Kroger 2012 Annual Report Download - page 25

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23
officer’s total cash compensation is dependent upon Kroger’s performance. Finally, the Committee considers
the reports of its compensation consultants to assess the bonus potential of the named executive officers in
light of total compensation paid to comparable executive positions in the industry.
The annual cash bonus potential in effect at the end of the year for each named executive officer is
shown below. Actual bonus payouts are prorated to reflect changes, if any, to bonus potentials during the year.
Annual Bonus Potential
2010 2011 2012
David B. Dillon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,500,000 $1,500,000 $1,500,000
J.฀Michael฀Schlotman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 525,000 $ 525,000 $ 550,000
W.฀Rodney฀McMullen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000,000 $1,000,000 $1,000,000
Paul W. Heldman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 550,000 $ 550,000 $ 550,000
Kathleen S. Barclay* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — $ 550,000
*฀ Ms.฀Barclay฀became฀a฀named฀executive฀officer฀in฀2012.
Over฀time฀the฀Committee฀has฀placed฀an฀increased฀emphasis฀on฀our฀strategic฀plan฀by฀making฀the฀target฀
more difficult to achieve. The bonus plan allows for minimal bonus to be earned at relatively low levels to
provide incentive for achieving even higher levels of performance.
The amount of bonus that the named executive officers earn each year is determined by Kroger’s
performance compared to targets established by the Committee based on the business plan adopted by the
Board฀of฀Directors.฀In฀2012,฀one-third฀of฀the฀bonus฀was฀based฀on฀a฀target฀for฀identical฀supermarket฀sales฀without฀
fuel; one-third was based on a target for EBITDA without fuel; and one-third was based on implementation
and results of a set of measures under our strategic plan. An additional 5% would be earned if Kroger achieved
three฀goals฀with฀respect฀to฀its฀supermarket฀fuel฀operations:฀achievement฀of฀the฀targeted฀fuel฀EBITDA,฀increase฀
of at least 3% in total gallons sold, and achievement of the planned number of fuel centers placed in service.
Following the close of the year, the Committee reviewed Kroger’s performance against the identical
sales without fuel, EBITDA without fuel, and strategic plan objectives and determined the extent to which
Kroger achieved those objectives. Kroger’s EBITDA without fuel for 2012 was $4.118 billion and Kroger’s
identical฀ supermarket฀ sales฀ without฀ fuel฀ for฀ 2012฀ were฀ 3.5%.฀ In฀ 2012,฀ Kroger’s฀ supermarket฀ fuel฀ EBITDA฀
was $215.818 million, which exceeded the goal of $153.425 million necessary to earn a bonus for the fuel
component.฀Kroger’s฀sale฀of฀fuel฀in฀supermarket฀fuel฀centers฀was฀4.250฀billion฀gallons,฀or฀9.7%฀over฀the฀prior฀
year.฀We฀operated฀1,169฀supermarket฀fuel฀centers฀as฀of฀the฀end฀of฀2012,฀exceeding฀our฀goal฀of฀1,150฀centers.฀
As a result, the payout percentage included the additional 5% fuel bonus. Due to our performance when
compared to the targets established by the Committee, and based on the business plan adopted by the Board
of Directors, the named executive officers earned 85.881% of their bonus potentials This is the same bonus
percentage payout received by all other participants in the annual corporate bonus plan.
The 2012 targets established by the Committee for annual bonus amounts based on identical sales and
EBITDA results, the actual 2012 results, and the bonus percentage earned in each of the components of named
executive฀officer฀bonus,฀were฀as฀follows:
Targets
Component Minimum 100% Result Amount Earned
Identical Sales without fuel . . . . . . . . . . . . 1.6% 3.6% 3.5% 31.170%
EBITDA without fuel . . . . . . . . . . . . . . . . . $3.589 Billion $4.222 Billion* $4.118 Billion 16.871%
Strategic Plan. . . . . . . . . . . . . . . . . . . . . . . ** ** ** 32.840%
Fuel Bonus . . . . . . . . . . . . . . . . . . . . . . . . . [as described in the text above] 5.000%
Total Earned . . . . . . . . . . . . . . . . . . . . . . . 85.881%
* Payout is at 125% if identical sales goal is achieved.
** The Strategic Plan component also was established by the Committee, but is not disclosed as it is
competitively sensitive.