Kroger 2012 Annual Report Download - page 32

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(4)฀ Non-equity฀ incentive฀ plan฀ compensation฀ for฀ 2012฀ consists฀ of฀ the฀ following฀ three฀ amounts฀ for฀ each฀
named฀executive฀officer:
In accordance with the terms of the 2012 performance-based annual cash bonus program, Kroger paid
85.881% of bonus potentials for the executive officers including the named executive officers. Payments
were฀made฀in฀the฀following฀amounts:฀Mr.฀Dillon:฀$1,288,215;฀Mr.฀Schlotman:฀$461,813;฀Mr.฀McMullen:฀
$858,810;฀Mr.฀Heldman:฀$472,346;฀and฀Ms.฀Barclay:฀$472,346.฀These฀amounts฀were฀earned฀with฀respect฀
to฀performance฀in฀2012,฀and฀paid฀in฀March฀2013.
The 2010 Long-Term Bonus Plan is a performance-based bonus plan designed to reward participants
for improving the long-term performance of the Company. The plan covered performance during fiscal
years 2010, 2011 and 2012, and the cash bonus potential amount equaled the executive’s salary in effect
on the last day of fiscal year 2009. The following amounts represent payouts at 24.75% of bonus potentials
that฀were฀earned฀under฀the฀plan฀and฀were฀paid฀in฀March฀2013:฀Mr.฀Dillon:฀$311,850;฀Mr.฀Schlotman:฀
$140,333;฀Mr.฀McMullen:฀$220,275;฀Mr.฀Heldman:฀$175,725;฀and฀Ms.฀Barclay:฀$155,925.
The 2010 Long-Term Bonus Plan also included a performance unit component. The Company common
shares฀issued฀to฀the฀executives฀under฀the฀plan฀are฀disclosed฀in฀the฀Option฀Exercises฀and฀Stock฀Vested฀
Table. Executives also received a cash payment equal to the cash dividends that would have been earned on
that number of common shares had the participant owned the shares during the three year performance
period. The following amounts were earned with respect to performance during fiscal years 2010, 2011
and฀2012฀and฀paid฀in฀March฀2013:฀Mr.฀Dillon:฀$19,354;฀Mr.฀Schlotman:฀$2,104;฀Mr.฀McMullen:฀$5,890;฀
Mr.฀Heldman:฀$2,524;฀and฀Ms.฀Barclay:฀$2,104.฀
(5)฀ Amounts฀are฀attributable฀to฀change฀in฀pension฀value฀and฀preferential฀earnings฀on฀nonqualified฀deferred฀
compensation.฀During฀2012,฀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
2012 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฀nineteen฀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
2012 earn interest at a rate lower than 120% of the corresponding federal rate, accordingly there are no
preferential earnings on these amounts.
฀The฀ amount฀ listed฀ for฀ Mr.฀ Dillon฀ includes฀ change฀ in฀ pension฀ value฀ in฀ the฀ amount฀ of฀ $3,367,229฀ and฀
preferential earnings on nonqualified deferred compensation in the amount of $13,298. The amount listed
for฀Mr.฀Schlotman฀represents฀only฀change฀in฀pension฀value.฀The฀amount฀listed฀for฀Mr.฀McMullen฀includes฀
change in pension value in the amount of $1,359,256 and preferential earnings on nonqualified deferred
compensation฀in฀the฀amount฀of฀$55,747.฀The฀amount฀listed฀for฀Mr.฀Heldman฀includes฀change฀in฀pension฀
value in the amount of $1,255,947 and preferential earnings on nonqualified deferred compensation in
the฀amount฀of฀$10,519.฀Ms.฀Barclay฀does฀not฀participate฀in฀a฀Company฀defined฀benefit฀pension฀plan฀or฀
the deferred compensation plan.