<PAGE> 1
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
January 2, 1999
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
257,856,756 shares outstanding on
March 23, 1999
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 5, 1999: $15,712,730,035
Documents Incorporated by Reference:
Proxy Statement to be filed pursuant to Regulation 14A of the Exchange
Act on or before May 3, 1999 incorporated by reference into Parts II
and III of Form 10-K.
<PAGE> 2
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements:
Report of Independent Public Accountants
Consolidated Balance Sheet as of January 2, 1999 and December 27, 1997
Consolidated Statement of Operations and Accumulated Deficit for the
years ended January 2, 1999, December 27, 1997 and December 28, 1996
Consolidated Statement of Cash Flows for the years ended January 2,
1999, December 27, 1997 and December 28, 1996
Notes to Consolidated Financial Statements
Financial Statement Schedules:
There are no Financial Statement Schedules included with this filing
for the reason that they are not applicable or are not required or the
information is included in the financial statements or notes thereto
(b) Reports on Form 8-K.
On October 20, 1998, The Kroger Co. filed a current report on Form 8-K
with the SEC disclosing its unaudited earnings for the third quarter
1998, and its Agreement and Plan of Merger dated as of October 18,
1998, between The Kroger Co., Jobsite Holdings, Inc., and Fred Meyer,
Inc.
On October 23, 1998, The Kroger Co. filed a current report on Form 8-K
dated October 22, 1998, disclosing materials that were distributed at
meetings with analysts conducted in October 1998, relating to The
Kroger Co.'s proposed merger with Fred Meyer, Inc.
On December 8, 1998, The Kroger Co. filed a current report on Form 8-K
with the SEC disclosing Fred Meyer, Inc.'s financial information and
proformas
On December 11, 1998, The Kroger Co. filed a current report on Form 8-K
with the SEC disclosing its Underwriting Agreement dated December 8,
1998, among The Kroger Co. and the Underwriters named therein; its
Pricing Agreement dated December 8, 1998, among The Kroger Co.,
Goldman, Sachs & Co., Chase Securities Inc., and Salomon Smith Barney
Inc., relating to The Kroger Co.'s 6.80% Senior Notes due 2018; and its
Third Supplemental Indenture, dated as of December 11, 1998, between
The Kroger Co. and Star Bank, National Association, as Trustee,
relating to The Kroger Co.'s 6.80% Senior Notes due 2018
(c) Exhibits
2.1 Agreement and Plan of Merger, dated as of October 18, 1998,
among The Kroger Co., Jobsite Holdings, Inc. and Fred Meyer,
Inc. Incorporated by reference to Appendix A to The Kroger
Co.'s Registration Statement on Form S-4 (Registration No.
333-66961)
2.2 Stock Option Agreement, dated as of October 18, 1998, between
Fred Meyer, Inc. and The Kroger Co. Incorporated by reference
to Appendix B to The Kroger Co.'s Registration Statement on
Form S-4 (Registration No. 333-66961)
<PAGE> 3
2.3 Stock Option Agreement, dated as of October 18, 1998, between
The Kroger Co. and Fred Meyer, Inc. Incorporated by reference
to Appendix C to The Kroger Co.'s Registration Statement on
Form S-4 (Registration No. 333-66961)
3.1 Amended Articles of Incorporation of The Kroger Co. are
incorporated by reference to Exhibit 3.1 of The Kroger Co.'s
Quarterly Report on Form 10-Q for the quarter ended October 3,
1998. The Kroger Co.'s Regulations are incorporated by
reference to Exhibit 4.2 of The Kroger Co.'s Registration
Statement on Form S-3 (Registration No. 33-57552) filed with
the SEC on January 28, 1993
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
10.1 Material Contracts - Third Amended and Restated Employment
Agreement dated as of July 22, 1993, between the Company and
Joseph A. Pichler is hereby incorporated by reference to
Exhibit 10.1 to the Company's Form 10-Q for the quarter ended
October 9, 1993
*12.1 Statement of Computation of Ratio of Earnings to Fixed Charges
*21.1 Subsidiaries of the Registrant
23.1 Consent of Independent Public Accountants
23.2 Consent of Independent Public Accountant
*24.1 Powers of Attorney
*27.1 Financial Data Schedule
99.1 Financial Statements for The Kroger Co. Savings Plan for the
Year Ended 1998
99.2 Financial Statements for the Dillon Companies, Inc. Employee
Stock Ownership Plan and Trust for the Year Ended 1998
- ---------------------
* Previously filed.
<PAGE> 4
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 27, 1999 By (*Joseph A. Pichler)
Joseph A. Pichler, Chairman
of the Board of Directors and
Chief Executive Officer
Dated: April 27, 1999 By (*W. Rodney McMullen)
W. Rodney McMullen
Senior Vice President and
Chief Financial Officer
Dated: April 27, 1999 By (*J. Michael Schlotman)
J. Michael Schlotman
Vice President & Corporate Controller
and Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities indicated on the 27th day of April, 1999.
(*Reuben V. Anderson) Director
Reuben V. Anderson
(*John L. Clendenin) Director
John L. Clendenin
(*David B. Dillon) President, Chief Operating
David B. Dillon Officer, and Director
(*John T. LaMacchia) Director
John T. LaMacchia
(*Edward M. Liddy) Director
Edward M. Liddy
(*Clyde R. Moore) Director
Clyde R. Moore
(*T. Ballard Morton, Jr). Director
T. Ballard Morton, Jr.
_______________________ Director
Thomas H. O'Leary
(Katherine D. Ortega) Director
Katherine D. Ortega
<PAGE> 5
(*Joseph A. Pichler) Chairman of the Board of
Joseph A. Pichler Directors, Chief Executive
Officer, and Director
(*Martha Romayne Seger) Director
Martha Romayne Seger
________________________ Director
Bobby S. Shackouls
(*James D. Woods) Director
James D. Woods
*By: (Bruce M. Gack)
Bruce M. Gack
Attorney-in-fact
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
The Kroger Co. on Form S-8 (File No. 33-2056), Form S-8 (File No. 2-98858), Form
S-8 (File No. 33-20734), Form S-8 (File No. 33-25698), Form S-8 File No.
(33-38121), Form S-8 (File No. 33-38122), Form S-8 (File No. 33-53747), Form S-8
(File No. 33-55501), Form S-8 (File No. 333-11859), Form S-8 (File
No.333-11909), Form S-8 (File No. 333-27211), Form S-4 (File No. 333-66961), and
Form S-3 (File No. 333-74389) of our report dated January 28, 1999, on our
audits of the consolidated financial statements of The Kroger Co. as of January
2, 1999 and December 27, 1997, and for the years ended January 2, 1999, December
27, 1997, and December 28, 1996, which report is included in this Annual Report
on Form 10-K.
(PricewaterhouseCoopers LLP)
PricewaterhouseCoopers LLP
Cincinnati, Ohio
April 26, 1999
<PAGE> 1
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, 1999, on
our audits of the financial statements and financial statement schedules of The
Kroger Co. Savings Plan as of December 31, 1998 and 1997, and for the years then
ended, which report is included in this annual report on Form 10-K.
We also 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 9, 1999, 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, 1998 and 1997, and for the years then ended, which report is
included in this annual report on Form 10-K.
(PricewaterhouseCoopers LLP)
PricewaterhouseCoopers LLP
Cincinnati, Ohio
April 26, 1999
<PAGE> 1
Exhibit 99.1
------------
The Kroger Co. Savings Plan
Report On Audits Of Financial Statements And Supplemental Schedules
For The Years Ended December 31, 1998 and 1997
<PAGE> 2
The Kroger Co. Savings Plan
Index To Financial Statements
December 31, 1998 and 1997
Pages
-----
Report of Independent Accountants 2
Statement of Net Assets Available
For Plan Benefits at December 31, 1998 3
Statement of Net Assets Available
For Plan Benefits at December 31, 1997 4
Statement of Changes in Net Assets
Available For Plan Benefits for
the year ended December 31, 1998 5
Statement of Changes in Net Assets
Available For Plan Benefits for
the year ended December 31, 1997 6
Notes to Financial Statements 7-8
Item 27a - Schedule of Assets Held for Investment
Purposes at December 31, 1998 9
Item 27d - Schedule of Reportable Transactions
for the year ended December 31, 1998 10
<PAGE> 3
Report of Independent Accountants
---------------------------------
To the Administrative Committee of The Kroger Co. Savings Plan
In our opinion, the accompanying statements of net assets available for plan
benefits and the related statements of changes in net assets available for plan
benefits present fairly, in all material respects, the financial position of The
Kroger Co. Savings Plan at December 31, 1998 and 1997. 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 of these statements in accordance with generally accepted
auditing standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
In our opinion, the accompanying supplemental schedules of assets held for
investment purposes and reportable transactions are fairly stated in all
material respects in relation to the basic financial statements, taken as a
whole. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. This information is presented for
purposes of additional analysis and is not a required part of the basic
financial statements, but is 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. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements.
(PricewaterhouseCoopers LLP)
Cincinnati, Ohio
April 16, 1999
<PAGE> 4
THE KROGER CO. SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
at December 31, 1998
(In thousands of dollars)
--------------------
<TABLE>
<CAPTION>
1998
-------------------------------------------------------------------------
MERRILL
LYNCH MERRILL MERRILL AMERICAN
EMPLOYER EQUITY LYNCH LYNCH CAPITAL
STOCK INDEX BASIC GLOBAL EMERGING TEMPLETON
ASSETS FUND TRUST VALUE ALLOCATION GROWTH FOREIGN
---------- -------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investments:
The Kroger Co. common shares
(Cost - $313,244) $1,636,141
Contracts with insurance
companies (stated at
contract value)
Mutual funds (cost - $70,531) $26,195 $9,271 $32,398 $11,014
Collective investment trust
(cost - $57,437) $118,631
Participant loans
Temporary cash investments
---------- -------- --------- ---------- ---------- ---------
Total investments 1,636,141 118,631 26,195 9,271 32,398 11,014
Receivables:
Employer contributions 6,293
Interest and dividends
---------- -------- --------- ---------- ---------- ---------
Total assets 1,642,434 118,631 26,195 9,271 32,398 11,014
---------- -------- --------- ---------- ---------- ---------
LIABILITIES
Payable for administrative
fees
---------- -------- --------- ---------- ---------- ---------
Total liabilities
---------- -------- --------- ---------- ---------- ---------
Net assets available for
plan benefits $1,642,434 $118,631 $26,195 $9,271 $32,398 $11,014
========== ======== ========= ========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
1998
-----------------------------------------------
TEMPORARY
FIXED PARTICIPANT INVESTMENT
ASSETS INCOME LOANS FUND TOTAL
--------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Investments:
The Kroger Co. common shares
(Cost - $313,244) $1,636,141
Contracts with insurance
companies (stated at
contract value) $130,970 130,970
Mutual funds (cost - $70,531) 78,878
Collective investment trust
(cost - $57,437) 118,631
Participant loans $27,059 27,059
Temporary cash investments 28,303 $5,028 33,331
--------- ----------- ---------- ----------
Total investments 159,273 27,059 5,028 2,025,010
Receivables:
Employer contributions 6,293
Interest and dividends 388 388
--------- ----------- ---------- ----------
Total assets 159,273 27,059 5,416 2,031,691
--------- ----------- ---------- ----------
LIABILITIES
Payable for administrative
fees 140 140
--------- ----------- ---------- ----------
Total liabilities 140 140
--------- ----------- ---------- ----------
Net assets available for
plan benefits $159,273 $27,059 $5,276 $2,031,551
========= =========== ========== ==========
</TABLE>
The accompanying notes are an
integral part of the
financial statements.
3
<PAGE> 5
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
ASSETS FUND TRUST VALUE ALLOCATION GROWTH FOREIGN
---------- -------- --------- ---------- ---------- ---------
<S> <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)
Mutual funds (cost - $59,597) $20,966 $10,018 $21,595 $12,842
Collective investment trust
(cost - $50,757) $92,405
Participant loans
Temporary cash investments
---------- -------- --------- ---------- ---------- ---------
Total investments 1,050,160 92,405 20,966 10,018 21,595 12,842
Receivables:
Employee contributions 1,704 258 87 45 102 55
Employer contributions 3,354
Interest and dividends
---------- -------- --------- ---------- ---------- ---------
Total assets 1,055,218 92,663 21,053 10,063 21,697 12,897
---------- -------- --------- ---------- ---------- ---------
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
========== ======== ========= ========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
1997
-----------------------------------------------
TEMPORARY
FIXED PARTICIPANT INVESTMENT
ASSETS INCOME LOANS FUND TOTAL
--------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Investments:
The Kroger Co. common shares
(Cost - $272,336) $1,050,160
Contracts with insurance
companies (stated at
contract value) $105,394 105,394
Mutual funds (cost - $59,597) 65,421
Collective investment trust
(cost - $50,757) 92,405
Participant loans $21,117 21,117
Temporary cash investments 16,583 $643 17,226
--------- ----------- ---------- ----------
Total investments 121,977 21,117 643 1,351,723
Receivables:
Employee contributions 321 2,572
Employer contributions 3,354
Interest and dividends 273 273
--------- ----------- ---------- ----------
Total assets 122,298 21,117 916 1,357,922
--------- ----------- ---------- ----------
LIABILITIES
Payable for administrative
fees 120 120
--------- ----------- ---------- ----------
Total liabilities 120 120
--------- ----------- ---------- ----------
Net assets available for
plan benefits $122,298 $21,117 $796 $1,357,802
========= =========== ========== ==========
</TABLE>
The accompanying notes are an
integral part of the
financial statements.
4
<PAGE> 6
THE KROGER CO. SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the year ended December 31, 1998
(In thousands of dollars)
--------------------
<TABLE>
<CAPTION>
1998
------------------------------------------------------------------------
MERRILL
LYNCH MERRILL MERRILL AMERICAN
EMPLOYER EQUITY LYNCH LYNCH CAPITAL
STOCK INDEX BASIC GLOBAL EMERGING TEMPLETON
FUND TRUST VALUE ALLOCATION GROWTH FOREIGN
---------- -------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Employee contributions $ 40,196 $ 5,959 $2,341 $ 915 $2,474 $1,090
Employer contributions 6,296
Transfer from (to) other funds (51,224) (934) 1,878 (1,391) 1,741 (2,023)
---------- -------- --------- ---------- ---------- ---------
Total contributions
and transfers (4,732) 5,025 4,219 (476) 4,215 (933)
Investment income:
Dividends 2,170 1,084 1,497 1,186
Interest 1,638 217 32 14 38 16
Net appreciation(depreciation) 642,920 26,087 294 (1,042) 6,490 (1,706)
---------- -------- --------- ---------- ---------- ---------
Total additions 639,826 31,329 6,715 (420) 12,240 (1,437)
---------- -------- --------- ---------- ---------- ---------
Distributions to participants 52,611 5,360 1,572 371 1,539 445
Administrative expenses, net
---------- -------- --------- ---------- ---------- ---------
Total deductions 52,611 5,360 1,572 371 1,539 445
---------- -------- --------- ---------- ---------- ---------
Net increase 587,215 25,969 5,143 (791) 10,701 (1,882)
Net assets available for
plan benefits:
Beginning of year 1,055,219 92,662 21,052 10,062 21,697 12,896
---------- -------- --------- ---------- ---------- ---------
End of year $1,642,434 $118,631 $26,195 $9,271 $32,398 $11,014
========== ======== ========= ========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
1998
-----------------------------------------------
TEMPORARY
FIXED PARTICIPANT INVESTMENT
INCOME LOANS FUND TOTAL
--------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Employee contributions $ 7,795 $ 60,770
Employer contributions 6,296
Transfer from (to) other funds 42,819 $ 7,445 $1,689
--------- ----------- ---------- ----------
Total contributions
and transfers 50,614 7,445 1,689 67,066
Investment income:
Dividends 5,937
Interest 9,306 115 11,376
Net appreciation(depreciation) 673,043
--------- ----------- ---------- ----------
Total additions 59,920 7,445 1,804 757,422
--------- ----------- ---------- ----------
Distributions to participants 22,520 1,502 (2,672) 83,248
Administrative expenses, net 425 425
--------- ---------- ---------- ----------
Total deductions 22,945 1,502 (2,672) 83,673
--------- ---------- ---------- ----------
Net increase 36,975 5,943 4,476 673,749
Net assets available for
plan benefits:
Beginning of year 122,298 21,116 800 1,357,802
--------- ---------- ---------- ----------
End of year $159,273 $27,059 $5,276 $2,031,551
========= ========== ========== ==========
</TABLE>
The accompanying notes are an
integral part of the
financial statements.
5
<PAGE> 7
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
FUND TRUST VALUE ALLOCATION GROWTH FOREIGN
---------- -------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Employee contributions $ 34,885 $ 5,823 $1,891 $1,067 $2,369 $1,281
Employer contributions 3,354
Transfer from (to) other funds 572 (996) 1,378 (166) (2,021) 350
---------- -------- --------- ---------- ---------- ---------
Total contributions
and transfers 38,811 4,827 3,269 901 348 1,631
Investment income:
Dividends 1,557 1,288 1,935 1,384
Interest 1,250 176 23 14 37 16
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
---------- -------- --------- ---------- ---------- ---------
Distributions to participants 25,967 2,963 818 633 710 773
Administrative expenses, net
---------- -------- --------- ---------- ---------- ---------
Total deductions 25,967 2,963 818 633 710 773
---------- -------- --------- ---------- ---------- ---------
Net increase 393,243 24,412 6,811 1,270 3,052 1,601
Net assets available for
plan benefits:
Beginning of year 661,976 68,250 14,241 8,792 18,645 11,295
---------- -------- --------- ---------- ---------- ---------
End of year $1,055,219 $92,662 $21,052 $10,062 $21,697 $12,896
========== ======== ========= ========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
1997
-----------------------------------------------
TEMPORARY
FIXED PARTICIPANT INVESTMENT
INCOME LOANS FUND TOTAL
--------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Employee contributions $ 8,732 $ 56,048
Employer contributions 3,354
Transfer from (to) other funds (3,669) $ 5,494 $(942)
--------- ----------- ---------- ----------
Total contributions
and transfers 5,063 5,494 (942) 59,402
Investment income:
Dividends 6,164
Interest 8,638 93 10,247
Net appreciation(depreciation) 404,786
--------- ----------- ---------- ----------
Total additions 13,701 5,494 (849) 480,599
--------- ----------- ---------- ----------
Distributions to participants 11,295 1,041 (271) 43,929
Administrative expenses, net 448 448
--------- ---------- ---------- ----------
Total deductions 11,743 1,041 (271) 44,377
--------- ---------- ---------- ----------
Net increase 1,958 4,453 (578) 436,222
Net assets available for
plan benefits:
Beginning of year 120,340 16,663 1,378 921,580
--------- ---------- ---------- ----------
End of year $122,298 $21,116 $800 $1,357,802
========= ========== ========== ==========
</TABLE>
The accompanying notes are an
integral part of the
financial statements.
6
<PAGE> 8
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 1.5%.
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 $10,000
or 19% (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 1998, the Company made matching and supplemental contributions. The
supplemental contribution was 4%. In 1997, the Company made a matching
contribution but did not make a supplemental contribution.
7
<PAGE> 9
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:
1998 1997
------------ ------------
Fair value $135,981,239 $108,385,328
Crediting interest rates 5.4% to 7.3% 6.0% to 7.3%
Average yield 6.8% 7.1%
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 March 1998, in
which the Internal Revenue Service stated that the Plan, as then
designed, was in compliance with 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> 10
THE KROGER CO. SAVINGS PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
at December 31, 1998
(In thousands of dollars)
-------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES 1998
-------
CARRYING
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT COST VALUE
- --------------------------------- --------------- ---------- ----------
<S> <C> <C> <C>
EMPLOYER STOCK FUND
-------------------
The Kroger Co. common shares 27,043,649 shs. $ 313,244 $1,636,141
MERRILL LYNCH EQUITY INDEX TRUST
--------------------------------
Collective Investment Trust 1,413,581 shs. 57,437 118,631
MERRILL LYNCH BASIC VALUE
-------------------------
Mutual Funds 688,992 shs. 22,969 26,195
MERRILL LYNCH GLOBAL ALLOCATION
-------------------------------
Mutual Funds 735,187 shs. 10,420 9,271
AMERICAN CAPITAL EMERGING GROWTH
--------------------------------
Mutual Funds 672,433 shs. 24,404 32,398
TEMPLETON FOREIGN
-----------------
Mutual Funds 1,312,699 shs. 12,738 11,014
FIXED INCOME
------------
Guaranteed Investment Contracts(GICs) 2 2
Synthetic GICs 130,968 135,979
Wrapper Contracts for Synthetic GICs (5,011)
---------- ----------
130,970 130,970
PARTICIPANT LOANS
-----------------
Loans to Participants 0 27,059
Temporary Cash Investments 33,719 33,719
---------- ----------
Total $ 605,901 $2,025,398
========== ==========
</TABLE>
9
<PAGE> 11
THE KROGER CO. SAVINGS PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For the Year Ended December 31, 1998
(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 1080 2,388,034 $111,374
SELL Kroger Co. Common Stock 1338 3,467,293 65,469 $163,318 $97,849
POOLED SEPARATE A/C(GICS)
BUY Fixed Income Fund 1133 113,339,904 113,340
SELL Fixed Income Fund 1189 76,044,030 76,043 76,044 1
TEMPORARY INVESTMENT FUNDS
BUY Temporary Investment Fund 252 158,306,516 158,307
SELL Temporary Investment Fund 250 156,564,640 156,565 156,565
</TABLE>
10
<PAGE> 1
EXHIBIT 99.2
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
December 31, 1998 and 1997
Table of Contents
-----------------
Financial Statements: Pages
- --------------------- -----
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
Supplemental Schedules: Schedule
- ----------------------- --------
Item 27(a) - Schedule of Assets Held for Investment Purposes 1
Item 27(d) - Schedule of Reportable Transactions 2
All other schedules required by Form 5500 have been omitted as being not
applicable.
<PAGE> 2
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Trust Committee
Dillon Companies, Inc.
Employees' Stock Ownership and Savings Plan
In our opinion, the accompanying statement of net assets available for plan
benefits and the related statement of changes in net assets available for plan
benefits present fairly, in all material respects, the financial position of
Dillon Companies, Inc. Employees' Stock Ownership and Savings Plan at December
31, 1998 and 1997. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
In our opinion, the accompanying supplemental schedules of assets held for
investment purposes and reportable transactions are fairly stated in all
material respects in relation to the basic financial statements, taken as a
whole. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. This information is presented for
purposes of additional analysis and is not a required part of the basic
financial statements, but is 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. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements.
(PricewaterhouseCoopers LLP)
Cincinnati, Ohio
April 9, 1999
<PAGE> 3
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Statement of Net Assets
Available for Plan Benefits
As of December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------- ------------
Assets
- ------
<S> <C> <C>
Cash and cash equivalents $ 4,919,899 $ 7,486,499
Investment contracts with insurance companies 661,350 5,708,750
Investments in BASIC 28,853,965 28,232,408
Investments in PIMCO 22,279,441 20,116,767
Investments in State Street Fixed Fund 16,127,809 16,402,062
Investments in CDC Investment Management 5,264,821 4,884,465
Investments in Transamerica Life Insurance 8,103,865 -
The Kroger Co. common stock 654,913,963 412,737,653
Trust funds managed by:
Sanford C. Bernstein & Co. 27,196,483 24,031,425
Mellon Capital Stock Index Fund 37,551,936 28,342,734
----------- -----------
Total assets 805,873,532 547,942,763
----------- -----------
Liabilities
- -----------
Accounts payable 187,427 136,241
Dividends payable 16,763 16,763
----------- -----------
Total liabilities 204,190 153,004
----------- -----------
Net assets available for plan benefits $805,669,342 $547,789,759
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
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, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------- ------------
<S> <C> <C>
Additions to net assets attributed to:
Investment income:
Net appreciation in fair value of investments:
The Kroger Co. common stock $260,908,978 $150,678,679
----------- -----------
Interest:
Short-term investments 186,902 113,490
Investment contracts with insurance companies, investments in BASIC,
investments in PIMCO, investments in State Street Fixed Fund,
investments in CDC Investment Management,
investments in Transamerica Life Insurance 5,627,138 5,828,533
----------- -----------
5,814,040 5,942,023
Net investment income of trust funds managed by:
Sanford C. Bernstein & Co. 3,309,564 4,224,362
Mellon Capital Stock Index Fund 8,085,828 6,961,650
----------- -----------
11,395,392 11,186,012
Contributions:
Employer 2,533,545 1,272,049
Employee 27,018,626 25,374,816
----------- -----------
29,552,171 26,646,865
Total additions 307,670,581 194,453,579
----------- -----------
Deductions from net assets attributed to:
Benefits paid to participants 49,711,845 29,209,099
Administrative expenses 79,153 82,167
----------- -----------
Total deductions 49,790,998 29,291,266
----------- -----------
Increase in net assets available for plan benefits 257,879,583 165,162,313
Net assets available at beginning of period 547,789,759 382,627,446
----------- -----------
Net assets available at end of period $805,669,342 $547,789,759
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
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 on 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. 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.
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 Company currently has discontinued contributions to the ESOP
portion of the Plan and has no present intentions to resume such
contributions.
<PAGE> 6
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Notes to Financial Statements, Continued
December 31, 1998 and 1997
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, 1998:
* Investment contracts with an insurance company with annual
crediting interest rates of 14.40% and maturities of six
months.
* Benefit Accessible Securities Investment Contracts (BASIC)
with annual crediting interest rates ranging from 6.00% to
8.50% and maturities from one to ten years.
* Investment in Pacific Investment Management Company (PIMCO)
with a variable crediting interest rate of 7.22%. 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
6.72%. 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 two to
three years.
* Investment in Transamerica Life Insurance and Annuity Company
(J.P. Morgan Investment Management Inc.) with a variable
crediting interest rate of 6.05%. The variable crediting
interest rate is adjusted quarterly.
<PAGE> 7
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Notes to Financial Statements, Continued
December 31, 1998 and 1997
4) FIXED INVESTMENTS, CONTINUED
The crediting interest rate for investment contracts with an insurance
company, BASIC, and CDC Investment Management is the contract rate. The
crediting interest rate for investments in PIMCO, State Street Fixed
Fund, and J.P. Morgan Investment Management Inc. 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:
1998 1997
------------- ---------
Fair Value $90,158,673 $85,047,367
Average Yield 7.19% 7.39%
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> 8
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Notes to Financial Statements, Continued
December 31, 1998 and 1997
8) SUMMARY OF CHANGES IN INVESTMENT OPTIONS
<TABLE>
<CAPTION>
Kroger
Fixed Index Balanced Stock Total
----------- ---------- ---------- ----------- -----------
1998
- ----
<S> <C> <C> <C> <C> <C>
ESOP
Beginning Balance 12-31-97 $ 2,661,683 $ 646,068 $ 968,956 $124,729,177 $ 129,005,884
Transfers 460,103 175,156 (78,550) (556,709) -
Withdrawals (329,183) (64,365) (176,862) (10,804,366) (11,374,776)
Earnings, net 177,697 173,724 118,368 77,762,648 78,232,437
----------- ---------- ---------- ----------- -----------
Ending Balance 12-31-98 $ 2,970,300 $ 930,583 $ 831,912 $191,130,750 195,863,545
=========== ========== ========== =========== -----------
401(k)
Beginning Balance 12-31-97 $ 79,366,092 $28,034,565 $23,374,742 $288,008,476 418,783,875
Transfers (557,208) 23,314 (661,359) 1,195,253 -
Withdrawals (7,563,752) (1,988,622) (1,774,637) (27,010,058) (38,337,069)
Contributions -- Employee 6,076,149 2,730,775 2,302,034 15,909,668 27,018,626
Contributions -- Employer - - - 2,533,545 2,533,545
Earnings, net 5,557,222 7,912,398 3,190,871 183,146,329 199,806,820
----------- ---------- ---------- ----------- -----------
Ending Balance 12-31-98 $ 82,878,503 $36,712,430 $26,431,651 $463,783,213 609,805,797
=========== ========== ========== =========== -----------
Total $805,669,342
===========
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
===========
</TABLE>
<PAGE> 9
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, 1998
<TABLE>
<CAPTION>
Annual
Interest Maturity Carrying
Rate Date Cost Value
--------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Cash and Cash Equivalents:
- --------------------------
Short Term Investments with PIMCO $ 19,466,314 $ 19,450,012
=========== ===========
Allocation:
-----------
Profit Sharing $ 13,113,059 $ 13,102,078
Pension 350,666 350,372
ESOP 401(k) 6,002,589 5,997,562
----------- -----------
$ 19,466,314 $ 19,450,012
=========== ===========
</TABLE>
<PAGE> 10
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, 1998
<TABLE>
<CAPTION>
Annual
Interest Maturity Carrying
Rate Date Cost Value
--------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Investment Contracts with Insurance Company:
- --------------------------------------------
Mutual Benefit Life of New Jersey 14.40% 1999 $ 1,500,000 $ 2,253,460
----------- -----------
Total Dillon Companies, Inc.
Employee Master Trust $ 1,500,000 $ 2,253,460
=========== ===========
Allocation:
-----------
Profit Sharing $ 972,240 $ 1,460,603
Pension 87,537 131,507
ESOP 401(k) 440,223 661,350
----------- -----------
$ 1,500,000 $ 2,253,460
=========== ===========
</TABLE>
<PAGE> 11
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, 1998
<TABLE>
<CAPTION>
Annual
Interest Maturity Carrying
Rate Date Cost Value
-------- -------- ------------ ------------
Investments in BASIC:
- ---------------------
<S> <C> <C> <C> <C>
FNMA 90-128H 8.500% 2000 $ 69,669 $ 198,968
FNMA 92-16KD 7.000% 2005 4,759,312 4,901,266
FNMA 92-134H 7.500% 2005 6,838,022 7,117,878
FHLMC 1365PI 7.250% 2005 3,961,844 4,100,261
FNMA 92-182PH 7.000% 2005 2,881,109 3,054,136
FNMA 92-200H 7.000% 2006 2,946,875 3,087,067
FHLMC 1458J 7.000% 2005 4,856,601 5,059,241
FHLMC 1457PJ 7.000% 2006 4,922,875 5,093,469
FHLMC 1542H 6.500% 2003 6,032,812 6,139,119
FHLMC 1625H 6.000% 2008 9,695,312 9,855,544
FNMA 93-134G 6.500% 2006 7,415,000 7,689,667
FNMA 94-48E 6.000% 2007 6,002,062 6,291,641
FNMA 94-10PC 6.500% 2005 9,006,250 9,382,042
5 YR UST 7.750% 1999 4,005,212 4,157,252
10 YR UST 7.875% 2004 4,042,185 4,069,288
FNMA 93-107D 6.500% 2002 2,902,969 2,966,015
FNMA 93-118H 6.500% 2004 5,932,992 5,981,907
FNMA 93-209J 6.000% 2008 4,641,333 4,744,337
Pension - BASIC Valuation - 43,394
----------- -----------
Total Dillon Companies, Inc.
Employee Master Trust $ 90,912,434 $ 93,932,492
=========== ===========
Fair Value $101,541,988
Wrap Value (7,609,496)
-----------
$ 93,932,492
===========
Allocation:
-----------
Profit Sharing $ 61,704,118 $ 63,724,441
Pension 1,269,138 1,310,692
Pension - BASIC Valuation - 43,394
ESOP 401(k) 27,939,178 28,853,965
----------- -----------
$ 90,912,434 $ 93,932,492
=========== ===========
</TABLE>
<PAGE> 12
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, 1998
<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 7.220% Variable $ 51,750,000 $ 71,483,943
=========== ===========
Fair Value $ 75,238,374
Wrap Value (3,754,431)
-----------
$ 71,483,943
===========
Allocation:
-----------
Profit Sharing $ 35,621,048 $ 49,204,502
Pension - -
ESOP 401(k) 16,128,952 22,279,441
----------- -----------
$ 51,750,000 $ 71,483,943
=========== ===========
Investments in State Street Fixed Fund:
- ---------------------------------------
Total Dillon Companies, Inc.
Employee Master Trust 6.721% Variable $ 38,750,000 $ 51,746,333
=========== ===========
Fair Value $ 55,087,704
Wrap Value (3,341,371)
-----------
$ 51,746,333
===========
Allocation:
-----------
Profit Sharing $ 26,672,765 $ 35,618,524
Pension - -
ESOP 401(k) 12,077,235 16,127,809
----------- -----------
$ 38,750,000 $ 51,746,333
=========== ===========
Investments in CDC Investment Management:
- -----------------------------------------
Total Dillon Companies, Inc. 6.200%
Employee Master Trust to 6.450% Variable $ 15,000,025 $ 16,892,263
=========== ===========
Fair Value $ 17,068,071
Wrap Value (175,808)
-----------
$ 16,892,263
===========
Allocation:
-----------
Profit Sharing $ 10,324,959 $ 11,627,442
Pension - -
ESOP 401(k) 4,675,066 5,264,821
----------- -----------
$ 15,000,025 $ 16,892,263
=========== ===========
</TABLE>
<PAGE> 13
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, 1998
<TABLE>
<CAPTION>
Annual
Interest Maturity Carrying
Rate Date Cost Value
--------- ---------- ------------ --------------
<S> <C> <C> <C> <C>
Investments in Transamerica Life Insurance:
- -------------------------------------------
Total Dillon Companies, Inc.
Employee Master Trust $ 25,000,000 $ 26,001,379
=========== =============
Fair Value $ 26,058,970
Wrap Value (57,591)
-------------
$ 26,001,379
=============
Allocation:
-----------
Profit Sharing $ 17,208,235 $ 17,897,514
Pension - -
ESOP 401(k) 7,791,765 8,103,865
----------- -------------
$ 25,000,000 $ 26,001,379
=========== =============
Investments in The Kroger Co. Common Stock:
- -------------------------------------------
Total Dillon Companies, Inc.
Employee Master Trust $166,415,369 $1,044,980,578
=========== =============
Allocation: Shares
----------- ----------
Profit Sharing 6,236,447 $ 78,298,302 $ 377,305,067
Pension 210,935 1,271,404 12,761,548
ESOP 401(k) 10,825,024 86,845,663 654,913,963
---------- ----------- -------------
17,272,406 $166,415,369 $1,044,980,578
========== =========== =============
</TABLE>
<PAGE> 14
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, 1998
<TABLE>
<CAPTION>
Annual
Interest Maturity Carrying
Rate Date Cost Value
-------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Investments in Trust Funds Managed by:
- --------------------------------------
Sanford C. Bernstein & Co.:
---------------------------
Total Dillon Companies, Inc.
Employee Master Trust $ 66,285,819 $ 81,181,811
=========== ===========
Allocation:
-----------
Profit Sharing $ 44,079,599 $ 53,985,328
Pension - -
ESOP 401(k) 22,206,220 27,196,483
----------- -----------
$ 66,285,819 $ 81,181,811
=========== ===========
Mellon Capital Stock Index Fund:
--------------------------------
Total Dillon Companies, Inc.
Employee Master Trust $ 42,776,376 $ 93,998,483
=========== ===========
Allocation:
-----------
Profit Sharing $ 25,687,422 $ 56,446,547
Pension - -
ESOP 401(k) 17,088,954 37,551,936
----------- -----------
$ 42,776,376 $ 93,998,483
=========== ===========
Investments in Mellon Trust:
- ----------------------------
Total Dillon Companies, Inc.
Employee Master Trust $ 51,581,779 $ 87,024,468
=========== ===========
Allocation:
-----------
Profit Sharing $ - $ -
Pension 51,581,779 87,024,468
ESOP 401(k) - -
----------- -----------
$ 51,581,779 $ 87,024,468
=========== ===========
</TABLE>
<PAGE> 15
DILLON COMPANIES, INC. Schedule 2
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN ----------
Item 27(d) - Schedule of Reportable Transactions
(Master Trust)
Year Ended December 31, 1998
<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>
PIMCO
time deposits $70,955,000 -- $70,955,000 $70,955,000 --
PIMCO
time deposits -- $76,000,000 76,000,000 76,000,000 --
John Hancock Mutual Life
investment contract -- 2,000,000 2,000,000 2,000,000 --
Hartford Life Insurance
investment contract -- 1,000,000 1,000,000 1,000,000 --
Metropolitan Life Insurance
investment contracts -- 803,852 803,852 803,852 --
Ohio National Life
investment contracts -- 5,000,000 5,000,000 5,000,000 --
Provident Mutual Life
investment contract -- 1,000,000 1,000,000 1,000,000 --
Travelers Insurance Company
investment contracts -- 2,000,000 2,000,000 2,000,000 --
FNMA 90-60G
investment contract -- 441,563 441,563 441,563 --
FNMA 89-50E
investment contract -- 56,801 56,801 56,801 --
FNMA 90-128H
investment contract -- 836,536 836,536 836,536 --
State Street Fixed Fund
trust investment -- 6,000,000 6,000,000 6,000,000 --
Transamerica Life Insurance
trust investment 25,000,000 -- 25,000,000 25,000,000 --
Merrill Lynch
The Kroger Co. common stock
155,847 shares 9,331,337 -- 9,331,337 9,331,337 --
Morgan Stanley
The Kroger Co. common stock
187,800 shares 8,982,379 -- 8,982,379 8,982,379 --
Morgan Stanley
The Kroger Co. common stock
511,300 shares -- 23,559,987 4,627,001 23,559,987 $18,932,986
Mellon Trust
The Kroger Co. common stock
99,611 shares -- 4,879,081 600,404 4,879,081 4,278,677
Sanford C. Bernstein & Co.
trust investment 1,300,000 -- 1,300,000 1,300,000 --
Sanford C. Bernstein & Co.
trust investment -- 7,800,000 7,800,000 7,800,000 --
Mellon Capital Index Fund
trust investment 2,400,000 -- 2,400,000 2,400,000 --
Mellon Capital Index Fund
trust investment -- 4,600,000 4,600,000 4,600,000 --
</TABLE>
<PAGE> 16
DILLON COMPANIES, INC. Schedule 2, cont.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN -----------------
Item 27(d) - Schedule of Reportable Transactions
(Master Trust)
Year Ended December 31, 1998
<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>
Mellon Trust
trust investment $ 4,879,081 -- $ 4,879,081 $ 4,879,081 --
Mellon Trust
trust investment -- $ 750,000 750,000 750,000 --
</TABLE>
