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Exhibit 99.2
FRED MEYER, INC. 401(k) SAVINGS
PLAN FOR COLLECTIVE BARGAINING
UNIT EMPLOYEES
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
AS OF DECEMBER 31, 1999 AND
FOR THE PERIOD FROM JULY 1, 1999 THROUGH
DECEMBER 31, 1999
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FRED MEYER, INC. 401(k) SAVINGS PLAN FOR COLLECTIVE
BARGAINING UNIT EMPLOYEES
TABLE OF CONTENTS
PAGE
Report of Independent Accountants.......................................... 1
Financial Statements:
Statement of Net Assets Available for Benefits........................ 2
Statement of Changes in Net Assets Available for Benefits............. 3
Notes to the Financial Statements .................................... 4
Supplemental Schedule:
Schedule of Assets Held for Investment Purposes at End of Period*..... 9
* Other schedules required by Section 2520.103-10 of the Department of Labor's
Rules and Regulations of Reporting and Disclosure under ERISA have been
omitted because they are not applicable.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator of the
Fred Meyer, Inc. 401(k) Savings Plan for Collective Bargaining Unit Employees
We have audited the accompanying statement of net assets available for benefits
(modified cash basis) of the Fred Meyer, Inc. 401(k) Savings Plan for Collective
Bargaining Unit Employees (the Plan) as of December 31, 1999, and the related
statement of changes in net assets available for benefits (modified cash basis)
from July 1, 1999 to December 31, 1999. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards 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. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
As described in Note 2, these financial statements and supplemental schedule
were prepared on a modified cash basis of accounting, which is a comprehensive
basis of accounting other than generally accepted accounting principles.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1999, and the changes in net assets available for benefits for the
period from July 1, 1999 to December 31, 1999, on the basis of accounting
described in Note 2.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule (modified cash
basis) of Assets Held for Investment Purposes at End of Year is presented for
the purpose 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. This supplemental schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements, and in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
(PricewaterhouseCoopers LLP)
PricewaterhouseCoopers LLP
Portland, Oregon
June 27, 2000
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FRED MEYER, INC. 401(k) SAVINGS PLAN FOR COLLECTIVE
BARGAINING UNIT EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1999
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Investments - at fair value (Note 6) $41,338,502
Participant loans 1,917,613
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Net assets available for benefits $43,256,115
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The accompanying notes are an integral part of the financial statements.
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</TABLE>
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FRED MEYER, INC. 401(k) SAVINGS PLAN FOR COLLECTIVE
BARGAINING UNIT EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE PERIOD FROM JULY 1, 1999 TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C>
Additions
Assets transferred from Smith's Food & Drug 401(k) Savings (Active Union):
Transferred assets $36,488,661
Transferred loans (net of forfeitures) 1,872,704
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Total Transfers 38,361,365
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Investment income:
Net appreciation in fair value of investments 2,101,724
Interest and dividends 827,546
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Net investment income 2,974,270
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Contributions:
Participant 3,241,763
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Total additions 44,577,398
Deductions - benefit payments to participants 1,321,283
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Net increase in net assets available for benefits 43,256,115
Net assets available for benefits, beginning of period --
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Net assets available for benefits, end of period $43,256,115
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</TABLE>
The accompanying notes are an integral part of the financial statements.
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FRED MEYER, INC. 401(k) SAVINGS PLAN FOR COLLECTIVE
BARGAINING UNIT EMPLOYEES
NOTES TO THE FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN
The following description of the Fred Meyer, Inc. 401(k) Savings Plan for
Collective Bargaining Unit Employees (the Plan) is provided for general
information purposes only. Participants should refer to the Plan agreement
for more complete information.
GENERAL
The Plan is sponsored by Fred Meyer, Inc., a Delaware corporation, and its
wholly-owned subsidiaries (collectively referred to as the Company). It is
subject to the provisions of the Employee Retirement Income Security Act of
1974 (ERISA). The Plan is a defined contribution plan for the benefit of
the employees of the Company. All employees who are 21 years of age and
older and covered by a collective bargaining agreement, are eligible to
participate after completing one year of service. On July 1, 1999, certain
assets of collective bargaining unit employees participating in Smith's
Food & Drug 401(k) Savings Plan were transferred to the Fred Meyer, Inc.
401(k) Savings Plan for Collective Bargaining Unit Employees due to the
merger between Fred Meyer, Inc. and Smith's Food & Drug Centers, Inc.
CONTRIBUTIONS
Contributions to the Plan consist of contributions made by qualified
employees to a trust. Employees could make elective contributions to the
Plan of up to a maximum 18% of their compensation established by the
Administrative Committee. The Administrative Committee may fix lower
maximum elective contribution percentages for highly compensated employees
to avoid exceeding set limits.
Employees may also rollover funds contributed to a conduit individual
retirement account or other tax-qualified plans subject to approval by the
Administrative Committee.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contribution
and an allocation of Plan earnings or losses. Allocations are based on
participant earnings/losses or account balances, as defined. The benefit to
which a participant is entitled is the benefit that could be provided from
the account.
VESTING
All accounts of a participant are fully vested at all times.
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FRED MEYER, INC. 401(k) SAVINGS PLAN FOR COLLECTIVE
BARGAINING UNIT EMPLOYEES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. DESCRIPTION OF THE PLAN (CONTINUED)
PARTICIPANT LOANS
Participants may borrow from their plan account a minimum of $1,000 up to a
maximum of $50,000 or 50 percent of their account balance, whichever is
less. The loans are secured by the balance in the participant's account and
bear interest at rates that range from 8.25 percent to 10.00 percent, which
are commensurate with local prevailing rates as determined quarterly by the
Plan administrator.
INVESTMENT OPTIONS
The Plan is comprised of The Kroger Co.'s common stock and nine T. Rowe
Price mutual and trust funds - Blue Chip Growth Fund, Equity Income Fund,
Blended Summit Cash Reserve Fund, Balanced Fund, Small Cap Stock Fund, Mid
Cap Growth Fund, Bond Indexed Trust, International Stock Fund and Equity
Index Trust. The investment strategies of these funds are as follows:
Blue Chip Growth Fund (BCG) - The fund's investment objective is to provide
long-term capital growth. Income is a secondary objective.
Equity Income Fund (EIF) - The fund's investment objective is to provide
substantial dividend income as well as long-term capital appreciation
through investments in common stocks of established companies.
Blended Summit Cash Reserve Fund (FMSCR) - The fund's investment objective
is the preservation of capital and liquidity and, consistent with these,
the highest possible current income.
Balanced Fund (BAL) - The fund's investment objective is to provide capital
appreciation, current income and preservation of capital through a
portfolio of stocks and fixed income securities.
Small Cap Stock Fund (SCS) - The fund's investment objective is to provide
long-term capital growth by investing primarily in stocks of small
companies.
Mid Cap Growth Fund (MCG) - The fund's investment objective is to provide
long-term capital appreciation by investing in mid cap stocks offering the
potential for above average earnings growth.
Bond Indexed Trust (BIT) - The investment objective of the trust is to
track returns associated with government bonds.
International Stock Fund (ISF) - The fund's investment objective is
long-term growth of capital through investments primarily in common stocks
of established, non-U.S. companies.
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FRED MEYER, INC. 401(k) SAVINGS PLAN FOR COLLECTIVE
BARGAINING UNIT EMPLOYEES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. DESCRIPTION OF THE PLAN (CONTINUED)
INVESTMENT OPTIONS (CONTINUED)
Equity Index Trust (EIT) - The fund's investment objective is to match the
performance of the Standard & Poor's 500 Stock Index (S&P 500). The S&P 500
is made up of primarily large capitalization companies that represent a
broad spectrum of the U.S. economy and about 70% of the U.S. stock market's
total capitalization.
Rollovers - The Administrative Committee determined that rollovers from
other plans would be allowed and invested as the participant directs.
BENEFITS
Participants are entitled to the benefit that could be provided by their
contributions and income thereon (including net realized and unrealized
investment gains and losses) allocated to their accounts. All retirement
(normal retirement age is 65), disability benefits, and beneficiary death
benefits are paid in a lump sum or in a partial lump sum. Death benefits
are paid to beneficiaries in a lump sum.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements and supplemental schedules of the Plan were
prepared using the modified cash basis of accounting, which is the
equivalent of the accrual basis except that certain income receivable,
contributions receivable and plan accrual balances are not recorded. This
practice is not in accordance with generally accepted accounting
principles, but is permitted under ERISA.
INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's investments are stated at fair value. Quoted market prices are
used to value investments. Shares of mutual funds are valued at the net
asset value of shares held by the Plan at year-end. Purchases and sales of
securities are recorded on a trade-date basis. Interest income and dividend
income are recorded at the date received by the Plan. Investment advisors
under the supervision of the Plan's Administrative Committee manage these
investments.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
FEES AND EXPENSES
The Plan provides that the Company will pay the administrative costs and
expenses of the Plan including the trustee and management fees. Such costs
not paid by the Company are paid from the Plan assets.
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FRED MEYER, INC. 401(k) SAVINGS PLAN FOR COLLECTIVE
BARGAINING UNIT EMPLOYEES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with the modified
cash basis of accounting requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
changes therein, and disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
3. RELATED-PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by T. Rowe
Price. T. Rowe Price is the trustee as defined by the Plan and, therefore,
these transactions qualify as party-in-interest transactions. Fees paid
for the management of the investments were paid for by the sponsor company
which amounted to $5,000 for the period from July 1, 1999 through December
31, 1999.
4. PLAN TERMINATION
Although the Company presently has no plans to terminate the Plan, it may
do so at its sole discretion. In no event shall any part of the trust's
assets be used for any purpose other than for the exclusive benefit of the
participants or their beneficiaries.
5. TAX STATUS
The Plan obtained its latest determination letter on April 21, 1998, in
which the Internal Revenue Service stated that the Plan, as then designed,
was in compliance with the applicable requirements of the Internal Revenue
Code (IRC). The Plan has been amended since receiving the determination
letter. However, the Plan administrator and the Plan's tax counsel believe
that the Plan is currently designed and being operated in compliance with
the applicable requirements of the IRC. Therefore, no provision for income
taxes has been included in the Plan's financial statements.
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FRED MEYER, INC. 401(k) SAVINGS PLAN FOR COLLECTIVE
BARGAINING UNIT EMPLOYEES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. INVESTMENTS
The Plan's assets held for investment purposes at December 31 are presented
in the following table:
<TABLE>
<CAPTION>
<S> <C>
The Kroger Co. common stock, 7,620 shares $ 143,825
T. Rowe Price Blue Chip Growth Fund, 522,562 shares 18,989,927 *
T. Rowe Price Equity Income Fund, 8,722 shares 216,399
T. Rowe Price Blended Summit Cash Reserve Fund, 3,833,543 shares 3,833,543 *
T. Rowe Price Balanced Fund, 308,473 shares 6,073,836 *
T. Rowe Price Small Cap Stock fund, 2,013 shares 45,904
T. Rowe Price Mid Cap Growth Fund, 141,776 shares 5,689,465 *
T. Rowe Price Bond Indexed Trust, 232,282 shares 3,533,014 *
T. Rowe Price International Stock Fund, 93,302 shares 1,775,546
T. Rowe Price Equity Index Trust, 26,915 shares 1,037,043
Participant loans 1,917,613
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Total assets held for investment purposes $43,256,115
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</TABLE>
* Represents greater than 5% of net assets available for benefits.
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SUPPLEMENTAL SCHEDULE
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FRED MEYER, INC. 401(k) SAVINGS PLAN FOR COLLECTIVE
BARGAINING UNIT EMPLOYEES
SCHEDULE H PART 4 LINE i
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF PERIOD
DECEMBER 31, 1999
<TABLE>
<CAPTION>
(c)
DESCRIPTION OF INVESTMENT,
(b) INCLUDING MATURITY DATE, RATE (e)
IDENTITY OF ISSUE, OF INTEREST, COLLATERAL, PAR, OR (d) CURRENT
(a) BORROWER, LESSOR, OR SIMILAR PARTY MATURITY VALUE COST ** VALUE
--- ---------------------------------- ------------------------------------ --------- -----------
<S> <C> <C> <C> <C>
* Participant loans Interest rates from 8.25% to 10.00%,
due from January 2000 to May 2025 $ -- $ 1,917,613
* The Kroger Co. Stock Company Stock -- 143,825
* T. Rowe Price Equity Index Trust Common Trust -- 1,037,043
* T. Rowe Price International Stock Fund Mutual Fund -- 1,775,546
* T. Rowe Price Bond Indexed Trust Common Trust -- 3,533,014
* T. Rowe Price Mid Cap Growth Fund Mutual Fund -- 5,689,465
* T. Rowe Price Small Cap Stock Fund Mutual Fund -- 45,904
* T. Rowe Price Balanced Fund Mutual Fund -- 6,073,836
* T. Rowe Price Blended Summit Cash Reserve Custom Fund -- 3,833,543
* T. Rowe Price Equity Income Fund Mutual Fund -- 216,399
* T. Rowe Price Blue Chip Growth Fund Mutual Fund -- 18,989,927
</TABLE>
* Represents party-in-interest.
** Historical cost has not been presented as all investments are participant
directed.
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