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 1, 2012
(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 March 1, 2012, the Company released its earnings for fourth quarter and fiscal year 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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2012 Guidance: |
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Identical supermarket sales growth (excluding fuel sales) |
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Approximately 3.0% to 3.5%. This includes the expected negative effect on sales from prescription drugs coming off patent. |
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Net earnings per diluted share |
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$2.28 to $2.38 |
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Non-fuel FIFO operating profit margin |
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We expect full-year FIFO operating margin rate in 2012, excluding fuel, to expand slightly compared to fiscal 2011 results. |
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Capital expenditures |
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$1.9 to $2.2 billion, excluding acquisitions and purchases of leased property. These capital projects include approximately 40 to 50 major projects covering new stores, expansions and relocations, and 125 to 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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1.3 to 1.5% before acquisitions and operational closings |
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Expected tax rate |
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Approximately 36.5%, excluding the resolution of any tax issues |
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LIFO |
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$140 to $190 million |
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Pension Contributions/ Expenses |
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Company-sponsored pension plans We expect 2012 expense to be approximately $90 million. We expect to make cash contributions in 2012 of approximately $75 million. |
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401(k) plan For 2012, we expect a slight increase in our cash contributions and expense compared to 2011. |
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Multi-employer plans In 2011, we expect to contribute approximately $240 million to |
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multi-employer pension funds. |
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Labor |
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In 2012, we will negotiate agreements with the UFCW for store associates in Memphis, Las Vegas, Dayton and Columbus, Ohio, Indianapolis, Louisville, Nashville, Phoenix and Portland. 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%, plus a dividend of 1.5% to 2%, for a total shareholder return of approximately 8% to 10%. Kroger expects this total shareholder return to compare favorably to the S&P 500 over a rolling three-to-five year time horizon. Annual earnings per share growth for fiscal 2012 will be higher than this due to a combination of the benefit of a 53rd week, a lower expected LIFO charge, our ability to aggressively repurchase stock during 2011, and benefits from the pension plan consolidation.
Share Repurchases: Since the end of the fourth quarter and through the close of the market on February 29, 2012, Kroger invested $96.1 million to repurchase 4.0 million shares, leaving $379 million remaining under the $1 billion stock repurchase program announced in September 2011.
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 nontraditional competitors, the aggressiveness of competition, and our response to these activities; 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; changes in government funded benefit programs; volatility in our fuel margins; increased fuel costs and the effect those increases have on consumer spending; the effect of prescription drugs going off patent has on our sales and earnings; our expectations regarding our ability to obtain additional pharmacy sales from third party payors such as Express Scripts; 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 supplying energy to our various operations, including the cost of transportation; and the benefits that we receive from the consolidation of the UFCW pension plans. 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 FIFO 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 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 plans to use cash flow from operations to fund capital expenditures, 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. 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 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. Total shareholder return, and the extent to which it compares favorably to the S&P 500 over a rolling three-to-five year time horizon, and our ability to continue to reward shareholders in 2012 through increased earnings, quarterly dividends, and share repurchases, will be affected by all of the factors identified above, as well as the ability for the company to pay dividends from free cash flow as contemplated. Our ability to expand non-fuel FIFO operating margins slightly compared to 2011 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 fourth quarter and fiscal year 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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March 1, 2012 |
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 Fourth Quarter and Full Year 2011 Results
Adjusted Earnings of $0.50 Per Diluted Share for the Fourth Quarter and $2.00 for the Full Year 2011 ID Sales Up 4.9% Without Fuel
CINCINNATI, Ohio, March 1, 2012 — The Kroger Co. (NYSE: KR) today reported total sales, including fuel, increased 7.7% to $21.4 billion in the fourth quarter of fiscal 2011 compared with $19.9 billion for the same period last year. In the fourth quarter, which ended on January 28, 2012, total sales, excluding fuel, increased 5.0% over the same period last year.
Identical supermarket sales, without fuel, increased 4.9% in the fourth quarter over the same period last year.
Excluding the effect of the UFCW pension plan consolidation announced in December, adjusted earnings for the quarter were $283.8 million, or $0.50 per diluted share. Including the effect of the UFCW pension plan consolidation, Kroger reported a net loss for the fourth quarter that totaled $(306.9) million, or $(0.54) per diluted share. Net earnings in the same period last year were $278.8 million, or $0.44 per diluted share.
“We are very pleased with Kroger’s outstanding performance in fiscal year 2011 and strong fourth quarter financial results,” said David B. Dillon, Kroger’s chairman and chief executive officer. “Our Customer 1st strategy is delivering value for our customers, who are rewarding Kroger with their loyalty. Customer loyalty, in turn, is driving sales and shareholder returns.”
Details of Fourth Quarter 2011 Results
FIFO gross margin, as reported, was 21.13% of sales for the fourth quarter of fiscal 2011. Excluding retail fuel operations, FIFO gross margin decreased 47 basis points from the same period last year.
Kroger recorded a $73.4 million LIFO charge during the quarter compared to $18.8 million in the same quarter last year. Excluding retail fuel sales, the LIFO charge increased 30 basis points as a percentage of sales.
Excluding retail fuel operations and the UFCW pension plan consolidation charge, operating, general and administrative (OG&A) costs, rent and depreciation declined a total of 21 basis points from the same quarter last year. OG&A declined 8 basis points, rent declined 3 basis points and depreciation declined 10 basis points. Positive identical sales growth, good cost control and productivity improvements offset an increase in incentive plan expense compared to the fourth quarter last year and the continued challenge of rising health care and pension costs and rising debit and credit card fees.
Fiscal Year 2011 Results
For fiscal year 2011, total sales increased 10.2% to $90.4 billion compared with $82.0 billion for fiscal year 2010. Excluding fuel sales, total sales increased 5.0% over the same period last year. Identical supermarket sales, without fuel, increased 4.9% in fiscal year 2011 compared with the prior fiscal year.
Excluding the effect of the UFCW pension plan consolidation, earnings for fiscal year 2011 were $1.2 billion, or $2.00 per diluted share. Including the effect of the UFCW pension plan consolidation, fiscal year 2011 earnings were $602.1 million or $1.01 per diluted share. Net earnings for fiscal year 2010 were $1.1 billion, or $1.74 per diluted share.
Inflation continued at a rate higher than expected during the 4th quarter, resulting in a final full year LIFO charge of approximately $216 million. At the end of the 3rd quarter of fiscal 2011, Kroger projected the full year LIFO charge to be $185 million.
FIFO operating margin, excluding fuel and the UFCW pension plan consolidation charge, increased by 5 basis points for fiscal year 2011.
“Kroger increased identical sales, grew market share and invested wisely to continue to win customer loyalty,” Mr. Dillon said. “That we were able to raise earnings per share and identical sales guidance through the year and achieve those higher results demonstrates the strength of our business strategy and momentum for a strong 2012.”
Financial Strategy
Kroger’s strong free cash flow allowed the company to return more than $1.8 billion to shareholders through share buybacks and dividends in 2011. During the fourth quarter, Kroger repurchased 11.7 million shares of stock for a total investment of $272.4 million.
Capital investment, excluding acquisitions and purchases of leased facilities, totaled $1,898.5 million for the year compared with $1,859.3 million in 2010.
Net total debt was $8.2 billion, an increase of $902.9 million from a year ago. On a rolling four quarters basis, Kroger’s net total debt to adjusted EBITDA ratio was 2.00 compared with 1.89 during the same period last year.
Fiscal 2012 Annual Guidance
For fiscal year 2012, Kroger anticipates identical supermarket sales growth, excluding fuel, of approximately 3.0% to 3.5%. This includes the expected negative effect on sales from prescription drugs coming off patent.
Kroger’s business model is structured to produce annual earnings per share growth averaging 6% to 8%, plus a dividend of 1.5% to 2%, for a total shareholder return of approximately 8% to 10%. We
expect this total shareholder return to compare favorably to the S&P 500 over a rolling three-to-five year time horizon.
Full-year net earnings for fiscal 2012 are expected to range from $2.28 to $2.38 per diluted share. This growth rate is higher than our business model due to a combination of the benefit of a 53rd week, an expected lower LIFO charge, the benefit of aggressive stock buybacks during 2011, and benefits from the UFCW pension plan consolidation.
During fiscal 2012, Kroger plans to use cash flow from operations to fund capital expenditures, repurchase shares, pay dividends to shareholders and maintain its current debt rating. We expect capital expenditures to be in the $1.9 to $2.2 billion range for the year.
“When we put our customers first, shareholders win,” said Mr. Dillon. “Kroger will continue to reward shareholders in 2012 through increased earnings, plus the benefit of quarterly dividends and share repurchases.”
Kroger, the nation’s largest traditional grocery retailer, employs more than 339,000 associates who serve customers in 2,435 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 791 convenience stores, 348 fine jewelry stores, 1,090 supermarket fuel centers and 39 food processing plants in the U.S. Recognized by Forbes as the most generous company in America, Kroger supports 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 more than 80 Feeding America food bank partners. For more information please visit Kroger.com.
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 “anticipates,” “expect,” “expected,” “plans,” and “will.” 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, net earnings, 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; and the benefits that we receive from the consolidation of the UFCW pension plans. 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. Total shareholder return, and the extent to which it compares favorably to the S&P 500 over a rolling three-to-five year time horizon, and our ability to continue to reward shareholders in 2012 through increased earnings, quarterly dividends, and share repurchases, will be affected by all of the factors identified above, as well as the ability for the company to pay dividends from free cash flow as contemplated. Our plans to use cash flow from operations to fund capital expenditures, repurchase shares, pay dividends to shareholders, and maintain our current debt rating, will depend on our ability to generate free cash flow, 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. Our LIFO charge will be affected by changes in product costs during the year if our estimates of product cost changes or the timing of those changes prove incorrect. Our capital expenditures 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 worsen. 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 1, 2012 at www.kroger.com. An on-demand replay of the webcast will be available from approximately 1 p.m. (ET) today through Thursday, March 15, 2012.
—30—
View 4th Quarter 2011 Reports - PDF Format:
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF CASH FLOWS
SUPPLEMENTAL SALES INFORMATION
RECONCILIATION OF TOTAL DEBT TO NET TOTAL DEBT
NET EARNINGS PER DILUTED SHARE EXCLUDING PENSION CHARGE
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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FOURTH 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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$ |
21,405.8 |
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100.00 |
% |
$ |
19,884.7 |
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100.00 |
% |
$ |
90,374.4 |
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100.00 |
% |
$ |
82,049.5 |
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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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16,955.9 |
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79.21 |
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15,546.6 |
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78.18 |
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71,494.6 |
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79.11 |
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63,802.9 |
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77.76 |
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OPERATING, GENERAL AND ADMINISTRATIVE (a) |
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4,338.7 |
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20.27 |
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3,231.8 |
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16.25 |
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15,344.6 |
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16.98 |
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13,823.1 |
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16.85 |
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RENT |
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144.1 |
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0.67 |
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141.9 |
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0.71 |
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619.0 |
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0.68 |
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623.1 |
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0.76 |
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DEPRECIATION AND AMORTIZATION |
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392.3 |
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1.83 |
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386.8 |
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1.95 |
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1,637.8 |
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1.81 |
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1,599.9 |
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1.95 |
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GOODWILL IMPAIRMENT CHARGE |
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— |
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0.00 |
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18.6 |
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0.09 |
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— |
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0.00 |
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18.6 |
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0.02 |
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OPERATING PROFIT (LOSS) |
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(425.2 |
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(1.99 |
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559.0 |
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2.81 |
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1,278.4 |
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1.41 |
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2,181.9 |
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2.66 |
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INTEREST EXPENSE |
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100.5 |
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0.47 |
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110.2 |
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0.55 |
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434.9 |
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0.48 |
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447.6 |
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0.55 |
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NET EARNINGS (LOSS) BEFORE INCOME TAX EXPENSE |
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(525.7 |
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(2.46 |
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448.8 |
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2.26 |
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843.5 |
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0.93 |
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1,734.3 |
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2.11 |
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INCOME TAX EXPENSE (BENEFIT) |
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(220.3 |
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(1.03 |
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165.1 |
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0.83 |
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247.4 |
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0.27 |
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601.3 |
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0.73 |
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NET EARNINGS (LOSS) INCLUDING NONCONTROLLING INTERESTS |
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(305.4 |
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(1.43 |
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283.7 |
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1.43 |
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596.1 |
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0.66 |
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1,133.0 |
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1.38 |
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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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4.9 |
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0.02 |
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(6.0 |
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(0.01 |
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16.7 |
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0.02 |
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NET EARNINGS (LOSS) ATTRIBUTABLE TO THE KROGER CO. |
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$ |
(306.9 |
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-1.43 |
% |
$ |
278.8 |
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1.40 |
% |
$ |
602.1 |
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0.67 |
% |
$ |
1,116.3 |
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1.36 |
% |
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NET EARNINGS (LOSS) ATTRIBUTABLE TO THE KROGER CO. PER BASIC COMMON SHARE |
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$ |
(0.54 |
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$ |
0.44 |
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$ |
1.01 |
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$ |
1.75 |
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AVERAGE NUMBER OF COMMON SHARES USED IN BASIC CALCULATION |
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565.0 |
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627.4 |
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589.6 |
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635.2 |
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NET EARNINGS (LOSS) ATTRIBUTABLE TO THE KROGER CO. PER DILUTED COMMON SHARE |
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$ |
(0.54 |
) |
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$ |
0.44 |
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$ |
1.01 |
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$ |
1.74 |
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AVERAGE NUMBER OF COMMON SHARES USED IN DILUTED CALCULATION |
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565.0 |
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630.5 |
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593.2 |
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638.3 |
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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.
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Note: |
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Average number of common shares used in basic and diluted earnings per share calculations are the same for the fourth quarter of 2011 due to the net loss recognized in the quarter. |
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(a) |
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Merchandise costs and operating, general and administrative expenses exclude depreciation and amortization expense and rent expense which are included in separate expense lines. |
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(b) |
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LIFO charges of $73.4 and $18.8 were recorded in the fourth quarter of 2011 and 2010, respectively. For the year-to-date period, LIFO charges of $215.7 and $57.3 were recorded for 2011 and 2010, respectively. |
Table 2.
THE KROGER CO.
CONSOLIDATED BALANCE SHEETS
(in millions)
(unaudited)
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January 28, |
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January 29, |
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2012 |
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2011 |
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ASSETS |
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Current Assets |
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Cash |
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$ |
181.2 |
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$ |
187.8 |
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Temporary cash investments |
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6.3 |
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636.8 |
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Deposits in-transit |
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786.3 |
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666.1 |
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Receivables |
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949.2 |
|
844.6 |
| ||
|
Inventories |
|
5,114.1 |
|
4,966.2 |
| ||
|
Prepaid and other current assets |
|
287.5 |
|
319.9 |
| ||
|
|
|
|
|
|
| ||
|
Total current assets |
|
7,324.6 |
|
7,621.4 |
| ||
|
|
|
|
|
|
| ||
|
Property, plant and equipment, net |
|
14,464.1 |
|
14,146.9 |
| ||
|
Goodwill |
|
1,137.9 |
|
1,139.8 |
| ||
|
Other assets |
|
548.7 |
|
596.5 |
| ||
|
|
|
|
|
|
| ||
|
Total Assets |
|
$ |
23,475.3 |
|
$ |
23,504.6 |
|
|
|
|
|
|
|
| ||
|
LIABILITIES AND SHAREOWNERS’ EQUITY |
|
|
|
|
| ||
|
Current liabilities |
|
|
|
|
| ||
|
Current portion of long-term debt including obligations under capital leases and financing obligations |
|
$ |
1,314.6 |
|
$ |
588.4 |
|
|
Trade accounts payable |
|
4,328.8 |
|
4,226.9 |
| ||
|
Accrued salaries and wages |
|
1,055.9 |
|
887.6 |
| ||
|
Deferred income taxes |
|
189.7 |
|
219.6 |
| ||
|
Other current liabilities |
|
2,215.2 |
|
2,148.2 |
| ||
|
|
|
|
|
|
| ||
|
Total current liabilities |
|
9,104.2 |
|
8,070.7 |
| ||
|
|
|
|
|
|
| ||
|
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 |
|
6,825.8 |
|
7,246.6 |
| ||
|
Adjustment to reflect fair-value interest rate hedges |
|
23.7 |
|
56.7 |
| ||
|
Long-term debt including obligations under capital leases and financing obligations |
|
6,849.5 |
|
7,303.3 |
| ||
|
|
|
|
|
|
| ||
|
Deferred income taxes |
|
646.7 |
|
750.1 |
| ||
|
Pension and postretirement benefit obligations |
|
1,392.5 |
|
946.3 |
| ||
|
Other long-term liabilities |
|
1,515.6 |
|
1,136.7 |
| ||
|
|
|
|
|
|
| ||
|
Total Liabilities |
|
19,508.5 |
|
18,207.1 |
| ||
|
|
|
|
|
|
| ||
|
Shareowners’ equity |
|
3,966.8 |
|
5,297.5 |
| ||
|
|
|
|
|
|
| ||
|
Total Liabilities and Shareowners’ Equity |
|
$ |
23,475.3 |
|
$ |
23,504.6 |
|
|
|
|
|
|
|
| ||
|
Total common shares outstanding at end of period |
|
561.3 |
|
620.3 |
| ||
|
Total diluted shares year-to-date |
|
593.2 |
|
638.3 |
| ||
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 |
|
$ |
596.1 |
|
$ |
1,133.0 |
|
|
Adjustment to reconcile net earnings including noncontrolling interests to net cash provided by operating activities: |
|
|
|
|
| ||
|
Depreciation and amortization |
|
1,637.8 |
|
1,599.9 |
| ||
|
LIFO charge |
|
215.7 |
|
57.3 |
| ||
|
Stock-based employee compensation |
|
81.2 |
|
79.3 |
| ||
|
Expense for Company-sponsored pension plans |
|
69.6 |
|
64.6 |
| ||
|
Goodwill impairment charge |
|
— |
|
18.6 |
| ||
|
Asset impairment charges |
|
36.5 |
|
25.0 |
| ||
|
Deferred income taxes |
|
30.6 |
|
37.0 |
| ||
|
Other |
|
7.9 |
|
7.1 |
| ||
|
Changes in operating assets and liabilities, net of effects from acquisitions of businesses: |
|
|
|
|
| ||
|
Deposits in-transit |
|
(120.2 |
) |
(11.7 |
) | ||
|
Receivables |
|
(62.6 |
) |
(10.6 |
) | ||
|
Inventories |
|
(361.1 |
) |
(88.1 |
) | ||
|
Prepaid expenses |
|
51.9 |
|
289.7 |
| ||
|
Trade accounts payable |
|
82.2 |
|
315.3 |
| ||
|
Accrued expenses |
|
216.3 |
|
70.6 |
| ||
|
Income taxes receivable and payable |
|
(106.2 |
) |
133.2 |
| ||
|
Contribution to Company-sponsored pension plan |
|
(51.7 |
) |
(141.0 |
) | ||
|
Other |
|
334.5 |
|
(213.5 |
) | ||
|
|
|
|
|
|
| ||
|
Net cash provided by operating activities |
|
2,658.5 |
|
3,365.7 |
| ||
|
|
|
|
|
|
| ||
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
| ||
|
Payments for capital expenditures |
|
(1,897.8 |
) |
(1,918.8 |
) | ||
|
Payments for acquisitions |
|
(51.0 |
) |
(6.9 |
) | ||
|
Proceeds from sale of assets |
|
50.7 |
|
54.7 |
| ||
|
Other |
|
(10.3 |
) |
(90.2 |
) | ||
|
|
|
|
|
|
| ||
|
Net cash used by investing activities |
|
(1,908.4 |
) |
(1,961.2 |
) | ||
|
|
|
|
|
|
| ||
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
| ||
|
Proceeds from lease-financing transactions |
|
1.7 |
|
5.7 |
| ||
|
Proceeds from issuance of long-term debt |
|
452.7 |
|
381.2 |
| ||
|
Payments on long-term debt |
|
(547.4 |
) |
(552.6 |
) | ||
|
Net borrowings on commercial paper |
|
370.0 |
|
— |
| ||
|
Dividends paid |
|
(257.4 |
) |
(250.0 |
) | ||
|
Excess tax benefits on stock-based awards |
|
9.1 |
|
2.5 |
| ||
|
Proceeds from issuance of capital stock |
|
118.2 |
|
29.3 |
| ||
|
Treasury stock purchases |
|
(1,546.6 |
) |
(545.1 |
) | ||
|
Increase in book overdrafts |
|
19.2 |
|
22.0 |
| ||
|
Investment in the remaining interest of a variable interest entity |
|
— |
|
(85.8 |
) | ||
|
Other |
|
(6.7 |
) |
(10.9 |
) | ||
|
|
|
|
|
|
| ||
|
Net cash used by financing activities |
|
(1,387.2 |
) |
(1,003.7 |
) | ||
|
|
|
|
|
|
| ||
|
NET INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS |
|
(637.1 |
) |
400.8 |
| ||
|
|
|
|
|
|
| ||
|
CASH AND TEMPORARY CASH INVESTMENTS: |
|
|
|
|
| ||
|
BEGINNING OF YEAR |
|
824.6 |
|
423.8 |
| ||
|
END OF QUARTER |
|
$ |
187.5 |
|
$ |
824.6 |
|
|
|
|
|
|
|
| ||
|
Reconciliation of capital expenditures: |
|
|
|
|
| ||
|
Payments for capital expenditures |
|
$ |
(1,897.8 |
) |
$ |
(1,918.8 |
) |
|
Changes in construction-in-progress payables |
|
(60.4 |
) |
21.5 |
| ||
|
Total capital expenditures |
|
$ |
(1,958.2 |
) |
$ |
(1,897.3 |
) |
|
|
|
|
|
|
| ||
|
Disclosure of cash flow information: |
|
|
|
|
| ||
|
Cash paid during the year for interest |
|
$ |
456.8 |
|
$ |
485.8 |
|
|
Cash paid during the year for income taxes |
|
$ |
295.6 |
|
$ |
664.1 |
|
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 an 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)
|
|
|
FOURTH QUARTER |
|
YEAR-TO-DATE |
| ||||||||
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
INCLUDING FUEL CENTERS |
|
$ |
19,264.7 |
|
$ |
17,983.9 |
|
$ |
81,082.1 |
|
$ |
74,243.1 |
|
|
EXCLUDING FUEL CENTERS |
|
$ |
16,525.3 |
|
$ |
15,749.7 |
|
$ |
68,557.9 |
|
$ |
65,335.5 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
INCLUDING FUEL CENTERS |
|
7.1 |
% |
6.3 |
% |
9.2 |
% |
5.7 |
% | ||||
|
EXCLUDING FUEL CENTERS |
|
4.9 |
% |
3.8 |
% |
4.9 |
% |
2.8 |
% | ||||
(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 they are 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 fourth quarter of 2011 to the balance in the fourth quarter of 2010.
|
|
|
January 28, |
|
January 29, |
|
|
| |||
|
|
|
2012 |
|
2011 |
|
Change |
| |||
|
|
|
|
|
|
|
|
| |||
|
Current portion of long-term debt including obligations under capital leases and financing obligations |
|
$ |
1,314.6 |
|
$ |
588.4 |
|
$ |
726.2 |
|
|
Face-value of long-term debt including obligations under capital leases and financing obligations |
|
6,825.8 |
|
7,246.6 |
|
(420.8 |
) | |||
|
Adjustment to reflect fair-value interest rate hedges |
|
23.7 |
|
56.7 |
|
(33.0 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Total debt |
|
$ |
8,164.1 |
|
$ |
7,891.7 |
|
$ |
272.4 |
|
|
|
|
|
|
|
|
|
| |||
|
Less: Temporary cash investments |
|
6.3 |
|
636.8 |
|
(630.5 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Net total debt |
|
$ |
8,157.8 |
|
$ |
7,254.9 |
|
$ |
902.9 |
|
The following table provides a reconciliation from net earnings attributable to the Kroger Co. to EBITDA, as defined in the Company’s credit agreement (“EBITDA”), on a rolling four quarter basis.
|
|
|
January 28, |
|
January 29, |
| ||
|
|
|
2012 |
|
2011 |
| ||
|
|
|
|
|
|
| ||
|
Net earnings attributable to the Kroger Co. |
|
$ |
602.1 |
|
$ |
1,116.3 |
|
|
LIFO |
|
215.7 |
|
57.3 |
| ||
|
Goodwill impairment charge |
|
— |
|
18.6 |
| ||
|
Depreciation and amortization |
|
1,637.8 |
|
1,599.9 |
| ||
|
Interest expense |
|
434.9 |
|
447.6 |
| ||
|
Income tax expense |
|
247.4 |
|
601.3 |
| ||
|
UFCW Pension Plan consolidation charge |
|
952.6 |
|
— |
| ||
|
Other |
|
(4.0 |
) |
(3.5 |
) | ||
|
|
|
|
|
|
| ||
|
EBITDA |
|
$ |
4,086.5 |
|
$ |
3,837.5 |
|
|
|
|
|
|
|
| ||
|
Net total debt to EBITDA ratio |
|
2.00 |
|
1.89 |
| ||
Table 6. Net Earnings Per Diluted Share Excluding the UFCW Pension Plan Consolidation Charge
(in millions, except per share amounts)
(unaudited)
Items identified in this table should not be considered alternatives to net earnings (loss) attributable to The Kroger Co. or any other GAAP measure of performance. These items should not be reviewed in isolation or considered substitutes of 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 periods presented. The item includes a charge that was recorded due to the consolidation of several Multi-Employer Pension Plans.
|
|
|
FOURTH QUARTER |
|
YEAR-TO-DATE |
| ||
|
|
|
2011 |
|
2011 |
| ||
|
|
|
|
|
|
| ||
|
NET EARNINGS (LOSS) ATTRIBUTABLE TO THE KROGER CO. |
|
$ |
(306.9 |
) |
$ |
602.1 |
|
|
|
|
|
|
|
| ||
|
AFTER-TAX UFCW PENSION PLAN CONSOLIDATION CHARGE (a) |
|
590.7 |
|
590.7 |
| ||
|
|
|
|
|
|
| ||
|
NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. EXCLUDING THE UFCW PENSION PLAN CONSOLIDATION CHARGE |
|
$ |
283.8 |
|
$ |
1,192.8 |
|
|
|
|
|
|
|
| ||
|
NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER DILUTED COMMON SHARE EXCLUDING THE UFCW PENSION PLAN CONSOLIDATION CHARGE |
|
$ |
0.50 |
|
$ |
2.00 |
|
|
|
|
|
|
|
| ||
|
AVERAGE NUMBER OF COMMON SHARES USED IN DILUTED CALCULATION |
|
568.6 |
|
593.2 |
| ||
(a) After-tax UFCW Pension Plan consolidation charge ($952.6 pre-tax) relating to the consolidation of several Multi-Employer Pension Plans.
|
|
|
FOURTH QUARTER |
|
YEAR-TO-DATE |
| ||
|
|
|
2011 |
|
2011 |
| ||
|
|
|
|
|
|
| ||
|
NET EARNINGS (LOSS) ATTRIBUTABLE TO THE KROGER CO. PER DILUTED COMMON SHARE |
|
$ |
(0.54 |
) |
$ |
1.01 |
|
|
|
|
|
|
|
| ||
|
NET EARNINGS PER DILUTED COMMON SHARE AFFECT DUE TO THE UFCW PENSION PLAN CONSOLIDATION CHARGE |
|
1.04 |
|
0.99 |
| ||
|
|
|
|
|
|
| ||
|
NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER DILUTED COMMON SHARE EXCLUDING THE UFCW PENSION PLAN CONSOLIDATION CHARGE |
|
$ |
0.50 |
|
$ |
2.00 |
|