CINCINNATI, June 21, 2018 /PRNewswire/ --
Q1 Highlights
- Great start to Restock Kroger, including progress on
cost controls due to process change and space
optimization
- Sold convenience store business unit for $2.15 billion ($1.59 per diluted share)
- Our Brands achieves highest-ever retail dollar
share
- Partner for Customer Value: Ocado partnership & Home
Chef merger agreemen
The Kroger Co. (NYSE: KR) today reported net earnings of
$2.0 billion, or $2.37 per diluted share, in the first quarter of
2018, which ended on May 26. Kroger's
first quarter adjusted net earnings were $626 million, or $0.73 per diluted share (see table 6, 2018 First
Quarter Adjustment Items). Net earnings for the first quarter 2017
were $303 million, or $0.32 per diluted share. Adjusted net earnings
for the first quarter 2017 were $546
million, or $0.58 per diluted
share (see table 6, 2017 First Quarter Adjustment Items).
Kroger's first quarter net earnings per diluted share result was
slightly ahead of the company's internal expectations due to the
great start to Restock Kroger, including process changes
that led to especially strong cost controls and alternative revenue
streams.
Kroger reported identical supermarket sales, without fuel, of
1.4% for the first quarter of 2018. When calculating identical
sales to be more inclusive of company business units – including
Kroger Specialty Pharmacy and ship-to-home solutions – Kroger's
identical sales, without fuel, were 1.9% in the first quarter. The
company intends to use this calculation going forward as a more
appropriate measure to track Kroger's performance as it redefines
the grocery customer experience, and to be more comparable with how
peers report.
Comments from Chairman and CEO Rodney
McMullen
"Restock Kroger is off to a fantastic start. Everything
we do supports our customers engaging seamlessly with Kroger.
Kroger is creating the future of retail by innovating our core
business and adding exciting partnerships like Ocado and our
planned merger with Home Chef. We are on track to generate the free
cash flow and incremental FIFO operating profit that we committed
to in Restock Kroger. We are confident in our ability to
deliver on our plans for the year and our long-term vision to serve
America through food inspiration and uplift."
Details of First Quarter 2018 Results
Total sales increased 3.4% to $37.5
billion in the first quarter compared to $36.3 billion for the same period last year.
Total sales, excluding fuel, increased 2.3% in the first quarter
over the same period last year. Excluding fuel and the effect of
Kroger's recently-sold convenience store business unit, total sales
increased 2.8%.
Gross margin was 21.8% of sales for the first quarter. Excluding
fuel and the LIFO charge, gross margin decreased 13 basis points
from the same period last year.
Kroger recorded a LIFO charge of $15
million in the first quarter, compared to a $25 million LIFO charge in the same quarter last
year.
Operating, General & Administrative costs as a rate of sales
– excluding fuel and the 2018 and 2017 First Quarter Adjustment
Items – increased 3 basis points; rent and depreciation with the
same exclusions increased by 1 basis point. The slight increase as
a rate of sales is driven by the company's investment in service
and higher starting wages, offset almost entirely by strong cost
controls due to process changes.
FIFO operating margin on a rolling four quarters basis decreased
25 basis points compared to the prior year, excluding fuel,
mergers, the 53rd week and the adjustment items from the
respective periods.
Kroger did not adjust the rates as a percent of sales described
above for the divestiture of the convenience store business
because the effect was insignificant.
Financial Strategy
Kroger's financial strategy is to use its free cash flow to
drive growth while also maintaining its current investment grade
debt rating and returning capital to shareholders. The company
actively balances the use of its cash flow to achieve these
goals.
Over the last four quarters, Kroger has used cash to:
- Contribute an incremental $1.2
billion pre-tax to company-sponsored pension plans and
$467 million pre-tax to satisfy
withdrawal obligations to the Central States Pension Fund,
- Repurchase 110 million common shares for $2.7 billion, which includes $1.1 billion repurchased with after-tax proceeds
from the sale of Kroger's convenience store business unit under a
previously-announced $1.2 billion
accelerated stock repurchase plan,
- Pay $442 million in dividends,
and
- Invest $3.0 billion in
capital.
Kroger's net total debt to adjusted EBITDA ratio increased to
2.43 (see Table 5), on a 52-week basis. The company's net total
debt to adjusted EBITDA ratio target range is 2.30 to 2.50. Kroger
expects its net total debt to adjusted EBITDA ratio to increase
throughout the year due to increased borrowings to fund its
investment in Ocado, its planned merger with Home Chef, and tax
payments related to the gain on the sale of the convenience store
business unit.
2018 Guidance
Kroger expects identical sales growth, excluding fuel, to range
from 2.0% to 2.5% in 2018. This reflects the company's updated
definition of identical sales and is supported by its expectation
for identical supermarket sales that is the same as its original
guidance for the year.
Kroger raised the low end of its net earnings guidance range to
$3.64 to $3.79 per diluted share for 2018. The previous
GAAP range was $3.59 to $3.79. The company raised the low end of its
adjusted net earnings guidance range to $2.00 to $2.15 per
diluted share for 2018, from $1.95 to
$2.15 previously.
The company continues to expect capital investments, excluding
mergers, acquisitions, and purchases of leased facilities, to be
approximately $3.0 billion in
2018.
Kroger expects its 2018 tax rate to be approximately 22%.
First Quarter 2018 Restock
Kroger Highlights
Redefine the Grocery Customer Experience
- Grew digital sales 66% in the first quarter
- Achieved highest-ever dollar share in the history of Our
Brands, driven by double-digit growth in Simple Truth and
Simple Truth Organic
- Announced location of second Kitchen 1883 restaurant
- Opened new Culinary Innovation Center
- Hosted second Natural Foods Innovation Summit
Partner for Customer Value
- Announced partnership with online grocery supermarket Ocado to
serve America's families anything, anytime, anywhere
- Entered into merger agreement with Home Chef to revolutionize
mealtime
- Expanded partnership with Instacart to increase customer
delivery coverage area
- Completed sale of convenience store business unit for
$2.15 billion
- Announced new offerings to enhance Kroger Precision Marketing
powered by 84.51°, which connects advertisers with
digitally-engaged customers at the point of purchase and creates
alternative revenue for Kroger by monetizing six billion annual
digital interactions on owned properties
Develop Talent
- Announced new and enhanced long-term associate benefits
following the Tax Cuts and Jobs Act, including an industry-leading
education assistance program called Feed Your Future,
accelerated investments in store associate wages, a more generous
401(k) benefit, and enriched associate discount and support
programs
- Kroger Technology named to Computerworld's Top 100 Best
Places to Work in IT
- Progressive Grocer magazine recognized 59 associates as
"Top Women in Grocery", since 2007, Kroger has had a total of 441
"Top Women" honorees
- Joined Catalyst in spotlighting 'workplaces that work for
women' on International Women's Day
Live Kroger's Purpose
- Announced 2017 Zero Hunger | Zero Waste progress, including 325
million meals donated and 77% waste diversion from landfill for the
year
- Drove nearly three times customer engagement in Kroger's annual
Sustainability Lives Here event in stores during Earth Month
through Zero Hunger | Zero Waste and sustainable products &
practices
- Named a 2018 ENERGY STAR® Partner of the Year Award by the U.S.
Environmental Protection Agency and U.S. Department of Energy
- Announced comprehensive commitment to help combat the
nationwide opioid epidemic, including hosting drug take-back events
at more than 100 Kroger Family of Pharmacies locations on
April 28 in partnership with the U.S.
Drug Enforcement Administration
- Donated $1 million to USO to
support veterans, active duty military and their families as part
of annual Honoring Our Heroes campaign
At The Kroger Co. (NYSE: KR), we are dedicated to our Purpose:
to Feed the Human SpiritTM. We are nearly
half a million associates who serve over nine million customers
daily through a seamless digital shopping experience and 2,779
retail food stores under a variety of banner names, serving America
through food inspiration and uplift, and creating
#ZeroHungerZeroWaste communities by 2025. To learn more about us,
visit our newsroom and investor relations site.
Note: Fuel sales have historically had a low gross margin rate
and operating expense rate as compared to corresponding rates on
non-fuel sales. As a result Kroger discusses the changes in these
rates excluding the effect of fuel.
Note: Kroger discusses the changes in operating results, as a
percentage of sales, excluding recent mergers due to them affecting
comparability to last year.
Please refer to the supplemental information presented in the
tables for reconciliations of the non-GAAP financial measures used
in this press release to the most comparable GAAP financial measure
and related disclosure.
This press release contains certain statements that constitute
"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.
These statements are indicated by words such as "expectation,"
"intend," "planned," "committed," "expect," "guidance," "goal,"
"target," "strategy," "plan," "vision," "confident" and "range."
Various uncertainties and other factors could cause actual results
to differ materially from those contained in the forward-looking
statements. These include the specific risk factors identified in
"Risk Factors" and "Outlook" in Kroger's annual report on Form 10-K
for the last fiscal year and any subsequent filings, as well as the
following:
- Kroger's ability to achieve sales, earnings and cash flow goals
may be affected by: labor negotiations or disputes; changes in the
types and numbers of businesses that compete with Kroger; pricing
and promotional activities of existing and new competitors,
including non-traditional competitors, and the aggressiveness of
that competition; Kroger's response to these actions; the state of
the economy, including interest rates, the inflationary and
deflationary trends in certain commodities, and the unemployment
rate; the effect that fuel costs have on consumer spending;
volatility of fuel margins; changes in government-funded benefit
programs; manufacturing commodity costs; diesel fuel costs related
to Kroger's logistics operations; trends in consumer spending; the
extent to which Kroger's customers exercise caution in their
purchasing in response to economic conditions; the uncertain pace
of economic growth; changes in inflation or deflation in product
and operating costs; stock repurchases; Kroger's ability to retain
pharmacy sales from third party payors; consolidation in the
healthcare industry, including pharmacy benefit managers; Kroger's
ability to negotiate modifications to multi-employer pension plans;
natural disasters or adverse weather conditions; the potential
costs and risks associated with potential cyber-attacks or data
security breaches; the success of Kroger's future growth plans; the
ability to execute on Restock Kroger; and the successful
integration of merged companies and new partnerships. Kroger's
ability to achieve sales and earnings goals may also be affected by
Kroger's ability to manage the factors identified above. Kroger's
ability to execute its financial strategy may be affected by its
ability to generate cash flow.
- Kroger's effective tax rate may differ from the expected rate
due to changes in laws, the status of pending items with various
taxing authorities, and the deductibility of certain expenses.
Kroger assumes no obligation to update the information contained
herein. Please refer to Kroger's reports and filings with the
Securities and Exchange Commission for a further discussion of
these risks and uncertainties.
Note: Kroger's quarterly conference call with investors will be
broadcast live online at 10 a.m. (ET)
on June 21, 2018 at ir.kroger.com. An
on-demand replay of the webcast will be available at approximately
1 p.m. (ET) on Thursday, June 21,
2018.
1st Quarter 2018 Tables Include:
- Consolidated Statements of Operations
- Consolidated Balance Sheets
- Consolidated Statements of Cash Flows
- Supplemental Sales Information
- Reconciliation of Net Total Debt and Net Earnings Attributable
to The Kroger Co. to Adjusted EBITDA
- Net Earnings Per Diluted Share Excluding the Adjustment
Items
Table
1.
|
THE KROGER
CO.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in millions, except
per share amounts)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST
QUARTER
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SALES
|
|
|
|
|
$
37,530
|
|
100.0%
|
|
$
36,285
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
MERCHANDISE COSTS,
INCLUDING ADVERTISING,
|
|
|
|
|
|
|
|
|
|
|
|
WAREHOUSING AND
TRANSPORTATION (a),
|
|
|
|
|
|
|
|
|
|
|
|
AND LIFO CHARGE
(b)
|
|
|
29,362
|
|
78.2
|
|
28,281
|
|
77.9
|
|
|
OPERATING, GENERAL
AND ADMINISTRATIVE (a)
|
|
6,122
|
|
16.3
|
|
6,367
|
|
17.6
|
|
|
RENT
|
|
|
|
|
276
|
|
0.7
|
|
270
|
|
0.7
|
|
|
DEPRECIATION AND
AMORTIZATION
|
|
741
|
|
2.0
|
|
736
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
PROFIT
|
|
|
1,029
|
|
2.7
|
|
631
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST
EXPENSE
|
|
|
(192)
|
|
(0.5)
|
|
(177)
|
|
(0.5)
|
|
|
NON-SERVICE COMPONENT
OF COMPANY-SPONSORED
|
|
|
|
|
|
|
|
|
|
|
|
PENSION PLAN
COSTS
|
|
|
(10)
|
|
(0.0)
|
|
(9)
|
|
(0.0)
|
|
|
MARK TO MARKET GAIN
ON OCADO SECURITIES
|
|
36
|
|
0.1
|
|
-
|
|
-
|
|
|
GAIN ON SALE OF
BUSINESS
|
|
|
1,771
|
|
4.7
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS BEFORE
INCOME TAX EXPENSE
|
|
2,634
|
|
7.0
|
|
445
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX
EXPENSE
|
|
|
616
|
|
1.6
|
|
148
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
INCLUDING NONCONTROLLING INTERESTS
|
|
2,018
|
|
5.4
|
|
297
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE
TO
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCONTROLLING
INTERESTS
|
|
(8)
|
|
-
|
|
(6)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
$
2,026
|
|
5.4%
|
|
$
303
|
|
0.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
|
|
|
|
|
|
|
|
|
|
|
PER BASIC COMMON
SHARE
|
|
$
2.39
|
|
|
|
$
0.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE NUMBER
OF COMMON SHARES USED IN
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
CALCULATION
|
|
|
839
|
|
|
|
914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
|
|
|
|
|
|
|
|
|
|
|
PER DILUTED COMMON
SHARE
|
|
$
2.37
|
|
|
|
$
0.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE NUMBER
OF COMMON SHARES USED IN
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED
CALCULATION
|
|
846
|
|
|
|
925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIVIDENDS DECLARED
PER COMMON SHARE
|
|
$
0.125
|
|
|
|
$
0.120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
Certain percentages
may not sum due to rounding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
The Company defines
First-In First-Out (FIFO) gross profit as sales minus merchandise
costs, including advertising, warehousing and transportation, but
excluding the Last-In First-Out (LIFO) charge.
|
|
|
|
The Company defines
FIFO gross margin, as described in the earnings release, as FIFO
gross profit divided by sales.
|
|
|
|
The Company defines
FIFO operating profit as operating profit excluding the LIFO
charge.
|
|
|
|
The Company defines
FIFO operating margin, as described in the earnings release, as
FIFO operating profit divided by sales.
|
|
|
|
The above FIFO
financial metrics are important measures used by management to
evaluate operational effectiveness. Management believes these
FIFO financial metrics are useful to investors and analysts because
they measure our day-to-day operational effectiveness.
|
|
|
|
The Company defines
free cash flow as net cash provided by operating activities minus
net cash used by investing activities, excluding merger and
acquisition activities. Free cash flow is an important
measure used by management to evaluate available funding for share
repurchases, dividends, debt levels and other strategic
investments. Management believes free cash flow is a useful
metric to investors and analysts because it demonstrates our
ability to make share repurchases and other strategic investments,
pay dividends and manage debt levels.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Merchandise costs and
operating, general and administrative expenses exclude depreciation
and amortization expense and rent expense which are included in
separate expense lines.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
LIFO charges of $15
and $25 were recorded in the first quarters of 2018 and 2017,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
Certain prior-year
amounts have been reclassified to conform to current-year
presentation. In the first quarter of 2018, the Company
adopted ASU 2017-07, "Compensation – Retirement Benefits (Topic 715
): Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost." and restated prior periods
for the adoption.
|
Table
2.
|
THE KROGER
CO.
|
CONSOLIDATED
BALANCE SHEETS
|
(in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May
26,
|
|
May 20,
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
$
315
|
|
$
335
|
|
|
Temporary cash
investments
|
|
|
376
|
|
21
|
|
|
Store deposits
in-transit
|
|
|
|
1,053
|
|
952
|
|
|
Receivables
|
|
|
|
|
1,583
|
|
1,394
|
|
|
Inventories
|
|
|
|
|
6,387
|
|
6,359
|
|
|
Assets held for
sale
|
|
|
|
42
|
|
-
|
|
|
Prepaid and other
current assets
|
|
|
530
|
|
477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
|
10,286
|
|
9,538
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
21,184
|
|
21,133
|
|
Intangibles,
net
|
|
|
|
|
1,100
|
|
1,141
|
|
Goodwill
|
|
|
|
|
2,936
|
|
3,031
|
|
Other
assets
|
|
|
|
|
1,055
|
|
956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
|
|
$
36,561
|
|
$
35,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREOWNERS' EQUITY
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
Current portion of
long-term debt including obligations
|
|
|
|
|
|
|
under capital leases
and financing obligations
|
|
$
2,242
|
|
$
1,854
|
|
|
Trade accounts
payable
|
|
|
|
6,202
|
|
6,078
|
|
|
Accrued salaries and
wages
|
|
|
1,011
|
|
1,135
|
|
|
Liabilities held for
sale
|
|
|
|
18
|
|
-
|
|
|
Other current
liabilities
|
|
|
|
4,003
|
|
3,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
|
13,476
|
|
12,515
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
including obligations under capital leases
|
|
|
|
|
|
|
and financing
obligations
|
|
|
12,059
|
|
11,590
|
|
Deferred income
taxes
|
|
|
|
1,590
|
|
2,181
|
|
Pension and
postretirement benefit obligations
|
|
789
|
|
1,552
|
|
Other long-term
liabilities
|
|
|
|
1,706
|
|
1,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
|
29,620
|
|
29,664
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareowners'
equity
|
|
|
|
|
6,941
|
|
6,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Shareowners' Equity
|
|
$
36,561
|
|
$
35,799
|
|
|
|
|
|
|
|
|
|
|
|
|
Total common shares
outstanding at end of period
|
|
796
|
|
900
|
|
Total diluted shares
year-to-date
|
|
|
846
|
|
925
|
|
Table
3.
|
THE KROGER
CO.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR-TO-DATE
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net earnings
including noncontrolling interests
|
|
$
2,018
|
|
$
297
|
|
|
Adjustments to
reconcile net earnings including noncontrolling
|
|
|
|
|
|
|
|
interests to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
741
|
|
736
|
|
|
|
|
LIFO
charge
|
|
|
|
15
|
|
25
|
|
|
|
|
Stock-based employee
compensation
|
|
45
|
|
53
|
|
|
|
|
Expense for
Company-sponsored pension plans
|
|
27
|
|
35
|
|
|
|
|
Deferred income
taxes
|
|
|
17
|
|
6
|
|
|
|
|
Other
|
|
|
|
-
|
|
(50)
|
|
|
|
|
Gain on sale of
business
|
|
|
(1,771)
|
|
-
|
|
|
|
|
Mark to market gain
on Ocado securities
|
|
(36)
|
|
-
|
|
|
|
|
Changes in operating
assets and liabilities, net
|
|
|
|
|
|
|
|
|
|
of effects from
mergers and disposals of businesses:
|
|
|
|
|
|
|
|
|
|
|
Store deposits
in-transit
|
|
|
108
|
|
(42)
|
|
|
|
|
|
|
Receivables
|
|
|
(123)
|
|
149
|
|
|
|
|
|
|
Inventories
|
|
|
134
|
|
177
|
|
|
|
|
|
|
Prepaid and other
current assets
|
|
307
|
|
409
|
|
|
|
|
|
|
Trade accounts
payable
|
|
|
345
|
|
260
|
|
|
|
|
|
|
Accrued
expenses
|
|
|
43
|
|
(86)
|
|
|
|
|
|
|
Income taxes
receivable and payable
|
|
558
|
|
153
|
|
|
|
|
|
|
Other
|
|
|
|
(60)
|
|
187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
2,368
|
|
2,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
Payments for property
and equipment
|
|
|
(758)
|
|
(817)
|
|
|
Proceeds from sale of
assets
|
|
|
47
|
|
83
|
|
|
Payments for
acquisitions, net of cash acquired
|
|
(44)
|
|
-
|
|
|
Net proceeds from
sale of business
|
|
|
2,142
|
|
-
|
|
|
Other
|
|
|
|
|
|
(38)
|
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided
(used) by investing activities
|
|
1,349
|
|
(744)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Proceeds from
issuance of long-term debt
|
|
1,010
|
|
1
|
|
|
Payments on long-term
debt
|
|
|
(214)
|
|
(84)
|
|
|
Net payments on
commercial paper
|
|
(2,120)
|
|
(545)
|
|
|
Dividends
paid
|
|
|
|
(110)
|
|
(111)
|
|
|
Proceeds from
issuance of capital stock
|
|
10
|
|
17
|
|
|
Treasury stock
purchases
|
|
|
(1,809)
|
|
(772)
|
|
|
Other
|
|
|
|
|
|
(140)
|
|
(37)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by
financing activities
|
|
|
(3,373)
|
|
(1,531)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH
AND TEMPORARY
|
|
|
|
|
|
|
CASH
INVESTMENTS
|
|
|
344
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND TEMPORARY
CASH INVESTMENTS:
|
|
|
|
|
|
|
BEGINNING OF
YEAR
|
|
|
347
|
|
322
|
|
|
END OF
YEAR
|
|
|
|
$
691
|
|
$
356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
capital investments:
|
|
|
|
|
|
|
|
Payments for property
and equipment
|
|
|
$
(758)
|
|
$
(817)
|
|
|
Changes in
construction-in-progress payables
|
|
(91)
|
|
(104)
|
|
|
|
Total capital
investments
|
|
|
$
(849)
|
|
$
(921)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disclosure of cash
flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the
year for interest
|
|
$
124
|
|
$
188
|
|
|
|
Cash paid during the
year for income taxes
|
|
$
36
|
|
$
11
|
|
Table 4.
Supplemental Sales Information
|
(in millions, except
percentages)
|
(unaudited)
|
|
Items identified
below should not be considered as alternatives to sales or any
other GAAP measure of performance. Identical sales is an
industry-specific measure and it is important to review it in
conjunction with Kroger's financial results reported in accordance
with GAAP. Other companies in our industry may calculate
identical sales differently than Kroger does, limiting the
comparability of the measure.
|
|
|
|
|
|
|
IDENTICAL SALES
(a)
|
|
|
|
|
|
|
|
FIRST
QUARTER
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
EXCLUDING
FUEL
|
$
30,839
|
|
$
30,268
|
|
|
|
|
|
|
|
|
EXCLUDING
FUEL
|
1.9%
|
|
-0.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Kroger defines
identical sales as sales made directly to the customer. Supermarket
sales are included as identical when a location has been open
without expansion or relocation for five full
quarters.
|
|
Table 5.
Reconciliation of Net Total Debt and
|
Net Earnings
Attributable to The Kroger Co. to Adjusted EBITDA
|
(in millions, except
for ratio)
|
(unaudited)
|
|
The items identified
below should not be considered an alternative to any GAAP measure
of performance or access to liquidity. Net total debt to
adjusted EBITDA is an important measure used by management to
evaluate the Company's access to liquidity. The items below
should be reviewed in conjunction with Kroger's financial results
reported in accordance with GAAP.
|
|
The following table
provides a reconciliation of net total debt.
|
|
|
|
|
|
|
|
|
|
|
May
26,
|
|
May 20,
|
|
|
|
|
2018
|
|
2017
|
|
Change
|
|
|
|
|
|
|
|
Current portion of
long-term debt including obligations
|
|
|
|
|
|
|
under
capital leases and financing obligations
|
|
$
2,242
|
|
$
1,854
|
|
$
388
|
Long-term debt
including obligations under capital leases
|
|
|
|
|
|
|
and financing
obligations
|
|
12,059
|
|
11,590
|
|
469
|
|
|
|
|
|
|
|
Total debt
|
|
14,301
|
|
13,444
|
|
857
|
|
|
|
|
|
|
|
Less: Temporary cash
investments
|
|
376
|
|
21
|
|
355
|
Less: Prepaid
employee benefits
|
|
2
|
|
2
|
|
-
|
|
|
|
|
|
|
|
Net total debt
|
|
$
13,923
|
|
$
13,421
|
|
$
502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table
provides a reconciliation from net earnings attributable to The
Kroger Co. to adjusted EBITDA, as defined in the Company's credit
agreement, on a rolling four quarter 52 week basis.
|
|
|
|
Rolling Four
Quarters Ended
|
|
|
|
|
May
26,
|
|
May 20,
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to The Kroger Co.
|
|
$
3,630
|
|
$
1,582
|
|
|
LIFO (credit)
charge
|
|
(18)
|
|
29
|
|
|
Depreciation and
amortization
|
|
2,441
|
|
2,382
|
|
|
Interest
expense
|
|
614
|
|
544
|
|
|
Income tax
expense
|
|
63
|
|
755
|
|
|
Adjustments for
pension plan agreements
|
|
338
|
|
310
|
|
|
Adjustment for
voluntary retirement offering
|
|
-
|
|
184
|
|
|
Adjustment for Kroger
Specialty Pharmacy goodwill impairment
|
|
110
|
|
-
|
|
|
Adjustment for
company-sponsored pension plan termination
|
|
502
|
|
-
|
|
|
Adjustment for mark
to market gain on Ocado securities
|
|
(36)
|
|
-
|
|
|
Adjustment for gain
on sale of convenience store business
|
|
(1,771)
|
|
-
|
|
|
53rd week EBITDA
adjustment
|
|
(131)
|
|
-
|
|
|
Other
|
|
(13)
|
|
(18)
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
$
5,729
|
|
$
5,768
|
|
|
|
|
|
|
|
|
|
Net total debt to
adjusted EBITDA ratio on a 52 week basis
|
|
2.43
|
|
2.33
|
|
|
Table 6. Net
Earnings Per Diluted Share Excluding the Adjustment
Items
|
(in millions, except
per share amounts)
|
(unaudited)
|
|
The purpose of this
table is to better illustrate comparable operating results from our
ongoing business, after removing the effects on net earnings per
diluted common share for certain items described below. Items
identified in this table should not be considered alternatives to
net earnings attributable to The Kroger Co. or any other GAAP
measure of performance. These items should not be reviewed in
isolation or considered substitutes for the Company's financial
results as reported in accordance with GAAP. Due to the
nature of these items, as further described below, it is important
to identify these items and to review them in conjunction with the
Company's financial results reported in accordance with
GAAP.
|
|
|
The following table
summarizes items that affected the Company's financial results
during the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST
QUARTER
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
$
|
2,026
|
|
$
|
303
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTMENTS FOR
PENSION PLAN AGREEMENTS (a)(b)
|
|
(10)
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTMENT FOR
VOLUNTARY RETIREMENT OFFERING (a)(c)
|
|
-
|
|
117
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTMENT FOR GAIN
ON SALE OF CONVENIENCE STORE BUSINESS (a)(d)
|
|
(1,352)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTMENT FOR MARK
TO MARKET GAIN ON OCADO SECURITIES (a)(e)
|
|
(27)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTMENT FOR
DEPRECIATION RELATED TO HELD FOR SALE ASSETS (a)(f)
|
|
(11)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
2018 AND 2017
ADJUSTMENT ITEMS
|
|
|
(1,400)
|
|
243
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
|
|
|
|
|
EXCLUDING THE
ADJUSTMENT ITEMS ABOVE
|
|
$
|
626
|
|
$
|
546
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
|
|
|
|
|
PER DILUTED COMMON
SHARE
|
|
|
$
|
2.37
|
|
$
|
0.32
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTMENTS FOR
PENSION PLAN AGREEMENTS (g)
|
|
(0.01)
|
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTMENT FOR
VOLUNTARY RETIREMENT OFFERING (g)
|
|
-
|
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTMENT FOR GAIN
ON SALE OF CONVENIENCE STORE BUSINESS (g)
|
|
(1.59)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTMENT FOR MARK
TO MARKET GAIN ON OCADO SECURITIES (g)
|
|
(0.03)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTMENT FOR
DEPRECIATION RELATED TO HELD FOR SALE ASSETS (g)
|
|
(0.01)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
2018 AND 2017
ADJUSTMENT ITEMS
|
|
|
(1.64)
|
|
0.26
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO. PER
|
|
|
|
|
|
|
DILUTED COMMON SHARE
EXCLUDING THE ADJUSTMENT ITEMS ABOVE
|
|
$
|
0.73
|
|
$
|
0.58
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE NUMBER
OF COMMON SHARES USED IN
|
|
|
|
|
|
|
DILUTED
CALCULATION
|
|
|
846
|
|
925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The amounts presented
represent the after-tax effect of each adjustment.
|
|
|
|
|
|
|
|
|
|
|
(b)
|
The pre-tax
adjustments for pension plan agreements were ($13) and $199 in the
first quarters of 2018 and 2017, respectively.
|
|
|
|
|
|
|
|
|
|
|
(c)
|
The pre-tax
adjustment for voluntary retirement offering was $184.
|
|
|
|
|
|
|
|
|
|
|
(d)
|
The pre-tax
adjustment for gain on sale of convenience store business was
($1,771).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e)
|
The pre-tax
adjustment for mark to market gain on securities was
($36).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(f)
|
The pre-tax
adjustment for depreciation related to held for sale assets was
($14).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(g)
|
The amounts presented
represent the net earnings per diluted common share effect of each
adjustment.
|
|
|
|
|
|
|
|
|
|
|
Note:
|
2018 First Quarter
Adjustment Items include adjustments for pension plan agreements,
the gain on sale of convenience store business, the mark to market
gain on Ocado securities and depreciation related to held for sale
assets.
|
|
|
|
|
|
|
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2017 First Quarter
Adjustment Items include adjustments for pension plan agreements
and the voluntary retirement offering.
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View original content with
multimedia:http://www.prnewswire.com/news-releases/kroger-reports-first-quarter-2018-results-300670087.html
SOURCE The Kroger Co.