Harris Teeter 2009 Annual Report Download - page 94

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20
For Fiscal 2009, Incentive Bonuses for executives employed directly by the holding Company were based on
NOPAT Return. With respect to an executive officer employed directly by Harris Teeter and A&E, the Incentive
Bonus was based on operating profit margin for Harris Teeter and NOPAT Return for A&E. Generally, if the
Company or a subsidiary, as applicable, achieves the predetermined minimum goals, which are approved by the
Compensation Committee, executives are paid a predetermined percentage of their base salary as their Incentive
Bonus. The percentage of base salary payable as Incentive Bonus increases as the operating profit margin or
NOPAT Return increases relative to the predetermined performance goal. The Compensation Committee has
the discretion to eliminate or reduce the Incentive Bonus payable to any or all of the NEOs in accordance with
the Cash Incentive Plan.
The Compensation Committee uses NOPAT Return and operating profit margin as performance measures
for the Company and its operating subsidiaries because the Compensation Committee believes these measures are
appropriate determinates of the Company’s and its operating subsidiaries’ success. NOPAT Return is a measure
by which the Compensation Committee is able to determine the Company’s return on total invested capital (for
all investors, including shareholders and debt holders). NOPAT Return effectively adjusts for the financing of a
company and is a better measure of the operational performance of the business. By using NOPAT Return the
Compensation Committee is able to determine the on-going operational success of the Company or A&E, as
applicable. Operating profit margin is a measurement of what proportion of a company’s revenue is remaining
after paying for all operating costs, specifically excluding financing costs. Operating profit margin provides a
measure of how much a company earns (before interest and taxes) on each dollar of sales. If the operating profit
margin is increasing the company is earning more per dollar of sales. In addition, the Compensation Committee
has chosen these performance measures because the Compensation Committee believes these measures are used
by third parties, such as investment banks, analysts and lenders, to judge the performance of the Company, its
operating subsidiaries and their competitors, and these performance measures are utilized by the Company and
its operating subsidiaries when evaluating their performance against their peers. Further, these measures are
used to compensate various other employees at the Company and its operating subsidiaries.
The following table describes the threshold and actual Incentive Bonuses that were payable to each of the
NEOs for Fiscal 2009. Based on the actual Fiscal 2009 performance of the Company and its subsidiaries, NEOs
were eligible for and received Incentive Bonuses for Fiscal 2009 in the aggregate amount of $1,156,742. The actual
Incentive Bonuses payable to the NEOs for performance in Fiscal 2009 are reflected in the following table and in
the Summary Compensation Table for 2009 and additional information regarding the Cash Incentive Plan awards
for Fiscal 2009 may be found in the Grants of Plan-Based Awards Table for 2009. The difference in the potential
Incentive Bonuses paid among the NEOs is reflective of the variance in the duties and responsibilities of the
positions held by each NEO. This difference in potential Incentive Bonuses is influenced by the Compensation
Committee’s assessment of the degree to which the NEO may directly influence either the Company’s business
or the operating subsidiaries’ business, as applicable.