Kroger 2011 Annual Report Download - page 81

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A-26
•฀ If฀ volatility฀ in฀ the฀ financial฀ markets฀ continues฀ or฀ worsens,฀ our฀ contributions฀ to฀ Company-sponsored฀
defined benefit pension plans could increase more than anticipated in future years.
•฀ Changes฀in฀laws฀or฀regulations,฀including฀changes฀in฀accounting฀standards,฀taxation฀requirements฀and฀
environmental laws may have a material effect on our financial statements.
•฀ Changes฀ in฀ the฀ general฀ business฀ and฀ economic฀ conditions฀ in฀ our฀ operating฀ regions฀ may฀ affect฀ the฀
shopping habits of our customers, which could affect sales and earnings.
•฀ 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. Although this negatively
affects our FIFO gross margin, gasoline sales provide a positive effect on OG&A expense as a percentage
of sales.
•฀ Our฀ capital฀ expenditures,฀ expected฀ square฀ footage฀ growth,฀ and฀ number฀ of฀ store฀ projects฀ completed฀
over the next fiscal year 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.
•฀ Interest฀expense฀could฀be฀adversely฀affected฀ by฀the฀interest฀rate฀ environment,฀changes฀in฀ our฀ credit฀
ratings, fluctuations in the amount of outstanding debt, decisions to incur prepayment penalties on the
early redemption of debt and any factor that adversely affects our operations and results in an increase
in debt.
•฀ Impairment฀losses,฀including฀goodwill,฀could฀be฀affected฀by฀changes฀in฀our฀assumptions฀of฀future฀cash฀
flows, market values or business valuations in the market. Our cash flow projections include several
years of projected cash flows which would be affected by changes in the economic environment, real
estate market values, competitive activity, inflation and customer behavior.
•฀ Our฀estimated฀ expense฀and฀ obligation฀for฀Kroger-sponsored฀pension฀plans฀and฀other฀post-retirement฀
benefits could be affected by changes in the assumptions used in calculating those amounts. These
assumptions include, among others, the discount rate, the expected long-term rate of return on plan
assets, average life expectancy and the rate of increases in compensation and health care costs.
•฀ Adverse฀ weather฀ conditions฀ could฀ increase฀ the฀ cost฀ our฀ suppliers฀ charge฀ for฀ their฀ products,฀ or฀ may฀
decrease customer demand for certain products. Increases in demand for certain commodities could
also increase the cost our suppliers charge for their products. Additionally, increases in the cost of
inputs, such as utility costs or raw material costs, could negatively affect financial ratios and earnings.
•฀ Although฀we฀presently฀operate฀only฀in฀the฀United฀States,฀civil฀unrest฀in฀foreign฀countries฀in฀which฀our฀
suppliers do business may affect the prices we are charged for imported goods. If we are unable to pass
on these increases to our customers, our FIFO gross margin and net earnings would suffer.
•฀ Earnings฀and฀sales฀also฀may฀be฀affected฀by฀adverse฀weather฀conditions,฀particularly฀to฀the฀extent฀that฀
hurricanes, tornadoes, floods, earthquakes, and other conditions disrupt our operations or those of our
suppliers; create shortages in the availability or increases in the cost of products that we sell in our stores
or materials and ingredients we use in our manufacturing facilities; or raise the cost of supplying energy
to our various operations, including the cost of transportation.
Other factors and assumptions not identified above could also cause actual results to differ materially
from those set forth in the forward-looking information. Accordingly, actual events and results may vary
significantly from those included in, contemplated or implied by forward-looking statements made by us or
our representatives.