<PAGE> 1
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: March 9, 2000
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> 2
Item 5. Other Events
On March 9, 2000, the Company released its earnings
for the fourth quarter of 2000 and for fiscal year
2000. Attached hereto as Exhibit 99.1 is the text of
that release.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits:
99.1 Earnings release for fourth quarter 2000 and fiscal
year 2000.
<PAGE> 3
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.
March 9, 2000 By: (Paul Heldman)
Paul Heldman
Senior Vice President, Secretary
and General Counsel
<PAGE> 4
EXHIBIT INDEX
Exhibit No. Exhibit
- ----------- -------
99.1 Earnings release for fourth quarter 2000 and fiscal year 2000.
<PAGE> 1
Exhibit 99.1
Media Contact: Gary Rhodes, The Kroger Co. (513) 762-1304
Investor Contact: Larry Turner, The Kroger Co. (513) 762-4911
KROGER REPORTS RECORD EARNINGS, BEFORE MERGER COSTS,
FOR FOURTH QUARTER OF 1999
CINCINNATI, OH, March 9, 2000 -- The Kroger Co. (NYSE: KR) today
reported record earnings of $0.39 per diluted share, excluding costs related to
mergers, for the fourth quarter ended January 29, 2000.
These results represent an increase of approximately 26% over estimated
combined earnings, before an extraordinary item, for the fourth quarter of 1998.
The prior-year estimate includes the actual results of Fred Meyer before merger
costs and an estimate of Kroger's pre-merger results adjusted to reflect the
change to a new fiscal calendar last year and 12 weeks of operations.
Including merger-related costs of $105 million pre-tax, Kroger earned
$0.29 per diluted share in the fourth quarter of 1999.
As Kroger previously reported, total sales for the fourth quarter of
1999 increased 6.8% to $11.2 billion, after adjusting for the change in the
Company's fiscal calendar last year and an extra week of sales in the fourth
quarter of 1998, and excluding sales from divested stores. On this basis,
identical food store sales grew 2.3%. Comparable food store sales, which include
relocations and expansions, rose 3.0% for the quarter. (Identical and comparable
sales include divisions with stores that changed names during the past year.)
Excluding the Fry's division, which has converted 35 former Smith's stores to
the Fry's banner, identical food store sales grew 2.8% and comparable food store
sales rose 3.4%.
EBITDA (earnings before interest, taxes, depreciation, amortization,
LIFO and one-time items) for the fourth quarter of 1999 totaled $900 million, an
1
<PAGE> 2
increase of approximately 15% compared to estimated combined results from the
fourth quarter of 1998.
"We are delighted with our strong sales and earnings performance in the
fourth quarter of 1999," said Joseph A. Pichler, Kroger chairman and chief
executive officer. "These results were generated by a variety of new
merchandising programs and product offerings. We have introduced more than 1,100
private-label items over the past year - nearly triple the number we rolled out
in 1998. Expanded private-label sales and growth in private-label market share
are already generating incremental sales and enhanced profit margins. Kroger's
manufacturing operations also finished an outstanding year with record results."
During the fourth quarter of 1999, Kroger opened, expanded, relocated
or acquired 30 stores. Overall square footage, excluding divested stores,
increased 5.6% over the prior year. Including acquisitions, capital expenditures
for the quarter totaled $427 million. For the year, capital expenditures were
$1.9 billion.
For the full 1999 fiscal year, Kroger reported earnings of $1.13 per
diluted share, before an extraordinary item and excluding merger costs. On that
basis, these results represent an increase of approximately 26% over estimated
combined earnings for fiscal 1998. The prior-year estimate includes the actual
results of Fred Meyer before merger costs and an estimate of Kroger's pre-merger
results, excluding one-time expenses, to reflect the change to a new fiscal
calendar and a 52-week year. The 1999 figures also include a full 52 weeks of
results from Ralphs, which was acquired by Fred Meyer on March 10, 1998, thus
contributing 47 weeks of results during the 1998 period.
Total sales in the 1999 fiscal year increased approximately 6.1%, after
adjusting for the change in Kroger's fiscal calendar and a 53rd week of sales in
1998, and excluding sales from divested stores. EBITDA totaled $3.2 billion for
fiscal 1999.
Kroger recently reported that the estimated combined synergy savings
from the merger with Fred Meyer and previous Fred Meyer mergers totaled $160
million for fiscal 1999. This total exceeded the Company's previously announced
projection of $155 million. Kroger expects to meet or beat its combined synergy
2
<PAGE> 3
savings goals of $260 million in fiscal 2000, $345 million in fiscal 2001 and
$360 million in fiscal 2002.
"We are off to a great start on synergy savings, which is a key
component of margin improvement. I am particularly pleased by the success that
has already been achieved in merchandising and manufacturing," Mr. Pichler said.
He also said the Company recently completed the purchases of Pay Less
Super Markets, Inc., which operates eight grocery stores in Indiana and Kessel
Food Markets, Inc., a privately owned chain of 20 supermarkets in Michigan.
"Looking ahead, Kroger has tremendous opportunities to expand its
business. Kroger's total pharmacy sales have more than doubled in the past five
years and our 1,500 pharmacies drive incremental sales in the highly profitable
health and beauty care category. We have opened 34 `Nature's Market' natural
food sections in our supermarkets over the past year to serve the rapidly
growing demand for natural and organic foods. And our loyalty card program,
which offers additional discounts to our best customers, is now available in
more than 1,260 stores, nearly double the figure from a year ago. We are now
using the card for effective, targeted merchandising programs," Mr. Pichler
explained.
Headquartered in Cincinnati, Ohio, Kroger is the nation's largest
retail grocery chain. The Company currently operates more than 2,300
supermarkets and multi-department stores in 31 states under more than a dozen
banners, including Kroger, Fred Meyer, Ralphs, Smith's, King Soopers, Dillon,
Fry's, Food 4 Less and Quality Food Centers. Kroger also operates 796
convenience stores, 389 fine jewelry stores and 42 food processing plants.
# # #
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.
Certain 1998 information included in this release has been estimated 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 and reflects an adjustment
for the extra week in 1998. The 1998 information included in the Company's Forms
10-Q filed with the SEC during 1999, and as reflected in the financials attached
here, are for different periods than those in the newly adopted fiscal year and
may not agree with certain 1998 estimated information included in this release.
3
<PAGE> 4
<TABLE>
<CAPTION>
THE KROGER CO.
SALES AND EARNINGS
WITH ONE-TIME EXPENSES
(in millions, except per share amounts)
4th Quarter Entire Year
------------------------------------------------------------------------------------------
1999 1998 (3) 1999 1998 (4)
------------------- ------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Sales $ 11,240 $ 11,205 $ 45,352 $ 43,082
=================== =================== ==================== ====================
EBITDA (1) $ 900 $ 799 $ 3,180 $ 2,783
LIFO $ (35) $ (18) $ (29) $ 10
Interest $ 157 $ 156 $ 652 $ 645
Depreciation $ 214 $ 165 $ 861 $ 745
Amortization $ 23 $ 26 $ 99 $ 92
One-time
items (5) $ 105 $ 31 $ 468 $ 420
------------------- ------------------- -------------------- --------------------
Pre-tax earnings
earnings before
extraordinary
item $ 436 $ 438 $ 1,129 $ 871
Tax expense $ 190 $ 176 $ 491 $ 378
------------------- ------------------- -------------------- --------------------
Earnings before
extraordinary
item $ 246 $ 262 $ 638 $ 494
Extraordinary
item (2) $ 0 $ (28) $ (10) $ (257)
------------------- ------------------- -------------------- --------------------
Net earnings $ 246 $ 234 $ 628 $ 237
=================== =================== ==================== ====================
Diluted earnings
per common
share:
From operations $ 0.29 $ 0.31 $ 0.74 $ 0.58
From extra-
ordinary item (2) $ 0.00 $ (0.03) $ (0.01) $ (0.30)
------------------- ------------------- -------------------- --------------------
Diluted net
earnings per
common share $ 0.29 $ 0.28 $ 0.73 $ 0.28
=================== =================== ==================== ====================
Number of shares
used in diluted
per share
calculation 854 859 858 851
</TABLE>
<PAGE> 5
(1) EBITDA, as defined in our credit agreements, represents earnings before
interest, taxes, depreciation, amortization, LIFO and one-time items.
(2) From the early retirement of debt.
(3) The information for the fourth quarter of 1998 includes the results of
operations of The Kroger Co. for the 13 weeks ended January 2, 1999, its wholly
owned subsidiary, Dillon Companies, Inc., for the 14 weeks ended January 2,
1999, and its wholly owned subsidiary, Fred Meyer, Inc., for the 12 weeks ended
January 30, 1999.
(4) The information for the entire year of 1998 includes the results of
operations of The Kroger Co. for the 53 weeks ended January 2, 1999, Dillon
Companies, Inc., for the 53 weeks ended January 2, 1999, and Fred Meyer, Inc.,
for the 52 weeks ended January 30, 1999.
(5) The one-time items in 1999 are costs related to mergers. The one-time items
in the fourth quarter of 1998 are costs related to mergers. The one-time items
for the entire year of 1998 are costs related to mergers ($278 million),
logistic initiatives ($41 million), accounting and operations consolidations in
Texas ($11 million), and charges related to an accounting change ($90 million).
<PAGE> 6
<TABLE>
<CAPTION>
THE KROGER CO.
SALES AND EARNINGS
WITHOUT ONE-TIME EXPENSES
(in millions, except per share amounts)
4th Quarter Entire Year
------------------------------------------------------------------------------------------
1999 1998 (3) 1999 1998 (4)
------------------- ------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Sales $ 11,240 $ 11,205 $ 45,352 $ 43,082
=================== =================== ==================== ====================
EBITDA (1) $ 900 $ 799 $ 3,180 $ 2,783
LIFO $ (35) $ (18) $ (29) $ 10
Interest $ 157 $ 156 $ 652 $ 645
Depreciation $ 214 $ 165 $ 861 $ 745
Amortization $ 23 $ 26 $ 99 $ 92
Pre-tax earnings
earnings before
extraordinary
item $ 541 $ 470 $ 1,597 $ 1,291
Tax expense $ 210 $ 193 $ 631 $ 529
------------------- ------------------- -------------------- --------------------
Earnings before
extraordinary
item $ 331 $ 277 $ 966 $ 762
Extraordinary
item (2) $ 0 $ (28) $ (10) $ (257)
------------------- ------------------- -------------------- --------------------
Net earnings $ 331 $ 249 $ 956 $ 505
=================== =================== ==================== ====================
Diluted earnings
per common
share:
From operations $ 0.39 $ 0.32 $ 1.13 $ 0.89
From extra-
ordinary item (2) $ 0.00 $ (0.03) $ (0.01) $ (0.30)
------------------- ------------------- -------------------- --------------------
Diluted net
earnings per
common share $ 0.39 $ 0.29 $ 1.12 $ 0.59
=================== =================== ==================== ====================
Number of shares
used in diluted
per share
calculation 854 859 858 851
</TABLE>
<PAGE> 7
(1) EBITDA, as defined in our credit agreements, represents earnings before
interest, taxes, depreciation, amortization, LIFO and one-time items.
(2) From the early retirement of debt.
(3) The information for the fourth quarter of 1998 includes the results of
operations of The Kroger Co. for the 13 weeks ended January 2, 1999, its wholly
owned subsidiary, Dillon Companies, Inc., for the 14 weeks ended January 2,
1999, and its wholly owned subsidiary, Fred Meyer, Inc., for the 12 weeks ended
January 30, 1999.
(4) The information for the entire year of 1998 includes the results of
operations of The Kroger Co. for the 53 weeks ended January 2, 1999, Dillon
Companies, Inc., for the 53 weeks ended January 2, 1999, and Fred Meyer, Inc.,
for the 52 weeks ended January 30, 1999.
