Harris Teeter 2010 Annual Report Download - page 100

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metrics for the Company, Harris Teeter and A&E based on information which the Compensation Committee deems
most important to determining the performance of such entities. The footnotes to the 2010 Cash Incentive Plan
Awards table identify the different performance metric thresholds which the NEOs would be required to meet in
order to earn an Incentive Bonus under the plan.
For Fiscal 2010, 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 under the Cash
Incentive Plan to each of the NEOs for Fiscal 2010. Based on the actual Fiscal 2010 performance of the Company
and its subsidiaries, NEOs were eligible for and received Incentive Bonuses for Fiscal 2010 in the aggregate amount
of $1,553,309. The actual Incentive Bonuses payable to the NEOs for performance in Fiscal 2010 are reflected in
the following table and in the Summary Compensation Table for 2010 and additional information regarding the
Cash Incentive Plan awards for Fiscal 2010 may be found in the Grants of Plan-Based Awards Table for 2010. 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.
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