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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 26, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- -----------------
Commission file number 1-303
THE KROGER CO.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-0345740
- ----------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1014 Vine Street, Cincinnati, OH 45202
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(513) 762-4000
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(Registrant's telephone number, including area code)
Unchanged
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No .
----- -----
There were 803,962,423 shares of Common Stock ($1 par value) outstanding as of
July 6, 2000.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE KROGER CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(in millions, except per share amounts)
(unaudited)
1st Quarter Ended
------------------
May 26, May 20,
2001 2000
------- -------
Sales ................................................................... $15,102 $14,329
------- -------
Merchandise costs, including advertising, warehousing, and transportation 11,035 10,500
Operating, general and administrative ................................... 2,835 2,749
Rent .................................................................... 207 201
Depreciation and amortization ........................................... 319 307
Asset impairment charges ................................................ -- 191
Merger related costs .................................................... 2 9
------- -------
Operating profit ...................................................... 704 372
Interest expense ........................................................ 206 206
------- -------
Earnings before income tax expense .................................... 498 166
Income tax expense ...................................................... 194 67
------- -------
Net Earnings .......................................................... $ 304 $ 99
======= =======
Earnings per basic common share:
Net earnings ....................................................... $ 0.37 $ 0.12
======= =======
Average number of common shares used in basic calculation ............... 812 831
Earnings per diluted common share:
Net earnings ....................................................... $ 0.36 $ 0.12
======= =======
Average number of common shares used in diluted calculation ............. 833 850
- --------------------------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
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THE KROGER CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions, except per share amounts)
(unaudited)
May 26, February 3,
2001 2001
-------- --------
ASSETS
Current assets
Cash ........................................................ $ 160 $ 161
Receivables ................................................. 672 687
Inventories ................................................. 4,206 4,063
Prepaid and other current assets ............................ 440 501
-------- --------
Total current assets .................................... 5,478 5,412
Property, plant and equipment, net ............................. 9,092 8,813
Goodwill, net .................................................. 3,645 3,639
Other assets ................................................... 332 315
-------- --------
Total Assets ............................................ $ 18,547 $ 18,179
======== ========
LIABILITIES
Current liabilities
Current portion of long-term debt including obligations under
capital leases ......................................... $ 330 $ 336
Accounts payable ............................................ 3,135 3,009
Salaries and wages .......................................... 553 603
Other current liabilities ................................... 1,487 1,434
-------- --------
Total current liabilities ............................... 5,505 5,382
Long-term debt including obligations under capital leases ...... 8,490 8,210
Other long-term liabilities .................................... 1,429 1,498
-------- --------
Total Liabilities ....................................... 15,424 15,090
-------- --------
Commitments and contingent liabilities ......................... -- --
SHAREOWNERS' EQUITY
Preferred stock, $100 par, 5 shares authorized
and unissued ................................................ -- --
Common stock, $1 par, 1,000 shares authorized: 896 shares issued
in 2001 and 891 shares issued in 2000 ....................... 896 891
Additional paid-in capital ..................................... 2,124 2,092
Retained earnings .............................................. 1,408 1,104
Common stock in treasury, at cost, 89 shares in 2001 and
76 shares in 2000 ........................................... (1,305) (998)
-------- --------
Total Shareowners' Equity ............................... 3,123 3,089
-------- --------
Total Liabilities and Shareowners' Equity ............... $ 18,547 $ 18,179
======== ========
- --------------------------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
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THE KROGER CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
(unaudited)
First Quarter Ended
------------------
May 26, May 20,
2001 2000
------- -------
Cash Flows From Operating Activities:
Net earnings .............................................. $ 304 $ 99
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation .......................................... 288 276
Goodwill amortization ................................. 31 31
Non-cash items ........................................ 2 258
Deferred income taxes ................................. (15) 181
Other ................................................. 21 18
Changes in operating assets and liabilities net of
effects from acquisitions of businesses:
Inventories ........................................ (142) 29
Receivables ........................................ 29 15
Accounts payable ................................... 66 140
Other .............................................. 32 (24)
------- -------
Net cash provided by operating activities ...... 616 1,023
------- -------
Cash Flows From Investing Activities:
Capital expenditures ...................................... (618) (455)
Proceeds from sale of assets .............................. 13 40
Payments for acquisitions, net of cash acquired ........... (67) (36)
Other ..................................................... 18 (26)
------- -------
Net cash used by investing activities .......... (654) (477)
------- -------
Cash Flows From Financing Activities:
Proceeds from issuance of long-term debt .................. 1,014 524
Reductions in long-term debt .............................. (738) (995)
Financing charges incurred ................................ (16) (7)
Increase in book overdrafts ............................... 47 3
Proceeds from issuance of capital stock ................... 34 20
Treasury stock purchases .................................. (304) (209)
------- -------
Net cash provided (used) by financing activities 37 (664)
------- -------
Net decrease in cash and temporary cash investments ........... (1) (118)
Cash and temporary investments:
Beginning of year ..................................... 161 281
------- -------
End of quarter ........................................ $ 160 $ 163
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the year for interest ................ $ 210 $ 201
Cash paid during the year for income taxes ............ $ 126 $ 66
Non-cash changes related to purchase acquisitions:
Fair value of assets acquired ...................... $ 42 $ 60
Goodwill recorded .................................. $ 37 $ 33
Value of stock issued .............................. $ -- $ --
Liabilities assumed ................................ $ 12 $ 57
- --------------------------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Certain prior year amounts have been reclassified to conform to current
year presentation and all amounts presented are in millions except per
share amounts.
1. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
-----------------------------------------------------
The accompanying financial statements include the consolidated accounts
of The Kroger Co. and its subsidiaries. The year-end balance sheet
includes Kroger's February 3, 2001 balance sheet, which was derived
from audited financial statements, and, due to its summary nature, does
not include all disclosures required by generally accepted accounting
principles. Significant intercompany transactions and balances have
been eliminated. References to the "Company" in these consolidated
financial statements mean the consolidated company.
In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments (consisting only of normal
recurring adjustments) which are necessary for a fair presentation of
results of operations for such periods but should not be considered as
indicative of results for a full year. The financial statements have
been prepared by the Company pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC"). Certain information and
footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
omitted pursuant to SEC regulations. Accordingly, the accompanying
consolidated financial statements should be read in conjunction with
the fiscal 2000 Annual Report on Form 10-K of The Kroger Co. filed with
the SEC on May 2, 2001.
The unaudited information included in the consolidated financial
statements for the first quarters ended May 26, 2001 and May 20, 2000
includes the results of operations of the Company for the 16 week
periods then ended.
2. MERGER RELATED COSTS
--------------------
The Company is continuing the process of implementing its integration
plan relating to recent mergers. Total merger related costs incurred
were $2 during the first quarter of 2001, and $9 during the first
quarter of 2000.
The following table presents the components of the merger related
costs:
First Quarter Ended
---------------------
May 26, May 20,
2000 1999
------- -------
CHARGES RECORDED AS CASH EXPENDED
Distribution consolidation .. $- $1
Administration integration .. - 4
-- --
- 5
OTHER CHARGES
Administration integration .. 2 4
-- --
Total merger related costs ...... $2 $9
== ==
TOTAL CHARGES
Distribution consolidation .. $- $1
Administration integration .. 2 8
-- --
Total merger related costs ...... $2 $9
== ==
Distribution Consolidation
Represents costs to consolidate distribution operations and eliminate
duplicate facilities. The costs in the first quarter of 2000 represent
severance costs incurred and paid.
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Administration Integration
Includes labor and severance costs related to employees identified for
termination in the integration. During the first quarter of 2001, the
Company incurred costs totaling $2 resulting from issuing restricted
stock related to merger synergies. During the first quarter of 2000,
the Company incurred costs totaling $8 including approximately $4
resulting from issuing restricted stock related to merger synergies,
and charges of $4 for severance payments recorded as cash was expended.
The restrictions on the stock grants lapse to the extent that synergy
goals are achieved.
The following table is a summary of the changes in accruals related to
various business combinations:
Facility Employee Incentive Awards
Closure Costs Severance and Contributions
------------- --------- -----------------
Balance at January 29, 2000 $ 130 $ 29 $ 29
Additions ............. -- -- 10
Payments .............. (17) (11) (4)
----- ---- ----
Balance at February 3, 2001 113 18 35
Additions ............. -- -- 2
Payments .............. (8) (2) (8)
----- ---- ----
Balance at May 26, 2001 ... $ 105 $ 16 $ 29
===== ==== ====
3. ONE-TIME ITEMS
--------------
In addition to the Merger Related Costs described above, the Company
incurred one-time expenses of $14 and $81 related to recent mergers
during the first quarters of 2001 and 2000, respectively. The one-time
items in the first quarter of 2001 included approximately $3 related
primarily to product costs for excess capacity included as merchandise
costs. The remaining $11 in 2001 is included in operating, general and
administrative costs and relates to employee severance and system
conversion costs. All of the costs in the first quarter of 2001
represented cash expenditures. The one-time items in the first quarter
of 2000 included approximately $15 for inventory writedowns included as
merchandise costs. The remaining $66 in 2000 is included in operating,
general and administrative costs and relates to the closing of stores,
severance expenses related to headcount reductions, and other
miscellaneous costs. Of the $66, $11 represented cash expenditures and
$55 represented charges that were accrued during the quarter.
4. ASSET IMPAIRMENT CHARGES
------------------------
As a result of recent investments in stores that did not perform as
expected, updated profitability forecasts for 2000 and beyond, and new
divisional leadership, the Company performed an impairment review of
its long-lived assets during the first quarter of 2000. During this
review, the Company identified impairment losses for both assets to be
disposed of and assets to be held and used.
Assets to be Disposed of
The impairment charge for assets to be disposed of related primarily to
the carrying value of land, buildings, and equipment for 25 stores that
were closed during fiscal 2000. The impairment charge was determined
using the fair value less the cost to sell. Fair value less the cost to
sell used in the impairment calculation was based on discounted cash
flows and third party offers to purchase the assets, or market value
for comparable properties, if applicable. Accordingly, an impairment
charge of $81 related to assets to be disposed of was recognized,
reducing the carrying value of fixed assets and goodwill by $41 and
$40, respectively.
Assets to be Held and Used
The impairment charge for assets to be held and used related primarily
to the carrying value of land, buildings, and equipment for 13 stores
that continue to be operated by the Company. Updated projections, based
on revised operating plans, were used,
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on a gross basis, to first determine whether the assets were impaired,
then, on a discounted cash flow basis, to serve as the estimated fair
value of the assets for purposes of measuring the asset impairment
charge. As a result, an impairment charge of $87 related to assets to
be held and used was recognized, reducing the carrying value of fixed
assets and goodwill by $47 and $40, respectively.
Other writedowns
In addition to the approximately $168 of impairment charges noted
above, the Company recorded a writedown of $23 to reduce the carrying
value of certain investments in unconsolidated entities, accounted for
on the cost basis of accounting, to reflect reductions in value
determined to be other than temporary. The writedowns related primarily
to investments in certain former suppliers that have experienced
financial difficulty and with whom supply arrangements have ceased.
5. INCOME TAXES
------------
The effective income tax rate differs from the expected statutory rate
primarily due to the effect of state taxes and non-deductible goodwill.
6. EARNINGS PER COMMON SHARE
-------------------------
Earnings per common share equals net earnings divided by the weighted
average number of common shares outstanding, after giving effect to
dilutive stock options.
The following table provides a reconciliation of earnings and shares
used in calculating basic earnings per share to those used in
calculating diluted earnings per share.
For the quarter ended For the quarter ended
May 26, 2001 May 20, 2000
------------------------------------------ ------------------------------------------
Earnings Shares Per Share Earnings Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
Basic earnings per common share ... $304 812 $ 0.37 $99 831 $ 0.12
Dilutive effect of stock options and
Warrants ....................... -- 21 -- 19
------ ------ --- ---
Diluted earnings per common share .. $304 833 $ 0.36 $99 850 $ 0.12
====== ====== ====== === === ======
7. RECENTLY ISSUED ACCOUNTING STANDARDS
------------------------------------
Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as
amended by SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement
No. 133," and SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities," became effective for the
Company as of February 4, 2001. SFAS No. 133, as amended, defines
derivatives, requires that derivatives be carried at fair value on the
balance sheet, and provides for hedge accounting when certain
conditions are met. Initial adoption of this new accounting standard
resulted in the Company recording a liability of $9 million with a
corresponding charge recorded as additional paid in capital, net of
income tax effects. An accumulated other comprehensive loss caption was
not utilized due to the immateriality of the balance.
In accordance with SFAS No. 133, derivative financial instruments are
recognized on the balance sheet at fair value. Changes in the fair
value of derivative instruments designated as "cash flow" hedges, to
the extent the hedges are highly effective, are recorded in other
comprehensive income, net of related tax effects. The ineffective
portion of the cash flow hedge, if any, is recognized in current-period
earnings. Other comprehensive income is reclassified to current-period
earnings when the hedged transaction affects earnings.
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The Company assesses, both at inception of the hedge and on an ongoing
basis, whether derivatives used as hedging instruments are highly
effective in offsetting the changes in the fair value or cash flow of
hedged items. If it is determined that a derivative is not highly
effective as a hedge or ceases to be highly effective, the Company
discontinues hedge accounting prospectively.
As of May 26, 2001, the Company recorded a liability of $9 related to
the fair value of its derivative instruments. These instruments are
designated as, and are considered, effective cash flow hedges. Hedge
ineffectiveness was not material during the quarter ended May 26, 2001.
A corresponding charge was recorded as a part of additional paid in
capital, net of income tax effects.
Emerging Issues Task Force (EITF) Issue Nos. 00-14, "Accounting for
Certain Sales Incentives;" 00-22, "Accounting for "Points" and Certain
Other Time-Based or Volume-Based Sales and Incentive Offers, and Offers
for Free Products or Services to be Delivered in the Future;" and
00-25, "Vendor Income Statement Characterization of Consideration from
a Vendor to a Retailer" become effective for The Kroger Co. beginning
in the first quarter of 2002. These issues address the appropriate
accounting for certain vendor contracts and loyalty programs. The
Company continues to assess the effect these new standards will have on
the financial statements. The Company expects the adoption of these
standards will not have a material effect on our financial statements.
SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and
Other Intangible Assets" were issued by the Financial Accounting
Standards Board in late June of 2001. SFAS 141 is effective for all
business combinations initiated after June 30, 2001 and SFAS 142 will
become effective for the Company on February 3, 2002. The Company is
currently analyzing the effect the adoption of these standards will
have on its financial statements.
8. GUARANTOR SUBSIDIARIES
----------------------
Certain of the Company's Senior Notes and Senior Subordinated Notes
(the "Guaranteed Notes") are jointly and severally, fully and
unconditionally guaranteed by certain Kroger subsidiaries (the
"Guarantor Subsidiaries"). At May 26, 2001 a total of approximately
$6.2 billion of Guaranteed Notes were outstanding. The Guarantor
Subsidiaries and non-guarantor subsidiaries are wholly-owned
subsidiaries of Kroger. Separate financial statements of Kroger and
each of the Guarantor Subsidiaries are not presented because the
guarantees are full and unconditional and the Guarantor Subsidiaries
are jointly and severally liable. The Company believes that separate
financial statements and other disclosures concerning the Guarantor
Subsidiaries would not be material to investors.
The non-guaranteeing subsidiaries represent less than 3% on an
individual and aggregate basis of consolidated assets, pretax earnings,
cash flow, and equity. Therefore, the non-guarantor subsidiaries'
information is not separately presented in the tables below.
There are no current restrictions on the ability of the Guarantor
Subsidiaries to make payments under the guarantees referred to above,
but the obligations of each guarantor under its guarantee are limited
to the maximum amount as will result in obligations of such guarantor
under its guarantee not constituting a fraudulent conveyance or
fraudulent transfer for purposes of Bankruptcy Law, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act, or any
similar Federal or state law (e.g. adequate capital to pay dividends
under corporate laws).
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The following tables present summarized financial information as of May
26, 2001 and February 3, 2001 and for the quarters ended May 26, 2001
and May 20, 2000.
CONDENSED CONSOLIDATING
BALANCE SHEETS
AS OF MAY 26, 2001
Guarantor
The Kroger Co. Subsidiaries Eliminations Consolidated
-------------- ------------ ------------ -------------
Current assets
Cash ......................................... $ 21 $ 139 $ -- $ 160
Receivables .................................. 144 528 -- 672
Net inventories .............................. 393 3,813 -- 4,206
Prepaid and other current assets ............. 227 213 -- 440
------- -------- -------- -------
Total current assets .................... 785 4,693 -- 5,478
Property, plant and equipment, net ............... 952 8,140 -- 9,092
Goodwill, net .................................... 1 3,644 -- 3,645
Other assets ..................................... 661 (329) -- 332
Investment in and advances to subsidiaries ....... 10,514 -- (10,514) --
------- -------- -------- -------
Total assets ............................ $12,913 $ 16,148 $(10,514) $18,547
======= ======== ======== =======
Current liabilities
Current portion of long-term debt including
obligations under capital leases ........... $ 290 $ 40 $ -- $ 330
Accounts payable ............................. 295 2,840 -- 3,135
Other current liabilities .................... 454 1,586 -- 2,040
------- -------- -------- -------
Total current liabilities ............... 1,039 4,466 -- 5,505
Long-term debt including obligations
under capital leases ......................... 8,096 394 -- 8,490
Other long-term liabilities ...................... 655 774 -- 1,429
------- -------- -------- -------
Total liabilities ....................... 9,790 5,634 -- 15,424
------- -------- -------- -------
Shareowners' Equity .............................. 3,123 10,514 (10,514) 3,123
------- -------- -------- -------
Total liabilities and shareowners' equity $12,913 $ 16,148 $(10,514) $18,547
======= ======== ======== =======
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CONDENSED CONSOLIDATING
BALANCE SHEETS
AS OF FEBRUARY 3, 2001
Guarantor
The Kroger Co. Subsidiaries Eliminations Consolidated
-------------- ------------ ------------ -------------
Current assets
Cash ......................................... $ 25 $ 136 $ -- $ 161
Receivables .................................. 134 553 -- 687
Net inventories .............................. 340 3,723 -- 4,063
Prepaid and other current assets ............. 148 353 -- 501
------- -------- -------- -------
Total current assets .................... 647 4,765 -- 5,412
Property, plant and equipment, net ............... 866 7,947 -- 8,813
Goodwill, net .................................... 1 3,638 -- 3,639
Other assets ..................................... 653 (338) -- 315
Investment in and advances to subsidiaries ....... 10,670 -- (10,670) --
------- -------- -------- -------
Total assets ............................ $12,837 $ 16,012 $(10,670) $18,179
======= ======== ======== =======
Current liabilities
Current portion of long-term debt including
obligations under capital leases ........... $ 287 $ 49 $ -- $ 336
Accounts payable ............................. 251 2,758 -- 3,009
Other current liabilities .................... 449 1,588 -- 2,037
------- -------- -------- -------
Total current liabilities ............... 987 4,395 -- 5,382
Long-term debt including obligations
under capital leases ......................... 7,808 402 -- 8,210
Other long-term liabilities ...................... 953 545 -- 1,498
------- -------- -------- -------
Total liabilities ....................... 9,748 5,342 -- 15,090
------- -------- -------- -------
Shareowners' Equity .............................. 3,089 10,670 (10,670) 3,089
------- -------- -------- -------
Total liabilities and shareowners' equity $12,837 $ 16,012 $(10,670) $18,179
======= ======== ======== =======
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CONDENSED CONSOLIDATING
STATEMENTS OF INCOME
FOR THE 16 WEEK QUARTER MAY 26, 2001
Guarantor
The Kroger Co. Subsidiaries Eliminations Consolidated
-------------- ------------ ------------ ------------
Sales ...................................... $ 2,124 $13,227 $ (249) $15,102
Merchandise costs, including warehousing and
transportation ......................... 1,688 9,580 (233) 11,035
------- ------- ------- -------
Gross profit ...................... 436 3,647 (16) 4,067
Operating, general and administrative ...... 285 2,550 -- 2,835
Rent ....................................... 58 165 (16) 207
Depreciation and amortization .............. 32 287 -- 319
Merger related costs and asset impairments . 2 -- -- 2
------- ------- ------- -------
Operating profit (loss) ........... 59 645 -- 704
Interest expense ........................... 194 12 -- 206
Equity in earnings of subsidiaries ......... 386 -- (386) --
------- ------- ------- -------
Earnings before tax expense ................ 251 633 (386) 498
Tax expense (benefit) ...................... (53) 247 -- 194
------- ------- ------- -------
Net earnings ...................... $ 304 $ 386 $ (386) $ 304
======= ======= ======= =======
CONDENSED CONSOLIDATING
STATEMENTS OF INCOME
FOR THE 16 WEEK QUARTER MAY 20, 2000
Guarantor
The Kroger Co. Subsidiaries Eliminations Consolidated
-------------- ------------ ------------ ------------
Sales ...................................... $ 1,989 $12,547 $ (207) $14,329
Merchandise costs, including warehousing and
transportation ......................... 1,576 9,115 (191) 10,500
------- ------- ------- -------
Gross profit ...................... 413 3,432 (16) 3,829
Operating, general and administrative ...... 398 2,351 -- 2,749
Rent ....................................... 49 168 (16) 201
Depreciation and amortization .............. 28 279 -- 307
Merger related costs and asset impairments . 9 191 -- 200
------- ------- ------- -------
Operating profit (loss) ........... (71) 443 -- 372
Interest expense ........................... 190 16 -- 206
Equity in earnings of subsidiaries ......... 242 -- (242) --
------- ------- ------- -------
Earnings before tax expense ................ (19) 427 (242) 166
Tax expense (benefit) ...................... (118) 185 -- 67
------- ------- ------- -------
Net earnings ...................... $ 99 $ 242 $ (242) $ 99
======= ======= ======= =======
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CONDENSED CONSOLIDATING
STATEMENTS OF CASH FLOWS
FOR THE 16 WEEK QUARTER MAY 26, 2001
Guarantor
The Kroger Co. Subsidiaries Consolidated
-------------- ------------ ------------
Net cash (used) provided by operating activities . $ (113) $ 729 $ 616
------- ------- -------
Cash flows from investing activities:
Capital expenditures ...................... (29) (589) (618)
Other ..................................... (35) (1) (36)
------- ------- -------
Net cash used by investing activities ............ (64) (590) (654)
------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of long-term debt .. 1,014 -- 1,014
Reductions in long-term debt .............. (721) (17) (738)
Proceeds from issuance of capital stock ... 34 -- 34
Capital stock reacquired .................. (304) -- (304)
Other ..................................... (6) 37 31
Net change in advances to subsidiaries .... 156 (156) --
------- ------- -------
Net cash provided (used) by financing activities . 173 (136) 37
------- ------- -------
Net (decrease) increase in cash and temporary cash
investments .................................. (4) 3 (1)
Cash and temporary investments:
Beginning of year ......................... 25 136 161
------- ------- -------
End of year ............................... $ 21 $ 139 $ 160
======= ======= =======
CONDENSED CONSOLIDATING
STATEMENTS OF CASH FLOWS
FOR THE 16 WEEK QUARTER MAY 20, 2000
Guarantor
The Kroger Co. Subsidiaries Consolidated
-------------- ------------ ------------
Net cash provided by operating activities ........ $ 568 $ 455 $ 1,023
------- ------- -------
Cash flows from investing activities:
Capital expenditures ...................... (14) (441) (455)
Other ..................................... (35) 13 (22)
------- ------- -------
Net cash used by investing activities ............ (49) (428) (477)
------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of long-term debt .. 524 -- 524
Reductions in long-term debt .............. (963) (32) (995)
Proceeds from issuance of capital stock ... 20 -- 20
Capital stock reacquired .................. (209) -- (209)
Other ..................................... (5) 1 (4)
Net change in advances to subsidiaries .... 108 (108) --
------- ------- -------
Net used by financing activities ................. (525) (139) (664)
------- ------- -------
Net decrease in cash and temporary cash
investments .................................. (6) (112) (118)
Cash and temporary investments:
Beginning of year ......................... 30 251 281
------- ------- -------
End of year ............................... $ 24 $ 139 $ 163
======= ======= =======
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9. COMMITMENTS AND CONTINGENCIES
-----------------------------
The Company is a 50% owner of Santee Dairies, L.L.C. ("Santee") and has
a 10-year product supply agreement with Santee that requires Ralphs to
purchase 9 million gallons of fluid milk and other products annually.
The product supply agreement expires on July 29, 2007. Upon acquisition
of Ralphs/Food 4 Less, Santee became excess capacity.
10. OTHER EVENTS
------------
On May 23, 2001, the Company entered into a new $1,625 revolving credit
facility, comprised of a Five-Year Credit Agreement and a 364-Day
Credit Agreement (collectively the "New Credit Agreement"). The Five
Year Credit Agreement, a $812.5 facility, terminates on May 23, 2006,
unless extended or earlier terminated. The 364-Day Credit Agreement, a
$812.5 facility, terminates on May 22, 2002 unless extended, converted
into a one year term loan, or earlier terminated by the Company. The
Company terminated its previous $1,500 Five-Year Credit Agreement and
364-Day Credit Agreement (collectively the "Old Credit Agreement") upon
entering the New Credit Agreement. Borrowings under the New Credit
Agreement bear interest as described in the Credit Agreement, which is
incorporated herein by reference to Exhibits 99.1 and 99.2 of Kroger's
Current Report on From 8-K dated May 31, 2001. At May 26, 2001, the
Applicable Margin for the 364-Day facility was .625% and for the
Five-Year facility was .600%. The Facility Fee for the 364-Day facility
was .125% and for the Five-Year facility was .150%. The Credit
Agreement contains covenants which among other things, restrict
dividends and require the maintenance of certain financial ratios,
including fixed charge coverage ratios and leverage ratios.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following analysis should be read in conjunction with the
consolidated financial statements.
RESULTS OF OPERATIONS
Total sales for the first quarter of 2001 increased 5.4% to $15.1
billion. The increase in sales is attributable to an increase in
comparable and identical store sales and an increase in the number of
stores due to acquisitions and expansions. Identical food store sales,
which includes stores that have been in operation and have not been
expanded or relocated for four quarters, grew 1.9% from the first
quarter of 2000. Comparable food stores sales, which includes
relocations and expansions, increased 2.5% over the prior year.
As previously stated, a portion of the increase in sales was also due
to an increase in the number of stores. During the first quarter of
2001, we opened, acquired, relocated, or expanded 46 food stores,
remodeled 26 food stores and closed 14 food stores. We operated 2,380
food stores at May 26, 2001 compared to 2,354 food stores at May 20,
2000. As of May 26, 2001, food store square footage totaled 127
million. This represents an increase of 4.3% over May 20, 2000.
The gross profit rate during the first quarter, excluding one-time
expenses and the effect of LIFO, was 27.0% in 2001 and 26.9% in 2000.
During the first quarter of 2001, we incurred $3 million of one-time
expenses included in merchandise costs compared to $15 million during
the same period of 2000. Including these costs, the first quarter gross
profit rates were 27.0% in 2001 and 26.8% in 2000. This increase is
primarily the result of synergy savings, reductions in product costs
through our corporate-wide merchandising programs, and increases in
private label sales and profitability. The economies of scale created
by the merger are providing reduced costs by enabling strategic
initiatives in coordinated purchasing. Technology and logistics
efficiencies have also led to improvements in category management and
various other aspects of our operations, resulting in a decreased cost
of product.
We incurred $11 million of one-time operating, general and
administrative expenses in the first quarter of 2001 compared to $66
million during the first quarter of 2000. Excluding these one-time
items, operating, general and administrative expenses as a percent of
sales were 18.7% during the first quarter of 2001 and 18.7% during the
first quarter of 2000. Including these one-time items, operating,
general and administrative expenses as a percent of sales were 18.8% in
the first quarter of 2001 compared to 19.2% in the first quarter of
2000. Operating, general and administrative expenses as a percent of
sales remained unchanged from the prior year, despite the negative
impact of higher utility costs, due primarily to increased
productivity.
The effective tax rate differs from the expected statutory rate
primarily due to the effect of certain state taxes and non-deductible
goodwill. Total goodwill amortization was $31 million in the first
quarter of 2001 and 2000.
Net earnings were $304 million or $0.36 per diluted share for the first
quarter of 2001. These results represent an increase of approximately
200% over net earnings of $0.12 per diluted share for the first quarter
of 2000. Net earnings, excluding merger related costs and one-time
items, were $314 million or $0.38 per diluted share in the first
quarter of 2001. These results represent an increase of approximately
19% over net earnings of $0.32 per diluted share excluding merger
related costs, the impairment charge, and one-time items for the first
quarter of 2000.
MERGER RELATED COSTS AND OTHER ONE-TIME EXPENSES
We are continuing the process of implementing our integration plan
relating to recent mergers. Total merger related costs incurred were $2
million during the first quarter of 2001, and $9 million during the
first quarter of 2000.
In addition to merger related costs that are shown separately on the
Consolidated Statements of Earnings, we also incurred other one-time
expenses that are included in merchandise costs and operating, general
and administrative expenses. The one-time expenses of $14 million
during the first quarter 2001 and $81 million during the first quarter
2000 were costs related to recent mergers.
During the first quarter of 2000, we recorded an impairment charge of
approximately $191 million. We identified impairment losses for assets
to be disposed of, assets to be held and used, and certain investments
in former suppliers that have experienced financial difficulty and with
whom supply arrangements have ceased. The table below details our
merger related costs and one-time items:
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First Quarter Ended
-------------------------------
May 26, May 20,
2001 2000
-------------------------------
(in millions)
Merger related costs...................................... $ 2 $ 9
--------- --------
One-time items related to mergers included in:
Merchandise costs...................................... 3 15
Operating, general and administrative.................. 11 66
--------- --------
Total one-time items..................................... 14 81
--------- --------
Impairment charge......................................... -- 191
--------- --------
Total merger related costs and other one-time items....... $ 16 $ 281
========= ========
Please refer to footnotes two, three and four of the financial
statements for more information on these costs.
LIQUIDITY AND CAPITAL RESOURCES
Debt Management
---------------
During the quarter, we invested $304 million to repurchase 12.9 million
shares of Kroger stock at an average price of $23.59 per share. We
purchased 7.9 million shares under our $750 million stock repurchase
plan and we purchased an additional 5 million shares under our program
to repurchase common stock funded by the proceeds and tax benefits from
stock option exercises.
We had several lines of credit totaling $3.5 billion, with $1.8 billion
in unused balances at May 26, 2001. In addition, we had a $466 million
synthetic lease credit facility with no unused balance and a $150
million money market line with an unused balance of $80 million at May
26, 2001.
On May 23, 2001, we entered into a new $1,625 revolving credit
facility, comprised of a Five-Year Credit Agreement and a 364-Day
Credit Agreement (collectively the "New Credit Agreement"). The Five
Year Credit Agreement, a $812.5 facility, terminates on May 23, 2006
unless extended or earlier terminated. The 364-Day Credit Agreement, a
$812.5 facility, terminates on May 22, 2002 unless extended, converted
into a one year term loan, or earlier terminated by us. We terminated
our previous $1,500 Five-Year Credit Agreement and 364-Day Credit
Agreement (collectively the "Old Credit Agreement") upon entering the
New Credit Agreement. Borrowings under the New Credit Agreement bear
interest as described in the Credit Agreement, which is incorporated
herein by reference to Exhibits 99.1 and 99.2 of Kroger's Current
Report on From 8-K dated May 31, 2001. At May 26, 2001, the Applicable
Margin for the 364-Day facility was .625% and for the Five-Year
facility was .600%. The Facility Fee for the 364-Day facility was .125%
and for the Five-Year facility was .150%. The Credit Agreement contains
covenants which among other things, restrict dividends and require the
maintenance of certain financial ratios, including fixed charge
coverage ratios and leverage ratios.
Net debt increased $267 million to $8.7 billion at the end of the first
quarter of 2001 compared to the first quarter of the prior year. Net
debt is defined as long-term debt, including capital leases and current
portion thereof, less investments in debt securities and prefunded
employee benefits. Net debt increased $388 million from year-end 2000.
These increases are primarily the result of the increased investment in
working capital and stock repurchases.
Our bank credit facilities and the indentures underlying our publicly
issued debt contain various restrictive covenants. Some of these
covenants are based on EBITDA, which we define as earnings before
interest, taxes, depreciation, amortization, LIFO, extraordinary
losses, and one-time items. The ability to generate EBITDA at levels
sufficient to satisfy the requirements of these agreements is a key
measure of our financial strength. We do not intend to present EBITDA
as an alternative to any generally accepted accounting principle
measure of performance. Rather, we believe the presentation of EBITDA
is important for understanding our performance compared to our debt
covenants. The calculation of EBITDA is based on the definition
contained in our bank credit facilities. This may be a different
definition than other companies use. We were in compliance with all
EBITDA-based bank credit facilities and indenture covenants on May 26,
2001.
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The following is a summary of the calculation of EBITDA for the first
quarter of 2001 and 2000.
1st Quarter Ended
----------------------------------
May 26, May 20,
2001 2000
---------------- ----------------
(in millions)
Earnings before tax expense............................. $ 498 $ 166
Interest................................................ 206 206
Depreciation............................................ 288 276
Goodwill amortization................................... 31 31
LIFO.................................................... 12 12
One-time items included in merchandise costs............ 3 15
One-time items included in operating, general and
Administrative expenses.............................. 11 66
Merger related costs.................................... 2 9
Impairment charges...................................... -- 191
---------- ---------
EBITDA.................................................. $ 1,051 $ 972
========== =========
Cash Flow
---------
We generated $616 million of cash from operating activities during the
first quarter of 2001 compared to $1.02 billion in the first quarter of
2000. Cash flow from operating activities decreased in the first
quarter of 2001 largely due to an increase in working capital.
Investing activities used $654 million of cash during the first quarter
of 2001 compared to $477 million in 2000. This increase in use of cash
was primarily due to the payment for acquisitions and increased capital
spending.
Financing activities provided $37 million of cash in the first quarter
of 2001 compared to a use of $664 million in the first quarter of 2000.
This increase in cash is due to proceeds received from the issuance of
debt during the first quarter of 2001.
CAPITAL EXPENDITURES
Capital expenditures excluding acquisitions totaled $618 million in the
first quarter of 2001 compared to $455 million in the first quarter of
2000. During the first quarter of 2001 we opened, acquired, expanded,
or relocated 46 food stores. We had 14 operational closings and
completed 26 within the wall remodels. Square footage increased 4.3%.
OTHER ISSUES
Kroger has completed the $750 million stock repurchase program
announced in April 2000 and continues to repurchase Kroger stock under
the $1 billion repurchase program authorized in March 2001.
We are a 50% owner of Santee Dairies, L.L.C. ("Santee") and have a
10-year product supply agreement with Santee that requires us to
purchase 9 million gallons of fluid milk and other products annually.
The product supply agreement expires on July 29, 2007. Upon the
acquisition of Ralphs/Food 4 Less, Santee became excess capacity.
Emerging Issues Task Force (EITF) Issue Nos. 00-14, "Accounting for
Certain Sales Incentives;" 00-22, "Accounting for "Points" and Certain
Other Time-Based or Volume-Based Sales and Incentive Offers, and Offers
for Free Products or Services to be Delivered in the Future;" and
00-25, "Vendor Income Statement Characterization of Consideration from
a Vendor to a Retailer" become effective for The Kroger Co. beginning
in the first quarter of 2002. These issues address the appropriate
accounting for certain vendor contracts and loyalty programs. The
Company continues to assess the effect these new standards will have on
the financial statements. The Company expects the adoption of these
standards will not have a material effect on our financial statements.
Statement of Financial Accounting Stanadards ("SFAS") No. 141,
"Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets" were issued by the Financial Accounting Standards
Board in late June of 2001. SFAS 141 is
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effective for all business combinations initiated after June 30, 2001
and SFAS 142 will become effective for the Kroger on February 3, 2002.
We are currently analyzing the effect the adoption of these standards
will have on its financial statements.
Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as
amended by SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement
No. 133," and SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities," became effective for
Kroger as of February 4, 2001. SFAS No. 133, as amended, defines
derivatives, requires that derivatives be carried at fair value on the
balance sheet, and provides for hedge accounting when certain
conditions are met. Initial adoption of this new accounting standard
resulted in Kroger recording a liability of $9 million with a
corresponding charge recorded as additional paid in capital, net of
income tax effects. An accumulated other comprehensive loss caption was
not utilized due to the immateriality of the balance.
In accordance with SFAS No. 133, derivative financial instruments are
recognized on the balance sheet at fair value. Changes in the fair
value of derivative instruments designated as "cash flow" hedges, to
the extent the hedges are highly effective, are recorded in other
comprehensive income, net of related tax effects. The ineffective
portion of the cash flow hedge, if any, is recognized in current-period
earnings. Other comprehensive income is reclassified to current-period
earnings when the hedged transaction affects earnings.
We assess, both at inception of the hedge and on an ongoing basis,
whether derivatives used as hedging instruments are highly effective in
offsetting the changes in the fair value or cash flow of hedged items.
If we determine that a derivative is not highly effective as a hedge
or ceases to be highly effective, we discontinue hedge accounting
prospectively.
As of May 26, 2001, we recorded a liability of $9 million related to
the fair value of its derivative instruments. These instruments are
designated as, and are considered, effective cash flow hedges. Hedge
ineffectiveness was not material during the quarter ended May 26, 2001.
We recorded a corresponding charge as a part of additional paid in
capital, net of income tax effects.
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OUTLOOK
Information provided by us, including written or oral statements made
by our representatives, may contain forward-looking information as
defined in the Private Securities Litigation Reform Act of 1995. All
statements, other than statements of historical facts, which address
activities, events or developments that we expect or anticipate will or
may occur in the future, including such things as integration of the
operations of acquired or merged companies, expansion and growth of our
business, future capital expenditures and our business strategy,
contain forward-looking information. Statements elsewhere in this
report and below regarding our expectations, hopes, beliefs,
intentions, or strategies are also forward looking statements. This
forward-looking information is based on various factors and was derived
utilizing numerous assumptions. While we believe that the statements
are accurate, uncertainties and other factors could cause actual
results to differ materially from those statements. In particular:
- We expect to reduce net operating working capital as compared
to the third quarter of 1999 by a total of $500 million by the
end of the third quarter 2004. Our ability to achieve this
reduction will depend on results of our programs to improve
net working capital management. We calculate net operating
working capital as detailed in the table below. As of the end
of the first quarter net operating working capital increased
$264 million since the first quarter of 2000. A calculation of
net operating working capital, after reclassification of
certain balance sheet amounts, based on our definition for all
quarters from the third quarter of 1999 through the first
quarter of 2001 is provided below:
THIRD FOURTH FIRST SECOND THIRD FOURTH FIRST
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
1999 1999 2000 2000 2000 2000 2001
--------------------------------------------------------------------------------
(in millions)
Cash ............................. $ 283 $ 281 $ 163 $ 155 $ 131 $ 161 $ 160
Receivables ...................... 633 635 623 583 628 687 672
FIFO inventory ................... 4,632 4,260 4,240 4,133 4,743 4,382 4,537
Operating prepaid and other assets 200 495 358 252 186 410 351
Accounts payable ................. (3,222) (2,804) (3,004) (2,940) (3,300) (3,009) (3,135)
Operating accrued liabilities .... (1,937) (1,844) (1,849) (1,932) (1,907) (1,918) (1,813)
Prepaid VEBA ..................... -- (200) (118) (56) (3) (208) (95)
------- ------- ------- ------- ------- ------- -------
Working capital .................. $ 589 $ 823 $ 413 $ 195 $ 478 $ 505 $ 677
======= ======= ======= ======= ======= ======= =======
- We obtain sales growth from new square footage, as well as
from increased productivity from existing locations. We expect
2001 full year square footage to grow 4.0% to 4.5%. We expect
combination stores to increase our sales per customer by
including numerous specialty departments, such as pharmacies,
natural food products, gasoline pumps, seafood shops, floral
shops, and bakeries. We believe the combination store format
will allow us to withstand continued competition from other
food retailers, supercenters, mass merchandisers, club or
warehouse stores, drug stores and restaurants.
- Our targeted annual earnings per share growth is 16%-18%
through the fiscal year ending February 1, 2003 and 15%
thereafter.
- Capital expenditures reflect our strategy of growth through
expansion and acquisition as well as our emphasis on
self-development and ownership of real estate, and on
logistics and technology improvements. The continued capital
spending in technology focusing on improved store operations,
logistics, manufacturing procurement, category management,
merchandising and buying practices, should reduce
merchandising costs as a percent of sales. We expect our
capital expenditures for fiscal 2001 to total $2.0 billion,
excluding acquisitions. We intend to use the combination of
free cash flows from operations, including reductions in
working capital, and borrowings under credit facilities to
finance capital expenditure requirements. If determined
preferable, we may fund capital expenditure requirements by
mortgaging facilities, entering into sale/leaseback
transactions, or by issuing additional debt or equity.
- Based on current operating results, we believe that operating
cash flow and other sources of liquidity, including borrowings
under our commercial paper program and bank credit facilities,
will be adequate to meet anticipated requirements for working
capital, capital expenditures, interest payments and scheduled
principal payments for the foreseeable future. We also believe
we have adequate coverage of our debt covenants to continue to
respond effectively to competitive conditions.
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- A decline in the generation of sufficient cash flows to
support capital expansion plans, share repurchase programs and
general operating activities could cause our growth to slow
significantly and may cause us to miss our earnings targets,
because we obtain some of our sales growth from new square
footage.
- The grocery retailing industry continues to experience fierce
competition from other grocery retailers, supercenters, club
or warehouse stores, and drug stores. Our ability to maintain
our current success is dependent upon our ability to compete
in this industry and continue to reduce operating expenses.
The competitive environment may cause us to reduce our prices
in order to gain or maintain share of sales, thus reducing
margins. While we believe our opportunities for sustained,
profitable growth are considerable, unanticipated actions of
competitors could impact our share of sales and net income.
- Changes in laws and regulations, including changes in
accounting standards, taxation requirements, and environmental
laws may have a material impact on our financial statements.
- Changes in the general business and economic conditions in our
operating regions, including the rate of inflation, population
growth, and employment and job growth in the markets in which
we operate may affect our ability to hire and train qualified
employees to operate our stores. This would negatively affect
earnings and sales growth. General economic changes may also
effect the shopping habits of our customers, which could
affect sales and earnings.
- Changes in our product mix may negatively affect certain
financial indicators. For example, we have added and will
continue to add supermarket fuel centers. Since gasoline is a
low profit margin item with high sales dollars, we expect to
see our gross profit margins decrease as we sell more
gasoline. Although this negatively affects our gross profit
margin, gasoline provides a positive affect on EBITDA and net
earnings.
- Our ability to integrate any companies we acquire or have
acquired and achieve operating improvements at those companies
will affect our operations.
- We retain a portion of the exposure for our workers'
compensation and general liability claims. It is possible that
these claims may cause significant expenditures that would
affect our operating cash flows.
- Our capital expenditures could fall outside of the expected
range if we are unsuccessful in acquiring suitable sites for
new stores, if development costs exceed those budgeted, or if
our logistics and technology projects are not completed in the
time frame expected or on budget.
- Adverse weather conditions could increase the cost our
suppliers charge for our products, or may decrease the
customer demand for certain products. Additionally, increases
in the cost of inputs, such as utility costs or raw material
costs, could negatively impact financial ratios and net
earnings.
- Although we presently operate only in the United States, civil
unrest in foreign countries in which our suppliers do business
may affect the prices we are charged for imported goods. If we
are unable to pass these increases on to our customers our
gross margin and EBITDA will suffer.
- Interest rate fluctuation and other capital market conditions
may cause variability in earnings. Although we use derivative
financial instruments to reduce our net exposure to financial
risks, we are still exposed to interest rate fluctuations and
other capital market conditions.
Other factors and assumptions not identified above could also cause actual
results to differ materially from those set forth in the forward-looking
information. Accordingly, actual events and results may vary significantly from
those included in or contemplated or implied by forward-looking statements made
by us or our representatives.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBIT 3.1 - Amended Articles of Incorporation of the Company
are hereby incorporated by reference to Exhibit 3.1 of the
Company's Quarterly Report on Form 10-Q for the quarter ended
October 3, 1998. The Company's Regulations are incorporated by
reference to Exhibit 4.2 of the Company's Registration
Statement on Form S-3 as filed with the Securities and
Exchange Commission on January 28, 1993, and bearing
Registration No. 33-57552.
EXHIBIT 4.1 - Instruments defining the rights of holders of
long-term debt of the Company and its subsidiaries are not
filed as Exhibits because the amount of debt under each
instrument is less than 10% of the consolidated assets of the
Company. The Company undertakes to file these instruments with
the Commission upon request.
EXHIBIT 99.1 - Additional Exhibits - Statement of Computation
of Ratio of Earnings to Fixed Charges.
(b) The Company disclosed and filed an announcement of preliminary
fourth quarter and fiscal year 2000 results and a restatement
of prior earnings by minor amounts in its Current Report on
Form 8-K dated March 5, 2001; its earnings release for the
fourth quarter and fiscal year of 2000 in its Current Report
on Form 8-K dated March 15, 2000; an announcement regarding
the reaudit of Fred Meyer, Inc.'s 1998 financials, including
preliminary restated financials, in its Current Report on Form
8-K dated March 21, 2001; and an underwriting agreement,
pricing agreement, the Tenth Supplemental Indenture related to
the issuance of $500,000,000, 6.80% Senior Notes, and the
Eleventh Supplemental Indenture related to the issuance of
$500,000,000, 7.50% Senior Notes in its Current Report on Form
8-K dated May 11, 2001.
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SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE KROGER CO.
Dated: July 10, 2001 By: /s/ Joseph A. Pichler
-------------------------------------
Joseph A. Pichler
Chairman of the Board and
Chief Executive Officer
Dated: July 10, 2001 By: /s/ M. Elizabeth Van Oflen
-------------------------------------
M. Elizabeth Van Oflen
Vice President and
Corporate Controller
22
Exhibit Index
-------------
Exhibit 3.1 - Amended Articles of Incorporation of the Company are hereby
incorporated by reference to Exhibit 3.1 of the Company's
Quarterly Report on Form 10-Q for the quarter ended October 3,
1998. The Company's Regulations are incorporated by reference
to Exhibit 4.2 of the Company's Registration Statement on Form
S-3 as filed with the Securities and Exchange Commission on
January 28, 1993, and bearing Registration No. 33-57552.
Exhibit 4.1 - Instruments defining the rights of holders of long-term debt
of the Company and its subsidiaries are not filed as Exhibits
because the amount of debt under each instrument is less than
10% of the consolidated assets of the Company. The Company
undertakes to file these instruments with the Commission upon
request.
Exhibit 10.1 - 364 - Day Credit Agreement and Five- Year Credit Agreement,
both dated as of May 23, 2001, among The Kroger Co., as
Borrower; the Initial Lenders named therein; Citibank, N.A.
and The Chase Manhattan Bank, as Administrative Agents; and
Bank of America, N.A., Bank One, N.A., and The Bank of New
York, as Co-Syndication Agents. Incorporated by reference to
Exhibit 99.1 and 99.2 of the Company's Current Report on Form
8-K dated May 31, 2001.
Exhibit 99.1 - Additional Exhibits - Statement of Computation of Ratio of
Earnings to Fixed Charges.