The Governance Committee and the Board annually assess the outside affiliations of each director to determine if these affiliations could cause a potential conflict of interest or interfere with the director’s independence. TheOur Corporate Governance Guidelines (the “Guidelines”) set forth the categorical standards of independence for the Board. To be considered “independent” for purposes of the director qualification standards:
The Board has four standing committees: the Audit Committee, the Compensation Committee, the Governance Committee and the Environment, Health and Safety Committee (“EHS Committee”). An additional committee, the Executive Committee, meets only as needed. Each standing committee member satisfies both the NYSE’s and our definitions of an independent director, and the Board has determined that all Audit Committee members are “financially literate” under NYSE listing standards and qualify as “audit committee financial experts” within the meaning of the rules and regulations of the SEC.
is provided below. In addition to the Executive Committee, Mr. O'Brien is an ex officio member of all other standing committees. See the committee charters on our website at www.muellerwaterproducts.com for more detail.
CURRENT MEMBERS
|
| | | |
| Current Members
Thomas (Chair) Franklin Hansen | Ortiz | •Reviews policies and procedures related to compliance with laws, regulations and rules pertaining to the environment, health and safety. •Monitors compliance with health, safety and environmental policies, programs and practices. •Encourages activities and initiatives that demonstrate sound environmental stewardship. •Reviews the scope of internal and independent environmental, health and safety audits and assessments. •Reviews results of internal compliance reviews and remediation projects. •Supports the Board’s responsibilities relating to sustainability and corporate social responsibility. •Reviews the Company’s environmental, health and safety performance and related initiatives. •Oversees matters related to the environmental, materials sustainability and employee health and safety programs. |
| 54 meetings in fiscal 2018 | 2020 |
Executive Committee
PROXY STATEMENT FOR 2021 ANNUAL MEETING 25
|
| | | | | | | | | | | | | | | | | | | |
| Nominating and Corporate Governance Committee |
CURRENT MEMBERS Rethore (Chair) Kolb Thomas Tokarz Van Arsdell | Current Members•Establishes criteria for and qualifications of persons suitable for nomination as directors and reports recommendations to Board.
•Selects and recommends director candidates to be considered for election. •Develops and annually reviews the Governance Guidelines. •Oversees the annual Board and committee evaluation process. •Makes recommendations to the Board related to committee structure and membership. •Advises the Board regarding corporate governance matters. •Monitors the orientation and continuing education programs for directors. •Oversees the development, updating and production of the Company's annual ESG Report, reviews and makes recommendations to the Board regarding our ESG practices and reviews applicable Committee ESG metrics. |
| 6 meetings in fiscal 2020 |
| | | | | | | | | | | | | | | | | | | | |
| Executive Committee |
CURRENT MEMBERS Hall (Chair) Kolb O’Brien Rethore Tokarz | | •Exercises interim powers delegated to it when a matter requires expeditious Board action or when it would not be practical for the full Board to meet. |
|
| 02 meetings in fiscal 2018 | | 2020 |
Board Practices, Processes and Policies
History of Commitment to Good Governance Practices
The Board has always followed a principled framework in carrying out its oversight responsibilities related to the business of the Company. The Board is committed to good corporate governance practices and a sound governance structure that promote the interests of all stockholders. While the underlying guiding principles of the Board remain consistent, the implementation of these principles continues to be flexible and evolves in response to ever-changing business, legal and social environments.
Director Attendance
As discussed above, the Board held 10 meetings in fiscal 2018 and each director attended at least 95% of the total number of meetings of the Board and its committees of which he or she was a member in fiscal 2018. Each current director also attended the 2018 | | | | | |
| The Board held 9 meetings in fiscal 2020 and each director attended at least 94% of the total number of meetings of the Board and its committees of which he or she was a member in fiscal 2020. Although the Company does not have a formal policy requiring attendance at annual meetings, directors are encouraged to attend and each director also attended the 2020 Annual Meeting of Stockholders. | Fiscal 2020 Board/Committee meeting attendance |
|
Executive Sessions
Our non-employee directors meet at least quarterly in executive sessions at which only non-employee directors are present. Our Non-Executive Chairman presides at these sessions.
Director, Board and Committee Evaluations
Each year, the Guidelines require the Board to conduct an evaluation of its own performance. Additionally, our committee charters require each of our committees to conduct an annual performance evaluation. The Governance Committee is responsible for overseeing the annual self-assessmentassessment process on behalf of the Board and its committees. Throughout the self-assessmentevaluation process, the Governance Committee solicits comments from directors, via self and peer evaluations and committee and Board assessments, to ensure that the Board andas a whole, its committees and each director are functioning effectively. The Governance Committee reviews comments from each director to assess directors’ contributions to the Board, evaluateevaluates the Board’s contributions to the Company and identifyidentifies areas for improvement in the Board’s performance. The Governance Committee submitsdiscusses its findings towith the Board in an annual report discussingannually regarding ways in which the Board and its committees can improve their key functions.
26 MUELLER WATER PRODUCTS, INC.
Board Risk Oversight
Director Orientation and Continuing Education
The Company’s Guidelines establish recommendations for director onboarding and continued education. All new members of the Board maintains oversight responsibility forparticipate in the Company’s new director orientation program, including corporate document and policy reviews, management meetings and site visits. Additionally, directors participate in an in-depth review of the Company strategy and have the opportunity to meet with senior management and obtain insights into the business. All directors are encouraged to participate in continuing education programs, with any associated expenses reimbursed by the Company, to stay current and knowledgeable about the Company’s industry, market and overall environment. Such orientation and continuing education programs are overseen by the Governance Committee.
Corporate Governance Guidelines
Our Board is committed to establishing and maintaining strong corporate governance practices that reflect high standards of ethics and integrity and promote long-term stockholder value.
To that end, our managementBylaws provide that our directors must be elected by the affirmative vote of risk and charges management with assessing and managing risk. Our internal control environment is designeda majority of the votes cast at the Annual Meeting. Additionally, the Guidelines provide that an incumbent director who fails to identify and manage risks andreceive a majority of the votes cast must tender an irrevocable offer of resignation to facilitate communication with the Board. Our internal audit department, which reportsThe Board will then consider a number of factors in determining whether to accept or reject the resignation, including the director’s contributions to the Audit Committee, facilitatesCompany.
Our corporate governance structure and processes are set forth in our enterprise risk assessment and ongoing enterprise risk management processes, in coordination with our legal and compliance functions, and regularly reports on risk-related issues,key governance documents, including the Company’s cyber security programs, toGuidelines. The Guidelines govern the operation of the Board and its committees and guide the Board and its committees in the execution of their respective responsibilities. The Governance Committee reviews the Guidelines at least annually, and the Board updates the Guidelines periodically in response to complementchanging regulatory requirements, evolving practices and otherwise as circumstances warrant.
Because an important aspect of achieving a strong and effective corporate governance structure is to encourage an open dialogue with our strategic planning process. Management is responsible for the development, implementationstockholders, we have aligned our policies and maintenance of the risk management processes and cyber security program. The Audit Committee consultsprocedures with the Company’s Senior Vice President, Engineering and Information Technology regarding ongoing cyber security initiatives, and requests such individual, together with senior management, to report tosuggestions set forth in the Audit Committee orCommonsense Principles. Accordingly, highlighted below are the full Board regularly on their assessment of operational, financial and accounting, competitive, reputational, cyber security and legal risks to the Company. The Board also considers specific risk topics and receives regular reports from the headskey areas of our principal businesses and corporate functionsgovernance practices that include discussions ofwe believe align with the risks and exposures involved in their respective areas of responsibility.
The Board executes its risk oversight function both as a whole and through delegation to committees. In particular:
|
| | | | | | | |
| Board Composition and Leadership | ü | | | | Our Board is led by an independent Non-Executive Chairman who is not our CEO |
ü | Audit Committee | | | Compensation Committee | Each of our director nominees, other than our President and CEO, is independent |
| ü | •
Oversees riskOur directors have complementary and diverse skills sets, backgrounds and experiences and are continually educated on our industry |
| ü | Our Board size promotes an open dialogue among directors |
| Director Elections | ü | We use a majority voting standard in uncontested director elections, and require incumbent directors who fail to receive a majority of the votes cast to tender their resignation |
| ü | Directors are elected on an annual basis |
| Board Committee Structure | ü | We have a well-developed committee structure with clearly understood responsibilities |
| ü | Each member of our standing committees is independent |
| Director Effectiveness | ü | Our Board, committees and directors conduct regular self and peer evaluations, led by our Governance Committee, to assess effectiveness and areas for improvement |
| Director Responsibilities | ü | Each of our directors has input into the setting of the Board agenda |
| ü | Each of our directors has unfettered access to management, relatedand committees have the authority to accounting and financial reporting,retain independent advisors |
| ü | Our Board frequently meets in executive session without the audit process, internal control over financial reporting and disclosure controls and procedures•
Oversees the internal audit function•
Monitors legal and compliance issues and active matters•
Reviews cyber and data security matters, including our risk mitigation initiatives |
| ü | | | •
Oversees risk management related to theOur Board focuses on significant risks and rewards associated withseeks the proper calibration of risk and reward while focusing on the longer-term interests of our compensation policies and practices•
Oversees management development and succession planning across senior positions | stockholders |
| Director Compensation | ü | | | | |
| | | | | |
| EHS Committee | | | Governance Committee | |
| •
Oversees risk management related to risks directly related to the environment, health and safety areas | | | •
Oversees risk management related to governance structure and processes and risks arising from related person transactions | We pay a substantial portion of non-employee director compensation in equity grants |
PROXY STATEMENT FOR 2021 ANNUAL MEETING 27
Related Person Transactions
The Governance Committee administers a written Related Person Transaction Policy that applies to any transaction or series of transactions in which we are a participant, the amount involved exceeds or may be expected to exceed $120,000 and a related person has a direct or indirect material interest. Under the policy, our General CounselChief Legal and Compliance Officer determines whether a transaction meets the requirements of a related person transaction requiring review by the Governance Committee. Transactions that fall within this definition will be referred to the Governance Committee for approval, ratification or other action. Based on its consideration of all of the relevant facts and circumstances, the Governance Committee will decide whether or not to approve the transaction and will approve only those transactions that are in our best interests.interest. In addition, the Board has delegated to the Chair of the Governance Committee the authority to pre-approve or ratify any transaction with a related person in which the aggregate amount involved is expected to be less than $500,000.
Following his retirement,exit from the Company on May 31, 2020, Mr. HartRogowski entered into a consulting agreement with the Company, pursuant to which he agreed to provide consulting services to the Company for a period of six months. As a result, in January 2018June 2020, Mr. HartRogowski began receiving a monthly amount equal to $25,000 and will receive an aggregate amount of $200,000. $150,000.
Other than Mr. Hart’sRogowski’s consulting agreement, we did not engage in any transaction during fiscal 2018,2020, and have no currently proposed transaction, in which the amount involved exceeds $120,000 and a related person had or will have a direct or indirect material interest.
Communicating with the Board
Stockholders and other interested parties may communicate with any of our directors, including our Non-Executive Chairman and the Chairs of our committees, or our independent directors as a group, on Board-related issues by writing in care of our Corporate Secretary at our principal executive office address: 1200 Abernathy Road, N.E., Suite 1200, Atlanta, Georgia 30328. Stockholders and other interested persons may also communicate with directors by sending an email message to boardofdirectors@muellerwp.com, or with the Audit Committee by sending an email message to auditcommittee@muellerwp.com. These procedures may change from time to time. Please visit our website at www.muellerwaterproducts.com for the most current means of contacting our directors.
Director Compensation
The Compensation Committee is responsible for reviewing and considering revisions to director compensation. With the assistance of its independent compensation consultant, the Compensation Committee reviews director compensation and compares it to director compensation paid by other companies in the peer group described under “Compensation Discussion and Analysis — Executive Compensation Program Overview — Peer Group Benchmarking and Total Compensation.”
The Board reviews the Compensation Committee’s recommendations and determines the final structure and amounts of director compensation. The Board has determined compensation for non-employee directors should comprise a mix of cash and equity-based awards consistent with the mix and form of payment implemented by other companies in our peer group. In addition to utilizing an overall compensation structure consistent with market practice, the Board believes the interests of directors are aligned with the interests of other stockholders by linking a significant portion of director compensation to Common Stock performance. Under our stock ownership guidelines, directors are required to hold at least 50% of the Common Stock acquired through equity-based awards until they own Common Stock equal in market value to at least five times their annual retainer. See “Compensation Discussion and Analysis — Other Compensation Practices and Policies — Stock Ownership Guidelines” for more information.
Annual Retainer
Each non-employee director was entitled to receive an annual retainer of $60,000 for fiscal 2020. In addition, the Chairs of the Audit Committee, the Compensation Committee, the Governance Committee and the EHS Committee were entitled to receive chair fees equal to $20,000, $15,000, $10,000 and $10,000, respectively. Our Non-Executive Chairman receives $100,000 for serving in this capacity. The annual retainers and chair fees are paid quarterly. During fiscal 2020, due to the impacts of the 2019 Novel Coronavirus ("COVID-19"), all retainer and chair fees accrued and payable to the directors were reduced by 20% during the time period between May 18, 2020 and July 24, 2020.
28 MUELLER WATER PRODUCTS, INC.
Meeting Fees
Each non-employee director was entitled to receive $1,500 for each Board or committee meeting attended during fiscal 2020, except that our Non-Executive Chairman, who is an ex officio member of each standing committee of the Board, receives no Committee meeting fees. Meeting fees are paid promptly after the conclusion of each meeting. The current meeting fee amount has not increased since 2006. During fiscal 2020, due to the impacts of COVID-19, meeting fees accrued and payable to the directors were reduced by 20% during the time period between May 18, 2020 and July 24, 2020.
Deferred Compensation
The Board adopted the Mueller Water Products, Inc. Directors’ Deferred Fee Plan, as amended, under which non-employee directors may elect to defer all or a portion of their directors’ fees. We make deferred payments in January of the year determined by the non-employee director pursuant to an election filed with our Corporate Secretary. The payments may be made in any calendar year not earlier than the year in which the participant has his or her 72nd birthday or the year of the participant’s termination of his or her services as a director, with the payment made in cash in one, five, ten or fifteen annual installments as determined by the participating director in his or her election form. Mr. Tokarz was the only non-employee director who participated in this plan during fiscal 2020. Mr. Tokarz’s deferred payments are maintained in a stock equivalent account.
Equity-Based Awards
Our Second Amended and Restated 2006 Stock Incentive Plan (the “Stock Plan”) provides that, on the date of each annual meeting of stockholders, we will grant equity-based awards with an economic value determined by the Compensation Committee to each non-employee director who is re-elected to the Board and has served as a director for at least six months. In addition, the Stock Plan provides that each director will receive an initial equity-based grant on the date on which he or she commences service as a director, the economic value and terms of which will be determined by the Compensation Committee. See “Compensation Discussion and Analysis — Other Compensation Practices and Policies — Role of Compensation Consultant in Compensation Decisions.”
On January 29, 2020, each non-employee director received equity-based awards in the amount of $105,000, which resulted in the grant of 8,641 restricted stock units (“RSUs”) in accordance with the Stock Plan and related policies. These RSUs will vest for directors remaining in continuous service through the first anniversary of the grant date, although the Compensation Committee may waive this minimum service requirement.
Travel Expenses
We reimburse directors for their travel and related expenses in connection with attending Board and committee meetings and related activities.
PROXY STATEMENT FOR 2021 ANNUAL MEETING 29
Director Compensation Summary
The following table shows fiscal 2020 compensation for our non-employee directors.
| | |
| DIRECTOR COMPENSATION TABLE |
| | | | | | | | | | | | | | | | | | | | |
| | Fees Earned or Paid in Cash ($)(3) | | Stock Awards ($)(2) |
Total
($) |
| Name | Annual Retainer ($)(1) | Meeting Fees
($) | Total
($) | |
| Shirley C. Franklin | 57,000 | 23,100 | 80,100 | | 104,988 | 185,088 |
| Thomas J. Hansen | 57,000 | 26,100 | 83,100 | | 104,988 | 188,088 |
| Jerry W. Kolb | 76,000 | 50,100 | 126,100 | | 104,988 | 231,088 |
| Mark J. O’Brien | 152,000 | 13,200 | 165,200 | | 104,988 | 270,188 |
| Christine Ortiz | 57,000 | 20,100 | 77,100 | | 104,988 | 182,088 |
| Bernard G. Rethore | 66,500 | 41,400 | 107,900 | | 104,988 | 212,888 |
| Lydia W. Thomas | 66,500 | 24,900 | 91,400 | | 104,988 | 196,388 |
Michael T. Tokarz(3) | 71,250 | 30,900 | 102,150 | | 104,988 | 207,138 |
| Stephen C. Van Arsdell | 57,000 | 32,400 | 89,400 | | 104,988 | 194,388 |
(1)Includes fees earned as Chair of a committee or as Non-Executive Chairman.
(2)Reflects the grant date fair value of the RSUs granted during fiscal 2020 computed in accordance with the stock-based compensation accounting rules described in our fiscal 2020 consolidated financial statements, which are included in the 2020 Annual Report.
(3)During fiscal 2020, due to the impacts of COVID-19, all director fees accrued and payable were reduced by 20% during the time period from May 18, 2020 and July 24, 2020.
The following table shows information related to option awards and stock awards made to our non-employee directors that were outstanding at September 30, 2020.
| | | | | | | | | | | | | | |
| | Option Awards |
| Stock Awards |
| | Number of Securities
Underlying Options (#) |
| Number of Shares or
Units of Stock That
Have Not Vested (#) |
| | Exercisable | Unexercisable | |
| Shirley C. Franklin | 39,990 | | — | |
| 8,641 | |
| Thomas J. Hansen | 58,999 | | — | |
| 8,641 | |
| Jerry W. Kolb | — | | — | |
| 8,641 | |
| Mark J. O’Brien | 55,084 | | — | |
| 8,641 | |
| Christine Ortiz | — | | — | |
| 8,641 | |
| Bernard G. Rethore | 33,025 | | — | |
| 8,641 | |
| Lydia W. Thomas | 55,084 | | — | |
| 8,641 | |
| Michael T. Tokarz | 55,084 | | — | |
| 8,641 | |
| Stephen C. Van Arsdell | — | | — | |
| 8,641 | |
30 MUELLER WATER PRODUCTS, INC.
EXECUTIVE COMPENSATION
| | | | | |
| Proposal Two |
| Advisory Resolution to Approve Executive Compensation |
| The Board recommends a vote FOR this proposal. |
We provide our stockholders with the annual opportunity to cast an advisory vote to approve the compensation of our named executive officers. The vote on this proposal represents an additional means by which we obtain feedback from our stockholders about executive compensation. Our Compensation Committee sets executive compensation.
The overall objective of our executive compensation program is to encourage and reward the creation of sustainable, long-term stockholder value. To meet this objective, the Compensation Committee has designed compensation plans for our executive officers that target total compensation at or about the regressed 50th percentile of our customized peer group. See “Compensation Discussion and Analysis — Executive Compensation Program Overview — Peer Group Benchmarking and Total Compensation.” A significant portion of our executives’ overall compensation is structured as incentive compensation. For fiscal 2020, incentive compensation represented approximately 80% of our current CEO’s total target compensation (excluding Other Compensation), and an average of 65% of the total target compensation (excluding Other Compensation) of the other named executive officers. We believe an emphasis on both short-term and long-term incentive compensation aligns executives’ and stockholders’ interests. Further, the Company’s results, as measured against the performance metrics established by the Committee in fiscal 2020, produced a performance-based cash incentive compensation pay out percentage of 117.0% of target and a long-term incentive payout percentage of 90.9%, which illustrate rigorous and meaningful targets and highlight the Committee's pay-for-performance philosophy.
We encourage our stockholders to read the Compensation Discussion and Analysis section of this Proxy Statement, which discusses how our compensation policies and procedures implement our compensation philosophy. The Board and the Compensation Committee believe these policies and procedures are strongly aligned with the long-term interests of our stockholders and are effective in implementing our compensation philosophy and in achieving our strategic goals.
Accordingly, we ask for stockholder approval of the following resolution:
RESOLVED, that the stockholders of Mueller Water Products, Inc. approve, on an advisory basis, the compensation paid to the Company’s named executive officers, as disclosed in the Compensation Discussion and Analysis, the accompanying compensation tables and the related narrative disclosure in the Company’s proxy statement for the 2021 annual meeting of stockholders.
At last year’s annual meeting of stockholders, approximately 97% of votes cast were in support of the compensation of our named executive officers. The Compensation Committee will once again consider the result of this year’s vote, as well as other communications from stockholders relating to our compensation practices, and take them into account in future determinations concerning our executive compensation program. See “Compensation Discussion and Analysis — Highlights of 2020 Executive Compensation.”
PROXY STATEMENT FOR 2021 ANNUAL MEETING 31
Compensation Committee Interlocks and Insider Participation
During fiscal 2018,2020, none of the members of the Compensation Committee (comprised of Shirley C. Franklin, Thomas J. Hansen, Jerry W. Kolb, Christine Ortiz and Michael T. Tokarz) was a former or current officer or employee of Mueller Water Products, Inc.the Company or any of its subsidiaries or had any relationships requiring disclosure as a related person transaction. None of our executive officers serves or has served on the board of directors or compensation committee of any other entity that has or has had one or more executive officers who served as a member of the Board or its Compensation Committee during fiscal 2018.2020.
Communicating with the Board
Stockholders and other interested parties may communicate with any of our directors, including our Non-Executive Chairman and the Chairs of our committees, or our independent directors as a group, on Board-related issues by writing in care of our Corporate Secretary at our principal executive office address: 1200 Abernathy Road, N.E., Suite 1200, Atlanta, Georgia 30328. Stockholders and other interested persons may also communicate with directors by sending an email message to boardofdirectors@muellerwp.com, or with the Audit Committee by sending an email message to auditcommittee@muellerwp.com. These procedures may change from time to time. Please visit our website at www.muellerwaterproducts.comfor the most current means of contacting our directors.
DIRECTOR COMPENSATION
The Compensation Committee is responsible for reviewing and considering any revisions to director compensation. With the assistance of its independent compensation consultant, the Compensation Committee reviews director compensation and compares it to director compensation paid by other companies in the peer group described under “Compensation Discussion and Analysis — Executive Compensation Program Overview — Peer Group Benchmarking and Total Compensation.”
The Board reviews the Compensation Committee’s recommendations and determines the final structure and amounts of director compensation. The Board has determined compensation for non-employee directors should comprise a mix of cash and equity-based awards consistent with the mix and form of payment implemented by other companies in the peer group. In addition to utilizing an overall compensation structure consistent with market practice, the Board believes the interests of directors are aligned with the interests of other stockholders by linking a significant portion of director compensation to Common Stock performance. Under our stock ownership guidelines, directors are required to hold at least 50% of the Common Stock acquired through equity-based awards until they own Common Stock equal in market value to at least five times their annual retainer. See “Compensation Discussion and Analysis — Other Compensation Practices and Policies — Stock Ownership Guidelines” for more information.
Annual Retainer
Each non-employee director received an annual retainer of $55,000 for fiscal 2018. Annual retainers are paid quarterly. In addition, the Chairs of the Audit Committee and Compensation Committee each received $15,000, while the Chairs of the Governance Committee and EHS Committee each received $7,500. Our Non-Executive Chairman received $68,750 for serving in this capacity.
Meeting Fees
Each non-employee director received $1,500 for each Board or committee meeting attended during fiscal 2018, except that our Non-Executive Chairman, who is an ex officio member of each standing committee of the Board, receives no Committee meeting fees. Meeting fees are paid monthly.
Equity-Based Awards
Our Second Amended and Restated 2006 Stock Incentive Plan (the “2006 Stock Plan”) provides that, on the date of each annual meeting of stockholders, we will grant equity-based awards with an economic value determined by the Compensation Committee to each non-employee director who is re-elected to the Board and has served as a director for at least six months. In addition, the 2006 Stock Plan provides that each director will receive an initial equity-based grant on the date on which he or she commences service as a director, the economic value and terms of which will be as determined by the Compensation Committee. The number of units equivalent to the economic value of those awards is calculated by the Compensation Committee’s compensation consultant. See “Compensation Discussion and Analysis — Other Compensation Practices and Policies — Role of Compensation Consultant in Compensation Decisions”.
On January 24, 2018, each non-employee director received equity-based awards in the form of 7,627 restricted stock units (“RSUs”). These RSUs will vest for directors remaining in continuing service through the first anniversary of the grant date, although the Compensation Committee may waive this minimum service requirement.
Travel Expenses
We reimburse directors for their travel and related expenses in connection with attending Board and committee meetings and related activities.
Director Compensation Summary
The following table shows fiscal 2018 compensation for our non-employee directors.| Director Compensation Table |
| | | | | | | | | | | | |
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(2) | All Other Compensation ($) | Total ($) |
Annual Retainer ($)(1) | Meeting Fees ($) | Total ($) |
| Shirley C. Franklin | 55,000 |
| 33,000 |
| 88,000 |
| 89,999 |
| — |
| 177,999 |
|
| Thomas J. Hansen | 55,000 |
| 46,500 |
| 101,500 |
| 89,999 |
| — |
| 191,499 |
|
| Jerry W. Kolb | 70,000 |
| 55,500 |
| 125,500 |
| 89,999 |
| — |
| 215,499 |
|
| Mark J. O’Brien | 123,750 |
| 15,000 |
| 138,750 |
| 89,999 |
| — |
| 228,749 |
|
| Bernard G. Rethore | 62,500 |
| 46,500 |
| 109,000 |
| 89,999 |
| — |
| 198,999 |
|
| Lydia W. Thomas | 62,500 |
| 36,000 |
| 98,500 |
| 89,999 |
| — |
| 188,499 |
|
Michael T. Tokarz (3) | 70,000 |
| 34,500 |
| 104,500 |
| 89,999 |
| 28,165 |
| 222,664 |
|
| |
(1) | Includes fees earned as chair of a committee or as Non-Executive Chairman. |
| |
(2) | Reflects the grant date fair value of the RSUs granted during fiscal 2018 computed in accordance with the stock-based compensation accounting rules described in Note 11 of our fiscal 2018 consolidated financial statements, which are included in the 2018 Annual Report. Since all non-employee directors were retirement-eligible at the grant date, expense is recognized over one year from the date of grant. |
| |
(3) | Mr. Tokarz deferred the receipt of all director compensation fees earned in fiscal 2018 into 8,982 stock equivalent shares of Common Stock. “All Other Compensation” represents amounts accrued on identical terms to dividends paid on Common Stock equal to the accumulated stock equivalent share balance. See “— Deferred Compensation” for more information. |
The following table shows information related to option awards and stock awards made to our non-employee directors that were outstanding at September 30, 2018.
|
| | | | | | |
| | Option Awards | Stock Awards |
| | Number of Securities Underlying Options (#) | Number of Shares or Units of Stock That Have Not Vested (#) |
| Exercisable | Unexercisable |
| Shirley C. Franklin | 65,796 |
| — |
| 7,627 |
|
| Thomas J. Hansen | 58,999 |
| — |
| 7,627 |
|
| Jerry W. Kolb | 55,084 |
| — |
| 7,627 |
|
| Mark J. O’Brien | 70,178 |
| — |
| 7,627 |
|
| Bernard G. Rethore | 33,025 |
| — |
| 7,627 |
|
| Lydia W. Thomas | 79,724 |
| — |
| 7,627 |
|
| Michael T. Tokarz | 79,724 |
| — |
| 7,627 |
|
Deferred Compensation
The Board adopted the Mueller Water Products, Inc. Directors’ Deferred Fee Plan, as amended, under which non-employee directors may elect to defer all or a portion of their directors’ fees. We make deferred payments in January of the year determined by the non-employee director pursuant to an election filed with our Corporate Secretary. The payments may be made in any calendar year not earlier than the year in which the participant has his or her 72nd birthday or the year of the participant’s termination of his or her services as a director, with the payment made in cash in one, five, ten or fifteen annual installments as determined by the participating director in his or her election form. During fiscal 2018, Mr. Tokarz was the only non-employee director who participated in this plan. Mr. Tokarz’s deferred payments are maintained in a stock equivalent account.
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis is intended to provide our stockholders with information about our fiscal 20182020 compensation program for the following executive officers (collectively, “named executive officers” or “NEOs”):
Scott Hall, President and Chief Executive Officer
Marietta Edmunds Zakas, Executive Vice President and Chief Financial Officer
Steven S. Heinrichs, Executive Vice President, General Counsel, Secretary and Chief Compliance Officer
Gregory E. Rogowski, Executive Vice President, Sales and Marketing
Evan L. Hart, Former Senior Vice President and Chief Financial Officer*
* Evan L. Hart retired from the Company effective December 31, 2017; his role as the Company’s principal financial officer was assumed by Ms. Zakas, who had previously served as Executive Vice President, Strategy, Corporate Development and Communications.
Notable Achievements in Fiscal 2018
In June 2018, we paid off our $484 million senior secured term loan through the issuance of $450 million aggregate principal amount of 5.50% Senior Notes due 2026.
We launched our new Mueller brand identity in September 2018 to bring our family of brands more closely aligned in support of our ongoing efforts to drive revenue growth.
In accordance with the strategic reorganization we announced last year, we re-configured our divisional structure around products, with five business teams that have line and cross-functional responsibility for managing specific product portfolios. Under the new organizational structure, engineering, operations, sales & marketing and other functions have been centralized to better align with business needs and generate greater efficiency. The changes we have made over the past year have led to improved execution of our key initiatives across the organization.
|
| | | | | | | | | | | | | |
| | | | |
Highlights of 2018 Performance |
In fiscal 2018, we improvedScott Hall
President and Chief Executive Officer | Marietta Edmunds Zakas Executive Vice President and Chief Financial Officer | Steven S. Heinrichs Executive Vice President, Chief Legal and Compliance Officer and Secretary | Gregory S. Rogowski Former Executive Vice President, Business Development | Chad D. Mize Senior Vice President, Sales and Marketing |
Notable Achievements in Fiscal 2020
| | | | | |
| We completed the integration of Krausz Industries, our operating performance2019 Israeli acquisition. |
| We began construction of a new state-of-the-art foundry in Decatur, Illinois. |
| We completed construction of a large casting foundry in Chattanooga, Tennessee to broaden our product lines and executed initiativesincrease our overall efficiency and capacity. |
| We acquired a 250,000 SF facility in Kimball, Tennessee to return valueconsolidate various diverse work streams, reduce our geographic footprint and increase the efficiency of sister facilities located in Chattanooga, Tennessee and Albertville, Alabama. |
| We amended our asset-based lending agreement to current market terms with increased capital flexibility and extended the term to July 2025. |
| We entered into the largest commercial transaction in our stockholders.163 year history with the City of Newport News, Virginia for the purchase of our advanced metering infrastructure solution. |
| We ratified a five year collective bargaining agreement in our Decatur, Illinois facility, increasing the stability of our labor relationship, providing fair and competitive wages and promoting the attraction and retention of top talent. |
32 MUELLER WATER PRODUCTS, INC.
Highlights of Fiscal 2020 Performance
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| Focused on Operational Investment and Efficiencies to Increase Stockholder Long-Term Value |
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| Strong Operating Results
We increasedgenerated net sales 10.9% over the prior year to $916.0 million. Ourof $964.1 million, operating income of $116.8 million, adjusted EBITDA of $190.6 million, net cash from operations of $140.3 million and net income in fiscal 2018 were $121.7 million and $105.6 million, respectively.Adjusted operatingper diluted share of $0.45 (with adjusted net income improved 11.4%per diluted share of $0.52). See Exhibit A for a reconciliation of non-GAAP information to $137.3 million, from $123.3 million in fiscal 2017.GAAP information. |
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| Dividend Benefits | | Stockholder Value |
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Increased dividend
•We increased ourpaid stockholders a quarterly dividend$0.0525 per share dividend during fiscal 2020.
•We returned $33.1 million to $0.05 from $0.04. We paid $30.1 million ofour stockholders through dividends in fiscal 2018.2020. |
| | | Repurchased Shares
We repurchased $30.0$5 million of our outstanding Common Stock during fiscal 2018.
2020.
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Highlights of 20182020 Performance Related to Executive Compensation
The Compensation Committee used several financial and performance elements (including those set forth below) to assess and determine incentive plan compensation earned during fiscal 2018. 2020. See Exhibit A for a reconciliation of the following non-GAAP financial measures used in determining executive compensation to GAAP financial results.
Our compensation programs continually evolve to incorporate stockholder feedback, market best practices, and performance and retention considerations. Our stockholders have strongly supported our executive compensation program in the past, as exhibited by an affirmative “say-on-pay” vote of approximately 97% in each of the last two years. Since the Compensation Committee’s approval of our fiscal 2020 compensation program design in December 2019, including the specific annual cash incentive plan and long-term equity program performance metrics and associated weightings, the world has experienced unprecedented industrial, economic and social disruption as a result of the COVID-19 pandemic. As discussed in more detail in “Compensation Elements — Annual Cash Incentive Awards” below, COVID-19 was declared a pandemic and national emergency in March 2020, coinciding with the midpoint of our fiscal year. In light of the widespread effects of the virus on the then-current global business environment, the Compensation Committee decided to take certain actions with respect to the 2020 executive annual cash incentive plan to address the extreme uncertainty and challenges facing the Company. The Compensation Committee convened and decided to replace the previously approved annual incentive plan metrics (i.e., adjusted EBITDA, net cash from operations and net sales (collectively, the “Financial Metrics”)) for the second half of fiscal 2020 with a single performance metric based upon rTSR. The Compensation Committee believes that rTSR has a strong correlation to our operational and financial objectives and performance, having adopted it in November 2019 as a new measurement vehicle for our long-term equity incentive program. The Compensation Committee determined that the rTSR metric was a fair and balanced measure for evaluating performance during this volatile and uncertain period and its substitution for the original Financial Metrics during the second half of fiscal 2020 in the short-term annual incentive program was a reasonable and prudent decision.
We strive to simplify and provide insight into our compensation-related disclosures while providing thorough and meaningful details of our process. Accordingly, the following summarizes the changes adopted by the Compensation Committee in fiscal 2020:
Annual Incentive Plan
•The adjusted operating income financial metric used in fiscal 2019 was replaced by the adjusted EBITDA financial metric in fiscal 2020 (the Compensation Committee maintained the other fiscal 2019 financial metrics, including net cash from operations and net sales). These metrics were approved at the beginning of fiscal 2020 and used for the first six months of fiscal 2020, prior to the declaration of the COVID-19 pandemic.
•The rTSR metric replaced the Financial Metrics for the last six months of fiscal 2020. The maximum attainment with respect to the rTSR metric was limited to 100% of the target opportunity.
Long-Term Equity Plan
•The rTSR metric was added as a metric, supplementing the continued use of the RONA metric. The fiscal 2020 long term equity incentive program design, including its metrics and weightings, were not modified due to the COVID-19 pandemic.
PROXY STATEMENT FOR 2021 ANNUAL MEETING 33
|
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| | Net Sales | Performance Evaluation Basis Adjusted Operating Income(1) | Performance Evaluation Basis Adjusted Cash Flow from Operations(2) | Performance Evaluation Basis Return on Net Assets(3) |
| | ($ in millions) | (%) |
| 2018 | $916.0 | $132.2 | $143.8 | 48.5% |
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| Company Results for Performance Evaluation Basis |
| First Half Fiscal 2020
Annual Cash Incentive Award Metrics | | Second Half Fiscal 2020
Annual Cash Incentive Award Metric | | Full Year 2020
LTIA Metric |
| Net Sales(1) | Adjusted EBITDA(2) | Adjusted Cash Flow(3) | | Relative Total Shareholder Return(4) | | Return on Net Assets(5) |
| ($ in millions) | | (Quartile) | | (%) |
| 2020 | 470.3 | 88.2 | 0.5 | | 2nd | | 22.7 |
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(1) | Defined for this purpose as operating income adjusted to exclude significant unusual charges. |
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(2) | Defined for this purpose as cash flow from operations excluding cash paid for income taxes, net of refunds. |
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(3) | Defined for this purpose as the quotient obtained by dividing performance evaluation basis adjusted operating income plus amortization of capitalized software and intangible assets by the quarterly average of the sum of working capital, excluding cash, debt and accrued interest and other items plus property, plant and equipment. |
(1)Annual Cash Incentive Award metrics used for the first half of fiscal 2020, measured over the first six months of fiscal 2020. (2)Annual Cash Incentive Award metric used for the first half of fiscal 2020, measured over the first six months of fiscal 2020. Defined for this purpose as net income plus interest, income tax, depreciation and amortization expenses, adjusted to exclude significant unusual charges.
(3)Annual Cash Incentive Award metric used for the first half of fiscal 2020, measured over the first six months of fiscal 2020. Defined for this purpose as cash flow from operations excluding cash paid for income taxes and net of refunds.
(4)Annual Cash Incentive Award metric used for the second half of fiscal 2020, measured over the second six months of fiscal 2020. Determined by, during the applicable performance period, computing the total shareholder return of each company that was in the S&P 600 SmallCap Industrial Index at the beginning of the applicable performance period (the “TSR Group”) and comparing the Company’s TSR results thereto in order to determine the quartile ranking within the TSR Group.
(5)Long-term incentive award (“LTIA”) metric measured over the full fiscal year. Defined for this purpose as the after-tax quotient obtained by dividing performance evaluation basis adjusted operating income plus amortization of capitalized software and intangible assets by the quarterly average of the sum of working capital, excluding cash, debt and accrued interest and other items plus property, plant and equipment.
Highlights of 20182020 Executive Compensation
We design our executive officer compensation programs to target total compensation at or about the 50thregressed 50th percentile (plus or minus 15%) for comparable executive positions at companies in our peer group. The principal elements of our compensation program for executives are base salary, annual performance-based cash bonus, long-term incentive equity compensation and broad-based benefit programs.programs and executive severance plan, as applicable.
We consider stockholder feedback on executive compensation. At our 2017 and 2018 annual meetings of stockholders, approximately 98% and 94%, respectively, of the votes cast supported the advisory vote on executive compensation. We carefully consider feedback from our stockholders regarding executive compensation.
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◦ | Based on strong stockholder support expressed forWe tie our executiveexecutives' compensation programs, the Compensation Committee applied a consistent pay-for-performance philosophy in structuring executive compensation for fiscal 2018.to Company performance. |
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◦ | Stockholders are invited to express their views or concerns on executiveFor fiscal 2020, 65% of our CEO’s total target compensation, directly to the Chairand an average of 55% of the Compensation Committee in the manner described under “Corporate Governance — Communicating with the Board.”total target compensation of our other NEOs, could only be earned by meeting performance goals. | | PERFORMANCE-BASED TOTAL TARGET COMPENSATION(1) | |
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(1)Excludes Other Compensation. See "Executive Compensation — Summary Compensation Table" for total compensation as earned.
We •structureOur NEOs’ compensation was both negatively and positively affected by Company performance in relation to targets set for fiscal 2020.
•Annual cash bonuses earned by our NEOs (excluding Mr. Hall) for fiscal 2020 ranged from $184,275 to $344,717 compared with $81,601 to $195,117 last year.
•Long-term performance-based compensation to paywas paid or credited at 90.9% of target for performance. fiscal 2020 because Company performance on the RONA financial measure was 90.9% of the target level. Long-term performance-based compensation based upon rTSR granted in fiscal 2020 has a three year performance period and vests September 30, 2022.
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| We structure performance-based compensation to pay for performance. |
We set clear and measurable financial goals for Company performance. In evaluating individual performance, we assess progress toward strategic priorities.
34 MUELLER WATER PRODUCTS, INC.
We have performance-based compensation earned by our named executive officers. For fiscal 2018, 52% of our CEO’s total target compensation, and an average of 49% of the total target compensation of our other continuing NEOs (excluding Mr. Heinrichs), could only be earned by meeting performance goals.EXECUTIVE COMPENSATION
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◦ | Our NEOs’ compensation was positively affected by Company performance in relation to targets set for fiscal 2018.We consider stockholder feedback on executive compensation. |
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◦At our 2019 and 2020 annual meetings of stockholders, approximately 97% of the votes cast supported the advisory vote on executive compensation. We carefully consider feedback from our stockholders regarding executive compensation. | Annual cash bonuses earned by our continuing NEOs (excluding Messrs. Hall and Heinrichs) ranged from $338,173 to $450,401 (compared with $255,929 to $282,075 last year). | “SAY-ON-PAY” SUPPORT | |
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•Based on strong stockholder support expressed for our executive compensation programs, the Compensation Committee applied a consistent pay-for-performance philosophy in structuring executive compensation for fiscal 2020.
•Stockholders are invited to express their views or concerns on executive compensation directly to the Chair of the Compensation Committee in the manner described under “Corporate Governance — Communicating with the Board.”
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◦ | Long-term, performance-based compensation was paid or credited at 135.7% of targetWe utilize best practices for fiscal 2018 becauseexecutive compensation. |
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| ü | WE DO |
| û | WE DON’T |
| ü | Use incentives to substantially link NEO pay to Company performance |
| û | Re-price or exchange equity-based awards |
| ü | Require executives and directors to maintain significant stock ownership levels | | û | Permit hedging or pledging of Common Stock by directors or executives |
| ü | Maintain a compensation clawback policy | | û | Pay dividends on the “return on net assets” financial measure was above the target level.unvested equity-based incentives |
| ü | Require a double trigger for equity award vesting upon a change-in-control | | û | Provide excise tax gross-up benefits |
We continue to maintain best practices for executive compensation.
Executive Compensation Program Overview
Guiding Principles
The Compensation Committee has identified the following guiding principles in overseeing the compensation program for our executives:
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Competitiveness Compensation programs should be designed to target at the 50thregressed 50th percentile plus or minus 15%, of total compensation for comparable executive positions at a customized peer group. | | Pay for Performance Where compensation for an executive is tied to the achievement of financial and strategic goals, actual results that exceed target levels should provide above-target payouts, and results that do not exceed threshold levels should not provide payouts. |
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Responsibility A significant portion of an executive’s overall compensation should be tied to the achievement of financial performance goals. The portion of an executive’s target total compensation that is incentive based should increase as an executive’s responsibilities increase. | | Stockholder Alignment Executives’ interests are more directly aligned with stockholders’ interests when compensation programs: •Emphasize both short- and long-term financial performance; •Are significantly impacted by the value of Common Stock; and •Require meaningful Common Stock ownership. |
PROXY STATEMENT FOR 2021 ANNUAL MEETING 35
Peer Group Benchmarking and Total Compensation
Each year, the Compensation Committee’s compensation consultant collects peer group compensation data and prepares an executive benchmarking study using a market regression analysis to size-adjust the market data for our net sales size as a whole. The Compensation Committee, with input from its independent compensation consultant, reviews the prior year peer group. This review focuses on companies that have a primary manufacturing component to their businesses, have similar organizational structures and are publicly traded or otherwise file financial statements with the SEC. In light of our recent strategicWe believe the resulting peer group provides a valid and business changes,appropriate comparison for the Company’s executive compensation program and governance practices. For fiscal 2020, the Compensation Committee updateddid not make any changes to the previous year’s group. The peer group for fiscal 2018 (the “Peer2020 (“Peer Group”) toconsisted of the 18 companies listed below.
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Fiscal 20182020 Peer Group | The Compensation Committee targets total compensation at or about the regressed 50th percentile of the Peer Group |
| Armstrong World Industries, Inc. | Hillenbrand, Inc. |
| Badger Meter, Inc. | IDEX Corporation |
| Chart Industries | Itron, Inc. |
| Circor International Inc. | Mueller Industries, Inc. |
| Crane Co. | Quanex Building Products Corporation |
| EnPro Industries, Inc. | Rexnord Corp. |
| Franklin Electric Co. | SPX Flow |
| Graco Inc. | Valmont Industries, Inc. |
| Harsco Corp. | Watts Water Technologies, Inc. |
The Compensation Committee regularly reviews the target total compensation of each executive and compares it to the total compensation for comparable executive positions in the Peer Group. The Compensation Committee targets total compensation at or about the regressed 50th50th percentile of the Peer Group plus or minus 15% (“targeted 50th percentile range”), subject to individual adjustments based on experience, length of service, individual performance and other factors deemed appropriate by the Compensation Committee.
Compensation Elements
The following table lists our primary elements of compensation. Each element is targeted at or about the 50thregressed 50th percentile for comparable positions in the Peer Group.
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| Pay Element | Salary | Bonus | RSUs | PRSUs |
Who ReceivesRecipients |
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| All NEOs --------------------------------------------------------------------------------------------------------------------------------------------------> |
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When Granted
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| Period of Grant | Generally reviewed every 12 months | Annually | Annually | Annually |
| Form of Delivery |
| | Cash --------------------------------------------------------------------> | | |
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| | Equity ------------------------------------------------------------------> | | |
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| Type of Performance |
| Short-term emphasis -----------------------------------------------> |
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| Long-term emphasis -----------------------------------------------> | |
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Performance
Measures | — | Mix of financial results, EHS-related operational goals and market index performance (rTSR) | Value of delivered shares based on stock price on vesting dates | Return on Net Assets ("RONA") achievement | Relative total shareholder return ("rTSR") |
| Performance Period / Vesting | Ongoing | 1 year | Generally vest annually over 3 years | Earned annually and vest at the end of the 3-year award cycle | Vest at the end of 3-year award cyclescycle |
How Payout
Determined | Predominantly tied to Peer Group data, with an element of Compensation Committee discretion | Predominantly formulaic (based on performance against goals)goals and market index), with an element of Compensation Committee discretion | Completion of required service period through each vesting date | Formulaic (based on performance against goals); Compensation Committee verifies results |
Most Recent Performance Measures for specific performance periods | __ | Mix of 90% financial results / 10% EHS-related operational goals | Value of delivered shares basedFormulaic (based on stock price on vesting dates | RONA achievementperformance against peers) for specific performance periods |
36 MUELLER WATER PRODUCTS, INC.
Salary
The Compensation Committee regularly compares the salary of each executive to the regressed 50th50th percentile of comparable executives in the Peer Group and uses that benchmark as a guide. Salaries for the NEOs are adjusted, as appropriate, annually on February 1. In February 2018,1, 2020. The Compensation Committee approved the following salaries for our NEOs in fiscal 2020.
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| Name | Annual Salary Rate at September 30, 2020(2) ($) | Annual Salary Rate at September 30, 2019 ($) | Salary Increase (%) |
| Scott Hall | 815,567 | | 795,675 | | 2.5 | |
| Marietta Edmunds Zakas | 424,350 | | 414,000 | | 2.5 | |
| Steven S. Heinrichs | 433,063 | | 422,500 | | 2.5 |
|
Gregory S. Rogowski(1) | N/A | 470,900 | | N/A | |
| Chad D. Mize | 315,000 | | 315,000 | | 0.0 | |
(1)Mr. Rogowski exited the Company on May 31, 2020.
(2)Due to and in mitigation of the impact of COVID-19, Messrs. Hall, Heinrichs, Mize and Rogowski each received a salary increase of 3.0%.and Ms. Zakas received an initialtwenty percent (20%) reduced salary increase of 5.0% in January 2018 due to her new role as Chief Financial Officer and an additional salary increase of 6.7% inpayments for the period from May 2018 in connection with her mid-year review and assessment of her performance by the Compensation Committee.18, 2020 through July 24, 2020.
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| Name | Annual Salary Rate at September 30, 2018 ($) | | Annual Salary Rate at September 30, 2017 ($) |
| Scott Hall | 772,500 |
|
| 750,000 |
|
| Marietta Edmunds Zakas | 400,000 |
| | 357,000 |
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| Steven S. Heinrichs | 415,000 |
| | N/A |
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| Gregory E. Rogowski | 459,400 |
| | 446,000 |
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| Evan L. Hart | N/A |
| | 418,000 |
|
Annual Cash Incentive Awards
The annual cash incentive plan rewards our named executive officers for achieving key financial metrics, which drive our operating results and enhance stockholder value. The Compensation Committee targetssets the annual cash incentive compensationtarget opportunity for each executive at the regressed 50th50th percentile of comparable executives in the Peer Group. Based on actual achieved
Historically, the Compensation Committee has selected two types of performance againstmetrics: (i) financial goals (weighted 90%) and (ii) EHS-related performance goals,metrics (weighted 10%), each subject to a performance multiplier ranging between 0% and 200%. At the outset of fiscal 2020, the Compensation Committee continued this practice, with each NEO mayable to earn between 0% and 200% of his or her annual cash target opportunity. ForThe financial goals consisted of adjusted EBITDA, net cash from operations and net sales. However, with the declaration of the COVID-19 pandemic at the midpoint of the Company’s fiscal 2018, each NEO could earn anyear, the Compensation Committee, recognizing the unpredictable effects of the pandemic on the Company’s performance in the near term, convened to review the Company’s actual performance year to date against the performance goals established at the beginning of fiscal 2020. The Compensation Committee determined that the uncertainty within the marketplace, the importance of executive engagement and retention, and the need to align compensation targets with meaningful and reasonable goals demanded a modification to the previously approved annual cash incentive plan. Accordingly, the Compensation Committee, using its discretion and on its own initiative, modified the structure of the annual cash incentive award based on achievement against financial performance goals (weighted 90%) and EHS-related operational goals (weighted 10%).program, dividing the program into two six-month measurement periods for non-EHS metrics. For financial performance goals,the first six months of fiscal 2020, the Compensation Committee determined several goalsthat the annual incentive award would be based upon the Company’s original performance metrics and associated targets and actual performance prior to the declaration of the COVD-19 pandemic. For the second half of the fiscal year, the Compensation Committee determined that the annual incentive award would be based upon rTSR because it believes rTSR is one of the most tangible, visible measures of the value created for stockholders during this uncertain and volatile period. Additionally, the Compensation Committee limited the performance multiplier for the NEOs relevantsecond half of the fiscal year to increasing100% of the Company’s growthtarget bonus opportunity.
FISCAL 2020 FIRST HALF
For the first six months of fiscal 2020 (“First Half”), the Compensation Committee retained the financial goals as the performance metric, but modified the associated full year weighting to 45% of the total target bonus opportunity. Each goal continued to be subject to a performance multiplier ranging between 0% and enhancing shareholder value.
All200%. When doing so, the Compensation Committee evaluated actual financial performance goals were set with minimum (or threshold), target and maximum objectives for each goal as describedachieved in the “Performance TargetsFirst Half against pro forma First Half targets and Results” table below. approved a weighted average performance of 59.8% against such targets for First Half attainment.
FISCAL 2020 SECOND HALF
For the last six months of fiscal 2020 ("Second Half"), the Compensation Committee replaced the First Half financial metrics with rTSR actual performance as measured against the S&P 600 SmallCap Industrial Index (based upon a 20-trading day average), with a full year weighting of 45% of the total target bonus opportunity and subject to a performance multiplier ranging between 0% and 100%, i.e., the Second Half attainment multiplier was limited to 100% of the target
PROXY STATEMENT FOR 2021 ANNUAL MEETING 37
bonus opportunity. Comparing the Second Half Company actual performance against the Second Half target, the Compensation Committee approved a Second Half attainment of 44.7%.
FISCAL 2020 FULL YEAR
The EHS-related performance metric (weighted 10% of the total target bonus opportunity), subject to a performance multiplier ranging between 0% and 200%, resulted in the full year EHS attainment.
The sum of the First Half attainment, the Second Half attainment and the full year EHS attainment thus represented the percentage of each NEO’s annual cash target opportunity earned during the year.
The Compensation Committee selected these financial metrics to encourage our NEOs to focus on generating income from continuing operations and enhancing long-term stockholder value. Additionally, the Compensation Committee established operational environmental, health and safety (“EHS”) objectives applicable to each NEO that wereThe EHS-related performance metric was tied to reductions in total recordable incidence rates and key performance indicators for sustainability and specific activities identified as leading indicators. The Compensation Committee believesselected these metrics and established the EHS objectives serve as a valuable tool to enhanceassociated targets because they promote, drive and support the Company’s EHS initiatives and performance.performance and reflect a reasonable chance of achievability while remaining challenging. The EHSCompensation Committee invested significant effort to ensure that the metrics and targets reflect both a desire for continuous improvement, stockholder value creation and a realistic assessment of changes in the market environment. All financial performance goals, subject to the above, were set with minimum (or threshold), target and maximum objectives for each NEO weregoal as described in the “Performance Targets and Results” table below.
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| 2020 ANNUAL PERFORMANCE TARGETS AND RESULTS |
| | | | | | | |
Based on First Half Results(1) | | Weighted Aggregate Actual % of Target
117.0% |
| Metric | First Half Weight
(% of Target Bonus) | Results Required to Achieve Bonus ($ in millions) | Actual Payout Factor Based on Results
(% of Target Bonus Unweighted) | |
|
Threshold
(50%) | Target
(100%) | Maximum
(200%) | |
| Adjusted EBITDA | 22.5% | | 176.7% | |
| Adjusted Cash Flow | 12.5% | | 0.0% | |
| Net Sales | 10.0% | | 200% | |
| Based on Second Half Results | |
| Metric | Second Half Weight
(% of Target Bonus) | Results Required to Achieve Bonus | Actual Payout Factor Based on Results
(% of Target Bonus Unweighted) | |
(Quartile)(2) | |
Threshold
(50%) | Target
(100%) | Maximum
(100%) | |
| rTSR | 45% | 2nd | 3rd | 4th | 99.3%
(2nd Quartile) | |
| Based on Full Year Results | |
| Metric | Full Year Weight (% of Target Bonus) | Results Required to Achieve Bonus
(Percentile) | Actual Payout Factor Based on Results
(% of Target Bonus Unweighted) | |
Threshold
(50%) | Target
(100%) | Maximum
(100%) | |
| EHS | 10% | — | — | — | 124.9% | |
(1)See Exhibit A for a reconciliation of non-GAAP information to GAAP information.
(2)Linearly interpolated between Threshold and Target and between Target and Maximum based on Company-wide performance.upon actual results.
The following table shows the fiscal 2018 performance targets and actual results applicable to each NEO.
38 MUELLER WATER PRODUCTS, INC.
| Performance Targets and Results |
| | | | | | | | | | | |
| | | | Results Required to Achieve Bonus ($ in millions, except for percentages) | 2018
Actual
Results
($ in millions) | Actual 2018 Payout Factor (% of Target Bonus) unweighted |
| | | Weight (% of Target Bonus) |
| Name | Metric | Threshold (0%) | Target (100%) | Maximum (200%) |
| Scott Hall | Adjusted
Operating Income | 45 | 110.5 |
| 130.0 |
| 153.0 |
| 132.2 |
| 109.6 |
| | Adjusted Cash Flow from Operations | 25 | 115.0 |
| 140.0 |
| 170.0 |
| 143.8 |
| 112.7 |
| | Net Sales | 20 | 826.0 |
| 855.0 |
| 914.0 |
| 916.0 |
| 200.0 |
| | EHS | 10 | | | | | 145.1 |
| Marietta Edmunds Zakas | Adjusted
Operating Income | 45 | 110.5 |
| 130.0 |
| 153.0 |
| 132.2 |
| 109.6 |
| | Adjusted Cash Flow from Operations | 25 | 115.0 |
| 140.0 |
| 170.0 |
| 143.8 |
| 112.7 |
| | Net Sales | 20 | 826.0 |
| 855.0 |
| 914.0 |
| 916.0 |
| 200.0 |
| | EHS | 10 | | | | | 145.1 |
| Steven S. Heinrichs | Adjusted
Operating Income | 45 | 110.5 |
| 130.0 |
| 153.0 |
| 132.2 |
| 109.6 |
| | Adjusted Cash Flow from Operations | 25 | 115.0 |
| 140.0 |
| 170.0 |
| 143.8 |
| 112.7 |
| | Net Sales | 20 | 826.0 |
| 855.0 |
| 914.0 |
| 916.0 |
| 200.0 |
| | EHS | 10 | | | | | 145.1 |
| Gregory S. Rogowski | Adjusted
Operating Income | 45 | 110.5 |
| 130.0 |
| 153.0 |
| 132.2 |
| 109.6 |
| | Adjusted Cash Flow from Operations | 25 | 115.0 |
| 140.0 |
| 170.0 |
| 143.8 |
| 112.7 |
| | Net Sales | 20 | 826.0 |
| 855.0 |
| 914.0 |
| 916.0 |
| 200.0 |
| | EHS | 10 | | | | | 145.1 |
| Evan L. Hart | Adjusted
Operating Income | 45 | 110.5 |
| 130.0 |
| 153.0 |
| 132.2 |
| 109.6 |
| | Adjusted Cash Flow from Operations | 25 | 115.0 |
| 140.0 |
| 170.0 |
| 143.8 |
| 112.7 |
| | Net Sales | 20 | 826.0 |
| 855.0 |
| 914.0 |
| 916.0 |
| 200.0 |
| | EHS | 10 | | | | | 145.1 |
Fiscal 2018 Annual Cash Incentive Awards
Fiscal 2018his or her annual cash target opportunity for fiscal 2020. The table below shows each NEO’s annual cash target opportunity and actualthe amount of the annual cash bonuses paid to each NEO are set forth inNEO.
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| At Target Performance |
| At Actual Performance |
| Name | % of Salary | Amount ($) | | % of Target | Amount ($) |
| Scott Hall | 100 | % | 808,936 | |
| 117.0 | % | 946,456 |
| Marietta Edmunds Zakas | 70 | % | 294,630 | |
| 117.0 | % | 344,717 |
| Steven S. Heinrichs | 60 | % | 257,725 | |
| 117.0 | % | 301,538 |
Gregory S. Rogowski(1) | 75 | % | 237,804 | |
| 117.0 | % | 278,231 |
| Chad D. Mize | 50 | % | 157,500 | |
| 117.0 | % | 184,275 |
(1)Amounts reflect Mr. Rogowski's salary prior to exiting the following table:Company on May 31, 2020.
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| Name | At Target Performance | At Actual Performance |
| % of Salary | Amount ($) | % of Target | Amount ($) |
| Scott Hall | 100 | 765,000 |
| 132.0 | 1,009,839 |
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Marietta Edmunds Zakas (1) | 67.5 | 256,181 |
| 132.0 | 338,173 |
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Steven S. Heinrichs (2) | 60 | 36,784 |
| 132.0 | 48,557 |
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| Gregory E. Rogowski | 75 | 341,200 |
| 132.0 | 450,401 |
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Evan L. Hart (3) | 75 | 78,375 |
| 132.0 | 103,459 |
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(1) | On January 1, 2018, Ms. Zakas’ target increased from 60% to 70%. Percentage represents a weighted average for the full fiscal year. |
| |
(2) | Amounts reflect Mr. Heinrichs’ employment with the Company commencing on August 8, 2018. |
| |
(3) | Amounts reflect Mr. Hart’s retirement from the Company on December 31, 2017. |
Long-Term Equity-Based Compensation
For fiscal 2018, ourThe long-term incentive program included a 50 / 50 mixaligns the interest of awardsour NEOs with those of our stockholders and rewards our NEOs for achieving key metrics. This program drives operating results, enhances stockholder value and helps retain our NEOs.
For fiscal 2020, the Compensation Committee set each NEO’s target long-term compensation value at or about the regressed 50th percentile of comparable executives in the Peer Group. This target value was allocated 70% in the form of performance-based restricted stock units (“PRSUs”) and time-vested RSUs. For30% in the form of time-based restricted stock units (“RSUs”).
PERFORMANCE-BASED RESTRICTED STOCK UNITS
The following are the key aspects of the PRSUs awarded to our NEOs in fiscal 2019, the Compensation Committee determined that the mix of PRSUs versus RSUs should be more heavily weighted to performance-based units and, as a result, has granted 2020:
•70% of the target long-term incentive compensation value in performance-based PRSUs and 30% in time-based RSUs. The Compensation Committee targets long-term compensation value for each NEO at the 50th (plus or minus 15%) percentile of comparable executives in the Peer Group.
Performance-Based Restricted Stock Units
For fiscal 2018, 50% ofNEO’s target long-term incentive compensation value was awarded in the form of PRSUs. The key terms of the PRSUs are as follows:
Each PRSU award reflects a target number of shares (based onPRSUs awarded in fiscal 2020 was equal to the fair markettarget value divided by the share price of our Common Stock on the award date) that may be issued todate of award.
•The PRSUs are divided into two categories, based upon applicable performance metric: (i) 57% of the recipient atPRSUs (and 40% of the endtotal award) are based upon after-tax RONA achievement ("RONA Units") and (ii) 43% of a three-year award cyclethe PRSUs (and 30% of the total award) are based on the achievement ofupon rTSR performance targets.("Market Units").
PRSUs•RONA Units:
◦The RONA Units are divided into three equal tranches and each tranche is earned over successive one-year performance periods coinciding with our fiscal years.
◦The Compensation Committee establishes RONA Unit performance period targets for the then-current performance period on an annual basis.
◦At the end of each performance period, the Compensation Committee confirms actual performance against the applicable performance period target.
◦The number of shares of our Common Stock earned at the conclusion of each applicable RONA Unit performance period may range from zero to two times the number of target RONA Units in the applicable tranche, based on the level of achievement against the applicable annual performance target.
Each performance period target is established by the Compensation Committee on an annual basis coinciding with our fiscal year.target.
At the end of each fiscal year, the Compensation Committee confirms performance against the applicable performance target, and PRSUs◦RONA Units representing the level of achievement during thatthe specific performance period are “banked” for potential payout following the end of the three-year award cycle.
Earned•Market Units:
◦The Market Units consist of a single tranche and vest on a 3-year cumulative performance period against the applicable index.
◦The Compensation Committee establishes the performance period target related to the Market Unit award on the grant date of the award.
PROXY STATEMENT FOR 2021 ANNUAL MEETING 39
◦At the end of the three-year award period, the Compensation Committee confirms actual performance against the applicable performance target.
◦The number of shares of our Common Stock earned at the conclusion of each Market Unit performance period may range from zero to two times the number of target Market Units awarded, based on the level of achievement against the applicable performance period target.
•All PRSUs are settled in shares of Common Stock. The actual number
•To receive earned shares of shares a participant may receive ranges from zero to two timesCommon Stock, the target numberNEO must be employed through the last day of shares, depending solely on the level of achievement during each performance period within thethree-year award cycle.
•PRSUs do not convey voting rights or earnaccrue dividends.
|
| | | | | |
Year of Award | Fiscal 2016 | Fiscal 2017 | Fiscal 2018 | Fiscal 2019 | FiscalPERFORMANCE MEASURE AND RESULT FOR FISCAL 2020 |
Fiscal 2016 | Performance Period | Performance Period | Performance Period | | |
Fiscal 2017 | | Performance Period | Performance Period | Performance Period | |
Fiscal 2018 | | | Performance Period | Performance Period | Performance Period |
Performance Measure and Result for Fiscal 2018
The applicable performance target for the fiscal 2020 performance period for PRSUs awarded in fiscal 2018 and fiscal 2019 was based solely on RONA. The applicable performance targets for the fiscal 2020 performance period for PRSU awards made in fiscal 2016, fiscal 2017 and fiscal 2018 was based on return on net assets, or “RONA.” For these purposes,2020 apply only to the termRONA units. “RONA” has the meaning described in footnote 34 to the table under “— Highlights of 20182020 Performance Related to Executive Compensation”.Compensation.” The Compensation Committee determined the RONA target using benchmark data from the Peer Group and assistance from the Company’s independent compensation consultant. AsFor fiscal 2019 and fiscal 2020, the Compensation Committee established the RONA target at an absolute percentage on an after-tax basis, whereas in fiscal 2018, the RONA target was based on a result ofpre-tax basis due to uncertainty arising from changes in tax legislation for fiscal 2018, the RONA target was set at an absolute percentage on a pre-tax basis, whereas in prior years the RONA target was based on the after-tax percentage year-over-year improvement in RONA.2018. For fiscal 2018,2020, the performance necessary to earn 100% of RONA Unit target payout required RONA of 46.0%23.5%, and the performance necessary to earn the maximum 200% of RONA Unit target payout required RONA of at least 53.0%26.0%. Actual RONA performance for fiscal 20182020 was 48.5%22.7%. Therefore, the recipients of PRSU awards were each credited with 135.7%2020 performance period RONA Units will settle at 90.9% of the awards attributable to the fiscal 2018 performance period.awards. See “Executive Compensation — Grants of Plan-Based Awards Table”.Table.”
For these purposes, the relative total shareholder return or “rTSR” has the meaning described in footnote 4 to the table under “— Highlights of 2020 Performance Related to Executive Compensation.” The Compensation Committee determined the rTSR target using benchmark data from the S&P 600 SmallCap Industrial Index (based upon a 20 trading day average) and assistance from the Company’s independent compensation consultant. For the fiscal 2020 grants, the performance necessary to earn 100% of Market Unit target payout requires the rTSR to be in the 50th percentile, and the performance necessary to earn the minimum of 50% and a maximum of 200% of Market Unit target payout requires the rTSR to be in the 25th and 75th percentile, respectively. The fiscal 2020 Market Unit grants will vest and settle at the end of the cumulative 3-year performance period.
| | |
| PRSU PERFORMANCE MEASURE AND RESULT FOR FISCAL 2020 |
|
40 MUELLER WATER PRODUCTS, INC.
PRSU Award IssuancesAWARD ISSUANCES
Common Stock to be issued related to PRSUs awarded in fiscal 20172019 (for the three-year award cycle from fiscal 20172019 through fiscal 2019)2021) and fiscal 2020 (for the three-year award cycle from fiscal 2020 through fiscal 2022) will not be issued until the Compensation Committee confirms performance results for the fiscal 2021 and fiscal 2022 performance periods, respectively. Shares of Common Stock issued in December 2020 to NEOs for the PRSUs awarded in fiscal 2018 (for the three-year award cycle from fiscal 2018 through fiscal 2020) will not be issued until the Compensation Committee certifies performance results for the fiscal 2019 and fiscal 2020 performance periods. Shares of Common Stock issued to NEOs for the PRSUs awarded in fiscal 2016 (for the three-year award cycle from fiscal 2016 through fiscal 2018) and vested in fiscal 20182020 are set forth in the following table:below:
| PRSU Settlements |
| | | | | | | | |
| | Shares Earned (1) | |
| Name | Fiscal 2016 (#) | Fiscal 2017 (#) | Fiscal 2018 (#) | Total (#) |
| Marietta Edmunds Zakas | 5,079 |
| 4,975 |
| 6,751 |
| 16,805 |
|
| Gregory E. Rogowski | 9,978 |
| 9,772 |
| 13,260 |
| 33,010 |
|
| | | | | | | | | | | | | | | | | |
(1)Year of Award | Performance Period |
| Fiscal 2018 | Fiscal 2019 | Fiscal 2020 | Fiscal 2021 | Fiscal 2022 |
| Fiscal 2018 | See the definitive proxy statements we filed with the SEC on December 15, 2016 and December 14, 2017, for information concerning target RONA performance and actual RONA performance for the 2016
| ,
| Vested 2018 PRSU Awards
(3 Tranches) | and 2017 performance periods, respectively.
|
|
| | | | | |
| Fiscal 2019 |
|
|
| Future Vesting of 2019 PRSU Awards
(3 Tranches) |
|
| |
| | | |
| Fiscal 2020 |
|
|
|
| Future Vesting of 2020 RU Awards
(3 Tranches) |
|
| Future Vesting of 2020 MU Awards
(1 Tranche) |
Time-Based Restricted Stock Units
As described above, a portion of an executive’s long-term incentive award value has historically been awarded in
| | |
| PRSU SETTLEMENTS OF FISCAL 2018 AWARD |
| | | | | | | | | | | | | | |
| Performance Periods | Total Issued Number of Shares |
| Fiscal 2018 | Fiscal 2019 | Fiscal 2020 |
| Name | Number of Shares Earned(1) |
| Scott Hall | 31,892 | 15,088 | 21,364 | 68,344 |
| Marietta Edmunds Zakas | 10,934 | 5,173 | 7,324 | 23,431 |
| Chad D. Mize | 2,505 | 1,214 | 1,678 | 5,397 |
(1)See the form of time-based RSUs. definitive proxy statements we filed with the SEC on December 13, 2018 and December 12, 2019, respectively, for information concerning target RONA performance and actual RONA performance for the 2018 and 2019 performance periods.
TIME-BASED RESTRICTED STOCK UNITS
For fiscal 2018, 50%2020, 30% of each NEO’s target long-term incentive compensation value was awarded in RSUs. The number of RSUs granted was equal to thatthe compensation value divided by the grantprice of our Common Stock on the date stock price.of award. Typically, one-third of the RSUs granted vest on each anniversary of the grant date. See “Executive Compensation — Grants of Plan-Based Awards Table”.Table.”
Timing of Equity AwardsTIMING OF EQUITY AWARDS
While the Compensation Committee may grant equity-based awards at any of its scheduled meetings or by unanimous written consent, it generally grantsestablishes awards for executives at its November or December meeting each year, except for awards related to promotions or new hires. Grants approved during scheduled meetings become effective and are priced as of the date of approval or as of a pre-determinedpredetermined future date based on a date of hire. Grants approved by unanimous written consent become effective and are priced as of a pre-determinedpredetermined future date. All stock options have a per-share exercise price equal to the closing stock price on the NYSE on the effective date of the grant.
PROXY STATEMENT FOR 2021 ANNUAL MEETING 41
Other Cash and Equity Awards
In order to provide a competitive compensation package in connection withUpon his hiring, Mr. Heinrichs’ employment agreement provided for an equity grant of RSUs with a grant date fair value equal to approximately $500,000, which will vest upon the second anniversary of Mr. Heinrichs’ employment. Mr. Heinrichs’ employment agreement also provides for a sign-on bonus of $275,000 to be paid at the same time as his prorated annual bonus for fiscal 2018.
In order to ensure a smooth transition, Mr. Hart agreed to remain with the Company until December 31, 2017, and in connection therewith, received a bonus payment of $90,000. Mr. Hart’s ultimate retirementexit from the Company, on December 31, 2017 was treated under his employment agreement as a termination without cause. As a result, Mr.
Hart Rogowski will receive an aggregate $1,113,860$1,260,835 of severance payments, payable in 18 monthly installments beginning February 2018.June 2020. During fiscal 2018,2020, severance payments, including accrued vacation, to Mr. HartRogowski totaled $495,050.$290,444. Following his retirement,exit from the Company on May 31, 2020, in order to ensure a smooth transition of his responsibilities, Mr. HartRogowski entered into a consulting agreement with the Company, pursuant to which he agreed to provide consulting services to the Company for a period of six months. As a result, in January 2018,June 2020, Mr. HartRogowski began receiving an aggregate$25,000 per month (a total of $100,000 in fiscal 2020) and will receive a cumulative amount of $200,000.$150,000.
Retirement Benefits
We offer retirement benefits to our NEOs and other employees intended to provide a competitive source of retirement income. These retirement benefits are provided through the vehicles described below.
Retirement Savings Plan Applicable to Employees GenerallyRETIREMENT SAVINGS PLAN APPLICABLE TO EMPLOYEES GENERALLY
The Mueller Group LLC Retirement Savings Plan is a 401(k) plan that provides retirement benefits for our non-union employees and those of our participating subsidiaries. Each of our NEOs participated in the plan in fiscal 20182020 on the same basis as our other eligible employees.employees, under which we make matching contributions in accordance with the terms of that plan.
Other Benefits
PerquisitesPERQUISITES
We provide certain perquisites to our NEOs that the Compensation Committee believes are reasonable and consistent with itsour overall compensation program. In fiscal 2018,2020, the Compensation Committee offered the NEOs limited perquisites, including a car allowance (excluding Mr. Mize), life insurance, supplemental long-term disability insurance and reimbursement for certain financial planning and annual physical examination expenses. See “Executive Compensation — Summary Compensation Table — All Other Compensation”.Compensation.”
Severance BenefitsSEVERANCE BENEFITS
Each NEO is entitled to severance benefits. See “Executive Compensation — Potential“Potential Payments Upon Termination or Change-in-Control”.Change-in-Control.”
Change-in-Control AgreementsCHANGE-IN-CONTROL BENEFITS
Change-in-control agreements are used to create incentives for executives to build stockholder value and to seek the highest value possible for stockholders should we be acquired, despite the risk of losing employment. Our change-in-control agreements for executives provide for vesting of outstanding equity-based awards and payment of severance amounts upon a change-in-control and operate with a “double trigger”for severance payments and equity awards, meaning severance payments and accelerated vesting of equity awards do not occur unless the executive’s employment is involuntarily terminated (other than for cause or for termination for good reason) within 24 months following a change-in-control. The agreements also contain a “best-of-net” provision, so that, in the event excise taxes would be imposed on payments under the agreements, the NEO will, at his or her discretion, either (1) pay the excise tax without assistance from the Company or (2) have the payments reduced to an amount at which an excise tax would no longer be payable, based on which resultpayable.
The Company provides NEOs without a change-in-control agreement with change-in-control benefits via the Company's executive severance plan approved by the Compensation Committee and instituted by the Company in January 2020. The executive severance plan provides applicable employees, upon a change-in-control, for vesting of outstanding equity-based awards if a replacement award (as defined in the executive severance plan) is more favorable tonot available and payment of severance amounts if the NEO on an after-tax basis.executive’s employment is involuntarily terminated (other than for cause or for termination for good reason) within 24 months following a change-in-control, i.e., a “double trigger.”
Employee Stock Purchase PlanEMPLOYEE STOCK PURCHASE PLAN
Our Employee Stock Purchase Plan (“ESPP”) provides all of our employees an opportunity to purchase Common Stock, subject to certain restrictions, through regular payroll deductions.
Health and Welfare Benefits
42 MUELLER WATER PRODUCTS, INC.
HEALTH AND WELFARE BENEFITS
We generally offer group medical, dental, vision, life and long-term disability insurance in a flexible benefits package to all active U.S. employees, except as otherwise required by collective bargaining agreements. Employees are provided life insurance up to one times their base salaries at no charge, other than related income taxes, to the employee. For an additional charge, employees may obtain coverage of up to four times their base salary up to a maximum life insurance benefit of $1,250,000. NEOs participate on the same basis as other eligible employees.
Other Factors Considered by the Compensation Committee
Risk and Incentive Compensation
The Compensation Committee has conducted an assessment of our compensation policies and practices and does not believe these policies and practices are reasonably likely to have a material adverse effect on us. This assessment included a review of the risk profile of our compensation policies and practices for all employees. To facilitate its review, the Compensation Committee engaged its compensation consultant to review our compensation structure to identify design elements that might encourage excessive risk taking. The compensation consultant discussed its review and conclusions with the Compensation Committee. In conducting its review, the Compensation Committee noted several policies and practices that mitigate risk, including:
•Using multiple performance measures in annual incentive awards and capping payout levels;
•Maintaining the ability to reduce annual incentive awards, based on its independent judgment;
•Using multiple long-term incentive vehicles;
•Using overlapping multi-year award cycles in connection with performance shares and capping payout levels; and
•Maintaining stock ownership guidelines, an anti-hedging policy, an anti-pledging policy and a clawback policy.
Tally Sheets
The Compensation Committee regularly reviews “tally sheets” for each executive. The tally sheets contain information concerning prior years’ compensation, proposed compensation for the current year, outstanding equity-based awards (both vested and unvested) and various termination-of-employment scenarios. The tally sheets assist the Compensation Committee in evaluating the many facets of executive compensation, understanding the magnitude of potential payouts as a result of termination-of-employment scenarios and considering changes to our compensation programs, arrangements and plans in light of emerging trends.
Other Compensation Practices and Policies
Role of Compensation Consultant in Compensation Decisions
The Compensation Committee has sole authority to select and retain a compensation consultant, including authority to approve fees and retention terms. For fiscal 2018,2020, the Compensation Committee retained Meridian Compensation Partners, LLC as its compensation consultant. The Compensation Committee reviews the performance of its compensation consultant annually.
In fiscal 2018,2020, the compensation consultant’s responsibilities included, but were not limited to:
•Providing recommendations regarding the composition of our Peer Group;
•Preparing and analyzing Peer Group compensation and plan design data;
•Reviewing and advising on the performance measures to be used in incentive awards;
•Valuing equity-based awards; and
•Reviewing and advising on principal aspects of executive and non-employee director compensation, including base salaries, bonuses and equity-based awards for executives, and cash compensation and equity-based awards for non-employee directors.
The Compensation Committee considered the independence of its compensation consultant in light of standards under NYSE listing standards. The Compensation Committee requested and received a letter from the compensation consultant addressing its independence, including the factors described below:
PROXY STATEMENT FOR 2021 ANNUAL MEETING 43
•Other services provided to us by the consultant;
•Fees paid by us as a percentage of the consultant’s total revenue;
•Policies or procedures maintained by the consultant that are designed to prevent a conflict of interest;
•Any business or personal relationships between the individual consultants involved in the engagement and a member of the Compensation Committee;
•Any Common Stock owned by the individual consultants involved in the engagement; and
•Any business or personal relationships between our executives and the consultant or the individual consultants involved in the engagement.
The Compensation Committee took into account these considerations, along with other factors relevant to the compensation consultant’s independence from management, and concluded the compensation consultant is independent and the engagement of the compensation consultant and the services rendered by the compensation consultant did not raise any conflict of interest.
Role of Management in Compensation Decisions
The Compensation Committee reviews information provided by its compensation consultant and uses that information as a reference point for the components of compensation. The Compensation Committee and the Chief Executive Officer discuss the financial metrics and operational goals intended to closely align performance targets of the business units and the Company as a whole with our strategic goals. The Chief Executive Officer makes recommendations to the Compensation Committee for executives other than himself with respect to annual salary adjustments, annual incentive adjustments and grants of equity-based awards under our incentive plans. The Compensation Committee makes the final decision with respect to the compensation of these executives, taking into consideration the Chief Executive Officer’s recommendations.
The Compensation Committee annually receives input from the entire Board with respect to the Chief Executive Officer’s performance and recommends his compensation level to the Board. The Board discusses and approves the annual salary of the Chief Executive Officer. The Chair of the Compensation Committee and Non-Executive Chairman of the Board meet with the Chief Executive Officer to discuss the Chief Executive Officer’s performance and compensation based on evaluations received from the Board. These discussions are considered by the Compensation Committee in setting all elements of compensation for the Chief Executive Officer.
In fiscal 2018,2020, the Chief Executive Officer was present at all of the Compensation Committee meetings but was excused from the executive sessions of the Compensation Committee and did not participate in meetings or deliberations during which his compensation was discussed.
Income Tax Consequences of Executive Compensation
Our compensation programs were designed to permit us to deduct compensation expense under Section 162(m) of the Internal Revenue Code, which historically limited the tax deductibility of annual compensation paid to executives to $1 million, unless the compensation qualified as “performance-based”.“performance-based.” The exemption from Section 162(m)’s deduction limit for performance-based compensation has been repealed (subject to certain transition rules), effective for taxable years beginning after December 31, 2017, such that compensation paid to our NEOs in excess of $1 million is generally not deductible. As a result, we may no longer take a deduction for any compensation paid to our NEOs in excess of $1 million. The Compensation Committee believes stockholder interests are best served by not restricting its discretion and flexibility in structuring compensation programs. In fiscal 20182020 and in plans for fiscal 2019,2021, the Compensation Committee continued to design compensation programs and make grants that it believes are performance-based and well aligned with the interests of our stockholders.
Previous grants made under the 2006 Stock Plan, and the PRSUs granted thereunder, as well as the annual cash incentive award, were structured and were intended to permit such awards to qualify as “performance-based” compensation to maximize the tax deductibility of these awards under Section 162(m). Those awards may not be fully deductible under all circumstances, as a number of additional requirements must be met for the awards to qualify as “performance-based” compensation.
Compensation Recovery (Clawback) Policy
Our employment agreements contain a provision requiring the employee,NEOs are required, to the extent required by law, to reimburse us following the publication of a restatement of our financial statements due to material noncompliance with any financial reporting requirement under the securities laws as a result of misconduct for (a)incentive-based or equity-based compensation received and (b)any profits realized from the sale of our securities in each case during the 12 months prior to discovery of the noncompliance. The Compensation Committee has exclusive authority to interpret and enforce this provision.
44 MUELLER WATER PRODUCTS, INC.
The Compensation Committee has adopted a “Clawback Policy” to recover pay that is determined to have been wrongfully earned by managerial or executive employees, including our NEOs. As a result, all RSUsequity awards granted after November 30, 2009 include a clause that reduces the number of equity-based awards upon the occurrence of certain events. The Compensation Committee has the exclusive authority to interpret the Clawback Policy, and may offset compensation as necessary to recover amounts due under the Clawback Policy.
Prohibition on Hedging and Pledging
We do not allow directors or employees to hedge the value of our equity securities held directly or indirectly by them. Our policy prohibits the purchase or sale of puts, calls, options or other derivative securities based on our securities, as well as hedging or monetization transactions, purchases of our equity securities on margin and borrowing against any account in which our securities are held. We prohibit pledging of Common Stock by executives or directors.
Stock Ownership Guidelines
The Compensation Committee has adopted stock ownership guidelines to promote a high level of stock retention among executives and non-employee directors. The guidelines require that the total value of the executive’s or non-employee director’s holdings of Common Stock must equal or exceed the specified target value shown below.
|
| | | | | | | |
| Position/Title | | Target Ownership |
| Chief Executive Officer and President | | 6 x6x base salary |
| Executive Vice Presidents | | 3 x 3xbase salary |
| Senior Vice Presidents | | 2 x2x base salary |
| Vice Presidents | | 1x base salary |
| Non-Employee Directors | | 5 x5x annual retainer |
All NEOs and directors are in compliance with our stock ownership requirements.guidelines. Our stock ownership guidelines are available on our website at www.muellerwaterproducts.com. Seewww.muellerwaterproducts.com.
Report of the Guidelines for more detail.
REPORT OF THE COMPENSATION AND HUMAN RESOURCES COMMITTEECompensation and Human Resources Committee
The Compensation Committee participated in the preparation of the Compensation Discussion and Analysis. Based on its review and discussions with management, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
See “Corporate Governance— Board Operations“Board Structure — Board Committee Information” for information concerning the Compensation Committee and its responsibilities.
| | | | | |
|
| Compensation and Human Resources Committee |
Michael | MICHAEL T. Tokarz, ChairmanTOKARZ, CHAIR |
Shirley | SHIRLEY C. FranklinFRANKLIN |
Jerry | THOMAS J. HANSEN |
| JERRY W. KolbKOLB |
| CHRISTINE ORTIZ |
Executive Compensation Tables Summary Compensation Table
The amounts reported in the following table, including base salary, annual and long-term incentive amounts, benefits and perquisites, are described more fully under “Compensation Discussion and Analysis”Analysis.”
| | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position(1) | Fiscal
Year | Salary(2) ($) | Bonus(3) ($) | Stock Awards(4) ($) | Non-Equity Incentive Plan Compensation(5) ($) | All Other Compensation(6) ($) | Total
($) |
Scott Hall President and Chief Executive Officer | 2020 | 777,786 | | — | | 2,509,534 | | 946,456 | | 52,990 | | 4,286,766 | |
| 2019 | 787,950 | | — | | 1,514,329 | | 438,889 | | 259,338 | | 3,000,506 | |
| 2018 | 765,000 | | — | | 1,402,578 | | 1,009,839 | | 41,715 | | 3,219,132 | |
Marietta Edmunds Zakas Executive Vice President and Chief Financial Officer | 2020 | 404,692 | | — | | 755,866 | | 344,717 | | 49,395 | | 1,554,671 | |
| 2019 | 409,333 | | — | | 457,792 | | 159,599 | | 50,426 | | 1,077,150 | |
| 2018 | 379,529 | | 15,000 | | 524,124 | | 338,173 | | 41,900 | | 1,298,726 | |
Steven S. Heinrichs Executive Vice President, Chief Legal and Compliance Officer and Secretary | 2020 | 413,001 | | — | | 521,697 | | 301,538 | | 36,975 | | 1,273,211 | |
| 2019 | 420,000 | | — | | 253,320 | | 140,364 | | 50,451 | | 864,135 | |
| 2018 | 61,307 | | 275,000 | | 499,994 | | 48,557 | | 7,543 | | 892,401 | |
Gregory S. Rogowski Former Executive Vice President, Business Development | 2020 | 313,070 | | 550,000 | | 207,850 | | 278,231 | | 418,181 | | 1,767,332 | |
| 2019 | 467,067 | | — | | 476,609 | | 195,117 | | 45,438 | | 1,184,231 | |
| 2018 | 454,933 | | — | | 591,809 | | 450,401 | | 84,458 | | 1,581,601 | |
Chad D. Mize Senior Vice President, Sales and Marketing | 2020 | 302,969 | | — | | 304,481 | | 184,275 | | 13,654 | | 805,379 | |
| 2019 | — | | — | | — | | — | | — | | — | |
| 2018 | — | | — | | — | | — | | — | | — | |
(1)Effective January 23, 2017, Mr. Hall was appointed President and Chief Executive Officer. Effective January 1, 2018, Ms. Zakas was appointed Executive Vice President and Chief Financial Officer. Effective August 8, 2018, Mr. Heinrichs was appointed Executive Vice President, Chief Legal and Compliance Officer and Secretary. Effective October 1, 2019, Mr. Mize was appointed Senior Vice President, Sales and Marketing. Effective May 31, 2020, Mr. Rogowski was no longer with the Company.
(2)Due to and in mitigation of the financial impact of COVID-19, our NEOs received twenty percent (20%) reduced salary payments for the period from May 18, 2020 through July 24, 2020.
(3)Mr. Heinrichs received a sign-on bonus in connection with joining the Company in August 2018. Ms. Zakas received payments in recognition of assuming interim Human Resources responsibilities from January 2016 through December 2017. Mr. Rogowski received $550,000 under an amendment to his employment agreement dated May 5, 2017.
(4)“Stock Awards” comprise RSUs, Market Units and RONA Units. All RSUs and Market Units are granted on the date of award. RONA Units are granted annually in three equal tranches, beginning on the date of award. The Stock Awards amounts include the aggregate grant date fair values of RSUs and Market Units granted in fiscal 2020 and the third, second and first tranches of RONA Units awarded in fiscal 2018, 2019 and 2020, respectively, for the fiscal 2020 performance period. The dollar amounts shown for Stock Awards represent the aggregate grant date fair values calculated in accordance with ASC 718, Stock Compensation. See “Compensation Discussion and Analysis — Compensation Elements — Long-Term Equity-Based Compensation” for more information.
(5)Amounts reflect annual non-equity incentive plan compensation awards earned by our NEOs based on Company financial performance, EHS-related objectives and rTSR results. The amounts earned for fiscal 2020 were paid in December 2020. See “Compensation Discussion and Analysis — Compensation Elements — Annual Cash Incentive Awards” for more information.
(6)Amounts reflect the combined value of each NEO’s perquisites and compensation that is not otherwise reflected in the Summary Compensation Table. Amounts for fiscal 2020 are described in “— Summary Compensation Table — All Other Compensation” below.
46 MUELLER WATER PRODUCTS, INC.
|
| | | | | | | | | | | | | | | | | | | |
Name and Principal Position(1) | Fiscal Year | Salary ($) | Bonus(2) ($) | Stock Awards(3) ($) | Non-Equity Incentive Plan Compensation(4) ($) | All Other Compensation(5) ($) | Total ($) |
| Scott Hall | 2018 | | 765,000 |
| | — |
| | 1,378,844 |
| | 1,009,839 |
| | 41,715 |
| | 3,195,398 |
|
| President and Chief Executive Officer | 2017 | | 518,229 |
| | — |
| | 1,657,694 |
| | 908,925 |
| | 108,195 |
| | 3,193,043 |
|
| Marietta Edmunds Zakas | 2018 | | 379,529 |
| | 15,000 |
| | 515,255 |
| | 338,173 |
| | 41,900 |
| | 1,289,857 |
|
| Executive Vice President, Chief Financial Officer | 2017 | | 351,967 |
| | 60,000 |
| | 393,623 |
| | 255,929 |
| | 36,883 |
| | 1,098,402 |
|
| 2016 | | 338,567 |
| | 145,000 |
| | 271,111 |
| | 261,973 |
| | 36,612 |
| | 1,053,263 |
|
| Steven S. Heinrichs | 2018 | | 61,307 |
| | 275,000 |
| | 495,796 |
| | 48,557 |
| | 7,543 |
| | 888,203 |
|
| Executive Vice President, General Counsel and Secretary | 2017 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| 2016 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Gregory S. Rogowski | 2018 | | 454,933 |
| | — |
| | 581,794 |
| | 450,401 |
| | 84,458 |
| | 1,571,586 |
|
| Executive Vice President, Sales and Marketing | 2017 | | 441,667 |
| | — |
| | 632,914 |
| | 282,075 |
| | 37,372 |
| | 1,394,028 |
|
| 2016 | | 429,500 |
| | — |
| | 552,069 |
| | 389,614 |
| | 37,226 |
| | 1,408,409 |
|
| Evan L. Hart | 2018 | | 104,500 |
| | 90,000 |
| | — |
| | 103,459 |
| | 704,328 |
| | 1,002,287 |
|
| Senior Vice President and Chief Financial Officer | 2017 | | 413,767 |
| | — |
| | 641,505 |
| | 376,083 |
| | 32,035 |
| | 1,463,390 |
|
| 2016 | | 401,367 |
| | — |
| | 573,278 |
| | 388,208 |
| | 31,801 |
| | 1,394,654 |
|
| |
(1) | Effective August 8, 2018, Mr. Heinrichs was appointed Executive Vice President, General Counsel, Secretary and Chief Compliance Officer. Effective January 1, 2018, Ms. Zakas was appointed Executive Vice President and Chief Financial Officer. Effective October 1, 2017, Mr. Rogowski was appointed Executive Vice President, Sales and Marketing. Effective December 31, 2017, Mr. Hart retired. |
| |
(2) | Mr. Heinrichs received a sign-on bonus of $275,000 in connection with joining the Company in August 2018. In order to ensure a smooth transition, Mr. Hart agreed to remain with the Company until December 31, 2017, and in connection therewith, received a bonus payment of $90,000. Ms. Zakas received payments in recognition of assuming interim Human Resources responsibilities from January 2016 through December 2017. |
| |
(3) | The dollar amounts shown for RSU and PRSU awards represent the aggregate grant date fair values calculated in accordance with ASC 718, Stock Compensation, excluding the effect of forfeitures. See “Compensation Discussion and Analysis — Compensation Elements — Long-Term Equity-Based Compensation” for more information. The dollar amounts shown for fiscal 2018 include the aggregate grant date fair values of PRSUs awarded in fiscal 2016, 2017 and 2018 for the fiscal 2018 performance period assuming target performance.
|
| |
(4) | Amounts reflect annual non-equity incentive plan compensation awards earned by our NEOs based on Company financial performance and EHS-related objectives. The amounts earned for fiscal 2018 were paid in December 2018. See “Compensation Discussion and Analysis — Compensation Elements — Annual Cash Incentive Awards” for more information. |
| |
(5) | Amounts reflect the combined value of each NEO’s perquisites and compensation that is not otherwise reflected in the Summary Compensation Table. Amounts for fiscal 2018 are described in “— Summary Compensation Table — All Other Compensation” below. |
Summary Compensation Table - All Other Compensation
The following table provides additional detail regarding the amounts presented in the “All Other Compensation” column in the Summary Compensation Table for fiscal 2018.2020.
| | | | | | | | | | | | | | | | | | | | |
| Name | Vehicle
Allowance
($) | Financial Planning(1) ($) | Contributions
to 401(k)
Plans
($) | Life and
Long-Term
Disability
Insurance
($) | Other(2) ($) | Total
($) |
| Scott Hall | 24,000 | | — | | 11,548 | | 17,442 | | — | | 52,990 | |
| Marietta Edmunds Zakas | 18,000 | | 7,500 | | 11,474 | | 9,370 | | 3,051 | | 49,395 | |
| Steven S. Heinrichs | 18,000 | | — | | 11,573 | | 7,402 | | — | | 36,975 | |
| Gregory S. Rogowski | 12,000 | | — | | 7,813 | | 7,923 | | 390,445 | | 418,181 | |
| Chad D. Mize | — | | 1,350 | | 10,019 | | 2,285 | | — | | 13,654 | |
|
| | | | | | | | | | | | |
| Name | Vehicle Allowance ($) | Financial Planning (1) ($) | Contributions to 401(k) Plans ($) | Life and Long-Term Disability Insurance ($) | Other(2) ($) | Total ($) |
| Scott Hall | 24,000 |
| — |
| 11,000 |
| 6,715 |
| — |
| 41,715 |
|
| Marietta Edmunds Zakas | 17,100 |
| 7,500 |
| 11,000 |
| 6,300 |
| — |
| 41,900 |
|
| Steven S. Heinrichs | 3,000 |
| — |
| 1,383 |
| 160 |
| 3,000 |
| 7,543 |
|
| Gregory S. Rogowski | 18,000 |
| — |
| 11,000 |
| 5,672 |
| 49,786 |
| 84,458 |
|
| Evan L. Hart | 4,500 |
| — |
| 3,600 |
| 1,179 |
| 695,049 |
| 704,328 |
|
| |
(1)
| NEOs are entitled to reimbursement of up to $7,500 for annual financial planning ($10,000 for the CEO). |
| |
(2) | (2)Other compensation for Mr. Hall, Heinrichs and Mize and Ms. Zakas consists of reimbursement of annual physical exam expenses. Other compensation for Mr. Rogowski consists of relocation benefits. Other compensation for Mr. Heinrichs consists of reimbursement of annual physical exam expenses. Other compensation for Mr. Hart consists of severance benefits as well as a bonus payment for |
transition services provided to the Company prior to his retirement and monthly fees for consulting services provided to the Company following his retirement.exit. See “Compensation Discussion and Analysis -— Compensation Elements -— Other Cash and Equity Awards”.Awards.”
Grants of Plan-Based Awards Table
The following table summarizes the awardsfiscal 2020 grants made to our NEOs during fiscal 2018on December 3, 2019 on a grant-by-grant basis. Each of the equity-based awards granted during fiscal 20182020 and reported in the following table was granted under, and is subject to the terms of, the 2006 Stock Plan. |
| | | | | | | | | | | | | | | | | |
| Fiscal 2018 Grants of Plan-Based Awards Table |
| | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Issuance of Shares Under Equity Incentive Plans (2) | All Other Stock-Based Awards (#) (3) | Grant Date Fair Value of Stock-Based Awards ($) (4) |
| Name | Award Date | | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) |
| Scott Hall | | | — | 765,000 |
| 1,530,000 |
| | | | | |
| | 11/28/2017 | | | | | | | | 70,507 |
| 860,185 |
|
| | 11/28/2017 | (5) | | | | 11,751 |
| 23,502 |
| 47,004 |
| | 286,724 |
|
| | 1/23/2017 | (5) | | | | 9,506 |
| 19,011 |
| 38,022 |
| | 231,934 |
|
| Marietta Edmunds Zakas | | | — | 256,181 |
| 512,363 |
| | | | | |
| 11/28/2017 | | | | | | | | 24,174 |
| 294,923 |
|
| | 11/28/2017 | (5) | | | | 4,029 |
| 8,058 |
| 16,116 |
| | 98,308 |
|
| | 11/29/2016 | (5) | | | | 2,514 |
| 5,027 |
| 10,054 |
| | 61,329 |
|
| | 12/1/2015 | (5) | | | | 2,488 |
| 4,975 |
| 9,950 |
| | 60,695 |
|
| Steven S. Heinrichs | | | — | 36,784 |
| 73,568 |
| | | | | |
| | 8/8/2018 | | | | | | | | 41,981 |
| 495,796 |
|
| Gregory S. Rogowski |
| | — | 341,200 |
| 682,400 |
| | | | | |
| | 11/28/2017 | | | | | | | | 23,045 |
| 281,149 |
|
| | 11/28/2017 | (5) | | | | 3,841 |
| 7,682 |
| 15,364 |
| | 93,720 |
|
| | 11/29/2016 | (5) | | | | 3,595 |
| 7,189 |
| 14,378 |
| | 87,706 |
|
| | 12/1/2015 | (5) | | | | 4,886 |
| 9,772 |
| 19,544 |
| | 119,218 |
|
| Evan L. Hart | | | — | 78,375 |
| 156,750 |
| | | | | |
| | |
(1) | Amounts represent the range of possible cash payouts for fiscal 2018 awards under the annual cash incentive plan as described in “Compensation Discussion and Analysis — Compensation Elements — Annual Cash Incentive Awards”. The awards that were earned based on actual performance for fiscal 2018 were paid in December 2018 and are shown in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. For Mr. Hart, amounts reflect Mr. Hart’s retirement from the Company on December 31, 2017.FISCAL 2020 GRANTS OF PLAN-BASED AWARDS TABLE |
| |
(2) | Represents PRSU awards that may be earned based on the achievement of performance goals in the 2018 performance period. See “Compensation Discussion and Analysis — Compensation Elements — Long-Term Equity-Based Compensation — Performance-Based Restricted Stock Units”. Estimated amounts that may be earned over the three-year award cycle of PRSUs granted for fiscal 2016, 2017 and 2018 are reflected in “Outstanding Equity Awards Table” below. |
| |
(3) | Represents time-vesting RSUs. Each RSU entitles the grantee to receive one share of Common Stock upon vesting. The RSUs generally vest in equal installments on the first, second and third anniversaries of the grant date. See “Compensation Discussion and Analysis — Compensation Elements — Long-Term Equity-Based Compensation — Time-Based Restricted Stock Units”. The RSUs granted to Mr. Heinrichs on August 8, 2018 will vest in full on the second anniversary of the grant date. |
| |
(4) | See footnote 3 to the “Summary Compensation Table” for a description of the methods used to determine grant date fair value of equity-based awards. |
| |
(5) | Represents the range of shares of Common Stock that may vest after the end of the three-year award cycle applicable to a PRSU award solely with respect to the fiscal 2018 performance period, assuming achievement of threshold, target and maximum performance. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Issuance of Shares Under Equity Incentive Plans(2) | All Other Stock-Based Awards (#)(3) | Grant Date Fair Value of Stock-Based Awards ($)(4) |
| Name | Award Date | Threshold ($) | Target
($) | Maximum ($) | | Threshold (#) | Target (#) | Maximum (#) |
| Scott Hall | | | — | | 808,936 | | 1,009,552 | |
|
|
|
|
|
|
| 12/3/2019 | | | | |
| | | | 55,950 | | 629,997 | |
| 12/3/2019 | (5) |
|
|
|
| 27,975 | | 55,950 | | 111,900 | | | 835,893 | |
| 12/3/2019 | (6) | | | | | 12,433 | | 24,866 | | 49,732 | | | 279,991 | |
| 11/27/2018 | (6) |
|
|
|
| 22,159 | | 44,317 | | 88,634 | | | 499,009 | |
| 11/28/2017 | (6) | | | | | 11,752 | | 23,503 | | 47,006 | | | 264,644 | |
| Marietta Edmunds Zakas | | | — | | 294,630 | | 367,698 | |
|
|
|
|
|
|
| 12/3/2019 | |
|
|
|
|
|
|
| 16,518 | | 185,993 | |
| 12/3/2019 | (5) | | | | | 8,259 | | 16,518 | | 33,036 | | | 246,779 | |
| 12/3/2019 | (6) | | | | | 3,671 | | 7,341 | | 14,682 | | | 82,660 | |
| 11/27/2018 | (6) |
|
|
|
| 6,648 | | 13,295 | | 26,590 | |
| 149,702 | |
| 11/28/2017 | (6) |
|
|
|
| 4,029 | | 8,058 | | 16,116 | |
| 90,733 | |
| Steven S. Heinrichs | | | — | | 257,725 | | 321,641 | |
|
|
|
|
|
|
| 12/3/2019 | | | | | | | | | 12,921 | | 145,490 | |
| 12/3/2019 | (5) | | | | | 6,461 | | 12,921 | | 25,842 | | | 193,040 | |
| 12/3/2019 | (6) | | | | | 2,871 | | 5,742 | | 11,484 | | | 64,655 | |
| 11/27/2018 | (6) | | | | | 5,263 | | 10,525 | | 21,050 | | | 118,512 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Issuance of Shares Under Equity Incentive Plans(2) | All Other Stock-Based Awards (#)(3) | Grant Date Fair Value of Stock-Based Awards ($)(4) |
| Name | Award Date | Threshold ($) | Target
($) | Maximum ($) | | Threshold (#) | Target (#) | Maximum (#) |
| Gregory S. Rogowski | | | — | | 237,804 | | 296,780 | |
|
|
|
|
|
|
| 12/3/2019 | | | | | | | | | — | | — | |
| 12/3/2019 | (5) | | | | | 1,806 | | 3,611 | | 7,222 | | | 53,948 | |
| 12/3/2019 | (6) | | | | | 2,403 | | 4,805 | | 9,610 | | | 54,104 | |
| 11/27/2018 | (6) |
|
|
|
| 4,432 | | 8,863 | | 17,726 | | | 99,797 | |
| 11/28/2017 | (6) |
|
|
|
| — | | — | | — | |
| — | |
| Chad D. Mize | | | — | | 157,500 | | 196,560 | | | | | | | |
| 12/3/2019 | | | | |
|
|
|
| 7,992 | | 89,990 | |
| 12/3/2019 | (5) | | | | | 3,996 | | 7,992 | | 15,984 | | | 119,400 | |
| 12/3/2019 | (6) | | | | | 1,776 | | 3,552 | | 7,104 | | | 39,996 | |
| 11/27/2018 | (6) | | | | | 1,523 | | 3,046 | | 6,092 | | | 34,298 | |
| 11/28/2017 | (6) | | | | | 924 | 1,847 | | 3,694 | | | 20,797 | |
(1)Amounts represent the range of possible cash payouts for fiscal 2020 awards under the annual cash incentive plan as described in “Compensation Discussion and Analysis — Compensation Elements — Annual Cash Incentive Awards.” The awards that were earned based on actual performance for fiscal 2020 were paid in December 2020 and are shown in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.
(2)Represents (i) shares that could have been earned based on the achievement of RONA performance goals in the 2020 performance period in connection with applicable RONA Unit grants and (ii) shares that could be earned based on the achievement of rTSR performance goals established in fiscal 2020 in connection with applicable Market Unit grants. Estimated amounts that may be earned over the three-year RONA Unit award cycle and three-year Market Unit cumulative award period of applicable PRSUs awarded for fiscal 2018, 2019 and 2020 are reflected in the “Outstanding Equity Awards Table” below. Market Units were initially granted in fiscal 2020. See “Compensation Discussion and Analysis — Compensation Elements — Long-Term Equity-Based Compensation — Performance-Based Restricted Stock Units.”
(3)Represents time-based RSUs. Each RSU entitles the grantee to receive one share of Common Stock upon vesting. The RSUs generally vest in equal installments on the first, second and third anniversaries of the award date. See “Compensation Discussion and Analysis — Compensation Elements — Long-Term Equity-Based Compensation — Time-Based Restricted Stock Units.”
(4)See footnote 4 to the “Summary Compensation Table” for a description of the methods used to determine grant date fair value of equity-based awards.
(5)Represents the range of shares of Common Stock that may vest after the end of the three-year cumulative award period applicable to a PRSU award based solely on rTSR performance goals established in fiscal 2020, i.e., Market Units, assuming achievement of threshold, target and maximum performance. Mr. Rogowski receives a prorated amount based upon his time of service, ending May 31, 2020, during the award period.
(6)Represents the range of shares of Common Stock that may vest after the end of the three-year award cycle applicable to a PRSU award solely with respect to the fiscal 2020 RONA performance period goals established in fiscal 2020, i.e., RONA Units, assuming achievement of threshold, target and maximum performance. Mr. Rogowski receives a prorated amount based upon his time of service, ending May 31, 2020, during the award cycle.
48 MUELLER WATER PRODUCTS, INC.
Outstanding Equity Awards Table
The following table sets forth information detailing the outstanding unexercised options and unvested RSUs and PRSUs held by each of our NEOs at September 30, 2018.2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | Option Awards |
| Stock Awards |
|
| | Number of Securities
Underlying Options
(#) | Option Exercise Price ($)(1) | Option
Expiration
Date |
| Number of Units That Have Not Vested (#)(2) | Market Value of Units That Have Not Vested ($)(3) | Number of
Performance
Units That
Have Not
Vested
(#) | Market Value of Performance Units That Have Not Vested ($)(3) |
| Name | Award Date | Exercisable | Unexercisable |
|
| Scott Hall | 11/28/17 | |
|
|
|
|
| 23,502 | | 244,186 | | — | | — | |
| 11/27/18 | (4) |
|
|
|
|
| 37,986 | | 394,675 | | 113,054 | | 1,174,631 | |
| 12/03/19 | (5) | | | | | | 55,950 | | 581,321 | | 128,285 | | 1,332,882 | |
| Marietta Edmunds Zakas | 11/29/11 | | 25,260 | | — | | 2.03 | | 11/29/21 |
| — | | — | | — | | — | |
| 11/28/17 | |
|
|
|
|
| 8,058 | | 83,723 | | — | | — | |
| 11/27/18 | (4) | | | | | | 11,396 | | 118,404 | | 33,916 | | 352,387 | |
| 12/03/19 | (5) | | | | | | 16,518 | | 171,622 | | 37,872 | | 393,490 | |
| Steven S. Heinrichs | 11/27/18 | (4) | | | | | | 9,021 | | 93,728 | | 26,850 | | 278,972 | |
| 12/03/19 | (5) | | | | | | 12,921 | | 134,249 | | 29,624 | | 307,793 | |
| Gregory S. Rogowski | 11/27/18 | (4) | | | | | | 11,396 | | 118,404 | | 16,591 | | 172,380 | |
| 12/03/19 | (5) | | | | | | — | | — | | 7,978 | | 82,891 | |
| Chad D. Mize | 11/28/17 | | | | | | | 1,846 | | 19,180 | | — | | — | |
| 11/27/18 | (4) | | | | | | 2,611 | | 27,128 | | 7,820 | | 81,250 | |
| 12/03/19 | (5) | | | | | | 7,992 | | 83,037 | | 18,324 | | 190,386 | |
|
| | | | | | | | | | | | | | | | | | |
| Name | | | Option Awards | Stock Awards |
Grant Date | Number of Securities Underlying Options (#) | Option Exercise Price ($) (1) | Option Expiration Date | Number of Units of Stock That Have Not Vested (#) (2) | Market Value of Units of Stock That Have Not Vested ($) (3) | Number of Performance Shares That Have Not Vested (#) | Market Value of Performance Shares That Have Not Vested ($) (3) |
| Exercisable | | Unexercisable |
| Scott Hall | 01/23/17 | (5) |
|
| |
|
|
|
|
| 38,022 |
| 435,732 |
| 63,821 |
| 731,389 |
|
| | 11/28/17 | | | | | | | 70,507 |
| 808,010 |
| 78,898 |
| 904,171 |
|
| Marietta Edmunds Zakas | 12/02/08 | | 38,022 |
| | — |
| 5.49 |
| 12/02/18 | — |
| — |
| — |
| — |
|
| | 12/01/09 | | 34,965 |
| | — |
| 5.05 |
| 12/01/19 | — |
| — |
| — |
| — |
|
| | 11/30/10 | | 34,965 |
| | — |
| 3.52 |
| 11/30/20 | — |
| — |
| — |
| — |
|
| | 11/29/11 | | 25,260 |
| | — |
| 2.03 |
| 11/29/21 | — |
| — |
| — |
| — |
|
| | 12/01/15 | | | | | | | 4,975 |
| 57,014 |
| — |
| — |
|
| | 11/29/16 | (4) | | | | | | 10,054 |
| 115,219 |
| 16,877 |
| 193,410 |
|
| | 11/28/17 | (5) | | | | | | 24,174 |
| 277,034 |
| 27,051 |
| 310,004 |
|
| Steven S. Heinrichs | 08/08/18 | | | | | | | 41,981 |
| 481,102 |
| — |
| — |
|
| Gregory S. Rogowski | 12/01/09 | | 85,839 |
| | — |
| 5.05 |
| 12/01/19 | — |
| — |
| — |
| — |
|
| | 11/30/10 | | 85,839 |
| | — |
| 3.52 |
| 11/30/20 | — |
| — |
| — |
| — |
|
| | 11/29/11 | | 70,684 |
| | — |
| 2.03 |
| 11/29/21 | — |
| — |
| — |
| — |
|
| | 12/01/15 |
| | | | | | 9,772 |
| 111,987 |
| — |
| — |
|
| | 11/29/16 | (4) | | | | | | 14,378 |
| 164,772 |
| 24,134 |
| 276,576 |
|
| | 11/28/17 | (5) | | | | | | 23,045 |
| 264,096 |
| 25,787 |
| 295,519 |
|
(2)RSUs vest in equal installments on the first, second and third anniversaries of the respective award dates.
| |
(1) | Option exercise prices are equal to the closing price of Common Stock on the NYSE on the respective grant dates. |
| |
(2) | RSUs granted on 12/01/15, 11/29/16, 1/23/17 and 11/28/17 each vest in equal installments on the first, second and third anniversaries of the respective grant dates. Mr. Heinrichs’ RSUs granted on 08/08/18 vest on the second anniversary of the date of grant. |
| |
(3) | “Market value” is calculated by multiplying the number of RSUs or PRSUs that have not vested by the adjusted closing price of Common Stock on the NYSE on September 28, 2018 of $11.46 per share. |
| |
(4) | Includes PRSUs awarded in fiscal 2017 for a three-year award cycle (fiscal 2017 through fiscal 2019). The PRSUs shown are based on actual performance for fiscal 2017 and 2018 and assumes target performance for fiscal 2019. Actual performances for fiscal 2017 and 2018 were 100.0% and 135.7% of target, respectively. See “Compensation Discussion and Analysis — Compensation Elements — Long-Term Equity-Based Compensation — Performance-Based Restricted Stock Units”. |
| |
(5) | Includes PRSUs awarded in fiscal 2018 for a three-year award cycle (fiscal 2018 through fiscal 2020). The PRSUs shown are based on actual performance for fiscal 2018 and assume target performance for fiscal 2019 and 2020. Actual performance for fiscal 2018 was 135.7% of target. See “Compensation Discussion and Analysis — Compensation Elements — Long-Term Equity-Based Compensation — Performance-Based Restricted Stock Units”. |
(3)Market value is calculated by multiplying the number of RSUs or PRSUs that have not vested by the closing price of Common Stock on the NYSE on September 30, 2020 of $10.39 per share. (4)Includes RONA Units and Market Units awarded in fiscal 2019 for a three-year award cycle (fiscal 2019 through fiscal 2021). The PRSUs shown are based on actual RONA performance for fiscal 2019 and 2020 and assume target performance for fiscal 2021. Actual RONA performances for fiscal 2019 and 2020 were 64.2% and 90.9% of target, respectively. See “Compensation Discussion and Analysis — Compensation Elements — Long-Term Equity-Based Compensation — Performance-Based Restricted Stock Units.” Market Units were initially granted in fiscal 2020.
(5)Includes RONA Units and Market Units awarded in fiscal 2020 for a three-year award cycle (fiscal 2020 through fiscal 2022). The RONA Units shown are based on actual RONA performance for fiscal 2020 and assume target performance for fiscal 2021 and 2022. Actual RONA performance for fiscal 2020 was 90.9% of target. See “Compensation Discussion and Analysis — Compensation Elements — Long-Term Equity-Based Compensation — Performance-Based Restricted Stock Units.”
Option Exercises and Stock Vested Table
The following table shows stock options exercised and RSUs and PRSUs vested during fiscal 2018.2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Option Awards | | RSU Awards | | PRSU Awards(3) |
| Name | Number of
Shares
Acquired
on Exercise | Value Realized on Exercise(1) ($) |
| Number of
Shares
Acquired
on Vesting
(#) | Value Realized on Vesting(2) ($) |
| Number of
Shares
Acquired
on Vesting
(#) | Value Realized on Vesting(2) ($) |
| Scott Hall | — | | — | |
| 61,507 | | 710,014 | |
| 68,344 | | 710,094 | |
| Marietta Edmunds Zakas | 69,930 | | 477,869 | |
| 18,783 | | 211,460 | |
| 23,431 | | 243,448 | |
| Steven S. Heinrichs | — | | — | |
| 46,492 | | 524,294 | |
| — | | — | |
| Gregory S. Rogowski | 156,523 | | 1,322,540 | |
| 20,568 | | 231,606 | |
| — | | — | |
| Chad D. Mize | — | | — | |
| — (4) | 60,975 | |
| 5,397 | | 56,075 | |
(1)Calculated by subtracting the exercise price of the option from the actual trade value of the share on exercise, multiplied by the number of options exercised.
PROXY STATEMENT FOR 2021 ANNUAL MEETING 49
|
| | | | | | | | | | | | |
| Option Awards | RSU Awards | PRSU Awards |
| Name | Number of Shares Acquired on Exercise | Value Realized on Exercise(1) ($) | Number of Shares Acquired on Vesting | Value Realized on Vesting(2) ($) | Number of Shares Earned on Vesting | Value on Vesting(2)
($) |
| Scott Hall | — |
| — |
| 75,081 |
| 891,211 |
| — |
| — |
|
| Marietta Edmunds Zakas | 22,676 |
| 37,028 |
| 14,604 |
| 181,013 |
| 16,805 |
| 193,426 |
|
| Gregory S. Rogowski | — |
| — |
| 26,164 |
| 324,060 |
| 33,010 |
| 379,945 |
|
| Evan L. Hart | 342,922 |
| 2,485,868 |
| 26,886 |
| 332,974 |
| — |
| — |
|
| |
(1) | Calculated by subtracting the exercise price of the option from the closing price of Common Stock on the NYSE on the exercise date, multiplied by the number of options exercised. |
| |
(2) | Calculated as the closing price of Common Stock on the NYSE on the vesting date multiplied by the number of RSUs or PRSUs that vested. |
(3)Consists only of RONA Units. Market Units were initially granted in fiscal 2020, which potentially vest in 2023. (4)Cash equivalent of 5,414 shares via annual incentive plan.
Pension Plan
None of our NEOs participate in a defined benefit pension plan. Each NEO participates in our 401(k) plan, under which we make matching contributions in accordance with the terms of that plan.
CEO Pay Ratio Disclosure
As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and SEC rules, we are providing the following information:
For fiscal 2018, (i) the annual total compensation of our median employee (excluding our CEO) was $58,992; and (ii) the annual total compensation of our CEO was $3,195,398. Based on this information, the ratio of the annual total compensation of our CEO to that of the median employee is approximately 54 to 1. Our employee population consists of approximately 2,600 employees located throughout the world, with approximately 88% in the United States, 5% in Canada, 6% in China and 1% elsewhere.
To identify the median employee for fiscal 2018, we included all part-time and full-time employees that were employed for any portion of fiscal 2018 so long as they were still actively employed on September 30, 2018. Earnings types used included regular pay (base salary for exempt population and hourly wages for non-exempt population), bonuses, overtime, shift pay and paid time off. Commissions and executive perquisites were omitted from the median employee selection calculation. Using this methodology, we determined the “median employee” was a full-time, hourly employee located in the United States.
Employment, Severance and Change-in-Control Arrangements
At September 30, 2018,2020, we maintained employment agreements with each NEO.NEO except as noted. Each agreement provides for an annual equity opportunity, which is subject to the discretion of the Compensation Committee, and commensurate with their executive-level position. Each agreement also entitles the employee to receive reimbursement for financial planning services and the cost of an annual physical exam. The following table sets forth certain information with respect to these agreements.
| | | | | | | | | | | | | | | | | |
| Name | Base Salary Rate(1) ($) | Annual Target Bonus as Percent of Base Salary(2) (%) | Monthly Car
Allowance
($) | Annual
Vacation | Severance Benefits as Percent of Salary(3) (%) |
| Scott Hall | 815,567 | | 100 | | 2,000 | | 4 weeks | 300.0 | |
| Marietta Edmunds Zakas | 424,350 | | 70 | | 1,500 | | 4 weeks | 262.5 | |
| Steven S. Heinrichs | 433,063 | | 60 | | 1,500 | | 4 weeks | 262.5 | |
Chad D. Mize(4) | 315,000 | | 50 | | N/A | 4 weeks | 100.0 |
|
| | | | | | | |
| Name | Base Salary Rate(1) ($) | Annual Target Bonus as Percent of Base Salary(2) (%) | Monthly Car Allowance ($) | Annual Vacation | Severance Benefits as Percent of Salary(3) (%) |
| Scott Hall | 772,500 |
| 100.0 | 2,000 |
| 4 weeks | 300.0 |
| Marietta Edmunds Zakas | 400,000 |
| 70.0 | 1,500 |
| 4 weeks | 262.5 |
| Steven S. Heinrichs | 415,000 |
| 60.0 | 1,500 |
| 4 weeks | 262.5 |
| Gregory S. Rogowski | 459,400 |
| 75.0 | 1,500 |
| 4 weeks | 262.5 |
| |
(1) | Salaries are reviewed annually. Amounts shown represent annual salary rates as of September 30, 2018. |
| |
(2) | Payout can range from zero to up to twice the amount of the target based on the satisfaction of predetermined financial and operational performance objectives. |
| |
(3) | Other severance benefits are paid in monthly installments over 24 months, in the case of Mr. Hall, and over 18 months in the case of each other NEO, together with a lump sum payment of unpaid salary and other benefits. |
(2)Payout can range from zero to up to twice the amount of the target based on the satisfaction of predetermined financial, market and operational performance objectives.
(3)Other severance benefits are paid in monthly installments over 24 months, in the case of Mr. Hall, and over 18 months in the case of each other NEO, together with a lump sum payment of unpaid salary and other benefits.
(4)Mr. Mize is subject to the Company's executive severance plan and does not maintain a separate employment agreement.
At September 30, 2018,2020, we also maintained change-in-control agreementsarrangements with each NEO. Under thesethe existing change-in-control agreements with Messrs. Hall and Heinrichs and Ms. Zakas, upon a change-in-control (as defined in the agreement) of Mueller Water Products, Inc.the Company and (i) the executive’s employment is terminated other than for Cause or for Good Reason (each as defined in the agreement) within 24 months following a change-in-control or (ii) a replacement award (as defined in the agreement) was not available (i.e., a double trigger), all outstanding options and RSUs would immediately vest. The value of PRSUs reflects the pro rata portion of shares earned during the performance period and payout at target for future performance periods within the award cycle. In addition, if the executive’s employment is terminated other than for Cause or for Good Reason (each as defined in the agreement) within 24 months following a change-in-control, the executive would be entitled to a lump-sum severance payment equivalent to 2.0x base salary and annual incentive bonus (generally calculated as the greater of (i) the Executive’s annual target bonus and (ii) the average of actual annual incentive bonuses over the preceding three years) and continuation of certain benefits, such as group life and medical insurance coverage for a period of 24 months. The agreements also contain a “best-of-net” provision, so that, in the event excise taxes would be imposed on payments under the agreements, the NEO will either (1) pay the excise tax without assistance from the Company or (2) have the payments reduced to an amount at which an excise tax would no longer be payable, based on which result is more favorable to him or her on an after-tax basis.
Mr. Mize receives change-in-control benefits under the executive severance plan. The executive severance plan provides, upon a change-in-control, for vesting of outstanding equity-based awards if a replacement award (as defined in the Executive Severance Plan) is not available and for payment of cash severance amounts if Mr. Mize’s employment is involuntarily terminated (other than for cause or for termination for Good Reason as defined in the executive severance plan) within 24 months following a change-in-control (i.e., a double trigger). Such cash severance payments would include a lump-sum payment equivalent to the sum of 1.0x base salary and annual target incentive bonus, a pro rata amount of his annual target incentive bonus (prorated based upon the time of service during the applicable fiscal year) and cash equivalent amounts related to other benefits.
Potential Payments Upon Termination or Change-in-Control
The following table sets forth the potential benefits each NEO would be entitled to receive upon termination of employment in the situations outlined below. The NEO would not be entitled to the severance benefits described below if he or she terminates employment without Good Reason or is terminated for Cause. The amounts shown are estimates and do not necessarily reflect the actual amounts that would be paid to the NEOs, which would only be known at the time they become eligible for payment. The amounts shown are the amounts that could be payable under existing plans and arrangements if the NEO’s employment had terminated on September 30, 2018.2020.
The termination events pursuant to which the NEOs are entitled to potential payments are as follows:
A - Severance arrangement for termination without cause or for good reason
B - Termination without causeCause after a change-in-control or, if applicable, sale of segment
C - Death, disability or retirement
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL TABLE |
| | | | | | | | | | | |
| Name |
| Cash Severance
($) | Bonus Earned as of Event Date(1) ($) | Vesting of Unvested Long-Term Awards(2) ($) | Health, Welfare and Other Benefits Continuation(3) ($) | Outplacement(4) ($) | Total
($) |
| Scott Hall | A | 2,509,437 | | (5) | 946,456 | | — | | | 57,992 | | | 25,000 | | 3,538,885 | |
| B | 3,467,622 | | (6) | 946,456 | | 3,727,688 | | | 121,504 | | | 285,448 | | 8,548,718 | |
| C | — | | | — | | 2,169,188 | | | — | | | — | | 2,169,188 | |
| Marietta Edmunds Zakas | A | 1,146,561 | | (5) | 344,717 | | — | | | 59,216 | | | 25,000 | | 1,575,494 | |
| B | 1,470,602 | | (6) | 344,717 | | 1,119,630 | | | 132,250 | | | 148,523 | | 3,215,722 | |
| C | — | | | — | | 657,327 | | | — | | | — | | 657,327 | |
| Steven S. Heinrichs | A | 1,170,103 | | (5) | 301,538 | | — | |
| 585 | | | 25,000 | | 1,497,226 | |
| B | 1,361,626 | | (6) | 301,538 | | 814,743 | | | 128,395 | | | 151,572 | | 2,757,874 | |
| C | — | | | — | | 451,810 | | | — | | | — | | 451,810 | |
| Chad D. Mize | A | 339,231 | | (5) | 184,275 | | — | | | 24,689 | | | 25,000 | | 573,195 | |
| B | 496,731 | | (6) | 184,275 | | 400,981 | | | 24,689 | | | 25,000 | | 1,131,676 | |
| C | — | | | — | | 212,465 | | | — | | | — | | 212,465 | |
(1)Each is entitled to a pro rata share of the current fiscal year bonus in the event of termination without Cause or after a change-in-control. Amounts in this table assume a termination date of September 30, 2020 and represent the actual bonus paid for fiscal 2020 since this amount would not have otherwise been paid at that date.
(2)The value of RSUs is the closing price of Common Stock on September 30, 2020 multiplied by the number of RSUs. The value of PRSUs reflects the pro rata portion of shares earned during the performance period and payout at target for future performance periods within the award cycle. The closing price of our Common Stock on September 30, 2020 on the NYSE was $10.39.
(3)For all NEOs, excluding Mr. Mize, health and welfare benefits are continued for up to 42 months from the separation date based on the current elections and plan premiums.
(4)Services in Case A (without Cause termination) will be reasonable in our sole discretion. Services in Case B (change-in-control termination) will be provided for up to two years, but will not exceed 35% of the base salary at the time of termination for Messrs. Hall and Heinrichs and Ms. Zakas or $25,000 for Mr. Mize.
(5)Cash severance in Case A (without Cause termination) is equal to a percentage of current annual base salary plus accrued vacation. The percentage applicable to Mr. Hall is 300%. The percentage applicable to Mr. Heinrichs and Ms. Zakas is 262.5%. The percentage applicable to Mr. Mize is 100%. Other severance benefits, if applicable, are paid in monthly installments over 24 months in the case of Mr. Hall and over 18 months in the case of each other NEO, together with a lump sum payment of unpaid salary and other benefits.
(6)Cash severance in Case B (change-in-control termination) for Messrs. Hall and Heinrichs and Ms. Zakas is equal to two times annual base salary plus two times the greater of (i) the annual target bonus and (ii) the average bonus over the last three years, plus accrued vacation. Cash severance in Case B (change-in-control termination) for Mr. Mize is equal to one times annual base salary and target annual incentive bonus plus pro rata target annual incentive bonus, accrued vacation and ancillary medical benefits. Accrued vacation assumes no vacation has been taken.
PROXY STATEMENT FOR 2021 ANNUAL MEETING 51
|
| | | | | | | | | | | | | | | | | |
| Potential Payments Upon Termination or Change-in-Control Table |
| Name | | Cash Severance ($) | | Bonus Earned as of Event Date(1) ($) | Vesting of Unvested Long-Term Awards(2) ($) | | Health, Welfare and Other Benefits Continuation(3) ($) | | Outplacement(4) ($) | | Total ($) |
| Scott Hall | A | 2,376,923 |
| (5) | 1,009,839 |
| — |
| | 36,586 |
| | 25,000 |
|
| 3,448,348 |
|
| | B | 3,240,373 |
| (6) | 1,009,839 |
| 2,879,288 |
| | 48,782 |
| | 270,375 |
|
| 7,448,657 |
|
| | C | — |
|
| — |
| 2,122,736 |
| | — |
|
| — |
|
| 2,122,736 |
|
| Marietta Edmunds Zakas | A | 1,080,769 |
| (5) | 338,173 |
| — |
| | 42,102 |
| | 25,000 |
| | 1,486,044 |
|
| B | 1,219,474 |
| (6) | 338,173 |
| 952,686 |
| | 56,136 |
| | 140,000 |
| | 2,706,469 |
|
| | C | — |
| | — |
| 710,383 |
| | — |
| | — |
| | 710,383 |
|
| Steven S. Heinrichs | A | 1,121,298 |
| (5) | 48,557 |
| 481,102 |
| (7) | 168 |
|
| 25,000 |
| | 1,676,125 |
|
| B | 1,359,923 |
| (6) | 48,557 |
| 481,102 |
| | 168 |
| | 145,250 |
| | 2,035,000 |
|
| | C | — |
| | — |
| 481,102 |
| | — |
| | — |
| | 481,102 |
|
| Gregory S. Rogowski | A | 1,791,263 |
| (5) | 450,401 |
| — |
| | 6,066 |
|
| 25,000 |
| | 2,272,730 |
|
| B | 1,532,786 |
| (6) | 450,401 |
| 1,112,947 |
| | 8,088 |
| | 160,790 |
| | 3,265,012 |
|
| | C | — |
| | — |
| 854,497 |
| | — |
| | — |
| | 854,497 |
|
CEO Pay Ratio Disclosure
For fiscal 2020, (i) the annual total compensation of our median employee (excluding our CEO) was $55,478 and (ii) the annual total compensation of our CEO was $4,286,766. Based on this information, the ratio of the annual total compensation of our CEO to that of the median employee is approximately 77 to 1. Our employee population consists of approximately 3,100 employees located throughout the world, with approximately 84% in the United States.
To identify the median employee for fiscal 2020, we included all part-time and full-time employees that were employed for any portion of fiscal 2020 so long as they were still actively employed on September 30, 2020. Compensation elements used included regular pay (base salary for exempt population and hourly wages for non-exempt population), bonuses, overtime, shift pay and paid time off. Commissions and executive perquisites were omitted from the median employee selection calculation. Using this methodology, we determined the “median employee” was a full-time, hourly employee located in the United States.
52 MUELLER WATER PRODUCTS, INC.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
| | | | | |
(1)Proposal Three |
Each is entitled to a pro rata shareRatification of the current fiscal year bonus in the eventAppointment of termination without Cause or afterour Independent Registered Public Accounting Firm for Fiscal 2021 |
| The Board recommends a change-in-control. Amounts invote FOR this table assume a termination date of September 30, 2018 and represent the actual bonus paid for fiscal 2018 since this amount would not have otherwise been paid at that date.proposal. |
The Audit Committee has authority to retain and terminate the services of our independent registered public accounting firm. The Audit Committee has appointed Ernst & Young LLP as the independent registered public accounting firm to audit our consolidated financial statements and internal control over financial reporting for the fiscal year ending September 30, 2021, subject to negotiation of definitive fee arrangements. Although stockholder ratification of Ernst & Young’s appointment is not required, the Board believes submitting the appointment to our stockholders for ratification is a matter of good corporate governance. See below for a description of the fees Ernst & Young billed us for fiscal 2020 and fiscal 2019.
A representative of Ernst & Young is expected to be present at the Annual Meeting. The representative will have an opportunity to make a statement and will be available to respond to stockholder questions.
Fees and Services of the Independent Registered Public Accounting Firm
The Audit Committee appointed Ernst & Young as the independent registered public accounting firm to audit our consolidated financial statements and internal control over financial reporting for fiscal 2020.
Audit Fees and Other Fees
The following table shows the approximate fees for audit and other services provided by Ernst & Young for fiscal years 2020 and 2019 (in millions). All fees in 2020 and 2019 were pre-approved by the Audit Committee.
| | | | | | | | |
| 2020 | 2019 |
Audit fees(1) | $ | 3.0 | | $ | 2.3 | |
| Audit-related fees | — | | — | |
| Tax fees | — | | 0.2 | |
| Total fees | $ | 3.0 | | $ | 2.5 | |
(1)Reflects fees for professional services performed by Ernst & Young for annual audits (including out-of-pocket expenses) and quarterly limited reviews of our consolidated financial statements.
Pre-Approval of Services Performed by the Independent Registered Public Accounting Firm
The Audit Committee has adopted procedures for pre-approving all audit and non-audit services provided by the independent registered public accounting firm. For both types of pre-approval, the Audit Committee considers whether the services are consistent with the Securities and Exchange Commission (“SEC”) rules on auditor independence and whether the independent registered public accounting firm is able to provide the most effective service. Non-audit fees to be incurred by the independent registered public accounting firm for services permitted by the Sarbanes-Oxley Act of 2002 to be performed by such firm must be approved in advance by the Audit Committee Chairman (for individual projects in amounts up to $100,000) or the Audit Committee. The Audit Committee periodically monitors the services rendered and actual fees paid to the independent registered public accounting firm to ensure the services are within the parameters approved by the Audit Committee.
PROXY STATEMENT FOR 2021 ANNUAL MEETING 53
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Report of the Audit Committee
Committee Composition and Skills
The Audit Committee is comprised of three independent directors meeting the requirements of applicable SEC and New York Stock Exchange (“NYSE”) rules. The Board has determined all Audit Committee members are “financially literate” for purposes of the NYSE Listed Company Manual (the “NYSE Manual”) and qualify as audit committee “financial experts” within the meaning of the rules and regulations of the SEC. See “Proposal One - Election of Ten Directors — The Board of Directors” for a description of the business background of each member. No member of the Audit Committee serves on the audit committee of more than three public companies.
Meetings
The Audit Committee met 13 times during fiscal 2020, including 11 times by video/teleconference. Meetings include periodic executive sessions with the independent registered public accounting firm, our internal auditors and our management.
Responsibilities of the Audit Committee, Management and the Independent Auditor
The Audit Committee’s key responsibilities are set forth in its charter, which was approved by the Board and is available on our website at www.muellerwaterproducts.com. See “Corporate Governance — Board Operations — Board Committee Information” for more information concerning the Audit Committee and its responsibilities. For the audit of our consolidated financial statements for fiscal 2020 and our internal control over financial reporting:
•Management was responsible for preparing our financial statements and establishing and maintaining effective internal control over financial reporting. The Audit Committee was responsible for monitoring and overseeing our financial reporting and audit functions, as well as our internal control over financial reporting and disclosure.
•Ernst & Young, our independent registered public accounting firm for fiscal 2020, was responsible for performing an independent audit of our consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States and was also responsible for performing an independent audit of, and expressing an opinion on, our internal control over financial reporting.
•The Audit Committee reviewed and discussed with management and Ernst & Young the audited consolidated financial statements for the year ended September 30, 2020, our quarterly consolidated financial statements and operating results for each quarter in the fiscal year and the related significant accounting and disclosure issues, our Critical Audit Matters (“CAMs”} and the effectiveness of our internal control over financial reporting.
•The Audit Committee reviewed management’s report contained in our annual report on Form 10-K for the year ended September 30, 2020 (“Annual Report”), as well as Ernst & Young’s Reports of Independent Registered Public Accounting Firm included in the Annual Report related to its audits of the consolidated financial statements and internal control over financial reporting.
•The Audit Committee discussed with Ernst & Young matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC. In addition, Ernst & Young provided the Audit Committee with the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence and the Audit Committee has discussed with Ernst & Young the firm’s independence.
Audited Consolidated Financial Statements
Based on the foregoing discussions with and reports of management and our independent registered public accounting firm and the Audit Committee’s review of the representations of management, the Audit Committee recommended to the Board the inclusion of our consolidated financial statements in the Annual Report.
| | | | | |
(2)
| The value of RSUs is the closing price of Common Stock on September 30, 2018 multiplied by the number of RSUs. The value of PRSUs reflects the pro rata portion of shares earned during the performance period and payout at target for future performance periods within the award cycle. The closing price of our Common Stock on September 30, 2018 on the NYSE was $11.46.Audit Committee |
| JERRY W. KOLB, CHAIR |
| BERNARD G. RETHORE |
| |
(3) | For all NEOs, excluding Mr. Heinrichs, welfare benefits are continued for up to 24 months from the separation date based on the current elections and plan premiums.STEPHEN C. VAN ARSDELL |
| |
(4) | Services in Case A (without cause termination) will be reasonable in our sole discretion. Services in Case B (change-in-control termination) will be provided for up to two years, but will not exceed 35% of the NEO’s base salary at the time of termination. |
| |
(5) | Cash severance in Case A (without cause termination) is equal to a percentage of current annual base salary plus accrued vacation. The percentage applicable to Mr. Hall is 300%. The percentage applicable to Messrs. Heinrichs and Rogowski and Ms. Zakas is 262.5%. Other severance benefits are paid in monthly installments over 24 months in the case of Mr. Hall and over 18 months in the case of each other NEO, together with a lump sum payment of unpaid salary and other benefits. |
| |
(6) | Cash severance in Case B (change-in-control termination) for Messrs. Hall, Heinrichs and Rogowski and Ms. Zakas is equal to two times annual base salary plus two times the average bonus over the last three years, plus accrued vacation. Accrued vacation assumes no vacation has been taken. |
| |
(7) | In accordance with Mr. Heinrichs’ employment agreement, RSUs shall vest, and all restrictions shall lapse, upon termination. |
54 MUELLER WATER PRODUCTS, INC.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table lists information as of December 6, 201814, 2020 regarding the number of shares of Common Stock beneficially owned by each incumbent director, each NEO, all of our directors and current executive officers as a group, and each person or group known by us to own more than 5% of our Common Stock. Unless otherwise noted, voting power and investment power in Common Stock are exercisable solely by the named person.
At December 6, 2018,14, 2020, there were 158,064,614158,315,625 shares of Common Stock outstanding.
| | | | | | | | | | | |
Name and Address of Beneficial Owner(1) | Aggregate Number of Shares of Common Stock Beneficially Owned(2) | Percent of Outstanding Common Stock |
Shirley C. Franklin Director | 100,544 | | (3) | * |
Scott Hall Director, President and Chief Executive Officer | 237,111 | | | * |
Thomas J. Hansen Director | 132,865 | | (3) | * |
Jerry W. Kolb Director | 130,586 | | (3) | * |
Mark J. O’Brien Non-Executive Chairman | 183,621 | | (3) | * |
Christine Ortiz Director | 18,185 | | (3) | * |
Bernard G. Rethore Director | 179,785 | | (3) | * |
Lydia W. Thomas Director | 147,386 | | (3) | * |
Michael T. Tokarz Director | 392,913 | | (3) | * |
Stephen C. Van Arsdell Director | 45,289 | | (3) | * |
Marietta Edmunds Zakas Executive Vice President and Chief Financial Officer | 352,280 | | | * |
Steven S. Heinrichs Executive Vice President, Chief Legal and Compliance Officer and Secretary | 41,099 | | | * |
Gregory S. Rogowski Former Executive Vice President, Business Development | 364,534 | | (4) | * |
Chad D. Mize Senior Vice President, Sales and Marketing | 31,207 | | | * |
| All directors and executive officers as a group (19 individuals) | 2,439,787 | | | 1.5 | % |
The Vanguard Group, Inc. PO Box 2600, V26, Valley Forge, PA 19482-2600 | 14,376,199 | | (5) | 9.1 | % |
BlackRock, Inc.
55 East 52nd Street, New York, NY 10055 | 11,871,890 | | (6) | 7.5 | % |
Impax Asset Management Group plc, et al.
7th Floor, 30 Panton Street, London, SW1Y 4AJ | 10,647,689 | | (7) | 6.7 | % |
| | | |
PROXY STATEMENT FOR 2021 ANNUAL MEETING 55
BENEFICIAL OWNERSHIP OF COMMON STOCK
|
| | | | | |
Name and Address of Beneficial Owner (1) | Aggregate Number of Shares of Common Stock Beneficially Owned (2) | Percent of Outstanding Common Stock |
| Shirley C. Franklin, Director | 127,592 |
| (3) | * |
|
| Scott Hall, Director, President and Chief Executive Officer | 85,314 |
| (4) | * |
|
| Thomas J. Hansen, Director | 114,599 |
| (3) | * |
|
| Jerry W. Kolb, Director | 167,404 |
| (3) | * |
|
| Mark J. O’Brien, Non-Executive Chairman | 171,386 |
| (3) | * |
|
| Bernard G. Rethore, Director | 154,097 |
| (3) | * |
|
| Lydia W. Thomas, Director | 159,308 |
| (3) | * |
|
| Michael T. Tokarz, Director | 539,299 |
| (3) | * |
|
Marietta Edmunds Zakas Executive Vice President and Chief Financial Officer | 367,166 |
| | * |
|
Steven S. Heinrichs Executive Vice President, General Counsel, Secretary and Chief Compliance Officer
| — |
| | * |
|
| Gregory S. Rogowski Executive Vice President, Sales and Marketing | 581,957 |
| | * |
|
| Evan L. Hart, Former Senior Vice President and Chief Financial Officer | 145,530 |
| (5) | * |
|
| All directors and executive officers as a group (17 individuals) | 2,753,652 |
| | 1.7 | % |
Vanguard Group Inc. PO Box 2600, V26, Valley Forge, PA 19482-2600 | 12,715,730 |
| (6) | 8.0 | % |
BlackRock, Inc. 55 East 52nd Street, New York, NY 10055 | 10,435,774 |
| (7) | 6.6 | % |
EARNEST Partners, LLC 1180 Peachtree Street, NE, Suite 2300, Atlanta, GA 30309 | 8,299,747 |
| (8) | 5.3 | % |
| | | | | | | | | | | |
Name and Address of Beneficial Owner(1) | Aggregate Number of Shares of Common Stock Beneficially Owned(2) | Percent of Outstanding Common Stock |
Franklin Mutual Advisers, LLC
101 John F. Kennedy Parkway, Short Hills, NJ 07078-2789 | 9,274,730 | | (8) | 5.9 | % |
T. Rowe Price Associates, Inc.
100 E. Pratt Street, Baltimore, MD 21202 | 7,927,122 | | (9) | 5.0 | % |
| |
* | *Less than 1% of outstanding common stock |
| |
(1) | The address of each of our directors and executive officers is c/o Mueller Water Products, Inc., 1200 Abernathy Road, N.E., Suite 1200, Atlanta, Georgia 30328. |
| |
(2) | Beneficial ownership as reported in the table has been determined in accordance with the rules of the SEC. Under those rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of, or to direct the disposition of, such security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under such rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may disclaim any beneficial interest. Except as indicated in other notes to this table, directors and executive officers possessed sole voting and investment power with respect to all shares of Common Stock referred to in the table. See “Executive Compensation — Outstanding Equity Awards at Fiscal Year-End Table” for more information concerning outstanding equity awards to our NEOs and “Director Compensation — Director Compensation Summary” for more information concerning outstanding equity awards to our directors. |
| |
(3) | Each non-employee director is “retirement-eligible” under and for purposes of the 2006 Stock Plan. Accordingly, for purposes of this table, all outstanding equity-based awards are deemed vested. Beginning with the equity-based awards granted to directors in January 2014, all such awards to directors require a grantee who is or becomes retirement-eligible prior to an initial vesting date to remain in continuous service from the grant date through at least the first anniversary thereof to receive accelerated vesting upon retirement. The beneficial ownership reported in the table assumes each grantee of an award on January 24, 2018 will remain in continuous service through January 24, 2019. |
| |
(4) | Includes 19,011 RSUs that will vest within 60 days. |
| |
(5) | Reflects Mr. Hart’s beneficial ownership as of his retirement from the Company on December 31, 2017, as reported on the Form 4 filed with the SEC on December 6, 2017. |
| |
(6) | As reported on Schedule 13G/A filed with the SEC on February 9, 2018, Vanguard Group, Inc. has sole investment discretion with respect to 12,456,212 shares, sole voting power with respect to 247,080 shares, shared voting power with respect to 23,269 shares and shared investment discretion with respect to 259,518 shares as follows: (1) Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 236,249 shares or 0.14% of the common stock outstanding of the company as a result of its serving as investment manager of collective trust accounts, and (2) Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 34,100 shares or 0.02% of the common stock outstanding of the company as a result of its serving as investment manager of Australian investment offerings. |
(1)The address of each of our directors and executive officers is c/o Mueller Water Products, Inc., 1200 Abernathy Road, N.E., Suite 1200, Atlanta, Georgia 30328.
(2)Beneficial ownership as reported in the table has been determined in accordance with the rules of the SEC. Under those rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of, or to direct the disposition of, such security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under such rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may disclaim any beneficial interest. Except as indicated in other notes to this table, directors and executive officers possessed sole voting and investment power with respect to all shares of Common Stock referred to in the table. See “Executive Compensation — Outstanding Equity Awards at Fiscal Year-End Table” for more information concerning outstanding equity awards to our NEOs and “Director Compensation — Director Compensation Summary” for more information concerning outstanding equity awards to our directors.
| |
(7) | As reported on Schedule 13G/A filed with the SEC on January 25, 2018, Blackrock, Inc. has sole investment discretion of 10,435,774 shares and sole voting power with respect to 10,109,323 shares. |
| |
(8) | As reported on Schedule 13G/A filed with the SEC on September 10, 2018, EARNEST Partners, LLC has sole investment discretion with respect to 8,299,747 shares, sole voting power with respect to 2,032,393 and shared voting power with respect to 498,991 shares. |
(3)Each non-employee director, with the exception of Dr. Ortiz and Mr. Van Arsdell, is “retirement-eligible” under and for purposes of the 2006 Stock Plan. Accordingly, for purposes of this table, all outstanding equity-based awards for the retirement eligible non-employee directors are deemed vested. Beginning with the equity-based awards granted to directors in January 2014, all such awards to directors require a grantee who is or becomes retirement-eligible prior to an initial vesting date to remain in continuous service from the grant date through at least the first anniversary thereof to receive accelerated vesting upon retirement. The beneficial ownership reported in the table assumes each grantee of an award on January 29, 2020 will remain in continuous service through February 9, 2021. Excludes Mr. Tokarz's 184,197 stock equivalent shares of Common Stock, which settle in cash in accordance with the Directors' Deferred Fee Plan.
(4)Reflects Mr. Rogowski’s beneficial ownership as of the record date consisting solely of Common Stock.
(5)As reported on Schedule 13G/A filed with the SEC on February 12, 2020, The Vanguard Group, Inc. has sole investment discretion with respect to 14,114,404 shares, sole voting power with respect to 258,116 shares, shared voting power with respect to 23,269 shares and shared investment discretion with respect to 261,795 shares as follows: (1) Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 238,526 shares or 0.15% of the common stock outstanding of the company as a result of its serving as investment manager of collective trust accounts, and (2) Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 42,859 shares or 0.03% of the common stock outstanding of the company as a result of its serving as investment manager of Australian investment offerings.
(6)As reported on Schedule 13G/A filed with the SEC on February 5, 2020, BlackRock, Inc. has sole investment discretion of 11,871,890 shares and sole voting power with respect to 11,549,281 shares.
(7)As reported on Schedule 13G filed with the SEC on February 13, 2020, Impax Asset Management Group plc and Impax Asset Management Limited each have sole investment discretion with respect to 10,647,689 shares and sole voting power with respect to 10,647,689 shares.
(8)As reported on Schedule 13G/A filed with the SEC on February 3, 2020, Franklin Mutual Advisers, LLC has sole investment discretion of 9,274,730 shares and sole voting power with respect to 8,581,327 shares.
(9)As reported on Schedule 13G/A filed with the SEC on February 14, 2020, T. Rowe Price Associates, Inc. has sole investment discretion of 7,927,122 shares and sole voting power with respect to 1,625,987 shares.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires executive officers and directors and persons who beneficially own more than 10% of a company’s common stock (together, “Reporting Persons”) to file initial reports of ownership and reports of changes in ownership with the SEC. Reporting Persons are required by SEC rules to furnish companies with copies of all Section 16(a) forms they file. Based solely on a review of copies of such forms furnished to us and written representations from the executive officers and directors, we believe our Reporting Persons complied with all Section 16 filing requirements during fiscal 2020, with the exception of Mr. Michael S. Nancarrow's December 5, 2019 late filing on Form 4 related to the exercise and sale of 3,973 options and Mr. Michael T. Tokarz’ July 2, 2020 late filing on Form 4 related to the acquisition of 8,520.63 shares of phantom stock acquired under the Directors’ Deferred Fee Plan.
56 MUELLER WATER PRODUCTS, INC.
QUESTIONS ABOUT VOTING AND THE ANNUAL MEETING
When and where is the Annual Meeting?
OurIn light of the public health and travel concerns our stockholders may have and the protocols that federal, state and local governments have and may impose regarding COVID-19, this year’s Annual Meeting will be heldconducted virtually on Wednesday, January 23, 2019February 9, 2021. You will be able to virtually (i) attend the Annual Meeting, (ii) vote your shares and (iii) submit questions during the meeting via live webcast by visiting: www.meetingcenter.io/240056906.
To participate virtually at the Annual Meeting, you will need the voter control number included in your proxy materials or on your proxy card and the password for the Annual Meeting, which is MWA2021. We encourage you to allow ample time for online check-in as the meeting will begin promptly at 10:00 A.M.,a.m. Eastern Time,Time. Please note that there is no in-person meeting for you to attend.
The Annual Meeting will begin promptly at 10:00 a.m. Eastern Time. We encourage you to access the Annual Meeting prior to the start time to allow you ample time to log in to the Peachtree Dunwoody Room onlive webcast and test your computer audio system. We recommend that you carefully review in advance the 3rd Floor of Building 500 at Northpark Town Center, located at 1100 Abernathy Road, N.E., in Atlanta, Georgia.procedures needed to gain admission virtually to the Annual Meeting.
What is the purpose of the Annual Meeting?
At the Annual Meeting, stockholders will vote virtually on matters summarized in this Proxy Statement. This Proxy Statement contains important information for you to consider when deciding how to vote.
Who is entitled to vote?
You may vote virtually at the Annual Meeting, and any adjournment or postponement thereof, if you were a holder of record of our Common Stock at the close of business on December 6, 2018,14, 2020, the record date. On the record date, there were 158,064,614158,315,625 shares of Common Stock outstanding. Each share of Common Stock represented at the Annual Meeting is entitled to one vote.
Who is soliciting my vote?
The Board is soliciting your proxy to vote your shares at the Annual Meeting. We made our proxy solicitation materials available to you on the Internet or, upon your request, we have delivered printed versions of these materials to you by mail, in connection with our solicitation of proxies.
What is included in the proxy materials?
The proxy materials for the Annual Meeting include the Notice of Internet Availability of Proxy Materials, this Proxy Statement and the Annual Report. If you requested printed versions by mail, these proxy materials also include the proxy card or voting instruction form for the Annual Meeting. These materials were first sent or made available to stockholders on or about December 13, 2018.21, 2020.
What proposals require my vote, what vote is required to approve each proposal, how will abstentions and broker non-votes be treated and how does the Board recommend I vote?
|
| | | | | | | | | | | | | |
| Voting Item | Voting Standard | Treatment of Abstentions & Broker Non-Votes | Board Recommendation |
| Elect Directors | Majority of votes cast | Not counted as votes cast and, therefore, no effect | | FOR each director nominee |
Approve executive compensation
| Majority of votes cast | Not counted as votes cast and, therefore, no effect | | FOR |
| Ratify Auditor | Majority of votes cast | N/A | | FOR |
PROXY STATEMENT FOR 2021 ANNUAL MEETING 57
QUESTIONS ABOUT VOTING AND THE ANNUAL MEETING
Will any other business be conducted at the Annual Meeting?
Management is not aware of any items, other than those referred to in this Proxy Statement, that may properly come before the Annual Meeting.
How are proxies voted?
Shares represented by all valid proxies received on time will be voted as specified. If a valid proxy form is received and does not indicate specific choices, the shares will be voted in accordance with the Board’s recommendations. The Board has designated each of Scott Hall, Steven S. Heinrichs and Kristi O. CrawfordChason Carroll as proxies for the Annual Meeting.
How may I vote?
If your shares are registered directly in your name with our transfer agent, you are a “registered stockholder.” Registered stockholders may vote by:
•Internet at the web address noted in the Notice of Internet Availability of Proxy Materials, proxy materials email or proxy card that you received (we(we encourage you to vote in this manner)manner);
•Telephone through the number noted in the proxy card that you received (if you received a proxy card);
•Signing and dating your proxy card (if you received a proxy card) and mailing it to the indicated address; or
Attending•Virtually attending the Annual Meeting and voting in person.your shares.
If your shares are registered in the name of your broker, bank or other agent, you are the “beneficial owner” of those shares and those shares are considered as held in “street name.” If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, you should have received a proxy card and voting instructions with these proxy materials from that organization rather than directly from us. Simply complete and mail the proxy card to ensure that your vote is counted. You may be eligible to vote your shares electronically over the Internet or by telephone. A large number of banks and brokerage firms offer Internet and telephone voting. If your bank or brokerage account,firm does not offer Internet or telephone voting information, please complete and return your proxy card in the self-addressed, postage-paid envelope provided. To virtually vote at the Annual Meeting, you aremust first obtain a “beneficial stockholder”valid legal proxy from your broker, bank or other agent and you should referthen register in advance to virtually attend the Annual Meeting. Follow the instructions provided byfrom your broker or bank included with these proxy materials, or contact your broker or bank to request a legal proxy form.
After obtaining a valid legal proxy from your broker, bank or other agent, to then register to virtually attend the Annual Meeting, you must e-mail to Computershare at legalproxy@computershare.com your name and e-mail address and either (a) the forwarded e-mail from your bank, brokeragebroker or other nominee regarding howcontaining your legal proxy or (b) an attached image of your legal proxy. Upon successful preregistration, a beneficial owner will receive a confirmation e-mail from Computershare confirming registration and providing a control number to vote your shares.enter the virtual meeting as a stockholder (using the password MWA2021). See “How can I register for the Annual Meeting?” below for additional details.
If you plan to vote other than by virtually attending the Annual Meeting and voting in person,your shares, your vote must be received by 11:59 P.M.10:00 a.m., Eastern Time, on January 22, 2019.February 9, 2021.
How can I ask questions pertinent to meeting matters?
Stockholders may submit questions either before the annual meeting (beginning February 5, 2021) or during the Annual Meeting. If you wish to submit a question either before or during the meeting, please log into www.meetingcenter.io/240056906, enter the meeting password, MWA2021, and your 15-digit voter control number, then follow the instructions to submit a question. Questions pertinent to meeting matters will be answered during the meeting, subject to time limitations.
How can I change my vote?
You can revoke a proxy prior to the completion of voting at the Annual Meeting by:
•Voting again using the Internet or by telephone prior to the Annual Meeting;
•Delivering a later-dated proxy card; or
•Voting in personyour shares virtually at the meeting (if you are a beneficial stockholder).
58 MUELLER WATER PRODUCTS, INC.
QUESTIONS ABOUT VOTING AND THE ANNUAL MEETING
What constitutes a quorum for the Annual Meeting?
The holders of a majority of the voting power of the outstanding shares of Common Stock at the close of business on the record date must be present, either in personpersonally or represented by proxy, to constitute a quorum necessary to conduct the Annual Meeting. Shares represented by proxies received but marked as abstentions or as withholding voting authority for any or all director nominees, and shares represented by proxies received but reflecting broker non-votes, will be counted as present at the Annual Meeting for purposes of establishing a quorum.
Why did I receive a Notice of Internet Availability of Proxy Materials in the mail instead of a printed set of proxy materials?
We are permitted by SEC rules to furnish proxy materials to stockholders by providing access to those documents on the Internet. Stockholders will not receive printed copies of the proxy materials unless they request them. The Notice provides instructions on how to access and review the Proxy Statement and the Annual Report over the Internet at www.proxyvote.com (for beneficial stockholders) and www.edocumentview.com/mwawww.envisionreports.com/MWA (for registered stockholders), and how to submit a proxy over the Internet. If you would like to receive a paper or email copy of the proxy materials, please follow the instructions in the Notice.
What does it mean if I receive more than one Notice, proxy materials email or proxy card?
It means you have multiple accounts holding Common Stock with brokers and/or our transfer agent. You will need to vote separately with respect to each Notice, proxy materials email or proxy card you receive.
What do I need to do if I want to attend the Annual Meeting?
Attendance atThe Annual Meeting will be a completely virtual meeting of stockholders, which will be conducted exclusively by webcast. You are entitled to participate in the Annual Meeting only if you were a stockholder of the Company as of the close of business on the Record Date or if you hold a valid proxy for the Annual Meeting. There is limited to our stockholders, members of their immediate families or their representatives. To gain admittance tono physical location for this meeting.
You can attend the Annual Meeting online, vote and submit questions pertinent to meeting matters during the meeting by visiting www.meetingcenter.io/240056906. The password for the meeting is MWA2021. Please follow the registration instructions below.
The Annual Meeting will begin promptly at 10:00 a.m., Eastern Time, on February 9, 2021. We encourage you may be required to show evidence thataccess the meeting prior to the start time in order to log in to the live webcast and test your computer audio system.
How can I register for the Annual Meeting?
If you wereare a holder of Common Stock on the record date. We reserve the rightregistered stockholder (i.e., you hold your shares through our transfer agent, Computershare), you do not need to limit the number of representatives who mayregister to attend the Annual Meeting.Meeting virtually on the Internet. Please follow the instructions on the Proxy Card or Notice that you received with this Proxy Statement. To access the meeting, you will need the 15-digit control number printed on your card or notice.
TableIf you are a beneficial owner (i.e., you hold your shares through an intermediary, such as a bank or broker), you must register in advance to attend the Annual Meeting virtually on the Internet. To register, you must submit a legal proxy that reflects your proof of Contentsproxy power. The legal proxy must reflect your Mueller Water Products, Inc. holdings along with your name. Please forward a copy of the legal proxy and your email address to Computershare either by email to legalproxy@computershare.com (forward the email from your broker or attach an image of your legal proxy) or by mail to Computershare, Mueller Water Products, Inc. Legal Proxy, P.O. Box 43001, Providence, RI 02940-3001.
Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on February 4, 2021. You will receive a confirmation of your registration by email (or by mail if no email address is provided) after Computershare receives your registration materials.
How are proxies solicited and what is the cost?
We bear all expenses incurred in connection with the solicitation of proxies. We have engaged Alliance Advisors LLC to assist with the solicitation of proxies for an estimated fee of $11,000,$10,000, plus expenses. We will reimburse brokers, fiduciaries
PROXY STATEMENT FOR 2021 ANNUAL MEETING 59
QUESTIONS ABOUT VOTING AND THE ANNUAL MEETING
and custodians for their costs in forwarding proxy materials to beneficial holders of Common Stock. Our directors, officers and employees also may solicit proxies in return for no additional compensation.
How can I submit my proposal for inclusion in next year’s proxy? SEC rules permit stockholders to submit proposals for inclusion in our proxy statement if the stockholder and the proposal meet the requirements specified in Rule 14a-8 under the Exchange Act.
•When to submit? Any stockholder proposals submitted in accordance with Rule 14a-8 must be received at our principal executive offices no later than August 23, 2021.
•Where to submit? Proposals should be addressed to Corporate Secretary, Mueller Water Products, Inc., 1200 Abernathy Road, N.E., Suite 1200, Atlanta, Georgia 30328.
•What to submit? Proposals must conform to and include the information required by Rule 14a-8.
We encourage stockholders to contact our Corporate Secretary prior to submitting a stockholder proposal or any time they have concerns about us.
How can I present a proposal for consideration at next year’s annual meeting?
Our Bylaws provide that any stockholder proposal, including director nominations, that is not submitted for inclusion in next year’s proxy statement under Rule 14a-8, but is instead sought to be presented directly at next year’s annual meeting of stockholders must be delivered to our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary of the date we commenced mailing these proxy materials.
•When to submit? Stockholder proposals submitted under these Bylaw provisions must be received no earlier than August 23, 2021 and no later than September 22, 2021.
•Where to submit? Proposals should be addressed to Corporate Secretary, Mueller Water Products, Inc., 1200 Abernathy Road, N.E., Suite 1200, Atlanta, Georgia 30328.
•What to submit? Proposals must include the information required by our Bylaws, which are available on our website. If the notice delivered to our Corporate Secretary does not contain all of the information specified in our Bylaws, the proposed business will not be transacted at the annual meeting.
By Order of the Board of Directors.
STEVEN S. HEINRICHS
Corporate Secretary
Atlanta, Georgia
December 21, 2020
60 MUELLER WATER PRODUCTS, INC.
GENERAL INFORMATION
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires executive officers and directors and persons who beneficially own more than 10% of a company’s common stock (together, “Reporting Persons”) to file initial reports of ownership and reports of changes in ownership with the SEC. Reporting Persons are required by SEC rules to furnish companies with copies of all Section 16(a) forms they file. Based solely on a review of copies of such forms furnished to us and written representations from the executive officers and directors, we believe our Reporting Persons complied with all Section 16 filing requirements during fiscal 2018.
Other Business for Presentation at the Annual Meeting
The Board and management do not intend to bring before the Annual Meeting any matters other than those disclosed in the Notice of Annual Meeting of Stockholders, nor do they know of any business that other persons intend to present virtually at the Annual Meeting. Should any other matter or business requiring a vote of stockholders arise, the persons named in the enclosed proxy intend to exercise the authority conferred by the proxy and vote the shares represented thereby in respect of any such other matter or business in accordance with their best judgment in the interest of Mueller Water Products, Inc.
Other Information
Consolidated financial statements for Mueller Water Products, Inc. are included in the 20182020 Annual Report filed with the SEC, 100 F Street, N.E., Washington, D.C. 20549, and the New York Stock Exchange. A copy of the 20182020 Annual Report (excluding exhibits) will be furnished, without charge, by writing to the Corporate Secretary, Mueller Water Products, Inc., 1200 Abernathy Road, N.E., Suite 1200, Atlanta, Georgia 30328. The 20182020 Annual Report is also available on the SEC’s website at www.sec.gov or on our website at www.muellerwaterproducts.com.
PROXY STATEMENT FOR 2021 ANNUAL MEETINGwww.muellerwaterproducts.com. 61
STOCKHOLDER INFORMATION
Stockholder Proposals for Inclusion in Next Year’s Proxy Statement
SEC rules permit stockholders to submit proposals for inclusion in our proxy statement if the stockholder and the proposal meet the requirements specified in Rule 14a-8 under the Exchange Act.
When to submit?
Any stockholder proposals submitted
EXHIBIT A - RECONCILIATION OF NON-GAAP PERFORMANCE MEASURES TO GAAP PERFORMANCE MEASURES
The Company presents adjusted net income, adjusted net income per diluted share, adjusted operating income, and adjusted EBITDA as performance measures because management uses these measures in evaluating the Company’s underlying performance on a consistent basis across periods and in making decisions about operational strategies. Management also believes these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of the Company’s recurring performance. These are considered measures not calculated in accordance with Rule 14a-8 must be received at our principal executive offices no later than August 15, 2019.GAAP, and are therefore considered non-GAAP measures. The Company provides the following reconciliations of these non-GAAP measures to their most comparable GAAP measures.
| | | | | | | | |
| Six Months Ended March 31, 2020 | |
| Reconciliation of Non-GAAP Performance Measures to GAAP Performance Measures (in millions) |
| Net income | $ | 34.1 | |
| Strategic reorganization and other charges | 3.3 | |
| Walter Energy Accrual | 0.2 | |
| Income tax benefit of adjusting items | (0.8) | |
| Adjusted net income | $ | 36.8 | |
| |
| Weighted average diluted shares outstanding | 158.7 | |
| |
| Adjusted net income per diluted share | $ | 0.23 | |
| |
| Net income | $ | 34.1 | |
| Income tax expense | 9.9 | |
| Interest expense, net | 13.4 | |
| Walter Energy Accrual | 0.2 | |
| Pension benefit other than service | (1.5) | |
| Operating income (loss) | 56.1 | |
| Strategic reorganization and other charges | 3.3 | |
| Adjusted operating income (loss) | 59.4 | |
| Pension benefit other than service | 1.5 | |
| Depreciation and amortization | 28.3 | |
| Adjusted EBITDA | 89.2 | |
| Other Adjustments | (1.0) | |
| Performance Evaluation Basis - Adjusted | $ | 88.2 | |
| | |
62 MUELLER WATER PRODUCTS, INC.
| | | | | | | | |
| Year Ended September 30, 2020 | |
| Reconciliation of Non-GAAP Performance Measures to GAAP Performance Measures (in millions) |
| Net income | $ | 72.0 | |
| Strategic reorganization and other charges | 13.0 | |
| Walter Energy accrual | 0.2 | |
| Income tax benefit of adjusting items | (3.1) | |
| Adjusted net income | $ | 82.1 | |
| |
| Weighted average diluted shares outstanding | 158.6 | |
| |
| Adjusted net income per diluted share | $ | 0.52 | |
| |
| Net income | $ | 72.0 | |
| Income tax expense | 22.1 | |
| Interest expense, net | 25.5 | |
| Walter Energy accrual | 0.2 | |
| Pension benefit other than service | (3.0) | |
| Operating income (loss) | 116.8 | |
| Strategic reorganization and other charges | 13.0 | |
| Adjusted operating income (loss) | 129.8 | |
| Pension benefit other than service | 3.0 | |
| Depreciation and amortization | 57.8 | |
| Adjusted EBITDA | $ | 190.6 | |
| | |
Where to submit?
| | | | | | | | | | | | | | | | | |
| GAAP | Reporting
Adjustments | Adjusted
Non-GAAP
As Reported | Other Adjustments | Performance
Evaluation
Basis |
| (in millions) |
| First Half 2020 Cash Flow From Operations | $ | (3.0) | | | | $ | 3.5 | | $ | 0.5 | |
PROXY STATEMENT FOR 2021 ANNUAL MEETING Proposals should be addressed to Corporate Secretary, Mueller Water Products, Inc., 1200 Abernathy Road, N.E., Suite 1200, Atlanta, Georgia 30328.63
Proposals must conform to and include the information required by Rule 14a-8.
We encourage stockholders to contact our Corporate Secretary prior to submitting a stockholder proposal or any time they have concerns about us.
Procedures for Business Matters and Director Nominations for Consideration at Next Year’s Annual Meeting of Stockholders
Our Bylaws provide that any stockholder proposal, including director nominations, that is not submitted for inclusion in next year’s proxy statement under Rule 14a-8, but is instead sought to be presented directly at next year’s annual meeting of stockholders must be delivered to our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary of the date we commenced mailing these proxy materials.
Stockholder proposals submitted under these Bylaw provisions must be received no earlier than August 15, 2019 and no later than September 14, 2019.
Proposals should be addressed to Corporate Secretary, Mueller Water Products, Inc., 1200 Abernathy Road, N.E., Suite 1200, Atlanta, Georgia 30328.
Proposals must include the information required by our Bylaws, which are available on our website. If the notice delivered to our Corporate Secretary does not contain all of the information specified in our Bylaws, the proposed business will not be transacted at the annual meeting.
By Order of the Board of Directors.
Steven S. Heinrichs
Corporate Secretary
Atlanta, Georgia
December 13, 2018
Exhibit A
| Reconciliation of Non-GAAP Performance Measures to GAAP Performance Measures |
| | | | | | | | | | | | | | | | | | | |
| 2018 |
| | GAAP | | Reporting Adjustments | | Adjusted Non-GAAP As Reported | | Other Adjustments | | Performance Evaluation Basis - Adjusted |
| (in millions) |
| Cash Flow from Operations | $ | 133.1 |
| | $ | — |
| | $ | 133.1 |
| | $ | 10.7 |
| | $ | 143.8 |
|
| | | | | | | | | | |
| Net sales | $ | 916.0 |
| | $ | — |
| | $ | 916.0 |
| | $ | — |
| | $ | 916.0 |
|
| Cost of goods sold | 626.1 |
| | (14.1 | ) | | 612.0 |
| | 5.1 |
| | 617.1 |
|
| Gross profit | 289.9 |
| | 14.1 |
| | 304.0 |
| | (5.1 | ) | | 298.9 |
|
| Operating expenses: | | | | | | | | | |
| Selling, general and administrative expenses | 166.7 |
| | — |
| | 166.7 |
| | — |
| | 166.7 |
|
| Gain on sale of idle property | (9.0 | ) | | 9.0 |
| | — |
| | — |
| | — |
|
| Strategic reorganization and other charges | 10.5 |
| | (10.5 | ) | | — |
| | — |
| | — |
|
| Operating income | $ | 121.7 |
| | $ | 15.6 |
| | $ | 137.3 |
| | $ | (5.1 | ) | | $ | 132.2 |
|
| | | | | | | | | | |
