Kroger 2015 Annual Report Download - page 133

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A-59
The Company had options outstanding for approximately 1.9 million, 4.6 million and 4.7 million,
respectively, for the years ended January 30, 2016, January 31, 2015 and February 1, 2014, which were
excluded from the computations of net earnings per diluted common share because their inclusion would
have had an anti-dilutive effect on net earnings per diluted share.
12. STOCK OPTION PLANS
The Company grants options for common shares (“stock options”) to employees under various plans
at an option price equal to the fair market value of the stock at the date of grant. The Company accounts
for stock options under the fair value recognition provisions. Under this method, the Company recognizes
compensation expense for all share-based payments granted. The Company recognizes share-based
compensation expense, net of an estimated forfeiture rate, over the requisite service period of the award.
Equity awards may be made at one of four meetings of its Board of Directors occurring shortly after the
Company’s release of quarterly earnings. The 2015 primary grant was made in conjunction with the June
meeting of the Company’s Board of Directors. Certain changes to the stock option compensation strategy
were put into effect in 2015, which resulted in a reduction to the number of stock options granted in 2015,
compared to 2014 and 2013.
Stock options typically expire 10 years from the date of grant. Stock options vest between one and
five years from the date of grant. At January 30, 2016, approximately 37 million common shares were
available for future option grants under these plans.
In addition to the stock options described above, the Company awards restricted stock to employees
and non-employee directors under various plans. The restrictions on these awards generally lapse between
one and five years from the date of the awards. The Company records expense for restricted stock awards
in an amount equal to the fair market value of the underlying shares on the grant date of the award, over the
period the awards lapse. As of January 30, 2016, approximately 21 million common shares were available
under the 2008, 2011 and 2014 Long-Term Incentive Plans (the “Plans”) for future restricted stock awards or
shares issued to the extent performance criteria are achieved. The Company has the ability to convert shares
available for stock options under the Plans to shares available for restricted stock awards. Under the Plans,
four shares available for option awards can be converted into one share available for restricted stock awards.
All awards become immediately exercisable upon certain changes of control of the Company.
Stock Options
Changes in options outstanding under the stock option plans are summarized below:
Shares
subject
to option
(in millions)
Weighted-
average
exercise
price
Outstanding, year-end 2012 53.0 $ 11.30
Granted 8.4 $18.84
Exercised (17.7) $ 11.11
Canceled or Expired (0.4) $12.74
Outstanding, year-end 2013 43.3 $12.83
Granted 8.4 $24.71
Exercised (10.3) $ 11.56
Canceled or Expired (0.6) $15.56
Outstanding, year-end 2014 40.8 $15.56
Granted 3.4 $38.40
Exercised (8.9) $13.54
Canceled or Expired (0.4) $19.98
Outstanding, year-end 2015 34.9 $18.26