<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 SECOND QUARTER
IMPROVED MARGINS, HIGHER PRIVATE-LABEL SALES AND SYNERGIES DRIVE PROFIT GROWTH
CINCINNATI, OH, September 12, 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 second quarter ended August 12, 2000. These
results represent an increase of 17% over the second quarter of 1999, excluding
extraordinary items.
Total sales for the second quarter increased 7.1% to $11.0 billion.
Excluding sales from divested stores, total sales increased 7.2%. Comparable
food store sales, which include relocations and expansions, rose 2.1% for the
quarter, while identical food store sales rose 1.7%.
EBITDA (earnings before interest, taxes, depreciation, amortization,
LIFO and one-time items) for the second quarter of fiscal 2000 totaled $778
million, an increase of 11.9% from a year ago.
"We are pleased with our strong earnings performance in the second
quarter, " said Joseph A. Pichler, Kroger chairman and chief executive officer.
"These results were driven by the solid performance of our divisions and the
success of corporate-wide category management strategies, increased
private-label penetration and synergies."
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Estimated combined synergy savings from the merger with Fred Meyer and
previous Fred Meyer mergers were $257 million at the end of the second quarter.
This total represents an increase of $59 million from the end of the first
quarter of 2000. Mr. Pichler said the Company now expects to exceed the combined
synergy savings goal of $260 million in fiscal 2000 and to achieve the total
synergy savings goal of $380 million in fiscal 2001, a year earlier than
previously expected.
"We continue to achieve synergy savings more quickly than we projected
at the time of our merger with Fred Meyer, contributing to an increase of 62
basis points in Kroger's gross profit margin during the second quarter," Mr.
Pichler said.
He also said Kroger made good progress in reducing net working capital
during the second quarter. Net working capital totaled $18.9 million, a decrease
of $567 million from the end of fiscal 1999 and $336 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.
Mr. Pichler said Kroger repurchased approximately 4.7 million shares of
its common stock during the second quarter at an average price of $21.39 per
share, for a total investment of approximately $101 million. During the first
half of fiscal 2000, the Company repurchased approximately 16 million shares of
its common stock at an average price of $19.37 per share, for a total investment
of $310 million.
Net total debt was $8.1 billion, a decrease of $205 million from the
second quarter of 1999 and $659 million from the end of fiscal 1999 as a result
of strong free cash flow from operations and the improvement in net working
capital.
During the second quarter of 2000, Kroger opened, expanded, relocated
or acquired 38 stores, as compared to 19 in the second quarter of 1999. Overall
square footage, excluding divested stores, increased 8.0% over the prior year.
Excluding acquisitions, capital expenditures for the quarter totaled $384
million.
Kroger incurred merger-related and one-time expenses of $9.8 million
pre-tax in the second quarter. Of this amount, $3.7 million was non-cash and
$6.1
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million was cash. The Company expects merger-related costs for the remainder of
the year to be in the range of $40-$65 million primarily as a result of the
conversion of the Fred Meyer Marketplace stores in Arizona to the Fry's banner
and the continued consolidation of information system platforms.
For the first two quarters of 2000, Kroger reported earnings of $0.60
per diluted share, excluding costs related to mergers and one-time expenses.
These results represent an increase of 20% over the first two quarters of 1999,
before an extraordinary item. Total sales in the first two quarters of 2000
increased 6.6% to $25.3 billion. EBITDA totaled $1.76 billion for the first half
of 2000, an increase of 11.8% over the first half of 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 second quarter, the Company operated
2,338 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, City Market, Food 4 Less and Quality Food Centers. Kroger also
operates 789 convenience stores, 397 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.
Note: Kroger's quarterly conference call with investors will be broadcast live
via the Internet at 11 a.m. (EDT) on September 12, 2000 at www.kroger.com and
www.streetevents.com. An on-demand replay of the webcast will be available from
2 p.m. (EDT) on September 12, 2000 through September 26, 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>
SECOND QUARTER YEAR TO DATE
---------------------------- -----------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
SALES $ 11,017.0 $ 10,288.9 $ 25,346.3 $ 23,782.0
COSTS AND EXPENSES:
MERCHANDISE COSTS, INCLUDING ADVERTISING,
WAREHOUSING AND TRANSPORTATION 8,048.9 7,577.5 18,535.6 17,534.3
OPERATING GENERAL AND ADMINISTRATIVE 2,035.3 1,873.5 4,687.9 4,343.0
RENT 159.0 142.8 379.1 342.1
DEPRECIATION 210.9 193.4 486.5 444.9
AMORTIZATION OF GOODWILL 23.1 23.2 54.4 52.7
NET INTEREST EXPENSE INCL. CAPITAL LEASES 155.4 142.9 361.5 341.8
---------- ---------- ---------- ----------
TOTAL 10,632.6 9,953.3 24,505.0 23,058.8
---------- ---------- ---------- ----------
INCOME BEFORE TAX EXPENSE AND
EXTRAORDINARY ITEM 384.4 335.6 841.3 723.2
TAX EXPENSE 149.9 133.5 330.4 290.1
---------- ---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY ITEM 234.5 202.1 510.9 433.1
EXTRAORDINARY ITEM (1.6) (9.8) (1.6) (9.8)
---------- ---------- ---------- ----------
NET INCOME $ 232.9 $ 192.3 $ 509.3 $ 423.3
========== ========== ========== ==========
INCOME PER BASIC COMMON SHARE:
FROM OPERATIONS $ 0.28 $ 0.24 $ 0.62 $ 0.52
EXTRAORDINARY ITEM 0.00 (0.01) 0.00 (0.01)
---------- ---------- ---------- ----------
NET INCOME PER COMMON SHARE $ 0.28 $ 0.23 $ 0.62 $ 0.51
========== ========== ========== ==========
SHARES USED IN BASIC CALCULATION 823.7 828.6 827.6 827.9
INCOME PER DILUTED COMMON SHARE:
FROM OPERATIONS $ 0.28 $ 0.24 $ 0.60 $ 0.50
EXTRAORDINARY ITEM 0.00 (0.01) 0.00 (0.01)
---------- ---------- ---------- ----------
NET INCOME PER DILUTED COMMON SHARE $ 0.28 $ 0.23 $ 0.60 $ 0.49
========== ========== ========== ==========
SHARES USED IN DILUTED CALCULATION 846.6 859.6 848.8 861.4
</TABLE>
Note: Certain prior year amounts have been reclassified to conform to current
year presentation.
<PAGE> 5
SUPPLEMENTAL FINANCIAL INFORMATION
WITHOUT ONE-TIME ITEMS
<TABLE>
<CAPTION>
SECOND QUARTER YEAR TO DATE
-------------------- --------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
EBITDA (a) 777.8 695.1 1,759.7 1,574.6
LIFO CHARGE 4.0 0.0 16.0 12.0
GROSS PROFIT % (EXCLUDING LIFO CHARGE)
WITHOUT ONE-TIME ITEMS 27.0% 26.4% 26.9% 26.3%
NET WORKING CAPITAL (b) 18.9 74.6
NET TOTAL DEBT (d) 8,086.5 8,291.4
ERONOA (c) 24.7% 24.1%
</TABLE>
% TO SALES FOR INCOME STATEMENT WITHOUT ONE-TIME ITEMS
<TABLE>
<CAPTION>
SECOND QUARTER YEAR TO DATE
------------------ -----------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
MERCHANDISE COSTS, INCLUDING ADVERTISING,
WAREHOUSING AND TRANSPORTATION 73.1% 73.6% 73.1% 73.7%
OPERATING, GENERAL AND ADMINISTRATIVE 18.5% 18.2% 18.5% 18.3%
EFFECTIVE TAX RATE 39.0% 39.8% 39.3% 40.1%
</TABLE>
(a) EBITDA, as defined in Kroger's credit agreements, represents earnings
before interest, taxes, depreciation, amortization, LIFO , and one-time
items.
(b) Net working capital, as defined by The Kroger Co., is calculated as current
operating assets less current operating liabilities.
(c) 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.
(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.
<PAGE> 6
THE KROGER CO.
CONSOLIDATED STATEMENT OF INCOME
WITH ONE-TIME ITEMS
(in millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
SECOND QUARTER YEAR TO DATE
------------------------------ -------------------------------
2000 1999 2000 1999
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
SALES $ 11,017.0 $ 10,288.9 $ 25,346.3 $ 23,782.0
COSTS AND EXPENSES:
MERCHANDISE COSTS, INCLUDING ADVERTISING,
WAREHOUSING, AND TRANSPORTATION 8,052.7 7,590.0 18,554.4 17,552.5
OPERATING GENERAL AND ADMINISTRATIVE 2,039.3 1,891.0 4,757.7 4,360.5
RENT 159.0 142.8 379.1 342.1
DEPRECIATION 210.9 193.4 486.5 444.9
AMORTIZATION OF GOODWILL 23.1 23.2 54.4 52.7
INTEREST EXPENSE INCL. CAPITAL LEASES 155.4 142.9 361.5 341.8
IMPAIRMENT CHARGES -- -- 190.9 -
MERGER RELATED COSTS 2.0 200.0 10.8 234.6
---------- ---------- ---------- ----------
TOTAL 10,642.4 10,183.3 24,795.3 23,329.1
INCOME BEFORE TAX EXPENSE AND
EXTRAORDINARY ITEM 374.6 105.6 551.0 452.9
TAX EXPENSE 156.5 50.1 227.2 190.4
---------- ---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY ITEM 218.1 55.5 323.8 262.5
EXTRAORDINARY ITEM (1.6) (9.8) (1.6) (9.8)
---------- ---------- ---------- ----------
NET INCOME $ 216.5 $ 45.7 $ 322.2 $ 252.7
========== ========== ========== ==========
INCOME PER BASIC COMMON SHARE:
FROM OPERATIONS $ 0.26 $ 0.07 $ 0.39 $ 0.32
EXTRAORDINARY ITEM 0.00 (0.01) 0.00 (0.01)
---------- ---------- ---------- ----------
NET INCOME PER COMMON SHARE $ 0.26 $ 0.06 $ 0.39 $ 0.31
========== ========== ========== ==========
SHARES USED IN BASIC CALCULATION 823.7 828.6 827.6 827.9
INCOME PER DILUTED COMMON SHARE:
FROM OPERATIONS $ 0.26 $ 0.06 $ 0.38 $ 0.30
EXTRAORDINARY ITEM 0.00 (0.01) 0.00 (0.01)
---------- ---------- ---------- ----------
NET INCOME PER DILUTED COMMON SHARE $ 0.26 $ 0.05 $ 0.38 $ 0.29
========== ========== ========== ==========
SHARES USED IN DILUTED CALCULATION 846.6 859.6 848.8 861.4
ONE-TIME EXPENSES IN MERCHANDISE COSTS (e) $ 3.8 $ 12.5 $ 18.8 $ 18.2
ONE-TIME EXPENSES IN OG&A (e) 4.0 17.5 69.8 17.5
IMPAIRMENT CHARGES (f) -- -- 190.9 --
MERGER RELATED COSTS 2.0 200.0 10.8 234.6
---------- ---------- ---------- ----------
TOTAL ONE-TIME ITEMS, MERGER COSTS,
AND IMPAIRMENT CHARGES $ 9.8 $ 230.0 $ 290.3 $ 270.3
========== ========== ========== ==========
</TABLE>
Note: Certain prior year amounts have been reclassified to conform to current
year presentation.
(e) 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.
(f) Relates primarily to the write-down of certain impaired assets in
accordance with Statements of Financial Accounting Standards No. 121.
<PAGE> 7
SUPPLEMENTAL FINANCIAL INFORMATION
WITH ONE-TIME ITEMS
<TABLE>
<CAPTION>
SECOND QUARTER YEAR TO DATE
--------------------- --------------------
2000 1999 2000 1999
-------- -------- ------- -------
<S> <C> <C> <C> <C>
EBITDA (a) 777.8 695.1 1,759.7 1,574.6
LIFO CHARGE 4.0 0.0 16.0 12.0
GROSS PROFIT % (EXCLUDING LIFO CHARGE)
WITH ONE-TIME ITEMS 26.9% 26.2% 26.9% 26.2%
NET WORKING CAPITAL (b) 18.9 74.6
NET TOTAL DEBT (d) 8,086.5 8,291.4
ERONOA (c) 24.7% 24.1%
</TABLE>
% TO SALES FOR INCOME STATEMENT WITH ONE-TIME ITEMS
<TABLE>
<CAPTION>
SECOND QUARTER YEAR TO DATE
------------------ -------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
MERCHANDISE COSTS, INCLUDING ADVERTISING,
WAREHOUSING AND TRANSPORTATION 73.1% 73.8% 73.2% 73.8%
OPERATING, GENERAL AND ADMINISTRATIVE 18.5% 18.4% 18.8% 18.3%
EFFECTIVE TAX RATE 41.8% 47.4% 41.2% 42.0%
</TABLE>
(a) EBITDA, as defined in Kroger's credit agreements, represents earnings
before interest, taxes, depreciation, amortization, LIFO , and one-time
items.
(b) Net working capital, as defined by The Kroger Co., is calculated as current
operating assets less current operating liabilities.
(c) 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.
(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.
<PAGE> 8
CONSOLIDATED BALANCE SHEET
Subject to Reclassification
(in millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
August 12, August 14,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 155.0 $ 303.8
Receivables 573.0 544.0
Inventories 3,794.9 3,666.0
Prepaid and other current assets 260.9 549.8
--------- ---------
Total current assets 4,783.8 5,063.6
Property, plant and equipment, net 8,534.1 7,663.1
Goodwill, net 3,726.4 3,807.7
Other assets 310.9 507.6
--------- ---------
Total Assets $17,355.2 $17,042.0
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 586.0 $ 280.4
Accounts payable 2,910.6 2,878.4
Accrued salaries and wages 637.5 618.0
Other current liabilities 1,728.7 1,890.4
--------- ---------
Total current liabilities 5,862.8 5,667.2
Long-term debt 7,222.5 7,713.1
Other long-term liabilities 1,531.1 1,412.4
Stockholders' equity 2,738.8 2,249.3
--------- ---------
Total liabilities and stockholders' equity $17,355.2 $17,042.0
========= =========
Total common shares outstanding at end of period 821.5 830.4
Total diluted shares Year to Date 848.8 861.4
</TABLE>
Note: Certain prior year amounts have been reclassified to conform to current
year presentation.
NET WORKING CAPITAL CALCULATION
<TABLE>
<CAPTION>
August 12, August 14, November 6,
2000 1999 1999
---------- ---------- ----------
<S> <C> <C> <C>
Cash $ 155.0 $ 303.8 $ 283.2
Receivables 573.0 544.0 619.7
FIFO Inventory 4,312.5 4,208.6 4,811.8
Operating prepaid and other assets 252.4 298.9 199.6
Accounts payable (2,910.6) (2,878.4) (3,198.5)
Operating accrued liabilities (2,306.8) (2,352.1) (2,361.4)
Prepaid VEBA (56.6) (50.2) --
--------- --------- ---------
Net working capital $ 18.9 $ 74.6 $ 354.4
</TABLE>
