Kroger 2008 Annual Report Download - page 49

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The Kroger Co. Page 48
FREE CASH FLOW
Kroger’s strong earnings results in 2008 would not be possible without our
prudent and balanced long-term financial strategy. We believe it is
important to allocate free cash flow to maximize its benefit for our equity
and fixed income investors. In 2008, to preserve liquidity and financial
flexibility, we reduced the amount of stock repurchased during the year,
decreasing the cash used for stock purchases in 2008 compared to 2007.
We have focused on improving our leverage metrics. On a rolling four-
quarters basis, Kroger’s net total debt to EBITDA ratio was 1.89 for fiscal
2008 compared to 2.03 during the corresponding period for fiscal 2007.
We ended fiscal 2008 with $7.7 billion in net total debt, a decrease of $24.1
million from a year earlier.
Note: Management believes net total debt is an important measure of liquidity, and a
primary component of measuring compliance with the financial covenants under the
Company’s credit facility. Net total debt should not be considered an alternative to
any GAAP measure of performance or liquidity and should be reviewed in conjunction
with Kroger’s financial results reported in accordance with GAAP. The following table
provides a reconciliation of total debt to net total debt for year-end 2008 and 2007.
$ millions
YE 2008
YE 2007
Total debt
$8,062.5
$8,121.6
Temporary cash investments
<46.6>
<81.7>
Prepaid employee benefits
<300.0>
<300.0>
Net total debt
$7,715.9
$7,739.9
Our bias towards strengthening our leverage metrics remains. We believe
this approach supports an appropriate level of liquidity and leverages
Kroger’s financial strength to continue delivering on our Customer 1st plan.
SHARE REPURCHASE
Board Repurchase Authorizations
We maintain stock repurchase programs that comply with Securities
Exchange Act Rule 10b5-1 to allow for the orderly repurchase of our
common stock, from time to time, even though we may be aware of
material non-public information, as long as purchases are made in
accordance with the plan. We made open market purchases totaling $448
million, $1.2 billion, and $374 million under Board-authorized repurchase
programs during fiscal 2008, 2007, and 2006, respectively. At the end of
fiscal 2008, approximately $493 million remained under the $1 billion share
repurchase program authorized by our Board in January 2008.