1
Filed Pursuant To Rule 424(b)(5)
Registration No. 333-95955
333-60222
Prospectus Supplement to Prospectus dated February 2, 2000.
$1,000,000,000
THE KROGER CO.
$500,000,000 6.80% Senior Notes due 2011
$500,000,000 7.50% Senior Notes due 2031
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Kroger is offering two series of notes. Kroger will pay interest on the
notes on April 1 and October 1 of each year. The first interest payment will be
made on October 1, 2001. The notes will be issued only in denominations of
$1,000 and integral multiples of $1,000.
Kroger has the right to redeem all or any portion of the notes at any time
at the redemption prices described in this prospectus supplement, plus accrued
interest.
The notes are guaranteed by our subsidiaries listed on pages S-13 and S-14
of this prospectus supplement.
See "Risk Factors" beginning on page S-2 of the prospectus supplement to
read about certain factors you should consider before buying notes.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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Proceeds, before
Initial public Underwriting expenses, to
offering price discount Kroger
---------------- ------------ ----------------
Per 6.80% note....................................... 99.740% 0.650% 99.090%
Total................................................ $498,700,000 $3,250,000 $495,450,000
Per 7.50% note....................................... 99.316% 0.875% 98.441%
Total................................................ $496,580,000 $4,375,000 $492,205,000
The initial public offering prices set forth above do not include accrued
interest, if any. Interest on the notes will accrue from May 11, 2001 and must
be paid by the purchaser if the notes are delivered after May 11, 2001.
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The underwriters expect to deliver the notes in book-entry form only
through the facilities of the Depository Trust Company against payment in New
York, New York on May 11, 2001.
Joint Bookrunners
BANC OF AMERICA SECURITIES LLC JPMORGAN SALOMON SMITH BARNEY
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BANC ONE CAPITAL MARKETS, INC.
BNP PARIBAS
BNY CAPITAL MARKETS, INC.
MIZUHO INTERNATIONAL PLC
SCOTIA CAPITAL
TOKYO-MITSUBISHI INTERNATIONAL PLC
U.S. BANCORP PIPER JAFFRAY INC.
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Prospectus Supplement dated May 4, 2001.
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RISK FACTORS
You should carefully consider the following matters in deciding whether to
purchase the notes.
OUR INDEBTEDNESS COULD ADVERSELY AFFECT US BY REDUCING OUR FLEXIBILITY TO
RESPOND TO CHANGING BUSINESS AND ECONOMIC CONDITIONS AND INCREASING OUR
BORROWING COSTS.
As of February 3, 2001, our total outstanding indebtedness, including
capital leases and the current portion thereof, was approximately $8.5 billion,
including approximately $2.3 billion under several bank credit facilities. As of
February 3, 2001, we had credit facilities totaling approximately $3.8 billion,
with approximately $1.4 billion available for additional borrowings under these
credit facilities. In addition, as of February 3, 2001, we had a fully borrowed
$470 million synthetic lease credit facility and $175 million in money market
lines with an unused balance of $75 million.
This indebtedness could reduce our ability to obtain additional financing
for working capital, acquisitions or other purposes and could make us more
vulnerable to economic downturns and competitive pressures. Our needs for cash
in the future will depend on many factors that are difficult to predict. These
factors include results of operations, the timing and cost of acquisitions and
efforts to expand existing operations.
We believe that we will have sufficient funds from all sources to meet our
needs over the next several years. We cannot assure you, however, that our
business will generate cash flow at or above current levels. If we are unable to
generate sufficient cash flow from operations in the future to pay our debt and
make necessary investments, we will be required to:
- refinance all or a portion of our existing debt;
- seek new borrowings;
- forego strategic opportunities; or
- delay, scale back or eliminate some aspects of our operations.
If necessary, any of these actions could have a material negative impact on
our business, financial condition or results of operations.
Some of our subsidiaries will guarantee the notes. As a result, the notes
will effectively rank equal in right of payment with approximately $7.6 billion
of indebtedness of these subsidiaries as of February 3, 2001. The notes will
effectively rank junior in right of payment to indebtedness of our subsidiaries
that do not guarantee the notes. As of February 3, 2001, the indebtedness of the
subsidiaries who will not guarantee the notes totaled approximately $248
million.
THE GUARANTEES OF THE NOTES BY OUR SUBSIDIARIES MAY BE INADEQUATE.
Although most of our subsidiaries have guaranteed our obligation to pay the
notes, the available assets of those subsidiaries may be insufficient for these
purposes. Some of those subsidiaries are direct borrowers under, or guarantors
of, our bank credit facilities.
FEDERAL AND STATE STATUTES PERMIT COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID
GUARANTEES AND REQUIRE THE RETURN OF PAYMENTS RECEIVED FROM GUARANTORS.
Under the U.S. Bankruptcy Code and comparable provisions of state
fraudulent transfer laws, a court has the power to void a guarantee, or to
subordinate claims in respect of a guarantee to all other debts of the
guarantor, if, among other things, at the time the guarantor incurred the
indebtedness
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evidenced by its guarantee, it received less than reasonably equivalent value or
fair consideration for the incurrence of the guarantee, and either:
- was insolvent or rendered insolvent by reason of that incurrence;
- was engaged in a business or transaction for which its remaining assets
constituted unreasonably small capital; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay as those debts mature.
In addition, the court may void any payment by that guarantor pursuant to
its guarantee and require the return of that payment to the guarantor or to a
fund for the benefit of the creditors of the guarantor.
The measures of insolvency for these purposes will vary depending upon the
law applied in any proceeding to determine whether a fraudulent transfer has
occurred. Generally, however, a guarantor would be considered insolvent if:
- the sum of its debts, including contingent liabilities, were greater than
the fair saleable value of all of its assets;
- the present fair saleable value of its assets were less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature; or
- it could not pay its debts as they become due.
On the basis of our historical financial results, recent operating history
and other factors, we believe that each subsidiary that has guaranteed the
notes, after giving effect to that guarantee, will not be insolvent, will not
have unreasonably small capital for the business in which it is engaged and will
not have incurred debts beyond its ability to pay as those debts mature.
However, we cannot assure you of the particular standard that might be applied
by a court in making its determinations or that a court would agree with our
conclusions in this regard.
OUR ABILITY TO MEET SALES AND EARNINGS TARGETS MAY BE NEGATIVELY IMPACTED BY A
VARIETY OF FACTORS.
We obtain sales growth from new square footage, as well as from increased
productivity from existing stores. We expect full year 2001 square footage to
grow 4.0% to 5.0%. We expect an annual earnings per share growth of 16% to 18%
through the fiscal year ending February 1, 2003, and 15% thereafter. Our ability
to achieve the expected increases in sales and earnings could be adversely
affected by the increasingly competitive environment in which we operate. In
addition, any labor dispute, delays in opening new stores, changes in the
economic climate, or other unanticipated events, could cause us to fall short of
sales and earnings targets. Sales growth may also be negatively affected if the
impact of new square footage on existing stores is greater than anticipated.
THE COMPANY
Kroger was founded in 1883 and was incorporated in 1902. We maintain our
corporate offices in Cincinnati, Ohio, and as of February 3, 2001, we were one
of the largest grocery retailers in the United States based on annual sales.
As of February 3, 2001, we operated approximately 2,354 supermarkets and
multi-department stores, 789 convenience stores, 77 supermarket fuel centers,
and 398 jewelry stores. Ninety six of the convenience stores are franchised to
third parties. We also operate 42 manufacturing plants that enable us to offer
quality, low-cost private label products.
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USE OF PROCEEDS
We estimate that the net proceeds from this offering will be approximately
$987.4 million. We intend to use those proceeds to repay amounts under our
credit facilities and thereafter to use borrowings under those credit facilities
to repurchase or redeem our outstanding indebtedness. We also expect to use
borrowing proceeds for other general corporate purposes.
The interest rate for borrowings under the credit facilities, as amended,
are detailed in the Consolidated Financial Statements attached to our Annual
Report on Form 10-K for the fiscal year ended February 3, 2001, filed with the
SEC.
DESCRIPTION OF THE NOTES
The following description of the particular terms of the notes (referred to
in the accompanying prospectus as the "debt securities") supplements, and to the
extent it is inconsistent with the description in the prospectus, it replaces
the description of the general terms and provisions of the debt securities in
the prospectus. We will issue the notes under an indenture dated June 25, 1999,
as it may be amended and supplemented from time to time, among Kroger and
Firstar Bank, N.A., as trustee, and the guarantors named in the supplemental
indenture. We have summarized select portions of the indenture below. The
summary is not complete and is qualified by reference to the indenture.
GENERAL
The 6.80% notes will be limited to an aggregate principal amount of
$500,000,000 and will mature on April 1, 2011. The 7.50% notes will be limited
to an aggregate principal amount of $500,000,000 and will mature on April 1,
2031.
The notes will bear interest from May 11, 2001 at the respective rates
shown on the front cover of this prospectus supplement. Interest on the notes is
payable semiannually on April 1 and October 1 of each year commencing on October
1, 2001 to the person in whose name such note is registered at the close of
business on March 15 or September 15, as the case may be, immediately preceding
such interest payment dates.
The notes rank equally in right of payment with all of our existing and
future unsecured senior debt. The notes rank senior to all of our existing and
future subordinated indebtedness.
Some of our subsidiaries will guarantee the notes. As a result, the notes
will effectively rank equal in right of payment with approximately $7.6 billion
of indebtedness of these subsidiaries as of February 3, 2001. If one of these
subsidiaries becomes insolvent, however, the guarantee of that subsidiary could
be held by a court to be unenforceable under applicable fraudulent transfer or
similar laws. The notes will effectively rank junior in right of payment to
indebtedness of our subsidiaries that do not guarantee the notes. As of February
3, 2001, the indebtedness of the subsidiaries who will not guarantee the notes
totaled approximately $248 million.
The notes are unsecured and not entitled to any sinking fund.
The notes will initially be issued only in registered, book-entry form, in
denominations of $1,000 and any integral multiple thereof as described under
"Book-Entry System". We will issue global securities in denominations equal to
the total principal amount of outstanding notes of the series represented by the
global securities.
If any interest payment date or the maturity date of the notes does not
fall on a business day, payment of interest or principal otherwise payable on
that day will be made on the next succeeding business day with the same effect
as if made on the actual interest payment date or the maturity date of the
notes, as the case may be, and no interest will accrue for the period from and
after such interest
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payment date or maturity date. "Business day" means any day other than a
Saturday or Sunday or a day on which banking institutions in New York City or
Cincinnati, Ohio are authorized or obligated by law or executive order to close.
GUARANTEES
All of our subsidiaries except those prohibited from so doing and those
without any significant assets or operations will guarantee our obligations
under the notes, subject to the limitations described below. In addition, if, in
the future, any of our existing or future subsidiaries guarantees any of our
indebtedness, that subsidiary will also be required to guarantee our obligations
under the notes, unless it is prohibited from doing so. If we default in payment
of the principal, interest or any premium due under the notes, the guarantors
will be obligated to pay these amounts.
The obligations of each guarantor under its guarantee are limited to the
maximum amount enforceable under applicable fraudulent conveyance or fraudulent
transfer laws. This maximum amount will be calculated after giving effect to all
other liabilities of the guarantor and after giving effect to all contribution
and other obligations among the guarantors under the indenture. Each guarantor
that makes a payment or distribution under its guarantee will be entitled to a
contribution from each other guarantor in a pro rata amount based on the net
assets of each guarantor.
A guarantee issued by a guarantor will automatically and unconditionally be
released and discharged in the following situations if doing so will not result
in any downgrade of the notes by Moody's Investors Service and Standard & Poor's
Ratings Services:
- upon any sale, exchange or transfer to any person of all of the capital
stock, or all or substantially all of the assets, of the guarantor in a
transaction that complies with the indenture, except that such a
transaction will not release or discharge a guarantee if the guarantor
continues to be a guarantor of any of our bank credit facilities; or
- at our request at any time if we no longer have in force guarantees under
our bank credit facilities.
Except as otherwise described above, as long as the notes are guaranteed we
will add comparable release provisions to any existing debt that we modify after
the date of this prospectus supplement to add guarantees, and to any future debt
securities (excluding asset backed securities) issued by us and guaranteed by
our subsidiaries. We have added guarantees to most of our existing debt. As of
February 3, 2001, approximately $3.1 billion of debt issued by Fred Meyer and
its subsidiaries is guaranteed by Fred Meyer's subsidiaries, and does not
contain similar guarantee release provisions.
Each guarantee will rank equal in right of payment with all other unsecured
and unsubordinated indebtedness of the guarantor and will rank senior in right
of payment to all subordinated indebtedness of the guarantor. As of February 3,
2001, after giving pro forma effect to this offering, the application of the net
proceeds of the offering and the guarantees to be given by some of our
subsidiaries, Kroger and the guarantors would have had approximately $8.3
billion of indebtedness outstanding, of which approximately $7.4 billion would
have been unsecured and unsubordinated indebtedness, $217 million would have
been secured and unsubordinated, and the balance of which would have been
unsecured and subordinated indebtedness.
OPTIONAL REDEMPTION
The notes will be redeemable, in whole or in part, at our option at any
time. The redemption price for the notes will equal the greater of:
- 100% of the principal amount of the notes; and
- the sum of the present values of the remaining scheduled payments of
principal and interest on the notes being redeemed, excluding accrued
interest on the date of redemption, from the
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redemption date to the maturity date. The discount to the redemption date
will be made on a semiannual basis based on a 360-day year, with each
month consisting of 30 days. The discount rate will equal the equivalent
yield to maturity of U.S. Treasury securities having a comparable
maturity to the notes being redeemed, plus 25 basis points for the 6.80%
notes and 30 basis points for the 7.50% notes, plus accrued interest to
the redemption date. The determination of the rate will be made by an
agent we appoint. Initially, that agent will be Salomon Smith Barney Inc.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of the notes to be redeemed.
Unless we default in payment of the redemption price, interest will cease to
accrue on and after the redemption date on the notes or portions of the notes
called for redemption.
COVENANTS
The indenture provides that the following covenants will apply to us:
Limitations on Liens. We covenant that, so long as any notes remain
outstanding, neither we nor any of our restricted subsidiaries will issue,
assume or guarantee any secured debt or other agreement comparable to secured
debt unless these notes and other debt ranking equally to these notes also is so
secured on an equal basis. This restriction will not apply to the following:
(1) liens on any property or assets of any corporation existing at the
same time such corporation becomes a restricted subsidiary provided
that the lien does not extend to any of our other property or that of
any other restricted subsidiaries;
(2) liens existing on assets acquired by us, to secure the purchase price
of assets, or to obtain a release of liens from any of our other
property, incurred no later than 18 months after the acquisition,
assumption, guarantee, or, in the case of real estate, completion of
construction and commencement of operations;
(3) liens securing indebtedness owing by any restricted subsidiary to us
or another restricted subsidiary;
(4) liens on any assets existing upon acquisition of a corporation through
merger or by acquisition of all or substantially all of the assets by
us or a restricted subsidiary;
(5) liens in favor of the U.S., a foreign country, or any political
subdivision to secure payments of debt incurred to finance the
purchase of assets;
(6) liens existing on our or any of our restricted subsidiaries'
properties or assets existing on the date hereof; provided that the
liens secure only those obligations which they secure on the date
hereof or any extension, renewal or replacement thereof;
(7) any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part, of any lien referred to
in clauses (1) through (6);
(8) some statutory liens or other similar liens arising in the ordinary
course of our or any of our restricted subsidiaries' business, or some
liens arising out of governmental contracts;
(9) some pledges, deposits or liens made or arising under worker's
compensation or similar legislation or in some other circumstances;
(10) some liens in connection with legal proceedings, including some liens
arising out of judgments or awards;
(11) liens for some taxes or assessments, landlord's liens, mechanic's
liens and liens and charges incidental to the conduct of the business,
or the ownership of our or any of our restricted
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subsidiaries' property or assets that were not incurred in connection
with the borrowing of money and that do not in our opinion, materially
impair the use of the property or assets in the operation of our
business or that of a restricted subsidiary or the value of the
property or assets for its purposes; or
(12) any other liens not included above, which together with amounts
included in clause (1) of the next section do not exceed 10% of our
consolidated net tangible assets.
Limitation on Sale and Lease-Back Transactions. We and our restricted
subsidiaries will not sell and leaseback for a term greater than three years
under a capital lease any material real property or operating assets unless:
(1) we could incur secured debt on that property equal to the present
value of rentals under the lease without having to equally secure the
note; or
(2) the sale proceeds equal or exceed the fair market value of the
property and the net proceeds are used within 180 days to acquire
material real property or operating assets or to purchase or redeem
notes offered hereby or long term debt, including capital leases, that
are senior to or rank on parity with these notes.
This restriction does not apply to sale and lease-back transactions of
material property or operating assets acquired or constructed after 18 months
prior to the date of the indenture as long as a commitment for the sale and
lease-back is made within 18 months of acquisition, in the case of operating
assets, and of completion of construction and commencement of operations, in the
case of material real property.
For purposes of these covenants, a "subsidiary" is an entity that we
directly or indirectly control, including partnerships in which we or our
subsidiaries own a greater than 50% interest. Restricted subsidiaries are all of
our subsidiaries other than those our board of directors has determined are not
material.
The covenants applicable to the notes would not necessarily afford holders
protection in the event of a highly leveraged or other transaction involving us
or in the event of a material adverse change in our financial condition or
results of operation, and the notes do not contain any other provisions that are
designed to afford protection in the event of a highly leveraged transaction
involving us.
MERGER AND CONSOLIDATION
The indenture provides that we will not merge or consolidate with any
corporation, partnership or other entity and will not sell, lease or convey all
or substantially all of our assets to any entity, unless:
- we are the surviving entity, or the surviving or successor entity is a
corporation or partnership organized under the laws of the United States
or a State thereof or the District of Columbia and expressly assumes all
our obligations under the indenture and the notes; and
- immediately after the merger, consolidation, sale, lease or conveyance,
we or the successor entity are not in default in the performance of the
covenants and conditions of the indenture.
BOOK-ENTRY SYSTEM
Upon issuance, the notes will be represented by one or more global
securities. Each global security representing global notes will be deposited
with, or on behalf of, The Depository Trust Company or "DTC", and registered in
the name of a nominee of DTC. Global notes will not be exchangeable for
certificated notes, except as described below. Certificated notes will not be
exchangeable for global notes and will not otherwise be issuable as global
notes.
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Ownership of beneficial interests in a global note will be limited to DTC
participants and to persons that may hold interests through institutions that
have accounts with DTC ("participants"). Beneficial interests in a global note
will be shown on, and transfers of those ownership interests will be effected
only through, records maintained by DTC and its participants for the global
note. The conveyance of notices and other communications by DTC to its
participants and by its participants to owners of beneficial interests in the
notes will be governed by arrangements among them, subject to any statutory or
regulatory requirements in effect.
DTC holds the securities of its participants and facilitates the clearance
and settlement of securities transactions among its participants in those
securities through electronic book-entry changes in accounts of its
participants. The electronic book-entry system eliminates the need for physical
certificates. DTC's participants include:
- securities brokers and dealers (including the underwriters);
- banks;
- trust companies;
- clearing corporations; and
- other organizations (some of which, and/or their representatives, own
DTC).
Banks, brokers, dealers, trust companies and others that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly, also have access to DTC's book-entry system.
Principal and interest payments on the global notes represented by a global
security will be made to DTC or its nominee, as the case may be, as the sole
registered owner and the sole holder of the global notes represented by the
global security for all purposes under the indenture. Accordingly, we, the
trustee and the paying agent under the indenture will have no responsibility or
liability for:
- any aspect of DTC's records relating to, or payments made on account of,
beneficial ownership interests in a global note represented by a global
security;
- any other aspect of the relationship between DTC and its participants or
the relationship between the participants and the owners of beneficial
interests in a global note held through the participants; or
- the maintenance, supervision or review of any of DTC's records relating
to the beneficial ownership interests.
DTC has advised us that upon receipt of any payment of principal of or
interest on a global note, DTC will immediately credit, on its book-entry
registration and transfer system, the accounts of participants with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the global note as shown on DTC's records. The applicable underwriter
or underwriters will initially designate the accounts to be credited. Payments
by participants to owners of beneficial interests in a global note will be
governed by standing instructions and customary practices, as is the case with
securities held for customer accounts in bearer form or registered in "street
name," and will be the sole responsibility of those participants.
A global note can only be transferred:
- as a whole by DTC to one of its nominees;
- as a whole by a nominee of DTC to DTC or another nominee of DTC; or
- as a whole by DTC or a nominee of DTC to a successor of DTC or a nominee
of the successor.
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Global notes represented by a global security can be exchanged for
certificated notes in registered form only if:
- DTC notifies us that it is unwilling or unable to continue as depositary
for the global note and we do not appoint a successor depositary within
90 days after receiving the notice;
- at any time DTC ceases to be a clearing agency registered under the
Securities Exchange Act of 1934 and we do not appoint a successor
depositary within 90 days after becoming aware that DTC has ceased to be
so registered as a clearing agency;
- we in our sole discretion determine that a global note will be
exchangeable for certificated notes in registered form and notify the
trustee of our decision; or
- an event of default with respect to the notes represented by a global
note has occurred and is continuing.
A global note that can be exchanged under the previous paragraph will be
exchanged for certificated notes that are issued in authorized denominations in
registered form for the same aggregate amount. Those certificated notes will be
registered in the names of the owners of the beneficial interests in the global
note as directed by DTC.
Except as provided above, owners of beneficial interests in a note will not
be entitled to receive physical delivery of notes in certificated form and will
not be considered the holders of the notes for any purpose under the indenture
and no global notes represented by a global security will be exchangeable. Each
person owning a beneficial interest in a global note must rely on the procedures
of DTC (and if the person is not a participant, on the procedures of the
participant through which the person owns its interest) to exercise any rights
of a holder under the indenture or the global note. The laws of some
jurisdictions require that purchasers of securities take physical delivery of
the securities in certificated form. Those laws may impair the ability to
transfer beneficial interests in a global note.
We understand that under existing industry practices, if we request holders
to take any action, or if an owner of a beneficial interest in a global note
desires to take any action which a holder is entitled to take under the
indenture, then (1) DTC would authorize the participants holding the relevant
beneficial interests to take that action and (2) those participants would
authorize the beneficial owners owning through those participants to take that
action or would otherwise act upon the instructions of beneficial owners owning
through them.
DTC has provided the following information to us. DTC is:
- a limited-purpose trust company organized under the laws of the State of
New York;
- a "banking organization" within the meaning of the New York Banking Law;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- a "clearing agency" registered under the Securities Exchange Act of 1934.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Under terms satisfactory to the trustee, we may discharge some obligations
to holders of the notes which have not already been delivered to the trustee for
cancellation and which have either become due and payable or are by their terms
due and payable within one year (or are scheduled for redemption within one
year) by irrevocably depositing with the trustee cash or U.S. Government
Obligations (as defined in the indenture) as trust funds in an amount certified
to be sufficient to pay at maturity (or upon redemption) the principal of and
interest on the notes.
We may also discharge any and all of our obligations to holders of the
notes at any time ("defeasance"), but we may not avoid our duty to register the
transfer or exchange of the notes, to replace any
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temporary, mutilated, destroyed, lost, or stolen notes or to maintain an office
or agency for the notes. Defeasance may be effected only if, among other things:
(1) we irrevocably deposit with the trustee cash or U.S. government
obligations as trust funds in an amount certified to be sufficient to
pay at maturity the principal of and interest on all outstanding notes;
and
(2) we deliver to the trustee an opinion of counsel to the effect that the
holders of the notes will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of the defeasance and that
defeasance will not otherwise alter the holders' U.S. federal income
tax treatment of principal and interest payments on the notes. The
opinion must be based on a ruling of the IRS or a change in U.S.
federal income tax law occurring after the date of the indenture, since
that result would not occur under current tax law.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the notes will be made by the underwriters in immediately
available funds. We will pay all principal and interest in immediately available
funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the notes
will trade in the DTC's same-day funds settlement system until maturity. As a
result, DTC will require that secondary market trading activity in the notes be
settled in immediately available funds. We cannot advise holders on the effect
on trading activity in the notes of settlement in immediately available funds.
THE TRUSTEE
Firstar Bank, N.A., is the trustee under the indenture. In the performance
of its duties, the trustee is entitled to indemnification for any act which
would involve it in expense or liability and will not be liable as a result of
any action taken in connection with the performance of its duties except for its
own gross negligence or default. The trustee is protected in acting upon any
direction or document reasonably believed by it to be genuine and to be signed
by the proper party or parties or upon the opinion or advice of counsel. The
trustee may resign upon written notice to us as provided in the indenture. The
trustee may acquire our obligations for its own account. The trustee performs
banking and other services for us, and is a lender under some of our credit
facilities.
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UNDERWRITING
Kroger and the underwriters for the offering named below have entered into
an underwriting agreement and a pricing agreement for offering the notes.
Subject to conditions in these agreements, each underwriter has severally agreed
to purchase the principal amount of notes indicated in the following table.
Principal Principal
Amount of Amount of
Underwriters 6.80% Notes 7.50% Notes
------------ ------------ ------------
Banc of America Securities LLC................... $116,500,000 $116,500,000
J.P. Morgan Securities Inc....................... 116,500,000 116,500,000
Salomon Smith Barney Inc......................... 116,500,000 116,500,000
Banc One Capital Markets, Inc.................... 50,000,000 50,000,000
Scotia Capital (USA) Inc......................... 30,500,000 30,500,000
BNY Capital Markets, Inc......................... 20,000,000 20,000,000
U.S. Bancorp Piper Jaffray Inc................... 20,000,000 20,000,000
BNP Paribas Securities Corp...................... 10,000,000 10,000,000
Mizuho International plc......................... 10,000,000 10,000,000
Tokyo-Mitsubishi International plc............... 10,000,000 10,000,000
------------ ------------
Total.................................. $500,000,000 $500,000,000
============ ============
Notes sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus
supplement. Any notes sold by the underwriters to securities dealers may be sold
at a discount from the initial public offering price of up to 0.40% and 0.50% of
the principal amount of the 6.80% notes and the 7.50% notes, respectively. Any
such securities dealers may resell any notes purchased from the underwriters to
certain other brokers or dealers at a discount from the initial public offering
price of up to 0.25% of the principal amount of each of the 6.80% notes and the
7.50% notes. If all the notes are not sold at the initial offering price, the
underwriters may change the offering price and the other selling terms.
The notes are new issues of securities with no established trading market.
The underwriters have advised Kroger that the underwriters intend to make a
market in the notes but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the notes.
In connection with the offerings, the underwriters may purchase and sell
notes in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater number of
notes than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the notes while the
offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the underwriters have repurchased notes sold by
or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the notes. As a result, the price of the notes may be
higher than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the underwriters at any
time. These transactions may be effected in the over-the-counter market or
otherwise.
S-11
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One or more of the underwriters or their affiliates have provided and may
in the future provide various commercial or investment banking services and
other services to us and our affiliates. In addition, affiliates of some of the
underwriters are lenders, and in some cases agents or managers for the lenders
under certain of our credit facilities.
Affiliates of the underwriters will in aggregate receive more than 10% of
the proceeds of this offering as a result of the repayment of borrowings under
our credit facilities. Therefore, this offering is being conducted in accordance
with Rule 2710(c)(8) of the National Association of Securities Dealers, Inc.
Kroger estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$300,000.
Kroger has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
VALIDITY OF THE NOTES
The validity of the notes will be passed upon for Kroger by Paul W.
Heldman, Esq., Senior Vice President, Secretary and General Counsel of Kroger,
and for the underwriters by Fried, Frank, Harris, Shriver & Jacobson (a
partnership including professional corporations), New York, New York. Mr.
Heldman may rely as to matters of New York law upon the opinion of Fried, Frank,
Harris, Shriver & Jacobson, and Fried, Frank, Harris, Shriver & Jacobson may
rely as to matters of Ohio law upon the opinion of Mr. Heldman. As of April 30,
2001, Mr. Heldman owned approximately 118,094 shares of Kroger's Common Stock
and had options to acquire an additional 505,500 shares. Fried, Frank, Harris,
Shriver & Jacobson from time to time performs legal services for Kroger.
EXPERTS
The financial statements incorporated in this prospectus supplement by
reference to the Annual Report on Form 10-K for the year ended February 3, 2001
have been so incorporated in reliance on the report (which contains an
explanatory paragraph relating to the restatement of the consolidated financial
statements as of and for each of the two years in the period ended January 29,
2000 and the Company's change in its application of the LIFO method of
accounting for store inventories as of December 28, 1997) of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
FORWARD-LOOKING STATEMENTS
The prospectus and this prospectus supplement contain, or incorporate by
reference, certain statements that may be deemed "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. All statements, other than statements of historical facts, that
address activities, events or developments that we intend, expect, project,
believe or anticipate will or may occur in the future are forward-looking
statements. Such statements are based on certain assumptions and assessments
made by our management in light of its experience and its perception of
historical trends, current conditions, expected future developments and other
factors it believes to be appropriate. The forward-looking statements included
in the prospectus and this prospectus supplement are also subject to a number of
material risks and uncertainties, including but not limited to economic,
competitive, governmental and technological factors affecting our operations,
markets, products, services and prices, and other factors discussed under "Risk
Factors" or in our filings under the Securities Act and the Exchange Act.
Prospective investors are cautioned that such forward-looking statements are not
guarantees of future performance and that actual results, developments and
business decisions may differ from those envisaged by such forward-looking
statements.
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LIST OF SUBSIDIARY GUARANTORS
NAME OF GUARANTOR JURISDICTION OF ORGANIZATION
----------------- ----------------------------
Alpha Beta Company.......................................... California
Bay Area Warehouse Stores, Inc.............................. California
Bell Markets, Inc........................................... California
Cala Co..................................................... Delaware
Cala Foods, Inc............................................. California
CB&S Advertising Agency, Inc................................ Oregon
Crawford Stores, Inc........................................ California
Dillon Companies, Inc....................................... Kansas
Dillon Real Estate Co., Inc................................. Kansas
Distribution Trucking Company............................... Oregon
Drugs Distributors, Inc..................................... Indiana
FM Holding Corporation...................................... Delaware
FM, Inc..................................................... Utah
Food 4 Less GM, Inc......................................... California
Food 4 Less Holdings, Inc................................... Delaware
Food 4 Less Merchandising, Inc.............................. California
Food 4 Less of California, Inc.............................. California
Food 4 Less of Southern California, Inc..................... Delaware
Fred Meyer, Inc............................................. Delaware
Fred Meyer Jewelers, Inc.................................... California
Fred Meyer of Alaska, Inc................................... Alaska
Fred Meyer of California, Inc............................... California
Fred Meyer Stores, Inc...................................... Delaware
Grand Central, Inc.......................................... Utah
Henpil, Inc................................................. Texas
Hughes Markets, Inc......................................... California
Hughes Realty, Inc.......................................... California
Inter-American Foods, Inc................................... Ohio
JH Properties, Inc.......................................... Washington
Junior Food Stores of West Florida, Inc..................... Florida
J.V. Distributing, Inc...................................... Michigan
KRGP Inc.................................................... Ohio
KRLP Inc.................................................... Ohio
The Kroger Co. of Michigan.................................. Michigan
Kroger Dedicated Logistics Co............................... Ohio
Kroger Limited Partnership I................................ Ohio
Kroger Limited Partnership II............................... Ohio
Kroger Texas L.P............................................ Ohio
KU Acquisition Corporation.................................. Washington
S-13
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NAME OF GUARANTOR JURISDICTION OF ORGANIZATION
----------------- ----------------------------
Kwik Shop, Inc.............................................. Kansas
Mini Mart, Inc.............................................. Wyoming
Peyton's-Southeastern, Inc.................................. Tennessee
QFC Sub, Inc................................................ Washington
Quality Food Centers, Inc................................... Washington
Quality Food Holdings, Inc.................................. Delaware
Quality Food, Inc........................................... Delaware
Quik Stop Markets, Inc...................................... California
Ralphs Grocery Company...................................... Delaware
RJD Assurance, Inc.......................................... Vermont
Richie's Inc................................................ Texas
Rocket Newco, Inc........................................... Texas
Roundup Co.................................................. Washington
Second Story, Inc........................................... Washington
Smith's Beverage of Wyoming, Inc............................ Wyoming
Smith's Food & Drug Centers, Inc............................ Delaware
THGP Co., Inc............................................... Pennsylvania
THLP Co., Inc............................................... Pennsylvania
Topvalco, Inc............................................... Ohio
Turkey Hill, L.P............................................ Pennsylvania
Vine Court Assurance Incorporated........................... Vermont
Wells Aircraft, Inc......................................... Kansas
Wydiv, Inc.................................................. Texas
S-14
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PROSPECTUS
$1,725,000,000
THE KROGER CO.
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
COMMON STOCK
WARRANTS
We will provide specific terms of these securities in supplements to this
prospectus. You should read this prospectus and any supplement carefully before
you invest.
We may offer any of the following securities from time to time:
- debt securities;
- preferred stock;
- depositary shares relating to preferred stock;
- common stock; and
- warrants to purchase debt securities, common stock or preferred stock.
------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------------
February 2, 2000
16
TABLE OF CONTENTS
PAGE
----
About This Prospectus....................................... 2
Where You Can Find More Information......................... 2
The Kroger Co............................................... 4
Consolidated Ratio of Earnings to Fixed Charges............. 4
Use of Proceeds............................................. 4
Plan of Distribution........................................ 4
Description of Debt Securities.............................. 5
Description of Capital Stock................................ 9
Description of the Depositary Shares........................ 12
Description of the Warrants................................. 15
Experts..................................................... 17
Legal Opinions.............................................. 17
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process. Under this shelf process, we may
sell any combination of the securities described in this prospectus in one or
more offerings up to a total dollar amount of $1,725,000,000. This prospectus
provides you with a general description of the securities we may offer. Each
time we sell securities, we will provide a prospectus supplement that will
contain specific information about the terms of that offering. The prospectus
supplement may also add, update or change information contained in this
prospectus. You should read both this prospectus and any prospectus supplement
together with additional information described under the heading "Where You Can
Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
Kroger files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms at 450 Fifth Street, N.W., Washington, D.C.
20549, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and 7 World Trade Center, Suite 1300, New York, New York 10048.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public from the SEC's
Web site at http://www.sec.gov.
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The SEC allows us to "incorporate by reference" the information we file
with them. This means that we can disclose important information to you by
referring you to these documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below, which we have already filed with the
SEC, and any future filings we make with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 until we sell all of the
securities.
KROGER SEC FILINGS (FILE NO. 1-303) PERIOD
- ----------------------------------- -----------------------------------------
Annual Report on Form 10-K......... Year ended January 2, 1999 (as amended).
Quarterly Reports on Form 10-Q..... Quarters ended May 22, 1999, August 14,
1999, and November 6, 1999.
Current Reports on Form 8-K or Form
8-K/A............................ January 8, 1999; January 15, 1999;
January 28, 1999; April 30, 1999; May 10,
1999; May 28, 1999; May 28, 1999, as
amended; June 17, 1999; June 23, 1999;
June 25, 1999; July 20, 1999; August 20,
1999; September 10, 1999; September 14,
1999; September 22, 1999; October 21,
1999; October 29, 1999; December 6, 1999;
and January 12, 2000.
Registration Statement on Form
8-A/A, dated April 4, 1997, as
amended on Form 8-A/A, dated
October 18, 1998................... Description of preferred stock purchase
rights
You may request a copy of these filings, other than any exhibits, unless we
have specifically incorporated by reference an exhibit in this prospectus, at no
cost, by writing or telephoning us at the following address:
The Kroger Co.
1014 Vine Street
Cincinnati, Ohio 45202-1100
(513) 762-4000
Attention: Paul Heldman
This prospectus is part of a registration statement we filed with the SEC.
We have incorporated into this registration statement exhibits that include a
form of proposed underwriting agreement and indenture. You should read the
exhibits carefully for provisions that may be important to you.
You should rely on the information incorporated by reference or provided in
this prospectus or any prospectus supplement. We have not authorized anyone to
provide you with different information. We are not making an offer of these
securities in any state where the offer is not permitted. You should not assume
that the information in this prospectus or the documents incorporated by
reference is accurate as of any date other than the date on the front of this
prospectus or those documents.
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THE KROGER CO.
Kroger was founded in 1883 and incorporated in Ohio in 1902. As of January
2, 1999, we were the largest grocery retailer in the United States based on
annual sales. We also manufacture and process food that our supermarkets sell.
Our principal executive offices are located at 1014 Vine Street, Cincinnati,
Ohio 45202-1100, and our telephone number is (513) 762-4000.
As of November 6, 1999, we have operated approximately 2,270 supermarkets
and multidepartment stores in 31 states, 790 convenience stores in 15 states and
380 fine jewelry stores in 25 states. One hundred thirteen of the convenience
stores are franchised to third parties in three states. We also operate
manufacturing facilities that permit us to offer quality, low-cost private label
products.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The table below presents our consolidated ratio of earnings to fixed
charges for the periods shown:
QUARTER ENDED FISCAL YEARS ENDED
- ----------------------- -------------------------------------------------------------------
NOVEMBER 6, OCTOBER 3, JANUARY 2, DECEMBER 27, DECEMBER 28, DECEMBER 30, DECEMBER 31,
1999 1998 1999 1997 1996 1995 1994
(12 WEEKS) (16 WEEKS) (53 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS)
- ----------- ---------- ----------- ------------ ------------ ------------ ------------
2.0 2.0 1.8 2.4 2.2 2.0 1.8
"Earnings" includes:
- earnings before tax expense; and
- extraordinary loss, plus fixed charges,
and excludes capitalized interest.
"Fixed charges" includes:
- interest, including capitalized interest, on all indebtedness;
- amortization of deferred financing costs; and
- that portion of rental expense that we believe is representative of
interest.
USE OF PROCEEDS
We will use the net proceeds from the sale of the securities to repay
amounts under our bank credit facilities, to retire debt, and for other general
corporate purposes.
PLAN OF DISTRIBUTION
We may sell the securities in any one or more of the following ways:
- directly to investors;
- to investors through agents or dealers;
- through underwriting syndicates led by one or more managing underwriters;
and
- through one or more underwriters acting alone.
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If we use underwriters in the sale, the obligations of the underwriters to
purchase the securities will be subject to conditions. The underwriters will be
obligated to purchase all the securities offered, if any are purchased. The
underwriters will acquire the securities for their own account. The underwriters
may resell the securities in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The underwriters may change from time to time any initial
public offering price and any discounts or concessions allowed or re-allowed or
paid to dealers.
We may use agents in the sale of securities. Unless indicated in the
prospectus supplement, the agent will be acting on a best efforts basis for the
period of its appointment.
If we use a dealer in the sale of the securities, we will sell the
securities to the dealer as principal. The dealer may then resell the securities
to the public at varying prices it determines at the time of resale.
We also may sell the securities in connection with a remarketing upon their
purchase, in accordance with a redemption or repayment, by a remarketing firm
acting as principal for its own account or as our agent. Remarketing firms may
be deemed to be underwriters in connection with the securities they remarket.
We may authorize underwriters, dealers or agents to solicit offers to
purchase the securities under a delayed delivery contract providing for payment
and delivery at a future date.
We will identify any underwriters or agents and describe their
compensation, including any discounts or commissions, in a prospectus
supplement. Underwriters, dealers and agents that participate in the
distribution of the offered securities may be underwriters as defined in the
Securities Act of 1933. Any discounts or commissions received by them from us
and any profit on the resale of the securities by them may be treated as
underwriting discounts and commissions.
We may have agreements with the underwriters, dealers and agents to
indemnify them against some civil liabilities, including liabilities under the
Securities Act of 1933, or to contribute to payments that the underwriters,
dealers or agents may be required to make. Underwriters, dealers or agents may
engage in transactions with, or perform services for, us in the ordinary course
of their business.
DESCRIPTION OF DEBT SECURITIES
This prospectus describes the terms and provisions of the debt securities.
When we offer to sell a particular series of debt securities, we will describe
the specific terms of the securities in a supplement to this prospectus. The
prospectus supplement also will indicate whether the general terms and
provisions described in this prospectus apply to the particular series of debt
securities.
The debt securities will be issued under an indenture between Kroger and a
trustee to be selected by us. The indenture allows us to have different trustees
for each debt security offering.
We have summarized the material terms of the indenture below. The indenture
is included as an exhibit to the registration statement for these securities
that we have filed with the SEC. You should read the indenture for the
provisions that are important to you.
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PRINCIPAL TERMS OF THE DEBT SECURITIES
The debt securities will rank equally and ratably with all of our other
unsecured and unsubordinated indebtedness.
A prospectus supplement relating to any series of debt securities being
offered will include specific terms relating to that series of debt securities.
These terms will include some or all of the following:
- their type and title;
- their total principal amount and currency or currency unit;
- the denominations in which they are authorized to be issued;
- the percentage of their principal amount at which they will be issued;
- the date on which they will mature;
- if they bear interest, the interest rate or the method by which the
interest rate will be determined;
- the times at which any interest will be payable or the manner of
determining the interest payment dates;
- any optional or mandatory redemption periods and the redemption or
purchase price;
- any guarantees by our direct and indirect subsidiaries;
- any sinking fund requirements;
- any special United States federal income tax considerations;
- whether they are to be issued in the form of one or more temporary or
permanent global securities and, if so, the identity of the depositary
for the global securities;
- any information with respect to book-entry procedures;
- the manner in which the amount of any payments of principal and interest
determined by reference to an index are determined; and
- any other specific terms not inconsistent with the indenture.
DENOMINATIONS, REGISTRATION, TRANSFER AND PAYMENT
We will issue the debt securities in registered form without coupons or in
the form of one or more global securities, as described below under "Global
securities." We will issue registered securities denominated in U.S. dollars
only in denominations of $1,000 or any integral multiple of $1,000. We will
issue global securities in a denomination equal to the total principal amount of
outstanding debt securities of the series represented by the global security. We
will describe the denomination of debt securities denominated in a foreign or
composite currency in a prospectus supplement.
You may present registered securities for registration of transfer at the
office of the registrar or at the office of any transfer agent designated by us.
We will pay principal and any premium and interest on registered securities
at the office of the paying agent. We may choose to make any interest payment
(1) by check mailed to the holder's address appearing in the register or (2) by
wire transfer to an account maintained by the holder as specified in the
register. We will make interest
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payments to the person in whose name the debt security is registered at the
close of business on the day or days specified by us.
The trustee's principal office in the City of New York, Chicago,
Cincinnati, or other location, will be designated as the sole paying agent for
payments on registered securities.
GLOBAL SECURITIES
We will deposit global securities with the depositary identified in the
prospectus supplement. A global security is a security, typically held by a
depositary, that represents the beneficial interests of a number of purchasers
of the security.
After we issue a global security, the depositary will credit on its
book-entry registration and transfer system the respective principal amounts of
the debt securities represented by the global security to the accounts of
persons that have accounts with the depositary. These account holders are known
as "participants." The underwriters or agents participating in the distribution
of the debt securities will designate the accounts to be credited. Only a
participant or a person that holds an interest through a participant may be the
beneficial owner of a global security. Ownership of beneficial interests in the
global security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the depositary and its
participants.
We and the trustee will treat the depositary or its nominee as the sole
owner or holder of the debt securities represented by a global security. Except
as set forth below, owners of beneficial interests in a global security will not
be entitled to have the debt securities represented by the global security
registered in their names. They also will not receive or be entitled to receive
physical delivery of the debt securities in definitive form and will not be
considered the owners or holders of the debt securities.
Principal, any premium and any interest payments on debt securities
represented by a global security registered in the name of a depositary or its
nominee will be made to the depositary or its nominee as the registered owner of
the global security. None of Kroger, the trustee or any paying agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the global
security or for maintaining, supervising or reviewing any records relating to
the beneficial ownership interests.
We expect that the depositary, upon receipt of any payments, will
immediately credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount of the global
security as shown on the depositary's records. We also expect that payments by
participants to owners of beneficial interests in the global security will be
governed by standing instructions and customary practices, as is the case with
the securities held for the accounts of customers registered in "street names"
and will be the responsibility of the participants.
If the depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by us within ninety days,
we will issue registered securities in exchange for the global security. In
addition, we may at any time in our sole discretion determine not to have any of
the debt securities of a series represented by global securities. In that event,
we will issue debt securities of that series in definitive form in exchange for
the global securities.
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EVENTS OF DEFAULT
When we use the term "Event of Default" in the indenture, here are examples
of what we mean:
- we fail to pay the principal or any premium on any debt security when
due;
- we fail to deposit any sinking fund payment when due;
- we fail to pay interest when due on any security for 30 days;
- we fail to comply with any other covenant in the debt securities and this
failure continues for 60 days after we receive written notice of it;
- we default in any of our other indebtedness in excess of $50,000,000, and
that results in an acceleration of maturity; or
- we take specified actions relating to our bankruptcy, insolvency or
reorganization.
The supplemental indenture or the form of security for a particular series
of debt securities may include additional Events of Default or changes to the
Events of Default described above. You should refer to the prospectus supplement
for the Events of Default relating to a particular series of debt securities. A
default under one series of debt securities will not necessarily be a default
under another series.
If an Event of Default for debt securities of any series occurs and is
continuing, the trustee or the holders of at least 25% in principal amount of
all of the debt securities of that series outstanding may require us to
immediately repay all of the principal and interest due on the debt securities
of that series. The holders of a majority in principal amount of all of the debt
securities of that series may rescind this accelerated payment requirement, if
the rescission would not conflict with any judgment or decree by a court and if
all existing Events of Default have been cured or waived.
If an Event of Default occurs and is continuing, the trustee may pursue any
remedy available to it to collect payment or to enforce the performance of any
provision of the debt securities or the indenture.
The holders of a majority in principal amount of the debt securities may
generally waive an existing default and its consequences.
MODIFICATION OF THE INDENTURE
The indenture may be amended without the consent of any holder of debt
securities:
- to cure any ambiguity, defect or inconsistency;
- to permit a successor to assume our obligations under the indenture;
- to add additional covenants for the benefit of holders;
- to add additional Events of Default;
- to add or change provisions necessary to facilitate the issuance of
securities; or
- to entitle the securities to the benefit of security.
The indenture may be amended with the written consent of the holders of at
least 50% in principal amount of the debt securities of the series affected by
the amendment. Holders of at least 50% in principal amount of the debt
securities may waive our
8
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compliance with any provision of the indenture or the debt securities by giving
notice to the trustee.
However, no amendment or waiver that
- changes the maturity of principal or any installment of principal or
interest;
- reduces the amount of principal or interest or premium payable on
redemption;
- reduces the amount of debt securities whose holders must consent to an
amendment or waiver;
- modifies provisions related to rights of holders to redeem securities at
their option; or
- changes other rights of holders as specifically identified in the
indenture
will be effective against any holder without the holder's consent.
OTHER DEBT SECURITIES
In addition to the debt securities described above, we may issue
subordinated debt securities that rank junior to our senior debt securities.
These debt securities will be described in a prospectus supplement and will be
issued pursuant to an indenture entered into between Kroger and a trustee that
we select. The indenture will be filed with the SEC and qualified under the
Trust Indenture Act.
OTHER LIMITATIONS
The prospectus supplement may contain provisions that limit our ability to
consolidate or merge with other companies. It also may contain provisions that
limit our right to incur liens and to engage in sale and leaseback transactions.
DESCRIPTION OF CAPITAL STOCK
Our Amended Articles of Incorporation authorize us to issue 1,000,000,000
shares of common stock, $1 par value per share, and 5,000,000 shares of
cumulative preferred stock, $100 par value per share. At our annual meeting of
shareholders in 1999, our shareholders authorized an increase in the authorized
shares of common stock to 2,000,000,000, but that increase has not yet been
implemented. As of November 6, 1999, there were outstanding 834,112,508 shares
of common stock, and no shares of cumulative preferred stock.
COMMON STOCK
All outstanding common stock is, and any stock issued under this prospectus
will be, fully paid and nonassessable. Subject to rights of preferred
stockholders if any preferred stock is issued and outstanding, holders of common
stock
- are entitled to any dividends validly declared;
- will share ratably in our net assets in the event of a liquidation; and
- are entitled to one vote per share, unless they are entitled to
cumulative voting for the election of directors.
The common stock has no conversion rights. Holders of common stock have no
preemption, subscription, redemption, or call rights related to those shares.
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The Bank of New York is the transfer agent and registrar for our common
stock.
PREFERRED STOCK
This prospectus describes the terms and provisions of our preferred stock.
When we offer to sell a particular series of preferred stock, we will describe
the specific terms of the securities in a supplement to this prospectus. The
prospectus supplement will also indicate whether the terms and provisions
described in this prospectus apply to the particular series of preferred stock.
The preferred stock will be issued under a certificate of designations relating
to each series of preferred stock. It is also subject to our Amended Articles of
Incorporation.
We have summarized the material portions of the certificate of designations
below. The certificate of designations will be filed with the SEC in connection
with an offering of preferred stock.
Our Amended Articles of Incorporation authorize us to issue 5,000,000
shares of preferred stock, par value $100 per share. Our Board is authorized to
designate any series of preferred stock and the powers, preferences and rights
of the preferred stock without further shareholder action. As of November 6,
1999, we had no shares of preferred stock outstanding. On that same date, 50,000
shares were reserved for issuance under our warrant dividend plan. These shares
are designated "Series A Preferred Shares."
Our Board is authorized to determine or fix the following terms for each
series of preferred stock, which will be described in a prospectus supplement:
- the designation and number of shares;
- the dividend rate;
- the payment date for dividends and the date from which dividends are
cumulative;
- our redemption rights and the redemption prices;
- amounts payable to holders on our liquidation, dissolution or winding up;
- the amount of the sinking fund, if any;
- whether the shares will be convertible or exchangeable, and if so the
prices and terms; and
- whether future shares of the series or any future series or other class
of stock is subject to any restrictions, and if so the nature of the
restrictions.
When we issue shares of preferred stock, they will be fully paid and
nonassessable.
Dividends
The holders of preferred stock will be entitled to receive cash dividends
if declared by our Board of Directors out of funds we can legally use for
payment. The prospectus supplement will indicate the dividend rates and the
dates on which we will pay dividends. The rates may be fixed or variable or
both. If the dividend rate is variable, the formula used to determine the
dividend rate will be described in the prospectus supplement. We will pay
dividends to the holders of record as they appear on the record dates fixed by
our Board.
Our Board will not declare and pay a dividend on any series of preferred
stock unless full dividends for all series of preferred stock ranking equal as
to dividends have been
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declared or paid and sufficient funds are set aside for payment. If dividends
are not paid in full, we will declare any dividends pro rata among the preferred
stock of each series and any series of preferred stock ranking equal to any
other series as to dividends. A "pro rata" declaration means that the dividends
we declare per share on each series of preferred stock will bear the same
relationship to each other that the full accrued dividends per share on each
series of the preferred stock bear to each other.
Unless all dividends on the preferred stock have been paid in full, we will
not declare or pay any dividends or set aside sums for payment of dividends or
distributions on any common stock or on any class of security ranking junior to
the series of preferred stock, except for dividends or distributions paid for
with securities ranking junior to the preferred stock. We also will not redeem,
purchase, or otherwise acquire any securities ranking junior to the series of
preferred stock as to dividends or liquidation preferences, except by conversion
into or exchange for stock junior to the series of preferred stock.
Convertibility
We will not convert or exchange any series of preferred stock for other
securities or property, unless otherwise indicated in the prospectus supplement.
Redemption and sinking fund
We will not redeem or pay into a sinking fund any series of preferred
stock, unless otherwise indicated in the prospectus supplement.
Liquidation rights
If we voluntarily or involuntarily liquidate, dissolve or wind up our
business, holders of any series of preferred stock will be entitled to receive
the liquidation preference per share specified in the prospectus supplement and
all accrued and unpaid dividends. We will pay these amounts to the holders of
each series of the preferred stock, and all amounts owing on any preferred stock
ranking equally with that series of preferred stock as to distributions upon
liquidation. These payments will be made out of our assets available for
distribution to shareholders before any distribution is made to holders of
common stock or any class of stock ranking junior to the series of preferred
stock as to dividends and liquidation preferences.
In the event there are insufficient assets to pay the liquidation
preferences for all equally-ranked classes of preferred stock in full, we will
allocate the remaining assets equally among all series of equally-ranked
preferred stock based upon the aggregate liquidation preference for all
outstanding shares for each series. This distribution means that the
distribution we pay to the holders of all shares ranking equal as to
distributions if we dissolve, liquidate or wind up our business will bear the
same relationship to each other that the full distributable amounts for which
the holders are respectively entitled if we dissolve, liquidate or wind up our
business bear to each other. After we pay the full amount of the liquidation
preference to which they are entitled, the holders of shares of a series of
preferred stock will not be entitled to participate in any further distribution
of our assets.
Voting rights
Holders of preferred stock will be entitled to one vote per share, unless
otherwise indicated in the prospectus supplement or otherwise required by law.
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Transfer agent and registrar
The prospectus supplement for each series of preferred stock will name the
transfer agent and registrar.
PREFERRED STOCK PURCHASE RIGHTS
On February 28, 1996, we adopted a shareholders' rights plan providing for
stock purchase rights to owners of Kroger common shares. The shareholders'
rights plan was amended and restated on April 4, 1997, and further amended on
October 18, 1998. Each right, when exercisable, entitles the holder to purchase
from us one ten-thousandth of a share. The rights will become exercisable, and
separately tradeable, ten days after a person or group acquires 10% or more of
our common shares or ten business days following a tender offer or exchange
offer resulting in a person or group having beneficial ownership of 10% or more
of our common shares. In the event the rights become exercisable, each right
will entitle the holder the right, if that holder pays the exercise price, to
purchase Kroger common shares, having a market value of twice the exercise price
of the right. Under other circumstances, including some acquisitions of Kroger
in a merger or other business combination transaction, or if 50% or more of our
assets or earning power are sold under some circumstances, each right will
entitle the holder to receive upon payment of the exercise price, shares of
common stock of the acquiring company with a market value of twice the exercise
price. At our option, the rights, before becoming exercisable, are redeemable in
their entirety at a price of $.01 per right. The rights may be adjusted and
expire March 19, 2006.
This summary is qualified by the full text of the shareholders' rights
plan. A copy of this plan is filed as an exhibit to the registration statement
and is incorporated into this prospectus by reference.
DESCRIPTION OF THE DEPOSITARY SHARES
This prospectus describes the terms and provisions of our depositary
shares. When we offer to sell depositary shares, we will describe the specific
terms for the securities in a supplement to this prospectus. The prospectus
supplement also will indicate whether the terms and provisions described in this
prospectus apply to the depositary shares being offered.
We have summarized the material portions of the deposit agreement below.
The deposit agreement will be filed with the SEC in connection with an offering
of depositary shares.
We may offer fractional interests in preferred stock, rather than full
shares of preferred stock. If we do, we will provide for a depositary to issue
to the public receipts for depositary shares, each of which will represent
ownership of and entitlement to all rights and preferences of a fractional
interest in a share of preferred stock of a specified series. These rights
include dividend, voting, redemption and liquidation rights. The applicable
fraction will be specified in a prospectus supplement. The shares of preferred
stock represented by the depositary shares will be deposited with a depositary
named in a prospectus supplement, under a deposit agreement among us, the
depositary and the holders of the depositary receipts.
The depositary shares will be evidenced by depositary receipts issued under
the deposit agreement. The depositary will be the transfer agent, registrar and
dividend
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disbursing agent for the depositary shares. Holders of depositary receipts agree
to be bound by the deposit agreement, which requires holders to file proof of
residence and pay charges.
DIVIDENDS
The depositary will distribute all cash dividends or other cash
distributions received to the record holders of depositary receipts in
proportion to the number of depositary shares owned by them on the relevant
record date. The record date will be the same date as the record date we fix for
the applicable series of preferred stock.
If we make a non-cash distribution, the depositary will distribute property
to the holders of depositary receipts, unless the depositary determines, after
consultation with us, that it is not feasible to make this distribution. If this
occurs, the depositary may, with our approval, adopt any other method for the
distribution as it deems appropriate, including the sale of the property and
distribution of the net proceeds from the sale.
LIQUIDATION PREFERENCE
If we voluntarily or involuntarily liquidate, dissolve or wind up our
business, the holders of each depositary share will receive the fraction of the
liquidation preference accorded each share of the applicable series of preferred
stock.
REDEMPTION
If we redeem the series of preferred stock underlying the depositary
shares, we will redeem the depositary shares from the redemption proceeds of the
preferred stock held by the depositary. Whenever we redeem any preferred stock
held by the depositary, the depositary will redeem on the same redemption date
the number of depositary shares representing the preferred stock being redeemed.
The depositary will mail the notice of redemption between 30 to 60 days prior to
the date fixed for redemption to the record holders of the depositary receipts.
VOTING
The depositary will promptly mail information contained in any notice of
meeting it receives from us to the record holders of the depositary receipts.
Each record holder of depositary receipts will be entitled to instruct the
depositary as to its exercise of its voting rights pertaining to the number of
shares of preferred stock represented by its depositary shares. The depositary
will try, if practical, to vote the preferred stock underlying the depositary
shares according to the instructions received. We will agree to try to take all
action that the depositary finds necessary in order to enable the depositary to
vote the preferred stock in that manner. The depositary will not vote any of the
preferred stock for which it does not receive specific instructions from the
holders of depositary receipts.
WITHDRAWAL OF PREFERRED STOCK
If holders surrender depositary receipts at the principal office of the
depositary and pay any unpaid amount due to the depositary, the owner of the
depositary shares is entitled to receive the number of whole shares of preferred
stock and all money and other property represented by the depositary shares.
Partial shares of preferred stock will not be issued. If the holder delivers
depositary receipts evidencing a number of depositary shares that represent more
than a whole number of shares of preferred stock, the depositary will issue a
new depositary receipt evidencing the excess number of depositary shares to that
holder.
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Holders of preferred stock received in exchange for depositary shares will no
longer be entitled to deposit these shares under the deposit agreement or to
receive depositary receipts.
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may be amended by agreement between us and
the depositary. However, any amendment that materially and adversely alters the
rights of the holders, other than any change in fees, of depositary shares will
not be effective unless approved by the holders of at least a majority of the
depositary shares then outstanding. An amendment may not impair the right of any
owner of any depositary shares to surrender its depositary receipt with
instructions to the depositary in exchange for preferred stock, money and
property, except in order to comply with mandatory provisions of applicable law.
The deposit agreement may be terminated by us or the depositary only if:
- all outstanding depositary shares have been redeemed; or
- there has been a final distribution to the holders of the preferred stock
in connection with the liquidation, dissolution or winding up of our
business, and the distribution has been made to all the holders of
depositary shares.
CHARGES OF DEPOSITARY
We will pay all transfer and other taxes and governmental charges
attributable solely to the depositary arrangements. We will pay the depositary's
charges for the initial deposit of the preferred stock and the initial issuance
of the depositary shares, any redemption of the preferred stock and all
exchanges for preferred stock. Holders of depositary receipts will pay transfer,
income and other taxes and governmental charges and other charges stated in the
deposit agreement to be for their accounts. In some circumstances, the
depositary may refuse to transfer depositary shares, may withhold dividends and
distributions and may sell the depositary shares if those charges are not paid.
OBLIGATIONS OF DEPOSITARY
The depositary will forward to the holders of depositary receipts all
reports and communications from us that are delivered to it and that we are
required to furnish to the holders of the preferred stock. In addition, the
depositary will make available for inspection by holders of depositary receipts
at its principal office, and at other places it deems advisable, any reports and
communications received from us.
We will not assume, and the depositary will not assume, any obligation or
any liability under the deposit agreement to holders of depositary receipts
other than for gross negligence or willful misconduct. We will not be liable,
and the depositary will not be liable, if we are prevented or delayed by law or
any circumstance beyond our control in performing our obligations under the
deposit agreement. Our obligations and the depositary's obligations under the
deposit agreement will be limited to performance in good faith of our and their
duties. We and the depositary will not be obligated to prosecute or defend any
legal proceeding related to any depositary shares or preferred stock unless we
receive satisfactory indemnity. We and the depositary may rely on written advice
of our counsel or accountants, on information provided by holders of depositary
receipts or other persons believed in good faith to be competent to give this
information. We also may rely on documents believed to be genuine and to have
been signed or presented by the proper party or parties.
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RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering to us notice of its
election to do so. At any time we may remove the depositary. The resignation or
removal will take effect after a successor depositary is appointed and has
accepted the appointment. We must appoint a successor within 60 days after
delivery of the notice for resignation or removal and the successor depositary
must be a bank or trust company having its principal office in the United States
and having a combined capital and surplus of at least $150,000,000.
FEDERAL INCOME TAX CONSEQUENCES
Owners of the depositary shares will be treated for federal income tax
purposes as if they were owners of the preferred stock underlying the depositary
shares. Accordingly, the owners will be entitled to take into account for
federal income tax purposes income and deductions to which they would be
entitled if they were holders of the preferred stock. In addition:
- no gain or loss will be recognized for federal income tax purposes upon
the withdrawal of preferred stock in exchange for depositary shares;
- the tax basis of each share of preferred stock to an exchanging owner of
depositary shares will, when exchanged, be the same as the aggregate tax
basis of the depositary shares being exchanged; and
- the holding period for preferred stock in the hands of an exchanging
owner of depositary shares will include the period during which that
person owned the depositary shares.
DESCRIPTION OF THE WARRANTS
This prospectus describes the terms and provisions of the warrants. When we
offer to sell warrants, we will describe the specific terms of the warrants and
warrant agreement in a supplement to this prospectus. The prospectus supplement
also will indicate whether the terms and provisions described in this prospectus
apply to the warrants being offered.
We have summarized the material portions of the warrant agreement below.
The warrant agreement will be filed with the SEC in connection with an offering
of warrants. You should read the warrant agreement for the provisions that are
important to you.
We may issue warrants for the purchase of our debt securities, preferred
stock or common stock. Warrants may be issued alone or together with debt
securities, preferred stock or common stock offered by any prospectus supplement
and may be attached to or separate from those securities. Each series of
warrants will be issued under a separate warrant agreement to be entered into
between us and a bank or trust company, as warrant agent. The warrant agent will
act solely as our agent in connection with the warrants and will not assume any
obligation or relationship of agency or trust for or with any holders or
beneficial owners of warrants.
DEBT WARRANTS
The prospectus supplement relating to a particular issue of warrants to
issue debt securities will describe the terms of the debt warrants, including
the following:
- their title;
- their offering price;
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- their aggregate number;
- the designation and terms of the debt securities that can be purchased
when they are exercised;
- the designation and terms of the debt securities that are issued with the
warrants and the number of warrants issued with each debt security;
- the date when they and any debt securities issued will be separately
transferable;
- the principal amount of debt securities that can be purchased when they
are exercised and the purchase price;
- the date on which the right to exercise warrants begins and the date on
which the right expires;
- the minimum or maximum amount of warrants that may be exercised at any
one time;
- whether they and the debt securities that may be issued when they are
exercised will be issued in registered or bearer form;
- information about book-entry procedures;
- the currency or currency units in which the offering price and the
exercise price are payable;
- a discussion of material United States federal income tax considerations;
- the antidilution provisions; and
- the redemption or call provisions.
STOCK WARRANTS
The prospectus supplement relating to any particular issue of warrants to
issue common stock or preferred stock will describe the terms of the stock
warrants, including the following:
- their title;
- their offering price;
- their aggregate number;
- the designation and terms of the common stock or preferred stock that can
be purchased when they are exercised;
- the designation and terms of the common stock or preferred stock that is
issued and the number of warrants issued with shares of each common stock
or preferred stock;
- the date when they and any common stock or preferred stock issued will be
separately transferable;
- the number of shares of common stock or preferred stock that can be
purchased when they are exercised and the purchase price;
- the date on which the right to exercise them begins and the date on which
the right expires;
- the minimum or maximum amount that may be exercised at any one time;
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- the currency or currency units in which the offering price and the
exercise price are payable;
- a discussion of material United States federal income tax considerations;
- the antidilution provisions; and
- the redemption or call provisions.
EXPERTS
The financial statements incorporated in this prospectus by reference to
the Annual Report on Form 10-K of The Kroger Co. for the year ended January 2,
1999 and to the Current Reports on Form 8-K dated August 20, 1999 and October
29, 1999 have been so incorporated in reliance on the reports (which contain an
explanatory paragraph relating to the Company's change in its application of the
LIFO method of accounting for store inventories as of December 28, 1997) of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements incorporated in this prospectus by reference to
the Current Report on Form 8-K dated May 10, 1999, have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The supplemental consolidated financial statements incorporated in this
prospectus by reference to the Current Report on Form 8-K dated May 28, 1999,
have been so incorporated in reliance on the report (which contains an
explanatory paragraph that describes a change in the Company's application of
the LIFO method of accounting for store inventories and an explanatory paragraph
that discloses that the supplemental financial statements give retroactive
effect to the merger of The Kroger Co. and Fred Meyer, Inc. on May 27, 1999,
which has been accounted for as a pooling of interests) of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements of Fred Meyer, Inc., as of January
30, 1999 and January 31, 1998 and for the fiscal years ended January 30, 1999,
January 31, 1998, and February 1, 1997, incorporated in this prospectus by
reference to Kroger's Current Report on Form 8-K dated May 28, 1999, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
Documents incorporated by reference in the future in this prospectus will
include financial statements, related schedules, if required, and auditors'
reports. The financial statements and schedules will have been audited to the
extent and for the periods identified in the reports by the firm submitting the
report. If audited financials are incorporated by reference, it will be based on
reports given on the authority of the issuing firm as experts in accounting and
auditing.
LEGAL OPINIONS
The validity of the securities we are offering will be passed upon for us
by Paul Heldman, Esq., Senior Vice President, Secretary and General Counsel of
Kroger. As of May 30, 1999, Mr. Heldman owned approximately 44,137 shares of
Kroger common stock, and had options to acquire an additional 204,583 shares.
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No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus supplement and
the accompanying prospectus are an
offer to sell only the notes offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus supplement and the accompanying prospectus is current only as of the
date of this prospectus supplement.
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TABLE OF CONTENTS
Prospectus Supplement
Page
----
Risk Factors......................... S-2
The Company.......................... S-3
Use of Proceeds...................... S-4
Description of the Notes............. S-4
Underwriting......................... S-11
Validity of the Notes................ S-12
Experts.............................. S-12
Forward-Looking Statements........... S-12
List of Subsidiary Guarantors........ S-13
Prospectus
About This Prospectus................ 2
Where You Can Find More
Information........................ 2
The Kroger Co. ...................... 4
Consolidated Ratio of Earnings to
Fixed Charges...................... 4
Use of Proceeds...................... 4
Plan of Distribution................. 4
Description of Debt Securities....... 5
Description of Capital Stock......... 9
Description of the Depositary
Shares............................. 12
Description of the Warrants.......... 15
Experts.............................. 17
Legal Opinions....................... 17
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$1,000,000,000
THE KROGER CO.
$500,000,000
6.80% Senior Notes due 2011
$500,000,000
7.50% Senior Notes due 2031
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[KROGER LOGO]
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Joint Bookrunners
BANC OF AMERICA SECURITIES LLC
JPMORGAN
SALOMON SMITH BARNEY
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BANC ONE CAPITAL MARKETS, INC.
BNP PARIBAS
BNY CAPITAL MARKETS, INC.
MIZUHO INTERNATIONAL PLC
SCOTIA CAPITAL
TOKYO-MITSUBISHI INTERNATIONAL PLC
U.S. BANCORP PIPER JAFFRAY INC.
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