Kroger 2012 Annual Report Download - page 86

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A-28
next few years, excluding acquisitions and purchases of leased facilities, to accomplish our strategy.
We expect total food store square footage for 2013 to grow approximately 1.5% before acquisitions and
operational closings.
•฀ Based฀ on฀ current฀ operating฀ trends,฀ we฀ believe฀ that฀ cash฀ flow฀ from฀ operations฀ and฀ other฀ sources฀ of฀
liquidity, including borrowings under our commercial paper program and bank credit facility, will be
adequate to meet anticipated requirements for working capital, capital expenditures, interest payments
and scheduled principal payments for the foreseeable future. We also believe we have adequate coverage
under our debt covenants to continue to respond effectively to competitive conditions.
•฀ We฀believe฀we฀have฀adequate฀sources฀of฀cash,฀if฀needed,฀under฀our฀credit฀facility฀and฀other฀borrowing฀
sources for the next twelve months and for the foreseeable future beyond the next twelve months.
•฀ We฀expect฀that฀our฀OG&A฀results฀will฀be฀affected฀by฀increased฀costs,฀such฀as฀higher฀employee฀benefit฀
costs and credit card fees, offset by improved productivity from process changes and leverage gained
through sales increases.
•฀ We฀expect฀that฀our฀effective฀tax฀rate฀for฀2013฀will฀be฀approximately฀35.5%,฀excluding฀the฀effect฀of฀the฀
resolution of any tax issues.
•฀ We฀expect฀rent฀expense,฀as฀a฀percentage฀of฀total฀sales฀and฀excluding฀closed-store฀activity,฀will฀decrease฀
due to the emphasis our current strategy places on ownership of real estate.
•฀ We฀ believe฀ that฀ in฀ 2013฀ there฀ will฀ be฀ opportunities฀ to฀ reduce฀ our฀ operating฀ costs฀ in฀ such฀ areas฀ as฀
administration, productivity improvements, shrink, warehousing and transportation. We intend to invest
most of these savings in our core business to drive profitable sales growth and offer improved value and
shopping experiences for our customers.
•฀ In฀ February฀ 2013,฀ we฀ contributed฀ $100฀ million฀ to฀ the฀ Company-sponsored฀ defined฀ benefit฀ pension฀
plans and do not expect to make any additional contributions in 2013. We expect contributions made
during 2013 will decrease our 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 additional contributions. We expect
2013 expense for Company-sponsored defined benefit pension plans to be approximately $80 million.
In addition, we expect 401(k) Retirement Savings Account Plan cash contributions and expense from
automatic and matching contributions to participants to increase slightly in 2013, compared to 2012.
•฀ We฀expect฀to฀contribute฀approximately฀$225฀million฀to฀multi-employer฀pension฀plans฀in฀2013,฀subject฀to฀
collective bargaining. In addition, excluding all payments to the UFCW consolidated pension plan and
the pension plans that were consolidated into the UFCW consolidated pension plan, we expect increases
in expense as a result of increases in multi-employer pension plan contributions over the next few years.
•฀ We฀do฀not฀anticipate฀additional฀goodwill฀impairments฀in฀2013.฀
•฀ In฀2013,฀we฀expect฀to฀refinance฀$1.5฀billion฀of฀debt.฀We฀plan฀on฀refinancing฀our฀debt฀maturities฀in฀2013฀
along with an additional issuance of approximately $500 million to replace the senior notes bearing an
interest rate of 5.5% that matured in the fourth quarter of 2012. The debt that matured in the fourth
quarter of 2012 was previously refinanced with commercial paper.
•฀ We฀ have฀ various฀ labor฀ agreements฀ that฀ will฀ be฀ renegotiated฀ in฀ 2013,฀ covering฀ store฀ employees฀ in฀
Indianapolis, Dallas, Houston, Seattle and Cincinnati, among others. Upon the expiration of our
collective bargaining agreements, work stoppages by the affected workers could occur if we are unable
to negotiate new contracts with labor unions. A prolonged work stoppage affecting a substantial number
of locations could have a material adverse effect on our results. In all of these contracts, rising health care
and pension costs will continue to be an important issue in negotiations.