SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the
- Securities Exchange Act of 1934 for the quarterly period ended
March 26, 1994 or
Transition report pursuant to Section 13 or 15(d) of the
- Securities Exchange Act of 1934 for the transition period from
to
Commission file number 1-303
THE KROGER CO.
An Ohio Corporation I.R.S. Employer Identification
No. 31-0345740
1014 Vine Street, Cincinnati, OH 45202
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (513) 762-
4000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No .
-------- ---------
There were 109,616,103 shares of Common Stock ($1 par value)
outstanding as of April 29, 1994.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited information for the quarters ended March 26, 1994 and
March 27, 1993 includes the results of operations of The Kroger Co.
for the 12 week periods ended March 26, 1994 and March 27, 1993,
and of Dillon Companies, Inc. for the 13 week periods ended April
2, 1994 and April 3, 1993. In the opinion of management, the
information reflects all adjustments (consisting only of normal
recurring adjustments) which are necessary for a fair presentation
of results of operations for such periods but should not be
considered as indicative of results for a full year.
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<CAPTION>
Quarter Ended
------------------------
March 26, March 27,
1994 1993
---------- ----------
<S> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,328,804 $5,173,926
---------- ----------
Costs and expenses
Merchandise costs, including warehousing and transportation. . . 4,052,901 3,964,439
Operating, general and administrative. . . . . . . . . . . . . . 974,290 932,349
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,066 67,571
Depreciation and amortization. . . . . . . . . . . . . . . . . . 62,310 62,976
Interest expense, including interest on obligations
under capital leases, net . . . . . . . . . . . . . . . . . . . 76,031 96,989
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,237,598 5,124,324
---------- ----------
</TABLE>
<TABLE>
<S> <C> <C>
Earnings before tax expense, extraordinary loss and
cumulative effect of change in accounting. . . . . . . . . . . . 91,206 49,602
Tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,516 20,138
Earnings before extraordinary loss and cumulative
effect of change in accounting . . . . . . . . . . . . . . . . . 55,690 29,464
Extraordinary loss (net of income tax credit) . . . . . . . . . . (8,332) (9,042)
Cumulative effect of change in accounting
(net of income tax credit) . . . . . . . . . . . . . . . . . . . (159,193)
---------- ----------
Net earnings (loss). . . . . . . . . . . . . . . . . . . . . $ 47,358 $ (138,771)
========== ==========
</TABLE>
<TABLE>
<S> <C> <C>
Primary earnings (loss) per common share:
Earnings from operations . . . . . . . . . . . . . . . . . . . . $ .50 $ .30
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . (.07) (.09)
Cumulative effect of change in accounting. . . . . . . . . . . . (1.63)
---------- ----------
Net earnings (loss). . . . . . . . . . . . . . . . . . . . . $ .43 $(1.42)
========== ==========
</TABLE>
<TABLE>
<S> <C> <C>
Average number of common shares used in per share calculations. . 111,923 97,765
Fully diluted earnings (loss) per common share:
Earnings from operations . . . . . . . . . . . . . . . . . . . . $ .46 $ .29
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . (.06) (.08)
Cumulative effect of change in accounting. . . . . . . . . . . . (1.38)
------ ------
Net earnings (loss). . . . . . . . . . . . . . . . . . . . . $ .40 $(1.17)
====== ======
Average number of common shares used in per share calculations. . 129,654 115,334
</TABLE>
- - -----------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
<TABLE>
CONSOLIDATED BALANCE SHEET
(in thousands of dollars)
(unaudited)
<CAPTION>
March 26, January 1,
1994 1994
---------- -----------
<S>
ASSETS <C> <C>
Current assets
Cash and temporary cash investments . . . . . . . . . . $ 110,068 $ 121,253
Receivables . . . . . . . . . . . . . . . . . . . . . . 242,269 287,925
Inventories:
FIFO cost . . . . . . . . . . . . . . . . . . . . . . 1,946,342 2,001,376
Less LIFO reserve . . . . . . . . . . . . . . . . . . (425,597) (422,097)
---------- ----------
1,520,745 1,579,279
Property held for sale. . . . . . . . . . . . . . . . . 45,669 37,721
Prepaid and other current assets. . . . . . . . . . . . 239,481 199,652
---------- ----------
Total current assets. . . . . . . . . . . . . . . . 2,158,232 2,225,830
Property, plant and equipment, net. . . . . . . . . . . . 2,003,083 1,981,308
Investments and other assets. . . . . . . . . . . . . . . 275,512 273,326
---------- ----------
Total Assets. . . . . . . . . . . . . . . . . . . . $4,436,827 $4,480,464
========== ==========
</TABLE>
<TABLE>
<S> <C> <C>
LIABILITIES
Current liabilities
Current portion of long-term debt . . . . . . . . . . . $ 58,172 $ 63,053
Current portion of obligations under
capital leases. . . . . . . . . . . . . . . . . . . . 8,099 7,962
Accounts payable. . . . . . . . . . . . . . . . . . . . 1,272,699 1,357,532
Other current liabilities . . . . . . . . . . . . . . . 883,530 822,284
---------- ----------
Total current liabilities . . . . . . . . . . . . . 2,222,500 2,250,831
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 3,891,916 3,975,362
Obligations under capital leases. . . . . . . . . . . . . 157,564 159,651
Deferred income taxes . . . . . . . . . . . . . . . . . . 176,120 182,891
Other long-term liabilities . . . . . . . . . . . . . . . 374,408 371,371
---------- ----------
Total Liabilities . . . . . . . . . . . . . . . . . 6,822,508 6,940,106
---------- ----------
</TABLE>
<TABLE>
<S> <C> <C>
SHAREOWNERS' DEFICIT
Common capital stock, par $1, at stated value
Authorized: 350,000,000 shares
Issued: 1994 - 119,514,485 shares
1993 - 118,549,173 shares. . . . . . . . . . . 319,387 308,534
Accumulated deficit . . . . . . . . . . . . . . . . . . . (2,443,575) (2,490,932)
Common stock in treasury, at cost
1994 - 10,283,336 shares
1993 - 10,901,846 shares . . . . . . . . . . . (261,493) (277,244)
---------- ----------
Total Shareowners' Deficit (2,385,681) (2,459,642)
---------- ----------
Total Liabilities and Shareowners' Deficit. . . . . . $4,436,827 $4,480,464
========== ==========
</TABLE>
- - -----------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands of dollars)
(unaudited)
<CAPTION>
Quarter Ended
------------------------------
March 26, March 27,
1994 1993
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . $ 47,358 $ (138,771)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . 8,332 9,042
Cumulative effect of change in accounting. . . . . . . . . . 159,193
Depreciation and amortization. . . . . . . . . . . . . . . . 62,310 62,976
Amortization of discount on Junior Subordinated Debentures . 21,471
Amortization of deferred financing costs . . . . . . . . . . 3,889 3,230
LIFO charge. . . . . . . . . . . . . . . . . . . . . . . . . 3,500 4,000
(Loss) gain on sale of fixed assets. . . . . . . . . . . . . (48) 345
Net increase in cash from changes in operating
assets and liabilities, detailed below . . . . . . . . . . 39,409 8,468
Other changes, net . . . . . . . . . . . . . . . . . . . . . (9) 333
---------- ----------
Net cash provided by operating activities . . . . . . . . 164,741 130,287
---------- ----------
</TABLE>
<TABLE>
<S>
CASH FLOWS FROM INVESTING ACTIVITIES: <C> <C>
Capital expenditures. . . . . . . . . . . . . . . . . . . . . . (84,097) (73,642)
Proceeds from sale of property, plant, and equipment. . . . . . 1,158 414
Increase in property held for sale. . . . . . . . . . . . . . . (7,910) (2,570)
Increase in other investments . . . . . . . . . . . . . . . . . (5,268) (11,782)
---------- ----------
Net cash used by investing activities . . . . . . . . (96,117) (87,580)
---------- ----------
</TABLE>
<TABLE>
<S> <S> <S>
CASH FLOWS FROM FINANCING ACTIVITIES
Debt prepayment costs . . . . . . . . . . . . . . . . . . . . . (11,222) (12,827)
Financing charges incurred. . . . . . . . . . . . . . . . . . . (4,491) (4,698)
Principal payments under capital lease obligations. . . . . . . (1,950) (1,852)
Proceeds from issuance of long-term debt. . . . . . . . . . . . 130,351 269,800
Reductions in long-term debt. . . . . . . . . . . . . . . . . . (218,678) (519,973)
Proceeds from sale of treasury stock. . . . . . . . . . . . . . 13,553 10,590
Proceeds from issuance of capital stock . . . . . . . . . . . . 12,628 192,636
---------- ----------
Net cash used by financing activities . . . . . . . . . . (79,809) (66,324)
---------- ----------
Net decrease in cash and temporary cash investments . . . . . . . (11,185) (23,617)
Cash and temporary cash investments:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . 121,253 103,995
---------- ----------
End of quarter. . . . . . . . . . . . . . . . . . . . . . . . $ 110,068 $ 80,378
========== ==========
</TABLE>
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH FROM CHANGES IN OPERATING ASSETS AND LIABILITIES:
<S> <C> <C>
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,034 $ 58,603
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . 45,656 9,467
Prepaid and other current assets. . . . . . . . . . . . . . . (39,709) (37,842)
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . (84,833) (70,514)
Deferred income taxes . . . . . . . . . . . . . . . . . . . . (6,771) (3,780)
Other liabilities . . . . . . . . . . . . . . . . . . . . . . 70,032 52,534
---------- ----------
$ 39,409 $ 8,468
========== ==========
</TABLE>
- - -----------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
<TABLE>
Supplemental disclosures of cash flow information:
<CAPTION>
Quarter Ended
--------------------------
March 26, March 27,
1994 1993
---------- ----------
<S> <C> <C>
Cash paid during the period for:
Interest (net of amount capitalized) $ 69,304 $ 85,082
Income taxes 19,756 13,537
</TABLE>
- - -----------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
1. CONTINGENCIES
-------------
The Company continuously evaluates contingencies based upon
the best available evidence.
Management believes that allowances for loss have been
provided to the extent necessary and that its assessment of
contingencies is reasonable. To the extent that resolution of
contingencies results in amounts that vary from management's
estimates, future earnings will be charged or credited.
The principal contingencies are described below:
Income Taxes - The Company has settled all tax years through
1983 with the Internal Revenue Service. The Internal Revenue
Service has completed its examination of the Company's tax
returns for 1984 through 1986 and the Company has made
payments based on its proposed settlement. The Company has
provided for this and other tax contingencies.
Insurance - The Company's workers' compensation risks are
self-insured in certain states and, where insured with a
third-party, are based on retrospective premiums. The
liability for these risks is accounted for on a present value
basis. In addition, certain levels of insured general
liability risks are based on retrospective premiums. Actual
claim settlements and expenses incident thereto may differ
from the provisions for loss. Other levels of general
liability risks have been underwritten by a subsidiary.
Operating divisions and subsidiaries have paid premiums, and
the insurance subsidiary has provided loss allowances, based
upon actuarially-determined estimates.
Litigation - Various suits and claims arising in the ordinary
course of business are pending against the Company. In the
opinion of management, these suits and claims will not have a
material adverse effect on the financial position or results
of operations of the Company.
2. INCOME TAXES
------------
The effective income tax rate differs from the expected
statutory rate primarily due to the effect of certain state
taxes.
3. EXTRAORDINARY LOSS
------------------
The extraordinary loss for the quarters ended March 26, 1994
and March 27, 1993 of $8.3 million and $9.0 million,
respectively (net of income taxes of $5.3 million and $5.5
million, respectively) is related to the early retirement of
long-term debt. During the first quarter of 1994 the Company
completed redemption of its remaining outstanding 11-1/8%
Senior Notes and repurchased $44.6 million of its other senior
subordinated debt issues. Redemptions and purchases of debt
were funded by excess cash from operations, proceeds from
miscellaneous asset sales, proceeds from the sale of treasury
stock to employee benefit plans, proceeds from new issuances
of debt, and funds borrowed under the Company's working
capital facility. (See Note 5)
4. EARNINGS (LOSS) PER COMMON SHARE
--------------------------------
Primary earnings (loss) per common share equals net earnings
(loss) divided by the weighted average number of common shares
outstanding, after giving effect to dilutive stock options.
Fully diluted earnings (loss) per common share are computed by
adjusting both net earnings and shares outstanding for the
effect of the conversion of the Convertible Junior
Subordinated Debentures issued in March 1991 and the
Convertible Junior Subordinated Notes issued in December 1992.
5. LONG-TERM DEBT ISSUANCES
------------------------
In the first quarter of 1994 the Company issued $13.4 million
General Term Notes (R), Series A, with interest rates ranging
from 7% to 8% and maturities ranging from 1999 through 2006,
and $43.3 million General Term Notes (R), Series B, with
initial interest rates, either fixed or variable, ranging from
6% to 8% and maturities ranging from 2000 through 2006. The
net proceeds of the offerings were initially used to repay
amounts outstanding under the working capital facility and,
thereafter, the Company used amounts available under the
working capital facility to purchase, on the open market,
portions of its high-cost long-term debt and to fund the March
15, 1994 call of its 11-1/8% Senior Notes.
6. SUBSEQUENT EVENTS
-----------------
Subsequent to March 26, 1994 and through April 29,1994 the
Company has purchased an additional $43.2 million face amount
of its high cost debt. As adjusted for these open market
purchases the carrying amount of the Company's senior
subordinated debt issues was $1.2 billion at April 29, 1994.
The Company expects to incur an after-tax extraordinary loss
of approximately $.8 million related to these purchases.
On May 2, 1994, the Company notified the trustee of its 8-3/4%
Senior Subordinated Reset Notes due 1999 that it will redeem
such notes on June 15, 1994.
(R) Registered Service mark of J. W. Korth & Company
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- - ------------------------
SALES
- - -----
First quarter 1994 sales were 3.0% ahead of the first quarter 1993.
These sales increases were achieved during a period of virtually no
inflation in pharmacy, health and beauty care, and dry grocery
prices and only slight inflation in some perishable commodities.
Sales were enhanced by severe winter weather in many of the areas
in which the Company operates. These weather patterns tend to
increase at home food consumption. Additionally, 1994's first
quarter includes the Easter holiday selling season for the Dillon
divisions of the Company which occurred in the second quarter of
1993. Sales in identical food stores, excluding the Dillon
divisions' Easter sales, increased 2.3% versus 1.0% in 1993.
Sales in identical convenience stores increased 1.1%. Convenience
stores' identical grocery sales increased 4.0% and identical
gasoline sales decreased 2.1%. The decrease in gasoline sales was
due to the combination of a 4.4% decrease in the average retail
price per gallon offset by a 2.3% increase in gallons sold.
A review of sales trends by lines of business includes:
<TABLE>
<CAPTION>
(in thousands of dollars)
% of 1994 1st Quarter
----------------------
Lines of Business Sales 1994 1993 Change
--------------------- --------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Food Stores ........ 92.9% $4,952,643 $4,729,559 +4.7%
Convenience Stores .. 3.7% 197,204 214,813 (8.2%)
Other sales ........ 3.4% 178,957 229,554 (22.0%)
--------- ---------- ----------
Total sales ........ 100.0% $5,328,804 $5,173,926 +3.0%
</TABLE>
The decrease in convenience stores sales is the result of excluding
certain franchised store sales which were included in reported
sales in prior years. Adjusting 1994 sales to include franchise
sales would result in a 2.7% increase in convenience store sales.
Other sales include outside sales by the Company's manufacturing
divisions and sales of general merchandise to a drug store company
in which the Company maintains an equity investment. The drug
store company completed an expansion of its warehouse in early 1994
and discontinued its purchases from the Company. In 1993, annual
sales to the drug store company were $472 million. Adjusting first
quarter sales for both years to eliminate these sales would produce
a 12.6% increase in other sales.
Total sales increased 5.7% after adjusting for the other sales to
the drug store company, the change in franchise sales accounting,
and the exclusion of sales from the Company's San Antonio stores
which were sold in August 1993.
Competitive pressures are expected to increase through the
remainder of the year as supercenters and other low-cost operators
open in the Company's markets. Twelve percent of the Company's
total sales base is projected to be in direct competition with Wal-
Mart and Kmart supercenters at year-end 1994 compared to 4% at
year-end 1993.
EBITD
- - ------
The Company's Credit Agreement, dated January 21, 1992, and the
indentures underlying approximately $1.6 billion of publicly issued
debt contain various restrictive covenants, many of which are based
on earnings before interest, taxes, depreciation, LIFO charge,
unusual and extraordinary items ("EBITD"). All EBITD based
covenants are based, among other things, upon generally accepted
accounting principles ("GAAP") as applied on a date prior to
January 3, 1993. The ability to generate EBITD at levels
sufficient to satisfy the requirements of these agreements is a key
measure of the Company's financial strength. The presentation of
EBITD is not intended to be an alternative to any GAAP measure of
performance but rather to facilitate an understanding of the
Company's performance compared to its debt covenants. At March 26,
1994 the Company was in compliance with all covenants of its Credit
Agreement and publicly issued debt. The Company believes it has
adequate coverage of its debt covenants to continue to respond
effectively to competitive conditions.
During the first quarter 1994, EBITD, which does not include the
effect of Statement of Financial Accounting Standards ("SFAS") No.
106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions", increased 8.9% to $237.5 million from $218.1 million.
Capital expansion, strong first quarter sales, focus on expense
controls, and strong private label results, combined to produce the
EBITD growth obtained in the first quarter of 1994.
MERCHANDISE COSTS
- - -------------------
Merchandise costs, including warehousing and transportation expense
and LIFO charges, for the first quarter 1994 declined to 76.1% of
sales compared to 76.6% in the first quarter 1993. Excluding LIFO
charges, these costs were 76.0% of sales in 1994 and 76.6% in 1993.
Merchandise costs were positively affected by a lower LIFO charge
and savings from advances in coupon scanning. Coordinated
procurement and new warehouse and transportation programs are also
benefitting the Company's cost of goods.
Merchandise costs were favorably influenced by the discontinuance
of the low-margin sales to the drug store company. Merchandise
costs as a percent of sales adjusted for these sales, declined to
75.9% compared to 76.1% in 1993.
OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES
- - ----------------------------------------------
Operating, general and administrative expenses in the first quarter
1994 increased to 18.3% of sales from 18.0% last year. Operating,
general and administrative expenses were essentially flat after
adjusting sales for sales to the drug store company and convenience
store franchise sales.
Higher sales levels helped control operating, general and
administrative expenses as a percent of sales. The Company's
investment in technology in the recent past has begun to impact
costs by increasing employee productivity, reducing front-end wages
and helping to control the growth in communication expenses.
Operating, general and administrative expenses were adversely
affected by new store opening costs of 27 new, expanded, or
acquired food stores in the quarter versus five in 1993.
NET INTEREST EXPENSE
- - --------------------
Net interest expense declined 21.6% to $76.0 million in the first
quarter 1994 from $97.0 million in last year's first quarter. This
reduction is primarily due to generally lower market rates this
year and the Company's progress in refinancing its high-cost, long-
term debt and the issuance of equity in 1993. The proceeds from
new issues are being used to redeem or repurchase, on the open
market, other high-cost debt. Total long-term debt at the end of
the first quarter was $4.1 billion, down $207 million from the
first quarter of 1993.
Despite the recent increase in rates, the Company expects net
interest expense for all of 1994 to total $330-$340 million
compared to $390.0 million last year.
NET EARNINGS
- - ------------
The Company's net earnings in the first quarter 1994 were $47.4
million or $.40 per share on a fully diluted basis compared to a
net loss in the first quarter 1993 of $138.8 million or $1.17 per
share. Net earnings in 1993 were negatively affected $159.2
million or $1.38 per share by the cumulative effect of the change
in accounting for retiree benefits. Net earnings in 1994 were
negatively affected by an extraordinary loss of $8.3 million or
$.06 per share compared to an extraordinary loss of $9.0 million or
$.08 per share in 1993. The extraordinary loss in both years
resulted from the early retirement of the Company's high-cost debt,
including the final redemption in 1994 of the Company's 11-1/8%
Senior Notes and in 1993 of the Company's 12-7/8% Senior
Subordinated Debentures. The Company expects to incur an
extraordinary loss in each quarter of 1994 as it continues to
retire high-cost debt.
Earnings before the extraordinary loss and the cumulative effect of
a change in accounting totalled $55.7 million in 1994 compared to
$29.5 million in 1993. The first quarter 1993 includes a $4.4
million pre-tax one-time charge related to a change in the
estimated useful life of certain computer equipment.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
During the first quarter 1994 the Company redeemed the remaining
outstanding amount of its 11-1/8% Senior Notes and purchased $44.6
million of its various senior subordinated debt issues.
At the end of the first quarter 1994 the Company had $248.7 million
available under its working capital facility to meet short-term
liquidity needs.
Capital expenditures for the first quarter 1994 totaled $84.1
million compared to $73.6 million for the first quarter 1993.
Capital expenditures for the year are expected to total
approximately $500 million compared to $376.1 million during all of
1993. This will enable the Company to open or expand approximately
70 stores, including the January 1994 purchase of 10 AppleTree
stores located in Houston, Texas, and remodel an additional 60 to
70 stores.
During the first quarter of 1994 the Company issued $56.7 million
of senior subordinated notes with interest rates ranging from 6% to
8% and maturities ranging from 1999 through 2006. The net proceeds
of the offerings were initially used to repay amounts outstanding
under the working capital facility and thereafter the Company used
amounts available under the working capital facility to purchase,
on the open market, portions of its high-cost long-term debt and to
fund in part the March 15, 1994 call of its 11-1/8% Senior Notes.
CONSOLIDATED STATEMENT OF CASH FLOWS
- - ------------------------------------
The Company generated $164.7 million of cash from operating
activities during the first quarter compared to $130.3 million last
year. The increase is due in part to a decrease in accounts
receivable of $45.7 million during 1994 versus a decrease of $9.5
million in 1993 offset by a decrease in accounts payable and other
liabilities during 1994 of $14.8 millon compared to a decrease
during 1993 of $18.0 million.
Investing activities used $96.1 million in cash during the first
quarter of 1994 compared to $87.6 million last year, primarily due
to a $10.5 million increase in capital expenditures.
Financing activities used $79.8 million in cash compared to $66.3
million last year. The increase is due to a decline of $319.5
million in proceeds from the sale of debt and equity issues
combined with a decline in long-term debt reductions of $301.3
million.
SUBSEQUENT EVENTS
- - -----------------
Subsequent to March 26, 1994 and through April 29,1994 the Company
has purchased an additional $43.2 million face amount of its high
cost debt. As adjusted for these open market purchases the
carrying amount of the Company's senior subordinated debt issues
was $1.2 billion at April 29, 1994. The Company expects to incur
an after-tax extraordinary loss of approximately $.8 million
related to these purchases.
On May 2, 1994, the Company notified the trustee of its 8-3/4%
Senior Subordinated Reset Notes due 1999 that it will redeem such
notes on June 15, 1994.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- - ------- --------------------------------
(a) Exhibit 4.1 - Instruments defining the rights
of holders of long-term debt of the Company and
its subsidiaries are not filed as Exhibits
because the amount of debt under each
instrument is less than 10% of the consolidated
assets of the Company. The Company undertakes
to file these instruments with the Commission
upon request.
Exhibit 11.1 - Statement of Computation of
Consolidated Earnings (Loss) Per Share.
Exhibit 99.1 - Additional Exhibits - Statement
of Computation of Ratio of Earnings to Fixed
Charges.
(b) The Company disclosed and filed its fourth
quarter 1993 earnings release in its Current
Report on Form 8-K dated February 8, 1994.
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 thereunto duly authorized.
THE KROGER CO.
Dated: May 6, 1994 By (Joseph A. Pichler)
Joseph A. Pichler
Chairman of the Board and
Chief Executive Officer
Dated: May 6, 1994 By (William J. Sinkula)
William J. Sinkula
Executive Vice President
and Principal Financial
Officer
Exhibit Index
-------------
Exhibit
-------
Exhibit 4.1 - Instruments defining the rights of holders of
long-term debt of the Company and its
subsidiaries are not filed as Exhibits because
the amount of debt under each instrument is
less than 10% of the consolidated assets of the
Company. The Company undertakes to file these
instruments with the Commission upon request.
Exhibit 11.1- Statement of Computation of Consolidated
Earnings (Loss) Per Share
Exhibit 99.1 - Additional Exhibits - Statement of Computation
of Ratio of Earnings to Fixed Charges
<TABLE>
EXHIBIT 11.1
COMPUTATION OF CONSOLIDATED EARNINGS (LOSS) PER SHARE
(in thousands, except per share amounts)
(unaudited)
<CAPTION>
Quarter Ended
-----------------------
March 26, March 27,
1994 1993
---------- ----------
(12 weeks) (12 weeks)
<S> <C> <C>
Earnings before extraordinary loss and
cumulative effect of change in accounting . . . . $ 55,690 $ 29,464
Extraordinary loss . . . . . . . . . . . . . . . . (8,332) (9,042)
Cumulative effect of change in accounting. . . . . (159,193)
--------- ---------
Net earnings (loss). . . . . . . . . . . . . . . . $ 47,358 $(138,771)
========= =========
</TABLE>
<TABLE>
<CAPTION>
PRIMARY (1)
- - -----------
<S> <C> <C>
Weighted average common and dilutive
common equivalent shares:
Common stock outstanding . . . . . . . . . . . 108,259 95,407
Stock options. . . . . . . . . . . . . . . . . 3,664 2,358
--------- --------
111,923 97,765
========= ========
Primary earnings from continuing
operations per share . . . . . . . . . . . . . . $ .50 $ .30
Primary results of extraordinary loss per share . . (.07) (.09)
Primary results of cumulative effect of change
in accounting. . . . . . . . . . . . . . . . . . . (1.63)
--------- --------
Primary net earnings (loss) per share . . . . . . . $ .43 $ (1.42)
========= ========
</TABLE>
<TABLE>
<CAPTION>
FULLY DILUTED (1)
- - -----------------
<S> <C> <C>
Weighted average common shares
and all other dilutive securities:
Common stock outstanding . . . . . . . . . . . 108,259 95,407
Stock options. . . . . . . . . . . . . . . . . 4,321 2,853
Convertible debt . . . . . . . . . . . . . . . 17,074 17,074
--------- --------
129,654 115,334
========= ========
</TABLE>
<TABLE>
<S> <C> <C>
Fully diluted earnings from
continuing operations per share (2) . . . . . . $ .46 $ .29
Fully diluted results of extraordinary
loss per share . . . . . . . . . . . . . . . . . (.06) (.08)
Fully diluted results of cumulative effect of
change in accounting . . . . . . . . . . . . . . (1.38)
--------- --------
Fully diluted net earnings (loss) per share (2) . . $ .40 $ (1.17)
========= ========
</TABLE>
(1) The Convertible Junior Subordinated Debentures issued in March
1991 and the Convertible Junior Subordinated Notes issued in
December 1992 are not included in the computation of primary
earnings per share since they are not common stock equivalents.
They are included in the fully diluted earnings per share
calculation for the quarters ended March 26, 1994 and March 27,
1993.
(2) Earnings used to calculate fully diluted earnings per share have
been adjusted to reflect the tax effected interest expense of
$3.6 million that would have been avoided in connection with the
assumed conversion of the convertible debt issues as of the
beginning of each year. <PAGE>
<TABLE>
EXHIBIT 99.1
Schedule of computation of ratio of earnings to fixed charges of The Kroger Co. and consolidated subsidiary companies and
unconsolidated companies as if consolidated for the five fiscal years ended January 1, 1994 and for the one quarter ended March 26,
1994 and March 27, 1993.
<CAPTION>
Quarter Ended Fiscal Years Ended
--------------------- ---------------------------------------------------------------
March 26, March 27, January 1, January 2, December 28, December 29, December 30,
1994 1993 1994 1993 1991 1990 1989
(12 Weeks) (12 Weeks) (52 Weeks) (53 Weeks) (52 weeks) (52 weeks) (52 Weeks)
---------- ---------- ---------- ------------ ------------ ------------ ------------
(in thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
Earnings (loss) from
continuing operations
before tax expense
(credit), extraordinary
loss and cumulative
effect of change in
accounting . . . . . . . $ 91,206 $ 49,602 $283,938 $173,415 $168,595 $142,203 $ (8,739)
Fixed charges. . . . . . 117,370 135,352 556,008 640,004 687,226 708,455 788,239
Capitalized interest . . (228) 145 230 (960) 122 (39) (839)
-------- -------- -------- -------- -------- -------- ---------
$208,348 $185,099 $840,176 $812,459 $855,943 $850,619 $778,661
======== ======== ======== ======== ======== ======== =========
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges
Interest . . . . . . . . $ 76,581 $ 97,107 $391,693 $476,932 $536,485 $565,540 $651,038
Portion of rental
payments deemed to be
interest. . . . . . . . 40,789 38,245 164,315 163,072 150,741 142,915 137,201
-------- -------- -------- -------- -------- -------- ---------
$117,370 $135,352 $556,008 $640,004 $687,226 $708,455 $788,239
======== ======== ======== ======== ======== ======== =========
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Fixed Charges . . . . . 1.8 1.4 1.5 1.3 1.2 1.2 -
Dollar Deficiency of
Coverage. . . . . . . . N/A N/A N/A N/A N/A N/A ($9,578)
</TABLE>
