01—Abstract
Summary
Summary of the 10-K filed March 27, 2012. Cited figures are marked; the original filing is the authoritative source.
The Kroger Co. reported net earnings attributable to The Kroger Co. of $602 milliona, or $1.01 per diluted share, for the fiscal year ended January 28, 2012, on sales of $90.37 billion (up 10.1% from $82.05 billion).
Results include a charge of $953 millionb pre-tax ($591 million after-tax) related to the consolidation of multi-employer pension plans (the UFCW consolidated pension plan). Excluding this charge, adjusted net earnings were $1.2 billion, or $2.00 per diluted share. Identical supermarket sales excluding fuel grew 4.9%, the company's 33rd consecutive quarter of positive identical sales growth excluding fuel, and fuel sales rose 42.6% on a 26.3% increase in average retail fuel prices.
The LIFO charge rose to $216 millionc from $57 million, reflecting higher product cost inflation. Liquidity and balance sheet items show total debt of about $8.2 billion including capital leases and financing obligations, cash of $188 million, and $475 million remaining on a $1 billion share repurchase program. The company repurchased $1.5 billion of common shares in 2011 and paid dividends of $257 million.
Kroger estimates its share of underfunding in multi-employer pension plans at $2.3 billiond pre-tax, and expects to contribute approximately $240 million to these plans in 2012. The filing also discloses a Tax Court case with a potential adverse cash payment of up to approximately $553 million, including interest.
For fiscal 2012, management guides to net earnings per diluted share of $2.28 to $2.38, identical supermarket sales growth excluding fuel of 3.0% to 3.5%, and capital investments of $1.9 billion to $2.2 billion. The guidance assumes the benefit of a 53rd week and a lower expected LIFO charge, which management projects at $140 million to $190 million.
02—Key points
Key Highlights
- Net earnings attributable to The Kroger Co. were $602 million, or $1.01 per diluted share, in fiscal 2011, versus $1.116 billion in fiscal 2010, including a $591 million after-tax UFCW consolidated pension plan charge.
- Adjusted net earnings excluding the pension charge were $1.2 billion, or $2.00 per diluted share.
- Total sales increased 10.1% to $90.37 billion, driven by a 42.6% rise in supermarket fuel sales and identical supermarket sales growth of 4.9% excluding fuel.
- Gross FIFO margin rate fell to 21.13% of sales from 22.31% in 2010, and the LIFO charge increased to $216 million from $57 million.
- Kroger repurchased $1.5 billion of common shares and paid $257 million in dividends in 2011; $475 million remained under the September 2011 $1 billion repurchase program.
- Kroger's share of multi-employer pension underfunding was estimated at $2.3 billion pre-tax, and 2012 multi-employer contributions are expected at about $240 million, with meaningful future increases anticipated.
- 2012 guidance calls for diluted EPS of $2.28 to $2.38 and identical supermarket sales growth excluding fuel of 3.0% to 3.5%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Kroger kept $0.01.
- Revenue$90.27B100.0%
- Cost of revenue−$71.49B79.2%
- Gross profit$18.77B20.8%
- Operating costs−$17.50B19.4%
- Operating income$1.28B1.4%
- Interest, other & tax−$682.0M0.8%
- Net income$596.0M0.7%
Where FY2012 revenue went
$90.27B- Cost of revenue: $71.49B, 79% of revenue
- Operating costs: $17.50B, 19% of revenue
- Net income: $596.0M, 0.7% of revenue
- Interest, other & tax: $682.0M, 0.8% of revenue
Kept 0.7% as net incomeNet income $596.0M · 0.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed March 27, 2012Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $90.27B$82.05B | +10.0% |
| Cost of Revenue | $71.49B$63.80B | +12.1% |
| Gross Profit | $18.77B$18.25B | +2.9% |
| Operating Income | $1.28B$2.18B | −41.4% |
| Interest Expense | $435.00M$448.00M | −2.9% |
| Net Income | $596.00M$1.13B | −47.4% |
| EPS (Basic) | $1.01$1.75 | −42.3% |
| EPS (Diluted) | $1.01$1.74 | −42.0% |
| Shares Outstanding (Basic) | 590.00M635.00M | −7.1% |
| Shares Outstanding (Diluted) | 593.00M638.00M | −7.1% |
05—Questions
Frequently Asked Questions
Why did Kroger's 2011 earnings fall so sharply compared with 2010?
Net earnings attributable to The Kroger Co. fell to $602 million from $1.116 billion, mainly because of the $953 million pre-tax ($591 million after-tax) charge tied to the consolidation of multi-employer pension plans into the UFCW consolidated pension plan. Excluding this charge, adjusted net earnings were $1.2 billion, or $2.00 per diluted share, compared with $1.76 per diluted share adjusted in 2010.
What drove sales growth in fiscal 2011?
Total sales rose 10.1% to $90.37 billion. Identical supermarket sales excluding fuel grew 4.9%, and supermarket fuel sales rose 42.6%, reflecting a 26.3% increase in average retail fuel prices and a 13.0% increase in fuel gallons sold.
How much debt does Kroger carry, and what liquidity does it have?
Total debt, including capital leases and financing obligations, was about $8.2 billion at year-end 2011. Cash and temporary cash investments were $188 million. Kroger had $370 million of commercial paper outstanding and an unsecured $2 billion revolving credit facility maturing January 25, 2017, and it estimates 12-month liquidity needs of about $3.6 billion.
What is the outlook for fiscal 2012?
Kroger expects net earnings per diluted share of $2.28 to $2.38, identical supermarket sales growth excluding fuel of 3.0% to 3.5%, capital investments of $1.9 billion to $2.2 billion, and an annualized LIFO charge of $140 million to $190 million. The guidance assumes the benefit of a 53rd week.
What are the main risks flagged in the filing?
Key risks include intense price competition, labor relations (about 300 collective bargaining agreements, with several contracts expiring in 2012), growing multi-employer pension funding requirements, and the possibility that a Tax Court decision could require a cash payment of up to about $553 million, including interest. The company also cites food safety, cybersecurity, and weather-related disruption.
06—Continue