Kroger 2010 Annual Report Download - page 107

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•฀ 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฀2011฀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.
•฀ We฀do฀not฀expect฀to฀make฀a฀cash฀contribution฀to฀the฀Company-sponsored฀defined฀benefit฀pension฀
plans during 2011. If a contribution is made to the Company-sponsored defined benefit pension plans,
we expect any elective contributions made during 2011 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 any additional contributions. We expect 2011 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 2011, compared to 2010.
•฀ We฀ expect฀ to฀ contribute฀ approximately฀ $300฀ million฀ to฀ multi-employer฀ pension฀ plans฀ in฀ 2011,฀
subject to collective bargaining. In addition, we expect meaningful 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฀2011.฀
•฀ We฀have฀various฀labor฀agreements฀that฀will฀be฀negotiated฀in฀2011,฀covering฀store฀employees฀in฀southern฀
California, Memphis and West Virginia. We will also negotiate agreements with the Teamsters who
represent some of our associates in distribution and manufacturing operation in the Midwest. 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.
•฀ We฀expect฀our฀business฀model฀to฀produce฀annual฀earnings฀per฀diluted฀share฀growth฀on฀average฀of฀
6.0% to 8.0% over each rolling three to five year time period. Including our dividend, our business
model is expected to generate total shareholder return on average of 8.0% to 10.0% over each rolling
three to five year time period.
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.
•฀ Changes฀in฀market฀conditions฀could฀affect฀our฀cash฀flow.
•฀ Our฀ ability฀ to฀ achieve฀ sales฀ and฀ earnings฀ goals฀ may฀ be฀ affected฀ by:฀ labor฀ disputes;฀ industry฀
consolidation; 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 increased fuel costs have on consumer