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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 22, 1998
THE KROGER CO.
(Exact name of registrant as specified in its charter)
OHIO 1-303 31-0345740
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification
incorporation or Number)
organization)
1014 VINE STREET
CINCINNATI, OHIO 45202
(Address of principal executive
offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (513) 762-4000
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Item 5. Other Events.
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On October 19, 1998, the registrant announced that it had
executed an Agreement and Plan of Merger, dated as of October 18,
1998, which is included as an exhibit to the registrant's current
report on Form 8-K filed October 20, 1998. In connection with the
announcement of the merger, the registrant distributed the
Materials at meetings with analysts conducted in October, 1998,
filed as Exhibit 99.1 hereto.
Item 7. Financial Statements and Exhibits.
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Exhibit Description
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99.1 Materials distributed at meetings with analysts
conducted in October, 1998
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SIGNATURE
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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 hereto duly authorized.
THE KROGER CO.
October 22, 1998 By: /s/ Paul W. Heldman
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Paul W. Heldman
Senior Vice President,
Secretary and General Counsel
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EXHIBIT INDEX
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Exhibit Description
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99.1 Materials distributed at meetings conducted in
October, 1998
EXHIBIT 99.1
[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
The Nation's Largest
Supermarket Company
<PAGE>
[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Forward-Looking Statement
This presentation includes forward-looking statements which are subject to
risks and uncertainties. Actual results might differ materially from those
projected in the forward-looking statements. Additional information
concerning factors that could cause actual results to materially differ
from those in the forward-looking statements is contained in the Securities
and Exchange Commission filings of both companies.
<PAGE>
[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Today's Agenda
[ ] Kroger Third Quarter Earnings
[ ] Kroger/Fred Meyer Merger
* Strategic Rationale
* Combined Company
* Financial Prespective
<PAGE>
[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Third Quarter 1998 Highlights
Total Sales - $8.0 billion +4.4%
* Food Stores Sales +4.9%
* Identical Store Sales +2.1%
* Comparable Store Sales +3.6%
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[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Third Quarter 1998 Highlights
[ ] EBITD $407 million +13.5%
[ ] Gross Profit Rate 24.09% of sales +38 bps
[ ] EPS 47 cents +27%
[ ] OG&A 17.78% of sales +1 bp
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[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Third Quarter 1998 Highlights
[ ] Net total debt ($77 million) $3.2 billion
[ ] Net interest expense (9.8%) $77 million
[ ] ERONOA +100 bps 41.8%
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[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
The Nation's Largest
Supermarket Company
<PAGE>
[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Kroger's Fundamental Strategy
"To achieve the responsiveness of decentralized
operating authority combined with the economies
of scale available from coordinating volume based
activities and consolidating support systems."
<PAGE>
[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Strategic Rationale
[ ] Creates nation's largest supermarket company
* $43 billion in sales
* 2,200 supermarkets
* 800 convenience stores
* 380 fine jewelry stores
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[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
10 cents of Every $1
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[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Strategic Rationale
[ ] Leverages economies of scale and infrastructure
[ ] Accretive transaction
* Increases free cash flow
* Accelerates EPS growth
* Improves operating margins
[ ] Significant cost-saving potential
<PAGE>
[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Transaction Summary
Name: The Kroger Co.
Headquarters: Cincinnati, Ohio
Management: Joseph A. Pichler, Chairman & CEO
Robert G. Miller, Vice Chairman & COO
Board: Kroger - 13 Board seats
Fred Meyer - 6 Board seats
Structure: Tax-Free Stock Merger
Terms: Fixed 1:1 Ratio
Ownership: Kroger - 62%
Fred Meyer - 38%
Accounting: Pooling of Interests
<PAGE>
[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Fred Meyer Strengths
[ ] Premier, multi-regional supermarket operator
* $15 billion in annual sales
* 1998 estimated EBITD of $1.3 billion
[ ] Outstanding supermarket brands with wide range of formats
* Strong customer loyalty
* Modern store base and infrastructure
[ ] Leading shares in fastest-growing U.S. markets
[ ] Experienced management team
* Ability to identify synergies, integrate businesses
<PAGE>
[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Strategic Rationale
Combining Kroger and Fred Meyer creates the nation's largest supermarket
company
[GRAPH COMPARING KROGER/FRED MEYER TOTAL SALES OF $43 BILLION WITH
TOTAL SALES OF ALBERTSON'S/AMERICAN STORES, WAL-MART (FOOD),
SAFEWAY/DOMINICKS AND AHOLD (U.S.) OF $36 BILLION, $32 BILLION,
$27 BILLION AND $19 BILLION RESPECTIVELY APPEARS HERE]
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[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Kroger's Markets
[MAP OF THE UNITED STATES INDICATING STATES
WHERE KROGER HAS STORES APPEARS HERE]
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[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Fred Meyer's Markets
[MAP OF THE UNITED STATES INDICATING STATES
WHERE FRED MEYER HAS STORES APPEARS HERE]
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[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Combined Markets
Broad Geographic Reach
[MAP OF THE UNITED STATES INDICATING STATES WHERE
KROGER AND FRED MEYER HAVE STORES APPEARS HERE]
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[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Transaction Rationale
Transaction combines two of the strongest performers in the industry
Last 3 Years
[LINE GRAPH COMPARING THE INDEXED [LINE GRAPH COMPARING THE INDEXED
PRICE GROWTH OF KROGER CO. VS. PRICE GROWTH OF FRED MEYER, INC.
THE INDEXED PRICE GROWTH OF THE VS. THE INDEXED PRICE GROWTH OF THE
S&P 500 AND THE INDEXED PRICE S&P 500 AND THE INDEXED PRICE GROWTH
GROWTH OF A COMPOSITE OF MAJOR OF A COMPOSITE OF MAJOR SUPERMARKET
SUPERMARKET STORES FOR THE PERIOD STORES FOR THE PERIOD FROM 1/96
FROM 1/96 TO 7/98. OVER THIS THROUGH 7/98. OVER THIS PERIOD, THE
PERIOD, THE INDEXED PRICE OF INDEXED PRICE OF FRED MEYER, INC. HAS
KROGER CO. HAS INCREASED FROM 100 INCREASED FROM 100 TO 448, THE PRICE
TO 285, THE PRICE INDEXED PRICE OF THE S&P 500 HAS INCREASED FROM 100
OF THE S&P 500 HAS INCREASED TO 180 AND THE INDEXED PRICE OF THE
FROM 100 TO 180 AND THE PRICE COMPOSITE OF MAJOR SUPERMARKET STORES
INDEXED PRICE OF THE COMPOSITE OF HAS INCREASED FROM 100 TO 172.]
MAJOR SUPERMARKET STORES HAS
INCREASED FROM 1OO TO 172.]
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[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Kroger's Strengths
[ ] Leading supermarket chain in Midwest and Southeast
* Existing #1 or #2 positions in 28 of 30 major markets
[ ] Large, well-run store base
* 1,400 food stores
* 800 convenience stores
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[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Kroger's Strengths
[ ] Strong franchises
[ ] Powerful private label business
[ ] Talented management team
[ ] Solid EPS growth
[ ] Improved operating margins
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[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Economies of Scale
[ ] Combined company will generate economies
from volume-based purchasing
* Food
* Health and beauty products
* General merchandise and seasonal items
* Supplies
* Equipment
* Raw materials
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[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Economies of Scale
[ ] Leverage capital expenditures across broader store base
* Information technology
* Manufacturing and distribution efficiencies
[ ] Sharing of best practices
* Fred Meyer's experience with multi-department and warehouse stores
* Kroger's pharmacy experience
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<TABLE>
<CAPTION>
[LOGO OF KROGER] Outstanding Supermarket Franchises
Banners Operating Area # of Stores Formats Average Store Size
<S> <C> <C> <C> <C>
[LOGO OF KROGER] Midwest/Southeast 1,138 Food & Drug 46,000 Sq. Ft.
Combination
[LOGO OF CITY MARKET] Western Colorado 43 Food & Drug 41,000 Sq. Ft.
Combination
[LOGO OF FRY'S FOOD
& DRUG STORES] Arizona 57 Food & Drug 56,000 Sq. Ft.
Combination
[LOGO OF KING
SOOPERS] Eastern Colorado 72 Food & Drug 57,000 Sq. Ft.
Combination
[LOGO OF DILLONS] Kansas 88 Food & Drug 41,000 Sq. Ft.
Combination
</TABLE>
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<TABLE>
<CAPTION>
[LOGO OF FRED MEYER, INC.] Outstanding Supermarket Franchises
Banners Operating Area # of Stores Formats Average Store Size
<S> <C> <C> <C> <C>
[LOGO OF FRED MEYER] Pacific Northwest 124 Multi-Department 142,000 Sq. Ft.
Intermountain States
[LOGO OF SMITH'S FOOD
& DRUG CENTERS] Intermountain States 157 Food & Drug 65,000 Sq. Ft.
Combination
[LOGO OF QFC QUALITY
FOOD CENTERS] Pacific Northwest 83 Premium 34,000 Sq. Ft.
[LOGO OF RALPHS] Southern California 313 Conventional 37,000 Sq. Ft.
[LOGO OF FOOD 4 LESS] Southern California 82 Price-Impact 53,000 Sq. Ft.
Warehouse
</TABLE>
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The "New" Kroger
[LOGOS OF:
KING SOOPERS CITY MARKET QFC QUALITY RALPHS
FOOD CENTERS
FRY'S FOOD KROGER FRED MEYER SAV-MOR FOODS
& DRUG STORES
DILLONS SMITH'S FOOD GERBES SUPER MARKETS FOOD 4 LESS]
& DRUG CENTERS
<PAGE>
[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
<TABLE>
<CAPTION>
Leading Positions in Major U.S. Markets
<S> <C> <C> <C>
Albuquerque, NM 1 Lexington, KY 1 Tucson, AZ 1
Atlanta, GA 1 Little Rock, AR 1 Wichita-Hutchinson, KS 1
Charleston-Huntington, WV 1 Los Angeles, CA 1 Dallas-Ft. Worth, TX 2
Cincinnati, OH 1 Louisville, KY 1 Detroit, MI 2
Colorado Springs-Pueblo, CO 1 Memphis, TN 1 El Paso, TX 2
Columbus, OH 1 Nashville, TN 1 Indianapolis, IN 2
Dayton, OH 1 Phoenix, AZ 1 Oxnard-Ventura, CA 2
Denver, CO 1 Salt Lake City, UT 1 Paducah, KY 2
Houston, TX 1 Savannah, GA 1 Portland, OR 2
Knoxville, TN 1 Seattle, WA 1 Roanoke, VA 2
Las Vegas, NV 1 Toledo, OH 1 South Bend, IN 2
</TABLE>
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[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Pro Forma Combined
Pro Forma
Kroger Fred Meyer Combined
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Sales $28 billion $15 billion $43 billion
EBITD $1.5 billion $1.3 billion $2.8 billion
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[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Synergies
[ ] Significant cost savings and synergy benefits
[ ] $225 million in annual cost savings within 3 years
* Purchasing & Merchandising
* Manufacturing/Distribution in-market efficiency
* General & Administrative saving
[ ] $75 million in the first 12 months
<PAGE>
[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Accretion Analysis
[ ] Neutral to EPS in 1999
[ ] Immediately accretive to cash flow per share
[ ] Significantly accretive to EPS in 2000 and beyond
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[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Financing Strategy
[ ] S&P reaffirms Kroger's investment grade rating
[ ] Existing bank credit facilities remain in place
[ ] Kroger and Fred Meyer public debt remains outstanding
<PAGE>
[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Capital Structure
Pro Forma
($ in millions) Kroger Fred Meyer Combined
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Total Debt 3,191 5,049 8,240
Total Shareholders'
Equity (602) 2,110 1,508
Total Capitalization $2,589 $7,159 $9,748
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<PAGE>
[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Anticipated Timing
Event Timing
[ ] HSR filing [ ] Late October
[ ] File Proxy/Registration [ ] Early November
Statement
[ ] Mail Proxy/Registration Statement [ ] Late December
[ ] Shareholder Meetings/ [ ] Early 1999
Closing
<PAGE>
[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Kroger's EPS growth target
increases to 16-18% in 2000
<PAGE>
[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
Multiple Drivers of Earnings Growth
[ ] Sales growth
[ ] Size and scale economies
[ ] Realization of cost savings
[ ] Deleveraging through strong free cash flow
[ ] New store growth in existing markets
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[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
National Supermarket Powerhouse
[ ] Creates nation's largest supermarket company
[ ] Broadest geographic coverage and widest spectrum of food retailing
formats
[ ] Leading shares in fast-growing markets
[ ] Substantial economies of scale
[ ] Significant cost savings
<PAGE>
[LOGO OF KROGER] [LOGO OF FRED MEYER, INC.]
The Nation's Largest
Supermarket Company
