01—Abstract
Summary
Summary of the 10-K filed April 2, 2013. Cited figures are marked; the original filing is the authoritative source.
The Kroger Co. reported fiscal 2012 (53 weeks ended February 2, 2013) net earnings attributable to The Kroger Co. of $1.5 billiona, or $2.77 per diluted share, compared with $602 million, or $1.01 per diluted share, in 2011.
Sales rose to $96.75 billionb from $90.37 billion. Management said adjusted net earnings were $1.4 billion, or $2.52 per diluted share, after excluding the 53rd week, a $74 million after-tax Visa and MasterCard settlement and a UFCW pension fund benefit. Identical supermarket sales excluding fuel increased 3.5%, and the company cited 37 consecutive quarters of positive identical supermarket sales growth excluding fuel.
The filing highlights several financial pressures. Total debt, including capital leases and financing obligations, was $8.9 billionc. The company estimated its share of underfunding in multi-employer pension plans at $1.8 billion pre-tax, and expects to contribute about $225 million to those plans in 2013.
Labor contracts covering store employees in Indianapolis, Houston, Dallas, Cincinnati and Seattle, among others, will be negotiated in 2013. Operating cash flow was $2.8 billiond, and capital investments were $2.1 billion excluding acquisitions and leased facility purchases.
For 2013, Kroger guided to net earnings per diluted share of $2.71 to $2.79, identical supermarket sales growth excluding fuel of 2.5% to 3.5%, and capital investments of $2.1 to $2.4 billion. The company also cited a long-term business model targeting annual earnings per diluted share growth of 8.0% to 11.0%, plus a dividend yield of 2.0% to 2.5%.
02—Key points
Key Highlights
- Net earnings attributable to The Kroger Co. were $1.5 billion, or $2.77 per diluted share, in fiscal 2012, versus $602 million, or $1.01 per diluted share, in 2011.
- Sales reached $96.75 billion, up from $90.37 billion, and the fiscal year included a 53rd week estimated at $91 million pre-tax in net earnings.
- Adjusted net earnings were $1.4 billion, or $2.52 per diluted share, excluding the extra week, a Visa and MasterCard settlement and a UFCW pension fund benefit.
- Identical supermarket sales excluding fuel rose 3.5%, with 37 consecutive quarters of positive growth on that measure.
- Total debt including capital leases and financing obligations was $8.9 billion, and the company repurchased $1.3 billion of its common shares in 2012.
- Kroger estimated its share of multi-employer pension plan underfunding at $1.8 billion pre-tax, and expects to contribute about $225 million to those plans in 2013.
- For 2013, the company expects net earnings of $2.71 to $2.79 per diluted share and identical supermarket sales growth excluding fuel of 2.5% to 3.5%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Kroger kept $0.02.
- Revenue$96.62B100.0%
- Cost of revenue−$76.73B79.4%
- Gross profit$19.89B20.6%
- Operating costs−$17.13B17.7%
- Operating income$2.76B2.9%
- Interest, other & tax−$1.26B1.3%
- Net income$1.51B1.6%
Where FY2013 revenue went
$96.62B- Cost of revenue: $76.73B, 79% of revenue
- Operating costs: $17.13B, 18% of revenue
- Net income: $1.51B, 1.6% of revenue
- Interest, other & tax: $1.26B, 1.3% of revenue
Kept 1.6% as net incomeNet income $1.51B · 1.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed April 2, 2013Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $96.62B$90.27B | +7.0% |
| Cost of Revenue | $76.73B$71.49B | +7.3% |
| Gross Profit | $19.89B$18.77B | +6.0% |
| Operating Income | $2.76B$1.28B | +116.3% |
| Interest Expense | $462.00M$435.00M | +6.2% |
| Net Income | $1.51B$596.00M | +153.0% |
| EPS (Basic) | $2.78$1.01 | +175.2% |
| EPS (Diluted) | $2.77$1.01 | +174.3% |
| Shares Outstanding (Basic) | 533.00M590.00M | −9.7% |
| Shares Outstanding (Diluted) | 537.00M593.00M | −9.4% |
05—Questions
Frequently Asked Questions
What drove the large increase in 2012 earnings?
Net earnings attributable to The Kroger Co. rose to $1.5 billion, or $2.77 per diluted share, from $602 million, or $1.01 per diluted share, in 2011. The 2011 results included a $591 million after-tax charge for consolidating four multi-employer pension plans into the UFCW consolidated pension plan, so the comparison is affected by that prior-year charge.
What adjustments did management make to 2012 earnings?
Management said 2012 benefited from an estimated $58 million after-tax from the 53rd week, a $74 million after-tax settlement with Visa and MasterCard, and a reduction in its obligation to fund the UFCW consolidated pension fund. Excluding these items, adjusted net earnings were $1.4 billion, or $2.52 per diluted share. The filing describes these adjusted measures as non-GAAP.
How much debt does Kroger carry and how will it be refinanced?
Total debt, including capital leases and lease-financing obligations, was $8.9 billion as of year-end 2012. The company expects to refinance $1.5 billion of debt in 2013, plus an additional issuance of about $500 million to replace senior notes that matured in the fourth quarter of 2012. Its $2 billion credit facility was undrawn apart from commercial paper backed by it, and it reported a Leverage Ratio of 1.81 to 1 against a covenant maximum of 3.50 to 1.
What risks does the filing highlight for 2013?
Kroger flagged 2013 labor negotiations covering store employees in Indianapolis, Houston, Dallas, Cincinnati and Seattle, among others, where a prolonged work stoppage could have a material adverse effect. It also cited rising health care and pension costs, the underfunding of multi-employer pension plans, intense price competition including supercenter expansion, and possible debt rating downgrades that could raise borrowing costs.
What does Kroger expect for 2013 financial performance?
Kroger expects 2013 net earnings of $2.71 to $2.79 per diluted share, identical supermarket sales growth excluding fuel of 2.5% to 3.5%, and capital investments of $2.1 to $2.4 billion excluding acquisitions and purchases of leased facilities. It also expects interest expense of about $440 million and an effective tax rate of about 35.5%, excluding the effect of resolving any tax issues.
06—Continue