1
EXHIBIT 99.1
The Kroger Co. Savings Plan
Report On Audits Of Financial Statements And Supplemental Schedules
For The Years Ended December 31, 1999 and 1998
2
The Kroger Co. Savings Plan
Index To Financial Statements
December 31, 1999 and 1998
Pages
-----
Report of Independent Accountants 2
Statement of Net Assets Available
For Plan Benefits at December 31, 1999 and 1998 3
Statement of Changes in Net Assets
Available For Plan Benefits for
the years ended December 31, 1999 and 1998 4
Notes to Financial Statements 5-7
Item 27a - Schedule of Assets Held for Investment
Purposes at December 31, 1999 8
Item 27d - Schedule of Reportable Transactions
for the year ended December 31, 1999 9
3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Administrative Committee of The Kroger Co. Savings Plan
In our opinion, the accompanying statement of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of The Kroger Co. Savings Plan (the "Plan") at December 31, 1999 and 1998, and
the changes in net assets available for benefits for the years then ended in
conformity with accounting principles generally accepted in the United States.
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 of these statements in accordance with
auditing standards generally accepted in the United States, which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules referred to in
the Index to Financial Statements 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. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules 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.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Cincinnati, Ohio
April 18, 2000
4
THE KROGER CO. SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
at December 31, 1999 and 1998
(In thousands of dollars)
1999 1998
---------- -------
Assets
Investments:
Employer Stock Fund $1,080,905 $1,636,141
Merrill Lynch Equity Index Trust 136,422 118,631
Merrill Lynch Basic Value 25,569 26,195
Merrill Lynch Global Allocation 14,807 9,271
American Capital Emerging Growth 70,421 32,398
Templeton Foreign 13,644 11,014
Fixed Income 141,567 159,273
Participation Loans 28,869 27,059
Temporary Investment Fund 650 5,028
---------- ----------
Total investments 1,512,854 2,025,010
Receivables:
Contributions 10,270 6,293
Interest and dividends 508 388
---------- ----------
Total assets 1,523,632 2,031,691
---------- ----------
Liabilities
Payable for administrative fees 207 140
---------- ----------
Total liabilities 207 140
---------- ----------
Net assets available for plan benefits $1,523,425 $2,031,551
========== ==========
The accompanying notes are an integral
part of the financial statements.
3
5
THE KROGER CO. SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the years ended December 31, 1999 and 1998
(In thousands of dollars)
1999 1998
---------- -------
Additions to (reduction in) net assets
attributable to:
Employee contributions $ 75,244 $ 60,770
Employer contributions 9,504 6,296
Transfer from (to) other trusts 89,397 -
---------- ----------
Total contributions and transfers 174,145 67,066
Investment activity
Dividends 11,860 5,937
Interest 12,180 11,376
Net (depreciation) appreciation (607,066) 673,043
---------- ----------
Total (reductions) additions (408,881) 757,422
---------- ----------
Distributions to participants 98,193 83,248
Payable for administrative fees 1,052 425
---------- ----------
Total deductions 99,245 83,673
---------- ----------
Net (decrease) increase (508,126) 673,749
Net assets available for plan benefits:
Beginning of year 2,031,551 1,357,802
---------- ----------
End of year $1,523,425 $2,031,551
========== ==========
The accompanying notes are an integral
part of the financial statements.
4
6
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).
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.
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 collateralized by the balance in the
participant's account and bear interest at a rate of Prime plus 1.5%.
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 $10,000
or 19% (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. This
supplemental contribution is automatically invested in the Employer
Stock Fund. 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 contributions.
5
7
In 1999, the Company made matching and supplemental contributions. The
supplemental contribution was 6%. In 1998, the Company made a matching
contribution and a supplemental contribution of 4%.
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:
1999 1998
------------ ------------
Fair value $137,432,142 $135,981,239
Crediting interest rates 5.2% to 7.2% 5.4% to 7.3%
Average yield 6.6% 6.8%
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 in March 1998, in
which the Internal Revenue Service stated that the Plan, as then
designed, was in compliance with 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.
5. NONPARTICIPANT-DIRECTED INVESTMENTS
-----------------------------------
Investments in the Employer Stock Fund are generated from
participant-directed contributions, the Company's basic matching
contribution, and the Company's supplemental matching contribution.
Employee and employer amounts included in the Employer Stock Fund
cannot be separately determined. Accordingly, the investments in the
Employer Stock Fund are considered non-participant directed for
disclosure purposes.
6
8
The information about the net assets and the significant components of
the changes in net assets relating to the nonparticipant-directed
investments in the Employer Stock Fund is as follows:
Net Assets:
December 31,
------------------------
1999 1998
---------- -----------
Employer Stock Fund $1,080,905 $1,636,141
========== ==========
Year Ended
December 31, 1999
------------------
Change in Net Assets in the
Employer Stock Fund:
Employee contributions $ 50,787
Employer contributions 6,493
Transfer from other trusts 9,975
Interest 1,931
Net depreciation (663,689)
Distributions to participants (58,717)
Administrative expenses (261)
Transfers from other funds 98,245
----------
$ (555,236)
==========
7
9
THE KROGER CO. SAVINGS PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
at December 31, 1999
(In Thousands of Dollars)
-------------------------
NUMBER OF
SHARES 1999
----------------------
CARRYING
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT COST VALUE
- --------------------------------- ----------------- ---------- --------
EMPLOYER STOCK FUND
The Kroger Co. common shares* 57,266,000 shs. $ 436,520 $1,080,905
MERRILL LYNCH EQUITY INDEX TRUST
Collective Investment Trust 1,348,000 shs. 62,248 136,422
MERRILL LYNCH BASIC VALUE
Mutual Funds 670,000 shs. 23,359 25,569
MERRILL LYNCH GLOBAL ALLOCATION
Mutual Funds 1,056,000 shs. 15,182 14,807
AMERICAN CAPITAL EMERGING GROWTH
Mutual Funds 806,000 shs. 37,697 70,421
TEMPLETON FOREIGN
Mutual Funds 1,216,000 shs. 11,913 13,644
FIXED INCOME
Guaranteed Investment Contracts(GICs) 2,055 2,055
Synthetic GICs 139,512 137,432
Wrapper Contracts for Synthetic GICs 0 2,080
--------- ----------
141,567 141,567
PARTICIPANT LOANS
Loans to Participants 0 28,869
Temporary Cash Investments 650 650
--------- ----------
Total $ 729,136 $1,512,854
========= ==========
*Represents party in interest transactions.
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10
THE KROGER CO. SAVINGS PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For the Year Ended December 31, 1999
(In thousands of dollars)
Transaction # of # of Realized
Type Security Description Trans Shares Cost Proceeds Gain(loss)
- ----------- ----------------------- ----- ----------- ------------ ------------ -----------
KROGER COMMON STOCK*
BUY Kroger Co. Common Stock 1,085 6,732,080 $175,603
SELL Kroger Co. Common Stock 1,420 2,643,663 $ 44,934 $110,780 $65,846
POOLED SEPARATE A/C(GICS)
BUY Fixed Income Fund 1,122 83,697,257 $ 83,697
SELL Fixed Income Fund 1,251 101,403,139 $101,403 $101,403 $ -
TEMPORARY INVESTMENT FUNDS
BUY Temporary Investment Fund 252 146,196,046 $146,196
SELL Temporary Investment Fund 252 148,012,767 $148,013 $148,013 $ -
*Represents party in interest transactions.
9
11
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
12
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
December 31, 1999 and 1998
TABLE OF CONTENTS
Financial Statements: Pages
- --------------------- -----
Report of Independent Accountants 2
Statement of Net Assets Available for Plan Benefits 3
Statement of Changes in Net Assets Available for Plan Benefits 4
Notes to Financial Statements 5-8
Supplemental Schedules: Schedule
- ----------------------- --------
Item 27(a) - Schedule of Assets Held for Investment Purposes 1
Item 27(d) - Schedule of Reportable Transactions 2
All other schedules required by Form 5500 have been omitted as being not
applicable.
13
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Trust Committee
Dillon Companies, Inc.
Employees' Stock Ownership and Savings Plan
In our opinion, the accompanying statement of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of Dillon Companies, Inc. Employees' Stock Ownership and Savings Plan (the
"Plan") at December 31, 1999 and 1998, and the changes in net assets available
for benefits for the years then ended in conformity with accounting principles
generally accepted in the United States. 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 of these statements in accordance with auditing standards generally
accepted in the United States, which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules referred to in
the Table of Contents 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. These supplemental schedules are the responsibility of the Plan's
management. The supplemental schedules 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.
/s/ PricewaterhouseCoopers LLP
- --------------------------------------
PricewaterhouseCoopers LLP
Cincinnati, Ohio
April 7, 2000
2
14
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Statement of Net Assets
Available for Plan Benefits
As of December 31, 1999 and 1998
1999 1998
------------- --------
ASSETS
Cash and cash equivalents $ 2,954,492 $ 4,919,899
Investment contracts with insurance companies 0 661,350
Investments in BASIC 23,715,578 28,853,965
Investments in PIMCO 20,655,524 22,279,441
Investments in State Street Fixed Fund 13,245,099 16,127,809
Investments in CDC Investment Management 3,060,815 5,264,821
Investments in Transamerica Life Insurance 8,015,337 8,103,865
The Kroger Co. common stock 378,176,896 654,913,963
Trust funds managed by:
Sanford C. Bernstein & Co. 21,699,098 27,196,483
State Street Global Advisors Index Fund 36,223,166 37,551,936
----------- -----------
Total assets 507,746,005 805,873,532
----------- -----------
LIABILITIES
Accounts payable 184,032 187,427
Dividends payable 16,763 16,763
----------- -----------
Total liabilities 200,795 204,190
----------- -----------
Net assets available for plan benefits $507,545,210 $805,669,342
=========== ===========
See accompanying notes to financial statements.
3
15
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Statement of Changes in Net Assets
Available for Plan Benefits
For the Years Ended December 31, 1999 and 1998
1999 1998
------------- ------------
Additions to net assets attributed to:
Investment income:
Net appreciation (depreciation)in fair value of investments:
The Kroger Co. common stock $(223,185,255) $260,908,978
------------- -----------
Interest:
Short-term investments 99,724 186,902
Investment contracts with insurance companies, investments in BASIC,
investments in PIMCO, investments in State Street Fixed Fund,
investments in CDC Investment Management,
investments in Transamerica Life Insurance 5,854,266 5,627,138
----------- -----------
5,953,990 5,814,040
----------- -----------
Net investment income of trust funds managed by:
Sanford C. Bernstein & Co. 1,587,174 3,309,564
State Street Global Advisors Index Fund 7,170,884 8,085,828
----------- -----------
8,758,058 11,395,392
----------- -----------
Contributions:
Employer 2,933,393 2,533,545
Employee 26,759,713 27,018,626
----------- -----------
29,693,106 29,552,171
----------- -----------
Total additions (178,780,101) 307,670,581
------------- -----------
Deductions from net assets attributed to:
Benefits paid to participants 41,062,823 49,711,845
Assets transferred to another trust 78,196,732 0
Administrative expenses 84,476 79,153
----------- -----------
Total deductions 119,344,031 49,790,998
----------- -----------
Increase (Decrease) in net assets available for plan benefits (298,124,132) 257,879,583
Net assets available at beginning of period 805,669,342 547,789,759
----------- -----------
Net assets available at end of period $507,545,210 $805,669,342
=========== ===========
See accompanying notes to financial statements.
4
16
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Notes to Financial Statements
December 31, 1999 and 1998
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared on an accrual
basis and present the net assets available for plan benefits and
changes in those net assets based on fair value (quoted market prices
where available). Fixed investments are valued at contract value (cost
plus accrued interest). Purchases and sales of The Kroger Co. common
stock are recorded on a trade date basis. The Dillon Companies, Inc.
Employees' Stock Ownership and Savings Plan (the Plan) presents in the
statement of changes in net assets the net appreciation (depreciation)
in the fair value of its investments which consists of the realized
gains or losses and the unrealized appreciation (depreciation) on those
investments.
2) DESCRIPTION OF DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND
SAVINGS PLAN
Employees of Dillon Companies, Inc. (the Company) and its subsidiaries
with one year of service and who have attained age 21 are eligible to
become a participant on January 1 or July 1 following completion of
eligibility requirements.
The interest of all participants in the Plan is fully vested at all
times and is not subject to forfeiture or cancellation under any
circumstances. Plan assets are for participants only and may never
revert to the employer.
Plan income and expenses for each period are allocated to the
participants' accounts in the ratio that the balance in the account of
each participant bears to the balance of all the participants' accounts
immediately before the allocation. Employer contributions are allocated
based on participants' salaries as stated in the Plan.
All distributions to participants are in cash or in whole shares of The
Kroger Co. common stock (cash is paid for fractional shares).
Participants and beneficiaries individually exercise voting rights on
the shares of The Kroger Co. common stock allocated to their account.
Under the 401(k) salary reduction provision, Plan participants may make
an election to have the Company contribute to the Plan on their behalf
from two percent (2%) to twenty percent (20%) of the qualifying
compensation that would otherwise be payable to them for the Plan year.
A basic matching employer contribution is allocated to participants of
the Stock Fund equal to ten percent (10%) of salaries directed by
participants. A supplemental employer contribution is allocated in
proportion to all participants' salaries directed to all investments.
The supplemental contribution is based on the annual financial results
of The Kroger Co. and determined annually by the Board of Directors.
The Company currently has discontinued contributions to the ESOP
portion of the Plan and has no present intentions to resume such
contributions.
5
17
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Notes to Financial Statements, Continued
December 31, 1999 and 1998
2) DESCRIPTION OF DILLON COMPANIES, INC. EMPLOYEES' STOCK OWNERSHIP AND
SAVINGS PLAN, CONTINUED
Participants of the 401(k) portion of the Plan and participants of the
ESOP portion of the Plan who are over age 55 are allowed monthly and
annual investment option selections, respectively, to direct all or a
portion of their contributions to the following funds:
Fixed
Index
Balanced
Kroger Stock
3) INVESTMENTS
The Dillon Companies, Inc. Employee Master Trust (the Trust) was formed
on July 1, 1987, as the funding medium for various employee benefit
plans administered by the Company. All assets of the Dillon Companies,
Inc. Profit Sharing and Savings Plan, Dillon Companies, Inc. Pension
Plan, and Dillon Companies, Inc. Employees' Stock Ownership and Savings
Plan are funded through the Dillon Companies, Inc. Employee Master
Trust. The allocation of assets between plans is based upon individual
plan assets adjusted monthly for contributions, benefit payments,
earnings and administrative expenses.
The Plan's investments are held by the Trust and are administered by
the Dillon Companies, Inc. Trust Committee. The Trust Committee selects
investment managers to manage certain assets of the Plan. The net
change in funds managed by investment managers includes revenue earned,
unrealized and realized gains and losses on investments, and fiduciary
expenses. The investments and changes therein of the trust funds
managed by investment managers have been reported to the Plan by the
trustees as having been determined through the use of fair value or
estimated fair values for all assets and liabilities of the trust
funds.
During 1999, certain employees of Smith's, a wholly-owned subsidiary of
the Kroger Co., became employees of Fry's Food Stores (Fry's).
Previously, Fry's employees participated in the Dillon Companies, Inc.
Employees' Stock Ownership and Savings Plan, while Smith's employees
participated in a different 401(K) plan. In order to conform all
current Fry's employees into the same plan, all such employee balances
under previously existing plans were transferred to The Kroger Co.
401(K) and Savings Plan. As such, approximately $78 million was
transferred out of the Trust in 1999.
4) FIXED INVESTMENTS
The Plan had the following fixed investments in the fixed fund as of
December 31, 1999:
* Benefit Accessible Securities Investment Contracts (BASIC)
with annual crediting interest rates ranging from 6.00% to
7.88% and maturities from one to nine years.
* Investment in Pacific Investment Management Company (PIMCO)
with a variable crediting interest rate of 6.64%. The variable
crediting interest rate is adjusted quarterly.
* Investment in Diversified Financial Products Inc. (State
Street Fixed Fund) with a variable crediting interest rate of
6.48%. The variable crediting interest rate is adjusted
quarterly.
6
18
4) FIXED INVESTMENTS, CONTINUED
* CDC Investment Management with annual crediting interest rates
ranging from 6.20% to 6.45% and maturities from one to two
years.
* Investment in Transamerica Life Insurance and Annuity Company
(J.P. Morgan Investment Management Inc.) with a variable
crediting interest rate of 6.05%. The variable crediting
interest rate is adjusted quarterly.
The crediting interest rate for investment contracts with BASIC, and
CDC Investment Management is the contract rate. The crediting interest
rate for investments in PIMCO, State Street Fixed Fund, and J.P. Morgan
Investment Management Inc. is based upon a predetermined formula which
factors in duration, market value, and book value of the portfolio. The
minimum crediting interest rate for these investments is zero percent.
All of the Plan's fixed investments 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 fixed
investments:
1999 1998
------------- ---------
Fair Value $70,698,625 $90,158,673
Average Yield 7.80% 7.19%
The fair value of the fixed investments are calculated as the aggregate
present value of the underlying cash flows using interest rates quoted
for securities with similar duration and credit risk.
5) TAX STATUS
The Internal Revenue Service has issued a determination letter to the
Plan that the requirements for a qualified plan under Section 401(a) of
the Internal Revenue Code have been met and the Plan is exempt from
federal and state income taxes.
6) PRIORITIES UPON TERMINATION OF THE PLAN
It is the intent of the Company to continue the Plan indefinitely;
however, the Company reserves the right to terminate the Plan at any
time.
In the event of termination of the Plan, the Trustees shall continue to
administer the Plan in accordance with the provisions of the Plan until
all obligations have been discharged or satisfied.
7) USE 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.
7
19
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Notes to Financial Statement, Continued
December 31, 1999 and 1998
8) NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the net assets and the significant components of the
changes in net assets relating to the nonparticipant-directed
investments is as follow
NET ASSETS 1999 1998
---------- ---------------- ---------------
The Kroger Co. common stock $ 378,176,896 $ 654,913,963
================ ===============
CHANGES IN NET ASSETS 1999 1998
--------------------- ---------------- ---------------
Contributions $ 20,569,936 $ 18,443,212
Net appreciation(depreciation) (223,185,255) 260,908,978
Benefits paid to participants (28,613,716) (37,814,424)
Transfers in 16,077,288 638,544
Transfers to another trust (61,585,320)
---------------- ---------------
$ 276,737,067 $ 242,176,310
================ ===============
8
20
SCHEDULE 1
----------
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Item 27(a) - Schedule of Assets Held for Investment Purposes
(Master Trust)
December 31, 1999
Annual
Interest Maturity Carrying
Rate Date Cost Value
---------- -------- ------------ ---------
CASH AND CASH EQUIVALENTS:
- -------------------------
Short Term Investments with PIMCO $ 12,412,583 $ 12,408,956
=========== ===========
ALLOCATION:
----------
Profit Sharing $ 8,476,769 $ 8,474,292
Pension 318,786 318,693
ESOP 401(k) 3,617,028 3,615,971
----------- -----------
$ 12,412,583 $ 12,408,956
=========== ===========
21
SCHEDULE 1, CONT.
-----------------
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Item 27(a) - Schedule of Assets Held for Investment Purposes
(Master Trust)
December 31, 1999
Annual
Interest Maturity Carrying
Rate Date Cost Value
-------- -------- ------------ ------------
INVESTMENTS IN BASIC:
- --------------------
FNMA 92-16KD 7.000% 2005 4,759,312 4,924,296
FHLMC 1365PI 7.250% 2005 3,961,844 4,102,804
FNMA 92-182PH 7.000% 2005 2,881,109 3,066,915
FNMA 92-200H 7.000% 2006 2,946,875 3,091,259
FHLMC 1458J 7.000% 2005 4,856,601 5,072,994
FHLMC 1457PJ 7.000% 2006 4,922,875 5,100,398
FHLMC 1542H 6.500% 2003 5,915,832 6,014,579
FHLMC 1625H 6.000% 2008 9,695,313 9,881,290
FNMA 93-134G 6.500% 2006 7,415,000 7,749,473
FNMA 94-48E 6.000% 2007 6,002,062 6,363,531
FNMA 94-10PC 6.500% 2005 9,006,250 9,474,607
10 YR UST 7.875% 2004 4,042,185 4,064,910
FNMA 93-107D 6.500% 2002 2,902,969 2,980,593
FNMA 93-118H 6.500% 2004 5,932,992 5,986,453
FNMA 93-209J 6.000% 2008 4,641,333 4,770,699
------------ ------------
Total Dillon Companies, Inc.
Employee Master Trust $ 79,882,552 $ 82,644,801
============ ============
Fair Value $ 87,792,783
Wrap Value (5,147,982)
------------
$ 82,644,801
============
ALLOCATION:
----------
Profit Sharing $ 56,072,139 $ 58,011,051
Pension 887,484 918,172
ESOP 401(k) 22,922,929 23,715,578
------------ ------------
$ 79,882,552 $ 82,644,801
============ ============
22
SCHEDULE 1, CONT.
-----------------
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Item 27(a) - Schedule of Assets Held for Investment Purposes
(Master Trust)
December 31, 1999
Annual
Interest Maturity Carrying
Rate Date Cost Value
-------- -------- ------------ ---------
INVESTMENTS IN PIMCO:
- --------------------
Total Dillon Companies, Inc.
Employee Master Trust 6.640% Variable $ 45,750,000 $ 71,181,328
=========== ===========
Fair Value $ 68,938,237
Wrap Value 2,243,091
-----------
$ 71,181,328
===========
ALLOCATION:
----------
Profit Sharing $ 32,474,184 $ 50,525,804
Pension - -
ESOP 401(k) 13,275,816 20,655,524
----------- -----------
$ 45,750,000 $ 71,181,328
=========== ===========
INVESTMENTS IN STATE STREET FIXED FUND:
- --------------------------------------
Total Dillon Companies, Inc.
Employee Master Trust 6.476% Variable $ 28,750,000 $ 45,644,145
=========== ===========
Fair Value $ 43,668,592
Wrap Value 1,975,553
----------
$ 45,644,145
===========
ALLOCATION:
----------
Profit Sharing $ 20,407,274 $ 32,399,046
Pension - -
ESOP 401(k) 8,342,726 13,245,099
----------- -----------
$ 28,750,000 $ 45,644,145
=========== ===========
INVESTMENTS IN CDC INVESTMENT MANAGEMENT:
- ----------------------------------------
Total Dillon Companies, Inc. 6.200%
Employee Master Trust to 6.450% Variable $ 8,078,769 $ 10,547,923
=========== ===========
Fair Value $ 10,523,926
===========
Wrap Value 23,997
-----------
$ 10,547,923
===========
ALLOCATION:
----------
Profit Sharing $ 5,734,457 $ 7,487,108
Pension - -
ESOP 401(k) 2,344,312 3,060,815
----------- -----------
$ 8,078,769 $ 10,547,923
=========== ===========
23
SCHEDULE 1, CONT.
-----------------
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Item 27(a) - Schedule of Assets Held for Investment Purposes
(Master Trust)
December 31, 1999
Annual
Interest Maturity Carrying
Rate Date Cost Value
---------- -------- ------------ --------------
INVESTMENTS IN TRANSAMERICA LIFE INSURANCE:
- ------------------------------------------
Total Dillon Companies, Inc.
Employee Master Trust 6.05% Variable $ 25,000,000 $ 27,621,778
============ =============
Fair Value $ 26,001,380
Wrap Value 1,620,398
-------------
$ 27,621,778
=============
ALLOCATION:
----------
Profit Sharing $ 17,745,455 $ 19,606,441
Pension - -
ESOP 401(k) 7,254,545 8,015,337
----------- -------------
$ 25,000,000 $ 27,621,778
=========== =============
INVESTMENTS IN THE KROGER CO. COMMON STOCK:*
- ------------------------------------------
Total Dillon Companies, Inc.
Employee Master Trust $212,835,359 $ 640,803,185
=========== =============
ALLOCATION: SHARES
-----------
Profit Sharing 13,358,014 $111,943,070 $ 252,132,519
Pension 555,962 3,382,308 10,493,770
ESOP 401(k) 20,035,862 97,509,981 378,176,896
---------- ----------- -------------
33,949,838 $212,835,359 $ 640,803,185
========== =========== =============
*Represents party in interest transactions.
24
SCHEDULE 1, CONT.
-----------------
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Item 27(a) - Schedule of Assets Held for Investment Purposes
(Master Trust)
December 31, 1999
Annual
Interest Maturity Carrying
Rate Date Cost Value
---------- -------- ------------ --------------
INVESTMENTS IN TRUST FUNDS MANAGED BY:
- -------------------------------------
SANFORD C. BERNSTEIN & CO.:
--------------------------
Total Dillon Companies, Inc.
Employee Master Trust $ 62,168,505 $ 69,711,516
=========== ===========
ALLOCATION:
----------
Profit Sharing $ 42,817,319 $ 48,012,418
Pension - -
ESOP 401(k) 19,351,186 21,699,098
----------- -----------
$ 62,168,505 $ 69,711,516
=========== ===========
STATE STREET GLOBAL ADVISORS INDEX FUND:
---------------------------------------
Total Dillon Companies, Inc.
Employee Master Trust $ 86,307,797 $ 97,752,976
=========== ===========
ALLOCATION:
----------
Profit Sharing $ 54,325,736 $ 61,529,810
Pension - -
ESOP 401(k) 31,982,061 36,223,166
----------- -----------
$ 86,307,797 $ 97,752,976
=========== ===========
INVESTMENTS IN MELLON TRUST:
- ---------------------------
Total Dillon Companies, Inc.
Employee Master Trust $ 47,970,875 $ 93,702,898
=========== ===========
ALLOCATION:
----------
Profit Sharing $ - $ -
Pension 47,970,875 93,702,898
ESOP 401(k) - -
----------- -----------
$ 47,970,875 $ 93,702,898
=========== ===========
25
SCHEDULE 2
----------
DILLON COMPANIES, INC.
EMPLOYEES' STOCK OWNERSHIP AND SAVINGS PLAN
Item 27(d) - Schedule of Reportable Transactions
(Master Trust)
Year Ended December 31, 1999
Current
Value on
Selling Cost of Date of Net Gain
Description of Transaction Price Price Asset Transactions or (Loss)
- -------------------------------------- ----------- ----------- ----------- ------------ ----------
PIMCO
time deposits $82,180,000 -- $82,180,000 $82,180,000 --
PIMCO
time deposits -- $89,600,000 89,600,000 89,600,000 --
Mutual Benefit Life of New Jersey
investment contract -- 1,500,000 1,500,000 1,500,000 --
FNMA 90-128H
investment contract -- 69,669 69,669 69,669 --
FNMA 92-134H
investment contract -- 6,838,022 6,838,022 6,838,022 --
5 YR UST
investment contract -- 4,005,212 4,005,212 4,005,212 --
State Street Fixed Fund
trust investment -- 10,000,000 10,000,000 10,000,000 --
PIMCO
trust investment -- 6,000,000 6,000,000 6,000,000 --
CDC Investment Management
trust investment -- 6,921,256 6,921,256 6,921,256 --
Merrill Lynch
The Kroger Co. common stock*
724,445 shares 13,799,986 -- 13,799,986 13,799,986 --
Morgan Stanley
The Kroger Co. common stock*
1,697,500 shares 45,501,880 -- 45,501,880 45,501,880 --
Morgan Stanley
The Kroger Co. common stock*
423,800 shares -- 12,122,754 2,204,562 12,122,754 $ 9,918,192
Mellon Trust
The Kroger Co. common stock*
134,092 shares 2,110,904 -- 2,110,904 2,110,904 --
Sanford C. Bernstein & Co.
trust investment 400,000 -- 400,000 400,000 --
Sanford C. Bernstein & Co.
trust investment -- 15,036,095 15,036,095 15,036,095 --
Mellon Capital Index Fund
trust investment 1,000,000 -- 1,000,000 1,000,000 --
Mellon Capital Index Fund
trust investment -- 2,100,000 2,100,000 2,100,000 --
State Street Global Advisors Index Fund
trust investment -- 14,145,306 14,145,306 14,145,306 --
Mellon Trust
trust investment -- 3,610,904 3,610,904 3,610,904 --
*Represents party in interest transactions.