CINCINNATI, Dec. 5, 2019 /PRNewswire/ -- The Kroger Co.
(NYSE: KR) today reported its third quarter 2019 results and
provided a Restock Kroger progress update on the
company's three-year transformation plan.
Comments from Chairman and CEO Rodney
McMullen
"Kroger's customer obsession and focus on operational excellence
continued to generate positive results in the third quarter.
Identical sales were the strongest since we started Restock
Kroger and gross margin rate, excluding fuel and pharmacy,
improved slightly in the quarter. At the same time, we continued to
reduce costs as a percentage of sales.
We are using the power of Kroger's stable and growing
supermarket business to create meaningful incremental operating
profit through the alternative profit stream businesses, which adds
up to a business built for long-term growth that generates
consistently attractive total shareholder returns. Kroger continues
to generate strong and durable free cash flow as reflected by the
fact that the company has reduced debt by $1.5 billion over the prior four quarters and
continues to increase its dividend to create shareholder value.
Restock Kroger is the right framework to reposition our
business to create value for all of our stakeholders, both today
and in the future."
Financial Results
|
3Q19 ($ in
millions; except EPS)
|
3Q18 (in
millions; except EPS)
|
ID Sales (Table
4)
|
2.5%
|
1.7%
|
EPS
|
$0.32
|
$0.39
|
Adjusted EPS
(Table 6)
|
$0.47
|
$0.48
|
Operating
Profit
|
$254
|
$647
|
Adjusted FIFO
Operating Profit (Table 7)
|
$653
|
$664
|
FIFO Gross Margin
Rate*
|
Decreased 24 basis
points
|
OG&A
Rate*
|
Decreased 15 basis
points
|
*without fuel and
adjustment items, if applicable
|
Total company sales were $28.0
billion in the third quarter, compared to $27.8 billion for the same period last year.
Excluding fuel and dispositions, sales grew 2.7%.
Gross margin was 22.1% of sales for the third quarter. The FIFO
gross margin rate excluding fuel decreased 24 basis points,
primarily driven by industry-wide lower gross margin rates in
pharmacy and continued growth in the specialty pharmacy business.
Gross margin rate excluding fuel and pharmacy improved
slightly.
LIFO charge for the quarter was $23
million, compared to $12
million for the same period last year, driven by higher
inflation in dry grocery, pharmacy and dairy.
The Operating, General & Administrative rate decrease of 15
basis points is due to broad based improvement of Restock
Kroger cost savings initiatives.
Third quarter results include an out-of-period charge of
$29 million related to an adjustment
for a provision of a pharmacy contract. This amount reduced third
quarter adjusted net earnings per diluted share by $0.03. There is no effect on earnings guidance as
a result of this contract going forward.
As a result of a portfolio review, Kroger has decided to divest
its interest in Lucky's Market and recognized a non-cash impairment
charge of $238 million in the third
quarter, and the portion of this charge attributable to Kroger is
$131 million.
The income tax rate for the third quarter was 35.6%. The
income tax rate is higher than the adjusted income tax rate because
a portion of the non-cash impairment charge related to Lucky's
Market is not attributable to Kroger (Table 9).
Capital Allocation Strategy
Kroger's financial strategy is to use its free cash flow to
drive growth while also maintaining its current investment grade
debt rating and returning capital to shareholders. The company
actively balances the use of its cash flow to achieve these
goals.
Consistent with its financial strategy, Kroger reduced net total
debt by $1.5 billion over the last
four quarters. Kroger's net total debt to adjusted EBITDA ratio is
2.50, compared to 2.72 a year ago (see Table 5). The company's net
total debt to adjusted EBITDA ratio target range is 2.30 to
2.50.
As a result of being within its targeted debt range, Kroger
plans to initiate share repurchases in the fourth quarter under its
$1 billion board authorization.
Earlier this year, Kroger increased the dividend by 14 percent,
marking the 13th consecutive year of dividend
increases.
2019 Guidance
|
IDS
(%)
|
EPS
($)
|
Operating
Profit
($B)
|
Tax
Rate
Range**
|
Cap
Ex
($B)
|
GAAP
|
N/A
|
$2.17 -
$2.27
|
$2.4 -
$2.5
|
24.0% -
24.5%
|
$3.0 -
$3.2
|
Adjusted*
|
2.0% -
2.25%
|
$2.15 -
$2.25
|
$2.9 -
$3.0
|
22.5% -
23.0%
|
N/A
|
* Without adjusted
items, if applicable; Operating profit represents FIFO Operating
Profit. Kroger is unable to provide a full reconciliation of the
GAAP and non-GAAP measures used in 2019 guidance without
unreasonable effort because it is not possible to predict certain
of our adjustment items with a reasonable degree of certainty. This
information is dependent upon future events and may be outside of
our control and its unavailability could have a significant impact
on 2019 GAAP financial results.
|
** These rates
reflect typical tax adjustments and do not reflect changes to the
rate from the completion of income tax audit examinations, which
cannot be predicted.
|
2020 Guidance
|
IDS
(%)
|
EPS
($)
|
Operating Profit
($B)
|
Tax
Rate**
|
Cap
Ex
($B)
|
Incremental
Alternative Profit ($M)
|
FCF
($B)
|
Share
Repurchase
($M)
|
Adjusted*
|
>2.25%
|
$2.30 -
$2.40
|
$3.0 -
$3.1
|
23.0%
|
$3.2-$3.4
|
$125-$150
|
$1.6-$1.8
|
$500-$1,000
|
* Without adjusted
items, if applicable; Operating profit represents FIFO Operating
Profit. Kroger is unable to provide a full reconciliation of the
GAAP and non-GAAP measures used in 2020 guidance without
unreasonable effort because it is not possible to predict certain
of our adjustment items with a reasonable degree of certainty. This
information is dependent upon future events and may be outside of
our control and its unavailability could have a significant impact
on 2020 GAAP financial results.
|
** This rate reflects
typical tax adjustments and does not reflect changes to the rate
from the completion of income tax audit examinations, which cannot
be predicted.
|
Third Quarter 2019 Restock Kroger Highlights
Redefine the Grocery Customer Experience
- Launched new contemporary logo and Fresh for
EveryoneTM brand transformation campaign
- Our Brands sales were up 3.4% vs. prior year
- Launched 231 new Our Brands items, including the Simple
Truth Plant Based collection, featuring fresh meatless burger
patties and other products that appeal to a growing number of
customers exploring meat and dairy alternatives
- Expanded to 1,915 Pickup locations and 2,326 Delivery
locations, covering over 96% of Kroger households and launched
fully-seamless Ship offering
- Announced Free Pickup promotion in most divisions through
January 1, 2020
- Expanded the availability of longer-lasting avocados, featuring
plant-based coating developed by Apeel Sciences to reduce food
waste, and introduced two new produce categories, Apeel asparagus
and Apeel limes
Partner for Customer Value
- Named the location of an additional Kroger-Ocado customer
fulfillment center in Wisconsin
- Kroger Precision Marketing increased engagement to over 1,000
brands this year
- Partnered with Europe's Infarm
to introduce the first in-store living produce farms in America in
Seattle-area QFC stores
Develop Talent
- Continued investment in Kroger associates with average hourly
rate now over $20 with comprehensive
benefits factored in
- Achieved record employee retention in one of the tightest labor
markets in years
- Recognized among the top 20 companies in the Wall Street
Journal diversity and inclusion ranking for S&P 500
companies
- Six emerging Kroger leaders named 2019 Progressive Grocer's
GenNext Award winners
Live Kroger's Purpose
- Awarded Best Community Improvement Program by the U.S. Chamber
of Commerce Foundation, recognizing the meaningful impact of
Kroger's bold Zero Hunger | Zero Waste social impact plan
- Named to Dow Jones Sustainability Index for seventh consecutive
year, driven by the company's progress toward its Zero Hunger |
Zero Waste and 2020 sustainability goals
- Continued to adopt standardized date labels for Our
Brands food products, providing simpler, easier-to-understand
product quality and safety information for customers
- Announced decision to stop selling e-cigarette products
- Partnered with the Cardinal Health Foundation to host drug take
back events across 25 states to combat the country's opioid
epidemic, resulting in the collection of 24,804 pounds of
medications
About Kroger
At The Kroger Co. (NYSE: KR), we are
Fresh for Everyone™ and dedicated to our Purpose: To Feed the
Human Spirit®. We are, across our family of companies, nearly half
a million associates who serve over 11 million customers daily
through a seamless shopping experience under a variety
of banner names. We are committed to creating
#ZeroHungerZeroWaste communities by 2025. To learn more about us,
visit our newsroom and investor relations site.
Kroger's third quarter 2019 ended on November 9, 2019.
Note: Fuel sales have historically had a low gross margin rate
and operating expense rate as compared to corresponding rates on
non-fuel sales. As a result, Kroger discusses the changes in these
rates excluding the effect of fuel.
Please refer to the supplemental information presented in the
tables for reconciliations of the non-GAAP financial measures used
in this press release to the most comparable GAAP financial measure
and related disclosure.
This press release contains certain statements that constitute
"forward-looking statements" about the future performance of the
company. These statements are based on management's assumptions and
beliefs in light of the information currently available to it. The
remarks contain certain forward-looking statements about the future
performance of the Company. These statements are based on
management's assumptions and beliefs in light of the information
currently available to it. Such statements are indicated by words
or phrases such as "build," "continue," "create," "deliver,"
"drive," "execute," "expect," "future," "guidance," "improve," "on
track," "strategy," "transformation," "trend," "vision," and
"will." Various uncertainties and other factors could cause actual
results to differ materially from those contained in the
forward-looking statements. These include the specific risk factors
identified in "Risk Factors" and "Outlook" in our annual report on
Form 10-K for our last fiscal year and any subsequent filings, as
well as the following:
- Kroger's ability to achieve sales, earnings, incremental FIFO
operating profit, and free cash flow goals may be affected by:
labor negotiations or disputes; changes in the types and numbers of
businesses that compete with Kroger; pricing and promotional
activities of existing and new competitors, including
non-traditional competitors, and the aggressiveness of that
competition; Kroger's response to these actions; the state of the
economy, including interest rates, the inflationary and
deflationary trends in certain commodities, changes in tariffs, and
the unemployment rate; the effect that fuel costs have on consumer
spending; volatility of fuel margins; changes in government-funded
benefit programs; manufacturing commodity costs; diesel fuel costs
related to Kroger's logistics operations; trends in consumer
spending; the extent to which Kroger's customers exercise caution
in their purchasing in response to economic conditions; the
uncertain pace of economic growth; changes in inflation or
deflation in product and operating costs; stock repurchases;
Kroger's ability to retain pharmacy sales from third party payors;
consolidation in the healthcare industry, including pharmacy
benefit managers; Kroger's ability to negotiate modifications to
multi-employer pension plans; natural disasters or adverse weather
conditions; the potential costs and risks associated with potential
cyber-attacks or data security breaches; the success of Kroger's
future growth plans; the ability to execute on Restock
Kroger; and the successful integration of merged companies and
new partnerships. Our ability to achieve these goals may also be
affected by our ability to manage the factors identified above. Our
ability to execute our financial strategy may be affected by our
ability to generate cash flow.
- Kroger's ability to achieve these goals may also be affected by
Kroger's ability to manage the factors identified above. Kroger's
ability to execute its financial strategy may be affected by its
ability to generate cash flow.
- Kroger's effective tax rate may differ from the expected rate
due to changes in laws, the status of pending items with various
taxing authorities, and the deductibility of certain expenses.
Kroger assumes no obligation to update the information contained
herein. Please refer to Kroger's reports and filings with the
Securities and Exchange Commission for a further discussion of
these risks and uncertainties.
Note: Kroger's quarterly conference call with investors will
broadcast live at 10 a.m. (ET) on
December 5, 2019
at ir.kroger.com. An on-demand replay of the webcast will be
available at approximately 1 p.m. (ET) on Thursday, December 5, 2019.
3rd Quarter 2019 Tables Include:
- Consolidated Statements of Operations
- Consolidated Balance Sheets
- Consolidated Statements of Cash Flows
- Supplemental Sales Information
- Reconciliation of Net Total Debt and Net Earnings Attributable
to The Kroger Co. to Adjusted EBITDA
- Net Earnings Per Diluted Share Excluding the Adjustment
Items
- Operating Profit Excluding the Adjustment Items
- 2018 Sales Reclassification
- Income Tax Rate Excluding the Impairment Charge Attributable to
the Minority Interest of Lucky's Market
Table
1.
|
THE KROGER
CO.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in millions, except
per share amounts)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRD
QUARTER
|
|
YEAR-TO-DATE
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SALES
|
|
|
|
|
$
27,974
|
|
100.0%
|
|
$
27,831
|
|
100.0%
|
|
$
93,393
|
|
100.0%
|
|
$
93,566
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MERCHANDISE COSTS,
INCLUDING ADVERTISING,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WAREHOUSING AND
TRANSPORTATION (a),
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AND LIFO CHARGE
(b)
|
|
|
21,798
|
|
77.9
|
|
21,753
|
|
78.2
|
|
72,787
|
|
77.9
|
|
73,147
|
|
78.2
|
|
|
OPERATING, GENERAL
AND ADMINISTRATIVE (a)
|
|
5,097
|
|
18.2
|
|
4,661
|
|
16.8
|
|
16,223
|
|
17.4
|
|
15,630
|
|
16.7
|
|
|
RENT
|
|
|
|
|
201
|
|
0.7
|
|
200
|
|
0.7
|
|
675
|
|
0.7
|
|
680
|
|
0.7
|
|
|
DEPRECIATION AND
AMORTIZATION
|
|
624
|
|
2.2
|
|
570
|
|
2.1
|
|
1,994
|
|
2.1
|
|
1,884
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
PROFIT
|
|
|
254
|
|
0.9
|
|
647
|
|
2.3
|
|
1,714
|
|
1.8
|
|
2,225
|
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST
EXPENSE
|
|
|
(137)
|
|
(0.5)
|
|
(142)
|
|
(0.5)
|
|
(463)
|
|
(0.5)
|
|
(479)
|
|
(0.5)
|
|
|
NON-SERVICE COMPONENT
OF COMPANY-SPONSORED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PENSION PLAN
COSTS
|
|
|
(1)
|
|
-
|
|
(6)
|
|
-
|
|
(2)
|
|
-
|
|
(19)
|
|
-
|
|
|
MARK TO MARKET (LOSS)
GAIN ON OCADO SECURITIES
|
|
106
|
|
0.4
|
|
(100)
|
|
(0.4)
|
|
166
|
|
0.2
|
|
152
|
|
0.2
|
|
|
GAIN ON SALE OF
BUSINESSES
|
|
-
|
|
-
|
|
-
|
|
-
|
|
176
|
|
0.2
|
|
1,782
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS BEFORE
INCOME TAX EXPENSE
|
|
222
|
|
0.8
|
|
399
|
|
1.4
|
|
1,591
|
|
1.7
|
|
3,661
|
|
3.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX
EXPENSE
|
|
|
79
|
|
0.3
|
|
91
|
|
0.3
|
|
398
|
|
0.4
|
|
834
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
INCLUDING NONCONTROLLING INTERESTS
|
|
143
|
|
0.5
|
|
308
|
|
1.1
|
|
1,193
|
|
1.3
|
|
2,827
|
|
3.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE
TO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCONTROLLING
INTERESTS
|
|
(120)
|
|
(0.4)
|
|
(9)
|
|
-
|
|
(139)
|
|
(0.2)
|
|
(24)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
$
263
|
|
0.9%
|
|
$
317
|
|
1.1%
|
|
$
1,332
|
|
1.4%
|
|
$
2,851
|
|
3.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER BASIC COMMON
SHARE
|
|
$
0.32
|
|
|
|
$
0.39
|
|
|
|
$
1.65
|
|
|
|
$
3.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE NUMBER
OF COMMON SHARES USED IN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
CALCULATION
|
|
|
802
|
|
|
|
797
|
|
|
|
800
|
|
|
|
814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER DILUTED COMMON
SHARE
|
|
$
0.32
|
|
|
|
$
0.39
|
|
|
|
$
1.64
|
|
|
|
$
3.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE NUMBER OF
COMMON SHARES USED IN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED
CALCULATION
|
|
807
|
|
|
|
807
|
|
|
|
805
|
|
|
|
822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIVIDENDS DECLARED
PER COMMON SHARE
|
|
$
0.160
|
|
|
|
$
0.140
|
|
|
|
$
0.460
|
|
|
|
$
0.405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
Certain percentages
may not sum due to rounding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
The Company defines
First-In First-Out (FIFO) gross profit as sales minus merchandise
costs, including advertising, warehousing and transportation, but
excluding the Last-In First-Out (LIFO) charge.
|
|
|
|
|
|
|
|
|
|
The Company defines
FIFO gross margin, as described in the earnings release, as FIFO
gross profit divided by sales.
|
|
|
|
|
|
|
|
|
|
The Company defines
FIFO operating profit as operating profit excluding the LIFO
charge.
|
|
|
|
|
|
|
|
|
|
The Company defines
FIFO operating margin, as described in the earnings release, as
FIFO operating profit divided by sales.
|
|
|
|
|
|
|
|
|
|
The above FIFO
financial metrics are important measures used by management to
evaluate operational effectiveness. Management believes these
FIFO financial metrics are useful to investors and analysts because
they measure our day-to-day operational effectiveness.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Merchandise costs
("COGS") and operating, general and administrative expenses
("OG&A") exclude depreciation and amortization expense and rent
expense which are included in separate expense lines.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
LIFO charges of $23
and $12 were recorded in the third quarter of 2019 and 2018,
respectively. For the year to date period, LIFO charges of
$69 and $39 were recorded for 2019 and 2018,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
Products and services
related primarily to Kroger Personal Finance and Media, which were
historically accounted for as an offset to OG&A, are now
classified as a component of sales, except for certain amounts in
Media, which are netted against COGS. These prior-year amounts have
been reclassified to conform to current-year presentation, which is
consistent with our Restock Kroger initiative and view of the
products and services as part of our core business strategy.
This is also more consistent with industry practice.
|
|
|
|
|
|
|
|
|
Table
2.
|
THE KROGER
CO.
|
CONSOLIDATED
BALANCE SHEETS
|
(in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November
9,
|
|
November
10,
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
$
417
|
|
$
393
|
|
|
Temporary cash
investments
|
|
|
128
|
|
36
|
|
|
Store deposits
in-transit
|
|
|
|
1,034
|
|
1,098
|
|
|
Receivables
|
|
|
|
|
1,600
|
|
1,510
|
|
|
Inventories
|
|
|
|
|
7,412
|
|
7,083
|
|
|
Assets held for
sale
|
|
|
|
-
|
|
172
|
|
|
Prepaid and other
current assets
|
|
|
434
|
|
461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
|
11,025
|
|
10,753
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
21,801
|
|
21,515
|
|
Operating lease
assets
|
|
|
|
6,847
|
|
-
|
|
Intangibles,
net
|
|
|
|
|
1,086
|
|
1,201
|
|
Goodwill
|
|
|
|
|
3,076
|
|
3,087
|
|
Other
assets
|
|
|
|
|
1,558
|
|
1,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
|
|
$
45,393
|
|
$
38,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREOWNERS' EQUITY
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
Current portion of
long-term debt including obligations
|
|
|
|
|
|
|
under finance
leases
|
|
|
|
$
1,417
|
|
$
3,371
|
|
|
Current portion of
operating lease liabilities
|
|
673
|
|
-
|
|
|
Trade accounts
payable
|
|
|
|
6,867
|
|
6,505
|
|
|
Accrued salaries and
wages
|
|
|
1,087
|
|
1,070
|
|
|
Liabilities held for
sale
|
|
|
|
-
|
|
57
|
|
|
Other current
liabilities
|
|
|
|
4,074
|
|
3,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
|
14,118
|
|
14,796
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
including obligations under finance leases
|
12,227
|
|
11,647
|
|
Noncurrent operating
lease liabilities
|
|
|
6,449
|
|
-
|
|
Deferred income
taxes
|
|
|
|
1,517
|
|
1,738
|
|
Pension and
postretirement benefit obligations
|
|
471
|
|
601
|
|
Other long-term
liabilities
|
|
|
|
1,883
|
|
1,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
|
36,665
|
|
30,531
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareowners'
equity
|
|
|
|
|
8,728
|
|
7,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Shareowners' Equity
|
|
$
45,393
|
|
$
38,141
|
|
|
|
|
|
|
|
|
|
|
|
|
Total common shares
outstanding at end of period
|
|
802
|
|
798
|
|
Total diluted shares
year-to-date
|
|
|
805
|
|
822
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
The Company adopted
ASU 2016-02, "Leases," and related amendments as of February 3,
2019 under the modified retrospective approach and has not revised
comparative periods.
|
|
|
|
|
|
|
|
Table
3.
|
THE KROGER
CO.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR-TO-DATE
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net earnings
including noncontrolling interests
|
|
$
1,193
|
|
$
2,827
|
|
|
Adjustments to
reconcile net earnings including noncontrolling
|
|
|
|
|
|
|
|
interests to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
1,994
|
|
1,884
|
|
|
|
|
Operating lease asset
amortization
|
|
494
|
|
-
|
|
|
|
|
LIFO
charge
|
|
|
|
69
|
|
39
|
|
|
|
|
Stock-based employee
compensation
|
|
117
|
|
115
|
|
|
|
|
Expense for
company-sponsored pension plans
|
|
32
|
|
54
|
|
|
|
|
Deferred income
taxes
|
|
|
(46)
|
|
148
|
|
|
|
|
Gain on sale of
businesses
|
|
|
(176)
|
|
(1,782)
|
|
|
|
|
Gain on the sale of
assets
|
|
|
(150)
|
|
-
|
|
|
|
|
Mark to market gain
on Ocado securities
|
|
(166)
|
|
(152)
|
|
|
|
|
Impairment of Lucky's
Market
|
|
|
238
|
|
-
|
|
|
|
|
Other
|
|
|
|
(1)
|
|
29
|
|
|
|
|
Changes in operating
assets and liabilities, net
|
|
|
|
|
|
|
|
|
|
of effects from
mergers and disposals of businesses:
|
|
|
|
|
|
|
|
|
|
|
Store deposits
in-transit
|
|
|
148
|
|
63
|
|
|
|
|
|
|
Receivables
|
|
|
93
|
|
(95)
|
|
|
|
|
|
|
Inventories
|
|
|
(636)
|
|
(601)
|
|
|
|
|
|
|
Prepaid and other
current assets
|
|
66
|
|
380
|
|
|
|
|
|
|
Trade accounts
payable
|
|
|
808
|
|
666
|
|
|
|
|
|
|
Accrued
expenses
|
|
|
299
|
|
270
|
|
|
|
|
|
|
Income taxes
receivable and payable
|
|
(145)
|
|
259
|
|
|
|
|
|
|
Contribution to
company-sponsored pension plan
|
|
-
|
|
(185)
|
|
|
|
|
|
|
Operating lease
liabilities
|
|
|
(477)
|
|
-
|
|
|
|
|
|
|
Proceeds from
contract associated with the sale of business
|
|
295
|
|
-
|
|
|
|
|
|
|
Other
|
|
|
|
(1)
|
|
(186)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
4,048
|
|
3,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
Payments for property
and equipment, including payments for lease buyouts
|
|
(2,363)
|
|
(2,257)
|
|
|
Proceeds from sale of
assets
|
|
|
257
|
|
76
|
|
|
Payments for
acquisitions, net of cash acquired
|
|
-
|
|
(197)
|
|
|
Purchases of
stores
|
|
|
|
-
|
|
(44)
|
|
|
Net proceeds from
sale of businesses
|
|
|
327
|
|
2,169
|
|
|
Purchases of Ocado
securities
|
|
|
-
|
|
(392)
|
|
|
Other
|
|
|
|
|
|
(45)
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by
investing activities
|
|
|
(1,824)
|
|
(630)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Proceeds from
issuance of long-term debt
|
|
61
|
|
1,033
|
|
|
Payments on long-term
debt including obligations under finance leases
|
|
(1,540)
|
|
(258)
|
|
|
Net payments on
commercial paper
|
|
|
(235)
|
|
(1,486)
|
|
|
Dividends
paid
|
|
|
|
(356)
|
|
(324)
|
|
|
Proceeds from
issuance of capital stock
|
|
32
|
|
55
|
|
|
Treasury stock
purchases
|
|
|
(34)
|
|
(1,996)
|
|
|
Other
|
|
|
|
|
|
(36)
|
|
(45)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by
financing activities
|
|
|
(2,108)
|
|
(3,021)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH
AND TEMPORARY
|
|
|
|
|
|
|
CASH
INVESTMENTS
|
|
|
116
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND TEMPORARY
CASH INVESTMENTS:
|
|
|
|
|
|
|
BEGINNING OF
YEAR
|
|
|
429
|
|
347
|
|
|
END OF
PERIOD
|
|
|
|
$
545
|
|
$
429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
capital investments:
|
|
|
|
|
|
|
|
Payments for property
and equipment, including payments for lease buyouts
|
|
$
(2,363)
|
|
$
(2,257)
|
|
|
Payments for lease
buyouts
|
|
|
24
|
|
-
|
|
|
Changes in
construction-in-progress payables
|
|
96
|
|
(49)
|
|
|
|
Total capital
investments, excluding lease buyouts
|
|
$
(2,243)
|
|
$
(2,306)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disclosure of cash
flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the
year for interest
|
|
$
407
|
|
$
424
|
|
|
|
Cash paid during the
year for income taxes
|
|
$
633
|
|
$
376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
|
The Company defines
free cash flow as cash provided by operating activities, minus
payments for property and equipment, including payments for lease
buyouts, adding back company-sponsored pension plan contributions
(if any) and excluding the effect of any cash taxes related to the
sale of strategic assets. Management believes free cash flow
is a useful metric to investors and analysts because it
demonstrates our ability to make share repurchases and other
strategic investments, pay dividends and manage debt
levels.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 4.
Supplemental Sales Information
|
(in millions, except
percentages)
|
(unaudited)
|
|
Items identified
below should not be considered as alternatives to sales or any
other GAAP measure of performance. Identical sales is an
industry-specific measure and it is important to review it in
conjunction with Kroger's financial results reported in accordance
with GAAP. Other companies in our industry may calculate
identical sales differently than Kroger does, limiting the
comparability of the measure.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IDENTICAL SALES
(a)
|
|
|
|
|
|
THIRD
QUARTER
|
|
YEAR-TO-DATE
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXCLUDING
FUEL
|
|
$
24,319
|
|
$
23,717
|
|
$
80,751
|
|
$
79,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXCLUDING
FUEL
|
|
2.5%
|
|
1.7%
|
|
2.0%
|
|
1.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Kroger defines
identical sales, excluding fuel, as sales to retail customers,
including sales from all departments at identical supermarket
locations, Kroger Specialty Pharmacy businesses, jewelry and
ship-to-home solutions. Kroger defines a supermarket as
identical when it has been in operation without expansion or
relocation for five full quarters. Additionally, sales from
all acquired businesses are treated as identical as if they were
part of the Company in the prior year. Products and services
related primarily to Kroger Personal Finance, which were
historically accounted for as an offset to OG&A, are now
classified as a component of sales. These prior-year amounts have
been reclassified to conform to current-year presentation and
included in identical sales in 2019 and 2018, which is consistent
with our Restock Kroger initiative and view of the products and
services as part of our core business strategy. This is also
more consistent with industry practice. This change increased
identical sales for the third quarter and year-to-date periods of
2018.
|
|
Table 5.
Reconciliation of Net Total Debt and
|
Net Earnings
Attributable to The Kroger Co. to Adjusted EBITDA
|
(in millions, except
for ratio)
|
(unaudited)
|
|
|
|
|
|
|
|
The items identified
below should not be considered an alternative to any GAAP measure
of performance or access to liquidity. Net total debt to
adjusted EBITDA is an important measure used by management to
evaluate the Company's access to liquidity. The items below
should be reviewed in conjunction with Kroger's financial results
reported in accordance with GAAP.
|
|
|
|
|
|
|
|
|
|
|
|
The following table
provides a reconciliation of net total debt.
|
|
|
|
|
|
|
|
|
|
|
November
9,
|
|
November
10,
|
|
|
|
|
2019
|
|
2018
|
|
Change
|
|
|
|
|
|
|
|
Current portion of
long-term debt including obligations
|
|
|
|
|
|
|
under
finance leases
|
|
$
1,417
|
|
$
3,371
|
|
$
(1,954)
|
Long-term debt
including obligations under finance leases
|
|
12,227
|
|
11,647
|
|
580
|
|
|
|
|
|
|
|
Total debt
|
|
13,644
|
|
15,018
|
|
(1,374)
|
|
|
|
|
|
|
|
Less: Temporary cash
investments
|
|
128
|
|
36
|
|
92
|
|
|
|
|
|
|
|
Net total debt
|
|
$
13,516
|
|
$
14,982
|
|
$
(1,466)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table
provides a reconciliation from net earnings attributable to The
Kroger Co. to adjusted EBITDA, as defined in the Company's credit
agreement, on a rolling four quarter 52 week basis.
|
|
|
|
|
|
|
|
|
|
Rolling Four Quarters
Ended
|
|
|
|
|
November
9,
|
|
November
10,
|
|
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to The Kroger Co.
|
|
$
1,591
|
|
$
3,705
|
|
|
LIFO charge
(credit)
|
|
59
|
|
(15)
|
|
|
Depreciation and
amortization
|
|
2,575
|
|
2,449
|
|
|
Interest
expense
|
|
605
|
|
627
|
|
|
Income tax expense
(benefit)
|
|
464
|
|
(123)
|
|
|
Adjustments for
pension plan withdrawal liabilities
|
|
299
|
|
338
|
|
|
Adjustment for Kroger
Specialty Pharmacy goodwill impairment
|
|
-
|
|
110
|
|
|
Adjustment for
Company-sponsored pension plan termination
|
|
-
|
|
502
|
|
|
Adjustment for mark
to market gain on Ocado securities
|
|
(241)
|
|
(152)
|
|
|
Adjustment for gain
on sale of convenience store business
|
|
-
|
|
(1,782)
|
|
|
Adjustment for gain
on sale of Turkey Hill Dairy
|
|
(106)
|
|
-
|
|
|
Adjustment for gain
on sale of You Technology
|
|
(70)
|
|
-
|
|
|
Adjustment for Home
Chef contingent consideration
|
|
15
|
|
-
|
|
|
Adjustment for loss
on settlement of financial instrument
|
|
42
|
|
-
|
|
|
Adjustment for
severance charge and related benefits
|
|
80
|
|
-
|
|
|
Adjustment for
impairment of Lucky's Market attributable to The Kroger Co.
(a)
|
|
131
|
|
-
|
|
|
53rd week EBITDA
adjustment
|
|
-
|
|
(131)
|
|
|
Other
|
|
(28)
|
|
(19)
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
$
5,416
|
|
$
5,509
|
|
|
|
|
|
|
|
|
|
Net total debt to
adjusted EBITDA ratio on a 52 week basis
|
|
2.50
|
|
2.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The adjustment
for impairment of Lucky's Market attributable to The Kroger Co.
excludes a $107 net loss attributable to the minority interest of
Lucky's Market.
|
|
|
Table 6. Net
Earnings Per Diluted Share Excluding the Adjustment
Items
|
(in millions, except
per share amounts)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The purpose of this
table is to better illustrate comparable operating results from our
ongoing business, after removing the effects on net earnings per
diluted common share for certain items described below.
Adjusted net earnings and adjusted net earnings per diluted share
are useful metrics to investors and analysts because they present
more accurately year-over-year comparisons for net earnings and net
earnings per diluted share because adjusted items are not the
result of normal operations. Items identified in this table
should not be considered alternatives to net earnings attributable
to The Kroger Co. or any other GAAP measure of performance.
These items should not be reviewed in isolation or considered
substitutes for the Company's financial results as reported in
accordance with GAAP. Due to the nature of these items, as
further described below, it is important to identify these items
and to review them in conjunction with the Company's financial
results reported in accordance with GAAP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table
summarizes items that affected the Company's financial results
during the periods presented.
|
|
|
|
|
|
|
|
|
THIRD
QUARTER
|
|
YEAR-TO-DATE
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
$
263
|
|
$
317
|
|
$
1,332
|
|
$
2,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTMENTS FOR
PENSION PLAN WITHDRAWAL LIABILITIES(a)(b)
|
|
35
|
|
-
|
|
101
|
|
(10)
|
|
ADJUSTMENT FOR GAIN
ON SALE OF CONVENIENCE STORE BUSINESS (a)(c)
|
|
-
|
|
-
|
|
-
|
|
(1,360)
|
|
ADJUSTMENT FOR GAIN
ON SALE OF TURKEY HILL DAIRY (a)(d)
|
|
-
|
|
-
|
|
(80)
|
|
-
|
|
ADJUSTMENT FOR GAIN
ON SALE OF YOU TECHNOLOGY (a)(e)
|
|
-
|
|
-
|
|
(52)
|
|
-
|
|
ADJUSTMENT FOR MARK
TO MARKET LOSS (GAIN) ON OCADO SECURITIES (a)(f)
|
|
(81)
|
|
77
|
|
(125)
|
|
(115)
|
|
ADJUSTMENT FOR
DEPRECIATION RELATED TO HELD FOR SALE ASSETS (a)(g)
|
|
-
|
|
-
|
|
-
|
|
(11)
|
|
ADJUSTMENT FOR
SEVERANCE CHARGE AND RELATED BENEFITS (a)(h)
|
|
61
|
|
-
|
|
61
|
|
-
|
|
ADJUSTMENT FOR
IMPAIRMENT OF LUCKY'S MARKET ATTRIBUTABLE TO THE KROGER CO.
(a)(i)
|
|
100
|
|
-
|
|
100
|
|
-
|
|
ADJUSTMENT FOR HOME
CHEF CONTINGENT CONSIDERATION (a)(j)
|
|
3
|
|
-
|
|
(13)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 AND 2018
ADJUSTMENT ITEMS
|
|
|
118
|
|
77
|
|
(8)
|
|
(1,496)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
|
|
|
|
|
|
|
|
|
EXCLUDING THE
ADJUSTMENT ITEMS ABOVE
|
|
$
381
|
|
$
394
|
|
$
1,324
|
|
$
1,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO.
|
|
|
|
|
|
|
|
|
|
|
PER DILUTED COMMON
SHARE
|
|
|
0.32
|
|
$
0.39
|
|
$
1.64
|
|
$
3.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTMENTS FOR
PENSION PLAN WITHDRAWAL LIABILITIES (k)
|
|
0.04
|
|
-
|
|
0.12
|
|
(0.01)
|
|
ADJUSTMENT FOR GAIN
ON SALE OF CONVENIENCE STORE BUSINESS (k)
|
|
-
|
|
-
|
|
-
|
|
(1.64)
|
|
ADJUSTMENT FOR GAIN
ON SALE OF TURKEY HILL DAIRY (k)
|
|
-
|
|
-
|
|
(0.10)
|
|
-
|
|
ADJUSTMENT FOR GAIN
ON SALE OF YOU TECHNOLOGY (k)
|
|
-
|
|
-
|
|
(0.06)
|
|
-
|
|
ADJUSTMENT FOR MARK
TO MARKET LOSS (GAIN) ON OCADO SECURITIES (k)
|
|
(0.10)
|
|
0.09
|
|
(0.16)
|
|
(0.14)
|
|
ADJUSTMENT FOR
DEPRECIATION RELATED TO HELD FOR SALE ASSETS (k)
|
|
-
|
|
-
|
|
-
|
|
(0.01)
|
|
ADJUSTMENT FOR
SEVERANCE CHARGE AND RELATED BENEFITS (k)
|
|
0.08
|
|
-
|
|
0.08
|
|
-
|
|
ADJUSTMENT FOR
IMPAIRMENT OF LUCKY'S MARKET ATTRIBUTABLE TO THE KROGER CO.
(k)
|
|
0.12
|
|
-
|
|
0.12
|
|
-
|
|
ADJUSTMENT FOR HOME
CHEF CONTINGENT CONSIDERATION (k)
|
|
0.01
|
|
-
|
|
(0.02)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 AND 2018
ADJUSTMENT ITEMS
|
|
|
0.15
|
|
0.09
|
|
(0.02)
|
|
(1.80)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
ATTRIBUTABLE TO THE KROGER CO. PER
|
|
|
|
|
|
|
|
|
|
|
DILUTED COMMON SHARE
EXCLUDING THE ADJUSTMENT ITEMS ABOVE
|
|
$
0.47
|
|
$
0.48
|
|
$
1.62
|
|
$
1.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE NUMBER OF
COMMON SHARES USED IN
|
|
|
|
|
|
|
|
|
|
|
DILUTED
CALCULATION
|
|
|
807
|
|
807
|
|
805
|
|
822
|
Table 6. Net
Earnings Per Diluted Share Excluding the Adjustment Items
(continued)
|
(in millions, except
per share amounts)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The amounts presented
represent the after-tax effect of each adjustment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
The pre-tax
adjustment for pension plan withdrawal liabilities was $45 in the
third quarter of 2019. The year-to-date pre-tax adjustments
were $131 and ($13) in the first three quarters of 2019 and 2018,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
The pre-tax
adjustment for gain on sale of convenience store business was
($1,782).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d)
|
The pre-tax
adjustment for gain on sale of Turkey Hill Dairy was
($106).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e)
|
The pre-tax
adjustment for gain on sale of You Technology was ($70).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(f)
|
The pre-tax
adjustment for mark to market loss (gain) on Ocado securities were
($106) and $100 in the third quarters of 2019 and 2018,
respectively. The year-to-date pre-tax adjustments were
($166) and ($152) in the first three quarters of 2019 and 2018,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(g)
|
The pre-tax
adjustment for depreciation related to held for sale assets was
($14).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(h)
|
The pre-tax
adjustment for severance charge and related benefits was
$80.
|
|
|
(i)
|
The pre-tax
adjustment for impairment of Lucky's Market was $238 including a
$107 net loss attributable to the minority interest of Lucky's
Market.
|
|
|
(j)
|
The pre-tax
adjustments for Home Chef contingent consideration was $4 in the
third quarter of 2019 and ($18) for the first three quarters of
2019.
|
|
|
(k)
|
The amounts presented
represent the net earnings per diluted common share effect of each
adjustment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
2019 Third Quarter
Adjustment items include adjustments for pension plan withdrawal
liabilities, the mark to market gain on Ocado securities, severance
charge, impairment of Lucky's Market and Home Chef contingent
consideration adjustment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 Adjustment Items
include the Third Quarter Adjustment Items plus the adjustments
that occurred in the first two quarter of 2019 for pension plan
withdrawal liabilities, the gain on sale of Turkey Hill Dairy, the
gain on sale of You Technology, the mark to market gain on Ocado
securities and Home Chef contingent consideration
adjustment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 Third Quarter
Adjustment item included the mark to market loss on Ocado
securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 Adjustment Items
include the 2018 Third Quarter Adjustment Item plus the adjustments
that occurred in the first two quarter of 2018 for pension plan
withdrawal liabilities, the gain on sale of convenience store
business, the mark to market gain on Ocado securities and
depreciation related to held for sale assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 7. Operating
Profit Excluding the Adjustment Items
|
(in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The purpose of this
table is to better illustrate comparable operating results from our
ongoing business, after removing the effects on operating profit
for certain items described below. Adjusted FIFO operating
profit is a useful metric to investors and analysts because they
present more accurately year-over year comparisons for operating
profit because adjusted items are not the result of normal
operations. Items identified in this table should not be
considered alternatives to operating profit or any other GAAP
measure of performance. These items should not be reviewed in
isolation or considered substitutes for the Company's financial
results as reported in accordance with GAAP. Due to the
nature of these items, as further described below, it is important
to identify these items and to review them in conjunction with the
Company's financial results reported in accordance with
GAAP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table
summarizes items that affected the Company's financial results
during the periods presented.
|
|
|
|
|
|
|
|
|
|
THIRD
QUARTER
|
|
YEAR-TO-DATE
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
|
$
254
|
|
$
647
|
|
$
1,714
|
|
$
2,225
|
|
LIFO
charge
|
|
|
|
23
|
|
12
|
|
69
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIFO Operating
profit
|
|
|
277
|
|
659
|
|
1,783
|
|
2,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for
pension plan withdrawal liabilities
|
|
45
|
|
-
|
|
131
|
|
(13)
|
|
Adjustment for
depreciation related to held for sale assets
|
|
-
|
|
-
|
|
-
|
|
(14)
|
|
Adjustment for Home
Chef contingent consideration
|
|
4
|
|
-
|
|
(18)
|
|
-
|
|
Adjustment for
severance charge and related benefits
|
|
80
|
|
-
|
|
80
|
|
-
|
|
Adjustment for
impairment of Lucky's Market (a)
|
|
238
|
|
-
|
|
238
|
|
-
|
|
Other
|
|
|
|
|
9
|
|
5
|
|
23
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 and 2018
Adjustment items
|
|
376
|
|
5
|
|
454
|
|
(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted FIFO
operating profit
|
|
|
|
|
|
|
|
|
|
|
|
excluding the
adjustment items above
|
|
$
653
|
|
$
664
|
|
$
2,237
|
|
$
2,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The adjustment for
impairment of Lucky's Market includes a $107 net loss attributable
to the minority interest of Lucky's Market.
|
Table 8. 2018
Sales Reclassification
|
(in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Products and services
related primarily to Kroger Personal Finance and Media, which were
historically accounted for as an offset to OG&A, are now
classified as a component of sales, except for certain amounts in
Media, which are netted against COGS. These prior-year amounts have
been reclassified to conform to current-year presentation, which is
consistent with our Restock Kroger initiative and view of the
products and services as part of our core business strategy.
This is also more consistent with industry practice.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables
summarize the Company's third quarter and first three quarters of
2018 sales reclassification:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRD QUARTER AS
PREVIOUSLY
STATED
|
|
RECLASSIFICATION
|
|
RECLASSIFIED
THIRD
QUARTER
|
|
|
|
|
|
|
|
2018
|
|
2018
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
SALES
|
|
|
|
|
|
$
27,672
|
|
$
159
|
|
$
27,831
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
MERCHANDISE COSTS,
INCLUDING ADVERTISING,
|
|
|
|
|
|
|
|
|
WAREHOUSING AND
TRANSPORTATION,
|
|
|
|
|
|
|
|
|
AND LIFO
CHARGE
|
|
|
21,699
|
|
54
|
|
21,753
|
|
OPERATING, GENERAL
AND ADMINISTRATIVE
|
|
4,556
|
|
105
|
|
4,661
|
|
RENT
|
|
|
|
|
200
|
|
-
|
|
200
|
|
DEPRECIATION AND
AMORTIZATION
|
|
570
|
|
-
|
|
570
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
PROFIT
|
|
|
|
$
647
|
|
$
-
|
|
$
647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR-TO-DATE AS
PREVIOUSLY
STATED
|
|
RECLASSIFICATION
|
|
RECLASSIFIED
YEAR-TO-DATE
|
|
|
|
|
|
|
|
2018
|
|
2018
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
SALES
|
|
|
|
|
|
$
93,071
|
|
$
495
|
|
$
93,566
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
MERCHANDISE COSTS,
INCLUDING ADVERTISING,
|
|
|
|
|
|
|
|
|
WAREHOUSING AND
TRANSPORTATION,
|
|
|
|
|
|
|
|
|
AND LIFO
CHARGE
|
|
|
72,991
|
|
156
|
|
73,147
|
|
OPERATING, GENERAL
AND ADMINISTRATIVE
|
|
15,291
|
|
339
|
|
15,630
|
|
RENT
|
|
|
|
|
680
|
|
-
|
|
680
|
|
DEPRECIATION AND
AMORTIZATION
|
|
1,884
|
|
-
|
|
1,884
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
PROFIT
|
|
|
|
$
2,225
|
|
$
-
|
|
$
2,225
|
Table 9.
Income Tax Rate Excluding the Impairment Charge Attributable to the
Minority Interest of Lucky's Market
|
(in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
This metric is useful
to investors and analysts because it illustrates the Company's
income tax rate excluding the impairment charge attributable to the
minority interest of Lucky's Market. This item should not be
reviewed in isolation or considered a substitute for the Company's
financial results as reported in accordance with GAAP. Due to
the nature of these items, as further described below, it is
important to identify these items and to review them in conjunction
with the Company's financial results reported in accordance with
GAAP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third
Quarter
|
|
|
2019
|
|
|
|
|
Income Tax
Expense
|
|
Income Tax
Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings before
income tax expense
|
|
$
222
|
|
$
79
|
|
35.6%
|
|
|
|
|
|
|
|
Adjustment for
impairment charge attributable to the minority interest of Lucky's
Market
|
|
107
|
|
-
|
|
|
|
|
|
|
|
|
|
Adjusted net earnings
before income tax expense excluding the adjustment above
|
|
$
329
|
|
$
79
|
|
24.0%
|
View original content to download
multimedia:http://www.prnewswire.com/news-releases/kroger-reports-third-quarter-2019-results-300970002.html
SOURCE The Kroger Co.