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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: June 17, 1999
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THE KROGER CO.
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(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
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(Address of principal executive offices)
Registrant's telephone number: (513) 762-4000
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Item 5. Other Events
On June 17, 1999, the Company released its earnings for the first
quarter 1999 in the form attached hereto as Exhibit 99.1.
Item 7. Financial Statements and Exhibits
(c) Exhibits
99.1 Other Exhibits--Earnings Release for First Quarter 1999
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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.
June 17, 1999 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
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99.1 Other Exhibits--Earnings Release for First Quarter 1999
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Exhibit 99.1
KROGER NEWS From:
Corporate Affairs Department
The Kroger Co.
1014 Vine St.
Cincinnati, Ohio 45202-1100
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Media Contact: Gary Rhodes, The Kroger Co. (513) 762-1304
Investor Contact: Kathy Kelly, The Kroger Co. (513) 762-4969
KROGER REPORTS STRONG EARNINGS FOR FIRST QUARTER OF 1999
CINCINNATI, OH, June 17, 1999 -- The Kroger Co. (NYSE: KR) today
reported pre-split diluted earnings per share, excluding all merger-related
costs, of $0.54 for the first quarter of 1999, reflecting for the first time the
combined financial results of Kroger and Fred Meyer, Inc. These results
represent an increase of approximately 20% over estimated combined earnings of
$0.45 per share for the first quarter of 1998. The prior-year estimate includes
the actual results of Fred Meyer before merger-related costs and an estimate of
Kroger's pre-merger results, excluding one-time expenses, to reflect the change
to a new fiscal calendar last January.
Kroger's first-quarter results cover the 16-week period ended May 22,
1999, following the Company's decision earlier this year to change its fiscal
year-end to the Saturday closest to January 31. The 1999 figures also include a
full 16 weeks of results from Ralphs, which was acquired by Fred Meyer on March
10, 1998, thus contributing only 11 weeks of results during the 1998 period.
Adjusting for the change in Kroger's fiscal calendar to include the
16-week period ended May 23, 1998, and including the Ralphs store sales for the
entire first quarter of 1998, total sales in the first quarter of 1999 increased
approximately 5.5% to $13.5 billion.
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On this basis, identical food store sales, excluding the Hughes and Smitty's
stores, which were remodeled and converted to different banners, grew 2.1%.
Comparable store sales, which include relocations and expansions (excluding
Hughes and Smitty's), were up 3.2% for the quarter.
EBITDA (earnings before interest, taxes, depreciation, amortization,
LIFO and unusual items) for the first quarter of 1999 totaled $879.4 million.
"Kroger's performance in the first quarter of 1999 was very strong,"
said Joseph A. Pichler, Kroger chairman and chief executive officer. "These
results reflect the success of new merchandising initiatives, higher sales of
private-label products, the strong contribution of our convenience stores, and a
solid performance by our manufacturing operations." Mr. Pichler also noted that
the Company introduced more than 260 private-label products through the end of
the first quarter.
Kroger opened, expanded, relocated or acquired 44 stores during the
first quarter, increasing overall square footage by 5.1%. Capital expenditures
for the quarter totaled $441.5 million and net total debt decreased by $28
million to $8.3 billion.
Robert G. Miller, Kroger vice chairman and chief operating officer,
said the integration of the Kroger and Fred Meyer organizations is proceeding
smoothly. "We're off to a solid start, and we've already begun to leverage our
purchasing power to obtain better pricing for a broad array of products,
including back-to-school and holiday items."
The Company expects to achieve $225 million in synergy savings over the
next three years as a result of the merger. The Company projects the timing of
the annual savings by fiscal year to be as follows: 1999 -- $40 million; 2000 --
$115 million; 2001 -- $190 million; and 2002 and beyond -- $225 million.
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Mr. Pichler said the Company is making solid progress with its plans to
convert 35 Smith's stores in Phoenix and Tucson to the Fry's banner. To date, 14
stores have been converted, with the remainder expected to be completed by the
end of the summer. During the quarter, the Company successfully negotiated new
collective bargaining agreements in its Louisville, Los Angeles and Denver
divisions prior to the expiration of the previous agreements.
Separately, Kroger said the distribution date for additional shares
related to the Company's two-for-one stock split will be June 28. Shareholders
are entitled to receive certificates representing one additional share for each
share held as of the June 7 record date.
Looking ahead, Mr. Pichler said Kroger remains comfortable with
analysts' consensus pre-split earnings forecast for the 1999 fiscal year.
Headquartered in Cincinnati, Ohio, Kroger is the nation's largest
retail grocery chain. Following the recent merger with Fred Meyer, Inc. Kroger
now operates 2,206 grocery stores, 798 convenience stores, 380 fine jewelry
stores and 43 food processing facilities.
# # #
This press release contains certain forward-looking statements about
the future performance of the Company. These statements are based on
management's assumptions and beliefs in light of the information currently
available to it. We assume no obligation to update the information contained
herein. These forward-looking statements are subject to uncertainties and other
factors that could cause actual results to differ materially from such
statements including, but not limited to, material adverse changes in the
business or financial condition of Kroger and other factors affecting the
businesses of the Company which are described in filings with the Securities and
Exchange Commission.
The financial information in this release gives retroactive effect to
the merger of The Kroger Co. and Fred Meyer, Inc. on May 27, 1999, which will be
accounted for as a pooling of interests. Generally accepted accounting
principles prohibit giving effect to a consummated business combination
accounted for by the pooling-of-interests method in financial statements that do
not include the date of consummation. The quarter ended May 22, 1999 does not
extend through the date of consummation; however, the financial information
included in this release will be included in the historical consolidated
financial statements of The Kroger Co. and subsidiaries after financial results
covering the date of consummation are issued. Certain 1998 information included
in this release has been estimated
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in order to present the 1998 information as if the decision to change Kroger's
fiscal year had been made at the beginning of 1998. The 1998 information
included in the Company's Forms 10-Q filed with the SEC during 1999 will be for
different periods than those in the newly adopted fiscal year and may not agree
with certain 1998 estimated information included in this release.
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The Kroger Co.
Sales and Earnings
With One-Time Items
(in millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
1st Qtr 1st Qtr
1999 1998 (1) % Change
---------- ---------- ---------
<S> <C> <C> <C>
Sales $13,493.1 $10,429.2 29.4%
========= =========
EBITDA (2) $ 879.4 $ 641.5 37.1
LIFO $ (12.0) $ (10.5)
Interest $ (198.9) $ (164.0)
Depreciation $ (251.5) $ (197.8)
Amortization $ (29.5) $ (22.3)
One-time
items (3) $ (40.3) $ (254.4)
--------- ---------
Pre-tax
earnings
before
extraordinary
item $ 347.2 $ (7.5)
Tax expense $ (140.3) $ (12.5)
---------- ---------
Earnings
before
extraordinary
item $ 206.9 $ (20.0)
Extraordinary
item (4) $ 0.0 $ (220.7)
--------- ----------
Net
earnings $ 206.9 $ (240.7)
========= ==========
PRE-SPLIT
Diluted
earnings
per common share:
</TABLE>
5
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<TABLE>
<CAPTION>
1st Qtr 1st Qtr
1999 1998 (1) % Change
---------- ---------- ---------
<S> <C> <C> <C>
From
operations $ 0.48 $ (0.05)
From extra-
ordinary
item (4) $ 0.00 $ (0.55)
--------- ---------
Diluted net
earnings
per common
share $ 0.48 $ (0.60)
========= =========
Number of
shares used
in diluted
per share
calculation 431,674,605 400,313,837
POST-SPLIT (5)
Diluted
earnings
per common
share:
From
operations $ 0.24 $ (0.02)
From extra-
ordinary
item (4) $ 0.00 $ (0.28)
--------- ---------
Diluted net
earnings
per common
share $ 0.24 $ (0.30)
========= =========
Number of
shares used
in diluted
per share
calculation 863,349,210 800,627,674
</TABLE>
(1) The information for the first quarter of 1998 includes the results of the
operations of The Kroger Co. for the 12 weeks ended March 21, 1998, its
wholly owned subsidiary, Dillon Companies Inc., for the 13 weeks ended
March 28, 1998, and its wholly owned subsidiary, Fred Meyer, Inc., for the
16 weeks ended May 23, 1998. The Fred Meyer results exclude five weeks of
results of its wholly owned subsidiary, Ralphs, which was acquired in
March 1998.
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(2) EBITDA, as defined in our credit agreements, represents earnings before
interest, taxes, depreciation, amortization, LIFO and one-time items.
(3) The 1999 one-time items are merger-related costs. The 1998 one-time items
are merger-related costs ($164.7 million) and charges related to an
accounting change ($89.7 million).
(4) From the early retirement of debt.
(5) Represents earnings per share based on the increased number of shares to
be issued in connection with the Company's 2-for-1 stock split announced
in May.
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The Kroger Co.
Sales and Earnings
Without One-Time Items
(in millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
1st Qtr 1st Qtr
1999 1998 (1) % Change
---------- ---------- ---------
<S> <C> <C> <C>
Sales $13,493.1 $10,429.2 29.4%
========= =========
EBITDA (2) $ 879.4 $ 641.5 37.1
LIFO $ (12.0) $ (10.5)
Interest $ (198.9) $ (164.0)
Depreciation $ (251.5) $ (197.8)
Amortization $ (29.5) $ (22.3)
--------- ---------
Pre-tax
earnings
before
extraordinary
item $ 387.5 $ 246.9 57.0
Tax expense $ (156.5) $ (101.4)
--------- ---------
Earnings
before
extraordinary
item $ 231.0 $ 145.5 58.8
Extraordinary
item (3) $ 0.0 $ (220.7)
--------- ---------
Net
earnings $ 231.0 $ (75.2)
========= =========
PRE-SPLIT
Diluted
earnings
per common
share:
</TABLE>
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<TABLE>
<CAPTION>
1st Qtr 1st Qtr
1999 1998 (1) % Change
---------- ---------- ---------
<S> <C> <C> <C>
From
operations $ 0.54 $ 0.36
From extra-
ordinary
item (3) $ 0.00 $ (0.55)
--------- ---------
Diluted net
earnings
per common
share $ 0.54 $ (0.19)
========= =========
Number of
shares used
in diluted
per share
calculation 431,674,605 400,313,837
POST-SPLIT (4)
Diluted
earnings
per common
share:
From
operations $ 0.27 $ 0.18
From extra-
ordinary
item (3) $ 0.00 $ (0.27)
--------- ---------
Diluted net
earnings
per common
share $ 0.27 $ (0.09)
========= =========
Number of
shares used
in diluted
per share
calculation 863,349,210 800,627,674
</TABLE>
(1) The information for the first quarter of 1998 includes the results of the
operations of The Kroger Co. for the 12 weeks ended March 21, 1998, its
wholly owned subsidiary, Dillon Companies Inc., for the 13 weeks ended
March 28, 1998, and its wholly owned subsidiary, Fred Meyer, Inc., for the
16 weeks ended May 23, 1998. The Fred Meyer results exclude five weeks of
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results of its wholly owned subsidiary, Ralphs, which was acquired in March
1998.
(2) EBITDA, as defined in our credit agreements, represents earnings before
interest, taxes, depreciation, amortization, LIFO and one-time items.
(3) From the early retirement of debt.
(4) Represents earnings per share based on the increased number of shares to be
issued in connection with the Company's 2-for-1 stock split announced in
May.
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