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Exhibit 99.3
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The unaudited pro forma combined financial statements are based on the
historical consolidated financial statements of The Kroger Co. ("Kroger") and
Fred Meyer, Inc. ("Fred Meyer") and give effect to the merger as a pooling of
interests. The pro forma information includes the historical results of
operations of Kroger as of and for the 53 weeks ended January 2, 1999 and the
historical results of operations of Fred Meyer as of and for the 52 weeks ended
January 30, 1999.
The unaudited pro forma combined statements of earnings assume that the merger
had been completed on December 28, 1997. Amounts for Fred Meyer have not been
adjusted on a pro forma basis to reflect the acquisition of Food 4 Less in March
of 1998 as if it had been acquired at the beginning of the period presented, as
the amounts are not material on a pro forma combined basis. The audited
supplemental consolidated financial statements attached as Exhibit 99.1 of this
report include adjustments to conform the accounting practices of Kroger and
Fred Meyer with respect to certain inventory related costs and the
capitalization policy for property, plant and equipment as described in Note 2
to the supplemental consolidated financial statements.
The unaudited pro forma financial statements are not necessarily indicative of
the actual or future financial position or results of operations of the combined
company. They should be read in conjunction with the audited and unaudited
historical consolidated financial statements, including the notes thereto, of
Kroger and Fred Meyer.
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UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(AMOUNTS IN THOUSANDS)
Kroger as of Fred Meyer as of Pro Forma Pro Forma
January 2, 1999 January 30, 1999 Adjustments Combined
--------------- ---------------- ----------- --------
ASSETS
Current assets
Cash $ 121,431 $ 177,907 ($75,000)(1) $ 224,338
Receivables 456,917 126,315 583,232
Inventories
FIFO cost 2,202,088 1,877,886 4,079,974
Less LIFO reserve (471,932) (57,700) (529,632)
---------- ----------- -----------
1,730,156 1,820,186 3,550,342
Property held for sale 10,291 0 10,291
Prepaid and other current assets 354,385 70,576 424,961
Deferred income taxes 0 256,417 256,417
---------- ----------- -------- -----------
Total current assets 2,673,180 2,451,401 (75,000) 5,049,581
Property, plant and equipment, net 3,785 122 3,449,586 7,234,708
Investments and other assets 213,493 183,816 397,309
Goodwill, net 28,276 3,791,334 3,819,610
Long-term deferred tax assets 0 275,077 275,077
---------- ----------- -------- -----------
Total Assets $6,700,071 $10,151,214 ($75,000) $16,776,285
========== =========== ======== ===========
LIABILITIES
Current liabilities
Current portion of long-term debt
and lease obligations $ 175,204 $ 188,059 $ 363,263
Accounts payable 1,785,630 1,140,386 2,926,016
Other current liabilities 1,231,234 929,438 2,160,672
---------- ----------- -----------
Total current liabilities 3,192,068 2,257,883 5,449,951
Long-term debt 3,025,980 4,821,635 7,847,615
Obligations under capital leases 202,683 158,938 361,621
Deferred income taxes 200,952 0 200,952
Other long-term liabilities 466,220 598,353 1,064,573
---------- ----------- -----------
Total Liabilities 7,087,903 7,836,809 14,924,712
SHAREOWNERS' EQUITY
Common capital stock 836,802 1,558 $1,948,486 (2) 2,711,846
(75,000)(1)
Additional paid-in capital 0 1,948,486 (1,948,486)(2) 0
Other 0 (3,991) (3,991)
Accumulated earnings (deficit) (773,605) 368,601 (405,004)
Common stock in treasury, at cost (451,029) (249) (451,278)
---------- ----------- -------- -----------
Total Shareowners'
Equity (Deficit) (387,832) 2,314,405 (75,000) 1,851,573
---------- ----------- -------- -----------
Total Liabilities and
Shareowners' Equity $6,700,071 $10,151,214 ($75,000) $16,776,285
========== =========== ======== ===========
See accompanying notes to unaudited pro forma combined financial data.
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UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS)
Fiscal Year 1998
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Kroger Fiscal Fred Meyer Fiscal
Year Ended Year Ended Pro Forma Pro Forma
January 2, 1999 January 30, 1999 Adjustments Combined
--------------- ---------------- ----------- --------
Sales $28,203,304 $14,878,771 $43,082,075
Costs and expenses
Merchandise costs, including
warehousing and transportation 21,523,021 10,418,893 31,941,914
Operating, general
and administrative 4,912,215 3,536,104 $(584,063)(3) 7,864,256
Rent 358,254 261,034 (3) 619,288
Depreciation and amortization 429,954 92,268 323,029 (3) 845,251
Net interest expense 266,896 378,236 645,132
Merger related costs 0 268,854 268,854
----------- ----------- -----------
Total 27,490,340 14,694,355 42,184,695
----------- ----------- -----------
Earnings before tax expense
and extraordinary loss 712,964 184,416 897,380
Tax expense 263,052 129,244 392,296
----------- ----------- ----------
Earnings before extraordinary loss $ 449,912 $ 55,172 $ 505,084
=========== =========== ==========
Basic earnings per common share
before extraordinary loss $1.76 $0.36 $1.24
===== ===== =====
Average number of common shares
used in basic calculation 255,814 151,699 407,513
Diluted earnings per common share
before extraordinary loss $1.70 $0.34 $1.19
===== ===== =====
Average number of common shares
used in diluted calculation 265,382 160,218 425,600
See accompanying notes to unaudited pro forma combined financial data.
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(1) Kroger and Fred Meyer estimate that they will incur direct transaction
costs of approximately $75 million associated with the merger. These costs
consist primarily of investment banking, legal, bank amendment fees,
accounting, printing and regulatory filing fees. The unaudited pro forma
combined balance sheet reflects these expenses as if they had been paid as
of January 2, 1999.
(2) Represents the conversion of Fred Meyer common stock into Kroger common
shares
(3) Represents the reclassification of rent expense, depreciation and
amortization to conform the presentation of Fred Meyer results to that of
Kroger.