SEC Comment Letter for KROGER CO (KR) (CIK 0000056873) (KR) — Jun 21, 2010
KROGER CO (KR) (CIK 0000056873)
Date: June 21, 2010 · CIK: 0000056873 · Accession: 0000000000-10-034689
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-00303
Letter
Re: The Kroger Co. Form 10-K for the Fiscal Year Ended January 30, 2010 Filed March 30, 2010 Definitive Proxy Statement on Schedule 14A Filed May 14, 2010 File No. 001-00303 Dear Mr. Dillon: We have reviewed your filing and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. You should comply with the comments in all future filings, as applicable. Please confirm in writing that you will do so, and also explain to us in sufficient detail for an understanding of the disclosure how you intend to comply by providing us with your proposed revisions Please respond to this letter within ten business days by amending your filing, by providing the requested information, or by advi sing us when you will provide the requested response. If you do not believe our comments apply to your fact s and circumstances or do not believe an amendment is appropriate, pl ease tell us why in your response. After reviewing any amendment to your filing and the information you provide in response to these comments, we ma y have additional comments.
June 21, 2010 David B. Dillon The Kroger Co. 1014 Vine Street Cincinnati, Ohio 45202
Form 10-K for the Fiscal Year Ended January 30, 2010
Item 7. Management’s Discussion and An alysis of Financial Condition…page 11
Results of Operations, page 12
1. We note that you do not provide a discussion and an alysis of changes in sales for each year presented. We also note that you do not quantif y the impact of a number of factors that contributed to the change in total sales for th e most recent year. Please provide a discussion and analysis of sales for each year presented. Also, please clarify your disclosure regarding the reasons for the change in total sales for the mo st recent year since it appears that a decline
David B. Dillon The Kroger Co. June 21, 2010 Page 2
in retail fuel prices would not have the effect of increasing total sale s. In addition, it would be useful to investors to unde rstand (a) the effect of cha nges in transaction counts and average sale per shopping trip in your analysis of identical su permarket sales, excluding fuel, (b) the reasons for changes in the retail price of fuel, and (c) the effect of the change in retail square footage. Further, since you include bot h identical and comparable supermarket sales in your discussion, please discuss both of thes e operating metrics in your analysis. Finally, please provide a discussion and analysis of other sales to the extent changes in such sales is significant to the overall change between years. Alternatively, please tell us why you believe enhanced disclosure is not useful to investor s. Please refer to Item 303(a)(3) of Regulation S-K and Section III.B.4 of SEC Release No. 34-48960. Liquidity and Capital Resources, page 21
2. We note the disclosure on page 26 that you believe cash flow from operations and other sources of liquidity, including borrowings under your commercial paper program and bank credit facility will be adequate to meet anti cipated requirements for working capital, capital expenditures, interest payments and scheduled pr incipal payments for the foreseeable future. Please provide a discussion of prospective information regard ing your short-term and long- term sources and needs for capital in this section. Please refer to Instructions 2 and 5 to Item 303(a) of Regulation S-K and Section 503.a of Codification of Financ ial Reporting polices. In addition, please provide a disc ussion of short-term liquidity and capital resources that cover cash needs for up to 12 months in the fu ture. A discussion of long-term liquidity and capital resources should address material capital expenditures, payments due on long-term debt and other demands or commitments beyond the next 12 months. Alternatively, tell us why you believe enhanced disclosure is not useful to investors in understanding your liquidity and capital resources. Outlook, page 26
3. We note your disclosure regard ing expected bad debt expens e from the credit extended to your customers through your branded credit card. Please tell us more about this program and what consideration you gave to disclosing information about the credit card portfolio and your accounting policies in your discussion and an alysis and/or the notes to consolidated financial statements.
Item 8. Financial Statements and Supplementary Data, page 32
Consolidated Statements of Cash Flows, page 35
4. We note that deferred income taxes included in adjustments to reconcile net earnings to net cash provided by operation activities differ fr om amounts disclosed in the income tax footnote on page 44. Please show us how to reconcile these disclosures.
David B. Dillon The Kroger Co. June 21, 2010 Page 3
Notes to Consolidated Financial Statements, page 37
13. Benefit Plans, page 57
5. Please disclose how you calculate the market rela ted value of plan assets as that term is defined in ASC 715-30-20. Since there is an alternative to how you can calculate this item, and it has a direct effect on pension expe nse, we believe you should disclose how you determine this amount in accordan ce with FASB ASC 235-10-50-3. Note 18. Quarterly Data, page 72
6. Please disclose gross profit or cost of revenues for each quarter. Refer to Item 302(a)(1) of Regulation S-K and Question 3 of SAB Topic 6.G. Item 15. Exhibits, Financial Statement Schedules, page 78
7. It appears that you have not pr ovided all of the schedules and/ or exhibits to Exhibit 10.11 – Five Year Credit Agreement dated as of November 15, 2006, such as Exhibit D – Administrative Questionnaire and Exhibit E –Guarantee Agreement. Please re-file the complete credit agreement, including all sche dules and exhibits with your next periodic report. Definitive Proxy Statement on Schedule 14A
Information Concerning the Bo ard of Directors, page 15
Committees of the Board, page 15
8. We note that you consider racial, ethnic, and ge nder diversity when ev aluating candidates to serve on your board of directors. Please de scribe how you implemen t this policy and how you assess the effectiveness of your policy. Plea se refer to Item 407(c)(2)(vi) of Regulation S-K.
Compensation Policies as they Relate to Risk Management, page 43 9. We note your disclosure in response to Item 402( s) of Regulation S-K. Please describe the policy you undertook to reach the conclusion that disclosure was not necessary. Performance-Based Long-Term Cash Bonus, page 26
10. We note that under the 2008 plan participants receive a 1% payout based on improvement in associate engagement measures. Please describe in greater detail the “associate engagement measures” and what improvement is required in order for participants to receive the 1% payout.
David B. Dillon The Kroger Co. June 21, 2010 Page 4
We urge all persons who are responsible for th e accuracy and adequacy of the disclosure in these filings to be certain that the filings include all information required under the Securities Exchange Act of 1934 and that they have provi ded all information investors require for an informed investment decision. Since the compa ny and its management are in possession of all facts relating to a company’s disclosure, they are responsible for the acc uracy and adequacy of the disclosures they have made. In connection with responding to our comme nts, please provide, in writing, a statement from the company acknowledging that: the company is responsible for the adequacy and accuracy of the disclo sure in the filings;
staff comments or changes to disclosure in re sponse to staff comments do not foreclose the Commission from taking any action with respect to the filings; and the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
In addition, please be advise d that the Division of Enfo rcement has access to all information you provide to the sta ff of the Division of Corporati on Finance in our review of your filings or in response to our comments on your filings.
You may contact Jason Niethamer, Assist ant Chief Accountant at (202) 551-3855 or in his absence William Thompson, Accounting Bran ch Chief, at (202) 551-3344 if you have questions regarding comments on th e financial statements and rela ted matters. Please contact Robert W. Errett, Staff Attorn ey, at (202) 551-3225, or Brigitt e Lippmann, Special Counsel, at (202) 551-3713 or me at (202) 551- 3720 with any other questions.
S i n c e r e l y , H. Christopher Owings A s s i s t a n t D i r e c t o r
Show Raw Text
June 21, 2010
David B. Dillon The Kroger Co. 1014 Vine Street Cincinnati, Ohio 45202
Re: The Kroger Co.
Form 10-K for the Fiscal Year Ended January 30, 2010 Filed March 30, 2010 Definitive Proxy Statement on Schedule 14A Filed May 14, 2010 File No. 001-00303
Dear Mr. Dillon:
We have reviewed your filing and have the following comments. In some of our
comments, we may ask you to provide us with information so we may better understand your
disclosure. You should comply with the comments in all future filings, as applicable. Please
confirm in writing that you will do so, and also explain to us in sufficient detail for an
understanding of the disclosure how you intend to comply by providing us with your proposed
revisions
Please respond to this letter within ten business days by amending your filing, by
providing the requested information, or by advi sing us when you will provide the requested
response. If you do not believe our comments apply to your fact s and circumstances or do not
believe an amendment is appropriate, pl ease tell us why in your response.
After reviewing any amendment to your filing and the information you provide in
response to these comments, we ma y have additional comments.
Form 10-K for the Fiscal Year Ended January 30, 2010
Item 7. Management’s Discussion and An alysis of Financial Condition…page 11
Results of Operations, page 12
1. We note that you do not provide a discussion and an alysis of changes in sales for each year
presented. We also note that you do not quantif y the impact of a number of factors that
contributed to the change in total sales for th e most recent year. Please provide a discussion
and analysis of sales for each year presented. Also, please clarify your disclosure regarding
the reasons for the change in total sales for the mo st recent year since it appears that a decline
David B. Dillon The Kroger Co.
June 21, 2010 Page 2
in retail fuel prices would not have the effect of increasing total sale s. In addition, it would
be useful to investors to unde rstand (a) the effect of cha nges in transaction counts and
average sale per shopping trip in your analysis of identical su permarket sales, excluding fuel,
(b) the reasons for changes in the retail price of fuel, and (c) the effect of the change in retail
square footage. Further, since you include bot h identical and comparable supermarket sales
in your discussion, please discuss both of thes e operating metrics in your analysis. Finally,
please provide a discussion and analysis of other sales to the extent changes in such sales is
significant to the overall change between years. Alternatively, please tell us why you believe
enhanced disclosure is not useful to investor s. Please refer to Item 303(a)(3) of Regulation
S-K and Section III.B.4 of SEC Release No. 34-48960.
Liquidity and Capital Resources, page 21
2. We note the disclosure on page 26 that you believe cash flow from operations and other
sources of liquidity, including borrowings under your commercial paper program and bank
credit facility will be adequate to meet anti cipated requirements for working capital, capital
expenditures, interest payments and scheduled pr incipal payments for the foreseeable future.
Please provide a discussion of prospective information regard ing your short-term and long-
term sources and needs for capital in this section. Please refer to Instructions 2 and 5 to Item
303(a) of Regulation S-K and Section 503.a of Codification of Financ ial Reporting polices.
In addition, please provide a disc ussion of short-term liquidity and capital resources that
cover cash needs for up to 12 months in the fu ture. A discussion of long-term liquidity and
capital resources should address material capital expenditures, payments due on long-term debt and other demands or commitments beyond the next 12 months. Alternatively, tell us
why you believe enhanced disclosure is not useful to investors in understanding your liquidity and capital resources.
Outlook, page 26
3. We note your disclosure regard ing expected bad debt expens e from the credit extended to
your customers through your branded credit card. Please tell us more about this program and
what consideration you gave to disclosing information about the credit card portfolio and your accounting policies in your discussion and an alysis and/or the notes to consolidated
financial statements.
Item 8. Financial Statements and Supplementary Data, page 32
Consolidated Statements of Cash Flows, page 35
4. We note that deferred income taxes included in adjustments to reconcile net earnings to net
cash provided by operation activities differ fr om amounts disclosed in the income tax
footnote on page 44. Please show us how to reconcile these disclosures.
David B. Dillon The Kroger Co.
June 21, 2010 Page 3
Notes to Consolidated Financial Statements, page 37
13. Benefit Plans, page 57
5. Please disclose how you calculate the market rela ted value of plan assets as that term is
defined in ASC 715-30-20. Since there is an alternative to how you can calculate this item, and it has a direct effect on pension expe nse, we believe you should disclose how you
determine this amount in accordan ce with FASB ASC 235-10-50-3.
Note 18. Quarterly Data, page 72
6. Please disclose gross profit or cost of revenues for each quarter. Refer to Item 302(a)(1) of Regulation S-K and Question 3 of SAB Topic 6.G.
Item 15. Exhibits, Financial Statement Schedules, page 78
7. It appears that you have not pr ovided all of the schedules and/ or exhibits to Exhibit 10.11 –
Five Year Credit Agreement dated as of November 15, 2006, such as Exhibit D – Administrative Questionnaire and Exhibit E –Guarantee Agreement. Please re-file the
complete credit agreement, including all sche dules and exhibits with your next periodic
report.
Definitive Proxy Statement on Schedule 14A
Information Concerning the Bo ard of Directors, page 15
Committees of the Board, page 15
8. We note that you consider racial, ethnic, and ge nder diversity when ev aluating candidates to
serve on your board of directors. Please de scribe how you implemen t this policy and how
you assess the effectiveness of your policy. Plea se refer to Item 407(c)(2)(vi) of Regulation
S-K.
Compensation Policies as they Relate to Risk Management, page 43
9. We note your disclosure in response to Item 402( s) of Regulation S-K. Please describe the
policy you undertook to reach the conclusion that disclosure was not necessary.
Performance-Based Long-Term Cash Bonus, page 26
10. We note that under the 2008 plan participants receive a 1% payout based on improvement in
associate engagement measures. Please describe in greater detail the “associate engagement
measures” and what improvement is required in order for participants to receive the 1%
payout.
David B. Dillon The Kroger Co. June 21, 2010 Page 4
We urge all persons who are responsible for th e accuracy and adequacy of the disclosure
in these filings to be certain that the filings include all information required under the Securities
Exchange Act of 1934 and that they have provi ded all information investors require for an
informed investment decision. Since the compa ny and its management are in possession of all
facts relating to a company’s disclosure, they are responsible for the acc uracy and adequacy of
the disclosures they have made. In connection with responding to our comme nts, please provide, in writing, a statement
from the company acknowledging that: the company is responsible for the adequacy and accuracy of the disclo sure in the filings;
staff comments or changes to disclosure in re sponse to staff comments do not foreclose the
Commission from taking any action with respect to the filings; and
the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
In addition, please be advise d that the Division of Enfo rcement has access to all
information you provide to the sta ff of the Division of Corporati on Finance in our review of your
filings or in response to our comments on your filings.
You may contact Jason Niethamer, Assist ant Chief Accountant at (202) 551-3855 or in
his absence William Thompson, Accounting Bran ch Chief, at (202) 551-3344 if you have
questions regarding comments on th e financial statements and rela ted matters. Please contact
Robert W. Errett, Staff Attorn ey, at (202) 551-3225, or Brigitt e Lippmann, Special Counsel, at
(202) 551-3713 or me at (202) 551- 3720 with any other questions.
S i n c e r e l y , H. Christopher Owings A s s i s t a n t D i r e c t o r