The Boardthe approval, on an advisory basis, of the resolution.
|
| |
| COMPENSATION-RELATED MATTERSExecutive Compensation Program |
|
| | | | |
PROPOSAL 3 — SAY-ON-PAY FREQUENCY |
This proposal gives shareholdersThe Company is a “smaller reporting company” under Item 10 of Regulation S-K promulgated under the opportunitySecurities and Exchange Act of 1934, and the following compensation disclosure is intended to cast an advisory vote on how often we should provide shareholderscomply with future say-on-pay votes. Shareholders may votethe requirements applicable to havesmaller reporting companies. Although the say-on-pay vote every year, every two years, or every three years.
We believe a say-on-pay vote should be held once each year, as has been conducted byrules allow the Company since 2011. This recommendation is based on a number of considerations, including the following:
In our last frequency advisory vote in 2011, "1 year" received a majority of the votes cast by shareholders.
An annual advisory say-on-pay vote allows our shareholders to provide us with their direct input on ourless detail about its executive compensation as disclosed inprogram, the proxy statement every year and will be most usefulCompensation Committee is committed to providing the Board.
This advisory vote does not bindinformation necessary to help shareholders understand its executive compensation-related decisions. Accordingly, this section includes supplemental narratives that describe our Board of Directors. Regardless of the Board's recommendation and the outcome of the shareholder vote on this proposal, our Board may in the future decide to conduct advisory say-on-pay votes on a more or less frequent basis and may vary its practice based on factors such as discussions with shareholders and the adoption of material changes to our executive pay program. The Board will disclose its position on the frequency of future say-on-pay votes no later than August 31, 2017.
Shareholders may cast their advisory vote to conduct future advisory say-on-pay votes every "1 Year," "2 Years," or "3 Years," or "Abstain."
The Board of Directors recommends a vote FOR
holding future say-on-pay votes every "1 YEAR."
|
| |
COMPENSATION-RELATED MATTERS | |
Compensation Discussion and Analysis
This Compensation Discussion and Analysis provides information regarding our 20162019 executive pay program, particularly as it relates to the following individuals, who are our named executivesexecutive officers for 2016:
2019: |
| | |
Named Executive | | Title |
| | Chief Executive Officer |
William A. Foley(1) | | Executive Chairman and Chief Executive Officer |
Stephanie A. Streeter(2)
| | former Chief Executive Officer |
Sherry Buck(3)
James C. Burmeister | | former Vice President, Chief Financial Officer |
Annunciata (Nucci) Cerioli | | Vice President, Chief Supply Chain Officer |
Susan A. Kovach | | Vice President, General Counsel and Secretary |
Salvador Miñarro Villalobos | | Vice President, General Manager, U.S. and Canada |
James H. White(4)
| | formerSenior Vice President, Chief Operating Officer |
| and former Chief Financial Officer |
Sarah J. Zibbel | |
| | Senior Vice President, Chief Human Resources Officer |
| |
(1) | Effective January 12, 2016. |
| |
(2) | Ms. Streeter's employment ended January 11, 2016. |
| |
(3) | Ms. Buck's employment ended December 31, 2016. |
| |
(4) | Mr. White's employment ended March 31, 2016. |
Executive Summary
Financial and Operational Highlights
Throughout 2016, we focused on transforming our business to become a faster-moving, market-focused company with improved margins and greater cash flow. We made substantial operational and organizational improvements to drive strategic priorities, address a number of legacy issues, and better position ourselves for sustainable, profitable growth:
In addition to strengthening our relationships with customers, we ramped up our new product development and conducted significant market research to ensure that we can bring to market the innovative products that our customers want;
| |
• | In that connection, we launched two new foodservice stemware collections, Neo and Contour, using our state-of-the-art ClearFire® glass composition;
|
We began development of our e-commerce strategy;
We started our furnace consolidation effort to optimize our capacity footprint and better align our capacity with demand; and
We streamlined our product portfolio and improved inventory control processes.
We believe that the changes made in 2016 and the additional improvements planned for 2017 will create the momentum necessary to strengthen our Company, create consistent growth and increase our future profitability.
However, we faced significant headwinds, including:
In the foodservice channel of distribution, declining restaurant traffic resulting from a continued move away from dining in restaurants to dining at home;
In the retail channel of distribution, an increasing shift away from brick-and-mortar stores toward e-commerce;
In all of our channels of distribution, a highly competitive pricing environment;
A two-week work stoppage at our Toledo manufacturing facility that negatively impacted gross profit by $4.2 million, net sales by an estimated $7 million to $9 million, and pre-tax income by approximately $7 million to $8 million. Additionally, the estimated lost sales negatively impacted adjusted EBITDA (calculated as shown in Appendices A and B) by approximately $3 million to $4 million;
Significant volatility in foreign currency exchange rates, in particular with respect to the Mexican peso and the euro; and
|
| |
| COMPENSATION-RELATED MATTERS |
Prior-year (2015) results that benefited from non-repeating items such as the release in the fourth quarter of 2015 of our U.S. deferred tax valuation allowance, which favorably impacted 2015 net income by approximately $43.8 million.
Faced with those challenges, we delivered the following financial results:
Although 2016 net sales were $793.4 million, a decrease of 3.5% year-over-year (or a decrease of 1.1% excluding the impact of currency), we achieved an increase in net sales in the foodservice channel. Despite ongoing decline in restaurant traffic trends, our U.S. and Canada foodservice sales grew 2.3%, which we believe indicates that Libbey is continuing to win market share.
Net income was $10.1 million in 2016, compared to $66.3 million in 2015.
| |
• | Our Adjusted EBITDA (calculated as shown on Appendices A and B) for 2016 was $109.8 million, compared to $116.1 million in 2015. |
Our stock price decreased from $21.32 on December 31, 2015 to $19.46 on December 31, 2016, reflecting annual total shareholder return (TSR) of (6)%, as shown in the chart on page (ii).
In addition, we returned $12.1 million to our shareholders through share repurchases and dividends, and we reduced our trade working capital (defined as as net inventory plus net accounts receivable less accounts payable) by $17.3 million compared to the prior year. Trade working capital is calculated as shown inEXECUTIVE COMPENSATION PHILOSOPHY Appendix A.
Executive Pay Highlights
At our 2016 Annual Meeting of shareholders, our say-on-pay proposal garnered the support of over 98% of the shares voted. Our Compensation Committee interpreted the results of the vote as an affirmation of our executive pay program and, as a result, the Committee generally retained the same structure for our 2016 executive pay program.
Notable actions taken by the Committee regarding our named executives' pay for 2016 include:
When Mr. Foley was hired as CEO in January, the Committee approved an initial base salary of $825,000, a target SMIP opportunity of 100% and a target LTIP opportunity of 300%, all of which are consistent with the compensation package that had been provided to Ms. Streeter. Because Mr. Foley was retired at the time of his appointment as CEO and intends to retire once again when his employment with Libbey ends (regardless of when or how it ends), the Committee chose not to give Mr. Foley an employment agreement or change in control agreement.
In February, the Committee approved the designs for our 2016 SMIP and the performance cash component of our 2016 LTIP. The 2016 SMIP design uses two performance measures: revenue growth (net sales) and adjusted cash earnings. Like the 2015 LTIP, the performance cash component of the 2016 LTIP is based on a single performance metric: return on invested capital (ROIC). See Appendices A and B for calculations of each of these performance measures.
Also in February, the Committee awarded RSUs and NQSOs with ratable, four-year vesting.
The Committee approved base salary increases, effective April 1, 2016, equal to 2.0% for each of the named executives other than Ms. Streeter and Mr. White (who were no longer employed by the Company at that date) and Mr. Foley.
Effective June 1, 2016, the Committee approved an additional increase in Ms. Cerioli's base salary from $408,002 to $440,004.
The below-target payouts under our incentive plans are a direct result of our below-target performance and the Committee's recognition of the fact that, in spite of our increased return of cash to shareholders through share repurchases and increased dividends in 2016, our total shareholder return for the year was (6.0%):
| |
• | The Committee believed it appropriate to limit payouts under our SMIP to no more than 69.5% of target before application of any modifier for individual performance. After application of the modifier for individual performance, no named executive received a payout under the SMIP greater than 69.5%. Adjusted cash earnings is calculated as shown in Appendix B. |
| |
• | Because our adjusted EBITDA margin and net debt to adjusted EBITDA ratio for the 2014-2016 performance cycle were below target, payouts under our 2014 LTIP were only 74.4% of target. Adjusted EBITDA and net debt are calculated as shown in Appendix A. |
|
| |
COMPENSATION-RELATED MATTERS | |
Key Compensation Practices
For a summary of our key executive compensation practices, including practices we use to drive performance and practices we do not use because we do not believe they would serve our shareholders' long-term interests, see page (v).
Executive Compensation Philosophy
Our executive compensation programs are designed to attract, develop and retain global business leaders who can drive financial and strategic objectives and are intended to foster a pay-for-performance culture and maximize long-term shareholder value.
Our Compensation Committee follows these guiding principles when designing our compensation programs:
Competitiveness- Overall, the mix and levels of compensation should be reasonably comparable to appropriate peer companies so that the Company can continue to attract, retain and motivate high performing executives in an environment where companies are increasingly competing for high-caliber talent. Recognizing that Libbey's size, manufacturing asset intensity and multi-channel characteristics make identifying appropriate peer companies especially challenging, the general guideline is to target compensation at the median; however, individual positions may have target compensation mix and/or levels above or below the median depending on an evaluation of relevant factors, including experience, performance, time in position, and what is needed to attract the best talent for key positions, particularly when the Company recruits from much larger companies.
Pay for Performance- Major components of compensation should be tied to the Company's overall performance. Base salary and annual incentive compensation also should be tied to the performance of the individual executive and his or her specific business unit or function.
Values- While the Company’s pay for performance philosophy should reward the achievement of financial and strategic objectives, the manner in which results are achieved is also important in assessing base salary adjustments and annual performance bonus payments. Therefore, while not always directly quantifiable, the manner in which the executive achieves results through collaboration and leadership - in keeping with the Company’s set of core values, notably teamwork, performance, continuous improvement, respect, development, and customer focus - are key considerations in the individual performance review process.
Judgment- In assessing the executive’s contributions to the Company’s performance, the Committee looks to results-oriented performance measures, but also considers the long-term impact of an executive’s decisions. The CEO and Committee use their judgment and experience to evaluate whether an executive’s actions were aligned with the Company’s values and cultural elements.
Accountability for Short- and Long-Term Performance- Annual and long-term incentives should reward an appropriate balance of short- and long-term financial and strategic business results, with an emphasis on managing the business for the long term. Such incentives should have a clear, direct and balanced link to the Company’s financial and strategic objectives.
Alignment to Shareholders’ Interests- Long-term incentives should align the interests of individual executives with the long-term interests of the Company’s shareholders.
Simplicity- The Company strives to the extent practicable to make its compensation programs straightforward, simple to understand, and easy to administer and evaluate for competitiveness and appropriateness.
Reasonableness- Indirect executive compensation programs are designed to be reasonable and appropriate, with executive perquisites applied conservatively but judiciously.
• | Competitiveness- Overall, the mix and levels of compensation should be reasonably comparable to appropriate peer companies so that the Company can continue to attract, retain and motivate high performing executives in an environment where companies are increasingly competing for high-caliber talent. Recognizing that Libbey’s size, manufacturing asset intensity and multi-channel characteristics make identifying appropriate peer companies especially challenging, the general guideline is to target compensation at the median; however, individual positions may have target compensation mix and/or levels above or below the median depending on an evaluation of relevant factors, including experience, performance, time in position, and what is needed to attract the best talent for key positions, particularly when the Company recruits from much larger companies. |
• | Pay for Performance- Major pay components should be tied to the Company’s overall performance. Base salary and annual incentive compensation also should be tied to the performance of the individual executive. |
• | Values- While the Company’s pay for performance philosophy should reward the achievement of financial and strategic objectives, how the results are achieved is also important in assessing base salary adjustments and annual incentive payments. Therefore, how the executive achieves results through collaboration and leadership - in keeping with the Company’s set of core values, notably teamwork, performance, continuous improvement, respect, development, and customer focus – is a key consideration in the individual performance review process. |
• | Judgment- In assessing the executive’s contributions to the Company’s performance, the Committee looks to results-oriented performance measures, but also considers the long-term impact of an executive’s decisions. The CEO and Committee use their judgment and experience to evaluate whether an executive’s actions were aligned with the Company’s values and cultural elements. |
• | Accountability for Short- and Long-Term Performance- Annual and long-term incentives should reward an appropriate balance of short- and long-term financial and strategic business results, with an emphasis on managing the business for the long term. Such incentives should have a clear, direct and balanced link to the Company’s financial and strategic objectives. |
• | Alignment to Shareholders’ Interests- Long-term incentives should align the interests of individual executives with the long-term interests of the Company’s shareholders. |
• | Simplicity- The Company strives to the extent practicable to make its compensation programs straightforward, simple to understand, and easy to administer and evaluate for competitiveness and appropriateness. |
• | Reasonableness- Indirect executive compensation programs are designed to be reasonable and appropriate, with executive perquisites applied conservatively but judiciously. |
In applying these guiding principles, the Committee seeks to ensure that the Company’s executive compensation programs attract, retain and motivate highly talented executives, support achieving the Company’s financial and strategic objectives, and align with shareholder interests generally.
In what forms did Libbey deliver
Key Compensation Practices
✔ WHAT WE DO | |  WHAT WE DON’T DO
|
✓ Tie pay to performance by ensuring that a significant portion of executive pay is performance-based or at-risk ✓ Set clear financial and strategic goals for corporate performance, and differentiate based on individual performance against objectives determined early in the year ✓ Review market data relative to our peer group of companies, and use tally sheets to ensure compensation opportunities are consistent with the Compensation Committee’s intent ✓ Mitigate undue risk by emphasizing long-term incentives, capping potential payouts under our annual and long-term incentive plans, and using clawback provisions in our Omnibus Incentive Plans, reasonable retention strategies, performance targets and appropriate Board and management processes to identify and manage risk ✓ Have modest post-employment and change in control arrangements that are competitive with market practices ✓ Utilize “double-trigger” vesting of equity awards and non-equity incentives after a change in control ✓ Have stock retention requirements to enhance alignment of our executives’ interests with those of our shareholders ✓ Our Compensation Committee retains an external, independent compensation consultant and other external advisors as needed | |  No compensation programs that we believe create undue risks for our business
No significant additional benefits to executive officers that differ from those provided to all other U.S. employees No repricing of stock options or SARs, nor buyouts of underwater stock options or SARs No hedging, pledging or engaging in transactions involving derivatives of our stock No employment agreements with our executives No tax “gross ups” in our severance and change in control benefits |
Core Compensation Elements
The Compensation Committee strives to its executives in 2016, and what purposes doprovide an executive compensation program that aligns the various forms of pay serve?
Generally the structureinterests of our 2016 executive pay program remained the same as our 2015 executive pay program in that the components of pay, and the weight accorded each component, remained the same.
|
| |
| COMPENSATION-RELATED MATTERS |
Core Compensation Elements: Balanced Program with Significant Pay At Risk
The core elements of compensation for which our executives were eligible in 2016 were base salary, an annual cash incentive award under our SMIP, and long-term cash incentive and equity awards under our LTIP. For 2016, the pay opportunities of our named executives were designed to provide a balance of stable and competitive pay in the form of base salary, welfare and retirement benefits and perquisites; equity-based compensation (NQSOs and RSUs) that aligns our executives’ interests with those of shareholders generally and also serves as a retention tool; and equity-based compensation and annual and long-term incentive awardsour shareholders. In furtherance of that are designed to motivate our executives to execute our strategy, thereby driving our financial and operational performance. The charts below show the mix of these pay elements and reflect the substantial portionsaim, 50% of our named executives’CEO's target pay opportunities that are atopportunity is performance-based and 76% of our CEO's target pay opportunity is “at risk.
”Element | Key Characteristics | % of CEO Target Pay |
BASE SALARY | | 24% |
Foley Pay Opportunity at TargetBase Salary | | Other Named Executives' Pay Opportunity at Target(1)
Fixed component, reviewed annually |
INCENTIVE-BASED PAY (Performance-Based; At Risk) | | |
| 50% |
(1) | Excludes Ms. Streeter, our former CEO, whose employment ended January 11, 2016. |
|
| | | | | | |
Type of Pay | | Element | | Key Characteristics | | Objectives |
| | | | | | |
Base salary | | Base salary | | Fixed component; reviewed annually | | Talent attraction and retention |
| | | | | | |
Incentive-Based Pay | | Annual cash incentive award under our 2016 SMIPSenior Management Incentive Plan (SMIP) | | At-risk variable pay opportunity for short-term performance; based 85% on financial metrics and 15% on strategic objectives; no guaranteed minimum payout; maximum payout equal to 225%of 200% of target | | Talent attraction and retention; motivation; alignment with key business and financial objectives and strategies; alignment with shareholder interests |
| | | | | | |
| | Long-term performance cash incentive awards under our 2016 LTIPLong-Term Incentive Plan (LTIP) | | Formula-driven, at-risk cash award that comprises 40%50% of LTIP opportunity; based on 2017 ROIC and 2018 and 2019 adjusted EBITDA; no guaranteed minimum payout; maximum payout equal toof 200% of target | | Talent attraction and retention; motivation; alignment with key business and financial objectives and strategies; alignment with shareholder interests |
TIME-BASED PAY (At Risk) | | | | | | 26% |
Time-Based Pay | | NQSOsRestricted stock units (RSUs) granted under our 2016 LTIP | | Comprise 20% of LTIP opportunity; exercise price equalIntended to closing stock price on grant date; generally awarded annually; vest ratably over four years beginning on a date not earlier than the first anniversary of the date the award is approved; expire ten years from grant date | | Talent attraction and retention; motivation; alignment with shareholder interests |
| | | | | | |
| | RSUs granted under our 2016 LTIP | | Comprise 40%comprise 50% of LTIP opportunity; vest ratably over four years beginning on a date not earlier than the first anniversary of the date the award is approved;three years; no dividends or voting rights with respect to unvested RSUs |
The percentages above represent annualized pay opportunity at target and do not include sign-on awards. “CEO” refers to Michael P. Bauer. See Appendix A for the definition of ROIC and calculations of adjusted cash earnings and adjusted EBITDA.
2019 financial and operating highlights
During 2019, we remained committed to our strategic priorities:
PROFITABLE GROWTH including leveraging our industry leading digital and e-commerce capabilities, focusing on underpenetrated segments of the foodservice channel, and maintaining a flow of innovative new products;
OPERATIONAL EXCELLENCE through best-in-class service, asset optimization and continuous improvement; and
ORGANIZATIONAL EXCELLENCE that develops our talent and culture to a more agile, externally focused organization in which people feel empowered, accountable and embrace transparency and change.
We also made significant progress with respect to key financial drivers of our strategic initiatives:
| • | Our adjusted EBITDA (calculated as shown in Appendix A) for 2019 was $70.3 million. |
Sales from new products contributed 7.3% of consolidated net sales for the year.
We achieved a $17 million reduction in net inventories year-over-year while maintaining best-in-class customer service levels.
Pay for Performance Alignment
The 2019 compensation of our named executives reflects alignment of pay with performance:
• | 30% Reduction in CEO Target Pay. When Mr. Bauer was hired as CEO in March 2019, the Compensation Committee set his annual target direct compensation 30% below that of our prior CEO, Mr. Foley. |
CEO Annual Target Direct Compensation
• | Simplified Annual Incentive Plan More Closely Tied to Financial Performance. In designing the 2019 SMIP, the Committee made several changes to simplify the plan design, focus the executives on key financial measures and strategic objectives, and increase the percentage of the plan tied to the Company’s financial performance. |
• | 36% Voluntary Reduction in Annual Incentive Payouts. Based on the Company’s 2019 performance with respect to the targets set by the Compensation Committee in early 2019 for each of the 2019 SMIP metrics, each of the named executives earned a payout under the 2019 SMIP equal to 136% of target. However, in recognition of the decline in the Company’s stock price during 2019 and the need to conserve cash, the executive leadership team recommended, and the Compensation Committee agreed, that all payouts under the 2019 SMIP should be limited to 100% of target. Our SMIP has paid out at or below target each of the last seven years. |
• | Below-Target Payouts Under Long-Term Incentive Plan. The performance cash opportunity under the 2017 LTIP (2017-2019 performance cycle) was based on the Company's ROIC in 2017 and the Company's adjusted EBITDA in 2018 and 2019. The Company's failure to achieve target with respect to these performance measures resulted in payouts under the performance cash component of our 2017 LTIP of only 23.1% of target. Our LTIP has paid out below target each of the last seven years. |
• | RSUs Granted in 2019 Have Declined in Value. Under our 2019 LTIP, named executives were awarded RSUs with ratable, 3-year vesting. Demonstrating that our executive’s pay is aligned with other shareholders, the value of this equity compensation has been further impacted by our negative total shareholder return. The chart below shows, with respect to the RSUs granted to our named executives in 2019, the market value on the grant date and the market value on December 31, 2019. The market value was determined by multiplying the number of RSUs by the closing price of our common stock on the applicable date. |
Market Value of RSUs Granted Under 2019 LTIP
■ Grant Date ■ December 31, 2019
WHAT PAY DID LIBBEY’S EXECUTIVES RECEIVE FOR 2019?
• | No salary increases for recently hired executives |
The Compensation Committee reviews base salaries at least annually and makes salary decisions after receiving input from its independent compensation consultant and the CEO (with respect to salaries of non-CEO executives).
Mr. Bauer succeeded Mr. Foley as our CEO effective March 25, 2019. In setting Mr. Bauer's initial base salary and target short-term and long-term incentive opportunities, we considered his highly sought after skill-set and experience, the significant responsibilities of the Chief Executive Officer position and its importance to achieving our strategy, the relationship of his compensation to that of our other executive officers, the fact that Mr. Bauer had never before been chief executive officer of a public company, and the results of a benchmarking study.
Except for Mr. Foley, the named executives' annualized base salary rates are:
Named Executive | Annualized Base Salary | |
M. Bauer | | $ | 675,000 | |
J. Burmeister | | | 430,000 | |
S. Zibbel | | | 310,002 | |
While serving as CEO during 2019, Mr. Foley's annualized base salary was $825,000, the same initial rate established at his time of hire in January 2016. As Executive Chairman, Mr. Foley’s annualized base salary was $232,000, equivalent to the compensation he would have received as a non-management director. See "Non-Management Directors' Compensation" for more information regarding our compensation program for non-management directors.
In March 2019, the Committee reviewed of Mr. Burmeister’s pay package. Effective March 15, 2019, the Committee authorized an increase in Mr. Burmeister’s annual salary from $390,000 to $430,000 and increases in Mr. Burmeister’s annual and long-term incentive opportunities. In authorizing these increases, the Committee considered Mr. Burmeister’s high performance, the need to retain Mr. Burmeister, the results of a benchmarking study, and the significant contributions that Mr. Burmeister has made and is expected to continue to make toward achieving the Company’s strategic objectives.
Ms. Zibbel did not receive a salary increase in 2019, as she was hired in April 2018.
| Annual Cash Incentive Award Under Our SMIP |
• | Based 85% on financial metrics (50% on adjusted cash earnings, 20% on OTIF and inventory reduction, 15% on new product revenue) and 15% on strategic objectives (ERP implementation) |
Despite achieving payouts of 136% of target, management recommended, and the Compensation Committee agreed, to cap actual payouts at 100%
Plan Design
The Compensation Committee approved the 2019 SMIP design, metrics, targets and payout scales in February 2019. In designing our 2019 SMIP, the Committee sought a design that, compared to our 2018 SMIP, was less complex with greater emphasis on financial metrics. The Committee felt it was important, however, to continue to directly incent the executives to focus their efforts on the critical objective of ERP implementation, recognizing that the benefits of the ERP implementation would not be reflected in the Company's financial performance until future years. The Committee also considered the need to motivate the management team and retain high-performing leaders after several years of below-target payouts. For these reasons, the Committee adopted the following design:
Adjusted Cash Earnings (50% of Target Opportunity)
The target and payout scale for the Company adjusted cash earnings performance metric was:
Full-Year Adjusted Cash Earnings
(in thousands) | | Percent of Targeted
Cash Earnings | | Performance
Level | | Payout
Percentage |
$97,061 | | | 110.0% | | Maximum | | 200% |
$88,237 | | | 100.0% | | Target | | 100% |
$70,590 | | | 80.0% | | Threshold | | 50% |
< $70,590 | | | < 80.0% | | Below Threshold | | 0% |
The 2019 adjusted cash earnings target of $88.2 million was lower than the adjusted cash earnings target under our 2018 SMIP, but higher than the Company's 2018 adjusted cash earnings (as calculated for incentive compensation purposes under the 2018 SMIP) of $69.2 million. The Committee believed that the 2019 adjusted cash earnings target was a sufficiently challenging goal because it reflected a significant increase over the Company's adjusted cash earnings for 2018 and, when this target was established in early 2019, the Company expected adjusted cash earnings to be affected by costs associated with implementation of a new global ERP system and a continued challenging competitive environment.
Under the 2019 SMIP, the Committee may adjust actual results to exclude the impact of special items. Examples of special items for which adjustments may be made include restructuring charges, asset impairment charges, and other similar items that are either not foreseen or are foreseen but are not included in the Company's annual operating plan because the occurrence of the event is substantially uncertain at the time the annual operating plan is submitted to the Board. The Committee believes such adjustments are appropriate so that our executives' pay will not be impacted, positively or negatively, by special items that are not a reflection of our core operating performance. With respect to the 2019 SMIP, the Committee believed that it was appropriate to adjust cash earnings (calculated as set forth on attached Appendix A) by the following items that did not reflect our core operating performance and were not anticipated or budgeted:
Item | Amount of Adjustment to Company-Wide Cash Earnings | |
Asset impairments | | $ | 65,152,000 | |
Organizational realignment | | | 3,341,000 | |
Debt refinancing fees | | | 525,000 | |
Total | | $ | 69,018,000 | |
After accounting for these adjustments, adjusted cash earnings were $91.5 million, or 103.7% of targeted adjusted cash earnings for the year. Based on the payout scale above, adjusted cash earnings were above target, resulting in payout scores of 137.5% of target for the named executives with respect to the adjusted cash earnings component of the SMIP.
OTIF and Inventory Reduction (20% of Target Opportunity)
Success under the OTIF and inventory reduction component of the 2019 SMIP is based on our ability to reduce net inventory while sustaining high levels of customer service, measured by the percentage of orders delivered on time and in full (OTIF). The Company achieved OTIF of 94.4% and inventory reduction net of currency impact (calculated as shown in Appendix A) of $16,708,000, resulting in a payout score of 187% based on the following matrix:
Inventory Reduction (Dollars in Millions)
| | Talent attraction and retention; motivation; alignment with shareholder interests |
Min | Target | Max | |
| OTIF | Max | 91% ($10.0) 100% | 91% ($13.0) 150% | 91% ($18.0) 200% | |
COMPENSATION-RELATED MATTERSTarget | 90% ($10.0) 75% | 90% ($13.0) 100% | 90% ($18.0) 150% | |
Min | 87% ($10.0) 50% | 87% ($13.0) 75% | 87% ($18.0) 100% | |
Objective Payout %
Other Compensation Elements
In additionNew Product Revenue (15% of Target Opportunity)
The new product revenue performance measure under the 2019 SMIP consists of gross revenue from new products launched in the previous 36 months on a rolling basis. The Committee chose new product revenue as a performance measure to encourage progress toward the Company's long-term goal to have new products make up 8% to 9% of the Company's sales. This form of measure acknowledges that, due to the core elements described above,length of the new product development cycle from initial innovation to market penetration, revenue benefits from new products take time to achieve.
The target and payout scale for the new product revenue performance metric was:
Full-Year New Product Gross Revenue
(dollars in thousands) | | Percent of Targeted
New Product Gross Revenue | | Performance
Level | | Payout
Percentage |
$57,750 | | 110.0% | | Maximum | | 200% |
$52,500 | | 100.0% | | Target | | 100% |
$44,625 | | 85.0% | | Threshold | | 50% |
< $44,625 | | < 85.0% | | Below Threshold | | 0% |
Based on the new product pipeline in place in early 2019, the Committee felt the new product revenue target was sufficiently challenging, even though the target was lower than the prior year’s target. The Company ultimately achieved $61.8 million in gross revenue from new products in 2019, a $3.3 million increase versus the prior year, resulting in a payout score of 200% based on the scale above. Even if the Committee had maintained the higher target and payout scale from the prior year, the $61.8 million in new product gross revenue still would have resulted in a 200% payout score.
Strategic Objective: ERP Implementation (15% of Target Opportunity)
The target was established by the Committee early in 2019 and the Company's performance with respect to the objectives was evaluated and scored by the Committee in February 2020. The Committee included the objective because it supports operational excellence and profitable growth. ERP investment is critical to driving future top-line growth and margin improvement. The target was established by the Committee early in 2019, based on the Company’s timeline and budget with respect to three key ERP implementation milestones the Company intended to achieve during the year. The ERP objective was qualitative, with success measured based on how many of the three key milestones the Company executed during the year, within budget.
At its meeting in February 2020, the Committee reviewed the Company's performance with respect to the ERP objective. Despite the fact that the Company had made significant progress with respect to the ERP implementation, the Committee took a conservative approach and scored the Company’s performance below threshold, resulting in no payout with respect to the ERP metric of the 2019 SMIP.
Target Opportunities
Each of our named executives had a target opportunity under the 2019 SMIP equal to a percentage of his or her actual base salary earned in 2019. Except with respect to Mr. Bauer, the Compensation Committee approved each executive’s target opportunity in February 2019. Mr. Bauer’s SMIP target was approved at the time of his hire in March 2019.
For the reasons described above under “Base Salaries,” the Committee elected to increase Mr. Burmeister’s SMIP target opportunity from 60% to 70%, effective March 15, 2019.
In connection with his retirement as CEO, Mr. Foley’s participation in the 2019 SMIP was prorated to March 31, 2019.
Payouts
In February 2020, the Committee evaluated and scored the Company’s performance with respect to each metric and the overall plan and determined each named executive’s actual payout under the SMIP. Based on the payout scores for each of the plan components and the weight assigned to each component, the total unadjusted payout score under the 2019 SMIP was 136% of target.
Component | | Payout Score | | Weight | | Weighted Payout Score | | Total Unadjusted Payout Score |
Adjusted Cash Earnings | | 137.5% | | 50% | | 68.8% | | 136% |
OTIF & Inventory | | 187% | | 20% | | 37.4% | |
New Product Revenue | | 200% | | 15% | | 30.0% | |
ERP Implementation | | 0% | | 15% | | 0.0% | |
The CEO and the other executive officers recommended to the Committee, and the Committee agreed, that payouts under the SMIP should be capped at 100% in light of the Company’s need to conserve cash and the significant decline in total shareholder return in 2019.
Accordingly, the named executives received the following payouts under the SMIP:
| | | | | | | | | | | | | | | Unadjusted Payout | | | Actual Payout | |
Named Executive | | Eligible Base Salary | | | Target as % of Eligible Base Salary | | | Target | | | As Percent of Target | | | Unadjusted Award | | | As Percent of Target | | | Actual Award | |
M. Bauer | | $ | 520,313 | | | | 100 | % | | $ | 520,313 | | | | 136 | % | | $ | 707,626 | | | | 100 | % | | $ | 520,313 | |
W. Foley | | | 206,250 | (1) | | | 100 | % | | | 206,250 | | | | 136 | % | | | 280,500 | | | | 100 | % | | | 206,250 | |
J. Burmeister | | | 421,668 | | | | 60%-70 | %(2) | | | 287,043 | | | | 136 | % | | | 390,378 | | | | 100 | % | | | 287,043 | |
S. Zibbel | | | 310,002 | | | | 50 | % | | | 155,001 | | | | 136 | % | | | 210,801 | | | | 100 | % | | | 155,001 | |
(1) Mr. Foley’s participation in the SMIP was prorated based on the portion of the year during which he served as CEO.
(2) Mr. Burmeister's target opportunity was increased from 60% to 70% effective March 15, 2019.
| Long-Term Performance-Based Compensation |
| • | Long-term performance cash incentive award with target equal to 50% of overall LTIP opportunity |
Based on Company's adjusted ROIC for 2017 and adjusted EBITDA for 2018 and 2019
Below target payout of 23.1% for 2017 LTIP (for the 2017-2019 performance cycle)
2018 LTIP (for 2018-2020 performance cycle) and 2019 LTIP (for 2019-2021 performance cycle) both tracking below target
Our long-term incentive plans include a cash-based performance component (50% of target opportunity) and an award of time-based equity (50% of target opportunity). The performance component under our LTIP provides for cash awards if and to the extent we achieve our targeted financial metrics for each of the 1-year performance periods included in the 3-year performance cycle. The scale used to determine the payout score for each of the three 1-year performance periods is reset for each performance period to correlate with targeted financial performance for that year. The amount of the final payout, if any, is determined based on the average of the three discrete, single-year payout scores. In deciding to set annual goals instead of 3-year goals, the Committee considered the extreme difficulty in forecasting three years ahead in the volatile economic environment and competitive market conditions (as evidenced by our inability to achieve target performance under our annual incentive plans over the preceding six years) and the need to keep management engaged as the Company faces that challenging environment.
Our performance during 2019 is included in the 3-year performance cycle for each of our 2019 LTIP (2019-2021 performance cycle), 2018 LTIP (2018-2020 performance cycle) and 2017 LTIP (2017-2019 performance cycle).
2019 LTIP (2019-2021 Performance Cycle)
The long-term incentive opportunity is intended to have an aggregate economic value equal to a target percentage of the executive’s base salary in effect on January 1, 2019, or, if the executive is hired later in the year, the base salary in effect at time of hire. Mr. Bauer’s target was set by the Committee at his time of hire, while the other named executive’s targets were also eligibleset by the Committee in February 2019. For the reasons explained above under “Base Salaries,” the Committee subsequently chose to increase Mr. Burmeister’s target from 100% to 120% effective March 15, 2019. The table below sets forth the target percentage for limited perquisites, welfareeach of the named executives in the 2019 LTIP.
Named Executive | | 2019 Target Long-Term Award as a Percentage of Annualized Base Salary | Weight of Performance Cash Component | 2019 Target Long-Term Cash Award as a Percentage of Annualized Base Salary |
M. Bauer | | 225% | 50% | 112.5% |
W. Foley | | 300% | 50% | 150% |
J. Burmeister | | 100% - 120% | 50% | 50% - 60% |
S. Zibbel | | 70% | 50% | 35% |
The Committee believes cash is the appropriate vehicle for the performance component of the long-term incentive plans. While the Committee has considered the use of performance-based equity awards, the Committee continues to use performance-based cash because of the need to conserve shares under its Omnibus Incentive Plans and retirement benefits,manage the Company's burn rate in light of the decline in the Company's stock price.
In early 2022, the Committee will evaluate the Company’s performance with respect to the 2019 LTIP and separation benefits,determine the amounts of the payouts, if any, for each of the named executives.
2018 LTIP (2018-2020 Performance Cycle)
In early 2021, the Committee will evaluate the Company’s performance with respect to the 2018 LTIP and determine the amounts of the payouts, if any, for each of the named executives. Based on the Company’s performance in 2018 (0% payout score) and 2019 (69.3% payout score), the highest possible payout under the 2018 LTIP would be below target at 89.8%.
2017 LTIP (2017-2019 Performance Cycle)
When the Committee initially adopted the 2017 LTIP, the Committee believed that using adjusted ROIC as a performance measure would align with the long-term interests of our shareholders because of adjusted ROIC's relationship to total shareholder return. In February 2018, the Committee elected to use adjusted EBITDA as the financial metric for the performance cash component of the 2018 LTIP and modified the performance cash components of the 2016 LTIP and 2017 LTIP to provide that the performance metric for the 2018 and 2019 plan years would be based on adjusted EBITDA as opposed to ROIC. The Committee transitioned from adjusted ROIC to adjusted EBITDA for the following reasons:
The Committee recognized that the large investments needed in connection with our ERP implementation, our e-commerce platform and new product development, all of which supportare essential to our objectiveCreating Momentum strategic priorities, were unlikely to attractgenerate significant returns until future years;
Given the asset intensity of our business, as well as our relatively high degree of financial leverage, the Committee believes that adjusted EBITDA is an appropriate measure of core operating performance;
The Committee felt it was imperative to re-focus management on the primary drivers of cash earnings;
Adjusted EBITDA is regularly used by the Company internally to measure profitability; and retain talented executives.
We believe adjusted EBITDA is used by investors, analysts and other interested parties in comparing our performance across reporting periods and in comparing Libbey to other companies with different capital and legal structures.
Despite transitioning from adjusted ROIC to adjusted EBITDA, the Company still failed to achieve target performance for the 2018 and 2019 calendar years.
2017 | | 2018 | | 2019 |
Adjusted ROIC | | Adjusted EBITDA | | Adjusted EBITDA |
Target: 9.2% | | Target: $89.8 million | | Target: $80.0 million |
| | | | | | | | |
Scale | | Scale | | Scale |
Basis Points +/- Target | Score | | % of Target | Score | | % of Target | Score |
+50 | 200% | | 112.5% | 200% | | 115.0% | 200% |
0 | 100% | | 100.0% | 100% | | 100.0% | 100% |
-100 | 50% | | 87.5% | 50% | | 80.0% | 50% |
< -100 | 0% | | < 87.5% | 0% | | < 80.0% | 0% |
| | | | | | | | |
2017 Adjusted ROIC | | 2018 Adjusted EBITDA | | 2019 Adjusted EBITDA |
3.1% | | $72.5 million | | $70.2 million |
| | | | | |
2017 Payout Score | | 2018 Payout Score | | 2019 Payout Score |
0% | | 0% | | 69.3% |
| | | | | |
Average of three 1-year Payout Scores: 23.1% |
Perquisites:2019 adjusted EBITDA is calculated as set forth on Appendix A Direct payment or reimbursement. Calculations for 2017 ROIC and 2018 adjusted EBITDA are included in our proxy statements filed March 29, 2018 and March 28, 2019, respectively.
Performance cash payouts under our LTIP are not subject to modifications based on individual performance but are prorated to reflect the portion of personalthe 2017-2019 performance period during which the executive was employed.
The final payout amounts received by the named executives under the performance cash component of the 2017 LTIP were:
Named Executive | 2017 LTIP Cash Target | | | 2017 LTIP Cash Payout Score as % of Target | | 2017 LTIP Cash Payout | |
M. Bauer | | $ | 189,844 | | | | 23.1% | | | $ | 43,854 | |
W. Foley | | | 928,125 | | | | 23.1% | | | | 214,397 | |
J. Burmeister | | | 182,513 | | | | 23.1% | | | | 42,161 | |
S. Zibbel | | | 63,256 | | | | 23.1% | | | | 14,612 | |
| Equity Compensation |
• | RSU awards under LTIP intended to equal 50% of LTIP target opportunity; 3-year ratable vesting |
Sign-on award of NQSOs to new CEO to establish meaningful link between pay and performance
2019 LTIP Restricted Stock Units
The Compensation Committee typically makes awards of equity to our senior leadership team under our long-term incentive compensation program each February. The Compensation Committee authorized these awards at its February 2019 meeting, which occurred before we announced financial planningresults for the 2018 fiscal year. The Committee elected to award the equity component of the 2019 LTIP entirely in RSUs to conserve shares under the Company's Omnibus Incentive Plans and tax return preparation fees; annualmanage its burn rate in light of the decline in the Company's stock price.
The intended economic value of the RSUs awarded to each executive physical examination and related services; ground transportation for tripswas equal to 50% of the executive’s long-term target incentive opportunity. To further conserve shares under the Omnibus Incentive Plans, the Committee determined the number of RSUs to be granted to each participant by dividing the intended economic value by $6.50, the average closing price of our common stock over the fourth quarter of 2018. Because of the decline in the Company’s stock price between Toledo, Ohio,the fourth quarter of 2018 and the Detroit, Wayne County Metropolitan airportgrant dates, the RSUs actually awarded to each executive had a grant date fair value of 47% less than the intended economic value.
As explained above, the Committee increased Mr. Burmeister’s LTIP target effective March 15, 2019. To reflect this increase, the Committee awarded Mr. Burmeister an additional 3,692 RSUs. The grant date for this award was March 15, 2019.
Except for the executive when traveling for business purposes3,692 RSUs granted to Mr. Burmeister and the executive's spouse when traveling together; membershipRSUs granted to Mr. Bauer, the grant date was the first business day after we released our fiscal 2018 financial results. For awards of RSUs made to Mr. Bauer, the Committee authorized these awards in one airline clubMarch 2019 and the grant date was Mr. Bauer’s first day of employment. All RSUs awarded in 2019 vest ratably over three years. The awards to Mr. Bauer were granted to induce Mr. Bauer to join the Company and were issued outside the terms of the executive's choice; for executives relocatingCompany's Omnibus Incentive Plans in accordance with Section 711(a) of the NYSE American Company Guide.
Sign-on Awards
To induce Mr. Bauer to join the Company and to establish an immediate and meaningful link to Libbey's long-term stock performance, the Compensation Committee made Mr. Bauer a new-hire grant of 150,000 non-qualified stock options on March 25, 2019. The options are divided into four groups of 37,500 options each, with one group having an exercise price of $7.00, one group having an exercise price of $8.50, one group having an exercise price of $10.00, and one group having an exercise price of $11.50. This new-hire grant cliff vests on March 25, 2022, the third anniversary of Mr. Bauer's first day of employment. The awards to Mr. Bauer were granted to induce Mr. Bauer to join the Company and were issued outside the terms of the Company's Omnibus Incentive Plans in accordance with Section 711(a) of the NYSE American Company Guide.
Other Equity Grant Practices
The Compensation Committee has delegated authority to the CEO to make limited grants of RSUs to senior managers and other employees who are not executive officers or direct reports to the CEO. The CEO’s authority to make these grants in 2019 was subject to the following limitations and conditions:
The maximum number of shares underlying RSUs that the CEO was authorized to award to all eligible individuals was 275,000;
The RSUs awarded could vest no more rapidly than ratably on the first, second and third anniversaries of the grant date;
The CEO was authorized to grant awards only outside "quiet periods";
The CEO was required to report at Libbey's request, movingleast quarterly to the Compensation Committee regarding the nature and related expenses associated with the move (may also include loss-on-sale protection when necessaryscope of awards made pursuant to attract talent);this authority; and for Mr. Foley, a housing allowance for housing
The agreements pursuant to which RSUs were granted must be substantially in the Toledo, Ohio, area since his primary residence is inform approved by the Cleveland, Ohio, metropolitan area.Committee from time to time.
HOW DOES LIBBEY DETERMINE THE FORMS AND AMOUNTS OF EXECUTIVE PAY?
Welfare and retirement benefits: Medical, dental and life insurance benefits for U.S. executives onThe Role of the same basis as for all U.S. salaried employees; matching contributions to our 401(k) savings plan on the same basis as for all U.S. salaried employees; and, for Ms. Kovach only, retirement benefits under our Salary Plan (a qualified retirement plan for all U.S. salaried employees hired before January 1, 2006) and our Supplemental Retirement Benefit Plan ("SERP") (an excess, non-qualified plan designed to promote substantially identical retirement benefits as the Salary Plan to the extent the Salary Plan cannot provide those benefits due to IRS limitations; no enhanced credit has ever been provided). Company contribution credits under the Salary Plan and the SERP were discontinued at the end of 2012.Compensation Committee
Limited income protection: Separation benefits under employment agreements, change in control agreements or our executive severance policy; payable only if employment is terminated under specified circumstances.
How does Libbey determine the forms and amounts of executive pay?
Participants and Tools
The Compensation Committee, consisting entirely of independent directors, is responsible for overseeing the design, development and implementation of our executive pay program. Each year, the Compensation Committee evaluates Libbey's executive compensation program to determine what, if any, changes are appropriate. In making these determinations, the Committee may consult with its independent compensation consultant, management and the Board, as described below; however, the Compensation Committee uses its own judgment in making final decisions regarding the compensation paid to our executives.
The Role of the Independent Compensation Consultant
The Compensation Committee consults with its independent executive compensation consultant when determined to be appropriate by the Compensation Committee. In 2016, the Compensation Committee retained Exequity, LLP to serveserved as the Committee’s independent compensation consultant. A representativeconsultant until October 2019, at which time the Committee replaced Exequity with the Rewards Solutions practice of Aon Consulting, Inc. The Committee replaced Exequity with Aon in order to develop another perspective on our executive compensation program and ensure it is geared to achieving our strategy. Aon’s retention was not due to a disagreement with Exequity over its advice or services. All amounts that we incurred in 2019 for services provided by Exequity and Aon were attributable to services provided by them to the Compensation Committee in connection with its executive pay decisions.
The Committee’s independent compensation consultant attended the majority of the meetings of the Compensation Committee in 2019, including the February 20162019 and February 20172020 meetings at which the Compensation Committee made decisions regarding our executive pay program for 20162019 and also advised the Committee in connection with other pay decisions made during the year. All expenses that we incurred in 2016 for services provided by Exequity were attributable to services provided by Exequity to the Compensation Committee in connection with its executive pay decisions.
In compliance with the NYSE MKTAmerican Company Guide's disclosure requirements regarding compensation consultant independence, Exequity and Aon each provided the Compensation Committee with a letter addressing each of six independence factors. Their responses affirm the independence of Exequity and theAon and their respective partners, consultants, and employees who service the Compensation Committee on executive compensation matters.
The Role of Management
Our CEO, our Senior Vice President, Chief Human Resources Officer and our Senior Vice President, General Counsel and Secretary attend meetings of, and provide information to, the Compensation Committee and its consultant to assist them in their pay determinations. In addition, management may request that the Compensation Committee convene a meeting, and management may communicate with the Compensation Committee’s consultant to provide the consultant with information or understand the views of, or request input from, the consultant as to pay proposals being submitted by management to the Committee. However, the Compensation Committee meets in executive session, without any member of management present, to discuss and make its final decisions with respect to our executive compensation program.
pay determinations.Our non-CEO executives play no direct role in determining their own pay, except to the extent they assess their own performance against their individual performance objectives as part of our performance appraisal process and to the extent
|
| |
| COMPENSATION-RELATED MATTERS |
that the Senior Vice President, Chief Human Resources Officer, the Senior Vice President, Chief Financial Officer and the Senior Vice President, General Counsel and Secretary provide information to the Compensation Committee with respect to pay programs affecting the entire executive leadership team.
The Compensation Committee sets the performance goals for our SMIP and LTIP based upon input from our CEO, including suggested individual performance objectives and metrics under the SMIP and the performance cash component of the LTIP. In setting our corporate performance objectives and measures, the Committee seeks input from its independent consultant. The Committee also seeks input from our Board in setting our CEO’s individual performance objectives and metrics.
Internal Pay Equity and Wealth Accumulation.Accumulation
In determining awards for current and future performance periods, the Compensation Committee considers internal pay equity within the senior leadership team, but does not consider the impact of, or wealth accumulated as a result of, equity awards made during prior years, since those awards represent pay for services rendered during prior-year periods.
Tally Sheets.Sheets
In connection with the preparation of our proxy statement each year, the Committee reviews ‘‘tally sheets’’“tally sheets” that summarize, for each executive officer, the compensation paid and equity grants awarded during the prior year, as well as the amounts that would have been payable to each executive officer if the executive officer’shis or her employment had been terminated under a variety of scenarios as of December 31 of the prior year. The Committee uses these ‘‘tally“tally sheets,’’” which are prepared by management and provide substantially the same information as is provided in the tables in this proxy statement, primarily to ensure that our executives’ estimated pay is consistent with the Committee’s intent in adopting the program and for reviewing internal pay equity within the senior leadership team.
Benchmarking and Peer Groups.Groups The Compensation Committee did not rely on peer group benchmarking in setting 2016 compensation.
The Compensation Committee engages its independent consultant to conduct a full benchmarking study of the Company'sCompany’s executive compensation and that of its peers approximately every other year. As disclosedBecause the Committee uses benchmarking studies as a reference point, and not the sole determinative factor, in setting executive compensation, the proxy statement filed in connection with our 2016 Annual Meeting,Committee does not conduct benchmarking on an annual basis. Exequity conducted a full benchmarking study in the fall of 2014, which2018 that the Compensation Committee considered as a reference point in setting our executives'executives’ 2019 pay opportunities. Exequity worked with management to develop a peer group for 2015.
Say-on-Pay Results.the benchmarking study. Initially, we reviewed for inclusion in the peer group public companies having revenues in the range of .5 to 2.0 times our revenues and having businesses that are consumer-driven and/or engaged in manufacturing. As a result, we identified, and the Compensation Committee approved for use in developing our 2019 CEO and CFO pay program, the following group: | PROXY-BASED PEER GROUP | |
American Woodmark Corporation | Helen of Troy Limited | Lindsay Corporation |
Barnes Group Inc. | Infinera Corporation | Myers Industries, Inc. |
Bassett Furniture Industries, Inc. | Interface, Inc. | Oxford Industries, Inc. |
Callaway Golf Company | iRobot Corporation | Sleep Number Corporation |
The Dixie Group, Inc. | Kimball International, Inc. | Trex Company, Inc. |
Ethan Allen Interiors Inc. | La-Z-Boy Incorporated | TriMas Corporation |
Flexsteel Industries, Inc. | Lifetime Brands, Inc. | |
We refer to this peer group as the “proxy-based peer group.” At the time the proxy-based peer group was selected, we ranked, by revenues, at the mid-point of the peer group.
To gather sufficient comparative data for executive positions other than the CEO and CFO, we created a second peer group consisting of companies who had participated in Equilar’s so-called “Top 25 Survey,” in which participating companies submit executive compensation data for their 25 most highly compensated executive positions. Using the same revenue criteria as described above for the proxy-based peer group, but a broader industry base than the proxy-based peer group, we identified, and the Compensation Committee approved, the following group:
EQUILAR TOP 25 PEER GROUP |
Acacia Communications, Inc. | Ethan Allen Interiors Inc. | Nautilus, Inc. |
Armstrong Flooring, Inc. | Federal Signal Corporation | Nordson Corporation |
Avanos Medical, Inc. | Hillenbrand, Inc. | Powell Industries, Inc. |
Callaway Golf Company | Infinera Corporation | Quanex Building Products Corporation |
Cantel Medical Corp. | Insulent Corporation | SPX Flow, Inc. |
Chart Industries, Inc. | Knoll, Inc. | Tennant Company |
ESCO Technologies Inc. | MTS Systems Corporation | Trex Company, Inc. |
| | Vera Bradley, Inc. |
We refer to this peer group as the “Equilar Top 25 peer group.” At the time the Equilar Top 25 peer group was selected, we ranked, by revenues, at the mid-point of the peer group.
Using publicly disclosed pay information from the current proxy statements for the companies in the proxy-based peer group, Exequity compared the compensation of the CEO and CFO to the proxy-based peer group in terms of base pay, target annual bonus opportunity, target total cash, long-term incentives and target total direct compensation (target total cash plus long-term incentives). Using data submitted by the companies in the Equilar Top 25 peer group as a reference point, Exequity compared the compensation of our 2016top officer positions (other than the CEO and CFO) to the peer group in terms of base pay, target annual bonus opportunity, target total cash, long-term incentives and target total direct compensation (target total cash plus long-term incentives). Exequity used the Equilar Top 25 peer group as an additional reference point when evaluating the compensation of our CEO and CFO.
Say-On-Pay Results and Shareholder Engagement
Our annual say-on-pay vote is one of our opportunities to receive feedback from shareholders regarding our executive compensation program. Following the 2018 Annual Meeting, of shareholders,at which our advisory say-on-pay proposal garnered the support of over 98%approximately 82% of the shares voted. voted, we reached out to our top 25 shareholders (collectively representing over 61% of our then outstanding common stock) to solicit feedback regarding executive compensation and corporate governance. Our Chief Financial Officer, General Counsel and Chief Human Resources Officer spoke with six shareholders (collectively representing over 21% of our then outstanding common stock) who accepted our invitation to provide feedback.
In our conversations with shareholders, we generally heard support for the strategic initiatives on which we are focused and for the compensation measures tied to those initiatives and recognition of the need to retain key executives in order to execute the Company's strategy and improve the Company's performance. We also heard suggestions for changes to our executive compensation program, many of which varied significantly from shareholder to shareholder. Suggestions we heard included, but were not limited to, preference for use of performance shares instead of performance cash in the Company's long-term incentive program, suggestions regarding performance metrics, and consideration of stock option awards as powerful incentive tools to drive performance and increase the Company's stock price.
Our Compensation Committee interpreted these resultsconsidered the vote result and the feedback we received as an affirmation ofit evaluated the compensation opportunities to be provided to our executive pay programofficers in 2019 and as a result,beyond. The Compensation Committee's ability to implement some of the Committee generally retained the same structure for our 2016 executive pay program.
Overview of Process for Setting 2016 Executive Pay
Leadership Transition. In connection with Ms. Streeter's termination of employment on January 11, 2016, the Company entered into a Mutual Separation Agreement and Release providing for separation payments and benefits consistent with her employment agreement. These separation payments and benefits are described in detail below under "Potential Payments upon Termination or Change in Control."In connection with hiring Mr. Foley as CEO (in addition to his existing role as Chairman), effective January 12, 2016, the Compensation Committee approved an initial base salary of $825,000, a target SMIP opportunity of 100% and a target LTIP opportunity of 300%, all of which are equivalentsuggestions proposed by shareholders is constrained due to the compensation package that had been provided to Ms. Streeter. In setting Mr. Foley's compensation, the Committee considered the significant responsibilities of the CEO position, Mr. Foley's deep knowledge of our business and over 30 years of experience in the glass tableware and consumer products markets, the critical importance of the CEO in achieving the Company's strategic objectives, market data, and the relationship of his compensation to that of our other executive officers.
Because Mr. Foley was retired at the time of his appointment as CEO and intends to retire once again when his employment with Libbey ends (regardless of when or how it ends), the Committee chose not to give Mr. Foley an employment agreement or change in control agreement. Instead, the Committee chose to provide Mr. Foley with modest separation benefits upon his eventual separation from service with the Company. Additional information regarding Mr. Foley's separation benefits is included below under"Potential Payments upon Termination or Change in Control."Base Salary Adjustments. The Compensation Committee reviews base salaries at least annually. With respect to base salary increases that were implemented in April 2016, the Compensation Committee made its decisions after receiving input from Mr. Foley and Exequity. Taking into account the Company's performance in 2015, Mr. Foley recommended, and the Compensation Committee approved, minimal salary increases of 2.0%, except that Mr. Foley's base salary remained unchanged in light of his limited time in the CEO role. Subsequently, the Committee approved an additional 7.8% increase
|
| |
COMPENSATION-RELATED MATTERS | |
to Ms. Cerioli's base salary effective June 1, 2016 because of her significant contributions to the Company's global supply chain initiatives during the first five months of the year.
Approval of 2016 SMIP and 2016 LTIP Designs. The Compensation Committee approved the Company's 2016 SMIP and the performance component of the Company's 2016 LTIP in February 2016. The material terms of the performance goals under these plans were approved by shareholders at the 2010 Annual Meeting of shareholders and reapproved by shareholders at the 2015 Annual Meeting of shareholders. The SMIP and the performance cash component of the 2016 LTIP are intended to serve as "umbrella" plans and potential funding vehicles for cash bonuses to ensure full tax deductibility of cash bonuses paid to officers who are subject to Internal Revenue Code Section 162(m). Performance under the approved formulas determines the amounts of the bonus pools under the 2016 SMIP and performance cash component of the 2016 LTIP, respectively, and the allocations of the bonus pools set by the Compensation Committee determine the maximum amount of awards to individual participants under the plans. The bonus pool for the 2016 SMIP was established by the Committee at 4% of actual 2016 adjusted EBITDA (excluding special charges, after adjustments for any acquisitions or dispositions, and assuming budgeted exchange rates). The bonus pool under the performance cash component of the 2016 LTIP was established by the Committee at 1% of actual, cumulative adjusted EBITDA (excluding special charges, after adjustments for any acquisitions or dispositions, and assuming budgeted exchange rates) for the performance cycle. The umbrella plans merely set the maximum bonus payout that any named executive may receive under the relevant plans, and the actual bonus paid to each named executive was determined as described under "What pay did Libbey's executives receive for 2016?" below.Equity Grants under our LTIP. The Compensation Committee typically makes awards of RSUs and NQSOs to our senior leadership team under our long-term incentive compensation program each February. The Compensation Committee authorized these awards at its February 2016 meeting, which occurred before we announced financial results for the 2015 fiscal year. The number of RSUs actually awarded was a function of the average closing price of our common stock over a period of 20 consecutive trading days ending on the grant date, and the number of NQSOs granted was a function of the Black-Scholes value (calculated using the average closing price of Libbey Inc. common stock over a period of 20 consecutive trading days ending on the grant date, and capping volatility at 50%) of the NQSOs on the grant date. In each case, the grant date was the first business day after we released our fiscal 2015 financial results.
Awards under our 2016 SMIP and 2014 LTIP. In February 2017, the Compensation Committee, with input from Mr. Foley and Exequity, reviewed and certified our 2016 performance and made the awards under our 2016 SMIP and the performance cash component of our 2014 LTIP (for the 2014-2016 performance cycle). Details regarding the decisions made and payouts awarded are described below under "What pay did Libbey's executives receive for 2016?"Our Equity Grant Practices
As explained above, the Compensation Committee typically makes awards of RSUs and NQSOs in February to our senior leadership team under our LTIP. The Compensation Committee also occasionally makes "sign-on" awards of RSUs and NQSOs to newly hired executives and other key employees. Typically, the number of RSUs and/or NQSOs awarded are determined as described above under "Equity Grants under our LTIP." Occasionally, the sign-on awards include the award of a fixed number of RSUs or NQSOs intended to make the executive whole for equity awards that the executive forfeits when leaving his or her prior employment. None of our named executives received sign-on awards in 2016.
The Compensation Committee has delegated authority to the CEO to make limited grants of NQSOs, RSUs and SARs to senior managers and other employees who are not executive officers or direct reports to the CEO. The CEO’s authority to make these grants was subject to the following limitations and conditions:
For 2016, the maximum number of shares
underlying RSUs, NQSOs and/or SARs thatavailable for issuance under our equity incentive plans. At our 2019 Annual Meeting, our advisory say-on-pay proposal garnered the CEO was authorized to award to all eligible individuals was 150,000;
The exercise pricesupport of any NQSOs and/or SARs awarded could not be less than the closing priceapproximately 84% of the Company's common stock on the grant date;
The RSUs, NQSOs and/or SARs awarded could vest no more rapidly than ratably on the first, second and third anniversaries of the grant date;
The CEO was authorized to make awards only outside "quiet periods";
The CEO was required to report at least quarterly to the Compensation Committee regarding the nature and scope of awards made pursuant to this authority; and
|
| |
| COMPENSATION-RELATED MATTERS |
The agreements pursuant to which RSUs, NQSOs, and/or SARs were granted must be in substantially the same form approved by the Committee from time to time.
shares voted.POLICIES AND PRACTICES RELATED TO LIBBEY’S EXECUTIVE COMPENSATION PROGRAM
Potential Impact of Misconduct on Compensation.
CompensationOur SMIP and long-term incentive plans are authorized under our Amended and Restated Libbey Inc. 2006 Omnibus Plan.Incentive Plan or our Amended and Restated Libbey Inc. 2016 Omnibus Incentive Plan, each of which contains a “clawback” provision. The clawback provision of the Amended and Restated Libbey Inc. 2006 Omnibus Incentive Plan contains a ‘‘clawback’’ provision that obligates the recipient of a cash or equity award to reimburse us if:
we are required, as a result of misconduct, to prepare an accounting restatement due to our material noncompliance with any financial reporting requirement under the securities laws; and
the award recipient knowingly engaged, or was grossly negligent in engaging, in the misconduct, or knowingly failed, or was grossly negligent in failing, to prevent the misconduct or is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002.
The amount to be reimbursed is the amount of any payment in settlement of an award made under the Amended and Restated Libbey Inc. 2006 Omnibus Plan and earned or accrued during the 12-month period following the first public issuance or filing with the SEC of the financial document embodying the financial reporting requirement in question.
Awards under the Amended and Restated Libbey Inc. 2016 Omnibus Incentive Plan are subject to forfeiture and clawback under such final rule as is promulgated under the Dodd-Frank Wall Street Reform and Consumer Protection Act by the SEC, and under any clawback policy that we may have in place at any time.
Share Ownership /Executive Stock Retention Guidelines.
What pay did Libbey's executives receive for 2016?
Base Salaries
WhenUnder the Board appointed Mr. Foleyguidelines, each executive is generally required to replace Ms. Streeter in January 2016, the Compensation Committee set his pay package so that it equaled the package then being provided to Ms. Streeter. Accordingly, Mr. Foley's base salary was set at $825,000. At Mr. Foley's request, his base salary will not be increased in 2017.
In February 2016, the Compensation Committee approved minimal base salary increases of 2.0% for each of the non-CEO named executives. For the executives other than Mr. White (who left the Company on March 31, 2016), the increases were effective April 1, 2016 and were as follows:
|
| | | | |
| | | Annualized Salary Before Increase | | Annualized Salary After Increase |
| Named Executive | | ($) | | ($) |
| S. Buck | | 475,000 | | 484,500 |
| A. Cerioli | | 400,002 | | 408,002 |
| S. Kovach | | 336,520 | | 343,250 |
| S. Miñarro | | 350,040 | | 357,041 |
In May 2016, the Committee approved an additional increase to Ms. Cerioli's base salary in recognition of her contributions to the Company's global supply chain initiatives during the first five months of the year. This additional increase, effective June 1, 2016, set Ms. Cerioli's base annual salary at $440,004.
Annual Cash Incentive Award under our SMIP
The Compensation Committee approved our 2016 SMIP design at its February 2016 meeting. Under our 2016 SMIP, each named executive had an opportunity to earn a payout based on the Company's financial performance with respect to two equally weighted metrics: revenue growth (net sales) and adjusted cash earnings (calculated as shown in Appendix B). By contrast, our 2015 SMIP design consisted of three metrics: revenue growth (net sales) (weighted at 33%), adjusted EBIT (weighted at 34%), and trade working capital (defined as net inventory plus net accounts receivable less accounts payable) as a percentage of net sales (weighted at 33%). The Committee believed that replacing the adjusted EBIT and trade working capital productivity measures with the adjusted cash earnings measure, in combination with the revenue growth measure, encourages profitable revenue growth and prudent management of inventory, accounts payable and accounts receivable - all potential consumers of cash if not appropriately managed.
|
| |
COMPENSATION-RELATED MATTERS | |
The targets and payout scales for the Company performance metrics were:
|
| | | | | | | | |
| Revenue Growth (Net Sales) | | Adjusted Cash Earnings |
Full Year Net Sales (dollars in thousands) | Percent of Targeted Net Sales | Performance Level | Payout Percentage | | Full Year Cash Earnings (dollars in thousands) | Percent of Targeted Cash Earnings | Performance Level | Payout Percentage |
| $880,000 | 104.9% | Maximum | 200% | | $131,076 | 110.0% | Maximum | 200% |
| $839,138 | 100.0% | Target | 100% | | $119,160 | 100.0% | Target | 100% |
| $800,000 | 95.3% | Threshold | 40% | | $95,328 | 80.0% | Threshold | 50% |
| < $800,000 | < 95.3% | Below Threshold | 0% | | < $95,328 | < 80.0% | Below Threshold | 0% |
Because the two metrics were weighted equally, the payout percentages for each metric were averaged to determine the total payout score.
While the 2016 net sales target of $839.1 million was lower than the net sales target under our 2015 SMIP, the Committee believed that the 2016 net sales target was a sufficiently challenging goal that aligned with the Company's annual operating plan and strategic initiatives. When this target was established in February 2016, the Company expected sales growth in 2016 to be limited to approximately 1% in light of the slowing global economy and increasing competitive dynamics - trends that began in 2015 and that were expected to continue in 2016. Additionally, the Company viewed 2016 as a year to invest in market research, new product development and e-commerce strategic planning, all of which would position us for sustainable revenue growth in later years. For these reasons, the Committee set a net sales target representing 2% growth over actual revenue for the 2015 fiscal year. The Committee sought to further ensure the rigor of the revenue growth metric by setting a high payout threshold of 95.3% of target and limiting the amount of a threshold payout to 40%. By comparison, the 2015 SMIP design required achievement of only 94.7% of target to receive a threshold payout, and payout for achieving threshold performance was 50%.
Each of our named executives had a target opportunity under the 2016 SMIP equal to a percentage ofretain, until his or her
actual base salary earned in 2016. The named executives’ 2016 SMIP targets were established basedseparation from service:50% of the net after-tax shares underlying each grant of RSUs that subsequently vests; and
50% of the net after-tax shares underlying NQSOs that the executive subsequently exercises.
Executives nearing retirement are released from our guidelines on a budget approved bythe date the Board of Directors.
|
| | |
Named Executive | | Target Award as a Percentage of Full-Year Base Salary |
W. Foley | | 100% |
S. Streeter | | 100% |
S. Buck | | 70% |
A. Cerioli | | 60% |
S. Kovach | | 50% |
S. Miñarro | | 60% |
J. White | | 75% |
On February 6, 2017, the Committee met and reviewed our performance and the performance of our senior leadership team during 2016. The Committee reviewed net sales and adjusted cash earnings for 2016 relative to our targeted net sales and adjusted cash earnings, respectively, for the year. We use constant currency at budgeted exchange rates when calculating our performance under each of these performance measures so that our executives will neither benefit from, nor be harmed by, currency fluctuations, which are not a reflectionis notified of the Company's performance.
Underplanned retirement, or one year before the 2016 SMIP, the Committee may adjust actual results to exclude the impactcontemplated retirement date, whichever is later.As of extraordinary and unusual items. Examples of special items for which adjustments may be made include merger and acquisition costs, severance payable to executives under our Executive Severance Compensation Policy, hedge ineffectiveness caused by unanticipated changes in regulation, and other similar items that are either not foreseen or are foreseen but are not included in the Company's annual operating plan because the occurrence of the event is substantially uncertain at the time the annual operating plan is submitted to the Board. The Committee believes such adjustments are appropriate so that our executives' pay will not be impacted, positively or negatively, by special items that are not a reflection of our core operating performance. As explained in further detail below, and as shown in the calculations set forth on attached
Appendix B, the Committee adjusted net sales and cash earnings to reflect certain special items. While the adjustments to net sales resulted in a net positive impact to the
|
| |
| COMPENSATION-RELATED MATTERS |
payout score for that metric, the adjustments to cash earnings resulted in a net negative impact to the payout score for that metric.
The Committee acknowledged that, in connection with collective bargaining agreement negotiations relating to our Toledo, Ohio manufacturing plant, a work stoppage had adversely impacted 2017 net sales by an estimated $7 million to $9 million and 2017 cash earnings by approximately $1.5 million. And the Committee believed that management should not be penalized for refusing to concede to labor demands that were not in the long-term best interests of the Company. Accordingly, the Committee adjusted each of net sales and cash earnings to neutralize the impact of the work stoppage. Net sales and cash earnings are calculated as set forth on attached Appendix B.In addition to adjusting for the work stoppage, the Committee believed that it was appropriate to adjust cash earnings (calculated as set forth on attached Appendix B) by other items that did not reflect our core operating performance and were not anticipated or budgeted. As a result, the Committee further adjusted cash earnings (calculated as set forth on attached Appendix B) by the following items: |
| | | | |
| Item | | Amount of Adjustment to Company-Wide Cash Earnings |
| Expense in connection with executive terminations | | $ | 3,554,000 |
|
| | | |
| Income related to natural gas contract hedge ineffectiveness | | (1,860,000 | ) |
| | | |
| 2010 Mexican tax assessment | | 1,085,000 |
|
| | | |
| Total | | $ | 2,779,000 |
|
After accounting for these adjustments, revenue growth was $806.9 million or 96.2% of targeted revenue growth for the year and adjusted cash earnings was $118.7 million or 99.6% of targeted adjusted cash earnings for the year. Based on the payout scales above, the payout scores for the revenue growth and adjusted cash earnings metrics (before application of any modifier for individual performance) were:
|
| | | | |
| Preliminary Financial Performance Payout Score as % of Target |
| Revenue Growth | | Adjusted Cash Earnings | | Total |
| 47.5 | | 99.0 | | 73.25 |
In recognition of the decline in total shareholder return over the 2016 fiscal year, however, the Committee exercised its discretion to limit the payout percentage under the revenue growth metric to threshold (40.0%). This limitation applied toMarch 20, 2020, all executives (except for Ms. Streeter, whose payout had been calculated at the time of her termination in January 2016) and was based solely on the Company's decline in total shareholder return during 2016, as opposed to any individual executive's performance. The resulting payout scores (before application of any modifier for individual performance) were:
|
| | | | |
| Final Financial Performance Payout Score as % of Target |
| Revenue Growth | | Adjusted Cash Earnings | | Total |
| 40.0 | | 99.0 | | 69.5 |
Pursuant to the plan design for the 2016 SMIP, an executive's individual award may also be adjusted (up or down) by as much as 25%, depending on his or her individual performance, including with respect to individual objectives approved by the Compensation Committee early in 2016. As a result, an executive who demonstrated exceptional performance in developing and/or implementing a process or tool that may not have impacted the current year’s financial results but is likely to favorably impact future success may be awarded a payout greater than the payout that is based strictly on financial performance measures. Alternatively, an executive whose individual performance did not meet expectations may be awarded a payout less than the payout that is based strictly on financial performance measures. Applying the individual performance modifier also ensured that the executive’s compensation was based not only on the goals achieved, but also on the extent to which the executive demonstrated effective organizational leadership skills in executing our strategy.
Pursuant to the separation and release agreement between Ms. Streeter and the Company, her 2016 SMIP payout amount was calculated at the time of her termination assuming target company performance, with no modifier for individual performance. The Committee received input from Mr. Foley regarding the other named executives' individual performance
|
| |
COMPENSATION-RELATED MATTERS | |
review scores, including an evaluation of the extent to which they achieved their individual objectives. After meeting in executive session with Exequity, the Committee determined that: (a) in light of the Company's performance, the payout amounts earned by each named executive should not be increased, despite any individual extraordinary performance; and (b) based on Ms. Cerioli's individual performance during the second half of 2016, Ms. Cerioli's payout should be reduced by 20%. Accordingly, theapplicable named executives received the following payouts under the 2016 SMIP:
|
| | | |
Named Executive | | SMIP 2016 Payout
($)
|
W. Foley | | 556,000 |
|
S. Streeter | | 24,057 |
|
S. Buck | | 234,554 |
|
A. Cerioli | | 141,670 |
|
S. Kovach | | 118,695 |
|
S. Miñarro | | 148,156 |
|
J. White | | 68,414 |
|
Long-Term Performance-Based Compensation
In 2016, each named executive’s long-term incentive opportunity included a cash-based performance component and an award of NQSOs and RSUs. The long-term incentive opportunity is intended to have an aggregate economic value equal to a target percentage of the executive’s base salary. The table below sets forth the target percentage for each of the named executiveswere in 2016.
|
| | | | |
| Named Executive | | 2016 Target Long-Term Award as a Percentage of Annualized Base Salary (%) | | 2016 LTIP Performance Cash Target as Percentage of Annualized Base Salary (%) |
| W. Foley | | 300 | | 120 |
| S. Streeter | | 300 | | 120 |
| S. Buck | | 140 | | 56 |
| A. Cerioli | | 120 | | 48 |
| S. Kovach | | 95 | | 38 |
| S. Miñarro | | 120 | | 48 |
| J. White | | 150 | | 60 |
The cash-based performance opportunity provided to our named executives for performance during 2016 consisted of the following components:
A performance component under our 2014 LTIP (for the 2014-2016 performance cycle) that provides for cash awards based on our performance, over the three-year performance cycle, against the following equally weighted performance measures: (1) a profitability measure - namely, the extent to which we achieve our targeted adjusted EBITDA margin over the performance cycle; and (2) a financial leverage measure - namely, the extent to which we achieve our targeted net debt to adjusted EBITDA ratio over the performance cycle. The targeted adjusted EBITDA margin over the performance cycle was 15.3% and the targeted net debt to adjusted EBITDA ratio was 2.82.
A performance component under our 2015 LTIP (for the 2015-2017 performance cycle) and 2016 LTIP (for the 2016-2018 performance cycle) that provides for cash awards if and to the extent we achieve our targeted return on invested capital (ROIC) for each of the three one-year performance periods included in the three-year performance cycle. Because of ROIC's relationship to total shareholder return, using ROIC as a performance measure emphasizes our philosophy that compensation should aligncompliance with the
long-term interestsExecutive Retention Guidelines.Deductibility of the three one-year performance periods is reset for each performance period to correlate with targeted ROIC for that year. The amount of the final payout, if any, will be determined based on the average of the three discrete, single-year payout scores.
|
| |
| COMPENSATION-RELATED MATTERS |
| |
◦ | For any performance cycle of which 2015 is a part, our 2015 ROIC target was 12.9%. We achieved ROIC of 10.9% in 2015, resulting in a payout score for the 2015 calendar year of 0%, as determined according to the following scale: |
|
| | | | |
| | Basis Points Above or Below 2015 Targeted ROIC | | Payout Score (%) | |
| | +50 | | 200 | |
| | 0 | | 100 | |
| | -70 | | 50 | |
| | Less than -70 | | 0 | |
| |
◦ | For any performance cycle of which 2016 is a part, our 2016 ROIC target was 10.8%. In setting the target, the Committee considered the Company's prior year performance and alignment with the Company's annual operating plan and long-term strategic initiatives. The slowing global economy, decline in restaurant traffic, shift in retail sales toward e-commerce, and competitive pricing environment of 2015 were expected to continue in 2016. The realities of the business environment led the Company to shift its priorities from aggressive growth toward improving marketing and new product development capabilities and innovation, improving customer relationships, and simplifying the business - all of which would support future sustainable, profitable growth. The Committee believed that a 2016 ROIC target of 10.8% would prove sufficiently challenging to achieve. In February 2017, the Committee determined that we had achieved 2016 ROIC of 9.9%, resulting in a payout score for the 2016 calendar year of 55%, as determined according to the following scale: |
|
| | | | |
| | Basis Points Above or Below 2016 Targeted ROIC | | Payout Score (%) | |
| | +100 | | 200 | |
| | 0 | | 100 | |
| | -150 | | 25 | |
| | Less than -150 | | 0 | |
Each of our adjusted EBITDA margin, net debt to adjusted EBITDA ratio and ROIC performance measures is calculated as set forth on CompensationAppendix A.For purposes of determining the extent to which the cash award is earned, adjusted EBITDA is calculated as described in Appendix A. Under the LTIP, the Committee may adjust actual results to exclude the impact of extraordinary and unusual items that are not indicative of our core operating performance and were not anticipated or budgeted. For purposes of the 2014 LTIP, the Committee approved the adjustment of 2016 EBITDA by the same special items included in adjusted EBITDA as reported in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016: |
| | | | |
| Item | | Amount of Adjustment to Company-Wide EBITDA |
| Product portfolio optimization | | $ | 5,693,000 |
|
| | | |
| Income related to natural gas contract hedge ineffectiveness | | (1,860,000 | ) |
| | | |
| Toledo Plant work stoppage | | 4,162,000 |
|
| | | |
| Executive terminations | | 4,460,000 |
|
| | | |
| Pension settlements | | 168,000 |
|
| | | |
| Total | | $ | 12,623,000 |
|
Additionally, the Committee adjusted 2016 net debt to neutralize the impact of our use of less cash for share repurchases than was budgeted. This adjustment resulted in a net negative impact to the payout score for the net debt to adjusted EBITDA ratio performance metric.
|
| |
COMPENSATION-RELATED MATTERS | |
The Committee approved these adjustments so that the executives would neither benefit from, nor be harmed by, the impact of items that were not indicative of our core operating performance and were not anticipated or budgeted.
In February 2017, the Compensation Committee reviewed our performance for the three-year performance cycle ended December 31, 2016 and determined that we had achieved an adjusted EBITDA margin of 14.2% over the three-year performance cycle, or 92.2% of our targeted adjusted EBITDA margin of 15.3%, and a net debt to adjusted EBITDA ratio of 3.22 for the three-year performance cycle, or 87.2% of our targeted net debt to adjusted EBITDA ratio of 2.82. The Committee then applied the following scales, which the Committee approved in 2014, to determine the amount earned under the performance cash component of the 2014 LTIP:
|
| | | | | | |
| Adjusted EBITDA Margin | | Net Debt to Adjusted EBITDA Ratio |
Percent of Targeted Adjusted EBITDA Margin | Performance Level | Payout Percentage | | Percent of Targeted Net Debt to Adjusted EBITDA Ratio | Performance Level | Payout Percentage |
| 115% | Maximum | 200 | | 115% | Maximum | 200 |
| 100% | Target | 100 | | 100% | Target | 100 |
| 80% | Threshold | 50 | | 80% | Threshold | 50 |
| <80% | Below Threshold | 0 | | <80% | Below Threshold | 0 |
Because the performance measures were weighted equally, their payout percentages were averaged to determine the final payout score:
|
| | | | |
| Final Payout Score as % of Target |
| Adjusted EBITDA Margin | | Net Debt to Adjusted EBITDA Ratio | | Total |
| 80.6% | | 68.2% | | 74.4% |
Performance cash payouts under our LTIP are not subject to modifications based on individual performance. Payouts were prorated, however, for those executives who were not employed for the entire 2014-2016 performance period.
The final payout amounts received by the named executives under the performance cash component of the 2014 LTIP were:
|
| | | |
Named Executive | | 2014 LTIP Cash Payout
($)
|
W. Foley(1)
| | 245,520 |
|
S. Streeter(2)
| | 406,027 |
|
S. Buck | | 151,657 |
|
A. Cerioli(1)
| | 72,342 |
|
S. Kovach | | 90,559 |
|
S. Miñarro | | 92,950 |
|
J. White(1)
| | 58,590 |
|
| |
(1) | Prorated to reflect the portion of the performance cycle during which the named executive was employed. |
| |
(2) | Ms. Streeter's payout amount was calculated at the time of her termination based on the most recent forecasts available. The payout amount was then prorated to reflect the portion of the performance cycle during which she was employed. This final payout amount was paid to her in March 2016. |
Stock Options and RSUs
In February 2016, the Compensation Committee awarded to participants in our 2016 LTIP (other than Ms. Streeter) NQSOs and RSUs having an economic value at the time of award equal to 20% and 40%, respectively, of their target long-term incentive opportunities. These NQSOs and RSUs vest ratably over four years beginning on February 17, 2017.
|
| |
| COMPENSATION-RELATED MATTERS |
What is the Compensation Committee’s policy regarding deductibility of compensation?
Pursuant to Section 162(m) of the Internal Revenue Code publicly-held corporations are prohibitedprecludes the Company from deductingtaking a federal income tax deduction for compensation paid to certain executive officers, as of the end of the fiscal year, in excess of $1.0$1 million unlessto our covered employees (which includes the CEO and our three other most highly compensated executive officers, other than the Chief Financial Officer, for years prior to 2018). Prior to 2018 (and including tax years that began prior to January 1, 2018), this limitation did not apply to performance-based compensation. While the Compensation Committee has generally attempted to maximize the tax deductibility of executive compensation, is ‘‘performance-based.’’ Thethe Compensation Committee believes that preserving the tax deductibilityprimary purpose of our compensation program is an important, butto support the Company’s business strategy and the long-term interests of our shareholders. Therefore, the Compensation Committee has maintained the flexibility to award compensation that may not be tax-deductible if doing so furthers the sole, objective when designingobjectives of our executive compensation programs. Accordingly, while our 2016 SMIPprogram.
Under the recent U.S. tax reform, the exception to Section 162(m) for performance-based compensation has been repealed for tax years beginning after December 31, 2017, subject to certain transition and grandfathering rules. In addition, the performance cash componentsChief Financial Officer is now included as a covered employee. Despite these new limits on the deductibility of performance-based compensation, the Compensation Committee continues to believe that a significant portion of our 2014 LTIP, 2015 LTIP and 2016 LTIP (fornamed executive officers’ compensation should be tied to the 2014-2016 performance cycle,Company’s performance. Therefore, we do not currently anticipate that the 2015-2017 performance cycle andchanges to Section 162(m) will significantly impact the 2016-2018 performance cycle, respectively) are designed to qualify as “performance-based” compensation, other componentsdesign of our 2016 executive paycompensation program (base salary and RSUs) are not. Additionally, in certain circumstances the Committee may authorize compensation arrangements that are not tax deductible in whole or in part, but which promote other important objectives such as attracting and retaining key executive leaders who can drive financial and strategic objectives that maximize long-term shareholder value.
Does Libbey assess compensation-related risks?
going forward.Compensation Risk Assessment
On an annual basis, management conducts a risk assessment of our compensation policies, practices and plans to determine whether they encourage excessive risk-taking. In addition to reviewing this annual risk-assessment, the Compensation Committee also reviews and discusses, at least annually, the relationship between risk management policies and practices and compensation and evaluates compensation policies and practices that could mitigate any such risk. Examples of features of our compensation program that guard against excessive risk-taking include:
An appropriate mix of fixed and variable, short-term and long-term, and cash and equity compensation;
Compensation Committee discretion regarding individual executive awards;
Oversight by non-participants in the plans;
Long-term compensation awards and vesting periods that encourage a focus on sustained, long-term results;
Executive incentive awards are subject to forfeiture and clawback;
Prohibition against hedging, pledging and engaging in transactions involving derivatives of our stock;
Stock ownership / ownership/retention requirements for our executives; and
"Double-trigger" vesting of equity awards and non-equity incentives after a change in control.
The Compensation Committee has determined that our compensation policies, practices and plans do not encourage excessive and unnecessary risk-taking, and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on the Company.
|
| |
COMPENSATION-RELATED MATTERS | |
Potential Payments Upon Termination or Change in Control
Ms. Streeter
We had an employment agreement with Ms. Streeter, whose employment was terminated effective January 11, 2016. Ms. Streeter's termination of employment was treated as a termination without Cause(1) under her employment agreement, which provided for certain separation payments and benefits in the event of such a termination. In establishing those payments and benefits, the Compensation Committee intended to support the objectives of attracting and retaining a talented chief executive officer by providing benefits consistent with competitive market practice, compensating Ms. Streeter for service to us and bridging the gap between employment with us and her next job, and compensating Ms. Streeter in exchange for restrictive covenants that protect Libbey's future interests.
In connection with her termination, we entered into a Mutual Separation Agreement and Release with Ms. Streeter. The separation payments and benefits we provided to Ms. Streeter under that agreement are consistent with the separation payments and benefits provided for in her employment agreement, except with respect to the timing and calculation method of incentive award payments under the 2016 SMIP and the performance cash components of the 2014 LTIP, 2015 LTIP and 2016 LTIP. The employment agreement called for payment of the amounts actually earned, prorated to the date of termination, with payments to be made between January 1 and March 15 of the year following the end of each applicable performance cycle. In the interest of fully and quickly resolving all potential issues related to separation compensation, the Company and Ms. Streeter mutually agreed to estimate the amounts that would be earned based on the most recent forecasts available in January 2016, prorate those estimated amounts to the date of termination, and make the payments to Ms. Streeter in March 2016. Accordingly, Ms. Streeter received the following benefits in connection with her termination:
Accrued Benefits.
Cash severance equal to two times the sum of (a) her annual base salary in effect on the date of termination; and (b) her target 2016 SMIP opportunity, with such amount being payable in equal monthly installments over a period of 24 months.
Annual incentive award under our 2016 SMIP based on Ms. Streeter's base salary earnings for 2016 and forecasted Company performance as of the end of January 2016.
Performance-based cash compensation under our 2014 LTIP, 2015 LTIP and 2016 LTIP, based on forecasted Company performance as of the end of January 2016, and prorated to Ms. Streeter's termination date.
Accelerated vesting of all cash-settled retention RSUs and cash-settled retention SARs.
Accelerated vesting of all other unvested equity awards that were scheduled to vest on or before June 30, 2016.
Executive-level outplacement services selected by Ms. Streeter, with the aggregate cost to Libbey not to exceed $75,000.
Continuation of medical, prescription drug, dental and life insurance benefits for a period of 18 months, with Ms. Streeter continuing to pay employee contributions.
Ms. Streeter's obligations under the Mutual Separation Agreement and Release include:
Our receipt of a release of claims against Libbey;
Confidentiality obligations;
Obligation to assign intellectual property rights;
Obligation to assist with litigation as to which Ms. Streeter has knowledge; and
24-month obligation not to: (a) interfere with customer accounts; (b) compete; (c) divert business opportunities; (d) solicit our employees; nor (e) disparage us.
| |
(1) | Cause means (a) willful and continuous failure to substantially perform duties; (b) willful and continuous failure to substantially follow and comply with directives of the Board; (c) commission of an act of fraud or dishonesty that results in a material adverse effect on us or commission of an act in material violation of our Code of Business Ethics and Conduct; or (d) willful, illegal conduct or gross misconduct that is materially and demonstrably injurious to us. |
|
| |
| COMPENSATION-RELATED MATTERS |
36
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Mr. Foley
Mr. Foley is employed at will. He is not covered by an employment agreement or change in control agreement, nor is he eligible to participate in our Executive Severance Pay Plan, our Salary Plan, or our SERP.
Compensation Policy.In early 2016, the Company entered into a letter agreement with Mr. Foley that provides for, among other things, limited separation benefits under certain circumstances. As with all other named executives, the award agreements relating to grants of RSUs, NQSOs and performance cash opportunities also provide for separation benefits in certain circumstances. There are no conditions to Libbey'sLibbey’s obligations to provide separation benefits to Mr. Foley.
Because Mr. Foley was retired at the time of his appointment as CEOhire and intendsintended to retire once again when his employment with Libbey endsended (regardless of when or how it ends)ended), the Compensation Committee chose to provide Mr. Foley with more modest separation benefits compared to those of our other named executives.
If Mr. Foley's employment terminates, other than a termination for Cause, Mr. Foley would be entitled to the following Basic Benefits:
Accrued Benefits; and
For the year in which termination occurs, a prorated award under our SMIP based on actual performance.
If the termination is due to Mr. Foley's death or permanent disability, Mr. Foley would be entitled to the Basic Benefits plus:
A prorated target award under the performance cash component of the LTIP for any performance cycle in effect on the date of death or permanent disability, paid as soon as administratively feasible; and
Immediate vesting of all NQSOs and RSUs.
If the termination is by Libbey without Cause, Mr. Foley would be entitled to the Basic Benefits plus:
As to performance-based cash compensation under our LTIP, payment of the amount actually earned for each performance cycle in effect on the date of termination, prorated to the termination date; provided, however, that the amounts will not be prorated if the termination is in connection with a change in control; and
Immediate vesting of all NQSOs and RSUs scheduled to vest within one year of the termination date; provided, however, that all unvested NQSOs and RSUs will vest if the termination is in connection with a change in control.
If the termination is due to Mr. Foley's resignation, Mr. Foley would be entitled to the Basic Benefits plus:
As to performance-based cash compensation under our LTIP, payment of the amount actually earned for each performance cycle in effect on the date of termination, prorated to the termination date.
Except as in instances | | Death or Disability | | | Resignation, Retirement or Termination without Cause |
Cash Severance | | None | | | None |
Annual Cash Incentive
(SMIP)(1) | | Prorated to March 31, 2019 and subject to actual performance | | | Prorated to March 31, 2019 and subject to actual performance |
Long-Term Performance Cash Incentive(1) | | Target awards for each of 2017 LTIP, 2018 LTIP and 2019 LTIP, in each case prorated to March 31, 2019, paid as soon as administratively feasible | | | Prorated to March 31, 2019 and subject to actual performance |
Equity Awards | | All awards immediately vest | | | All awards immediately vest |
Health, Welfare and Other Benefits | | Accrued Benefits only | | | Accrued Benefits only |
(1) | Except in the case of death or permanent disability, amounts paid under our SMIP and the performance cash component of our LTIP will be paid between January 1 and March 15 of the year following the end of the relevant performance cycle. |
In March 2019, Mr. Foley retired from his role as CEO but continued to be employed by the Company as Executive Chairman. In connection with his retirement from his role as CEO, his participation in the 2019 SMIP and the performance cash component of our LTIP will be paid between January 1 and March 15components of the year following2017 LTIP (2017-2019 performance cycle), 2018 LTIP (2018-2020 performance cycle) and 2019 LTIP (2019-2021 performance cycle) was prorated to March 31, 2019.
Mr. Foley retired from employment with the Company on February 29, 2020 but continues to serve on the Board as Chairman. In connection with his end of the relevant performance cycle.
Ifemployment, Mr.
Foley had retired on or before December 31, 2016, allFoley’s unvested equity awards
would have been forfeited.vested on February 29, 2020.All Other Named Executives
We do not have employment agreements with our non-CEOother named executives. Our non-CEO named executivesThey are, however:
parties to change in control agreements the forms of which are substantially similar to each other, that provide for payments under the circumstances described below in the event of a termination of employment in connection with a Change in Control; and
covered by our Executive Severance Compensation Policy, which provides for certain separation benefits in the event of termination of employment without Cause absent a Change in Control.
|
| |
COMPENSATION-RELATED MATTERS | |
The terms of award agreements under which awards of RSUs and NQSOs were made provide for acceleration of unvested awards in the event of termination of employment under certain circumstances. Additionally, the terms of award agreements relating to the performance cash components of our 20142017 LTIP (for the 2014-20162017-2019 performance cycle), 20152018 LTIP (for the 2015-20172018-2020 performance cycle) and 20162019 LTIP (for the 2016-20182019-2021 performance cycle) provide for payouts in the event of termination of employment under certain circumstances.
Mr. White's employment ended March 31, 2016. His termination was treated asThe following table assumes a termination by Libbey without Cause under the Executive Severance Compensation Policy, and he received severance benefits and payments pursuant to the terms of the Executive Severance Compensation Policy and equity and performance cash agreements. Such severance benefits and payments are consistent with those described below under "Termination without Cause (No Change in Control)" and in the
Potential Payments Upon Termination of Employment table on page 48.Ms. Buck voluntarily resigned without Good Reason effective December 31, 2016. Ms. Buck was not entitled to any separation benefits or payments in connection with her resignation.
Because individuals hired after January 1, 2006 are ineligible for participation in the Salary Plan and SERP, Ms. Kovach is our only named executive who is eligible for benefits under the Salary Plan and SERP. Asdate of December 31, 2016, Ms. Kovach was at least age 552019, and had at least five years of service with Libbey. As a result, Ms. Kovach would have been eligible to receive a retirement benefit under our Salary Plan and SERP if she had retired on or before December 31, 2016. If Ms. Kovach or any of our other named executives had retired on or before December 31, 2016, all unvested equity awards would have been forfeited.
With respect to all non-CEO named executives, the following table summarizes the trigger events under which payments may be made and/or other benefits provided, the material payments or benefits to be provided, and the conditions to our obligations to make the payments and/or provide the benefits, and the reasons why we believe that providing these payments and/or benefits is appropriate under the circumstances described.
benefits. |
| | | | | | | | | |
Event | | Benefits | | Conditions to Payment of Benefits | | | Rationale |
| | | Death or
Disability | | Termination
for Cause or
Quit without
Good Reason | | Quit for
Good Reason | | | |
Death or Permanent DisabilityTermination
without Cause | | • | Accrued Benefits | | | None | | • | To compensate for service to us |
| • | A prorated target award under the LTIP performance cash component for any performance cycle in effect on the date of death Termination without Cause
or permanent disability | | | | | |
| | | | | • | Aids in attracting and retaining executives |
| • | Accelerated vesting of all unvested RSUs and NQSOs | | | | | • | Consistent with competitive market practice |
| | | | | | | | | |
Quit for Good Reason (No
in connection with
Change in Control)
Control |
Cash
Severance | | • | Accrued BenefitsNone | | | None | | • | To compensate for service to us |
| • | As to performance-based compensation under our LTIP, payment of the amount actually earned for each performance cycle in effect on the date of termination, prorated to the date of termination(1)
None | | 12 months’ salary continuation + lump sum target annual incentive (For Mr. Bauer: 24 months’ salary continuation + lump sum 2x target annual incentive) | | | Lump sum 2x annual salary + 2x target annual incentive(2) (For Mr. Bauer: Lump sum 3x annual salary + 3x target annual incentive)(2) |
Annual
Cash Incentive
(SMIP) | | None | | | • | Aids in attracting and retaining executives |
None | | None | | Prorated and subject to actual performance(1) | | • | Consistent with competitive market practice |
Prorated and subject to actual performance(1) |
| |
| COMPENSATION-RELATED MATTERS |
|
| | | | | | | | | |
EventLong-Term
Performance
Cash Incentive | | BenefitsProrated target award for any current performance cycle | | Conditions to Payment of BenefitsNone | | | Rationale |
Prorated and subject to actual performance(1) | | Prorated and subject to actual performance(1) | | Not prorated but subject to actual performance(1) |
Equity Awards | | All awards immediately vest | | | |
Termination without Cause (No Change in Control)Forfeit all unvested
awards | | • | Accrued BenefitsForfeit all
unvested
awards | | •Awards scheduled to vest within 1 year immediately vest | | All awards immediately vest |
Health,
Welfare and
Other Benefits | | Accrued
Benefits
only | | Accrued
Benefits
only | | Accrued
Benefits
only | | Accrued Benefits; continued dental/health benefits during period of salary continuation; outplacement services during period of salary continuation | | Accrued Benefits; 18 months (24 months for Mr. Bauer) continued dental/health/life insurance benefits; outplacement services with cost to Libbey ≤15% base salary; financial planning services with cost to Libbey ≤$10,000 |
Conditions
to Payment
of Benefits | | None | | None | | None | | Release of claims against Libbey | | • | To compensate for service to us and bridge the gap between employment with us and the executive's next job |
| • | For the year in which termination occurs, a prorated SMIP award based on actual performance(1)
| | | | |
| | | • | Libbey; Confidentiality obligations | | |
| | | | |
| • | Base salary continuation for 12 months | | • | obligations; Obligation to assign intellectual property rights | | |
| • | Lump sum payment equal to the executive's SMIP target award. Paid on the first payroll date after termination | | | |
| | | • | rights; Obligation to assist with litigation as to which the executive has knowledge | | • | Aids in attracting and retaining executives |
| • | As to LTIP performance-based cash compensation, payment of the amount actually earned for each performance cycle in effect on termination date, prorated to termination date(1)
| | | |
| | | | | • | To provide compensation in exchange for restrictive covenants that protect Libbey's future interests |
| • | Immediate vesting of all NQSOs and RSUs scheduled to vest within one year of termination | | • | 12-monthlitigation; 1-year obligation not to interfere with customer accounts, compete, divert business opportunities, solicit our employees, or disparage us | | |
| | | |
| • | Continuation of medical, dental, prescription drug and life insurance coverage for 12 months, subject to payment by the executive of premiums at employee rates | | | | |
| | | | | • | Consistent with competitive market practice |
| • | For a period of one year from termination, executive level outplacement services at the rate for Shields Meneley Partners or equivalent | | | |
| | | | | | | | | |
| | | | | | | | | |
Termination without Cause or
Quit for
Good Reason
in connection with a
Change in Control
| | • | Accrued Benefits | | • | Release of claims against Libbey | | • | Aids in attracting and retaining executives |
| • | For the year in which termination occurs, a prorated SMIP award based on actual performance(1)
| | | | |
| | • | Libbey; Confidentiality obligations | | |
| | | | | • | To provide compensation in exchange for restrictive covenants that protect Libbey’s future interests |
| • | As to LTIP performance cash compensation under, payment of the amount actually earned for each performance cycle in effect on the date of termination(1)
| | • | obligations; Obligation to assign intellectual property rights | | |
| | | • | rights; Obligation to assist with litigation as to which the executive has knowledge | | |
| • | Accelerated vesting of all unvested equity awards | | | |
| | | | | • | Consistent with competitive market practice |
| | • | Lump-sum payment of two times the sum of the executive’s annual base salary in effect on the date notice of termination is given plus the executive’s target SMIP opportunity for the year in which the notice of termination is given(2)
| | | |
| | | | • | 12-monthlitigation; 1-year obligation not to interfere with customer accounts, compete, divert business opportunities, solicit our employees, or disparage us | | |
| | • | Executive level outplacement services by a provider approved by Libbey, with the cost being limited to 15% of the executive’s base salary at the time of termination | | | | |
| | • | Financial planning services, with the cost to Libbey not to exceed $10,000 | | | | | |
| | • | Continuation of medical, prescription drug, dental and life insurance benefits for a period of 18 months or until the executive obtains medical or life insurance through a future employer, with the executive continuing to pay the employee’s portion of the cost of such insurance | | | | | |
| | | | | | | | | |
|
(1) | |
COMPENSATION-RELATED MATTERS | |
| |
(1) | Amounts paid under our SMIP and the performance cash component of our LTIP will be paid between January 1 and March 15 of the year following the end of the relevant performance cycle. |
(2) | |
(2) | Lump-sum cash payments will be paid no later than five days after termination of employment except to the extent the payments are subject to a six-month delay under Internal Revenue Code Section 409A, in which case payment will be on the first day of the seventh month after the executive's termination of employment.executive’s termination. |
DEFINITIONS
Unless otherwise specified above, the following definitions apply:
"“Accrued Benefits"” includes base salary through date of termination, any amounts to which the executive is entitled under any retirement savings plan, equity participation plan, medical benefit plan or employment policy and any incentive compensation earned but not yet paid for a performance period ended before the date of termination.
"“Cause"” means (a) willful and continuous failure to substantially perform duties; (b) willful and continuous failure to substantially follow and comply with directives of the Board; (c) commission of an act of fraud or dishonesty that results in harm to us or failure to comply with a material policy, including our Code of Business Ethics and Conduct; (d) material breach of a material obligation to us; or (e) commission of illegal conduct or gross misconduct that causes harm to us. When used in reference to a termination that is not in connection with a change in control, "Cause"“Cause” can have any of the previously listed meanings or:or conviction of a misdemeanor or felony that is directly related to, or indicates the executive is not suited for, the position the executive occupies with us.
"“Change in Control"” generally means any of the following events:
A person (other than Libbey, any trustee or other fiduciary holding securities under one of our employee benefit plans, or any corporation owned, directly or indirectly, by our shareholders in substantially the same proportions as their ownership of our common stock) becomes the ‘‘beneficial“beneficial owner,’’” directly or indirectly, of our securities representing 30% or more of the combined voting power of our then-outstanding securities;
The consummation of a merger or consolidation pursuant to which we are merged or consolidated with any other corporation (or other entity), unless our voting securities outstanding immediately prior to the merger or consolidation continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 66 2/3% of the combined voting power of securities of the surviving entity outstanding immediately after the merger or consolidation;
A plan of complete liquidation or an agreement for the sale or disposition of all or substantially all of our assets is consummated; or
During any period of two consecutive years (not including any period prior to the execution of the agreement), Continuing Directors (as defined below) cease for any reason to constitute at least a majority of our Board. Continuing Directors means (i) individuals who were members of the Board at the beginning of the two-year period referred to above and (ii) any individuals elected to the Board, after the beginning of the two-year period referred to above, by a vote of at least 2/3 of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously approved in accordance with this provision. However, an individual who is elected to the Board after the beginning of the two-year period referred to above will not be considered to be a Continuing Director if the individual was designated by a person who has entered into an agreement with us to effect a transaction that otherwise meets the definition of a change in control.
A person typically is considered to be the ‘‘beneficial owner’’“beneficial owner” of securities if the person has or shares the voting power associated with those securities.
"“Good Reason"” means (a) the executive ceases to be an officer of the Company; (b) we reduce the executive’s base salary and we do not apply the reduction in the same or similar manner to similarly situated employees; (c) we materially reduce the executive’s annual incentive compensation opportunity and the reduction is not applied in the same or similar manner to similarly situated employees; (d) we materially reduce or eliminate an executive benefit or an employee benefit, and we do not apply the reduction to similarly situated employees in the same or similar manner; (e) we materially breach any written agreement between the executive and the Company and we fail to remedy the breach within 60 days after our receipt from the executive of written notice of breach; or (f) we exercise our right not to renew the agreement unless we concurrently exercise our right not to renew the agreements of similarly situated employees.
|
| |
| COMPENSATION-RELATED MATTERS |
39
Compensation Committee Interlocks and Insider Participation
Compensation Committee Report
The Compensation Committee has reviewed and discussed with Libbey’s management the Compensation Discussion and Analysis in this proxy statement. Taking all of these reviews and discussions into account, the Compensation Committee has approved the inclusion of the Compensation Discussion and Analysis in this proxy statement and has approved the incorporation by reference of the Compensation Discussion and Analysis in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
|
| |
| Carlos V. Duno, Chair |
| Ginger M. Jones |
| Theo Killion |
| Eileen A. Mallesch |
| Carol B. Moerdyk |
SUMMARY
|
| |
COMPENSATION-RELATED MATTERS | |
Summary Compensation Table
COMPENSATION TABLEThe following narrative and tables describe the ‘‘total compensation’’“total compensation” our named executives earned during 2016, 20152019 and 2014.2018. The total compensation presented below does not reflect the actual pay received by, or the target pay of, the named executives in 2016, 20152019 or 2014. The actual value realized by our named executives in 2016 from NQSOs and RSUs is presented in the Option Exercises and Stock Vested Table on page 44. Target annual and long-term incentive awards for 2016 are presented in the Grants of Plan-Based Awards Table on page 40.
2018.The core components of our named executives'executives’ compensation are base salary, an annual cash incentive opportunity pursuant tounder our SMIP, and a long-term incentive opportunity under our LTIP, which includes performance-based cash compensation and equity awards. In addition to these core components, our executives occasionally receive compensation through sign-on awards, discretionary awards in recognition of outstanding individual contributions, retention awards, or in connection with termination of employment.
In 2016, Ms. Streeter and Mr. White received compensation in connection with their terminations of employment. Ms. Buck did not receive any compensation in connection with her resignation.
Ms. Streeter
CEO Retention Award. As indicated in our proxy statement for our 2014 Annual Meeting, we entered into a CEO Retention Award Agreement with Ms. Streeter in December 2013 pursuant to which the Company issued to Ms. Streeter 240,829 cash-settled stock appreciation rights (which we refer to as SARs) in December 2013 and 115,687 restricted stock units (which we refer to as RSUs) in February 2014. These awards were subject to cliff vesting on December 31, 2018. When Ms. Streeter's employment terminated on January 11, 2016, these awards automatically vested under the terms of the agreement. The value of these RSUs and SARs is not included in the "All Other Compensation" column in this Summary Compensation Table because the cumulative grant date fair values were included in the "Stock Awards" and "Option Awards" columns of the Summary Compensation Tables in the years in which they were granted.
At the time the Compensation Committee and other non-management directors approved the CEO Retention Award Agreement, and the awards of SARs and RSUs made under it, the Compensation Committee and other non-management directors believed that the awards were in the best interest of our shareholders. The Committee and the Board believed that it was critical to the Company's transformation from a manufacturing-focused company to a consumer-focused company to ensure that Ms. Streeter's talents continued to be available to steer the transformation. Recognizing that Ms. Streeter's skills and talents may be in high demand from others, and in order to maximize the retention value at the time of the awards, the Committee elected to provide Ms. Streeter with cash-settled retention RSUs and cash-settled SARs, the vesting of which would be accelerated if the company were to elect to terminate her employment without cause before December 31, 2018, when the awards were otherwise scheduled to cliff-vest. The Committee and the Board viewed the CEO Retention Award Agreement, and the grants of SARs and RSUs made under it, as extraordinary in nature, and did not enter into any additional special retention agreements with Ms. Streeter or Mr. Foley, nor do they anticipate entering into any similar agreements with Mr. Foley or any of the other executive officers.
Separation Agreement. We entered into a Mutual Separation Agreement and Release with Ms. Streeter in January 2016 in connection with her termination. The separation payments and benefits we provided to Ms. Streeter under that agreement are consistent with the separation payments and benefits provided for in her employment agreement, except with respect to the timing and calculation method of incentive award payments under the 2016 SMIP and the performance cash components of the 2014 LTIP, 2015 LTIP and 2016 LTIP. The employment agreement called for payment of the amounts actually earned, prorated to the date of termination, with payments to be made between January 1 and March 15 of the year following the end of each applicable performance cycle. In the interest of fully and quickly resolving all potential issues related to separation compensation, the Company and Ms. Streeter mutually agreed to estimate the amounts that would be earned based on the most recent forecasts available in January 2016, prorate those estimated amounts to the date of termination, and make the payments to Ms. Streeter in March 2016. Our expense associated with these payments is reflected in the "Non-Equity Incentive Compensation" column in this Summary Compensation Table.
Mr. White
The payments and benefits provided to Mr. White in connection with his
termination were determinedhire, Mr. Bauer received a sign-on award of 150,000 NQSOs to induce him to join the Company. The sign-on NQSOs cliff-vest on March 25, 2022, the third anniversary of Mr. Bauer's start date.In connection with his transition from CEO to Executive Chairman, Mr. Foley’s salary was reduced to $232,000 and his participation in accordance with the Executive Severance Compensation Policy and the award agreements governing awards of RSUs, NQSOsSMIP and LTIP performance cash opportunities.was prorated to March 31, 2019.
Our named executives do not participate in a pension plan. We do not guarantee any particular rate of return on deferred compensation under our Executive Savings Plan ("ESP") or our Executive Deferred Compensation Plan ("EDCP"). The valuesrate of those RSUs and NQSOs for which vesting accelerated in connection with Mr. White's termination are not included inreturn depends upon the "All Other Compensation" column in this Summary Compensation Table because the cumulative grant date fair values were included in the "Stock Awards" and "Option Awards" columnsperformance of the Summary Compensation Tables in the yearsfund in which they were granted.
the participant's ESP or EDCP account is deemed invested. Accordingly, our named executives do not have any above-market earnings on nonqualified deferred compensation.Name | Year | | Salary ($) | | | Bonus ($)(1) | | | Stock Awards ($)(2) | | | Option Awards ($)(3) | | | Non-Equity Incentive Compensation ($)(4) | | | All Other Compensation ($)(5) | | | Total ($) | |
Michael P. Bauer(6) | 2019 | | | 520,313 | | | | 0 | | | | 366,837 | | | | 122,419 | | | | 564,167 | | | | 93,339 | | | | 1,667,075 | |
Chief Executive Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
William A. Foley(7) | 2019 | | | 380,250 | | | | 0 | | | | 677,771 | | | | 0 | | | | 420,647 | | | | 44,727 | | | | 1,523,395 | |
Chairman and former CEO | 2018 | | | 825,000 | | | | 0 | | | | 814,353 | | | | 0 | | | | 1,014,805 | | | | 123,984 | | | | 2,778,142 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
James C. Burmeister(8) | 2019 | | | 421,668 | | | | 0 | | | | 118,467 | | | | 0 | | | | 329,204 | | | | 18,845 | | | | 888,184 | |
Senior Vice President, Chief Operating Officer | 2018 | | | 386,250 | | | | 0 | | | | 123,389 | | | | 0 | | | | 247,598 | | | | 28,362 | | | | 785,599 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Sarah J. Zibbel(9) | 2019 | | | 310,002 | | | | 0 | | | | 59,424 | | | | 0 | | | | 169,613 | | | | 35,206 | | | | 574,245 | |
Senior Vice President, Chief Human Resources Officer | 2018 | | | 228,626 | | | | 100,000 | | | | 120,170 | | | | 0 | | | | 107,538 | | | | 22,304 | | | | 578,638 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
(1) | |
| COMPENSATION-RELATED MATTERS |
SUMMARY COMPENSATION TABLE
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary ($)(1) | | Bonus ($)(2) | | Stock Awards ($)(3) | | Option Awards ($)(4) | | Non-Equity Incentive Compensation ($)(5) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(6) | | All Other Compensation ($)(7) | | Total ($) |
| William A. Foley | | 2016 | | 804,185 |
| | 0 |
| | 1,037,687 |
| | 532,688 |
| | 801,520 |
| | 0 |
| | 110,050 |
| | 3,286,130 |
|
| Chairman and Chief | | | | | | | | | | | | | | | | | | |
Executive Officer(8) | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Stephanie A. Streeter | | 2016 | | 21,166 |
| | 0 |
| | 0 |
| | 0 |
| | 653,666 |
| | 0 |
| | 3,301,516 |
| | 3,976,348 |
|
| Chief Executive | | 2015 | | 792,438 |
| | 0 |
| | 960,406 |
| | 517,050 |
| | 728,386 |
| | 0 |
| | 73,677 |
| | 3,071,957 |
|
Officer(9) | | 2014 | | 768,750 |
| | 0 |
| | 4,436,131 |
| | 413,043 |
| | 941,390 |
| | 0 |
| | 44,259 |
| | 6,603,573 |
|
| | | | | | | | | | | | | | | | | | | |
| Sherry Buck | | 2016 | | 482,125 |
| | 0 |
| | 257,312 |
| | 143,125 |
| | 386,211 |
| | 0 |
| | 47,115 |
| | 1,315,888 |
|
| Vice President, Chief | | 2015 | | 462,500 |
| | 0 |
| | 245,784 |
| | 132,320 |
| | 221,129 |
| | 0 |
| | 41,651 |
| | 1,103,384 |
|
Financial Officer(10) | | 2014 | | 386,907 |
| | 0 |
| | 217,148 |
| | 112,263 |
| | 311,530 |
| | 0 |
| | 35,988 |
| | 1,063,836 |
|
| | | | | | | | | | | | | | | | | | | |
| Annunciata Cerioli | | 2016 | | 424,670 |
| | 0 |
| | 185,728 |
| | 103,312 |
| | 214,012 |
| | 0 |
| | 60,679 |
| | 988,401 |
|
| Vice President, Chief | | 2015 | | 377,646 |
| | 0 |
| | 244,588 |
| | 77,851 |
| | 86,713 |
| | 0 |
| | 27,435 |
| | 814,233 |
|
| Supply Chain | | 2014 | | 29,170 |
| | 252,289 |
| | 246,591 |
| | 70,866 |
| | 13,714 |
| | 0 |
| | 0 |
| | 612,630 |
|
Officer(11) | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Susan A. Kovach | | 2016 | | 341,568 |
| | 0 |
| | 123,696 |
| | 68,809 |
| | 209,254 |
| | 21,812 |
| | 34,191 |
| | 799,330 |
|
| Vice President, | | 2015 | | 334,070 |
| | 0 |
| | 128,214 |
| | 69,025 |
| | 123,403 |
| | 0 |
| | 24,320 |
| | 679,032 |
|
| General Counsel & | | 2014 | | 325,117 |
| | 25,000 |
| | 129,672 |
| | 67,034 |
| | 189,097 |
| | 29,532 |
| | 19,442 |
| | 784,894 |
|
| Secretary | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Salvador Miñarro | | 2016 | | 355,291 |
| | 0 |
| | 162,528 |
| | 90,407 |
| | 241,106 |
| | 0 |
| | 98,845 |
| | 948,177 |
|
| Villalobos | | 2015 | | 373,902 |
| | 0 |
| | 617,047 |
| | 93,409 |
| | 143,209 |
| | 0 |
| | 71,138 |
| | 1,298,705 |
|
| Vice President, | | | | | | | | | | | | | | | | | | |
| General Manager | | | | | | | | | | | | | | | | | | |
U.S. & Canada(12) | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| James H. White | | 2016 | | 131,250 |
| | 0 |
| | 304,720 |
| | 169,491 |
| | 127,004 |
| | 0 |
| | 1,041,734 |
| | 1,774,199 |
|
| Vice President, Chief | | 2015 | | 246,591 |
| | 0 |
| | 1,561,933 |
| | 148,879 |
| | 80,949 |
| | 0 |
| | 13,980 |
| | 2,052,332 |
|
Operating Officer(13) | | | | | | | | | | | | | | | | | | |
| |
(1) | As to Mr. MiñarroMs. Zibbel for 2015,2018, represents base salary paid from January 1 through March 31, 2015, as well as other fixed components of pay that our Mexican subsidiary was required under Mexican law to pay Mr. Miñarro, totaling $111,372. These amounts were paid to Mr. Miñarro in Mexican pesos, and the amount included in this column was translated to U.S. currency using the interbank exchange rate in effect at the time of payment to Mr. Miñarro. The remaining $262,530 represents the base salary paid to Mr. Miñarro after he assumed his executive officer role on April 1, 2015.a signing bonus. |
(2) | |
(2) | As to Ms. Cerioli for 2014, represents: (a) $70,000 signing bonus; and (b) $182,289 minimum guaranteed incentive under the 2014 SMIP. The balance of Ms. Cerioli's 2014 SMIP award is included in the "Non-Equity Incentive Compensation" column. As to Ms. Kovach for 2014, represents a special award made in April 2014 in recognition of leadership related to our 2014 refinancing. |
| |
(3) | Represents the grant date fair value, in accordance with FASB ASC Topic 718, with respect toof RSUs granted in 2016, 20152019 and 2014,2018, respectively. As to Mr. Foley, also representsThe actual values realized by the grant date fair value, determined in accordance with FASB ASC Topic 718,executive depends on the number of awardsRSUs that actually vest and the price of our common stock made to non-management directors on May 10, 2016. On that date, we awarded certain non-management directors stock having a grant date fair value of $80,007, or $17.58 per share. Although Mr. Foley ceased to be a non-management director when he was appointed CEO on January 12, 2016, this stock award was attributable to service as a non-management director during the 2015 fiscal year. As to all RSUs vest. RSU awards in 2016, 2015 and 2014 other than the special retention2019 vest ratably over a three-year period. RSU awards of 115,687 cash-settled RSUs made to Ms. Streeter in February 2014, the awards2018 vest ratably over a four-year period, from the date of grant. The special retention award of 115,687 cash-settledexcept that 10,000 RSUs madegranted to Ms. Streeter Zibbel in February 2014 were scheduled to cliff vest2018 cliff-vest on December 31, |
|
| |
COMPENSATION-RELATED MATTERS | |
2018, however, all 115,687 cash-settled RSUs vested automatically upon Ms. Streeter's termination of employment on January 11, 2016. When Ms. Buck resigned effective December 31, 2016, all unvested RSUs were forfeited. When Mr. White's employment ended on March 31, 2016, vesting was accelerated with respect to all RSUs that otherwise would have vested by March 31, 2017, and all other unvested RSUs were forfeited. For more information, see Footnote 12, ‘‘Employee Stock Benefit Plans,’’ to the consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on March 3, 2017. The actual values realized by the respective named executives depend on the number of RSUs that actually vest and the price of our common stock when the RSUs vest or, in the case of Ms. Streeter's cash-settled RSUs, when they are settled in cash.
| |
(4) | Represents the grant date fair value, in accordance with FASB ASC Topic 718, with respect to NQSOs granted in 2016, 2015 and 2014, respectively. The awards vest ratably over a four-year period from the datethird anniversary of grant. When Ms. Buck resigned effective December 31, 2016, all unvested NQSOs were forfeited. When Mr. White's employment ended on March 31, 2016, vesting was accelerated with respect to all NQSOs that otherwise would have vested by March 31, 2017, and all other unvested NQSOs were forfeited.her first day of employment. For more information, see Footnote 12, ‘‘Employee11, “Employee Stock Benefit Plans,” to the consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on March 3, 2017. February 27, 2020. |
(3) | Represents the grant date fair value, in accordance with FASB ASC Topic 718, with respect to NQSOs granted to Mr. Bauer in 2019. The actual values received by the respective named executivesMr. Bauer depend on the number of NQSOs that actually vest, the number of shares with respect to which NQSOs are exercised and the price of our common stock on the date on which the NQSOs are exercised.The awards cliff-vest on March 25, 2022, the third anniversary of Mr. Bauer’s date of hire. For more information, see Footnote 11, “Employee Stock Benefit Plans,” to the consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on February 27, 2020. |
(4) | |
(5) | Represents (a) amounts earned by the named executives in 2016, 20152019 and 2014 2018 under our SMIP and (b) for 2016, 2015 and 2014, amounts earned by the named executives under the performance cash component of our 2014 LTIP, 20132017 LTIP and 20122016 LTIP, respectively. The awards under our 2019 SMIP and 2017 LTIP were paid in March of 2017, 2016 and 2015, respectively,2020 and the awards under the performance cash component of our 2014 LTIP, 2013 LTIP2018 SMIP and 20122016 LTIP were paid in March of 2017, March of 2016 and February of 2015, respectively. As to Ms. Streeter for 2016, also includes amounts earned by her under the performance cash component of our 2015 LTIP and 2016 LTIP. The awards to Ms. Streeter under our 2015 SMIP, 2016 SMIP and the performance cash component of our 2013 LTIP, 2014 LTIP, 2015 LTIP and 2016 LTIP were paid to her in March 2016 upon her termination.2019. |
(5) | |
(6) | Represents the actuarial increase in pension value under our Salary Plan and our SERP. In 2015, the net pension value under our Salary Plan and our SERP declined for all named executives who are participants under those plans; as a result, for 2015 the amount of the actuarial increase is $0. We do not guarantee any particular rate of return on deferred compensation under our Executive Savings Plan ("ESP") or our EDCP. The rate of return depends upon the performance of the fund in which the participant's ESP or EDCP account is deemed invested. Accordingly, the amounts included in this column do not include above-market earnings on nonqualified deferred compensation. Ms. Kovach is the only named executive who is eligible to participate in the Salary Plan and SERP. |
| |
(7) | For 2016, includes: (i)2019, includes annual company matching contributions to our 401(k) savings plan (a broad-based plan open to all U.S. salaried employees); (ii) for Ms. Streeter and Mr. White, our expense associated with the compensation payable to them in connection with their terminations of employment; and (iii) the following perquisites: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Named Executive | | EDCP Matching Contribution ($)(a) | | Tax Prep / Financial Planning ($)(b) | | Housing Allowance or Relocation Assistance ($)(c) | | Tax Gross-Up ($)(d) | | Ground Transport ($)(e) | | Airline Club Membership ($) | | Annual Executive Physical Exam ($) | | Legal Fees ($)(f) | | Vacation ($)(g) | | Total ($) |
| W. Foley | | 30,938 |
| | 11,699 |
| | 49,416 |
| | 2,185 |
| | 1,365 |
| | 495 |
| | 2,739 |
| | 0 |
| | 0 |
| | 98,837 |
|
| S. Streeter | | 0 |
| | 537 |
| | 0 |
| | 0 |
| | 109 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 646 |
|
| S. Buck | | 12,113 |
| | 14,000 |
| | 0 |
| | 0 |
| | 1,036 |
| | 479 |
| | 0 |
| | 0 |
| | 3,587 |
| | 31,215 |
|
| A. Cerioli | | 8,800 |
| | 13,772 |
| | 13,551 |
| | 7,949 |
| | 707 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 44,779 |
|
| S. Kovach | | 4,291 |
| | 14,000 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 18,291 |
|
| S. Miñarro | | 0 |
| | 3,255 |
| | 51,192 |
| | 10,195 |
| | 342 |
| | 0 |
| | 0 |
| | 23,126 |
| | 0 |
| | 88,110 |
|
| J. White | | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 1,569 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 1,569 |
|
Named Executive | | EDCP Matching (a) | | | Tax Prep / Financial Planning (b) | | | Housing Allowance, Commuting or Relocation Assistance (c) | | | Tax Gross-Up (d) | | | Ground Transport (e) | | | Airline Club | | | Annual Executive Physical Exam | | | Total | |
M. Bauer | | $ | 0 | | | $ | 0 | | | $ | 50,333 | | | $ | 21,892 | | | $ | 1,953 | | | $ | 845 | | | $ | 4,047 | | | $ | 79,070 | |
W. Foley | | | 5,800 | | | | 3,744 | | | | 17,838 | | | | 0 | | | | 0 | | | | 545 | | | | 0 | | | | 27,927 | |
J. Burmeister | | | 0 | | | | 1,500 | | | | 0 | | | | 0 | | | | 0 | | | | 545 | | | | 0 | | | | 2,045 | |
S. Zibbel | | | 0 | | | | 15,046 | | | | 0 | | | | 0 | | | | 47 | | | | 545 | | | | 2,768 | | | | 18,406 | |
(a) | |
(a) | Annual company matching contributions to our EDCP |
| |
(b) | The cost we paid for tax return preparation and financial planning for the respective named executivesexecutive |
| |
(c) | As to Mr. Bauer, represents relocation expense. As to Mr. Foley, represents ana $14,164 allowance for housing in the Toledo, Ohio, area since Mr. Foley'sFoley’s primary home is in the Cleveland, Ohio metropolitan area. Asarea and $3,674 in expenses related to Ms. Cerioli, represents relocation assistance provided in connection with her hire. As tocommuting between Cleveland and Toledo. Mr. Miñarro, represents relocation assistance provided in connection with his promotion to his current role.Foley's housing allowance ended effective April 24, 2019. |
| |
(d) | As to Mr. Foley, and Ms. Cerioli, represents tax gross-upsgross-up on a housing allowance and relocation assistance, respectively.commuting expense. As to Mr. Miñarro,Bauer, represents tax gross-upsgross-up on relocation assistance ($7,093) and foreign tax return preparation ($3,102).expense. |
| |
(e) | Includes our incremental cost for ground transportation for personal and business trips from the Toledo, Ohio, area to the Detroit / Wayne County Metropolitan Airport. For personal trips, includes the entire cost that we incurred for such transportation. For business trips, includes the amount in excess of the amount to which the respective named executivesexecutive would have been entitled as reimbursement for mileage and parking under our travel policy applicable to all employees. |
|
| |
| COMPENSATION-RELATED MATTERS |
| |
(f) | Represents payment of legal expenses that Mr. Miñarro incurred in connection with immigration matters relating to his and his family's relocation to the U.S. from Mexico. |
(6) | |
(g) | Reimbursement of expenses Ms. Buck incurred for a vacation in 2016.Mr. Bauer was hired as CEO on March 25, 2019. |
(7) | |
(8) | Effective March 24, 2019, Mr. Foley assumed retired from his role as CEO effective January 12, 2016.but continued to be employed by the Company as Executive Chairman until his employment ended on February 29, 2020. Mr. Foley now serves as non-executive Chairman and is compensated in accordance with the Company’s non-management director compensation program. For more information, see"Non-Management Directors' Compensation." |
(8) | |
(9) | Ms. Streeter's employment endedMr. Burmeister was promoted to Senior Vice President, Chief Operating Officer and Chief Financial Officer on October 1, 2019. Mr. Burmeister ceased serving as Chief Financial Officer effective January 11, 2016.13, 2020 but continues to serve as Chief Operating Officer. |
(9) | |
(10) | Ms. Buck's employment ended December 31, 2016. |
| |
(11) | Ms. CerioliZibbel was hired on December 1, 2014.April 5, 2018. |
| |
(12) | Mr. Miñarro was named Vice President, General Manager, U.S. and Canada, on April 1, 2015. He previously served as Vice President, General Manager, Latin America. |
| |
(13) | Mr. White was hired on July 13, 2015. His employment ended March 31, 2016. |
|
| |
COMPENSATION-RELATED MATTERS | |
Grants of Plan-Based Awards Table
During 2016, the Compensation Committee granted to our named executives RSUs and NQSOs under our 2006 Omnibus Plan and 2016 LTIP. RSU recipients are not entitled to dividends or voting rights with respect to the common shares underlying the RSUs unless and until they are earned or vested. We do not reprice NQSOs, nor have we repurchased underwater NQSOs. On May 10, 2016, Mr. Foley received an outright grant of common stock under our 2016 Omnibus Plan attributable to his service as a non-management director during the 2015 fiscal year. On February 6, 2017, the Compensation Committee approved the payment of cash awards under our 2016 SMIP and our 2014 LTIP.
This table and accompanying footnotes contain information as to each of these awards, including information as to applicable performance measures for our cash awards, and vesting schedules for RSUs and NQSOs.
GRANTS OF PLAN-BASED AWARDS TABLE
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Estimated Possible Payouts under Non-Equity Incentive Plan Awards(2) | | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | | All Other Option Awards: Number of Securities Underlying Options (#)(4) | | Exercise or Base Price of Option Awards ($/Sh) | | Grant Date Fair Value of Stock and Option Awards ($)(5) |
Named Executive | | Plan Name | | Award Date(1) | | Grant Date(1) | | Threshold ($) | | Target ($) | | Maximum ($) | | | | |
| W. Foley | | 2016 SMIP | | 1/11/2016 | | | | 165,000 |
| | 825,000 |
| | 1,856,250 |
| | | | | | | | |
| | | 2016 LTIP (cash) | | 1/11/2016 | | | | 247,500 |
| | 990,000 |
| | 1,980,000 |
| | | | | | | | |
| | | 2015 LTIP (cash) | | 1/11/2016 | | | | 326,700 |
| | 653,400 |
| | 1,306,800 |
| | | | | | | | |
| | | 2014 LTIP (cash) | | 1/11/2016 | | | | 81,675 |
| | 326,700 |
| | 653,400 |
| | | | | | | | |
| | | 2016 LTIP (RSUs) | | 1/11/2016 | | 2/25/2016 | | | | | | | | 59,855 |
| | | | | | 957,680 |
|
| | | 2016 LTIP (NQSOs) | | 1/11/2016 | | 2/25/2016 | | | | | | | | | | 126,598 |
| | 17.13 |
| | 532,688 |
|
| | | 2016 Omnibus Plan | | 10/28/2014 | | 5/10/2016 | | | | | | | | 4,551 |
| | | | | | 80,007 |
|
| | | | | | | | | | | | | | | | | | | | | |
| S. Streeter | | 2016 SMIP | | 1/11/2016 | | | |
|
| | 24,057 |
| |
|
| | | | | | | | |
| | | 2016 LTIP (cash) | | 1/11/2016 | | | |
|
| | 9,623 |
| |
|
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| S. Buck | | 2016 SMIP | | 2/8/2016 | | | | 67,498 |
| | 337,488 |
| | 759,348 |
| | | | | | | | |
| | | 2016 LTIP (cash) | | 2/8/2016 | | | | 66,500 |
| | 266,000 |
| | 532,000 |
| | | | | | | | |
| | | 2016 LTIP (RSUs) | | 2/8/2016 | | 2/25/2016 | | | | | | | | 16,082 |
| | | | | | 257,312 |
|
| | | 2016 LTIP (NQSOs) | | 2/8/2016 | | 2/25/2016 | | | | | | | | | | 34,015 |
| | 17.13 | | 143,125 |
|
| | | | | | | | | | | | | | | | | | | | | |
| A. Cerioli | | 2016 SMIP | | 2/8/2016 | | | | 48,720 |
| | 243,601 |
| | 548,102 |
| | | | | | | | |
| | | 2016 LTIP (cash) | | 2/8/2016 | | | | 48,000 |
| | 192,001 |
| | 384,002 |
| | | | | | | | |
| | | 2016 LTIP (RSUs) | | 2/8/2016 | | 2/25/2016 | | | | | | | | 11,608 |
| | | | | | 185,728 |
|
| | | 2016 LTIP (NQSOs) | | 2/8/2016 | | 2/25/2016 | | | | | | | | | | 24,553 |
| | 17.13 | | 103,312 |
|
| | | | | | | | | | | | | | | | | | | | | |
| S. Kovach | | 2016 SMIP | | 2/8/2016 | | | | 34,157 |
| | 170,784 |
| | 384,264 |
| | | | | | | | |
| | | 2016 LTIP (cash) | | 2/8/2016 | | | | 31,970 |
| | 127,878 |
| | 255,756 |
| | | | | | | | |
| | | 2016 LTIP (RSUs) | | 2/8/2016 | | 2/25/2016 | | | | | | | | 7,731 |
| | | | | | 123,696 |
|
| | | 2016 LTIP (NQSOs) | | 2/8/2016 | | 2/25/2016 | | | | | | | | | | 16,353 |
| | 17.13 |
| | 68,809 |
|
| | | | | | | | | | | | | | | | | | | | | |
| S. Miñarro | | 2016 SMIP | | 2/8/2016 | | | | 42,635 |
| | 213,175 |
| | 479,644 |
| | | | | | | | |
| | | 2016 LTIP (cash) | | 2/8/2016 | | | | 42,005 |
| | 168,019 |
| | 336,038 |
| | | | | | | | |
| | | 2016 LTIP (RSUs) | | 2/8/2016 | | 2/25/2016 | | | | | | | | 10,158 |
| | | | | | 162,528 |
|
| | | 2016 LTIP (NQSOs) | | 2/8/2016 | | 2/25/2016 | | | | | | | | | | 21,486 |
| | 17.13 | | 90,407 |
|
| | | | | | | | | | | | | | | | | | | | | |
| J. White | | 2016 SMIP | | 2/8/2016 | | | | 79,931 |
| | 399,656 |
| | 899,226 |
| | | | | | | | |
| | | 2016 LTIP (cash) | | 2/8/2016 | | | | 78,750 |
| | 315,000 |
| | 630,000 |
| | | | | | | | |
| | | 2016 LTIP (RSUs) | | 2/8/2016 | | 2/25/2016 | | | | | | | | 19,045 |
| | | | | | 304,720 |
|
| | | 2016 LTIP (NQSOs) | | 2/8/2016 | | 2/25/2016 | | | | | | | | | | 40,281 |
| | 17.13 | | 169,491 |
|
|
| |
| COMPENSATION-RELATED MATTERS |
41
| |
(1) | For Non-Equity Incentive Plan Awards made to all named executives other than Mr. Foley and Ms. Streeter, the Award Date and the Grant Date for awards made under the 2016 SMIP and the performance cash component of the 2016 LTIP are the date on which the Compensation Committee approved the 2016 SMIP and the performance cash component of our 2016 LTIP. For Non-Equity Incentive Plan Awards made to Mr. Foley, the Award Date and the Grant Date are the date on which the Board approved Mr. Foley's participation in, and target opportunities under, the 2016 SMIP and 2016 LTIP. For Non-Equity Incentive Plan Awards made to Ms. Streeter, the Award Date and the Grant Date are the date on which the Board approved the Mutual Separation Agreement and Release pursuant to which Ms. Streeter was awarded these exact amounts. For All Other Stock Awards and All Other Option Awards, the Award Date is the date on which the Compensation Committee took action, and the Grant Date is the date on which we determined the number of NQSOs or RSUs, as the case may be, awarded. The number of NQSOs and RSUs awarded to the named executives in February 2016 under our 2016 LTIP was determined by dividing the target dollar value of the applicable component of equity to be awarded by (a) in the case of NQSOs, the Black-Scholes value of the options, determined using the average closing price of Libbey common stock over a period of 20 consecutive trading days ending on the grant date and capping the volatility at 50%, or (b) in the case of RSUs, the average closing price of Libbey common stock over the 20 consecutive trading-day period ending February 25, 2016. The number of shares of common stock granted to Mr. Foley on May 10, 2016 under our 2016 Omnibus Plan was determined by multiplying the number of shares times $17.58, the closing price of our common stock on the date of the grant. We inform grant recipients of their awards after we determine the number of RSUs and/or NQSOs to be granted. For awards made in February 2016, we determined the number of RSUs and NQSOs to be granted on the first business day after we announced our results of operations for the 2015 fiscal year. |
| |
(2) | Represents the range of possible cash awards under (a) our 2016 SMIP and (b) the performance cash component of our 2016 LTIP. |
| |
(a) | Under our SMIP, each named executive is eligible for an annual incentive award in an amount up to 225% of the executive officer’s target award, which in turn is a percentage of the executive’s anticipated full-year base salary, as set forth in the following table: |
|
| | |
Named Executive | | Target Award as a Percentage of Anticipated Full-Year Base Salary
(%)
|
W. Foley | | 100 |
S. Streeter | | 100 |
S. Buck | | 70 |
A. Cerioli | | 60 |
S. Kovach | | 50 |
S. Miñarro | | 60 |
J. White | | 75 |
For all of our named executives, 100% of their opportunity was based on company-wide performance, as reflected in company-wide revenue growth (net sales) and adjusted cash earnings performance metrics. The payout scales with respect to each of the metrics were as follows:
|
| | | | | | | | |
| Revenue Growth (Net Sales) | | Adjusted Cash Earnings |
Full Year Net Sales | Percent of Targeted Net Sales | Performance Level | Payout Percentage | | Full Year Cash Earnings | Percent of Targeted Cash Earnings | Performance Level | Payout Percentage |
| $880,000 | 104.9% | Maximum | 200% | | $131,076 | 110.0% | Maximum | 200% |
| $839,138 | 100.0% | Target | 100% | | $119,160 | 100.0% | Target | 100% |
| $800,000 | 95.3% | Threshold | 40% | | $95,328 | 80.0% | Threshold | 50% |
| < $800,000 | < 95.3% | Below Threshold | 0% | | < $95,328 | < 80.0% | Below Threshold | 0% |
|
| |
COMPENSATION-RELATED MATTERS | |
| |
(b) | Under the performance cash component of our 2016 LTIP, each named executive is eligible for a cash award in an amount up to 200% of the named executive’s target award. Each named executive’s target award under the performance cash component is 40% of the named executive’s target award under all components of the relevant LTIP. The target awards are based on the named executives' respective annualized base salaries as of January 1, 2016 (in the case of Mr. Foley, January 12, 2016). Each named executive’s target award under all components of the 2016 LTIP is set forth in the following table: |
|
| | | | |
| Named Executive | | 2016 Target Long-Term Award as a Percentage of Annualized Base Salary (%) | | 2016 LTIP Performance Cash Target as Percentage of Annualized Base Salary (%) |
| W. Foley | | 300 | | 120 |
| S. Streeter | | 300 | | 120 |
| S. Buck | | 140 | | 56 |
| A. Cerioli | | 120 | | 48 |
| S. Kovach | | 95 | | 38 |
| S. Miñarro | | 120 | | 48 |
| J. White | | 150 | | 60 |
The extent to which a payout is earned under the performance cash component of the 2016 LTIP is based on our return on invested capital (ROIC) for each of the three one-year performance periods (calendar years 2016, 2017 and 2018) included in the three-year performance cycle ended December 31, 2018. ROIC is calculated as shown in OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLEAppendix A. The scale used to determine the payout score for each of the three one-year performance periods is reset for each performance period to correlate with targeted ROIC for that year. The amount of the final payout, if any, will be determined based on the average of the three discrete, single-year payout scores. The scale used to determine the payout score for the 2016 calendar year is:
|
| | | | |
| | Basis Points Above or Below 2016 Targeted ROIC | | Payout Score (%) | |
| | +100 | | 200 | |
| | 0 | | 100 | |
| | -150 | | 25 | |
| | Less than -150 | | 0 | |
| |
(3) | Represents grants of RSUs made under our 2016 LTIP and, as to Mr. Foley, an outright grant of common stock attributable to his service as a non-management director during 2015. |
| |
(4) | Represents grants of NQSOs made under our 2016 LTIP. The grants vest 25% per year beginning on February 17, 2016. |
| |
(5) | Represents the respective grant date fair values, determined in accordance with FASB ASC Topic 718, of the RSUs and NQSOs. |
Outstanding Equity Awards at Fiscal Year-End Table
Our named executives had the following types of equity awards outstanding at the end of the 20162019 fiscal year:
NQSOs granted under our 2006Amended 2016 Omnibus Plan and predecessor plans;
RSUs granted under our 2006 Omnibus Plan; and
Cash-settled SARs granted under our 2006 Omnibus Plan.
• | RSUs granted under our Amended 2016 Omnibus Plan and predecessor plans; and |
• | RSUs and NQSOs granted to Mr. Bauer to induce him to join the Company and issued outside the terms of the Company's Omnibus Incentive Plans in accordance with Section 711(a) of the NYSE American Company Guide. |
The following table shows, for each of the named executives, as of December 31, 20162019: (a) the number, exercise price and expiration date of NQSOs and cash-settled SARs that were vested but not yet exercised and of NQSOs that were not vested; and (b) the number and market value of RSUs that were not vested.
Mr. White had no outstanding equity awards as of December 31, 2016. Pursuant to the terms of the applicable award agreements, upon termination of Mr. White's employment on March 31, 2016, vesting was accelerated as to all NQSOs and RSUs that otherwise would have vested within one year of his termination date. All other unvested NQSOs and RSUs were forfeited. Vested NQSOs expired on June 29, 2016. For additional information, see footnote (3) to the Potential Payments Upon Termination of Employment table below.
| | | | | | Option Awards | | Stock Awards | |
Name | Award Date(1) | | Grant Date(1)(2) | | Number of Securities Underlying Unexercised Options Exercisable | | | Number of Securities Underlying Unexercised Options Unexercisable(3) | | | Option Exercise Price | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested(4) | | | Market Value of Shares or Units of Stock That Have Not Vested(5) | |
M. Bauer | 3/10/19 | | 3/25/19 | | | 0 | | | | 37,500 | | | $ | 7.00 | | 3/25/29 | | | 116,827 | | | $ | 169,399 | |
| | 3/10/19 | | 3/25/19 | | | 0 | | | | 37,500 | | | | 8.50 | | 3/25/29 | | | | | | | | |
| | 3/10/19 | | 3/25/19 | | | 0 | | | | 37,500 | | | | 10.00 | | 3/25/29 | | | | | | | | |
| | 3/10/19 | | 3/25/19 | | | 0 | | | | 37,500 | | | | 11.50 | | 3/25/29 | | | | | | | | |
W. Foley | 1/11/16 | | 2/25/16 | | | 94,949 | | | | 31,649 | | | | 17.13 | | 2/25/26 | | | 14,963 | | | | 21,696 | |
| | 2/13/17 | | 3/1/17 | | | 44,276 | | | | 44,274 | | | | 13.60 | | 3/1/27 | | | 21,889 | | | | 31,739 | |
| | 2/6/18 | | 2/28/18 | | | | | | | | | | | | | | | | 119,757 | | | | 173,648 | |
| | 2/18/19 | | 2/22/19 | | | | | | | | | | | | | | | | 190,385 | | | | 276,058 | |
J. Burmeister | 3/16/17 | | 5/3/17 | | | 10,594 | | | | 10,592 | | | | 9.38 | | 5/3/27 | | | 4,672 | | | | 6,774 | |
| | 2/6/18 | | 2/28/18 | | | | | | | | | | | | | | | | 18,145 | | | | 26,310 | |
| | 2/18/19 | | 2/22/19 | | | | | | | | | | | | | | | | 30,000 | | | | 43,500 | |
| | 3/10/19 | | 3/15/19 | | | | | | | | | | | | | | | | 3,692 | | | | 5,353 | |
S. Zibbel | 3/7/18 | | 5/2/18 | | | | | | | | | | | | | | | | 10,500 | | | | 15,225 | |
| | 3/7/18 | | 5/2/18 | | | | | | | | | | | | | | | | 10,000 | | | | 14,500 | |
| | 2/18/19 | | 2/22/19 | | | | | | | | | | | | | | | | 16,692 | | | | 24,203 | |
|
(1) | |
| COMPENSATION-RELATED MATTERS |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Option Awards | | Stock Awards |
| Named Executive | | Award Date(1) | | Grant Date(1)(2) | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable(3) | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#)(3)(4) | | Market Value of Shares or Units of Stock That Have Not Vested ($)(5) |
| W. Foley | | 1/11/2016 | | 2/25/2016 | | 0 |
| | 126,598 |
| | 17.13 |
| | 2/25/2026 | | 59,855 |
| | 1,164,778 |
|
| | | | | | | | | | | | | | | | | |
S. Streeter(6) | | 12/9/2013 | | 12/16/2013 | | 240,829 |
| | 0 |
| | 21.29 |
| | 1/11/2017 | | | | |
| | | | | | | | | | | | | | | | | |
S. Buck(7) | | 7/6/2012 | | 8/1/2012 | | 33,389 |
| | 0 |
| | 13.96 |
| | 3/31/2017 | | 0 |
| | 0 |
|
| | | 2/11/2013 | | 2/22/2013 | | 8,953 |
| | 0 |
| | 19.02 |
| | 2/22/2023 | | 0 |
| | 0 |
|
| | | 2/17/2014 | | 2/24/2014 | | 5,370 |
| | 0 |
| | 23.02 |
| | 2/24/2024 | | 0 |
| | 0 |
|
| | | 2/16/2015 | | 3/2/2015 | | 2,246 |
| | 0 |
| | 38.06 |
| | 3/31/2017 | | 0 |
| | 0 |
|
| | | | | | | | | | | | | | | | | |
| A. Cerioli | | 10/27/2014 | | 12/1/2014 | | 2,746 |
| | 2,745 |
| | 29.50 |
| | 12/1/2024 | | 4,178 |
| | 81,304 |
|
| | | 2/16/2015 | | 3/2/2015 | | 1,321 |
| | 3,963 |
| | 38.06 |
| | 3/2/2025 | | 2,934 |
| | 57,096 |
|
| | | 6/11/2015 | | 6/12/2015 | | | | | | | | | | 1,875 |
| | 36,488 |
|
| | | 2/8/2016 | | 2/25/2016 | | 0 |
| | 24,553 |
| | 17.13 |
| | 2/25/2026 | | 11,608 |
| | 225,892 |
|
| | | | | | | | | | | | | | | | | |
| S. Kovach | | 2/4/2008 | | 2/15/2008 | | 3,621 |
| | 0 |
| | 15.35 |
| | 2/15/2018 | | | | |
| | | 2/7/2011 | | 2/10/2011 | | 3,625 |
| | 0 |
| | 17.00 |
| | 2/10/2021 | | | | |
| | | 2/6/2012 | | 2/17/2012 | | 4,624 |
| | 0 |
| | 13.95 |
| | 2/17/2022 | | | | |
| | | 2/11/2013 | | 2/22/2013 | | 5,177 |
| | 1,725 |
| | 19.02 |
| | 2/22/2023 | | 1,513 |
| | 29,443 |
|
| | | 2/17/2014 | | 2/24/2014 | | 3,207 |
| | 3,206 |
| | 23.02 |
| | 2/24/2024 | | 2,817 |
| | 54,819 |
|
| | | 2/16/2015 | | 3/2/2015 | | 1,172 |
| | 3,513 |
| | 38.06 |
| | 3/2/2025 | | 2,601 |
| | 50,615 |
|
| | | 2/8/2016 | | 2/25/2016 | | 0 |
| | 16,353 |
| | 17.13 |
| | 2/25/2026 | | 7,731 |
| | 150,445 |
|
| | | | | | | | | | | | | | | | | |
| S. Miñarro | | 2/4/2008 | | 2/15/2008 | | 3,200 |
| | 0 |
| | 15.35 |
| | 2/15/2018 | | | | |
| | | 2/9/2009 | | 2/27/2009 | | 3,500 |
| | 0 |
| | 1.01 |
| | 2/27/2019 | | | | |
| | | 2/8/2010 | | 2/11/2010 | | 6,000 |
| | 0 |
| | 10.13 |
| | 2/11/2020 | | | | |
| | | 12/6/2010 | | 12/31/2010 | | 20,000 |
| | 0 |
| | 15.47 |
| | 12/31/2020 | | | | |
| | | 2/7/2011 | | 2/10/2011 | | 7,000 |
| | 0 |
| | 17.00 |
| | 2/10/2021 | | | | |
| | | 2/6/2012 | | 2/17/2012 | | 7,500 |
| | 0 |
| | 13.95 |
| | 2/17/2022 | | | | |
| | | 7/5/2012 | | 8/1/2012 | | 3,597 |
| | 0 |
| | 13.96 |
| | 8/1/2022 | | | | |
| | | 2/11/2013 | | 2/22/2013 | | 5,939 |
| | 1,979 |
| | 19.02 |
| | 2/22/2023 | | 1,734 |
| | 33,744 |
|
| | | 2/17/2014 | | 2/24/2014 | | 3,291 |
| | 3,291 |
| | 23.02 |
| | 2/24/2024 | | 2,891 |
| | 56,259 |
|
| | | 2/16/2015 | | 3/2/2015 | | 1,585 |
| | 4,755 |
| | 38.06 |
| | 3/2/2025 | | 12,521 |
| | 243,659 |
|
| | | 2/8/2016 | | 2/25/2016 | | 0 |
| | 21,486 |
| | 17.13 |
| | 2/25/2026 | | 10,158 |
| | 197,675 |
|
| | | | | | | | | | | | | | | | | |
J. White(8) | | | | | | | | | | | | | | | | |
| |
(1) | The Award Date is the date on which the Compensation Committee took action, and the Grant Date is the date on which we determined the number of NQSOs or RSUs, as the case may be, awarded. |
(3) | |
(3) | Represents NQSOs awarded under our 2006 Omnibus Plan.Plans and, with respect to Mr. Bauer, issued outside our Omnibus Incentive Plans in accordance with Section 711(a) of the NYSE American Company Guide. NQSOs granted before 2015 vest 25% on each of the first four anniversaries of the grant date. NQSOs granted to Mr. Burmeister in 2015 and 2016May 2017 vest 25% on each of the first four anniversaries of March 30, 2017, his first day of employment. NQSOs granted to Mr. Foley in 2017 vest 25% per year for four years beginning on February 17th17 of the year after the grant. NQSOs granted to Mr. Bauer in 2019 cliff-vest on March 25, 2022, the third anniversary of his hire date. |
(4) | |
(4) | Represents RSUs awarded under our 2006 Omnibus Plan.Plans and, with respect to Mr. Bauer, issued outside our Omnibus Incentive Plans in accordance with Section 711(a) of the NYSE American Company Guide. One share of our common stock underlies each RSU. RSUs granted in 2013, 2014February 2016, March 2017, and on June 12, 2015 vest 25% on each of the first four anniversaries of the grant date. All other RSUsFebruary 2018 vest 25% per year for four years beginning on February 17th17 of the year after the grant. The 10,000 sign-on RSUs granted to Ms. Zibbel on May 2, 2018 cliff vest on April 5, 2021, the third anniversary of her start date, while the remaining 14,000 RSUs granted to Ms. Zibbel in 2018 vest ratably over four years starting on April 5, 2019. All RSUs granted to Mr. Bauer in 2019 vest one-third on each of the first three anniversaries of the grant date. The RSUs granted to Mr. Burmeister on March 15, 2019 vest one-third on each of the first three anniversaries of the grant date. All other RSUs granted in 2019 vest one-third per year for three years beginning on February 18, 2020. |
(5) | |
(5) | Represents the market value, as of December 31, 2016,2019, of unvested RSUs. We have estimated the market value by multiplying the number of shares of common stock underlying the RSUs by $19.46, the closing price of our common stock on December 30, 2016, the last trading day of 2016. |
|
| |
COMPENSATION-RELATED MATTERS | |
| |
(6) | The special retention award of cash-settled SARs made to Ms. Streeter in December 2013 was scheduled to cliff vest on December 31, 2018; however, all 240,829 cash-settled SARs vested automatically upon Ms. Streeter's termination of employment on January 11, 2016. For additional information, see footnote (8) to the Potential Payments Upon Termination of Employment table below. |
| |
(7) | Pursuant to the terms of the applicable NQSO and RSU award agreements, upon Ms. Buck's resignation on December 31, 2016, all unvested NQSOs and RSUs were forfeited. |
| |
(8) | Mr. White had no outstanding equity awards as of December 31, 2016. When Mr. White's employment ended on March 31, 2016, vesting was accelerated as to all NQSOs and RSUs that otherwise would have vested within one year of his termination date. All other unvested NQSOs and RSUs were forfeited. Vested NQSOs expired on June 29, 2016. |
Option Exercises and Stock Vested for Fiscal 2016 Table
The following table sets forth information concerning the exercise of stock options by the named executives in 2016 and the value of RSUs that vested in 2016.
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2016
|
| | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| Named Executive | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($)(1) | | Number of Shares Acquired on Vesting ($)(2) | | Value Realized on Vesting ($)(3) |
| W. Foley | | 0 |
| | 0 |
| | 4,551 |
| | 80,007 |
|
| S. Streeter | | 54,801 |
| | 129,731 |
| | 150,029 |
| | 2,937,568 |
|
| S. Buck | | 0 |
| | 0 |
| | 11,747 |
| | 212,777 |
|
| A. Cerioli | | 0 |
| | 0 |
| | 3,693 |
| | 66,863 |
|
| S. Kovach | | 0 |
| | 0 |
| | 5,586 |
| | 96,832 |
|
| S. Miñarro | | 2,882 |
| | 21,846 |
| | 8,584 |
| | 149,804 |
|
| J. White | | 10,071 |
| | 9,265 |
| | 15,564 |
| | 289,490 |
|
| |
(1) | Represents the sum of the differences between the market prices and the exercise prices for the respective awards of NQSOs exercised by the named executive officers during 2016. |
| |
(2) | As to Mr. Foley, represents grant of unrestricted common stock in 2016. As to Ms. Streeter, represents 34,342 RSUs and 115,687 cash-settled RSUs that vested during 2016. As to all other named executives, represents the number of RSUs that vested during 2016. |
| |
(3) | As to Mr. Foley, represents the value of unrestricted common stock granted in 2016, the value of which was determined by multiplying the number of shares by$1.45, the closing price of our common stock on the grant date: $17.58. Aslast trading day of 2019. |
STOCK OWNERSHIP INFORMATION
WHO ARE THE LARGEST OWNERS OF LIBBEY STOCK?
The following table shows information, as of March 20, 2020 unless otherwise indicated, with respect to the persons we know to be beneficial owners of 5% or more of our common stock. Except as otherwise indicated by footnote, the percentage ownership indicated is based on 22,577,358 outstanding shares of Libbey Inc. common stock as of March 20, 2020.
Name and Address of Beneficial Owner | | Amount and Nature of Beneficial Ownership | | Percent of Class |
Dimensional Fund Advisors LP(1)
Building One
6300 Bee Cave Road
Austin, TX 78746 | | 1,214,757 | | 5.38 | % |
(1) | Based solely on Amendment No. 5 to Schedule 13G filed with the SEC on February 12, 2020, as of December 31, 2019, Dimensional Fund Advisors LP, an investment adviser, was the beneficial owner of 1,214,757 common shares, with sole dispositive power as to all othersuch shares, shared dispositive power as to no such shares, sole voting power with respect to 1,167,499 common shares, and shared voting power with respect to no common shares. |
HOW MUCH LIBBEY STOCK DO OUR DIRECTORS AND OFFICERS OWN?
BENEFICIAL OWNERSHIP TABLE
The following table shows, as of March 20, 2020, the number of shares of our common stock and percentage of all issued and outstanding shares of our common stock that are beneficially owned by our directors, the named executives and our directors and executive officers as a group. With respect to those named executives who were no longer employed by the Company as of March 20, 2020, the information included in this table is accurate to the best of our knowledge. Our address, as set forth on the Notice of Annual Meeting of Shareholders, is the address of each director and named executive set forth below. The shares owned by the named executives set forth below include the shares held in their accounts in our 401(k) plan. An asterisk indicates ownership of less than one percent of the outstanding stock.
Name of Beneficial Owner | | Amount and Nature of
Beneficial Ownership | | | Percent of Class | |
Michael P. Bauer(1) | | | 10,000 | | | | * | |
James C. Burmeister(1) | | | 42,288 | | | | * | |
William A. Foley(1)(2) | | | 643,956 | | | | 2.85 | % |
Ginger M. Jones(2) | | | 46,481 | | | | * | |
Eileen A. Mallesch(2) | | | 36,258 | | | | * | |
Deborah G. Miller(2) | | | 56,284 | | | | * | |
Carol B. Moerdyk(2) | | | 63,534 | | | | * | |
Steve Nave(2) | | | 25,786 | | | | * | |
John C. Orr(2) | | | 50,122 | | | | * | |
Sarah J. Zibbel(1) | | | 6,026 | | | | * | |
Directors and Executive Officers as a Group(1)(2) | | | 987,742 | | | | 4.37 | % |
(1) | Includes the following NQSOs that have been granted to our named executives representsand all executive officers as a group and that currently are exercisable or will be exercisable on or before May 18, 2020: |
Named Executive | | Number of Outstanding Stock Options
Exercisable Within 60 Days | |
M. Bauer | | | 0 | |
W. Foley | | | 215,148 | |
J. Burmeister | | | 15,890 | |
S. Zibbel | | | 0 | |
All executive officers as a group | | | 233,838 | |
(2) | Includes the value of RSUs, including cash-settled RSUs, that vested during 2016. The value was determined by multiplying the number offollowing shares by the closing price of our common stock on the applicable vesting dates:that are deferred by non-management directors under our 2009 Director Deferred Compensation Plan, which we refer to as our Director DCP, and that are payable as shares of our common stock: |
|
| | |
Vesting DateName of Director | | Closing Price
($)
Number of Deferred Shares | |
January 11, 2016W. Foley(a) | | 19.58 |
February 17, 2016 | | 16.75 |
February 22, 2016 | | 17.56 |
February 24, 2016 | | 18.20 |
March 31, 2016 | | 18.60 |
June 12, 2016 | | 16.80 |
August 1, 2016 | | 18.80 |
December 1, 2016 | | 19.13 |
|
| |
| COMPENSATION-RELATED MATTERS |
Pension Benefits in Fiscal 2016 Table
Executives hired before January 1, 2006 are eligible for benefits under our Salary Plan and our SERP. Of our named executives, only Ms. Kovach is eligible for benefits under the Salary Plan and SERP.
The Salary Plan is a qualified plan, and the SERP is an excess, non-qualified plan designed to provide substantially identical retirement benefits as the Salary Plan to the extent that the Salary Plan cannot provide those benefits due to limitations in the Internal Revenue Code. Benefits under the Salary Plan and SERP are determined by annual contribution credits equal to a percentage of annual earnings plus interest. Ms. Kovach is eligible for a pension benefit under the Salary Plan and SERP under the cash balance formula, which is based upon the value of a notional account that had an opening balance determined in accordance with the final average pay formula described below as of January 1, 1998. Under the cash balance formula, the account balance is increased each year with a contribution amount based on the sum of age and years of service with Libbey and with interest based upon the 30-year Treasury rate.
The final average pay formula is: [(A) x (B) x (C)] + [(D) x (E) x (C)] + [(F) + (A) + (G)]
Where:
(A) Monthly final average earnings for the three highest consecutive calendar years before 2008
(B) 1.212%
(C) Years of credited service up to 35 years
(D) Monthly final average earnings above Social Security Wage base at retirement
(E) 0.176%
(F) 0.5%
(G) Years of credited service over 35 years
Only base salary and amounts earned under the SMIP are included in calculating final average earnings.
The retirement benefit may be adjusted if the employee has more or less than 35 years of credited service or retired before age 65. The Salary Plan and the SERP provide for additional benefit accruals beyond age 65 and for annual annuity benefits as well as an optional lump sum form of benefit. Ms. Kovach is entitled to a benefit computed only in accordance with the cash balance formula. None of our other named executives is eligible for a pension benefit under our Salary Plan or our SERP because their employment with Libbey did not begin before January 1, 2006.
The following table sets forth information concerning the benefits provided to the named executives under the Salary Plan and the SERP as of December 31, 2016, the date that we use for pension plan measurement for financial statement reporting purposes.
PENSION BENEFITS IN FISCAL 2016 TABLE
|
| | | | | | | | | | | |
| Named Executive | | Plan Name | | Number of Years of Credited Service (#)(1) | | Present Value of Accumulated Benefit ($)(2) | | Payments During Last Fiscal Year ($) |
| W. Foley | | N/A | | N/A |
| | N/A |
| | N/A |
|
| S. Streeter | | N/A | | N/A |
| | N/A |
| | N/A |
|
| S. Buck | | N/A | | N/A |
| | N/A |
| | N/A |
|
| A. Cerioli | | N/A | | N/A |
| | N/A |
| | N/A |
|
| S. Kovach | | Salary Plan | | 13.08 |
| | 164,229 |
| | 0 |
|
| | | SERP | | 13.08 |
| | 125,254 |
| | 0 |
|
| S. Miñarro | | N/A | | N/A |
| | N/A |
| | N/A |
|
| J. White | | N/A | | N/A |
| | N/A |
| | N/A |
|
| 0 | |
(1)G. Jones | Represents actual years of service to Libbey. The plans were frozen at the end of 2012, after which additional pension service is not credited. |
| | 13,846 | |
(2)E. Mallesch | Amounts were determined based on the assumptions outlined in our audited financial statements for the year ended December 31, 2016, except that all named executives who are eligible for pension benefits under the Salary Plan are assumed to receive benefits under the cash balance design at their normal retirement age of 65. |
| 36,258 | |
D. Miller | | | 0 | |
COMPENSATION-RELATED MATTERSC. Moerdyk | | | 0 | |
S. Nave | | | 25,786 | |
J. Orr | | | 0 | |
All non-management directors as a group | | | 75,890 | |
Nonqualified Deferred Compensation
TheDoes not include the following table sets forth information with respectshares of phantom stock that are held by non-management directors pursuant to our EDCP. The EDCP was the only nonqualified deferred compensation plan under which employees could defer pay earnedplans for outside directors and that are payable in 2016:cash:
NONQUALIFIED DEFERRED COMPENSATION IN FISCAL 2016 TABLE
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Executive Contributions in Last FY | | Registrant Contributions in Last FY | | Aggregate Earnings in Last FY | | Aggregate Withdrawals / Distributions in Last FY | | Aggregate Balance at Last FYE(3) |
| Named Executive | | ($) | | RSUs | | ($)(1) | | RSUs | | ($)(2) | | RSUs | | ($) | | RSUs | | ($) | | RSUs |
| W. Foley | | 30,938 |
| | 0 | | 30,938 |
| | 0 | | 6 |
| | 0 | | 0 |
| | 0 | | 61,881 |
| | 0 |
|
| S. Streeter | | 2,117 |
| | 0 | | 0 |
| | 0 | | (24,001 | ) | | 0 | | (388,925 | ) | | 0 | | 0 |
| | 0 |
|
| S. Buck | | 12,113 |
| | 0 | | 12,113 |
| | 0 | | 2,055 |
| | 131 | | 0 |
| | 0 | | 83,480 |
| | 5,310 |
|
| A. Cerioli | | 68,800 |
| | 0 | | 8,800 |
| | 0 | | 1,830 |
| | 0 | | 0 |
| | 0 | | 79,430 |
| | 0 |
|
| S. Kovach | | 4,291 |
| | 0 | | 4,291 |
| | 0 | | 1,011 |
| | 407 | | 0 |
| | 0 | | 69,922 |
| | 16,530 |
|
| S. Miñarro | | 0 |
| | 0 | | 0 |
| | 0 | | 0 |
| | 0 | | 0 |
| | 0 | | 0 |
| | 0 |
|
| J. White | | 6,563 |
| | 0 | | 0 |
| | 0 | | 839 |
| | 0 | | (40,696 | ) | | 0 | | 0 |
| | 0 |
|
Name of Director | | Number of Phantom Shares | |
W. Foley(a) | |
| | |
| 13,126 | |
(1)G. Jones | The following amounts are included in the column headed ‘‘All Other Compensation’’ in the Summary Compensation Table above: Mr. Foley — $30,938; Ms. Buck — $12,113; Ms. Cerioli — $8,800; Ms. Kovach— $4,291.
|
| | 0 | |
(2)E. Mallesch | Not included in the Summary Compensation Table because earnings are not at an above-market rate. |
| | 0 | |
(3)D. Miller | Of the total amounts in this column, the following amounts are reported as ‘‘Salary’’ or ‘‘Stock Awards’’ in the Summary Compensation Table in this proxy statement for the 2016, 2015 and/or 2014 fiscal years: |
|
| | | | | | |
| Named Executive | | Salary ($) | | Stock Awards ($) |
| W. Foley | | 30,938 |
| | 0 |
|
| S. Streeter | | 381,251 |
| | 0 |
|
| S. Buck | | 35,288 |
| | 0 |
|
| A. Cerioli | | 68,800 |
| | 0 |
|
| S. Kovach | | 10,923 |
| | 0 |
|
| S. Miñarro | | 0 |
| | 0 |
|
| J. White | | 28,875 |
| | 0 |
|
Under the EDCP, our named executives and other members of senior management may defer base pay, cash incentive and bonus compensation and RSUs into an account that is deemed invested in one of 13 measurement funds, including a Libbey common stock measurement fund. RSUs in all events are deemed invested in the Libbey common stock measurement fund. We selected these funds to provide measurement options similar to the investment options provided under our 401(k) plan. Participants make deferral elections with respect to cash pay and RSUs before the year in which they are earned or they vest.
Participants can defer (a) up to 60% of the amount by which base salary exceeds required payroll obligations and 401(k) plan contributions; (b) up to 60% of the amount by which cash incentive or bonus compensation exceeds required payroll obligations; and (c) up to 100% of RSUs that are earned or vest during the year to which the deferral relates. We provide matching contributions on excess contributions of base salary in the same manner as we provide matching contributions under our 401(k) plan. The matching contributions are deemed invested in accordance with the participant’s election as to his or her own contributions.
The balance credited to a participant’s account, including the matching contributions that we make, is 100% vested at all times. However, the EDCP is not funded and, as a result, EDCP account balances are subject to the claims of our creditors.
We must pay the account balance in a lump sum made on, or in installments that begin on, the distribution date elected by the participant. However, if a participant dies before his or her account balance is distributed in full, we must distribute the account balance in a lump sum to the participant’s beneficiaries no later than 60 days after the participant’s death. If a participant ceases to be a Libbey employee before his or her 62nd birthday, we must pay the participant his or her account balance in a lump sum within 60 days after the date of his or her separation from service, unless the participant is a ‘‘specified
| 2,443 | |
C. Moerdyk | | | 20,566 | |
S. Nave | COMPENSATION-RELATED MATTERS |
employee’’ for purposes of Internal Revenue Code Section 409A. In that event, we must pay the participant his or her account balance on the first day of the seventh month after his or her separation from service. If a participant ceases to be a Libbey employee on or after his or her 62nd birthday, we must distribute the account balance either in a lump sum or in installments, as elected by the participant, on or beginning on the distribution date elected by the participant. In that event, the distribution date cannot be later than the January 1st immediately following the participant’s 75th birthday. If, however, the executive is a ‘‘specified employee’’ for purposes of Internal Revenue Code Section 409A, we cannot distribute the account balance, or begin distributing the account balance, to the participant before the first day of the seventh month after the participant’s separation from service. Finally, if a change in control, as defined in the EDCP, occurs, a participant’s entire account balance will be distributed to him or her within 30 days after the change in control.
EDCP hardship distributions are permitted, but there are no loan provisions. All EDCP distributions are fully taxable. Rollovers to defer taxes are not permitted.
Potential Payments Upon Termination or Change in Control
The terms of our RSU and NQSO award agreements provide for acceleration of unvested awards in the event of termination of employment under certain circumstances. Additionally, the terms of award agreements relating to the performance cash components of our 2014 LTIP (for the 2014-2016 performance cycle), 2015 LTIP (for the 2015-2017 performance cycle) and 2016 LTIP (for the 2016-2018 performance cycle) provide for payouts in the event of termination of employment under certain circumstances.
Mr. White's employment ended effective March 31, 2016. His termination was treated as a termination by Libbey without Cause under the Executive Severance Compensation Policy, and he received severance benefits and payments pursuant to the terms of the Executive Severance Compensation Policy and the agreements pursuant to which awards of RSUs, NQSOs and performance cash awards were made. The amounts of these severance benefits and payments are set forth under "Involuntary termination without Cause - no change in control triggering event."
Ms. Buck voluntarily resigned effective December 31, 2016. She received no severance benefits or payments in connection with her resignation.
For each of Ms. Streeter, Mr. White and Ms. Buck, the amounts reflected in the table on the following page are the amounts actually payable to each of them in connection with their respective terminations of employment.
With respect to all other named executives, the table provides information with respect to the amounts payable to each of them based upon the following significant assumptions:
We have assumed that the executive's employment terminated on December 31, 2016 under the various scenarios described in the table.
For purposes of illustrating the amounts payable on or in connection with a change in control, we have assumed that a change in control occurred on December 31, 2016, and that the named executive's employment terminated concurrently with the change in control.
Ms. Kovach is the only named executive eligible for benefits under our Salary Plan and SERP. As of December 31, 2016, Ms. Kovach was at least age 55 and had at least five years of service with Libbey. As a result, Ms. Kovach would have been eligible to receive a retirement benefit under our Salary Plan and SERP if she had retired on or before December 31, 2016. If any of our other named executives had retired on or before December 31, 2016, all unvested equity awards would have been forfeited.
| 80,093 | |
J. Orr | | | 0 | |
COMPENSATION-RELATED MATTERSAll non-management directors as a group | | | 116,228 | |
POTENTIAL PAYMENTS UPON TERMINATION OF EMPLOYMENT(1)
|
| | | | | | | | | | | | | | | | | | |
| Named Executive | | Cash Severance ($) | | Annual Incentive for Year of Termination ($) | | LTIP Cash ($)(2) | | Acceleration of Unvested Equity Awards ($)(3) | | Misc. Benefits ($) | | Total ($) |
| William A. Foley | | | | | | | | | | | | |
Death or permanent disability(4) | | 0 |
| | 556,000 |
| | 980,100 |
| | 1,459,752 |
| | 0 |
| | 2,995,852 |
|
Voluntary termination(5) | | 0 |
| | 556,000 |
| | 759,550 |
| | 0 |
| | 0 |
| | 1,315,550 |
|
Involuntary termination without Cause - no change in control(6) | | 0 |
| | 556,000 |
| | 759,550 |
| | 364,944 |
| | 0 |
| | 1,680,494 |
|
Involuntary termination without Cause in connection with a change in control(7) | | 0 |
| | 556,000 |
| | 1,459,854 |
| | 1,459,752 |
| | 0 |
| | 3,475,606 |
|
| Involuntary termination for Cause | | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
|
| | | | | | | | | | | | | |
| Stephanie A. Streeter | | | | | | | | | | | | |
Involuntary termination without Cause - no change in control(8) | | 3,193,000 |
| | 24,057 |
| | 629,609 |
| | 2,978,115 |
| | 106,618 |
| | 6,931,399 |
|
| | | | | | | | | | | | | |
| Sherry Buck | | | | | | | | | | | | |
Voluntary termination without Good Reason - no change in control(9) | | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
|
| | | | | | | | | | | | | |
| Annunciata Cerioli | | | | | | | | | | | | |
Death or permanent disability(10) | | 0 |
| | 141,670 |
| | 254,404 |
| | 457,987 |
| | 0 |
| | 854,061 |
|
Voluntary termination for Good Reason - no change in control(11) | | 0 |
| | 0 |
| | 176,576 |
| | 0 |
| | 0 |
| | 176,576 |
|
Involuntary termination without Cause - no change in control(12) | | 704,006 |
| | 141,670 |
| | 176,576 |
| | 142,623 |
| | 93,393 |
| | 1,258,268 |
|
Voluntary termination for Good Reason or involuntary termination without Cause - change in control(13) | | 1,408,012 |
| | 141,670 |
| | 314,631 |
| | 457,987 |
| | 106,507 |
| | 2,428,807 |
|
| Involuntary termination for Cause | | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
|
| | | | | | | | | | | | | |
| Susan A. Kovach | | | | | | | | | | | | |
Death or permanent disability(10) | | 0 |
| | 118,695 |
| | 247,101 |
| | 324,184 |
| | 0 |
| | 689,980 |
|
Retirement(14) | | 0 |
| | 118,695 |
| | 0 |
| | 0 |
| | 289,483 |
| | 408,178 |
|
Voluntary termination for Good Reason - no change in control(11) | | 0 |
| | 0 |
| | 170,540 |
| | 0 |
| | 0 |
| | 170,540 |
|
Involuntary termination without Cause - no change in control(12) | | 514,875 |
| | 118,695 |
| | 170,540 |
| | 121,617 |
| | 88,454 |
| | 1,014,181 |
|
Voluntary termination for Good Reason or involuntary termination without Cause - change in control(13) | | 1,029,750 |
| | 118,695 |
| | 267,688 |
| | 324,184 |
| | 84,585 |
| | 1,824,902 |
|
| Involuntary termination for Cause | | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
|
| | | | | | | | | | | | | |
| Salvador Miñarro Villalobos | | | | | | | | | | | | |
Death or permanent disability(10) | | 0 |
| | 148,156 |
| | 292,952 |
| | 582,269 |
| | 0 |
| | 1,023,377 |
|
Voluntary termination for Good Reason – no change in control(11) | | 0 |
| | 0 |
| | 199,709 |
| | 0 |
| | 0 |
| | 199,709 |
|
Involuntary termination without Cause -- no change in control(12) | | 571,266 |
| | 148,156 |
| | 199,709 |
| | 205,905 |
| | 93,393 |
| | 1,218,429 |
|
Voluntary termination for Good Reason or involuntary termination without Cause - change in control(13) | | 1,142,532 |
| | 148,156 |
| | 328,177 |
| | 582,269 |
| | 94,062 |
| | 2,295,196 |
|
| Involuntary termination for Cause | | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
|
| | | | | | | | | | | | | |
| James H. White | | | | | | | | | | | | |
Involuntary termination without Cause -- no change in control(11) | | 918,750 |
| | 68,414 |
| | 93,209 |
| | 324,295 |
| | 93,808 |
| | 1,498,476 |
|
|
| |
| | COMPENSATION-RELATED MATTERS |
| |
(1) | Represents potential payments pursuant to equity award agreements (including award agreements for cash-settled retention RSUs and cash-settled retention SARs), performance cash award agreements and (a) in the case of the named executives other than Ms. Streeter or Mr. Foley our Executive Severance Compensation Policy or their respective change in control agreements, as applicable, (b) inwas a non-management director from 1994 until he assumed the caserole of Mr. Foley, his Letter Agreement, and (c)in the case of Ms. Streeter, her Mutual Separation and Release Agreement. Only Ms. Kovach was retirement eligible as of December 31, 2016. |
| |
(2) | As to those triggering events for which we estimated future payouts under the performance cash component of our 2015 LTIP and 2016 LTIP, we estimated the payout under the performance cash component of our 2015 LTIP assuming achievement at 51% of target performance and we estimated the payout under the performance cash component of our 2016 LTIP assuming achievement of 89% of target performance. |
| |
(3) | For those triggering events that result in acceleration of unvested equity awards: (a) except as to RSUs (including cash-settled RSUs) granted to Ms. Streeter and Mr. White, we have estimated the value of common stock underlying RSUs by multiplying the applicable number of RSUs by $19.46, the closing price of our common stock on December 31, 2016; and (b) except as to RSUs (including cash-settled RSUs) granted to Ms. Streeter and Mr. White, we have determined the in-the-money / intrinsic value of the applicable NQSOs by deducting the respective exercise prices for the NQSOs from $19.46 and multiplying the result (if greater than zero) by the applicable number of NQSOs. As to Ms. Streeter, the values for the RSUs (including cash-settled RSUs), NQSOs and cash-settled SARs were calculated based on the closing price of our common stockCEO on January 11,12, 2016. After serving as a management director from January 12, 2016 which was $19.58. Asthrough February 29, 2020, he returned to Mr. White, the values of the RSUs and NQSOs were calculated based on the closing price of our common stock onserving as a non-management director effective March 31, 2016, which was $18.60. 1, 2020. |
| |
(4) | Represents the sum of: |
| |
(a) | under "Annual Incentive for Year of Termination," the amount actually earned under our 2016 SMIP; |
| |
(b) | under "LTIP Cash," a target award (unprorated because the performance cycle was complete as of December 31, 2016) under the performance cash component of our 2014 LTIP and prorated target awards under the performance cash component of our 2015 LTIP and our 2016 LTIP; and |
| |
(c) | under "Acceleration of Unvested Equity Awards," the sum of (i) the estimated value, as of December 31, 2016, of common stock underlying all RSUs that were not vested as of December 31, 2016, and (ii) the in-the-money/ intrinsic value, as of December 31, 2016, of all NQSOs that were not vested as of December 31, 2016. |
| |
(5) | Represents the sum of: |
| |
(a) | under "Annual Incentive for Year of Termination," the amount actually earned under our 2016 SMIP; and |
| |
(b) | under "LTIP Cash," the sum of the amount actually earned under the performance cash component of our 2014 LTIP and an estimate of the prorated amount that actually would be earned under the performance cash component of each of our 2015 LTIP and 2016 LTIP (estimated as described in footnote (2) above). The prorated amounts actually earned under the performance cash component of our 2015 LTIP and 2016 LTIP would be paid between January 1 and March 15 of the calendar year following conclusion of the applicable performance cycle. |
| |
(6) | Represents the sum of: |
| |
(a) | under "Annual Incentive for Year of Termination," the amount actually earned under our 2016 SMIP; |
| |
(b) | under "LTIP Cash," the sum of the amount actually earned under the performance cash component of our 2014 LTIP and an estimate of the prorated amount that actually would be earned under the performance cash component of each of our 2015 LTIP and 2016 LTIP (estimated as described in footnote (2) above). The prorated amounts actually earned under the performance cash component of our 2015 LTIP and 2016 LTIP would be paid between January 1 and March 15 of the calendar year following conclusion of the applicable performance cycle; and |
| |
(c) | under "Acceleration of Unvested Equity Awards," the sum of (i) the estimated value, as of December 31, 2016, of common stock underlying RSUs that were not vested as of December 31, 2016 but were scheduled to vest by December 31, 2017, and (ii) the in-the-money/ intrinsic value, as of December 31, 2016, of NQSOs that were not vested as of December 31, 2016 but were scheduled to vest by December 31, 2017. |
| |
(7) | Represents the sum of: |
| |
(a) | under "Annual Incentive for Year of Termination," the amount actually earned under our 2016 SMIP; and |
| |
(b) | under "LTIP Cash," the sum of the amount actually earned under the performance cash component of our 2014 LTIP and an estimate of the unprorated amount that actually would be earned under the performance cash component of each of our 2015 LTIP and 2016 LTIP (estimated as described in footnote (2) above). The unprorated amounts actually earned under the performance cash component of our 2015 LTIP and 2016 LTIP would be paid between January 1 and March 15 of the calendar year following conclusion of the applicable performance cycle; and |
|
| |
COMPENSATION-RELATED MATTERS | |
| |
(c) | under "Acceleration of Unvested Equity Awards," the sum of (i) the estimated value, as of December 31, 2016, of common stock underlying all RSUs that were not vested as of December 31, 2016, and (ii) the in-the-money/ intrinsic value, as of December 31, 2016, of all NQSOs that were not vested as of December 31, 2016. |
| |
(8) | Represents the sum of: |
| |
(a) | under "Cash Severance," two times the sum of (a) her annual base salary in effect on the date of termination; and (b) her target 2016 SMIP opportunity, with such amount being payable in equal monthly installments over a period of 24 months; |
| |
(b) | under "Annual Incentive for Year of Termination," the amount earned under our 2016 SMIP based on Ms. Streeter's base salary earnings for 2016 and forecasted Company performance as of the end of January 2016. This amount was paid to Ms. Streeter in March 2016; |
| |
(c) | under "LTIP Cash," the sum of the amount actually earned under the performance cash component of our 2014 LTIP, 2015 LTIP and 2016 LTIP, based on forecasted Company performance as of the end of January 2016, and prorated to Ms. Streeter's termination date. This amount was paid to Ms. Streeter in March 2016; |
| |
(d) | under "Acceleration of Unvested Equity Awards," the sum of (i) the value, as of January 11, 2016, of common stock underlying all cash-settled retention RSUs; (ii) the value, as of January 11, 2016, of common stock underlying stock-settled RSUs scheduled to vest on or before June 30, 2016; and (iii) the in-the-money / intrinsic value, as of January 11, 2016, of all NQSOs scheduled to vest on or before June 30, 2016. Ms. Streeter's cash-settled retention SARs were underwater as of January 11, 2016; and |
| |
(e) | under "Misc. Benefits," the sum of the maximum cost ($75,000) to be incurred by Libbey to provide executive level outplacement services for two years following termination and the estimated cost (net of contributions by Ms. Streeter at the active employee rate) to provide medical, dental, prescription drug and life insurance coverage for 18 months following termination. |
| |
(9) | Ms. Buck did not receive any severance payments or benefits in connection with her resignation. |
| |
(10) | Represents the sum of: |
| |
(a) | under "Annual Incentive for Year of Termination," the amount actually earned under our 2016 SMIP; |
| |
(b) | under "LTIP Cash," a target award (unprorated because the performance cycle was complete as of December 31, 2016) under the performance cash component of our 2014 LTIP and prorated target awards under the performance cash component of our 2015 LTIP and our 2016 LTIP; and |
| |
(c) | under "Acceleration of Unvested Equity Awards," the sum of (i) the estimated value, as of December 31, 2016, of common stock underlying all RSUs that were not vested as of December 31, 2016, (iii) the in-the-money/ intrinsic value, as of December 31, 2016, of all NQSOs that were not vested as of December 31, 2016. |
| |
(11) | Under "LTIP Cash," represents prorated actual awards under the performance cash component of our 2014 LTIP, 2015 LTIP and 2016 LTIP (estimated as described in footnote (2) above). We have prorated the amounts through the assumed date of termination. The prorated amounts actually earned under the performance cash component of our 2015 LTIP and 2016 LTIP would be paid between January 1 and March 15 of the calendar year following conclusion of the applicable performance cycle. |
| |
(12) | Represents the sum of: |
| |
(a) | under "Cash Severance," salary continuation for 12 months and a lump sum payment in an amount equal to the named executive's target annual incentive compensation, based on the annual base salary and target opportunity percentage in effect on the date of termination; |
| |
(b) | under "Annual Incentive for Year of Termination," the amount actually earned under our 2016 SMIP; |
| |
(c) | under "LTIP Cash," prorated actual awards under the performance cash component of our 2014 LTIP, 2015 LTIP and 2016 LTIP (estimated as described in footnote (2) above). We have prorated the amounts through the assumed date of termination. The prorated amounts actually earned under the performance cash component of our 2015 LTIP and 2016 LTIP would be paid between January 1 and March 15 of the calendar year following conclusion of the applicable performance cycle; |
| |
(d) | under "Acceleration of Unvested Equity Awards," the sum of (i) the estimated value, as of December 31, 2016, of common stock underlying RSUs that were not yet vested as of December 31, 2016, and were scheduled to vest by December 31, 2017; (ii) the in-the-money / intrinsic value, as of December 31, 2016, of NQSOs that were not yet vested as of December 31, 2016, and were scheduled to vest by December 31, 2017; and |
| |
(e) | under "Misc. Benefits," the sum of (i) the estimated cost (net of contributions by the named executive, at the active employee rate) of continued medical, dental, prescription drug and life insurance coverage for a period of 12 months following termination, and (ii) executive outplacement services for a period of one year from termination at the rate of $75,000 per year. |
|
| |
| COMPENSATION-RELATED MATTERS |
| |
(13) | Represents the sum of: |
| |
(a) | under "Cash Severance," the sum of two times the named executive's annual base salary and two times the named executive’s target award under our 2016 SMIP, at the annual base salary and target incentive opportunity in effect on the date of termination; |
| |
(b) | under "Annual Incentive for Year of Termination," the amount actually earned under our 2016 SMIP; |
| |
(c) | under "LTIP Cash," the sum of the amount actually earned under the performance cash component of our 2014 LTIP and an estimate (without proration) of the amount the named executive would earn under the performance cash component of each of our 2015 LTIP and our 2016 LTIP (estimated as described in footnote (2) above). The unprorated amounts actually earned under the performance cash component of our 2015 LTIP and 2016 LTIP would be paid between January 1 and March 15 of the calendar year following conclusion of the applicable performance cycle; |
| |
(d) | under "Acceleration of Unvested Equity Awards," the estimated value, as of December 31, 2016, of common stock underlying RSUs not yet vested as of that date and the in-the-money / intrinsic value, as of December 31, 2016, of NQSOs not yet vested as of that date; and |
| |
(e) | under "Misc. Benefits," the sum of (i) the maximum cost (15% of base salary) to be incurred by Libbey to provide executive level outplacement services for two years after termination; (ii) the estimated cost (net of contributions by the named executive at the active employee rate) of continued medical, dental, prescription drug and life insurance coverage for 18 months following termination; and (iii) and the maximum cost ($10,000) to provide financial planning services to the named executive. |
| |
(14) | Represents the sum of: |
| |
(a) | under "Annual Incentive for Year of Termination," the amount actually earned under our 2016 SMIP; and |
| |
(b) | under "Misc. Benefits," the present value of Ms. Kovach's accumulated benefit under our Salary Plan and SERP at December 31, 2016. |
In addition, if the Compensation Committee were to exercise discretion to accelerate unvested RSUs and NQSOs that were scheduled to vest by December 31, 2017, we estimate that the value, as of December 31, 2016, of the accelerated RSUs would be $111,331, and that the in-the-money / intrinsic value, as of December 31, 2016, of the accelerated NQSOs would be $10,286. We estimated these values in the manner described in footnote (3) above.
|
| |
COMPENSATION-RELATED MATTERS | |
Non-Management Directors’ Compensation in 2016
Our management directors do not receive additional pay for service on the Board of Directors. Upon his appointment to CEO on January 12, 2016, Mr. Foley was no longer entitled to receive any additional compensation for service as a director. He was, however, entitled to receive the annual equity award granted to non-management directors at the 2016 annual meeting of shareholders, as the award is attributable to service for the 2015 fiscal year. The grant date fair value of this award is included in the Summary Compensation Table above.
Each of our non-management directors receives the following compensation for their service on the board and its committees. For service periods of less than one year, amounts are prorated.
|
| | |
Element of Compensation | | Annual Compensation Amount |
Annual Cash Retainer | | $47,500 |
Lead Independent Director Cash Retainer | | $20,000 |
Equity Award | | On the date of each annual meeting of shareholders, outright grant of shares of common stock valued at $80,000 on the date of grant |
Committee Chair Cash Retainers
(in addition to Committee Member Cash Retainers)
| | $12,500 (Audit Committee and Compensation Committee) |
| $6,500 (Nominating and Governance Committee) |
Committee Member Cash Retainers | | $7,500 (Audit Committee and Compensation Committee) |
| $5,000 (Nominating and Governance Committee) |
Other Fees | | $500 per one-half day of service |
The Lead Independent Director Cash Retainer replaced the Chairman of the Board Cash Retainer, which was discontinued when we combined the roles of Chairman of the Board and Chief Executive Officer in January 2016.
Pursuant to the Director Deferred Compensation Plan, directors may elect to defer cash and/or equity compensation into any of 13 measurement funds. The Director DCP and the predecessor deferred compensation plans for which non-management directors were eligible are unfunded plans, and the Company does not guarantee an above-market return on amounts deferred under these plans. Amounts deferred under the Director DCP or a predecessor plan are, at the director's election, payable either in a lump sum or in installments over a period of time selected by the director. Amounts deferred under our first deferred compensation plan for outside directors are payable in a lump sum upon the earlier of the director's death or retirement from our Board.
We reimburse our non-management directors for their travel expenses incurred in attending Board or Board committee meetings, and for fees and expenses incurred in attending director education seminars and conferences. The directors do not receive any other personal benefits.
|
| |
| COMPENSATION-RELATED MATTERS |
The table below shows the pay received by our non-management directors in 2016. Compensation received by Mr. Foley in 2016 for his service as a non-management director is included in the Summary Compensation Table above.DIRECTOR COMPENSATION FOR YEAR ENDED DECEMBER 31, 2016
|
| | | | | | | | | | | | | |
| Director | | Fees Earned or Paid in Cash ($)(1) | | Stock Awards ($)(2) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(3) | | All Other Compensation ($) | | Total ($) |
| Carlos V. Duno | | 72,500 |
| | 80,007 |
| | 0 | | 0 | | 152,507 |
|
| Peter C. McC. Howell | | 16,630 |
| | 80,007 |
| | 0 | | 0 | | 96,637 |
|
| Ginger M. Jones | | 75,000 |
| | 80,007 |
| | 0 | | 0 | | 155,007 |
|
| Theo Killion | | 60,421 |
| | 80,007 |
| | 0 | | 0 | | 140,428 |
|
| Eileen A. Mallesch | | 42,079 |
| | 0 |
| | 0 | | 0 | | 42,079 |
|
| Deborah G. Miller | | 60,693 |
| | 80,007 |
| | 0 | | 0 | | 140,700 |
|
| Carol B. Moerdyk | | 60,000 |
| | 80,007 |
| | 0 | | 0 | | 140,007 |
|
| John C. Orr | | 87,587 |
| | 80,007 |
| | 0 | | 0 | | 167,594 |
|
In addition to outstanding shares of common stock that our named executives beneficially owned as of March 20, 2020, the named executives and all executive officers as a group have received the following grants of RSUs that have not yet vested:
Named Executive | | Number of Unvested RSUs(1) | |
M. Bauer | |
| | |
| 520,750 | |
(1)W. Foley | Includes pay deferred into the Libbey common stock measurement fund pursuant to the Director DCP. |
| | 0 | |
(2)J. Burmeister | Represents the grant date fair value, determined in accordance with FASB ASC Topic 718, of awards of stock made to non-management directors on May 10, 2016. On that date, we awarded certain non-management directors stock having a grant date fair value of $17.58 per share. |
| | 176,464 | |
(3)S. Zibbel | We do not maintain | | 89,341 | |
All executive officers as a pension plan for our non-management directors. We do not guarantee any particular rate of returngroup | | | 947,183 | |
(1) | Of these amounts, 387 RSUs with 4-year ratable vesting were awarded on any pay deferred pursuant to our deferred compensation plans. DividendsFebruary 13, 2017; 4,672 RSUs with 4-year ratable vesting were awarded on pay deferred into the Libbey Inc. phantom stock or measurement fund under our deferred compensation plans for non-management directors accrue only ifMarch 16, 2017; 13,840 RSUs with 4-year ratable vesting were awarded on February 5, 2018; 10,500 RSUs with 4-year ratable vesting were awarded on March 7, 2018; 10,000 RSUs with 3-year cliff vesting were awarded on March 7, 2018; 34,040 RSUs with 3-year ratable vesting were awarded on February 18, 2019; 119,288 RSUs with 3-year ratable vesting were awarded on March 10, 2019; and to the extent payable to holders754,456 RSUs with 3-year ratable vesting were awarded on February 18, 2020. One share of our common stock. Pay deferred into interest-bearing accountsstock will be issued for each vested RSU. Dividends do not accrue on RSUs until they vest. For further information, see the Outstanding Equity Awards at Fiscal Year-End Table. |
EQUITY COMPENSATION PLAN INFORMATION
Following are the number of securities and weighted average exercise price thereof under our compensation plans approved and not approved by security holders as of December 31, 2019:
Plan Category | | Number of Securities to be Issued Upon Exercise of Outstanding Options and Rights | | | Weighted Average Exercise Price of Outstanding Options and Rights | | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | |
Equity compensation plans approved by security holders(1) | | | 1,549,333 | | | $ | 16.94 | | | | 2,140,834 | |
Equity compensation plans not approved by security holders(2) | | | 266,827 | | | | 9.25 | | | | 0 | |
Total | | | 1,816,160 | | | | 15.31 | | | | 2,140,834 | |
(1) | Includes 990,010 restricted stock units awarded under our deferredLibbey's equity compensation plans for non-management directors does not earn an above-market return, as the applicable interest rate is the yield on ten-year treasuries. Pay deferred into other measurement funds under our deferred compensation plans for non-management directors does not earn an above-market return as that pay earns a return only if and to the extent that the net asset value of the measurement fund into which the pay is deemed invested actually increases. |
| plans. |
| (2) | |
AUDIT- RELATED MATTERS | Represents 116,827 restricted stock units and 150,000 nonqualified stock options granted as inducement awards to Mr. Bauer in connection with his hire in March 2019. These inducement awards were not granted under an equity compensation plan. |
AUDIT-RELATED MATTERS
|
|
PROPOSAL 4 — RATIFICATION OF AUDITORS
|
AUDIT-RELATED MATTERS
Proposal 3 Ratification of Auditors
The Audit Committee has appointed Deloitte & Touche LLP to serve as our independent auditors for our 20172020 fiscal year. Although ratification by the shareholders is not required by law, the Board of Directors believes that you should be given the opportunity to express your views on the subject. Unless otherwise directed, proxies will be voted for ratification.
The Board of Directors recommends a vote FOR this proposal.
proposalIf our shareholders do not ratify the appointment of Deloitte & Touche LLP, our Audit Committee, in its discretion, will consider the voting results and evaluate whether to select a different independent auditor.
WHAT
Who are Libbey’s auditors?
FEES DID LIBBEY PAY TO ITS AUDITORS FOR FISCAL 2019 AND 2018?For our 2016 fiscal year,the years ended December 31, 2019, and December 31, 2018, Deloitte & Touche LLP served as the Company's independent registered public accounting firm. The Audit Committee has appointed Deloitte & Touche LLP to serve as our independent auditors for our 2017 fiscal year.
Representatives of Deloitte & Touche LLP are expected to attend the Annual Meeting and will have an opportunity to make a statement if they so desire. The representatives will be available to respond to appropriate questions.
What fees did Libbey pay to its auditors for Fiscal 2016 and 2015?
For the years ended December 31, 2015 and December 31, 2016, Deloitte & Touche LLP served as the Company'sCompany’s external auditors. Fees for services rendered by Deloitte & Touche LLP for the years ended December 31, 20162019, and December 31, 20152018, are as follows:
|
| | | | | | | | |
| Nature of Fees | | 2016 Fees | | 2015 Fees |
Audit Fees(1) | | $ | 1,116,444 |
| | $ | 1,112,248 |
|
Audit-Related Fees(2) | | 112,840 |
| | 115,200 |
|
Tax Fees(3) | | 0 |
| | 33,900 |
|
| All Other Fees | | 0 |
| | 0 |
|
| Total | | $ | 1,229,284 |
| | $ | 1,261,348 |
|
Nature of Fees | | 2019 Fees | | | 2018 Fees | |
Audit Fees(1) | | $ | 1,403,940 | | | $ | 1,163,145 | |
Audit-Related Fees(2) | | | 90,677 | | | | 99,586 | |
Tax Fees(3) | | | 36,250 | | | | 0 | |
All Other Fees | | | 0 | | | | 0 | |
Total | | | 1,530,867 | | | | 1,262,731 | |
| |
(1) | Audit Fees include fees associated with the annual audit of our internal controls, the annual audit of financial statements, the reviews of our quarterly reports on Form 10-Q and annual report on Form 10-K, and statutory audit procedures.procedures and services that generally only the independent registered accounting firm can provide such as comfort letters, consents and assistance with review of documents to be filed with or furnished to the SEC. |
(2) | |
(2) | Audit-related fees include fees for audits of our employee benefit plans. The 2015 fees represent payments for the audits of our employee benefit plans for the year ended December 31, 2014, which were performed by Ernst & Young LLP. The 2016 fees represent payments for the audits of our employee benefit plans for the year ended December 31, 2015, which were performed by Deloitte & Touche LLP. |
(3) | |
(3) | Tax fees are for analysis that was performed in 2015 on new U.S. tangible property regulationstax consulting and was contracted and started in 2014, prior to the appointment of Deloitte & Touche LLP as our independent registered accounting firm.planning services. |
WHAT ARE LIBBEY'S PRE-APPROVAL POLICIES AND PROCEDURES?
All audit-related, tax and other services were pre-approved by the Audit Committee, which concluded that the provision of these services by Deloitte & Touche LLP was compatible with the maintenance of that firm’s independence in the conduct of its audit functions. The Audit Committee’s policy regarding auditor independence requires pre-approval by the Audit Committee of audit, audit-related and tax services on an annual basis. The policy requires that engagements that the auditors or management anticipates will exceed pre-established thresholds must be separately approved. The policy also provides that the Committee will authorize one of its members to pre-approve certain services. The Committee appointed Ginger Jones, Chair of the Committee, to pre-approve these services.
For our 2019 fiscal year, Deloitte & Touche LLP served as the Company’s independent registered public accounting firm. The Audit Committee has appointed Deloitte & Touche LLP to serve as our independent auditors for our 2020 fiscal year.
Representatives of Deloitte & Touche LLP are expected to attend the Annual Meeting and will have an opportunity to make a statement if they so desire. The representatives will be available to respond to appropriate questions.
Report of the Audit Committee
The following Report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other filing by Libbey under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent Libbey specifically incorporates this Report by reference therein.
The Audit Committee oversees the integrity of our financial statements on behalf of the Board of Directors; the adequacy of our systems of internal controls; our compliance with legal and regulatory requirements; the qualifications and independence of our independent auditors; and the performance of our independent auditors and of our internal audit function.
In fulfilling its oversight responsibilities, the Audit Committee has direct responsibility for, among other things:
confirming the independence of our independent auditors;
appointing, compensating and retaining our independent auditors;
reviewing the scope of the audit services to be provided by our independent auditors, including the adequacy of staffing and compensation;
approving non-audit services;
overseeing management’s relationship with our independent auditors;
overseeing management’s implementation and maintenance of effective systems of internal and disclosure controls;
reviewing our internal audit program; and
together with the Board and its other standing committees, overseeing our enterprise risk management program.
The Audit Committee reviews and discusses with management and the independent auditors all annual and quarterly financial statements before their issuance. The Audit Committee’s discussions with management and the independent auditors include a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.
With respect to the audited financial statements for the year endedyear-ended December 31, 2016,2019, the Audit Committee met both with management and with the independent auditors who are responsible for auditing the financial statements prepared by management and expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States. The Audit Committee also met with each of the independent auditors and the internal auditors without management being present. The Audit Committee discussed with the independent auditors and management the results of the independent auditors’ examinations; their judgments as to the quality, not just the acceptability, of our accounting principles; the adequacy and effectiveness of our accounting and financial internal controls; the reasonableness of significant judgments; the clarity of disclosures in the financial statements; and such other matters as are required to be communicated todiscussed by the Audit Committee under Statement on Auditing Standards Standard No. 61, as amended, as adopted byapplicable requirements of the Public Company Accounting Oversight Board in Rule 3200T.and the SEC. The independent auditors provided the Audit Committee with the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditors'auditors’ communications with the Audit Committee concerning independence, and the Audit Committee has discussed with the independent auditors their independence.
Taking all of these reviews and discussions into account, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2016,2019, for filing with the Securities and Exchange Commission.
|
| | |
| Ginger M. Jones, Chair | |
| Theo Killion | |
| Eileen A. Mallesch | |
| Deborah G. Miller | |
| John C. Orr |
QUESTIONS AND ANSWERS ABOUT
THE MEETING
WHO MAY VOTE?
You may vote if you were a holder of the common stock of Libbey Inc. at the close of business on March 20, 2020.
A complete list of shareholders entitled to vote at the Annual Meeting will be maintained at the Company’s principal executive offices at 300 Madison Avenue, Toledo, Ohio, for a period of at least ten days before the Annual Meeting.
WHAT MAY I VOTE ON, WHAT ARE MY VOTING OPTIONS AND HOW DOES THE BOARD RECOMMEND THAT I VOTE?
Voting Options | | Board Recommendation |
1 | Election of Directors:
Election of William A. Foley, Deborah G. Miller and Steve Nave to serve as Class III directors | | For, Withhold (as to any nominee) or Abstain | | FOR each nominee |
STOCK OWNERSHIP2 | Advisory Say-on-Pay:
RESOLVED, that the stockholders of the Company approve, on an advisory and non-binding basis, the compensation of the Company’s named executives, as disclosed in this proxy statement, including the compensation tables and narrative discussion, pursuant to Item 402 of Regulation S-K | |
STOCK OWNERSHIP
Who are the largest owners of Libbey stock?
The following table shows information with respect to the persons we know to be beneficial owners of more than 5% of our common stock as of December 31, 2016, based solely on filings made by such beneficial owners with the SEC:
|
| | | | | | | | | | |
| Name and Address of Beneficial Owner | | Amount and Nature of Beneficial Ownership | | Percent of Class |
Frontier Capital Management Co., LLC.(1) | | | | |
| 99 Summer Street | | | | |
| Boston, MA 02110 | | 2,164,994 | | 9.9% |
| | | | | |
RBC Global Asset Management (U.S.) Inc.(2) | | | | |
| 50 South Sixth Street, Suite 2350 | | | | |
| Minneapolis, MN 55402 | | 1,889,001 | | 8.6% |
| | | | | |
BlackRock, Inc.(3) | | | | |
| 55 East 52nd Street | | | | |
| New York, NY 10055 | | 1,292,374 | | 5.9% |
| | | | | |
Dimensional Fund Advisors LP(4) | | | | |
| Building One | | | | |
| 6300 Bee Cave Road | | | | |
| Austin, TX 78746 | | 1,228,844 | | 5.6% |
| | | | | |
Boston Partners(5) | | | | |
| One Beacon Street | | | | |
| Boston, MA 02108 | | 1,195,143 | | 5.5% |
| | | | | |
The Vanguard Group(6) | | | | |
| 100 Vanguard Boulevard | | | | |
| Malvern, PA 19355 | | 1,103,770 | | 5.1% |
For, Against or Abstain | | FOR |
3 | Ratification of Independent Auditor:
Ratification of the appointment of Deloitte & Touche LLP as Libbey’s independent auditors for the 2020 fiscal year |
| | For, Against or Abstain | | FOR |
HOW DO I VOTE?
Registered Shareholders
If you are a registered shareholder, you may vote in any of the following ways:
• | |
(1) | Schedule 13G filed withVote by telephone: Call toll-free 1-800-690-6903, 24 hours a day, seven days a week, until 11:59 p.m. EDT, on May 12, 2020 for shares held directly or May 10, 2020 for shares held in a Plan. Make sure you have your proxy card, notice document or email that you received and follow the SEC on behalf of Frontier Capital Management Co., LLC. ("Frontier"), an investment adviser, indicates that, as of December 31, 2016, Frontier was the beneficial owner of 2,164,994 common shares, with sole dispositive power as to all of such shares, shared dispositive power as to none of such shares, sole voting power as to 758,964 common shares, and shared voting power with respect to no common shares.simple instructions provided. |
• | |
(2) | Amendment No. 4Vote over the internet: Go to Schedule 13G filed withwww.proxyvote.com, 24 hours a day, seven days a week, until 11:59 p.m. EDT, on May 12, 2020 for shares held directly or May 10, 2020 for shares held in a Plan. Make sure you have available the SEC on behalf of RBC Global Asset Management (U.S.) Inc. (‘‘RBC’’), an investment adviser, indicatesproxy card, notice document or email that as of December 31, 2016, RBC wasyou received and follow the beneficial owner of 1,889,001 common shares, with sole dispositive power as to none of such shares, shared dispositive power as to all of such shares, sole voting power with respect to no common shares, and shared voting power with respect to 1,650,102 common shares.simple instructions provided. |
| |
(3) | Schedule 13G filed with the SEC on behalf of BlackRock, Inc. ("BlackRock"), a parent holding company, indicates that, as of December 31, 2016, BlackRock was the beneficial owner of 1,292,374 common shares, with sole dispositive power as to all of such shares, shared dispositive power as to none of such shares, sole voting power with respect to 1,241,664 common shares, and shared voting power with respect to no common shares. |
| |
(4) | Amendment No. 1 to Schedule 13G filed with the SEC on behalf of Dimensional Fund Advisors LP ("Dimensional"), an investment adviser, indicates that, as of December 31, 2016, Dimensional was the beneficial owner of 1,228,884 common shares, with sole dispositive power as to all of such shares, shared dispositive power as to none of such shares, sole voting power with respect to 1,170,018 common shares, and shared voting power with respect to no common shares. |
| |
(5) | Schedule 13G filed with the SEC on behalf of Boston Partners ("Boston"), an investment adviser, indicates that, as of December 31, 2016, Boston was the beneficial owner of 1,195,143 common shares, with sole dispositive power as to all of such shares, shared dispositive power as to none of such shares, sole voting power with respect to 704,280 common shares, and shared voting power with respect to no common shares. |
| |
(6) | Schedule 13G filed with the SEC on behalf of The Vanguard Group ("Vanguard"), an investment adviser, indicates that, as of December 31, 2016, Vanguard was the beneficial owner of 1,103,770 common shares, with sole dispositive power as to 1,075,574 of such shares, shared dispositive power as to 28,196 of such shares, sole voting power with respect to 27,994 common shares and shared voting power with respect to 1,700 common shares. |
Vote by mail: If you received printed copies of the proxy materials by mail, you may mark, date and sign the enclosed proxy card and return it in the postage-paid envelope that was provided to you. Sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), indicate your name and title or capacity.
Vote in person at the annual meeting: Bring the proxy card, notice document or email you received and bring other proof of identification and request a ballot at the meeting.
Shares held jointly by two or more registered shareholders may be voted by any joint owner unless we receive written notice from another joint owner denying the authority of the first joint owner to vote those shares.
Shares Held in Street Name
If you hold your shares in street name (you hold your shares through a broker or other nominee) you will receive from your broker a notice regarding availability of proxy materials that will tell you how to access our proxy materials and provide voting instructions to your broker over the internet. It also will tell you how to request a paper or e-mail copy of our proxy materials. If you hold your shares in street name and do not provide voting instructions to your broker, your shares will not be voted on any proposals on which your broker does not have discretionary authority to vote, including Proposals 1 and 2.
Shares Held Through 401(k) Plan
If you participate in one of our 401(k) plans, and if you have investments in the Libbey Inc. stock do our directorsfund and officers own?
Stock Ownership / Retention Guidelines
Non-Management Director Retention Guidelines. In late 2015, we transitioned our non-management director stock ownership guidelines to stock retention guidelineshave an e-mail address provided by Libbey for business purposes, you will receive an e-mail message at your Libbey-provided e-mail address containing instructions that you must follow in order for shares in your account to provide greater parity between long-time non-management directorsbe voted. If you participate in one of our 401(k) plans, have investments in the Libbey Inc. stock fund and our newer non-management directors, to further align our non-management directors' interests with those of shareholders, and to further promote our commitment to sound corporate governance. Under our Director Retention Guidelines, each non-management director is generally required to retain, until the first to occur of his or her death or retirementdo not have an e-mail address provided by Libbey for business purposes, you will receive instructions from the Board, 100%trustee of the applicable 401(k) plan that you must follow in order for shares in your account to be voted.MAY I CHANGE MY VOTE?
If you are a shareholder of record, you may, at any time before your shares are voted at the annual meeting, change your vote or revoke your proxy by sending us a proxy card dated later than your last vote, notifying the Secretary of Libbey in writing, or voting at the meeting. If you hold your shares in street name through a broker or other nominee, you should contact your broker or nominee to determine how to change your vote or revoke your proxy.
HOW MANY SHARES OF LIBBEY COMMON STOCK ARE OUTSTANDING?
At the close of business on March 20, 2020, there were 22,577,358 shares of Libbey common stock issuedoutstanding. Each share of common stock is entitled to himone vote.
HOW BIG A VOTE DO THE PROPOSALS NEED IN ORDER TO BE ADOPTED?
Provided that a quorum is present either in person or herby proxy at the Annual Meeting:
Proposal 1: Since the election of directors is uncontested, each director must receive the vote of the majority of the votes cast with respect to such director’s election.
Proposals 2-3: The affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the dateproposal.
WHAT CONSTITUTES A QUORUM?
Under our By-laws, the holders of each annuala majority of the total shares issued and outstanding, whether present in person or represented by proxy, will constitute a quorum, permitting business to be transacted at the meeting.
HOW WILL VOTES BE COUNTED?
Votes cast in person or by proxy will be tabulated by the inspector of elections and will determine whether a quorum is present. Abstentions will be counted as shares that are present and entitled to vote for purposes of determining whether a quorum is present. For purposes of determining whether shareholders meetinghave approved a matter, abstentions are not treated as votes cast “for,” “against” or “withheld,” and all other shareswill have no effect on the outcome of Libbey common stock that he or she ownedany of Proposals 1 – 3. Additionally, broker non-votes will not be considered as of November 1, 2015 or otherwise may acquire after November 1, 2015. The Director Retention Guidelines do not applypresent and entitled to cash or stock compensation that was deferred by a non-management director, before November 1, 2015, pursuantvote with respect to any of our deferred compensation plans covering non-management directors if:
Pursuant to the applicable deferral election in effect immediately before NovemberProposals 1 2015, the deferred compensation is to be distributed on a date that may precede the first to occur of the non-management director's death or retirement from the Board; and
In the case of deferred cash compensation, the cash was deemed invested in "phantom stock" or the Libbey– 2. The common stock fund pursuantoutstanding on the record date held by the trustee under Libbey’s 401(k) plans will be voted by the trustee in accordance with instructions from participants in those plans. Votes will not be cast with respect to the applicable deferred compensation plan.
As of March 20, 2017, all of our existing non-management directors are in compliance with the Director Retention Guidelines.
Executive Stock Ownership / Retention Guidelines. In October 2007, we established guidelines pursuant to which our executive officers also are required to achieve ownership of meaningful amounts of equity in Libbey. We refer to the guidelines, as originally established, as the Original Guidelines.
Under the Original Guidelines, each executive officer was required to own a specified number of shares of Libbey common stock equal to a multiple of his or her base salary in effect on January 1, 2008 or, if later, the date on which the executive officer became subject to the guidelines. Ms. Kovach is the only executive officer who remains subject to the Original Guidelines. As of December 31, 2016, she was in compliance with the Original Guidelines.
In late 2012, we transitioned our executive stock ownership guidelines to stock retention guidelines to provide greater parity between long-time executive officers and our newer executive officers and to further align our executives’ interests with those of shareholders. We refer to the new stock retention guidelines as the Executive Retention Guidelines.
Under the Executive Retention Guidelines, each executive is generally required to retain, until his or her separation from service:
50% of the net after-tax shares underlying each grant of RSUs made after January 1, 2013 that subsequently vests; and
50% of the net after-tax shares underlying NQSOs granted after January 1, 2013 that the executive subsequently exercises.
Ms. Kovach is exempt from the Executive Retention Guidelines until January 1, 2018. Until then, she may sell or otherwise dispose of our stock, but only to the extent of any shares in
excessthe plans for which no instructions are received.
Executives nearing retirement
WHAT ARE BROKER NON-VOTES?
If you hold your shares in street name through a broker or other nominee, your broker or nominee may not be permitted to vote your shares with respect to certain matters, including Proposals 1 – 2, unless you give your broker or nominee specific instructions as to how to vote. Non-voted shares on non-routine matters are released from our guidelines on the date the Board is notified of the planned retirement, or one year before the contemplated retirement date, whichever is later.
As of December 31, 2016, Messrs. Foley and Minarro and Ms. Cerioli werecalled broker non-votes. They will not be counted in compliance with the Executive Retention Guidelines.
Beneficial Ownership Table
The following table shows, as of March 20, 2017,determining the number of shares
necessary for approval but will be counted in determining whether there is a quorum.HOW WILL VOTING BE CONDUCTED ON OTHER MATTERS RAISED AT THE MEETING?
The proxy committee will vote on other matters that properly come before the meeting in accordance with the Board’s recommendation or, if no recommendation is given, in the discretion of the proxy committee.
WHEN MUST SHAREHOLDER PROPOSALS BE SUBMITTED FOR THE 2021 ANNUAL MEETING?
A shareholder desiring to submit a proposal for inclusion in our common stock and percentage of all issued and outstanding shares ofProxy Statement for our common stock that are beneficially owned by our directors, the named executives and our directors and executive officers as a group. With respect to those named executives were no longer employed by the Company as of March 20, 2017, the information included in this table is accurate to the best of our knowledge. Our address, as set forth on the Notice of2021 Annual Meeting must deliver the proposal so that we receive it no later than December 2, 2020. Any proposal submitted outside the processes of Shareholders, isRule 14a-8 under the address of each director and named executive set forth below. The shares owned by the named executives set forth below include the shares held in their accounts in our 401(k) plan. An asterisk indicates ownership of less than one percent of the outstanding stock.
|
| | | | | | |
| Name of Beneficial Owner | | Amount and Nature of Beneficial Ownership | | Percent of Class |
Sherry Buck(1)(2)(4) | | 69,538 |
| | | * |
Anunciata (Nucci) Cerioli(1)(2) | | 18,116 |
| | | * |
Carlos V. Duno(3) | | 37,648 |
| | | * |
William A. Foley(1)(2)(3) | | 89,376 |
| | | * |
Ginger M. Jones(3) | | 10,599 |
| | | * |
Theo Killion(3) | | 6,381 |
| | | * |
Susan A. Kovach(1)(2) | | 50,788 |
| | | * |
Eileen A. Mallesch(3) | | 0 |
| | | * |
Deborah G. Miller(3) | | 25,492 |
| | | * |
Salvador Miñarro Villalobos(1)(2) | | 86,596 |
| | | * |
Carol B. Moerdyk(3) | | 38,095 |
| | | * |
John C. Orr(3) | | 29,423 |
| | | * |
Stephanie A. Streeter(1)(2)(4) | | 109,350 |
| | | * |
James H. White(1)(2)(4) | | 10,413 |
| | | * |
Directors and Executive Officers as a Group(1)(2)(3)(4) | | 600,344 |
| | | 2.74% |
| |
(1) | Does not include shares of our common stock that have vested but are deferred under our Executive Deferred Compensation Plan, which we refer to as our EDCP. As of March 20, 2017, each of our named executives, and all executive officers as a group, had the following number of shares of our common stock that are vested but deferred under our EDCP: |
|
| | | |
Named Executive | | Number of Deferred Shares |
S. Buck | | 5,355 |
|
A. Cerioli | | 0 |
|
W. Foley | | 0 |
|
S. Kovach | | 16,670 |
|
S. Miñarro | | 0 |
|
S. Streeter | | 0 |
|
J. White | | 0 |
|
All executive officers as a group | | 22,025 |
|
| |
(2) | Includes the following number of NQSOs that have been granted to our named executives and all executive officers as a group and that currently are exercisable or will be exercisable on or before May 19, 2017: |
|
| | | |
Named Executive | | Number of Outstanding Stock Options Exercisable Within 60 Days |
S. Buck | | 49,958 |
|
A. Cerioli | | 11,527 |
|
W. Foley | | 31,650 |
|
S. Kovach | | 30,014 |
|
S. Miñarro | | 72,194 |
|
S. Streeter | | 0 |
|
J. White | | 0 |
|
All executive officers as a group | | 210,693 |
|
| |
(3) | Includes the following number of shares of our common stock that are deferred by non-management directors under our 2009 Director Deferred Compensation Plan, which we refer to as our Director DCP, and that are payable as shares of our common stock: |
|
| | | |
Name of Director | | Number of
Deferred Shares
|
C. Duno | | 24,522 |
|
W. Foley(a)
| | 0 |
|
G. Jones | | 0 |
|
T. Killion | | 0 |
|
E. Mallesch | | 0 |
|
D. Miller | | 0 |
|
C. Moerdyk | | 0 |
|
J. Orr | | 0 |
|
All non-management directors as a group | | 24,522 |
|
Does not include the following number of shares of phantom stock that are held by non-management directors pursuant to our deferred compensation plans for outside directors and that are payable in cash:
|
| | | |
Name of Director | | Number of
Phantom Shares
|
C. Duno | | 0 |
|
W. Foley(a)
| | 12,348 |
|
G. Jones | | 0 |
|
T. Killion | | 0 |
|
E. Mallesch | | 0 |
|
D. Miller | | 2,298 |
|
C. Moerdyk | | 19,347 |
|
J. Orr | | 0 |
|
All non-management directors as a group | | 33,993 |
|
(a) Mr. Foley was a non-management director from 1994 until he assumed the role of CEO on January 12, 2016.
| |
(4) | Based on last known information as of date of separation from service. For Ms. Buck, that date was December 31, 2016. For Ms. Streeter, that date was January 11, 2016. For Mr. White, that date was March 31, 2016. |
In addition to outstanding shares of common stock that our named executives beneficially owned as of March 20, 2017 or, for those no longer employed by the Company as of that date, as of their last date of employment, the named executives and all executive officers as a group have received the following grants of RSUs that have not yet vested:
|
| | | |
Named Executive | | Number of
Unvested RSUs(1)
|
S. Buck | | 0 |
|
A. Cerioli | | 16,715 |
|
W. Foley | | 88,670 |
|
S. Kovach | | 14,709 |
|
S. Miñarro | | 24,990 |
|
S. Streeter | | 0 |
|
J. White | | 0 |
|
All executive officers as a group | | 166,338 |
|
| |
(1) | Of these amounts, a total of 2,855 RSUs with four-year vesting were awarded on February 24, 2014; a total of 4,178 RSUs with four-year vesting were awarded on December 1, 2014; a total of 12,956 RSUs with four-year vesting were awarded on February 16, 2015; a total of 1,674 RSUs with four-year vesting were awarded on May 18, 2015; a total of 1,875 RSUs with four-year vesting were awarded on June 11, 2015; a total of 4,125 RSUs with four-year vesting were awarded on December 11, 2015; a total of 72,457 RSUs with four-year vesting were awarded on February 8, |
2016; a total of 1,500 RSUs with four-year vesting were awarded on August 18, 2016; and a total of 64,718 RSUs with four-year vesting were awarded on February 6, 2017. One share of our common stockExchange Act will be issuedconsidered untimely if submitted after February 15, 2021. A shareholder desiring to nominate one or more directors for each vested RSU. Dividends do not accrue on RSUs until they vest. For further information, see ‘‘Compensation-Related Matters — Compensation Discussionelection at our 2021 Annual Meeting must deliver the written nomination no earlier than January 13, 2021, and Analysis — In what forms doesno later than February 12, 2021. All such proposals must be addressed to Jennifer M. Jaffee, Senior Vice President, General Counsel and Secretary, Libbey deliver pay to its executives, and what purposes do the various formsInc., 300 Madison Avenue, P.O. Box 10060, Toledo, Ohio 43699-0060.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on our review of filings with the Securities and Exchange Commission and written representations that no other reports were required to be filed by the relevant persons, we believe that, during the fiscal year ended December 31, 2016, all officers, directors and greater-than-10% beneficial owners complied, on a timely basis, with the filing requirements applicable to them pursuant to Section 16 of the Exchange Act.
Certain Legal Proceedings
We are involved in various routine legal proceedings arising in the ordinary course of our business. We are a named potentially responsible party with respect to a landfill in West Covina, California, and with respect to the Lower Ley Creek and Upper Ley Creek sub-sites of the Onondaga (New York) Lake Superfund Site. For a detailed discussion of these environmental contingencies, see note 17, Contingencies, to the Consolidated Financial Statements included in Part II, Item 8 of the Company's Annual Report on Form 10-K for the year-ended December 31, 2019. In addition, the Company and its subsidiaries are subject to examination by various countries' tax authorities. These examinations may lead to proposed or assessed adjustments to our taxes. For a detailed discussion on tax contingencies, see note 8,7, Income Taxes, to the Consolidated Financial Statements included in Part II, Item 8 of the Company's Annual Report on Form 10-K for the year endedyear-ended December 31, 2016.
As of the date of this proxy statement, neither the Board nor management knows of any other business that will be presented for consideration at the Annual Meeting. However, if other proper matters are presented at the meeting, it is the intention of the proxy committee intends to take such action as shall be in accordance with their judgment on such matters. All other matters to be voted upon by shareholders will require a majority vote of common stock represented in person or by proxy.
The Company has retained Georgeson Shareholder to solicitassist in the submissionsolicitation of proxies authorizingproxies. We estimate the votingcost of shares in accordance with the Board’s recommendations. The Company has agreed to pay a fee of $8,000,Georgeson's services will be approximately $8,500, plus expenses for out-of-pocket costs, for Georgeson’s services.costs. Certain of the Company’s officers and employees may solicit the submission of proxies authorizing the voting of shares in accordance with the Board of Directors’ recommendations, but no additional remuneration will be paid by the Company for the solicitation of those proxies. Such solicitations may be made by personal interview, telephone or telegram.electronic communication. Arrangements have been made with Corporate Investor Communications, Inc. to perform a broker-nominee search. Arrangements also have been made with brokerage firms and others for the forwarding of proxy solicitation materials to the beneficial owners of common stock, and the Company will reimburse them for reasonable out-of-pocket expenses incurred in connection therewith. The Company will pay the cost of preparing and mailing this proxy statement and other costs of the proxy solicitation made by the Company’s Board of Directors.
We are pleased to take advantage of SEC rules that permit issuers to furnish their proxy materials to shareholders on the internet. Shareholders may request a paper copy of this proxy statement and the 20162019 Annual Report by:
Internet | www.proxyvote.com |
Telephone | 1-800-579-1639 |
InternetEmail | www.proxyvote.com |
Telephone | 1-800-579-1639 |
Email | sendmaterial@proxyvote.com |
A copy of the Company’s Annual Report on Form 10-K for the year endedyear-ended December 31, 2016,2019, including the consolidated financial statements, as filed with the Securities and Exchange Commission,SEC, may be obtained without charge by sending a written request to Libbey Inc., Attention: Investor Relations, 300 Madison Avenue, P.O. Box 10060, Toledo, Ohio 43699-0060.
By Order of the Board of Directors,
SUSAN A. KOVACH,
Jennifer M. Jaffee
Secretary
Toledo, Ohio
April 1, 2020
April 4, 2017
APPENDIX
APPENDIX A
Calculation of Adjusted EBITDA, Adjusted Cash Earnings and Decrease in Inventories
Used for Incentive Compensation Purposes
(dollars in thousands)
|
| | | | | | | | |
| | | Year ended December 31, 2016 |
| | | As Reported | | For LTIP Incentive Calculations |
| Revenue | | | | |
| Reported net sales | | $ | 793,420 |
| | $ | 793,420 |
|
| | | | | |
| Adjusted EBITDA | | | | |
| Reported net income | | $ | 10,073 |
| | $ | 10,073 |
|
| Add: Interest expense | | 20,888 |
| | 20,888 |
|
| Add: Provision for income taxes | | 17,711 |
| | 17,711 |
|
| Earnings before interest and income taxes (EBIT) | | 48,672 |
| | 48,672 |
|
| Add: Depreciation and amortization | | 48,486 |
| | 48,486 |
|
| Earnings before interest, taxes, depreciation and amortization (EBITDA) | | 97,158 |
| | 97,158 |
|
| Add: Special items before interest and taxes | | | | |
| Pension settlement | | 168 |
| | 168 |
|
| Product portfolio optimization | | 5,693 |
| | 5,693 |
|
| Work Stoppage | | 4,162 |
| | 4,162 |
|
| Executive terminations | | 4,460 |
| | 4,460 |
|
| Derivatives | | (1,860 | ) | | (1,860 | ) |
| Adjusted EBITDA | | $ | 109,781 |
| | $ | 109,781 |
|
| | | | | |
| Adjusted EBITDA margin | | | | |
| Adjusted EBITDA | | $ | 109,781 |
| | $ | 109,781 |
|
| Net sales | | $ | 793,420 |
| | $ | 793,420 |
|
| Adjusted EBITDA margin | | 13.8 | % | | 13.8 | % |
| | | | |
| Debt net of cash to Adjusted EBITDA ratio | | | | |
| Debt | | $ | 407,840 |
| | $ | 407,840 |
|
| Plus: Unamortized discount and finance fees | | 4,480 |
| | 4,480 |
|
| Gross debt | | 412,320 |
| | 412,320 |
|
| Cash | | 61,011 |
| | 61,011 |
|
| Less: Share repurchases below budgeted amount | | — |
| | 8,000 |
|
| Debt net of Cash | | $ | 351,309 |
| | $ | 359,309 |
|
| Adjusted EBITDA | | $ | 109,781 |
| | $ | 109,781 |
|
| Debt net of cash to adjusted EBITDA ratio | | 3.2 |
| | 3.3 |
|
| | | | | |
|
| | | | | | | | |
| | | Year ended December 31, 2016 |
| | | As Reported | | For LTIP Incentive Calculations |
| Return on Invested Capital (ROIC) | | | | |
| Defined as: After tax adjusted income from operations (using a 30% tax rate) over ending working capital (accounts receivable-net plus inventory-net, less accounts payable) plus net book value of property, plant and equipment | | | | |
| Income from operations | | $ | 45,310 |
| | $ | 45,310 |
|
| Add: Adjustments | | | | |
| Product portfolio optimization charge | | 5,693 |
| | 5,693 |
|
| Work stoppage | | 4,162 |
| | 4,162 |
|
| Executive terminations | | 4,460 |
| | 3,554 |
|
| Pension settlement charges | | 168 |
| | — |
|
| Mexico tax assessment | | — |
| | 1,085 |
|
| Adjusted income from operations | | 59,793 |
| | 59,804 |
|
| Add: Impact of currency to reflect results at budgeted exchange rates | | — |
| | 4,574 |
|
| Adjusted income from operations at budgeted exchange rates | | 59,793 |
| | 64,378 |
|
| Factor to apply for taxes | | 70 | % | | 70 | % |
| After tax adjusted income from operations at budgeted exchange rates | | $ | 41,855 |
| | $ | 45,065 |
|
| | | | | |
| Invested capital | | | | |
| Property, plant and equipment, net | | $ | 256,392 |
| | $ | 256,392 |
|
| Add: Impact of currency to reflect results at budgeted exchange rates | | — |
| | 4,174 |
|
| Property, plant and equipment, net at budgeted exchange rates | | 256,392 |
| | 260,566 |
|
| Accounts receivable - net | | 85,113 |
| | 85,113 |
|
| Inventories - net | | 170,009 |
| | 170,009 |
|
| Less: Accounts payable | | 71,582 |
| | 71,582 |
|
| Trade Working Capital | | 183,540 |
| | 183,540 |
|
| Add: Adjustments | | | | |
| Inventory impact of work stoppage at Toledo, Ohio plant | | — |
| | 2,694 |
|
| Inventory impact of product portfolio optimization | | — |
| | 5,693 |
|
| Adjusted trade working capital | | 183,540 |
| | 191,927 |
|
| Add: Impact of currency | | — |
| | 4,616 |
|
| Adjusted trade working capital at budgeted exchange rates | | 183,540 |
| | 196,543 |
|
| Total adjusted invested capital at budgeted exchange rates | | $ | 439,932 |
| | $ | 457,109 |
|
| | | | | |
| ROIC | | 9.5 | % | | 9.9 | % |
| | | | | |
Year-ended December 31, 2019 |
| |
APPENDIX BAdjusted EBITDA(1) | |
APPENDIX B
(dollars in thousands)
|
| | | | | | | | |
| | | Year ended December 31, 2016 |
| | | As Reported | | For SMIP Incentive Calculations |
| Revenue | | | | |
| Reported net sales | | $ | 793,420 |
| | $ | 793,420 |
|
| Add: Sales impact of work stoppage at Toledo, Ohio plant | | — |
| | 7,245 |
|
| Adjusted net sales | | 793,420 |
| | 800,665 |
|
| Add: Impact of currency to reflect results at budgeted exchange rates | | — |
| | 6,263 |
|
| Adjusted net sales at budgeted exchange rates | | $ | 793,420 |
| | $ | 806,928 |
|
| | | | | |
| | | | | |
| Adjusted EBITDA | | | | |
| Reported net income | | $ | 10,073 |
| | $ | 10,073 |
|
| Add: Interest expense | | 20,888 |
| | 20,888 |
|
| Add: Provision for income taxes | | 17,711 |
| | 17,711 |
|
| Earnings before interest and income taxes (EBIT) | | 48,672 |
| | 48,672 |
|
| Add: Depreciation and amortization | | 48,486 |
| | 48,486 |
|
| Earnings before interest, taxes, depreciation and amortization (EBITDA) | | 97,158 |
| | 97,158 |
|
| Add: Special items before interest and taxes | | | | |
| Pension settlement | | 168 |
| | — |
|
| Product portfolio optimization | | 5,693 |
| | 5,693 |
|
| Work Stoppage | | 4,162 |
| | 4,162 |
|
| Executive terminations | | 4,460 |
| | 3,554 |
|
| Derivatives | | (1,860 | ) | | (1,860 | ) |
| 2010 Mexican tax assessment | | — |
| | 1,085 |
|
| Adjusted EBITDA | | 109,781 |
| | 109,792 |
|
| Add: Impact of currency to reflect results at budgeted exchange rates | | — |
| | 4,609 |
|
| Adjusted EBITDA at budgeted exchange rates | | 109,781 |
| | 114,401 |
|
| | | | | |
| | | | | |
| Change in Trade Working Capital | | | | |
| Change in accounts receivable - net | | $ | 9,266 |
| | $ | 9,266 |
|
| Change in inventories - net | | 8,018 |
| | 8,018 |
|
| Change in accounts payable | | 22 |
| | 22 |
|
| Change in trade working capital | | 17,306 |
| | 17,306 |
|
| Add: Adjustments | | | | |
| Inventory impact of work stoppage at Toledo, Ohio plant | | — |
| | (2,694 | ) |
| Inventory impact of product portfolio optimization | | — |
| | (5,693 | ) |
| Adjusted change in trade working capital | | 17,306 |
| | 8,919 |
|
| Add: Impact of currency | | — |
| | 4,616 |
|
| Adjusted change in trade working capital at budgeted exchange rates | | $ | 17,306 |
| | $ | 4,303 |
|
| | | | | |
| Adjusted Cash Earnings | | | | |
| Adjusted EBITDA at budgeted exchange rates | | $ | 109,781 |
| | $ | 114,401 |
|
| Adjusted change in trade working capital at budgeted exchange rates | | 17,306 |
| | 4,303 |
|
| Adjusted cash earnings at budgeted exchange rates | | $ | 127,087 |
| | $ | 118,704 |
|
| | | | | |
|
| | | | |
| | | VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
Electronic Delivery of Future PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
| |
| LIBBEY INC.
P.O. BOX 10060
TOLEDO, OH 43699-0060
| | |
|
| | |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:Reported net income (loss) (U.S. GAAP) | | KEEP THIS PORTION FOR YOUR RECORDS$ | (69,019) |
Add: Interest expense | | | DETACH AND RETURN THIS PORTION ONLY22,510 |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.Add: Provision for income taxes |
| | 8,753 |
Add: Depreciation and amortization | | | 39,046 |
Add: Special items before interest and taxes | | | |
Asset impairments | | | 65,152 |
Organizational realignment | | | 3,341 |
Debt refinancing fees | | | 525 |
Reported Adjusted EBITDA (non-GAAP) | | | 70,308 |
Impact of currency to reflect results at budgeted exchange rates | | | (149) |
Adjusted EBITDA at budgeted exchange rates (non-GAAP) | | $ | 70,159 |
| | | | |
Decrease in Trade Working Capital(2) | | | |
Decrease in accounts receivable - net | | $ | 2,670 |
Decrease in inventories - net | | | 17,306 |
Increase in accounts payable | | | 4,426 |
Decrease in Trade Working Capital (non-GAAP) | | | 24,402 |
Decrease due to currency | | | (673) |
Decrease in Trade Working Capital at budgeted exchange rates (non-GAAP) | | $ | 23,729 |
| | | | |
Adjusted Cash Earnings | | | |
| For
All
| Withhold
All
| For All
Except
Adjusted EBITDA at budgeted exchange rates (non-GAAP) | | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.$ | 70,159 |
Decrease in Trade Working Capital at budgeted exchange rates (non-GAAP) | | | 23,729 |
Adjustment to Cash Earnings to reduce actual SMIP payout to target(3) | | | (2,388) |
Adjusted Cash Earnings at budgeted exchange rates (non-GAAP) | | $ | 91,500 |
| | | | |
| | The Board of Directors recommends you vote FOR the following Class III Directors: | | | | Decrease in Inventories – net | | | |
Inventories – net balance at the beginning of the year | | 1.$ | Election192,103 |
Inventories – net balance at the end of Directors | | o | o | othe year | | | 174,797 |
Decrease in inventories – net | | | 17,306 |
Decrease due to currency | | | 598 |
Decrease in inventories – net at constant currency exchange rates (non-GAAP) | | $ | 16,708 |
(1) | We believe that Adjusted EBITDA, a non-GAAP financial measure, is a useful metric for evaluating our financial performance, as it is a measure that we use internally to assess our performance. For certain limitations and a reconciliation from net income (loss) to Adjusted EBITDA, see the "Non-GAAP Measures" and "Reconciliation of Net Income (Loss) to Adjusted EBITDA" sections included in Part II, Item 6. Selected Financial Data, in our 2019 Annual Report on Form 10-K. |
(2) | Trade Working Capital, a non-GAAP financial measure, is defined as net accounts receivable plus net inventories less accounts payable. We believe that Trade Working Capital is important supplemental information for investors in evaluating liquidity in that it provides insight into the availability of net current resources to fund our ongoing operations. Trade Working Capital is a measure used by management in internal evaluations of cash availability and operational performance. |
| | | | Nominees | | | | | | | | | | | | | |
| | 01 | William A. Foley 02 Deborah G. Miller 03 Steve Nave | | | | | | | | |
| | | | | | | | | NOTE: The Directors up for election are Class III directors. At the meeting shareholders will transact such other business as properly may come before the meeting.
| | | | | |
| | The Board of Directors recommends you vote FOR the following proposal: | | For | Against | Abstain | | | | | | |
| | 2.
| Approve, on an advisoryTrade Working Capital is used in conjunction with and non-binding basis, the 2016 compensation of the Company’s named executives. | | o | o | o | | | | | | |
| | | | | | | | | | | | | | | | |
| | The Board of Directors recommends you vote 1 YEAR on the following proposal: | 1 year | 2 years | 3 years | Abstain | | | | | | | | | |
| | 3. | Recommend, on an advisory and non-binding basis, the frequency of future advisory votes on executive compensation. | o | o | o | o | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | The Board of Directors recommends you vote FOR the following proposal: | | For | Against | Abstain | | | | | | | | | |
| | 4.
| Ratification of the appointment of Deloitte & Touche LLP as Libbey’s independent auditors for the 2017 fiscal year. | | o | o | o | | | | | | | | | |
| | | | | | | |
| | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | Signature [PLEASE SIGN WITHIN BOX] | Date | | | | Signature (Joint Owners) | | Date | | | | |
|
| | | |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report and Notice & Proxy Statement are available at www.proxyvote.com.
|
| | |
| | |
| LIBBEY INC.
Annual Meeting of Shareholders
May 17, 2017 2:00 PM
This proxy is solicited by the Board of Directors
The shareholder(s) hereby appoint(s) Veronica (Ronni) L. Smith and Susan A. Kovach, or either of them, as proxies, each with the poweraddition to appoint her substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of LIBBEY INC. that the shareholder(s) is/are entitled to vote at the Annual Meeting of shareholders to be held at 02:00 PM, EDT on May 17, 2017, at the Libbey Corporate Showroom, 335 N. St. Clair Street, Toledo, Ohio, 43604, and any adjournment or postponement thereof.
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be votedresults presented in accordance with the BoardU.S. GAAP. Trade Working Capital is neither intended to represent nor be an alternative to any measure of Directors’ recommendations.
| |
| Continuedliquidity and operational performance recorded under U.S. GAAP. Trade Working Capital may not be comparable to be signed on reverse side | similarly titled measures reported by other companies. |
(3) | Adjustment represents the favorable impact to Adjusted Cash Earnings of reducing the Senior Management Incentive Plan payout from 136% of target to 100% of target. |
Adjusted Income from Operations, a non-GAAP financial measure, is defined as net income (loss) plus interest expense, provision for income taxes, other (income) expense, and special items, when applicable, that Libbey believes are not reflective of our core operating performance. For a reconciliation of Adjusted Income from Operations to the most directly comparable U.S. GAAP measure, see Libbey's 8-K press release dated February 25, 2020.
Free Cash Flow, a non-GAAP financial measure, is the sum of net cash provided by operating activities and net cash used in investing activities. The most directly comparable U.S. GAAP measure is net cash provided by (used in) operating activities. For a reconciliation of Free Cash Flow to the most directly comparable U.S. GAAP measure, see Libbey's 8-K press release dated February 25, 2020.
Return on Invested Capital (ROIC), a non-GAAP financial measure, is defined as after-tax adjusted income from operations (using a 35% tax rate) over ending Trade Working Capital (accounts receivable-net plus inventory-net, less accounts payable) plus net book value of property, plant and equipment. For purposes of the 2017 LTIP (2017-2019 performance period), the calculation of ROIC for the 2017 plan year is included in Appendix A of our proxy statement filed on March 29, 2018.
