Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Nov. 04, 2017 | Dec. 04, 2017 | |
Document and Entity Information Abstract | ||
Entity Registrant Name | KROGER CO | |
Entity Central Index Key | 56,873 | |
Document Type | 10-Q | |
Document Period End Date | Nov. 4, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --02-03 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 881,361,794 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Nov. 04, 2017 | Nov. 05, 2016 | Nov. 04, 2017 | Nov. 05, 2016 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Sales | $ 27,749 | $ 26,557 | $ 91,631 | $ 87,726 |
Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below | 21,532 | 20,653 | 71,422 | 68,019 |
Operating, general and administrative | 4,708 | 4,443 | 15,606 | 14,695 |
Rent | 196 | 199 | 691 | 666 |
Depreciation and amortization | 573 | 549 | 1,871 | 1,768 |
Operating profit | 740 | 713 | 2,041 | 2,578 |
Interest expense | 136 | 124 | 453 | 396 |
Earnings before income tax expense | 604 | 589 | 1,588 | 2,182 |
Income tax expense | 215 | 206 | 552 | 727 |
Net earnings including noncontrolling interests | 389 | 383 | 1,036 | 1,455 |
Net loss attributable to noncontrolling interests | (8) | (8) | (17) | (14) |
Net earnings attributable to The Kroger Co. | $ 397 | $ 391 | $ 1,053 | $ 1,469 |
Net earnings attributable to The Kroger Co. per basic common share | $ 0.44 | $ 0.41 | $ 1.16 | $ 1.54 |
Average number of common shares used in basic calculation | 887 | 940 | 901 | 946 |
Net earnings attributable to The Kroger Co. per diluted common share | $ 0.44 | $ 0.41 | $ 1.15 | $ 1.52 |
Average number of common shares used in diluted calculation | 893 | 953 | 910 | 962 |
Dividends declared per common share | $ 0.125 | $ 0.120 | $ 0.370 | $ 0.345 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Nov. 04, 2017 | Nov. 05, 2016 | Nov. 04, 2017 | Nov. 05, 2016 | ||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||
Net earnings including noncontrolling interests | $ 389 | $ 383 | $ 1,036 | $ 1,455 | |
Other comprehensive income (loss) | |||||
Realized gains and losses on available for sale securities, net of income tax | [1] | (20) | |||
Amortization of amounts included in net periodic pension expense, net of income tax | [2] | 10 | 8 | 33 | 23 |
Unrealized gains and losses on cash flow hedging activities, net of income tax | [3] | 9 | 46 | (26) | (52) |
Amortization of unrealized gains and losses on cash flow hedging activities, net of income tax | [4] | 1 | 2 | 1 | |
Total other comprehensive income (loss) | 20 | 54 | 9 | (48) | |
Comprehensive income | 409 | 437 | 1,045 | 1,407 | |
Comprehensive loss attributable to noncontrolling interests | (8) | (8) | (17) | (14) | |
Comprehensive income attributable to The Kroger Co. | $ 417 | $ 445 | $ 1,062 | $ 1,421 | |
[1] | Amount is net of tax of $(16) for the first three quarters of 2016. | ||||
[2] | Amount is net of tax of $5 for the third quarter of 2017 and $4 for the third quarter of 2016. Amount is net of tax of $19 for the first three quarters of 2017 and $14 for the first three quarters of 2016. | ||||
[3] | Amount is net of tax of $5 for the third quarter of 2017 and $27 for the third quarter of 2016. Amount is net of tax of $(15) for the first three quarters of 2017 and $(31) for the first three quarters of 2016. | ||||
[4] | Amount is net of tax of $1 for the third quarter of 2017 and 2016. Amount is net of tax of $2 for the first three quarters of 2017 and $1 for the first three quarters of 2016. |
CONSOLIDATED STATEMENTS OF COM4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Nov. 04, 2017 | Nov. 05, 2016 | Nov. 04, 2017 | Nov. 05, 2016 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Realized gains and losses on available for sale securities, income tax | $ (16) | |||
Amortization of amounts included in net periodic pension expense, income tax | $ 5 | $ 4 | $ 19 | 14 |
Unrealized gains and losses on cash flow hedging activities, income tax | 5 | 27 | (15) | (31) |
Amortization of unrealized gains and losses on cash flow hedging activities, income tax | $ 1 | $ 1 | $ 2 | $ 1 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Nov. 04, 2017 | Jan. 28, 2017 |
Current assets | ||
Cash and temporary cash investments | $ 352 | $ 322 |
Store deposits in-transit | 1,163 | 910 |
Receivables | 1,452 | 1,649 |
FIFO inventory | 8,222 | 7,852 |
LIFO reserve | (1,305) | (1,291) |
Assets held for sale | 604 | |
Prepaid and other current assets | 437 | 898 |
Total current assets | 10,925 | 10,340 |
Property, plant and equipment, net | 20,966 | 21,016 |
Intangibles, net | 1,113 | 1,153 |
Goodwill | 3,035 | 3,031 |
Other assets | 989 | 965 |
Total Assets | 37,028 | 36,505 |
Current liabilities | ||
Current portion of long-term debt including obligations under capital leases and financing obligations | 1,729 | 2,252 |
Trade accounts payable | 6,307 | 5,818 |
Accrued salaries and wages | 1,074 | 1,234 |
Deferred income taxes | 251 | |
Liabilities held for sale | 259 | |
Other current liabilities | 3,521 | 3,305 |
Total current liabilities | 12,890 | 12,860 |
Long-term debt including obligations under capital leases and financing obligations | 13,118 | 11,825 |
Deferred income taxes | 2,452 | 1,927 |
Pension and postretirement benefit obligations | 522 | 1,524 |
Other long-term liabilities | 1,835 | 1,659 |
Total Liabilities | 30,817 | 29,795 |
Commitments and contingencies (see Note 7) | ||
SHAREHOLDERS’ EQUITY | ||
Preferred shares, $100 per share, 5 shares authorized and unissued | ||
Common shares, $1 par per share, 2,000 shares authorized; 1,918 shares issued in 2017 and 2016 | 1,918 | 1,918 |
Additional paid-in capital | 3,124 | 3,070 |
Accumulated other comprehensive loss | (706) | (715) |
Accumulated earnings | 16,263 | 15,543 |
Common shares in treasury, at cost, 1,037 shares in 2017 and 994 shares in 2016 | (14,364) | (13,118) |
Total Shareholders’ Equity - The Kroger Co. | 6,235 | 6,698 |
Noncontrolling interests | (24) | 12 |
Total Equity | 6,211 | 6,710 |
Total Liabilities and Equity | $ 37,028 | $ 36,505 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Millions | Nov. 04, 2017 | Jan. 28, 2017 |
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 | 1,037 | 994 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Nov. 04, 2017 | Nov. 05, 2016 | |
Cash Flows from Operating Activities: | ||
Net earnings including noncontrolling interests | $ 1,036 | $ 1,455 |
Adjustments to reconcile net earnings including noncontrolling interests to net cash provided by operating activities: | ||
Depreciation and amortization | 1,871 | 1,768 |
LIFO charge | 46 | 19 |
Stock-based employee compensation | 118 | 110 |
Expense for Company-sponsored pension plans | 68 | 62 |
Deferred income taxes | 267 | 5 |
Other | 5 | (27) |
Changes in operating assets and liabilities net of effects from mergers of businesses: | ||
Store deposits in-transit | (268) | (120) |
Receivables | 45 | 48 |
Inventories | (466) | (798) |
Prepaid and other current assets | 426 | 219 |
Trade accounts payable | 620 | 509 |
Accrued expenses | 26 | (144) |
Income taxes receivable and payable | 143 | 267 |
Contribution to Company-sponsored pension plans | (1,000) | |
Other | 117 | 83 |
Net cash provided by operating activities | 3,054 | 3,456 |
Cash Flows from Investing Activities: | ||
Payments for property and equipment, including payments for lease buyouts | (2,137) | (3,025) |
Proceeds from sale of assets | 120 | 114 |
Payments for acquisitions, net of cash acquired | (16) | (401) |
Other | (2) | 39 |
Net cash used by investing activities | (2,035) | (3,273) |
Cash Flows from Financing Activities: | ||
Proceeds from issuance of long-term debt | 1,503 | 1,785 |
Payments on long-term debt | (769) | (1,332) |
Net borrowings (payments) on commercial paper | (45) | 1,200 |
Dividends paid | (333) | (316) |
Proceeds from issuance of capital stock | 31 | 51 |
Treasury stock purchases | (1,292) | (1,401) |
Other | (84) | (73) |
Net cash used by financing activities | (989) | (86) |
Net increase in cash and temporary cash investments | 30 | 97 |
Cash and temporary cash investments: | ||
Beginning of year | 322 | 277 |
End of year | 352 | 374 |
Reconciliation of capital investments: | ||
Payments for property and equipment, including payments for lease buyouts | (2,137) | (3,025) |
Payments for lease buyouts | 9 | 5 |
Changes in construction-in-progress payables | (149) | 14 |
Total capital investments, excluding lease buyouts | (2,277) | (3,006) |
Disclosure of cash flow information: | ||
Cash paid during the year for interest | 469 | 410 |
Cash paid during the year for income taxes | $ 168 | $ 450 |
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 Loss | Accumulated Earnings | Noncontrolling Interest | Total |
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 | |||||
Issuance of common stock: | |||||||
Stock options exercised | $ 51 | 51 | |||||
Stock options exercised (in shares) | (4) | ||||||
Restricted stock issued | (111) | $ 55 | (56) | ||||
Restricted stock issued (in shares) | (2) | ||||||
Treasury stock activity: | |||||||
Treasury stock purchases, at cost | $ (1,319) | (1,319) | |||||
Treasury stock purchases, at cost (in shares) | 37 | ||||||
Stock options exchanged | $ (82) | (82) | |||||
Stock options exchanged (in shares) | 2 | ||||||
Share-based employee compensation | 110 | 110 | |||||
Other comprehensive income (loss), net of income tax of $6 in 2017 and $(32) in 2016 | (48) | (48) | |||||
Other | 60 | $ (63) | 54 | 51 | |||
Cash dividends declared ($0.37 in 2017 and $0.345 in 2016 per common share) | (330) | (330) | |||||
Net earnings including noncontrolling interests | 1,469 | (14) | 1,455 | ||||
Balances at Nov. 05, 2016 | $ 1,918 | 3,039 | $ (12,767) | (728) | 15,150 | 18 | 6,630 |
Balances (in shares) at Nov. 05, 2016 | 1,918 | 984 | |||||
Balances at Jan. 28, 2017 | $ 1,918 | 3,070 | $ (13,118) | (715) | 15,543 | 12 | 6,710 |
Balances (in shares) at Jan. 28, 2017 | 1,918 | 994 | |||||
Issuance of common stock: | |||||||
Stock options exercised | $ 31 | 31 | |||||
Stock options exercised (in shares) | (2) | ||||||
Restricted stock issued | (115) | $ 82 | (33) | ||||
Restricted stock issued (in shares) | (2) | ||||||
Treasury stock activity: | |||||||
Treasury stock purchases, at cost | $ (1,247) | (1,247) | |||||
Treasury stock purchases, at cost (in shares) | 45 | ||||||
Stock options exchanged | $ (45) | (45) | |||||
Stock options exchanged (in shares) | 2 | ||||||
Share-based employee compensation | 118 | 118 | |||||
Other comprehensive income (loss), net of income tax of $6 in 2017 and $(32) in 2016 | 9 | 9 | |||||
Other | 51 | $ (67) | (19) | (35) | |||
Cash dividends declared ($0.37 in 2017 and $0.345 in 2016 per common share) | (333) | (333) | |||||
Net earnings including noncontrolling interests | 1,053 | (17) | 1,036 | ||||
Balances at Nov. 04, 2017 | $ 1,918 | $ 3,124 | $ (14,364) | $ (706) | $ 16,263 | $ (24) | $ 6,211 |
Balances (in shares) at Nov. 04, 2017 | 1,918 | 1,037 |
CONSOLIDATED STATEMENTS OF CHA9
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY (Parenthetical) - USD ($) $ in Millions | 9 Months Ended | |
Nov. 04, 2017 | Nov. 05, 2016 | |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY | ||
Other comprehensive income (loss), income tax | $ 6 | $ (32) |
Cash dividends declared per common share (in dollars per share) | $ 0.370 | $ 0.345 |
ACCOUNTING POLICIES
ACCOUNTING POLICIES | 9 Months Ended |
Nov. 04, 2017 | |
ACCOUNTING POLICIES | |
ACCOUNTING POLICIES | 1. Basis of Presentation and Principles of Consolidation The accompanying financial statements include the consolidated accounts of The Kroger Co., its wholly-owned subsidiaries, and the variable interest entities in which the Company is the primary beneficiary. The January 28, 2017 balance sheet was derived from audited financial statements and, due to its summary nature, does not include all disclosures required by generally accepted accounting principles (“GAAP”). Significant intercompany transactions and balances have been eliminated. References to the “Company” in these Consolidated Financial Statements mean the consolidated company. In the opinion of management, the accompanying unaudited Consolidated Financial Statements include adjustments, all of which are of a normal, recurring nature that are necessary for a fair statement of results of operations for such periods but should not be considered as indicative of results for a full year. The financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted, pursuant to SEC regulations. Accordingly, the accompanying Consolidated Financial Statements should be read in conjunction with the financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended January 28, 2017. The unaudited information in the Consolidated Financial Statements for the third quarter and three quarters ended November 4, 2017 and November 5, 2016, includes the results of operations of the Company for the 1 2 and 40 -week periods then ended. Fair Value Measurements Fair value measurements are classified and disclosed in one of the following three categories: 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. The Company records 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 at approximated fair value. Certain other investments and derivatives are recorded as Level 1, 2 or 3 instruments. Refer to Note 2 for the disclosure of debt instrument fair values. |
DEBT OBLIGATIONS
DEBT OBLIGATIONS | 9 Months Ended |
Nov. 04, 2017 | |
DEBT OBLIGATIONS | |
DEBT OBLIGATIONS | 2. Long-term debt consists of: November 4, January 28, 2017 2017 1.50% to 8.00% Senior Notes due through 2048 $ 12,198 $ 11,311 5.63% to 12.75% Mortgages due in varying amounts through 2027 32 38 0.91% to 1.36% Commercial paper borrowings due through November 2017 1,380 1,425 Other 454 541 Total debt, excluding capital leases and financing obligations 14,064 13,315 Less current portion (1,677) (2,197) Total long-term debt, excluding capital leases and financing obligations $ 12,387 $ 11,118 In the second quarter of 2017, the Company issued $400 of senior notes due in fiscal year 2022 bearing an interest rate of 2.80%, $600 of senior notes due in fiscal year 2027 bearing an interest rate of 3.70% and $500 of senior notes due in fiscal year 2048 bearing an interest rate of 4.65%. Additionally, in the third quarter of 2017, the Company repaid, upon maturity, $600 of senior notes bearing an interest rate of 6.40%, with proceeds from the second quarter senior notes issuances. In connection with the senior note issuances, the Company also terminated forward-starting interest rate swap agreements with an aggregate notional amount of $600. 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 during the second quarter of 2017. Since these forward-starting interest rate swap agreements were classified as cash flow hedges, the unamortized loss of $20, $12 net of tax, has been deferred in Accumulated Other Comprehensive Loss, the Company will continue to amortize to earnings as the interest payments are made. In the third quarter of 2017, the Company entered into an amended and restated $2,750 unsecured revolving credit facility (the “Amended and Restated Credit Agreement”), with a termination date of August 29, 2022, unless extended as permitted under the Amended and Restated Credit Agreement. This Amended and Restated Credit Agreement amended the Company’s $2,750 credit facility that would otherwise have terminated on June 30, 2019. The notable changes from the previous agreement include: (1) the Company has the ability to increase the size of the Amended and Restated Credit Agreement by up to an additional $1,000, subject to certain conditions compared to $750 in the prior agreement; (2) the Company’s Public Debt Rating, as opposed to the Company’s Leverage Ratio, is now used as one of the factors in calculating the Company’s Interest Rate, Commitment Fee, and Letter of Credit Fees; (3) reduced annual Commitment and certain Letter of Credit Fees at the Company’s current Public Debt Rating. Public Debt Rating means, as of any date, the rating that has been most recently announced by either S&P or Moody’s, as the case may be, for any class of non-credit enhanced long-term senior unsecured debt issued by the Company. The financial covenants in the Amended and Restated Credit Agreement did not change compared to the prior credit agreement. 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 November 4, 2017 and January 28, 2017. At November 4, 2017, the fair value of total debt was $14,504 compared to a carrying value of $14,064. At January 28, 2017, the fair value of total debt was $13,905 compared to a carrying value of $13,315. |
BENEFIT PLANS
BENEFIT PLANS | 9 Months Ended |
Nov. 04, 2017 | |
BENEFIT PLANS | |
BENEFIT PLANS | 3. The following table provides the components of net periodic benefit cost for the Company-sponsored defined benefit pension plans and other post-retirement benefit plans for the third quarters of 2017 and 2016. Third Quarter Ended Pension Benefits Other Benefits November 4, November 5, November 4, November 5, 2017 2016 2017 2016 Components of net periodic benefit cost: Service cost $ — $ 14 $ 2 $ 2 Interest cost 42 44 3 2 Expected return on plan assets (54) (55) — — Amortization of: Prior service cost — — (2) (2) Actuarial loss (gain) 19 16 (2) (2) Other 1 — — — Net periodic benefit cost $ 8 $ 19 $ 1 $ — The following table provides the components of net periodic benefit cost for the Company-sponsored defined benefit pension plan and other post-retirement benefit plans for the first three quarters of 2017 and 2016. Three Quarters Ended Pension Benefits Other Benefits November 4, November 5, November 4, November 5, 2017 2016 2017 2016 Components of net periodic benefit cost: Service cost $ 42 $ 50 $ 7 $ 7 Interest cost 140 145 8 8 Expected return on plan assets (182) (183) — — Amortization of: Prior service cost — — (6) (6) Actuarial loss (gain) 65 50 (7) (7) Other 3 — — — Net periodic benefit cost $ 68 $ 62 $ 2 $ 2 Although the Company is not required to make any contributions to its Company-sponsored pension plans in 2017, in the third quarter of 2017, the Company contributed $1,000 to the Company-sponsored pension plans that will significantly address the underfunded position of the Company-sponsored pension plans. The $1,000 is deductible for tax purposes, resulting in a tax benefit of $375. The Company did not make any contributions to its Company-sponsored pension plans in the first three quarters of 2016. The Company contributed $173 and $167 to employee 401(k) retirement savings accounts in the first three quarters of 2017 and 2016, respectively. The Company also contributes to various multi-employer pension plans based on obligations arising from most of its collective bargaining agreements, which included an incremental $111, $69 net of tax, contribution to the UFCW Consolidated Pension Plan in the third quarter of 2017. These plans provide retirement benefits to participants based on their service to contributing employers. The Company recognizes expense in connection with these plans as contributions are funded. During the first quarter of 2017, the Company incurred a charge of $199, $126 net of tax, due to withdrawing from two multi-employer pension plans, which represents the Company’s best estimate of the withdrawal liability, absent demand letters from the multi-employer pension plans. Demand letters from the affected multi-employer pension plans may be received in 2017, or later, and the ultimate withdrawal liability may change from the currently estimated amount. Any future charge will be recorded in the period in which the change is identified. Based on ERISA regulations, the liability will be paid out in installments, which vary by plan, over a period of up to 20 years. The net present value of the liability was determined using a risk free interest rate. The charge was recorded in the ‘Operating, general and administrative’ (“OG&A”) caption in the Consolidated Statements of Operations and the liability was recorded in the ‘Other long-term liabilities’ caption in the Consolidated Balance Sheets. During the second quarter of 2016, the Company incurred a charge of $111, $71 net of tax, due to commitments arising from the restructuring of certain multi-employer pension plan obligations during the second quarter of 2016. |
EARNINGS PER COMMON SHARE
EARNINGS PER COMMON SHARE | 9 Months Ended |
Nov. 04, 2017 | |
EARNINGS PER COMMON SHARE | |
EARNINGS PER COMMON SHARE | 4. Net earnings attributable to The Kroger Co. per basic common share equal 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 equal 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: Third Quarter Ended Third Quarter Ended November 4, 2017 November 5, 2016 Per Per Earnings Shares Share Earnings Shares Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Net earnings attributable to The Kroger Co. per basic common share $ 393 887 $ 0.44 $ 388 940 $ 0.41 Dilutive effect of stock options 6 13 Net earnings attributable to The Kroger Co. per diluted common share $ 393 893 $ 0.44 $ 388 953 $ 0.41 Three Quarters Ended Three Quarters Ended November 4, 2017 November 5, 2016 Per Per Earnings Shares Share Earnings Shares Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Net earnings attributable to The Kroger Co. per basic common share $ 1,044 901 $ 1.16 $ 1,458 946 $ 1.54 Dilutive effect of stock options 9 16 Net earnings attributable to The Kroger Co. per diluted common share $ 1,044 910 $ 1.15 $ 1,458 962 $ 1.52 The Company had combined undistributed and distributed earnings to participating securities totaling $4 in the third quarter of 2017 and $3 in the third quarter of 2016. For the first three quarters of 2017 and 2016, the Company had combined undistributed and distributed earnings to participating securities of $9 and $11, respectively. The Company had options outstanding for approximately 26 million and 11 million shares during the third quarter of 2017 and 2016, respectively that 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 share. The Company had options outstanding for approximately 15 million shares in the first three quarters of 2017 and 7 million shares in the first three quarters of 2016 that 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 share. |
RECENTLY ADOPTED ACCOUNTING STA
RECENTLY ADOPTED ACCOUNTING STANDARDS | 9 Months Ended |
Nov. 04, 2017 | |
RECENTLY ADOPTED ACCOUNTING STANDARDS | |
RECENTLY ADOPTED ACCOUNTING STANDARDS | 5. In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.” This amendment requires deferred tax liabilities and assets to be classified as noncurrent in a classified statement of financial position. This amendment became effective for the Company beginning January 29, 2017, and was adopted prospectively in accordance with the standard. The implementation of this amendment resulted in the reclassification of current deferred tax liabilities as non-current and had no effect on the Company’s Consolidated Statements of Operations. |
RECENTLY ISSUED ACCOUNTING STAN
RECENTLY ISSUED ACCOUNTING STANDARDS | 9 Months Ended |
Nov. 04, 2017 | |
RECENTLY ISSUED ACCOUNTING STANDARDS | |
RECENTLY ISSUED ACCOUNTING STANDARDS | 6. In March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits (Topic 715),” which requires that the service cost component of pension and postretirement benefit costs be presented in the same line item as other current employee compensation costs and other components of those benefit costs be presented separately from the service cost component and outside a subtotal of income from operations, if presented. The ASU also requires that only the service cost component of pension and postretirement benefit costs is eligible for capitalization. The update is effective for annual periods beginning after December 15, 2017 and interim periods within that annual period. Application is retrospective for the presentation of the components of these benefit costs and prospective for the capitalization of only service costs. The Company does not expect application of this ASU to have a material impact on its Consolidated Financial Statements. In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”, as amended by several subsequent ASUs, which provides guidance for revenue recognition. The new standard’s overarching principle is that revenue must be recognized when goods and services are transferred to the customer in an amount that is proportionate to what has been delivered at that point and that reflects the consideration to which the company expects to be entitled 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. The Company formed a project team to assess and document the Company’s accounting policies related to the new revenue guidance. As of the end of the third quarter of 2017, the Company has nearly completed this assessment and documentation. Based on this project, the Company does not expect that the implementation of the new standard will have a material effect on the Company’s Consolidated Statements of Operations, Consolidated Balance Sheets or Consolidated Statements of Cash Flows. The Company intends to adopt the new standard on a modified retrospective basis and will be addressing new disclosures regarding revenue recognition policies as required by the new standard at adoption. As the Company completes its assessment, it is also identifying and preparing to implement changes to its accounting policies and practices, business processes, systems and controls to support the new revenue recognition and disclosure requirements. 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 for the Company in the first quarter of fiscal year ending February 1, 2020. Early adoption is permitted. The adoption of this ASU will result in a significant increase to the Company’s Consolidated Balance Sheets 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. This evaluation process includes reviewing all forms of leases, performing a completeness assessment over the lease population, analyzing the practical expedients and assessing opportunities to make certain changes to the Company’s lease accounting information technology system in order to determine the best implementation strategy. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Nov. 04, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 7. 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. 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 where an adverse outcome is probable. Nonetheless, assessing and predicting the outcomes of these matters involve 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. |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 9 Months Ended |
Nov. 04, 2017 | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 8. The following table represents the changes in AOCI by component for the first three quarters of 2016 and 2017: Pension and Cash Flow Postretirement Hedging Available for sale Defined Benefit Activities(1) Securities(1) Plans(1) Total(1) Balance at January 30, 2016 $ (51) $ 20 $ (649) $ (680) OCI before reclassifications(2) (52) (6) — (58) Amounts reclassified out of AOCI(3) 1 (14) 23 10 Net current-period OCI (51) (20) 23 (48) Balance at November 5, 2016 $ (102) $ — $ (626) $ (728) Balance at January 28, 2017 $ (2) $ — $ (713) $ (715) OCI before reclassifications(2) (26) — — (26) Amounts reclassified out of AOCI(3) 2 — 33 35 Net current-period OCI (24) — 33 9 Balance at November 4, 2017 $ (26) $ — $ (680) $ (706) (1) All amounts are net of tax. (2) Net of tax of $(31) for cash flow hedging activities and $(3) for available for sale securities for the first three quarters of 2016. Net of tax of $(15) for cash flow hedging activities for the first three quarters of 2017. (3) Net of tax of $1 for cash flow hedging activities, $(13) for available for sale securities and $1 4 for pension and postretirement defined benefit plans for the first three quarters of 2016. Net of tax of $ 2 for cash flow hedging activities and $ 19 for pension and postretirement defined benefit plans for the first three quarters of 2017. The following table represents the items reclassified out of AOCI and the related tax effects for the third quarter and first three quarters of 2017 and 2016: Third Quarter Ended Three Quarters Ended November 4, November 5, November 4, November 5, 2017 2016 2017 2016 Cash flow hedging activity items Amortization of gains and losses on cash flow hedging activities(1) $ 2 $ 1 $ 4 $ 2 Tax expense (1) (1) (2) (1) Net of tax 1 — 2 1 Available for sale security items Realized gains on available for sale securities(2) — — — (27) Tax expense — — — 13 Net of tax — — — (14) Pension and postretirement defined benefit plan items Amortization of amounts included in net periodic pension expense(3) 15 12 52 37 Tax expense (5) (4) (19) (14) Net of tax 10 8 33 23 Total reclassifications, net of tax $ 11 $ 8 $ 35 $ 10 (1) Reclassified from AOCI into interest expense. (2) Reclassified from AOCI into operating, general and administrative expense. (3) Reclassified from AOCI into merchandise costs and operating, general and administrative expense. These components are included in the computation of net periodic pension expense (see Note 3 for additional details). |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Nov. 04, 2017 | |
INCOME TAXES | |
INCOME TAXES | 9. The effective income tax rate was 35.6% in the third quarter of 2017, compared to 35.0% in the third quarter of 2016. The effective income tax rate was 34.8% for the first three quarters of 2017, compared to 33.3% for the first three quarters of 2016. The effective income tax rate for the third quarter of 2017 differed from the federal statutory rate primarily due to the effect of state income taxes partially offset by the utilization of tax credits and deductions. The effective income tax rate for the first three quarters of 2017 differed from the federal statutory rate due to the utilization of tax credits and deductions partially offset by the effect of state income taxes. The effective income tax rate for the third quarter of 2016 was equal to the federal statutory rate due to the utilization of tax credits and deductions, offset by the effect of state income taxes. The effective income tax rate for the first three quarters of 2016 differed from the federal statutory rate primarily due to the recognition of excess tax benefits related to share-based payments after the adoption of ASU 2016-09, “Compensation-Stock Compensation (Topic 718),” which caused a reduction in income tax expense of $42 in the first three quarters of 2016, and the benefit from tax credits and deductions, partially offset by the effect of state income taxes. |
VOLUNTARY RETIREMENT OFFERING
VOLUNTARY RETIREMENT OFFERING | 9 Months Ended |
Nov. 04, 2017 | |
VOLUNTARY RETIREMENT OFFERING | |
VOLUNTARY RETIREMENT OFFERING | 10. In 2016, the Company announced a Voluntary Retirement Offering (“VRO”) for certain non-store associates. Approximately 1,300 associates irrevocably accepted the VRO in the first quarter of 2017. Due to the employee acceptances, the Company recognized a VRO charge of $184, $117 net of tax, in the first quarter of 2017, which was comprised of $165 for severance and other benefits, as well as $19 of other non-cash charges. This charge was recorded in the OG&A caption within the Consolidated Statements of Operations. The Company paid $162 of the severance and other benefits in the first three quarters of 2017, and will fulfill all payment obligations by the end of the fourth quarter of 2017. |
HELD FOR SALE
HELD FOR SALE | 9 Months Ended |
Nov. 04, 2017 | |
HELD FOR SALE | |
HELD FOR SALE | 11. During the third quarter of 2017, the Company announced that as a result of a review of its assets, the Company has decided to explore strategic alternatives, including a potential sale, of its convenience store business. At November 4, 2017, certain assets and liabilities , primarily those related to the Company’s convenience store business, were classified as held for sale in the Consolidated Balance Sheet. The Company expects to complete the sale of these disposal groups within the next year. The businesses classified as held for sale will not be reported as discontinued operations as the dispositions do not represent a strategic shift that will have a major effect on the Company’s operations and financial results. The following table presents information related to the major classes of assets and liabilities that were classified as assets and liabilities held for sale in the Consolidated Balance Sheet as of November 4, 2017: November 4, (In millions) 2017 Assets held for sale: Cash and temporary cash investments $ 1 Store deposits in-transit 16 Receivables 55 FIFO inventory 96 LIFO reserve (34) Prepaid and other current assets 17 Property, plant and equipment, net 428 Intangibles, net 9 Goodwill 14 Other assets 2 Total assets held for sale $ 604 Liabilities held for sale: Trade accounts payable $ 130 Accrued salaries and wages 10 Other current liabilities 101 Other long-term liabilities 18 Total liabilities held for sale $ 259 |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 9 Months Ended |
Nov. 04, 2017 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 12. On December 5, 2017, the Company settled certain Company-sponsored pension plan obligations using existing assets of the plan. The Company expects to recognize a one-time non-cash settlement charge of approximately $400 in the fourth quarter of 2017, associated with the settlement of the Company’s obligations for the eligible participants’ pension balances that are distributed out of the plan via a transfer to other qualified retirement plan options, a lump sum payout, or the purchase of an annuity contract, based on each participant’s election. This charge will not have a cash tax effect in 2017. The actual amount of the settlement charge could vary based on final valuation of liabilities and assets transferred. |
ACCOUNTING POLICIES (Policies)
ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Nov. 04, 2017 | |
ACCOUNTING POLICIES | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The accompanying financial statements include the consolidated accounts of The Kroger Co., its wholly-owned subsidiaries, and the variable interest entities in which the Company is the primary beneficiary. The January 28, 2017 balance sheet was derived from audited financial statements and, due to its summary nature, does not include all disclosures required by generally accepted accounting principles (“GAAP”). Significant intercompany transactions and balances have been eliminated. References to the “Company” in these Consolidated Financial Statements mean the consolidated company. In the opinion of management, the accompanying unaudited Consolidated Financial Statements include adjustments, all of which are of a normal, recurring nature that are necessary for a fair statement of results of operations for such periods but should not be considered as indicative of results for a full year. The financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted, pursuant to SEC regulations. Accordingly, the accompanying Consolidated Financial Statements should be read in conjunction with the financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended January 28, 2017. The unaudited information in the Consolidated Financial Statements for the third quarter and three quarters ended November 4, 2017 and November 5, 2016, includes the results of operations of the Company for the 1 2 and 40 -week periods then ended. |
Fair Value Measurements | Fair Value Measurements Fair value measurements are classified and disclosed in one of the following three categories: 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. The Company records 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 at approximated fair value. Certain other investments and derivatives are recorded as Level 1, 2 or 3 instruments. Refer to Note 2 for the disclosure of debt instrument fair values. |
DEBT OBLIGATIONS (Tables)
DEBT OBLIGATIONS (Tables) | 9 Months Ended |
Nov. 04, 2017 | |
DEBT OBLIGATIONS | |
Schedule of long-term debt | November 4, January 28, 2017 2017 1.50% to 8.00% Senior Notes due through 2048 $ 12,198 $ 11,311 5.63% to 12.75% Mortgages due in varying amounts through 2027 32 38 0.91% to 1.36% Commercial paper borrowings due through November 2017 1,380 1,425 Other 454 541 Total debt, excluding capital leases and financing obligations 14,064 13,315 Less current portion (1,677) (2,197) Total long-term debt, excluding capital leases and financing obligations $ 12,387 $ 11,118 |
BENEFIT PLANS (Tables)
BENEFIT PLANS (Tables) | 9 Months Ended |
Nov. 04, 2017 | |
BENEFIT PLANS | |
Schedule of components of net periodic benefit cost | Third Quarter Ended Pension Benefits Other Benefits November 4, November 5, November 4, November 5, 2017 2016 2017 2016 Components of net periodic benefit cost: Service cost $ — $ 14 $ 2 $ 2 Interest cost 42 44 3 2 Expected return on plan assets (54) (55) — — Amortization of: Prior service cost — — (2) (2) Actuarial loss (gain) 19 16 (2) (2) Other 1 — — — Net periodic benefit cost $ 8 $ 19 $ 1 $ — The following table provides the components of net periodic benefit cost for the Company-sponsored defined benefit pension plan and other post-retirement benefit plans for the first three quarters of 2017 and 2016. Three Quarters Ended Pension Benefits Other Benefits November 4, November 5, November 4, November 5, 2017 2016 2017 2016 Components of net periodic benefit cost: Service cost $ 42 $ 50 $ 7 $ 7 Interest cost 140 145 8 8 Expected return on plan assets (182) (183) — — Amortization of: Prior service cost — — (6) (6) Actuarial loss (gain) 65 50 (7) (7) Other 3 — — — Net periodic benefit cost $ 68 $ 62 $ 2 $ 2 |
EARNINGS PER COMMON SHARE (Tabl
EARNINGS PER COMMON SHARE (Tables) | 9 Months Ended |
Nov. 04, 2017 | |
EARNINGS PER COMMON SHARE | |
Schedule of earnings per common and diluted shares | Third Quarter Ended Third Quarter Ended November 4, 2017 November 5, 2016 Per Per Earnings Shares Share Earnings Shares Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Net earnings attributable to The Kroger Co. per basic common share $ 393 887 $ 0.44 $ 388 940 $ 0.41 Dilutive effect of stock options 6 13 Net earnings attributable to The Kroger Co. per diluted common share $ 393 893 $ 0.44 $ 388 953 $ 0.41 Three Quarters Ended Three Quarters Ended November 4, 2017 November 5, 2016 Per Per Earnings Shares Share Earnings Shares Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Net earnings attributable to The Kroger Co. per basic common share $ 1,044 901 $ 1.16 $ 1,458 946 $ 1.54 Dilutive effect of stock options 9 16 Net earnings attributable to The Kroger Co. per diluted common share $ 1,044 910 $ 1.15 $ 1,458 962 $ 1.52 |
ACCUMULATED OTHER COMPREHENSI26
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 9 Months Ended |
Nov. 04, 2017 | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | |
Schedule of changes in AOCI by component | Pension and Cash Flow Postretirement Hedging Available for sale Defined Benefit Activities(1) Securities(1) Plans(1) Total(1) Balance at January 30, 2016 $ (51) $ 20 $ (649) $ (680) OCI before reclassifications(2) (52) (6) — (58) Amounts reclassified out of AOCI(3) 1 (14) 23 10 Net current-period OCI (51) (20) 23 (48) Balance at November 5, 2016 $ (102) $ — $ (626) $ (728) Balance at January 28, 2017 $ (2) $ — $ (713) $ (715) OCI before reclassifications(2) (26) — — (26) Amounts reclassified out of AOCI(3) 2 — 33 35 Net current-period OCI (24) — 33 9 Balance at November 4, 2017 $ (26) $ — $ (680) $ (706) (1) All amounts are net of tax. (2) Net of tax of $(31) for cash flow hedging activities and $(3) for available for sale securities for the first three quarters of 2016. Net of tax of $(15) for cash flow hedging activities for the first three quarters of 2017. (3) Net of tax of $1 for cash flow hedging activities, $(13) for available for sale securities and $1 4 for pension and postretirement defined benefit plans for the first three quarters of 2016. Net of tax of $ 2 for cash flow hedging activities and $ 19 for pension and postretirement defined benefit plans for the first three quarters of 2017. |
Schedule of items reclassified out of AOCI and the related tax effects | Third Quarter Ended Three Quarters Ended November 4, November 5, November 4, November 5, 2017 2016 2017 2016 Cash flow hedging activity items Amortization of gains and losses on cash flow hedging activities(1) $ 2 $ 1 $ 4 $ 2 Tax expense (1) (1) (2) (1) Net of tax 1 — 2 1 Available for sale security items Realized gains on available for sale securities(2) — — — (27) Tax expense — — — 13 Net of tax — — — (14) Pension and postretirement defined benefit plan items Amortization of amounts included in net periodic pension expense(3) 15 12 52 37 Tax expense (5) (4) (19) (14) Net of tax 10 8 33 23 Total reclassifications, net of tax $ 11 $ 8 $ 35 $ 10 (1) Reclassified from AOCI into interest expense. (2) Reclassified from AOCI into operating, general and administrative expense. (3) Reclassified from AOCI into merchandise costs and operating, general and administrative expense. These components are included in the computation of net periodic pension expense (see Note 3 for additional details). |
HELD FOR SALE (Tables)
HELD FOR SALE (Tables) | 9 Months Ended |
Nov. 04, 2017 | |
HELD FOR SALE | |
Schedule of assets and liabilities that were classified as assets and liabilities held for sale | November 4, (In millions) 2017 Assets held for sale: Cash and temporary cash investments $ 1 Store deposits in-transit 16 Receivables 55 FIFO inventory 96 LIFO reserve (34) Prepaid and other current assets 17 Property, plant and equipment, net 428 Intangibles, net 9 Goodwill 14 Other assets 2 Total assets held for sale $ 604 Liabilities held for sale: Trade accounts payable $ 130 Accrued salaries and wages 10 Other current liabilities 101 Other long-term liabilities 18 Total liabilities held for sale $ 259 |
ACCOUNTING POLICIES - POLICIES
ACCOUNTING POLICIES - POLICIES (Details) | 3 Months Ended | 9 Months Ended | ||
Nov. 04, 2017 | Nov. 05, 2016 | Nov. 04, 2017 | Nov. 05, 2016 | |
Fiscal Year | ||||
Length of fiscal period | 84 days | 84 days | 280 days | 280 days |
DEBT OBLIGATIONS (Details)
DEBT OBLIGATIONS (Details) - USD ($) $ in Millions | 3 Months Ended | ||||
Nov. 04, 2017 | Aug. 29, 2017 | Aug. 28, 2017 | Aug. 12, 2017 | Jan. 28, 2017 | |
Debt | |||||
Total debt, excluding capital leases and financing obligations | $ 14,064 | $ 13,315 | |||
Less current portion | (1,677) | (2,197) | |||
Total long-term debt, excluding capital leases and financing obligations | 12,387 | 11,118 | |||
Unamortized loss on cash flow hedging activities, net of income tax | 706 | 715 | |||
Fair value of total debt | 14,504 | 13,905 | |||
Terminated hedge | Cash Flow Hedging Activities | |||||
Debt | |||||
Notional amount | 600 | ||||
Unamortized loss on cash flow hedging activities, before income tax | 20 | ||||
Unamortized loss on cash flow hedging activities, net of income tax | 12 | ||||
Senior Notes due through 2048 | |||||
Debt | |||||
Total debt, excluding capital leases and financing obligations | $ 12,198 | 11,311 | |||
Senior Notes due through 2048 | Minimum | |||||
Debt | |||||
Interest rate (as a percent) | 1.50% | ||||
Senior Notes due through 2048 | Maximum | |||||
Debt | |||||
Interest rate (as a percent) | 8.00% | ||||
Senior notes 2.80% due 2022 | |||||
Debt | |||||
New issue of senior notes | $ 400 | ||||
Interest rate (as a percent) | 2.80% | ||||
Senior notes 3.70% due 2027 | |||||
Debt | |||||
New issue of senior notes | $ 600 | ||||
Interest rate (as a percent) | 3.70% | ||||
Senior notes 4.65% due 2048 | |||||
Debt | |||||
New issue of senior notes | $ 500 | ||||
Interest rate (as a percent) | 4.65% | ||||
Senior Notes 6.40% | |||||
Debt | |||||
Repayment of debt | $ 600 | ||||
Interest rate (as a percent) | 6.40% | ||||
Mortgages due in varying amounts through 2027 | |||||
Debt | |||||
Total debt, excluding capital leases and financing obligations | $ 32 | 38 | |||
Mortgages due in varying amounts through 2027 | Minimum | |||||
Debt | |||||
Interest rate (as a percent) | 5.63% | ||||
Mortgages due in varying amounts through 2027 | Maximum | |||||
Debt | |||||
Interest rate (as a percent) | 12.75% | ||||
Commercial paper borrowings due through November 2017 | |||||
Debt | |||||
Total debt, excluding capital leases and financing obligations | $ 1,380 | 1,425 | |||
Commercial paper borrowings due through November 2017 | Minimum | |||||
Debt | |||||
Interest rate (as a percent) | 0.91% | ||||
Commercial paper borrowings due through November 2017 | Maximum | |||||
Debt | |||||
Interest rate (as a percent) | 1.36% | ||||
Other | |||||
Debt | |||||
Total debt, excluding capital leases and financing obligations | $ 454 | $ 541 | |||
Unsecured revolving credit facility | Amended and Restated Credit Agreement | |||||
Debt | |||||
Maximum borrowing capacity | $ 2,750 | ||||
Additional borrowing capacity | $ 1,000 | ||||
Unsecured revolving credit facility | Prior Credit Agreement | |||||
Debt | |||||
Maximum borrowing capacity | $ 2,750 | ||||
Additional borrowing capacity | $ 750 |
BENEFIT PLANS - COMPONENTS OF N
BENEFIT PLANS - COMPONENTS OF NET PERIODIC BENEFIT COSTS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Nov. 04, 2017 | Nov. 05, 2016 | Nov. 04, 2017 | Nov. 05, 2016 | |
Amortization of: | ||||
Contributions into Fund | $ 1,000 | |||
Contribution into fund, tax benefit | 375 | |||
Pension Benefits | ||||
Components of net periodic benefit cost: | ||||
Service cost | $ 14 | $ 42 | $ 50 | |
Interest cost | 42 | 44 | 140 | 145 |
Expected return on plan assets | (54) | (55) | (182) | (183) |
Amortization of: | ||||
Actuarial loss (gain) | 19 | 16 | 65 | 50 |
Other | 1 | 3 | ||
Net periodic benefit cost | 8 | 19 | 68 | 62 |
Other Benefits | ||||
Components of net periodic benefit cost: | ||||
Service cost | 2 | 2 | 7 | 7 |
Interest cost | 3 | 2 | 8 | 8 |
Amortization of: | ||||
Prior service cost | (2) | (2) | (6) | (6) |
Actuarial loss (gain) | (2) | $ (2) | (7) | (7) |
Net periodic benefit cost | $ 1 | $ 2 | $ 2 |
BENEFIT PLANS - DEFINED CONTRIB
BENEFIT PLANS - DEFINED CONTRIBUTION PLAN INFORMATION (Details) - USD ($) $ in Millions | 9 Months Ended | |
Nov. 04, 2017 | Nov. 05, 2016 | |
BENEFIT PLANS | ||
Contribution to 401(k) retirement savings accounts | $ 173 | $ 167 |
BENEFIT PLANS - MULTI EMPLOYER
BENEFIT PLANS - MULTI EMPLOYER PENSION PLAN OBLIGATIONS (Details) - Pension Fund $ in Millions | 3 Months Ended | 4 Months Ended | |
Nov. 04, 2017USD ($) | Aug. 13, 2016USD ($) | May 20, 2017USD ($)item | |
Multiemployer Plans | |||
Charge (before-tax) related to pension plan agreements | $ 111 | $ 199 | |
Charge (after-tax) related to pension plan agreements | $ 71 | $ 126 | |
Number of multi-employer pension plans withdrawn | item | 2 | ||
Multi-employer pension plan liability payout period | 20 years | ||
United Food and Commercial Workers International Union (UFCW) | |||
Multiemployer Plans | |||
Employer contribution to multi-employer benefit plans | $ 111 | ||
Employer contribution to multi-employer benefit plans, net of tax | $ 69 |
EARNINGS PER COMMON SHARE (Deta
EARNINGS PER COMMON SHARE (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Nov. 04, 2017 | Nov. 05, 2016 | Nov. 04, 2017 | Nov. 05, 2016 | |
EARNINGS PER COMMON SHARE | ||||
Net earnings numerator | $ 393 | $ 388 | $ 1,044 | $ 1,458 |
Average number of common shares used in basic calculation | 887 | 940 | 901 | 946 |
Net earnings attributable to The Kroger Co. per basic common share | $ 0.44 | $ 0.41 | $ 1.16 | $ 1.54 |
Dilutive effect of stock options (in shares) | 6 | 13 | 9 | 16 |
Average number of common shares used in diluted calculation | 893 | 953 | 910 | 962 |
Net earnings attributable to The Kroger Co. per diluted common share | $ 0.44 | $ 0.41 | $ 1.15 | $ 1.52 |
Undistributed and distributed earnings to participating securities | $ 4 | $ 3 | $ 9 | $ 11 |
Shares excluded from the earnings per share calculation due to anti-dilutive effect on earnings per share | 26 | 11 | 15 | 7 |
ACCUMULATED OTHER COMPREHENSI34
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - CHANGES IN AOCI BY COMPONENT (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Nov. 04, 2017 | Nov. 05, 2016 | Nov. 04, 2017 | Nov. 05, 2016 | |
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Balance at the beginning of the period | $ 6,698 | |||
Amounts reclassified out of AOCI | $ 11 | $ 8 | 35 | $ 10 |
Total other comprehensive income (loss) | 20 | 54 | 9 | (48) |
Balance at the end of the period | 6,235 | 6,235 | ||
Accumulated Other Comprehensive Loss | ||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Balance at the beginning of the period | (715) | (680) | ||
OCI before reclassifications | (26) | (58) | ||
Amounts reclassified out of AOCI | 35 | 10 | ||
Total other comprehensive income (loss) | 9 | (48) | ||
Balance at the end of the period | (706) | (728) | (706) | (728) |
Cash Flow Hedging Activities | ||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Balance at the beginning of the period | (2) | (51) | ||
OCI before reclassifications | (26) | (52) | ||
Amounts reclassified out of AOCI | 2 | 1 | ||
Total other comprehensive income (loss) | (24) | (51) | ||
Balance at the end of the period | (26) | (102) | (26) | (102) |
OCI before reclassifications, tax | (15) | (31) | ||
Amounts reclassified out of AOCI, tax | 2 | 1 | ||
Available for sale Securities | ||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Balance at the beginning of the period | 20 | |||
OCI before reclassifications | (6) | |||
Amounts reclassified out of AOCI | (14) | |||
Total other comprehensive income (loss) | (20) | |||
OCI before reclassifications, tax | (3) | |||
Amounts reclassified out of AOCI, tax | (13) | |||
Pension and Postretirement Defined Benefit Plans | ||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Balance at the beginning of the period | (713) | (649) | ||
Amounts reclassified out of AOCI | 10 | 8 | 33 | 23 |
Total other comprehensive income (loss) | 33 | 23 | ||
Balance at the end of the period | (680) | (626) | (680) | (626) |
Amounts reclassified out of AOCI, tax | $ 5 | $ 4 | $ 19 | $ 14 |
ACCUMULATED OTHER COMPREHENSI35
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - ITEMS RECLASSIFIED OUT OF AOCI (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Nov. 04, 2017 | Nov. 05, 2016 | Nov. 04, 2017 | Nov. 05, 2016 | |
Reclassification out of AOCI and the related tax effects | ||||
Amortization of gains and losses on cash flow hedging activities | $ 136 | $ 124 | $ 453 | $ 396 |
Realized gains on available for sale securities | 4,708 | 4,443 | 15,606 | 14,695 |
Tax expense | 215 | 206 | 552 | 727 |
Net of tax | (397) | (391) | (1,053) | (1,469) |
Total reclassifications, net of tax | 11 | 8 | 35 | 10 |
Cash Flow Hedging Activities | ||||
Reclassification out of AOCI and the related tax effects | ||||
Tax expense | (2) | (1) | ||
Total reclassifications, net of tax | 2 | 1 | ||
Available for sale Securities | ||||
Reclassification out of AOCI and the related tax effects | ||||
Tax expense | 13 | |||
Total reclassifications, net of tax | (14) | |||
Pension and Postretirement Defined Benefit Plans | ||||
Reclassification out of AOCI and the related tax effects | ||||
Amortization of amounts included in net periodic pension expense | 15 | 12 | 52 | 37 |
Tax expense | (5) | (4) | (19) | (14) |
Total reclassifications, net of tax | 10 | 8 | 33 | 23 |
Reclassification out of AOCI | Cash Flow Hedging Activities | ||||
Reclassification out of AOCI and the related tax effects | ||||
Amortization of gains and losses on cash flow hedging activities | 2 | 1 | 4 | 2 |
Tax expense | (1) | $ (1) | (2) | (1) |
Net of tax | $ 1 | $ 2 | 1 | |
Reclassification out of AOCI | Available for sale Securities | ||||
Reclassification out of AOCI and the related tax effects | ||||
Realized gains on available for sale securities | (27) | |||
Tax expense | 13 | |||
Net of tax | $ (14) |
INCOME TAXES - EFFECTIVE INCOME
INCOME TAXES - EFFECTIVE INCOME TAX RATE (Details) | 3 Months Ended | 9 Months Ended | ||
Nov. 04, 2017 | Nov. 05, 2016 | Nov. 04, 2017 | Nov. 05, 2016 | |
INCOME TAXES | ||||
Effective income tax rate (as a percent) | 35.60% | 35.00% | 34.80% | 33.30% |
INCOME TAXES - ASU 2016-09 (Det
INCOME TAXES - ASU 2016-09 (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Nov. 04, 2017 | Nov. 05, 2016 | Nov. 04, 2017 | Nov. 05, 2016 | |
Recently adopted accounting standards | ||||
Tax expense | $ (215) | $ (206) | $ (552) | $ (727) |
Accounting Standards Update 2016-09 | Adjustment | ||||
Recently adopted accounting standards | ||||
Tax expense | $ 42 |
VOLUNTARY RETIREMENT OFFERING (
VOLUNTARY RETIREMENT OFFERING (Details) $ in Millions | 4 Months Ended | 9 Months Ended |
May 20, 2017USD ($)employee | Nov. 04, 2017USD ($) | |
VOLUNTARY RETIREMENT OFFERING | ||
Number of approximate associates that accepted Voluntary Retirement Offer | employee | 1,300 | |
VRO charge, before-tax | $ 184 | |
VRO charge, net of tax | 117 | |
VRO severance costs and other benefits | 165 | |
VRO other non-cash expense | $ 19 | |
VRO lump sum cash payments | $ 162 |
HELD FOR SALE (Details)
HELD FOR SALE (Details) $ in Millions | Nov. 04, 2017USD ($) |
Assets held for sale: | |
Total assets held for sale | $ 604 |
Liabilities held for sale: | |
Total liabilities held for sale | 259 |
Convenience Stores Business | Disposal Group, Held-for-sale, Not Discontinued Operations | |
Assets held for sale: | |
Cash and temporary cash investments | 1 |
Store deposits in transit | 16 |
Receivables | 55 |
FIFO inventory | 96 |
LIFO reserve | (34) |
Prepaid and other current assets | 17 |
Property, plant and equipment, net | 428 |
Intangibles, net | 9 |
Goodwill | 14 |
Other assets | 2 |
Total assets held for sale | 604 |
Liabilities held for sale: | |
Trade accounts payable | 130 |
Accrued salaries and wages | 10 |
Other current liabilities | 101 |
Other long-term liabilities | 18 |
Total liabilities held for sale | $ 259 |
SUBSEQUENT EVENT (Details)
SUBSEQUENT EVENT (Details) $ in Millions | 3 Months Ended |
Feb. 03, 2018USD ($) | |
Forecast | Subsequent event | |
SUBSEQUENT EVENTS | |
Non-cash expense for settlement of obligations for eligible participants' pension balances | $ 400 |