Kroger Company (KR)

 

UNITED STATES

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 November 8, 2008

 

OR

 

o		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.

(Exact name of registrant as specified in its charter)

 

 

1014 Vine Street, Cincinnati, OH 45202

(Address of principal executive offices)

(Zip Code)

 

(513) 762-4000

(Registrant’s telephone number, including area code)

 

Unchanged

(Former name, former address and former fiscal year, if changed since last report)

 

 

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  o .

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer		x		Accelerated filer		o
Non-accelerated filer (do not check if a smaller reporting company)		o		Smaller reporting company		o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x .

 

There were 652,453,769 shares of Common Stock ($1 par value) outstanding as of December 12, 2008.

 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1.  Financial Statements.

 

THE KROGER CO.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)

(unaudited)

 

		Third Quarter Ended						Three Quarters Ended
		November 8, 2008			November 10, 2007			November 8, 2008			November 10, 2007
Sales		$	17,580		$	16,135		$	58,740		$	53,000
Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below		13,552			12,402			45,476			40,551
Operating, general and administrative		3,062			2,823			9,868			9,259
Rent		152			150			510			488
Depreciation and amortization		335			315			1,094			1,030
Operating profit		479			445			1,792			1,672
Interest expense		106			110			370			360
Earnings before income tax expense		373			335			1,422			1,312
Income tax expense		136			81			522			454
Net earnings		$	237		$	254		$	900		$	858
Net earnings per basic common share		$	0.37		$	0.37		$	1.38		$	1.23
Average number of common shares used in basic calculation		649			678			653			696
Net earnings per diluted share		$	0.36		$	0.37		$	1.36		$	1.22
Average number of common shares used in diluted calculation		656			685			660			704
Dividends declared per common share		$	.09		$	.075		$	.27		$	.225

 

The accompanying notes are an integral part of the Consolidated Financial Statements.

 

2

 

THE KROGER CO.

CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)

(unaudited)

 

		November 8,			February 2,
		2008			2008
ASSETS
Current assets
Cash and temporary cash investments		$	280		$	242
Deposits in-transit		610			676
Receivables		807			786
FIFO inventory		6,127			5,459
LIFO credit		(759		)	(604		)
Prefunded employee benefits		¾			300
Prepaid and other current assets		254			255
Total current assets		7,319			7,114
Property, plant and equipment, net		13,085			12,498
Goodwill		2,246			2,144
Other assets		531			543
Total Assets		$	23,181		$	22,299
LIABILITIES
Current liabilities
Current portion of long-term debt including obligations under capital leases and financing obligations		$	1,141		$	1,592
Accounts payable		4,337			4,050
Accrued salaries and wages		789			815
Deferred income taxes		239			239
Other current liabilities		2,110			1,993
Total current liabilities		8,616			8,689
Long-term debt including obligations under capital leases and financing obligations
Face-value long-term debt including obligations under capital leases and financing obligations		6,853			6,485
Adjustment to reflect fair-value interest rate hedges		41			44
Long-term debt including obligations under capital leases and financing obligations		6,894			6,529
Deferred income taxes		517			367
Other long-term liabilities		1,789			1,800
Total Liabilities		17,816			17,385
Minority interests		96			¾
Commitments and contingencies (see Note 11)
SHAREOWNERS’ EQUITY
Preferred stock, $100 par per share, 5 shares authorized and unissued		¾			¾
Common stock, $1 par per share, 1,000 shares authorized; 954 shares issued in 2008 and 947 shares issued in 2007		954			947
Additional paid-in capital		3,257			3,031
Accumulated other comprehensive loss		(115		)	(122		)
Accumulated earnings		7,203			6,480
Common stock in treasury, at cost, 306 shares in 2008 and 284 shares in 2007		(6,030		)	(5,422		)
Total Shareowners’ Equity		5,269			4,914
Total Liabilities and Shareowners’ Equity		$	23,181		$	22,299

 

The accompanying notes are an integral part of the Consolidated Financial Statements.

 

3

 

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions and unaudited)

 

		Three Quarters Ended
		November 8, 2008			November 10, 2007
Cash Flows from Operating Activities:
Net earnings		$	900		$	858
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		1,094			1,030
LIFO charge		155			100
Stock-based employee compensation		69			68
Expense for Company-sponsored pension plans		35			49
Deferred income taxes		147			(102		)
Other		28			33
Changes in operating assets and liabilities net of effects from acquisitions of businesses:
Store deposits in-transit		66			34
Receivables		(20		)	34
Inventories		(667		)	(659		)
Prepaid expenses		302			322
Accounts payable		309			349
Accrued expenses		¾			88
Income tax payables and receivables		(25		)	121
Contribution to Company-sponsored pension plans		(20		)	(52		)
Other		(16		)	4
Net cash provided by operating activities		2,357			2,277
Cash Flows from Investing Activities:
Payments for capital expenditures		(1,613		)	(1,628		)
Proceeds from sale of assets		51			46
Payments for acquisitions		(80		)	(86		)
Other		(10		)	(46		)
Net cash used by investing activities		(1,652		)	(1,714		)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		778			625
Dividends paid		(168		)	(151		)
Payments on long-term debt		(1,017		)	(545		)
Borrowings on credit facility		133			341
Excess tax benefits on stock-based awards		13			34
Proceeds from issuance of capital stock		164			181
Treasury stock purchases		(626		)	(1,152		)
Increase (decrease) in book overdrafts		(19		)	78
Other		10			3
Net cash used by financing activities		(732		)	(586		)
Net decrease in cash and temporary cash investments		(27		)	(23		)
Cash from Consolidated Variable Interest Entity		65			¾
Cash and temporary cash investments:
Beginning of year		242			189
End of quarter		$	280		$	166
Reconciliation of capital expenditures:
Payments for property and equipment		$	(1,613	)	$	(1,628	)
Changes in construction-in-progress payables		(106		)	36
Total capital expenditures		$	(1,719	)	$	(1,592	)
Disclosure of cash flow information:
Cash paid during the year for interest		$	404		$	387
Cash paid during the year for income taxes		$	444		$	327

 

The accompanying notes are an integral part of the Consolidated Financial Statements.

 

4

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

All amounts in the notes to Consolidated Financial Statements are in millions except per share amounts.

 

Certain prior-year amounts have been reclassified to conform to current-year presentation.

 

1.            ACCOUNTING POLICIES

 

Basis of Presentation and Principles of Consolidation

 

The accompanying financial statements include the consolidated accounts of The Kroger Co., its wholly-owned subsidiaries, and a Variable Interest Entity (“VIE”) in which the Company is the primary beneficiary.  The February 2, 2008 balance sheet was derived from audited financial statements and, due to its summary nature, does not include all disclosures required by generally accepted accounting principles (“GAAP”). Significant intercompany transactions and balances have been eliminated. References to the “Company” in these Consolidated Financial Statements mean the consolidated company.

 

In the opinion of management, the accompanying unaudited Consolidated Financial Statements include all normal, recurring adjustments that 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. The financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted, pursuant to SEC regulations. Accordingly, the accompanying Consolidated Financial Statements should be read in conjunction with the 2007 Annual Report on Form 10-K of The Kroger Co. filed with the SEC on April 1, 2008.

 

The unaudited information in the Consolidated Financial Statements for the third quarter and three quarters ended November 8, 2008 and November 10, 2007 includes the results of operations of the Company for the 12-week and 40-week periods then ended.

 

Store Closing and Other Expense Allowances

 

All closed store liabilities related to exit or disposal activities initiated after December 31, 2002, are accounted for in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities.  The Company provides for closed store liabilities relating to the present value of the estimated remaining noncancellable lease payments after the closing date, net of estimated subtenant income.  The Company estimates the net lease liabilities using a discount rate to calculate the present value of the remaining net rent payments on closed stores.  The closed store lease liabilities usually are paid over the lease terms associated with the closed stores, which generally have remaining terms ranging from one to 20 years.  Adjustments to closed store liabilities primarily relate to changes in subtenant income and actual exit costs differing from original estimates.  Adjustments are made for changes in estimates in the period in which the change becomes known.  Store closing liabilities are reviewed quarterly to ensure that any accrued amount that is not a sufficient estimate of future costs, or that no longer is needed for its originally intended purpose, is adjusted to income in the proper period.

 

Owned stores held for disposal are adjusted to their estimated net realizable value.  Costs to reduce the carrying values of property, equipment and leasehold improvements are accounted for in accordance with the Company’s policy on impairment of long-lived assets.  Inventory write-downs, if any, in connection with store closings, are classified in “Merchandise costs.”  Costs to transfer inventory and equipment from closed stores are expensed as incurred.

 

The following table summarizes accrual activity for future lease obligations of stores that were closed in the normal course of business and locations closed in California prior to the Fred Meyer merger in 1999.

 

		Future Lease Obligations
		2008			2007
Balance at beginning of year		$	74		$	89
Additions		2			5
Payments		(10		)	(12		)
Adjustments		6			(8		)
Balance at end of third quarter		$	72		$	74

 

5

 

The Company recorded asset impairments in the normal course of business totaling $5 in the third quarter of 2008 and $4 in the third quarter of 2007.  During the first three quarters of 2008 and 2007, the Company recorded asset impairments in the normal course of business totaling $21 and $15, respectively.

 

2.            GOODWILL AND BUSINESS ACQUISTIONS

 

The following table summarizes the changes in the Company’s goodwill balance through November 8, 2008.

 

		Goodwill
Balance at February 2, 2008		$	2,144
Goodwill recorded		102
Balance at November 8, 2008		$	2,246

 

In the first quarter of 2008, the Company made an investment in The Little Clinic LLC (“TLC”).  TLC operates walk-in medical clinics in seven states, primarily in the Midwest and Southeast.  At the date of investment, TLC was determined to be a VIE under FASB Interpretation No. 46R, Consolidation of Variable Interest Entities (FIN 46R), with the Company being the primary beneficiary.  As a result, the Company consolidated TLC in accordance with FIN 46R.  The minority interest was recorded at fair value on the acquisition date.  The fair value of TLC was determined based on the amount of the investment made by the Company and the percentage acquired.  The Company’s assessment of goodwill represents the excess of this amount over the fair value of TLC’s net assets as of the investment date.

 

The pro forma effect of this investment is not material to previously reported results.

 

3.            STOCK OPTION PLANS

 

The Company recognized total stock-based compensation of $21 and $20 in the third quarter ended November 8, 2008 and November 10, 2007, respectively.  The Company recorded $69 and $68 of stock-based compensation for the first three quarters ended November 8, 2008 and November 10, 2007, respectively.  These costs were recognized as operating, general and administrative costs in the Company’s Consolidated Statements of Operations.

 

The Company grants options for common stock (“stock options”) to employees, as well as to its non-employee directors, under various plans at an option price equal to the fair market value of the stock at the date of grant. In addition to stock options, the Company awards restricted stock to employees and its non-employee directors under various plans.  Equity awards may be made once each quarter on a predetermined date.  It has been the Company’s practice to make a general annual grant, which occurred in the second quarter of 2008.

 

Stock options granted in the first three quarters of 2008 expire 10 years from the date of the grant and vest from one year to five years from the date of grant. Restricted stock awards granted in the first three quarters of 2008 have restrictions that lapse in one year to five years from the date of the awards. All awards become immediately exercisable upon certain changes of control of the Company.

 

6

 

Changes in equity awards outstanding under the plans are summarized below.

 

Stock Options

 

		Shares subject to option		Weighted-average exercise price
Outstanding, February 2, 2008		44.8		$	20.94
Granted		3.4		$	28.56
Exercised		(7.8	)	$	21.27
Canceled or Expired		(0.2	)	$	22.81
Outstanding, November 8, 2008		40.2		$	21.52

 

Restricted Stock

 

		Restricted shares outstanding		Weighted-average grant-date fair value
Outstanding, February 2, 2008		3.4		$	25.89
Granted		2.4		$	28.50
Lapsed		(1.6	)	$	26.70
Canceled or Expired		(0.1	)	$	25.48
Outstanding, November 8, 2008		4.1		$	27.13

 

The weighted-average fair value of stock options granted during the first three quarters ended November 8, 2008 and November 10, 2007, was $8.67 and $9.91, respectively. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model, based on the assumptions shown in the table below. The Black-Scholes model utilizes extensive accounting judgment and financial estimates, including the term employees are expected to retain their stock options before exercising them, the volatility of the Company’s stock price over that expected term, the dividend yield over the term, and the number of awards expected to be forfeited before they vest. Using alternative assumptions in the calculation of fair value would produce fair values for stock option grants that could be different than those used to record stock-based compensation expense in the Consolidated Statements of Operations.

 

The following table reflects the weighted average assumptions used for grants awarded to option holders:

 

		2008		2007
Risk-free interest rate		3.64%		5.06%
Expected dividend yield		1.50%		1.40%
Expected volatility		27.89%		29.21%
Expected term		6.8 Years		6.9 Years

 

7

 

4.            DEBT OBLIGATIONS

 

Long-term debt consists of:

 

		November 8,			February 2,
		2008			2008
Credit Facility, Commercial Paper and Money Market Borrowings		$	703		$	570
4.95% to 9.20% Senior Notes due through 2038		6,588			6,766
5.00% to 9.95% mortgages due in varying amounts through 2034		138			166
Other		137			137
Total debt, excluding capital leases and financing obligations		7,566			7,639
Less current portion		(1,112		)	(1,564		)
Total long-term debt, excluding capital leases and financing obligations		$	6,454		$	6,075

 

During the first quarter of 2008, the Company issued $400 of senior notes bearing an interest rate of 5.0% due in 2013 and $375 of senior notes bearing an interest rate of 6.9% due in 2038.

 

5.            COMPREHENSIVE INCOME

 

     Comprehensive income is as follows:

 

		Third Quarter Ended						Year-To-Date
		November 8, 2008			November 10, 2007			November 8, 2008			November 10, 2007
Net earnings		$	237		$	254		$	900		$	858
Unrealized gain and (losses) on hedging activities, net of tax(1)		—			(13		)	3			(4		)
Amortization of unrealized gains and losses on hedging activities, net of tax(2)		—			—			1			—
Amortization of amounts included in net periodic pension expense(3)		1			3			3			15
Other		—			1			—			2
Comprehensive income		$	238		$	245		$	907		$	871

 

(1)		Amount is net of tax of $(7) for the third quarter of 2007.  Amount is net of tax of $2 for the first three quarters of 2008 and $(2) for the first three quarters of 2007.
(2)		Amount is net of tax of $1 for the first three quarters of 2008.
(3)		Amount is net of tax of $1 for the third quarter of 2007.  Amount is net of tax of $2 for the first three quarters of 2008 and $9 for the first three quarters of 2007.

 

       During 2008 and 2007, unrealized gains and losses on hedging activities included in other comprehensive income consisted of reclassifications of unrealized gains and losses on cash flow hedges into net earnings.  In 2007, other comprehensive income also consisted of market value adjustments to reflect cash flow hedges at fair value as of the respective balance sheet dates.

 

8

 

6.              BENEFIT PLANS

 

The following table provides the components of net periodic benefit costs for the Company-sponsored pension plans and other post-retirement benefit plans for the third quarter of 2008 and 2007.

 

		Third Quarter
		Pension Benefits						Other Benefits
		2008			2007			2008			2007
Components of net periodic benefit cost:
Service cost		$	11		$	10		$	3		$	3
Interest cost		40			34			4			5
Expected return on plan assets		(40		)	(38		)	—			—
Amortization of:
Prior service cost		—			1			(2		)	(1		)
Actuarial loss		8			8			—			—
Net periodic benefit cost		$	19		$	15		$	5		$	7

 

The following table provides the components of net periodic benefit costs for the Company-sponsored pension plans and other post-retirement benefit plans for the first three quarters of 2008 and 2007.

 

		Year-To-Date
		Pension Benefits						Other Benefits
		2008			2007			2008			2007
Components of net periodic benefit cost:
Service cost		$	32		$	33		$	8		$	11
Interest cost		124			114			15			16
Expected return on plan assets		(136		)	(127		)	—			—
Amortization of:
Prior service cost		2			2			(5		)	(5		)
Actuarial loss		13			27			—			—
Net periodic benefit cost		$	35		$	49		$	18		$	22

 

The Company contributed $20 and $52 to Company-sponsored pension plans in the first three quarters of 2008 and 2007, respectively.

 

The Company contributed $75 and $73 to employee 401(k) retirement savings accounts in the first three quarters of 2008 and 2007, respectively.

 

The Company also contributes to various multi-employer pension plans based on obligations arising from most of its collective bargaining agreements. These plans provide retirement benefits to participants based on their service to contributing employers. The Company recognizes expense in connection with these plans as contributions are funded, in accordance with SFAS No. 87, Employers’ Accounting for Pensions.

 

7.            INCOME TAXES

 

The effective income tax rate was 36.7% and 34.6% for the first three quarters of 2008 and 2007, respectively.  The 2008 effective income tax rate differed from the federal statutory rate primarily due to the effect of state income taxes.  The 2007 effective income tax rate differed from the statutory rate primarily due to the effect of state income taxes and the favorable resolution of certain tax issues during the third quarter totaling approximately $40.  There were no material changes in unrecognized tax benefits during the first three quarters of 2008.

 

9

 

8.            EARNINGS PER COMMON SHARE

 

Earnings per basic common share equals net earnings divided by the weighted average number of common shares outstanding. Earnings per diluted common share equals net earnings divided by the weighted average number of common shares outstanding, after giving effect to dilutive stock options and restricted stock. The following tables provide a reconciliation of net earnings and shares used in calculating earnings per basic common share to those used in calculating earnings per diluted common share:

 

		Third Quarter Ended November 8, 2008								Third Quarter Ended November 10, 2007
		Earnings (Numerator)			Shares (Denominator)		Per Share Amount			Earnings (Numerator)			Shares (Denominator)		Per Share Amount
Earnings per basic common share		$	237		649		$	0.37		$	254		678		$	0.37
Dilutive effect of stock options and restricted stock					7								7
Earnings per diluted common share		$	237		656		$	0.36		$	254		685		$	0.37

 

		Year-To-Date November 8, 2008								Year-To-Date November 10, 2007
		Earnings			Shares		Per Share			Earnings			Shares		Per Share
		(Numerator)			(Denominator)		Amount			(Numerator)			(Denominator)		Amount
Earnings per basic common share		$	900		653		$	1.38		$	858		696		$	1.23
Dilutive effect of stock options and restricted stock					7								8
Earnings per diluted common share		$	900		660		$	1.36		$	858		704		$	1.22

 

The Company had options outstanding for approximately 12 shares and 3 shares during the third quarter of 2008 and 2007, respectively, that were excluded from the computations of earnings per diluted common share because their inclusion would have had an anti-dilutive effect on earnings per share.  For the first three quarters of 2008 and 2007, the Company had options outstanding for approximately 11 and 2 shares, respectively, that were excluded from the computations of diluted earnings per share because their inclusion would have had an anti-dilutive effect on earnings per share.

 

9.            RECENTLY ISSUED ACCOUNTING STANDARDS

 

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51 (SFAS No. 160).  SFAS No. 160 will require the consolidation of noncontrolling interests as a component of equity.  SFAS No. 160 will become effective for the Company’s fiscal year beginning February 1, 2009.  The Company is currently evaluating the effect the adoption of SFAS No. 160 will have on its Consolidated Financial Statements.

 

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations (SFAS No. 141R), which replaces SFAS No. 141.  SFAS No. 141R further expands the definitions of a business and the fair value measurement and reporting in a business combination.  SFAS No. 141R will become effective for the Company’s fiscal year beginning February 1, 2009.  The Company is currently evaluating the effect the adoption of SFAS No. 141R will have on its Consolidated Financial Statements.

 

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS No 161).   SFAS No. 161 requires enhanced disclosures on an entity’s derivative and hedging activities.  SFAS No. 161 will become effective for the Company’s fiscal year beginning February 1, 2009.  The Company is currently evaluating the effect the adoption of SFAS No. 161 will have on its Consolidated Financial Statements.

 

In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FSP No. EITF 03-6-1).   FSP No. EITF 03-6-1clarifies that share-based payment awards that entitle their holders to receive nonforfeitable dividends before vesting should be considered participating securities and included in the calculation of basic EPS.  FSP No. EITF 03-6-1 will become effective for the Company’s fiscal year beginning February 1, 2009.  The Company is currently evaluating the effect the adoption of FSP No. EITF 03-6-1 will have on its Consolidated Financial Statements.

 

10

 

In December 2008, the FASB issued FAS 140-4 and FIN 46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities (FAS 140-4 and FIN 46(R)-8).   FAS 140-4 and FIN 46(R)-8 requires additional disclosures about an entity’s involvement with variable interest entities and transfers of financial assets.  FAS 140-4 and FIN 46(R)-8 will become effective for the Company’s fiscal year beginning February 1, 2009.  The Company is currently evaluating the effect the adoption of FAS 140-4 and FIN 46(R)-8 will have on its Consolidated Financial Statements.

 

10. GUARANTOR SUBSIDIARIES

 

The Company’s outstanding public debt (the “Guaranteed Notes”) is jointly and severally, fully and unconditionally guaranteed by The Kroger Co. and certain of its subsidiaries (the “Guarantor Subsidiaries”). At November 8, 2008, a total of approximately $6,588 of Guaranteed Notes were outstanding. The Guarantor Subsidiaries and non-guarantor subsidiaries are direct or indirect wholly-owned subsidiaries of The Kroger Co. Separate financial statements of The Kroger Co. and each of the Guarantor Subsidiaries are not presented because the guarantees are full and unconditional and the Guarantor Subsidiaries are jointly and severally liable. The Company believes that separate financial statements and other disclosures concerning the Guarantor Subsidiaries would not be material to investors.

 

The non-guaranteeing subsidiaries represent less than 3% on an individual and aggregate basis of consolidated assets, pre-tax earnings, cash flow, and equity. Therefore, the non-guarantor subsidiaries’ information is not separately presented in the tables below.

 

There are no current restrictions on the ability of the Guarantor Subsidiaries to make payments under the guarantees referred to above. The obligations of each guarantor under its guarantee are limited to the maximum amount permitted under Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act, or any similar Federal or state law (e.g. laws requiring adequate capital to pay dividends) respecting fraudulent conveyance or fraudulent transfer.

 

11

 

The following tables present summarized financial information as of November 8, 2008 and February 2, 2008, for the third quarter ended, and the three quarters ended November 8, 2008 and November 10, 2007:

 

Condensed Consolidating

Balance Sheets

As of November 8, 2008

 

		The Kroger Co.			Guarantor Subsidiaries			Eliminations			Consolidated
Current assets
Cash, including temporary cash investments		$	24		$	256		$	—		$	280
Deposits in-transit		67			543			—			610
Receivables		205			2,483			(1,881		)	807
Net inventories		523			4,845			—			5,368
Prepaid and other current assets		72			182			—			254
Total current assets		891			8,309			(1,881		)	7,319
Property, plant and equipment, net		1,762			11,323			—			13,085
Goodwill		107			2,139			—			2,246
Adjustment to reflect fair value interest rate hedges		14			—			—			14
Other assets		1,636			612			(1,731		)	517
Investment in and advances to subsidiaries		12,567			—			(12,567		)	—
Total assets		$	16,977		$	22,383		$	(16,179	)	$	23,181
Current liabilities
Current portion of long-term debt including obligations under capital leases and financing obligations		$	1,141		$	—		$	—		$	1,141
Accounts payable		2,231			5,718			(3,612		)	4,337
Other current liabilities		—			3,138			—			3,138
Total current liabilities		3,372			8,856			(3,612		)	8,616
Long-term debt including obligations under capital leases and financing obligations
Face value long-term debt including obligations under capital leases and financing obligations		6,853			—			—			6,853
Adjustment to reflect fair value interest rate hedges		41			—			—			41
Long-term debt including obligations under capital leases and financing obligations		6,894			—			—			6,894
Other long-term liabilities		1,346			960			—			2,306
Total liabilities		11,612			9,816			(3,612		)	17,816
Minority interests		96			—			—			96
Shareowners’ Equity		5,269			12,567			(12,567		)	5,269
Total liabilities and shareowners’ equity		$	16,977		$	22,383		$	(16,179	)	$	23,181

 

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