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Kroger Annual Report (Amendment), Year Ended Dec 28, 1996

Filing Date
Filed April 24, 1997
Period End
December 28, 1996
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/A filed April 24, 1997. Cited figures are marked; the original filing is the authoritative source.

The Kroger Co. reported record 1996 sales of $25.17 billiona, up 5.1% from $23.94 billion in 1995, with food stores sales of $23.51 billion (up 4.5%) and convenience stores sales of $948 million (up 11.6%).

Results were held back by work stoppages at the King Soopers and City Markets divisions, which the filing says reduced identical store sales growth to .5% for the full year (1.0% excluding the strike). Net earnings rose to $349.8 millionb in 1996 from $302.8 million in 1995, helped by lower extraordinary losses ($2.9 million versus $16.1 million) and net interest expense that declined to $300.0 million from $312.7 million. EBITD, a covenant-related measure, increased 6.7% to $1.241 billion, and the company stated it was in compliance with all Credit Agreement covenants at year-end.

Cash flow and balance sheet items show more pressure. Cash from operating activities fell to $477.8 millionc from $798.5 million, mainly due to a $224.5 million increase in net owned inventories and a $120.6 million rise in prepaid and other assets. Capital expenditures were $733.8 million, and the company expects 1997 capital spending of approximately $800 to $850 million.

Long-term obligations including capital leases were $3.66 billion, and the shareowners' deficit narrowed to $1.18 billiond from $1.60 billion. The company is prohibited from paying cash dividends under its Credit Agreement.

Management highlighted several 1997 initiatives: a stock repurchase program to offset dilution from employee stock options, redemption of about $142 million of 9 3/4% Senior Subordinated Debentures in February 1997, and plans to open or expand roughly 100 stores. The filing also notes that more than 200 collective bargaining agreements cover about 160,000 employees, with major contracts in Phoenix, Dallas, Atlanta and Nashville to be negotiated in 1997, and that a prolonged work stoppage could have a material adverse effect.

02—Key points

Key Highlights

  1. Sales from continuing operations reached a record $25.17 billion in 1996, up 5.1% from $23.94 billion in 1995.
  2. Net earnings were $349.8 million, or $2.65 fully diluted per share, compared with $302.8 million, or $2.38, in 1995.
  3. EBITD rose 6.7% to $1.241 billion, and the company said it was in compliance with all Credit Agreement covenants at December 28, 1996.
  4. Operating cash flow fell to $477.8 million from $798.5 million, mainly due to a $224.5 million increase in net owned inventories.
  5. Capital expenditures totaled $733.8 million in 1996, with 1997 spending planned at $800 to $850 million.
  6. Net interest expense declined to $300.0 million from $312.7 million, and the company expects about $295 million in 1997.
  7. Labor risk: work stoppages at King Soopers and City Markets affected 1996 results, and major union contracts in Phoenix, Dallas, Atlanta and Nashville will be negotiated in 1997.

03—Questions

Frequently Asked Questions

  1. How did Kroger perform in 1996?

    Kroger reported record sales of $25.17 billion, up 5.1%, and net earnings of $349.8 million, up from $302.8 million in 1995. Identical store sales rose only .5% for the full year because of strikes at the King Soopers and City Markets divisions.

  2. Why did operating cash flow decline in 1996?

    Cash from operations fell to $477.8 million from $798.5 million, primarily because operating assets and liabilities used $248.5 million of cash. The largest factor was a $224.5 million increase in net owned inventories tied to the storing program and warehouse expansions, and prepaid and other assets rose $120.6 million, largely from funding a Voluntary Employee Benefit Association Trust.

  3. Can Kroger pay dividends?

    No. The filing states the company is prohibited from paying cash dividends under the terms of its Credit Agreement, and the shareowners' deficit was $1.18 billion at year-end 1996.

  4. What are Kroger's plans for 1997?

    The company plans capital expenditures of approximately $800 to $850 million, to open or expand about 100 stores, and to increase food store square footage 5 to 6%. It also began a stock repurchase program to reduce dilution from employee stock options and redeemed about $142 million of 9 3/4% Senior Subordinated Debentures in February 1997.

  5. What are the main risks mentioned in the filing?

    The filing cites competitive pressure from other food retailers, supercenters, mass merchandisers and restaurants, labor disputes, and the company's ability to access public debt and equity markets on satisfactory terms. It also warns that a prolonged work stoppage affecting many stores could have a material adverse effect on operations.

04—Continue

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