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Section 1: 10-Q (10-Q)

kr_Current_Folio_10Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 


 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended May 26, 2018

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from           to         

Commission file number 1-303

 


 

 

Picture 2

(Exact name of registrant as specified in its charter)

 


 

 

 

 

Ohio

 

31-0345740

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

1014 Vine Street, Cincinnati, OH 45202

(Address of principal executive offices)

(Zip Code)

 

(513) 762-4000

(Registrant’s telephone number, including area code)

 

Unchanged

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

 


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒  No  ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  ☒  No  ☐

 

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

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer (do not check if a smaller reporting company)

 

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

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

 

There were 796,675,676 shares of Common Stock ($1 par value) outstanding as of June 26, 2018.

 

 

 

 


 

 

PART I – FINANCIAL INFORMATION

 

Item 1.Financial Statements.

 

THE KROGER CO.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter Ended

 

 

 

 

May 26,

 

May 20,

 

 

(In millions, except per share amounts)

    

2018

    

2017

    

 

Sales

 

$

37,530

 

$

36,285

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below

 

 

29,362

 

 

28,281

 

 

Operating, general and administrative

 

 

6,122

 

 

6,367

 

 

Rent

 

 

276

 

 

270

 

 

Depreciation and amortization

 

 

741

 

 

736

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

 

1,029

 

 

631

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

Interest expense

 

 

(192)

 

 

(177)

 

 

Non-service component of company-sponsored pension plan costs

 

 

(10)

 

 

(9)

 

 

Mark to market gain on Ocado securities

 

 

36

 

 

 —

 

 

Gain on sale of business

 

 

1,771

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

Net earnings before income tax expense

 

 

2,634

 

 

445

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

616

 

 

148

 

 

 

 

 

 

 

 

 

 

 

Net earnings including noncontrolling interests

 

 

2,018

 

 

297

 

 

Net loss attributable to noncontrolling interests

 

 

(8)

 

 

(6)

 

 

 

 

 

 

 

 

 

 

 

Net earnings attributable to The Kroger Co.

 

$

2,026

 

$

303

 

 

 

 

 

 

 

 

 

 

 

Net earnings attributable to The Kroger Co. per basic common share

 

$

2.39

 

$

0.33

 

 

 

 

 

 

 

 

 

 

 

Average number of common shares used in basic calculation

 

 

839

 

 

914

 

 

 

 

 

 

 

 

 

 

 

Net earnings attributable to The Kroger Co. per diluted common share

 

$

2.37

 

$

0.32

 

 

 

 

 

 

 

 

 

 

 

Average number of common shares used in diluted calculation

 

 

846

 

 

925

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.125

 

$

0.120

 

 

 

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

 

2


 

 

THE KROGER CO.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

First Quarter Ended

 

 

 

May 26,

 

May 20,

 

(In millions)

    

2018

    

2017

 

Net earnings including noncontrolling interests

 

$

2,018

 

$

297

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

Realized and unrealized gains and losses on available for sale securities, net of income tax(1)  

 

 

(4)

 

 

 —

 

Change in pension and other postretirement defined benefit plans, net of income tax(2)

 

 

15

 

 

13

 

Unrealized gains and losses on cash flow hedging activities, net of income tax(3)

 

 

 4

 

 

(36)

 

Amortization of unrealized gains and losses on cash flow hedging activities, net of income tax(4)

 

 

 1

 

 

 —

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss)

 

 

16

 

 

(23)

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

2,034

 

 

274

 

Comprehensive loss attributable to noncontrolling interests

 

 

(8)

 

 

(6)

 

Comprehensive income attributable to The Kroger Co.

 

$

2,042

 

$

280

 


(1)

Amount is net of tax of $(1) for the first quarter of 2018.

(2)

Amount is net of tax of $4 for the first quarter of 2018 and $8 for the first quarter of 2017. 

(3)

Amount is net of tax of $1 for the first quarter of 2018 and $(21) for the first quarter of 2017.

(4)

Amount is net of tax of $1 for the first quarter of 2018.

 

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

 

 

 

 

3


 

 

THE KROGER CO.

CONSOLIDATED BALANCE SHEETS

(unaudited)

 

 

 

 

 

 

 

 

 

 

    

May 26,

    

February 3,

 

(In millions, except par amounts)

 

2018

 

2018

 

ASSETS 

 

 

 

 

 

 

 

Current assets 

 

 

 

 

 

 

 

Cash and temporary cash investments 

 

$

691

 

$

347

 

Store deposits in-transit 

 

 

1,053

 

 

1,161

 

Receivables 

 

 

1,583

 

 

1,637

 

FIFO inventory 

 

 

7,650

 

 

7,781

 

LIFO reserve 

 

 

(1,263)

 

 

(1,248)

 

Assets held for sale

 

 

42

 

 

604

 

Prepaid and other current assets 

 

 

530

 

 

835

 

Total current assets 

 

 

10,286

 

 

11,117

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net 

 

 

21,195

 

 

21,071

 

Intangibles, net

 

 

1,100

 

 

1,100

 

Goodwill 

 

 

2,925

 

 

2,925

 

Other assets 

 

 

1,055

 

 

984

 

 

 

 

 

 

 

 

 

Total Assets 

 

$

36,561

 

$

37,197

 

 

 

 

 

 

 

 

 

LIABILITIES 

 

 

 

 

 

 

 

Current liabilities 

 

 

 

 

 

 

 

Current portion of long-term debt including obligations under capital leases and financing obligations 

 

$

2,242

 

$

3,560

 

Trade accounts payable 

 

 

6,202

 

 

5,858

 

Accrued salaries and wages 

 

 

1,011

 

 

1,099

 

Liabilities held for sale

 

 

18

 

 

259

 

Other current liabilities 

 

 

4,003

 

 

3,421

 

Total current liabilities 

 

 

13,476

 

 

14,197

 

 

 

 

 

 

 

 

 

Long-term debt including obligations under capital leases and financing obligations 

 

 

12,059

 

 

12,029

 

Deferred income taxes 

 

 

1,590

 

 

1,568

 

Pension and postretirement benefit obligations

 

 

789

 

 

792

 

Other long-term liabilities 

 

 

1,706

 

 

1,706

 

 

 

 

 

 

 

 

 

Total Liabilities 

 

 

29,620

 

 

30,292

 

 

 

 

 

 

 

 

 

Commitments and contingencies see Note 7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred shares, $100 per share, 5 shares authorized and unissued 

 

 

 —

 

 

 —

 

Common shares, $1 par per share, 2,000 shares authorized; 1,918 shares issued in 2018 and 2017

 

 

1,918

 

 

1,918

 

Additional paid-in capital 

 

 

3,059

 

 

3,161

 

Accumulated other comprehensive loss 

 

 

(455)

 

 

(471)

 

Accumulated earnings 

 

 

18,924

 

 

17,007

 

Common shares in treasury, at cost, 1,122 shares in 2018 and 1,048 shares in 2017

 

 

(16,476)

 

 

(14,684)

 

 

 

 

 

 

 

 

 

Total Shareholders’ Equity - The Kroger Co.

 

 

6,970

 

 

6,931

 

Noncontrolling interests 

 

 

(29)

 

 

(26)

 

 

 

 

 

 

 

 

 

Total Equity 

 

 

6,941

 

 

6,905

 

 

 

 

 

 

 

 

 

Total Liabilities and Equity 

 

$

36,561

 

$

37,197

 

 

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

4


 

 

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

First Quarter Ended

 

 

 

May 26,

 

May 20,

 

(In millions)

    

2018

    

2017

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

Net earnings including noncontrolling interests 

 

$

2,018

 

$

297

 

Adjustments to reconcile net earnings including noncontrolling interests to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

741

 

 

736

 

LIFO charge

 

 

15

 

 

25

 

Stock-based employee compensation

 

 

45

 

 

53

 

Expense for company-sponsored pension plans

 

 

27

 

 

35

 

Deferred income taxes

 

 

17

 

 

 6

 

Gain on sale of business

 

 

(1,771)

 

 

 —

 

Mark to market gain on Ocado securities

 

 

(36)

 

 

 —

 

Other

 

 

 —

 

 

(50)

 

Changes in operating assets and liabilities net of effects from mergers of businesses:

 

 

 

 

 

 

 

Store deposits in-transit

 

 

108

 

 

(42)

 

Receivables

 

 

(123)

 

 

149

 

Inventories

 

 

134

 

 

177

 

Prepaid and other current assets

 

 

307

 

 

409

 

Trade accounts payable

 

 

345

 

 

260

 

Accrued expenses

 

 

43

 

 

(86)

 

Income taxes receivable and payable

 

 

558

 

 

153

 

Other

 

 

(60)

 

 

187

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

 

2,368

 

 

2,309

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

Payments for property and equipment

 

 

(758)

 

 

(817)

 

Proceeds from sale of assets

 

 

47

 

 

83

 

Purchases of stores

 

 

(44)

 

 

 —

 

Net proceeds from sale of business

 

 

2,142

 

 

 —

 

Other

 

 

(38)

 

 

(10)

 

 

 

 

 

 

 

 

 

Net cash provided (used) by investing activities

 

 

1,349

 

 

(744)

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

Proceeds from issuance of long-term debt

 

 

1,010

 

 

 1

 

Payments on long-term debt

 

 

(214)

 

 

(84)

 

Net payments on commercial paper

 

 

(2,120)

 

 

(545)

 

Dividends paid

 

 

(110)

 

 

(111)

 

Proceeds from issuance of capital stock

 

 

10

 

 

17

 

Treasury stock purchases

 

 

(1,809)

 

 

(772)

 

Other

 

 

(140)

 

 

(37)

 

 

 

 

 

 

 

 

 

Net cash used by financing activities

 

 

(3,373)

 

 

(1,531)

 

 

 

 

 

 

 

 

 

Net increase in cash and temporary cash investments

 

 

344

 

 

34

 

 

 

 

 

 

 

 

 

Cash and temporary cash investments:

 

 

 

 

 

 

 

Beginning of year

 

 

347

 

 

322

 

End of period

 

$

691

 

$

356

 

 

 

 

 

 

 

 

 

Reconciliation of capital investments:

 

 

 

 

 

 

 

Payments for property and equipment

 

$

(758)

 

$

(817)

 

Changes in construction-in-progress payables

 

 

(91)

 

 

(104)

 

Total capital investments

 

$

(849)

 

$

(921)

 

 

 

 

 

 

 

 

 

Disclosure of cash flow information:

 

 

 

 

 

 

 

Cash paid during the year for interest

 

$

124

 

$

188

 

Cash paid during the year for income taxes

 

$

36

 

$

11

 

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

 

 

5


 

 

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS’ EQUITY

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

Paid-In

 

Treasury Stock

 

Comprehensive

 

Accumulated

 

Noncontrolling

 

 

 

 

(In millions, except per share amounts)

  

Shares

  

Amount

  

Capital

  

Shares

  

Amount

  

Loss

  

Earnings

  

Interest

  

Total

 

Balances at January 28, 2017

 

1,918

 

$

1,918

 

$

3,070

 

994

 

$

(13,118)

 

$

(715)

 

$

15,543

 

$

12

 

$

6,710

 

Issuance of common stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options exercised

 

 —

 

 

 —

 

 

 —

 

(1)

 

 

17

 

 

 —

 

 

 —

 

 

 —

 

 

17

 

Restricted stock issued

 

 —

 

 

 —

 

 

(11)

 

 —

 

 

 5

 

 

 —

 

 

 —

 

 

 —

 

 

(6)

 

Treasury stock activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury stock purchases, at cost

 

 —

 

 

 —

 

 

 —

 

24

 

 

(747)

 

 

 —

 

 

 —

 

 

 —

 

 

(747)

 

Stock options exchanged

 

 —

 

 

 —

 

 

 —

 

 —

 

 

(25)

 

 

 —

 

 

 —

 

 

 —

 

 

(25)

 

Share-based employee compensation

 

 —

 

 

 —

 

 

53

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

53

 

Other comprehensive loss net of income tax of ($13)

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(23)

 

 

 —

 

 

 —

 

 

(23)

 

Other

 

 —

 

 

 —

 

 

(8)

 

 —

 

 

(6)

 

 

 —

 

 

 —

 

 

(16)

 

 

(30)

 

Cash dividends declared ($0.12 per common share)

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(111)

 

 

 —

 

 

(111)

 

Net earnings including noncontrolling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

303

 

 

(6)

 

 

297

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at May 20, 2017

 

1,918

 

$

1,918

 

$

3,104

 

1,017

 

$

(13,874)

 

$

(738)

 

$

15,735

 

$

(10)

 

$

6,135

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at February 3, 2018

 

1,918

 

$

1,918

 

$

3,161

 

1,048

 

$

(14,684)

 

$

(471)

 

$

17,007

 

$

(26)

 

$

6,905

 

Issuance of common stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options exercised

 

 —

 

 

 —

 

 

 —

 

(1)

 

 

10

 

 

 —

 

 

 —

 

 

 —

 

 

10

 

Restricted stock issued

 

 —

 

 

 —

 

 

(6)

 

 —

 

 

 5

 

 

 —

 

 

 —

 

 

 —

 

 

(1)

 

Treasury stock activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury stock purchases, at cost

 

 —

 

 

 —

 

 

(134)

 

74

 

 

(1,792)

 

 

 —

 

 

 —

 

 

 —

 

 

(1,926)

 

Stock options exchanged

 

 —

 

 

 —

 

 

 —

 

 1

 

 

(17)

 

 

 —

 

 

 —

 

 

 —

 

 

(17)

 

Share-based employee compensation

 

 —

 

 

 —

 

 

45

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

45

 

Other comprehensive income net of income tax of $5

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

16

 

 

 —

 

 

 —

 

 

16

 

Other

 

 —

 

 

 —

 

 

(7)

 

 —

 

 

 2

 

 

 —

 

 

 —

 

 

 5

 

 

 —

 

Cash dividends declared ($0.125 per common share)

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(109)

 

 

 —

 

 

(109)

 

Net earnings including noncontrolling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

2,026

 

 

(8)

 

 

2,018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at May 26, 2018

 

1,918

 

$

1,918

 

$

3,059

 

1,122

 

$

(16,476)

 

$

(455)

 

$

18,924

 

$

(29)

 

$

6,941

 

 

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

 

 

6


 

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

1.ACCOUNTING POLICIES

 

Basis of Presentation and Principles of Consolidation

 

The accompanying financial statements include the consolidated accounts of The Kroger Co., its wholly-owned subsidiaries, and the variable interest entities in which the Company is the primary beneficiary.  The February 3, 2018 balance sheet was derived from audited financial statements and, due to its summary nature, does not include all disclosures required by generally accepted accounting principles (“GAAP”).  Significant intercompany transactions and balances have been eliminated.  References to the “Company” in these Consolidated Financial Statements mean the consolidated company.

 

In the opinion of management, the accompanying unaudited Consolidated Financial Statements include adjustments, all of which are of a normal, recurring nature that are necessary for a fair statement of results of operations for such periods but should not be considered as indicative of results for a full year.  The financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted, pursuant to SEC regulations.  Accordingly, the accompanying Consolidated Financial Statements should be read in conjunction with the financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended February 3, 2018.

 

The unaudited information in the Consolidated Financial Statements for the first quarters ended May 26, 2018 and May 20, 2017, includes the results of operations of the Company for the 16-week periods then ended.

 

Refer to Note 5 for a description of changes to the Consolidated Statements of Operations for a recently adopted accounting standard regarding the presentation of the non-service component of company-sponsored pension plan costs.

 

Fair Value Measurements

 

Fair value measurements are classified and disclosed in one of the following three categories:

 

Level 1 – Quoted prices are available in active markets for identical assets or liabilities;

 

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable;

 

Level 3 – Unobservable pricing inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing an asset or liability. 

 

The Company records cash and temporary cash investments, store deposits in-transit, receivables, prepaid and other current assets, trade accounts payable, accrued salaries and wages and other current liabilities at approximated fair value.  Certain other investments and derivatives are recorded as Level 1, 2 or 3 instruments.  Refer to Note 2 for the disclosure of debt instrument fair values.

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Revenue Recognition

 

Sales

 

The Company recognizes revenues from the retail sale of products, net of sales taxes, at the point of sale.  Pharmacy sales are recorded when the product is provided to the customer.  Digital channel originated sales are recognized either upon pickup in store or upon delivery to the customer and may include shipping revenue. Discounts provided to customers by the Company at the time of sale, including those provided in connection with loyalty cards, are recognized as a  reduction in sales as the products are sold. Discounts provided by vendors, usually in the form of paper coupons, are not recognized as a reduction in sales provided the coupons are redeemable at any retailer that accepts coupons. The Company records a  receivable from the vendor for the difference in sales price and cash received. For merchandise sold in one of our stores or online, tender is accepted at the point of sale.  Certain pharmacy fees previously recorded as merchandise costs have been reclassified to be recorded as a reduction of sales.  Effective February 4, 2018, the Company prospectively reclassified $61 of these pharmacy fees from merchandise costs to sales on the Company’s Consolidated Statements of Operations.  For pharmacy sales, collection of third party receivables is typically expected within three months or less from the time of purchase.  The third party receivables from pharmacy sales are recorded in Receivables in the Company’s Consolidated Balance Sheets and were $635 as of May 26, 2018 and $571 as of February 3, 2018.

 

Gift Cards and Gift Certificates

 

The Company does not recognize a sale when it sells its own gift cards and gift certificates. Rather, it records a deferred revenue liability equal to the amount received. A  sale is then recognized when the gift card or gift certificate is redeemed to purchase the Company’s products.  The Company’s gift cards and gift certificates do not expire.  While gift cards and gift certificates are generally redeemed within 12 months, some are never fully redeemed. The Company recognizes gift card and gift certificate breakage under the proportional method, where recognition of breakage income is based upon the historical run-off rate of unredeemed gift cards and gift certificates.  The Company’s gift card and gift certificate deferred revenue liability was $72 as of May 26, 2018 and $90 as of February 3, 2018.

 

Disaggregated Revenues

 

The following table presents sales revenue by type of product for the first quarters of 2018 and 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter Ended

 

First Quarter Ended

 

 

 

May 26, 2018

 

May 20, 2017

 

 

    

Amount

    

% of total

    

Amount

    

% of total

    

Non Perishable (1)

 

$

18,289

 

48.7

%  

$

17,927

 

49.4

%  

Fresh (2)

 

 

9,083

 

24.2

%  

 

8,775

 

24.2

%  

Supermarket Fuel

 

 

4,560

 

12.2

%  

 

3,817

 

10.5

%  

Pharmacy

 

 

3,236

 

8.6

%  

 

3,198

 

8.8

%  

Convenience Stores

 

 

944

 

2.5

%  

 

1,311

 

3.6

%  

Other (3)

 

 

1,418

 

3.8

%  

 

1,257

 

3.5

%  

 

 

 

 

 

 

 

 

 

 

 

 

Total Sales and other revenue

 

$

37,530

 

100

%  

$

36,285

 

100

%  

 

(1)

Consists primarily of grocery, general merchandise, health and beauty care and natural foods.

(2)

Consists primarily of produce, floral, meat, seafood, deli, bakery and fresh prepared.

(3)

Consists primarily of sales related to jewelry stores, food production plants to outside vendors, data analytic services, variable interest entities, specialty pharmacy, in-store health clinics, digital coupon services and other online sales not included in the categories above.

 

8


 

 

 

2.DEBT OBLIGATIONS

 

Long-term debt consists of:

 

 

 

 

 

 

 

 

 

 

 

May 26,

 

February 3,

 

 

    

2018

    

2018

 

1.50% to 8.00% Senior Notes due through 2048

 

$

12,005

 

$

12,201

 

5.63% to 12.75% Mortgages due in varying amounts through 2027

 

 

22

 

 

22

 

1.68% Commercial paper borrowings

 

 

 —

 

 

2,121

 

2.82% Term Loan due 2019

 

 

1,000

 

 

 —

 

Other

 

 

450

 

 

443

 

 

 

 

 

 

 

 

 

Total debt, excluding capital leases and financing obligations

 

 

13,477

 

 

14,787

 

Less current portion

 

 

(2,189)

 

 

(3,509)

 

 

 

 

 

 

 

 

 

Total long-term debt, excluding capital leases and financing obligations

 

$

11,288

 

$

11,278

 

 

 

On March 16, 2018, the Company obtained a $1,000 term loan with a maturity date of March 16, 2019.  The funds were drawn on March 26, 2018 and were used to reduce outstanding commercial paper borrowings.  Under the terms of the agreement, interest rates are adjusted monthly based on the Company’s Public Debt Rating and prevailing LIBOR rates. 

 

Additionally, in the first quarter of 2018, the Company repaid, upon maturity, $200 of senior notes bearing an interest rate of 7%.

 

The fair value of the Company’s long-term debt, including current maturities, was estimated based on the quoted market prices for the same or similar issues adjusted for illiquidity based on available market evidence.  If quoted market prices were not available, the fair value was based upon the net present value of the future cash flow using the forward interest rate yield curve in effect at May 26, 2018 and February 3, 2018.  At May 26, 2018, the fair value of total debt was $13,509 compared to a carrying value of $13,477.  At February 3, 2018, the fair value of total debt was $15,167 compared to a carrying value of $14,787.

 

3.BENEFIT  PLANS

 

The following table provides the components of net periodic benefit cost for the Company-sponsored defined benefit pension plans and other post-retirement benefit plans for the first quarters of 2018 and 2017.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter Ended