Kroger 2015 Annual Report Download - page 83

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A-9
Net Earnings
Net earnings totaled $2.0 billion in 2015, $1.7 billion in 2014 and $1.5 billion in 2013. Net earnings
improved in 2015, compared to net earnings in 2014, due to an increase in operating profit, partially
offset by an increase in income tax expense. Operating profit increased in 2015, compared to 2014,
primarily due to an increase in first-in, first-out (“FIFO”) non-fuel operating profit, lower charges for total
contributions to The Kroger Co. Foundation, UFCW Consolidated Pension Plan, the charge related
to the 2014 Multi-Employer Pension Plan Obligation and a lower LIFO charge which was $28 million
(pre-tax), compared to a LIFO charge of $147 million (pre-tax) in 2014, partially offset by a decrease in
fuel operating profit and continued investments in lower prices for our customers. The decrease in fuel
operating profit was primarily due to a decrease in fuel margin per gallon to $0.17 in 2015, compared to
$0.19 in 2014, partially offset by an increase in fuel gallons sold. Continued investments in lower prices
for our customers includes our pharmacy department, which experienced high levels of inflation that were
not fully passed on to the customer in 2015. Net earnings improved in 2014, compared to net earnings
in 2013, due to an increase in operating profit, partially offset by increases in interest and income tax
expense. Operating profit increased in 2014, compared to 2013, primarily due to an increase in FIFO non-
fuel operating profit, excluding Harris Teeter, the effect of our merger with Harris Teeter and an increase
in fuel operating profit, partially offset by continued investments in lower prices for our customers, the
2014 Contributions, the charge related to the 2014 Multi-Employer Pension Plan Obligation and a higher
LIFO charge which was $147 million (pre-tax), compared to a LIFO charge of $52 million (pre-tax) in
2013.
The net earnings for 2015 do not include any non-GAAP adjustments. The net earnings for 2014
include a net charge of $39 million, after tax, related to the 2014 Adjusted Items. The net earnings
for 2013 include a net benefit of $23 million, after tax, related to the 2013 Adjusted Items. Excluding
these benefits and charges for Adjusted Items for 2014 and 2013, adjusted net earnings were $2.0
billion in 2015, $1.8 billion in 2014 and $1.5 billion in 2013. 2015 net earnings improved, compared to
adjusted net earnings in 2014, due to an increase in FIFO non-fuel operating profit, lower charges for
total contributions to The Kroger Co. Foundation and UFCW Consolidated Pension Plan and a lower
LIFO charge which was $28 million (pre-tax), compared to a LIFO charge of $147 million (pre-tax) in
2014, partially offset by continued investments in lower prices for our customers, a decrease in fuel
operating profit and an increase in income tax expense. Continued investments in lower prices for our
customers includes our pharmacy department, which experienced high levels of inflation that were not
fully passed on to the customer in 2015. 2014 adjusted net earnings improved, compared to adjusted net
earnings in 2013, due to an increase in FIFO non-fuel operating profit, excluding Harris Teeter, the effect
of our merger with Harris Teeter and an increase in fuel operating profit, partially offset by continued
investments in lower prices for our customers, the 2014 Contributions, increases in interest and income
tax expense and a higher LIFO charge which was $147 million (pre-tax), compared to a LIFO charge of
$52 million (pre-tax) in 2013.
Net earnings per diluted share totaled $2.06 in 2015, $1.72 in 2014 and $1.45 in 2013. Net earnings
per diluted share in 2015, compared to 2014, increased primarily due to fewer shares outstanding as a
result of the repurchase of Kroger common shares and an increase in net earnings. Net earnings per
diluted share in 2014, compared to 2013, increased primarily due to fewer shares outstanding as a result
of the repurchase of Kroger common shares and an increase in net earnings.
There were no adjustment items in 2015, but excluding the 2014 and 2013 Adjusted Items, adjusted
net earnings per diluted share totaled $1.76 in 2014 and $1.43 in 2013. Net earnings per diluted share
in 2015, compared to adjusted net earnings per diluted share in 2014, increased primarily due to fewer
shares outstanding as a result of the repurchase of Kroger common shares and an increase in adjusted
net earnings. Adjusted net earnings per diluted share in 2014, compared to adjusted net earnings per
diluted share in 2013, increased primarily due to fewer shares outstanding as a result of the repurchase
of Kroger common shares and an increase in adjusted net earnings.