SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒
Filed by a party other than the Registrant ☐
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☐ Preliminary Proxy Statement | ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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☒ Definitive Proxy Statement | ||
☐ Definitive Additional Materials | ||
☐ Soliciting Material Pursuant to § 240.14a-12 |
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H.B. Fuller Company
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☒ | No fee required |
☐ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 |
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Office: | 1200 Willow Lake Boulevard |
| St. Paul, Minnesota 55110-5101 |
Mail: | P.O. Box 64683 |
| St. Paul, Minnesota 55164-0683 |
Phone: | (651) |
Dear Shareholder:
Our 20162019 Annual Meeting of Shareholders will be held on Thursday, April 7, 2016.We are pleased to inform you that this year’s4, 2019. This year's annual meeting will once again be our firsta completely virtual meeting, of shareholders.which will be conducted via live webcast. You maycan attend the meeting and vote your shares electronically during the meeting via the Internet by visitingat www.virtualshareholdermeeting.com/FULFUL2019., where you will be able to vote and submit questions electronically prior to and during the meeting. Specific instructions for accessing the meeting are provided in the notice, proxy card or voting instruction form you received. The online meeting will begin promptly at 1:2:00 p.m. central time. The Notice of Annual Meeting of Shareholders and the Proxy Statement describe the business to be conducted at the meeting.
We have elected to take advantage of the “notice"notice and access”access" rules of the Securities and Exchange Commission to furnish most of our shareholders with proxy materials over the Internet. This method of delivery allows us to provide you with the information you need, while reducing printing and delivery expenses.
Your vote on the proposals is important. Whether or not you plan on attending the virtual meeting, we encourage you to vote your shares to make certain that you are represented at the meeting. You may vote via the Internet or, if you received a printed copy of the proxy materials, by telephone or by mailing a proxy or voting instruction card.
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 Sincerely,  | ||
James J. Owens | ||
President and Chief Executive Officer | ||
February 24, 2016
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February 20, 2019
Office: | 1200 Willow Lake Boulevard |
| St. Paul, Minnesota 55110-5101 |
Mail: | P.O. Box 64683 |
| St. Paul, Minnesota 55164-0683 |
Phone: | (651) |
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Date and Time: | Thursday, April |
Items of Business: | The election of three directors named in the attached Proxy Statement to serve for a three-year |
| A non-binding advisory vote to approve the compensation of our named executive officers as disclosed in the attached Proxy Statement. |
| The ratification of the appointment of KPMG LLP as H.B. |
| Any other business that may properly be considered at the meeting or any adjournment thereof. |
Record Date: | You |
Voting by Proxy: | It is important that your shares be represented and voted at the meeting. Whether or not you plan to attend the meeting, we encourage you to submit your proxy as soon as possible. For specific instructions on how to vote your shares, please refer to the instructions |
By Order of the Board of Directors | ||
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Timothy J. Keenan | ||
Vice President, General Counsel and Corporate Secretary | ||
February 24, 201620, 2019
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Executive Benefit and Payments Upon Termination – Fiscal Year |
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Proposal 2 — Non-Binding Advisory Vote on Executive Compensation |
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PROPOSAL 3 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 7, 20164, 2019
The Board of Directors (the "Board") of H.B. Fuller Company ("H.B. Fuller", the "Company" or "we") is soliciting proxies to be used at the Annual Meeting of Shareholders to be held on April 7, 2016,4, 2019, and at any adjournment and reconvening of the meeting. We first made this Proxy Statement and the Annual Report for the fiscal year ended November 28, 2015December 1, 2018 available to our shareholders on or about February 24, 2016.20, 2019.
Provided below are highlights of some of the information contained in this proxy statement.Proxy Statement. These highlights are only a summary. Please review the complete Proxy Statement and 20152018 Annual Report to Shareholders before you vote.
ANNUAL MEETING OF SHAREHOLDERS
| Date and Time: | Thursday, April |
Place: | Via the Internet. You may attend the online meeting by visitingwww.virtualshareholdermeeting.com/ |
| Record Date: | Wednesday, February |
Voting: | You may vote at the meeting if you were a shareholder of record at the close of business on February |
PROPOSAL 1 – ELECTION OF DIRECTORS (see pages12S REQUIRING YOUR VOTE -14 for more information)
You are being asked to elect three directors. The Board of Directors (the “Board”) is currently composed of nine directors and divided into three classes. The Class II directors are standing for election for a three year term at the Annual Meeting. The term of office for these Class II directors will expire at the Annual Meeting or until their successors are duly elected and qualified. All of our directors other than Mr. Owens are independent under New York Stock Exchange rules. Only independent directors serve on our Audit, Compensation, and Corporate Governance and Nominating Committees.
Vote required: Each director is elected by a plurality of the votes cast. However, if a nominee for director receives a greater number of votes “withheld’ from his or her election than votes “for” such election, the director shall submit to the Board a letter of resignation for consideration. See the heading “Director Elections” in the “Corporate Governance” section of this Proxy Statement for more information.
Information about our director nominees:
Director |
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| Other Public | Committees | ||||||||
Name | Age | Occupation | Since | Independent? | Boards? | Served On | ||||||
Dante C. Parrini | 51 | Chairman & CEO, P.H. Glatfelter Company | 2012 | Yes | Yes | C, CGN | ||||||
John C. van Roden, Jr. | 66 | Independent Director | 2003 | Yes | Yes | A, CGN | ||||||
James J. Owens | 51 | Chairman & CEO, H.B. Fuller Company | 2010 | No | Yes | None |
A - Audit Committee
C - Compensation Committee
CGN - Corporate Governance and Nominating Committee
The Board of Directors recommends a vote FOR election of each of the nominees.
PROPOSAL 2 – NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION (see page62 for more information)
The Company provides shareholders with an annual advisory (non-binding)Your vote on the compensation of our named executive officers.proposals is important. Whether or not you plan on attending the virtual meeting, we encourage you to vote your shares to make certain that you are represented at the meeting.
1 | Proposal 1 – Election of Directors | Board Recommendation | Page |
The three director nominees would serve for a three-year term until the 2022 Annual Meeting and until their successors are duly elected and qualified. | FOR | 13 | |
2 | Proposal 2 -Non-Binding Advisory Vote on Executive Compensation | ||
The Company's executive compensation program is designed to provide a competitive compensation package that rewards executive officers for sustained financial and operating performance that creates long-term value for our shareholders. | FOR | 59 | |
3 | Ratification of Appointment of Independent Registered Public Accounting Firm | ||
The Audit Committee has approved the appointment of KPMG LLP as the Company's independent auditor for fiscal year 2019. Shareholders are asked to ratify this appointment. | FOR | 61 |
2018 PERFORMANCE HIGHLIGHTS
The Board of Directors recommends a vote FOR this proposal.
PROPOSAL 3 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (see page 64 for more information)
The Audit Committee has appointed KPMG LLP, as our independent registered public accounting firmNet income for the 2018 fiscal year ending December 3, 2016. KPMG LLP has acted as our independent registered public accounting firm since 2004. Representativeswas $171 million, or $3.29 per diluted share, versus net income of KPMG LLP will be present at the meeting and will have the opportunity to make a statement if they desire to do so and to respond to appropriate questions from shareholders.
The Board of Directors recommends a vote FOR this proposal.
PROPOSAL 4 –APPROVE THE H.B. FULLER COMPANY 2016 MASTER INCENTIVE PLAN (see pages64- 76 for more information)
On January 21, 2016, our Board of Directors adopted, upon recommendation of the Compensation Committee and subject to shareholder approval, the H.B. Fuller Company 2016 Master Incentive Plan (“2016 Master Incentive Plan”). The purpose of the 2016 Master Incentive Plan is to promote the interests of the Company and our shareholders by aiding the Company in attracting and retaining employees, officers, consultants, independent contractors and non-employee directors capable of assuring the future success of the Company, to provide such persons with opportunities for stock ownership$59 million, or $1.15 per diluted share, in the Company and to offer such persons other incentives to put forth maximum efforts for2017 fiscal year. Adjusted diluted earnings per share ("AEPS") in the success of the Company’s business.
The Board of Directors recommends a vote FOR this proposal.
2015 PERFORMANCE HIGHLIGHTS
Our overall Company net income results2018 fiscal year were down 7$3.00, up 22 percent versus the prior year due to a varietyyear.
Net revenue for the 20152018 fiscal year was $2,083.7$3,041 million, down 1.0up 32 percent versus the 20142017 fiscal year. Higher volumeAdjusting for the Royal Adhesives acquisition, and higher average selling prices positively impactedorganic revenue ("OR"), defined as constant currency revenue less the impact from acquisitions, was up 3.7 percent.
Operating income ("OI") for the 2018 fiscal year was $255 million, up 99 percent from OI for fiscal year 2017 of $128 million. Adjusted operating income ("AOI") for 2018 was $300 million, up 54 percent versus $195 million in the 2017 fiscal year.
Within our Construction Adhesives segment, which accounts for 15 percent of our net revenue, growth. Constant currencysegment revenue grew by 5.0totaled $446.1 million for the 2018 fiscal year, an increase of 71 percent year-over-year. Foreign currency translation negatively impacted revenue growth duringfrom the 2017 fiscal year. Additional results include:
• Adjusted gross profit marginWithin our Americas Adhesives segment, which accounts for 36 percent of our net revenue, segment revenue totaled $1.1 billion for the 2018 fiscal year, was up 160 basis points to 27.7an increase of 21 percent
• Adjusted SG&A expense was up 5 from the 2017 fiscal year, and segment operating income totaled $115.4 million, an increase of 26 percent versusfrom the prior year, but down nearly 32017 fiscal year. Within our EIMEA segment, which accounts for 24 percent when adjustingof our net revenue, segment revenue totaled $738.6 million for the additional SG&A expense added2018 fiscal year, an increase of 30 percent from the TONSAN Adhesive Inc. acquisition
• Adjusted EBITDA margin was 12.8 percent, up 100 basis points versus the 20142017 fiscal year, and segment operating income totaled $40.1 million, more than doubled from the 2017 fiscal year.
For the 46th49th consecutive year, we implemented an increase in the amount of quarterly cash dividends we paypaid to shareholders, with an 11a 3 percent increase this year.
More information on our 20152018 performance can be found on pages 3027 - 31.28. Adjusted diluted earnings per share, adjusted operating income, constant currency revenue and organic revenue are non-GAAP financial metrics that are reconciled with the most directly comparable GAAP financial metrics in Annex A.
EXECUTIVE COMPENSATION PROGRAM (for more information, see pages 3027 - 48)
Our focus is to accelerate profitable growth and we motivate performance and measure our results in large part by the metrics in our short-term incentive plan. Overall, in fiscal year 2015, with regard to the metrics used in our short-term incentive plan, the Company performed as follows:
• For the Company organic revenue metric, we exceeded the threshold level, but did not meet our target, resulting in a less than target payout.
• For the Company adjusted operating income metric, we exceeded the threshold level, but did not meet our target, resulting in a less than target payout.
• For the adjusted earnings per share (“EPS”) metric, we did not meet our threshold level. Therefore, there was no payout with regard to this short-term incentive metric.
• Performance related to regional and business short-term incentive metrics for our executive officers listed in the Summary Compensation Table in this Proxy Statement (the “named executive officers” or “NEOs”) other than the CEO and CFO, was varied, resulting in a short-term incentive payment for all but one of the NEOs higher than in the previous year.
The achievements in our financial metrics resulted in short-term incentive payouts for our CEO of 42.3% of target and ranged from 25.0% to 52.3% of target for our other NEOs.45)
Our executive compensation program is also designed to provide a competitive compensation package that rewards executive officers for sustained financial and operating performance that creates long-term value for our shareholders. HighlightsOur program emphasizes pay for performance through the use of short- and long-term incentive awards as a significant percentage of total compensation.
The graph below shows the main elements of total compensation (base salary, short-term incentive, long-term incentive (NQSOs, RSUs and PSUs)) as approximate percentages of 2018 total compensation measured by amounts for fiscal 2018 for the CEO and the other NEOs as set forth in the "Summary Compensation Table" later in this Proxy Statement (less above market interest and all other compensation).
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Short-Term Incentive Awards
The short-term incentive plan ("STIP") aligns executive performance with achievement of annual company strategic goals and objectives and provides financial reward for meeting or exceeding specific metrics. Payouts are dependent on achievement of predetermined financial performance goals. We motivate performance and measure our results using metrics aligned with our strategic plan. The Company's fiscal 2018 performance against STIP metrics is summarized below:
• Company-wide financial metrics were organic revenue, adjusted operating income ("AOI") and adjusted diluted earnings per share ("AEPS"), and they factored into short-term incentives for all of our executive officers named in the "Summary Compensation Table" (the "NEOs"). We exceeded the threshold level for organic revenue, AOI and AEPS.
• Business financial metrics were operating segment- and key market-based measures of AEPS, AOI, organic revenue and Adjusted EBITDA and they factored into short-term incentives for all of our NEOs other than our Chief Executive Officer (the "CEO") and the Chief Financial Officer (the "CFO"). Performance varied with all results exceeding the threshold metric and some results exceeding the target level. Actual results are set forth in a table on page 36 of this Proxy Statement.
STIP payments can range from 0% to 200% of target. In fiscal 2018, the achievement of our financial metrics resulted in short-term cash incentive payouts for our CEO and CFO of 85.3% of target and ranged from 77.3% to 88.1% of target for our other NEOs.
Long-Term Incentive Awards
Our long-term incentive awards are equity-based and are used to attract, retain and reward high caliber executive talent and to encourage long-term strategic decision making that is aligned with shareholder interests. We grant the following awards, which are periodically benchmarked against market data. These awards tie a significant portion of NEO total compensation to shareholder value creation, which is measured by share price performance.
● | For all NEOs except the CEO, half of restricted stock units ("RSUs") are subject to time-based vesting. |
o | For the CEO, all RSUs are subject to performance-based vesting, with half of his RSUs vesting only if the Company achieves at least a threshold level of AEPS, AOI or organic revenue. |
● | For all NEOs, including the CEO, half of RSUs only vest upon the fulfillment of certain performance conditions over a three-year period. Performance-based payouts can range from 0% to 200% of target. |
o | For the January 2016 grant, the metric target was 9.5% return on invested capital as adjusted ("ROIC"). The Company achieved 8.3% ROIC in fiscal 2018. Therefore, the vesting for that part of the grant was at 70% of target for all NEOs; |
o | For the January 2017 grant, the metric target was 10.0% ROIC. The Company achieved 8.3% ROIC in fiscal 2018. Therefore, the vesting for that part of the grant was at 57.5% of target for all NEOs; and |
o | For the January 2018 grant, the metric target was 8.0% ROIC, which is lower than prior year targets due to the unprecedented scope of the Royal Adhesives business having a dilutive effect in the short term calculation of ROIC. The acquisition is highly accretive from a profitability standpoint, however. The Company achieved 8.3% ROIC in fiscal 2018. Therefore, the vesting for that part of the grant was at 107.5% of target for all NEOs. |
o | Future vesting of performance-based RSUs will require meeting at least a threshold level of ROIC annually. See further discussion and detail in the "Compensation Discussion and Analysis" section of this Proxy Statement. ROIC is a non-GAAP financial metric that is reconciled with the most directly comparable GAAP financial metric in Annex A. |
● | Non-qualified stock options vest in three equal annual installments, and they are granted to all NEOs. |
Other highlights of our executive compensation program include:
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ForSAY-ON-PAY VOTE AND SHAREHOLDER ENGAGEMENT
Overview
An advisory shareholder vote on the Company's fiscal 2017 executive compensation program ("Say-on-Pay") was held at the 2018 Annual Meeting of Shareholders, with 59% of the shares voting in favor, below the Company's historical average outcomes exceeding 91%.
To continue fostering open and transparent communications, and to learn more about our shareholders' perspectives on our executive compensation program, we conducted shareholder outreach during fiscal year 2016,2018. Specifically, we contacted 12 shareholders, including the 10 largest, representing approximately 60% of our share ownership to collect feedback on a variety of topics, including our NEO compensation program. Most of the shareholders accepted our offer to discuss these matters or indicated that they did not have particular governance or compensation program concerns. Overall, shareholders are pleased with our compensation programs as indicated by the historical high percentage approval results on Say-on-Pay proposals in prior years.
However, based on the feedback we received from these investor meetings, the following themes emerged:
Many of the shareholders indicated a general preference for the removal of tax gross-up provisions from executive change-in-control agreements. These shareholders also indicated that they would support an approach where the Company would eliminate such tax gross-up provisions from future executive agreements.
Some of the shareholders indicated a general preference for double-trigger equity vesting in the event of a change-in-control.
In addition, we reviewed current market practices, specifically tax gross-up provisions in executive change-in-control agreements and double-trigger equity vesting in the event of a change-in-control. Based on our review, we have concluded that market practices indicate that these types of change-in-control provisions are no longer common practice.
2018 Actions
The market information and shareholder feedback were shared with the Compensation Committee and the full Board of Directors, and were thoroughly discussed. Based on this information, the Compensation Committee approved certain changes for future executive compensation agreements:
For future executive change-in-control agreements, the addition ofCompany will not include a performance metric applicabletax gross-up provision.
For any executive equity grant agreements beginning in 2019, a double-trigger will be required prior to 50%accelerated equity vesting. This means that there must be a change in control of the restricted stock units granted under our long-term incentive planCompany and a termination of employment (or a material change to the NEO's terms of employment (such as demotion, reduction in compensation or required relocation)) in order for eachvesting to accelerate.
These changes support the Compensation Committee's objectives of our NEOs. Seeproviding competitive, performance-based compensation that is aligned with the “Actions for 2016” sectionCompany's business strategy and shareholder value creation, as well as good governance practices and current best practices in the "Compensation Discussion and Analysis" section of this Proxy Statement.market.
QUESTIONS AND ANSWERS ABOUT THE MEETING
What is the purpose of the meeting?
At our annual meeting,Annual Meeting, shareholders will act upon the matters disclosed in the Notice of Annual Meeting of Shareholders that accompanies this Proxy Statement. These matters include the election of three directors, a non-binding advisory vote to approve the compensation of our named executive officers as disclosed in this Proxy Statement (the “Say"Say on Pay Proposal”Proposal"), and the ratification of the appointment of our independent registered public accounting firm, and the approval of the H.B. Fuller Company 2016 Master Incentive Plan (“2016 Master Incentive Plan”).firm.
WeHow will also consider any other business that may properly be presented atmanagement respond to questions during the meeting and managementvirtual meeting?
Management will respond to questions from shareholders.shareholders in the same way as it would if the Company held an in-person meeting. Shareholders who wish to submit a question to the Company for the meeting may do so in advance at www.proxyvote.com and live during the meeting at www.virtualshareholdermeeting.com/FUL2019. You will need the 16-digit control number that is printed in the box marked by the arrow on your Notice Regarding the Availability of Proxy Materials to enter the Annual Meeting. We recommend that you log in at least 15 minutes before the meeting to ensure that you are logged in when the meeting starts.
While our Annual Meeting of Shareholders is just one of the forums where we engage with shareholders, it is an important one. Physical attendance at our meetings was dwindling prior to our adoption of a virtual only annual meeting and participation has subsequently increased. In addition, a virtual only meeting saves the Company's and our shareholders' time and money and reduces our environmental impact. We welcome your suggestions on how we can improve our virtual Annual Meeting of Shareholders and make it more effective and efficient.
How does the Board recommend that I vote?
The Board of Directors recommends a vote “FOR”"FOR" each of the nominees for director, “FOR”"FOR" the Say on Pay Proposal, “FOR”and "FOR" the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 3, 2016, and “FOR” the 2016 Master Incentive Plan.November 30, 2019.
Who is entitled to vote at the meeting?
If you were a shareholder of record at the close of business on February 10, 2016,6, 2019, you are entitled to vote at the meeting.
As of the record date, 49,986,79150,856,446 shares of common stock of the Company ("Common StockStock") were outstanding and eligible to vote.
What is the difference between a shareholder of record and a street name holder?
If your shares are registered directly in your name, you are considered the “shareholder"shareholder of record”record" with respect to those shares.
If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of those shares, and your shares are held in street name. If you are a “street"street name holder”holder" you will receive a voting instruction card, which appears very similar to a proxy card. Please complete that card as directed in order to ensure your shares are voted at the meeting.
What are the voting rights of the shareholders?
Holders of Common Stock are entitled to one vote per share. Therefore, a total of 49,986,79150,856,446 votes are entitled to be cast at the meeting. There is no cumulative voting for the election of directors.
How many shares must be present to hold the meeting?
A quorum is necessary to hold the meeting and conduct business. The presence of shareholders who can direct the voting of at least a majority of the outstanding shares of Common Stock as of the record date is considered a quorum. A shareholder is counted as present at the meeting if the shareholder is present at the online meeting and votes at the meeting or the shareholder has properly submitted a proxy by mail, telephone or Internet.
How do I vote my shares?
If you are a shareholder of record, you may give a proxy to be voted at the meeting either:
electronically, by following the instructions provided in the Notice of Internet Availability of Proxy Materials or proxy card; or
if you received printed proxy materials, you may also vote by mail or telephone as instructed on the proxy card.
If you hold shares beneficially in street name, you may also vote by proxy over the Internet by following the instructions provided in the Notice of Internet Availability of Proxy Materials or, if you received printed proxy materials, you may also vote by mail or telephone by following the instructions provided in the voting instruction card provided to you by your broker, bank, trustee or nominee.
The telephone and Internet voting procedures have been set up for your convenience. The procedures have been designed to authenticate your identity, to allow you to give voting instructions, and to confirm that those instructions have been recorded properly. You may also vote at the online meeting as described in “"Can I vote my shares atduring the virtual meeting?”" below.
If you hold any shares of Common Stock in the H.B. Fuller Company 401(k) & Retirement Plan (sometimes referred to as the “401(k) Plan” in this Proxy Statement)(the "401(k) Plan"), you are receiving or being provided access to the same proxy materials as any other shareholder of record. However, your proxy vote will serve as voting instructions to the plan trustee. The shares held in the 401(k) Plan will be voted by the plan trustee.
What does it mean if I receive more than one Notice of Internet Availability of Proxy Materials, proxy card or voting instruction card??
It means you hold shares of H.B. Fuller stockCommon Stock in more than one account. To ensure that all of your shares are voted, sign and return each proxy card or voting instruction card or, if you vote by telephone or via the Internet, vote once for each proxy card, voting instruction card or Notice of Internet Availability of Proxy Materials you receive.
Can I vote my shares during the onlinevirtual meeting?
Yes. If you are a shareholder of record, you may attend the meeting and vote your shares electronically during the online meeting by visitingwww.virtualshareholdermeeting.com/FULFUL2019. You will need the 16-digit control number that is printed in the box marked by the arrow on your Notice Regarding the Availability of Proxy Materials to enter the Annual Meeting. We recommend that you log in at least fifteen15 minutes before the meeting to ensure that you are logged in when the meeting starts. However, even if you currently plan to attend the online meeting, we recommend that you submit your proxy ahead of time so that your vote will be counted if, for whatever reason, you later decide to not attend the online meeting.
If you hold your shares of Common Stock in street name, you may vote your shares electronically during the online meeting only if you obtain a signed proxy from your broker, bank, trustee or other nominee giving you the right to vote such shares during the meeting.
If you are a participant in the 401(k) Plan, you may submit a proxy vote as described above, but you may not vote your 401(k) Plan shares during the online meeting.
What vote is required for the proposals to be approved?
Each director is elected by a plurality of the votes cast. However, if a nominee for director receives a greater number of votes “withheld’"withheld' from his or her election than votes “for”"for" such election, the director shall submit to the Board a letter of resignation for consideration. See the heading “"Director Elections”" in the “"Corporate Governance”" section of this Proxy Statement for more information. With respect to the Say On Pay Proposal the approval of the 2016 Master Incentive Plan and the ratification of the appointment of KPMG LLP as our independent registered public accounting firm, the affirmative vote of a majority of the shares of Common Stock represented and entitled to vote on each proposal is required, provided that the total number of shares of Common Stock that vote in favor of the proposal represents more than 25% of the shares outstanding on the record date.
How are votes counted?
Shareholders may either vote “FOR”"FOR" or “WITHHOLD”"WITHHOLD" authority to vote for each nominee for election to the Board of Directors.Board. Shareholders may vote “FOR,” “AGAINST”"FOR," "AGAINST" or “ABSTAIN”"ABSTAIN" on the Say on Pay Proposal the approval of the 2016 Master Incentive Plan and on the ratification of the appointment of KPMG LLP.
If you vote ABSTAIN or WITHHOLD, your shares will be counted as present at the meeting for the purposes of determining a quorum. If you ABSTAIN from voting on aany proposal, your abstention has the same effect as a vote against that proposal. If you WITHHOLD authority to vote for one or more of the nominees for director, this withholding of authority to vote will have no effect on the election of any director from whom votes are withheld.
If you hold your shares in street name and do not provide voting instructions to your broker or nominee, your shares will be considered to be “broker non-votes”"broker non-votes" and will not be voted on any proposal on which your broker or nominee does not have discretionary authority to vote under the rules of the New York Stock Exchange. Shares that constitute broker non-votes will be present at the meeting for the purpose of determining a quorum, but are not considered entitled to vote on the proposal in question. Your broker or nominee has discretionary authority to vote your shares on the ratification of KPMG LLP as our independent registered public accounting firm even if your broker or nominee does not receive voting instructions from you. Your broker or nominee may not vote your shares on the election of directors or the Say on Pay Proposal or the 2016 Master Incentive Plan withoutunless it receives voting instructions from you.
What if I do not specify how I want my shares voted?
If you do not specify on your returned proxy card or voting instruction card (or when giving your proxy by telephone or via the Internet) how you want to vote your shares, we will vote them:
FOR all of the nominees for director;
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FOR the approvalSay on Pay Proposal;
FOR the ratification of the 2016 Master Incentive Plan;appointment of KPMG LLP as our independent registered public accounting firm for fiscal year ending November 30, 2019; and
with respect to such other matters that may properly come before the meeting, in accordance with the judgment of the persons named as proxies.
Can I change my vote?
Yes. If you are a shareholder of record, you may change your vote and revoke your proxy at any time before it is voted at the online meeting in any of the following ways:
by sending a written notice of revocation to our Corporate Secretary;
by submitting another properly signed proxy card at a later date to our Corporate Secretary;
by submitting another proxy by telephone or via the Internet at a later date; or
by voting electronically at the online meeting.
If you are a street name holder, please consult your broker, bank, trustee or nominee for instructions on how to change your vote.
Who pays for the cost of proxy preparation and solicitation?
We pay for the cost of proxy preparation and solicitation, including the charges and expenses of brokerage firms or other nominees for forwarding proxy materials to beneficial owners of shares held in street name. We have retainedengaged The Proxy Advisory Group, LLC to assist in the solicitation of proxies and provide related advice and informational support, for a services fee and the reimbursement of approximately $12,000 plus associated costs and expenses.customary disbursements which are not expected to exceed $15,000 in total.
We are soliciting proxies primarily by mail. In addition, proxies may be solicited by telephone or facsimile, or personally by our directors, officers and regular employees. These individuals will receive no compensation (other than their regular salaries) for these services.
Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of paper copies?
In accordance with rules adopted by the Securities and Exchange Commission (the “SEC”"SEC"), we may furnish proxy materials to our shareholders by providing access to these documents on the Internet instead of mailing printed copies. In general, you will not receive printed copies of the materials unless you request them or you are a participant in the H.B. Fuller Company 401(k) & Retirement Plan.them. Instead, we mailed you the Notice of Internet Availability of Proxy Materials (unless you have previously consented to electronic delivery or already requested to receive paper copies), which instructs you as to how you may access and review all of the proxy materials on the Internet. The Notice of Internet Availability of Proxy Materials explains how to submit your proxy over the Internet. If you would like to receive a paper copy or e-mail copy of the proxy materials, please follow the instructions provided in the Notice of Internet Availability of Proxy Materials.
Are the proxy and related materials available electronically?
Yes.
Important Notice Regarding the Availability of Proxy Materials
for the Shareholder Meeting to be held on April 7, 20164, 2019
Our Proxy Statement and 20152018 Annual Report, including our Annual Report on Form 10-K, are available atwww.proxyvote.com.
Will any other business be considered at the meeting?
Our Bylaws provide that a shareholder may present a proposal at the annual meeting that is not included in this Proxy Statement only if proper written notice was received by us. No shareholder has given the timely notice required by our Bylaws in order to present a proposal at the annual meeting. OurThe Board of Directors does not intend to present any other matters for a vote at the annual meeting. If you wish to present a proposal at the 20172020 Annual Meeting, please see“"How can a shareholder present a proposal at the 20172020 Annual Meeting?”" As of the date of this Proxy Statement, we do not know of any other business to be presented for consideration at the annual meeting. If any other business does properly come before the meeting, the persons named as proxies will vote in accordance with their best judgment as to the best interests of H.B. Fuller and its shareholders.
How can a shareholder present a proposal at the 20172020 Annual Meeting?
In order for a shareholder proposal to be considered for inclusion in our Proxy Statement for the 20172020 Annual Meeting, the written proposal must be received at our principal executive offices by the close of business on October 27, 2016.23, 2019. The proposal must comply with SEC regulationsrules regarding the inclusion of shareholder proposals in company-sponsored proxy materials and with the requirements set forth in our Bylaws. Please contact our Corporate Secretary for a copy of such regulationsrules and for a description of the steps outlined in our Bylaws that must be taken to present such a proposal.
If a shareholder wishes to present a proposal at the 20172020 Annual Meeting that would not be included in our Proxy Statement for such meeting, the shareholder must provide notice to us no later than January 9, 20176, 2020 and no earlier than December 8, 2016.6, 2019. Please contact the Corporate Secretary for a description of the steps to be taken to present such a proposal.
How can a shareholder get a copy of the Company’s 2015Company's 2018 Annual Report on Form 10-K?
Our 20152018 Annual Report, including our Annual Report on Form 10-K for the year ended November 28, 2015,December 1, 2018, accompanies this Proxy Statement. The 20152018 Annual Report, including our Annual Report on Form 10-K, is also available via the internet in the “"Financial”" section of our Investor Relations page of our website (www.hbfuller.com). If requested, we will provide you a paper copy of the 20152018 Annual Report, including our Annual Report on Form 10-K without charge. We will also provide you with copies of any exhibits to the Form 10-K, upon written request and upon payment of a fee covering our reasonable expenses in furnishing the exhibits. You can request a paper copy of the 20152018 Annual Report, or paper copies of exhibits to the Form 10-K by writing to the Corporate Secretary, H.B. Fuller Company, 1200 Willow Lake Boulevard, P.O. Box 64683, St. Paul, Minnesota 55164-0683.
Where can I find information about the Company's sustainability efforts, corporate giving and employee volunteerism?
H.B. Fuller is deeply committed to ensuring that the communities where we live and work thrive. With a direct presence in more than 40 countries, H.B. Fuller has an opportunity to strengthen communities across the globe through sustainability efforts, corporate giving and employee volunteerism. Our most recent sustainability report is available in the "Corporate Responsibility" section of our website, www.hbfuller.com. This report and our website are not incorporated by reference in, and are not part of this Proxy Statement.
Who is the Corporate Secretary?
The Corporate Secretary is Timothy J. Keenan. The mailing address is the Office of the Corporate Secretary, P.O. Box 64683, St. Paul, Minnesota 55164-0683.
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows how much H.B. Fullermany shares of Common Stock each director and executive officer listed in the Summary Compensation Table in this Proxy StatementNEO beneficially owned as of January 29, 2016.28, 2019. The table also shows the beneficial ownership of H.B. Fuller Common Stock ofby all directors and executive officers of H.B. Fuller as a group. In general, “beneficial ownership”"beneficial ownership" includes those shares of our Common Stock which a director or executive officer has the power to vote or transfer, as well as stock options that are exercisable currently or within 60 days and stockCommon Stock underlying phantom stock units, time-based restricted stock units and performance-based restricted stock units that may be acquired, in certain circumstances, within 60 days. The detail of beneficial ownership is set forth in the following table. In addition, the table shows all shareholders known to us to be the beneficial owners of more than 5% of H.B. Fullerthe outstanding shares of Common Stock.
Unless otherwise noted, the shareholders listed in the table have sole voting and investment power with respect to the shares of Common Stock owned by them, and the shares beneficially owned by our directors and executive officers are not subject to any pledge.
Amount and | Percent of | ||||||
Nature of | Common Stock | ||||||
Name of Beneficial Owner | Beneficial Ownership | Outstanding | |||||
BlackRock, Inc. | 4,758,401 | 1 | 9.52% | ||||
The Vanguard Group, Inc. | 4,069,175 | 2 | 8.14% | ||||
Mairs and Power, Inc. | 3,454,392 | 3 | 6.91% | ||||
State Street Corporation | 3,347,103 | 4 | 6.70% | ||||
Fiduciary Management, Inc. | 2,793,632 | 5 | 5.59% | ||||
Franklin Resources, Inc. | 2,600,725 | 6 | 5.20% | ||||
Thomas W. Handley | 17,677 | 7 | * | ||||
Maria Teresa Hilado | 7,401 | 7,8 | * | ||||
J. Michael Losh | 90,226 | 7 | * | ||||
Lee R. Mitau | 91,663 | 7 | * | ||||
Dante C. Parrini | 7,810 | 7 | * | ||||
Ann W.H. Simonds | 9,348 | 7,8 | * | ||||
John C. van Roden, Jr. | 42,779 | 7 | * | ||||
R. William Van Sant | 39,336 | 7 | * | ||||
James J. Owens | 540,524 | 9 | 1.07% | ||||
James R. Giertz | 233,146 | 10 | * | ||||
Traci L. Jensen | 83,638 | 11 | * | ||||
Patrick J. Trippel | 122,246 | 12 | * | ||||
Steven Kenny | 225,643 | 13 |
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All directors and executive officers as a group (19 people) | 1,825,847 | 14 |
| 3.55% | |||
Amount and | Percent of | |||||
Nature of | Common Stock | |||||
Name of Beneficial Owner | Beneficial Ownership | Outstanding | ||||
BlackRock, Inc. | 7,497,141 | 1 | 14.74% | |||
The Vanguard Group, Inc. | 5,734,719 | 2 | 11.28% | |||
State Street Corporation | 4,041,203 | 3 | 7.95% | |||
Janus Henderson Group PLC | 3,079,732 | 4 | 6.06% | |||
| Mairs and Power, Inc. | 2,645,827 | 5 | 5.20% | |||
| Daniel L. Florness | 0 | 6 | * | |||
Thomas W. Handley | 19,625 | 6 | * | |||
Maria Teresa Hilado | 21,145 | 6 | * | |||
J. Michael Losh | 106,906 | 6 | * | |||
| Ruth S. Kimmelshue | 0 | 6 | * | |||
Lee R. Mitau | 97,229 | 6,7 | * | |||
Dante C. Parrini | 14,736 | 6 | * | |||
John C. van Roden, Jr. | 50,487 | 6 | * | |||
R. William Van Sant | 36,217 | 6 | * | |||
James J. Owens | 965,464 | 8 | 1.87% | |||
John J. Corkrean | 54,426 | 9 | * | |||
Traci L. Jensen | 125,443 | 10 | * | |||
Heather A. Campe | 88,479 | 11 | * | |||
Patrick M. Kivits | 51,763 | 12 | * | |||
All directors and executive officers as a group (21 people) | 2,012,081 | 13 | 3.83% | |||
* | Indicates less than 1%. |
(1) | This information is based on a Schedule 13G/A filed with the SEC on January |
(2) | This information is based on a Schedule 13G/A filed with the SEC on February 11, |
(3) | This information is based on a Schedule 13G filed with the SEC on February 13, 2019 reporting beneficial ownership as of December 31, 2018. State Street Corporation, a holding company, reported that it has shared voting power over 3,683,376 shares and shared dispositive power over all of the shares. SSGA Funds Management, Inc., a subsidiary of State Street Corporation beneficially owns 2,565,725 of the 4,041,203 shares noted in this table as beneficially owned by State Street Corporation. The holder's address is State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111. |
| (4) | This information is based on a Form 13F-HR filed with the SEC on February 6, 2019 reporting holdings as of December 31, 2018. Janus Henderson Group PLC reported that it shared voting power over 2,948,832 of these shares and no voting power over the remaining 130,900 shares. The holder's address is Janus Henderson Group PLC, 201 Bishopsgate, London, United Kingdom EC2M 3AE. |
(5) | This information is based on a Schedule 13G/A filed by the holder with the SEC on February |
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Thomas W. Handley | 16,330 | Dante C. Parrini. | 6,468 | 18,278 | Dante C. Parrini | 13,395 | ||||||
Maria Teresa Hilado | 6,068 | Ann W. H. Simonds | 8,016 | 19,799 | John C. van Roden, Jr. | 35,526 | ||||||
J. Michael Losh | 86,629 | John C. van Roden, Jr. | 27,818 | 103,309 | R. William Van Sant | 18,552 | ||||||
Lee R. Mitau | 48,847 | R. William Van Sant | 16,171 | 54,456 |
Excludes shares of Common Stock subject to phantom stock units credited to the accounts of directors who participate in the Directors' Deferred Compensation Plan, described under the heading "Director Compensation" that may not be acquired within 60 days. The number of units credited to each director participating in this plan that are excluded from the table is as follows:
Daniel L. Florness | 2,061 | Lee R. Mitau | 106,616 |
Thomas W. Handley | 23,551 | R. William Van Sant | 82,183 |
Ruth S. Kimmelshue | 2,061 |
None of the phantom stock units are entitled to vote at the meeting.
(7)
Thomas W. Handley | 11,612 | Lee R. Mitau | 88,700 | ||||||
Maria Teresa Hilado | 622 | Ann W.H. Simonds | 622 | ||||||
J. Michael Losh | 621 | R. William Van Sant | 65,612 |
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”"Exchange Act") requires the Company’sCompany's directors and executive officers to file initial reports of ownership and reports of changes in ownership of H.B. Fuller’sFuller's securities with the SEC. These reports are available for review on our website (www.hbfuller.com) in the “"Financial”" section of the Investor Relations page. Directors and executive officers are required to furnish us with copies of these reports. Based solely on a review of these reports and written representations from the directors and executive officers, we believe that all directors and executive officers complied with all Section 16(a) filing requirements for fiscal year 2015, except that, due to administrative error, James Owens was one day late in filing a Form 4 reporting stock option and restricted stock unit grants.2018.
PROPOSAL 1—ELECTION OF DIRECTORS
The Board of Directors is currently composed of nineten directors and is divided into three classes. Each year one class of directors stands for election for a three-year term. The term of office for Class II directors, consisting of James J. Owens, Dante C. Parrini and John C. van Roden, Jr. and James J. Owens,, will expire at the annual meeting.
At the annual meeting, three persons They are being nominated to be elected as Class II directors to hold aserve an additional three-year term of office from the date of their election until the 20192022 annual meeting orand until their successors are duly elected and qualified. The three nominees for election as Class II directors are Dante C. Parrini, John C. van Roden, Jr. and James J. Owens, all of whom are currently directors. Each of the nominees has agreed to serve as a director if elected. Following the annual meeting, the Board will be comprised of nine directors. Pursuant to our Company’s Bylaws, no more than 15 persons may serve on the Board. For information on how a shareholder may suggest a person to be a nominee to the Board, see“"How can a shareholder suggest a candidate for election to the Board?”"
Unless earlier terminated due to retirement or resignation, the term of office for Class III directors, consisting of Daniel L. Florness, J. Michael Losh, Lee R. Mitau and R. William Van Sant, will expire at the annual meeting in 2017,2020, and the term of office for Class I directors, consisting of Thomas W. Handley, Maria Teresa Hilado, and Ann W.H. Simonds,Ruth S. Kimmelshue, will expire at the annual meeting in 2018.2021. All of the directors except Mr. Florness, were elected to the Board of Directors by the shareholders. Mr. Florness, who was appointed during fiscal 2018, was recommended by Mr. Owens as a potential director to the Corporate Governance and Nominating Committee for consideration.
If, for any reason, any nominee becomes unable to serve before the election, the persons designated as proxies will vote your shares for a substitute nominee selected by the Board of Directors. Alternatively, the Board of Directors, at its option, may reduce the number of directors constituting Class II directors.
The Board of Directors recommends a vote FOR election of each of the nominees.
The nominees provided the following information about themselves as of January 31, 2016.2019.
Class II (Term Ending in 2016)2019)
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Director since 2010 Committees: None | President and Chief Executive Officer (2010-present) of H.B. Fuller Company. Previously, Senior Vice President, Americas (2010); Senior Vice President, North America (2008–2010); Senior Vice President of Henkel Corporation, a global manufacturer of home care products, cosmetics, toiletries and adhesives products (2008). | ||||
Qualifications | |||||
Mr. Owens brings to the Board his extensive experience in the global adhesives business. In addition to his experience with H.B. Fuller and Henkel, Owens spent 22 years with National Starch's adhesive business, a division of ICI (Imperial Chemical Industries Limited) in a variety of management positions, including experience as a Corporate Vice President and General Manager and as a Vice President and General Manager of Europe/Middle East and Africa. Also, Mr. Owens currently serves as a director of the American Chemical Association. Mr. Owens brings to Board discussions and deliberations his deep knowledge of the adhesives industry and public company Board experience and is the voice of management on the Board. | |||||
Other Public Company Boards: Donaldson Company, Inc. | |||||
Dante C. Parrini | ||||
| Biography | |||
Director since 2012 Committees: Compensation, Corporate Governance and Nominating | Chairman and Chief Executive Officer (2011-present), P.H. Glatfelter Company ("Glatfelter"), a leading global supplier of | |||
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Qualifications | ||||
Mr. Parrini brings to the Board a broad range of management experience, | ||||
Other Public Company Boards: P.H. Glatfelter Company | ||||
John C. van Roden, Jr. | |||||
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Director | since 2003 | ||||
| Independent Director. Previously, Presiding Director | ||||
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Qualifications | |||||
Mr. van Roden brings to the Board a broad range of management, finance and | |||||
Other Public Company Boards: Airgas, Inc. | |||||
The Board of Directors has determined that Mr. van Roden is an audit committee financial expert as that term is defined under the rules of the SEC. | |||||
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How can a shareholder suggest a candidate for election to the Board?
The Corporate Governance and Nominating Committee of the Board nominates all candidates for election to the Board. Generally, current directors or third party search firms engaged by the Corporate Governance and Nominating Committee identify candidates for consideration by the Committee. No third party search firm was engaged during fiscal 2015.2018. The Corporate Governance and Nominating Committee will review all nomineescandidates to the Board of Directors, including an assessment of a nominee’scandidate's judgment, experience, independence and such other factors as the Corporate Governance and Nominating Committee concludes are pertinent in light of the Board’sBoard's needs. The Board of Directors believes that its membership should reflect a diversity of experience, skills, geography, gender and ethnicity. The Board of Directors considers each of these factors when evaluating director nomineescandidates and evaluates the makeup of the Board of Directors with regard to these factors on an ongoing basis as it searches for and asks director nomineescandidates to join the Board. The Corporate Governance and Nominating Committee will select qualified nomineescandidates and review its recommendations with the Board, which will decide whether to invite any nomineecandidate to join or stand for re-election to the Board. The Committee will consider candidates recommended by any shareholder using the same criteria set forth above. Recommendations may be sent to the Corporate Governance and Nominating Committee in care of the Corporate Secretary of H.B. Fuller. No shareholder recommended any candidate during fiscal year 2015.2018.
Who are the remaining directors?
The directors not standing for election at the meeting and whose service will continue until the end of their respective terms provided the following information about themselves as of January 31, 2016.2019.
Class III (Term Ending in 2017)2020)
Daniel L. Florness | |
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Director Committees: Audit and Compensation |
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Qualifications | |
Mr. Florness brings to the Board a broad range of financial and management experience, CEO experience and public company Board experience. Prior to becoming CEO at Fastenal, his responsibilities included finance, leadership of a portion of a manufacturing division, product development and procurement, and Fastenal's national accounts business. He also brings deep knowledge and understanding of corporate strategy, and experience growing a business from a $250 million business with operations in two countries to a $5.0 billion global entity with a direct presence in 24 countries. | |
Other Public Company Boards: Fastenal Company |
J. Michael Losh | |
Age 72 | Biography |
Committee: Corporate Governance and Nominating | Independent Director |
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Qualifications | |
Mr. Losh brings to the Board a wealth of global operating, financial and accounting experience through his 36-year career at | |
Other | Public Company Boards: Prologis, Inc. (Prologis), Aon plc ("AON"), MASCO and |
Lee R. Mitau | |
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Director | since 1996, Chairman of the Board since |
| Chairman of the Board, H.B. Fuller Company (2006-present) and Graco Inc. |
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Mr. Mitau | |
Other |
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R. William Van Sant | |
| Biography |
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Director | since 2001, Vice Chairman of the Board since |
| Vice Chairman of the Board (2011-present); Executive Chairman and Director (2015), Builtrite Holdings, LLC ("Builtrite"), a portfolio company of TJM Capital Partners, which designs and produces truck mount and stationary electric material handlers and material handling attachments; Operating Partner, TJM Capital Partners ("TJM"), a private equity boutique; Senior Advisor (2014), Yukon Partners II, L.L.C. ("Yukon") a mezzanine fund; Senior Advisor (2014) and Senior Operating Partner (2012-2014), Tenex Capital Management L.P. |
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Mr. Van Sant brings to | |
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Class I (Term Ending in 2018)2021)
Thomas W. Handley | ||
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Director | since 2010 | |
| President and Chief Operating Officer (2012-present) of Ecolab Inc. ("Ecolab"), a global company providing businesses with solutions for clean water, safe food, abundant energy and healthy | |
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Qualifications | ||
Mr. Handley brings to our Board a valuable operating perspective | ||
Other Public Company Boards: Republic Services, Inc. | ||
The Board of Directors has determined that Mr. Handley is an audit committee financial expert as that term is defined under the rules of the SEC. | ||
Maria Teresa Hilado | ||
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Director Committees: Audit, Compensation |
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| Independent Director. Previously, Chief Financial Officer (2014-2018), Allergan plc ("Allergan") a | |
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Ms. Hilado brings to our Board strategic leadership experience, | ||
Other Public Company Boards: Campbell Soup Company, Zimmer Biomet Holdings, Inc. | ||
The Board of Directors has determined that Ms. Hilado is an audit committee financial expert as that term is defined under the rules of the SEC. | ||
Ruth S. Kimmelshue | ||
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Director Committees: Audit, Compensation |
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| Corporate Senior Vice President, | |
Cargill's Executive Team. Previously, corporate leader (2015) for Cargill's Animal Protein and Salt businesses; Business |
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Ms. | ||
Corporate Governance Guidelines
The Board, of Directors (the “Board”), upon recommendation of the Corporate Governance and Nominating Committee, has adopted Corporate Governance Guidelines, which summarize many of the corporate governance principles that the Board follows in governing H.B. Fuller. The guidelines are available for review on our website (www.hbfuller.com), in the “"Governance”" section of the Investor Relations page.
We have a Code of Business Conduct applicable to all of our directors and employees, including our principal executive officer, principal financial officer and principal accounting officer. A copy of this Code of Business Conduct is available for review on our website (www.hbfuller.com), in the “"Governance”" section of the Investor Relations page.
Any shareholder may contact the Board, any Board committee or any independent director, by mailing a letter addressed to the attention of the Corporate Secretary. The Corporate Secretary reviews all communications, and after ascertaining whether such communications are appropriate to the duties and responsibilities of the Board, will forward such correspondence to the directors for their information and consideration. The Board has requested that the Corporate Secretary not forward the following types of communications to the Board: general solicitations for business or products; job applications or resumes; advertisements, junk mail and surveys; and any other communication that does not relate to the responsibilities of the Board.
Pursuant to our Corporate Governance Guidelines and the listing standards of the New York Stock Exchange (“NYSE”("NYSE"), the Board has determined that all Board members, other than Mr. Owens, are independent. No director is considered independent unless the Board affirmatively determines that such director has no material relationship with H.B. Fuller. In assessing the materiality of any person’sperson's relationship with H.B. Fuller, the Board considers all relevant facts and circumstances, including not only direct relationships between H.B. Fuller and each director but also any relationships between H.B. Fuller and any entity with which a director is affiliated.
The Board reviewed certain transactions between H.B. Fuller and our directors and entities with which they are affiliated and determined that they were made or established in the ordinary course of business and that the directors had no direct or indirect material interest in the transactions. Mr. Florness, Mr. Handley and Ms. SimondsKimmelshue recused themselves from this review and determination as it related to the entities with which they are affiliated. The Board considered customer-supplier transactions between: (i) the Company and Fastenal Company, of which Mr. Florness is the President and Chief Executive Officer, (ii) the Company and Ecolab, Inc., of which Mr. Handley is President and Chief Operating Officer and (ii)(iii) the Company and General Mills, Inc.Cargill, of which Ms. SimondsKimmelshue is aCorporate Senior Vice President.President, Business Operations & Supply Chain. After consideration of these relationships, the Board of Directors determined that the directors had no direct or indirect material interest in the transactions. In addition, the dollar amounts involved in the transactions with Fastenal, Ecolab Inc. and General Mills, Inc.Cargill fall below the thresholds set by the NYSE for director independence.
Meetings of the Board and the Board the's CommitteesBoard’s Committees
Directors are expected to attend the Annual Meeting of Shareholders and all meetings (including teleconference meetings) of the Board and each committee on which they serve. During the 20152018 fiscal year, the Board held fivenine meetings. The directors attended greater than 75% of the meetings of the Board and Board committees on which the directors served during the 20152018 fiscal year. In addition, all of the directors with the exception of Maria Teresa Hilado, attended our Annual Meeting of Shareholders held on April 9, 2015.12, 2018.
What are the roles of the Board’sBoard's committees?
The Board of Directors is responsible for the overall affairs of H.B. Fuller. The Board conducts its business through meetings of the Board and three standing committees: Audit; Compensation; and Corporate Governance and Nominating. The Board has adopted a written charter for each committee. The charters for each of these committees are available for review on our website (www.hbfuller.com) in the “"Governance”" section of the Investor Relations page. Information regarding the three standing committees is set forth below. When necessary, the Board may also establish ad hoc committees to address specific issues.
Audit Committee
John C. | Maria Teresa Hilado |
Daniel L. Florness | Ruth S. Kimmelshue |
Thomas W. Handley |
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Number of Meetings in fiscal year20152018: Nine
Functions: The Audit Committee reviews the Company's financial information and disclosures, appoints the independent registered public accounting firm to audit our consolidated financial statements, oversees the audit and the independence and performance of our independent registered public accounting firm, determines and pre-approves the type and scope of all audit, audit-related and non-audit services provided by our independent registered public accounting firm, oversees our internal audit function, reviews the performance of our retirement plans and reviews theour annual audited consolidated financial statements, accounting principles and practices and the adequacy of internal controls. In addition, the Audit Committee reviews the Company’sCompany's risk management policies and procedures to assess their adequacy and appropriateness in the context of the Company’sCompany's business and operating environment. This Committee also monitors compliance with legal and regulatory requirements, our Code of Business Conduct and our Policy and Procedures Regarding Transactions with Related Persons.
All of the members of the Audit Committee are considered independent as that term is defined by our Corporate Governance Guidelines, the listing standards of the NYSE and the applicable rules and regulations of the SEC. The Board of Directors has also determined that John C. van Roden, Jr., Thomas W. Handley and Maria Teresa Hilado satisfy the requirements of an audit committee financial expert as such term is defined under the rules and regulations of the SEC. The Audit Committee Report for fiscal year 20152018 is included in this Proxy Statement.
Compensation Committee
R. William Van Sant (Chair) | Ruth S. Kimmelshue |
Daniel L. Florness | Lee R. Mitau |
Thomas W. Handley | Dante C. Parrini |
Maria Teresa Hilado |
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Number of Meetings in fiscal year20152018: Five
Functions: The Compensation Committee establishes overall compensation programs and practices for executives and reviews and approves compensation, including salary, incentive programs, stock-based awards, retirement plans, perquisites and other supplemental benefits, employment agreements, severance agreements, change in control provisions and other executive compensation items for our executive officers. The Compensation Committee monitors the competitiveness, fairness and equity of our retirement plans and administers our stock-based compensation plans and individual awards.
The Compensation Committee annually reviews and approves compensation for our non-employee directors including retainers, fees, stock-based awards, and other compensation and expense items.
The Compensation Committee may delegate its authority to the Chair of the Compensation Committee to accelerate vesting of outstanding awards. The Committee intends this delegation of authority to be for situations of retirement or termination, and where it is impractical to obtain participation by all Committee members.
The Compensation Committee may use outside compensation consultants to provide compensation advice, competitive survey data and other reference market information related to trends and competitive practices in executive compensation. Since April 2010, the Compensation Committee has used Buck Consultants, LLC, a wholly owned subsidiary of Xerox Corporation, to provide ongoing advice and information regarding design and implementation of the Company’s executive compensation programs as requested by the Compensation Committee.
The Compensation Committee retained Buck Consultants to be its independent compensation consultant due to their independence and industry experience. Buck Consultants advises the Committee on director and executive compensation, but does no other work for the Company. The Company uses Towers Watson for actuarial, benefits, medical plan and employee engagement survey consulting services. During fiscal 2015, we purchased broad-based market compensation survey information from Towers Watson and Hewitt Associates. See discussion in the “Compensation Discussion and Analysis” section of this Proxy Statement.
The Compensation Committee believes that Buck Consultants provided candid, direct and objective advice to the Compensation Committee. To ensure independence:
The Compensation Committee directly hired and has the authority to terminate Buck Consultants
Buck Consultants is engaged by and reports directly to the Compensation Committee and its chairman
None of the members of the Compensation Committee have a business or personal relationship with the Buck Consulting consultant with whom the Committee works, outside of work he provides for the Compensation Committee. The consultant does not have any business or personal relationship with any executive officer of the Company and he does not own any stock in the Company.
The amount of fees that Buck Consultants receives for work performed for the Company is de minimis as a percentage of Buck Consultants’ annual revenue
Buck Consultants does only work for the Compensation Committee that falls within the scope of work of the service agreement. No other work will be initiated without the Committee’s approval.
Buck Consultants has direct access to all members of the Compensation Committee during and between meetings
No employee of Buck Consultants works for the Company
The Compensation Committee has approved direct interaction between Buck Consultants and management; however; these interactions are generally limited to discussions on behalf of the Compensation Committee and information that is presented to the Compensation Committee for approval
In addition, the Compensation Committee has assessed the independence of Buck Consultants pursuant to SEC rules and concluded that no conflict of interest exists that would prevent Buck Consultants, or the individual advisor employed by Buck Consultants with whom we work, from independently representing the Compensation Committee.
A representative of Buck Consultants generally attends Compensation Committee meetings to serve as a resource for the Compensation Committee. In order to encourage independent review and discussion of executive compensation matters, the Compensation Committee and the committee chair may request meetings with the independent compensation consultant in executive session without management present.
During fiscal 2015, the Compensation Committee asked Buck Consultants to conduct a review and analysis of non-employee director compensation. Buck Consultants presented information regarding director compensation to the Compensation Committee, provided a market data report on director compensation and presented its findings and recommendations for discussion. Buck Consultants provided these services and reported directly to the Compensation Committee Chair.
All of the members of the Compensation Committee are considered independent as that term is defined by our Corporate Governance Guidelines and the listing standards of the NYSE. The Compensation Committee Report for fiscal year 20152018 is included in this Proxy Statement.
Corporate Governance and Nominating Committee
Lee R. Mitau (Chair) | John C. van Roden, Jr. |
J. Michael Losh | R. William Van Sant |
Dante C. Parrini |
|
Number of Meetings in fiscal year20152018: Three Four
Functions: The Corporate Governance and Nominating Committee reviews matters of corporate governance, including our organizational structure and succession planning. This Committee evaluates and recommends new director nominees and evaluates each current director prior to nominating such person for re-election. The Corporate Governance and Nominating Committee reviews a director’sdirector's continued service if a director’sdirector's occupation changes during his or her term. This Committee also evaluates the performance of the Chairman of the Board, the President and Chief Executive Officer, and the directors, and makes recommendations to the Board regarding any shareholder proposals.
The Corporate Governance and Nominating Committee considers shareholder recommendations for potential director nominees. See“"How can a shareholder suggest a candidate for election to the Board?”"
All of the members of the Corporate Governance and Nominating Committee are considered independent as that term is defined by our Corporate Governance Guidelines and the listing standards of the NYSE.
Board’sBoard's Role in Oversight of Risk
In General
The Board believes that effective enterprise risk management must be an integral part of Board and Committee deliberations and activities throughout the year. As part of the enterprise risk management, the Board engages in the following activities throughout the fiscal year:
The full Board of Directors reviews the Company’sCompany's enterprise risk management process and a comprehensive assessment of key financial, operational and strategy risks identified by management, as well as mitigating practices.
The Company's strategy is reviewed with the Board on a regular basis and management considers input from the Board in setting and adjusting the Company's strategy. The full Board of Directors discusses risks related to the Company’sCompany's annual financial plan and budget each fiscal year and risks related to the Company’sCompany's strategy at meetings where the strategy is presented and reviewed.
The Board of Directors also encourages management to promote a corporate culture that integrates risk management into the Company’sCompany's strategy and day-to-day business operations in a way that is consistent with the Company’sCompany's targeted risk profile.
Each committee conducts its own risk assessment and management activities throughout the year (some of which are highlighted in the section on Board committees above), and reports its conclusions to the Board.
Through these processes, the Board oversees a system to identify, assess and address material risks to the Company on a timely basis. In addition, the Board’sBoard's leadership structure, as described below in the section titled “"Board Leadership Structure”" supports its role in risk oversight. The Company presently has a separate Chairman of the Board and Chief Executive Officer. When those positions are combined, we have an independent Presiding Director. We have strong independent directors chairing each of our Board Committees, all of which are involved in risk oversight, and there is open communication between management and the non-employee directors.
Risk Assessment of Compensation Programs
Management conducted a risk assessment of the Company’sCompany's policies and programs relating to the compensation of employees, including those that apply to our executive officers, with a focus on those programs that had changed from the prior fiscal year review. The format of this review was similar to that conducted in the prior fiscal year which was discussed with and approved by the Compensation Committee.
officers. Management discussed the findings of the risk assessment review with the Compensation Committee. Based on the assessment, the Company believes that its compensation policies and practices create an appropriate balance amongbetween our base salary compensation, short-term incentive compensation and long-term incentive compensation, thereby reducing the possibility of imprudent risk-taking and that its compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
Our Corporate Governance Guidelines provide that the Board of Directors has no policy with respect todoes not require the separation of the offices of Chairman and Chief Executive Officer. Separation of these offices is an issue that is to be addressed as part of the Company’sCompany's succession planning. When the Chairman and Chief Executive Officer are separate offices, the Chairman will serve as the Presiding Director. However, when the Chief Executive Officer also holds the position of Chairman, a Presiding Director will be appointed by the Board to further the achievement of a strong, independent Board with an appropriate balance between the Board and the Chief Executive Officer. In such cases, the Chair of the Corporate Governance and Nominating Committee shall serve as the Presiding Director.
Mr. Mitau has served as our independent Chairman of the Board since December 2006 and, in this capacity, has acted as the Presiding Director at Board of Director meetings and during executive sessions of the non-management directors. Our Board has separated the roles of Chairman of the Board and Chief Executive Officer since 2006 because our current Chief Executive Officer and our previous Chief Executive Officer both had limited public company chief executive officer experience at the time of each of their elections to the Board.2006. Mr. Mitau serves as the Chairman of the Board of Graco Inc. and has significant public company experience. The Chief Executive Officer, in consultation with the Chairman, establishes the agenda for each Board meeting. At the beginning of each fiscal year, the Chairman also publishes a schedule of topics to be discussed. In addition, Mr. Van Sant has served as Vice Chairman of the Board since fiscal 2011 and in this role he provides special assistance, oversight and guidance to the Chairman of the Board in performing the duties of the Chairman, and he provides counsel to the Chief Executive Officer.
With respect to the election of directors, during fiscal 2014, our Board has adopted a so-called “plurality-plus”"plurality-plus" standard. In accordance with procedures set forth in our Corporate Governance Guidelines, at any shareholder meeting at which directors are subject to an uncontested election (i.e., an election where the only nominees are those recommended by the Board), any nominee for director who receives a greater number of votes “withheld”"withheld" from his or her election than votes “for”"for" such election shall submit to the Board a letter of resignation for consideration by the Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee shall promptly consider the resignation offer and recommend to the full Board whether to accept it. In considering whether to accept or reject the resignation offer, the Corporate Governance and Nominating Committee will consider all factors deemed relevant by members of the Corporate Governance and Nominating Committee, including, without limitation, (i) the perceived reasons why shareholders withheld votes “for”"for" election from the director, (ii) the length of service and qualifications of the director, (iii) the director’sdirector's contributions to the Company, (iv) compliance with listing standards, (v) the purpose and provisions of these guidelines,the Corporate Governance Guidelines, and (vi) the best interests of the Company and its shareholders. To the extent that one or more directors’ resignations aredirectors' resignation is accepted by the Board, the Corporate Governance and Nominating Committee will recommend to the Board whether to fill such vacancy or vacancies or to reduce the size of the Board. Any director who tenders his or her offer to resign from the Board pursuant to this provision shall not participate in the Corporate Governance and Nominating Committee or Board deliberations regarding whether to accept the offer of resignation. The Board will act on the Corporate Governance and Nominating Committee’sCommittee's recommendation within 90 days following the certification of the shareholder vote by the Inspector of Elections, which action may include, without limitation, acceptance of the offer of resignation, adoption of measures intended to address the perceived issues underlying the vote, or rejection of the resignation offer. Thereafter, the Board will publicly disclose its decision whether to accept the director’sdirector's resignation offer.
The Board of Directors has a practice of annually reviewing its performance, and the performance of its committees and individual directors. Extensive input is received from each director during these annual performance reviews, as well as during the course of the year, through written evaluation forms and other informal means of communication with the Chairman, Vice Chairman and other members of the Board.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Board of Directors has a written policy and procedures for the review, approval or ratification of transactions with executive officers, directors and nominees for director, and their immediate family members. In general, the policy provides that certain transactions with these related persons and their immediate family members and certain transactions with any person who is a security holder known to us to be the beneficial owner of more than five percent of any class of our stock, and immediate family members of these parties. In general, the policy provides that certain transactions with these related persons are subject to the review, approval and/or ratification of the disinterested members of the Audit Committee. If ratification of a transaction is not forthcoming, management must make all reasonable efforts to cancel or annul that transaction. If a transaction with a related party is entered into without the pre-approval of the Audit Committee, it shall not be deemed to violate these policies and procedures, or be invalid or unenforceable, so long as the transaction is brought to the Audit Committee for ratification as promptly as reasonably practical after it is entered into or brought to the Company’sCompany's attention. All executive officers and directors of H.B. Fuller are informed in writing on an annual basis of these policies and procedures. The Audit Committee may use any process and review any information that it determines is reasonable in order to determine if a transaction is fair and reasonable and on terms no less favorable to H.B. Fuller than could be obtained in a comparable arm’sarm's length transaction with a third party unrelated to H.B. Fuller.
In addition, on an annual basis, each of our directors and executive officers completes a questionnaire and discloses information regarding entities with which they and their immediate family members are affiliated. Any person nominated for election as a director must complete a questionnaire no later than the date he or she becomes a member of the Board of Directors. Any person who becomes an executive officer must complete a questionnaire as soon as reasonably practicable thereafter.
Our Audit Committee annually reviews all transactions and relationships disclosed in the director and officer questionnaires and approves or ratifies, as applicable, any transactions with related persons. The Board of Directors makes a formal determination regarding each director’sdirector's independence.
During fiscal year 2015,2018, we had transactions, arrangements and relationships with entities with which some of our related persons, specifically certain of our directors, are affiliated. However, in accordance with the procedures in the Company’sCompany's policy, the Audit Committee determined that those related persons had no direct or indirect material interest in those transactions, arrangements and relationships.
The form and amount of compensation for each non-employee director is determined and reviewed at least annually by the Compensation Committee. Such compensation reflects the practices of boards of similar public companies and is comprised of cash and H.B. Fuller Common Stock (or its equivalents). Similar to our executive compensation policy, the practice of generally aligning to the market median/50th percentile also applies to our non-employee director compensation.
20152018 Review of Director Compensation
TheFor the fiscal 2018 review, the Compensation Committee uses Buck Consultants, LLC, a wholly owned subsidiary of Xerox Corporation,used Conduent to provide ongoing advice and information regarding design and implementation of the Company’s executive andCompany's director compensation programs as requested by the Compensation Committee. See further discussion regarding the Compensation Committee’sCommittee's independent consultantconsultants under the heading “"Independent Compensation Committee”Consultant" in the Corporate GovernanceCompensation Discussion and Analysis section in this Proxy Statement. At its July 20152018 meeting, the Compensation Committee reviewed a market analysis conducted by Buck ConsultantsConduent relating to non-employee director compensation, including annual board retainers, committee chair retainers and annual stock-based awards. The market analysis included our peer group (see section titled “"Executive Compensation – Compensation Discussion and Analysis – Use of Competitive Market Data -Peer Group Data”" in this Proxy Statement), and a subset of our peer group with revenues under $4.2 billion andbillion. We also use the Frederic W. Cook & Company 20142017 Survey on Non-Employee Director Compensation Across Industry and Size (which includes 300 companies: 100 Small Cap (Less than $1B), 100 Mid Cap ($1B - $5B) and 100 Large Cap (Greater than $5B)). The, with mid cap company information wasas the primary point of reference.
After a review of the market comparison data, the Compensation Committee determined the Directors’ current stocknon-employee directors' compensation program was slightly belowcompetitive with the market median of companies and decidedno changes were made to increase the annual equity-based award value from $90,000 to $100,000. In addition, the Compensation Committee Chair annual cash retainer was increased from $12,000 to $15,000 to better align with market median. These changes position totalour non-employee directors' compensation for a typical director competitively with peer companies with annual revenues less than $4.2 billion. The change to the annual cash retainer for the Compensation Committee Chair was effective for the fourth quarter of fiscal 2015 and the change to the value of the equity-based award was effective for the grant made in July 2015. All other forms of compensation remain unchanged.program.
The fees paid to our non-employee directors are set forth in the table below. Non-employee directors may elect to defer their fees into deferred phantom stock units or other deferred investments. If the director elects to defer their cash fees into phantom stock units, the number of phantom stock units received equals the cash retainer divided by the closing price of a share of the Company common stock on the payment date, plus the Company's 10% matching contribution as described below under Directors' Deferred Compensation Plan. Mr. Owens, our President and Chief Executive Officer, does not receive separate compensation for serving as a director or for attendance at any meeting.
The following fees are paid to our non-employee directors:
Annual Cash Retainers | ||||
Board Member | $ | 90,000 | ||
Non-Executive Chairman | $ | 70,000 | ||
Non-Executive Vice Chairman | $ | 30,000 | ||
Audit Committee Chair | $ | 20,000 | ||
Compensation Committee Chair | $ | 15,000 | ||
Corporate Governance and Nominating CommitteeChair | $ | 12,000 | ||
Equity Awards | ||||
Annual Award of Restricted Common Stock or Common Stock units | Valued at $100,000 | |||
One-time Initial Award of Restricted Stock | 1,300 shares | |||
Annual Cash Retainers | |||
Board Member | $90,000 | ||
Non-Executive Chairman | $70,000 | ||
Non-Executive Vice Chairman | $30,000 | ||
Audit Committee Chair | $20,000 | ||
Compensation Committee Chair | $15,000 | ||
Corporate Governance and Nominating Committee Chair | $12,000 | ||
Equity Awards | |||
Discretionary Annual Award of Deferred Phantom Stock Units | Valued at $115,000 | ||
One-time Initial Award of Restricted Stock Units | 1,300 units |
We also reimburse each director for any out-of-pocket expenses related to attendance at any meeting or arising from other H.B. Fuller business.
In addition to the board and chair retainers described above, the Board believes it is important that each director have an economic stake in our Common Stock. As a result, the Compensation Committee typically makes an annual grant of shares of restricted Common Stock or an award of Common Stockdeferred phantom stock units to each non-employee director, which pays out in shares of Common Stock under the terms of H.B. Fuller Company Directors' Deferred Compensation Plan ("DDCP") and pursuant to elections made by each director. This plan is described below.
On July 9, 2015,12, 2018, the Compensation Committee made a discretionary award in the amount of 2,500.63 Common Stock units$115,000 to each non-employee director under the H.B. Fuller Company Directors’ Deferred Compensation Plan (“DDCP”).director. This plan is described below. For this award, the Committee approved an award value of $100,000 per director (based on a review of market data), whichamount was divided by the fair market value of ourthe Common Stock on the date of grant to determine the number of deferred phantom stock units awarded.awarded under the DDCP.
In addition, each non-employee director typically receives a one-time grant of restricted H.B. Fuller Common Stock (or its equivalent)stock units upon his or her initial election to the Board. These Common Stock (or its equivalent)restricted stock unit awards are granted under our 2009 Director StockH.B. Fuller Company 2018 Master Incentive Plan, which is described below. In general, these sharesawards vest three years from the date of grant subject to continued service during that period. Mr. Florness received a grant of restricted stock units upon his election to the Board.
Directors’Directors' Deferred Compensation Plan
Under this plan, directors may elect to defer all or a percentage of their board and chair retainers.retainers into several investments. Deferred amounts are credited with gains and losses based on the performance of certain mutual funds or H.B. Fullerthe Common Stock as elected by the director prior to deferring any fees. Directors who elect to defer their retainers to be deferred into H.B. Fuller Common Stock units as an investment are credited with phantom stock units that will eventually be paid out in shares of Common Stock. Phantom stock units are credited with dividend equivalents equal to the amount of dividends, if any, paid on an equal number of shares of H.B. Fullerthe Common Stock. The dividend equivalents are converted into additional phantom stock units based on the fair market value of H.B. Fuller Common Stock on the dividend payment date. If a participant elects to defer retainers into the H.B. Fuller Common Stock account in this plan, we make a 10% matching contribution of additional phantom stock units to the amount invested in H.B. Fuller Common Stock by the director. The phantom stock units credited to the directors’directors' accounts do not have voting rights. In addition, the Compensation Committee may make discretionary contributions to a participant’sparticipant's H.B. Fuller Common Stock account under this plan. As described above, during fiscal year 2015,2018, the Compensation Committee exercised this discretion and awarded each non-employee director 2,500.63 Common Stock2,048.45 deferred phantom stock units under this plan.
Any amounts deferred under this plan are paid in shares of Common Stock or cash (depending on the election made by the director) at the earliest to occur of:
The later of the date of the director’sdirector's retirement (that is, the date of resignation or removal from the Board or the end of the director’sdirector's elected term) or such other date as elected and specified by the director, which is subject to approval by the Compensation Committee and is made only at the time of the director’sdirector's initial elections and is irrevocable;
disability;
death;
the date of a change in control of H.B. Fuller; or
the date of termination of the plan.
2009 Director StockH.B. Fuller Company 2018 Master Incentive Plan
Under this plan,In 2018, we asked shareholder to approve the H.B. Fuller Company 2018 Master Incentive Plan (the "2018 Incentive Plan"). The shareholders approved replacing the H.B. Fuller Company 2016 Master Incentive Plan ("2016 Incentive Plan") with the 2018 Incentive Plan. Similar to the 2016 Incentive Plan, under the 2018 Incentive Plan, we may issue to non-employee directors restricted stock, restricted stock units, options, stock appreciation rights, performance awards or other stock-based awards. In addition, shares of H.B. Fuller Common Stock are issued under this plan to satisfy any requirements under the DDCP. The Compensation Committee determines the type, amount and other terms and conditions of any awards under this plan.
Non-employee directors are reimbursed for a preventative/diagnostic annual physical examination and local travel expenses. In fiscal year 2015, Mr.2018, J. Michael Losh and Mr. Mitau received reimbursement for a physical examination. This amount is shown in the "All Other Compensation" column of the "Director Compensation Table" in this Proxy Statement.
Matching Gifts to Educational, Arts and Cultural Organizations Program
Under this program, we match a non-employee director’sdirector's contributions (up to $1,000) to eligible educational, arts and cultural institutions. These amounts are shown in the “"All Other Compensation”" column of the“"Director Compensation Table”Table" in this Proxy Statement.
Director Compensation Table – Fiscal Year20152018
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)1 | All Other Compensation ($)2 | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($)1 |
| All Other Compensation ($)2 |
| Total ($) | ||||||||||
Daniel L. Florness | 45,000 | 187,982 | 404 | 233,386 | ||||||||||||||||
Thomas W. Handley3 | 90,000 | 100,000 | 9,000 | 199,000 |
| 90,000 | 115,000 | 9,106 | 214,106 | |||||||||||
Maria Teresa Hilado4 | 90,000 | 100,000 | 8,883 | 198,883 |
| 90,000 | 115,000 | 9,000 | 214,000 | |||||||||||
Ruth S. Kimmelshue | 90,000 | 115,000 | 907 | 205,907 | ||||||||||||||||
J. Michael Losh5 | 97,100 | 100,000 | 13,436 | 210,536 |
| 90,000 | 115,000 | 10,573 | 215,573 | |||||||||||
Lee R. Mitau6 | 172,000 | 100,000 | 20,919 | 292,919 |
| 172,000 | 115,000 | 17,200 | 304,200 | |||||||||||
Dante C. Parrini | 90,000 | 100,000 | 507 | 190,507 | 90,000 | 115,000 | - | 205,000 | ||||||||||||
Ann W.H. Simonds7 | 90,000 | 100,000 | 9,674 | 199,674 | ||||||||||||||||
John C. van Roden, Jr. | 102,900 | 100,000 | - | 202,900 | 110,000 | 115,000 | - | 225,000 | ||||||||||||
R. William Van Sant8 | 132,750 | 100,000 | 13,275 | 246,025 | ||||||||||||||||
R. William Van Sant7 |
| 135,000 | 115,000 | 14,500 | 264,500 | |||||||||||||||
(1) | The amounts in this column are calculated based on the fair market value of |
The aggregate number of shares ofdeferred phantom stock units and restricted H.B. Fuller Common Stock and deferred stock units ("RSUs") held by each non-employee director as of November 28, 2015December 1, 2018 were as follows:
Name | Shares of Stock | Deferred | ||||||||
Thomas W. Handley | 0 | 27,941 | ||||||||
Maria Teresa Hilado | 1,333 | 6,690 | ||||||||
J. Michael Losh | 0 | 87,250 | ||||||||
Lee R. Mitau | 0 | 137,547 | ||||||||
Dante C. Parrini | 0 | 6,468 | ||||||||
Ann W.H. Simonds | 1,333 | 8,637 | ||||||||
John C. van Roden, Jr. | 0 | 27,820 | ||||||||
R. William Van Sant | 0 | 81,784 | ||||||||
Name | Deferred | ||||
Daniel L. Florness | 2,061 | ||||
Thomas W. Handley | 41,829 | ||||
Maria Teresa Hilado | 19,799 | ||||
Ruth S. Kimmelshue | 2,061 | ||||
J. Michael Losh | 103,309 | ||||
Lee R. Mitau | 161,072 | ||||
Dante C. Parrini | 13,395 | ||||
John C. van Roden, Jr. | 35,526 | ||||
R. William Van Sant | 100,735 | ||||
No non-employee director held any stock options as of November 28, 2015.December 1, 2018. Only Ms. Kimmelshue and Mr. Florness held RSUs as of 2018. As of 2018, Mr. Florness held 1,308 RSUs and Ms. Kimmelshue held 1,319 RSUs.
(2) | These amounts represent the following: for Mr. Florness, dividends paid on unvested restricted stock units in the amount of $404; for Mr. Handley, a 10% company match pursuant to the DDCP in the amount of |
(3) | Mr. Handley elected to receive 100% of his annual retainer in |
(4) | Ms. Hilado elected to receive 100% of her annual retainer in |
(5) | Mr. Losh elected to receive 100% of his annual retainer in |
(6) | Mr. Mitau elected to receive 100% of his annual retainer in |
|
|
| Mr. Van Sant elected to receive 100% of his annual retainer in |
We have goals for stock ownership by all non-employee directors. Our goal for director stock ownership is five times the annual board retainer within five years of becoming a director. A review of director stock ownership was conducted using June 30, 20152018 stock values. At the time of this review, all directors except Mr. Parrini (who joined the board in 2012) and Ms. Hilado and Ms. Simonds (who both joined the board in 2013), hadhave met or exceeded this goal.goal or are on track to meet this goal within five years of being elected as a director. Mr. Florness was elected as a director on July 11, 2018. Therefore, he was not included in this review of stock ownership.
Compensation Discussion and Analysis
Executive Summary
This Compensation Discussion and Analysis describes our executive compensation program, including its underlying philosophy, policies and practices; significant executive compensation developments during the fiscal year; and the determinations made on material elements of compensation awarded to each of our executive officers listed in the "Summary Compensation Table" in this Proxy Statement (the “named executive officers” or “NEOs”"NEOs"). This discussion and analysis focuses on the information contained in the NEO compensation tables and accompanying footnotes and narrative for fiscal year 20152018 which follows. We discuss compensation actions taken during fiscal years 20142017 and 20162019 to the extent they enhance the understanding of our executive compensation program for fiscal year 2015.2018.
Elements of Executive Compensation. We use base salary, a short-term cash incentive plan and a long-term incentive plan with equity grants, as well as benefits, to attract and motivate our executive officers to achieve results that are in the best long-term interests of our shareholders.increase shareholder value. We generally align with the market median for the three main elements of compensation, and we review these elements each year. The emphasis on short-term and long-term incentive compensation reflects our pay-for-performance philosophy. See "Key Elements of Executive Compensation Program" on page 33.
Fiscal 20152018 Business Results. Our overall Company Net income for the 2018 fiscal year was $171 million, or $3.29 per diluted share, versus net income resultsof $59 million, or $1.15 per diluted share, in the 2017 fiscal year. Adjusted diluted earnings per share ("AEPS") in the 2018 fiscal year were down 7$3.00, up 22 percent versus the prior year due to a variety of factors, includinglower revenue in the Americas, the adverse impact of foreign exchange rates, high operating costs in our EIMEA segment and a higher core tax rate. These negative factors were mostly offset by the successful integration of the TONSAN Adhesive Inc. business and effective price and raw material cost management. For similar reasons, adjusted total diluted earnings per share in the 2015 fiscal year were $2.17, down versus the prior year’s result of $2.33.year.
Net revenue for the 20152018 fiscal year was $2,083.7$3,041 million, down 1.0up 32 percent versus the 20142017 fiscal year. Higher volumeAdjusting for the Royal Adhesives acquisition, and higher average selling prices positively impactedorganic revenue ("OR"), defined as constant currency revenue less the impact from acquisitions, was up 3.7 percent.
Operating income ("OI") for the 2018 fiscal year was $255 million, up 99 percent from OI for fiscal year 2017 of $128 million. Adjusted operating income ("AOI") for 2018 was $300 million, up 54 percent versus $195 million in the 2018 fiscal year.
Within our Construction Adhesives segment, which accounts for 15 percent of our net revenue, growth. Constant currencysegment revenue grew by 5.0totaled $446.1 million for the 2018 fiscal year, an increase of 71 percent year-over-year. Foreign currency translation negatively impacted revenue growth duringfrom the 2017 fiscal year. Additional results include:
• Adjusted gross profit marginWithin our Americas Adhesives segment, which accounts for 36 percent of our net revenue, segment revenue totaled $1.1 billion for the 2018 fiscal year, was up 160 basis points to 27.7an increase of 21% from the 2017 fiscal year, and segment operating income totaled $115.4 million, an increase of 26 percent
• Adjusted SG&A expense was up 5 from the 2017 fiscal year. Within our EIMEA segment, which accounts for 24 percent versus the prior year, but down nearly 3 percent when adjustingof our net revenue, segment revenue totaled $738.6 million for the additional SG&A expense added2018 fiscal year, an increase of 30 percent from the TONSAN Adhesive Inc. acquisition
• Adjusted EBITDA margin was 12.8 percent, up 100 basis points versus the 20142017 fiscal year, and segment operating income totaled $40.1 million, more than doubled from the 2017 fiscal year.
For the 46th49th consecutive year, we implemented an increase in the amount of quarterly cash dividends we paypaid to shareholders, with an 11a 3 percent increase this year.
WeMore information on our 2018 performance can be found on pages 35 - 37. Company-wide adjusted diluted earnings per share, adjusted operating income, constant currency revenue and organic revenue, as well as adjusted segment operating results, are non-GAAP financial metrics that are reconciled with the most directly comparable GAAP financial metrics in Annex A.
Performance Metrics. For our short-term incentive plan, we measure our success in large partprimarily by the Company-wide financial metrics which are aligned with our strategic plan and which are also used as metrics in our short-term incentive plan. As it relates to our short-term incentive plan,These metrics consist of organic revenue, adjusted operating income ("AOI") and adjusted earnings per share ("AEPS"). Organic revenue is a measure that focuses on our growth without taking into account acquisitions or foreign currency fluctuations. Operating income is a measureAOI and adjusted Earnings before Interest, Taxes and Depreciation ("Adjusted EBITDA") are measures of operational effectiveness and profitability, and earnings per shareAEPS is an overall measurement of profitability and of the effectiveness of the three profitable growth strategies we follow:
• to grow organically by targeting our growth efforts on specific segments where we see opportunity for competitive strength;
• to manage margins by effectively executing operational excellence;properly pricing our products and controlling expenses;
• to efficiently deploy cash generated that returnsfrom operations in order to repay debt balances and return additional value to shareholders.shareholders; and
• to effectively integrate the Royal Adhesives business and continue strong growth and profit enhancement in high value adhesive solutions.
Overall,Adjusted EPS and AOI exclude certain expenses that are non-recurring in fiscal year 2015, with regardnature, to better reflect ongoing operational results. A full reconciliation of these items is found in Annex A of this Proxy Statement.
Achieving the metrics used in ourannual, short-term incentive plan targets for organic revenue, AOI and AEPS support the Company performed as follows:company's path to achieve its strategic financial targets for 2020. In addition, the strategic EBITDA and debt paydown targets are key components to the company's return on invested capital ("ROIC") metrics for its long-term strategic plan.
• For the Company organic revenue metric,Performance and Compensation Outcomes. In fiscal year 2018, we exceeded the threshold level but did not meet our target, resulting in a less than target payout.
• For theof performance for Company adjusted operating income metric, we exceeded the threshold level, but did not meet our target, resulting in a less than target payout.
• For the adjusted earnings per share (“EPS”) metric, we did not meet our threshold level. Therefore, there was no payout with regard to this short-term incentive metric.organic revenue, AOI and AEPS.
• Performance related to regional and businessoperating segment or key market short-term incentive metrics which factored into short-term incentives for our NEOs other than the CEO and CFO, was varied resulting in a short-term incentive payment forwith all but one ofresults exceeding threshold and some results exceeding the NEOs higher than in the previous year.target metric.
TheSTIP payments can range from 0% to 200% of target. In fiscal 2018, the achievements in theour financial metrics discussed above resulted in short-term incentive payouts for our CEO and CFO of 42.3%85.3% of target and ranged from 25.0%77.3% to 52.3%88.1% of target for our other NEOs. Our short-term incentive plan is a key way we link pay for performance to compensation for our NEOs.
Please also see “"Management’s Discussion and Analysis of Financial Conditions and Results of OperationsFiscal 2018 Short-Term Incentive Compensation" ” section in our Annual Report on Form 10-Kpage 35 for more information on our fiscal 20152018 financial performance.performance versus target.
TheFor our long-term incentive plan, we use return on invested capital as adjusted ("ROIC") as the performance metric for half of the RSUs granted to our NEO, including our CEO. ROIC was selected as the LTIP performance metric because it is a common metric in the market for LTIP designs and it is a key measure for assessing how much profit a company is generating for every dollar that is invested, providing a clear picture of how efficiently a company is using the capital that has been invested in it to generate income. Based on the ROIC performance, one-third of the awards granted in 2016 and 2017 vested between threshold and target and one-third of the 2018 award vested above discussion contains non-GAAP financial measures. See "Non-GAAP Financial Measures" in Annex A to this Proxy Statement fortarget. One-half of the CEO's RSUs vest if at least a reconciliationthreshold level of AEPS, AOI or organic revenue is met. At least one of these non-GAAP financial measures to GAAP results.
Fiscal 2015 Compensation Actions. In setting the financial metrics for our short-term incentive planwas met for fiscal year 2015, our Compensation Committee reviewed company performance expectations and budgeted targets. The annual short-term incentive award targets were set based on predetermined ranges for the achievement of EPS, organic revenue and operating income targets. The targets that were set were considered to be challenging, but achievable. See section below titled “Analysis of Fiscal 2015 Short-Term Incentive Awards” for a description of the targets and actual results.2018.
All equity awards granted in fiscal year 2018 are shown in the "Grants of Plan-Based Awards During Fiscal 2018" Table later in this Proxy Statement.
Executive Compensation “BestBest Practices.”The Company’sCompany's compensation program includes severalfeatures best practices, such as:
• a policy regarding “clawbacks”"clawbacks" of executive officer and key manager incentive compensation, which allows the Compensation Committee the discretion to claw back incentive-based compensation in the event that there is a material restatement of the Company’sCompany's financial statements or in the event of misconduct by an executive officer or key manager;
• a prohibition on hedging, pledging and certain other transactions in the Company stock by directors and certain executive officers, including all of the NEOs;NEOs.
• an emphasis on long-term equity awards to align the executives’executives' interests with long-term goals and shareholder interests, with performance-based vesting for at least 50% of the CEO’sRSU portion of the long-term equity grant including a performance-based vesting restriction;award (100% of the CEO's restricted stock units are performance-based);
• a prohibition on repricing of stock options; and
• stock ownership goals for our directors and executive officers, which are reviewed annually.
For fiscal 2016, the Compensation Committee approved the addition of a financial performance metric to 50% of the restricted stock units granted under our long-term incentive plan for all of our NEOs.
Philosophy
The philosophy of our executive compensation program is to provide a competitive compensation package that rewards executive officers for sustained financial and operating performance that creates long-term value for our shareholders. We have designed and implemented our compensation programs for our executive officers to meet three principal goals:
Attract and retain qualified executive officers;
Motivate these individuals to achieve short-term and long-term corporate goals, without undue risk-taking; and
Promote equity amongequitable treatment of our executive officer positions,officers, while considering external competitiveness and differences in job responsibilities.
To meet these goals, H.B. Fullerthe Company has the following guidelines:
Pay compensation that is competitive with the practices of companies in a broad number of industries, as well asincluding comparable companies in the chemical industry, with revenues comparable to our revenues;
Pay for performance by setting challenging performance goals for our executive officers and providing a short-term incentive plan that is based upon achievement of these goals; and
Provide long-term incentives in the form of stock options and restricted stock units that are designed to increase long-term shareholder value by aligning the interests of our executive officers with those of our shareholders.
We strive to keep the target value of each individual element of compensation at or near the market median/50th percentile, thereby maintaining target total compensation at or near the market median/50th percentile.
Use of Competitive Market Data
We useThe Compensation Committee uses several surveys and data points when we reviewit reviews executive compensation as described below.
General Survey Data. We define our market as This year, due to recent acquisitions, we chose a broad range of companies across various industries in the $1-3revenue cut category from $2-5 billion revenue category. We chose this revenue category because revenue from our prior fiscal year was in this range and revenue from fiscal 20152018 was expected to be in this range. The Compensation Committee uses published survey data from the following sources to analyze the appropriate level of compensation for our executive compensation analysis:NEOs (see Section titled "Analysis of Fiscal 2018 Base Salaries" on page 34 for detail related to the CEO):
• AonAON Hewitt ($1—2.492.5-4.99 billion revenue categories for corporate positions (CFO) and relevant revenue categories for non-corporate positions (other NEOs))
•Willis Towers Watson ($2-4 billion revenue category for corporate positions (CFO) and relevant revenue categories for non-corporate positions)positions (other NEOs))
• Towers Watson ($1—3 billion revenue category for corporate positions and relevant revenue categories for non-corporate positions)
H.B. FullerThe Company participates in both of these surveys. The Aon Hewitt survey includes 480504 companies and is titled “Total Compensation MeasurementTM (TCMTM) Executive"AON Hewitt U.S. Total Compensation byMeasurement™ (TCM™) Total Compensation Industry – United States 2014”;Executive and Senior Management - 2017", and the Willis Towers Watson survey includes 446507 companies and is titled “2014 Compensation Data Bank (CDB™)"Willis Towers Watson 2017 CDB General Industry Executive Compensation Survey Report – U.S.”"
In the case of Mr. Kenny,Kivits, our Senior Vice President, Emerging Markets,EIMEA, the Compensation Committee reviews his total compensation relative to the market approximately every other year. In 2014, marketMarket data was provided by Willis Towers Watson for a profit center head for the EIMEA region, his position at that time. Therefore, no review was conducted forin conjunction with Mr. Kivits' relocation to Switzerland in early fiscal 2015 and no changes were made.2018.
Peer Group Data. Our peer group consists of the following companies:
Albemarle Corp. | Donaldson Company, Inc. | Nordson Corporation | |
Ashland Global Holdings Inc. | Ferro Corp. | Olin Corp. | |
Avery Dennison Corporation | FMC Corp. | Polyone Corp. | |
| Graco Inc. | RPM International Inc. | |
| Hexcel Corp. |
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| International Flavors & Fragrances Inc. | Sensient Technologies Corp. | |
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These companies represent comparable global, publicly-traded chemical and allied products companies in the 2800 Standard Industrial Classification Code with revenues between $1.104 billion to $6.140$1.362 - $6.614 billion (for the most recent fiscal year). During 2014, weDue to acquisition activity, Chemtura Corporation, A Schulman, Inc., and The Valspar Corporation were removed Celanese Corp., Eastman Chemical Co. and Ecolab Inc. from our peer group because their revenues were at the high end of the group. We added Graco Inc. and Nordson Corporation as these two companies share common characteristics with the Company and serve as good comparators for compensation purposes. These changes also moved the Company to the 33rd percentile (for annual revenue) of the peer group. Prior to this change, we were below the 25thpercentile in annual revenue.during 2018.
Use of Market Data in Fiscal 2018. 2015
When analyzing compensation paid to our NEOs, the Compensation Committee uses specific data that matches revenue and job responsibilities from the published surveys named above, based on availability, by position. For fiscal 2015,2018, the above-referenced survey data used by the Compensation Committee to review total compensation (base salary, short-term incentive compensation and long-term incentive compensation) for our executive officers showed that our total compensation was generally in line with the market data matched according to revenue and job responsibilities.
In addition, for the NEOs, management and the Compensation Committee used the peer group data, in conjunction with the general surveys, as a reference point for compensation design considerations. This data was derived from the most recent proxy statement available for each peer company. However, theThe primary data sources for pay level information for all of our executive officers are the survey sources listed inunder the section titled “heading "General Survey DataData.”." This survey data is supplemented by peer group data, which is adjusted for differences in the sizes of companies in the peer group.
The Compensation Committee uses survey data and peer group data because these sources of data are considered reliable market information. When we refer to competitive market data in the rest of this Compensation Discussion and Analysis, unless otherwise noted, we are referring to the “"General Survey Data”" and the “"Peer Group Data”" discussed above.
Compensation Process
The Compensation Committee reviews and approves all elements of compensation for our CEO, taking into account the Board of Directors’Directors' review and assessment of the performance of the CEO as well as competitive market data and information from our human resources personnel and the Compensation Committee’sCommittee's independent compensation consultant. The Compensation Committee also reviews and approves all elements of compensation for our other executive officers using the same sources noted above and taking into account the recommendations of the CEO.
In determining the particular elements of compensation that will be used to implement our overall compensation policies, the Compensation Committee takes into consideration factors related to our performance, such as our earnings and revenue growth, and business-unit-specific operational and financial performance. Other considerations include our business objectives, corporate responsibilities (including equity among executive officer positions and affordability), competitive practices and trends, and local legal requirements. In deciding on the type and amount of compensation for each executive officer, the Compensation Committee focuses on both the current pay and the opportunity for future increases in pay, and combines the compensation elements for each executive officer in a manner that optimizes the executive officer’s contributionofficer's incentive to contribute to the Company.Company's success.
The Compensation Committee on occasion meets with the CEO and/or certain other executive officers to obtain recommendations with respect to our compensation program, practices and packages for executive officers and directors. The Compensation Committee considers, but is not bound to and does not always accept, management’smanagement's recommendations with respect to executive compensation. The CEO typically attends the Compensation Committee’sCommittee's meetings, except when his compensation package is discussed. In addition, the Compensation Committee also holds executive sessions not attended by any members of management, including the CEO.
Independent Compensation Consultant
The Compensation Committee may use outside compensation consultants to provide compensation advice, competitive survey data and other reference market information related to trends and competitive practices in executive compensation. The Compensation Committee used Conduent, Inc. ("Conduent") through July 2018, and Willis Towers Watson ("WTW") beginning in August 2018, to provide ongoing advice and information regarding design and implementation of the Company's director and executive compensation programs as requested by the Compensation Committee. In addition, from time to time, management receives information from the independent compensation consultant in preparation for Compensation Committee meetings. WTW provides broker services for insurance in Brazil but receives no direct payment from the Company. Conduent did no other work for the Company.
The Company also uses WTW for other services as noted below.
Services | Fees | |||
Executive and Board compensation support | $37,117 | |||
Retirement Plan Benefits Administration and Actuarial Valuations (U.S.) | $396,540 | |||
Placement of Property and Casualty Insurances (U.S.) | $362,700 | |||
Retirement Plan Investment Advisory Services (EIMEA) | $86,848 | |||
All of the additional services performed by WTW, along with their affiliated companies, were approved by management and performed at the direction of management in the ordinary course of business. In assessing the independence of Conduent and WTW, the Compensation Committee considered the factors contained in the applicable SEC and NYSE rules, including the amount and nature of the additional consulting work provided to the Company by WTW and concluded that no conflict of interest exists that would prevent Conduent and WTW from independently advising the Committee.
A representative of the independent compensation consultant generally attends Compensation Committee meetings to serve as a resource for the Compensation Committee. To encourage independent review and discussion of executive compensation matters, the Compensation Committee and its chair may request meetings with the independent compensation consultant in executive session without management present.
The Role of Shareholder Say on Pay Votes. The Company provides its shareholders with the opportunity to cast an annual advisory vote on executive compensation (a “Say"Say on Pay Proposal”Proposal"). At the Company’s annual meetingCompany's Annual Meeting of shareholdersShareholders held in April 2015, 97.4%2018, 59% of the votes cast on the Say on Pay Proposal were voted in favor of the proposal. The Compensation Committee believesDue to the outcome of this is an overall endorsement byvote, which was below the shareholdersCompany's historical average outcomes in excess of support of91%, the Company’s approach to executive compensation, and did not change its approach materiallyCompany engaged in shareholder outreach during fiscal year 2015.2018. See "Say-on-Pay Vote and Shareholder Engagement" earlier in the "Proxy Summary" section of this Proxy Statement for a summary of actions taken. The Compensation Committee will continue to take into account the outcome of the Company’sCompany's Say on Pay Proposal votes when making future compensation decisions for the NEOs.
Compensation Consultant
The Compensation Committee uses Buck Consultants, LLC, a wholly owned subsidiary of Xerox Corporation, to provide ongoing advice and information regarding design and implementation of the Company’s executive compensation programs as requested by the Compensation Committee. See further discussion regarding the Compensation Committee’s independent consultant under the heading “Compensation Committee” in the Corporate Governance Section in this Proxy Statement. In this Proxy Statement, we discuss the use of compensation consultants when the Compensation Committee utilized its independent consultant for a specific project. In addition, from time to time, management receives information from the compensation consultant in preparation for Compensation Committee meetings.votes.
Key Elements of the Executive Compensation Program
The key elements of the executive compensation program are:
Element and Purpose |
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Attract and retain high caliber executive talent with competitive fixed compensation. Base salary is not performance based. | Each | |
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Aligns executive performance with achievement of annual | Short-term incentive awards are set for each executive officer so that the expected payout at target performance levels would result in competitive market levels of such compensation. Payments under the short-term incentive plan can range from no payment to a payment no higher than 200% of the target, based upon actual results. The annual short-term incentive plan is designed to achieve several goals, including emphasizing the | |
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| Our long-term incentive plan ties a significant portion of our executive | |
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Other Benefits (includes supplemental retirement and deferred compensation plans, severance, change-in-control and other perquisites) | ||
Attract and retain high caliber executive talent. These benefits are not performance-based. |
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In General. In January of each year, the Compensation Committee reviews and considers the annual performance of the CEO and the other NEOs. The effective date of annual merit increases is February 1st. In April, the Compensation Committee reviews the overall compensation (base salary, short-term incentive, long-term incentive and high-level review of benefits and perquisites) of all of the executive officers The amount of annual base salary and year-over-year increase for each of the NEOs in fiscal year Named Executive Officer Base Salary as of Base Salary as of Percent Base Salary as of 12/1/2017 ($) Base Salary as of 2/1/2018 ($) Percent Increase from 12/1/2017 to 2/1/2018 (%) James J. Owens 1,067,846 1,121,238 5.0% James R. Giertz John J. Corkrean 479,000 493,000 2.92%1 Traci L. Jensen 465,515 470,000 .96% Patrick J. Trippel Steven Kenny2 Heather A. Campe 424,000 430,000 1.42% Patrick M. Kivits 500,0502 510,0712 2.0%2 (1) (2) Analysis of Fiscal group and a subset of our peer group with revenues under $4.2 billion. Based on this competitive market data review, there were no changes to the short-term and long-term incentive plan targets. Mr. Owens received a 5.0% merit increase after a review of his performance and the competitive market data review. Mr. Owens is in the fourth quartile of the CEO salary range. Mr. Ms. Jensen received a merit increase of 0.96%. Her base salary is in the second quartile of the salary range for her position. Ms. Campe received a merit increase of 1.42%. Ms. Campe's base salary is in the second quartile of the salary range for her position. Mr. Kivits received a merit increase of 2.0%. Mr. Kivits' base salary is in the third quartile of the salary range for his position. For fiscal Fiscal In General. Each year, the Compensation Committee establishes the annual cash incentive target opportunities as a percentage of base salary. Under the short-term incentive plan, the Compensation Committee may also consider extraordinary circumstances that may positively or negatively impact the achievement of the total Company performance objectives. For fiscal The Compensation Committee, in its discretion, has the right at any time to enhance, diminish or terminate all or any portion of any compensation plan or program, on a collective or individual basis for the NEOs. Regional Operating Unit1 EPS4 Company Organic Revenue5 Company Operating Income6 Region or Business Organic Revenue Region or Business Operating Income Global Key Market Organic Revenue Global Key Market Gross Margin7 Emerging Markets Organic Revenue Emerging Markets Contribution Margin8The graph below shows the percentageAdditional information regarding base salary, short-term incentive compensation and long-term incentive compensation follows.Fiscal 2018 Base SalariesFiscal 2015 Base Salaries(including(excluding the NEOs)CEO) for market competitiveness.2015 is2018 are set forth in the following table.
12/1/2014 ($)1
2/1/2015 ($)
Increase from 12/1/2014
to 2/1/2015 (%) 968,000 989,296 2.20% 576,000 588,672 2.20% 447,000 455,940 2.00% 447,000 469,350 5.00% 414,261 420,475 1.50% The base salaries for U.S. based NEOs differ from the baseMr. Corkrean received a mid-year salary reported in the proxy statement in fiscal 2014 due to the eliminationincrease effective July 16, 2018. See discussion below under "Analysis of the car allowance effective June 1, 2014. At that time, the amount paid for car allowance was added to each NEO’s salary. Market practice in the EIMEA region supports a car allowance for Mr. Kenny therefore this perquisite was not eliminated in that region.Fiscal 2018 Base Salaries".Non U.S.-based compensation paidThe calculation of the percentage increase in Mr. Kivits' base salary is based on the increase from January 1, 2018 (the date of his relocation to Mr. Kenny isSwitzerland and change from base salary denominated in British Pounds SterlingEuros to Swiss francs) to February 1, 2018. Mr. Kivits' base salary as of January 1, 2018 differs from the base salary reported for fiscal year 2017 in last year's proxy statement due to a change in location, payment partially in Swiss francs vs. Euros and different exchange rates used for financial reporting purposes. His compensation has been converted to U.S. dollars at the same exchange rate used for financial reporting purposes. Mr. Kenny’s base salary as of December 1, 2014 differs from the base salary reported for fiscal year 2015 reported in last year’s proxy statement due to different exchange rates used for financial reporting purposes in fiscal 2014 and fiscal 2015.20152018 Base Salaries. In January 2015,2018, the Compensation Committee reviewed Mr. Owens’Owens' base salary, short-term incentive target and long-term incentive target amount. The review includedbased on competitive market data, including the following market data: Mercer 2014 U.S. Executive Benchmark Database (All Industries with data regressed to $2.1 billion in revenue); Towers Watson 2014 Top Management Report (All Industries For Profit with annual revenues between $1—5 billion and median revenues of 2.08 billion); and Hewitt Total Compensation MeasurementTM (TCMTM) Executive Total Compensation by Industry – United States 2014 (all industries, companies with revenues $1-2.5 billion and median revenue of 1.7 billion).sources noted above. The Compensation Committee also reviewed market data relating to our peer group. For fiscal 2015, Mr. Owens received a 2.2% merit increase. The rangeGiertz’s fiscal 2015 base salary was in the fourth quartile of his salary range. His salary has historically been higher than the midpoint in this salary range to reflect Mr. Giertz’s extensive experience in both finance (as a CFO) and in operations with prior employers, where he held key leadership positions in several companies. For fiscal 2015, Mr. GiertzCorkrean received a merit increase of 2.2% effective February 1, 20152.92%. Based on a review of market data for this position and Mr. Corkrean's performance, he remains in the fourth quartile of his salary range. Ms. Jensen received a merit increase of 2.00% effective February 1, 2015.mid-year promotion. Effective July 16, 2018, Mr. TrippelCorkrean received a merit3.45% increase of 5.0% duein base salary to several successful initiatives including the progress on the Tonsan Adhesive, Inc. acquisition (which closed in early fiscal 2015) and building the foundation for our electronics business. Ms. Jensen’s and$510,000. Mr. Trippel’s fiscal 2015 base salaries were in the third quartile of their salary range. Mr. Kenny received a merit increase of 1.5%. Mr. Kenny’s fiscal 2015Corkrean's base salary was in the second quartile of histhe salary range on February 1, 2015. On June 1, 2015,for his position. Effective the same time, Mr. Kenny changed job responsibilitiesCorkrean's short-term incentive target increased from Sr. Vice President, Europe, India, Middle East and Africa65% of base salary to Sr. Vice President, Emerging Markets.75% of base salary. In addition, his long-term incentive annual target value increased from $500,000 to $750,000 effective for grants beginning in January 2019.2015,2018, all merit increases for the NEOs fell within the Company’sCompany's general merit increase guidelines for our general employee population. The range of increases provided to NEOs was 0.96% to 5%.20152018 Short-Term Incentive Compensation2015,2018, based on market data, the annual cash incentive target opportunity for our executive officers ranged from 65%52% to 100% of base salary at a target level of performance. Potential payouts range from 0% to 200% of the target award based on attainment of operating unitsegment, key market and/or Company predeterminedCompany-wide financial goals. The threshold level for the annual cash incentive was set at 80% of each financial target, goal, except the organic revenue metrics had a threshold amount of 90%. At of target, meaning that financial performance must meet or exceed these levels, the annual cash incentive would pay outthresholds for executive officers to earn at least 50% of the target incentive. Higher payouts are possible if performance is above thresholdtarget levels. For example, at the “superior”superior level payout is 150%(110% of target for organic revenue and at the “superior stretch” level,120% of target for all other metrics), payout is 200% of target.All performance measures for the NEOs, and the percentage of short-term incentive compensation based on these measures as established by the Compensation Committee, are set forth in the table below:Performance Measure CEO CFO SVP, Market
Development2 SVP,Emerging
Markets3 30% 30% 30% 30% 30% 30% 30% 40% 40% 20% 20% 20% 15% 25% 15% 15% 25% 15% 20% 20% (1)Includes Ms. Jensen and Mr. Kenny for the first half of the fiscal year.(2)Includes Mr. Trippel.(3)Includes Mr. Kenny for the second half of the fiscal year.(4)EPS is defined as net income divided by weighted average common stock shares outstanding (diluted).(5)Organic revenue is defined as revenue, excluding the effects of changes due to foreign currency exchange rates and acquisitions/divestitures.(6)Operating income (“OI”) is defined as gross profit less selling, general and administrative expenses.(7)Gross Margin (in dollars) is defined as Net Revenue less Cost of Sales(8)Contribution Margin (in dollars) is defined as Net Revenue less Raw Material/Container Cost – Delivery Costs
Analysis of Fiscal 20152018 Short-Term Incentive Awards. The financial performance measuresmetrics approved by the Compensation Committee in early fiscal 20152018 were selected because management believed they were the most representative measurements of our financial results and were key financial measures that linked to our long-term strategic plan. In establishing the goals for these goalsmetrics for fiscal year 2015,2018, we considered our prior year results, economic conditions and expected business opportunities. The specific performance goals for the target level are considered to bewere challenging but achievable. In addition, we set a superior and superior stretch goalsgoal which would pay amounts for performance exceeding the target. These are noted in the table on page 40 below. The following chart shows the percentage increase in fiscal year 2015 performance targets over fiscal year 2014 actual results for each measure used to determine the short-term incentive bonuses:table.
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For fiscal 2015,2018, the financial performance measuresgoals for thethreshold, target superior and superior stretch performance and the actual performance were as set forth below. AmountsThese amounts are shown inon a non-GAAP basis, which differs from the table below may differ from reported GAAP results discussed under the section entitled "Fiscal 2018 Business Results", due to adjustments which are allowed under the short-term incentive plan as set forth in footnote 12 in the table below. All performance goals for the NEOs, and the percentage of short-term incentive compensation based on these goals as established by the Compensation Committee, are set forth in the table below:
Performance Measure ($ amounts in thousands as noted, except EPS) | CEO, CFO, and SVP, Market Development |
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EPS | ||||||||
Target | $ | 2.60 | $ | 2.60 | ||||
Superior/Superior Stretch | $ | 2.99/3.25 | $ | 2.99/3.25 | ||||
Actual2 | $ | 1.70 | $ | 1.70 | ||||
Company Organic Revenue | ||||||||
Target | $ | 2,188,412 | ||||||
Superior/Superior Stretch | $ | 2,407,250/2,516,670 | ||||||
Actual2 | $ | 2,067,014 | ||||||
Company Operating Income | ||||||||
Target | $ | 207,318 | ||||||
Superior/Superior Stretch | $ | 238,420/259,150 | ||||||
Actual2 | $ | 167,124 | ||||||
EIMEA Region Organic Revenue | ||||||||
Target | $ | 583,060 | 3 | |||||
Superior/Superior Stretch | $ | 641,367/$670,519 | 3 | |||||
Actual2 | $ | 565,342 | 3 | |||||
EIMEA Region Operating Income | ||||||||
Target | $ | 34,031 | 3 | |||||
Superior/Superior Stretch | $39,135/42,538 | 3 | ||||||
Actual2 | $ | 13,076 | 3 | |||||
Americas Adhesives Region and Construction Products Organic Revenue | ||||||||
Target | $ | 1,190,294 | ||||||
Superior/Superior Stretch | $ | 1,309,320/$1,368,840 | ||||||
Actual2 | $ | 1,107,542 | ||||||
Americas Adhesives Region and Construction Products Operating Income | ||||||||
Target | $ | 144,423 | ||||||
Superior/Superior Stretch | $ | 166,090/$180,530 | ||||||
Actual2 | $ | 137,641 | ||||||
Key and Emerging Market Metrics4 | * | * | ||||||
Annual Cash Bonus, Weighting, and Goal Attainment Level | ||||||
Named Executive Officer | 2018 Target Cash Bonus | 2018 Actual Cash Bonus Paid |
Metric |
Weighting | Threshold1 Target1 Superior1 |
Actual ($)1,2 |
James J. Owens | $1,112,167 | $948,233 |
AEPS3 |
30% | $2.68 $3.35 $4.02 |
$3.00 |
Organic Revenue4 |
30% | $2,756,745 $3,063,050 $3,369,355 |
$3,055,117 | |||
AOI5 |
40% | $257,666 $322,083 $386,500 |
$301,085 | |||
John J. Corkrean | $342,364 | $291,900 |
AEPS3 |
30% | $2.68 $3.35 $4.02 |
$3.00 |
Organic Revenue4 |
30% | $2,756,745 $3,063,050 $3,369,355 |
$3,055,117 | |||
AOI5 |
40% | $257,666 $322,083 $386,500 |
$301,085 | |||
Traci L. Jensen | $305,004 | $235,860 | AEPS3 |
30% | $2.68 $3.35 $4.02 |
$3.00 |
Construction Adhesives Segment Organic Revenue4 |
30% | $419,892 $466,547 $513,202 |
$446,404 | |||
Construction Adhesives Segment Adjusted EBITDA6 |
40% | $68,026 $85,032 $102,038 |
$77,916 | |||
Heather A. Campe | $278,837 | $245,781 | AEPS3 | 30% | $2.68 $3.35 $4.02 |
$3.00 |
Americas Adhesives Segment Organic Revenue4 | 20% | $1,012,811 $1,125,345 $1,237,880 |
$1,119,981 | |||
Americas Adhesives Segment AOI5 | 25% | $116,903 $146,129 $175,355 |
$134,253 | |||
Key Markets Revenue | 15% | *8 | *8 | |||
Key Markets Gross Margin7 | 10% | *8 | *8 | |||
Patrick M. Kivits | $260,660 | $227,635 | AEPS3 |
30% | $2.68 $3.35 $4.02 |
$3.00 |
EIMEA Segment Organic Revenue4 |
20% | $659,964 $733,293 $806,622 |
$737,582 | |||
EIMEA Segment AOI5 |
25% | $45,137 $56,421 $67,705 |
$51,618 | |||
Key Markets Revenue | 15% | *8 | *8 | |||
Key Markets Gross Margin7 | 10% | *8 | *8 | |||
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(4) | Organic revenue is a non-GAAP measure which is defined as the adjusted reported revenue as disclosed in the Company's fourth quarter earnings release and is adjusted for currency impact compared to budgeted exchange rates. Unbudgeted acquisitions and divestitures are excluded from the calculation. |
(5) | AOI is a non-GAAP measure which is defined as the adjusted gross profit minus adjusted selling, general and administrative expenses as disclosed in the Company's fourth quarter earnings release and is adjusted for currency impact compared to budgeted exchange rates. Unbudgeted acquisitions and divestitures are excluded from the calculation. AOI is reconciled with the most directly comparable GAAP measure in Annex A. |
(6) | Adjusted EBITDA is a non-GAAP financial measure which is defined as earnings before interest, tax, depreciation and amortization on a constant currency basis. Adjusted EBITDA is reconciled to the most directly comparable GAAP measure in Annex A. |
(7) | Gross Margin (in dollars) is defined as net revenue less cost of sales. |
(8) | We consider the targets for our Key |
The following chart shows the percentage increase in fiscal year 2018 performance targets over fiscal year 2017 actual results for each measure used to determine the short-term incentive target and actual payment as a percent of base salary for fiscal 2015 for each of our NEOs is set forth in the table below:payouts:
Named Executive Officer | Target Payment | Actual Payment | Actual Payment ($)1 | ||||||||||
James J. Owens | 100% | 42.3% | 416,872 | ||||||||||
James R. Giertz | 70% | 29.6% | 173,639 | ||||||||||
Traci L. Jensen | 65% | 34.0% | 154,538 | ||||||||||
Patrick J. Trippel | 65% | 16.2% | 75,619 | ||||||||||
Steven Kenny | 65% | 31.0% | 130,202 | 2 | |||||||||
Performance Metric | FY 2018 Target to FY | ||
AEPS | 34% | ||
Company Organic Revenue | 6.04% | ||
Company AOI | 18.08% | ||
Construction Adhesives Segment Organic Revenue | 3.45% | ||
Construction Adhesives Segment Adjusted EBITDA | 17.5% | ||
Americas Adhesives Segment Organic Revenue | 6.16% | ||
Americas Adhesives Segment AOI | 11.91% | ||
EIMEA Segment Organic Revenue | 5.57% | ||
EIMEA Segment AOI | 13.41% | ||
Global Key Metrics | *2 |
(1) | In calculating the year over year increase, with the exception of AEPS, the fiscal 2017 pro forma results assumed the Royal Adhesives acquisition was made on December 3, 2017. |
(2) | We consider our Global Key Market metrics to be confidential commercial information the disclosure of which would result in competitive harm to us. |
The following table shows the actual short-term incentive award for each NEO as compared to the target payment as a percentage of base salary.
Named Executive Officer | Target Payment | Actual Payment | Actual Payment ($)1 | ||||
James J. Owens | 100% | 85.3% | 948,233 | ||||
John J. Corkrean | 75%2 | 58.7%2 | 291,900 | ||||
Traci L. Jensen | 65% | 50.3% | 235,860 | ||||
Heather A. Campe | 65% | 57.3% | 245,781 | ||||
Patrick M. Kivits | 52% | 45.4% | 227,6353 |
(1) | The actual total payment that was made for the fiscal year is also found in the Non-Equity Incentive Plan Compensation column of the |
(2) |
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(3) | Non-U.S.-based compensation paid to Mr. |
Bonus Multiplier Program
Fiscal 2018 Long-Term Incentive Compensation
Beginning in fiscal 2015, the Compensation Committee approved a program that is intended to incentivize and reward individual performance. The plan pays plus or minus 5% of an individual’s Short-Term Incentive Plan (STIP) payout based on performance related to an individual metric. Each NEO (excluding the CEO and CFO) have an individual metric and target. Due to Mr. Kenny’s mid-year change in position, he had two metrics for the year. If the eligible NEO achieves his/her performance target as of fiscal year-end, he/she will receive an additional 5% of their annual STIP bonus payout. If the eligible NEO does not achieve their performance target as of fiscal year end, the NEO will receive a 5% reduction to their annual STIP bonus payout. The CEO has the authority to change the minus 5% adjustment to zero in situations where the ability to obtain the metric is outside of the eligible NEO’s control. In such cases, the ability to obtain the plus 5% is not available. Amounts paid or deducted under this program are included in the amount reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. The NEOs’ individual metrics are key financial measures for the specific businesses for which they are responsible. We consider the metrics and targets to be confidential. Ms. Jensen met her target resulting in a bonus adjustment of plus 5% of her short-term incentive. Mr. Kenny met one of his two targets, resulting in a bonus adjustment of plus 0.8% of his short-term incentive. Mr. Trippel did not meet his target, which resulted in an adjustment of negative 5% of his short-term incentive.
Special 2015 Performance Acceleration Bonus Plan
For fiscal 2015 only, the Compensation Committee approved a program to pay an amount up to 50% of an eligible individual’s (including all NEOs) short-term incentive program target if:
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The threshold level for earnings per share under this program was not met for the first half of fiscal 2015. Therefore, no payment was made to any NEO under this program.
Fiscal 2015 Long-Term Incentive Compensation
In General. The fiscal 20152018 long-term incentive plan design includes grants with a mix of 50% nonqualified stock optionsNQSOs and 50% restricted stock unitsRSUs based on the grant value. The Compensation Committee decided to move to the sole usedate fair market value of awards of restricted stock units beginning in fiscal 2014 to better align with market practice and to ensure consistency of awards among all participants.H.B. Fuller Common Stock.
Stock Options. The standard nonqualified stock options typically vest in three equal installments on each anniversary date of the grant date, as long as the optionee continues to be employed by the Company, which enhances retention. Vested stock options provide a benefit to an executive officer only if the market value of the stock increases over the term of the option and if the executive officer remains employed at H.B. Fuller.with the Company. Stock options are granted for a 10 year10-year term. Stock options are granted at theirwith an exercise price equal to the fair market value of our common stock on the date of grant.
Restricted Stock Units. Restricted stock unit grants typically vest in three equal annual installments from the grant date, which enhances retention. Restricted stock unit RSU awards provide a benefit to an employee only if the employee remains employed until the award vests. Dividends are accrued on restricted stock units during the period prior to vesting and are subject to the same vesting requirements, with payment in the form of additional shares once vesting has occurred. Only restrictedRestricted stock (for grants prior to fiscal 2014) hasunits do not have voting rights during the period prior to vesting.rights. In addition, if the market value of the stock increases over the grant date price of the award, the employee further benefits from that appreciation in value.
• Restricted Stock Units (Time-Based). For ourNEOs other than the CEO, recenthalf of each RSU grant vests based on continued employment over time. RSU grants typically vest in three equal annual restricted stock and restricted stock unit grants includeinstallments from the grant date, which enhances retention.
• Restricted Stock Units (Performance-Based). For all NEOs including the CEO, half of each RSU grant vests only if the Company achieves at least a performance goal which must be achieved or the restricted stock/threshold level of ROIC performance. The performance-based restricted stock units will not vest and all rights will be forfeited.ratably over three years depending on our performance against the ROIC metric for each year. Payouts range from 0% to 200% of target.
• The CEO does not receive time-based RSUs. The other half of his RSU grant will vest if the Company achieves at least a threshold level of AEPS, OI or organic revenue.
The value of an individual’sindividual's target award is established to generally reflect competitiveness atcorrelate with the market median/50th percentile for the applicable position and grade level. The CEO recommends to the Compensation Committee the number of stock options and restricted stock unitsRSUs (both time-based and performance-based RSUs) to be granted to each executive officer. The Compensation Committee retains full authority to accept, modify or reject these recommendations and to increase or decrease the value of the award. The Compensation Committee also reviews total Company performance and the CEO’sCEO's individual performance to determine the award for the CEO. The number of options is determined based on a Black-Scholes valuation, and a 30-day stockshare price average is applied. To determine the number of restricted stock/restricted stock units to be awarded, a 30-day stockshare price average is applied.
The Compensation Committee reviews and approves long-term incentives for our CEO and the other executive officers in January of each year. This long-term incentive grant date in January aligns with the annual individual performance review process and allows the grants to occur during the open trading period (after our fiscal year endyear-end annual earnings release) for H.B. Fullerour common stock as provided under Company policy. The grants of stock options are made with an exercise price determined as of the close of trading on the applicable grant day. We do not allow backdating of options, nor do we have a program, plan or practice to time stock option grants to executive officers in coordination with the release of material non-public information.
The target values for each named executive officer’sofficer's long-term incentive award are set forth in the table below. It is the general practice of the Compensation Committee to make awards to executive officers in a range of 80% to 120% of the target value below.
Named Executive Officer | Target Value of | Actual Value of | Annual Target Value of | Actual Value of | |||||||||
James J. Owens | 2,375,000 | 2,375,000 | 3,363,715 | 3,363,715 | |||||||||
James R. Giertz | 625,000 | 687,500 | |||||||||||
John J. Corkrean | 500,000 | 500,000 | |||||||||||
Traci L. Jensen | 500,000 | 500,000 | 500,000 | 500,000 | |||||||||
Patrick J. Trippel | 500,000 | 500,000 | |||||||||||
Steven Kenny | 500,000 | 500,000 | |||||||||||
Heather A. Campe | 500,000 | 500,000 | |||||||||||
Patrick M. Kivits | 375,000 | 375,000 | |||||||||||
Analysis of Fiscal20182015 Long-Term Incentive Awards. In January, 2018, each NEO received grants of RSUs. For all NEOS except for the CEO, half of the RSUs vest based on an ROIC performance metric and the other half are time based. The performance-based RSUs vest ratably over three years depending on the performance against the ROIC metric for each year. The time-based restricted units vest ratably over three years if the NEO remains employed at the Company.
• For the January 20152016 grant, the metric target was 9.5% ROIC. The Company achieved 8.3% ROIC in fiscal 2018. Therefore, the vesting for that part of restricted stock unitsthe grant was at 70% of target.
• For the January 2017 grant, the metric target was 10.0% ROIC. The Company achieved 8.3% ROIC in fiscal 2018. Therefore, the vesting for that part of the grant was at 57.5% of target.
• For the January 2018 grant, the metric target was 8.0% ROIC, which is lower than prior year targets due to Mr. Owens containsthe unprecedented scope of the Royal Adhesives business having a requirementdilutive effect in the short term calculation of ROIC. The acquisition is highly accretive from a profitability standpoint, however. The Company achieved 8.3% ROIC in fiscal 2018. Therefore, the vesting for that part of the restricted stock unitsgrant was at 107.5% of target.
All of the CEO's RSUs vest based on performance versus the passage of time.
• Half of the RSUs vest based on an ROIC metric consistent with the other NEOs, as described above.
• The other half of the RSUs will vest in three equal installments on January 22, 2016, January 22, 2017 and January 22, 2018 only if (1) one or more of the performance measures in the CEO’sCEO's short-term incentive plan are met at the threshold level for fiscal 20152018 as determined by the Compensation Committee and (2) Mr. Owensour CEO continues to be employed by the Company on the respective vesting date. BothFor the January 2018 grant, both of these requirements were met as of January 22, 2016.24, 2019. Therefore, the first installment has vested, and the remaining two installments of these restricted units will vest according to the three-year vesting schedule as long as Mr. Owens remains employed by the Company. There is no higher level of payout for these restricted stock units if target or superior performance is achieved for any of the measures.
During fiscal year 2015, all long-term incentive awards toROIC is a non-GAAP financial metric that is reconciled with the NEOs fell within 100% to 110% of the target value above. most directly comparable GAAP financial metric in Annex A.
Fiscal year 20152018 long-term incentive awards of stock options and restricted stock units are set forth in the“"Grants of Plan-Based Awards During Fiscal Year2015”2018" table in this Proxy Statement.
Other Executive Benefits and Perquisites
In General.
We provide the following perquisites and benefits to our executive officers who are based in the United States or who are U.S. expatriates:
Perquisites and Benefits | Description | |||||
Defined Contribution Restoration Plan | • |
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  | 3% non-elective (retirement) contribution restoration for compensation in excess of IRS limits for eligible U.S. employees, | |||||
| 4% 401(k) match restoration for compensation match in excess of IRS limits, and | |||||
| Additional credit equal to 7% of eligible earnings. | |||||
Key Employee Deferred Compensation Plan | • | Allows deferral of a portion of annual base salary and/or any annual incentive payment. If an executive defers a portion of his or her salary or incentive payment into the Company stock account, the Company credits units of | ||||
Financial Counseling | • | Up to $7,500 annually in financial planning and tax preparation. | ||||
Executive Health Exams | • | Annual preventive/diagnostic physical examination and local | ||||
Excess Liability Insurance | • | Group personal excess liability insurance policy provides individual coverage up to | ||||
Relocation Expense | • | Assistance with relocation, sale and purchase of home, temporary living assistance, and movement of property, including a tax | ||||
Long-Term Disability Insurance | • | Executives may elect to purchase long-term disability insurance coverage of 50% of their salary up to $20,000 per month. The premiums are paid on an after-tax basis by the employee and then reimbursed by the Company. | ||||
Of the perquisites and benefits set forth above, only the financial counseling, executive health exam, relocation and the excess liability insurance are provided to Mr. Kenny,Kivits, who is not based in the United States and is not an expatriate. Other benefits provided to Mr. KennyKivits include:
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Perquisites and Benefits | Description | ||
Retirement Plan | • |
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Additional Health and Life Insurance | • | We provide additional health insurance for | |
Auto Allowance | • | Monthly allowance | |
Analysis of Fiscal20182015Executive Benefits and Perquisites. We provide perquisites to our executive officers to generally reflect competitiveness at the market median/50th percentile.
In conjunction with the annual review of executive officer total compensation, the Compensation Committee reviews executive officer benefits and perquisites for market prevalence. In fiscal 2015,2018, the Compensation Committee reviewed market data on the prevalence of the following benefits and perquisites provided by the Company: the Key Employee Deferred Compensation Plan, executive health programs, financial counseling, and Defined Contribution Restoration Plan.Plan and executive long-term disability. The survey data used to review the market prevalence of all of these benefits was provided by the Aon Hewitt U.S. TCM Executive Compensation Policies and Programs: U.S. 20142017 survey (537(106 participating companies). AsThe data also included a result of the Compensation Committee’s review of these perquisite offerings from our peer group, which was provided by our compensation consultant. The Compensation Committee reviewed the data provided and benefit programs,made no changes were made because ofdue to the general market prevalence of these programs. This survey data did not cover the prevalence of personal excess liability insurance coverage and relocation programs. No changes were made to these programs.
All perquisites paid to our NEOs are disclosed in the “"Summary Compensation Table”Table" under the “"Other Compensation”" column and the footnotes thereto.
Severance, Change-in-Control and other Employment-Related Agreements
In General. H.B. Fuller does not have employment agreements with any of the NEOs that provide for a specified term of employment. The Company does have an employment agreement with Mr. KennyKivits as discussed below. The Company also has change-in-control agreements discussed under the heading“"Change-in-Control Agreements”Agreements" and executive severance agreements discussed under the heading“Severance”"Severance.".
Severance. The executive severance agreements provide for payment of the following severance benefits if the eligible executive officer’sofficer's employment is terminated involuntarily by the Company without cause (as defined in the agreement) or voluntarily by the executive officer for good reason (as defined in the agreement):
Severance pay equal to one times (two times for the CEO) base salary plus target annual bonus, payable over the 12 months (24 months for the CEO) following termination;
Continued group medical and dental insurance over 12 months (18 months for the CEO); and
Outplacement services with a value of up to $20,000.
Except as indicated above with respect to the CEO, the same form of agreement was provided to all NEOs other than for Mr. Kenny.Kivits. The severance agreement with Mr. KennyKivits provides for a reduction in any severance pay due to him for any severance pay required by local law.
Change-in-Control Agreements. All NEOs have entered into change-in-control agreements with H.B. Fuller. The agreements are a critical and effective tool to attract and retain executives, especially during times of uncertainty.executives. These agreements provide for payments under certain circumstances following a change-in-control of the Company. The Compensation Committee believes that one of the purposes of providing change-in-control agreements is to provide financial security to the executive officer in the event the executive officer’sofficer's employment is terminated in connection with a change-in-control. The agreement is intended to ensure the executive officer remains focused on activities related to a change-in-control that could be in the best interest of the Company and its shareholders, and that the executive officer is not distracted by compensation implications as a result of a change-in-control. The Compensation Committee also believes that change-in-control agreements assist in the retention of executive officers at a time when their departure might be detrimental to the Company and shareholders.
The change-in-control agreements contain a “double trigger”"double trigger" for receipt of change-in-control payments. This means that there must be a change in control of the Company and a termination of employment (or a material change to employment)the NEO's terms of employment (such as demotion, reduction in compensation or required relocation)) during the covered period for the provisions to apply and benefits to be paid. The Compensation Committee believes that a “double trigger”"double trigger" is more appropriate than a “single trigger”,"single trigger," because a double-triggerdouble trigger prevents the unnecessary payment of benefits to an executive officer in the event that the change in control does not result in the executive officer’sofficer's termination of employment or a material change in the terms of the executive officer’s employment (such as demotion, pay cut or relocation).officer's employment.
Our change-in-control arrangements have been structured to ensure that executives receive the full intended benefits of these arrangements in the event that a transaction should take place, particularly when their short tenure creates an imbalance between intended benefit and potential tax liability. Our approach has been to provide our executives with arrangements that include a modified tax gross-up. These arrangements eliminate de minimis or inefficient gross upgross-up payments, only providing tax gross upgross-up in cases of significant imbalance. The Compensation Committee reviews all change-in-control packages periodically to ensure their continued effectiveness. For future executive change-in-control agreements, the Company will not include a tax gross-up provision.
An explanation of any payments to be made under the change-in-control agreements is found under the heading “"Involuntary (Not for Cause) Termination or Good Reason Termination after a Change-in-Control”Change-in-Control" in the section of this Proxy Statement titled “"Potential Payments Made Upon Termination or Change-In-Control”Change-In-Control.".
Other. The Company has an employment agreement with Mr. Kenny,Kivits, because employment agreements are customary in EnglandSwitzerland where Mr. KennyKivits is based. The agreement with Mr. KennyKivits sets forth his salary, job functions and benefits, and contains intellectual property ownership rights, termination, non-competition and confidentiality provisions. The agreement does not provide for any minimum termMr. Kivits or the Company may terminate his employment by giving a notice period of employment.six months to the end of a calendar month. See the section titled “"Potential Payments made upon Termination or Change-in-Control”" later in this Proxy Statement for contractual payments that the Company may owe Mr. KennyKivits under his employment agreement.
Stock Ownership
Stock Ownership
We believe that ownership of H.B. Fuller Common Stock by executive officers encourages long-term, strategic decision making that helps to reduce undue short-term risk-takingGoals and is aligned with the best interests of H.B. Fuller’s shareholders and other constituents. Goals for recommended levels of executive stock ownership were established in 2003 and are reviewed annually by the Compensation Committee. An executive officer’sofficer's stock ownership goal (which includes common stock directly held H.B. Fuller stock, H.B. Fullerby the executive officer and common stock held in the H.B. Fuller Companyour 401(k) & Retirement Plan, restricted stock, restricted stock units (time-based and performance-based), and phantom stock units held in the Key Employee Deferred Compensation Plan) ranges in dollar amount from one to five times the executive officer’s annual base salary.Plan.
The guideline for the CEO is ownership of at least five times his base salary in H.B. Fuller Common Stock, and the guideline for the other NEOs is ownership of at least three times their base salaries.salary. The guideline provides that an executive should strive to reach and then maintain the applicable stock ownership goal within five years of appointment to a new job grade. For the 2018 review of stock ownership, all NEOs who had been in their position. The review was based on job grades and stock values in effect as of June 30, 2015. At that point in time, the CEO and all other NEOs havegrade for at least five years had met the applicable stock ownership goal.
If after five years in his or her position, a named executive officerjob grade, an NEO has not met his/her stock ownership goal, the named executive officerNEO must retain 100% of all after-tax profit shares from any exercise, vesting or payout of equity awards until the stock ownership guideline is met, unless a hardship exception is granted.
| Named Executive Officer | Stock Ownership Guideline as of June 30, 2015 | 2015 % of Target as of June 30, 2015 | Years at Grade/Target as of June 30, 2015 | |||||||||
James J. Owens | 5 times base salary | >100% | 4 | |||||||||
James R. Giertz | 3 times base salary | >100% | 7 | |||||||||
Traci L. Jensen | 3 times base salary | 100% | 2 | |||||||||
Patrick J. Trippel | 3 times base salary | 94% | 4 | |||||||||
Steven Kenny | 3 times base salary | >100% | 5 | |||||||||
Tax Considerations
Under Section 162(m) of the U.S. Internal Revenue Code we must meet specified requirements related("Section 162(m)") imposes a $1,000,000 annual deduction limit on compensation payable to our performancecertain current and must obtain shareholder approval of certain compensation arrangements in order for the Company to fully deduct compensation in excess of $1,000,000 paid to aformer named executive officer other than the CFO. The H.B. Fuller Company 2013 Master Incentive Plan (the “2013 Master Incentive Plan”) was approved by our shareholders and includes specific performance criteria to be used by the Compensation Committee when establishing performance awards that are intended to be fully deductible under Section 162(m). The Committee believes that performance-based cash and stock incentive awards and stock options granted under the 2013 Master Incentive Plan will be deductible. However, there can be no assurance that incentive awards intended to qualify for tax deductibility will ultimately be determined by the Internal Revenue Service to so qualify. Cash compensation voluntarily deferred by our executive officers under our Key Employee Deferred Compensation Plan is not subject to the Section 162(m) cap until the year paid.
officers. The Compensation Committee intends to continue its practice of payingpay competitive compensation consistent with our philosophy to attract, retain and motivate executive officers to manage our business in the best interests of H.B. Fullerthe Company and our shareholders. The Compensation Committee, therefore, may choose to provide non-deductible compensation to our executive officers if it deems such compensation to be in the best interests of H.B. Fuller and our shareholders. In fiscal 2015,
Prior to the compensation subject toTax Cuts and Jobs Act (the "Act"), Section 162(m) didpermitted a deduction for compensation in excess of $1,000,000 paid to a covered executive if specified requirements related to our performance were met and shareholder approval was obtained. The Act eliminated the exception to the deduction limit for qualified performance-based compensation (and broadened the application of the deduction limit to certain current and former executive officers who previously were exempt from such limit). However, the Act also included a transition provision which exempts from the above changes performance-based compensation payable under a written binding agreement that was in effect on November 2, 2017, if such agreement is not exceedsubsequently materially amended. As a result of the $1,000,000 captransition rule, certain performance-based awards that were outstanding as of November 2, 2017 but which may vest and pay out in future tax years may be fully deductible if they qualify for any of our NEOs.transition relief.
Various programs, including our benefit plans that provide for deferrals of compensation are subject to Section 409A of the Internal Revenue Code. We have reviewed such plans for compliance with Section 409A and believe that they are in compliance.
Actions for Fiscal20162019
In January 2016,DC Restoration Plan. Effective as of calendar year 2019, the Compensation Committee approved a change to the addition3% non-elective (retirement) contribution restoration for compensation in excess of the IRS annual compensation limit for eligible U.S. employees (including all NEOs except Mr. Kivits). In lieu of a 3% contribution, there will be a 1% non-discretionary contribution and an opportunity for a discretionary contribution of 0% to 3% of eligible pay in excess of IRS limits, based on EPS performance. This change was made to align to a change made to the H.B. Fuller Company 401(k) and Retirement Plan.
RSU Grant. In fiscal 2017 and 2016, the Company made grants to NEOs of performance-based RSUs with ROIC as the performance metricmetric. The targets for the 2016 and 2017 awards were 9.5% and 10.0% respectively. In October 2017, the Company acquired the Royal Adhesives business. Prior to 50%the acquisition of Royal Adhesives, the Company was performing above the target level of ROIC performance for these awards. In 2018, the actual ROIC was 8.3%.
The Company has guidelines for how to calculate ROIC, including how to account for acquisitions. However, due to the unprecedented scope of this acquisition, there was a dilutive effect in the short term calculation of ROIC. The acquisition is highly accretive from a profitability standpoint. Excluding the effect of the restricted stock units (RSUs) granted under our long-term incentive plan. acquisition of the Royal Adhesives business, the actual ROIC for 2018 was 11.2%. Due to the acquisition, the ROIC performance was negatively impacted and affected the outstanding performance based RSU awards as follows:
For the CEO, who already had a performance metric as part of his RSU grant, his RSU grant will continue to have a performance element related to EPS, Operating Income and Organic Revenue which applies to half of his RSU grant. The other half2018 vesting of the award granted in January 2016, actual performance vested at 70% of target and would have vested at 142.5% of target without the impact of the Royal Adhesives acquisition.
For the 2018 vesting of the award granted in January 2017, actual performance vested at 57.5% of target and would have vested at 130% of target without the impact of the Royal Adhesives acquisition.
In order to compensate for the undue negative impact of the Royal Adhesives acquisition, the Compensation Committee approved an RSU grant will be subject to a return on invested capital (“ROIC”) target,award in January 2019, which will not vest unless at leastvests in 12 months, for all LTIP plan participants, including all NEOs. The CEO's award includes an additional requirement that the Company must achieve a threshold level of performanceAEPS, AOI or net revenue in fiscal 2019 for vesting of this award. The award is metintended to make up the shortfall between actual results and the results excluding the impact of the Royal Adhesives acquisition. This acquisition was strategically important in each yearthe long-term and as part of vesting. For all other NEOs, halfmeeting the Company's 2020 goals. Therefore, the Compensation Committee determined that it was appropriate to provide this additional award in order not to penalize LTIP participants for the negative short-term effect of their RSU grant will be subject to ROIC performance and will not vest unless at least a threshold level of performance is met in each year of vesting. For all NEOs, higher levels of ROIC performance will result in increased stock vesting amounts.
Total Compensation for Named Executive Officersthe Royal Adhesives acquisition on ROIC.
We believe that
Non-GAAP Financial Measures
ROIC is a non-GAAP financial measure, and the policies and programs described in the "Compensation Discussion and Analysis maintain an appropriate balance between motivating achievementAnalysis" section of short-term goals and strategically leading H.B. Fuller in a direction to provide long-term success, and therefore serve the interests of H.B. Fuller and its shareholders.
Non-GAAP Financial Measures
The“Compensation Discussion and Analysis”discussion in this Proxy Statement contains non-GAAP financial measures.measures, including organic revenue, AOI, AEPS and ROIC measured on a company-wide basis and certain financial measures for individual business segments. See “"Reconciliation of Non-GAAP Financial Measures”Information" in Annex A to this Proxy Statement for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP results.financial measures.
The Compensation Committee of the Board of Directors has reviewed and discussed with H.B. Fuller management the Compensation Discussion and Analysis. Based on this review and discussion with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in the Annual Report on Form 10-K for the year ended November 28, 2015.December 1, 2018.
Compensation Committee of the Board of Directors of H.B. Fuller Company
R. William Van Sant, Chair | Ruth S. Kimmelshue | ||
| Daniel L. Florness | Lee R. Mitau | ||
Thomas W. Handley | Dante C. Parrini | ||
Maria |
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The following table shows the cash and non-cash compensation for the last three fiscal years awarded to or earned by individuals who served as Chief Executive Officer and Chief Financial Officer during fiscal year 20152018 and each of the other three most highly compensated executive officers who were serving as executive officers at the end of fiscal year 2015.2018.
Name and Principal Position | Year | Salary ($)1 | Stock Awards($)2 | Option Awards ($)3 | Non-Equity Incentive Plan Compensation ($)1,4 | Change in Pension Value and Non-qualified Deferred Compensation Earnings ($)5 | All Other Compen- sation ($)6 | Total ($) | Year | Salary ($)1 | Bonus ($)2 | Stock Awards ($)3 | Option Awards ($)4 | Non-Equity Incentive Plan Compensation ($)1,5 | Change in Pension Value and Non- qualified Deferred Compensation Earnings ($)6 | All Other Compen- sation ($)7 | Total ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James J. Owens | 2015 | 985,610 | 1,180,472 | 1,187,917 | 416,872 | 2,211 | 263,392 | 4,036,474 | 2018 | 1,112,408 | - | 1,662,920 | 1,675,099 | 948,233 | 21,066 | 373,222 | 5,792,948 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
President and | 2014 | 960,428 | 1,138,368 | 1,123,931 | 221,401 | 326,367 | 3,770,495 | 2017 | 1,059,632 | - | 2,135,063 | 4,891,466 | 985,592 | 12,120 | 299,655 | 9,383,528 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chief Executive Officer | 2013 | 839,135 | 4,150,348 | 1,220,461 | 783,682 | 348,306 | 7,341,932 | 2016 | 1,031,760 | - | 1,390,144 | 1,389,140 | 474,511 | 9,073 | 327,779 | 4,622,407 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James R. Giertz | 2015 | 586,479 | 298,275 | 300,185 | 173,639 | 1,407 | 136,153 | 1,496,138 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
John J. Corkrean | 2018 | 497,223 | - | 247,172 | 248,995 | 291,900 | 573 | 158,378 | 1,444,241 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exec. Vice President & | 2014 | 563,677 | 329,525 | 325,347 | 92,750 | 174,535 | 1,485,834 | 2017 | 477,546 | - | 336,548 | 864,734 | 275,129 | - | 130,676 | 2,084,633 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chief Financial Officer | 2013 | 519,236 | 339,636 | 339,609 | 305,457 | 173,796 | 1,677,734 | 2016 | 260,308 | - | 657,330 | 163,002 | 77,290 | - | 47,093 | 1,205,023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Traci L. Jensen | 2015 | 454,393 | 238,620 | 240,150 | 154,538 | 677 | 89,677 | 1,178,055 | 2018 | 469,258 | - | 247,172 | 248,995 | 235,860 | 6,810 | 100,809 | 1,308,904 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sr. Vice President, | 2014 | 436,581 | 239,659 | 236,611 | 96,863 | 115,805 | 1,125,519 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Vice President, | 2017 | 465,515 | 343,913 | 763,436 | 123,091 | 3,942 | 112,958 | 1,812,855 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Global Construction Adhesives | 2016 | 472,810 | - | 227,819 | 227,648 | 84,547 | 2,890 | 147,054 | 1,162,768 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Heather A. Campe | 2018 | 429,008 | - | 247,172 | 248,995 | 245,781 | 2,421 | 112,353 | 1,285,730 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Vice President, | 2017 | 420,123 | - | 371,568 | 763,436 | 281,957 | 1,157 | 85,858 | 1,924,099 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Americas Adhesives | 2013 | 404,423 | 283,030 | 283,000 | 253,716 | 113,298 | 1,337,467 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patrick J. Trippel7 | 2015 | 474,078 | 238,620 | 240,150 | 75,619 | 492 | 90,808 | 1,119,767 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sr. Vice President, | 2014 | 452,722 | 239,659 | 236,611 | 130,017 | 113,996 | 1,173,005 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Market Development | 2013 | 426,250 | 283,030 | 283,000 | 217,762 | 125,696 | 1,335,738 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Steven Kenny | 2015 | 419,439 | 238,620 | 240,150 | 130,202 | 62,733 | 1,091,144 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sr. Vice President, | 2014 | 428,954 | 239,659 | 236,611 | 87,660 | 67,275 | 1,060,159 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Emerging Markets | 2013 | 433,104 | 283,030 | 283,000 | 162,379 | 69,670 | 1,231,183 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patrick Kivits8 | 2018 | 506,159 | - | 185,352 | 186,741 | 227,635 | - | 145,464 | 1,251,351 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Vice President, EIMEA | 2017 | 434,550 | - | 313,357 | 699,202 | 225,254 | - | 132,306 | 1,804,669 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Europe, India, Middle East, Africa) | 2016 | 353,705 | 106,644 | 170,838 | 170,736 | 117,859 | - | 141,760 | 1,061,542 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) | Includes cash compensation deferred at the election of the executive under the |
(2) | The amount in this column for Mr. Kivits represents the final payment of a hiring bonus. |
(3) | The amounts in this column represent the grant date fair value of time-based and performance-based restricted stock awards made in fiscal |
| The amounts in this column represent the grant date fair values of stock option awards. In accordance with FASB ASC Topic 718, the grant date fair value of these awards has been determined using the Black-Scholes method and based on the assumptions set forth in Note |
| As described in the |
| Amounts reported in this column for Mr. Owens, Mr. |
| The table below shows the components of this column for fiscal |
All Other Compensation -- Fiscal Year 2015 | ||||||||||||||||||||||||||||||
Name | Defined Contribution Plan Company Match & Contributions ($) | Defined Contribution Restoration Plan Contributions ($) | Dividendson Unvested Restricted Stock ($) | Charitable Matching Contributions and Donations ($)a | Perquisites (see table below) ($) | Total ($) | ||||||||||||||||||||||||
James J. Owens | 18,521 | 150,461 | 67,093 | 16,000 | 11,317 | 263,392 | ||||||||||||||||||||||||
James R. Giertz | 18,521 | 76,571 | 7,557 | 18,000 | 15,504 | 136,153 | ||||||||||||||||||||||||
Traci L. Jensen | 18,521 | 58,655 | 5,931 | - | 6,570 | 89,677 | ||||||||||||||||||||||||
Patrick J. Trippel | 18,521 | 64,849 | 5,935 | - | 1,503 | 90,808 | ||||||||||||||||||||||||
Steven Kenny | 33,555 | - | 6,589 | - | 22,589 | 62,733 | ||||||||||||||||||||||||
All Other Compensation -- Fiscal Year 2018 |
Name | Defined Contribution Plan Company Match & Contributions ($) | Defined Contribution Restoration Plan Contributions ($) | Dividends on Unvested Restricted Stock Units ($) | Perquisites (see table below) ($) | Total ($) | |||||||||
James J. Owens | 19,221 | 274,499 | 40,881 | 38,621 | 373,222 | |||||||||
John J. Corkrean | 19,221 | 84,771 | 9,526 | 44,860 | 158,378 | |||||||||
Traci L. Jensen | 19,221 | 63,708 | 6,434 | 11,446 | 100,809 | |||||||||
Heather A. Campe | 19,221 | 80,314 | 6,167 | 6,651 | 112,353 | |||||||||
Patrick M. Kivits | - | 67,427 | a |
| 5,584 | 72,453 | 145,464 | |||||||
(a) | The contribution for Mr. Kivits relates to a defined contribution to his pension plan in Europe. He does not participate in the U.S. based plan. See further discussion in the section titled "Other Executive Benefits and Perquisites" in the Compensation Discussion and Analysis section of this Proxy Statement on page 41. |
Perquisites - Fiscal Year 2018 |
Name | Auto Allowance ($)a | Insurance ($) b | Health Exam ($)c | Match on Key Employee Deferred Compensation Contributions ($)d | Tuition ($)e | Moving Expenses and Transfer Allowance ($) | Financial Counseling ($) | Charitable Matching Contributions and Donationsf | Total Perquisites ($) | ||||||||||||||||||
James J. Owens | - | 4,921 | 7,500 | - | - | - | 6,900 | 19,300 | 38,621 | ||||||||||||||||||
John J. Corkrean | - | 1,903 | - | 5,517 | - | - | 3,540 | 33,900 | 44,860 | ||||||||||||||||||
Traci L. Jensen | - | 4,325 | 2,343 | - | - | - | - | 4,778 | 11,446 | ||||||||||||||||||
Heather A. Campe | - | 1,751 | - | - | - | - | 4,650 | 250 | 6,651 | ||||||||||||||||||
Patrick M. Kivits | 20,336 | 12,014 | - | - | 15,363 | 24,740 | - | - | 72,453 | ||||||||||||||||||
(a) | U.S. based executives do not receive an auto allowance. Mr. Kivits, who does not work in the U.S., receives an auto allowance. |
(b) | Includes premiums paid on a tax-protected basis on personal excess liability insurance of $1,215 and a related tax gross-up of $1,018 for Mr. Owens, $536 for Mr. Corkrean, $503 for Ms. Jensen and $536 for Ms. Campe. The amount for Mr. Kivits does not include a related tax gross-up. Also includes reimbursement for long-term disability insurance premiums in the following amounts: for Mr. Owens, $2,688, for Mr. Corkrean, $152, and for Ms. Jensen, $2,607. For Mr. Kivits, amount includes amounts reimbursed for additional health insurance and life insurance in the amount of $10,799. |
(c) | Amounts for health exam include related expenses, if any. |
(d) | Amount for Mr. Corkrean represents a 10% match by the Company on contributions to the Key Employee Deferred Compensation Plan. |
(e) | Amount includes tuition for Mr. Kivits' child in the amount of $7,972 and a related tax gross-up in the amount of $7,391. |
(f) | Amounts in this column represent matching contributions by the Company under a |
Perquisites - Fiscal Year 2015 | ||||||||||||||||||||||||||||||
Name | Auto Allowance ($)a | Personal Excess Liability Insurance ($)b | Health Exam ($) | Spousal Airfare ($)c | Financial Counseling ($) | Total Perquisites ($) | ||||||||||||||||||||||||
James J. Owens | - | 1,811 | 3,192 | 6,314 | 11,317 | |||||||||||||||||||||||||
James R. Giertz | - | 1,811 | 10,293 | 3,400 | 15,504 | |||||||||||||||||||||||||
Traci L. Jensen | - | 1,413 | 2,913 | 1,244 | 1,000 | 6,570 | ||||||||||||||||||||||||
Patrick J. Trippel | - | 1,503 | - | - | 1,503 | |||||||||||||||||||||||||
Steven Kenny | 16,238 | 938 | - | 5,413 | 22,589 | |||||||||||||||||||||||||
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Grants of Plan-Based Awards During Fiscal 20152018
The following table summarizes the grants of plan-based awards in fiscal year 20152018 for each of the named executive officers in the Summary Compensation Table.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards1 | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of | All Other Option Awards: Number of Securities Underlying | Exercise or Base Price of Option | Grant Date Fair Value of Stock and Options | Estimated Future Payouts Under Non-Equity Incentive Plan Awards1 | Estimated Future Payouts Under Equity Incentive Plan Awards2 | All Other Stock Awards: Number of Shares of | Option Awards: Number of Securities Underlying | Exercise or Base Price of Option | Grant Date Fair Value of Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name and Award Type | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Stock or Units (#)2 | Options (#)3 | Awards ($/Sh) | Awards ($)4 | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Stock or Units (#) 3 | Options (#)4 | Awards ($/Sh) | and Options Awards ($)5 | |||||||||||||||||||||||||||||||||||||||||||||||||||
James J. Owens | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-Term Incentive | Short-Term Incentive | 492,873 | 985,747 | 1,971,493 | �� | 556,083 | 1,112,167 | 2,224,334 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/22/2015 | 28,792 | 5 | 1,180,472 | 1/25/2018 | 15,521 | 6 | 831,460 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/22/2015 | 112,727 | 41.00 | 1,187,917 | 1/25/2018 | 7,760 | 15,521 | 31,042 | 831,460 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/25/2018 | 146,887 | 53.57 | 1,675,099 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James R. Giertz | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
John J. Corkrean | John J. Corkrean | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-Term Incentive | Short-Term Incentive | 205,296 | 410,592 | 821,184 | 171,182 | 342,364 | 684,728 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/25/2018 | 2,307 | 123,586 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/22/2015 | 7,275 | 298,275 | 1/25/2018 | 1,153 | 2,307 | 4,614 | 123,586 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/22/2015 | 28,486 | 41.00 | 300,185 | 1/25/2018 | 21,834 | 53.57 | 248,995 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Traci L. Jensen | Traci L. Jensen | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-Term Incentive | Short-Term Incentive | 147,696 | 295,393 | 590,785 | 152,502 | 305,004 | 610,009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/22/2015 | 5,820 | 238,620 | 1/25/2018 | 2,307 | 123,586 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/22/2015 | 22,789 | 41.00 | 240,150 | 1/25/2018 | 1,153 | 2,307 | 4,614 | 123,586 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/25/2018 | 21,834 | 53.57 | 248,995 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patrick J. Trippel | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Heather A. Campe | Heather A. Campe | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-Term Incentive | Short-Term Incentive | 151,328 | 302,656 | 605,313 | 139,418 | 278,837 | 557,674 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/22/2015 | 5,820 | 238,620 | 1/25/2018 | 2,307 | 123,586 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/22/2015 | 22,789 | 41.00 | 240,150 | 1/25/2018 | 1,153 | 2,307 | 4,614 | 123,586 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/25/2018 | 21,834 | 53.57 | 248,995 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Steven Kenny | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patrick M. Kivits | Patrick M. Kivits | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-Term Incentive | Short-Term Incentive | 136,318 | 272,636 | 545,271 | 130,330 | 260,660 | 521,320 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/22/2015 | 5,820 | 238,620 | 1/25/2018 | 1,730 | 92,676 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/22/2015 | 22,789 | 41.00 | 240,150 | 1/25/2018 | 865 | 1,730 | 3,460 | 92,676 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/25/2018 | 16,375 | 53.57 | 186,741 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) | The amounts shown in these columns represent the |
(2) | The performance-based stock unit awards were granted under the 2016 Incentive Plan. The performance-based stock unit grants vest in three annual installments beginning on the first anniversary date of the grant upon the achievement of certain return on invested capital ("ROIC") targets being met. The number of units may increase to as much as 200% or decrease to as low as 0% of the target number of units depending on the level of performance. Under the 2016 Incentive Plan, dividends on performance stock units are accrued by H.B. Fuller at the same rate as payable to all H.B. Fuller shareholders and are paid if and when the performance stock units vest. The fair value of the performance-based restricted stock unit awards is calculated by multiplying the target number of units of performance-based restricted stock by the closing price of the Common Stock on the date of grant. The performance stock units become immediately vested in the event of death, disability and change-in-control. The value of accrued dividends is included in the Summary Compensation Table in the "All Other Compensation" column. |
(3) | The time-based restricted stock unit awards were granted under the |
(4) | These options are granted under 2016 Incentive Plan and become exercisable at the rate of one-third each year beginning on the first anniversary of the grant date, and expire 10 years from the grant date. These options become immediately exercisable upon retirement (age 55 and 10 years of service), death, disability or change-in-control. |
(5) | The grant date fair value of time-based and performance-based restricted stock unit awards is calculated by multiplying the number of units of restricted stock by the closing price of our Common Stock on the date of grant. The Black-Scholes option pricing method was used to estimate the grant date fair value of the options in this column. The assumptions used to develop the grant date valuations for the options are as follows: for options granted on January 25, 2018, risk-free rate of return of 2.3838%, dividend rate of 1.12%, volatility rate of 23.263%, quarterly reinvestment of dividends and an average term of 4.75 years. No adjustments have been made for non-transferability or risk of forfeiture. The real value of the stock options in this table will depend on the actual performance of our Common Stock during the applicable period and the fair market value of our Common Stock on the date the options are exercised. |
(6) | This performance stock unit award for Mr. Owens was granted under the 2016 Incentive Plan. The terms of the award provide for vesting of the restricted stock unit grant in three annual installments on January 25, 2019, January 25, 2020 and January 25, 2021 only if (a) one or more of the performance measures in the CEO's short-term incentive program measures are met at the threshold level for fiscal 2018 as determined by the Compensation Committee and (b) Mr. Owens continues to be employed by the Company |
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Outstanding Equity Awards at Fiscal 20152018 Year-End
The following table summarizes the outstanding equity awards as of November 28, 2015December 1, 2018 for each of the named executive officers in the Summary Compensation Table.
Option Awards | Stock Awards | Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable1 | Number of Securities Underlying Unexercised Options (#) Unexercisable1 | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)2 | Market Value of Shares or Units of Stock That Have Not Vested ($)3 | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable1 | Number of Securities Underlying Unexercised Options (#) Unexercisable1 | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)2 | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)3 |
| Market Value of Shares or Units of Stock That Have Not Vested ($)4 |
| Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#)5 |
| Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($)4, 6 | |||||||||||||||||||||||||||||||||||||
James J. Owens | 12/3/2009 | 33,275 | - | 20.57 | 12/3/2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
10/2/2008 | 7,385 | - | 19.03 | 10/02/2018 | 1/20/2011 | 48,331 | - | 22.27 | 1/20/2021 | ||||||||||||||||||||||||||||||||||||||||||||||||
12/4/2008 | 47,663 | - | 14.15 | 12/04/2018 | 7/7/2011 | 15,748 | - | 25.19 | 7/7/2021 | ||||||||||||||||||||||||||||||||||||||||||||||||
12/3/2009 | 33,275 | - | 20.57 | 12/03/2019 | 1/26/2012 | 77,881 | - | 28.40 | 1/26/2022 | ||||||||||||||||||||||||||||||||||||||||||||||||
1/20/2011 | 48,331 | - | 22.27 | 1/20/2021 | 1/24/2013 | 80,697 | - | 39.64 | 1/24/2023 | ||||||||||||||||||||||||||||||||||||||||||||||||
7/7/2011 | 15,748 | - | 25.19 | 7/07/2021 | 1/23/2014 | 79,061 | - | 48.92 | 1/23/2024 | ||||||||||||||||||||||||||||||||||||||||||||||||
1/26/2012 | 77,881 | - | 28.40 | 1/26/2022 | 1/22/2015 | 112,727 | - | 41.00 | 1/22/2025 | ||||||||||||||||||||||||||||||||||||||||||||||||
1/24/2013 | 53,260 | 27,437 | 39.64 | 1/24/2023 | 1/19/2016 | 120,145 | 61,894 | 33.38 | 1/19/2026 | ||||||||||||||||||||||||||||||||||||||||||||||||
1/23/2014 | 26,090 | 52,971 | 48.92 | 1/23/2024 | 1/26/2017 | 50,102 | 101,724 | 50.10 | 1/26/2027 | ||||||||||||||||||||||||||||||||||||||||||||||||
1/22/2015 | - | 112,727 | 41.00 | 1/22/2025 | 10/20/2017 | - | - | 133,592 | 57.70 | 10/20/2027 | |||||||||||||||||||||||||||||||||||||||||||||||
1/24/2013 | 76,304 | 3,034,610 | 1/25/2018 | - | 146,887 | 53.57 | 1/25/2028 | ||||||||||||||||||||||||||||||||||||||||||||||||||
1/24/2013 | 10,841 | 431,147 | 1/19/2016 | 7,339 | 354,033 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
1/23/2014 | 15,949 | 634,292 | 1/19/2016 | 8,165 | 393,880 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
1/22/2015 | 29,152 | 1,159,375 | 1/26/2017 | 12,422 | 599,237 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
1/26/2017 | 17,781 | 857,755 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
James R. Giertz | 12/4/2008 | 47,663 | - | 14.15 | 12/04/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
1/25/2018 | 15,662 | 755,535 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/25/2018 | 17,424 | 840,534 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
John J. Corkrean | 5/17/2016 | 11,003 | 5,669 | 43.48 | 5/17/2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
1/26/2017 | 7,819 | 15,877 | 50.10 | 1/26/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
10/20/2017 | - | - | 25,020 | 57.70 | 10/20/2027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
1/20/2011 | 28,768 | - | 22.27 | 1/20/2021 | 1/25/2018 | - | 21,834 | 53.57 | 1/25/2028 | ||||||||||||||||||||||||||||||||||||||||||||||||
1/26/2012 | 28,556 | - | 28.40 | 1/26/2022 | 5/17/2016 | 676 | 32,610 | ||||||||||||||||||||||||||||||||||||||||||||||||||
1/24/2013 | 14,820 | 7,635 | 39.64 | 1/24/2023 | 5/17/2016 | 3,950 | 190,548 | ||||||||||||||||||||||||||||||||||||||||||||||||||
1/23/2014 | 7,552 | 15,334 | 48.92 | 1/23/2024 | 5/17/2016 | 743 | 35,842 | ||||||||||||||||||||||||||||||||||||||||||||||||||
1/22/2015 | - | 28,486 | 41.00 | 1/22/2025 | 1/26/2017 | 2,821 | 136,085 | ||||||||||||||||||||||||||||||||||||||||||||||||||
1/24/2013 | 3,021 | 120,145 | 1/26/2017 | 1,939 | 93,537 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
1/23/2014 | 4,618 | 183,658 | 1/25/2018 | 2,327 | 112,254 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
1/22/2015 | 7,366 | 292,946 | 1/25/2018 | 2,590 | 124,942 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Traci L. Jensen | 4/14/2010 | 6,223 | - | 23.68 | 4/14/2020 | 1/20/2011 | 12,658 | - | 22.27 | 1/20/2021 | |||||||||||||||||||||||||||||||||||||||||||||||
1/20/2011 | 12,658 | - | 22.27 | 1/20/2021 | 1/23/2014 | 16,644 | - | 48.92 | 1/23/2024 | ||||||||||||||||||||||||||||||||||||||||||||||||
1/24/2013 | 12,349 | 6,363 | 39.64 | 1/24/2023 | 1/22/2015 | 22,789 | - | 41.00 | 1/22/2025 | ||||||||||||||||||||||||||||||||||||||||||||||||
1/23/2014 | 5,492 | 11,152 | 48.92 | 1/23/2024 | 1/19/2016 | 19,689 | 10,143 | 33.38 | 1/19/2026 | ||||||||||||||||||||||||||||||||||||||||||||||||
1/22/2015 | - | 22,789 | 41.00 | 1/22/2025 | 1/26/2017 | 7,819 | 15,877 | 50.10 | 1/26/2027 | ||||||||||||||||||||||||||||||||||||||||||||||||
1/24/2013 | 2,513 | 99,942 | 10/20/2017 | - | - | 20,850 | 57.70 | 10/20/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||
1/23/2014 | 3,359 | 133,587 | 1/25/2018 | 21,834 | 53.57 | 1/25/2028 | |||||||||||||||||||||||||||||||||||||||||||||||||||
1/22/2015 | 5,893 | 234,365 | 1/19/2016 | 1,203 | 58,033 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
1/19/2016 | 1,339 | 64,593 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patrick J. Trippel | 4/26/2011 | 35,549 | - | 21.37 | 4/26/2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
1/26/2012 | 25,960 | - | 28.40 | 1/26/2022 | 1/26/2017 | 2,924 | 141,054 | ||||||||||||||||||||||||||||||||||||||||||||||||||
1/24/2013 | 12,349 | 6,363 | 39.64 | 1/24/2023 | 1/26/2017 | 1,939 | 93,537 | ||||||||||||||||||||||||||||||||||||||||||||||||||
1/23/2014 | 5,492 | 11,152 | 48.92 | 1/23/2024 | 1/25/2018 | 2,328 | 112,303 | ||||||||||||||||||||||||||||||||||||||||||||||||||
1/22/2015 | 22,789 | 41.00 | 1/22/2025 | 1/25/2018 | 2,590 | 124,942 | |||||||||||||||||||||||||||||||||||||||||||||||||||
1/24/2013 | 2,551 | 101,453 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/23/2014 | 3,359 | 133,587 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/22/2015 | 5,893 | 234,365 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Steven Kenny | 10/1/2009 | 41,708 | - | 19.85 | 10/01/2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
12/3/2009 | 28,935 | - | 20.57 | 12/03/2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
10/1/2010 | 30,557 | - | 20.20 | 10/01/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
1/20/2011 | 28,768 | - | 22.27 | 1/20/2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
1/26/2012 | 25,960 | - | 28.40 | 1/26/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
1/24/2013 | 12,349 | 6,363 | 39.64 | 1/24/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
1/23/2014 | 5,492 | 11,152 | 48.92 | 1/23/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
1/22/2015 | - | 22,789 | 41.00 | 1/22/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
1/24/2013 | 2,522 | 100,300 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/23/2014 | 3,359 | 133,587 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/22/2015 | 5893 | 234,365 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Heather A. Campe | 12/3/2009 | 1,446 | - | 20.57 | 12/3/2019 | ||||||||||||||||||||||||
1/20/2011 | 2,013 | - | 22.27 | 1/20/2021 | |||||||||||||||||||||||||
1/26/2012 | 1,998 | - | 28.40 | 1/26/2022 | |||||||||||||||||||||||||
1/24/2013 | 5,988 | - | 39.64 | 1/24/2023 | |||||||||||||||||||||||||
1/23/2014 | 7,323 | - | 48.92 | 1/23/2024 | |||||||||||||||||||||||||
1/22/2015 | 12,534 | - | 41.00 | 1/22/2025 | |||||||||||||||||||||||||
1/19/2016 | 12,994 | 6,695 | 33.38 | 1/19/2026 | |||||||||||||||||||||||||
1/26/2017 | 7,819 | 15,877 | 50.10 | 1/26/2027 | |||||||||||||||||||||||||
10/20/2017 | - | - | 20,850 | 57.70 | 10/20/2027 | ||||||||||||||||||||||||
1/25/2018 | 21,834 | 53.57 | 1/25/2028 | ||||||||||||||||||||||||||
1/19/2016 | 794 | 38,303 | |||||||||||||||||||||||||||
1/19/2016 | 883 | 42,596 | |||||||||||||||||||||||||||
1/26/2017 | 3,301 | 159,240 | |||||||||||||||||||||||||||
1/26/2017 | 1,939 | 93,537 | |||||||||||||||||||||||||||
1/25/2018 | 2,328 | 112,303 | |||||||||||||||||||||||||||
1/25/2018 | 2,590 | 124,942 | |||||||||||||||||||||||||||
Patrick M. Kivits | 10/1/2015 | 7,207 | 34.43 | 10/1/2025 | |||||||||||||||||||||||||
1/19/2016 | 14,766 | 7,608 | 33.38 | 1/19/2026 | |||||||||||||||||||||||||
1/26/2017 | 5,864 | 11,908 | 50.10 | 1/26/2027 | |||||||||||||||||||||||||
10/20/2017 | - | - | 20,850 | 57.70 | 10/20/2027 | ||||||||||||||||||||||||
1/25/2018 | - | 16,375 | 53.57 | 1/25/2028 | |||||||||||||||||||||||||
1/19/2016 | 903 | 43,561 | |||||||||||||||||||||||||||
1/19/2016 | 1,004 | 48,433 | |||||||||||||||||||||||||||
1/26/2017 | 2,951 | 142,356 | |||||||||||||||||||||||||||
1/26/2017 | 1,454 | 70,141 | |||||||||||||||||||||||||||
1/25/2018 | 1,746 | 84,227 | |||||||||||||||||||||||||||
1/25/2018 | 1,942 | 93,682 |
(1) | Stock options |
(2) |
|
(3) | Time-based restricted stock units |
(4) | The market value is based on the closing price at November 30, 2018 (the last business day of |
(5) | Beginning January 19, 2016, awards of restricted stock units to named executive officers (other than the CEO) were 50% time-based restricted stock units and 50% performance-based restricted stock units. For the CEO, |
| For the January 2016 grant, the metric target was 9.5% ROIC. For the January 2017 grant, the metric target was 10.0% ROIC. For the January 2018 grant, the metric target was 8.0% ROIC. The |
Option Exercises and Stock Vested—Fiscal Year 20152018
The following table summarizes the number of options exercised and shares of restricted stock units vested during fiscal year 20152018 for each of the named executive officers in the Summary Compensation Table.
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||
Name | Number of Shares | Value Realized | Number of Shares | Value Realized | Number of Shares | Value Realized | Number of Shares | Value Realized | ||||||||||||||||||||||||||||||||
James J. Owens | -0- | -0- | 29,174 | 1,191,742 | -0- | -0- | 39,817 | 2,179,468 | ||||||||||||||||||||||||||||||||
James R. Giertz | 55,799 | 1,084,473 | 9,179 | 375,245 | ||||||||||||||||||||||||||||||||||||
John J. Corkrean | -0- | -0- | 7,478 | 395,304 | ||||||||||||||||||||||||||||||||||||
Traci L. Jensen | 14,278 | 166,447 | 6,062 | 247,495 | 6,223 | 138,983 | 6,868 | 376,003 | ||||||||||||||||||||||||||||||||
Patrick J. Trippel | -0- | -0- | 7,719 | 315,697 | ||||||||||||||||||||||||||||||||||||
Steven Kenny | -0- | -0- | 7,719 | 315,697 | ||||||||||||||||||||||||||||||||||||
Heather A. Campe | -0- | -0- | 5,277 | 288,658 | ||||||||||||||||||||||||||||||||||||
Patrick M. Kivits | -0- | -0- | 4,628 | 251,706 | ||||||||||||||||||||||||||||||||||||
(1) | The value realized on the exercise of options is the closing market price of a share of H.B. Fuller Common Stock on the date of exercise less the exercise price, multiplied by the number of shares exercised. |
(2) | The value realized on the vesting of stock awards is the closing market price of a share of H.B. Fuller Common Stock on the date of |
Nonqualified Deferred Compensation—Fiscal Year 20152018
The following table summarizes information with respect to the participation of the named executive officers in our nonqualified deferred compensation plans. Mr. KennyKivits is not eligible to participate in our nonqualified deferred compensation plans.
Name | Plan Name | Executive | Registrant | Aggregate | Aggregate | Aggregate | Plan Name | Executive Contributions in Last FY ($)1 | Registrant Contributions in Last FY ($)2 | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)3 | |||||||||||||||||||||||||||||||||||||||||
James J. Owens | Key Employee Deferred | -0- | -0- | -0- | -0- | -0- | Key Employee Deferred Compensation Plan | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||||||||||||||||||||||
Defined Contribution Restoration Plan | -0- | 274,499 | 76,212 | -0- | 1,940,141 | ||||||||||||||||||||||||||||||||||||||||||||||||
Defined Contribution | -0- | 150,461 | 29,849 | -0- | 1,114, 220 | ||||||||||||||||||||||||||||||||||||||||||||||||
James R. Giertz | Key Employee Deferred | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||||||||||||||||||||||||||||
Defined Contribution | -0- | 76,571 | 19,046 | -0- | 689,091 | ||||||||||||||||||||||||||||||||||||||||||||||||
John J. Corkrean | Key Employee Deferred Compensation Plan | 58,858 | 5,517 | (1,684 | ) | -0- | 107,630 | ||||||||||||||||||||||||||||||||||||||||||||||
Defined Contribution Restoration Plan | -0- | 84,771 | 5,782 | -0- | 142,410 | ||||||||||||||||||||||||||||||||||||||||||||||||
Traci L. Jensen | Key Employee Deferred | -0- | -0- | -0- | -0- | -0- | Key Employee Deferred Compensation Plan | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||||||||||||||||||||||
Defined Contribution Restoration Plan | -0- | 63,708 | 24,470 | -0- | 600,704 | ||||||||||||||||||||||||||||||||||||||||||||||||
Heather A. Campe | Key Employee Deferred Compensation Plan | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||||||||||||||||||||||||||||
Defined Contribution | -0- | 58,655 | 9,039 | -0- | 354,196 | Defined Contribution Restoration Plan | -0- | 80,314 | 8,976 | -0- | 280,936 | ||||||||||||||||||||||||||||||||||||||||||
Patrick J. Trippel | Key Employee Deferred | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||||||||||||||||||||||||||||
Defined Contribution | -0- | 64,849 | 6,505 | -0- | 280,033 | ||||||||||||||||||||||||||||||||||||||||||||||||
(1) |
|
(2) | The |
(3) | Of the totals in this column, the table below sets forth amounts that were previously reported as compensation to the relevant |
Name | Plan Name | Amount previously reported as named our Summary Table for previous | |||||
James J. Owens | Key Employee Deferred | ||||||
|
| -0- | |||||
Defined Contribution Restoration Plan | 1,544,476 | ||||||
John J. Corkrean | Key Employee Deferred Compensation Plan | 44,939 | |||||
Defined Contribution | |||||||
| 51,857 | |||||||
Traci L. Jensen | Key Employee Deferred | -0- | |||||
Defined Contribution Restoration Plan | |||||||
| 383,124 | |||||||
| Key Employee Deferred | -0- | |||||
Defined Contribution Restoration Plan | |||||||
(a) | Amounts also include earnings from previous fiscal years, which are not reported in the Summary Compensation Table in previous years. |
Key Employee Deferred Compensation Plan. The Key Employee Deferred Compensation Plan is a nonqualified deferred compensation plan that allows deferral of salary or short-term incentive awards on a pre-tax basis. Executive officers may defer up to 80% of their base salary or up to 100% of their short-term incentive award. The plan is unfunded and does not protect the executive from insolvency of the Company.
Amounts deferred under the Key Employee Deferred Compensation Plan are credited with earnings and investment gains and losses by assuming that deferred amounts were invested in one or more hypothetical investment options selected by the executive. Executive officers are allowed to change their investment elections at any time. The one year rates of return for such investments for fiscal 20152018 are as follows: PIMCO VIT Total Return AC, -.09%-1.61%; PIMCO VIT Real Return AC, -4.00%-1.96%; Fidelity VIP Equity-Income SC, -3.69%1.65%; T. Rowe Price Equity Income II, -4.73%0.24%;Dreyfus Stock Index IS, 2.06%5.60%; Fidelity VIP Contrafund SC, 1.75%2.54%; Oppenheimer Capital Appreciation VA Non-SS, 4.47%4.26%; Janus ASHenderson Forty SS, 12.98%Fund, 8.89%; Goldman VIT MidCap Value, -5.29%-0.08%; Fidelity VIP MidCap SC, 2.45%-2.72%; T. Rowe Price MidCap Growth II, 8.67%6.25%; Royce Micro-Cap IC, -7.39%0.05%; Lincoln VIPT Baron Growth Opportunities SC, -1.79%8.06%; Morgan Stanley UIF US Real Estate Class I, 2.14%2.99%; Oppenheimer Global Securities VA Non-SS, 2.29%-5.23%; Dreyfus VIF International Value PortfolioIS, -5.10%PortfolioIS, -10.55%; Janus ASHenderson Overseas PortfolioSS, -12.62%PortfolioSS, -9.59%; Dreyfus VIF Appreciations, -1.94%3.46%; Fidelity VIP Growth, 5.48%;8.10% and H.B. Fuller Company stock, -7.92%-13.32%. Participants who invest in the Company stock fund are eligible to receive a 10% match in Company stock. The value of the matching contributions received, if any, is disclosed in the Summary Compensation Table in this Proxy Statement. During fiscal year 2015, no named executive officers2018, only Mr. Corkrean made contributions to this plan. In addition, the Compensation Committee may make discretionary contributions to a participant’sparticipant's Company stock account under this plan. For fiscal year 2015,2018, no discretionary contributions were made to any of the named executive officers listed in the Summary Compensation Table. Balances in the plan reflect amounts that have accumulated over time.
Executive officers are always 100% vested in their Key Employee Deferred Compensation Plan account and are entitled to receive a distribution from their account under the following circumstances: separation from service, death, disability, age 65, date elected or unforeseeable emergency that results in severe financial hardship that is consistent with the meaning of that term under section 409A of the Internal Revenue Code. Distributions are made in either a lump sum or, if previously elected by the executive officer, up to 11 annual installments. Distributions from the Company stock account will be in the form of stock and all other amounts will be distributed in cash.
Defined Contribution Restoration Plan (“("DC Restoration Plan”Plan"). The DC Restoration Plan is a non-qualified unfunded retirement plan that is intended to provide for retirement benefits above amounts available under H.B. Fuller’sFuller's tax-qualified retirement plans. Participants in this plan receive annual credits in a bookkeeping account that is hypothetical in nature. Following are the three component accounts in the plan:
4% restoration plan match credit provides a contribution of 4% of eligible pay in excess of the IRS annual compensation limit as long as the participant defers the maximum allowed contribution under the H.B. Fuller Company 401(k) & Retirement Plan. Participants are immediately 100% vested in the value of the match restoration contribution.
3% “restoration non-elective”"restoration non-elective" credit provides a contribution of 3% of eligible pay in excess of the IRS annual compensation limit. Participants become vested after 3 years of service with the company.
7% credit on all eligible earnings. Participants become vested after 3 years of participation in the DC Restoration Plan.
Interest on contributions is based on the daily Wall Street Journal prime rate when credited. Upon termination, the vested balance is paid in a lump sum approximately 90 days after the end of the sixth month after termination. Upon death or disability, the vested balance is paid in a lump sum approximately 90 days after date of death or after becoming totally disabled as defined by the plan.
Mr. KennyKivits does not participate in this plan. This plan applies only to U.S. named executive officers (including expatriates).
Contributions made on behalf of named executive officers under the DC Restoration Plan are disclosed in the “"Summary Compensation Table”Table" in this Proxy Statement.
Potential Payments Upon Termination or Change-in-Control
In General.
The Company has certain arrangements, policies and practices covering the named executive officers in this Proxy Statement that require it to provide compensation in the event of certain types of terminations, including certain terminations due to a change-in-control of the Company.
The information set forth below describes amounts that the Company would pay or provide to a named executive officer or his or her beneficiaries in each of the following situations: voluntary termination, involuntary for cause termination, involuntary not for cause termination or good reason termination, involuntary (not for cause) or good reason termination after a change-in control,change-in-control, death, disability, early retirement and retirement. The estimated amounts payable are calculated as if the termination occurred on the last business day of the fiscal year, November 28, 2015,December 1, 2018, using the closing stockshare price from the last business day of the fiscal year.
We have not included payments or benefits that are fully disclosed in the Nonqualified Deferred Compensation Table of this Proxy Statement, unless such payment is enhanced or its vesting or other provisions are accelerated. We have also not included information or payments related to contracts, agreements, plans or arrangements to the extent that they do not discriminate in scope, term or operation in favor of the named executive officers and that are available generally to all salaried employees. We call these benefits “general benefits”"general benefits" and they include:
Accrued Vacation Pay
H.B. Fuller Company 401(k) & Retirement Plan (or similar applicable plan)
Health and Welfare Benefits
Life Insurance Proceeds
Voluntary Termination and Involuntary For Cause Termination
In the event of a voluntary termination or an involuntary for cause termination as of the last business day of the fiscal year, the Company is not obligated to provide any enhanced benefits or accelerate vesting of any existing benefits of a named executive officer. Should Mr. KennyKivits terminate his employment with the Company, he is required to give six months’a notice of such termination.period applies.
Involuntary Not For Cause Termination or Good Reason Termination
In the event of an involuntary not for cause termination or a good reason termination as of the last business day of the fiscal year, a named executive officer’sofficer's compensation would be affected as follows:
We have a severance arrangement with each of the named executive officers. If the named executive officer’sofficer's employment with the Company is involuntarily terminated at the initiative of the Company for any reason other than cause or disability or at the initiative of the executive for good reason and such termination does not occur during the protected period of a change-in-control, then the executive officer is entitled to receive certain severance benefits. Good reason means a material reduction of the executive officer’sofficer's base salary, material diminution in the executive officer’sofficer's authority and duties, or a required change of the executive officer’sofficer's principal work location of 50 miles or more. Protected period means the 24-month period immediately following each and every change-in-control. In order to receive severance, the executive officer must sign a release of claims in favor of the Company and be in compliance with the terms of the executive severance agreement, including that the executive officer must agree not to compete with the Company or solicit customers or employees of the Company for two years after termination of employment. The severance benefit consists of the following:
A severance payment equal to one times (two times for the CEO) base salary plus target bonus, payable over the 12 months (24 months for the CEO) following termination. Any amount over the lesser of (a) $460,000 or $490,000 (whichever is applicable per the individual’sindividual's agreement) or (b) two times the executive’sexecutive's annualized compensation based upon the annual rate of pay for services to the Company for the calendar year prior to the calendar year in which the date of termination occurs, shall be paid out in a lump sum at the earliest of the executive’sexecutive's death or six months after the date of termination.
The executive is entitled to medical and dental insurance over 12 months (18 months for the CEO).
Outplacement services with a value up to $20,000.
Benefits under the Defined ContributionDC Restoration Plan are not accelerated or automatically vested upon involuntary not for cause termination or good reason termination.
For Mr. Kenny,Kivits, any benefits he receives pursuant to local law are offset against the severance benefits set forth above.
Involuntary (Not for Cause) Termination or Good Reason Termination after a Change-in-Control
We have entered into a change-in-control agreement with each of the named executive officers. The initial three-year term of these agreements automatically extends for an additional year on each subsequent anniversary of the agreement, unless our Board of Directors gives notice of non-renewal prior to an anniversary date. A protected period of 24 months follows each and every change-in-control of H.B. Fuller under the terms of these agreements. If during this protected period, the executive officer separates from service for any reason other than cause or disability, or the executive officer terminates his or her employment for good reason (including demotion, pay cut or certain relocations), the executive officer is entitled to receive a lump sum payment from us. The payment consists of the following:
The executive will receive a target short-term incentive plan payment prorated to the date of the termination without application of any denial provisions based on unsatisfactory personal performance or any other reason.
A severance payment equal to three times the sum of: (a) the executive’sexecutive's highest base salary, on an annualized basis, established by us during the period commencing three months prior to the occurrence of the change-in-control and ending on the date of the executive’sexecutive's termination of employment; plus (b) the executive’sexecutive's target annual incentive in effect immediately prior to the change-in-control.
A payment for outplacement services of up to $25,000.
In addition, the executive is entitled to medical and dental benefits for a three-year period following the termination of employment.
In the event severance payments are made to the named executive officers due to a change-in-control and in the event that they are subject to an excise tax imposed by Section 280G of the Internal Revenue Code, and dowhere the 280G parachute value does not exceed 330% of the executive’sexecutive's base amount, we will adjustreduce the payments and benefits. Under these circumstances, the payments and benefits will be adjustedreduced so that the amount of the payments equals 299% of the base amount, which is the maximum amount that can be paid without imposition of an excise tax. In the event that the payments and benefits are subject to an excise tax, and exceedwhere the 280G parachute value exceeds 330% of the executive’sexecutive's base amount, we have agreed to reimburse the executive for the amount of the excise tax and for any taxes imposed upon the reimbursement. This is typically called a “gross-up”"gross-up". The effects of the Internal Revenue Code are unpredictable and executive officers may have very different and unexpected effects based on their own particular compensation history. Therefore, these payments are intended to place an executive officer in the same position that they would have been in had they received the payments for reasons other than a change-in-control. The payments are not meant to pay regular income tax payments for an executive officer. For all future executive change-in-control agreements, this tax gross-up provision will be eliminated.
We have other compensatory arrangements with our named executive officers that will be affected by a change-in-control. The DC Restoration Plan provides that if within two years after a change-in-control, we terminate a participant’sparticipant's employment without cause or the participant terminates his or her employment for good reason (as defined in this plan), then zero to three years (depending on the participant’s position and pay grade) shall be added to the participant’sparticipant's years of credited service for purposes of determining benefits under the plan.
In addition, in the event of a change-in-control, all shares of restricted stock, all restricted stock units and any unvested stock options outstanding under our stock incentive plans immediately vest in full. For performance-based RSU grants, if termination under a change-in-control occurs during the performance period, the participant is entitled to receive a payment based on, and assuming that, performance would have been achieved at the target level. During fiscal year 2018, the Compensation Committee determined that for any executive equity grant agreements beginning in 2019, a double-trigger will be required prior to accelerated equity vesting. This means that there must be a change-in-control of the Company and a termination of employment (or a material change to the NEO's terms of employment (such as demotion, reduction in compensation or required relocation)) in order for vesting to accelerate.
Payments upon Death or Disability
In the event of a death or disability as of the last business day of the fiscal year, a named executive officer’sofficer's compensation would be affected as follows:
Stock options restricted stock and restricted stock units would vest at death and at disability. For performance-based RSU grants, if death or disability occurs during the performance period, the participant is entitled to receive a payment based on, and assuming that, performance would have been achieved at the target level.
Benefits under the Defined Contribution Restoration Plan would vest at death or disability.
In the event of Mr. Kenny’sKivits' death as of the last business day of the fiscal year, his beneficiariesbeneficiary would be eligible to receive four times his annual base salary. In the event of a disability during which Mr. Kenny would not be able to work at all, as of the last business day of the fiscal year, Mr. Kenny would be eligible to receive 80% of his net pay, less car allowance, less National Insurance Contribution (NIC) following 28 consecutive weeks of absence. This would amount to an annual net amount of £120,000€1,000,000 ($180,424) on November 28, 2015. During the 28 week waiting period, the Company would pay his normal base salary, allowances and fringe benefits.1,131,734).
Early and Normal Retirement
As of the last business day of the fiscal year, no named executive officer was eligible for early or normal retirement.
Executive Benefit and Payments Upon Termination—Fiscal Year 20152018
The following table shows potential estimated payments to the named executive officers in this Proxy Statement upon (1) involuntary (not for cause) or good reason termination, (2) involuntary (not for cause) or good reason termination after a change-in-control, and (3) death or disability. The table assumes that the termination was effective on the last business day of the fiscal year and contains estimates of amounts that would be paid to the named executive officers upon termination in addition to the base salary and short-term incentive earned by the executives during the fiscal year. Actual amounts payable to any named executive officer would only be determined after an actual event of termination.
Name | Type of Payment | Involuntary Not For Cause or Good Reason ($) | Payments upon Involuntary (not for cause) or Good Reason Termination after a Change-in- Control ($) | Death or Disability ($) | ||||||||||
James J. Owens | ||||||||||||||
Short-Term Incentive Plan | - | 989,296 | - | |||||||||||
Stock Options | - | 3,567 | 3,567 | |||||||||||
Restricted Stock | - | 5,259,423 | 5,259,423 | |||||||||||
Health and Welfare Benefits | 18,361 | 36,722 | - | |||||||||||
Cash Severance | 1,978,592 | 5,567,500 | - | |||||||||||
Outplacement Services | 20,000 | - | - | |||||||||||
Excise Tax Gross-Up | - | - | ||||||||||||
Total | 2,016,953 | 11,856,508 | 5,262,990 | |||||||||||
James R. Giertz | ||||||||||||||
Short-Term Incentive Plan | - | 412,070 | - | |||||||||||
Stock Options | - | 993 | 993 | |||||||||||
Restricted Stock | - | 596,749 | 596,749 | |||||||||||
Health and Welfare Benefits | 12,241 | 36,722 | - | |||||||||||
Cash Severance | 1,000,742 | 3,002,227 | - | |||||||||||
Outplacement Services | 20,000 | 25,000 | - | |||||||||||
Excise Tax Gross-Up | - | - | - | |||||||||||
Total | 1,032,983 | 4,073,761 | 597,742 | |||||||||||
Traci L. Jensen | ||||||||||||||
Short-Term Incentive Plan | - | 296,361 | - | |||||||||||
Stock Options | - | 827 | 827 | |||||||||||
Restricted Stock | - | 467,894 | 467,894 | |||||||||||
Health and Welfare Benefits | 7,879 | 23,636 | - | |||||||||||
Cash Severance | 752,301 | 2,256,903 | - | |||||||||||
Outplacement Services | 20,000 | 25,000 | - | |||||||||||
Excise Tax Gross-Up | - | 1,215,268 | - | |||||||||||
Total | 780,180 | 4,285,889 | 468,721 | |||||||||||
Patrick J. Trippel | ||||||||||||||
Short-Term Incentive Plan | - | 305,078 | - | |||||||||||
Stock Options | - | 827 | 827 | |||||||||||
Restricted Stock | - | 469,405 | 469,405 | |||||||||||
Health and Welfare Benefits | 14,820 | 44,459 | - | |||||||||||
Cash Severance | 774,428 | 2,323,283 | - | |||||||||||
Outplacement Services | 20,000 | 25,000 | - | |||||||||||
Excise Tax Gross-Up | - | - | - | |||||||||||
Total | 809,248 | 3,168,052 | 470,232 | |||||||||||
Steven Kenny | ||||||||||||||
Short-Term Incentive Plan | - | 273,309 | - | |||||||||||
Stock Options | - | 827 | 827 | |||||||||||
Restricted Stock | - | 468,252 | 468,252 | |||||||||||
Health and Welfare Benefits | 1,878 | 5,634 | - | |||||||||||
Cash Severance | 693,784 | 2,081,351 | - | |||||||||||
Outplacement Services | 20,000 | 25,000 | - | |||||||||||
Excise Tax Gross-UP | - | - | - | |||||||||||
Total | 715,662 | 2,854,373 | 469,079 | |||||||||||
Name | Involuntary Not For Cause or Good Reason ($) | Payments upon Involuntary (not for cause) or Good Reason Termination after a Change- in-Control ($) | Death or Disability ($) | ||||||||||||
James J. Owens | 4,528,487 | 11,334,803 | 4,535,302 | ||||||||||||
John J. Corkrean | 931,411 | 5,036,889 | 774,947 | ||||||||||||
Traci L. Jensen | 806,461 | 3,100,880 | 716,497 | ||||||||||||
Heather A. Campe | 740,461 | 2,675,115 | 644,024 | ||||||||||||
Patrick M. Kivits | 806,891 | 2,959,670 | 573,997 | ||||||||||||
As required by SEC rules and regulations, we are providing the following information regarding the ratio of the median annual total compensation of our employees and the annual total compensation of our CEO. For the fiscal year ended December 1, 2018:
• The median of the annual total compensation of all employees of our company was reasonably estimated to be $57,333;
• The annual total compensation of our CEO, Mr. Owens was $5,792,948;
• Based on this information, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all other employees is estimated to be 101 to 1.
To identify our median employee, we began by considering each individual employed by us globally on September 30, 2018, which included approximately 6,213 total employees. We then calculated total cash compensation for each employee including both current base salary and target cash incentive (or commission, if applicable), and we annualized this amount for employees who commenced employment during the 12-month period ending September 30, 2018. To calculate total cash compensation for any employee that we paid in currency other than U.S. Dollars, we converted to U.S. Dollars using the same exchange rate used for financial reporting purposes. We then analyzed the compensation amounts for all our employees to determine our median employee. As permitted by SEC rules and regulations, we excluded leased employees and independent contractors.
Once we identified our median employee, we added together all the elements of the median employee's compensation for 2018 in the same way that we calculate the annual total compensation of our NEOs (including the CEO) in the Summary Compensation Table. To calculate our ratio, we divided Mr. Owens' annual total compensation, as reported in the Summary Compensation Table above, by the median employee's annual total compensation.
PROPOSAL 2—NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION
Pursuant to Section 14A of the Exchange Act, the Company is providing shareholders with an advisory (non-binding) vote on the compensation of our named executive officers as disclosed in the “"Compensation Discussion and Analysis”", the tabular disclosure regarding such compensation and the accompanying narrative disclosure contained in this Proxy Statement.
The Company is asking shareholders to indicate their support for the compensation of our named executive officersNEOs described in this Proxy Statement. The Company has designed its executive compensation program to attract, motivate, reward and retain the executive talent required to achieve our corporate growth objectives and increase shareholder value. We believe that our compensation policies and procedures are centered on a pay-for-performance philosophy and are strongly aligned with the long-term interests of our shareholders. See “"Executive Compensation–Compensation Discussion and Analysis".”
In deciding how to vote on this proposal, the Board urges you to consider the following factors, many of which are more fully discussed in the “"Executive Compensation—Compensation Discussion and Analysis”" section of this Proxy Statement:
The Compensation Committee has designed our executive compensation program to be competitive with the compensation offered by those peers with whom we compete for management talent.
The Compensation Committee believes the Company’sCompany's executive compensation programs have been effective at incenting the achievement ofproviding our executive officers with incentive to achieve short-term financial performance metricsgoals and to engage long-term decision making that is in the best interests of our shareholders.
Company best practices include:
a policy prohibiting hedging and pledging of, and certain other transactions in, the Company stockshares of Common Stock by executive officers (including our NEOs) and members of our board of directorsthe Board;
a policy regarding “clawbacks”"clawbacks" of executive and key manager incentive compensation;compensation in the event of financial statement restatement or a determination that the executive officer (including NEOs) engaged in intentional misconduct;
an emphasis on long-term equity awards to align the executives’executives' interests with long-term goals and shareholder interests, with the Chief Executive Officer’s long-term equity grant50% of RSUs granted to NEOs (other than the CEO) including a performance-based vesting restriction;restriction, and all of the CEO's long-term RSUs including performance-based vesting restrictions;
a prohibition on repricing of stock options; and
stock ownership goals for our directors and executive officers.
In response to the shareholder feedback and in response to market conditions, the Company adopted the following changes in fiscal year 2018:
for future executive change-in-control agreements, the Company will not include a tax-gross up provision; and
for executive equity grant agreements beginning in 2019, a double-trigger will be required prior to accelerated equity vesting. This means that there must be a change-in-control of the Company and a termination of employment (or a material change to the NEO's terms of employment (such as demotion, reduction in compensation or required relocation)) in order for vesting to accelerate.
Accordingly, the Company is asking shareholders to vote FOR the following resolution at the annual meeting:
“"RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the H.B. Fuller Company named executive officers, as disclosed in the Compensation Discussion and Analysis section, the tabular disclosure regarding such compensation, and the accompanying narrative disclosure, set forth in this Proxy Statement.”"
This advisory vote on executive compensation is not binding on the Company’s Board of Directors.Board. However, the Board of Directors will take into account the result of the vote when determining future executive compensation arrangements. The Company currently conducts annual advisory votes on executive compensation. At or before our 2017 annual meeting of shareholders, we expect to conduct a non-binding advisory vote on the frequency of an advisory vote on executive compensation.
The Board of Directors recommends a vote FOR adoption of the resolution approving the compensation of the Company’sCompany's named executive officers, as described in the Compensation Discussion and Analysis section and the related tabular and narrative disclosure set forth in this Proxy Statement.
Pursuant to its charter, the Audit Committee of the Board of Directors is responsible for the appointment, compensation and oversight of the work of our independent registered public accounting firm. In the exercise of that authority, we, the members of the Audit Committee, determined to engage KPMG LLP to serve as H.B. Fuller’sFuller's independent registered public accounting firm for the year ending December 3, 2016.November 30, 2019.
Management is responsible for the financial reporting process, accounting principles, and internal controls and procedures designed to assure compliance with accounting standards and applicable law and regulation. Management represented to us that H.B. Fuller’sFuller's consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America.
KPMG LLP, as H.B. Fuller’sFuller's independent registered public accounting firm for fiscal year 2015,2018, was responsible for performing an independent audit of the consolidated financial statements and the company’scompany's internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States) and issuing reports.
We have reviewed and discussed the audited consolidated financial statements with management and KPMG LLP. We have also discussed with KPMG LLP the matters required to be discussed pursuant to audit standard no. 16 as adopted by theapplicable Public Company Accounting Oversight Board standards, and they have discussed with us their independence and provided to us the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’saccountant's communications with the audit committee concerning independence.
Based upon our review and discussions referred to above, we recommended to the Board of Directors that the audited consolidated financial statements be included in H.B. Fuller’sFuller's Annual Report on Form 10-K for the fiscal year ended November 28, 2015December 1, 2018 filed with the SEC.
Audit Committee of the Board of Directors of H.B. Fuller Company
John C. van Roden, Jr. (Chair) | Maria Teresa Hilado |
Daniel L. Florness | Ruth S. Kimmelshue |
| Thomas W. Handley |
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FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following table presents fees for professional services provided by KPMG LLP for the audit, audit-related, tax and all other services rendered to us and our affiliates for the 20152018 and 20142017 fiscal years.
2015 | 2014 | 2018 | 2017 | |||||||||||||||||
Audit Fees | $4,006,000 | $3,509,000 | $3,847,000 | $4,096,885 | ||||||||||||||||
Audit-Related Fees | $-0- | $248,000 | $-0- | $-0- | ||||||||||||||||
Tax Fees | $58,000 | $117,000 | $263,000 | $3,586 | ||||||||||||||||
Audit Fees: Includes fees and expenses billed and to be billed for (i) the audit of the consolidated financial statements included in our annual report on Form 10-K, (ii) the audit of the effectiveness of our internal control over financial reporting, (iii) reviews of the interim consolidated financial information included in our quarterly reports on Form 10-Q, (iv) statutory audits of certain international subsidiaries, and (v) consultations concerning financial accounting and reporting. Audit fees also include fees for reviews of documents filed with the SEC.
Audit-Related Fees: Audit-related fees include fees and expenses for services related to internal control over financial reporting reviews.registration statements.
Tax Fees: Includes fees and expenses for U.S. federal, state and international tax planning and tax compliance services.
The Audit Committee has in place procedures to pre-approve all audit, audit-related, tax and other permissible services provided to us by our independent registered public accounting firm. We have a policy of avoiding the engagement of our independent registered public accounting firm except for audit, audit-related and tax planning and compliance services. The Audit Committee has delegated to one or more of its members pre-approval authority with respect to permitted services, and receives a regular report from management on all such services provided to us by our independent registered public accounting firm. All of the services provided by our independent registered public accounting firm in fiscal 20152018 and 20142017 were pre-approved by the Audit Committee under its pre-approval procedures.
PROPOSAL 3—RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed KPMG LLP, as our independent registered public accounting firm for the fiscal year ending December 3, 2016.November 30, 2019. KPMG LLP has acted as our independent registered public accounting firm since our 2004 fiscal year. While we are not required to do so, H.B. Fuller is submitting the appointment of KPMG LLP to serve as our independent registered public accounting firm for the fiscal year ending December 3, 2016 for ratification in order to ascertain the views of our shareholders on this appointment.shareholders. If the shareholders do not ratify the Audit Committee’sCommittee's appointment of KPMG LLP as our independent registered public accounting firm, the Audit Committee intends to reconsider that appointment. However, because of the difficulty and expense of making any change so long after the beginning of the current fiscal year, it is likely that the appointment would standAudit Committee retains sole responsibility for fiscal year 2016 unless there were compelling reasons for making an immediate change.appointing or terminating our independent registered public accounting firm.
Representatives of KPMG LLP will be present at the meeting and will have the opportunity to make a statement if they desire to do so and to respond to appropriate questions from shareholders.
The Board of Directors recommends a vote FOR ratification of the appointment of KPMG LLP.
PROPOSAL 4—APPROVAL OF THE H.B. FULLER COMPANY
2016 MASTER INCENTIVE PLAN
We are asking our shareholders to approve the H.B. Fuller Company 2016 Master Incentive Plan (the “2016 Incentive Plan”). On January 21, 2016, our Board of Directors adopted, upon recommendation of our Compensation Committee and subject to shareholder approval, the 2016 Incentive Plan.
Long-term equity compensation plays an important part in the Company’s pay-for-performance philosophy. Our compensation program emphasizes stock-based compensation, encouraging our executive officers and other employees and non-employee directors to think and act as long-term shareholders.
The purpose of the 2016 Incentive Plan is to promote the interests of the Company and our shareholders by aiding us in attracting and retaining employees, officers, consultants, independent contractors and non-employee directors capable of assuring the future success of the Company, to provide such persons with opportunities for stock ownership in the Company and to offer such persons other incentives to put forth maximum efforts for the success of the Company’s business. The 2016 Incentive Plan will allow us to provide such persons an opportunity to acquire a proprietary interest in the Company, and align the interests of such persons with our shareholders.
The 2016 Incentive Plan is an omnibus equity incentive plan that allows the Company to grant stock options, stock appreciation rights, restricted stock and restricted stock units, performance awards, dividend equivalents and other stock-based awards to employees, officers, consultants, independent contractors and non-employee directors. The total number of shares of common stock that may be issued under all stock-based awards under the 2016 Incentive Plan will be 3,300,000. Of these authorized shares, an aggregate of 1,200,000 shares may be issued in the form of awards other than stock options or stock appreciation rights (e.g., restricted stock and restricted stock units) (“Full Value Awards”).
Reasons for Adopting the 2016 Incentive Plan
We currently make awards of stock options and restricted stock units to officers and other employees under our 2013 Master Incentive Plan (the “2013 Incentive Plan”). The total number of shares of common stock authorized for issuance under the 2013 Incentive Plan is 3,500,000, of which a maximum of 1,200,000 shares may be issued in the form of Full Value Awards. We are asking our shareholders to approve the 2016 Incentive Plan so that the Company will have a sufficient number of shares authorized to make appropriate levels of stock incentive awards to officers, other employees and non-employee directors in 2017 and beyond. On November 28, 2015, there were 2,058,431 shares available for future grants of incentive awards under the 2013 Incentive Plan. On January 19, 2016, as part of the 2016 award cycle, the Company granted stock options and restricted stock units covering a total of 979,555 shares (stock options for 797,220 shares and restricted stock units for 182,335 shares). Under the terms of performance-based restricted stock units issued by the Company, an additional 91,114 shares of common stock may be issued if superior performance targets are achieved. As a result of the awards granted on January 19, 2016 and forfeiture of awards for 4,373 shares in December 2015, on January 29, 2016, only 992,135 shares remained available for future equity awards under the 2013 Incentive Plan.
In addition to the 2013 Incentive Plan, we have a 2009 Director Stock Incentive Plan (the “Director Plan”). Under the Director Plan, the Company issues restricted stock and restricted stock units to non-employee directors. The Director Plan provides that the maximum number of shares that may be issued under the Director Plan is 300,000. As of November 28, 2015, only 28,466 shares remained available for issuance under the Director Plan.
The Company is proposing to replace the 2013 Incentive Plan and the Director Plan with the 2016 Incentive Plan. Under the 2016 Incentive Plan, equity awards will be made both to officers and other employees and to non-employee directors. The Compensation Committee and the Board of Directors have concluded it will be more efficient to administer a single plan.
Our Board of Directors believes that the continuation of the Company’s stock-based compensation program is essential in attracting, retaining and motivating highly qualified officers and other employees and non-employee directors to enhance the success of the Company. As discussed above in the “Compensation Discussion and Analysis” under the caption “Fiscal 2015 Long-Term Incentive Compensation,” awards of stock options and restricted stock units to officer and other employees are an essential part of this program. Unless the 2016 Incentive Plan is adopted, the Board of Directors has concluded that the Company will need to curtail grants of stock incentive awards to officer, other employees and non-employee directors. The Board of Directors believes this result will have a significantly negative impact on the Company’s stock-based compensation program. Accordingly, the Board of Directors recommends adoption of the 2016 Incentive Plan in order to allow the Company to have the ability to continue to grant stock options and restricted stock units to officers and other employees and restricted stock and restricted stock units to non-employee directors at current levels.
If the 2016 Incentive Plan is approved by our shareholders, no additional awards will be granted under the 2013 Incentive Plan or the Director Plan (although all outstanding awards previously granted under these plans will remain outstanding and subject to the terms of these plans), and no shares subject to any outstanding awards under these prior plans that are forfeited, cancelled or reacquired by the Company will become available for re-issuance under the 2016 Incentive Plan, the 2013 Incentive Plan or the Director Plan.
Key Features of the 2016 Incentive Plan
The following features of the 2016 Incentive Plan reflect equity incentive plan “best practices” intended to protect the interests of our shareholders:
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Determination of Number of Shares for the 2016 Incentive Plan
The Company has a history of conservative and disciplined share usage under the 2013 Incentive Plan and the Director Plan. In setting the number of proposed shares issuable under the 2016 Incentive Plan, our Compensation Committee and Board of Directors considered the Company’s historical equity compensation practices (including the total number of shares underlying existing equity awards, the Company’s three-year average share usage and dilution). The Compensation Committee and the Board of Directors also considered these factors in assessing the number of shares likely to be needed for future grants.
The 2016 Incentive Plan does not set the number of shares subject to equity awards that will be granted in future years. In setting each year’s award amounts for executive officers, the Compensation Committee considers the following: the relative market position of the awards and the total compensation for each executive, the proportion of each executive’s total compensation to be delivered as a long-term incentive award, internal pay equity, executive performance and changes in responsibility, retention concerns, and corporate performance. Similar considerations are taken into account in granting awards to participants who are not executive officers. Equity awards to non-employee directors have historically been granted at levels intended to be competitive, taking into account current market conditions.
Burn Rate. Burn rate, a measure of the speed at which companies use shares available for grant under their equity compensation plans, is an important factor for investors concerned about shareholder dilution. In setting and recommending to shareholders the number of shares to be authorized under the 2016 Incentive Plan, the Compensation Committee and the Board of Directors considered our burn rates for the past three years. Burn rate is calculated as the total number of shares subject to stock awards granted in a fiscal year, divided by the weighted average number of shares outstanding. Our burn rate for the past three fiscal years ended November 28, 2015, November 29, 2014 and November 30, 2013 was 1.89%, 1.27% and 1.17%, respectively. This represents a three-year average burn rate of 1.44%.
Overhang. Overhang is a commonly used measure to assess the dilutive impact of equity programs such as the 2016 Incentive Plan. Our overhang is calculated as the total number of shares available for future equity grants under existing stock incentive plans plus the number of shares subject to outstanding equity awards, divided by the total number of shares outstanding. Our overhang, calculated as incentive shares reserved in the plan but unissued plus incentives shares outstanding (unexercised stock options and unvested restricted stock/restricted stock units) divided by the total common shares outstanding. Our overhang for the three fiscal years ended November 28, 2015, November 29, 2014 and November 30, 2013 was 11.38%, 11.96% and 13.45% respectively. This represents a three-year average overhang of 12.26%.
Summary of Material Terms of the 2016 Incentive Plan
The following summary of the material terms of the 2016 Incentive Plan is qualified in its entirety by reference to the full text of the 2016 Incentive Plan, which is attached as Annex B to this proxy statement.
Administration
The Compensation Committee will administer the 2016 Incentive Plan and will have full power and authority to determine when and to whom awards will be granted, and the type, amount, form of payment and other terms and conditions of each award, consistent with the provisions of the 2016 Incentive Plan. In addition, the Compensation Committee can specify whether, and under what circumstances, awards to be received under the 2016 Incentive Plan or amounts payable under such awards may be deferred automatically or at the election of either the holder of the award or the Compensation Committee. Also, the Compensation Committee can specify the manner in which the Awards are paid out under the 2016 Incentive Plan. Subject to the provisions of the 2016 Incentive Plan, the Compensation Committee may amend or waive the terms and conditions, or accelerate the exercisability, of an outstanding award. The Compensation Committee has authority to interpret the 2016 Incentive Plan and establish rules and regulations for the administration of the 2016 Incentive Plan.
The Compensation Committee may delegate to one or more officers or directors of the Company the authority to grant awards under the 2016 Incentive Plan, except that the Compensation Committee may not delegate such authority with regard to grants to executive officers who are subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or in a way that would violate Section 162(m) of the Code, applicable rules of the Exchange Act or applicable corporate law.
The Board of Directors may also exercise the powers of the Compensation Committee at any time, so long as its actions would not violate Rule 16b-3 or Section 162(m) of the Code. Only the Compensation Committee (or another committee of the Board of Directors comprised of independent directors) may grant awards to non-employee directors.
No member of the Board of Directors or the Compensation Committee or any person to whom the Compensation Committee delegates authority under the 2016 Incentive Plan will be liable for any action or determination taken and made in good faith with respect to the 2016 Incentive Plan or any award granted under the 2016 Incentive Plan. Members of the Board of Directors and the Compensation Committee and each person to whom the Compensation Committee delegates authority under the 2016 Incentive Plan will be entitled to indemnification with regard to such actions and determinations.
Shares Available for Awards
The aggregate number of shares of our common stock that may be issued under all stock-based awards made under the 2016 Incentive Plan will be 3,300,000. Of that number, a maximum of 1,200,000 shares are available for “Full Value Awards,” or awards other than options, stock appreciation rights and other awards the value of which is based solely on an increase in the value of the shares underlying such award after the date of grant. Shares of our common stock that are issued under awards granted in substitution for awards previously granted by an entity that is acquired by or merged with us or one of our affiliates will not be counted against the aggregate number of shares of our common stock available for awards under the 2016 Incentive Plan. No person may be granted awards under the 2016 Incentive Plan that are denominated in shares of our common stock for more than 500,000 shares in the aggregate in any calendar year, and the Compensation Committee will not grant incentive stock options in which the aggregate fair market value of the shares with respect to which such options are exercisable for the first time by any participant during any calendar year exceeds $100,000. In addition, no non-employee director may be granted awards under the 2016 Incentive Plan that are denominated in shares of our common stock with a value of more than $250,000 in the aggregate in any calendar year, but such limit will not apply to any award granted pursuant to an election by the non-employee director to receive an award in lieu of all or a portion of annual and committee retainers and annual meeting fees.
The Compensation Committee will adjust the number of shares and share limits described above in the case of a dividend or other distribution, stock split, reverse stock split, merger or other similar corporate transaction or event that affects shares of our common stock, in order to prevent dilution or enlargement of the benefits or potential benefits intended to be provided under the 2016 Incentive Plan.
Eligible Participants
Any employee, officer, non-employee director or consultant or independent contractor providing services to us or any of our affiliates is eligible to receive an award under the 2016 Incentive Plan. Subject to the 2016 Incentive Plan, the Compensation Committee will have full authority to designate which eligible persons will be granted an award. As of February 10, 2016, the record date for our 2016 annual meeting of shareholders, approximately 4,429 officers and other employees and 8 non-employee directors would have been eligible to be selected by the Compensation Committee to receive awards under the 2016 Incentive Plan. In fiscal 2015, we granted awards to approximately 207 officers and other employees and all of our non-employee directors.
Types of Awards and Terms and Conditions
The 2016 Incentive Plan permits the granting of:
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Awards may be granted alone, in addition to, in combination with or in substitution for, any other award granted under the 2016 Incentive Plan or any other compensation plan. Awards can be granted for no cash consideration or for any cash or other consideration as may be determined by the Compensation Committee or as required by applicable law. Awards may provide that upon the grant or exercise thereof, the holder will receive cash, shares of our common stock, other securities (but excluding promissory notes), other awards or other property, or any combination of these in a single payment, installments or on a deferred basis.
The exercise price per share under any stock option may not be less than the fair market value of our common stock on the date of grant of such option, except if such option is granted in substitution for an option previously granted by an entity that is acquired by or merged with us or one of our affiliates. The grant price of any stock appreciation right may not be less than the fair market value of our common stock on the date of grant of such stock appreciation right, except if such stock appreciation right is granted in substitution for a stock appreciation right previously granted by an entity that is acquired by or merged with us or one of our affiliates. Determinations of fair market value under the 2016 Incentive Plan will be made in accordance with methods and procedures established by the Compensation Committee. Unless otherwise determined by the Compensation Committee, the value of a share of our common stock as of a given date will be the closing price per share of the common stock on the New York Stock Exchange on such date. Awards will be adjusted by the Compensation Committee in the case of a dividend (other than a regular cash dividend) or other distribution, recapitalization, stock split, reverse stock split, merger or other similar corporate transaction or event that affects shares of our common stock, in order to prevent dilution or enlargement of the benefits or potential benefits intended to be provided under the 2016 Incentive Plan.
A maximum of 5% of the aggregate number of shares of common stock available for issuance under the 2016 Incentive Plan may be issued as options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other stock-based awards with a vesting schedule that is over a period of less than one year from the date of grant (or, in the case of vesting based upon the attainment of performance goals or other performance-based objectives, over a period of less than one year from the commencement of the period over which performance is evaluated). All other options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other stock-based awards granted under the 2016 Incentive Plan must vest at least one year from the date of grant (or, in the case of vesting based upon the attainment of performance goals or other performance-based objectives, at least one year from the commencement of the period over which performance is evaluated). The Compensation Committee may provide for the acceleration of the exercisability of any award or the lapse of any restrictions relating to any award, except that no award agreement may contain a definition of change in control that has the effect of accelerating the exercisability of any award or the lapse of any restrictions relating to any award upon the announcement or shareholder approval (rather than consummation) of any reorganization, merger or consolidation of the Company, or sale or other disposition of all or substantially all of our assets.
Stock Options. The holder of an option will be entitled to purchase a number of shares of our common stock at a specified exercise price during a specified time period, all as determined by the Compensation Committee. The option exercise price may be payable, at the discretion of the Compensation Committee, in cash, shares of our common stock, other securities, other awards or other property having a fair market value on the exercise date equal to the exercise price. The Compensation Committee may also permit an option to be exercised by delivering to the participant a number of shares of our common stock having an aggregate fair market value equal to the excess, if positive, of the fair market value of the shares underlying the option being exercised, on the date of exercise, over the exercise price of the option for such shares (being referred to as a “net exercise”). Stock options vest and become exercisable in accordance with a vesting schedule established by the Compensation Committee. In the case of a grant of an incentive stock option to a participant who, at the time of grant, possesses more than 10% of the combined voting power of all classes of stock of us and our affiliates, the exercise price per share may not be less than 110% of the fair market value of our common stock on the date of grant, and each such incentive stock option will expire five years from the date of grant.
Stock Appreciation Rights. The holder of a stock appreciation right is entitled to receive the excess of the fair market value as of the exercise date of a specified number of shares of our common stock over the grant price of the stock appreciation right. Stock appreciation rights vest and become exercisable in accordance with a vesting schedule established by the Compensation Committee.
Restricted Stock and Restricted Stock Units. The holder of restricted stock will own shares of our common stock subject to restrictions imposed by the Compensation Committee (including, for example, restrictions on the right to vote the restricted shares or to receive any dividends with respect to the shares) for a specified time period determined by the Compensation Committee. The holder of restricted stock units will have the right, subject to any restrictions imposed by the Compensation Committee, to receive shares of our common stock, or a cash payment equal to the fair market value of those shares, at some future date determined by the Compensation Committee.
Performance Awards. The Compensation Committee may grant awards under the 2016 Incentive Plan that are intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code. A performance award may be denominated or payable in cash, shares of our common stock (including restricted stock and restricted stock units), other securities, other awards or other property and confers on the holder the right to receive payments, in whole or in part, upon the achievement of one or more performance goals during performance periods as established by the Compensation Committee. The Compensation Committee must determine the length of the performance period, establish the performance goals for the performance period, designate all participants for the performance period and determine the amounts of the performance awards for each participant no later than 90 days after the beginning of each performance period according to the requirements of Section 162(m) of the Code.
Performance goals must be based solely on one or more of the following business criteria, individually or in any combination, applied on a corporate, subsidiary, division, business unit or line of business basis:
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Under the 2016 Incentive Plan, the Compensation Committee is required to certify that the applicable performance goals have been met prior to payment of any performance awards to participants. The maximum amount that may be paid with respect to performance awards denominated in cash to any participant in the aggregate in any calendar year is $5,000,000 in value, whether payable in cash, shares of our common stock or other property.
Dividend Equivalents. The holder of a dividend equivalent will be entitled to receive payments (in cash, shares of our common stock, other securities, other awards or other property) equivalent to the amount of cash dividends paid by us to the holders of our common stock, with respect to the number of shares determined by the Compensation Committee. Dividend equivalents will be subject to other terms and conditions determined by the Compensation Committee, but the Compensation Committee may not grant dividend equivalents to a participant in connection with grants of options, stock appreciation rights or other awards the value of which is based is solely on an increase in the value of our common stock after the grant of such award. No dividend equivalent payment shall be made to a participant with respect to any performance award prior to the date on which all conditions or restrictions relating to the award have been satisfied, waived or lapsed.
Other Stock-Based Awards. The Compensation Committee is also authorized to grant other types of awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to shares of our common stock, subject to terms and conditions determined by the Compensation Committee and the limitations in the 2016 Incentive Plan. No such other stock-based award can contain a purchase right or an option-like feature.
Counting Shares
If an award entitles the holder to receive or purchase shares of our common stock, the shares covered by such award or to which the award relates will be counted against the aggregate number of shares available for awards under the 2016 Incentive Plan. Awards that do not entitle the holder to receive or purchase shares, and shares issued under awards granted in substitution for awards previously granted by an entity that is acquired by or merged with us or one of our affiliates, will not be counted against the aggregate number of shares available for awards under the 2016 Incentive Plan.
If shares covered by an award are not purchased or are forfeited or are reacquired by us (including any shares withheld by us or tendered to satisfy any tax withholding obligation on Full Value Awards or shares covered by an award that is settled in cash), or if an award otherwise terminates or is cancelled without delivery of any shares, then the number of shares counted against the aggregate number of shares available under the 2016 Incentive Plan with respect to such award, to the extent of any such forfeiture, reacquisition by us, termination or cancellation, will again be available for future awards under the 2016 Incentive Plan. Shares withheld as payment of the purchase or exercise price of an award or in satisfaction of tax obligations relating to an option or stock appreciation right, shares covered by a stock-settled stock appreciation right that are not issued in connection with settlement in shares upon exercise, and shares repurchased by us using option exercise proceeds, will not be available again for granting awards under the 2016 Incentive Plan.
Amendment and Termination
The 2016 Incentive Plan will terminate on January 21, 2026 unless earlier terminated by the Board. No awards may be made after that date, provided that no performance award may be granted under the 2016 Incentive Plan after the fifth year following the year in which our shareholders approved the related performance goals unless and until the performance goals or the 2016 Incentive Plan are re-approved by our shareholders. Unless otherwise expressly provided in an applicable award agreement, any award granted under the 2016 Incentive Plan prior to expiration may extend beyond the expiration of the 2016 Incentive Plan through the award’s normal expiration date.
The Board may amend, alter, suspend, discontinue or terminate the 2016 Incentive Plan at any time, although shareholder approval must be obtained for any amendment to the 2016 Incentive Plan that would (1) increase the number of shares of our common stock available under the 2016 Incentive Plan, (2) increase the award limits under the 2016 Incentive Plan, (3) permit awards of options or stock appreciation rights at a price less than fair market value (other than as permitted under the 2016 Incentive Plan), (4) permit repricing of options or stock appreciation rights, (5) increase the maximum term permitted for options or stock appreciation rights under the 2016 Incentive Plan or (6) cause us to be unable to grant incentive stock options under the 2016 Incentive Plan or cause the exemption under Section 162(m) of the Code for qualified performance-based compensation to become unavailable with respect to the 2016 Incentive Plan. Shareholder approval is also required for any action that requires shareholder approval under the rules and regulations of the SEC, the NYSE or any other securities exchange that are applicable to us.
Prohibition on Repricing Awards
Without the approval of our shareholders, the Compensation Committee will not reprice, adjust or amend the exercise price of any option or the grant price of any stock appreciation right previously awarded, whether through amendment, cancellation, repurchase and replacement grant or any other means, except in connection with a dividend (other than a regular cash dividend) or other distribution, stock split, reverse stock split, merger or other similar corporate transaction or event that affects shares of our common stock, in order to prevent dilution or enlargement of the benefits, or potential benefits intended to be provided under the 2016 Incentive Plan.
Clawback or Recoupment
All awards under the 2016 Incentive Plan will be subject to forfeiture or other penalties pursuant to the Company’s clawback policy and such forfeiture and penalty provisions as are determined by the Compensation Committee.
Certain Corporate Events
In the event of certain corporate transactions or events involving us, including any reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares of our common stock or other securities, or if we enter into a written agreement to undergo such a transaction or event, the Compensation Committee or our Board will have the authority, with respect to any awards under the 2016 Incentive Plan and subject to the terms of the 2016 Incentive Plan, to (i) either terminate such awards, whether or not vested, in exchange for an amount of cash and/or other property, if any, equal to the amount that would have been attained upon the exercise of the vested portion of such award or realization of the participant’s vested rights, or replace such awards with other rights or property selected by the Compensation Committee or the Board, (ii) provide that such awards will be assumed by the successor or survivor corporation, or a parent or subsidiary of the successor or surviving corporation, or substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, (iii) accelerate such awards, or (iv) provide that such awards cannot vest, be exercised or become payable after a date certain in the future, which may be the effective date of such event.
Transferability of Awards
Except as otherwise provided by the Compensation Committee in its discretion and subject to additional terms and conditions as it determines, no awards (other than fully-vested and unrestricted stock awards) and no right under any under the 2016 Incentive Plan, and no rights under any such award, may be transferred (other than by will or by the laws of descent and distribution) or pledged, alienated, attached or otherwise encumbered. When the Compensation Committee does permit the transfer of an award (other than a fully-vested and unrestricted stock awards), under no circumstances may such permitted transfer be for value.
Federal Income Tax Consequences
Grant of Options and Stock Appreciation Rights. The grant of a stock option (either an incentive stock option or a non-qualified stock option) or stock appreciation right is not expected to result in any taxable income for the recipient.
Exercise of Incentive Stock Options. No taxable income is realized by the optionee upon the exercise of an incentive stock option. If stock is issued to the optionee pursuant to the exercise of an incentive stock option, and if no disqualifying disposition of such shares is made by such award holder within two years after the date of grant or within one year after the transfer of such shares to such award holder, then (1) upon the sale of such shares, any amount realized in excess of the option price will be taxed to such optionee as a long-term capital gain and any loss sustained will be a long-term capital loss, and (2) we will not be entitled to a deduction for federal income tax purposes.
If the stock acquired upon the exercise of an incentive stock option is disposed of prior to the expiration of either holding period described above, generally (1) the optionee will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of such shares at exercise (or, if less, the amount realized on the disposition of such shares) over the option price paid for such shares, and (2) we generally will be entitled to deduct such amount for federal income tax purposes if the amount represents an ordinary and necessary business expense. Any further gain (or loss) realized by the optionee will be taxed as short-term or long-term capital gain (or loss), as the case may be, and will not result in any deduction by us.
Exercise of Non-Qualified Stock Options and Stock Appreciation Rights. Upon exercising a non-qualified stock option, the optionee must recognize ordinary income equal to the excess of the fair market value of the shares of our common stock acquired on the date of exercise over the exercise price, and we generally will be entitled at that time to an income tax deduction for the same amount. Upon exercising a stock appreciation right, the amount of any cash received and the fair market value on the exercise date of any shares of our common stock received are taxable to the recipient as ordinary income and generally are deductible by us.
The tax consequence upon a disposition of shares acquired through the exercise of a non-qualified stock option or stock appreciation right will depend on how long the shares have been held. Generally, there will be no tax consequence to us in connection with the disposition of shares acquired under a non-qualified stock option or stock appreciation right.
Restricted Stock. Recipients of grants of restricted stock generally will be required to include as taxable ordinary income the fair market value of the restricted stock at the time it is no longer subject to a substantial risk of forfeiture. However, an award holder who makes an 83(b) election within 30 days of the date of grant of the restricted stock will incur taxable ordinary income on the date of grant equal to the fair market value of such shares of restricted stock (determined without regard to forfeiture restrictions). With respect to the sale of shares after the forfeiture restrictions have expired, the holding period to determine whether the award recipient has long-term or short-term capital gain or loss generally begins when the restrictions expire, and the tax basis for such shares will generally be based on the fair market value of the shares on that date. However, if the award holder made an 83(b) election as described above, the holding period commences on the date of such election, and the tax basis will be equal to the fair market value of the shares on the date of the election (determined without regard to the forfeiture restrictions on the shares). Dividends, if any, that are paid or accrued while the restricted stock is subject to a substantial risk of forfeiture will also be taxed as ordinary income. We generally will be entitled to an income tax deduction equal to amounts the award holder includes in ordinary income at the time of such income inclusion.
Restricted Stock Units, Performance Awards and Dividend Equivalents. Recipients of grants of restricted stock units, performance awards or dividend equivalents (collectively, “deferred awards”) will not incur any federal income tax liability at the time the awards are granted. Award holders will recognize ordinary income equal to (a) the amount of cash received under the terms of the award or, as applicable, (b) the fair market value of the shares received (determined as of the date of receipt) under the terms of the award. Dividend equivalents received with respect to any deferred award will also be taxed as ordinary income. Cash or shares to be received pursuant to a deferred award generally become payable when applicable forfeiture restrictions lapse; provided, however, that, if the terms of the award so provide, payment may be delayed until a later date to the extent permitted under applicable tax laws. We will be entitled to an income tax deduction for any amounts included by the award holder as ordinary income. For awards that are payable in shares, participant’s tax basis is equal to the fair market value of the shares at the time the shares become payable. Upon the sale of the shares, appreciation (or depreciation) after the shares are paid is treated as either short-term or long-term capital gain (or loss) depending on how long the shares have been held.
Income Tax Deduction. Subject to the usual rules concerning reasonable compensation, including our obligation to withhold or otherwise collect certain income and payroll taxes, and assuming that, as expected, stock options, stock appreciation rights and certain other performance awards paid under the 2016 Incentive Plan are “qualified performance-based compensation” within the meaning of Section 162(m) of the Code, we generally will be entitled to a corresponding income tax deduction at the time a participant recognizes ordinary income from awards made under the 2016 Incentive Plan.
Special Rules for Executive Officers Subject to Section 16 of the Exchange Act. Special rules may apply to individuals subject to Section 16 of the Exchange Act. In particular, unless a special election is made pursuant to the Code, shares received through the exercise of a stock option or stock appreciation right may be treated as restricted as to transferability and subject to a substantial risk of forfeiture for a period of up to six months after the date of exercise. Accordingly, the amount of any ordinary income recognized and the amount of our income tax deduction will be determined as of the end of that period.
Section 409A of the Internal Revenue Code. The Compensation Committee will administer and interpret the 2016 Incentive Plan and all award agreements in a manner consistent with the intent to satisfy the requirements of Section 409A of the Code to avoid any adverse tax results thereunder to a holder of an award. If any provision of the 2016 Incentive Plan or any award agreement would result in such adverse consequences, the Compensation Committee may amend that provision or take other necessary action to avoid any adverse tax results, and no such action will be deemed to impair or otherwise adversely affect the rights of any holder of an award under the 2016 Incentive Plan.
New Plan Benefits
No benefits or amounts have been granted, awarded or received under the 2016 Incentive Plan, as it will only take effect upon shareholder approval. In addition, the Compensation Committee, in its sole discretion, will determine the number and types of awards that will be granted under the 2016 Incentive Plan. Accordingly, it is not possible to determine the benefits that will be received by eligible participants if the 2016 Incentive Plan is approved by our shareholders. The closing price of a share of our common stock as reported on the NYSE on February 10, 2016, the record date for our 2016 annual meeting of shareholders, was $36.02.
Recommendation
The Board of Directors recommends that you vote FOR the proposal to approve the H.B. Fuller Company 2016 Master Incentive Plan. Proxies will be voted FOR the proposal unless otherwise specified.
Equity Compensation Plan Information
The following table summarizes information regarding our equity compensation plans as of November 28, 2015, the last day of our fiscal year:
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Equity compensation plans approved by security holders | 3,259,246 | 1 | $ | 33.37 | 2 | 2,086,897 | 3 | |||||
Equity compensation plans not approved by security holders | NONE | N/A | NONE | |||||||||
Total | 3,259,246 | $ | 33.37 | 2,086,897 | ||||||||
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“HOUSEHOLDING”"HOUSEHOLDING" OF PROXY MATERIALS
The SEC rules allow a single copy of the Proxy Statement, Annual Report and Notice of Internet Availability of Proxy Materials to be delivered to multiple shareholders sharing the same address and last name, or who we reasonably believe are members of the same family, and who consent to receive a single copy of these materials in a manner provided by these rules. This practice is referred to as “householding”"householding" and can result in significant savings of paper and mailing costs. Although we do not household for our registered shareholders, some brokers household H.B. Fuller Company proxy statements and annual reports, delivering a single copy of each to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker that they will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate copy of our Proxy Statement, Annual Report or Notice of Internet Availability of Proxy Materials, or if you are receiving multiple copies of either document and wish to receive only one, please notify your broker. The Company will deliver promptly upon written or oral request a separate copy of our Proxy Statement, Annual Report and/or Notice of Internet Availability of Proxy Materials to a shareholder at a shared address to which a single copy of either document was delivered. For copies of either or both documents, shareholders should write to Corporate Secretary, H.B. Fuller Company, or call (651) 236-5825.
RECONCILIATION OFNON-GAAP FINANCIALINFORMATION
Certain financial information presented in this proxy statement under the captions “Proxy Summary—2015 Performance Highlights” and “Executive Compensation—Compensation Discussion and Analysis—Fiscal 2015 Business Results” does not conform to generally accepted accounting principles (GAAP) and should not be construed as an alternative to the reported financial results of the Company determined in accordance with GAAP. We have included this non-GAAP information to assist in understanding the operating performance of the Company as well as the comparability of results. TheSuch non-GAAP information provided may not be consistent with methodologies used by other companies. AllThe non-GAAP information is reconciled with reported GAAP results in the tables below.
Adjusted Diluted Earnings Per Share | For the year ended November 28,2015 | For the year ended November 29, 2014 | ||||||
GAAP diluted earnings per share | $ | 1.71 | $ | 0.97 | ||||
Special charges, net | $ | 0.09 | $ | 0.88 | ||||
Non-recurring costs related to integrating and accounting for past and potential acquisitions | $ | 0.14 | $ | 0.03 | ||||
Non-recurring costs related to the ramp up of new business with Lowes and the combination of facilities in Illinois | $ | 0.06 | $ | 0.01 | ||||
Non-recurring costs related to inventory adjustments, plant inefficiencies and restructuring in EIMEA | $ | 0.10 | $ | 0.11 | ||||
Non-recurring costs related to the initial go-live event under Project ONE in North America in 2014 | $ | - | $ | 0.25 | ||||
Non-recurring costs related to the completion and start-up of a new electronics facility in Yantai China and other non-recurring items | $ | 0.07 | $ | 0.08 | ||||
Adjusted diluted earnings per share | $ | 2.17 | $ | 2.33 | ||||
Adjusted GrossProfitMargin, SG&A, Operating Incomeand EBITDA Margin(in Thousands) | For the year ended November 28, 2015 | For the year ended November 29, 2014 | ||||||
Net revenue as reported | $ | 2,083,660 | $ | 2,104,454 | ||||
Non-recurring costs related to the ramp up of new business with Lowes | $ | 1,002 | $ | - | ||||
Adjusted net revenue | $ | 2,084,662 | $ | 2,104,454 | ||||
Cost of goods sold as reported | $ | (1,515,617 | ) | $ | (1,571,164 | ) | ||
Non-recurring costs related to plant inefficiencies in EIMEA & acquisition integration | $ | 9,205 | $ | 15,475 | ||||
Adjusted cost of goods sold | $ | (1,506,412 | ) | $ | (1,555,689 | ) | ||
Gross profit as reported | $ | 568,043 | $ | 533,290 | ||||
Adjusted gross profit | $ | 578,250 | $ | 548,765 | ||||
Gross profit margin | 27.3 | % | 25.3 | % | ||||
Adjusted gross profit margin | 27.7 | % | 26.1 | % | ||||
Selling, general and administrative expenses (SG&A) | $ | (397,558 | ) | $ | (383,449 | ) | ||
Non-recurring costs related to the accounting for and integrating past and potential acquisitions and plant inefficiencies in EIMEA | $ | 12,245 | $ | 17,525 | ||||
Adjusted SG&A | $ | (385,313 | ) | $ | (365,924 | ) | ||
SG&A as a percentage of net revenue | 19.1 | % | 18.2 | % | ||||
Adjusted SG&A as a percentage of adjusted net revenue | 18.5 | % | 17.4 | % | ||||
Operating income | $ | 170,485 | $ | 149,841 | ||||
Adjusted operating income | $ | 192,937 | $ | 182,841 | ||||
Depreciation Expense | $ | 47,906 | $ | 42,455 | ||||
Amortization Expense | $ | 26,984 | $ | 23,069 | ||||
Earnings before interest, taxes, depreciation and amortization (EBITDA) | $ | 245,375 | $ | 215,365 | ||||
Adjusted EBITDA | $ | 267,828 | $ | 248,367 | ||||
EBITDA Margin | 11.8 | % | 10.2 | % | ||||
Adjusted EBITDA Margin | 12.8 | % | 11.8 | % | ||||
Certain financial information presented in this proxy statement under the captions “Executive Compensation – CompensationDiscussion and Analysis—Fiscal 2015 Short-Term Incentive Compensation” are non-GAAP financial measures and should not be construed as an alternative to the reported financial results of the Company determined in accordance with GAAP. We have included this non-GAAP information to assist in understanding the manner in which cash bonuses were determined under the Company’s Short-Term Incentive Plan (the “STIP”). The non-GAAP information provided may not be consistent with methodologies used by other companies. All non-GAAP information is reconciled with reportedmost directly comparable GAAP results in the tables below. All information below is in thousands (except per share amounts) and is unaudited.
ORGANIC REVENUE GROWTH
EPS –Fiscal Year Ended December 1, 2018GAAP AMOUNT TO ACTUAL AMOUNT USED FOR THE STIP
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Organic Revenue Growth | 3.7% | ||||
Acquisitions | 28.3% | ||||
Constant Currency Growth1 | 32.0% | ||||
Foreign Exchange | ( | ) | |||
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COMPANY ORGANIC REVENUE –GAAP AMOUNTTO ACTUALAMOUNTUSED FORTHESTIP
52 Weeks Ended November 28, 2015
Revenue (GAAP) | $ | 2,083,660 | ||
Acquisitions | (95,293 | ) | ||
EIMEA Foreign Exchange | 60,313 | |||
Asia Pacific Foreign Exchange | 18,333 | |||
Company Organic Revenue used for the STIP | $ | 2,067,014 |
COMPANY OPERATING INCOME – GAAP AMOUNTTO ACTUALAMOUNTUSED FORTHESTIP
52 Weeks Ended November 28, 2015
Operating Income (GAAP) | $ | 170,485 | ||
Adjustments per Plan Terms | (8,375 | ) | ||
EIMEA Foreign Exchange | 3,928 | |||
Asia Pacific Foreign Exchange | 1,086 | |||
Company Operating Income used for the STIP | $ | 167,124 |
(1) Constant currency revenue is a non-GAAP financial measure defined as changes in revenue due to price, volume, product mix and acquisitions and excludes revenue changes driven by foreign currency translation. The table above reconciles each component of net revenue growth.
For the Fiscal Year ended | For the Fiscal Year ended | |||||||||
December 1, 2018 | December 2, 2017 | |||||||||
ADJUSTED DILUTED EARNINGS PER SHARE – NON-GAAP RECONCILIATION | ||||||||||
Net income attributable to H.B. Fuller | $171,208 | $59,418 | ||||||||
Acquisition project costs | 2,833 | 5,258 | ||||||||
Tonsan call option agreement | 1,496 | (3,946 | ) | |||||||
Organizational realignment | 2,836 | 15,620 | ||||||||
Royal restructuring and integration | 20,351 | 47,423 | ||||||||
Tax reform | (43,276 | ) | - | |||||||
Other | 514 | 2,787 | ||||||||
Adjusted net income attributable to H.B. Fuller1 | $155,962 | $126,560 | ||||||||
Diluted shares | 51,975 | 51,619 | ||||||||
Diluted earnings per share (GAAP) | $3.29 | $1.15 | ||||||||
Adjusted diluted earnings per share (AEPS) 1 | $3.00 | $2.45 | ||||||||
EIMEASEGMENT ORGANIC REVENUE – GAAP AMOUNT
TO ACTUALAMOUNTUSED FORTHESTIP
52 Weeks Ended November 28, 2015
EIMEA Segment Organic Revenue (GAAP) | $ | 605,064 | ||
Corporate Allocation | ( 1,324 | ) | ||
Acquisition | ( 2,085 | ) | ||
EIMEA Foreign Exchange at Actual Close Rate | (36,313 | ) | ||
EIMEA Segment Organic Revenue used for the STIP | $ | 565,342 |
EIMEA SEGMENT OPERATING INCOME – GAAP AMOUNT
TO ACTUALAMOUNTUSED FORTHESTIP
52 Weeks Ended November 28, 2015
EIMEA Segment Operating Income (GAAP) | $ | 11,881 | ||
Corporate Operating Income Allocation | (693 | ) | ||
Acquisition | 33 | |||
EIMEA Foreign Exchange at Actual Close Rate | 1,988 | |||
Corporate Allocation Adjustment | (133 | ) | ||
EIMEA Segment Operating Income used for the STIP | $ | 13,076 |
AMERICAS ADHESIVESSEGMENT AND CONSTRUCTION PRODUCTS (“CP”) ORGANIC REVENUE –GAAP AMOUNT
TO ACTUALAMOUNTUSED FORTHESTIP
52 Weeks Ended November 28, 2015
Americas Adhesives Segment and CP Organic Revenue (GAAP) | $ | 1,109,860 | ||
Corporate Sales Allocation | (2,318 | ) | ||
Americas Adhesives Segment and CP Organic Revenue used for the STIP | $ | 1,107,542 |
AMERICAS ADHESIVESSEGMENT AND CP OPERATING INCOME
–GAAP AMOUNT TO ACTUALAMOUNTUSED FORTHESTIP
52 Weeks Ended November 28, 2015
Americas Adhesives Segment and CP Operating Income (GAAP) | $ | 141,430 | ||
Corporate Operating Income Allocation | (1,211 | ) | ||
Short-term incentive accruals | (3,391 | ) | ||
Approved exceptions | 813 | |||
Americas Adhesives Segment and CP Operating Income used for the STIP | $ | 137,641 |
a Amounts may not add due(1) Adjusted net income attributable to rounding
ANNEX B
H.B. fuller company2016 master INCENTIVE PLAN
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The purposeFuller and adjusted diluted earnings per share (AEPS) are non-GAAP financial measures and exclude the items shown on the reconciliation table above, including: costs related to accounting for acquisitions; non-cash costs related to revaluation of the Plan isTonsan call option agreement; organizational realignment to promotesupport the interests2020 strategic plan as announced in December 2016; costs associated with the integration and restructuring of the Company and its shareholders by aiding the Company in attracting and retaining employees, officers, consultants, independent contractors and non-employee Directors capable of assuring the future success of the Company, to provide such personsacquired Royal business; costs associated with opportunities for stock ownership in the Company and to offer such persons other incentives to put forth maximum efforts for the success of the Company’s business.
Section 2. Definitions
As used in the Plan, the following terms shall have the meanings set forth below:
(a) “Affiliate” shall mean (i) any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and (ii) any entity in which the Company has a significant equity interest, in each case as determined by the Committee.
(b) “Award” shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent or Other Stock-Based Award granted under the Plan.
(c) “Award Agreement” shall mean any written agreement, contract or other instrument or document evidencing an Award granted under the Plan (including a document in an electronic medium) executed in accordance with the requirements of Section 9(b).
(d) “Board” shall mean the Board of Directors of the Company.
(e) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder.
(f) “Committee” shall mean the Compensation Committee of the Board or such other committee designated by the Board to administer the Plan. The Committee shall be comprised of not less than such number of Directors as shall be required to permit Awards granted under the Plan to qualify under Rule 16b-3, and each member of the Committee shall be a “non-employee director” within the meaning of Rule 16b-3 and an “outside director” within the meaning of Section 162(m).
(g) “Company” shall mean H.B. Fuller Company, a Minnesota corporation, and any successor corporation.
(h) “Director” shall mean a member of the Board.
(i) “Dividend Equivalent” shall mean any right granted under Section 6(e) of the Plan.
(j) “Eligible Person” shall mean any employee, officer, non-employee Director, consultant, independent contractor or advisor providing services to the Company or any Affiliate, or any person to whom an offer of employment or engagement with the Company or any Affiliate is extended.
(k) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
(l) “Fair Market Value” shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. Notwithstanding the foregoing, unless otherwise determined by the Committee, the Fair Market Value of a Share as of a given date shall be, if the Shares are then traded on the New York Stock Exchange, the closing price of one Share as reported on the New York Stock Exchange on such date or, if the New York Stock Exchange is not open for trading on such date, on the most recent preceding date when the New York Stock Exchange is open for trading.
(m) “Full Value Award” shall mean any Award other than an Option or Stock Appreciation Right or similar Award, the value of which Option, Stock Appreciation Right or similar Award is based solely on an increase in the value of the Shares after the date of grant of such Award.
(n) “Incentive Stock Option” shall mean an option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code or any successor provision.
(o) “Non-Qualified Stock Option” shall mean an option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.
(p) “Option” shall mean an Incentive Stock Option or a Non-Qualified Stock Option to purchase shares of the Company.
(q) “Other Stock-Based Award” shall mean any right granted under Section 6(f) of the Plan.
(r) “Participant” shall mean an Eligible Person designated to be granted an Award under the Plan.
(s) “Performance Award” shall mean any right granted under Section 6(d) of the Plan.
(t) “Performance Goal” shall mean one or more of the following performance goals, either individually, alternatively or in any combination, applied on a corporate, subsidiary, division, business unit or line of business basis:
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Each such Performance Goal may be based (i) solely by reference to absolute results of individual performance or organizational performance at various levels (e.g., the Company’s performance or the performance of a subsidiary, division, business segment or business unit of the Company) or (ii) upon organizational performance relative to the comparable performance of other companies selected by the Committee. To the extent consistent with Section 162(m), the Committee may, when it establishes performance criteria, also provide for the exclusion of charges related to an event or occurrence which the Committee determines should appropriately be excluded, including (X) asset-write downs, litigation or claim judgments or settlements, reorganizations, the impact of acquisitions and divestitures, restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring charges, (Y) foreign exchange gains and losses or an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management, or (Z) the cumulative effects of tax or accounting changes in accordance with U.S. generally accepted accounting principles (or other accounting principles which may then be in effect). To the extent that Section 162(m) of the Code or applicable tax and/or securities laws change to permit Committee discretion to alter the governing performance measures without disclosing to shareholders and obtaining shareholder approval of such changes and without thereby exposing the Company to potentially adverse tax or other legal consequences, the Committee shall have the sole discretion to make such changes without obtaining shareholder approval.
(u) “Person” shall mean any individual or entity, including a corporation, partnership, limited liability company, association, joint venture or trust.
(v) “Plan” shall mean the H.B. Fuller Company 2016 Master Incentive Plan, as amended from time to time.
(w) “Prior Plans” shall mean the H.B. Fuller Company 2013 Master Incentive Plan and the H.B. Fuller Company 2009 Director Stock Incentive Plan.
(x) “Restricted Stock” shall mean any Share granted under Section 6(c) of the Plan.
(y) “Restricted Stock Unit” shall mean any unit granted under Section 6(c) of the Plan evidencing the right to receive a Share (or a cash payment equal to the Fair Market Value of a Share) at some future date.
(z) “Rule 16b-3” shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, or any successor rule or regulation.
(aa) “Section 162(m)” shall mean Section 162(m) of the Code, or any successor provision, and the applicable Treasury Regulations promulgated thereunder.
(bb) “Section 409A” shall mean Section 409A of the Code, or any successor provision, and applicable Treasury Regulations and other applicable guidance thereunder.
(cc) “Securities Act” shall mean the Securities Act of 1933, as amended.
(dd) “Share” orShares” shall mean share(s) of common stock, $1.00 par value per share, of the Company or such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4(c) of the Plan.
(ee) “Specified Employee” shall mean a specified employee as defined in Section 409A(a)(2)(B) of the Code or applicable proposed or final regulations under Section 409A, determined in accordance with procedures established by the Company and applied uniformly with respect to all plans maintained by the Company that are subject to Section 409A.
(ff) “Stock Appreciation Right” shall mean any right granted under Section 6(b) of the Plan.
Section 3. Administration
(a) Power and Authority of the Committee. The Plan shall be administered by the Committee. Subject to the express provisions of the Plan and to applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or the method by which payments or other rights are to be calculated in connection with) each Award; (iv) determine the terms and conditions of any Award or Award Agreement, including any terms relating to the forfeiture of any Award and the forfeiture, recapture or disgorgement of any cash, Shares or other amounts payable with respect to any Award; (v) amend the terms and conditions of any Award or Award Agreement; (vi) accelerate the exercisability of any Award or the lapse of any restrictions relating to any Award (vii) determine whether, to what extent and under what circumstances Awards may be exercised in cash, Shares, other securities, other Awards or other property (excluding promissory notes), or canceled, forfeited or suspended; (viii) determine whether, to what extent and under what circumstances cash, Shares, promissory notes, other securities, other Awards, other property and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or the Committee, subject to the requirements of Section 409A; (ix) interpret and administer the Plan and any instrument or agreement, including an Award Agreement, relating to the Plan; (x) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan; and (xii) adopt such modifications, rules, procedures and subplans as may be necessary or desirable to comply with provisions of the laws of non-U.S. jurisdictions in which the Company or an Affiliate may operate, including, without limitation, establishing any special rules for Affiliates, Eligible Persons or Participants located in any particular country, in order to meet the objectives of the Plan and to ensure the viability of the intended benefits of Awards granted to Participants located in such non-United States jurisdictions. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award or Award Agreement shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon any Participant, any holder or beneficiary of any Award or Award Agreement, and any employee of the Company or any Affiliate.
(b) Delegation. The Committee may delegate to one or more officers or Directors of the Company, subject to such terms, conditions and limitations as the Committee may establish in its sole discretion, the authority to grant Awards;provided,however, that the Committee shall not delegate such authority (i) with regard to grants of Awards to be made to officers of the Company or any Affiliate who are subject to Section 16 of the Exchange Act or (ii) in such a manner as would cause the Plan not to comply with the requirements of Section 162(m), applicable exchange rules or applicable corporate law.
(c) Power and Authority of the Board. Notwithstanding anything to the contrary contained herein, (i) the Board may, at any time and from time to time, without any further action of the Committee, exercise the powers and duties of the Committee under the Plan, unless the exercise of such powers and duties by the Board would cause the Plan not to comply with the requirements of Rule 16b-3 or Section 162(m); and (ii) only the Committee (or another committee of the Board comprised of directors who qualify as independent directors within the meaning of the independence rules of any applicable securities exchange where the Shares are then listed) may grant Awards to Directors who are not also employees of the Company or an Affiliate.
(d) Indemnification. To the full extent permitted by law, (i) no member of the Board, the Committee or any person to whom the Committee delegates authority under the Plan shall be liable for any action or determination taken or made in good faith with respect to the Plan or any Award made under the Plan, and (ii) the members of the Board, the Committee and each person to whom the Committee delegates authority under the Plan shall be entitled to indemnification by the Company with regard to such actions and determinations. The provisions of this paragraph shall be in addition to such other rights of indemnification as a member of the Board, the Committee or any other person may have by virtue of such person’s position with the Company.
Section 4. Shares Available for Awards
(a) Shares Available. Subject to adjustment as provided in Section 4(c) of the Plan, the aggregate number of Shares that may be issued under all Awards under the Plan shall be 3,300,000. Notwithstanding the foregoing and subject to adjustment as provided in Section 4(c) of the Plan, the number of Shares available for granting Full Value Awards shall not exceed 1,200,000. On and after shareholder approval of this Plan as provided in Section 11, (i) no awards shall be granted under the Prior Plans (although all outstanding awards previously granted under the Prior Plans shall remain outstanding and subject to the terms of the Prior Plans), and (ii) no Shares subject to any outstanding awards under the Prior Plans that are either forfeited, cancelled or reacquired by the Company shall become available for re-issuance under this Plan or the Prior Plans.
(b) Counting Shares. For purposes of this Section 4, except as set forth in this Section 4(b) below, if an Award entitles the holder thereof to receive or purchase Shares, the number of Shares covered by such Award or to which such Award relates shall be counted on the date of grant of such Award against the aggregate number of Shares available for granting Awards under the Plan.
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(c) Adjustments. In the event that any dividend (other than a regular cash dividend) or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that an adjustment is necessary in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or other property) that thereafter may be made the subject of Awards, (ii) the number and type of Shares (or other securities or other property) subject to outstanding Awards, (iii) the purchase price or exercise price with respect to any Award and (iv) the limitations contained in Section 4(d)(i) below;provided,however, that the number of Shares covered by any Award or to which such Award relates shall always be a whole number. Such adjustment shall be made by the Committee or the Board, whose determination in that respect shall be final, binding and conclusive.
(d) Award Limitations Under the Plan.
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Section 5. Eligibility
Any Eligible Person shall be eligible to be designated as a Participant. In determining which Eligible Persons shall receive an Award and the terms of any Award, the Committee may take into account the nature of the services rendered by the respective Eligible Persons, their present and potential contributions to the success of the Company or such other factors as the Committee, in its discretion, shall deem relevant. Notwithstanding the foregoing, an Incentive Stock Option may only be granted to full-time or part-time employees (which term as used herein includes, without limitation, officers and Directors who are also employees), and an Incentive Stock Option shall not be granted to an employee of an Affiliate unless such Affiliate is also a “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Code or any successor provision.
Section 6. Awards
(a) Options. The Committee is hereby authorized to grant Options to Eligible Persons with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine:
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(b) Stock Appreciation Rights. The Committee is hereby authorized to grant Stock Appreciation Rights to Eligible Persons subject to the terms of the Plan and any applicable Award Agreement. A Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive upon exercise thereof the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the grant price of the Stock Appreciation Right as specified by the Committee, which price shall not be less than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right;provided, however,that the Committee may designate a grant price below Fair Market Value on the date of grant if the Stock Appreciation Right is granted in substitution for a stock appreciation right previously granted by an entity that is acquired by or merged with the Company or an Affiliate. Subject to the terms of the Plan and any applicable Award Agreement, the grant price, term, methods of exercise, dates of exercise, methods of settlement and any other terms and conditions of any Stock Appreciation Right shall be as determined by the Committee (except that the term of each Stock Appreciation Right shall be subject to the same limitation in Section 6(a)(ii) applicable to Options). The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate.
(c) Restricted Stock and Restricted Stock Units. The Committee is hereby authorized to grant an Award of Restricted Stock and Restricted Stock Units to Eligible Persons with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine:
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(d) Performance Awards. The Committee is hereby authorized to grant to Eligible Persons Performance Awards that are intended to be “qualified performance-based compensation” within the meaning of Section 162(m). A Performance Award granted under the Plan (i) may be denominated or payable in cash, Shares (including, without limitation, Restricted Stock and Restricted Stock Units), other securities, other Awards or other property and (ii) shall confer on the holder thereof the right to receive payments, in whole or in part, upon the achievement of one or more objective Performance Goals during such performance periods as the Committee shall establish. Subject to the terms of the Plan, the Performance Goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award granted, the amount of any payment or transfer to be made pursuant to any Performance Award and any other terms and conditions of any Performance Award shall be determined by the Committee. Performance Awards shall be conditioned solely on the achievement of one or more objective Performance Goals established by the Committee within the time prescribed by Section 162(m), and shall otherwise comply with the requirements of Section 162(m), as described below.
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(e) Dividend Equivalents. The Committee is hereby authorized to grant Dividend Equivalents to Eligible Persons under which the Participant shall be entitled to receive payments (in cash, Shares, other securities, other Awards or other property as determined in the discretion of the Committee) equivalent to the amount of cash dividends paid by the Company to holders of Shares with respect to a number of Shares determined by the Committee. Subject to the terms of the Plan and any applicable Award Agreement, such Dividend Equivalents may have such terms and conditions as the Committee shall determine. Notwithstanding the foregoing, (i) the Committee may not grant Dividend Equivalents to Eligible Persons in connection with grants of Options, Stock Appreciation Rights or other Awards the value of which is based solely on an increase in the value of the Shares after the grant of such Award, and (ii) no dividend or Dividend Equivalent payments shall be made to a Participant with respect to any Performance Award or other Award subject to performance-based vesting conditions prior to the date on which all conditions or restrictions relating to such Award (or portion thereof to which the dividend or Dividend Equivalent relates) have been satisfied, waived or lapsed.
(f) Other Stock-Based Awards. The Committee is hereby authorized to grant to Eligible Persons such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as are deemed by the Committee to be consistent with the purpose of the Plan. The Committee shall determine the terms and conditions of such Awards, subject to the terms of the Plan and any applicable Award Agreement. No Award issued under this Section 6(f) shall contain a purchase right or an option-like exercise feature.
(g) General.
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Section 7. Amendment and Termination; Corrections
(a) Amendments to the Plan. The Board may amend, alter, suspend, discontinue or terminate the Plan at any time;provided,however, that, notwithstanding any other provision of the Plan or any Award Agreement, prior approval of the shareholders of the Company shall be required for any amendment to the Plan that would:
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(b) Amendments to Awards. Except as otherwise expressly provided in the Plan, the Committee may waive any conditions of or rights of the Company under any outstanding Award, prospectively or retroactively. Except as otherwise expressly provided in the Plan (specifically including the next two sentences hereof), the Committee may amend, alter, suspend, discontinue or terminate any outstanding Award, prospectively or retroactively, but no such action may adversely affect the rights of the holder of such Award without the consent of the Participant or holder or beneficiary thereof. If any provision of the Plan or an Award Agreement would result in adverse tax consequences under Section 409A, the Committee may amend that provision (or take any other action reasonably necessary) to avoid any adverse tax results and no action taken to comply with Section 409A shall be deemed to impair or otherwise adversely affect the rights of any holder of an Award or beneficiary thereof. In the event of any reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company or any other similar corporate transaction or event involving the Company (or the Company shall enter into a written agreement to undergo such a transaction or event), the Committee or the Board may, in its sole discretion, provide for any of the following to be effective upon the consummation of the event (or effective immediately prior to the consummation of the event, provided that the consummation of the event subsequently occurs), and no action taken under this Section 7(b) shall be deemed to impair or otherwise adversely alter the rights of any holder of an Award or beneficiary thereof:
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(c) Correction of Defects, Omissions and Inconsistencies. The Committee may, without prior approval of the shareholders of the Company, correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award or Award Agreement in the manner and to the extent it shall deem desirable to implement or maintain the effectiveness of the Plan.
Section 8. Income Tax Withholding
In order to comply with all applicable federal, state, local or foreign income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal, state, local or foreign payroll, withholding, income or other taxes, which are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant. In order to assist a Participant in paying all or a portion of the applicable taxes to be withheld or collected upon exercise or receipt of (or the lapse of restrictions relating to) an Award, the Committee, in its discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant to satisfy such tax obligation by (a) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes (but only to the extent necessary to satisfy minimum statutory withholding requirements if required by ASC Topic 718 to avoid adverse accounting treatment) or (b) delivering to the Company Shares other than Shares issuable upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes. The election, if any, must be made on or before the date that the amount of tax to be withheld is determined.
Section 9. General Provisions
(a) No Rights to Awards. No Eligible Person, Participant or other Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Eligible Persons, Participants or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to any Participant or with respect to different Participants.
(b) Award Agreements. No Participant shall have rights under an Award granted to such Participant unless and until an Award Agreement shall have been signed by the Participant (if requested by the Company), or until such Award Agreement is delivered and accepted through an electronic medium in accordance with procedures established by the Company. An Award Agreement need not be signed by a representative of the Company unless required by the Committee. Each Award Agreement shall be subject to the applicable terms and conditions of the Plan and any other terms and conditions (not inconsistent with the Plan) determined by the Committee.
(c) Plan Provisions Control. In the event that any provision of an Award Agreement conflicts with or is inconsistent in any respect with the terms of the Plan as set forth herein or subsequently amended, the terms of the Plan shall control.
(d) No Rights of Shareholders. Except with respect to Shares issued under Awards (and subject to such conditions as the Committee may impose on such Awards), neither a Participant nor the Participant’s legal representative shall be, or have any of the rights and privileges of, a shareholder of the Company with respect to any Shares issuable upon the exercise or payment of any Award, in whole or in part, unless and until such Shares have been issued.
(e) No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation plans or arrangements, and such plans or arrangements may be either generally applicable or applicable only in specific cases.
(f) No Right to Employment. The grant of an Award shall not be construed as giving a Participant the right to be retained as an employee of the Company or any Affiliate, nor will it affect in any way the right of the Company or an Affiliate to terminate a Participant’s employment at any time, with or without cause, in accordance with applicable law. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment free from any liability or any claim under the Plan or any Award, unless otherwise expressly provided in the Plan or in any Award Agreement. Nothing in this Plan shall confer on any person any legal or equitable right against the Company or any Affiliate, directly or indirectly, or give rise to any cause of action at law or in equity against the Company or an Affiliate. Under no circumstances shall any person ceasing to be an employee of the Company or any Affiliate be entitled to any compensation for any loss of any right or benefit under the Plan which such employee might otherwise have enjoyed but for termination of employment, whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating in the Plan, each Participant shall be deemed to have accepted all the conditions of the Plan and the terms and conditions of any rules and regulations adopted by the Committee and shall be fully bound thereby.
(g) Governing Law. The internal law, and not the law of conflicts, of the State of Minnesota shall govern all questions concerning the validity, construction and effect of the Plan or any Award, and any rules and regulations relating to the Plan or any Award.
(h) Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect.
(i) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate.
(j) Other Benefits. No compensation or benefit awarded to or realized by any Participant under the Plan shall be included for the purpose of computing such Participant’s compensation or benefits under any pension, retirement, savings, profit sharing, group insurance, disability, severance, termination pay, welfare or other benefit plan of the Company, unless required by law or otherwise provided by such other plan.
(k) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash shall be paid in lieu of any fractional Share or whether such fractional Share or any rights thereto shall be canceled, terminated or otherwise eliminated.
(l) Headings. Headings are given to the sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.
Section 10. Clawback or Recoupment
All Awards under this Plan shall be subject to forfeiture or other penalties pursuant to the Company’s Executive and Key Manager Compensation Clawback Policy, as amended from time to time, and such forfeiture and/or penalty conditions or provisions as determined by the Committee.
Section 11. Effective Date of the Plan
The Plan was adopted by the Board on January 21, 2016. The Plan shall be subject to approval by the shareholders of the Company at the annual meeting of shareholders of the Company to be held on April 7, 2016, and the Plan shall be effective as of the date of such shareholder approval. On and after shareholder approval of the Plan, no awards shall be granted under the Prior Plans, but all outstanding awards previously granted under the Prior Plans shall remain outstanding and subject to the terms of the Prior Plans.
Section 12. Term of the Plan
No Award shall be granted under the Plan, and the Plan shall terminate, on January 21, 2026 or any earlier date of discontinuation or termination established pursuant to Section 7(a) of the Plan;provided, however, that no Performance Award shall be granted under the Plan after the first shareholder meeting to occur in the fifth year following the year in which shareholders approved the Performance Goals unless and until the Performance Goals or the Plan is re-approved by the shareholders. Unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond such dates, and the authority of the Committee provided for hereunder with respect to the Plan and any Awards, and the authority of the Board to amend the Plan, shall extend beyond the termination of the Plan.
costs.
ORGANIC REVENUE - GAAP AMOUNT TO ADJUSTED AMOUNT USED FOR THE STIP
Fiscal Year Ended December 1, 2018
Net Revenue (GAAP) | $3,041,002 | |||
Foreign Exchange Adjustment to Budget Rates | 14,115 | |||
Organic Revenue – STIP | $3,055,117 |
ADJUSTED OPERATING INCOME - GAAP AMOUNT TO ADJUSTED AMOUNT USED FOR THE STIP
Fiscal Year Ended December 1, 2018
Operating Income (GAAP) | $254,762 | |||
Foreign Exchange Adjustment to Budget Rates | 1,440 | |||
Adjustments1 | 44,883 | |||
Adjusted Operating Income – STIP | $301,085 |
CONSTRUCTION ADHESIVES ("CA") ORGANIC REVENUE -
GAAP AMOUNT TO ADJUSTED AMOUNT USED FOR THE STIP
Fiscal Year Ended December 1, 2018
CA Segment Revenue (GAAP) | $446,101 | |||
Foreign Exchange Adjustment to Budget Rates | 308 | |||
Corporate Allocated Revenue | (5 | ) | ||
CA Segment Organic Revenue – STIP | $446,404 |
CA SEGMENT ADJUSTED EBITDA - GAAP AMOUNT TO ADJUSTED AMOUNT USED FOR THE STIP
Fiscal Year Ended December 1, 2018
| CA Segment Revenue (GAAP) | ||||
CA Segment EBITDA (GAAP) | $70,803 | |||
Foreign Exchange Adjustment to Budget Rates | 83 | |||
Adjustments1 | 7,030 | |||
CA Segment Adjusted EBITDA – STIP | $77,916 |
AMERICAS ADHESIVES SEGMENT ORGANIC REVENUE -
GAAP AMOUNT TO ADJUSTED AMOUNT USED FOR THE STIP
Fiscal Year Ended December 1, 2018
Americas Adhesives Segment Revenue (GAAP) | $1,099,918 | |||
Corporate Allocated Revenue | (16 | ) | ||
Foreign Exchange Adjustment to Budget Rates | 20,079 | |||
Americas Adhesives Segment Organic Revenue – STIP | $1,119,981 |
AMERICAS ADHESIVES SEGMENT OPERATING INCOME
- ADJUSTED AMOUNT USED FOR THE STIP
Fiscal Year Ended December 1, 2018
Americas Adhesives Segment Operating Income (GAAP) | $115,363 | |||
Foreign Exchange Adjustment to Budget Rates | 1,698 | |||
Adjustments1 | 17,192 | |||
Americas Adhesives Segment Adjusted Operating Income – STIP | $134,253 |
(1) Adjustments include some or all of the following: costs related to accounting for acquisitions; non-cash costs related to revaluation of the Tonsan call option agreement; organizational realignment to support the 2020 strategic plan as announced in December 2016; costs associated with the integration and restructuring of the acquired Royal business; costs associated with U.S. tax reform; Project ONE development costs and other costs.
EIMEA SEGMENT ORGANIC REVENUE - GAAP AMOUNT
TO ADJUSTED AMOUNT USED FOR THE STIP
Fiscal Year Ended December 1, 2018
EIMEA Segment Revenue (GAAP) | $738,553 | |||
Corporate Allocated Revenue | (10 | ) | ||
Foreign Exchange Adjustment to Budget Rates | (961 | ) | ||
EIMEA Segment Organic Revenue – STIP | $737,582 |
EIMEA SEGMENT ADJUSTED OPERATING INCOME - GAAP AMOUNT
TO ADJUSTED AMOUNT USED FOR THE STIP
Fiscal Year Ended December 1, 2018
EIMEA Segment Operating Income (GAAP) | $40,060 | |||
Foreign Exchange Adjustment to Budget Rates | (961 | ) | ||
Adjustments1 | 12,519 | |||
EIMEA Segment Adjusted Operating Income – STIP | $51,618 |
ROIC RECONCILIATION
At December 1, 2018
Actual | Adjustment for Royal Adhesives Acquisition | Amount excluding Royal Adhesives Acquisition | ||||||||||
| Operating Income (GAAP) | $254,762 | (76,186) | 178,576 | |||||||||
| Add back Amortization expense from prior year acquistions | 48,218 | (43,166) | 5,052 | |||||||||
| Royal Adhesives Acquisition Synergies in Legacy H.B. Fuller Company | (9,000) | (9,000) | ||||||||||
| Adjustments1 | 44,883 | 44,883 | ||||||||||
Adjusted Operating Income | $347,864 | (128,353 | ) | 219,511 | ||||||||
Tax Expense | (87,314 | ) | 35,169 | (52,145 | ) | |||||||
Equity Earnings | $8,151 | - | 8,151 | |||||||||
NOPATa | $268,701 | (93,184) | 175,517 | |||||||||
Invested Capitalb | $3,248,902 | (1,675,254 | ) | 1,573,648 | ||||||||
ROIC (a/b) | 8.3 | % | 11.2 | % | ||||||||
(1) Adjustments include some or all of the following: costs related to accounting for acquisitions; non-cash costs related to revaluation of the Tonsan call option agreement; organizational realignment to support the 2020 strategic plan as announced in December 2016; costs associated with the integration and restructuring of the acquired Royal business; costs associated with U.S. tax reform; Project ONE development costs and other costs.
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