8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report: March 3, 2011

(Date of earliest event reported)

THE KROGER CO.

(Exact name of registrant as specified in its charter)

An Ohio Corporation	No. 1-303	31-0345740
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1014 Vine Street

Cincinnati, OH  45202

(Address of principal executive offices)

Registrant’s telephone number: (513) 762-4000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 — Financial Information

Item 2.02Results of Operations and Financial Condition.

On March 3, 2011, the Company released its earnings for fourth quarter and fiscal year 2010.  Attached hereto as Exhibit 99.1, and filed herewith, is the text of that release.

Section 7 — Regulation FD

Item 7.01Regulation FD Disclosure.

2011 Guidance:
Identical supermarket sales growth (excluding fuel sales)	3 - 4%
Net earnings per diluted share	$1.80 - $1.92
Non-fuel operating profit margin	Approximately the same as 2010, as a percentage of supermarket sales, excluding fuel
Capital expenditures	$1.7 - $1.9 billion, excluding acquisitions and purchases of leased property. These capital projects include approximately 25 - 35 major projects covering new stores, expansions and relocations, and 130 - 140 remodels, and other investments including technology and infrastructure to support our Customer 1st business strategy.
Supermarket square footage growth	1.0 - 1.5% before acquisitions and operational closings
Expected tax rate	Approximately 36%, excluding the resolution of any tax issues
Fuel margins	Our guidance for fiscal 2011 assumes a fuel margin of approximately 11.5¢ per gallon as well as continued strong growth in gallons sold.
LIFO	$50 to $75 million
Pension Contributions/ Expenses	Company-sponsored pension plans We expect 2011 expense to be approximately $80 million.  We do not expect to make a cash contribution in 2011. 401(k) plan For 2011, we expect a slight increase in our cash contributions and expense compared to 2010. Multi-employer plans In 2011, we expect to contribute approximately $300 million to

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multi-employer pension funds.

Labor

In 2011, we will negotiate agreements with the UFCW for store associates in southern California, Memphis and West Virginia, and with the Teamsters who represent some of our associates in distribution and manufacturing operations in the Midwest. Negotiations this year will be challenging as we must have competitive cost structures in each market while meeting our associates’ needs for good wages and affordable health care. Also, we must address the underfunding of Taft-Hartley pension plans.

Growth Strategy:Kroger’s business model is structured to produce annual earnings per share growth averaging 6% to 8% over a rolling three- to five-year time horizon.  Including Kroger’s dividend, the Company’s business model is expected to generate total shareholder return of approximately 8% to 10%.  Kroger’s goal is to produce an average annual return for shareholders that matches or exceeds the S&P 500 index over the time horizon described above, but with less volatility.

Our ability to achieve identical supermarket sales and earnings growth and earnings per share goals, as well as the timing that those earnings occur within the year, may be affected by: labor disputes, particularly as the Company seeks to manage health care and pension costs; industry consolidation; pricing and promotional activities of existing and new competitors, including non-traditional competitors; our response to these actions; unexpected changes in product costs; the state of the economy, including interest rates and the inflationary and deflationary trends in certain commodities; the extent to which our customers exercise caution in their purchasing behavior in response to economic conditions as well as rising fuel and food prices; the number of shares outstanding; the success of our future growth plans; goodwill impairment; volatility in our fuel margins; increased fuel costs and the effect those incr eases have on consumer spending; and our ability to generate sales at desirable margins, as well as the success of our programs designed to increase our identical sales without fuel.  In addition, any delays in opening new stores, failure to achieve tonnage growth as expected, or changes in the economic climate, could cause us to fall short of our sales and earnings targets.  Our ability to increase identical supermarket sales also could be adversely affected by increased competition, and sales shifts to other stores that we operate, as well as increases in sales of our corporate brand products.  Earnings and sales also may be affected by adverse weather conditions, particularly to the extent that hurricanes, tornadoes, floods, and other conditions disrupt our operations or those of our suppliers; create shortages in the availability or increases in the cost of products that we sell in our stores or materials and ingredients we use in our manufacturing facilities; or raise the cost of supplyin g energy to our various operations, including the cost of transportation.  Our guidance for LIFO is based on our forecast of cost changes for products in our inventory. Our estimate of product cost changes could be affected by general economic conditions, weather, availability of raw materials and ingredients in the products that we sell and their packaging, and other factors beyond our control. Our non-fuel operating margin guidance could change if we are unable to pass on any cost increases, if our strategies fail to deliver the cost savings contemplated, or if changes in the cost of our inventory and the timing of those changes differ from our expectations.  Our LIFO charge and the timing of our recognition of LIFO expense will be affected by changes in product costs during the year.  Our earnings per share results also will be affected by our ability to improve our operating results and our ability to repurchase shares under our repurchase program as expected.  Our capital expenditure s, and the number of projects that we complete, could vary from our expectations if we are unsuccessful in acquiring suitable sites for new stores; development costs vary from those budgeted; our logistics and technology or store projects are not completed on budget or within the time frame projected; or if current operating conditions fail to improve, or worsen.  Square footage growth during the year is dependent upon our ability to acquire desirable sites for construction of new facilities, as well as the timing of completion of projects.  Our plans to use cash flow from operations and cash on hand to fund

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capital expenditures, repay debt, repurchase shares, pay dividends to shareholders, and maintain our current debt rating will depend on our ability to generate free cash flow and otherwise to have cash on hand, which will be affected by all of the factors identified above, as well as the extent to which funds can be used for those reasons while maintaining our debt rating.   Although we believe that our expected reduced capital expenditures should provide for sufficient cash flow to permit us to execute our strategy, any cash flow shortfall could have an effect on our ability to do so.  If our expectation of fuel margins, which are unpredictable, is inaccurate, we could fail to achieve our anticipated earnings per share growth.  Any change in tax laws, the regulations related thereto, the applicable accounting rules or standards, or the interpretation thereof by federal, state or local authorities could affect our expected tax rate. Should asset values in the multi-employer pension funds further deteriorate, if employers withdraw from these funds without providing for their share of the liability, or should our estimates prove to be understated, our contributions and pension expense could increase more than we have anticipated. Likewise, if health care expenses continue to grow at a faster pace than expected, our incremental cost for those expenses will exceed our expectations.  The actual amount of cash contributions to our 401(k) Retirement Savings Account Plan will depend on the number of employees who participate and the level of their participation.   Our ability to achieve operating margins comparable to 2010 could be affected by all of the factors outlined above that could cause us to fail to achieve our expected earnings and earnings per share growth.

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Section 9 — Financial Statements and Exhibits

Item 9.01Financial Statements and Exhibits.

(d)Exhibits.

99.1Earnings release for fourth quarter and fiscal year 2010, filed herewith.

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 SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	THE KROGER CO.
March 3, 2011	By:	/s/ Paul Heldman
		Paul Heldman
		Executive Vice President, Secretary and General Counsel

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EXHIBIT INDEX

Exhibit No.	Exhibit
99.1	Earnings release for fourth quarter and fiscal year 2010, filed herewith.

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EX-99.1

EXHIBIT 99.1

KROGER REPORTS FOURTH QUARTER AND FULL YEAR 2010 RESULTS

Fourth Quarter Identical Supermarket Sales Up 3.8% Without Fuel

CINCINNATI, Ohio, March 3, 2011 — The Kroger Co. (NYSE: KR) today reported total sales, which include fuel, increased 7.4% to $19.9 billion in the fourth quarter of fiscal 2010 compared with $18.6 billion for the same period last year.  Excluding fuel sales, total sales increased 4.2% over the same period last year.  Identical supermarket sales, without fuel, increased 3.8% in the fourth quarter over the same period last year.

Net earnings for the fourth quarter, which ended on January 29, 2011, totaled $278.8 million, or $0.44 per diluted share.  These results include a non-cash charge resulting from a goodwill write-down related to a small group of stores.  Excluding this goodwill impairment charge, net earnings for the quarter would have been $290.8 million, or $0.46 per diluted share (Table 6).  Net earnings in the same period last year were $255.4 million, or $0.39 per diluted share.

“Our customers appreciate the distinct blend of friendly service, variety and value that Kroger’s family of stores offers, and our strong fourth quarter results show we are on the right path,” said David B. Dillon, Kroger’s chairman and chief executive officer.  “Thanks to the Kroger team, we increased identical supermarket sales, gained more loyal customers and strengthened our competitive position among grocery retailers.”

Details of Fourth Quarter 2010 Results

FIFO gross margin, as reported, was 21.88% of sales for the fourth quarter of fiscal 2010 (Table 1).  Excluding retail fuel operations, FIFO gross margin was unchanged as a percentage of sales relative to the fourth quarter of the prior year.  Supermarket selling gross margin (Table 1) increased one basis point without fuel.

Operating, general and administrative (OG&A) costs, as reported, were 16.20% of sales (Table 1).  Excluding retail fuel operations, Kroger’s OG&A rate decreased 39 basis points from the same period last year.  Positive identical sales growth, good cost control and productivity improvements offset the continued challenge of rising credit card fees, health care and pension costs.

Financial Strategy

Capital investment, excluding acquisitions and purchases of leased facilities, totaled $440.5 million for the fourth quarter, compared with $458.9 million for the same period last year.

At the end of the fourth quarter, net total debt (Table 5) was $7.3 billion, a decrease of $243.5 million from a year ago.  On a rolling four-quarters basis, Kroger’s net total debt to EBITDA ratio, adjusted for the impairment charges in fiscal 2010 and 2009, was 1.89 compared with 1.97 during the same period last year.

During the fourth quarter, Kroger invested $253.4 million to repurchase 11.8 million shares of stock at an average price of $21.51 per share.  At the end of the quarter, approximately $106.9 million remained under the $500 million stock repurchase program announced in June 2010.  Kroger separately announced today that its Board of Directors authorized an additional $1 billion stock repurchase program.

Fiscal Year 2010 Results

For fiscal year 2010, total sales increased 7.1% to $82.2 billion compared with $76.7 billion for fiscal year 2009.  Excluding fuel sales, total sales increased 3.4% over the same period last year.  Identical supermarket sales, without fuel, increased 2.8% in fiscal year 2010 compared with the prior fiscal year.

Net earnings for fiscal year 2010 were $1.12 billion, or $1.74 per diluted share.  These results were reduced by approximately $0.02 per diluted share for the goodwill impairment charge incurred during the fourth quarter (Table 7).  They also include various tax benefits totaling approximately $0.03 per diluted share recognized during the second and third quarters.

Net earnings for fiscal year 2009 were $70.0 million, or $0.11 per diluted share.  These results include the effect of the southern California asset impairment charges in the third quarter.  Excluding these items, net earnings for fiscal year 2009 would have been $1.12 billion, or $1.71 per diluted share (Table 7).

Operating profit for fiscal year 2010, as reported, was 2.65% of sales (Table 1).  Excluding retail fuel operations and adjusting to exclude the impairment charges in fiscal years 2010

and 2009, operating profit decreased 22 basis points as a percentage of sales compared to the prior year.

“Kroger’s business proved resilient in 2010, weathering a challenging environment that continued to affect many of our customers,” Mr. Dillon said.  “We achieved solid positive identical supermarket sales and market share growth, which demonstrates that we can strengthen our business and increase earnings by placing our customers’ needs first.”

Fiscal 2011 Annual Guidance

For fiscal year 2011, Kroger anticipates identical supermarket sales growth, excluding fuel, of approximately 3% to 4%.  Full-year net earnings are expected to range from $1.80 to $1.92 per diluted share.  Kroger’s quarterly dividend enhances total shareholder return by approximately 1.5% to 2.0%.

During fiscal year 2011, Kroger plans to use cash flow from operations and cash on hand to fund capital expenditures, repay debt maturing on April 1, repurchase shares, pay dividends to shareholders and maintain its current debt rating.

Growth Strategy

Kroger’s business model is structured to produce annual earnings per share growth averaging 6% to 8% over a rolling three- to five-year time horizon.  Including Kroger’s dividend, the Company’s business model is expected to generate total shareholder return of approximately 8% to 10%.

“This growth strategy provides an attractive return for shareholders,” said Mr. Dillon.  “We are committed to creating shareholder value through earnings, share repurchases and quarterly dividends as we invest for the future growth of Kroger’s business.”

Kroger, the nation’s largest traditional grocery retailer, employs more than 338,000 associates who serve customers in 2,458 supermarkets and multi-department stores in 31 states under two dozen local banner names including Kroger, City Market, Dillons, Jay C, Food 4 Less, Fred Meyer, Fry’s, King Soopers, QFC, Ralphs and Smith’s.  The Company also operates 786 convenience stores, 361 fine jewelry stores, 1,014 supermarket fuel centers and 40 food processing plants in the U.S.  Kroger, headquartered in Cincinnati, Ohio,

focuses its charitable efforts on supporting hunger relief, health and wellness initiatives, and local organizations in the communities it serves. For more information about Kroger, please visit www.kroger.com.

# # #

Note: Fuel sales have historically had low FIFO gross margin and OG&A rates as compared to corresponding rates on non-fuel sales.  Additionally, pricing and margins in Kroger’s retail fuel operations can be volatile on a quarterly basis.  As a result, Kroger discloses such rates, both including and excluding the effect of retail fuel operations.

This press release contains certain forward-looking statements about the future performance of the Company.  These statements are based on management’s assumptions and beliefs in light of the information currently available to it.  Such statements are indicated by words such as “anticipates,” “plans,” and “expected.”  Aggressive competition, economic conditions, interest rates, goodwill impairment, the success of programs designed to increase our identical supermarket sales without fuel, the impact of increasing fuel costs on consumer spending, and labor disputes, particularly as the Company seeks to manage increases in health care and pension costs, could materially affect our expected identical supermarket sales growth and earnings per share. Earnings per share also will be affected by the number of shares outstanding, as well as the volatility in the Company& #146;s fuel margins, which will be affected by changes in fuel costs.  Earnings and sales also may be affected by adverse weather conditions, particularly to the extent that hurricanes, tornadoes, floods, and other conditions disrupt our operations or those of our suppliers; create shortages in the availability or increases in the cost of products that we sell in our stores or materials and ingredients we use in our manufacturing facilities; or raise the cost of supplying energy to our various operations.  Our results also will be affected by rising commodity costs, the inconsistency of the economic recovery, changes in government-funded benefit programs, consumer confidence, and changes in inflation and deflation in product and operating costs.  Our plans to use cash flow from operations and cash on hand to fund capital expenditures, repay debt, repurchase shares, pay dividends to shareholders, and maintain our current debt rating will depend on our ability to generate free cash flow and othe rwise to have cash on hand, which will be affected by all of the factors identified above, as well as the extent to which funds can be used for those reasons while maintaining our debt rating.  These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially.  We assume no obligation to update the information contained herein.  Please refer to Kroger’s reports and filings with the Securities and Exchange Commission for a further discussion of these risks and uncertainties.

Note: Kroger’s quarterly conference call with investors will be broadcast live online at 10 a.m. (ET) on March 3, 2011 at www.kroger.com and www.streetevents.com.  An on-demand replay of the webcast will be available from approximately 1 p.m. (ET) today through Thursday, March 17, 2011.

# # #

Kroger Contacts:
Media:	Lynn Marmer, (513) 762-1304
Investors:	Carin Fike / Cindy Holmes, (513) 762-4969

Table 1.

THE KROGER CO.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)

(unaudited)

	FOURTH QUARTER									YEAR-TO-DATE
	2010				2009					2010				2009
SALES	$	19,928.4	100.00	%	$	18,554.5		100.00	%	$	82,189.4	100.00	%	$	76,733.2		100.00	%
MERCHANDISE COSTS, INCLUDING ADVERTISING, WAREHOUSING AND TRANSPORTATION (a), AND LIFO CHARGE (b)	15,586.0		78.21		14,384.0			77.52		63,927.8		77.78		58,958.3			76.84
OPERATING, GENERAL AND ADMINISTRATIVE (a)	3,229.3		16.20		3,149.8			16.98		13,809.8		16.80		13,397.7			17.46
RENT	148.7		0.75		146.3			0.79		651.4		0.79		648.2			0.84
DEPRECIATION AND AMORTIZATION	386.8		1.94		367.7			1.98		1,599.9		1.95		1,524.9			1.99
GOODWILL IMPAIRMENT CHARGE	18.6		0.09		—			0.00		18.6		0.02		1,112.7			1.45
OPERATING PROFIT	559.0		2.81		506.7			2.73		2,181.9		2.65		1,091.4			1.42
INTEREST EXPENSE	110.2		0.55		119.1			0.64		447.6		0.54		502.3			0.65
EARNINGS BEFORE INCOME TAX EXPENSE	448.8		2.25		387.6			2.09		1,734.3		2.11		589.1			0.77
INCOME TAX EXPENSE	165.1		0.83		136.0			0.73		601.3		0.73		532.4			0.69
NET EARNINGS INCLUDING NONCONTROLLING INTERESTS	283.7		1.42		251.6			1.36		1,133.0		1.38		56.7			0.07
NET EARNINGS (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS	4.9		0.02		(3.8		)	(0.02	)	16.7		0.02		(13.3		)	(0.02	)
NET EARNINGS ATTRIBUTABLE TO THE KROGER CO.	$	278.8	1.40	%	$	255.4		1.38	%	$	1,116.3	1.36	%	$	70.0		0.09	%
NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER BASIC COMMON SHARE	$	0.44			$	0.39				$	1.75			$	0.11
AVERAGE NUMBER OF COMMON SHARES USED IN BASIC CALCULATION	627.4				644.3					635.2				646.6
NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER DILUTED COMMON SHARE	$	0.44			$	0.39				$	1.74			$	0.11
AVERAGE NUMBER OF COMMON SHARES USED IN DILUTED CALCULATION	630.5				647.7					638.3				650.1

Note: Certain prior-year amounts have been reclassified to conform to current-year presentation.  Certain per share amounts and percentages may not sum due to rounding.

Note:  The Company defines FIFO gross margin, as described in the earnings release, as sales minus merchandise costs, including advertising, warehousing and transportation, but excluding the Last-In First-Out (LIFO) charge.  This measure is included to reflect trends in current cost of product.

Note:  The Company defines selling gross margin, as described in the earnings release related to the Company’s supermarkets, as gross margin before incurring expenses directly related to distributing and merchandising the products on its store shelves.  These expenses include advertising, warehousing, transportation, and shrink.  Selling gross margin is a measure of how competitively the Company is pricing the products it sells.

(a)	Merchandise costs and operating, general and administrative expenses exclude depreciation and amortization expense and rent expense which are included in separate expense lines.
(b)	LIFO charges of $18.8 and $1.3 were recorded in the fourth quarter of 2010 and 2009, respectively. For the year-to-date period, LIFO charges of $57.3 and $49.0 were recorded for 2010 and 2009, respectively.

Table 2.

THE KROGER CO.

CONSOLIDATED BALANCE SHEETS

(in millions)

(unaudited)

	January 29,		January 30,
	2011		2010
ASSETS
Current Assets
Cash	$	187.8	$	165.5
Temporary cash investments	636.8		258.3
Deposits in-transit	666.1		654.4
Receivables	844.6		908.7
Inventories	4,966.2		4,934.6
Prepaid and other current assets	319.9		561.0
Total current assets	7,621.4		7,482.5
Property, plant and equipment, net	14,146.9		13,928.9
Goodwill	1,139.8		1,158.4
Other assets	596.5		555.5
Total Assets	$	23,504.6	$	23,125.3
LIABILITIES AND SHAREOWNERS’ EQUITY
Current liabilities
Current portion of long-term debt including obligations under capital leases and financing obligations	$	553.9	$	579.4
Trade accounts payable	4,226.9		3,889.7
Accrued salaries and wages	887.6		786.4
Deferred income taxes	219.6		353.5
Other current liabilities	2,148.2		2,117.4
Total current liabilities	8,036.2		7,726.4
Long-term debt including obligations under capital leases and financing obligations
Face-value of long-term debt including obligations under capital leases and financing obligations	7,281.1		7,419.6
Adjustment to reflect fair-value interest rate hedges	56.7		57.7
Long-term debt including obligations under capital leases and financing obligations	7,337.8		7,477.3
Deferred income taxes	750.1		568.0
Pension and postretirement benefit obligations	946.3		1,081.8
Other long-term liabilities	1,136.7		1,345.9
Total Liabilities	18,207.1		18,199.4
Shareowners’ equity	5,297.5		4,925.9
Total Liabilities and Shareowners’ Equity	$	23,504.6	$	23,125.3
Total common shares outstanding at end of period	620.3		642.6
Total diluted shares year-to-date	638.3		650.1

Note: Certain prior-year amounts have been reclassified to conform to current-year presentation.

Table 3.

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

	YEAR-TO-DATE
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings including noncontrolling interests	$	1,133.0		$	56.7
Adjustment to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	1,599.9			1,524.9
LIFO charge	57.3			49.0
Stock-based employee compensation	79.3			83.4
Expense for Company-sponsored pension plans	64.6			31.0
Goodwill impairment charge	18.6			1,112.7
Asset impairment charges	25.0			47.5
Deferred income taxes	37.0			221.6
Other	7.1			53.4
Changes in operating assets and liabilities, net of effects from acquisitions of businesses:
Deposits in-transit	(11.7		)	(23.4		)
Receivables	(10.6		)	(20.5		)
Inventories	(88.1		)	(45.3		)
Prepaid expenses	289.7			(51.2		)
Trade accounts payable	315.3			53.5
Accrued expenses	70.6			(46.0		)
Income taxes receivable and payable	133.2			49.2
Contribution to Company-sponsored pension plan	(141.0		)	(265.0		)
Other	(213.5		)	90.3
Net cash provided by operating activities	3,365.7			2,921.8
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for capital expenditures	(1,918.8		)	(2,296.5		)
Payments for acquisitions	(6.9		)	(35.7		)
Proceeds from sale of assets	54.7			19.7
Other	(90.2		)	(14.2		)
Net cash used by investing activities	(1,961.2		)	(2,326.7		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from lease-financing transactions	5.7			6.2
Proceeds from issuance of long-term debt	381.2			511.0
Payments on long-term debt	(552.6		)	(431.4		)
Payments on credit facility	—			(129.0		)
Dividends paid	(250.0		)	(237.6		)
Excess tax benefits on stock-based awards	2.5			4.4
Proceeds from issuance of capital stock	29.3			50.5
Treasury stock purchases	(545.1		)	(218.3		)
Increase in book overdrafts	22.0			14.1
Investment in the remaining interest of a variable interest entity	(85.8		)	—
Other	(10.9		)	(4.3		)
Net cash used by financing activities	(1,003.7		)	(434.4		)
NET INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS	400.8			160.7
CASH AND TEMPORARY CASH INVESTMENTS:
BEGINNING OF YEAR	423.8			263.1
END OF YEAR	$	824.6		$	423.8
Reconciliation of capital expenditures:
Payments for capital expenditures	$	(1,918.8	)	$	(2,296.5	)
Changes in construction-in-progress payables	21.5			(18.5		)
Total capital expenditures	$	(1,897.3	)	$	(2,315.0	)
Disclosure of cash flow information:
Cash paid during the year for interest	$	485.8		$	541.9
Cash paid during the year for income taxes	$	664.1		$	130.4

Note: Certain prior-year amounts have been reclassified to conform to current-year presentation. 

Table 4. Supplemental Sales Information

(in millions, except percentages)

(unaudited)

Items identified below should not be considered as alternatives to sales or any other GAAP measure of performance.  Identical and comparable supermarket sales are industry-specific measures and it is important to review them in conjunction with Kroger’s financial results reported in accordance with GAAP.  Other companies in our industry may calculate identical or comparable sales differently than Kroger does, limiting the comparability of these measures.

IDENTICAL SUPERMARKET SALES (a)

	FOURTH QUARTER						YEAR-TO-DATE
	2010			2009			2010			2009
INCLUDING FUEL CENTERS	$	18,021.3		$	16,950.8		$	74,144.2		$	70,153.6
EXCLUDING FUEL CENTERS	$	15,830.7		$	15,255.3		$	65,426.6		$	63,637.0
INCLUDING FUEL CENTERS	6.3		%	5.5		%	5.7		%	0.6		%
EXCLUDING FUEL CENTERS	3.8		%	1.2		%	2.8		%	2.1		%

COMPARABLE SUPERMARKET SALES (b)

	FOURTH QUARTER						YEAR-TO-DATE
	2010			2009			2010			2009
INCLUDING FUEL CENTERS	$	18,483.9		$	17,337.3		$	76,112.6		$	71,816.1
EXCLUDING FUEL CENTERS	$	16,231.5		$	15,601.3		$	67,156.1		$	65,167.0
INCLUDING FUEL CENTERS	6.6		%	5.8		%	6.0		%	0.9		%
EXCLUDING FUEL CENTERS	4.0		%	1.6		%	3.1		%	2.5		%

(a)Kroger defines a supermarket as identical when it has been open without expansion or relocation for five full quarters.

(b)Kroger defines a supermarket as comparable when it has been open for five full quarters, including expansions and relocations.

Table 5.  Reconciliation of Total Debt to Net Total Debt

(in millions)

(unaudited)

Net total debt should not be considered an alternative to any GAAP measure of performance or liquidity.  Management believes net total debt is an important measure of liquidity, and a primary component of measuring compliance with the financial covenants under the Company’s credit facility.  Net total debt should be reviewed in conjunction with Kroger’s financial results reported in accordance with GAAP.

The following table provides a reconciliation of total debt to net total debt and compares the balance in the fourth quarter of 2010 to the balance in the fourth quarter of 2009.

		January 29,		January 30,
		2011		2010		Change
Current portion of long-term debt including obligations under capital leases and financing obligations		$	553.9	$	579.4	$	(25.5	)
Face-value of long-term debt including obligations under capital leases and financing obligations		7,281.1		7,419.6		(138.5		)
Adjustment to reflect fair-value interest rate hedges		56.7		57.7		(1.0		)
Total debt		$	7,891.7	$	8,056.7	$	(165.0	)
Less: Temporary cash investments		636.8		258.3		378.5
	Prepaid employee benefits	—		300.0		(300.0		)
Net total debt		$	7,254.9	$	7,498.4	$	(243.5	)

Table 6. Net Earnings Per Diluted Share Excluding Impairment Charge

(in millions, except per share amounts)

(unaudited)

Items identified in this table should not be considered alternatives to net earnings attributable to The Kroger Co. or any other GAAP measure of performance.  These items should not be reviewed in isolation or considered substitutes for the Company’s financial results as reported in accordance with GAAP.  Due to the nature of these items, as further described below in the footnotes, it is important to identify these items and to review them in conjunction with the Company’s financial results reported in accordance with GAAP.

The following table summarizes an item that affected the Company’s financial results during the period presented.  The item includes a charge that was recorded as a component of goodwill impairment charge.

	FOURTH QUARTER
	2010
			NET EARNINGS
	NET EARNINGS		ATTRIBUTABLE TO
	ATTRIBUTABLE TO		THE KROGER CO. PER
	THE KROGER CO.		DILUTED COMMON SHARE
	.
NET EARNINGS ATTRIBUTABLE TO THE KROGER CO.	$	278.8	$	0.44
AFTER-TAX GOODWILL IMPAIRMENT CHARGE ($18.6 pre-tax)	12.0		0.02
NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. EXCLUDING A GOODWILL IMPAIRMENT CHARGE	$	290.8	$	0.46
AVERAGE NUMBER OF COMMON SHARES USED IN DILUTED CALCULATION			630.5

Table 7. Net Earnings Per Diluted Share Excluding Impairment Charges

(in millions, except per share amounts)

(unaudited)

Items identified in this table should not be considered alternatives to net earnings attributable to The Kroger Co. or any other GAAP measure of performance.  These items should not be reviewed in isolation or considered substitutes for the Company’s financial results as reported in accordance with GAAP.  Due to the nature of these items, as further described below in the footnotes, it is important to identify these items and to review them in conjunction with the Company’s financial results reported in accordance with GAAP.

The following table summarizes items that affected the Company’s financial results during the periods presented.  The items include charges that were recorded as components of asset impairment and goodwill impairment charges.

	YEAR-TO-DATE				YEAR-TO-DATE
	2010				2009
	NET EARNINGS ATTRIBUTABLE TO THE KROGER CO.		NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER DILUTED COMMON SHARE		NET EARNINGS ATTRIBUTABLE TO THE KROGER CO.		NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER DILUTED COMMON SHARE
NET EARNINGS ATTRIBUTABLE TO THE KROGER CO.	$	1,116.3	$	1.74	$	70.0	$	0.11
AFTER-TAX GOODWILL IMPAIRMENT CHARGES ($18.6 and $1,112.7 pre-tax, respectively)	12.0		0.02		1,036.1		1.58
AFTER-TAX ASSET IMPAIRMENT CHARGES ($24.1 pre-tax)	—		—		15.5		0.02
NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. EXCLUDING IMPAIRMENT CHARGES	$	1,128.3	$	1.76	$	1,121.6	$	1.71
AVERAGE NUMBER OF COMMON SHARES USED IN DILUTED CALCULATION			638.3				650.1