<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 4, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- -------------------
Commission file number 1-303
THE KROGER CO.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-0345740
------------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1014 Vine Street, Cincinnati, OH 45202
-----------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(513) 762-4000
----------------------------------------------------
(Registrant's telephone number, including area code)
Unchanged
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 .
----- -----
There were 818,510,642 shares of Common Stock ($1 par value) outstanding as of
December 12, 2000.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE KROGER CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(in millions, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Third Quarter Ended Three Quarters Ended
----------------------- -----------------------
November 4, November 6, November 4, November 6,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales........................................................................ $ 10,962 $ 10,329 $ 36,308 $ 34,111
-------- -------- -------- --------
Merchandise costs, including advertising, warehousing, and transportation ... 8,050 7,606 26,605 25,158
Operating, general and administrative ....................................... 2,029 1,898 6,786 6,259
Rent ........................................................................ 152 156 531 498
Depreciation and amortization ............................................... 234 217 775 714
Asset impairment charges .................................................... -- -- 191 --
Merger related costs ........................................................ 2 69 13 304
-------- -------- -------- --------
Operating profit .......................................................... 495 383 1,407 1,178
Interest expense ............................................................ 146 143 508 485
-------- -------- -------- --------
Earnings before income tax expense and extraordinary loss ................. 349 240 899 693
Income tax expense .......................................................... 146 111 373 301
-------- -------- -------- --------
Earnings before extraordinary loss ........................................ $ 203 $ 129 $ 526 $ 392
Extraordinary loss, net of income tax benefit ............................... (2) -- (3) (10)
-------- -------- -------- --------
Net earnings .............................................................. $ 201 $ 129 $ 523 $ 382
======== ======== ======== ========
Earnings per basic common share:
Earnings before extraordinary loss ........................................ $ 0.25 $ 0.16 $ 0.64 $ 0.47
Extraordinary loss ........................................................ -- -- -- (0.01)
-------- -------- -------- --------
Net earnings ........................................................... $ 0.25 $ 0.16 $ 0.64 $ 0.46
======== ======== ======== ========
Average number of common shares used in basic calculation ................... 821 832 825 829
Earnings per diluted common share:
Earnings before extraordinary loss ........................................ $ 0.24 $ 0.15 $ 0.62 $ 0.46
Extraordinary loss ........................................................ -- -- -- (0.01)
-------- -------- -------- --------
Net earnings ........................................................... $ 0.24 $ 0.15 $ 0.62 $ 0.45
======== ======== ======== ========
Average number of common shares used in diluted calculation ................. 845 857 848 860
</TABLE>
--------------------------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
2
<PAGE> 3
THE KROGER CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
November 4, January 29,
2000 2000
-------- --------
<S> <C> <C>
ASSETS
Current assets
Cash ............................................................. $ 131 $ 281
Receivables ...................................................... 618 622
Inventories ...................................................... 4,412 3,938
Prepaid and other current assets ................................. 197 690
-------- --------
Total current assets ......................................... 5,358 5,531
Property, plant and equipment, net .................................. 8,698 8,275
Goodwill, net ....................................................... 3,707 3,761
Other assets ........................................................ 343 399
-------- --------
Total assets ................................................. $ 18,106 $ 17,966
======== ========
LIABILITIES
Current liabilities
Current portion of long-term debt ................................ $ 309 $ 536
Accounts payable ................................................. 3,274 2,775
Accrued salaries and wages ....................................... 651 695
Other current liabilities ........................................ 1,751 1,689
-------- --------
Total current liabilities .................................... 5,985 5,695
Long-term debt ...................................................... 7,746 8,045
Other long-term liabilities ......................................... 1,529 1,543
-------- --------
Total liabilities ............................................ 15,260 15,283
-------- --------
Commitments and contingent liabilities .............................. -- --
SHAREOWNERS' EQUITY
Preferred stock, $100 par, 5 million shares authorized
and unissued ..................................................... -- --
Common stock, $1 par, 1 billion shares authorized: 889 million shares
issued in 2000 and 885 million shares issued in 1999 ............. 889 885
Additional paid-in capital .......................................... 2,073 2,023
Retained earnings ................................................... 755 232
Common stock in treasury, at cost, 71 million shares in 2000 and
50 million shares in 1999 ........................................ (871) (457)
-------- --------
Total shareowners' equity .................................... 2,846 2,683
-------- --------
Total liabilities and shareowners' equity .................... $ 18,106 $ 17,966
======== ========
</TABLE>
--------------------------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
3
<PAGE> 4
THE KROGER CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
(unaudited)
<TABLE>
<CAPTION>
Three Quarters Ended
-----------------------------------
November 4, November 6,
2000 1999
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings.................................................................. $ 523 $ 382
Adjustments to reconcile net earnings to net cash provided by operating activities:
Extraordinary loss......................................................... 3 10
Depreciation............................................................... 696 638
Goodwill amortization...................................................... 79 76
Non-cash items............................................................. 282 30
Deferred income taxes...................................................... 151 106
Other...................................................................... 33 (9)
Changes in operating assets and liabilities net of effects from
acquisitions of businesses:
Inventories............................................................ (474) (665)
Receivables............................................................ 7 (75)
Accounts payable....................................................... 492 377
Other.................................................................. 276 441
---------- ---------
Net cash provided by operating activities.......................... 2,068 1,311
---------- ---------
Cash Flows From Investing Activities:
Capital expenditures.......................................................... (1,238) (1,470)
Proceeds from sale of assets.................................................. 82 101
Payments for acquisitions, net of cash acquired............................... (67) --
Other......................................................................... (15) (33)
---------- ----------
Net cash used by investing activities.............................. (1,238) (1,402)
---------- ----------
Cash Flows From Financing Activities:
Proceeds from issuance of long-term debt...................................... 825 1,718
Reductions in long-term debt.................................................. (1,418) (1,600)
Debt prepayment costs......................................................... (2) (2)
Financing charges incurred.................................................... (10) (10)
Decrease in book overdrafts................................................... (5) (58)
Proceeds from issuance of capital stock....................................... 44 63
Treasury stock purchases...................................................... (414) --
---------- ---------
Net cash (used)/provided by financing activities.................. (980) 111
---------- ---------
Net (decrease) increase in cash and temporary cash investments.................... (150) 20
Cash and temporary investments:
Beginning of year.......................................................... 281 263
---------- ---------
End of period.............................................................. $ 131 $ 283
========== =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest..................................... $ 550 $ 425
Cash paid during the year for income taxes................................. $ 167 $ 75
Non-cash changes related to purchase acquisitions:
Fair value of assets acquired.......................................... $ 91 $ --
Goodwill recorded...................................................... $ 30 $ --
Liabilities assumed.................................................... $ 54 $ --
</TABLE>
--------------------------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
4
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
All amounts are in millions except per share amounts. Certain prior
year amounts have been reclassified to conform to current year
presentation.
1. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
-----------------------------------------------------
The accompanying financial statements include the consolidated accounts
of The Kroger Co. and its subsidiaries ("Kroger"), including Fred
Meyer, Inc. and its subsidiaries ("Fred Meyer") which were merged with
Kroger on May 27, 1999 (see note 2). The year-end balance sheet
includes Kroger's January 29, 2000 balance sheet, which was derived
from audited financial statements, and, due to its summary nature, does
not include all disclosures required by generally accepted accounting
principles. Significant intercompany transactions and balances have
been eliminated. References to the "Company" in these consolidated
financial statements mean the consolidated company.
In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments (consisting only of normal
recurring adjustments) which are necessary for a fair presentation of
results of operations for such periods but should not be considered as
indicative of results for a full year. The financial statements have
been prepared by the Company pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC"). Certain information and
footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
omitted pursuant to SEC regulations. Accordingly, the accompanying
consolidated financial statements should be read in conjunction with
the fiscal 1999 Form 10-K Annual Report of The Kroger Co. filed with
the SEC on April 27, 2000, as amended.
The unaudited information included in the consolidated financial
statements for the third quarter and three quarters ended November 4,
2000 and November 6, 1999 includes the results of operations of the
Company for the 12 week and 40 week periods then ended.
2. BUSINESS COMBINATIONS
---------------------
On May 27, 1999, Kroger issued 312 million shares of Kroger common
stock in connection with a merger, for all of the outstanding common
stock of Fred Meyer, Inc., which operates stores primarily in the
Western region of the United States. The merger was accounted for as a
pooling of interests, and the accompanying financial statements
relating to periods in fiscal 1999 have been restated to give effect to
the consolidated results of Kroger and Fred Meyer.
3. MERGER RELATED COSTS
--------------------
The Company is continuing the process of implementing its integration
plan relating to recent mergers. The integration plan includes
distribution consolidation, systems integration, store conversions,
store closures, and administration integration. Total merger related
costs incurred were $2 during the third quarter of 2000, and $69 during
the third quarter of 1999. Year-to-date merger related costs were $13
in 2000 and $304 in 1999.
The following table presents the components of the merger related
costs:
<TABLE>
<CAPTION>
Third Quarter Ended Three Quarters Ended
------------------------------- --------------------------------
November 4, November 6, November 4, November 6,
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
CHARGES RECORDED AS CASH EXPENDED
Distribution consolidation............................ $ -- $ 14 $ 1 $ 24
Systems integration................................... -- 22 -- 65
Store conversions..................................... -- 21 -- 43
Transaction costs..................................... -- 4 -- 91
Administration integration............................ -- 6 4 19
------ ------ ------ -----
-- 67 5 242
NON-CASH WRITEDOWN
System integration.................................... -- -- -- 3
Store closures........................................ -- -- -- 3
Administration integration............................ -- 1 -- 14
------ ------ ------ -----
-- 1 -- 20
OTHER CHARGES
Administration integration............................ 2 -- 8 --
------ ------ ------ -----
ACCRUED CHARGES
Distribution consolidation.............................. -- -- -- 5
Store closures.......................................... -- 1 -- 5
</TABLE>
5
<PAGE> 6
<TABLE>
<S> <C> <C> <C> <C>
Administration integration........................................ -- -- -- 32
------ ------ ------ -----
-- 1 -- 42
------ ------ ------ -----
Total merger related costs........................................ $ 2 $ 69 $ 13 $ 304
====== ====== ====== =====
TOTAL CHARGES
Distribution consolidation..................................... $ -- $ 14 $ 1 $ 29
Systems integration............................................ -- 22 -- 68
Store conversions.............................................. -- 21 -- 43
Transaction costs.............................................. -- 4 -- 91
Store closures ................................................ -- 1 -- 8
Administration integration..................................... 2 7 12 65
------ ------ ------ -----
Total merger related costs........................................ $ 2 $ 69 $ 13 $ 304
====== ====== ====== =====
</TABLE>
Distribution Consolidation
Represents costs to consolidate distribution operations and eliminate
duplicate facilities. The costs in 2000 represent severance costs
incurred and paid. The $14 in the third quarter of 1999 was for
Tolleson warehouse expenses recorded as cash was expended.
Systems Integration
Represents the costs of integrating systems and the related conversion
of corporate office and store systems. In the third quarter of 1999,
costs totaling $22 were expensed as incurred including incremental
operating costs during the conversion process, payments to third
parties, and training costs. The incremental operating costs were
principally labor costs.
Store Conversions
Includes the cost to convert store banners. All prior year costs
represented incremental cash expenditures for advertising and
promotions to establish the banner, changing store signage, labor
required to remerchandise the store inventory and other services that
were expensed as incurred.
Transaction Costs
Represents fees paid to outside parties, employee bonuses that were
contingent upon the completion of mergers, and an employee stay bonus
program. The Company incurred costs totaling $4 in the third quarter of
1999, related to fees and employee bonuses recorded as the cash was
expended.
Store Closures
Includes the costs to close stores identified as duplicate facilities
and to sell stores pursuant to settlement agreements. Year-to-date 1999
costs are related to the closure of seven stores identified as
duplicate facilities and to sell three stores pursuant to a settlement
with the Federal Trade Commission.
6
<PAGE> 7
Administration Integration
Includes labor and severance costs related to employees identified for
termination in the integration and charges to conform accounting
policies. During the third quarter of 2000, the Company incurred costs
totaling $2 resulting from the issuance of restricted stock related to
merger synergies. Year-to-date 2000, the Company has recorded costs
totaling $12 which includes $8 resulting from restricted stock, and $4
for severance payments recorded as cash was expended. Restrictions on
the stock grants lapse as synergy goals are achieved. Through three
quarters of 1999, the Company accrued severance costs totaling $12 and
an obligation to make a charitable contribution of $20 within seven
years from the date of the Fred Meyer merger.
The following table is a summary of the changes in accruals related to
various business combinations:
<TABLE>
<CAPTION>
Facility Employee Incentive Awards
Closure Costs Severance and Contributions
----------------- -------------- ---------------------
<S> <C> <C> <C>
Balance at January 2, 1999........................................ $ 133 $ 30 $ --
Additions...................................................... 8 24 29
Payments....................................................... (11) (25) --
-------- ------- ------
Balance at January 29, 2000....................................... 130 29 29
Payments....................................................... (15) (10) --
-------- ------- ------
Balance at November 4, 2000....................................... $ 115 $ 19 $ 29
======== ======= ======
</TABLE>
4. ONE-TIME ITEMS
--------------
In addition to the "merger related costs" described above, the Company
incurred one-time expenses related to recent mergers of $121 and $59
year-to-date 2000 and 1999, respectively. The one-time items in 2000
included approximately $16 for inventory writedowns and $11 of other
one-time product related charges included as merchandise costs. The
remaining $94 in 2000 is included in operating, general and
administrative costs and relates primarily to stores that have closed
or will close and severance expenses related to headcount reductions
and other miscellaneous costs. Of the $94, $27 represented cash
expenditures and $67 represented charges that were accrued pertaining
primarily to the present value of lease liabilities relating to closed
stores. The table below details the changes in the accruals of the
closed store reserves. The 1999 one-time items represent costs related
to mergers recorded as cash was expended. Of the $59, $23 was included
in operating, general and administrative costs, and $36 was included in
merchandise costs.
<TABLE>
<CAPTION>
Accrued Lease Liability
Related to Store Closings
-----------------------------
<S> <C>
Balance at January 29, 2000....................................... $ --
Additions...................................................... 67
Payments....................................................... (9)
--------
Balance at November 4, 2000....................................... $ 58
=======
</TABLE>
5. ASSET IMPAIRMENT CHARGES
------------------------
Due to updated profitability forecasts for 2000 and beyond and new
divisional leadership, the Company performed an impairment review of
its long-lived assets during the first quarter of 2000. During this
review, the Company identified impairment losses for both assets to be
disposed of and assets to be held and used.
7
<PAGE> 8
Assets to be Disposed of
The impairment charge for assets to be disposed of related primarily to
the carrying value of land, buildings, and equipment for 25 stores that
have been closed or that management has committed to close by the end
of the fiscal year. The impairment charge was determined using the fair
value less the cost to sell. Fair value less the cost to sell used in
the impairment calculation was based on discounted cash flows and third
party offers to purchase the assets, or market value for comparable
properties, if applicable. Accordingly, an impairment charge of $81
related to assets to be disposed of was recognized, reducing the
carrying value of fixed assets and goodwill by $41 and $40,
respectively.
Assets to be Held and Used
The impairment charge for assets to be held and used related primarily
to the carrying value of land, buildings, and equipment for 13 stores
that will continue to be operated by the Company. Updated projections,
based on revised operating plans, were used, on a gross basis, first to
determine whether the assets were impaired, then, on a discounted cash
flow basis, to serve as the estimated fair value of the assets for
purposes of measuring the asset impairment charge. As a result, an
impairment charge of $87 related to assets to be held and used was
recognized, reducing the carrying value of fixed assets and goodwill by
$47 and $40, respectively.
Other Writedowns
In addition to the approximately $168 of impairment charges noted
above, the Company recorded a writedown of $23 to reduce the carrying
value of certain investments in unconsolidated entities, accounted for
on the cost basis of accounting, to reflect reductions in value
determined to be other than temporary. The writedowns related primarily
to investments in certain former suppliers that have experienced
financial difficulty and with whom supply arrangements have ceased.
6. INCOME TAXES
------------
The effective income tax rate differs from the expected statutory rate
primarily due to the effect of certain state taxes and the amortization
and impairment writedown of non-deductible goodwill.
7. EARNINGS PER COMMON SHARE
-------------------------
Basic earnings per common share equals net earnings divided by the
weighted average number of common shares outstanding. Diluted earnings
per common share equals net earnings divided by the weighted average
number of common shares outstanding, after giving effect to dilutive
stock options.
The amounts below are calculated based on earnings before extraordinary
items. The extraordinary items during 2000 and 1999 resulted from the
early retirement of debt. The following table provides a reconciliation
of earnings and shares used in calculating basic earnings per share to
those used in calculating diluted earnings per share.
<TABLE>
<CAPTION>
For the quarter ended For the quarter ended
November 4, 2000 November 6, 1999
----------------------------------------- -----------------------------------------
Earnings Shares Per Share Earnings Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per common share....... $ 203 821 $ 0.25 $ 129 832 $ 0.16
Dilutive effect of stock options and
warrants.......................... -- 24 -- 25
--------- --------- --------- --------
Diluted earnings per common share.... $ 203 845 $ 0.24 $ 129 857 $ 0.15
========= ========= ========= =========
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
For the three quarters ended For the three quarters ended
November 4, 2000 November 6, 1999
----------------------------------------- -----------------------------------------
Earnings Shares Per Share Earnings Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
------------- ------------- ------------- -------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per common share....... $ 526 825 $ 0.64 $ 392 829 $ 0.47
Dilutive effect of stock options and
warrants.......................... -- 23 -- 31
--------- --------- --------- --------
Diluted earnings per common share.... $ 526 848 $ 0.62 $ 392 860 $ 0.46
========= ========= ========= =========
</TABLE>
8. RECENTLY ISSUED ACCOUNTING STANDARDS
------------------------------------
In June 1998, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This standard, as
amended, is effective for fiscal years beginning after June 15, 2000.
Given current activities, the Company expects that the adoption of the
standard will not have a material impact on the financial statements.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, "Accounting for Certain Transactions involving
Stock Compensation." This standard became effective July 1, 2000. The
adoption of the standard did not have a material impact on the
financial statements.
9. GUARANTOR SUBSIDIARIES
----------------------
Certain of Kroger's Senior Notes and Senior Subordinated Notes (the
"Guaranteed Notes") are jointly and severally, fully and
unconditionally guaranteed by The Kroger Co. and certain of its
subsidiaries (the "Guarantor Subsidiaries"). At November 4, 2000, a
total of approximately $5.2 billion of Guaranteed Notes were
outstanding. The Guarantor Subsidiaries and non-guarantor subsidiaries
are wholly-owned subsidiaries of The Kroger Co. Separate financial
statements of The Kroger Co. and each of the Guarantor Subsidiaries are
not presented because the guarantees are full and unconditional and the
Guarantor Subsidiaries are jointly and severally liable. The Company
believes that separate financial statements and other disclosures
concerning the Guarantor Subsidiaries would not be material to
investors.
The non-guaranteeing subsidiaries represent less than 3% on an
individual and aggregate basis of consolidated assets, pretax earnings,
cash flow, and equity. Therefore, the non-guarantor subsidiaries'
information is not separately presented in the tables below, but rather
is included in the column labeled "Guarantor Subsidiaries."
There are no current restrictions on the ability of the Guarantor
Subsidiaries to make payments under the guarantees referred to above,
but the obligations of each guarantor under its guarantee are limited
to the maximum amount as will result in obligations of such guarantor
under its guarantee not constituting a fraudulent conveyance or
fraudulent transfer for purposes of Bankruptcy Law, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act, or any
similar Federal or state law (e.g. adequate capital to pay dividends
under corporate laws).
9
<PAGE> 10
The following tables present summarized financial information as of
November 4, 2000 and January 29, 2000 and for the three quarters ended
November 4, 2000 and November 6, 1999.
SUMMARIZED FINANCIAL INFORMATION AS OF NOVEMBER 4, 2000 AND FOR THE THREE
QUARTERS THEN ENDED:
<TABLE>
<CAPTION>
Guarantor
The Kroger Co. Subsidiaries Eliminations Consolidated
------------------------------------ -------------------- ------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Current assets $ 463 $ 4,895 $ -- $ 5,358
Non-current assets $ 11,971 $ 11,458 $ (10,681) $ 12,748
Current liabilities $ 1,356 $ 4,629 $ -- $ 5,985
Non-current liabilities $ 8,202 $ 1,073 $ -- $ 9,275
Sales $ 4,943 $ 31,875 $ (510) $ 36,308
Gross profit $ 1,031 $ 8,712 $ (40) $ 9,703
Operating (loss) profit $ (202) $ 1,609 $ -- $ 1,407
Net earnings $ 523 $ 925 $ (925) $ 523
</TABLE>
SUMMARIZED FINANCIAL INFORMATION AS OF JANUARY 29, 2000:
<TABLE>
<CAPTION>
Guarantor
The Kroger Co. Subsidiaries Eliminations Consolidated
------------------------------------ -------------------- ------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Current assets $ 578 $ 4,953 $ -- $ 5,531
Non-current assets $ 11,652 $ 11,180 $ (10,397) $ 12,435
Current liabilities $ 1,109 $ 4,586 $ -- $ 5,695
Non-current liabilities $ 8,437 $ 1,151 $ -- $ 9,588
</TABLE>
SUMMARIZED FINANCIAL INFORMATION FOR THE THREE QUARTERS ENDED
NOVEMBER 6, 1999:
<TABLE>
<CAPTION>
Guarantor
The Kroger Co. Subsidiaries Eliminations Consolidated
------------------------------------ -------------------- ------------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Sales $ 4,877 $ 29,783 $ (549) $ 34,111
Gross profit $ 1,035 $ 7,954 $ (36) $ 8,953
Operating (loss) profit $ (13) $ 1,191 $ -- $ 1,178
Net earnings $ 382 $ 681 $ (681) $ 382
</TABLE>
10. TREASURY STOCK
--------------
During the quarter, the Company invested $103 to repurchase 4.7 million
shares of Kroger common stock. During the first three quarters of 2000,
the Company repurchased approximately 20.8 million shares of its common
stock for a total investment of $414. The Company has purchased 19.6
million shares for approximately $389 under its $750 stock repurchase
plan and has purchased an additional 1.2 million shares under its
program to repurchase common stock funded by the proceeds and tax
benefits from stock option exercises.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following analysis should be read in conjunction with the
consolidated financial statements.
BUSINESS COMBINATIONS
On May 27, 1999, Kroger issued 312 million shares of Kroger common
stock in connection with a merger, for all of the outstanding common
stock of Fred Meyer, Inc., which operates stores primarily in the
Western region of the United States. This merger was accounted for as a
pooling of interests. The accompanying statements of earnings and cash
flows for the three quarters ended November 6, 1999, have been restated
to give effect to the consolidated results of Kroger and Fred Meyer.
RESULTS OF OPERATIONS
Total sales for the third quarter of 2000 increased 6.1% to $11 billion
while year-to-date sales increased 6.4% to $36 billion. The increase in
sales is attributable to an increase in comparable and identical store
sales and an increase in the number of stores due to new stores and
acquisitions. Identical food store sales, which includes stores that
have been in operation and have not been expanded or relocated for five
quarters, grew 1.4% from the third quarter of 1999. Comparable food
stores sales, which includes relocations and expansions, increased 1.9%
over the prior year. During the third quarter of 2000, we opened,
acquired, expanded or relocated 35 food stores. We had 24 operational
closings and completed 35 within-the-wall remodels. We operated 2,343
food stores at November 4, 2000, compared to 2,268 food stores at
November 6, 1999. As of November 4, 2000, food store square footage
totaled 124 million. This represents an increase of 4.8% over November
6, 1999. Excluding acquisitions and operational closings, square
footage rose 4.3%. Excluding only acquisitions, square footage
increased 2.9% due to the 63 operational closings during the past four
quarters, compared to 41 operational closings in the preceding four
quarters.
Our gross profit rate, excluding one-time expenses and the effect of
LIFO, was 26.6% in the third quarter of 2000 and 26.5% in the third
quarter of 1999. On this same basis, our year-to-date gross profit rate
was 26.8% in 2000 and 26.4% in 1999. During the third quarter of 2000,
we incurred $8 million of one-time expenses included in merchandise
costs bringing our year-to-date one-time costs for 2000 to $27 million.
This compares to $18 million during the third quarter and $36 million
year-to-date 1999. Including these costs, our gross profit rates were
26.5% for the third quarter and 26.8% year-to-date 2000 and 26.3% for
the third quarter and year-to-date 1999. This increase is primarily the
result of synergy savings, reductions in product costs through our
corporate-wide merchandising programs, and increases in private-label
sales and profitability. The economies of scale created by the merger
are providing reduced costs through coordinated purchasing. Technology
and logistics efficiencies also have led to improvements in category
management and various other aspects of our operations, resulting in a
decreased cost of product. During the quarter, we introduced 482
private-label products that produce a higher gross profit than the
comparable national brands.
We incurred $24 million of one-time operating, general and
administrative expenses in the third quarter of 2000 compared to $6
million during the third quarter of 1999. Year-to-date these costs are
$94 million for 2000 and $23 million for 1999. Excluding these one-time
items, operating, general and administrative expenses as a percent of
sales decreased 4 basis points from the third quarter of 1999 to 18.3%
during the third quarter 2000. On this same basis, these expenses were
and 18.4% for year-to-date 2000 and 18.3% for year-to-date 1999.
Including the one-time items, operating, general and administrative
expenses as a percent of sales were 18.5% in the third quarter of 2000
and 18.7% year-to-date 2000, compared to 18.4% in the third quarter and
year-to-date 1999. The increase in operating, general and
administrative expenses as a percent of sales is primarily due to the
increase in one-time expenses in 2000, higher health care costs, higher
utility costs, and increasing credit card fees.
The effective tax rate differs from the expected statutory rate
primarily due to the effect of state taxes and the amortization and
impairment writeoff of non-deductible goodwill. Goodwill amortization
was $25 million in the third quarter of 2000 and $23 million in the
third quarter of 1999. The goodwill impairment writedown taken in the
first quarter of 2000 was $80 million.
11
<PAGE> 12
Net earnings before extraordinary loss, excluding merger related costs
and one-time items, were $231 million or $0.28 per diluted share for
the third quarter of 2000. This represents a 17% increase over earnings
before extraordinary loss, excluding merger related costs and one-time
items, of $0.24 per diluted share for the third quarter of 1999. On
these same basis, year-to-date 2000 earnings before extraordinary loss
were $744 million or $0.88 per diluted share. These results represent
an increase of 19% over year-to-date 1999 earnings before extraordinary
loss of $0.74 per diluted share.
MERGER RELATED COSTS
We are continuing the process of implementing our integration plan
relating to recent mergers. The integration plan includes distribution
consolidation, systems integration, store conversions, store closures,
and administration integration. Total merger related costs incurred
were $2 million during the third quarter of 2000, and $69 million
during the third quarter of 1999. Year-to-date merger related costs
incurred were $13 million in 2000 and $304 million in 1999.
The following table presents the components of the merger related
costs:
<TABLE>
<CAPTION>
Third Quarter Ended Three Quarters Ended
------------------------------- --------------------------------
November 4, November 6, November 4, November 6,
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
(in millions) (in millions)
<S> <C> <C> <C> <C>
CHARGES RECORDED AS CASH EXPENDED
Distribution consolidation.............................. $ -- $ 14 $ 1 $ 24
Systems integration..................................... -- 22 -- 65
Store conversions....................................... -- 21 -- 43
Transaction costs....................................... -- 4 -- 91
Administration integration.............................. -- 6 4 19
------ ------ ------ -----
-- 67 5 242
NON-CASH WRITEDOWN
System integration...................................... -- -- -- 3
Store closures.......................................... -- -- -- 3
Administration integration.............................. -- 1 -- 14
------ ------ ------ -----
-- 1 -- 20
OTHER CHARGES
Administration integration.............................. 2 -- 8 --
------ ------ ------ -----
ACCRUED CHARGES
Distribution consolidation................................. -- -- -- 5
Store closures............................................. -- 1 -- 5
Administration integration................................. -- -- -- 32
------ ------ ------ -----
-- 1 -- 42
------ ------ ------ -----
Total merger related costs................................. $ 2 $ 69 $ 13 $ 304
====== ====== ====== =====
TOTAL CHARGES
Distribution consolidation.............................. $ -- $ 14 $ 1 $ 29
Systems integration..................................... -- 22 -- 68
Store conversions....................................... -- 21 -- 43
Transaction costs....................................... -- 4 -- 91
Store closures.......................................... -- 1 -- 8
Administration integration.............................. 2 7 12 65
------ ------ ------ -----
Total merger related costs................................. $ 2 $ 69 $ 13 $ 304
====== ====== ===== =====
</TABLE>
12
<PAGE> 13
Distribution Consolidation
Charges related to "Distribution Consolidation" represent costs to
consolidate distribution operations and eliminate duplicate facilities.
The $14 million in the third quarter of 1999 was for Tolleson warehouse
expenses recorded as cash was expended.
Systems Integration
Charges related to "Systems Integration" represent the costs of
integrating systems and the related conversion of corporate office and
store systems. In the third quarter of 1999, costs totaling $22 million
were expensed as incurred including incremental operating costs during
the conversion process, payments to third parties, and training costs.
The incremental operating costs consisted principally of labor costs.
Store Conversions
Charges related to "Store Conversions" include the cost to convert
store banners. All costs represented incremental cash expenditures for
advertising and promotions to establish the banner, changing store
signage, labor required to remerchandise the store inventory and other
services that were expensed as incurred.
Transaction Costs
Charges related to "Transaction Costs" represent fees paid to outside
parties, employee bonuses that were contingent upon the completion of
mergers, and an employee stay bonus program. We incurred costs totaling
$4 million in the third quarter of 1999, related to fees and employee
bonuses recorded as the cash was expended.
Store Closures
Charges related to "Store Closures" include the costs to close stores
identified as duplicate facilities and to sell stores pursuant to
settlement agreements. Year-to-date 1999 costs related to the closure
of seven stores identified as duplicate facilities and to sell three
stores pursuant to a settlement with the Federal Trade Commission.
Administration Integration
Charges related to "Administration Integration" include labor and
severance costs related to employees identified for termination in the
integration and charges to conform accounting policies. During the
third quarter of 2000, we incurred costs totaling $2 million resulting
from the issuance of restricted stock related to merger synergies.
Year-to-date 2000, we have recorded costs totaling $12 million which
includes approximately $8 million resulting from restricted stock, and
$4 million for severance payments recorded as cash was expended.
Restrictions on the stock grants lapse as synergy goals are achieved.
Year-to-date 1999, we accrued severance costs totaling $12 million and
an obligation to make a charitable contribution of $20 million within
seven years from the date of the Fred Meyer merger.
The following table is a summary of the changes in accruals related to
various business combinations:
<TABLE>
<CAPTION>
Facility Employee Incentive Awards
Closure Costs Severance and Contributions
----------------- -------------- ---------------------
(in millions)
<S> <C> <C> <C>
Balance at January 2, 1999........................................ $ 133 $ 30 $ --
Additions...................................................... 8 24 29
Payments....................................................... (11) (25) --
-------- -------------- ------
Balance at January 29, 2000....................................... 130 29 29
Payments....................................................... (15) (10) --
-------- -------------- ------
Balance at November 4, 2000....................................... $ 115 $ 19 $ 29
======== ======= ======
</TABLE>
13
<PAGE> 14
ONE-TIME ITEMS
In addition to the "merger related costs" described above, we incurred
one-time expenses related to recent mergers of $121 million and $59
million year-to-date 2000 and 1999, respectively. The one-time items in
2000 included approximately $16 million for inventory writedowns and
$11 million of one-time product related costs included as merchandise
costs. The remaining $94 million in 2000 is included in operating,
general and administrative costs and relates primarily to stores that
have closed or will close and severance expenses related to headcount
reductions and other miscellaneous costs. Of the $94 million, $27
million represented cash expenditures and $67 million represented
charges that were accrued pertaining primarily to the present value of
lease liabilities relating to closed stores. The table below details
the changes in the accruals related to the closed store reserves. The
1999 one-time items represent costs related to mergers recorded as cash
was expended. Of the $59 million, $23 million was included in
operating, general and administrative costs, and $36 million was
included in merchandise costs.
<TABLE>
<CAPTION>
Accrued Lease Liability
Related to Store Closings
-----------------------------
(in millions)
<S> <C>
Balance at January 29, 2000....................................... $ --
Additions...................................................... 67
Payments....................................................... (9)
-------
Balance at November 4, 2000....................................... $ 58
=======
</TABLE>
ASSET IMPAIRMENT CHARGES
Due to updated profitability forecasts for 2000 and beyond and new
divisional leadership, we performed an impairment review of our
long-lived assets during the first quarter of 2000. During this review,
we identified impairment losses for both assets to be disposed of and
assets to be held and used.
Assets to be Disposed of
The impairment charge for assets to be disposed of related primarily to
the carrying value of land, buildings, and equipment for 25 stores that
have been closed or that management has committed to close by the end
of the fiscal year. The impairment charge was determined using the fair
value less the cost to sell. Fair value less the cost to sell used in
the impairment calculation was based on discounted cash flows and
third-party offers to purchase the assets, or market value for
comparable properties, if applicable. Accordingly, an impairment charge
of $81 million related to assets to be disposed of was recognized,
reducing the carrying value of fixed assets and goodwill by $41 million
and $40 million, respectively.
Assets to be Held and Used
The impairment charge for assets to be held and used related primarily
to the carrying value of land, buildings, and equipment for 13 stores
that we will continue to operate. Updated projections, based on revised
operating plans, were used, on a gross basis, first to determine
whether the assets were impaired, then, on a discounted cash flow basis
to serve as the estimated fair value of the assets for purposes of
measuring the asset impairment charge. As a result, an impairment
charge of $87 million related to assets to be held and used was
recognized, reducing the carrying value of fixed assets and goodwill by
$47 million and $40 million, respectively.
Other Writedowns
In addition to the approximately $168 million of impairment charges
noted above, we recorded a writedown of $23 million to reduce the
carrying value of certain investments in unconsolidated entities,
accounted for on the cost basis of accounting, to reflect reductions in
value determined to be other than temporary. The writedowns related
primarily to investments in certain former suppliers that have
experienced financial difficulty and with whom supply arrangements have
ceased.
14
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
Debt Management
---------------
During the third quarter, we invested $103 million to repurchase 4.7
million shares of Kroger stock at an average price of $21.84 per share.
During the first three quarters of 2000, we repurchased approximately
20.8 million shares of our common stock at an average price of $19.93
per share for a total investment of $414 million. We have purchased
19.6 million shares for approximately $389 million under our $750
million stock repurchase plan and we purchased an additional 1.2
million shares under our program to repurchase common stock funded by
the proceeds and tax benefits from stock option exercises.
We had several lines of credit totaling $4.0 billion, with $1.8 billion
in unused balances at November 4, 2000. In addition, we had a $470
million synthetic lease credit facility with no unused balance and $175
million of money market lines with unused balances of $165 million at
November 4, 2000.
Net debt decreased $364 million to $8.4 billion at the end of the third
quarter of 2000 compared to the third quarter of the prior year. We
define net debt as long-term debt, including capital leases and current
portion thereof, less investments in Kroger debt securities and
prefunded employee benefits. We do not intend to present net debt as an
alternative to any generally accepted accounting principle measure of
performance. Rather, we believe that presentation of this calculation
is important to the understanding of our financial condition. Net debt
decreased $363 million from year-end 1999, despite the $414 million
repurchase of Kroger stock and acquisitions completed during the first
three quarters of 2000. The decrease since year-end resulted from
strong free cash flow from operations, including a reduction in net
working capital.
Our bank credit facilities and the indentures underlying our publicly
issued debt contain various restrictive covenants. Some of these
covenants are based on EBITDA, which we define as earnings before
interest, taxes, depreciation, amortization, LIFO, extraordinary
losses, and one-time items. The ability to generate EBITDA at levels
sufficient to satisfy the requirements of these agreements is a key
measure of our financial strength. We do not intend to present EBITDA
as an alternative to any generally accepted accounting principle
measure of performance. Rather, we believe the presentation of EBITDA
is important for understanding our performance compared to our debt
covenants. The calculation of EBITDA is based on the definition
contained in our bank credit facilities. This may be a different
definition than other companies use. We were in compliance with all
EBITDA-based bank credit facility and indenture covenants on November
4, 2000.
The following is a summary of the calculation of EBITDA for the third
quarter and three quarters ended November 4, 2000 and November 6, 1999.
<TABLE>
<CAPTION>
Third Quarter Ended Three Quarters Ended
---------------------------------- --------------------------------
November 4, November 6, November 4, November 6,
2000 1999 2000 1999
---------------- ---------------- ----------------- --------------
(in millions) (in millions)
<S> <C> <C> <C> <C>
Earnings before tax expense............................. $ 349 $ 240 $ 899 $ 693
Interest................................................ 146 143 508 485
Depreciation............................................ 209 193 696 638
Goodwill amortization................................... 25 23 79 76
LIFO.................................................... (6) (6) 10 6
One-time items included in merchandise costs............ 8 18 27 36
One-time items included in operating, general and
administrative expenses.............................. 24 6 94 23
Merger related costs.................................... 2 69 13 304
Impairment charges...................................... -- -- 191 --
---------- ---------- ---------- ---------
EBITDA.................................................. $ 757 $ 686 $ 2,517 $ 2,261
========== ========== ========== =========
</TABLE>
Cash Flow
---------
We generated $2,068 million of cash from operating activities
year-to-date 2000 compared to $1,311 million year-to-date 1999. Cash
flow from operating activities increased in the third quarter of 2000
largely due to a reduction in working capital and an increase in net
earnings excluding non-cash charges.
Investing activities used $1,238 million of cash year-to-date 2000
compared to $1,402 million year-to-date 1999. This decrease was
primarily due to a decrease in capital spending during 2000.
Financing activities used $980 million of cash year-to-date 2000
compared to providing $111 million through the third quarter of 1999.
This increase in the use of cash was due to our repurchase of Company
common stock and net reductions in debt.
15
<PAGE> 16
CAPITAL EXPENDITURES
Capital expenditures excluding acquisitions totaled $400 million in the
third quarter of 2000 compared to $625 million in the third quarter of
1999. During the third quarter of 2000 we opened, acquired, expanded,
or relocated 35 food stores. We had 24 operational closings and
completed 35 within-the-wall remodels. Square footage increased 4.8%
over the prior year. Excluding acquisitions and operational closings,
square footage rose 4.3%. Excluding only acquisitions, square footage
increased 2.9% due to the 63 operational closings during the past four
quarters, compared to 41 operational closing in the preceding four
quarters.
Year-to-date 2000 capital expenditures totaled $1,238 million compared
to $1,470 million year-to-date 1999. During the first three quarters of
2000 we opened, acquired, expanded, or relocated 130 food stores. We
had 54 operational closings and completed 93 within the wall remodels.
OUTLOOK
Information provided by us, including written or oral statements made
by our representatives, may contain forward-looking information as
defined in the Private Securities Litigation Reform Act of 1995. All
statements, other than statements of historical facts, which address
activities, events or developments that we expect or anticipate will or
may occur in the future, including such things as integration of the
operations of acquired or merged companies, expansion and growth of our
business, future capital expenditures and our business strategy,
contain forward-looking information. Statements elsewhere in this
report and below regarding our expectations, hopes, beliefs,
intentions, or strategies are also forward-looking statements. This
forward-looking information is based on various factors and was derived
utilizing numerous assumptions. While we believe that the statements
are accurate, uncertainties and other factors could cause actual
results to differ materially from those statements. In particular:
- We obtain sales growth from new square footage, as well as
from increased productivity from existing locations. We expect
2000 full year square footage to grow approximately 4.0%.
During the next two years, Kroger plans to grow square footage
by 4.0% to 5.0% year over year. We expect to continue to
realize savings from economies of scale in technology and
logistics, some of which may be reinvested in retail price
reductions to increase sales volume and enhance market share.
- We expect combination stores to increase our sales per
customer by including numerous specialty departments, such as
pharmacies, seafood shops, floral shops and bakeries. We
believe the combination store format will allow us to
withstand continued competition from other food retailers,
supercenters, mass merchandisers and restaurants.
- We believe we have adequate coverage of our debt covenants to
continue to respond effectively to competitive conditions.
- We expect to continue capital spending in technology focusing
on improved store operations, logistics, manufacturing
procurement, category management, merchandising and buying
practices, which should continue to reduce merchandising costs
as a percent of sales.
- We expect to reduce working capital as compared to the third
quarter of 1999 by a total of $500 million by the end of the
third quarter of fiscal 2004. We define working capital as
current operating assets less current operating liabilities.
We do not intend to present working capital as an alternative
to any generally accepted accounting principle measure of
performance. Rather, we believe this presentation is relevant
to an assessment of our financial condition. As of the end of
the third quarter of 2000 we have reduced working capital $85
million since the third quarter of 1999. A calculation of
working capital based on our definition as of the end of the
third quarter of 2000 and the third quarter of 1999 is
provided in the following table:
16
<PAGE> 17
<TABLE>
<CAPTION>
Third Quarter Third Quarter
2000 1999
------------- --------------
(in millions)
<S> <C> <C>
Cash..................................... $ 131 $ 283
Receivables.............................. 618 620
FIFO inventory........................... 4,923 4,812
Operating prepaid and other assets....... 186 199
Accounts payable......................... (3,274) (3,199)
Operating accrued liabilities............ (2,279) (2,328)
Prepaid VEBA............................. (3) --
--------- ---------
Working capital ......................... $ 302 $ 387
========= =========
</TABLE>
- Our earnings per share target is a 16%-18% average annual
increase through the fiscal year ending February 1, 2003.
- We expect our capital expenditures for the year to total
approximately $1.8 billion, net of acquisitions. Capital
expenditures reflect our strategy of growth through expansion
and acquisition as well as our emphasis, whenever possible, on
self-development and ownership of store real estate, and on
logistics and technology improvements. We intend to use the
combination of cash flows from operations, including
reductions in working capital, and borrowings under credit
facilities to finance capital expenditure requirements. If
determined preferable, we may fund capital expenditure
requirements by mortgaging facilities, entering into
sale/leaseback transactions, or by issuing additional debt or
equity.
- We expect to meet or exceed $380 million in annual synergy
savings as a result of our mergers by the end of fiscal 2001.
We have exceeded our previously stated annual synergy savings
goal of $260 million for fiscal 2000 by achieving an annual
run rate of $294 million as of the end of the third quarter of
2000. Some of these savings will be reinvested in the business
to drive sales growth.
- We expect interest expense for the year to total $660 - $670
million. We continue to utilize interest rate swaps and caps
to limit our exposure to rising interest rates. The
derivatives are used primarily to fix the rates on variable
debt and limit the floating rate debt to a total of $2.3
billion or less. For the balance of the year, we expect less
than 10% of our outstanding debt will be exposed to upward
movements in interest rates and expect this floating rate debt
to average $800 - $850 million for the remainder of the year.
Our ability to achieve our expectations may be impacted by several
factors that could cause actual results to differ materially from our
expectations. We operate in an increasingly competitive environment
that could adversely affect our expected increases in sales and
earnings. Competitors' pricing strategies, store openings, and remodels
may effect our sales and earnings growth. A downturn in the general
business or economic conditions in our operating regions may also
adversely affect our sales and earnings. Such an economic downturn may
include fluctuations in the rate of inflation, decreases in population,
or employment and job growth. Our projected increases in store square
footage could be adversely affected by increased operational store
closings or delays in construction projects. Although we believe we
have adequate coverage of our debt covenants, our indebtedness could
adversely affect us by reducing our flexibility to respond to changing
business and economic conditions and increasing our borrowing costs.
Increases in labor costs and relations with union bargaining units
representing our employees or delays in opening new stores could also
cause us to fall short of our sales and earnings targets. Sales growth
may also be negatively affected if the impact of new square footage on
existing stores is greater than anticipated. While we expect to reduce
working capital, our ability to do so may be impaired by changes in
vendor payment terms, seasonal variations in inventory levels, or
systems problems that result in increases in inventory levels. Our
capital expenditures could fall outside of the expected range if we are
unsuccessful in acquiring suitable sites for new stores, if development
costs exceed those budgeted, or if our logistics and technology
projects are not completed in the time frame expected or on budget.
While we expect to achieve benefits through logistics and technology,
due to our recent mergers and acquisitions, there are inherent
uncertainties that may hinder the development of new systems and
integration of systems. Unforeseen difficulties in integrating Fred
Meyer or any other acquired entity with Kroger could cause us to fail
to achieve the anticipated synergy savings, and could otherwise
adversely affect our ability to meet our other expectations. Changes in
laws and regulations, including changes in accounting standards and
taxation requirements may adversely affect our operations. Accordingly,
actual events and results may vary significantly from those included in
or contemplated or implied by forward looking statements made by us.
17
<PAGE> 18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to risk from the changes in interest rates as a result
of borrowing activities. We continue to utilize interest rate swaps and
caps to limit our exposure to rising interest rates. We use derivatives
primarily to fix the rates on variable debt and limit the floating rate
debt to a total of $2.3 billion or less.
There have been no significant changes in our exposure to market risk
from the information provided in Item 7A. Quantitative and Qualitative
Disclosures About Market Risk on our Form 10-K filed with the SEC on
April 27, 2000.
18
<PAGE> 19
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBIT 3.1 - Amended Articles of Incorporation of the Company
are hereby incorporated by reference to Exhibit 3.1 of the
Company's Quarterly Report on Form 10-Q for the quarter ended
October 3, 1998. The Company's Regulations are incorporated by
reference to Exhibit 4.2 of the Company's Registration
Statement on Form S-3 as filed with the Securities and
Exchange Commission on January 28, 1993, and bearing
Registration No. 33-57552.
EXHIBIT 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.
EXHIBIT 27.1 - Financial Data Schedule.
EXHIBIT 99.1 - Additional Exhibits - Statement of
Computation of Ratio of Earnings to Fixed Charges.
(b) The Company disclosed and filed an underwriting agreement,
pricing agreement, and the eighth Supplemental Indenture
related to the issuance of $300,000,000, 7.80% senior notes in
its Current Report on Form 8-K dated August 21, 2000; and its
earnings release for the second quarter of fiscal 2000 in its
Current Report on Form 8-K dated September 12, 2000.
19
<PAGE> 20
SIGNATURES
----------
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 thereunto duly authorized.
THE KROGER CO.
Dated: December 15, 2000 By: /s/ Joseph A. Pichler
---------------------
Joseph A. Pichler
Chairman of the Board and
Chief Executive Officer
Dated: December 15, 2000 By: /s/ M. Elizabeth Van Oflen
--------------------------
M. Elizabeth Van Oflen
Vice President and
Corporate Controller
<PAGE> 21
Exhibit Index
-------------
Exhibit 3.1 - Amended Articles of Incorporation of the Company are hereby
incorporated by reference to Exhibit 3.1 of the Company's
Quarterly Report on Form 10-Q for the quarter ended October 3,
1998. The Company's Regulations are incorporated by reference
to Exhibit 4.2 of the Company's Registration Statement on Form
S-3 as filed with the Securities and Exchange Commission on
January 28, 1993, and bearing Registration No. 33-57552.
Exhibit 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.
Exhibit 27.1 - Financial Data Schedule.
Exhibit 99.1 - Additional Exhibits - Statement of Computation of Ratio of
Earnings to Fixed Charges.
