Kroger 2011 Annual Report Download - page 32

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30
The value of the performance-based awards, or performance units, reflected in the table is as follows:
Mr. Dillon: $499,441; Mr. Schlotman: $80,376; Mr. McMullen: $161,033; Mr. Heldman: $76,431; and
Mr. Donnelly: $44,661. The reported amounts reflect the aggregate fair value at the grant date based on
the probable outcome of the performance conditions. These amounts are consistent with the estimate
of aggregate compensation cost to be recognized by the Company over the three-year service period of
the award determined as of the grant date under FASB ASC Topic 718, excluding the effect of estimated
forfeitures.
Assuming that the highest level of performance conditions are achieved, the value of the performance-
based awards at the grant date is as follows: Mr. Dillon: $1,849,781; Mr. Schlotman: $297,687; Mr. McMullen:
$596,417; Mr. Heldman: $283,077; and Mr. Donnelly: $165,411. These amounts are not reflected in
the table.
(3) These amounts represent the aggregate grant date fair value of awards computed in accordance with
FASB ASC Topic 718.
(4) Non-equity incentive plan compensation for 2011 consists of payments under an annual cash bonus
program and a long-term cash bonus program. In accordance with the terms of the 2011 performance-
based annual cash bonus program, Kroger paid 138.666% of bonus potentials for the executive officers
including the named executive officers. Payments were made in the following amounts: Mr. Dillon:
$2,079,990; Mr. Schlotman: $727,997; Mr. McMullen: $1,386,660; Mr. Heldman: $762,663; and
Mr. Donnelly: $473,332. These amounts were earned with respect to performance in 2011, and paid in
March 2012.
The 2008 Long-Term Bonus Plan is a performance-based cash bonus plan designed to reward participants
for improving the long-term performance of the Company. The plan covered performance during fiscal
years 2008, 2009, 2010, and 2011, and the bonus potential amount equalled the executive’s salary in effect
on the last day of fiscal year 2007. The following amounts represent payouts at 52.25% of bonus potentials
that were earned under the plan and were paid in March 2012: Mr. Dillon: $619,163; Mr. Schlotman:
$274,313; Mr. McMullen: $435,243; Mr. Heldman: $347,463; and Mr. Donnelly: $222,063.
(5) Amounts are attributable to change in pension value and preferential earnings on nonqualified deferred
compensation. During 2011, pension values increased primarily due to: (i) a decrease in the discount
rate for the plans, as determined by the plan actuary; (ii) increases in final average earnings used in
determining pension benefits; (iii) an additional year of credited service; and (iv) an increase in present
value due to participant aging. Since the benefits are based on final average earnings and service, the
effect of the final average earnings increase is larger for those with longer service. Please refer to the
2011 Pension Benefits Table for further information regarding credited service.
Under the Company’s deferred compensation plan, deferred compensation earns interest at the rate
representing Kroger’s cost of ten-year debt as determined by Kroger’s CEO prior to the beginning
of each deferral year. For each participant, a separate deferral account is created each year, and the
interest rate established under the plan for that year is applied to that deferral account until the deferred
compensation is paid out. If the interest rate established by the Company for a particular year exceeds
120% of the applicable federal long-term interest rate that corresponds most closely to the Company rate,
the amount by which the Company rate exceeds 120% of the corresponding federal rate is deemed to
be above-market or preferential. In eleven of the eighteen years in which at least one named executive
officer deferred compensation, the Company rate set under the plan for that year exceeds 120% of the
corresponding federal rate. For each of the deferral accounts in which the Company rate is deemed
to be above-market, the Company calculates the amount by which the actual annual earnings on the
account exceed what the annual earnings would have been if the account earned interest at 120% of the
corresponding federal rate, and discloses those amounts as preferential earnings. Amounts deferred in
2011 earn interest at a rate lower than 120% of the corresponding federal rate, accordingly there are no
preferential earnings on these amounts.