CINCINNATI, March 4, 2021 /PRNewswire/ -- The Kroger Co.
(NYSE: KR) today reported its fourth quarter and fiscal year 2020
results.
Comments from Chairman and CEO Rodney
McMullen
"I am incredibly humbled by the strength of our associates and
what we continue to accomplish together. Our customers are at the
center of everything we do and we will continue to serve them as we
have since the beginning of the pandemic, through our leadership in
food and as a health partner, providing COVID-19 testing and
vaccines.
"Kroger continued to grow market share during the quarter. Our
ability to meet our customers' evolving needs is a testament to our
deep competitive moats, disciplined investments in our increasingly
robust digital capabilities, as well as our associates' relentless
focus on our customers. We finished fiscal year 2020 with strong
sales and earnings, as heightened demand for fresh, convenient food
and meal solutions across modalities, including in store, pick up
and home delivery, continued throughout the fourth quarter.
"Supported by our strong performance and cash position, we were
pleased to commit more than $2.5
billion to safeguard the environment our associates and
customers work and shop in and to reward associates, including
nearly $1 billion to better secure
pensions."
Fourth Quarter Financial Results
|
4Q20 ($ in
millions; except EPS)
|
4Q19 ($ in
millions; except EPS)
|
ID Sales* (Table
4)
|
10.6%
|
2.0%
|
EPS**
|
($0.10)
|
$0.40
|
Adjusted EPS
(Table 6)
|
$0.81
|
$0.57
|
Operating (Loss)
Profit**
|
($158)
|
$537
|
Adjusted FIFO
Operating
Profit (Table 7)
|
$837
|
$758
|
FIFO Gross Margin
Rate*
|
Decreased 6 basis
points
|
OG&A
Rate*
|
Decreased 7 basis
points
|
*without fuel and adjustment items, if applicable
** Includes a $989 million pre-tax
charge related to UFCW pension commitments and adjustment items, if
applicable
Total company sales were $30.7
billion in the fourth quarter, compared to $28.9 billion for the same period last year.
Excluding fuel and dispositions, sales grew 10.7%.
Gross margin was 22.9% of sales for the fourth quarter. The FIFO
gross margin rate, excluding fuel, decreased 6 basis points
compared to the same period last year, reflecting continued price
investments offset by growth in alternative profit streams and
sourcing benefits.
The LIFO credit for the fourth quarter was $84 million, compared to a LIFO charge of
$36 million for the same period last
year. The LIFO credit was primarily driven by fourth quarter
working capital improvements in pharmacy inventory and dairy
deflation.
The Operating, General & Administrative rate decreased 7
basis points, excluding fuel and adjustment items, which reflects
sales leverage and execution of cost savings initiatives, offset by
continued COVID-19 related investments to protect the health and
safety of associates, customers and communities and increased
incentive costs.
Rent and depreciation, excluding fuel, decreased 28 basis points
due to sales leverage.
As a result of the UFCW pension charge, the income tax rate was
a benefit for the fourth quarter of 2020 of 30.8%. This compared to
a rate of 18.3% for the same period last year which was lower than
our effective rate due to an increase in tax deductions.
Fiscal 2020 Financial Results
|
2020 ($ in
billions; except EPS)
|
2019 ($ in
billions; except EPS)
|
ID Sales* (Table
4)
|
14.1%
|
2.0%
|
EPS**
|
$3.27
|
$2.04
|
Adjusted EPS
(Table 6)
|
$3.47
|
$2.19
|
Operating
Profit**
|
$2.8
|
$2.3
|
Adjusted FIFO
Operating
Profit (Table 7)
|
$4.1
|
$3.0
|
FIFO Gross Margin
Rate*
|
Increased 14 basis
points
|
OG&A
Rate*
|
Decreased 6 basis
points
|
*without fuel and adjustment items, if applicable
** Includes a $989 million pre-tax
charge related to UFCW pension commitments and adjustment items, if
applicable
Total company sales were $132.5
billion in 2020, compared to $122.3
billion for the same period last year. Excluding fuel and
dispositions, total sales grew 14.2%.
Gross margin was 23.3% of sales for 2020. The FIFO gross margin
rate, excluding fuel, increased 14 basis points compared to the
same period last year. This increase was primarily driven by sales
leverage, growth in alternative profit streams, and sourcing
benefits, partially offset with continued price investments.
The LIFO credit for 2020 was $7
million, compared to a LIFO charge of $105 million in 2019. The LIFO credit was
primarily driven by fourth quarter working capital improvements in
pharmacy inventory and dairy deflation.
The Operating, General & Administrative rate decreased 6
basis points, excluding fuel and adjustment items, which reflects
sales leverage and execution of cost savings initiatives, offset by
continued COVID-19 related investments to protect the health and
safety of associates, customers and communities and increased
incentive costs.
Rent and depreciation, excluding fuel, decreased 31 basis points
due to sales leverage.
The income tax rate for 2020 was 23.2% compared to 23.7% for the
same period last year. The income tax rate is lower compared
to 2019 due to the unfavorable impact of the Lucky's Market
impairment charge in 2019.
Capital Allocation Strategy
Kroger reduced net total debt by $2.0
billion over the last four quarters. Kroger's net total debt
to adjusted EBITDA ratio is 1.75, compared to 2.48 a year ago
(Table 5). The company's net total debt to adjusted EBITDA ratio
target range is 2.30 to 2.50.
In total, Kroger returned $1.9
billion to shareholders in 2020. Kroger repurchased
$1.32 billion of shares in 2020 under
its board authorizations. Kroger increased the dividend by 13
percent, from 64¢ to 72¢ per year, marking the 14th
consecutive year of dividend increases, which resulted in a payout
of $534 million.
2021 Guidance
Comments from CFO Gary
Millerchip
"As a result of strong execution of our strategy, enabled by
continued investments in our customers and associates, we are
accelerating the momentum in our business. Looking ahead to 2021,
evaluating our performance using the two-year period of 2020 and
2021 more accurately measures this underlying momentum. We expect
our two-year identical sales stack*** to be in the range of 9% to
11%. In addition, we expect our adjusted net earnings per diluted
share and adjusted FIFO operating profit to have compounded annual
growth rates of between 12% and 16% and 5.4% and 8.5%,
respectively. Over the two years, this would result in total
shareholder return significantly above our previously communicated
target of 8-11%.
"Our 2021 guidance contemplates continued investments in
associates and customers plus ongoing COVID-19 related costs,
balanced with continued execution of cost savings initiatives and
growth in our alternative profit businesses.
"We remain committed to delivering strong and attractive total
shareholder return over the long term and expect our 2021 operating
profit guidance to represent a new, higher baseline from which we
will deliver total shareholder return of 8-11%. We look forward to
sharing more about our future growth plans at our upcoming investor
day."
Full Year 2021 Guidance
|
IDs
(%)
|
EPS
($)
|
Operating
Profit ($B)
|
Tax
Rate**
|
Cap Ex
($B)
|
Free Cash
Flow ($B)****
|
Adjusted*
|
(3.0%) -
(5.0%)
|
$2.75 -
$2.95
|
$3.3 -
$3.5
|
23%
|
$3.4 -
$3.6
|
$1.6 -
$1.8
|
2-Year
Basis***
|
9.1% -
11.1%
(Stack)
|
12% - 16%
(CAGR)
|
5.4% - 8.5%
(CAGR)
|
|
|
$2.9 -
$3.0
(Average)
|
* Without adjusted items, if applicable; Identical sales is
without fuel; Operating profit represents FIFO Operating Profit.
Kroger is unable to provide a full reconciliation of the GAAP and
non-GAAP measures used in 2021 guidance without unreasonable effort
because it is not possible to predict certain of our adjustment
items with a reasonable degree of certainty. This information is
dependent upon future events and may be outside of our control and
its unavailability could have a significant impact on 2021 GAAP
financial results.
** This rate reflects typical tax adjustments and does not reflect
changes to the rate from the completion of income tax audit
examinations, which cannot be predicted.
*** Identical sales, without fuel, guidance for 2-year basis
represents the sum of actual 2020 identical sales and 2021
guidance. The 2-year basis guidance items denoted with CAGR
represent the compounded annual growth rate utilizing 2019 as the
base year. Average free cash flow is the average of actual 2020
free cash flow and 2021 guidance.
**** 2021 free cash flow guidance includes a $300M payment of deferred payroll taxes. This
excludes planned payments related to the restructuring of
multi-employer pension plans.
Fourth Quarter 2020 Highlights
Customer Obsession
- Our Brands achieved its best year ever, exceeding
$26.2 billion in sales
- Simple Truth achieved a major milestone, exceeding $3 billion in annual sales for the first time and
launched 53 new items in the Plant Based collection
- Expanded to 2,223 Pickup locations and 2,472 Delivery
locations, covering 98% of Kroger households
- Expanded partnership with Ocado with plans to construct an
additional Customer Fulfillment Center in the Southwest
U.S. and leverage capabilities from its in-store fulfillment
solution with the best of Kroger's solutions to support the rapid
growth of pickup demand
- Kroger Precision Marketing was rated #1 for Targeting
Effectiveness, Measurement Capabilities and ability to drive CPG
Sales (tie) in a survey by the Path to Purchase Institute
- Kroger Health administered more than 665,000 COVID-19 vaccines
as of February 28th to
eligible populations and was selected to be part of the Biden's
Administration's Federal Retail Pharmacy Program. Additionally,
launched a new COVID-19 vaccine scheduling tool and hotline
- Celebrated first anniversary of brand launch, new logo design
and Fresh for Everyone campaign
Associate Experience
- Continued investment in Kroger associate wages has increased
Kroger's average hourly wage to $15.50 an hour, with average hourly rate over
$20 per hour with comprehensive
benefits factored in, benefits that many competitors don't
offer
- Invested nearly $1 billion to
secure pensions for over 30,000 associates
- Helping Hands Fund issued 5,722 grants in 2020 to assist
associates facing hardships
- Announced a $100
incentive for all associates who receive the COVID-19
vaccination
- Vaccinated 38,000 associates against COVID-19 as of
February 28th
- Invested approximately $275
million to reward associates and to protect them and
customers through the continued implementation of dozens of safety
measures during the fourth quarter
- More than 3,100 associates, 86% of whom are hourly, have taken
advantage of Kroger's best-in-class education assistance program in
2020 alone
Live Our Purpose
- The Kroger Co. Foundation announced recipients of the Racial
Equity Fund Build It Together grant challenge, an initiative
awarding $3 million in grants and
forging partnerships with innovating organizations to help build
more equitable, inclusive communities
- Introduced the founding members of Kroger's Diversity, Equity
& Inclusion Advisory Council, which will work closely with
senior leaders and associates to ensure the company continues to
create a more equitable future for the communities we serve
- Named one of the Best Places to Work for LGBTQ Equality for the
third consecutive year
- Named to the Dow Jones Sustainability North America Index
(DJSI) for the eighth consecutive year
- Recognized by Newsweek as one of America's Most Responsible
Companies of 2021
- Reduced total waste sent to landfill – including food waste –
by approximately 5% in 2020 through Zero Hunger | Zero Waste
initiatives
About Kroger
At The Kroger Co. (NYSE: KR), we are
Fresh for Everyone™ and dedicated to our Purpose: To Feed the
Human Spirit®. We are, across our family of companies, nearly half
a million associates who serve over 11 million customers daily
through a seamless shopping experience under a variety
of banner names. We are committed to creating
#ZeroHungerZeroWaste communities by 2025. To learn more about us,
visit our newsroom and investor relations site.
Kroger's fourth quarter 2020 ended on January 30, 2021.
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.
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. Such
statements are indicated by words or phrases such as "achieve,"
"believe," "contemplates," "continue," "deliver," "expect,"
"future," "guidance," "strategy," "target," "trends," and "will."
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" in our annual report on Form 10-K for our last
fiscal year and any subsequent filings, as well as the
following:
- Kroger's ability to achieve sales, earnings, incremental FIFO
operating profit, and adjusted free cash flow goals may be
affected by: COVID-19 related factors, risks and challenges,
including among others, the length of time that the pandemic
continues, the temporary inability of customers to shop due to
illness, quarantine, or other travel restrictions or financial
hardship, shifts in demand away from discretionary or higher priced
products to lower priced products, or stockpiling or similar
pantry-filling activities, reduced workforces which may be caused
by, but not limited to, the temporary inability of the workforce to
work due to illness, quarantine, or government mandates, temporary
store closures due to reduced workforces or government mandates, or
the availability and efficacy of a vaccine; 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,
changes in tariffs, and the unemployment rate; the effect that fuel
costs have on consumer spending; volatility of fuel margins;
changes in government-funded benefit programs and the extent and
effectiveness of any COVID-19 stimulus packages; 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 uncertainty of economic growth or
recession; 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 effect of
public health crises or other significant catastrophic events,
including the coronavirus; 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 our growth
strategy and value creation model, including continued cost
savings, growth of our alternative profit businesses, and widening
and deepening our strategic moats of fresh, our brands,
personalization, and seamless; and the successful integration of
merged companies and new partnerships. Our ability to achieve these
goals may also be affected by our ability to manage the factors
identified above. Our ability to execute our financial strategy may
be affected by our 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
broadcast live at 10 a.m. (ET) on
March 4, 2021 at ir.kroger.com.
An on-demand replay of the webcast will be available at
approximately 1 p.m. (ET) on Thursday, March
4, 2021.
Kroger will host its 2021 Investor Conference virtually at
ir.kroger.com at 9:00 a.m. (ET) on
March 31, 2021.
4th Quarter 2020 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
- Operating Profit Excluding the Adjustment Items
- Adjusted Free Cash Flow
Table
1.
|
THE KROGER
CO.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in millions, except
per share amounts)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOURTH
QUARTER
|
|
YEAR-TO-DATE
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SALES
|
|
|
|
|
$
30,737
|
|
100.0%
|
|
$
28,893
|
|
100.0%
|
|
$
132,498
|
|
100.0%
|
|
$
122,286
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MERCHANDISE COSTS,
INCLUDING ADVERTISING,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WAREHOUSING AND
TRANSPORTATION (a),
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AND LIFO CHARGE
(b)
|
|
|
23,691
|
|
77.1
|
|
22,507
|
|
77.9
|
|
101,597
|
|
76.7
|
|
95,294
|
|
77.9
|
|
|
OPERATING, GENERAL
AND ADMINISTRATIVE (a)
|
|
6,338
|
|
20.6
|
|
4,985
|
|
17.3
|
|
24,500
|
|
18.5
|
|
21,208
|
|
17.3
|
|
|
RENT
|
|
|
|
|
192
|
|
0.6
|
|
209
|
|
0.7
|
|
874
|
|
0.7
|
|
884
|
|
0.7
|
|
|
DEPRECIATION AND
AMORTIZATION
|
|
674
|
|
2.2
|
|
655
|
|
2.3
|
|
2,747
|
|
2.1
|
|
2,649
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
PROFIT (LOSS)
|
|
(158)
|
|
(0.5)
|
|
537
|
|
1.9
|
|
2,780
|
|
2.1
|
|
2,251
|
|
1.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST
EXPENSE
|
|
|
(106)
|
|
(0.3)
|
|
(140)
|
|
(0.5)
|
|
(544)
|
|
(0.4)
|
|
(603)
|
|
(0.5)
|
|
|
NON-SERVICE COMPONENT
OF COMPANY-SPONSORED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PENSION PLAN
COSTS
|
|
|
1
|
|
-
|
|
2
|
|
-
|
|
29
|
|
-
|
|
-
|
|
-
|
|
|
GAIN (LOSS) ON
INVESTMENTS
|
|
153
|
|
0.5
|
|
(9)
|
|
-
|
|
1,105
|
|
0.8
|
|
157
|
|
0.1
|
|
|
GAIN ON SALE OF
BUSINESSES
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
176
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS (LOSS)
BEFORE INCOME TAX EXPENSE (BENEFIT)
|
|
(110)
|
|
(0.4)
|
|
390
|
|
1.4
|
|
3,370
|
|
2.5
|
|
1,981
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE
(BENEFIT)
|
|
(34)
|
|
(0.1)
|
|
71
|
|
0.3
|
|
782
|
|
0.6
|
|
469
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS (LOSS)
INCLUDING NONCONTROLLING INTERESTS
|
|
(76)
|
|
(0.3)
|
|
319
|
|
1.1
|
|
2,588
|
|
2.0
|
|
1,512
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
ATTRIBUTABLE TO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCONTROLLING
INTERESTS
|
|
1
|
|
-
|
|
(8)
|
|
-
|
|
3
|
|
-
|
|
(147)
|
|
(0.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS (LOSS)
ATTRIBUTABLE TO THE KROGER CO.
|
|
$
(77)
|
|
-0.3%
|
|
$
327
|
|
1.1%
|
|
$
2,585
|
|
2.0%
|
|
$
1,659
|
|
1.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS (LOSS)
ATTRIBUTABLE TO THE KROGER CO.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER BASIC COMMON
SHARE
|
|
$
(0.10)
|
|
|
|
$
0.40
|
|
|
|
$
3.31
|
|
|
|
$
2.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE NUMBER
OF COMMON SHARES USED IN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
CALCULATION
|
|
|
761
|
|
|
|
797
|
|
|
|
773
|
|
|
|
799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS (LOSS)
ATTRIBUTABLE TO THE KROGER CO.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER DILUTED COMMON
SHARE
|
|
$
(0.10)
|
|
|
|
$
0.40
|
|
|
|
$
3.27
|
|
|
|
$
2.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE NUMBER OF
COMMON SHARES USED IN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED
CALCULATION
|
|
|
761
|
|
|
|
804
|
|
|
|
781
|
|
|
|
805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIVIDENDS DECLARED
PER COMMON SHARE
|
|
$
0.180
|
|
|
|
$
0.160
|
|
|
|
$
0.700
|
|
|
|
$
0.620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 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 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
("COGS") and operating, general and administrative expenses
("OG&A") exclude depreciation and amortization expense and rent
expense which are included in separate expense lines.
|
|
(b)
|
LIFO credit of ($84)
and charge of $36 were recorded in the fourth quarter of 2020 and
2019, respectively. For the year to date period, LIFO credit of
($7) and charge of $105 were recorded for 2020 and 2019,
respectively.
|
Table
2.
|
THE KROGER
CO.
|
CONSOLIDATED
BALANCE SHEETS
|
(in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
30,
|
|
February
1,
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
$
371
|
|
$
393
|
|
|
Temporary cash
investments
|
|
|
1,316
|
|
6
|
|
|
Store deposits
in-transit
|
|
|
|
1,096
|
|
1,179
|
|
|
Receivables
|
|
|
|
|
1,756
|
|
1,706
|
|
|
Inventories
|
|
|
|
|
7,063
|
|
7,084
|
|
|
Prepaid and other
current assets
|
|
|
876
|
|
522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
|
12,478
|
|
10,890
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
22,386
|
|
21,871
|
|
Operating lease
assets
|
|
|
|
6,796
|
|
6,814
|
|
Intangibles,
net
|
|
|
|
|
997
|
|
1,066
|
|
Goodwill
|
|
|
|
|
3,076
|
|
3,076
|
|
Other
assets
|
|
|
|
|
2,904
|
|
1,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
|
|
$
48,637
|
|
$
45,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREOWNERS' EQUITY
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
Current portion of
long-term debt including obligations
|
|
|
|
|
|
|
under finance
leases
|
|
|
|
$
911
|
|
$
1,965
|
|
|
Current portion of
operating lease liabilities
|
|
667
|
|
597
|
|
|
Trade accounts
payable
|
|
|
|
6,679
|
|
6,349
|
|
|
Accrued salaries and
wages
|
|
|
|
1,413
|
|
1,168
|
|
|
Other current
liabilities
|
|
|
|
5,700
|
|
4,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
|
15,370
|
|
14,243
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
including obligations under finance leases
|
12,502
|
|
12,111
|
|
Noncurrent operating
lease liabilities
|
|
|
6,507
|
|
6,505
|
|
Deferred income
taxes
|
|
|
|
1,513
|
|
1,466
|
|
Pension and
postretirement benefit obligations
|
|
535
|
|
608
|
|
Other long-term
liabilities
|
|
|
|
2,660
|
|
1,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
|
39,087
|
|
36,683
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareowners'
equity
|
|
|
|
|
9,550
|
|
8,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Shareowners' Equity
|
|
$
48,637
|
|
$
45,256
|
|
|
|
|
|
|
|
|
|
|
|
|
Total common shares
outstanding at end of period
|
|
757
|
|
788
|
|
Total diluted shares
year-to-date
|
|
|
781
|
|
805
|
|
Table
3.
|
THE KROGER
CO.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR-TO-DATE
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net earnings
including noncontrolling interests
|
|
$
2,588
|
|
$
1,512
|
|
|
Adjustments to
reconcile net earnings including noncontrolling
|
|
|
|
|
|
|
|
interests to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
2,747
|
|
2,649
|
|
|
|
|
Operating lease asset
amortization
|
|
626
|
|
640
|
|
|
|
|
LIFO (credit)
charge
|
|
|
(7)
|
|
105
|
|
|
|
|
Stock-based employee
compensation
|
|
185
|
|
155
|
|
|
|
|
Expense (credit) for
company-sponsored pension plans
|
|
(9)
|
|
39
|
|
|
|
|
Asset impairment
charges
|
|
|
70
|
|
120
|
|
|
|
|
Deferred income
taxes
|
|
|
44
|
|
(56)
|
|
|
|
|
Gain on sale of
businesses
|
|
|
-
|
|
(176)
|
|
|
|
|
Gain on the sale of
assets
|
|
|
(59)
|
|
(158)
|
|
|
|
|
Gain on
investments
|
|
|
(1,105)
|
|
(157)
|
|
|
|
|
Loss on
deconsolidation and impairment of Lucky's Market
|
|
-
|
|
412
|
|
|
|
|
Other
|
|
|
|
165
|
|
(109)
|
|
|
|
|
Changes in operating
assets and liabilities, net
|
|
|
|
|
|
|
|
|
|
of effects from
mergers and disposals of businesses:
|
|
|
|
|
|
|
|
|
|
|
Store deposits
in-transit
|
|
|
83
|
|
3
|
|
|
|
|
|
|
Receivables
|
|
|
(90)
|
|
(36)
|
|
|
|
|
|
|
Inventories
|
|
|
7
|
|
(351)
|
|
|
|
|
|
|
Prepaid and other
current assets
|
|
(342)
|
|
(33)
|
|
|
|
|
|
|
Trade accounts
payable
|
|
|
330
|
|
342
|
|
|
|
|
|
|
Accrued
expenses
|
|
|
1,382
|
|
302
|
|
|
|
|
|
|
Income taxes
receivable and payable
|
|
53
|
|
(142)
|
|
|
|
|
|
|
Operating lease
liabilities
|
|
|
(552)
|
|
(639)
|
|
|
|
|
|
|
Proceeds from
contract associated with the sale of business
|
|
-
|
|
295
|
|
|
|
|
|
|
Other
|
|
|
|
699
|
|
(53)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
6,815
|
|
4,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
Payments for property
and equipment, including payments for lease buyouts
|
|
(2,865)
|
|
(3,128)
|
|
|
Proceeds from sale of
assets
|
|
|
165
|
|
273
|
|
|
Net proceeds from
sale of businesses
|
|
|
-
|
|
327
|
|
|
Other
|
|
|
|
|
|
(114)
|
|
(83)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by
investing activities
|
|
|
(2,814)
|
|
(2,611)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Proceeds from
issuance of long-term debt
|
|
1,049
|
|
813
|
|
|
Payments on long-term
debt including obligations under finance leases
|
|
(747)
|
|
(2,304)
|
|
|
Net proceeds
(payments) on commercial paper
|
|
(1,150)
|
|
350
|
|
|
Dividends
paid
|
|
|
|
(534)
|
|
(486)
|
|
|
Proceeds from
issuance of capital stock
|
|
127
|
|
55
|
|
|
Treasury stock
purchases
|
|
|
(1,324)
|
|
(465)
|
|
|
Other
|
|
|
|
|
|
(134)
|
|
(46)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by
financing activities
|
|
|
(2,713)
|
|
(2,083)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE
(DECREASE) IN CASH AND TEMPORARY
|
|
|
|
|
|
|
CASH
INVESTMENTS
|
|
|
1,288
|
|
(30)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND TEMPORARY
CASH INVESTMENTS:
|
|
|
|
|
|
|
BEGINNING OF
YEAR
|
|
|
399
|
|
429
|
|
|
END OF
PERIOD
|
|
|
|
$
1,687
|
|
$
399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
capital investments:
|
|
|
|
|
|
|
|
Payments for property
and equipment, including payments for lease buyouts
|
|
$
(2,865)
|
|
$
(3,128)
|
|
|
Payments for lease
buyouts
|
|
|
58
|
|
82
|
|
|
Changes in
construction-in-progress payables
|
|
(359)
|
|
2
|
|
|
|
Total capital
investments, excluding lease buyouts
|
|
$
(3,166)
|
|
$
(3,044)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disclosure of cash
flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the
year for interest
|
|
$
564
|
|
$
523
|
|
|
|
Cash paid during the
year for income taxes
|
|
$
659
|
|
$
706
|
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOURTH
QUARTER
|
|
YEAR-TO-DATE
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXCLUDING
FUEL
|
|
$
28,004
|
|
$
25,321
|
|
$
120,762
|
|
$
105,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXCLUDING
FUEL
|
|
10.6%
|
|
2.0%
|
|
14.1%
|
|
2.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Kroger defines
identical sales, excluding fuel, as sales to retail customers,
including sales from all departments at identical supermarket
locations, Kroger Specialty Pharmacy businesses, jewelry and
ship-to-home solutions. Kroger defines a supermarket as
identical when it has
been in operation 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
30,
|
|
February
1,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of
long-term debt including obligations
|
|
|
|
|
|
|
|
|
under
finance leases
|
|
$
911
|
|
$
1,965
|
|
$
(1,054)
|
|
|
Long-term debt
including obligations under finance leases
|
|
12,502
|
|
12,111
|
|
391
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
13,413
|
|
14,076
|
|
(663)
|
|
|
|
|
|
|
|
|
|
|
|
Less: Temporary cash
investments
|
|
1,316
|
|
6
|
|
1,310
|
|
|
Less: Prepaid benefit
payments
|
|
125
|
|
125
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Net total debt
|
|
$
11,972
|
|
$
13,945
|
|
$
(1,973)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, for 2020 and 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR-TO-DATE
|
|
|
|
|
|
|
January
30,
|
|
February
1,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to The Kroger Co.
|
|
$
2,585
|
|
$
1,659
|
|
|
|
|
LIFO (credit)
charge
|
|
(7)
|
|
105
|
|
|
|
|
Depreciation and
amortization
|
|
2,747
|
|
2,649
|
|
|
|
|
Interest
expense
|
|
544
|
|
603
|
|
|
|
|
Income tax
expense
|
|
782
|
|
469
|
|
|
|
|
Adjustment for
pension plan withdrawal liabilities
|
|
989
|
|
135
|
|
|
|
|
Adjustment for gain
on investments
|
|
(1,105)
|
|
(157)
|
|
|
|
|
Adjustment for gain
on sale of Turkey Hill Dairy
|
|
-
|
|
(106)
|
|
|
|
|
Adjustment for gain
on sale of You Technology
|
|
-
|
|
(70)
|
|
|
|
|
Adjustment for Home
Chef contingent consideration
|
|
189
|
|
(69)
|
|
|
|
|
Adjustment for
severance charge and related benefits
|
|
-
|
|
80
|
|
|
|
|
Adjustment for
deconsolidation and impairment of Lucky's Market
|
|
|
|
|
|
|
|
|
attributable to The
Kroger Co. (a)
|
|
-
|
|
305
|
|
|
|
|
Adjustment for
transformation costs (b)
|
|
111
|
|
52
|
|
|
|
|
Other
|
|
(8)
|
|
(26)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
$
6,827
|
|
$
5,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net total debt to
adjusted EBITDA ratio
|
|
1.75
|
|
2.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The adjustment for
impairment of Lucky's Market attributable to The Kroger Co.
excludes a $107 net loss attributable to the minority interest of
Lucky's Market.
|
|
|
|
|
|
|
|
(b)
|
Transformation costs
primarily include costs related to store and business closure costs
and third party professional consulting fees associated with
business transformation and cost saving initiatives.
|
|
|
|
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.
Adjusted net earnings and
adjusted net earnings per diluted share are useful metrics to
investors and analysts because they present more accurately
year-over-year comparisons for net earnings (loss) and net earnings
(loss) per diluted share because adjusted
items are not the result of normal operations. Items
identified in this table should not be considered alternatives to
net earnings (loss) 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.
|
|
|
|
|
|
|
FOURTH
QUARTER
|
|
YEAR-TO-DATE
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS (LOSS)
ATTRIBUTABLE TO THE KROGER CO.
|
|
$
(77)
|
|
$
327
|
|
$
2,585
|
|
$
1,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTMENT FOR
PENSION PLAN WITHDRAWAL LIABILITIES (a)(b)
|
|
754
|
|
3
|
|
754
|
|
104
|
ADJUSTMENT FOR GAIN
ON SALE OF TURKEY HILL DAIRY (a)(c)
|
|
-
|
|
-
|
|
-
|
|
(80)
|
ADJUSTMENT FOR GAIN
ON SALE OF YOU TECHNOLOGY (a)(d)
|
|
-
|
|
-
|
|
-
|
|
(52)
|
ADJUSTMENT FOR (GAIN)
LOSS ON INVESTMENTS (a)(e)
|
|
|
(116)
|
|
6
|
|
(821)
|
|
(119)
|
ADJUSTMENT FOR
SEVERANCE CHARGE AND RELATED BENEFITS (a)(f)
|
|
-
|
|
-
|
|
-
|
|
61
|
ADJUSTMENT FOR
IMPAIRMENT OF LUCKY'S MARKET
|
|
|
|
|
|
|
|
|
|
ATTRIBUTABLE TO THE
KROGER CO. (a)(g)
|
|
-
|
|
125
|
|
-
|
|
225
|
ADJUSTMENT FOR HOME
CHEF CONTINGENT CONSIDERATION (a)(h)
|
|
61
|
|
(36)
|
|
141
|
|
(49)
|
ADJUSTMENT FOR
TRANSFORMATION COSTS (a)(i)
|
|
|
8
|
|
37
|
|
81
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 AND 2019
ADJUSTMENT ITEMS
|
|
|
707
|
|
135
|
|
155
|
|
127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
|
|
|
|
|
|
|
|
|
EXCLUDING THE
ADJUSTMENT ITEMS ABOVE
|
|
|
$
630
|
|
$
462
|
|
$
2,740
|
|
$
1,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS (LOSS)
ATTRIBUTABLE TO THE KROGER CO.
|
|
|
|
|
|
|
|
|
|
PER DILUTED COMMON
SHARE
|
|
|
$
(0.10)
|
|
$
0.40
|
|
$
3.27
|
|
$
2.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTMENT FOR
PENSION PLAN WITHDRAWAL LIABILITIES (j)
|
|
0.97
|
|
0.01
|
|
0.95
|
|
0.13
|
ADJUSTMENT FOR GAIN
ON SALE OF TURKEY HILL DAIRY (j)
|
|
-
|
|
-
|
|
-
|
|
(0.10)
|
ADJUSTMENT FOR GAIN
ON SALE OF YOU TECHNOLOGY (j)
|
|
-
|
|
-
|
|
-
|
|
(0.06)
|
ADJUSTMENT FOR (GAIN)
LOSS ON INVESTMENTS (j)
|
|
|
(0.15)
|
|
0.01
|
|
(1.05)
|
|
(0.15)
|
ADJUSTMENT FOR
SEVERANCE CHARGE AND RELATED BENEFITS (j)
|
|
-
|
|
-
|
|
-
|
|
0.08
|
ADJUSTMENT FOR
IMPAIRMENT OF LUCKY'S MARKET
|
|
|
|
|
|
|
|
|
|
ATTRIBUTABLE TO THE
KROGER CO. (j)
|
|
-
|
|
0.16
|
|
-
|
|
0.28
|
ADJUSTMENT FOR HOME
CHEF CONTINGENT CONSIDERATION (j)
|
|
0.08
|
|
(0.05)
|
|
0.18
|
|
(0.07)
|
ADJUSTMENT FOR
TRANSFORMATION COSTS (j)
|
|
|
0.01
|
|
0.04
|
|
0.12
|
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 AND 2019
ADJUSTMENT ITEMS
|
|
|
0.91
|
|
0.17
|
|
0.20
|
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO. PER
|
|
|
|
|
|
|
|
|
|
DILUTED COMMON SHARE
EXCLUDING THE ADJUSTMENT ITEMS ABOVE
|
|
$
0.81
|
|
$
0.57
|
|
$
3.47
|
|
$
2.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE NUMBER OF
COMMON SHARES USED IN
|
|
|
|
|
|
|
|
|
|
|
DILUTED
CALCULATION
|
|
|
|
768
|
|
804
|
|
781
|
|
805
|
Table 6. Net
Earnings Per Diluted Share Excluding the Adjustment Items
(continued)
|
(in millions, except
per share amounts)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The amounts presented
represent the after-tax effect of each adjustment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
The pre-tax
adjustment to OG&A expenses for pension plan withdrawal
liabilities were $989 and $4 in the fourth quarters of 2020 and
2019, respectively. The year-to-date pre-tax adjustment to
OG&A expenses for pension plan withdrawal liabilities were $989
and $135 in 2020 and 2019, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
The pre-tax
adjustment for gain on sale of Turkey Hill Dairy was
($106).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d)
|
The pre-tax
adjustment for gain on sale of You Technology was ($70).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e)
|
The pre-tax
adjustments for (gain) loss on investments were ($153) and $9 in
the fourth quarters of 2020 and 2019, respectively. The
year-to-date pre-tax adjustments for gain on investments were
($1,105) and ($157) in 2020 and 2019, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(f)
|
The pre-tax
adjustment for severance charge and related benefits was
$80.
|
|
|
(g)
|
The pre-tax
adjustment for deconsolidation and impairment of Lucky's Market was
$174 in the fourth quarter of 2019. For the year-to-date
period, pre-tax adjustment for deconsolidation and impairment of
Lucky's Market was $412 including a $107 net loss attributable to
the minority interest of Lucky's Market.
|
|
|
(h)
|
The pre-tax
adjustments to OG&A expenses for Home Chef contingent
consideration were $80 and ($51) in the fourth quarters of 2020 and
2019, respectively. The year-to-date pre-tax adjustments to
OG&A expenses for Home Chef contingent consideration were $189
and ($69) in 2020 and 2019, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
The pre-tax
adjustment to OG&A expenses for transformation costs was $11
and $52 in the fourth quarters of 2020 and 2019,
respectively. The year-to-date pre-tax adjustment to OG&A
expenses for transformation costs was $111 and $52 in 2020 and
2019, respectively. Transformation costs primarily include
costs related to store and business closure costs and third party
professional consulting fees associated with business
transformation and cost saving initiatives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(j)
|
The amounts presented
represent the net earnings (loss) per diluted common share effect
of each adjustment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
2020 Fourth Quarter
Adjustment Items include adjustments for pension plan withdrawal
liabilities, gain on investments, Home Chef contingent
consideration adjustment and strategic transformation
costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 Adjustment Items
include the fourth Quarter Adjustment Items plus the adjustments
that occurred in the first three quarters of 2020 for the gain on
investments, Home Chef contingent consideration adjustment and
strategic transformation costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 Fourth Quarter
Adjustment items include adjustments for pension plan withdrawal
liabilities, the loss on investments, deconsolidation of Lucky's
Market, Home Chef contingent consideration adjustment, and
strategic transformation costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 Adjustment Items
include the fourth Quarter Adjustment Items plus the adjustments
that occurred in the first three quarters of 2019 for pension plan
withdrawal liabilities, the gain on sale of Turkey Hill Dairy, the
gain on sale of You Technology, the gain on investments, Home Chef
contingent consideration adjustment, the impairment of Lucky's
Market and severance charge and related benefits.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 7. Operating
Profit Excluding the Adjustment Items
|
|
|
(in
millions)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The purpose of this
table is to better illustrate comparable operating results from our
ongoing business, after removing the effects on operating profit
for certain items described below. Adjusted FIFO operating
profit is a useful metric to investors and analysts because it
presents more accurately year-over year comparisons for operating
profit (loss) because adjusted items are not the result of normal
operations. Items identified in this table should not be
considered alternatives to operating profit (loss) 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOURTH
QUARTER
|
|
YEAR-TO-DATE
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
(loss)
|
|
|
$
(158)
|
|
$
537
|
|
$
2,780
|
|
$
2,251
|
|
LIFO (credit)
charge
|
|
|
(84)
|
|
36
|
|
(7)
|
|
105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIFO Operating profit
(loss)
|
|
|
(242)
|
|
573
|
|
2,773
|
|
2,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment for
pension plan withdrawal liabilities
|
|
989
|
|
4
|
|
989
|
|
135
|
|
Adjustment for Home
Chef contingent consideration
|
|
80
|
|
(51)
|
|
189
|
|
(69)
|
|
Adjustment for
severance charge and related benefits
|
|
-
|
|
-
|
|
-
|
|
80
|
|
Adjustment for
transformation costs (a)
|
|
11
|
|
52
|
|
111
|
|
52
|
|
Adjustment for
deconsolidation and impairment of Lucky's Market
(b)
|
|
-
|
|
174
|
|
-
|
|
412
|
|
Other
|
|
|
|
|
(1)
|
|
6
|
|
(6)
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 and 2019
Adjustment items
|
|
|
1,079
|
|
185
|
|
1,283
|
|
639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted FIFO
operating profit
|
|
|
|
|
|
|
|
|
|
|
|
excluding the
adjustment items above
|
|
$
837
|
|
$
758
|
|
$
4,056
|
|
$
2,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Transformation costs
primarily include costs related to store and business closure costs
and third party professional consulting fees associated with
business transformation and cost saving initiatives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
For the year-to-date
period, the adjustment for impairment of Lucky's Market includes a
$107 net loss attributable to the minority interest of Lucky's
Market.
|
|
|
|
|
Table 8.
Adjusted Free Cash Flow
|
|
|
|
|
|
(in
millions)
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted free cash
flow is an important performance measure used by management, and
management believes it is also a useful metric for investors and
analysts to evaluate the Company's ability to generate additional
funding from business operations available for dividends, managing
debt levels, share repurchases and other strategic
investments. Adjusted free cash flow is one of the key
financial indicators of the Company's business performance and the
Company also uses adjusted free cash flow to evaluate the Company's
senior management. However, adjusted free cash flow is not a
measure of financial performance or liquidity under GAAP and,
therefore, should not be considered an alternative to net earnings
(loss) or net cash provided by operating activities as an indicator
of the Company's performance or liquidity. Although
free cash flow is a relatively standard term, numerous methods
exist for calculating free cash flow. As a result, the method used
by the Company's management to calculate adjusted free cash flow
may differ from methods other companies use to calculate free cash
flow.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table
sets forth a reconciliation of net cash provided by operating
activities to adjusted free cash flow.
|
|
|
|
YEAR-TO-DATE
|
|
January
30,
|
|
February
1,
|
|
February
2,
|
|
2021
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
$
|
6,815
|
|
$
|
4,664
|
|
$
|
4,164
|
|
|
|
|
|
|
|
|
|
Payments for property
and equipment, including payments for lease buyouts
|
|
(2,865)
|
|
|
(3,128)
|
|
|
(2,967)
|
|
|
|
|
|
|
|
|
|
Free Cash
Flow
|
|
3,950
|
|
|
1,536
|
|
|
1,197
|
|
|
|
|
|
|
|
|
|
Adjustment for
company pension plans and payments
related to the restructuring of
multi-employer pension plans
|
|
263
|
|
|
-
|
|
|
185
|
Adjustment for tax
effects of divestiture transactions
|
|
-
|
|
|
156
|
|
|
460
|
|
|
|
|
|
|
|
|
|
Adjusted Free Cash
Flow
|
$
|
4,213
|
|
$
|
1,692
|
|
$
|
1,842
|
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SOURCE The Kroger Co.