Kroger 2012 Annual Report Download - page 87

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A-29
Various uncertainties and other factors could cause us to fail to achieve our goals. 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.
•฀ Changes฀in฀market฀conditions฀could฀affect฀our฀cash฀flow.
•฀ Our฀ability฀to฀achieve฀sales฀and฀earnings฀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; and the success of our future growth plans. The
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.
•฀ Our฀product฀cost฀inflation฀could฀vary฀from฀our฀estimate฀due฀to฀general฀economic฀conditions,฀weather,฀
availability of raw materials and ingredients in the products that we sell and their packaging, and other
factors beyond our control.
•฀ Our฀ ability฀ to฀ pass฀ on฀ product฀ cost฀ increases฀ will฀ depend฀ on฀ the฀ reactions฀ of฀ our฀ customers฀ and฀
competitors to those increases.
•฀ Our฀ability฀to฀use฀free฀cash฀flow฀to฀continue฀to฀maintain฀our฀debt฀coverage฀and฀to฀reward฀our฀shareholders฀
could be affected by unanticipated increases in net total debt, our inability to generate free cash flow at
the levels anticipated, and our failure to generate expected earnings.
•฀ During฀the฀first฀three฀quarters฀of฀the฀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 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.
•฀ In฀addition฀to฀the฀factors฀identified฀above,฀our฀identical฀store฀sales฀growth฀could฀be฀affected฀by฀increases฀
in Kroger private label sales, the effect of our “sister stores” (new stores opened in close proximity to an
existing store) and reductions in retail pricing.
•฀ Our฀operating฀margins,฀without฀fuel,฀could฀decline฀or฀fail฀to฀meet฀expectations฀if฀we฀are฀unable฀to฀pass฀
on any cost increases, if we fail to deliver the cost savings contemplated or if changes in the cost of our
inventory and the timing of those changes differ from our expectations.