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Kroger Annual Report, Year Ended Jan 31, 2004

Filing Date
Filed April 14, 2004
Period End
January 31, 2004
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 April 14, 2004. Cited figures are marked; the original filing is the authoritative source.

The Kroger Co. reported net earnings of $315 milliona, or $0.42 per diluted share, for the fiscal year ended January 31, 2004, down sharply from $1.52 per diluted share in 2002 (a decrease the filing describes as approximately 72.4%).

Sales rose to $53.79 billionb from $51.76 billion, an annual increase of 3.9%. Results were significantly affected by a $444 million non-cash goodwill impairment charge tied to the Smith's division, $120 million in asset impairment charges, and the estimated effects of labor disputes in southern California and the West Virginia area. Management said the labor disputes adversely affected sales, FIFO gross margin and operating, general and administrative expenses, and that the effective income tax rate rose to 59.1% largely because the goodwill impairment was non-deductible.

Operating cash flow declined to $2,215 millionc from $3,183 million in 2002, and total debt decreased to $8.4 billion. Shareowners' equity rose to $4,011 million. Management stated it expects 2004 earnings to be lower than 2003, excluding the labor dispute and unusual items, and expects capital investment of $1.8 to $2.0 billion for 2004.

The company has not paid cash dividends in the past three fiscal years, and it plans to use one-third of cash flow for debt reduction and two-thirds for stock repurchases or dividends. The company also disclosed pending contingencies, including a settlement of the southern California labor dispute with at least $147 milliond in payments expected in 2004 and projected pension contributions of $183 million by September 15, 2004. Management concluded the company's legal proceedings are not expected to have a material adverse effect on its financial position.

02—Key points

Key Highlights

  1. Net earnings fell to $315 million ($0.42 per diluted share) from $1,205 million ($1.52 per diluted share) in 2002, reflecting the goodwill and asset impairment charges and labor disputes.
  2. Sales reached $53.79 billion, up from $51.76 billion, an increase of 3.9% for 2003.
  3. A $444 million non-cash goodwill impairment charge related to the Smith's division, which is non-deductible for income tax purposes.
  4. Asset impairment charges totaled $120 million; the estimated effect of labor disputes was $177 million in FIFO gross margin and $216 million in OG&A.
  5. Operating cash flow decreased to $2,215 million from $3,183 million, and total debt declined to $8.4 billion.
  6. Management expects 2004 earnings to be lower than 2003, excluding the labor dispute and unusual items, and projects 2004 capital investment of $1.8 to $2.0 billion.
  7. No cash dividends were declared or paid in fiscal 2003 or 2002; the company is operating 2,532 supermarkets, 802 convenience stores and 440 fine jewelry stores.

03—Questions

Frequently Asked Questions

  1. Why did Kroger's earnings fall so sharply in fiscal 2003?

    Diluted earnings per share fell to $0.42 from $1.52 mainly because of a $444 million goodwill impairment charge at the Smith's division, $120 million in asset impairment charges, and the estimated effects of labor disputes in southern California and West Virginia. The filing also notes a 59.1% effective tax rate, driven largely by the non-deductible goodwill impairment.

  2. What is the outlook for 2004 earnings?

    Management expects earnings in 2004 to be lower than in 2003, excluding the effect of the labor dispute and unusual items. It said it cannot provide a more precise estimate because of uncertainties including the cost of the southern California labor dispute and the investment needed to rebuild its business in affected areas.

  3. How is Kroger using its cash flow and what are its capital plans?

    Kroger plans to use one-third of its cash flow for debt reduction and two-thirds for stock repurchases or payment of a cash dividend. It expects 2004 capital investment of $1.8 to $2.0 billion, excluding acquisitions, and it reported $2,000 million in capital expenditures for 2003. The company has not paid cash dividends in the past three fiscal years.

  4. What labor-related costs will affect Kroger in 2004?

    The company expects to pay at least $147 million in 2004 related to the settlement of the southern California labor dispute, with additional amounts due for 2004 activity. It also expects pension contributions of $183 million by September 15, 2004, and it noted that multi-employer pension plan contributions are expected to continue to increase.

  5. Are there significant legal risks disclosed in the filing?

    The filing describes a previously disclosed restatement-related class action that was dismissed with no appeal filed, and the SEC inquiry was terminated without enforcement action. Other pending claims, including antitrust and civil rights suits, are not expected by management to have a material adverse effect on the company's financial position.

04—Continue

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