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 23, 1996 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 125,130,471 shares of Common Stock ($1 par value)
outstanding as of April 19, 1996.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited information for the quarters ended March 23, 1996 and
March 25, 1995 includes the results of operations of The Kroger Co.
for the 12 week periods ended March 23, 1996 and March 25, 1995,
and of its wholly owned subsidiary Dillon Companies, Inc. for the
13 week periods ended March 30, 1996 and April 1, 1995. 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 23, March 25,
1996 1995
---------- ----------
<S> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,784,254 $5,464,954
---------- ----------
Costs and expenses
Merchandise costs, including warehousing and transportation. . . 4,367,967 4,129,439
Operating, general and administrative. . . . . . . . . . . . . . 1,075,915 1,015,665
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,729 69,934
Depreciation and amortization. . . . . . . . . . . . . . . . . . 75,643 68,841
Interest expense, including interest on obligations
under capital leases, net . . . . . . . . . . . . . . . . . . . 70,626 75,324
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,659,880 5,359,203
---------- ----------
</TABLE>
<TABLE>
<S> <C> <C>
Earnings before tax expense and extraordinary loss. . . . . . . . 124,374 105,751
Tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,884 41,275
---------- ----------
Earnings before extraordinary loss. . . . . . . . . . . . . . . . 76,490 64,476
Extraordinary loss (net of income tax credit) . . . . . . . . . . (1,084) (5,336)
---------- ----------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . $ 75,406 $ 59,140
========== ==========
</TABLE>
<TABLE>
<S> <C> <C>
Primary earnings per common share:
Earnings from operations . . . . . . . . . . . . . . . . . . . . $ .59 $ .56
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . (.01) (.05)
---------- ----------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . $ .58 $ .51
========== ==========
</TABLE>
<TABLE>
<S> <C> <C>
Average number of common shares used in per share calculations. . 130,197 114,992
</TABLE>
<TABLE>
<S> <C> <C>
Fully diluted earnings per common share:
Earnings from operations . . . . . . . . . . . . . . . . . . . . $ .59 $ .53
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . (.01) (.04)
------ ------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . $ .58 $ .49
====== ======
</TABLE>
<TABLE>
<S> <C> <C>
Average number of common shares used in per share calculations. . 130,611 126,216
</TABLE>
- -----------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
<TABLE>
CONSOLIDATED BALANCE SHEET
(in thousands of dollars)
(unaudited)
<CAPTION>
March 23, December 30,
1996 1995
---------- ------------
<S> <C> <C>
ASSETS
Current assets
Receivables . . . . . . . . . . . . . . . . . . . . . . $ 256,256 $ 288,067
Inventories:
FIFO cost . . . . . . . . . . . . . . . . . . . . . . 1,976,919 2,034,880
Less LIFO reserve . . . . . . . . . . . . . . . . . . (452,663) (449,163)
---------- ----------
1,524,256 1,585,717
Property held for sale. . . . . . . . . . . . . . . . . 37,953 40,527
Prepaid and other current assets. . . . . . . . . . . . 237,832 192,673
---------- ----------
Total current assets. . . . . . . . . . . . . . . . 2,056,297 2,106,984
Property, plant and equipment, net. . . . . . . . . . . . 2,764,729 2,662,338
Investments and other assets. . . . . . . . . . . . . . . 272,031 275,395
---------- ----------
Total Assets. . . . . . . . . . . . . . . . . . . . $5,093,057 $5,044,717
========== ==========
</TABLE>
<TABLE>
<S> <C> <C>
LIABILITIES
Current liabilities
Current portion of long-term debt . . . . . . . . . . . $ 25,171 $ 24,939
Current portion of obligations under
capital leases. . . . . . . . . . . . . . . . . . . . 9,071 8,975
Accounts payable. . . . . . . . . . . . . . . . . . . . 1,369,569 1,540,067
Other current liabilities . . . . . . . . . . . . . . . 1,013,562 991,456
---------- ----------
Total current liabilities . . . . . . . . . . . . . 2,417,373 2,565,437
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 3,425,115 3,318,499
Obligations under capital leases. . . . . . . . . . . . . 173,378 171,229
Deferred income taxes . . . . . . . . . . . . . . . . . . 153,589 153,232
Other long-term liabilities . . . . . . . . . . . . . . . 443,274 439,333
---------- ----------
Total Liabilities . . . . . . . . . . . . . . . . . 6,612,729 6,647,730
---------- ----------
</TABLE>
<TABLE>
<S> <C> <C>
SHAREOWNERS' DEFICIT
Common capital stock, par $1, at stated value
Authorized: 350,000,000 shares
Issued: 1996 - 134,180,739 shares
1995 - 133,777,921 shares. . . . . . . . . . . 594,499 586,541
Accumulated deficit . . . . . . . . . . . . . . . . . . . (1,870,517) (1,945,923)
Common stock in treasury, at cost
1996 - 9,576,723 shares
1995 - 9,575,950 shares . . . . . . . . . . . (243,654) (243,631)
---------- ----------
Total Shareowners' Deficit (1,519,672) (1,603,013)
---------- ----------
Total Liabilities and Shareowners' Deficit. . . . . . $5,093,057 $5,044,717
========== ==========
</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 23, March 25,
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings. . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,406 $ 59,140
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . 1,084 5,336
Depreciation and amortization. . . . . . . . . . . . . . . . 75,643 68,841
Amortization of deferred financing costs . . . . . . . . . . 3,445 3,367
LIFO charge. . . . . . . . . . . . . . . . . . . . . . . . . 3,500 3,500
Loss on sale of fixed assets . . . . . . . . . . . . . . . . 376 444
Net decrease in cash from changes in operating
assets and liabilities, net of effects from sale of
subsidiary, detail below . . . . . . . . . . . . . . . . . (124,092) (4,238)
Other changes, net . . . . . . . . . . . . . . . . . . . . . (332) (750)
---------- ----------
Net cash provided by operating activities . . . . . . . . 35,030 135,640
---------- ----------
</TABLE>
<TABLE>
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures. . . . . . . . . . . . . . . . . . . . . . (173,649) (93,858)
Proceeds from sale of assets. . . . . . . . . . . . . . . . . . 1,475 35,784
Decrease (increase) in property held for sale . . . . . . . . . 2,183 (4,412)
Decrease (increase) in other investments. . . . . . . . . . . . (986) 396
---------- ----------
Net cash used by investing activities . . . . . . . . . . (170,977) (62,090)
---------- ----------
</TABLE>
<TABLE>
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt prepayment costs . . . . . . . . . . . . . . . . . . . . . (1,583) (7,340)
Financing charges incurred. . . . . . . . . . . . . . . . . . . (127) (1,777)
Principal payments under capital lease obligations. . . . . . . (2,272) (2,109)
Proceeds from issuance of long-term debt. . . . . . . . . . . . 127,496 78,408
Reductions in long-term debt. . . . . . . . . . . . . . . . . . (20,648) (124,716)
Increase in book overdrafts . . . . . . . . . . . . . . . . . . 25,528
Proceeds from sale of treasury stock. . . . . . . . . . . . . . 20
Proceeds from issuance of capital stock . . . . . . . . . . . . 7,553 5,162
---------- ----------
Net cash provided (used) by financing activities . . . . 135,947 (52,352)
---------- ----------
Net increase in cash and temporary cash investments . . . . . . . 0 21,198
Cash and temporary cash investments:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . 0 27,223
---------- ----------
End of quarter. . . . . . . . . . . . . . . . . . . . . . . . $ 0 $ 48,421
========== ==========
</TABLE>
<TABLE>
INCREASE (DECREASE) IN CASH FROM CHANGES IN OPERATING ASSETS AND LIABILITIES, NET OF EFFECTS FROM SALE OF SUBSIDIARY:
<S> <C> <C>
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . $ 57,961 $ 111,606
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . 31,811 25,871
Prepaid and other current assets. . . . . . . . . . . . . . . (45,272) (38,625)
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . (196,025) (125,531)
Deferred income taxes . . . . . . . . . . . . . . . . . . . . 357 (13,067)
Other liabilities . . . . . . . . . . . . . . . . . . . . . . 27,076 35,508
---------- ----------
$ (124,092) $ (4,238)
========== ==========
</TABLE>
- ----------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
<TABLE>
Supplemental disclosures of cash flow information:
<CAPTION>
Quarter Ended
--------------------------
March 23, March 25,
1996 1995
---------- ----------
<S> <S> <S>
Cash paid during the period for:
Interest (net of amount capitalized) $ 51,240 $ 69,267
Income taxes 30,610 29,311
</TABLE>
- ----------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. BASIS OF PRESENTATION
---------------------
The year-end condensed balance sheet data was derived from
audited financial statements, but does not include all
disclosures required by generally accepted accounting
principles.
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 23, 1996
and March 25, 1995 of $1.1 million and $5.3 million,
respectively (net of income taxes of $.7 million and $3.4
million, respectively) is related to the early retirement of
long-term debt. During the first quarter of 1996 the Company
repurchased $16.8 million of its senior debt issues.
Purchases of debt were funded by excess cash from operations,
proceeds from miscellaneous asset sales, and funds borrowed
under the Company's Credit Agreement.
4. 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 first quarter 1995 are
computed by adjusting both net earnings and shares outstanding
for the effect of the assumed conversion of the Convertible
Junior Subordinated Notes issued in December 1992 as of the
beginning of the year. The Convertible Junior Subordinated
Notes were converted into common stock on or before the
redemption date of September 5, 1995.
5. SUBSEQUENT EVENTS
-----------------
On April 29, 1996, the Company notified its lenders under the
Credit Agreement of the Company's election to release the
collateral securing the Company's obligations under the Credit
Agreement. The collateral also secures the Company's
obligations under its two issues of Senior Secured Debentures.
This election was permitted because the Company's consolidated
ratio of net total debt to EBITD for the most recently ended
fiscal quarter was 3.15 to 1 or lower. The Company's ratio at
March 23, 1996, was 3.05 to 1. Upon release of the
collateral, the Credit Agreement and the Senior Secured
Debentures become unsecured.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SALES
- -----
Total sales for the first quarter of 1996 increased 5.8% from the
first quarter 1995 to a record $5.78 billion. Food store sales
increased 5.5% over the 1995 first quarter. Solid sales in the
Company's existing units were coupled with sales from 89 stores
opened or expanded subsequent to the first quarter of 1995. Square
footage increased 4.8% during this same time period. Sales in
identical food stores, units that have been in operation for one
full year and have not been expanded during that period, increased
2.0% versus a 1.1% increase in 1995. These results were achieved
despite increased competitive openings in several major markets
such as Phoenix, Atlanta, Colorado Springs, and Raleigh/Durham.
Identical store sales are in line with the 1% to 2% increase
expected by the Company for the entire year.
A review of sales trends by lines of business includes:
<TABLE>
<CAPTION>
(in thousands of dollars)
% of 1996 1st Quarter
-----------------------
Lines of Business Sales 1996 1995 Change
--------------------- --------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Food Stores ........ 93.9% $5,432,754 $5,149,145 +5.5%
Convenience Stores .. 3.5% 203,275 187,053 +8.7%
Other sales ........ 2.6% 148,225 128,756 +15.1%
--------- ---------- ----------
Total sales ........ 100.0% $5,784,254 $5,464,954 +5.8%
</TABLE>
Convenience stores' identical grocery sales increased 1.5%,
identical gasoline sales increased 4.3%, and identical gas gallons
increased 1.8%. Sales for the six company convenience store group
were strengthened by strong in-store sales and gasoline gallons
sold, combined with a 2.5% increase in the average retail price per
gallon of gasoline as compared to the first quarter of 1995.
Other sales primarily consist of outside sales by the Company's
manufacturing divisions.
The Company's strategy in an environment of low food price
inflation continues to be to obtain sales growth from new square
footage, as well as increased productivity from existing locations.
The Company currently expects to increase square footage by 6% to
7% in 1996. The Company expects to continue to realize savings
from technology and logistics improvements, some of which may be
reinvested in retail price reductions to increase sales.
EBITD
- -----
The Company's Credit Agreement and the indentures underlying
approximately $1.2 billion of publicly issued debt contain various
restrictive covenants, many of which are based on earnings before
interest, taxes, depreciation, LIFO charge, and 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 23, 1996 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 1996, 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 8.3% to $278.1 million from $256.9 million.
The increase in EBITD was the result of many factors, including
increases in food store sales from existing and new stores,
improvements in gross profit rates from productivity gains and cost
reductions, and the controlling of operating, general and
administrative costs.
MERCHANDISE COSTS
- -----------------
Merchandise costs, including warehousing and transportation expense
and LIFO charges, for the first quarter 1996 declined to 75.5% of
sales compared to 75.6% in the first quarter 1995. Merchandise
costs were once again positively affected by the Company's efforts
in consolidated distribution and coordinated purchasing. The
decrease in merchandise costs was achieved in spite of some
logistics and manufacturing projects being in the start-up phase
and producing temporary increased costs. There has been virtually
no net inflation in the cost of product. Inflation in some
commodities such as milk, wheat and corn are being offset by cost
reductions in other items, such as coffee, paper and plastics.
OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES
- ----------------------------------------------
Operating, general and administrative expenses as a percent of
sales in the first quarter 1996 remained at the 1995 level of
18.6%. Operating, general and administrative expenses were
adversely affected by store opening costs from the opening of 25
new or expanded stores in 1996 as compared to 15 in 1995's first
quarter. Operating, general and administrative costs improved from
declines in total employee costs, including health benefits and
incentive pay for both store and management employees, as well as
decreases in utility costs.
NET INTEREST EXPENSE
- --------------------
Net interest expense declined to $70.6 million in the first quarter
1996 as compared to $75.3 million in last year's first quarter.
The decline was due in large part to the conversion into common
stock of the Company's $200 million 6-3/8% Convertible Junior
Subordinated Notes in the third quarter of 1995. The Company
expects 1996 net interest expense to total approximately $300
million.
In an effort to effectively further reduce the Company's interest
expense, the Company has purchased a portion of the debt issued by
the lenders of certain of its structured financings, which cannot
be retired early. Excluding the debt incurred to make these
purchases, which are classified as investments, the Company's long-
term debt at the end of the first quarter was $3.57 billion, down
from $3.79 billion at the end of the 1995 first quarter. The
Company does not expect a material change in its debt balance
during 1996 from the year end 1995 balance.
NET EARNINGS
- ------------
The Company's net earnings in the first quarter 1996 were $75.4
million or $.58 per share on a fully diluted basis as compared to
net earnings in the first quarter 1995 of $59.1 million or $.49 per
share. Net earnings in 1996 were negatively affected by an
extraordinary loss of $1.1 million or $.01 per share as compared to
an extraordinary loss of $5.3 million or $.04 per share in 1995.
The extraordinary loss in both years resulted from the early
retirement of long term debt. The Company expects to incur an
extraordinary loss in each quarter of 1996 as it continues to
retire high-cost debt.
Earnings before the extraordinary loss totalled $76.5 million or
$.59 per share fully diluted in 1996 as compared to $64.5 million
in 1995 or $.53 per fully diluted share.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the first quarter 1996 the Company purchased $16.8 million
of its various long-term debt issues.
At the end of the first quarter 1996 the Company had $438.1 million
available under its Credit Agreement to meet short-term liquidity
needs.
Capital expenditures for the first quarter 1996 totaled $173.6
million as compared to $93.9 million for the first quarter 1995.
Capital expenditures for the year are expected to total
approximately $850 million as compared to $726.1 million during all
of 1995. The increase reflects the Company's strategy of growth
through expansion as well as the Company's emphasis, whenever
possible, on self-development and ownership of store real estate.
The planned capital expenditures will allow the Company to open or
expand approximately 115 stores and remodel 50 to 60 additional
stores. Capital expenditures will also be made in the areas of
logistics and technology projects.
During the first quarter of 1996 the Company's only new debt issues
consisted of 7.5% First Mortgage Bonds in the amount of $9.1
million due in the year 2016.
CONSOLIDATED STATEMENT OF CASH FLOWS
- ------------------------------------
The Company generated $35.0 million of cash from operating
activities during the first quarter 1996 compared to $135.6 million
in last year's first quarter. The decrease was due primarily to an
investment in working capital during the first quarter of 1996,
partially offset by higher net earnings.
Investing activities used $171.0 million in cash during the first
quarter of 1996 as compared to $62.1 million last year. Cash
generated by operating and financing activities is being used for
additional capital expenditures. The Company's capital investment
in the first quarter of 1996 increased $79.8 million from the first
quarter of 1995. Also contributing to the net increase in the use
of cash for investment activities was the decline of $34.3 million
in the cash proceeds from the sale of assets.
Financing activities provided $135.9 million in cash as compared to
a use of cash of $52.4 million last year. The Company borrowed an
additional $109.2 million under its bank Credit Agreement during
the first quarter of 1996 and obtained an additional $18.3 million
from other debt issues and commercial paper offerings while
repurchasing only $20.6 million of other long term debt. This
compared to a net debt reduction in the first quarter of 1995 of
$46.3 million. Additionally, cash used for debt prepayment costs
and new financing charges used only $1.7 million as compared to
$9.1 million in 1995 and book overdrafts provided an additional
$25.5 million in 1996.
SUBSEQUENT EVENTS
- -----------------
On April 29, 1996, the Company notified its lenders under the
Credit Agreement of the Company's election to release the
collateral securing the Company's obligations under the Credit
Agreement. The collateral also secures the Company's obligations
under its two issues of Senior Secured Debentures. This election
was permitted because the Company's consolidated ratio of net total
debt to EBITD for the most recently ended fiscal quarter was 3.15
to 1 or lower. The Company's ratio at March 23, 1996, was 3.05 to
1. Upon release of the collateral, the Credit Agreement and the
Senior Secured Debentures become unsecured.<PAGE>
PART II - OTHER INFORMATION
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 fourth quarter
and fiscal year 1995 earnings release in its Current
Report on Form 8-K dated January 25, 1996.
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, 1996 By: (Paul W. Heldman)
Paul W. Heldman
Vice President,
Secretary and
General Counsel
Dated: May 6, 1996 By: (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.
<TABLE>
<CAPTION>
EXHIBIT 11.1
COMPUTATION OF CONSOLIDATED EARNINGS PER SHARE
(in thousands, except per share amounts)
(unaudited)
Quarter Ended
-----------------------
March 23, March 25,
1996 1995
---------- ----------
(12 weeks) (12 weeks)
<S> <C> <C>
Earnings before extraordinary loss . . . . . . . . $ 76,490 $ 64,476
Extraordinary loss . . . . . . . . . . . . . . . . (1,084) (5,336)
--------- ---------
Net earnings . . . . . . . . . . . . . . . . . . . $ 75,406 $ 59,140
========= =========
</TABLE>
<TABLE>
<CAPTION>
PRIMARY <F1>
- ------------
<S> <C> <C>
Weighted average common and dilutive
common equivalent shares:
Common stock outstanding . . . . . . . . . . . 124,397 111,130
Stock options. . . . . . . . . . . . . . . . . 5,800 3,862
--------- --------
130,197 114,992
========= ========
</TABLE
</TABLE>
<TABLE>
<S> <C> <C>
Primary earnings from continuing
operations per share . . . . . . . . . . . . . . $ .59 $ .56
Primary results of extraordinary loss per share . . (.01) (.05)
--------- --------
Primary net earnings per share. . . . . . . . . . . $ .58 $ .51
========= ========
</TABLE>
<TABLE>
<CAPTION>
FULLY DILUTED <F1>
- ------------------
<S> <C> <C>
Weighted average common shares
and all other dilutive securities:
Common stock outstanding . . . . . . . . . . . 124,397 111,130
Stock options. . . . . . . . . . . . . . . . . 6,214 4,379
Convertible debt . . . . . . . . . . . . . . . 10,707
--------- --------
130,611 126,216
========= ========
</TABLE>
<TABLE>
<S> <C> <C>
Fully diluted earnings from
continuing operations per share <F2> . . . . . . $ .59 $ .53
Fully diluted results of extraordinary
loss per share . . . . . . . . . . . . . . . . . (.01) (.04)
--------- --------
Fully diluted net earnings per share <F2> . . . . . $ .58 $ .49
========= ========
<FN>
<F1> The Convertible Junior Subordinated Notes issued in December
1992 are not included in the computation of primary earnings
per share for 1995 since they were not common stock
equivalents. They are included in the fully diluted earnings
per share calculation for the quarter ended March 25, 1995.
The notes were converted into common stock on or before the
redemption date of September 5, 1995.
<F2> Earnings for 1995 used to calculate fully diluted earnings
per share have been adjusted to reflect the tax effected
interest expense of $1.8 million that would have been avoided
in connection with the assumed conversion of the convertible
debt issue as of the beginning of the year.
</TABLE>
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 quarter ended March 23, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> MAR-23-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 256,256
<ALLOWANCES> 0
<INVENTORY> 1,524,256
<CURRENT-ASSETS> 2,056,297
<PP&E> 5,289,409
<DEPRECIATION> 2,524,681
<TOTAL-ASSETS> 5,093,057
<CURRENT-LIABILITIES> 2,417,373
<BONDS> 3,632,735
<COMMON> 350,845
0
0
<OTHER-SE> (1,870,517)
<TOTAL-LIABILITY-AND-EQUITY> 5,093,057
<SALES> 5,784,254
<TOTAL-REVENUES> 5,784,254
<CGS> 4,367,967
<TOTAL-COSTS> 4,367,967
<OTHER-EXPENSES> 1,221,287
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 70,626
<INCOME-PRETAX> 124,374
<INCOME-TAX> 47,884
<INCOME-CONTINUING> 76,490
<DISCONTINUED> 0
<EXTRAORDINARY> (1,084)
<CHANGES> 0
<NET-INCOME> 75,406
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.58
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT 99.1
Schedule of computation of ratio of earnings to fixed charges of The Kroger Co. and consolidated subsidiary companies and unconsolid
companies as if consolidated for the five fiscal years ended December 30, 1995 and for the one quarter ended March 23, 1996 and Marc
25, 1995.
Quarter Ended Fiscal Years Ended
--------------------- --------------------------------------------------------------
March 23, March 25, December 30, December 31, January 1, January 2, December 28,
1996 1995 1995 1994 1994 1993 1991
(12 Weeks) (12 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (53 weeks) (52 weeks)
---------- ---------- ------------ ------------ ----------- ------------ ------------
(in thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
Earnings from continuing
operations before tax
expense, extraordinary
loss and cumulative
effect of change in
accounting . . . . . . . $124,374 $105,751 $509,638 $421,363 $283,938 $173,415 $168,595
Fixed charges. . . . . . 113,076 115,584 489,939 500,599 556,008 640,004 687,226
Capitalized interest . . (2,818) (435) (6,785) (2,521) 230 (960) 122
-------- -------- -------- -------- -------- -------- --------
$234,632 $220,900 $992,692 $919,441 $840,176 $812,459 $855,943
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges
Interest . . . . . . . . $ 73,609 $ 76,001 $320,236 $331,097 $391,693 $476,932 $536,485
Portion of rental
payments deemed to be
interest. . . . . . . . 39,467 39,583 169,703 169,502 164,315 163,072 150,741
-------- -------- -------- -------- -------- -------- --------
$113,076 $115,584 $489,939 $500,599 $556,008 $640,004 $687,226
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Fixed Charges . . . . . 2.1 1.9 2.0 1.8 1.5 1.3 1.2
</TABLE>
