Kroger 2013 Annual Report Download - page 101

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A-28
•฀ 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