Kroger 2014 Annual Report Download - page 35

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฀ The฀value฀of฀the฀performance-based฀awards,฀or฀performance฀units,฀reflected฀in฀the฀table฀is฀as฀follows:฀
Mr.฀ McMullen:฀ $965,438;฀ Mr.฀ Schlotman:฀ $257,450;฀ Mr.฀ Ellis:฀ $289,631;฀ Ms.฀ Barclay:฀ $225,269;฀
Mr.฀Donnelly:฀$193,088;฀and฀Mr.฀Dillon:฀$346,579.฀These฀amounts฀reflect฀the฀aggregate฀fair฀value฀at฀the฀
grant฀date฀based฀on฀the฀probable฀outcome฀of฀the฀performance฀conditions.฀These฀amounts฀are฀consistent฀
with฀the฀estimate฀of฀aggregate฀compensation฀cost฀to฀be฀recognized฀by฀the฀Company฀over฀the฀three-year฀
performance฀period฀of฀the฀award฀determined฀as฀of฀the฀grant฀date฀under฀FASB฀ASC฀Topic฀718,฀excluding฀
the฀effect฀of฀estimated฀forfeitures.฀Due฀to฀his฀retirement,฀Mr.฀Dillon’s฀performance฀units฀will฀be฀prorated฀
with฀service฀credited฀through฀February฀28,฀2015฀and฀that฀prorated฀amount฀is฀reported฀in฀the฀table.฀Prior฀
to฀prorating,฀the฀aggregate฀fair฀value฀at฀the฀grant฀date฀of฀his฀performance฀units฀was฀$965,438.
Assuming that the highest level of performance conditions is achieved, the aggregate fair value of the
performance฀ unit฀ awards฀ at฀ the฀ grant฀ date฀ is฀ as฀ follows:฀ Mr.฀ McMullen:฀ $1,930,875;฀ Mr.฀ Schlotman:฀
$514,900;฀Mr.฀Ellis:฀$579,263;฀Ms.฀Barclay:฀$450,538;฀Mr.฀Donnelly:฀$386,175;฀and฀Mr.฀Dillon:฀$693,158.฀
These฀amounts฀are฀required฀to฀be฀reported฀in฀a฀footnote฀and฀are฀not฀reflected฀in฀the฀table.฀Due฀to฀his฀
retirement,฀Mr.฀Dillon’s฀performance฀units฀will฀be฀prorated฀with฀service฀credited฀through฀February฀28,฀
2015.฀Prior฀to฀prorating,฀the฀aggregate฀fair฀value฀of฀his฀performance฀units฀assuming฀the฀highest฀level฀of฀
performance฀conditions฀is฀achieved฀was฀$1,930,875.
฀ The฀assumptions฀used฀in฀calculating฀the฀valuations฀are฀set฀forth฀in฀Note฀12฀to฀the฀consolidated฀financial฀
statements฀in฀Kroger’s฀10-K฀for฀fiscal฀year฀2014฀ended฀January฀31,฀2015.
(3)฀ These฀amounts฀represent฀the฀aggregate฀grant฀date฀fair฀value฀of฀option฀awards฀computed฀in฀accordance฀
with฀FASB฀ASC฀Topic฀718.฀The฀assumptions฀used฀in฀calculating฀the฀valuations฀are฀set฀forth฀in฀Note฀12฀to฀
the฀consolidated฀financial฀statements฀in฀Kroger’s฀10-K฀for฀fiscal฀year฀2014฀ended฀January฀31,฀2015.
(4)฀ Non-equity฀incentive฀plan฀ compensation฀earned฀ for฀2014฀ consists฀ of฀amounts฀ earned฀under฀the฀2014฀
performance-based฀ annual฀ cash฀ bonus฀ program฀ and฀ the฀ 2012฀ performance-based฀ long-term฀ cash฀
bonus฀plan.฀
฀ In฀accordance฀with฀the฀terms฀of฀the฀2014฀performance-based฀annual฀cash฀bonus฀program,฀Kroger฀paid฀
121.5%฀of฀bonus฀potentials฀for฀the฀executive฀officers,฀including฀the฀named฀executive฀officers.฀Payments฀
were฀made฀in฀the฀following฀amounts:฀Mr.฀McMullen:฀ $1,831,846;฀ Mr.฀ Schlotman:฀ $668,250;฀ Mr.฀Ellis:฀
$942,793;฀Ms.฀Barclay:฀$668,250;฀Mr.฀Donnelly:฀$668,250;฀and฀Mr.฀Dillon:฀$1,494,450.฀These฀amounts฀
were฀earned฀with฀respect฀to฀performance฀in฀2014฀and฀paid฀in฀March฀2015.
฀ The฀2012฀Long-Term฀Cash฀Bonus฀Plan฀is฀a฀performance-based฀bonus฀plan฀designed฀to฀reward฀participants฀
for฀improving฀the฀long-term฀performance฀of฀the฀Company.฀The฀plan฀covered฀performance฀during฀fiscal฀
years฀2012,฀2013฀and฀2014฀and฀amounts฀earned฀under฀the฀plan฀were฀paid฀in฀March฀2015.฀The฀cash฀bonus฀
potential฀amount฀equaled฀the฀executive’s฀salary฀in฀effect฀on฀the฀last฀day฀of฀fiscal฀2011.฀The฀following฀
amounts฀represent฀payouts฀at฀67%฀of฀the฀bonus฀potentials฀that฀were฀earned฀under฀the฀plan:฀Mr.฀McMullen:฀
$609,700;฀Mr.฀Schlotman:฀$435,500;฀Mr.฀Ellis:฀$316,508;฀Ms.฀Barclay:฀$439,520;฀Mr.฀Donnelly:฀$356,011;฀
and฀Mr.฀Dillon:฀$864,300.
(5)฀ Amounts฀reported฀for฀2014฀and฀2012฀include฀the฀change฀in฀the฀actuarial฀present฀value฀of฀accumulated฀
pension฀benefits฀and฀preferential฀earnings฀on฀nonqualified฀deferred฀compensation.฀Amounts฀reported฀
for฀2013฀include฀only฀preferential฀earnings฀on฀nonqualified฀deferred฀compensation฀because฀the฀changes฀
in฀pension฀value฀were฀negative,฀which฀are฀not฀required฀to฀be฀reported฀in฀the฀table฀in฀accordance฀with฀
SEC฀rules.฀Ms.฀Barclay฀does฀not฀participate฀in฀a฀defined฀benefit฀pension฀plan฀or฀nonqualified฀deferred฀
compensation฀plan.฀Pension฀values฀may฀fluctuate฀significantly฀from฀year฀to฀year฀depending฀on฀a฀number฀
of factors, including age, years of service, average annual earnings and the assumptions used to determine
the present value, such as the discount rate. The change in the actuarial present value of accumulated
pension฀benefits฀for฀2014฀was฀significantly฀greater฀than฀2013฀and฀2012฀primarily฀due฀to฀a฀lower฀discount฀
rate฀ and฀ revised฀ mortality฀ assumptions฀ for฀ 2014.฀ Please฀ see฀ the฀ Pension฀ Benefits฀ section฀ for฀ further฀
information฀regarding฀the฀assumptions฀used฀in฀calculating฀pension฀benefits.฀
฀ Under฀the฀Company’s฀nonqualified฀deferred฀compensation฀plan,฀deferred฀compensation฀earns฀interest฀
at฀a฀rate฀representing฀Kroger’s฀cost฀of฀ ten-year฀debt,฀as฀determined฀by฀the฀CEO฀and฀reviewed฀by฀the฀
Compensation฀Committee฀prior฀to฀the฀beginning฀of฀each฀deferral฀year.฀For฀each฀participant,฀a฀separate฀