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The Kroger Co. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: June 28, 2010 08:12PM
The Kroger Co. (KR) filed Quarterly Report for the period ended 2010-05-22. The Kroger Co. has a market cap of $13.07 billion; its shares were traded at around $20.23 with a P/E ratio of 12.41 and P/S ratio of 0.17. The dividend yield of The Kroger Co. stocks is 1.88%. The Kroger Co. had an annual average earning growth of 3.8% over the past 10 years. GuruFocus rated The Kroger Co. the business predictability rank of 3-star.KR is in the portfolios of Jeff Auxier of Auxier Focus Fund, NWQ Managers of NWQ Investment Management Co, Manning & Napier Advisors, Inc, Steven Cohen of SAC Capital Advisors, Charles Brandes of Brandes Investment, Pioneer Investments, Pioneer Investments, John Buckingham of Al Frank Asset Management, Inc., Paul Tudor Jones of The Tudor Group, Bruce Kovner of Caxton Associates, Jeremy Grantham of GMO LLC.
Highlight of Business Operations:
For the first quarter of 2010, net earnings totaled $374 million, or $0.58 per diluted share, compared to $435 million, or $0.66 per diluted share for the same period of 2009. The results for the first quarter of 2009 benefited from favorable commodity costs. This unfavorable comparison in the first quarter of 2010 was offset by improved profits from our retail fuel operations. In the first quarter of 2010, our retail fuel operations improved by approximately $0.04 per diluted share compared to the first quarter of 2009.
We generated $1.6 billion of cash from operating activities during the first quarter of 2010, compared to $1.3 billion in the first quarter of 2009. The cash provided by operating activities came from net earnings including noncontrolling interests, adjusted for non-cash expenses. In addition, an improvement in working capital provided cash of $662 million in the first quarter of 2010 and $484 million in the first quarter of 2009. The 2010 improvement in the working capital over 2009 was primarily the result of a larger decrease in inventories and prepaid assets offset by a smaller decline in trade accounts payable. Prepaid expenses decreased significantly from year end in both first quarters of 2009 and 2010, reflecting a decrease in the prepayment balance of some employee benefits at year end. We contributed $27 million in the first quarter of 2010, and $200 million in the first quarter of 2009, to Kroger-sponsored pension plans.
As of May 22, 2010, we maintained a committed $2.5 billion, five-year revolving credit facility that, unless extended, terminates on November 15, 2011. Outstanding borrowings under the credit agreement and commercial paper borrowings, and some outstanding letters of credit, reduce funds available under the credit agreement. In addition to the credit agreement, we maintained three uncommitted money market lines totaling $100 million in the aggregate. The money market lines allow us to borrow from banks at mutually agreed upon rates, usually at rates below the rates offered under the credit agreement. As of May 22, 2010, we did not have any borrowings under the credit facility, money market lines, or outstanding commercial paper. The outstanding letters of credit that reduced the funds available under our credit agreement totaled $315 million as of May 22, 2010.
Total debt, including both the current and long-term portions of capital leases and lease-financing obligations, decreased $388 million to $7.5 billion as of the end of the first quarter of 2010, from $7.9 billion as of the end of the first quarter of 2009. Total debt decreased $531 million as of the end of the first quarter of 2010, from $8.1 billion as of year-end 2009. The decrease as of the end of the first quarter of 2010, compared to the end of the first quarter of 2009, resulted from the payment at maturity in the second quarter of 2009 of $350 million of senior notes bearing an interest rate of 7.25% and the payment in the first quarter of 2010 of $500 million of senior notes bearing an interest rate of 8.05%, partially offset by the issuance in the third quarter of 2009 of $500 million of senior notes bearing an interest rate of 3.90%. As of May 22, 2010, our cash and temporary cash investments were $602 million compared to $424 million as of January 30, 2010.
During the first quarter of 2010, we invested $80 million to repurchase four million shares of Kroger common stock at an average price of $21.89 per share. From the end of the first quarter of 2010 through June 23, 2010, we have invested an additional $53 million to repurchase three million shares of Kroger common stock at an average price of $20.23 per share. These shares were reacquired under two separate stock repurchase programs. The first is a $1 billion repurchase program that was authorized by Krogers Board of Directors on January 18, 2008. The second is a program that uses the cash proceeds from the exercises of stock options by participants in Krogers stock option and long-term incentive plans as well as the associated tax benefits. On June 24, 2010, our Board of Directors authorized a new $500 million repurchase program to replace the existing $1 billion program, which had approximately $225 million remaining.
Capital expenditures, excluding acquisitions and the purchase of leased facilities, totaled $532 million for the first quarter of 2010, compared to $622 million for the first quarter of 2009. During the first quarter of 2010, we opened, acquired, expanded, or relocated fifteen food stores and also completed 35 within-the-wall remodels. Total food store square footage increased 1.2% from the first quarter of 2009. Excluding acquisitions and operational closings, total food store square footage increased 1.8% in the first quarter of 2010, as compared to the first quarter of 2009. Capital expenditures for the purchase of leased facilities totaled $10 million in the first quarter of 2010, compared to $32 million in the first quarter of 2009.
Stocks Discussed: KR,