EX-99.1 3 l88783aex99-1.txt EXHIBIT 99.1 1 Exhibit 99.1 ------------ The Kroger Co. Savings Plan Report On Audits Of Financial Statements And Supplemental Schedules For The Years Ended December 31, 2000 and 1999 2 The Kroger Co. Savings Plan Index To Financial Statements December 31, 2000 and 1999
Pages ----- Report of Independent Accountants 2 Statement of Net Assets Available For Plan Benefits at December 31, 2000 and 1999 3 Statement of Changes in Net Assets Available For Plan Benefits for the years ended December 31, 2000 and 1999 4 Notes to Financial Statements 5-8 SUPPLEMENTAL SCHEDULE: Schedule H, Part IV, Line i - Schedule of Assets Held for Investment Purposes at December 31, 2000 9
3 REPORT OF INDEPENDENT ACCOUNTANTS To the Administrative Committee of The Kroger Co. Savings Plan In our opinion, the accompanying statement of net assets available for plan benefits and the related statement of changes in net assets available for plan benefits present fairly, in all material respects, the net assets available for plan benefits of The Kroger Co. Savings Plan (the "Plan") at December 31, 2000 and 1999, and the changes in net assets available for plan benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule referred to in the Index to Financial Statements is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ PricewaterhouseCoopers LLP Cincinnati, Ohio June 12, 2001 4 THE KROGER CO. SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS at December 31, 2000 and 1999 (In thousands of dollars) ------------------------- 2000 1999 ---------- ----------- Assets Investments: Employer Stock Fund $2,044,187 $1,080,905 Merrill Lynch Equity Index Trust 165,028 136,422 Merrill Lynch Basic Value 27,690 25,569 Merrill Lynch Global Allocation 18,085 14,807 Merrill Lynch International Index Fund 3,165 - Merrill Lynch Fundamental Growth Fund 1 - Merrill Lynch Small Cap Index Fund 3,712 - Van Kampen Emerging Growth 77,855 70,421 Van Kampen Emerging Markets 2,309 - Van Kampen American Value Fund 1,208 - Templeton Foreign 14,160 13,644 Fixed Income 235,563 141,567 Participant Loans 50,761 28,869 Temporary Investment Fund 6,086 650 ---------- ---------- Total investments 2,649,810 1,512,854 Receivables: Contributions 3,581 10,270 Interest and dividends 1,112 508 Receivables from plan trustee 561,499 -- ---------- ---------- Total assets 3,216,002 1,523,632 ---------- ---------- Liabilities Payable for administrative fees 115 207 ---------- ---------- Total liabilities 115 207 ---------- ---------- Net assets available for plan benefits $3,215,887 $1,523,425 ========== ========== The accompanying notes are an integral part of the financial statements. 3 5 THE KROGER CO. SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS for the years ended December 31, 2000 and 1999 (In thousands of dollars) Year Ended December 31, --------------------------- 2000 1999 ----------- ------------ Additions to net assets attributable to: Employee contributions $ 82,941 $ 75,244 Employer contributions 6,998 9,504 Transfer from other trusts 1,239,788 89,397 ----------- ----------- Total contributions and transfers 1,329,727 174,145 Investment activity Dividends 22,298 11,860 Interest 12,168 12,180 Net (depreciation) appreciation 410,191 (607,066) ----------- ----------- Total (reductions) additions 1,774,384 (408,881) ----------- ----------- Distributions to participants 81,135 98,193 Administrative fees 787 1,052 ----------- ----------- Total deductions 81,922 99,245 ----------- ----------- Net increase (decrease) 1,692,462 (508,126) Net assets available for plan benefits: Beginning of year 1,523,425 2,031,551 ----------- ----------- End of year $ 3,215,887 $ 1,523,425 ----------- ----------- The accompanying notes are an integral part of the financial statements. 4 6 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 equity securities, mutual funds and collective trusts are valued at fair value (quoted market prices where available) or estimated fair values. Investment contracts are valued at contract value (cost plus accrued interest). Wrapper contracts are valued based on information received from a financially responsible third party. PERVASIVENESS OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of net assets available for plan benefits as of the date of the Plan's financial statements and the reported changes in net assets available for plan benefits during the reporting period. Actual results could differ from those estimates. OTHER Purchases and sales of securities are reflected on a trade date basis. Gains or losses 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. 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. Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lowest of: a) account balance less $2,500; b) 50% of account balance; c) $50,000 less the highest outstanding loan balance over the last 12 months. Loan transactions are treated as a transfer from the investment fund to the Participant Loan Fund. Loan terms range from 1-4 years or up to 6 years for the purchase of a primary residence. The loans are collateralized by the balance in the participant's account and bear interest at a rate of Prime plus 1.5%. The rate is changed quarterly and the Prime rate used for a quarter is the Prime rate on the last business day of the previous quarter. Principal and interest are paid through periodic payroll deductions. 2. PLAN DESCRIPTION The Plan provides for eligible employees of The Kroger Co. and subsidiaries (the "Company") to redirect a portion of their salary/wages, up to limits defined in the Plan, to the investment funds of the Plan at any time. Employee contributions to the Plan are limited to the lower of $10,500 or 20% (6% if the participant is a highly compensated employee as defined by the Internal Revenue Service) of the employee's annual compensation during the period in which they are a participant in the Plan, subject to Internal Revenue Service Code limitations. At the end of each year, the Company makes a basic matching contribution into the Employer Stock Fund equal to ten percent (10%) of the salary directed by participants to the Employer Stock Fund during the year. A supplemental matching contribution is allocated in proportion to participant contributions directed to all other investment funds. This supplemental contribution is automatically invested in the Employer Stock Fund. The supplemental contribution is based on the annual financial results of the Company and determined annually by the Board of Directors. The supplemental contribution ranges from none to 20% of participant contributions. 5 7 THE KROGER CO. SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS - CONTINUED In 2000, the Company made a matching contribution but did not make a supplemental contribution. In 1999, the Company made a matching contribution and a supplemental contribution of 6%. Each participant's account is credited with the participant's contribution and an allocation of the Company's matching contribution, supplemental contribution (if any), 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 eligibility, vesting, allocation and benefit provisions, and employer and employee contributions is contained in the Plan and summary plan description. Copies of these documents are available from the Human Resources Department. 3. TRANSFERS FROM OTHER TRUSTS At the end of 2000, the Dillon Companies, Inc. Employees' Stock Ownership and Savings Plan (the Dillon Plan) was merged into the Plan. As such, participant balances of the Dillon Plan, approximately $658 million, were transferred into The Kroger Co. Savings Plan. Additionally $562 million of plan assets were transferred from the Fred Meyer, Inc. 401(k) Savings Plan (the Fred Meyer Plan) on December 29, 2000. These assets were received and held by the Plan trustee at December 31, 2000 in conjunction with the merger of the Fred Meyer Plan into the Plan as of the end of 2000 and the amendment and restatement of the Plan, effective immediately thereafter. As such, at year end, a receivable from the trustee was recorded by the Plan for these assets. On January 2, 2001 these assets were deposited into the Plan by the trustee and were allocated among the various investments. Approximately $20 million of loans that were previously a part of the Fred Meyer Plan were transferred into the Plan on December 31, 2000. During 1999, assets for the account of certain employees of wholly-owned subsidiaries of The Kroger Co. that had been held in other savings plans were transferred to the Plan. As such, approximately $89 million was transferred into the Plan in 1999. 4. INVESTMENT CONTRACTS The Plan's Fixed Income Fund contains various investment contracts which are fully benefit-responsive. A fully benefit-responsive investment provides a liquidity guarantee by a financially responsible third party of principal and previously accrued interest for liquidations, transfers, loans, or withdrawals initiated by Plan participants under the terms of the ongoing Plan. Certain employer initiated events (i.e., lay-offs, mergers, bankruptcy, Plan termination) are not eligible for the liquidity guarantee. The following information is presented in the aggregate for the investment contracts: 2000 1999 ------------ --------- Fair value $240,741 $139,487 Crediting interest rates 5.2% to 8.5% 5.2% to 7.2% Average yield 6.9% 6.6% The crediting interest rates for the investment contracts are based upon the contract rate or a predetermined formula which factors in duration, market value and book value of the investment. Certain of the crediting rates are adjusted quarterly. The minimum crediting interest rate for these investments is zero. The fair value of the investment contracts is calculated as the aggregate present value of the underlying cash flows using interest rates quoted for securities with similar duration and credit risk. 6 8 THE KROGER CO. SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS - CONTINUED 5. TAX STATUS The Plan obtained its latest determination letter in March 1999, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with 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. NON PARTICIPANT-DIRECTED INVESTMENTS Investments in the Employer Stock Fund are generated from participant-directed contributions, the Company's basic matching contribution, and the Company's supplemental matching contribution. Employee and employer amounts included in the Employer Stock Fund cannot be separately determined. Accordingly, the investments in the Employer Stock Fund are considered non participant-directed for disclosure purposes. The information about the net assets and the significant components of the changes in net assets relating to the non participant-directed investments in the Employer Stock Fund is as follows:
Investments: At December 31, ------------------------------------- 2000 1999 ---------------- --------------- Employer Stock Fund $ 2,044,187 $ 1,080,905 ================ ===============
Years Ended December 31, ------------------------------------ 2000 1999 --------------- --------------- Change in Net Assets in the Employer Stock Fund: Employee contributions $ 52,264 $ 50,787 Employer contributions 9,513 6,493 Transfer from other trusts 526,419 9,975 Interest 2,221 1,931 Net appreciation (depreciation) 454,672 (663,689) Distributions to participants (43,919) (58,717) Administrative expenses (224) (261) Transfers (to) from other funds (37,664) 98,245 ---------------- --------------- $ 963,282 $ (555,236) ================= ================
7 9 THE KROGER CO. SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS - CONTINUED 7. INVESTMENTS During 2000 and 1999, the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value by $410,191 during 2000 and depreciated in value by $607,066 during 1999, as follows:
2000 1999 ------------------ -------------------- Employer Stock Fund $ 454,672 $ (663,689) Merrill Lynch Equity Index Trust (12,765) 23,640 Merrill Lynch Basic Value (3,762) 224 Merrill Lynch Global Allocation (998) 739 Merrill Lynch International Index Fund (49) -- Merrill Lynch Small Cap Index Fund (19) -- Van Kampen Emerging Growth (25,256) -- Van Kampen Emerging Markets (446) 28,581 Van Kampen American Value Fund (116) -- Templeton Foreign (1,070) 3,439 ---------------- ----------------- $ 410,191 $ (607,066) ================ =================
8 10 THE KROGER CO. SAVINGS PLAN SCHEDULE H, Part IV Line i - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES at December 31, 2000 (In thousands of dollars) -------------------------
(c) (b) Description of investment, Including Identity of Issue, Borrower, Maturity Date, Rate of Interest, (d) (e) (a) Lessor or Similar Party Collateral, Par or Maturity Value Cost Current Value ------- -------------------------------- --------------------------------------------- ------------------- ---------------------- * Employer Stock Fund The Kroger Co. common shares $ 576,801 $2,044,187 * Merrill Lynch Equity Index Fund 114,220 165,028 Basic Value Fund 29,458 27,690 Global Allocation Fund 19,431 18,085 International Index Fund 3,425 3,165 Fundamental Growth Fund 1 1 Small Cap Index Fund 3,843 3,712 Van Kampen Emerging Growth Fund 75,987 77,855 Emerging Markets Fund 3,079 2,309 American Value Fund 1,348 1,208 Templeton Foreign Fund 13,593 14,160 Fixed Income Fund Guaranteed Investment Contracts(GICs)(Variable maturities; interest rates from 6.6% to 6.8%) 32,884 32,884 Synthetic GICs (Maturities ranging from July 2001 to December 2045; interest rates from 5.2% to 8.5%) 202,679 207,857 Wrapper Contracts for synthetic GICs -- (5,178) -------------- --------------- Total Fixed Income 235,563 235,563 Participant Loans Loans to Participants (Maturities from 1-6 years; interest rates of Prime plus 1.5%) -- 50,761 Temporary Investment Fund Temporary Cash Investments 6,086 6,086 -------------- --------------- TOTAL $1,082,835 $2,649,810 ============== ===============
* Denotes party-in-interest. 9 11 DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 12 DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN Index to Financial Statements December 31, 2000 and 1999
Pages Report of Independent Accountants 2 Statement of Net Assets Available For Plan Benefits at December 31, 2000 and 1999 3 Statement of Changes in Net Assets Available For Plan Benefits for the years ended December 31, 2000 and 1999 4 Notes to Financial Statements 5 - 7 SUPPLEMENTAL SCHEDULES: Schedule H, Part IV, Line i - Schedule of Assets Held for Investment at December 31, 2000 8 Schedule H, Part IV, Line j - Schedule of Reportable Transactions 9
1 13 REPORT OF INDEPENDENT ACCOUNTANTS --------------------------------- To the Trust Committee Dillon Companies, Inc. Employees' Stock Ownership and Savings Plan In our opinion, the accompanying statement of net assets available for plan benefits and the related statement of changes in net assets available for plan benefits present fairly, in all material respects, the net assets available for plan benefits of Dillon Companies, Inc. Employees' Stock Ownership and Savings Plan (the "Plan") at December 31, 2000 and 1999, and the changes in net assets available for plan benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules referred to in the Index to Financial Statements are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan's management. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ PricewaterhouseCoopers LLP Cincinnati, Ohio June 12, 2001 2 14 DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN Statement of Net Assets Available for Plan Benefits At December 31, 2000 and 1999
Assets 2000 1999 ------ ------------ ------------ Temporary Investment Fund $ 330,946 $ 2,954,492 Fixed Income -- 68,692,353 The Kroger Co. common stock -- 378,176,896 Trust funds managed by: Sanford C. Bernstein & Co. -- 21,699,098 State Street Global Advisors Index Fund -- 36,223,166 ------------ ------------ Total assets 330,946 507,746,005 Liabilities ----------- Accounts payable -- 200,795 ------------ ------------ Net assets available for plan benefits $ 330,946 $507,545,210 ============ ============
The accompanying notes are an integral part of the financial statements. 3 15 DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN Statement of Changes in Net Assets Available for Plan Benefits For the Years Ended December 31, 2000 and 1999
Additions to (reductions in) net assets attributable to: 2000 1999 ---------------- ----------------- Employee Contributions $ 23,787,901 $ 26,759,713 Employer Contributions -- 2,933,393 Transfer to other trusts (657,839,144) (78,196,732) --------------- ----------------- Total contributions and transfers (634,051,243) (48,503,626) Investment Activity Dividends and Interest 5,739,209 5,953,990 Net appreciation (depreciation) 153,078,156 (214,427,197) --------------- ----------------- Total additions (reductions) (475,233,878) (256,976,833) --------------- ----------------- Distributions to participants 31,856,604 41,062,823 --------------- ----------------- Administrative fees 123,782 84,476 --------------- ----------------- Total deductions 31,980,386 41,147,299 --------------- ----------------- Net increase (decrease) (507,214,264) (298,124,132) Net assets available for plan benefits: Beginning of year 507,545,210 805,669,342 --------------- ----------------- End of year $ 330,946 $ 507,545,210 =============== =================
The accompanying notes are an integral part of the financial statements. 4 16 DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN Notes to Financial Statements December 31, 2000 and 1999 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements have been prepared on an accrual basis and present the net assets available for plan benefits and changes in those net assets based on fair value (quoted market prices where available). Fixed income investments are valued at contract value (cost plus accrued interest). Purchases and sales of The Kroger Co. common stock are recorded on a trade date basis. The Dillon Companies, Inc. Employees' Stock Ownership and Savings Plan (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) DESCRIPTION OF DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN Employees of Dillon Companies, Inc. (the Company) and its subsidiaries with one year of service and who have attained age 21 are eligible to become a participant on January 1 or July 1 following completion of eligibility requirements. The Plan provides for eligible employees to redirect a portion of their salary, up to limits defined in the Plan, to the investment funds of the Plan at any time. The investment balance of all participants in the Plan is fully vested at all times and is 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. 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, Plan participants may make an election to have the Company contribute to the Plan on their behalf from 2% to 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 Employer Stock Fund equal to ten percent (10%) of salaries directed by participants to this fund. 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 of The Kroger Co. and determined annually by the Board of Directors. The Company 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 summary plan description. Copies of these documents are available from the Company's Human Resources Department. 5 17 DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN Notes to Financial Statements, Continued December 31, 2000 and 1999 3) TRANSFERS TO OTHER TRUSTS During 1999, assets for the account of certain employees of wholly-owned subsidiaries of The Kroger Co., that had been held in other savings plans were transferred to The Kroger Co. Savings Plan. As such, approximately $78 million was transferred out of the Plan in 1999. At the end of 2000, the Plan was merged into The Kroger Co. Savings Plan. As such, participant balances of approximately $658 million were transferred out of the Trust. The remaining $330,946 was kept in the Temporary Investment Fund and was transferred to the Kroger Plan subsequent to the end of 2000. 4) FIXED INCOME INVESTMENTS All of the Plan's fixed income investments are fully benefit-responsive. A fully benefit-responsive investment provides a liquidity guarantee by a financially responsible third party of principal and previously accrued interest for liquidations, transfers, loans, or withdrawals initiated by plan participants under the terms of the ongoing Plan. Certain employer initiated events (i.e. lay-offs, mergers, bankruptcy, plan termination) are not eligible for the liquidity guarantee. The following information is presented in the aggregate for the fixed income investments: 2000 1999 ----- ----------- Fair Value -- $70,698,625 Average Yield 6.90% 7.80% The fair value of the fixed investments is calculated as the aggregate present value of the underlying cash flows using interest rates quoted for securities with similar duration and credit risk. 5) TAX STATUS The Internal Revenue Service has issued a determination letter to the Plan that the requirements for a qualified plan under Section 401(a) of the Internal Revenue Code have been met and the Plan is exempt from federal and state income taxes. 6) PRIORITIES UPON TERMINATION OF THE PLAN It is the intent of the Company to continue the Plan (or the successor thereto) indefinitely; however, the Company reserves the right to terminate the Plan (or the successor thereto) at any time. In the event of termination of the Plan (or the successor thereto), the Trustees shall continue to administer the Plan (or the successor thereto) in accordance with the provisions of the Plan (or the successor thereto) until all obligations have been discharged or satisfied. 7) USE OF ESTIMATES The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of net assets available for plan benefits as of the date of the Plan's financial statements and the reported changes in net assets available for plan benefits during the reporting period. Actual results could differ from those estimates. 6 18 DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN Notes to Financial Statements, Continued December 31, 2000 and 1999 8) NONPARTICIPANT-DIRECTED INVESTMENTS Information about the net assets and the significant components of the changes in net assets relating to the nonparticipant-directed investments is as follows : Net Assets 2000 1999 ---------- ------ ------------- The Kroger Co. common stock $ -- $ 378,176,896 ====== =============
Changes in Net Assets --------------------- Contributions $ 16,133,384 $ 20,569,936 Net appreciation (depreciation) 162,847,661 (223,185,255) Benefits paid to participants (24,533,332) (28,613,716) Transfers in (out) within trust (6,206,966) 16,077,288 Transfers to another trust (526,417,643) (61,585,320) ---------------- ----------------- $ (378,176,896) $ 276,737,067 ================ =================
9) INVESTMENTS During 2000 and 1999 the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value by $153,078,156 during 2000 and depreciated in value by $214,427,197 during 1999 as follows: 2000 1999 ---------------- ------------------ Employer Stock Fund $ 162,847,661 $ (223,185,255) Mutual Funds (9,769,505) 8,758,058 ----------------- ------------------ $ 153,078,156 $ (214,427,197) ================= ================== 7 19 DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN SCHEDULE H, PART IV, LINE i - SCHEDULE OF ASSETS HELD FOR INVESTMENT at December 31, 2000
(a) (b) (c) (d) (e) Identity of Issue, Borrower, Description of investment, Including Cost Current Value Lessor or Similar Party Maturity Date, Rate of Interest, Collateral, Par or Maturity Value ------- ------------------------------------------------------------------------------ ------------------- ---------------------- Temporary Investment Fund Temporary Cash Investments $ 330,946 $ 330,946 ================ ===============
8 20 DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN SCHEDULE H, PART IV, LINE j - SCHEDULE OF REPORTABLE TRANSACTIONS for the year ended December 31, 2000
(a) (b) (c) (d) (e) (f) (g) (h) (i) Identity of Description Purchase Selling Lease Expense Incurred Cost of Asset Current Value of Net Gain or Party Involved of Asset Price Price Rental with Transaction Asset on (Loss) Transaction Date -------------- ----------- -------- ------- ------ ---------------- ------------- ---------------- ----------- State Street Global Issues Trust Index Fund Investment -- $36,703,778 -- -- $36,703,778 $36,703,778 -- Merrill Lynch Equity Index $36,703,778 -- -- -- $36,703,778 $36,703,778 --
9 21 FRED MEYER, INC. 401(K) SAVINGS PLAN FOR COLLECTIVE BARGAINING UNIT EMPLOYEES REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2000 AND THE PERIOD FROM JULY 1, 1999 THROUGH DECEMBER 31, 1999 22 FRED MEYER, INC. 401(K) SAVINGS PLAN FOR COLLECTIVE BARGAINING UNIT EMPLOYEES TABLE OF CONTENTS
PAGE ---- Report of Independent Accountants ................................. 1 Financial Statements: Statements of Net Assets Available for Benefits at December 31, 2000 and 1999 .................................. 3 Statements of Changes in Net Assets Available for Benefits For the Year Ended December 31, 2000 and the Period from July 1, 1999 through December 31, 1999 .......... 4 Notes to the Financial Statements .............................. 5 Supplemental Schedule:* Schedule H, line 4i - Schedule of Assets (Held at end of year) as of December 31, 2000 ..................................... 10
* Other schedules required by Section 2520.103-10 of the Department of Labor's Rules and Regulations for Reporting and Disclosure under ERISA have been omitted because they are not applicable. 23 REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Administrator of the Fred Meyer, Inc. 401(k) Savings Plan for Collective Bargaining Unit Employees We have audited the accompanying statements of net assets available for benefits (modified cash basis) of the Fred Meyer, Inc. 401(k) Savings Plan for Collective Bargaining Unit Employees (the Plan) as of December 31, 2000 and 1999, and the related statements of changes in net assets available for benefits (modified cash basis) for the year ended December 31, 2000 and the period from July 1, 1999 through December 31, 1999. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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. As described in Note 2, these financial statements were prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2000 and 1999, and the changes in net assets available for benefits for the year ended December 31, 2000 and the period from July 1, 1999 through December 31, 1999, on the basis of accounting described in Note 2. 1 24 Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule (modified cash basis) of reportable transactions is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ PricewaterhouseCoopers LLP June 22, 2001 2 25 FRED MEYER, INC. 401(K) SAVINGS PLAN FOR COLLECTIVE BARGAINING UNIT EMPLOYEES STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 31, 2000 AND 1999
2000 1999 ---- ---- ASSETS Investments (Note 3) $ 596,292 $41,338,502 Cash 45,846,619 -- Participant loans 2,232,708 1,917,613 ----------- ----------- Net assets available for benefits $48,675,619 $43,256,115 =========== ===========
The accompanying notes are an integral part of the financial statements. 3 26 FRED MEYER, INC. 401(K) SAVINGS PLAN FOR COLLECTIVE BARGAINING UNIT EMPLOYEES STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 2000 AND THE PERIOD FROM JULY 1, 1999 THROUGH DECEMBER 31, 1999
2000 1999 ---- ---- Additions: Assets transferred from predecessor benefit plans (Note 1): Transferred assets $ -- $36,488,661 Transferred loans (net of forfeitures) -- 1,872,704 ------------ ----------- -- 38,361,365 ------------ ----------- Investment income: Net appreciation (depreciation) in fair value of investments (1,830,902) 2,101,724 Interest and dividends 2,415,631 872,546 ------------ ----------- Net investment income 584,729 2,974,270 ------------ ----------- Contributions: Participant 9,352,606 3,241,763 ------------ ----------- Total additions 9,937,335 44,577,398 ------------ ----------- Deductions: Administrative fees 10,450 2,850 Benefit payments to participants 4,507,381 1,318,433 ------------ ----------- Total deductions 4,517,831 1,321,283 ------------ ----------- Net increase (decrease) in net assets available for benefits 5,419,504 43,256,115 Net assets available for benefits, beginning of period 43,256,115 -- ------------ ----------- Net assets available for benefits, end of period $ 48,675,619 $43,256,115 ============ ===========
The accompanying notes are an integral part of the financial statements. 4 27 FRED MEYER, INC. 401(K) SAVINGS PLAN FOR COLLECTIVE BARGAINING UNIT EMPLOYEES NOTES TO THE FINANCIAL STATEMENTS 1. DESCRIPTION OF THE PLAN The following description of the Fred Meyer, Inc. 401(k) Savings Plan for Collective Bargaining Unit Employees (the Plan) is provided for general information purposes only. Participants should refer to the Plan document for more complete information. GENERAL The Plan is sponsored by Fred Meyer, Inc. (a wholly-owned subsidiary of The Kroger Co.), a Delaware corporation, and its wholly-owned subsidiaries (collectively, the Company). The Plan is a defined contribution plan covering all employees of the Company who are 21 years of age and older, are covered by a collective bargaining agreement and have completed one year of service. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). On July 1, 1999, certain assets of collective bargaining unit employees participating in Smith's Food and Drug 401(k) Savings Plan were transferred to the Plan due to the merger between Fred Meyer, Inc. and Smith's Food & Drug Centers, Inc. CONTRIBUTIONS Contributions to the Plan consist of contributions made by eligible employees to a trust. Each year participants may contribute to the Plan up to a maximum of 18% of their pretax annual compensation. Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans subject to approval by the Administrative Committee. Participants direct the investment of their contributions into various investment options offered by the Plan. Contributions are subject to certain limitations. PARTICIPANT ACCOUNTS Each participant's account is credited with the participant's contribution and an allocation of Plan earnings or losses. Allocations are based on participant earnings/losses or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account. VESTING All accounts of a participant are fully vested at all times. 5 28 FRED MEYER, INC. 401(K) SAVINGS PLAN FOR COLLECTIVE BARGAINING UNIT EMPLOYEES NOTES TO FINANCIAL STATEMENTS, CONTINUED 1. DESCRIPTION OF THE PLAN (CONTINUED) PARTICIPANT LOANS Participants may borrow from their account from a minimum of $1,000 up to a maximum of $50,000 or 50% of their account balance, whichever is less. The loans are secured by the balance in the participant's account and bear interest at rates that range from 6% to 11%, which are commensurate with local prevailing rates as determined quarterly by the Plan administrator. Principal and interest is paid ratably through monthly payroll deductions. INVESTMENT OPTIONS The Plan's investment options are comprised of The Kroger Co.'s common stock and ten T. Rowe Price mutual and trust funds - Blue Chip Growth Fund, Equity Income Fund, Summit Cash Reserve Fund, Balanced Fund, Small Cap Stock Fund, Mid Cap Growth Fund, Bond Indexed Trust, International Stock Fund, Equity Index Trust and Blended Summit Cash Reserves Fund. The investment strategies of these funds are as follows: Blue Chip Growth Fund (BCG) - The fund's investment objective is to provide long-term capital growth. Income is a secondary objective. Equity Income Fund (EIF) - The fund's investment objective is to provide substantial dividend income as well as long-term capital appreciation through investments in common stocks of established companies. Summit Cash Reserves Fund (SCR) - The fund seeks to provide preservation of capital, liquidity, and, consistent with these, the highest possible current income. Balanced Fund (BAL) - The fund's investment objective is to provide capital appreciation, current income and preservation of capital through a portfolio of stocks and fixed income securities. Small Cap Stock Fund (SCS) - The fund's investment objective is to provide long-term capital growth by investing primarily in stocks of small companies. Mid Cap Growth Fund (MCG) - The fund's investment objective is to provide long-term capital appreciation by investing in mid cap stocks offering the potential for above average earnings growth. Bond Indexed Trust (BIT) - The investment objective of the trust is to track returns associated with government bonds. International Stock Fund (ISF) - The fund's investment objective is long-term growth of capital through investments primarily in common stocks of established, non-U.S. companies. 6 29 FRED MEYER, INC. 401(K) SAVINGS PLAN FOR COLLECTIVE BARGAINING UNIT EMPLOYEES NOTES TO FINANCIAL STATEMENTS, CONTINUED 1. DESCRIPTION OF THE PLAN (CONTINUED) INVESTMENT OPTIONS (CONTINUED) Equity Index Trust (EIT) - The fund's investment objective is to match the performance of the Standard & Poor's 500 Stock Index (S&P 500). The S&P 500 is made up of primarily large capitalization companies that represent a broad spectrum of the U.S. economy and about 70% of the U.S. stock market's total capitalization. Blended Summit Cash Reserves Fund (FMSCR) - The fund's investment objective is the preservation of capital, and liquidity and, consistent with these, the highest possible current income. As of December 31, 2000, assets were held as cash and The Kroger Co. common stock in order to transfer them to the new Plan trustee, Merrill Lynch (see Note 6). PAYMENT OF BENEFITS Participants are entitled to the benefit that could be provided by their contributions and income thereon (including net realized and unrealized investment gains and losses) allocated to their accounts. All retirement (normal retirement age is 65), disability, and beneficiary death benefits are paid in a lump sum or in a partial lump sum. Death benefits are paid to beneficiaries in a lump sum. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements of the Plan were prepared using the modified cash basis of accounting, which is the equivalent of the accrual basis except that certain income receivable, contributions receivable and other accruals are not recorded. This practice is not in accordance with accounting principles generally accepted in the United States of America, but is permitted under ERISA. USE OF ESTIMATES The preparation of financial statements in conformity with the modified cash basis of accounting requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. INVESTMENT VALUATION AND INCOME RECOGNITION The Plan's investments are stated at fair value. Quoted market prices are used to value investments. Shares of mutual funds are valued at the net asset value of shares held by the Plan at year-end. Purchases and sales of securities are recorded on a trade-date basis. Interest income and dividend income are recorded on the date received by the Plan. PAYMENT OF BENEFITS Benefits are recorded when paid. 7 30 FRED MEYER, INC. 401(K) SAVINGS PLAN FOR COLLECTIVE BARGAINING UNIT EMPLOYEES NOTES TO FINANCIAL STATEMENTS, CONTINUED 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FEES AND EXPENSES The Plan provides that the Company will pay the administrative costs and expenses of the Plan including the trustee and management fees. Such costs not paid by the Company are paid from Plan assets. 3. INVESTMENTS The Plan's assets held for investment purposes at December 31 are presented in the following table:
2000 1999 ---- ---- The Kroger Co. common stock, 21,799 shares and 7,620 shares in 2000 and 1999 respectively $ 596,292 $ 143,825 T. Rowe Price Blue Chip Growth Fund, 522,562 shares -- 18,989,927 * T. Rowe Price Equity Income Fund, 8,722 shares -- 216,399 T. Rowe Price Summit Cash Reserves, 3,833,543 shares -- 3,833,543 * T. Rowe Price Balanced Fund, 308,473 shares -- 6,073,836 * T. Rowe Price Small Cap Stock Fund, 2,013 shares -- 45,904 T. Rowe Price Mid Cap Growth Fund, 141,776 shares -- 5,689,465 * T. Rowe Price Bond Indexed Trust, 232,282 shares -- 3,533,014 * T. Rowe Price International Stock Fund, 93,302 shares -- 1,775,546 T. Rowe Price Equity Index Trust, 26,915 shares -- 1,037,043 Participant loans $2,282,708 1,917,613 ---------- ----------- Total assets held for investment purposes $2,829,000 $43,256,115 ========== ===========
* Represents 5% or more of net assets available for benefits. During the year ended December 31, 2000 and the period from July 1, 1999 through December 31, 1999, the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value by ($1,830,902) and $2,101,724, respectively, as follows:
2000 1999 ---- ---- Mutual funds $(2,014,329) $2,084,801 Common stock 183,427 16,923 ----------- ---------- $(1,830,902) $2,101,724 =========== ==========
8 31 FRED MEYER, INC. 401(K) SAVINGS PLAN FOR COLLECTIVE BARGAINING UNIT EMPLOYEES NOTES TO FINANCIAL STATEMENTS, CONTINUED 4. RELATED PARTY TRANSACTIONS Certain Plan investments are shares of mutual funds managed by T. Rowe Price. T. Rowe Price is the trustee and recordkeeper as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions. Fees paid by the Plan for the investment management and recordkeeping services amounted to $10,450 and $2,850 for the year ended December 31, 2000 and the period from July 1, 1999 through December 31, 1999, respectively. 5. TAX STATUS The Plan obtained its latest determination letter on April 21, 1998, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code (IRC). The Plan had been amended since receiving the determination letter. However, the Plan administrator and the Plan's tax counsel believe that the Plan was designed and was operated in compliance with the applicable requirements of the IRC. 6. SUBSEQUENT EVENTS The Administrative Committee of the Plan voted to rename the Plan The Kroger Co. Savings Plan for Bargaining Unit Associates and change the Plan trustee and recordkeeper to Merrill Lynch, effective January 1, 2001. Accordingly, the Plan trustee converted invested assets to cash on December 29, 2000 to facilitate the transfer of Plan assets to Merrill Lynch on January 2, 2001. On January 1, 2001, certain participants were transferred to the Kroger Co. Savings Plan. Cash and investments of $22,529,983 and participant loans of $1,579,161 were transferred on January 2, 2001. 9 32 FRED MEYER, INC. 401(K) SAVINGS PLAN FOR COLLECTIVE BARGAINING UNIT EMPLOYEES SCHEDULE H, LINE 41, - SCHEDULE OF ASSETS (HELD AT END OF YEAR) AS OF DECEMBER 31, 2000
(c) Description of investment, (b) including maturity date, rate (c) Identity of issue, of interest, collateral, par or (d) Current (a) borrower, lessor, or similar party maturity value Cost** value --- ---------------------------------- ------------------------------- ------ ---------- * The Kroger Co. Company Stock $ -- $ 596,292 * Participant loans Interest rates from 8.25% to 10.00% due from January 2001 to May 2025 -- 2,232,708
* Represents party-in-interests. ** Historical cost has not been presented as all investments are participant directed. 10 33 Fred Meyer, Inc. 401(k) Savings Plan Report and Financial Statements For the Period From April 1, 2000 through December 31, 2000 and the Year Ended March 31, 2000 34 FRED MEYER, INC. 401(K) SAVINGS PLAN TABLE OF CONTENTS PAGE Report of Independent Accountants ....................................... 1 Financial Statements: Statements of Net Assets Available for Benefits at December 31, 2000 and March 31, 2000 .............................. 3 Statements of Changes in Net Assets Available for Benefits For the Period From April 1, 2000 through December 31, 2000 and the Year Ended March 31, 2000 ................................. 4 Notes to Financial Statements ........................................ 5 Other schedules required by Section 2520.103-10 of the Department of Labor's Rules and Regulations for Reporting and Disclosure under ERISA have been omitted because they are not applicable. 35 REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Administrator of the Fred Meyer, Inc. 401(k) Savings Plan We have audited the accompanying statements of net assets available for benefits (modified cash basis) of the Fred Meyer, Inc. 401(k) Savings Plan (the Plan) as of December 31, 2000 and March 31, 2000, and the related statements of changes in net assets available for benefits (modified cash basis) for the period from April 1, 2000 through December 31, 2000 and the year ended March 31, 2000. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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. As described in Note 2, these financial statements were prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2000 and March 31, 2000, and the changes in net assets available for benefits for the period from April 1, 2000 through December 31, 2000 and the year ended March 31, 2000, on the basis of accounting described in Note 2. 1 36 As further discussed in Note 1 to the financial statements, the Plan was merged into The Kroger Co. Savings Plan at the end of the Plan year. Plan assets were transferred on December 29, 2000, the final business day of the Plan year. /s/ PricewaterhouseCoopers LLP June 22, 2001 2 37 FRED MEYER, INC. 401(K) SAVINGS PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 31, 2000 AND MARCH 31, 2000 DECEMBER 31, MARCH 31, 2000 2000 ------------ --------- ASSETS Investments (Note 3) $ -- $553,133,672 Participant loans -- 12,633,431 Cash -- 10,091 ---- ------------ Net assets available for benefits $ -- $565,777,194 ==== ============ The accompanying notes are an integral part of the financial statements. 3 38 FRED MEYER, INC. 401(K) SAVINGS PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE PERIOD FROM APRIL 1, 2000 THROUGH DECEMBER 31, 2000 AND THE YEAR ENDED MARCH 31, 2000
DECEMBER 31, MARCH 31, 2000 2000 ------------- ------------ Additions: Assets transferred from predecessor benefit plans (Note 1): Transferred assets $ 40,361,437 $472,841,219 Transferred loans 1,512,171 2,808,255 ------------- ------------ Total transfers 41,873,608 475,649,474 ------------- ------------ Investment income: Net appreciation (depreciation) in fair value of investments (Note 3) (37,164,441) 53,722,859 Interest and dividends 25,491,227 19,048,368 ------------- ------------ Net investment income (loss) (11,673,214) 72,771,227 ------------- ------------ Contributions: Employee contributions 28,613,338 36,919,147 Employer contributions 14,131,395 18,184,839 ------------- ------------ Total contributions 42,744,733 55,103,986 ------------- ------------ Total additions 72,945,127 603,524,687 ------------- ------------ Deductions: Benefit payments to participants 58,465,629 37,648,576 Administrative expenses (Note 4) 190,839 98,917 Assets transferred to The Kroger Co. 401(k) Plan (Note 1): Transferred assets 561,423,430 -- Transferred loans 18,642,423 -- ------------- ------------ Total deductions 638,722,321 37,747,493 ------------- ------------ Net increase (decrease) in net assets available for benefits (565,777,194) 565,777,194 Net assets available for benefits, beginning of period 565,777,194 -- ------------- ------------ Net assets available for benefits, end of period $ -- $565,777,194 ============= ============
The accompanying notes are an integral part of the financial statements. 4 39 FRED MEYER, INC. 401(K) SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS 1. DESCRIPTION OF THE PLAN The following description of the Fred Meyer, Inc. 401(k) Savings Plan (the Plan) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions. GENERAL The Plan is sponsored by Fred Meyer, Inc., (a wholly-owned subsidiary of The Kroger Co.), a Delaware corporation, and its wholly-owned subsidiaries (collectively, the Company). The Plan is a defined contribution plan covering all employees of the Company. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). All employees who are 21 years of age and older and have completed one year of service are eligible to participate in the Plan, unless their employment is subject to a collective bargaining agreement, are non-resident aliens or leased employees. On April 1, 1999, the following plans were merged into the Fred Meyer, Inc. 401(k) Savings Plan: o Fred Meyer Profit Sharing Plan o Ralphs Grocery Company Savings Plan Plus - Primary o Ralphs Grocery Company Savings Plan Plus - Basic o Hughes Markets, Inc. Employee's Profit Sharing Plan o Keith Uddenberg, Inc. 401(k) Profit Sharing Plan and Trust o Quality Food Centers Defined Contribution Plan o Quality Food Centers 401(k) Retirement Plan On July 1, 1999, the Smith's Food & Drug Centers, Inc. 401(k) Savings Plan was merged into the Fred Meyer, Inc. 401(k) Savings Plan. On August 15, 2000, the Ralphs Grocery Company Savings Plan Plus - ESOP transferred its non-stock assets and loans into the Plan. PLAN MERGER On December 29, 2000, the assets of the Plan were transferred to The Kroger Co. Savings Plan as a result of the merger of the Plan into The Kroger Co. Savings Plan. Participant account balances were mapped by investment strategy into mutual funds managed by Merrill Lynch, the new Plan's trustee and recordkeeper. CONTRIBUTIONS Each year participants may contribute up to 18% of pretax annual compensation, as defined by the Plan. Participants direct the investment of their contributions into various investment options offered by the Plan. The Plan currently offers ten mutual funds and a direct investment into Kroger Co. stock to all eligible participants. The Company contributes 100% of the first 3% of salary deferrals plus 50% of the next 2% of deferrals. The matching contributions are invested as the participants have designated for their salary contributions. 5 40 FRED MEYER, INC. 401(K) SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS, CONTINUED 1. DESCRIPTION OF THE PLAN (CONTINUED) CONTRIBUTIONS (CONTINUED) Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans, subject to the approval by the Administrative Committee. Participants direct the investment of their contributions into various investment options offered by the Plan. Contributions are subject to certain limitations. PARTICIPANT ACCOUNTS Each participant's account is credited with the participant's contribution and allocations of (a) the Company's matching contribution and (b) Plan earnings and losses. Allocations are based on participant earnings/losses or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account. VESTING Participants are vested immediately in their contributions plus actual earning thereon, rollover contributions and earnings thereon, predecessor plan contributions and earnings thereon, and company matching contributions and earnings thereon. PARTICIPANT LOANS Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. The loans are secured by the balance in the participant's account and bear interest at rates that range from 8% to 10%, which are commensurate with local prevailing interest rates for similar borrowing as determined monthly by the Plan Committee. Principal and interest is paid ratably through weekly payroll deductions. INVESTMENT OPTIONS The Plan's investment options are comprised of The Kroger Co. common stock and ten T. Rowe Price mutual and trust funds - Blue Chip Growth Fund, Equity Income Fund, Blended Summit Cash Reserve Fund, Balanced Fund, Small Cap Stock Fund, Mid Cap Growth Fund, Bond Indexed Trust, International Stock Fund, Equity Index Trust and Summit Cash Reserves Fund. The investment strategies of these funds are as follows: Blue Chip Growth Fund (BCG) - The fund's investment objective is to provide long-term capital growth. Income is a secondary objective. Equity Income Fund (EIF) - The fund's investment objective is to provide substantial dividend income as well as long-term capital appreciation through investments in common stocks of established companies. Blended Summit Cash Reserve Fund (BSCR) - The fund's investment objective is the preservation of capital and liquidity and, consistent with these, the highest possible current income. 6 41 FRED MEYER, INC. 401(K) SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS, CONTINUED 1. DESCRIPTION OF THE PLAN (CONTINUED) INVESTMENT OPTIONS (CONTINUED) Balanced Fund (BAL) - The fund's investment objective is to provide capital appreciation, current income and preservation of capital through a portfolio of stocks and fixed income securities. Small Cap Stock Fund (SCS) - The fund's investment objective is to provide long-term capital growth by investing primarily in stocks of small companies. Mid Cap Growth Fund (MCG) - The fund's investment objective is to provide long-term capital appreciation by investing in mid cap stocks offering the potential for above average earnings growth. Bond Indexed Trust (BIT) - The investment objective of the trust is to track returns associated with government bonds. International Stock Fund (ISF) - The fund's investment objective is long-term growth of capital through investments primarily in common stocks of established, non-U.S. companies. Equity Index Trust (EIT) - The fund's investment objective is to match the performance of the Standard & Poor's 500 Stock Index (S&P 500). The S&P 500 is made up of primarily large capitalization companies that represent a broad spectrum of the U.S. economy and about 70% of the U.S. stock market's total capitalization. Summit Cash Reserves Fund (SCR) - The fund seeks to provide preservation of capital, liquidity and, consistent with these, the highest possible current income. PAYMENT OF BENEFITS On termination of service due to death, disability, or retirement, a participant may elect to receive either a lump-sum amount equal to the value of the participant's vested interest in his or her account, annual installments up to a maximum of 20 years, or the participant's life expectancy. For termination of service for other reasons, a participant may receive the value of the vested interest in his or her account as a lump-sum distribution. Hardship and financial need withdrawals are provided to the extent of the participant's need, grossed up for taxes and penalties, and matching contributions are not available for hardship withdrawal. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements of the Plan were prepared using the modified cash basis of accounting, which is the equivalent of the accrual basis except that certain income receivable, contribution receivable and other accruals balances are not recorded. This practice is not in accordance with accounting principles generally accepted in the United States of America, but is permitted under ERISA. 7 42 FRED MEYER, INC. 401(K) SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS, CONTINUED 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) USE OF ESTIMATES The preparation of financial statements in conformity with the modified cash basis of accounting requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. INVESTMENT VALUATION AND INCOME RECOGNITION The Plan's investments are stated at fair value. Quoted market prices are used to value investments. Shares of mutual funds are valued at the net asset value of shares held by the Plan at year end. Purchases and sales of securities are recorded on a trade-date basis. Interest income and dividend income are recorded on the date received by the Plan. PAYMENT OF BENEFITS Benefits are recorded when paid. FEES AND EXPENSES The Plan provides that the Company will pay the administrative costs and expense of the Plan including the trustee and management fees. Such costs not paid by the Company are paid from the Plan assets. 3. INVESTMENTS The Plan's assets held for investment purposes at December 31, 2000 and March 31, 2000 are presented in the following table:
DECEMBER 31, MARCH 31, 2000 2000 ----------- ------------ The Kroger Co. common stock; 844,082 shares $ -- $ 14,824,188 T. Rowe Price Blue Chip Growth Fund; 5,959,918 shares -- 230,231,620 * T. Rowe Price Equity Income Fund; 603,096 shares -- 14,015,951 T. Rowe Price Blended Summit Cash Reserve Fund; 40,558,003 shares -- 40,558,003 * T. Rowe Price Balanced Fund; 8,650,574 shares -- 173,270,995 * T. Rowe Price Small Cap Stock Fund; 247,624 shares -- 6,173,256 T. Rowe Price Mid Cap Growth Fund; 417,984 shares -- 18,445,619 T. Rowe Price Bond Indexed Trust; 1,061,211 shares -- 16,512,439 T. Rowe Price International Stock Fund; 567,072 shares -- 10,842,426 T. Rowe Price Equity Index Trust; 717,056 shares -- 28,259,175 Participant loans -- 12,633,431 ---- ------------ Total assets held for investment purposes $ -- $565,767,103 ==== ============ * Represents 5% or more of net assets available for benefits.
8 43 FRED MEYER, INC. 401(K) SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS, CONTINUED 3. INVESTMENTS (CONTINUED) During the period from April 1, 2000 through December 31, 2000 and the year ended March 31, 2000, the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value by ($37,164,441) and $53,722,859, respectively, as follows: DECEMBER 31, MARCH 31, 2000 2000 ------------ ----------- Common stock $ 7,690,908 $ 1,047,276 Mutual funds (44,855,349) 52,675,583 ------------ ----------- $(37,164,441) $53,722,859 ============ =========== 4. RELATED PARTY TRANSACTIONS Certain Plan investments are shares of mutual funds managed by T. Rowe Price. T. Rowe Price is the trustee and recordkeeper as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions. Fees paid by the Plan for the investment management and recordkeeping services amounted to $190,839 and $98,917 for the period from April 1, 2000 through December 31, 2000 and the year ended March 31, 2000, respectively. 5. TAX STATUS A tax determination letter request from the Internal Revenue Services had been completed by the Plan's administrator and tax counsel. The Plan administrator and the Plan's tax counsel believe the Plan was designed and was operated in compliance with the applicable requirements of the Internal Revenue Code. 9 44 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) 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: June 28, 2001 By (*Joseph A. Pichler) Joseph A. Pichler, Chairman of the Board of Directors and Chief Executive Officer Dated: June 28, 2001 By (*J. Michael Schlotman) J. Michael Schlotman Group Vice President and Chief Financial Officer Dated: June 28, 2001 By (*M. Elizabeth Van Oflen) M. Elizabeth Van Oflen Vice President & Corporate Controller and Principal Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities indicated on the 28th day of June, 2001. (*Reuben V. Anderson) Director Reuben V. Anderson Director ------------------------- Robert D. Beyer (*John L. Clendenin) Director John L. Clendenin (*David B. Dillon) President, Chief Operating David B. Dillon Officer, and Director (*Carlton J. Jenkins) Director Carlton J. Jenkins (*Bruce Karatz) Director Bruce Karatz 45 (*John T. LaMacchia) Director John T. LaMacchia (*Edward M. Liddy) Director Edward M. Liddy (*Clyde R. Moore) Director Clyde R. Moore (*T. Ballard Morton, Jr.) Director T. Ballard Morton, Jr. Director ------------------------- Thomas H. O'Leary (*Katherine D. Ortega) Director Katheriine D. Ortega (*Joseph A. Pichler) Chairman of the Board of Joseph A. Pichler Directors, Chief Executive Officer, and Director (*Steven R. Rogel) Director Steven R. Rogel Director ------------------------- Martha Romayne Seger (*Bobby S. Shackouls) Director Bobby S. Shackouls (*James D. Woods) Director James D. Woods *By: (Bruce M. Gack) Bruce M. Gack Attorney-in-fact