filings.toolsKroger (KR) 10-K risk factor changes: FY2020 vs FY2019
The 2021-01-30 10-K against the 2020-02-01 one, compared heading by heading and sentence by sentence.
Item 1A40 rewritten45 added21 removed77 unchanged
All filing items995 rewritten412 added501 removed1,813 unchanged
Summary
counted, not written
- Item 1A headings could not be compared: only 0 carried over between the two years, which usually means one filing was read wrongly, so none is reported as new or removed.
- Sentence by sentence, 412 added, 501 removed, 995 rewritten and 1,813 unchanged across 18 items that differ.
Sentences by item
22 items, with every count and a link to each item that changed
Underlined words on a shaded ground are new in FY2020; struck-through words were in FY2019. Sentences that are wholly new or wholly gone are labelled rather than marked.
Item 1A. RISK FACTORS.
40 rewritten, 45 added, 21 removed, 77 unchanged
If we are not successful in [added: reducing or] offsetting [removed: increased] [added: the] cost of fulfilling orders outside of our traditional in-store channel with efficiencies, [removed: cost-savings or] [added: cost-savings,] expense reductions, [added: or alternative revenues,] our [added: financial condition,] results of operations [added: or cash flows] could be adversely affected.
If we do not [added: appropriately or accurately] anticipate customer preferences or fail to quickly adapt to these changing preferences, [added: or if trends shift more quickly to food away from home,] our sales and profitability could be adversely affected.
We are continuing to enhance the customer connection with investments in our [added: four] competitive moats [removed: of today] – [removed: which are product freshness] [added: Seamless, Personalization, Fresh,] and [removed: quality,] _Our [removed: Brands_, and personalized rewards – and our competitive moat of tomorrow, the seamless ecosystem we are building.][added: Brands_.]
If we are unable to [added: continue to] enhance the foregoing [added: key elements of our connection with customers, or they fail to strengthen] customer [removed: connection,] [added: loyalty,] our ability to compete and our financial condition, results of [removed: operations,] [added: operations] or cash flows could be adversely affected.
We believe our [removed: _Restock Kroger_ plan provides] [added: plans to deepen and strengthen our competitive moats provide] a balanced approach that will enable us to meet the wide-ranging needs and expectations of our customers.
[removed: However, we] [added: We] may be unsuccessful in implementing [removed: _Restock Kroger_, including] our alternative profit [removed: strategy and our cost savings initiatives,] [added: strategy,] which could adversely affect our [removed: relationships with our customers, our] market share and business growth, and our [added: financial condition, results of] operations [removed: and results.][added: or cash flows.]
Any issue regarding the safety of items [added: whether _Our Brands_ items manufactured by the company or for the company or CPG products] we sell, regardless of the cause, could have a substantial and adverse effect on our reputation, financial condition, results of [removed: operations,] [added: operations] or cash flows.
A majority of our [removed: employees] [added: associates] are covered by collective bargaining agreements with unions, and our relationship with those unions, including a prolonged work stoppage affecting a substantial number of locations, could have a material adverse effect on our [removed: results.][added: financial condition, results of operations or cash flows.]
We are a party to approximately [removed: 360] [added: 350] collective bargaining agreements.
Further, if we are unable to control health care, pension and wage costs, or if we have insufficient operational flexibility under our collective bargaining agreements, we may experience increased operating costs and an adverse effect on our financial condition, results of [removed: operations,] [added: operations] or cash flows.
Our technology systems are vulnerable to disruption from circumstances beyond our [removed: control.][added: control, and we regularly defend against and respond to data security incidents.]
Cyber-attackers [added: have targeted and accessed, and] may [added: in the future again] attempt to [removed: access] [added: target and access,] information stored in our or our vendors’ systems in order to misappropriate confidential customer or business information.
Although we have implemented procedures to protect our information, and require our vendors to do the same, we cannot be certain that our security systems will successfully defend [removed: against] [added: against, or be able to effectively respond to,] rapidly evolving, increasingly sophisticated cyber-attacks as they become more difficult to detect and defend against.
In addition, hardware, software or applications we may use may have inherent [removed: defects] [added: defects, vulnerabilities,] or could be inadvertently or intentionally applied or used in a way that could compromise our information security.
Our [added: cybersecurity program,] continued investment in our information technology [removed: systems] [added: systems, and our processes to evaluate and select vendors with reasonable information security controls] may not effectively insulate us from potential attacks, [added: data] breaches or disruptions to our business operations, which could result in a loss of customers or business information, negative publicity, damage to our reputation, and exposure to claims from customers, financial institutions, regulatory authorities, payment card associations, associates and other persons.
Any such events could have an adverse effect on our business, financial [removed: condition and] [added: condition,] results of operations [added: or cash flows] and may not be covered by our insurance.
Following a [removed: cyber-attack ,] [added: cyber-attack,] our and/or our vendors’ remediation efforts may not be successful, and a cyber-attack could result in interruptions, delays or cessation of service, and loss of existing or potential customers.
In addition, breaches of our and/or our vendors’ security measures and the unauthorized dissemination of sensitive personal information or confidential information about us or our customers could expose our customers’ private information and our customers to the risk of financial or medical identity theft, or expose us or other third parties to a risk of loss or misuse of this information, and result in investigations, regulatory enforcement actions, material fines and penalties, loss of [removed: customers,] [added: customers and business relationships,] litigation or other actions which could have a material adverse effect on our brands, reputation, business, financial condition, results of [removed: operations,] [added: operations] or cash flows.
Events that adversely affect that trust, including inadequate disclosure to our customers of our uses of their information, failing to keep our information technology systems and our customers’ sensitive information secure from significant attack, theft, damage, loss or unauthorized disclosure or access, whether as a result of our action or inaction (including human error) or that of our business associates, vendors or other third parties, could adversely affect our brand and reputation and operating results and also could expose and/or has exposed us to mandatory disclosure to the media, litigation (including class action litigation), governmental investigations and enforcement proceedings, material fines, penalties and/or remediation costs, and compensatory, special, punitive and statutory damages, consent orders, and/or injunctive relief, any of which could adversely affect our businesses, financial condition, results of [removed: operations,] [added: operations] or cash flows.
Large scale data breaches at other [removed: entities] [added: entities, including supply chain security vulnerabilities,] increase the challenge we and our vendors face in maintaining the security of our information technology systems and proprietary information and of our customers’ information.
If we or those with whom we share information fail to comply with laws and regulations, such as the California Consumer Privacy Act [removed: (CCPA),] [added: (CCPA) or the Health Insurance Portability and Accountability Act (HIPAA),] our reputation could be damaged, possibly resulting in lost business, and we could be subjected to additional legal risk or financial losses as a result of non-compliance.
We accept payments using a variety of methods, including cash and checks, [removed: and] select credit and debit [removed: cards.][added: cards, and Kroger Pay, a mobile payment solution.]
It could disrupt our business if these companies become unwilling or unable to provide these services to [removed: us.][added: us, including due to short term disruption of service.]
If our [added: payment card terminals or] internal systems are breached or compromised, we may be liable for card re-issuance [added: costs and other] costs, subject to fines and higher transaction [removed: fees] [added: fees,] and lose our ability to accept card payments from our members, [removed: and] [added: or if] our [added: third-party service providers’ systems are breached or compromised, our] business, financial condition, results of [removed: operations,] [added: operations] or cash flows could be adversely affected.
From time to time, we are a party to legal proceedings, including matters involving personnel and employment issues, personal injury, [removed: antitrust] [added: contract disputes, regulatory] claims and other proceedings.
Adverse outcomes in these legal proceedings, or changes in our evaluations or predictions about the proceedings, could have a material adverse effect on our financial [removed: results.][added: condition, results of operations or cash flows.]
Please also refer to the [removed: “Legal Proceedings” section in Item 3 and the] “Litigation” section in Note 13 to the Consolidated Financial Statements.
We use a combination of insurance and self-insurance to provide for potential liability for workers’ compensation, automobile and general liability, property, director and officers’ liability, [added: cyber risk exposure] and [removed: employee] [added: associate] health care benefits.
Changes in legal claims, trends and interpretations, variability in inflation rates, changes in the nature and method of claims settlement, benefit level changes due to changes in applicable laws, insolvency of insurance carriers, and changes in discount rates could all affect our financial condition, results of [removed: operations,] [added: operations] or cash flows.
As discussed in more detail below in “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting [removed: Policies-_Multi-Employer] [added: Policies-Multi-Employer] Pension [removed: Plans_,”] [added: Plans,”] Kroger contributes to several multi-employer pension plans based on obligations arising under collective bargaining agreements with unions representing [removed: employees] [added: associates] covered by those agreements.
A significant increase to those funding requirements could adversely affect our financial condition, results of [removed: operations,] [added: operations] or cash flows.
If investment results fail to meet our expectations, we could be required to make additional contributions to fund a portion of or the entire shortfall, which could have an adverse effect on our business, financial condition, results of [removed: operations,] [added: operations] or cash flows.
Achieving the anticipated [added: or desired] benefits may be subject to a number of significant challenges and uncertainties, including, without limitation, whether unique corporate cultures will work collaboratively in an efficient and effective manner, the coordination of geographically separate organizations, the possibility of imprecise assumptions underlying expectations regarding potential synergies, capital requirements, and the integration process, unforeseen expenses and delays, and competitive factors in the marketplace.
If we are unable to achieve our objectives within the anticipated time frame, or at all, the expected benefits may not be realized fully or at all, or may take longer to realize than expected, which could have an adverse effect on our business, financial [removed: condition and] [added: condition,] results of [removed: operations,] [added: operations] or cash flows.
We sell a significant amount of [removed: fuel,] [added: fuel in our 1,596 fuel centers,] which could face increased [removed: regulation] [added: regulation, including due to climate change or other environmental concerns,] and demand could be affected by concerns about the effect of emissions on the environment as well as retail price increases.
We are unable to predict future regulations, environmental effects, political unrest, acts of terrorism, disruptions to the economy, including but not limited to the COVID-19 pandemic, and other matters that may affect the cost and availability of fuel, and how our customers will [removed: react,] [added: react to such factors,] which could adversely affect our financial condition, results of [removed: operations,] [added: operations] or cash flows.
Future economic conditions affecting disposable consumer income such as employment levels, business conditions, changes in housing market conditions, the availability of credit, interest rates, tax [removed: rates, the impact of natural disasters or acts of terrorism or pandemics, such as the spread of the novel coronavirus, COVID-19,] [added: rates] and other matters could reduce consumer spending.
If the global economy and financial markets do not perform as we expect, it could adversely affect our financial condition, results of [removed: operations,] [added: operations] or cash flows.
[removed: WEATHER AND] [added: WEATHER,] NATURAL [removed: DISASTERS][added: DISASTERS AND OTHER EVENTS]
[removed: Adverse weather and natural disasters] [added: Any or all of these requirements] could [removed: materially affect] [added: have an adverse effect on] our financial condition, results of [removed: operations,] [added: operations] or cash flows.
Customer behavior shifted quickly and considerably during the pandemic, including a shift from food away from home to food at home.
We see three major trends shaping the industry post-pandemic: e-commerce, cooking at home and prepared foods to go.
If we fail to meet the evolving needs of our customers, our ability to compete and our financial condition, results of operations or cash flows could be adversely affected.
Each of these are strategic differentiators and each one is designed to generate customer loyalty and sustainable growth momentum.
Our ecosystem monetizes the traffic and data insights generated by our enhanced customer experience.
We are using our assets in new ways through these fast-growing, asset-light and margin rich businesses.
In addition, if we do not successfully develop and maintain a relevant digital experience for our customers, our business, financial condition, results of operations or cash flows could be adversely impacted.
Digital retailing is rapidly evolving, and we must keep pace with new developments by our competitors as well as the evolving needs and preferences of our customers.
Our digital business accelerated significantly during the COVID-19 pandemic including Pickup, Delivery and Ship.
We must compete by offering a convenient shopping experience for our customers regardless of how they choose to shop with us, and by investing in, providing and maintaining relevant customer-facing apps and interfaces that have the features customers want that are also reliable and easy to use.
The future success of the digital business will also depend on the efficiency and cost effectiveness of fulfilling orders across our modalities, whether in store, in pickup-only locations, and through customer fulfillment centers powered by Ocado.
We could be adversely affected by personal injury or project liability claims, product recalls, or other health and safety issues.
If we sell products that cause illness or injury to customers, resulting from product contamination or spoilage, the presence of certain substances, or damage caused in handling, storage or transportation, we could be exposed to claims or litigation.
EMPLOYEE MATTERS
In addition, changes to national labor policy could affect labor relations with our associates and relationships with unions.
We are committed to paying fair wages and providing the benefits that were collectively bargained with the United Food and Commercial Workers (“UFCW”) and other labor unions representing associates.
Our ability to control labor and benefit costs is subject to numerous internal and external factors, including regulatory changes, wage rates, and healthcare and other insurance costs.
Changes to wage regulations, including further increases in the minimum wage and extra pay ordinances enacted by local governments, could have an impact on our future financial condition, results of operations or cash flows.
Our ability to meet our labor needs, while controlling wages and other costs, is subject to numerous external factors, including the available qualified workforce in each area where we are located, unemployment levels within those areas, wage rates, and changes in employment and labor laws.
Our continued success depends on the ongoing contributions of our associates, including members of our senior management and other key personnel.
We must recruit, hire, develop and retain qualified associates with an increasingly large range of skills to meet the needs of our evolving and complex business.
We compete with other retail and non-retail businesses for these associates and invest significant resources in training and motivating them.
Competition among potential employers could result in increased associate costs, or in our failure to recruit and retain associates.
There is no assurance that we will be able to attract or retain sufficient highly qualified associates in the future, which could have a material adverse effect on our business, financial condition, results of operations or cash flows.
With respect to insured matters, we are liable for retention amounts that vary by the nature of the claim, and some losses may not be covered by insurance.
Moreover, the effects of climate change, including those associated with extreme weather events, may affect our ability to procure needed commodities at costs and in quantities that are optimal for us or at all.
Adverse weather, natural disasters, geo-political and catastrophic events, such as war, civil unrest, acts of terrorism or other acts of violence, including active shooter situations (which have occurred in the past at our locations), or pandemics, such as the spread of the novel coronavirus, COVID-19, or other future pandemics and other matters that could reduce consumer spending, could materially affect our financial condition, results of operations or cash flows.
The global COVID-19 pandemic continues to affect our business.
A full year into the pandemic, many factors and uncertainties remain, including:
| | ● | the continuing concerns about the health of, and the effect on our associates, and our ability to meet staffing needs in our stores, distribution facilities, corporate offices and other critical functions; |
| | ● | the ultimate duration of the pandemic, including whether there will be additional spikes in the number of COVID-19 cases, future mutations or related strains of the virus; |
| | ● | the duration, degree and effectiveness of governmental measures, such as access to unemployment compensation, stimulus payments, and other fiscal policy changes; |
| | ● | the timing and availability of, and prevalence of access to and utilization of, effective medical treatments and timely rollout of vaccinations for COVID-19; |
| | ● | evolving macroeconomic factors, including general economic uncertainty, unemployment rates, and recessionary pressures; |
| | ● | the impact of the pandemic on economic activity and the pace and extent of recovery when the pandemic subsides, which may vary materially over time and among the different regions and markets we serve; |
| | ● | the extent and duration of the effect on consumer confidence, economic well-being, spending, customer demand, buying patterns and shopping behaviors, including spend on discretionary categories, which often include higher margin products, and increased utilization of online sales channels, both during and after the pandemic; and |
| --- | --- | --- |
| | ● | the long-term impact of the pandemic on our business, including consumer behaviors. |
| --- | --- | --- |
In addition, we cannot predict with certainty the extent of the impact that COVID-19 will have on our customers, suppliers, vendors, and other business partners, and each of their financial conditions; however, any material adverse effect on these parties could materially and adversely impact us.
If we are unable to make, improve, or develop relevant customer-facing technology in a timely manner, our ability to compete and our results of operations could be adversely affected.
LABOR RELATIONS
A prolonged work stoppage affecting a substantial number of locations could have a material adverse effect on our results.
On March 11, 2020, the World Health Organization announced that infections of the coronavirus (COVID-19) had become a pandemic, and on March 13, the U.S. President announced a National Emergency relating to the disease.
There is a possibility of widespread infection in the United States and abroad, with the potential for catastrophic impact.
National, state and local authorities have recommended social distancing and imposed or are considering quarantine and isolation measures on large portions of the population, including mandatory business closures.
These measures, while intended to protect human life, are expected to have serious adverse impacts on domestic and foreign economies of uncertain severity and duration.
The effectiveness of economic stabilization efforts, including proposed government payments to affected citizens and industries, is uncertain.
Some economists are predicting the United States may enter a recession as a result of the pandemic.
Our business may be negatively impacted by the fear of exposure to or actual effects of a disease outbreak, epidemic, pandemic or similar widespread public health concern, such as reduced travel or recommendations or mandates from governmental authorities to avoid large gatherings or to self-quarantine as a result of the coronavirus pandemic.
These impacts include but are not limited to:
| | ● | Increased costs due to short-term significant increases in customer traffic and demand spikes; |
| | ● | Failure of third parties on which we rely, including our suppliers, contract manufacturers, contractors, commercial banks, joint venture partners and external business partners to meet their obligations to the company, or significant disruptions in their ability to do so which may be caused by their own financial or operational difficulties and may adversely impact our operations; |
| | ● | Supply chain risks such as scrutiny or embargoing of goods produced in infected areas; |
| | ● | Reduced workforces which may be caused by, but not limited to, the temporary inability of the workforce to work due to illness, quarantine, or government mandates; |
| | ● | Temporary store closures due to reduced workforces or government mandates; or |
| | ● | Reduced consumer traffic and purchasing which may be caused by, but not limited to, the temporary inability of customers to shop with us due to illness, quarantine or other travel restrictions, or financial hardship, shifts in demand from discretionary or higher priced products to lower priced products, or stockpiling or similar pantry-loading activities. |
Any of the foregoing factors, or other cascading effects of the coronavirus pandemic that are not currently foreseeable, could materially increase our costs, negatively impact our sales and damage the Company’s financial condition, results of operations, cash flows and its liquidity position, possibly to a significant degree.
The duration of any such impacts cannot be predicted because of the sweeping nature of the COVID-19 pandemic.
Any or all of these requirements could have an adverse effect on our financial condition, results of operations, or cash flows.
An excerpt. Shown here: all 40 rewritten, 40 of 45 added and all 21 removed. The counts are complete. For every sentence, read Item 1A. RISK FACTORS. in the FY2020 filing and the FY2019 filing.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
241 rewritten, 124 added, 165 removed, 321 unchanged
MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying notes thereto contained in Item 8 of this report, as well as Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the year ended February [removed: 2, 2019,] [added: 1, 2020,] which provides additional information on comparisons of fiscal years [removed: 2018] [added: 2019] and [removed: 2017.][added: 2018.]
As of [removed: February 1, 2020,] [added: January 30, 2021,] Kroger is one of the world’s largest retailers, as measured by revenue, operating [removed: 2,757] [added: 2,742] supermarkets under a variety of local banner names in 35 states and the District of Columbia.
Of these stores, [removed: 2,270] [added: 2,255] have pharmacies and [removed: 1,567] [added: 1,596] have fuel centers.
We offer Pickup (also referred to as ClickList®) and Harris Teeter ExpressLane™ — personalized, order online, pick up at the store services — at [removed: 1,989] [added: 2,223] of our supermarkets and provide home delivery service to [removed: 97%] [added: substantially all] of Kroger households.
We operate 35 food production plants, primarily bakeries and dairies, which supply approximately [removed: 31%] [added: 29%] of _Our Brands_ units and [removed: 42%] [added: 40%] of the grocery category _Our Brands_ units sold in our supermarkets; the remaining _Our Brands_ items are produced to our strict specifications by outside manufacturers.
Lucky’s Market is included in our Consolidated [removed: Balance Sheet for 2018 and our Consolidated] Statements of Operations in all periods in [removed: 2017 and] 2018 and through January 26, 2020.
Turkey Hill Dairy is included in our Consolidated [removed: Balance Sheet for 2018 and our Consolidated] Statements of Operations in all periods in [removed: 2017 and] 2018 and through April 25, 2019.
You Technology is included in our Consolidated [removed: Balance Sheet for 2018 and our Consolidated] Statements of Operations in all periods in [removed: 2017 and] 2018 and through March 12, 2019.
Home Chef is included in our ending Consolidated Balance Sheet for [removed: 2018 and] 2019 and [added: 2020 and] in our Consolidated Statements of Operations from June 22, 2018 through February 2, 2019 and all periods in [removed: 2019.][added: 2019 and 2020.]
The convenience store business is included in our Consolidated Statements of Operations [removed: in all periods in 2017 and] through April 19, 2018.
We provide non-GAAP measures, including [removed: FIFO] [added: First-In, First-Out (“FIFO”)] gross margin, FIFO operating profit, adjusted net earnings and adjusted net earnings per diluted share because management believes these metrics are useful to investors and analysts.
| | ● | Charges to [removed: operating, general and administrative expenses (“OG&A”)] [added: OG&A] of $135 million, $104 million net of tax, for obligations related to withdrawal liabilities for certain multi-employer pension funds; $80 million, $61 million net of tax, for a severance charge and related benefits; $412 million including $305 million attributable to The Kroger Co., $225 million net of tax, for impairment of Lucky’s Market; $52 million, $37 million net of tax, for transformation costs, primarily including 35 planned store closures; and a reduction to OG&A of $69 million, $49 million net of tax, for the revaluation of Home Chef contingent consideration (the “2019 OG&A Adjusted Items”). |
Net earnings for [removed: 2017] [added: 2020] include the following, which we define as the [removed: “2017] [added: “2020] Adjusted Items:”
Our financial strategy is to continue to use our [removed: strong] free cash flow to invest in the business to drive long-term sustainable [removed: growth] [added: net earnings growth,] through the identification of high-return projects that support our strategy.
At the same time, we are committed to maintaining our net debt to adjusted EBITDA range of 2.30 to 2.50 in order to keep our current [removed: investment-grade] [added: investment grade] debt rating.
[removed: We also expect] [added: Our resilient cash flow will allow us] to continue to grow our dividend over [removed: time, reflecting the confidence we have in our free cash flow,] [added: time] and [removed: will] continue to return excess cash to investors via share [removed: repurchases.][added: repurchases, resulting in consistently strong and sustainable total shareholder return of between 8% and 11%.]
| [removed: ] [added: ] | [removed: ] [added: ] | [added: 2020 | | | Change(1) | |] 2019 | | | [removed: Change] [added: Change(2)] | | 2018 | | |
| [removed: Sales] [added: Total sales] | | $ | [added: 132,498 | | 8.4 | % | $ |] 122,286 | | 0.4 | % | $ | 121,852 | |
| Net earnings attributable to The Kroger Co. | | [removed: ] [added: $] | [removed: 1,659] [added: 2,585] | | [removed: (46.7)] [added: $] | [removed: %] [added: 1,659] | | [added: $ |] 3,110 | |
| [removed: Adjusted net] [added: Net] earnings attributable to The Kroger Co. [added: excluding the Adjusted Items] | | [added: $] | [removed: 1,786] [added: 2,740] | | [removed: 2.3] [added: $] | [removed: %] [added: 1,786] | [added: ] | [added: $ |] 1,745 | |
| Net earnings attributable to The Kroger Co. per diluted common share | | [added: $] | [removed: 2.04] [added: 3.27] | | [removed: (45.7)] [added: $] | [removed: %] [added: 2.04] | [added: ] | [added: $ |] 3.76 | |
| [removed: Adjusted net] [added: Net] earnings attributable to The Kroger Co. per diluted common share [added: excluding the Adjusted Items] | | [removed: ] [added: $] | [removed: 2.19] [added: 3.47] | | [removed: 3.8] [added: $] | [removed: %] [added: 2.19] | [added: ] | [added: $ |] 2.11 | |
| Operating profit | | [removed: ] [added: $] | [removed: 2,251] [added: 2,780] | | [removed: (13.9) | % | ] [added: $] | [removed: 2,614] [added: 2,251] | |
| Adjusted FIFO operating profit | | | [removed: 2,995] [added: 4,056] | | [removed: 4.0] [added: 35.4] | % | | [removed: 2,880] [added: 2,995] | |
| Reduction in total debt, including obligations under finance leases [added: compared to prior fiscal year end] | | | [removed: 1,153] [added: 663] | | [removed: 220.3] [added: N/A] | [removed: %] [added: ] | | [removed: 360] [added: 1,153] | |
| Share repurchases | | | [removed: 465] [added: 1,324] | | [removed: (76.9)] [added: N/A] | [removed: %] [added: ] | | [removed: 2,010] [added: 465] | |
| Dividends paid | | | [removed: 486] [added: 534] | | [removed: 11.2] [added: 9.9] | % | | [removed: 437] [added: 486] | |
| Dividends paid per common share | | | [removed: 0.600] [added: 0.68] | | [removed: 13.2] [added: 13.3] | % | | [removed: 0.530] [added: 0.60] | |
| Identical sales excluding fuel | | | [removed: 2.0] [added: 14.1] | % | N/A | | | [removed: 1.8] [added: 2.0] | % |
| FIFO gross margin rate, excluding [removed: fuel and Adjusted Items,] [added: fuel,] bps [removed: decrease] [added: increase (decrease)] | | | [removed: (0.23)] [added: 0.14] | | N/A | | | [removed: (0.55)] [added: (0.23)] | |
| OG&A rate, excluding fuel and Adjusted Items, bps [removed: increase (decrease)] [added: decrease] | | | [removed: (0.29)] [added: 0.06] | | N/A | | | [removed: 0.07] [added: 0.29] | |
Notable items for [removed: 2019] [added: 2020] are:
| | ● | Net earnings attributable to The Kroger Co. per diluted common share of [removed: $2.04.] [added: $3.27.] |
| | ● | Adjusted net earnings attributable to The Kroger Co. per diluted common share of [removed: $2.19.] [added: $3.47.] |
| | ● | [removed: We returned $951 million] [added: Returned $1.9 billion] to shareholders [removed: from] [added: through] share repurchases and dividend payments. |
[removed: | | ● |] Over the last 12 months, we decreased total debt, including obligations under finance leases, by [removed: $1.2 billion. |][added: $663 million.]
| | ● | Identical sales, excluding fuel, increased [removed: 2.0%] [added: 14.1%] in [removed: 2019.] [added: 2020.] |
On March 11, 2020, the World Health Organization announced that infections of [removed: the coronavirus (COVID-19)] [added: COVID-19] had become a pandemic, and on March 13, the U.S. President announced a National Emergency relating to the disease.
We expect the ultimate significance [removed: of the impact on our financial condition, results of operations, or cash flows] will be dictated by the length of time that such circumstances continue, which will depend on the currently unknowable extent and duration of the COVID-19 pandemic and any governmental and public actions taken in response.
The following table provides a reconciliation of net earnings attributable to The Kroger Co. to adjusted net earnings attributable to The Kroger Co. and a reconciliation of net earnings attributable to The Kroger Co. per diluted common share to adjusted net earnings attributable to The Kroger Co. per diluted common share, excluding the [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] Adjusted Items.
We are proud of our results in 2020 and the balance achieved in delivering for all our key stakeholders – our Associates, Customers, Communities and Investors.
We gained market share and exceeded guidance that we gave in the second half of 2020.
We committed more than $2.5 billion to safeguard the environment our associates and customers work and shop in and to reward associates, including a $1 billion commitment to a UFCW pension fund.
Identical sales, without fuel, were 14.1% for 2020, as customers continued to consolidate trips and spend more per transaction.
We grew digital sales triple digits in 2020, enabled by our team’s ability to pivot quickly and effectively in the first stage of the pandemic to ensure that we were meeting our customers’ demand for safe, low-touch or touchless shopping modalities.
Our strong performance in digital is also a testament to the proactive investments we made over the last several years in our network, which positioned us to respond with agility during this critical time.
We were disciplined in balancing investments in our customers and associates with cost savings.
For the third year in a row, our operations and sourcing teams delivered over $1 billion in incremental cost savings.
These savings continue to be focused in areas that take complexity out of the business and allow our associates to provide a better customer experience.
Strong execution by our team and accelerated investments in our competitive moats – Fresh, _Our Brands_, Data & Personalization and Seamless, during the pandemic allowed us to create significant value for shareholders and strengthen our balance sheet, including accelerated growth in our alternative profit business.
The momentum we see in our business, which started pre-pandemic and accelerated during the pandemic, places us in an even better position to grow sales and profitability in the future and deliver on our total shareholder return commitments.
Our financial model is underpinned by our leading position in food.
We continue to invest in areas of the business that matter most to our customers and deepen our competitive moats, to drive sales growth in our retail supermarket business, including fuel and pharmacy.
This in turn generates the data and traffic that enables our fast-growing alternative profit streams.
Capital allocation is a core element of our value creation model, and we will allocate capital towards driving profitable sales growth, accelerating digital, expanding margin as well as maintaining the business.
We will continue to be disciplined in deploying capital towards projects that exceed our hurdle rate of return and prioritize the highest return opportunities to drive 3% to 5% net earnings growth.
| | | 2020 | | | Change | | 2019 | | |
| Sales | | $ | 132,498 | | 8.4 | % | $ | 122,286 | |
| Sales without fuel | | | 123,012 | | 13.7 | % | | 108,234 | |
| | ● | Achieved operating profit of $2.8 billion. |
| | ● | Achieved adjusted FIFO operating profit of $4.1 billion. |
| | ● | Generated cash from operations of $6.8 billion. |
| | ● | Increased cash and temporary cash investments by $1.3 billion, reflecting improved operating performance, significant improvements in working capital and the deferral of tax payments as a result of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which was enacted in the first quarter of 2020. |
| | ● | Digital revenue grew 116% in 2020. Digital revenue primarily includes Pickup, Delivery, Ship and pharmacy e-commerce sales. |
| | ● | Alternative profit streams contributed an incremental $150 million of operating profit in 2020 fueled by our retail media business – Kroger Precision Marketing. |
| | ● | Cost savings for 2020 exceeded $1 billion. |
| | ● | During the fourth quarter of 2020, certain of the Company’s associates ratified an agreement with certain UFCW local unions to withdraw from the UFCW International Union-Industry Pension Fund (“National Fund”). We incurred a withdrawal liability charge of $962 million, on a pre-tax basis, to fulfill obligations for past service for associates and retirees in the National Fund. We also made a $27 million commitment to a transition reserve in the new variable annuity pension plan. On an after-tax basis, the withdrawal liability and commitment to the transition reserve total $754 million (collectively, the “National Fund Commitment”). The withdrawal liability will be satisfied by payments to the National Fund over the next three years. |
| | ● | During 2020, we invested over $1.5 billion to support and safeguard associates, customers and communities during the COVID-19 pandemic. These investments primarily relate to items within OG&A such as associate appreciation awards, expanded sick and emergency leave pay and investments in associate and customer safety during the pandemic (collectively, the “COVID-19 Investments”). Supported by our strong performance and cash position, we committed more than $2.5 billion to safeguard the environment our associates and customers work and shop in and to reward associates, including the National Fund Commitment. |
| | ● | During the first quarter of 2020, in addition to the recurring multi-employer pension contributions we make in the normal course of business, we contributed an incremental $236 million, $180 million net of tax, to multi-employer pension plans, helping stabilize future associate benefits (the “First Quarter 2020 Multi-Employer Pension Contribution”). |
The impact on our financial condition, results of operations, and cash flows was material in fiscal year 2020.
Since the beginning of the pandemic, our most urgent priority has been to safeguard our associates and customers.
We’ve implemented dozens of new safety and cleanliness processes and procedures in our stores and other facilities, including safety partitions and physical distancing floor decals, implementation of customer capacity limits, and providing personal protective equipment like masks for our associates.
All of which are described in our _Blueprint for Businesses_ – an open source guide we created to help other companies navigate the complexities of safely operating during a pandemic.
As the pandemic has evolved, we have experienced unusually strong sales.
We continue to see people eat and work more from home and prioritize health and cleanliness.
The change in customer behavior caused by COVID-19 was a major factor in our 2020 results.
The pandemic brought to the forefront the importance to the customer of fresh and digital.
We continued to invest and grow our capabilities in these areas, leading to gains in both digital and total food at home market share.
Identical sales, without fuel, were 14.1% for 2020, as customers continued to consolidate trips and spend more per transaction.
Digital revenue grew 116% in 2020, enabled by our team’s ability to pivot quickly and effectively in the first stage of the pandemic to ensure that we were meeting our customers’ demand for safe, low-touch or touchless shopping modalities.
| | ● | Charges to OG&A of $550 million, $360 million net of tax, for obligations related to withdrawing from and settlements of withdrawal liabilities for certain multi-employer pension funds; $184 million, $117 million net of tax, related to the voluntary retirement offering (“VRO”); and $110 million, $74 million net of tax, related to the Kroger Specialty Pharmacy goodwill impairment (the “2017 OG&A Adjusted Items”). |
| | ● | A reduction to depreciation and amortization expenses of $19 million, $13 million net of tax, related to held for sale assets (the “2017 Depreciation Adjusted Item”). |
| | ● | A reduction to income tax expense of $922 million primarily due to the re-measurement of deferred tax liabilities and the reduction of the statutory rate for the last five weeks of the fiscal year from the Tax Cuts and Jobs Act ("Tax Act") (the “2017 Tax Expense Adjusted Item”). |
| | ● | A charge in other income (expense) of $502 million, $335 million net of tax, related to a company-sponsored pension plan termination. |
In addition, net earnings for 2017 include $119 million, $79 million net of tax, due to a 53rd week in fiscal year 2017 (the “Extra Week”).
In 2019, we delivered on the total shareholder return model that we outlined at our Investor Day in November 2019 and are positioned to deliver on our total shareholder return model of the future.
We also delivered on our guidance for identical sales without fuel, adjusted net earnings per diluted share and adjusted FIFO operating profit.
We are using the power of Kroger’s stable and growing supermarket business to create meaningful incremental operating profit through the alternative profit stream businesses, positioning our business for long-term growth.
By executing against the _Restock Kroger_ framework, we are repositioning our business by widening and deepening our competitive moats.
The four main areas of the _Restock Kroger_ framework – Redefine the Customer Experience, Partner to Create Value, Develop Talent and Live Our Purpose – continue to be a top strategic priority for us.
Our model is built upon a strong and durable base driven by our retail supermarket, fuel, and health and wellness businesses.
We continue to generate strong free cash flow and are being disciplined in how we deploy it to deliver strong and attractive total shareholder returns.
We will allocate capital toward driving profitable sales growth in stores and digital, improving productivity, and building a seamless digital ecosystem and supply chain.
We expect our model to deliver improved operating results over time and continued strong free cash flow, which will translate into a consistently strong and attractive total shareholder return over the long-term of 8% to 11%.
Our full-year 2019 results demonstrated clear progress toward delivering on this model.
_Restock Kroger_ is the right strategic framework to deliver both our 2020 guidance and to position Kroger for sustainable growth and total shareholder return.
($ in millions, except per share amounts)
**
| | ● | Digital revenue grew 29% in 2019, driven by Pickup and Delivery sales growth. Digital revenue growth has moderated primarily due to cycling our merger with the Home Chef business. Digital revenue primarily includes revenue from all curbside pickup locations, online sales delivered to customer locations and products shipped to customer locations. |
| | ● | Alternative profit streams grew over $100 million in 2019 compared to 2018, meeting our expectations. Kroger’s ecosystem fuels the growth of adjacent alternative profit streams like Kroger Personal Finance, customer data insights, and media businesses that are essential components of _Restock Kroger_. These businesses comprise a significant portion of Kroger’s overall alternative profit stream portfolio. They are dependent on a core supermarket business to deliver sustainable, long-term growth and profitability. |
| | ● | During the fourth quarter of 2019, we recognized transformation costs of $52 million, $37 million net of tax, primarily including 35 planned store closures. |
| | ● | During the third quarter of 2019, we approved and implemented a plan to reorganize certain portions of our division management structure, resulting in a charge for severance and related benefits of $80 million, $61 million net of tax. This reorganization is expected to increase operational effectiveness and reduce overhead costs while maintaining a high quality customer experience. |
| | ● | As a result of a portfolio review, we decided to divest our interest in Lucky’s Market and we recognized a non-cash impairment charge of $238 million in the third quarter of 2019. The amount of the impairment charge attributable to The Kroger Co. is $131 million, $100 million net of tax. Subsequently, the decision was made by Lucky’s Market to file for bankruptcy in January 2020, which led us to fully write off the value of our investment and deconsolidate Lucky’s Market from our consolidated financial statements. This resulted in an additional non-cash charge of $174 million, $125 million net of tax, in the fourth quarter of 2019. The amount of the total 2019 charge attributable to The Kroger Co. is $305 million, $225 million net of tax. This impairment charge was a non-cash charge and reflects the write down of our initial investment in Lucky’s Market, as well as additional funding provided to operate and grow the business. Kroger maintains liabilities associated with certain property related guarantees that will result in Kroger making payments to settle these over time. |
| | ● | During the first quarter of 2019, we sold our You Technology business to Inmar for total consideration of $565 million, including $396 million of cash and $64 million of preferred equity received upon closing. We are also entitled to receive other cash payments of $105 million over five years. The transaction includes a long-term service agreement for Inmar to provide us digital coupon services. |
| | ● | During the first quarter of 2019, we sold our Turkey Hill Dairy business to an affiliate of Peak Rock Capital for $225 million. |
| | ● | In 2019, we recorded charges to OG&A of $135 million, $104 million net of tax, for obligations related to withdrawal liabilities for certain multi-employer pension funds. |
There is a possibility of widespread infection in the United States and abroad, with the potential for catastrophic impact.
National, state and local authorities have recommended social distancing and imposed or are considering quarantine and isolation measures on large portions of the population, including mandatory business closures.
These measures, while intended to protect human life, are expected to have serious adverse impacts on domestic and foreign economies of uncertain severity and duration.
The effectiveness of economic stabilization efforts, including proposed government payments to affected citizens and industries, is uncertain.
Some economists are predicting the United States may enter a recession as a result of the pandemic.
COVID-19 also makes it more challenging for management to estimate future performance of our businesses, particularly over the near term.
On April 1, 2020, we issued a press release announcing business updates in response to the impact from novel coronavirus (COVID-19).
| | | | | | | | | | | |
| Adjustment for voluntary retirement offering(1)(3) | | | — | | | — | | | 117 | |
| Adjustment for Kroger Specialty Pharmacy goodwill impairment(1)(4) | | | — | | | — | | | 74 | |
| Adjustment for company-sponsored pension plan termination(1)(5) | | | — | | | — | | | 335 | |
| Adjustment for Tax Act(1)(16) | | | — | | | — | | | (922) | |
| Extra Week adjustment(1)(17) | | | — | | | — | | | (79) | |
| Net earnings attributable to The Kroger Co. excluding the Adjusted Items and the Extra Week adjustment | | $ | 1,786 | | $ | 1,745 | | $ | 1,779 | |
An excerpt. Shown here: 40 of 241 rewritten, 40 of 124 added and 40 of 165 removed. The counts are complete. For every sentence, read Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. in the FY2020 filing and the FY2019 filing.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
9 rewritten, 7 added, 11 removed, 30 unchanged
[removed: We] [added: When we] use derivative financial [removed: instruments] [added: instruments, it is] primarily to manage our exposure to fluctuations in interest rates.
The tables below provide information about our underlying debt portfolio as of [removed: February 1, 2020] [added: January 30, 2021] and February [removed: 2, 2019.][added: 1, 2020.]
The amounts shown for each year represent the contractual maturities of long-term debt, excluding finance leases, as of [removed: February 1, 2020] [added: January 30, 2021] and February [removed: 2, 2019.][added: 1, 2020.]
The variable rate debt is based on U.S. dollar LIBOR using the forward yield curve as of [removed: February 1, 2020] [added: January 30, 2021] and February [removed: 2, 2019.][added: 1, 2020.]
The Fair Value column includes the fair value of our debt instruments as of [removed: February 1, 2020] [added: January 30, 2021] and February [removed: 2, 2019.][added: 1, 2020.]
We have no outstanding interest rate derivatives classified as fair value hedges as of [removed: February 1, 2020] [added: January 30, 2021] or February [removed: 2, 2019.][added: 1, 2020.]
| | | [removed: 2019] [added: 2021] | | | [removed: 2020] [added: 2022] | | | [removed: 2021] [added: 2023] | | | [removed: 2022] [added: 2024] | | | [removed: 2023] [added: 2025] | | | Thereafter | | | Total | | | Fair Value | | |
| Variable rate | | $ | [removed: (1,852)] [added: (42)] | | $ | [removed: (25)] [added: —] | | $ | [removed: —] [added: (23)] | | $ | — | | $ | [removed: —] [added: (81)] | | $ | [removed: (81)] [added: —] | | $ | [removed: (1,958)] [added: (146)] | | $ | [removed: (1,958)] [added: (146)] | |
Based on our year-end [removed: 2019] [added: 2020] variable rate debt levels, a 10 percent change in interest rates would be immaterial.
As of January 30, 2021, we had no forward-starting interest rate swap agreements outstanding.
| | | January 30, 2021 | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fixed rate | | $ | (802) | | $ | (894) | | $ | (594) | | $ | (494) | | $ | (494) | | $ | (8,986) | | $ | (12,264) | | $ | (14,534) | |
| Average interest rate | | | 4.20 | % | | 4.29 | % | | 4.41 | % | | 4.55 | % | | 4.58 | % | | 4.40 | % | | | | | | |
| Average interest rate | | | 1.87 | % | | — | | | 2.62 | % | | — | | | 0.08 | % | | — | % | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
As of February 1, 2020, we maintained seven forward-starting interest rate swap agreements with a maturity date of January 15, 2021 with an aggregate notional amount totaling $350 million.
A forward-starting interest rate swap is an agreement that effectively hedges the variability in future benchmark interest payments attributable to changes in interest rates on the forecasted issuance of fixed-rate debt.
We entered into these forward-starting interest rate swaps in order to lock in fixed interest rates on our forecasted issuances of debt in January 2021.
The fixed interest rates for these forward-starting interest rate swaps range from 1.57% to 2.45%.
The variable rate component on the forward-starting interest rate swaps is 3 month LIBOR.
Accordingly, the forward-starting interest rate swaps were designated as cash-flow hedges as defined by GAAP.
As of February 1, 2020, the fair value of the interest rate swaps was recorded in “Other long-term liabilities” for $19 million and accumulated other comprehensive loss for $17 million, net of tax.
| | | February 2, 2019 | | | | | | | | | | | | | | | | | | | | | | | |
| Fixed rate | | $ | (1,251) | | $ | (695) | | $ | (793) | | $ | (896) | | $ | (595) | | $ | (8,163) | | $ | (12,393) | | $ | (12,232) | |
| Average interest rate | | | 4.51 | % | | 4.47 | % | | 4.47 | % | | 4.56 | % | | 4.74 | % | | 4.70 | % | | | | | | |
| Average interest rate | | | 3.09 | % | | 4.26 | % | | — | | | — | | | — | | | 1.75 | % | | | | | | |
Item 1. BUSINESS.
26 rewritten, 48 added, 4 removed, 74 unchanged
As of [removed: February 1, 2020,] [added: January 30, 2021,] we are one of the largest retailers in the world based on annual sales.
We maintain a web site (www.thekrogerco.com) that includes [added: the _Kroger Fact Book_ and other] additional information about the Company.
All references to [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] are to the fiscal years ended [added: January 30, 2021,] February 1, [removed: 2020, February 2, 2019] [added: 2020] and February [removed: 3, 2018,] [added: 2, 2019,] respectively, unless specifically indicated otherwise.
As of [removed: February 1, 2020,] [added: January 30, 2021,] Kroger employed approximately [removed: 435,000] [added: 465,000] full- and part-time employees.
There are approximately [removed: 360] [added: 350] such agreements, usually with terms of three to five years.
As of [removed: February 1, 2020,] [added: January 30, 2021,] Kroger operated, either directly or through its subsidiaries, [removed: 2,757] [added: 2,742] supermarkets under a variety of local banner names, of which [removed: 2,270] [added: 2,255] had pharmacies and [removed: 1,567] [added: 1,596] had fuel centers.
We offer Pickup (also referred to as ClickList®) and Harris Teeter ExpressLane™— personalized, order online, pick up at the store services — at [removed: 1,989] [added: 2,223] of our supermarkets and provide home delivery service to [removed: 97%] [added: substantially all] of Kroger households.
Approximately [removed: 54%] [added: 51%] of our supermarkets were operated in Company-owned facilities, including some Company-owned buildings on leased land.
Our supermarkets, on average, stock over [removed: 16,000] [added: 15,000] private label items.
In [removed: addition, we continue] [added: addition] to [removed: grow] [added: our three “tiers,” _Our Brands_ offers customers a variety of] natural and organic [removed: _Our Brands_ offerings] [added: products] with Simple Truth® and Simple Truth Organic®.
Approximately [removed: 31%] [added: 29%] of _Our Brands_ units and [removed: 42%] [added: 40%] of the grocery category _Our Brands_ units sold in our supermarkets are produced in our food production plants; the remaining _Our Brands_ items are produced to our strict specifications by outside manufacturers.
As of [removed: February 1, 2020,] [added: January 30, 2021,] we operated 35 food production plants.
| Mary E. Adcock | | [removed: 44] [added: 45] | | Ms. Adcock was elected Senior Vice President effective May 1, 2019 and is responsible for [added: retail operations as well as] the oversight of several Kroger retail divisions. From June 2016 to April 2019, she served as Group Vice President of Retail Operations. Prior to that, she served as Vice President of Operations for Kroger’s Columbus Division from November 2015 to May 2016 and as Vice President of Merchandising for the Columbus Division from March 2014 to November 2015. From February 2012 to March 2014, Ms. Adcock served as Vice President of Natural Foods Merchandising and from October 2009 to February 2012, she served as Vice President of Deli/Bakery Manufacturing. Prior to that, Ms. Adcock held several leadership positions in the manufacturing department, including human resources manager, general manager and division operations manager. Ms. Adcock joined Kroger in 1999 as human resources assistant manager at the Country Oven Bakery in Bowling Green, Kentucky. |
| Stuart W. Aitken | | [removed: 48] [added: 49] | | Mr. Aitken was [added: named Senior Vice President and Chief Merchant and Marketing Officer in August 2020. He was] elected Senior Vice President in February 2019 and served as Group Vice President from June 2015 to February 2019. He is responsible for [removed: leading Kroger’s alternative profit businesses, including Kroger’s data] [added: sales, pricing, promotional and category planning for fresh foods, center store and general merchandise categories, as well as] analytics [removed: subsidiary, 84.51° LLC] [added: & execution, e-commerce] and [removed: Kroger Personal Finance.] [added: Digital Merchandising, and _Our Brands_.] Prior to joining Kroger, he served as the chief executive officer of dunnhumby USA, LLC from July 2010 to June 2015. Mr. Aitken has over 15 years of marketing, academic and technical experience across a variety of industries, and held various leadership roles with other companies, including Michaels Stores and Safeway, Inc. |
| Yael Cosset | | [removed: 46] [added: 47] | | Mr. Cosset was elected Senior Vice President and Chief Information Officer in May 2019 and is responsible for leading Kroger’s digital strategy, focused on building Kroger’s presence in the marketplace in digital channels, personalization and e-commerce. [added: In August 2020, he also assumed responsibility for Kroger’s alternative profit businesses, including Kroger’s data analytics subsidiary, 84.51 ͦ LLC and Kroger Personal Finance.] Prior to that, Mr. Cosset served as Group Vice President and Chief Digital Officer from January 2017 to April 2019. Before that, he served as Chief Commercial Officer and Chief Information Officer of 84.51° LLC from April 2015 to December 2016. Prior to joining Kroger, Mr. Cosset served in several leadership roles at dunnhumby USA, LLC from 2009 to 2015, including Executive Vice President of Consumer Markets and Global Chief Information Officer. |
| Michael J. Donnelly | | [removed: 61] [added: 62] | | Mr. Donnelly was elected Executive Vice President and Chief Operating Officer in December 2017. Prior to that, he was Executive Vice President of Merchandising from September 2015 to December 2017, and Senior Vice President of Merchandising from July 2011 to September 2015. Before that, Mr. Donnelly held a variety of key management positions with Kroger, including President of Ralphs Grocery Company, President of Fry’s Food Stores, and Senior Vice President, Drug/GM Merchandising and Procurement. Mr. Donnelly joined Kroger in 1978 as a clerk. [added: Mr. Donnelly has announced his plan to retire in Spring of 2021.] |
| Carin L. Fike | | [removed: 51] [added: 52] | | Ms. Fike was elected Vice President and Treasurer effective April 2017. Prior to that, she served as Assistant Treasurer from March 2011 to April 2017. Before that, Ms. Fike served as Director of Investor Relations from December 2003 to March 2011. Ms. Fike began her career with Kroger in 1999 as a manager in the Financial Reporting department after working with PricewaterhouseCoopers from 1995 to 1999, where most recently she was an audit manager. |
| Todd A. Foley | | [removed: 50] [added: 51] | | Mr. Foley was elected Vice President and Corporate Controller effective April 2017. Before that, he served as Vice President and Treasurer from June 2013 to April 2017. Prior to that, Mr. Foley served as Assistant Corporate Controller from March 2006 to June 2013, and Controller of Kroger’s Cincinnati/Dayton division from October 2003 to March 2006. Mr. Foley began his career with Kroger in 2001 as an audit manager in the Internal Audit Department after working for PricewaterhouseCoopers from 1991 to 2001, where most recently he was a senior audit manager. |
| Calvin J. Kaufman | | [removed: 57] [added: 58] | | Mr. Kaufman was elected Senior Vice President in June 2017, and is responsible for the oversight of several Kroger retail divisions. From July 2013 to June 2017, he served as President of the Louisville division. Prior to that, he served as President of Kroger Manufacturing and [removed: Our Brands] [added: _Our Brands_] from June 2008 to June 2013, and Group Vice President of Fred Meyer Logistics from September 2005 to May 2008. Mr. Kaufman held various positions in Logistics after joining Kroger in the Fred Meyer division in September 1994. |
| Timothy A. Massa | | [removed: 53] [added: 54] | | Mr. Massa was elected Senior Vice President of Human Resources and Labor Relations in June 2018. Prior to that, he served as Group Vice President of Human Resources and Labor Relations from June 2014 to June 2018. Mr. Massa joined Kroger in October 2010 as Vice President, Corporate Human Resources and Talent Development. Prior to joining Kroger, he served in various Human Resources leadership roles for 21 years at Procter & Gamble, most recently serving as Global Human Resources Director of Customer Business Development. |
| Stephen M. McKinney | | [removed: 63] [added: 64] | | Mr. McKinney was elected Senior Vice President in March 2018, and is responsible for the oversight of several Kroger retail divisions. From October 2013 to March 2018, he served as President of Kroger’s Fry’s Food Stores division. Prior to that, he served as Vice President of Operations for the Ralphs division from October 2007 to September 2013, and Vice President of Operations for the Southwest division from October 2006 to September 2007. From 1988 to 1998, Mr. McKinney served in various leadership positions in the Fry’s Food Stores division, including store manager, deli director, and executive director of operations. From 1981 to 1998, Mr. McKinney held several roles with Florida Choice Supermarkets, a former Kroger banner, including store manager, buyer, and field representative. He started his career with Kroger in 1981 as a clerk with Florida Choice. |
| W. Rodney McMullen | | [removed: 59] [added: 60] | | Mr. McMullen was elected Chairman of the Board effective January 1, 2015, and Chief Executive Officer effective January 1, 2014. Prior to that, he served as President and Chief Operating Officer from August 2009 to December 2013. Prior to that he was elected Vice Chairman in June 2003, Executive Vice President, Strategy, Planning and Finance in January 2000, Executive Vice President and Chief Financial Officer in May 1999, Senior Vice President in October 1997, and Group Vice President and Chief Financial Officer in June 1995. Before that he was appointed Vice President, Control and Financial Services in March 1993, and Vice President, Planning and Capital Management in December 1989. Mr. McMullen joined Kroger in 1978 as a part-time stock clerk. |
| Gary Millerchip | | [removed: 48] [added: 49] | | Mr. Millerchip was elected Senior Vice President and Chief Financial Officer effective April 2019. Prior to this, he [removed: serviced] [added: served] as Chief Executive Officer for Kroger Personal Finance since joining Kroger in 2008. Before coming to Kroger he was responsible for the Royal Bank of Scotland (RBS) Personal Credit Card business in the United Kingdom. He joined RBS in 1987 and held leadership positions in Sales & Marketing, Finance, Change Management, Retail Banking Distribution Strategy and Branch Operations during his time there. |
| Erin S. Sharp | | [removed: 62] [added: 63] | | Ms. Sharp has served as Group Vice President of Manufacturing since June 2013. She joined Kroger in 2011 as Vice President of Operations for Kroger’s Manufacturing division. Before joining Kroger, Ms. Sharp served as Vice President of Manufacturing for the Sara Lee Corporation. In that role, she led the manufacturing and logistics operations for the central region of their U.S. Fresh Bakery Division. Ms. Sharp has over 30 years of experience supporting food manufacturing operations. [added: Ms. Sharp has announced her plan to retire in Spring of 2021.] |
| Mark C. Tuffin | | [removed: 60] [added: 61] | | Mr. Tuffin has served as Senior Vice President since January 2014, and is responsible for the oversight of several of Kroger’s retail divisions. Prior to that, he served as President of Kroger’s Smith’s division from July 2011 to January 2014. From September 2009 to July 2011, Mr. Tuffin served as Vice President of Transition, where he was responsible for implementing an organizational restructuring initiative for Kroger’s retail divisions. He joined Kroger’s Smith’s division in 1996 and served in a series of leadership roles, including Vice President of Merchandising from September 1999 to September 2009. Mr. Tuffin held various positions with other supermarket retailers before joining Smith’s in 1996. |
| Christine S. Wheatley | | [removed: 49] [added: 50] | | Ms. Wheatley was elected Group Vice President, Secretary and General Counsel in May 2014. She joined Kroger in February 2008 as Corporate Counsel, and became Senior Attorney in 2010, Senior Counsel in 2011, and Vice President in 2012. Before joining Kroger, Ms. Wheatley was engaged in the private practice of law for 11 years, most recently as a partner at Porter Wright Morris & Arthur in Cincinnati. |
Kroger’s website and any reports or other information made available by Kroger through its website are not part of or incorporated by reference into this Annual Report on Form 10-K.
Fuel sales are an important part of our revenue, net earnings and loyalty offering.
Our fuel strategy is to include a fuel center at each of our supermarket locations when it is feasible and it is expected to be profitable.
Each fuel center typically includes 5 to 10 islands of fuel dispensers and storage tanks with capacity for 40,000 to 50,000 gallons of fuel.
HUMAN CAPITAL MANAGEMENT
_Our People_
We want Kroger to be a place our customers love to shop and associates love to work.
This is why we create working environments where associates feel encouraged and supported to be their best selves every day.
With these nearly half a million associates serving more than nine million customers every day, our people are essential to our success, and we focus intentionally on attracting, developing and engaging a diverse workforce that represents the communities we serve.
We have long been guided by our core values – Honesty, Integrity, Respect, Safety, Diversity and Inclusion.
_Attracting & Developing Our Talent_
We recognize that our people are our most important asset.
To deliver on our customers’ experiences, we continually improve how we attract and retain talent.
In addition to competitive wages, quality benefits, and a safe work environment, we offer a broad range of employment opportunities for workers of all ages and aspirations.
During the past decade, Kroger has added 100,000 new jobs in communities across America.
Many supermarket roles offer opportunities to learn new skills, grow and advance careers — inside or outside our family of companies.
Associates at all levels of the Company have access to training and education programs to build their skills and prepare for the roles they want.
In 2021, we expect to spend approximately $125 million on training our associates through onboarding, leadership development programs, and programs designed to upskill associates across the Company.
We continue to invest in new platforms and applications to make learning more accessible to our associates.
Beyond our own programs, associates can take advantage of our tuition reimbursement benefit, which offers up to $3,500 annually — $21,000 over the course of employment — toward continuing education.
These funds can be applied to education programs like certifications, associate or graduate degrees.
Kroger has invested more than $15 million in this program since it launched in 2018.
_Rewarding Our Associates_
We care about our associates’ overall well-being — physical, financial and emotional — and provide wages and benefits that help associates take care of themselves and their families.
Between 2018 and 2020, we invested an incremental $800 million in associate wages.
Since 2018, Kroger’s average retail hourly wage increased to over $15 per hour.
Including benefit equivalents, the average rate surpasses $20 per hour.
_Promoting Diversity, Equity & Inclusion_
Diversity and inclusion have been among Kroger’s values for decades.
We strive to reflect the communities we serve and foster a culture that empowers everyone to be their true self, inspires collaboration, and feeds the human spirit.
During the past year, we have taken a very thoughtful and purposeful approach to enact meaningful change and develop what we believe are the right actions to achieve true and lasting equality.
Our new _Framework for Action: Diversity, Equity & Inclusion_ plan reflects our desire to redefine, deepen, and advance our commitment, mobilizing our people, passion, scale and resources.
The following summarizes our framework: Create a More Inclusive Culture; Develop Diverse Talent; Advance Diverse Partnerships; Advance Equitable Communities; Deeply Listen and Report Progress.
_Creating a Safe Environment_
**
Our associates’ safety is a top priority and it is one of our core values.
Since March of 2020, we have made significant investments to reward and safeguard our associates and customers.
At the onset of the COVID-19 pandemic, we activated our _Pandemic Preparedness Plan_ and _Business Resilience Plan_ to help protect frontline associates, stay open to serve our customers and communities, and anticipate and adapt to critical needs in a rapidly changing situation.
Since then, we have enacted more than 30 policy changes to help keep our associates safe, including offering paid emergency leave to those most directly affected by COVID-19, providing personal protective equipment, offering free testing through our COVID-19 at-home test kits, and promoting physical distancing in our locations.
EMPLOYEES
Our current strategy emphasizes self-development and ownership of real estate.
| Robert W. Clark | | 54 | | Mr. Clark was named Senior Vice President of Supply Chain, Manufacturing and Sourcing in May 2019. He was elected Senior Vice President of Merchandising in March 2016. From March 2013 to March 2016, he served as Group Vice President of Non-Perishables. Prior to that, he served as Vice President of Merchandising for Kroger’s Fred Meyer division from October 2011 to March 2013. From August 2010 to October 2011 he served as Vice President of Operations for Kroger’s Columbus division. Prior to that, from May 2002 to August 2010, he served as Vice President of Merchandising for Kroger’s Fry’s division. From 1985 to 2002, Mr. Clark held various leadership positions in store and district management, as well as grocery merchandising. Mr. Clark began his career with Kroger in 1985 as a courtesy clerk at Fry’s. |
| Joseph A. Grieshaber, Jr. | | 62 | | Mr. Grieshaber was elected Senior Vice President in June 2019 and is responsible for sales, promotional and category planning for center store, fresh foods, and general merchandise categories. Prior to this, he served as President of Kroger’s Fred Meyer division since March 2017, the Columbus division President from March 2015 to March 2017, and the Dillons division President from July 2010 to March 2015. In August 2003, Mr. Grieshaber was named Kroger’s Group Vice President of Perishables Merchandising and Procurement. From 1995 to 2003, he served various leadership roles, including district management and Meat Merchandising in the Michigan Division and Vice President of Merchandising in the Columbus Division. Mr. Grieshaber began his career with Kroger in 1983 as a store manager trainee in Nashville. |
An excerpt. Shown here: all 26 rewritten, 40 of 48 added and all 4 removed. The counts are complete. For every sentence, read Item 1. BUSINESS. in the FY2020 filing and the FY2019 filing.
Item 3. LEGAL PROCEEDINGS.
0 rewritten, 1 added, 8 removed, 1 unchanged
Incorporated by reference herein is information regarding certain legal proceedings in which we are involved as set forth under “Litigation” contained in Note 13 – “Commitments and Contingencies” in the notes to the Consolidated Financial Statements in Item 8 of Part II of this Annual Report.
Various claims and lawsuits arising in the normal course of business, including suits charging violations of certain antitrust, wage and hour, or civil rights laws, as well as product liability cases, are pending against the Company.
Some of these suits purport or have been determined to be class actions and/or seek substantial damages.
Any damages that may be awarded in antitrust cases will be automatically trebled.
Although it is not possible at this time to evaluate the merits of all of these claims and lawsuits, nor their likelihood of success, we believe that any resulting liability will not have a material adverse effect on our financial position, results of operations, or cash flows.
We continually evaluate our exposure to loss contingencies arising from pending or threatened litigation and believe we have made provisions where it is reasonably possible to estimate and where an adverse outcome is probable.
Nonetheless, assessing and predicting the outcomes of these matters involves substantial uncertainties.
We currently believe that the aggregate range of loss for our exposures is not material.
It remains possible that despite our current belief, material differences in actual outcomes or changes in our evaluation or predictions could arise that could have a material adverse effect on our financial condition, results of operations, or cash flows.
Cover and table of contents
25 rewritten, 4 added, 2 removed, 94 unchanged
For the fiscal year ended [removed: February 1, 2020.][added: January 30, 2021.]
| Yes [removed: ⌧] [added: ☒] | | No [removed: ◻] [added: ☐] |
| Yes [removed: ◻] [added: ☐] | | No [removed: ⌧] [added: ☒] |
| Large accelerated filer [removed: ⌧] [added: ☒] | | Accelerated filer [removed: ◻] [added: ☐] | |
| Non-accelerated filer [removed: ◻] [added: ☐] | | Smaller reporting company ☐ | |
| Yes [removed: ☐] [added: ☒] | | No [removed: ⌧] [added: ☐] |
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter (August [removed: 17, 2019).][added: 15, 2020).]
[removed: 777,891,827] [added: 751,993,701] shares of Common Stock of $1 par value, as of March [removed: 25, 2020.][added: 24, 2021.]
For the Fiscal Year Ended [removed: February 1, 2020][added: January 30, 2021]
| [Part I](#PARTI_977245) | | [removed: ] [added: 2] |
| [Item 1A](#ITEM1ARISKFACTORS_427495) | [Risk Factors](#ITEM1ARISKFACTORS_427495) | [removed: 8] [added: 9] |
| [Item 1B](#ITEM1BUNRESOLVEDSTAFF_782482) | [Unresolved Staff Comments](#ITEM1BUNRESOLVEDSTAFF_782482) | [removed: 13] [added: 16] |
| [Item 2](#ITEM2PROPERTIES_938453) | [Properties](#ITEM2PROPERTIES_938453) | [removed: 13] [added: 16] |
| [Item 3](#ITEM3LEGALPROCEEDINGS_398656) | [Legal Proceedings](#ITEM3LEGALPROCEEDINGS_398656) | [removed: 13] [added: 16] |
| [Item 4](#ITEM4MINESAFETY_848917) | [Mine Safety Disclosures](#ITEM4MINESAFETY_848917) | [removed: 14] [added: 16] |
| [Part II](#PARTII_655666) | | [removed: 14] [added: 17] |
| [Item 5](#ITEM5MARKETFORREGISTRANTS_787451) | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#ITEM5MARKETFORREGISTRANTS_787451) | [removed: 14] [added: 17] |
| [Item 6](#ITEM6SELECTEDFINANCIALDATA_648582) | [Selected Financial Data](#ITEM6SELECTEDFINANCIALDATA_648582) | [removed: 17] [added: 20] |
| [Item 7](#ITEM7MANAGEMENTSDISCUSSION_279865) | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#ITEM7MANAGEMENTSDISCUSSION_279865) | [removed: 18] [added: 21] |
| [Item 7A](#ITEM7AQUANTITATIVEANDQUALITATIVE_789704) | [Quantitative and Qualitative Disclosures About Market Risk](#ITEM7AQUANTITATIVEANDQUALITATIVE_789704) | [removed: 39] [added: 43] |
| [Item 8](#ITEM8FINANCIALSTATEMENTS_150262) | [Financial Statements and Supplementary Data](#ITEM8FINANCIALSTATEMENTS_150262) | [removed: 41] [added: 44] |
| [Item 13](#ITEM13CERTAINRELATIONSHIPS_678646) | [Certain Relationships and Related Transactions, and Director Independence](#ITEM13CERTAINRELATIONSHIPS_678646) | [removed: 96] [added: 97] |
| | ● | The extent to which our sources of liquidity are sufficient to meet our requirements may be affected by the state of the financial markets and the effect that such condition has on our ability to issue commercial paper at acceptable rates. Our ability to borrow under our committed lines of credit, including our bank credit facilities, could be impaired if one or more of our lenders under those lines is unwilling or unable to honor its contractual obligation to lend to us, or in the event that global pandemics, including the [removed: novel coronavirus,] [added: COVID-19 pandemic,] natural disasters or weather conditions interfere with the ability of our lenders to lend to us. Our ability to refinance maturing debt may be affected by the state of the financial markets. |
| | ● | Our ability to achieve sales, [removed: earnings and] [added: earnings,] incremental [removed: First-In, First-Out (“FIFO”)] [added: FIFO] operating [removed: profit] [added: profit, and adjusted free cash flow] goals may be affected by: COVID-19 related factors, risks and challenges, including among others, the length of time that the pandemic continues, the temporary inability of customers to shop due to illness, quarantine, or other travel restrictions or financial hardship, shifts in demand away from discretionary or higher priced products to lower priced products, or stockpiling or similar pantry-filling activities, reduced workforces which may be caused by, but not limited to, the temporary inability of the workforce to work due to illness, quarantine, or government mandates, [removed: or] temporary store closures due to reduced workforces or government [removed: mandates;] [added: mandates, or the availability and efficacy of a vaccine;] 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 and the extent and effectiveness of any COVID-19 stimulus packages; manufacturing commodity costs; diesel fuel costs related to Kroger's logistics operations; trends in consumer spending; the extent to which [removed: Kroger's] [added: our] customers exercise caution in their purchasing in response to economic conditions; the uncertainty of economic growth or recession; changes in inflation or deflation in product and operating costs; stock repurchases; [removed: Kroger's] [added: our] ability to retain pharmacy sales from [removed: third party] [added: third-party] payors; consolidation in the healthcare industry, including pharmacy benefit managers; [removed: Kroger's] [added: our] ability to negotiate modifications to multi-employer pension plans; natural disasters or adverse weather conditions; the effect of public health crises or other significant catastrophic events, including the coronavirus; the potential costs and risks associated with potential cyber-attacks or data security breaches; the success of [removed: Kroger's] [added: our] future growth plans; the ability to execute [removed: on _Restock Kroger_;] [added: our growth strategy] and [added: value creation model, including continued cost savings, growth of our alternative profit businesses, and widening and deepening our strategic moats of fresh, _Our Brands_, personalization, and seamless; and] the successful integration of merged companies and new partnerships. |
Other factors and assumptions not identified above, including those discussed in [added: Part 1,] Item 1A of this [added: Annual] Report, could also cause actual results to differ materially from those set forth in the forward-looking information.
| Yes ☒ | | No ☐ |
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
| Yes ☐ | | No ☒ |
$27.6 billion.
$18.2 billion.
Item 2. PROPERTIES.
3 rewritten, 0 added, 1 removed, 12 unchanged
As of [removed: February 1, 2020,] [added: January 30, 2021,] we operated approximately 2,800 owned or leased supermarkets, distribution warehouses and food production plants through divisions, subsidiaries or affiliates.
The total cost of our owned assets and finance leases at [removed: February 1, 2020,] [added: January 30, 2021,] was [removed: $45.8] [added: $46.0] billion while the accumulated depreciation was [removed: $24.0] [added: $23.6] billion.
[removed: While our current strategy emphasizes ownership of store real estate, we] [added: We] operate in leased facilities in approximately half of our store locations.
While our current strategy emphasizes ownership of real estate, a substantial portion of the properties used to conduct our business are leased.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
18 rewritten, 12 added, 11 removed, 21 unchanged
Our common stock is listed on the New York Stock Exchange under the symbol “KR.” As of March [removed: 25, 2020,] [added: 24, 2021,] there were [removed: 26,407] [added: 25,973] shareholders of record.
During [removed: 2018,] [added: 2020,] we paid two quarterly cash dividends of [removed: $0.125] [added: $0.16] per share and two quarterly cash dividends of [removed: $0.14] [added: $0.18] per share.
On March 1, [removed: 2020,] [added: 2021,] we paid a quarterly cash dividend of [removed: $0.16] [added: $0.18] per share.
On March [removed: 12, 2020,] [added: 11, 2021,] we announced that our Board of Directors declared a quarterly cash dividend of [removed: $0.16] [added: $0.18] per share, payable on June 1, [removed: 2020,] [added: 2021,] to shareholders of record at the close of business on May [removed: 15, 2020.][added: 14, 2021.]
[removed: ][added: Description automatically generated](https://www.sec.gov/Archives/edgar/data/56873/000155837021003706/kr-20210130x10k001.jpg)]
| Company Name/Index | | [removed: 2014 | |] 2015 | | 2016 | | 2017 | | 2018 | | 2019 | | [added: 2020 | |]
* Total assumes $100 invested on January [removed: 31, 2015,] [added: 30, 2016,] in The Kroger Co., S&P 500 Index, and the Peer Group, with reinvestment of dividends.
The Peer Group consists of [added: Albertsons Companies, Inc. (included from June 26, 2020 when it began trading),] Costco Wholesale Corp., CVS Health Corporation, Etablissements Delhaize Freres Et Cie Le Lion (“Groupe Delhaize”, which is included through July 22, 2016 when it merged with Koninklijke Ahold), Koninklijke Ahold Delhaize NV (changed name from Koninklijke Ahold after merger with Groupe Delhaize), Supervalu Inc. (included through October 19, 2018 when it was acquired by United Natural Foods), Target Corp., [removed: Walmart Inc.,] Walgreens Boots Alliance [removed: Inc. (formerly, Walgreen Co.),] [added: Inc., Walmart Inc.,] Whole Foods Market Inc. (included through August 28, 2017 when it was acquired by Amazon.com, Inc.).
The following table presents information on our purchases of our common shares during the fourth quarter of [removed: 2019.][added: 2020.]
| | | of Shares | | Price [removed: Paid] [added: Paid Per] | | | Plans or | | [removed: Programs (4)] [added: Programs(4)] | | |
| [removed: Period (1)] [added: Period(1)] | | [removed: Purchased (2)] [added: Purchased(2)] | | [removed: Per Share] [added: Share(2)] | | | [removed: Programs (3)] [added: Programs(3)] | | (in millions) | | |
| First [removed: period -] four weeks | | | | | | | | | | | |
| Second [removed: period -] four weeks | | | | | | | | | | | |
| Third [removed: period —] four weeks | | | | | | | | | | | |
[removed: (1)The] [added: | (1) | The] reported periods conform to our fiscal calendar composed of thirteen 28-day periods. [added: The fourth quarter of 2020 contained three 28-day periods. |]
[removed: (2)Includes] [added: | (2) | Includes] (i) shares repurchased under the [removed: November 2019] [added: September 2020] Repurchase Program described below in (4), (ii) shares repurchased under a program announced on December 6, 1999 to repurchase common shares to reduce dilution resulting from our employee stock option and long-term incentive plans, under which repurchases are limited to proceeds received from exercises of stock options and the tax benefits associated therewith (“1999 Repurchase Program”) and (iii) [removed: 24,550] [added: 32,120] shares that were surrendered to the Company by participants under our long term incentive plans to pay for taxes on restricted stock awards. [added: |]
[removed: (3)Represents] [added: | (3) | Represents] shares repurchased under the [removed: November 2019] [added: September 2020] Repurchase Program and the 1999 Repurchase Program. [added: |]
[removed: (4)On November 5, 2019,] [added: | (4) | On September 11, 2020,] our Board of Directors approved a $1.0 billion share repurchase program to reacquire shares via open market purchase or privately negotiated transactions, block trades, or pursuant to trades intending to comply with [removed: rule] [added: Rule] 10b5-1 [removed: of] [added: under] the Securities Exchange Act of [removed: 1934] [added: 1934, as amended] (the [removed: “November 2019] [added: “September 2020] Repurchase Program”). [added: The amounts shown in this column reflect the amount remaining under the September 2020 Repurchase Program as of the specified period end dates. Amounts available under the 1999 Repurchase Program are dependent upon option exercise activity. The September 2020 Repurchase Program and the 1999 Repurchase Program do not have an expiration date but may be suspended or terminated by our Board of Directors at any time. |]
![Chart, line chart
| The Kroger Co. | | 100 | | 87.11 | | 78.05 | | 76.08 | | 74.51 | | 97.75 | |
| S&P 500 Index | | 100 | | 120.87 | | 148.47 | | 148.38 | | 180.37 | | 211.48 | |
| Peer Group | | 100 | | 98.35 | | 127.05 | | 123.40 | | 148.90 | | 183.16 | |
| November 8, 2020 to December 5, 2020 | | 4,397,677 | | $ | 32.38 | | 4,397,633 | | $ | 583 | |
| December 6, 2020 to January 2, 2021 | | 3,788,929 | | $ | 31.10 | | 3,756,853 | | $ | 470 | |
| January 3, 2021 to January 30, 2021 | | 2,363,215 | | $ | 32.05 | | 2,363,215 | | $ | 400 | |
| Total | | 10,549,821 | | $ | 31.85 | | 10,517,701 | | $ | 400 | |
| --- | --- |
| --- | --- |
| --- | --- |
| --- | --- |
| The Kroger Co. | | 100 | | 113.63 | | 98.98 | | 88.69 | | 86.45 | | 84.67 | |
| S&P 500 Index | | 100 | | 99.33 | | 120.06 | | 147.48 | | 147.40 | | 179.17 | |
| Peer Group | | 100 | | 93.30 | | 91.76 | | 118.54 | | 115.13 | | 138.93 | |
| November 10, 2019 to December 7, 2019 | | 224,436 | | $ | 26.95 | | 211,551 | | $ | 1,000 | |
| December 8, 2019 to January 4, 2020 | | 7,844,559 | | $ | 28.43 | | 7,832,894 | | $ | 787 | |
| January 5, 2020 to February 1, 2020 | | 7,117,032 | | $ | 28.49 | | 7,117,032 | | $ | 600 | |
| Total | | 15,186,027 | | $ | 28.43 | | 15,161,477 | | $ | 600 | |
The fourth quarter of 2019 contained three 28-day periods.
The amounts shown in this column reflect the amount remaining under the November 2019 Repurchase Program as of the specified period end dates.
Amounts available under the 1999 Repurchase Program are dependent upon option exercise activity.
The November 2019 Repurchase Program and the 1999 Repurchase Program do not have an expiration date but may be suspended or terminated by our Board of Directors at any time.
Item 6. SELECTED FINANCIAL DATA.
12 rewritten, 2 added, 2 removed, 15 unchanged
| | | [added: January 30, | | |] February 1, | | | February 2, | | | February 3, | | | January 28, | | | [removed: January 30, | | |]
| | | [removed: 2020] [added: 2021] | | | [removed: 2019] [added: 2020] | | | [removed: 2018] [added: 2019] | | | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | | |
| | | (52 weeks) | | | (52 weeks) | | | [removed: (53] [added: (52] weeks) | | | [removed: (52] [added: (53] weeks) | | | (52 weeks) | | |
| Sales | | $ | [removed: 122,286] [added: 132,498] | | $ | [removed: 121,852] [added: 122,286] | | $ | [removed: 123,280] [added: 121,852] | | $ | [removed: 115,337] [added: 123,280] | | $ | [removed: 109,830] [added: 115,337] | |
| Net earnings including noncontrolling interests | | $ | [removed: 1,512] [added: 2,588] | | $ | [removed: 3,078] [added: 1,512] | | $ | [removed: 1,889] [added: 3,078] | | $ | [removed: 1,957] [added: 1,889] | | $ | [removed: 2,049] [added: 1,957] | |
| Net earnings attributable to The Kroger Co. | | $ | [removed: 1,659] [added: 2,585] | | $ | [removed: 3,110] [added: 1,659] | | $ | [removed: 1,907] [added: 3,110] | | $ | [removed: 1,975] [added: 1,907] | | $ | [removed: 2,039] [added: 1,975] | |
| Net earnings attributable to The Kroger Co. per diluted common share | | $ | [removed: 2.04] [added: 3.27] | | $ | [removed: 3.76] [added: 2.04] | | $ | [removed: 2.09] [added: 3.76] | | $ | [removed: 2.05] [added: 2.09] | | $ | [removed: 2.06] [added: 2.05] | |
| Total assets | | $ | [removed: 45,256] [added: 48,637] | | $ | [removed: 38,118] [added: 45,256] | | $ | [removed: 37,197] [added: 38,118] | | $ | [removed: 36,505] [added: 37,197] | | $ | [removed: 33,897] [added: 36,505] | |
| Long-term liabilities, including obligations under finance leases | | $ | [removed: 22,440] [added: 23,717] | | $ | [removed: 16,009] [added: 22,440] | | $ | [removed: 16,095] [added: 16,009] | | $ | [removed: 16,935] [added: 16,095] | | $ | [removed: 14,128] [added: 16,935] | |
| Total shareholders’ equity — The Kroger Co. | | $ | [removed: 8,602] [added: 9,576] | | $ | [removed: 7,886] [added: 8,602] | | $ | [removed: 6,931] [added: 7,886] | | $ | [removed: 6,698] [added: 6,931] | | $ | [removed: 6,820] [added: 6,698] | |
Fiscal year [removed: 2015,] 2016, [removed: 2018 and] [added: 2018,] 2019 [added: and 2020] each include 52 weeks.
The prior-year amounts have been reclassified to conform to current-year presentation with the exception of [removed: 2016 and 2015,] [added: 2016,] which [removed: were] [added: was] not material and not adjusted for the sales reclassification.
| | | | | | | | | | | | | | | | | |
| Cash dividends per common share | | $ | 0.68 | | $ | 0.60 | | $ | 0.53 | | $ | 0.49 | | $ | 0.45 | |
| Cash dividends per common share | | $ | 0.600 | | $ | 0.530 | | $ | 0.490 | | $ | 0.450 | | $ | 0.395 | |
See Item 7, _Supplemental Information_ for additional details.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
588 rewritten, 155 added, 264 removed, 1,021 unchanged
For the Fiscal Year Ended [removed: February 1, 2020][added: January 30, 2021]
| [Report of Independent Registered Public Accounting [removed: Firm](#ReportOfIndependent)] [added: Firm](#ReportofIndependentRegisteredPublic)] | [removed: 42] [added: 45] |
| [Consolidated Balance Sheets](#BALANCE_SHEETS) | [removed: 45] [added: 48] |
| [Consolidated Statements of Operations](#STATEMENTS_OF_OPERATIONS) | [removed: 46] [added: 49] |
| [Consolidated Statements of Comprehensive Income](#STATEMENTS_COMPREHENSIVE_INCOME) | [removed: 47] [added: 50] |
| [Consolidated Statements of Cash Flows](#STATEMENTS_CASH_FLOWS) | [removed: 48] [added: 51] |
| [Consolidated Statements of Changes in Shareholders’ [removed: Equity](#CHANGES_SHAREHOLDERS_EQUITY)] [added: Equity](#CONSOLIDATEDSTATEMENTOFCHANGESINSHA)] | [removed: 49] [added: 52] |
| [Notes to Consolidated Financial Statements](#NOTES_TO_FINANCIAL_STATEMEN) | [removed: 50] [added: 53] |
We have audited the accompanying consolidated balance sheets of The Kroger Co. and its subsidiaries (the “Company”) as of [removed: February 1, 2020] [added: January 30, 2021] and February [removed: 2, 2019,] [added: 1, 2020,] and the related consolidated statements of operations, of comprehensive income, of changes in shareholders' equity and of cash flows for each of the three years in the period ended [removed: February 1, 2020,] [added: January 30, 2021,] including the related notes (collectively referred to as the “consolidated financial statements”).
We also have audited the Company's internal control over financial reporting as of [removed: February 1, 2020,] [added: January 30, 2021] based on criteria established in _Internal Control - Integrated Framework_ (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of [removed: February 1, 2020] [added: January 30, 2021] and February [removed: 2, 2019,] [added: 1, 2020,] and the results of its operations and its cash flows for each of the three years in the period ended [removed: February 1, 2020] [added: January 30, 2021] in conformity with accounting principles generally accepted in the United States of America.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of [removed: February 1, 2020,] [added: January 30, 2021,] based on criteria established in _Internal Control - Integrated Framework_ (2013) issued by the COSO.
As described in Notes 1 and 3 to the consolidated financial statements, the Company’s consolidated goodwill balance was $3.1 billion as of [removed: February 1, 2020, and the goodwill associated with] [added: January 30, 2021, a portion of which is allocated to] the KSP reporting [removed: unit was $243 million.][added: unit.]
The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the KSP reporting unit is a critical audit matter are [removed: there was] [added: (i) the] significant judgment by management when developing the fair value measurement of the reporting [removed: unit.][added: unit; (ii) the high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s cash flow projections and significant assumptions related to revenue growth rates, margin assumptions, discount rate, peer group determination, and market multiple selection; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.]
These procedures also included, among others, testing management’s process for developing the fair value estimate, evaluating the appropriateness of the income and market approach models, testing the [removed: completeness, accuracy,] [added: completeness] and [removed: relevance] [added: accuracy] of the underlying data used in the models and evaluating the [added: reasonableness of] significant assumptions used by [removed: management, including] [added: management related to] the revenue growth rates, margin assumptions, discount rate, peer group determination, and market multiple selection.
Professionals with specialized skill and knowledge were used to assist in [added: evaluating] the [removed: evaluation] [added: appropriateness] of the [removed: Company’s] discounted cash flow and market [removed: models,] [added: models] and [added: evaluating the reasonableness of] certain significant [removed: assumptions, including] [added: assumptions related to] the discount rate, peer group determination, and market multiples.
| | | [removed: February 1,] [added: January 30,] | | | February [removed: 2,] [added: 1,] | | |
| (In millions, except par amounts) | | [removed: 2020] [added: 2021] | | | [removed: 2019] [added: 2020] | | |
| Cash and temporary cash investments | | $ | [removed: 399] [added: 1,687] | | $ | [removed: 429] [added: 399] | |
| Store deposits in-transit | | | [removed: 1,179] [added: 1,096] | | | [removed: 1,181] [added: 1,179] | |
| Receivables | | | [removed: 1,706] [added: 1,781] | | | [removed: 1,589] [added: 1,706] | |
| FIFO inventory | | | [removed: 8,464] [added: 8,436] | | | [removed: 8,123] [added: 8,464] | |
| LIFO reserve | | | [removed: (1,380)] [added: (1,373)] | | | [removed: (1,277)] [added: (1,380)] | |
| Prepaid and other current assets | | | [removed: 522] [added: 876] | | | [removed: 592] [added: 522] | |
| Total current assets | | | [removed: 10,890] [added: 12,503] | | | [removed: 10,803] [added: 10,890] | |
| Property, plant and equipment, net | | | [removed: 21,871] [added: 22,386] | | | [removed: 21,635] [added: 21,871] | |
| Operating lease assets | | | [removed: 6,814] [added: 6,796] | | | [removed: —] [added: 6,814] | |
| Intangibles, net | | | [removed: 1,066] [added: 997] | | | [removed: 1,258] [added: 1,066] | |
| Goodwill | | | 3,076 | | | [removed: 3,087] [added: 3,076] | |
| Other assets | | | [removed: 1,539] [added: 2,904] | | | [removed: 1,335] [added: 1,539] | |
| Total Assets | | $ | [removed: 45,256] [added: 48,662] | | $ | [removed: 38,118] [added: 45,256] | |
| Current portion of long-term debt including obligations under finance leases | | $ | [removed: 1,965] [added: 911] | | $ | [removed: 3,157] [added: 1,965] | |
| Current portion of operating lease liabilities | | | [removed: 597] [added: 667] | | | [removed: —] [added: 597] | |
| Trade accounts payable | | | [removed: 6,349] [added: 6,679] | | | [removed: 6,059] [added: 6,349] | |
| Accrued salaries and wages | | | [removed: 1,168] [added: 1,413] | | | [removed: 1,227] [added: 1,168] | |
| Other current liabilities | | | [removed: 4,164] [added: 5,696] | | | [removed: 3,780] [added: 4,164] | |
| Total current liabilities | | | [removed: 14,243] [added: 15,366] | | | [removed: 14,274] [added: 14,243] | |
| Long-term debt including obligations under finance leases | | | [removed: 12,111] [added: 12,502] | | | [removed: 12,072] [added: 12,111] | |
| Noncurrent operating lease liabilities | | | [removed: 6,505] [added: 6,507] | | | [removed: —] [added: 6,505] | |
| Deferred income taxes | | | [removed: 1,466] [added: 1,542] | | | [removed: 1,562] [added: 1,466] | |
March 30, 2021
| Gain on investments | | | | 1,105 | | | 157 | | | 228 | |
Years Ended January 30, 2021, February 1, 2020 and February 2, 2019
| | | | | | | | | | |
| (1) | Amount is net of tax benefit of ($1) in 2018. |
Years Ended January 30, 2021, February 1, 2020 and February 2, 2019
| (In millions) | | (52 weeks) | | | (52 weeks) | | | (52 weeks) | | |
| Gain on investments | | | (1,105) | | | (157) | | | (228) | |
Years Ended January 30, 2021, February 1, 2020 and February 2, 2019
| Balances at January 30, 2021 | | 1,918 | | $ | 1,918 | | $ | 3,461 | | 1,160 | | $ | (18,191) | | $ | (630) | | $ | 23,018 | | $ | (26) | | $ | 9,550 |
During 2020, the Company had a LIFO liquidation primarily related to pharmacy inventory.
The liquidated inventory was carried at lower costs prevailing in prior years as compared with current costs.
The effect of this reduction in inventory decreased “Merchandise costs” by approximately $76, $58 net of tax.
These obligations are included in “Other current liabilities” in the Consolidated Balance Sheets.
In 2020 and 2018, adjustments to increase the contingent consideration liability as of year-end were recorded for $189 and $33, respectively, in OG&A expense.
The Company regularly evaluates the performance of its stores and periodically closes those stores that are underperforming.
Related liabilities arise, such as severance, contractual obligations and other accruals associated with store closings.
The Company records a liability for costs associated with an exit or disposal activity when the liability is incurred, usually in the period the store closes.
In addition to stock options, the Company awards restricted stock to employees and nonemployee directors under various plans.
The Company also maintains insurance coverages for some risks, including cyber exposure and property-related losses.
The Company’s insurance coverage begins for these exposures ranging from $25 to $50.
Amounts billed to a customer related to shipping and delivery represent revenues earned for the goods provided and are classified as sales.
When shipping is discounted, it is recorded as an adjustment to sales.
Shipping and delivery costs associated with the Company’s digital offerings originating from non-retail store locations are included in the “Merchandise costs” line item.
Shipping and delivery costs associated with the Company's digital offerings originating from retail store locations, including third-party delivery fees, are included in the “OG&A” line item of the Consolidated Statements of Operations.
The Partnership Framework Agreement was amended in 2020.
Fair value adjustments in equity of Ocado flow through “Gain on investments” in the Company’s Consolidated Statements of Operations.
| 2025 | | | 30 |
The 2020 tax rate differed from the federal statutory rate primarily due to the effect of state income taxes, partially offset by the utilization of tax credits and deductions.
The Company anticipates resolution in the next twelve to eighteen months of Internal Revenue Service audits for tax years ending January 28, 2017 and February 3, 2018.
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020, includes measures to assist companies in response to the COVID-19 pandemic.
These measures include deferring the due dates of tax payments and other changes to income and non-income-based tax laws.
As permitted under the CARES Act, the Company is deferring the remittance of the employer portion of the social security tax.
The social security tax provision requires that the deferred employment tax be paid over two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
During 2020, the Company deferred the employer portion of social security tax of $622.
| | | 2021 | | | 2020 | |
| Other | | | 511 | | | 508 |
During 2020, the Company fully repaid the $1,000 borrowed under the revolving credit facility and the entire $1,150 in outstanding commercial paper obligations using cash generated by operations.
| 2021 | | $ | 844 | |
| 2023 | | | 617 | |
| --- | --- |
This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s cash flow projections and significant assumptions, including revenue growth rates, margin assumptions, discount rate, peer group determination, and market multiple selection.
In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.
April 1, 2020
| | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Assets held for sale | | | — | | | 166 | |
| Liabilities held for sale | | | — | | | 51 | |
| Mark to market gain on Ocado securities | | | | 157 | | | 228 | | | — | |
| | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (4) | Amount is net of tax expense of $3 in 2019 and $3 in 2018 and $3 in 2017. |
| Goodwill impairment charge | | | — | | | — | | | 110 | |
| Mark to market gain on Ocado securities | | | (157) | | | (228) | | | — | |
| Balances at January 28, 2017 | | 1,918 | | $ | 1,918 | | $ | 3,070 | | 994 | | $ | (13,118) | | $ | (715) | | $ | 15,543 | | $ | 12 | | $ | 6,710 |
Products and services related primarily to Kroger Personal Finance and Media, which were historically accounted for as an offset to operating, general and administrative expenses (“OG&A”), are classified as a component of sales as of the beginning of fiscal year 2019, except for certain amounts in Media, which are netted against merchandise costs.
These prior-year amounts have been reclassified to conform to current-year presentation.
The Company recorded asset impairments in the normal course of business totaling $56 and $71 in 2018 and 2017, respectively.
The Company provides for closed store liabilities relating to the present value of the estimated remaining non-cancellable 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.
Store closing liabilities are reviewed quarterly to ensure that any accrued amount that is not a sufficient estimate of future costs is adjusted to income in the proper period.
Excess tax benefits related to share-based payments are recognized in the provision for income taxes.
Refer to Note 12 for additional information regarding the Company’s stock based compensation.
The Company is similarly self-insured for property-related losses.
The Company maintains stop loss coverage to limit its property loss exposures including coverage for earthquake, wind, flood and other catastrophic events.
Effective February 4, 2018, the Company prospectively reclassified certain pharmacy fees of $250 for 2018 from merchandise costs to be recorded as a reduction to sales on the Company’s Consolidated Statements of Operations.
(5)Digital sales, primarily including Pickup, Delivery and pharmacy e-commerce sales, grew approximately 29%, 58% and 90% in 2019, 2018 and 2017, respectively, adjusted to remove the impact of the 53rd week in 2017.
These sales are included in the non perishable, fresh, pharmacy, and other line items above.
(6)Products and services related primarily to Kroger Personal Finance and Media, which were historically accounted for as an offset to OG&A, are classified as a component of sales as of the beginning of fiscal year 2019, except for certain amounts in Media, which are netted against merchandise costs.
Merger Agreement
On June 22, 2018, the Company finalized the merger with Home Chef, a meal kit delivery company.
The merger allows the Company to increase the availability of meal kits and expand its offerings to customers.
The Company completed the merger by purchasing 100% of the ownership interest in Home Chef, for $197 net of cash and cash equivalents of $30, in addition to future earnout payments of up to $500 over five years that are contingent on achieving certain milestones.
The contingent consideration is based on future performance of both the online and offline business and the related customer engagement.
Changes in the fair value of the earnout liability in future periods will be recorded in the Company’s results in the period of the change, refer to Note 8 for additional details.
The merger was accounted for under the purchase method of accounting and was financed through the issuance of commercial paper.
In a business combination, the purchase price is allocated to assets acquired and liabilities assumed based on their fair values, with any excess of purchase price over fair value recognized as goodwill.
In addition to recognizing assets and liabilities on the acquired company’s balance sheet, the Company reviews supply contracts, leases, financial instruments, employment agreements and other significant agreements to identify potential assets or liabilities that require recognition in connection with the application of acquisition accounting under Accounting Standards Codification (“ASC”) 805.
An excerpt. Shown here: 40 of 588 rewritten, 40 of 155 added and 40 of 264 removed. The counts are complete. For every sentence, read Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA in the FY2020 filing and the FY2019 filing.
Item 9A. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
5 rewritten, 0 added, 0 removed, 5 unchanged
As of [removed: February 1, 2020,] [added: January 30, 2021,] our Chief Executive Officer and Chief Financial Officer, together with a disclosure review committee appointed by the Chief Executive Officer, evaluated the Company’s disclosure controls and procedures.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of [removed: February 1, 2020.][added: January 30, 2021.]
There was no change in our internal control over financial reporting during the fiscal quarter ended [removed: February 1, 2020] [added: January 30, 2021] that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Based on the evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of [removed: February 1, 2020.][added: January 30, 2021.]
The effectiveness of the Company’s internal control over financial reporting as of [removed: February 1, 2020,] [added: January 30, 2021,] has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which can be found in Item 8 of this Form 10-K.
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
1 rewritten, 6 added, 0 removed, 1 unchanged
The information required by this Item 10 with respect to executive officers is included within Item 1 in Part I of this Annual Report on Form 10-K under the caption “Information about our Executive Officers.” The information required by this Item not otherwise set forth in Part I above [added: or in this Item 10 of Part III] is set forth under the headings Election of Directors, Information Concerning the Board of Directors- Committees of the Board, Information Concerning the Board of Directors- Audit [removed: Committee, Information Concerning the Board of Directors- Code of Ethics] [added: Committee] and [removed: Section] [added: Delinquent] 16(a) [removed: Beneficial Ownership Reporting Compliance] [added: Reports] in the definitive proxy statement to be filed by the Company with the Securities and Exchange Commission within 120 days after the end of the fiscal year [removed: 2019] [added: 2020] (the [removed: “2020] [added: “2021] proxy statement”) and is hereby incorporated by reference into this Form 10-K.
Our board of directors has adopted The Kroger Co. Policy on Business Ethics, applicable to all officers, employees and directors, including Kroger’s principal executive, financial and accounting officers.
The Policy on Business Ethics is available on our website at ir.kroger.com under Investors – Governance – Policy on Business Ethics.
A copy of the Code of Ethics is available in print free of charge to any shareholder who requests a copy.
Shareholders may make a written request to Kroger’s Secretary at our executive offices at 1014 Vine Street, Cincinnati, Ohio 45202.
We intend to satisfy the disclosure requirement regarding any amendment to, or a waiver from, a provision of the Policy on Business Ethics for our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on our website.
Item 11. EXECUTIVE COMPENSATION.
1 rewritten, 0 added, 0 removed, 1 unchanged
The information required by this Item is set forth in the sections entitled Compensation Discussion and Analysis, Compensation Committee Report, and Compensation Tables in the [removed: 2020] [added: 2021] proxy statement and is hereby incorporated by reference into this Form 10-K.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
5 rewritten, 2 added, 2 removed, 14 unchanged
| Plan Category | | warrants and [removed: rights (1)] [added: rights(1)] | | warrants and [removed: rights (1)] [added: rights(1)] | | | reflected in column (a)) | |
(1)The total number of securities reported includes the maximum number of common shares, [removed: 2,936,351,] [added: 3,693,198,] that may be issued under performance units granted under our long-term incentive plans.
The nature of the awards is more particularly described in the Compensation Discussion and Analysis section of the definitive [removed: 2020] [added: 2021] proxy statement and is hereby incorporated by reference into this Form 10-K.
Based on historical data, or in the case of the awards made in [removed: 2017] [added: 2018] through [removed: 2019] [added: 2020] and earned in [removed: 2019] [added: 2020] the actual payout percentage, our best estimate of the number of common shares that will be issued under the performance unit grants is approximately [removed: 2,024,683.][added: 5,052,484.]
The remainder of the information required by this Item is set forth in the section entitled Beneficial Ownership of Common Stock in the [removed: 2020] [added: 2021] proxy statement and is hereby incorporated by reference into this Form 10-K.
| Equity compensation plans approved by security holders | | 30,516,238 | | $ | 26.65 | | 33,857,862 | |
| Total | | 30,516,238 | | $ | 26.65 | | 33,857,862 | |
| Equity compensation plans approved by security holders | | 35,135,064 | | $ | 24.52 | | 57,586,095 | |
| Total | | 35,135,064 | | $ | 24.52 | | 57,586,095 | |
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
1 rewritten, 0 added, 0 removed, 1 unchanged
This information required by this Item is set forth in the sections entitled Related Person Transactions and Information Concerning the Board of Directors-Independence in the [removed: 2020] [added: 2021] proxy statement and is hereby incorporated by reference into this Form 10-K.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
1 rewritten, 0 added, 0 removed, 2 unchanged
The information required by this Item is set forth in the section entitled Ratification of the Appointment of Kroger’s Independent Auditor in the [removed: 2020] [added: 2021] proxy statement and is hereby incorporated by reference into this Form 10-K.
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
15 rewritten, 2 added, 5 removed, 71 unchanged
| | | Consolidated Balance Sheets as of [added: January 30, 2021 and] February 1, 2020 [removed: and February 2, 2019] |
| | | Consolidated Statements of Operations for the years ended [added: January 30, 2021,] February 1, [removed: 2020,] [added: 2020 and] February 2, 2019 [removed: and February 3, 2018] |
| | | Consolidated Statements of Comprehensive Income for the years ended [added: January 30, 2021,] February 1, [removed: 2020,] [added: 2020 and] February 2, 2019 [removed: and February 3, 2018] Consolidated Statements of Cash Flows for the years ended [added: January 30, 2021,] February 1, [removed: 2020,] [added: 2020 and] February 2, 2019 [removed: and February 3, 2018] |
| | | Consolidated Statement of Changes in Shareholders’ Equity for the years ended [added: January 30, 2021,] February 1, [removed: 2020,] [added: 2020 and] February 2, 2019 [removed: and February 3, 2018] |
| [removed: 10.11*] [added: 10.16*†] | | [Form of Restricted Stock Grant Agreement under Long-Term Incentive [added: and] Cash Bonus [removed: Plans.](https://www.sec.gov/Archives/edgar/data/56873/000155837020003501/kr-20200201ex1011d57ca.htm)] [added: Plans.](https://www.sec.gov/Archives/edgar/data/56873/000155837021003706/kr-20210130xex10d16.htm)] |
| 10.13* | | [Form of Non-Qualified Stock Option Grant Agreement under Long-Term Incentive and Cash Bonus [removed: Plan.](https://www.sec.gov/Archives/edgar/data/56873/000155837020003501/kr-20200201ex1013d552d.htm)] [added: Plan. Incorporated by reference to Exhibit 10.13 of the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2020.](https://www.sec.gov/Archives/edgar/data/56873/000155837020003501/kr-20200201ex1013d552d.htm)] |
| 10.15* | | [Form of Performance Unit Award Agreement under Long-Term Incentive and Cash Bonus [removed: Plans.](https://www.sec.gov/Archives/edgar/data/56873/000155837020003501/kr-20200201ex1015272d7.htm)] [added: Plans. Incorporated by reference to Exhibit 10.15 of the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2020.](https://www.sec.gov/Archives/edgar/data/56873/000155837020003501/kr-20200201ex1015272d7.htm)] |
| [removed: 10.16*] [added: 10.11*] | | [Form of [removed: Performance Unit Award] [added: Restricted Stock Grant] Agreement under Long-Term Incentive [removed: and] Cash Bonus Plans. Incorporated by reference to Exhibit [removed: 10.2] [added: 10.11] of the Company’s [removed: Quarterly] [added: Annual] Report on Form [removed: 10-Q] [added: 10-K] for the [removed: quarter] [added: fiscal year] ended [removed: August 12, 2017.](http://www.sec.gov/Archives/edgar/data/56873/000155837017007064/kr-20170812ex1024597ae.htm)] [added: February 1, 2020.](https://www.sec.gov/Archives/edgar/data/56873/000155837020003501/kr-20200201ex1011d57ca.htm)] |
| [removed: 10.19*] [added: 4.2] | | [removed: [The Kroger Co. 2016 Long-Term Cash Bonus Plan.] [added: [Description of Securities.] Incorporated by reference to Exhibit [removed: 10.18] [added: 4.2] of the Company’s Annual Report on Form 10-K for the fiscal year ended [removed: January 30, 2016.](http://www.sec.gov/Archives/edgar/data/56873/000110465916108277/a15-23178_1ex10d18.htm)] [added: February 1, 2020..](https://www.sec.gov/Archives/edgar/data/56873/000155837020003501/kr-20200201ex423a773e4.htm)] |
| 21.1 | | [Subsidiaries of the [removed: Registrant.](https://www.sec.gov/Archives/edgar/data/56873/000155837020003501/kr-20200201ex211929347.htm)] [added: Registrant.](https://www.sec.gov/Archives/edgar/data/56873/000155837021003706/kr-20210130xex21d1.htm)] |
| 23.1 | | [Consent of Independent Registered Public Accounting [removed: Firm.](https://www.sec.gov/Archives/edgar/data/56873/000155837020003501/kr-20200201ex231fd5a35.htm)] [added: Firm.](https://www.sec.gov/Archives/edgar/data/56873/000155837021003706/kr-20210130xex23d1.htm)] |
| 24.1 | | [Powers of [removed: Attorney.](https://www.sec.gov/Archives/edgar/data/56873/000155837020003501/kr-20200201ex241012654.htm)] [added: Attorney.](https://www.sec.gov/Archives/edgar/data/56873/000155837021003706/kr-20210130xex24d1.htm)] |
| 31.1 | | [Rule 13a-14(a)/15d-14(a) [removed: Certification.](https://www.sec.gov/Archives/edgar/data/56873/000155837020003501/kr-20200201ex311d06c7e.htm)] [added: Certification.](https://www.sec.gov/Archives/edgar/data/56873/000155837021003706/kr-20210130xex31d1.htm)] |
| 31.2 | | [Rule 13a-14(a)/15d-14(a) [removed: Certification.](https://www.sec.gov/Archives/edgar/data/56873/000155837020003501/kr-20200201ex3122dc277.htm)] [added: Certification.](https://www.sec.gov/Archives/edgar/data/56873/000155837021003706/kr-20210130xex31d2.htm)] |
| 32.1 | | [Section 1350 [removed: Certifications.](https://www.sec.gov/Archives/edgar/data/56873/000155837020003501/kr-20200201ex321f2691a.htm)] [added: Certifications.](https://www.sec.gov/Archives/edgar/data/56873/000155837021003706/kr-20210130xex32d1.htm)] |
| † | Filed herewith. |
| --- | --- |
| | | |
| 4.2 | | [Description of Securities](https://www.sec.gov/Archives/edgar/data/56873/000155837020003501/kr-20200201ex423a773e4.htm) |
| 10.17* | | [Form of Performance Unit Award Under Long-Term Incentive Plans. Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended August 18, 2018.](http://www.sec.gov/Archives/edgar/data/56873/000155837018007555/kr-20180818ex1015e021a.htm) |
| 10.18* | | [The Kroger Co. 2015 Long-Term Cash Bonus Plan. Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended May 23, 2015.](http://www.sec.gov/Archives/edgar/data/56873/000110465915048764/a15-10878_1ex10d1.htm) |
| 10.20* | | [The Kroger Co. 2017 Long-Term Cash Bonus Plan. Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended May 20, 2017.](http://www.sec.gov/Archives/edgar/data/56873/000155837017004958/kr-20170520ex101c55fc2.htm) |
Item 16. FORM 10-K SUMMARY
4 rewritten, 4 added, 5 removed, 42 unchanged
| Dated: [removed: April 1, 2020] [added: March 30, 2021] | /s/ W. Rodney McMullen |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities indicated on the [removed: 1st April 2020.][added: 30th March 2021.]
| Karen [added: M.] Hoguet | | | |
| Mark S. Sutton | | | [removed: ] |
| Kevin M. Brown | | | |
| J. Amanda Sourry Knox | | | |
| | | | |
| | | | |
| * | | | Director |
| Jorge P. Montoya | | | |
| James A. Runde | | | |
| Bobby S. Shackouls | | | |