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<PAGE>
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 27, 1997
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
255,664,563 shares outstanding on
March 17, 1998
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 10K or any amendment to this
Form 10K [_].
The aggregate market value of the voting and non-voting common equity of The
Kroger Co. held by nonafflilates as of February 27, 1998: $10,760,140,852
Documents Incorporated by Reference:
Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act
on or before April 27, 1998 incorporated by reference into Parts II and III
of Form 10-K.
<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, 1998 By: (Paul W. Heldman)
Paul W. Heldman
Senior Vice President,
Secretary and General
Counsel
<PAGE>
INDEX OF EXHIBITS
-----------------
Exhibit
- -------
23.2 Consent of Independent Accountants
23.3 Consent of Independent Accountants
27.1 Restated Financial Data Schedule
27.2 Restated Financial Data Schedule
27.3 Restated Financial Data Schedule
27.4 Restated Financial Data Schedule
27.5 Restated Financial Data Schedule
27.6 Restated Financial Data Schedule
27.7 Restated Financial Data Schedule
27.8 Restated Financial Data Schedule
99.2 Financial Statements for The Kroger Co. Savings Plan for the Year
Ended December 31, 1997
99.3 Financial Statements for the Dillon Companies, Inc. Employees' Stock
Ownership and Savings Plan for the Year Ended December 31, 1997
<PAGE>
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 16, 1998, on
our audits of the financial statements and financial statement schedules of The
Kroger Co. Savings Plan as of December 31, 1997 and 1996, 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 21, 1998
<PAGE>
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 3, 1998, 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,
1997 and 1996, 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 21, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS, CONSOLIDATED BALANCE SHEET AND
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> DEC-30-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 288,067
<ALLOWANCES> 0
<INVENTORY> 2,034,880
<CURRENT-ASSETS> 2,106,984
<PP&E> 5,144,656
<DEPRECIATION> 2,482,318
<TOTAL-ASSETS> 5,044,717
<CURRENT-LIABILITIES> 2,565,437
<BONDS> 3,523,642
0
0
<COMMON> 586,541
<OTHER-SE> (1,945,923)
<TOTAL-LIABILITY-AND-EQUITY> 5,044,717
<SALES> 23,937,795
<TOTAL-REVENUES> 23,937,795
<CGS> 18,098,027
<TOTAL-COSTS> 18,098,027
<OTHER-EXPENSES> 5,017,545
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 312,685
<INCOME-PRETAX> 509,538
<INCOME-TAX> 190,672
<INCOME-CONTINUING> 318,866
<DISCONTINUED> 0
<EXTRAORDINARY> (16,053)
<CHANGES> 0
<NET-INCOME> 302,813
<EPS-PRIMARY> 1.31<F1>
<EPS-DILUTED> 1.22
<FN>
<F1>THE AMOUNT REPORTED IS EPS-BASIC AND NOT EPS-PRIMARY.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS 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>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<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
0
0
<COMMON> 350,845
<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> .31<F1>
<EPS-DILUTED> .30
<FN>
<F1>THE AMOUNT REPORTED IS EPS-BASIC AND NOT EPS-PRIMARY.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS, CONSOLIDATED BALANCE SHEET AND
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE TWO QUARTERS ENDED JUNE 15, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> JUN-15-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 276,776
<ALLOWANCES> 0
<INVENTORY> 1,506,853
<CURRENT-ASSETS> 2,131,797
<PP&E> 5,341,000
<DEPRECIATION> 2,575,195
<TOTAL-ASSETS> 5,193,967
<CURRENT-LIABILITIES> 2,470,576
<BONDS> 3,577,244
0
0
<COMMON> 368,596
<OTHER-SE> (1,792,905)
<TOTAL-LIABILITY-AND-EQUITY> 5,193,967
<SALES> 11,628,620
<TOTAL-REVENUES> 11,628,620
<CGS> 8,780,169
<TOTAL-COSTS> 8,780,169
<OTHER-EXPENSES> 2,455,484
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 141,149
<INCOME-PRETAX> 251,818
<INCOME-TAX> 96,950
<INCOME-CONTINUING> 154,868
<DISCONTINUED> 0
<EXTRAORDINARY> (1,850)
<CHANGES> 0
<NET-INCOME> 153,018
<EPS-PRIMARY> .62<F1>
<EPS-DILUTED> .60
<FN>
<F1>THE AMOUNT REPORTED IS EPS-BASIC AND NOT EPS-PRIMARY.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<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 THREE QUARTERS ENDED OCTOBER 5,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> OCT-05-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 306,339
<ALLOWANCES> 0
<INVENTORY> 2,119,639
<CURRENT-ASSETS> 2,273,275
<PP&E> 5,563,186
<DEPRECIATION> 2,636,816
<TOTAL-ASSETS> 5,590,026
<CURRENT-LIABILITIES> 2,563,684
<BONDS> 3,777,169
0
0
<COMMON> 625,218
<OTHER-SE> (1,965,157)
<TOTAL-LIABILITY-AND-EQUITY> 5,590,026
<SALES> 18,971,752
<TOTAL-REVENUES> 18,971,752
<CGS> 14,362,201
<TOTAL-COSTS> 14,362,201
<OTHER-EXPENSES> 4,007,115
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 232,979
<INCOME-PRETAX> 369,457
<INCOME-TAX> 142,241
<INCOME-CONTINUING> 227,216
<DISCONTINUED> 0
<EXTRAORDINARY> (2,778)
<CHANGES> 0
<NET-INCOME> 224,438
<EPS-PRIMARY> 0.90<F1>
<EPS-DILUTED> 0.90
<FN>
<F1>THE AMOUNT REPORTED IS EPS-BASIC AND NOT EPS-PRIMARY.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS, CONSOLIDATED BALANCE SHEET AND
CONSOLIDATED STATEMENT OF CASH FLOWS FOR YEAR ENDED DECEMBER 28, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> DEC-28-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 324,050
<ALLOWANCES> 0
<INVENTORY> 2,175,630
<CURRENT-ASSETS> 2,352,764
<PP&E> 5,726,618
<DEPRECIATION> 2,663,084
<TOTAL-ASSETS> 5,825,413
<CURRENT-LIABILITIES> 2,712,920
<BONDS> 3,680,634
0
0
<COMMON> 658,230
<OTHER-SE> (1,839,936)
<TOTAL-LIABILITY-AND-EQUITY> 5,825,413
<SALES> 25,170,909
<TOTAL-REVENUES> 25,170,909
<CGS> 19,041,465
<TOTAL-COSTS> 19,041,465
<OTHER-EXPENSES> 5,562,131
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 299,984
<INCOME-PRETAX> 567,313
<INCOME-TAX> 214,578
<INCOME-CONTINUING> 352,735
<DISCONTINUED> 0
<EXTRAORDINARY> (2,862)
<CHANGES> 0
<NET-INCOME> 349,873
<EPS-PRIMARY> 1.40<F1>
<EPS-DILUTED> 1.35
<FN>
<F1>THE AMOUNT REPORTED IS EPS-BASIC AND NOT EPS-PRIMARY.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<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 22, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> MAR-22-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 305,218
<ALLOWANCES> 0
<INVENTORY> 1,682,713
<CURRENT-ASSETS> 2,284,113
<PP&E> 5,840,954
<DEPRECIATION> (2,727,229)
<TOTAL-ASSETS> 5,835,281
<CURRENT-LIABILITIES> 2,614,907
<BONDS> 3,521,893
672,065
0
<COMMON> 0
<OTHER-SE> (1,509,000)
<TOTAL-LIABILITY-AND-EQUITY> 5,835,281
<SALES> 6,139,413
<TOTAL-REVENUES> 6,139,413
<CGS> 4,626,390
<TOTAL-COSTS> 4,626,390
<OTHER-EXPENSES> 1,363,007
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,747
<INCOME-PRETAX> 150,016
<INCOME-TAX> 57,756
<INCOME-CONTINUING> 92,260
<DISCONTINUED> 0
<EXTRAORDINARY> (5,210)
<CHANGES> 0
<NET-INCOME> 87,050
<EPS-PRIMARY> 0.34<F1>
<EPS-DILUTED> 0.33
<FN>
<F1>THE AMOUNT REPORTER IS EPS-BASIC AND NOT EPS-PRIMARY.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS, CONSOLIDATED BALANCE SHEET AND
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE TWO QUARTERS ENDED
JUNE 14, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> JUN-14-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 318,718
<ALLOWANCES> 0
<INVENTORY> 1,594,558
<CURRENT-ASSETS> 2,135,248
<PP&E> 5,971,558
<DEPRECIATION> (2,796,425)
<TOTAL-ASSETS> 5,730,051
<CURRENT-LIABILITIES> 2,667,645
<BONDS> 3,258,292
0
0
<COMMON> 679,990
<OTHER-SE> (1,403,896)
<TOTAL-LIABILITY-AND-EQUITY> 5,730,051
<SALES> 12,371,207
<TOTAL-REVENUES> 12,371,207
<CGS> 9,308,755
<TOTAL-COSTS> 2,274,147
<OTHER-EXPENSES> 150,834
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 138,099
<INCOME-PRETAX> 325,796
<INCOME-TAX> 125,399
<INCOME-CONTINUING> 200,397
<DISCONTINUED> 0
<EXTRAORDINARY> (8,243)
<CHANGES> 0
<NET-INCOME> 192,154
<EPS-PRIMARY> 0.76<F1>
<EPS-DILUTED> 0.73
<FN>
<F1>THE AMOUNT REPORTED IS EPS-BASIC AND NOT EPS-PRIMARY.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<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 THREE QUARTERS ENDED OCTOBER 4,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> OCT-04-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 345,238
<ALLOWANCES> 0
<INVENTORY> 1,705,754
<CURRENT-ASSETS> 2,260,922
<PP&E> 6,049,553
<DEPRECIATION> (2,857,889)
<TOTAL-ASSETS> 6,034,723
<CURRENT-LIABILITIES> 2,762,896
<BONDS> 3,388,308
0
0
<COMMON> 693,381
<OTHER-SE> (1,308,169)
<TOTAL-LIABILITY-AND-EQUITY> 6,034,723
<SALES> 20,057,847
<TOTAL-REVENUES> 20,057,847
<CGS> 15,098,702
<TOTAL-COSTS> 3,714,106
<OTHER-EXPENSES> 537,656
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 223,313
<INCOME-PRETAX> 484,070
<INCOME-TAX> 187,143
<INCOME-CONTINUING> 296,927
<DISCONTINUED> 0
<EXTRAORDINARY> (9,045)
<CHANGES> 0
<NET-INCOME> 287,882
<EPS-PRIMARY> 1.14<F1>
<EPS-DILUTED> 1.10
<FN>
<F1>THE AMOUNT REPORTED IS EPS-BASIC AND NOT ESP-PRIMARY.
</FN>
</TABLE>
<PAGE>
Exhibit 99.2
------------
The Kroger Co. Savings Plan
Report On Audits Of Financial Statements And Supplemental Schedules
For The Years Ended December 31, 1997 and 1996
<PAGE>
Exhibit 99.2
The Kroger Co. Savings Plan
Index To Financial Statements
December 31, 1997 and 1996
Pages
-------
Report of Independent Accountants 2
Statement of Net Assets Available
For Plan Benefits at December 31, 1997 3
Statement of Net Assets Available
For Plan Benefits at December 31, 1996 4
Statement of Changes in Net Assets
Available For Plan Benefits for
the year ended December 31, 1997 5
Statement of Changes in Net Assets
Available For Plan Benefits for
the year ended December 31, 1996 6
Notes to Financial Statements 7-8
Item 27a - Schedule of Assets Held for Investment
Purposes at December 31, 1997 9
Item 27d - Schedule of Reportable Transactions
for the year ended December 31, 1997 10
<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, 1997 and 1996, and
the related statements of changes in net assets available for plan benefits for
the years ended December 31, 1997 and 1996. 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, 1997 and 1996, and the changes in net assets
available for plan benefits for the years ended December 31, 1997 and 1996 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.P.)
Cincinnati, Ohio
April 16, 1998
<PAGE>
THE KROGER CO. SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
at December 31, 1997
(In thousands of dollars)
__________________
<TABLE>
<CAPTION>
1997
---------------------------------------------------------------------------------------
MERRILL
LYNCH MERRILL MERRILL AMERICAN
EMPLOYER EQUITY LYNCH LYNCH CAPITAL
STOCK INDEX BASIC GLOBAL EMERGING TEMPLETON FIXED PARTICIPANT
ASSETS FUND TRUST VALUE ALLOCATION GROWTH FOREIGN INCOME LOANS
---------- ------- ------- ---------- -------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments:
The Kroger Co. common shares
(Cost - $272,336) $1,050,160
Contracts with insurance
companies (stated at
contract value) $105,394
Mutual funds (cost - $59,597) $20,966 $10,018 $21,595 $12,842
Collective investment trust
(cost - $50,757) $92,405
Participant loans $ 21,117
Temporary cash investments 16,583
--------- ------ ------ ------ ------ ------ ------- ------
Total investments 1,050,160 92,405 20,966 10,018 21,595 12,842 121,977 21,117
Receivables:
Employee contributions 1,704 258 87 45 102 55 321
Employer contributions 3,354
Interest and dividends
--------- ------ ------ ------ ------ ------ ------- ------
Total assets 1,055,218 92,663 21,053 10,063 21,697 12,897 122,298 21,117
--------- ------ ------ ------ ------ ------ ------- ------
LIABILITIES
Payable for administrative --------- ------ ------ ------ ------ ------ ------- ------
fees
Total liabilities --------- ------ ------ ------ ------ ------ ------- ------
Net assets available for
plan benefits $1,055,218 $92,663 $21,053 $10,063 $21,697 $12,897 $122,298 $21,117
========= ====== ====== ====== ====== ====== ======= ======
<CAPTION>
TEMPORARY
INVESTMENT
ASSETS FUND TOTAL
---------- ----------
<S> <C> <C>
Investments:
The Kroger Co. common share
(Cost - $272,336) $1,050,160
Contracts with insurance
companies (stated at
contract value) 150,394
Mutual funds (cost - $59,597) 65,421
Collective investment trust
(cost - $50,757) 92,405
Participant loans 21,117
Temporary cash investments $643 17,226
------- ---------
Total investments 643 1,351,723
Receivables:
Employee contributions 2,572
Employer contributions 3,354
Interest and dividends 273 273
------- ---------
Total assets 916 1,357,922
------- ---------
LIABILITIES
Payable for administrative
fees 120 120
------- ---------
Total liabilities 120 120
------- ---------
Net assets available for
plan benefits $796 $1,357,802
======= ==========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
3
<PAGE>
THE KROGER CO. SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
at December 31, 1996
(In thousands of dollars)
_________________
<TABLE>
<CAPTION>
1996
---------------------------------------------------------------------------------------
MERRILL
LYNCH MERRILL MERRILL AMERICAN
EMPLOYER EQUITY LYNCH LYNCH CAPITAL
STOCK INDEX BASIC GLOBAL EMERGING TEMPLETON FIXED PARTICIPANT
ASSETS FUND TRUST VALUE ALLOCATION GROWTH FOREIGN INCOME LOANS
---------- ------- ------- ---------- -------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments:
The Kroger Co. common shares
(Cost - $221,481) $ 657,814
Contracts with insurance
companies (stated at
contract value) $ 99,722
Mutual funds (cost - $48,972) $14,173 $ 8,747 $18,540 $11,243
Collective investment trust
(cost - $45,015) $68,007
Participant loans 16,663
Temporary cash investments 20,261
--------- ------ ------ ------ ------ ------ ------- ------
Total investments 657,814 68,007 14,173 8,747 18,540 11,243 119,983 16,663
Receivables:
Employee contributions 1,379 243 68 45 105 52 357
Employer contributions 2,783
Interest and dividends
--------- ------ ------ ------ ------ ------ ------- ------
Total assets 661,976 68,250 14,241 8,792 18,645 11,295 120,340 16,663
--------- ------ ------ ------ ------ ------ ------- ------
LIABILITIES
Payable for administrative --------- ------ ------ ------ ------ ------ ------- ------
fees
Total liabilities --------- ------ ------ ------ ------ ------ ------- ------
Net assets available for
plan benefits $ 661,976 $68,250 $14,241 $8,792 $18,645 $11,295 $120,340 $16,663
========= ====== ====== ====== ====== ======= ======= ======
<CAPTION>
TEMPORARY
INVESTMENT
ASSETS FUND TOTAL
---------- ----------
<S> <C> <C>
Investments:
The Kroger Co. common share
(Cost - $272,336) $ 657,814
Contracts with insurance
companies (stated at
contract value) 99,722
Mutual funds (cost - $59,597) 52,703
Collective investment trust
(cost - $50,757) 68,007
Participant loans 16,663
Temporary cash investments $1,317 21,578
------- ---------
Total investments 1,317 916,487
Receivables:
Employee contributions 2,249
Employer contributions 2,783
Interest and dividends 180 180
------- ---------
Total assets $1,497 921,699
------- ---------
LIABILITIES
Payable for administrative
fees 119 119
------- ---------
Total liabilities 119 119
------- ---------
Net assets available for
plan benefits $1,378 $ 921,580
======= ==========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
4
<PAGE>
THE KROGER CO. SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the year ended December 31, 1997
(In thousands of dollars)
______________
<TABLE>
<CAPTION>
1997
- ------------------------------------------------------------------------------------------------------------------------------------
MERRILL
LYNCH MERRILL MERRILL AMERICAN
EMPLOYER EQUITY LYNCH LYNCH CAPITAL
STOCK INDEX BASIC GLOBAL EMERGING TEMPLETON FIXED
FUND TRUST VALUE ALLOCATION GROWTH FOREIGN INCOME
---------- --------- -------- -------------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Employee contributions $ 34,885 $ 5,823 $ 1,891 $ 1,067 $ 2,369 $ 1,281 $ 8,732
Employer contributions 3,354
Transfer from (to) other funds 572 (996) 1,378 (166) (2,021) 350 (3,669)
---------- -------- --------- ---------- ---------- --------- ---------
Total contributions
and transfers 38,811 4,827 3,269 901 348 1,631 5,063
Investment income:
Dividends 1,557 1,288 1,935 1,384
Interest 1,250 176 23 14 37 16 8,638
Net appreciation(depreciation) 379,149 22,372 2,780 (300) 1,442 (657)
---------- -------- --------- ---------- ---------- --------- ---------
Total additions 419,210 27,375 7,629 1,903 3,762 2,374 13,701
---------- -------- --------- ---------- ---------- --------- ---------
Distributions to participants 25,967 2,963 818 633 710 773 11,295
Administrative expenses, net 448
---------- -------- --------- ---------- ---------- --------- ---------
Total deductions 25,967 2,963 818 633 710 773 11,743
---------- -------- --------- ---------- ---------- --------- ---------
Net increase 393,243 24,412 6,811 1,270 3,052 1,601 1,958
Net assets available for plan benefits:
Beginning of year 661,976 68,250 14,241 8,792 18,645 11,295 120,340
---------- -------- --------- ---------- ---------- --------- ---------
End of year $1,055,219 $ 92,662 $21,052 $10,062 $21,697 $12,896 $122,298
========== ======== ========= ========== ========== ========= =========
<CAPTION>
---------------------------------------
TEMPORARY
PARTICIPANT INVESTMENT
LOANS FUND TOTAL
----------- ---------- ----------
<S> <C> <C> <C>
Employee contributions $ 56,048
Employer contributions 3,354
Transfer from (to) other funds $ 5,494 $ (942)
----------- ---------- ----------
Total contributions
and transfers 5,494 (942) 59,402
Investment income:
Dividends 6,164
Interest 93 10,247
Net appreciation(depreciation 404,786
----------- ---------- ----------
Total additions 5,494 (849) 480,599
----------- ---------- ----------
Distributions to participants 1,041 (271) 43,929
Administrative expenses, net 448
----------- ---------- ----------
Total deductions 1,041 (271) 44,377
----------- ---------- ----------
Net increase 4,453 (578) 436,222
Net assets available for plan benefits:
Beginning of year 16,663 1,378 921,580
----------- ---------- ----------
End of year $21,116 $ 800 $1,357,802
=========== ========== ==========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
5
<PAGE>
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)
_________________
<TABLE>
<CAPTION>
1996
---------------------------------------------------------------------------------------------
MERRILL
LYNCH MERRILL MERRILL AMERICAN
EMPLOYER EQUITY LYNCH LYNCH CAPITAL
STOCK INDEX BASIC GLOBAL EMERGING TEMPLETON FIXED PARTICIPANT
FUND TRUST VALUE ALLOCATION GROWTH FOREIGN INCOME LOANS
-------- -------- -------- ---------- --------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Employee contributions $ 29,640 $ 5,846 $1,568 $ 985 $2,002 $1,166 $ 9,601
Employer contributions 2,783
Transfer from (to) other funds (30,760) 1,669 4,155 2,076 7,006 2,355 8,087 $ 4,520
-------- -------- --------- ---------- ---------- --------- --------- -----------
Total contributions
and transfers 1,663 7,515 5,723 3,061 9,008 3,521 17,688 4,520
Investment income:
Dividends 878 804 788 436
Interest 945 145 21 13 28 19 7,438
Net appreciation 129,136 12,071 861 193 1,001 1,015
-------- -------- --------- ---------- ---------- --------- --------- -----------
Total additions 131,744 19,731 7,483 4,071 10,825 4,991 25,126 4,520
-------- -------- --------- ---------- ---------- --------- --------- -----------
Distributions to participants 17,578 2,531 213 324 365 162 9,633 592
Administrative expenses 22 1 0 0 0 0 575
-------- -------- --------- ---------- ---------- --------- --------- ----------
Total deductions 17,600 2,532 213 324 365 162 10,208 592
-------- -------- --------- ---------- ---------- --------- --------- ----------
Net increase 114,144 17,199 7,270 3,747 10,460 4,829 14,918 3,928
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
-------- -------- --------- ---------- ---------- --------- --------- ----------
End of year $661,976 $68,250 $14,241 $8,792 $18,645 $11,295 $120,340 $16,663
======== ======== ========= ========== ========== ========= ========= ==========
<CAPTION>
----------------------
TEMPORARY
INVESTMENT
FUND TOTAL
---------- --------
<S> <C> <C>
Employee contributions $50,808
Employer contributions 2,783
Transfer from (to) other funds $892
---------- --------
Total contributions
and transfers 892 53,591
Investment income:
Dividends 2,906
Interest 72 8,681
Net appreciation 144,277
---------- --------
Total additions 964 209,455
---------- --------
Distributions to participants 101 31,499
Administrative expenses (352) 246
---------- --------
Total deductions (251) 31,745
---------- --------
Net increase 1,215 177,710
Net assets available for
plan benefits:
Beginning of year 163 743,870
---------- --------
End of year $1,378 $921,580
========== ========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
6
<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).
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.
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 collateralized 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 1997 and 1996, the Company made a matching contribution but did not make
a supplemental contribution.
7
<PAGE>
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>
1997 1996
------------ ------------
<S> <C> <C>
Fair value 108,385,328 100,694,871
Crediting interest rates 6.0% to 7.3% 6.0% to 8.9%
Average yield 7.1% 6.9%
</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 in January 1996, 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.
8
<PAGE>
THE KROGER CO. SAVINGS PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
at December 31, 1997
(In thousands of dollars)
-------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES 1997
----------------------
CARRYING
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT COST VALUE
- --------------------------------- --------------- --------- -----------
<S> <C> <C> <C>
EMPLOYER STOCK FUND
-------------------
The Kroger Co. common shares 28,575,776 shs. $272,336 $1,050,160
MERRILL LYNCH EQUITY INDEX TRUST
--------------------------------
Collective Investment Trust 1,413,456 shs. 50,757 92,405
MERRILL LYNCH BASIC VALUE
-------------------------
Mutual Funds 565,438 shs. 17,293 20,966
MERRILL LYNCH GLOBAL ALLOCATION
-------------------------------
Mutual Funds 708,454 shs. 10,206 10,018
AMERICAN CAPITAL EMERGING GROWTH
--------------------------------
Mutual Funds 572,821 shs. 19,168 21,595
TEMPLETON FOREIGN
-----------------
Mutual Funds 1,290,644 shs. 12,930 12,842
FIXED INCOME
------------
Guaranteed Investment Contracts(GICs) 446 446
Synthetic GICs 104,948 107,939
Wrapper Contracts for Synthetic GICs (2,991)
-------- ----------
105,394 105,394
PARTICIPANT LOANS
-----------------
Loans to Participants 0 21,117
Temporary Cash Investments 17,226 17,226
-------- ----------
Total $505,310 $1,351,723
======== ==========
</TABLE>
9
<PAGE>
THE KROGER CO. SAVINGS PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For the Year Ended December 31, 1997
(In thousands of dollars)
--------------
<TABLE>
<CAPTION>
Transaction # of # of Realized
Type Security Description Trans Shares Cost Proceeds Gain(Loss)
- ---------------- ---------------------- ----- --------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
KROGER COMMON STOCK
BUY Kroger Co. Common Stock 1053 2,518,421 $90,612
SELL Kroger Co. Common Stock 1234 2,103,783 37,532 $75,190 $37,657
POOLED SEPARATE A/C(GICS)
BUY Fixed Income Fund 1106 59,719,250 59,719
SELL Fixed Income Fund 1134 57,725,446 57,724 57,725 1
TEMPORARY INVESTMENT FUNDS
BUY Temporary Investment Fund 253 86,747,654 86,747
SELL Temporary Investment Fund 250 87,678,054 87,678 87,678
</TABLE>
10
<PAGE>
EXHIBIT 99.3
------------
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
December 31, 1997 and 1996
Table of Contents
-----------------
<TABLE>
<CAPTION>
Financial Statements: Pages
- --------------------- -----
<S> <C>
Report of Independent Accountants 2
Statement of Net Assets Available for Plan Benefits 3
Statement of Changes in Net Assets Available for Plan Benefits 4
Notes to Financial Statements 5-8
<CAPTION>
Supplemental Schedules: Schedule
- ----------------------- --------
<S> <C>
Item 27(a) - Schedule of Assets Held for Investment Purposes 1
Item 27(d) - Schedule of Reportable Transactions 2
</TABLE>
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, 1997 and 1996, 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,
1997 and 1996, 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.
(Coopers & Lybrand L.L.P.)
Cincinnati, Ohio
April 3, 1998
<PAGE>
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Statement of Net Assets
Available for Plan Benefits
As of December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
Assets
- ------
<S> <C> <C>
Cash and cash equivalents $ 7,486,499 $ 6,844,527
Investment contracts with insurance companies 5,708,750 10,886,146
Investments in BASIC 28,232,408 28,509,307
Investments in PIMCO 20,116,767 20,221,869
Investments in State Street Fixed Fund 16,402,062 16,483,916
Investments in CDC Investment Management 4,884,465 4,659,206
The Kroger Co. common stock 412,737,653 253,407,826
Trust funds managed by:
Sanford C. Bernstein & Co. 24,031,425 20,475,482
Mellon Capital Stock Index Fund 28,342,734 21,351,318
------------ ------------
Total assets 547,942,763 382,839,597
------------ ------------
Liabilities
- -----------
Accounts payable 136,241 195,388
Dividends payable 16,763 16,763
------------ ------------
Total liabilities 153,004 212,151
------------ ------------
Net assets available for plan benefits $547,789,759 $382,627,446
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
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, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Additions to net assets attributed to:
Investment income:
Net appreciation in fair value of investments:
The Kroger Co. common stock $150,678,679 $ 50,872,910
------------ ------------
Interest:
Short-term investments 113,490 157,402
Investment contracts with insurance companies, investments in BASIC,
investments in PIMCO, investments in State Street Fixed Fund,
investments in CDC Investment Management 5,828,533 5,624,019
------------ ------------
5,942,023 5,781,421
------------ ------------
Net investment income of trust funds managed by:
State Street Research and Management - 1,015,709
Sanford C. Bernstein & Co. 4,224,362 1,596,754
Mellon Capital Stock Index Fund 6,961,650 3,631,226
------------ ------------
11,186,012 6,243,689
------------ ------------
Contributions:
Employer 1,272,049 1,058,703
Employee 25,374,816 22,900,855
------------ ------------
26,646,865 23,959,558
------------ ------------
Total additions 194,453,579 86,857,578
------------ ------------
Deductions from net assets attributed to:
Benefits paid to participants 29,209,099 19,634,324
Administrative expenses 82,167 74,866
------------ ------------
Total deductions 29,291,266 19,709,190
------------ ------------
Increase in net assets available for plan benefits 165,162,313 67,148,388
Net assets available at beginning of period 382,627,446 315,479,058
------------ ------------
Net assets available at end of period $547,789,759 $382,627,446
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Notes to Financial Statements
December 31, 1997 and 1996
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.
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 1997 and 1996, the Company made a basic matching
contribution.
The Company currently has discontinued contributions to the ESOP portion of
the Plan and has no present intentions to resume such contributions.
<PAGE>
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Notes to Financial Statements, Continued
December 31, 1997 and 1996
2) Description of Dillon Companies, Inc. Employees' Stock Ownership and
--------------------------------------------------------------------
Savings Plan, continued
-----------------------
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 (the 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 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, 1997:
* Investment contracts with insurance companies with annual crediting
interest rates varying from 6.70% to 9.75% and maturities from one
month to two years.
* Benefit Accessible Securities Investment Contracts (BASICs) with
annual crediting interest rates ranging from 6.00% to 8.75% and
maturities from two to 11 years.
* Investment in Pacific Investment Management Company (PIMCO) with a
variable crediting interest rate of 7.00%. The variable crediting
interest rate is adjusted quarterly.
* Investment in Diversified Financial Products Inc. (State Street Fixed
Fund) with a variable crediting interest rate of 7.11%. 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 three to four years.
<PAGE>
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Notes to Financial Statements, Continued
December 31, 1997 and 1996
4) Fixed Investments, continued
----------------------------
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>
1997 1996
------------ ------------
<S> <C> <C>
Fair Value $85,047,367 $86,804,798
Average Yield 7.39% 7.49%
</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.
<PAGE>
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Notes to Financial Statements, Continued
December 31, 1997 and 1996
8) Summary of Changes in Investment Options
----------------------------------------
<TABLE>
<CAPTION>
Kroger
Fixed Index Balanced Stock Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1997
- ----
ESOP
Beginning Balance 12-31-96 $ 3,079,114 $ 541,784 $ 786,405 $ 84,335,898 $ 88,743,201
Transfers (256,075) 2,556 91,145 162,374 -
Withdrawals (372,522) (67,438) (71,192) (7,006,691) (7,517,843)
Earnings, net 211,166 169,166 162,598 47,237,596 47,780,526
------------ ----------- ----------- ------------ ------------
Ending Balance 12-31-97 $ 2,661,683 $ 646,068 $ 968,956 $124,729,177 129,005,884
============ =========== =========== ============ ------------
401(k)
Beginning Balance 12-31-96 $ 83,811,542 $21,254,733 $19,746,042 $169,071,928 293,884,245
Transfers (11,234,895) (1,011,418) (1,555,352) 13,801,665 -
Withdrawals (6,034,968) (1,478,313) (1,164,418) (13,013,557) (21,691,256)
Contributions -- Employee 7,181,850 2,473,674 2,283,984 13,435,308 25,374,816
Contributions -- Employer - - - 1,272,049 1,272,049
Earnings, net 5,642,563 6,795,889 4,064,486 103,441,083 119,944,021
------------ ----------- ----------- ------------ ------------
Ending Balance 12-31-97 $ 79,366,092 $28,034,565 $23,374,742 $288,008,476 418,783,875
============ =========== =========== ============ ------------
Total $547,789,759
============
1996
- ----
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
============
</TABLE>
<PAGE>
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, 1997
<TABLE>
<CAPTION>
Annual
Interest Maturity Carrying
Rate Date Cost Value
-------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Investments with PIMCO:
- ----------------------
Short Term Investments (Cash Equivalents) $ 23,872,528 $23,842,590
=========== ==========
Allocation:
----------
Profit Sharing $ 16,281,210 $16,260,791
Pension 485,425 484,817
ESOP 401(k) 7,105,893 7,096,982
----------- ----------
$ 23,872,528 $23,842,590
=========== ==========
</TABLE>
<PAGE>
DILLON COMPANIES, INC. Schedule 1. cont.
-----------------
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Item 27(a) - Schedule of Assets Held for Investment Purposes
(Master Trust)
December 31, 1997
<TABLE>
<CAPTION>
Annual
Interest Maturity Carrying
Rate Date Cost Value
--------- -------- ------------ -------------
<S> <C> <C> <C> <C>
Investment Contracts with Insurance Companies:
- ------------------------------------------------
John Hancock Mutual Life 8.84% 1998 $ 2,000,000 $ 3,601,082
Hartford Life Insurance 8.50% 1998 1,000,000 1,756,175
Metropolitan Life Insurance 6.70%
to 6.85% 1998 803,852 1,230,968
Mutual Benefit Life of New Jersey 9.75% 1999 1,500,000 2,031,903
Ohio National Life 8.21%
to 8.87% 1998 5,000,000 8,355,989
Provident Mutual Life Insurance 8.82% 1998 1,000,000 1,086,437
Travelers Insurance Company 8.80%
to 9.10% 1998 2,000,000 2,101,354
Investment Contract Reserve for Loss - (120,000)
Pension - Investment Contract Valuation - 31,000
----------- -----------
Total Dillon Companies, Inc.
Employee Master Trust $13,303,852 $20,074,908
=========== ===========
Allocation:
----------
Profit Sharing $ 8,757,796 $13,194,710
Pension 756,956 1,140,448
Pension - Investment Contract Valuation - 31,000
ESOP 401(k) 3,789,100 5,708,750
----------- ------------
$13,303,852 $20,074,908
=========== ============
</TABLE>
<PAGE>
DILLON COMPANIES, INC. Schedule 1. cont.
-----------------
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Item 27(a) - Schedule of Assets Held for Investment Purposes
(Master Trust)
December 31, 1997
<TABLE>
<CAPTION>
Annual
Interest Maturity Carrying
Rate Date Cost Value
--------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Investments in BASIC:
- --------------------
FNMA 90-128H 8.500% 2000 $ 906,235 $ 1,028,098
FNMA 90-6G 8.750% 1998 441,563 431,503
FNMA 89-50E 8.625% 1998 56,801 27,742
FNMA 92-16KD 7.000% 2005 4,759,312 4,880,237
FNMA 92-134H 7.500% 2005 6,838,022 7,094,706
FHLMC 1365PI 7.250% 2005 3,961,844 4,098,567
FNMA 92-182PH 7.000% 2005 2,881,109 3,045,188
FNMA 92-200H 7.000% 2006 2,946,875 3,082,438
FHLMC 1458J 7.000% 2005 4,856,601 5,045,048
FHLMC 1457PJ 7.000% 2006 4,922,875 5,086,248
FHLMC 1542H 6.500% 2003 6,032,812 6,145,841
FHLMC 1625H 6.000% 2008 9,695,312 9,831,338
FNMA 93-134G 6.500% 2006 7,415,000 7,634,119
FNMA 94-48E 6.000% 2007 6,002,062 6,224,951
FNMA 94-10PC 6.500% 2005 9,006,250 9,296,465
5 YR UST 7.750% 1999 4,005,212 4,158,572
10 YR UST 7.875% 2004 4,042,185 4,073,380
FNMA 93-107D 6.500% 2002 2,902,969 2,952,401
FNMA 93-118H 6.500% 2004 5,932,992 5,977,614
FNMA 93-209J 6.000% 2008 4,641,333 4,719,712
Pension - BASIC Valuation - 51,370
------------ ------------
Total Dillon Companies, Inc.
Employee Master Trust $92,247,364 $ 94,885,538
============ ============
Fair Value $104,159,934
Wrap Value (9,274,396)
------------
$ 94,885,538
============
Allocation:
- ----------
Profit Sharing $63,474,005 $ 65,253,945
Pension 1,311,050 1,347,815
Pension - BASIC Valuation - 51,370
ESOP 401(k) 27,462,309 28,232,408
------------ ------------
$92,247,364 $ 94,885,538
============ ============
</TABLE>
<PAGE>
DILLON COMPANIES, INC. Schedule 1, cont.
-----------------
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Item 27(a) - Schedule of Assets Held for Investment Purposes
(Master Trust)
December 31, 1997
<TABLE>
<CAPTION>
Annual
Interest Maturity Carrying
Rate Date Cost Value
--------- -------- ------------ -------------
<S> <C> <C> <C> <C>
Investments in PIMCO:
- --------------------
Total Dillon Companies, Inc.
Employee Master Trust 7.000% Variable $ 51,750,000 $ 66,612,920
============ ============
Fair Value $ 68,707,216
Wrap Value (2,094,296)
------------
$ 66,612,920
============
Allocation:
-----------
Profit Sharing $ 36,121,760 $ 46,496,153
Pension - -
ESOP 401(k) 15,628,240 20,116,767
------------ ------------
$ 51,750,000 $ 66,612,920
============ ============
Investments in State Street Fixed Fund:
- --------------------------------------
Total Dillon Companies, Inc.
Employee Master Trust 7.111% Variable $ 44,750,000 $ 54,312,370
============ ============
Fair Value $ 56,667,400
Wrap Value (2,355,030)
------------
$ 54,312,370
============
Allocation:
-----------
Profit Sharing $ 31,235,726 $ 37,910,308
Pension - -
ESOP 401(k) 13,514,274 16,402,062
------------ ------------
$ 44,750,000 $ 54,312,370
============ ============
Investments in CDC Investment Management:
- ----------------------------------------
Total Dillon Companies, Inc. 6.200%
Employee Master Trust to 6.450% Variable $ 15,000,025 $ 16,173,996
============ ============
Fair Value $ 16,239,968
Wrap Value (65,972)
------------
$ 16,173,996
============
Allocation:
----------
Profit Sharing $ 10,470,093 $ 11,289,531
Pension - -
ESOP 401(k) 4,529,932 4,884,465
------------ ------------
$ 15,000,025 $ 16,173,996
============ ============
</TABLE>
<PAGE>
DILLON COMPANIES, INC. Schedule 1, cont.
-----------------
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Item 27(a) - Schedule of Assets Held for Investment Purposes
(Master Trust)
December 31, 1997
<TABLE>
<CAPTION>
Annual
Interest Maturity Carrying
Rate Date Cost Value
--------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Investments in The Kroger Co. Common Stock:
- -------------------------------------------
Total Dillon Companies, Inc.
Employee Master Trust $157,046,192 $658,949,905
============ ============
Allocation: Shares
----------- ---------
Profit Sharing 6,389,107 $ 70,686,004 $234,799,691
Pension 310,546 1,871,808 11,412,561
ESOP 401(k) 11,230,957 84,488,380 412,737,653
---------- ------------ ------------
17,930,610 $157,046,192 $658,949,905
========== ============ ============
Investments in Trust Funds Managed by:
- -------------------------------------
Sanford C. Bernstein & Co.:
--------------------------
Total Dillon Companies, Inc.
Employee Master Trust $ 62,227,038 $ 77,456,884
============ ============
Allocation:
----------
Profit Sharing $ 42,920,757 $ 53,425,459
Pension - -
ESOP 401(k) 19,306,281 24,031,425
------------ ------------
$ 62,227,038 $ 77,456,884
============ ============
Mellon Capital Stock Index Fund:
-------------------------------
Total Dillon Companies, Inc.
Employee Master Trust $ 40,479,722 $ 74,576,546
============ ============
Allocation:
----------
Profit Sharing $ 25,095,448 $ 46,233,812
Pension - -
ESOP 401(k) 15,384,274 28,342,734
------------ ------------
$ 40,479,722 $ 74,576,546
============ ============
Investments in Mellon Trust:
- ---------------------------
Total Dillon Companies, Inc.
Employee Master Trust $ 47,452,698 $ 74,078,859
============ ============
Allocation:
----------
Profit Sharing $ - $ -
Pension 47,452,698 74,078,859
ESOP 401(k) - -
------------ ------------
$ 47,452,698 $ 74,078,859
============ ============
</TABLE>
<PAGE>
DILLON COMPANIES, INC. Schedule 2
----------
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Item 27(d) - Schedule of Reportable Transactions
(Master Trust)
Year Ended December 31, 1997
<TABLE>
<CAPTION>
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 $12,600,000 -- $12,600,000 $12,600,000 --
The Northern Trust Company
time deposits -- $25,556,599 25,556,599 25,556,599 --
PIMCO
time deposits 61,050,000 -- 61,050,000 61,050,000 --
PIMCO
time deposits -- 37,500,000 37,500,000 37,500,000 --
Allstate Life Insurance
investment contract -- 2,000,000 2,000,000 2,000,000 --
Confederation Life Insurance
investment contract -- 1,000,000 1,000,000 1,000,000 --
Connecticut Mutual Life
investment contracts -- 4,000,000 4,000,000 4,000,000 --
John Hancock Mutual Life
investment contracts -- 4,000,000 4,000,000 4,000,000 --
Metropolitan Life Insurance
investment contracts -- 803,852 803,852 803,852 --
PIMCO
trust investment 5,500,000 -- 5,500,000 5,500,000 --
PIMCO
trust investment -- 10,750,000 10,750,000 10,750,000 --
State Street Fixed Fund
trust investment 4,500,000 -- 4,500,000 4,500,000 --
State Street Fixed Fund
trust investment -- 8,750,000 8,750,000 8,750,000 --
Merrill Lynch
The Kroger Co. common stock
227,277 shares 8,200,025 -- 8,200,025 8,200,025 --
Morgan Stanley
The Kroger Co. common stock
1,043,700 shares 40,705,677 -- 40,705,677 40,705,677 --
Morgan Stanley
The Kroger Co. common stock
327,400 shares -- 9,793,726 2,750,676 9,793,726 $7,043,050
Sanford C. Bernstein & Co.
trust investment -- 6,700,000 6,700,000 6,700,000 --
Mellon Capital Index Fund
trust investment 3,300,000 -- 3,300,000 3,300,000 --
Mellon Capital Index Fund
trust investment -- 7,500,000 7,500,000 7,500,000 --
The Northern Trust Company
trust investment -- 700,000 700,000 700,000 --
Mellon Trust
trust investment -- 500,000 500,000 500,000 --
</TABLE>
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