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Press release from PR Newswire

Kroger Reports Record Fourth Quarter and Full Year 2012 Results

Thursday, March 07, 2013

Kroger Reports Record Fourth Quarter and Full Year 2012 Results09:10 EST Thursday, March 07, 2013Q4 EPS of $0.88 and Full Year 2012 EPS of $2.77 Q4 ID Sales Up 3.0% Without FuelCINCINNATI, March 7, 2013 /PRNewswire/ -- The Kroger Co. (NYSE: KR) today reported net earnings of $0.88 per diluted share and identical supermarket sales growth, without fuel, of 3.0% in the fourth quarter. The Company reported net earnings for fiscal year 2012 of $2.77 per diluted share and identical sales growth, without fuel, of 3.5%. The fourth quarter and full fiscal year earnings per share results include an $0.11 per diluted share benefit of a 53rd week (extra week). The year's strong results included: Record EPS that exceeded guidance by $0.07 per diluted share, on an adjusted basis (Table 6) EPS growth of 16% on an adjusted basis (Table 6) Increased rolling four quarters FIFO operating margin, excluding fuel, of 6 bps Record 52-week FIFO EBITDA "Our associates delivered an outstanding year that underscores how our growing connection with customers remains the key to shareholder value creation," said David B. Dillon, Kroger's chairman and chief executive officer. "Kroger's unique value offering of better service, great products and an enjoyable shopping experience with low prices continues to resonate with a full range of customers. The result is an industry-leading 37 consecutive quarters of positive identical sales growth." Details of Fourth Quarter 2012 ResultsSales and EarningsTotal sales increased 12.8% to $24.2 billion in the fourth quarter ended February 2, 2013. After adjusting for the extra week in the fourth quarter, total sales increased by 3.7% over the fourth quarter of fiscal 2011. Net earnings for the fourth quarter totaled $461.5 million, or $0.88 per diluted share. LIFO was $0.09 per diluted share lower than estimated and a discrete tax item added $0.02 per diluted share to the results for the quarter. Excluding these benefits, Kroger exceeded fourth quarter earnings per diluted share expectations by $0.07. On an adjusted basis (Table 6), net earnings per diluted share in the fourth quarter 2012 grew 22%.Fourth Quarter Operating ResultsFIFO gross margin decreased 43 basis points from the same period last year, excluding retail fuel operations and the extra week. The company recorded a $41.2 million LIFO credit during the quarter compared to a $73.4 million LIFO charge in the same quarter last year. Operating, general and administrative costs plus rent and depreciation, excluding retail fuel operations and the extra week, declined 70 basis points as a percent of sales compared to the prior year's adjusted fourth quarter. Fiscal Year 2012 ResultsFor the full 2012 fiscal year, total sales increased to $96.8 billion or 7.1% compared with the prior fiscal year. After adjusting for the extra week in fiscal 2012, total sales increased to $94.8 billion or 4.9% compared with the prior fiscal year. Excluding fuel, total sales increased 6% over the same period last year. Further adjusting for the extra week, total sales excluding fuel increased 4%. Net earnings for fiscal year 2012 totaled $1.50 billion, or $2.77 per diluted share. These results include LIFO being lower than the Company's guidance by $0.08 per diluted share, the discrete tax item that added $0.02 per diluted share in the fourth quarter, and the $0.14 per diluted share benefit from the credit card settlement and a reduction in the UFCW pension accrual in the third quarter. Collectively, these totaled $0.24 per diluted share and were not included in the Company's guidance. As a result, Kroger exceeded the high end of its fiscal 2012 earnings per diluted share guidance by $0.07.  On an adjusted basis (Table 6), net earnings per diluted share in fiscal year 2012 grew 16%.Kroger recorded a LIFO charge of approximately $55 million. The company's fiscal 2011 LIFO charge was $216 million. "We are very pleased with our full year 2012 results," Mr. Dillon said. "We achieved strong sales and pharmacy results, plus controlled expenses well throughout the year. We delivered value to shareholders by increasing our dividend 30 percent and exceeding our own earnings per share guidance through the combination of solid operating results and share buybacks in 2012."Financial StrategyKroger's strong financial position allowed the company to return more than $1.5 billion to shareholders through share buybacks and dividends in 2012. During the fourth quarter, Kroger repurchased 2.2 million common shares for a total investment of $57 million.Capital investments, excluding acquisitions and purchases of leased facilities, totaled $2.0 billion for the year, compared to $1.9 billion in 2011. Kroger recently began reporting return on invested capital, or ROIC. ROIC on a 52-week, rolling four quarters basis was 13.4%, compared to 13.4% during the same period last year.Net total debt was $8.6 billion, an increase of $470.6 million from a year ago. Kroger's net total debt to adjusted EBITDA ratio was 2.04, compared to 2.00 during the same period last year (Table 5).Fiscal 2013 Annual Guidance Full-year net earnings for fiscal 2013 are expected to range from $2.71 to $2.79 per diluted share. This equates to the Company's long term growth rate of 8 ? 11% from the adjusted fiscal 2012 earnings per diluted share of $2.52 (Table 6). Shareholder return will be further enhanced by a dividend of 2.0% to 2.5%, for a total shareholder return of approximately 10% to 13.5%. Kroger anticipates identical supermarket sales growth, excluding fuel, of approximately 2.5% to 3.5% for fiscal year 2013. During fiscal 2013, Kroger plans to use cash flow from operations to fund capital investments, pay dividends to shareholders, maintain its current debt rating and repurchase shares. We expect capital investments to be in the $2.1 to $2.4 billion range for the year. "Kroger's performance is the result of our associates' hard work and commitment to making each day better for our customers," Mr. Dillon said. "Building on the momentum of last year, we expect to deliver the growth in 2013 that we outlined at our investors meeting in October." Kroger, one of the world's largest retailers, employs 343,000 associates who serve customers in 2,424 supermarkets and multi-department stores in 31 states under two dozen local banner names including Kroger, City Market, Dillons, Jay C, Food 4 Less, Fred Meyer, Fry's, King Soopers, QFC, Ralphs and Smith's. The company also operates 786 convenience stores, 328 fine jewelry stores, 1,169 supermarket fuel centers and 37 food processing plants in the U.S. Recognized by Forbes as the most generous company in America, Kroger supports hunger relief, breast cancer awareness, the military and their families, and more than 30,000 schools and grassroots organizations in the communities it serves. Kroger contributes food and funds equal to 160 million meals a year through more than 80 Feeding America food bank partnersNote: Fuel sales have historically had a low FIFO gross margin rate and OG&A rate as compared to corresponding rates on non-fuel sales. As a result Kroger discusses the changes in these rates excluding the effect of retail fuel operations.This press release contains certain forward-looking statements about the future performance of the company. These statements are based on management's assumptions and beliefs in light of the information currently available to it. These statements are indicated by words such as "expected," "will," "expects," "plan," and "anticipates." Our ability to achieve identical supermarket sales and earnings growth and earnings per share goals, as well as the timing that those earnings occur within the year, may be affected by: labor disputes, particularly as the Company seeks to manage health care and pension costs; industry consolidation; pricing and promotional activities of existing and new competitors, including nontraditional competitors, the aggressiveness of competition, and our response to these activities; unexpected changes in product costs; the state of the economy, including interest rates and the inflationary and deflationary trends in certain commodities; the extent to which our customers exercise caution in their purchasing behavior in response to economic conditions as well as fuel and food prices; the number of shares outstanding; the success of our future growth plans; goodwill impairment; changes in government funded benefit programs; volatility in our fuel margins; the effect of fuel costs on consumer spending; the effect of prescription drugs going off patent has on our  sales and earnings; our expectations regarding our ability to obtain additional pharmacy  sales from third party payors; and our ability to generate sales at desirable margins, as well as the success of our programs designed to increase our identical sales without fuel.  In addition, any delays in opening new stores, failure to achieve tonnage growth as expected, or changes in the economic climate, could cause us to fall short of our sales and earnings targets.  Our ability to increase identical supermarket sales also could be adversely affected by increased competition, and sales shifts to other stores that we operate, as well as increases in sales of our corporate brand products.  Earnings and sales also may be affected by adverse weather conditions, particularly to the extent that adverse weather conditions and natural disasters disrupt our operations or those of our suppliers; create shortages in the availability or increases in the cost of products that we sell in our stores or materials and ingredients we use in our manufacturing facilities; or raise the cost of supplying energy to our various operations, including the cost of transportation; and the benefits that we receive from the consolidation of the UFCW pension plans.  Our earnings per share results also will be affected by our ability to improve our operating results and our ability to repurchase shares under our repurchase program as expected.  Our capital investments, our plan to increase capital investments, and the number of projects that we complete, could vary from our expectations if we are unsuccessful in acquiring suitable sites for new stores; development costs vary from those budgeted; our logistics and technology or store projects are not completed on budget or within the time frame projected; or if current operating conditions fail to improve, or worsen. Our plans to use cash flow from operations to fund capital investments, repurchase shares, pay dividends to shareholders, and maintain our current debt rating will depend on our ability to generate free cash flow and otherwise to have cash on hand, which will be affected by all of the factors identified above, as well as the extent to which funds can be used for those reasons while maintaining our debt rating.   Total shareholder return,  and our ability to continue to reward shareholders in 2013 through increased earnings,  quarterly dividends, and share repurchases, will be affected by all of the factors identified  above, as well as the ability of the company to pay dividends from free cash flow as contemplated.  These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially. We assume no obligation to update the information contained herein. Please refer to Kroger's reports and filings with the Securities and Exchange Commission for a further discussion of these risks and uncertainties.Note: Kroger's quarterly conference call with investors will be broadcast live online at 10 a.m. (ET) on March 7, 2013 at ir.kroger.com. An on-demand replay of the webcast will be available from approximately 1 p.m. (ET) Thursday, March 7 through Thursday, March 21, 2013.View 4th Quarter 2012 Reports:CONSOLIDATED STATEMENTS OF OPERATIONSCONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENTS OF CASH FLOWSSUPPLEMENTAL SALES INFORMATIONRECONCILIATION OF TOTAL DEBT TO NET TOTAL DEBT AND NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. TO EBITDANET EARNINGS PER DILUTED SHARE EXCLUDING ADJUSTED ITEMSRETURN ON INVESTED CAPITAL    Table 1.THE KROGER CO.CONSOLIDATED STATEMENTS OF OPERATIONS(in millions, except per share amounts)(unaudited)FOURTH QUARTERYEAR-TO-DATE2012201120122011SALES$ 24,153.1100.00%$ 21,405.8100.00%$ 96,751.3100.00%$ 90,374.4100.00%MERCHANDISE COSTS, INCLUDING ADVERTISING,WAREHOUSING AND TRANSPORTATION (a),AND LIFO CHARGE (b)19,101.079.0816,955.979.2176,858.279.4471,494.679.11OPERATING, GENERAL AND ADMINISTRATIVE (a)3,689.015.274,338.720.2714,849.715.3515,344.616.98RENT157.20.65144.10.67628.40.65619.00.68DEPRECIATION AND AMORTIZATION386.11.60392.31.831,651.51.711,637.81.81OPERATING PROFIT (LOSS)819.83.39(425.2)(1.99)2,763.52.861,278.41.41INTEREST EXPENSE112.30.46100.50.47462.00.48434.90.48NET EARNINGS (LOSS) BEFORE INCOME TAX EXPENSE707.52.93(525.7)(2.46)2,301.52.38843.50.93INCOME TAX EXPENSE (BENEFIT)238.80.99(220.3)(1.03)793.80.82247.40.27NET EARNINGS (LOSS) INCLUDING NONCONTROLLING INTERESTS468.71.94(305.4)(1.43)1,507.71.56596.10.66NET EARNINGS (LOSS) ATTRIBUTABLE TONONCONTROLLING INTERESTS7.20.031.50.0111.20.01(6.0)(0.01)NET EARNINGS (LOSS) ATTRIBUTABLE TO THE KROGER CO. $ 461.51.91%$ (306.9)(1.43%)$ 1,496.51.55%$ 602.10.67%NET EARNINGS (LOSS) ATTRIBUTABLE TO THE KROGER CO.PER BASIC COMMON SHARE$ 0.89$ (0.54)$ 2.78$ 1.01AVERAGE NUMBER OF COMMON SHARES USED INBASIC CALCULATION513.8565.0533.4589.6NET EARNINGS (LOSS) ATTRIBUTABLE TO THE KROGER CO.PER DILUTED COMMON SHARE$ 0.88$ (0.54)$ 2.77$ 1.01AVERAGE NUMBER OF COMMON SHARES USED INDILUTED CALCULATION517.5565.0536.6593.2Note: Certain per share amounts and percentages may not sum due to rounding.Note: The Company defines FIFO gross margin, as described in the earnings release, as sales minus merchandise costs, including advertising, warehousing and transportation, but excluding the Last-In First-Out (LIFO) charge. This measure is included to reflect trends in current cost of product.(a)Merchandise costs and operating, general and administrative expenses exclude depreciation and amortization expense and rent expense which are included in separate expense lines.(b)A LIFO credit of $(41.2) and a LIFO charge of $73.4 were recorded in the fourth quarters of 2012 and 2011, respectively. For the year to date period, LIFO charges of $55.0 and $215.7 were recorded for 2012 and 2011, respectively.Table 2.THE KROGER CO.CONSOLIDATED BALANCE SHEETS(in millions)(unaudited)February 2,January 28,20132012ASSETSCurrent AssetsCash$ 237.1$ 181.2Temporary cash investments0.86.3Deposits in-transit955.2786.3Receivables1,051.5949.2Inventories5,145.75,114.1Prepaid and other current assets568.3287.5Total current assets7,958.67,324.6Property, plant and equipment, net14,881.514,464.1Goodwill1,234.21,137.9Other assets577.2548.7Total Assets$ 24,651.5$ 23,475.3LIABILITIES AND SHAREOWNERS' EQUITYCurrent liabilitiesCurrent portion of long-term debt including obligationsunder capital leases and financing obligations$ 2,699.9$ 1,314.6Trade accounts payable4,523.84,328.8Accrued salaries and wages977.01,055.9Deferred income taxes283.7189.7Other current liabilities2,538.92,215.2Total current liabilities11,023.39,104.2Long-term debt including obligations under capital leasesand financing obligationsFace-value of long-term debt including obligations undercapital leases and financing obligations6,174.96,825.8Adjustment to reflect fair-value interest rate hedges4.423.7Long-term debt including obligations under capital leasesand financing obligations6,179.36,849.5Deferred income taxes798.1646.7Pension and postretirement benefit obligations1,295.91,392.5Other long-term liabilities1,144.11,515.6Total Liabilities20,440.719,508.5Shareowners' equity4,210.83,966.8Total Liabilities and Shareowners' Equity$ 24,651.5$ 23,475.3Total common shares outstanding at end of period514.0561.3Total diluted shares year-to-date536.6593.2Table 3.THE KROGER CO.CONSOLIDATED STATEMENTS OF CASH FLOWS(in millions)(unaudited)YEAR-TO-DATE20122011CASH FLOWS FROM OPERATING ACTIVITIES:Net earnings including noncontrolling interests$ 1,507.7$ 596.1Adjustment to reconcile net earnings including noncontrollinginterests to net cash provided by operating activities:Depreciation and amortization1,651.51,637.8LIFO charge55.0215.7Stock-based employee compensation81.681.2Expense for Company-sponsored pension plans88.569.6Asset impairment charges17.936.5Deferred income taxes176.130.6Other16.97.9Changes in operating assets and liabilities, netof effects from acquisitions of businesses:Deposits in-transit(168.9)(120.2)Receivables(125.7)(62.6)Inventories(78.4)(361.1)Prepaid expenses(257.1)51.9Trade accounts payable57.982.2Accrued expenses78.4216.3Income taxes receivable and payable163.6(106.2)Contribution to Company-sponsored pension plan(71.0)(51.7)Other(358.8)334.5Net cash provided by operating activities2,835.22,658.5CASH FLOWS FROM INVESTING ACTIVITIES:Payments for capital investments(2,063.9)(1,897.8)Payments for acquisitions(122.4)(51.0)Proceeds from sale of assets49.350.7Other(47.6)(10.3)Net cash used by investing activities(2,184.6)(1,908.4)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from lease-financing transactions3.71.7Proceeds from issuance of long-term debt863.3452.7Payments on long-term debt(1,445.1)(547.4)Net borrowings on commercial paper / credit facility1,274.6370.0Dividends paid(267.0)(257.4)Excess tax benefits on stock-based awards8.09.1Proceeds from issuance of capital stock110.5118.2Treasury stock purchases(1,260.6)(1,546.6)Increase in book overdrafts120.819.2Other(8.4)(6.7)Net cash used by financing activities(600.2)(1,387.2)NET INCREASE (DECREASE) IN CASH AND TEMPORARYCASH INVESTMENTS50.4(637.1)CASH AND TEMPORARY CASH INVESTMENTS:BEGINNING OF YEAR187.5824.6END OF QUARTER$ 237.9$ 187.5Reconciliation of capital investments:Payments for capital investments$ (2,063.9)$ (1,897.8)Changes in construction-in-progress payables(5.4)(60.4)Total capital expenditures$ (2,069.3)$ (1,958.2)Disclosure of cash flow information:Cash paid during the year for interest$ 438.3$ 456.8Cash paid during the year for income taxes$ 468.2$ 295.6Table 4. Supplemental Sales Information(in millions, except percentages)(unaudited)Items identified below should not be considered as alternatives to sales or any other GAAP measure of performance. Identical supermarket sales is an industry-specific measure and it is important to review it in conjunction with Kroger's financial results reported in accordance with GAAP. Other companies in our industry may calculate identical sales differently than Kroger does, limiting the comparability of the measure.IDENTICAL SUPERMARKET SALES (a)FOURTH QUARTERYEAR-TO-DATE20122011 (b)20122011 (b)INCLUDING FUEL CENTERS$ 21,800.0$ 21,069.8$ 86,800.5$ 83,071.9EXCLUDING FUEL CENTERS$ 18,583.3$ 18,047.3$ 72,561.6$ 70,086.6INCLUDING FUEL CENTERS3.5%7.1%4.5%9.2%EXCLUDING FUEL CENTERS3.0%4.9%3.5%4.9%(a)Kroger defines a supermarket as identical when it has been open without expansion or relocation for five full quarters.(b)Identical sales for the fourth quarter of 2011 and year-to-date 2011 were adjusted to a 13 and 53 week basis, respectively.Table 5. Reconciliation of Total Debt to Net Total Debt andNet Earnings Attributable to The Kroger Co. to EBITDA(in millions, except for ratio)(unaudited)The items identified below should not be considered an alternative to any GAAP measure of performance or access to liquidity. Net total debt to adjusted EBITDA is an important measure used by management to evaluate the Company's access to liquidity. The items below 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 and compares the balance in the fourth quarter of 2012 to the balance in the fourth quarter of 2011.February 2,January 28,20132012ChangeCurrent portion of long-term debt including obligationsunder capital leases and financing obligations$ 2,699.9$ 1,314.6$ 1,385.3Face-value of long-term debt including obligations undercapital leases and financing obligations6,174.96,825.8(650.9)Adjustment to reflect fair-value interest rate hedges4.423.7(19.3)Total debt$ 8,879.2$ 8,164.1$ 715.1Less: Temporary cash investments0.86.3(5.5)Less: Prepaid Benefit Payments250.0-250.0Net total debt$ 8,628.4$ 8,157.8$ 470.6The following table provides a reconciliation from net earnings attributable to The Kroger Co. to EBITDA, as defined in the Company's credit agreement ("EBITDA"), for 2012 and 2011 on a 52 week basis.YEAR-TO-DATE February 2,January 28,20132012Net earnings attributable to The Kroger Co. on a 53 week basis in fiscal year 2012$ 1,496.5$ 602.1LIFO55.0215.7Depreciation and amortization1,651.51,637.8Interest expense462.0434.9Income tax expense793.8247.4UFCW pension plan consolidation charge-952.6UFCW consolidated pension plan liability and credit cardsettlement adjustments(114.9)-53rd week EBITDA adjustment(99.1)-Other(5.3)(4.0)EBITDA$ 4,239.5$ 4,086.5Net total debt to adjusted EBITDA ratio on a 52 week basis2.042.00  Table 6. Net Earnings Per Diluted Share Excluding the Adjusted Items Below(in millions, except per share amounts)(unaudited)The purpose of this table is to better illustrate comparable operating results from our ongoing business, after removing the effects on net earnings per diluted common share of certain items described below. This includes an adjustment to the 2011 LIFO charge to make it comparable to the 2012 LIFO charge. We manage the Company without regard to the LIFO charge, so we believe it is important to understand net earnings per diluted common share trends without the effects of the changes in this amount. Items identified in this table should not be considered alternatives to net earnings attributable to The Kroger Co. or any other GAAP measure of performance. These items should not be reviewed in isolation or considered substitutes for the Company's financial results as reported in accordance with GAAP. Due to the nature of these items, as further described below, it is important to identify these items and to review them in conjunction with the Company's financial results reported in accordance with GAAP.The following table summarizes items that affected the Company's financial results during the periods presented. In 2012, these items include a reduction to the Company's UFCW consolidated pension plan liability and the receipt of a credit card litigation settlement payment. In 2011, the item includes a charge that was recorded due to the consolidation of several Multi-Employer Pension Plans into the UFCW consolidated plan.FOURTH QUARTERFOURTH QUARTERYEAR-TO-DATEYEAR-TO-DATE2012201120122011NET EARNINGS (LOSS) ATTRIBUTABLE TO THE KROGER CO.$                       461.5$                     (306.9)$                   1,496.5$                      602.1UFCW PENSION PLAN CONSOLIDATION CHARGE (a) (e)-590.7-590.7UFCW CONSOLIDATED PENSION PLAN LIABILITY AND CREDIT CARDSETTLEMENT ADJUSTMENTS (b) (e)--(74.1)-NET EARNINGS ATTRIBUTABLE TO THE KROGER CO.EXCLUDING THE ADJUSTED ITEMS ABOVE$                       461.5$                       283.8$                   1,422.4$                   1,192.853RD WEEK ADJUSTMENT (c) (e)(58.4)-(58.4)-EFFECT OF MAKING THE 2011 LIFO CHARGE COMPARABLE TO THE 2012 LIFO CHARGE (d) (e)-73.3-102.9NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. EXCLUDING THE ADJUSTEDITEMS ABOVE, THE 53RD WEEK ADJUSTMENT AND THE LIFO ADJUSTMENT$                       403.1$                       357.1$                   1,364.0$                   1,295.7NET EARNINGS (LOSS) ATTRIBUTABLE TO THE KROGER CO. PER DILUTED COMMON SHARE$                         0.88$                       (0.54)$                         2.77$                         1.01UFCW PENSION PLAN CONSOLIDATION CHARGE (f)-1.04-0.99UFCW CONSOLIDATED PENSION PLAN LIABILITYAND CREDIT CARD SETTLEMENT ADJUSTMENTS (f)--(0.14)-NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER DILUTED COMMON SHARE EXCLUDING THE ADJUSTED ITEMS ABOVE$                         0.88$                         0.50$                         2.63$                         2.0053RD WEEK ADJUSTMENT (f)(0.11)-(0.11)-EFFECT OF MAKING THE 2011 LIFO CHARGE COMPARABLE TO THE 2012 LIFO CHARGE (f)-0.13-0.17NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PERDILUTED COMMON SHARE EXCLUDING THE ADJUSTED ITEMS ABOVE,THE 53RD WEEK ADJUSTMENT AND THE LIFO ADJUSTMENT$                         0.77$                         0.63$                         2.52$                         2.17PERCENT INCREASE22.2%16.1%AVERAGE NUMBER  OF COMMON SHARES USED INDILUTED CALCULATION517.5568.6536.6593.2(a)The pre-tax UFCW pension plan consolidation charge was $952.6.(b)The pre-tax UFCW consolidated pension plan liability and credit card settlement adjustments were $114.9.(c)The pre-tax 53rd week adjustment was $91.3.(d)The pre-tax adjustment to make 2011 LIFO charge comparable to the 2012 LIFO charge was $114.6 in the fourth quarter of 2011 and $160.7 in fiscal year 2011.(e)The amounts presented represent the after-tax effect of each adjustment.(f)The amounts presented represent the net earnings per diluted common share effect of each adjustment.Table 7. Return on Invested Capital(in millions, except percentages)(unaudited)Return on invested capital should not be considered an alternative to any GAAP measure of performance. Return on invested capital is an important measure used by management to evaluate our investment returns on capital and our effectiveness of deploying our assets. Return on invested capital should not be reviewed in isolation or considered as a substitute for our financial results as reported in accordance with GAAP. Other companies may calculate return on invested capital differently than Kroger, limiting the comparability of the measure.The following table provides a calculation of return on invested capital for 2012 and 2011 on a 52 week basis.YEAR-TO-DATEFebruary 2,January 28,20132012Return on Invested CapitalNumerator (a)Operating profit on a 53 week basis in fiscal year 2012$ 2,763.5$ 1,278.4LIFO charge55.0215.7Depreciation and amortization1,651.51,637.8Rent on a 53 week basis in fiscal year 2012628.4619.053rd week rent adjustment(12.1)-UFCW pension plan consolidation charge-952.6UFCW consolidated pension plan liability and credit cardsettlement adjustments(114.9)-53rd week operating profit adjustment(99.1)-Adjusted operating income on a 52 week basis$ 4,872.3$ 4,703.5Denominator (b)Average total assets $ 24,063.3$ 23,489.8Average taxes receivable (c)(22.0)(21.0)Average LIFO reserve (d)1,070.6935.3Average accumulated depreciation and amortization14,051.113,087.6Average trade accounts payable(4,426.1)(4,277.7)Average accrued salaries and wages(1,016.4)(971.8)Average other current liabilities (e) (2,313.3)(2,151.1)Rent * 84,930.44,952.0Average invested capital$ 36,337.6$ 35,043.1Return on Invested Capital13.4%13.4%a)Represents year-to-date results for the periods noted.b)Represents the average of amounts at the beginning and end of the year.c)Taxes receivable is recorded in the Consolidated Balance Sheet in receivables.d)LIFO reserve is recorded in the Consolidated Balance Sheet in inventories.e)The calculation of average other current liabilities excludes accrued income taxes.SOURCE The Kroger Co.For further information: Media, Keith Dailey, +1-513-762-1304, Investors, Cindy Holmes, +1-513-762-4969