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Kroger Annual Report, Year Ended Jan 1, 1994

Filing Date
Filed March 11, 1994
Period End
January 1, 1994
Security
KR
In the record · 2016–202610-K1210-Q328-K137

KR filed 12 annual reports (10-K), 32 quarterly reports (10-Q) and 137 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Oct ’17Oct ’17
  2. Leadership change8-K · Dec ’19Dec ’19
  3. FY2022 annual report10-K · Mar ’22Mar ’22
  4. Impairment8-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 10-K filed March 11, 1994. Cited figures are marked; the original filing is the authoritative source.

The Kroger Co. reported net sales from continuing operations of $22.38 billiona for the fiscal year ended January 1, 1994, up from $22.14 billion in fiscal 1992, which was a 53-week year.

Net earnings were a loss of $12.2 millionb, compared with a loss of $5.9 million in 1992 and earnings of $79.9 million in 1991. The loss reflects a $159.2 million after-tax cumulative effect charge from adopting SFAS No. 106 for postretirement benefits and a $23.8 million extraordinary loss on early debt retirement. Earnings before extraordinary loss and the cumulative effect were $170.8 million, or $1.50 per fully diluted share, versus $101.2 million in 1992.

The company operated 1,277 supermarkets in 24 states and 931 convenience stores in 16 states, and it is the nation's largest supermarket operator by 1993 total sales. The balance sheet remains heavily leveraged, with a shareowners' deficit of $2.46 billionc and total long-term debt of $4.21 billion at year-end 1993, down from $4.55 billion a year earlier. Management reported EBITD of $976.8 million, up 7.5% from $908.2 million in 1992, and said the company was in compliance with all debt covenants.

Net interest expense fell to $390.0 milliond from $474.8 million, and the company expects 1994 net interest expense of $330 to $340 million. The company has not paid cash dividends on common stock for the past two fiscal years and is prohibited from paying them under its Credit Agreement. Capital expenditures rose to $376.1 million in 1993 and are expected to total about $1.5 billion over the next three years.

Management expects gross profit as a percent of sales to improve, citing coupon scanning, reduced multiple couponing, procurement savings, and private label growth. Risks identified in the filing include competitive pressure from new supermarket entries and supercenters, approximately 110,000 employees under collective bargaining agreements with some contracts expiring in 1994, and a planned drug store customer purchase discontinuation that is expected to reduce other sales by 45% to 50%.

02—Key points

Key Highlights

  1. Sales from continuing operations were $22.38 billion in fiscal 1993, up from $22.14 billion in 1992, which included an extra week.
  2. Net loss of $12.2 million, driven by a $159.2 million after-tax cumulative effect charge for SFAS No. 106 postretirement benefit accounting.
  3. Earnings before extraordinary loss and accounting change were $170.8 million, versus $101.2 million in 1992.
  4. EBITD rose 7.5% to $976.8 million, and the company reported compliance with all credit agreement and public debt covenants.
  5. Net interest expense fell to $390.0 million from $474.8 million, with the weighted average cost of long-term debt reduced to 8.2% from 11.6% at the start of 1990.
  6. Total long-term debt including capital leases and current portions decreased to $4.21 billion, and the shareowners' deficit was $2.46 billion.
  7. No cash dividends have been paid on common stock for the past two fiscal years, and the Credit Agreement prohibits them.

03—Questions

Frequently Asked Questions

  1. Why did Kroger report a net loss in 1993 when earnings before accounting changes improved?

    The net loss of $12.2 million included a $159.2 million after-tax, non-cash cumulative effect charge from adopting SFAS No. 106, which requires retiree health care costs to be expensed as employees render service. Earnings before the extraordinary loss and this charge were $170.8 million, up from $101.2 million in 1992.

  2. Is Kroger paying dividends to shareholders?

    No. The company has not paid dividends on its common stock for the past two fiscal years, and its restated Credit Agreement prohibits cash dividends during the agreement's term. The company may pay dividends in the form of stock.

  3. How is Kroger reducing its debt burden?

    Long-term debt including capital leases and current portions decreased $348 million to $4.206 billion at year-end 1993. The company refinanced high-yield subordinated debt with lower-rate senior and convertible notes, issued 13,275,000 common shares for $203.5 million, and reduced the weighted average cost of long-term debt to 8.2%.

  4. What does Kroger expect for 1994 interest expense and capital spending?

    Based on year-end 1993 rates, the company expects 1994 net interest expense of $330 million to $340 million. It expects capital expenditures of about $1.5 billion over the next three years and plans to increase food store square footage by 4.5% to 5% in 1994.

  5. What are the main risks to Kroger's operations?

    The filing cites intense competition from new supermarket entries in markets such as Atlanta and Indiana and from expanding supercenters, labor risk from more than 200 collective bargaining agreements covering about 110,000 employees, with a prolonged work stoppage possibly having a material adverse effect, and a drug store customer expected to discontinue purchases in early 1994, reducing other sales by 45% to 50%.

04—Continue

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