SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: July 15, 1998
THE KROGER CO.
(Exact name of registrant as specified in its charter)
An Ohio Corporation No. 1-303 31-0345740
(State or other jurisdiction (Commission File (IRS employer
of incorporation) Number) Number)
1014 Vine Street
Cincinnati, OH 45201
(Address of principal
executive offices)
Registrant's telephone number: (513) 762-4000
<PAGE>
Item 5. Other Events
- ------ ------------
On July 15, 1998, the Company released its earnings
for the second quarter 1998 in the form attached
hereto as Exhibit 99.1.
Item 7. Financial Statements and Exhibits
- ------ ---------------------------------
(c) Exhibits
99.1 Other Exhibits--Earnings Release for
Second Quarter 1998
<PAGE>
SIGNATURE
----------
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.
July 15, 1998 By: (Paul W. Heldman)
Paul W. Heldman
Senior Vice President,
Secretary and General
Counsel
<PAGE>
EXHIBIT INDEX
--------------
Exhibit
- --------
99.1 Other Exhibits--Earnings Release for Second Quarter
1998
<PAGE>
Exhibit 99.1
------------
KROGER 2ND QUARTER PER SHARE:
48 CENTS VS. 41 CENTS
EXCLUDING ONE-TIME EXPENSES
CINCINNATI, Ohio, July 15, 1998 --- The Kroger Co. (NYSE: KR)
said today that earnings, earnings per share, operating cash
flow, and sales all established Company records for the 1998
second quarter, excluding one-time expenses.
In releasing the quarterly results, Kroger Chairman and Chief
Executive Officer Joseph A. Pichler said the Company is
raising its earnings per share target to a 15-17 percent
average annual increase for fiscal years 1999-2001 from the
previously stated target of a 13-15 percent average annual
increase. Pichler stated that the success of Kroger's programs
to achieve economies of scale in procurement and logistics,
returns from the Company's capital investments in stores, plus
the benefits of technology caused Kroger to raise its
financial goals. He also said the Company remains comfortable
with analysts' consensus estimates for FY 1998 excluding the
one-time expenses incurred in the first half of 1998.
Earnings before extraordinary items in the second quarter --
excluding one-time expenses associated with the realignment of
distribution operations and the closing of facilities
associated with consolidation of its Texas operations -- rose
17.3 percent to $126.8 million, or 48 cents per diluted share,
from $108.1 million, or 41 cents per diluted share, in the
1997 second quarter. On the same basis, operating cash flow
- -- earnings before interest, taxes, depreciation, and LIFO --
totaled $369.4 million, a 10 percent increase over the prior
year's quarter.
The one-time expenses reduced net earnings in the quarter by
$32.5 million, or 12 cents per diluted share, to $94.3
million, or 36 cents per diluted share. Operating cash flow
was reduced to $317 million. The following table illustrates
the effect of the one-time expenses on second quarter results:
<TABLE>
<CAPTION>
Excluding One-Time Including One-Time
Expenses Expenses
(in millions, except per share) (in millions, except per share)
------------------------------- -------------------------------
<S> <C> <C>
EBITD $369.4 $317.0
Net earnings $126.8 $ 94.3
Net per
diluted share $ 0.48 $ 0.36
</TABLE>
Total sales in the quarter increased 3.4 percent to a record
$6.44 billion, while food store sales increased 3.8 percent.
Identical food store sales increased 0.53 percent. Comparable
store sales, which include results from expanded and relocated
stores, increased 3 percent. "The sales performance in the
quarter was especially noteworthy because it was generated in
an environment of deflation for overall product costs,"
Pichler said.
He added that the consolidation of Texas retail operations and
changes in logistics will further strengthen the Company's
ability to reduce product costs. "The one-time expenses
incurred during the second quarter reflect the effect of
investments that are expected to reduce product costs and
improve distribution efficiencies," he said.
Net interest expense declined 7.7 percent in the second
quarter to $63.1 million from $68.4 million in the prior year
quarter. Net long term debt declined to $3.04 billion, a
decrease of $237 million from the 1997 second quarter.
Separately, Kroger said it changed its method of accounting
for inventory to the item cost method from the retail balance
method. The change, which the Company implemented during the
1998 second quarter, will improve the accuracy of product cost
calculations. The after-tax effect of the change is a charge
of $55.6 million, or 21 cents per diluted share, and is
reflected as a restatement of 1998 first quarter results.
Earnings before extraordinary items for the first two quarters
of FY 1998 were $146.0 million, or 55 cents per diluted share,
after the accounting change and the one-time expenses,
compared to $234.1 million, or 88 cents per diluted share,
excluding the one-time expenses and the accounting change. On
the same basis, operating cash flow for the first two quarters
was $562.3 million as compared to $704.4 million.
The foregoing statements regarding 1998-2001 plans or
expectations are forward looking statements, based on
information available to the Company as of the date of this
release. The Company's actual results could differ materially
due to competitive action, changes in capital markets, labor
disputes, material shortages, or delays in completing real
estate projects.
THE KROGER CO.
SALES AND EARNINGS
WITH ONE-TIME EXPENSES AND ACCOUNTING CHANGE
(in millions except per share amounts)
<TABLE>
<CAPTION>
2nd Quarter Ended 2 Quarters Ended
6/13/98 6/14/97 6/13/98 6/14/97
<S> <C> <C> <C> <C>
Sales $ 6,441.6 $ 6,231.8 $12,830.4 $ 12,371.2
======================== ========================
EBITD <F1><F2> $ 317.0 $ 335.8 $ 562.3 $ 645.5
LIFO $ (3.5) $ (3.5) $ (8.0) $ (8.0)
Interest $ (63.1) $ (68.4) $ (127.3) $ (138.1)
Depreciation $ (98.3) $ (88.2) $ (191.5) $ (173.6)
------------------------ -----------------------
Pretax earnings
before extra-
ordinary item $ 152.1 $ 175.7 $ 235.5 $ 325.8
Tax expense $ (57.8) $ (67.6) $ (89.5) $ (125.4)
------------------------ -----------------------
Earnings before
extraordinary
item $ 94.3 $ 108.1 $ 146.0 $ 200.4
Extraordinary
item <F3> $ 0.0 $ (3.0) $ (4.3) $ (8.2)
------------------------ -----------------------
Net earnings $ 94.3 $ 105.1 $ 141.7 $ 192.2
======================== =======================
Diluted earnings
per common
share:
From operations $ 0.36 $ 0.41 $ 0.55 $ 0.76
From extra-
ordinary item <F3> $ 0.00 $ (0.01) $ (0.02) $ (0.03)
------------------------ ------------------------
Diluted net
earnings per
common share $ 0.36 $ 0.40 $ 0.53 $ 0.73
======================== =======================
Number of
shares used in
diluted per
share calcu-
lation 265.1 262.1 265.0 262.3
</TABLE>
<F1> EBITD for the 2nd Quarter includes the effect of one-time
expenses totaling $52.4 million ($32.5 million after tax,
or 12 cents per diluted share). These expenses relate to
logistics initiatives which became operational in the 2nd
Quarter, $40.8 million; and expenses primarily due to
closing facilities resulting from the consolidation of
Texas operations, $11.6 million.
<F2> In addition to the expenses described in footnote (1),
the two quarters 1998 EBITD includes expenses totaling
$89.7 million ($55.6 million after-tax, or 21 cents per
diluted share) related to a change in the method of
accounting for inventory.
<F3> From the early retirement of debt.
<PAGE>
THE KROGER CO.
SALES AND EARNINGS
WITHOUT ONE-TIME EXPENSES AND ACCOUNTING CHANGE
(in millions except per share amounts)
<TABLE>
<CAPTION>
2nd Quarter Ended 2 Quarters Ended
6/13/98 6/14/97 6/13/98 6/14/97
<S> <C> <C> <C> <C>
Sales $ 6,441.6 $ 6,231.8 $12,830.4 $ 12,371.2
======================== ========================
EBITD <F1><F2> $ 369.4 $ 335.8 $ 704.4 $ 645.5
LIFO $ (3.5) $ (3.5) $ (8.0) $ (8.0)
Interest $ (63.1) $ (68.4) $ (127.3) $ (138.1)
Depreciation $ (98.3) $ (88.2) $ (191.5) $ (173.6)
------------------------ ------------------------
Pretax earnings
before extra-
ordinary item $ 204.5 $ 175.7 $ 377.6 $ 325.8
Tax expense $ (77.7) $ (67.6) $ (143.5) $ (125.4)
------------------------ ------------------------
Earnings before
extraordinary
item $ 126.8 $ 108.1 $ 234.1 $ 200.4
Extraordinary
item <F3> $ 0.0 $ (3.0) $ (4.3) $ (8.2)
------------------------ ------------------------
Net earnings $ 126.8 $ 105.1 $ 229.8 $ 192.2
======================== ========================
Diluted earnings
per common
share:
From operations $ 0.48 $ 0.41 $ 0.88 $ 0.76
From extra-
ordinary item <F3> $ 0.00 $ (0.01) $ (0.02) $ (0.03)
------------------------ ------------------------
Diluted net
earnings per
common share $ 0.48 $ 0.40 $ 0.86 $ 0.73
======================== ========================
Number of
shares used in
diluted per
share calcu-
lation 265.1 262.1 265.0 262.3
</TABLE>
<F1> EBITD for the 2nd Quarter excludes the effect of one-time
expenses totaling $52.4 million ($32.5 million after tax,
or 12 cents per diluted share). These expenses relate to
logistics initiatives which became operational in the 2nd
Quarter, $40.8 million; and expenses primarily due to
closing facilities in the consolidation of Texas
operations, $11.6 million.
<F2> In addition to the expenses described in footnote (1),
the two quarters 1998 EBITD excludes expenses totaling
$89.7 million ($55.6 million after-tax, or 21 cents per
diluted share) related to a change in the method of
accounting for inventory.
<F3> From the early retirement of debt.
<PAGE>
