SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the
- ---- Securities Exchange Act of 1934 for the quarterly period
ended March 21, 1998 or
- ---- Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from to
-------- ----------
Commission file number 1-303
THE KROGER CO.
An Ohio Corporation I.R.S. Employer Identification
No. 31-0345740
1014 Vine Street, Cincinnati, OH 45202
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code (513) 762-4000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No .
---------- ---------
There were 256,054,229 shares of Common Stock ($1 par value)
outstanding as of May 1, 1998.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited information for the quarters ended March 21, 1998 and
March 22, 1997 includes the results of operations of The Kroger Co.
for the 12 week periods ended March 21, 1998 and March 22, 1997,
and of its wholly owned subsidiary Dillon Companies, Inc. for the
13 week periods ended March 28, 1998 and March 29, 1997. In the
opinion of management, the information reflects all adjustments
(consisting only of normal recurring adjustments) which are
necessary for a fair presentation of results of operations for such
periods but should not be considered as indicative of results for a
full year.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended
------------------------
March 21, March 22,
1998 1997
---------- ----------
<S> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,388,759 $6,139,413
---------- ----------
Costs and expenses
Merchandise costs, including warehousing and transportation. . . 4,866,307 4,686,363
Operating, general and administrative. . . . . . . . . . . . . . 1,109,425 1,072,069
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,529 75,845
Depreciation and amortization. . . . . . . . . . . . . . . . . . 93,183 85,373
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . 64,192 69,747
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,215,636 5,989,397
---------- ----------
Earnings before tax expense and extraordinary loss. . . . . . . . 173,123 150,016
Tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,788 57,756
---------- ----------
Earnings before extraordinary loss. . . . . . . . . . . . . . . . 107,335 92,260
Extraordinary loss. . . . . . . . . . . . . . . . . . . . . . . . (4,293) (5,210)
---------- ----------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . $ 103,042 $ 87,050
========== ==========
Basic earnings per common share:
Earnings from operations . . . . . . . . . . . . . . . . . . . . $ .42 $ .36
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . (.02) (.02)
------ ------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . $ .40 $ .34
====== ======
Average number of common shares used in per share calculations. . 255,173 254,080
Diluted earnings per common share:
Earnings from operations . . . . . . . . . . . . . . . . . . . . $ .41 $ .35
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . (.02) (.02)
------ ------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . $ .39 $ .33
====== ======
Average number of common shares used in per share calculations. . 264,919 262,447
</TABLE>
- -------------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEET
(in thousands of dollars)
(unaudited)
<TABLE>
<CAPTION>
March 21, December 27,
1998 1997
<S> <C> <C>
ASSETS
Current assets
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,275 $ 65,484
Receivables . . . . . . . . . . . . . . . . . . . . . . 376,992 400,529
Inventories:
FIFO cost . . . . . . . . . . . . . . . . . . . . . . 2,191,054 2,273,896
Less LIFO reserve . . . . . . . . . . . . . . . . . . (472,431) (467,931)
---------- ----------
1,718,623 1,805,965
Property held for sale. . . . . . . . . . . . . . . . . 14,423 39,672
Prepaid and other current assets. . . . . . . . . . . . 320,975 328,901
---------- ----------
Total current assets. . . . . . . . . . . . . . . . 2,490,288 2,640,551
Property, plant and equipment, net. . . . . . . . . . . . 3,378,349 3,296,599
Investments and other assets. . . . . . . . . . . . . . . 373,326 364,191
---------- ----------
Total Assets. . . . . . . . . . . . . . . . . . . . $6,241,963 $6,301,341
========== ==========
LIABILITIES
Current liabilities
Current portion of long-term debt . . . . . . . . . . . $ 14,594 $ 14,304
Current portion of obligations under
capital leases. . . . . . . . . . . . . . . . . . . . 10,235 10,031
Accounts payable. . . . . . . . . . . . . . . . . . . . 1,527,384 1,781,527
Other current liabilities . . . . . . . . . . . . . . . 1,215,796 1,137,654
---------- ----------
Total current liabilities . . . . . . . . . . . . . 2,768,009 2,943,516
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 3,347,111 3,306,451
Obligations under capital leases. . . . . . . . . . . . . 183,967 186,624
Deferred income taxes . . . . . . . . . . . . . . . . . . 162,751 166,013
Other long-term liabilities . . . . . . . . . . . . . . . 470,975 483,585
---------- ----------
Total Liabilities . . . . . . . . . . . . . . . . . 6,932,813 7,086,189
---------- ----------
SHAREOWNERS' DEFICIT
Common capital stock, par $1, at stated value
Authorized: 350,000,000 shares
Issued: 1998 - 278,395,628 shares
1997 - 277,153,260 shares. . . . . . . . . . . 744,855 728,644
Accumulated deficit . . . . . . . . . . . . . . . . . . . (1,081,352) (1,184,394)
Common stock in treasury, at cost
1998 - 22,784,635 shares
1997 - 22,182,650 shares . . . . . . . . . . . (354,353) (329,098)
---------- ----------
Total Shareowners' Deficit (690,850) (784,848)
---------- ----------
Total Liabilities and Shareowners' Deficit. . . . . . $6,241,963 $6,301,341
========== ==========
</TABLE>
- -------------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands of dollars)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended
----------------------------
March 21, March 22,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings. . . . . . . . . . . . . . . . . . . . . . . . . . $ 103,042 $ 87,050
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . 4,293 5,210
Depreciation and amortization. . . . . . . . . . . . . . . . 93,183 85,373
Amortization of deferred financing costs . . . . . . . . . . 2,592 3,249
LIFO charge. . . . . . . . . . . . . . . . . . . . . . . . . 4,500 4,500
Other changes, net . . . . . . . . . . . . . . . . . . . . . 1,151 (220)
Net increase (decrease) in cash from changes in operating
assets and liabilities, detail below . . . . . . . . . . . 28,966 115,472
---------- ----------
Net cash provided by operating activities . . . . . . . . 237,727 300,634
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures. . . . . . . . . . . . . . . . . . . . . . (175,341) (136,685)
Proceeds from sale of assets. . . . . . . . . . . . . . . . . . 456 2,600
Decrease in property held for sale. . . . . . . . . . . . . . . 25,208 6,094
Increase in other investments . . . . . . . . . . . . . . . . . (4,411) (29,632)
---------- ----------
Net cash used by investing activities . . . . . . . . . . (154,088) (157,623)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt prepayment costs . . . . . . . . . . . . . . . . . . . . . (5,850) (6,999)
Financing charges incurred. . . . . . . . . . . . . . . . . . . (9,423) (4,314)
Principal payments under capital lease obligations. . . . . . . (2,453) (2,341)
Proceeds from issuance of long-term debt. . . . . . . . . . . . 214,960 418,798
Reductions in long-term debt. . . . . . . . . . . . . . . . . . (174,010) (375,471)
Outstanding checks. . . . . . . . . . . . . . . . . . . . . . . (103,719) (159,897)
Proceeds from issuance of capital stock . . . . . . . . . . . . 15,902 13,255
Capital stock reacquired. . . . . . . . . . . . . . . . . . . . (25,255) (34 383)
---------- ----------
Net cash used by financing activities . . . . . . . . . . (89,848) (151,352)
---------- ----------
Net increase in cash and temporary cash investments . . . . . . . (6,209) (8,341)
Cash and temporary cash investments:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . 65,484 67,052
---------- ----------
End of quarter. . . . . . . . . . . . . . . . . . . . . . . . $ 59,275 $ 58,711
========== ==========
INCREASE (DECREASE) IN CASH FROM CHANGES IN OPERATING ASSETS AND LIABILITIES:
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . $ 82,842 $ 26,728
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . 23,538 18,832
Prepaid and other current assets. . . . . . . . . . . . . . . 7,856 18,850
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . (150,424) (29,516)
Deferred income taxes . . . . . . . . . . . . . . . . . . . . (3,263) 2,476
Other liabilities . . . . . . . . . . . . . . . . . . . . . . 68,417 78,102
---------- ----------
$ 28,966 $ 115,472
========== ==========
</TABLE>
- -------------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
Supplemental disclosures of cash flow information:
Quarter Ended
--------------------------
March 21, March 22,
1998 1997
--------- ----------
Cash paid during the period for:
Interest (net of amount capitalized) $ 58,821 $ 64,945
Income taxes 12,891 7,805
- -------------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------
1. BASIS OF PRESENTATION
---------------------
The year-end condensed balance sheet data was derived from
audited financial statements, but does not include all
disclosures required by generally accepted accounting
principles. Certain prior year amounts have been restated to
conform to current year presentation.
2. INCOME TAXES
------------
The effective income tax rate differs from the expected
statutory rate primarily due to the effect of certain state
taxes.
3. EXTRAORDINARY LOSS
------------------
The extraordinary loss for the quarters ended March 21, 1998
and March 22, 1997 of $4.3 million and $5.2 million,
respectively (net of income tax credit of $2.6 million and
$3.3 million, respectively) is related to the early retirement
of long-term debt.
4. EARNINGS PER COMMON SHARE
-------------------------
Earnings per common share equals net earnings divided by the
weighted average number of common shares outstanding, after
giving effect to dilutive stock options.
The following table provides a reconciliation of earnings
before extraordinary loss and shares used in calculating basic
earnings per share to those used in calculating diluted
earnings per share.
<TABLE>
<CAPTION>
For the quarter ended For the quarter ended
March 21, 1998 March 22, 1997
--------------------------- --------------------------
Income Shares Per Income Shares Per
(Numer- (Denomi- Share (Numer- (Denomi- Share
ator nator Amount ator nator Amount
-------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
---------
Earnings before extraordinary
loss . . . . . . . . . . . $107,335 255,173 $0.42 $92,260 254,080 $0.36
Effect of Dilutive Securities
-----------------------------
Stock option awards. . . . 9,746 8,367
Diluted EPS
-----------
Income available to share-
holders plus assumed -------- ------- ----- ------- ------- -----
conversions. . . . . . . $107,335 264,919 $0.41 $92,260 262,447 $0.35
======== ======= ===== ======= ======= =====
</TABLE>
5. SUBSEQUENT EVENTS
-----------------
On April 8, 1998, Fitch Investors Service, L.P. upgraded its
rating on the Company's senior debt to BBB from BBB-.
6. COMPREHENSIVE INCOME
--------------------
The Company has no items of other comprehensive income in
any period presented. Therefore Net Income as presented in
the Consolidated Statement of Operations equals comprehensive
income.
7. RECENTLY ISSUED ACCOUNTING STANDARDS
------------------------------------
The Financial Accounting Standards Board issued Statement of
Financial Standards No. 131 "Disclosure about Segments of an
Enterprise and Related Information" and No. 132 "Employers'
Disclosures about Pensions and Other Postretirement Benefits".
The Company has not yet determined what effect, if any, these
statements will have.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SALES
Total sales for the first quarter of 1998 increased 4.1% from the
first quarter 1997 to a record $6.4 billion. Food store sales
increased 4.4% over the 1997 first quarter. The first quarter of
1998, food stores square footage increased 3.7% over the same
period last year. Sales in identical food stores, units that have
been in operation for one full year and have not been expanded or
relocated during that period, increased .7% versus a .4% increase
in 1997. First quarter comparable store sales, which include
results of expanded and relocated stores, increased 2.5%. A review
of sales trends by lines of business is as follows:
<TABLE>
<CAPTION>
(in thousands of dollars)
% of 1998 1st Quarter
-------------------------
Lines of Business Sales 1998 1997 Change
--------------------- ------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Food Stores ........ 93.8% $5,989,649 $5,736,235 +4.4%
Convenience Stores .. 3.5% 224,458 233,653 -3.9%
Other sales ........ 2.7% 174,652 169,525 +3.0%
------- ---------- ---------- ------
Total sales ........ 100.0% $6,388,759 $6,139,413 +4.1%
</TABLE>
Convenience stores' identical grocery sales increased 3.9%,
identical gasoline sales decreased 10.8%, and identical gas gallons
increased 3.9%. Total sales for the six company convenience store
group were weakened by a 13.4% decline in the average retail price
per gallon of gasoline as compared to the first quarter of 1997.
Total gallons sold increased 4.3% during this period.
Other sales, consisting of non-retail sales to unaffiliated third
parties, increased 3% over the first quarter 1997. These included
sales of product manufactured or packaged to the customer's
specifications.
EBITD
The Company's $1.5 Billion Five-Year Credit Agreement and $500
Million 364-Day Credit Agreement (collectively, the "Credit
Agreement"), and the indentures underlying approximately $576
million of publicly issued debt contain various restrictive
covenants, many of which are based on earnings before interest,
taxes, depreciation, LIFO charge, and unusual and extraordinary
items ("EBITD"). The ability to generate EBITD at levels
sufficient to satisfy the requirements of these agreements is a key
measure of the Company's financial strength. The presentation of
EBITD is not intended to be an alternative to any GAAP measure of
performance but rather to facilitate an understanding of the
Company's performance compared to its debt covenants. At March 21,
1998 the Company was in compliance with all covenants of its Credit
Agreements and its indentures. The Company believes it has
adequate coverage of its debt covenants to continue to respond
effectively to competitive conditions.
EBITD increased 8.2% to $335.0 million compared to $309.6 million
in the first quarter of 1997. EBITD growth was generated by sales
gains, increased gross profit and reduced operating, general and
administrative expenses as a percent of sales. The Company's
storing program continued to produce incremental EBITD increases as
well.
MERCHANDISE COSTS
Merchandise costs, including advertising, warehousing and
transportation expense and LIFO charges, for the first quarter 1998
declined to 76.2% of sales compared to 76.3% in the first quarter
1997. Merchandise costs were positively affected by the Company's
efforts in coordinated purchasing, and strong private label sales.
OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating, general and administrative expenses as a percent of
sales in the first quarter 1998 were 17.4% compared to 17.5% in
1997. This improvement reflects the effect of the Company's
investments in logistics and technology, improved expense control,
and the continuing consolidation of support services.
NET INTEREST EXPENSE
Net interest expense decreased to $64.2 million in the first
quarter 1998 as compared to $69.7 million in last year's first
quarter.
To reduce its effective interest expense, the Company has purchased
a portion of the debt under certain of its structured financings.
Excluding the debt incurred to make these purchases, which are
classified as investments, the Company's long-term debt at the end
of the first quarter was $3.29 billion, down from $3.49 billion at
the end of the 1997 first quarter.
NET EARNINGS
The Company's net earnings in the first quarter 1998 were $103.0
million or $.39 per diluted share as compared to net earnings in
the first quarter 1997 of $87.0 million or $.33 per diluted share.
Net earnings in 1998 were negatively affected by an extraordinary
loss of $4.3 million or $.02 per diluted share as compared to an
extraordinary loss of $5.2 million or $.02 per diluted share in
1997. The extraordinary loss in both years resulted from the early
retirement of long term debt.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter 1998 the Company repurchased or redeemed
$130.0 million of its various subordinated debt issues.
At the end of the first quarter 1998 the Company had $765.3 million
available under its Credit Agreement to meet short-term liquidity
needs.
Capital expenditures for the first quarter 1998 totaled $175.3
million as compared to $136.7 million for the first quarter 1997.
CONSOLIDATED STATEMENT OF CASH FLOWS
The Company generated $237.7 million of cash from operating
activities during the first quarter 1998 compared to $300.6 million
in last year's first quarter. The decrease from 1997 is primarily
due to a decrease in operating assets and liabilities that provided
$29.0 million of cash in the first quarter of 1998 compared to
$115.5 million in the first quarter of 1997, a net change of $86.5
million. The largest component of the change in operating assets
and liabilities was accounts payable, which used $120.9 million
more cash than in the first quarter of 1997.
Investing activities used $154.1 million in cash during the first
quarter of 1998 as compared to $157.6 million last year. The
Company's capital investment in the first quarter of 1998 increased
$38.7 million from the first quarter of 1997.
Financing activities during the first quarter used $89.8 million in
cash as compared to $151.4 million last year. The Company's net
debt borrowings in the first quarter of 1998 equaled $41.0 million
as compared to $43.3 million in the first quarter of 1997.
Additionally, debt prepayment costs and new financing charges used
$15.3 million of cash as compared to $11.3 million in 1997. The
change in the balance of outstanding checks used an additional
$103.7 million of cash in 1998 compared to $159.9 million in 1997.
SUBSEQUENT EVENTS
On April 8, 1998, Fitch Investors Service, L.P. upgraded its rating
on the Company's senior debt to BBB from BBB-.
OUTLOOK
Statements below regarding the Company's expectations, hopes,
beliefs, intentions or strategies are forward looking statements
within the meaning of Section 21E of the Securities Exchange Act of
1934. While we believe that the statements are accurate,
uncertainties and other factors could cause actual results to
differ materially from those statements. In particular:
. The Company's strategy continues to be to obtain sales
growth from new square footage, as well as from increased
productivity from existing locations. During 1998, the
Company is expected to open, acquire, relocate or expand
90 stores and remodel approximately 100 units. Full year
square footage growth is expected to equal 4.5 to 5.0%.
The Company expects to continue to realize savings from
technology and logistics improvements, some of which may
be reinvested in retail price reductions to increase
sales volume.
. The Company believes it has adequate coverage of its debt
covenants to continue to respond effectively to
competitive conditions.
. The Company will continue to invest capital in technology
focusing on improved store operation, procurement,
merchandising and distribution practices which are
expected to continue to positively affect merchandising
cost as a percent of sales.
. The Company expects 1998 net interest expense to total
approximately $280 million.
. The Company expects to incur an extraordinary loss in
each quarter of 1998 as it continues to retire its
higher-cost debt.
. Capital expenditures for the year are expected to total
$750-$800 million as compared to $612.2 million during
all of 1997. The increase reflects the Company's
strategy of growth through expansion as well as the
Company's emphasis, whenever possible, on self-
development and ownership of store real estate.
. The Company currently is working to resolve the potential
impact of the year 2000 on the processing of date-
sensitive information by the Company's computerized
information systems. The year 2000 problem is the result
of computer programs being written using two digits
(rather than four) to define the applicable year. Any of
the Company's programs that have time-sensitive software
may recognize a date using "00" as the year 1900 rather
than the year 2000, which could result in miscalculations
or system failures. Based on current information, costs
of addressing potential problems are not expected to have
a material adverse impact on the Company's financial
position, results of operations or cash flows in future
periods. However, if the Company, its customers or
vendors are unable to resolve such processing issues in a
timely manner, it could result in a material financial
risk. Accordingly, the Company believes it has allocated
the resources necessary to resolve all significant year
2000 issues in a timely manner.
Inflationary factors, increased competition, construction delays,
and labor disputes could affect the Company's ability to obtain
expected increases in sales and earnings. Delays in store
maturity, increased competition and increased capital spending
could adversely affect the anticipated increase in sales per square
foot. Increases in gross profit rate may not be achieved if start
up costs are higher than expected or if problems associated with
integrating new systems occur. Increased operating costs and
changes in inflationary trends could prevent the Company from
reducing operating, general and administrative expenses. New
technologies could fail to achieve the desired savings and
efficiencies. Net interest expenses could exceed expectations due
to acquisitions, higher working capital usage, inflation, or
increased competition. The Company's ability to achieve its
storing goals could be hampered by construction delays, labor
disputes, increased competition, delays in technology projects, and
its ability to generate continued EBITD growth. The inherent
complexity of computer software and reliance on third party
software vendors to interface with the Company's systems could
affect the completion of necessary 'year 2000' modifications.
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 3.1 - Amended Articles of Incorporation
-----------
of the Company are hereby incorporated by
reference to Exhibit 3(a) of the Company's
Current Report on Form 8-K as filed with the
Securities and Exchange Commission on April 16,
1997. The Company's Regulations are
incorporated by reference to Exhibit 4.2 of the
Company's Registration Statement on Form S-3 as
filed with the Securities and Exchange
Commission on January 28, 1993, and bearing
Registration No. 33-57552.
Exhibit 4.1 - Instruments defining the rights
-----------
of holders of long-term debt of the Company and
its subsidiaries are not filed as Exhibits
because the amount of debt under each
instrument is less than 10% of the consolidated
assets of the Company. The Company undertakes
to file these instruments with the Commission
upon request.
Exhibit 27.1 - Financial Data Schedule.
------------
Exhibit 99.1 - Additional Exhibits - Statement
------------
of Computation of Ratio of Earnings to Fixed
Charges.
(b) The Company filed its fourth quarter and fiscal
year 1997 earnings release in its Current
Report on Form 8-K dated January 22, 1998, and
the Pricing Agreement and Third Supplemental
Indenture related to its 6-3/8% Senior Notes
due 2008 in its Current Report on Form 8-K
dated February 25, 1998.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
THE KROGER CO.
Dated: May 5, 1998 By: (Joseph A. Pichler)
Joseph A. Pichler
Chairman of the Board and
Chief Executive Officer
Dated: May 5, 1998 By: (J. Michael Schlotman)
J. Michael Schlotman
Vice President and
Corporate Controller
<PAGE>
Exhibit Index
-------------
Exhibit
- -------
Exhibit 3.1 - Amended Articles of Incorporation of the
Company are hereby incorporated by
reference to Exhibit 3(a) of the
Company's Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on April 16, 1997. The
Company's Regulations are incorporated by
reference to Exhibit 4.2 of the Company's
Registration Statement on Form S-3 as
filed with the Securities and Exchange
Commission on January 28, 1993, and
bearing Registration No. 33-57552.
Exhibit 4.1 - Instruments defining the rights of holders
of long-term debt of the Company and its
subsidiaries are not filed as Exhibits
because the amount of debt under each
instrument is less than 10% of the
consolidated assets of the Company. The
Company undertakes to file these
instruments with the Commission upon
request.
Exhibit 27.1 - Financial Data Schedule.
Exhibit 99.1 - Additional Exhibits - Statement of
Computation of Ratio of Earnings to Fixed
Charges.
<PAGE>
EXHIBIT 99.1
Schedule of computation of ratio of earnings to fixed charges of
The Kroger Co. and consolidated subsidiary companies and
unconsolidated companies as if consolidated for the five fiscal
years ended December 27, 1997 and for the one quarter ended March
21, 1998 and March 22, 1997.
<TABLE>
<CAPTION>
Quarter Ended Fiscal Years Ended
------------------- ---------------------------------------------------------------
March 21, March 22, December 27, December 28, December 30, December 31, January 1,
1998 1997 1997 1996 1995 1994 1994
(12 Weeks) (12 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (52 weeks) (52 weeks)
---------- ---------- ----------- ----------- ------------ ------------- -----------
(in thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
Earnings from continuing
operations before tax
expense, extraordinary
loss and cumulative
effect of change in
accounting . . . . . . . $173,123 $150,016 $712,363 $567,313 $509,538 $421,363 $283,938
Fixed charges. . . . . . 112,988 115,002 482,338 482,680 489,939 500,599 556,008
Capitalized interest . . (1,797) (2,866) (8,550) (10,887) (6,785) (2,521) 230
-------- -------- ---------- ---------- -------- -------- --------
$284,314 $262,152 $1,186,151 $1,039,106 $992,692 $919,441 $840,176
======== ======== ========== ========== ======== ======== ========
Fixed Charges
Interest . . . . . . . . $ 66,277 $ 72,074 $294,985 $311,958 $320,236 $331,097 $391,693
Portion of rental
payments deemed to be
interest. . . . . . . . 46,711 42,928 187,353 170,722 169,703 169,502 164,315
-------- -------- ---------- -------- -------- -------- --------
$112,988 $115,002 $ 482,338 $482,280 $489,939 $500,599 $556,008
======== ======== ========== ======== ======== ======== ========
Ratio of Earnings to
Fixed Charges . . . . . 2.5 2.3 2.5 2.2 2.0 1.8 1.5
<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated statement of operations, consolidated balance sheet and
consolidated statement of cash flows for the quarter ended March 21, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> MAR-21-1998
<CASH> 59,275
<SECURITIES> 0
<RECEIVABLES> 376,992
<ALLOWANCES> 0
<INVENTORY> 1,718,623
<CURRENT-ASSETS> 2,490,288
<PP&E> 6,325,321
<DEPRECIATION> (2,946,972)
<TOTAL-ASSETS> 6,241,963
<CURRENT-LIABILITIES> 2,768,009
<BONDS> 3,347,111
0
0
<COMMON> 744,855
<OTHER-SE> (1,081,352)
<TOTAL-LIABILITY-AND-EQUITY> 6,241,963
<SALES> 6,388,759
<TOTAL-REVENUES> 6,388,759
<CGS> 4,866,307
<TOTAL-COSTS> 4,866,307
<OTHER-EXPENSES> 1,349,329
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 64,192
<INCOME-PRETAX> 173,123
<INCOME-TAX> 65,788
<INCOME-CONTINUING> 107,335
<DISCONTINUED> 0
<EXTRAORDINARY> (4,293)
<CHANGES> 0
<NET-INCOME> 103,042
<EPS-PRIMARY> .40<F1>
<EPS-DILUTED> .39
<FN>
<FN1> The amount reported is EPS-BASIC and not EPS-PRIMARY
</FN>
</TABLE>
