Attached files

file filename
8-K - 8-K - KROGER COa14-7522_18k.htm

Exhibit 99.1

 

Kroger Reports Fourth Quarter and Full Year 2013 Results

 

Adjusted Q4 EPS of $0.78 and Full Year 2013 EPS of $2.85

 

Q4 ID Sales Up 4.3% Without Fuel

 

CINCINNATI, March 6, 2014 — The Kroger Co. (NYSE: KR) today reported net earnings of $0.81 per diluted share and identical supermarket sales growth, without fuel, of 4.3% in the fourth quarter.  The company reported fiscal 2013 net earnings of $2.90 per diluted share and identical supermarket sales growth, without fuel, of 3.6%.  Kroger’s third and fourth quarter net earnings include the benefits of certain tax items partially offset by expenses related to the company’s merger with Harris Teeter.  Excluding these items, Kroger’s adjusted net earnings per diluted share were $0.78 in the fourth quarter and $2.85 per diluted share in fiscal 2013 (Table 6).

 

On a 52-week basis and excluding fiscal 2013 and 2012 adjustment items, as outlined in Table 6, the year’s strong results included:

 

·                  Record net earnings per diluted share

 

·                  EPS growth of 13%

 

·                  Increased rolling four quarters FIFO operating margin, excluding fuel, of 11 bps

 

·                  Record FIFO EBITDA

 

“Our associates’ connection with customers fueled another year of market share growth and record earnings per share,” said Rodney McMullen, Kroger’s chief executive officer. “Kroger’s Customer 1st strategy is a powerful foundation on which to continue growing and differentiating our business in 2014.”

 

Details of Fourth Quarter 2013 Results

 

The Harris Teeter transaction closed on January 28, 2014. Harris Teeter is included in the company’s ending balance sheet, but because of the timing late in the year it had no effect on the adjusted fourth quarter or fiscal 2013 earnings.

 



 

Kroger reported total sales of $23.2 billion in the fourth quarter, which ended February 1, 2014.  After adjusting for the extra week in the fourth quarter last year, total sales increased by 4.8%.  On this basis and without fuel, total sales increased by 4.4%.  Results were enhanced by the company’s response to adverse weather in the fourth quarter 2013.

 

The company recorded a $9.7 million LIFO charge during the quarter compared to a $41.2 million LIFO credit in the same quarter last year.

 

Net earnings for the fourth quarter totaled $421.9 million, or $0.81 per diluted share.  Excluding the 2013 adjustment items, the extra week, and making the 2012 LIFO credit comparable to the 2013 charge (Table 6), net earnings per diluted share in the fourth quarter grew 10%.

 

FIFO gross margin increased 11 basis points from the same period last year, excluding retail fuel operations and the extra week.

 

Operating, general and administrative costs plus rent and depreciation — excluding retail fuel operations, the 2013 adjustment items and the extra week — declined 16 basis points as a percent of sales compared to the prior year’s adjusted fourth quarter.

 

Fiscal Year 2013 Results

 

Kroger reported total sales of $98.4 billion in fiscal 2013, an increase of 3.9% after adjusting for the 53rd week last year. On this basis and excluding fuel, total sales increased 4.2% over the prior fiscal year.

 

Net earnings for fiscal 2013 totaled $1.52 billion, or $2.90 per diluted share.  Excluding the fiscal 2013 and 2012 adjustment items (Table 6), net earnings per diluted share for fiscal 2013 grew 13%.  Kroger’s LIFO charge for fiscal 2013 was comparable to fiscal 2012.

 

Financial Strategy

 

Kroger’s strong financial position allowed the company to return more than $928 million to shareholders through share buybacks and dividends in 2013. During the fiscal year, Kroger repurchased 16.1 million common shares for a total investment of $609 million.

 

Capital investments, excluding mergers, acquisitions and purchases of leased facilities, totaled $2.3 billion for the year, compared to $2.0 billion in 2012.

 



 

Kroger reported a return on invested capital, excluding the Harris Teeter transaction, on a 52-week, rolling four quarters basis, of 13.43%, compared to 13.42% during the same period last year.

 

Net total debt was $10.9 billion, an increase of $2.3 billion from a year ago as a result of the Harris Teeter transaction and, due to the timing late in our fiscal year, Kroger realized no incremental EBITDA in 2013 from this transaction.  Therefore, Kroger’s net total debt to adjusted EBITDA ratio was 2.43, compared to 2.04 during the same period last year.  Kroger remains committed to managing cash flow to achieve a 2.00 — 2.20 net debt to EBITDA ratio over the next 18-24 months.

 

Fiscal 2014 Annual Guidance

 

Full-year net earnings for fiscal 2014 are expected to range from $3.14 to $3.25 per diluted share. This guidance includes Harris Teeter.  Growing fiscal 2013 adjusted earnings per diluted share of $2.85 by the company’s long term growth rate of 8 — 11% equates to a range of $3.08 to $3.16 per diluted share.  Adding net accretion to earnings from the Harris Teeter merger of $0.06 — $0.09 per diluted share, excluding transition and transaction expenses, results in a 10 — 14% growth rate for fiscal 2014.  Thereafter, Kroger expects to return to its long-term growth rate of 8 — 11%.

 

Shareholder return will be further enhanced by a dividend expected to increase over time.

 

Kroger anticipates identical supermarket sales growth, excluding fuel, of approximately 2.5% to 3.5% for fiscal 2014, including Harris Teeter.  This range takes into account the expectation of low inflation during the year.

 

During fiscal 2014, Kroger plans to use cash flow from operations to maintain its current investment grade debt rating, repurchase shares, have a growing dividend, and fund capital investments. The company expects capital investments to be in the $2.8 to $3.0 billion range for the year, including Harris Teeter.

 

“The remarkable consistency of Kroger’s performance has shown time and again that serving our customers is serving our shareholders,” Mr. McMullen said. “We are well positioned to

 



 

continue delivering sustainable high performance that benefits our customers and shareholders today and in the future.”

 

Kroger, one of the world’s largest retailers, employs more than 375,000 associates who serve customers in 2,640 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 786 convenience stores, 320 fine jewelry stores, 1,240 supermarket fuel centers and 38 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 grassroots 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 OG&A 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.

 

This press release contains certain forward-looking statements about the future performance of the company. These statements are based on management’s assumptions and beliefs in light of the information currently available to it. These statements are indicated by words such as “expect,” “guidance” and “plans.”

 

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 our annual report on Form 10-K for our last fiscal year and any subsequent filings, as well as the following:

 

·                  Our 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 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; 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; the effect of brand prescription drugs going off patent; our ability to retain additional pharmacy sales from third party payors; natural disasters or adverse weather conditions; the success of our future growth plans; and the successful integration of Harris Teeter.  The extent to which the adjustments we are making to our strategy create value for our shareholders will depend primarily on the reaction of our customers and our competitors to these adjustments, as well as operating conditions, including inflation or deflation, increased competitive activity, and cautious spending behavior of our customers.  Our ability to achieve sales and earnings goals may also be affected by our ability to manage the factors identified above.

 

·                  Our ability to use free cash flow to continue to maintain our investment grade debt rating and repurchase shares, pay dividends, and fund capital investments, could be affected by unanticipated increases in net total debt, our inability to generate free 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.

 

We assume 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 6, 2014 at ir.kroger.com. An on-demand replay of the webcast will be available from approximately 1 p.m. (ET) Thursday, March 6 through Thursday, March 20, 2014.

 

—30—

 

4th Quarter 2013 Tables Include:

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

CONSOLIDATED BALANCE SHEETS

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

SUPPLEMENTAL SALES INFORMATION

 



 

RECONCILIATION OF TOTAL DEBT TO 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

 

Kroger Contacts:

 

Media: Keith Dailey (513) 762-1304

 

Investors: Cindy Holmes (513) 762-4969

 



 

Table 1.

THE KROGER CO.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)

(unaudited)

 

 

 

FOURTH QUARTER

 

YEAR-TO-DATE

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SALES

 

$

23,222

 

100.0

%

$

24,120

 

100.0

%

$

98,375

 

100.0

%

$

96,619

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MERCHANDISE COSTS, INCLUDING ADVERTISING, WAREHOUSING AND TRANSPORTATION (a), AND LIFO CHARGE (b)

 

18,397

 

79.2

 

19,069

 

79.1

 

78,138

 

79.4

 

76,726

 

79.4

 

OPERATING, GENERAL AND ADMINISTRATIVE (a)

 

3,558

 

15.3

 

3,689

 

15.3

 

15,196

 

15.5

 

14,849

 

15.4

 

RENT

 

147

 

0.6

 

157

 

0.7

 

613

 

0.6

 

628

 

0.7

 

DEPRECIATION

 

402

 

1.7

 

386

 

1.6

 

1,703

 

1.7

 

1,652

 

1.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING PROFIT

 

718

 

3.1

 

819

 

3.4

 

2,725

 

2.8

 

2,764

 

2.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

107

 

0.5

 

112

 

0.5

 

443

 

0.5

 

462

 

0.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET EARNINGS BEFORE INCOME TAX EXPENSE

 

611

 

2.6

 

707

 

2.9

 

2,282

 

2.3

 

2,302

 

2.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME TAX EXPENSE

 

184

 

0.8

 

239

 

1.0

 

751

 

0.8

 

794

 

0.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET EARNINGS INCLUDING NONCONTROLLING INTERESTS

 

427

 

1.8

 

468

 

1.9

 

1,531

 

1.6

 

1,508

 

1.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

5

 

0.0

 

6

 

0.0

 

12

 

0.0

 

11

 

0.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET EARNINGS ATTRIBUTABLE TO THE KROGER CO.

 

$

422

 

1.8

%

$

462

 

1.9

%

$

1,519

 

1.5

%

$

1,497

 

1.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER BASIC COMMON SHARE

 

$

0.82

 

 

 

$

0.89

 

 

 

$

2.93

 

 

 

$

2.78

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AVERAGE NUMBER OF COMMON SHARES USED IN BASIC CALCULATION

 

511

 

 

 

514

 

 

 

514

 

 

 

533

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER DILUTED COMMON SHARE

 

$

0.81

 

 

 

$

0.88

 

 

 

$

2.90

 

 

 

$

2.77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AVERAGE NUMBER OF COMMON SHARES USED IN DILUTED CALCULATION

 

517

 

 

 

518

 

 

 

520

 

 

 

537

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DIVIDENDS DECLARED PER COMMON SHARE

 

$

0.165

 

 

 

$

0.150

 

 

 

$

0.630

 

 

 

$

0.530

 

 

 

 


Note:      Certain per share amounts and percentages may not sum due to rounding.

 

Note:      The Company defines 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 profit 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 expense and rent expense which are included in separate expense lines.

 

(b)                     LIFO charges (credits) of $10 and $(41) were recorded in the fourth quarter of 2013 and 2012, respectively.  For the year to date period, LIFO charges of $52 and $55 were recorded for 2013 and 2012, respectively.

 

Note:      Certain prior-year amounts have been reclassified to conform to current-year presentation.

 



 

Table 2.

THE KROGER CO.

CONSOLIDATED BALANCE SHEETS

(in millions)

(unaudited)

 

 

 

February 1,

 

February 2,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash

 

$

260

 

$

237

 

Temporary cash investments

 

141

 

1

 

Store deposits in-transit

 

958

 

955

 

Receivables

 

1,116

 

1,051

 

Inventories

 

5,667

 

5,146

 

Prepaid and other current assets

 

705

 

569

 

 

 

 

 

 

 

Total current assets

 

8,847

 

7,959

 

 

 

 

 

 

 

Property, plant and equipment, net

 

16,932

 

14,848

 

Intangibles

 

702

 

130

 

Goodwill

 

2,112

 

1,234

 

Other assets

 

721

 

463

 

 

 

 

 

 

 

Total Assets

 

$

29,314

 

$

24,634

 

 

 

 

 

 

 

LIABILITIES AND SHAREOWNERS’ EQUITY

 

 

 

 

 

Current liabilities

 

 

 

 

 

Current portion of long-term debt including obligations under capital leases and financing obligations

 

$

1,634

 

$

2,734

 

Trade accounts payable

 

4,898

 

4,484

 

Accrued salaries and wages

 

1,150

 

1,017

 

Deferred income taxes

 

248

 

288

 

Other current liabilities

 

2,769

 

2,538

 

 

 

 

 

 

 

Total current liabilities

 

10,699

 

11,061

 

 

 

 

 

 

 

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

 

9,676

 

6,141

 

Adjustment to reflect fair-value interest rate hedges

 

(1

)

4

 

Long-term debt including obligations under capital leases and financing obligations

 

9,675

 

6,145

 

 

 

 

 

 

 

Deferred income taxes

 

1,397

 

796

 

Pension and postretirement benefit obligations

 

901

 

1,291

 

Other long-term liabilities

 

1,247

 

1,127

 

 

 

 

 

 

 

Total Liabilities

 

23,919

 

20,420

 

 

 

 

 

 

 

Shareowners’ equity

 

5,395

 

4,214

 

 

 

 

 

 

 

Total Liabilities and Shareowners’ Equity

 

$

29,314

 

$

24,634

 

 

 

 

 

 

 

Total common shares outstanding at end of period

 

508

 

514

 

Total diluted shares year-to-date

 

520

 

537

 

 

Note:      Certain prior-year amounts have been reclassified to conform to current-year presentation.

 



 

Table 3.

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

 

 

 

YEAR-TO-DATE

 

 

 

2013

 

2012

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net earnings including noncontrolling interests

 

$

1,531

 

$

1,508

 

Adjustment to reconcile net earnings including noncontrolling interests to net cash provided by operating activities:

 

 

 

 

 

Depreciation

 

1,703

 

1,652

 

LIFO charge

 

52

 

55

 

Stock-based employee compensation

 

107

 

82

 

Expense for Company-sponsored pension plans

 

74

 

89

 

Deferred income taxes

 

72

 

176

 

Other

 

85

 

41

 

Changes in operating assets and liabilities, net of effects from acquisitions of businesses:

 

 

 

 

 

Store deposits in-transit

 

25

 

(169

)

Receivables

 

(8

)

(126

)

Inventories

 

(147

)

(78

)

Prepaid expenses

 

(49

)

(257

)

Trade accounts payable

 

20

 

67

 

Accrued expenses

 

77

 

67

 

Income taxes receivable and payable

 

(47

)

164

 

Other

 

(115

)

(438

)

 

 

 

 

 

 

Net cash provided by operating activities

 

3,380

 

2,833

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Payments for property and equipment, including payments for lease buyouts

 

(2,330

)

(2,062

)

Payments for acquisitions

 

(2,344

)

(122

)

Proceeds from sale of assets

 

24

 

49

 

Other

 

(121

)

(48

)

 

 

 

 

 

 

Net cash used by investing activities

 

(4,771

)

(2,183

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Proceeds from issuance of long-term debt

 

3,548

 

863

 

Payments on long-term debt

 

(1,060

)

(1,445

)

Net (payments) borrowings on commercial paper

 

(395

)

1,275

 

Dividends paid

 

(319

)

(267

)

Excess tax benefits on stock-based awards

 

32

 

8

 

Proceeds from issuance of capital stock

 

196

 

110

 

Treasury stock purchases

 

(609

)

(1,261

)

Net increase in book overdrafts

 

193

 

121

 

Other

 

(32

)

(4

)

 

 

 

 

 

 

Net cash used by financing activities

 

1,554

 

(600

)

 

 

 

 

 

 

NET INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS

 

163

 

50

 

 

 

 

 

 

 

CASH AND TEMPORARY CASH INVESTMENTS:

 

 

 

 

 

BEGINNING OF YEAR

 

238

 

188

 

END OF YEAR

 

$

401

 

$

238

 

 

 

 

 

 

 

Reconciliation of capital investments:

 

 

 

 

 

Payments for property and equipment, including payments for lease buyouts

 

$

(2,330

)

$

(2,062

)

Payments for lease buyouts

 

108

 

73

 

Changes in construction-in-progress payables

 

(83

)

(1

)

Total capital investments, excluding lease buyouts

 

$

(2,305

)

$

(1,990

)

 

 

 

 

 

 

Disclosure of cash flow information:

 

 

 

 

 

Cash paid during the year for interest

 

$

401

 

$

438

 

Cash paid during the year for income taxes

 

$

679

 

$

468

 

 

Note:      Certain prior-year amounts have been reclassified to conform to current-year presentation.

 



 

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 sales differently than Kroger does, limiting the comparability of the measure.

 

IDENTICAL SUPERMARKET SALES (a)

 

 

 

FOURTH QUARTER

 

YEAR-TO-DATE

 

 

 

2013

 

2012 (b)

 

2013

 

2012 (b)

 

 

 

 

 

 

 

 

 

 

 

INCLUDING FUEL CENTERS

 

$

21,039

 

$

20,239

 

$

88,482

 

$

85,661

 

EXCLUDING FUEL CENTERS

 

$

17,971

 

$

17,238

 

$

74,095

 

$

71,541

 

 

 

 

 

 

 

 

 

 

 

INCLUDING FUEL CENTERS

 

4.0

%

3.5

%

3.3

%

4.5

%

EXCLUDING FUEL CENTERS

 

4.3

%

3.0

%

3.6

%

3.5

%

 


(a)         Kroger defines a supermarket as identical when it has been open without expansion or relocation for five full quarters.

 

(b)         Identical sales for the fourth quarter of 2012 and year-to-date 2012 were adjusted to a 12 and 52 week basis, respectively.

 



 

Table 5.  Reconciliation of Total Debt to 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 total debt to net total debt.

 

 

 

February 1,

 

February 2,

 

 

 

 

 

2014

 

2013

 

Change

 

 

 

 

 

 

 

 

 

Current portion of long-term debt including obligations under capital leases and financing obligations

 

$

1,634

 

$

2,734

 

$

(1,100

)

Face-value of long-term debt including obligations under capital leases and financing obligations

 

9,676

 

6,141

 

3,535

 

Adjustment to reflect fair-value interest rate hedges

 

(1

)

4

 

(5

)

 

 

 

 

 

 

 

 

Total debt

 

$

11,309

 

$

8,879

 

$

2,430

 

 

 

 

 

 

 

 

 

Less: Temporary cash investments

 

141

 

1

 

140

 

Less: Prepaid benefit payments

 

275

 

250

 

25

 

 

 

 

 

 

 

 

 

Net total debt

 

$

10,893

 

$

8,628

 

$

2,265

 

 

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 2013 and 2012 on a 52 week basis.

 

 

 

YEAR-TO-DATE

 

 

 

February 1,

 

February 2,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Net earnings attributable to The Kroger Co., on a 53 week basis in fiscal year 2012

 

$

1,519

 

$

1,497

 

LIFO

 

52

 

55

 

Depreciation

 

1,703

 

1,652

 

Interest expense

 

443

 

462

 

Income tax expense

 

751

 

794

 

Adjustments for the UFCW consolidated pension plan liability and credit card settlement

 

 

(115

)

53rd week EBITDA adjustment

 

 

(99

)

Other

 

10

 

(7

)

 

 

 

 

 

 

Adjusted EBITDA

 

$

4,478

 

$

4,239

 

 

 

 

 

 

 

Net total debt to adjusted EBITDA ratio on a 52 week basis

 

2.43

 

2.04

 

 



 

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 of 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 2013, these items include the benefit from certain tax items and expenses related to the merger with Harris Teeter.  In 2012, these items include a reduction to the Company’s UFCW consolidated pension plan liability and the receipt of a credit card litigation settlement payments.

 

 

 

FOURTH QUARTER

 

FOURTH QUARTER

 

YEAR-TO-DATE

 

YEAR-TO-DATE

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

NET EARNINGS ATTRIBUTABLE TO THE KROGER CO.

 

$

422

 

$

462

 

$

1,519

 

$

1,497

 

 

 

 

 

 

 

 

 

 

 

BENEFIT FROM CERTAIN TAX ITEMS OFFSET BY HARRIS TEETER MERGER CHARGES (a)

 

(16

)

 

(23

)

 

 

 

 

 

 

 

 

 

 

 

ADJUSTMENT FOR THE UFCW CONSOLIDATED PENSION PLAN LIABILITY AND CREDIT CARD SETTLEMENT (a) (b)

 

 

 

 

(74

)

 

 

 

 

 

 

 

 

 

 

NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. EXCLUDING THE ADJUSTMENT ITEMS ABOVE

 

$

406

 

$

462

 

$

1,496

 

$

1,423

 

 

 

 

 

 

 

 

 

 

 

53RD WEEK ADJUSTMENT (a) (c) 

 

 

(58

)

 

(58

)

 

 

 

 

 

 

 

 

 

 

EFFECT OF MAKING THE 2012 LIFO CHARGE COMPARABLE TO THE 2013 LIFO CHARGE (a) (d)

 

 

(34

)

 

 

 

 

 

 

 

 

 

 

 

 

NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. EXCLUDING THE ADJUSTMENT ITEMS ABOVE, THE 53RD WEEK ADJUSTMENT AND THE LIFO ADJUSTMENT

 

$

406

 

$

370

 

$

1,496

 

$

1,365

 

 

 

 

 

 

 

 

 

 

 

NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER DILUTED COMMON SHARE

 

$

0.81

 

$

0.88

 

$

2.90

 

$

2.77

 

 

 

 

 

 

 

 

 

 

 

BENEFIT FROM CERTAIN TAX ITEMS OFFSET BY HARRIS TEETER MERGER CHARGES (e)

 

(0.03

)

 

(0.05

)

 

 

 

 

 

 

 

 

 

 

 

ADJUSTMENTS FOR THE UFCW CONSOLIDATED PENSION PLAN LIABILITY AND CREDIT CARD SETTLEMENT (e)

 

 

 

 

(0.14

)

 

 

 

 

 

 

 

 

 

 

NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER DILUTED COMMON SHARE EXCLUDING THE ADJUSTMENT ITEMS ABOVE

 

$

0.78

 

$

0.88

 

$

2.85

 

$

2.63

 

 

 

 

 

 

 

 

 

 

 

53RD WEEK ADJUSTMENT (e)

 

 

(0.11

)

 

(0.11

)

 

 

 

 

 

 

 

 

 

 

EFFECT OF MAKING THE 2012 LIFO CHARGE COMPARABLE TO THE 2013 LIFO CHARGE (e)

 

 

(0.06

)

 

 

 

 

 

 

 

 

 

 

 

 

NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER DILUTED COMMON SHARE EXCLUDING THE ADJUSTMENT ITEMS ABOVE, THE 53RD WEEK ADJUSTMENT AND THE LIFO ADJUSTMENT

 

$

0.78

 

$

0.71

 

$

2.85

 

$

2.52

 

 

 

 

 

 

 

 

 

 

 

AVERAGE NUMBER OF COMMON SHARES USED IN DILUTED CALCULATION

 

517

 

518

 

520

 

537

 

 


(a)   The amounts presented represent the after-tax effect of each adjustment.

 

(b)   The pre-tax adjustments for the UFCW consolidated pension plan liability and credit card settlement were $115.

 

(c)   The pre-tax 53rd week adjustment was $91.

 

(d)         The pre-tax adjustment to make the fourth quarter 2012 LIFO charge comparable to the fourth quarter 2013 LIFO charge was $51.

 

(e)   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 our investment returns on capital and our effectiveness in deploying our assets.  Return on invested capital should not be reviewed in isolation or considered as a substitute for our 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 2013 and 2012 on a 52 week basis and excluding the assets and liabilities recorded at year end for Harris Teeter.

 

 

 

YEAR-TO-DATE

 

 

 

February 1,

 

February 2,

 

 

 

2014

 

2013

 

Return on Invested Capital

 

 

 

 

 

Numerator (a)

 

 

 

 

 

Operating profit on a 53 week basis in fiscal year 2012

 

$

2,725

 

$

2,764

 

53rd week operating profit adjustment

 

 

(100

)

LIFO charge

 

52

 

55

 

Depreciation

 

1,703

 

1,652

 

Rent on a 53 week basis in fiscal year 2012

 

613

 

628

 

53rd week rent adjustment

 

 

(12

)

Adjustments for the UFCW consolidated pension plan liability and credit card settlement

 

 

(115

)

Other

 

16

 

 

 

 

 

 

 

 

Adjusted operating income on a 52 week basis

 

$

5,109

 

$

4,872

 

 

 

 

 

 

 

Denominator (b)

 

 

 

 

 

Average total assets

 

$

26,974

 

$

24,044

 

Average taxes receivable (c)

 

(10

)

(22

)

Average LIFO reserve (d)

 

1,124

 

1,071

 

Average accumulated depreciation

 

14,991

 

14,051

 

Average trade accounts payable

 

(4,691

)

(4,382

)

Average accrued salaries and wages

 

(1,084

)

(1,061

)

Average other current liabilities (e) 

 

(2,544

)

(2,314

)

Adjustment for Harris Teeter (f)

 

(1,626

)

 

Rent * 8 (g)

 

4,904

 

4,928

 

 

 

 

 

 

 

Average invested capital

 

$

38,038

 

$

36,315

 

 

 

 

 

 

 

Return on Invested Capital

 

13.43

%

13.42

%

 


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 for Harris Teeter.

 

g)   The factor of eight estimates the hypothetical capitalization of our operating leases.