01—Abstract
Summary
Summary of the 10-K filed March 22, 1996. Cited figures are marked; the original filing is the authoritative source.
The Kroger Co. reported record 1995 results for its fiscal year ended December 30, 1995, with total sales of $23.94 billiona, up 4.3% from $22.96 billion in 1994, and net earnings of $302.8 million, or $2.38 per fully diluted share, compared with $242.2 million in 1994.
Food Stores sales rose 4.9% to $22.49 billionb, while Convenience Stores sales fell 5.4% to $850 million following the January 1995 sale of Time Savers Stores, Inc. Identical food store sales increased 1.4% for the full year. EBITD, a covenant-based measure, rose 9.2% to $1.163 billion. Net interest expense declined to $312.7 million from $327.6 million, and shareowners' deficit narrowed to $1.60 billion from $2.15 billion.
The company has not paid dividends on its common stock for the past two fiscal years and is prohibited from paying cash dividends under its Credit Agreement. Debt reduction was a central theme. The company converted its $200 millionc 6 3/8% Convertible Junior Subordinated Notes into about 10.7 million common shares, and repurchased $283.0 million of high-yield senior and subordinated debt.
Long-term debt, including capital leases and current portion, fell $382 million to $3.524 billiond. The company was in compliance with all Credit Agreement covenants at year-end, and the $1.75 billion revolving credit facility runs through July 20, 2002. Capital expenditures rose 36% to $726.1 million, and management guided 1996 capital spending to $800-$850 million, with 115 to 120 store openings or expansions planned.
Management expects continued sales growth in 1996 from store expansion, with food store square footage projected to rise 6-7%. Management also cited ongoing labor and litigation risks, including more than 200 collective bargaining agreements covering about 160,000 employees and a pending Tax Court case on 1984-1986 tax years. Management does not expect the litigation to have a material adverse effect on financial position.
02—Key points
Key Highlights
- Total sales of $23.94 billion in 1995, up 4.3% from $22.96 billion in 1994; the company describes these as record sales.
- Net earnings of $302.8 million, or $2.38 per fully diluted share, versus $242.2 million, or $1.98, in 1994.
- EBITD rose 9.2% to $1.163 billion; net interest expense fell to $312.7 million from $327.6 million.
- Long-term debt including capital leases declined $382 million to $3.524 billion; $283.0 million of high-yield debt was repurchased and retired.
- Capital expenditures of $726.1 million in 1995, a 36% increase; 1996 guidance is $800-$850 million.
- Shareowners' deficit narrowed to $1.60 billion from $2.15 billion; no cash dividends were paid in the past two fiscal years, and the Credit Agreement prohibits them.
- Operates 1,325 supermarkets in 24 states and 819 Dillon convenience stores, with about 205,000 employees.
03—Questions
Frequently Asked Questions
Did Kroger's sales and earnings grow in 1995?
Yes. Sales rose 4.3% to $23.94 billion, and net earnings increased to $302.8 million from $242.2 million. Fully diluted earnings per share were $2.38, compared with $1.98 in 1994. Food Stores sales grew 4.9%, while Convenience Stores sales fell 5.4%, largely due to the sale of Time Savers Stores, Inc.
Does Kroger pay dividends?
No. The company has not paid dividends on its common stock for the past two fiscal years. Its Credit Agreement prohibits cash dividends, though it permits dividends payable in stock.
How did Kroger manage its debt in 1995?
Kroger converted its $200 million 6 3/8% Convertible Junior Subordinated Notes into about 10.7 million common shares and repurchased $283.0 million of high-yield senior and subordinated debt. Long-term debt including capital leases fell $382 million to $3.524 billion, and net interest expense declined to $312.7 million. The company was in compliance with all Credit Agreement covenants at year-end.
What are Kroger's plans for 1996?
Management plans to open or expand 115 to 120 stores, compared with 83 in 1995, and expects food store square footage to rise 6-7%. Capital expenditures are projected at $800-$850 million. Management expects another year of improved total sales, though the expansion strategy is expected to weigh on identical store sales and operating, general and administrative expense rates.
What are the main risks identified in the filing?
Key risks include intense competition from supermarkets, supercenters, mass merchandisers and restaurants; labor risk, since more than 200 union agreements cover about 160,000 employees and a prolonged work stoppage could materially affect operations; and a pending U.S. Tax Court case on 1984-1986 tax years. Management believes pending litigation and claims will not have a material adverse effect on financial position.
04—Continue