SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
ANNUAL REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File No. 1-303
December 28, 1996
THE KROGER CO.
An Ohio Corporation I.R.S. Employer Identification
No. 31-0345740
Address Telephone Number
- -------- ----------------
1014 Vine St. (513) 762-4000
Cincinnati, Ohio 45202
Securities registered pursuant to section 12 (b) of the Act:
Name of Exchange on
Title of Class which Registered
- --------------- ---------------------
Common $1 par value New York Stock Exchange
126,987,871 shares outstanding on
March 10, 1997
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 .
---------- --------
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K[ ].
The aggregate market value of the Common Stock of The Kroger Co.
held by non-affiliates as of February 28, 1997: $6,689,444,184
Documents Incorporated by Reference:
Proxy Statement to be filed pursuant to Regulation 14A of
the Exchange Act on or before April 28, 1997, incorporated by
reference into Parts II and III of Form 10-K.
<PAGE>
PART II
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------------------------------------------
DECEMBER 28, DECEMBER 30, DECEMBER 31, JANUARY 1, JANUARY 2,
1996 1995 1994 1994 1993
(52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS)
-------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Sales from continuing operations............. $25,170,909 $23,937,795 $22,959,122 $22,384,301 $22,144,588
Earnings from continuing operations
before extraordinary loss and
cumulative effect of change in
accounting.................................. 352,735 318,866 268,903 170,805 101,160
Extraordinary loss (net of income
tax credit)<F1>............................. (2,862) (16,053) (26,707) (23,832) (107,103)
Cumulative effect of change in
accounting (net of income tax
credit)<F2>................................ (159,193)
Net earnings (loss).......................... 349,873 302,813 242,196 (12,220) (5,943)
Fully diluted earnings (loss) per share
Earnings from continuing operations
before extraordinary loss................... 2.67 2.50 2.19 1.50 1.11
Extraordinary loss <F1>..................... (.02) (.12) (.21) (.19) (1.17)
Cumulative effect of change in
accounting <F2>............................. (1.28)
Net earnings (loss)......................... 2.65 2.38 1.98 .03 (.06)
Total assets................................. 5,825,413 5,044,717 4,707,674 4,480,464 4,303,084
Long-term obligations, including obligations
under capital leases........................ 3,659,491 3,489,728 3,889,194 4,135,013 4,472,978
Shareowners' deficit......................... (1,181,706) (1,603,013) (2,153,684) (2,459,642) (2,700,044)
Cash dividends per common share.............. <F3> <F3> <F3> <F3> <F3>
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
[FN]
<F1> See Extraordinary Loss in the Notes to Consolidated Financial
Statements.
<F2> See Post-retirement Health Care and Life Insurance Benefits in
the respective year's Notes to Consolidated Financial
Statements.
<F3> The Company is prohibited from paying cash dividends under the
terms of its Credit Agreement.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SALES
Total sales for the fourth quarter of 1996 were $6.2 billion
compared to $5.9 billion in the fourth quarter of 1995, a 5.8%
increase. Sales for the full year increased 5.1%. Food stores sales
for the fourth quarter 1996 were 5.0% ahead of the fourth quarter
1995 and 4.5% ahead for the year. A review of sales by lines of
business for the three years ended December 28, 1996, is as
follows:
<TABLE>
<CAPTION> 1996 1995 1994
% OF 1996 ------------------ ---------------- ----------------
SALES AMOUNT CHANGE AMOUNT CHANGE AMOUNT CHANGE
---------- ------- -------- ------ ------ ------ ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
Food Stores.............. 93.4% $23,508 + 4.5% $22,488 +4.9% $21,442 +4.9%
Convenience Stores....... 3.8% 948 +11.6% 850 -5.4% 898 -5.6%
Other sales.............. 2.8% 714 +19.0% 600 -3.1% 619 -37.5%
------ ------- ------ ------- ----- ------- ------
Total sales.............. 100.0% $25,170 +5.1% $23,938 +4.3% $22,959 +2.6%
</TABLE>
Sales in identical food stores, stores that have been in operation
and have not been expanded or relocated for one full year,
increased .5% in the fourth quarter and .5% for the full year.
Identical store sales, excluding the strike in the King Soopers and
City Markets divisions, were up 1.0% for the full year. In the
fourth quarter comparable store sales, which include results of
expanded and relocated stores, increased 4.0%. The increase in
food stores' sales can be attributed primarily to inflation of less
than .5%, the opening or expansion of 116 food stores, and higher
average sales per customer. Higher sales per customer are the
result of the Company's focus on the combination food and drug
store, combining a food store with a pharmacy and numerous
specialty departments such as floral, video rental, and book
stores. The Company expects to emphasize this "one-stop shopping"
convenience format tailored to each market to obtain future sales
growth.
Convenience stores' sales increased 11.6% for the year and 15.4%
during the fourth quarter of 1996. The convenience stores' sales
increase can be attributed to a 12% increase in gas retails for the
quarter on a 10.5% increase in gallons sold. In-store sales in
identical convenience stores increased 1.9% for both the fourth
quarter and the full year. Gasoline sales at identical convenience
stores increased 13.3% in the fourth quarter 1996 on a 1.1%
increase in gallons sold, and gasoline sales increased 8.9% for the
year on a 1.5% increase in gallons sold.
Other sales primarily consists of outside sales by the Company's
manufacturing divisions. The increase in other sales compared to
1995 was 24.2% for the fourth quarter and 19.0% for the year.
Manufacturing division outside sales increased 22.5% in the fourth
quarter 1996 and 15.4% for the full year.
Total food store square footage increased 6.7%, 4.6% and 4.7% in
1996, 1995, and 1994, respectively. The Company expects to
increase retail food store square footage by approximately 5-6% in
both 1997 and 1998. Convenience store square footage increased 1.5%
in 1996, decreased 10.6% in 1995, and increased .4% in 1994.
Sales per average square foot for the last three years were:
<TABLE>
<CAPTION>
TOTAL SALES
PER
AVERAGE SQUARE
FOOT
---------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Food Stores............................. $403 $405 $404
Convenience Stores...................... $519 $475 $436
</TABLE>
Sales per average square foot for convenience stores for 1996,
1995, and 1994 exclude stores that are operated by franchisees. The
decrease in sales per average square foot for food stores can be
attributed to a large increase in square footage at the end of 1996
as new store construction was completed.
The Company produced record sales in 1996 despite work stoppages at
the King Soopers and City Markets divisions. In 1996 and 1995 sales
improved despite increased competition from other food retailers,
supercenters, mass merchandisers, and restaurants. The Company's
wide regional diversity allowed it to withstand these challenges
and to produce record results.
The sales improvement in 1994 was the result of new square footage
combined with the increased productivity of existing stores.
The Company's future food store strategy is to invest in existing
Kroger markets or adjacent geographic regions where the Company has
a strong franchise and can leverage marketing, distribution, and
overhead dollars. Consistent increases from the Company's existing
store base combined with incremental contributions from the capital
spending program are expected.
EBITD
The Company's Senior Competitive Advance and Revolving Credit
Facility Agreement (the "Credit Agreement"), as amended, 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, 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 December
28, 1996, the Company was in compliance with all covenants of its
Credit Agreement. The Company believes it has adequate coverage of
its debt covenants to continue to respond effectively to
competitive conditions.
EBITD, which does not include the effect of Statement of Financial
Accounting Standards ("SFAS") No. 106, "Employer's Accounting for
Postretirement Benefits Other Than Pensions," increased 6.7% in
1996 to $1.241 billion compared to $1.163 billion in 1995 and
$1.065 billion in 1994. Excluding the effect of strikes in the
King Soopers and City Markets divisions, EBITD would have been
approximately $1.274 billion for 1996. EBITD growth was generated
by sales gains, and reduced operating, general and administrative
expenses as a percent of sales. The Company's strong storing
program continued to produce incremental EBITD increases as well.
EBITD increases in 1995 and 1994 were due in large part to
increased sales combined with improved gross profits rates.
MERCHANDISE COSTS
Merchandise costs include warehousing and transportation expenses
and LIFO charges or credits. The following table shows the relative
effect that LIFO charges have had on merchandising costs as a
percent of sales:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Merchandise costs as reported.............. 75.65% 75.60% 75.81%
LIFO charge................................ .05% .05% .07%
----- ----- -----
Merchandise costs as adjusted.............. 75.60% 75.55% 75.74%
</TABLE>
On a consolidated basis, cost of goods increased for the year.
However, the consolidated gross profit rate does not reflect the
general trend in food stores. The food stores' gross profit rates
were favorable to last year. Much of the decline in the
consolidated gross profit rate was due to lower gross margins
experienced at the convenience stores, primarily in gasoline. The
Company will continue to invest capital in technology focusing on
improved store operations, procurement, and distribution practices.
Warehousing costs as a percent of sales declined from 1995's rates.
The gross profit rate is expected to be favorably influenced by the
Company's advances in consolidated distribution and coordinated
purchasing, reduced transportation costs, and strong private label
sales.
The Company expects to limit product cost increases through
continued use of technology, outsourcing, and a variety of store
level efficiency enhancements.
OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating, general and administrative expenses as a percent of
sales in 1996, 1995 and 1994 were 18.34%, 18.41% and 18.42%,
respectively.
Operating, general and administrative costs declined 40 basis
points in the fourth quarter and 7 basis points for the full year.
The improved fourth quarter results were caused by a combination of
factors, including favorable workers compensation and general
liability trends, cost reduction achieved through enhanced
technology, a reduction in employee benefit costs, and reduced
administrative expenses.
The Company's goal for 1997 is to further reduce operating, general
and administrative expense rates. Increased sales volume combined
with investments in new technologies and logistics programs to
improve efficiencies and lower costs while maintaining customer
service, should help achieve this goal. In 1997, the Company plans
to open or expand approximately 100 stores compared to 116 in 1996.
This expansion program will adversely affect operating, general and
administrative rates as upfront costs associated with the opening
of new stores are incurred.
INCOME TAXES
The Company has closed 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 tax years 1984-1989.
All issues have been resolved with one exception. Efforts to
resolve this issue for tax years 1984-1986 with the Appeals
Division of the Internal Revenue Service were unsuccessful. As a
result the Company filed a petition with the United States Tax
Court in Washington, D.C. Litigation was completed in November
1995 and a decision was rendered in January 1997 in favor of the
Company. The Company is awaiting a decision from the Internal
Revenue Service regarding appeal. This issue for years 1987-1989
is being held in abeyance pending the ultimate outcome of this
court case. The Company has provided for this and other tax
contingencies.
NET EARNINGS
Net earnings totaled $349.8 million in 1996 compared to $302.8
million in 1995 and $242.2 million in 1994. Earnings in 1996
compared to 1995 and 1994 were affected by: (i) an after tax
extraordinary loss from the early retirement of debt in 1996 of
$2.9 million compared to $16.1 million in 1995 and $26.7 million in
1994, (ii) net interest expense in 1996 of $300.0 million versus
$312.7 million in 1995 and $327.6 million in 1994, and (iii)
depreciation expense of $343.7 million, $311.3 million and $277.8
million in 1996, 1995 and 1994, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Debt Management and Interest Expense
Net interest expense declined to $300.0 million in 1996 as compared
to $312.7 million in 1995 and $327.6 million in 1994.
In 1996, the Company made open market purchases of $49.9 million of
its senior and subordinated debt and redeemed $134.7 million of its
subordinated debt. The repurchases and redemption were effected
with proceeds from the issuance of $240 million of new senior debt,
additional bank borrowings and cash generated from operations. In
1995 the Company repurchased, on the open market, $283.0 million of
high yield senior and subordinated debt which was financed by cash
generated from operations and lower cost bank debt. Interest
expense was adversely affected in 1995 by an increase in market
rates. In 1994 the Company repurchased or redeemed $559.5 million
of high rate senior debt. A portion of these redemptions were
financed by $111.4 million of new subordinated debt and $132.3
million in additional bank borrowings.
The Company has in place a Senior Competitive Advance and Revolving
Credit Facility Agreement ("Credit Agreement") providing a $1.75
billion revolving credit loan through July 20, 2002. The average
interest rate on the Company's bank debt, which totaled $1.001
billion at year-end 1996 versus $1.008 billion at year-end 1995 was
6.16% compared to 6.84% in 1995 and 5.57% in 1994. The Company's
rate on the bank debt is variable.
The Company currently expects 1997 net interest expense, estimated
using year-end 1996 rates, to total approximately $295 million. A
1% increase in market rates would increase this estimated expense
by approximately $6.5 million. A 1% decrease in market rates would
reduce the estimated expense by approximately $9.4 million.
Long-term debt, including capital leases and current portion
thereof, increased $157.0 million to $3.681 billion at year-end
1996 from $3.524 billion at year-end 1995. The Company 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 would be
$152.6 million less or $3.528 billion at year-end 1996 compared to
$3.465 billion at year-end 1995.
Required principal repayments over the next five years amount to
$285.8 million at year-end 1996 versus $429.2 million and $670.7
million at year-end 1995 and 1994, respectively. Scheduled debt
maturities for the five years subsequent to 1996, 1995 and 1994
were:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Year 1.................................. $ 11,642 $ 24,939 $ 7,926
Year 2.................................. 16,095 11,838 14,341
Year 3.................................. 197,876 16,839 12,875
Year 4.................................. 28,868 337,419 15,507
Year 5.................................. 31,301 38,212 620,012
</TABLE>
In 1996, Year 3 maturities include the remaining $124.7 million of
10% Senior Subordinated Notes.
In 1995, Year 4 maturities included the remaining $139.2 million of
10% Senior Subordinated Notes, and $125.0 million of 9% Senior
Subordinated Notes.
In 1994, Year 5 maturities included $125 million of 9% Senior
Subordinated Notes, $200 million of 6 3/8% Convertible Junior
Subordinated Notes, and $222.6 million of 10% Senior Subordinated
Notes. In 1995 the Company issued a redemption notice to the
holders of the remaining outstanding balance of the 6 3/8%
Convertible Junior Subordinated Notes. All of the holders elected
to convert the notes into approximately 10.7 million shares of
common stock.
Interest Rate Protection Program
The Company uses derivatives to limit its exposure to rising
interest rates. The guidelines the Company follows are: (i) use
average daily bank balance to determine annual debt amounts subject
to interest rate exposure, (ii) limit the annual amount of debt
subject to interest rate reset and the amount of floating rate
debt to a combined total of $1 billion or less, (iii) include no
leveraged products, and (iv) hedge without regard to profit motive
or sensitivity to current mark-to-market status. The Company's
compliance with these guidelines is reviewed semi-annually with the
Financial Policy Committee of the Company's Board of Directors.
The Company currently has in place various interest rate hedging
agreements with notional amounts aggregating $3.160 billion. The
effect of these agreements is to: (i) fix the rate on $465 million
floating rate debt, with $100 million of swaps expiring in December
1998, $125 million expiring in January 1999, $75 million expiring
in January 2001, $65 million expiring in December 2004, and the
remaining $100 million expiring in 2007, for which the Company pays
an average rate of 6.72% and receives 6 month LIBOR; (ii) fix the
rate on $860 million floating rate debt incurred to purchase the
Company's high-rate public bonds in the open market to match the
original maturity of the debt purchased, with the Company borrowing
at an effective rate that is lower than the yield to maturity of
the repurchased debt and paying an average rate of 7.11% and
receiving 6 month LIBOR on these agreements which will expire $375
million in 2000, $395 million in 2001, and $90 million in 2002;
(iii) swap the contractual interest rate on $350 million of seven
and ten year debt instruments into floating-rate instruments, for
which the Company pays 6 month LIBOR and receives an average rate
of 7.04%, with $100 million of these contracts expiring in May 1999
and the remaining $250 million expiring in August 2002, and
concurrently, fixing the rate on $200 million of floating rate
debt, with $100 million expiring in May 1997, and $100 million
expiring in August 1998, for which the Company pays an average rate
of 6.87%; effectively changing a portion of the Company's interest
rate exposure from seven to ten years to three to five years; (iv)
swap the contractual interest rate on $735 million of four, seven
and ten year fixed-rate instruments into floating-rate instruments,
for which the Company pays 6 month LIBOR and receives an average
rate of 5.99%, with $75 million of these swaps expiring in February
1998, $75 million expiring in March 1998, $50 million expiring in
October 1999, $100 million expiring in November 1999, $50 million
expiring in July 2000, $110 million expiring in November 2000, $125
million expiring in January 2001, and $150 million expiring in July
2003; and (v) cap six month LIBOR on $550 million for one to five
years at rates between 5.0% and 6.0%, with $50 million of the caps
expiring in each of July 1997 and July 1998, $100 million expiring
in December 1997, $100 million expiring in each of January 1997 and
January 1998, and the remaining $150 million expiring in January
1999. Interest expense was increased $11,071 and $2,760 in 1996 and
1995, respectively, and reduced $13,449 in 1994, as a result of the
Company's hedging program.
The Company's borrowings under the Credit Agreement are permitted
to be in the form of commercial paper. At December 28, 1996, the
Company had $187.7 million of commercial paper outstanding of the
$1.001 billion in total bank borrowings. After deducting amounts
set aside as backup for the Company's unrated commercial paper
program, $739.5 million was available under the Company's Credit
Agreement to meet short-term liquidity needs. There are no
principal payments required under the Credit Agreement until its
expiration on July 20, 2002.
COMMON STOCK
On September 5, 1995 the Company issued approximately 10.7 million
shares of common stock in connection with the redemption of its 6
3/8% Convertible Junior Subordinated Notes and the election by
holders to convert their Notes to stock.
REPURCHASE AND REDEMPTION OF DEBT
In 1996, the Company redeemed the entire $125 million outstanding
balance of its 9% Senior Subordinated Notes and approximately $9.7
million of its General Term Notes, Series B. The Company also made
open market purchases totaling $23.4 million of its 9 1/4% Senior
Secured Debentures and $26.5 million of its various senior
subordinated debt issues. Borrowings under the Credit Agreement,
proceeds from exercise of stock options, the issuance of new senior
debt, the sale of assets and excess cash from operations were used
to finance these redemptions and repurchases. The outstanding
balances of these debt issues at December 28, 1996, were $695.8
million for the senior subordinated debt issues which includes the
General Term Notes, and $107.6 million for the 9 1/4% Senior
Secured Debentures.
During 1995 the Company redeemed the remaining outstanding amount
of its 6 3/8% Convertible Junior Subordinated Notes. The holders
elected thereupon to convert their Notes into 10.7 million shares
of common stock. The Company also repurchased, on the open market,
$29.1 million of its 9 1/4% Senior Secured Debentures and $253.9
million of its various senior subordinated debt issues. The
redemptions and repurchases were affected using additional bank
borrowings, cash from operations, proceeds from the sale of assets
and working capital improvements. The outstanding balances of these
debt issues at December 30, 1995, were $857.1 million for the
senior subordinated debt issues and $131.0 million for the 9 1/4%
Senior Secured Debentures.
During 1994 the Company redeemed the remaining outstanding amounts
of its 11 1/8% Senior Notes, its 8 3/4% Senior Subordinated Reset
Notes and its 8 1/4% Convertible Junior Subordinated Debentures.
The Company also repurchased $144.8 million of its various senior
subordinated debt issues and $39.9 million of its 9 1/4% Senior
Secured Debentures. The redemptions and repurchases were affected
using funds from asset sales, the sale of treasury stock to
employee benefit plans, proceeds from new financings, excess cash
from operations and additional bank borrowings. The outstanding
balances of these debt issues at December 31, 1994, were $1.105
billion for the Senior Subordinated Debt issues, and $160.2 million
for the 9 1/4% Senior Secured Debentures.
CAPITAL EXPENDITURES
Capital expenditures totaled $733.8 million for 1996, compared to
$726.1 million in 1995. Capital outlays in 1994 were $534.0
million. During 1996 the Company opened, acquired or expanded 116
food stores and 31 convenience stores compared to 83 food stores
and 19 convenience stores in 1995 and 82 food stores and 17
convenience stores in 1994. The Company also completed 53 food
store and 9 convenience store remodels during 1996. During 1996,
the Company closed or sold 49 food stores and 19 convenience
stores.
The Company expects 1997 capital expenditures, including additional
Company owned real estate, logistics projects, and continuing
technology investments, to total approximately $800-$850 million.
Food store square footage is expected to increase 5-6% through the
opening, expansion or acquisition of approximately 90-100 food
stores. The Company also expects to complete within-the-wall
remodels of 50 food stores. The increased square footage is
planned for existing Company markets where the Company has an
established market position and an existing administrative and
logistical network. The Company's ability to execute its capital
expenditure plan will depend, in part, on its ability to generate
continued EBITD growth.
CONSOLIDATED STATEMENT OF CASH FLOWS
During 1996 the Company generated $477.8 million in cash from
operating activities compared to $798.5 million in 1995 and $750.3
million in 1994. The decrease from 1995 is primarily due to an
increase in operating assets and liabilities that used $248.5
million of cash in 1996 compared to generating cash of $143.0
million in 1995. The largest component of the change in operating
assets and liabilities was net owned inventories due in part to the
Company's storing program and warehouse expansions which increased
$224.5 million as compared to a decrease of $109.1 million in 1995.
Additionally, prepaid and other assets increased $120.6 million,
primarily because of the Company's funding of a Voluntary Employee
Benefit Association Trust for employee benefit plan expenses.
Offsetting these net uses of cash were increases in net earnings
before extraordinary losses of $47.1 million and non-cash charges
for depreciation and amortization of $32.5 million.
Investing activities used $856.9 million compared to $665.6 million
of cash used in 1995 and $546.5 million of cash used in 1994. The
increase in the use of cash was due to increased purchase of
investments of $140.9 million and increased capital expenditures of
$7.7 million combined with a decrease in proceeds from sale of
assets and investments of $40.3 million.
Cash provided by financing activities in 1996 totaled $379.1
million compared to uses of $160.2 million and $297.8 million in
1995 and 1994, respectively. The decrease in the use of cash during
1996 as compared to 1995 is due to a 1996 net debt increase of
$146.9 million versus 1995's net debt reduction of $191.0 million.
Additionally, $6.8 million less cash was needed for debt
prepayments and finance charges and an additional $175.4 million
was provided by outstanding checks. An additional $19.5 million
was provided from the sale of stock and related transactions.
OTHER ISSUES
The Company is party to more than 200 collective bargaining
agreements with local unions representing approximately 160,000 of
the Company's employees. During 1996 the Company negotiated over
50 labor contracts, but it did incur work stoppages in the King
Soopers and City Markets divisions. Typical agreements are 3 to 5
years in duration, and as such agreements expire, the Company
expects to negotiate with the unions and to enter into new
collective bargaining agreements. There can be no assurance,
however, that such agreements will be reached without work
stoppage. A prolonged work stoppage affecting a substantial number
of stores could have a material adverse effect on the results of
the Company's operations. Major union contracts that will be
negotiated in 1997 include Phoenix, Dallas, Atlanta and Nashville
store employees.
SUBSEQUENT EVENTS
On January 29, 1997, the Company announced that it would begin a
stock repurchase program in order to reduce dilution caused by the
Company's stock option plans for employees. The repurchase program
will be funded by proceeds derived from employee stock option
exercises, plus associated tax benefits.
Effective as of February 15, 1997, the Company redeemed the entire
outstanding balances of its 9 3/4% Senior Subordinated Debentures
and its 9 3/4% Senior Subordinated Debentures, Series B, both of
which were due in 2004. The balance outstanding under both issues
totaled approximately $142 million.
SPECIAL NOTE
The foregoing Management's Discussion and Analysis contains certain
forward-looking statements about the future performance of the
Company which are based on management's assumptions and beliefs in
light of the information currently available to it. These
forward-looking statements are subject to uncertainties and other
factors that could cause actual results to differ materially from
those statements including, but not limited to: competitive
practices and pricing in the food and drug industries generally and
particularly in the Company's principal markets; changes in the
financial markets related to the cost of the Company's capital; the
ability of the Company to access the public debt and equity markets
to refinance indebtedness and fund the Company's capital
expenditure program on satisfactory terms; supply or quality
control problems with the Company's vendors; labor disputes and
material shortages; and changes in economic conditions that affect
the buying patterns of the Company's customers.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
THE KROGER CO.
Dated: April 24, 1997 By: (Paul W. Heldman)
Paul W. Heldman
Vice President, Secretary
and General Counsel
<PAGE>
INDEX OF EXHIBITS
-----------------
Exhibit
- -------
23.2 Consent of Independent Accountants
23.3 Consent of Independent Accountants
99.2 Financial Statements for The Kroger Co. Savings Plan for
the Year Ended December 31, 1996
99.3 Financial Statements for the Dillon Companies, Inc.
Employees' Stock Ownership and Savings Plan for the Year
Ended December 31, 1996
EXHIBIT 99.2
-------------
The Kroger Co. Savings Plan
Report On Audits Of Financial Statements And Supplemental Schedules
For The Years Ended December 31, 1996, 1995 and 1994
<PAGE>
The Kroger Co. Savings Plan
Index To Financial Statements
December 31, 1996
Report of Independent Accountants
Statement of Net Assets Available
For Plan Benefits at December 31, 1996
Statement of Net Assets Available
For Plan Benefits at December 31, 1995
Statement of Changes in Net Assets
Available For Plan Benefits for
the year ended December 31, 1996
Statement of Changes in Net Assets
Available For Plan Benefits for
the year ended December 31, 1995
Statement of Changes in Net Assets
Available For Plan Benefits for
the year ended December 31, 1994
Notes to Financial Statements
Item 27a - Schedule of Assets Held for Investment
Purposes at December 31, 1996
Item 27d - Schedule of Reportable Transactions for the year ended
December 31, 1996
<PAGE>
Report of Independent Accountants
----------------------------------
To the Administrative Committee of The Kroger Co. Savings Plan
We have audited the accompanying statements of net assets available
for plan benefits of The Kroger Co. Savings Plan as of December 31,
1996 and 1995, and the related statements of changes in net assets
available for plan benefits for the years ended December 31, 1996,
1995 and 1994. These financial statements are the responsibility
of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for plan
benefits of The Kroger Co. Savings Plan as of December 31, 1996 and
1995, and the changes in net assets available for plan benefits for
the years ended December 31, 1996, 1995, and 1994 in conformity
with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on
the basic financial statements taken as a whole. The supplemental
schedules of assets held for investment purposes and reportable
transactions are presented for the purpose of additional analysis
and are not a required part of the basic financial statements but
are supplementary information required by the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974. The fund
information in the statement of net assets available for plan
benefits and the statement of changes in net assets available for
plan benefits is presented for purposes of additional analysis
rather than to present the net assets available for plan benefits
and changes in net assets available for plan benefits of each fund.
The supplemental schedules and fund information have been subjected
to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements
taken as a whole.
(Coopers & Lybrand L.L.C.)
Coopers & Lybrand L.L.C.
Cincinnati, Ohio
April 11, 1997
<PAGE>
<TABLE>
<CAPTION>
THE KROGER CO. SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
at December 31, 1996
(In thousands of dollars)
------------------
1996
-------------------------------------------------------------------------------------------------
MERRILL
LYNCH MERRILL MERRILL AMERICAN
EMPLOYER EQUITY LYNCH LYNCH CAPITAL TEMPORARY
STOCK INDEX BASIC GLOBAL EMERGING TEMPLETON FIXED PARTICIPANT INVESTMENT
ASSETS FUND TRUST VALUE ALLOCATION GROWTH FOREIGN INCOME LOANS FUND TOTAL
-------- ------ ------- ---------- -------- ---------- ------ ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investments:
The Kroger Co. common shares
(Cost - $221,481) $657,814 $657,814
Contracts with insurance
companies (stated at
contract value) $99,722 99,722
Mutual funds (cost - $48,972) $14,173 $8,747 $18,540 $11,243 52,703
Collective investment trust
(cost - $45,015) $68,007 68,007
Participant loans $16,663 16,663
Temporary cash investments 20,261 $1,317 21,578
-------- ------- ------- ------ ------- ------- ------- ------- ------ -------
Total investments 657,814 68,007 14,173 8,747 18,540 11,243 119,983 16,663 1,317 916,487
Receivables:
Employee contributions 1,379 243 68 45 105 52 357 2,249
Employer contributions 2,783 2,783
Interest and dividends 180 180
------- ------ ------ ----- -------- ------ -------- ------- ----- -------
Total assets 661,976 68,250 14,241 8,792 18,645 11,295 120,340 16,663 1,497 921,699
------- ------ ------ ----- -------- ------ -------- ------- ----- -------
LIABILITIES
Payable for administrative
fees 119 119
------- ------ ------ ----- ------- ------ -------- ------- ----- -------
Total liabilities 119 119
------- ------ ------ ----- ------- ------ -------- ------- ----- -------
Net assets available for
plan benefits $661,976 $68,250 $14,241 $8,792 $18,645 $11,295 $120,340 $16,663 $1,378 $921,580
======== ======= ======= ====== ======= ======= ======== ======= ====== ========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE KROGER CO. SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
at December 31, 1995
(In thousands of dollars)
------------------
1995
-------------------------------------------------------------------------------------------------
MERRILL
LYNCH MERRILL MERRILL AMERICAN
EMPLOYER EQUITY LYNCH LYNCH CAPITAL TEMPORARY
STOCK INDEX BASIC GLOBAL EMERGING TEMPLETON FIXED PARTICIPANT INVESTMENT
ASSETS FUND TRUST VALUE ALLOCATION GROWTH FOREIGN INCOME LOANS FUND TOTAL
-------- ------ ------- ---------- -------- ---------- ------ ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investments:
The Kroger Co. common shares
(Cost - $198,005) $540,548 $540,548
Contracts with insurance
companies (stated at
contract value) $83,352 83,352
Mutual funds (cost - $25,248) $6,926 $5,012 $8,127 $6,423 26,488
Collective investment trust
(cost - $38,162) $50,818 50,818
Temporary cash investments
and loans to participants 21,701 $12,735 $380 34,816
-------- ------- ------ ------ ------ ------ ------- ------- ---- --------
Total investments 540,548 50,818 6,926 5,012 8,127 6,423 105,053 12,735 380 736,022
Receivables:
Employee contributions 1,204 233 45 33 58 43 369 1,985
Employer contributions 6,080 6,080
Interest and dividends 107 107
-------- ------- ------ ------- ------- ------ ------- ------- ---- --------
Total assets 547,832 51,051 6,971 5,045 8,185 6,466 105,422 12,735 487 744,194
-------- ------- ------ ------- ------- ------ ------- ------- ---- --------
LIABILITIES
Payable for administrative
fees 324 324
-------- ------- ------ ------- ------- ------ ------- ------- ---- --------
Total liabilities 324 324
-------- ------- ------ ------- ------- ------ ------- ------- ---- --------
Net assets available for
plan benefits $547,832 $51,051 $6,971 $5,045 $8,185 $6,466 $105,422 $12,735 $163 $743,870
======== ======= ====== ====== ====== ====== ======== ======= ==== ========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE KROGER CO. SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the year ended December 31, 1996
(In thousands of dollars)
------------------
1996
------------------------------------------------------------------------------------------------
MERRILL
LYNCH MERRILL MERRILL AMERICAN
EMPLOYER EQUITY LYNCH LYNCH CAPITAL TEMPORARY
STOCK INDEX BASIC GLOBAL EMERGING TEMPLETON FIXED PARTICIPANT INVESTMENT
FUND TRUST VALUE ALLOCATION GROWTH FOREIGN INCOME LOANS FUND TOTAL
-------- ------ ------- ---------- -------- ---------- ------ ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Employee contributions $ 29,640 $ 5,846 $1,568 $ 985 $2,002 $1,166 $ 9,601 $ 50,808
Employer contributions 2,783 2,783
Transfer from (to) other funds (30,760) 1,669 4,155 2,076 7,006 2,355 8,087 $ 4,520 $892
--------- ------- ------ ------ ------ ------ ------- ------- -------- --------
Total contributions
and transfers 1,663 7,515 5,723 3,061 9,008 3,521 17,688 4,520 892 53,591
Investment income:
Dividends 878 804 788 436 2,906
Interest 945 145 21 13 28 19 7,438 72 8,681
Net appreciation 129,136 12,071 861 193 1,001 1,015 144,277
------- ------ ------ ----- ------ ------ ------- ------ ----- -------
Total additions 131,744 19,731 7,483 4,071 10,825 4,991 25,126 4,520 964 209,455
-------- ------- ------ ----- ------ ------ ------- ------ ----- -------
Distributions to participants 17,578 2,531 213 324 365 162 9,633 592 101 31,499
Administrative expenses 22 1 0 0 0 0 575 (352) 246
-------- ------- ------ ----- ------ ------ ------- ------ ----- --------
Total deductions 17,600 2,532 213 324 365 162 10,208 592 (251) 31,745
-------- ------- ------ ------ ------ ------ ------- ------ ----- --------
Net increase 114,144 17,199 7,270 3,747 10,460 4,829 14,918 3,928 1,215 177,710
Net assets available for
plan benefits:
Beginning of year 547,832 51,051 6,971 5,045 8,185 6,466 105,422 12,735 163 743,870
------- ------ ----- ----- ------ ----- ------- ------ ----- -------
End of year $661,976 $68,250 $14,241 $8,792 $18,645 $11,295 $120,340 $16,663 $1,378 $921,580
======== ======= ======= ====== ======= ======= ======== ======= ====== ========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE KROGER CO. SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the year ended December 31, 1996
(In thousands of dollars)
------------------
1995
MERRILL
LYNCH MERRILL MERRILL AMERICAN
EMPLOYER EQUITY LYNCH LYNCH CAPITAL TEMPORARY
STOCK INDEX BASIC GLOBAL EMERGING TEMPLETON FIXED PARTICIPANT INVESTMENT
FUND TRUST VALUE ALLOCATION GROWTH FOREIGN INCOME LOANS FUND TOTAL
-------- ------ ------- ---------- -------- ---------- ------ ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Employee contributions $ 24,177 $ 5,212 $ 780 $ 657 $ 932 $ 865 $ 9,587 $ 42,210
Employer contributions 6,080 6,080
Transfer from (to) other funds (29,677) 953 3,105 1,239 3,489 1,572 15,223 $ 3,945 $151
--------- ------- ------ ------ ------ ------ ------- ------- ---- --------
Total contributions
and transfers 580 6,165 3,885 1,896 4,421 2,437 24,810 3,945 151 48,290
Investment income:
Dividends 264 387 721 373 1,745
Interest 577 87 7 7 9 12 6,334 74 7,107
Net appreciation 194,359 12,945 773 343 796 131 209,347
-------- ------ ----- ------ ----- ------ ------ ------ ----- --------
Total additions 195,516 19,197 4,929 2,633 5,947 2,953 31,144 3,945 225 266,489
-------- ------ ----- ------ ----- ------ ------ ------ ----- --------
Distributions to participants 13,924 1,226 35 60 108 61 5,939 334 (209) 21,478
Administrative expenses 103 23 2 2 2 2 195 184 513
-------- ------ ----- ------ ----- ------ ----- ------ ------ --------
Total deductions 14,027 1,249 37 62 110 63 6,134 334 (25) 21,991
-------- ------ ----- ------ ----- ------ ----- ------ ------ --------
Net increase 181,489 17,948 4,892 2,571 5,837 2,890 25,010 3,611 250 244,498
Net assets available for
plan benefits:
Beginning of year 366,343 33,103 2,079 2,474 2,348 3,576 80,412 9,124 (87) 499,372
------- ------ ----- ------ ----- ----- ------ ------ ------ -------
End of year $547,832 $51,051 $6,971 $5,045 $8,185 $6,466 $105,422 $12,735 $163 $743,870
======== ======= ====== ====== ====== ====== ======== ======= ==== ========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE KROGER CO. SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the year ended December 31, 1994
(In thousands of dollars)
----------------
1994
------------------------------------------------------------------------------------------------
MERRILL
LYNCH MERRILL MERRILL AMERICAN
EMPLOYER EQUITY LYNCH LYNCH CAPITAL TEMPORARY
STOCK INDEX BASIC GLOBAL EMERGING TEMPLETON FIXED MELLON PARTICIPANT INVESTMENT
ASSETS FUND TRUST VALUE ALLOCATION GROWTH FOREIGN INCOME EQUITY LOANS FUND TOTAL
-------- ------ ------- ---------- -------- --------- ------ ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Employee contributions $ 21,972 $ 5,846 $ 271 $ 314 $ 355 $ 373 $ 9,807 $ (532) $38,406
Employer contributions 6,684 6,684
Transfer from (to) other funds (11,554) 28,186 1,795 2,238 2,013 3,283 3,014 $(32,266) $9,905 (6,614)
-------- ------- ------ ------ ------ ------ ------- --------- ------ ------- -------
Total contributions
and transfers 17,102 34,032 2,066 2,552 2,368 3,656 12,821 (32,266) 9,905 (7,146) 45,090
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss):
Dividends 108 133 60 223 524
Interest 381 65 2 3 3 4 4,885 31 5,374
Net appreciation
(depreciation) 59,151 224 (88) (208) (72) (303) 58,704
------ ------ ------ ------ ------ ------- ------ ------- ------ ------- -------
Total additions(deductions) 76,634 34,321 2,088 2,480 2,359 3,580 17,706 (32,266) 9,905 (7,115) 109,692
------ ------ ------ ------ ------ ------- ------ ------- ------ ------ -------
Distributions to participants 10,897 1,185 9 6 11 4 3,565 781 1,127 17,585
Administrative expenses 78 33 141 298 550
------ ------ ------ ------ ------ ------- ------ ------- ------ ------ ------
Total deductions 10,975 1,218 9 6 11 4 3,706 781 1,425 18,135
------ ------ ------ ------ ------ ------- ------ ------- ------ ------ ------
Net increase(decrease) 65,659 33,103 2,079 2,474 2,348 3,576 14,000 (32,266) 9,124 (8,540) 91,557
Net assets available for
plan benefits:
Beginning of year 300,684 66,412 32,266 8,453 407,815
------- ------ ------ ------ ------ ------- ------ -------- ------ ------ -------
End of year $366,343 $33,103 $2,079 $2,474 $2,348 $3,576 $80,412 $0 $9,124 $ (87) $499,372
======== ======= ====== ======= ======= ======= ======= ======= ======= ====== =======
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
THE KROGER CO. SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
---------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
The following describes the significant policies followed in
the preparation of these financial statements.
INVESTMENTS VALUATION
---------------------
Investments in equity securities, mutual funds and collective
trusts are valued at fair value (quoted market prices where
available) or estimated fair values. Investment contracts are
valued at contract value (cost plus accrued interest).
In 1995, the Plan adopted the American Institute of Certified
Public Accountants Statement of Position (SOP) 94-4 "Reporting
of Investment Contracts Held by Health and Welfare Benefit
Plans and Defined Contribution Pension Plans". SOP 94-4
requires that investment contracts that are fully benefit-
responsive be stated at contract value and all other
investment contracts be stated at fair value. The adoption of
SOP 94-4 did not have a material effect on the financial
position of the Plan.
PERVASIVENESS OF ESTIMATES
--------------------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of net assets available for plan benefits as of the
date of the Plan's financial statements and the reported
changes in net assets available for plan benefits during the
reporting period. Actual results could differ from those
estimates.
OTHER
-----
Purchases and sales of securities are reflected on a trade
date basis. Gain or loss on sales of securities are based on
average cost.
Dividend income is recorded on the ex-dividend date. Income
from other investments is recorded as earned on an accrual
basis.
The plan presents in the statement of changes in net assets
available for plan benefits the net appreciation or
depreciation in the fair value of its investments which
consists of the realized gains or losses and the unrealized
appreciation or depreciation on those investments.
Participants may borrow from their fund accounts a minimum of
$1,000 up to a maximum equal to the lowest of: a) account
balance less $2,500; b) 50% of account balance; c) $50,000
less the highest outstanding loan balance over the last 12
months. Loan transactions are treated as a transfer from the
investment fund to the Participant Loan Fund. Loan terms
range from 1-4 years or up to 6 years for the purchase of a
primary residence. The loans are secured by the balance in
the participant's account and bear interest at a rate of Prime
plus .5%. The rate is changed quarterly and the Prime rate
used for a quarter is the Prime rate on the last business day
of the previous quarter. Principal and interest are paid
through periodic payroll deductions.
2. PLAN DESCRIPTION
----------------
The Plan provides for eligible employees of The Kroger Co. and
subsidiaries (the "Company") to redirect a portion of their
salary, up to limits defined in the Plan, to the seven
investment funds of the Plan at any time.
Employee contributions to the Plan are limited to the lower of
$9,500 or 15% (6% if the participant is a highly compensated
employee as defined by the Internal Revenue Service) of the
employee's annual compensation during the period in which they
are a participant in the Plan, subject to Internal Revenue
Service Code limitations.
At the end of each year, the Company makes a basic matching
contribution into the Employer Stock Fund equal to ten percent
(10%) of the salary directed by participants to the Employer
Stock Fund during the year. A supplemental matching
contribution is allocated in proportion to salary directed to
all investment funds. The supplemental contribution is based
on the annual financial results of the Company and determined
annually by the Board of Directors. The supplemental
contribution ranges from none to twenty percent (20%) of
participant contributors.
In 1996, the Company made a matching contribution but did not
make a supplemental contribution. In 1995 and 1994, the
Company made both a basic matching contribution and a
supplemental matching contribution.
Each participant's account is credited with the participant's
contribution and an allocation of the Company's matching
contribution, Plan earnings, and other adjustments as defined
in the Plan. Allocations are based on participant earnings or
account balances as defined. The benefit to which a
participant is entitled is the benefit that can be provided
from the participant's account.
Further information about the Plan, including vesting,
allocation and benefit provisions, and employer and employee
contributions is contained in the Plan, and Plan amendments.
Copies of these documents are available from the Company's
Personnel Department.
3. INVESTMENT CONTRACTS
--------------------
The Plan's Fixed Income Fund contains various investment
contracts which are fully benefit-responsive. A fully
benefit-responsive investment provides a liquidity guarantee
by a financially responsible third party of principal and
previously accrued interest for liquidations, transfers,
loans, or withdrawals initiated by plan participants under the
terms of the ongoing Plan. Certain employer initiated events
(i.e., lay-offs, mergers, bankruptcy, plan termination) are
not eligible for the liquidity guarantee.
The following information is presented in the aggregate for
the investment contracts:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Fair value 100,694,871 87,186,580
Crediting interest rates 6.0% to 8.9% 6.0% to 9.4%
Average yield 6.9% 7.0%
</TABLE>
The crediting interest rates for the investment contracts are
based upon the contract rate or a predetermined formula which
factors in duration, market value and book value of the
investment. Certain of the crediting rates are adjusted
quarterly. The minimum crediting interest rate for these
investments is zero.
The fair value of the investment contracts is calculated as
the aggregate present value of the underlying cash flows using
interest rates quoted for securities with similar duration and
credit risk.
4. TAX STATUS
-----------
The Plan obtained its latest determination letter on October
7, 1986, in which the Internal Revenue Service stated that the
Plan, as then designed, was in compliance with the Internal
Revenue Code. However, the Plan has been amended since
receiving the determination letter. The Plan administrator
believes that the Plan is currently designed and being
operated in compliance with the applicable requirements of the
Internal Revenue Code. Therefore, no provision for income
taxes has been included in the Plan's financial statements.
Participant contributions and earnings of the Plan are not
subject to federal income tax until distribution, at which
time they are taxable to the recipient.
<PAGE>
<TABLE>
<CAPTION>
THE KROGER CO. SAVINGS PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
at December 31, 1996
(In thousands of dollars)
----------------------
NUMBER OF
SHARES OR
PRINCIPAL 1996
---------
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT COST VALUE
- --------------------------------- --------- -------- --------
<S> <C> <C> <C>
EMPLOYER STOCK FUND
-------------------
The Kroger Co. common shares 14,146,529 shs. $221,481 $657,814
MERRILL LYNCH EQUITY INDEX TRUST
--------------------------------
Collective Investment Trust 1,383,367 shs. 45,015 68,007
MERRILL LYNCH BASIC VALUE
-------------------------
Mutual Funds 457,204 shs. 12,813 14,173
MERRILL LYNCH GLOBAL ALLOCATION
-------------------------------
Mutual Funds 601,172 shs. 8,504 8,747
AMERICAN CAPITAL EMERGING GROWTH
--------------------------------
Mutual Funds 539,739 shs. 17,227 18,540
TEMPLETON FOREIGN
-----------------
Mutual Funds 1,085,273 shs. 10,428 11,243
FIXED INCOME
------------
Investment Contracts 119,983,320 shs. 99,722 100,695
PARTICIPANT LOANS
-----------------
Loans to Participants $16,663 16,663 16,663
Temporary Cash Investments $21,578 21,578 21,578
-------- --------
Total $453,431 $917,460
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE KROGER CO. SAVINGS PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For the Year Ended December 31, 1996
(In thousands of dollars)
---------------------
Expenses
incurred in
Transaction # of # of connection with Realized
Type Security Description Trans Shares transaction Cost Proceeds Gain(Loss)
- ----------- -------------------- ----- ------ --------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
KROGER COMMON STOCK
BUY Kroger Co. Common Stock 1020 1,659,446 66,026,805
SELL Kroger Co. Common Stock 1256 1,857,702 193,469 40,644,311 75,990,251 35,345,940
POOLED SEPARATE A/C(GICS)
BUY Kroger Co. Income Fund 1110 52,197,908 52,197,908
SELL Kroger Co. Income Fund 1136 37,267,343 37,265,594 37,267,343 1,749
PENDING SETTLEMENT FUNDS
BUY Pending Settlement Fund 255 64,283,200 64,283,200
SELL Pending Settlement Fund 251 63,391,246 63,391,246 63,391,246 -
<PAGE>
</TABLE>
Exhibit 99.3
------------
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
December 31, 1996 and 1995
Table of Contents
-----------------
Financial Statements
- --------------------
Report of Independent Accountants
Statement of Net Assets Available for Plan Benefits
Statement of Changes in Net Assets Available for Plan Benefits
Notes to Financial Statements
Supplemental Schedules:
- ------------------------
Item 27(a) - Schedule of Assets Held for Investment Purposes
Item 27(d) - Schedule of Reportable Transactions
All other schedules required by Form 5500 have been omitted as
being not applicable.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
----------------------------------
The Trust Committee
Dillon Companies, Inc.
Employees' Stock Ownership and Savings Plan
We have audited the accompanying statement of net assets available
for plan benefits of the Dillon Companies, Inc. Employees' Stock
Ownership and Savings Plan as of December 31, 1996 and 1995, and
the related statement of changes in net assets available for plan
benefits for the years then ended. These financial statements are
the responsibility of the Plan s management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for plan
benefits of the Dillon Companies, Inc. Employees' Stock Ownership
and Savings Plan as of December 31, 1996 and 1995, and the changes
in net assets available for plan benefits for the years then ended
in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental
schedules as listed on page 1 are presented for the purpose of
additional analysis and are not a required part of the basic
financial statements but are supplementary information required by
the Department of Labor s Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental schedules have been subjected to the
auditing procedures applied in the audit of the basic financial
statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a
whole.
Cincinnati, Ohio
April 4, 1997
<PAGE>
<TABLE>
<CAPTION>
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Statement of Net Assets
Available for Plan Benefits
As of December 31, 1996 and 1995
1996 1995
------------ ------------
<S> <C> <C>
Assets
- ------
Cash and cash equivalents $ 6,844,527 $ 5,956,681
Investment contracts with insurance companies 10,886,146 18,610,773
Investments in BASIC 28,509,307 28,145,775
Investments in PIMCO 20,221,869 14,263,587
Investments in State Street Fixed Fund 16,483,916 11,442,943
Investments in CDC Investment Management 4,659,206 -
The Kroger Co. common stock 253,407,826 207,482,373
Trust funds managed by:
State Street Research and Management - 15,625,016
Sanford C. Bernstein & Co. 20,475,482 -
Mellon Capital Stock Index Fund 21,351,318 14,322,892
------------ -----------
Total assets 382,839,597 315,850,040
------------ -----------
Liabilities
- -----------
Accounts payable 195,388 354,219
Dividends payable 16,763 16,763
------------ -----------
Total liabilities 212,151 370,982
------------ -----------
Net assets available for plan benefits $382,627,446 $315,479,058
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Statement of Changes in Net Assets
Available for Plan Benefits
For the Years Ended December 31, 1996 and 1995
1996 1995
------------ ------------
<S> <C> <C>
Additions to net assets attributed to:
Investment income:
Net appreciation in fair value of investments:
The Kroger Co. common stock $ 50,872,910 $ 71,942,470
------------ ------------
Interest:
Short-term investments 157,402 178,049
Investment contracts with insurance companies, investments in BASIC,
investments in PIMCO, investments in State Street Fixed Fund,
investments in CDC Investment Management 5,624,019 5,442,050
------------ ------------
5,781,421 5,620,099
------------ ------------
Net investment income of trust funds managed by:
State Street Research and Management 1,015,709 2,760,524
Sanford C. Bernstein & Co. 1,596,754 -
Mellon Capital Stock Index Fund 3,631,226 2,963,792
------------ ------------
6,243,689 5,724,316
------------ ------------
Contributions:
Employer 1,058,703 2,797,626
Employee 22,900,855 21,079,737
------------ ------------
23,959,558 23,877,363
------------ ------------
Total additions 86,857,578 107,164,248
------------ ------------
Deductions from net assets attributed to:
Benefits paid to participants 19,634,324 10,927,021
Administrative expenses 74,866 67,159
------------ ------------
Total deductions 19,709,190 10,994,180
------------ ------------
Increase in net assets available for plan benefits 67,148,388 96,170,068
Net assets available at beginning of period 315,479,058 219,308,990
------------ ------------
Net assets available at end of period $382,627,446 $315,479,058
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Notes to Financial Statements
December 31, 1996 and 1995
1) Summary of Significant Accounting Policies
------------------------------------------
The accompanying financial statements have been prepared on an
accrual basis and present the net assets available for plan
benefits and changes in those net assets based on fair value
(quoted market prices where available). Fixed investments are
valued at contract value (cost plus accrued interest).
Purchases and sales of The Kroger Co. common stock are
recorded on a trade date basis. The Dillon Companies, Inc.
Employees' Stock Ownership and Savings Plan (the Plan)
presents in the statement of changes in net assets the net
appreciation (depreciation) in the fair value of its investments
which consists of the realized gains or losses and the
unrealized appreciation (depreciation) on those investments.
In 1995, the Plan adopted the American Institute of Certified
Public Accountants Statement of Position (SOP) 94-4,
"Reporting of Investment Contracts Held by Health and Welfare
Benefit Plans and Defined-Contribution Pension Plans". SOP
94-4 requires that investment contracts that are fully
benefit-responsive be stated at contract value, which may or
may not be equal to fair value, and all other investment
contracts be stated at fair value. The adoption of SOP 94-4
did not have a material effect on the financial position and
changes in financial position of the Plan.
2) Description of Dillon Companies, Inc. Employees' Stock
-------------------------------------------------------
Ownership and Savings Plan
--------------------------
Employees of Dillon Companies, Inc. (the Company) and its
subsidiaries with one year of service and who have attained
age 21 are eligible to become a participant as of the earliest
January 1 or July 1 following completion of eligibility
requirements.
The interest of all participants in the Plan is fully vested
at all times and is not subject to forfeiture or cancellation
under any circumstances. Plan assets are for participants
only and may never revert to the employer.
Plan income and expenses for each period are allocated to the
participants accounts in the ratio that the balance in the
account of each participant bears to the balance of all the
participants' accounts immediately before the allocation.
ESOP employer contributions are allocated based on
participants' salaries as stated in the Plan.
All distributions to participants are in cash or in whole
shares of The Kroger Co. common stock (cash is paid for
fractional shares). Participants and beneficiaries
individually exercise voting rights on the shares of The
Kroger Co. common stock allocated to their account.
Dividends are allocated to participants' accounts in the same
manner as earnings.
Under the 401(k) salary reduction provision, Plan participants
may make an election to have the Company contribute to the
Plan on their behalf from two percent (2%) to twenty percent
(20%) of the qualifying compensation that would otherwise be
payable to them for the Plan year.
A basic matching employer contribution is allocated to
participants of the Stock Fund equal to ten percent (10%) of
salaries directed by participants. A supplemental employer
contribution is allocated in proportion to all participants'
salaries directed to all investments. The supplemental
contribution is based on the annual financial results of The
Kroger Co. and determined annually by the Board of Directors.
The supplemental contribution ranges from none to twenty
percent (20%) of participant contributions. For 1996, the
Company made a basic matching contribution; for 1995, the
Company made both a basic matching contribution and a
supplemental contribution.
The Company currently has discontinued contributions to the
ESOP portion of the Plan and has no present intentions to
resume such contributions.
Participants of the 401(k) portion of the Plan and
participants of the ESOP portion of the Plan who are over age 55
are allowed monthly and annual investment option selections,
respectively, to direct all or a portion of their
contributions to the following funds:
Fixed
Index
Balanced
Kroger Stock
3) Investments
-----------
The Dillon Companies, Inc. Employee Master Trust was formed on
July 1, 1987, as the funding medium for various employee
benefit plans administered by the Company. All assets of the
Dillon Companies, Inc. Profit Sharing and Savings Plan, Dillon
Companies, Inc. Pension Plan, and Dillon Companies, Inc.
Employees' Stock Ownership and Savings Plan are funded through
the Dillon Companies, Inc. Employee Master Trust. The
allocation of assets between plans is based upon individual
plan assets adjusted monthly for contributions, benefit
payments, earnings and administrative expenses.
The Plan's investments are held by the Dillon Companies, Inc.
Employee Master Trust (the Trust) and are administered by the
Dillon Companies, Inc. Trust Committee. The Trust Committee
selects investment managers to manage certain assets of the
Plan. The net change in funds managed by investment managers
includes revenue earned, unrealized and realized gains and
losses on investments, and fiduciary expenses. The
investments and changes therein of the trust funds managed by
investment managers have been reported to the Plan by the
trustees as having been determined through the use of fair
value or estimated fair values for all assets and liabilities of
the trust funds.
4) Fixed Investments
------------------
The Plan had the following fixed investments in the fixed fund
as of December 31, 1996:
* Investment contracts with insurance companies with annual
crediting interest rates varying from 6.25% to 9.60% and
maturities from seven months to eight years.
* Benefit Accessible Securities Investment Contracts
(BASICs) with annual crediting interest rates ranging
from 6.00% to 8.75% and maturities from three to 12
years.
* Investment in Pacific Investment Management Company
(PIMCO) with a variable crediting interest rate of 7.12%.
The variable crediting interest rate is adjusted
quarterly.
* Investment in Providian Capital Management (State Street
Fixed Fund) with a variable crediting interest rate of
7.15%. The variable crediting interest rate is adjusted
quarterly.
* CDC Investment Management with annual crediting interest
rates ranging from 6.20% to 6.45% and maturities from
four to five years.
The crediting interest rate for investment contracts with
insurance companies, BASICs, and CDC Investment Management is
the contract rate. The crediting interest rate for
investments in PIMCO and State Street Fixed Fund is based upon a
predetermined formula which factors in duration, market
value, and book value of the portfolio. The minimum crediting
interest rate for these investments is zero percent.
All of the Plan's fixed investments are fully benefit-
responsive. A fully benefit-responsive investment provides a
liquidity guarantee by a financially responsible third party of
principal and previously accrued interest for liquidations,
transfers, loans, or withdrawals initiated by plan
participants under the terms of the ongoing Plan. Certain
employer initiated events (i.e. lay-offs, mergers, bankruptcy,
plan termination) are not eligible for the liquidity
guarantee.
The following information is presented in the aggregate for
the fixed investments:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Fair Value $86,804,798 $81,600,836
Average Yield 7.49% 7.85%
</TABLE>
The fair value of the fixed investments are calculated as the
aggregate present value of the underlying cash flows using
interest rates quoted for securities with similar duration and
credit risk.
5) Tax Status
----------
The Internal Revenue Service has issued a determination letter
to the Plan that the requirements for a qualified plan under
Section 401(a) of the Internal Revenue Code have been met and
the Plan is exempt from federal and state income taxes.
6) Priorities Upon Termination of the Plan
---------------------------------------
It is the intent of the Company to continue the Plan
indefinitely; however, the Company reserves the right to
terminate the Plan at any time.
In the event of termination of the Plan, the Trustees shall
continue to administer the Plan in accordance with the
provisions of the Plan until all obligations have been
discharged or satisfied.
7) Use of Estimates
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of net assets available for plan benefits as of the
date of the Plan s financial statements and the reported
changes in net assets available for plan benefits during the
reporting period. Actual results could differ from those
estimates.
8) Summary of Changes in Investment Options
----------------------------------------
<TABLE>
<CAPTION>
Kroger
Fixed Index Balanced Stock Total
1996 ------------ ----------- ---------- ------------ -------------
- ----
<S> <C> <C> <C> <C> <C>
ESOP
Beginning Balance 12-31-95 $ 2,678,954 $ 288,088 $ 376,098 $ 71,900,846 $ 75,243,986
Transfers 518,471 217,780 414,313 (1,150,564) -
Withdrawals (303,442) (26,236) (56,511) (3,836,567) (4,222,756)
Earnings, net 185,131 62,152 52,505 17,422,183 17,721,971
----------- ----------- ----------- ------------ -------------
Ending Balance 12-31-96 $ 3,079,114 $ 541,784 $ 786,405 $ 84,335,898 88,743,201
=========== =========== =========== ============ -------------
401(k)
Beginning Balance 12-31-95 $74,536,276 $14,516,774 $15,600,495 $135,581,527 240,235,072
Transfers 2,004,434 1,969,313 457,807 (4,431,554) -
Withdrawals (6,073,658) (795,441) (992,130) (7,550,339) (15,411,568)
Contributions -- Employee 7,824,304 1,987,977 2,125,710 10,962,864 22,900,855
Contributions -- Employer - - - 1,058,703 1,058,703
Earnings, net 5,520,186 3,576,110 2,554,160 33,450,727 45,101,183
----------- ----------- ----------- ------------ ------------
Ending Balance 12-31-96 $83,811,542 $21,254,733 $19,746,042 $169,071,928 293,884,245
=========== =========== =========== ============ ------------
Total $382,627,446
============
1995
- ----
ESOP
Beginning Balance 12-31-94 $ 2,269,628 $ 156,705 $ 182,280 $ 48,786,162 $ 51,394,775
Transfers 468,702 85,313 172,893 (726,908) -
Withdrawals (226,663) (10,393) (22,845) (958,671) (1,218,572)
Earnings, net 167,287 56,463 43,770 24,800,263 25,067,783
----------- ----------- ----------- ------------ ------------
Ending Balance 12-31-95 $ 2,678,954 $ 288,088 $ 376,098 $ 71,900,846 75,243,986
=========== =========== =========== ============ ------------
401(k)
Beginning Balance 12-31-94 $67,843,290 $ 6,605,789 $ 9,936,025 $ 83,529,111 167,914,215
Transfers (2,538,104) 4,009,820 1,510,727 (2,982,443) -
Withdrawals (4,253,340) (396,152) (400,834) (4,658,123) (9,708,449)
Contributions -- Employee 8,109,482 1,381,200 1,835,906 9,753,149 21,079,737
Contributions -- Employer - - - 2,797,626 2,797,626
Earnings, net 5,374,948 2,916,117 2,718,671 47,142,207 58,151,943
----------- ----------- ----------- ------------ ------------
Ending Balance 12-31-95 $74,536,276 $14,516,774 $15,600,495 $135,581,527 240,235,072
=========== =========== =========== ============ ------------
Total $315,479,058
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DILLON COMPANIES, INC. Schedule 1
EMPLOYEES STOCK OWNERSHIP AND SAVINGS PLAN -----------
Item 27(a) - Schedule of Assets Held for Investment Purposes
(Master Trust)
December 31, 1996
Annual
Interest Maturity Carrying
Rate Date Cost Value
-------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Investments with The Northern Trust Company:
- -------------------------------------------
Short Term Investments (Cash Equivalents) $ 11,433,000 $ 12,815,595
============ ============
Allocation:
----------
Profit Sharing $ 7,877,595 $ 8,830,234
Pension 92,209 103,360
ESOP 401(k) 3,463,196 3,882,001
------------ ------------
$ 11,433,000 $ 12,815,595
============ ============
<CAPTION>
Investment Contracts with Insurance Companies:
- ----------------------------------------------
<S> <C> <C> <C> <C>
Allstate Life Insurance 9.30% 1997 $ 2,000,000 $ 3,434,151
Confederation Life Insurance - 1,000,000 1,016,473
Connecticut Mutual Life 9.47%
to 9.60% 1997 4,000,000 7,166,423
John Hancock Mutual Life 8.84% 1997
to 9.60% to 1998 6,000,000 10,192,730
Hartford Life Insurance 8.50% 1998 1,000,000 1,618,956
Metropolitan Life Insurance 6.60%
to 6.70% 1998 2,411,556 2,306,256
Mutual Benefit Life of New Jersey 6.25% 2004 1,500,000 1,908,980
Ohio National Life 8.21%
to 8.87% 1998 5,000,000 7,702,656
Provident Mutual Life Insurance 8.82% 1998 1,000,000 1,086,689
Travelers Insurance Company 8.80%
to 9.10% 1998 2,000,000 2,101,354
Investment Contract Reserve for Loss - (175,000)
Pension - Investment Contract Valuation - 53,159
----------- -----------
Total Dillon Companies, Inc.
Employee Master Trust $ 25,911,556 $ 38,412,827
============ ============
Allocation:
----------
Profit Sharing $ 17,099,191 $ 25,313,775
Pension 1,458,887 2,159,747
Pension - Investment Contract Valuation - 53,159
ESOP 401(k) 7,353,478 10,886,146
------------ ------------
$ 25,911,556 $ 38,412,827
============ ============
<CAPTION>
Investments in BASIC:
- --------------------
<S> <C> <C> <C> <C>
FNMA 90-128H 8.500% 2007 $ 1,380,380 $ 1,494,308
FNMA 90-6G 8.750% 2008 1,250,143 1,242,325
FNMA 89-50E 8.625% 2003 491,200 463,391
FNMA 92-16KD 7.000% 2005 4,759,312 4,860,748
FNMA 92-134H 7.500% 2005 6,838,022 7,074,562
FHLMC 1365PI 7.250% 2005 3,961,844 4,096,986
FNMA 92-182PH 7.000% 2005 2,881,109 3,036,862
FNMA 92-200H 7.000% 2006 2,946,875 3,078,132
FHLMC 1458J 7.000% 2005 4,856,601 5,031,936
FHLMC 1457PJ 7.000% 2006 4,922,875 5,079,598
FHLMC 1542H 6.500% 2003 6,032,812 6,152,138
FHLMC 1625H 6.000% 2008 9,695,312 9,808,603
FNMA 93-134G 6.500% 2006 7,415,000 7,582,594
FNMA 94-48E 6.000% 2007 6,002,062 6,163,133
FNMA 94-10PC 6.500% 2005 9,006,250 9,217,392
5 YR UST 7.750% 1999 4,005,212 4,159,795
10 YR UST 7.875% 2004 4,042,185 4,077,143
FNMA 93-107D 6.500% 2002 2,902,969 2,939,715
FNMA 93-118H 6.500% 2004 5,932,992 5,973,600
FNMA 93-209J 6.000% 2008 4,641,333 4,696,731
Pension - BASIC Valuation - 31,632
------------ ------------
Total Dillon Companies, Inc.
Employee Master Trust $ 93,964,488 $ 96,261,324
============ ============
Allocation:
-----------
Profit Sharing $ 64,732,753 $ 66,293,267
Pension 1,393,524 1,427,118
Pension - BASIC Valuation - 31,632
ESOP 401(k) 27,838,211 28,509,307
------------ ------------
$ 93,964,488 $ 96,261,324
============ ============
<CAPTION>
Investments in PIMCO:
- --------------------
<S> <C> <C> <C> <C>
Total Dillon Companies, Inc.
Employee Master Trust 7.120% Variable $ 57,000,000 $ 67,244,189
============ ============
Allocation:
----------
Profit Sharing $ 39,858,793 $ 47,022,320
Pension - -
ESOP 401(k) 17,141,207 20,221,869
------------ ------------
$ 57,000,000 $ 67,244,189
============ ============
<CAPTION>
Investments in State Street Fixed Fund:
<S> <C> <C> <C> <C>
Total Dillon Companies, Inc.
Employee Master Trust 7.145% Variable $ 49,000,000 $ 54,814,298
============ ============
Allocation:
----------
Profit Sharing $ 34,264,577 $ 38,330,382
Pension - -
ESOP 401(k) 14,735,423 16,483,916
------------ ------------
$ 49,000,000 $ 54,814,298
============ ============
<CAPTION>
Investments in CDC Investment Management:
- ----------------------------------------
<S> <C> <C> <C> <C>
Total Dillon Companies, Inc. 6.200%
Employee Master Trust to 6.450% Variable $ 15,000,025 $ 15,493,353
============ ============
Allocation:
----------
Profit Sharing $ 10,489,174 $ 10,834,147
Pension - -
ESOP 401(k) 4,510,851 4,659,206
------------ ------------
$ 15,000,025 $ 15,493,353
<CAPTION> ============ ============
Investments in The Kroger Co. Common Stock:
<S> <C> <C> <C>
Total Dillon Companies, Inc.
Employee Master Trust $111,708,369 $386,684,614
============ ============
Allocation: Shares
---------- ---------
Profit Sharing 2,710,894 $ 39,996,077 $126,056,599
Pension 155,273 1,871,808 7,220,189
ESOP 401(k) 5,449,631 69,840,484 253,407,826
--------- ------------ ------------
8,315,798 $111,708,369 $386,684,614
========= ============ ============
<CAPTION>
Investments in Trust Funds Managed by:
- --------------------------------------
<S> <C> <C>
Sanford C. Bernstein & Co.:
---------------------------
Total Dillon Companies, Inc.
Employee Master Trust $ 63,152,613 $ 69,960,041
============ ============
Allocation:
----------
Profit Sharing $ 44,669,488 $ 49,484,559
Pension - -
ESOP 401(k) 18,483,125 20,475,482
------------ ------------
$ 63,152,613 $ 69,960,041
============ ============
Mellon Capital Stock Index Fund:
-------------------------------
Total Dillon Companies, Inc.
Employee Master Trust $ 40,605,515 $ 60,029,586
============ ============
Allocation:
----------
Profit Sharing $ 26,162,949 $ 38,678,268
Pension - -
ESOP 401(k) 14,442,566 21,351,318
------------ ------------
$ 40,605,515 $ 60,029,586
============ ============
<CAPTION>
Investments in The Northern Trust Company:
- ------------------------------------------
Total Dillon Companies, Inc.
Employee Master Trust $ 48,652,698 $ 64,641,654
============ ============
Allocation:
----------
Profit Sharing $ - $ -
Pension 48,652,698 64,641,654
ESOP 401(k) - -
------------ ------------
$ 48,652,698 $ 64,641,654
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DILLON COMPANIES, INC. Schedule 2
EMPLOYEES STOCK OWNERSHIP AND SAVINGS PLAN ----------
Item 27(d) - Schedule of Reportable Transactions
(Master Trust)
Year Ended December 31, 1996
Current
Value on
Selling Cost of Date of Net Gain
Description of Transaction Price Price Asset Transactions or (Loss)
- ------------------------------------ ----------- ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
The Northern Trust Company
time deposits $76,570,000 -- $76,570,000 $76,570,000 --
The Northern Trust Company
time deposits -- $83,900,000 83,900,000 83,900,000 --
Connecticut Mutual Life
investment contract -- 2,000,000 2,000,000 2,000,000 --
John Hancock Mutual Life
investment contract -- 3,000,000 3,000,000 3,000,000 --
Hartford Life Insurance
investment contract -- 4,000,000 4,000,000 4,000,000 --
Life Insurance Co. of GA
investment contract -- 4,000,000 4,000,000 4,000,000 --
Massachusetts Mutual Life
investment contract -- 8,500,000 8,500,000 8,500,000 --
PIMCO
trust investment 14,000,000 -- 14,000,000 14,000,000 --
State Street Fixed Fund
trust investment 12,000,000 -- 12,000,000 12,000,000 --
CDC Investment Management
trust investment 15,000,025 -- 15,000,025 15,000,025 --
Merrill Lynch
The Kroger Co. common stock
12,800 shares 504,134 -- 504,134 504,134 --
Merrill Lynch
The Kroger Co. common stock
67,600 shares -- 2,684,399 958,175 2,684,399 $1,726,224
Morgan Stanley
The Kroger Co. common stock
130,000 shares -- 5,728,296 1,815,093 5,728,296 3,913,203
The Kroger Co. K-Plan
The Kroger Co. common stock
12,147 shares -- 570,002 147,188 570,002 422,814
State Street Research & Management Co.
trust investment 4,500,000 -- 4,500,000 4,500,000 --
Sanford C. Bernstein & Co.
trust investment 1,500,000 -- 1,500,000 1,500,000 --
Sanford C. Bernstein & Co.
trust investment -- 625,000 625,000 625,000 --
Mellon Capital Index Fund
trust investment 10,250,000 -- 10,250,000 10,250,000 --
The Northern Trust Company
trust investment 5,743,053 -- 5,743,053 5,743,053 --
The Northern Trust Company
trust investment -- 900,000 900,000 900,000 --
The Northern Trust Company
The Kroger Co. common stock
75,781 shares -- 3,143,053 913,539 3,143,053 2,229,514
<PAGE>
</TABLE>
EXHIBIT 23.2
---------------
Consent of Independent Accountants
-------------------------------------
We consent to the incorporation by reference in the registration
statement of The Kroger Co. on Form S-8 (333-11859) of our report
dated April 11, 1997, on our audits of the financial statements and
financial statement schedules of The Kroger Co. Savings Plan as of
December 31, 1996 and 1995, and for the years ended December 31,
1996, 1995, and 1994, which report is included in this Annual
report on Form 10-K.
(Coopers & Lybrand L.L.P.)
Coopers & Lybrand L.L.P.
Cincinnati, Ohio
April 23, 1997
EXHIBIT 23.3
----------------
Consent of Independent Accountants
--------------------------------------
We consent to the incorporation by reference in the registration
statement of The Kroger Co. on Form S-8 (333-11909) of our report
dated April 4, 1997, on our audits of the financial statements and
financial statement schedules of Dillon Companies, Inc. Employees'
Stock Ownership and Savings Plan as of December 31, 1996 and 1995,
and for the years then ended, which report is included in this
Annual report on Form 10-K.
(Coopers & Lybrand L.L.P.)
Coopers & Lybrand L.L.P.
Cincinnati, Ohio
April 23, 1997
