The Kroger Co Annual Report 2013

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FY2013 Annual Report · The Kroger Co

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N o t i c e o f A N N u A l M e e t i N g o f S h A r e h o l d e r S

P r o x y S t A t e M e N t

A N d

2 0 1 3 A N N u A l r e P o r t

Kroger

Bring it all home.

Convenience Stores

Jewelry Stores

Services

COVER PRINTED ON RECYCLED PAPER

F e l l o w S h a r e h o l d e r S :

Kroger achieved another outstanding year of performance for shareholders in 2013.

We are a company with many strengths, among them:

• Strong and consistent returns to shareholders,

• An aggressive strategic plan that delivers reliable growth and financial performance, and

• Deeply loyal customers who are the basis for our broad and growing market share.

Our Company’s most enduring strength is our people — our more than 375,000 associates who strive

to make every customer’s day a little better each time they visit one of our stores.

Our foundational approach is called Customer 1st. It simply means that the needs and wants of our
customers are at the heart of every decision we make—in our stores, plants, offices, and facilities. It is our
associates who bring Customer 1st to life. From product and technology innovation to improvements in the
shopping experience, we are inspired by the ever-changing needs and wants of customers. Our greatest
strategic advantage is our Customer 1st culture.

We are proud to be both large and small. As one of the world’s largest retailers, we leverage economies
of scale in ways that make a difference for our customers in their daily lives. For example, we implemented
an innovative, faster checkout approach that saves minutes for each customer every time they shop. We also
leverage our size to offer great value on everyday items and weekly specials, and then provide a personalized
mobile app—one of the most popular in that crowded space—that highlights the deals that match each
shopper’s list.

In this letter, I will provide more detail behind our outstanding results in 2013 and explain the basis of

our firm conviction that there is much more to come for shareholders, associates and customers.

Fiscal 2013 Results – Delivering Growth That Investors Can Count On

At our October 2012 investor meeting, we announced aggressive growth plans that expand our
Customer 1st Strategy by accelerating growth in our core business and improving our connection with all
customers, expanding our presence in new and existing markets, and investing to create unique competitive
positioning for today and the future. As a result, we expect to achieve a long-term, net-earnings-per-diluted-
share growth rate of 8-11% and an increasing dividend over time.

We committed to four key performance indicators to measure our progress at that meeting as well:

• Positive identical supermarket sales;

• Slightly expanding FIFO operating margin on a rolling four quarters basis, excluding fuel;

• Improving return on invested capital; and

• Growing market share.

In 2013, the first full fiscal year executing our aggressive growth plan, Kroger delivered on all four
indicators. We achieved an unparalleled 41st consecutive quarter of positive identical supermarket sales;
expanded FIFO operating margin on a rolling four quarters and adjusted basis, excluding fuel; improved
return on invested capital, even as we increased capital investments; and grew market share for the ninth
consecutive year.

Kroger’s consistent and reliable performance delivers long-term growth investors can count on.
And 2013 was another year of steady growth. Total sales were $98.4 billion in fiscal 2013, an increase of 3.9%
after adjusting for the 53rd week in fiscal 2012. Net earnings were $1.52 billion, or $2.90 per diluted share.
On an adjusted basis, net earnings grew 13 percent over last year’s adjusted amount. We continue to lower
Kroger’s costs of doing business – achieving our ninth consecutive year of reducing operating expenses as a
rate of sales – and to reinvest these savings in lower prices for our customers.

We are using free cash flow to reward shareholders. Since January 2000, Kroger has returned
nearly $10 billion to shareholders through share repurchases. Since 2006, Kroger has paid nearly $1.9 billion
in dividends to shareholders, while maintaining our investment-grade credit rating. In 2013, we increased our
annual dividend for the seventh consecutive year and returned more than $928 million to shareholders through
dividends and stock buybacks. If you had invested $100 in Kroger stock on January 31, 2000, and reinvested
all dividends issued, your investment would have been worth $235 on January 31, 2014, and Kroger’s Total
Shareholder Return in that same period is 125.8%. In March 2014, Kroger’s Board of Directors approved a $1
billion share repurchase program, underscoring our commitment to deliver cash to shareholders.

Welcoming Harris Teeter to the Kroger family

One of our platforms for growth is expanding into new markets. We are proud and excited to warmly
welcome Harris Teeter to the Kroger family of stores. We completed our merger in January 2014 and
integration is well underway. This exceptional 54-year-old regional chain receives very high marks from their
customers for service, selection, meal-time solutions, and freshness. The 230 Harris Teeter stores are located
in the highly attractive mid-Atlantic markets and expand Kroger’s national footprint. We have long respected
the Harris Teeter management team and their operations, and we look forward to bringing the best of Harris
Teeter and Kroger to our customers and shareholders.

Deeply loyal customers, creating strong market share

We have the privilege of serving eight million customers each day. Every one of them has unique
interests and comes to our stores with the belief we will both meet their needs – their tastes, budget, and
lifestyle – and delight them with the unexpected.

We continue to create innovative ways that allow us to know our customers better than anyone else and
to personalize their experience with us. We’ve been mining “big data” for a long time, always with the single
focus on Customer 1st – bringing to each customer what is most relevant to them.

We have invested in price every year for ten consecutive years, saving our customers more than $3 billion

annually in the process.

We have rewarded customers with fuel savings through our popular fuel rewards program at more than
1,240 convenient supermarket fuel center locations in 2013. And, customers with a Kroger Rewards Visa
credit card earned more than $33 million in free groceries last year.

We have partnered with customers to support the community organizations they care about most,
returning $46 million annually to local organizations that customers select through our Community Rewards
program.

Our approach has resulted in growing both market share and share of loyalty.

And we are not done!

Customer 1st innovation is giving us new and varied ways of connecting with and deepening our
relationship with our customers. We are growing our digital offering to deliver value to our customers
through the communication channels they prefer, and customers are responding. In fact, our customers have
downloaded more than 1 billion digital coupons since we began offering them in late 2009.

We are innovating up and down our supply chain so that Kroger milk stays fresher, longer in customers’
refrigerators. Through process improvements, our dairy suppliers, milk plants, logistics operation, and stores
worked together so that we can promise our customers that Kroger’s milk is among the freshest in the
industry.

And we continue to build our best-in-class Corporate Brands portfolio by providing choices to our
customers through a multi-tier offering of price points and product experiences. We expect Simple Truth
and Simple Truth Organic to join our premium tier, Private Selection, as a “Billion Dollar Brand” by the end
of fiscal 2014 as those brands are increasingly sought by shoppers focused on natural and organic foods. Our
Banner Brand continues to provide great quality with a wide breadth of products, and our Value brand offers
customers the choice of quality products that are priced to fit their budget.

The Kroger Difference

Kroger’s culture and deeply-rooted values are also reflected in how we serve our friends and neighbors

in local communities, and how we take care of each other.

We strive to be connected to and responsive to the local communities we serve by:

• Delivering the equivalent of more than 200 million meals to more than 100 local Feeding America

food banks in 2013.

• Engaging vendors and customers to donate more than $6 million in 2013 in support of women’s

health and breast cancer awareness programs.

• Contributing $3.3 million to the USO in 2013 to help support the military and their families. Since
2010, Kroger has donated $8.5 million to the USO – the largest cumulative gift to the USO in that
organization’s history.

• Hiring more than 22,456 veterans since 2009, and helping the “100,000 Jobs Mission” – a coalition
of more than 130 companies with the common goal of hiring more than 100,000 transitioning service
members and military veterans by 2020 – surpass its original goal in January, seven years early.

• Supporting more than 30,000 schools and local organizations with $46 million in 2013 through
our Community Rewards program that delivers personalized, customer-driven donations based on
total purchases.

• Contributing an additional $9.1 million to local organizations in 2013 through The Kroger Co. Foundation.

In the past five years, our foundation has donated nearly $40 million.

Let’s remember that we make these investments because our customers tell us these causes are important
to them, and because they strengthen the communities we call home. When you combine the cash, food and
product we donate to a variety of causes and programs, Kroger contributed more than $250 million to
our local communities in 2013.

We also make a difference in the lives of our associates, customers and communities through our

commitments to safety, sustainability, supplier diversity and job growth.

Kroger is one of the safest companies in our industry. Associate engagement in innovative safety
programs has reduced accident rates in our stores and manufacturing plants by 77 percent since 1995. In
2013, 831 retail locations, three manufacturing plants, and three distribution centers went the entire year
without a recordable accident.

One of Kroger’s key sustainability priorities is moving our retail stores and facilities toward “zero
waste”. Our stores are sending less waste to landfills and incinerators through a variety of efforts, including
composting and our innovative Perishable Donations Program – a process to rescue safe, edible fresh
products and donate them quickly to local food banks. This system has been replicated by other retailers and
today fresh products make up more than half of the food distributed nationwide by Feeding America. Our
manufacturing facilities continue to lead waste reduction. Today, 26 of our 38 manufacturing plants are
designated as “zero waste” facilities.

You can learn more about our sustainability initiatives by reading our annual sustainability report,

available on our website sustainability.kroger.com.

Kroger is a leader in supplier diversity, spending nearly $2 billion annually with women- and
minority-owned businesses. We proudly remain a member of the Billion Dollar Roundtable and the United
States Hispanic Chamber of Commerce Million Dollar Club.

Kroger is doing our part to create jobs and opportunity. We employ 7,000 more associates today
than we did last year, and nearly 90 percent of those new jobs are in our supermarket divisions. Over the last
six years, Kroger has created more than 40,000 new jobs in the local communities we serve.

Leadership

We believe we have one of the strongest management teams in the retail industry. For ten years our
Company has been led by Dave Dillon, who has been called “the grocers’ grocer.” Dave’s knowledge of the
business, passion for customers and associates, and principled and disciplined approach to running a world-
class company has rewarded shareholders, associates, customers, and communities. We thank him for the
strong foundation he built and that we are inspired to continue to expand. Dave often refers to retailing
as a team sport. Every great team, including ours, needs a great coach and leader. Thank you, Dave, for ten
remarkable years as Chairman and CEO.

In Memoriam and Retirements

We were saddened by the loss of our friend and colleague, Jon C. Flora, who passed away unexpectedly
in September 2013. He was president of Fry’s Food Stores in Arizona. Jon was a compassionate and hands-on
leader. We all miss him deeply.

We extend our appreciation to John LaMacchia, who retired from Kroger’s Board of Directors in
December 2013 after 24 years of service; to Paul Heldman, executive vice president, secretary and general
counsel, who retires in May after 32 years of service; and to Robert “Pete” Williams, senior vice president,
who retires in May after 37 years with the Company. On behalf of our entire Company, we thank each of these
individuals for their service and leadership.

Bright Future – More to Come

Kroger’s future is bright. We are differentiating our Company in the crowded field of retailers in ways that
lead to sustainable, reliable growth. And there is a lot more to come for shareholders, associates and customers.

On behalf of the entire Kroger family, we thank you for your continued support and trust.

W. Rodney McMullen
Chief Executive Officer

Congratulations to the winners of The Kroger Co. Community Service Award for 2013:

2013 Community Service Award Winners

Division
Atlanta
Central
Cincinnati
City Market
Columbus
Delta
Dillon Stores
Food 4 Less
Fred Meyer
Fry’s
Jay C Stores
King Soopers
Louisville
Michigan
Mid-Atlantic
Nashville
QFC
Ralphs
Smith’s
Southwest
______

Recipient
Emily May
Sherry Miller
Jeanetta Steely
Adilia Asplund
Marti King
Dianne Scallions
Jamie Tietgen
Marisa Roberts
Tracy Nichols
Bryan Seppala
Donnie Roark
Linda Hutsell
John Owens
Rachel Mason
Rachel Stratton
Bryson Higgins
Kathy Butcher
Michael Vu
April Wilson
Aaron Calvert / Phillip Ingram

Tara Foods
KB Specialty Foods
Pace Crawfordsville
Winchester Farms Dairy
LaHabra Bakery
______

C Stores
______

Corporate
Logistics

Mona McCoy
Laurie Foster
Kevin Froedge
Rita Akers
Bertha Guzman

Aiesha Little

Tricia Fetters
Patty Freeman

N o t i c e o F a N N u a l M e e t i N g o F S h a r e h o l d e r S

Cincinnati, Ohio, May 14, 2014

To All Shareholders of The Kroger Co.:

You are invited to our annual meeting of shareholders of The Kroger Co. which will be held at the MUSIC
HALL BALLROOM, MUSIC HALL, 1241 Elm Street, Cincinnati, Ohio 45202, on June 26, 2014, at 11 a.m., eastern
time, for the following purposes:

To elect thirteen directors for the ensuing year;

To consider and act upon a proposal to approve the 2014 Long-Term Incentive and Cash Bonus Plan;

To consider and act upon an advisory vote to approve executive compensation;

To consider and act upon a proposal to ratify the selection of independent registered public
accountants for the year 2014;

To act upon two shareholder proposals, if properly presented at the annual meeting; and

To transact such other business as may properly be brought before the meeting;

Holders of common shares of record at the close of business on April 29, 2014, will be entitled to notice

of and to vote at the meeting.

a t t e N d a N c e

Only shareholders and persons holding proxies from shareholders may attend the meeting. If you are
attending the meeting, please bring the notice of the meeting that was separately mailed to you or
the top portion of your proxy card, either of which will serve as your admission ticket.

YOUR MANAGEMENT DESIRES TO HAVE A LARGE NUMBER OF SHAREHOLDERS REPRESENTED
AT THE MEETING, IN PERSON OR BY PROXY. PLEASE VOTE YOUR PROXY ELECTRONICALLY VIA THE
INTERNET OR BY TELEPHONE. IF YOU HAVE ELECTED TO RECEIVE PRINTED MATERIALS, YOU MAY SIGN
AND DATE THE PROXY AND MAIL IT IN THE SELF-ADDRESSED ENVELOPE PROVIDED. NO POSTAGE IS
REQUIRED IF MAILED WITHIN THE UNITED STATES.

If you are unable to attend the annual meeting, you may listen to a live webcast of the meeting, which

will be accessible through our website, ir.kroger.com, at 11 a.m., eastern time.

By order of the Board of Directors,
Paul W. Heldman, Secretary

P r o x y S t a t e M e N t

Cincinnati, Ohio, May 14, 2014

This Combined Notice, Proxy Statement and Annual Report is being furnished to the shareholders of
The Kroger Co. in connection with the solicitation of proxies by the Board of Directors for use at the Annual
Meeting of Shareholders to be held on June 26, 2014, at 11 a.m., eastern time, at the MUSIC HALL BALLROOM,
MUSIC HALL, 1241 Elm Street, Cincinnati, Ohio 45202 and at any adjournments thereof.

The principal executive offices of The Kroger Co. are located at 1014 Vine Street, Cincinnati, Ohio
45202-1100. Our telephone number is 513-762-4000. This Proxy Statement and Annual Report, and the
accompanying proxy, were first furnished to shareholders on May 14, 2014.

Your proxy is solicited by the Board of Directors of The Kroger Co., and the cost of solicitation will
be borne by Kroger. We will reimburse banks, brokers, nominees, and other fiduciaries for postage and
reasonable expenses incurred by them in forwarding the proxy material to their principals. Kroger has
retained D.F. King & Co., Inc., 48 Wall Street, New York, New York, to assist in the solicitation of proxies and
will pay that firm a fee estimated at present not to exceed $15,000. Proxies may be solicited personally, by
telephone, electronically via the Internet, or by mail.

Robert D. Beyer, W. Rodney McMullen, and Ronald L. Sargent, all of whom are Kroger directors, have

been named members of the Proxy Committee.

As of the close of business on April 29, 2014, the record date, our outstanding voting securities consisted
of 509,553,233 common shares, the holders of which will be entitled to one vote per share at the annual
meeting. The shares represented by each proxy will be voted unless the proxy is revoked before it is exercised.
Revocation may be in writing to Kroger’s Secretary, or in person at the meeting, or by appointment of a
subsequent proxy. Shareholders may not cumulate votes in the election of directors.

If you hold shares in street name and do not provide your broker with specific voting instructions on
proposals 1, 2, 3, 5 and 6, your broker does not have the authority to vote on those proposals. This is generally
referred to as a “broker non-vote.” Proposal 4 is considered a routine matter and, therefore, your broker may
vote your shares according to your broker’s discretion. The vote required, including the effect of broker
non-votes and abstentions for each of the matters presented for shareholder vote, is set forth below.

Item No. 1, Election of Directors – An affirmative vote of the majority of the total number of votes
cast “for” or “against” a director nominee is required for the election of a director in an uncontested election.
Accordingly, broker non-votes and abstentions will have no effect on this proposal. A majority of votes cast
means that the number of shares voted “for” a director nominee must exceed the number of votes “against”
such director.

Item No. 2, Approval of 2014 Long-Term Incentive and Cash Bonus Plan – Approval by shareholders
of the Plan requires the affirmative vote of the majority of shares entitled to vote on the matter. Accordingly,
broker non-votes and abstentions will have no effect on this proposal.

Item No. 3, Advisory Vote to Approve Executive Compensation – Approval by shareholders of
executive compensation requires the affirmative vote of the majority of shares entitled to vote on the matter.
Accordingly, broker non-votes and abstentions will have no effect on this proposal.

Item No. 4, Selection of Auditors – Ratification by shareholders of the selection of independent public
accountants requires the affirmative vote of the majority of shares entitled to vote on the matter. Accordingly,
abstentions will have no effect on this proposal.

Item Nos. 5 and 6, Shareholder Proposals – The affirmative vote of a majority of shares participating
in the voting on a shareholder proposal is required for its adoption. Proxies will be voted AGAINST these
proposals unless the Proxy Committee is otherwise instructed on a proxy properly executed and returned.
Broker non-votes and abstentions will have no effect on these proposals.

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to

be Held on June 26, 2014.

Under the rules adopted by the SEC, we are furnishing proxy materials to our shareholders primarily on
the Internet. We believe that this process should expedite shareholders’ receipt of proxy materials, lower the
cost of our annual meeting and help to conserve natural resources. On or about May 14, 2014, we mailed to
each of our shareholders (other than those who previously requested electronic or paper delivery), a Notice
of Internet Availability of Proxy Materials containing instructions on how to access and review the proxy
materials on the Internet and instructions on how to vote your shares. The Notice of Internet Availability of
Proxy Materials also contains instructions on how to receive a paper or e-mail copy of the proxy materials. If
you receive a Notice of Internet Availability of Proxy Materials, you will not receive a printed copy of the proxy
materials unless you request one. If you receive paper copies of our proxy materials, you may also view these
materials at http://www.proxyvote.com. If you receive paper copies of our proxy materials and wish to receive
them by electronic delivery in the future, please request electronic delivery at http://www.proxyvote.com.

P r o P o S a l S t o S h a r e h o l d e r S

e l e c t i o N o F d i r e c t o r S
( i t e M N o . 1 )

The Board of Directors, as now authorized, consists of thirteen members. All members are to be elected
at the annual meeting to serve until the annual meeting in 2015, or until their successors have been elected
by the shareholders or by the Board of Directors pursuant to Kroger’s Regulations, and qualified. Kroger’s
Articles of Incorporation provide that the vote required for election of a director by the shareholders, except
in a contested election or when cumulative voting is in effect, will be the affirmative vote of a majority of the
votes cast for or against the election of a nominee.

The experience, qualifications, attributes, and skills that led the Corporate Governance Committee and
the Board to conclude that the following individuals should serve as directors are set forth opposite each
individual’s name. The committee memberships stated below are those in effect as of the date of this proxy
statement. It is intended that, except to the extent that authority is withheld, proxies by the Proxy Committee
will be voted for the election of the following persons:

Name

Professional
Occupation (1)

N o M i N e e S F o r d i r e c t o r F o r t e r M S o F o F F i c e
c o N t i N u i N g u N t i l 2 0 15

Reuben V. Anderson Mr. Anderson is a Senior Partner in the Jackson, Mississippi office
of Phelps Dunbar, a regional law firm based in New Orleans. Prior
to joining this law firm, he was a justice of the Supreme Court of
Mississippi. Mr. Anderson is currently serving as the lead director of
AT&T Inc., and during the past five years was a director of Trustmark
Corporation. He is a member of the Corporate Governance and Public
Responsibilities Committees.

Director
Since

Age

1991

Mr. Anderson has extensive litigation experience, and he served as the
first African-American Justice on the Mississippi Supreme Court. His
knowledge and judgment gained through years of legal practice are of
great value to the Board. In addition, as former Chairman of the Board
of Trustees of Tougaloo College and a resident of Mississippi, he brings
to the Board his insights into the African-American community and
the southern region of the United States. Mr. Anderson has served on
numerous board committees, including audit, public policy, finance,
executive, and nominating committees.

Name

Robert D. Beyer

David B. Dillon

Director
Since

1999

Age

1995

Professional
Occupation (1)

Mr. Beyer is Chairman of Chaparal Investments LLC, a private investment
firm and holding company that he founded in 2009. From 2005 to 2009,
Mr. Beyer served as Chief Executive Officer of The TCW Group, Inc., a
global investment management firm. From 2000 to 2005, he served as
President and Chief Investment Officer of Trust Company of the West,
the principal operating subsidiary of TCW. Mr. Beyer is a member of the
Board of Directors of The Allstate Corporation and Leucadia National
Corporation. He is chair of the Corporate Governance Committee, a
member of the Financial Policy Committee, and our Lead Director.

Mr. Beyer brings to Kroger his experience as CEO of TCW, a global
investment management firm serving many of the largest institutional
investors in the U.S. He has exceptional insight into Kroger’s financial
strategy, and his experience qualifies him to serve as a member of
the Financial Policy Committee. While at TCW, he also conceived and
developed the firm’s risk management infrastructure, an experience
that is useful to the Kroger Board in performing its risk management
oversight functions. His abilities and service as a director were
recognized by his peers, who selected Mr. Beyer as an Outstanding
Director in 2008 as part of the Outstanding Directors Program of the
Financial Times. His strong insights into corporate governance form
the foundation of his leadership role as Lead Director on the Board.

Mr. Dillon was elected Chief Executive Officer in 2003 and Chairman
of the Board of Kroger in 2004. Mr. Dillon retired as Chief Executive
Officer at the end of calendar year 2013 and will continue to serve as
Chairman of the Board until the end of calendar year 2014. Mr. Dillon
served as President and Chief Operating Officer in 2000, as President
in 1999, and as President and Chief Operating Officer from 1995 to
1999. Mr. Dillon was elected Executive Vice President of Kroger in
1990 and President of Dillon Companies, Inc. in 1986. He is a director
of DIRECTV and Union Pacific Corporation, and during the past five
years was a director of Convergys Corporation.

Mr. Dillon brings to Kroger his extensive knowledge of the supermarket
business, having over 38 years of experience with Kroger and Dillon
Companies. In addition to his depth of knowledge of Kroger and the
fiercely competitive industry in which Kroger operates, he has gained
a wealth of experience by serving on audit, compensation, finance, and
governance committees of other boards.

Name

Susan J. Kropf

David B. Lewis

Director
Since

2007

Age

2002

Professional
Occupation (1)

Ms. Kropf was President and Chief Operating Officer of Avon Products
Inc., a manufacturer and marketer of beauty care products, from
2001 until her retirement in January 2007. She joined Avon in 1970.
Prior to her most recent assignment, Ms. Kropf had been Executive
Vice President and Chief Operating Officer, Avon North America and
Global Business Operations from 1998 to 2000. From 1997 to 1998 she
was President, Avon U.S. Ms. Kropf was a member of Avon’s Board of
Directors from 1998 to 2006. She currently is a member of the Board
of Directors of Coach, Inc., MeadWestvaco Corporation, and Sherwin
Williams Company. She is a member of the Audit and Financial
Policy Committees.

Ms. Kropf has gained a unique consumer insight, having led a major
beauty care company. She has extensive experience in manufacturing,
marketing, supply chain operations, customer service, and product
development, all of which assist her in her role as a member of Kroger’s
Board. Ms. Kropf has a strong financial background, and has served on
compensation, audit, and corporate governance committees of other
boards. She was inducted into the YWCA Academy of Women Achievers.

Mr. Lewis is a shareholder and director of Lewis & Munday, a Detroit
based law firm with offices in Washington, D.C. and New York City.
He is a director of H&R Block, Inc. and STERIS Corporation. He is a
member of the Financial Policy Committee and vice chair of the Public
Responsibilities Committee.

In addition to his background as a practicing attorney and expertise
in bond financing, Mr. Lewis brings to Kroger’s Board his financial
expertise gained while earning his MBA in Finance as well as his
service and leadership on Kroger’s audit committee and the board
committees of other publicly traded companies. Mr. Lewis has served
on the Board of Directors of Conrail, Inc., LG&E Energy Corp., M.A.
Hanna, TRW, Inc., and Comerica, Inc. He is a former chairman of the
National Association of Securities Professionals.

Name

Professional
Occupation (1)

W. Rodney McMullen Mr. McMullen was elected Chief Executive Officer of Kroger in January
2014. Prior to this, he served as President and Chief Operating Officer
from August 2009 to December 2013. Prior to that, Mr. McMullen was
elected Vice Chairman in 2003, Executive Vice President in 1999, and
Senior Vice President in 1997. Mr. McMullen is a director of Cincinnati
Financial Corporation.

Director
Since

2003

Age

Jorge P. Montoya

Clyde R. Moore

Mr. McMullen has broad experience in the supermarket business,
having spent his career spanning over 35 years with Kroger. He has
a strong financial background, having served as our CFO, and played
a major role as architect of Kroger’s strategic plan. His service on the
compensation, executive, and investment committees of Cincinnati
Financial Corporation adds depth to his extensive retail experience.

Mr. Montoya was President of The Procter & Gamble Company’s Global
Snacks & Beverage division, and President of Procter & Gamble Latin
America, from 1999 until his retirement in 2004. Prior to that, he was
an Executive Vice President of Procter & Gamble, a provider of branded
consumer packaged goods, from 1995 to 1999. Mr. Montoya is a director
of The Gap, Inc. He is chair of the Public Responsibilities Committee
and a member of the Compensation Committee.

Mr. Montoya brings to Kroger’s Board over 30 years of leadership
experience at a premier consumer products company. He has a deep
knowledge of the Hispanic market, as well as consumer products and
retail operations. Mr. Montoya has vast experience in marketing and
general management, including international business. He was named
among the 50 most important Hispanics in Business & Technology, in
Hispanic Engineer & Information Technology Magazine.

Mr. Moore is the Chairman and Chief Executive Officer of First Service
Networks, a national provider of facility and maintenance repair
services. He is a director of First Service Networks. Mr. Moore is chair
of the Compensation Committee and a member of the Corporate
Governance Committee.

Mr. Moore has over 25 years of general management experience in
public and private companies. He has sound experience as a corporate
leader overseeing all aspects of a facilities management firm and a
manufacturing concern. Mr. Moore’s expertise broadens the scope of
the Board’s experience to provide oversight to Kroger’s facilities and
manufacturing businesses.

2007

1997

Name

Susan M. Phillips

Steven R. Rogel

James A. Runde

Director
Since

2003

Age

1999

2006

Professional
Occupation (1)

Dr. Phillips is Professor Emeritus of Finance at The George Washington
University School of Business. She joined that university as a Professor
and Dean in 1998. She retired as Dean of the School of Business as
of June 30, 2010, and as Professor the following year. She was a
member of the Board of Governors of the Federal Reserve System
from December 1991 through June 1998. Before her Federal Reserve
appointment, Dr. Phillips served as Vice President for Finance and
University Services and Professor of Finance in The College of Business
Administration at the University of Iowa from 1987 through 1991. She
is a director of CBOE Holdings, Inc., State Farm Mutual Automobile
Insurance Company, State Farm Life Insurance Company, State Farm
Companies Foundation, National Futures Association, the Chicago
Board Options Exchange, and Agnes Scott College. Dr. Phillips also was
a trustee of the Financial Accounting Foundation until the end of 2010.
She is a member of the Audit and Compensation Committees.

Dr. Phillips brings to the Board strong financial acumen, along with a
deep understanding of, and involvement with, the relationship between
corporations and the government. Her experience in academia brings
a unique and diverse viewpoint to the deliberations of the Board. Dr.
Phillips has been designated an Audit Committee financial expert.

Mr. Rogel was elected Chairman of the Board of Weyerhaeuser
Company, a forest products company, in 1999 and was President and
Chief Executive Officer and a director thereof from December 1997
to January 1, 2008 when he relinquished the role of President. He
relinquished the CEO role in April of 2008 and retired as Chairman as
of April 2009. Before that time Mr. Rogel was Chief Executive Officer,
President and a director of Willamette Industries, Inc. He served as Chief
Operating Officer of Willamette Industries, Inc. until October 1995
and, before that time, as an executive and group vice president for more
than five years. Mr. Rogel is a director of Union Pacific Corporation and
during the past five years was a director and non-executive Chairman
of the Board of EnergySolutions, Inc. He is a member of the Corporate
Governance and Financial Policy Committees.

Mr. Rogel has extensive experience
large
corporations at all levels. He brings to the Board a unique perspective,
having led a national supplier of paper products prior to his retirement.
Mr. Rogel previously served as Kroger’s Lead Director, and has served
on compensation, finance, audit, and governance committees of
other corporations.

in management of

Mr. Runde is a special advisor and a former Vice Chairman of Morgan
Stanley, a financial services provider, where he has been employed
since 1974. He was a member of the Board of Directors of Burlington
Resources Inc. prior to its acquisition by ConocoPhillips in 2006.
Mr. Runde serves as a Trustee Emeritus of Marquette University and
the Pierpont Morgan Library. He is a member of the Compensation
Committee and chair of the Financial Policy Committee.

Mr. Runde brings to Kroger’s Board a strong financial background,
having led a major financial services provider. He has served on the
compensation committee of a major corporation.

Name

Ronald L. Sargent

Director
Since

2006

Age

Professional
Occupation (1)

Mr. Sargent is Chairman and Chief Executive Officer of Staples, Inc., a
consumer products retailer, where he has been employed since 1989.
Prior to joining Staples, Mr. Sargent spent 10 years with Kroger in various
positions. In addition to serving as a director of Staples, Mr. Sargent is a
director of Five Below, Inc. During the past five years, he was a director
of Mattel, Inc. and The Home Depot, Inc. Mr. Sargent is chair of the Audit
Committee and a member of the Public Responsibilities Committee.

Mr. Sargent has over 30 years of retail experience, first with Kroger
and then with increasing levels of responsibility and leadership
at Staples, Inc. His efforts helped carve out a new market niche for
the international retailer that he leads. His understanding of retail
operations and consumer insights are of particular value to the Board.
Mr. Sargent has been designated an Audit Committee financial expert.

1999

Bobby S. Shackouls Until the merger of Burlington Resources Inc. and ConocoPhillips,
which became effective in 2006, Mr. Shackouls was Chairman of
the Board of Burlington Resources Inc., a natural resources business,
since July 1997 and its President and Chief Executive Officer since
December 1995. He had been a director of that company since 1995
and President and Chief Executive Officer of Burlington Resources
Oil and Gas Company (formerly known as Meridian Oil Inc.), a wholly-
owned subsidiary of Burlington Resources, since 1994. Mr. Shackouls is
a director of Plains GP Holdings, L.P. and Oasis Petroleum Inc. During
the past five years, Mr. Shackouls was a director of ConocoPhillips and
PNGS GP LLC, the general partner of PAA Natural Gas Storage, L.P.
Mr. Shackouls is a member of the Audit and Corporate Governance
Committees. Mr. Shackouls previously served as Kroger’s Lead Director.

Mr. Shackouls brings to the Board the critical thinking that comes
with a chemical engineering background, as well as his experience
leading a major natural resources company, coupled with his corporate
governance expertise.

(1) Except as noted, each of the directors has been employed by his or her present employer (or a subsidiary)

in an executive capacity for at least five years.

i N F o r M a t i o N c o N c e r N i N g t h e B o a r d o F d i r e c t o r S

c o M M i t t e e S o F t h e B o a r d

The Board of Directors has a number of standing committees including Audit, Compensation and
Corporate Governance. All standing committees are composed exclusively of independent directors. All Board
committees have charters that can be found on our corporate website at ir.kroger.com under Guidelines on
Issues of Corporate Governance.

The table below provides the current membership of our independent directors on each of the standing

committees of our Board of Directors.

Name
Reuben V. Anderson
Robert D. Beyer
Susan J. Kropf
David B. Lewis
Jorge P. Montoya
Clyde R. Moore
Susan M. Phillips
Steven R. Rogel
James A. Runde
Ronald L. Sargent
Bobby S. Shackouls

Audit
Committee

Compensation
Committee

Corporate
Governance
Committee
x
Chair

Chair
x

x
Chair
x

Financial
Policy
Committee

Public
Responsibilities
Committee
x

x
x
x

x
Chair

During 2013, the Audit Committee met five times, the Compensation Committee met four times, and
the Corporate Governance Committee met two times. The Audit Committee reviews financial reporting
and accounting matters pursuant to its charter and selects our independent accountants. The Compensation
Committee recommends for determination by the independent members of our Board the compensation of the
Chief Executive Officer, determines the compensation of Kroger’s other senior management, and administers
some of our incentive programs. Additional information on the Compensation Committee’s processes and
procedures for consideration of executive compensation are addressed in the Compensation Discussion and
Analysis below. The Corporate Governance Committee develops criteria for selecting and retaining members
of the Board, seeks out qualified candidates for the Board, and reviews the performance of the Board and,
along with the other independent board members, the CEO.

d i r e c t o r N o M i N a t i o N S

The Corporate Governance Committee will consider shareholder recommendations for nominees for
membership on the Board of Directors. If shareholders wish to nominate a person or persons for election
to the Board of Directors at our 2015 annual meeting, written notice must be submitted to the Company’s
Secretary, and received at our executive offices not later than January 14, 2015. Such notice should include the
name, age, business address and residence address of such person, the principal occupation or employment
of such person, the number of shares of the Company owned of record or beneficially by such person, and
any other information relating to the person that would be required to be included in a proxy statement
relating to the election of directors. The Secretary will forward the information to the Corporate Governance
Committee for its consideration. The Committee will use the same criteria in evaluating candidates submitted
by shareholders as it uses in evaluating candidates identified by the Committee. These criteria are:

• Demonstrated ability in fields considered to be of value in the deliberations of the Board, including

business management, public service, education, science, law, and government;

• Highest standards of personal character and conduct;

• Willingness to fulfill the obligations of directors and to make the contribution of which he or she is capable,
including regular attendance and participation at Board and committee meetings, and preparation for all
meetings, including review of all meeting materials provided in advance of the meeting; and

• Ability to understand the perspectives of Kroger’s customers, taking into consideration the diversity of

our customers, including regional and geographic differences.

Racial, ethnic, and gender diversity is an important element in promoting full, open, and balanced
deliberations of issues presented to the Board, and is considered by the Corporate Governance Committee.
Some consideration also is given to the geographic location of director candidates in order to provide a
reasonable distribution of members from the operating areas of the Company.

The Corporate Governance Committee typically recruits candidates for Board membership through its
own efforts and through suggestions from other directors and shareholders. The Committee on occasion has
retained an outside search firm to assist in identifying and recruiting Board candidates who meet the criteria
established by the Committee.

c o r P o r a t e g o v e r N a N c e

The Board of Directors has adopted Guidelines on Issues of Corporate Governance. These Guidelines,
which include copies of the current charters for the Audit, Compensation, and Corporate Governance
Committees, and the other committees of the Board of Directors, are available on our corporate website at
ir.kroger.com. Shareholders may obtain a copy of the Guidelines by making a written request to Kroger’s
Secretary at our executive offices.

i N d e P e N d e N c e

The Board of Directors has determined that all of the directors, with the exception of Messrs. Dillon
and McMullen, have no material relationships with Kroger and, therefore, are independent for purposes of
the New York Stock Exchange listing standards. The Board made its determination based on information
furnished by all members regarding their relationships with Kroger and its management, and other relevant
information. After reviewing the information, the Board determined that all of the non-employee directors
were independent because (i) they all satisfied the independence standards set forth in Rule 10A-3 of the
Securities Exchange Act of 1934, (ii) they all satisfied the criteria for independence set forth in Rule 303A.02
of the New York Stock Exchange Listed Company Manual, (iii) any business transactions between Kroger and
entities with which the directors are affiliated, the value of which falls below the thresholds identified by the
New York Stock Exchange listing standards, and (iv) none had any material relationships with us except for
those arising directly from their performance of services as a director for Kroger.

a u d i t c o M M i t t e e e x P e r t i S e

The Board of Directors has determined that Susan M. Phillips and Ronald L. Sargent, independent
directors who are members of the Audit Committee, are “audit committee financial experts” as defined by
applicable SEC regulations and that all members of the Audit Committee are “financially literate” as that term
is used in the NYSE listing standards.

c o d e o F e t h i c S

The Board of Directors has adopted The Kroger Co. Policy on Business Ethics, applicable to all officers,
employees and members of the Board of Directors, including Kroger’s principal executive, financial, and
accounting officers. The Policy is available on our corporate website at ir.kroger.com. Shareholders may
obtain a copy of the Policy by making a written request to Kroger’s Secretary at our executive offices. We
intend to satisfy the disclosure requirement regarding any amendment to, or a waiver from, a provision of
the Policy for our principal executive, financial and accounting officers by posting that information on our
website at ir.kroger.com.

c o M M u N i c a t i o N S w i t h t h e B o a r d

The Board has established two separate mechanisms for shareholders and interested parties to
communicate with the Board. Any shareholder or interested party who has concerns regarding accounting,
improper use of Kroger assets, or ethical improprieties may report these concerns via the toll-free hotline
(800-689-4609) or email address (helpline@kroger.com) established by the Board’s Audit Committee. The
concerns are investigated by Kroger’s Vice President of Auditing and reported to the Audit Committee as
deemed appropriate by the Vice President of Auditing.

Shareholders or interested parties also may communicate with the Board in writing directed to Kroger’s
Secretary at our executive offices. The Secretary will consider the nature of the communication and determine
whether to forward the communication to the chair of the Corporate Governance Committee. Communications
relating to personnel issues or our ordinary business operations, or seeking to do business with us, will be
forwarded to the business unit of Kroger that the Secretary deems appropriate. All other communications will
be forwarded to the chair of the Corporate Governance Committee for further consideration. The chair of the
Corporate Governance Committee will take such action as he or she deems appropriate, which may include
referral to the Corporate Governance Committee or the entire Board.

a t t e N d a N c e

The Board of Directors held seven meetings in 2013. During 2013, all incumbent directors attended at
least 75% of the aggregate number of meetings of the Board and committees on which that director served.
Members of the Board are expected to use their best efforts to attend all annual meetings of shareholders. All
fourteen members then serving on the Board attended last year’s annual meeting.

c o M P e N S a t i o N c o N S u l t a N t S

The Compensation Committee directly engages a compensation consultant from Mercer Human Resource
Consulting to advise the Committee in the design of compensation for executive officers. In 2013, Kroger paid
that consultant $375,944 for work performed for the Committee. Kroger, on management’s recommendation,
retained the parent and affiliated companies of Mercer Human Resource Consulting to provide other services
for Kroger in 2013, for which Kroger paid $4,743,100. These other services primarily related to insurance
claims (for which Kroger was reimbursed by insurance carriers as claims were adjusted), insurance brokerage
and bonding commissions, and pension consulting. Kroger also made payments to affiliated companies for
insurance premiums that were collected by the affiliated companies on behalf of insurance carriers, but these
amounts are not included in the totals referenced above, as the amounts were paid over to insurance carriers
for services provided by those carriers. Although neither the Committee nor the Board expressly approved
the other services, after taking into consideration the NYSE’s independence standards and the SEC rules,
the Committee determined that the consultant is independent and his work has not raised any conflict of
interest because (a) he was first engaged by the Committee before he became associated with Mercer; (b) he
works exclusively for the Committee and not for our management; (c) he does not benefit from the other
work that Mercer’s parent and affiliated companies perform for Kroger; and (d) neither the consultant nor the
consultant’s team perform any other services on behalf of Kroger.

No member of the Compensation Committee was an officer or employee of the Company during fiscal
year 2013, and no member of the Compensation Committee was formerly an officer of the Company or was
a party to any disclosable related person transaction involving the Company. During fiscal year 2013, none of
the executive officers of the Company served on the board of directors or on the compensation committee
of any other entity that has or had executive officers serving as a member of the Board of Directors or
Compensation Committee of the Company.

B o a r d o v e r S i g h t o F e N t e r P r i S e r i S k

While risk management is primarily the responsibility of Kroger’s management team, the Board of
Directors is responsible for the overall supervision of our risk management activities. The Board’s oversight of
the material risks faced by Kroger occurs at both the full Board level and at the committee level.

The Board’s Audit Committee has oversight responsibility not only for financial reporting of Kroger’s
major financial exposures and the steps management has taken to monitor and control those exposures,
but also for the effectiveness of management’s processes that monitor and manage key business risks facing
Kroger, as well as the major areas of risk exposure and management’s efforts to monitor and control that
exposure. The Audit Committee also discusses with management its policies with respect to risk assessment
and risk management.

Management, including Kroger’s Chief Ethics and Compliance Officer, provides regular updates
throughout the year to the respective committees regarding the management of the risks they oversee, and
each of these committees reports on risk to the full Board at each regular meeting of the Board.

In addition to the reports from the committees, the Board receives presentations throughout the year from
various department and business unit leaders that include discussion of significant risks as necessary. At each
Board meeting, the Chairman and the CEO address matters of particular importance or concern, including any
significant areas of risk that require Board attention. Additionally, through dedicated sessions focusing entirely
on corporate strategy, the full Board reviews in detail Kroger’s short- and long-term strategies, including
consideration of significant risks facing Kroger and their potential impact. The independent directors, in
executive sessions led by the Lead Director, address matters of particular concern, including significant areas
of risk, that warrant further discussion or consideration outside the presence of Kroger employees.

We believe that our approach to risk oversight, as described above, optimizes our ability to assess
inter-relationships among the various risks, make informed cost-benefit decisions, and approach emerging
risks in a proactive manner for Kroger. We also believe that our risk structure complements our current
Board leadership structure, as it allows our independent directors, through the five fully independent Board
committees, and in executive sessions of independent directors led by an independent Lead Director, to
exercise effective oversight of the actions of management, led by Mr. McMullen as CEO, in identifying risks
and implementing effective risk management policies and controls.

B o a r d l e a d e r S h i P S t r u c t u r e a N d l e a d d i r e c t o r

Our Board is composed of eleven independent non-employee directors, and two management directors,
Mr. Dillon, the Chairman of the Board and our former Chief Executive Officer, and Mr. McMullen, our Chief
Executive Officer. In addition, as provided in our Guidelines on Issues of Corporate Governance, the Board
has designated one of the independent directors as Lead Director. The Board has established five standing
committees — audit, compensation, corporate governance, financial policy, and public responsibilities. Each
Board committee is composed solely of independent directors, each with a different independent director
serving as committee chair. The mix of experienced independent and management directors that make up
our Board, along with the independent role of our Lead Director and our independent Board committees,
benefits Kroger and its shareholders.

The Board designates one of the independent directors as a Lead Director. The Lead Director serves
a variety of roles, including reviewing and approving Board agendas, meeting materials and schedules to
confirm the appropriate topics are reviewed and sufficient time is allocated to each; serving as liaison between
the Chairman of the Board, management, and the non-management directors; presiding at the executive
sessions of independent directors and at all other meetings of the Board of Directors at which the Chairman
of the Board is not present; calling an executive session of independent directors at any time and serving as
the Board’s representative for any consultation and direct communication, following a request, with major
shareholders. Unless otherwise determined by the Board, the chair of the Corporate Governance Committee
is designated as the Lead Director. Robert Beyer, an independent director and the chair of the Corporate
Governance Committee, is currently our Lead Director. Mr. Beyer is an effective Lead Director for Kroger
due to, among other things, his independence, his deep strategic and operational understanding of Kroger
obtained while serving as a Kroger director, his insight into corporate governance and his experience on
other boards.

With respect to the roles of Chairman and CEO, the Guidelines provide that the Board will determine
when it is in the best interests of Kroger and its shareholders for the roles to be separated or combined, and
the Board exercises its discretion as it deems appropriate in light of prevailing circumstances. As part of
the succession planning process, the Guidelines provide that upon the selection of a new Chief Executive
Officer, the Board will determine whether a separation of the offices is appropriate. The Board believes that
the combination or separation of these positions should continue to be considered as part of the succession
planning process, as was the case in 2003, and again in 2014, when the roles were separated.

Our Board and each of its committees conduct an annual evaluation to determine whether they are
functioning effectively. As part of this annual self-evaluation, the Board assesses whether the current leadership
structure continues to be appropriate for Kroger and its shareholders. Our Guidelines provide the flexibility
for our Board to modify our leadership structure in the future as appropriate. We believe that Kroger, like
many U.S. companies, has been well-served by this flexible leadership structure.

c o M P e N S a t i o N d i S c u S S i o N a N d a N a l y S i S

e x e c u t i v e c o M P e N S a t i o N – o v e r v i e w

As one of the largest retailers in the world, our executive compensation philosophy remains to attract
and retain the best management talent and to motivate these employees to achieve our business and financial
goals. We believe our strategy creates value for shareholders in a manner consistent with our focus on our core
values: honesty, integrity, respect, inclusion, diversity, and safety.

To achieve our objectives, our Compensation Committee seeks to ensure that compensation is competitive
and that there is a direct link between pay and performance. To do so, it is guided by the following principles:

• A significant portion of pay should be performance-based, increasing proportionally with an executive’s

level of responsibility;

• Compensation should include incentive-based pay to drive performance, providing superior pay for

superior performance, including both a short- and long-term focus;

• Compensation policies should include an opportunity for, and a requirement of, equity ownership; and

• Components of compensation should be tied to an evaluation of business and individual performance

measured against metrics that align with our business strategy.

The compensation of our senior executives in fiscal year 2013 reflects these principles. Total compensation
for the year is an indicator of how well Kroger performed compared to our business plan, reflecting how our
compensation program responds to business challenges and the marketplace. We continue to deliver sales
growth and positive earnings results.

• A key metric, identical supermarket sales, excluding the 53rd week in 2012 and fuel, increased 3.6% from
2012. Through fiscal 2013, we have achieved 41 consecutive quarters of positive identical sales growth.

• Net earnings per diluted share were $2.90, and even after taking into account several items that we
believe are necessary to make these results comparable to fiscal 2012, our results still exceeded our
guidance range.

• In September 2013, the Board of Directors raised the quarterly cash dividend by 10%, to $0.165 per share.

• Kroger’s stock price increased 29.4% in fiscal year 2013.

The Committee believes our management produced outstanding results in 2013, measured against
increasingly aggressive business plan objectives for sales, earnings, and our strategic plan. The compensation
paid to our named executive officers reflected this fact as the annual performance-based cash bonus paid out
at 104.949% of bonus potentials. The strong link between pay and performance is illustrated by a comparison
of the 2012 annual cash bonus, with an 85.881% payout. In 2012, we performed well but did not achieve all
of our business plan objectives. In 2013, all of our business plan goals were exceeded (with the exception of
our sales goal, which fell slightly short), resulting in an annual bonus payout that exceeded 100% of potentials.

In keeping with our overall compensation philosophy, we endeavor to ensure that our compensation

practices conform to best practices. In particular, over the past several years we have:

• put in place significant stock ownership guideline levels to reinforce the link between the interests of

our named executive officers and those of our shareholders;

• adopted claw-back policies under which the repayment of bonuses may be required

certain circumstances;

• eliminated tax gross-ups;

• adopted the recommendation of shareholders that they be permitted annually, on an advisory basis, to

vote on executive compensation; and

• adopted a policy prohibiting hedging and short sales, and restricting pledging, of Kroger common shares

by our officers and directors.

In addition, beginning in 2010, fifty percent of the time-based equity awards that otherwise would have
been granted to the named executive officers as restricted stock have been replaced with performance units
that are earned only to the extent that performance objectives are achieved. Equity compensation awards
continue to play an important role in rewarding named executive officers for the achievement of long-term
business objectives and providing incentives for the creation of shareholder value.

The following discussion and analysis addresses the compensation of the named executive officers, and
the factors considered by the Committee in setting compensation for the named executive officers and making
recommendations to the independent Board members in the case of the CEO’s compensation. Additional
detail is provided in the compensation tables and the accompanying narrative disclosures that follow this
discussion and analysis.

e x e c u t i v e c o M P e N S a t i o N – o B j e c t i v e S

The Committee has several related objectives regarding compensation. First, the Committee believes
that compensation must be designed to attract and retain those best suited to fulfill the challenging roles
that executive officers play at Kroger. Second, some elements of compensation should help align the interests
of the officers with your interests as shareholders. Third, compensation should create strong incentives for
the officers (a) to achieve the annual business plan targets established by the Board, and (b) to achieve
Kroger’s long-term strategic objectives. In developing compensation programs and amounts to meet these
objectives, the Committee exercises judgment to ensure that executive officer compensation is appropriate
and competitive in light of Kroger’s performance and the needs of the business.

S h a r e o w N e r S h i P g u i d e l i N e S

To more closely align the interests of the officers with your interests as shareholders, the Board of
Directors has adopted stock ownership guidelines. These guidelines require non-employee directors, officers
and some other key executives to acquire and hold a minimum dollar value of Kroger common shares. The
guidelines require the CEO to acquire and maintain ownership of Kroger shares equal to five times his
base salary; the Chief Operating Officer at four times his base salary; Executive Vice Presidents, Senior Vice
Presidents and non-employee directors at three times their base salaries or annual base cash retainers; and
other officers and key executives at two times their base salaries. Covered individuals are expected to achieve
the target level within five years of appointment to their position. Kroger shares, including equity awards
from Kroger, may not be sold by covered individuals prior to achieving holdings required by the guidelines
(other than to pay for the exercise price of options and the taxes associated with equity awards), without the
approval of Kroger’s CEO.

r e S u l t S o F 2 0 1 3 a d v i S o r y v o t e t o a P P r o v e e x e c u t i v e c o M P e N S a t i o N

At the 2013 Annual Meeting of Shareholders, we held our third annual advisory vote on executive
compensation. Over 97% of the votes cast were in favor of the advisory proposal in 2013. The Committee
considered this overwhelmingly favorable outcome and believes it conveys our shareholders’ support of the
Committee’s decisions and the existing executive compensation programs. As a result, the Committee made
no material changes in the structure of our compensation programs or pay for performance philosophy. At the
2014 Annual Meeting of Shareholders, in keeping with our shareholders’ request for an annual advisory vote,
we will again hold a vote to approve executive compensation (see page 55). The Committee will continue to
consider the results from this year’s and future advisory votes on executive compensation.

r o l e o F c o M P e N S a t i o N c o M M i t t e e

The Compensation Committee of the Board has the primary responsibility for establishing the
compensation of Kroger’s executive officers, including the named executive officers, with the exception
of the Chief Executive Officer. The Committee’s role regarding the CEO’s compensation is to make
recommendations to the independent members of the Board; those independent Board members establish
the CEO’s compensation.

e S t a B l i S h i N g e x e c u t i v e c o M P e N S a t i o N

The independent members of the Board have the exclusive authority to determine the amount of the
CEO’s salary; the bonus potential for the CEO; the nature and amount of any equity awards made to the
CEO; and any other compensation questions related to the CEO. In setting the annual bonus potential for
the CEO, the independent directors determine the dollar amount that will be multiplied by the percentage
payout under the annual bonus plan generally applicable to all corporate management, including the named
executive officers. The independent directors retain discretion to reduce the percentage payout the CEO
would otherwise receive. The independent directors thus make a separate determination annually concerning
both the CEO’s bonus potential and the percentage of bonus paid.

The Committee performs the same function and exercises the same authority as to the other named
executive officers. The Committee’s annual review of compensation for the named executive officers includes
the following:

• Conducts an annual review of all components of compensation, quantifying total compensation for the
named executive officers on tally sheets. The review includes a summary for each named executive officer
of salary; annual performance-based cash bonus; long-term performance-based cash and performance
unit compensation; equity; accumulated realized and unrealized stock option gains and restricted stock
and performance unit values; the value of any perquisites; retirement benefits; severance benefits
available under The Kroger Co. Employee Protection Plan; and earnings and payouts available under
Kroger’s nonqualified deferred compensation program.

• Considers internal pay equity at Kroger to ensure that the CEO is not compensated disproportionately.
The Committee has assured itself that the compensation of Kroger’s CEO and that of the other named
executive officers bears a reasonable relationship to the compensation levels of other executive positions
at Kroger taking into consideration performance and differences in responsibilities.

• Reviews a report from the Committee’s compensation consultants (described below) comparing named
executive officer and other senior executive compensation with that of other companies, primarily our
competitors, to ensure that the Committee’s objectives of competitiveness are met.

• Takes into account a recommendation from the CEO (except in the case of his own compensation) for
salary, bonus potential, and equity awards for each of the senior officers including the other named
executive officers. The CEO’s recommendation takes into consideration the objectives established by
and the reports received by the Committee as well as his assessment of individual job performance and
contribution to our management team.

• Looks at historical information regarding salary, bonus, and equity compensation for a 3-year period.

In considering each of the factors above, the Committee does not make use of a formula, but rather

subjectively reviews each in setting compensation.

t h e c o M M i t t e e ’ S c o M P e N S a t i o N c o N S u l t a N t S a N d B e N c h M a r k i N g

As referenced earlier in this compensation discussion and analysis, the Committee directly engages a
compensation consultant from Mercer Human Resource Consulting to advise the Committee in the design of
compensation for executive officers.

The Mercer consultant conducts an annual competitive assessment of executive positions at Kroger
for the Committee. The assessment is one of several bases, as described above, on which the Committee
determines compensation. The consultant assesses:

• Base salary;

• Target annual performance-based bonus;

• Target annual cash compensation (the sum of salary and annual bonus);

• Annualized long-term incentive awards, such as stock options, restricted shares, and performance-based

long-term cash bonuses and performance-based equity awards; and

• Total direct compensation (the sum of all these elements).

The consultant compares these elements against those of other companies in a group of publicly-traded

food and drug retailers. For 2013, the group consisted of:

Costco Wholesale
CVS/Caremark
Rite Aid
Safeway

Supervalu
Target
Wal-Mart
Walgreens

This peer group is the same group as was used in 2012. The make-up of the compensation peer group
is reviewed annually and modified as circumstances warrant. Industry consolidation and other competitive
forces will change the peer group used over time. The consultant also provides the Committee data from
companies in “general industry,” a representation of major publicly-traded companies. These data are reference
points, particularly for senior staff positions where competition for talent extends beyond the retail sector.

In 2009, the Committee directly engaged an additional compensation consultant to conduct a review
of Kroger’s executive compensation. This consultant, from Frederic W. Cook & Co., Inc., examined the
compensation philosophy, peer group composition, annual cash bonus, and long-term incentive compensation
including equity awards. The consultant concluded that Kroger’s executive compensation program met the
Committee’s objectives, and that it provides a strong linkage between pay and performance. The Committee
expects to engage an additional compensation consultant from time to time as it deems advisable.

Considering the size of Kroger in relation to other peer group companies, the Committee believes that
salaries paid to our executive officers should be at or above the median paid by competitors for comparable
positions. The committee also aims to provide an annual bonus potential to our executive officers that, if
the increasingly more challenging annual business plan objectives are achieved, would cause total cash
compensation to be meaningfully above the median.

c o M P o N e N t S o F e x e c u t i v e c o M P e N S a t i o N a t k r o g e r

Compensation for our named executive officers is comprised of the following:

• Salary;

• Performance-Based Annual Cash Bonus (annual, non-equity incentive pay);

• Performance-Based

Long-Term Compensation

(long-term,

cash

and performance

unit

incentive compensation);

• Other Equity (non-qualified stock options and restricted stock);

• Retirement and other benefits; and

• Perquisites.

S a l a r y

We provide our named executive officers and other employees a fixed amount of cash compensation –
salary – for their work. Salaries for named executive officers (with the exception of the CEO) are established
each year by the Committee, in consultation with the CEO. The CEO’s salary is established by the independent
directors. Salaries for the named executive officers were reviewed in June 2013.

The amount of each executive’s salary is influenced by numerous factors including:

• An assessment of individual contribution in the judgment of the CEO and the Committee (or, in the case

of the CEO, of the Committee and the rest of the independent directors);

• Benchmarking with comparable positions at peer group companies;

• Tenure; and

• Relationship with the salaries of other executives at Kroger.

The assessment of individual contribution is based on a subjective determination, without the use of

performance targets, in the following areas:

• Leadership;

• Contribution to the officer group;

• Achievement of established objectives, to the extent applicable;

• Decision-making abilities;

• Performance of the areas or groups directly reporting to the officer;

• Increased responsibilities;

• Strategic thinking; and

• Furtherance of Kroger’s core values.

The amounts shown below reflect the salaries of the named executive officers in effect following the

annual review of their compensation in June.

David B. Dillon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
W. Rodney McMullen* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
J. Michael Schlotman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kathleen S. Barclay** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paul W. Heldman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Michael L. Ellis*** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Salaries
2012
$1,330,000
$ 939,600
$ 671,100
— $ 677,300
$ 763,000

2011
$1,290,000
$ 910,000
$ 650,000

$ 739,000
—

2013
$1,370,000
$ 968,600
$ 704,655
$ 700,000
$ 786,000
— $ 527,360

Mr. McMullen’s salary increased to $1,100,000 effective with his promotion to CEO on January 1, 2014.

** Ms. Barclay became a named executive officer in 2012.

*** Mr. Ellis became a named executive officer in 2013. His salary increased to $775,000 effective with his

promotion to President and COO on January 1, 2014.

P e r F o r M a N c e - B a S e d a N N u a l c a S h B o N u S

A large percentage of our employees at all levels, including the named executive officers, are eligible to
receive a performance-based annual cash bonus based on the performance of Kroger (in the case of the named
executive officers) or business unit (in the case of employees in our business units). The Committee establishes
bonus potentials for each executive officer, other than the CEO whose bonus potential is established by the
independent directors. Actual payouts, which can exceed 100% of the potential amounts but may not exceed
200% of the potential amounts, represent the extent to which performance meets or exceeds the thresholds
established by the Committee.

The Committee considers several factors in making its determination or recommendation as to bonus
potentials. First, the individual’s level within the organization is a factor in that the Committee believes
that more senior executives should have a substantial part of their compensation dependent upon Kroger’s
performance. Second, the individual’s salary is a factor so that a substantial portion of a named executive
officer’s total cash compensation is dependent upon Kroger’s performance. Finally, the Committee considers
the reports of its compensation consultants to assess the bonus potential of the named executive officers in
light of total compensation paid to comparable executive positions in the industry.

The annual cash bonus potential in effect following the annual review of compensation in June for each
named executive officer is shown below. Actual bonus payouts are prorated to reflect changes, if any, to bonus
potentials during the year.

2011
$1,500,000
$1,000,000
$ 525,000

$ 550,000

Annual Bonus Potential
2012
$1,500,000
$1,000,000
$ 550,000
— $ 550,000
$ 550,000

2013
$1,500,000
$1,000,000
$ 550,000
$ 550,000
$ 550,000
— $ 375,000

— $

* Mr. McMullen’s annual bonus potential increased to $1,500,000 effective with his promotion to CEO on

January 1, 2014.

** Ms. Barclay became a named executive officer in 2012.

*** Mr. Ellis became a named executive officer in 2013. His annual bonus potential increased to $750,000

effective with his promotion to President and COO on January 1, 2014.

Over time the Committee and our independent directors have placed an increased emphasis on our
strategic plan by making the target more difficult to achieve. The bonus plan allows for minimal bonus
to be earned at relatively low levels of performance to provide incentive for achieving even higher levels
of performance.

The amount of bonus that the named executive officers earn each year is determined by Kroger’s
performance compared to targets established by the Committee and our independent directors based on
the business plan adopted by the Board of Directors. In 2013, one-third of the bonus was based on a target
for identical sales without fuel; one-third was based on a target for EBITDA without fuel; and one-third was
based on implementation and results of a set of measures under our strategic plan. An additional 5% would
be earned if Kroger achieved three goals with respect to its supermarket fuel operations: achievement of the
targeted fuel EBITDA, increase of at least 3% in total gallons sold, and achievement of the planned number of
fuel centers placed in service.

Following the close of the year, the Committee reviewed Kroger’s performance against the identical sales
without fuel, EBITDA without fuel, and strategic plan objectives and determined the extent to which Kroger
achieved those objectives. Kroger’s EBITDA without fuel for 2013 was $4.245 billion and Kroger’s identical
sales without fuel for 2013 were 3.5%. In 2013, Kroger’s supermarket fuel EBITDA was $232.990 million,
which exceeded the goal of $184.875 million necessary to earn a bonus for the fuel component. Kroger’s fuel
gallon sales in supermarket fuel centers were 4.431 billion gallons, or 6.6% over the prior year. We operated
1,240 supermarket fuel centers as of the end of 2013, exceeding our goal of 1,235 centers. As a result, the
payout percentage included the additional 5% fuel bonus. Due to our performance when compared to the
targets established by the Committee, and based on the business plan adopted by the Board of Directors,
the named executive officers earned 104.949% of their bonus potentials. This is the same bonus percentage
payout received by all other participants in the annual corporate bonus plan.

The 2013 targets established by the Committee for annual bonus amounts based on identical sales
without fuel and EBITDA without fuel results, the actual 2013 results, and the bonus percentage earned in
each of the components of named executive officer bonus, were as follows:

Targets

Component
Identical Sales without fuel . . . . . . . . .
EBITDA without fuel . . . . . . . . . . . . . .
Strategic Plan . . . . . . . . . . . . . . . . . . . .
Fuel Bonus . . . . . . . . . . . . . . . . . . . . . .
Total Earned . . . . . . . . . . . . . . . . . . . . .

Minimum
1.6%
$3.583 Billion
**

100%
3.6%
$4.216 Billion*
**
[as described in the text above]

Result
3.5%
$4.245 Billion
**

Amount Earned
31.679%
34.474%
33.796 %
5.000%
104.949%

Payout is at 125% if identical sales goal is achieved.

The Strategic Plan component also was established by the Committee, but is not disclosed as it is
competitively sensitive.

In 2013, as in all years, the Committee retained discretion to reduce the bonus payout for all executive
officers, including the named executive officers, if the Committee determined for any reason that the bonus
payouts were not appropriate. The independent directors retained that discretion for the CEO’s bonus. Those
bodies also retained discretion to adjust the targets under the plan should unanticipated developments arise
during the year. No adjustments were made to the targets in 2013. The Committee, and the independent
directors in the case of the CEO, determined that the bonus payouts for the named executive officers should
remain the same as other participants.

The percentage paid for 2013 represented excellent performance that exceeded our business plan
objectives. A comparison of bonus percentages for the named executive officers in prior years demonstrates
the variability of annual cash bonus incentive compensation:

Fiscal Year
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004

Annual Cash Bonus
Percentage
104.949%
85.881%
138.666%
53.868%
38.450%
104.948%
128.104%
141.118%
132.094%
55.174%

The actual amounts of annual performance-based cash bonuses paid to the named executive officers
for 2013 are reported in the Summary Compensation Table under the heading “Non-Equity Incentive Plan
Compensation” and footnote 4. These amounts represent the bonus potentials for each named executive
officer multiplied by the 104.949% payout percentage earned in 2013. In no event can any participant receive
a performance-based annual cash bonus in excess of $5,000,000. The maximum amount that a participant,
including each named executive officer, can earn is further limited to 200% of the participant’s bonus
potential amount.

The performance-based annual cash bonus for 2014 will be determined based on Kroger’s performance
against the identical sales without fuel, EBITDA without fuel, strategic plan, and operating costs as a percentage
of sales objectives established by the Committee. The first three metrics will be weighted at 30% each and
the final metric will be weighted at 10%. The underlying strategy metrics have been revised from prior years
to focus on shorter-term measures, as the long-term bonus emphasizes long-term performance. The 2014 plan
also provides for an additional 5% payout if our goals for supermarket fuel EBITDA, supermarket fuel gallons
sold, and targeted number of fuel centers in operation at the fiscal year end are achieved.

l o N g - t e r M i N c e N t i v e S

The Committee believes in the importance of providing an incentive to the named executive officers
to achieve the long-term goals established by the Board of Directors by conditioning a significant portion of
compensation on the achievement of those goals.

In 2006, the Committee adopted the first in a series of long-term performance based compensation
plans designed to reward participants for their contribution to the long-term performance of Kroger. These
earlier plans provided for overlapping four year performance periods that allowed for the earning of a long-
term cash bonus. In 2010, Kroger’s long-term incentive program was redesigned to combine the total value of
our long-term cash bonus and equity programs into a cohesive, strategic reward for eligible executives at the
Vice President level and above. Approximately fifty percent of the plan value is performance-based, delivered
in cash and performance units, contingent on the achievement of certain strategic performance measures.
The other fifty percent of the value is time-based and delivered in stock options and restricted shares. Each
component is described in more detail below.

P e r F o r M a N c e B a S e d l o N g - t e r M c o M P e N S a t i o N

The long-term incentive plan adopted in 2010 (and earned in 2012) provides the model for our combined
plan structure. Subsequent plans have been adopted each year thereafter. Each of these plans has the
following characteristics:

• Performance is measured over a three year period.

• Between 130 and 170 executives, including the named executive officers, participate in each plan.

• Awards include both cash and performance units.

The cash bonus base equals the executive’s salary at the end of the fiscal year preceding the plan
adoption date (or for those participants entering the plan after the commencement date, as of the
date of commencing participation in the plan).

Ø A fixed number of performance units is awarded to each participant. The awards are paid out
in Kroger common shares, along with a cash amount equal to the dividends paid during the
performance period on the number of issued common shares.

• Compensation under the plans is earned based on our performance against metrics established by the

Committee at the beginning of the performance period.

• The payout percentage, based on the extent to which the performance metrics are achieved, is applied

to both the bonus base and the number of performance units awarded.

• Actual payouts cannot exceed 100% of the cash bonus base or 100% of the number of performance

units awarded.

• In no event can a cash bonus award exceed $5,000,000.

The following table summarizes each of the long-term performance based plans for the years shown:

2011 Plan
Performance Period 2011 to 2013

2012 Plan
2012 to 2014

2013 Plan

2014 Plan

2013 to 2015

2014 to 2016

Payout Date

March 2014

March 2015

March 2016

March 2017

Cash Bonus Base

Salary at end of
fiscal year 2010*

Salary at end of
fiscal year 2011*

Salary at end of fiscal
year 2012*

Salary at end of fiscal
year 2013*

Performance Metrics

Strategic Plan

Reduction in
Operating Cost as
a Percentage of
Sales, Excluding
Fuel

Improvement
in Associate
Engagement

2% payout per unit
improvement

0.50% payout per
0.01% reduction in
operating costs
Baseline: 27.60%

0.50% payout per
0.01% reduction in
operating costs
Baseline: 27.09%

0.50% payout per
0.01% reduction in
operating costs
Baseline: 26.69%

0.50% payout per
0.01% reduction in
operating costs
Baseline: 26.61%

2% payout per unit
improvement

4% payout per unit
improvement

Return on
Invested Capital

N/A

1% payout per 0.01%
improvement in ROIC
Baseline: 13.41%

1% payout per 0.01%
improvement in ROIC
Baseline: 13.43%

Or date of plan entry, if later.

At the time of adopting new long-term plans, the Committee has made adjustments to the percentage
payouts for the components of the long-term plans to account for the increasing difficulty of achieving
compounded improvement.

The Committee anticipates adopting a new plan each year, measuring improvement over successive

three-year periods.

The long-term performance based plan adopted in 2011, which measured improvements through fiscal

year 2013, paid out in March 2014 and was calculated as follows:

Component
Strategic Plan . . . . . . . . . . . . . . . . . . . . .
Associate Engagement . . . . . . . . . . . . .
Operating Costs, as a Percentage of

Baseline Result

*
*

Improvement
6 units of improvement
8 units of improvement

Multiplier
2%
2%

Percentage
Earned
12.00%
6.00%

Sales, Excluding Fuel . . . . . . . . . . . . 27.60% 26.76% 84 basis point improvement

0.50%

Total Earned . . . . . . . . . . . . . . . . . . . . . .

42.00%
70.00%

The Strategic Plan and Associate Engagement components were established by the Committee but are
not disclosed as they are competitively sensitive.

Accordingly, each named executive officer received cash in an amount equal to 70.00% of that executive’s
long-term cash bonus base, and was issued the number of Kroger common shares equal to 70.00% of the
number of performance units awarded to that executive, along with a cash amount equal to the dividends paid
on that number of common shares during the three year performance period. Payout for the cash components
of the 2011 plan are reported in the “Non-Equity Incentive Plan Compensation” and “All Other Compensation”
columns of the Summary Compensation Table and footnotes 4 and 6 to that table, and the common shares
issued under the plan are reported in the Options Exercised and Stock Vested Table and footnote 2 to that table.

Equity Awards

Awards based on Kroger’s common shares are granted periodically to the named executive officers and
a large number of other employees. Equity participation aligns the interests of employees with your interest as
shareholders, and Kroger historically has distributed equity awards widely. In 2013, Kroger granted 4,211,102
stock options to approximately 8,151 employees, including the named executive officers. The options permit
the holder to purchase Kroger common shares at an option price equal to the closing price of Kroger common
shares on the date of the grant. Options are granted only on one of the four dates of Compensation Committee
meetings conducted after Kroger’s public release of its quarterly earnings results.

Kroger’s long-term incentive plans also provide for other equity-based awards, including restricted stock
and performance units. During 2013, Kroger awarded 3,116,214 shares of restricted stock to approximately
20,214 employees, including the named executive officers; and 413,588 performance units to approximately
167 employees. Performance units provide for the issuance of Kroger common shares to participants, after
the completion of the three year performance period, based on the extent to which the performance goals
established at the beginning of the performance period have been achieved.

The Committee considers several factors in determining the amount of options, restricted shares, and
performance units awarded to the named executive officers or, in the case of the CEO, recommending to the
independent directors the amount awarded. These factors include:

• The compensation consultant’s benchmarking report regarding equity-based and other long-term

compensation awarded by our competitors;

• The officer’s level in the organization and the internal relationship of equity-based awards within Kroger;

• Individual performance; and

• The recommendation of the CEO, for all named executive officers other than the CEO.

The Committee has long recognized that the amount of compensation provided to the named executive
officers through equity-based pay is often below the amount paid by our competitors. Lower equity-based
awards for the named executive officers and other senior management permit a broader base of Kroger
employees to participate in equity awards.

Amounts of equity awards issued and outstanding for the named executive officers are set forth in the

tables that follow this discussion and analysis.

r e t i r e M e N t a N d o t h e r B e N e F i t S

Kroger maintains a defined benefit and several defined contribution retirement plans for its employees.
The named executive officers participate in one or more of these plans, as well as one or more excess plans
designed to make up the shortfall in retirement benefits created by limitations under the Internal Revenue
Code on benefits to highly compensated individuals under qualified plans. Additional details regarding
retirement benefits available to the named executive officers can be found in the 2013 Pension Benefits table
and the accompanying narrative description that follows this discussion and analysis.

Kroger also maintains an executive deferred compensation plan in which some of the named executive
officers participate. This plan is a nonqualified plan under which participants can elect to defer up to 100%
of their cash compensation each year. Compensation deferred bears interest, until paid out, at the rate
representing Kroger’s cost of ten-year debt in the year the rate is set, as determined by Kroger’s CEO, and
reviewed with the Committee, prior to the beginning of each deferral year. In 2013, that rate was 3.8%.
Deferred amounts are paid out only in cash, in accordance with a deferral option selected by the participant
at the time the deferral election is made.

We adopted The Kroger Co. Employee Protection Plan, or KEPP, during fiscal year 1988. That plan was
amended and restated in 2007. All of our management employees and administrative support personnel whose
employment is not covered by a collective bargaining agreement, with at least one year of service, are covered.
KEPP provides for severance benefits and extended Kroger-paid health care, as well as the continuation of
other benefits as described in the plan, when an employee is actually or constructively terminated without

cause within two years following a change in control of Kroger (as defined in the plan). Participants are
entitled to severance pay of up to 24 months’ salary and bonus. The actual amount is dependent upon pay
level and years of service. KEPP can be amended or terminated by the Board at any time prior to a change
in control.

Stock option, restricted stock and performance unit agreements with participants in Kroger’s long-term
incentive plans provide that those awards “vest,” with options becoming immediately exercisable, restrictions
on restricted stock lapsing, and common shares equal to 50% of the performance units being awarded, upon
a change in control as described in the agreements.

None of the named executive officers is party to an employment agreement.

P e r q u i S i t e S

The Committee does not believe that it is necessary for the attraction or retention of management talent
to provide the named executive officers a substantial amount of compensation in the form of perquisites. In
2013, the only perquisites available to our named executive officers were:

• premiums paid on life insurance policies,

• premiums paid on accidental death and dismemberment insurance; and

• premiums paid on long-term disability insurance policies.

The life insurance benefit was offered beginning several years ago to replace a split-dollar life insurance
benefit that was substantially more costly to Kroger. Currently, 159 active executives, including the named
executive officers, and 87 retired executives, receive this benefit.

In addition, the named executive officers are entitled to the following benefit that does not constitute a
perquisite as defined by SEC rules: personal use of Kroger aircraft, which officers may lease from Kroger and
pay the average variable cost of operating the aircraft, making officers more available and allowing for a more
efficient use of their time.

The total amount of perquisites furnished to the named executive officers is shown in the Summary

Compensation Table and described in more detail in footnote 6 to that table.

e x e c u t i v e c o M P e N S a t i o N r e c o u P M e N t P o l i c y

If a material error of facts results in the payment to an executive officer at the level of Group Vice
President or higher of an annual bonus or a long-term bonus in an amount higher than otherwise would
have been paid, as determined by the Committee, then the officer, upon demand from the Committee,
will reimburse Kroger for the amounts that would not have been paid if the error had not occurred. This
recoupment policy applies to those amounts paid by Kroger within 36 months prior to the detection and
public disclosure of the error. In enforcing the policy, the Committee will take into consideration all factors
that it deems appropriate, including:

• The materiality of the amount of payment involved;

• The extent to which other benefits were reduced in other years as a result of the achievement of

performance levels based on the error;

• Individual officer culpability, if any; and

• Other factors that should offset the amount of overpayment.

h e d g i N g P o l i c y

After considering best practices related to ownership of company shares, the Board adopted a policy
regarding hedging, pledging, and short sales of Kroger securities. Kroger directors and officers are prohibited
from engaging, directly or indirectly, in hedging transactions in, or short sales of, Kroger securities. In
addition, they are precluded from pledging Kroger securities as collateral for a loan, except to the extent that
shares so pledged are in excess of the number of shares the individual is required to maintain in accordance
with Kroger’s share ownership guidelines more particularly described earlier in this compensation discussion
and analysis.

S e c t i o N 1 6 2 ( M ) o F t h e i N t e r N a l r e v e N u e c o d e

Tax laws place a deductibility limit of $1,000,000 on some types of compensation for the CEO and the
next four most highly compensated officers reported in this proxy because they are among the four highest
compensated officers (“covered employees”). In Kroger’s case, this group of individuals is not identical to the
group of named executive officers. Compensation that is deemed to be “performance-based” is excluded for
purposes of the calculation and is tax deductible. Awards under Kroger’s long-term incentive plans, when
payable upon achievement of stated performance criteria, should be considered performance-based and the
compensation paid under those plans should be tax deductible. Generally, compensation expense related to
stock options awarded to the CEO and the next four most highly compensated officers should be deductible.
On the other hand, Kroger’s awards of restricted stock that vest solely upon the passage of time are not
performance-based. As a result, compensation expense for those awards to the covered employees is not
deductible, to the extent that the related compensation expense, plus any other expense for compensation
that is not performance-based, exceeds $1,000,000.

Kroger’s bonus plans rely on performance criteria, and have been approved by shareholders. As a result,

bonuses paid under the plans to the covered employees will be deductible by Kroger.

Kroger’s policy is, primarily, to design and administer compensation plans that support the achievement
of long-term strategic objectives and enhance shareholder value. Where it is material and supports Kroger’s
compensation philosophy, the Committee also will attempt to maximize the amount of compensation expense
that is deductible by Kroger.

c o M P e N S a t i o N c o M M i t t e e r e P o r t

The Compensation Committee has reviewed and discussed with management of the Company the
Compensation Discussion and Analysis contained in this proxy statement. Based on its review and discussions
with management, the Compensation Committee has recommended to the Company’s Board of Directors that
the Compensation Discussion and Analysis be included in the Company’s proxy statement and incorporated
by reference into its annual report on Form 10-K.

Compensation Committee:
Clyde R. Moore, Chair
Jorge P. Montoya
Susan M. Phillips
James A. Runde

e x e c u t i v e c o M P e N S a t i o N

S u M M a r y c o M P e N S a t i o N t a B l e

The following table shows the compensation of the former Chief Executive Officer, Chief Executive
Officer, Chief Financial Officer and each of the Company’s three most highly compensated executive officers
other than the former CEO, CEO and CFO (the “named executive officers”) during the fiscal years presented:

S u M M a r y c o M P e N S a t i o N t a B l e

Name and Principal
Position
(1)
David B. Dillon

Salary
($)

Bonus
($)

Year

Stock
Awards
($)
(2)

Option
Awards
($)
(3)

2013 $1,346,161
Chairman and Former
2012 $1,328,320
Chief Executive Officer 2011 $1,273,871

— $5,709,429 $2,781,910
— $3,332,852 $1,342,088
— $3,130,540 $1,716,693

Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
(5)
$
15,376
$3,380,527
$3,088,686

Non-Equity
Incentive Plan
Compensation
($)
(4)
$2,456,235
$1,600,065
$2,699,153

All Other
Compensation
($)
(6)
$459,584
$301,985
$232,820

Total
($)

$12,768,695
$11,285,837
$12,141,763

W. Rodney McMullen

2013 $ 962,731
Chief Executive Officer 2012 $ 937,732
2011 $ 899,113

— $5,062,435 $ 907,862
— $1,087,655 $ 437,983
— $1,009,368 $ 553,506

$1,722,946
$1,079,085
$1,821,903

J. Michael Schlotman

Senior Vice President
and Chief Financial
Officer

2013 $ 688,599
2012 $ 669,787
2011 $ 631,371

— $1,564,689 $ 509,088
— $ 609,908 $ 245,602
— $ 503,801 $ 276,269

$1,004,220
$ 602,146
$1,002,310

$
63,518
$1,415,003
$1,768,792

$
—
$ 822,669
$ 990,524

$166,329
$124,998
$104,573

$ 8,885,821
$ 5,082,456
$ 6,157,255

$ 85,176
$ 60,137
$ 45,269

$ 3,851,772
$ 3,010,249
$ 3,449,544

Kathleen S. Barclay

Senior Vice President

2013 $ 686,702
2012 $ 675,972

— $1,436,930 $ 307,838
— $ 491,998 $ 148,512

$1,026,620
$ 628,271

$
$

—
—

$144,953
$ 96,054

$ 3,603,043
$ 2,040,807

Paul W. Heldman

Executive Vice
President, Secretary
and General Counsel

2013 $ 772,298
2012 $ 761,501
2011 $ 730,682

— $ 944,621 $ 460,267
— $ 551,418 $ 222,048
— $ 479,075 $ 262,710

$1,084,020
$ 648,071
$1,110,126

$
11,645
$1,266,466
$1,374,309

$156,184
$115,715
$ 96,977

$ 3,429,035
$ 3,565,219
$ 4,053,879

Michael L. Ellis

2013 $ 539,576

— $1,484,681 $ 236,283

$ 755,571

1,944

$ 64,332

$ 3,082,387

President and
Chief Operating Officer

(1) Mr. McMullen was promoted to Chief Executive Officer on January 1, 2014 when Mr. Dillon retired from
his position as Chief Executive Officer. Mr. Dillon remains as Chairman of the Board. Ms. Barclay became
a named executive officer in 2012. Mr. Ellis became a named executive officer in 2013 and became
President and Chief Operating Officer on January 1, 2014.

(2) The stock awards reflected in the table consist of both time-based and performance-based awards
granted under the Company’s long-term incentive plans. With respect to time-based awards, or restricted
stock, the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 is as follows:
Mr. Dillon: $4,227,912; Mr. McMullen: $4,578,950; Mr. Schlotman: $1,293,572; Ms. Barclay: $1,272,990;
Mr. Heldman: $699,504; and Mr. Ellis: $1,358,848.

The value of the performance-based awards, or performance units, reflected in the table is as follows:
Mr. Dillon: $1,481,517; Mr. McMullen: $483,485; Mr. Schlotman: $271,117; Ms. Barclay: $163,940;
Mr. Heldman: $245,117; and Mr. Ellis: $125,833. The reported amounts reflect the aggregate fair value
at the grant date based on the probable outcome of the performance conditions. These amounts are
consistent with the estimate of aggregate compensation cost to be recognized by the Company over the
three-year performance period of the award determined as of the grant date under FASB ASC Topic 718,
excluding the effect of estimated forfeitures.

Assuming that the highest level of performance conditions is achieved, the value of the performance unit
awards at the grant date is as follows: Mr. Dillon $2,963,033; Mr. McMullen: $966,970; Mr. Schlotman:
$542,234; Ms. Barclay: $327,881; Mr. Heldman: $490,233; and Mr. Ellis: $251,666. These amounts are
required to be reported in a footnote and are not reflected in the table.

The assumptions used in calculating the valuation are set forth in Note 12 to the consolidated financial
statements in Kroger’s 10-K for fiscal year 2013 ended February 1, 2014.

(3) These amounts represent the aggregate grant date fair value of awards computed in accordance with
FASB ASC Topic 718. The assumptions used in calculating the valuation are set forth in Note 12 to the
consolidated financial statements in Kroger’s 10-K for fiscal year 2013 ended February 1, 2014.

(4) Non-equity incentive plan compensation earned for 2013 consists of the following two amounts for each

named executive officer:

In accordance with the terms of the 2013 performance-based annual cash bonus program, Kroger paid
104.959% of bonus potentials for the executive officers including the named executive officers. Payments
were made in the following amounts: Mr. Dillon: $1,574,235; Mr. McMullen: $1,099,946; Mr. Schlotman:
$577,220; Ms. Barclay: $577,220; Mr. Heldman: $577,220; and Mr. Ellis: $431,401. These amounts were
earned with respect to performance in 2013, and paid in March 2014.

The 2011 Long-Term Bonus Plan is a performance-based bonus plan designed to reward participants
for improving the long-term performance of the Company. The plan covered performance during fiscal
years 2011, 2012 and 2013, and amounts earned under the plan were paid in March 2014. The cash bonus
potential amount equaled the executive’s salary in effect on the last day of fiscal year 2010. The following
amounts represent payouts at 70% of bonus potentials that were earned under the plan: Mr. Dillon:
$882,000; Mr. McMullen: $623,000; Mr. Schlotman: $427,000; Ms. Barclay: $449,400; Mr. Heldman:
$506,800; and Mr. Ellis: $324,170.

(5) Amounts in the table for 2011 and 2012 are changes in pension value and preferential earnings on
nonqualified deferred compensation. For 2013, the amounts only include preferential earnings on
nonqualified deferred compensation. Under the Company’s deferred compensation plan, deferred
compensation earns interest at the rate representing Kroger’s cost of ten-year debt as determined by
Kroger’s CEO, and reviewed by the Compensation Committee, prior to the beginning of each deferral
year. For each participant, a separate deferral account is created each year, and the interest rate established
under the plan for that year is applied to that deferral account until the deferred compensation is paid
out. If the interest rate established by the Company for a particular year exceeds 120% of the applicable
federal long-term interest rate that corresponds most closely to the Company rate, the amount by which
the Company rate exceeds 120% of the corresponding federal rate is deemed to be above-market or
preferential. In twelve of the twenty years in which at least one named executive officer deferred
compensation, the Company rate set under the plan for that year exceeds 120% of the corresponding
federal rate. For each of the deferral accounts in which the Company rate is deemed to be above-market,
the Company calculates the amount by which the actual annual earnings on the account exceed what
the annual earnings would have been if the account earned interest at 120% of the corresponding federal
rate, and discloses those amounts as preferential earnings. Amounts deferred in 2013 earned interest at
a rate higher than 120% of the corresponding federal rate, accordingly there are preferential earnings on
these amounts.

In accordance with SEC rules, negative amounts are required to be disclosed in the footnotes, but not
reflected in the sum of total compensation reported in the table. Mr. Dillon’s pension value decreased
by $1,863,504; Mr. McMullen’s pension value decreased by $450,556; Mr. Schlotman’s pension value
decreased by $98,636; Mr. Heldman’s pension value decreased by $149,721; and Mr. Ellis’ pension values
decreased by $6,080. During 2013, pension values decreased primarily due to an increase in the discount
rate for the plans, as determined by the plan actuary and decreased slightly due to annuity election
assumptions. Ms. Barclay does not participate in a Company defined benefit pension plan or the deferred
compensation plan.

(6) The following table provides the items and amounts included in All Other Compensation for 2013:

Life Insurance
Premium
$187,652
$ 48,227
$ 42,242
$112,157
$108,359
$ 33,982

Accidental Death
and Dismemberment
Insurance Premium
$ 228
$ 228
$ 228
$ 228
$ 228
$ 228

Long-Term
Disability
Insurance
Premium
—
$ 2,778
—
—
$ 2,778
$ 2,229

Dividend
Equivalent
Payments on
Performance Units
$76,430
$24,643
$12,300
$ 8,904
$11,696
$ 5,929

Dividends
on Unvested
Restricted
Stock
$195,274
$ 90,453
$ 30,406
$ 23,664
$ 33,123
$ 21,964

Mr. Dillon
Mr. McMullen
Mr. Schlotman
Ms. Barclay
Mr. Heldman
Mr. Ellis

g r a N t S o F P l a N - B a S e d a w a r d S

The following table provides information about equity and non-equity awards granted to the named

executive officers in 2013:

Estimated Future
Payouts Under
Non-Equity
Incentive Plan Awards
Target
($)

Maximum
($)

Estimated Future
Payouts Under
Equity Incentive
Plan Awards

Target
(#)

Maximum
(#)

Name

Grant
Date

David B. Dillon

$ 1,500,000(1) $3,000,000(1)
$ 665,000(2) $1,330,000(2)

All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)
(3)

All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
(4)

Exercise
or Base
Price of
Option
Awards
($/Sh)

Grant
Date Fair
Value of
Stock and
Option
Awards

7/15/2013
7/15/2013
7/15/2013

37,323(5)

74,645(5)

111,968

298,580

$ 37.76

$4,227,912
$2,781,910
$1,481,517(5)

W. Rodney McMullen

$ 1,000,000(1) $2,000,000(1)
$ 469,800(2) $ 939,600(2)

7/15/2013
12/12/2013
7/15/2013
7/15/2013

12,180(5)

24,360(5)

J. Michael Schlotman

$ 550,000(1) $1,100,000(1)
$ 335,550(2) $ 671,100(2)

7/15/2013

12/12/2013

7/15/2013
7/15/2013

6,830(5)

13,660(5)

Kathleen S. Barclay

$ 550,000(1) $1,100,000(1)
$ 338,500(2) $ 677,300(2)

7/15/2013
12/17/2013
7/15/2013
7/15/2013

97,440

$ 37.76

54,640

$ 37.76

36,540
80,000

20,490
13,000

20,000
13,000

$1,379,750
$3,199,200
$ 907,862
$ 483,485(5)

$ 773,702
$ 519,870
$ 509,088
$ 271,117(5)

$ 755,200
$ 517,790
$ 307,838
$ 163,940(5)

4,130(5)

8,260(5)

33,040

$ 37.76

Estimated Future
Payouts Under
Non-Equity
Incentive Plan Awards
Target
($)

Maximum
($)

Estimated Future
Payouts Under
Equity Incentive
Plan Awards

Target
(#)

Maximum
(#)

Name

Grant
Date

Paul W. Heldman

$ 550,000(1) $1,100,000(1)
$ 381,500(2) $ 763,000(2)

7/15/2013
7/15/2013
7/15/2013

6,175(5)

12,350(5)

Michael L. Ellis

$ 375,000(1) $ 750,000(1)
$ 256,000(2) $ 512,000(2)

7/15/2013
12/12/2013
7/15/2013
7/15/2013

3,170(5)

6,340(5)

All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)
(3)

All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
(4)

Exercise
or Base
Price of
Option
Awards
($/Sh)

Grant
Date Fair
Value of
Stock and
Option
Awards

18,525

9,510
25,000

49,400

$ 37.76

$ 699,504
$ 460,267
$ 245,117(5)

25,360

$ 37.76

$ 359,098
$ 999,750
$ 236,283
$ 125,833(5)

(1) The amount listed under “Target” for each named executive officer represents the bonus potential of
the named executive officer under the Company’s 2013 performance-based annual cash bonus program.
By the terms of this plan, payouts are limited to no more than 200% of a participant’s bonus potential;
accordingly, the amount listed under “Maximum” equals two times that officer’s bonus potential amount.
In connection with his promotion on January 1, 2014, Mr. McMullen was eligible for a bonus based on
a proration of his bonus potential of $1,000,000 and of his revised bonus potential of $1,500,000. In
connection with his promotion on January 1, 2014, Mr. Ellis was eligible for a bonus based on a proration
of his bonus potential of $375,000 and of his revised bonus potential of $750,000. The amount actually
earned under this plan is shown in the Summary Compensation Table for 2013 and is described in
footnote 4 to that table.

(2) This amount represents the bonus potential of the named executive officer under the cash bonus
component of the Company’s performance-based 2013 Long-Term Incentive Plan. “Maximum” amount
equals the annual base salary of the named executive officers as of the last day of fiscal year 2012. Bonuses
are determined upon completion of the performance period as of fiscal year ending 2015. Because the
target amount is not determinable, the amount listed under “Target” reflects a representative amount
based on the probable outcome of the performance conditions.

(3) This amount represents the number of restricted shares awarded under one of the Company’s long-term

incentive plans.

(4) This amount represents the number of stock options granted under one of the Company’s long-term
incentive plans. Options are granted at fair market value of Kroger common shares on the date of the
grant. Fair market value is defined as the closing price of Kroger shares on the date of the grant.

(5) Performance units were awarded under the Company’s performance-based 2013 Long-Term Incentive
Plan. The “Maximum” amount represents the maximum number of common shares that can be earned
by the named executive officer under the award. Because the target amount of common shares is not
determinable, the amount listed under “Target” reflects a representative amount based on the probable
outcome of the performance conditions. The dollar amount listed in the grant date fair value column
is the value at the grant date based on the probable outcome of these conditions. This amount is
consistent with the estimate of aggregate compensation cost to be recognized by the Company over the
three-year performance period determined as of the grant date under FASB ASC Topic 718, excluding
the effect of estimated forfeitures, along with estimated cash payments equal to projected dividend
equivalent payments.

The Compensation Committee, and the independent members of the Board in the case of the CEO,
established bonus potentials, shown in this table as “target” amounts, for the performance-based annual and
long-term cash bonus awards for the named executive officers. Amounts were payable to the extent that
performance met specific objectives established at the beginning of the performance period. As described
in the Compensation Discussion and Analysis, actual earnings under the annual cash bonus can exceed the
target amounts if performance exceeds the thresholds. The Compensation Committee, and the independent
members of the Board in the case of the CEO, also determined the number of performance units to be
awarded to each named executive officer, under which common shares are earned to the extent performance
meets objectives established at the beginning of the performance period. The performance units are more
particularly described in the Compensation Discussion and Analysis.

Restrictions on restricted stock awards made to the named executive officers normally lapse, so long
as the officer is then in our employ, in equal amounts on each of the five anniversaries of the date the
award is made, except that: 70,000 shares awarded to Mr. McMullen in 2009 vest as follows: 15,000 shares on
6/25/2012, 20,000 shares on 6/25/2013, and 35,000 shares on 6/25/2014; 111,986 shares awarded to Mr. Dillon
in 2012 vest in equal amounts on each of the four anniversaries of the date the award was made; 13,000 shares
awarded to Mr. Schlotman in 2013 vest as follows: 3,250 shares on each of 12/12/2014 and 12/12/2015 and
6,500 shares on 12/12/16; 18,000 shares awarded to Ms. Barclay in 2012 vest in equal amounts on each of the
three anniversaries of the date the award was made; 20,000 shares awarded to Ms. Barclay in 2013 vest in equal
amounts on each of the two anniversaries of the date the award was made; 13,000 awarded to Ms. Barclay
in 2013 vest as follows: 3,250 shares on each of 12/17/2014 and 12/17/ 2015 and 6,500 shares on 12/17/2016;
10,000 shares awarded to Mr. Ellis in 2012 vest in equal amounts on each of the three anniversaries of the date
the award was made; and 6,667 shares awarded to Mr. Ellis in 2013 vest in equal amounts on each of the two
anniversaries of the date the award was made. For grants made to the named executive officers in 2013, the
restrictions continue to lapse following retirement if the following criteria are met: the officer is employed for
at least one year after the grant of the restricted stock, has at least 5 years of service, has attained the age of
62, and does not provide services to a competitor of ours. Any dividends declared on Kroger common shares
are payable on restricted stock. Nonqualified stock options granted to the named executive officers vest in
equal amounts on each of the five anniversaries of the date of grant.

o u t S t a N d i N g e q u i t y a w a r d S a t F i S c a l y e a r - e N d

The following table discloses outstanding equity-based incentive compensation awards for the named
executive officers as of the end of fiscal year 2013. Each outstanding award is shown separately. The vesting
schedule for each award is described in the footnotes to this table. Market value of unvested shares is based on
Kroger’s closing stock price of $36.10 on January 31, 2014, the last trading day of the 2013 fiscal year.

Option Awards

Stock Awards

Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)

Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable

Option
Exercise
Price
($)

Name
David B. Dillon

W. Rodney McMullen

J. Michael Schlotman

Kathleen S. Barclay

Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
300,000
240,000
220,000
225,000
180,000
138,000
113,440

59,716

75,000
75,000
60,000
60,000
65,000
52,000
42,000
36,576
19,488

20,000
20,000
20,000
16,000
15,000
18,256
10,928

25,000
15,000
13,216
6,608

45,000(1)
92,000(2)

170,160(3)
238,864(4)
298,580(5)

13,000(1)
28,000(2)
54,864(3)
77,952(4)
97,440(5)

4,000(1)
10,000(2)
27,384(3)
43,712(4)
54,640(5)

10,000(2)
19,824(3)
26,432(4)
33,040(5)

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have
Not Vested

Equity
Incentive
Plan
Awards:
Market or
Payout Value
of Unearned
Shares,
Units or
Other Rights
That Have
Not Vested

52,998(18)

$2,007,032

37,323(19)

$1,419,561

17,296(18)
12,180(19)

$ 654,984
$ 463,266

9,699(18)
6,830(19)

$ 367,286
$ 259,779

5,865(18)
4,130(19)

$ 222,092
$ 157,085

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
$ 830,300
$1,245,450
$2,303,541
$3,031,534
$4,042,045

Number of
Shares or
Units of Stock
That Have
Not Vested
(#)
23,000(6)
34,500(7)
63,810(8)
83,976(9)
111,968(10)

Option
Expiration
Date
5/5/2015
5/4/2016
6/28/2017
6/26/2018
6/25/2019
6/24/2020

$16.39
$19.94
$28.27
$28.61
$22.34
$20.16

$24.74
$21.96
$37.76

6/23/2021
7/12/2022
7/15/2023

35,000(6)
7,000(6)
10,500(7)
20,574(8)
29,232(11)
36,540(10)
80,000(13)

$1,263,500
$ 252,700
$ 379,050
$ 742,721
$1,055,275
$1,319,094
$2,888,000

2,000(6)
3,750(7)
10,269(8)
16,392(11)
20,490(10)
13,000(12)

$
72,200
$ 135,375
$ 370,711
$ 591,751
$ 739,689
$ 469,300

5/6/2014
5/5/2015
5/4/2016
6/28/2017
6/26/2018
6/25/2019
6/24/2020
6/23/2021
7/12/2022
7/15/2023

5/4/2016
6/28/2017
6/26/2018
6/25/2019
6/24/2020
6/23/2021
7/12/2022
7/15/2023

12/10/2019
6/24/2020
6/23/2021
7/12/2022
7/15/2023

3,750(7)
7,434(8)
12,000(14)
20,000(15)
13,000(16)

$ 135,375
$ 268,367
$ 433,200
$ 722,000
$ 469,300

$17.31
$16.39
$19.94
$28.27
$28.61
$22.34
$20.16
$24.74
$21.96
$37.76

$19.94
$28.27
$28.61
$22.34
$20.16
$24.74
$21.96
$37.76

$20.06
$20.16
$24.74
$21.96
$37.76

Name

Paul W. Heldman

Michael L. Ellis

Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
25,000
25,000
25,000
20,000
18,000
17,360
9,880

15,000
20,000
20,000
16,000
12,000
8,800
4,400

Option Awards

Stock Awards

Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)

Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable

5,000(1)
12,000(2)
26,040(3)
39,520(4)
49,400(5)

4,000(1)
8,000(2)
13,200(3)
17,600(4)
25,360(5)

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
90,250
$
$ 162,450
$ 352,517
$ 535,002
$ 668,753

Number of
Shares or
Units of Stock
That Have
Not Vested
(#)
2,500(6)
4,500(7)
9,765(8)
14,820(11)
18,525(10)

2,000(6)
3,000(7)
4,950(8)
6,600(11)
6,667(17)
9,510(10)
25,000(13)

$
72,200
$ 108,300
$ 178,695
$ 238,260
$ 240,679
$ 343,311
$ 902,500

Option
Exercise
Price
($)
$19.94
$28.27
$28.61
$22.34
$20.16
$24.74
$21.96
$37.76

Option
Expiration
Date
5/4/2016
6/28/2017
6/26/2018
6/25/2019
6/24/2020
6/23/2021
7/12/2022
7/15/2023

$19.94
$28.27
$28.61
$22.34
$20.16
$24.74
$21.96
$37.76

5/4/2016
6/28/2017
6/26/2018
6/25/2019
6/24/2020
6/23/2021
7/12/2022
7/15/2023

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have
Not Vested

Equity
Incentive
Plan
Awards:
Market or
Payout Value
of Unearned
Shares,
Units or
Other Rights
That Have
Not Vested

8,769(18)
6,175(19)

$ 332,063
$ 234,866

3,905(18)
3,170(19)

$ 147,882
$ 120,571

(1) Stock options vest on 6/25/2014.

(2) Stock options vest in equal amounts on 6/24/2014 and 6/24/2015.

(3) Stock options vest in equal amounts on 6/23/2014, 6/23/2015 and 6/23/2016.

(4) Stock options vest in equal amounts on 7/12/2014, 7/12/2015, 7/12/2016 and 7/12/2017.

(5) Stock options vest in equal amounts on 7/15/2014, 7/15/2015, 7/15/2016, 7/15/2017 and 7/15/2018.

(6) Restricted stock vests on 6/25/2014.

(7) Restricted stock vests in equal amounts on 6/24/2014 and 6/24/2015.

(8) Restricted stock vests in equal amounts on 6/23/2014, 6/23/2015 and 6/23/2016.

(9) Restricted stock vests in equal amounts on 7/12/2014, 7/12/2015 and 7/12/2016.

(10) Restricted stock vests in equal amounts on 7/15/2014, 7/15/2015, 7/15/2016, 7/15/2017 and 7/15/2018.

(11) Restricted stock vests in equal amounts on 7/12/2014, 7/12/2015, 7/12/2016 and 7/12/2017.

(12) Restricted stock vests as follows: 3,250 shares on 12/12/2014, 3,250 shares on 12/12/2015 and

6,500 shares on 12/12/2016.

(13) Restricted stock vests in equal amounts on 12/12/2014, 12/12/2015, 12/12/2016, 12/12/2017 and

12/12/2018.

(14) Restricted stock vests in equal amounts on 7/12/2014 and 7/12/2015.

(15) Restricted stock vests in equal amounts on 7/15/2014 and 7/15/2015.

(16) Restricted stock vests as follows: 3,250 shares on 12/17/2014, 3,250 shares on 12/17/2015 and

6,500 shares on 12/17/2016.

(17) Restricted stock vests as follows: 3,333 shares on 12/6/2014 and 3,334 shares on 12/6/2015.

(18) Performance units granted under the 2012 Long Term Incentive Plan are earned as of the last day of
fiscal year 2014, to the extent performance goals are achieved. Because the awards are not currently
determinable, the number of units and value as of fiscal year-end in the table reflect the probable outcome
of such conditions. The maximum number of units achievable and the value of the maximum number of
units as of fiscal year-end if such maximum would be achieved are as follows: Mr. Dillon: 74,645 units;
$2,826,806; Mr. McMullen: 24,360 units; $922,513; Mr. Schlotman: 13,660 units; $517,304; Ms. Barclay:
8,260 units; $312,806; Mr. Heldman: 12,350 units; $467,695; and Mr. Ellis: 5,500 units; $208,285.

(19) Performance units granted under the 2013 Long Term Incentive Plan are earned as of the last day of
fiscal year 2015, to the extent performance goals are achieved. Because the awards are not currently
determinable, the number of units and value as of fiscal year-end in the table reflect the probable outcome
of such conditions. The maximum number of units achievable and the value of the maximum number of
units as of fiscal year-end if such maximum would be achieved are as follows: Mr. Dillon: 74,645 units;
$2,839,123; Mr. McMullen: 24,360 units; $926,533; Mr. Schlotman: 13,660 units; $519,558; Ms. Barclay:
8,260 units; $314,169; Mr. Heldman: 12,350 units; $469,732; and Mr. Ellis: 6,340 units; $241,142.

o P t i o N e x e r c i S e S a N d S t o c k v e S t e d

The following table provides the stock options exercised and restricted stock vested during 2013, as well
as common shares issued to the named executive officers pursuant to performance units awarded under the
2011 Long Term Incentive Plan.

2013 OPTION EXERCISES AND STOCK VESTED

Option Awards(1)

Stock Awards(2)

Name
David B. Dillon . . . . . . . . . . . . . . . . . . . . . .
W. Rodney McMullen . . . . . . . . . . . . . . . . .
J. Michael Schlotman . . . . . . . . . . . . . . . . .
Kathleen S. Barclay . . . . . . . . . . . . . . . . . . .
Paul W. Heldman . . . . . . . . . . . . . . . . . . . . .
Michael L. Ellis . . . . . . . . . . . . . . . . . . . . . .

Number of
Shares Acquired
on Exercise
(#)

—
—
57,250
—
80,000
42,000

Value Realized
on Exercise
($)

—
—
$1,370,567
—
$1,940,200
$ 890,220

Number of
Shares Acquired
on Vesting
(#)
162,142
69,418
21,383
16,135
33,805
15,983

Value Realized
on Vesting
($)
$6,103,134
$2,554,100
$ 818,869
$ 624,652
$1,242,360
$ 609,000

(1) Options granted under our various long-term incentive plans have a ten-year life and expire if not

exercised within that ten-year period.

(2) The Stock Awards columns of the table include the following two components:

In 2011, executives were awarded performance units that are earned based on performance criteria
established by the Compensation Committee at the beginning of the three year performance period.
Actual payouts are based on the degree to which improvements are achieved and are earned in Kroger
common shares. The number of common shares issued and the value realized based on the closing
share price on March 13, 2014, the date of deemed delivery of the shares, are as follows: Mr. Dillon:
49,630 common shares, $2,158,409 value realized; Mr. McMullen: 16,002 common shares, $695,927 value
realized; Mr. Schlotman: 7,987 common shares, $347,355 value realized; Ms. Barclay: 5,782 common
shares, $251,459 value realized; Mr. Heldman: 7,595 common shares, $330,307 value realized; and
Mr. Ellis: 3,850 common shares; $167,437 value realized.

The table also includes the number of shares acquired on vesting and the value realized on the vesting of
restricted shares as follows: Mr. Dillon: 112,512 common shares, $3,944,725 value realized; Mr. McMullen:
53,416 common shares, $1,858,173 value realized; Mr. Schlotman: 13,396 common shares, $471,514 value
realized; Ms. Barclay: 10,353 common shares, $373,193, value realized; Mr. Heldman: 26,210 common
shares, $912,053 value realized; and Mr. Ellis: 12,133 common shares, $441,563 value realized.

P e N S i o N B e N e F i t S

The following table provides information on pension benefits as of 2013 year-end for the named

executive officers.

2013 PENSION BENEFITS

Name

David B. Dillon

Plan Name

The Kroger Consolidated Retirement Benefit Plan
The Kroger Co. Excess Benefit Plan
Dillon Companies, Inc. Excess Benefit Pension Plan

Number
of Years
Credited
Service
(#)
18
18
20

Present
Value of
Accumulated
Benefit
($)
$ 753,266
$9,736,250
$8,211,305

Payments
During
Last Fiscal
Year
($)
$0
$0
$0

W. Rodney McMullen The Kroger Consolidated Retirement Benefit Plan

The Kroger Co. Excess Benefit Plan

J. Michael Schlotman The Kroger Consolidated Retirement Benefit Plan

The Kroger Co. Excess Benefit Plan

Paul W. Heldman

The Kroger Consolidated Retirement Benefit Plan
The Kroger Co. Excess Benefit Plan

Michael L. Ellis

The Kroger Consolidated Retirement Benefit Plan
The Kroger Co. Excess Benefit Plan

28
28

31
31

39
39

$ 802,528
$6,579,958

$ 899,195
$3,760,659

$1,346,417
$6,867,111

$
$

90,301
71,317

$0
$0

Messrs. Dillon, McMullen, Schlotman, Heldman and Ellis participate in The Kroger Consolidated Retirement
Benefit Plan (the “Consolidated Plan”), which is a qualified defined benefit pension plan. The Consolidated Plan
generally determines accrued benefits using a cash balance formula, but retains benefit formulas applicable
under prior plans for certain “grandfathered participants” who were employed by Kroger on December 31,
2000. Each of the above listed named executive officers, except for Mr. Ellis, is eligible for these grandfathered
benefits under the Consolidated Plan. Their benefits, therefore, are determined using formulas applicable under
prior plans, including the Kroger formula covering service to The Kroger Co. and the Dillon Companies, Inc.
Pension Plan formula covering service to Dillon Companies, Inc. While Mr. Ellis is also a participant in the
Consolidated Plan, he is not a grandfathered participant, but is a participant in the cash balance formula.

Messrs. Dillon, McMullen, Schlotman, Heldman and Ellis also are eligible to receive benefits under The
Kroger Co. Excess Benefit Plan (the “Kroger Excess Plan”), and Mr. Dillon is also eligible to receive benefits
under the Dillon Companies, Inc. Excess Benefit Pension Plan (the “Dillon Excess Plan”). These plans are
collectively referred to as the “Excess Plans.” The Excess Plans are each considered to be nonqualified deferred
compensation plans as defined in Section 409A of the Internal Revenue Code. The purpose of the Excess Plans
is to make up the shortfall in retirement benefits caused by the limitations on benefits to highly compensated
individuals under qualified plans in accordance with the Internal Revenue Code.

Each of the above listed named executive officers, except for Mr. Ellis, will receive benefits under the

Consolidated Plan and the Excess Plans, determined as follows:

• 1½% times years of credited service multiplied by the average of the highest five years of total earnings
(base salary and annual bonus) during the last ten calendar years of employment, reduced by 1¼% times
years of credited service multiplied by the primary social security benefit;

• normal retirement age is 65;

• unreduced benefits are payable beginning at age 62; and

• benefits payable between ages 55 and 62 will be reduced by ¹⁄ ³ of one percent for each of the first
24 months and by ½ of one percent for each of the next 60 months by which the commencement of
benefits precedes age 62.

Although participants generally receive credited service beginning at age 21, those participants who
commenced employment prior to 1986, including the above listed named executive officers, began to accrue
credited service after attaining age 25. In the event of a termination of employment, Mr. Schlotman currently is
eligible for a reduced early retirement benefit, as he has attained age 55. Mr. Ellis, as a cash balance participant
in the Consolidated Plan, will receive benefits as an annual pay credit equal to 5% of eligible earnings with
interest accruing daily at a rate equal to the 30-year Treasury rate.

Mr. Dillon also participates in the Dillon Employees’ Profit Sharing Plan (the “Dillon Plan”). The Dillon Plan
is a qualified defined contribution plan under which Dillon Companies, Inc. and its participating subsidiaries
may choose to make discretionary contributions each year that are then allocated to each participant’s account.
Participation in the Dillon Plan was frozen effective January 1, 2001. Benefits under the Dillon Plan do not
continue to accrue for Mr. Dillon. Participants in the Dillon Plan elect from among a number of investment
options and the amounts in their accounts are invested and credited with investment earnings in accordance
with their elections. Prior to July 1, 2000, participants could elect to make voluntary contributions under the
Dillon Plan, but that option was discontinued effective as of July 1, 2000. Participants can elect to receive their
Dillon Plan benefit in the form of either a lump sum payment or installment payments.

Due to offset formulas contained in the Consolidated Plan and the Dillon Excess Plan, Mr. Dillon’s
accrued benefits under the Dillon Plan offset a portion of the benefit that would otherwise accrue for them
under those plans for their service with Dillon Companies, Inc. Although benefits that accrue under defined
contribution plans are not reportable under the accompanying table, we have added narrative disclosure of
the Dillon Plan because of the offsetting effect that benefits under that plan has on benefits accruing under
the Consolidated Plan and the Dillon Excess Plan.

The assumptions used in calculating the present values are set forth in Note 15 to the consolidated
financial statements in Kroger’s Form 10-K for fiscal year 2013 ended February 1, 2014. The discount rate used
to determine the present values is 4.99%, which is the same rate used at the measurement date for financial
reporting purposes.

N o N q u a l i F i e d d e F e r r e d c o M P e N S a t i o N

The following table provides information on nonqualified deferred compensation for the named

executive officers for 2013.

2013 NONQUALIFIED DEFERRED COMPENSATION

Name

Executive
Contributions
in Last FY
($)

David B. Dillon . . . . . . . . . . . . . . . . . . . . $ 60,000(1)
W. Rodney McMullen . . . . . . . . . . . . . . . $215,817(2)
J. Michael Schlotman . . . . . . . . . . . . . . . $
Paul W. Heldman . . . . . . . . . . . . . . . . . . . $
Kathleen S. Barclay . . . . . . . . . . . . . . . . . $
Michael L. Ellis . . . . . . . . . . . . . . . . . . . . $

0
0
0
0

Registrant
Contributions
in Last FY
($)
$0
$0
$0
$0
$0
$0

Aggregate
Earnings
in Last FY
($)
$ 76,367
$452,389
$
0
$ 80,713
$
0
$ 33,804

Aggregate
Withdrawals/
Distributions
($)
$0
$0
$0
$0
$0
$0

Aggregate
Balance at
Last FYE
($)
$1,173,732
$6,998,182
$
0
$1,449,413
$
0
$ 584,760

(1) This amount represents the deferral of performance-based annual bonus earned in fiscal year 2012 and
paid in March 2013. This amount is included in the Summary Compensation Table for 2012 in footnote 4.

(2) This amount represents the deferral of performance-based annual bonus earned in fiscal year 2012 and
paid in March 2013 in the amount of $171,762 and deferral of long-term cash bonus earned during
the 2010 through 2012 performance period and paid in March 2013 in the amount of $44,055. These
amounts are included in the Summary Compensation Table for 2012 in footnote 4.

Eligible participants may elect to defer up to 100% of the amount of their salary that exceeds the sum of
the FICA wage base and pre-tax insurance and other Internal Revenue Code Section 125 plan deductions, as
well as 100% of their annual and long-term bonus compensation. Deferral account amounts are credited with

interest at the rate representing Kroger’s cost of ten-year debt as determined by Kroger’s CEO and reviewed
by the Compensation Committee prior to the beginning of each deferral year. The interest rate established for
deferral amounts for each deferral year will be applied to those deferral amounts for all subsequent years until
the deferred compensation is paid out. Participants can elect to receive lump sum distributions or quarterly
installments for periods up to ten years. Participants also can elect between lump sum distributions and
quarterly installments to be received by designated beneficiaries if the participant dies before distribution of
deferred compensation is completed.

d i r e c t o r c o M P e N S a t i o N

The following table describes the fiscal year 2013 compensation for non-employee directors. Employee

directors receive no compensation for their Board service.

2013 DIRECTOR COMPENSATION

Fees
Earned
or Paid
in Cash
($)

$ 79,823
$ 99,935
$ 89,798
$ 72,512
$ 79,823
$ 93,299
$ 95,815
$ 89,798
$ 79,823
$ 93,299
$105,784
$105,628

Stock
Awards
($)

(2)

$165,011
$165,011(3)
$165,011(3)
$ 67,817
$165,011
$165,011
$165,011(3)
$165,011
$165,011
$165,011
$165,011(3)
$165,011(3)

Name

Reuben V. Anderson . . . . . . . .
Robert D. Beyer. . . . . . . . . . . .
Susan J. Kropf . . . . . . . . . . . . .
John T. LaMacchia (1) . . . . . . .
David B. Lewis . . . . . . . . . . . .
Jorge P. Montoya . . . . . . . . . . .
Clyde R. Moore . . . . . . . . . . . .
Susan M. Phillips . . . . . . . . . . .
Steven R. Rogel . . . . . . . . . . . .
James A. Runde . . . . . . . . . . . .
Ronald L. Sargent . . . . . . . . . .
Bobby S. Shackouls . . . . . . . . .

Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)

All
Other
Compensation
($)

Option
Awards
($)

Non-Equity
Incentive Plan
Compensation
($)

(2)
$—(4)
$—(4)
$—(5)
$—(7)
$—(6)
$—(5)
$—(7)
$—(8)
$—(4)
$—(6)
$—(6)
$—(9)

—
—
—
—
—
—
—
—
—
—
—
—

$ 833(10)
$ 6,664(11)
N/A
$ 455(11)
N/A
N/A
$ 2,900(10)
$ 2,211(11)
N/A
N/A
$ 2,279(11)
N/A

(12)
$ 189
$ 189
$ 189
$ 3,556(13)
$ 189
$ 189
$ 189
$ 189
$ 189
$ 189
$ 189
$ 189

Total
($)

$245,856
$271,799
$254,998
$144,340
$245,023
$258,499
$263,915
$257,209
$245,023
$258,499
$273,263
$270,828

(1) Mr. LaMacchia retired as a member of the Board of Directors on 12/12/13.

(2) These amounts represent the aggregate grant date fair value of awards computed in accordance with

FASB ASC Topic 718.

(3) Aggregate number of stock awards outstanding at fiscal year end was 2,750 shares.

(4) Aggregate number of stock options outstanding at fiscal year end was 57,500 shares.

(5) Aggregate number of stock options outstanding at fiscal year end was 37,500 shares.

(6) Aggregate number of stock options outstanding at fiscal year end was 42,500 shares.

(7) Aggregate number of stock options outstanding at fiscal year end was 47,500 shares.

(8) Aggregate number of stock options outstanding at fiscal year end was 46,500 shares.

(9) Aggregate number of stock options outstanding at fiscal year end was 32,500 shares.

(10) This amount reflects the change in pension value for the applicable directors. Only those directors elected
to the Board prior to July 17, 1997 are eligible to participate in the outside director retirement plan.

(11) This amount reflects preferential earnings on nonqualified deferred compensation. For a complete
explanation of preferential earnings, please refer to footnote 5 to the Summary Compensation Table.

(12) This amount reflects the value of gift cards in the amount of $75 and the cost to the Company per director
for providing accidental death and dismemberment insurance coverage for non-employee directors in
the amount of $114. These premiums are paid on an annual basis in July.

(13) In connection with his retirement, Mr. LaMacchia received a gift valued at $867 and a charitable donation

was given in his name in the amount of $2,500.

Effective August 1, 2013, each non-employee director receives an annual retainer of $85,000. The chairs
of each of the Audit Committee and the Compensation Committee receive an additional annual retainer of
$20,000. The chair of each of the other committees receives an additional annual retainer of $15,000. Each
member of the Audit Committee receives an additional annual retainer of $10,000. The director designated
as the Lead Director receives an additional annual retainer of $25,000. Beginning in 2013, incentive shares
were issued to non-employee directors in lieu of options and restricted stock, as a portion of the directors’
overall compensation. On July 15, 2013, each non-employee director, except for Mr. LaMacchia, received 4,370
common shares. Mr. LaMacchia received 1,796 common shares, as his award was prorated as a result of his
planned retirement.

Non-employee directors first elected prior to July 17, 1997 receive a major medical plan benefit as well
as an unfunded retirement benefit. The retirement benefit equals the average cash compensation for the five
calendar years preceding retirement. Participants who retire from the Board prior to age 70 will be credited
with 50% vesting after five years of service, and 10% for each additional year up to a maximum of 100%.
Benefits for participants who retire prior to age 70 begin at the later of actual retirement or age 65.

We also maintain a deferred compensation plan, in which all non-employee members of the Board are
eligible to participate. Participants may defer up to 100% of their cash compensation. They may elect from
either or both of the following two alternative methods of determining benefits:

• interest accrues until paid out at the rate of interest determined prior to the beginning of the deferral

year to represent Kroger’s cost of ten-year debt; and

• amounts are credited in “phantom” stock accounts and the amounts in those accounts fluctuate with the

price of Kroger common shares.

In both cases, deferred amounts are paid out only in cash, based on deferral options selected by the
participants at the time the deferral elections are made. Participants can elect to have distributions made in
a lump sum or in quarterly installments, and may make comparable elections for designated beneficiaries
who receive benefits in the event that deferred compensation is not completely paid out upon the death of
the participant.

The Board has determined that compensation of non-employee directors must be competitive on an
on-going basis to attract and retain directors who meet the qualifications for service on Kroger’s Board. Non-
employee director compensation will be reviewed from time to time as the Corporate Governance Committee
deems appropriate.

P o t e N t i a l P a y M e N t S u P o N t e r M i N a t i o N o r c h a N g e i N c o N t r o l

Kroger has no employment agreements with its named executive officers and no contracts, agreements,
plans or arrangements that provide for payments to the named executive officers in connection with
resignation, severance, retirement, termination, or change in control, except for those available generally to
salaried employees. The Kroger Co. Employee Protection Plan, or KEPP, applies to all management employees
and administrative support personnel who are not covered by a collective bargaining agreement, with at least
one year of service, and provides severance benefits when a participant’s employment is terminated actually
or constructively within two years following a change in control of Kroger. The actual amount is dependent
on pay level and years of service. For purposes of KEPP, a change in control occurs if:

• any person or entity (excluding Kroger’s employee benefit plans) acquires 20% or more of the voting

power of Kroger;

• a merger, consolidation, share exchange, division, or other reorganization or transaction with Kroger
results in Kroger’s voting securities existing prior to that event representing less than 60% of the
combined voting power immediately after the event;

• Kroger’s shareholders approve a plan of complete liquidation or winding up of Kroger or an agreement

for the sale or disposition of all or substantially all of Kroger’s assets; or

• during any period of 24 consecutive months, individuals at the beginning of the period who constituted
Kroger’s Board of Directors cease for any reason to constitute at least a majority of the Board of Directors.

Assuming that a change in control occurred on the last day of Kroger’s fiscal year 2013, and the named
executive officers had their employment terminated, they would receive a maximum payment, or, in the case
of group term life insurance, a benefit having a cost to Kroger, in the amounts shown below:

Name

Severance
Benefit

David B. Dillon . . . . . . . . $4,958,446
W. Rodney McMullen . . . $3,458,466
J. Michael Schlotman . . . $2,187,021
Kathleen S. Barclay . . . . . $2,204,318
Paul W. Heldman . . . . . . . $2,375,510
Michael L. Ellis . . . . . . . . $1,654,634

Additional
Vacation and
Bonus
$107,366
$ 73,132
$ 40,364
$ 41,224
$ 42,047
$ 29,166

Accrued
and
Banked
Vacation
$776,640
$592,448
$423,744
$ 66,030
$222,780
$ 93,384

Group
Term Life
Insurance
$32
$32
$32
$32
$32
$32

Tuition
Reimbursement
$5,000
$5,000
$5,000
$5,000
$5,000
$5,000

Outplacement
Reimbursement
$10,000
$10,000
$10,000
$10,000
$10,000
$10,000

Each of the named executive officers also is entitled to continuation of health care coverage for up to
24 months at the same contribution rate as existed prior to the change in control. The cost to Kroger cannot
be calculated, as Kroger self insures the health care benefit and the cost is based on the health care services
utilized by the participant and eligible dependents.

Under the KEPP benefits will be reduced, to the extent necessary, so that payments to an executive

officer will in no event exceed 2.99 times the officer’s average W-2 earnings over the preceding five years.

Kroger’s change in control benefits under KEPP and under equity compensation awards are discussed
further in the Compensation Discussion and Analysis section under the “Retirement and Other Benefits”
heading.

c o M P e N S a t i o N P o l i c i e S a S t h e y r e l a t e t o r i S k M a N a g e M e N t

Kroger’s compensation policies and practices for its employees are designed to attract and retain highly
qualified and engaged employees, and to minimize risks that would have a material adverse effect on Kroger.
One of these policies, the executive compensation recoupment policy, is more particularly described in the
Compensation Discussion and Analysis. Kroger does not believe that its compensation policies and practices
create risks that are reasonably likely to have a material adverse effect on Kroger.

B e N e F i c i a l o w N e r S h i P o F c o M M o N S t o c k

The following table sets forth the common shares beneficially owned as of February 14, 2014 by Kroger’s
directors, the named executive officers, and the directors and executive officers as a group. The percentage
of ownership is based on 512,053,904 of the Company common shares outstanding on February 14, 2014.
Except as otherwise noted, each beneficial owner listed in the table has sole voting and investment power
with regard to the common shares beneficially owned by such owner.

Name
Reuben V. Anderson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kathleen S. Barclay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Robert D. Beyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
David B. Dillon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Michael L. Ellis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paul W. Heldman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Susan J. Kropf . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
David B. Lewis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
W. Rodney McMullen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jorge P. Montoya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clyde R. Moore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Susan M. Phillips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Steven R. Rogel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
James A. Runde . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ronald L. Sargent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
J. Michael Schlotman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bobby S. Shackouls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors and Executive Officers as a group (29 persons,

Amount and Nature
of
Beneficial Ownership
109,490(1)
119,816(2)
151,637(1)

2,587,845(2)(3)(4)(5)

240,000(2)(3)
365,788(2)(3)(6)

54,120(7)
70,622(8)
1,440,739(2)(3)
44,724(7)
88,120(9)
85,210(10)
98,853(1)
62,620(8)
61,620(8)

290,011(2)(3)(5)

59,120(11)

including those named above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,322,242(2)(3)

No director or officer owned as much as 1% of the common shares of Kroger. The directors and executive

officers as a group beneficially owned 1% of the common shares of Kroger.

(1) This amount includes 44,500 shares that represent options that are or become exercisable on or before

April 15, 2014.

(2) This amount includes shares that represent options that are or become exercisable on or before April 15,
2014, in the following amounts: Ms. Barclay, 59,824; Mr. Dillon, 1,476,156; Mr. Ellis, 96,200; Mr. Heldman,
140,240; Mr. McMullen, 485,064; Mr. Schlotman, 120,184; and all directors and executive officers as a
group, 3,343,321.

(3) The fractional interest resulting from allocations under Kroger’s defined contribution plans has been

rounded to the nearest whole number.

(4) This amount includes 307,392 shares held in trusts by Mr. Dillon’s wife. Mr. Dillon disclaims beneficial

ownership of these shares.

(5) This amount includes Kroger common shares that are pledged as security in the following amounts:
Mr. Dillon, 206,020 shares pledged as security for bank loans; and Mr. Schlotman, 25,000 shares pledged
as security for bank loans.

(6) This amount includes 41,842 shares held in Mr. Heldman’s family trust. Mr. Heldman disclaims beneficial

ownership of these shares.

(7) This amount includes 24,500 shares that represent options that are or become exercisable on or before

April 15, 2014.

(8) This amount includes 29,500 shares that represent options that are or become exercisable on or before

April 15, 2014.

(9) This amount includes 34,500 shares that represent options that are or become exercisable on or before

April 15, 2014.

(10) This amount includes 33,500 shares that represent options that are or become exercisable on or before

April 15, 2014.

(11) This amount includes 19,500 shares that represent options that are or become exercisable on or before

April 15, 2014.

As of February 14, 2014, the following reported beneficial ownership of Kroger common shares based
on reports on Schedule 13G filed with the Securities and Exchange Commission or other reliable information
as follows:

Name

BlackRock, Inc. (1)

FMR LLC (2)

The Kroger Co. Savings Plan

Address of Beneficial Owner
40 East 52nd Street
New York, NY 10022

245 Summer Street
Boston, MA 02210

1014 Vine Street
Cincinnati, OH 45202

Amount and
Nature of
Ownership
38,359,173

Percentage
of Class
7.40%

37,604,848

7.28%

26,231,418(3)

5.12%

(1) Reflects beneficial ownership by BlackRock Inc., as of December 31, 2013, as reported on Amendment No.
4 to the Schedule 13G filed with the SEC on January 29, 2014, and reports sole voting power with respect
to 31,511,599 common shares and sole dispositive power with respect to 38,359,173 common shares.

(2) Reflects beneficial ownership by FMR LLC, as of December 31, 2013, as reported on Schedule 13G
filed with the SEC on February 14, 2014 (the “FMR 13G”), and reports sole voting power with respect
to 1,337,580 common shares and sole dispositive power with respect to 37,604,848 common shares.
The FMR 13G reports beneficial ownership of common shares by Fidelity Management & Research
Company, Edward C. Johnson 3d, FMR LLC, Fidelity SelectCo, LLC, SelectCo Funds, Fidelity Management
Trust Company, Strategic Advisors, Inc., Pyramis Global Advisors, LLC, Pyramis Global Advisors Trust
Company and FIL Limited. The voting and investment power of the various holders with respect to these
common shares is set forth in the FMR 13G.

(3) Shares beneficially owned by plan trustees for the benefit of participants in employee benefit plan.

S e c t i o N 1 6 ( a ) B e N e F i c i a l o w N e r S h i P r e P o r t i N g c o M P l i a N c e

Section 16(a) of the Securities Exchange Act of 1934 requires our officers and directors, and persons who
own more than 10% of a registered class of our equity securities, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission. Those officers, directors and shareholders are
required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.

Based solely on our review of the copies of Forms 3 and 4 received by Kroger, and any written
representations from certain reporting persons that no Forms 5 were required for those persons, we believe
that during fiscal year 2013 all filing requirements applicable to our officers, directors and 10% beneficial
owners were timely satisfied, with the following exceptions. In March 2013, Kathleen S. Barclay, Robert W.
Clark, Geoffrey J. Covert, David B. Dillon, Michael J. Donnelly, Kevin M. Dougherty, Michael L. Ellis, Paul W.
Heldman, Scott M. Henderson, Christopher T. Hjelm, Calvin J. Kaufman, Lynn Marmer, W. Rodney McMullen,
M. Marnette Perry, J. Michael Schlotman, Mary Elizabeth Van Oflen, and R. Pete Williams were 2 days late

in the filing of Forms 4 to report (i) share awards under Company performance unit agreements, and (ii)
with the exception of Mr. McMullen, share dispositions for tax liability related to said share awards; due to
an administrative error by the Company. Also, in March 2013, Mark C. Tuffin filed a Form 5 to report 4,000
shares held directly that inadvertently were not reported on his Form 3 filing and a subsequent Form 3/A and
Form 4 filing.

r e l a t e d P e r S o N t r a N S a c t i o N S

Under our Statement of Policy with Respect to Related Person Transactions and the rules of the SEC,

the Audit Committee approved the following related party transaction:

• During fiscal year 2013, Kroger made purchases from Staples, Inc., totaling approximately $10 million.
This amount represents substantially less than 2% of Staples’ annual consolidated gross revenue. Kroger
periodically employs a bidding process or negotiations following a benchmarking of costs of products
from various vendors for the items purchased from Staples and awards the business based on the results
of that process. Ronald L. Sargent, a member of Kroger’s Board of Directors, is Chairman and Chief
Executive Officer of Staples.

Director independence is discussed above under the heading “Information Concerning the Board of

Directors.” Kroger’s policy on related person transactions is as follows:

S t a t e M e N t o F P o l i c y
w i t h r e S P e c t t o
r e l a t e d P e r S o N t r a N S a c t i o N S

a . i N t r o d u c t i o N

It is the policy of Kroger’s Board of Directors that any Related Person Transaction may be consummated
or may continue only if the Committee approves or ratifies the transaction in accordance with the guidelines
set forth in this policy. The Board of Directors has determined that the Audit Committee of the Board is best
suited to review and approve Related Person Transactions.

For the purposes of this policy, a “Related Person” is:

any person who is, or at any time since the beginning of Kroger’s last fiscal year was, a director or
executive officer of Kroger or a nominee to become a director of Kroger;

any person who is known to be the beneficial owner of more than 5% of any class of Kroger’s voting
securities; and

any immediate family member of any of the foregoing persons, which means any child, stepchild,
parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-
in-law, or sister-in-law of the director, executive officer, nominee or more than 5% beneficial owner,
and any person (other than a tenant or employee) sharing the household of such director, executive
officer, nominee or more than 5% beneficial owner.

For the purposes of this policy, a “Related Person Transaction” is a transaction, arrangement or relationship
(or any series of similar transactions, arrangements or relationships) since the beginning of Kroger’s last fiscal
year in which Kroger (including any of its subsidiaries) was, is or will be a participant and the amount involved
exceeds $120,000, and in which any Related Person had, has or will have a direct or indirect material interest
(other than solely as a result of being a director or a less than 10 percent beneficial owner of another entity).

Notwithstanding the foregoing, the Audit Committee has reviewed the following types of transactions
and has determined that each type of transaction is deemed to be pre-approved, even if the amount involved
exceeds $120,000.

1. Certain Transactions with Other Companies. Any transaction for property or services in the ordinary
course of business involving payments to or from another company at which a Related Person’s
only relationship is as an employee (including an executive officer), director, or beneficial owner of
less than 10% of that company’s shares, if the aggregate amount involved in any fiscal year does not
exceed the greater of $1,000,000 or 2 percent of that company’s annual consolidated gross revenues.

2. Certain Company Charitable Contributions. Any charitable contribution, grant or endowment by
Kroger (or one of its foundations) to a charitable organization, foundation, university or other not
for profit organization at which a Related Person’s only relationship is as an employee (including
an executive officer) or as a director, if the aggregate amount involved does not exceed $250,000
or 5 percent, whichever is lesser, of the charitable organization’s latest publicly available annual
consolidated gross revenues.

Transactions where all Shareholders Receive Proportional Benefits. Any transaction where the
Related Person’s interest arises solely from the ownership of Kroger common stock and all holders
of Kroger common stock received the same benefit on a pro rata basis.

Executive Officer and Director Compensation. (a) Any employment by Kroger of an executive officer
if the executive officer’s compensation is required to be reported in Kroger’s proxy statement,
(b) any employment by Kroger of an executive officer if the executive officer is not an immediate
family member of a Related Person and the Compensation Committee approved (or recommended
that the Board approve) the executive officer’s compensation, and (c) any compensation paid to a
director if the compensation is required to be reported in Kroger’s proxy statement.

5. Other Transactions. (a) Any transaction involving a Related Person where the rates or charges
involved are determined by competitive bids, (b) any transaction with a Related Person involving
the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed
in conformity with law or governmental authority, or (c) any transaction with a Related Person
involving services as a bank depositary of funds, transfer agent, registrar, trustee under a trust
indenture or similar services.

B . a u d i t c o M M i t t e e a P P r o v a l

In the event management becomes aware of any Related Person Transactions that are not deemed
pre-approved under paragraph A of this policy, those transactions will be presented to the Committee for
approval at the next regular Committee meeting, or where it is not practicable or desirable to wait until the
next regular Committee meeting, to the Chair of the Committee (who will possess delegated authority to act
between Committee meetings) subject to ratification by the Committee at its next regular meeting. If advance
approval of a Related Person Transaction is not feasible, then the Related Person Transaction will be presented
to the Committee for ratification at the next regular Committee meeting, or where it is not practicable or
desirable to wait until the next regular Committee meeting, to the Chair of the Committee for ratification,
subject to further ratification by the Committee at its next regular meeting.

In connection with each regular Committee meeting, a summary of each new Related Person Transaction
deemed pre-approved pursuant to paragraphs A(1) and A(2) above will be provided to the Committee for
its review.

If a Related Person Transaction will be ongoing, the Committee may establish guidelines for management
to follow in its ongoing dealings with the Related Person. Thereafter, the Committee, on at least an annual
basis, will review and assess ongoing relationships with the Related Person to see that they are in compliance
with the Committee’s guidelines and that the Related Person Transaction remains appropriate.

The Committee (or the Chair) will approve only those Related Person Transactions that are in, or are
not inconsistent with, the best interests of Kroger and its shareholders, as the Committee (or the Chair)
determines in good faith in accordance with its business judgment.

No director will participate in any discussion or approval of a Related Person Transaction for which he
or she, or an immediate family member (as defined above), is a Related Person except that the director will
provide all material information about the Related Person Transaction to the Committee.

c . d i S c l o S u r e

Kroger will disclose all Related Person Transactions in Kroger’s applicable filings as required by the

Securities Act of 1933, the Securities Exchange Act of 1934 and related rules.

a u d i t c o M M i t t e e r e P o r t

The primary function of the Audit Committee is to represent and assist the Board of Directors in fulfilling
its oversight responsibilities regarding the Company’s financial reporting and accounting practices including
the integrity of the Company’s financial statements; the Company’s compliance with legal and regulatory
requirements; the independent public accountants’ qualifications and independence; the performance of the
Company’s internal audit function and independent public accountants; and the preparation of this report
that SEC rules require be included in the Company’s annual proxy statement. The Audit Committee performs
this work pursuant to a written charter approved by the Board of Directors. The Audit Committee charter
most recently was revised during fiscal 2012 and is available on the Company’s website at ir.kroger.com. The
Audit Committee has implemented procedures to assist it during the course of each fiscal year in devoting the
attention that is necessary and appropriate to each of the matters assigned to it under the Committee’s charter.
The Audit Committee held five meetings during fiscal year 2013. The Audit Committee meets separately
with the Company’s internal auditor and PricewaterhouseCoopers LLP, the Company’s independent public
accountants, without management present, to discuss the results of their audits, their evaluations of the
Company’s internal controls over financial reporting, and the overall quality of the Company’s financial
reporting. The Audit Committee also meets separately with the Company’s Chief Financial Officer and General
Counsel when needed. Following these separate discussions, the Audit Committee meets in executive session.

Management of the Company is responsible for the preparation and presentation of the Company’s financial
statements, the Company’s accounting and financial reporting principles and internal controls, and procedures
that are designed to provide reasonable assurance regarding compliance with accounting standards and
applicable laws and regulations. The independent public accountants are responsible for auditing the Company’s
financial statements and expressing opinions as to the financial statements’ conformity with generally accepted
accounting principles and the effectiveness of the Company’s internal control over financial reporting.

In the performance of its oversight function, the Audit Committee has reviewed and discussed
with management and PricewaterhouseCoopers LLP the audited financial statements for the year ended
February 1, 2014, management’s assessment of the effectiveness of the Company’s internal control over
financial reporting as of February 1, 2014, and PricewaterhouseCoopers’ evaluation of the Company’s internal
control over financial reporting as of that date. The Audit Committee has also discussed with the independent
public accountants the matters that the independent public accountants must communicate to the Audit
Committee under applicable requirements of the Public Company Accounting Oversight Board.

With respect to the Company’s independent public accountants, the Audit Committee, among other
things, discussed with PricewaterhouseCoopers LLP matters relating to its independence and has received
the written disclosures and the letter from the independent public accountants required by applicable
requirements of the Public Company Accounting Oversight Board regarding the independent public
accountants’ communications with the Audit Committee concerning independence. The Audit Committee
has reviewed and approved in advance all services provided to the Company by PricewaterhouseCoopers LLP.

The Audit Committee annually reviews PricewaterhouseCoopers LLP’s independence and performance
in connection with the Audit Committee’s responsibility for the appointment and oversight of the Company’s
independent public accountants. The Audit Committee considers, among other things, PricewaterhouseCoopers
LLP’s historical and recent performance on the Company’s audit, including an internal survey of their service

quality by members of management and the Audit Committee. The Audit Committee reviews recent Public
Company Accounting Oversight Board reports on PricewaterhouseCoopers LLP and its peer firms, and considers
PricewaterhouseCoopers LLP’s tenure as the Company’s independent public accountants and their familiarity
with our operations, businesses, accounting policies and practices and internal control over financial reporting.
Further, in conjunction with the mandated rotation of the public accountants’ lead engagement partner, the Audit
Committee is directly involved in the selection of PricewaterhouseCoopers LLP’s lead engagement partner every
five years. The Audit Committee believes that the continued retention of PricewaterhouseCoopers LLP to serve
as the Company’s independent public accountants is in the best interests of the Company and its shareowners.

Based upon the review and discussions described in this report, the Audit Committee recommended
to the Board of Directors that the audited consolidated financial statements be included in the Company’s
Annual Report on Form 10-K for the year ended February 1, 2014, as filed with the SEC.

This report is submitted by the Audit Committee.

Ronald L. Sargent, Chair
Susan J. Kropf
Susan M. Phillips
Bobby S. Shackouls

a P P r o v a l o F t h e 2 0 1 4 l o N g - t e r M i N c e N t i v e a N d c a S h B o N u S P l a N
( i t e M N o . 2 )

The Board of Directors has adopted, subject to shareholder approval, The Kroger Co. 2014 Long-Term
Incentive and Cash Bonus Plan (“Plan”) for which a maximum of 25,000,000 shares are reserved. The purpose
of the Plan is to assist in attracting and retaining employees and directors of outstanding ability and to align their
interests with those of the shareholders of Kroger. If approved, the Plan will be effective as of June 26, 2014.

d e S c r i P t i o N o F t h e P l a N

General. The Plan consists of two separate equity-based programs; the Insider Program and the Non-
Insider Program. Officers and directors of Kroger subject to Section 16(a) of the Securities Exchange Act
of 1934 (the “Exchange Act”) are eligible for grants or awards under the Insider Program while all other
employees of Kroger are eligible for grants or awards under the Non-Insider Program. As of the date of
this proxy statement, 29 employees and directors are eligible to participate in the Insider Program and the
remaining approximately 375,000 employees of Kroger are eligible to participate in the Non-Insider Program.
In addition, the Plan provides for a performance-based Cash Bonus Program in which all 375,000 employees
are eligible to participate. Shareholders last approved a similar plan, providing for issuance of a maximum of
25,000,000 shares, at the annual meeting of shareholders held in June 2011. Kroger intends for shares under
these plans to be sufficient for grants and awards made in the ordinary course for a period of three to four
years. Options may not be issued below the fair market value of a Kroger common share on the date of the
grant. Options and stock appreciation rights may not be repriced.

Administration. The Insider Program will be administered by a committee of the Board of Directors
that meets the standards of Rule 16b-3(d)(1) under the Exchange Act and initially will be the Compensation
Committee of the Board of Directors, made up exclusively of independent directors. The Non-Insider Program
will be administered by a committee of three officers appointed by the Chief Executive Officer, the members
of which are ineligible to receive grants or awards under the Non-Insider Program. The administering
committee in each case is referred to as the “Committee.” The Cash Bonus Program will be administered by
the Committee under the Insider Program. The Plan is drafted to maintain the maximum amount of flexibility
with the Committee determining the ultimate provisions of each grant or award.

The Committee is authorized to award or grant nonstatutory stock options, stock appreciation rights,
performance units, restricted stock and incentive shares to participants under the Insider Program and the
Non-Insider Program, and to award performance-based cash bonuses under the Cash Bonus Program. The
Committee will determine the types and amounts of awards or grants, the recipients of awards or grants,
vesting schedules, restrictions, performance criteria, and other provisions of the grants or awards. All of these
provisions will be set forth in a written instrument.

In addition to other rights of indemnification they may have as directors or employees of Kroger, members
of the Committee will be indemnified by Kroger for reasonable expenses incurred in connection with defense
of any action brought against them by reason of action taken or failure to act under or in connection with the
Plan or any grant or award thereunder, if the members acted in good faith and in a manner that they believed
to be in the best interest of Kroger.

The Board of Directors may terminate or amend the Plan at any time without shareholder approval,
except that it may not amend the Plan without shareholder approval if required by applicable law, regulations,
or rules of the principal exchange or interdealer quotation system on which Kroger’s common shares are listed
or quoted. Unless earlier terminated by the Board of Directors, the Plan will terminate on March 13, 2024.
Termination of the Plan will have no effect on the validity of any options, stock appreciation rights, performance
units, restricted stock or incentive shares outstanding on the date of termination.

Unless otherwise provided in the agreement, awards and grants will not be transferable other than by

will or the laws of descent and distribution.

Shares Subject to Grant. Under the Plan, up to 25,000,000 authorized but unissued or reacquired
common shares may be issued upon the exercise of stock options, stock appreciation rights, performance
units, or awarded as restricted stock or incentive shares. In no event may any participant receive awards and
grants totaling more than 3,750,000 common shares in the aggregate under the Plan. The maximum number
of shares that may be issued as restricted stock, incentive shares, or performance units under the Plan is
10,000,000 in the aggregate. However, the Committee under the Insider Program may increase this number,
but for each share issued for such purpose in excess of 10,000,000, the number of shares that may be issued
under the Plan will be reduced by four shares.

If an option, stock appreciation right, or performance unit expires or terminates without having been
fully issued, or if restricted stock or incentive shares are not issued or are forfeited prior to the payment of a
dividend on those shares to a participant, the shares not exercised, unissued or forfeited, as the case may be,
will generally become available for other grants or awards under the Plan.

Stock Options. Nonstatutory stock options granted under the Plan will have exercise prices not less than
the greater of the fair market value per common share or the par value of a common share, a term of not more
than 10 years after the date of grant, and may not be exercised before six months from the date of grant. The
Plan prohibits the “repricing” of stock options. Subject to the terms of the Plan, the Committee determines the
vesting schedule and other terms and conditions applicable to stock options granted to employees. In recent
years, option grants generally have not become exercisable earlier than one year from the date of grant. An
eligible participant may receive more than one grant of options.

The Committee may in its discretion provide for the payment of the option exercise price otherwise than
in cash, including by delivery of common shares, valued at their fair market value on the date of exercise, or
by a combination of both cash and common shares.

Stock Appreciation Rights. Stock appreciation rights may be granted in connection with the grant of a
nonstatutory option under the Plan (“related rights”). In the Committee’s sole discretion, a related right may
apply to all or a portion of the common shares subject to the related option. Stock appreciation rights may
also be granted independently of any option granted under the Plan. A stock appreciation right entitles the
grantee upon exercise to elect to receive in cash, common shares or a combination thereof, the excess of the
fair market value of a specified number of common shares at the time of exercise over the fair market value
of such number of shares at the time of grant, or, in the case of a related right, the exercise price provided in
the related option. To the extent required to comply with the requirements of Rule 16b-3 under the Exchange
Act or otherwise provided in an agreement under the Plan, the Committee will have sole discretion to consent
to or disapprove the election of any grantee to receive cash in full or partial settlement of a right. A stock
appreciation right generally will not be exercisable until at least six months from the date of grant and will
have a term of not more than ten years from the date of grant (or, in the case of a related right, not beyond the
expiration of the related option). The Plan prohibits the “repricing” of stock appreciation rights.

Performance Units. Performance units may be granted in connection with the grant of a nonstatutory
stock option under the Plan (“related performance unit”). In the Committee’s sole discretion, a related
performance unit may apply to all or a portion of the common shares subject to the related option. Performance
units may also be granted independently of any option granted under the Plan. In connection with the grant of
performance units, the Committee will establish Performance Goals (as defined below) for a specified period.

Upon the exercise of performance units, or automatically upon satisfaction of the performance goals
as set forth in an agreement for the performance units, a grantee will be entitled to receive the payment of
such units in accordance with the terms of the award in common shares, cash, or a combination thereof, as
the Committee may determine. The values generally will depend upon the extent to which the performance
goals for the specified period have been satisfied, as determined by the Committee. Performance goals may
be particular to a grantee or the department, branch, subsidiary or other unit in which the grantee works,
or may be based on the performance of Kroger generally and may cover such periods as may be specified
by the Committee. For purposes of the Plan, “Performance Goals” means performance goals established
by the Committee which may be based on (i) earnings or earnings per share of Kroger, a unit of Kroger,
or designated projects; (ii) total sales, identical sales, or comparable sales of Kroger, a unit of Kroger, or
designated projects; (iii) cash flow; (iv) cash flow from operations; (v) operating profit or income; (vi) net
income; (vii) operating margin; (viii) net income margin; (ix) return on net assets; (x) economic value added;
(xi) return on total assets; (xii) return on common equity; (xiii) return on total or invested capital; (xiv) total
shareholder return; (xv) revenue; (xvi) revenue growth; (xvii) earnings before interest, taxes, depreciation
and amortization (“EBITDA”); (xviii) EBITDA growth; (xix) funds from operations per share and per share
growth; (xx) cash available for distribution; (xxi) cash available for distribution per share and per share
growth; (xxii) share price performance on an absolute basis and relative to an index of earnings per share or
improvements in Kroger’s attainment of expense levels; (xxiii) reduction in operating costs as a percentage
of sales; (xxiv) performance in key categories; (xxv) implementing or completion of strategic initiatives or
critical projects; and (xxvi) key category performance as measured by the results of surveys of customers or
associates, or any other objective goals established by the Committee, and may be absolute in their terms or
measured against or in relationship to other companies similarly or otherwise situated. Performance units may
be exercised only upon the achievement of minimum Performance Goals during the period as determined by
the Committee. The Committee will determine the period during which performance units are exercisable
and specifically set forth such period in any agreement granting performance units to a participant in the
Plan, provided, however, that a performance unit generally may not be exercised until the expiration of at
least six months from the date of grant. Performance units will expire no later than ten years from the date
of grant (or in the case of a related performance unit, the expiration of the related option). Any performance
units paid in the form of cash are deemed to be paid in common shares, with the number of shares being
deemed paid equal to the amount of cash paid to the employee divided by the fair market value of a common
share on the date of payment.

Restricted Stock. The Committee may award restricted stock to participants. The stock will be subject to
forfeiture, restrictions on transferability, and other restrictions as specified in the agreement. The Committee
has authority to impose other terms and conditions as it may determine in its discretion including making the
vesting of awards contingent on the achievement of Performance Goals. During the period that a restricted
stock award is subject to restrictions, an employee has the right to vote the shares and receive dividends.

Incentive Shares. The Committee may grant incentive shares to participants. Incentive share awards will
consist of common shares issued or to be issued at such times, subject to achievement of such Performance
Goals or other goals, or without condition, and on such other terms and conditions as the Committee deems
appropriate and specifies in an agreement relating thereto.

Cash Bonuses. Two types of bonuses can be awarded under the Cash Bonus Program; an annual bonus
award for each fiscal year, and a long-term bonus award for measurement periods in excess of one year.
Bonus payments are based on Kroger’s performance measured against Performance Goals established by the
Committee. The Committee establishes a bonus “potential” for each bonus payable under the Cash Bonus
Program for each participant, based on the participant’s level within Kroger, and actual payouts can exceed that
amount when Kroger’s performance exceeds the pre-established thresholds. Initially the Performance Goals
for annual bonuses will include the following components: (i) EBITDA; (ii) identical sales; (iii) achievement

of strategic initiatives; and (iv) achievement of supermarket fuel center goals for EBITDA, gallons sold, and
number of fuel centers. Initially the Performance Goals for long-term bonuses will include the following
components: (i) performance in four key categories in Kroger’s strategic plan, (ii) reduction in operating
costs as a percentage of sales, (iii) performance in categories designed to measure associate engagement, and
(iv) return on invested capital. No single Cash Bonus to a participant may exceed $5,000,000.

c e r t a i N F e d e r a l i N c o M e t a x c o N S e q u e N c e S

Nonstatutory Stock Options, Stock Appreciation Rights, and Performance Units. A grantee will not
recognize income on the grant of a nonstatutory stock option, stock appreciation right or performance unit,
but generally will recognize ordinary income upon the exercise thereof. The amount of income recognized
upon the exercise of a nonstatutory stock option generally will be measured by the excess, if any, of the fair
market value of the shares at the time of exercise over the exercise price, provided the shares issued are either
transferable or not subject to a substantial risk of forfeiture. The amount of income recognized upon the
exercise of a stock appreciation right or a performance unit, in general, will be equal to the amount of cash
received and the fair market value of any shares received at the time of exercise, provided the shares issued
are either transferable or not subject to a substantial risk of forfeiture, plus the amount of any taxes withheld.
Under certain circumstances, income on the exercise of a performance unit will be deferred if the grantee
makes a proper election to defer such income. In some cases the recognition of income by a grantee from the
exercise of a performance unit may be delayed for up to six months if a sale of the shares would subject the
grantee to suit under Section 16(b) of the Exchange Act unless the grantee elects to recognize income at the
time of receipt of such shares. In either case, the amount of income recognized is measured with respect to
the fair market value of the common stock at the time the income is recognized.

In the case of ordinary income recognized by a grantee as described above in connection with the
exercise of a nonstatutory stock option, a stock appreciation right, or a performance unit, Kroger will be
entitled to a deduction in the amount of ordinary income so recognized by the grantee. Kroger will report the
income to be recognized by grantee and will withhold the appropriate taxes.

Incentive Shares and Restricted Stock. A grantee of incentive shares or restricted stock is not required
to include the value of such shares in ordinary income until the first time the grantee’s rights in the shares
are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, unless the
grantee elects to be taxed on receipt of the shares. In either case, the amount of such income will be equal
to the excess of the fair market value of the stock at the time the income is recognized over the amount paid
for the stock. Kroger will be entitled to a deduction in the amount of the ordinary income recognized by
the grantee for Kroger’s taxable year which includes the last day of the grantee’s taxable year in which such
grantee recognizes the income. Kroger will report the income to be recognized by grantee and will withhold
the appropriate taxes.

General. The rules governing the tax treatment of options, stock appreciation rights, performance units,
incentive shares and restricted stock and stock acquired upon the exercise of options, stock appreciation rights
and performance units are quite technical, so that the above description of tax consequences is necessarily
general in nature and does not purport to be complete. Moreover, statutory provisions are, of course, subject
to change, as are their interpretations, and their application may vary in individual circumstances. Finally,
the tax consequences under applicable state law may not be the same as under the federal income tax laws.

Tax Deductibility Cap. Section 162(m) of the Code provides that certain compensation received in any
year by a “covered employee” in excess of $1,000,000 is non-deductible by Kroger for federal income tax
purposes. Section 162(m) provides an exception, however, for “performance-based compensation.” To the extent
practicable under the circumstances, the Committee currently intends to structure grants and awards made
under the Plan to “covered employees” as performance-based compensation that is exempt from Section 162(m).

This summary of the 2014 Long-Term Incentive and Cash Bonus Plan is qualified in its entirety by the

complete text of the Plan that is set forth in Appendix 1 of this Proxy Statement.

e x i S t i N g P l a N S

As of our fiscal year ended February 1, 2014, there were 16,171,099 shares remaining for future issuance
under existing equity compensation plans. Of these shares, 5,103,640 were available for awards other than
options or stock appreciation rights. Under some of these plans, this sublimit on full value shares can be
increased by decreasing by four the total number of shares issuable under the plan for each such increased share.

t h e B o a r d o F d i r e c t o r S r e c o M M e N d S a v o t e F o r t h i S P r o P o S a l .

N e w P l a N B e N e F i t S

2014 Long-Term Incentive
and Cash Bonus Plan

Name and Position (1)
All Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dollar value ($)
(1)

Number of Units
(1)

(1) Awards under the 2014 Long-Term Incentive and Cash Bonus Plan are subject to the discretion of the
Compensation Committee or a committee of officers, as applicable. It is not possible to determine the
benefits that will be received by executive officers and other employees if the plan is approved by
shareholders. Please refer to the Grants of Plan-Based Awards table for disclosure of equity awards made
to our named executive officers in fiscal 2013.

e q u i t y c o M P e N S a t i o N P l a N i N F o r M a t i o N

The following table provides information regarding shares outstanding and available for issuance under

the Company’s existing equity compensation plans.

Plan Category

Equity compensation plans approved by

security holders . . . . . . . . . . . . . . . . . . . . .
Equity compensation plans not approved by
security holders . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(a)
Number of
securities
to be issued
upon exercise of
outstanding options,
warrants and rights
(1)

(b)
Weighted-average
exercise price of
outstanding
options, warrants
and rights

(c)
Number of securities
remaining for future
issuance under equity
compensation plans
(excluding securities
reflected in column
(a))(2)

22,863,444

—
22,863,444

$25.66

$ —
$25.66

16,171,099

—
16,171,099

(1) The total number of securities reported includes the maximum number of common shares, 1,189,345,
that may be issued under performance units granted under one or more long-term incentive plans. The
nature of the awards is more particularly described in the Equity section of the Compensation Discussion
and Analysis. The weighted-average exercise price in column (b) does not take these performance unit
awards into account. Based on historical data, or in the case of the award made in 2011 and earned in
2013, the actual payout percentage, the Company’s best estimate of the number of securities that will be
issued under the performance unit agreements is approximately 752,139.

(2) The plans include initial limitations on the number of shares that can be issued as incentive shares or
restricted stock. The Company may increase this amount by decreasing the total number of securities
that can be issued by four for each stock share issued in excess of the stated initial limitation.

a d v i S o r y v o t e o N e x e c u t i v e c o M P e N S a t i o N
( i t e M N o . 3 )

The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, requires that we
give our shareholders the right to approve, on a nonbinding, advisory basis, the compensation of our named
executive officers as disclosed earlier in this proxy statement in accordance with the SEC’s rules.

As discussed earlier in our Compensation Discussion and Analysis, our compensation philosophy is to:

• make total compensation competitive;

• include opportunities for equity ownership as part of compensation; and

• use incentive compensation to help drive performance by providing superior pay for superior results.

Furthermore, as previously disclosed, an increased percentage of total potential compensation is
performance-based as opposed to time-based as half of the compensation previously awarded to the named
executive officers as restricted stock (and earned based on the passage of time) is now only earned to the
extent that performance goals are achieved. In addition, annual and long-term cash bonuses are performance-
based and earned only to the extent that performance goals are achieved. In addition, annual and long-term
cash bonuses are performance-based and earned only to the extent that performance goals are achieved. In
tying a large portion of executive compensation to achievement of short-term and long-term strategic and
operational goals, we seek to closely align the interests of our named executive officers with the interests of
our shareholders.

The vote on this resolution is not intended to address any specific element of compensation. Rather, the
vote relates to the compensation of our named executive officers as described in this proxy statement. The
vote is advisory. This means that the vote is not binding on Kroger. The Compensation Committee of our
Board of Directors is responsible for establishing executive compensation. In so doing that Committee will
consider, along with all other relevant factors, the results of this vote.

We ask our shareholders to vote on the following resolution:

“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant
to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation
tables, and the related narrative discussion, is hereby APPROVED.”

t h e B o a r d o F d i r e c t o r S r e c o M M e N d S a v o t e F o r t h i S P r o P o S a l .

S e l e c t i o N o F a u d i t o r S
( i t e M N o . 4 )

The Audit Committee of the Board of Directors is responsible for the appointment, compensation and
retention of Kroger’s independent auditor, as required by law and by applicable NYSE rules. On March 12,
2014, the Audit Committee appointed PricewaterhouseCoopers LLP as Kroger’s independent auditor for the
fiscal year ending January 31, 2015. While shareholder ratification of the selection of PricewaterhouseCoopers
LLP as Kroger’s independent auditor is not required by Kroger’s Regulations or otherwise, the Board of
Directors is submitting the selection of PricewaterhouseCoopers LLP to shareholders for ratification, as it has
in past years, as a good corporate governance practice. If the shareholders fail to ratify the selection, the Audit
Committee may, but is not required to, reconsider whether to retain that firm. Even if the selection is ratified,
the Audit Committee in its discretion may direct the appointment of a different auditor at any time during the
year if it determines that such a change would be in the best interests of Kroger and its shareholders.

A representative of PricewaterhouseCoopers LLP is expected to be present at the meeting to respond to

appropriate questions and to make a statement if he or she desires to do so.

t h e B o a r d o F d i r e c t o r S r e c o M M e N d S a v o t e F o r t h i S P r o P o S a l .

d i S c l o S u r e o F a u d i t o r F e e S

The following describes the fees billed to Kroger by PricewaterhouseCoopers LLP related to the fiscal

years ended February 1, 2014 and February 2, 2013:

Audit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit-Related Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year 2013
$5,151,390
151,878
188,021
—
$5,491,289

Fiscal Year 2012
$4,428,204
45,993
—
—
$4,474,197

Audit Fees for the years ended February 1, 2014 and February 2, 2013, respectively, were for professional
services rendered for the audits of Kroger’s consolidated financial statements, the issuance of comfort letters
to underwriters, consents, and assistance with the review of documents filed with the SEC.

Audit-Related Fees. Audit related services for the year ended February 1, 2014 were for assurance and
related services pertaining to accounting consultation in connection with attest services that are not required
by statute or regulation, and consultations concerning financial accounting and reporting standards. These
services are considered approved under the Company’s existing Audit and Non-Audit Service Pre-Approval
Policy. These fees also included services related to acquisition related due diligence which were approved by
the Audit Committee in June 2013.

Tax Fees for the year ended February 1, 2014 were for tax audit support and debt restructuring. We did

not engage PricewaterhouseCoopers LLP for any tax services for the year ended February 2, 2013.

All Other Fees. We did not engage PricewaterhouseCoopers LLP for other services for the years ended

February 1, 2014 and February 2, 2013.

The Audit Committee requires that it approve in advance all audit and non-audit work performed by
PricewaterhouseCoopers LLP. On March 12, 2014, the Audit Committee approved services to be performed
by PricewaterhouseCoopers LLP for the remainder of fiscal year 2014 that are related to the audit of Kroger
or involve the audit itself. In 2007, the Audit Committee adopted an audit and non-audit service pre-approval
policy. Pursuant to the terms of that policy, the Committee will annually pre-approve certain defined services
that are expected to be provided by the independent auditors. If it becomes appropriate during the year
to engage the independent accountant for additional services, the Audit Committee must first approve the
specific services before the independent accountant may perform the additional work.

PricewaterhouseCoopers LLP has advised the Audit Committee that neither the firm, nor any member of

the firm, has any financial interest, direct or indirect, in any capacity in Kroger or its subsidiaries.

S h a r e h o l d e r P r o P o S a l
( i t e M N o . 5 )

We have been notified by five shareholders, the names and shareholdings of which will be furnished
promptly to any shareholder upon written or oral request to Kroger’s Secretary at Kroger’s executive offices,
that they intend to propose the following resolution at the annual meeting:

“ t h e k r o g e r c o M P a N y
h u M a N r i g h t S r i S k a S S e S S M e N t - 2 0 1 4

RESOLVED, that shareholders of The Kroger Company (“Kroger”) urge the Board of Directors to report
to shareholders, at reasonable cost and omitting proprietary information, on Kroger’s process for identifying
and analyzing potential and actual human rights risks of Kroger’s operations and supply chain (referred to
herein as a “human rights risk assessment”) addressing the following:

• Human rights principles used to frame the assessment

• Frequency of assessment

• Methodology used to track and measure performance

• Nature and extent of consultation with relevant stakeholders in connection with the assessment

• How the results of the assessment are incorporated into company policies and decision making

The report should be made available to shareholders on Kroger’s website no later than October 31, 2014.

S u P P o r t i N g S t a t e M e N t

As long-term shareholders, we favor policies and practices that protect and enhance the value of our
investments. There is increasing recognition that company risks related to human rights violations, such as
litigation, reputational damage, and project delays and disruptions, can adversely affect shareholder value.

Kroger, like many other companies, has adopted a supplier code of conduct (See The Kroger Company
Standard Vendor Agreement) but has yet to publish a company-wide Human Rights Policy, addressing human
rights issues and a separate human rights code that applies to its suppliers. Adoption of these principles would
be an important first step in effectively managing human rights risks. Companies must then assess risks to
shareholder value of human rights practices in their operations and supply chains to translate principles into
protective practices.

The importance of human rights risk assessment is reflected in the United Nations Guiding Principles
on Business and Human Rights (the “Ruggie Principles”) approved by the UN Human Rights Council in 2011.
The Ruggie Principles urge that “business enterprises should carry out human rights due diligence…accessing
actual and potential human rights impacts, integrating and acting upon the findings, tracking responses,
and communicating how impacts are addressed.” (http://www.business -humanrights.org/media/documents/
ruggie/ruggie-guiding-principles-21-mar-201l.pd:D

Kroger’s business exposes it to significant human rights risks. As of year-end 2012, Kroger operations,
including supermarkets, convenience and jewelry stores, are located in over 40 states, with suppliers in
countries around the world, including Iran, China and Malaysia. The company’s supply chain is complex
and global. The company acknowledges that work stoppages, supply chain interruptions and civil unrest
(The Kroger Company Form 10-K, Feb. 2, 2013, pages 32, 34) could adversely affect the company’s ability to
execute its strategic plan.

We urge shareholders to vote for this proposal.”

t h e B o a r d o F d i r e c t o r S r e c o M M e N d S a v o t e a g a i N S t t h i S P r o P o S a l F o r t h e
F o l l o w i N g r e a S o N S :

Kroger recognizes the importance of ensuring basic human rights are recognized by those seeking to
do business with us. As such, Kroger has in place a comprehensive code of conduct that is applicable to those
that furnish goods or services to us, as well as their contractors. That code of conduct has been published
and is available on our website at www.kroger.com. Our existing code of conduct requires compliance with
all applicable labor laws, regulations, and orders, including the Fair Labor Standards Act. In addition, the code
of conduct:

• Prohibits child, indentured, involuntary, or prison labor;

• Prohibits exposing workers to unreasonably hazardous, unsafe, or unhealthy conditions;

• Prohibits unlawful discrimination;

• Requires the workplace to be free from harassment;

• Requires workers to be treated fairly, with dignity and respect;

• Requires that wages meet or exceed legal and industry standards;

• Requires that U.S. workers be eligible for employment in the U.S.;

• Prohibits bribes and conduct that appears improper or may result in a conflict of interest;

• Requires compliance with the U.S. Foreign Corrupt Practices Act; and

• Requires maintenance of records (that must be furnished to us upon request) evidencing compliance

with the code.

Kroger’s code of conduct does more than simply reporting on human rights risks in its supply chain; it
prohibits those that do business with us from engaging in the type of conduct of concern to the proponents.
Those that violate our code will not be permitted to do business with us until they comply with our code.
As such, we do not believe that human rights violations in our supply chain pose a substantial risk, that the
requested report would serve little benefit to shareholders, and preparation of a report would divert resources
that otherwise could be more appropriately used in the best interests of shareholders.

This proposal covers the same subject matter as one submitted to a vote at the last three years’ annual

meetings and was soundly defeated by shareholders.

S h a r e h o l d e r P r o P o S a l
( i t e M N o . 6 )

We have been notified by two shareholders, the name and shareholdings of which will be furnished
promptly to any shareholder upon written or oral request to Kroger’s Secretary at Kroger’s executive offices,
that it intends to propose the following resolution at the annual meeting:

“WHEREAS, post-consumer packaging and printed paper comprises nearly half of U.S. landfill waste and is
a significant consumer of natural resources, energy and source of greenhouse gas emissions. Half of printed
paper and packaging is landfilled or burned rather than recycled. Plastic packaging debris migrates to oceans
where it damages fisheries, tourism and marine life. There is a growing link between ineffective waste
management and plastic debris piling up in Earth’s oceans and waterways, where it ·injures and kills marine
animals, transports invasive species and poses a threat to human health. California spends nearly $500 million
annually to prevent trash, much of it packaging, from polluting beaches, rivers and ocean frontage.

The estimated market value of wasted packaging that could be recycled is $11.4 billion. Increased recycling
provides more efficient use of valuable resources. It generates less pollution, and requires less energy than
using virgin raw materials. In the U.S., taxpayers pay to recycle packaging, but poor infrastructure and
strapped municipal budgets have yielded lagging recycling rates: 38% for aluminum; 34% for glass, and only
12% for plastic. Further, Kroger’s house brands, among other products, are recently increasing use of non-
recyclable flexible plastic packaging, such as pouches.

More than 40 countries have shifted some or all costs of packaging recycling onto producers. U.S. producers
of packaging-intensive brands can expect to be asked to take more responsibility for recycling of packaging
in the future. We believe some measure of responsibility for packaging is a key component of a corporate
environmental sustainability policy.

Extended Producer Responsibility (EPR), a corporate and public policy that shifts accountability for financing
recycling of materials from taxpayers to producers, is a promising potential solution. Two major brands,
Coca-Cola Co. and Nestle Waters NA, have called for producers to adopt EPR programs in the U.S. Legislation is
pending in several states. Taking an active role in planning for mandated producer responsibility for packaging
will reduce risk, ensure continued high quality packaging, reduce wasted resources, and increase program
efficiencies. The company has not moved decisively to lead or participate in such an effort nor addressed its
responsibility for post-consumer packaging for its brands.

BE IT RESOLVED THAT shareowners of Kroger request that the board of directors issue a report, at reasonable
cost and omitting confidential information, developing a policy position on the company’s responsibility for
post-consumer product packaging recycling of its private label brands, and assessing whether alternative
approaches could lead to substantially increased packaging recycling.

Supporting Statement: Options reviewed in the report should include analyses of company -based actions that
will increase recyclability of packaging materials, and participation in policy and technical development of
EPR or other producer responsibility strategies in collaboration with sector peers, policymakers and suppliers
with a goal of greatly increased U.S. recycling rates and reduced energy use and pollution.”

t h e B o a r d o F d i r e c t o r S r e c o M M e N d S a v o t e a g a i N S t t h i S P r o P o S a l F o r t h e
F o l l o w i N g r e a S o N S :

Kroger shares the proponent’s concerns regarding waste reduction and recognizes the important role it
plays as a good steward of the environment. We have numerous sustainability initiatives in place to preserve
our natural resources and to conserve energy. For instance, the company recycled more than 35 million
pounds of plastic waste, from bags and plastic film, in 2013. The company also recycles more than a billion
pounds of cardboard each year. Most importantly, we’ve pioneered the Perishable Donations Partnership,
which enables the donation of more than 49 million pounds of safe, wholesome food to Feeding America
food banks to fight hunger in local communities. That which cannot be donated is composted or converted
to energy through an innovative waste to energy system. By scaling up these innovative solutions, Kroger is
reducing the amount of waste being sent to landfills. Kroger also works to reduce waste in the first place by
designing optimized packaging, and is participating in national efforts to expand and scale infrastructure. For
each of the past several years we have published on-line The Kroger Co. Public Responsibilities Report and
our annual Sustainability Report that highlight the company’s sustainability initiatives and waste reduction
efforts in greater detail.

This proposal requests that Kroger take additional steps to report on the feasibility of adopting a policy
of “Extended Producer Responsibility,” or EPR. The resolution provides no guidance regarding proponent’s
view of the requirements of a company-adopted EPR policy.

Kroger supports efforts to reduce waste in the supply chain, as described above and in our various
sustainability reports. It would be inappropriate, however, to support a policy that is not clearly defined. We
believe our support for waste reduction efforts in our supply chain are significant and meaningful.

Kroger is familiar with various EPR proposals in states and laws in other countries that require retailers
and manufacturers to pay substantial taxes and fees related to waste disposal. The proposals vary in detail and
implementation, and while we do assess new laws and regulations for their feasibility, cost and requirements,
to do so for each individual EPR proposal at the federal, state, and international level would require significant
resources that could be allocated more wisely in the best interests of shareholders.

Kroger often is asked to take a position on legislation or regulatory proposals. While occasionally we
will communicate to federal, state and local officials our positions on specific policy issues, we believe it is
premature to offer an official position statement on EPR legislative and regulatory proposals without first
carefully examining the specifics of each individual law or regulation and how it would affect our customers
and our business.

This proposal covers the same subject matter as one submitted to a vote at the last two years’ annual

meetings and was soundly defeated by shareholders.

SHAREHOLDER PROPOSALS – 2015 ANNUAL MEETING. Shareholder proposals intended for inclusion
in our proxy material relating to Kroger’s annual meeting in June 2015 should be addressed to the Secretary
of Kroger and must be received at our executive offices not later than January 14, 2015. These proposals
must comply with Rule 14a-8 and the SEC’s proxy rules. The Company’s Regulations contain an advance
notice of shareholder business and nominations requirement, which generally prescribes the procedures
that a shareholder of the Company must follow if the shareholder intends, at an annual meeting, to nominate
a person for election to the Company’s Board of Directors or to propose other business to be considered by
shareholders. These procedures include, among other things, that the shareholder give timely notice to the
Secretary of the Company of the nomination or other proposed business, that the notice contain specified
information, and that the shareholder comply with certain other requirements. Generally, in the case of an

annual meeting, a shareholder’s notice in order to be timely must be delivered in writing to the Secretary
of the Company, at its principal executive office, not later 45 calendar days prior to the date on which the
Company’s proxy statement for the prior year’s annual meeting of shareholders was mailed to shareholders. If
a shareholder’s nomination or proposal is not in compliance with the procedures set forth in the Regulations,
the Company may disregard such nomination or proposal. Accordingly, if a shareholder intends, at the 2015
annual meeting, to nominate a person for election to the Board of Directors or to propose other business,
the shareholder must deliver a notice of such nomination or proposal to the Company’s Secretary not later
March 30, 2015, and comply with the requirements of the Regulations. If a shareholder submits a proposal
outside of Rule 14a-8 for the Company’s 2015 annual meeting of shareholder and such proposal is not delivered
within the time frame specified in the Regulations, the Company’s proxy may confer discretionary authority
on persons being appointed as proxies on behalf of the Company to vote on such proposal. Notices should be
addressed in writing to: Secretary, The Kroger Co., 1014 Vine Street, Cincinnati, Ohio 45202-1100.

Attached to this Proxy Statement is Kroger’s 2013 Annual Report which includes a brief description of
Kroger’s business, including the general scope and nature thereof during 2013, together with the audited
financial information contained in our 2013 report to the SEC on Form 10-K. A copy of that report is
available to shareholders on request without charge by writing to: Todd A. Foley, Treasurer, The
Kroger Co., 1014 Vine Street, Cincinnati, Ohio 45202-1100 or by calling 1-513-762-1220. Our SEC filings
are available to the public from the SEC’s web site at www.sec.gov.

h o u S e h o l d i N g o F P r o x y M a t e r i a l S

We have adopted a procedure approved by the SEC called “householding.” Under this procedure,
shareholders of record who have the same address and last name will receive only one copy of the Notice
of Internet Availability of Proxy Materials (or proxy materials in the case of shareholders who receive paper
copies of such materials) unless one or more of these shareholders notifies us that they wish to continue
receiving individual copies. This procedure will reduce our printing costs and postage fees. Householding will
not in any way affect dividend check mailings.

If you are eligible for householding, but you and other shareholders of record with whom you share an
address currently receive multiple copies of our Notice of Internet Availability of Proxy Materials (or proxy
materials in the case of shareholders who receive paper copies of such materials), or if you hold in more than
one account, and in either case you wish to receive only a single copy for your household or if you prefer
to receive separate copies of our documents in the future, please contact your bank or broker, or contact
Kroger’s Secretary at 1014 Vine Street, Cincinnati, Ohio 45202-1100 or via telephone at 513-762-4000.

Beneficial shareholders can request information about householding from their banks, brokers or other

holders of record.

The management knows of no other matters that are to be presented at the meeting but, if any should be

presented, the Proxy Committee expects to vote thereon according to its best judgment.

By order of the Board of Directors,

Paul W. Heldman, Secretary

APPENDIX 1

THE KROGER CO.
2014 LONG-TERM INCENTIVE AND CASH BONUS PLAN

1. Definitions

In this Plan the following definitions will apply:

1.1

“Agreement” means a written instrument implementing a grant of an Option, Right or
Performance Unit, an award of Restricted Stock or Incentive Shares, or setting forth the terms of a Cash Bonus.

1.2

“Board” means the Board of Directors of the Company.

1.3

“Cash Bonus” means an annual or long-term bonus awarded to a participant under the Cash
Bonus Program and determined by the Committee based on performance measured against Performance
Goals established by the Committee.

1.4
Cash Bonus.

“Cash Bonus Program” means that portion of the Plan under which a participant is awarded a

1.5

“Code” means the Internal Revenue Code of 1986, as amended.

1.6

“Committee” means the committee appointed to administer each of the Programs under the
Plan. For purposes of the Insider Program and the Cash Bonus Program the Committee will be a committee
of the Board meeting the standards of Rule 16b-3(d)(1) under the Exchange Act, or any similar successor rule,
appointed by the Board to administer the Insider Program and the Cash Bonus Program, which initially will be
composed of those members of the Compensation Committee of the Board who qualify as “outside directors”
under Section 162(m) of the Code. For purposes of the Non-Insider Program, the Committee will be the Stock
Option Committee.

1.7

1.8

“Company” means THE KROGER CO.

“Date of Exercise” means the date on which the Company receives notice of the exercise of an

Option, Right or Performance Unit in accordance with the terms of Article 9.

1.9

“Date of Grant” means the date on which an Option, Right or Performance Unit is granted or

Restricted Stock or Incentive Shares are awarded by the Committee.

1.10

“Director” means a non-Employee member of the Board of the Company.

1.11

“Employee” means any person, excluding Directors, to whom awards or grants can be made
pursuant to the securities laws of the United State and to whom such awards or grants are made by the
Committee.

1.12

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

1.13

“Fair Market Value” of a Share means the amount equal to the fair market value of a Share
determined pursuant to a reasonable method adopted by the Committee in good faith for such purpose.
Unless otherwise provided in an Agreement to the contrary, the Fair Market Value of a Share will be the
closing price on the date of determination on the New York Stock Exchange--Composite Transactions, or if no
sales are made on such date, on the most recent prior date for which sales are reported.

1.14

“Grantee” means an Employee or a Director to whom Restricted Stock has been awarded

pursuant to Article 11 or to whom Incentive Shares have been awarded pursuant to Article 12.

1.15

1.16

1.17

“Incentive Share” means a Share awarded pursuant to Article 12.

“Insider” means an officer of the Company subject to Section 16(a) of the Exchange Act.

“Insider Program” means that portion of the Plan under which grants or awards are made to

Insiders and Directors.

1.18

“Non-Insider Program” means that portion of the Plan under which grants or awards are made

to Employees, excluding Insiders.

1.19

“Option” means a nonstatutory stock option granted under the Plan that does not qualify as an

incentive stock option under Section 422 of the Code.

1.20

“Option Period” means the period during which an Option may be exercised.

1.21

“Option Price” means the price per Share at which an Option may be exercised. The Option
Price will be determined by the Committee, but in no event will the Option Price of an Option be less than
the Fair Market Value per Share determined as of the Date of Grant.

1.22
been granted.

“Optionee” means an Employee or Director to whom an Option, Right or Performance Unit has

1.23

“Performance Goals” means performance goals established by the Committee that may be
based on: (i) earnings or earnings per share of Kroger, a unit of Kroger, or designated projects; (ii) total
sales, identical sales, or comparable sales of Kroger, a unit of Kroger, or designated projects; (iii) cash flow;
(iv) cash flow from operations; (v) operating profit or income; (vi) net income; (vii) operating margin; (viii) net
income margin; (ix) return on net assets; (x) economic value added; (xi) return on total assets; (xii) return
on common equity; (xiii) return on total or invested capital; (xiv) total shareholder return; (xv) revenue;
(xvi) revenue growth; (xvii) earnings before interest, taxes, depreciation and amortization (“EBITDA”);
(xviii) EBITDA growth; (xix) funds from operations per share and per share growth; (xx) cash available
for distribution; (xxi) cash available for distribution per share and per share growth; (xxii) share price
performance on an absolute basis and relative to an index of earnings per share or improvements in Kroger’s
attainment of expense levels; (xxiii) reduction in operating costs as a percentage of sales; (xxiv) performance
in key categories; (xxv) implementing or completion of strategic initiatives or critical projects, and (xxvi) key
category performance as measured by the results of surveys of customers or associates; or any other objective
goals established by the Committee, and may be absolute in their terms or measured against or in relationship
to other companies similarly or otherwise situated. Performance goals may be particular to an employee
or the department, branch, Subsidiary or other division in which he or she works, or may be based on the
performance of the Company generally, and may cover such period as may be specified by the Committee.

1.24
Article 8.

“Performance Unit” means a performance unit granted under the Plan in accordance with

1.25

“Performance Unit Period” means the period during which a Performance Unit is outstanding.

1.26

“Plan” means THE KROGER CO. 2014 Long-Term Incentive and Cash Bonus Plan.

1.27
Unit is granted.

“Related Option” means the Option in connection with which a specified Right or Performance

1.28

“Related Performance Unit” means the Performance Unit granted in connection with a specified

Option.

1.29

“Related Right” means the Right granted in connection with a specified Option.

1.30

“Restricted Stock” means Shares awarded pursuant to Article 11.

1.31

1.32

1.33

“Right” means a stock appreciation right granted under the Plan pursuant to Article 7.

“Right Period” means the period during which a Right may be exercised.

“Share” means an authorized but unissued common share, par value $1.00 per share, of the

Company, or a reacquired previously issued common share.

1.34

“Stock Option Committee” means a committee of three or more members appointed by the
Chief Executive Officer of the Company to administer the Non-Insider Program, each of whom is ineligible to
receive grants or awards under the Non-Insider Program, and has been so ineligible for at least one year.

1.35

“Subsidiary” means a corporation at least 50% of the total combined voting power of all classes

of stock of which is owned by the Company, either directly or through one or more other Subsidiaries.

2. Purpose

The Plan is intended to assist in attracting and retaining Employees and Directors of outstanding ability

and to promote the identification of their interests with those of the shareholders of the Company.

3. Administration

The Plan will be administered by the Committee. In addition to any other powers granted to the

Committee, it will have the following powers, subject to the express provisions of the Plan:

3.1

to determine in its discretion the Employees to whom Options, Performance Units or Rights will
be granted, to whom Restricted Stock and Incentive Shares will be awarded, and those Employees eligible to
receive Cash Bonuses; the number of Shares to be subject to each Option, Right, Performance Unit, Restricted
Stock or Incentive Share award, and the terms upon which Options, Rights or Performance Units may be
acquired and exercised and the terms and conditions of Restricted Stock and Incentive Share awards and Cash
Bonuses;

3.2

3.3

to determine all other terms and provisions of each Agreement, which need not be identical;

without limiting the generality of the foregoing, to provide in its discretion in an Agreement:

(a)

for an agreement by the Optionee or Grantee to render services to the Company
or a Subsidiary upon such terms and conditions as may be specified in the Agreement, provided that the
Committee will not have the power to commit the Company or any Subsidiary to employ or otherwise retain
any Optionee or Grantee;

(b)

for restrictions on the transfer, sale or other disposition of Shares issued to the Optionee
upon the exercise of an Option, Right or Performance Unit, for other restrictions permitted by Article 11 with
respect to Restricted Stock or for conditions with respect to the issuance of Incentive Shares;

(c)

for an agreement by the Optionee or Grantee to resell to the Company, under specified
conditions, Shares issued upon the exercise of an Option, Right or Performance Unit or awarded as Restricted
Stock or Incentive Shares;

(d)

for the payment of the Option Price upon the exercise by an Employee or Director of
an Option otherwise than in cash, including without limitation by delivery of Common Shares (other than
Restricted Stock) valued at Fair Market Value on the Date of Exercise of the Option, or a combination of cash
and Shares; and

(e)

for the deferral of receipt of amounts that otherwise would be distributed upon exercise
of a Performance Unit, the terms and conditions of any such deferral and any interest or dividend equivalent
or other payment that will accrue with respect to deferred distributions;

3.4

to construe and interpret the Agreements and the Plan;

3.5

to require, whether or not provided for in the pertinent Agreement, of any person exercising
an Option, Right or Performance Unit or acquiring Restricted Stock or Incentive Shares, at the time of such
exercise or acquisition, the making of any representations or agreements that the Committee may deem
necessary or advisable in order to comply with the securities laws of the United States or of any state;

3.6

to provide for satisfaction of an Optionee’s or Grantee’s tax liabilities arising in connection with
the Plan through, without limitation, retention by the Company of Common Shares otherwise issuable on
the exercise of an Option, Right or Performance Unit or pursuant to an award of Incentive Shares or through
delivery of Common Shares to the Company by the Optionee or Grantee under such terms and conditions as
the Committee deems appropriate; and

3.7

to make all other determinations and take all other actions necessary or advisable for the

administration of the Plan.

Any determinations or actions made or taken by the Committee pursuant to this Article will be binding

and final.

4. Eligibility

Options, Rights, Performance Units, Restricted Stock and Incentive Shares may be granted or awarded
only to Employees and Directors. Cash Bonuses may only be awarded to Employees. In no event may any
participant receive awards and grants totaling more than 3,750,000 Shares in the aggregate under this Plan,
and no single Cash Bonus to a participant may exceed $5,000,000.

Shares Subject to the Plan

5.1

The maximum number of Shares that may be issued under the Plan is 25,000,000 Shares. Except
as otherwise provided in the following sentence, the maximum number of Shares that may be issued as
Restricted Stock, Incentive Shares, or Performance Units under the Plan is 10,000,000 Shares in the aggregate.
Notwithstanding the foregoing, the Committee for the Insider Program may increase the number of Shares that
may be issued as Restricted Stock, Incentive Shares, or Performance Units to an amount in excess of 10,000,000
Shares, provided that for each such Share in excess of 10,000,000 Shares that are issued as Restricted Stock,
Incentive Shares, or Performance Units, in the aggregate, the number of Shares that may be issued under the
Plan will be reduced by four Shares. In addition to the decisions that it makes in administering the Insider
Program, annually the Committee for the Insider Program will approve the number of Shares to be granted
under the Non-Insider Program for that fiscal year.

5.2

If an Option, Right or Performance Unit expires or terminates for any reason (other than
termination by virtue of the exercise of a Related Option, Related Right or a Related Performance Unit, as the
case may be) without having been fully exercised, if Shares of Restricted Stock are forfeited or if Incentive
Shares are not issued or are forfeited, the unissued or forfeited Shares that had been subject to the Agreement
relating thereto will become available for the grant of other Options, Rights and Performance Units or for
the award of additional Restricted Stock or Incentive Shares, provided that in the case of forfeited Shares, the
Grantee has received no dividends prior to forfeiture with respect to such Shares.

6. Options

6.1

The Committee is authorized to grant Options to Employees and Directors.

6.2

The Option Period for Options granted to Employees and Directors will be determined by the
Committee and specifically set forth in the Agreement. No Option will be exercisable before six months
after the Date of Grant (except that this limitation need not apply in the event of the death or disability of the
Optionee within the six-month period) or after ten years from the Date of Grant.

6.3

The maximum number of Shares with respect to which Options may be granted to any Employee
or Director under this Plan during its term is 3,750,000 Shares. In no event will the Option Price of an Option
be less than the Fair Market Value of a Share at the time of the grant.

6.4

Except in connection with a corporate transaction involving the company (including, without
limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination, or exchange of shares) or as otherwise permitted
pursuant to Article 13 or Article 15, the Option Price of an Option as set forth on the Date of Grant will not be
reduced during the term of the Option, nor will Options be canceled in exchange for cash, other awards, or
newly issued Options with an Option Price that is less than the Option Price of the original Options without
shareholder approval (i.e., Options will not be “repriced”).

6.5
sole discretion.

All other terms of Options granted under the Plan will be determined by the Committee in its

7. Rights

7.1

7.2

The Committee is hereby authorized to grant Rights to Employees and Directors.

A Right may be granted under the Plan:

(a)

(b)

in connection with, and at the same time as, the grant of an Option under the Plan; or

independently of any Option granted under the Plan.

A Right granted under clause (a) of the preceding sentence is a Related Right. A Related Right may, in the

Committee’s discretion, apply to all or a portion of the Shares subject to the Related Option.

7.3

A Right may be exercised in whole or in part as provided in the Agreement, and, subject to the
provisions of the Agreement, entitles its Optionee to receive, without any payment to the Company (other
than required income tax withholding amounts), either cash or that number of Shares (equal to the highest
whole number of Shares), or a combination thereof, in an amount or having a Fair Market Value determined
as of the Date of Exercise not to exceed the number of Shares subject to the portion of the Right exercised
multiplied by an amount equal to the excess of (i) the Fair Market Value of a Share on the Date of Exercise
of the Right over (ii) either (A) the Fair Market Value of a Share on the Date of Grant of the Right if it is not a
Related Right, or (B) the Option Price as provided in the Related Option if the Right is a Related Right.

7.4

The Right Period will be determined by the Committee and specifically set forth in the

Agreement, provided, however --

(a)

a Right may not be exercised before the expiration of six months from the Date of Grant
(except that this limitation need not apply in the event of the death or disability of the Optionee within the
six-month period);

(b)

a Right will expire no later than the earlier of (i) ten years from the Date of Grant, or (ii)

in the case of a Related Right, the expiration of the Related Option; and

(c)

a Right may be exercised only when the Fair Market Value of a Share exceeds either (i)
the Fair Market Value of a Share on the Date of Grant of the Right if it is not a Related Right, or (ii) the Option
Price as provided in the Related Option if the Right is a Related Right.

7.5

The exercise, in whole or in part, of a Related Right will cause a reduction in the number of
Shares subject to the Related Option equal to the number of Shares with respect to which the Related Right is
exercised. Similarly, the exercise, in whole or in part, of a Related Option will cause a reduction in the number
of Shares subject to the Related Right equal to the number of Shares with respect to which the Related Option
is exercised.

7.6

Rights granted under the Plan, to the extent determined by the Committee, will comply with
the requirements of Rule 16b-3 under the Exchange Act during the term of this Plan. Should any additional
provisions be necessary for this Article 7 to comply with the requirements of Rule 16b-3 or any other rules or
regulations, the Board may amend this Plan to delete, add to or modify the provisions of the Plan accordingly,
subject to the provisions of Article 14, if applicable. The Company intends to comply, if and to the extent
applicable, with the requirements of Rule 16b-3; however, the Company’s failure for any reason whatsoever
to comply with such requirements will not impose any liability on the Company to any Optionee or any
other party.

7.7

To the extent required by Rule 16b-3 under the Exchange Act or otherwise provided in the
Agreement, the Committee will have sole discretion to consent to or disapprove the election of any Optionee
to receive cash in full or partial settlement of a Right. In cases where an election of settlement in cash must
be consented to by the Committee, the Committee may consent to, or disapprove, such election at any time
after such election, or within such period for taking action as is specified in the election, and failure to give
consent will be disapproval. Consent may be given in whole or as to a portion of the Right surrendered by the
Optionee. If the election to receive cash is disapproved in whole or in part, the Right will be deemed to have
been exercised for Shares, or, if so specified in the notice of exercise and election, not to have been exercised
to the extent the election to receive cash is disapproved.

7.8

The maximum number of Shares with respect to which Rights may be granted to any Employee

or Director under this Plan during its term is 3,750,000 Shares.

7.9

be reduced during the term of the Right, nor will Rights be canceled in exchange for cash, other awards, or
newly issued Rights with an exercise price that is less than the exercise price of the original Rights without
shareholder approval (i.e., Rights will not be “repriced”).

8. Performance Units

8.1

8.2

The Committee is hereby authorized to grant Performance Units to Employees and Directors.

Performance Units may be granted under the Plan:

(a)

(b)

in connection with, and at the same time as, the grant of an Option under the Plan; or

independently of any Option granted under the Plan.

A Performance Unit granted under clause (a) of the preceding sentence is a Related Performance Unit. A
Related Performance Unit may, in the Committee’s discretion, apply to all or a portion of the shares subject to
the Related Option.

8.3

A Performance Unit may be exercised in whole or in part, or automatically may be deemed
exercised upon satisfaction of the Performance Goals, as provided in the Agreement, and, subject to the
provisions of the Agreement, entitles its Optionee to receive, without any payment to the Company (other
than required income tax withholding amounts), cash, Shares or a combination of cash and Shares, based
upon the degree to which Performance Goals established by the Committee and specified in the Agreement
have been achieved.

8.4

The Performance Unit Period will be determined by the Committee and specifically set forth in

the Agreement, provided, however --

(a)

a Performance Unit may not be exercised before the expiration of six months from the
Date of Grant (except that this limitation need not apply in the event of the death or disability of the Optionee
within the six-month period); and

(b)

a Performance Unit will expire no later than the earlier of (i) ten years from the Date of

Grant, or (ii) in the case of a Related Performance Unit, the expiration of the Related Option.

8.5

Each Agreement granting Performance Units will specify the number of Performance Units
granted; provided, however, that the maximum number of Related Performance Units may not exceed the
maximum number of Shares subject to the Related Option.

8.6

The exercise, in whole or in part, of Related Performance Units will cause a reduction in the
number of Shares subject to the Related Option and the number of Performance Units in accordance with the
terms of the Agreement. Similarly, the exercise, in whole or in part, of a Related Option, will cause a reduction
in the number of Shares subject to the Related Performance Unit equal to the number of Shares with respect
to which the Related Option is exercised.

8.7

Performance Units granted under the Plan, to the extent determined by the Committee, will
comply with the requirements of Rule 16b-3 under the Exchange Act during the term of this Plan. Should any
additional provisions be necessary for this Article 8 to comply with the requirements of Rule 16b-3 or any
other applicable rule or regulation, the Board may amend this Plan to delete, add to or modify the provisions
of the Plan accordingly, subject to the provisions of Article 14, if applicable. The Company intends to comply,
if and to the extent applicable, with the requirements of Rule 16b-3; however, the Company’s failure for any
reason whatsoever to comply with such requirements will not impose any liability on the Company to any
Optionee or any other party.

8.8

Unit surrendered by the Optionee. If the election to receive cash is disapproved in whole or in part, the
Performance Unit will be deemed to have been exercised for Shares, or, if so specified in the notice of exercise
and election, not to have been exercised to the extent the election to receive cash is disapproved.

8.9

The maximum number of Shares that may be issued to any Employee or Director pursuant to
the exercise of Performance Units may not exceed 3,750,000 Shares. For purposes of the preceding sentence,
any Performance Units paid in the form of cash will be deemed to have been paid in Shares, with the number
of Shares being deemed paid equal to the amount of cash paid to the Employee or Director divided by the Fair
Market Value of a Share on the date of payment.

9. Exercise

An Option, Right or Performance Unit, subject to the provisions of the Agreement under which it was
granted, may be exercised in whole or in part by the delivery to the Company of written notice of the exercise,
in such form as the Committee may prescribe, accompanied, in the case of an Option, by (i) full payment for
the Shares with respect to which the Option is exercised, or (ii) irrevocable instructions to a broker selected
by the Committee to consummate “cashless” exercises to deliver promptly to the Company cash equal to full
payment for the Shares for which the Option is exercised.

10. Non-transferability

Options, Rights, Performance Units and Incentive Shares granted or awarded under the Plan will not
be transferable otherwise than by will or the laws of descent and distribution, and an Option, Right or
Performance Unit may be exercised during his or her lifetime only by the Optionee or, in the event of his
or her legal disability, by his or her legal representative. A Related Right or Related Performance Unit is
transferable only when the Related Option is transferable and only with the Related Option and under the
same conditions.

11. Restricted Stock Awards

11.1
Directors.

The Committee is hereby authorized to award Shares of Restricted Stock to Employees and

11.2

Restricted Stock awards under the Plan will consist of Shares that are restricted against transfer,
subject to forfeiture, and subject to such other terms and conditions intended to further the purposes of
the Plan as may be determined by the Committee. The terms and conditions may provide, in the discretion
of the Committee, for the vesting of such awards to be contingent upon the achievement of one or more
Performance Goals.

11.3

Restricted Stock awards will be evidenced by Agreements containing provisions setting forth

the terms and conditions governing such awards. Each such agreement will contain the following:

(a)

prohibitions against the sale, assignment, transfer, exchange, pledge, hypothecation,
or other encumbrance of (i) the Shares awarded as Restricted Stock under the Plan, (ii) the right to vote the
Shares, or (iii) the right to receive dividends thereon in each case during the restriction period applicable to
the Shares; provided, however, that the Grantee will have all the other rights of a shareholder including, but
not limited to, the right to receive dividends and the right to vote the Shares;

(b)

at least one term, condition or restriction constituting a “substantial risk of forfeiture” as

defined in Section 83(c) of the Code;

(c)

such other terms, conditions and restrictions as the Committee in its discretion may

specify (including, without limitation, provisions creating additional substantial risks of forfeiture);

a requirement that each certificate or other evidence of ownership representing Shares
of Restricted Stock must be deposited with the Company, or its designee, and will bear the following legend:

(d)

“This certificate or other evidence of ownership and the shares of stock
represented hereby are subject to the terms and conditions (including the risks
of forfeiture and restrictions against transfer) contained in THE KROGER CO.

2014 Long-Term Incentive and Cash Bonus Plan and an Agreement entered into
between the registered owner and The Kroger Co. Release from such terms and
conditions will be made only in accordance with the provisions of the Plan and
the Agreement, a copy of each of which is on file in the office of the Secretary of
The Kroger Co.

(e)

the applicable period or periods of any terms, conditions or restrictions applicable to
the Restricted Stock, provided, however, that the Committee in its discretion may accelerate the expiration of
the applicable restriction period with respect to any part or all of the Shares awarded to a Grantee; and

(f)

the terms and conditions upon which any restrictions upon Shares of Restricted Stock
awarded under the Plan will lapse and new certificates free of the foregoing legend will be issued to the
Grantee or his or her legal representative.

11.4

The Committee may include in an Agreement a requirement that in the event of a Grantee’s
termination of employment for any reason prior to the lapse of restrictions, all Shares of Restricted Stock
will be forfeited by the Grantee to the Company without payment of any consideration by the Company,
and neither the Grantee nor any successors, heirs, assigns or personal representatives of the Grantee will
thereafter have any further rights or interest in the Shares or certificates.

11.5

The maximum number of Shares of Restricted Stock that may be awarded to any Employee or

Director under this Plan during its term is 3,750,000 Shares.

12. Incentive Share Awards

12.1

The Committee is hereby authorized to award Incentive Shares to Employees and Directors.

12.2

Incentive Shares will be Shares that are issued at such times, subject to achievement of such
Performance Goals or other goals, or without condition, and on such other terms and conditions as the
Committee deems appropriate and specify in the Agreement relating thereto.

12.3

The maximum number of Shares of Incentive Shares that may be awarded to any Employee or

Director under this Plan during its term is 3,750,000 Shares.

13. Capital Adjustments

The number and class of Shares subject to each outstanding Option, Right or Performance Unit or
Restricted Stock or Incentive Share award, the Option Price and the aggregate number and class of Shares for
which grants or awards thereafter may be made will be subject to such adjustment, if any, as the Committee in
its sole discretion deems appropriate to reflect such events as stock dividends, stock splits, adoption of stock
rights plans, recapitalizations, mergers, consolidations or reorganizations of or by the Company.

14. Termination or Amendment

The Board may amend or terminate this Plan in any respect at any time. Board approval must
be accompanied by (i) shareholder approval in those cases in which amendment requires shareholder
approval under applicable law or regulations or the requirements of the principal exchange or interdealer
quotation system on which the Shares are listed or quoted, and (ii) affected Optionee or Grantee approval
if the amendment or termination would adversely affect the holder’s rights under any outstanding grants or
awards. The Cash Bonus Program may be wholly or partially amended or otherwise modified, suspended or
terminated at any time or from time to time by the Committee or the Board. To the extent required by Section
162(m) of the Internal Revenue Code with respect to bonus awards that the Committee determines should
qualify as performance-based compensation as described in Section 162(m)(4)(C), no action may modify the
performance criteria or bonus potentials after the commencement of the measurement period with respect
to which such bonus awards relate.

15. Modification, Extension and Renewal of Options, Rights, Performance Units, Restricted Stock
and Incentive Shares

Subject to the terms and conditions and within the limitations of the Plan, the Committee may modify,
extend or renew outstanding Options, Rights and Performance Units, or accept the surrender of outstanding
options, rights and performance units (to the extent not theretofore exercised) granted under the Plan or
under any other plan of the Company, a Subsidiary or a company or similar entity acquired by the Company
or a Subsidiary, and authorize the granting of new Options, Rights and Performance Units pursuant to the
Plan in substitution therefor (to the extent not theretofore exercised), and the substituted Options, Rights and
Performance Units may specify a longer term than the surrendered options, rights and performance units or
may have any other provisions that are authorized by the Plan; provided that the exercise price may not be
less than that of the surrendered option, rights and performance units. Subject to the terms and conditions
and within the limitations of the Plan, the Committee may modify the terms of any outstanding Agreement
providing for awards of Restricted Stock or Incentive Shares. Notwithstanding the foregoing, however, no
modification of an Option, Right or Performance Unit granted under the Plan, or an award of Restricted Stock
or Incentive Shares, will, without the consent of the Optionee or Grantee, alter or impair any of the Optionee’s
or Grantee’s rights or obligations.

16. Cash Bonuses

Two types of bonuses can be awarded under the Cash Bonus Program; an annual bonus award for each
fiscal year, and a long-term bonus award for measurement periods in excess of one year. Bonus payments are
based on the Company’s performance measured against Performance Goals established by the Committee.
The Committee establishes a bonus “potential” for each bonus payable under the Cash Bonus Program for each
participant, based on the participant’s level within the Company, and actual payouts can exceed that amount
when the Company’s performance exceeds the pre-established thresholds. Initially the Performance Goals
for annual bonuses will include the following components: (i) EBITDA; (ii) identical sales; (iii) achievement
of strategic initiatives, and (iv) achievement of supermarket fuel center goals for EBITDA, gallons sold, and
number of fuel centers. Initially the Performance Goals for long-term bonuses will include the following
components: (i) performance in four key categories in the Company’s strategic plan, (ii) reduction in operating
costs as a percentage of sales, (iii) performance in categories designed to measure associate engagement, and
(iv). No single cash bonus to a participant may exceed $5,000,000.

17. Effectiveness of the Plan

The Plan and any amendments requiring shareholder approval pursuant to Article 14 are subject to
approval by vote of the shareholders of the Company within 12 months after their adoption by the Board.
Subject to that approval, the Plan is effective upon approval by the shareholders and any amendments are
effective on the date on which they are adopted by the Board. Options, Rights, Performance Units, Restricted
Stock and Incentive Shares may be granted or awarded prior to shareholder approval of the Plan or amendments,
but each such Option, Right, Performance Unit, Restricted Stock or Incentive Share grant or award will be
subject to the approval of the Plan or amendments by the shareholders. The date on which any Option, Right,
Performance Unit, Restricted Stock or Incentive Shares granted or awarded prior to shareholder approval of
the Plan or amendment is granted or awarded will be the Date of Grant for all purposes as if the Option, Right,
Performance Unit, Restricted Stock or Incentive Shares had not been subject to approval. No Option, Right or
Performance Unit may be exercised prior to such shareholder approval, and any Restricted Stock or Incentive
Shares awarded will be forfeited if such shareholder approval is not obtained.

18. Term of the Plan

Unless sooner terminated by the Board pursuant to Article 14, the Plan will terminate on the date ten
years after its adoption by the Board, and no Options, Rights, Performance Units, Restricted Stock or Incentive
Shares may be granted or awarded after termination. The termination will not affect the validity of any Option,
Right, Performance Unit, Restricted Stock or Incentive Shares outstanding on the date of termination.

19. Indemnification of Committee

In addition to such other rights of indemnification as they may have as Directors or as members of the
Committee, the members of the Committee will be indemnified by the Company against the reasonable
expenses, including attorneys’ fees, actually and reasonably incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be
a party by reason of any action taken or failure to act under or in connection with the Plan or any grant or
award hereunder, and against all amounts reasonably paid by them in settlement thereof or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, if such members acted in good faith and in a
manner that they believed to be in, and not opposed to, the best interests of the Company.

20. General Provisions

20.1

The establishment of the Plan will not confer upon any Employee or Director any legal or
equitable right against the Company, any Subsidiary or the Committee, except as expressly provided in
the Plan.

20.2

The Plan does not constitute inducement or consideration for the employment of any Employee
or the service of any Director, nor is it a contract of employment between the Company or any Subsidiary and
any Employee or Director. Participation in the Plan, or the receipt of a grant or award hereunder, will not give
an Employee or Director any right to be retained in the service of the Company or any Subsidiary.

20.3

The Company and its Subsidiaries may assume options, warrants, or rights to purchase stock
issued or granted by other corporations whose stock or assets are acquired by the Company or its Subsidiaries,
or that is merged into or consolidated with the Company. Assumed options will not be counted toward the
limit specified in Section 6.3 unless the Committee determines that application of the limit is necessary for the
grants of Options to qualify as “performance-based compensation” under Section 162(m) of the Code. Neither
the adoption of this Plan, nor its submission to the shareholders, may be taken to impose any limitations on the
powers of the Company or its affiliates to issue, grant, or assume options, warrants, rights, or restricted stock,
otherwise than under this Plan, or to adopt other long-term incentive plans or to impose any requirement of
shareholder approval upon the same.

20.4

The interests of any Employee or Director under the Plan are not subject to the claims of

creditors and may not, in any way, be assigned, alienated or encumbered except as provided in Article 10.

20.5

The Plan will be governed, construed and administered in accordance with the laws of Ohio.

2 0 1 3 a N N u a l r e P o r t

F i N a N c i a l r e P o r t 2 0 1 3

M a N a g e M e N t ’ S r e S P o N S i B i l i t y F o r F i N a N c i a l r e P o r t i N g

The management of The Kroger Co. has the responsibility for preparing the accompanying financial
statements and for their integrity and objectivity. The statements were prepared in accordance with generally
accepted accounting principles applied on a consistent basis and are not misstated due to material error
or fraud. The financial statements include amounts that are based on management’s best estimates and
judgments. Management also prepared the other information in the report and is responsible for its accuracy
and consistency with the financial statements.

The Company’s financial statements have been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, whose selection has been approved by the shareholders. Management has
made available to PricewaterhouseCoopers LLP all of the Company’s financial records and related data, as
well as the minutes of the shareholders’ and directors’ meetings. Furthermore, management believes that all
representations made to PricewaterhouseCoopers LLP during its audit were valid and appropriate.

Management also recognizes its responsibility for fostering a strong ethical climate so that the Company’s
affairs are conducted according to the highest standards of personal and corporate conduct. This responsibility
is characterized and reflected in The Kroger Co. Policy on Business Ethics, which is publicized throughout
the Company and available on the Company’s website at ir.kroger.com. The Kroger Co. Policy on Business
Ethics addresses, among other things, the necessity of ensuring open communication within the Company;
potential conflicts of interests; compliance with all domestic and foreign laws, including those related to
financial disclosure; and the confidentiality of proprietary information. The Company maintains a systematic
program to assess compliance with these policies.

M a N a g e M e N t ’ S r e P o r t o N i N t e r N a l c o N t r o l o v e r F i N a N c i a l r e P o r t i N g

The management of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting for the Company. With the participation of the Chief Executive Officer and the
Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control
over financial reporting based on the framework and criteria established in Internal Control – Integrated
Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on
this evaluation, our management has concluded that the Company’s internal control over financial reporting
was effective as of February 1, 2014.

W. Rodney McMullen
Chief Executive Officer

J. Michael Schlotman
Senior Vice President and
Chief Financial Officer

A-1

S e l e c t e d F i N a N c i a l d a t a

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings including noncontrolling

February 1,
2014
(52 weeks)

$ 98,375

Fiscal Years Ended
January 29,
January 28,
February 2,
2011
2012
2013
(53 weeks)*
(52 weeks)*
(52 weeks)*
(In millions, except per share amounts)
$81,967
$90,269

$96,619

January 30,
2010
(52 weeks)*

$76,538

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,531

1,508

Net earnings attributable to

The Kroger Co. . . . . . . . . . . . . . . . . . . . . . .

1,519

1,497

596

602

1,133

1,116

Net earnings attributable to

The Kroger Co. per diluted
common share . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term liabilities, including obligations
under capital leases and financing
obligations . . . . . . . . . . . . . . . . . . . . . . . . . .

Total shareowners’ equity –

2.90
29,281

2.77
24,634

1.01
23,454

1.74
23,505

0.11
23,126

13,181

9,359

10,405

10,137

10,473

The Kroger Co. . . . . . . . . . . . . . . . . . . . . . .
Cash dividends per common share . . . . . . . . .

5,384
0.615

4,207
0.495

3,981
0.43

5,296
0.39

4,852
0.365

Certain prior year amounts have been revised or reclassified to conform to current year presentation. For
further information, see Note 1 to the Consolidated Financial Statements.

c o M M o N S h a r e P r i c e r a N g e

2013

2012

Quarter
1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2nd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3rd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4th . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

High
$35.44
$39.98
$43.85
$42.73

Low
$27.53
$32.77
$35.91
$35.71

High
$24.78
$23.22
$25.44
$28.00

Low
$21.76
$20.98
$21.57
$24.19

Main trading market: New York Stock Exchange (Symbol KR)

Number of shareholders of record at year-end 2013: 30,587

Number of shareholders of record at March 28, 2014: 30,449

During 2012, the Company paid three quarterly cash dividends of $0.115 per share and one quarterly
dividend of $0.15 per share. During 2013, the Company paid three quarterly dividends of $0.15 per share
and one quarterly dividend of $0.165 per share. On March 1, 2014, the Company paid a quarterly dividend
of $0.165 per share. On March 13, 2014, the Company announced that its Board of Directors has declared
a quarterly dividend of $0.165 per share, payable on June 1, 2014, to shareholders of record at the close of
business on May 15, 2014.

A-2

P e r F o r M a N c e g r a P h

Set forth below is a line graph comparing the five-year cumulative total shareholder return on Kroger’s
common shares, based on the market price of the common shares and assuming reinvestment of dividends,
with the cumulative total return of companies in the Standard & Poor’s 500 Stock Index and a peer group
composed of food and drug companies.

COMPARISON OF CUMULATIVE FIVE-YEAR TOTAL RETURN*
Among The Kroger Co., the S&P 500, and Peer Group**

300

250

200

150

100

2008

2009

2010

2011

2012

2013

The Kroger Co.

S&P 500 Index

Peer Group

Company Name/Index
The Kroger Co. . . . . . . . . . . . . . . . . . . . . . . . . . .
S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . .
Peer Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Base
Period
2008
100
100
100

2009
96.85
133.14
123.89

Kroger’s fiscal year ends on the Saturday closest to January 31.

INDEXED RETURNS
Years Ending
2011
113.86
171.34
141.36

2010
97.93
162.67
134.49

2012
133.45
201.50
170.73

2013
175.77
242.42
193.17

Total assumes $100 invested on January 31, 2009, in The Kroger Co., S&P 500 Index, and the Peer Group,
with reinvestment of dividends.

The Peer Group consists of Costco Wholesale Corp., CVS Caremark Corp, Etablissments Delhaize Freres
Et Cie Le Lion (Groupe Delhaize), Great Atlantic & Pacific Tea Company, Inc. (included through March 13,
2012 when it became private after emerging from bankruptcy), Koninklijke Ahold NV, Safeway, Inc.,
Supervalu Inc., Target Corp., Tesco plc, Wal-Mart Stores Inc., Walgreen Co., Whole Foods Market Inc. and
Winn-Dixie Stores, Inc. (included through March 9, 2012 when it became a wholly-owned subsidiary of
Bi-Lo Holding).

Data supplied by Standard & Poor’s.

The foregoing Performance Graph will not be deemed incorporated by reference into any other filing,

absent an express reference thereto.

A-3

i S S u e r P u r c h a S e S o F e q u i t y S e c u r i t i e S

First period - four weeks

Period (1)

Total Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs (2)

Maximum Dollar
Value of Shares
that May Yet Be
Purchased Under
the Plans or
Programs (3)
(in millions)

Total Number
of Shares
Purchased

Average
Price Paid
Per Share

November 10, 2013 to December 7, 2013 . . . .

1,525,832

$41.99

1,525,832

Second period - four weeks

December 8, 2013 to January 4, 2014 . . . . . . .

1,776,028

$40.04

1,776,028

Third period – four weeks

January 5, 2014 to February 1, 2014 . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,407,317
5,709,177

$37.91
$39.66

2,407,317
5,709,177

$281

$214

$129
$129

(1) The reported periods conform to the Company’s fiscal calendar composed of thirteen 28-day periods.

The fourth quarter of 2013 contained three 28-day periods.

(2) Shares were repurchased under (i) a $500 million share repurchase program, authorized by the Board
of Directors and announced on October 16, 2012 and (ii) a program announced on December 6, 1999 to
repurchase common shares to reduce dilution resulting from our employee stock option and long-term
incentive plans, which program is limited to proceeds received from exercises of stock options and
the tax benefits associated therewith. The programs have no expiration date but may be terminated by
the Board of Directors at any time. Total shares purchased include shares that were surrendered to the
Company by participants under the Company’s long-term incentive plans to pay for taxes on restricted
stock awards. On March 13, 2014, the Company announced a new $1 billion share repurchase program
that was authorized by the Board of Directors, replacing the program identified in clause (i) above.

(3) The amounts shown in this column reflect amounts remaining, as of February 1, 2014, under the
$500 million share repurchase program referenced in clause (i) of Note 2 above. Amounts to be invested
under the program utilizing option exercise proceeds are dependent upon option exercise activity.

B u S i N e S S

The Kroger Co. (the “Company”) was founded in 1883 and incorporated in 1902. As of February 1,
2014, the Company was one of the largest retailers in the world based on annual sales. The Company also
manufactures and processes some of the food for sale in its supermarkets. The Company’s principal executive
offices are located at 1014 Vine Street, Cincinnati, Ohio 45202, and its telephone number is (513) 762-4000.
The Company maintains a web site (www.thekrogerco.com) that includes additional information about the
Company. The Company makes available through its web site, free of charge, its annual reports on Form 10-K,
its quarterly reports on Form 10-Q, its current reports on Form 8-K and its interactive data files, including
amendments. These forms are available as soon as reasonably practicable after the Company has filed them
with, or furnished them electronically to, the SEC.

The Company’s revenues are earned and cash is generated as consumer products are sold to customers in
its stores. The Company earns income predominantly by selling products at price levels that produce revenues
in excess of its costs to make these products available to its customers. Such costs include procurement and
distribution costs, facility occupancy and operational costs, and overhead expenses. The Company’s fiscal year
ends on the Saturday closest to January 31. All references to 2013, 2012 and 2011 are to the fiscal years ended
February 1, 2014, February 2, 2013 and January 28, 2012, respectively, unless specifically indicated otherwise.

e M P l o y e e S

As of February 1, 2014, the Company employed approximately 375,000 full- and part-time employees.
A majority of the Company’s employees are covered by collective bargaining agreements negotiated with
local unions affiliated with one of several different international unions. There are approximately 300 such
agreements, usually with terms of three to five years.

A-4

S t o r e S

As of February 1, 2014, the Company operated, either directly or through its subsidiaries, 2,640
supermarkets and multi-department stores, 1,240 of which had fuel centers. Approximately 45% of these
supermarkets were operated in Company-owned facilities, including some Company-owned buildings on
leased land. The Company’s current strategy emphasizes self-development and ownership of store real
estate. The Company’s stores operate under several banners that have strong local ties and brand recognition.
Supermarkets are generally operated under one of the following formats: combination food and drug stores
(“combo stores”); multi-department stores; marketplace stores; or price impact warehouses.

The combo stores are the primary food store format. They typically draw customers from a 2 – 2½ mile
radius. The Company believes this format is successful because the stores are large enough to offer the
specialty departments that customers desire for one-stop shopping, including natural food and organic
sections, pharmacies, general merchandise, pet centers and high-quality perishables such as fresh seafood
and organic produce.

Multi-department stores are significantly larger in size than combo stores. In addition to the departments
offered at a typical combo store, multi-department stores sell a wide selection of general merchandise items
such as apparel, home fashion and furnishings, electronics, automotive products, toys and fine jewelry.

Marketplace stores are smaller in size than multi-department stores. They offer full-service grocery,
pharmacy and health and beauty care departments as well as an expanded perishable offering and general
merchandise area that includes apparel, home goods and toys.

Price impact warehouse stores offer a “no-frills, low cost” warehouse format and feature everyday low
prices plus promotions for a wide selection of grocery and health and beauty care items. Quality meat, dairy,
baked goods and fresh produce items provide a competitive advantage. The average size of a price impact
warehouse store is similar to that of a combo store.

In addition to the supermarkets, as of February 1, 2014, the Company operated through subsidiaries
786 convenience stores and 320 fine jewelry stores. All 144 of our fine jewelry stores located in malls are
operated in leased locations. In addition, 83 convenience stores were operated by franchisees through
franchise agreements. Approximately 54% of the convenience stores operated by subsidiaries were operated
in Company-owned facilities. The convenience stores offer a limited assortment of staple food items and
general merchandise and, in most cases, sell gasoline.

S e g M e N t S

The Company operates retail food and drug stores, multi-department stores, jewelry stores, and
convenience stores throughout the United States. The Company’s retail operations, which represent over
99% of the Company’s consolidated sales and EBITDA, are its only reportable segment. The Company’s retail
operating divisions have been aggregated into one reportable segment due to the operating divisions having
similar economic characteristics with similar long-term financial performance. In addition, the Company’s
operating divisions offer to its customers similar products, have similar distribution methods, operate in
similar regulatory environments, purchase the majority of the Company’s merchandise for retail sale from
similar (and in many cases identical) vendors on a coordinated basis from a centralized location, serve similar
types of customers, and are allocated capital from a centralized location. The Company’s operating divisions
reflect the manner in which the business is managed and how the Company’s Chief Executive Officer and
Chief Operating Officer, who act as the Company’s chief operating decision makers, assess performance
internally. All of the Company’s operations are domestic. Revenues, profit and losses and total assets are
shown in the Company’s Consolidated Financial Statements set forth in Item 8 below.

M e r c h a N d i S i N g a N d M a N u F a c t u r i N g

Corporate brand products play an important role in the Company’s merchandising strategy. Our
supermarkets, on average, stock approximately 13,000 private label items. The Company’s corporate brand
products are primarily produced and sold in three “tiers.” Private Selection is the premium quality brand
designed to be a unique item in a category or to meet or beat the “gourmet” or “upscale” brands. The “banner

A-5

brand” (Kroger, Ralphs, King Soopers, etc.), which represents the majority of the Company’s private label
items, is designed to satisfy customers with quality products. Before Kroger will carry a banner brand product
we must be satisfied that the product quality meets our customers’ expectations in taste and efficacy, and we
guarantee it. Kroger Value is the value brand, designed to deliver good quality at a very affordable price. In
addition, the Company continues to grow its other brands, including Simple Truth and Simple Truth Organic.
Both Simple Truth and Simple Truth Organic are free from 101 artificial preservatives and ingredients that
customers have told us they do not want in their food, and the Simple Truth Organic products are USDA
certified organic.

Approximately 40% of the corporate brand units sold are produced in the Company’s manufacturing
plants; the remaining corporate brand items are produced to the Company’s strict specifications by outside
manufacturers. The Company performs a “make or buy” analysis on corporate brand products and decisions are
based upon a comparison of market-based transfer prices versus open market purchases. As of February 1, 2014,
the Company operated 38 manufacturing plants. These plants consisted of 18 dairies, nine deli or bakery plants,
five grocery product plants, two beverage plants, two meat plants and two cheese plants.

S e a S o N a l i t y

The majority of our revenues are generally not seasonal in nature. However, revenues tend to be higher

during the major holidays throughout the year.

e x e c u t i v e o F F i c e r S o F t h e r e g i S t r a N t

The disclosure regarding executive officers is set forth in Item 10 of Part III of this Form 10-K under the

heading “Executive Officers of the Company,” and is incorporated herein by reference.

c o M P e t i t i v e e N v i r o N M e N t

For the disclosure related to the Company’s competitive environment, see Item 1A under the heading

“Competitive Environment.”

A-6

M a N a g e M e N t ’ S d i S c u S S i o N a N d a N a l y S i S o F
F i N a N c i a l c o N d i t i o N a N d r e S u l t S o F o P e r a t i o N S

o u r B u S i N e S S

The Kroger Co. was founded in 1883 and incorporated in 1902. It is one of the nation’s largest retailers,
as measured by revenue, operating 2,640 supermarket and multi-department stores under two dozen banners
including Kroger, City Market, Dillons, Food 4 Less, Fred Meyer, Fry’s, Harris Teeter, Jay C, King Soopers, QFC,
Ralphs and Smith’s. Of these stores, 1,240 have fuel centers. We also operate 786 convenience stores, either
directly or through franchisees, and 320 fine jewelry stores.

Kroger operates 38 manufacturing plants, primarily bakeries and dairies, which supply approximately

40% of the corporate brand units sold in our retail outlets.

Our revenues are earned and cash is generated as consumer products are sold to customers in our
stores. We earn income predominately by selling products at price levels that produce revenues in excess of
the costs we incur to make these products available to our customers. Such costs include procurement and
distribution costs, facility occupancy and operational costs, and overhead expenses. Our retail operations,
which represent over 99% of Kroger’s consolidated sales and EBITDA, are our only reportable segment.

On January 28, 2014, we closed our merger with Harris Teeter Supermarkets, Inc. (“Harris Teeter”) by
purchasing 100% of the Harris Teeter outstanding common stock for approximately $2.4 billion. The merger
allows us to expand into the fast-growing southeastern and mid-Atlantic markets and into Washington, D.C.
Harris Teeter is included in our ending Consolidated Balance Sheet, but because of the timing of the merger
closing late in the year its results of operations were not material to our consolidated results of operations for
2013. See Note 2 to the Consolidated Financial Statements for more information related to our merger with
Harris Teeter.

o u r 2 0 1 3 P e r F o r M a N c e

We achieved outstanding results in 2013. Our business strategy continues to resonate with a full range
of customers and our results reflect the balance we seek to achieve across our business including positive
identical sales growth, increases in loyal household count, and good cost control, as well as growth in net
earnings and net earnings per diluted share. Our 2013 net earnings were $1.5 billion or $2.90 per diluted
share, compared to $1.5 billion, or $2.77 per diluted share for the same period of 2012. The net earnings for
2013 include a net benefit of $23 million, which includes benefits from certain tax items of $40 million, offset
partially by after-tax expense of $17 million ($7 million in interest and $10 million in operating, general and
administrative expenses) in costs related to our merger with Harris Teeter (“2013 adjusted items”). See Note 5
to the Consolidated Financial Statements for more information relating to the benefits from certain tax items.
For 2012, our net earnings include an estimated after-tax amount of $58 million or $0.11 per diluted share
due to a 53rd week in fiscal year 2012 (the “extra week”). In addition, 2012 net earnings benefited by $74
million after-tax or $0.14 per diluted share from a settlement with Visa and MasterCard and from a reduction
in our obligation to fund the UFCW consolidated pension fund created in January 2012. Excluding the 2013
adjusted items, net earnings for 2013 totaled $1.5 billion, or $2.85 per diluted share, compared to net earnings
in 2012 of $1.4 billion, or $2.52 per diluted share, excluding the Visa and MasterCard settlement, the UFCW
consolidated pension fund adjustment and the extra week in 2012. We believe adjusted net earnings and
adjusted net earnings per diluted share present a more accurate year-over-year comparison of our financial
results because the adjusted items were not directly related to our day-to-day business. After accounting for
these 2013 and 2012 adjusted items, our adjusted net earnings per diluted share for 2013 represents a 13%
increase, compared to 2012. Please refer to the “Net Earnings” section for more information.

Our identical supermarket sales increased 3.6%, excluding fuel, in 2013, compared to 2012. We have
achieved 41 consecutive quarters of positive identical supermarket sales growth, excluding fuel. As we
continue to outpace many of our competitors on identical supermarket sales growth, we continue to gain
market share. We focus on identical supermarket sales growth, excluding fuel, as it is a key performance target
for our long-term growth strategy.

A-7

Increasing market share is an important part of our long-term strategy as it best reflects how our products
and services resonate with customers. Market share growth allows us to spread the fixed costs in our business
over a wider revenue base. Our fundamental operating philosophy is to maintain and increase market share
by offering customers good prices and superior products and service. Based on Nielsen POS+ data, our
estimated market share increased in total by approximately 50 basis points in 2013 across our 18 marketing
areas outlined by the Nielsen report. This information also indicates that our market share increased in 16 of
the marketing areas and declined in two. Wal-Mart supercenters are one of our top two competitors in 13 of
these 18 marketing areas. In these 13 marketing areas, our market share increased in 12 and slightly declined
in one. These market share results reflect our long-term strategy of market share growth.

r e S u l t S o F o P e r a t i o N S

The following discussion summarizes our operating results for 2013 compared to 2012 and for 2012
compared to 2011. Comparability is affected by income and expense items that fluctuated significantly
between and among the periods and an extra week in 2012.

Net Earnings

Net earnings totaled $1.5 billion in 2013, $1.5 billion in 2012 and $602 million in 2011. The net earnings
for 2013 include a net benefit of $23 million, after tax, related to the 2013 adjusted items. The net earnings for
2012 include a benefit from net earnings of approximately $58 million, after-tax, for the extra week and a net
$74 million, after-tax, benefit for the settlement with Visa and MasterCard and a reduction in our obligation to fund
the UFCW consolidated pension fund created in January 2012 (“2012 adjusted items”). The net earnings for 2011
include a UFCW consolidated pension plan charge totaling $591 million, after-tax (“2011 adjusted item”). Excluding
these benefits and charges for adjusted items in 2013, 2012 and 2011, adjusted net earnings were $1.5 billion in
2013, $1.4 billion in 2012 and $1.2 billion in 2011. 2013 adjusted net earnings improved, compared to adjusted net
earnings in 2012, due to an increase in first-in, first-out (“FIFO”) non-fuel operating profit and decreased interest
expense, partially offset by increased income tax expense. 2012 adjusted net earnings improved, compared to
adjusted net earnings in 2011, due to an increase in FIFO non-fuel operating profit, increased net earnings from
our fuel operations and a last-in, first-out (“LIFO”) charge of $55 million (pre-tax), compared to a LIFO charge of
$216 million (pre-tax) in 2011, partially offset by increased interest expense and income tax expense.

2013 net earnings per diluted share totaled $2.90, and adjusted net earnings per diluted share totaled
$2.85, which excludes the 2013 adjusted items. 2012 net earnings per diluted share totaled $2.77, and adjusted
net earnings per diluted share totaled $2.52, which excludes the 2012 adjusted items. 2011 net earnings per
diluted share totaled $1.01, and adjusted net earnings per diluted share in 2011 totaled $2.00, which excludes
the 2011 adjusted item. Adjusted net earnings per diluted share in 2013, compared to adjusted net earnings
per diluted share in 2012, increased primarily due to fewer shares outstanding as a result of the repurchase
of Kroger common shares, increased FIFO non-fuel operating profit and decreased interest expense, partially
offset by increased income tax expense. Adjusted net earnings per diluted share in 2012, compared to adjusted
net earnings per diluted share in 2011, increased primarily due to fewer shares outstanding as a result of the
repurchase of Kroger common shares, increased FIFO non-fuel operating profit, increased net earnings from
our fuel operations and a decrease in the LIFO charge to $55 million (pre-tax), compared to a LIFO charge of
$216 million (pre-tax) in 2011, partially offset by increased interest expense and income tax expense.

Management believes adjusted net earnings (and adjusted net earnings per diluted share) are useful
metrics to investors and analysts because the adjusted items referenced above in net earnings and net earnings
per diluted share are not directly related to our day-to-day business. Adjusted net earnings (and adjusted net
earnings per diluted share) are non-generally accepted accounting principle (“non-GAAP”) financial measures
and should not be considered alternatives to net earnings (and net earnings per diluted share) or any other
generally accepted accounting principle (“GAAP”) measure of performance. Adjusted net earnings (and
adjusted net earnings per diluted share) should not be reviewed in isolation or considered substitutes for our
financial results as reported in accordance with GAAP. Management uses adjusted net earnings (and adjusted
net earnings per diluted share) as it believes these measures are more meaningful indicators of ongoing
operating performance since, as adjusted, those earnings relate more directly to our day-to-day operations.
Management also uses adjusted net earnings (and adjusted net earnings per diluted share) to measure our
progress against internal budgets and targets. In addition, management takes into account adjusted net
earnings when calculating management incentive programs.

A-8

The following table provides a reconciliation of net earnings attributable to The Kroger Co. to net
earnings attributable to The Kroger Co. excluding the adjusted items and a reconciliation of net earnings
attributable to The Kroger Co. per diluted common share to the net earnings attributable to The Kroger Co.
per diluted common share excluding the adjusted items, for 2013, 2012 and 2011:

Net Earnings per Diluted Share excluding the Adjustment Items
(in millions, except per share amounts)

Net earnings attributable to The Kroger Co. . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit from certain tax items offset by Harris Teeter merger costs (1) . . . . .
53rd week adjustment (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment for the UFCW consolidated pension plan liability and

credit card settlement (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UFCW pension plan consolidation charge (1) . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to The Kroger Co. excluding the adjustment

items above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Earnings attributable to The Kroger Co. per diluted common share . . . .
Benefit from certain tax items offset by Harris Teeter merger costs (2) . . . . .
53rd week adjustment (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments for the UFCW consolidated pension plan liability and

credit card settlement (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UFCW pension plan consolidation charge (2) . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to The Kroger Co. per diluted common

2013
$1,519
(23)
—

2012
$1,497
—
(58)

2011
$ 602
—
—

—
—

(74)
—

—
591

$1,496
$ 2.90
(0.05)
—

$1,365
$ 2.77
—
(0.11)

$1,193
$ 1.01
—
—

—
—

(0.14)
—

—
0.99

share excluding the adjustment items above . . . . . . . . . . . . . . . . . . . . . . .
Average numbers of common shares used in diluted calculation . . . . . . . . . .

$ 2.85
520

$ 2.52
537

$ 2.00
593

(1) The amounts presented represent the after-tax effect of each adjustment. Pre-tax amounts were $27 for
Harris Teeter merger costs in 2013, $91 for the 53rd week adjustment in 2012, $115 for the adjustment for
the UFCW consolidated pension plan liability and credit card settlement in 2012 and $953 for the UFCW
pension plan consolidation charge in 2011.

(2) The amounts presented represent the net earnings per diluted common share effect of each adjustment.

Sales

Total Sales
(in millions)

2013

Percentage
Increase (2)

2012

2012
Adjusted (3)

Percentage
Increase (4)

2011

Total supermarket sales

without fuel . . . . . . . . . . . . . . . . . . . $ 76,666
18,962
Fuel sales . . . . . . . . . . . . . . . . . . . . . . . .
Other sales (1) . . . . . . . . . . . . . . . . . . . .
2,747
Total sales . . . . . . . . . . . . . . . . . . . . . . . $ 98,375

4.0%
3.0%
9.2%
3.9%

$75,179
18,896
2,544
$96,619

$ 73,733
18,413
2,515
$ 94,661

3.8%
8.9%
6.4%
4.9%

$71,004
16,901
2,364
$90,269

(1) Other sales primarily relate to sales at convenience stores, excluding fuel; jewelry stores; manufacturing

plants to outside customers; variable interest entities; a specialty pharmacy; and in-store health clinics.

(2) This column represents the percentage increase in 2013, compared to adjusted sales in 2012.

(3) The 2012 adjusted column represents the items presented in the 2012 column as adjusted to remove the

extra week.

(4) This column represents the percentage increase in adjusted sales in 2012, compared to 2011.

A-9

Total sales increased in 2013, compared to 2012, by 1.82%. The increase in 2013 total sales, compared to
2012, was primarily due to our identical supermarket sales increase, excluding fuel, of 3.6%, partially offset
by the extra week in fiscal 2012. Total sales increased in 2013, compared to 2012 adjusted total sales, by 3.9%.
The increase in 2013 total sales, compared to 2012 adjusted total sales, was primarily due to our identical
supermarket sales increase, excluding fuel, of 3.6%. Identical supermarket sales, excluding fuel, increased in
2013, compared to 2012, primarily due to an increase in average sale per customer, partially due to inflation,
and an increase in the transaction count.

Total sales increased in 2012, compared to 2011, by 7.0%. The increase in 2012 total sales, compared to
2011, was primarily due to our identical supermarket sales increase, excluding fuel, of 3.5%, increased fuel
sales of 8.9% and the extra week in fiscal 2012. Adjusted total sales increased in 2012, compared to 2011, by
4.9%. The increase in 2012 adjusted total sales, compared to 2011 total sales, was primarily due to our identical
supermarket sales increase, excluding fuel, of 3.5% and an increase in fuel sales of 8.9%. Identical supermarket
sales, excluding fuel, increased in 2012, adjusted for the extra week, compared to 2011, primarily due to an
increase in the average sale per customer, partially due to inflation, and an increase in the transaction count.
Total fuel sales increased in 2012, adjusted for the extra week, compared to 2011, primarily due to an increase
in fuel gallons sold of 7.8% and an increase in the average retail fuel price of 1.7%. The increase in the average
retail fuel price was caused by an increase in the product cost of fuel.

We define a supermarket as identical when it has been in operation without expansion or relocation
for five full quarters. Although identical supermarket sales is a relatively standard term, numerous methods
exist for calculating identical supermarket sales growth. As a result, the method used by our management
to calculate identical supermarket sales may differ from methods other companies use to calculate identical
supermarket sales. We urge you to understand the methods used by other companies to calculate identical
supermarket sales before comparing our identical supermarket sales to those of other such companies.
Fuel discounts received at our fuel centers and earned based on in-store purchases are included in all of
the supermarket identical sales results calculations illustrated below and reduce our identical supermarket
sales results. Differences between total supermarket sales and identical supermarket sales primarily relate
to changes in supermarket square footage. Identical supermarket sales include sales from all departments at
identical Fred Meyer multi-department stores. We calculate annualized identical supermarket sales by adding
together four quarters of identical supermarket sales. Our identical supermarket sales results are summarized
in the table below, based on the 52-week period of 2013, compared to the previous year results adjusted to a
comparable 52 week period.

Identical Supermarket Sales
(dollars in millions)

Including supermarket fuel centers . . . . . . . . . . .
Excluding supermarket fuel centers . . . . . . . . . . .

2013
$ 88,482
$ 74,095

2012 (1)
$ 85,661
$ 71,541

Including supermarket fuel centers . . . . . . . . . . .
Excluding supermarket fuel centers . . . . . . . . . . .

3.3%
3.6%

4.5%
3.5%

(1)

Identical supermarket sales for 2013 were calculated on a 52 week basis by excluding week 1 of fiscal
2012 in our 2012 identical supermarket sales base. Identical supermarket sales for 2012 were calculated
on a 53 week basis by including week 1 of fiscal 2012 in our 2011 identical supermarket sales base.

A-10

Gross Margin and FIFO Gross Margin

Our gross margin rates, as a percentage of sales, were 20.57% in 2013, 20.59% in 2012 and 20.92% in 2011.
The decrease in 2013, compared to 2012, resulted primarily from continued investments in lower prices for
our customers and increased shrink and advertising costs, as a percentage of sales, offset partially by a growth
rate in retail fuel sales that was lower than the total Company sales growth rate. Our retail fuel operations
lower our gross margin rate, as a percentage of sales, due to the very low gross margin on retail fuel sales as
compared to non-fuel sales. A lower growth rate in retail fuel sales, as compared to the growth rate for the
total Company, increases the gross margin rates, as a percentage of sales, when compared to the prior year.
The decrease in gross margin rates in 2012, compared to 2011, resulted primarily from a higher growth rate
in fuel sales, as compared to the growth rate for the total Company, continued investments in lower prices
for our customers and increased shrink and warehousing costs, as a percentage of sales, offset partially by a
decrease in the LIFO charge as a percentage of sales.

We calculate FIFO gross margin as sales minus merchandise costs, including advertising, warehousing,
and transportation expenses, but excluding the LIFO charge. Merchandise costs exclude depreciation and
rent expenses. Our LIFO charge was $52 million in 2013, $55 million in 2012 and $216 million in 2011.
FIFO gross margin is a non-GAAP financial measure and should not be considered as an alternative to gross
margin or any other GAAP measure of performance. FIFO gross margin should not be reviewed in isolation or
considered as a substitute for our financial results as reported in accordance with GAAP. FIFO gross margin
is an important measure used by management to evaluate merchandising and operational effectiveness.
Management believes FIFO gross margin is a useful metric to investors and analysts because it measures our
day-to-day merchandising and operational effectiveness.

Our FIFO gross margin rates, as a percentage of sales, were 20.62% in 2013, 20.65% in 2012 and 21.15%
in 2011. Our retail fuel operations lower our FIFO gross margin rate, as a percentage of sales, due to the very
low FIFO gross margin on retail fuel sales as compared to non-fuel sales. Excluding the effect of retail fuel
operations, our FIFO gross margin rate decreased 14 basis points in 2013, as a percentage of sales, compared to
2012. This decrease in 2013, compared to 2012, resulted primarily from continued investments in lower prices
for our customers and increased shrink and advertising costs as a percentage of sales. Excluding the effect of
retail fuel operations, our FIFO gross margin rate decreased 40 basis points in 2012, as a percentage of sales,
compared to 2011. This decrease in 2012, compared to 2011, resulted primarily from continued investments
in lower prices for our customers and increased shrink and warehousing costs as a percentage of sales.

LIFO Charge

The LIFO charge was $52 million in 2013, $55 million in 2012 and $216 million in 2011. We experienced
relatively consistent levels of product cost inflation in 2013, compared to 2012. In 2013, our LIFO charge
resulted primarily from an annualized product cost inflation related to meat, seafood and pharmacy. In 2012,
our LIFO charge resulted primarily from an annualized product cost inflation related to grocery, natural
foods, meat, deli and bakery, general merchandise and grocery, partially offset by deflation in seafood and
manufactured product. In 2012, we experienced lower levels of product cost inflation, compared to 2011. In
2011, our LIFO charge primarily resulted from an annualized product cost inflation related to grocery, meat
and seafood, deli and bakery, and pharmacy.

A-11

Operating, General and Administrative Expenses

Operating, general and administrative (“OG&A”) expenses consist primarily of employee-related costs
such as wages, health care benefits and retirement plan costs, utilities and credit card fees. Rent expense,
depreciation and amortization expense, and interest expense are not included in OG&A.

OG&A expenses, as a percentage of sales, were 15.45% in 2013, 15.37% in 2012 and 17.00% in 2011.
Excluding the 2013, 2012 and 2011 adjusted items, OG&A expenses, as a percentage of sales, were 15.43%
in 2013, 15.52% in 2012 and 15.94% in 2011. Our retail fuel operations reduce our overall OG&A rate, as a
percentage of sales, due to the very low OG&A rate on retail fuel sales as compared to non-fuel sales. OG&A
expenses, as a percentage of sales excluding fuel and the 2013 adjusted items, decreased 17 basis points in
2013, compared to 2012, adjusted for the 2012 adjusted items. This decrease resulted primarily from increased
identical supermarket sales growth, productivity improvements and effective cost controls at the store level,
offset partially by increased incentive compensation. OG&A expenses, as a percentage of sales excluding
fuel and the 2012 adjusted items, decreased 36 basis points in 2012, compared to 2011, adjusted for the
2011 adjusted items. This decrease resulted primarily from increased identical supermarket sales growth,
productivity improvements, effective cost controls at the store level, the benefit received in lower operating
expenses from the consolidation of four UFCW multi-employer pension plans in the prior year and decreased
incentive compensation, offset partially by increased healthcare costs.

Rent Expense

Rent expense was $613 million in 2013, as compared to $628 million in 2012 and $619 million in 2011.
Rent expense, as a percentage of sales, was 0.62% in 2013, as compared to 0.65% in 2012 and 0.69% in 2011.
Rent expense, as a percentage of sales excluding fuel, decreased four basis points in 2013, compared to 2012
and four basis points in 2012, compared to 2011. These continual decreases in rent expense, as a percentage
of sales both including and excluding fuel, reflects our continued emphasis on owning rather than leasing,
whenever possible, and the benefit of increased sales.

Depreciation and Amortization Expense

Depreciation and amortization expense was $1.7 billion in both 2013 and 2012 and $1.6 billion in 2011.
Depreciation and amortization expense, as a percentage of sales, was 1.73% in 2013, 1.71% in 2012 and 1.81%
in 2011. Excluding the extra week in 2012, depreciation and amortization expense, as a percentage of sales,
was 1.74% in 2012. Depreciation and amortization expense, as a percentage of sales excluding fuel and the
extra week in 2012, decreased three basis points in 2013, compared to 2012 and seven basis points in 2012,
compared to 2011. These continual decreases in depreciation and amortization expense, excluding the extra
week in 2012, as a percentage of sales both including and excluding fuel, are primarily the result of increasing
sales, offset partially by our increased spending in capital investments.

Operating Profit and FIFO Operating Profit

Operating profit was $2.7 billion in 2013, $2.8 billion in 2012 and $1.3 billion in 2011. Excluding the
extra week, operating profit was $2.7 billion in 2012. Operating profit, as a percentage of sales, was 2.77% in
2013, 2.86% in 2012 and 1.42% in 2011. Operating profit, as a percentage of sales excluding the extra week in
2012, was 2.81%. Operating profit, excluding the 2013, 2012 and 2011 adjusted items, was $2.7 billion in 2013,
$2.6 billion in 2012 and $2.2 billion in 2011. Operating profit, as a percentage of sales excluding the 2013,
2012 and 2011 adjusted items, was 2.79% in 2013, 2.69% in 2012 and 2.47% in 2011.

Operating profit, as a percentage of sales excluding the 2013 and 2012 adjusted items, increased 10 basis
points in 2013, compared to 2012, primarily due to improvements in operating, general and administrative
expenses, rent and depreciation, as a percentage of sales, offset partially by continued investments in lower
prices for our customers and increased shrink and advertising costs, as a percentage of sales. Operating
profit, as a percentage of sales excluding the 2012 and 2011 adjusted items, increased 22 basis points in 2012,
compared to 2011, primarily due to improvements in operating, general and administrative expenses, rent,
depreciation and the LIFO charge, as a percentage of sales, offset partially by continued investments in lower
prices for our customers and increased shrink and warehousing costs, as a percentage of sales.

A-12

We calculate FIFO operating profit as operating profit excluding the LIFO charge. FIFO operating profit
is a non-GAAP financial measure and should not be considered as an alternative to operating profit or any
other GAAP measure of performance. FIFO operating profit should not be reviewed in isolation or considered
as a substitute for our financial results as reported in accordance with GAAP. FIFO operating profit is an
important measure used by management to evaluate operational effectiveness. Management believes FIFO
operating profit is a useful metric to investors and analysts because it measures our day-to-day operational
effectiveness. Since fuel discounts are earned based on in-store purchases, fuel operating profit does not
include fuel discounts, which are allocated to our in-store supermarket location departments. We also derive
operating, general and administrative expenses, rent and depreciation and amortization through the use of
estimated allocations in the calculation of fuel operating profit.

FIFO operating profit was $2.8 billion in 2013 and 2012, and $1.5 billion in 2011. Excluding the extra
week in 2012, FIFO operating profit was $2.7 billion. FIFO operating profit, as a percentage of sales, was
2.82% in 2013, 2.92% in 2012 and 1.66% in 2011. FIFO operating profit, as a percentage of sales excluding the
extra week in 2012, was 2.87%. FIFO operating profit, excluding the 2013, 2012, and 2011 adjusted items, was
$2.8 billion in 2013, $2.6 billion in 2012 and $2.4 billion in 2011. FIFO operating profit, as a percentage of
sales excluding the 2013, 2012, and 2011 adjusted items, was 2.84% in 2013, 2.75% in 2012, and 2.71% in 2011.

Retail fuel sales lower our overall FIFO operating profit rate due to the very low FIFO operating profit
rate, as a percentage of sales, of retail fuel sales compared to non-fuel sales. FIFO operating profit, excluding
fuel, was $2.6 billion in 2013 and 2012, and $1.3 billion in 2011. Excluding the extra week, FIFO operating
profit, excluding fuel, was $2.5 billion in 2012. FIFO operating profit, as a percentage of sales excluding fuel,
was 3.22% in 2013, 3.35% in 2012, and 1.77% in 2011. Excluding the extra week, FIFO operating profit, as a
percentage of sales excluding fuel, was 3.28% in 2012. FIFO operating profit, excluding fuel and the 2013,
2012 and 2011 adjusted items, was $2.6 billion in 2013, $2.4 billion in 2012 and $2.3 billion in 2011. FIFO
operating profit, as a percentage of sales excluding fuel and the 2013, 2012, and 2011 adjusted items, was
3.24% in 2013, 3.13% in 2012 and 3.07% in 2011.

Excluding fuel, FIFO operating profit, as a percentage of sales excluding the 2013 and 2012 adjusted items,
increased 11 basis points in 2013, compared to 2012, primarily due to improvements in OG&A expenses, rent
and depreciation, as a percentage of sales, offset partially by continued investments in lower prices for our
customers and increased shrink and advertising costs, as a percentage of sales. Excluding fuel, FIFO operating
profit, as a percentage of sales excluding the 2012 and 2011 adjusted items, increased six basis points in 2012,
compared to 2011, primarily due to improvements in operating, general and administrative expenses, rent
and depreciation, as a percentage of sales, offset partially by continued investments in lower prices for our
customers and increased shrink and warehousing costs, as a percentage of sales.

A-13

The following table provides a reconciliation of operating profit to FIFO operating profit and FIFO

operating profit, excluding fuel and the adjusted items, for 2013, 2012 and 2011 ($ in millions):

2013
Percentage
of Sales

2013

Sales . . . . . . . . . . . . . . . . $ 98,375
Fuel sales . . . . . . . . . . . .
(18,962)
Sales excluding fuel . . . . $ 79,413
Operating profit . . . . . . . $ 2,725
52
LIFO charge . . . . . . . . . .
2,777
FIFO operating profit. . .
Fuel operating profit . . .
(219)
FIFO operating profit

excluding fuel . . . . . .
Adjusted items (2) . . . . .
FIFO operating profit

2,558
16

excluding fuel and the
adjusted items . . . . . . $ 2,574

2.77%
0.05%
2.82%
1.15%

3.22%

2012
Percentage
of Sales

2.86%
0.06%
2.92%
1.15%

3.35%

2012
Adjusted
Percentage
of Sales

2.81%
0.06%
2.87%
1.17%

3.28%

2011
$ 90,269
(16,901)
$ 73,368
$ 1,278
216
1,494
(192)

1,302
953

2012
Adjusted (1)
$ 94,661
(18,413)
$ 76,248
$ 2,664
55
2,719
(215)

2,504
(115)

2012
$ 96,619
(18,896)
$ 77,723
$ 2,764
55
2,819
(218)

2,601
(115)

2011
Percentage
of Sales

1.42%
0.24%
1.66%
1.14%

1.77%

3.24%

$ 2,486

3.20%

$ 2,389

3.13%

$ 2,255

3.07%

(1) The 2012 adjusted column represents items presented above adjusted to remove the extra week.

(2) Adjusted items refer to the pre-tax effect of the 2013, 2012 and 2011 adjusted items.

Percentages may not sum due to rounding.

Interest Expense

Net interest expense totaled $443 million in 2013, $462 million in 2012 and $435 million in 2011. Excluding
the extra week, net interest expense was $454 million in 2012. The decrease in net interest expense in 2013,
compared to 2012, excluding the extra week, resulted primarily from a lower weighted average interest rate,
offset partially by a decrease in the net benefit from interest rate swaps. The increase in net interest expense
in 2012 excluding the extra week, compared to 2011, resulted primarily from a decrease in the benefit from
interest rate swaps and an increase in total debt, offset partially by a lower weighted average interest rate.

Income Taxes

Our effective income tax rate was 32.9% in 2013, 34.5% in 2012 and 29.3% in 2011. The 2013 tax rate
differed from the federal statutory rate primarily as a result of the utilization of tax credits, the Domestic
Manufacturing Deduction and other changes, partially offset by the effect of state income taxes. The 2012 tax
rate differed from the federal statutory rate primarily as a result of the utilization of tax credits, the favorable
resolution of certain tax issues and other changes, partially offset by the effect of state income taxes. The
2013 benefit from the Domestic Manufacturing Deduction increased from 2012 due to additional deductions
taken in 2013, as well as the amendment of prior years’ tax returns to claim the additional benefit available in
years still under review by the Internal Revenue Service. The 2011 effective tax rate differed from the federal
statutory rate primarily as a result of the utilization of tax credits and the favorable resolution of certain tax
issues, partially offset by the effect of state income taxes. The 2011 effective tax rate was also lower than 2013
and 2012 due to the effect on pre-tax income of the UFCW consolidated pension plan charge of $953 million
($591 million after-tax). Excluding the UFCW consolidated pension plan charge, our effective rate in 2011
would have been 33.9%.

A-14

c o M M o N S h a r e r e P u r c h a S e P r o g r a M

We maintain share repurchase programs that comply with Securities Exchange Act Rule 10b5-1 and
allow for the orderly repurchase of our common shares, from time to time. We made open market purchases
of Kroger common shares totaling $338 million in 2013, $1.2 billion in 2012 and $1.4 billion in 2011 under
these repurchase programs. In addition to these repurchase programs, we also repurchase common shares to
reduce dilution resulting from our employee stock option plans. This program is solely funded by proceeds from
stock option exercises, and the tax benefit from these exercises. We repurchased approximately $271 million
in 2013, $96 million in 2012 and $127 million in 2011 of Kroger shares under the stock option program.

The shares reacquired in 2013 were acquired under two separate share repurchase programs. The first is
a $500 million repurchase program that was authorized by Kroger’s Board of Directors on October 16, 2012.
The second is a program that uses the cash proceeds from the exercises of stock options by participants in
Kroger’s stock option and long-term incentive plans as well as the associated tax benefits. As of February 1,
2014, we had $129 million remaining on the October 16, 2012 $500 million share repurchase program. On
March 13, 2014, the Company announced a new $1 billion share repurchase program that was authorized by
the Board of Directors, replacing the $500 million repurchase program that was authorized by the Board of
Directors on October 16, 2012.

c a P i t a l i N v e S t M e N t S

Capital investments, including changes in construction-in-progress payables and excluding acquisitions
and the purchase of leased facilities, totaled $2.3 billion in 2013, $2.0 billion in 2012 and $1.9 billion in 2011.
Capital investments for acquisitions totaled $2.3 billion in 2013, $122 million in 2012 and $51 million in 2011.
Capital investments for acquisitions of $2.3 billion in 2013 relate to our merger with Harris Teeter. Refer to
Note 2 to the Consolidated Financial Statements for more information on the merger with Harris Teeter.
Capital investments for the purchase of leased facilities totaled $108 million in 2013, $73 million in 2012
and $60 million in 2011. The table below shows our supermarket storing activity and our total food store
square footage:

Supermarket Storing Activity

Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Opened. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Opened (relocation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired (relocation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closed (operational) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closed (relocation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2013
2,424
17
7
227
—
(28)
(7)

2012
2,435
18
7
—
—
(29)
(7)

2011
2,460
10
12
6
2
(41)
(14)

End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,640

2,424

2,435

Total food store square footage (in millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

161

149

r e t u r N o N i N v e S t e d c a P i t a l

We calculate return on invested capital (“ROIC”) by dividing adjusted operating profit for the prior four
quarters by the average invested capital. Adjusted operating profit is calculated by excluding certain items
included in operating profit, and adding our LIFO charge, depreciation and amortization and rent. Average
invested capital is calculated as the sum of (i) the average of our total assets, (ii) the average LIFO reserve,
(iii) the average accumulated depreciation and amortization and (iv) a rent factor equal to total rent for the
last four quarters multiplied by a factor of eight; minus (i) the average taxes receivable, (ii) the average trade
accounts payable, (iii) the average accrued salaries and wages and (iv) the average other current liabilities.
Averages are calculated for return on invested capital by adding the beginning balance of the first quarter
and the ending balance of the fourth quarter, of the last four quarters, and dividing by two. We use a factor
of eight for our total rent as we believe this is a common factor used by our investors and analysts. Harris

A-15

Teeter’s invested capital has been excluded from the calculation in 2013 due to the timing of the merger and
the immaterial effect on operations as compared to the average invested capital. ROIC is a non-GAAP financial
measure of performance. ROIC should not be reviewed in isolation or considered as a substitute for our
financial results as reported in accordance with GAAP. ROIC is an important measure used by management
to evaluate our investment returns on capital. Management believes ROIC is a useful metric to investors and
analysts because it measures how effectively we are deploying our assets. All items included in the calculation
of ROIC are GAAP measures, excluding certain adjustments to operating income.

Although ROIC is a relatively standard financial term, numerous methods exist for calculating a company’s
ROIC. As a result, the method used by our management to calculate ROIC may differ from methods other
companies use to calculate their ROIC. We urge you to understand the methods used by other companies to
calculate their ROIC before comparing our ROIC to that of such other companies.

The following table provides a calculation of ROIC for 2013 and 2012 on a 52 week basis and excluding

the assets and liabilities recorded at year end for Harris Teeter ($ in millions):

Return on Invested Capital
Numerator

Operating profit on a 53 week basis in fiscal year 2012. . . . . . . . . . . . . . . . . . .
53rd week operating profit adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIFO charge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent on a 53 week basis in fiscal year 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
53rd week rent adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 adjusted item . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 adjusted items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Denominator

Average total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average taxes receivable (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average LIFO reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average accumulated depreciation and amortization. . . . . . . . . . . . . . . . . . . . .
Average trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average accrued salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average other current liabilities (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment for Harris Teeter (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent x 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average invested capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on Invested Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

February 1,
2014

February 2,
2013

$ 2,725
—
52
1,703
613
—
16
—
$ 5,109

$ 26,958
(10)
1,124
14,991
(4,683)
(1,084)
(2,544)
(1,618)
4,904
$ 38,038

$ 2,764
(100)
55
1,652
628
(12)
—
(115)
$ 4,872

$ 24,044
(22)
1,071
14,051
(4,382)
(1,061)
(2,314)
—
4,928
$ 36,315

13.43%

13.42%

(1) Taxes receivable were $18 as of February 1, 2014, $2 as of February 2, 2013 and $42 as of

January 28, 2012.

(2) Other current liabilities included accrued income taxes of $92 as of February 1, 2014 and $128 as of
February 2, 2013. As of January 28, 2012, other current liabilities did not include any accrued income
taxes. Accrued income taxes are removed from other current liabilities in the calculation of average
invested capital.

(3) Harris Teeter’s invested capital has been excluded from the calculation due to the timing of the merger

and the immaterial effect on the operations as compared to the average invested capital.

A-16

c r i t i c a l a c c o u N t i N g P o l i c i e S

We have chosen accounting policies that we believe are appropriate to report accurately and fairly our
operating results and financial position, and we apply those accounting policies in a consistent manner. Our
significant accounting policies are summarized in Note 1 to the Consolidated Financial Statements.

The preparation of financial statements in conformity with GAAP requires us to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and related
disclosures of contingent assets and liabilities. We base our estimates on historical experience and other
factors we believe to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results could differ from those estimates.

We believe that the following accounting policies are the most critical in the preparation of our financial
statements because they involve the most difficult, subjective or complex judgments about the effect of
matters that are inherently uncertain.

Self-Insurance Costs

We primarily are self-insured for costs related to workers’ compensation and general liability claims. The
liabilities represent our best estimate, using generally accepted actuarial reserving methods, of the ultimate
obligations for reported claims plus those incurred but not reported for all claims incurred through February
1, 2014. We establish case reserves for reported claims using case-basis evaluation of the underlying claim data
and we update as information becomes known.

For both workers’ compensation and general liability claims, we have purchased stop-loss coverage to
limit our exposure to any significant exposure on a per claim basis. We are insured for covered costs in excess
of these per claim limits. We account for the liabilities for workers’ compensation claims on a present value
basis utilizing a risk-adjusted discount rate. A 25 basis point decrease in our discount rate would increase our
liability by approximately $2 million. General liability claims are not discounted.

The assumptions underlying the ultimate costs of existing claim losses are subject to a high degree of
unpredictability, which can affect the liability recorded for such claims. For example, variability in inflation
rates of health care costs inherent in these claims can affect the amounts realized. Similarly, changes in legal
trends and interpretations, as well as a change in the nature and method of how claims are settled can affect
ultimate costs. Our estimates of liabilities incurred do not anticipate significant changes in historical trends
for these variables, and any changes could have a considerable effect on future claim costs and currently
recorded liabilities.

Impairments of Long-Lived Assets

We monitor the carrying value of long-lived assets for potential impairment each quarter based on
whether certain trigger events have occurred. These events include current period losses combined with a
history of losses or a projection of continuing losses or a significant decrease in the market value of an asset.
When a trigger event occurs, we perform an impairment calculation, comparing projected undiscounted
cash flows, utilizing current cash flow information and expected growth rates related to specific stores,
to the carrying value for those stores. If we identify impairment for long-lived assets to be held and used,
we compare the assets’ current carrying value to the assets’ fair value. Fair value is determined based on
market values or discounted future cash flows. We record impairment when the carrying value exceeds fair
market value. With respect to owned property and equipment held for disposal, we adjust the value of the
property and equipment to reflect recoverable values based on our previous efforts to dispose of similar assets
and current economic conditions. We recognize impairment for the excess of the carrying value over the
estimated fair market value, reduced by estimated direct costs of disposal. We recorded asset impairments in
the normal course of business totaling $39 million in 2013, $18 million in 2012 and $37 million in 2011. We
record costs to reduce the carrying value of long-lived assets in the Consolidated Statements of Operations as
“Operating, general and administrative” expense.

A-17

The factors that most significantly affect the impairment calculation are our estimates of future cash
flows. Our cash flow projections look several years into the future and include assumptions on variables such
as inflation, the economy and market competition. Application of alternative assumptions and definitions, such
as reviewing long-lived assets for impairment at a different level, could produce significantly different results.

Goodwill

Our goodwill totaled $2.1 billion as of February 1, 2014. We review goodwill for impairment in the
fourth quarter of each year, and also upon the occurrence of triggering events. We perform reviews of each
of our operating divisions and variable interest entities (collectively, our reporting units) that have goodwill
balances. Fair value is determined using a multiple of earnings, or discounted projected future cash flows,
and we compare fair value to the carrying value of a reporting unit for purposes of identifying potential
impairment. We base projected future cash flows on management’s knowledge of the current operating
environment and expectations for the future. If we identify potential for impairment, we measure the fair
value of a reporting unit against the fair value of its underlying assets and liabilities, excluding goodwill, to
estimate an implied fair value of the division’s goodwill. We recognize goodwill impairment for any excess of
the carrying value of the division’s goodwill over the implied fair value.

In 2013, goodwill increased $901 million due to our merger with Harris Teeter which closed on
January 28, 2014. For additional information related to the allocation of the Harris Teeter purchase price, refer
to Note 2 to the Consolidated Financial Statements.

The annual evaluation of goodwill performed for our other reporting units during the fourth quarter
of 2013, 2012 and 2011 did not result in impairment. Based on current and future expected cash flows, we
believe goodwill impairments are not reasonably likely. A 10% reduction in fair value of our reporting units
would not indicate a potential for impairment of our goodwill balance.

For additional information relating to our results of the goodwill impairment reviews performed during

2013, 2012 and 2011 see Note 3 to the Consolidated Financial Statements.

The impairment review requires the extensive use of management judgment and financial estimates.
Application of alternative estimates and assumptions, such as reviewing goodwill for impairment at a different
level, could produce significantly different results. The cash flow projections embedded in our goodwill
impairment reviews can be affected by several factors such as inflation, business valuations in the market, the
economy and market competition.

Store Closing Costs

We provide for closed store liabilities on the basis of the present value of the estimated remaining non-
cancellable lease payments after the closing date, net of estimated subtenant income. We estimate the net lease
liabilities using a discount rate to calculate the present value of the remaining net rent payments on closed
stores. We usually pay closed store lease liabilities over the lease terms associated with the closed stores,
which generally have remaining terms ranging from one to 20 years. Adjustments to closed store liabilities
primarily relate to changes in subtenant income and actual exit costs differing from original estimates. We
make adjustments for changes in estimates in the period in which the change becomes known. We review store
closing liabilities quarterly to ensure that any accrued amount that is not a sufficient estimate of future costs,
or that no longer is needed for its originally intended purpose, is adjusted to earnings in the proper period.

We estimate subtenant income, future cash flows and asset recovery values based on our experience and
knowledge of the market in which the closed store is located, our previous efforts to dispose of similar assets
and current economic conditions. The ultimate cost of the disposition of the leases and the related assets is
affected by current real estate markets, inflation rates and general economic conditions.

We reduce owned stores held for disposal to their estimated net realizable value. We account for costs to
reduce the carrying values of property, equipment and leasehold improvements in accordance with our policy
on impairment of long-lived assets. We classify inventory write-downs in connection with store closings, if
any, in “Merchandise costs.” We expense costs to transfer inventory and equipment from closed stores as they
are incurred.

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Post-Retirement Benefit Plans

We account for our defined benefit pension plans using the recognition and disclosure provisions of
GAAP, which require the recognition of the funded status of retirement plans on the Consolidated Balance
Sheet. We record, as a component of Accumulated Other Comprehensive Income (“AOCI”), actuarial gains or
losses, prior service costs or credits and transition obligations that have not yet been recognized.

The determination of our obligation and expense for Company-sponsored pension plans and other post-
retirement benefits is dependent upon our selection of assumptions used by actuaries in calculating those
amounts. Those assumptions are described in Note 15 to the Consolidated Financial Statements and include,
among others, the discount rate, the expected long-term rate of return on plan assets, average life expectancy
and the rate of increases in compensation and health care costs. Actual results that differ from our assumptions
are accumulated and amortized over future periods and, therefore, generally affect our recognized expense
and recorded obligation in future periods. While we believe that our assumptions are appropriate, significant
differences in our actual experience or significant changes in our assumptions, including the discount rate
used and the expected return on plan assets, may materially affect our pension and other post-retirement
obligations and our future expense. Note 15 to the Consolidated Financial Statements discusses the effect
of a 1% change in the assumed health care cost trend rate on other post-retirement benefit costs and the
related liability.

The objective of our discount rate assumptions was intended to reflect the rates at which the pension
benefits could be effectively settled. In making this determination, we take into account the timing and
amount of benefits that would be available under the plans. Our methodology for selecting the discount
rates as of year-end 2013 and 2012 was to match the plan’s cash flows to that of a hypothetical bond portfolio
whose cash flow from coupons and maturities match the plan’s projected benefit cash flows. The discount
rates are the single rates that produce the same present value of cash flows. The selection of the 4.99%
and 4.68% discount rates as of year-end 2013 for pension and other benefits, respectively, represents the
hypothetical bond portfolio using bonds with an AA or better rating constructed with the assistance of an
outside consultant. We utilized a discount rate of 4.29% and 4.11% as of year-end 2012 for pension and other
benefits, respectively. A 100 basis point increase in the discount rate would decrease the projected pension
benefit obligation as of February 1, 2014, by approximately $395.

To determine the expected rate of return on pension plan assets held by Kroger for 2013, we considered
current and forecasted plan asset allocations as well as historical and forecasted rates of return on various
asset categories. Due to the Harris Teeter merger occurring close to year end, the expected rate of return
on pension plan assets acquired in the Harris Teeter merger did not affect our net periodic benefit cost in
2013. For 2013 and 2012, we assumed a pension plan investment return rate of 8.5%. Our pension plan’s
average rate of return was 8.1% for the 10 calendar years ended December 31, 2013, net of all investment
management fees and expenses. The value of all investments in our Company-sponsored defined benefit
pension plans, excluding pension plan assets acquired in the Harris Teeter merger, during the calendar year
ending December 31, 2013, net of investment management fees and expenses, increased 8.0%. For the past
20 years, our average annual rate of return has been 9.2%. Based on the above information and forward
looking assumptions for investments made in a manner consistent with our target allocations, we believe an
8.5% rate of return assumption was reasonable for 2013 and 2012. See Note 15 to the Consolidated Financial
Statements for more information on the asset allocations of pension plan assets.

Sensitivity to changes in the major assumptions used in the calculation of Kroger’s pension plan liabilities

is illustrated below (in millions).

Discount Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected Return on Assets . . . . . . . . . . . . . . . . . .

Percentage
Point Change
+/- 1.0%
+/- 1.0%

Projected Benefit
Obligation
Decrease/(Increase)
$395/(477)
—

Expense
Decrease/(Increase)
$31/($36)
$28/($28)

A-19

We contributed $100 million in 2013, $71 million in 2012 and $52 million in 2011 to our Company-
sponsored defined benefit pension plans. We do not expect to make any contributions to Company-sponsored
defined benefit pension plans in 2014. Among other things, investment performance of plan assets, the
interest rates required to be used to calculate the pension obligations, and future changes in legislation, will
determine the amounts of contributions.

We contributed and expensed $148 million in 2013, $140 million in 2012 and $130 million in 2011 to
employee 401(k) retirement savings accounts. The 401(k) retirement savings account plans provide to eligible
employees both matching contributions and automatic contributions from the Company based on participant
contributions, plan compensation, and length of service.

Multi-Employer Pension Plans

We also contribute to various multi-employer pension plans based on obligations arising from collective
bargaining agreements. These plans provide retirement benefits to participants based on their service to
contributing employers. The benefits are paid from assets held in trust for that purpose. Trustees are appointed
in equal number by employers and unions. The trustees typically are responsible for determining the level
of benefits to be provided to participants as well as for such matters as the investment of the assets and the
administration of the plans.

In the fourth quarter of 2011, we entered into a memorandum of understanding (“MOU”) with 14 locals
of the UFCW that participated in four multi-employer pension funds. The MOU established a process that
amended each of the collective bargaining agreements between Kroger and the UFCW locals under which
we made contributions to these funds and consolidated the four multi-employer pension funds into one
multi-employer pension fund.

Under the terms of the MOU, the locals of the UFCW agreed to a future pension benefit formula through
2021. We are designated as the named fiduciary of the new consolidated pension plan with sole investment
authority over the assets. We committed to contribute sufficient funds to cover the actuarial cost of current
accruals and to fund the pre-consolidation Unfunded Actuarial Accrued Liability (“UAAL”) that existed as
of December 31, 2011, in a series of installments on or before March 31, 2018. At January 1, 2012, the UAAL
was estimated to be $911 million (pre-tax). In accordance with GAAP, we expensed $911 million in 2011
related to the UAAL. The expense was based on a preliminary estimate of the contractual commitment. In
2012, we finalized the UAAL contractual commitment and recorded an adjustment that reduced our 2011
estimated commitment by $53 million (pre-tax). The final UAAL contractual commitment, at January 1, 2012,
was $858 million (pre-tax). In the fourth quarter of 2011, we contributed $650 million to the consolidated
multi-employer pension plan of which $600 million was allocated to the UAAL and $50 million was allocated
to service and interest costs and expensed in 2011. In the fourth quarter of 2012, we contributed $258 million
to the consolidated multi-employer pension plan to fully fund our UAAL contractual commitment. Future
contributions will be dependent, among other things, on the investment performance of assets in the plan.
The funding commitments under the MOU replace the prior commitments under the four existing funds to
pay an agreed upon amount per hour worked by eligible employees.

We recognize expense in connection with these plans as contributions are funded or, in the case of the
UFCW consolidated pension plan, when commitments are made, in accordance with GAAP. We made cash
contributions to these plans of $228 million in 2013, $492 million in 2012 and $946 million in 2011. The
cash contributions for 2012 and 2011 include our $258 million contribution in 2012 and our $650 million
contribution in 2011 to the UFCW consolidated pension plan in the fourth quarter of each year.

Based on the most recent information available to us, we believe that the present value of actuarially
accrued liabilities in most of the multi-employer plans to which we contribute substantially exceeds the
value of the assets held in trust to pay benefits. We have attempted to estimate the amount by which these
liabilities exceed the assets, (i.e., the amount of underfunding), as of December 31, 2013. Because Kroger is
only one of a number of employers contributing to these plans, we also have attempted to estimate the ratio
of Kroger’s contributions to the total of all contributions to these plans in a year as a way of assessing Kroger’s
“share” of the underfunding. Nonetheless, the underfunding is not a direct obligation or liability of Kroger
or of any employer except as noted above. As of December 31, 2013, we estimate that Kroger’s share of the

A-20

underfunding of multi-employer plans to which Kroger contributes was $1.6 billion, pre-tax, or $1.0 billion,
after-tax. This represents a decrease in the estimated amount of underfunding of approximately $150 million,
pre-tax, or $95 million, after-tax, as of December 31, 2013, compared to December 31, 2012. The decrease in
the amount of underfunding is attributable to the increased returns on the assets held in the multi-employer
plans during 2013. Our estimate is based on the most current information available to us including actuarial
evaluations and other data (that include the estimates of others), and such information may be outdated or
otherwise unreliable.

We have made and disclosed this estimate not because, except as noted above, this underfunding is a
direct liability of Kroger. Rather, we believe the underfunding is likely to have important consequences. In 2013,
excluding all payments to the UFCW consolidated pension plan and the pension plans that were consolidated
into the UFCW consolidated pension plan, our contributions to these plans increased approximately 5% over
the prior year and have grown at a compound annual rate of approximately 8% since 2008. In 2014, we expect
to contribute approximately $250 million to multi-employer pension plans, subject to collective bargaining
and capital market conditions. Excluding all payments to the UFCW consolidated pension plan and the pension
plans that were consolidated into the UFCW consolidated pension plan, based on current market conditions,
we expect increases in expense as a result of increases in multi-employer pension plan contributions over the
next few years. Finally, underfunding means that, in the event we were to exit certain markets or otherwise
cease making contributions to these funds, we could trigger a substantial withdrawal liability. Any adjustment
for withdrawal liability will be recorded when it is probable that a liability exists and can be reasonably
estimated, in accordance with GAAP.

The amount of underfunding described above is an estimate and could change based on contract
negotiations, returns on the assets held in the multi-employer plans and benefit payments. The amount could
decline, and Kroger’s future expense would be favorably affected, if the values of the assets held in the trust
significantly increase or if further changes occur through collective bargaining, trustee action or favorable
legislation. On the other hand, Kroger’s share of the underfunding could increase and Kroger’s future expense
could be adversely affected if the asset values decline, if employers currently contributing to these funds
cease participation or if changes occur through collective bargaining, trustee action or adverse legislation.
The Company continues to evaluate our potential exposure to under-funded multi-employer pension plans.
Although these liabilities are not a direct obligation or liability of Kroger, any commitments to fund certain
multi-employer plans will be expensed when our commitment is probable and an estimate can be made.

See Note 16 to the Consolidated Financial Statements for more information relating to our participation

in these multi-employer pension plans.

Deferred Rent

We recognize rent holidays, including the time period during which we have access to the property for
construction of buildings or improvements, as well as construction allowances and escalating rent provisions
on a straight-line basis over the term of the lease. The deferred amount is included in Other Current Liabilities
and Other Long-Term Liabilities on the Consolidated Balance Sheets.

Uncertain Tax Positions

We review the tax positions taken or expected to be taken on tax returns to determine whether and
to what extent a benefit can be recognized in our consolidated financial statements. Refer to Note 5 to the
Consolidated Financial Statements for the amount of unrecognized tax benefits and other related disclosures
related to uncertain tax positions.

Various taxing authorities periodically audit our income tax returns. These audits include questions
regarding our tax filing positions, including the timing and amount of deductions and the allocation of income
to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions,
including state and local taxes, we record allowances for probable exposures. A number of years may elapse
before a particular matter, for which an allowance has been established, is audited and fully resolved. As of

A-21

February 1, 2014, the Internal Revenue Service had concluded its field examination of our 2008 and 2009
federal tax returns. We have filed an administrative appeal with the Internal Revenue Service protesting
certain adjustments proposed by the Internal Revenue Service as a result of their field work.

The assessment of our tax position relies on the judgment of management to estimate the exposures

associated with our various filing positions.

Share-Based Compensation Expense

We account for stock options under the fair value recognition provisions of GAAP. Under this method,
we recognize compensation expense for all share-based payments granted. We recognize share-based
compensation expense, net of an estimated forfeiture rate, over the requisite service period of the award. In
addition, we record expense for restricted stock awards in an amount equal to the fair market value of the
underlying stock on the grant date of the award, over the period the award restrictions lapse.

Inventories

Inventories are stated at the lower of cost (principally on a LIFO basis) or market. In total, approximately
95% of inventories in 2013 and 96% of inventories in 2012 were valued using the LIFO method. Cost for the
balance of the inventories, including substantially all fuel inventories, was determined using the FIFO method.
Replacement cost was higher than the carrying amount by $1.2 billion at February 1, 2014 and by $1.1 billion
at February 2, 2013. We follow the Link-Chain, Dollar-Value LIFO method for purposes of calculating our LIFO
charge or credit.

We follow the item-cost method of accounting to determine inventory cost before the LIFO adjustment
for substantially all store inventories at our supermarket divisions. This method involves counting each item in
inventory, assigning costs to each of these items based on the actual purchase costs (net of vendor allowances
and cash discounts) of each item and recording the cost of items sold. The item-cost method of accounting
allows for more accurate reporting of periodic inventory balances and enables management to more precisely
manage inventory. In addition, substantially all of our inventory consists of finished goods and is recorded at
actual purchase costs (net of vendor allowances and cash discounts).

We evaluate inventory shortages throughout the year based on actual physical counts in our facilities.
We record allowances for inventory shortages based on the results of recent physical counts to provide for
estimated shortages from the last physical count to the financial statement date.

Vendor Allowances

We recognize all vendor allowances as a reduction in merchandise costs when the related product is
sold. In most cases, vendor allowances are applied to the related product cost by item, and therefore reduce
the carrying value of inventory by item. When it is not practicable to allocate vendor allowances to the
product by item, we recognize vendor allowances as a reduction in merchandise costs based on inventory
turns and as the product is sold. We recognized approximately $6.2 billion in 2013 and 2012 and $5.9 billion
in 2011 of vendor allowances as a reduction in merchandise costs. We recognized approximately 94% of all
vendor allowances in the item cost with the remainder being based on inventory turns.

r e c e N t l y a d o P t e d a c c o u N t i N g S t a N d a r d S

In February 2013, the FASB amended its standards on comprehensive income by requiring disclosure
of information about amounts reclassified out of accumulated other comprehensive income (“AOCI”) by
component. Specifically, the amendment requires disclosure of the effect of significant reclassifications
out of AOCI on the respective line items in net income in which the item was reclassified if the amount
being reclassified is required to be reclassified to net income in its entirety in the same reporting period. It
requires cross reference to other disclosures that provide additional detail for amounts that are not required
to be reclassified in their entirety in the same reporting period. This new disclosure became effective for us
beginning February 3, 2013, and is being adopted prospectively in accordance with the standard. See Note
9 to the Company’s Consolidated Financial Statements for the Company’s new disclosures related to this
amended standard.

A-22

In December 2011, the FASB amended its standards related to offsetting assets and liabilities. This
amendment requires entities to disclose both gross and net information about certain instruments and
transactions eligible for offset in the statement of financial position and certain instruments and transactions
subject to an agreement similar to a master netting agreement. This information is intended to enable users
of the financial statements to understand the effect of these arrangements on our financial position. The new
rules became effective for us on February 3, 2013. In January 2013, the FASB further amended this standard
to limit its scope to derivatives, repurchase and reverse repurchase agreements, securities borrowings and
lending transactions. See Note 7 to the Company’s Consolidated Financial Statements for the Company’s new
disclosures related to this amended standard.

r e c e N t l y i S S u e d a c c o u N t i N g S t a N d a r d S

In July 2013, the FASB amended Accounting Standards Codification (“ASC”) 740, “Income Taxes.” The
amendments provide guidance on the financial statement presentation of an unrecognized tax benefit, as
either a reduction of a deferred tax asset or as a liability, when a net operating loss carryforward, similar tax
loss, or a tax credit carryforward exists. The amendments will be effective for interim and annual periods
beginning after December 15, 2013 and may be applied on a retrospective basis. Early adoption is permitted.
We do not expect the adoption of these amendments to have a significant effect on our consolidated financial
position or results of operations.

l i q u i d i t y a N d c a P i t a l r e S o u r c e S

Cash Flow Information

Net cash provided by operating activities

We generated $3.4 billion of cash from operations in 2013, compared to $2.8 billion in 2012 and
$2.7 billion in 2011. The cash provided by operating activities came from net earnings including non-
controlling interests adjusted primarily for non-cash expenses of depreciation and amortization, the LIFO
charge and changes in working capital. The increase in net cash provided by operating activities in 2013,
compared to 2012, resulted primarily due to changes in working capital and long-term liabilities. The increase
in net cash provided by operating activities in 2012, compared to 2011, resulted primarily due to an increase
in net earnings including non-controlling interests, offset by a decline in long-term liabilities and changes in
working capital.

The use of cash for the payment of long-term liabilities decreased in 2013, as compared to 2012, primarily
due to our funding of the remaining UAAL in 2012. The use of cash increased in 2012, as compared to 2011,
primarily due to our funding of the remaining UAAL commitment. Changes in working capital used cash
from operating activities of $130 million in 2013, compared to $332 million in 2012 and $300 million in
2011. The decreased use of cash for changes in working capital in 2013, compared to 2012, was primarily
due to a decrease in deposits in-transit and a reduced use of cash for prepaid expenses and receivables. The
increased use of cash for changes in working capital in 2012, compared to 2011, was primarily due to an
increased use of cash for prepaid expenses and less cash provided by accrued expenses, partially offset by
a reduced use of cash for inventories. Cash used for prepaid expenses increased in 2012, compared to 2011,
due to Kroger prefunding $250 million of employee benefits at the end of 2012. These amounts are also net
of cash contributions to our Company-sponsored defined benefit pension plans totaling $100 million in 2013,
$71 million in 2012 and $52 million in 2011.

The amount of cash paid for income taxes increased in 2013, compared to 2012, primarily due to
additional deductions taken in 2012 related to the funding of our pension contributions and union health
benefits. The amount of cash paid for income taxes increased in 2012, compared to 2011, primarily due to an
increase in net earnings including non-controlling interests.

A-23

Net cash used by investing activities

Cash used by investing activities was $4.8 billion in 2013, compared to $2.2 billion in 2012 and
$1.9 billion in 2011. The amount of cash used by investing activities increased in 2013, compared to 2012, due
to increased payments for capital investments and acquisitions. The amount of cash used by investing activities
increased in 2012, compared to 2011, due to increased payments for capital investments and acquisitions.
Capital investments, including changes in construction-in-progress payables and excluding acquisitions, were
$2.4 billion in 2013, $2.1 billion in 2012 and $2.0 billion in 2011. Acquisitions were $2.3 billion in 2013,
$122 million in 2012 and $51 million in 2011. The increase in payments for acquisitions in 2013, compared
to 2012 was primarily due to our merger with Harris Teeter. Refer to the “Capital Investments” section for an
overview of our supermarket storing activity during the last three years.

Net cash used by financing activities

Financing activities provided (used) cash of $1.6 billion in 2013, ($600) million in 2012 and ($1.4) billion
in 2011. The increase in cash provided by financing activities in 2013, compared to 2012, was primarily related
to increased proceeds from the issuance of long-term debt, primarily to finance our merger with Harris Teeter,
and a reduction in payments on long-term debt and treasury stock purchases, offset partially by net payments
on our commercial paper program. The decrease in the amount of cash used for financing activities in 2012,
compared to 2011, was primarily related to increased proceeds from the issuance of long-term debt and net
borrowings from our commercial paper program, offset partially by payments on long-term debt. Proceeds
from the issuance of long-term debt were $3.5 billion in 2013, $863 million in 2012 and $453 million in 2011.
Proceeds (payments) provided from our commercial paper program were ($395) million in 2013, $1.3 billion
in 2012 and $370 million in 2011. Please refer to the “Debt Management” section for additional information. We
repurchased $609 million of Kroger common shares in 2013, compared to $1.3 billion in 2012 and $1.5 billion
in 2011. We paid dividends totaling $319 million in 2013, $267 million in 2012 and $257 million in 2011.

Debt Management

Total debt, including both the current and long-term portions of capital lease and lease-financing
obligations increased $2.4 billion to $11.3 billion as of year-end 2013, compared to 2012. The increase in
2013, compared to 2012, resulted from the issuance of (i) $600 million of senior notes bearing an interest
rate of 3.85%, (ii) $400 million of senior notes bearing an interest rate of 5.15%, (iii) $500 million of senior
notes bearing an interest rate of 3-month London Inter-Bank Offering Rate (“LIBOR”) plus 53 basis points,
(iv) $300 million of senior notes bearing an interest rate of 1.2%, (v) $500 million of senior notes bearing an
interest rate of 2.3%, (vi) $700 million of senior notes bearing an interest rate of 3.3%, and (vii) $500 million of
senior notes bearing an interest rate of 4.0%, offset partially by a reduction in commercial paper of $395 million
and payments at maturity of $400 million of senior notes bearing an interest rate of 5.0% and $600 million
of senior notes bearing an interest rate of 7.5%. This increase in financing obligations was due to partially
funding our merger with Harris Teeter, refinancing our debt maturities in 2013 and replacing the senior notes
that matured in fourth quarter of 2012, offset partially by the payment at maturity of our $400 million of
senior notes bearing an interest rate of 5.0%, $600 million of senior notes bearing an interest rate of 7.5% and
a reduction in commercial paper of $395 million.

Total debt, including both the current and long-term portions of capital leases and lease-financing
obligations increased $714 million to $8.9 billion as of year-end 2012, compared to 2011. The increase in
2012, compared to 2011, resulted from increased borrowings of $1.3 billion of commercial paper supported
by our credit facility and the issuance of (i) $500 million of senior notes bearing an interest rate of 3.4% and
(ii) $350 million of senior notes bearing an interest rate of 5.0%, offset partially by payments at maturity of
(i) $491 million of senior notes bearing an interest rate of 6.75%, (ii) $346 million of senior notes bearing an
interest rate of 6.2% and (iii) $500 million of senior notes bearing an interest rate of 5.5%. This increase in
financing obligations was primarily to fund our $258 million UFCW consolidated pension plan contribution
in the fourth quarter of 2012, prefunding $250 million of employee benefit costs at the end of 2012, to
repurchase common shares, pay at maturity $500 million of senior notes bearing an interest rate of 5.5% and
purchase of a specialty pharmacy.

A-24

Liquidity Needs

We estimate our liquidity needs over the next twelve-month period to be approximately $4.5 billion, which
includes anticipated requirements for working capital, capital expenditures, interest payments and scheduled
principal payments of debt and commercial paper, offset by cash and temporary cash investments on hand
at the end of 2013. Based on current operating trends, we believe that cash flows from operating activities
and other sources of liquidity, including borrowings under our commercial paper program and bank credit
facility, will be adequate to meet our liquidity needs for the next twelve months and for the foreseeable future
beyond the next twelve months. We have approximately $1.2 billion of commercial paper and $300 million of
senior notes maturing in the next twelve months, which is included in the $4.5 billion in estimated liquidity
needs. We expect to refinance this debt, in 2014, by issuing additional senior notes or commercial paper on
favorable terms based on our past experience. We also currently plan to continue repurchases of common
shares under the Company’s share repurchase programs. We may use our commercial paper program to fund
debt maturities during 2014 but do not currently expect to use the program permanently. We believe we have
adequate coverage of our debt covenants to continue to maintain our current debt ratings and to respond
effectively to competitive conditions.

Factors Affecting Liquidity

We can currently borrow on a daily basis approximately $2 billion under our commercial paper (“CP”)
program. At February 1, 2014, we had $1.2 billion of CP borrowings outstanding. CP borrowings are backed
by our credit facility, and reduce the amount we can borrow under the credit facility. If our short-term credit
ratings fall, the ability to borrow under our current CP program could be adversely affected for a period of time
and increase our interest cost on daily borrowings under our CP program. This could require us to borrow
additional funds under the credit facility, under which we believe we have sufficient capacity. However, in
the event of a ratings decline, we do not anticipate that our borrowing capacity under our CP program would
be any lower than $500 million on a daily basis. Although our ability to borrow under the credit facility is not
affected by our credit rating, the interest cost on borrowings under the credit facility could be affected by an
increase in our Leverage Ratio. As of March 28, 2014, we had $665 million of CP borrowings outstanding. The
decrease as of March 28, 2014, compared to year-end 2013, was due to applying cash from operations against
our year-end CP outstanding borrowings.

Our credit facility requires the maintenance of a Leverage Ratio and a Fixed Charge Coverage Ratio (our
“financial covenants”). A failure to maintain our financial covenants would impair our ability to borrow under
the credit facility. These financial covenants and ratios are described below:

• Our Leverage Ratio (the ratio of Net Debt to Consolidated EBITDA, as defined in the credit facility) was
2.30 to 1 as of February 1, 2014. If this ratio were to exceed 3.50 to 1, we would be in default of our
credit facility and our ability to borrow under the facility would be impaired. In addition, our Applicable
Margin on borrowings is determined by our Leverage Ratio.

• Our Fixed Charge Coverage Ratio (the ratio of Consolidated EBITDA plus Consolidated Rental Expense to
Consolidated Cash Interest Expense plus Consolidated Rental Expense, as defined in the credit facility)
was 4.83 to 1 as of February 1, 2014. If this ratio fell below 1.70 to 1, we would be in default of our credit
facility and our ability to borrow under the facility would be impaired.

Our credit agreement is more fully described in Note 6 to the Consolidated Financial Statements. We

were in compliance with our financial covenants at year-end 2013.

A-25

The tables below illustrate our significant contractual obligations and other commercial commitments,

based on year of maturity or settlement, as of February 1, 2014 (in millions of dollars):

2014

2015

2016

2017

2018

Thereafter

Total

Contractual Obligations (1) (2)
Long-term debt (3) . . . . . . . . . . . . . . . . . . $ 1,616 $ 524 $1,267 $ 708 $1,003
278
Interest on long-term debt (4). . . . . . . . . .
43
Capital lease obligations . . . . . . . . . . . . . .
563
Operating lease obligations . . . . . . . . . . .
—
Low-income housing obligations . . . . . . .
13
Financed lease obligations . . . . . . . . . . . .
26
Self-insurance liability (5) . . . . . . . . . . . . .
—
Construction commitments . . . . . . . . . . .
39
Purchase obligations . . . . . . . . . . . . . . . . .

364
57
770
—
13
131
—
135

427
62
832
3
13
224
313
549

321
52
634
—
13
52
—
57

349
53
708
—
13
88
—
82

$ 5,662
1,352
349
3,101
—
111
48
—
87

$10,780
3,091
616
6,608
3
176
569
313
949

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,039 $1,994 $2,560 $1,837 $1,965

$10,710

$ 23,105

Other Commercial Commitments
Standby letters of credit . . . . . . . . . . . . . . $ 209 $ — $ — $ — $ — $ — $
Surety bonds . . . . . . . . . . . . . . . . . . . . . . .

310

—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 519 $ — $ — $ — $ — $ — $

209
310

519

(1) The contractual obligations table excludes funding of pension and other postretirement benefit
obligations, which totaled approximately $125 million in 2013. This table also excludes contributions
under various multi-employer pension plans, which totaled $228 million in 2013.

(2) The liability related to unrecognized tax benefits has been excluded from the contractual obligations
table because a reasonable estimate of the timing of future tax settlements cannot be determined.

(3) As of February 1, 2014, we had $1.2 billion of borrowings of commercial paper and no borrowings under

our credit agreement and money market lines.

(4) Amounts include contractual interest payments using the interest rate as of February 1, 2014, and stated

fixed and swapped interest rates, if applicable, for all other debt instruments.

(5) The amounts included in the contractual obligations table for self-insurance liability related to workers’

compensation claims have been stated on a present value basis.

Our construction commitments include funds owed to third parties for projects currently under

construction. These amounts are reflected in other current liabilities in our Consolidated Balance Sheets.

Our purchase obligations include commitments, many of which are short-term in nature, to be utilized in
the normal course of business, such as several contracts to purchase raw materials utilized in our manufacturing
plants and several contracts to purchase energy to be used in our stores and manufacturing facilities. Our
obligations also include management fees for facilities operated by third parties and outside service contracts.
Any upfront vendor allowances or incentives associated with outstanding purchase commitments are recorded
as either current or long-term liabilities in our Consolidated Balance Sheets.

As of February 1, 2014, we maintained a $2 billion (with the ability to increase by $500 million), unsecured
revolving credit facility that, unless extended, terminates on January 25, 2017. Outstanding borrowings under
the credit agreement and commercial paper borrowings, and some outstanding letters of credit, reduce funds
available under the credit agreement. In addition to the credit agreement, we maintain two uncommitted
money market lines totaling $75 million in the aggregate. The money market lines allow us to borrow from
banks at mutually agreed upon rates, usually at rates below the rates offered under the credit agreement. As of
February 1, 2014, we had $1.2 billion of borrowings of commercial paper and no borrowings under our credit
agreement and money market lines. The outstanding letters of credit that reduce funds available under our
credit agreement totaled $12 million as of February 1, 2014.

A-26

In addition to the available credit mentioned above, as of February 1, 2014, we had authorized for
issuance $2.5 billion of securities under a shelf registration statement filed with the SEC and effective on
December 13, 2013.

We also maintain surety bonds related primarily to our self-insured workers’ compensation claims. These
bonds are required by most states in which we are self-insured for workers’ compensation and are placed with
predominately third-party insurance providers to insure payment of our obligations in the event we are unable
to meet our claim payment obligations up to our self-insured retention levels. These bonds do not represent
liabilities of Kroger, as we already have reserves on our books for the claims costs. Market changes may make
the surety bonds more costly and, in some instances, availability of these bonds may become more limited,
which could affect our costs of, or access to, such bonds. Although we do not believe increased costs or
decreased availability would significantly affect our ability to access these surety bonds, if this does become
an issue, we would issue letters of credit, in states where allowed, against our credit facility to meet the state
bonding requirements. This could increase our cost and decrease the funds available under our credit facility.

We also are contingently liable for leases that have been assigned to various third parties in connection
with facility closings and dispositions. We could be required to satisfy obligations under the leases if any of
the assignees are unable to fulfill their lease obligations. Due to the wide distribution of our assignments
among third parties, and various other remedies available to us, we believe the likelihood that we will be
required to assume a material amount of these obligations is remote. We have agreed to indemnify certain
third-party logistics operators for certain expenses, including pension trust fund contribution obligations and
withdrawal liabilities.

In addition to the above, we enter into various indemnification agreements and take on indemnification
obligations in the ordinary course of business. Such arrangements include indemnities against third party
claims arising out of agreements to provide services to Kroger; indemnities related to the sale of our securities;
indemnities of directors, officers and employees in connection with the performance of their work; and
indemnities of individuals serving as fiduciaries on benefit plans. While Kroger’s aggregate indemnification
obligation could result in a material liability, we are not aware of any current matter that could result in a
material liability.

o u t l o o k

This discussion and analysis contains certain forward-looking statements about Kroger’s future
performance, including Harris Teeter. These statements are based on management’s assumptions and beliefs
in light of the information currently available. Such statements are indicated by words such as “comfortable,”
“committed,” “will,” “expect,” “goal,” “should,” “intend,” “target,” “believe,” “anticipate,” “plan,” and similar
words or phrases. These forward-looking statements are subject to uncertainties and other factors that could
cause actual results to differ materially.

Statements elsewhere in this report and below regarding our expectations, projections, beliefs, intentions
or strategies are forward-looking statements within the meaning of Section 21E of the Securities Exchange
Act of 1934. While we believe that the statements are accurate, uncertainties about the general economy, our
labor relations, our ability to execute our plans on a timely basis and other uncertainties described below
could cause actual results to differ materially.

• We expect net earnings per diluted share in the range of $3.14-$3.25 for fiscal year 2014.

• In 2014, we expect net earnings per diluted share growth of 10 – 14%, which includes the expected
accretion to net earnings from the Harris Teeter merger. Thereafter, we would expect to return to our
8 – 11% long-term growth rate.

• We expect identical supermarket sales growth, excluding fuel sales, of 2.5%-3.5% in fiscal year 2014.

• We expect full-year FIFO non-fuel operating margin for 2014 to expand slightly compared to 2013,

excluding the 2013 adjusted items.

• For 2014, we expect our annualized LIFO charge to be approximately $55 million.

A-27

• For 2014, we expect interest expense to be approximately $490 million.

• We plan to use cash flow primarily for capital investments, to improve our current debt coverage ratios,

to pay cash dividends and to repurchase stock.

• We expect to obtain sales growth from new square footage, as well as from increased productivity from

existing locations.

• We expect capital investments for 2014 to increase to approximately $2.8 - $3.0 billion, excluding
mergers, acquisitions and purchases of leased facilities. We also expect capital investments to increase
incrementally $200 million each year over the next few years, excluding mergers, acquisitions and
purchases of leased facilities, to accomplish our strategy. We expect total food store square footage for
2014 to grow approximately 1.8% before mergers, acquisitions and operational closings.

• For 2014, we expect our effective tax rate to be approximately 35.0%, excluding the unexpected effect

of the resolution of any tax issues and benefits from certain tax items.

• We do not anticipate goodwill impairments in 2014.

• For 2014, we expect to contribute approximately $250 million to multi-employer pension funds. We
continue to evaluate our potential exposure to under-funded multi-employer pension plans. Although
these liabilities are not a direct obligation or liability of Kroger, any commitments to fund certain multi-
employer plans will be expensed when our commitment is probable and an estimate can be made.

• In 2014, we will negotiate agreements with the UFCW for store associates in Cincinnati, Atlanta, Southern
California, New Mexico, Richmond/Hampton Roads, West Virginia and Arizona, and an agreement with
the Teamsters covering several distribution and manufacturing facilities. These negotiations will be
challenging, as we must have competitive cost structures in each market while meeting our associates’
needs for good wages and affordable health care. Also, we must address the underfunding of multi-
employer pension plans.

Various uncertainties and other factors could cause actual results to differ materially from those contained

in the forward-looking statements. These include:

• The extent to which our sources of liquidity are sufficient to meet our requirements may be affected by
the state of the financial markets and the effect that such condition has on our ability to issue commercial
paper at acceptable rates. Our ability to borrow under our committed lines of credit, including our
bank credit facilities, could be impaired if one or more of our lenders under those lines is unwilling or
unable to honor its contractual obligation to lend to us, or in the event that natural disasters or weather
conditions interfere with the ability of our lenders to lend to us. Our ability to refinance maturing debt
may be affected by the state of the financial markets.

• Our ability to use cash flow to continue to maintain our investment grade debt rating and repurchase
shares, pay dividends and fund capital investments, could be affected by unanticipated increases in
net total debt, our inability to generate cash flow at the levels anticipated, and our failure to generate
expected earnings.

• Our ability to achieve sales, earnings and cash flow goals may be affected by: labor negotiations or
disputes; changes in the types and numbers of businesses that compete with us; pricing and promotional
activities of existing and new competitors, including non-traditional competitors, and the aggressiveness
of that competition; our response to these actions; the state of the economy, including interest rates, the
inflationary and deflationary trends in certain commodities, and the unemployment rate; the effect that
fuel costs have on consumer spending; changes in government-funded benefit programs; manufacturing
commodity costs; diesel fuel costs related to our logistics operations; trends in consumer spending;
the extent to which our customers exercise caution in their purchasing in response to economic
conditions; the inconsistent pace of the economic recovery; changes in inflation or deflation in product
and operating costs; stock repurchases; the effect of brand prescription drugs going off patent; our
ability to retain additional pharmacy sales from third party payors; natural disasters or adverse weather
conditions; the success of our future growth plans; and the successful integration of Harris Teeter. The

A-28

extent to which the adjustments we are making to our strategy create value for our shareholders will
depend primarily on the reaction of our customers and our competitors to these adjustments, as well
as operating conditions, including inflation or deflation, increased competitive activity, and cautious
spending behavior of our customers. Our ability to achieve sales and earnings goals may also be affected
by our ability to manage the factors identified above.

• During the first three quarters of our fiscal year, our LIFO charge and the recognition of LIFO expense
will be affected primarily by estimated year-end changes in product costs. Our LIFO charge for the fiscal
year will be affected primarily by changes in product costs at year-end.

• If actual results differ significantly from anticipated future results for certain reporting units including
variable interest entities, an impairment loss for any excess of the carrying value of the reporting units’
goodwill over the implied fair value would have to be recognized.

• Our effective tax rate may differ from the expected rate due to changes in laws, the status of pending

items with various taxing authorities, and the deductibility of certain expenses.

• The actual amount of automatic and matching cash contributions to our 401(k) Retirement Savings
Account Plan will depend on the number of participants, savings rate, compensation as defined by the
plan, and length of service of participants.

• Changes in our product mix may negatively affect certain financial indicators. For example, we continue
to add supermarket fuel centers to our store base. Since gasoline generates low profit margins, we
expect to see our FIFO gross profit margins decline as gasoline sales increase.

We cannot fully foresee the effects of changes in economic conditions on Kroger’s business. We have

assumed economic and competitive situations will not change significantly in 2014.

Other factors and assumptions not identified above could also cause actual results to differ materially
from those set forth in the forward-looking information. Accordingly, actual events and results may vary
significantly from those included in, contemplated or implied by forward-looking statements made by us
or our representatives. We undertake no obligation to update the forward-looking information contained in
this filing.

A-29

r e P o r t o F i N d e P e N d e N t r e g i S t e r e d P u B l i c a c c o u N t i N g F i r M

To the Shareowners and Board of Directors of
The Kroger Co.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of
operations, comprehensive income, cash flows and changes in shareowners’ equity present fairly, in all material
respects, the financial position of The Kroger Co. and its subsidiaries at February 1, 2014 and February 2,
2013, and the results of their operations and their cash flows for each of the three years in the period ended
February 1, 2014 in conformity with accounting principles generally accepted in the United States of America.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of February 1, 2014, based on criteria established in Internal Control - Integrated Framework
(1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Company’s management is responsible for these financial statements, for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our
responsibility is to express opinions on these financial statements and on the Company’s internal control
over financial reporting based on our integrated audits. We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal control over financial reporting was maintained
in all material respects. Our audits of the financial statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall financial statement presentation.
Our audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

A-30

As described in Management’s Report on Internal Control Over Financial Reporting, management has
excluded Harris Teeter Supermarkets, Inc. from its assessment of internal control over financial reporting as of
February 1, 2014 because it was acquired by the Company in a purchase business combination on January 28,
2014. We have also excluded Harris Teeter Supermarkets, Inc. from our audit of internal control over financial
reporting. Harris Teeter Supermarkets, Inc. is a wholly-owned subsidiary whose total assets and total revenues
represent 12% and less than 1%, respectively, of the related consolidated financial statement amounts as of and
for the year ended February 1, 2014.

Cincinnati, Ohio
April 1, 2014

A-31

T H E K R O G E R C O .
c o N S o l i d a t e d B a l a N c e S h e e t S

February 1,
2014

February 2,
2013

(In millions, except par values)
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
Intangibles, net
Goodwill
Other assets

401
958
1,116
6,801
(1,150)
704
8,830
16,893
702
2,135
721

238
955
1,051
6,244
(1,098)
569
7,959
14,848
130
1,234
463

Total Assets

$29,281

$24,634

LIABILITIES
Current liabilities

Current portion of long-term debt including obligations under capital leases

and financing obligations
Trade accounts payable
Accrued salaries and wages
Deferred income taxes
Other current liabilities
Total current liabilities

$ 1,657
4,881
1,150
248
2,769
10,705

Long-term debt including obligations under capital leases and financing obligations

Face-value of long-term debt including obligations under capital leases and

financing obligations
Adjustment to reflect fair-value interest rate hedges
Long-term debt including obligations under capital leases and financing obligations
Deferred income taxes
Pension and postretirement benefit obligations
Other long-term liabilities
Total Liabilities

9,654
(1)
9,653
1,381
901
1,246
23,886

$ 2,734
4,484
1,017
288
2,538
11,061

6,141
4
6,145
796
1,291
1,127
20,420

Commitments and contingencies (see Note 13)

SHAREOWNERS’ EQUITY
Preferred shares, $100 par per share, 5 shares authorized and unissued
Common shares, $1 par per share, 1,000 shares authorized;

959 shares issued in 2013 and 2012
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated earnings
Common stock in treasury, at cost, 451 shares in 2013 and 445 shares in 2012
Total Shareowners’ Equity - The Kroger Co
Noncontrolling interests
Total Equity
Total Liabilities and Equity

—

959
3,549
(464)
10,981
(9,641)
5,384
11
5,395
$29,281

959
3,451
(753 )
9,787
(9,237 )
4,207
7
4,214
$24,634

The accompanying notes are an integral part of the consolidated financial statements

A-32

T H E K R O G E R C O .
c o N S o l i d a t e d S t a t e M e N t S o F o P e r a t i o N S

Years Ended February 1, 2014, February 2, 2013 and January 28, 2012

(In millions, except per share amounts)

2013
(52 weeks)

2012
(53 weeks)

2011
(52 weeks)

Sales $98,375
Merchandise costs, including advertising, warehousing, and

$96,619

$90,269

transportation, excluding items shown separately below
Operating, general and administrative
Rent
Depreciation

Operating Profit
Interest expense

Earnings before income tax expense
Income tax expense

Net earnings including noncontrolling interests
Net earnings (loss) attributable to noncontrolling interests

78,138
15,196
613
1,703

2,725
443

2,282
751

1,531
12

76,726
14,849
628
1,652

2,764
462

2,302
794

1,508
11

Net earnings attributable to The Kroger Co $ 1,519

$ 1,497

Net earnings attributable to The Kroger Co per basic common share $

2.93

Average number of common shares used in basic calculation
Net earnings attributable to The Kroger Co per diluted common share $
Average number of common shares used in diluted calculation
Dividends declared per common share $

514
2.90
520
0.63

278

533
277
537
053

71,389
15,345
619
1,638

1,278
435

843
247

596
(6)

602

101

590
101
593
044

The accompanying notes are an integral part of the consolidated financial statements

A-33

T H E K R O G E R C O .
c o N S o l i d a t e d S t a t e M e N t S o F c o M P r e h e N S i v e i N c o M e

Years Ended February 1, 2014, February 2, 2013 and January 28, 2012

(In millions)
Net earnings including noncontrolling interests
Other comprehensive income (loss)

2013
(52 weeks)
$1,531

2012
(53 weeks)
$1,508

2011
(52 weeks)
$ 596

Unrealized gain on available for sale securities, net of income tax (1)
Change in pension and other postretirement defined benefit plans,

net of income tax (2)

295

Unrealized gains and losses on cash flow hedging activities,

net of income tax (3)

(12)

Amortization of unrealized gains and losses on cash flow hedging

—

activities, net of income tax (4)
Total other comprehensive income (loss)
Comprehensive income
Comprehensive income (loss) attributable to noncontrolling interests
Comprehensive income attributable to The Kroger Co

1
289
1,820
12
$1,808

3
91
1,599
11
$1,588

(271)

(26)

1
(294)
302
(6)
$ 308

(1) Amount is net of tax of $3 in 2013 and $1 in 2011

(2) Amount is net of tax of $173 in 2013, $45 in 2012 and $(154) in 2011

(3) Amount is net of tax of $(8) in 2013, $7 in 2012 and $(15) in 2011

(4) Amount is net of tax of $1 in 2013, $2 in 2012 and $1 in 2011

The accompanying notes are an integral part of the consolidated financial statements

A-34

T H E K R O G E R C O .
c o N S o l i d a t e d S t a t e M e N t S o F c a S h F l o w S

Years Ended February 1, 2014, February 2, 2013 and January 28, 2012

(In millions)
Cash Flows From Operating Activities:

2013
(52 weeks)

2012
(53 weeks)

2011
(52 weeks)

Net earnings including noncontrolling interests

$ 1,531

$ 1,508

596

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation
Asset impairment charge
LIFO charge
Stock-based employee compensation
Expense for Company-sponsored pension plans
Deferred income taxes
Other
Changes in operating assets and liabilities net of effects from acquisitions

of businesses:
Store deposits in-transit
Inventories
Receivables
Prepaid expenses
Trade accounts payable
Accrued expenses
Income taxes receivable and payable
Contribution to Company-sponsored pension plans
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 assets
Payments for acquisitions
Other
Net cash used by investing activities

Cash Flows From Financing Activities:

Proceeds from issuance of long-term debt
Payments on long-term debt
Net (payments) borrowings of commercial paper
Proceeds from issuance of capital stock
Treasury stock purchases
Dividends paid
Net increase in book overdrafts
Other
Net cash provided (used) by financing activities
Net increase (decrease) in cash and temporary cash investments
Cash and temporary cash investments:

1,703
39
52
107
74
72
47

25
(131)
(8)
(49)
3
77
(47)
(100)
(15)
3,380

(2,330)
24
(2,344)
(121)
(4,771)

3,548
(1,060)
(395)
196
(609)
(319)
193
—
1,554
163

1,652
18
55
82
89
176
23

(169)
(78)
(126)
(257)
67
67
164
(71)
(367)
2,833

(2,062)
49
(122)
(48)
(2,183)

863
(1,445)
1,275
110
(1,261)
(267)
121
4
(600)
50

1,638
37
216
81
70
31
3

(120)
(361)
(63)
52
83
215
(106)
(52)
338
2,658

(1,898)
51
(51)
(10)
(1,908)

453
(547)
370
118
(1,547)
(257)
19
4
(1,387)
(637)

Beginning of year
End of year

238
401

188
238

825
188

Reconciliation of capital investments:

Payments for property and equipment, including payments for lease buyouts
Payments for lease buyouts
Changes in construction-in-progress payables
Total capital investments, excluding lease buyouts

$(2,330)
108
(83)
$(2,305)

$(2,062)
73
(1)
$(1,990)

$(1,898)
60
(60)
$(1,898)

Disclosure of cash flow information:

Cash paid during the year for interest
Cash paid during the year for income taxes

$
$

401
679

$
$

438
468

$
$

457
296

The accompanying notes are an integral part of the consolidated financial statements

A-35

T H E K R O G E R C O .
c o N S o l i d a t e d S t a t e M e N t o F c h a N g e S i N S h a r e o w N e r S ’ e q u i t y

Years Ended February 1, 2014, February 2, 2013 and January 28, 2012

(In millions, except per share amounts)

Common Stock

Shares Amount

Additional
Paid-In
Capital

Treasury Stock

Shares Amount

Accumulated
Other
Comprehensive
Gain (Loss)

Accumulated
Earnings

Noncontrolling
Interest

Balances at January 29, 2011

959

$ 959

$3,394

339

$(6,732)

$(550)

$ 8,225

$ 2

Issuance of common stock:

Stock options exercised

Restricted stock issued

Treasury stock activity:

Treasury stock purchases, at cost

Stock options exchanged

Share-based employee compensation

Other comprehensive loss net of income

tax of $(167)

Other

Cash dividends declared

($044 per common share)

Net earnings (loss) including non-controlling

interests

Balances at January 28, 2012

Issuance of common stock:

Stock options exercised

Restricted stock issued

Treasury stock activity:

Treasury stock purchases, at cost

Stock options exchanged

Share-based employee compensation

Other comprehensive gain net of income tax

of $54

Other

Cash dividends declared

($053 per common share)

Net earnings including non-controlling interests

—

959

—

(55)

(6)

(2)

118

—

398

(1,420)

(127)

—

(5)

—

(294)

—

$ 959

$3,427

$(8,132)

$(844)

—

(59)

(7)

(2)

110

—

(1,165)

(96)

—

(256)

602

$ 8,571

—

(281)

1,497

—

(11)

—

(6)

$(15)

—

Total

$ 5,298

118

(21)

(1,420)

(127)

(294)

(9)

(256)

596

$ 3,966

110

(19)

(1,165)

(96)

(281)

1,508

Balances at February 2, 2013

959

$ 959

$3,451

445

$(9,237)

$(753)

$ 9,787

$ 7

$ 4,214

Issuance of common stock:

Stock options exercised

Restricted stock issued

Treasury stock activity:

Treasury stock purchases, at cost

Stock options exchanged

Share-based employee compensation

Other comprehensive gain net of income tax

of $169

Other

Cash dividends declared

($063 per common share)

Net earnings including non-controlling interests

—

(60)

—

107

—

(9)

(2)

—

196

(338)

(271)

—

(17)

—

289

—

(325)

1,519

Balances at February 1, 2014

959

$ 959

$3,549

451

$(9,641)

$(464)

$10,981

—

(8)

196

(34)

(338)

(271)

107

289

—

$ 11

(325)

1,531

$ 5,395

The accompanying notes are an integral part of the consolidated financial statements

A-36

All dollar amounts are in millions except share and per share amounts

Certain prior-year amounts have been reclassified to conform to current year presentation

1 . a c c o u N t i N g P o l i c i e S

The following is a summary of the significant accounting policies followed in preparing these

financial statements

Description of Business, Basis of Presentation and Principles of Consolidation

The Kroger Co (the “Company”) was founded in 1883 and incorporated in 1902 As of February 1,
2014, the Company was one of the largest retailers in the United States based on annual sales The Company
also manufactures and processes food for sale by its supermarkets The accompanying financial statements
include the consolidated accounts of the Company, its wholly-owned subsidiaries and the Variable Interest
Entities (“VIEs”) in which the Company is the primary beneficiary Significant intercompany transactions and
balances have been eliminated

Certain revenue transactions previously reported in sales and merchandise costs in the Consolidated
Statements of Operations are now reported net within sales Certain prior year amounts have been revised
or reclassified to conform to the current year presentation These amounts were not material to the
prior periods

Fiscal Year

The Company’s fiscal year ends on the Saturday nearest January 31 The last three fiscal years consist of the
52-week periods ended February 1, 2014 and January 28, 2012 and the 53-week period ended February 2, 2013

Pervasiveness of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles
(“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities Disclosure of contingent assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of consolidated revenues and expenses during the reporting period also
is required Actual results could differ from those estimates

Inventories

Inventories are stated at the lower of cost (principally on a last-in, first-out “LIFO” basis) or market In
total, approximately 95% and 96% of inventories for 2013 and 2012, respectively, were valued using the LIFO
method Cost for the balance of the inventories, including substantially all fuel inventories, was determined
using the first-in, first-out (“FIFO”) method Replacement cost was higher than the carrying amount by $1,150
at February 1, 2014 and $1,098 at February 2, 2013 The Company follows the Link-Chain, Dollar-Value LIFO
method for purposes of calculating its LIFO charge or credit

The item-cost method of accounting to determine inventory cost before the LIFO adjustment is followed
for substantially all store inventories at the Company’s supermarket divisions This method involves counting
each item in inventory, assigning costs to each of these items based on the actual purchase costs (net of vendor
allowances and cash discounts) of each item and recording the cost of items sold The item-cost method of
accounting allows for more accurate reporting of periodic inventory balances and enables management to
more precisely manage inventory In addition, substantially all of the Company’s inventory consists of finished
goods and is recorded at actual purchase costs (net of vendor allowances and cash discounts)

The Company evaluates inventory shortages throughout the year based on actual physical counts in its
facilities Allowances for inventory shortages are recorded based on the results of these counts to provide for
estimated shortages as of the financial statement date

A-37

Notes to CoNsolidated FiNaNCial statemeNtsProperty, Plant and Equipment

Property, plant and equipment are recorded at cost or, in the case of assets acquired in a business
combination, at fair value Depreciation expense, which includes the amortization of assets recorded under
capital leases, is computed principally using the straight-line method over the estimated useful lives of individual
assets Buildings and land improvements are depreciated based on lives varying from 10 to 40 years All new
purchases of store equipment are assigned lives varying from three to nine years Leasehold improvements
are amortized over the shorter of the lease term to which they relate, which varies from four to 25 years,
or the useful life of the asset Manufacturing plant and distribution center equipment is depreciated over
lives varying from three to 15 years Information technology assets are generally depreciated over five years
Depreciation expense was $1,703 in 2013, $1,652 in 2012 and $1,638 in 2011

Interest costs on significant projects constructed for the Company’s own use are capitalized as part
of the costs of the newly constructed facilities Upon retirement or disposal of assets, the cost and related
accumulated depreciation are removed from the balance sheet and any gain or loss is reflected in net earnings

Deferred Rent

The Company recognizes rent holidays, including the time period during which the Company has access
to the property for construction of buildings or improvements and escalating rent provisions on a straight-line
basis over the term of the lease The deferred amount is included in Other Current Liabilities and Other Long-
Term Liabilities on the Company’s Consolidated Balance Sheets

Goodwill

The Company reviews goodwill for impairment during the fourth quarter of each year, and also upon
the occurrence of trigger events The Company performs reviews of each of its operating divisions and
variable interest entities (collectively, our reporting units) that have goodwill balances Generally, fair value
is determined using a multiple of earnings, or discounted projected future cash flows, and is compared to the
carrying value of a division for purposes of identifying potential impairment Projected future cash flows are
based on management’s knowledge of the current operating environment and expectations for the future
If potential for impairment is identified, the fair value of a division is measured against the fair value of
its underlying assets and liabilities, excluding goodwill, to estimate an implied fair value of the division’s
goodwill Goodwill impairment is recognized for any excess of the carrying value of the division’s goodwill
over the implied fair value Results of the goodwill impairment reviews performed during 2013, 2012 and 2011
are summarized in Note 3 to the Consolidated Financial Statements

Impairment of Long-Lived Assets

The Company monitors the carrying value of long-lived assets for potential impairment each quarter based
on whether certain trigger events have occurred These events include current period losses combined with
a history of losses or a projection of continuing losses or a significant decrease in the market value of an asset
When a trigger event occurs, an impairment calculation is performed, comparing projected undiscounted
future cash flows, utilizing current cash flow information and expected growth rates related to specific stores,
to the carrying value for those stores If the Company identifies impairment for long-lived assets to be held and
used, the Company compares the assets’ current carrying value to the assets’ fair value Fair value is based on
current market values or discounted future cash flows The Company records impairment when the carrying
value exceeds fair market value With respect to owned property and equipment held for sale, the value of the
property and equipment is adjusted to reflect recoverable values based on previous efforts to dispose of similar
assets and current economic conditions Impairment is recognized for the excess of the carrying value over
the estimated fair market value, reduced by estimated direct costs of disposal The Company recorded asset
impairments in the normal course of business totaling $39, $18 and $37 in 2013, 2012 and 2011, respectively
Costs to reduce the carrying value of long-lived assets for each of the years presented have been included in
the Consolidated Statements of Operations as “Operating, general and administrative” expense

A-38

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedStore Closing Costs

The Company provides for closed store liabilities relating to the present value of the estimated remaining
non-cancellable lease payments after the closing date, net of estimated subtenant income The Company
estimates the net lease liabilities using a discount rate to calculate the present value of the remaining net rent
payments on closed stores The closed store lease liabilities usually are paid over the lease terms associated
with the closed stores, which generally have remaining terms ranging from one to 20 years Adjustments
to closed store liabilities primarily relate to changes in subtenant income and actual exit costs differing
from original estimates Adjustments are made for changes in estimates in the period in which the change
becomes known Store closing liabilities are reviewed quarterly to ensure that any accrued amount that is not
a sufficient estimate of future costs, or that no longer is needed for its originally intended purpose, is adjusted
to income in the proper period

Owned stores held for disposal are reduced to their estimated net realizable value Costs to reduce the
carrying values of property, equipment and leasehold improvements are accounted for in accordance with the
Company’s policy on impairment of long-lived assets Inventory write-downs, if any, in connection with store
closings, are classified in “Merchandise costs” Costs to transfer inventory and equipment from closed stores
are expensed as incurred

The following table summarizes accrual activity for future lease obligations of stores that were closed in the
normal course of business and assumed in the merger with Harris Teeter Supermarkets, Inc (“Harris Teeter”):

Balance at January 28, 2012
Additions
Payments
Other

Future Lease
Obligations
$ 55
6
(10)
(7)

Balance at February 2, 2013
Additions
Payments
Other
Assumed from Harris Teeter

44
7
(9)
(2)
18

Balance at February 1, 2014

$ 58

Interest Rate Risk Management

The Company uses derivative instruments primarily to manage its exposure to changes in interest rates
The Company’s current program relative to interest rate protection and the methods by which the Company
accounts for its derivative instruments are described in Note 7

Commodity Price Protection

The Company enters into purchase commitments for various resources, including raw materials utilized
in its manufacturing facilities and energy to be used in its stores, manufacturing facilities and administrative
offices The Company enters into commitments expecting to take delivery of and to utilize those resources in
the conduct of the normal course of business The Company’s current program relative to commodity price
protection and the methods by which the Company accounts for its purchase commitments are described
in Note 7

A-39

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedBenefit Plans and Multi-Employer Pension Plans

The Company recognizes the funded status of its retirement plans on the Consolidated Balance Sheet
Actuarial gains or losses, prior service costs or credits and transition obligations that have not yet been
recognized as part of net periodic benefit cost are required to be recorded as a component of Accumulated
Other Comprehensive Income (“AOCI”) All plans are measured as of the Company’s fiscal year end

The determination of the obligation and expense for Company-sponsored pension plans and other
post-retirement benefits is dependent on the selection of assumptions used by actuaries and the Company
in calculating those amounts Those assumptions are described in Note 15 and include, among others, the
discount rate, the expected long-term rate of return on plan assets and the rates of increase in compensation
and health care costs Actual results that differ from the assumptions are accumulated and amortized over
future periods and, therefore, generally affect the recognized expense and recorded obligation in future
periods While the Company believes that the assumptions are appropriate, significant differences in actual
experience or significant changes in assumptions may materially affect the pension and other post-retirement
obligations and future expense

The Company also participates in various multi-employer plans for substantially all union employees
Pension expense for these plans is recognized as contributions are funded Refer to Note 16 for additional
information regarding the Company’s participation in these various multi-employer plans and the United Food
and Commercial Workers International Union (“UFCW”) consolidated fund

The Company administers and makes contributions to the employee 401(k) retirement savings accounts
Contributions to the employee 401(k) retirement savings accounts are expensed when contributed Refer to
Note 15 for additional information regarding the Company’s benefit plans

Stock Based Compensation

The Company accounts for stock options under fair value recognition provisions Under this method, the
Company recognizes compensation expense for all share-based payments granted The Company recognizes
share-based compensation expense, net of an estimated forfeiture rate, over the requisite service period of
the award In addition, the Company records expense for restricted stock awards in an amount equal to the
fair market value of the underlying stock on the grant date of the award, over the period the awards lapse

Deferred Income Taxes

Deferred income taxes are recorded to reflect the tax consequences of differences between the tax basis
of assets and liabilities and their financial reporting basis Refer to Note 5 for the types of differences that give
rise to significant portions of deferred income tax assets and liabilities Deferred income taxes are classified
as a net current or noncurrent asset or liability based on the classification of the related asset or liability for
financial reporting purposes A deferred tax asset or liability that is not related to an asset or liability for
financial reporting is classified according to the expected reversal date

Uncertain Tax Positions

The Company reviews the tax positions taken or expected to be taken on tax returns to determine
whether and to what extent a benefit can be recognized in its consolidated financial statements Refer to Note 5
for the amount of unrecognized tax benefits and other related disclosures related to uncertain tax positions

Various taxing authorities periodically audit the Company’s income tax returns These audits include
questions regarding the Company’s tax filing positions, including the timing and amount of deductions and
the allocation of income to various tax jurisdictions In evaluating the exposures connected with these various
tax filing positions, including state and local taxes, the Company records allowances for probable exposures A
number of years may elapse before a particular matter, for which an allowance has been established, is audited
and fully resolved As of February 1, 2014, the Internal Revenue Service had concluded its field examination of

A-40

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedthe Company’s 2008 and 2009 federal tax returns The Company has filed an administrative appeal with the
Internal Revenue Service protesting certain adjustments proposed by the Internal Revenue Service as a result
of their field work

The assessment of the Company’s tax position relies on the judgment of management to estimate the

exposures associated with the Company’s various filing positions

Self-Insurance Costs

The Company is primarily self-insured for costs related to workers’ compensation and general liability
claims Liabilities are actuarially determined and are recognized based on claims filed and an estimate of
claims incurred but not reported The liabilities for workers’ compensation claims are accounted for on a
present value basis The Company has purchased stop-loss coverage to limit its exposure to any significant
exposure on a per claim basis The Company is insured for covered costs in excess of these per claim limits

The following table summarizes the changes in the Company’s self-insurance liability through

February 1, 2014

2013
Beginning balance $ 537
Expense
220
Claim payments
(215)
Assumed from Harris Teeter
27
Ending balance
569
Less: Current portion
(224)
Long-term portion $ 345

2012
$ 529
215
(207)
—
537
(205)
$ 332

2011
$ 514
215
(200)
—
529
(197)
$ 332

The current portion of the self-insured liability is included in “Other current liabilities,” and the long-

term portion is included in “Other long-term liabilities” in the Consolidated Balance Sheets

The Company maintains surety bonds related to self-insured workers’ compensation claims These bonds
are required by most states in which the Company is self-insured for workers’ compensation and are placed
with third-party insurance providers to insure payment of our obligations in the event the Company is unable
to meet its claim payment obligations up to its self-insured retention levels These bonds do not represent
liabilities of the Company, as the Company has recorded reserves for the claim costs

The Company is similarly self-insured for property-related losses The Company maintains stop loss
coverage to limit its property loss exposures including coverage for earthquake, wind, flood and other
catastrophic events

Revenue Recognition

Revenues from the sale of products are recognized at the point of sale Discounts provided to customers
by the Company at the time of sale, including those provided in connection with loyalty cards, are recognized
as a reduction in sales as the products are sold Discounts provided by vendors, usually in the form of paper
coupons, are not recognized as a reduction in sales provided the coupons are redeemable at any retailer that
accepts coupons The Company records a receivable from the vendor for the difference in sales price and
cash received Pharmacy sales are recorded when provided to the customer Sales taxes are recorded as other
accrued liabilities and not as a component of sales The Company does not recognize a sale when it sells its
own gift cards and gift certificates Rather, it records a deferred liability equal to the amount received A sale
is then recognized when the gift card or gift certificate is redeemed to purchase the Company’s products
Gift card and certificate breakage is recognized when redemption is deemed remote and there is no legal
obligation to remit the value of the unredeemed gift card The amount of breakage has not been material for
2013, 2012 and 2011

A-41

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedMerchandise Costs

The “Merchandise costs” line item of the Consolidated Statements of Operations includes product costs,
net of discounts and allowances; advertising costs (see separate discussion below); inbound freight charges;
warehousing costs, including receiving and inspection costs; transportation costs; and manufacturing
production and operational costs Warehousing, transportation and manufacturing management salaries
are also included in the “Merchandise costs” line item; however, purchasing management salaries and
administration costs are included in the “Operating, general, and administrative” line item along with most of
the Company’s other managerial and administrative costs Rent expense and depreciation expense are shown
separately in the Consolidated Statements of Operations

Warehousing and transportation costs include distribution center direct wages, repairs and maintenance,
utilities, inbound freight and, where applicable, third party warehouse management fees, as well as
transportation direct wages and repairs and maintenance These costs are recognized in the periods the
related expenses are incurred

The Company believes the classification of costs included in merchandise costs could vary widely
throughout the industry The Company’s approach is to include in the “Merchandise costs” line item the
direct, net costs of acquiring products and making them available to customers in its stores The Company
believes this approach most accurately presents the actual costs of products sold

The Company recognizes all vendor allowances as a reduction in merchandise costs when the related
product is sold When possible, vendor allowances are applied to the related product cost by item and,
therefore, reduce the carrying value of inventory by item When the items are sold, the vendor allowance is
recognized When it is not possible, due to systems constraints, to allocate vendor allowances to the product
by item, vendor allowances are recognized as a reduction in merchandise costs based on inventory turns and,
therefore, recognized as the product is sold

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
pre-tax advertising costs totaled $587 in 2013, $553 in 2012 and $532 in 2011 The Company does not record
vendor allowances for co-operative advertising as a reduction of advertising expense

Cash, Temporary Cash Investments and Book Overdrafts

Cash and temporary cash investments represent store cash and short-term investments with original
maturities of less than three months Book overdrafts are included in trade accounts payable and accrued
salaries and wages

Deposits In-Transit

Deposits in-transit generally represent funds deposited to the Company’s bank accounts at the end of the
year related to sales, a majority of which were paid for with debit cards, credit cards and checks, to which the
Company does not have immediate access but that settle within a few days of the sales transaction

Consolidated Statements of Cash Flows

For purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid debt

instruments purchased with an original maturity of three months or less to be temporary cash investments

A-42

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedSegments

The Company operates retail food and drug stores, multi-department stores, jewelry stores, and
convenience stores throughout the United States The Company’s retail operations, which represent over
99% of the Company’s consolidated sales and EBITDA, are its only reportable segment The Company’s retail
operating divisions have been aggregated into one reportable segment due to the operating divisions having
similar economic characteristics with similar long-term financial performance In addition, the Company’s
operating divisions offer to its customers similar products, have similar distribution methods, operate in
similar regulatory environments, purchase the majority of the Company’s merchandise for retail sale from
similar (and in many cases identical) vendors on a coordinated basis from a centralized location, serve similar
types of customers, and are allocated capital from a centralized location The Company’s operating divisions
reflect the manner in which the business is managed and how the Company’s Chief Executive Officer and
Chief Operating Officer, who act as the Company’s chief operating decision makers, assess performance
internally All of the Company’s operations are domestic

The following table presents sales revenue by type of product for 2013, 2012 and 2011

Non Perishable (1) $49,229
Perishable (2)
20,625
Fuel
18,962
Pharmacy
8,073
Other (3)
1,486

2013
Amount % of total

2012

2011

50.0% $48,663
19,761
21.0%
18,896
19.3%
8,018
8.2%
1,281
1.5%

Amount % of total Amount % of total
515%
504% $46,494
206%
18,588
205%
187%
16,901
195%
81%
7,322
83%
11%
964
13%

Total Sales and other revenue $98,375 100.0% $96,619 1000% $90,269 1000%

(1) Consists primarily of grocery, general merchandise, health and beauty care and natural foods

(2) Consists primarily of produce, floral, meat, seafood, deli and bakery

(3) Consists primarily of jewelry store sales, outside manufacturing sales and sales from entities not

controlled by the Company

2 . M e r g e r

On January 28, 2014, the Company closed its merger with Harris Teeter by purchasing 100% of the
Harris Teeter outstanding common stock for $2,436 The merger allows us to expand into the fast-growing
southeastern and mid-Atlantic markets and into Washington, DC The merger was accounted for under the
purchase method of accounting and was financed through a combination of commercial paper and long-
term debt (see Note 6) In a business combination, the purchase price is allocated to assets acquired and
liabilities assumed based on their fair values, with any excess of purchase price over fair value recognized
as goodwill In addition to recognizing the assets and liabilities on the acquired company’s balance sheet,
the Company reviews supply contracts, leases, financial instruments, employment agreements and other
significant agreements to identify potential assets or liabilities that require recognition in connection with
the application of acquisition accounting under ASC 805 Intangible assets are recognized apart from goodwill
when the asset arises from contractual or other legal rights, or are separable from the acquired entity such that
they may be sold, transferred, licensed, rented or exchanged either on a standalone basis or in combination
with a related contract, asset or liability

A-43

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNued
Pending the finalization of the Company’s valuations and other items, the following table summarizes

the preliminary fair values of the assets acquired and liabilities assumed:

ASSETS
Cash and temporary cash investments
Store deposits in-transit
Receivables
FIFO inventory
Prepaid and other current assets
Total current assets

Property, plant and equipment
Intangibles
Other assets

Total Assets, excluding Goodwill

LIABILITIES
Current portion of long-term debt including obligations under

capital leases and financing obligations
Trade accounts payable
Accrued salaries and wages
Deferred income taxes
Other current liabilities
Total current liabilities

Fair-value of long-term debt including obligations under

capital leases and financing obligations
Deferred income taxes
Pension and postretirement benefit obligations
Other long-term liabilities

January 28,
2014

92
28
41
426
31
618

1,328
558
238

2,742

(7)
(202)
(47)
(20)
(159)
(435)

(252)
(285)
(98)
(137)

Total Liabilities

(1,207)

Total Identifiable Net Assets
Goodwill
Total Purchase Price

1,535
901
$ 2,436

Of the $558 allocated to intangible assets, $430 relates to the Harris Teeter trade name, to which we
assigned an indefinite life and, therefore, will not be amortized The Company also recorded $53 and $75
related to pharmacy prescription files and favorable leasehold interests, respectively The Company will
amortize the pharmacy prescription files and favorable leasehold interests over seven and 24 years, respectively
The goodwill recorded as part of the merger was attributable to the assembled workforce of Harris Teeter
and operational synergies expected from the merger, as well as any intangible assets that do 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 The above amounts represent the preliminary allocation of
the purchase price, and are subject to revision when the resulting valuations of property and intangible assets
are finalized, which will occur prior to January 28, 2015 Due to the timing of the merger closing late in the
year, the revenue and earnings of Harris Teeter in 2013 were not material

A-44

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedPro forma results of operations, assuming the transaction had taken place at the beginning of 2012,
are included in the following table The pro forma information includes historical results of operations of
Harris Teeter and adjustments for interest expense that would have been incurred due to financing the
acquisition, depreciation and amortization of the assets acquired and excludes the pre-acquisition transaction
related expenses incurred by Harris Teeter and the Company The pro forma information does not include
efficiencies, cost reductions, synergies and investments in lower prices for our customers expected to result
from the merger or immaterial acquisitions completed in 2012 The unaudited pro forma financial information
is not necessarily indicative of the results that actually would have occurred had the merger been completed
at the beginning of the 2012

Sales
Net earnings including noncontrolling interests
Net earnings attributable to noncontrolling interests

Fiscal year ended
February 1, 2014
$103,202
1,664
12

Fiscal year ended
February 2, 2013
$101,214
1,584
11

Net earnings attributable to The Kroger Co

1,652

1,573

3 . g o o d w i l l a N d i N t a N g i B l e a S S e t S

The following table summarizes the changes in the Company’s net goodwill balance through

February 1, 2014

Balance beginning of year

Goodwill
Accumulated impairment losses

2013

2012

$ 3,766
(2,532)
1,234

$ 3,670
(2,532)
1,138

Activity during the year

Acquisitions

901

Balance end of year

Goodwill
Accumulated impairment losses

4,667
(2,532)
$ 2,135

3,766
(2,532)
$ 1,234

In 2013, the Company acquired all the outstanding shares of Harris Teeter, a supermarket retailer in
southeastern and mid-Atlantic markets and Washington, DC, resulting in additional goodwill of $901 See
Note 2 for additional information regarding the merger

In 2012, the Company acquired an interest in one of its suppliers and all the outstanding shares of Axium
Pharmacy, a leading specialty pharmacy that provides specialized drug therapies and support services for
patients with complex medical conditions, resulting in combined additional goodwill of $96

Testing for impairment must be performed annually, or on an interim basis upon the occurrence of
a triggering event or a change in circumstances that would more likely than not reduce the fair value of a
reporting unit below its carrying amount The annual evaluation of goodwill performed during the fourth
quarter of 2013, 2012 and 2011 did not result in impairment

Based on current and future expected cash flows, the Company believes goodwill impairments are
not reasonably likely A 10% reduction in fair value of the Company’s reporting units would not indicate a
potential for impairment of the Company’s remaining goodwill balance

A-45

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedThe Company acquired definite and indefinite lived intangible assets totaling approximately $558 as a

result of the merger with Harris Teeter See Note 2 for additional information regarding the merger

The following table summarizes the Company’s intangible assets balance through February 1, 2014

Definite-lived favorable leasehold interests
Definite-lived pharmacy prescription files
Definite-lived other
Indefinite-lived trade name
Indefinite-lived liquor licenses

2013

2012

Gross carrying
amount
$144
95
78
430
54

Accumulated
amortization (1)
$(61)
(28)
(10)
—
—

Gross carrying
amount
$ 69
45
54
—
48

Accumulated
amortization (1)
$ (58)
(26)
(2)
—
—

Total

$801

$(99)

$ 216

$ (86)

(1) Favorable leasehold interests are amortized to rent expense, pharmacy prescription files are amortized to
merchandise costs and other intangibles are amortized to operating, general and administrative expense

Amortization expense associated with intangible assets totaled approximately $18, $13 and $12, during
fiscal years 2013, 2012 and 2011, respectively Future amortization expense associated with the net carrying
amount of definite-lived intangible assets for the years subsequent to 2013 is estimated to be approximately:

2014
2015
2016
2017
2018
Thereafter

$ 28
25
22
21
20
102

Total future estimated amortization associated

with definite-lived intangible assets

$ 218

4 . P r o P e r t y , P l a N t a N d e q u i P M e N t , N e t

Property, plant and equipment, net consists of:

Land
Buildings and land improvements
Equipment
Leasehold improvements
Construction-in-progress
Leased property under capital leases and financing obligations

2013
$ 2,639
8,848
11,037
7,644
1,520
691

2012
$ 2,450
8,249
10,267
6,545
1,239
593

Total property, plant and equipment
Accumulated depreciation and amortization

32,379
(15,486)

29,343
(14,495)

Property, plant and equipment, net

$ 16,893

$ 14,848

Accumulated depreciation for leased property under capital leases was $339 at February 1, 2014 and

$321 at February 2, 2013

Approximately $232 and $236, original cost, of Property, Plant and Equipment collateralized certain

mortgages at February 1, 2014 and February 2, 2013, respectively

A-46

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNued5 . t a x e S B a S e d o N i N c o M e

The provision for taxes based on income consists of:

Federal

Current
Deferred

Subtotal federal

2013

2012

2011

$638
81

719

$ 563
154

717

$ 146
78

224

State and local

Current
Deferred

Subtotal state and local

42
(10)

46
31

42
(19)

Total

$751

$ 794

$ 247

A reconciliation of the statutory federal rate and the effective rate follows:

Statutory rate
State income taxes, net of federal tax benefit
Credits
Favorable resolution of issues
Domestic manufacturing deduction
Other changes, net

2012
2013
350%
35.0%
22%
0.9%
(1.3)% (14)%
(05)%
(1.1)% (05)%
(0.6)% (03)%

—

2011
350%
18%
(36)%
(34)%
(13)%
08%

32.9%

345%

293%

The 2013 tax rate differed from the federal statutory rate primarily as a result of the utilization of tax
credits, the Domestic Manufacturing Deduction and other changes, partially offset by the effect of state
income taxes The 2013 rate for state income taxes is lower than 2012 and 2011 due to an increase in state
credits, including the benefit from filing amended returns to claim additional credits The 2013 benefit
from the Domestic Manufacturing Deduction increased from 2012 due to additional deductions taken in
2013, as well as the amendment of prior years’ tax returns to claim the additional benefit available in years
still under review by the Internal Revenue Service The 2011 effective tax rate was significantly lower than
2013 and 2012 due to the effect on pre-tax income of the UFCW consolidated pension plan charge of $953
($591 after-tax) in 2011 The effect of the UFCW consolidated pension plan charge reduced pre-tax income
thereby increasing the effect of credits and of the favorable resolution of tax issues on our 2011 effective
tax rate

A-47

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedThe tax effects of significant temporary differences that comprise tax balances were as follows:

Current deferred tax assets:

Net operating loss and credit carryforwards
Compensation related costs
Other

Subtotal
Valuation allowance

Total current deferred tax assets

Current deferred tax liabilities:

Insurance related costs
Inventory related costs
Other

Total current deferred tax liabilities

2013

2012

4
103
15

122
(9)

113

(96)
(265)
—

(361)

4
79
—

83
(4)

(116)
(234)
(17)

(367)

Current deferred taxes

$ (248)

$ (288)

Long-term deferred tax assets:

Compensation related costs
Lease accounting
Closed store reserves
Insurance related costs
Net operating loss and credit carryforwards
Other

Subtotal
Valuation allowance

Total long-term deferred tax assets

464
115
54
66
103
—

802
(38)

764

564
87
56
77
82
2

868
(28)

840

Long-term deferred tax liabilities:

Depreciation
Other

Total long-term deferred tax liabilities

(2,128)
(17)

(2,145)

(1,636)
—

(1,636)

Long-term deferred taxes

$(1,381)

$ (796)

The long-term deferred tax liability for depreciation increased over the prior year due to the inclusion
of Harris Teeter and an adjustment to the estimated tax depreciation used in the 2012 provision that resulted
in a correction in the balance sheet between other current liabilities and long-term deferred income taxes in
2013 The amount of the correction was not material to any periods presented

At February 1, 2014, the Company had net operating loss carryforwards for state income tax purposes of
$1,280 These net operating loss carryforwards expire from 2014 through 2032 The utilization of certain of
the Company’s 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 net operating losses

At February 1, 2014, the Company had state credit carryforwards of $34, most of which expire from
2014 through 2027 The utilization of certain of the Company’s credits 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 credits

A-48

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedThe Company regularly reviews all deferred tax assets on a tax filer and jurisdictional basis to estimate
whether these assets are more likely than not to be realized based on all available evidence This evidence
includes historical taxable income, projected future taxable income, the expected timing of the reversal of
existing temporary differences and the implementation of tax planning strategies Projected future taxable
income is based on expected results and assumptions as to the jurisdiction in which the income will be
earned The expected timing of the reversals of existing temporary differences is based on current tax law
and the Company’s tax methods of accounting Unless deferred tax assets are more likely than not to be
realized, a valuation allowance is established to reduce the carrying value of the deferred tax asset until such
time that realization becomes more likely than not Increases and decreases in these valuation allowances are
included in “Income tax expense” in the Consolidated Statements of Operations

A reconciliation of the beginning and ending amount of unrecognized tax benefits, including positions

impacting only the timing of tax benefits, is as follows:

Beginning balance
Additions based on tax positions related to the current year
Reductions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Ending balance

2013
$299
23
(10)
17
(4)
—
$325

2012
$ 310
45
(9)
1
(27)
(21)
$ 299

2011
$ 285
24
—
24
(11)
(12)
$ 310

The Company does not anticipate that changes in the amount of unrecognized tax benefits over the next

twelve months will have a significant impact on its results of operations or financial position

As of February 1, 2014, February 2, 2013 and January 28, 2012, the amount of unrecognized tax benefits

that, if recognized, would impact the effective tax rate was $98, $70 and $81 respectively

To the extent interest and penalties would be assessed by taxing authorities on any underpayment
of income tax, such amounts have been accrued and classified as a component of income tax expense
During the years ended February 1, 2014, February 2, 2013 and January 28, 2012, the Company recognized
approximately $10, $(8) and $(24), respectively, in interest and penalties (recoveries) The Company had
accrued approximately $41 and $33 for the payment of interest and penalties as of February 1, 2014 and
February 2, 2013, respectively

As of February 1, 2014, the Internal Revenue Service had concluded its field examination of the Company’s
2008 and 2009 federal tax returns and is currently auditing years 2010 and 2011 The 2010 and 2011 audits are
expected to be completed in 2014 The Company has filed an administrative appeal with the Internal Revenue
Service protesting certain adjustments proposed by the Internal Revenue Service as a result of their field work

On September 13, 2013, the US Department of the Treasury and Internal Revenue Service released
final tangible property regulations that provide guidance on the tax treatment regarding the deduction
and capitalization of expenditures related to tangible property These regulations are effective for tax years
beginning on or after January 1, 2014 The Company is currently assessing these rules and their effect on its
financial statements, and believes adoption of these regulations will not have an effect on net income and
will not have a material effect on the reclassification between long-term deferred tax liabilities and current
income tax liabilities

A-49

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNued6 . d e B t o B l i g a t i o N S

Long-term debt consists of:

080% to 800% Senior notes due through 2043
500% to 1275% Mortgages due in varying amounts through 2034
027% to 045% Commercial paper due through February 2014
Other

2013
$ 9,083
64
1,250
383

2012
$ 6,587
60
1,645
184

Total debt
Less current portion

10,780
(1,616)

8,476
(2,700)

Total long-term debt

$ 9,164

$ 5,776

In 2013, the Company issued $600 of senior notes due in fiscal year 2023 bearing an interest rate of
385%, $400 of senior notes due in fiscal year 2043 bearing an interest rate of 515%, $500 of senior notes due
in fiscal year 2016 bearing an interest rate of 3-month London Inter-Bank Offering Rate plus 53 basis points,
$300 of senior notes due in fiscal year 2016 bearing an interest rate of 120%, $500 of senior notes due in fiscal
year 2019 bearing an interest rate of 230%, $700 of senior notes due in fiscal year 2021 bearing an interest
rate of 330% and $500 in senior notes due in fiscal year 2024 bearing an interest rate of 400% In 2013, the
Company repaid $400 of senior notes bearing an interest rate of 500% and $600 of senior notes bearing an
interest rate of 750% upon their maturity

In 2012, the Company issued $500 of senior notes due in fiscal year 2022 bearing an interest rate of
340% and $350 of senior notes due in fiscal year 2042 bearing an interest rate of 500% In 2012, the Company
repaid upon their maturity $491 of senior notes bearing an interest rate of 675%, $346 of senior notes bearing
an interest rate of 620% and $500 of senior notes bearing an interest rate of 550%

On January 25, 2012, the Company amended and extended its $2,000 unsecured revolving credit facility
The Company entered into the amended credit facility to amend and extend the Company’s existing credit
facility which would have terminated on May 15, 2014 The amended credit facility provides for a $2,000
unsecured revolving credit facility (the “Credit Agreement”), with a termination date of January 25, 2017,
unless extended as permitted under the Credit Agreement The Company has the ability to increase the size
of the Credit Agreement by up to an additional $500, subject to certain conditions

Borrowings under the Credit Agreement bear interest at the Company’s option, at either (i) LIBOR plus
a market rate spread, based on the Company’s Leverage Ratio or (ii) the base rate, defined as the highest
of (a) the Bank of America prime rate, (b) the Federal Funds rate plus 05%, and (c) one-month LIBOR plus
10%, plus a market rate spread based on the Company’s Leverage Ratio The Company will also pay a
Commitment Fee based on the Leverage Ratio and Letter of Credit fees equal to a market rate spread based
on the Company’s Leverage Ratio The Credit Agreement contains covenants, which, among other things,
require the maintenance of a Leverage Ratio of not greater than 350:100 and a Fixed Charge Coverage Ratio
of not less than 170:100 In the first quarter of 2012, the covenants were amended to exclude up to $1,000 in
expense related to the Company’s commitment to fund the UFCW consolidated pension plan The Company
may repay the Credit Agreement in whole or in part at any time without premium or penalty The Credit
Agreement is not guaranteed by the Company’s subsidiaries

In addition to the Credit Agreement, the Company maintained two uncommitted money market lines
totaling $75 in the aggregate The money market lines allow the Company to borrow from banks at mutually
agreed upon rates, usually at rates below the rates offered under the credit agreement As of February 1,
2014, the Company had $1,250 of borrowings of commercial paper, with a weighted average interest rate of
027%, and no borrowings under its Credit Agreement and money market lines As of February 2, 2013, the
Company had $1,645 of borrowings of commercial paper, with a weighted average interest rate of 045%, and
no borrowings under its Credit Agreement and money market lines

A-50

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedAs of February 1, 2014, the Company had outstanding letters of credit in the amount of $209, of which
$12 reduces funds available under the Company’s Credit Agreement The letters of credit are maintained
primarily to support performance, payment, deposit or surety obligations of the Company

Most of the Company’s outstanding public debt is subject to early redemption at varying times and
premiums, at the option of the Company In addition, subject to certain conditions, some of the Company’s
publicly issued debt will be subject to redemption, in whole or in part, at the option of the holder upon the
occurrence of a redemption event, upon not less than five days’ notice prior to the date of redemption, at a
redemption price equal to the default amount, plus a specified premium “Redemption Event” is defined in
the indentures as the occurrence of (i) any person or group, together with any affiliate thereof, beneficially
owning 50% or more of the voting power of the Company, (ii) any one person or group, or affiliate thereof,
succeeding in having a majority of its nominees elected to the Company’s Board of Directors, in each case,
without the consent of a majority of the continuing directors of the Company or (iii) both a change of control
and a below investment grade rating

The aggregate annual maturities and scheduled payments of long-term debt, as of year-end 2013, and for

the years subsequent to 2013 are:

2014
2015
2016
2017
2018
Thereafter

$ 1,616
524
1,267
708
1,003
5,662

Total debt

$10,780

7 . d e r i v a t i v e F i N a N c i a l i N S t r u M e N t S

GAAP defines derivatives, requires that derivatives be carried at fair value on the balance sheet, and provides
for hedge accounting when certain conditions are met The Company’s derivative financial instruments are
recognized on the balance sheet at fair value Changes in the fair value of derivative instruments designated as
“cash flow” hedges, to the extent the hedges are highly effective, are recorded in other comprehensive income,
net of tax effects Ineffective portions of cash flow hedges, if any, are recognized in current period earnings
Other comprehensive income or loss is reclassified into current period earnings when the hedged transaction
affects earnings Changes in the fair value of derivative instruments designated as “fair value” hedges, along
with corresponding changes in the fair values of the hedged assets or liabilities, are recorded in current period
earnings Ineffective portions of fair value hedges, if any, are recognized in current period earnings

The Company assesses, both at the inception of the hedge and on an ongoing basis, whether derivatives
used as hedging instruments are highly effective in offsetting the changes in the fair value or cash flow of
the hedged items If it is determined that a derivative is not highly effective as a hedge or ceases to be highly
effective, the Company discontinues hedge accounting prospectively

Interest Rate Risk Management

The Company is exposed to market risk from fluctuations in interest rates The Company manages its
exposure to interest rate fluctuations through the use of a commercial paper program, interest rate swaps (fair
value hedges) and forward-starting interest rate swaps (cash flow hedges) The Company’s current program
relative to interest rate protection contemplates hedging the exposure to changes in the fair value of fixed-rate
debt attributable to changes in interest rates To do this, the Company uses the following guidelines: (i) use
average daily outstanding borrowings to determine annual debt amounts subject to interest rate exposure,
(ii) limit the average annual amount subject to interest rate reset and the amount of floating rate debt to a
combined total of $2,500 or less, (iii) include no leveraged products, and (iv) hedge without regard to profit
motive or sensitivity to current mark-to-market status

A-51

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedThe Company reviews compliance with these guidelines annually with the Financial Policy Committee

of the Board of Directors These guidelines may change as the Company’s needs dictate

Fair Value Interest Rate Swaps

The table below summarizes the outstanding interest rate swaps designated as fair value hedges as of

February 1, 2014 and February 2, 2013

2013

2012

Notional amount
Number of contracts
Duration in years
Average variable rate
Average fixed rate
Maturity

Pay
Floating
$ 100
2
494
583 %
680 %

—
—
—
—
December 2018

Pay
Floating

Pay
Fixed
$— $ 475
6
141
329%
538%

Pay
Fixed
$—
—
—
—
—

Between
April 2013 and
December 2018

During the first quarter of 2013, four of the Company’s fair value swaps, with a notional amount

aggregating $375, matured

The gain or loss on these derivative instruments as well as the offsetting gain or loss on the hedged items
attributable to the hedged risk is recognized in current earnings as “Interest expense” These gains and losses
for 2013 and 2012 were as follows:

February 1, 2014

February 2, 2013

Year-To-Date

Consolidated Statement of Operations
Classification
Interest Expense

Gain/(Loss) on
Swaps
$ (3)

Gain/(Loss) on
Borrowings
$4

Gain/(Loss) on
Swaps
$(24)

Gain/(Loss) on
Borrowings
$16

The following table summarizes the location and fair value of derivative instruments designated as fair

value hedges on the Company’s Consolidated Balance Sheets:

Derivatives Designated as Fair Value Hedging Instruments
Interest Rate Hedges

Asset Derivatives

Fair Value

February 1,
2014
$(2)

February 2,
2013
$1

Balance Sheet
Location
(Other Long-Term
Liabilities)/Other
Assets

Cash Flow Forward-Starting Interest Rate Swaps

As of February 1, 2014, the Company did not have any outstanding forward-starting interest rate

swap agreements

As of February 2, 2013, the Company had 17 forward-starting interest rate swap agreements with
maturity dates between April 2013 and January 2014 with an aggregate notional amount totaling $850 In
2012, the Company entered into seven of these forward-starting interest rate swap agreements with an
aggregate notional amount totaling $350 A forward-starting interest rate swap is an agreement that effectively
hedges the variability in future benchmark interest payments attributable to changes in interest rates on the
forecasted issuance of fixed-rate debt The Company entered into the forward-starting interest rate swaps

A-52

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedin order to lock in fixed interest rates on its forecasted issuances of debt in fiscal year 2013 Accordingly,
the forward-starting interest rate swaps were designated as cash-flow hedges as defined by GAAP As of
February 2, 2013, the fair value of the interest rate swaps was recorded in other assets and other long-term
liabilities for $14 and $9, respectively, and AOCI and accumulated other comprehensive loss for $9 net of tax
and $6 net of tax, respectively

During 2013, the Company terminated 29 forward-starting interest rate swap agreements with maturity
dates of April 2013 and January 2014 with an aggregate notional amount totaling $1,700 Twelve of these
forward-starting interest rate swap agreements, with an aggregate notional amount totaling $850, were
entered into and terminated in 2013 These forward-starting interest rate swap agreements were hedging the
variability in future benchmark interest payments attributable to changing interest rates on the forecasted
issuance of fixed-rate debt issued in 2013 As discussed in Note 6, the Company issued $3,500 of senior notes
in 2013 Since these forward-starting interest rate swap agreements were classified as cash flow hedges, the
unamortized loss of $15, $9 net of tax, has been deferred net of tax in AOCI and will be amortized to earnings
as the interest payments are made

The following table summarizes the effect of the Company’s derivative instruments designated as cash

flow hedges for 2013 and 2012:

Year-To-Date

Derivatives in Cash Flow Hedging
Relationships

Forward-Starting Interest Rate

Amount of Gain/(Loss)
in AOCI on Derivative
(Effective Portion)
2012
2013

Swaps, net of tax*

$(25)

$(14)

Amount of Gain/(Loss)
Reclassified from AOCI
into Income (Effective
Portion)

2013

$(1)

2012

$(3)

Location of Gain/(Loss)
Reclassified into Income
(Effective Portion)

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 2013

For the above fair value and 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

Collateral is generally not required of the counterparties or of the Company under these master netting
agreements As of February 1, 2014 and February 2, 2013, no cash collateral was received or pledged under
the master netting agreements

A-53

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedThe 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, 2014 and
February 2, 2013:

February 1, 2014

Liabilities
Fair Value Interest Rate Swaps

February 2, 2013

Assets
Cash Flow Forward-Starting

Interest Rate Swaps
Fair Value Interest Rate Swaps
Total

Liabilities
Cash Flow Forward-Starting

Gross
Amounts
Offset in
the Balance
Sheet

Net
Amount
Presented in
the Balance
Sheet

Gross
Amount
Recognized

Gross Amounts Not Offset
in the Balance Sheet

Financial
Instruments

Cash
Collateral

Net
Amount

$—

Gross
Amounts
Offset in
the Balance
Sheet

Net
Amount
Presented in
the Balance
Sheet

Gross
Amount
Recognized

Gross Amounts Not Offset
in the Balance Sheet

Financial
Instruments

Cash
Collateral

Net
Amount

$16
1
$17

$ (2)
—
$ (2)

$14
1
$15

$—
—
$—

$14
1
$15

Interest Rate Swaps

$11

$ (2)

$ 9

$—

$ 9

Commodity Price Protection

The Company enters into purchase commitments for various resources, including raw materials utilized
in its manufacturing facilities and energy to be used in its stores, warehouses, manufacturing facilities and
administrative offices The Company enters into commitments expecting to take delivery of and to utilize
those resources in the conduct of normal business Those commitments for which the Company expects to
utilize or take delivery in a reasonable amount of time in the normal course of business qualify as normal
purchases and normal sales

8 . F a i r v a l u e M e a S u r e M e N t S

GAAP establishes a fair value hierarchy that prioritizes the inputs used to measure fair value The three

levels of the fair value hierarchy defined in the standards are as follows:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities;

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are

either directly or indirectly observable;

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

A-54

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedFor items carried at (or adjusted to) fair value in the consolidated financial statements, the following

tables summarize the fair value of these instruments at February 1, 2014 and February 2, 2013:

February 1, 2014 Fair Value Measurements Using

Available-for-Sale Securities
Warrants
Long-Lived Assets
Interest Rate Hedges
Total

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
$36
—
—
—
$36

Significant Other
Observable Inputs
(Level 2)
$—
16
—
(2)
$14

Significant
Unobservable
Inputs
(Level 3)
$ —
—
29
—
$29

Total
$36
16
29
(2)
$79

February 2, 2013 Fair Value Measurements Using

Available-for-Sale Securities
Long-Lived Assets
Interest Rate Hedges
Total

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
$ 8
—
—
$ 8

Significant Other
Observable Inputs
(Level 2)
$ —
—
6
$ 6

Significant
Unobservable
Inputs
(Level 3)
$20
8
—
$28

Total
$28
8
6
$42

In 2013, one of the Company’s available-for-sale securities began trading in an active market Because of
this, the Company transferred the $20 fair value of securities from a Level 3 asset to a Level 1 asset in 2013 In
2013, unrealized gains on the Level 1 available-for-sale securities totaled $8

The Company values warrants using the Black-Scholes option-pricing model The Black-Scholes option-

pricing model is classified as a Level 2 input

The Company values interest rate hedges using observable forward yield curves These forward yield

curves are classified as Level 2 inputs

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 other intangible assets for impairment annually, during the
fourth quarter of each 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 value
hierarchy See Note 1 for further discussion of the Company’s policies and recorded amounts for impairments
of long-lived assets and valuation of store lease exit costs In 2013, long-lived assets with a carrying amount of
$68 were written down to their fair value of $29, resulting in an impairment charge of $39 In 2012, long-lived
assets with a carrying amount of $26 were written down to their fair value of $8, resulting in an impairment
charge of $18

Mergers are accounted for using the acquisition method of accounting, which requires that the purchase
price paid for an acquisition be allocated to the assets and liabilities acquired based on their estimated fair
values as of the effective date of the acquisition, with the excess of the purchase price over the net assets
being recorded as goodwill See Note 2 for further discussion related to the merger with Harris Teeter

A-55

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedF a i r v a l u e o F o t h e r F i N a N c i a l i N S t r u M e N t S

Current and Long-term Debt

The fair value of the Company’s long-term debt, including current maturities, was estimated based on the
quoted market prices for the same or similar issues adjusted for illiquidity based on available market evidence
If quoted market prices were not available, the fair value was based upon the net present value of the future
cash flow using the forward interest rate yield curve in effect at respective year-ends At February 1, 2014, the
fair value of total debt was $11,547 compared to a carrying value of $10,780 At February 2, 2013, the fair value
of total debt was $9,339 compared to a carrying value of $8,476

Cash and Temporary Cash Investments, Store Deposits In-Transit, Receivables, Prepaid and Other

Current Assets, Trade Accounts Payable, Accrued Salaries and Wages and Other Current Liabilities

The carrying amounts of these items approximated fair value

Other Assets

The fair values of these investments were estimated based on quoted market prices for those or similar
investments, or estimated cash flows, if appropriate At February 1, 2014 and February 2, 2013, the carrying
and fair value of long-term investments for which fair value is determinable were $51 and $44, respectively

9 . o t h e r c o M P r e h e N S i v e i N c o M e ( l o S S )

The following table represents the changes in AOCI by component for the year ended February 1, 2014:

Balance at February 2, 2013
OCI before reclassifications (2)
Amounts reclassified out of AOCI
Net current-period OCI
Balance at February 1, 2014

(1) All amounts are net of tax

Cash Flow
Hedging
Activities (1)
$ (14)
(12)
1
(11)
$ (25)

Available
for sale
Securities (1)
$ 7
5
—
5
$12

Pension and
Postretirement
Defined Benefit
Plans (1)
$(746)
197
98
295
$(451)

Total (1)
$(753)
190
99
289
$(464)

(2) Net of tax of $(8), $3 and $116 for cash flow hedging activities, available for sale securities and pension

and postretirement defined benefit plans, respectively

The following table represents the items reclassified out of AOCI and the related tax effects for the year

ended February 1, 2014:

Gains on cash flow hedging activities

February 1, 2014

Amortization of unrealized gains and losses on cash flow hedging activities (1)
Tax expense
Net of tax

Pension and postretirement defined benefit plan items

Amortization of amounts included in net periodic pension expense (2)
Tax expense
Net of tax
Total reclassifications, net of tax

2
(1)
1

155
(57)
98
$ 99

(1) Reclassified from AOCI into interest expense

A-56

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNued(2) Reclassified from AOCI into merchandise costs and operating, general and administrative expense
These components are included in the computation of net periodic pension expense (see Note 15 to the
Company’s Consolidated Financial Statements for additional details)

1 0 . l e a S e S a N d l e a S e - F i N a N c e d t r a N S a c t i o N S

While the Company’s current strategy emphasizes ownership of store real estate, the Company operates
primarily in leased facilities Lease terms generally range from 10 to 20 years with options to renew for
varying terms Terms of certain leases include escalation clauses, percentage rent based on sales or payment
of executory costs such as property taxes, utilities or insurance and maintenance Rent expense for leases
with escalation clauses or other lease concessions are accounted for on a straight-line basis beginning with
the earlier of the lease commencement date or the date the Company takes possession Portions of certain
properties are subleased to others for periods generally ranging from one to 20 years

Rent expense (under operating leases) consists of:

Minimum rentals
Contingent payments
Tenant income
Total rent expense

2013
$ 706
13
(106)
$ 613

2012
$ 727
13
(112)
$ 628

2011
$ 715
13
(109)
$ 619

Minimum annual rentals and payments under capital leases and lease-financed transactions for the five

years subsequent to 2013 and in the aggregate are:

2014
2015
2016
2017
2018
Thereafter

Less estimated executory costs included in capital leases

Net minimum lease payments under capital leases
Less amount representing interest

Operating
Leases
$ 832
770
708
634
563
3,101

Lease-
Financed
Transactions

6
7
7
8
8
83

$ 6,608

$119

Capital
Leases
$ 62
57
53
52
43
349

616

—

616
204

Present value of net minimum lease payments under capital leases

$412

Total future minimum rentals under noncancellable subleases at February 1, 2014, were $217

A-57

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNued1 1 . e a r N i N g S P e r c o M M o N S h a r e

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 ended
February 1, 2014
Shares
(Denomi-
nator)

Earnings
(Numer-
ator)

Per
Share
Amount

For the year ended
February 2, 2013
Shares
(Denomi-
nator)

Earnings
(Numer-
ator)

Per
Share
Amount

For the year ended
January 28, 2012
Shares
(Denomi-
nator)

Earnings
(Numer-
ator)

Per
Share
Amount

(in millions, except
per share amounts)
Net earnings attributable
to The Kroger Co
per basic
common share $1,507

Dilutive effect of

stock options

Net earnings attributable
to The Kroger Co
per diluted
common share $1,507

514

$2.93

$1,485

533

$278

$598

590

$101

520

$2.90

$1,485

537

$277

$598

593

$101

The Company had undistributed and distributed earnings to participating securities totaling $12, $12

and $4 in 2013, 2012 and 2011, respectively

For the years ended February 1, 2014, February 2, 2013 and January 28, 2012, there were options
outstanding for approximately 23 million, 122 million and 122 million common shares, respectively, which
were excluded from the computation of net earnings attributable to The Kroger Co per diluted common
share These shares were excluded because their inclusion would have had an anti-dilutive effect on EPS

1 2 . S t o c k o P t i o N P l a N S

The Company grants options for common shares (“stock options”) to employees under various plans at
an option price equal to the fair market value of the stock at the date of grant The Company accounts for stock
options under the fair value recognition provisions Under this method, the Company recognizes compensation
expense for all share-based payments granted The Company recognizes share-based compensation expense,
net of an estimated forfeiture rate, over the requisite service period of the award Equity awards may be made
at one of four meetings of its Board of Directors occurring shortly after the Company’s release of quarterly
earnings The 2013 primary grant was made in conjunction with the June meeting of the Company’s Board
of Directors

Stock options typically expire 10 years from the date of grant Stock options vest between one and five
years from the date of grant At February 1, 2014, approximately 11 million common shares were available for
future option grants under these plans

In addition to the stock options described above, the Company awards restricted stock to employees,
as well as to non-employee directors, under various plans The restrictions on these awards generally lapse
between one and five years from the date of the awards The Company records expense for restricted stock
awards in an amount equal to the fair market value of the underlying shares on the grant date of the award,
over the period the awards lapse As of February 1, 2014, approximately 5 million common shares were

A-58

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedavailable under the 2005, 2008 and 2011 Long-Term Incentive Plans (the “Plans”) for future restricted stock
awards or shares issued to the extent performance criteria are achieved The Company has the ability to
convert shares available for stock options under the Plans to shares available for restricted stock awards
Under some of the Plans, four shares available for option awards can be converted into one share available for
restricted stock awards

All awards become immediately exercisable upon certain changes of control of the Company

Stock Options

Changes in options outstanding under the stock option plans are summarized below:

Outstanding, year-end 2010
Granted
Exercised
Canceled or Expired

Outstanding, year-end 2011
Granted
Exercised
Canceled or Expired

Outstanding, year-end 2012
Granted
Exercised
Canceled or Expired

Outstanding, year-end 2013

Shares
subject
to option
(in millions)
359
39
(59)
(29)

310
41
(67)
(19)

265
42
(88)
(02)

217

Weighted-
average
exercise
price
$ 2145
$ 2469
$ 2028
$ 2443

$ 2180
$ 2204
$ 1835
$ 2328

$ 2261
$ 3768
$ 2222
$ 2547

$ 2566

A summary of options outstanding and exercisable at February 1, 2014 follows:

Range of Exercise
Prices

$1378 - $1857
$1858 - $2097
$2098 - $2337
$2338 - $2817
$2818 - $3297
$3298 - $4099
$1378 - $4099

Number
outstanding
(in millions)
21
36
52
31
36
41
217

Weighted-
average
remaining
contractual life
(in years)
099
480
728
722
401
944
612

Weighted-
average
exercise price

$ 1662
$ 2009
$ 2211
$ 2482
$ 2851
$ 3781
$ 2566

Options
exercisable
(in millions)
21
29
26
16
35
—
127

Weighted-
average
exercise price

$ 1662
$ 2006
$ 2221
$ 2489
$ 2844
$ 3776
$ 2288

The weighted-average remaining contractual life for options exercisable at February 1, 2014, was
approximately 45 years The intrinsic value of options outstanding and exercisable at February 1, 2014 was
$233 and $169, respectively

A-59

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedRestricted stock

Changes in restricted stock outstanding under the restricted stock plans are summarized below:

Outstanding, year-end 2010
Granted
Lapsed
Canceled or Expired

Outstanding, year-end 2011
Granted
Lapsed
Canceled or Expired

Outstanding, year-end 2012
Granted
Lapsed
Canceled or Expired

Outstanding, year-end 2013

Restricted
shares
outstanding
(in millions)
44
25
(25)
(02)

Weighted-average
grant-date
fair value
$ 2239
$ 2463
$ 2196
$ 2380

42
26
(24)
(01)

43
32
(25)
(01)

$ 2392
$ 2223
$ 2434
$ 2328

$ 2267
$ 3769
$ 2297
$ 2731

$ 3231

The weighted-average grant date fair value of stock options granted during 2013, 2012 and 2011 was
$898, $439 and $600, respectively The fair value of each stock option grant was estimated on the date of
grant using the Black-Scholes option-pricing model, based on the assumptions shown in the table below The
Black-Scholes model utilizes extensive judgment and financial estimates, including the term employees are
expected to retain their stock options before exercising them, the volatility of the Company’s stock price
over that expected term, the dividend yield over the term and the number of awards expected to be forfeited
before they vest Using alternative assumptions in the calculation of fair value would produce fair values for
stock option grants that could be different than those used to record stock-based compensation expense in
the Consolidated Statements of Operations The increase in the fair value of the stock options granted during
2013, compared to 2012, resulted primarily from an increase in the Company’s share price, an increase in the
weighted average risk-free interest rate and a decrease in the expected dividend yield The decrease in the
fair value of the stock options granted during 2012, compared to 2011, resulted primarily from a decrease in
the Company’s share price, a decrease in the weighted average risk-free interest rate and an increase in the
expected dividend yield

The following table reflects the weighted-average assumptions used for grants awarded to option holders:

Weighted average expected volatility
Weighted average risk-free interest rate
Expected dividend yield
Expected term (based on historical results)

2013
26.34%
1.87%
1.82%

2012
2649%
097%
249%

2011
2631%
216%
190%

6.8 years

69 years

The weighted-average risk-free interest rate was based on the yield of a treasury note as of the grant date,
continuously compounded, which matures at a date that approximates the expected term of the options
The dividend yield was based on our history and expectation of dividend payouts Expected volatility was
determined based upon historical stock volatilities; however, implied volatility was also considered Expected
term was determined based upon a combination of historical exercise and cancellation experience as well as
estimates of expected future exercise and cancellation experience

A-60

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedTotal stock compensation recognized in 2013, 2012 and 2011 was $107, $82 and $81, respectively Stock
option compensation recognized in 2013, 2012 and 2011 was $24, $22 and $22, respectively Restricted shares
compensation recognized in 2013, 2012 and 2011 was $83, $60 and $59, respectively

The total intrinsic value of options exercised was $115, $44 and $24 in 2013, 2012 and 2011, respectively
The total amount of cash received in 2013 by the Company from the exercise of options granted under
share-based payment arrangements was $196 As of February 1, 2014, there was $154 of total unrecognized
compensation expense remaining related to non-vested share-based compensation arrangements granted
under the Company’s equity award plans This cost is expected to be recognized over a weighted-average
period of approximately two years The total fair value of options that vested was $20, $23 and $33 in 2013,
2012 and 2011, respectively

Shares issued as a result of stock option exercises may be newly issued shares or reissued treasury shares
Proceeds received from the exercise of options, and the related tax benefit, may be utilized to repurchase the
Company’s common shares under a stock repurchase program adopted by the Company’s Board of Directors
During 2013, the Company repurchased approximately eight million common shares in such a manner

1 3 . c o M M i t M e N t S a N d c o N t i N g e N c i e S

The Company continuously evaluates contingencies based upon the best available evidence

The Company believes that allowances for loss have been provided to the extent necessary and that its
assessment of contingencies is reasonable To the extent that resolution of contingencies results in amounts
that vary from the Company’s estimates, future earnings will be charged or credited

The principal contingencies are described below:

Insurance — The Company’s workers’ compensation risks are self-insured in most states In addition,
other workers’ compensation risks and certain levels of insured general liability risks are based on retrospective
premium plans, deductible plans, and self-insured retention plans The liability for workers’ compensation
risks is accounted for on a present value basis Actual claim settlements and expenses incident thereto may
differ from the provisions for loss Property risks have been underwritten by a subsidiary and are all reinsured
with unrelated insurance companies Operating divisions and subsidiaries have paid premiums, and the
insurance subsidiary has provided loss allowances, based upon actuarially determined estimates

Litigation — Various claims and lawsuits arising in the normal course of business, including suits
charging violations of certain antitrust, wage and hour, or civil rights laws, are pending against the Company
Some of these suits purport or have been determined to be class actions and/or seek substantial damages Any
damages that may be awarded in antitrust cases will be automatically trebled Although it is not possible at this
time to evaluate the merits of all of these claims and lawsuits, nor their likelihood of success, the Company
is of the belief that any resulting liability will not have a material adverse effect on the Company’s financial
position, results of operations, or cash flows

The Company continually evaluates its exposure to loss contingencies arising from pending or threatened
litigation and believes it has made provisions where the loss contingency can be reasonably estimated and an
adverse outcome is probable Nonetheless, assessing and predicting the outcomes of these matters involves
substantial uncertainties Management currently believes that the aggregate range of loss for the Company’s
exposure is not material to the Company It remains possible that despite management’s current belief,
material differences in actual outcomes or changes in management’s evaluation or predictions could arise that
could have a material adverse effect on the Company’s financial condition, results of operations, or cash flows

Assignments — The Company is contingently liable for leases that have been assigned to various third
parties in connection with facility closings and dispositions The Company could be required to satisfy the
obligations under the leases if any of the assignees is unable to fulfill its lease obligations Due to the wide
distribution of the Company’s assignments among third parties, and various other remedies available, the
Company believes the likelihood that it will be required to assume a material amount of these obligations
is remote

A-61

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNued1 4 . S t o c k

Preferred Shares

The Company has authorized five million shares of voting cumulative preferred shares; two million
shares were available for issuance at February 1, 2014 The shares have a par value of $100 per share and are
issuable in series

Common Shares

The Company has authorized one billion common shares, $1 par value per share On May 20, 1999, the
shareholders authorized an amendment to the Amended Articles of Incorporation to increase the number of
authorized common shares from one billion to two billion when the Board of Directors determines it to be in
the best interest of the Company

Common Stock Repurchase Program

The Company maintains stock repurchase programs that comply with Securities Exchange Act
Rule 10b5-1 to allow for the orderly repurchase of The Kroger Co common shares, from time to time The
Company made open market purchases totaling $338, $1,165 and $1,420 under these repurchase programs in
2013, 2012 and 2011, respectively In addition to these repurchase programs, in December 1999, the Company
began a program to repurchase common shares to reduce dilution resulting from its employee stock option
plans This program is solely funded by proceeds from stock option exercises and the related tax benefit The
Company repurchased approximately $271, $96 and $127 under the stock option program during 2013, 2012
and 2011, respectively

1 5 . c o M P a N y - S P o N S o r e d B e N e F i t P l a N S

The Company administers non-contributory defined benefit retirement plans for some non-union
employees and union-represented employees as determined by the terms and conditions of collective
bargaining agreements These include several qualified pension plans (the “Qualified Plans”) and non-qualified
plans (the “Non-Qualified Plans”) The Non-Qualified Plans pay benefits to any employee that earns in excess
of the maximum allowed for the Qualified Plans by Section 415 of the Internal Revenue Code The Company
only funds obligations under the Qualified Plans Funding for the pension plans is based on a review of the
specific requirements and on evaluation of the assets and liabilities of each plan

In addition to providing pension benefits, the Company provides certain health care benefits for retired
employees The majority of the Company’s employees may become eligible for these benefits if they reach
normal retirement age while employed by the Company Funding of retiree health care benefits occurs as
claims or premiums are paid

The Company recognizes the funded status of its retirement plans on the Consolidated Balance Sheet
Actuarial gains or losses, prior service costs or credits and transition obligations that have not yet been
recognized as part of net periodic benefit cost are required to be recorded as a component of AOCI All plans
are measured as of the Company’s fiscal year end

Amounts recognized in AOCI as of February 1, 2014 and February 2, 2013 consist of the following (pre-tax):

Net actuarial loss (gain)
Prior service cost (credit)

Pension Benefits
2013
$857
2

2012
$ 1,201
3

Other Benefits
2012
2013
$(15)
$(111)
(8)
(35)

Total

2013
$746
(33)

2012
$ 1,186
(5)

Total

$859

$ 1,204

$(146)

$(23)

$713

$ 1,181

A-62

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedAmounts in AOCI expected to be recognized as components of net periodic pension or postretirement

benefit costs in the next fiscal year are as follows (pre-tax):

Net actuarial loss (gain)
Prior service cost (credit)

Pension
Benefits
2014
$52
1

Other
Benefits
2014
$ (6)
(7)

Total
2014
$46
(6)

Total

$53

$(13)

$40

Other changes recognized in other comprehensive income in 2013, 2012 and 2011 were as follows (pre-tax):

2012
Incurred net actuarial loss (gain) $(243) $ (33) $451 $ (97) $ 6
Amortization of prior service

2013

2011

Pension Benefits
2012

Other Benefits

Total
2012

2013

2011
2011
$32 $(340) $ (27) $483

credit (cost)

—

(1)

Amortization of net actuarial

gain (loss)
Other
Total recognized in other

(102)
—

(97)
—

(64)
—

— —

2
(30) — —

(102)
(30)

(97)
—

(62)
—

comprehensive income

(345)

(130)

386

(123)

(468)

(120)

425

Total recognized in net periodic

benefit cost and other
comprehensive income $(271) $ (41) $456 $ (95) $38

$62 $(366) $

(3) $518

A-63

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedInformation 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
2012
2013

Non-Qualified Plans Other Benefits
2012

2013

2012

Change in benefit obligation:
Benefit obligation at beginning of fiscal year $3,443 $3,348
44
146
—
33
(131)
3
—

Service cost
Interest cost
Plan participants’ contributions
Actuarial (gain) loss
Benefits paid
Other
Assumption of Harris Teeter benefit obligation

40
144
—
(308)
(136)
—
326

$ 221
3
9
—
(20)
(10)
—
60

$ 217
3
9
—
3
(11)
—
—

$ 402 $ 378
16
16
9
6
(23)
—
—

17
15
10
(97)
(25)
(30)
2

Benefit obligation at end of fiscal year $3,509 $3,443

$ 263

$ 221

$ 294 $ 402

Change in plan assets:
Fair value of plan assets at beginning of

fiscal year $2,746 $2,523
278
Actual return on plan assets
71
Employer contributions
—
Plan participants’ contributions
(131)
Benefits paid
Other
5
—
Assumption of Harris Teeter plan assets

139
100
—
(136)
—
286

$ — $ — $ — $ —
—
14
9
(23)
—
—

—
15
10
(25)
—
—

—
10
—
(10)
—
—

—
11
—
(11)
—
—

Fair value of plan assets at end of fiscal year $3,135 $2,746

$ — $ — $ — $ —

Funded status at end of fiscal year $ (374) $ (697) $(263)

$(221) $(294) $(402)

Net liability recognized at end of fiscal year $ (374) $ (697) $(263)

$(221) $(294) $(402)

As of February 1, 2014 and February 2, 2013, other current liabilities include $30 and $29, respectively,

of net liability recognized for the above benefit plans

The pension plan assets acquired and liabilities assumed in the Harris Teeter merger did not affect the

Company’s net periodic benefit cost in 2013 due to the merger occurring close to year end

As of February 1, 2014 and February 2, 2013, pension plan assets do not include common shares of The

Kroger Co

Weighted average assumptions
Discount rate – Benefit obligation
Discount rate – Net periodic benefit cost
Expected return on plan assets
Rate of compensation increase –

2013

Pension Benefits
2012
4.99% 429%
4.29% 455%
8.50% 850%

2011
455%
560%
850%

2013

Other Benefits
2012
4.68% 411%
4.11% 440%

2011
440%
540%

Net periodic benefit cost

2.77% 282%

288%

Rate of compensation increase –

Benefit Obligation

2.86% 277%

282%

A-64

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedThe Company’s discount rate assumptions were intended to reflect the rates at which the pension
benefits could be effectively settled They take into account the timing and amount of benefits that would be
available under the plans The Company’s policy for selecting the discount rates as of year-end 2013 and 2012
changed from the policy as of year-end 2011 In 2013 and 2012, the Company’s policy was to match the plan’s
cash flows to that of a hypothetical bond portfolio whose cash flow from coupons and maturities match the
plan’s projected benefit cash flows The discount rates are the single rates that produce the same present value
of cash flows The selection of the 499% and 468% discount rates as of year-end 2013 for pension and other
benefits, respectively, represents the hypothetical bond portfolio using bonds with an AA or better rating
constructed with the assistance of an outside consultant In 2011, the Company’s policy was to match the
plan’s cash flows to that of a yield curve that provides the equivalent yields on zero-coupon corporate bonds
for each maturity Benefit cash flows due in a particular year can theoretically be “settled” by “investing” them
in the zero-coupon bond that matures in the same year The discount rates are the single rates that produce
the same present value of cash flows The selection of the 455% and 440% discount rates as of year-end
2011 for pension and other benefits, respectively, represents the equivalent single rates constructed under
a broad-market AA yield curve constructed with the assistance of an outside consultant A 100 basis point
increase in the discount rate would decrease the projected pension benefit obligation as of February 1, 2014,
by approximately $395

To determine the expected rate of return on pension plan assets held by the Company for 2013, the
Company considered current and forecasted plan asset allocations as well as historical and forecasted rates of
return on various asset categories Due to the Harris Teeter merger occurring close to year end, the expected
rate of return on pension plan assets acquired in the Harris Teeter merger did not affect our net periodic benefit
costs in 2013 For 2013, 2012 and 2011, the Company assumed a pension plan investment return rate of 85%
The Company pension plan’s average rate of return was 81% for the 10 calendar years ended December 31,
2013, net of all investment management fees and expenses The value of all investments in the Company-
sponsored defined benefit pension plans, excluding pension plan assets acquired in the Harris Teeter merger,
during the calendar year ending December 31, 2013 increased 80%, net of investment management fees and
expenses For the past 20 years, the Company’s average annual rate of return has been 92% Based on the
above information and forward looking assumptions for investments made in a manner consistent with the
Company’s target allocations, the Company believes an 85% rate of return assumption was reasonable for
2013, 2012 and 2011

The Company calculates its expected return on plan assets by using the market-related value of plan
assets The market-related value of plan assets is determined by adjusting the actual fair value of plan assets for
gains or losses on plan assets Gains or losses represent the difference between actual and expected returns
on plan investments for each plan year Gains or losses on plan assets are recognized evenly over a five year
period Using a different method to calculate the market-related value of plan assets would provide a different
expected return on plan assets

The funded status increased in 2013, compared to 2012, due primarily to the increase in the discount rate,
return on plan assets and contributions to the plan, offset slightly by the update in the mortality assumption

A-65

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedThe Company uses the RP-2000 projected 2021 mortality table in calculating the pension obligation

Pension Benefits

Qualified Plans
2012

2013

2011

Non-Qualified Plan
2011
2012
2013

Other Benefits
2013 2012 2011

Components of net periodic benefit cost:

$ 3 $17 $16 $13
Service cost $ 40 $ 44 $ 41
158
Interest cost
17
Expected return on plan assets
(207) — — — — — —
Amortization of:

144
(224)

146
(210)

$ 3
9

Prior service cost (credit)
Actuarial (gain) loss

—
93

—
88

— — —
9
57
9

(4)

1
(5)
7 — — (2)

(4)

Net periodic benefit cost $ 53 $ 68 $ 49

$21

$21 $28 $28 $23

The following table provides the projected benefit obligation (“PBO”), accumulated benefit obligation

(“ABO”) and the fair value of plan assets for all Company-sponsored pension plans

PBO at end of fiscal year
ABO at end of fiscal year
Fair value of plan assets at end of year

Qualified Plans
2012
2013
$3,443
$3,509
$3,278
$3,360
$2,746
$3,135

Non-Qualified Plan

2013
$263
$256
$ —

2012
$221
$211
$ —

The following table provides information about the Company’s estimated future benefit payments

2014
2015
2016
2017
2018
2019 – 2023

Pension
Benefits
$ 201
$ 204
$ 203
$ 211
$ 221
$1,232

Other
Benefits
$ 16
$ 18
$ 19
$ 21
$ 23
$135

The following table provides information about the weighted average target and actual pension plan

asset allocations

Target
allocations
2013

Actual
Allocations

2013

2012

Pension plan asset allocation

Global equity securities
Emerging market equity securities
Investment grade debt securities
High yield debt securities
Private equity
Hedge funds
Real estate
Other
Total

14.6%
5.6
11.6
12.7
9.1
32.9
3.3
10.2
100.0%

15.0%
6.2
10.4
12.5
7.7
34.2
3.3
10.7

192%
89
81
173
60
272
33
100

100.0% 1000%

A-66

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedInvestment objectives, policies and strategies are set by the Pension Investment Committees (the
“Committees”) appointed by the CEO The primary objectives include holding and investing the assets and
distributing benefits to participants and beneficiaries of the pension plans Investment objectives have been
established based on a comprehensive review of the capital markets and each underlying plan’s current and
projected financial requirements The time horizon of the investment objectives is long-term in nature and
plan assets are managed on a going-concern basis

Investment objectives and guidelines specifically applicable to each manager of assets are established
and reviewed annually Derivative instruments may be used for specified purposes, including rebalancing
exposures to certain asset classes Any use of derivative instruments for a purpose or in a manner not
specifically authorized is prohibited, unless approved in advance by the Committees

The current target allocations shown represent a combination of the 2013 targets established by the
Company in 2012 and allocation targets on assets acquired as part of the merger with Harris Teeter The
Company will rebalance by liquidating assets whose allocation materially exceeds target, if possible, and
investing in assets whose allocation is materially below target If markets are illiquid, the Company may not
be able to rebalance to target quickly To maintain actual asset allocations consistent with target allocations,
assets are reallocated or rebalanced periodically In addition, cash flow from employer contributions and
participant benefit payments can be used to fund underweight asset classes and divest overweight asset
classes, as appropriate The Company expects that cash flow will be sufficient to meet most rebalancing needs

The Company is not required and does not expect to make any contributions to the Company-sponsored
defined benefit pension plans in 2014 If the Company does make any contributions in 2014, the Company
expects these contributions will decrease its required contributions in future years Among other things,
investment performance of plan assets, the interest rates required to be used to calculate the pension
obligations, and future changes in legislation, will determine the amounts of any contributions The Company
expects 2014 expense for Company-sponsored defined benefit pension plans to be approximately $40 In
addition, the Company expects 401(k) Retirement Savings Account Plan cash contributions and expense from
automatic and matching contributions to participants to increase approximately $30 in 2014 compared to
2013 primarily due to the Harris Teeter merger

Assumed health care cost trend rates have a significant effect on the amounts reported for the health
care plans The Company used a 710% initial health care cost trend rate and a 450% ultimate health care cost
trend rate to determine its expense A one-percentage-point change in the assumed health care cost trend
rates would have the following effects:

Effect on total of service and interest cost components
Effect on postretirement benefit obligation

1% Point
Increase
5
$
31
$

1% Point
Decrease
$
(4)
(26)
$

A-67

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedThe following table sets forth by level, within the fair value hierarchy, the Plan’s assets at fair value as of

February 1, 2014 and February 2, 2013:

a S S e t S a t F a i r v a l u e a S o F F e B r u a r y 1 , 2 0 1 4

Cash and cash equivalents
Corporate Stocks
Corporate Bonds
US Government Securities
Mutual Funds/Collective Trusts
Partnerships/Joint Ventures
Hedge Funds
Private Equity
Real Estate
Other
Total

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
$ 26
326
—
—
303
—
—
—
—
—
$655

Significant
Other
Observable
Inputs
(Level 2)
$ —
—
94
60
419
317
—
—
—
139
$1,029

Significant
Unobservable
Inputs
(Level 3)
$ —
—
—
—
39
—
1,073
243
96
—
$1,451

a S S e t S a t F a i r v a l u e a S o F F e B r u a r y 2 , 2 0 1 3

Cash and cash equivalents
Corporate Stocks
Corporate Bonds
US Government Securities
Mutual Funds/Collective Trusts
Partnerships/Joint Ventures
Hedge Funds
Private Equity
Real Estate
Other
Total

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
$ 17
375
—
—
130
—
—
—
—
—
$522

Significant
Other
Observable
Inputs
(Level 2)
$ —
—
72
66
559
378
—
—
—
139
$1,214

Significant
Unobservable
Inputs
(Level 3)
$ —
—
—
—
—
—
739
180
91
—
$1,010

Total

26
326
94
60
761
317
1,073
243
96
139
$3,135

Total

17
375
72
66
689
378
739
180
91
139
$2,746

A-68

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedFor measurements using significant unobservable inputs (Level 3) during 2013 and 2012, a reconciliation

of the beginning and ending balances is as follows:

Ending balance, January 28, 2012
Contributions into Fund
Realized gains
Unrealized gains
Distributions
Other

Ending balance, February 2, 2013
Contributions into Fund
Realized gains
Unrealized gains
Distributions
Other
Assumption of Harris Teeter plan assets

Hedge Funds
$ 579
175
11
55
(81)
—

Private Equity
$159
49
15
—
(49)
6

Real Estate
$ 81
23
3
2
(22)
4

Collective Trusts
$—
—
—
—
—
—

739
297
7
71
(88)
—
47

180
74
12
17
(47)
7
—

91
22
11
—
(27)
(1)
—

—
—
—
—
—
—
39

Ending balance, February 1, 2014

$1,073

$243

$ 96

$39

See Note 8 for a discussion of the levels of the fair value hierarchy The assets’ fair value measurement

level above is based on the lowest level of any input that is significant to the fair value measurement

The following is a description of the valuation methods used for the plan’s assets measured at fair value

in the above tables:

• Cash and cash equivalents: The carrying value approximates fair value.

• Corporate Stocks: The fair values of these securities are based on observable market quotations for
identical assets and are valued at the closing price reported on the active market on which the individual
securities are traded

• Corporate Bonds: The fair values of these securities are primarily based on observable market quotations
for similar bonds, valued at the closing price reported on the active market on which the individual
securities are traded When such quoted prices are not available, the bonds are valued using a discounted
cash flow approach using current yields on similar instruments of issuers with similar credit ratings,
including adjustments for certain risks that may not be observable, such as credit and liquidity risks

• U.S. Government Securities: Certain U.S. Government securities are valued at the closing price reported
in the active market in which the security is traded Other US government securities are valued based
on yields currently available on comparable securities of issuers with similar credit ratings When
quoted prices are not available for similar securities, the security is valued under a discounted cash flow
approach that maximizes observable inputs, such as current yields of similar instruments, but includes
adjustments for certain risks that may not be observable, such as credit and liquidity risks

• Mutual Funds/Collective Trusts: The mutual funds/collective trust funds are public investment vehicles
valued using a Net Asset Value (NAV) provided by the manager of each fund The NAV is based on the
underlying net assets owned by the fund, divided by the number of shares outstanding The NAV’s unit
price is quoted on a private market that is not active However, the NAV is based on the fair value of the
underlying securities within the fund, which are traded on an active market, and valued at the closing
price reported on the active market on which those individual securities are traded

• Partnerships/Joint Ventures: These funds consist primarily of U.S. government securities, Corporate
Bonds, Corporate Stocks, and derivatives, which are valued in a manner consistent with these types of
investments, noted above

A-69

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNued• Hedge Funds: Hedge funds are private investment vehicles valued using a Net Asset Value (NAV) provided
by the manager of each fund The NAV is based on the underlying net assets owned by the fund, divided
by the number of shares outstanding The NAV’s unit price is quoted on a private market that is not
active The NAV is based on the fair value of the underlying securities within the funds, which may be
traded on an active market, and valued at the closing price reported on the active market on which those
individual securities are traded For investments not traded on an active market, or for which a quoted
price is not publicly available, a variety of unobservable valuation methodologies, including discounted
cash flow, market multiple and cost valuation approaches, are employed by the fund manager to value
investments Fair values of all investments are adjusted annually, if necessary, based on audits of the
Hedge Fund financial statements; such adjustments are reflected in the fair value of the plan’s assets

• Private Equity: Private Equity investments are valued based on the fair value of the underlying securities
within the fund, which include investments both traded on an active market and not traded on an active
market For those investments that are traded on an active market, the values are based on the closing
price reported on the active market on which those individual securities are traded For investments not
traded on an active market, or for which a quoted price is not publicly available, a variety of unobservable
valuation methodologies, including discounted cash flow, market multiple and cost valuation approaches,
are employed by the fund manager to value investments Fair values of all investments are adjusted
annually, if necessary, based on audits of the private equity fund financial statements; such adjustments
are reflected in the fair value of the plan’s assets

• Real Estate: Real estate investments include investments in real estate funds managed by a fund manager.
These investments are valued using a variety of unobservable valuation methodologies, including
discounted cash flow, market multiple and cost valuation approaches

The methods described above may produce a fair value calculation that may not be indicative of net
realizable value or reflective of future fair values Furthermore, while the plan believes its valuation methods are
appropriate and consistent with other market participants, the use of different methodologies or assumptions
to determine the fair value of certain financial instruments could result in a different fair value measurement

The Company contributed and expensed $148, $140 and $130 to employee 401(k) retirement savings
accounts in 2013, 2012 and 2011, respectively The 401(k) retirement savings account plan provides to eligible
employees both matching contributions and automatic contributions from the Company based on participant
contributions, compensation as defined by the plan, and length of service

The Company also administers other defined contribution plans for eligible employees The cost of these

plans was $5, $7 and $6 for 2013, 2012 and 2011, respectively

1 6 . M u l t i - e M P l o y e r P e N S i o N P l a N S

The Company contributes to various multi-employer pension plans based on obligations arising from
collective bargaining agreements These plans provide retirement benefits to participants based on their
service to contributing employers The benefits are paid from assets held in trust for that purpose Trustees are
appointed in equal number by employers and unions The trustees typically are responsible for determining
the level of benefits to be provided to participants as well as for such matters as the investment of the assets
and the administration of the plans

In the fourth quarter of 2011, the Company entered into a memorandum of understanding (“MOU”) with
14 locals of the UFCW that participated in four multi-employer pension funds The MOU established a process
that amended each of the collective bargaining agreements between the Company and the UFCW locals under
which the Company made contributions to these funds and consolidated the four multi-employer pension
funds into one multi-employer pension fund

A-70

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedUnder the terms of the MOU, the locals of the UFCW agreed to a future pension benefit formula through
2021 The Company was designated as the named fiduciary of the new consolidated pension plan with sole
investment authority over the assets If investment results fail to meet expectations, the Company could be
responsible for the shortfall The Company committed to contribute sufficient funds to cover the actuarial
cost of current accruals and to fund the pre-consolidation Unfunded Actuarial Accrued Liability (“UAAL”) that
existed as of December 31, 2011, in a series of installments on or before March 31, 2018 At January 1, 2012,
the UAAL was estimated to be $911 (pre-tax) In accordance with GAAP, the Company expensed $911 in 2011
related to the UAAL The expense was based on a preliminary estimate of the contractual commitment In
2012, the Company finalized the UAAL contractual commitment and recorded an adjustment that reduced
the 2011 estimated commitment by $53 (pre-tax) The final UAAL contractual commitment, at January 1,
2012, was $858 (pre-tax) In the fourth quarter of 2011, the Company contributed $650 to the consolidated
multi-employer pension plan of which $600 was allocated to the UAAL and $50 was allocated to service and
interest costs and expensed in 2011 In the fourth quarter of 2012, the Company contributed $258 to the
consolidated multi-employer pension plan to fully fund the Company’s UAAL contractual commitment Future
contributions will be dependent, among other things, on the investment performance of assets in the plan
The funding commitments under the MOU replace the prior commitments under the four existing funds to
pay an agreed upon amount per hour worked by eligible employees

The Company recognizes expense in connection with its multi-employer pension plans as contributions
are funded, or in the case of the UFCW consolidated pension plan, when commitments are made The Company
made contributions to these funds of $228 in 2013, $492 in 2012 and $946 in 2011 The cash contributions
for 2012 and 2011 include the Company’s $258 and $650 contributions described above, respectively, to the
UFCW consolidated pension plan in the fourth quarter of each year

The risks of participating in multi-employer pension plans are different from the risks of participating in

single-employer pension plans in the following respects:

Assets contributed to the multi-employer plan by one employer may be used to provide benefits to
employees of other participating employers

If a participating employer stops contributing to the plan, the unfunded obligations of the plan
allocable to such withdrawing employer may be borne by the remaining participating employers

If the Company stops participating in some of its multi-employer pension plans, the Company may
be required to pay those plans an amount based on its allocable share of the underfunded status of
the plan, referred to as a withdrawal liability

The Company’s participation in these plans is outlined in the following tables The EIN / Pension Plan
Number column provides the Employer Identification Number (“EIN”) and the three-digit pension plan
number The most recent Pension Protection Act Zone Status available in 2013 and 2012 is for the plan’s
year-end at December 31, 2012 and December 31, 2011, respectively Among other factors, generally, plans in
the red zone are less than 65 percent funded, plans in the yellow zone are less than 80 percent funded and
plans in the green zone are at least 80 percent funded The FIP/RP Status Pending / Implemented Column
indicates plans for which a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending
or has been implemented Unless otherwise noted, the information for these tables was obtained from the
Forms 5500 filed for each plan’s year-end at December 31, 2012 and December 31, 2011 The multi-employer
contributions listed in the table below are the Company’s multi-employer contributions made in fiscal years
2013, 2012 and 2011

A-71

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNuedThe following table contains information about the Company’s multi-employer pension plans:

Pension Fund

SO CA UFCW Unions & Food

Employers Joint Pension
Trust Fund (1) (2)

BD of Trustees of UNTD Food

and Commercial (1) (5)
Desert States Employers & UFCW
Unions Pension Plan (1)

UFCW Unions and Food

Employers Pension Plan of
Central Ohio (1) (5)

Sound Retirement Trust

(formerly Retail Clerks
Pension Plan) (1) (3)

Rocky Mountain UFCW Unions
and Employers Pension
Plan (1)

Indiana UFCW Unions and
Retail Food Employers
Pension Plan (1) (5)

Oregon Retail Employees

Pension Plan (1)
Bakery and Confectionary Union
& Industry International
Pension Fund (1)

Washington Meat Industry

United Food & Commercial

Workers Intl Union – Industry
Pension Fund (1) (4)

Northwest Ohio UFCW Union

and Employers Joint
Pension Fund (1) (5)

Western Conference of

EIN / Pension
Plan Number

Pension
Protection
Act Zone Status

2013

2012

FIP/RP
Status
Pending/
Implemented

Multi-Employer
Contributions
2012

2011

2013

95-1939092 - 001

Red

Implemented $ 45 $ 43 $ 40

58-6101602 - 001 N/A

Red

84-6277982 - 001 Green Green

N/A

— — 59

Surcharge
Imposed (7)

31-6089168 - 001 N/A

Green

N/A

— — 23

91-6069306 – 001

Red

Implemented

84-6045986 - 001 Green Green

35-6244695 - 001 N/A

Red

N/A

— —

93-6074377 - 001

Red

Implemented

52-6118572 - 001

Red

Implemented

Pension Trust (1) (4)

91-6134141 - 001

Red

Implemented

Retail Food Employers & UFCW

Local 711 Pension (1)

51-6031512 - 001

Red

Implemented

Denver Area Meat Cutters and

Employers Pension Plan (1)

84-6097461 - 001 Green Green

51-6055922 - 001 Green Green

34-0947187 - 001 N/A

Green

N/A

— —

Teamsters Pension Plan

91-6145047 - 001 Green Green

Central States, Southeast &

Southwest Areas
Pension Plan

UFCW Consolidated

Pension Plan (1) (6)
Other

Total Contributions

36-6044243 - 001

Red

Implemented

58-6101602 – 001 Green

N/A

— 275
12
13

650
11

$228 $ 492 $ 946

(1) The Company’s multi-employer contributions to these respective funds represent more than 5% of the

total contributions received by the pension funds

A-72

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNued(2) The information for this fund was obtained from the Form 5500 filed for the plan’s year-end at

March 31, 2013 and March 31, 2012

(3) The information for this fund was obtained from the Form 5500 filed for the plan’s year-end at

September 30, 2012 and September 30, 2011

(4) The information for this fund was obtained from the Form 5500 filed for the plan’s year-end at June 30,

2012 and June 30, 2011

(5) As of December 31, 2011, these four pension funds were consolidated into the UFCW consolidated
pension plan See the above information regarding this multi-employer pension fund consolidation

(6) The UFCW consolidated pension plan was formed on January 1, 2012, as the result of the consolidation
of four existing multi-employer pension plans See the above information regarding this multi-employer
pension fund consolidation

(7) Under the Pension Protection Act, a surcharge may be imposed when employers make contributions under
a collective bargaining agreement that is not in compliance with a rehabilitation plan As of February 1,
2014, the collective bargaining agreements under which the Company was making contributions were
in compliance with rehabilitation plans adopted by the applicable pension fund

The following table describes (a) the expiration date of the Company’s collective bargaining agreements
and (b) the expiration date of the Company’s most significant collective bargaining agreements for each of the
material multi-employer funds in which the Company participates

Pension Fund

SO CA UFCW Unions & Food Employers Joint

Pension Trust Fund

UFCW Consolidated Pension Plan (3)

Desert States Employers & UFCW Unions Pension Plan

Sound Retirement Trust (formerly Retail Clerks Pension Plan)

Rocky Mountain UFCW Unions and Employers Pension Plan

Oregon Retail Employees Pension Plan
Bakery and Confectionary Union & Industry

International Pension Fund

Washington Meat Industry Pension Trust

Retail Food Employers & UFCW Local 711 Pension

Denver Area Meat Cutters and Employers Pension Plan
United Food & Commercial Workers Intl Union – Industry

Pension Fund

Western Conference of Teamsters Pension Plan
Central States, Southeast & Southwest Areas Pension Plan

A-73

Expiration Date
of Collective
Bargaining
Agreement
March 2014 (2) to
June 2014
July 2013 (2) to
June 2017
June 2014 to
October 2014
May 2016 to
December 2016
September 2015 to
October 2015
April 2013 (2) to
October 2016
May 2011 (2) to
September 2017
January 2015 to
July 2016
April 2013 (2) to
March 2015
September 2015 to
October 2015
July 2013 (2) to
June 2017
April 2014 to
April 2018
September 2014

Most Significant Collective
Bargaining Agreements (1)
(not in millions)

Count

5
2

Expiration
March 2014 (2) to
June 2014
October 2013 (2) to
June 2017

October 2014
May 2016 to
August 2016

September 2015
August 2015 to
June 2016
May 2014 to
August 2016

May 2016

March 2015

September 2015
April 2015 to
March 2017
July 2014 to
September 2015
September 2014

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNued(1) This column represents the number of significant collective bargaining agreements and their expiration
date for each of the Company’s pension funds listed above For purposes of this table, the “significant
collective bargaining agreements” are the largest based on covered employees that, when aggregated,
cover the majority of the employees for which we make multi-employer contributions for the referenced
pension fund

(2) Certain collective bargaining agreements for each of these pension funds are operating under

an extension

(3) As of January 1, 2012, four multi-employer pension funds were consolidated into the UFCW consolidated
pension plan See the above information regarding this multi-employer pension fund consolidation

Based on the most recent information available to it, the Company believes that the present value of
actuarial accrued liabilities in most of these multi-employer plans substantially exceeds the value of the assets
held in trust to pay benefits Moreover, if the Company were to exit certain markets or otherwise cease making
contributions to these funds, the Company could trigger a substantial withdrawal liability Any adjustment for
withdrawal liability will be recorded when it is probable that a liability exists and can be reasonably estimated

The Company also contributes to various other multi-employer benefit plans that provide health and
welfare benefits to active and retired participants Total contributions made by the Company to these other
multi-employer benefit plans were approximately $1,100 in 2013, $1,100 in 2012 and $1,000 in 2011

1 7 . r e c e N t l y a d o P t e d a c c o u N t i N g S t a N d a r d S

In February 2013, the Financial Accounting Standards Board (“FASB”) amended its standards on
comprehensive income by requiring disclosure of information about amounts reclassified out of accumulated
other comprehensive income (“AOCI”) by component Specifically, the amendment requires disclosure of the
effect of significant reclassifications out of AOCI on the respective line items in net income in which the item
was reclassified if the amount being reclassified is required to be reclassified to net income in its entirety
in the same reporting period It requires cross reference to other disclosures that provide additional detail
for amounts that are not required to be reclassified in their entirety in the same reporting period This new
disclosure became effective for the Company beginning February 3, 2013, and is being adopted prospectively
in accordance with the standard See Note 9 to the Company’s Consolidated Financial Statements for the
Company’s new disclosures related to this amended standard

In December 2011, the FASB amended its standards related to offsetting assets and liabilities This
amendment requires entities to disclose both gross and net information about certain instruments and
transactions eligible for offset in the statement of financial position and certain instruments and transactions
subject to an agreement similar to a master netting agreement This information is intended to enable users of
the financial statements to understand the effect of these arrangements on the Company’s financial position
The new rules became effective for the Company on February 3, 2013 In January 2013, the FASB further
amended this standard to limit its scope to derivatives, repurchase and reverse repurchase agreements,
securities borrowings and lending transactions See Note 7 to the Company’s Consolidated Financial Statements
for the Company’s new disclosures related to this amended standard

1 8 . r e c e N t l y i S S u e d a c c o u N t i N g S t a N d a r d S

In July 2013, the FASB amended Accounting Standards Codification (“ASC”) 740, “Income Taxes” The
amendment provides guidance on the financial statement presentation of an unrecognized tax benefit, as
either a reduction of a deferred tax asset or as a liability, when a net operating loss carryforward, similar tax
loss, or a tax credit carryforward exists The amendment will be effective for interim and annual periods
beginning after December 15, 2013 and may be applied on a retrospective basis Early adoption is permitted
The Company does not expect the adoption of this amendment to have a significant effect on the Company’s
consolidated financial position or results of operations

A-74

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNued1 9 . q u a r t e r l y d a t a ( u N a u d i t e d )

The two tables that follow reflect the unaudited results of operations for 2013 and 2012

2013
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Merchandise costs, including advertising, warehousing,

and transportation,
excluding items shown separately below . . . . . . . . . .

Quarter

First
(16 Weeks)
$29,997

Second
(12 Weeks)
$22,686

Third
(12 Weeks)
$22,470

Fourth
(12 Weeks)
$23,222

Total Year
(52 Weeks)
$98,375

23,817

18,059

17,866

18,397

78,138

Operating, general, and administrative . . . . . . . . . . . . . .

4,593

3,506

3,537

3,558

15,196

Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . .

Operating profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Earnings before income tax expense . . . . . . . . . . . . .

Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net earnings including noncontrolling interests . . . . . .

Net earnings 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 shares used in basic calculation. . . .

Net earnings attributable to The Kroger Co. per

189

519

879

129

750

266

484

481

0.93

514

139

387

595

496

176

320

317

0.61

515

138

395

534

108

426

125

301

299

0.58

515

147

402

718

107

611

184

427

613

1,703

2,725

443

2,282

751

1,531

422

$ 1,519

0.82

2.93

511

514

diluted common share . . . . . . . . . . . . . . . . . . . . . . . . .

0.92

0.60

0.57

0.81

2.90

Average number of shares used in diluted

calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

520

521

517

520

Dividends declared per common share . . . . . . . . . . . . . .

$ 0.150

$ 0.165

$ 0.630

Annual amounts may not sum due to rounding

Certain revenue transactions previously reported in sales and merchandise costs in the Consolidated
Statements of Operations are now reported net within sales Also, certain expense transactions previously
reported in operating, general, and administrative in the Consolidated Statements of Operations are now
reported within merchandise costs Prior quarter amounts have been revised or reclassified to conform to the
current year presentation These amounts were not material to the prior periods

A-75

Notes to CoNsolidated FiNaNCial statemeNts, CoNtiNued2012
Sales

Merchandise costs, including advertising,
warehousing, and transportation,
excluding items shown separately below

Operating, general, and administrative

4,464

3,391

3,305

3,689

23,056

17,249

17,352

19,069

Quarter

First
(16 Weeks)
$29,026

Second
(12 Weeks)
$21,697

Third
(12 Weeks)
$21,776

Fourth
(13 Weeks)
$24,120

Total Year
(53 Weeks)
$96,619

Rent

Depreciation and amortization

Operating profit

Interest expense

Earnings before income tax expense

Income tax expense

Net earnings including noncontrolling interests

Net earnings attributable to noncontrolling interests

Net earnings attributable to The Kroger Co

per basic common share

Average number of shares used in basic calculation

Net earnings attributable to The Kroger Co

191

501

814

141

673

232

441

439

078

556

139

383

535

106

429

148

281

279

052

538

141

382

596

103

493

175

318

317

061

518

76,726

14,849

628

1,652

2,764

462

2,302

794

1,508

157

386

819

112

707

239

468

462

$ 1,497

089

278

514

533

per diluted common share

078

051

060

088

277

Average number of shares used in diluted calculation

559

541

522

518

537

Dividends declared per common share

$ 0115

$ 0150

$ 0530

Annual amounts may not sum due to rounding

Certain revenue transactions previously reported in sales and merchandise costs in the Consolidated
Statements of Operations are now reported net within sales Prior quarter amounts have been revised or
reclassified to conform to the current year presentation These amounts were not material to the prior periods

A-76

Notes to CoNsolidated FiNaNCial statemeNts, CoNCludedKroger has a variety of plans under which employees may acquire common shares of Kroger Employees
of Kroger and its subsidiaries own shares through a profit sharing plan, as well as 401(k) plans and a payroll
deduction plan called the Kroger Stock Exchange If employees have questions concerning their shares
in the Kroger Stock Exchange, or if they wish to sell shares they have purchased through this plan, they
should contact:

Computershare Plan Managers
PO Box 43021
Providence, RI 02940
Phone 800-872-3307

Questions regarding Kroger’s 401(k) plans should be directed to the employee’s Human Resources Department
or 1-800-2KROGER Questions concerning any of the other plans should be directed to the employee’s Human
Resources Department

SHAREOWNERS: Wells Fargo Shareowner Services, a division of Wells Fargo Bank, NA, is Registrar and
Transfer Agent for Kroger’s Common Shares For questions concerning payment of dividends, changes of
address, etc, individual shareowners should contact:

Wells Fargo Shareowner Services
P O Box 64854
Saint Paul, MN 55164-0854
Toll Free 1-855-854-1369

Shareholder questions and requests for forms available on the Internet should be directed to:
wwwshareowneronlinecom

FINANCIAL INFORMATION: Call (513) 762-1220 to request printed financial information, including Kroger’s
most recent report on Form 10-Q or 10-K, or press release Written inquiries should be addressed to Shareholder
Relations, The Kroger Co, 1014 Vine Street, Cincinnati, Ohio 45202-1100 Information also is available on
Kroger’s corporate website at irkrogercom

Kathleen S. Barclay
Senior Vice President

Robert W. Clark
Group Vice President

Geoffrey J. Covert
Senior Vice President

David B. Dillon
Chairman of the Board

Michael J. Donnelly
Senior Vice President

Kevin M. Dougherty
Group Vice President

Michael L. Ellis
President and
Chief Operating Officer

Paul L. Bowen
Jay C

William H. Breetz, Jr.
Southwest Division

Timothy F. Brown
Delta Division

Jeffrey D. Burt
Central Division

Jay Cummins
Smith’s

Russell J. Dispense
King Soopers

Peter M. Engel
Fred Meyer Jewelers

Joseph E. Fey
Mid-Atlantic Division

Dennis R. Gibson
QFC

Donna Giordano
Ralphs

e x e c u t i v e o F F i c e r S

Todd A. Foley
Vice President and Treasurer

M. Marnette Perry
Senior Vice President

Paul W. Heldman
Executive Vice President,
Secretary and General Counsel

J. Michael Schlotman
Senior Vice President and
Chief Financial Officer

Christopher T. Hjelm
Senior Vice President and
Chief Information Officer

Lynn Marmer
Group Vice President

W. Rodney McMullen
Chief Executive Officer

Erin S. Sharp
Group Vice President,
Manufacturing

Mark C. Tuffin
Senior Vice President

M. Elizabeth Van Oflen
Vice President and Controller

R. Pete Williams
Senior Vice President

o P e r a t i N g u N i t h e a d S

Rick Going
Nashville Division

Joseph A. Grieshaber, Jr.
Dillon Stores

Lynn T. Gust
Fred Meyer Stores

Kevin L. Hess
Kwik Shop

Jayne Homco
Michigan Division

Bryan H. Kaltenbach
Food 4 Less

Calvin J. Kaufman
Louisville Division

Bruce A. Lucia
Atlanta Division

Bruce A. Macaulay
Columbus Division

Sukanya Madlinger
Cincinnati Division

Stephen M. McKinney
Fry’s

Gary Millerchip
Kroger Personal Finance

Frederick J. Morganthall II
Harris Teeter

Jeffrey A. Parker
Convenience Stores

Darel Pfeiff
Turkey Hill Minit Markets

Mark W. Salisbury
Tom Thumb

Arthur Stawski, Sr.
Loaf ‘N Jug

Ron Stewart
Quik Stop

Michael J. Stoll
The Little Clinic

Van Tarver
Supermarket Petroleum

Th e K roge r C o. • 1014 Vi n e ST r e e T • Ci nC i n naT i, oh io 45202 • (513) 762- 4000