CINCINNATI, March 5, 2015 /PRNewswire/ --
Fiscal 2014 Highlights
- Achieved 45th consecutive quarter of positive
identical supermarket sales growth, excluding fuel
- Exceeded commitment to slightly expand FIFO operating margin,
excluding fuel, on a rolling four quarters basis2
- Achieved 10th consecutive year of market share
growth
- Reduced operating expenses as a rate of sales for
10th consecutive year2
- Improved return on invested capital and increased capital
investment
- Achieved 2.00 – 2.20 net total debt to adjusted EBITDA ratio
earlier than anticipated
- Created nearly 25,000 new jobs
- Continued successful integration with Harris Teeter
- Completed merger with Vitacost.com
- Invested in The Kroger Co. Foundation to support future
community investments
The Kroger Co. (NYSE: KR) today reported fourth quarter net
earnings of $1.04 per diluted share
and identical supermarket sales growth, without fuel, of
6.0%. Fiscal 2014 GAAP net earnings were $3.44 per diluted share1, and
identical supermarket sales growth, without fuel, was 5.2%.
In addition to strong core operating results, an increase in
fuel margin per gallon and a lower-than-estimated LIFO charge
contributed to the company's net earnings per diluted share results
in the fourth quarter.
Comments from Chairman and CEO Rodney
McMullen
"2014 was an outstanding year by all measures. Kroger captured
more share of the massive food market, delivered on our commitments
and invested to grow our business.
"While improved fuel margins contributed to our results in the
second half of the year, our core operating performance without
fuel shows that our associates are improving our relationship with
customers in ways that grow loyalty and generate strong shareholder
returns.
"Kroger's consistent Customer 1st performance is
expanding our business, creating opportunity for associates and
generating value for our shareholders. We created nearly 25,000 new
jobs last year, and I am especially proud that our commitment to
hiring veterans resulted in more than 6,000 veterans joining our
company last year."
Items Affecting 2014 Results
Kroger's 2014 net earnings results are adjusted for two
items:
- Charges incurred in the first quarter related to the
restructuring of certain pension obligations to help stabilize
associates' future benefits.
- Certain tax items that benefited the third quarter.
Adjusted 2014 results include the effect of the following
items:
- Low retail fuel prices and unusually-high fuel margins.
- A LIFO charge that was significantly higher in 2014 than in
2013.
- A $55 million contribution to the
UFCW Consolidated Pension Plan in the fourth quarter.
- An $85 million contribution to
The Kroger Co. Foundation in 2014, $60
million of which was in the fourth quarter. This will allow
Kroger to continue to support causes such as hunger relief, breast
cancer awareness, the military and their families, and local
community organizations.
Details of Fourth Quarter 2014 Results
Kroger's operating results include Harris Teeter in fourth quarter and fiscal 2014
but not fourth quarter and fiscal 2013, which affects
year-over-year comparisons.
Kroger reported total sales of $25.2
billion in the fourth quarter, which ended January 31, 2015. Total sales increased by
8.5%. Total sales excluding fuel increased by
14.2%.
Net earnings for the fourth quarter totaled $518 million, or $1.04 per diluted share.
The company recorded a LIFO charge of $9
million, compared to a $10
million LIFO charge in the same quarter last year.
FIFO gross margin was comparable to the same period last year,
excluding retail fuel operations.
Total operating expenses – excluding retail fuel operations, the
contributions to the pension and foundation described above, and
the 2013 adjustment items – decreased 15 basis points as a percent
of sales compared to the same period last year.
Fiscal Year 2014 Results
Kroger reported total sales of $108.5
billion in 2014, an increase of 10.3%. Total sales excluding
fuel increased 12.9% over the prior year.
Net earnings for 2014 totaled $1.73
billion, or $3.44 per diluted
share. Excluding the 2014 adjustment items, adjusted net
earnings for fiscal 2014 totaled $1.77
billion, or $3.52 per diluted
share.
Kroger's LIFO charge for 2014 was $147
million, significantly higher than 2013 due to higher
product costs.
FIFO gross margin for 2014, excluding retail fuel operations,
declined 3 basis points.
Total operating expenses for 2014 – excluding retail fuel
operations, the contributions to the pension and foundation
described above, and the 2013 adjustment items – decreased 13 basis
points as a percent of sales compared to the prior year.
FIFO operating margin for 2014 – excluding retail fuel
operations, the contributions to the pension and foundation
described above, and the 2013 adjustment items –increased 10 basis
points compared to the prior year.
Fiscal Year 2014 Job Creation
Kroger's total active workforce grew by nearly 25,000 during
2014. More than 90 percent of the new jobs are in the
company's supermarket divisions, ranging from full-time department
heads and assistant store managers to part-time courtesy clerks and
cashiers.
"Kroger is a great place to start and build a career. We
continue to have thousands of openings for friendly, hard-working
associates who are passionate about making a difference for our
customers," said Mr. McMullen, whose career began as a part-time
stock clerk at a Kroger store in Lexington, KY, noting that many store and
executive managers started with entry level jobs in the company's
family of stores.
Over the last seven years, Kroger has created more than 65,000
new jobs. This figure does not include increases due to the
company's mergers. Kroger and its subsidiaries today employ
nearly 400,000 associates.
The company hired more than 6,000 veterans in 2014, and has
hired more than 29,000 veterans since 2009.
Financial Strategy
Kroger's long-term financial strategy continues to be to use
cash flow from operations to maintain its current investment grade
debt rating, repurchase shares, fund its dividend, and increase
capital investments.
Kroger achieved its 2.00 – 2.20 net total debt to adjusted
EBITDA ratio objective earlier than anticipated due to strong
fiscal 2014 operating results. As of the close of the fourth
quarter, net total debt to adjusted EBITDA ratio decreased to 2.15,
compared to 2.43 during the same period last year (see Table
5).
Kroger's strong financial position allowed the company to return
more than $1.6 billion to
shareholders through share buybacks and dividends in 2014. During
the fiscal year, Kroger repurchased 28.4 million common shares for
a total investment of $1.3
billion.
Capital investments, excluding mergers, acquisitions and
purchases of leased facilities, totaled $2.8
billion for the year, compared to $2.3 billion in 2013.
Kroger's strong EBITDA performance resulted in a return on
invested capital for 2014 of 13.74%, compared to 13.43% for
2013.
Fiscal 2015 Annual Guidance
Kroger anticipates identical supermarket sales growth, excluding
fuel, of approximately 3.0% to 4.0% for 2015. This range
takes into account the expectation of lower inflation during the
year.
Full-year net earnings for 2015 are expected to range from
$3.80 to $3.90 per diluted share.
This is consistent with the company's long-term net earnings per
diluted share growth rate of 8 – 11%, growing off of 2014 adjusted
earnings of $3.52 per diluted share.
Shareholder return will be further enhanced by a dividend which is
expected to increase over time.
For 2015, Kroger expects fuel margins to return to historical
averages, a lower LIFO charge, and no comparable contributions to
the pension and foundation; as a result, the company expects to
achieve near the middle of the guidance range.
The company expects capital investments, excluding mergers,
acquisitions and purchases of leased facilities, to be in the
$3.0 to $3.3 billion range for
2015.
Kroger, one of the world's largest retailers, employs nearly
400,000 associates who serve customers in 2,625 supermarkets and
multi-department stores in 34 states and the District of Columbia under two dozen local
banner names including Kroger, City Market, Dillons, Food 4 Less,
Fred Meyer, Fry's, Harris Teeter, Jay C, King Soopers, QFC, Ralphs
and Smith's. The company also operates 782 convenience
stores, 326 fine jewelry stores, 1,330 supermarket fuel centers and
37 food processing plants in the U.S. Recognized by Forbes as
the most generous company in America, Kroger supports hunger
relief, breast cancer awareness, the military and their families,
and more than 30,000 schools and community organizations. Kroger
contributes food and funds equal to 200 million meals a year
through more than 80 Feeding America food bank partners. A leader
in supplier diversity, Kroger is a proud member of the Billion
Dollar Roundtable and the U.S. Hispanic Chamber's Million
Dollar Club.
--------------------------------------------------------------------------------
Note: Fuel sales have historically had a low FIFO 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 retail fuel operations.
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 "expect,"
"anticipate," "believe," "guidance," "plans," "committed," "goal,"
"will" and "continue." 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:
- Our ability to achieve identical 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 us;
pricing and promotional activities of existing and new competitors,
including non-traditional competitors, and the aggressiveness of
that competition; our 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 our logistics operations; trends in consumer spending; the
extent to which our customers exercise caution in their purchasing
in response to economic conditions; the inconsistent pace of the
economic recovery; changes in inflation or deflation in product and
operating costs; stock repurchases; our ability to retain pharmacy
sales from third party payors; consolidation in the healthcare
industry, including pharmacy benefit managers; our 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 our future growth plans; and the
successful integration of Harris
Teeter. Our ability to achieve sales and earnings
goals may also be affected by our ability to manage the factors
identified above.
- During the first three quarters of each fiscal year, the
company's LIFO charge and the recognition of LIFO expense is
affected primarily by estimated year-end changes in product costs.
The fiscal year LIFO charge is affected primarily by changes in
product costs at year-end.
- Our ability to use cash flow to continue to maintain our
investment grade debt rating and repurchase shares, fund dividends,
and increase capital investments, could be affected by
unanticipated increases in net total debt, our inability to
generate cash flow at the levels anticipated, and our failure to
generate expected earnings.
- Our capital investments could differ from our estimate if we
are unsuccessful in acquiring suitable sites for new stores, if
development costs vary from those budgeted, if our logistics and
technology or store projects are not completed on budget or within
the time frame projected, or if economic conditions fail to
improve, or worsen.
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 March 5, 2015 at ir.kroger.com. An
on-demand replay of the webcast will be available from
approximately 1 p.m. (ET) Thursday, March
5 through Thursday, March 19,
2015.
1 See Table 6 for a reconciliation of non-GAAP to
GAAP results
2 Excludes FY 2013 and 2014 adjustments and certain
contributions as described in this press release
4th Quarter and Fiscal Year 2014 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 Adjustment Items
- Return on Invested Capital
Table
1.
|
THE KROGER
CO.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in millions, except
per share amounts)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOURTH
QUARTER
|
|
YEAR-TO-DATE
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SALES
|
|
$ 25,207
|
|
100.0%
|
|
$ 23,222
|
|
100.0%
|
|
$ 108,465
|
|
100.0%
|
|
$ 98,375
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MERCHANDISE COSTS,
INCLUDING ADVERTISING,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WAREHOUSING AND
TRANSPORTATION (a),
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AND LIFO CHARGE
(b)
|
|
19,547
|
|
77.6
|
|
18,397
|
|
79.2
|
|
85,512
|
|
78.8
|
|
78,138
|
|
79.4
|
OPERATING, GENERAL AND
ADMINISTRATIVE (a)
|
|
4,119
|
|
16.3
|
|
3,558
|
|
15.3
|
|
17,161
|
|
15.8
|
|
15,196
|
|
15.5
|
RENT
|
|
162
|
|
0.6
|
|
147
|
|
0.6
|
|
707
|
|
0.7
|
|
613
|
|
0.6
|
DEPRECIATION AND
AMORTIZATION
|
|
467
|
|
1.9
|
|
402
|
|
1.7
|
|
1,948
|
|
1.8
|
|
1,703
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
PROFIT
|
|
912
|
|
3.6
|
|
718
|
|
3.1
|
|
3,137
|
|
2.9
|
|
2,725
|
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST
EXPENSE
|
|
115
|
|
0.5
|
|
107
|
|
0.5
|
|
488
|
|
0.5
|
|
443
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS BEFORE
INCOME TAX EXPENSE
|
|
797
|
|
3.2
|
|
611
|
|
2.6
|
|
2,649
|
|
2.4
|
|
2,282
|
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX
EXPENSE
|
|
274
|
|
1.1
|
|
184
|
|
0.8
|
|
902
|
|
0.8
|
|
751
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS INCLUDING
NONCONTROLLING INTERESTS
|
|
523
|
|
2.1
|
|
427
|
|
1.8
|
|
1,747
|
|
1.6
|
|
1,531
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCONTROLLING
INTERESTS
|
|
5
|
|
0.0
|
|
5
|
|
0.0
|
|
19
|
|
0.0
|
|
12
|
|
0.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
$ 518
|
|
2.1%
|
|
$ 422
|
|
1.8%
|
|
$ 1,728
|
|
1.6%
|
|
$ 1,519
|
|
1.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER BASIC COMMON
SHARE
|
|
$ 1.06
|
|
|
|
$ 0.82
|
|
|
|
$ 3.49
|
|
|
|
$ 2.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE NUMBER
OF COMMON SHARES USED IN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
CALCULATION
|
|
486
|
|
|
|
511
|
|
|
|
490
|
|
|
|
514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER DILUTED COMMON
SHARE
|
|
$ 1.04
|
|
|
|
$ 0.81
|
|
|
|
$ 3.44
|
|
|
|
$ 2.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE NUMBER
OF COMMON SHARES USED IN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED
CALCULATION
|
|
493
|
|
|
|
517
|
|
|
|
497
|
|
|
|
520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIVIDENDS DECLARED PER
COMMON SHARE
|
|
$ 0.185
|
|
|
|
$ 0.165
|
|
|
|
$ 0.700
|
|
|
|
$ 0.630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
Certain per share
amounts and 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 $9
and $10 were recorded in the fourth quarter of 2014 and 2013,
respectively. For the year to date period, LIFO charges of
$147 and $52 were recorded for 2014 and 2013,
respectively.
|
Table
2.
|
THE KROGER
CO.
|
CONSOLIDATED
BALANCE SHEETS
|
(in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
31,
|
|
February
1,
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
$
268
|
|
$
260
|
|
|
Temporary cash
investments
|
|
|
-
|
|
141
|
|
|
Store deposits
in-transit
|
|
|
|
988
|
|
958
|
|
|
Receivables
|
|
|
|
|
1,266
|
|
1,116
|
|
|
Inventories
|
|
|
|
|
5,688
|
|
5,651
|
|
|
Prepaid and other
current assets
|
|
|
701
|
|
704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
|
8,911
|
|
8,830
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
17,912
|
|
16,893
|
|
Intangibles,
net
|
|
|
|
|
757
|
|
702
|
|
Goodwill
|
|
|
|
|
2,304
|
|
2,135
|
|
Other
assets
|
|
|
|
|
672
|
|
721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
|
|
$ 30,556
|
|
$ 29,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREOWNERS' EQUITY
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
Current portion of
long-term debt including obligations
|
|
|
|
|
|
|
under capital leases
and financing obligations
|
|
$ 1,885
|
|
$ 1,657
|
|
|
Trade accounts
payable
|
|
|
|
5,052
|
|
4,881
|
|
|
Accrued salaries and
wages
|
|
|
1,291
|
|
1,150
|
|
|
Deferred income
taxes
|
|
|
|
287
|
|
248
|
|
|
Other current
liabilities
|
|
|
|
2,888
|
|
2,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
|
11,403
|
|
10,705
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
including obligations under capital leases
|
|
|
|
|
and financing
obligations
|
|
|
|
|
|
|
|
|
Face-value of
long-term debt including obligations under
|
|
|
|
|
|
|
capital leases and
financing obligations
|
|
9,771
|
|
9,654
|
|
|
Adjustment to reflect
fair-value interest rate hedges
|
|
-
|
|
(1)
|
|
|
Long-term debt
including obligations under capital leases
|
|
|
|
|
|
|
and financing
obligations
|
|
|
9,771
|
|
9,653
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income
taxes
|
|
|
|
1,209
|
|
1,381
|
|
Pension and
postretirement benefit obligations
|
|
1,463
|
|
901
|
|
Other long-term
liabilities
|
|
|
|
1,268
|
|
1,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
|
25,114
|
|
23,886
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareowners'
equity
|
|
|
|
|
5,442
|
|
5,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Shareowners' Equity
|
|
$ 30,556
|
|
$ 29,281
|
|
|
|
|
|
|
|
|
|
|
|
|
Total common shares
outstanding at end of period
|
|
486
|
|
508
|
|
Total diluted shares
year-to-date
|
|
497
|
|
520
|
|
Table
3.
|
THE KROGER
CO.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR-TO-DATE
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
Net earnings
including noncontrolling interests
|
|
$ 1,747
|
|
$ 1,531
|
|
Adjustments to
reconcile net earnings including noncontrolling
|
|
|
|
|
|
interests to net cash
provided by operating activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
1,948
|
|
1,703
|
|
LIFO charge
|
|
147
|
|
52
|
|
Stock-based employee
compensation
|
|
155
|
|
107
|
|
Expense for
Company-sponsored pension plans
|
|
54
|
|
74
|
|
Deferred income
taxes
|
|
73
|
|
72
|
|
Other
|
|
110
|
|
86
|
|
Changes in operating
assets and liabilities, net
|
|
|
|
|
|
of effects from
acquisitions of businesses:
|
|
|
|
|
|
Store deposits
in-transit
|
|
(27)
|
|
25
|
|
Receivables
|
|
(141)
|
|
(8)
|
|
Inventories
|
|
(147)
|
|
(131)
|
|
Prepaid and other
current assets
|
|
2
|
|
(49)
|
|
Trade accounts
payable
|
|
146
|
|
3
|
|
Accrued
expenses
|
|
208
|
|
77
|
|
Income taxes
receivable and payable
|
|
(68)
|
|
(47)
|
|
Other
|
|
(22)
|
|
(115)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
4,185
|
|
3,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
Payments for property
and equipment, including payments for lease buyouts
|
|
(2,831)
|
|
(2,330)
|
|
Proceeds
from sale of assets
|
|
37
|
|
24
|
|
Payments for
acquisitions
|
|
(252)
|
|
(2,344)
|
|
Other
|
|
(14)
|
|
(121)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by
investing activities
|
|
(3,060)
|
|
(4,771)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
Proceeds from
issuance of long-term debt
|
|
576
|
|
3,548
|
|
Payments on long-term
debt
|
|
(375)
|
|
(1,060)
|
|
Net borrowings
(payments) on commercial paper
|
|
25
|
|
(395)
|
|
Dividends
paid
|
|
(338)
|
|
(319)
|
|
Excess tax benefits
on stock-based awards
|
|
52
|
|
32
|
|
Proceeds from
issuance of capital stock
|
|
110
|
|
196
|
|
Treasury stock
purchases
|
|
(1,283)
|
|
(609)
|
|
Net increase
(decrease) in book overdrafts
|
|
(22)
|
|
193
|
|
Other
|
|
(3)
|
|
(32)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by
financing activities
|
|
(1,258)
|
|
1,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE
(DECREASE) IN CASH AND TEMPORARY
|
|
|
|
|
|
CASH
INVESTMENTS
|
|
(133)
|
|
163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND TEMPORARY
CASH INVESTMENTS:
|
|
|
|
|
|
BEGINNING OF
YEAR
|
|
401
|
|
238
|
|
END OF
YEAR
|
|
$ 268
|
|
$ 401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
capital investments:
|
|
|
|
|
|
|
Payments for property
and equipment, including payments for lease buyouts
|
|
$ (2,831)
|
|
$ (2,330)
|
|
Payments for lease
buyouts
|
|
|
135
|
|
108
|
|
Changes in
construction-in-progress payables
|
|
(56)
|
|
(83)
|
|
Total capital
investments, excluding lease buyouts
|
|
$ (2,752)
|
|
$ (2,305)
|
|
|
|
|
|
|
|
|
|
|
|
|
Disclosure of cash
flow information:
|
|
|
|
|
|
Cash paid during the
year for interest
|
|
$ 477
|
|
$ 401
|
|
Cash paid during the
year for income taxes
|
|
$ 941
|
|
$ 679
|
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 supermarket 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
supermarket sales differently than Kroger does, limiting the
comparability of the measure. These results include Harris Teeter
sales for stores that are identical as if they were part of Kroger
in the prior year.
|
|
|
|
|
|
|
|
|
|
|
IDENTICAL
SUPERMARKET SALES (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOURTH
QUARTER
|
|
YEAR-TO-DATE
|
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCLUDING FUEL
CENTERS
|
|
$ 22,728
|
|
$ 22,181
|
|
$ 97,323
|
|
$ 93,435
|
|
|
EXCLUDING FUEL
CENTERS
|
|
$ 20,234
|
|
$ 19,086
|
|
$ 82,987
|
|
$ 78,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCLUDING FUEL
CENTERS
|
|
2.5%
|
|
4.0%
|
|
4.2%
|
|
3.3%
|
|
|
EXCLUDING FUEL
CENTERS
|
|
6.0%
|
|
4.3%
|
|
5.2%
|
|
3.6%
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Kroger defines a
supermarket as identical when it 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.
|
|
|
|
|
|
|
|
|
|
January
31,
|
|
February
1,
|
|
|
|
|
2015
|
|
2014
|
|
Change
|
|
|
|
|
|
|
|
Current portion of
long-term debt including obligations
|
|
|
|
|
|
|
under
capital leases and financing obligations
|
|
$ 1,885
|
|
$ 1,657
|
|
$ 228
|
Face-value of
long-term debt including obligations under
|
|
|
|
|
|
|
capital
leases and financing obligations
|
|
9,771
|
|
9,654
|
|
117
|
Adjustment to reflect
fair-value interest rate hedges
|
|
-
|
|
(1)
|
|
1
|
|
|
|
|
|
|
|
Total debt
|
|
$ 11,656
|
|
$ 11,310
|
|
$ 346
|
|
|
|
|
|
|
|
Less: Temporary cash
investments
|
|
-
|
|
141
|
|
(141)
|
Less: Prepaid benefit
payments
|
|
275
|
|
275
|
|
-
|
|
|
|
|
|
|
|
Net total debt
|
|
$ 11,381
|
|
$ 10,894
|
|
$ 487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. The table below only includes Harris Teeter in
2014.
|
|
|
|
|
|
|
|
|
|
YEAR-TO-DATE
|
|
|
|
|
January
31,
|
|
February
1,
|
|
|
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to The Kroger Co.
|
|
$ 1,728
|
|
$ 1,519
|
|
|
LIFO
|
|
147
|
|
52
|
|
|
Depreciation and
amortization
|
|
1,948
|
|
1,703
|
|
|
Interest
expense
|
|
488
|
|
443
|
|
|
Income tax
expense
|
|
902
|
|
751
|
|
|
Adjustments for
pension plan agreements
|
|
87
|
|
-
|
|
|
Other
|
|
(7)
|
|
10
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
$ 5,293
|
|
$ 4,478
|
|
|
|
|
|
|
|
|
|
Net total debt to
adjusted EBITDA ratio
|
|
2.15
|
|
2.43
|
|
|
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. In 2014, these items include
the benefit from certain tax items and charges related to the
restructuring of certain pension obligations. In 2013, these
items included the benefit from certain tax items and charges
related to the merger with Harris Teeter.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOURTH
QUARTER
|
|
YEAR-TO-DATE
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
$ 518
|
|
$ 422
|
|
$ 1,728
|
|
$ 1,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BENEFIT FROM CERTAIN
TAX ITEMS (a)
|
|
-
|
|
-
|
|
(17)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTMENTS FOR
PENSION PLAN AGREEMENTS (a)(b)
|
|
-
|
|
-
|
|
56
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BENEFIT FROM CERTAIN
TAX ITEMS OFFSET BY HARRIS TEETER
|
|
|
|
|
|
|
|
|
|
|
MERGER CHARGES
(a)
|
|
|
-
|
|
(16)
|
|
-
|
|
(23)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
|
|
|
|
|
|
|
|
|
EXCLUDING THE
ADJUSTMENT ITEMS ABOVE
|
|
$ 518
|
|
$ 406
|
|
$ 1,767
|
|
$ 1,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
|
|
|
|
|
|
|
|
|
PER DILUTED COMMON
SHARE
|
|
|
$ 1.04
|
|
$ 0.81
|
|
$ 3.44
|
|
$ 2.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BENEFIT FROM CERTAIN
TAX ITEMS (c)
|
|
-
|
|
-
|
|
(0.03)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTMENTS FOR
PENSION PLAN AGREEMENTS (c)
|
|
-
|
|
-
|
|
0.11
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BENEFIT FROM CERTAIN
TAX ITEMS OFFSET BY HARRIS TEETER
|
|
|
|
|
|
|
|
|
|
|
MERGER CHARGES
(c)
|
|
|
-
|
|
(0.03)
|
|
-
|
|
(0.05)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO. PER
|
|
|
|
|
|
|
|
|
|
|
DILUTED COMMON SHARE
EXCLUDING THE ADJUSTMENT ITEMS ABOVE
|
|
$ 1.04
|
|
$ 0.78
|
|
$ 3.52
|
|
$ 2.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE NUMBER
OF COMMON SHARES USED IN
|
|
|
|
|
|
|
|
|
|
|
DILUTED
CALCULATION
|
|
|
493
|
|
517
|
|
497
|
|
520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The amounts presented
represent the after-tax effect of each adjustment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
The pre-tax
adjustment for the pension plan agreements was $87.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
The amounts presented
represent the net earnings per diluted common share effect of each
adjustment.
|
Table 7.
Return on Invested Capital
|
(in millions, except
percentages)
|
(unaudited)
|
|
|
Return on invested
capital should not be considered an alternative to any GAAP measure
of performance. Return on invested capital is an important
measure used by management to evaluate the Company's investment
returns on capital and its effectiveness in deploying assets.
Return on invested capital should not be reviewed in isolation or
considered as a substitute for the Company's financial results as
reported in accordance with GAAP. Other companies may
calculate return on invested capital differently than Kroger,
limiting the comparability of the measure.
|
|
|
|
|
|
|
|
|
|
|
The following table
provides a calculation of return on invested capital for 2014 and
2013. The calculation of the numerator in the table below
only includes Harris Teeter in 2014. The calculation of the
denominator excludes the assets and liabilities recorded as of
February 1, 2014 for Harris Teeter due to the merger being
completed at the end of 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR-TO-DATE
|
|
|
|
|
|
|
|
January
31,
|
|
February
1,
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
Return on Invested
Capital
|
|
|
|
|
Numerator
(a)
|
|
|
|
|
|
|
Operating
profit
|
$ 3,137
|
|
$ 2,725
|
|
|
|
LIFO
charge
|
147
|
|
52
|
|
|
|
Depreciation and
amortization
|
1,948
|
|
1,703
|
|
|
|
Rent
|
707
|
|
613
|
|
|
|
Adjustments for
pension plan agreements
|
87
|
|
-
|
|
|
|
Other
|
-
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating
income
|
$ 6,026
|
|
$ 5,109
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
(b)
|
|
|
|
|
|
|
Average total
assets
|
$ 29,919
|
|
$ 26,958
|
|
|
|
Average taxes
receivable (c)
|
(19)
|
|
(10)
|
|
|
|
Average LIFO reserve
(d)
|
1,197
|
|
1,124
|
|
|
|
Average accumulated
depreciation
|
16,057
|
|
14,991
|
|
|
|
Average trade
accounts payable
|
(4,967)
|
|
(4,683)
|
|
|
|
Average accrued
salaries and wages
|
(1,221)
|
|
(1,084)
|
|
|
|
Average other current
liabilities (e)
|
(2,780)
|
|
(2,544)
|
|
|
|
Adjustment for Harris
Teeter (f)
|
-
|
|
(1,618)
|
|
|
|
Rent * 8
(g)
|
5,656
|
|
4,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average invested
capital
|
$ 43,842
|
|
$ 38,038
|
|
|
|
|
|
|
|
|
|
|
|
Return on Invested
Capital
|
13.74%
|
|
13.43%
|
|
|
|
|
|
|
|
|
|
|
a)
|
Represents
year-to-date results for the periods noted.
|
|
|
|
|
|
|
|
|
|
|
b)
|
Represents the
average of amounts at the beginning and end of year.
|
|
|
|
|
|
|
|
|
|
|
c)
|
Taxes receivable is
recorded in the Consolidated Balance Sheet in
receivables.
|
|
|
|
|
|
|
|
|
|
|
d)
|
LIFO reserve is
recorded in the Consolidated Balance Sheet in
inventories.
|
|
|
|
|
|
|
|
|
|
|
e)
|
The calculation of
average other current liabilities excludes accrued income
taxes.
|
|
|
|
|
|
|
|
|
|
|
f)
|
Adjustment to remove
the assets and liabilities recorded at year end 2013 for Harris
Teeter.
|
|
|
|
|
|
|
|
|
|
|
g)
|
The factor of eight
estimates the hypothetical capitalization of our operating
leases.
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/kroger-reports-fourth-quarter-and-full-year-2014-results-300046050.html
SOURCE The Kroger Co.