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: December 1, 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 |
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(Commission File Number) |
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(IRS Employer |
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 December 1, 2011, the Company released its earnings for third 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 — 5% |
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Net earnings per diluted share |
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$1.95 to $2.00. |
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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 expanded by 5 basis points. For the full year, the company expects rolling four quarters operating profit to decline slightly on a LIFO basis. Excluding the LIFO charge from the calculation, rolling four quarter operating profit increased 21 basis points. For the full year 2011, the company projects rolling four quarter operating profit on a FIFO basis to increase slightly. |
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Product cost inflation |
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4 — 5% |
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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 30 — 40 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 last quarter 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 $185 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 made a cash contribution in 2011 of approximately $52 million. |
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401(k) plan For 2011, we expect a slight increase in our cash contributions and expense compared to 2010. |
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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 the remainder of 2011, we will negotiate agreements with the UFCW for store associates in Memphis, and with the Teamsters who represent some of our associates in distribution and manufacturing operations. Negotiations are 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. Kroger is in the middle of the business planning process and full guidance will be provided in March 2012. Based on what the company is seeing today, the company expects to reach 8% to 10% annual earnings per share growth in 2012, plus a dividend of 1.5% to 2%. This does not factor in the 53rd week in fiscal year 2012.
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 last quarter 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
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Item 9.01 |
Financial Statements and Exhibits. | ||
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(d) |
Exhibits. | |
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99.1 |
Earnings release for third 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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December 1, 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 Third Quarter 2011 Results
Increases 2011 Earnings Per Share Guidance to $1.95 to $2.00;
Identical Supermarket Sales Increased 5.0% without Fuel
CINCINNATI, Ohio, December 1, 2011 — The Kroger Co. (NYSE: KR) today reported total sales, including fuel, increased 10.3% to $20.6 billion in the third quarter of fiscal 2011 compared with $18.7 billion for the same period last year. In the third quarter, which ended November 5, 2011, total sales, excluding fuel, increased 5.1% over the same period last year.
Identical supermarket sales, without fuel, increased 5.0% in the third quarter over the same period last year. This marks 32 consecutive quarters of identical supermarket sales increases for Kroger.
Net earnings for the third quarter totaled $195.9 million, or $0.33 per diluted share. Net earnings in the same period last year were $202.2 million, or $0.32 per diluted share.
“Kroger had an outstanding third quarter. Our associates delivered on our Customer 1st strategy and we had strong sales and earnings per share growth,” said David B. Dillon, Kroger’s chairman and chief executive officer. “This is exactly the positive momentum we strive for as we enter the holiday season, our most exciting time of the year. Based on the consistency of our results, we have the confidence to raise our earnings guidance for the year.”
Details of Third Quarter 2011 Results
FIFO gross margin was 20.87% of sales for the third quarter of fiscal 2011. Excluding retail fuel operations, FIFO gross margin decreased 34 basis points from the same period last year.
Kroger recorded a $61.6 million LIFO charge during the quarter compared to $11.5 million in the same quarter last year. Excluding retail fuel sales, the LIFO charge increased 30 basis points as a percentage of sales. Kroger increased its LIFO charge estimate to $185 million for the year. Previously, Kroger estimated its LIFO charge at $150 million.
Operating, general and administrative (OG&A) costs were 16.09% of sales. Excluding retail fuel operations, OG&A decreased 29 basis points from the same period last year. The benefits of leverage from strong sales and outstanding cost control more than offset rising debit and credit card fees, incentive plan, health care and pension costs. In addition, depreciation and rent expense were 19 basis points lower as a percentage of sales, excluding fuel, as compared to the prior year.
Third quarter operating margin including the effect of fuel was 1.96% of sales. Excluding fuel, on a rolling four quarters basis the company’s operating margin increased by 5 basis points; excluding LIFO, the increase was 21 basis points.
Financial Strategy
Kroger’s strong free cash flow has allowed the company to return more than $1.8 billion to shareholders through share buybacks and dividends over the last four quarters. During the third quarter, Kroger repurchased 21.0 million shares of stock for a total investment of $471.2 million.
Capital investment, excluding acquisitions and purchases of leased facilities, totaled $497.0 million for the third quarter, compared with $484.0 million for the same period last year.
Net total debt was $7.7 billion, an increase of $476.6 million from a year ago. On a rolling four quarters basis, Kroger’s net total debt to EBITDA ratio was 1.89 compared with 1.93 during the same period last year.
Fiscal 2011 Guidance
Kroger increased its diluted earnings per share guidance to $1.95 to $2.00 for the full year. Previously, the range was $1.85 to $1.95.
The company also raised its identical supermarket sales growth guidance, excluding fuel, to 4.5% to 5% for the year. Previously, identical supermarket sales were expected to range from 4% to 5%.
“Kroger is winning in the marketplace and delivering value for our customers, associates and shareholders. We have a great strategy that has worked well in a variety of economic environments,” Mr. Dillon said. “We are confident that the balance we strive for, including strong sales growth and exceptional cost control, will continue to drive growth in loyal customers and earnings per share well into the future.”
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 796 convenience stores, 363 fine jewelry stores, 1,067 supermarket fuel centers and 40 food processing plants in the U.S. Kroger was recognized by Forbes as the most generous company in the U.S. The company focuses its charitable efforts on supporting hunger relief, breast cancer awareness, the military and their families, and more than 30,000 schools and grassroots organizations in the communities it serves. Kroger contributes food
and funds equal to 125 million meals a year through its partnership with more than 80 Feeding America food banks. 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 “estimate,” “expects,” and “guidance.” 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. Our LIFO charge will be affected by changes in product costs during the year, and our estimate of that charge could prove inaccurate if our estimates regarding product cost changes, or the timing of those changes, prove incorrect. 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 December 1, 2011 at www.kroger.com. An on-demand replay of the webcast will be available from approximately 1 p.m. (ET) Thursday, December 1 through Thursday, December 15, 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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THIRD 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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$ |
20,594.3 |
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100.00 |
% |
$ |
18,666.7 |
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100.00 |
% |
$ |
68,968.6 |
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100.00 |
% |
$ |
62,164.8 |
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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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16,358.9 |
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79.43 |
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14,549.7 |
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77.94 |
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54,538.7 |
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79.08 |
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48,256.3 |
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77.63 |
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OPERATING, GENERAL AND ADMINISTRATIVE (a) |
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3,312.6 |
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16.09 |
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3,188.1 |
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17.08 |
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10,987.9 |
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15.93 |
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10,569.8 |
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17.00 |
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RENT |
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145.6 |
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0.71 |
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154.3 |
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0.83 |
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492.9 |
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0.71 |
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502.7 |
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0.81 |
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DEPRECIATION AND AMORTIZATION |
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372.8 |
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1.81 |
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367.7 |
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1.97 |
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1,245.5 |
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1.81 |
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1,213.1 |
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1.95 |
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OPERATING PROFIT |
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404.4 |
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1.96 |
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406.9 |
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2.18 |
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1,703.6 |
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2.47 |
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1,622.9 |
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2.61 |
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INTEREST EXPENSE |
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99.1 |
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0.48 |
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103.4 |
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0.55 |
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334.4 |
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0.48 |
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337.4 |
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0.54 |
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EARNINGS BEFORE INCOME TAX EXPENSE |
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305.3 |
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1.48 |
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303.5 |
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1.63 |
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1,369.2 |
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1.99 |
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1,285.5 |
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2.07 |
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INCOME TAX EXPENSE |
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107.9 |
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0.52 |
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96.2 |
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0.52 |
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467.7 |
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0.68 |
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436.2 |
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0.70 |
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NET EARNINGS INCLUDING NONCONTROLLING INTERESTS |
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197.4 |
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0.96 |
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207.3 |
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1.11 |
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901.5 |
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1.31 |
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849.3 |
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1.37 |
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NET EARNINGS (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS |
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1.5 |
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0.01 |
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5.1 |
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0.03 |
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(7.5 |
) |
(0.01 |
) |
11.8 |
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0.02 |
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NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. |
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$ |
195.9 |
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0.95 |
% |
$ |
202.2 |
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1.08 |
% |
$ |
909.0 |
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1.32 |
% |
$ |
837.5 |
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1.35 |
% |
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NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER BASIC COMMON SHARE |
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$ |
0.33 |
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$ |
0.32 |
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$ |
1.51 |
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$ |
1.30 |
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AVERAGE NUMBER OF COMMON SHARES USED IN BASIC CALCULATION |
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582.7 |
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633.1 |
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597.0 |
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637.6 |
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NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER DILUTED COMMON SHARE |
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$ |
0.33 |
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$ |
0.32 |
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$ |
1.50 |
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$ |
1.30 |
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AVERAGE NUMBER OF COMMON SHARES USED IN DILUTED CALCULATION |
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585.9 |
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636.2 |
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600.7 |
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640.7 |
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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 $61.6 and $11.5 were recorded in the third quarter of 2011 and 2010, respectively. For the year-to-date period, LIFO charges of $142.3 and $38.5 were recorded for 2011 and 2010, respectively.
Table 2.
THE KROGER CO.
CONSOLIDATED BALANCE SHEETS
(in millions)
(unaudited)
|
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November 05, |
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November 06, |
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2011 |
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2010 |
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ASSETS |
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Current Assets |
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Cash |
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$ |
207.6 |
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$ |
155.9 |
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Temporary cash investments |
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8.2 |
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602.0 |
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Deposits in-transit |
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879.4 |
|
755.1 |
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Receivables |
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876.7 |
|
847.0 |
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Inventories |
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5,507.3 |
|
5,255.8 |
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Prepaid and other current assets |
|
344.1 |
|
290.7 |
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|
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Total current assets |
|
7,823.3 |
|
7,906.5 |
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Property, plant and equipment, net |
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14,450.5 |
|
14,105.5 |
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Goodwill |
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1,137.9 |
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1,158.4 |
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Other assets |
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548.6 |
|
584.5 |
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Total Assets |
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$ |
23,960.3 |
|
$ |
23,754.9 |
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|
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LIABILITIES AND SHAREOWNERS’ EQUITY |
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Current liabilities |
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| ||
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Current portion of long-term debt including obligations under capital leases and financing obligations |
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$ |
1,261.7 |
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$ |
546.9 |
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Trade accounts payable |
|
4,654.3 |
|
4,178.6 |
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Accrued salaries and wages |
|
956.4 |
|
836.5 |
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Deferred income taxes |
|
214.7 |
|
353.6 |
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Other current liabilities |
|
2,401.5 |
|
2,426.2 |
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Total current liabilities |
|
9,488.6 |
|
8,341.8 |
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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 |
|
6,396.2 |
|
7,190.5 |
| ||
|
Adjustment to reflect fair-value interest rate hedges |
|
31.9 |
|
69.6 |
| ||
|
Long-term debt including obligations under capital leases and financing obligations |
|
6,428.1 |
|
7,260.1 |
| ||
|
|
|
|
|
|
| ||
|
Deferred income taxes |
|
1,065.6 |
|
577.0 |
| ||
|
Pension and postretirement benefit obligations |
|
930.2 |
|
988.9 |
| ||
|
Other long-term liabilities |
|
1,148.8 |
|
1,326.5 |
| ||
|
|
|
|
|
|
| ||
|
Total Liabilities |
|
19,061.3 |
|
18,494.3 |
| ||
|
|
|
|
|
|
| ||
|
Shareowners’ equity |
|
4,899.0 |
|
5,260.6 |
| ||
|
|
|
|
|
|
| ||
|
Total Liabilities and Shareowners’ Equity |
|
$ |
23,960.3 |
|
$ |
23,754.9 |
|
|
|
|
|
|
|
| ||
|
Total common shares outstanding at end of period |
|
571.6 |
|
631.7 |
| ||
|
Total diluted shares year-to-date |
|
600.7 |
|
640.7 |
| ||
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 |
|
$ |
901.5 |
|
$ |
849.3 |
|
|
Adjustment to reconcile net earnings including noncontrolling interests to net cash provided by operating activities: |
|
|
|
|
| ||
|
Depreciation and amortization |
|
1,245.5 |
|
1,213.1 |
| ||
|
LIFO charge |
|
142.3 |
|
38.5 |
| ||
|
Stock-based employee compensation |
|
62.4 |
|
61.9 |
| ||
|
Expense for Company-sponsored pension plans |
|
54.0 |
|
49.6 |
| ||
|
Asset impairment charges |
|
29.5 |
|
21.5 |
| ||
|
Deferred income taxes |
|
313.5 |
|
5.1 |
| ||
|
Other |
|
24.5 |
|
(11.3 |
) | ||
|
Changes in operating assets and liabilities, net of effects from acquisitions of businesses: |
|
|
|
|
| ||
|
Deposits in-transit |
|
(213.3 |
) |
(100.8 |
) | ||
|
Receivables |
|
20.8 |
|
(2.2 |
) | ||
|
Inventories |
|
(680.9 |
) |
(358.9 |
) | ||
|
Prepaid expenses |
|
(22.4 |
) |
270.1 |
| ||
|
Trade accounts payable |
|
452.3 |
|
287.6 |
| ||
|
Accrued expenses |
|
240.3 |
|
213.7 |
| ||
|
Income taxes receivable and payable |
|
(110.9 |
) |
138.3 |
| ||
|
Contribution to Company-sponsored pension plan |
|
(51.7 |
) |
(141.0 |
) | ||
|
Other |
|
3.1 |
|
(0.8 |
) | ||
|
|
|
|
|
|
| ||
|
Net cash provided by operating activities |
|
2,410.5 |
|
2,533.7 |
| ||
|
|
|
|
|
|
| ||
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
| ||
|
Payments for capital expenditures |
|
(1,405.1 |
) |
(1,422.5 |
) | ||
|
Payments for acquisitions |
|
(51.0 |
) |
(6.9 |
) | ||
|
Proceeds from sale of assets |
|
42.6 |
|
33.6 |
| ||
|
Other |
|
(5.6 |
) |
(4.2 |
) | ||
|
|
|
|
|
|
| ||
|
Net cash used by investing activities |
|
(1,419.1 |
) |
(1,400.0 |
) | ||
|
|
|
|
|
|
| ||
|
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 |
|
(541.9 |
) |
(569.5 |
) | ||
|
Borrowings on commercial paper |
|
330.0 |
|
— |
| ||
|
Dividends paid |
|
(191.4 |
) |
(183.3 |
) | ||
|
Excess tax benefits on stock-based awards |
|
6.1 |
|
2.2 |
| ||
|
Proceeds from issuance of capital stock |
|
92.7 |
|
24.4 |
| ||
|
Treasury stock purchases |
|
(1,274.1 |
) |
(291.8 |
) | ||
|
Increase (Decrease) in book overdrafts |
|
(25.1 |
) |
1.2 |
| ||
|
Investment in the remaining interest of a variable interest entity |
|
— |
|
(85.8 |
) | ||
|
Other |
|
(0.9 |
) |
(3.4 |
) | ||
|
|
|
|
|
|
| ||
|
Net cash used by financing activities |
|
(1,600.2 |
) |
(799.6 |
) | ||
|
|
|
|
|
|
| ||
|
NET INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS |
|
(608.8 |
) |
334.1 |
| ||
|
|
|
|
|
|
| ||
|
CASH AND TEMPORARY CASH INVESTMENTS: |
|
|
|
|
| ||
|
BEGINNING OF YEAR |
|
824.6 |
|
423.8 |
| ||
|
END OF QUARTER |
|
$ |
215.8 |
|
$ |
757.9 |
|
|
|
|
|
|
|
| ||
|
Reconciliation of capital expenditures: |
|
|
|
|
| ||
|
Payments for capital expenditures |
|
$ |
(1,405.1 |
) |
$ |
(1,422.5 |
) |
|
Changes in construction-in-progress payables |
|
(123.7 |
) |
(24.8 |
) | ||
|
Total capital expenditures |
|
$ |
(1,528.8 |
) |
$ |
(1,447.3 |
) |
|
|
|
|
|
|
| ||
|
Disclosure of cash flow information: |
|
|
|
|
| ||
|
Cash paid during the year for interest |
|
$ |
338.8 |
|
$ |
370.7 |
|
|
Cash paid during the year for income taxes |
|
$ |
295.4 |
|
$ |
333.9 |
|
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) | |||||||
|
|
|
|
| ||||
|
|
|
THIRD QUARTER |
| ||||
|
|
|
2011 |
|
2010 |
| ||
|
|
|
|
|
|
| ||
|
INCLUDING FUEL CENTERS |
|
$ |
18,418.1 |
|
$ |
16,839.5 |
|
|
EXCLUDING FUEL CENTERS |
|
$ |
15,524.9 |
|
$ |
14,780.2 |
|
|
|
|
|
|
|
| ||
|
INCLUDING FUEL CENTERS |
|
9.4 |
% |
4.5 |
% | ||
|
EXCLUDING FUEL CENTERS |
|
5.0 |
% |
2.4 |
% | ||
(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 and
Net Earnings Attributable to the Kroger Co to EBITDA.
(in millions)
(unaudited)
The items identified below should not be considered an alternative to any GAAP measure of performance or liquidity. The items below are a primary component of determining compliance with the financial covenants under the Company’s credit facility and management believes that it is an important measure of liquidity. The items below 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 third quarter of 2011 to the balance in the third quarter of 2010.
|
|
|
November 05, |
|
November 06, |
|
|
| |||
|
|
|
2011 |
|
2010 |
|
Change |
| |||
|
|
|
|
|
|
|
|
| |||
|
Current portion of long-term debt including obligations under capital leases and financing obligations |
|
$ |
1,261.7 |
|
$ |
546.9 |
|
$ |
714.8 |
|
|
Face-value of long-term debt including obligations under capital leases and financing obligations |
|
6,396.2 |
|
7,190.5 |
|
(794.3 |
) | |||
|
Adjustment to reflect fair-value interest rate hedges |
|
31.9 |
|
69.6 |
|
(37.7 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Total debt |
|
$ |
7,689.8 |
|
$ |
7,807.0 |
|
$ |
(117.2 |
) |
|
|
|
|
|
|
|
|
| |||
|
Less: Temporary cash investments |
|
8.2 |
|
602.0 |
|
(593.8 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Net total debt |
|
$ |
7,681.6 |
|
$ |
7,205.0 |
|
$ |
476.6 |
|
The following table provides a reconciliation from net earnings attributable to the Kroger Co. to EBITDA, as defined in our credit agreement (“EBITDA”), on a rolling four quarter basis.
|
|
|
November 05, |
|
November 06, |
|
|
|
| ||
|
|
|
2011 |
|
2010 |
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| ||
|
Net earnings attributable to the Kroger Co. |
|
$ |
1,187.8 |
|
$ |
1,092.9 |
|
|
|
|
|
LIFO |
|
161.1 |
|
39.8 |
|
|
|
| ||
|
Goodwill impairment charge |
|
18.6 |
|
— |
|
|
|
| ||
|
Depreciation and amortization |
|
1,632.3 |
|
1,580.8 |
|
|
|
| ||
|
Interest expense |
|
444.6 |
|
456.5 |
|
|
|
| ||
|
Income tax expense |
|
632.8 |
|
572.2 |
|
|
|
| ||
|
Other |
|
(3.8 |
) |
(4.0 |
) |
|
|
| ||
|
|
|
|
|
|
|
|
|
| ||
|
EBITDA |
|
4,073.4 |
|
3,738.2 |
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| ||
|
Net total debt to EBITDA ratio |
|
1.89 |
|
1.93 |
|
|
|
| ||