<PAGE> 1
EXHIBIT 99.1
Media Contact: Gary Rhodes, The Kroger Co. (513) 762-1304
Investor Contact: Kathy Kelly, The Kroger Co. (513) 762-4969
KROGER REPORTS 17% INCREASE IN EARNINGS PER SHARE,
BEFORE ONE-TIME ITEMS, FOR THIRD QUARTER
Profit Growth Driven by Higher Margins,
Solid Corporate Brand Sales and Synergies
CINCINNATI, OH, December 5, 2000 -- The Kroger Co. (NYSE: KR) today
reported earnings of $0.28 per diluted share, excluding costs related to mergers
and one-time expenses, for the third quarter ended November 4, 2000. These
results represent an increase of 17% over the third quarter of 1999.
Total sales for the third quarter increased 6.1% to $11.0 billion. Food
store sales also rose 6.1%. Comparable food store sales, which include
relocations and expansions, rose 1.9% for the quarter, while identical food
store sales rose 1.4%.
EBITDA (earnings before interest, taxes, depreciation, amortization,
LIFO and one-time items) for the third quarter of fiscal 2000 totaled $757
million, an increase of 10.2% from a year ago.
"We are pleased with our strong earnings performance in the third
quarter," said Joseph A. Pichler, Kroger chairman and chief executive officer.
"Kroger now has met or exceeded its earnings per share growth goal for 15
consecutive quarters."
Among the financial highlights of the third quarter:
o Gross profit margin, without one-time expenses and excluding
the LIFO charge, increased 10 basis points to 26.58%
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o Operating, general and administrative (OG&A) costs, on this
basis, declined 4 basis points to 18.28% as the Company began
to realize the benefits of technology and productivity
initiatives
o Estimated combined synergy savings reached an annual run rate
of $294 million - well above the Company's original goal of
$260 million for all of fiscal 2000.
As previously announced, Kroger expects to achieve its total synergy
savings goal of $380 million in fiscal 2001, a full year earlier than originally
projected.
Mr. Pichler said the Company's corporate brand products continued to
perform well in the third quarter. In October, Kroger officially launched
Private Selection(R), its own brand of nearly 300 premium-quality grocery, meat,
deli and seafood items. These are now available exclusively at the Company's
2,343 food stores in 31 states. In addition, Kroger recently introduced
Naturally Preferred(TM), its premium brand of all-natural vitamins, herbs and
other products that will be available in all Company-owned stores by year-end.
In all, Kroger introduced more than 480 corporate brand items during the third
quarter.
Mr. Pichler also said Kroger continued to make solid progress in
reducing net working capital. Net working capital totaled $302 million, a
decrease of $85 million from the end of the third quarter of 1999, when the
Company set a goal of reducing working capital by at least $500 million over
five years.
Kroger repurchased approximately 4.7 million shares of its common stock
during the third quarter at an average price of $21.84 per share, for a total
investment of approximately $103 million. During the first three quarters of
fiscal 2000, the Company repurchased approximately 20.8 million shares of its
common stock at an average price of $19.93 per share, for a total investment of
approximately $414 million.
Net total debt was $8.4 billion, a decline of $364 million from the
third quarter of 1999 as a result of strong free cash flow from operations and
the improvement in net working capital.
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"This debt reduction is especially noteworthy given the magnitude of
our stock repurchase program this year," Mr. Pichler said.
On a related note, both Moody's Investors Service and Standard & Poor's
recently upgraded their ratings outlook for Kroger from "stable" to "positive"
based on the Company's operating and financial performance since the merger.
During the third quarter of 2000, Kroger opened, expanded, relocated or
acquired 35 food stores, as compared to 104 in the third quarter of 1999 when
the Company completed the acquisition of 27 Jay C Food Stores and 35 stores from
Albertson's. Overall square footage in the third quarter increased 4.8% over the
prior year. Excluding acquisitions and operational closings, square footage rose
4.3%. Excluding only acquisitions, square footage rose 2.9%. Capital
expenditures for the quarter totaled $400 million.
Kroger incurred merger-related and one-time expenses of $34.5 million
pre-tax in the third quarter. Of this amount, $20.5 million was non-cash and
$14.0 million was cash. The Company expects these costs for the remainder of the
year to be in the range of $15-$30 million primarily as a result of the
conversion of the Fred Meyer Marketplace stores in Arizona to the Fry's banner
and the ongoing consolidation of information system platforms.
For the first three quarters of 2000, Kroger reported earnings of $0.88
per diluted share, excluding costs related to mergers and one-time expenses.
These results represent an increase of 19% over the first three quarters of
1999, before an extraordinary item. Total sales in the first three quarters of
2000 increased 6.4% to $36.3 billion. EBITDA totaled $2.5 billion for the first
three quarters of 2000, an increase of 11.3% over the same period in 1999.
For fiscal year 2000, Mr. Pichler said that he remains comfortable with
the consensus estimate for earnings per share.
Headquartered in Cincinnati, Ohio, Kroger is the nation's largest
retail grocery chain. At the end of the third quarter, the Company operated
2,343 supermarkets and multi-department stores in 31 states under nearly two
dozen banners, including Kroger, Fred Meyer, Ralphs, Smith's, King Soopers,
Dillon, Fry's, City Market, Food 4 Less and Quality Food Centers. Kroger also
operates
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787 convenience stores, 396 fine jewelry stores, 57 supermarket fuel centers 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.
Note: Kroger's quarterly conference call with investors will be broadcast live
via the Internet at 11 a.m. (EST) on December 5, 2000 at www.kroger.com and
www.streetevents.com. An on-demand replay of the webcast will be available from
2 p.m. (EST) on December 5, 2000 through December 19, 2000.
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THE KROGER CO.
CONSOLIDATED STATEMENT OF INCOME
WITHOUT ONE-TIME ITEMS
(in millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
THIRD QUARTER YEAR TO DATE
---------------------------- ---------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SALES $10,961.9 $10,329.2 $36,308.3 $34,111.2
COSTS AND EXPENSES:
MERCHANDISE COSTS, INCLUDING ADVERTISING,
WAREHOUSING AND TRANSPORTATION 8,042.2 7,587.8 26,577.9 25,122.1
OPERATING, GENERAL AND ADMINISTRATIVE 2,004.2 1,892.4 6,692.1 6,235.5
RENT 152.2 155.9 531.3 498.1
DEPRECIATION 209.5 193.6 696.0 638.5
AMORTIZATION OF GOODWILL 24.5 23.3 78.9 76.0
NET INTEREST EXPENSE INCL. CAPITAL LEASES 146.1 142.8 507.6 484.6
--------- ---------- --------- ----------
TOTAL 10,578.7 9,995.8 35,083.8 33,054.8
--------- ---------- --------- ----------
INCOME BEFORE TAX EXPENSE AND
EXTRAORDINARY ITEMS 383.2 333.4 1,224.5 1,056.4
TAX EXPENSE 150.2 131.4 480.6 421.5
--------- ---------- --------- ----------
INCOME BEFORE EXTRAORDINARY ITEMS 233.0 202.0 743.9 634.9
EXTRAORDINARY ITEMS (a) (1.6) -- (3.2) (9.8)
--------- ---------- --------- ----------
NET INCOME $ 231.4 $ 202.0 $ 740.7 $ 625.1
========= ========== ========= ==========
INCOME PER BASIC COMMON SHARE:
FROM OPERATIONS $ 0.28 $ 0.24 $ 0.90 $ 0.77
EXTRAORDINARY ITEMS 0.00 0.00 0.00 (0.01)
--------- ---------- --------- ----------
NET INCOME PER COMMON SHARE $ 0.28 $ 0.24 $ 0.90 $ 0.76
========= ========== ========= ==========
SHARES USED IN BASIC CALCULATION 820.7 831.7 825.5 829.1
INCOME PER DILUTED COMMON SHARE:
FROM OPERATIONS $ 0.28 $ 0.24 $ 0.88 $ 0.74
EXTRAORDINARY ITEMS 0.00 0.00 0.00 (0.01)
--------- ---------- --------- ----------
NET INCOME PER DILUTED COMMON SHARE $ 0.28 $ 0.24 $ 0.88 $ 0.73
========= ========== ========= ==========
SHARES USED IN DILUTED CALCULATION 844.5 857.4 847.5 860.0
</TABLE>
Note: Certain prior year amounts have been reclassified to conform to current
year presentation.
(a) The Extraordinary Items are from the early retirement of debt.
<PAGE> 6
SUPPLEMENTAL FINANCIAL INFORMATION
WITHOUT ONE-TIME ITEMS
<TABLE>
<CAPTION>
THIRD QUARTER YEAR TO DATE
----------------------- ---------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
EBITDA (b) 756.8 686.6 2,516.5 2,261.0
LIFO CHARGE (CREDIT) (6.5) (6.5) 9.5 5.5
GROSS PROFIT % (EXCLUDING LIFO CHARGE)
WITHOUT ONE-TIME ITEMS 26.58% 26.48% 26.83% 26.37%
NET WORKING CAPITAL (c) 302.0 387.4
NET TOTAL DEBT (d) 8,382.6 8,746.2
ERONOA (e) 24.22% 23.53%
</TABLE>
% TO SALES FOR INCOME STATEMENT WITHOUT ONE-TIME ITEMS
<TABLE>
<CAPTION>
THIRD QUARTER YEAR TO DATE
---------------------- ---------------------
2000 1999 2000 1999
------- ------ ------- -------
<S> <C> <C> <C> <C>
MERCHANDISE COSTS, INCLUDING ADVERTISING,
WAREHOUSING AND TRANSPORTATION 73.37% 73.46% 73.20% 73.65%
OPERATING, GENERAL AND ADMINISTRATIVE 18.28% 18.32% 18.43% 18.28%
EFFECTIVE TAX RATE 39.20% 39.41% 39.25% 39.90%
</TABLE>
(b) EBITDA, as defined in Kroger's credit agreements, represents earnings
before interest, taxes, depreciation, amortization, LIFO, and one-time
items.
(c) Net working capital, as defined by The Kroger Co., is calculated as
current operating assets less current operating liabilities. The
components of this calculation are detailed following the Consolidated
Balance Sheet.
(d) Net total debt, as defined by The Kroger Co., is calculated as the amount
of long-term debt, including capital leases, net of Kroger's investment in
debt securities issued by lenders of certain of Kroger's structured
financings and net of prefunded employee benefits.
(e) ERONOA, as defined by The Kroger Co., represents the EBITDA return on net
operating assets and is calculated as rolling four quarters EBITDA before
rent expense divided by the sum of total assets less goodwill less accounts
payable, less prepaid VEBA, plus 8 times rolling four quarters rent
expense.
<PAGE> 7
THE KROGER CO.
CONSOLIDATED STATEMENT OF INCOME
WITH ONE-TIME ITEMS
(in millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
THIRD QUARTER YEAR TO DATE
---------------------------- ----------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SALES $10,961.9 $10,329.2 $36,308.3 $34,111.2
COSTS AND EXPENSES:
MERCHANDISE COSTS, INCLUDING ADVERTISING,
WAREHOUSING, AND TRANSPORTATION 8,050.5 7,605.8 26,605.0 25,158.3
OPERATING, GENERAL AND ADMINISTRATIVE 2,028.6 1,898.2 6,786.3 6,258.8
RENT 152.2 155.9 531.3 498.1
DEPRECIATION 209.5 193.6 696.0 638.5
AMORTIZATION OF GOODWILL 24.5 23.3 78.9 76.0
INTEREST EXPENSE INCL. CAPITAL LEASES 146.1 142.8 507.6 484.6
IMPAIRMENT CHARGES -- -- 190.9 --
MERGER RELATED COSTS 1.8 69.2 12.6 303.8
--------- --------- --------- ---------
TOTAL 10,613.2 10,088.8 35,408.6 33,418.1
INCOME BEFORE TAX EXPENSE AND
EXTRAORDINARY ITEMS 348.7 240.4 899.7 693.1
TAX EXPENSE 146.2 111.0 373.3 301.4
--------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEMS 202.5 129.4 526.4 391.7
EXTRAORDINARY ITEMS (a) (1.6) -- (3.2) (9.8)
--------- --------- --------- ---------
NET INCOME $ 200.9 $ 129.4 $ 523.2 $ 381.9
========= ========= ========= =========
INCOME PER BASIC COMMON SHARE:
FROM OPERATIONS $ 0.25 $ 0.16 $ 0.64 $ 0.47
EXTRAORDINARY ITEMS 0.00 0.00 0.00 (0.01)
--------- --------- --------- ---------
NET INCOME PER COMMON SHARE $ 0.25 $ 0.16 $ 0.64 $ 0.46
========= ========= ========= =========
SHARES USED IN BASIC CALCULATION 820.7 831.7 825.5 829.1
INCOME PER DILUTED COMMON SHARE:
FROM OPERATIONS $ 0.24 $ 0.15 $ 0.62 $ 0.46
EXTRAORDINARY ITEMS 0.00 0.00 0.00 (0.01)
--------- --------- --------- ---------
NET INCOME PER DILUTED COMMON SHARE $ 0.24 $ 0.15 $ 0.62 $ 0.45
========= ========= ========= =========
SHARES USED IN DILUTED CALCULATION 844.5 857.4 847.5 860.0
ONE-TIME EXPENSES IN MERCHANDISE COSTS (b) $ 8.3 $ 18.0 $ 27.1 $ 36.2
ONE-TIME EXPENSES IN OG&A (b) 24.4 5.8 94.2 23.3
IMPAIRMENT CHARGES (c) -- -- 190.9 --
MERGER RELATED COSTS 1.8 69.2 12.6 303.8
--------- --------- --------- ---------
TOTAL ONE-TIME ITEMS, MERGER COSTS,
AND IMPAIRMENT CHARGES $ 34.5 $ 93.0 $ 324.8 $ 363.3
========= ========= ========= =========
</TABLE>
Note: Certain prior year amounts have been reclassified to conform to current
year presentation.
(a) The Extraordinary Items are from the early retirement of debt.
(b) The one-time items in both 1999 and 2000 are costs related to mergers. The
merchandise charges relate to inventory revaluations. The operating,
general and administrative charges primarily relate to expenses for stores
closed or to be closed.
(c) Relates primarily to the write-down of certain impaired assets in
accordance with Statements of Financial Accounting Standards No. 121.
<PAGE> 8
SUPPLEMENTAL FINANCIAL INFORMATION
WITH ONE-TIME ITEMS
<TABLE>
<CAPTION>
THIRD QUARTER YEAR TO DATE
----------------------- ---------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
EBITDA (d) 756.8 686.6 2,516.5 2,261.0
LIFO CHARGE (CREDIT) (6.5) (6.5) 9.5 5.5
GROSS PROFIT % (EXCLUDING LIFO CHARGE)
WITH ONE-TIME ITEMS 26.50% 26.30% 26.75% 26.26%
NET WORKING CAPITAL (e) 302.0 387.4
NET TOTAL DEBT (f) 8,382.6 8,746.2
ERONOA (g) 24.22% 23.53%
</TABLE>
% TO SALES FOR INCOME STATEMENT WITH ONE-TIME ITEMS
<TABLE>
<CAPTION>
THIRD QUARTER YEAR TO DATE
--------------------- ---------------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
MERCHANDISE COSTS, INCLUDING ADVERTISING,
WAREHOUSING AND TRANSPORTATION 73.44% 73.63% 73.28% 73.75%
OPERATING, GENERAL AND ADMINISTRATIVE 18.51% 18.38% 18.69% 18.35%
EFFECTIVE TAX RATE 41.93% 46.17% 41.49% 43.49%
</TABLE>
(d) EBITDA, as defined in Kroger's credit agreements, represents earnings
before interest, taxes, depreciation, amortization, LIFO, and one-time
items.
(e) Net working capital, as defined by The Kroger Co., is calculated as
current operating assets less current operating liabilities. The
components of this calculation are detailed following the Consolidated
Balance Sheet.
(f) Net total debt, as defined by The Kroger Co., is calculated as the amount
of long-term debt, including capital leases, net of Kroger's investment in
debt securities issued by lenders of certain of Kroger's structured
financings and net of prefunded employee benefits.
(g) ERONOA, as defined by The Kroger Co., represents the EBITDA return on net
operating assets and is calculated as rolling four quarters EBITDA before
rent expense divided by the sum of total assets less goodwill less accounts
payable plus 8 times rolling four quarters rent expense.
<PAGE> 9
CONSOLIDATED BALANCE SHEET
Subject to Reclassification
(in millions)
<TABLE>
<CAPTION>
November 4, November 6,
2000 1999
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 130.5 $ 283.2
Receivables 618.1 619.7
Inventories 4,412.3 4,275.7
Prepaid and other current assets 197.3 418.7
--------- ---------
Total current assets 5,358.2 5,597.3
Property, plant and equipment, net 8,698.1 8,057.5
Goodwill, net 3,707.1 3,799.5
Other assets 342.5 483.3
--------- ---------
Total Assets $18,105.9 $17,937.6
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 308.6 $ 530.1
Accounts payable 3,274.2 3,198.5
Accrued salaries and wages 651.2 673.0
Other current liabilities 1,751.3 1,864.2
--------- ---------
Total current liabilities 5,985.3 6,265.8
Long-term debt 7,745.7 7,863.5
Other long-term liabilities 1,528.5 1,400.5
Stockholders' equity 2,846.4 2,407.8
--------- ---------
Total liabilities and stockholders' equity $18,105.9 $17,937.6
========= =========
Total common shares outstanding at end of period 817.9 834.8
Total diluted shares Year to Date 847.5 860.0
</TABLE>
Note: Certain prior year amounts have been reclassified to conform to current
year presentation.
NET WORKING CAPITAL CALCULATION
<TABLE>
<CAPTION>
November 4, November 6,
2000 1999
----------- ----------
<S> <C> <C>
Cash $ 130.5 $ 283.2
Receivables 618.1 619.7
FIFO Inventory 4,923.4 4,811.8
Operating prepaid and other assets 185.8 199.6
Accounts payable (3,274.2) (3,198.5)
Operating accrued liabilities (2,278.6) (2,328.4)
Prepaid VEBA (3.0) --
--------- ---------
Net working capital $ 302.0 $ 387.4
</TABLE>
