01—Abstract
Summary
Summary of the 10-K filed March 31, 2015. Cited figures are marked; the original filing is the authoritative source.
The Kroger Co. reported fiscal 2014 (fiscal year ended January 31, 2015) sales of $108.47 billiona, up from $98.38 billion in 2013, with the increase primarily due to the Harris Teeter merger and identical supermarket sales growth, excluding fuel, of 5.2%.
Net earnings attributable to The Kroger Co. were $1.73 billionb, or $3.44 per diluted share, compared with $2.90 in 2013. Excluding Adjusted Items, diluted earnings per share were $3.52 versus $2.85, which management describes as a 24% increase. Results were affected by a $147 million LIFO charge, an $87 million pension plan restructuring charge, and $140 million in contributions to the UFCW Consolidated Pension Plan and the company's charitable foundation.
Cash flow from operations was $4.2 billionc, and the company repurchased $1.3 billion of common stock and paid $338 million in dividends. Total debt, including capital leases and financing obligations, was $11.7 billion, and the Leverage Ratio was 2.06 to 1 against a covenant maximum of 3.50 to 1. Management estimates its share of multi-employer pension underfunding at $1.8 billion pre-tax, and expects to contribute about $250 million to these plans in 2015.
For fiscal 2015, Kroger expects diluted net earnings per share of $3.80 to $3.90d, identical supermarket sales growth excluding fuel of 3.0% to 4.0%, capital investments of $3.0 billion to $3.3 billion, and an effective tax rate of approximately 35.0%. The company also noted it will negotiate several major union contracts in 2015 and that the Board declared a quarterly dividend of $0.185 per share.
02—Key points
Key Highlights
- Sales rose to $108.465 billion in 2014 from $98.375 billion in 2013, up 10.3%, driven by the Harris Teeter merger and 5.2% identical supermarket sales growth excluding fuel.
- Diluted net earnings per share were $3.44 in 2014 versus $2.90 in 2013; excluding Adjusted Items, diluted EPS was $3.52 versus $2.85.
- Operating profit was $3.137 billion, or 2.89% of sales, compared with $2.725 billion, or 2.77%, in 2013.
- Cash provided by operating activities was $4.163 billion, and capital investments excluding acquisitions and lease buyouts totaled $2.752 billion.
- Total debt including capital leases and financing obligations was $11.7 billion; the Leverage Ratio was 2.06 to 1 versus a 3.50 to 1 default threshold.
- The company repurchased $1.3 billion of common shares in 2014 and paid $338 million in dividends; the Board declared a $0.185 quarterly dividend for June 2015.
- Management guides to 2015 diluted EPS of $3.80 to $3.90, identical supermarket sales growth of 3.0% to 4.0% excluding fuel, and capital investments of $3.0 to $3.3 billion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Kroger kept $0.02.
- Revenue$108.47B100.0%
- Cost of revenue−$85.51B78.8%
- Gross profit$22.95B21.2%
- Operating costs−$19.82B18.3%
- Operating income$3.14B2.9%
- Interest, other & tax−$1.41B1.3%
- Net income$1.73B1.6%
Where FY2015 revenue went
$108.47B- Cost of revenue: $85.51B, 79% of revenue
- Operating costs: $19.82B, 18% of revenue
- Net income: $1.73B, 1.6% of revenue
- Interest, other & tax: $1.41B, 1.3% of revenue
Kept 1.6% as net incomeNet income $1.73B · 1.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed March 31, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $108.47B$98.38B | +10.3% |
| Cost of Revenue | $85.51B$78.14B | +9.4% |
| Gross Profit | $22.95B$20.24B | +13.4% |
| Operating Income | $3.14B$2.73B | +15.1% |
| Interest Expense | $488.00M$443.00M | +10.2% |
| Net Income | $1.73B$1.52B | +13.8% |
| EPS (Basic) | $1.74$1.47 | +18.4% |
| EPS (Diluted) | $1.72$1.45 | +18.6% |
| Shares Outstanding (Basic) | 981.00M1.03B | −4.6% |
| Shares Outstanding (Diluted) | 993.00M1.04B | −4.5% |
05—Questions
Frequently Asked Questions
What drove the increase in Kroger's 2014 sales and earnings?
Total sales increased 10.3% to $108.465 billion, primarily due to the Harris Teeter merger that closed on January 28, 2014, and identical supermarket sales growth excluding fuel of 5.2%. Net earnings improved to $1.728 billion, reflecting higher operating profit, partly offset by higher interest and tax expense. Fuel margin per gallon rose to $0.19 from $0.14.
How large are Kroger's pension-related obligations and risks?
Kroger estimates its share of the underfunding of multi-employer pension plans it contributes to at $1.8 billion pre-tax, or $1.2 billion after-tax. The filing states this is not a direct liability except for certain noted commitments, but could trigger substantial withdrawal liability if the company exits markets. Kroger expects to contribute about $250 million to these plans in 2015, and it is required to contribute an additional $75 million over four years under restructured pension agreements.
What is Kroger's liquidity and debt position?
Kroger estimates its liquidity needs over the next twelve months at about $5.2 billion. It can borrow about $2.75 billion daily under its commercial paper program, had $1.3 billion of commercial paper outstanding at January 31, 2015, and had a $2.75 billion revolving credit facility with no borrowings under it. The Leverage Ratio was 2.06 to 1, and the Fixed Charge Coverage Ratio was 4.99 to 1, both within covenant limits.
What does Kroger expect for fiscal 2015?
Kroger expects diluted net earnings per share of $3.80 to $3.90, consistent with a long-term growth rate of 8 to 11% off 2014 adjusted EPS of $3.52. It expects identical supermarket sales growth excluding fuel of 3.0% to 4.0%, capital investments of $3.0 to $3.3 billion, an annualized LIFO charge of about $75 million, interest expense of about $480 million, and an effective tax rate of about 35.0%.
06—Continue