Kroger 2014 Annual Report Download - page 89

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($395) million in 2013 and $1.3 billion in 2012. Please refer to the “Debt Management” section of MD&A
for additional information. We repurchased $1.3 billion of Kroger common shares in 2014, compared to
$609 million in 2013 and $1.3 billion in 2012. We paid dividends totaling $338 million in 2014, $319 million
in 2013 and $267 million in 2012.
Debt Management
Total debt, including both the current and long-term portions of capital lease and lease-financing
obligations increased $346 million to $11.7 billion as of year-end 2014, compared to 2013. The increase in
2014, compared to 2013, resulted primarily from the issuance of (i) $500 million of senior notes bearing an
interest rate of 2.95% and (ii) an increase in commercial paper of $25 million, partially offset by payments at
maturity of $300 million of senior notes bearing an interest rate of 4.95%. The increase in financing obligations
was due to partially funding our outstanding common share repurchases.
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 the 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.
Liquidity Needs
We estimate our liquidity needs over the next twelve-month period to be approximately $5.2 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 2014. 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 $1.3 billion of commercial paper
and $500 million of senior notes maturing in the next twelve months, which is included in the $5.2 billion
in estimated liquidity needs. We expect to refinance this debt, in 2015, 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 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 $2.75 billion under our commercial paper
(“CP”) program. At January 31, 2015, we had $1.3 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