Harris Teeter 2012 Annual Report Download - page 86

COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
Despite the challenging economic environment, the Company delivered strong financial results in Fiscal 2012.
Due to the sale of A&E as previously described, A&E’s results were reported as discontinued operations for Fiscal
2012 and prior years. The Company reported earnings from continuing operations for Fiscal 2012 of $99.9 million,
or $2.04 per diluted share, a decrease from $111.4 million, or $2.28 per diluted share, for the fiscal year ended
October 2, 2011 (“Fiscal 2011”). Fiscal 2012 earnings from continuing operations were impacted by the one-time
incremental costs of $29.8 million associated with the Company’s previously announced sale and purchase
transactions with Lowe’s Food Stores, Inc. (“Lowes Foods”) in June 2012 (the “Lowes Foods Transaction
Expenses”). Consolidated Fiscal 2012 net earnings were $82.5 million, comprised of the $99.9 million in earnings
from continuing operations and $17.4 million in losses from discontinued operations (net of tax benefits). The
Company also generated net sales of $4.54 billion for Fiscal 2012, a 5.8% increase in net sales from Fiscal 2011,
attributable to new store activity and comparable store sales increases. Comparable store sales increased by 3.97%
for Fiscal 2012. In addition, the Company successfully completed the realignment of the Company’s focus into
one primary business, the supermarket business, while achieving its operating profit targets for Fiscal 2012.
We refer to the five named executive officers listed in the Summary Compensation Table for 2012 as the “NEOs.”
Mr. Jackson was an executive officer of the Company until he separated from employment with the Company on
November 7, 2011. However, Mr. Jackson is treated as an NEO for purposes of this Proxy Statement based on SEC
rules. Because some of the Compensation Committee’s decisions regarding Fiscal 2012 executive compensation
occurred at its meeting held subsequent to the sale of A&E and Mr. Jackson’s separation, he is not included in certain
of the discussions regarding the compensation setting process for Fiscal 2012 (including for example the setting of
Fiscal 2012 base salaries and performance criteria for equity awards). Those distinctions are described in more detail
below. The four NEOs other than Mr. Jackson are sometimes referred to as “current NEOs.”
Based on a comprehensive performance assessment of the Company’s financial results, and combined with
a review of the economic environment and competitive trends, the Compensation Committee made the following
decisions for the current NEOs for Fiscal 2012:
•Base salaries increased for each current NEO, due to the Company’s meeting Fiscal 2011 performance
targets and the relative success of each current NEO in achieving his applicable individual performance
goals, all as described in more detail below.
•Fiscal 2012 annual cash plan incentive awards were granted to the current NEOs based upon the respective
Fiscal 2012 operating results of the Company and as computed in accordance with the respective bonus
formulas approved by the Compensation Committee.
•The Compensation Committee granted long-term incentive awards covering 37,500 shares of Common Stock
to Mr. Dickson and covering an aggregate of 46,000 shares of Common Stock to the other current NEOs.
For Fiscal 2012, Mr. Dickson received total compensation of $3,330,328 (excluding amounts attributable to
change in pension value and non-qualified deferred compensation earnings), reflecting strong Company and
individual performance in Fiscal 2012. Mr. Dickson’s total compensation reflects the role he plays in establishing
the Company’s strategic agenda and long-range plan, overseeing the management and execution of the Company’s
day-to-day operations and leading the Company in a challenging global economic and regulatory environment.
Although his compensation is generally determined using the same methodology as used for each of the other NEOs,
Mr. Dickson’s compensation is higher than the compensation paid to any of the other NEOs as his responsibilities
and obligations at the Company are greater than those of any of the other NEOs.
Each of the other NEOs received total compensation in Fiscal 2012, excluding amounts attributable to change
in pension value and non-qualified deferred compensation earnings, as follows: Mr. Morganthall, $1,959,581,
Mr. Woodlief, $1,757,768, Mr. Antolock, $1,357,675, and Mr. Jackson, $995,949. The compensation paid to the
current NEOs reflects the performance of the Company during Fiscal 2012, as well as individual performance as
detailed below. Mr. Jackson’s compensation reflects his base salary earned through the date of his separation, a cash
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