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Exhibit 99.1
Media Contact: Gary Rhodes, The Kroger Co. (513) 762-1304
Investor Contact: Kathy Kelly, The Kroger Co. (513) 762-4969
KROGER REPORTS RECORD EARNINGS, BEFORE MERGER COSTS,
FOR SECOND QUARTER OF 1999
CINCINNATI, OH, September 14, 1999 -- The Kroger Co. (NYSE: KR) today
reported record second-quarter earnings per share, on a diluted basis after
excluding all costs related to the merger with Fred Meyer, Inc. and before an
extraordinary item, of $0.24 for the quarter ended August 14, 1999.
These results represent an increase of approximately 26% over estimated
combined earnings before an extraordinary item of $0.19 per share for the second
quarter of 1998. The prior-year estimate includes the actual results of Fred
Meyer before merger costs and an estimate of Kroger's pre-merger results,
excluding one-time expenses, to reflect the change to a new fiscal calendar last
January.
Including merger costs of $229.9 million pre-tax or $146.5 million
after taxes, Kroger earned $0.06 per diluted share before an extraordinary item
in the second quarter of 1999.
Adjusting for the change in Kroger's fiscal calendar and excluding
sales from divested stores, total sales for the second quarter of 1999 increased
6.2% to $10.3 billion. Identical food store sales grew 2.6%. Comparable store
sales, which include relocations and expansions, rose 3.6% for the quarter.
Identical and comparable sales exclude stores that changed names during the past
year.
EBITDA (earnings before interest, taxes, depreciation, amortization,
LIFO and unusual items) for the second quarter of 1999 totaled $705 million.
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"Kroger continued its solid performance record in the second quarter of
1999," said Joseph A. Pichler, Kroger chairman and chief executive officer. "Our
strong sales momentum was generated by new merchandising programs, the
introduction of more than 100 new private-label products and another fine
performance from our manufacturing operations."
Kroger opened, expanded, relocated or acquired 19 stores during the
second quarter, increasing overall square footage by 4.1%. Capital expenditures
for the quarter totaled $404 million and net total debt increased by $204
million to $8.3 billion from a year ago.
For the first two quarters of 1999, Kroger reported diluted earnings
before extraordinary item of $0.50 per share, excluding merger costs. On this
basis, these results represent an increase of approximately 22% over estimated
combined diluted earnings of $0.41 per share for the first half of 1998. The
prior-year estimate includes the actual results of Fred Meyer before merger
costs and an estimate of Kroger's pre-merger results, excluding one-time
expenses, to reflect the change to a new fiscal calendar. The 1999 figures also
include a full 28 weeks of results from Ralphs, which was acquired by Fred Meyer
on March 10, 1998, thus contributing only 23 weeks of results during the 1998
period.
Adjusting for these changes, and excluding sales from divested stores
in 1998, total sales in the first two quarters of 1999 increased approximately
5.6% to $23.8 billion. EBITDA totaled $1.58 billion for the first half of 1999.
Robert G. Miller, Kroger vice chairman and chief operating officer,
said the integration of the Kroger and Fred Meyer organizations continues to
proceed smoothly. "We're making tremendous progress at all levels of the
organization. For example, we recently introduced a three-tier merchandising
strategy for our private-label business that will offer a wide variety of
groceries and perishable products to our diverse customer base. In addition,
we've been able to leverage our purchasing power to obtain better pricing for a
broad array of products, including seasonal items, pharmaceuticals and
perishables."
Mr. Miller said the Company remains comfortable with achieving the
projected $40 million in synergy savings by the end of the current fiscal year.
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The Company completed the conversion of 35 Smith's stores in Phoenix
and Tucson to the Fry's banner during the second quarter of 1999. Since the end
of the second quarter, the Company has added the Jay C Stores chain in southern
Indiana and has converted and opened 14 of the 41 stores in northern California
that are being acquired from Albertson's, Inc.
Entering the second half of 1999, Mr. Pichler said Kroger remains
comfortable with analysts' consensus earnings forecast for the 1999 fiscal year,
excluding merger-related costs.
Headquartered in Cincinnati, Ohio, Kroger is the nation's largest
retail grocery chain. Following the recent merger with Fred Meyer, Inc. Kroger
now operates 2,192 grocery stores, 796 convenience stores, 380 fine jewelry
stores and 43 food processing plants.
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This press release contains certain forward-looking statements about
the future performance of the Company. These statements are based on
management's assumptions and beliefs in light of the information currently
available to it. We assume no obligation to update the information contained
herein. These forward-looking statements are subject to uncertainties and other
factors that could cause actual results to differ materially from such
statements including, but not limited to, material adverse changes in the
business or financial condition of Kroger and other factors affecting the
businesses of the Company which are described in filings with the Securities and
Exchange Commission.
Certain 1998 information included in this release has been estimated in
order to present the 1998 information as if the decision to change Kroger's
fiscal year had been made at the beginning of 1998. The 1998 information
included in the Company's Forms 10-Q filed with the SEC during 1999 will be for
different periods than those in the newly adopted fiscal year and may not agree
with certain 1998 estimated information included in this release.
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THE KROGER CO.
SALES AND EARNINGS
WITH ONE-TIME EXPENSES
(in millions, except per share amounts)
2nd Quarter 2 Quarters
-------------------------- --------------------------
1999 1998 (1) 1999 1998 (2)
-------- --------- -------- ---------
Sales $ 10,289 $ 9,947 $ 23,782 $ 20,376
======== ======== ======== ========
EBITDA (3) $ 705 $ 652 $ 1,584 $ 1,294
LIFO $ -- $ 9 $ 12 $ 19
Interest $ 148 $ 155 $ 347 $ 319
Depreciation $ 198 $ 182 $ 449 $ 380
Amortization $ 23 $ 21 $ 53 $ 43
One-time
items (4) $ 230 $ 100 $ 270 $ 355
-------- -------- -------- --------
Pre-tax earnings
earnings before
extraordinary
item $ 106 $ 185 $ 453 $ 178
Tax expense $ 50 $ 85 $ 190 $ 97
-------- -------- -------- --------
Earnings before
extraordinary
item $ 56 $ 100 $ 263 $ 81
Extraordinary
item (5) $ (10) $ (1) $ (10) $ (222)
-------- -------- -------- --------
Net earnings $ 46 $ 99 $ 253 $ (141)
======== ======== ======== ========
Diluted earnings
per common
share:
From operations $ 0.06 $ 0.12 $ 0.30 $ 0.10
From extra-
ordinary item (5) $ (0.01) $ -- $ (0.01) $ (0.26)
-------- -------- -------- --------
Diluted net
earnings per
common share $ 0.05 $ 0.12 $ 0.29 $ (0.16)
======== ======== ======== ========
Number of shares
used in diluted
per share
calculation 860 854 861 846
(1) The information for the second quarter of 1998 includes the results of
operations of The Kroger Co. for the 12 weeks ended June 13, 1998, its wholly
owned subsidiary, Dillon Companies Inc., for the 13 weeks ended June 27, 1998,
and its wholly owned subsidiary, Fred Meyer, Inc., for the 12 weeks ended August
15, 1998.
(2) The information for the first two quarters of 1998 includes the results of
operations of The Kroger Co. for the 24 weeks ended June 13, 1998, its wholly
owned subsidiary, Dillon Companies Inc., for the 26 weeks ended June 27, 1998,
and its wholly owned subsidiary, Fred Meyer, Inc., for the 28 weeks ended August
15, 1998.
(3) EBITDA, as defined in our credit agreements, represents earnings before
interest, taxes, depreciation, amortization, LIFO and one-time items.
(4) The one-time items in the second quarter of 1999 are costs related to
mergers ($230 million). The one-time items in the first two quarters of 1999 are
costs related to mergers ($270 million). The one-time items in the second
quarter of 1998 are costs related to mergers ($48 million), logistic initiatives
($41 million), and accounting and operations consolidations in Texas ($11
million). The one-time items in the first two quarters of 1998 are costs related
to mergers ($213 million), logistic initiatives ($41 million), accounting and
operations consolidations in Texas ($11 million), and charges related to an
accounting change ($90 million).
(5) From the early retirement of debt.
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THE KROGER CO.
SALES AND EARNINGS
WITHOUT ONE-TIME EXPENSES
(in millions, except per share amounts)
2nd Quarter 2 Quarters
-------------------------- --------------------------
1999 1998 (1) 1999 1998 (2)
-------- --------- -------- ---------
Sales $ 10,289 $ 9,947 $ 23,782 $ 20,376
======== ======== ======== ========
EBITDA (3) $ 705 $ 652 $ 1,584 $ 1,294
LIFO $ -- $ 9 $ 12 $ 19
Interest $ 148 $ 155 $ 347 $ 319
Depreciation $ 198 $ 182 $ 449 $ 380
Amortization $ 23 $ 20 $ 53 $ 43
-------- -------- -------- --------
Pre-tax earnings
earnings before
extraordinary
item $ 336 $ 286 $ 723 $ 533
Tax expense $ 134 $ 117 $ 290 $ 219
-------- -------- -------- --------
Earnings before
extraordinary
item $ 202 $ 169 $ 433 $ 314
Extraordinary
item (4) $ (10) $ (1) $ (10) $ (222)
-------- -------- -------- --------
Net earnings $ 192 $ 168 $ 423 $ 92
======== ======== ======== ========
Diluted earnings
per common
share:
From operations $ 0.24 $ 0.20 $ 0.50 $ 0.37
From extra-
ordinary item (4) $ (0.01) $ -- $ (0.01) $ (0.26)
-------- -------- -------- --------
Diluted net
earnings per
common share $ 0.23 $ 0.20 $ 0.49 $ 0.11
======== ======== ======== ========
Number of shares
used in diluted
per share
calculation 860 854 861 846
(1) The information for the second quarter of 1998 includes the results of
operations of The Kroger Co. for the 12 weeks ended June 13, 1998, its wholly
owned subsidiary, Dillon Companies Inc., for the 13 weeks ended June 27, 1998,
and its wholly owned subsidiary, Fred Meyer, Inc., for the 12 weeks ended August
15, 1998.
(2) The information for the first two quarters of 1998 includes the results of
operations of The Kroger Co. for the 24 weeks ended June 13, 1998, its wholly
owned subsidiary, Dillon Companies Inc., for the 26 weeks ended June 27, 1998,
and its wholly owned subsidiary, Fred Meyer, Inc., for the 28 weeks ended August
15, 1998.
(3) EBITDA, as defined in our credit agreements, represents earnings before
interest, taxes, depreciation, amortization, LIFO and one-time items.
(4) From the early retirement of debt.