GIVIISI V. Common Size Income Statement Prepare a common size income statement for two years and compare/contrast the changes (Refer to chapter 17) VI. Ratio Analysis of Financial Statements Prepare a ratio analysis using ALL of the ratios learned in chapter 17 to analyze your company. You should calculate the ratios for two years to be able to compare one year to another by telling if they improved or deteriorated from one year to another. For this section you will include a discussion of the ratios in the paper portion and the actual formula AND calculation will be in an appendix at the end of your paper. You need to show calculations IN AN APPENDIX to earn credit. (Review APA to see where an Appendix goes in a paper). VII. Conclusions In your opinion, what is the most interesting part of the annual report and why? What is your prognosis for this company? Do you foresee success, failure, market leadership, stagnation, improvement, decline? Why? You may point to economic, political, regulatory, resource, market, or other factors that will have an impact on the success of this company. ciuruvc accompany are u pvuvv vv v V. Common Size Income Statement Prepare a common size income statement for two years and compare/contrast the changes (Refer to chapter 17) a VI. Ratio Analysis of Financial Statements Prepare a ratio analysis using ALL of the ratios learned in chapter 17 to analyze your company. You should calculate the ratios for two years to be able to compare one year to another by telling if they improved or deteriorated from one year to another. For this section you will include a discussion of the ratios in the paper portion and the actual formula AND calculation will be in an appendix at the end of your paper. You need to show calculations IN AN APPENDIX to earn credit. (Review APA to see where an Appendix goes in a paper). VII. Conclusions In your opinion, what is the most interesting part of the annual report and why? What is your prognosis for this company? Do you foresee success, failure, market leadership, stagnation, improvement, decline? Why? You may point to economic, political, regulatory, resource, market, or other factors that will have an impact on the success of this company. -Motorex Accounting Complex 2001 hoy box Report & SX content/14154/viewContent/3066741/View 1 of 2 + Automatic Zoom View as Text Dov Evaluation of an Annual Report Objectives of the Project: 1) to read a financial statement; 2) to become familiar with the typical contents of an annual report; 3) to assess the condition of the company using ratio analysis, horizontal or vertical analysis, and charting. You will be assigned a publicly traded company and will be using that company's annual report to analyze their financial condition. A written APA style paper will be prepared to answer the questions below. The project is worth 100 points. No late submissions are accepted. You will read the series of questions and provide responses in written paragraph format. While I am providing an outline for the sections, your paper should not be an outline. Each section of the outline below will be used as your headings. Please proofread your work for spelling and grammatical errors. Accountants are professionals and I expect this to look like it was written in a professional manner. As with any APA paper, you must use in text citations and that means you should list the page range where you found the information for each question Annual report, p.2). The paper must be typed and double-spaced. You will be following APA format so you can use the Policies and Resources tab and go to Writing Resources if you need help with APA formatting. The basics are Times New Roman 12 point font, Title Page Headers, 1" Margins. Headings, in-text citations, references, etc. The suggested length of your final report is at least five pages not including the title or reference pages but should not exceed 10. Company assignments: Once you are assigned a company, go to the company's website and locate the annual report (look under annual report or investor relations). The annual report is what you will use for your project. No other websites should be used without permission from the instructor. If you cannot find something you should ask the instructor well before the due date. General Outline of Project 1. Description of the Company Review the annual report and identify the Company name, the services or products they provide the major industries in which they compete, geographical locations in which they do business, and list major competitors. (If not listed in annual report, you may use another source but be sure to citet Mail-rene ee X Accounting II AX Corporate Pro X 2021 Proxy for X 2021 Pracy for 4 Reports & StatX Vle/content/74154/viewContent/3086741/View R1 1 of 2 - 1+ Automatic Zoom View as Text Dov. II. Income Statement What is the trend from the last two years of each of the following: Sales, Cost of Goods Sold, Expenses, and Net Income? You should calculate dollar and percentage change in each element and include one or two graphs showing trends-use the tools we learned in ch 17 (You should be able to do the trends before ch 17 but add the graphs after ch 17). Did the company have an increase or decrease in revenues? III. Balance Sheet What have been the trends from the last two years of assets, liabilities and stockholders' equity? How many shares of stock the company has outstanding? What is the par value of their stock? IV. Statement of Cash Flows The cash flow statement is divided into 3 sections: operating, financing, and investing. What are the major cash flow items in each section? What is the trend of cash flows over a 2-year period? Does the company have a positive cash flow from operations? V. Common Size Income Statement Prepare a common size income statement for two years and compare/contrast the changes (Refer to chapter 17) VI. Ratio Analysis of Financial Statements Prepare a ratio analysis using ALL of the ratios leamed in chapter 17 to analyze your company. You should calculate the ratios for two years to be able to compare one year to another by telling if they improved or deteriorated from one vear to another. For this section you will RESULTS OF OPERATIONS Sales Total Sales ($ in millions) 2020 $ 122,134 9,486 Total sales to retail customers without fuel) Supermarket fuel sales Convenience stores Other sales Total sales Percentage Change) 2019 13.6 % S 107,487 (32.5% 14.052 % 17.5 % 747 8.4 % $ 122,286 Percentage Change 2018 2.2 % $ 105,123 (5.7)% 14,903 % 944 (15.3% 882 0.4 % $ 121,852 878 S 132.498 (1) This column represents the percentage change in 2020 compared to 2019. (2) This column represents the percentage change in 2019 compared to 2018. (3) Digital sales, primarily including Pickup, Delivery, Ship and pharmacy e-commerce sales, grew approximately 116% in 2020,29% in 2019 and 58% in 2018. These sales are included in the total sales to retail customers without fuel" line above, (4) We completed the sale of our convenience store business unit during the first quarter of 2018. (5) Other sales primarily relate to external sales at food production plants , data analytic services and third-party media revenue. The increase in 2020, compared to 2019, is primarily due to growth in third-party media revenue, partially offset by decreased sales due to the disposal of Turkey Hill Dairy and You Technology in the first quarter of 2019. The decrease in 2019, compared to 2018, is primarily due to the disposal of Turkey Hill Dairy and You Technology in the first quarter of 2019, partially offset by an increase in data analytic services and third-party media revenue. Total sales increased in 2020, compared to 2019, by 8.4%. The increase was due to an increase in total sales to retail customers without fuel, partially offset by a reduction in supermarket fuel sales and decreased sales due to the disposal of Turkey Hill Dairy and You Technology in the first quarter of 2019. Total sales to retail customers without fuel increased 13.6% in 2020, compared to 2019. The increase was primarily due to our identical sales increase, excluding fuel, of 14.1%, partially offset by decreased sales due to the deconsolidation of Lucky's Market in the fourth quarter of 2019. Total sales excluding fuel and dispositions increased 14.2% in 2020 compared to 2019. The significant increase in identical sales, excluding fuel, was caused by unprecedented demand due to the COVID-19 pandemic, digital sales growth and growth in market share. Market share growth contributed to our identical sales increase, excluding fuel. as our sales outpaced the general growth in the food retail industry during 2030. The increase in identicul sales, excluding fuel, was broad based across all supermarket divisions and remained heightened throughout 2020. During the pandemic, customers reduced trips while significantly increasing basket value. Total supermarket fuel sales decreased 32 5% in 2020, compared to 2019, primarily due to a decrease in fiel gallons sold of 17.5% and a decrease in the average retail el price of 18.2%. The decrease in fuel gallons sold was reflective of the national trend, which decreased due to the COVID-19 pandemic The decrease in the average retail fuel price was caused by a decrease in the product cost of fuel Thankinnamon 1 Clear Co (13) (1.65) 818 Adjustment for gain on sale of convenience store business) (165 Adjustment for gain on sale of Turkey Hill Dairy (13) (0.10) Adjustment for gain on sale of You Technology (13) (0.06) Adjustment for gain on investments (13) (1.05) (0.15) (0.21) Adjustment for depreciation related to held for sale assets(13) (0.01) Adjustment for severance charge and related benefits() 0.08 Adjustment for deconsolidation and impairment of Lucky's Market attributable to The Kroger 0.28 Adjustment for Home Chef contingent consideration) 0.18 (0.07) 0.03 Adjustment for impairment of financial instrument 0.04 Adjustment for transformation costs(13) 0.12 0.04 Total Adjusted Items 0.20 0.15 Net earnings attributable to The Kroger Co. per diluted common share excluding the Adjusted Items 3.47 $ 2.19 $ 2.11 Average numbers of common shares used in diluted calculation 781 805 (1) The amounts presented represent the after-tax effect of each adjustment, which was calculated using discrete tax (2) The pre-tax adjustment for pension plan withdrawal liabilities was $989 in 2020, $135 in 2019 and S155 in 2018. (3) The pre-tax adjustment for gain on sale of convenience store business was ($1,782). (4) The pre-tax adjustment for gain on sale of Turkey Hill Dairy was ($106). (5) The pre-tax adjustment for gain on sale of You Technology was (870). (6) The pre-tax adjustment for gain on investments was (S1,105) in 2020. (S157) in 2019 and ($228) in 2018. (7) The pre-tax adjustment for depreciation related to held for sale assets was (914) in 2018. (8) The pre-tax adjustment for severance charge and related benefits was $80. (9) The pre-tax adjustment for deconsolidation and impairment of Lucky's Market was $412 including $305 attributable to The Kroger Co. (10) The pre-tax adjustment for Home Chef contingent consideration was $189 in 2020. (569) in 2019 and 533 in 2018. (11) The pre-tax adjustment for impairment of financial instrument was $42. (12) The pre-tax adjustment for transformation costs was S111 in 2020 and $52 in 2019. Transformation costs primarily include costs related to store and business closures and third-party professional consulting fees associated with business transformation and cost saving initiatives. (13) The amount presented represents the net carings per diluted common share effect of each adjustment. rates. 27 RESULTS OF OPERATIONS Net Earnings per Diluted Share excluding the Adjusted Items (s in millions, except per share amounts) 2020 $ 2,585 2019 2018 $ 1.659 $ 3.110 754 104 121 (1.360) (80) (52) (119) (821) (174) 61 141 225 (49) 26 33 81 155 37 127 (1.365 Net earnings attributable to The Kroger Co. (Income) expense adjustments Adjustments for pension plan withdrawal liabilities (1) Adjustment for gain on sale of convenience store business Adjustment for gain on sale of Turkey Hill Dairy14 Adjustment for gain on sale of You Technology Adjustment for gain on investments Adjustment for depreciation related to held for sale assets Adjustment for severance charge and related benefits Adjustment for deconsolidation and impairment of Lucky's Market attributable to The Kroger Co. Adjustment for Home Chef contingent consideration Adjustment for impairment of financial instrumenti Adjustment for transformation costa Total Adjusted Items Net earnings attributable to The Kroger Co. excluding the Adjusted Items Net earnings attributable to The Kroger Co. per diluted common share Income) expense adjustments Adjustments for pension plan withdrawal liabilities Adjustment for gain on sale of convenience store business Adjustment for gain on sale of Turkey Hill Dairy Adjustment for gain on sale of You Technology Adjustment for gain on investments Adjustment for depreciation related to held for sale assets Adjustment for severance charge and related benefits Adjustment for deconsolidation and impairment of Lucky's Market attributable to The Kroger Adjustment for Home Chef contingent consideration Adjustment for impairment of financial instrument Adjustment for transformation costs Total Adjusted liens $ 2,740 S 1.786 S 1745 S 3.27 S 2.04 $ 3.76 0.95 0.13 0.15 (1.65) (0.10) (0.06) (0.15) (105) (0.21) (0.01) 0.08 Con O.IS 0.28 (0.07) 0.03 0.04 0.12 020 004 0.15 (1.65 Net earnings attributable to The Kroger Coper diluted common share excluding the Adjustad Items S 3:47 2.19 52:11 Average numbers of common share used in dilute calculation 781 805 818 (1) The amounts presented represent the after tax effect of each adjustment, which was calculated using discrete tax rates (2) The pre-tax adjustment for pension plan withdrawal liabilities was 5989 in 2020, S139 in 2019 and 5155 in 2018, (3) The pre-tax adjustment for gam on sale of convenience store business was (51,782) (d) The prelax adjustment for sin on sale of Turkey Hill Dairy was (106) 41F Clear Corpo de Port X S221 Pylor X 2021 Proxy for X Airports & StateX SAN Pylor X oads/2021%20Proxy%20for%20Flipbook.pdf 134 / 176 100% The following table provides the components of the Company's net periodic benefit costs for 2020, 2019 and 2018: Pensle Benefits Qualified Plane Nee Qualified Plans 20:30 2019 2018 2010 2019 2018 Other Resefits 2010 2019 2018 Components of niet periodic benefit co: Service cost Interest cost Expected return on plan assets Amortization of Prior service credit Actuarial (gain) loss Other Net periodic benefit cost $ 13$ 32 $ 35 $ - $ 1S 2S 7 S 6 S 7 104 124 124 10 12 12 (168) (182) (174) (13) (11) (11) 35 SS 69 5 6 (8) (12) (10) (0) (15) S 29 5 54 S 15 S 19 S 22 S (9) S (9) S (6) The following table provides the projected benefit obligation ("PRO") and the fair value of plan assets for those company-sponsored pension plans with projected benefit obligations in excess of plan assets Dalian Non Oualified Plans 2020 2019 2010 2019 PBO at end of fiscal year 53,415 53.272 S 351 328 Fair value of plan assets at end of year $ 3.349 $3.157 S $ The following table provides the accumulated benefit obligation ("ABC") and the fair value of plan assets for those company sponsored pension plans with accumulated benefit obligations in excess of plan assets Calified as Qualified as 20.30 2019 2020 2019 ABO end of fiscal year $ 3415 $3.271 S 351 $ 125 Fair value of plan assets at end S105 3.157 S 5 The following table provides information about the Company's estimated future benefit payments. 2021 2022 2023 2024 2025 2036 2030 Hei Benci S3 S11 S2315 52195 12 5321513 $2265 12 5112 41F Clear PERFORMANCE GRAPH Set forth below is a line graph comparing the five-year cumulative total shareholder return on our common shares, based on the market price of the common shares and assuming reinvestment of dividends, with the cumulative total return of companies in the Standard & Poor's 500 Stock Index and a peer group composed of food and drug companies. COMPARISON OF CUMULATIVE FIVE-YEAR TOTAL RETURN Among The Kroger Co., the S&P 500, and Peer Group** 250 200 150 100 50 0 01/30/16 01/28/17 02/03/16 02/02/19 02/01/20 01/30/21 The Kroger Co. - S&P 500 -Peer Group Base Period Company Name/Index 2015 The Kroger Co 100 S&P 500 Index 100 Peer Group 100 Kroger's fiscal year ends on the Saturday closest to January 31. 1016 82.11 120.87 98.35 INDEXED RETURNS Year Ending 2017 2018 2019 78.05 76.08 74.51 148.47 148.38 18037 12703 123.10 148.00 2020 97.75 211.48 183.16 ISSUER PURCHASES OF EQUITY SECURITIES Total Number of Approximate Dollar Shares Value of Shares Purchased as that May Yet Be Part of Publicly Purchased Under Announced the Plans or Plans or Programs Programs (in millions) Total Number of Shares Purchased Average Price Paid Per Share 4397,677 s 32.38 4,397,633 S 583 Period First four weeks November 8, 2020 to December 5, 2020 Second four weeks December 6, 2020 to January 2, 2021 Third four weeks January 3, 2021 to January 30, 2021 Total 3.788,929 $ 31.10 3.756,853 S 470 2.363.215 10,549.821 S S 32.05 31.85 2.363,215 5 10.517.701 $ 400 400 (1) The reported periods conform to our fiscal calendar composed of thirteen 28-day periods. The fourth quarter of 2020 contained three 28-day periods. (2) Includes (1) shares repurchased under the 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 (i) 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 (3) Represents shares repurchased under the September 2020 Repurchase Program and the 1999 Repurchase Program. (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 Rule 1065-1 under the Securities Exchange Act of 1934, as amended (the "September 2020 Repurchase Program). 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 opon 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. ITEM 6. SELECTED FINANCIAL DATA. The following table presents our selected consolidated financial data for each of the last five fiscal years. Fiscal Years Ended January 30, February 1, February 2, February 3, January 28, 2021 2020 2019 2018 2017 (52 weeks) (52 weeks) (52 weeks) (53 weeks) (52 weeks) (In millions, except per share amounts) Sales $ 132,498 $ 122,286 S121,852 S123,280 S 115.337 Net earnings including noncontrolling interests S 2,588 S 1,512 s 3,078 $ 1,889 $ 1,957 Net earnings attributable to The Kroger Co. S 2,585 S 1,659 S 3,110 S 1,907 S 1,975 Net earnings attributable to The Kroger Co. per diluted common share S 3.27 S 2.04 S 3.76 S 2.09 $ 2.05 Total assets $ 48,637 $ 45,256 S 38,118 S 37.197 S 36,505 Long-term liabilities, including obligations under finance leases S 23.717 $ 22.440 S 16,009 $ 16,095 Total shareholders' equity S 16.935 The Kroger Co. S 9,576 S 8,602 S 7.886 S 6,931 S 6,698 Cash dividends per common share S 0.68 S 0.60 s 0.53 S 0.49 S 0.45 Note: This information should be read in conjunction with MD&A and the Consolidated Financial Statements. Fiscal year 2016, 2018, 2019 and 2020 each include 52 weeks Fiscal year 2017 include Financial Performance Data (S in millions, except per share amounts) 2020 $ 132.498 123,012 2,585 2,740 3.27 Fical Year Percentage Change 8.4% s 13.7% 55.8 % 53.4% 60.3% 2019 122,286 108.234 1.659 1.786 2.04 3.47 2.780 4,056 534 Sales Sales without fuel Net earnings attributable to The Kroger Co. Adjusted net camnings attributable to The Kroger Co. Net earnings attributable to The Kroger Co. per diluted common share Adjusted net earnings attributable to The Kroger Co per diluted common share Operating profit Adjusted FIFO operating profit Dividends paid Dividends paid per common share identical sales excluding fuel FIFO gross margin rate, excluding fuel.bps increase (decrease) OG&A rate, excluding fuel and Adjusted Items, hps decrease Reduction in total debt, including obligations under finance leases compared to prior fiscal year end Share repurchases OVERVIEW Notable items for 2020 are: Shareholder Return 58.4 % 23.59 35.4 % 9.9% 13.3% NA NA NA 2.19 2.251 2.995 486 0.60 2.0 % (0.23) 0.29 0.68 14.1% 0.14 0.06 663 1.324 N/A N/A 1.153 465 . Net earnings attributable to The Kroger Co. per diluted common share of $3.27. Adjusted net camnings attributable to The Kroger Co. per diluted common share of S3.47 Achieved operating profit of $2.8 billion Achieved adjusted FIFO operating profit of S4.1 billion. Generated cash from operations of 56.8 billion Increased cash and temporary cash investments by ST 3 billion, reflecting improved operating performance, significant improvements in working capital and the deferral of tax payments as a result of the Coronavirus Aid. Relief, and Economic Security Act (the "CARES Act") which was enacted in the first quarter of 2020 Returned 1 billion to shareholders through share repurchases and dividend payments. . Net Earnings per Diluted Share excluding the Adjusted Items ($ in millions, except per share amounts) 2020 S 2.585 2019 S 1.659 2018 S 3.110 754 104 121 (1.360) Net earnings attributable to The Kroger Co. (Income) expense adjustments Adjustments for pension plan withdrawal liabilities! Adjustment for gain on sale of convenience store business Adjustment for gain on sale of Turkey Hill Dairy Adjustment for gain on sale of You Technology Adjustment for gain on investments Adjustment for depreciation related to held for sale assets Adjustment for severance charge and related benefits Adjustment for deconsolidation and impairment of Lucky's Market attributable to The Kroger Adjustment for Home Chef contingent consideration Adjustment for impairment of financial instrument Adjustment for transformation costs Total Adjusted Items (80) (52) (119) (821) (174) (11) 61 C..19 225 (49) 141 26 33 81 155 37 127 (1.365) Net earnings attributable to The Kroger Co, excluding the Adjusted Items $ 2.740 SIN786 SI 745 s 3.27 $ 2.04 S 3.76 0.95 0.13 0.15 (1.65 Net earnings attributable to The Kroger Coper diluted common share (Income) expense adjustments Adjustments for pension plan Withdrawal liabilities Adjustment for gain on sale of convenience store business Adjustment for gain on sale of Turkey Hill Daryo Adjustment for gain on sale of You Technology Adjustment for gain on investments Adjustment for depreciation related to held for sale isset Adjustment for severance charge and related benclits Adjustment for deconsolidation and impunment of Lucky Market attributable to The Koper Com Adjustment for Home Chief contingent consideration Adjustment for impairment of financial instrumene Achustnient for transformation cost Total Adjusted les (9.10) (0.06) (0.15 (1.05) (0.21) (0.01) 0.08 018 O.ZA 10.07) 0.03 0/04 0.13 0.20 0.014 DAS 11.65 Netvarnings attributable to The Kroger Coper diluted common share excluding the Adjusted Tems SAZ $ 2.19 SZAL! Average number of common shares used in diluted calculation 781 sos 818 (1) The amounts presented represent the after tax effect of each adjustment, which was calculated using discrete tax rites ParadismantellineseSRS 2012 Senzos rates Average numbers of common shares used in diluted calculation 781 805 818 (1) The amounts presented represent the after-tax effect of each adjustment, which was calculated using discrete tax (2) The pre-tax adjustment for pension plan withdrawal liabilities was $989 in 2020, $135 in 2019 and $155 in 2018. (3) The pre-tax adjustment for gain on sale of convenience store business was (51.782). (4) The pre-tax adjustment for gain on sale of Turkey Hill Dairy was ($106). (5) The pre-tax adjustment for gain on sale of You Technology was (870). (6) The pre-tax adjustment for gain on investments was ($1.105) in 2020. (S157) in 2019 and (228) in 2018. (7) The pre-tax adjustment for depreciation related to held for sale assets was (914) in 2018 (8) The pre-tax adjustment for severance charge and related benefits was $80. (9) The pro-tax adjustment for deconsolidation and impairment of Lucky's Market was $412 including $305 attributable to The Kroger Co. (10) The pre-tax adjustment for Home Chef contingent consideration was $189 in 2020. (569) in 2019 and 533 in 2018, (11) The pre-tax adjustment for impairment of financial instrument was $42 (12) The pre-tax adjustment for transformation costs was Sillin 2020 and 52 in 2019. Transformation costs primarily include costs related to store and business closures and third-party professional consulting fees associated with business transformation and cost saving initiatives, (13) The amount presented represents the net eamings per diluted common share effect of each adjustment. RESULTS OF OPERATIONS Sales Total Sales (s in millions) 2020 S 122,134 9.486 Total sales to retail customers without fuel) Supermarket fuel sales Convenience stores Other sales Total sales Percentage Changel 2019 13.6 % S 107,487 (32.5% 14.052 Percentage Change 2018 2.2 % $ 105,123 (5.7) 14.903 % 944 (15.3% 882 0.4 % $ 121.852 878 $ 132,498 17.5 % 747 8.4 % S 122.286 (1) This column represents the percentage change in 2020 compared to 2019. (2) This column represents the percentage change in 2019 compared to 2018. (3) Digital sales, primarily including Pickup, Delivery, Ship and pharmacy e-commerce sales, grew approximately 116% in 2020, 29% in 2019 and 58% in 2018. These sales are included in the total sales to retail customers without fuel" line above. (4) We completed the sale of our convenience store business unit during the first quarter of 2018 (5) Other sales primarily relate to external sales at food production plants, data analytic services and third-party media revenue. The increase in 2020, compared to 2019. is primarily due to growth in third-party media revenue, partially offset by decreased sales due to the disposal of Turkey Hill Dairy and You Technology in the first quarter of 2019, The decrease in 2019, compared to 2018, is primarily due to the disposal of Turkey Hill Dairy and You Technology in the first quarter of 2019.partially offset by an increase in data analytic services and third-party media revenue Total sales increased in 2020, compared to 2019, by 84%. The increase was due to an increase in total sales to retail customers without fuel, partially offset by a reduction in supermarket fuel sales and decreased sales due to the disposal of Turkey Hill Dairy and You Technology in the first quarter of 2019. Total sales to retul customers without fuel increased 13.6% in 2020, compared to 2019. The increase was primarily due to our identical sales increase excluding fuel, of 14.1%, partially offset by decreased sales due to the deconsolidation of Lucky's Market in the fourth quarter of 2019. Total sales excluding fuel and dispositions increased 14.2% in 2020 compared to 2018 The significant increase in identical sales, excluding fuel, was caused by unprecedented demand due to the COVID-19 pandemic, digital sales growth and growth in market share. Market share growth contributed to our identical sales increase excluding fuel, as our sales outpaced the general growth in the food retail industry during 2020. The increase in identical sales excluding fuel was brood based across all supermarket divisions and remained heightened throughout 2020. During the pandemic, customers reduced trips while significantly increasing basket value. Rent Expense Rent expense was $874 million, or 0.66% of sales, for 2020, compared to $884 million, or 0.72% of sales, for 2019. Rent expense, as a percentage of sales, decreased 6 basis points in 2020, compared to 2019, primarily due to the effect of increased sales due to the pandemic which decreases our rent expense, as a percentage of sales. Depreciation and Amortization Expense Depreciation and amortization expense was $2.7 billion, or 2.07% of sales, for 2020, compared to $2.6 billion, or 2.17% of sales, for 2019. Depreciation and amortization expense, as a percentage of sales, decreased 10 basis points in 2020, compared to 2019. This decrease resulted primarily from the effect of increased sales due to the pandemic which decreases our depreciation expense, as a percentage of sales, partially offset by decreased fuel sales, which increases our depreciation expense, as a percentage of sales, additional depreciation on capital investments, excluding mergers and lease buyouts, of $3.2 billion during 2020 and a decrease in the average useful life on these capital investments. Our strategy includes initiatives to enhance the customer experience in stores, improve our process efficiency and integrate our digital shopping experience through technology developments. As such, the percentage of capital investments related to digital and technology has grown compared to the prior year, which has caused a decrease in the average depreciable life of our capital portfolio Operating Profit and FIFO Operating Profit Operating profit was $2.8 billion, or 2.10% of sales, for 2020, compared to $2.3 billion, or 1.84% of sales, for 2019, Operating profit, as a percentage of sales, increased 26 basis points in 2020, compared to 2019, due to improved sales to retail customers without fuel, a higher gross margin rate, decreased rent and depreciation and amortization expenses, as a percentage of sales, and increased fuel carnings partially offset by increased OG&A expense with fuel as a percentage of sales FIFO operating profit was $2.8 billion, or 2.09% of sales for 2020, compared to $2.4 billion, or 1.93% of sales, for 2019. FIFO operating profit, exeluding the 2020 and 2019 Adjusted Items increased 64 basis points in 2020, compared to 2019. due to improved sales to retail customers without fuel, a higher gross margin rate, decreased rent und depreciation and amortization expenses, as a percentage of sales, and increased fucl earnings, partially offset by increased OG&A expense with fuel, as a percentage of sales. Specific factors contributing to the trends driving operating profit und FIFO operating profit identified above are discussed earlier in this section. Operating Profit excluding the Adjusted Items ($ in millions) Operating profit LIFO (credit) charge S 2020 2,780 (7) S 2019 2,251 105 FIFO Operating profit 2,773 2,356 989 189 Adjustment for pension plan withdrawal liabilities Adjustment for Home Chef contingent consideration Adjustment for severance charge and related benefits Adjustment for transformation costs Adjustment for deconsolidation and impairment of Lucky's Market(2) Other 135 (69) 80 52 412 29 111 (6) 2020 and 2019 Adjusted items 1.283 639 Adjusted FIFO operating profit excluding the adjustment items above 4.056 S 2.995 (1) Transformation costs primarily include costs related to store and business closures and third-party professional consulting fees associated with business transformation and cost saving initiatives (2) The adjustment for impairment of Lucky Market includes a $107 million net loss attributable to the minority interest of Lucky Market. Interest Expense Interest expense totaled S544 million in 2020 and $603 million in 2019. The decrease in interest expense in 2020, compared to 2019. resulted primarily from decreased borrowings. Over the last 12 months, we decreased total debt, including obligations under finance leases, by $663 million Income Taxes Our effective income tax rate was 23.2% in 2020 and 23.7% in 2019. The 2020 tax rata differed from the federal statutory rate primarily due to the effect of state income taxes, partially offset by the utilization of tax credits and deduction. The 2019 tax rute differed from the federal statutory note primarily due to the effect of state income taxes and Lucky Micket losses attributable to the incontrolling interest which reduced pre-tax income but did not impact TAXON Fiscal Year Ended January 30, February 1, 2021 2020 S Return on invested Capital Numerator Operating profit LIFO charge (credit) Depreciation and amortization Rent Adjustment for Home Chef contingent consideration Adjustment for pension plan withdrawal liabilities Adjustment for severance charge and related benefits Adjustment for transformation costs Adjustment for deconsolidation and impairment of Lucky's Market Adjustment for operating losses of Lucky's Market Adjustment for disposal of You Technology Adjusted ROIC operating profit 2.780 $ 2,251 (7) 105 2,747 2.649 874 884 189 (69) 989 135 80 111 S2 412 75 (49) 7.683 S 6,525 S Denominator Average total assets Average taxes receivable Average LIFO reserve Average accumulated depreciation and amortization Average trade accounts payable Average accrued salaries and wages Average other current liabilities Average liabilities held for sale Adjustment for disposal of Turkey Hill Dairy Adjustment for disposal of You Technology Adjustment for deconsolidation of Lucky Market Initial operating lease assets at adoption of ASU 2016-02. "Leases" (see Notes 10 and 18) Average invested capital Return on invested Capital $ 46,959 S41.687 (74) (41) 1,372 1.329 24.161 23,404 (6.514) (6,204) (1.291) (1.198) (4.926) (3.942) (26) (45) (13 (25) 3.-406 S 59,692 S58132 12879 1119 (1) Taxes receivable were 566 as of January 30, 2021 und 882 us of February 1, 2020. We did not have any taxes receivable as of February 2, 2019, (2) Other current liabilities included accrued income taxes of S9 as of January 30, 2021 and $60 is of February 2, 2019. We did not have any nocued income taxes as of February 1, 2020. Accrued income taxes are removed from other current liabilities in the calculation of average invested capital THE KROGER CO. CONSOLIDATED BALANCE SHEETS January 30, 2021 February 1, 2020 S 1.687 1,096 1,781 8,436 (1.373) 876 12 503 399 1.179 1,706 8,4644 (1.380) 522 10,890 (le millions, except par amounts) ASSETS Current assets Cash and temporary cash investments Store deposits in-transit Receivables FIFO inventory LIFO reserve Prepaid and other current assets Total current assets Property, plant and equipment, net Operating lease assets Intangibles, net Goodwill Other assets Total Assets LIABILITIES Current liabilities Current portion of long-term debt including obligations under finance lenses Current portion of operating lease liabilities Tradescants payable Accrued salaries and wages Other current liabilities Total current liabilities Long-term debt including obligations under finance leven Noncurrent operating lease abilities Detened income taxes Pension and postretirenin benefit obligations Other long term abilities 22.386 6,796 997 3.076 2,004 21.871 6,814 1.066 3,076 1.519 48 667 S 45.256 S 911 667 6,670 1.13 S. 15.366 1.96 597 149 1.168 4,164 14.240 12250 6,507 1542 535 2.660 12.111 6.505 1.46 GO 1.750 Total Liabilities 39.112 16.03 Commitments and contingene soe Note 13 SHAREHOLDERS' LOLITY S S 911 667 6,679 1,413 5,696 15,366 1,965 597 6,349 1.168 4,164 14,243 12.502 6,507 1.542 535 2,660 12,111 6,505 1.466 608 1.750 Current portion of long-term debt including obligations under finance leases Current portion of operating lease liabilities Trade accounts payable Accrued salaries and wages Other current liabilities Total current liabilities Long-term debt including obligations under finance leases Noncurrent operating lease liabilities Deferred income taxes Pension and postretirement benefit obligations Other long-term liabilities Total Liabilities Commitments and contingencies see Note 13 SHAREHOLDERS' EQUITY Preferred shares, $100 par per share, 5 shares authorized and unissued Common shares. Si par per shure, 2.000 shares authorized: 1.918 shares issued in 2020 and 2019 Additional paid-in capital Accumulated other comprehensive loss Accumulated camings Common shares in treasury, at cost, 1.160 shares in 2020 and 1.130 shares in 2019 Total Shareholders' Equity - The Kroger Col Noncontrolling interests Total Equity 39,112 36,683 1.918 3.461 (630) 23,018 (18,191) 1.918 3.337 (640) 20,978 (16,991) 9,576 (26) 8.602 (29) 9.850 8.373 Total Liabilities and Equity 48.662 S 457256 The accompanying notes are an integral part of the consolidated financial statements, THE KROGER CO. CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended January 30, 2021, February 1, 2020 and February 2, 2019 (In millions, except per share amounts) Sales 2020 (52 weeks) $ 132,498 2019 (52 weeks) $ 122,286 2018 (52 weeks) $ 121,852 Operating expenses Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below Operating, general and administrative Rent Depreciation and amortization 101,597 24,500 874 2,747 95,294 21,208 884 2,649 95,103 20,786 884 2,465 Operating profit 2,780 2.251 2.614 (603) Other income (expense) Interest expense Non-service component of company-sponsored pension plan costs Gain on investments Gain on sale of businesses Net earnings before income tax expense (544) 29 1,105 157 176 (620) (26) 228 1.782 3,370 1,981 3.978 Income tax expense 782 469 900 2.588 3 1512 (142) 3,078 (32) Net earnings including noncontrolling interest Net income (loss) attributable to noncontrolling interests Net earnings attributable to The Kroger Co. 24585 1.659 S 3.110 Net earnings attributable to The Kroger Co per basic common share 331 2.05 $ 3.80 Average number of common shares used in basic calculation 773 709 810 Net carnings attributable to The Kroger Co per diluted common share 3.27 2.04 S 3.76 Average number of common shares used in diluted calculation 781 805 818 The accompanying notes are an integral part of the consolidated financial statements THE KROGER CO. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years Ended January 30, 2021, February 1, 2020 and February 2, 2019 2020 (52 weeks) $ 2,588 2019 2018 (52 weeks) (52 weeks) $ 1.512 $ 3,078 (In millions) Net earnings including noncontrolling interests Other comprehensive income (loss) Realized gains on available for sale securities, net of income tax Change in pension and other postretirement defined benefit plans, net of income Unrealized gains and losses on cash flow hedging activities, net of income tax!! Amortization of unrealized gains and losses on cash flow hedging activities, net of income tax Cumulative effect of accounting change? Total other comprehensive income (loss) tax (2) 147 22 (14) (105) (47) (23) 2 4 (146) 10 (294) 125 Comprehensive income Comprehensive income (loss) attributable to noncontrolling interests Comprehensive income attributable to The Kroger Co. 2598 3 $24595 1.218 (147) S 365 3,203 (32) S 3,235 (1) Amount is net of tax benelito (SI) in 2018. (2) Amount is net of tax expense (benefit) of S7 in 2020. (533) in 2019 and $45 in 2018, (3) Amount is not of tax benefit of (58) in 2020. (517) in 2019 and (58) in 2018. (4) Amount is net of tax expense of S2 in 2020, 53 in 2019 and 3 in 2018. (5) Related to the adoption of Accounting Standards Update ("ASU) 2018-02. Income Statement Reporting Comprehensive Income (Topic 220): Roclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. (See Note 18 for additional details). The accompanying notes are an integral part of the consolidated financial statements, THE KROGER CO. CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended January 30, 2021, February 1, 2020 and February 2, 2019 2020 (52 weeks) 2019 (52 weeks) 2018 (52 weeks) $ 2.588 5 1312 $ 3,07% 2.465 56 2,747 70 626 (7) TRS (19) 73 (La millions) Cash Flows from Operating Activities Net earnings including noncontrolling interests Adjustments to reconcile net earnings including noncontrolling interests to net cash provided by operating activities Depreciation and mortization Asset impairment charges Operating lease asset amortization LIFO (cedit) change Stock-based emplovee compensation Expense (credit) for company sponsored pension plans Deferred income taxes Gain on sale of businesses (Gain) loss on the sale of assets Gain on investments Low on deconsolidation and impairment of Lucky Market Other Changes in operating assets and liabilities set of effects from mergers and disposals of businesses Store deposits in tamil Receivables Inventories Prepaid and other current Trade accounts payable Aconied expenses Income taxes receivable and able Contribution to company pod plan Operating lean ibilities Proceeds from contacted with sale of hosios Odie 1.649 120 6-40 105 155 39 (56) (176) (158) (157) 412 (109) 29 154 76 (45) (1.782) (59) (1.105) 165 SN NU (0) 7 (342) 130 12 24 3 (36) (351) (33) 3. 102 (1423 (20) (20) (154) 244 203 416 284 (IRST (532 (39) 295 (53) w 1994 Net cash provided by activities ABS 664 4,160 Q. 165 (2.067 1.18 273 Cail Fw from investing Activities Payments for perty and including pay for use buvous Proceeds from Proceeds sentement of financial instrument Payment for the Purchases of stones Net pred troma of businesses Purchase of a cartier Other 31 (197) (44 2.1 (192) IS (014) (3) Natched by investing activities 0214 2.60 ILIA Cash Flows from ing Active Proceeds from cance of long con Payments or debidobligations de final Neem conciler Dividend paid Proceeds lance of plastock Tryck Other 1019 (147 150 138) 12 (1224) (134) (2.4) 350 (46) SS (ANS (46) 33116 1:72 (1.121 (637) 65 12.010) Neto by G 2303 2963 123 / 176 100% Coninbution to company sponsored pension plan Operating lease liabilities Proceeds from contract associated with sale of business Other (123) (552) (639) 295 699 (94) Net cash provided by operating activities 6,815 4,664 4,164 (2.865) 165 (3,128) 273 Cash Flows from Investing Activities Payments for property and equipment, including payments for lease buyouts Proceeds from sale of assets Proceeds on settlement of financial instrument Payments for acquisitions, net of cash acquired Purchases of stores Net proceeds from sale of businesses Purchases of Oesde securities Other (2.967 85 235 (197) (44) 2.169 (392) 327 (114) (83) 225 Netcash used by investing activities (2.814) 2,611 (1186 Cash Flows from Financing Activities: Proceeds from suance of long term debt Payments on long-term debt includmg obligations under finance la Net procede payments) on commercial paper Dividends paid Proceeds from issance of capital stock The stock purchase Other 1.019 (147) (1.150) (534) 127 1.324) (11) 813 (2.304) 350 (486) 55 (465) (46) 2,236 (1.372) (1.321) (437) 65 (2010) (52) Net cached by financing activities 12,00) 96 Net increase (decrease in cash and temporary 1.288 (30) Cuand empowych investment Begioning of your Enduro 199 62 S 199 362 419 $ Reconciliation of capitales Payments for property and equipment including ment for the Payments for use by Chain contre les Totaleptal invece, exciding a boy 5 (2.865 5 (128) S 02.967 S. S3044 SO S 2018 Down Capaid during the years Cal puid during the force 564 659 S 522 700 S $ 614 600 The accompanying notes are an integral part of the consolidated financial statements THE KROGER CO. HOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY d Fhuary 2, 2019 Semulated Other C Stock Tror Stock Compree Amm Income ilon) 191 53.161 10 $ 14,684) (471) Accumulated Earnings $ 17.007 Noncontrolling Interest (26) Total $6,905 (4) 3 63 74 65 (45) 119 76 183) 154 125 (1.927) (83) 154 125 (1) (436) 3,078 49 157) (436) 3110 . 19 53.245 2.120 (16,612) 3-46 $ 19,681 s S7835 55 (3) 3) SS (36) 400 CES) 155 (294) (400) (65) 155 294 146 168 146 BELI BITI BIL 168 169 (5) (503) 1.659 (503) 1.512 (147) 1.9 1918 2337 LIJO (16,991) (640) S 20.97% S (29) $8,573 123 127 71 3) 127 (63) (1.196 6128 11 T! |||| 33 14 0.196) (128) 185 10 (1) (545) 2.588 (545) 2,585 16301 1960 (18191) accompanying notes are an integral part of the consolidated financial statements $ 23,01 $9.550 THE KROGER CO. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOL Years Ended January 30, 2021. February 1, 2020 and February 2, 2019 Common Stock Share Amount $ 1,918 Additional Paid-In Capital S 3,161 Treasury Stock Shares And 1,048 S (l 1.918 (4) (3) (119) 76 TILL 154 49 1918 $ 1.918 $3,245 1.120 S (le (128) (3) (3) 14 is mistershments Balance at February 2018 Istance of cock Stock options cerised Restricted to issued Treasury Miskati Try stock purchases atcest Slock options exchanged Share based employee compensation Other comprehensive incomend of tax of 539 Other Cash dividends declared 50 SES per common share) Neaming (including non-controlling interests Balances at February 2, 2019 Issuance of common sock Stock options Sd Restricted stocked Treasy stock activity: Tasty stock purchases, a cost Sheck options echangat Sluce-based employee compensation Odier comprehensive loss net oftass of 547) Camulative effect of accounting changese note 18) Decomalidation of Lucky Market Other Cash dividend declared 50.62 per comeno shure) Net caminston) induding on controlling interests Balance at February 1, 2020 Issuance of common sock Suck options.id Restricted stocki Treasury stock activity Treasury stock purchase a cost Sleek options exchanged Slure-based employee compensation Other comprehensive income net of tax of SE Other Case dividend declared S070 par common shine) Net numisscluding mencobolling interests Balances at January 20 2021 155 65 1,918 s 1918 s 3,337 1.130 S (16 (7) (3) (134) 36 (1, | 185 UTILE 73 1918 1,918 $ 3,461 1,160 $ (18) The accompanying notes are an integral part of the consolidated financ Disaggregated Revenues The following table presents sales revenue by type of product for the year-ended January 30, 2021, February 1, 2020, and February 2, 2019: 2020 2019 2018 Amount % of total Amount % of total Amount % of total Non Perishable $ 71,434 53.9 % S 61,464 50.3 % S 60,649 49.8 % Fresh 33.449 25.2 % 29,452 24.1 % 29,089 23.9% Supermarket Fuel 9.486 7.2 % 14,052 11.5% 14.903 12.2 % Pharmacy 11,388 8.6 % 11,015 9.0 % 10,617 8.7 % Convenience Stores 96 % 944 0.8 % Other 6,741 5.1 % 6,303 5.1 % 5.650 4.6% Total Sales $ 132,498 100% S122 286 100% $ 121.852 100 % (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) The Company completed the sale of its convenience store business unit during the first quarter of 2018 (4) Consists primarily of sales related to food production plants to outside parties, data analytic services, third-party media revenue, other consolidated entities, specialty pharmacy, in-store health clinics, digital coupon services and other online sales not included in the categories above Advertising Costs The Company's advertising costs are recognized in the periods the related expenses are incurred and are included in the "Merchandise costs" line item of the Consolidated Statements of Operations. The Company's advertising costs totaled $888 in 2020, $854 in 2019 and S752 in 2018. The Company does not record vendor allowances for co-operative advertising as a reduction of advertising expense. Operating, General and Administrative Expenses OG&A expenses consist primarily of employce-related costs such as wages, healthcare benefit costs, retirement plan costs, utilities, and credit card fees. 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. Rent expense, depreciation and amortization expense and interest expense are shown separately in the Consolidated Statement of Operations. Consolidated Statements of Cash Flows For purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be temporary cash investments Segments The Company operates supermarkets and multi-department stores throughout the United States. The Company's retail operations, which represent 97% of the Company's consolidated sales are its only reportable segment. The Company aggregated its operating divisions into one reportable segment due to the operating divisions having similar economic characteristics with similar long-term financial performance. In addition, the Company's operating divisions offer customers similar products, have similar distribution methods, operate in similar regulatory environments, purchase the majority of the merchandise for retail sale from similar and in many cases identical) vendors on a coordinated basis from a centralized location, serve similar types of customers, and are allocated capital from a centralized location Operating divisions are organized primarily on a geographical basis so that the operating division management team can be responsive to local needs of the operating division and can execute company strategic plans and initiatives throughout the locations in their operating division. This geographical separation is the primary differentiation between these retail operating divisions. The geographical basis of organization reflects how the business is managed and how the Company's Chief Executive Officer, who acts as the Company's chief operating decision maker, assesses performance internally. All of the Company's operations are domestic 3. GOODWILL AND INTANGIBLE ASSETS The following table summarizes the changes in the Company's net goodwill balance through January 30, 2021. 2020 2019 Balance beginning of year Goodwill Accumulated impairment losses Subtotal $ 5.737 $ 5.729 (2,661) (2.642) 3,076 3,087 Activity during the year Mergers Impairment losses (19) Balance end of year Goodwill Accumulated impairment losses Total Goodwill 5.737 5.737 (2.661) (2.661) $ 3,076 S 3,076 In 2019, the Company finalized the purchase accounting for the Home Chef acquisition resulting in an increase of goodwill and deferred taxes of S8. The Company also recorded an impairment charge of $19 as a result of the Lucky's Market impairment Testing for impairment must be performed annually, or on an interim basis upon the occurrence of a triggering event or a change in circumstances that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The annual evaluation of goodwill and indefinite-lived intangible assets was performed during the fourth quarter of 2020, 2019 and 2018 and did not result in impairment. The following table summarizes the Company's intangible assets balance through January 30, 2021 2020 Gross Hm Definite-lived pharmacy prescription files Definite-lived customer relationships Definite-lived other Indefinite lived trade name Indefinite-lived liquor licenses Cross carrying Necunilates mount martiration 315 (167) 186 (143) 110 (78) 685 89 2019 Accumulated amortization 320 (133) 180 (120) 100 (68) 685 90 Total 1.1855 (388) S 1,387 S (321 (0) Pharmacy prescription files are mortized to merchandise cost customer relationships are amortized to Amortization expense associated with intangible assets totaled approximately $67, 885 and $80, during fiscal years 2020, 2019 and 2018, respectively. Future amortization expense associated with the net carrying amount of definite- lived intangible assets for the years subsequent to 2020 is estimated to be approximately: 2021 2022 2023 2024 2025 Thereafter 58 51 38 34 30 12 Total future estimated amortization associated with definite-lived intangible assets S 223 4. PROPERTY, PLANT AND EQUIPMENT.NET Property, plant and equipment, net consists of Land Buildings and land improvements Equipment Leasehold improvements Construction-in-progress Leased property under finance cases 2020 2019 $ 3.373 $ 3.299 13,149 12.353 14.928 15.031 10,516 10,832 2,892 3,166 1.163 966 Total property, plant and equipment 16.020 45.847 Accumulated depreciation and amortization (23,617) (23,976 Property, plant and equipment, net 512386 $21,871 Accumulated depreciation and amortization for leased property under finance leases was $121 at Jingary 30, 2021 und S276 at Fcbruary 1.2020 Approximately $152 and Sie net book value of property, plant and equipment collaterali cortin mortgages at January 30,2021 and February 1, 2020. respectively, 5. TAXES BASED ON INCOME The provision for taxes based on income consists of: 2020 2019 2018 Federal Current Deferred $ 577 $ 454 $ 775 75 (50) (3) Subtotal federal 652 404 772 State and local Current Deferred 133 (3) 70 (5) 108 20 Subtotal state and local 130 63 128 Total $ 782 S 469 S 469 S 900 A reconciliation of the statutory federal rate and the effective rate follows: Statutory rate State income taxes, net of federal tax benefit Credits Resolution of issues Excess tax benefits from shard-based payments Impairment losses attributable to noncontrolling interest Other changes het 2020 2019 21.096 21,0% 21.0% 3.0 226 2.6 (0.7) (115) (1.3) (0.1) 0.5 (0.8 (0.2) (0.3) 1.2 0.7 0.2 0.1 23.2% 23.7.14 22.6 The 2020 in 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 2019 tax rate differed from the federal statutory rate primarily due to the effect of state income taxes and Lucky Market losses attributable to the noncontrolling interest which reduced pre-tax income but did not impact tax expense The tax effects of significant temporary differences that comprise tax balances were as follows: 2020 2019 $ Deferred tax assets: Compensation related costs Lease liabilities Closed store reserves Net operating loss and credit carry forwards Deferred income Allowance for uncollectible receivables Other 766 $ 1.932 38 86 149 23 46 406 1,872 55 100 172 93 Subtotal Valuation allowance 3,040 (53) 2,698 (55) Total deferred tax assets 2,987 2.643 (2,115) (1.794) Deferred tax liabilities: Depreciation and amortization Operating lease assets Insurance related costs Inventory related costs Equity investments in excess of tax basis Other (264) (356) (1.942) (1.782) (28) (252) (94) (11) Total deferred tax liabilities (4.529) 4.109) Deferred taxes SC_542) $11.466) At January 30, 2021, the Company had net operating loss carry forwards for state income tax purposes of $1.081. hese net operating loss carryforwards expire from 2021 through 2040. The utilization of certain of the Company's state toperating loss carryforwards may be limited in a given year. Further, based on the analysis described below, the ompany has recorded a valuation allowance against some of the deferred tax assets resulting from its state net perating losses At January 30, 2021, the Company had state credit carryforwards of $38, most of which expire from 2021 through As of January 30, 2021. February 1, 2020 and February 2, 2019 the amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $85, 874 and $72 respectively. To the extent interest and penalties (recoveries) would be assessed by taxing authorities on any underpayment of income tax, such amounts have been accrued and classified as a component of income tax expense. During the years ended January 30, 2021, February 1, 2020 and February 2, 2019, the Company recognized approximately $7. $7 and $2. respectively, in interest and penalties (recoveries). The Company had accrued approximately $38, $30 and $30 for the payment of interest and penalties as of January 30, 2021. February 1, 2020 and February 2, 2019, As of January 30, 2021, the Intemal Revenue Service had concluded its examination of all federal tax returns up to and including the return for the year ended January 30, 2016. 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 S622. Of the total, 311 is included in "Other current liabilities and 5311 is included in "Other long-term liabilities in the Company's Consolidated Balance Sheets DEBT OBLIGATIONS 6. Long-term debt consists of: January 30 2021 $ 11,899 1.70% to 8.00% Sensor Notes due through 2049 177 Commercial paper borrowings Other Fehr 2020 S 11.598 1.1 SO SOS 511 Total debt, excluding obligations under finance leases Les current portion 12.410 (844) 13,256 (1.926 Total long-term debt, excluding obligations under finance leases S 11.566 S 11.330 The aggregate annual maturities and scheduled payments of long-term debt, as of year-end 2020, and for the years subsequent to 2020 are: S 2021 2022 2023 2024 2025 Thereafter 844 894 617 494 575 8,986 Total debt $ 12.410 7. DERIVATIVE FINANCIAL INSTRUMENTS GAAP requires that derivatives be carried at fair value on the balance sheet and provides for hedge accounting when certain conditions are met. The Company's derivative financial instruments are recognized on the balance sheet at fair value. Changes in the fair value of derivative instruments designated as "cash flow" hedges, to the extent the hedges are highly effective, are recorded in other comprehensive income, net of tax effects. Ineffective portions of cash flow hedges, if any, are recognized in current period earnings. Other comprehensive income or loss is reclassified into current period earnings when the hedged transaction affects earnings. Changes in the fair value of derivative instruments designated as "fair value hedges, along with corresponding changes in the fair values of the hedged assets or liabilities are recorded in current period carings. Ineffective portions of fair value hedges, if any, are recognized in current period camnings The Company assesses, both at the inception of the hedge and on an ongoing basis, whether derivatives used as hedging instruments are highly effective in offsetting the changes in the fair value or cash flow of the hedged items. If it is determined that a derivative is not highly effective as a hedge or ceases to be highly effective, the Company discontinues hedge accounting prospectively Interest Rate Risk Management The Company is exposed to market risk from fluctuations in interest rates. The Company manages its exposure to interest rate fluctuations through the use of a commercial paper program, interest rate swaps (fair valuc hedges) and forward-starting interest rate swaps (cash flow hedges). The Company's current program relative to interest rate protection contemplates hedging the exposure to changes in the fair value of