SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended October 5, 1996 or __ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ________________ to ______________ Commission file number 1-303 THE KROGER CO. An Ohio Corporation I.R.S. Employer Identification No. 31-0345740 1014 Vine Street, Cincinnati, OH 45202 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (513) 762-4000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . ---------- ---------- There were 126,141,021 shares of Common Stock ($1 par value) outstanding as of October 5, 1996. PART I - FINANCIAL INFORMATION Item 1. Financial Statements The unaudited information for the quarters ended October 5, 1996 and October 7, 1995 includes the results of operations of The Kroger Co. for the 16 and 40 week periods ended October 5, 1996 and October 7, 1995, and of Dillon Companies, Inc. for the 13 and 39 week periods ended September 28, 1996 and September 30, 1995. In the opinion of management, the information reflects all adjustments (consisting only of normal recurring adjustments) which are necessary for a fair presentation of results of operations for such periods but should not be considered as indicative of results for a full year. <TABLE> CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share amounts) (unaudited) <CAPTION> 3rd Quarter Ended 3 Quarters Ended ---------------------- ----------------------- October 5, October 7, October 5, October 7, 1996 1995 1996 1995 ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> Sales . . . . . . . . . . . . . . . . . . . . . . . . . $7,343,132 $6,959,216 $18,971,752 $18,077,061 ---------- ---------- ----------- ----------- Costs and expenses: Merchandise costs, including warehousing and transportation. . . . . . . . . . . . . . . . . . . . 5,582,031 5,284,006 14,362,201 13,681,241 Operating, general and administrative. . . . . . . . . 1,361,525 1,303,774 3,521,968 3,348,224 Rent . . . . . . . . . . . . . . . . . . . . . . . . . 88,913 86,561 227,958 227,711 Depreciation and amortization. . . . . . . . . . . . . 101,192 89,424 257,189 231,670 Interest expense, net. . . . . . . . . . . . . . . . . 91,831 93,430 232,979 243,393 --------- ---------- ----------- ----------- Total. . . . . . . . . . . . . . . . . . . . . . . 7,225,492 6,857,195 18,602,295 17,732,239 ---------- ---------- ----------- ----------- Earnings before income tax expense and extraordinary loss . . . . . . . . . . . . . . . . . . 117,640 102,021 369,457 344,822 Tax expense . . . . . . . . . . . . . . . . . . . . . . 45,292 39,344 142,241 135,205 ---------- ---------- ----------- ----------- Earnings before extraordinary loss. . . . . . . . . . . 72,348 62,677 227,216 209,617 Extraordinary loss (net of income tax credit) . . . . . (928) (1,516) (2,778) (12,303) ---------- ---------- ----------- ----------- Net earnings . . . . . . . . . . . . . . . . . . . $ 71,420 $ 61,161 $ 224,438 $ 197,314 ========== ========== =========== =========== <S> <C> <C> <C> <C> Primary earnings per common share: Earnings from operations . . . . . . . . . . . . . . . $ .55 $ .52 $ 1.73 $ 1.78 Extraordinary loss . . . . . . . . . . . . . . . . . . (.01) (.01) (.02) (.10) ----- ----- ------ ------ Net earnings . . . . . . . . . . . . . . . . . . . . $ .54 $ .51 $ 1.71 $ 1.68 ===== ===== ====== ====== Average number of common shares used in primary per share calculation. . . . . . . . . . . . . . . . . . . 131,499 121,617 131,009 117,669 Fully diluted earnings per common share: Earnings from operations . . . . . . . . . . . . . . . $ .55 $ .49 $ 1.72 $ 1.66 Extraordinary loss . . . . . . . . . . . . . . . . . . (.01) (.01) (.02) (.10) ----- ----- ------ ------ Net earnings . . . . . . . . . . . . . . . . . . . $ .54 $ .48 $ 1.70 $ 1.56 ===== ===== ====== ====== Average number of common shares used in fully diluted per share calculations . . . . . . . . . . . . . . . . 132,276 129,019 131,982 128,441 </TABLE> - ------------------------------------------------------------------- The accompanying notes are an integral part of the consolidated financial statements.
<TABLE> CONSOLIDATED BALANCE SHEET (in thousands of dollars) (unaudited) <CAPTION> October 5, December 30, 1996 1995 ---------- ------------ <S> <C> <C> ASSETS Current assets Receivables . . . . . . . . . . . . . . . . . . . . . . $ 306,339 $ 288,067 Inventories: FIFO cost . . . . . . . . . . . . . . . . . . . . . . 2,119,639 2,034,880 Less LIFO reserve . . . . . . . . . . . . . . . . . . (463,863) (449,163) ----------- ----------- 1,655,776 1,585,717 Property held for sale. . . . . . . . . . . . . . . . . 101,140 40,527 Prepaid and other current assets. . . . . . . . . . . . 210,020 192,673 ----------- ----------- Total current assets. . . . . . . . . . . . . . . . 2,273,275 2,106,984 Property, plant and equipment, net. . . . . . . . . . . . 2,926,370 2,662,338 Investments and other assets. . . . . . . . . . . . . . . 390,381 275,395 ----------- ----------- Total Assets. . . . . . . . . . . . . . . . . . . . $5,590,026 $5,044,717 =========== =========== LIABILITIES Current liabilities Current portion of long-term debt . . . . . . . . . . . $ 21,721 $ 24,939 Current portion of obligations under capital leases. . . . . . . . . . . . . . . . . . . . 9,203 8,975 Accounts payable. . . . . . . . . . . . . . . . . . . . 1,504,517 1,540,067 Other current liabilities . . . . . . . . . . . . . . . 1,028,243 991,456 ----------- ----------- Total current liabilities . . . . . . . . . . . . . 2,563,684 2,565,437 Long-term debt. . . . . . . . . . . . . . . . . . . . . . 3,576,493 3,318,499 Obligations under capital leases. . . . . . . . . . . . . 169,752 171,229 Deferred income taxes . . . . . . . . . . . . . . . . . . 155,427 153,232 Other long-term liabilities . . . . . . . . . . . . . . . 464,609 439,333 ----------- ----------- Total Liabilities . . . . . . . . . . . . . . . . . 6,929,965 6,647,730 ----------- ----------- SHAREOWNERS' DEFICIT Common capital stock, par $1, at stated value Authorized: 350,000,000 shares Issued: 1996 - 135,613,811 shares 1995 - 133,777,921 shares. . . . . . . . . . . 625,218 586,541 Accumulated deficit . . . . . . . . . . . . . . . . . . . (1,721,485) (1,945,923) Common stock in treasury, at cost 1996 - 9,577,175 shares 1995 - 9,575,950 shares . . . . . . . . . . . (243,672) (243,631) ----------- ----------- Total Shareowners' Deficit (1,339,939) (1,603,013) ----------- ----------- Total Liabilities and Shareowners' Deficit. . . . . . $5,590,026 $5,044,717 =========== =========== </TABLE> - ------------------------------------------------------------------- The accompanying notes are an integral part of the consolidated financial statements.
<TABLE> CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands of dollars) (unaudited) <CAPTION> 3 Quarters Ended ------------------------------ October 5, October 7, 1996 1995 ----------- ----------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings. . . . . . . . . . . . . . . . . . . . . . . . . . $ 224,438 $ 197,314 Adjustments to reconcile net earnings to net cash provided by operating activities: Extraordinary loss . . . . . . . . . . . . . . . . . . . . . 2,778 12,303 Depreciation and amortization. . . . . . . . . . . . . . . . 257,189 231,670 Amortization of deferred financing costs . . . . . . . . . . 10,194 9,803 LIFO charge. . . . . . . . . . . . . . . . . . . . . . . . . 14,700 16,500 Net increase (decrease) in cash from changes in operating assets and liabilities, net of effects from sale of subsidiary, detail below . . . . . . . . . . . . . . . . . (162,541) 157,134 Other changes, net . . . . . . . . . . . . . . . . . . . . . (5,219) (4,128) ----------- ----------- Net cash provided by operating activities . . . . . . . . 341,539 620,596 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures. . . . . . . . . . . . . . . . . . . . . . (518,271) (462,095) Proceeds from sale of assets. . . . . . . . . . . . . . . . . . 12,126 48,489 Increase in property held for sale. . . . . . . . . . . . . . . (61,914) (8,861) (Increase) decrease in other investments . . . . . . . . . . . (118,365) 7,836 ----------- ----------- Net cash used by investing activities . . . . . . . . . . (686,424) (414,631) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Debt prepayment costs . . . . . . . . . . . . . . . . . . . . . (4,080) (16,597) Financing charges incurred. . . . . . . . . . . . . . . . . . . (9,940) (7,379) Principal payments under capital lease obligations. . . . . . . (6,818) (6,619) Proceeds from issuance of long-term debt. . . . . . . . . . . . 461,892 76,698 Reductions in long-term debt. . . . . . . . . . . . . . . . . . (207,116) (264,673) Proceeds from sale of treasury stock. . . . . . . . . . . . . . 151 Proceeds from issuance of capital stock . . . . . . . . . . . . 37,352 29,111 Increase in book overdrafts . . . . . . . . . . . . . . . . . . 73,595 ----------- ----------- Net cash provided (used) by financing activities. . . . . 344,885 (189,308) ----------- ----------- Net increase in cash and temporary cash investments . . . . . . . 0 16,657 Cash and temporary cash investments: Beginning of year . . . . . . . . . . . . . . . . . . . . . . 0 27,223 ----------- ----------- End of quarter. . . . . . . . . . . . . . . . . . . . . . . . $ 0 $ 43,880 =========== =========== INCREASE (DECREASE) IN CASH FROM CHANGES IN OPERATING ASSETS AND LIABILITIES: Inventories . . . . . . . . . . . . . . . . . . . . . . . . . $ (84,759) $ 87,453 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . (18,272) 3,732 Prepaid and other current assets. . . . . . . . . . . . . . . (17,645) (11,816) Accounts payable. . . . . . . . . . . . . . . . . . . . . . . (109,145) 18,907 Deferred income taxes . . . . . . . . . . . . . . . . . . . . 2,195 (14,860) Other liabilities . . . . . . . . . . . . . . . . . . . . . . 65,085 73,718 ----------- ----------- $ (162,541) $ 157,134 =========== =========== </TABLE> - ------------------------------------------------------------------- The accompanying notes are an integral part of the consolidated financial statements.
Supplemental disclosures of cash flow information: <TABLE> <CAPTION> 3 Quarters Ended -------------------------- October 5, October 7, 1996 1995 ---------- ---------- <S> <C> <C> Cash paid during the period for: Interest (net of amount capitalized) $221,856 $238,792 Income taxes 139,166 151,114 </TABLE> - ------------------------------------------------------------------- The accompanying notes are an integral part of the consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------- 1. BASIS OF PRESENTATION --------------------- The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. 2. INCOME TAXES ------------ The effective income tax rate differs from the expected statutory rate primarily due to the effect of certain state taxes. 3. EXTRAORDINARY LOSS ------------------ The extraordinary loss for the three quarters ended October 5, 1996 and October 7, 1995 of $2.8 million and $12.3 million, respectively (net of income taxes of $1.7 million and $7.9 million, respectively) and for the third quarter ended October 5, 1996 and October 7, 1995 of $.9 million and $1.5 million, respectively (net of income taxes of $.6 million and $1.0 million, respectively) is related to the early retirement of long-term debt. During the third quarter of 1996 the Company repurchased $3.2 million of its Senior Subordinated Debt issues and $19.8 million of Senior Debt. Purchases of debt were financed by excess cash flow from operations, proceeds from miscellaneous asset sales, and funds borrowed under the Company's Credit Agreement. 4. EARNINGS PER COMMON SHARE -------------------------- Primary and fully diluted earnings per common share equals net earnings divided by the weighted average number of common shares outstanding, after giving effect to dilutive stock options. Fully diluted earnings per common share for the three quarters ended October 7, 1995 is computed by adjusting net earnings for the effect of the assumed conversion of the Convertible Junior Subordinated Notes issued in December 1992. The Convertible Junior Subordinated Notes were not included for the third quarter ended October 7, 1995 and the third quarter and three quarters ended October 5, 1996 because they were redeemed on September 5, 1995. 5. LONG-TERM DEBT -------------- In the third quarter the Company issued $240.0 million of 8.15% Senior Notes. The net proceeds of the offering were initially used to repay amounts outstanding under the working capital facility and, thereafter the Company will use amounts available under the working capital facility to purchase, on the open market, or redeem portions of its high cost long-term debt and for other general corporate purposes. On August 17, 1996 the Company redeemed the entire $125 million principal amount of its 9% Senior Subordinated Notes due 1999. 6. SUBSEQUENT EVENTS ----------------- On October 18, 1996, the Company notified its lenders under the Credit Agreement that it qualified for a reduction in its borrowing cost under the agreement. This reduction was achieved as a result of the Company's improved coverage ratios. On November 8, 1996, the Company notified the trustee of its General Term Notes, Series B that it intends to redeem approximately $9.7 million of these notes on December 15, 1996. These securities are redeemable at par.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS SALES Total sales for the third quarter of 1996 increased 5.5% over the third quarter 1995 to a new third quarter record of $7.34 billion. Food stores sales increased 4.9% over the 1995 third quarter. Sales were enhanced by the opening or expansion of 31 stores during the quarter versus 18 in last year's third quarter. Square footage increased 5.9% over the third quarter of 1995. Sales in identical food stores, units that have been in operation for one full year and have not been expanded, increased .8% for the quarter versus a 1.4% increase in 1995. Year-to-date identical sales, increased .6% versus a 1.3% increase in 1995. Identical store sales, excluding the strike in the King Soopers and City Markets divisions, were up .9% for the third quarter and 1.1% year-to-date. The Company's capital expenditure emphasis is more heavily concentrated in existing markets with growth potential which causes sales from existing stores to be shifted to new stores within close proximity of the existing stores, resulting in a reduction in same store sales. In the third quarter comparable store sales, which include results from expanded and relocated stores, increased 3.7%. A review of sales trends by lines of business includes: <TABLE> <CAPTION> (in thousands of dollars) 3rd Quarter % of 1996 ---------------------- Lines of Business Sales 1996 1995 Change --------------------- ------- ---------- ---------- ------ <S> <C> <C> <C> <C> Food Stores ........ 93.5% $6,862,770 $6,540,486 +4.9% Convenience Stores .. 3.5% 257,475 232,890 +10.6% Other sales ........ 3.0% 222,887 185,840 +19.9% ------- ---------- ---------- Total sales ........ 100.0% $7,343,132 $6,959,216 +5.5% </TABLE> <TABLE> <CAPTION> (in thousands of dollars) 3 Quarters Year-to-date % of 1996 ------------------------ Lines of Business Sales 1996 1995 Change --------------------- --------- ----------- ----------- ------ <S> <C> <C> <C> <C> Food Stores ........ 93.4% $17,722,744 $16,975,151 +4.4% Convenience Stores .. 3.7% 706,571 640,294 +10.4% Other sales ........ 2.9% 542,437 461,616 +17.5% --------- ----------- ----------- Total sales ........ 100.0% $18,971,752 $18,077,061 +4.9% </TABLE> The increase in total convenience stores sales for the third quarter was the result of a 1.5% increase in in-store sales combined with a 16.2% increase in gasoline sales. Sales for the convenience store group were strengthened by a combination of a 6.3% increase in the average retail price per gallon of gasoline and an 8.7% increase in gallons sold as compared to the third quarter of 1995. Convenience stores identical grocery sales increased 1.2% and identical gasoline sales increased 8.9%. Other sales primarily consist of outside sales by the Company's manufacturing divisions. The 19.9% increase in other sales for the third quarter of 1996 over the third quarter of 1995 reflects the increased level of outside sales of manufactured product. As the Company's storing program progresses, the impact on identical sales from the shifting of sales from existing stores to new stores is expected to continue for the remainder of the year. Total sales, however, are expected to benefit from the additional new stores or remodels that are planned for the remainder of the year. Competitive pressures in some markets also will continue to affect sales. The Company's geographic diversity, however, is expected to help limit the competitive impact on consolidated sales. EBITD The Company's Credit Agreement and the indentures underlying approximately $1.1 billion of publicly issued debt contain various restrictive covenants, many of which are based on earnings before interest, taxes, depreciation, LIFO charge, unusual and extraordinary items ("EBITD"). All such covenants are based, among other things, upon generally accepted accounting principles ("GAAP") as applied on a date prior to January 3, 1993. The ability to generate EBITD at levels sufficient to satisfy the requirements of these agreements is a key measure of the Company's financial strength. The presentation of EBITD is not intended to be an alternative to any GAAP measure of performance but rather to facilitate an understanding of the Company's performance compared to its debt covenants. At October 5, 1996 the Company was in compliance with all covenants of its Credit Agreement. The Company believes it has adequate coverage of its debt covenants to continue to respond effectively to competitive conditions. During the third quarter 1996, EBITD, which does not include the effect of Statement of Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions", increased 8.2% to $323.6 million from $299.0 million. Year-to-date 1996 EBITD increased 4.7% to $887.5 million from $847.9 million. Excluding the effect of strikes in the King Soopers and City Market divisions, EBITD would have been approximately $328.3 million for the third quarter, a 9.8% increase and year-to-date would have been $921.0 million, an 8.6% increase. MERCHANDISE COSTS The Company continues to invest capital in technology, logistics and category management systems with the goal of reducing merchandising cost, as well as increasing sales. <TABLE> <CAPTION> 3 Quarters 3rd Quarter Year-to-date --------------- --------------- 1996 1995 1996 1995 ------ ------ ------ ------ <S> <C> <C> <C> <C> Merchandise Costs - LIFO 76.02% 75.93% 75.70% 75.68% LIFO Charge .11% .14% .07% .09% ------ ------ ------ ------ Merchandise Costs - FIFO 75.91% 75.79% 75.63% 75.59% </TABLE> OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES Operating, general and administrative expenses in the third quarter 1996 decreased to 18.54% of sales from 18.73% in last year's third quarter. The decrease can be attributed to lower employee cost during the third quarter. Year-to-date operating, general and administrative expenses in 1996 were 18.56% compared to 18.52% in 1995. Sales growth has helped to control operating, general and administrative expenses as a percentage of sales. Operating, general and administrative expenses are negatively affected by the Company's capital expansion program as costs are incurred to open and expand new stores. The Company's is focusing on controlling operating, general and administrative expenses. A number of administrative changes are underway to reduce support costs. While the Company believes that these programs will bring about cost reductions, there can be no assurance of these results. NET INTEREST EXPENSE Net interest expense declined to $91.8 million in the third quarter 1996 from $93.4 million in last year's third quarter. Year-to-date net interest expense totaled $233.0 million as compared to $243.4 million in 1995. The Company has purchased a portion of the debt issued by the lenders of certain of its structured financings, which cannot be retired early, in an effort to effectively further reduce the Company's interest expense. The Company purchased $79.7 million of this Debt during the third quarter of 1996, bringing the total investment to $153.5 million. Excluding the debt incurred to make these purchases, which are classified as investments, the Company's long-term debt at the end of the third quarter would have been $3.62 billion, up from $3.47 billion at the end of the 1995 third quarter, due to the Company's increased storing program and an increase in net operating working capital. Net operating working capital increased by $96.8 million to $103.0 million as compared to $6.2 million in the third quarter 1995. NET EARNINGS Third quarter earnings before the extraordinary loss totaled $72.3 million in 1996 compared to $62.7 million in 1995. Year-to-date earnings before the extraordinary loss totaled $227.2 million in 1996 compared to $209.6 million in 1995. The Company's net earnings in the third quarter 1996 were $71.4 million or $.54 per share on a fully diluted basis compared to net earnings in the third quarter 1995 of $61.2 million or $.48 per share. Net earnings in 1996 were negatively affected by the King Soopers and City Market strikes and by an extraordinary loss of $.9 million or $.01 per share compared to an extraordinary loss of $1.5 million or $.01 per share in 1995. Year-to-date net earnings in 1996 were $224.4 million or $1.70 per share on a fully-diluted basis compared to net earnings in 1995 of $197.3 million or $1.56 per share. 1996 year-to-date net earnings included a $2.8 million extraordinary loss compared to a $12.3 million extraordinary loss in 1995. The extraordinary loss in both years resulted from the early retirement of the Company's high-cost debt. The Company expects to incur an extraordinary loss in the fourth quarter of 1996 and, depending on the interest rate environment, in each quarter of 1997. LIQUIDITY AND CAPITAL RESOURCES During the third quarter 1996 the Company purchased $23.0 million of its various debt issues. Through three quarters of 1996 the Company has purchased $48.2 million of these issues. Additionally, in the third quarter the Company redeemed the entire $125 million face amount of the Company's 9% Senior Subordinated Notes and issued $240.0 million of 8.15% Senior Notes. At the end of the third quarter 1996 the Company had $535.1 million available under its Credit Agreement to meet short-term liquidity needs. Capital expenditures for the third quarter 1996 totaled $259.4 million compared to $217.7 million for the third quarter 1995. Capital expenditures for the year are expected to total approximately $850 million. This will enable the Company to open or expand approximately 115 stores and remodel 50 to 60 additional stores in 1996. Capital expenditures also includes investments in the areas of logistics and technology projects. Through three quarters of 1996, the Company has opened, expanded or acquired 77 new stores and completed 34 remodels. CONSOLIDATED STATEMENT OF CASH FLOWS The Company generated $341.5 million of cash from operating activities through the first three quarters of 1996 compared to $620.6 million during the same period last year. The decrease is due in part to changes in operating assets and liabilities that used $162.5 million of cash in 1996 compared to providing $157.1 million in 1995. The largest component of the change in operating assets and liabilities was net owned inventory, which increased $193.9 million in the third quarter versus a decrease of $106.3 million in the third quarter of 1995, due in part to the Company's storing program. This use of cash was offset somewhat by an increase in operating profits before depreciation of $43.1 million over 1995. Investing activities used $686.4 million in cash during the first three quarters of 1996 compared to $414.6 million last year. The net increase in the use of cash is due to $109.2 million of additional capital expenditures and investments in property held for sale and an additional $126.2 million used for purchase of investments. Proceeds from the sale of assets decreased $36.4 million from prior year. Financing activities provided $344.9 million in cash compared to the use of $189.3 million in the first three quarters of last year. The increase in cash from financing activities was used primarily to fund increases in capital expenditures and investments in working capital. Additionally, the Company realized $37.4 million from the exercise of stock options as compared to $29.1 million during the first three quarters of 1995. With respect to the foregoing statements in Management's Discussion and Analysis that are forward looking in nature, the Company's actual results could adversely be affected by delays in completion of projects, labor disputes or competitive activity in the marketplace. SUBSEQUENT EVENTS On October 18, 1996, the Company notified its lenders under the Credit Agreement that it qualified for a reduction in its borrowing cost under the agreement. This reduction was achieved as a result of the Company's improved coverage ratios. On November 8, 1996, the Company notified the trustee of its General Term Notes, Series B that it intends to redeem approximately $9.7 million of these notes on December 15, 1996. These securities are redeemable at par.
PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS Fry's Food Stores of Arizona, Inc. ("Fry's"), a subsidiary of the Company, is currently a defendant and cross-defendant in actions pending in the U.S. District Court for the Southern District of Florida (the "Court") entitled Harley S. Tropin v. Kenneth Thenen, et. al., ------------------------------------------- No. 93-2502-CIV-MORENO and Walco Investments, Inc., et. ---------------------------- al. v. Kenneth Thenen, et al., No. 93-2534-CIV-MORENO. ----------------------------- The plaintiff and cross-claimants in these actions seek unspecified damages against numerous defendants and cross-defendants, including Fry's. Plaintiffs and cross- claimants allege that a former employee of Fry's supplied false information to third parties in connection with purported sales transactions between Fry's and affiliates of Premium Sales Corporation or certain limited partnerships. Claims have been alleged against Fry's for breach of implied contract, aiding and abetting conspiracy, conversion and civil theft, negligent supervision, fraud, and violations of 18 U.S.C. Sections 1961 and 1962(d) and Chapter 895, Florida Statutes. Fry's has entered into an agreement with Harley S. Tropin as trustee and receiver for the Premium Sales Corporation, certain affiliates and the representatives of the class to settle all claims against Fry's. On October 21, 1996, the Court approved the settlement agreement and, upon the completion of certain administrative tasks and assuming no appeals, the cases against Fry's will be dismissed.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit 3.1 - Amended Articles of Incorporation and ----------- Regulations of the Company are hereby incorporated by reference to Exhibits 4.1 and 4.2 of the Company's Registration Statement on Form S-3 as filed with the Securities and Exchange Commission on January 28, 1993, and bearing Registration No. 33-57552. Exhibit 4.1 - Instruments defining the rights of holders ----------- of long-term debt of the Company and its subsidiaries are not filed as Exhibits because the amount of debt under each instrument is less than 10% of the consolidated assets of the Company. The Company undertakes to file these instruments with the Commission upon request. Exhibit 11.1 - Statement of Computation of Consolidated ------------ Earnings (Loss) Per Share. Exhibit 27.1 - Financial Data Schedule. ------------ Exhibit 99.1 - Additional Exhibits - Statement of ------------ Computation of Ratio of Earnings to Fixed Charges. (b) The Company disclosed and filed its preliminary second quarter 1996 earnings release in its Current Report on Form 8-K dated July 9, 1996 and its final second quarter 1996 earnings release in its Current Report on Form 8-K dated July 17, 1996.
SIGNATURES ----------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE KROGER CO. Dated: November 12, 1996 (Joseph A. Pichler) Joseph A. Pichler Chairman of the Board and Chief Executive Officer Dated: November 12, 1996 (J. Michael Schlotman) J. Michael Schlotman Vice President and Corporate Controller