate sales growth may be limited by significant competitive entries into markets such as Atlanta and Indiana, as well as continued supercenter growth. Sales in 1992 showed an improvement over 1991 primarily due to the extra week in the fiscal year. Sales in 1991 benefited from the purchase of the former Great Scott! Stores in Michigan in late 1990, the continued maturation of the Company's combination food store format, and significant growth in private label products. EBITD The Company's Credit Agreement, dated January 21, 1992, and the indentures underlying approximately $1.7 billion of publicly issued debt contain various restrictive covenants, many of which are based on earnings before interest, taxes, depreciation, LIFO charge, unusual and extraordinary items ("EBITD"). These covenants are based, among other things, upon generally accepted accounting principles ("GAAP") as applied on a date prior to January 3, 1993. The ability to generate EBITD at levels sufficient to satisfy the requirements of these agreements is a key measure of the Company's financial strength. The presentation of EBITD is not intended to be an alternative to any GAAP measure of performance but rather to facilitate an understanding of the Company's performance compared to its debt covenants. At January 1, 1994 the Company was in compliance with all covenants of its Credit Agreement and publicly issued debt. The Company believes it has adequate coverage of its debt covenants to continue to respond effectively to competitive conditions. During 1993, EBITD, which does not include the effect of Statement of Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions", or the charges related to the disposition of the San Antonio stores, increased 7.5% to $976.8 million compared to $908.2 million in 1992 and $968.0 million in 1991. 1992's EBITD was negatively affected by a Michigan strike which reduced EBITD by approximately $69 million and was increased by the extra week in the fiscal year. 1993's EBITD increase was primarily the result of increased sales combined with an improved gross profit rate. MERCHANDISE COSTS Merchandise costs include warehousing and transportation expenses and LIFO charges or credits. The following table shows merchandising costs as a percent of sales and the relative effect of LIFO charges:
1993 1992 1991 --------------------- Merchandise costs as reported............................. 76.43% 77.12% 77.19% LIFO charge (credit)...................................... (.02%) .03% .12% ------ ------ ------ Merchandise costs as adjusted............................. 76.45% 77.09% 77.07%
The Company's gross profit rate in 1993 improved over previous years in all categories with the exceptions of pharmacy and deli. The improvement was due in large measure to improved results in Michigan which was affected by a strike in 1992, an increase in private label sales, a reduction in coupon costs, and cost reduction programs in procurement and warehousing. The Company expects gross profit as a percent of sales to improve in the future as benefits are derived from coupon scanning and a decline in multiple couponing. Coupon scanning allows the Company to readily determine the validity of coupons presented. The effect of reduced multiple couponing is enhanced by a reduction in the face value and quantity of vendor coupons. The Company also expects to show gross profit improvement from coordinated procurement and the continued expansion of private label sales. The Company produces many of its own private label products and, therefore, has lower product costs for such items than could be obtained through procurement. Some of the gross profit benefit will be reflected in lower prices to protect or enhance the Company's competitive position. OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES Operating, general and administrative expenses as a percent of sales in 1993, 1992 and 1991 were 17.98%, 17.51% and 17.15%, respectively. Excluding the effect of SFAS No. 106 from 1993, operating, general and administrative expenses as a percent of sales were 17.89%. The increase in operating, general and administrative expenses over last year was due in part to the increase in incentive pay for both management and store employees, reflecting 1993's improved performance compared to 1992. The Company also has experienced increases in collectively bargained wages, health insurance, general liability claims, and other store expenses. Controlling operating, general and administrative expenses is a significant challenge to the Company. Beginning in 1992 and continuing through 1995, the Company expects to spend approximately $125 million of capital to increase technological capabilities with the goal of reducing operating costs. The Company has dedicated management resources to improve its procurement, logistics, administrative, and accounting functions, both to realize the benefits of improved technological capability and otherwise to control costs. The Company also has begun the redesign of some specialty departments within the food stores to realize cost savings. The Company currently is absorbing the expense of converting some full service departments to self service. This effort will continue during 1994 and 1995, and the Company expects to realize some benefit from these efforts beginning in late 1994. INCOME TAXES The effective income tax rates were 39.8%, 41.7% and 40.3% for 1993, 1992 and 1991, respectively. 1993's income tax expense includes a $4.2 million charge to increase deferred taxes for the change in the federal income tax rate. NET EARNINGS (LOSS) Net earnings (loss) totaled $(12.2) million in 1993 compared to $(5.9) million in 1992 and $79.9 million in 1991. Earnings in 1993 compared to 1992 and 1991 was affected by: (i) a 1993 charge against earnings of $159.2 million after taxes for the cumulative effect of a change in accounting for retiree benefits, (ii) an extraordinary loss from the early retirement of debt in 1993 of $23.8 million compared to $107.1 million in 1992 and $20.8 million in 1991, (iii) a sixty-seven day strike in Michigan during 1992, (iv) a LIFO credit in 1993 of $3.2 million versus a charge of $8.1 million in 1992 and $26.2 million in 1991, and (v) net interest expense in 1993 of $390.0 million versus $474.8 million in 1992 and $531.1 million in 1991. 1993's net earnings also include a $4.4 million pre-tax ($2.7 million after tax) one-time charge related to a change in the estimated useful life of certain computer equipment and a $22.7 million charge ($15 million after tax) in connection with the disposition of the San Antonio stores. Severance pay, unemployment benefits costs and loss on sale of assets are included in this charge. LIQUIDITY AND CAPITAL RESOURCES DEBT MANAGEMENT AND INTEREST EXPENSE The Company continued to reduce interest expense during 1993. The Company was successful in placing $1.6 billion of senior subordinated or senior secured debt during 1992 and 1993 with an average rate of 9.39% and $200 million of convertible junior subordinated notes with a rate of 6.375%. The Company also borrowed $100 million at a rate equal to LIBOR + 1.25% or, at the Company's election, such lenders' base rate + .25%, pursuant to a term facility under the Credit Agreement. The proceeds from these offerings and the issuance of 13,275,000 shares of common stock with proceeds of $203.5 million, were used to redeem or repurchase, on the open market, high yield subordinated debt with an average rate of 14.2% (see "Repurchase and Redemption of Subordinated Debt"). As a result of these transactions the Company has reduced the weighted average cost of its long-term debt including capital leases to 8.2% at year-end 1993 versus 11.6% at the beginning of 1990. Long-term debt, including capital leases and current portions thereof, decreased $348 million to $4.206 billion at year end 1993 from $4.554 billion at year end 1992. Required principal repayments over the next five years increased to $1.048 billion at year end 1993 versus $534.5 million and $541.3 million at year-end 1992 and 1991, respectively. Scheduled debt maturities for the five years subsequent to 1993, 1992 and 1991 were:
1993 1992 1991 -------- -------- -------- (IN THOUSANDS) Year 1....................................... $ 63,053 $ 73,248 $ 73,580 Year 2....................................... 111,010 115,017 123,368 Year 3....................................... 117,434 111,549 114,927 Year 4....................................... 146,784 118,032 111,451 Year 5....................................... 609,769 116,669 117,926
1993's Year 5 maturities include the entire $362.0 million outstanding under the Company's Working Capital Facility under its Credit Agreement, $68.0 million of Facility D under its Credit Agreement, and the remaining 11 1/8% Senior Notes outstanding at January 1, 1994 of $138.4 million. The Company has notified the trustee for the Senior Notes that it will redeem these notes on March 15, 1994. Maturities shown for 1991 reflect the restated Credit Agreement dated January 21, 1992. The Company's interest rate on Credit Agreement borrowings is variable. The average interest rate, including the effect of interest rate swaps, on the Company's bank debt, which totaled $847.0 million at year-end 1993, including Facility D, versus $851.0 million at year-end 1992, was 4.57% compared to 5.42% at the end of 1992 and 6.13% at the end of 1991. The decline is due to generally lower market interest rates and achieving a .25% interest rate step down in January, 1993. The Company currently has in place various interest rate hedging agreements aggregating $1.4 billion. The effect of these agreements is to: (i) fix the rate on $100 million floating rate debt until July, 1994 (ii) swap the contractual interest rate on $350 million of seven and ten year debt instruments to the rates available on three to five year fixed rate instruments (upon expiration of the three to five year swap agreements the fixed contractual rate will become floating for the remainder of the seven and ten year term of debt), (iii) swap the contractual interest rate on $600 million of seven and ten year fixed-rate instruments into floating-rate instruments and (iv) cap six month LIBOR on $350 million for one to five years at rates of 3.70% to 5.50%. $50 million of the caps expire in each of July 1994, July 1995, July 1997 and July 1998. The remaining $150 million cap expires in November 1995. The Company currently expects 1994 net interest expense, based on year-end 1993 rates, to total $330-$340 million compared to $390.0 million, $474.8 million and $531.1 million in 1993, 1992 and 1991, respectively. To meet any short-term liquidity needs, the Company has available an $850 million Working Capital Facility under its Credit Agreement. A portion of the Company's short-term borrowings are permitted to be in the form of commercial paper. At January 1, 1994, the Company had outstanding $98.0 million of commercial paper and $264.0 million under the Working Capital Facility. At year-end 1993, after deducting amounts set aside as backup for the Company's unrated commercial paper program and stand-by letters of credit, $317.8 million was available under the Working Capital Facility. There are no annual principal payments required under the Working Capital Facility, which expires on January 3, 1998. COMMON STOCK On March 4, 1993 the Company issued 12,500,000 shares of its common stock through a public offering. On April 1, 1993, the Company issued an additional 775,000 shares of its common stock pursuant to an over-allotment option granted to the underwriters in connection with the offering. The Company realized net proceeds of $203.5 million on these issues which were used initially to repay amounts outstanding under the Working Capital Facility, and thereafter the Company used amounts available under the Working Capital Facility to purchase or redeem outstanding indebtedness of the Company. REPURCHASE AND REDEMPTION OF SUBORDINATED DEBT During 1993 the Company repurchased $300.6 million face amount of Junior Subordinated Discount Debentures with an accreted value of $285.1 million, $71.2 million Senior Subordinated Debentures, $111.6 million Senior Notes, and $33.5 million Senior Subordinated Reset Notes. Additionally, the Company redeemed the remaining $498.2 million Junior Subordinated Discount Debentures. The redemptions were effected using funds from asset sales, the sale of treasury stock to employee benefit plans, proceeds from the sale of common stock and new financings, and excess cash from operations. The outstanding balances of these debt issues at January 1, 1994 were $0 for the Junior Subordinated Discount Debentures, $0 for the Senior Subordinated Debentures, $138.4 million for the Senior Notes, and $66.5 million for the Senior Subordinated Reset Notes. The Company issued a redemption notice for the remaining Senior Notes on February 13, 1994. The redemption will be effected on March 15, 1994. During 1992 the Company repurchased $269.9 million face amount of Junior Subordinated Discount Debentures with an accreted value of $231.1 million, $343.9 million Senior Subordinated Debentures and $256.2 million Subordinated Debentures. Additionally, the Company redeemed $120.5 million Senior Subordinated Debentures and $304.6 million Subordinated Debentures. During 1991 the Company repurchased $303.8 million face amount of Junior Subordinated Discount Debentures with an accreted value of $217.9 million, $59.3 million Senior Subordinated Debentures and $64.2 million Subordinated Debentures. CAPITAL EXPENDITURES Capital expenditures totaled $376.1 million for 1993, $241.2 million for 1992 and $208.1 million in 1991. During 1993 the Company opened, acquired or expanded 46 food stores and 10 convenience stores compared to 42 food stores and 19 convenience stores in 1992 and 42 food stores and 4 convenience stores in 1991. The Company also completed 70 food store and 21 convenience store remodels during 1993. During 1993, 32 food stores were closed or sold including the 15 San Antonio stores sold to Megafood Stores, Inc. in August 1993. 17 convenience stores also were closed. The Company expects capital expenditures to approximate $1.5 billion over the next three years. In 1994 the Company plans to increase food store square footage by 4 1/2%-5% by opening, expanding or acquiring approximately 70 food stores and completing within-the-wall remodels of 60-70 food stores, including the recently completed purchase of 10 stores in Houston, Texas from AppleTree Markets, Inc. The increased square footage is planned for existing Company markets where the Company has an established market position and an existing administrative and logistical network. The Company's ability to realize its capital expenditure plan will depend, in part, on its ability to generate sufficient free cash flow. The Company expects to dedicate one half of its free cash flow in excess of planned expenditures to its capital program and the remainder to debt reduction. CONSOLIDATED STATEMENT OF CASH FLOWS During 1993 the Company generated $617.3 million in cash from operating activities compared to $532.8 million in 1992 and $448.4 million in 1991. The increase from 1992 is due to an increase in operating net income of $69.6 million. Additionally, the Company experienced an increase in cash from changes in operating assets and liabilities of $105.5 million. The increase is due to an increase in accounts payable over and above the increase in inventory values of $47.7 million, an increase in income taxes payable of $17.5 million, and an increase in self-insured workers compensation and general liability accruals of $34.4 million. The increase in 1992 from 1991 is due to an increase in cash of $45.1 million from changes in operating assets and liabilities and a $56.3 million reduction in interest expense. Investing activities used $368.3 million compared to $264.3 million of cash used in 1992 and $187.9 million of cash used in 1991. The increase in the use of cash in 1993 is due to an increase in the level of capital expenditures over 1992 of $134.9 million and an increased use of cash of $18.2 million for investments. This was offset by an increase in cash over 1992 from reduced current year expenditures for additions to property held for sale and increased proceeds from the sale of property, plant and equipment. The increase in 1992 from 1991 is due to an increase in cash used for capital expenditures and additions to property held for sale. Cash used by financing activities totaled $231.7 million compared to $168.4 million and $311.1 million in 1992 and 1991, respectively. The increase in the use of cash during 1993 is due to a debt reduction, excluding capital leases and the interest accretion on the Junior Subordinated Discount Debentures, of $423.0 million versus 1992's debt reduction of $38.8 million. The debt reduction was offset by proceeds from the sale of stock and lower debt prepayment and financing costs incurred. OTHER ISSUES The Company is party to more than 200 collective bargaining agreements with local unions representing approximately 110,000 of the Company's employees. Among the contracts that have expired or will expire in the remainder of 1994 are those covering store employees in Charleston (WV), Nashville, Louisville, Cincinnati, Phoenix and Tucson as well as warehouse and distribution employees in a number of the Company's operating divisions. Typical agreements are 3 to 4 years in duration, and as such agreements expire, the Company expects to negotiate with the unions and to enter into new collective bargaining agreements. There can be no assurance, however, that such agreements will be reached without work stoppage. A prolonged work stoppage affecting a substantial number of stores could have a material adverse effect on the results of the Company's operations. As of January 3, 1993 the Company implemented SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" using the immediate recognition approach. This new standard requires that the expected cost of retiree health benefits be charged to expense during the years that the employees render service rather than the Company's past practice of recognizing these costs on a cash basis. As part of adopting the new standard, the Company recorded in 1993 a non-cash charge against earnings of $248.7 million before taxes ($159.2 million after taxes). This cumulative adjustment as of January 3, 1993 represents the discounted present value of expected future retiree health benefits attributed to employees' service rendered prior to that date. In addition, the new standard results in additional annual expense, which for the year ended January 1, 1994 totaled $19.5 million before taxes. The increase in the annual postretirement benefit expense does not affect the Company's EBITD. Effective December 29, 1991, the Company adopted the provisions of SFAS No. 109, "Accounting for Income Taxes". The adoption of SFAS No. 109 had a material effect on the Company's financial statements in the first quarter of 1993 due to the adoption of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The Company recognized a deferred tax benefit of $89.5 million in connection with the adoption of SFAS No. 106. A portion of this tax benefit would not have been recognized under the Company's previous method of accounting for income taxes. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE KROGER CO. Dated: May 2, 1994 By (Paul W. Heldman) Paul W. Heldman Vice President, Secretary and General Counsel INDEX OF EXHIBITS Exhibit 23.2 Consent of Independent Accountants 23.3 Consent of Independent Accountants 99.2 Financial Statements for The Kroger Co. Savings Plan for the Year Ended December 31, 1993 99.3 Financial Statements for the Dillon Companies, Inc. Employees' Stock Ownership and Savings Plan for the Year Ended December 31, 1993 EX-23.2 2 EXHIBIT 23.2 TO FORM 10-K/A EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statement of The Kroger Co. on Form S-8 (File No. 33-29640) of our report dated April 1, 1994, on our audits of the financial statements and financial statement schedule of The Kroger Co. Savings Plan as of December 31, 1993 and 1992, and for each of the three years in the period ended December 31, 1993, which report is included in this Annual Report on Form 10-K. (COOPERS & LYBRAND) COOPERS & LYBRAND Cincinnati, Ohio April 27, 1994 EX-23.3 3 EXHIBIT 23.3 TO FORM 10-K/A EXHIBIT 23.3 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statement of The Kroger Co. on Form S-8 (File No. 33-29405) of our report dated April 22, 1994, on our audits of the financial statements and financial statement schedule of Dillon Companies, Inc. Employees' Stock Ownership and Savings Plan as of December 31, 1993 and 1992, and for each of the three years in the period ended December 31, 1993, which report is included in this Annual Report on Form 10-K. (COOPERS & LYBRAND) COOPERS & LYBRAND Cincinnati, Ohio April 28, 1994 EX-99.2 4 EXHIBIT 99.2 TO FORM 10-K/A Exhibit 99.2 THE KROGER CO. SAVINGS PLAN INDEX TO FINANCIAL STATEMENTS DECEMBER 31, 1993 Report of Independent Accountants Statement of Net Assets Available For Plan Benefits at December 31, 1993 Statement of Net Assets Available For Plan Benefits at December 31, 1992 Statement of Changes in Net Assets Available for Plan Benefits for the Year Ended December 31, 1993 Statement of Changes in Net Assets Available for Plan Benefits for the Year Ended December 31, 1992 Statement of Changes in Net Assets Available for Plan Benefits for the Year Ended December 31, 1991 Notes to Financial Statements Schedule of Investments REPORT OF INDEPENDENT ACCOUNTANTS To the Administrative Committee of The Kroger Co. Savings Plan We have audited the financial statements and the financial statement schedule of The Kroger Co. Savings Plan as listed in the accompanying index. These financial statements and financial statement schedule are the responsibility of the Administrative Committee of The Kroger Co. Savings Plan. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of The Kroger Co. Savings Plan as of December 31, 1993 and 1992, and the changes in its net assets available for plan benefits for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial state- ments taken as a whole, presents fairly, in all material respects, the information required to be included therein. (COOPERS & LYBRAND) COOPERS & LYBRAND Cincinnati, Ohio April 1, 1994 THE KROGER CO. SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS December 31, 1993 (In thousands of dollars) -------------- 1993 -------------------------------------------------------------
EMPLOYER MELLON TEMPORARY STOCK EQUITY GIC INVESTMENT ASSETS FUND FUND FUND FUND TOTAL -------- -------- ------- ---------- --------- Investments: The Kroger Co. common shares (cost - $156,929) $297,549 $297,549 Contracts with insurance companies (stated at cost) $62,804 62,804 Collective investment funds (cost - $29,528) $32,199 32,199 U.S. Government Securities 17 67 3,626 3,710 Temporary cash investments and loans to participants (stated at cost) $8,107 8,107 -------- -------- ------- ---------- -------- Total investments 297,566 32,266 66,430 8,107 404,369
Receivables: Employee allotments 400 400 Employer contributions 3,116 3,116 Interest and dividends 2 6 4 12 -------- -------- ------- ---------- -------- Total assets 300,684 32,266 66,436 8,511 407,897 -------- -------- ------- ---------- --------
LIABILITIES Payable for administrative fees 24 58 82 -------- -------- ------- ---------- -------- Total liabilities 24 58 82 -------- -------- ------- ---------- -------- Net assets available for plan benefits $300,684 $32,266 $66,412 $8,453 $407,815 ======== ======== ======= ========== ========
The accompanying notes are an integral part of the financial statements. THE KROGER CO. SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS December 31, 1992 (In thousands of dollars) -------------- 1992 --------------------------------------------------------------------
EMPLOYER FIDELITY MELLON TEMPORARY STOCK EQUITY EQUITY GIC INVESTMENT ASSETS FUND FUND FUND FUND FUND TOTAL -------- -------- ------- --------- ---------- -------- Investments: The Kroger Co. common shares (cost - $147,337) $212,403 $212,403 Contracts with insurance companies (stated at cost) $45,936 45,936 Mutual funds (cost - $10,656) $12,151 12,151 Collective investment funds (cost - $11,381) $ 12,121 12,121 U.S. Government Securities 67 12 98 6,821 $ 215 7,213 Temporary cash investments and loans to participants (stated at cost) 160 56 7,164 7,380 -------- ------- ------- ------- -------- -------- Total investments 212,630 12,163 12,275 52,757 7,379 297,204
Receivables: Employee allotments 380 380 Employer contributions 1,928 1,928 Interest and dividends 3 2 5 ------- ------- ------- ------- -------- -------- Total assets 214,561 12,163 12,275 52,757 7,761 299,517 -------- ------- ------- ------- -------- --------
LIABILITIES Payable for administrative fees 114 114 -------- ------- ------- ------- -------- --------- Total liabilities 114 114 -------- ------- ------- ------- -------- --------- Net assets available for plan benefits $214,561 $12,163 $12,275 $52,757 $ 7,647 $299,403 ======== ======= ======= ======= ======== =========
The accompanying notes are an integral part of the financial statements. THE KROGER CO. SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS for the year ended December 31, 1993 (In thousands of dollars) --------------
1993 ------------------------------------------------------------------ EMPLOYER FIDELITY MELLON TEMPORARY STOCK EQUITY EQUITY GIC INVESTMENT FUND FUND FUND FUND FUND TOTAL --------- -------- -------- --------- ---------- -------- Employee contributions $ 34,909 $ 34,909 Employer contributions $ 3,125 3,125 Transfer from (to) other funds 7,751 $(12,170) $ 17,286 $ 9,686 (22,553) -------- ------- ------- -------- --------- -------- Total allotments and contributions 10,876 (12,170) 17,286 9,686 12,356 38,034
Investment income(expense): Dividends 7 773 780 Interest 90 4,106 529 4,725 Change in unrealized appreciation (depreciation) 79,119 1,947 (14) 81,052 Other 362 362 -------- ------- ------- -------- -------- -------- Total additions (deductions) 90,085 (12,163) 20,006 13,778 13,247 124,953 -------- ------- ------- -------- -------- --------
Distributions to participants 3,961 12,053 16,014 Administrative expenses 1 15 123 388 527 -------- ------- ------- -------- -------- -------- Total deductions 3,962 15 123 12,441 16,541 -------- ------- ------- -------- -------- -------- Net increase (decrease) 86,123 (12,163) 19,991 13,655 806 108,412 Net assets available for plan benefits: Beginning of year 214,561 12,163 12,275 52,757 7,647 299,403 -------- ------- ------- -------- -------- End of year $300,684 $ 0 $32,266 $ 66,412 $ 8,453 $407,815 ======== ======= ======= ======== ======== ========
The accompanying notes are an integral part of the financial statements. THE KROGER CO. SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS for the year ended December 31, 1992 (In thousands of dollars) --------------
1992 ------------------------------------------------------------------ EMPLOYER FIDELITY MELLON TEMPORARY STOCK EQUITY EQUITY GIC INVESTMENT FUND FUND FUND FUND FUND TOTAL --------- -------- -------- --------- ---------- -------- Employee contributions $ 18,373 $ 18,373 Employer contributions $ 1,036 1,036 Merger from other trust 72,439 $ 2,608 $ 3,294 $ 11,068 623 90,032 Transfer from (to) other funds 7,200 (1,939) 4,361 2,386 (12,008) -------- ------- ------- -------- -------- -------- Total allotments and contributions 80,675 669 7,655 13,454 6,988 109,441
Investment income(expense): Dividends 370 187 557 Interest 27 3,045 796 3,868 Change in unrealized appreciation (depreciation) (48,348) 925 416 (47,007) Other 178 (180) (2) -------- ------- ------- -------- -------- -------- Total additions 32,532 1,964 8,258 16,499 7,604 66,857 -------- ------- ------- -------- -------- -------- Distributions to participants 1,568 100 5,237 6,905 Administrative expenses 5 404 409 -------- ------- ------- -------- -------- -------- Total deductions 1,568 100 5 5,641 7,314 -------- ------- ------- -------- -------- -------- Net increase 30,964 1,864 8,253 16,499 1,963 59,543
Net assets available for plan benefits: Beginning of year 183,597 10,299 4,022 36,258 5,684 239,860 -------- ------- ------- -------- -------- -------- End of year $214,561 $12,163 $12,275 $ 52,757 $ 7,647 $299,403 ======== ======= ======= ======== ======== ========
The accompanying notes are an integral part of the financial statements. THE KROGER CO. SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS for the year ended December 31, 1991 (In thousands of dollars) --------------
1991 ------------------------------------------------------------------ EMPLOYER FIDELITY MELLON TEMPORARY STOCK EQUITY EQUITY GIC INVESTMENT FUND FUND FUND FUND FUND TOTAL --------- -------- -------- --------- ---------- -------- Employee contributions 18,047 $ 18,047 Employer contributions $ 1,040 1,040 Transfer from (to) other trusts 574 $ (1) 8 581 Transfer from (to) other funds 4,614 (2,797) $ 3,696 $ 3,989 (9,502) -------- ------- ------- -------- -------- -------- Total allotments and contributions 6,228 (2,798) 3,696 3,989 8,553 19,668
Investment income(expense): Dividends 589 48 637 Interest 29 2,762 530 3,321 Change in unrealized appreciation (depreciation) 48,426 2,356 278 51,060 Other 7 3 10 -------- ------- ------- -------- -------- -------- Total additions 54,690 150 4,022 6,751 9,083 74,696 -------- ------- ------- -------- -------- --------
Distributions to participants 2,496 7,757 10,253 Administrative expenses 349 349 -------- ------- ------- -------- -------- -------- Total deductions 2,496 8,106 10,602 -------- ------- ------- -------- -------- -------- Net increase 52,194 150 4,022 6,751 977 64,094
Net assets available for plan benefits: Beginning of year 131,403 10,149 29,507 4,707 175,766 -------- ------- ------- -------- -------- -------- End of year $183,597 $10,299 $ 4,022 $ 36,258 $ 5,684 $239,860 ======== ======= ======= ======== ======== ========
The accompanying notes are an integral part of the financial statements. THE KROGER CO. SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS -------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ The following describes the significant policies followed in the preparation of these financial statements. INVESTMENTS VALUATION --------------------- Investments in securities (common and preferred stock) traded on a national securities exchange are valued at the last reported sales price on the last business day of the year; listed securities for which no sale was reported on that date are valued at the last reported bid price. Guaranteed Insurance Contracts are valued at cost. OTHER ----- Purchases and sales of securities are reflected on a trade date basis. Gain or loss on sales of securities are based on average cost. Dividend income is recorded on the ex-dividend date. Income from other investments is recorded as earned on an accrual basis. The plan presents in the statement of changes in net assets available for plan benefits the net appreciation or depreciation in the fair value of its investments which consists of the realized gains or losses and the unrealized appreciation or depreciation on those investments. 2. PARTICIPANT DATA ---------------- At December 31, 1993, the number of employees, including 3,466 former employees with remaining balances, participating by investment directions was: Entirely in Employer Stock Fund 14,874 Entirely in Mellon Equity Fund 1,658 Entirely in GIC Fund 12,648 Partially in Employer Stock Fund and Mellon Equity Fund 3,875 Partially in Employer Stock Fund and GIC Fund 7,784 Partially in Mellon Equity Fund and GIC Fund 2,056 Partially in Employer Stock Fund, Mellon Equity Fund and GIC Fund 4,475 ------ Total participants 47,370 ======
3. PLAN DESCRIPTION ---------------- The Plan provides for eligible employees of The Kroger Co. and subsidiaries (the "Company") to redirect a portion of their salary, up to limits defined in the Plan, to the investment funds of the Plan. At the end of each year, the Company may make a matching contribution of either or both of the following: A basic matching contribution which is allocated in proportion to the salary directed by participants to the Employer Stock Fund during the year, or a supplemental matching contribution which is allocated in proportion to salary directed to all investment funds. In 1992 the Company made a basic matching contribution. In 1993 and 1991 the Company made both a basic matching contribution and a supplemental matching contribution. Each participant's account is credited with the participant's contribution and an allocation of the Company's matching contribution, Plan earnings, and other adjustments as defined in the Plan. Allocations are based on participant earnings or account balances as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account. Further information about the Plan, including vesting, allocation and benefit provisions, and employer and employee contributions is contained in the Plan, and Plan amendments. Copies of these documents are available from the Company's Personnel Department. 4. UNREALIZED APPRECIATION (DEPRECIATION) -------------------------------------- Net changes in unrealized appreciation (depreciation) on investments was as follows:
($000) ------------------------------- Employer Fidelity Mellon Stock Equity Equity Fund Fund Fund --------- -------- ------- Unrealized appreciation (depreciation): December 31, 1990 $ 48,001 $ (2,249) $ 0 Change in unrealized appreciation 46,005 2,451 278 -------- -------- ------- December 31, 1991 94,006 202 278 Change in unrealized appreciation (depreciation) (49,323) 849 271 Merger of bargaining unit plan (See Note 6) 20,383 444 191 -------- -------- ------- December 31, 1992 65,066 1,495 740 Change in unrealized appreciation (depreciation) 75,554 (1,495) 1,931 -------- -------- ------- December 31, 1993 $140,620 $ 0 $ 2,671 ======== ======== =======
5. TAX STATUS ---------- The plan obtained its latest determination letter on October 7, 1986, in which the Internal Revenue Service stated that the plan, as then designed, was in compliance with the Internal Revenue Code. However, the plan has been amended since receiving the determination letter. The plan administrator and the plan's tax counsel believe that the plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the plan's financial statements. Participant contributions and earnings of the Plan are not subject to federal income tax until distribution, at which time they are taxable to the recipient. 6. MERGER OF PLANS Effective December 31, 1992, The Kroger Co. Savings Plan for Bargaining Unit Employees was merged with the Plan. Such assets transferred to the Plan, $90,032,000, are reflected in the statement of changes in net assets available for plan benefits for the year ended December 31, 1992. 7. RECONCILIATION TO FORM 5500 Department of Labor regulations require that differences between the amounts included in the financial statements of the Plan and reported on Form 5500 be disclosed. Differences in amounts shown in the financial statements of the Plan and those reported on Form 5500, as amended, for the year ended December 31, 1991 and 1993 are as follows:
Amounts per Amounts per Financial Statements Form 5500 Difference -------------------- ----------- ------------ The Kroger Co. Savings Plan --------------------------- For the year ended December 31, 1991 Statement of Net Assets Available for Plan Benefits: Employer contributions receivable $1,039,545 $ 929,239 $ 110,306 Statement of Changes in Net Assets Available for Plan Benefits: Employer contributions $1,039,545 $ 929,239 $ 110,306 For the year ended December 31, 1993
Statement of Net Assets Available for Plan Benefits: Employer contributions receivable $3,115,652 $3,851,048 $(735,396) Statement of Changes in Net Assets Available for Plan Benefits: Employer contributions $3,115,652 $3,851,048 $(735,396)
These differences result from the valuation of the employer stock contribution receivable at December 31, 1991 and 1993. The financial statements reflect the value of the shares to be contributed to the Plan at the date the matching contribution was granted. Form 5500 reflects the value of the shares contributed to the Plan on the date the shares were transferred to the Trustee. Since the employer matching contribution to the Plan for 1992 was made in cash on February 18, 1993, employer contribution receivable in the statement of net assets available for plan benefits, and employer contributions and change in unrealized appreciation in the statement of changes in net assets available for plan benefits for the year ended December 31, 1992 does not differ from those reported on Form 5500. THE KROGER CO. SAVINGS PLAN SCHEDULE OF INVESTMENTS December 31, 1993 and 1992 (In thousands of dollars) ------------------
NUMBER OF SHARES OR PRINCIPAL 1993 1992 NAME OF ISSUER AND TITLE OF ISSUE AMOUNT COST VALUE COST VALUE - - --------------------------------- ----------- -------- -------- -------- ----- EMPLOYER STOCK FUND ------------------- The Kroger Co. common shares 14,877,459 shs. $156,929 $297,549 14,523,300 shs. $147,337 $212,403 U.S. Government Securities $17 17 17 $67 67 67 Temporary Cash Investments $160 160 160 -------- -------- -------- -------- 156,946 297,566 147,564 212,630 -------- -------- -------- --------
FIDELITY EQUITY FUND -------------------- Mutual Funds 0 shs. 418,843.84 shs. 10,656 12,151 U.S. Government Securities $12 12 12 -------- -------- -------- -------- 0 0 10,668 12,163 -------- -------- -------- --------
MELLON EQUITY FUND ------------------ Collective Investment Funds 279,523 shs. 29,528 32,199 112,618 shs. 11,381 12,121 U.S. Goverment Securities $67 67 67 $98 98 98 Temporary Cash Investments $56 56 56 -------- -------- -------- -------- 29,595 32,266 11,535 12,275 -------- -------- -------- --------
GIC FUND -------- Contracts with Insurance Companies 62,804,060.21 shs. 62,804 62,804 45,935,708.75 shs. 45,936 45,936 U.S. Government Securities $3,626 3,626 3,626 $6,821 6,821 6,821 -------- -------- -------- -------- 66,430 66,430 52,757 52,757 -------- -------- -------- --------
TEMPORARY INVESTMENT FUND ------------------------- Temporary Cash Investments $1,445 1,445 1,445 84 84 84 U. S. Government Securities $215 215 215 Loans to participants $6,662 6,662 6,662 $7,080 7,080 7,080 -------- -------- -------- -------- 8,107 8,107 7,379 7,379 -------- -------- -------- -------- $261,078 $404,369 $229,903 $297,204 ======== ======== ======== ========
EX-99.3 5 EXHIBIT 99.3 TO FORM 10-K/A EXHIBIT 99.3 DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN INDEX TO FINANCIAL STATEMENTS DECEMBER 31, 1993 Report of Independent Accountants Statement of Net Assets Available for Plan Benefits at December 31, 1993 Statement of Net Assets Available for Plan Benefits at December 31, 1992 Statement of Changes in Net Assets Available for Plan Benefits For the Year Ended December 31, 1993 Statement of Changes in Net Assets Available for Plan Benefits For the Year Ended December 31, 1992 Statement of Changes in Net Assets Available for Plan Benefits For the Year Ended December 31, 1991 Notes to Financial Statements Schedule of Investments REPORT OF INDEPENDENT ACCOUNTANTS The Administration Committee of Dillon Companies, Inc. Employees' Stock Ownership and Savings Plan We have audited the financial statements and the financial statement schedule of Dillon Companies, Inc. Employees' Stock Ownership and Savings Plan as listed in the accompanying index. These financial statements and financial statement schedule are the responsibility of the Administration Committee of Dillon Companies, Inc. Employees' Stock Ownership and Savings Plan. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of Dillon Companies, Inc. Employees' Stock Ownership and Savings Plan as of December 31, 1993 and 1992, and the changes in its net assets available for plan benefits for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. (COOPERS & LYBRAND) COOPERS & LYBRAND Cincinnati, Ohio April 22, 1994 DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN Statement of Net Assets Available for Plan Benefits December 31, 1993 (In Thousands)
401(k) ESOP --------------------------------------------------------------------------- Balanced Index Fixed Stock Balanced Index Fixed Stock Fund Fund Fund Fund Fund Fund Fund Fund Total -------- ----- ----- ----- -------- ----- ----- ------ ----- ASSETS Investments: State Street Research and Management $10,167 $266 $10,433 Mellon Capital Opening Stock Index Fund $5,588 $161 5,749 Fixed Income Securities $52,565 $1,814 54,379 The Kroger Co. Common Stock 401(k) Cost - $39,113 ESOP Cost - $23,530 $64,845 $42,569 107,414 ------ ------ ------- ------- ---- ---- ------ ------- --------- Total Investments 10,167 5,588 52,565 64,845 266 161 1,814 42,569 177,975 Contributions Receivables and Other 1,015 207 1,121 27 6 38 2,414 ------ ----- ------ ------ ---- ---- ------ ------- ------- NET ASSETS AVAILABLE FOR PLAN BENEFITS $11,182 $5,795 $53,686 $64,845 $293 $167 $1,852 $42,569 $180,389 ======= ====== ======= ======= ==== ==== ====== ======= ========
The accompanying notes are an integral part of the financial statements. DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN Statement of Net Assets Available for Plan Benefits December 31, 1992 (In Thousands)
401(k) ESOP ------------------------------------------------------------------------------ Balanced Index Fixed Stock Balanced Index Fixed Stock Fund Fund Fund Fund Fund Fund Fund Fund Total --------- ----- ----- ----- -------- ----- ----- ----- ----- ASSETS Investments: State Street Research and Management $6,522 $132 $ 6,654 Mellon Capital Opening Stock Index Fund $4,760 $136 4,896 Fixed Income Securities $41,538 $1,086 42,624 The Kroger Co. Common Stock 401(k) Cost - $35,435 ESOP Cost - $24,853 $44,637 $32,732 77,369 Temporary Cash Investment 19 19 ------ ------ ------- ------- ---- ---- ------ ------- --------- Total Investments 6,522 4,760 41,538 44,637 132 136 1,086 32,751 $ 131,562
Receivables: Employer Contributions 782 782 ----- ----- ------ ------ ---- ----- ------- -------- ---------- Total Assets 6,522 4,760 41,538 45,419 132 136 1,086 32,751 132,344
LIABILITIES Excess Participants Contribution 4 5 22 79 19 129 ------ ------ ------- ------- ---- ----- ------- ------- --------- NET ASSETS AVAILABLE FOR PLAN BENEFITS $6,518 $4,755 $41,516 $45,340 $132 $136 $1,086 $32,732 $132,215 ====== ====== ======= ======= ==== ===== ======= ======= =========
The accompanying notes are an integral part of the financial statements. DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN Statement of Changes in Net Assets Available for Plan Benefits December 31, 1993 (In Thousands)
401(k) ESOP ---------------------------------------- -------------------------------------- Balanced Index Fixed Stock Balanced Index Fixed Stock Fund Fund Fund Fund Fund Fund Fund Fund Total ---------- ----- ----- ------- -------- ----- ----- ----- ----- Employee Contributions $1,393 $1,022 $7,423 $8,484 $ 18,322 Employer Contributions 1,713 1,713 Transfers from (to) Other Funds 2,619 (134) 3,036 (5,521) $155 $24 $ 729 ($908) 0 ------ ------ ------ ------ ---- ----- ------ ------ -------- 4,012 888 10,459 4,676 155 24 729 (908) 20,035
Investment Income: State Street Research and Management 945 20 965 Mellon Capital Stock Index Fund 480 12 492 Interest 3,956 131 4,087 Net Appreciation 17,472 11,692 29,164 ------ ------ ------- ------ ---- ---- ------ ------- -------- Total Additions 4,957 1,368 14,415 22,148 175 36 860 10,784 54,743
Expenses 5 4 31 1 41 Distributions to Participants 288 324 2,214 2,643 14 5 93 947 6,528 ----- ----- ------ ------ ---- ---- ------ ------- -------- Net Increase 4,664 1,040 12,170 19,505 161 31 766 9,837 48,174 Net Assets Available for Plan Benefits: Beginning of Year 6,518 4,755 41,516 45,340 132 136 1,086 32,732 132,215 ------- ------ ------- ------- ---- ----- ------- -------- --------- End of Year $11,182 $5,795 $53,686 $64,845 $293 $167 $1,852 $42,569 $180,389 ======= ====== ======= ======= ==== ===== ======= ======== =========
The accompanying notes are an integral part of the financial statements. DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN Statement of Changes in Net Assets Available for Plan Benefits December 31, 1992 (In Thousands)
401(k) ESOP --------------------------------------- ------------------------------------------- Balanced Index Fixed Stock Balanced Index Fixed Stock Fund Fund Fund Fund Fund Fund Fund Fund Total -------- ----- ----- ----- -------- ----- ----- ----- ----- Employee Contributions $1,094 $856 $6,764 $7,975 $ 16,689 Employer Contributions 782 782 Transfers from (to) Other Funds 304 33 (2,361) 2,024 $ 64 $ 47 $ 112 ($223) 0 ------ ---- ------ ------ ---- ---- ------ ----- -------- 1,398 889 4,403 10,781 64 47 112 (223) 17,471
Investment Income: State Street Research and Management 525 10 535 Mellon Capital Stock Index Fund 319 10 329 Interest 3,404 96 3,500 Net Depreciation (12,597) (11,897) (24,494) ----- ----- ----- ------- -- ----- ------- -------- -------- Total Additions (Deductions) 1,923 1,208 7,807 (1,816) 74 57 208 (12,120) (2,659) Distributions to Participants 232 194 1,952 1,779 8 8 60 640 4,873 ----- ----- ----- ------- -- ----- ------- ------- --------
Net Increase (Decrease) 1,691 1,014 5,855 (3,595) 66 49 148 (12,760) (7,532) Net Assets Available for Plan Benefits: Beginning of Year 4,827 3,741 35,661 48,935 66 87 938 45,492 139,747 ------ ------ ------- ------- ----- ----- ------- ------- -------- End of Year $6,518 $4,755 $41,516 $45,340 $132 $ 136 $ 1,086 $32,732 $132,215 ====== ====== ======= ======= ==== ===== ======= ======= ========
The accompanying notes are an integral part of the financial statements. DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN Statement of Changes in Net Assets Available for Plan Benefits December 31, 1991 (In Thousands)
401(k) ESOP ---------------------------------------- ----------------------------------------- Balanced Index Fixed Stock Balanced Index Fixed Stock Fund Fund Fund Fund Fund Fund Fund Fund Total --------- ----- ----- ------ -------- ----- ----- ----- ----- Employee Contributions $894 $650 $6,292 $7,188 $15,024 Employer Contributions 699 $3 702 Transfers from (to) Other Funds (828) 293 (529) 1,064 $2 ($19) $355 (338) 0 ------ ------ ------- ------ --- ---- ---- ------ -------- 66 943 5,763 8,951 2 (19) 355 (335) 15,726
Investment Income: State Street Research and Management 940 15 955 Mellon Capital Stock Index Fund 700 20 720 Interest 3,067 86 3,153 Net Appreciation 11,621 12,336 23,957 ------ ------ ------ ------- -- ---- ---- ------- -------- Total Additions 1,006 1,643 8,830 20,572 17 1 441 12,001 44,511 Distributions to Participants 181 181 1,809 2,232 13 1 52 1,159 5,628 ------ ------ ------ ------- -- ---- --- ------- -------- Net Increase 825 1,462 7,021 18,340 4 0 389 10,842 38,883
Net Assets Available for Plan Benefits: Beginning of Year 4,002 2,279 28,640 30,595 62 87 549 34,650 100,864 ------ ------ ------- ------- --- --- ---- ------- -------- End of Year $4,827 $3,741 $35,661 $48,935 $66 $87 $938 $45,492 $139,747 ====== ====== ======= ======= === === ==== ======= ========
The accompanying notes are an integral part of the financial statements. DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN Notes to Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ The following describes the significant policies followed in the preparation of these financial statements. INVESTMENTS VALUATION --------------------- Investments in securities (common and preferred stock) traded on a national securities exchange are valued at the last reported sales price on the last business day of the year. Guaranteed Investment Contracts (GICs) with Insurance Companies are valued at contract value. Benefit Accessible Securities Investment Contracts (BASICs) are carried in the financial statements at amortized cost. Investments in the Index and Balanced Funds are valued at their fair value on the last business day of the year. Investment in Pacific Investment Management Company is valued at amortized cost. OTHER ----- Purchases and sales of securities are reflected on a trade date basis. In accordance with the policy of stating investments at fair value, the Plan presents in the Statement of Changes in Net Assets the net appreciation (depreciation) in the fair value of its investments which consists of the realized gains or losses and the unrealized appreciation (depreciation) on those investments. 2. PARTICIPANT DATA ---------------- At December 31, 1993, the approximate number of employees, including former employees with remaining balances, participating by investment direction was: 401(k) ESOP ------ ---- Stock Fund 2,903 12,312 GIC Fund 913 249 Balanced Fund 64 7 Index Fund 27 6 Stock Fund and GIC Fund 6,221 379 Stock Fund and Balanced Fund 427 6 Stock Fund and Index Fund 284 7 GIC Fund and Balanced Fund 169 20 GIC Fund and Index Fund 55 7 Balanced Fund and Index Fund 39 3 Participation in three or more funds 2,990 25 ------ ------- Total participants 14,092 13,021 ====== ======= 3. PLAN DESCRIPTION ---------------- Employees of Dillon Companies, Inc. and its subsidiaries (Company) with one year of service and who have attained age 21 are eligible to become a participant as of the earliest January 1 or July 1 following completion of said eligibility requirements. The interest of all participants in the Plan are fully vested at all times and are not subject to forfeiture or cancellation under any circumstances. Plan assets are for participants only and may never revert to the employer. Plan income and expenses for each period are allocated to the participants' accounts in the ratio that the balance in the account of each participant bears to the balance of all the participants' accounts immediately before the allocation. ESOP employer contributions are allocated based on participants' salaries as stated in the Plan. All distributions to participants are in cash or in whole shares of The Kroger Co. common stock (cash is paid for fractional shares). Participants and beneficiaries individually exercise voting rights on the shares of The Kroger Co. common stock allocated to their account. Under the 401(k) salary reduction provision, each participant may make an election to have the Company contribute to the Plan on their behalf from two percent (2%) to twenty percent (20%) of the qualifying compensation that would otherwise be payable to them for the Plan year. A basic matching employer contribution is allocated to participants of the Stock Fund equal to ten percent (10%) of salaries directed by participants. A supplemental employer contribution is allocated in proportion to all participants' salaries directed to all investments. The supplemental contribution is based on the annual financial results as set by the Board of Directors of The Kroger Co. and ranges from none to twenty percent (20%) of participant contributions. For 1993, the Company made both a basic matching contribution and a supplemental contribution; for 1992 and 1991, the Company made only the basic matching contribution. The Company currently has discontinued contributions to the ESOP portion of the Plan and has no present intentions to resume such contributions. Further information about the Plan, including vesting, allocation and benefit provisions, and employer and employee contributions is contained in the Plan, and Plan amendments. Copies of these documents are available from the Company's Personnel Department. 4. INVESTMENTS ----------- The Plan's investments are held by the Dillon Companies, Inc. Employee Master Trust (the Trust) and are administered by the Dillon Companies, Inc. Trust Committee. The Trust Committee has selected investment managers, State Street Research and Management Company and the Mellon Capital Management Corp., to manage some of the fund assets. The State Street Research and Management Company is granted discretionary authority concerning investment of assets they manage. The Mellon Capital Stock Index Fund is directed by the Trust Committee to maintain a portfolio which performs comparable to the Standard & Poor's 500 Index. The net change in funds managed by investment managers includes revenue earned, unrealized and realized gains and losses on investments, and fiduciary expenses. The Plan transfers shares of The Kroger Co. common stock (at fair market value) to and from the other employee benefit plans of the Company participating in the Trust. The cost of the shares recorded by the Plan is the original cost of the shares of the transferring employee benefit plan. The resulting difference between the cost recorded and amount paid for the purchased shares is included in the determination of the net appreciation (depreciation) in fair value of the Plan's investments, which was $(1,474) in 1993, $(631) in 1992, and $1,075 in 1991. The Plan's investments (including investments bought, sold and held during the period), appreciated (depreciated) in value as follows: Kroger Stock 401(k) ESOP Total ------------ ------ ----- ----- 1991 $ 11,621 $ 12,336 $ 23,957 1992 (12,597) (11,897) (24,494) 1993 17,472 11,692 29,164 5. TAX STATUS ---------- The Fund constitutes a qualified trust under Section 401 of the Internal Revenue Code and is therefore exempt from federal income taxes under the provisions of Section 501(a). Participant contributions and earnings of the Plan are not subject to federal income tax until distribution, at which time they are taxable to the recipient. DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN SCHEDULE OF INVESTMENTS December 31, 1993 and 1992 (In Thousands)
1993 1992 ----------------------------- ----------------------------- Number of Number of Shares or Shares or Principal Principal Name of Issuer and Title of Issue Amount Cost Value Amount Cost Value - - --------------------------------- --------- ---- ----- --------- ---- ----- BALANCED FUND State Street Research and Management 401(k) $10,167 $10,167 $10,167 $6,522 $6,522 $6,522 ESOP $266 266 266 $132 132 132 INDEX FUND Mellon Capital Stock Index Fund 401(k) $5,588 5,588 5,588 $4,760 4,760 4,760 ESOP $161 161 161 $136 136 136 FIXED FUND Contracts with Insurance Companies, Benefit Accessible Securities Investment Contracts, and Pacific Investment Management Company 401(k) $52,565 52,565 52,565 $41,538 41,538 41,538 ESOP $1,814 1,814 1,814 $1,086 1,086 1,086 STOCK FUND The Kroger Co. Common Shares 401(k) 3,222 39,113 64,845 3,052 35,435 44,637 ESOP 2,115 23,530 42,569 2,238 24,853 32,732 Temporary Cash Investments ESOP -- -- -- $19 19 19 -------- -------- -------- -------- $133,204 $177,975 $114,481 $131,562 ======== ======== ======== ========
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