01—Abstract
Summary
Summary of the 10-K filed March 30, 2010. Cited figures are marked; the original filing is the authoritative source.
The Kroger Co. reported fiscal 2009 (52 weeks ended January 30, 2010) sales of $76.73 billiona, up 0.8% from $76.15 billion in 2008, with net earnings attributable to The Kroger Co. of $70 million, or $0.11 per diluted share.
That result includes non-cash goodwill impairment charges of $1.05 billionb after-tax ($1.113 billion pre-tax) tied to the Ralphs division in southern California. Excluding these charges, adjusted earnings were $1.71 per diluted share, compared with $1.89 in 2008. The company attributes the decline in adjusted results to lower retail fuel margins and decreased operating profit, partly offset by a lower LIFO charge of $49 million versus $196 million in 2008.
Identical supermarket sales excluding fuel rose 2.1%, and management said it did not reach its original goals of 3% to 4% identical sales growth and $2.00 to $2.05c per diluted share. The balance sheet shows total debt of about $8.1 billion, cash flow from operations of $2.9 billion, and capital expenditures of $2.3 billion. Total debt was roughly flat year over year.
The company had no borrowings under its $2.5 billiond credit facility or commercial paper at year-end, and it was in compliance with its financial covenants. Management guides to 2010 diluted EPS of $1.60 to $1.80, identical supermarket sales growth excluding fuel of 2.0% to 3.0%, and capital expenditures of $1.9 billion to $2.1 billion.
It also expects to contribute about $250 million to multi-employer pension plans and reports an estimated $2.7 billion pre-tax share of underfunding in those plans. Key risks flagged in the filing include about 305 collective bargaining agreements, with major store-employee contracts to be negotiated in 2010, rising multi-employer pension contributions, intense price competition, and an open Tax Court case with potential cash payments of up to about $488 million, including interest, if the Commissioner prevails.
02—Key points
Key Highlights
- Fiscal 2009 sales were $76.73 billion, up 0.8% from $76.15 billion in 2008, with 2,468 supermarkets and multi-department stores as of January 30, 2010.
- Net earnings attributable to The Kroger Co. were $70 million, or $0.11 per diluted share, after a $1.113 billion pre-tax goodwill impairment charge tied to the Ralphs division in southern California.
- Excluding the impairment charges, adjusted diluted EPS was $1.71, compared with $1.89 in 2008, due to lower retail fuel margins and lower operating profit.
- Identical supermarket sales excluding fuel increased 2.1% in 2009, below the original 3% to 4% goal; the company reported a last-quarter deflation effect on sales.
- Cash from operations was $2.9 billion, capital expenditures were $2.3 billion, and total debt was about $8.1 billion, with no borrowings under the $2.5 billion credit facility at year-end.
- 2010 guidance calls for diluted EPS of $1.60 to $1.80, identical supermarket sales growth excluding fuel of 2.0% to 3.0%, and capital investments of $1.9 billion to $2.1 billion.
- Multi-employer pension underfunding is estimated at $2.7 billion pre-tax for Kroger's share, with about $250 million of 2010 contributions expected; a Tax Court case could require up to about $488 million in cash if adverse.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Kroger kept $0.00.
- Revenue$76.61B100.0%
- Cost of revenue−$58.85B76.8%
- Gross profit$17.76B23.2%
- Operating costs−$16.67B21.8%
- Operating income$1.09B1.4%
- Interest, other & tax−$1.03B1.3%
- Net income$57.0M0.1%
Where FY2010 revenue went
$76.61B- Cost of revenue: $58.85B, 77% of revenue
- Operating costs: $16.67B, 22% of revenue
- Net income: $57.0M, 0.1% of revenue
- Interest, other & tax: $1.03B, 1.3% of revenue
Kept 0.1% as net incomeNet income $57.0M · 0.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed March 30, 2010Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $76.61B$76.15B | +0.6% |
| Cost of Revenue | $58.85B$58.54B | +0.5% |
| Gross Profit | $17.76B$17.60B | +0.9% |
| Operating Income | $1.09B$2.45B | −55.5% |
| Interest Expense | $502.00M$485.00M | +3.5% |
| Net Income | $57.00M$1.25B | −95.4% |
| EPS (Basic) | $0.11$1.91 | −94.2% |
| EPS (Diluted) | $0.11$1.89 | −94.2% |
| Shares Outstanding (Basic) | 647.00M652.00M | −0.8% |
| Shares Outstanding (Diluted) | 650.00M658.00M | −1.2% |
05—Questions
Frequently Asked Questions
Why was Kroger's 2009 reported EPS so much lower than in 2008?
Net earnings attributable to The Kroger Co. were $70 million, or $0.11 per diluted share, because of a $1.113 billion pre-tax goodwill impairment charge (about $1.05 billion after-tax) on the Ralphs division in southern California. Excluding the charge, adjusted diluted EPS was $1.71, compared with $1.89 in 2008.
What drove the operating performance in 2009?
Identical supermarket sales excluding fuel rose 2.1%, and the company reported increased transaction counts but a lower average sale per trip. Results were pressured by deflation, intense competition, lower retail fuel margins and decreased operating profit. The LIFO charge fell to $49 million from $196 million in 2008.
How is Kroger's debt and liquidity position?
Total debt, including capital leases and financing obligations, was about $8.1 billion at year-end 2009, roughly flat from 2008. The company had no borrowings under its $2.5 billion credit facility, money market lines or commercial paper at January 30, 2010, and it reported compliance with its financial covenants.
What is the outlook for 2010?
Kroger expects 2010 diluted EPS of $1.60 to $1.80, identical supermarket sales growth excluding fuel of 2.0% to 3.0%, an effective tax rate of about 37.0%, and capital expenditures of $1.9 billion to $2.1 billion. It also expects contributions of about $110 million to Company-sponsored pension plans and about $250 million to multi-employer plans.
What are the main risks flagged in the filing?
The filing highlights labor relations, with about 305 collective bargaining agreements and major store-employee contracts to be negotiated in 2010, which could lead to work stoppages. It also flags rising multi-employer pension costs, competitive pressure, and a pending Tax Court case in which an adverse decision would require a cash payment of up to about $488 million, including interest.
06—Continue