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Exhibit 99.1
Media Contact: Gary Rhodes, The Kroger Co. (513) 762-1304
Investor Contact: Kathy Kelly, The Kroger Co. (513) 762-4969
KROGER REPORTS 30% INCREASE IN EARNINGS PER SHARE, BEFORE
ONE-TIME ITEMS, FOR FOURTH QUARTER
CINCINNATI, OH, March 15, 2001 -- The Kroger Co. (NYSE: KR) today
reported final earnings per diluted share of $0.48, excluding one-time items,
for the fourth quarter ended February 3, 2001. These results represent an
increase of 30% from earnings of $0.37 per diluted share in the fourth quarter
of fiscal 1999.
Including one-time items of $14.8 million after tax, Kroger earned
$0.44 per diluted share in the fourth quarter of 2000.
Total sales in the fourth quarter of fiscal 2000 increased 12.9% to
$12.7 billion. After adjusting for an extra week in the fourth quarter of fiscal
2000, food store sales increased 5.1% and total sales rose 4.7% over the fourth
quarter of fiscal 1999.
Without the effect of the extra week in the quarter, identical food
store sales grew 1.5%, while comparable food store sales, which include
relocations and expansions, rose 1.9%. (Identical and comparable sales include
stores that changed names during the past year.)
EBITDA (earnings before interest, taxes, depreciation, amortization,
LIFO and one-time items) for the fourth quarter of 2000 totaled $1.04 billion,
an increase of 20.6% from the fourth quarter of 1999.
"Our sales and earnings growth in the fourth quarter were driven by
strong results in Kroger's core supermarket business and our manufacturing
facilities," said Joseph A. Pichler, Kroger chairman and chief executive
officer. "The market
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share for corporate brands such as Private Selection is growing in every region,
generating incremental sales and enhanced profit margins. Kroger's manufacturing
operations capped another outstanding year, and we continue to realize the
benefits of new merchandising programs and our technology investments."
Among the financial highlights of the fourth quarter:
- FIFO gross profit margin, without one-time expenses, increased
18 basis points to 27.41% due to merger synergies, increased
corporate-brand sales and savings from centralized purchasing.
- Operating, general and administrative (OG&A) costs, without
one-time expenses, declined 22 basis points to 17.95% as
improvements in productivity and safety offset increases in
utility and health care costs.
- Estimated combined synergy savings reached an annual run rate
of $330 million - an incremental gain of $36 million from the
third quarter and well above Kroger's original goal of $260
million for all of fiscal 2000.
During the fourth quarter of 2000, Kroger opened, expanded, relocated
or acquired 20 food stores. Overall square footage, including the effect of
acquisitions and operational closings, increased 4.0% over the prior year.
Capital expenditures for the quarter totaled $380 million, including
acquisitions. On this basis, capital expenditures for fiscal 2000 were $1.7
billion.
Mr. Pichler said Kroger continued to make solid progress in reducing
net working capital. Net working capital totaled $476 million, a decrease of
$183 million from the end of the fourth quarter of fiscal 1999.
For fiscal 2000, Kroger reported earnings per diluted share of $1.34,
before extraordinary and one-time items, an increase of 21% from restated
earnings of $1.11 per diluted share for fiscal 1999. After adjusting for the
53rd week in fiscal 2000, earnings were $1.31 per diluted share, an increase of
18%. Total sales increased 8.0% to $49.0 billion. After adjusting for the 53rd
week in fiscal 2000, total sales increased 6.0% from the prior year. EBITDA for
the year
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rose 13.2% to $3.5 billion. Without the effect of the extra week, EBITDA for
fiscal 2000 increased 11.1%.
Kroger's strong free cash flow from operations enabled the Company to
reduce debt and repurchase shares in an aggregate amount of more than $1 billion
in fiscal 2000.
Kroger repurchased nearly 6.7 million shares of its common stock during
the fourth quarter at an average price of $25.14 per share, for a total
investment of approximately $168 million. During fiscal 2000, the Company
repurchased 27.4 million shares of its stock at an aggregate cost of $581
million, or an average price of $21.20 per share.
Net total debt at the end of fiscal 2000 was $8.27 billion, a decline
of $476 million from the end of fiscal 1999. Net total debt was 2.34 times
EBITDA, as compared to 2.80 times in the fourth quarter of 1999. The Company's
goal is to reduce debt to 2 times EBITDA.
Mr. Pichler said Kroger remains comfortable with achieving annual
earnings per share growth of 16-18% through fiscal 2002 (which ends February 1,
2003) from an adjusted base of $1.31 per share in 2000.
Looking beyond fiscal 2002, Kroger expects to achieve sustainable
earnings per share growth of 15% annually, excluding major acquisitions, he
said.
"We are very excited about Kroger's growth prospects. Most of the
merger integration has been completed and we expect to achieve our goal of $380
million in synergy savings by the end of fiscal 2001. We have identified 12
additional initiatives that we believe will continue to drive sales and reduce
OG&A expenses. We believe that the 15% earnings per share growth rate will
enable Kroger to increase market share, while producing solid returns for our
investors. Kroger is committed to reducing working capital and achieving a
superior return on assets as we have done in the past," he said.
Comparisons to the prior year in the text and accompanying tables
reflect restated results to be filed with the SEC.
Headquartered in Cincinnati, Ohio, Kroger is one of the nation's
largest retail grocery chains. At the end of the fourth quarter, the Company
operated
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2,354 supermarkets and multi-department stores in 31 states under nearly two
dozen banners, including Kroger, Fred Meyer, Ralphs, Smith's, King Soopers,
Dillon, Fry's, City Market, Food 4 Less and Quality Food Centers. Kroger also
operates 789 convenience stores, 398 fine jewelry stores, 77 supermarket fuel
centers and 42 food processing plants.
# # #
This press release contains certain forward-looking statements about the future
performance of the Company. These statements are based on management's
assumptions and beliefs in light of the information currently available to it.
We assume no obligation to update the information contained herein. These
forward-looking statements are subject to uncertainties and other factors that
could cause actual results to differ materially from such statements including,
but not limited to, material adverse changes in the business or financial
condition of Kroger and other factors affecting the businesses of the Company.
Our ability to achieve earnings per share growth targets could be adversely
affected by a general downturn in the economy or increased competitive pressures
resulting in reductions in sales or margins. Other factors that could affect our
future performance are described in filings with the Securities and Exchange
Commission.
Note: Kroger's fourth-quarter conference call with investors will be broadcast
live via the Internet at 10 a.m. (EST) on March 15, 2001 at www.kroger.com and
www.streetevents.com. An on-demand replay of the webcast will be available from
2 p.m. (EST) on March 15, 2001 through March 22, 2001.
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THE KROGER CO.
CONSOLIDATED STATEMENT OF INCOME
WITHOUT ONE-TIME ITEMS
(in millions of dollars, except per share amounts)
FOURTH QUARTER YEAR TO DATE
------------------------- --------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
SALES $ 12,692.1 $ 11,240.5 $ 49,000.4 $ 45,351.6
COSTS AND EXPENSES:
MERCHANDISE COSTS, INCLUDING ADVERTISING,
WAREHOUSING AND TRANSPORTATION 9,198.2 8,146.1 35,769.3 33,257.8
OPERATING, GENERAL AND ADMINISTRATIVE 2,278.8 2,042.5 9,030.4 8,299.7
RENT 155.5 151.8 658.7 641.4
DEPRECIATION 211.3 209.3 907.3 847.5
AMORTIZATION OF GOODWILL 23.0 22.7 101.3 97.9
NET INTEREST EXPENSE INCL. CAPITAL LEASES 167.2 152.2 674.8 636.8
---------- ---------- ---------- ----------
TOTAL 12,034.0 10,724.6 47,141.8 43,781.1
---------- ---------- ---------- ----------
INCOME BEFORE TAX EXPENSE AND
EXTRAORDINARY ITEMS 658.1 515.9 1,858.6 1,570.5
TAX EXPENSE 257.4 200.2 728.6 621.1
---------- ---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY ITEMS 400.7 315.7 1,130.0 949.4
EXTRAORDINARY ITEMS (a) -- -- (3.2) (9.8)
---------- ---------- ---------- ----------
NET INCOME $ 400.7 $ 315.7 $ 1,126.8 $ 939.6
========== ========== ========== ==========
INCOME PER BASIC COMMON SHARE:
FROM OPERATIONS $ 0.49 $ 0.38 $ 1.37 $ 1.14
EXTRAORDINARY ITEMS 0.00 0.00 0.00 (0.01)
---------- ---------- ---------- ----------
NET INCOME PER COMMON SHARE $ 0.49 $ 0.38 $ 1.37 $ 1.13
========== ========== ========== ==========
SHARES USED IN BASIC CALCULATION 816.2 832.1 823.2 829.4
INCOME PER DILUTED COMMON SHARE:
FROM OPERATIONS $ 0.48 $ 0.37 $ 1.34 $ 1.11
EXTRAORDINARY ITEMS 0.00 0.00 0.00 (0.01)
---------- ---------- ---------- ----------
NET INCOME PER DILUTED COMMON SHARE $ 0.48 $ 0.37 $ 1.34 $ 1.10
========== ========== ========== ==========
SHARES USED IN DILUTED CALCULATION 841.7 854.5 846.1 858.2
(a) The Extraordinary Items are from the early retirement of debt.
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SUPPLEMENTAL FINANCIAL INFORMATION
WITHOUT ONE-TIME ITEMS
FOURTH QUARTER YEAR TO DATE
------------------------------ ---------------------------
2000 1999 2000 1999
--------------- ------------- ------------- ------------
EBITDA (b) $1,044.2 $ 865.6 $3,536.1 $3,123.7
LIFO CREDIT $ (15.4) $ (34.5) $ (5.9) $ (29.0)
GROSS PROFIT % (EXCLUDING LIFO CREDIT)
WITHOUT ONE-TIME ITEMS 27.41% 27.22% 26.99% 26.60%
NET WORKING CAPITAL (c) $ 476.0 $ 658.6
NET TOTAL DEBT (d) $8,269.6 $8,745.2
ERONOA (e) 24.70% 23.51%
% TO SALES FOR INCOME STATEMENT WITHOUT ONE-TIME ITEMS
FOURTH QUARTER YEAR TO DATE
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2000 1999 2000 1999
--------------- ------------- ------------- ------------
MERCHANDISE COSTS, INCLUDING ADVERTISING,
WAREHOUSING AND TRANSPORTATION 72.47% 72.47% 73.00% 73.33%
OPERATING, GENERAL AND ADMINISTRATIVE 17.95% 18.17% 18.43% 18.30%
EFFECTIVE TAX RATE 39.11% 38.81% 39.20% 39.55%
(b) EBITDA, as defined in Kroger's credit agreements, represents earnings
before interest, taxes, depreciation, amortization, LIFO , and one-time
items.
(c) Net working capital, as defined by The Kroger Co., is calculated as
current operating assets less current operating liabilities. The
components of this calculation are detailed following the Consolidated
Balance Sheet.
(d) Net total debt, as defined by The Kroger Co., is calculated as the amount
of long-term debt, including capital leases, net of Kroger's investment in
debt securities issued by lenders of certain of Kroger's structured
financings and net of prefunded employee benefits.
(e) ERONOA, as defined by The Kroger Co., represents the EBITDA return on net
operating assets and is calculated as rolling four quarters EBITDA before
rent expense divided by the sum of total assets less goodwill less accounts
payable, less prepaid VEBA, plus 8 times rolling four quarters rent
expense.
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THE KROGER CO.
CONSOLIDATED STATEMENT OF INCOME
WITH ONE-TIME ITEMS
(in millions of dollars, except per share amounts)
FOURTH QUARTER YEAR TO DATE
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2000 1999 2000 1999
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SALES $ 12,692.1 $ 11,240.5 $ 49,000.4 $ 45,351.6
COSTS AND EXPENSES:
MERCHANDISE COSTS, INCLUDING ADVERTISING,
WAREHOUSING, AND TRANSPORTATION 9,207.9 8,167.5 35,806.1 33,315.5
OPERATING, GENERAL AND ADMINISTRATIVE 2,292.6 2,046.5 9,138.4 8,327.0
RENT 155.5 151.8 658.7 641.4
DEPRECIATION 211.2 209.3 907.3 847.5
AMORTIZATION OF GOODWILL 23.0 22.7 101.3 97.9
INTEREST EXPENSE INCL. CAPITAL LEASES 167.2 152.2 674.8 636.8
IMPAIRMENT CHARGES -- -- 190.9 --
MERGER RELATED COSTS 2.0 79.5 14.6 383.4
---------- ---------- ---------- ----------
TOTAL 12,059.4 10,829.5 47,492.1 44,249.5
INCOME BEFORE TAX EXPENSE AND
EXTRAORDINARY ITEMS 632.7 411.0 1,508.3 1,102.1
TAX EXPENSE 264.8 178.9 628.2 478.9
---------- ---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY ITEMS 367.9 232.1 880.1 623.2
EXTRAORDINARY ITEMS (a) -- -- (3.2) (9.8)
---------- ---------- ---------- ----------
NET INCOME $ 367.9 $ 232.1 $ 876.9 $ 613.4
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INCOME PER BASIC COMMON SHARE:
FROM OPERATIONS $ 0.45 $ 0.28 $ 1.07 $ 0.75
EXTRAORDINARY ITEMS 0.00 0.00 0.00 (0.01)
---------- ---------- ---------- ----------
NET INCOME PER COMMON SHARE $ 0.45 $ 0.28 $ 1.07 $ 0.74
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SHARES USED IN BASIC CALCULATION 816.2 832.1 823.2 829.4
INCOME PER DILUTED COMMON SHARE:
FROM OPERATIONS $ 0.44 $ 0.27 $ 1.04 $ 0.73
EXTRAORDINARY ITEMS 0.00 0.00 0.00 (0.01)
---------- ---------- ---------- ----------
NET INCOME PER DILUTED COMMON SHARE $ 0.44 $ 0.27 $ 1.04 $ 0.72
========== ========== ========== ==========
SHARES USED IN DILUTED CALCULATION 841.7 854.5 846.1 858.2
ONE-TIME EXPENSES IN MERCHANDISE COSTS (b) $ 9.7 $ 21.4 $ 36.8 $ 57.7
ONE-TIME EXPENSES IN OG&A (b) 13.8 4.0 108.0 27.3
IMPAIRMENT CHARGES (c) -- -- 190.9 --
MERGER RELATED COSTS 2.0 79.5 14.6 383.4
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TOTAL ONE-TIME ITEMS, MERGER COSTS,
AND IMPAIRMENT CHARGES $ 25.5 $ 104.9 $ 350.3 $ 468.4
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(a) The Extraordinary Items are from the early retirement of debt.
(b) The one-time items in both 1999 and 2000 are costs related to mergers.
The merchandise charges primarily relate to inventory revaluations.
The operating, general and administrative charges primarily relate to
store conversions or closures.
(c) Relates primarily to the write-down of certain impaired assets in
accordance with Statements of Financial Accounting Standards No. 121.
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SUPPLEMENTAL FINANCIAL INFORMATION
WITH ONE-TIME ITEMS
FOURTH QUARTER YEAR TO DATE
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2000 1999 2000 1999
--------------- ------------- -------------- ------------
EBITDA (d) $1,044.2 $ 865.6 $3,536.1 $3,123.7
LIFO CREDIT $ (15.4) $ (34.5) $ (5.9) $ (29.0)
GROSS PROFIT % (EXCLUDING LIFO CREDIT)
WITH ONE-TIME ITEMS 27.33% 27.03% 26.91% 26.48%
NET WORKING CAPITAL (e) $ 476.0 $ 658.6
NET TOTAL DEBT (f) $8,269.6 $8,745.2
ERONOA (g) 24.70% 23.51%
% TO SALES FOR INCOME STATEMENT WITH ONE-TIME ITEMS
FOURTH QUARTER YEAR TO DATE
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2000 1999 2000 1999
--------------- ------------- -------------- ------------
MERCHANDISE COSTS, INCLUDING ADVERTISING,
WAREHOUSING AND TRANSPORTATION 72.55% 72.66% 73.07% 73.46%
OPERATING, GENERAL AND ADMINISTRATIVE 18.06% 18.21% 18.65% 18.36%
EFFECTIVE TAX RATE 41.85% 43.53% 41.65% 43.45%
(d) EBITDA, as defined in Kroger's credit agreements, represents earnings
before interest, taxes, depreciation, amortization, LIFO , and one-time
items.
(e) Net working capital, as defined by The Kroger Co., is calculated as current
operating assets less current operating liabilities. The components of this
calculation are detailed following the Consolidated Balance Sheet.
(f) Net total debt, as defined by The Kroger Co., is calculated as the amount
of long-term debt, including capital leases, net of Kroger's investment in
debt securities issued by lenders of certain of Kroger's structured
financings and net of prefunded employee benefits.
(g) ERONOA, as defined by The Kroger Co., represents the EBITDA return on net
operating assets and is calculated as rolling four quarters EBITDA before
rent expense divided by the sum of total assets less goodwill less accounts
payable plus 8 times rolling four quarters rent expense.
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CONSOLIDATED BALANCE SHEET
Subject to Reclassification
(in millions)
February 3, January 29,
2001 2000
----------- -----------
ASSETS
Current Assets
Cash $ 160.8 $ 280.6
Receivables 687.3 635.6
Inventories 4,066.0 3,938.0
Prepaid and other current assets 501.5 690.0
----------- -----------
Total current assets 5,415.6 5,544.2
Property, plant and equipment, net 8,819.8 8,266.2
Goodwill, net 3,639.4 3,717.8
Other assets 314.8 402.7
----------- -----------
Total Assets $ 18,189.6 $ 17,930.9
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 306.9 $ 536.3
Accounts payable 3,012.4 2,772.8
Accrued salaries and wages 603.8 694.7
Other current liabilities 1,668.0 1,659.6
----------- -----------
Total current liabilities 5,591.1 5,663.4
Long-term debt 7,845.8 8,045.3
Other long-term liabilities 1,664.4 1,542.9
Stockholders' equity 3,088.3 2,679.3
----------- -----------
Total liabilities and stockholders' equity $ 18,189.6 $ 17,930.9
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Total common shares outstanding at end of period 815.5 834.7
Total diluted shares Year to Date 846.1 858.2
NET WORKING CAPITAL CALCULATION
February 3, January 29,
2001 2000
----------- -----------
Cash $ 160.8 $ 280.6
Receivables 687.3 635.6
FIFO Inventory 4,561.7 4,439.7
Operating prepaid and other assets 409.8 495.3
Accounts payable (3,012.4) (2,772.8)
Operating accrued liabilities (2,123.2) (2,219.8)
Prepaid VEBA (208.0) (200.0)
----------- -----------
Net working capital $ 476.0 $ 658.6