Kroger 2015 Annual Report Download - page 36

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Results of 2013 Long-Term Incentive Plan
The 2013 Long-Term Incentive Plan, which measured improvements over the three year period from
2013 to 2015, paid out in March 2016 and was calculated as follows:
Metric Baseline Result(1)
Improvement
(A)
Payout per
Improvement
(B)
Percentage
Earned
(A) x (B)
Customer 1st
Strategy(2) **
12 units of
improvement 2.00% 24.00%
Improvement
in Associate
Engagement(2) **
2 units of
improvement 4.00% 8.00%
Reduction in Operating
Cost as a Percentage
of Sales, without Fuel 26.69% 26.13%
56 basis point
improvement 0.50% 28.00%
Return on Invested
Capital 13.27% 13.93%
66 basis point
improvement 1.00% 66.00%
Total 126.00%
Total Earned: Payout is
capped at 100% 100.00%
(1) Results exclude Harris Teeter and Roundy’s because the mergers occurred after the performance
goals were established.
(2) The Customer 1st Strategy and Improvement in Associate Engagement components were
established by the Compensation Committee at the beginning of the performance period, but are
not disclosed as they are competitively sensitive.
Accordingly, each NEO received a long-term cash bonus in an amount equal to 100% of that
executive’s long-term cash bonus potential, and was issued the number of Kroger common shares equal
to 100% of the number of performance units awarded to that executive, along with a cash amount equal
to the dividends paid on that number of common shares during the three year performance period.
Payout for the cash components of the 2013 Long-Term Incentive Plan are reported in the “Non-Equity
Incentive Plan Compensation” and “All Other Compensation” columns of the Summary Compensation
Table and footnotes 4 and 6 to that table, and the common shares issued under the plan are reported in
the 2015 Option Exercises and Stock Vested Table and footnote 2 to that table.
Stock Options and Restricted Stock
Stock options and restricted stock continue to play an important role in rewarding NEOs for the
achievement of long-term business objectives and providing incentives for the creation of shareholder
value.Awards based on Kroger’s common shares are granted annually to the NEOs and a large number
of other employees. Kroger historically has distributed time-based equity awards widely, aligning the
interests of employees with your interest as shareholders.
In 2015, Kroger granted 3,425,720 stock options to approximately 1,222 employees, including the
NEOs. The options permit the holder to purchase Kroger common shares at an option price equal to the
closing price of Kroger common shares on the date of the grant.
During 2015, Kroger awarded 3,228,270 shares of restricted stock to approximately 8,280
employees, including the NEOs.
Options are granted only on one of the four dates of Board meetings conducted after Kroger’s public
release of its quarterly earnings results. The Compensation Committee determines the vesting schedule
for stock options and restricted stock.
During 2015, the Compensation Committee granted to the NEOs: (a) stock options with a five-year
vesting schedule; and (b) restricted stock with a three- or five-year vesting schedule.