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: September 9, 2011
(Date of earliest event reported)
THE KROGER CO.
(Exact name of registrant as specified in its charter)
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An Ohio Corporation |
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No. 1-303 |
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31-0345740 |
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(State or other jurisdiction of incorporation) |
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(Commission File Number) |
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(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:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Section 2 — Financial Information
Item 2.02 Results of Operations and Financial Condition.
On September 9, 2011, the Company released its earnings for second quarter 2011. Attached hereto as Exhibit 99.1, and filed herewith, is the text of that release.
Section 7 — Regulation FD
Item 7.01 Regulation FD Disclosure.
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2011 Guidance: |
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Identical supermarket sales growth (excluding fuel sales) |
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4 – 5% |
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Net earnings per diluted share |
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$1.85 – $1.95. Based on the current operating environment, the company expects to achieve results near the top end of this range. |
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Non-fuel operating profit margin |
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Excluding fuel, on a rolling four quarters basis, the company’s operating margin increased 10 basis points. For the full year, the company expects the operating margin change to be less than this amount. |
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Product cost inflation |
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3 – 4% |
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Capital expenditures |
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Slightly above $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. |
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Supermarket square footage growth |
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1.0 – 1.5% before acquisitions and operational closings |
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Expected tax rate |
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Approximately 36.5% for the remainder of the year, excluding the resolution of any tax issues |
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Fuel margins |
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For the latter half of the year, the company expects fuel margins of approximately 11.5¢ per gallon, as well as continued strong growth in gallons sold. |
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LIFO |
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Approximately $150 million |
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Pension Contributions/ Expenses |
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Company-sponsored pension plans We expect 2011 expense to be approximately $70 million. We |
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expect to make a cash contribution in 2011 of approximately $52 million.
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 multi-employer pension funds. |
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Labor |
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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. 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, , our ability to achieve results near the top end of our earnings guidance range, our ability to continue to invest in the four key components of our Customer 1st strategy, our ability to strike a balance between delivering solid near-term financial results and investing for the future growth of our business, and our ability to deliver operating margins at projected levels, 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; the aggressiveness of that competition; 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; the number of shares outstanding; the success of our future growth plans; goodwill impairment; changes in government-funded benefit programs; volatility in our fuel margins; increased fuel costs and the effect those increases have on consumer spending; our ability to maintain good cost control and to consistently reduce the overall cost to run our business; 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, 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 supplying
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 LIFO charge and the timing of our recognition of LIFO expense will be affected by changes in product costs during the year. 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 ability to pass along product cost increases will depend primarily upon the reactions of our customers and our competitors to those increases. 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. The accuracy of our product cost inflation estimate will depend primarily on weather conditions, supply constraints, unrest in areas of the country in which products are grown or are produced, natural disasters, and the general economic climate. We could fail to achieve fuel margins of 11.5¢ per gallon for the latter half of the year if variability in fuel costs continues. Our capital expenditures, 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 ability to use cash flow from operations and cash on hand to maintain our current debt rating, fund capital expenditures, repurchase shares, and pay dividends, could be affected by unanticipated increases in net total debt, our inability to generate free cash flow at the levels anticipated, and our failure to generate expected earnings. 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. Our incremental expense from rising pension and health care costs could exceed our expectations if health care costs continue to rise faster than projected, if unforeseen medical expenses are incurred under our self-insured health benefit plans, or if the assumptions used to estimate pension expenses differ from actual experience. 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 anticipated operating margins 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.
Section 9 — Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
99.1 Earnings release for second quarter 2011, filed herewith.
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.
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THE KROGER CO. | |
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September 9, 2011 |
By: |
/s/ Paul Heldman |
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Paul Heldman |
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Executive Vice President, |
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Secretary and General Counsel |
EXHIBIT 99.1
Kroger Reports Second Quarter 2011 Results
Identical Supermarket Sales Increased 5.3% without Fuel
Increases Fiscal 2011 Sales Guidance
CINCINNATI, Ohio, September 09, 2011 — The Kroger Co. (NYSE: KR) today reported total sales, including fuel, increased 11.5% to $20.9 billion in the second quarter of fiscal 2011 compared with $18.8 billion for the same period last year. In the second quarter, which ended August 13, 2011, total sales, excluding fuel, increased 5.2% over the same period last year.
Identical supermarket sales, without fuel, increased 5.3% in the second quarter over the same period last year. This marks 31 consecutive quarters of identical supermarket sales increases for Kroger.
Net earnings for the second quarter totaled $280.8 million, or $0.46 per diluted share. Net earnings in the same period last year were $261.6 million, or $0.41 per diluted share.
Both the current and prior year quarters benefited from certain tax adjustments. Without the benefit of these adjustments, earnings per share would have been $0.41 in the second quarter this year, and $0.38 in the second quarter last year. This 7.9% increase is consistent with Kroger’s expectations for the quarter and long term earnings growth expectations of 6% to 8% plus a dividend yield of 1.5% to 2.0%.
“We are pleased with Kroger’s strong performance this quarter, which we believe is the outcome of our consistent approach to managing the business and executing our Customer 1st strategy,” said David B. Dillon, Kroger’s chairman and chief executive officer. “Our ongoing investments in the four keys — our people, products, prices and the shopping experience — continued to enhance our connection with customers and drive positive identical sales growth.”
Details of Second Quarter 2011 Results
FIFO gross margin was 21.00% of sales for the second quarter of fiscal 2011. Excluding retail fuel operations, FIFO gross margin decreased 53 basis points from the same period last year.
Kroger recorded a $34.7 million LIFO charge during the quarter compared to $11.5 million in the second quarter last year. Excluding retail fuel sales, the LIFO charge increased 13 basis points as a percentage of sales. Kroger maintained its LIFO charge estimate at $150 million for the year.
Operating, general and administrative (OG&A) costs were 16.01% of sales. Excluding retail fuel operations, OG&A decreased 20 basis points from the same period last year. The benefits of leverage from strong sales, productivity improvements and outstanding cost control more than offset rising credit card fees, incentive plan, health care and pension costs. In addition, depreciation and rent expense were 16 basis points lower as a percentage of sales, excluding fuel, as compared to the prior year.
Second quarter operating margin was 2.33% of sales. Excluding fuel, on a rolling four quarters basis, the company’s operating margin increased by 10 basis points.
Financial Strategy
Capital investment, excluding acquisitions and purchases of leased facilities, totaled $428.5 million for the second quarter, compared with $402.5 million for the same period last year.
Net total debt was $6.9 billion, a decrease of $49.0 million from a year ago. On a rolling four quarters basis, Kroger’s net total debt to EBITDA ratio, adjusted for impairment charges in 2010 and 2009, was 1.71 compared with 1.87 during the same period last year.
Strong cash flow enabled Kroger to invest $258.6 million to repurchase 10.6 million shares of stock at an average price of $24.30 per share during the second quarter. At the end of the second quarter, approximately $403.4 million remained under the $1 billion stock repurchase program announced in March 2011. Since the end of the quarter, Kroger has purchased 4.5 million shares of stock at an average price of $22.87 per share for a total of $103.5 million.
Fiscal 2011 Guidance
Kroger increased its identical supermarket sales guidance for fiscal 2011. The company now expects identical supermarket sales growth, excluding fuel, of 4% to 5% for the year. The previous guidance range was 3.5% to 4.5%.
Kroger maintained its full-year earnings guidance of $1.85 to $1.95 per diluted share. Based on the current operating environment, the company expects to achieve results near the top end of this range.
“Faced with a sluggish economy, we remain focused on giving better value to our customers,” Mr. Dillon said. “We continue making investments that deliver value today and for the future for both customers and shareholders.”
Kroger, the nation’s largest traditional grocery retailer, employs more than 338,000 associates who serve customers in 2,439 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 788 convenience stores, 361 fine jewelry stores, 1,046 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 a low FIFO gross margin rate and OG&A rate as compared to corresponding rates on non-fuel sales. As a result, in addition to disclosing such rates including the effect of retail fuel operations, Kroger also discusses the changes in these rates 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. These statements are indicated by words such as “expects,” “maintained,” “guidance,” and “updated.” 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 and volatility in the company’s fuel margins. 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, including the cost of transportation. Our results also will be affected by rising commodity costs, the inconsistency of the economic recovery, consumer confidence, changes in government-funded benefit programs, and changes in inflation or deflation in product and operating costs. 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 September 9, 2011 at www.kroger.com. An on-demand replay of the webcast will be available from approximately 1 p.m. (ET) Friday, September 9 through Friday, September 23, 2011.
Kroger Contacts:
Media: Keith Dailey (513) 762-1304
Investors: Cindy Holmes (513) 762-4969
Table 1.
THE KROGER CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(unaudited)
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SECOND QUARTER |
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YEAR-TO-DATE |
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2011 |
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2010 |
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2011 |
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2010 |
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SALES |
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$ |
20,913.4 |
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100.00 |
% |
$ |
18,759.7 |
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100.00 |
% |
$ |
48,374.3 |
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100.00 |
% |
$ |
43,498.1 |
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100.00 |
% |
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MERCHANDISE COSTS, INCLUDING ADVERTISING, WAREHOUSING AND TRANSPORTATION (a), AND LIFO CHARGE (b) |
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16,555.4 |
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79.16 |
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14,552.0 |
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77.57 |
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38,179.8 |
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78.93 |
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33,706.6 |
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77.49 |
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OPERATING, GENERAL AND ADMINISTRATIVE (a) |
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3,348.3 |
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16.01 |
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3,197.7 |
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17.05 |
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7,675.3 |
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15.87 |
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7,381.7 |
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16.97 |
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RENT |
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147.8 |
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0.71 |
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148.8 |
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0.79 |
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347.3 |
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0.72 |
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348.4 |
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0.80 |
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DEPRECIATION AND AMORTIZATION |
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373.7 |
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1.79 |
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367.7 |
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1.96 |
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872.7 |
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1.80 |
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845.4 |
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1.94 |
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OPERATING PROFIT |
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488.2 |
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2.33 |
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493.5 |
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2.63 |
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1,299.2 |
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2.69 |
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1,216.0 |
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2.80 |
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INTEREST EXPENSE |
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97.3 |
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0.47 |
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102.0 |
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0.54 |
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235.3 |
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0.49 |
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234.0 |
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0.54 |
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EARNINGS BEFORE INCOME TAX EXPENSE |
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390.9 |
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1.87 |
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391.5 |
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2.09 |
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1,063.9 |
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2.20 |
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982.0 |
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2.26 |
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INCOME TAX EXPENSE |
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107.7 |
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0.51 |
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124.1 |
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0.66 |
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359.8 |
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0.74 |
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340.0 |
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0.78 |
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NET EARNINGS INCLUDING NONCONTROLLING INTERESTS |
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283.2 |
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1.35 |
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267.4 |
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1.43 |
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704.1 |
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1.46 |
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642.0 |
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1.48 |
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NET EARNINGS (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS |
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2.4 |
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0.01 |
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5.8 |
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0.03 |
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(9.0 |
) |
(0.02 |
) |
6.7 |
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0.02 |
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NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. |
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$ |
280.8 |
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1.34 |
% |
$ |
261.6 |
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1.39 |
% |
$ |
713.1 |
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1.47 |
% |
$ |
635.3 |
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1.46 |
% |
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NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER BASIC COMMON SHARE |
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$ |
0.47 |
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$ |
0.41 |
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$ |
1.17 |
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$ |
0.99 |
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AVERAGE NUMBER OF COMMON SHARES USED IN BASIC CALCULATION |
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596.4 |
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637.1 |
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603.1 |
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639.5 |
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NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER DILUTED COMMON SHARE |
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$ |
0.46 |
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$ |
0.41 |
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$ |
1.17 |
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$ |
0.98 |
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AVERAGE NUMBER OF COMMON SHARES USED IN DILUTED CALCULATION |
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600.4 |
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639.9 |
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607.0 |
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642.6 |
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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.
(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 $34.7 and $11.5 were recorded in the second quarter of 2011 and 2010, respectively. For the year-to-date period, LIFO charges of $80.7 and $26.9 were recorded for 2011 and 2010, respectively.
Table 2.
THE KROGER CO.
CONSOLIDATED BALANCE SHEETS
(in millions)
(unaudited)
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August 13, |
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August 14, |
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2011 |
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2010 |
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ASSETS |
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Current Assets |
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Cash |
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$ |
181.9 |
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$ |
154.9 |
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Temporary cash investments |
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461.1 |
|
881.7 |
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Deposits in-transit |
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805.8 |
|
747.7 |
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Receivables |
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858.9 |
|
804.9 |
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Inventories |
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4,763.8 |
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4,650.4 |
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Prepaid and other current assets |
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356.9 |
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306.3 |
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Total current assets |
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7,428.4 |
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7,545.9 |
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Property, plant and equipment, net |
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14,266.6 |
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14,002.7 |
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Goodwill |
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1,139.8 |
|
1,158.4 |
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Other assets |
|
563.1 |
|
568.5 |
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Total Assets |
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$ |
23,397.9 |
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$ |
23,275.5 |
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LIABILITIES AND SHAREOWNERS’ EQUITY |
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Current liabilities |
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Current portion of long-term debt including obligations under capital leases and financing obligations |
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$ |
927.9 |
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$ |
538.9 |
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Trade accounts payable |
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4,249.6 |
|
3,851.2 |
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Accrued salaries and wages |
|
916.4 |
|
835.8 |
| ||
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Deferred income taxes |
|
219.5 |
|
353.6 |
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Other current liabilities |
|
2,701.8 |
|
2,344.7 |
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Total current liabilities |
|
9,015.2 |
|
7,924.2 |
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Long-term debt including obligations under capital leases and financing obligations |
|
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Face-value of long-term debt including obligations under capital leases and financing obligations |
|
6,378.2 |
|
7,207.7 |
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|
Adjustment to reflect fair-value interest rate hedges |
|
41.3 |
|
70.4 |
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Long-term debt including obligations under capital leases and financing obligations |
|
6,419.5 |
|
7,278.1 |
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Deferred income taxes |
|
657.3 |
|
554.9 |
| ||
|
Pension and postretirement benefit obligations |
|
973.0 |
|
1,016.1 |
| ||
|
Other long-term liabilities |
|
1,123.0 |
|
1,335.3 |
| ||
|
|
|
|
|
|
| ||
|
Total Liabilities |
|
18,188.0 |
|
18,108.6 |
| ||
|
|
|
|
|
|
| ||
|
Shareowners’ equity |
|
5,209.9 |
|
5,166.9 |
| ||
|
|
|
|
|
|
| ||
|
Total Liabilities and Shareowners’ Equity |
|
$ |
23,397.9 |
|
$ |
23,275.5 |
|
|
|
|
|
|
|
| ||
|
Total common shares outstanding at end of period |
|
592.6 |
|
634.1 |
| ||
|
Total diluted shares year-to-date |
|
607.0 |
|
642.6 |
| ||
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 |
| ||||
|
|
|
2011 |
|
2010 |
| ||
|
|
|
|
|
|
| ||
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
| ||
|
Net earnings including noncontrolling interests |
|
$ |
704.1 |
|
$ |
642.0 |
|
|
Adjustment to reconcile net earnings including noncontrolling interests to net cash provided by operating activities: |
|
|
|
|
| ||
|
Depreciation and amortization |
|
872.7 |
|
845.4 |
| ||
|
LIFO charge |
|
80.7 |
|
26.9 |
| ||
|
Stock-based employee compensation |
|
43.6 |
|
44.3 |
| ||
|
Expense for Company-sponsored pension plans |
|
43.7 |
|
34.3 |
| ||
|
Asset impairment charges |
|
14.2 |
|
15.9 |
| ||
|
Deferred income taxes |
|
(94.5 |
) |
(16.3 |
) | ||
|
Other |
|
39.6 |
|
4.4 |
| ||
|
Changes in operating assets and liabilities, net of effects from acquisitions of businesses: |
|
|
|
|
| ||
|
Deposits in-transit |
|
(139.7 |
) |
(93.3 |
) | ||
|
Receivables |
|
9.9 |
|
33.1 |
| ||
|
Inventories |
|
121.7 |
|
258.0 |
| ||
|
Prepaid expenses |
|
(38.7 |
) |
254.6 |
| ||
|
Trade accounts payable |
|
107.2 |
|
53.1 |
| ||
|
Accrued expenses |
|
238.3 |
|
132.6 |
| ||
|
Income taxes receivable and payable |
|
201.7 |
|
179.6 |
| ||
|
Contribution to Company-sponsored pension plan |
|
— |
|
(99.0 |
) | ||
|
Other |
|
(10.9 |
) |
2.7 |
| ||
|
|
|
|
|
|
| ||
|
Net cash provided by operating activities |
|
2,193.6 |
|
2,318.3 |
| ||
|
|
|
|
|
|
| ||
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
| ||
|
Payments for capital expenditures |
|
(923.5 |
) |
(951.6 |
) | ||
|
Payments for acquisitions |
|
— |
|
(6.9 |
) | ||
|
Proceeds from sale of assets |
|
5.4 |
|
17.0 |
| ||
|
Other |
|
(8.0 |
) |
3.0 |
| ||
|
|
|
|
|
|
| ||
|
Net cash used by investing activities |
|
(926.1 |
) |
(938.5 |
) | ||
|
|
|
|
|
|
| ||
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
| ||
|
Proceeds from lease-financing transactions |
|
1.7 |
|
5.7 |
| ||
|
Proceeds from issuance of long-term debt |
|
2.7 |
|
300.7 |
| ||
|
Payments on long-term debt |
|
(533.3 |
) |
(560.2 |
) | ||
|
Dividends paid |
|
(128.8 |
) |
(122.6 |
) | ||
|
Excess tax benefits on stock-based awards |
|
6.0 |
|
1.6 |
| ||
|
Proceeds from issuance of capital stock |
|
91.0 |
|
16.3 |
| ||
|
Treasury stock purchases |
|
(802.9 |
) |
(227.8 |
) | ||
|
Decrease in book overdrafts |
|
(84.6 |
) |
(91.7 |
) | ||
|
Investment in the remaining interest of a variable interest entity |
|
— |
|
(85.8 |
) | ||
|
Other |
|
(0.9 |
) |
(3.2 |
) | ||
|
|
|
|
|
|
| ||
|
Net cash used by financing activities |
|
(1,449.1 |
) |
(767.0 |
) | ||
|
|
|
|
|
|
| ||
|
NET INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS |
|
(181.6 |
) |
612.8 |
| ||
|
|
|
|
|
|
| ||
|
CASH AND TEMPORARY CASH INVESTMENTS: |
|
|
|
|
| ||
|
BEGINNING OF YEAR |
|
824.6 |
|
423.8 |
| ||
|
END OF QUARTER |
|
$ |
643.0 |
|
$ |
1,036.6 |
|
|
|
|
|
|
|
| ||
|
Reconciliation of capital expenditures: |
|
|
|
|
| ||
|
Payments for capital expenditures |
|
$ |
(923.5 |
) |
$ |
(951.6 |
) |
|
Changes in construction-in-progress payables |
|
(97.3 |
) |
— |
| ||
|
Total capital expenditures |
|
$ |
(1,020.8 |
) |
$ |
(951.6 |
) |
|
|
|
|
|
|
| ||
|
Disclosure of cash flow information: |
|
|
|
|
| ||
|
Cash paid during the year for interest |
|
$ |
241.1 |
|
$ |
249.2 |
|
|
Cash paid during the year for income taxes |
|
$ |
285.7 |
|
$ |
181.2 |
|
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 supermarket sales is a industry-specific measure and it is important to review it in conjunction with Kroger’s financial results reported in accordance with GAAP. Other companies in our industry may calculate identical sales differently than Kroger does, limiting the comparability of the measure.
IDENTICAL SUPERMARKET SALES (a)
|
|
|
SECOND QUARTER |
| ||||
|
|
|
2011 |
|
2010 |
| ||
|
|
|
|
|
|
| ||
|
INCLUDING FUEL CENTERS |
|
$ |
18,715.8 |
|
$ |
16,947.2 |
|
|
EXCLUDING FUEL CENTERS |
|
$ |
15,719.5 |
|
$ |
14,933.0 |
|
|
|
|
|
|
|
| ||
|
INCLUDING FUEL CENTERS |
|
10.4 |
% |
4.7 |
% | ||
|
EXCLUDING FUEL CENTERS |
|
5.3 |
% |
2.7 |
% | ||
(a) Kroger defines a supermarket as identical when it has been open without expansion or relocation for five full quarters.
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 second quarter of 2011 to the balance in the second quarter of 2010.
|
|
|
August 13, |
|
August 14, |
|
|
| |||
|
|
|
2011 |
|
2010 |
|
Change |
| |||
|
|
|
|
|
|
|
|
| |||
|
Current portion of long-term debt including obligations under capital leases and financing obligations |
|
$ |
927.9 |
|
$ |
538.9 |
|
$ |
389.0 |
|
|
Face-value of long-term debt including obligations under capital leases and financing obligations |
|
6,378.2 |
|
7,207.7 |
|
(829.5 |
) | |||
|
Adjustment to reflect fair-value interest rate hedges |
|
41.3 |
|
70.4 |
|
(29.1 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Total debt |
|
$ |
7,347.4 |
|
$ |
7,817.0 |
|
$ |
(469.6 |
) |
|
|
|
|
|
|
|
|
| |||
|
Less: Temporary cash investments |
|
461.1 |
|
881.7 |
|
(420.6 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Net total debt |
|
$ |
6,886.3 |
|
$ |
6,935.3 |
|
$ |
(49.0 |
) |
Table 6. Net Earnings Per Diluted Share Excluding Tax Adjustments
(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 table, 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 tax adjustments that were recorded as components of income tax expense.
|
|
|
SECOND QUARTER |
|
SECOND QUARTER |
| ||||||||
|
|
|
2011 |
|
2010 |
| ||||||||
|
|
|
|
|
NET EARNINGS |
|
|
|
NET EARNINGS |
| ||||
|
|
|
NET EARNINGS |
|
ATTRIBUTABLE TO |
|
NET EARNINGS |
|
ATTRIBUTABLE TO |
| ||||
|
|
|
ATTRIBUTABLE TO |
|
THE KROGER CO. PER |
|
ATTRIBUTABLE TO |
|
THE KROGER CO. PER |
| ||||
|
|
|
THE KROGER CO. |
|
DILUTED COMMON SHARE |
|
THE KROGER CO. |
|
DILUTED COMMON SHARE |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. |
|
$ |
280.8 |
|
$ |
0.46 |
|
$ |
261.6 |
|
$ |
0.41 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
TAX ADJUSTMENTS |
|
(30.2 |
) |
(0.05 |
) |
(14.6 |
) |
(0.03 |
) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. EXCLUDING TAX ADJUSTMENTS |
|
$ |
250.6 |
|
$ |
0.41 |
|
$ |
247.0 |
|
$ |
0.38 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
AVERAGE NUMBER OF COMMON SHARES USED IN DILUTED CALCULATION |
|
|
|
600.4 |
|
|
|
639.9 |
| ||||