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KR > SEC Filings for KR > Form 8-K on 5-Dec-2013All Recent SEC Filings

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Form 8-K for KROGER CO


Results of Operations and Financial Condition, Regulation FD Disclosure, Financial Stat

Item 2.02 Results of Operations and Financial Condition.

On December 5, 2013, the Company released its earnings for third quarter 2013. Attached hereto as Exhibit 99.1, and filed herewith, is the text of that release.

Item 7.01 Regulation FD Disclosure.

2013 Annual Guidance, unless otherwise noted:

Identical supermarket sales          3.0% to 3.5% for the fourth quarter of 2013
growth (excluding fuel sales)

Net earnings per diluted share       $2.73 to $2.80, excluding certain tax items
                                     and expenses related to the pending Harris
                                     Teeter merger, and assuming a $55 million
                                     LIFO charge

Non-fuel FIFO operating profit       We expect full-year FIFO operating margin
margin                               in 2013, excluding fuel, to expand slightly
                                     compared to fiscal 2012 results, excluding
                                     the 53rd week of 2012 and 2012 and 2013
                                     adjustment items.

Capital investments                  Approximately $2.4 billion, excluding
                                     mergers, acquisitions and purchases of
                                     leased property.  These capital projects
                                     include approximately 45-50 major projects
                                     covering new stores, expansions and
                                     relocations, 130 to 160 remodels, and other
                                     investments including technology and
                                     infrastructure to support our Customer
                                     1st business strategy.

Supermarket square footage growth    Approximately 1.5% before mergers,
                                     acquisitions and operational closings

Expected tax rate                    Approximately 35.5%, excluding the
                                     resolution of any tax issues and benefits
                                     from certain tax items

LIFO                                 $55 million

Pension Contributions/ Expenses      Company-sponsored pension plans
                                     We expect 2013 expense to be approximately
                                     $75 million.  We made a cash contribution
                                     of $100 million in February 2013, and we do
                                     not expect to make additional contributions
                                     in 2013.

                                     401(k) plan
                                     For 2013, we expect a slight increase in
                                     our cash contributions and expense compared
                                     to 2012.

                                     Multi-employer plans
                                     In 2013, we expect to contribute
                                     approximately $225 million to
                                     multi-employer pension funds.

Labor                                In the remainder of 2013, we will negotiate
                                     an agreement with the UFCW for store
                                     associates in Cincinnati. 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.

2014 Guidance:

Looking forward to 2014, we expect our earnings per share growth rate to be 8 - 11%, excluding the effect of the Harris Teeter merger and tax benefits, which is consistent with our long term growth objective.

Long Term Guidance:

Our long term net earnings per diluted share growth rate guidance is 8 - 11%, plus a dividend that we expect to grow over time.

Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. These include the specific risk factors identified in our annual report on Form 10-K for our last fiscal year and any subsequent filings, as well as the following:

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 free 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 free 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; 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 capital investments could differ from our estimate if we are unsuccessful in acquiring suitable sites for new stores, if development costs vary from those budgeted, if our logistics and technology or store projects are not completed on budget or within the time frame projected, or if economic conditions fail to improve, or worsen.

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.

Our effective tax rate may differ from the expected rate due to changes in laws, the status of pending items with various taxing authorities, and the deductibility of certain expenses.

The actual amount of automatic and matching cash contributions to our
401(k) Retirement Savings Account Plan will depend on the number of participants, savings rate, compensation as defined by the plan, and length of service of participants.

Changes in our product mix may negatively affect certain financial indicators. For example, we continue to add supermarket fuel centers to our store base. Since gasoline generates low profit margins, we expect to see our FIFO gross profit margins decline as gasoline sales increase.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

99.1 Earnings release for third quarter 2013, filed herewith.

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