UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 11-K

 

x                              ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2015.

 

OR

 

o                                 TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from              to              

 

Commission file number 1-303

 

Harris Teeter Supermarkets, Inc. Retirement and Savings Plan

701 Crestdale Road

Matthews, North Carolina 28105

(Full title of the plan and the address of the plan)

 

The Kroger Co.

1014 Vine Street

Cincinnati, OH 45202

(Name of issuer of the securities held pursuant to the

plan and the address of its principal executive office)

 

 

 



 

REQUIRED INFORMATION

 

Item 4. Plan Financial Statements and Schedules Prepared in Accordance with the Financial Reporting Requirements of ERISA.

 

2



 

HARRIS TEETER SUPERMARKETS, INC. RETIREMENT AND SAVINGS PLAN

 

Financial Statements and Supplemental Schedule

 

As of December 31, 2015 and 2014 and for the year ended December 31, 2015

 

(With Report of Independent Registered Public Accounting Firm Thereon)

 

3



 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Participants of the Harris Teeter Supermarkets, Inc.

Retirement and Savings Plan and the Retirement Plan

Committee of Harris Teeter Supermarkets, Inc.

Matthews, North Carolina

 

We have audited the accompanying statements of net assets available for benefits of the Harris Teeter Supermarkets, Inc. Retirement and Savings Plan (the “Plan”) as of December 31, 2015 and 2014, and the related statement of changes in net assets available for benefits for the year ended December 31, 2015.  These financial statements are the responsibility of the Plan’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  We were not engaged to perform an audit of the Plan’s internal control over financial reporting.  An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes 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.  We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2015 and 2014, and the changes in its net assets available for benefits for the year ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

 

The supplemental information in the accompanying schedule of assets (held at end of year) as of December 31, 2015, has been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplemental information is presented for the purpose of additional analysis and is not a required part of the basic financial statements but includes supplemental information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental information is the responsibility of the Plan’s management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information in the accompanying schedules, we evaluated whether the supplemental information, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental information in the accompanying schedule is fairly stated in all material respects in relation to the financial statements as a whole.

 

 

/s/ Dixon Hughes Goodman LLP

Charlotte, North Carolina

June 9, 2016

 

4



 

HARRIS TEETER SUPERMARKETS, INC. RETIREMENT AND SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 2015 and 2014

 

 

 

2015

 

2014,
as adjusted

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Cash

 

$

18,706

 

$

 

Fully benefit-responsive investment contract, at contract value

 

48,787,607

 

47,374,622

 

Investments, at fair value:

 

 

 

 

 

Mutual funds

 

555,001,847

 

557,397,204

 

Common collective trust fund

 

26,658,169

 

27,542,231

 

Kroger Shares

 

10,759,223

 

2,603,471

 

 

 

592,419,239

 

587,542,906

 

Receivables:

 

 

 

 

 

Participant contributions

 

663,064

 

642,108

 

Employer contributions

 

15,963,010

 

14,673,052

 

Notes receivable from participants

 

32,983,391

 

30,641,718

 

 

 

49,609,465

 

45,956,878

 

Total Assets

 

690,835,017

 

680,874,406

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Administrative expenses payable

 

22,441

 

15,250

 

NET ASSETS AVAILABLE FOR BENEFITS

 

$

690,812,576

 

$

680,859,156

 

 

The accompanying notes are an integral part of these financial statements.

 

5



 

HARRIS TEETER SUPERMARKETS, INC. RETIREMENT AND SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the Year Ended December 31, 2015

 

Investment income:

 

 

 

Dividends

 

$

27,816,797

 

Net change in fair value of investments

 

(20,389,353

)

 

 

7,427,444

 

 

 

 

 

Interest income on notes receivable from participants

 

1,427,616

 

 

 

 

 

Contributions:

 

 

 

Participant

 

34,331,209

 

Employer

 

23,972,566

 

 

 

58,303,775

 

 

 

 

 

Total Additions

 

67,158,835

 

 

 

 

 

Deductions:

 

 

 

Benefits paid to participants

 

56,580,046

 

Administrative expenses

 

625,369

 

Total Deductions

 

57,205,415

 

 

 

 

 

NET INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS

 

9,953,420

 

 

 

 

 

NET ASSETS AVAILABLE FOR BENEFITS, beginning of year

 

680,859,156

 

 

 

 

 

NET ASSETS AVAILABLE FOR BENEFITS, end of year

 

$

690,812,576

 

 

The accompanying notes are an integral part of these financial statements.

 

6



 

HARRIS TEETER SUPERMARKETS, INC. RETIREMENT AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2015 and 2014

 

NOTE A — DESCRIPTION OF THE PLAN

 

Harris Teeter Supermarkets, Inc. (the “Company”) is a wholly owned subsidiary of The Kroger Co. (“Kroger”). The Company is the sole Member of Harris Teeter, LLC (the “Employer”) and sponsors the Harris Teeter Supermarkets, Inc. Retirement and Savings Plan (the “Plan”).

 

The following description of the Plan provides only general information.  On July 29, 2014 the Plan was amended and restated, generally effective January 1, 2014.  On December 28, 2015 the Plan was again amended and restated, generally effective January 1, 2016.  The common shares of Kroger are referred to as “Kroger Shares” herein.  Participants should refer to the Plan document for a more complete description of the Plan’s provisions.

 

General

 

The Company sponsors the Plan, which is a defined contribution plan with 401(k) features. The Plan is maintained by the Company primarily for the benefit of employees of the Employer. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). Under the provisions of the Plan, eligible employees may elect to have the Company make contributions to the Plan on their behalf out of their regular salary and bonus (before state and federal income taxes).  Employees become eligible to participate in the Plan after three months of employment.  Participants may generally contribute up to 30% of gross pay not to exceed established limits of $18,000 for 2015.  Highly compensated employees are subject to additional contribution limitations.  In addition to established limits, participants age 50 or older may contribute “catch-up” contributions of $6,000 for 2015.  Participants may elect to make pre-tax and/or Roth contributions, subject to the aggregate limits stated above.

 

Contributions

 

The Plan includes Company matching contributions at a rate determined at the sole discretion of the Board of Directors of the Company or its delegate.  The Company matching contributions are applicable only to the first 4% of compensation contributed by participants.  The matching contributions are deposited with each payroll contribution.

 

For each plan year (January 1 — December 31), the Company generally makes an Automatic Retirement Contribution (“ARC”) to an individual participant’s account if the participant has completed at least 1,000 hours of service during the 12-month period ending on September 30 of each plan year and is employed by the Company or its subsidiaries on the last day of the plan year.  Contributions are a percentage of the individual participant’s pay, determined on the basis of the combined years of age and years of service as of the last day of the plan year.

 

Participants may generally direct the investment of their contributions, the Company’s matching contributions, and their ARC from among various investment options offered by the Plan, including Kroger Shares, subject to certain limitations. In the event an effective investment direction is not made by the participant, and in the case of contributions made by or on behalf of a participant that, under the terms of the Plan, are to be invested in the Plan’s default investment, such contributions shall be invested in a default investment fund that meets the requirements of ERISA, Department of Labor Regulations and any other related regulations or similar guidance. Currently, the Plan’s default investment fund is an age-appropriate retirement fund based upon retirement at age 65.  Participants may not direct more than 20% of their contributions into Kroger Shares.  If participants direct more than 20% of their contributions into Kroger Shares, the excess will be invested in the Plan’s default investment.  In addition, amounts may not be transferred from existing investment funds to Kroger Shares if the resulting amount of Kroger Shares exceeds 20% of the aggregate value of the participant’s account.  Generally, a participant’s Kroger Shares account will be invested exclusively in Kroger Shares.  The Company intends the Kroger Shares account to be a permanent investment fund unless the Company’s Retirement Plan Committee determines, in its

 

7



 

sole discretion, that the continued holding or purchase of Kroger Shares would be inconsistent with ERISA.

 

Participant Accounts

 

Each participant’s account is credited or charged with the participant’s contributions, allocations of the Company’s contributions, plan earnings, benefit payments and allocations of administrative expenses and plan losses. Allocations of administrative expenses may be determined on a per participant basis or prorated across all participants’ investments based proportionately on each participant’s account balance, depending upon the category and nature of the expense. There is also a quarterly administrative credit provided to participants based upon the amount the Plan’s recordkeeper receives for administrative services from certain of the Plan’s investments.  The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.

 

Payment of Benefits

 

Upon a bona fide termination of service from the Company, participants may receive the vested value of their account.  In general (and except for certain distributions associated with the ARC which include an annuity purchase option), payment of any benefit is made in the form of a lump-sum payment, or the participant may elect partial or installment distributions, as outlined in the Plan document.  In-service withdrawals are subject to certain restrictions, and they generally include rollover withdrawals, age 59-1/2 withdrawals, merged ESOP plan withdrawals, certain financial hardship withdrawals and qualified reservist distributions.  Participants are taxed on their accounts upon withdrawal, except for qualified rollovers into other tax deferred plans, and withdrawal of Roth contributions plus earnings thereon, subject to certain restrictions.

 

Vesting

 

Participants are immediately vested in their contributions plus actual earnings thereon.  For Company matching contributions and ARC, a participant is fully vested in the contributions plus actual earnings thereon after three years of service. A “Year of Service” requires a minimum of 1,000 hours of service during the vesting computation period with the Company or an affiliate.

 

Forfeited Accounts

 

A participant who terminates service without a fully vested interest forfeits any nonvested balance in his or her Company contributions account and ARCs as of the earlier of (a) distribution to the participant of the participant’s vested balance, or (b) the last day of the first Plan year in which the participant incurs five consecutive Breaks in Service, as defined by the Plan.  The forfeited funds are used to offset Employer contributions.  Forfeitures utilized to offset Employer contributions totaled $3,510,377 during 2015. The forfeiture balance was $138,865 and $110,558 at December 31, 2015 and 2014, respectively.

 

Notes Receivable From Participants

 

Participants may borrow from certain of their fund accounts, subject to certain restrictions and requirements, a minimum of $500 and up to a maximum equal to the lesser of $50,000 or 50 percent of their vested account balance excluding ARC and merged ESOP accounts.  Only one loan per year may be taken, but up to two loans can be outstanding at a time.  A third loan, which is not subject to the minimum requirement, may be granted at any time for the sole purpose of applying the proceeds of such third loan to other outstanding loans to avoid or cure a loan default resulting from an administrative error. Except for certain loans relating to a participant’s principal residence, loans must be repaid within five years.  Loans bear a fixed interest rate of one percent over the prime rate in effect at the time of borrowing.  Interest on loans outstanding ranged from 4.25% to 9.25%, reflecting the change in interest rates during the life of the outstanding loans.  Principal and interest is paid through payroll deductions.

 

NOTE B — SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Accounting

 

The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

 

8



 

In May 2015, the Financial Accounting Standards Board (“FASB”) issued an amendment of the FASB Accounting Standards Codification (“ASC”) for Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).  The amendment removes the requirement to present investments for which the practical expedient is used to measure fair value at net asset value (“NAV”) within the fair value hierarchy table. Instead, an entity would be required to include those investments as a reconciling item so that the total fair value amount of investments in the disclosure is consistent with the fair value investment balance on the statement of net assets available for benefits. The amendment is effective for Plan years beginning after December 15, 2015; however, earlier application is permitted.  The Plan management has elected to adopt the early application of the amendment and has applied the provisions retrospectively.  The adoption had no impact on the statements of net assets available for benefits as of December 31, 2015 and December 31, 2014 or the statement of changes in net assets available for benefits for the year ended December 31, 2015.

 

In July 2015, the FASB issued amendments of the FASB ASC for Defined Contribution Pension Plans (Topic 962).  Under the amendments:  fully benefit-responsive investment contracts are measured, presented and disclosed only at contract value; certain disclosure requirements are eliminated for both participant-directed investments and nonparticipant-directed investments; and, investments (both participant-directed and nonparticipant-directed investments) of employee benefit plans are grouped and disclosed only on the basis of general type.  The amendments are effective for Plan years beginning after December 15, 2015; however, earlier application is permitted.  Plan management has elected to adopt the early application of the amendments and has applied the provisions retrospectively.

 

Use of Estimates

 

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities.  Actual results could differ from those estimates.

 

Fully Benefit-Responsive Investment Contracts

 

Fully benefit-responsive investment contracts held by a defined contribution plan are reported at contract value.  Contract value is the relevant measurement attribute for fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the plan.

 

Investment Valuation and Income Recognition

 

As reported by T. Rowe Price Trust Company, a wholly owned subsidiary of T. Rowe Price Associates, Inc. (the “Trustee”), Plan investments are reported at fair value.  Fair value is the price that would be received from an asset sale or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  See Note C for a discussion of fair value measurements.

 

Purchases and sales of securities are recorded on a trade-date basis.  Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation and depreciation in fair value of investments is comprised of the net realized and unrealized gains and losses.

 

The Equity Index Trust Fund is a common collective trust fund operated by the Trustee.  Each investor’s beneficial interest in the net assets of the trust is represented by units, an unlimited number of which are authorized.  Unit transactions are subject to terms, conditions, and limitations defined in the Declaration of Trust.  Trust units are issued and redeemed only on a valuation date and at the net asset value per unit computed on that date. The Equity Index Trust Fund’s financial instruments are valued and its net asset value is computed at the close of the New York Stock Exchange each day it is open for business.  The investment objective of the trust is to seek long-term capital appreciation by investing primarily in common stocks.  Specifically, the trust seeks to replicate the total return of the U.S equity market as represented by the S&P 500 Stock Index.

 

9



 

Notes Receivable from Participants

 

Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest.  Delinquent notes receivable from participants are reclassified as distributions based upon the terms of the Plan document and the loan policy.

 

Administrative Expenses

 

All direct expenses, to the extent allowed by law, are charged to the Plan. Direct expenses include trustee, investment consulting, record-keeping, legal, and auditing expenses related to the Plan.

 

Payment of Benefits

 

Benefit payments to participants are recorded when paid.

 

NOTE C — FAIR VALUE MEASUREMENTS

 

ASC Topic 820, Fair Value Measurements and Disclosure, defines fair value, establishes a framework for measuring fair value, and establishes a fair value hierarchy which prioritizes the inputs to valuation techniques.  Fair value is the price that would be received in an asset sale or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  A fair value measurement assumes that the transaction in an asset sale or to transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market.  Valuation techniques that are consistent with the market, income or cost approach, as specified by ASC Topic 820, are used to measure fair value.

 

The standard describes three levels of inputs that may be used to measure fair value:

 

Level 1  —

 

Inputs to the valuation methodology are quoted prices available in active markets for identical investments as of the reporting date;

 

 

 

Level 2  —

 

Inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value can be determined through the use of models or other valuation methodologies; and

 

 

 

Level 3  —

 

Inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity for the asset or liability and the reporting entity makes estimates and assumptions related to the pricing of the asset or liability including assumptions regarding risk.

 

A financial instrument’s level within the fair value hierarchy 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 methodologies used for instruments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy.

 

Common Stock

 

This investment is valued at the closing price reported on the active market on which the individual security is traded.  This investment is classified within Level 1 of the valuation hierarchy.

 

Mutual Funds

 

These investments are publicly traded investment vehicles, which are valued daily at the closing price reported on the active market on which the individual securities are traded.  These investments are classified within Level 1 of the valuation hierarchy.

 

Common Collective Trust Fund

 

This investment is a public investment vehicle valued using the NAV provided by the administrator of the fund.  The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding.  The fair market value of the Common Collective Trust Fund has been established using the NAV under the practical expedient approach and therefore is not assigned to a level in the hierarchy table.

 

10



 

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 Plan management 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 at the reporting date.  There have been no changes in the methodologies used at December 31, 2015 and 2014.

 

The following table sets forth by level, within the fair value hierarchy, the Plan’s investments measured at fair value on a recurring basis as of December 31, 2015 and 2014.

 

 

 

As of December 31, 2015

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Mutual funds

 

$

555,001,847

 

$

 

$

 

$

555,001,847

 

Kroger Shares

 

10,759,223

 

 

 

10,759,223

 

Total investments in fair value hierarchy

 

$

565,761,070

 

$

 

$

 

565,761,070

 

Investments measured at net asset value

 

 

 

 

 

 

 

26,658,169

 

Total investments at fair value

 

 

 

 

 

 

 

$

592,419,239

 

 

 

 

As of December 31, 2014

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Mutual funds

 

$

557,397,204

 

$

 

$

 

$

557,397,204

 

Kroger Shares

 

2,603,471

 

 

 

2,603,471

 

Total investments in fair value hierarchy

 

$

560,000,675

 

$

 

$

 

560,000,675

 

Investments measured at net asset value

 

 

 

 

 

 

 

27,542,231

 

Total investments at fair value

 

 

 

 

 

 

 

$

587,542,906

 

 

Fair Value Estimated Using Net Asset Value per Share

 

The following table at December 31, 2015 and 2014 sets forth a summary of the Plan’s investments with a reported estimated fair value using net asset value per share:

 

 

 

Fair Value at
December 31,
2015

 

Fair Value at
December 31,
2014

 

Unfunded
Commitment

 

Redemption
Frequency

 

Other
Redemption
Restrictions

 

Redemption
Notice
Period

 

Equity Index Trust

 

$

26,658,169

 

$

27,542,231

 

$

0

 

Daily

 

None

 

90-day advance written notice

 

 

NOTE D — STABLE VALUE FUND

 

The Stable Value Fund is a collective trust fund sponsored by T. Rowe Price Associates, Inc.  Each investor’s beneficial interest in the net assets of the trust is represented by units, an unlimited number of which are authorized. Unit transactions are subject to terms, conditions, and limitations defined in the Declaration of Trust. Trust units are issued and redeemed only on a valuation date and at the net asset value per unit computed on that date.  Trust units may be redeemed on a daily basis to meet benefit payments and other participant initiated withdrawals permitted by retirement plans invested in the trust.  The investment objectives of the trust are to maximize current income consistent with the maintenance of principal and to provide for withdrawals for certain participant initiated transactions under a retirement plan without penalty or adjustment. The trust will attempt to achieve these objectives by investing principally in guaranteed investment contracts (“GICs”) issued by insurance companies; investment contracts issued by banks (“BICs”); structured or synthetic investment contracts (“SICs”) issued by banks, insurance companies, and other issuers, as well as the securities supporting such SICs (underlying assets); separate account contracts; and other similar instruments that are intended to maintain a constant net asset value while permitting participant initiated, benefit-responsive withdrawals for certain events.

 

11



 

The Stable Value Fund investment has been identified as a fully benefit-responsive investment. Participants ordinarily may direct the withdrawal or transfer of all or a portion of their investment at contract value. Contract value represents contributions made to the benefit-responsive investments, plus earnings, less participant withdrawals, and administrative expenses. The benefit-responsive investments impose certain restrictions on the Plan, and the investments themselves may be subject to circumstances that impact their ability to transact at contract value, as described in the following paragraphs. Plan management believes that the occurrence of events that would cause the investments to transact at less than contract value is not probable.

 

All investment contracts held by the Stable Value Fund are effected directly between the trust and the issuer of the contract and are nontransferable. Permitted participant-initiated withdrawals refer to withdrawals from the trust by an employer-sponsored defined contribution plan directly as a result of participant transactions allowed by the Plan, such as participant withdrawals for benefits, loans, or transfers to other funds or trusts within the Plan.

 

NOTE E — INCOME TAX STATUS

 

The Internal Revenue Service (“IRS”) has determined and informed the Company by a letter dated June 7, 2013, that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (“IRC”).  Although the Plan has been amended and restated since the effective date of the determination letter, the Plan’s administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC, except as described below.  On January 29, 2016, the Company submitted to the IRS a request for determination that the Plan and its related trust are qualified under IRC Section 401(a) and 501(a), respectively.

 

GAAP requires the Plan’s management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The Plan’s administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2015 and 2014, there are no uncertain positions taken or expected to be taken that would require recognition of a liability or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no tax audits for any tax periods in progress.

 

On January 29, 2016, the Company submitted to the IRS a request for a compliance statement under the Voluntary Correction Program (“VCP”) to resolve certain Plan operational failures identified by the Plan administrator.  These failures have been or are being corrected in a manner that the Company believes is consistent with established IRS correction procedures. The Plan administrator and counsel for the Plan believe that these failures and the VCP application will not impact the tax qualification of the Plan and that the Plan continues to maintain tax qualified status under the applicable sections of the IRC.  The Plan administrator believes that the final outcome of the VCP will not have a material effect on the Plan’s financial statements.

 

NOTE F — PLAN TERMINATION

 

The Company expects to continue the Plan indefinitely but has the right to amend or terminate the Plan as necessary.  If the Plan were to be terminated, Plan participants would become fully vested in their account balances and all assets of the Plan would be distributed to the individual participants based upon their individual account balances at the date of termination.

 

NOTE G — PARTY-IN-INTEREST TRANSACTIONS

 

Certain Plan assets invested in mutual funds with a fair value of $516,516,655 and $516,729,299 at December 31, 2015 and 2014, respectively, a common collective trust fund with a fair value of $26,658,169 and $27,542,231 at December 31, 2015 and 2014, respectively, and a fully benefit-responsive investment contract with a contract value of $48,787,607 and $47,374,622 at December 31, 2015 and 2014, respectively, are managed by the Trustee or by T. Rowe Price Associates, Inc. (a company related to the

 

12



 

Trustee through common ownership).  Such transactions qualify as party-in-interest transactions as defined by ERISA.  Fees paid by the Plan to the Trustee for administrative services were $4,750 for the year ended December 31, 2015.  There are additional fees paid by the Plan to parties-in-interest for investment management and other services, which are included in the net appreciation/depreciation and/or administrative expenses reported in the statement of changes in net assets available for benefits.

 

At December 31, 2015, the Plan held 256,721 shares of Kroger Shares with a fair value of $10,759,223.  At December 31, 2014, the Plan held 40,197 shares of Kroger Shares with a fair value of $2,603,471.

 

NOTE H — RISKS AND UNCERTAINTIES

 

The Plan provides for investments in various investment securities which, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility risks.  Further, due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near-term and such changes could materially affect the participants’ account balances and amounts reported in the statements of net assets available for benefits.

 

NOTE I — SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events since the date of these financial statements. The Company has determined there are no other material subsequent events which require adjustment to or additional disclosure in the Plan’s financial statements.

 

NOTE J — RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500

 

The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500 at December 31, 2015 and 2014:

 

 

 

2015

 

2014

 

Net assets available for benefits per the financial statements

 

$

690,812,576

 

$

680,859,156

 

Adjustment from contract value to fair value for fully benefit-responsive investment contracts

 

38,786

 

696,881

 

Net assets available for benefits per the Form 5500

 

$

690,851,362

 

$

681,556,037

 

 

The following is a reconciliation of the net increase in net assets available for benefits per the financial statements to net increase in net assets available for benefits per the Form 5500 for the year ended December 31, 2015:

 

Net increase in net assets available for benefits per the financial statements

 

$

9,953,420

 

Prior year adjustment from contract value to fair value for fully benefit-responsive investment contracts

 

(696,881

)

Current year adjustment from contract value to fair value for fully benefit-responsive investment contracts

 

38,786

 

Net increase in net assets available for benefits per the Form 5500

 

$

9,295,325

 

 

13



 

HARRIS TEETER SUPERMARKETS, INC. RETIREMENT AND SAVINGS PLAN
SCHEDULE H, LINE 4i — SCHEDULE OF ASSETS (HELD AT END OF YEAR)
EMPLOYER IDENTIFICATION NUMBER:  56-0905940
PLAN NUMBER:  003
December 31, 2015

 

 

 

 

 

(c)

 

 

 

 

 

 

 

 

 

(b)

 

Description of Investment, including

 

 

 

 

 

 

 

 

 

Identity of Issue, borrower,

 

maturity date, rate of interest,

 

 

 

(d)

 

(e)

 

(a)

 

lessor, or similar party

 

collateral, par, or maturity value

 

Shares

 

Cost**

 

Current Value

 

 

 

 

 

 

 

 

 

 

 

 

 

FULLY BENEFIT-RESPONSIVE INVESTMENT CONTRACT, AT CONTRACT VALUE

*

 

T. Rowe Price Associates, Inc.

 

Stable Value Fund

 

48,787,607

 

 

 

$

48,787,607

 

 

 

 

 

 

 

 

 

 

 

 

 

MUTUAL FUNDS

 

 

American Funds

 

Cap World Growth & Income Fund

 

219,621

 

 

 

9,520,558

 

 

 

Loomis Sayles

 

Core Plus Bond Fund

 

1,107,955

 

 

 

13,605,682

 

 

 

Harding Loevnr

 

International Equity Instl Fund

 

422,209

 

 

 

7,219,766

 

 

 

Prudential

 

Global Real Estate Fund

 

88,957

 

 

 

2,106,512

 

 

 

Harbor

 

Small Cap Growth Opp Instl Fund

 

593,767

 

 

 

6,032,674

 

*

 

T. Rowe Price Associates, Inc.

 

U.S. Bond Index Fund

 

241,585

 

 

 

2,633,280

 

*

 

T. Rowe Price Associates, Inc.

 

Retirement 2005 Fund

 

229,096

 

 

 

2,847,666

 

*

 

T. Rowe Price Associates, Inc.

 

Retirement 2010 Fund

 

492,078

 

 

 

8,306,271

 

*

 

T. Rowe Price Associates, Inc.

 

Retirement 2015 Fund

 

1,666,044

 

 

 

22,791,486

 

*

 

T. Rowe Price Associates, Inc.

 

Retirement 2020 Fund

 

3,443,917

 

 

 

67,810,731

 

*

 

T. Rowe Price Associates, Inc.

 

Retirement 2025 Fund

 

5,624,664

 

 

 

84,088,724

 

*

 

T. Rowe Price Associates, Inc.

 

Retirement 2030 Fund

 

3,455,408

 

 

 

75,362,457

 

*

 

T. Rowe Price Associates, Inc.

 

Retirement 2035 Fund

 

3,215,608

 

 

 

50,774,455

 

*

 

T. Rowe Price Associates, Inc.

 

Retirement 2040 Fund

 

2,117,200

 

 

 

47,806,386

 

*

 

T. Rowe Price Associates, Inc.

 

Retirement 2045 Fund

 

2,591,261

 

 

 

39,283,523

 

*

 

T. Rowe Price Associates, Inc.

 

Retirement 2050 Fund

 

1,243,817

 

 

 

15,846,231

 

*

 

T. Rowe Price Associates, Inc.

 

Retirement 2055 Fund

 

1,271,179

 

 

 

16,156,684

 

*

 

T. Rowe Price Associates, Inc.

 

Value Fund

 

317,883

 

 

 

9,933,833

 

*

 

T. Rowe Price Associates, Inc.

 

Small Cap Value Fund

 

170,932

 

 

 

6,208,232

 

*

 

T. Rowe Price Associates, Inc.

 

Blue Chip Growth Fund

 

921,065

 

 

 

66,666,696

 

 

 

 

 

Total Mutual Funds

 

 

 

$

555,001,847

 

 

 

 

 

 

 

 

 

 

 

 

 

COMMON COLLECTIVE TRUST FUND, AT FAIR VALUE

*

 

T. Rowe Price Associates, Inc.

 

Equity Index Trust

 

372,737

 

 

 

$

26,658,169

 

 

 

 

 

 

 

 

 

 

 

 

 

COMMON STOCK

*

 

The Kroger Co.

 

Kroger Shares

 

256,721

 

 

 

$

10,759,223

 

 

 

 

 

 

 

 

 

 

 

 

 

PARTICIPANT LOANS***

*

 

Participant Loans***

 

Interest rates ranging from 4.25% to 9.25%, maturing through October 2030.

 

 

 

 

 

$

32,983,391

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

674,190,237

 

 


*

Party-in-Interest to the Plan

**

Cost omitted for participant directed investments.

***

The accompanying financial statements classify participant loans as notes receivable from participants.

 

14



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

HARRIS TEETER SUPERMARKETS, INC. RETIREMENT AND SAVINGS PLAN

 

 

 

 

By:

Harris Teeter Supermarkets, Inc., as Plan Sponsor

 

 

 

 

 

 

Date: June 9, 2016

By:

/s/ Scott K. Nations

 

 

Vice President

 

15



 

EXHIBIT INDEX

 

Exhibit No.

 

 

 

 

 

23.1

 

Consent of Independent Registered Public Accounting Firm

 

16