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
June 17, 1995 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 111,834,540 shares of Common Stock ($1 par value)
outstanding as of July 17, 1995.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited information for the quarters ended June 17, 1995 and
June 18, 1994 includes the results of operations of The Kroger Co.
for the 12 and 24 week periods ended June 17, 1995 and June 18,
1994, and of Dillon Companies, Inc. for the 13 and 26 week periods
ended July 1, 1995 and July 2, 1994. 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.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
2nd Quarter Ended 2 Quarters Ended
---------------------- ------------------------
June 17, June 18, June 17, June 18,
1995 1994 1995 1994
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . . . . . . . $5,652,890 $5,394,228 $11,117,844 $10,723,032
---------- ---------- ----------- -----------
Costs and expenses:
Merchandise costs, including warehousing and
transportation. . . . . . . . . . . . . . . . . . . . 4,267,794 4,081,213 8,397,233 8,134,114
Operating, general and administrative. . . . . . . . . 1,028,785 988,588 2,044,450 1,962,877
Rent . . . . . . . . . . . . . . . . . . . . . . . . . 71,216 70,757 141,150 142,822
Depreciation and amortization. . . . . . . . . . . . . 73,405 64,384 142,246 126,694
Interest expense, net. . . . . . . . . . . . . . . . . 74,639 75,008 149,963 151,040
---------- ---------- ---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . 5,515,839 5,279,950 10,875,042 10,517,547
---------- ---------- ----------- -----------
Earnings before income tax expense and
extraordinary loss . . . . . . . . . . . . . . . . . . 137,051 114,278 242,802 205,485
Tax expense . . . . . . . . . . . . . . . . . . . . . . 54,587 44,300 95,861 79,817
---------- ---------- ----------- -----------
Earnings before extraordinary loss. . . . . . . . . . . 82,464 69,978 146,941 125,668
Extraordinary loss (net of income tax credit) . . . . . (5,451) (2,645) (10,788) (10,978)
---------- ---------- ----------- -----------
Net earnings . . . . . . . . . . . . . . . . . . . $ 77,013 $ 67,333 $ 136,153 $ 114,690
========== ========== =========== ===========
Primary earnings per common share:
Earnings from operations . . . . . . . . . . . . . . . $ .71 $ .62 $ 1.28 $ 1.12
Extraordinary loss . . . . . . . . . . . . . . . . . . (.05) (.02) (.09) (.10)
----- ----- ------ ------
Net earnings . . . . . . . . . . . . . . . . . . . . $ .66 $ .60 $ 1.19 $ 1.02
===== ===== ====== ======
Average number of common shares used in primary per
share calculation. . . . . . . . . . . . . . . . . . . 115,391 112,966 115,191 112,445
Fully diluted earnings per common share:
Earnings from operations . . . . . . . . . . . . . . . $ .67 $ .57 $ 1.19 $ 1.02
Extraordinary loss . . . . . . . . . . . . . . . . . . (.04) (.02) (.09) (.08)
----- ----- ------ ------
Net earnings . . . . . . . . . . . . . . . . . . . $ .63 $ .55 $ 1.10 $ .94
===== ===== ====== ======
Average number of common shares used in fully diluted
per share calculations . . . . . . . . . . . . . . . . 126,638 130,272 126,459 129,963
</TABLE>
- -------------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEET
(in thousands of dollars)
(unaudited)
<TABLE>
<CAPTION>
June 17, December 31,
1995 1994
---------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and temporary cash investments . . . . . . . . . . $ 47,878 $ 27,223
Receivables . . . . . . . . . . . . . . . . . . . . . . 263,190 270,811
Inventories:
FIFO cost . . . . . . . . . . . . . . . . . . . . . . 1,870,673 2,053,207
Less LIFO reserve . . . . . . . . . . . . . . . . . . (442,060) (438,184)
---------- ----------
1,428,613 1,615,023
Property held for sale. . . . . . . . . . . . . . . . . 48,201 39,631
Prepaid and other current assets. . . . . . . . . . . . 216,174 199,437
---------- ----------
Total current assets. . . . . . . . . . . . . . . . 2,004,056 2,152,125
Property, plant and equipment, net. . . . . . . . . . . . 2,346,100 2,252,663
Investments and other assets. . . . . . . . . . . . . . . 294,982 302,886
---------- ----------
Total Assets. . . . . . . . . . . . . . . . . . . . $4,645,138 $4,707,674
========== ==========
LIABILITIES
Current liabilities
Current portion of long-term debt . . . . . . . . . . . $ 8,770 $ 7,926
Current portion of obligations under
capital leases. . . . . . . . . . . . . . . . . . . . 8,674 8,467
Accounts payable. . . . . . . . . . . . . . . . . . . . 1,367,926 1,425,612
Other current liabilities . . . . . . . . . . . . . . . 977,751 952,963
---------- ----------
Total current liabilities . . . . . . . . . . . . . 2,363,121 2,394,968
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 3,536,124 3,726,343
Obligations under capital leases. . . . . . . . . . . . . 166,832 162,851
Deferred income taxes . . . . . . . . . . . . . . . . . . 158,518 172,690
Other long-term liabilities . . . . . . . . . . . . . . . 427,718 404,506
---------- ----------
Total Liabilities . . . . . . . . . . . . . . . . . 6,652,313 6,861,358
---------- ----------
SHAREOWNERS' DEFICIT
Common capital stock, par $1, at stated value
Authorized: 350,000,000 shares
Issued: 1995 - 121,234,028 shares
1994 - 120,573,148 shares. . . . . . . . . . . 348,910 338,568
Accumulated deficit . . . . . . . . . . . . . . . . . . . (2,112,583) (2,248,736)
Common stock in treasury, at cost
1995 - 9,575,384 shares
1994 - 9,576,231 shares . . . . . . . . . . . (243,502) (243,516)
---------- ----------
Total Shareowners' Deficit (2,007,175) (2,153,684)
---------- ----------
Total Liabilities and Shareowners' Deficit. . . . . . $4,645,138 $4,707,674
========== ==========
</TABLE>
- -------------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands of dollars)
(unaudited)
<TABLE>
<CAPTION>
2 Quarters Ended
------------------------------
June 17, June 18,
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings. . . . . . . . . . . . . . . . . . . . . . . . . . $ 136,153 $ 114,690
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . 10,788 10,978
Depreciation and amortization. . . . . . . . . . . . . . . . 142,246 126,694
Amortization of deferred financing costs . . . . . . . . . . 6,720 7,952
LIFO charge. . . . . . . . . . . . . . . . . . . . . . . . . 7,000 6,500
Net increase in cash from changes in operating assets and
liabilities, net of effects from sale of subsidiary,
detail below . . . . . . . . . . . . . . . . . . . . . . . 130,910 160,152
Other changes, net . . . . . . . . . . . . . . . . . . . . . 491 1,445
---------- ----------
Net cash provided by operating activities . . . . . . . . 434,308 428,411
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures. . . . . . . . . . . . . . . . . . . . . . (244,405) (182,255)
Proceeds from sale of assets. . . . . . . . . . . . . . . . . . 40,828 7,937
Increase in property held for sale. . . . . . . . . . . . . . . (6,086) (14,330)
Increase in other investments . . . . . . . . . . . . . . . . . (205) (7,169)
---------- ----------
Net cash used by investing activities . . . . . . . . . . (209,868) (195,817)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt prepayment costs . . . . . . . . . . . . . . . . . . . . . (14,055) (14,062)
Financing charges incurred. . . . . . . . . . . . . . . . . . . (5,718) (6,239)
Principal payments under capital lease obligations. . . . . . . (4,375) (3,911)
Proceeds from issuance of long-term debt. . . . . . . . . . . . 66,548 84,546
Reductions in long-term debt. . . . . . . . . . . . . . . . . . (255,923) (346,805)
Proceeds from sale of treasury stock. . . . . . . . . . . . . . 14 22,290
Proceeds from issuance of capital stock . . . . . . . . . . . . 9,724 15,924
---------- ----------
Net cash used by financing activities . . . . . . . . . . (203,785) (248,257)
---------- ----------
Net increase (decrease) in cash and temporary cash investments. . 20,655 (15,663)
Cash and temporary cash investments:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . 27,223 121,253
---------- ----------
End of quarter. . . . . . . . . . . . . . . . . . . . . . . . $ 47,878 $ 105,590
========== ==========
INCREASE (DECREASE) IN CASH FROM CHANGES IN OPERATING ASSETS AND LIABILITIES:
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . $ 174,603 $ 132,375
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . 6,669 38,562
Prepaid and other current assets. . . . . . . . . . . . . . . (17,909) (17,313)
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . (54,827) (58,968)
Deferred income taxes . . . . . . . . . . . . . . . . . . . . (14,172) (8,030)
Other liabilities . . . . . . . . . . . . . . . . . . . . . . 36,546 73,526
---------- ----------
$ 130,910 $ 160,152
========== ==========
</TABLE>
- -------------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
Supplemental disclosures of cash flow information:
2 Quarters Ended
--------------------------
June 17, June 18,
1995 1994
----------- -----------
Cash paid during the period for:
Interest (net of amount capitalized) $152,205 $158,415
Income taxes 97,159 67,408
- -------------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INCOME TAXES
------------
The effective income tax rate differs from the expected
statutory rate primarily due to the effect of certain state
taxes.
2. EXTRAORDINARY LOSS
------------------
The extraordinary loss for the two quarters ended June 17,
1995 and June 18, 1994 of $10.8 million and $11.0 million,
respectively (net of income taxes of $6.9 million and $7.0
million, respectively) and for the second quarter ended June
17, 1995 and June 18, 1994 of $5.5 million and $2.6 million
(net of income taxes of $3.5 million and $1.6 million,
respectively) is related to the early retirement of long-term
debt. During the second quarter of 1995 the Company
repurchased $81.3 million of its senior subordinated debt issues.
Year-to-date 1995 purchases total $201.4 million.
3. EARNINGS PER COMMON SHARE
-------------------------
Primary earnings per common share equals net earnings divided
by the weighted average number of common shares outstanding,
after giving effect to dilutive stock options. Fully diluted
earnings per common share for the second quarter and two
quarters ended June 18, 1994 are computed by adjusting both
net earnings and shares outstanding for the effect of the
assumed conversion of the Convertible Junior Subordinated
Debentures issued in March 1991 and the Convertible Junior
Subordinated Notes issued in December 1992. The Convertible
Junior Subordinated Debentures were not included for the
second quarter and two quarters ended June 17, 1995 because
they were redeemed on October 24, 1994 but the Convertible
Junior Subordinated Notes were included.
4. LONG-TERM DEBT ISSUANCES
------------------------
In the first half of 1995 the Company issued $6.2 million
General Term Notes(R), Series B, with initial interest rates,
either fixed or variable, ranging from 9% to 9-1/4% and
maturities ranging from 2004 through 2005. The Company also
issued 9.27% First Mortgage Bonds in the amount of $35.6
million due in the year 2010 and $14.4 million of 9.0%
mortgages due in 2010.
5. SUBSEQUENT EVENTS
-----------------
On July 20, 1995 the Company amended its Credit Agreement to
extend the maturity of the Company's $1.75 billion revolving
credit facility by one year to July 2002, to reduce interest
rates on the Company's bank debt, and to provide for the
earlier release of collateral if certain financial ratios are
achieved.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SALES
Total sales for the second quarter of 1995 increased 4.8% over
second quarter 1994 to a new second quarter high of $5.65 billion.
Food store sales increased 5.2% over the 1994 second quarter.
Sales in the Company's existing units were bolstered by a store
opening program and strong results in new stores. Square footage
increased 4.4% over the second quarter of 1994. Sales in identical
food stores, units that have been in operation for one full year
and have not been expanded, increased 1.5% versus a 1.8% increase
in 1994. Identical store sales were affected by sales shifted to
new stores opened by the Company in existing high share markets.
Identical store sales were weak in a few markets where increased
competitive efforts have put pressure on sales. Year-to-date
identical sales were up 1.3%. The Company estimates that inflation
affected sales by slightly less than 1%.
A review of sales trends by lines of business includes:
<TABLE>
<CAPTION>
(in thousands of dollars)
2nd Quarter
% of 1995 ----------------------
Lines of Business Sales 1995 1994 Change
--------------------- --------- ---------- ---------- ------
<S> <C> <C> <C> <C>
Food Stores ........ 93.5% $5,285,521 $5,022,777 +5.2%
Convenience Stores .. 3.9% 220,349 228,558 (3.6%)
Other sales ........ 2.6% 147,020 142,893 2.9%
--------- ---------- ----------
Total sales ........ 100.0% $5,652,890 $5,394,228 +4.8%
(in thousands of dollars)
2 Quarters Year-to-date
% of 1995 ------------------------
Lines of Business Sales 1995 1994 Change
--------------------- --------- ----------- ----------- ------
Food Stores ........ 93.9% $10,434,665 $ 9,975,420 +4.6%
Convenience Stores .. 3.7% 407,403 425,762 (4.3%)
Other sales ........ 2.4% 275,776 321,850 (14.3%)
--------- ----------- -----------
Total sales ........ 100.0% $11,117,844 $10,723,032 +3.7%
</TABLE>
The decrease in total convenience stores sales is due to the sale
in January 1995 of Time Saver Stores, Inc., which operated 116
convenience stores. Adjusting 1994 second quarter sales to exclude
Time Saver's sales would result in a 10.7% increase in convenience
store sales in the second quarter of 1995 and a 10.8% increase
year-to-date. Convenience stores' identical grocery sales
increased 1.2% and identical gasoline sales increased 9.0%. Sales
for the six company convenience store group were strengthened by a
9.1% increase in the average retail price per gallon of gasoline.
Other sales include outside sales by the Company's manufacturing
divisions and sales of general merchandise to Hook-SupeRx, Inc.
(HSI). HSI completed an expansion of its warehouse in early 1994
and discontinued its purchases from the Company. In 1994, sales to
HSI were $48.3 million. Adjusting second quarter and year-to-date
1994 sales to eliminate these sales would produce a 3.3% and a .8%
increase in other sales, respectively.
Total sales increased 5.4% for the quarter and 4.7% year-to-date
after adjusting for the other sales to HSI and the sale of Time
Saver Stores, Inc.
As the Company's storing program progresses, the impact on
identical sales from the shifting of sales from existing stores to
new stores is expected to continue. Total sales, however, will
benefit from the approximately 55 to 60 additional new stores or
remodels that are planned for the remainder of the year.
Additionally, the savings that will be realized from technology and
logistics improvements should allow more competitive pricing and
improved service to increase sales in both existing and new store
locations. Inflation is not expected to have a material effect on
sales.
EBITD
The Company's Credit Agreement and the indentures underlying
approximately $1.4 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 such 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 June 17, 1995 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 second quarter 1995, 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 11.8% to $292.1 million from $261.2 million.
Year-to-date 1995 EBITD increased 10.1% to $548.9 million from
$498.7 million. The increase in EBITD was the result of many
factors, including the increase in food store sales from existing
and new stores combined with improvements in gross profit rates, a
decline in the operating, general and administrative expenses as a
percentage of sales, and private label sales that are outpacing
total sales increases.
MERCHANDISE COSTS
Merchandise costs, including warehousing and transportation expense
and LIFO charges, for the second quarter 1995 were once again
favorably affected by the Company's capital investment in warehouse
and distribution technology. Merchandise costs were also
positively affected by the Company's advances in consolidated
warehousing and distribution and coordinated purchasing.
<TABLE>
<CAPTION>
2 Quarters
2nd Quarter Year-to-date
--------------- ---------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Merchandise Costs - LIFO 75.50% 75.66% 75.53% 75.86%
LIFO Charge .06% .06% .06% .06%
------ ------ ------ ------
Merchandise Costs - FIFO 75.44% 75.60% 75.47% 75.80%
</TABLE>
OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating, general and administrative expenses in the second
quarter 1995 decreased to 18.20% of sales from 18.33% last year.
Year-to-date operating, general and administrative expenses in 1995
were 18.39% compared to 18.31% in 1994.
Sales growth has helped to control operating, general and
administrative expenses as a percentage of sales. Additionally,
the Company has signed labor contracts which are helping to control
both wages and benefits. The Company's investments in technology
are having a favorable effect on costs by increasing employee
productivity and reducing store wages. Some of these savings are
offset by the Company's capital expansion program that affects
operating, general and administrative expenses as costs are
incurred to open and expand new stores.
NET INTEREST EXPENSE
Net interest expense declined to $74.6 million in the second
quarter 1995 from $75.0 million in last year's second quarter.
Year-to-date net interest expense totalled $150.0 million as
compared to $151.0 million in the first half of 1994. The Company
expects 1995 net interest expense to total approximately $320
million, a decrease of $5 million from the beginning of the year
estimate due to the current interest rate environment.
The Company has purchased a portion of the debt issued by the
lenders of certain of its structured financings, which cannot be
retired early, in an effort to effectively further reduce the
Company's interest expense. Excluding the debt incurred to make
these purchases, which are classified as investments, the Company's
long-term debt at the end of the second quarter was $3.652 billion,
down from $3.925 billion at the end of the 1994 second quarter.
Net operating working capital declined by $199.6 million as
compared to the second quarter 1994 to the level of $53.7 million.
NET EARNINGS
The Company's net earnings in the second quarter 1995 were $77.0
million or $.63 per share on a fully diluted basis compared to net
earnings in the second quarter 1994 of $67.3 million or $.55 per
share. Net earnings in 1995 were negatively affected by an
extraordinary loss of $5.5 million or $.04 per share compared to an
extraordinary loss of $2.6 million or $.02 per share in 1994.
Year-to-date net earnings in 1995 were $136.2 million or $1.10 per
share on a fully-diluted basis compared to net earnings in 1994 of
$114.7 million or $.94 per share. 1995 year-to-date net earnings
included a $10.8 million extraordinary loss compared to $11.0
million in 1994. The extraordinary loss in both years resulted
from the early retirement of the Company's high-cost debt. The
Company expects to incur an extraordinary loss in each quarter of
1995 as it continues to retire high-cost debt.
Second quarter earnings before the extraordinary loss totalled
$82.5 million in 1995 compared to $70.0 million in 1994. Year-to-
date earnings before the extraordinary loss totalled $146.9 million
in 1995 compared to $125.7 million in 1994.
LIQUIDITY AND CAPITAL RESOURCES
During the second quarter 1995 the Company purchased $81.3 million
of its various senior subordinated debt issues. Through two
quarters of 1995 the Company has purchased $201.4 million of these
issues.
At the end of the second quarter 1995 the Company had $626.9
million available under its Credit Agreement to meet short-term
liquidity needs.
Capital expenditures for the second quarter 1995 totaled $150.5
million compared to $98.2 million for the second quarter 1994.
Capital expenditures for the year are expected to total
approximately $625 million compared to $534.1 million during all of
1994. This will enable the Company to open or expand approximately
90 stores and remodel 65 additional stores. Capital expenditures
will also be made in the areas of logistics and technology
projects. Through two quarters of 1995, the Company has opened,
expanded or acquired 30 new stores and completed 25 remodels.
During the first half of 1995 the Company issued $6.2 million of
senior subordinated notes with interest rates ranging from 9% to 9-
1/4% and maturities ranging from 2004 through 2005. The Company
also issued 9.27% First Mortgage Bonds in the amount of $35.6
million due in the year 2010 and $14.4 million of 9.0% mortgages
due in 2010. The net proceeds of the offerings were initially used
to repay amounts outstanding under the Credit Agreement and
thereafter the Company used amounts available thereunder to
purchase, on the open market, portions of its higher-cost long-term
debt.
CONSOLIDATED STATEMENT OF CASH FLOWS
The Company generated $434.3 million of cash from operating
activities during the first half of 1995 compared to $428.4 million
during the same period last year. The increase is due in part to
increased operating profits before depreciation of $36.8 million
over 1994. The increased profits were offset by changes in
operating assets and liabilities that provided $130.9 million of
cash in 1995 compared to $160.2 million in 1994.
Investing activities used $209.9 million in cash during the first
half of 1995 compared to $195.8 million last year. The net
increase in the use of cash is due to $62.2 million of additional
capital expenditures offset by additional cash proceeds from the
sale of assets of $32.9 million, primarily due to the sale of Time
Saver Stores, Inc., and a reduction of $15.2 million in the use of
cash to increase property held for sale and other investments.
Financing activities used $203.8 million in cash compared to $248.3
million in the first half of last year. The decrease is due to a
decline of $72.9 million in the use of cash for the net reduction
in long-term debt. This was offset by a $28.5 million reduction in
cash proceeds from the sale of stock.
SUBSEQUENT EVENTS
On July 20, 1995 the Company amended its Credit Agreement to extend
the maturity of the Company's $1.75 billion revolving credit
facility by one year to July 2002, to reduce interest rates on the
Company's bank debt, and to provide for the release of collateral
if certain financial ratios are achieved.
<PAGE>
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) May 18, 1995 -- Annual Meeting
(c) The shareholders elected four directors to serve until
the annual meeting in 1998 or until their successors have
been elected and qualified, and ratified the selection of
Coopers & Lybrand, L.L.P. as Company auditors for 1995.
Votes cast were as follows:
<TABLE>
<CAPTION>
For Withheld Broker Non-Votes
<S> <C> <C> <C>
John L. Clendenin 94,176,366 920,674 -0-
Patricia Shontz Longe 94,191,559 905,481 -0-
Thomas H. O'Leary 94,179,091 917,949 -0-
James D. Woods 94,155,396 941,644 -0-
For Against Withheld Broker Non-Votes
<S> <C> <C> <C> <C>
Coopers &
Lybrand, L.L.P. 93,946,601 591,483 558,956 -0-
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 3.1 - Amended Articles of Incorporation and
-----------
Regulations of the Company are hereby incorporated by
reference to Exhibits 4.1 and 4.2 of the Company's
Registration Statement on Form S-3 as filed with the
Securities and Exchange Commission on January 28, 1993,
and bearing Registration No. 33-57552.
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 27.1 - Financial Data Schedule.
------------
Exhibit 99.1 - Additional Exhibits - Statement of
------------
Computation of Ratio of Earnings to Fixed Charges.
(b) The Company disclosed and filed its first quarter 1995
earnings release in its Current Report on Form 8-K dated
April 18, 1995.
<PAGE>
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: July 25, 1995 (Joseph A. Pichler)
Joseph A. Pichler
Chairman of the Board and
Chief Executive Officer
Dated: July 25, 1995 (J. Michael Schlotman)
J. Michael Schlotman
Vice President and
Corporate Controller
<PAGE>
Exhibit Index
-------------
Exhibit
- -------
Exhibit 3.1 - Amended Articles of Incorporation and
Regulations of the Company are hereby incorporated by
reference to Exhibits 4.1 and 4.2 of the Company's
Registration Statement on Form S-3 as filed with the
Securities and Exchange Commission on January 28, 1993, and
bearing Registration No. 33-57552.
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 27.1 - Financial Data Schedule.
Exhibit 99.1 - Additional Exhibits - Statement of Computation
of Ratio of Earnings to Fixed Charges.
<PAGE>
EXHIBIT 11.1
COMPUTATION OF CONSOLIDATED EARNINGS (LOSS) PER SHARE
(in thousands, except per share amounts)
(unaudited)
</TABLE>
<TABLE>
<CAPTION>
2nd Quarter Ended 2 Quarters Ended
---------- ---------- ---------- ----------
June 17, June 18, June 17, June 18,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Earnings before extraordinary loss . . . . . . . . $ 82,464 $ 69,978 $ 146,941 $ 125,668
Extraordinary loss . . . . . . . . . . . . . . . . (5,451) (2,645) (10,788) (10,978)
---------- ---------- ---------- ----------
Net earnings . . . . . . . . . . . . . . . . . . . $ 77,013 $ 67,333 $ 136,153 $ 114,690
========== ========== ========== ==========
PRIMARY <F1>
- ------------
Weighted average common and dilutive
common equivalent shares:
Common stock outstanding . . . . . . . . . . . 111,465 109,546 111,298 108,903
Stock options. . . . . . . . . . . . . . . . . 3,926 3,420 3,893 3,542
---------- --------- ---------- ----------
115,391 112,966 115,191 112,445
========== ========= ========== ==========
Primary earnings from continuing
operations per share . . . . . . . . . . . . . . $ .71 $ .62 $ 1.28 $ 1.12
Primary results of extraordinary loss per share . . (.05) (.02) (.09) (.10)
---------- --------- ---------- ----------
Primary net earnings per share. . . . . . . . . . . $ .66 $ .60 $ 1.19 $ 1.02
========== ========= ========== ==========
FULLY DILUTED <F1>
Weighted average common shares
and all other dilutive securities:
Common stock outstanding . . . . . . . . . . . 111,465 109,546 111,298 108,903
Stock options. . . . . . . . . . . . . . . . . 4,466 3,652 4,454 3,986
Convertible debt . . . . . . . . . . . . . . . 10,707 17,074 10,707 17,074
---------- --------- ---------- ----------
126,638 130,272 126,459 129,963
========== ========= ========== ==========
Fully diluted earnings from
continuing operations per share <F2> . . . . . . $ .67 $ .57 $ 1.19 $ 1.02
Fully diluted results of extraordinary
loss per share . . . . . . . . . . . . . . . . . (.04) (.02) (.09) (.08)
---------- --------- ---------- ----------
Fully diluted net earnings per share <F2> . . . . . $ .63 $ .55 $ 1.10 $ .94
========== ========= ========== ==========
<FN>
<F1> The Convertible Junior Subordinated Notes issued in December
1992 and the Convertible Junior Subordinated Debentures issued
in March 1991 are not included in the computation of primary
earnings per share since they are not common stock
equivalents. The Convertible Junior Subordinated Notes are
included in the fully diluted earnings per share calculation
for the quarters ended June 17, 1995 and June 18, 1994 and the
two quarters ended June 17, 1995 and June 18, 1994. The
Convertible Junior Subordinated Debentures are included in the
fully diluted earnings per share calculation for the quarter
and two quarters ended June 18, 1994. They are not included
for the quarter and two quarters ended June 17, 1995 as they
were redeemed on October 24, 1994.
<F2> Earnings used to calculate fully diluted earnings per share
have been adjusted to reflect the tax effected interest
expense of $1.8 million and $3.7 million, respectively, for
the quarters ended June 17, 1995 and June 18, 1994 and $3.6
million and $7.4 million, respectively, for the two quarters
ended June 17, 1995 and June 18, 1994 that would have been
avoided in connection with the assumed conversion of the
convertible debt issue as of the beginning of each year.
<PAGE>
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 December 31, 1994 and for the two quarters ended June
17, 1995 and June 18, 1994.
</TABLE>
<TABLE>
<CAPTION>
Two Quarters Ended Fiscal Years Ended
--------------------- ---------------------------------------------------------------
June 17, June 18, December 31, January 1, January 2, December 28, December 29,
1995 1994 1994 1994 1993 1991 1990
(24 Weeks) (24 Weeks) (52 Weeks) (52 Weeks) (53 weeks) (52 weeks) (52 Weeks)
---------- ---------- ------------ ----------- ---------- ------------ ------------
(in thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
Earnings from continuing
operations before tax
expense and
extraordinary loss . . . $242,802 $205,485 $421,363 $283,938 $173,415 $168,595 $142,203
Fixed charges. . . . . . 231,975 233,209 500,599 556,008 640,004 687,227 708,455
Capitalized interest . . (1,735) (772) (2,521) 230 (960) 122 (39)
--------- --------- --------- -------- --------- -------- ---------
$473,042 $437,922 $919,441 $840,176 $812,459 $855,944 $850,619
========= ========= ========= ======== ========= ======== =========
Fixed Charges
Interest . . . . . . . . $152,084 $152,372 $331,097 $391,693 $476,932 $536,485 $565,540
Portion of rental
payments deemed to be
interest. . . . . . . . 79,891 80,837 169,502 164,315 163,072 150,742 142,915
--------- --------- --------- -------- --------- -------- --------
$231,975 $233,209 $500,599 $556,008 $640,004 $687,227 $708,455
========= ========= ========= ======== ========= ======== ========
Ratio of Earnings to
Fixed Charges . . . . . 2.0 1.9 1.8 1.5 1.3 1.2 1.2
</TABLE>
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS, CONSOLIDATED BALANCE SHEET AND
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE TWO QUARTERS ENDED JUNE 17, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> QTR-2
<PERIOD-END> JUN-17-1995
<CASH> 47,878
<SECURITIES> 0
<RECEIVABLES> 263,190
<ALLOWANCES> 0
<INVENTORY> 1,428,613
<CURRENT-ASSETS> 2,004,057
<PP&E> 4,748,080
<DEPRECIATION> 2,401,981
<TOTAL-ASSETS> 4,645,138
<CURRENT-LIABILITIES> 2,363,120
<BONDS> 3,720,400
<COMMON> 105,408
0
0
<OTHER-SE> (2,112,583)
<TOTAL-LIABILITY-AND-EQUITY> 4,645,138
<SALES> 11,117,845
<TOTAL-REVENUES> 11,117,845
<CGS> 8,397,233
<TOTAL-COSTS> 8,397,233
<OTHER-EXPENSES> 2,327,847
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 149,963
<INCOME-PRETAX> 242,802
<INCOME-TAX> 95,861
<INCOME-CONTINUING> 146,941
<DISCONTINUED> 0
<EXTRAORDINARY> (10,787)
<CHANGES> 0
<NET-INCOME> 136,154
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.10
</TABLE>
