EXHIBIT 99.2
-------------
The Kroger Co. Savings Plan
Report On Audits Of Financial Statements And Supplemental Schedules
For The Years Ended December 31, 1996, 1995 and 1994
The Kroger Co. Savings Plan
Index To Financial Statements
December 31, 1996
Report of Independent Accountants
Statement of Net Assets Available
For Plan Benefits at December 31, 1996
Statement of Net Assets Available
For Plan Benefits at December 31, 1995
Statement of Changes in Net Assets
Available For Plan Benefits for
the year ended December 31, 1996
Statement of Changes in Net Assets
Available For Plan Benefits for
the year ended December 31, 1995
Statement of Changes in Net Assets
Available For Plan Benefits for
the year ended December 31, 1994
Notes to Financial Statements
Item 27a - Schedule of Assets Held for Investment
Purposes at December 31, 1996
Item 27d - Schedule of Reportable Transactions for the year ended
December 31, 1996
Report of Independent Accountants
----------------------------------
To the Administrative Committee of The Kroger Co. Savings Plan
We have audited the accompanying statements of net assets available
for plan benefits of The Kroger Co. Savings Plan as of December 31,
1996 and 1995, and the related statements of changes in net assets
available for plan benefits for the years ended December 31, 1996,
1995 and 1994. These financial statements are the responsibility
of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for plan
benefits of The Kroger Co. Savings Plan as of December 31, 1996 and
1995, and the changes in net assets available for plan benefits for
the years ended December 31, 1996, 1995, and 1994 in conformity
with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on
the basic financial statements taken as a whole. The supplemental
schedules of assets held for investment purposes and reportable
transactions are presented for the purpose of additional analysis
and are not a required part of the basic financial statements but
are supplementary information required by the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974. The fund
information in the statement of net assets available for plan
benefits and the statement of changes in net assets available for
plan benefits is presented for purposes of additional analysis
rather than to present the net assets available for plan benefits
and changes in net assets available for plan benefits of each fund.
The supplemental schedules and fund information have been subjected
to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements
taken as a whole.
(Coopers & Lybrand L.L.C.)
Coopers & Lybrand L.L.C.
Cincinnati, Ohio
April 11, 1997
THE KROGER CO. SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
at December 31, 1996
(In thousands of dollars)
------------------
1996
-------------------------------------------------------------------------------------------------
MERRILL
LYNCH MERRILL MERRILL AMERICAN
EMPLOYER EQUITY LYNCH LYNCH CAPITAL TEMPORARY
STOCK INDEX BASIC GLOBAL EMERGING TEMPLETON FIXED PARTICIPANT INVESTMENT
ASSETS FUND TRUST VALUE ALLOCATION GROWTH FOREIGN INCOME LOANS FUND TOTAL
-------- ------ ------- ---------- -------- ---------- ------ ----------- ---------- -------
Investments:
The Kroger Co. common shares
(Cost - $221,481) $657,814 $657,814
Contracts with insurance
companies (stated at
contract value) $99,722 99,722
Mutual funds (cost - $48,972) $14,173 $8,747 $18,540 $11,243 52,703
Collective investment trust
(cost - $45,015) $68,007 68,007
Participant loans $16,663 16,663
Temporary cash investments 20,261 $1,317 21,578
-------- ------- ------- ------ ------- ------- ------- ------- ------ -------
Total investments 657,814 68,007 14,173 8,747 18,540 11,243 119,983 16,663 1,317 916,487
Receivables:
Employee contributions 1,379 243 68 45 105 52 357 2,249
Employer contributions 2,783 2,783
Interest and dividends 180 180
------- ------ ------ ----- -------- ------ -------- ------- ----- -------
Total assets 661,976 68,250 14,241 8,792 18,645 11,295 120,340 16,663 1,497 921,699
------- ------ ------ ----- -------- ------ -------- ------- ----- -------
LIABILITIES
Payable for administrative
fees 119 119
------- ------ ------ ----- ------- ------ -------- ------- ----- -------
Total liabilities 119 119
------- ------ ------ ----- ------- ------ -------- ------- ----- -------
Net assets available for
plan benefits $661,976 $68,250 $14,241 $8,792 $18,645 $11,295 $120,340 $16,663 $1,378 $921,580
======== ======= ======= ====== ======= ======= ======== ======= ====== ========
The accompanying notes are an integral
part of the financial statements.
THE KROGER CO. SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
at December 31, 1995
(In thousands of dollars)
------------------
1995
-------------------------------------------------------------------------------------------------
MERRILL
LYNCH MERRILL MERRILL AMERICAN
EMPLOYER EQUITY LYNCH LYNCH CAPITAL TEMPORARY
STOCK INDEX BASIC GLOBAL EMERGING TEMPLETON FIXED PARTICIPANT INVESTMENT
ASSETS FUND TRUST VALUE ALLOCATION GROWTH FOREIGN INCOME LOANS FUND TOTAL
-------- ------ ------- ---------- -------- ---------- ------ ----------- ---------- -------
Investments:
The Kroger Co. common shares
(Cost - $198,005) $540,548 $540,548
Contracts with insurance
companies (stated at
contract value) $83,352 83,352
Mutual funds (cost - $25,248) $6,926 $5,012 $8,127 $6,423 26,488
Collective investment trust
(cost - $38,162) $50,818 50,818
Temporary cash investments
and loans to participants 21,701 $12,735 $380 34,816
-------- ------- ------ ------ ------ ------ ------- ------- ---- --------
Total investments 540,548 50,818 6,926 5,012 8,127 6,423 105,053 12,735 380 736,022
Receivables:
Employee contributions 1,204 233 45 33 58 43 369 1,985
Employer contributions 6,080 6,080
Interest and dividends 107 107
-------- ------- ------ ------- ------- ------ ------- ------- ---- --------
Total assets 547,832 51,051 6,971 5,045 8,185 6,466 105,422 12,735 487 744,194
-------- ------- ------ ------- ------- ------ ------- ------- ---- --------
LIABILITIES
Payable for administrative
fees 324 324
-------- ------- ------ ------- ------- ------ ------- ------- ---- --------
Total liabilities 324 324
-------- ------- ------ ------- ------- ------ ------- ------- ---- --------
Net assets available for
plan benefits $547,832 $51,051 $6,971 $5,045 $8,185 $6,466 $105,422 $12,735 $163 $743,870
======== ======= ====== ====== ====== ====== ======== ======= ==== ========
The accompanying notes are an integral
part of the financial statements.
THE KROGER CO. SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the year ended December 31, 1996
(In thousands of dollars)
------------------
1996
------------------------------------------------------------------------------------------------
MERRILL
LYNCH MERRILL MERRILL AMERICAN
EMPLOYER EQUITY LYNCH LYNCH CAPITAL TEMPORARY
STOCK INDEX BASIC GLOBAL EMERGING TEMPLETON FIXED PARTICIPANT INVESTMENT
FUND TRUST VALUE ALLOCATION GROWTH FOREIGN INCOME LOANS FUND TOTAL
-------- ------ ------- ---------- -------- ---------- ------ ----------- ---------- -------
Employee contributions $ 29,640 $ 5,846 $1,568 $ 985 $2,002 $1,166 $ 9,601 $ 50,808
Employer contributions 2,783 2,783
Transfer from (to) other funds (30,760) 1,669 4,155 2,076 7,006 2,355 8,087 $ 4,520 $892
--------- ------- ------ ------ ------ ------ ------- ------- -------- --------
Total contributions
and transfers 1,663 7,515 5,723 3,061 9,008 3,521 17,688 4,520 892 53,591
Investment income:
Dividends 878 804 788 436 2,906
Interest 945 145 21 13 28 19 7,438 72 8,681
Net appreciation 129,136 12,071 861 193 1,001 1,015 144,277
------- ------ ------ ----- ------ ------ ------- ------ ----- -------
Total additions 131,744 19,731 7,483 4,071 10,825 4,991 25,126 4,520 964 209,455
-------- ------- ------ ----- ------ ------ ------- ------ ----- -------
Distributions to participants 17,578 2,531 213 324 365 162 9,633 592 101 31,499
Administrative expenses 22 1 0 0 0 0 575 (352) 246
-------- ------- ------ ----- ------ ------ ------- ------ ----- --------
Total deductions 17,600 2,532 213 324 365 162 10,208 592 (251) 31,745
-------- ------- ------ ------ ------ ------ ------- ------ ----- --------
Net increase 114,144 17,199 7,270 3,747 10,460 4,829 14,918 3,928 1,215 177,710
Net assets available for
plan benefits:
Beginning of year 547,832 51,051 6,971 5,045 8,185 6,466 105,422 12,735 163 743,870
------- ------ ----- ----- ------ ----- ------- ------ ----- -------
End of year $661,976 $68,250 $14,241 $8,792 $18,645 $11,295 $120,340 $16,663 $1,378 $921,580
======== ======= ======= ====== ======= ======= ======== ======= ====== ========
The accompanying notes are an integral
part of the financial statements.
THE KROGER CO. SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the year ended December 31, 1996
(In thousands of dollars)
------------------
1995
MERRILL
LYNCH MERRILL MERRILL AMERICAN
EMPLOYER EQUITY LYNCH LYNCH CAPITAL TEMPORARY
STOCK INDEX BASIC GLOBAL EMERGING TEMPLETON FIXED PARTICIPANT INVESTMENT
FUND TRUST VALUE ALLOCATION GROWTH FOREIGN INCOME LOANS FUND TOTAL
-------- ------ ------- ---------- -------- ---------- ------ ----------- ---------- -------
Employee contributions $ 24,177 $ 5,212 $ 780 $ 657 $ 932 $ 865 $ 9,587 $ 42,210
Employer contributions 6,080 6,080
Transfer from (to) other funds (29,677) 953 3,105 1,239 3,489 1,572 15,223 $ 3,945 $151
--------- ------- ------ ------ ------ ------ ------- ------- ---- --------
Total contributions
and transfers 580 6,165 3,885 1,896 4,421 2,437 24,810 3,945 151 48,290
Investment income:
Dividends 264 387 721 373 1,745
Interest 577 87 7 7 9 12 6,334 74 7,107
Net appreciation 194,359 12,945 773 343 796 131 209,347
-------- ------ ----- ------ ----- ------ ------ ------ ----- --------
Total additions 195,516 19,197 4,929 2,633 5,947 2,953 31,144 3,945 225 266,489
-------- ------ ----- ------ ----- ------ ------ ------ ----- --------
Distributions to participants 13,924 1,226 35 60 108 61 5,939 334 (209) 21,478
Administrative expenses 103 23 2 2 2 2 195 184 513
-------- ------ ----- ------ ----- ------ ----- ------ ------ --------
Total deductions 14,027 1,249 37 62 110 63 6,134 334 (25) 21,991
-------- ------ ----- ------ ----- ------ ----- ------ ------ --------
Net increase 181,489 17,948 4,892 2,571 5,837 2,890 25,010 3,611 250 244,498
Net assets available for
plan benefits:
Beginning of year 366,343 33,103 2,079 2,474 2,348 3,576 80,412 9,124 (87) 499,372
------- ------ ----- ------ ----- ----- ------ ------ ------ -------
End of year $547,832 $51,051 $6,971 $5,045 $8,185 $6,466 $105,422 $12,735 $163 $743,870
======== ======= ====== ====== ====== ====== ======== ======= ==== ========
The accompanying notes are an integral
part of the financial statements.
THE KROGER CO. SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the year ended December 31, 1994
(In thousands of dollars)
----------------
1994
------------------------------------------------------------------------------------------------
MERRILL
LYNCH MERRILL MERRILL AMERICAN
EMPLOYER EQUITY LYNCH LYNCH CAPITAL TEMPORARY
STOCK INDEX BASIC GLOBAL EMERGING TEMPLETON FIXED MELLON PARTICIPANT INVESTMENT
ASSETS FUND TRUST VALUE ALLOCATION GROWTH FOREIGN INCOME EQUITY LOANS FUND TOTAL
-------- ------ ------- ---------- -------- --------- ------ ------- ---------- ------- -------
Employee contributions $ 21,972 $ 5,846 $ 271 $ 314 $ 355 $ 373 $ 9,807 $ (532) $38,406
Employer contributions 6,684 6,684
Transfer from (to) other funds (11,554) 28,186 1,795 2,238 2,013 3,283 3,014 $(32,266) $9,905 (6,614)
-------- ------- ------ ------ ------ ------ ------- --------- ------ ------- -------
Total contributions
and transfers 17,102 34,032 2,066 2,552 2,368 3,656 12,821 (32,266) 9,905 (7,146) 45,090
Investment income (loss):
Dividends 108 133 60 223 524
Interest 381 65 2 3 3 4 4,885 31 5,374
Net appreciation
(depreciation) 59,151 224 (88) (208) (72) (303) 58,704
------ ------ ------ ------ ------ ------- ------ ------- ------ ------- -------
Total additions(deductions) 76,634 34,321 2,088 2,480 2,359 3,580 17,706 (32,266) 9,905 (7,115) 109,692
------ ------ ------ ------ ------ ------- ------ ------- ------ ------ -------
Distributions to participants 10,897 1,185 9 6 11 4 3,565 781 1,127 17,585
Administrative expenses 78 33 141 298 550
------ ------ ------ ------ ------ ------- ------ ------- ------ ------ ------
Total deductions 10,975 1,218 9 6 11 4 3,706 781 1,425 18,135
------ ------ ------ ------ ------ ------- ------ ------- ------ ------ ------
Net increase(decrease) 65,659 33,103 2,079 2,474 2,348 3,576 14,000 (32,266) 9,124 (8,540) 91,557
Net assets available for
plan benefits:
Beginning of year 300,684 66,412 32,266 8,453 407,815
------- ------ ------ ------ ------ ------- ------ -------- ------ ------ -------
End of year $366,343 $33,103 $2,079 $2,474 $2,348 $3,576 $80,412 $0 $9,124 $ (87) $499,372
======== ======= ====== ======= ======= ======= ======= ======= ======= ====== =======
The accompanying notes are an integral
part of the financial statements.
THE KROGER CO. SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
---------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
The following describes the significant policies followed in
the preparation of these financial statements.
INVESTMENTS VALUATION
---------------------
Investments in equity securities, mutual funds and collective
trusts are valued at fair value (quoted market prices where
available) or estimated fair values. Investment contracts are
valued at contract value (cost plus accrued interest).
In 1995, the Plan adopted the American Institute of Certified
Public Accountants Statement of Position (SOP) 94-4 "Reporting
of Investment Contracts Held by Health and Welfare Benefit
Plans and Defined Contribution Pension Plans". SOP 94-4
requires that investment contracts that are fully benefit-
responsive be stated at contract value and all other
investment contracts be stated at fair value. The adoption of
SOP 94-4 did not have a material effect on the financial
position of the Plan.
PERVASIVENESS OF ESTIMATES
--------------------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of net assets available for plan benefits as of the
date of the Plan's financial statements and the reported
changes in net assets available for plan benefits during the
reporting period. Actual results could differ from those
estimates.
OTHER
-----
Purchases and sales of securities are reflected on a trade
date basis. Gain or loss on sales of securities are based on
average cost.
Dividend income is recorded on the ex-dividend date. Income
from other investments is recorded as earned on an accrual
basis.
The plan presents in the statement of changes in net assets
available for plan benefits the net appreciation or
depreciation in the fair value of its investments which
consists of the realized gains or losses and the unrealized
appreciation or depreciation on those investments.
Participants may borrow from their fund accounts a minimum of
$1,000 up to a maximum equal to the lowest of: a) account
balance less $2,500; b) 50% of account balance; c) $50,000
less the highest outstanding loan balance over the last 12
months. Loan transactions are treated as a transfer from the
investment fund to the Participant Loan Fund. Loan terms
range from 1-4 years or up to 6 years for the purchase of a
primary residence. The loans are secured by the balance in
the participant's account and bear interest at a rate of Prime
plus .5%. The rate is changed quarterly and the Prime rate
used for a quarter is the Prime rate on the last business day
of the previous quarter. Principal and interest are paid
through periodic payroll deductions.
2. PLAN DESCRIPTION
----------------
The Plan provides for eligible employees of The Kroger Co. and
subsidiaries (the "Company") to redirect a portion of their
salary, up to limits defined in the Plan, to the seven
investment funds of the Plan at any time.
Employee contributions to the Plan are limited to the lower of
$9,500 or 15% (6% if the participant is a highly compensated
employee as defined by the Internal Revenue Service) of the
employee's annual compensation during the period in which they
are a participant in the Plan, subject to Internal Revenue
Service Code limitations.
At the end of each year, the Company makes a basic matching
contribution into the Employer Stock Fund equal to ten percent
(10%) of the salary directed by participants to the Employer
Stock Fund during the year. A supplemental matching
contribution is allocated in proportion to salary directed to
all investment funds. The supplemental contribution is based
on the annual financial results of the Company and determined
annually by the Board of Directors. The supplemental
contribution ranges from none to twenty percent (20%) of
participant contributors.
In 1996, the Company made a matching contribution but did not
make a supplemental contribution. In 1995 and 1994, the
Company made both a basic matching contribution and a
supplemental matching contribution.
Each participant's account is credited with the participant's
contribution and an allocation of the Company's matching
contribution, Plan earnings, and other adjustments as defined
in the Plan. Allocations are based on participant earnings or
account balances as defined. The benefit to which a
participant is entitled is the benefit that can be provided
from the participant's account.
Further information about the Plan, including vesting,
allocation and benefit provisions, and employer and employee
contributions is contained in the Plan, and Plan amendments.
Copies of these documents are available from the Company's
Personnel Department.
3. INVESTMENT CONTRACTS
--------------------
The Plan's Fixed Income Fund contains various investment
contracts which are fully benefit-responsive. A fully
benefit-responsive investment provides a liquidity guarantee
by a financially responsible third party of principal and
previously accrued interest for liquidations, transfers,
loans, or withdrawals initiated by plan participants under the
terms of the ongoing Plan. Certain employer initiated events
(i.e., lay-offs, mergers, bankruptcy, plan termination) are
not eligible for the liquidity guarantee.
The following information is presented in the aggregate for
the investment contracts:
1996 1995
----------- ----------
Fair value 100,694,871 87,186,580
Crediting interest rates 6.0% to 8.9% 6.0% to 9.4%
Average yield 6.9% 7.0%
The crediting interest rates for the investment contracts are
based upon the contract rate or a predetermined formula which
factors in duration, market value and book value of the
investment. Certain of the crediting rates are adjusted
quarterly. The minimum crediting interest rate for these
investments is zero.
The fair value of the investment contracts is calculated as
the aggregate present value of the underlying cash flows using
interest rates quoted for securities with similar duration and
credit risk.
4. TAX STATUS
-----------
The Plan obtained its latest determination letter on October
7, 1986, in which the Internal Revenue Service stated that the
Plan, as then designed, was in compliance with the Internal
Revenue Code. However, the Plan has been amended since
receiving the determination letter. The Plan administrator
believes that the Plan is currently designed and being
operated in compliance with the applicable requirements of the
Internal Revenue Code. Therefore, no provision for income
taxes has been included in the Plan's financial statements.
Participant contributions and earnings of the Plan are not
subject to federal income tax until distribution, at which
time they are taxable to the recipient.
THE KROGER CO. SAVINGS PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
at December 31, 1996
(In thousands of dollars)
----------------------
NUMBER OF
SHARES OR
PRINCIPAL 1996
---------
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT COST VALUE
- --------------------------------- --------- -------- --------
EMPLOYER STOCK FUND
-------------------
The Kroger Co. common shares 14,146,529 shs. $221,481 $657,814
MERRILL LYNCH EQUITY INDEX TRUST
--------------------------------
Collective Investment Trust 1,383,367 shs. 45,015 68,007
MERRILL LYNCH BASIC VALUE
-------------------------
Mutual Funds 457,204 shs. 12,813 14,173
MERRILL LYNCH GLOBAL ALLOCATION
-------------------------------
Mutual Funds 601,172 shs. 8,504 8,747
AMERICAN CAPITAL EMERGING GROWTH
--------------------------------
Mutual Funds 539,739 shs. 17,227 18,540
TEMPLETON FOREIGN
-----------------
Mutual Funds 1,085,273 shs. 10,428 11,243
FIXED INCOME
------------
Investment Contracts 119,983,320 shs. 99,722 100,695
PARTICIPANT LOANS
-----------------
Loans to Participants $16,663 16,663 16,663
Temporary Cash Investments $21,578 21,578 21,578
-------- --------
Total $453,431 $917,460
======== ========
THE KROGER CO. SAVINGS PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For the Year Ended December 31, 1996
(In thousands of dollars)
---------------------
Expenses
incurred in
Transaction # of # of connection with Realized
Type Security Description Trans Shares transaction Cost Proceeds Gain(Loss)
- ----------- -------------------- ----- ------ --------------- ----------- ---------- ----------
KROGER COMMON STOCK
BUY Kroger Co. Common Stock 1020 1,659,446 66,026,805
SELL Kroger Co. Common Stock 1256 1,857,702 193,469 40,644,311 75,990,251 35,345,940
POOLED SEPARATE A/C(GICS)
BUY Kroger Co. Income Fund 1110 52,197,908 52,197,908
SELL Kroger Co. Income Fund 1136 37,267,343 37,265,594 37,267,343 1,749
PENDING SETTLEMENT FUNDS
BUY Pending Settlement Fund 255 64,283,200 64,283,200
SELL Pending Settlement Fund 251 63,391,246 63,391,246 63,391,246 -