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? Shareholder Return . Net camnings attributable to The Kroger Co. per diluted common share of $3.27. . Adjusted net earnings attributable to The Kroger Co. per diluted common share of $3.47. . Achieved operating profit of $2.8 billion. . . . Achieved adjusted FIFO operating profit of $4.1 billion. Generated cash from operations of $6.8 billion. Increased cash and temporary cash investments by S1.3 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 $1.9 billion to shareholders through share repurchases and dividend payments. Decreased total debt, including obligations under finance cases, by $663 million Other Financial Results Identical sales, excluding fuel, increased 14.1% in 2020. Digital revenue grew 116% in 2020. Digital revenue primarily includes Pickup. Delivery, Ship and pharmacy c- . . commerce sales Alternative profit streams contributed an incremental S150 million of operating profit in 2020 fueled by our retail media business - Kroger Precision Marketing, 22 Cost savings for 2020 exceeded S1 billion Significani s 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 2018 (52 weeks) (52 weeks) S 122,286 S 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 2.614 (620) (26) 228 1,782 3.978 409 900 Opernting profit 2.780 2.251 Other income (expense) Interest expense (544) (603) Non-service component of company sponsored pension plan costs 29 Gain on investments 1.105 157 Gain on sale of businesses 176 Net earnings before income tax expense 3,370 1.981 Income tax expense Net earnings mcluding noncontrolling interests 2,588 1.512 Net income (loss) attributable to noncontrolling interests (147 Net earnings attributable to The Kroger Co. 2.585 S 1659 Net carnings attributable to The Kroyer Co. por basic common share 331 S 2.05 Average number of common shares used in basic calculation 799 Net carnings attributable to The Kroger Coper diluted common share 5 3.275 -2.04 S Average number of common shures used in diluted calculation 781 805 The accompanying notes are an integral part of the consolidated financial statements 3,078 182) 3.110 S 3.80 773 810 3.76 818 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 152 weeks $ 1.512 $ 3,078 (4) 22 (105) (47) 147 (23) (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 tax 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 chanel Total other comprehensive income (loss) Comprehensive income Comprehensive income (loss) attributable to noncontrolling interests Comprehensive income attributable to The Kroger Co. 2 5 (146) 10 (294) 125 2.598 1.218 (147) $ 1.365 3,203 (32) $3235 S 2.595 (1) Amount is net of tax benefit of (sl) in 2018. (2) Amount is niet of tax expense (benefit of S7 in 2020. (533) in 2019 and 45 in 2018 ) Amount is niet of tax benefit of (58) in 2020. (17) in 2019 and (58) in 2018 (4) Amount is net of tax expense of S2 in 2020, S3 in 2019 and $3 in 2018 (5) Related to the adoption of Accounting Standards Update ("ASU) 2018-02, "comic Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certun Tax Effects from Accumulated Other Comprehensive Income. (See Note 18 for additional details) The accompanying notes are un integral part of the consolidated financial statements 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 % $ 61,464 50.3 % $ 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 % %% 944 0.8% Other 6,741 5.1 % 6,303 5.1 % 5,650 4.696 Total Sales S 132.498 100% $ 122,286 100% S121.852 100% (1) Consists primarily of grocery, general merchandise, health and beauty care and natural foods. (2) Consists primarily of produce, floral, meat, scafood, 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 healthy 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 8888 in 2020, 8854 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 Administrarive Expenses OG&A expenses consist primarily of employce-related costs such as wages, healthcare benefit costs, retirement plan costs, utilities, and credit card fces. 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 5. DEBT OBLIGATIONS Long-term debt consists of: 1.70% to 8.00% Senior Notes due through 2049 1.77% Commercial paper borrowings Other January 30, February 1, 2021 2020 S 11,899 S 11,598 1,150 511 508 Total debt, excluding obligations under finance lenses Less current portion 12.410 (844) 13,256 (1.926 Total long-term debt, excluding obligations under finance leases $11.566 S 11.330 9. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following table represents the changes in AOCI by component for the years ended January 30, 2021 and February 1, 2020 Total s S 33 Pension and Cash Flow Portretirement Hedging Defined Benefit Activities Plans Balance at February 2, 2019 6 (352) S (346) Cumulative effect of accounting changel (5) (141) (146) OCI before reclassifications (47) (134) (181) Amounts reclassified out of AOCT") 4 29 Net current-period OCI (48) (246) (294) Balance at February 1, 2020 (42 S (598) s (640) Balance at February 1, 2020 (42) (598) (640) OCI before reclassifications (14) (6) Amounts reclassified out of AOC Net current-period OCI (12) 22 Balance at January 30, 2021 1576) (1) All amounts are net of tax. 2) Related to the adoption of ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," (sce Note 18 for additional details) (3) Net of tax of ($17) and (542) for cash flow hedging activities and pension and postretirement defined benefit plans, respectively, as of February 1.2020. Net of tax of (88) and $2 for cash flow hedging activities and pension and postretirement defined benefit plans, respectively, as of January 30, 2021 (4) Net of tax of S9 and 3 for pension and postretirement defined benefit plans and cash flow hedging activities, respectively, ns of February 1, 2020. Net of tax of s5 and 2 for pension and postretirement defined benefit plans and cash flow hedging activities. respectively, as of January 30, 2021 8 14 2 16 10 (630) (54) S Amounts recognized in AOCI as of January 30, 2021 and February 1, 2020 consists of the following (pre-tax): Net actuarial loss (gain) Prior service credit Pension Benefits Other Benefits Total 2020 2019 2020 2019 2020 2019 $951 $955 S (147) S (109) $ 804 $ 846 (55) (68) (55) (68) 2019 (32) Total S 951 S955 S (202) S(177) S 749 S 778 Other changes recognized in other comprehensive income (loss) in 2020, 2019 and 2018 were as follows (pre-tax): Pension Benefits Other Benefits Total 2020 2019 2018 2020 2019 2018 2020 2018 incurred net actuarial loss (gain) S 36 $ 179 S(126) S (46) S 9 S (TO) S (10) S 188 S (136) Amortization of prior service credit 13 11 11 13 11 11 Amortization of net actuarial gain (loss) (40) (61) (77) 8 12 10 (49) (67) Other (1) (12) (13) Total recognized in other comprehensive income (loss) S (4) SH12 S (203) S (25) S 20 S 11 S (29) $ 137 S (192) Total recognized in net periodic benefit cost and other comprehensive income (loss) S (4) $165 $127) S (34) S II S. (38) $ 176. S.(122) Information with respect to change in benefit obligation, change in plan assets, the funded status of the plans recorded in the Consolidated Balance Sheets, net amounts recognized at the end of fiscal years, weighted average assumptions and components of net periodic benefit cost follow: Pension Benefits Qualified Plans Non-Oualified Pan 2020 2019 2020 2019 Other Henefits 2020 2019 $ 3,518 $ 2,994 S 328 13 32 104 124 10 Change in benefit obligation: Benefit obligation at beginning of fiscal year Service cost Interest cost Plan participants contributions Actuarial (gain) loss Plan settlements Benefits paid Other Benefit obligation at end of fiscal year S 298 S 198 S 200 7 6 12 6 8 12 13 41 (47) 545 35 175 (16) (17) (8) (180) 3 (241) (21 (1) 20 (3) (26) (12) S 1,615 S3,518 351 S 328 S 152 S 198 Change in plan assets 20 Clan Information with respect to change in benefit obligation, change in plan assets, the funded status of the plans recorded in the Consolidated Balance Sheets, net amounts recognized at the end of fiscal years, weighted average assumptions and components of net periodic benefit cost follow: Pension Benefits Qualified Plans Non-Qualified Plans 2020 2019 2020 2019 Other Benefits 2020 2019 $ 3,518 S 2,994 S 328 13 32 104 124 10 Change in benefit obligation: Benefit obligation at beginning of fiscal year Service cost Interest cost Plan participants' contributions Actuarial (gain) loss Plan settlements Benefits paid Other S 298 S 198 1 7 12 6 12 41 (47) $ 200 6 8 13 9 545 35 175 (16) (171) (8) (180) 3 (24) (21) (1) (21) (3) (26) (12) Benefit obligation at end of fiscal year $ 3.615 S 3.518 S 351 $ 328 S 152 S 198 S S $ 3,422 S 3.010 S 342 590 s 21 21 12 12 13 13 (16) Change in plan assets: Fair value of plan assets at beginning of fiscal year Actual retum on plan assets Employer contributions Plan participants' contributions Plan settlements Benefits pand Other Fair value of plun assets at end of fiscal year Funded status and net asset and liability recognized at end of fiscal year (180) (21) (21) (24) (171) (8) (26) $ 3.569 53.422 $ S S $ (46) S1 (96) S (351) S (328) S(152) S1198) Changes in options outstanding under the stock option plans are summarized below: Shares subject to option (in millions) 36.7 $ 2.7 $ (4.4) S (0.9) $ Weighted- average exercise price 22.23 27.88 15.34 28.05 $ A Outstanding. year-end 2017 Granted Exercised Canceled or Expired Outstanding, year-end 2018 Granted Exercised Canceled or Expired Outstanding, year-end 2019 Granted Exercised Canceled or Expired Outstanding, year-end 2020 34.1 3.1 S (4.0) S (1.0) $ 23.42 24.63 14.17 28.87 32.2 S 2.9 $ (7.3) S (1.0) $ 24.52 29.31 17.72 30.53 26.8 S 26,65 A summary of options outstanding, exercisable and expected to vest at January 30, 2021 follows: Weighted average remaining Weighted average contractual life exercise price (in years) 5.43 S 26.63 4.34 S 26.42 7.82S 27.16 Number of shares (in millions) 26.8 18.5 8.2 Aggregate intrinsic value (in millions) 231 168 62 Options Outstanding Options Exercisable Options Expected to Vest Restricted stock Changes in restricted stock outstanding under the restricted stock plans are summarized below: Outstanding, year-end 2017 Granted Lapsed Canceled or Expired Restricted shares Weighted average outstanding grant-date (in millions) fair value 9.2 S 26.78 4.6 $ 27.99 (4.4) S 25.93 (0.6) $ 26.57 Outstanding, year-end 2018 Granted Lapsed Canceled or Expired 8.8 $ 5.4 S (4.1) S (0.8) S 27.86 22.72 28.07 25.68 Outstanding, year-end 2019 Granted Lapsed Canceled or Expired Outstanding, year-end 2020 9.3 S 4.0 $ (4.9) $ (0.6) S 24.85 31.99 24.69 26.71 7.8 S 28.46 11. EARNINGS PER COMMON SHARE Net earnings attributable to The Kroger Co. per basic common share equals net earnings attributable to The Kroger Co. less income allocated to participating securities divided by the weighted average number of common shares outstanding. Net earnings attributable to The Kroger Co per diluted common share equals net earnings attributable to The Kroger Co. less income allocated to participating securities divided by the weighted average number of common shares outstanding, after giving effect to dilutive stock options. The following table provides a reconciliation of net earnings attributable to The Kroger Co. and shares used in calculating net earnings attributable to The Kroger Co. per basic common share to those used in calculating net earnings attributable to The Kroger Co. per diluted common share: For the year added January 30, 2021 Earnings Shares Numerator Demir 2.36 773 For the year ended Yhtruary 1, 2070 Per Share Earning Shares Am (Numerator laminata) 335 1.540 For the year ended February 2, 2019 Per Per Shar Kaip Shares Share Amat Numrator) Denominator A 2015 1053 07 in millions where mos) Netcar The Keper hannare Dilutive cfect of stock options Nereaming itable to The Kroger Coper deshare 2.556 7315 3.275 160 OS 5 2045 3,076 NIES 2.76 The Company had combined undistributed and distributed carnings to participating securities totaling $29, S19 and $34 in 2020, 2019 and 2018, respectively. The Company had stock options outstanding for approximately 9.1 million, 18.4 million and 10.1 million shares, respectively, for the years ended January 30, 2021. February 1, 2020, and February 2, 2019, which were excluded from the computations of net earnings per diluted common share because their inclusion would have had an anti-dilutive effect on net earnings per diluted share Maturities of operating and finance lease liabilities are listed below. Amounts in the table include options to extend lease terms that are reasonably certain of being exercised. Operating Finance Leases Lenses Total 2021 947 s 109 $ 1,056 2022 865 97 962 2023 790 95 2024 717 93 810 2025 92 745 Thereafter 6,260 935 7,195 Total lease payments 10.232 1,421 $ 11.653 885 653 3,058 418 Less amount representing interest Present value of lease liabilities S 7.174 1.003 (1) Includes the current portion of $667 for operating leases and $67 for finance lenses. Total future minimum rentals under non-cancellable subleases at January 30, 2021 were $261. The following table provides the weighted-average lease term and discount rate for operating and finance leases January 30, 2021 February 1, 2020 15.3 16.2 16.0 15.3 Weighted average remaining lease term (years) Operating leases Finance leases Weighted average discount rate Operating leases Finance leases 4.2 % 4.4% 4.3% 5.4% The following table provides supplemental balance sheet classification information related to leases: January 30, 2021 February 1. 2020 Classification Assets Operating Finance Operating lease assets Property, plant and equipment, net 6,796 $ 844 6,814 690 7.640 7.504 Total leased assets Liabilities Current Operating 667 597 Current portion of operating lease liabilities Current portion of long-term debt including obligations under finance leases Finance 67 39 Noncurrent Operating Finance Noncurrent operating lease liabilities Long-term debt including obligations under finance leases 6,507 936 6,505 781 Total lense liabilities s 8,177 S 7.922 (1) Finance lease assets are recorded net of accumulated amortization of $321 and S276 as of January 30, 2021 and February 1, 2020 The following table provides the components of lease cost: Classification Rent Expense Rent Expense Year-to-Date January 30, 2021 981 (107) Year To-Date February 1, 2020 1.000 (116 Leane Cost Operating lease cose Sublease and other rental income Finance lease cost Amortization of leased assets Interest on lease liabilities Depreciation and Amortization Interest Expense 55 45 53 48 Not lense cost 974 983 The following table represents the items reclassified out of AOCI and the related tax effects for the years ended January 30, 2021, February 1, 2020 and February 2, 2019: $ 8 4 For the year ended For the year ended For the year ended January 30, 2021 February 1, 2020 February 2, 2019 Cash flow hedging activity items Amortization of gains and losses on cash flow hedging activities) 4 S 7 S Tax expense (2) (3) (3) Net of tax 2 $ Pension and postretirement defined benefit plan items Amortization of amounts included in net periodic pension cost(2) 19 38 56 Tax expense (5) (9) (13) Net of tax 14 29 43 Total reclassifications, net of tax S 16 S 33 $ 48 (1) Reclassified from AOCI into interest expense. (2) Reclassified from AOCI into non-service component of company sponsored pension plan costs. These components are included in the computation of net periodic pension expense. 9. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following table represents the changes in AOCI by component for the years ended January 30, 2021 and February 1, 2020 Pension and Cash Flow Postretirement Hedging Defined Benefit Activities Balance at February 2, 2019 Plans Total 6 s Cumulative effect of accounting changel? (352) $ (346) (5) (141) OCI before reclassifications) (146) (47) (134) (181) Amounts reclassified out of AOC 4 29 33 Net current-period OCI (48) (246) Balance at February 1, 2020 (294) (42) S (598) S (640) Balance at February 1, 2020 (42) S (598) S (640) OCI before reclassifications (14) 8 (6) Amounts reclassified out of AOCH 2 14 16 Net current period OCI (12) 22 10 Balance at January 30, 2021 (54) S (576) S (630) (1) All amounts are net of tax. (2) Related to the adoption of ASU 2018-02. "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." (see Note 18 for additional details) (3) Net of tax of ($17) and (542) for cash flow hedging activities and pension and postretirement defined benefit plans, respectively, as of February 1, 2020. Net of tax of (88) and 2 for cash flow hedging activities and pension and postretirement defined benefit plans, respectively, as of January 30, 2021 (4) Net of tax of S9 and 3 for pension and postretirement defined benefit plans and cash flow hedging activities, respectively, as of February 1, 2020. Net of tax of $5 and S2 for pension and postretirement benefit plans and cash flow hedging activities, respectively, as of January 30, 2021 The equity investment in Ocado is measured at fair value through net earnings. The fair value of all shares owned, which is measured using Level 1 inputs, was $1,808 and $776 as of January 30, 2021 and February 1, 2020, respectively, and is included in "Other assets" in the Company's Consolidated Balance Sheets. The unrealized gain for this level 1 investment was approximately $1,032 and Si 57 for 2020 and 2019, respectively, and is included in "Gain on investments" in the Company's Consolidated Statements of Operations. The Company held other equity investments without a readily determinable fair value. These investments are measured initially at cost and remeasured for observable price changes to fair value through net camnings. The value of these investments, which were measured using Level 3 inputs, was $160 and $41 at January 30, 2021 and February 1, 2020, respectively, and is included in "Other assets" in the Company's Consolidated Balance Sheets. The unrealized gain for these level 3 investments was approximately $73 for 2020 and is included in "Gain on investments in the Company's Consolidated Statements of Operations. Fair value measurements of non-financial assets and non-financial liabilities are primarily used in the impairment analysis of goodwill , other intangible assets, long-lived assets and in the valuation of store lease exit costs. The Company reviews goodwill and indefinite-lived intangible assets for impairment annually, during the fourth quarter of cach fiscal year, and as circumstances indicate the possibility of impairment. See Note 3 for further discussion related to the Company's carrying value of goodwill. Long-lived assets and store lease exit costs were measured at fair value on a nonrecurring basis using Level 3 inputs as defined in the fair valuc hierarchy. Sce Note 1 for further discussion of the Company's policies for impairments of long-lived assets and valuation of store lease exit costs. In 2020, long-lived assets with a carrying amount of $72 were written down to their fair value of S2, resulting in an impairment charge of S70. In 2019, long-lived assets with a carrying amount of S152 were written down to their fair value of $32, resulting in an impairment charge of $120, which included the 35 planned store closures. Mergers are necounted for using the acquisition method of accounting, which requires that the purchase price paid for a merger be allocated to the assets and liabilities acquired based on their estimated fair values as of the effective date of the merger, with the excess of the purchase price over the net assets being recorded as goodwill 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. For items carried at (or adjusted to) fair value in the consolidated financial statements, the following tables summarize the fair value of these instruments at January 30, 2021 and February 1, 2020: January 30, 2021 Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) 1.882 Significant Unobservable Inputs (Level 3) Trading Securities Other Investment Total 160 160 Total 1.882 160 2,042 1.882 February 1, 2020 Fair Value Measurements Using Quoted Prices in Active Markets Significant for Identical Significant Other Unobservable Assets Observable Inputs Inputs (Level 1) (Level 2) (Level 5) Total Trading Securities 840 840 Other Investment 41 Interest Rate Hedges (19 (19) Total 840 (19) S 41 862 in 2018, realized gains on Level 1 available-for-sale securities totaled S5. The Company values interest rate hedges using observable forward yield curves. These forward yield curves are classified as Level 2 inputs. Collateral is generally not required of the counterparties or of the Company under these master netting agreements. As of February 1, 2020, no cash collateral was received or pledged under the master netting agreements. The effect of the net settlement provisions of these master netting agreements on the Company's derivative balances upon an event of default or termination event is as follows as of February 1, 2020: Gross Amounts Not Offset in the Net Amount Gross Amount Gross Amounts Offset Presented in the Recognized in the Balance Sheet Balance Sheet Balance Sheet Financial Instruments Cash Collateral Net Amount February 1, 2020 Liabilities Cash Flow Forward-Starting Interest Rate Swaps 19 $ 19 $ 19 The following table summarizes the effect of the Company's derivative instruments designated as cash flow hedges for 2020, 2019 and 2018: Derivatives in Cash Flow Hedging Relationships Forward-Starting Interest Rate Swaps, net of tax Year-to-Date Amount of Gain/(Loss) in Amount of Gain (L.) AOCI on Derivative Reclassified from AOCI into Location of Gain/(Loss) (Effective Portion) Income (Effective Portion) Reclawified into Income 2020 2019 2018 2020 2019 2018 (Effective Portion) 5 (54) $ (42) 6.5 (2) (5) Interest expense The amounts of Gain/(Loss) in AOCI on derivatives include unamortized proceeds and payments from forward- starting interest rate swaps once classified as cash flow hedges that were terminated prior to end of 2020, 2019 and 2018, respectively. For the above cash flow interest rate swaps, the Company has entered into International Swaps and Derivatives Association master netting agreements that permit the net settlement of amounts owed under their respective derivative contracts. Under these master netting agreements, net settlement generally permits the Company or the counterparty to determine the net amount payable for contracts due on the same date and in the same currency for similar types of derivative transactions. These master netting agreements generally also provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event Ies and see agaregate subsequent to 2020 are: payments of long-term deb, u 2021 2022 2023 2024 2025 Thereafter 844 894 617 494 575 8,986 Total debt $ 12,410 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 $ 406 1.932 1.872 38 55 86 100 149 172 23 93 46 Subtotal Valuation allowance 3.040 (53) 2,698 (55) Total deferred tax assets 2.987 2,643 Deferred tax liabilities: Depreciation and amortization (2,115) (1.942) Operating lease assets (1,794) (1.782) Insurance related costs (28) Inventory related costs (264) (252) Equity investments in excess of tax basis (356) (94) Other (11) Total deferred tax liabilities (4.529) (4,109) Deferred taxes S (1.542) S (1.466) At January 30, 2021, the Company had net operating loss carryforwards for state income tax purposes of $1.081 These net operating loss carry forwards expire from 2021 through 2040. The utilization of certain of the Company's stato net operating loss carryforwards may be limited in a given year. Further, based on the analysis described below, the Company has recorded a valuation allowance against some of the deferred tax assets resulting from its state net operating losses 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 65 128 Total $ 782 S 469 $ 900 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 leases 2020 2019 $ 3,373 $3,299 13,149 12,553 14.928 15,031 10,516 10,832 2,892 3,166 1.165 966 Total property, plant and equipment 46,023 45,847 Accumulated depreciation and amortization (23.637) (23,976) Property, plant and equipment, net $ 22,386 $ 21,871 Accumulated depreciation and amortization for leased property under finance lenses was $321 at January 30, 2021 and S276 at February 1, 2020, Approximately S152 and S162. net book value of property, plant and equipment collateralized certain mortgages at January 30, 2021 and February 1, 2020, respectively, THE KROGER CO. CONSOLIDATED BALANCE SHEETS January 30, 2021 February 1, 2020 s s (in 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 1,687 1,096 1.781 8.436 (1,373) 876 12.503 399 1,179 1,706 8.464 (1.380) 522 10.890 22,386 6,796 997 3,076 2,904 21.871 6,814 1,066 3,076 1.539 Total Assets 48,662 S 45,256 911 S LIABILITIES Current liabilities 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 667 6,679 1,413 3.696 15,366 1.965 597 6.149 1,168 4.164 14,243 Long-term debt including obligations under finance leaves Noncurrent operating lease liabilities Deferred income taxes Pension and postretirement benefit obligations Other long-term liabilities 12.302 6,507 1.542 535 2.660 12,111 6,505 1466 608 1.750 Total Liabilities 19.112 16,68 Commitment and contingencies see Note 13 SIIAREHOLDERS' EQUITY Preferred shares S100 per share. 3 shares authorized and unised Common share, Superstar 2.000 shares thorized: 1918 shares issued in 2020 and 2010 Aditional paid canal 1.918 461 1.918 11 1.706 Receivables FIFO inventory LIFO reserve Prepaid and other current assets Total current assets 1,781 8,436 (1.373) 876 12,503 8,464 (1,380) 522 10,890 Property, plant and equipment, net Operating lease assets Intangibles, net Goodwill Other assets 22,386 6,796 997 3,076 2,904 21,871 6,814 1,066 3,076 1.539 Total Assets 48,662 S 45,256 s 911 667 6,679 1.413 5,696 15,366 LIABILITIES Current liabilities 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 1.965 597 6,349 1,168 4,164 14.243 12,502 6,507 1.542 $35 2,660 12,111 6,505 1,466 608 1.750 39,112 36,683 Commitments and contingencies see Note 13 SHAREHOLDERS' EQUITY Preferred shares, S100 par per share, shares authorized and unissued Common shares SI par per share. 2,000 shares authorized; 1.918 shares issued in 2020 and 2019, Additional paid in capital Accumulated other comprehensive loss Accumulated earnings Common shares in treasury, it cost 1.160 shares in 2020 and 1.130 shares in 2019 1,918 3.461 (630) 23.018 (18.191 1.918 3.337 (640) 20,978 (16,991) Total Shareholders Equity The Kroger Co. Noncontrolling interests 9.576 126 8.602 (29) Total Equity 9,550 84573 Total Liabilities and Equity 48,662 s 45.256 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) S 122,286 2018 (52 weeks $ 121,852 101,597 24,500 874 2,747 95,294 21,208 884 2,649 95,103 20,786 2,465 2,780 2.251 2,614 (603) (544) 29 1.105 (620) (26) 228 1.782 157 176 Operating expenses Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below Operating, general and administrative Rent Depreciation and amortization Operating profil Other income (expense) Interest expense Non-service component of company sponsored pension plan costs Gain on investments Gain on sale of businesses Net camnings before income tax expense Income tax expense Net carnings including noncontrolling interests Net income (los) attributable to noncontrolling interests Net earnings attributable to The Kroger Co. Net earnings attributable to The Kroger Co per basic common share Average number of common shares used in basic calculation Net earnings attebutable to The Kroger Coper diluted common shine Average number of comunon shares used in diluted calculation 3.370 1.981 3.978 782 469 900 2,588 3 1.512 (447) 3,078 (32) S2.583 51.659 S 3.110 S 331 2.05 S 3.80 773 799 810 327 s 2.04 3.76 781 SOS 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 2019 2018 (52 weeks) (82 weeks) (52 weeks) $ 2,588 $ 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 tax(2) 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) 22 (14) (105) (47) 147 (23) 2 4 (146 5 5 10 (294) 125 2.598 Comprehensive income Comprehensive income (loss) attributable to noncontrolling interests Comprehensive income attributable to The Kroger Co. 1.218 3.203 (147) S 1.365 $13.235 (32) $ 2.595 (1) Amount is net of tax benefit of (SI) in 2018. (2) Amount is net of tax expense (benefit) of S7 in 2020. (833) in 2019 and S45 in 2018 (3) Amount is net of tax benefit of (58) in 2020. ($17) in 2019 and (58) in 2018. (4) Amount is niet 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): Reclassification 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 1,512 S 3,078 2,747 70 6265 2,465 56 185 191 73 2.649 220 640 105 135 39 (56) (176) (158) (157) 412 (109) 29 154 76 (45) (1.782) 2 (228) (In millions) Cash Flows from Operating Activities Net earnings including noncontrolling interests Adjustments to reconcile net eamings including noncontrolling interests to net cash provided by operating activities Depreciation and amortization Asset impairment charges Operating lease asset amortization LIFO (credit) charge Stock-based employee 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 Lors on deconsolidation and impairment of Lucky: Market Other Changes in operating assets and liabilities net of effects from mergers and disposal of businesses Store deposits in-transit Receivables Inventories Prepaid and other current acts Trade accounts payable Accred expenses Income taxes receivable and payable Contribution to company sponsored pension plan Operating lease liabilities Proceeds from contract sociated with sale of business Other Net cash vided by operating activities (59) (1.105) 165 58 190) 7 (342) 330 1,382 24 3 (36) (351) (33) 142 302 (20) (208) (354) 244 213 289 (185) 1552 (639) 205 (53 699 6,815 4,664 4.164 (2.865) (3.128) 273 (2.967 85 25 (197 Cash Flows from Investing Activities Payments for property and equipment, including payments for Lease buyouts Proceeds from sale of aucta Procredi on sellement al financial instrument Punicats for one of cash acquired Purchase of stores Net proceeds from sale of businesses Purch of Occasecurities Other Na cated by activities 337 2169 (1923 (3) 2.611) Nol 330 1.382 24 342 302 (142) 213 416 289 (185) (552) (639) 295 (53) 699 (94) 6,815 4,664 4,164 Trade accounts payable Accred expenses Income taxes receivable and payable Contribution to company-sponsored pension plan Operating lease liabilities Proceeds from contract associated with sale of business Other Net cash provided by operating activities Cash Flows from Investing Activities: Payments for property and equipment, including payments for lease buyouts Proceeds from sale of acts Proceeds on settlement of financial instrument Payments for acquisitions, net of cash acquired Purchases of stores Net proceeds from sale of businesses Purchases or Ocado securities Other (2.865) 165 (3.128) 273 (2.967 85 205 (197) (44) 2.169 (392) (75) 327 (83) (814) (1.186) Net cash used by investing activities Cash Flows from Financing Activities: Proceeds from instance of long-term debt Payments on long-term debt including obligations under finance Ines Net proceeds (payments) on commercial paper Dividends paid Proceeds from sane of capital Mock Treasury stock purchases Other Net cachwed by financing activities Net increase (decrease) in cash and temporary cash investments Cash and temporary cash investments Being of your End of year 1.009 (147) (1.150) (334) 127 (1.324 114 813 09.304) 350 (486) 55 (465) (46 2,236 (1.372) (1.321 (437) 65 0.010) (57 (2713) 12,083 (2.896) 1.2 (30) 82 999 1,687 347 429 5 5399 5 $ 12 s Reconciliation of capital investment Payments for property and equipment including payments for lease buyout Payment for lease buyouts Changes in construction-in-proyes payabiles Total capital investments, acidint ambryouts (2.967) 5 5 2.863) 5 (3:59) $1,166 2014 5 CON Di losure of information Cibuidor the year for interest Candid during the you for income in 14 00 100 THE KROGER CO. TEMENT OF CHANGES IN SHAREHOLDERS' EQUITY mon Stock Additional Paid Is Capital S 3.161 Trnur Suck Shares Amon 1.048 S (14.684) Accumulated Other Comprehensive Income (Less) (471) Accumulated Earnings $ 17,007 Noncontrolling Interest s (26) Total 6,905 S 1.918 (4) (3) 65 74 65 (45) (119) 76 3 (1.927 (83) 154 125 (1,927) (83) 154 125 (1) (436) 3,078 49 (57 3.110 (32) 1.918 3.245 1.120 S (16,6123 s (346) s 19,681 - III IIIIIIIII (51) $ 7.835 3) (3) 55 92 55 (36) (128) 14 2 (400) (65) 155 (400) (65) 155 (294) 146 168 (294) 146 168 65 (61) (5) (503) 1,659 (147) (503) 1.512 1.913 S 3.133 1.130 S (16,991) 5 (640) 5 20,978 (29) $ 8.573 127 71 (3) 127 (63) 36 4 (1.196) (128) 185 (1.196) (128) 185 10 (1) (545) 2.588 73 (74) III (545) 2.585 1,91% 53,461 1.160 S (18.191 $ (630) 23.018 S (26) S 9.550 are an integral part of the consolidated financial statements. THE KROGER CO. CONSOLIDATED STATEMENT OF CHANGES IN Years Ended January 30, 2021, February 1, 2020 and February 2, 2019 Common Stock Shares Amount 1.918 1.918 Additional Pald-In Capital s 3,161 ST (119) ) Ralat February 3, 2018 Inge of common stock Sock options crised Restricted stock issued Trenuty stock activity Treasury stock purchase, ut cost Stock optisexchanged Shassa employee compensation Other compensive income of tax or 19 Oba Cath dividends doclared (S0.545 per common share) Netamintos including non-controlling interests 154 49 1.918 $ 1.918 S 3.245 (1280 TITI 155 65 Balances at February 2. 2019 ce of common stock Stock options exercued Restricted steek toed Treasury stock activity Toy Mock purchases at cost Stock options changed Sundcmployee compensation Other comprehensive lount of tax of ($47) Cumulative det of counting dan see note 18) Deconciliation of lucky's Market Other Cabanidades del (50.62 per common share) Netcorning (inkluding non-controlling interest Balacca February 1, 2020 sunce of common stock Stock options exercised Restcndeck is Treamy Aack activity Trasy dick purchasist Stock options exchanged Shite-watcmployee compensation Other chemive income net of tax of Si Od Cash dividends declared 50-70 per common share) Net carmingsinduding non-controlling interest Balanses y 30, 2021 1.918 1.918 S 3,337 (134) LLLL 185 73 1.918 $ 1.918 S 3.461 The accompanying notes are an integral part of the cons