Document and Entity Information
Document and Entity Information - USD ($) $ in Billions | 12 Months Ended | ||
Jan. 30, 2016 | Mar. 23, 2016 | Aug. 14, 2015 | |
Document and Entity Information | |||
Entity Registrant Name | KROGER CO | ||
Entity Central Index Key | 56,873 | ||
Document Type | 10-K | ||
Document Period End Date | Jan. 30, 2016 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --01-30 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $ 37.1 | ||
Entity Common Stock, Shares Outstanding | 962,480,228 | ||
Document Fiscal Year Focus | 2,015 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Jan. 30, 2016 | Jan. 31, 2015 |
Current assets | ||
Cash and temporary cash investments | $ 277 | $ 268 |
Store deposits in-transit | 923 | 988 |
Receivables | 1,734 | 1,266 |
FIFO inventory | 7,440 | 6,933 |
LIFO reserve | (1,272) | (1,245) |
Prepaid and other current assets | 790 | 701 |
Total current assets | 9,892 | 8,911 |
Property, plant and equipment, net | 19,619 | 17,912 |
Intangibles, net | 1,053 | 757 |
Goodwill | 2,724 | 2,304 |
Other assets | 609 | 613 |
Total Assets | 33,897 | 30,497 |
Current liabilities | ||
Current portion of long-term debt including obligations under capital leases and financing obligations | 2,370 | 1,874 |
Trade accounts payable | 5,728 | 5,052 |
Accrued salaries and wages | 1,426 | 1,291 |
Deferred income taxes | 221 | 287 |
Other current liabilities | 3,226 | 2,888 |
Total current liabilities | 12,971 | 11,392 |
Long-term debt including obligations under capital leases and financing obligations | ||
Face-value of long-term debt including obligations under capital leases and financing obligations | 9,708 | 9,723 |
Adjustment to reflect fair-value interest rate hedges | 1 | |
Long-term debt including obligations under capital leases and financing obligations | 9,709 | 9,723 |
Deferred income taxes | 1,752 | 1,209 |
Pension and postretirement benefit obligations | 1,380 | 1,463 |
Other long-term liabilities | 1,287 | 1,268 |
Total Liabilities | $ 27,099 | $ 25,055 |
Commitments and contingencies (see Note 13) | ||
SHAREHOLDERS' EQUITY | ||
Preferred shares, $100 par per share, 5 shares authorized and unissued | ||
Common shares, $1 par per share, 2,000 shares authorized; 1,918 shares issued in 2015 and 2014 | $ 1,918 | $ 1,918 |
Additional paid-in capital | 2,980 | 2,748 |
Accumulated other comprehensive loss | (680) | (812) |
Accumulated earnings | 14,011 | 12,367 |
Common stock in treasury, at cost, 951 shares in 2015 and 944 shares in 2014 | (11,409) | (10,809) |
Total Shareholders' Equity - The Kroger Co. | 6,820 | 5,412 |
Noncontrolling interests | (22) | 30 |
Total Equity | 6,798 | 5,442 |
Total Liabilities and Equity | $ 33,897 | $ 30,497 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Millions | Jan. 30, 2016 | Jan. 31, 2015 |
CONSOLIDATED BALANCE SHEETS | ||
Preferred shares, per share (in dollars per share) | $ 100 | $ 100 |
Preferred shares, shares authorized | 5 | 5 |
Preferred shares, shares unissued | 5 | 5 |
Common shares, par per share (in dollars per share) | $ 1 | $ 1 |
Common shares, shares authorized | 2,000 | 2,000 |
Common shares, shares issued | 1,918 | 1,918 |
Common shares in treasury, shares | 951 | 944 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 4 Months Ended | 12 Months Ended | ||||||||
Jan. 30, 2016 | Nov. 07, 2015 | Aug. 15, 2015 | Jan. 31, 2015 | Nov. 08, 2014 | Aug. 16, 2014 | May. 23, 2015 | May. 24, 2014 | Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||
Sales | $ 26,165 | $ 25,075 | $ 25,539 | $ 25,207 | $ 24,987 | $ 25,310 | $ 33,051 | $ 32,961 | $ 109,830 | $ 108,465 | $ 98,375 |
Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below | 20,193 | 19,478 | 20,065 | 19,547 | 19,764 | 20,136 | 25,760 | 26,065 | 85,496 | 85,512 | 78,138 |
Operating, general and administrative | 4,355 | 4,169 | 4,068 | 4,119 | 3,954 | 3,920 | 5,354 | 5,168 | 17,946 | 17,161 | 15,196 |
Rent | 181 | 172 | 155 | 162 | 162 | 166 | 215 | 217 | 723 | 707 | 613 |
Depreciation and amortization | 508 | 484 | 477 | 467 | 456 | 444 | 620 | 581 | 2,089 | 1,948 | 1,703 |
Operating profit | 928 | 772 | 774 | 912 | 651 | 644 | 1,102 | 930 | 3,576 | 3,137 | 2,725 |
Interest expense | 113 | 107 | 114 | 115 | 114 | 112 | 148 | 147 | 482 | 488 | 443 |
Earnings before income tax expense | 815 | 665 | 660 | 797 | 537 | 532 | 954 | 783 | 3,094 | 2,649 | 2,282 |
Income tax expense | 250 | 238 | 227 | 274 | 172 | 182 | 330 | 274 | 1,045 | 902 | 751 |
Net earnings including noncontrolling interests | 565 | 427 | 433 | 523 | 365 | 350 | 624 | 509 | 2,049 | 1,747 | 1,531 |
Net earnings (loss) attributable to noncontrolling interests | 6 | (1) | 5 | 3 | 3 | 5 | 8 | 10 | 19 | 12 | |
Net earnings attributable to The Kroger Co. | $ 559 | $ 428 | $ 433 | $ 518 | $ 362 | $ 347 | $ 619 | $ 501 | $ 2,039 | $ 1,728 | $ 1,519 |
Net earnings attributable to The Kroger Co. per basic common share | $ 0.57 | $ 0.44 | $ 0.44 | $ 0.53 | $ 0.37 | $ 0.35 | $ 0.63 | $ 0.50 | $ 2.09 | $ 1.74 | $ 1.47 |
Average number of common shares used in basic calculation | 966 | 965 | 963 | 972 | 972 | 970 | 969 | 1,002 | 966 | 981 | 1,028 |
Net earnings attributable to The Kroger Co. per diluted common share | $ 0.57 | $ 0.43 | $ 0.44 | $ 0.52 | $ 0.36 | $ 0.35 | $ 0.62 | $ 0.49 | $ 2.06 | $ 1.72 | $ 1.45 |
Average number of common shares used in diluted calculation | 980 | 979 | 977 | 987 | 984 | 982 | 983 | 1,014 | 980 | 993 | 1,040 |
Dividends declared per common share | $ 0.105 | $ 0.105 | $ 0.105 | $ 0.093 | $ 0.093 | $ 0.083 | $ 0.093 | $ 0.083 | $ 0.408 | $ 0.35 | $ 0.315 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 12 Months Ended | |||
Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | ||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Net earnings including noncontrolling interests | $ 2,049 | $ 1,747 | $ 1,531 | |
Other comprehensive income (loss) | ||||
Unrealized gain on available for sale securities, net of income tax | [1] | 3 | 5 | 5 |
Change in pension and other postretirement defined benefit plans, net of income tax | [2] | 131 | (329) | 295 |
Unrealized losses on cash flow hedging activities, net of income tax | [3] | (3) | (25) | (12) |
Amortization of unrealized gains and losses on cash flow hedging activities, net of income tax | [4] | 1 | 1 | 1 |
Total other comprehensive income (loss) | 132 | (348) | 289 | |
Comprehensive income | 2,181 | 1,399 | 1,820 | |
Comprehensive income attributable to noncontrolling interests | 10 | 19 | 12 | |
Comprehensive income attributable to The Kroger Co. | $ 2,171 | $ 1,380 | $ 1,808 | |
[1] | Amount is net of tax of $2 in 2015 and $3 in 2014 and 2013. | |||
[2] | Amount is net of tax of $77 in 2015, $(193) in 2014 and $173 in 2013. | |||
[3] | Amount is net of tax of $(2) in 2015, $(14) in 2014 and $(8) in 2013. | |||
[4] | Amount is net of tax of $1 in 2013. |
CONSOLIDATED STATEMENTS OF COM6
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions | 12 Months Ended | ||
Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||
Unrealized gain on available for sale securities, income tax | $ 2 | $ 3 | $ 3 |
Change in pension and other postretirement defined benefit plans, income tax | 77 | (193) | 173 |
Unrealized gains and losses on cash flow hedging activities, income tax | $ (2) | $ (14) | (8) |
Amortization of unrealized gains and losses on cash flow hedging activities, income tax | $ 1 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 12 Months Ended | ||
Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | |
Cash Flows From Operating Activities: | |||
Net earnings including noncontrolling interests | $ 2,049 | $ 1,747 | $ 1,531 |
Adjustments to reconcile net earnings including noncontrolling interests to net cash provided by operating activities: | |||
Depreciation and amortization | 2,089 | 1,948 | 1,703 |
Asset impairment charge | 46 | 37 | 39 |
LIFO charge | 28 | 147 | 52 |
Stock-based employee compensation | 165 | 155 | 107 |
Expense for Company-sponsored pension plans | 103 | 55 | 74 |
Deferred income taxes | 317 | 73 | 72 |
Other | 54 | 72 | 47 |
Changes in operating assets and liabilities net of effects from mergers of businesses: | |||
Store deposits in-transit | 95 | (27) | 25 |
Receivables | (59) | (141) | (8) |
Inventories | (184) | (147) | (131) |
Prepaid and other current assets | (28) | 2 | (49) |
Trade accounts payable | 440 | 135 | 196 |
Accrued expenses | 191 | 197 | 77 |
Income taxes receivable and payable | (359) | (68) | (47) |
Contribution to Company-sponsored pension plans | (5) | (100) | |
Other | (109) | (22) | (15) |
Net cash provided by operating activities | 4,833 | 4,163 | 3,573 |
Cash Flows From Investing Activities: | |||
Payments for property and equipment, including payments for lease buyouts | (3,349) | (2,831) | (2,330) |
Proceeds from sale of assets | 45 | 37 | 24 |
Payments for mergers | (168) | (252) | (2,344) |
Other | (98) | (14) | (121) |
Net cash used by investing activities | (3,570) | (3,060) | (4,771) |
Cash Flows From Financing Activities: | |||
Proceeds from issuance of long-term debt | 1,181 | 576 | 3,548 |
Payments on long-term debt | (1,245) | (375) | (1,060) |
Net (payments) borrowings on commercial paper | (285) | 25 | (395) |
Dividends paid | (385) | (338) | (319) |
Excess tax benefits on stock based awards | 97 | 52 | 32 |
Proceeds from issuance of capital stock | 120 | 110 | 196 |
Treasury stock purchases | (703) | (1,283) | (609) |
Investment in the remaining equity of a noncontrolling interest | (26) | ||
Other | (8) | (3) | (32) |
Net cash provided (used) by financing activities | (1,254) | (1,236) | 1,361 |
Net increase (decrease) in cash and temporary cash investments | 9 | (133) | 163 |
Cash and temporary cash investments: | |||
Beginning of year | 268 | 401 | 238 |
End of year | 277 | 268 | 401 |
Reconciliation of capital investments: | |||
Payments for property and equipment, including payments for lease buyouts | (3,349) | (2,831) | (2,330) |
Payments for lease buyouts | 35 | 135 | 108 |
Changes in construction-in-progress payables | (35) | (56) | (83) |
Total capital investments, excluding lease buyouts | (3,349) | (2,752) | (2,305) |
Disclosure of cash flow information: | |||
Cash paid during the year for interest | 474 | 477 | 401 |
Cash paid during the year for income taxes | $ 1,001 | $ 941 | $ 679 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY - USD ($) shares in Millions, $ in Millions | Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Gain (Loss) | Accumulated Earnings | Noncontrolling Interest | Total |
Balances at Feb. 02, 2013 | $ 1,918 | $ 2,492 | $ (9,237) | $ (753) | $ 9,787 | $ 7 | $ 4,214 |
Balances (in shares) at Feb. 02, 2013 | 1,918 | 890 | |||||
Issuance of common stock: | |||||||
Stock options exercised | $ 196 | 196 | |||||
Stock options exercised (in shares) | (18) | ||||||
Restricted stock issued | (60) | $ 26 | (34) | ||||
Restricted stock issued (in shares) | (5) | ||||||
Treasury stock activity: | |||||||
Treasury stock purchases, at cost | $ (338) | (338) | |||||
Treasury stock purchases, at cost (in shares) | 18 | ||||||
Stock options exchanged | $ (271) | (271) | |||||
Stock options exchanged (in shares) | 17 | ||||||
Share-based employee compensation | 107 | 107 | |||||
Other comprehensive gain (loss) net of income tax of $77, $(204), and $168 for 2015, 2014 and 2013, respectively | 289 | 289 | |||||
Other | 51 | $ (17) | (8) | 26 | |||
Cash dividends declared ($0.408, $0.350 and $0.315 per common share for 2015, 2014 and 2013, respectively) | (325) | (325) | |||||
Net earnings including non-controlling interests | 1,519 | 12 | 1,531 | ||||
Balances at Feb. 01, 2014 | $ 1,918 | 2,590 | $ (9,641) | (464) | 10,981 | 11 | 5,395 |
Balances (in shares) at Feb. 01, 2014 | 1,918 | 902 | |||||
Issuance of common stock: | |||||||
Stock options exercised | $ 110 | 110 | |||||
Stock options exercised (in shares) | (10) | ||||||
Restricted stock issued | (91) | $ 40 | (51) | ||||
Restricted stock issued (in shares) | (5) | ||||||
Treasury stock activity: | |||||||
Treasury stock purchases, at cost | $ (1,129) | (1,129) | |||||
Treasury stock purchases, at cost (in shares) | 51 | ||||||
Stock options exchanged | $ (154) | (154) | |||||
Stock options exchanged (in shares) | 6 | ||||||
Share-based employee compensation | 155 | 155 | |||||
Other comprehensive gain (loss) net of income tax of $77, $(204), and $168 for 2015, 2014 and 2013, respectively | (348) | (348) | |||||
Other | 94 | $ (35) | 59 | ||||
Cash dividends declared ($0.408, $0.350 and $0.315 per common share for 2015, 2014 and 2013, respectively) | (342) | (342) | |||||
Net earnings including non-controlling interests | 1,728 | 19 | 1,747 | ||||
Balances at Jan. 31, 2015 | $ 1,918 | 2,748 | $ (10,809) | (812) | 12,367 | 30 | 5,442 |
Balances (in shares) at Jan. 31, 2015 | 1,918 | 944 | |||||
Issuance of common stock: | |||||||
Stock options exercised | $ 120 | 120 | |||||
Stock options exercised (in shares) | (9) | ||||||
Restricted stock issued | (122) | $ 37 | (85) | ||||
Restricted stock issued (in shares) | (5) | ||||||
Treasury stock activity: | |||||||
Treasury stock purchases, at cost | $ (500) | (500) | |||||
Treasury stock purchases, at cost (in shares) | 14 | ||||||
Stock options exchanged | $ (203) | $ (203) | |||||
Stock options exchanged (in shares) | 7 | 5 | |||||
Share-based employee compensation | 165 | $ 165 | |||||
Other comprehensive gain (loss) net of income tax of $77, $(204), and $168 for 2015, 2014 and 2013, respectively | 132 | 132 | |||||
Investment in the remaining equity of a non-controlling interest | 26 | (57) | (31) | ||||
Other | 163 | $ (54) | (5) | 104 | |||
Cash dividends declared ($0.408, $0.350 and $0.315 per common share for 2015, 2014 and 2013, respectively) | (395) | (395) | |||||
Net earnings including non-controlling interests | 2,039 | 10 | 2,049 | ||||
Balances at Jan. 30, 2016 | $ 1,918 | $ 2,980 | $ (11,409) | $ (680) | $ 14,011 | $ (22) | $ 6,798 |
Balances (in shares) at Jan. 30, 2016 | 1,918 | 951 |
CONSOLIDATED STATEMENTS OF CHA9
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY (Parenthetical) - USD ($) $ in Millions | 12 Months Ended | ||
Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY | |||
Other comprehensive gain (loss), income tax | $ 77 | $ (204) | $ 168 |
Cash dividends declared per common share (in dollars per share) | $ 0.408 | $ 0.35 | $ 0.315 |
ACCOUNTING POLICIES
ACCOUNTING POLICIES | 12 Months Ended |
Jan. 30, 2016 | |
ACCOUNTING POLICIES | |
ACCOUNTING POLICIES | 1. A CCOUNTING P OLICIES The following is a summary of the significant accounting policies followed in preparing these financial statements. Description of Business, Basis of Presentation and Principles of Consolidation The Kroger Co. (the “Company”) was founded in 1883 and incorporated in 1902. As of January 30, 2016, the Company was one of the largest retailers in the nation based on annual sales. The Company also manufactures and processes food for sale by its supermarkets. The accompanying financial statements include the consolidated accounts of the Company, its wholly-owned subsidiaries and the variable interest entities in which the Company is the primary beneficiary. Significant intercompany transactions and balances have been eliminated. On June 25, 2015, the Company’s Board of Directors approved a two-for-one stock split of The Kroger Co.’s common shares in the form of a 100% stock dividend, which was effective July 13, 2015. All share and per share amounts in the Company’s Consolidated Financial Statements and related notes have been retroactively adjusted to reflect the stock split for all periods presented. Refer to Note 17 for an additional change to the Consolidated Balance Sheets for a recently adopted accounting standard regarding the presentation of debt issuance costs. Fiscal Year The Company’s fiscal year ends on the Saturday nearest January 31. The last three fiscal years consist of the 52-week periods ended January 30, 2016, January 31, 2015 and February 1, 2014. Pervasiveness of Estimates The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of consolidated revenues and expenses during the reporting period is also required. Actual results could differ from those estimates. Cash, Temporary Cash Investments and Book Overdrafts Cash and temporary cash investments represent store cash and short-term investments with original maturities of less than three months. Book overdrafts are included in “Trade accounts payable” and “Accrued salaries and wages” in the Consolidated Balance Sheets. Deposits In-Transit Deposits in-transit generally represent funds deposited to the Company’s bank accounts at the end of the year related to sales, a majority of which were paid for with debit cards, credit cards and checks, to which the Company does not have immediate access but settle within a few days of the sales transaction. Inventories Inventories are stated at the lower of cost (principally on a last-in, first-out “LIFO” basis) or market. In total, approximately 95% of inventories in 2015 and 2014 were valued using the LIFO method. Cost for the balance of the inventories, including substantially all fuel inventories, was determined using the first-in, first-out (“FIFO”) method. Replacement cost was higher than the carrying amount by $1,272 at January 30, 2016 and $1,245 at January 31, 2015. The Company follows the Link-Chain, Dollar-Value LIFO method for purposes of calculating its LIFO charge or credit. The item-cost method of accounting to determine inventory cost before the LIFO adjustment is followed for substantially all store inventories at the Company’s supermarket divisions. This method involves counting each item in inventory, assigning costs to each of these items based on the actual purchase costs (net of vendor allowances and cash discounts) of each item and recording the cost of items sold. The item-cost method of accounting allows for more accurate reporting of periodic inventory balances and enables management to more precisely manage inventory. In addition, substantially all of the Company’s inventory consists of finished goods and is recorded at actual purchase costs (net of vendor allowances and cash discounts). The Company evaluates inventory shortages throughout the year based on actual physical counts in its facilities. Allowances for inventory shortages are recorded based on the results of these counts to provide for estimated shortages as of the financial statement date. Property, Plant and Equipment Property, plant and equipment are recorded at cost or, in the case of assets acquired in a business combination, at fair value. Depreciation and amortization expense, which includes the depreciation of assets recorded under capital leases, is computed principally using the straight-line method over the estimated useful lives of individual assets. Buildings and land improvements are depreciated based on lives varying from 10 to 40 years. All new purchases of store equipment are assigned lives varying from three to nine years. Leasehold improvements are amortized over the shorter of the lease term to which they relate, which generally varies from four to 25 years, or the useful life of the asset. Food production plant and distribution center equipment is depreciated over lives varying from three to 15 years. Information technology assets are generally depreciated over five years. Depreciation and amortization expense was $2,089 in 2015, $1,948 in 2014 and $1,703 in 2013. Interest costs on significant projects constructed for the Company’s own use are capitalized as part of the costs of the newly constructed facilities. Upon retirement or disposal of assets, the cost and related accumulated depreciation and amortization are removed from the balance sheet and any gain or loss is reflected in net earnings. Refer to Note 4 for further information regarding the Company’s property, plant and equipment. Deferred Rent The Company recognizes rent holidays, including the time period during which the Company has access to the property for construction of buildings or improvements and escalating rent provisions on a straight-line basis over the term of the lease. The deferred amount is included in “Other current liabilities” and “Other long-term liabilities” on the Company’s Consolidated Balance Sheets. Goodwill The Company reviews goodwill for impairment during the fourth quarter of each year, and also upon the occurrence of a triggering event. The Company performs reviews of each of its operating divisions and variable interest entities (collectively, “reporting units”) that have goodwill balances. Generally, fair value is determined using a multiple of earnings, or discounted projected future cash flows, and is compared to the carrying value of a reporting unit for purposes of identifying potential impairment. Projected future cash flows are based on management’s knowledge of the current operating environment and expectations for the future. If potential for impairment is identified, the fair value of a reporting unit is measured against the fair value of its underlying assets and liabilities, excluding goodwill, to estimate an implied fair value of the reporting unit’s goodwill. Goodwill impairment is recognized for any excess of the carrying value of the reporting unit’s goodwill over the implied fair value. Results of the goodwill impairment reviews performed during 2015, 2014 and 2013 are summarized in Note 3. Impairment of Long-Lived Assets The Company monitors the carrying value of long-lived assets for potential impairment each quarter based on whether certain triggering events have occurred. These events include current period losses combined with a history of losses or a projection of continuing losses or a significant decrease in the market value of an asset. When a triggering event occurs, an impairment calculation is performed, comparing projected undiscounted future cash flows, utilizing current cash flow information and expected growth rates related to specific stores, to the carrying value for those stores. If the Company identifies impairment for long-lived assets to be held and used, the Company compares the assets’ current carrying value to the assets’ fair value. Fair value is based on current market values or discounted future cash flows. The Company records impairment when the carrying value exceeds fair market value. With respect to owned property and equipment held for disposal, the value of the property and equipment is adjusted to reflect recoverable values based on previous efforts to dispose of similar assets and current economic conditions. Impairment is recognized for the excess of the carrying value over the estimated fair market value, reduced by estimated direct costs of disposal. The Company recorded asset impairments in the normal course of business totaling $46, $37 and $39 in 2015, 2014 and 2013, respectively. Costs to reduce the carrying value of long-lived assets for each of the years presented have been included in the Consolidated Statements of Operations as “Operating, general and administrative” expense. Store Closing Costs The Company provides for closed store liabilities relating to the present value of the estimated remaining non-cancellable lease payments after the closing date, net of estimated subtenant income. The Company estimates the net lease liabilities using a discount rate to calculate the present value of the remaining net rent payments on closed stores. The closed store lease liabilities usually are paid over the lease terms associated with the closed stores, which generally have remaining terms ranging from one to 20 years. Adjustments to closed store liabilities primarily relate to changes in subtenant income and actual exit costs differing from original estimates. Adjustments are made for changes in estimates in the period in which the change becomes known. Store closing liabilities are reviewed quarterly to ensure that any accrued amount that is not a sufficient estimate of future costs is adjusted to income in the proper period. Owned stores held for disposal are reduced to their estimated net realizable value. Costs to reduce the carrying values of property, equipment and leasehold improvements are accounted for in accordance with the Company’s policy on impairment of long-lived assets. Inventory write-downs, if any, in connection with store closings, are classified in the Consolidated Statements of Operations as “Merchandise costs.” Costs to transfer inventory and equipment from closed stores are expensed as incurred. The current portion of the future lease obligations of stores is included in “Other current liabilities,” and the long-term portion is included in “Other long-term liabilities” in the Consolidated Balance Sheets. Interest Rate Risk Management The Company uses derivative instruments primarily to manage its exposure to changes in interest rates. The Company’s current program relative to interest rate protection and the methods by which the Company accounts for its derivative instruments are described in Note 7. Commodity Price Protection The Company enters into purchase commitments for various resources, including raw materials utilized in its food production plants and energy to be used in its stores, food production plants and administrative offices. The Company enters into commitments expecting to take delivery of and to utilize those resources in the conduct of the normal course of business. The Company’s current program relative to commodity price protection and the methods by which the Company accounts for its purchase commitments are described in Note 7. Benefit Plans and Multi-Employer Pension Plans The Company recognizes the funded status of its retirement plans on the Consolidated Balance Sheets. Actuarial gains or losses, prior service costs or credits and transition obligations that have not yet been recognized as part of net periodic benefit cost are required to be recorded as a component of Accumulated Other Comprehensive Income (“AOCI”). All plans are measured as of the Company’s fiscal year end. The determination of the obligation and expense for Company-sponsored pension plans and other post-retirement benefits is dependent on the selection of assumptions used by actuaries and the Company in calculating those amounts. Those assumptions are described in Note 15 and include, among others, the discount rate, the expected long-term rate of return on plan assets, mortality and the rates of increase in compensation and health care costs. Actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect the recognized expense and recorded obligation in future periods. While the Company believes that the assumptions are appropriate, significant differences in actual experience or significant changes in assumptions may materially affect the pension and other post-retirement obligations and future expense. The Company also participates in various multi-employer plans for substantially all union employees. Pension expense for these plans is recognized as contributions are funded. Refer to Note 16 for additional information regarding the Company’s participation in these various multi-employer plans. The Company administers and makes contributions to the employee 401(k) retirement savings accounts. Contributions to the employee 401(k) retirement savings accounts are expensed when contributed. Refer to Note 15 for additional information regarding the Company’s benefit plans. Share Based Compensation The Company accounts for stock options under fair value recognition provisions . Under this method, the Company recognizes compensation expense for all share-based payments granted. The Company recognizes share-based compensation expense, net of an estimated forfeiture rate, over the requisite service period of the award. In addition, the Company records expense for restricted stock awards in an amount equal to the fair market value of the underlying stock on the grant date of the award, over the period the awards lapse. Refer to Note 12 for additional information regarding the Company’s stock based compensation. Deferred Income Taxes Deferred income taxes are recorded to reflect the tax consequences of differences between the tax basis of assets and liabilities and their financial reporting basis. Refer to Note 5 for the types of differences that give rise to significant portions of deferred income tax assets and liabilities. Deferred income taxes are classified as a net current or noncurrent asset or liability based on the classification of the related asset or liability for financial reporting purposes. A deferred tax asset or liability that is not related to an asset or liability for financial reporting is classified according to the expected reversal date. Uncertain Tax Positions The Company reviews the tax positions taken or expected to be taken on tax returns to determine whether and to what extent a benefit can be recognized in its consolidated financial statements. Refer to Note 5 for the amount of unrecognized tax benefits and other related disclosures related to uncertain tax positions. Various taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. As of January 30, 2016, the Internal Revenue Service had concluded its examination of the Company’s 2010 and 2011 federal tax returns. Tax years 2012 and 2013 remain under examination. The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions. Self-Insurance Costs The Company is primarily self-insured for costs related to workers’ compensation and general liability claims. Liabilities are actuarially determined and are recognized based on claims filed and an estimate of claims incurred but not reported. The liabilities for workers’ compensation claims are accounted for on a present value basis. The Company has purchased stop-loss coverage to limit its exposure to any significant exposure on a per claim basis. The Company is insured for covered costs in excess of these per claim limits. The following table summarizes the changes in the Company’s self-insurance liability through January 30, 2016. 2015 2014 2013 Beginning balance $ $ $ Expense Claim payments ) ) ) Assumed from Roundy’s or Harris Teeter Ending balance Less: Current portion ) ) ) Long-term portion $ $ $ The current portion of the self-insured liability is included in “Other current liabilities,” and the long-term portion is included in “Other long-term liabilities” in the Consolidated Balance Sheets. The Company maintains surety bonds related to self-insured workers’ compensation claims. These bonds are required by most states in which the Company is self-insured for workers’ compensation and are placed with third-party insurance providers to insure payment of the Company’s obligations in the event the Company is unable to meet its claim payment obligations up to its self-insured retention levels. These bonds do not represent liabilities of the Company, as the Company has recorded reserves for the claim costs. The Company is similarly self-insured for property-related losses. The Company maintains stop loss coverage to limit its property loss exposures including coverage for earthquake, wind, flood and other catastrophic events. Revenue Recognition Revenues from the sale of products are recognized at the point of sale. Discounts provided to customers by the Company at the time of sale, including those provided in connection with loyalty cards, are recognized as a reduction in sales as the products are sold. Discounts provided by vendors, usually in the form of paper coupons, are not recognized as a reduction in sales provided the coupons are redeemable at any retailer that accepts coupons. The Company records a receivable from the vendor for the difference in sales price and cash received. Pharmacy sales are recorded when product is provided to the customer. Sales taxes are recorded as other accrued liabilities and not as a component of sales. The Company does not recognize a sale when it sells its own gift cards and gift certificates. Rather, it records a deferred liability equal to the amount received. A sale is then recognized when the gift card or gift certificate is redeemed to purchase the Company’s products. Gift card and certificate breakage is recognized when redemption is deemed remote and there is no legal obligation to remit the value of the unredeemed gift card. The amount of breakage has not been material for 2015, 2014 and 2013. Merchandise Costs The “Merchandise costs” line item of the Consolidated Statements of Operations includes product costs, net of discounts and allowances; advertising costs (see separate discussion below); inbound freight charges; warehousing costs, including receiving and inspection costs; transportation costs; and food production and operational costs. Warehousing, transportation and manufacturing management salaries are also included in the “Merchandise costs” line item; however, purchasing management salaries and administration costs are included in the “Operating, general and administrative” line item along with most of the Company’s other managerial and administrative costs. Rent expense and depreciation and amortization expense are shown separately in the Consolidated Statements of Operations. Warehousing and transportation costs include distribution center direct wages, transportation direct wages, repairs and maintenance, utilities, inbound freight and, where applicable, third party warehouse management fees. These costs are recognized in the periods the related expenses are incurred. The Company believes the classification of costs included in merchandise costs could vary widely throughout the industry. The Company’s approach is to include in the “Merchandise costs” line item the direct, net costs of acquiring products and making them available to customers in its stores. The Company believes this approach most accurately presents the actual costs of products sold. The Company recognizes all vendor allowances as a reduction in merchandise costs when the related product is sold. When possible, vendor allowances are applied to the related product cost by item and, therefore, reduce the carrying value of inventory by item. When the items are sold, the vendor allowance is recognized. When it is not possible, due to systems constraints, to allocate vendor allowances to the product by item, vendor allowances are recognized as a reduction in merchandise costs based on inventory turns and, therefore, recognized as the product is sold. Advertising Costs The Company’s advertising costs are recognized in the periods the related expenses are incurred and are included in the “Merchandise costs” line item of the Consolidated Statements of Operations. The Company’s pre-tax advertising costs totaled $679 in 2015, $648 in 2014 and $587 in 2013. The Company does not record vendor allowances for co-operative advertising as a reduction of advertising expense. Consolidated Statements of Cash Flows For purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be temporary cash investments. Segments The Company operates retail food and drug stores, multi-department stores, jewelry stores, and convenience stores throughout the United States. The Company’s retail operations, which represent over 99% of the Company’s consolidated sales and EBITDA, are its only reportable segment. The Company’s retail operating divisions have been aggregated into one reportable segment due to the operating divisions having similar economic characteristics with similar long-term financial performance. In addition, the Company’s operating divisions offer to its customers similar products, have similar distribution methods, operate in similar regulatory environments, purchase the majority of the Company’s merchandise for retail sale from similar (and in many cases identical) vendors on a coordinated basis from a centralized location, serve similar types of customers, and are allocated capital from a centralized location. The Company’s operating divisions reflect the manner in which the business is managed and how the Company’s Chief Executive Officer, who acts as the Company’s chief operating decision maker, assess performance internally. All of the Company’s operations are domestic. The following table presents sales revenue by type of product for 2015, 2014 and 2013. 2015 2014 2013 Amount % of total Amount % of total Amount % of total Non Perishable(1) $ % $ % $ % Perishable(2) % % % Fuel % % % Pharmacy % % % Other(3) % % % Total Sales and other revenue $ % $ % $ % (1) Consists primarily of grocery, general merchandise, health and beauty care and natural foods. (2) Consists primarily of produce, floral, meat, seafood, deli, bakery and fresh prepared. (3) Consists primarily of sales related to jewelry stores, food production plants to outside customers, variable interest entities, a specialty pharmacy, in-store health clinics and online sales by Vitacost.com. |
MERGERS
MERGERS | 12 Months Ended |
Jan. 30, 2016 | |
MERGERS | |
MERGERS | 2. M ERGERS On December 18, 2015, the Company closed its merger with Roundy’s by purchasing 100% of Roundy’s outstanding common stock for $3.60 per share and assuming Roundy’s outstanding debt, for a purchase price of $866. The merger brings a complementary store base in communities throughout Wisconsin and a stronger presence in the greater Chicagoland area. The merger was accounted for under the purchase method of accounting and was financed through a combination of commercial paper and long-term debt (see Note 6). In a business combination, the purchase price is allocated to assets acquired and liabilities assumed based on their fair values, with any excess of purchase price over fair value recognized as goodwill. In addition to recognizing the assets and liabilities on the acquired company’s balance sheet, the Company reviews supply contracts, leases, financial instruments, employment agreements and other significant agreements to identify potential assets or liabilities that require recognition in connection with the application of acquisition accounting under Accounting Standards Codification (“ASC”) 805. Intangible assets are recognized apart from goodwill when the asset arises from contractual or other legal rights, or are separable from the acquired entity such that they may be sold, transferred, licensed, rented or exchanged either on a standalone basis or in combination with a related contract, asset or liability. Pending finalization of the Company’s valuation and other items, the following table summarizes the preliminary fair values of the assets acquired and liabilities assumed as part of the merger with Roundy’s: December 18, 2015 ASSETS Cash and temporary cash investments $ Store deposits in-transit Receivables FIFO inventory Prepaid and other current assets Total current assets Property, plant and equipment Intangibles Other assets Total Assets, excluding Goodwill LIABILITIES Current portion of obligations under capital leases and financing obligations ) Trade accounts payable ) Accrued salaries and wages ) Other current liabilities ) Total current liabilities ) Fair-value of long-term debt ) Fair-value of long-term obligations under capital leases and financing obligations ) Deferred income taxes ) Pension and postretirement benefit obligations ) Other long-term liabilities ) Total Liabilities ) Total Identifiable Net Liabilities ) Goodwill Total Purchase Price $ Of the $324 allocated to intangible assets, $211 relates to the Mariano’s, Pick ‘n Save, Metro Market and Copps trade names, to which we assigned an indefinite life and, therefore, will not be amortized. The Company also recorded $69, $38, and $6 related to favorable leasehold interests, pharmacy prescription files and customer lists, respectively. The Company will amortize the favorable leasehold interests over a weighted average of twelve years. The Company will amortize the pharmacy prescription files and customer lists over seven and two years, respectively. The goodwill recorded as part of the merger was attributable to the assembled workforce of Roundy’s and operational synergies expected from the merger, as well as any intangible assets that do not qualify for separate recognition. The transaction was treated as a stock purchase for income tax purposes. The assets acquired and liabilities assumed as part of the merger did not result in a step up of the tax basis and goodwill is not expected to be deductible for tax purposes. The above amounts represent the preliminary allocation of the purchase price, and are subject to revision when the resulting valuations of property and intangible assets are finalized, which will occur prior to December 18, 2016. Due to the timing of the merger closing late in the year, the revenue and earnings of Roundy’s in 2015 were not material. On August 18, 2014, the Company closed its merger with Vitacost.com, Inc. (“Vitacost.com”) by purchasing 100% of the Vitacost.com outstanding common stock for $8.00 per share or $287. This merger affords the Company access to Vitacost.com’s extensive e-commerce platform, which can be combined with the Company’s customer insights and loyal customer base, to create new levels of personalization and convenience for customers. The merger was accounted for under the purchase method of accounting and was financed through the issuance of commercial paper (see Note 6). The Company’s purchase price allocation was finalized in the second quarter of 2015. The changes in the fair values assumed from the preliminary amounts were not material. The table below summarizes the final fair values of the assets acquired and liabilities assumed: August 18, 2014 ASSETS Total current assets $ Property, plant and equipment Intangibles Total Assets, excluding Goodwill LIABILITIES Total current liabilities ) Deferred income taxes ) Total Liabilities ) Total Identifiable Net Assets Goodwill Total Purchase Price $ Of the $81 allocated to intangible assets, the Company recorded $49, $26 and $6 related to customer relationships, technology and the trade name, respectively. The Company will amortize the technology and the trade name, using the straight line method, over 10 and three years, respectively, while the customer relationships will be amortized over five years using the declining balance method. The goodwill recorded as part of the merger was attributable to the assembled workforce of Vitacost.com and operational synergies expected from the merger, as well as any intangible assets that did not qualify for separate recognition. The transaction was treated as a stock purchase for income tax purposes. The assets acquired and liabilities assumed as part of the merger did not result in a step up of the tax basis and goodwill is not expected to be deductible for tax purposes. Pro forma results of operations, assuming the Harris Teeter Supermarkets, Inc. (“Harris Teeter”) merger had taken place at the beginning of 2012, the Vitacost.com merger had taken place at the beginning of 2013 and the Roundy’s transaction had taken place at the beginning of 2014, are included in the following table. The pro forma information includes historical results of operations of Harris Teeter, Vitacost.com and Roundy’s, as well as adjustments for interest expense that would have been incurred due to financing the mergers, depreciation and amortization of the assets acquired and excludes the pre-merger transaction related expenses incurred by Harris Teeter, Vitacost.com, Roundy’s and the Company. The pro forma information does not include efficiencies, cost reductions, synergies or investments in lower prices for our customers expected to result from the mergers. The unaudited pro forma financial information is not necessarily indicative of the results that actually would have occurred had the Harris Teeter merger been completed at the beginning of 2012, the Vitacost.com merger completed at the beginning of 2013 or the Roundy’s merger completed at the beginning of 2014. Fiscal year ended January 30, 2016 Fiscal year ended January 31, 2015 Fiscal year ended February 1, 2014 Sales $ $ $ Net earnings including noncontrolling interests Net earnings attributable to noncontrolling interests Net earnings attributable to The Kroger Co. $ $ $ |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 12 Months Ended |
Jan. 30, 2016 | |
GOODWILL AND INTANGIBLE ASSETS | |
GOODWILL AND INTANGIBLE ASSETS | 3. G OODWILL AND I NTANGIBLE A SSETS The following table summarizes the changes in the Company’s net goodwill balance through January 30, 2016. 2015 2014 Balance beginning of year Goodwill $ $ Accumulated impairment losses ) ) Activity during the year Mergers Balance end of year Goodwill Accumulated impairment losses ) ) $ $ In 2015, the Company acquired all the outstanding shares of Roundy’s, a supermarket retailer in the Wisconsin and Chicagoland markets, resulting in additional goodwill totaling $414. Roundy’s is accounted for as a single reporting unit. In 2014, the Company acquired all the outstanding shares of Vitacost.com, an online retailer, resulting in additional goodwill of $160. See Note 2 for additional information regarding the Roundy’s and Vitacost.com mergers. Testing for impairment must be performed annually, or on an interim basis upon the occurrence of a triggering event or a change in circumstances that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The annual evaluations of goodwill and indefinite-lived intangible assets were performed during the fourth quarter of 2015, 2014 and 2013 did not result in impairment. Based on current and future expected cash flows, the Company believes goodwill impairments are not reasonably likely. A 10% reduction in fair value of the Company’s reporting units would not indicate a potential for impairment of the Company’s remaining goodwill balance. In 2015, the Company acquired definite and indefinite lived intangible assets totaling approximately $324 as a result of the merger with Roundy’s. In 2014, the Company acquired definite and indefinite lived intangible assets totaling approximately $81 as a result of the merger with Vitacost.com. The following table summarizes the Company’s intangible assets balance through January 30, 2016. 2015 2014 Gross carrying amount Accumulated amortization(1) Gross carrying amount Accumulated amortization(1) Definite-lived favorable leasehold interests $ $ ) $ $ ) Definite-lived pharmacy prescription files ) ) Definite-lived customer relationships ) ) Definite-lived other ) ) Indefinite-lived trade name — — Indefinite-lived liquor licenses — — Total $ $ ) $ $ ) (1) Favorable leasehold interests are amortized to rent expense, pharmacy prescription files are amortized to merchandise costs, customer relationships are amortized to depreciation and amortization expense and other intangibles are amortized to operating, general and administrative (“OG&A”) expense and depreciation and amortization expense. Amortization expense associated with intangible assets totaled approximately $51, $41 and $18, during fiscal years 2015, 2014 and 2013, respectively. Future amortization expense associated with the net carrying amount of definite-lived intangible assets for the years subsequent to 2015 is estimated to be approximately: 2016 $ 2017 2018 2019 2020 Thereafter Total future estimated amortization associated with definite-lived intangible assets $ |
PROPERTY, PLANT AND EQUIPMENT,
PROPERTY, PLANT AND EQUIPMENT, NET | 12 Months Ended |
Jan. 30, 2016 | |
PROPERTY, PLANT AND EQUIPMENT, NET | |
PROPERTY, PLANT AND EQUIPMENT, NET | 4. P ROPERTY, P LANT AND E QUIPMENT, N ET Property, plant and equipment, net consists of: 2015 2014 Land $ $ Buildings and land improvements Equipment Leasehold improvements Construction-in-progress Leased property under capital leases and financing obligations Total property, plant and equipment Accumulated depreciation and amortization ) ) Property, plant and equipment, net $ $ Accumulated depreciation and amortization for leased property under capital leases was $293 at January 30, 2016 and $332 at January 31, 2015. Approximately $264 and $260, net book value, of property, plant and equipment collateralized certain mortgages at January 30, 2016 and January 31, 2015, respectively. |
TAXES BASED ON INCOME
TAXES BASED ON INCOME | 12 Months Ended |
Jan. 30, 2016 | |
TAXES BASED ON INCOME | |
TAXES BASED ON INCOME | 5. T AXES B ASED ON I NCOME The provision for taxes based on income consists of: 2015 2014 2013 Federal Current $ $ $ Deferred ) Subtotal federal State and local Current Deferred ) Subtotal state and local Total $ $ $ A reconciliation of the statutory federal rate and the effective rate follows: 2015 2014 2013 Statutory rate % % % State income taxes, net of federal tax benefit % % % Credits )% )% )% Favorable resolution of issues )% )% % Domestic manufacturing deduction )% )% )% Other changes, net )% )% )% % % % The 2015 effective tax rate differed from the federal statutory rate primarily as a result of the utilization of tax credits, the Domestic Manufacturing Deduction and other changes, partially offset by the effect of state income taxes. The 2015 rate for state income taxes is lower than 2014 due to the filing of amended returns to claim additional benefits in years still under review, the favorable resolution of state issues and an increase in state credits. The 2013 rate for state income taxes is lower than 2015 and 2014 due to an increase in state credits, including the benefit from filing amended returns to claim additional credits. The 2013 benefit from the Domestic Manufacturing Deduction is greater than 2015 and 2014 due to the amendment of prior years’ tax returns to claim the additional benefit available in years still under review by the Internal Revenue Service. The tax effects of significant temporary differences that comprise tax balances were as follows: 2015 2014 Current deferred tax assets: Net operating loss and credit carryforwards $ $ Compensation related costs Other Subtotal Valuation allowance ) ) Total current deferred tax assets Current deferred tax liabilities: Insurance related costs ) ) Inventory related costs ) ) Total current deferred tax liabilities ) ) Current deferred taxes $ ) $ ) Long-term deferred tax assets: Compensation related costs $ $ Lease accounting Closed store reserves Insurance related costs Net operating loss and credit carryforwards Other Subtotal Valuation allowance ) ) Total long-term deferred tax assets Long-term deferred tax liabilities: Depreciation and amortization ) ) Total long-term deferred tax liabilities ) ) Long-term deferred taxes $ ) $ ) On November 19, 2015, the Internal Revenue Service issued implementation guidance for retailers with respect to recently issued tangible property regulations. The adoption of this guidance resulted in the immediate deduction of qualifying costs related to current and prior year store remodels, resulting in an increase in long-term deferred tax liability and current income tax receivable. The adoption of this guidance, along with the impact of the Roundy’s merger, resulted in the increase in the deferred tax liability related to depreciation and amortization from January 31, 2015 to January 30, 2016. At January 30, 2016, the Company had net operating loss carryforwards for state income tax purposes of $1,460. These net operating loss carryforwards expire from 2016 through 2036. The utilization of certain of the Company’s state net operating loss carryforwards may be limited in a given year. Further, based on the analysis described below, the Company has recorded a valuation allowance against some of the deferred tax assets resulting from its state net operating losses. At January 30, 2016, the Company had state credit carryforwards of $65, most of which expire from 2016 through 2027. The utilization of certain of the Company’s credits may be limited in a given year. Further, based on the analysis described below, the Company has recorded a valuation allowance against some of the deferred tax assets resulting from its state credits. At January 30, 2016, the Company had federal net operating loss carryforwards of $62. These net operating loss carryforwards expire from 2030 through 2034. The utilization of certain of the Company’s federal net operating loss carryforwards may be limited in a given year. Further, based on the analysis described below, the Company has not recorded a valuation allowance against the deferred tax assets resulting from its federal net operating losses. The Company regularly reviews all deferred tax assets on a tax filer and jurisdictional basis to estimate whether these assets are more likely than not to be realized based on all available evidence. This evidence includes historical taxable income, projected future taxable income, the expected timing of the reversal of existing temporary differences and the implementation of tax planning strategies. Projected future taxable income is based on expected results and assumptions as to the jurisdiction in which the income will be earned. The expected timing of the reversals of existing temporary differences is based on current tax law and the Company’s tax methods of accounting. Unless deferred tax assets are more likely than not to be realized, a valuation allowance is established to reduce the carrying value of the deferred tax asset until such time that realization becomes more likely than not. Increases and decreases in these valuation allowances are included in “Income tax expense” in the Consolidated Statements of Operations. A reconciliation of the beginning and ending amount of unrecognized tax benefits, including positions impacting only the timing of tax benefits, is as follows: 2015 2014 2013 Beginning balance $ $ $ Additions based on tax positions related to the current year Reductions based on tax positions related to the current year ) ) ) Additions for tax positions of prior years Reductions for tax positions of prior years ) ) ) Settlements ) ) Lapse of statute ) Ending balance $ $ $ The Company does not anticipate that changes in the amount of unrecognized tax benefits over the next twelve months will have a significant impact on its results of operations or financial position. As of January 30, 2016, January 31, 2015 and February 1, 2014, the amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $83, $90 and $98, respectively. To the extent interest and penalties would be assessed by taxing authorities on any underpayment of income tax, such amounts have been accrued and classified as a component of income tax expense. During the years ended January 30, 2016, January 31, 2015 and February 1, 2014, the Company recognized approximately $(5), $3 and $10, respectively, in interest and penalties (recoveries). The Company had accrued approximately $25, $30 and $41 for the payment of interest and penalties as of January 30, 2016, January 31, 2015 and February 1, 2014, respectively. As of January 31, 2015, the Internal Revenue Service had concluded its examination of our 2010 and 2011 federal tax returns and is currently auditing tax years 2012 and 2013. The 2012 and 2013 audits are expected to be completed in 2016. |
DEBT OBLIGATIONS
DEBT OBLIGATIONS | 12 Months Ended |
Jan. 30, 2016 | |
DEBT OBLIGATIONS | |
DEBT OBLIGATIONS | 6. D EBT O BLIGATIONS Long-term debt consists of: 2015 2014 0.76% to 8.00% Senior notes due through 2043 $ $ 5.00% to 12.75% Mortgages due in varying amounts through 2027 0.27% to 0.66% Commercial paper due through February 2016 Other Total debt Less current portion ) ) Total long-term debt $ $ In 2015, the Company issued $500 of senior notes due in fiscal year 2026 bearing an interest rate of 3.50%, $300 of senior notes due in fiscal year 2021 bearing an interest rate of 2.60% and $300 of senior notes due in fiscal year 2019 bearing an interest rate of 2.00%, and repaid $500 of senior notes bearing an interest rate of 3.90% upon maturity. Due to the merger with Roundy’s, the Company assumed $678 of term loans, which were entirely paid off following the merger. In 2014, the Company issued $500 of senior notes due in fiscal year 2021 bearing an interest rate of 2.95% and repaid $300 of senior notes bearing an interest rate of 4.95% upon maturity. On June 30, 2014, the Company amended, extended and restated its $2,000 unsecured revolving credit facility. The Company entered into the amended credit facility to amend, extend and restate the Company’s existing credit facility that would have terminated on January 25, 2017. The amended credit facility provides for a $2,750 unsecured revolving credit facility (the “Credit Agreement”), with a termination date of June 30, 2019, unless extended as permitted under the Credit Agreement. The Company has the ability to increase the size of the Credit Agreement by up to an additional $750, subject to certain conditions. Borrowings under the Credit Agreement bear interest at the Company’s option, at either (i) LIBOR plus a market rate spread, based on the Company’s Leverage Ratio or (ii) the base rate, defined as the highest of (a) the Federal Funds Rate plus 0.5%, (b) the Bank of America prime rate, and (c) one-month LIBOR plus 1.0%, plus a market rate spread based on the Company’s Leverage Ratio. The Company will also pay a Commitment Fee based on the Leverage Ratio and Letter of Credit fees equal to a market rate spread based on the Company’s Leverage Ratio. The Credit Agreement contains covenants, which, among other things, require the maintenance of a Leverage Ratio of not greater than 3.50:1.00 and a Fixed Charge Coverage Ratio of not less than 1.70:1.00. The Company may repay the Credit Agreement in whole or in part at any time without premium or penalty. The Credit Agreement is not guaranteed by the Company’s subsidiaries. As of January 30, 2016, the Company had $990 of borrowings of commercial paper, with a weighted average interest rate of 0.66%, and no borrowings under its Credit Agreement. As of January 31, 2015, the Company had $1,275 of borrowings of commercial paper, with a weighted average interest rate of 0.37%, and no borrowings under its Credit Agreement. As of January 30, 2016, the Company had outstanding letters of credit in the amount of $244, of which $13 reduces funds available under the Company’s Credit Agreement. The letters of credit are maintained primarily to support performance, payment, deposit or surety obligations of the Company. Most of the Company’s outstanding public debt is subject to early redemption at varying times and premiums, at the option of the Company. In addition, subject to certain conditions, some of the Company’s publicly issued debt will be subject to redemption, in whole or in part, at the option of the holder upon the occurrence of a redemption event, upon not less than five days’ notice prior to the date of redemption, at a redemption price equal to the default amount, plus a specified premium. “Redemption Event” is defined in the indentures as the occurrence of (i) any person or group, together with any affiliate thereof, beneficially owning 50% or more of the voting power of the Company, (ii) any one person or group, or affiliate thereof, succeeding in having a majority of its nominees elected to the Company’s Board of Directors, in each case, without the consent of a majority of the continuing directors of the Company or (iii) both a change of control and a below investment grade rating. The aggregate annual maturities and scheduled payments of long-term debt, as of year-end 2015, and for the years subsequent to 2015 are: 2016 $ 2017 2018 2019 2020 Thereafter Total debt $ |
DERIVATIVE FINANCIAL INSTRUMENT
DERIVATIVE FINANCIAL INSTRUMENTS | 12 Months Ended |
Jan. 30, 2016 | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
DERIVATIVE FINANCIAL INSTRUMENTS | 7. D ERIVATIVE F INANCIAL I NSTRUMENTS GAAP defines derivatives, requires that derivatives be carried at fair value on the balance sheet, and provides for hedge accounting when certain conditions are met. The Company’s derivative financial instruments are recognized on the balance sheet at fair value. Changes in the fair value of derivative instruments designated as “cash flow” hedges, to the extent the hedges are highly effective, are recorded in other comprehensive income, net of tax effects. Ineffective portions of cash flow hedges, if any, are recognized in current period earnings. Other comprehensive income or loss is reclassified into current period earnings when the hedged transaction affects earnings. Changes in the fair value of derivative instruments designated as “fair value” hedges, along with corresponding changes in the fair values of the hedged assets or liabilities, are recorded in current period earnings. Ineffective portions of fair value hedges, if any, are recognized in current period earnings. The Company assesses, both at the inception of the hedge and on an ongoing basis, whether derivatives used as hedging instruments are highly effective in offsetting the changes in the fair value or cash flow of the hedged items. If it is determined that a derivative is not highly effective as a hedge or ceases to be highly effective, the Company discontinues hedge accounting prospectively. Interest Rate Risk Management The Company is exposed to market risk from fluctuations in interest rates. The Company manages its exposure to interest rate fluctuations through the use of a commercial paper program, interest rate swaps (fair value hedges) and forward-starting interest rate swaps (cash flow hedges). The Company’s current program relative to interest rate protection contemplates hedging the exposure to changes in the fair value of fixed-rate debt attributable to changes in interest rates. To do this, the Company uses the following guidelines: (i) use average daily outstanding borrowings to determine annual debt amounts subject to interest rate exposure, (ii) limit the average annual amount subject to interest rate reset and the amount of floating rate debt to a combined total of $2,500 or less, (iii) include no leveraged products, and (iv) hedge without regard to profit motive or sensitivity to current mark-to-market status. The Company reviews compliance with these guidelines annually with the Financial Policy Committee of the Board of Directors. These guidelines may change as the Company’s needs dictate. Fair Value Interest Rate Swaps The table below summarizes the outstanding interest rate swaps designated as fair value hedges as of January 30, 2016 and January 31, 2015. 2015 2014 Pay Floating Pay Fixed Pay Floating Pay Fixed Notional amount $ $ — $ $ — Number of contracts — — Duration in years — — Average variable rate % — % — Average fixed rate % — % — Maturity December 2018 December 2018 The gain or loss on these derivative instruments as well as the offsetting gain or loss on the hedged items attributable to the hedged risk is recognized in current earnings as “Interest expense.” These gains and losses for 2015 and 2014 were as follows: Year-To-Date January 30, 2016 January 31, 2015 Consolidated Statements of Operations Classification Gain/(Loss) on Swaps Gain/(Loss) on Borrowings Gain/(Loss) on Swaps Gain/(Loss) on Borrowings Interest Expense $ $ ) $ $ ) The following table summarizes the location and fair value of derivative instruments designated as fair value hedges on the Company’s Consolidated Balance Sheets: Asset Derivatives Fair Value Derivatives Designated as Fair Value Hedging Instruments January 30, 2016 January 31, 2015 Balance Sheet Location Interest Rate Hedges $ $ — (Other long-term liabilities)/Other assets Cash Flow Forward-Starting Interest Rate Swaps As of January 30, 2016, the Company had seven forward-starting interest rate swap agreements with maturity dates of August 2017 with an aggregate notional amount totaling $400. A forward-starting interest rate swap is an agreement that effectively hedges the variability in future benchmark interest payments attributable to changes in interest rates on the forecasted issuance of fixed-rate debt. The Company entered into these forward-starting interest rate swaps in order to lock in fixed interest rates on its forecasted issuance of debt in August 2017. Accordingly, the forward-starting interest rate swaps were designated as cash-flow hedges as defined by GAAP. As of January 30, 2016, the fair value of the interest rate swaps was recorded in other long-term liabilities for $27 and accumulated other comprehensive loss for $17 net of tax. As of January 31, 2015, the Company had four forward-starting interest rate swap agreements with maturity dates of October 2015 with an aggregate notional amount totaling $300 and seven forward-starting interest rate swap agreements with maturity dates of August 2017 with an aggregate notional amount totaling $400. The Company entered into these forward-starting interest rate swaps in order to lock in fixed interest rates on its forecasted issuances of debt in October 2015 and August 2017. Accordingly, the forward-starting interest rate swaps were designated as cash-flow hedges as defined by GAAP. As of January 31, 2015, the fair value of the interest rate swaps was recorded in other long-term liabilities for $39 and accumulated other comprehensive loss for $25 net of tax. During 2015, the Company terminated eight forward-starting interest rate swap agreements with maturity dates of October 2015 and January 2016 with an aggregate notional amount totaling $600. Four of these forward-starting interest rate swap agreements, with an aggregate notional amount totaling $300, were entered into and terminated in 2015. These forward-starting interest rate swap agreements were hedging the variability in future benchmark interest payments attributable to changing interest rates on the forecasted issuance of fixed-rate debt issued in 2015. As discussed in Note 6, the Company issued $1,100 of senior notes in 2015. Since these forward-starting interest rate swap agreements were classified as cash flow hedges, the unamortized loss of $17, $11 net of tax, has been deferred in AOCI and will be amortized to earnings as the interest payments are made. The following table summarizes the effect of the Company’s derivative instruments designated as cash flow hedges for 2015 and 2014: Year-To-Date Derivatives in Cash Flow Hedging Amount of Gain/(Loss) in AOCI on Derivative (Effective Portion) Amount of Gain/(Loss) Reclassified from AOCI into Income (Effective Portion) Location of Gain/(Loss) Reclassified into Income Relationships 2015 2014 2015 2014 (Effective Portion) Forward-Starting Interest Rate Swaps, net of tax* $ ) $ ) $ ) $ ) Interest expense *The amounts of Gain/(Loss) in AOCI on derivatives include unamortized proceeds and payments from forward-starting interest rate swaps once classified as cash flow hedges that were terminated prior to end of 2015. For the above fair value and cash flow interest rate swaps, the Company has entered into International Swaps and Derivatives Association master netting agreements that permit the net settlement of amounts owed under their respective derivative contracts. Under these master netting agreements, net settlement generally permits the Company or the counterparty to determine the net amount payable for contracts due on the same date and in the same currency for similar types of derivative transactions. These master netting agreements generally also provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event. Collateral is generally not required of the counterparties or of the Company under these master netting agreements. As of January 30, 2016 and January 31, 2015, no cash collateral was received or pledged under the master netting agreements. The effect of the net settlement provisions of these master netting agreements on the Company’s derivative balances upon an event of default or termination event is as follows as of January 30, 2016 and January 31, 2015: Net Amount Gross Amounts Not Offset in the Balance Sheet January 30, 2016 Gross Amount Recognized Gross Amounts Offset in the Balance Sheet Presented in the Balance Sheet Financial Instruments Cash Collateral Net Amount Assets Fair Value Interest Rate Swaps — — — Liabilities Cash Flow Forward-Starting Interest Rate Swaps $ $ — $ $ — $ — $ Net Amount Gross Amounts Not Offset in the Balance Sheet January 31, 2015 Gross Amount Recognized Gross Amounts Offset in the Balance Sheet Presented in the Balance Sheet Financial Instruments Cash Collateral Net Amount Liabilities Cash Flow Forward-Starting Interest Rate Swaps $ $ — $ $ — $ — $ Commodity Price Protection The Company enters into purchase commitments for various resources, including raw materials utilized in its food production plants and energy to be used in its stores, warehouses, food production plants and administrative offices. The Company enters into commitments expecting to take delivery of and to utilize those resources in the conduct of normal business. Those commitments for which the Company expects to utilize or take delivery in a reasonable amount of time in the normal course of business qualify as normal purchases and normal sales. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Jan. 30, 2016 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 8. F AIR V ALUE M EASUREMENTS GAAP establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of the fair value hierarchy defined in the standards are as follows: Level 1 — Quoted prices are available in active markets for identical assets or liabilities; Level 2 — Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable; Level 3 — Unobservable pricing inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing an asset or liability. For items carried at (or adjusted to) fair value in the consolidated financial statements, the following tables summarize the fair value of these instruments at January 30, 2016 and January 31, 2015: January 30, 2016 Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Trading Securities $ $ — $ — $ Available-for-Sale Securities — — Long-Lived Assets — — Interest Rate Hedges — ) — ) Total $ $ ) $ $ January 31, 2015 Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Trading Securities $ $ — $ — $ Available-for-Sale Securities — — Warrants — — Long-Lived Assets — — Interest Rate Hedges — ) — ) Total $ $ ) $ $ In 2015 and 2014, unrealized gains on the Level 1 available-for-sale securities totaled $5 and $8, respectively. The Company values warrants using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model is classified as a Level 2 input. The Company values interest rate hedges using observable forward yield curves. These forward yield curves are classified as Level 2 inputs. Fair value measurements of non-financial assets and non-financial liabilities are primarily used in the impairment analysis of goodwill, other intangible assets, long-lived assets and in the valuation of store lease exit costs. The Company reviews goodwill and indefinite-lived intangible assets for impairment annually, during the fourth quarter of each fiscal year, and as circumstances indicate the possibility of impairment. See Note 3 for further discussion related to the Company’s carrying value of goodwill. Long-lived assets and store lease exit costs were measured at fair value on a nonrecurring basis using Level 3 inputs as defined in the fair value hierarchy. See Note 1 for further discussion of the Company’s policies and recorded amounts for impairments of long-lived assets and valuation of store lease exit costs. In 2015, long-lived assets with a carrying amount of $53 were written down to their fair value of $7, resulting in an impairment charge of $46. In 2014, long-lived assets with a carrying amount of $59 were written down to their fair value of $22, resulting in an impairment charge of $37. Mergers are accounted for using the acquisition method of accounting, which requires that the purchase price paid for an acquisition be allocated to the assets and liabilities acquired based on their estimated fair values as of the effective date of the acquisition, with the excess of the purchase price over the net assets being recorded as goodwill. See Note 2 for further discussion related to accounting for mergers. Fair Value of Other Financial Instruments Current and Long-term Debt The fair value of the Company’s long-term debt, including current maturities, was estimated based on the quoted market prices for the same or similar issues adjusted for illiquidity based on available market evidence. If quoted market prices were not available, the fair value was based upon the net present value of the future cash flow using the forward interest rate yield curve in effect at respective year-ends. At January 30, 2016, the fair value of total debt was $12,344 compared to a carrying value of $11,396. At January 31, 2015, the fair value of total debt was $12,378 compared to a carrying value of $11,026. Cash and Temporary Cash Investments, Store Deposits In-Transit, Receivables, Prepaid and Other Current Assets, Trade Accounts Payable, Accrued Salaries and Wages and Other Current Liabilities The carrying amounts of these items approximated fair value. Other Assets The fair values of these investments were estimated based on quoted market prices for those or similar investments, or estimated cash flows, if appropriate. At January 30, 2016 and January 31, 2015, the carrying and fair value of long-term investments for which fair value is determinable was $128 and $133, respectively. At January 30, 2016 and January 31, 2015, the carrying value of notes receivable for which fair value is determinable was $145 and $98, respectively. |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 12 Months Ended |
Jan. 30, 2016 | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 9. A CCUMULATED O THER C OMPREHENSIVE I NCOME (L OSS ) The following table represents the changes in AOCI by component for the years ended January 31, 2015 and January 30, 2016 : Cash Flow Hedging Activities(1) Available for sale Securities(1) Pension and Postretirement Defined Benefit Plans(1) Total(1) Balance at February 1, 2014 $ ) $ $ ) $ ) OCI before reclassifications(2) ) ) ) Amounts reclassified out of AOCI(3) — Net current-period OCI ) ) ) Balance at January 31, 2015 ) ) ) OCI before reclassifications(2) ) Amounts reclassified out of AOCI(3) — Net current-period OCI ) Balance at January 30, 2016 $ ) $ $ ) $ ) (1) All amounts are net of tax. (2) Net of tax of $(14), $3 and $(206) for cash flow hedging activities, available for sale securities and pension and postretirement defined benefit plans, respectively, as of January 31, 2015. Net of tax of $(2), $2 and $45 for cash flow hedging activities, available for sale securities and pension and postretirement defined benefit plans, respectively, as of January 30, 2016. (3) Net of tax of $13 for pension and postretirement defined benefit plans, as of January 31, 2015. Net of tax of $32 for pension and postretirement defined benefit plans as of January 30, 2016. The following table represents the items reclassified out of AOCI and the related tax effects for the years ended January 30, 2016, January 31, 2015 and February 1, 2014: For the year ended For the year ended For the year ended January 30, 2016 January 31, 2015 February 1, 2014 Gains on cash flow hedging activities Amortization of unrealized gains and losses on cash flow hedging activities(1) $ $ $ Tax expense — — ) Net of tax Pension and postretirement defined benefit plan items Amortization of amounts included in net periodic pension expense(2) Tax expense ) ) ) Net of tax Total reclassifications, net of tax $ $ $ (1) Reclassified from AOCI into interest expense. (2) Reclassified from AOCI into merchandise costs and OG&A expense. These components are included in the computation of net periodic pension costs (see Note 15 for additional details). |
LEASES AND LEASE-FINANCED TRANS
LEASES AND LEASE-FINANCED TRANSACTIONS | 12 Months Ended |
Jan. 30, 2016 | |
LEASES AND LEASE-FINANCED TRANSACTIONS | |
LEASES AND LEASE-FINANCED TRANSACTIONS | 10. L EASES AND L EASE-FINANCED T RANSACTIONS While the Company’s current strategy emphasizes ownership of store real estate, the Company operates primarily in leased facilities. Lease terms generally range from 10 to 20 years with options to renew for varying terms. Terms of certain leases include escalation clauses, percentage rent based on sales or payment of executory costs such as property taxes, utilities or insurance and maintenance. Rent expense for leases with escalation clauses or other lease concessions are accounted for on a straight-line basis beginning with the earlier of the lease commencement date or the date the Company takes possession. Portions of certain properties are subleased to others for periods generally ranging from one to 20 years. Rent expense (under operating leases) consists of: 2015 2014 2013 Minimum rentals $ $ $ Contingent payments Tenant income ) ) ) Total rent expense $ $ $ Minimum annual rentals and payments under capital leases and lease-financed transactions for the five years subsequent to 2015 and in the aggregate are: Capital Leases Operating Leases Lease- Financed Transactions 2016 $ $ $ 2017 2018 2019 2020 Thereafter Total $ $ $ Less estimated executory costs included in capital leases — Net minimum lease payments under capital leases Less amount representing interest Present value of net minimum lease payments under capital leases $ Total future minimum rentals under noncancellable subleases at January 30, 2016 were $261. |
EARNINGS PER COMMON SHARE
EARNINGS PER COMMON SHARE | 12 Months Ended |
Jan. 30, 2016 | |
EARNINGS PER COMMON SHARE | |
EARNINGS PER COMMON SHARE | 11. E ARNINGS P ER C OMMON S HARE Net earnings attributable to The Kroger Co. per basic common share equals net earnings attributable to The Kroger Co. less income allocated to participating securities divided by the weighted average number of common shares outstanding. Net earnings attributable to The Kroger Co. per diluted common share equals net earnings attributable to The Kroger Co. less income allocated to participating securities divided by the weighted average number of common shares outstanding, after giving effect to dilutive stock options. The following table provides a reconciliation of net earnings attributable to The Kroger Co. and shares used in calculating net earnings attributable to The Kroger Co. per basic common share to those used in calculating net earnings attributable to The Kroger Co. per diluted common share: For the year ended January 30, 2016 For the year ended January 31, 2015 For the year ended February 1, 2014 (in millions, except per share amounts) Earnings (Numer- ator) Shares (Denomi- nator) Per Share Amount Earnings (Numer- ator) Shares (Denomi- nator) Per Share Amount Earnings (Numer- ator) Shares (Denomi- nator) Per Share Amount Net earnings attributable to The Kroger Co. per basic common share $ $ $ $ $ $ Dilutive effect of stock options Net earnings attributable to The Kroger Co. per diluted common share $ $ $ $ $ $ The Company had combined undistributed and distributed earnings to participating securities totaling $18, $17 and $12 in 2015, 2014 and 2013, respectively. The Company had options outstanding for approximately 1.9 million, 4.6 million and 4.7 million, respectively, for the years ended January 30, 2016, January 31, 2015 and February 1, 2014, which were excluded from the computations of net earnings per diluted common share because their inclusion would have had an anti-dilutive effect on net earnings per diluted share. |
STOCK OPTION PLANS
STOCK OPTION PLANS | 12 Months Ended |
Jan. 30, 2016 | |
STOCK OPTION PLANS | |
STOCK OPTION PLANS | 12. S TOCK O PTION P LANS The Company grants options for common shares (“stock options”) to employees under various plans at an option price equal to the fair market value of the stock at the date of grant. The Company accounts for stock options under the fair value recognition provisions . Under this method, the Company recognizes compensation expense for all share-based payments granted. The Company recognizes share-based compensation expense, net of an estimated forfeiture rate, over the requisite service period of the award. Equity awards may be made at one of four meetings of its Board of Directors occurring shortly after the Company’s release of quarterly earnings. The 2015 primary grant was made in conjunction with the June meeting of the Company’s Board of Directors. Certain changes to the stock option compensation strategy were put into effect in 2015, which resulted in a reduction to the number of stock options granted in 2015, compared to 2014 and 2013. Stock options typically expire 10 years from the date of grant. Stock options vest between one and five years from the date of grant. At January 30, 2016, approximately 37 million common shares were available for future option grants under these plans. In addition to the stock options described above, the Company awards restricted stock to employees and non-employee directors under various plans. The restrictions on these awards generally lapse between one and five years from the date of the awards. The Company records expense for restricted stock awards in an amount equal to the fair market value of the underlying shares on the grant date of the award, over the period the awards lapse. As of January 30, 2016, approximately 21 million common shares were available under the 2008, 2011 and 2014 Long-Term Incentive Plans (the “Plans”) for future restricted stock awards or shares issued to the extent performance criteria are achieved. The Company has the ability to convert shares available for stock options under the Plans to shares available for restricted stock awards. Under the Plans, four shares available for option awards can be converted into one share available for restricted stock awards. All awards become immediately exercisable upon certain changes of control of the Company. Stock Options Changes in options outstanding under the stock option plans are summarized below: Shares subject to option (in millions) Weighted- average exercise price Outstanding, year-end 2012 $ Granted $ Exercised ) $ Canceled or Expired ) $ Outstanding, year-end 2013 $ Granted $ Exercised ) $ Canceled or Expired ) $ Outstanding, year-end 2014 $ Granted $ Exercised ) $ Canceled or Expired ) $ Outstanding, year-end 2015 $ A summary of options outstanding, exercisable and expected to vest at January 30, 2016 follows: Number of shares Weighted- average remaining contractual life Weighted- average exercise price Aggregate intrinsic value (in millions) (in years) (in millions) Options Outstanding $ Options Exercisable $ Options Expected to Vest $ Restricted stock Changes in restricted stock outstanding under the restricted stock plans are summarized below: Restricted shares outstanding (in millions) Weighted-average grant-date fair value Outstanding, year-end 2012 $ Granted $ Lapsed ) $ Canceled or Expired ) $ Outstanding, year-end 2013 $ Granted $ Lapsed ) $ Canceled or Expired ) $ Outstanding, year-end 2014 $ Granted $ Lapsed ) $ Canceled or Expired ) $ Outstanding, year-end 2015 $ The weighted-average grant date fair value of stock options granted during 2015, 2014 and 2013 was $9.78, $5.98 and $4.49, respectively. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model, based on the assumptions shown in the table below. The Black-Scholes model utilizes accounting judgment and financial estimates, including the term option holders are expected to retain their stock options before exercising them, the volatility of the Company’s share price over that expected term, the dividend yield over the term and the number of awards expected to be forfeited before they vest. Using alternative assumptions in the calculation of fair value would produce fair values for stock option grants that could be different than those used to record stock-based compensation expense in the Consolidated Statements of Operations. The increase in the fair value of the stock options granted during 2015, compared to 2014, resulted primarily from an increase in the Company’s share price, which decreased the expected dividend yield. The increase in the fair value of the stock options granted during 2014, compared to 2013, resulted primarily from an increase in the Company’s share price, which decreased the expected dividend yield, and an increase in the weighted average risk-free interest rate. The following table reflects the weighted-average assumptions used for grants awarded to option holders: 2015 2014 2013 Weighted average expected volatility % % % Weighted average risk-free interest rate % % % Expected dividend yield % % % Expected term (based on historical results) 7.2 years 6.6 years 6.8 years The weighted-average risk-free interest rate was based on the yield of a treasury note as of the grant date, continuously compounded, which matures at a date that approximates the expected term of the options. The dividend yield was based on our history and expectation of dividend payouts. Expected volatility was determined based upon historical stock volatilities; however, implied volatility was also considered. Expected term was determined based upon historical exercise and cancellation experience. Total stock compensation recognized in 2015, 2014 and 2013 was $165, $155 and $107, respectively. Stock option compensation recognized in 2015, 2014 and 2013 was $31, $32 and $24, respectively. Restricted shares compensation recognized in 2015, 2014 and 2013 was $134, $123 and $83, respectively. The total intrinsic value of options exercised was $217, $142 and $115 in 2015, 2014 and 2013, respectively. The total amount of cash received in 2015 by the Company from the exercise of options granted under share-based payment arrangements was $120. As of January 30, 2016, there was $206 of total unrecognized compensation expense remaining related to non-vested share-based compensation arrangements granted under the Company’s equity award plans. This cost is expected to be recognized over a weighted-average period of approximately two years. The total fair value of options that vested was $33, $26 and $20 in 2015, 2014 and 2013, respectively. Shares issued as a result of stock option exercises may be newly issued shares or reissued treasury shares. Proceeds received from the exercise of options, and the related tax benefit, may be utilized to repurchase the Company’s common shares under a stock repurchase program adopted by the Company’s Board of Directors. During 2015, the Company repurchased approximately five million common shares in such a manner. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Jan. 30, 2016 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 13. C OMMITMENTS AND C ONTINGENCIES The Company continuously evaluates contingencies based upon the best available evidence. The Company believes that allowances for loss have been provided to the extent necessary and that its assessment of contingencies is reasonable. To the extent that resolution of contingencies results in amounts that vary from the Company’s estimates, future earnings will be charged or credited. The principal contingencies are described below: Insurance — The Company’s workers’ compensation risks are self-insured in most states. In addition, other workers’ compensation risks and certain levels of insured general liability risks are based on retrospective premium plans, deductible plans, and self-insured retention plans. The liability for workers’ compensation risks is accounted for on a present value basis. Actual claim settlements and expenses incident thereto may differ from the provisions for loss. Property risks have been underwritten by a subsidiary and are all reinsured with unrelated insurance companies. Operating divisions and subsidiaries have paid premiums, and the insurance subsidiary has provided loss allowances, based upon actuarially determined estimates. Litigation — Various claims and lawsuits arising in the normal course of business, including suits charging violations of certain antitrust, wage and hour, or civil rights laws, as well as product liability cases, are pending against the Company. Some of these suits purport or have been determined to be class actions and/or seek substantial damages. Any damages that may be awarded in antitrust cases will be automatically trebled. Although it is not possible at this time to evaluate the merits of all of these claims and lawsuits, nor their likelihood of success, the Company is of the belief that any resulting liability will not have a material effect on the Company’s financial position, results of operations, or cash flows. The Company continually evaluates its exposure to loss contingencies arising from pending or threatened litigation and believes it has made provisions where it is reasonably possible to estimate and when an adverse outcome is probable. Nonetheless, assessing and predicting the outcomes of these matters involves substantial uncertainties. Management currently believes that the aggregate range of loss for the Company’s exposure is not material to the Company. It remains possible that despite management’s current belief, material differences in actual outcomes or changes in management’s evaluation or predictions could arise that could have a material adverse effect on the Company’s financial condition , results of operations, or cash flows. Assignments — The Company is contingently liable for leases that have been assigned to various third parties in connection with facility closings and dispositions. The Company could be required to satisfy the obligations under the leases if any of the assignees is unable to fulfill its lease obligations. Due to the wide distribution of the Company’s assignments among third parties, and various other remedies available, the Company believes the likelihood that it will be required to assume a material amount of these obligations is remote. |
STOCK
STOCK | 12 Months Ended |
Jan. 30, 2016 | |
STOCK | |
STOCK | 14. S TOCK Preferred Shares The Company has authorized five million shares of voting cumulative preferred shares; two million shares were available for issuance at January 30, 2016. The shares have a par value of $100 per share and are issuable in series. Common Shares The Company has authorized two billion common shares, $1 par value per share. On June 25, 2015, the Company’s Board of Directors approved a two-for-one stock split of The Kroger Co.’s common shares in the form of a 100% stock dividend, which was effective July 13, 2015. All share and per share amounts in the Company’s Consolidated Financial Statements and related notes have been retroactively adjusted to reflect the stock split for all periods presented. Common Stock Repurchase Program The Company maintains stock repurchase programs that comply with Rule 10b5-1 of the Securities Exchange Act of 1934 to allow for the orderly repurchase of The Kroger Co. common shares, from time to time. The Company made open market purchases totaling $500, $1,129 and $338 under these repurchase programs in 2015, 2014 and 2013, respectively. In addition to these repurchase programs, in December 1999, the Company began a program to repurchase common shares to reduce dilution resulting from its employee stock option plans. This program is solely funded by proceeds from stock option exercises and the related tax benefit. The Company repurchased approximately $203, $154 and $271 under the stock option program during 2015, 2014 and 2013, respectively. |
COMPANY-SPONSORED BENEFIT PLANS
COMPANY-SPONSORED BENEFIT PLANS | 12 Months Ended |
Jan. 30, 2016 | |
COMPANY-SPONSORED BENEFIT PLANS | |
COMPANY-SPONSORED BENEFIT PLANS | 15. C OMPANY- S PONSORED B ENEFIT P LANS The Company administers non-contributory defined benefit retirement plans for some non-union employees and union-represented employees as determined by the terms and conditions of collective bargaining agreements. These include several qualified pension plans (the “Qualified Plans”) and non-qualified pension plans (the “Non-Qualified Plans”). The Non-Qualified Plans pay benefits to any employee that earns in excess of the maximum allowed for the Qualified Plans by Section 415 of the Internal Revenue Code. The Company only funds obligations under the Qualified Plans. Funding for the Company-sponsored pension plans is based on a review of the specific requirements and on evaluation of the assets and liabilities of each plan. In addition to providing pension benefits, the Company provides certain health care benefits for retired employees. The majority of the Company’s employees may become eligible for these benefits if they reach normal retirement age while employed by the Company. Funding of retiree health care benefits occurs as claims or premiums are paid. The Company recognizes the funded status of its retirement plans on the Consolidated Balance Sheets. Actuarial gains or losses, prior service costs or credits and transition obligations that have not yet been recognized as part of net periodic benefit cost are required to be recorded as a component of AOCI. All plans are measured as of the Company’s fiscal year end. Amounts recognized in AOCI as of January 30, 2016 and January 31, 2015 consists of the following (pre-tax): Pension Benefits Other Benefits Total 2015 2014 2015 2014 2015 2014 Net actuarial loss (gain) $ $ $ ) $ ) $ $ Prior service cost (credit) ) ) ) ) Total $ $ $ ) $ ) $ $ Amounts in AOCI expected to be recognized as components of net periodic pension or postretirement benefit costs in the next fiscal year are as follows (pre-tax): Pension Benefits Other Benefits Total 2016 2016 2016 Net actuarial loss (gain) $ $ ) $ Prior service credit — ) ) Total $ $ ) $ Other changes recognized in other comprehensive income in 2015, 2014 and 2013 were as follows (pre-tax): Pension Benefits Other Benefits Total 2015 2014 2013 2015 2014 2013 2015 2014 2013 Incurred net actuarial loss (gain) $ ) $ $ ) $ ) $ $ ) $ ) $ $ ) Amortization of prior service credit — — — Amortization of net actuarial gain (loss) ) ) ) — ) ) ) Other — — — ) ) ) ) ) ) Total recognized in other comprehensive income (loss) ) ) ) ) ) ) ) Total recognized in net periodic benefit cost and other comprehensive income $ ) $ $ ) $ ) $ ) $ ) $ ) $ $ ) Information with respect to change in benefit obligation, change in plan assets, the funded status of the plans recorded in the Consolidated Balance Sheets, net amounts recognized at the end of fiscal years, weighted average assumptions and components of net periodic benefit cost follow: Pension Benefits Qualified Plans Non-Qualified Plans Other Benefits 2015 2014 2015 2014 2015 2014 Change in benefit obligation: Benefit obligation at beginning of fiscal year $ $ $ $ $ $ Service cost Interest cost Plan participants’ contributions — — — — Actuarial (gain) loss ) ) ) Benefits paid ) ) ) ) ) ) Other ) — — ) ) Assumption of Roundy’s benefit obligation — — — — Benefit obligation at end of fiscal year $ $ $ $ $ $ Change in plan assets: Fair value of plan assets at beginning of fiscal year $ $ $ — $ — $ — $ — Actual return on plan assets ) — — — — Employer contributions — Plan participants’ contributions — — — — Benefits paid ) ) ) ) ) ) Other ) — — — — — Assumption of Roundy’s plan assets — — — — — Fair value of plan assets at end of fiscal year $ $ $ — $ — $ — $ — Funded status at end of fiscal year $ ) $ ) $ ) $ ) $ ) $ ) Net liability recognized at end of fiscal year $ ) $ ) $ ) $ ) $ ) $ ) As of January 30, 2016 and January 31, 2015, other current liabilities include $31 and $29, respectively, of net liability recognized for the above benefit plans. As of January 30, 2016 and January 31, 2015, pension plan assets do not include common shares of The Kroger Co. Pension Benefits Other Benefits Weighted average assumptions 2015 2014 2013 2015 2014 2013 Discount rate — Benefit obligation % % % % % % Discount rate — Net periodic benefit cost % % % % % % Expected long-term rate of return on plan assets % % % Rate of compensation increase — Net periodic benefit cost % % % Rate of compensation increase — Benefit obligation % % % The Company’s discount rate assumptions were intended to reflect the rates at which the pension benefits could be effectively settled. They take into account the timing and amount of benefits that would be available under the plans. The Company’s policy is to match the plan’s cash flows to that of a hypothetical bond portfolio whose cash flow from coupons and maturities match the plan’s projected benefit cash flows. The discount rates are the single rates that produce the same present value of cash flows. The selection of the 4.62% and 4.44% discount rates as of year-end 2015 for pension and other benefits, respectively, represents the hypothetical bond portfolio using bonds with an AA or better rating constructed with the assistance of an outside consultant. A 100 basis point increase in the discount rate would decrease the projected pension benefit obligation as of January 31, 2016, by approximately $438. To determine the expected rate of return on pension plan assets held by the Company for 2015, the Company considered current and forecasted plan asset allocations as well as historical and forecasted rates of return on various asset categories. In 2015 and 2014, the Company decreased the assumed pension plan investment return rate to 7.44% compared to 8.50% in 2013. The Company pension plan’s average rate of return was 6.47% for the 10 calendar years ended December 31, 2015, net of all investment management fees and expenses. The value of all investments in the Qualified Plans during the calendar year ending December 31, 2015 decreased 0.80%, net of investment management fees and expenses. For the past 20 years, the Company’s average annual rate of return has been 7.99%. Based on the above information and forward looking assumptions for investments made in a manner consistent with the Company’s target allocations, the Company believes a 7.44% rate of return assumption is reasonable. The Company calculates its expected return on plan assets by using the market-related value of plan assets. The market-related value of plan assets is determined by adjusting the actual fair value of plan assets for gains or losses on plan assets. Gains or losses represent the difference between actual and expected returns on plan investments for each plan year. Gains or losses on plan assets are recognized evenly over a five year period. Using a different method to calculate the market-related value of plan assets would provide a different expected return on plan assets. On January 31, 2015, the Company adopted new mortality tables based on mortality experience and assumptions for generational mortality improvement in calculating the Company’s 2015 and 2014 Company sponsored benefit plans obligations. The tables assume an improvement in life expectancy and increase our current year benefit obligation and future net periodic benefit cost. The Company used the RP-2000 projected 2021 mortality table in calculating the Company’s 2013 Company sponsored benefit plans obligations and the 2014 and 2013 Company-sponsored net periodic benefit cost. The funded status increased in 2015, compared to 2014, due primarily to an increase in the discount rate and a decrease in plan assets. The following table provides the components of the Company’s net periodic benefit costs for 2015, 2014 and 2013: Pension Benefits Qualified Plans Non-Qualified Plans Other Benefits 2015 2014 2013 2015 2014 2013 2015 2014 2013 Components of net periodic benefit cost: Service cost $ $ $ $ $ $ $ $ $ Interest cost Expected return on plan assets ) ) ) — — — — — — Amortization of: Prior service credit — — — — — — ) ) ) Actuarial (gain) loss ) ) — Net periodic benefit cost $ $ $ $ $ $ $ $ $ The following table provides the projected benefit obligation (“PBO”), accumulated benefit obligation (“ABO”) and the fair value of plan assets for all Company-sponsored pension plans. Qualified Plans Non-Qualified Plans 2015 2014 2015 2014 PBO at end of fiscal year $ $ $ $ ABO at end of fiscal year $ $ $ $ Fair value of plan assets at end of year $ $ $ — $ — The following table provides information about the Company’s estimated future benefit payments. Pension Benefits Other Benefits 2016 $ $ 2017 $ $ 2018 $ $ 2019 $ $ 2020 $ $ 2021 – 2025 $ $ The following table provides information about the weighted average target and actual pension plan asset allocations. Target allocations Actual Allocations 2015 2015 2014 Pension plan asset allocation Global equity securities % % % Emerging market equity securities Investment grade debt securities High yield debt securities Private equity Hedge funds Real estate Other Total % % % Investment objectives, policies and strategies are set by the Pension Investment Committees (the “Committees”) appointed by the CEO. The primary objectives include holding and investing the assets and distributing benefits to participants and beneficiaries of the pension plans. Investment objectives have been established based on a comprehensive review of the capital markets and each underlying plan’s current and projected financial requirements. The time horizon of the investment objectives is long-term in nature and plan assets are managed on a going-concern basis. Investment objectives and guidelines specifically applicable to each manager of assets are established and reviewed annually. Derivative instruments may be used for specified purposes, including rebalancing exposures to certain asset classes. Any use of derivative instruments for a purpose or in a manner not specifically authorized is prohibited, unless approved in advance by the Committees. The current target allocations shown represent the 2015 targets that were established in 2014. The Company will rebalance by liquidating assets whose allocation materially exceeds target, if possible, and investing in assets whose allocation is materially below target. If markets are illiquid, the Company may not be able to rebalance to target quickly. To maintain actual asset allocations consistent with target allocations, assets are reallocated or rebalanced periodically. In addition, cash flow from employer contributions and participant benefit payments can be used to fund underweight asset classes and divest overweight asset classes, as appropriate. The Company expects that cash flow will be sufficient to meet most rebalancing needs. The Company is not required and does not expect to make any contributions to the Qualified Plans in 2016. If the Company does make any contributions in 2016, the Company expects these contributions will decrease its required contributions in future years. Among other things, investment performance of plan assets, the interest rates required to be used to calculate the pension obligations, and future changes in legislation, will determine the amounts of any contributions. The Company expects 2016 expense for Company-sponsored pension plans to be approximately $80. In addition, the Company expects 401(k) retirement savings account plans cash contributions and expense from automatic and matching contributions to participants to be approximately $200 in 2016. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. The Company used a 6.90% initial health care cost trend rate, which is assumed to decrease on a linear basis to a 4.50% ultimate health care cost trend rate in 2028, to determine its expense. A one-percentage-point change in the assumed health care cost trend rates would have the following effects: 1% Point Increase 1% Point Decrease Effect on total of service and interest cost components $ $ ) Effect on postretirement benefit obligation $ $ ) The following tables set forth by level, within the fair value hierarchy, the Qualified Plans’ assets at fair value as of January 30, 2016 and January 31, 2015: Assets at Fair Value as of January 30, 2016 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Cash and cash equivalents $ $ — $ — $ Corporate Stocks — — Corporate Bonds — — U.S. Government Securities — — Mutual Funds/Collective Trusts Partnerships/Joint Ventures — — Hedge Funds — — Private Equity — — Real Estate — — Other — — Total $ $ $ $ Assets at Fair Value as of January 31, 2015 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Cash and cash equivalents $ $ — $ — $ Corporate Stocks — — Corporate Bonds — — U.S. Government Securities — — Mutual Funds/Collective Trusts Partnerships/Joint Ventures — — Hedge Funds — — Private Equity — — Real Estate — — Other — — Total $ $ $ $ For measurements using significant unobservable inputs (Level 3) during 2015 and 2014, a reconciliation of the beginning and ending balances is as follows: Hedge Funds Private Equity Real Estate Collective Trusts Ending balance, February 1, 2014 $ $ $ $ Contributions into Fund — Realized gains Unrealized gains (losses) ) — Distributions ) ) ) — Reclass(1) ) — — Other ) ) ) — Ending balance, January 31, 2015 Contributions into Fund — Realized gains — Unrealized (losses) gains ) ) — Distributions ) ) ) — Other ) ) — Ending balance, January 30, 2016 $ $ $ $ (1) In 2014, the Company reclassified $58 of Level 3 assets from Private Equity to Hedge Funds. See Note 8 for a discussion of the levels of the fair value hierarchy. The assets’ fair value measurement level above is based on the lowest level of any input that is significant to the fair value measurement. The following is a description of the valuation methods used for the Qualified Plans’ assets measured at fair value in the above tables: · Cash and cash equivalents: The carrying value approximates fair value. · Corporate Stocks: The fair values of these securities are based on observable market quotations for identical assets and are valued at the closing price reported on the active market on which the individual securities are traded. · Corporate Bonds: The fair values of these securities are primarily based on observable market quotations for similar bonds, valued at the closing price reported on the active market on which the individual securities are traded. When such quoted prices are not available, the bonds are valued using a discounted cash flow approach using current yields on similar instruments of issuers with similar credit ratings, including adjustments for certain risks that may not be observable, such as credit and liquidity risks. · U.S. Government Securities: Certain U.S. Government securities are valued at the closing price reported in the active market in which the security is traded. Other U.S. government securities are valued based on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for similar securities, the security is valued under a discounted cash flow approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable, such as credit and liquidity risks. · Mutual Funds/Collective Trusts: The mutual funds/collective trust funds are public investment vehicles valued using a Net Asset Value (NAV) provided by the manager of each fund. The NAV is based on the underlying net assets owned by the fund, divided by the number of shares outstanding. The NAV’s unit price is quoted on a private market that is not active. However, t he NAV is based on the fair value of the underlying securities within the fund, which are traded on an active market, and valued at the closing price reported on the active market on which those individual securities are traded. · Partnerships/Joint Ventures: These funds consist primarily of U.S. government securities, Corporate Bonds, Corporate Stocks, and derivatives, which are valued in a manner consistent with these types of investments, noted above. · Hedge Funds: Hedge funds are private investment vehicles valued using a Net Asset Value (NAV) provided by the manager of each fund. The NAV is based on the underlying net assets owned by the fund, divided by the number of shares outstanding. The NAV’s unit price is quoted on a private market that is not active. T he NAV is based on the fair value of the underlying securities within the funds, which may be traded on an active market, and valued at the closing price reported on the active market on which those individual securities are traded. For investments not traded on an active market, or for which a quoted price is not publicly available, a variety of unobservable valuation methodologies, including discounted cash flow, market multiple and cost valuation approaches, are employed by the fund manager to value investments. Fair values of all investments are adjusted annually, if necessary, based on audits of the Hedge Fund financial statements; such adjustments are reflected in the fair value of the plan’s assets. · Private Equity: Private Equity investments are valued based on the fair value of the underlying securities within the fund, which include investments both traded on an active market and not traded on an active market. For those investments that are traded on an active market, the values are based on the closing price reported on the active market on which those individual securities are traded. For investments not traded on an active market, or for which a quoted price is not publicly available, a variety of unobservable valuation methodologies, including discounted cash flow, market multiple and cost valuation approaches, are employed by the fund manager to value investments. Fair values of all investments are adjusted annually, if necessary, based on audits of the private equity fund financial statements; such adjustments are reflected in the fair value of the plan’s assets. · Real Estate: Real estate investments include investments in real estate funds managed by a fund manager. These investments are valued using a variety of unobservable valuation methodologies, including discounted cash flow, market multiple and cost valuation approaches. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement. The Company contributed and expensed $196, $177 and $148 to employee 401(k) retirement savings accounts in 2015, 2014 and 2013, respectively. The 401(k) retirement savings account plans provide to eligible employees both matching contributions and automatic contributions from the Company based on participant contributions, compensation as defined by the plan, and length of service. The Company also administers other defined contribution plans for eligible employees. The cost of these plans was $5 for 2015, 2014 and 2013. |
MULTI-EMPLOYER PENSION PLANS
MULTI-EMPLOYER PENSION PLANS | 12 Months Ended |
Jan. 30, 2016 | |
MULTI-EMPLOYER PENSION PLANS | |
MULTI-EMPLOYER PENSION PLANS | 16. MULTI-EMPLOYER PENSION PLANS The Company contributes to various multi-employer pension plans, including the UFCW Consolidated Pension Plan, based on obligations arising from collective bargaining agreements. The Company is designated as the named fiduciary of the UFCW Consolidated Pension Plan and has sole investment authority over these assets. These plans provide retirement benefits to participants based on their service to contributing employers. The benefits are paid from assets held in trust for that purpose. Trustees are appointed in equal number by employers and unions. The trustees typically are responsible for determining the level of benefits to be provided to participants as well as for such matters as the investment of the assets and the administration of the plans. In 2015, the Company contributed $190 to the UFCW Consolidated Pension Plan. The Company had previously accrued $60 of the total contributions at January 31, 2015 and recorded expense for the remaining $130 at the time of payment in 2015. In 2014, the Company incurred a charge of $56 (after-tax) related to commitments and withdrawal liabilities associated with the restructuring of pension plan agreements, of which $15 was contributed to the UFCW Consolidated Pension Plan in 2014. Refer to Note 19 for additional details on the effect of certain contributions on quarterly results for 2015 and 2014. The Company recognizes expense in connection with its multi-employer pension plans as contributions are funded, or when commitments are made. The Company made contributions to multi-employer funds of $426 in 2015, $297 in 2014 and $228 in 2013. The risks of participating in multi-employer pension plans are different from the risks of participating in single-employer pension plans in the following respects: a. Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers. b. If a participating employer stops contributing to the plan, the unfunded obligations of the plan allocable to such withdrawing employer may be borne by the remaining participating employers. c. If the Company stops participating in some of its multi-employer pension plans, the Company may be required to pay those plans an amount based on its allocable share of the unfunded vested benefits of the plan, referred to as a withdrawal liability. The Company’s participation in multi-employer plans is outlined in the following tables. The EIN / Pension Plan Number column provides the Employer Identification Number (“EIN”) and the three-digit pension plan number. The most recent Pension Protection Act Zone Status available in 2015 and 2014 is for the plan’s year-end at December 31, 2014 and December 31, 2013, respectively. Among other factors, generally, plans in the red zone are less than 65 percent funded, plans in the yellow zone are less than 80 percent funded and plans in the green zone are at least 80 percent funded. The FIP/RP Status Pending / Implemented Column indicates plans for which a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented. Unless otherwise noted, the information for these tables was obtained from the Forms 5500 filed for each plan’s year-end at December 31, 2014 and December 31, 2013. The multi-employer contributions listed in the table below are the Company’s multi-employer contributions made in fiscal years 2015, 2014 and 2013. The following table contains information about the Company’s multi-employer pension plans: FIP/RP Pension Protection Status EIN / Pension Act Zone Status Pending/ Multi-Employer Contributions Surcharge Pension Fund Plan Number 2015 2014 Implemented 2015 2014 2013 Imposed(6) SO CA UFCW Unions & Food Employers Joint Pension Trust Fund(1) (2) 95-1939092 - 001 Red Red Implemented $ $ $ No Desert States Employers & UFCW Unions Pension Plan(1) 84-6277982 - 001 Green Green No No Sound Retirement Trust (formerly Retail Clerks Pension Plan)(1) (3) 91-6069306 – 001 Red Red Implemented No Rocky Mountain UFCW Unions and Employers Pension Plan(1) 84-6045986 - 001 Green Green No No Oregon Retail Employees Pension Plan(1) 93-6074377 - 001 Green Red No No Bakery and Confectionary Union & Industry International Pension Fund(1) 52-6118572 - 001 Red Red Implemented No Washington Meat Industry Pension Trust(1) (4) (5) 91-6134141 - 001 Red Red Implemented — No Retail Food Employers & UFCW Local 711 Pension(1) 51-6031512 - 001 Red Red Implemented No Denver Area Meat Cutters and Employers Pension Plan(1) 84-6097461 - 001 Green Green No No United Food & Commercial Workers Intl Union — Industry Pension Fund(1) (4) 51-6055922 - 001 Green Green No No Western Conference of Teamsters Pension Plan 91-6145047 - 001 Green Green No No Central States, Southeast & Southwest Areas Pension Plan 36-6044243 - 001 Red Red Implemented No UFCW Consolidated Pension Plan(1) 58-6101602 – 001 Green Green No — No Other Total Contributions $ $ $ (1) The Company’s multi-employer contributions to these respective funds represent more than 5% of the total contributions received by the pension funds. (2) The information for this fund was obtained from the Form 5500 filed for the plan’s year-end at March 31, 2015 and March 31, 2014. (3) The information for this fund was obtained from the Form 5500 filed for the plan’s year-end at September 30, 2014 and September 30, 2013. (4) The information for this fund was obtained from the Form 5500 filed for the plan’s year-end at June 30, 2014 and June 30, 2013. (5) As of June 30, 2014, this pension fund was merged into the Sound Retirement Trust. After the completion of the merger, on July 1, 2014, certain assets and liabilities related to the Washington Meat Industry Pension Trust were transferred from the Sound Retirement Trust to the UFCW Consolidated Pension Plan. See the above information regarding the restructuring of certain pension plan agreements. (6) Under the Pension Protection Act, a surcharge may be imposed when employers make contributions under a collective bargaining agreement that is not in compliance with a rehabilitation plan. As of January 30, 2016, the collective bargaining agreements under which the Company was making contributions were in compliance with rehabilitation plans adopted by the applicable pension fund. The following table describes (a) the expiration date of the Company’s collective bargaining agreements and (b) the expiration date of the Company’s most significant collective bargaining agreements for each of the material multi-employer funds in which the Company participates. Expiration Date Most Significant Collective of Collective Bargaining Agreements(1) Bargaining (not in millions) Pension Fund Agreements Count Expiration SO CA UFCW Unions & Food Employers Joint Pension Trust Fund March 2016 to June 2017 2 March 2016 to June 2017 UFCW Consolidated Pension Plan March 2016 to August 2020 8 April 2016 to August 2020 Desert States Employers & UFCW Unions Pension Plan October 2016 to June 2018 1 October 2016 Sound Retirement Trust (formerly Retail Clerks Pension Plan) April 2016 to January 2018 2 May 2016 to August 2016 Rocky Mountain UFCW Unions and Employers Pension Plan January 2019 to February 2019 1 January 2019 Oregon Retail Employees Pension Plan August 2015(2) to April 2017 3 August 2015(2) to June 2016 Bakery and Confectionary Union & Industry International Pension Fund June 2016 to July 2018 4 August 2016 to July 2018 Retail Food Employers & UFCW Local 711 Pension April 2017 to November 2019 1 March 2019 Denver Area Meat Cutters and Employers Pension Plan January 2019 to February 2019 1 January 2019 United Food & Commercial Workers Intl Union — Industry Pension Fund March 2014(2) to April 2019 2 March 2017 to April 2019 Western Conference of Teamsters Pension Plan April 2017 to September 2020 5 July 2017 to September 2020 Central States, Southeast & Southwest Areas Pension Plan September 2017 to November 2018 3 September 2017 to November 2018 (1) This column represents the number of significant collective bargaining agreements and their expiration date for each of the Company’s pension funds listed above. For purposes of this table, the “significant collective bargaining agreements” are the largest based on covered employees that, when aggregated, cover the majority of the employees for which we make multi-employer contributions for the referenced pension fund. (2) Certain collective bargaining agreements for each of these pension funds are operating under an extension. Based on the most recent information available to it, the Company believes the present value of actuarial accrued liabilities in most of these multi-employer plans substantially exceeds the value of the assets held in trust to pay benefits. Moreover, if the Company were to exit certain markets or otherwise cease making contributions to these funds, the Company could trigger a substantial withdrawal liability. Any adjustment for withdrawal liability will be recorded when it is probable that a liability exists and can be reasonably estimated. The Company also contributes to various other multi-employer benefit plans that provide health and welfare benefits to active and retired participants. Total contributions made by the Company to these other multi-employer health and welfare plans were approximately $1,192 in 2015, $1,200 in 2014 and $1,100 in 2013 . |
RECENTLY ADOPTED ACCOUNTING STA
RECENTLY ADOPTED ACCOUNTING STANDARDS | 12 Months Ended |
Jan. 30, 2016 | |
RECENTLY ADOPTED ACCOUNTING STANDARDS | |
RECENTLY ADOPTED ACCOUNTING STANDARDS | 17. R ECENTLY A DOPTED A CCOUNTING S TANDARDS In 2015, the Financial Accounting Standards Board (“FASB”) amended Accounting Standards Codification 835, “Interest-Imputation of Interest.” The amendment simplifies the presentation of debt issuance costs related to a recognized debt liability by requiring it be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This amendment became effective for the Company beginning February 1, 2015, and was adopted retrospectively in accordance with the standard. The adoption of this amendment resulted in amounts previously reported in other assets to now be reported within long-term debt including obligations under capital leases and financing obligations in the Consolidated Balance Sheets. These amounts were not material to the prior year. The adoption of this amendment did not have an effect on the Company’s Consolidated Statements of Operations. |
RECENTLY ISSUED ACCOUNTING STAN
RECENTLY ISSUED ACCOUNTING STANDARDS | 12 Months Ended |
Jan. 30, 2016 | |
RECENTLY ISSUED ACCOUNTING STANDARDS | |
RECENTLY ISSUED ACCOUNTING STANDARDS | 18. R ECENTLY I SSUED A CCOUNTING S TANDARDS In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “ Revenue from Contracts with Customers,” which provides guidance for revenue recognition. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Per ASU 2015-14, “Deferral of Effective Date,” this guidance will be effective for the Company in the first quarter of its fiscal year ending February 2, 2019. Early adoption is permitted as of the first quarter of the Company’s fiscal year ending February 3, 2018. The Company is currently in the process of evaluating the effect of adoption of this ASU on the Company’s Consolidated Financial Statements. In April 2015, the FASB issued ASU 2015-04, “Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets.” This amendment permits an entity to measure defined benefit plan assets and obligations using the month end that is closest to the entity’s fiscal year end for all plans. This guidance will be effective for the Company in the fiscal year ending January 28, 2017. The implementation of this amendment will not have an effect on the Company’s Consolidated Statements of Operations, and will not have a significant effect on the Company’s Consolidated Balance Sheets . In April 2015, the FASB issued ASU 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).” This amendment removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share. This guidance will be effective for the Company in the fiscal year ending January 28, 2017. The implementation of this amendment will have an effect on the Company’s Notes to the Consolidated Financial Statements and will not have an effect on the Company’s Consolidated Statements of Operations or Consolidated Balance Sheets. In September 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.” This amendment eliminates the requirement to retrospectively account for adjustments made to provisional amounts recognized in a business combination. This guidance will be effective for the Company in its fiscal year ending January 28, 2017. The implementation of this amendment is not expected to have a significant effect on the Company’s Consolidated Financial Statements. In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.” This amendment requires deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This guidance will be effective for the fiscal year ending January 28, 2017. Early adoption is permitted. The implementation of this amendment will not have an effect on the Company’s Consolidated Statements of Operations and will not have a significant effect on the Company’s Consolidated Balance Sheets. In February 2016, the FASB issued ASU 2016-02, “Leases”, which provides guidance for the recognition of lease agreements. The standard’s core principle is that a company will now recognize most leases on its balance sheet as lease liabilities with corresponding right-of-use assets. This guidance will be effective in the first quarter of fiscal year ending February 1, 2020. Early adoption is permitted currently. The adoption of this ASU will result in a significant increase to the Company’s balance sheet for lease liabilities and right-of-use assets, and the Company is currently evaluating the other effects of adoption of this ASU on its Consolidated Financial Statements. |
QUARTERLY DATA (UNAUDITED)
QUARTERLY DATA (UNAUDITED) | 12 Months Ended |
Jan. 30, 2016 | |
QUARTERLY DATA (UNAUDITED) | |
QUARTERLY DATA (UNAUDITED) | 19. Q UARTERLY D ATA (U NAUDITED ) The two tables that follow reflect the unaudited results of operations for 2015 and 2014. Quarter 2015 First (16 Weeks) Second (12 Weeks) Third (12 Weeks) Fourth (12 Weeks) Total Year (52 Weeks) Sales $ $ $ $ $ Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below Operating, general and administrative Rent Depreciation and amortization Operating profit Interest expense Earnings before income tax expense Income tax expense Net earnings including noncontrolling interests Net earnings (loss) attributable to noncontrolling interests — ) Net earnings attributable to The Kroger Co. $ $ $ $ $ Net earnings attributable to The Kroger Co. per basic common share $ $ $ $ $ Average number of shares used in basic calculation Net earnings attributable to The Kroger Co. per diluted common share $ $ $ $ $ Average number of shares used in diluted calculation Dividends declared per common share $ $ $ $ $ Annual amounts may not sum due to rounding. In the third quarter of 2015, the Company incurred a $80 charge to OG&A expenses for contributions to the UFCW Consolidated Pension Plan. In the fourth quarter of 2015, the Company incurred a $30 charge to OG&A expenses for contributions to the UFCW Consolidated Pension Plan. Quarter 2014 First (16 Weeks) Second (12 Weeks) Third (12 Weeks) Fourth (12 Weeks) Total Year (52 Weeks) Sales $ $ $ $ $ Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below Operating, general and administrative Rent Depreciation and amortization Operating profit Interest expense Earnings before income tax expense Income tax expense Net earnings including noncontrolling interests Net earnings attributable to noncontrolling interests Net earnings attributable to The Kroger Co. $ $ $ $ $ Net earnings attributable to The Kroger Co. per basic common share $ $ $ $ $ Average number of shares used in basic calculation Net earnings attributable to The Kroger Co. per diluted common share $ $ $ $ $ Average number of shares used in diluted calculation Dividends declared per common share $ $ $ $ $ Annual amounts may not sum due to rounding. In the first quarter of 2014, the Company incurred a $87 charge to OG&A expenses due to commitments and withdrawal liabilities arising from restructuring of certain pension plan agreements to help stabilize associates’ future benefits. In the third quarter of 2014, the Company incurred a $25 charge to OG&A expenses due to contributions to the Company’s charitable foundation and a $17 benefit to income tax expense due to certain tax items. In the fourth quarter of 2014, the Company incurred a $60 charge to OG&A expenses due to contributions to the Company’s charitable foundation and a $55 charge to OG&A expenses for contributions to the UFCW Consolidated Pension Plan. |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 12 Months Ended |
Jan. 30, 2016 | |
SUBSEQUENT EVENT. | |
SUBSEQUENT EVENT | 20. S UBSEQUENT E VENT In anticipation of future debt refinancing in fiscal years 2017 and 2018, the Company, in the first quarter of 2016, entered into additional forward-starting interest rate swap agreements with an aggregate notional amount totaling $1,300. After entering into these additional forward-starting interest rate swaps, the Company has a total of $1,700 notional amount of forward-starting interest rate swaps outstanding. The forward-starting interest rate swaps entered into in the first quarter of 2016 were designated as cash-flow hedges as defined by GAAP. |
ACCOUNTING POLICIES (Policies)
ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Jan. 30, 2016 | |
ACCOUNTING POLICIES | |
Description of Business, Basis of Presentation and Principles of Consolidation | Description of Business, Basis of Presentation and Principles of Consolidation The Kroger Co. (the “Company”) was founded in 1883 and incorporated in 1902. As of January 30, 2016, the Company was one of the largest retailers in the nation based on annual sales. The Company also manufactures and processes food for sale by its supermarkets. The accompanying financial statements include the consolidated accounts of the Company, its wholly-owned subsidiaries and the variable interest entities in which the Company is the primary beneficiary. Significant intercompany transactions and balances have been eliminated. On June 25, 2015, the Company’s Board of Directors approved a two-for-one stock split of The Kroger Co.’s common shares in the form of a 100% stock dividend, which was effective July 13, 2015. All share and per share amounts in the Company’s Consolidated Financial Statements and related notes have been retroactively adjusted to reflect the stock split for all periods presented. Refer to Note 17 for an additional change to the Consolidated Balance Sheets for a recently adopted accounting standard regarding the presentation of debt issuance costs. |
Fiscal Year | Fiscal Year The Company’s fiscal year ends on the Saturday nearest January 31. The last three fiscal years consist of the 52-week periods ended January 30, 2016, January 31, 2015 and February 1, 2014. |
Pervasiveness of Estimates | Pervasiveness of Estimates The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of consolidated revenues and expenses during the reporting period is also required. Actual results could differ from those estimates. |
Cash, Temporary Cash Investments and Book Overdrafts | Cash, Temporary Cash Investments and Book Overdrafts Cash and temporary cash investments represent store cash and short-term investments with original maturities of less than three months. Book overdrafts are included in “Trade accounts payable” and “Accrued salaries and wages” in the Consolidated Balance Sheets. |
Deposits In-Transit | Deposits In-Transit Deposits in-transit generally represent funds deposited to the Company’s bank accounts at the end of the year related to sales, a majority of which were paid for with debit cards, credit cards and checks, to which the Company does not have immediate access but settle within a few days of the sales transaction. |
Inventories | Inventories Inventories are stated at the lower of cost (principally on a last-in, first-out “LIFO” basis) or market. In total, approximately 95% of inventories in 2015 and 2014 were valued using the LIFO method. Cost for the balance of the inventories, including substantially all fuel inventories, was determined using the first-in, first-out (“FIFO”) method. Replacement cost was higher than the carrying amount by $1,272 at January 30, 2016 and $1,245 at January 31, 2015. The Company follows the Link-Chain, Dollar-Value LIFO method for purposes of calculating its LIFO charge or credit. The item-cost method of accounting to determine inventory cost before the LIFO adjustment is followed for substantially all store inventories at the Company’s supermarket divisions. This method involves counting each item in inventory, assigning costs to each of these items based on the actual purchase costs (net of vendor allowances and cash discounts) of each item and recording the cost of items sold. The item-cost method of accounting allows for more accurate reporting of periodic inventory balances and enables management to more precisely manage inventory. In addition, substantially all of the Company’s inventory consists of finished goods and is recorded at actual purchase costs (net of vendor allowances and cash discounts). The Company evaluates inventory shortages throughout the year based on actual physical counts in its facilities. Allowances for inventory shortages are recorded based on the results of these counts to provide for estimated shortages as of the financial statement date. |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment are recorded at cost or, in the case of assets acquired in a business combination, at fair value. Depreciation and amortization expense, which includes the depreciation of assets recorded under capital leases, is computed principally using the straight-line method over the estimated useful lives of individual assets. Buildings and land improvements are depreciated based on lives varying from 10 to 40 years. All new purchases of store equipment are assigned lives varying from three to nine years. Leasehold improvements are amortized over the shorter of the lease term to which they relate, which generally varies from four to 25 years, or the useful life of the asset. Food production plant and distribution center equipment is depreciated over lives varying from three to 15 years. Information technology assets are generally depreciated over five years. Depreciation and amortization expense was $2,089 in 2015, $1,948 in 2014 and $1,703 in 2013. Interest costs on significant projects constructed for the Company’s own use are capitalized as part of the costs of the newly constructed facilities. Upon retirement or disposal of assets, the cost and related accumulated depreciation and amortization are removed from the balance sheet and any gain or loss is reflected in net earnings. Refer to Note 4 for further information regarding the Company’s property, plant and equipment. |
Deferred Rent | Deferred Rent The Company recognizes rent holidays, including the time period during which the Company has access to the property for construction of buildings or improvements and escalating rent provisions on a straight-line basis over the term of the lease. The deferred amount is included in “Other current liabilities” and “Other long-term liabilities” on the Company’s Consolidated Balance Sheets. |
Goodwill | Goodwill The Company reviews goodwill for impairment during the fourth quarter of each year, and also upon the occurrence of a triggering event. The Company performs reviews of each of its operating divisions and variable interest entities (collectively, “reporting units”) that have goodwill balances. Generally, fair value is determined using a multiple of earnings, or discounted projected future cash flows, and is compared to the carrying value of a reporting unit for purposes of identifying potential impairment. Projected future cash flows are based on management’s knowledge of the current operating environment and expectations for the future. If potential for impairment is identified, the fair value of a reporting unit is measured against the fair value of its underlying assets and liabilities, excluding goodwill, to estimate an implied fair value of the reporting unit’s goodwill. Goodwill impairment is recognized for any excess of the carrying value of the reporting unit’s goodwill over the implied fair value. Results of the goodwill impairment reviews performed during 2015, 2014 and 2013 are summarized in Note 3. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The Company monitors the carrying value of long-lived assets for potential impairment each quarter based on whether certain triggering events have occurred. These events include current period losses combined with a history of losses or a projection of continuing losses or a significant decrease in the market value of an asset. When a triggering event occurs, an impairment calculation is performed, comparing projected undiscounted future cash flows, utilizing current cash flow information and expected growth rates related to specific stores, to the carrying value for those stores. If the Company identifies impairment for long-lived assets to be held and used, the Company compares the assets’ current carrying value to the assets’ fair value. Fair value is based on current market values or discounted future cash flows. The Company records impairment when the carrying value exceeds fair market value. With respect to owned property and equipment held for disposal, the value of the property and equipment is adjusted to reflect recoverable values based on previous efforts to dispose of similar assets and current economic conditions. Impairment is recognized for the excess of the carrying value over the estimated fair market value, reduced by estimated direct costs of disposal. The Company recorded asset impairments in the normal course of business totaling $46, $37 and $39 in 2015, 2014 and 2013, respectively. Costs to reduce the carrying value of long-lived assets for each of the years presented have been included in the Consolidated Statements of Operations as “Operating, general and administrative” expense. |
Store Closing Costs | Store Closing Costs The Company provides for closed store liabilities relating to the present value of the estimated remaining non-cancellable lease payments after the closing date, net of estimated subtenant income. The Company estimates the net lease liabilities using a discount rate to calculate the present value of the remaining net rent payments on closed stores. The closed store lease liabilities usually are paid over the lease terms associated with the closed stores, which generally have remaining terms ranging from one to 20 years. Adjustments to closed store liabilities primarily relate to changes in subtenant income and actual exit costs differing from original estimates. Adjustments are made for changes in estimates in the period in which the change becomes known. Store closing liabilities are reviewed quarterly to ensure that any accrued amount that is not a sufficient estimate of future costs is adjusted to income in the proper period. Owned stores held for disposal are reduced to their estimated net realizable value. Costs to reduce the carrying values of property, equipment and leasehold improvements are accounted for in accordance with the Company’s policy on impairment of long-lived assets. Inventory write-downs, if any, in connection with store closings, are classified in the Consolidated Statements of Operations as “Merchandise costs.” Costs to transfer inventory and equipment from closed stores are expensed as incurred. The current portion of the future lease obligations of stores is included in “Other current liabilities,” and the long-term portion is included in “Other long-term liabilities” in the Consolidated Balance Sheets. |
Interest Rate Risk Management | Interest Rate Risk Management The Company uses derivative instruments primarily to manage its exposure to changes in interest rates. The Company’s current program relative to interest rate protection and the methods by which the Company accounts for its derivative instruments are described in Note 7. |
Commodity Price Protection | Commodity Price Protection The Company enters into purchase commitments for various resources, including raw materials utilized in its food production plants and energy to be used in its stores, food production plants and administrative offices. The Company enters into commitments expecting to take delivery of and to utilize those resources in the conduct of the normal course of business. The Company’s current program relative to commodity price protection and the methods by which the Company accounts for its purchase commitments are described in Note 7. |
Benefit Plans and Multi-Employer Pension Plans | Benefit Plans and Multi-Employer Pension Plans The Company recognizes the funded status of its retirement plans on the Consolidated Balance Sheets. Actuarial gains or losses, prior service costs or credits and transition obligations that have not yet been recognized as part of net periodic benefit cost are required to be recorded as a component of Accumulated Other Comprehensive Income (“AOCI”). All plans are measured as of the Company’s fiscal year end. The determination of the obligation and expense for Company-sponsored pension plans and other post-retirement benefits is dependent on the selection of assumptions used by actuaries and the Company in calculating those amounts. Those assumptions are described in Note 15 and include, among others, the discount rate, the expected long-term rate of return on plan assets, mortality and the rates of increase in compensation and health care costs. Actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect the recognized expense and recorded obligation in future periods. While the Company believes that the assumptions are appropriate, significant differences in actual experience or significant changes in assumptions may materially affect the pension and other post-retirement obligations and future expense. The Company also participates in various multi-employer plans for substantially all union employees. Pension expense for these plans is recognized as contributions are funded. Refer to Note 16 for additional information regarding the Company’s participation in these various multi-employer plans. The Company administers and makes contributions to the employee 401(k) retirement savings accounts. Contributions to the employee 401(k) retirement savings accounts are expensed when contributed. Refer to Note 15 for additional information regarding the Company’s benefit plans. |
Share Based Compensation | Share Based Compensation The Company accounts for stock options under fair value recognition provisions . Under this method, the Company recognizes compensation expense for all share-based payments granted. The Company recognizes share-based compensation expense, net of an estimated forfeiture rate, over the requisite service period of the award. In addition, the Company records expense for restricted stock awards in an amount equal to the fair market value of the underlying stock on the grant date of the award, over the period the awards lapse. Refer to Note 12 for additional information regarding the Company’s stock based compensation. |
Deferred Income Taxes | Deferred Income Taxes Deferred income taxes are recorded to reflect the tax consequences of differences between the tax basis of assets and liabilities and their financial reporting basis. Refer to Note 5 for the types of differences that give rise to significant portions of deferred income tax assets and liabilities. Deferred income taxes are classified as a net current or noncurrent asset or liability based on the classification of the related asset or liability for financial reporting purposes. A deferred tax asset or liability that is not related to an asset or liability for financial reporting is classified according to the expected reversal date. |
Uncertain Tax Positions | Uncertain Tax Positions The Company reviews the tax positions taken or expected to be taken on tax returns to determine whether and to what extent a benefit can be recognized in its consolidated financial statements. Refer to Note 5 for the amount of unrecognized tax benefits and other related disclosures related to uncertain tax positions. Various taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. As of January 30, 2016, the Internal Revenue Service had concluded its examination of the Company’s 2010 and 2011 federal tax returns. Tax years 2012 and 2013 remain under examination. The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions. |
Self-Insurance Costs | Self-Insurance Costs The Company is primarily self-insured for costs related to workers’ compensation and general liability claims. Liabilities are actuarially determined and are recognized based on claims filed and an estimate of claims incurred but not reported. The liabilities for workers’ compensation claims are accounted for on a present value basis. The Company has purchased stop-loss coverage to limit its exposure to any significant exposure on a per claim basis. The Company is insured for covered costs in excess of these per claim limits. The following table summarizes the changes in the Company’s self-insurance liability through January 30, 2016. 2015 2014 2013 Beginning balance $ $ $ Expense Claim payments ) ) ) Assumed from Roundy’s or Harris Teeter Ending balance Less: Current portion ) ) ) Long-term portion $ $ $ The current portion of the self-insured liability is included in “Other current liabilities,” and the long-term portion is included in “Other long-term liabilities” in the Consolidated Balance Sheets. The Company maintains surety bonds related to self-insured workers’ compensation claims. These bonds are required by most states in which the Company is self-insured for workers’ compensation and are placed with third-party insurance providers to insure payment of the Company’s obligations in the event the Company is unable to meet its claim payment obligations up to its self-insured retention levels. These bonds do not represent liabilities of the Company, as the Company has recorded reserves for the claim costs. The Company is similarly self-insured for property-related losses. The Company maintains stop loss coverage to limit its property loss exposures including coverage for earthquake, wind, flood and other catastrophic events. |
Revenue Recognition | Revenue Recognition Revenues from the sale of products are recognized at the point of sale. Discounts provided to customers by the Company at the time of sale, including those provided in connection with loyalty cards, are recognized as a reduction in sales as the products are sold. Discounts provided by vendors, usually in the form of paper coupons, are not recognized as a reduction in sales provided the coupons are redeemable at any retailer that accepts coupons. The Company records a receivable from the vendor for the difference in sales price and cash received. Pharmacy sales are recorded when product is provided to the customer. Sales taxes are recorded as other accrued liabilities and not as a component of sales. The Company does not recognize a sale when it sells its own gift cards and gift certificates. Rather, it records a deferred liability equal to the amount received. A sale is then recognized when the gift card or gift certificate is redeemed to purchase the Company’s products. Gift card and certificate breakage is recognized when redemption is deemed remote and there is no legal obligation to remit the value of the unredeemed gift card. The amount of breakage has not been material for 2015, 2014 and 2013. |
Merchandise Costs | Merchandise Costs The “Merchandise costs” line item of the Consolidated Statements of Operations includes product costs, net of discounts and allowances; advertising costs (see separate discussion below); inbound freight charges; warehousing costs, including receiving and inspection costs; transportation costs; and food production and operational costs. Warehousing, transportation and manufacturing management salaries are also included in the “Merchandise costs” line item; however, purchasing management salaries and administration costs are included in the “Operating, general and administrative” line item along with most of the Company’s other managerial and administrative costs. Rent expense and depreciation and amortization expense are shown separately in the Consolidated Statements of Operations. Warehousing and transportation costs include distribution center direct wages, transportation direct wages, repairs and maintenance, utilities, inbound freight and, where applicable, third party warehouse management fees. These costs are recognized in the periods the related expenses are incurred. The Company believes the classification of costs included in merchandise costs could vary widely throughout the industry. The Company’s approach is to include in the “Merchandise costs” line item the direct, net costs of acquiring products and making them available to customers in its stores. The Company believes this approach most accurately presents the actual costs of products sold. The Company recognizes all vendor allowances as a reduction in merchandise costs when the related product is sold. When possible, vendor allowances are applied to the related product cost by item and, therefore, reduce the carrying value of inventory by item. When the items are sold, the vendor allowance is recognized. When it is not possible, due to systems constraints, to allocate vendor allowances to the product by item, vendor allowances are recognized as a reduction in merchandise costs based on inventory turns and, therefore, recognized as the product is sold. |
Advertising Costs | Advertising Costs The Company’s advertising costs are recognized in the periods the related expenses are incurred and are included in the “Merchandise costs” line item of the Consolidated Statements of Operations. The Company’s pre-tax advertising costs totaled $679 in 2015, $648 in 2014 and $587 in 2013. The Company does not record vendor allowances for co-operative advertising as a reduction of advertising expense. |
Consolidated Statements of Cash Flows | Consolidated Statements of Cash Flows For purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be temporary cash investments. |
Segments | Segments The Company operates retail food and drug stores, multi-department stores, jewelry stores, and convenience stores throughout the United States. The Company’s retail operations, which represent over 99% of the Company’s consolidated sales and EBITDA, are its only reportable segment. The Company’s retail operating divisions have been aggregated into one reportable segment due to the operating divisions having similar economic characteristics with similar long-term financial performance. In addition, the Company’s operating divisions offer to its customers similar products, have similar distribution methods, operate in similar regulatory environments, purchase the majority of the Company’s merchandise for retail sale from similar (and in many cases identical) vendors on a coordinated basis from a centralized location, serve similar types of customers, and are allocated capital from a centralized location. The Company’s operating divisions reflect the manner in which the business is managed and how the Company’s Chief Executive Officer, who acts as the Company’s chief operating decision maker, assess performance internally. All of the Company’s operations are domestic. The following table presents sales revenue by type of product for 2015, 2014 and 2013. 2015 2014 2013 Amount % of total Amount % of total Amount % of total Non Perishable(1) $ % $ % $ % Perishable(2) % % % Fuel % % % Pharmacy % % % Other(3) % % % Total Sales and other revenue $ % $ % $ % (1) Consists primarily of grocery, general merchandise, health and beauty care and natural foods. (2) Consists primarily of produce, floral, meat, seafood, deli, bakery and fresh prepared. (3) Consists primarily of sales related to jewelry stores, food production plants to outside customers, variable interest entities, a specialty pharmacy, in-store health clinics and online sales by Vitacost.com. |
ACCOUNTING POLICIES (Tables)
ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Jan. 30, 2016 | |
ACCOUNTING POLICIES | |
Summary of changes in self-insurance liability | 2015 2014 2013 Beginning balance $ $ $ Expense Claim payments ) ) ) Assumed from Roundy’s or Harris Teeter Ending balance Less: Current portion ) ) ) Long-term portion $ $ $ |
Summary of sales revenue by type of product | 2015 2014 2013 Amount % of total Amount % of total Amount % of total Non Perishable(1) $ % $ % $ % Perishable(2) % % % Fuel % % % Pharmacy % % % Other(3) % % % Total Sales and other revenue $ % $ % $ % (1) Consists primarily of grocery, general merchandise, health and beauty care and natural foods. (2) Consists primarily of produce, floral, meat, seafood, deli, bakery and fresh prepared. (3) Consists primarily of sales related to jewelry stores, food production plants to outside customers, variable interest entities, a specialty pharmacy, in-store health clinics and online sales by Vitacost.com. |
MERGERS (Tables)
MERGERS (Tables) | 12 Months Ended |
Jan. 30, 2016 | |
MERGERS | |
Schedule of pro forma results of operations | Fiscal year ended January 30, 2016 Fiscal year ended January 31, 2015 Fiscal year ended February 1, 2014 Sales $ $ $ Net earnings including noncontrolling interests Net earnings attributable to noncontrolling interests Net earnings attributable to The Kroger Co. $ $ $ |
Roundy's Inc. | |
MERGER | |
Summary of the preliminary fair values of the assets acquired and liabilities assumed | December 18, 2015 ASSETS Cash and temporary cash investments $ Store deposits in-transit Receivables FIFO inventory Prepaid and other current assets Total current assets Property, plant and equipment Intangibles Other assets Total Assets, excluding Goodwill LIABILITIES Current portion of obligations under capital leases and financing obligations ) Trade accounts payable ) Accrued salaries and wages ) Other current liabilities ) Total current liabilities ) Fair-value of long-term debt ) Fair-value of long-term obligations under capital leases and financing obligations ) Deferred income taxes ) Pension and postretirement benefit obligations ) Other long-term liabilities ) Total Liabilities ) Total Identifiable Net Liabilities ) Goodwill Total Purchase Price $ |
Vitacost.com, Inc. | |
MERGER | |
Summary of the preliminary fair values of the assets acquired and liabilities assumed | August 18, 2014 ASSETS Total current assets $ Property, plant and equipment Intangibles Total Assets, excluding Goodwill LIABILITIES Total current liabilities ) Deferred income taxes ) Total Liabilities ) Total Identifiable Net Assets Goodwill Total Purchase Price $ |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Jan. 30, 2016 | |
GOODWILL AND INTANGIBLE ASSETS | |
Summary of the changes in net goodwill | 2015 2014 Balance beginning of year Goodwill $ $ Accumulated impairment losses ) ) Activity during the year Mergers Balance end of year Goodwill Accumulated impairment losses ) ) $ $ |
Summary of intangible assets | 2015 2014 Gross carrying amount Accumulated amortization(1) Gross carrying amount Accumulated amortization(1) Definite-lived favorable leasehold interests $ $ ) $ $ ) Definite-lived pharmacy prescription files ) ) Definite-lived customer relationships ) ) Definite-lived other ) ) Indefinite-lived trade name — — Indefinite-lived liquor licenses — — Total $ $ ) $ $ ) (1) Favorable leasehold interests are amortized to rent expense, pharmacy prescription files are amortized to merchandise costs, customer relationships are amortized to depreciation and amortization expense and other intangibles are amortized to operating, general and administrative (“OG&A”) expense and depreciation and amortization expense. |
Schedule of future amortization expense associated with the net carrying amount of definite-lived intangible assets | Future amortization expense associated with the net carrying amount of definite-lived intangible assets for the years subsequent to 2015 is estimated to be approximately: 2016 $ 2017 2018 2019 2020 Thereafter Total future estimated amortization associated with definite-lived intangible assets $ |
PROPERTY, PLANT AND EQUIPMENT34
PROPERTY, PLANT AND EQUIPMENT, NET (Tables) | 12 Months Ended |
Jan. 30, 2016 | |
PROPERTY, PLANT AND EQUIPMENT, NET | |
Schedule of property, plant and equipment, net | 2015 2014 Land $ $ Buildings and land improvements Equipment Leasehold improvements Construction-in-progress Leased property under capital leases and financing obligations Total property, plant and equipment Accumulated depreciation and amortization ) ) Property, plant and equipment, net $ $ |
TAXES BASED ON INCOME (Tables)
TAXES BASED ON INCOME (Tables) | 12 Months Ended |
Jan. 30, 2016 | |
TAXES BASED ON INCOME | |
Schedule of provision for income taxes | 2015 2014 2013 Federal Current $ $ $ Deferred ) Subtotal federal State and local Current Deferred ) Subtotal state and local Total $ $ $ |
Schedule of reconciliation of the statutory federal rate and the effective rate | 2015 2014 2013 Statutory rate % % % State income taxes, net of federal tax benefit % % % Credits )% )% )% Favorable resolution of issues )% )% % Domestic manufacturing deduction )% )% )% Other changes, net )% )% )% % % % |
Schedule of significant temporary differences that comprise tax balances | 2015 2014 Current deferred tax assets: Net operating loss and credit carryforwards $ $ Compensation related costs Other Subtotal Valuation allowance ) ) Total current deferred tax assets Current deferred tax liabilities: Insurance related costs ) ) Inventory related costs ) ) Total current deferred tax liabilities ) ) Current deferred taxes $ ) $ ) Long-term deferred tax assets: Compensation related costs $ $ Lease accounting Closed store reserves Insurance related costs Net operating loss and credit carryforwards Other Subtotal Valuation allowance ) ) Total long-term deferred tax assets Long-term deferred tax liabilities: Depreciation and amortization ) ) Total long-term deferred tax liabilities ) ) Long-term deferred taxes $ ) $ ) |
Schedule of reconciliation of beginning and ending amounts of unrecognized tax benefits | 2015 2014 2013 Beginning balance $ $ $ Additions based on tax positions related to the current year Reductions based on tax positions related to the current year ) ) ) Additions for tax positions of prior years Reductions for tax positions of prior years ) ) ) Settlements ) ) Lapse of statute ) Ending balance $ $ $ |
DEBT OBLIGATIONS (Tables)
DEBT OBLIGATIONS (Tables) | 12 Months Ended |
Jan. 30, 2016 | |
DEBT OBLIGATIONS | |
Schedule of long-term debt | 2015 2014 0.76% to 8.00% Senior notes due through 2043 $ $ 5.00% to 12.75% Mortgages due in varying amounts through 2027 0.27% to 0.66% Commercial paper due through February 2016 Other Total debt Less current portion ) ) Total long-term debt $ $ |
Schedule of aggregate annual maturities and scheduled payments of long-term debt | The aggregate annual maturities and scheduled payments of long-term debt, as of year-end 2015, and for the years subsequent to 2015 are: 2016 $ 2017 2018 2019 2020 Thereafter Total debt $ |
DERIVATIVE FINANCIAL INSTRUME37
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 12 Months Ended |
Jan. 30, 2016 | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
Summary of outstanding interest rate swaps designated as fair value hedges | 2015 2014 Pay Floating Pay Fixed Pay Floating Pay Fixed Notional amount $ $ — $ $ — Number of contracts — — Duration in years — — Average variable rate % — % — Average fixed rate % — % — Maturity December 2018 December 2018 |
Schedule of gains or losses on fair value hedges and hedged items and the fair value of derivative instruments designated as fair value hedges | Year-To-Date January 30, 2016 January 31, 2015 Consolidated Statements of Operations Classification Gain/(Loss) on Swaps Gain/(Loss) on Borrowings Gain/(Loss) on Swaps Gain/(Loss) on Borrowings Interest Expense $ $ ) $ $ ) Asset Derivatives Fair Value Derivatives Designated as Fair Value Hedging Instruments January 30, 2016 January 31, 2015 Balance Sheet Location Interest Rate Hedges $ $ — (Other long-term liabilities)/Other assets |
Schedule of effect of derivative instruments designated as cash flow hedges | Year-To-Date Derivatives in Cash Flow Hedging Amount of Gain/(Loss) in AOCI on Derivative (Effective Portion) Amount of Gain/(Loss) Reclassified from AOCI into Income (Effective Portion) Location of Gain/(Loss) Reclassified into Income Relationships 2015 2014 2015 2014 (Effective Portion) Forward-Starting Interest Rate Swaps, net of tax* $ ) $ ) $ ) $ ) Interest expense |
Schedule of effects of master netting agreements | Net Amount Gross Amounts Not Offset in the Balance Sheet January 30, 2016 Gross Amount Recognized Gross Amounts Offset in the Balance Sheet Presented in the Balance Sheet Financial Instruments Cash Collateral Net Amount Assets Fair Value Interest Rate Swaps — — — Liabilities Cash Flow Forward-Starting Interest Rate Swaps $ $ — $ $ — $ — $ Net Amount Gross Amounts Not Offset in the Balance Sheet January 31, 2015 Gross Amount Recognized Gross Amounts Offset in the Balance Sheet Presented in the Balance Sheet Financial Instruments Cash Collateral Net Amount Liabilities Cash Flow Forward-Starting Interest Rate Swaps $ $ — $ $ — $ — $ |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended |
Jan. 30, 2016 | |
FAIR VALUE MEASUREMENTS | |
Summary of fair value measurements | January 30, 2016 Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Trading Securities $ $ — $ — $ Available-for-Sale Securities — — Long-Lived Assets — — Interest Rate Hedges — ) — ) Total $ $ ) $ $ January 31, 2015 Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Trading Securities $ $ — $ — $ Available-for-Sale Securities — — Warrants — — Long-Lived Assets — — Interest Rate Hedges — ) — ) Total $ $ ) $ $ |
ACCUMULATED OTHER COMPREHENSI39
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 12 Months Ended |
Jan. 30, 2016 | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | |
Schedule of changes in AOCI by component | Cash Flow Hedging Activities(1) Available for sale Securities(1) Pension and Postretirement Defined Benefit Plans(1) Total(1) Balance at February 1, 2014 $ ) $ $ ) $ ) OCI before reclassifications(2) ) ) ) Amounts reclassified out of AOCI(3) — Net current-period OCI ) ) ) Balance at January 31, 2015 ) ) ) OCI before reclassifications(2) ) Amounts reclassified out of AOCI(3) — Net current-period OCI ) Balance at January 30, 2016 $ ) $ $ ) $ ) (1) All amounts are net of tax. (2) Net of tax of $(14), $3 and $(206) for cash flow hedging activities, available for sale securities and pension and postretirement defined benefit plans, respectively, as of January 31, 2015. Net of tax of $(2), $2 and $45 for cash flow hedging activities, available for sale securities and pension and postretirement defined benefit plans, respectively, as of January 30, 2016. (3) Net of tax of $13 for pension and postretirement defined benefit plans, as of January 31, 2015. Net of tax of $32 for pension and postretirement defined benefit plans as of January 30, 2016. |
Schedule of items reclassified out of AOCI and the related tax effects | For the year ended For the year ended For the year ended January 30, 2016 January 31, 2015 February 1, 2014 Gains on cash flow hedging activities Amortization of unrealized gains and losses on cash flow hedging activities(1) $ $ $ Tax expense — — ) Net of tax Pension and postretirement defined benefit plan items Amortization of amounts included in net periodic pension expense(2) Tax expense ) ) ) Net of tax Total reclassifications, net of tax $ $ $ (1) Reclassified from AOCI into interest expense. (2) Reclassified from AOCI into merchandise costs and OG&A expense. These components are included in the computation of net periodic pension costs (see Note 15 for additional details). |
LEASES AND LEASE-FINANCED TRA40
LEASES AND LEASE-FINANCED TRANSACTIONS (Tables) | 12 Months Ended |
Jan. 30, 2016 | |
LEASES AND LEASE-FINANCED TRANSACTIONS | |
Schedule of rent expense (under operating leases) | 2015 2014 2013 Minimum rentals $ $ $ Contingent payments Tenant income ) ) ) Total rent expense $ $ $ |
Schedule of minimum annual rentals and payments under capital leases and lease-financed transactions | Minimum annual rentals and payments under capital leases and lease-financed transactions for the five years subsequent to 2015 and in the aggregate are: Capital Leases Operating Leases Lease- Financed Transactions 2016 $ $ $ 2017 2018 2019 2020 Thereafter Total $ $ $ Less estimated executory costs included in capital leases — Net minimum lease payments under capital leases Less amount representing interest Present value of net minimum lease payments under capital leases $ |
EARNINGS PER COMMON SHARE (Tabl
EARNINGS PER COMMON SHARE (Tables) | 12 Months Ended |
Jan. 30, 2016 | |
EARNINGS PER COMMON SHARE | |
Schedule of earnings per common and diluted shares | For the year ended January 30, 2016 For the year ended January 31, 2015 For the year ended February 1, 2014 (in millions, except per share amounts) Earnings (Numer- ator) Shares (Denomi- nator) Per Share Amount Earnings (Numer- ator) Shares (Denomi- nator) Per Share Amount Earnings (Numer- ator) Shares (Denomi- nator) Per Share Amount Net earnings attributable to The Kroger Co. per basic common share $ $ $ $ $ $ Dilutive effect of stock options Net earnings attributable to The Kroger Co. per diluted common share $ $ $ $ $ $ |
STOCK OPTION PLANS (Tables)
STOCK OPTION PLANS (Tables) | 12 Months Ended |
Jan. 30, 2016 | |
STOCK OPTION PLANS | |
Summary of changes in stock options outstanding | Shares subject to option (in millions) Weighted- average exercise price Outstanding, year-end 2012 $ Granted $ Exercised ) $ Canceled or Expired ) $ Outstanding, year-end 2013 $ Granted $ Exercised ) $ Canceled or Expired ) $ Outstanding, year-end 2014 $ Granted $ Exercised ) $ Canceled or Expired ) $ Outstanding, year-end 2015 $ |
Summary of options outstanding, exercisable and expected to vest | Number of shares Weighted- average remaining contractual life Weighted- average exercise price Aggregate intrinsic value (in millions) (in years) (in millions) Options Outstanding $ Options Exercisable $ Options Expected to Vest $ |
Summary of changes in restricted stock outstanding | Restricted shares outstanding (in millions) Weighted-average grant-date fair value Outstanding, year-end 2012 $ Granted $ Lapsed ) $ Canceled or Expired ) $ Outstanding, year-end 2013 $ Granted $ Lapsed ) $ Canceled or Expired ) $ Outstanding, year-end 2014 $ Granted $ Lapsed ) $ Canceled or Expired ) $ Outstanding, year-end 2015 $ |
Summary of weighted-average assumptions used for grants awarded to option holders | 2015 2014 2013 Weighted average expected volatility % % % Weighted average risk-free interest rate % % % Expected dividend yield % % % Expected term (based on historical results) 7.2 years 6.6 years 6.8 years |
COMPANY-SPONSORED BENEFIT PLA43
COMPANY-SPONSORED BENEFIT PLANS (Tables) | 12 Months Ended |
Jan. 30, 2016 | |
COMPANY-SPONSORED BENEFIT PLANS | |
Schedule of amounts recognized in AOCI (pre-tax) | Pension Benefits Other Benefits Total 2015 2014 2015 2014 2015 2014 Net actuarial loss (gain) $ $ $ ) $ ) $ $ Prior service cost (credit) ) ) ) ) Total $ $ $ ) $ ) $ $ |
Schedule of amounts in AOCI expected to be recognized as components of net periodic pension or postretirement benefit costs in the next fiscal year (pre-tax) | Pension Benefits Other Benefits Total 2016 2016 2016 Net actuarial loss (gain) $ $ ) $ Prior service credit — ) ) Total $ $ ) $ |
Schedule of other changes recognized in other comprehensive income (pre-tax) | Pension Benefits Other Benefits Total 2015 2014 2013 2015 2014 2013 2015 2014 2013 Incurred net actuarial loss (gain) $ ) $ $ ) $ ) $ $ ) $ ) $ $ ) Amortization of prior service credit — — — Amortization of net actuarial gain (loss) ) ) ) — ) ) ) Other — — — ) ) ) ) ) ) Total recognized in other comprehensive income (loss) ) ) ) ) ) ) ) Total recognized in net periodic benefit cost and other comprehensive income $ ) $ $ ) $ ) $ ) $ ) $ ) $ $ ) |
Schedule of change in benefit obligation, change in plan assets and the funded status of the plans recorded in the Consolidated Balance Sheets and net amounts recognized at the end of fiscal years | Pension Benefits Qualified Plans Non-Qualified Plans Other Benefits 2015 2014 2015 2014 2015 2014 Change in benefit obligation: Benefit obligation at beginning of fiscal year $ $ $ $ $ $ Service cost Interest cost Plan participants’ contributions — — — — Actuarial (gain) loss ) ) ) Benefits paid ) ) ) ) ) ) Other ) — — ) ) Assumption of Roundy’s benefit obligation — — — — Benefit obligation at end of fiscal year $ $ $ $ $ $ Change in plan assets: Fair value of plan assets at beginning of fiscal year $ $ $ — $ — $ — $ — Actual return on plan assets ) — — — — Employer contributions — Plan participants’ contributions — — — — Benefits paid ) ) ) ) ) ) Other ) — — — — — Assumption of Roundy’s plan assets — — — — — Fair value of plan assets at end of fiscal year $ $ $ — $ — $ — $ — Funded status at end of fiscal year $ ) $ ) $ ) $ ) $ ) $ ) Net liability recognized at end of fiscal year $ ) $ ) $ ) $ ) $ ) $ ) |
Schedule of weighted-average assumptions used in determining the benefit obligation and net periodic benefit cost | Pension Benefits Other Benefits Weighted average assumptions 2015 2014 2013 2015 2014 2013 Discount rate — Benefit obligation % % % % % % Discount rate — Net periodic benefit cost % % % % % % Expected long-term rate of return on plan assets % % % Rate of compensation increase — Net periodic benefit cost % % % Rate of compensation increase — Benefit obligation % % % |
Schedule of components of net periodic benefit cost | Pension Benefits Qualified Plans Non-Qualified Plans Other Benefits 2015 2014 2013 2015 2014 2013 2015 2014 2013 Components of net periodic benefit cost: Service cost $ $ $ $ $ $ $ $ $ Interest cost Expected return on plan assets ) ) ) — — — — — — Amortization of: Prior service credit — — — — — — ) ) ) Actuarial (gain) loss ) ) — Net periodic benefit cost $ $ $ $ $ $ $ $ $ |
Schedule of projected benefit obligation ("PBO"), accumulated benefit obligation ("ABO") and the fair value of plan assets for all Company-sponsored pension plans | Qualified Plans Non-Qualified Plans 2015 2014 2015 2014 PBO at end of fiscal year $ $ $ $ ABO at end of fiscal year $ $ $ $ Fair value of plan assets at end of year $ $ $ — $ — |
Schedule of estimated future benefit payments for defined benefit pension plans and other benefits | Pension Benefits Other Benefits 2016 $ $ 2017 $ $ 2018 $ $ 2019 $ $ 2020 $ $ 2021 – 2025 $ $ |
Schedule of weighted average target and actual pension plan asset allocations | Target allocations Actual Allocations 2015 2015 2014 Pension plan asset allocation Global equity securities % % % Emerging market equity securities Investment grade debt securities High yield debt securities Private equity Hedge funds Real estate Other Total % % % |
Schedule of effects of one-percentage-point change in assumed health care cost trend rates | 1% Point Increase 1% Point Decrease Effect on total of service and interest cost components $ $ ) Effect on postretirement benefit obligation $ $ ) |
Schedule of fair values of defined benefit pension plan assets | Assets at Fair Value as of January 30, 2016 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Cash and cash equivalents $ $ — $ — $ Corporate Stocks — — Corporate Bonds — — U.S. Government Securities — — Mutual Funds/Collective Trusts Partnerships/Joint Ventures — — Hedge Funds — — Private Equity — — Real Estate — — Other — — Total $ $ $ $ Assets at Fair Value as of January 31, 2015 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Cash and cash equivalents $ $ — $ — $ Corporate Stocks — — Corporate Bonds — — U.S. Government Securities — — Mutual Funds/Collective Trusts Partnerships/Joint Ventures — — Hedge Funds — — Private Equity — — Real Estate — — Other — — Total $ $ $ $ |
Schedule of reconciliation of beginning and ending balances for measurements using significant unobservable inputs (Level 3) | Hedge Funds Private Equity Real Estate Collective Trusts Ending balance, February 1, 2014 $ $ $ $ Contributions into Fund — Realized gains Unrealized gains (losses) ) — Distributions ) ) ) — Reclass(1) ) — — Other ) ) ) — Ending balance, January 31, 2015 Contributions into Fund — Realized gains — Unrealized (losses) gains ) ) — Distributions ) ) ) — Other ) ) — Ending balance, January 30, 2016 $ $ $ $ (1) In 2014, the Company reclassified $58 of Level 3 assets from Private Equity to Hedge Funds. |
MULTI-EMPLOYER PENSION PLANS (T
MULTI-EMPLOYER PENSION PLANS (Tables) | 12 Months Ended |
Jan. 30, 2016 | |
Collective Bargaining Agreements | |
MULTI-EMPLOYER PENSION PLANS | |
Schedule of multi-employer pension plans | Expiration Date Most Significant Collective of Collective Bargaining Agreements(1) Bargaining (not in millions) Pension Fund Agreements Count Expiration SO CA UFCW Unions & Food Employers Joint Pension Trust Fund March 2016 to June 2017 2 March 2016 to June 2017 UFCW Consolidated Pension Plan March 2016 to August 2020 8 April 2016 to August 2020 Desert States Employers & UFCW Unions Pension Plan October 2016 to June 2018 1 October 2016 Sound Retirement Trust (formerly Retail Clerks Pension Plan) April 2016 to January 2018 2 May 2016 to August 2016 Rocky Mountain UFCW Unions and Employers Pension Plan January 2019 to February 2019 1 January 2019 Oregon Retail Employees Pension Plan August 2015(2) to April 2017 3 August 2015(2) to June 2016 Bakery and Confectionary Union & Industry International Pension Fund June 2016 to July 2018 4 August 2016 to July 2018 Retail Food Employers & UFCW Local 711 Pension April 2017 to November 2019 1 March 2019 Denver Area Meat Cutters and Employers Pension Plan January 2019 to February 2019 1 January 2019 United Food & Commercial Workers Intl Union — Industry Pension Fund March 2014(2) to April 2019 2 March 2017 to April 2019 Western Conference of Teamsters Pension Plan April 2017 to September 2020 5 July 2017 to September 2020 Central States, Southeast & Southwest Areas Pension Plan September 2017 to November 2018 3 September 2017 to November 2018 (1) This column represents the number of significant collective bargaining agreements and their expiration date for each of the Company’s pension funds listed above. For purposes of this table, the “significant collective bargaining agreements” are the largest based on covered employees that, when aggregated, cover the majority of the employees for which we make multi-employer contributions for the referenced pension fund. (2) Certain collective bargaining agreements for each of these pension funds are operating under an extension. |
Multi-employer Pension Plan | |
MULTI-EMPLOYER PENSION PLANS | |
Schedule of multi-employer pension plans | FIP/RP Pension Protection Status EIN / Pension Act Zone Status Pending/ Multi-Employer Contributions Surcharge Pension Fund Plan Number 2015 2014 Implemented 2015 2014 2013 Imposed(6) SO CA UFCW Unions & Food Employers Joint Pension Trust Fund(1) (2) 95-1939092 - 001 Red Red Implemented $ $ $ No Desert States Employers & UFCW Unions Pension Plan(1) 84-6277982 - 001 Green Green No No Sound Retirement Trust (formerly Retail Clerks Pension Plan)(1) (3) 91-6069306 – 001 Red Red Implemented No Rocky Mountain UFCW Unions and Employers Pension Plan(1) 84-6045986 - 001 Green Green No No Oregon Retail Employees Pension Plan(1) 93-6074377 - 001 Green Red No No Bakery and Confectionary Union & Industry International Pension Fund(1) 52-6118572 - 001 Red Red Implemented No Washington Meat Industry Pension Trust(1) (4) (5) 91-6134141 - 001 Red Red Implemented — No Retail Food Employers & UFCW Local 711 Pension(1) 51-6031512 - 001 Red Red Implemented No Denver Area Meat Cutters and Employers Pension Plan(1) 84-6097461 - 001 Green Green No No United Food & Commercial Workers Intl Union — Industry Pension Fund(1) (4) 51-6055922 - 001 Green Green No No Western Conference of Teamsters Pension Plan 91-6145047 - 001 Green Green No No Central States, Southeast & Southwest Areas Pension Plan 36-6044243 - 001 Red Red Implemented No UFCW Consolidated Pension Plan(1) 58-6101602 – 001 Green Green No — No Other Total Contributions $ $ $ (1) The Company’s multi-employer contributions to these respective funds represent more than 5% of the total contributions received by the pension funds. (2) The information for this fund was obtained from the Form 5500 filed for the plan’s year-end at March 31, 2015 and March 31, 2014. (3) The information for this fund was obtained from the Form 5500 filed for the plan’s year-end at September 30, 2014 and September 30, 2013. (4) The information for this fund was obtained from the Form 5500 filed for the plan’s year-end at June 30, 2014 and June 30, 2013. (5) As of June 30, 2014, this pension fund was merged into the Sound Retirement Trust. After the completion of the merger, on July 1, 2014, certain assets and liabilities related to the Washington Meat Industry Pension Trust were transferred from the Sound Retirement Trust to the UFCW Consolidated Pension Plan. See the above information regarding the restructuring of certain pension plan agreements. (6) Under the Pension Protection Act, a surcharge may be imposed when employers make contributions under a collective bargaining agreement that is not in compliance with a rehabilitation plan. As of January 30, 2016, the collective bargaining agreements under which the Company was making contributions were in compliance with rehabilitation plans adopted by the applicable pension fund. |
QUARTERLY DATA (UNAUDITED) (Tab
QUARTERLY DATA (UNAUDITED) (Tables) | 12 Months Ended |
Jan. 30, 2016 | |
QUARTERLY DATA (UNAUDITED) | |
Schedule of quarterly data (unaudited) | Quarter 2015 First (16 Weeks) Second (12 Weeks) Third (12 Weeks) Fourth (12 Weeks) Total Year (52 Weeks) Sales $ $ $ $ $ Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below Operating, general and administrative Rent Depreciation and amortization Operating profit Interest expense Earnings before income tax expense Income tax expense Net earnings including noncontrolling interests Net earnings (loss) attributable to noncontrolling interests — ) Net earnings attributable to The Kroger Co. $ $ $ $ $ Net earnings attributable to The Kroger Co. per basic common share $ $ $ $ $ Average number of shares used in basic calculation Net earnings attributable to The Kroger Co. per diluted common share $ $ $ $ $ Average number of shares used in diluted calculation Dividends declared per common share $ $ $ $ $ Quarter 2014 First (16 Weeks) Second (12 Weeks) Third (12 Weeks) Fourth (12 Weeks) Total Year (52 Weeks) Sales $ $ $ $ $ Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below Operating, general and administrative Rent Depreciation and amortization Operating profit Interest expense Earnings before income tax expense Income tax expense Net earnings including noncontrolling interests Net earnings attributable to noncontrolling interests Net earnings attributable to The Kroger Co. $ $ $ $ $ Net earnings attributable to The Kroger Co. per basic common share $ $ $ $ $ Average number of shares used in basic calculation Net earnings attributable to The Kroger Co. per diluted common share $ $ $ $ $ Average number of shares used in diluted calculation Dividends declared per common share $ $ $ $ $ |
ACCOUNTING POLICIES - POLICIES
ACCOUNTING POLICIES - POLICIES (Details) - USD ($) $ in Millions | Jun. 25, 2015 | Jan. 30, 2016 | Nov. 07, 2015 | Aug. 15, 2015 | Jan. 31, 2015 | Nov. 08, 2014 | Aug. 16, 2014 | May. 23, 2015 | May. 24, 2014 | Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 |
Description of Business, Basis of Presentation and Principles of Consolidation | ||||||||||||
Stock split conversion ratio | 2 | |||||||||||
Common stock dividend rate percentage | 100.00% | |||||||||||
Fiscal Year | ||||||||||||
Length of fiscal period | 84 days | 84 days | 84 days | 84 days | 84 days | 84 days | 112 days | 112 days | 364 days | 364 days | 364 days | |
Inventories | ||||||||||||
Percentage of inventory valued at LIFO method | 95.00% | 95.00% | 95.00% | 95.00% | ||||||||
Replacement cost over carrying value | $ 1,272 | $ 1,245 | $ 1,272 | $ 1,245 | ||||||||
Impairment of Long-Lived Assets | ||||||||||||
Asset impairment charge | 46 | 37 | $ 39 | |||||||||
Changes in self-insurance liability | ||||||||||||
Balance at the beginning of the period | $ 599 | $ 569 | 599 | 569 | 537 | |||||||
Expense | 234 | 246 | 220 | |||||||||
Claim payments | (225) | (216) | (215) | |||||||||
Assumed from Roundy's or Harris Teeter | 31 | 27 | ||||||||||
Balance at the end of the period | 639 | 599 | 639 | 599 | 569 | |||||||
Less: Current portion | (223) | (213) | (223) | (213) | (224) | |||||||
Long-term portion | 416 | 386 | 416 | 386 | 345 | |||||||
Advertising Costs | ||||||||||||
Advertising costs | 679 | 648 | 587 | |||||||||
Property, Plant and Equipment | ||||||||||||
Depreciation and amortization | $ 508 | $ 484 | $ 477 | $ 467 | $ 456 | $ 444 | $ 620 | $ 581 | $ 2,089 | $ 1,948 | $ 1,703 | |
Minimum | ||||||||||||
Store Closing Costs | ||||||||||||
Remaining lease terms of closed stores | 1 year | |||||||||||
Maximum | ||||||||||||
Store Closing Costs | ||||||||||||
Remaining lease terms of closed stores | 20 years | |||||||||||
Buildings and land improvements | Minimum | ||||||||||||
Property, Plant and Equipment | ||||||||||||
Useful life of the assets | 10 years | |||||||||||
Buildings and land improvements | Maximum | ||||||||||||
Property, Plant and Equipment | ||||||||||||
Useful life of the assets | 40 years | |||||||||||
Store equipment | Minimum | ||||||||||||
Property, Plant and Equipment | ||||||||||||
Useful life of the assets | 3 years | |||||||||||
Store equipment | Maximum | ||||||||||||
Property, Plant and Equipment | ||||||||||||
Useful life of the assets | 9 years | |||||||||||
Leasehold improvements | Minimum | ||||||||||||
Property, Plant and Equipment | ||||||||||||
Useful life of the assets | 4 years | |||||||||||
Leasehold improvements | Maximum | ||||||||||||
Property, Plant and Equipment | ||||||||||||
Useful life of the assets | 25 years | |||||||||||
Food production plant and distribution center equipment | Minimum | ||||||||||||
Property, Plant and Equipment | ||||||||||||
Useful life of the assets | 3 years | |||||||||||
Food production plant and distribution center equipment | Maximum | ||||||||||||
Property, Plant and Equipment | ||||||||||||
Useful life of the assets | 15 years | |||||||||||
Information Technology | ||||||||||||
Property, Plant and Equipment | ||||||||||||
Useful life of the assets | 5 years |
ACCOUNTING POLICIES - REVENUE B
ACCOUNTING POLICIES - REVENUE BY PRODUCT TYPE (Details) $ in Millions | 3 Months Ended | 4 Months Ended | 12 Months Ended | ||||||||
Jan. 30, 2016USD ($) | Nov. 07, 2015USD ($) | Aug. 15, 2015USD ($) | Jan. 31, 2015USD ($) | Nov. 08, 2014USD ($) | Aug. 16, 2014USD ($) | May. 23, 2015USD ($) | May. 24, 2014USD ($) | Jan. 30, 2016USD ($)segment | Jan. 31, 2015USD ($)segment | Feb. 01, 2014USD ($)segment | |
Segments | |||||||||||
Company's retail operations (as a percent) | 99.00% | ||||||||||
Number of segments | segment | 1 | 1 | 1 | ||||||||
Total Sales and other revenue | $ 26,165 | $ 25,075 | $ 25,539 | $ 25,207 | $ 24,987 | $ 25,310 | $ 33,051 | $ 32,961 | $ 109,830 | $ 108,465 | $ 98,375 |
Percentage of total sales | 100.00% | 100.00% | 100.00% | ||||||||
Non Perishable | |||||||||||
Segments | |||||||||||
Total Sales and other revenue | $ 57,187 | $ 54,392 | $ 49,229 | ||||||||
Percentage of total sales | 52.10% | 50.10% | 50.00% | ||||||||
Perishable | |||||||||||
Segments | |||||||||||
Total Sales and other revenue | $ 25,726 | $ 24,178 | $ 20,625 | ||||||||
Percentage of total sales | 23.40% | 22.30% | 21.00% | ||||||||
Fuel | |||||||||||
Segments | |||||||||||
Total Sales and other revenue | $ 14,802 | $ 18,850 | $ 18,962 | ||||||||
Percentage of total sales | 13.50% | 17.40% | 19.30% | ||||||||
Pharmacy | |||||||||||
Segments | |||||||||||
Total Sales and other revenue | $ 9,778 | $ 9,032 | $ 8,073 | ||||||||
Percentage of total sales | 8.90% | 8.30% | 8.20% | ||||||||
Other | |||||||||||
Segments | |||||||||||
Total Sales and other revenue | $ 2,337 | $ 2,013 | $ 1,486 | ||||||||
Percentage of total sales | 2.10% | 1.90% | 1.50% |
MERGERS (Details)
MERGERS (Details) - USD ($) $ / shares in Units, $ in Millions | Dec. 18, 2015 | Aug. 18, 2014 | Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 |
Additional disclosures | |||||
Goodwill | $ 2,724 | $ 2,304 | $ 2,135 | ||
Pro forma results of operations | |||||
Sales | 113,308 | 112,458 | 103,584 | ||
Net earnings including noncontrolling interests | 2,061 | 1,751 | 1,624 | ||
Net earnings attributable to noncontrolling interests | 10 | 19 | 12 | ||
Net earnings attributable to The Kroger Co. | $ 2,051 | $ 1,732 | $ 1,612 | ||
Roundy's Inc. | |||||
MERGER | |||||
Percentage of outstanding common stock acquired | 100.00% | ||||
Price per share of outstanding common stock acquired | $ 3.60 | ||||
Purchase price | $ 866 | ||||
ASSETS | |||||
Cash and temporary cash investments | 20 | ||||
Store deposits in-transit | 30 | ||||
Receivables | 43 | ||||
FIFO inventory | 323 | ||||
Prepaid and other current assets | 19 | ||||
Total current assets | 435 | ||||
Property, plant and equipment | 342 | ||||
Intangibles | 324 | ||||
Other assets | 4 | ||||
Total Assets, excluding Goodwill | 1,105 | ||||
LIABILITIES | |||||
Current portion of obligations under capital leases and financing obligations | (9) | ||||
Trade accounts payable | (236) | ||||
Accrued salaries and wages | (40) | ||||
Other current liabilities | (89) | ||||
Total current liabilities | (374) | ||||
Fair-value of long-term debt | (678) | ||||
Fair-value of long-term obligations under capital leases and financing obligations | (20) | ||||
Deferred income taxes | (112) | ||||
Pension and postretirement benefit obligations | (36) | ||||
Other long-term liabilities | (111) | ||||
Total Liabilities | (1,331) | ||||
Additional disclosures | |||||
Total Identifiable Net Assets/Liabilities | (226) | ||||
Goodwill | 414 | ||||
Total Purchase Price | 188 | ||||
Roundy's Inc. | Favorable leasehold interests | |||||
ASSETS | |||||
Intangibles | $ 69 | ||||
Additional disclosures | |||||
Weighted-average amortizable lives | 12 years | ||||
Roundy's Inc. | Pharmacy prescription files | |||||
ASSETS | |||||
Intangibles | $ 38 | ||||
Additional disclosures | |||||
Weighted-average amortizable lives | 7 years | ||||
Roundy's Inc. | Customer Lists | |||||
ASSETS | |||||
Intangibles | $ 6 | ||||
Additional disclosures | |||||
Weighted-average amortizable lives | 2 years | ||||
Roundy's Inc. | Trade name | |||||
ASSETS | |||||
Intangibles | $ 211 | ||||
Vitacost.com, Inc. | |||||
MERGER | |||||
Percentage of outstanding common stock acquired | 100.00% | ||||
Price per share of outstanding common stock acquired | $ 8 | ||||
Purchase price | $ 287 | ||||
ASSETS | |||||
Total current assets | 80 | ||||
Property, plant and equipment | 28 | ||||
Intangibles | 81 | ||||
Total Assets, excluding Goodwill | 189 | ||||
LIABILITIES | |||||
Total current liabilities | (56) | ||||
Deferred income taxes | (6) | ||||
Total Liabilities | (62) | ||||
Additional disclosures | |||||
Total Identifiable Net Assets/Liabilities | 127 | ||||
Goodwill | 160 | ||||
Total Purchase Price | 287 | ||||
Vitacost.com, Inc. | Customer relationships | |||||
ASSETS | |||||
Intangibles | $ 49 | ||||
Additional disclosures | |||||
Weighted-average amortizable lives | 5 years | ||||
Vitacost.com, Inc. | Technology | |||||
ASSETS | |||||
Intangibles | $ 26 | ||||
Additional disclosures | |||||
Weighted-average amortizable lives | 10 years | ||||
Vitacost.com, Inc. | Trade name | |||||
ASSETS | |||||
Intangibles | $ 6 | ||||
Additional disclosures | |||||
Weighted-average amortizable lives | 3 years |
GOODWILL AND INTANGIBLE ASSET49
GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) $ in Millions | 12 Months Ended | ||||
Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | Dec. 18, 2015 | Aug. 18, 2014 | |
GOODWILL AND INTANGIBLE ASSETS | |||||
Percentage reduction in fair value of reporting units used by the entity for determining potential impairment | 10.00% | ||||
Goodwill and Intangible Assets | |||||
Goodwill, Beginning Balance | $ 4,836 | $ 4,667 | |||
Accumulated impairment losses | (2,532) | (2,532) | |||
Goodwill, beginning balance | 2,304 | 2,135 | |||
Mergers | 420 | 169 | |||
Goodwill, end of year | 5,256 | 4,836 | $ 4,667 | ||
Accumulated impairment losses | (2,532) | (2,532) | (2,532) | ||
Goodwill, ending balance | 2,724 | 2,304 | 2,135 | ||
Intangible Assets, Gross (Excluding Goodwill) | 1,186 | 854 | |||
Accumulated amortization | (133) | (97) | |||
Amortization expense associated with intangible assets | 51 | 41 | $ 18 | ||
Future amortization expense associated with the net carrying amount of definite-lived intangible assets for the years subsequent to 2015 | |||||
2,016 | 57 | ||||
2,017 | 48 | ||||
2,018 | 42 | ||||
2,019 | 40 | ||||
2,020 | 35 | ||||
Thereafter | 112 | ||||
Total future estimated amortization associated with definite-lived intangible assets | 334 | ||||
Trade name | |||||
Goodwill and Intangible Assets | |||||
Indefinite-lived, Gross carrying amount | 641 | 430 | |||
Liquor licenses | |||||
Goodwill and Intangible Assets | |||||
Indefinite-lived, Gross carrying amount | 78 | 64 | |||
Favorable leasehold interests | |||||
Goodwill and Intangible Assets | |||||
Gross carrying amount | 169 | 101 | |||
Accumulated amortization | (31) | (26) | |||
Pharmacy prescription files | |||||
Goodwill and Intangible Assets | |||||
Gross carrying amount | 127 | 98 | |||
Accumulated amortization | (40) | (41) | |||
Customer relationships. | |||||
Goodwill and Intangible Assets | |||||
Gross carrying amount | 93 | 87 | |||
Accumulated amortization | (39) | (17) | |||
Other | |||||
Goodwill and Intangible Assets | |||||
Gross carrying amount | 78 | 74 | |||
Accumulated amortization | $ (23) | $ (13) | |||
Roundy's Inc. | |||||
Goodwill and Intangible Assets | |||||
Intangibles | $ 324 | ||||
Roundy's Inc. | Trade name | |||||
Goodwill and Intangible Assets | |||||
Intangibles | 211 | ||||
Roundy's Inc. | Favorable leasehold interests | |||||
Goodwill and Intangible Assets | |||||
Intangibles | 69 | ||||
Roundy's Inc. | Pharmacy prescription files | |||||
Goodwill and Intangible Assets | |||||
Intangibles | $ 38 | ||||
Vitacost.com, Inc. | |||||
Goodwill and Intangible Assets | |||||
Intangibles | $ 81 |
PROPERTY, PLANT AND EQUIPMENT50
PROPERTY, PLANT AND EQUIPMENT, NET (Details) - USD ($) $ in Millions | Jan. 30, 2016 | Jan. 31, 2015 |
Property, Plant and Equipment | ||
Total property, plant and equipment | $ 37,667 | $ 34,540 |
Accumulated depreciation and amortization | (18,048) | (16,628) |
Property, plant and equipment, net | 19,619 | 17,912 |
Accumulated depreciation for leased property under capital leases | 293 | 332 |
Property, plant and equipment collateralized, net book value | 264 | 260 |
Land | ||
Property, Plant and Equipment | ||
Total property, plant and equipment | 2,997 | 2,819 |
Buildings and land improvements | ||
Property, Plant and Equipment | ||
Total property, plant and equipment | 10,524 | 9,639 |
Equipment | ||
Property, Plant and Equipment | ||
Total property, plant and equipment | 12,520 | 11,587 |
Leasehold improvements | ||
Property, Plant and Equipment | ||
Total property, plant and equipment | 8,710 | 8,068 |
Construction-in-progress | ||
Property, Plant and Equipment | ||
Total property, plant and equipment | 2,115 | 1,690 |
Leased property under capital leases and financing obligations | ||
Property, Plant and Equipment | ||
Total property, plant and equipment | $ 801 | $ 737 |
TAXES BASED ON INCOME - PROVISI
TAXES BASED ON INCOME - PROVISION, RECONCILIATION, AND DEFERRED TAX BALANCES (Details) - USD ($) $ in Millions | 3 Months Ended | 4 Months Ended | 12 Months Ended | ||||||||
Jan. 30, 2016 | Nov. 07, 2015 | Aug. 15, 2015 | Jan. 31, 2015 | Nov. 08, 2014 | Aug. 16, 2014 | May. 23, 2015 | May. 24, 2014 | Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | |
Federal | |||||||||||
Current | $ 723 | $ 847 | $ 638 | ||||||||
Deferred | 266 | (15) | 81 | ||||||||
Subtotal federal | 989 | 832 | 719 | ||||||||
State and local | |||||||||||
Current | 37 | 59 | 42 | ||||||||
Deferred | 19 | 11 | (10) | ||||||||
Subtotal state and local | 56 | 70 | 32 | ||||||||
Total | $ 250 | $ 238 | $ 227 | $ 274 | $ 172 | $ 182 | $ 330 | $ 274 | $ 1,045 | $ 902 | $ 751 |
A reconciliation of the statutory federal rate and the effective rate follows: | |||||||||||
Statutory rate (as a percent) | 35.00% | 35.00% | 35.00% | ||||||||
State income taxes, net of federal tax benefit (as a percent) | 1.20% | 1.70% | 0.90% | ||||||||
Credits (as a percent) | (1.20%) | (1.20%) | (1.30%) | ||||||||
Favorable resolution of issues (as a percent) | (0.20%) | (0.40%) | |||||||||
Domestic manufacturing deduction (as a percent) | (0.70%) | (0.70%) | (1.10%) | ||||||||
Other changes, net (as a percent) | (0.30%) | (0.30%) | (0.60%) | ||||||||
Total (as a percent) | 33.80% | 34.10% | 32.90% | ||||||||
Current deferred tax assets: | |||||||||||
Net operating loss and credit carryforwards | 10 | 5 | $ 10 | $ 5 | |||||||
Compensation related costs | 83 | 88 | 83 | 88 | |||||||
Other | 61 | 14 | 61 | 14 | |||||||
Subtotal | 154 | 107 | 154 | 107 | |||||||
Valuation allowance | (9) | (7) | (9) | (7) | |||||||
Total current deferred tax assets | 145 | 100 | 145 | 100 | |||||||
Current deferred tax liabilities: | |||||||||||
Insurance related costs | (56) | (99) | (56) | (99) | |||||||
Inventory related costs | (310) | (288) | (310) | (288) | |||||||
Total current deferred tax liabilities | (366) | (387) | (366) | (387) | |||||||
Current deferred taxes | (221) | (287) | (221) | (287) | |||||||
Long-term deferred tax assets: | |||||||||||
Compensation related costs | 709 | 721 | 709 | 721 | |||||||
Lease accounting | 106 | 129 | 106 | 129 | |||||||
Closed store reserves | 57 | 50 | 57 | 50 | |||||||
Insurance related costs | 29 | 77 | 29 | 77 | |||||||
Net operating loss and credit carryforwards | 128 | 115 | 128 | 115 | |||||||
Other | 17 | 2 | 17 | 2 | |||||||
Subtotal | 1,046 | 1,094 | 1,046 | 1,094 | |||||||
Valuation allowance | (43) | (42) | (43) | (42) | |||||||
Total long-term deferred tax assets | 1,003 | 1,052 | 1,003 | 1,052 | |||||||
Long-term deferred tax liabilities: | |||||||||||
Depreciation and amortization | (2,755) | (2,261) | (2,755) | (2,261) | |||||||
Total long-term deferred tax liabilities | (2,755) | (2,261) | (2,755) | (2,261) | |||||||
Long-term deferred taxes | (1,752) | $ (1,209) | (1,752) | $ (1,209) | |||||||
Federal | |||||||||||
Operating loss carryforwards and tax credit carryforwards | |||||||||||
Net operating loss carryforwards | 62 | 62 | |||||||||
State | |||||||||||
Operating loss carryforwards and tax credit carryforwards | |||||||||||
Net operating loss carryforwards | 1,460 | 1,460 | |||||||||
Credit carryforwards | $ 65 | $ 65 |
TAXES BASED ON INCOME - UNRECOG
TAXES BASED ON INCOME - UNRECOGNIZED TAX BENEFITS (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | |
Reconciliation of the beginning and ending amount of unrecognized tax benefits | |||
Balance at the beginning of the period | $ 246 | $ 325 | $ 299 |
Additions based on tax positions related to the current year | 11 | 17 | 23 |
Reductions based on tax positions related to the current year | (11) | (6) | (10) |
Additions for tax positions of prior years | 4 | 9 | 17 |
Reductions for tax positions of prior years | (27) | (36) | (4) |
Settlements | (17) | (63) | |
Lapse of statute | (2) | ||
Balance at the end of the period | 204 | 246 | 325 |
Impact on effective tax rate, if amount of unrecognized tax benefits is recognized | 83 | 90 | 98 |
Interest and penalties recognized (recoveries) | (5) | 3 | 10 |
Interest and penalties | $ 25 | $ 30 | $ 41 |
DEBT OBLIGATIONS - LONG-TERM DE
DEBT OBLIGATIONS - LONG-TERM DEBT (Details) $ in Millions | Jun. 30, 2014USD ($) | Jan. 30, 2016USD ($) | Jan. 31, 2015USD ($) | Dec. 18, 2015USD ($) |
Debt | ||||
Total debt | $ 11,396 | $ 11,026 | ||
Less current portion | (2,318) | (1,844) | ||
Total long-term debt | 9,078 | 9,182 | ||
New issue of senior notes | 1,100 | |||
Unsecured revolving credit facility | ||||
Debt | ||||
Maximum borrowing capacity | $ 2,750 | |||
Maximum borrowing capacity prior to amended and restated credit agreement | 2,000 | |||
Additional borrowing capacity | $ 750 | |||
Unsecured revolving credit facility | Maximum | ||||
Debt | ||||
Leverage ratio (as a percent) | 3.50 | |||
Unsecured revolving credit facility | Minimum | ||||
Debt | ||||
Fixed charge coverage ratio (as a percent) | 1.70 | |||
Unsecured revolving credit facility | LIBOR plus a market rate spread, based on the Company's Leverage Ratio | ||||
Debt | ||||
Debt instrument variable basis rate | LIBOR plus a market rate spread, based on the Company's Leverage Ratio | |||
Unsecured revolving credit facility | Federal Funds Rate | ||||
Debt | ||||
Debt instrument variable basis rate | Federal Funds Rate | |||
Interest rate margin (as a percent) | 0.50% | |||
Unsecured revolving credit facility | Bank of America prime rate | ||||
Debt | ||||
Debt instrument variable basis rate | Bank of America prime rate | |||
Unsecured revolving credit facility | One-month LIBOR plus 1.0 percent plus a market rate spread based on the Company's Leverage Ratio | ||||
Debt | ||||
Debt instrument variable basis rate | one-month LIBOR plus 1.0%, plus a market rate spread based on the Company's Leverage Ratio | |||
Interest rate margin (as a percent) | 1.00% | |||
Roundy's Inc. | ||||
Debt | ||||
Term loans assumed | $ 678 | |||
Senior Notes due through 2043 | ||||
Debt | ||||
Total debt | $ 9,826 | $ 9,224 | ||
Interest rate, minimum range (as a percent) | 0.76% | 0.76% | ||
Interest rate, maximum range (as a percent) | 8.00% | 8.00% | ||
Senior notes 3.50% due 2026 | ||||
Debt | ||||
New issue of senior notes | $ 500 | |||
Interest rate (as a percent) | 3.50% | |||
Senior notes 2.60% due 2021 | ||||
Debt | ||||
New issue of senior notes | $ 300 | |||
Interest rate (as a percent) | 2.60% | |||
Senior notes 2.00% due 2019 | ||||
Debt | ||||
New issue of senior notes | $ 300 | |||
Interest rate (as a percent) | 2.00% | |||
Senior notes 3.90% | ||||
Debt | ||||
Repayment of debt | $ 500 | |||
Interest rate (as a percent) | 3.90% | |||
Senior notes 2.95% due 2021 | ||||
Debt | ||||
New issue of senior notes | $ 500 | |||
Interest rate (as a percent) | 2.95% | |||
Senior notes 4.95% | ||||
Debt | ||||
Repayment of debt | $ 300 | |||
Interest rate (as a percent) | 4.95% | |||
Mortgages due in varying amounts through 2027 | ||||
Debt | ||||
Total debt | $ 58 | $ 73 | ||
Interest rate, minimum range (as a percent) | 5.00% | 5.00% | ||
Interest rate, maximum range (as a percent) | 12.75% | 12.75% | ||
Commercial paper due through February 2016 | ||||
Debt | ||||
Total debt | $ 990 | $ 1,275 | ||
Interest rate, minimum range (as a percent) | 0.27% | 0.27% | ||
Interest rate, maximum range (as a percent) | 0.66% | 0.66% | ||
Other | ||||
Debt | ||||
Total debt | $ 522 | $ 454 |
DEBT OBLIGATIONS - OTHER DEBT (
DEBT OBLIGATIONS - OTHER DEBT (Details) - USD ($) $ in Millions | 12 Months Ended | |
Jan. 30, 2016 | Jan. 31, 2015 | |
Debt obligations | ||
Total debt | $ 11,396 | $ 11,026 |
Line of credit agreement | ||
Outstanding letters of credit | 244 | |
Reduction in funds available under letter of credit agreement | $ 13 | |
Minimum number of days notice required prior to the date of redemption | 5 days | |
Redemption event | 50.00% | |
Credit Agreement | ||
Debt obligations | ||
Total debt | $ 0 | 0 |
Commercial paper due through February 2016 | ||
Debt obligations | ||
Total debt | $ 990 | $ 1,275 |
Weighted average interest rate (as a percent) | 0.66% | 0.37% |
DEBT OBLIGATIONS - MATURITIES (
DEBT OBLIGATIONS - MATURITIES (Details) - USD ($) $ in Millions | Jan. 30, 2016 | Jan. 31, 2015 |
Aggregate annual maturities and scheduled payments of long-term debt, as of year-end 2015, and for the years subsequent to 2015 | ||
2,016 | $ 2,318 | |
2,017 | 735 | |
2,018 | 1,307 | |
2,019 | 774 | |
2,020 | 724 | |
Thereafter | 5,538 | |
Total debt | $ 11,396 | $ 11,026 |
DERIVATIVE FINANCIAL INSTRUME56
DERIVATIVE FINANCIAL INSTRUMENTS - DERIVATIVE INSTRUMENTS (Details) $ in Millions | 12 Months Ended | |||
Jan. 30, 2016USD ($)instrumentproduct | Jan. 31, 2015USD ($)instrument | Feb. 01, 2014USD ($) | ||
Interest Rate Risk Management | ||||
Combined average annual limit of aggregate amount of debt subject to interest rate reset and floating rate debt, to reduce interest rate risk | $ 2,500 | |||
Number of leveraged products | product | 0 | |||
Gain/(Loss) in AOCI on Derivatives (Effective Portion) | [1] | $ (3) | $ (25) | $ (12) |
New issue of senior notes | 1,100 | |||
Fair value hedges | Interest rate swaps | ||||
Interest Rate Risk Management | ||||
Fair value of asset derivatives | 1 | |||
Cash flow hedges | Forward-starting interest rate swaps | ||||
Interest Rate Risk Management | ||||
Fair value of liability derivatives | 27 | 39 | ||
Unamortized (gain) loss, before tax | 17 | |||
Unamortized (gain) loss, net of tax | 11 | |||
Cash flow hedges | Forward-starting interest rate swaps | Terminated with maturity dates of October 2015 and January 2016 | ||||
Interest Rate Risk Management | ||||
Notional amount | $ 600 | |||
Number of contracts | instrument | 8 | |||
Cash flow hedges | Forward-starting interest rate swaps | Entered into and terminated during period | ||||
Interest Rate Risk Management | ||||
Notional amount | $ 300 | |||
Number of contracts | instrument | 4 | |||
Designated | Fair value hedges | Interest rate swaps | ||||
Interest Rate Risk Management | ||||
Notional amount | $ 100 | $ 100 | ||
Number of contracts | instrument | 2 | 2 | ||
Duration | 2 years 11 months 1 day | 3 years 11 months 9 days | ||
Average variable rate (as a percent) | 6.00% | 5.83% | ||
Average fixed rate (as a percent) | 6.80% | 6.80% | ||
Designated | Fair value hedges | Interest rate swaps | Interest expense. | ||||
Interest Rate Risk Management | ||||
Gain/(Loss) on Swaps | $ 1 | $ 2 | ||
Gain/(Loss) on Borrowings | (1) | (2) | ||
Designated | Fair value hedges | Interest rate swaps | Other assets | ||||
Interest Rate Risk Management | ||||
Fair value of asset derivatives | 1 | |||
Designated | Cash flow hedges | Forward-starting interest rate swaps | ||||
Interest Rate Risk Management | ||||
Gain/(Loss) in AOCI on Derivatives (Effective Portion) | (51) | (49) | ||
Designated | Cash flow hedges | Forward-starting interest rate swaps | Interest expense. | ||||
Interest Rate Risk Management | ||||
Gain/(Loss) Reclassified from AOCI into Income (Effective Portion) | (1) | (1) | ||
Designated | Cash flow hedges | Forward-starting interest rate swaps | Other Comprehensive Loss | ||||
Interest Rate Risk Management | ||||
Gain/(Loss) in AOCI on Derivatives (Effective Portion) | 17 | 25 | ||
Designated | Cash flow hedges | Forward-starting interest rate swaps | Other long-term liabilities | ||||
Interest Rate Risk Management | ||||
Fair value of liability derivatives | 27 | 39 | ||
Designated | Cash flow hedges | Forward-starting interest rate swaps | Derivatives maturing August 2017 | ||||
Interest Rate Risk Management | ||||
Notional amount | $ 400 | $ 400 | ||
Number of contracts | instrument | 7 | 7 | ||
Designated | Cash flow hedges | Forward-starting interest rate swaps | Derivatives maturing October 2015 | ||||
Interest Rate Risk Management | ||||
Notional amount | $ 300 | |||
Number of contracts | instrument | 4 | |||
[1] | Amount is net of tax of $(2) in 2015, $(14) in 2014 and $(8) in 2013. |
DERIVATIVE FINANCIAL INSTRUME57
DERIVATIVE FINANCIAL INSTRUMENTS - MASTER NETTING AGREEMENTS (Details) - USD ($) $ in Millions | Jan. 30, 2016 | Jan. 31, 2015 |
Derivative Assets | ||
Cash Collateral | $ 0 | $ 0 |
Derivative Liabilities | ||
Cash Collateral | 0 | 0 |
Cash flow hedges | Forward-starting interest rate swaps | ||
Derivative Liabilities | ||
Gross Amount Recognized | 27 | 39 |
Net Amount Presented in the Balance Sheet | 27 | 39 |
Net Amount | 27 | $ 39 |
Fair value hedges | Interest rate swaps | ||
Derivative Assets | ||
Gross Amount Recognized | 1 | |
Net Amount Presented in the Balance Sheet | 1 | |
Net Amount | $ 1 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | |
Fair value of financial instruments carried at fair value | |||
Asset impairment charge | $ 46 | $ 37 | $ 39 |
Carrying Value | |||
Fair value of financial instruments carried at fair value | |||
Total debt | 11,396 | 11,026 | |
Long-term investments | 128 | 133 | |
Notes receivable | 145 | 98 | |
Carrying Value | Before impairment | |||
Fair value of financial instruments carried at fair value | |||
Long-Lived Assets | 53 | 59 | |
Fair value | |||
Fair value of financial instruments carried at fair value | |||
Total | 70 | 92 | |
Total debt | 12,344 | 12,378 | |
Long-term investments | 128 | 133 | |
Notes receivable | 145 | 98 | |
Significant Unobservable Inputs (Level 3) | |||
Fair value of financial instruments carried at fair value | |||
Total | 7 | 22 | |
Recurring | Fair value | |||
Fair value of financial instruments carried at fair value | |||
Trading Securities | 48 | 47 | |
Available-for-Sale Securities | 41 | 36 | |
Warrants | 26 | ||
Recurring | Fair value | Interest Rate Hedges | |||
Fair value of financial instruments carried at fair value | |||
Interest Rate Hedges | (26) | (39) | |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | |||
Fair value of financial instruments carried at fair value | |||
Trading Securities | 48 | 47 | |
Available-for-Sale Securities | 41 | 36 | |
Total | 89 | 83 | |
Unrealized gains on Available-for-Sale Securities | 5 | 8 | |
Recurring | Significant Other Observable Inputs (Level 2) | |||
Fair value of financial instruments carried at fair value | |||
Warrants | 26 | ||
Total | (26) | (13) | |
Recurring | Significant Other Observable Inputs (Level 2) | Interest Rate Hedges | |||
Fair value of financial instruments carried at fair value | |||
Interest Rate Hedges | (26) | (39) | |
Nonrecurring | Fair value | |||
Fair value of financial instruments carried at fair value | |||
Long-Lived Assets | 7 | 22 | |
Nonrecurring | Significant Unobservable Inputs (Level 3) | |||
Fair value of financial instruments carried at fair value | |||
Long-Lived Assets | $ 7 | $ 22 |
ACCUMULATED OTHER COMPREHENSI59
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - CHANGES IN AOCI BY COMPONENT (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | |
Accumulated other comprehensive income (loss) | |||
Balance at the beginning of the period | $ (812) | $ (464) | |
OCI before reclassifications | 78 | (371) | |
Amounts reclassified out of AOCI | 54 | 23 | |
Total other comprehensive income (loss) | 132 | (348) | $ 289 |
Balance at the end of the period | (680) | (812) | (464) |
OCI before reclassifications, tax | (2) | (14) | (8) |
Cash Flow Hedging Activities | |||
Accumulated other comprehensive income (loss) | |||
Balance at the beginning of the period | (49) | (25) | |
OCI before reclassifications | (3) | (25) | |
Amounts reclassified out of AOCI | 1 | 1 | |
Total other comprehensive income (loss) | (2) | (24) | |
Balance at the end of the period | (51) | (49) | (25) |
OCI before reclassifications, tax | (2) | (14) | |
Available for sale Securities | |||
Accumulated other comprehensive income (loss) | |||
Balance at the beginning of the period | 17 | 12 | |
OCI before reclassifications | 3 | 5 | |
Total other comprehensive income (loss) | 3 | 5 | |
Balance at the end of the period | 20 | 17 | 12 |
OCI before reclassifications, tax | 2 | 3 | |
Pension and Postretirement Defined Benefit Plans | |||
Accumulated other comprehensive income (loss) | |||
Balance at the beginning of the period | (780) | (451) | |
OCI before reclassifications | 78 | (351) | |
Amounts reclassified out of AOCI | 53 | 22 | |
Total other comprehensive income (loss) | 131 | (329) | |
Balance at the end of the period | (649) | (780) | $ (451) |
OCI before reclassifications, tax | 45 | (206) | |
Amounts reclassified out of AOCI, tax | $ 32 | $ 13 |
ACCUMULATED OTHER COMPREHENSI60
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - ITEMS RECLASSIFIED OUT OF AOCI (Details) - USD ($) $ in Millions | 3 Months Ended | 4 Months Ended | 12 Months Ended | ||||||||
Jan. 30, 2016 | Nov. 07, 2015 | Aug. 15, 2015 | Jan. 31, 2015 | Nov. 08, 2014 | Aug. 16, 2014 | May. 23, 2015 | May. 24, 2014 | Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | |
Reclassification out of AOCI and the related tax effects | |||||||||||
Amortization of unrealized gains and losses on cash flow hedging activities | $ (113) | $ (107) | $ (114) | $ (115) | $ (114) | $ (112) | $ (148) | $ (147) | $ (482) | $ (488) | $ (443) |
Amortization of amounts included in net periodic pension expense | 95 | 42 | 102 | ||||||||
Tax expense | (250) | (238) | (227) | (274) | (172) | (182) | (330) | (274) | (1,045) | (902) | (751) |
Net earnings attributable to The Kroger Co. | $ 559 | $ 428 | $ 433 | $ 518 | $ 362 | $ 347 | $ 619 | $ 501 | 2,039 | 1,728 | 1,519 |
Reclassification out of AOCI | |||||||||||
Reclassification out of AOCI and the related tax effects | |||||||||||
Net earnings attributable to The Kroger Co. | 54 | 23 | 63 | ||||||||
Reclassification out of AOCI | Cash Flow Hedging Activities | |||||||||||
Reclassification out of AOCI and the related tax effects | |||||||||||
Amortization of unrealized gains and losses on cash flow hedging activities | 1 | 1 | 2 | ||||||||
Tax expense | (1) | ||||||||||
Net earnings attributable to The Kroger Co. | 1 | 1 | 1 | ||||||||
Reclassification out of AOCI | Pension and Postretirement Defined Benefit Plans | |||||||||||
Reclassification out of AOCI and the related tax effects | |||||||||||
Amortization of amounts included in net periodic pension expense | 85 | 35 | 98 | ||||||||
Tax expense | (32) | (13) | (36) | ||||||||
Net earnings attributable to The Kroger Co. | $ 53 | $ 22 | $ 62 |
LEASES AND LEASE-FINANCED TRA61
LEASES AND LEASE-FINANCED TRANSACTIONS (Details) - USD ($) $ in Millions | 3 Months Ended | 4 Months Ended | 12 Months Ended | ||||||||
Jan. 30, 2016 | Nov. 07, 2015 | Aug. 15, 2015 | Jan. 31, 2015 | Nov. 08, 2014 | Aug. 16, 2014 | May. 23, 2015 | May. 24, 2014 | Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | |
Rent expense under operating leases | |||||||||||
Minimum rentals | $ 807 | $ 795 | $ 706 | ||||||||
Contingent payments | 18 | 16 | 13 | ||||||||
Tenant income | (102) | (104) | (106) | ||||||||
Total rent expense | $ 181 | $ 172 | $ 155 | $ 162 | $ 162 | $ 166 | $ 215 | $ 217 | 723 | $ 707 | $ 613 |
Capital Leases, Future minimum annual rentals and payments | |||||||||||
Capital Leases, 2016 | 103 | 103 | |||||||||
Capital Leases, 2017 | 72 | 72 | |||||||||
Capital Leases, 2018 | 62 | 62 | |||||||||
Capital Leases, 2019 | 57 | 57 | |||||||||
Capital Leases, 2020 | 52 | 52 | |||||||||
Capital Leases, Thereafter | 527 | 527 | |||||||||
Minimum capital lease annual rentals and payments | 873 | 873 | |||||||||
Less amount representing interest | 293 | 293 | |||||||||
Present value of net minimum lease payments under capital leases | 580 | 580 | |||||||||
Future minimum rentals under noncancellable subleases | 261 | 261 | |||||||||
Operating Leases, Future minimum annual rentals and payments | |||||||||||
Operating Leases, 2016 | 967 | 967 | |||||||||
Operating Leases, 2017 | 922 | 922 | |||||||||
Operating Leases, 2018 | 853 | 853 | |||||||||
Operating Leases, 2019 | 774 | 774 | |||||||||
Operating Leases, 2020 | 674 | 674 | |||||||||
Operating Leases, Thereafter | 4,199 | 4,199 | |||||||||
Minimum operating lease annual rentals and payments | 8,389 | 8,389 | |||||||||
Lease-Financed Transactions, Future minimum annual rentals and payments | |||||||||||
Lease-Financed Transactions, 2016 | 7 | 7 | |||||||||
Lease-Financed Transactions, 2017 | 7 | 7 | |||||||||
Lease-Financed Transactions, 2018 | 8 | 8 | |||||||||
Lease-Financed Transactions, 2019 | 8 | 8 | |||||||||
Lease-Financed Transactions, 2020 | 9 | 9 | |||||||||
Lease-Financed Transactions, Thereafter | 63 | 63 | |||||||||
Minimum lease-financed transactions annual rentals and payments | $ 102 | $ 102 | |||||||||
Minimum | |||||||||||
Leases and lease-financed transactions | |||||||||||
Lease term | 10 years | ||||||||||
Sublease term | 1 year | ||||||||||
Maximum | |||||||||||
Leases and lease-financed transactions | |||||||||||
Lease term | 20 years | ||||||||||
Sublease term | 20 years |
EARNINGS PER COMMON SHARE (Deta
EARNINGS PER COMMON SHARE (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 4 Months Ended | 12 Months Ended | ||||||||
Jan. 30, 2016 | Nov. 07, 2015 | Aug. 15, 2015 | Jan. 31, 2015 | Nov. 08, 2014 | Aug. 16, 2014 | May. 23, 2015 | May. 24, 2014 | Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | |
EARNINGS PER COMMON SHARE | |||||||||||
Net earnings attributable to The Kroger Co. per basic common share | $ 2,021 | $ 1,711 | $ 1,507 | ||||||||
Average number of common shares used in basic calculation | 966 | 965 | 963 | 972 | 972 | 970 | 969 | 1,002 | 966 | 981 | 1,028 |
Net earnings attributable to The Kroger Co. per basic common share | $ 0.57 | $ 0.44 | $ 0.44 | $ 0.53 | $ 0.37 | $ 0.35 | $ 0.63 | $ 0.50 | $ 2.09 | $ 1.74 | $ 1.47 |
Dilutive effect of stock options (in shares) | 14 | 12 | 12 | ||||||||
Net earnings attributable to The Kroger Co. per diluted common share | $ 2,021 | $ 1,711 | $ 1,507 | ||||||||
Average number of common shares used in diluted calculation | 980 | 979 | 977 | 987 | 984 | 982 | 983 | 1,014 | 980 | 993 | 1,040 |
Net earnings attributable to The Kroger Co. per diluted common share | $ 0.57 | $ 0.43 | $ 0.44 | $ 0.52 | $ 0.36 | $ 0.35 | $ 0.62 | $ 0.49 | $ 2.06 | $ 1.72 | $ 1.45 |
Undistributed and distributed earnings to participating securities | $ 18 | $ 17 | $ 12 | ||||||||
Shares excluded from the earnings per share calculation due to anti-dilutive effect on earnings per share | 1.9 | 4.6 | 4.7 |
STOCK OPTION PLANS - STOCK OPTI
STOCK OPTION PLANS - STOCK OPTIONS AND RESTRICTED STOCK (Details) $ / shares in Units, shares in Millions, $ in Millions | 12 Months Ended | ||
Jan. 30, 2016USD ($)$ / sharesshares | Jan. 31, 2015$ / sharesshares | Feb. 01, 2014$ / sharesshares | |
STOCK OPTION PLANS | |||
Frequency of equity grants made | at one of four meetings of its Board of Directors | ||
Stock options | |||
Stock Options Plans | |||
Expiration period from date of grant | 10 years | ||
Common stock available for future grants (in shares) | 37 | ||
Ratio at which shares available for stock options can be converted into shares available for restricted stock awards | 4 | ||
Shares subject to option | |||
Outstanding at the beginning of the period (in shares) | 40.8 | 43.3 | 53 |
Granted (in shares) | 3.4 | 8.4 | 8.4 |
Exercised (in shares) | (8.9) | (10.3) | (17.7) |
Canceled or Expired (in shares) | (0.4) | (0.6) | (0.4) |
Outstanding at the end of the period (in shares) | 34.9 | 40.8 | 43.3 |
Weighted-average exercise price | |||
Outstanding at the beginning of the period (in dollars per share) | $ / shares | $ 15.56 | $ 12.83 | $ 11.30 |
Granted (in dollars per share) | $ / shares | 38.40 | 24.71 | 18.84 |
Exercised (in dollars per share) | $ / shares | 13.54 | 11.56 | 11.11 |
Canceled or Expired (in dollars per share) | $ / shares | 19.98 | 15.56 | 12.74 |
Outstanding at the end of the period (in dollars per share) | $ / shares | $ 18.26 | 15.56 | 12.83 |
Options Outstanding and Exercisable | |||
Options Outstanding, Weighted-average remaining contractual life | 6 years 2 months 12 days | ||
Options Outstanding, Aggregate intrinsic value | $ | $ 719 | ||
Options Exercisable, Number of shares | 21.4 | ||
Options Exercisable, Weighted-average remaining contractual life | 5 years 18 days | ||
Options Exercisable, Weighted-average exercise price | $ / shares | $ 14.24 | ||
Options Exercisable, Aggregate intrinsic value | $ | $ 526 | ||
Options Expected to Vest | |||
Options Expected to Vest, Number of shares | 13.2 | ||
Options Expected to Vest, Weighted-average remaining contractual life | 8 years 7 days | ||
Options Expected to Vest, Weighted-average exercise price | $ / shares | $ 24.53 | ||
Options Expected to Vest, Aggregate intrinsic value | $ | $ 189 | ||
Weighted-average grant-date fair value | |||
Weighted-average grant date fair value of stock options granted in period (in dollars per share) | $ / shares | $ 9.78 | $ 5.98 | $ 4.49 |
Weighted average assumptions for grants awarded to option holders | |||
Weighted average expected volatility | 24.07% | 25.29% | 26.34% |
Weighed average risk-free interest rate | 2.12% | 2.06% | 1.87% |
Expected dividend yield | 1.20% | 1.51% | 1.82% |
Expected term (based on historical results) | 7 years 2 months 12 days | 6 years 7 months 6 days | 6 years 9 months 18 days |
Stock options | Minimum | |||
Stock Options Plans | |||
Vesting period from date of grant | 1 year | ||
Stock options | Maximum | |||
Stock Options Plans | |||
Vesting period from date of grant | 5 years | ||
Restricted stock | |||
Stock Options Plans | |||
Common stock available for future grants (in shares) | 21 | ||
Restricted shares outstanding | |||
Outstanding at the beginning of the period (in shares) | 10.2 | 9.6 | 8.6 |
Granted (in shares) | 3.2 | 6.1 | 6.3 |
Lapsed (in shares) | (5.4) | (5.2) | (5.1) |
Canceled or Expired (in shares) | (0.4) | (0.3) | (0.2) |
Outstanding at the end of the period (in shares) | 7.6 | 10.2 | 9.6 |
Weighted-average grant-date fair value | |||
Outstanding at the beginning of the period (in dollars per share) | $ / shares | $ 21.04 | $ 16.16 | $ 11.34 |
Granted (in dollars per share) | $ / shares | 38.34 | 24.76 | 18.84 |
Lapsed (in dollars per share) | $ / shares | 21.49 | 16.52 | 11.49 |
Canceled or Expired (in dollars per share) | $ / shares | 22.80 | 18.67 | 13.66 |
Outstanding at the end of the period (in dollars per share) | $ / shares | $ 28.01 | $ 21.04 | $ 16.16 |
Restricted stock | Minimum | |||
Stock Options Plans | |||
Vesting period from date of grant | 1 year | ||
Restricted stock | Maximum | |||
Stock Options Plans | |||
Vesting period from date of grant | 5 years |
STOCK OPTION PLANS - OPTIONS OU
STOCK OPTION PLANS - OPTIONS OUTSTANDING AND EXERCISABLE (Details) - USD ($) shares in Millions, $ in Millions | 12 Months Ended | ||
Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | |
STOCK OPTION PLANS | |||
Share-based employee compensation | $ 165 | $ 155 | $ 107 |
Stock option compensation | 31 | 32 | 24 |
Restricted shares compensation | 134 | 123 | 83 |
Intrinsic value of options exercised | 217 | 142 | 115 |
Cash received from the exercise of options | 120 | ||
Compensation expenses related to non-vested share-based compensation arrangements | $ 206 | ||
Weighted-average period for recognition of expenses related to non-vested share-based compensation arrangements | 2 years | ||
Total fair value of options vested | $ 33 | $ 26 | $ 20 |
Common stock repurchase from proceeds of stock option exercises (in shares) | 5 |
STOCK - COMMON STOCK, PREFERRED
STOCK - COMMON STOCK, PREFERRED STOCK AND REPURCHASES (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | Jun. 25, 2015 | Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 |
Preferred Shares | ||||
Preferred Stock, Shares Authorized | 5 | 5 | ||
Preferred stock, shares available for issuance | 2 | |||
Preferred shares, per share (in dollars per share) | $ 100 | $ 100 | ||
Common Shares | ||||
Common shares, shares authorized | 2,000 | 2,000 | ||
Common shares, par per share (in dollars per share) | $ 1 | $ 1 | ||
Stock split conversion ratio | 2 | |||
Common stock dividend rate percentage | 100.00% | |||
Common Stock Repurchase Program | ||||
Open market purchases under repurchase programs | $ 500 | $ 1,129 | $ 338 | |
Common stock repurchased from stock option proceeds | $ 203 | $ 154 | $ 271 |
COMPANY-SPONSORED BENEFIT PLA66
COMPANY-SPONSORED BENEFIT PLANS - AMOUNTS RECOGNIZED IN AOCI AND OTHER CHANGES IN OCI (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | |
Amounts recognized in AOCI (pre-tax): | |||
Net actuarial loss (gain) | $ 1,092 | $ 1,309 | |
Prior service cost (credit) | (65) | (74) | |
Total | 1,027 | 1,235 | |
Amounts in AOCI expected to be recognized as components of net periodic pension or postretirement benefit costs in the next fiscal year (pre-tax): | |||
Net actuarial loss (gain) | 53 | ||
Prior service cost (credit) | (8) | ||
Total | 45 | ||
Other changes recognized in other comprehensive income (pre-tax): | |||
Incurred net actuarial loss (gain) | (122) | 604 | $ (340) |
Amortization of prior service credit (cost) | 11 | 7 | 4 |
Amortization of net actuarial gain (loss) | (95) | (42) | (102) |
Other | (2) | (47) | (30) |
Total recognized in other comprehensive income (loss) | (208) | 522 | (468) |
Total recognized in net periodic benefit cost and other comprehensive income | (104) | 586 | (366) |
Pension Benefits | |||
Amounts recognized in AOCI (pre-tax): | |||
Net actuarial loss (gain) | 1,213 | 1,398 | |
Prior service cost (credit) | 1 | 1 | |
Total | 1,214 | 1,399 | |
Amounts in AOCI expected to be recognized as components of net periodic pension or postretirement benefit costs in the next fiscal year (pre-tax): | |||
Net actuarial loss (gain) | 62 | ||
Total | 62 | ||
Other changes recognized in other comprehensive income (pre-tax): | |||
Incurred net actuarial loss (gain) | (83) | 590 | (243) |
Amortization of net actuarial gain (loss) | (102) | (50) | (102) |
Total recognized in other comprehensive income (loss) | (185) | 540 | (345) |
Total recognized in net periodic benefit cost and other comprehensive income | (82) | 595 | (271) |
Other Benefits | |||
Amounts recognized in AOCI (pre-tax): | |||
Net actuarial loss (gain) | (121) | (89) | |
Prior service cost (credit) | (66) | (75) | |
Total | (187) | (164) | |
Amounts in AOCI expected to be recognized as components of net periodic pension or postretirement benefit costs in the next fiscal year (pre-tax): | |||
Net actuarial loss (gain) | (9) | ||
Prior service cost (credit) | (8) | ||
Total | (17) | ||
Other changes recognized in other comprehensive income (pre-tax): | |||
Incurred net actuarial loss (gain) | (39) | 14 | (97) |
Amortization of prior service credit (cost) | 11 | 7 | 4 |
Amortization of net actuarial gain (loss) | 7 | 8 | |
Other | (2) | (47) | (30) |
Total recognized in other comprehensive income (loss) | (23) | (18) | (123) |
Total recognized in net periodic benefit cost and other comprehensive income | $ (22) | $ (9) | $ (95) |
COMPANY-SPONSORED BENEFIT PLA67
COMPANY-SPONSORED BENEFIT PLANS - FUNDED STATUS (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | |
Change in plan assets: | |||
Other current liabilities | $ 31 | $ 29 | |
Qualified Plans | |||
Change in benefit obligation: | |||
Benefit obligations at beginning of fiscal year | 4,102 | 3,509 | |
Service cost | 62 | 48 | $ 40 |
Interest cost | 154 | 169 | 144 |
Actuarial (gain) loss | (411) | 539 | |
Benefits paid | (162) | (163) | |
Other | (17) | ||
Assumption of Roundy's benefit obligation | 194 | ||
Benefit obligations at end of fiscal year | 3,922 | 4,102 | 3,509 |
Change in plan assets: | |||
Fair value of plan assets at beginning of fiscal year | 3,189 | 3,135 | |
Actual return on plan assets | (124) | 217 | |
Employer contributions | 5 | ||
Benefits paid | (162) | (163) | |
Other | (18) | ||
Assumption of Roundy's plan assets | 155 | ||
Fair value of plan assets at end of fiscal year | 3,045 | 3,189 | 3,135 |
Funded status at end of fiscal year | (877) | (913) | |
Net liability recognized at end of fiscal year | (877) | (913) | |
Non-Qualified Plans | |||
Change in benefit obligation: | |||
Benefit obligations at beginning of fiscal year | 304 | 263 | |
Service cost | 3 | 3 | 3 |
Interest cost | 12 | 13 | 9 |
Actuarial (gain) loss | (17) | 40 | |
Benefits paid | (17) | (15) | |
Other | 3 | ||
Assumption of Roundy's benefit obligation | 2 | ||
Benefit obligations at end of fiscal year | 290 | 304 | 263 |
Change in plan assets: | |||
Employer contributions | 17 | 15 | |
Benefits paid | (17) | (15) | |
Funded status at end of fiscal year | (290) | (304) | |
Net liability recognized at end of fiscal year | (290) | (304) | |
Other Benefits | |||
Change in benefit obligation: | |||
Benefit obligations at beginning of fiscal year | 275 | 294 | |
Service cost | 10 | 11 | 17 |
Interest cost | 9 | 13 | 15 |
Plan participants' contributions | 10 | 11 | |
Actuarial (gain) loss | (39) | 14 | |
Benefits paid | (19) | (21) | |
Other | (2) | (47) | |
Benefit obligations at end of fiscal year | 244 | 275 | $ 294 |
Change in plan assets: | |||
Employer contributions | 9 | 10 | |
Plan participants' contributions | 10 | 11 | |
Benefits paid | (19) | (21) | |
Funded status at end of fiscal year | (244) | (275) | |
Net liability recognized at end of fiscal year | $ (244) | $ (275) |
COMPANY-SPONSORED BENEFIT PLA68
COMPANY-SPONSORED BENEFIT PLANS - ASSUMPTIONS (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | |
Weighted average assumptions used to determine pension benefits and other benefits | |||
The number of years in which the Company average annual return rate has been at the current rate | 20 years | ||
Average annual rate of return for the past 20 years (as a percent) | 7.99% | ||
Period of recognition of gains or losses on plan assets | 5 years | ||
Pension Benefits | |||
Weighted average assumptions used to determine pension benefits and other benefits | |||
Discount rate - Benefit obligation (as a percent) | 4.62% | 3.87% | 4.99% |
Discount rate - Net periodic benefit cost (as a percent) | 3.87% | 4.99% | 4.29% |
Expected long-term rate of return on plan assets (as a percent) | 7.44% | 7.44% | 8.50% |
Rate of compensation increase - Net periodic benefit cost (as a percent) | 2.85% | 2.86% | 2.77% |
Rate of compensation increase - Benefit obligation (as a percent) | 2.71% | 2.85% | 2.86% |
Increase in discount rate used to determine pension benefit obligation, as compared to prior year (in basis points) | 100 | ||
Decrease in pension benefit obligation due to change in discount rate | $ 438 | ||
Pension plan's average rate of return for the 10 calendar years ended December 31, net of all investment management fees and expenses (as a percent) | 6.47% | ||
The measurement period for the pension plan's average annual rate of return, rate in calendar years | 10 years | ||
Percentage decrease in value of all investments in Qualified Plans, net of investment management fees and expenses | 0.80% | ||
Other Benefits | |||
Weighted average assumptions used to determine pension benefits and other benefits | |||
Discount rate - Benefit obligation (as a percent) | 4.44% | 3.74% | 4.68% |
Discount rate - Net periodic benefit cost (as a percent) | 3.74% | 4.68% | 4.11% |
COMPANY-SPONSORED BENEFIT PLA69
COMPANY-SPONSORED BENEFIT PLANS - BENEFIT COST, PBO/ABO, FUTURE PAYMENTS, ASSET ALLOCATIONS (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | |
COMPANY-SPONSORED BENEFIT PLANS | |||
Expected contribution to employee 401(k) retirement savings accounts | $ 200 | ||
BENEFIT PLANS | |||
Estimated future employer contributions in next fiscal year | $ 80 | ||
Defined Benefit Plan, Assumed Health Care Cost Trend Rates | |||
Initial health care cost trend rate (as a percent) | 6.90% | ||
Ultimate health care cost trend rate (as a percent) | 4.50% | ||
One-percentage-point change in assumed health care cost trend rates | |||
Effect of a one-percentage-point increase to total of service and interest cost components | $ 3 | ||
Effect of a one-percentage-point decrease to total of service and interest cost components | (2) | ||
Effect of a one-percentage-point increase to post-retirement benefit obligation | 23 | ||
Effect of a one-percentage-point decrease to post-retirement benefit obligation | (20) | ||
Pension Benefits | |||
Estimated future benefit payments | |||
2,016 | 234 | ||
2,017 | 221 | ||
2,018 | 230 | ||
2,019 | 238 | ||
2,020 | 248 | ||
2021-2025 | $ 1,346 | ||
Target and actual pension plan asset allocations | |||
Target allocations (as a percent) | 100.00% | ||
Total actual allocations (as a percent) | 100.00% | 100.00% | |
Pension Benefits | Global equity securities | |||
Target and actual pension plan asset allocations | |||
Target allocations (as a percent) | 16.00% | ||
Total actual allocations (as a percent) | 14.90% | 13.40% | |
Pension Benefits | Emerging market equity securities | |||
Target and actual pension plan asset allocations | |||
Target allocations (as a percent) | 5.40% | ||
Total actual allocations (as a percent) | 5.20% | 5.80% | |
Pension Benefits | Investment grade debt securities | |||
Target and actual pension plan asset allocations | |||
Target allocations (as a percent) | 13.10% | ||
Total actual allocations (as a percent) | 11.30% | 11.20% | |
Pension Benefits | High yield debt securities | |||
Target and actual pension plan asset allocations | |||
Target allocations (as a percent) | 12.10% | ||
Total actual allocations (as a percent) | 11.90% | 12.50% | |
Pension Benefits | Private Equity | |||
Target and actual pension plan asset allocations | |||
Target allocations (as a percent) | 5.20% | ||
Total actual allocations (as a percent) | 7.40% | 6.60% | |
Pension Benefits | Hedge Funds | |||
Target and actual pension plan asset allocations | |||
Target allocations (as a percent) | 34.60% | ||
Total actual allocations (as a percent) | 36.00% | 37.50% | |
Pension Benefits | Real Estate | |||
Target and actual pension plan asset allocations | |||
Target allocations (as a percent) | 3.40% | ||
Total actual allocations (as a percent) | 3.90% | 3.50% | |
Pension Benefits | Other | |||
Target and actual pension plan asset allocations | |||
Target allocations (as a percent) | 10.20% | ||
Total actual allocations (as a percent) | 9.40% | 9.50% | |
Qualified Plans | |||
Components of net periodic benefit cost: | |||
Service cost | $ 62 | $ 48 | $ 40 |
Interest cost | 154 | 169 | 144 |
Expected return on plan assets | (230) | (228) | (224) |
Amortization of: | |||
Actuarial loss (gain) | 93 | 46 | 93 |
Net periodic benefit expense | 79 | 35 | 53 |
Projected benefit obligation ("PBO"), accumulated benefit obligation ("ABO") and the fair value of plan assets for all Company-sponsored pension plans: | |||
PBO at end of fiscal year | 3,922 | 4,102 | 3,509 |
ABO at end of fiscal year | 3,786 | 3,947 | |
Fair value of plan assets at end of year | 3,045 | 3,189 | 3,135 |
Non-Qualified Plans | |||
Components of net periodic benefit cost: | |||
Service cost | 3 | 3 | 3 |
Interest cost | 12 | 13 | 9 |
Amortization of: | |||
Actuarial loss (gain) | 9 | 4 | 9 |
Net periodic benefit expense | 24 | 20 | 21 |
Projected benefit obligation ("PBO"), accumulated benefit obligation ("ABO") and the fair value of plan assets for all Company-sponsored pension plans: | |||
PBO at end of fiscal year | 290 | 304 | 263 |
ABO at end of fiscal year | 280 | 297 | |
Other Benefits | |||
Components of net periodic benefit cost: | |||
Service cost | 10 | 11 | 17 |
Interest cost | 9 | 13 | 15 |
Amortization of: | |||
Prior service cost | (11) | (7) | (4) |
Actuarial loss (gain) | (7) | (8) | |
Net periodic benefit expense | 1 | 9 | 28 |
Projected benefit obligation ("PBO"), accumulated benefit obligation ("ABO") and the fair value of plan assets for all Company-sponsored pension plans: | |||
PBO at end of fiscal year | 244 | $ 275 | $ 294 |
Estimated future benefit payments | |||
2,016 | 15 | ||
2,017 | 16 | ||
2,018 | 17 | ||
2,019 | 18 | ||
2,020 | 19 | ||
2021-2025 | $ 105 |
COMPANY-SPONSORED BENEFIT PLA70
COMPANY-SPONSORED BENEFIT PLANS - FAIR VALUE OF PLAN ASSETS (Details) - USD ($) $ in Millions | Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 |
Fair value | |||
BENEFIT PLANS | |||
Fair value of plan assets | $ 3,045 | $ 3,189 | |
Fair value | Cash and cash equivalents | |||
BENEFIT PLANS | |||
Fair value of plan assets | 27 | 73 | |
Fair value | Corporate Stocks | |||
BENEFIT PLANS | |||
Fair value of plan assets | 231 | 294 | |
Fair value | Corporate Bonds | |||
BENEFIT PLANS | |||
Fair value of plan assets | 76 | 80 | |
Fair value | U.S. Government Securities | |||
BENEFIT PLANS | |||
Fair value of plan assets | 75 | 78 | |
Fair value | Mutual Funds/Collective Trusts | |||
BENEFIT PLANS | |||
Fair value of plan assets | 990 | 666 | |
Fair value | Partnerships/Joint Ventures | |||
BENEFIT PLANS | |||
Fair value of plan assets | 118 | 468 | |
Fair value | Hedge Funds | |||
BENEFIT PLANS | |||
Fair value of plan assets | 1,104 | 1,158 | |
Fair value | Private Equity | |||
BENEFIT PLANS | |||
Fair value of plan assets | 225 | 210 | |
Fair value | Real Estate | |||
BENEFIT PLANS | |||
Fair value of plan assets | 103 | 105 | |
Fair value | Other | |||
BENEFIT PLANS | |||
Fair value of plan assets | 96 | 57 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | |||
BENEFIT PLANS | |||
Fair value of plan assets | 347 | 490 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Cash and cash equivalents | |||
BENEFIT PLANS | |||
Fair value of plan assets | 27 | 73 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Corporate Stocks | |||
BENEFIT PLANS | |||
Fair value of plan assets | 231 | 294 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Mutual Funds/Collective Trusts | |||
BENEFIT PLANS | |||
Fair value of plan assets | 89 | 123 | |
Significant Other Observable Inputs (Level 2) | |||
BENEFIT PLANS | |||
Fair value of plan assets | 1,226 | 1,186 | |
Significant Other Observable Inputs (Level 2) | Corporate Bonds | |||
BENEFIT PLANS | |||
Fair value of plan assets | 76 | 80 | |
Significant Other Observable Inputs (Level 2) | U.S. Government Securities | |||
BENEFIT PLANS | |||
Fair value of plan assets | 75 | 78 | |
Significant Other Observable Inputs (Level 2) | Mutual Funds/Collective Trusts | |||
BENEFIT PLANS | |||
Fair value of plan assets | 861 | 503 | |
Significant Other Observable Inputs (Level 2) | Partnerships/Joint Ventures | |||
BENEFIT PLANS | |||
Fair value of plan assets | 118 | 468 | |
Significant Other Observable Inputs (Level 2) | Other | |||
BENEFIT PLANS | |||
Fair value of plan assets | 96 | 57 | |
Significant Unobservable Inputs (Level 3) | |||
BENEFIT PLANS | |||
Fair value of plan assets | 1,472 | 1,513 | |
Significant Unobservable Inputs (Level 3) | Mutual Funds/Collective Trusts | |||
BENEFIT PLANS | |||
Fair value of plan assets | 40 | 40 | |
Significant Unobservable Inputs (Level 3) | Hedge Funds | |||
BENEFIT PLANS | |||
Fair value of plan assets | 1,104 | 1,158 | $ 1,073 |
Significant Unobservable Inputs (Level 3) | Private Equity | |||
BENEFIT PLANS | |||
Fair value of plan assets | 225 | 210 | 243 |
Significant Unobservable Inputs (Level 3) | Real Estate | |||
BENEFIT PLANS | |||
Fair value of plan assets | $ 103 | $ 105 | $ 96 |
COMPANY-SPONSORED BENEFIT PLA71
COMPANY-SPONSORED BENEFIT PLANS - LEVEL 3 RECONCILIATION (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | |
COMPANY-SPONSORED BENEFIT PLANS | |||
Contribution to employee 401(k) retirement savings accounts | $ 196 | $ 177 | $ 148 |
Cost of other defined contribution plans | 5 | 5 | 5 |
Significant Unobservable Inputs (Level 3) | |||
Roll-forward of assets measured at fair value using Level 3 inputs | |||
Fair value of plan assets at beginning of fiscal year | 1,513 | ||
Fair value of plan assets at end of fiscal year | 1,472 | 1,513 | |
Hedge Funds | Significant Unobservable Inputs (Level 3) | |||
Roll-forward of assets measured at fair value using Level 3 inputs | |||
Fair value of plan assets at beginning of fiscal year | 1,158 | 1,073 | |
Contributions into Fund | 239 | 220 | |
Realized gains | 49 | 47 | |
Unrealized (losses) gains | (49) | 18 | |
Distributions | (294) | (257) | |
Reclass | 58 | ||
Other | 1 | (1) | |
Fair value of plan assets at end of fiscal year | 1,104 | 1,158 | 1,073 |
Private Equity | Significant Unobservable Inputs (Level 3) | |||
Roll-forward of assets measured at fair value using Level 3 inputs | |||
Fair value of plan assets at beginning of fiscal year | 210 | 243 | |
Contributions into Fund | 47 | 47 | |
Realized gains | 23 | 35 | |
Unrealized (losses) gains | (3) | (1) | |
Distributions | (50) | (54) | |
Reclass | (58) | ||
Other | (2) | (2) | |
Fair value of plan assets at end of fiscal year | 225 | 210 | 243 |
Real Estate | Significant Unobservable Inputs (Level 3) | |||
Roll-forward of assets measured at fair value using Level 3 inputs | |||
Fair value of plan assets at beginning of fiscal year | 105 | 96 | |
Contributions into Fund | 13 | 17 | |
Realized gains | 9 | 14 | |
Unrealized (losses) gains | 3 | 4 | |
Distributions | (26) | (25) | |
Other | (1) | (1) | |
Fair value of plan assets at end of fiscal year | 103 | 105 | 96 |
Collective Trusts | Significant Unobservable Inputs (Level 3) | |||
Roll-forward of assets measured at fair value using Level 3 inputs | |||
Fair value of plan assets at beginning of fiscal year | 40 | 39 | |
Realized gains | 1 | ||
Fair value of plan assets at end of fiscal year | $ 40 | $ 40 | $ 39 |
MULTI-EMPLOYER PENSION PLANS (D
MULTI-EMPLOYER PENSION PLANS (Details) $ in Millions | 3 Months Ended | 4 Months Ended | 12 Months Ended | ||
Jan. 31, 2015USD ($) | May. 24, 2014USD ($) | Jan. 30, 2016USD ($)item | Jan. 31, 2015USD ($) | Feb. 01, 2014USD ($) | |
MULTI-EMPLOYER PLANS | |||||
Employer contribution to multi-employer plans | $ 1,192 | $ 1,200 | $ 1,100 | ||
Red zone | Maximum | |||||
MULTI-EMPLOYER PLANS | |||||
Percentage of funded status | 65.00% | ||||
Yellow zone | Maximum | |||||
MULTI-EMPLOYER PLANS | |||||
Percentage of funded status | 80.00% | ||||
Green zone | Minimum | |||||
MULTI-EMPLOYER PLANS | |||||
Percentage of funded status | 80.00% | ||||
Multi-employer Pension Plan | |||||
MULTI-EMPLOYER PLANS | |||||
Employer contribution to multi-employer plans | $ 426 | 297 | 228 | ||
Multi-employer Pension Plan | SO CA UFCW Unions & Food Employers Joint Pension Trust Fund | |||||
MULTI-EMPLOYER PLANS | |||||
Employer contribution to multi-employer plans | $ 55 | $ 48 | $ 45 | ||
Minimum percentage of total contributions received by pension fund | 5.00% | 5.00% | 5.00% | 5.00% | |
Most significant collective bargaining agreements count | item | 2 | ||||
Multi-employer Pension Plan | Desert States Employers & UFCW Unions Pension Plan | |||||
MULTI-EMPLOYER PLANS | |||||
Employer contribution to multi-employer plans | $ 18 | $ 21 | $ 23 | ||
Minimum percentage of total contributions received by pension fund | 5.00% | 5.00% | 5.00% | 5.00% | |
Most significant collective bargaining agreements count | item | 1 | ||||
Multi-employer Pension Plan | Sound Retirement Trust (formerly Retail Clerks Pension Plan) | |||||
MULTI-EMPLOYER PLANS | |||||
Employer contribution to multi-employer plans | $ 17 | $ 15 | $ 13 | ||
Minimum percentage of total contributions received by pension fund | 5.00% | 5.00% | 5.00% | 5.00% | |
Most significant collective bargaining agreements count | item | 2 | ||||
Multi-employer Pension Plan | Rocky Mountain UFCW Unions and Employers Pension Plan | |||||
MULTI-EMPLOYER PLANS | |||||
Employer contribution to multi-employer plans | $ 17 | $ 17 | $ 17 | ||
Minimum percentage of total contributions received by pension fund | 5.00% | 5.00% | 5.00% | 5.00% | |
Most significant collective bargaining agreements count | item | 1 | ||||
Multi-employer Pension Plan | Oregon Retail Employees Pension Plan | |||||
MULTI-EMPLOYER PLANS | |||||
Employer contribution to multi-employer plans | $ 9 | $ 7 | $ 7 | ||
Minimum percentage of total contributions received by pension fund | 5.00% | 5.00% | 5.00% | 5.00% | |
Most significant collective bargaining agreements count | item | 3 | ||||
Multi-employer Pension Plan | Bakery and Confectionary Union & Industry International Pension Fund | |||||
MULTI-EMPLOYER PLANS | |||||
Employer contribution to multi-employer plans | $ 11 | $ 11 | $ 12 | ||
Minimum percentage of total contributions received by pension fund | 5.00% | 5.00% | 5.00% | 5.00% | |
Most significant collective bargaining agreements count | item | 4 | ||||
Multi-employer Pension Plan | Washington Meat Industry Pension Trust | |||||
MULTI-EMPLOYER PLANS | |||||
Employer contribution to multi-employer plans | $ 1 | $ 3 | |||
Minimum percentage of total contributions received by pension fund | 5.00% | 5.00% | 5.00% | 5.00% | |
Multi-employer Pension Plan | Retail Food Employers & UFCW Local 711 Pension | |||||
MULTI-EMPLOYER PLANS | |||||
Employer contribution to multi-employer plans | $ 9 | $ 9 | $ 8 | ||
Minimum percentage of total contributions received by pension fund | 5.00% | 5.00% | 5.00% | 5.00% | |
Most significant collective bargaining agreements count | item | 1 | ||||
Multi-employer Pension Plan | Denver Area Meat Cutters and Employers Pension Plan | |||||
MULTI-EMPLOYER PLANS | |||||
Employer contribution to multi-employer plans | $ 7 | $ 8 | $ 8 | ||
Minimum percentage of total contributions received by pension fund | 5.00% | 5.00% | 5.00% | 5.00% | |
Most significant collective bargaining agreements count | item | 1 | ||||
Multi-employer Pension Plan | United Food & Commercial Workers Intl Union - Industry Pension Fund | |||||
MULTI-EMPLOYER PLANS | |||||
Employer contribution to multi-employer plans | $ 35 | $ 33 | $ 33 | ||
Minimum percentage of total contributions received by pension fund | 5.00% | 5.00% | 5.00% | 5.00% | |
Most significant collective bargaining agreements count | item | 2 | ||||
Multi-employer Pension Plan | Western Conference of Teamsters Pension Plan | |||||
MULTI-EMPLOYER PLANS | |||||
Employer contribution to multi-employer plans | $ 31 | $ 30 | $ 31 | ||
Most significant collective bargaining agreements count | item | 5 | ||||
Multi-employer Pension Plan | Central States, Southeast & Southwest Areas Pension Plan | |||||
MULTI-EMPLOYER PLANS | |||||
Employer contribution to multi-employer plans | $ 16 | 15 | $ 15 | ||
Most significant collective bargaining agreements count | item | 3 | ||||
Multi-employer Pension Plan | UFCW Consolidated Pension Plan | |||||
MULTI-EMPLOYER PLANS | |||||
Charge (after-tax) related to pension plan agreements | $ 56 | ||||
Employer contribution to multi-employer plans | $ 15 | $ 190 | 70 | ||
Employer contributions accrued in period to multi-employer plans | $ 60 | ||||
Contribution expense | $ 130 | ||||
Minimum percentage of total contributions received by pension fund | 5.00% | 5.00% | 5.00% | 5.00% | |
Most significant collective bargaining agreements count | item | 8 | ||||
Multi-employer Pension Plan | Other | |||||
MULTI-EMPLOYER PLANS | |||||
Employer contribution to multi-employer plans | $ 11 | $ 12 | $ 13 |
QUARTERLY DATA (UNAUDITED) (Det
QUARTERLY DATA (UNAUDITED) (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 4 Months Ended | 12 Months Ended | ||||||||
Jan. 30, 2016 | Nov. 07, 2015 | Aug. 15, 2015 | Jan. 31, 2015 | Nov. 08, 2014 | Aug. 16, 2014 | May. 23, 2015 | May. 24, 2014 | Jan. 30, 2016 | Jan. 31, 2015 | Feb. 01, 2014 | |
Quarterly Financial Information | |||||||||||
Fiscal Period Duration | 84 days | 84 days | 84 days | 84 days | 84 days | 84 days | 112 days | 112 days | 364 days | 364 days | 364 days |
Sales | $ 26,165 | $ 25,075 | $ 25,539 | $ 25,207 | $ 24,987 | $ 25,310 | $ 33,051 | $ 32,961 | $ 109,830 | $ 108,465 | $ 98,375 |
Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below | 20,193 | 19,478 | 20,065 | 19,547 | 19,764 | 20,136 | 25,760 | 26,065 | 85,496 | 85,512 | 78,138 |
Operating, general and administrative | 4,355 | 4,169 | 4,068 | 4,119 | 3,954 | 3,920 | 5,354 | 5,168 | 17,946 | 17,161 | 15,196 |
Rent | 181 | 172 | 155 | 162 | 162 | 166 | 215 | 217 | 723 | 707 | 613 |
Depreciation and amortization | 508 | 484 | 477 | 467 | 456 | 444 | 620 | 581 | 2,089 | 1,948 | 1,703 |
Operating profit | 928 | 772 | 774 | 912 | 651 | 644 | 1,102 | 930 | 3,576 | 3,137 | 2,725 |
Interest expense | 113 | 107 | 114 | 115 | 114 | 112 | 148 | 147 | 482 | 488 | 443 |
Earnings before income tax expense | 815 | 665 | 660 | 797 | 537 | 532 | 954 | 783 | 3,094 | 2,649 | 2,282 |
Income tax expense | 250 | 238 | 227 | 274 | 172 | 182 | 330 | 274 | 1,045 | 902 | 751 |
Net earnings including noncontrolling interests | 565 | 427 | 433 | 523 | 365 | 350 | 624 | 509 | 2,049 | 1,747 | 1,531 |
Net earnings (loss) attributable to noncontrolling interests | 6 | (1) | 5 | 3 | 3 | 5 | 8 | 10 | 19 | 12 | |
Net earnings attributable to The Kroger Co. | $ 559 | $ 428 | $ 433 | $ 518 | $ 362 | $ 347 | $ 619 | $ 501 | $ 2,039 | $ 1,728 | $ 1,519 |
Net earnings attributable to The Kroger Co. per basic common share | $ 0.57 | $ 0.44 | $ 0.44 | $ 0.53 | $ 0.37 | $ 0.35 | $ 0.63 | $ 0.50 | $ 2.09 | $ 1.74 | $ 1.47 |
Average number of common shares used in basic calculation | 966 | 965 | 963 | 972 | 972 | 970 | 969 | 1,002 | 966 | 981 | 1,028 |
Net earnings attributable to The Kroger Co. per diluted common share | $ 0.57 | $ 0.43 | $ 0.44 | $ 0.52 | $ 0.36 | $ 0.35 | $ 0.62 | $ 0.49 | $ 2.06 | $ 1.72 | $ 1.45 |
Average number of common shares used in diluted calculation | 980 | 979 | 977 | 987 | 984 | 982 | 983 | 1,014 | 980 | 993 | 1,040 |
Dividends declared per common share | $ 0.105 | $ 0.105 | $ 0.105 | $ 0.093 | $ 0.093 | $ 0.083 | $ 0.093 | $ 0.083 | $ 0.408 | $ 0.35 | $ 0.315 |
OG&A expenses due to contributions to the company's charitable foundation | $ 60 | $ 25 | |||||||||
Income tax benefit due to certain tax items | $ 17 | ||||||||||
UFCW Consolidated Pension Plan | |||||||||||
Quarterly Financial Information | |||||||||||
Operating, general and administrative | $ 30 | $ 80 | $ 55 | ||||||||
Pension Benefits | |||||||||||
Quarterly Financial Information | |||||||||||
Operating, general and administrative | $ 87 |
SUBSEQUENT EVENT (Details)
SUBSEQUENT EVENT (Details) - Subsequent Event - Designated - Cash flow hedges - Forward-starting interest rate swaps $ in Millions | May. 21, 2016USD ($) |
SUBSEQUENT EVENT | |
Notional amount | $ 1,700 |
Derivative contracts entered into during first quarter of 2016 | |
SUBSEQUENT EVENT | |
Notional amount | $ 1,300 |