CINCINNATI, May 21, 2021 /PRNewswire/ -- The Kroger Co.
(NYSE: KR) today announced that certain associates within the Fred
Meyer and QFC divisions have ratified an agreement with four local
unions for the transfer of liabilities from the Sound Retirement
Trust to the UFCW Consolidated Pension Plan. This new arrangement
will help secure the pension benefits of more than 10,600 Kroger
Family of Companies' associates and is expected to minimize the
organization's exposure to market risk going forward while also
reducing administrative costs.
"I am delighted we have reached an agreement to address the
underfunding of the Sound Retirement Trust, which is ineligible for
relief under the Emergency Pension Plan Relief Act of 2021. This
agreement is a great outcome for our associates as it better
protects previously earned benefits and will stabilize future
benefits," said Gary Millerchip,
Kroger's CFO.
"As with previously announced pension restructuring agreements,
this agreement allows us to minimize future exposure to market
risk, produces a return on investment above our internal hurdle
rate by mitigating future costs and provides a more secure future
for our associates' pension benefits. The proactive steps Kroger
has taken over many years to address the significant underfunding
challenges faced by multi-employer pension plans, puts us in a
position of strength to continue to deliver strong and sustainable
total shareholder return," continued Millerchip.
This agreement has been approved by the UFCW Consolidated
Pension Plan, the Pension Benefit Guaranty Corporation, Sound
Retirement Trust, and the local unions. As a result, Kroger will
transfer approximately $400 million
in net accrued pension liabilities, on a pre-tax basis, to fulfill
obligations for past service for associates and retirees from the
Sound Retirement Trust to the UFCW Consolidated Pension Plan. On an
after-tax basis, approximately $310
million would be needed to execute this transaction. This
agreement will be satisfied by installment payments to the UFCW
Consolidated Pension Plan and is expected to be paid evenly over
the next six years. Benefits for future service for these
associates are expected to accrue in a newly created variable
annuity pension plan administered by the Sound Retirement
Trust.
As a result of this agreement, the organization will incur a
charge to net earnings during the first quarter of 2021. The charge
to net earnings is estimated to be approximately $0.40 per diluted share on a GAAP basis. This
does not affect adjusted earnings per diluted share results for
2021, which are provided on a basis that excludes adjustment items
such as this contribution.
Capital Allocation Strategy
The organization
continues to generate strong free cash flow and remains committed
to investing in the business to drive long-term sustainable
earnings growth, maintaining its current investment grade debt
rating, and returning excess free cash flow to shareholders via
share repurchase and a growing dividend over time.
About Kroger
At The Kroger Co. (NYSE: KR), we
are dedicated to our Purpose: to Feed the Human Spiritâ„¢. We are,
across our family of companies nearly half a million associates who
serve over nine million customers daily through a seamless digital
shopping experience and 2,800 retail food stores under a variety of
banner names, serving America through food inspiration and uplift,
and creating #ZeroHungerZeroWaste communities by 2025. To learn
more about us, visit our newsroom and investor
relations site.
This press release contains certain statements that constitute
"forward-looking statements" about the future performance of the
Company. These statements are based on management's assumptions and
beliefs in light of the information currently available to it. Such
statements are indicated by words or phrases such as "achieve,"
"believe," "contemplates," "continue," "deliver," "expect,"
"future," "guidance," "strategy," "target," "trends," and "will."
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
"Risk Factors" in our annual report on Form 10-K for our last
fiscal year and any subsequent filings, as well as the
following:
- Kroger's ability to achieve sales, earnings, incremental FIFO
operating profit, and adjusted free cash flow goals may be
affected by: COVID-19 related factors, risks and challenges,
including among others, the length of time that the pandemic
continues, the temporary inability of customers to shop due to
illness, quarantine, or other travel restrictions or financial
hardship, shifts in demand away from discretionary or higher priced
products to lower priced products, or stockpiling or similar
pantry-filling activities, reduced workforces which may be caused
by, but not limited to, the temporary inability of the workforce to
work due to illness, quarantine, or government mandates, temporary
store closures due to reduced workforces or government mandates, or
the availability and efficacy of a vaccine; labor negotiations or
disputes; changes in the types and numbers of businesses that
compete with Kroger; pricing and promotional activities of existing
and new competitors, including non-traditional competitors, and the
aggressiveness of that competition; Kroger's response to these
actions; the state of the economy, including interest rates, the
inflationary and deflationary trends in certain commodities,
changes in tariffs, and the unemployment rate; the effect that fuel
costs have on consumer spending; volatility of fuel margins;
changes in government-funded benefit programs and the extent and
effectiveness of any COVID-19 stimulus packages; manufacturing
commodity costs; diesel fuel costs related to Kroger's logistics
operations; trends in consumer spending; the extent to which
Kroger's customers exercise caution in their purchasing in response
to economic conditions; the uncertainty of economic growth or
recession; changes in inflation or deflation in product and
operating costs; stock repurchases; Kroger's ability to retain
pharmacy sales from third party payors; consolidation in the
healthcare industry, including pharmacy benefit managers; Kroger's
ability to negotiate modifications to multi-employer pension plans;
natural disasters or adverse weather conditions; the effect of
public health crises or other significant catastrophic events,
including the coronavirus; the potential costs and risks associated
with potential cyber-attacks or data security breaches; the success
of Kroger's future growth plans; the ability to execute our growth
strategy and value creation model, including continued cost
savings, growth of our alternative profit businesses, and widening
and deepening our strategic moats of fresh, our brands,
personalization, and seamless; and the successful integration of
merged companies and new partnerships. Our ability to achieve these
goals may also be affected by our ability to manage the factors
identified above. Our ability to execute our financial strategy may
be affected by our ability to generate cash flow.
- Kroger's 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.
Kroger assumes no obligation to update the information contained
herein unless required by applicable law. Please refer to Kroger's
reports and filings with the Securities and Exchange Commission for
a further discussion of these risks and uncertainties
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SOURCE The Kroger Co.