SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
ANNUAL REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File No. 1-303
January 1,December 31, 1994
THE KROGER CO.
An Ohio Corporation I.R.S. Employer
Identification
No. 31-0345740
Address Telephone Number
- - --------------------- ----------------
1014 Vine St. (513) 762-4000
Cincinnati, Ohio 45202
Securities registered pursuant to section 12 (b) of the Act:
Name of Exchange on
Title of Class which Registered
- - -------------- ----------------------------------------------
Common $1 par value New York Stock Exchange
108,129,456111,043,613 shares outstanding on
February 11, 1994
6-3/8%10, 1995
6 % Convertible Junior Subordinated New York Stock Exchange
Notes due 1999, face $1000
200,000 notes outstanding
9% Senior Subordinated Notes New York Stock Exchange
due 1999, face $1000
125,000 notes outstanding
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 .
-------- ------------------- ---------
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K10K or any amendment to this Form 10-K10K [ ].
The aggregate market value of the Common Stock of The Kroger Co.
held by nonaffiliatesnonafflilates as of February 11, 1994: $2,521,592,30910, 1995: $2,841,589,473
Documents Incorporated by Reference:
Proxy Statement to be filed pursuant to Regulation 14A of the
Exchange Act on or before April 6, 1994May 1, 1995, incorporated by
reference into Parts II and III of Form 10-K.
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SALES
Sales
- ------
Total sales for the fourth quarter of 1994 were $5.6 billion
compared to $5.4 billion in the fourth quarter of 1993, which included 12 weeks, decreased 5.2% below
the same quarter in 1992, which included 13 weeks. Adjusting 1992's sales for
the extra week and excluding sales from the Company's San Antonio, Texas stores
which were sold in August 1993, sales in the 1993 fourth quarter increased
3.8%.a 3.4%
increase. Sales for the full year including the extra week in 1992 and the San
Antonio sales, increased 1.1% over those for 1992. Excluding the extra week and
the San Antonio stores, full year 1993 sales increased 3.6% over 1992.2.6%. A review of sales
by lines of business for the three years ended January 1,December 31, 1994,
is as follows:follows
1994 1993 1992
1991
% OF 1993 -------------- --------------1994 ------------- ------------- --------------
SALES AMOUNT CHANGE AMOUNT CHANGE AMOUNT CHANGE
------------------------------------------------------------
(MILLIONS OF DOLLARS)--------------------------------------------------------
(millions of dollars)
Food Stores.............. 91.3%Stores 93.4% $21,442 +4.9% $20,443 +1.1% $20,199 +3.4%
$19,533 +5.7%
Convenience Stores....... 4.3%Stores 3.9% 898 -5.6% 951 +3.9% 916 +6.0%
864 +0.2%
Other sales.............. 4.4%sales 2.7% 619 -37.5% 990 -3.9% 1,030 +8.0%
954 +4.4%
------ ------- ------------- -------
Total sales..............sales 100.0% $22,959 +2.6% $22,384 +1.1% $22,145 +3.7% $21,351 +5.4%
Food stores sales for the fourth quarter 1994 were 5.9% ahead of
the fourth quarter 1993. Food stores sales for the full year were
5.4% ahead of 1993 after adjusting for the San Antonio stores sold
during the third quarter of 1993. Sales in identical food stores,
stores that have been in operation and have not been expanded or
relocated for theone full year, 1993 (those operating a full
year and not expanded) increased 1.6% from the prior year. Excluding Michigan,
which had a sixty-seven day strike during the second and third quarters of
1992, identical food stores sales increased 1.2% for all of 1993 and 1.1%2.5% in the fourth quarter
and 2.2% for the full year. Management estimates that inflation
accounted for approximately 1% of the 1994 identical store sales
increase. The increase in food stores sales can be attributed
primarily to a 4.7% increase in square footage, price inflation in
pharmaceuticals and certain commodities such as coffee, and the
continuing maturation of the Company's ''combination'' format
stores. The Company's storing program is focused on the combination
food and drug store. These stores combine a food store with a
pharmacy and numerous specialty departments such as floral, video
rental, book stores, etc. The emphasis and on-going development of
this store format have become the primary vehicle by which the
Company expects to increase sales.
Convenience stores sales decreased 5.6% for the year and 4.0%
during the fourth quarter as a result of excluding certain
franchised store sales that were included in reported sales in
prior years. Adjusting 1993 versus the same periods in 1992. These increases were
achieved despite low overall food inflation and deflation in some commodities
in both 1993 and 1992, intense new supermarket competition in markets like
Houston, Texas and Toledo, Ohio, and expanding supercenter competition in many
other markets.
1993sales to exclude franchise sales from
convenience stores sales changes as compared towould result in an 8.4% increase for the
same periods in 1992
were as follows:
4TH QUARTER YEAR-TO-DATE
--------------------------
Total Sales............................................ -3.8% 3.9%
Identical.............................................. 1.7% 3.6%
In-Store Sales:
Total................................................ -4.1% 2.7%
Identical............................................ 3.9% 4.5%
Gasoline Sales:
Total................................................ -3.5% 5.2%
Identical............................................ -.6% 2.6%
Gasoline Gallons:
Total................................................ .1% 7.7%
Identical............................................ 3.4% 5.3%
quarter and a 6.0% increase year-to-date. The fourth quarter and
full year 19931994 sales for the seven-company convenience store group
were enhancedstrengthened by strong identical in-store sales and increases in gasoline
gallons sold but were depressed by decreasesan
increase in gasoline retail prices. In-store sales in identical
convenience stores increased 5.3% in the fourth quarter 1994 and
4.0% for the full year. Gasoline sales at identical convenience
stores increased 3.9% in the fourth quarter 1994 on a .5% decrease
in gallons sold and increased 2.9% for the year on a 1.6% increase
in gallons sold.
Other sales include outside sales by the Company's manufacturing
divisions and sales of general merchandise to a drug store companyHook-SupeRx, Inc.
(''HSI'') (See Other Charges and Credits in which the Company
maintains an equity interest. The drug store company is expectedNotes to completeFinancial
Statements). HSI completed an expansion of its warehouse in early
1994 and to discontinuediscontinued its purchases from the Company. The Company expects that this will resultIn 1993,
annual sales to HSI were $472 million. Adjusting other sales to
eliminate sales to HSI would produce increases of 7.4% for the
fourth quarter and 10.2% for the full year.
Total sales for the fourth quarter and year-to-date increased 6.0%
and 5.6%, respectively, after adjusting for the other sales to HSI,
the change in a declinefranchise sales accounting, and the exclusion of
approximately 45% to 50%sales from the Company's San Antonio stores which were sold in
other sales.August 1993.
Total food store square footage excluding the San Antonio stores disposition,
increased 3.2%4.7%, 3.2% and 2.5% in
1994, 1993, and 2.2% in 1993, 1992, and 1991, respectively. The Company expects to increase
retail food store square footage by 4 1/2 to 5%
each year from 1994 throughapproximately 5.5% during 1995
and 1996. Convenience store square footage increased .4% in 1994,
declined .7% and 2.1% in 1993, and 1991 respectively, and increased .2% in 1992. In early 1995, the
Company sold its Time Savers convenience store operations which
will result in a convenience store square footage decline of 12%.
Sales per average square foot for the last three years were:
TOTAL SALES
PER
AVERAGE SQUARE
FOOT
--------------
1993 1992 1991
-------------------------
Food Stores...................................................... $398 $402 $398
Convenience Stores............................................... $405 $389 $364
Total Sales Per
Average Square Foot
-------------------
1994 1993 1992
----- ---- ----
Food Stores $402 $398 $402
Convenience Stores $412 $405 $389
1992's food stores sales per average square foot for 1992 includes an extra
week which occurs due to the extra week.Company's 52/53 week fiscal year.
Without the extra week the amount would have been $394.
The Company was ablecontinued to maintainbuild its sales growthvolume in 1993 in the face1994 during a
period of new and intense competition for a numberformidable competition. The Company achieved this
through new square footage and through the increased productivity
of reasons. Fierce price competitionexisting stores. Markets that were especially competitive in markets,the
recent past, such as Toledo and Dayton, Ohio and Houston and Dallas, Texas, has abated
somewhat. The Company's Michigan operations have
begun to recover from a
prolonged strikeproduce favorable comparable results. The Atlanta, Georgia
market experienced an influx of major new competition during 1994
yet the operating division was still able to produce improved
results. All of these markets helped to offset the challenge that
the Company faced in 1992.Indiana with the opening of supercenters in
the marketplace. The Company's effortsCompany has been able to reduceoffset the effect of
highly competitive areas such as Indiana in 1994, because of its
multi-regional operations. The Company reduced the cost of products
during 1994 through its investment in technology aimed toward
improved store operation, procurement and distribution practices havepractices.
This has allowed the Company to pass on some of these lower costs
to the consumer and made the Company more price competitive and
attractive to consumers without sacrificing gross
profit. Finally,customers.
It is anticipated that 1995 will be another year of improved
performance from the shift in customer interest to private label products has
enhanced sales. The Company's line of private label products, many of which are
manufactured by the Company, have met with increasing acceptance by consumers.
While these factors likely will continue to benefit the Company in 1994, the
ability to generate sales growth may be limited by significant competitive
entries into markets such as Atlanta and Indiana,existing store base as well as
continued
supercenter growth.realized contributions from the capital spending program which will
substantially increase the Company's food store square footage
during 1995. Additional investments in technology should continue
to increase operating efficiencies, which can be reinvested into
sales growth through improved service to the customer and more
competitive pricing.
Factors that affected 1994 sales had already begun to impact sales
in 1993. 1993's sales showed an improvement over 1992 from the
rebounding of the Michigan market that sustained a prolonged labor
strike in 1992, increased price competitiveness of the Company, and
private label popularity. Sales in 1992 showed an improvement overwere improved from 1991
primarily due to the extra week in the fiscal year.
Sales in 1991 benefited from the purchase of the former
Great Scott! Stores in Michigan in late 1990, the continued maturation of the
Company's combination food store format, and significant growth in private
label products.
EBITD
- ------
The Company's Senior Competitive Advance and Revolving Credit
Facility Agreement (the ''Credit Agreement''), dated January 21, 1992,as of July 19,
1994, and the indentures underlying approximately $1.7$1.5 billion of
publicly issued debt contain various restrictive covenants, many of
which are based on earnings before interest, taxes, depreciation,
LIFO charge, unusual and extraordinary items ("EBITD"(''EBITD''). These
covenants are based, among other things, upon generally accepted
accounting principles ("GAAP"(''GAAP'') as applied on a date prior to
January 3, 1993. The ability to generate EBITD at levels sufficient
to satisfy the requirements of these agreements is a key measure of
the Company's financial strength. The presentation of EBITD is not
intended to be an alternative to any GAAP measure of performance
but rather to facilitate an understanding of the Company's
performance compared to its debt covenants. At January 1,December 31, 1994
the Company was in compliance with all covenants of its Credit
Agreement and publicly issued debt. The Company believes it has
adequate coverage of its debt covenants to continue to respond
effectively to competitive conditions.
During 1993,1994, EBITD, which does not include the effect of Statement
of Financial Accounting Standards ("SFAS"(''SFAS'') No. 106, "Employers'''Employer's
Accounting for Postretirement Benefits Other Than Pensions"Pensions'', the
Company's special contribution to The Kroger Co. Foundation, or the
charges1993 charge related to the disposition of the San Antonio stores,
increased 7.5%9.0% to $976.8 million$1.065 billion compared to $908.2$977 million in 19921993
and $968.0$908 million in 1991.1992. 1994's EBITD increase was primarily the
result of increased sales, positive effects from the Company's
accelerated store construction, cost reductions in procurement and
distribution which improved gross margins, and the return on
investments in new technology. 1993's EBITD increase was due in
large part to increased sales combined with an improved gross
profit rate. 1992's EBITD was negatively affected by a Michigan
strike which reduced EBITD by approximately $69 million and was
increased by the extra week in the fiscal year.
1993's
EBITD increase was primarily the result of increased sales combined with an
improved gross profit rate.
MERCHANDISE COSTSMerchandise Costs
- -------------------
Merchandise costs include warehousing and transportation expenses
and LIFO charges or credits. The following table shows the relative
effect that LIFO charges have had on merchandising costs as a
percent of sales:
1994 1993 1992
------ ------ -----
Merchandise costs as reported 75.81% 76.43% 77.12%
LIFO charge (credit) .07% (.02%) .03%
------ ------ ------
Merchandise costs as adjusted 75.74% 76.45% 77.09%
The Company's FIFO merchandise costs decreased for the second
consecutive year. 1992's rate was up from 1991 due to a costly
labor strike in Michigan. 1994's gross profit rate was favorably
influenced by the Company's advances in consolidated distribution
and coordinated purchasing, reduced transportation costs as a
percent of sales, and the relative effect of LIFO charges:
1993 1992 1991
---------------------
Merchandise costs as reported............................. 76.43% 77.12% 77.19%
LIFO charge (credit)...................................... (.02%) .03% .12%
------ ------ ------
Merchandise costs as adjusted............................. 76.45% 77.09% 77.07%
The Company's gross profit rate in 1993 improved over previous years in all
categories with the exceptions of pharmacy and deli. The improvement was due in
large measure to improved results in Michigan which wasstrong private label sales. Merchandise costs
were unfavorably affected by a strike in
1992, anthe increase in private labelthe LIFO reserve
charge. Merchandise costs also were favorably affected by the
discontinuance of low-margin sales to HSI. Merchandise costs as a
reductionpercent of sales adjusted for these sales declined to 75.76% in
coupon costs, and
cost reduction programs1994 from 75.97% in procurement and warehousing.1993.
The Company expects gross profit as a percent of salesrates to improve in the future as
benefits are derivedcost savings continue to be realized from coupon scanning and a declineincreased efficiencies in
multiple
couponing. Coupon scanning allows the Company to readily determine the validity
of coupons presented. The effect of reduced multiple couponing is enhanced by a
reduction in the face value and quantity of vendor coupons. The Company also
expects to show gross profit improvement from coordinatedlogistics, procurement and the
continued expansion of private label sales. The Company produces many of its
own private label productstechnology.
Operating, General and therefore, has lower product costs for such
items than could be obtained through procurement. Some of the gross profit
benefit will be reflected in lower prices to protect or enhance the Company's
competitive position.
OPERATING, GENERAL AND ADMINISTRATIVE EXPENSESAdministrative Expenses
- -----------------------------------------------
Operating, general and administrative expenses as a percent of
sales in 1994, 1993 and 1992 were 18.42%, 17.98% and 1991 were 17.98%, 17.51% and 17.15%,
respectively. Excluding the effect of SFAS No. 106 and sales to HSI
from 1994, operating, general and administrative expenses were
18.37%. Excluding the effect of SFAS No. 106, sales to HSI, and the
convenience store franchise sales from 1993, operating, general and
administrative expenses as a percent of sales were 17.89%18.27%.
The increase in operating,Operating, general and administrative expenses over last year
was due in part to the increase inwere adversely
affected by higher incentive paybonuses for both management and store
employees reflecting 1993'sbased on improved performanceresults as compared to 1992. The Company
also has experienced increases in collectively bargained wages, health
insurance, general liability claims, and other store expenses.
Controlling1993.
Additionally, the up-front costs associated with the opening of new
stores increased operating, general and administrative expenses is a significant
challenge to the Company. Beginning in 1992 and continuing through 1995, the
Company expects to spend approximately $125 million of capital to increase
technological capabilities with the goal of reducing operating costs.expenses.
The Company has dedicated management resourcesopened, acquired, or expanded 82 food stores in 1994 as
compared to a total of 46 in 1993.
The Company continues to invest in new technologies to improve
its procurement,
logistics, administrative,efficiencies, lower costs, and accounting functions, both to realize the
benefitsincrease customer service. Automated
labor scheduling and faster front-end point of improved technological capabilitysale systems
including coupon validation technology and otherwise to control costs.
The Company also has begun the redesignfront-end scaling are
examples of some specialty departments within
the food stores to realize cost savings. The Company currently is absorbing the
expense of converting some full service departments to self service. This
effort will continuenew systems being implemented. Labor negotiations
during 1994 produced peaceful and 1995,generally favorable settlements
that will help to improve operating flexibility and contain costs
in the Company expects to realize
some benefit from these efforts beginning in late 1994.
INCOME TAXESfuture.
Income Taxes
- ------------
The effective income tax rates were 39.8%36.2%, 39.8% and 41.7% for
1994, 1993 and 40.3% for 1993, 1992, and
1991, respectively. 1994's income tax expense
includes a $5.9 million benefit from the donation to The Kroger Co.
Foundation of an asset that had a market value above the book
value. 1993's income tax expense includes a $4.2 million charge to
increase deferred taxes for the change in the federal income tax
rate.
NET EARNINGS (LOSS)Net Earnings (Loss)
- -------------------
Net earnings (loss) totaled $242.2 million in 1994 compared to
$(12.2) million in 1993 compared toand $(5.9) million in 1992 and $79.9 million in 1991.1992. Earnings in
19931994 compared to 19921993 and 19911992 was affected by: (i) a 1994 pre-tax
charge of $4.4 million offset by a $5.9 million tax credit in
connection with the Company's contribution to The Kroger Co.
Foundation, (ii) a $25.1 million pre-tax charge in 1994 to
recognize future lease commitments and losses on equipment related
to certain San Antonio stores sold to Megafoods, Inc. which
declared bankruptcy during 1994, (iii) a $25.1 million 1994 pre-tax
gain on the disposition of the Company's investment in HSI after
providing for certain tax indemnities related to HSI, (iv) a 1993
charge against earnings of $248.7 million before taxes, $159.2
million after taxestax, for the cumulative effect, along with an
additional $17.7 million and $19.5 million in 1994 and 1993,
respectively, for the current year's effect of a change in
accounting for retiree health benefits, (ii)(v) an after tax
extraordinary loss from the early retirement of debt in 19931994 of
$26.7 million compared to $23.8 million compared toin 1993 and $107.1 million
in 1992, and $20.8 million in 1991, (iii)(vi) a sixty-seven day strike in Michigan duringwhich reduced
pre-tax income by approximately $69 million in 1992, (iv)(vii) a pre-
tax LIFO creditcharge in 19931994 of $16.1 million versus a credit of $3.2
million versusin 1993 and a charge of $8.1 million in 1992, and $26.2 million in 1991,
and (v) net interest expense in 1993 of $390.0 million versus $474.8 million in
1992 and $531.1 million in 1991. 1993's net earnings also include(viii) a $4.4
million pre-tax ($2.7 million after tax) one-time charge in 1993
related to a change in the estimated useful life of certain
computer equipment, and(ix) a $22.7 million charge ($15 million after
tax) during 1993 in connection with the disposition of the San
Antonio stores. Severance pay, unemployment benefits costsstores, and loss on sale of
assets are included in this charge.
LIQUIDITY AND CAPITAL RESOURCES
DEBT MANAGEMENT AND INTEREST EXPENSE
The Company continued to reduce(x) net interest expense during 1993.in 1994 of $327.6
million versus $390.0 million in 1993 and $474.8 million in 1992.
Liquidity and Capital Resources
Debt Management and Interest Expense
- ------------------------------------
Net interest expense declined to $327.6 million in 1994 as compared
to $390.0 million in 1993 and $474.8 million in 1992. The reduction
in interest expense is primarily due to the Company's progress in
refinancing its high-cost, long-term debt and debt reduction. The
Company was successful in placing $1.6$1.7 billion of senior
subordinated or senior secured debt during 1992, 1993, and 19931994
with an average rate of 9.39%9.23% and $200 million of convertible
junior subordinated notes with a rate of 6.375%.
The Company also
borrowed $100 million at a rate equal to LIBOR + 1.25% or, at the Company's
election, such lenders' base rate + .25%, pursuant to a term facility under the
Credit Agreement. The proceeds from these offerings, and from the issuance of
13,275,000 shares of common stock with proceeds ofwhich netted $203.5 million in
1993, were used to redeem or repurchase, on the open market, $3.3
billion of high yield subordinated debt with an average rate of
14.2% (see "Repurchase13.3% (See ''Repurchase and Redemption of Subordinated Debt"Debt'').
The Company entered into a new Credit Agreement on July 19, 1994
which reduced the Company's interest rate spread over LIBOR on its
bank borrowings. The Company's Credit Agreement is a seven year,
$1.75 billion revolving loan which increases the amount the Company
is permitted to expend on capital expenditures compared to the
prior agreement. The Company's initial borrowing under the new
agreement, totaling $745 million, was used to pay the remaining
balance on the old agreement. The average interest rate on the
Company's bank debt, which totaled $979.3 million at year-end 1994
versus $847.0 million at year-end 1993, was 5.57% compared to 4.57%
at the end of 1993 and 5.42% at the end of 1992. The increase is
due to higher market interest rates that were not entirely offset
by the lower interest rate spreads on the Company's new Credit
Agreement. The Company's rate on the bank debt is variable.
The Company currently expects 1995 net interest expense, based on
year-end 1994 rates, to total approximately $330 million. A 1%
change upward in market rates would increase this estimated expense
by approximately $4.8 million. A 1% decrease in market rates would
reduce the estimated expense by approximately $5.9 million.
As a result of these public and bank debt transactions as well as
the 1993 stock issuance, the Company has reduced the weighted
average cost of its long-term debt, including capital leases, to
8.2% at year-end 19938.5% versus 11.6% at the beginning of 1990. Long-term debt,
including capital leases and current portionsportion thereof, decreased
$348$300 million to $3.906 billion at year-end 1994 from $4.206 billion
at year
end 1993 from $4.554 billion at year end 1992.year-end 1993. The Company has purchased a portion of the debt
issued by the lenders of certain of its structured financings,
which cannot be retired early, in an effort to effectively further
reduce the Company's interest expense. Excluding the debt incurred
to make these purchases, which are classified as investments, the
Company's long-term debt would be $68.8 million less or $3.837
billion.
Required principal repayments over the next five years increaseddecreased to
$1.048
billion at year end 1993 versus $534.5 million and $541.3$670.7 million at year-end 19921994 versus $1.048 billion and 1991,$534.5
million at year-end 1993 and 1992, respectively. Scheduled debt
maturities for the five years subsequent to 1994, 1993 and 1992
were:
1994 1993 1992
-------- -------- --------
(in thousands)
Year 1 $ 7,926 $ 63,053 $ 73,248
Year 2 14,341 111,010 115,017
Year 3 12,875 117,434 111,549
Year 4 15,507 146,784 118,032
Year 5 620,012 609,769 116,669
1994's Year 5 maturities include $125 million of 9% Senior
Subordinated Notes, $200 million of 6 3/8% Convertible Junior
Subordinated Notes, and 1991 were:
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)
Year 1....................................... $ 63,053 $ 73,248 $ 73,580
Year 2....................................... 111,010 115,017 123,368
Year 3....................................... 117,434 111,549 114,927
Year 4....................................... 146,784 118,032 111,451
Year 5....................................... 609,769 116,669 117,926
the remaining $222.6 million of 10% Senior
Subordinated Notes. The Company currently expects to issue a
redemption notice on the 6 3/8% Convertible Junior Subordinated
Notes by December 1995, which, based solely on the current market
price of the Company's common stock, should result in conversion by
virtually all of the holders.
1993's Year 5 maturities include the entire $362.0 million
outstanding under the Company's Working Capital Facility under itsthe
predecessor to the Company's current Credit Agreement, $68.0
million of Facility D under its predecessor Credit Agreement, and
the remaining 11 1/8% Senior Notes outstanding at January 1, 1994
of $138.4 million. The Company has
notified the trustee for the Senior Notes that it will redeem these notesmillion which were redeemed on March 15, 1994. Maturities
shown for 19911992 reflect the restated Credit Agreement dated as of
January 21, 1992.
The Company's interest rate on Credit Agreement borrowings is variable. The
average interest rate, including the effect of interest rate swaps, on the
Company's bank debt, which totaled $847.0 million at year-end 1993, including
Facility D, versus $851.0 million at year-end 1992, was 4.57% compared to 5.42%
at the end of 1992 and 6.13% at the end of 1991. The decline is due to
generally lower market interest rates and achieving a .25% interest rate step
down in January, 1993.
The Company currently has in place various interest rate hedging
agreements aggregating $1.4$2.65 billion. The Company enters into
interest rate hedging agreements to lower funding cost, to
diversify sources of funding and to alter interest rate exposures
arising from mismatches between assets and liabilities. The effect
of these agreements is to: (i) fix the rate on $100$550 million
floating rate debt, untilwith $200 million of swaps expiring in May
1996, and the remaining $350 million of swaps expiring in July
19942001, (ii) swap the contractual interest rate on $350 million of
seven and ten year debt instruments to the rates available on three
to five year fixed rate instruments (upon expiration of the three
to five year swap agreements the fixed contractual rate will become
floating for the remainder of the seven and ten year term of debt),
(iii) swap the contractual interest rate on $600$825 million of four,
seven and ten year fixed-rate instruments into floating-rate
instruments, and (iv) cap six month LIBOR on $350$575 million for one
to five years at rates of 3.70%4.20% to 5.50%.6.00%, with $50 million of the
caps expireexpiring in each of July 1994, July 1995, July 1997 and July 1998. The remaining1998, $150
million cap expiresof the caps expiring in November 1995.
The Company currently expects 1994 net interest expense, based on year-end 1993
rates, to total $330-$3401995, and the remaining
$275 million compared to $390.0 million, $474.8 million
and $531.1 millionexpiring in 1993, 1992 and 1991, respectively.the first quarter of 1996.
To meet any short-term liquidity needs, the Company has available an $850
million Working Capital FacilityCompany's Credit
Agreement provides for borrowings of up to $1.75 billion. The
Company's borrowings under itsthe Credit Agreement. A portion of the
Company's short-term borrowingsAgreement are permitted to be
in the form of commercial paper. At January 1,December 31, 1994, the Company
had outstanding $98.0$227.9 million of commercial paper and $264.0outstanding of the $979.3
million under the Working Capital Facility.in total bank borrowings. At year-end 1993,1994, after deducting
amounts set aside as backup for the Company's unrated commercial
paper program, and stand-by letters of credit, $317.8$585.0 million was available under the Working Capital Facility.Company's
Credit Agreement to meet short-term liquidity needs. There are no annual
principal payments required under the Working Capital Facility, which expiresCredit Agreement until its
expiration on January
3, 1998.
COMMON STOCKJuly 19, 2001.
Common Stock
- ------------
On March 4, 1993 the Company issued 12,500,000 shares of its common
stock through a public offering. On April 1, 1993, the Company
issued an additional 775,000 shares of its common stock pursuant to
an over-allotment option granted to the underwriters in connection
with the offering. The Company realized net
proceeds of $203.5 million on these
issues which werewas used initially to repay,
amounts outstanding under the Working Capital Facility, and thereafter the
Company used amounts available under the Working Capital Facility to purchase, or redeem outstanding
indebtedness of the Company.
REPURCHASE AND REDEMPTION OF SUBORDINATED DEBTRepurchase and Redemption of Subordinated Debt
- ----------------------------------------------
During 1994 the Company redeemed the remaining outstanding amounts
of its 11 1/8% Senior Notes, its 8 3/4% Senior Subordinated Reset
Notes and its 8 1/4% Convertible Junior Subordinated Debentures.
The Company also repurchased $144.8 million of its various senior
subordinated debt issues and $39.9 million of its 9 1/4% Senior
Secured Debentures. The redemptions and repurchases were effected
using funds from asset sales, the sale of treasury stock to
employee benefit plans, proceeds from new financings, and excess
cash from operations. The outstanding balances of these debt issues
at December 31, 1994 were $1.105 billion for the Senior
Subordinated Debt issues, and $160.2 million for the 9 1/4% Senior
Secured Debentures.
During 1993 the Company repurchased $300.6 million face amount of
Junior Subordinated Discount Debentures with an accreted value of
$285.1 million, $71.2 million Senior Subordinated Debentures,
$111.6 million Senior Notes, and $33.5 million Senior Subordinated
Reset Notes. Additionally, the Company redeemed the remaining
$498.2 million Junior Subordinated Discount Debentures.
The redemptions were effected using funds from asset sales, the sale of
treasury stock to employee benefit plans, proceeds from the sale of common
stock and new financings, and excess cash from operations. The outstanding
balances of these debt issues at January 1, 1994 were $0 for the Junior
Subordinated Discount Debentures, $0 for the Senior Subordinated Debentures,
$138.4 million for the Senior Notes, and $66.5 million for the Senior
Subordinated Reset Notes. The Company issued a redemption notice for the
remaining Senior Notes on February 13, 1994. The redemption will be effected on
March 15, 1994.
During 1992 the Company repurchased $269.9 million face amount of
Junior Subordinated Discount Debentures with an accreted value of
$231.1 million, $343.9 million Senior Subordinated Debentures and
$256.2 million Subordinated Debentures. Additionally, the Company
redeemed $120.5 million Senior Subordinated Debentures and $304.6
million Subordinated Debentures.
During 1991 the Company repurchased $303.8 million face amount of Junior
Subordinated Discount Debentures with an accreted value of $217.9 million,
$59.3 million Senior Subordinated Debentures and $64.2 million Subordinated
Debentures.
CAPITAL EXPENDITURESCapital Expenditures
- --------------------
Capital expenditures totaled $376.1$534.0 million for 1993,1994, a 42%
increase over 1993's total of $376.1 million. 1992's capital
outlays were $241.2 million for 1992
and $208.1 million in 1991.million. During 19931994 the Company opened,
acquired or expanded 82 food stores and 17 convenience stores
compared to 46 food stores and 10 convenience stores compared toin 1993 and 42
food stores and 19 convenience stores in 1992 and 42 food stores and 4 convenience stores
in 1991.1992. The Company also
completed 7066 food store and 21 convenience store remodels during
1993.1994. During 1993, 321994, 41 food stores were closed or sold including the
15 San Antoniosale of seven stores soldin Alabama and Mississippi to Megafood Stores, Inc. in August 1993. 17Delchamps. The
Company closed 16 convenience stores also were closed.during 1994 and, in early
1995, completed the sale of its 116 store Time Savers convenience
store division. The Company expects capital expenditures to
approximate $1.5 billion over the next three years. In 1994 the Company
plans to increase$600 million in 1995 which will allow for food store
square footage by 4 1/2%-5%growth of approximately 5.5% by opening, expanding
or acquiring approximately 7090 food stores and completingstores. The Company also expects
to complete within-the-wall remodels of 60-70 food stores, including the recently completed purchase of 10
stores in Houston, Texas from AppleTree Markets, Inc.stores. The
increased square footage is planned for existing Company markets
where the Company has an established market position and an
existing administrative and logistical network. The Company's
ability to realize its capital expenditureexpenditures plan will depend, in
part, on its ability to generate sufficient free cash flow. The
Company expects to dedicate one halfcontinued EBITD growth.
Consolidated Statement of its free cash flow in excess of
planned expenditures to its capital program and the remainder to debt
reduction.
CONSOLIDATED STATEMENT OF CASH FLOWSCash Flows
- -------------------------------------
During 19931994 the Company generated $617.3$750.3 million in cash from
operating activities compared to $617.3 million in 1993 and $532.8
million in 1992 and $448.41992. The increase from 1993 is primarily due to an
increase in operating net income of $98.1 million. Additionally,
the Company experienced an increase in cash from changes in
operating working capital of $195.9 million as compared to $105.5
million in 1991.1993. This reduction in working capital was due in large
part to increases in accrued expenses and other liabilities. The
increase in 1993 from 1992 is due to an increase in operating net
income of $69.6 million. Additionally, the Company experiencedmillion and an increase in cash from changes in
operating assets and liabilities of $105.5 million. The increase is duemillion as compared to
an increase in accounts payable over and above the increase in inventory values
of $47.7 million, an increase in income taxes payable of $17.5 million, and an
increase in self-insured workers compensation and general liability accruals of
$34.4 million. The increase in 1992 from 1991 is due to an increase in cash of
$45.1 million from changes in operating assets and liabilities and a $56.3
million reduction in interest expense.1992.
Investing activities used $368.3$546.5 million compared to $368.3 million
of cash used in 1993 and $264.3 million of cash used in 1992 and $187.9 million of cash used in 1991.1992. The
increase in the use of cash in 19931994 is due to an increase in the
level of capital expenditures over 19921993 of $134.9$157.8 million, and an
increasedincrease in the use of cash of $18.2$43.5 million for investments.investments and
$8.8 million for 1994 additions to property held for sale, combined
with a decline of $18.5 million in the source of cash from sales of
property, plant and equipment. The increase in investments was
primarily due to the purchase of debt issued by a lender of certain
of the Company's structured financings. (See Liquidity and Capital
Resources) This increase in the use of cash was offset by an
increase in cash proceeds from the sale of investments of $50.5
million over 1993. The increase in 1993 from 1992 fromis due to an
increase in cash used for capital expenditures and the purchase of
investments offset by reduced
current year expenditures for additions to
property held for sale and increased proceeds from the sale of
property, plant and equipment.
The increase in 1992
from 1991 is due to an increase in cash used for capital expenditures and
additions to property held for sale.
Cash used by financing activities totaled $231.7$297.8 million compared
to $231.7 million and $168.4 million in 1993 and $311.1 million in 1992, and 1991,
respectively. The increase in the use of cash during 19931994 is due to
a debtnet reduction excluding capital leasesin proceeds from the sale of common stock and
the interest accretion on the Junior Subordinated Discount Debentures,treasury stock of $423.0$192.9 million versus 1992'soffset by a 1994 debt reduction of
$38.8$304.1 million versus 1993's debt reduction of $423.0 million. The
increase in 1993 from 1992 is due to a larger level of debt
reduction was offset by proceeds from the sale of stock and lower debt
prepayment and financing costs incurred.
OTHER ISSUESOther Issues
- -------------
The Company is party to more than 200 collective bargaining
agreements with local unions representing approximately 110,000150,000 of
the Company's employees. AmongDuring 1994 the Company negotiated a total
of 63 labor contracts, that have expired or will expire in the remainderall of 1994
are those covering store employees in Charleston (WV), Nashville, Louisville,
Cincinnati, Phoenix and Tucson as well as warehouse and distribution employees
in a number of the Company's operating divisions.which were settled with no work
stoppages. Typical agreements are 3 to 45 years in duration, and as
such agreements expire, the Company expects to negotiate with the
unions and to enter into new collective bargaining agreements.
There can be no assurance, however, that such agreements will be
reached without work stoppage. A prolonged work stoppage affecting
a substantial number of stores could have a material adverse effect
on the results of the Company's operations. As ofMajor union contracts
that will be negotiated in 1995 include the Memphis, Houston,
Indianapolis, and Columbus, Ohio food clerks.
Subsequent Events
- -----------------
On January 3, 199317, 1995 the Company implemented SFAS No. 106, "Employers'
Accountingsold its Time Saver Stores, Inc.
subsidiary to E-Z Serve Convenience Stores, Inc. Time Saver Stores,
Inc. had 1994 sales of $116.7 million and operated 116 convenience
stores, either directly or through franchise agreements, in the
state of Louisiana.
Subsequent to December 31, 1994 and through March 2, 1995 the
Company purchased an additional $95.6 million of its various senior
subordinated debt issues. As adjusted for Postretirement Benefits Other Than Pensions" usingthese open market
purchases, the immediate
recognition approach. This new standard requires that the expected costcarrying amount of
retiree health benefits be charged to expense during the years that the
employees render service rather than the Company's past practice of recognizing
these costs on a cash basis. As part of adopting the new standard, the Company
recorded in 1993 a non-cash charge against earnings of $248.7 million before
taxes ($159.2 million after taxes). This cumulative adjustment as of January 3,
1993 represents the discounted present value of expected future retiree health
benefits attributed to employees' service rendered prior to that date.
In addition, the new standard results in additional annual expense, which for
the year ended January 1, 1994 totaled $19.5 million before taxes. The increase
in the annual postretirement benefit expense does not affect the Company's
EBITD.
Effective December 29, 1991, the Company adopted the provisions of SFAS No.
109, "Accounting for Income Taxes". The adoption of SFAS No. 109 had a material
effect on the Company's financial statements in the first quarter of 1993 due
to the adoption of SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions."senior subordinated
debt was $1.0 billion at March 2, 1995. The Company recognized a deferred tax benefitexpects to
incur an after-tax extraordinary loss of $89.5approximately $3.2 million
in connection with the adoption of SFAS No. 106. A portion of
this tax benefit would not have been recognized under the Company's previous
method of accounting for income taxes.
related to these purchases.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
THE KROGER CO.
Dated: May 2, 1994 ByApril 28, 1995 By: (Paul W. Heldman)
-----------------------
Paul W. Heldman
Vice President, Secretary
and General Counsel
INDEX OF EXHIBITS
-----------------
Exhibit
- -------
23.2 Consent of Independent AccountantsAccountants.
23.3 Consent of Independent AccountantsAccountants.
99.2 Financial Statements for The Kroger Co. Savings Plan for
the Year Ended December 31, 19931994
99.3 Financial Statements for the Dillon Companies, Inc.
Employees' Stock Ownership and Savings
Plan for the Year Ended December 31, 1994
Exhibit 23.2
------------
Consent of Independent Accountants
We consent to the incorporation by reference in the registration
statement of The Kroger Co. on Form S-8 (File No. 33-29640) of our
report dated April 21, 1995, on our audits of the financial
statements and financial statement schedules of The Kroger Co.
Savings Plan as of December 31, 1994 and 1993, and for each of the
three years in the period ended December 31, 1994, which report is
included in this Annual Report on Form 10-K.
(COOPERS & LYBRAND L. L. P.)
COOPERS & LYBRAND L.L.P.
Cincinnati, Ohio
April 27, 1995
Exhibit 23.3
------------
Consent of Independent Accountants
We consent to the incorporation by reference in the registration
statement of The Kroger Co. on Form S-8 (File No. 33-29405) of our
report dated March 31, 1995, on our audits of the financial
statements and financial statement schedule of Dillon Companies,
Inc. Employees' Stock Ownership and Savings Plan as of December 31,
1994 and 1993, and for each of the three years in the period ended
December 31, 1994, which report is included in this Annual Report
on Form 10-K.
(COOPERS & LYBRAND L.L.P.)
COOPERS & LYBRAND L.L.P.
Cincinnati, Ohio
April 27, 1995
Exhibit 99.2
The Kroger Co. Savings Plan
Index To Financial Statements
December 31, 1994
Independent Auditors' Report
Statement of Net Assets Available
For Plan Benefits at December 31, 1994
Statement of Net Assets Available
For Plan Benefits at December 31, 1993
Statement of Changes in Net Assets
Available For Plan Benefits for
the year ended December 31, 1994
Statement of Changes in Net Assets
Available For Plan Benefits for
the year ended December 31, 1993
Statement of Changes in Net Assets
Available For Plan Benefits for
the year ended December 31, 1992
Notes to Financial Statements
Item 27a - Schedule of Assets Held for Investment
Item 27d - Schedule of Reportable Transactions
Independent Auditors' Report
-----------------------------
To the Administrative Committee of The Kroger Co. Savings Plan
We have audited the accompanying statements of net assets available
for plan benefits of The Kroger Co. Savings Plan as of December 31,
1994 and 1993, and the related statements of changes in net assets
available for plan benefits for the years ended December 31, 1994,
1993 and 1992. These financial statements are the responsibility
of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts of disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for plan
benefits of the The Kroger Co. Savings Plan as of December 31, 1994
and 1993, and the changes in net assets available for plan benefits
for the years ended December 31, 1994, 1993 and 1992 in conformity
with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on
the basic financial statements taken as a whole. The supplemental
schedules of assets held for investment and reportable transactions
are presented for the purpose of additional analysis and are not a
required part of the basic financial statements but are
supplementary information required by the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974. The fund
information in the statement of net assets available for plan
benefits and the statement of changes in net assets available for
plan benefits is presented for purposes of additional analysis
rather than to present the net assets available for plan benefits
and changes in net assets available for plan benefits of each fund.
The supplemental schedules and fund information have been subjected
to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements
taken as a whole.
(COOPERS & LYBRAND L.L.P.)
COOPERS & LYBRAND L.L.P.
Cincinnati, Ohio
April 21, 1995
THE KROGER CO. SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
December 31, 1994
(In thousands of dollars)
--------------
1994
--------------------------------------------------------------------------------------------
MERRILL
LYNCH MERRILL MERRILL AMERICAN
EMPLOYER EQUITY LYNCH LYNCH CAPITAL TEMPORARY
STOCK INDEX BASIC GLOBAL EMERGING TEMPLETON FIXED PARTICIPANT INVESTMENT
ASSETS FUND TRUST VALUE ALLOCATION GROWTH FOREIGN INCOME LOANS FUND TOTAL
--------- ------- ------- ---------- ------- --------- ------ ----------- ---------- -----
Investments:
The Kroger Co. common shares
(Cost - $186,931) $360,232 $360,232
Contracts with insurance
companies (stated at cost) $80,290 80,290
Mutual funds (cost - $11,109) $2,075 $2,469 $2,343 $3,569 10,456
Collective investment trust
(cost - $32,708) $33,045 33,045
Temporary cash investments
and loans to participants $9,124 $178 9,302
-------- ------- ------ ------ ------ ------ -------- ------ ------- --------
Total investments 360,232 33,045 2,075 2,469 2,343 3,569 80,290 9,124 178 493,325
Receivables:
Employee contributions 246 58 4 5 5 7 122 447
Employer contributions 5,865 5,865
Interest and dividends 33 33
-------- ------- ------ ------ ------ ------ -------- ----- ------- --------
Total assets 366,343 33,103 2,079 2,474 2,348 3,576 80,412 9,124 211 499,670
-------- ------- ------ ------ ------ ------ -------- ------ ------- --------
LIABILITIES
Payable for administrative
fees 298 298
-------- ------ ------ ------ ------ ------ -------- ------ ------- -------
Total liabilities 298 298
-------- ------ ------ ------ ------ ------ -------- ------ ------- -------
Net assets available for
plan benefits $366,343 $33,103 $2,079 $2,474 $2,348 $3,576 $80,412 $9,124 $(87) $499,372
======== ======= ====== ====== ====== ====== ======= ====== ======= ========
The accompanying notes are an integral
part of the financial statements.
THE KROGER CO. SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
December 31, 1993
(In thousands of dollars)
----------------------
1993
-------------------------------------------------------
EMPLOYER MELLON TEMPORARY
STOCK EQUITY FIXED INVESTMENT
ASSETS FUND FUND INCOME FUND TOTAL
--------- ------ ------ ---------- -------
Investments:
The Kroger Co. common shares
(cost - $156,929) $297,549 $297,549
Contracts with insurance
companies (stated at cost) $62,804 62,804
Collective investment funds
(cost - $29,528) $32,199 32,199
U.S. Government Securities 17 67 3,626 3,710
Temporary cash investments
and loans to participants $8,107 8,107
--------- ------- ------- ------ --------
Total investments 297,566 32,266 66,430 8,107 404,369
Receivables:
Employee contributions 400 400
Employer contributions 3,116 3,116
Interest and dividends 2 6 4 12
--------- ------- -------- ------ --------
Total assets 300,684 32,266 66,436 8,511 407,897
--------- ------- -------- ------ --------
LIABILITIES
Payable for administrative
fees 24 58 82
-------- ------- -------- ------ --------
Total liabilities 24 58 82
-------- ------- -------- ------ --------
Net assets available for
plan benefits $300,684 $32,266 $66,412 $8,453 $407,815
======== ======= ======= ======= ========
The accompanying notes are an integral
part of the financial statements.
THE KROGER CO. SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the year ended December 31, 1994
(In thousands of dollars)
----------------------
--------------------------------------------------------------------------------------------------
MERRILL
LYNCH MERRILL MERRILL AMERICAN
EMPLOYER EQUITY LYNCH LYNCH CAPITAL TEMPORARY
STOCK INDEX BASIC GLOBAL EMERGING TEMPLETON FIXED MELLON PARTICIPANT INVESTMENT
ASSETS FUND TRUST VALUE ALLOCATION GROWTH FOREIGN INCOME EQUITY LOANS FUND TOTAL
-------- ------- ------- ---------- -------- --------- ------ ------ ----------- --------- ------
Employee contributions $ 21,972 $ 5,846 $ 271 $ 314 $ 355 $ 373 $ 9,807 $ (532) $ 38,406
Employer contributions 6,684 6,684
Transfer from (to) other funds (11,554) 28,186 1,795 2,238 2,013 3,283 3,014 $(32,266) $9,905 (6,614)
-------- ------- ------ ---------- -------- --------- ------ --------- -------- --------- -------
Total contributions
and transfers 17,102 34,032 2,066 2,552 2,368 3,656 12,821 (32,266) 9,905 (7,146) 45,090
Investment income (loss):
Dividends 108 133 60 223 524
Interest 381 65 2 3 3 4 4,885 31 5,374
Net appreciation(depreciation)59,151 224 (88) (208) (72) (303) 58,704
-------- ------- ------ ---------- -------- -------- ------ --------- -------- -------- -------
Total additions(deductions) 76,634 34,321 2,088 2,480 2,359 3,580 17,706 (32,266) 9,905 (7,115) 109,692
-------- ------- ------ ---------- -------- -------- ------ --------- -------- -------- -------
Distributions to participants 10,897 1,185 9 6 11 4 3,565 781 1,127 17,585
Administrative expenses 78 33 141 298 550
-------- ------- ------ ---------- -------- -------- ------ --------- -------- -------- -------
Total deductions 10,975 1,218 9 6 11 4 3,706 781 1,425 18,135
-------- ------- ------ --------- -------- -------- ------ --------- ------- -------- -------
Net increase(decrease) 65,659 33,103 2,079 2,474 2,348 3,576 14,000 (32,266) 9,124 (8,540) 91,557
Net asset available for
plan benefits:
Beginning of year 300,684 66,412 32,266 8,453 407,815
-------- ------- ------ -------- -------- -------- ------ --------- ------- -------- --------
End of year $366,343 $33,103 $2,079 $2,474 $2,348 $3,576 $80,412 $0 $9,124 $(87) $499,372
======== ======= ====== ======== ======== ======== ======= ======== ======= ======== ========
The accompanying notes are an integral
part of the financial statements.
THE KROGER CO. SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the year ended December 31, 1993
(In thousands of dollars)
-------------------
1993
-------------------------------------------------------------------
EMPLOYER FIDELITY MELLON TEMPORARY
STOCK EQUITY EQUITY FIXED INVESTMENT
FUND FUND FUND INCOME FUND TOTAL
--------- -------- ------- ------ ----------- ---------
Employee contributions $ 34,909 $ 34,909
Employer contributions $ 3,125 3,125
Transfer from (to) other funds 7,751 $(12,170) $ 17,286 $ 9,686 (22,553)
--------- --------- -------- --------- --------- ---------
Total contributions
and transfers 10,876 (12,170) 17,286 9,686 12,356 38,034
Investment income(loss):
Dividends 7 773 780
Interest 90 4,106 529 4,725
Net appreciation (depreciation) 79,119 1,947 (14) 81,052
Other 362 362
-------- --------- -------- -------- --------- --------
Total additions (deductions) 90,085 (12,163) 20,006 13,778 13,247 124,953
======== ========= ======== ======== ========= ========
Distributions to participants 3,961 12,053 16,014
Administrative expenses 1 15 123 388 527
-------- --------- -------- -------- -------- --------
Total deductions 3,962 15 123 12,441 16,541
-------- --------- -------- -------- -------- --------
Net increase (decrease) 86,123 (12,163) 19,991 13,655 806 108,412
Net assets available for
plan benefits:
Beginning of year 214,561 12,163 12,275 52,757 7,647 299,403
-------- -------- ------- -------- -------- -------
End of year $300,684 $ 0 $32,266 $ 66,412 $ 8,453 $407,815
======== ======== ======= ======== ======== ========
The accompanying notes are an integral
part of the financial statements.
THE KROGER CO. SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the year ended December 31, 1992
(In thousands of dollars)
-------------------
1992
------------------------------------------------------------------
EMPLOYER FIDELITY MELLON TEMPORARY
STOCK EQUITY EQUITY FIXED INVESTMENT
FUND FUND FUND INCOME FUND TOTAL
---------- -------- ------ ------- ---------- -------
Employee contributions $ 18,373 $ 18,373
Employer contributions $ 1,036 1,036
Merger from other trust 72,439 $ 2,608 $ 3,294 $ 11,068 623 90,032
Transfer from (to) other funds 7,200 (1,939) 4,361 2,386 (12,008)
---------- --------- ------- -------- --------- --------
Total contributions
and transfers 80,675 669 7,655 13,454 6,988 109,441
Investment income(loss):
Dividends 370 187 557
Interest 27 3,045 796 3,868
Net appreciation(depreciation) (48,348) 925 416 (47,007)
Other 178 (180) (2)
---------- --------- ------- -------- --------- ---------
Total additions 32,532 1,964 8,258 16,499 7,604 66,857
---------- --------- ------- -------- --------- ---------
Distributions to participants 1,568 100 5,237 6,905
Administrative expenses 5 404 409
---------- --------- ------- -------- --------- ---------
Total deductions 1,568 100 5 5,641 7,314
---------- --------- ------- -------- --------- ---------
Net increase 30,964 1,864 8,253 16,499 1,963 59,543
Net assets available for
plan benefits:
Beginning of year 183,597 10,299 4,022 36,258 5,684 239,860
---------- --------- ------- -------- --------- ---------
End of year $214,561 $12,163 $12,275 $ 52,757 $ 7,647 $299,403
========== ========= ======= ======== ========= =========
The accompanying notes are an integral
part of the financial statements.
THE KROGER CO. SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
The following describes the significant policies followed in
the preparation of these financial statements.
INVESTMENTS VALUATION
---------------------
Investments in securities (common and preferred stock) traded
on a national securities exchange are valued at the last
reported sales price on the last business day of the year;
listed securities for which no sale was reported on that date
are valued at the last reported bid price. Guaranteed
Investment Contracts are valued at cost.
OTHER
-----
Purchases and sales of securities are reflected on a trade
date basis. Gain or loss on sales of securities are based on
average cost.
Dividend income is recorded on the ex-dividend date. Income
from other investments is recorded as earned on an accrual
basis.
The plan presents in the statement of changes in net assets
available for plan benefits the net appreciation or
depreciation in the fair value of its investments which
consists of the realized gains or losses and the unrealized
appreciation or depreciation on those investments.
2. PLAN DESCRIPTION
----------------
The Plan provides for eligible employees of The Kroger Co. and
subsidiaries (the "Company") to redirect a portion of their
salary, up to limits defined in the Plan, to the investment
funds of the Plan.
Employee contributions to the Plan are limited to the lower of
$9,240 or 8% (6% if the participant is a highly compensated
employee as defined by the Internal Revenue Service) of the
employee's annual compensation during the period in which they
are a participant in the Plan, subject to Internal Revenue
Service Code limitations.
At the end of each year, the Company may make a matching
contribution of either or both of the following:
A ten percent (10%) basic matching contribution which is
allocated in proportion to the salary directed by
participants to the Employer Stock Fund during the year,
or a supplemental matching contribution which is
allocated in proportion to salary directed to all
investment funds. The supplemental contribution is based
on the annual financial results of the Company and
determined annually by the Board of Directors. The
supplemental contribution ranges from none to twenty
percent (20%) of participant contributors.
In 1994 and 1993 the Company made both a basic matching
contribution and a supplemental matching contribution. In 1992
the Company made a basic matching contribution.
Each participant's account is credited with the participant's
contribution and an allocation of the Company's matching
contribution, Plan earnings, and other adjustments as defined
in the Plan. Allocations are based on participant earnings or
account balances as defined. The benefit to which a
participant is entitled is the benefit that can be provided
from the participant's account.
Further information about the Plan, including vesting,
allocation and benefit provisions, and employer and employee
contributions is contained in the Plan, and Plan amendments.
Copies of these documents are available from the Company's
Personnel Department.
3. TAX STATUS
----------
The Plan obtained its latest determination letter on October
7, 1986, in which the Internal Revenue Service stated that the
Plan, as then designed, was in compliance with the Internal
Revenue Code. However, the Plan has been amended since
receiving the determination letter. The Plan administrator
and the Plan's tax counsel believe that the Plan is currently
designed and being operated in compliance with the applicable
requirements of the Internal Revenue Code. Therefore, no
provision for income taxes has been included in the Plan's
financial statements.
Participant contributions and earnings of the Plan are not
subject to federal income tax until distribution, at which
time they are taxable to the recipient.
4. MERGER OF PLANS
---------------
Effective December 31, 1992, The Kroger Co. Savings Plan for
Bargaining Unit Employees was merged with the Plan. Such
assets transferred to the Plan, $90,032,000, are reflected in
the statement of changes in net assets available for plan
benefits for the year ended December 31, 1992.
5. RECONCILIATION TO FORM 5500
---------------------------
Department of Labor regulations require that differences
between the amounts included in the financial statements of
the Plan and reported on Form 5500 be disclosed. Differences
in amounts shown in the financial statements of the Plan and
those reported on Form 5500, as amended, for the year ended
December 31, 1993 are as follows:
Amounts per Amounts per
Financial Statements Form 5500 Difference
-------------------- ----------- ----------
The Kroger Co. Savings Plan
---------------------------
For the year ended December 31, 1993
Statement of Net Assets
Available for Plan Benefits:
Employer contributions receivable $3,115,652 $3,851,048 $(735,396)
Statement of Changes in Net Assets
Available for Plan Benefits:
Employer contributions $3,115,652 $3,851,048 $(735,396)
These differences result from the valuation of the employer stock
contribution receivable at December 31, 1993. The financial
statements reflect the value of the shares to be contributed to the
Plan at the date the matching contribution was granted. Form 5500
reflects the value of the shares contributed to the Plan on the
date the shares were transferred to the Trustee.
Since the employer matching contribution to the Plan for 1994 and
1992 was made in cash, the employer contribution receivable in the
statement of net assets available for plan benefits, and employer
contributions and change in unrealized appreciation in the
statement of changes in net assets available for plan benefits for
the years ended December 31, 1994 and December 31, 1992 do not
differ from those reported on Form 5500.
THE KROGER CO. SAVINGS PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT
December 31, 1994
(In thousands of dollars)
-----------------------------
NUMBER OF
SHARES OR
PRINCIPAL 1994
------
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT COST VALUE
- --------------------------------- ---------- ------- -----
EMPLOYER STOCK FUND
-------------------
The Kroger Co. common shares 14,931,881 shs. $186,931 $360,232
MERRILL LYNCH EQUITY INDEX TRUST
--------------------------------
Collective Investment Trust 1,131,091 shs. 32,708 33,045
MERRILL LYNCH BASIC VALUE
-------------------------
Mutual Funds 92,852 shs. 2,158 2,075
MERRILL LYNCH GLOBAL ALLOCATION
-------------------------------
Mutual Funds 201,846 shs. 2,669 2,469
AMERICAN CAPITAL EMERGING GROWTH
--------------------------------
Mutual Funds 100,274 shs. 2,417 2,343
TEMPLETON FOREIGN
-----------------
Mutual Funds 404,670 shs. 3,867 3,569
FIXED INCOME
------------
Contracts with Insurance
Companies 80,289,847 shs. 80,290 80,290
PARTICIPANT LOANS
-----------------
Loans to Participants $9,124 9,124 9,124
TEMPORARY INVESTMENT FUND
-------------------------
Temporary Cash Investments $178 178 178
------- ------
Total $320,342 $493,325
======== ========
THE KROGER CO. SAVINGS PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
December 31, 1994
(In thousands of dollars)
Transaction # of # of Realized
Type Security Description Trans Shares Cost Proceeds Gain(Loss)
- ----------- ----------------------- ------ ----------- ----------- ----------- -------------
COMMON COLLECTIVE TRUST
BUY Merrill Lynch Index Trust 472 1,363,186.66 $71,708,649
SELL Merrill Lynch Index Trust 756 232,095.97 6,711,465 $6,598,944 ($112,521)
KROGER COMMON STOCK
BUY Kroger Co. Common Stock 601 733,644.11 17,998,576
SELL Kroger Co. Common Stock 1,025 1,298,514.74 17,597,356 31,150,672 13,553,316
FIXED INCOME FUND
BUY Kroger Co. Income Fund 785 26,728,037.21 26,728,037
SELL Kroger Co. Income Fund 845 12,814,402.44 12,814,402 12,814,402 0
Exhibit 99.3
DILLON COMPANIES, INC.
EMPLOYEES STOCK OWNERSHIP AND SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS
December 31, 1994
Report of Independent Accountants
Statement of Net Assets Available for Plan Benefits
December 31, 1994
Statement of Net Assets Available for Plan Benefits
December 31, 1993
Statement of Changes in Net Assets Available for Plan Benefits
For the Year Ended December 31, 1994
Statement of Changes in Net Assets Available for Plan Benefits
For the Year Ended December 31, 1993
Statement of Changes in Net Assets Available for Plan Benefits
For the Year Ended December 31, 1992
Notes to Financial Statements
Schedule of Investments
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
The Administration Committee of
Dillon Companies, Inc. Employees
Stock Ownership and Savings Plan
We have audited the financial statements and the financial statement
schedule of Dillon Companies, Inc. Employees Stock Ownership and
Savings Plan as listed in the accompanying index. These financial
statements and financial statement schedule are the responsibility of
the Administration Committee of Dillon Companies, Inc. Employee s
Stock Ownership and Savings Plan. Our responsibility is to express
an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for plan
benefits of Dillon Companies, Inc. Employee s Stock Ownership and
Savings Plan as of December 31, 1994 and 1993, and the changes in its
net assets available for plan benefits for each of the three years in
the period ended December 31, 1994, in conformity with generally
accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents
fairly, in all material respects, the information required to be
included therein.
(COOPERS & LYBRAND L. L. P.)
COOPERS & LYBRAND L. L. P.
Cincinnati, Ohio
March 31, 1995
DILLON COMPANIES, INC. EMPLOYEES STOCK OWNERSHIP AND SAVINGS PLAN
Statement of Net Assets Available for Plan Benefits
December 31, 1994
(In Thousands)
401(k) ESOP
---------------------------------- -------------------------------------
Balanced Index Fixed Stock Balanced Index Fixed Stock
Fund Fund Fund Fund Fund Fund Fund Fund Total
---------------------------------- ------------------------------------- -----
ASSETS
Investments:
State Street Research and Management $9,838 $180 $10,018
Mellon Capital Opening Stock Index Fund $6,389 $152 6,541
Fixed Income Securities $63,519 $2,125 65,644
The Kroger Co. Common Stock
401(k) Cost - $40,507
ESOP Cost - $22,573 $78,956 $48,786 127,742
------- ------- ------- ------- ----- ----- ------ ------- --------
Total Investments 9,838 6,389 63,519 78,956 180 152 2,125 48,786 209,945
Contributions Receivable and Other 98 217 4,324 4,573 2 5 145 9,364
------- ------ ------- ------- ----- ----- ------ ------- --------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $9,936 $6,606 $67,843 $83,529 $182 $157 $2,270 $48,786 $219,309
======= ====== ======== ======== ===== ===== ====== ======= =========
The accompanying notes are an integral
part of the financial statements.
DILLON COMPANIES, INC. EMPLOYEES STOCK OWNERSHIP AND SAVINGS PLAN
Statement of Net Assets Available for Plan Benefits
December 31, 1993
(In Thousands)
401(k) ESOP
-------------------------------- ---------------------------------
Balanced Index Fixed Stock Balanced Index Fixed Stock
Fund Fund Fund Fund Fund Fund Fund Fund Total
-------------------------------- --------------------------------- ------
ASSETS
Investments:
State Street Research and Management $10,167 $266 $10,433
Mellon Capital Opening Stock Index Fund $5,588 $161 5,749
Fixed Income Securities $52,565 $1,814 54,379
The Kroger Co. Common Stock
401(k) Cost - $39,113
ESOP Cost - $23,530 $64,845 $42,569 107,414
------- ------ ------- ------- ----- ----- ------ ------- --------
Total Investments 10,167 5,588 52,565 64,845 266 161 1,814 42,569 177,975
Contributions Receivable and Other 1,015 207 1,121 27 6 38 2,414
------- ------ -------- ------ ----- ----- ------ ------- --------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $11,182 $5,795 $53,686 $64,845 $293 $167 $1,852 $42,569 $180,389
======= ====== ======== ======= ==== ==== ====== ======= ========
The accompanying notes are an integral part of the
financial statements
DILLON COMPANIES, INC. EMPLOYEES STOCK OWNERSHIP AND SAVINGS PLAN
Statement of Changes in Net Assets Available for Plan Benefits
For the Year Ended December 31, 1994
(In Thousands)
401(k) ESOP
-------------------------------- ---------------------------------
Balanced Index Fixed Stock Balanced Index Fixed Stock
Fund Fund Fund Fund Fund Fund Fund Fund Total
-------------------------------- --------------------------------- ------
Employee Contributions $ 1,803 $1,188 $ 7,867 $ 8,964 $ 19,822
Employer Contributions 2,787 2,787
Transfers from (to) Other Funds (1,989) (192) 4,084 (1,903) $ (85) $ 5 $ 434 $ (354) 0
Investment Income (Loss):
State Street Research and Management (461) (11) (472)
Mellon Capital Opening Stock Index Fund 53 53
Interest 4,710 141 4,851
Net Appreciation 12,776 7,496 20,272
-------- ------ ------- ------- ------- ------ ------ ------- --------
Total Additions (Deductions) (647) 1,049 16,661 22,624 (96) 5 575 7,142 47,313
Expenses 7 4 59 1 71
Distributions to Participants 592 234 2,445 3,940 15 15 156 925 8,322
------ ------ ------ ------ ------ ------ ------ ------- --------
Net Increase (Decrease) (1,246) 811 14,157 18,684 (111) (10) 418 6,217 38,920
Net Assets Available for Plan Benefits:
Beginning of Year 11,182 5,795 53,686 64,845 293 167 1,852 42,569 180,389
------- ------ ------- ------- --- ------ ------ ------- --------
End of Year $ 9,936 $6,606 $67,843 $83,529 $182 $157 $2,270 $48,786 $219,309
======= ====== ======= ======= ===== ====== ====== ======= ========
The accompanying notes are an integral part
of the financial statements.
DILLON COMPANIES, INC. EMPLOYEES STOCK OWNERSHIP AND SAVINGS PLAN
Statement of Changes in Net Assets Available for Plan Benefits
For the Year Ended December 31, 1993
(In Thousands)
401(k) ESOP
--------------------------------- ----------------------------------
Balanced Index Fixed Stock Balanced Index Fixed Stock
Fund Fund Fund Fund Fund Fund Fund Fund Total
--------------------------------- ---------------------------------- -----
Employee Contributions $ 1,393 $1,022 $ 7,423 $ 8,484 $ 18,322
Employer Contributions 1,713 1,713
Transfers from (to) Other Funds 2,619 (134) 3,036 (5,521) $ 155 $ 24 $ 729 $ (908) 0
Investment Income:
State Street Research and Management 945 20 965
Mellon Capital Opening Stock Index Fund 480 12 492
Interest 3,956 131 4,087
Net Appreciation 17,472 11,692 29,164
------ ------ ------ ------- ------ ------ ------ ------- -------
Total Additions 4,957 1,368 14,415 22,148 175 36 860 10,784 54,743
Expenses 5 4 31 1 41
Distributions to Participants 288 324 2,214 2,643 14 5 93 947 6,528
------ ----- ------- ------ ------ ------ ------ ------- -------
Net Increase 4,664 1,040 12,170 19,505 161 31 766 9,837 48,174
Net Assets Available for Plan Benefits:
Beginning of Year 6,518 4,755 41,516 45,340 132 136 1,086 32,732 132,215
------ ------ ------ ------ ----- ----- ------ ------- --------
End of Year $11,182 $5,795 $53,686 $64,845 $293 $167 $1,852 $42,569 $180,389
======= ====== ======= ======= ===== ===== ====== ======= ========
The accompanying notes are an integral part of
the financial statements.
DILLON COMPANIES, INC. EMPLOYEES STOCK OWNERSHIP AND SAVINGS PLAN
Statement of Changes in Net Assets Available for Plan Benefits
For the Year Ended December 31, 1992
(In Thousands)
401(k) ESOP
--------------------------------- ---------------------------------
Balanced Index Fixed Stock Balanced Index Fixed Stock
Fund Fund Fund Fund Fund Fund Fund Fund Total
--------------------------------- --------------------------------- --------
Employee Contributions $ 1,094 $ 856 $ 6,764 $ 7,975 $ 16,689
Employer Contributions 782 782
Transfers from (to) Other Funds 304 33 (2,361) 2,024 $ 64 $ 47 $ 112 $ (223) 0
Investment Income:
State Street Research and Management 525 10 535
Mellon Capital Opening Stock Index Fund 319 10 329
Interest 3,404 96 3,500
Net Depreciation (12,597) (11,897) (24,494)
------ ------- ------- -------- ------ ------ ------ --------- --------
Total Additions (Deductions) 1,923 1,208 7,807 (1,816) 74 57 208 (12,120) (2,659)
Distributions to Participants 232 194 1,952 1,779 8 8 60 640 4,873
------ ------- ------- ------- ----- ------ ------ --------- --------
Net Increase (Decrease) 1,691 1,014 5,855 (3,595) 66 49 148 (12,760) (7,532)
Net Assets Available for Plan Benefits:
Beginning of Year 4,827 3,741 35,661 48,935 66 87 938 45,492 139,747
------ ------- ------- ------- ----- ------ ------ ------- --------
End of Year $6,518 $4,755 $41,516 $45,340 $132 $136 $1,086 $32,732 $132,215
====== ======= ======= ======= ===== ====== ====== ======= ========
The accompanying notes are an integral part of
the financial statements.
DILLON COMPANIES, INC.
EMPLOYEES STOCK OWNERSHIP AND SAVINGS PLAN
Notes to Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
The following describes the significant policies followed in the
preparation of these financial statements.
INVESTMENTS VALUATION
- ---------------------
Investments in securities (common and preferred stock) traded on a
national securities exchange are valued at the last reported sales
price on the last business day of the year. Guaranteed Investment
Contracts (GICs) with Insurance Companies are valued at contract
value. Benefit Accessible Securities Investment Contracts (BASICs)
are carried in the financial statements at amortized cost.
Investments in the Index and Balanced Funds are valued at their fair
value on the last business day of the year. Investments in Pacific
Investment Management Company and Providian Capital Management
Company are actively managed synthetic GICs, which are valued at
amortized cost.
OTHER
- -----
Purchases and sales of securities are reflected on a trade date
basis.
In accordance with the policy of stating investments at fair value,
the Plan presents in the Statement of Changes in Net Assets the net
appreciation (depreciation) in the fair value of its investments
which consists of the realized gains or losses and the unrealized
appreciation (depreciation) on those investments.
2. PARTICIPANT DATA
----------------
At December 31, 1994, the approximate number of employees, including
former employees with remaining balances, participating by investment
direction was:
401(k) ESOP
------ ----
Stock Fund 3,135 11,719
Fixed Fund 171 306
Balanced Fund 10 17
Index Fund 2 8
Stock Fund and Fixed Fund 7,436 393
Stock Fund and Balanced Fund 435 6
Stock Fund and Index Fund 303 6
Fixed Fund and Balanced Fund 15 19
Fixed Fund and Index Fund 4 9
Balanced Fund and Index Fund 2 3
Participation in three or more funds 3,437 27
------ ------
Total participants 14,950 12,513
====== ======
3. PLAN DESCRIPTION
----------------
Employees of Dillon Companies, Inc. and its subsidiaries (Company)
with one year of service and who have attained age 21 are eligible to
become a participant as of the earliest January 1 or July 1 following
completion of said eligibility requirements.
The interest of all participants in the Plan are fully vested at all
times and are not subject to forfeiture or cancellation under any
circumstances. Plan assets are for participants only and may never
revert to the employer.
Plan income and expenses for each period are allocated to the
participants accounts in the ratio that the balance in the account
of each participant bears to the balance of all the participants
accounts immediately before the allocation. ESOP employer
contributions are allocated based on participants salaries as stated
in the Plan.
All distributions to participants are in cash or in whole shares of
The Kroger Co. common stock (cash is paid for fractional shares).
Participants and beneficiaries individually exercise voting rights on
the shares of The Kroger Co. common stock allocated to their account.
Under the 401(k) salary reduction provision, each participant may
make an election to have the Company contribute to the Plan on their
behalf from two percent (2%) to twenty percent (20%) of the
qualifying compensation that would otherwise be payable to them for
the Plan year.
A basic matching employer contribution is allocated to participants
of the Stock Fund equal to ten percent (10%) of salaries directed by
participants. A supplemental employer contribution is allocated in
proportion to all participants salaries directed to all investments.
The supplemental contribution is based on the annual financial
results of The Kroger Co. and determined annually by the Board of
Directors. The supplemental contribution ranges from none to twenty
percent (20%) of participant contributions. For 1994 and 1993, the
Company made both a basic matching contribution and a supplemental
contribution; for 1992, the Company made only the basic matching
contribution.
The Company currently has discontinued contributions to the ESOP
portion of the Plan and has no present intentions to resume such
contributions.
Further information about the Plan, including vesting, allocation and
benefit provisions, and employer and employee contributions is
contained in the Plan, and Plan amendments. Copies of these
documents are available from the Company s Human Resources
Department.
4. INVESTMENTS
-----------
The Plan s investments are held by the Dillon Companies, Inc.
Employee Master Trust (the Trust) and are administered by the Dillon
Companies, Inc. Trust Committee. The Trust Committee has selected
investment managers, State Street Research and Management Company and
the Mellon Capital Management Corp., to manage certain fund assets.
The State Street Research and Management Company is granted
discretionary authority concerning investment of assets they manage.
The Mellon Capital Stock Index Fund is directed by the Trust
Committee to maintain a portfolio which performs comparable to the
Standard & Poor s 500 Index. The net change in funds managed by
investment managers includes revenue earned, unrealized and realized
gains and losses on investments, and fiduciary expenses.
The Plan transfers shares of The Kroger Co. common stock (at fair
market value) to and from the other employee benefit plans of the
Company participating in the Trust. The cost of the shares recorded
by the Plan is the original cost of the shares of the transferring
employee benefit plan. The resulting difference between the cost
recorded and amount paid for the purchased shares, which is included
in the determination of the net appreciation (depreciation) in fair
value of the Plan s investments, was $381 in 1994, $1,474 in 1993,
and $631 in 1992.
The Plan s investments (including investments purchased, sold and
held during the period), appreciated (depreciated) in value as
follows:
Kroger Stock 401(k) ESOP Total
------------ ------ ---- -----
1992 $(12,597) $(11,897) $(24,494)
1993 17,472 11,692 29,164
1994 12,776 7,496 20,272
5. TAX STATUS
----------
The Fund constitutes a qualified trust under Section 401 of the
Internal Revenue Code and is therefore exempt from federal income
taxes under the provisions of Section 501(a).
Participant contributions and earnings of the Plan are not subject to
federal income tax until distribution, at which time they are taxable
to the recipient.
DILLON COMPANIES, INC.
EMPLOYEES STOCK OWNERSHIP AND SAVINGS PLAN
SCHEDULE OF INVESTMENTS
December 31, 1994
(In Thousands)
1994
---------------------------------
Number of
Shares or
Principal
Name of Issuer and Title of Issue Amount Cost Value
- --------------------------------- ---------- -------- -------
BALANCED FUND
State Street Research and Management
401(k) $ 9,613 $ 9,613 $ 9,838
ESOP 176 176 180
INDEX FUND
Mellon Capital Stock Index Fund
401(k) 56 5,737 6,389
ESOP 1 136 152
FIXED FUND
Contracts with Insurance Companies, Benefit
Accessible Securities Investment Contracts,
Pacific Investment Management Company,
and Providian Capital Management
401(k) $63,519 63,519 63,519
ESOP $ 2,125 2,125 2,125
STOCK FUND
The Kroger Co. Common Shares
401(k) 3,273 40,507 78,956
ESOP 2,022 22,573 48,786
-------- --------
$144,386 $209,945
======== ========