Kroger 2015 Annual Report Download - page 118

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A-44
On August 18, 2014, the Company closed its merger with Vitacost.com, Inc. (“Vitacost.com”) by
purchasing 100% of the Vitacost.com outstanding common stock for $8.00 per share or $287. This
merger affords the Company access to Vitacost.com’s extensive e-commerce platform, which can
be combined with the Company’s customer insights and loyal customer base, to create new levels of
personalization and convenience for customers. The merger was accounted for under the purchase
method of accounting and was financed through the issuance of commercial paper (see Note 6).
The Company’s purchase price allocation was finalized in the second quarter of 2015. The changes
in the fair values assumed from the preliminary amounts were not material. The table below summarizes
the final fair values of the assets acquired and liabilities assumed:
August 18,
2014
ASSETS
Total current assets $80
Property, plant and equipment 28
Intangibles 81
Total Assets, excluding Goodwill 189
LIABILITIES
Total current liabilities (56)
Deferred income taxes (6)
Total Liabilities (62)
Total Identifiable Net Assets 127
Goodwill 160
Total Purchase Price $287
Of the $81 allocated to intangible assets, the Company recorded $49, $26 and $6 related to
customer relationships, technology and the trade name, respectively. The Company will amortize the
technology and the trade name, using the straight line method, over 10 and three years, respectively,
while the customer relationships will be amortized over five years using the declining balance method.
The goodwill recorded as part of the merger was attributable to the assembled workforce of Vitacost.com
and operational synergies expected from the merger, as well as any intangible assets that did not qualify
for separate recognition. The transaction was treated as a stock purchase for income tax purposes. The
assets acquired and liabilities assumed as part of the merger did not result in a step up of the tax basis
and goodwill is not expected to be deductible for tax purposes.
Pro forma results of operations, assuming the Harris Teeter Supermarkets, Inc. (“Harris Teeter”)
merger had taken place at the beginning of 2012, the Vitacost.com merger had taken place at the
beginning of 2013 and the Roundy’s transaction had taken place at the beginning of 2014, are included
in the following table. The pro forma information includes historical results of operations of Harris Teeter,
Vitacost.com and Roundy’s, as well as adjustments for interest expense that would have been incurred
due to financing the mergers, depreciation and amortization of the assets acquired and excludes
the pre-merger transaction related expenses incurred by Harris Teeter, Vitacost.com, Roundy’s and
the Company. The pro forma information does not include efficiencies, cost reductions, synergies or
investments in lower prices for our customers expected to result from the mergers. The unaudited pro